In a unanimous decision, the New York Court of Appeals issued a ringing endorsement of the LSTA's position that the acceptance of an auction bid for the sale of a syndicated loan constitutes a final and binding trade, even if the trade remains subject to a final, written agreement.1 RK&O represented the LSTA in helping to secure this important result. 

In Stonehill Capital Management, LLC, et al. v. Bank of the West, Bank of the West ("BOTW") conducted an auction for the sale of certain non-performing mortgage loans. Plaintiff Stonehill Capital Management LLC ("Stonehill") submitted a firm bid to purchase one loan offered for sale in the auction. BOTW notified Stonehill by telephone that it had submitted the winning bid on that loan. Several days later, BOTW sent a written confirmation of the trade, including price, quantity and other material terms, but noting that the trade was "subject to mutual execution of an acceptable" loan sale agreement. The parties exchanged drafts of such an agreement but it was never finalized. 

Shortly after BOTW accepted the bid and confirmed the trade, the loan substantially increased in value due to a refinancing. BOTW announced to Stonehill that it was not going to proceed with the trade. BOTW took the position that it was under no obligation to do so because it had said in its confirmation that the trade was "subject to mutual execution of an acceptable" written agreement. 

Stonehill sued for breach and won a judgment in its favor at the trial court level. However, the First Department reversed in a troubling decision that, in the LSTA's view, was directly contrary to New York's long tradition of upholding the enforceability of oral agreements to trade. 

In a unanimous decision written by Judge Jenny Rivera, the Court of Appeals endorsed the LSTA's position that BOTW's acceptance of the winning bid was binding on the parties. The Court categorically rejected BOTW's argument that the confirmation's "subject to" language made the trade contingent on a final written agreement. The Court concluded that the totality of the parties' actions and communications reflected an agreement to trade and the Court was untroubled by the fact that a written agreement had not been finalized. Instead, the Court of Appeals, as a matter of law, reinstated the judgment against BOTW. 

Through its legislative and litigation efforts, the LSTA has long supported efforts to promote certainty in trade execution and settlement, including by treating as binding oral agreements to trade. The Stonehill decision is an important milestone in advancing those efforts.