Opinion

Miami Metals I, Inc., et al.

Court: United States Bankruptcy Court, S.D. New York
Filed: Oct 15, 2021
Cited by: 0 cases
Authority: More cited than 30.2%

judges must look at the totality of circumstances and are not bound by labels

How later courts described this case

judges must look at the totality of circumstances and are not bound by labels
courts are not bound by labels used by the parties
“Choice of law does not matter, however, unless the laws of the competing jurisdictions are actually in conflict. . . . In the absence of substantive difference, however, a New York court will dispense with choice of law analysis[.]”
“[W]here the transaction is denominated a lease, the burden is upon the [opposing party] to demonstrate that the transaction is in fact a disguised security interest rather than a true lease.”

Written by the judges who cited it.

The opinion

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

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In re: Chapter 11

MIAMI METALS I, INC., et al., Case No. 18-13359 (SHL)

Liquidated Debtors. (Jointly Administered)

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MEMORANDUM OF DECISION ON CROSS MOTIONS FOR SUMMARY

JUDGMENT OF THE SENIOR LENDERS, SCMI AND THE LEVINE PARTIES

A P P E A R A N C E S:

AKERMAN LLP

Counsel for the Debtors

2001 Ross Avenue

Suite 3600

Dallas, TX 75201

By: Yelena E. Archiyan, Esq.

LUSKIN, STERN & EISLER LLP

Attorneys for Senior Lenders

Eleven Times Square

New York, NY 10036

By: Michael Luskin, Esq.

Stephan A. Hornung, Esq.

Alex Talesnick, Esq.

BORGES & ASSOCIATES, LLC.

Attorneys for SCMI US Inc.

575 Underhill Blvd – Ste 118

Syosset, New York 11791

By: Wanda Borges, Esq.

Sue L. Chin, Esq.

SHUMAKER, LOOP & KENDRICK, LLP

Counsel to Mitchell Levine, and Erie Management Partners, LLC

101 E. Kennedy Blvd., Suite 2800

Tampa, Florida 33602

By: Steven M. Berman, Esq.

STEINHILBER SWANSON LLP

Co-Counsel to Mitchell Levine, and Erie Management Partners, LLC

112 W. Washington, Suite 850

Madison, WI 53703

By: Michael P. Richman, Esq.

ARNOLD & PORTER KAYE SCHOLER LLP

Attorneys for Tiffany & Co.

250 West Fifth Street

New York, NY 10019

By: Benjamin Mintz, Esq.

SEAN H. LANE

UNITED STATES BANKRUPTCY JUDGE

Before the Court are motions for summary judgment filed by the Senior Lenders in this

case as to two groups of customers of the above-captioned Debtors (the “Debtors”): 1) SCMI US

Inc. (“SCMI”); and 2) Mitchell Levine and Erie Management Partners, LLC (the “Levine

Parties”).1 See Memorandum of Law in Support of the Senior Lenders’ Motion for Summary

Judgment as to Customer Statement of SCMI US Inc. [ECF No. 1731] (“Senior Lenders’ SCMI

Motion”); Memorandum of Law in Support of the Senior Lenders’ Motion for Summary

Judgment as to Customer Statements of Mitchell Levine and Erie Management Partners, LLC

[ECF No. 1759] (“Senior Lenders’ Levine Motion”). SCMI and the Levine Parties have filed

cross motions for summary judgment against the Senior Lenders as well. See Motion for

Summary Judgment as to Title Property Claim of Mitchell Levine and Erie Management

Partners, LLC and Supporting Memorandum of Law [ECF No. 1752] (“Levine’s Motion”);

Memorandum of Law of SCMI US Inc. in Support of Cross-Motion for Summary Judgment and

1 The “Senior Lenders” are Coöperatieve Rabobank U.A., New York Branch, Brown Brothers Harriman &

Co., Bank Hapoalim B.M., Mitsubishi International Corporation, ICBC Standard Bank Plc, Techemet Metal Trading

LLC, Merced Partners Limited Partnership, Athilon Capital Corp. LLC, and Hain Capital Investors Master Fund,

Ltd. Senior Lenders’ SCMI Motion at 5.

in Opposition to the Senior Lenders’ Motion for Summary Judgment [ECF No. 1769] (“SCMI’s

Motion”).

