Loomis Sayles Trust Company LLC v. Citigroup Global Markets Inc

Background

Loomis Sayles Trust Co., LLC sued Citigroup Global Markets, Inc. over Citigroup’s execution of two securities trades on March 18, 2022. The trades involved the purchase of 780,856 shares of Shopify and the sale of 5,236,139 shares of Colgate. Citigroup placed all of the shares into the market’s closing auction as market-on-close orders. A market-on-close order must be executed at the closing price, without a price limit.

The complaint alleged that the volume of the trades and their placement in the closing auction caused price movements and losses of more than $60 million on the Shopify purchase and more than $10 million on the Colgate sale. Loomis Sayles asserted claims for breach of contract and breach of fiduciary duty. Citigroup moved for summary judgment, which asks the court to rule without a trial when the evidence shows no genuine dispute about an important fact.

Breach of Contract

The parties agreed that they formed a contract for Citigroup to execute Loomis Sayles’s orders. They also agreed that the contract consisted of Bloomberg chats and two telephone conversations during a 90-minute period on March 18. The court held that the contract’s terms were ambiguous. In other words, the communications could reasonably be understood in more than one way, including whether Loomis Sayles agreed to have all of the Shopify and Colgate orders executed as market-on-close orders regardless of price dislocation.

The court also concluded that the additional evidence did not establish one unavoidable interpretation of the agreement. Citigroup offered evidence that Loomis Sayles wanted to take advantage of the market’s liquidity and understood that the trades would be executed at the close. Loomis Sayles identified contrary evidence suggesting that it wanted to avoid significant price disruption and that some communications supported using price limits. The court stated that a jury, rather than the court on summary judgment, must resolve these conflicting interpretations.

Best Execution

Citigroup did not dispute that it owed Loomis Sayles some duty of best execution as part of the contract. The parties disagreed about the scope of that duty. Citigroup argued that it only had to use reasonable diligence in following Loomis Sayles’s instructions. Loomis Sayles argued that Citigroup had to perform a meaningful liquidity analysis and use informed judgment to place the orders in a way that would not cause price dislocation.

The court held that summary judgment was inappropriate even under Citigroup’s narrower description of the duty. Whether Citigroup acted with reasonable diligence was a question for a jury. The parties disputed both the meaning of their agreement and whether Citigroup should have performed a more meaningful liquidity analysis. The court also noted competing evidence about market data, expected liquidity, auction imbalances, and whether the Shopify closing price was unusual or foreseeable.

Breach of Fiduciary Duty

The court granted summary judgment on the breach-of-fiduciary-duty claim. Under the New York law applied by the court, a fiduciary-duty claim cannot proceed when it merely duplicates a breach-of-contract claim. The court found that Loomis Sayles’s fiduciary-duty claim identified no duties, misconduct, or damages beyond those asserted in the contract claim. Because the parties agreed that a contract existed, even though they disagreed about its meaning, the fiduciary-duty claim was duplicative.

Disposition

Citigroup’s motion for summary judgment was denied on the breach-of-contract claim and granted on the breach-of-fiduciary-duty claim. The parties’ motions for oral argument were denied as moot, and the clerk was directed to close the listed motions.