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Update: INTL FCStone Mkts., LLC v. Corrib Oil Co. Ltd. First Department Affirms Summary Judgment Grant Involving Investment in Hundreds of Transactions

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  • Posted on: May 15 2019

On April 25, 2018, this Blog wrote about INTL FCStone Mkts., LLC v. Corrib Oil Co. Ltd., 2018 N.Y. Slip Op. 30646(U) (Sup. Ct., N.Y. County, Apr. 9, 2018) (here.) The case involved a motion for summary judgment involving claims that Defendant, Corrib Oil Co. Ltd. (“Corrib”), owed the plaintiff, INTL FCStone Markets, LLC (“FCStone”), nearly $3.5 million in connection with investment in more than 800 derivatives transactions over a four-year period. In granting the motion, Justice Shirley Werner Kornreich had some harsh words about the strength of the defenses proffered in opposition to the motion. She described the defenses as “border[ing] on the frivolous.”

On May 9, 2019, the Appellate Division, First Department, unanimously affirmed, with costs, Justice Kornreich’s decision. INTL FCStone Mkts., LLC v. Corrib Oil Co. Ltd., 2019 N.Y. Slip Op. 03682 (1st Dept. May 9, 2019) (here).


The action arose from the investment by Corrib in hundreds of derivatives transactions with FCStone, which Corrib made as a hedge on its exposure to oil price fluctuations. The trades were governed by an ISDA Master Agreement, Schedule, and Credit Support Annex, along with trade confirmations (“Confirmations”) governing each of the transactions.

Until 2014, Corrib made money on the transactions because the price of oil increased. But in June 2014, the oil market crashed, and so too did Corrib’s positions on the trades. Margin calls followed. Corrib initially satisfied FCStone’s margin calls but, eventually, as Corrib’s positions went even more into the red, Corrib stopped making payments. Corrib first defaulted on a margin call in September 2015. It then defaulted on FCStone’s subsequent margin calls and payment demands. On December 11, 2015, FCStone declared an event of default under the Master Agreement and, on December 29, 2015, FCStone noticed an early termination. At that time, Corrib owed FCStone approximately $3.4 million on 59 trades. FCStone again demanded payment in May 2016, but Corrib did not pay.

On June 24, 2016, FCStone commenced the action by filing a summons and motion for summary judgment in lieu of complaint. By order dated February 23, 2017, the Court denied the motion because FCStone failed to submit the Confirmations governing the trades.

On March 15, 2017, Corrib filed an answer with counterclaims. At a preliminary conference conducted shortly thereafter, problems with the counterclaims were discussed.

On April 17, 2017, Corrib filed an amended answer in which it asserted various counterclaims, including, but not limited to: breach of contract; breach of the implied covenant of good faith and fair dealing; fraud; and fraudulent inducement. At a compliance conference a few weeks later, the court stayed discovery because it became “apparent that Corrib’s defenses and counterclaims bordered on the frivolous.…” Corrib admitted that after production of the trade Confirmations, “it never objected to them,” it never had any written investment advisory agreement with FCStone, and, more importantly, Corrib had “no defense to nonpayment.”

On August 7, 2017, FCStone filed a motion for summary judgment. Corrib opposed the motion on the strength of the “supposed merits of its counterclaims.” Those counterclaims, however, “have no merit,” said the Justice Kornreich in a decision issued on April 9, 2018. Consequently, the court held that “[t]here is no question of fact regarding Corrib’s liability to FCStone.”

Corrib appealed.

The First Department’s Decision

In granting summary judgment and rejecting Corrib’s fraud-based counterclaims, Justice Kornreich held that Corrib could not show justifiable reliance on any purported misstatement. Noting that these defenses were based on alleged misrepresentations about the terms of the trades and FCStone’s promise not to serve as a counterparty, the Court found that the “terms of the trades [were] set forth in the Confirmations, which clearly disclose[d] that FCStone was the counterparty.” As such, Corrib could not claim any fraud or fraudulent inducement – Corrib could not claim “to have justifiably relied on a representation when that very representation [was] negated by the terms of a contract.” Citations omitted.