The motions concern who owned precious metals deposited by these customers with the

Debtors. If the metals were owned by the Debtors, the metals—or their cash equivalent—is

available to pay the claims of the Senior Lenders in these bankruptcy cases. If the metals were

owned by the customers, the customers are entitled to receive the full value of the metals.

In support of their respective summary judgment motions, the parties have submitted

statements of undisputed facts and various evidence.2 On October 19, 2020, a hearing on these

arguments took place before this Court. For the reasons set forth below, the Court denies the

cross motions as to SCMI, grants the Senior Lenders’ motion as to the Levine Parties and denies

the motion filed by the Levine Parties.

BACKGROUND

A. The Chapter 11 Cases

The Debtors were in the business of refining precious metals that they received from their

customers. Each Debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy

Code on either November 2, 2018 or November 21, 2018 [ECF No. 1 in each Debtor case] (the

“Petition Date”).

2 Senior Lenders’ Statement of Undisputed Facts Pursuant to S.D.N.Y. Local Bankr. Rule 7056-1 [ECF No.

1730] (“Senior Lenders’ 7056 Statement re SCMI”); Mitchell Levine and Erie Management Partners, LLC’s

Statement of Undisputed Facts Pursuant to S.D.N.Y. Local Bankr. Rule 7056-1 [ECF No. 1753] (“Levine’s 7056

Statement”); The Senior Lenders’ Statement of Undisputed Facts Pursuant to S.D.N.Y. Local Bankr. Rule 7056-1

[ECF No. 1758] (“Senior Lenders’ 7056 Statement re Levine”); SCMI US Inc.’s Statement of Undisputed Facts and

Response to the Senior Lenders’ Joint Statement of Undisputed Facts Pursuant to S.D.N.Y. Local Bankr. Rule 7056-

1 [ECF No. 1768] (“SCMI’s 7056 Statement”); Mitchell Levine and Erie Management Partners, LLC’s Response to

Senior Lenders’ Statement of Undisputed Facts Pursuant to S.D.N.Y. Local Bankr. Rule 7056-1 [ECF No. 1775]

(“Levine’s 7056 Response”); Senior Lenders’ Response to Mitchell Levine and Erie Management Partners, LLC’s

Statement of Undisputed Facts Pursuant to S.D.N.Y. Local Bankr. Rule 7056-1 [ECF No. 1779] (“Senior Lenders’

Response to Levine’s Statement”); Senior Lenders’ Response to SCMI US Inc.’s Statement of Undisputed Facts

Pursuant to S.D.N.Y. Local Bankr. Rule 7056-1 [ECF No. 1790] (“Senior Lenders’ Response to SCMI’s

Statement”).

On December 23, 2019, the Court entered an order confirming the Debtors’ Second

Amended Joint Chapter 11 Plan of Liquidation [ECF No. 1491-2] (the “Plan”). See Findings of

Fact, Conclusions of Law, And Order Pursuant to Sections 1129(a) and (b) of the Bankruptcy

Code and Rule 3020 of the Federal Rules of Bankruptcy Procedure Confirming Debtors’ Second

Amended Joint Chapter 11 Plan of Liquidation [ECF No. 1668]. The Effective Date of the Plan

occurred on January 7, 2020, and the Plan was substantially consummated. See Notice of (A)

Occurrence of the Effective Date of Plan, (B) Deadline to File Administrative Claims and (C)

Deadline to File Rejection Damages Claims [ECF No. 1682].

