Commercial Division Blog

Posted: March 19, 2017 / Categories Commercial, Contracts

Assignment of Claim"Of Any Nature Whatsoever" Sufficient to Assign Tort Claims

On March 6, 2017, Justice Scarpulla of the New York County Commercial Division issued a decision in Optimal Strategic U.S. Equity Ltd. v. SPV OSUS Ltd., 2017 NY Slip Op. 50284(U), holding that the assignment of a claim "of any nature whatsoever" was sufficient to assign a tort claim, explaining:

Under New York law, absent language demonstrating an intent to do so, tort claims do not automatically pass to an assignee.

There must be some demonstrated and direct intent to assign claims sounding in tort in an assignment, but New York law does not require any specific language to accomplish the transfer of tort causes of action. Rather, words are sufficient which show an intention of transferring such rights.

The Banque Arabe court specifically held that the phrase "all of [the assignor's] rights, title and interest" in a loan participation agreement was not demonstrative of an intent to assign a claim against the lead lender for rescission of that agreement based on fraud claims, concluding that this reference to the contract may be deemed insufficient under Fox to transfer claims for rescission or fraud in the inducement. Nevertheless, the Banque Arabe court did conclude there was a valid assignment of fraud claims as a result of broader language elsewhere in the assignment. There was also a transfer of all of the assignor's rights and interest in the loan transaction, which was construed to be broader than an interest in the contract and, thus, sufficient to effect the assignment of tort claims based on fraud.

The Assignment at issue in this case, like the assignment in the Banque Arabe case, does much more than assign to SPV all of OSUS's "rights, title and interest in and to the" Allowed Claim. Section 1 (b) of the Assignment also transferred to SPV "all rights and benefits of Assignor related to the Purchased Claim, including . . . (ii) any action or claim . . . of any nature whatsoever, whether against the Debtor or any other party, arising out of or in connection with the Purchased Claim" (emphasis added). This language plainly includes third-party tort claims, so long as the claims arise out of, or are in connection with, the Allowed Claim.

(Internal quotations and citations omitted).