Opinion
Master File No. 98 Civ. 3938 (SWK)
October 29, 2002
OPINION AND ORDER
Plaintiffs move for an order declaring that Bank Austria and Creditanstalt (the "Austrian Banks") pay interest in the amount of 5 percent on the $30 million previously paid by the Austrian Banks to the settlement fund. For the reasons set forth below, the motion is denied.
BACKGROUND
The Court has previously issued opinions detailing the procedural history of the consolidated action against the Austrian Banks, and the reader's familiarity with the subject is assumed. Only those facts necessary to understand the issues presented in this motion are repeated herein.
On March 15, 1999, Class Counsel and the Austrian Banks reached a settlement (the "Settlement Agreement") in the above captioned matters. The Settlement Agreement states, in relevant part:
9. The Austrian Banks shall fund a Bank Austria Humanitarian Fund ("Humanitarian Fund") to be administered and disbursed in accordance with the terms of this Agreement the sum of thirty million U.S. Dollars (US $30,000,000.00) in installments as follows:
(a) Fifteen million U.S. dollars (US $15,000,000.00) within twenty (20) Austrian business days after the Effective Date of this Agreement; and
(b) Fifteen million U.S. dollars (US $15,000,000.00) within one (1) year after the payment provided for in paragraph 9(a) above.
The Court may direct the accelerated payment of such sums as are critically necessary to the expeditious payment of claims.
10. Bank Austria and Creditanstalts shall pay as an Administrative and Interim Allowed Claim Fund to be administered and disbursed in accordance with the terms of this Agreement the sum of ten million U.S. dollars (US $10,000,000.00) payable within twenty (20) Austrian business days after execution of this Agreement and its acknowledgment and authorization in accordance with paragraph 44 hereof . . . .
. . .
16. The payments and/or expenditures made in accordance with the provisions of paragraphs 9, 10, 15, 23, 25 and 30 shall be the sole, complete and final monetary obligation of she Austrian Banks, individually and collectively, under this Agreement.
Therefore, the Settlement Agreement provided for three installment payments: (1) $10 million within twenty days of execution of the agreement; (2) $15 million within twenty days of entry of the final judgment; and (3) $15 million within one year and twenty days of entry of the final judgment.
The Settlement Agreement, however, does not contain any language with respect to interest payments to the settlement fund. In fact, during settlement negotiations, "[t]he parties were unable to agree on plaintiffs' request for interest on the installment payments in the event payments were delayed should an objecting class member file an appeal." Declaration of Robert A. Swift, dated June 5, 2002 ("Swift Decl."), at ¶ 3. Plaintiffs contend that even though the Settlement Agreement lacks a provision with respect to the payment of interest, there was an oral understanding between the parties regarding such payments. Id. The Austrian Banks deny that such an oral agreement was reached. See Declaration of Charles G. Moerdler, dated August 15, 2002 ("Moerdler Decl."), at ¶ 3. Instead, Charles G. Moerdler, Esq., counsel for the Austrian Banks, states that he informed Robert A. Swift, Esq., co-lead counsel for plaintiffs, that "I would raise his [Swift's] request with the Austrian Banks." Id.
Following the Court's approval of the Settlement Agreement, see In re Austrian and German Bank Holocaust Litig., 80 F. Supp.2d 164 (S.D.N.Y. 2000), and issuance of the Final Order and Judgment, dated January 18, 2000, class member Peter Georgi, an objector, appealed. The Second Circuit affirmed. See D'Amato v. Deutsche Bank, 236 F.3d 78 (2d Cir. 2000). On August 14, 2000, the time period to petition for a Writ of Certiorari to the United States Supreme Court expired without Georgi filing such a writ, and, therefore, the Settlement Agreement became effective.
After being unable to resolve this disagreement regarding the interest payment, plaintiffs brought this motion.
DISCUSSION
Plaintiffs argue that the Austrian Banks should pay interest at a rate of 5 percent for a period of 18 months because the two payments of $15 million to the settlement fund were delayed. Plaintiffs acknowledge that the delay was caused by the actions of a class member. See Swift Decl. at ¶ 4. They also concede that the Settlement Agreement is silent with respect to the payment of interest. See Reply Memorandum in Support of Plaintiffs' Motion ("Reply Memo."), at I. However, plaintiffs assert that since the Austrian Banks undertook "to make payments voluntarily not because of legal liability but out of a sense of moral responsibility," plaintiffs are entitled to the payment of interest. Id. at 1-2; see also Swift Decl. at ¶¶ 3, 5.