B. The Ownership Disputes

In the first month of these cases, the Debtors filed the Motion for Entry of Interim and

Final Orders (I) Authorizing the Debtors to Use Cash Collateral (II) Granting Adequate

Protection to the Secured Parties, (III) Scheduling a Final Hearing and (IV) Granting Related

Relief [ECF No. 10] (“Cash Collateral Motion”), seeking Court authorization for the use of cash

collateral. Various customers of the Debtors filed more than 40 objections and responses to the

Cash Collateral Motion, asserting ownership interests in certain raw metals and other assets that

the Debtors believed were property of the bankruptcy estate (collectively, the “Ownership

Disputes”). To facilitate efficient resolution of the Ownership Disputes, the Court entered the

Order Approving Uniform Procedures for Resolution of Ownership Disputes [ECF No. 395],

which was subsequently amended on several occasions. See ECF No. 913, ECF No. 1196 and

ECF No. 1516 (collectively, the “Uniform Procedures Order”). Under the Uniform Procedures

Order, customers were categorized and grouped into various “buckets” for resolution based on

the type of contract governing each customer’s relationship with the Debtor. The Levine Parties

and SCMI are part of the so-called Bucket 8 group of customers in this case.

The Court has already made rulings as to several of the Ownership Disputes.

In August 2019, the Court granted summary judgment for the Debtors and Senior

Lenders on a subset of the Debtors’ customers in Bucket 1, whose relationships were governed

by the so-called Standard Terms (“Standard Terms”) of Debtor Republic Metals Corporation

(“RMC”). See In re Miami Metals I, Inc., 603 B.R. 727 (Bankr. S.D.N.Y. 2019) (the “Bucket

One Decision”). In that decision, the Court concluded that the Standard Terms established a sale

of precious metal to Debtor RMC as opposed to a bailment relationship where ownership

remained with the customers. See id. at 735. In reaching its decision, the Court noted that the

metal to be returned to the customers after refining by RMC was simply metal of “like kind,”

rather than the identical metal deposited by the customer or the same metal in altered form. Id. at

736. As such, the Court held that the disputed assets were property of the estate and that the

subset of Bucket One customers lacked any ownership interests in the disputed assets. Id. at 742.

In January 2021, the Court denied summary judgment as to the Debtors and Senior

Lenders with respect to customer Premier Gold Mines Limited, concluding that there were

disputed issues of material fact as to whether the precious metal given by Premier Gold to Debtor

RMC was a sale or a bailment. Decision and Order Denying Summary Judgment [ECF No.

1939] (the “Buckets 3-5 Decision”). More specifically, the Court concluded that there were

material differences between the Standard Terms at issue in the Bucket One Decision and the

agreement governing Premier Gold such that a trial was necessary to determine the intent of the

parties. Id. at 23.

The cross motions for summary judgment currently before the Court address whether the

agreements between the Debtor RMC and these customers are leases—with the precious metal in

question remaining property of the customers—or agreements that conveyed the property to

Debtor RMC. There are different agreements at issue in each set of motions, so the Court will

discuss each separately.

C. SCMI

SCMI and RMC entered into a Master Agreement for Precious Metals Transactions in

2017 [ECF No. 1812-1] (the “Master Agreement”); see Senior Lenders’ 7056 Statement re SCMI

¶ 11. The Master Agreement is governed by New York law. Master Agreement, Section 12.2.

The Master Agreement contains three annexes, and the parties agree that transactions at issue

here are governed by Annex II, which is entitled “Leases.” Senior Lenders’ 7056 Statement re

SCMI ¶ 12; SCMI’s 7056 Statement ¶¶ 12, 52. Annex II provides:

Pursuant to Clause 4.1, this Annex II sets out the terms of Leases, where a

“Lease” means a Transaction for the bailment of Precious Metal, whereby

one . . . Party as bailor (“the Lessor”) on an agreed date (“the Delivery

Date”) delivers an agreed quantity of Material (“the Leased Material”) to

the possession of the other Party as bailee (“the Lessee”) at an agreed

Delivery Location, on terms that the Lessee: (i) has the right to enjoy quiet

possession of the Leased Material until an agreed future date (“the Expiry

Date”), (ii) on the Expiry Date must redeliver the Leased Material to the

Lessor at an agreed Delivery Location (“the Return Location”) and (iii)

must pay an agreed sum (“the Lease Fee”) to the Lessor.

Senior Lenders’ 7056 Statement re SCMI ¶ 12; SCMI’s 7056 Statement ¶ 12; Master

Agreement, Annex II – Leases.

