Citibank, N.A v. Jacobsen

Background

Citibank sued Douglas Jacobsen and Norman J. Kravetz to recover amounts they allegedly guaranteed in connection with a $50 million loan. The loan was made under a Credit Agreement between Citibank, JHCG Holdings LLC (the Borrower), and JH Capital Group Holdings, LLC (Parent). Jacobsen and Kravetz later signed limited indemnity guaranties as part of an amendment to that agreement.

The guaranties stated that the defendants absolutely, irrevocably, and unconditionally guaranteed payment of the “Guaranteed Obligations” after a defined “Guaranty Trigger Event.” Those obligations included “all Obligations of Borrower to [Citibank] under the Credit Agreement and other Loan Documents.” The guaranties also required payment or reimbursement of reasonable attorney’s fees and costs incurred to enforce them and waived defenses, claims, setoffs, and discharges concerning the guaranteed obligations.

The Borrower and Parent did not repay the loan by its maturity date. Citibank sent demand letters to Jacobsen and Kravetz, but neither they nor the Borrower or Parent made payments toward the principal balance. Citibank’s amended complaint asserted breach of contract, attorney’s fees, and unjust enrichment. An earlier order dismissed the unjust-enrichment claim but allowed the other claims to proceed. Citibank then moved for summary judgment on the remaining claims and on the defendants’ affirmative defenses.

Legal standard

Summary judgment is appropriate when the evidence shows that no genuine dispute exists over a fact that could affect the outcome and the moving party is entitled to judgment under the law. The court must view disputed facts in favor of the nonmoving party, but unsupported assertions, conjecture, or speculation are insufficient to require a trial.

Under the New York law applied by the court, a party seeking summary judgment on a guaranty claim must establish the guaranty, the underlying debt, and the guarantor’s failure to perform. Contract interpretation is generally a matter for the court when the agreement is unambiguous. Outside evidence of the parties’ intent may be considered only if the contract is ambiguous.

Breach of contract

The court found no dispute about the existence of the guaranties, Citibank’s performance, the underlying debt, or the defendants’ failure to pay. The court had previously determined that the Borrower’s failure to repay the loan by the maturity date was a Guaranty Trigger Event.

The remaining issue was whether repayment of the $50 million loan was included in the guaranties’ “Guaranteed Obligations.” The guaranties did not define “Obligations,” and the Credit Agreement referred to the Security Agreement, which also did not define that term. The court therefore applied the term’s plain and ordinary meaning. It concluded that an obligation includes a contractual duty to pay a specified amount and that the guaranties’ reference to “all Obligations” covered the Borrower’s duty to repay the loan.

The court rejected the defendants’ arguments that the use of capitalization, the separate term “Secured Obligations,” the Security Agreement’s references to particular payments, or the definition of “Originator Receivables Obligations” narrowed the guaranties. It also rejected reliance on the defendants’ subjective understanding, prior guaranties involving Parent, and proposed discovery concerning negotiations and contract drafts. Because the guaranties were unambiguous, the court held that the outside evidence was not necessary to decide the claim.

The court concluded that the guaranties unambiguously required Jacobsen and Kravetz to pay the loan balance after the Guaranty Trigger Event and that their failure to do so breached the guaranties. Citibank was therefore entitled to summary judgment on the breach-of-contract claim.

Attorney’s fees and costs

The guaranties required the defendants to pay or reimburse reasonable out-of-pocket expenses, including reasonable attorney’s fees and legal expenses, incurred to enforce the guaranties in litigation. The defendants did not dispute that interpretation; they argued only that there had been no breach. Because the court found a breach and Citibank brought the action to enforce the guaranties, it held that Citibank was entitled to attorney’s fees and costs connected with the litigation.

The court directed Citibank to file its application for fees and costs by December 22, 2020, and directed the defendants to file any opposition by January 12, 2021.

Defendants’ affirmative defenses

The court held that the guaranties’ language was absolute and unconditional and waived defenses concerning the guaranteed obligations. It interpreted the phrase “any other obligor” to include Jacobsen and Kravetz because they had undertaken obligations under the guaranties and were identified in the documents as primary obligors. The court therefore granted summary judgment against the defendants on those affirmative defenses.

Disposition

The court granted Citibank’s motion for summary judgment. It also denied as moot the defendants’ requests for oral argument and discovery under Rule 56(d), and directed the Clerk of Court to terminate the motion.