N.Y. Banking Law § 618-a: Repudiation of contracts

§ 618-a. Repudiation of contracts. 1. Except as otherwise provided in

this section, when the superintendent has taken possession of the

business and property in this state of a banking organization, unless

the federal regulator or insurer is appointed as receiver or liquidator,

the superintendent may assume or repudiate any contract, including an

unexpired lease, of the banking organization: (a) to which such banking

organization is a party, (b) the performance of which the

superintendent, in the superintendent's discretion, determines to be

burdensome, and (c) the repudiation of which the superintendent

determines, in the superintendent's discretion, will promote the orderly

administration of the banking organization's affairs. After the

expiration of ninety days from the date that the superintendent takes

possession of the banking organization, any party to a contract with the

banking organization being liquidated may demand in writing that the

superintendent assume or repudiate such contract. If the superintendent

has not assumed or repudiated the contract within fifteen calendar days

from the date of receipt of the demand by the superintendent, the

affected party may bring an action in the supreme court in the judicial

district in which the principal office of the banking organization is

located to obtain an order requiring the superintendent to decide

whether to assume or repudiate that contract. If the superintendent has

not assumed or repudiated a contract by one month before the last date

for filing claims against the banking organization being liquidated

pursuant to section six hundred twenty of this article, such contract

shall be deemed repudiated. Notwithstanding the foregoing, with respect

to an unexpired lease of the banking organization for the rental of real

property under which the banking organization was a lessee, if the

superintendent remains in possession of the leasehold, the

superintendent shall not be required to assume or repudiate such lease

and may continue in possession of such leasehold for the remainder of

the term of the lease in accordance with the terms of the lease;

provided, however, that should the superintendent later repudiate the

lease before the end of the lease term, any amounts that may be due the

lessor due to such repudiation shall be calculated according to the

provisions of paragraph (a) of subdivision three of this section.

Notwithstanding any other provision contained in this subdivision, in

liquidating a branch or agency of a foreign banking corporation, the

superintendent shall not assume or repudiate any qualified financial

contract that the branch or agency entered into which is subject to a

multi-branch netting agreement or arrangement that provides for netting

present or future payment obligations or payment entitlements (including

termination or close-out values relating to the obligations or

entitlements) among the parties to the contract and agreement or

arrangement and the superintendent shall not be required to assume or

repudiate any other qualified financial contract that the branch or

agency entered into; provided, however, that upon any repudiation of any

qualified financial contract or the termination or liquidation of any

qualified financial contract in accordance with its terms, the liability

of the superintendent under such qualified financial contract shall be

determined in accordance with subdivision two of this section.

2. (a) Except as otherwise provided in this section, upon the

repudiation or termination of any contract pursuant to subdivision one

of this section, the liability of the superintendent shall be limited to

the actual direct compensatory damages of the parties to the contract,

determined as of the date the superintendent took possession of the

banking organization. The superintendent shall not be liable for any

future wages other than severance payments (to the extent such payments

are reasonable), or for payments for future services, costs of cover, or

any consequential, punitive or exemplary damages, damages for lost

profits or lost opportunity or damages for pain and suffering.

(b) Except as otherwise provided in this section, the liability of the

superintendent upon the repudiation of any qualified financial contract,

or in connection with the termination or liquidation of any qualified

financial contract in accordance with the terms thereof, shall be

limited as provided in paragraph (a) of this subdivision, except that

compensatory damages shall be deemed to include normal and reasonable

costs of cover or other reasonable measures of damages utilized among

participants in the market for qualified financial contract claims,

calculated as of the date of repudiation or the date of the termination

of such qualified financial contract in accordance with its terms. Upon

the repudiation of any qualified financial contract or in connection

with the termination or liquidation of any qualified financial contract

in accordance with the terms thereof, if the superintendent shall be

entitled to damages, such damages shall be paid over by the party to the

superintendent upon written demand pursuant to subdivision two of

section six hundred fifteen of this article, notwithstanding any

provision in any such contract that purports to effect a forfeiture of

such damages.

(c) In the case of the liquidation of a branch or agency of a foreign

banking corporation by the superintendent, with respect to qualified

financial contracts subject to netting agreements or arrangements that

provide for netting present or future payment obligations or payment

entitlements (including termination or close-out values relating to the

obligations or entitlements) among the parties to the contracts and

agreements or arrangements, the liability of the superintendent to any

party to any such qualified financial contract upon repudiation or in

connection with the termination or liquidation of such qualified

financial contract in accordance with the terms thereof, shall be

calculated as of the date of repudiation or the date of the termination

of such qualified financial contract in accordance with its terms and

shall be limited to the lesser of (i) the global net payment obligation

and (ii) the branch/agency net payment obligation. The liability of the

superintendent under this paragraph shall be reduced by any amount

otherwise paid to or received by the party in respect of the global net

payment obligation pursuant to such qualified financial contract which

if added to the liability of the superintendent under this paragraph

would exceed the global net payment obligation. The liability of the

superintendent under this paragraph to a party to a qualified financial

contract also shall be reduced by the fair market value or the amount of

any proceeds of collateral that secures and has been applied to satisfy

the obligations of the foreign banking corporation pursuant to such

qualified financial contract to the party. In the event that netting

under the applicable netting agreement or arrangement results in a

branch/agency net payment entitlement, notwithstanding any provision in

any such contract that purports to effect a forfeiture of such

entitlement, the superintendent may make written demand upon the party

to such contract under subdivision two of section six hundred fifteen of

this article for an amount not to exceed the lesser of (x) the global

net payment entitlement and (y) the branch/agency net payment

entitlement. The liability of the party under this paragraph shall be

reduced by any amount otherwise paid to or received by the

superintendent or any other liquidator or receiver of the foreign

banking corporation in respect of the global net payment entitlement

pursuant to such qualified financial contract which if added to the

liability of the party under this paragraph would exceed the global net

payment entitlement. The liability of the party under this paragraph to

the superintendent pursuant to such qualified financial contract also

shall be reduced by the fair market value or the amount of any proceeds

of collateral that secures and has been applied to satisfy the

obligations of the party pursuant to such qualified financial contract

to the foreign banking corporation.