Pursuant to the Master Agreement, SCMI and RMC entered into eight transactions from

October 2017 through November 2018. SCMI’s 7056 Statement ¶ 53; Senior Lenders’ Response

to SCMI’s Statement ¶ 53. Under one such transaction, RMC leased 600,000 troy ounces of

precious metals (“Toz”) of silver from April 3, 2018 until May 3, 2018 for a fee of $15,557.3

3 “The troy ounce is the standard unit used to weigh precious metals like gold and silver. A troy ounce,

when converted into grams, is equal to 31.103 grams, which makes it heavier and therefore worth more than the

traditional ounce, equal to 28.349 grams.” What is a Troy Ounce?, GOLDSILVER, https://goldsilver.com/blog/what-

is-a-troy-ounce/ (last visited Oct. 12, 2021).

Senior Lenders’ 7056 Statement re SCMI ¶ 36; SCMI’s 7056 Statement ¶¶ 36, 53. At the

expiration of that term, the lease was rolled over three times; first until July 3, 2018, then again

until September 7, 2018, and for a third time until November 7, 2018. Id. Fees of $32,179.53,

$33,968.00, and $28,880.86, respectively, were due for each of those three respective,

subsequent terms. Id. On November 5, 2018—three days after these bankruptcy cases were

filed—SCMI demanded return of the 600,000 Toz of silver as property of SCMI.4 SCMI’s 7056

Statement ¶ 73; Senior Lenders’ Response to SCMI’s Statement ¶ 73. On November 7, 2018,

the final expiration date of the last rollover from the April 3rd transaction, the final lease fee of

$28,880.86 was not paid to SCMI nor was the 600,000 Toz of unallocated silver returned.

Senior Lenders’ 7056 Statement re SCMI ¶ 41; SCMI’s 7056 Statement ¶¶ 74-75.

The Master Agreement placed no restrictions on RMC’s use of pool account silver credits

during the duration of each term. Senior Lenders’ 7056 Statement re SCMI ¶ 19; SCMI’s 7056

Statement ¶ 19. Indeed, both parties agree that the Master Agreement allowed RMC to freely

use the pool account silver credits without restrictions. Id.; see also Master Agreement, Annex

II.A.1.

SCMI contends that these transactions are plain, straightforward leases and, therefore, the

silver in question is owned by SCMI. SCMI’s Motion at 7-8. If the Court finds a true lease,

SCMI would be entitled to a return of 600,000 Toz of silver or the cash equivalent of $8,652,000

currently held in escrow in this case. Id. at 7, 16. But Senior Lenders dispute that any silver in

RMC’s possession on the Petition Date was property of SCMI and contend that any silver in the

possession of RMC was subject to the Senior Lenders’ lien. Senior Lenders’ Response to

4 SCMI filed their initial customer statement on January 17, 2019 [ECF No. 428] and filed their amended

customer statement on September 13, 2019 [ECF No. 1408].

SCMI’s Statement ¶ 73. Senior Lenders dispute that any true lease could exist here, noting that

the silver in question was merely a metal credit in the Loco London exchange rather than any

specifically identifiable silver.5 Senior Lenders’ Response to SCMI’s Statement ¶¶ 53, 58-61,

63-68. The Senior Lenders instead assert that these transactions were in fact disguised financing

arrangements and were treated as such on SCMI’s own books and records. Senior Lenders’ 7056

Statement re SCMI ¶ 38.

Senior Lenders emphasize that prior to the Petition Date, RMC’s Loco London account

was zeroed out and closed. Senior Lenders’ 7056 Statement re SCMI ¶ 39; SCMI’s 7056

Statement ¶ 39. But an escrow account was set up in this case to set aside sufficient funds to pay

any valid ownership claims. See Memorandum of Decision on (I) Debtors’ PSA Motion and (II)

Joint Settlement Motion of Debtors, Official Committee of Unsecured Creditors, and Senior

Lenders [ECF No. 1318] (“PSA Decision”) at 8; Debtors’ Motion for Entry of an Order

Authorizing Debtors to Enter and Perform Under an Amended Plan Support Agreement [ECF

No. 1413] (“Revised PSA Motion”) at 6 of 59.

