Mancini v. UBS AG, New York Branch

Background

Robert S. Mancini, an investment professional and former Carlyle Group Managing Director and Global Partner, obtained financing from UBS for investments in Carlyle co-investment entities. His interests in those entities served as collateral for the loan. After Mancini left Carlyle in December 2018, UBS treated that event as a contractual “Final Event” and required repayment of the loan.

Mancini alleged that UBS breached the implied covenant of good faith and fair dealing and its duty to conduct the sale in a commercially reasonable manner. He argued that UBS used March 31, 2020 fair-market-value marks instead of newer marks, should have delayed the sale until October or early November, and effectively nullified his notice and redemption rights by telling him during a phone call that it was “too late” to bid in or redeem the collateral.

Motion and Legal Standard

UBS moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). The court explained that this motion uses the same standard as a motion to dismiss for failure to state a claim. The court considered the pleadings and incorporated documents, accepted well-pleaded factual allegations as true, and drew reasonable inferences in Mancini’s favor. The motion could be granted if the pleadings showed that UBS was entitled to judgment as a matter of law.

Implied Covenant of Good Faith and Fair Dealing

The court held that UBS did not breach the implied covenant through the timing of the sale, its use of the March 31 marks, or its notice. Under New York law, the implied covenant prevents a party from exercising contractual discretion arbitrarily, irrationally, or in bad faith, but it cannot impose duties inconsistent with the contract’s express terms.

The credit agreement gave UBS “sole and absolute” discretion to liquidate the collateral and did not require UBS to use particular valuation marks, marketing methods, or sale timing. The court also stated that New York’s Uniform Commercial Code did not require a secured party to delay a sale merely because a different time or method might have produced more money. Mancini did not plausibly allege that UBS intentionally deprived him of a contractual benefit or acted arbitrarily or irrationally.

The court likewise rejected Mancini’s notice theory. The agreement treated ten calendar days’ notice as reasonable, and New York law also treats ten days or more before the earliest disposition time as reasonable notice. Mancini acknowledged that UBS satisfied the basic ten-day period and did not allege that he contacted UBS within that period to assert a right to redeem. The court therefore dismissed Mancini’s first claim for breach of the implied covenant.

Commercial Reasonableness

The court also ruled for UBS on Mancini’s claim that the collateral sale was commercially unreasonable. Under New York’s Uniform Commercial Code, every aspect of a collateral disposition—including its method, manner, timing, place, and other terms—must be commercially reasonable. But the possibility that a different method or timing could have produced a higher amount does not by itself establish unreasonableness.

The court found that Mancini did not provide enough factual or legal support to show that using the March 31 marks made the sale commercially unreasonable. He supplied no competing valuation or projected sale figure showing that the collateral’s market value in September or October 2020 was dramatically higher than the sale proceeds. The court also found no sufficient basis to conclude that UBS had a duty to delay the sale or that the timing made the sale commercially unreasonable.

As to notice and redemption, the court found that UBS complied with the contractual and statutory ten-day notice requirement. Mancini did not show that UBS’s phone statement deprived him of a redemption right through failure to comply with the notice rules. The court granted UBS’s motion for judgment on the pleadings on the second claim.

Disposition

The court granted UBS’s motion for judgment on the pleadings. Mancini may file a Second Amended Complaint, if at all, by December 12, 2024. If he does not do so, the case will be closed. The opinion directs the Clerk of Court to terminate UBS’s motion.