The First Department agreed. The Court held that “[t]he fraud counterclaims [were] barred by the express terms of the ISDA master agreement, which contain[ed] directly contrary representations, and by the trade [C]onfirmations, which contain[ed] the very information as to which defendant claims to have been deceived.” Slip Op. at *1 (citations omitted).

Justice Kornreich also found that Corrib could not claim justifiable reliance on the alleged misrepresentations because it failed “to review and challenge [the] terms of a Confirmation.” “Having failed to do so,” Corrib could not “claim it was justified in not noticing that terms in the Confirmations conflicted with oral assurances allegedly provided by FCStone.”

On appeal, Corrib maintained that it could not rely on the Confirmations because it did not understand them. The First Department rejected this argument, finding that Corrib was a sophisticated investor that should understand the contents of a trade confirmation: “Defendant is a sophisticated business doing millions of dollars’ worth of trades. Its claim that it did not understand the trade [C]onfirmations is unavailing.” Id. (citations omitted).

The Court also held that Corrib failed to plead fraud with particularity. To plead fraud with particularity, a plaintiff must provide sufficient facts to support a “reasonable inference” that the allegations of fraud are true. Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559-60 (2009). This means that the plaintiff should describe the “who, what, when, where, and how” of the fraud, or “the first paragraph of any newspaper story.” United States ex rel. Lubsy v. Rolls-Royce Corp., 570 F.3d 849, 853 (7th Cir. 2009) (internal quotation marks omitted). Conclusory allegations will not suffice. Eurycleia Partners, 12 N.Y.3d at 559-60. Neither will allegations based on information and belief. See Facebook, Inc. v. DLA Piper LLP (US), 134 A.D.3d 610, 615 (1st Dept. 2015) (“Statements made in pleadings upon information and belief are not sufficient to establish the necessary quantum of proof to sustain allegations of fraud.”).

In FCStone, the Court held that, “with minimal exceptions,” Corrib failed “to identify who made the misrepresentations, when the misrepresentations were made, and the substance of the misrepresentations.” Slip Op. at *1, citing E1 Entertainment U.S. LP v. Real Talk Entertainment, Inc., 85 A.D.3d 561, 562 (1st Dept. 2011).

Finally, the Court held that Corrib failed to plead scienter. To satisfy the scienter element, a plaintiff is required to allege facts “from which it is possible to infer defendant[s’] knowledge of the falsity of [their] statements” when they were made. MP Cool Invs. Ltd. v. Forkosh, 142 A.D.3d 286, 292 (1st Dept. 2016) (citation omitted). In FCStone, the Court rejected Corrib’s argument that FCStone had a financial motive to commit fraud – i.e., “to increase its commissions revenue.” Under New York law, as well as under Federal law, “the motive to earn a fee, without more, cannot be used to infer scienter.” Celtixconnect Equity Invs. LLC v. Sea Fibre Network Ltd, 52 Misc. 3d 1210(A), 2016 N.Y. Slip Op. 51103(U), at *8-9 & n.7 (Sup. Ct. N.Y. County 2016). See also In re Tower Grp. Int’l, Ltd. Sec. Lit., 2015 WL 5813393, at *6 (S.D.N.Y. 2015) (collecting cases); Saltz v. First Frontier, L.P., 485 F. App’x 461, 464 (2d Cir. 2012) (noting that Second Circuit has “consistently rejected” the notion that pleading “generic motive” to earn fees may be used to infer scienter).


FCStone serves as a good reminder of the hurdles that a plaintiff pleading fraud must overcome. Aside from pleading each element of the claim, a fraud plaintiff must satisfy the particularity requirement of CPLR § 3016(b). As this Blog has noted in previous posts, the failure to satisfy the foregoing will result in dismissal of the action. The hurdles become even higher when, as in FCStone, the facts undermine the claim.  

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