Eddystone Rail Company, LLC v. Bank of America, N.A.

Background

Eddystone Rail Company, LLC brought the action against Bank of America, N.A., Capital One, N.A., Fifth Third Bank, JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A., The Bank of Tokyo-Mitsubishi UFJ, Ltd., SunTrust Bank, BMO Harris Bank, N.A., CIBC Bank USA, U.S. Bank National Association, TPG Specialty Lending, Inc., PNC Bank, National Association, Tao Talents, LLC, and Pontus Holdings, Ltd. Eddystone sought to set aside alleged fraudulent transfers from Bridger Transfer Services, LLC, Bridger Logistics, LLC, and affiliates. Eddystone alleged that the transfers were intended to prevent it from recovering approximately $140 million owed by Bridger Transfer Services under a rail services agreement.

Eddystone originally filed the case in New York state court. All defendants except Fifth Third Bank and BMO Harris Bank removed it to the U.S. District Court for the Southern District of New York, relying on the Edge Act and admiralty jurisdiction. Eddystone moved to remand, meaning it asked the federal court to return the case to state court.

Jurisdictional issue

The Edge Act gives federal district courts original jurisdiction over certain civil suits involving federally chartered corporations that arise from international or foreign banking or financial operations. The court stated that removal under the Edge Act required three elements: a civil suit, a federally chartered corporation as a party, and a connection to international or foreign banking or financial operations involving that federally chartered corporation.

The parties did not dispute that the case was civil, that federally chartered banks known as the Edge Act Banks were parties, or that the claims arose from two credit agreements involving those banks. The disputed question was whether those credit agreements were international or foreign transactions under the Edge Act.

Eddystone argued that qualifying banking activity had to involve activities outside the United States. The court rejected that interpretation. It explained that the cited Second Circuit decisions did not establish that transactions must occur outside the United States, and that those decisions focused instead on whether the federally chartered bank involved in the case had participated in the relevant transaction.

Court’s analysis

The court relied on decisions holding that a transaction between an Edge Act bank and a foreign counterparty can establish the required international connection. The Bank of America credit agreement included Bank of America as a signatory and administrative agent and MUFG, a bank formed under Japanese law, as a signatory. The TPG credit agreement included PNC, an Edge Act Bank, and Pontus, a corporation organized under the laws of Bermuda, as signatories.

The court held that each credit agreement qualified as an international or foreign banking transaction under the Edge Act. It also held that alleged repayments received by Bank of America as administrative agent and distributed to other lenders, including MUFG, qualified under the Act. The fact that the transactions occurred entirely within the United States did not defeat Edge Act jurisdiction because MUFG and Pontus’s participation supplied the necessary international connection.

The court stated that, because it found jurisdiction under the Edge Act, it did not need to decide whether admiralty jurisdiction existed.

Disposition

Judge George B. Daniels denied Eddystone’s motion to remand. The order addressed the federal court’s jurisdiction and the location of the case; it did not decide the merits of Eddystone’s alleged fraudulent-transfer claims.