(d) A party to a qualified financial contract with a foreign banking

corporation, the branch or agency of which the superintendent is

liquidating, which party has a perfected security interest in

collateral, or other valid lien or security interest in collateral

enforceable against third parties pursuant to a security arrangement

related to such qualified financial contract, may retain all such

collateral and upon repudiation of that qualified financial contract, or

in connection with the termination or liquidation of that qualified

financial contract in accordance with its terms thereof, apply such

collateral in satisfaction of any claims secured by the collateral,

provided that the total amount so applied to such claims shall in no

event exceed the global net payment obligation, if any.

(e) The following terms shall have the following meanings: (i)

"qualified financial contract" means any securities contract, commodity

contract, forward contract (including spot and forward foreign

exchange), repurchase agreement, swap agreement, and any similar

agreement, any option to enter into any such agreement, including any

combination of the foregoing, and any master agreement for such

agreements (such master agreement, together with all supplements

thereto, shall be treated as one qualified financial contract), provided

that such contract, option or agreement, or combination of contracts,

options or agreements is reflected in the books, accounts or records of

the banking organization or a party provides documentary evidence of

such agreement; the superintendent may define by regulation securities

contract, commodity contract, forward contract, repurchase agreement and

swap agreement, and may by regulation or order determine any other

agreement to be a qualified financial contract for purposes of this

paragraph; (ii) "global net payment obligation" means the amount, if

any, owed by a foreign banking corporation as a whole to a party after

giving effect to the netting provisions of a qualified financial

contract with respect to all transactions subject to netting under such

qualified financial contract; (iii) "global net payment entitlement"

means the amount, if any, owed by a party (or that would be owed if the

relevant agreements provided for payments to either party, upon

termination thereof under any and all circumstances) to a foreign

banking corporation as a whole after giving effect to the netting

provisions of a qualified financial contract with respect to all

transactions subject to netting under such qualified financial contract;

(iv) "branch/agency net payment obligation" means with respect to a

qualified financial contact the amount, if any, that would have been

owed by the foreign banking corporation to a party after netting only

those transactions entered into by the branch or agency and such party

under such qualified financial contract; and (v) "branch/agency net

payment entitlement" means with respect to a qualified financial

contract the amount, if any, that would have been owed by a party to the

foreign banking corporation after netting only those transactions

entered into by the branch or agency and such party under such qualified

financial contract. The superintendent shall have authority to prescribe

such regulations relating to qualified financial contracts and netting

thereof as the superintendent shall deem appropriate.

3. (a) If the superintendent repudiates a lease of the banking

organization for the rental of real or personal property under which the

banking organization was a lessee, the lessor under such lease shall be

entitled to file a claim with the superintendent for whichever is the

least amount of: (i) the amount designated as liquidated damages

contained in the agreement between the banking organization and the

lessor, (ii) an amount equal to one year's rent under the terms of the

repudiated lease, or (iii) an amount equal to the rent for the remaining

term of the lease.

(b) If the superintendent repudiates a lease of the banking

organization for the rental of real property under which the banking

organization was a lessor, and the lessee was not in default at the time

of repudiation, the lessee under such repudiated lease may either (i)

treat the lease as terminated by such repudiation and vacate the

premises, or (ii) remain in possession of the leasehold interest for the

balance of the term of the lease, and for any renewal or extension of

such term that is enforceable by such lessee under applicable

non-insolvency law, unless the lessee defaults under the terms of the

lease after the date of such repudiation. If the lessee remains in

possession of the leasehold interest, the lessee shall continue to pay

to the superintendent the contractual rent pursuant to the terms of the

lease after the date of the repudiation of such lease, and may offset

against such rent payment any damages which may accrue due to the

nonperformance of any obligation of the banking organization under the

lease after the date of repudiation. The superintendent shall not be

liable to the lessee for any damages arising after such date as a result

of the repudiation other than the amount of any offset allowed under

this subdivision. Nothing stated herein shall prohibit the

superintendent from entering into a new contract with the lessee for the

rental of the leasehold which was the subject of the repudiated lease.

4. Except as otherwise provided, notwithstanding any provision in an

unexpired lease or other contract, or in applicable law, a contract or

unexpired lease of the banking organization may not be terminated or

modified by any party other than the superintendent without the

concurrence of the superintendent, and any right or obligation under

such contract or lease may not be terminated or modified, at any time

after the superintendent's taking of possession, solely pursuant to a

provision in such contract or lease that is conditioned on the

superintendent's taking of possession, or the insolvency, financial

condition or liquidation of the banking organization.

5. Nothing in this section shall affect the right of a party to a

contract of a foreign banking corporation to seek performance of such

contract or damages thereon in any other jurisdiction, provided,

however, that the superintendent shall not be liable for the performance

of such contract or damages thereon in any other jurisdiction.

6. The rights granted herein are in addition to any other rights

available to the superintendent under common law or any other law.