The Austrian Banks, in addition to denying the existence of an oral agreement, also argue that the motion fails as a matter of law. Furthermore, they argue that it would be "inequitable to saddle [them] with the obligation to pay interest for delays that were not of their doing and not even connected with the claims against them." Defendants' Memorandum of Law at 12. However, "the Austrian Banks have offered, ex gratia, to pay a further $1 million in addition to the $40 million specified in the Settlement Agreement." Moerdler Decl. at ¶ 5.
Under New York law, which the parties agree governs the Settlement Agreement, "[a] written agreement . . . which contains a provision to the effect that it cannot be changed orally, cannot be changed by an executory agreement unless such executory agreement is in writing and signed by the party against whom enforcement of the change is sought or by his agent." N.Y. Gen. Oblig. Law § 15-301(1) (McKinney 2001). "In general, therefore, a written agreement that expressly states it can be modified only in writing cannot be modified orally." Towers Charter Marine Corp. v. Cadillac Ins. Co., 894 F.2d 516, 522 (2d Cir. 1990); see also John St. Leasehold LLC v. Fed. Deposit Ins. Corp., 196 F.3d 379, 382 (2d Cir. 1999).
Where it is provided that modifications must be made in writing, "New York will enforce oral modifications in two circumstances — where there has been (1) partial performance or (2) reliance — but only where subsequent performance or reliance is unequivocally referable to the modification." John St. Leasehold, 196 F.3d at 382 (quotation omitted). "Thus, for either exception to apply, the conduct claimed to have resulted from the oral modification must be conduct that is inconsistent with the agreement as written." Towers Charter, 894 F.2d at 522.
In this action, the Settlement Agreement expressly states that "[t]his Agreement may not be modified or amended except in writing executed by Plaintiffs, Bank Austria and Creditanstalt and approved by the Court." Settlement Agreement at ¶ 42. The Settlement Agreement further states that it "supersedes all prior and contemporaneous undertakings of" the parties. Id.
Plaintiffs do not argue that as a result of the oral agreement the Austrian Banks partially performed or that they relied on such an agreement. Instead, plaintiffs contend that the Austrian Banks' position "is contrary to both the spirit and word of the Settlement Agreement." Reply Memo. at 2. This argument is unpersuasive. The Settlement Agreement expressly provides that the Austrian Banks would pay a total of $40 million in three installments. See Settlement Agreement at ¶¶ 9-10. If the Court were to enforce this alleged oral agreement and order the payment of interest, the Court would in effect modify the unambiguous terms of the Settlement Agreement. Thus, the Court finds that any such oral agreement is unenforceable as a matter of law.
As a result, the Court need not decide whether the parties reached an oral agreement with respect to the payment of interest.
It would also be inequitable to force the Austrian Banks to pay interest. The two installments of $15 million were each delayed approximately eight months through the actions of a class member. The Austrian Banks were not involved in that class member's objections to the Settlement Agreement. Therefore, the delay caused by the class member cannot be attributed to the Austrian Banks.
The Court disagrees with plaintiffs' assertion that the two $15 million installments were delayed by eighteen months. Plaintiffs' calculation covers the time period between when the parties signed the Settlement Agreement on March 15, 1999, and the expiration of time to petition for a Writ of Certiorari on August 14, 2000. According to the Settlement Agreement, the two $15 million installments would be paid a certain period of time after entry of the final judgment. See Settlement Agreement at ¶ 9. The two installments were delayed by only eight months, the amount of time between the Court's Final Order and Judgment dated January 18, 2000 and the expiration of time to petition for a Writ of Certiorari on August 14, 2000.
As indicated above, the Austrian Banks have recently offered to contribute an additional $1 million to the settlement fund. See Moerdler Decl. at ¶¶ 5-6. The Court accepts this offer, and instructs the Austrian Banks to pay $1 million to the settlement fund. This money will then be disbursed to appropriate class members.
CONCLUSION
For the reasons set forth above, plaintiffs' motion for an order compelling the Austrian Banks pay interest on the two $15 million installment payments is denied. The Austrian Banks, pursuant to their offer, are hereby ordered to pay $1 million to the settlement fund.
SO ORDERED.