D. Mitchell Levine and Erie Management Partners

The second set of motions involves metal deposited with RMC by Mitchell Levine and

his companies. Mr. Levine has been involved in the precious metal industry for over 25 years,

and he founded a precious metal refinery company called Asset Recovery Management

(“ARM”). See Levine’s 7056 Statement ¶ 1; Senior Lenders’ 7056 Statement re Levine ¶ 22.

5 As “physical transfer of the precious metals is burdensome and expensive, industry participants generally

settle their transaction through the Loco London electronic clearing system.” Senior Lenders’ SCMI Motion at 5.

“All Loco London transactions are backed by silver that actually is physically in place in London.” SCMI’s 7056

Statement ¶ 31 (citing Hitoshi Ishida Tr.). “Customer pool accounts are entries in RMC’s books and records that

reflect RMC’s obligations to its Customers denominated in ounces of a specific type of metal.” Senior Lender’s

7056 Statement re Levine ¶ 14; Levine’s 7056 Response (contending that the metals in the pool account were indeed

a reflection of the metals held by RMC).

Erie Management Partners, LLC is the successor to ARM. Levine’s 7056 Statement ¶ 12.6 Mr.

Levine contends that his relationship began with RMC’s Richard Rubin in the 1990s when Mr.

Levine initially deposited his metals, and the relationship continued with other employees under

the same terms as originally struck. Levine’s 7056 Statement ¶¶ 2, 14. For more than 20 years,

Mr. Levine and ARM sent for further refining hundreds of lots of gold, silver and platinum to

RMC. Levine’s 7056 Statement ¶ 3. Levine contends that, throughout that time, he had the

option to (i) take delivery of the refined metal, (ii) sell the metal to RMC for payments, or (iii)

retain the metal in his pool account with RMC. Id.7

Around 2008, Mr. Levine closed his refining business due to health issues but kept his

inventory of gold and silver with RMC, both individually and in the name of Erie Management.

Senior Lenders’ 7056 Statement re SCMI ¶ 24; Levine’s 7056 Response ¶ 24. Mr. Levine and

the Senior Lenders agree that his individual pool account of metal has remained static since

2008, consisting of some 2,323.908 Toz. of gold and 57,663.822 Toz. of silver. Senior Lenders’

7056 Statement re Levine ¶ 28; Levine’s 7056 Response ¶ 28. The parties agree that all of Erie

Management’s gold and silver was delivered (at least) prior to January 1, 2015. Senior Lenders’

7056 Statement re Levine ¶ 29; Levine’s 7056 Response ¶ 29. Indeed, the Levine Parties

contend that Erie Management’s silver was delivered even sooner, prior to 2011. Levine’s 7056

Response ¶ 21.

The Levine parties and Senior Lender have not provided any written agreement between

the parties up through and including 2013. But starting in 2014, Mr. Levine signed three

versions of RMC’s Standard Terms: the first dated April 14, 2011 on behalf of Erie

6 Levine and Erie Management Partners filed their customer statement on January 18, 2019 [ECF No. 468].

7 Regarding this third option of retaining metal in pool accounts, the Senior Lenders dispute that Mr. Levine

in fact had that option and argue instead, upon delivery to RMC, title transferred to RMC under section 2-401 of the

UCC. Senior Lenders’ Response to Levine’s 7056 Statement ¶ 3.

Management, the second dated December 13, 2013 as an update again on behalf of Erie

Management, and the third dated October 14, 2014 on behalf of Mr. Levine, individually. Senior

Lenders’ 7056 Statement re Levine ¶ 21; Levine’s 7056 Response ¶ 21.

Each of the three Standard Terms provides that the customer has a “pool account” which

is a “ledger account representing the amount of returnable metal owed to Customer (if account

reflects a positive balance), or the amount of metal owed to RMC (if the account reflects a

negative balance).” Declaration of Stephan E. Hornung in Support of the Senior Lenders’

Motion for Summary Judgment as to Customer Statements of Mitchell Levine and Erie

Management Partners, LLC [ECF No. 1810] (the “Hornung Decl.”), Ex. A. As discussed in the

Bucket One Decision, the Standard Terms provide that the metals in a pool account is

“fungible,” such that:

[A]ny unit of material is equivalent to another of like kind i.e. similar quality

and/or value, and is deemed adequate payment for purposes of outstanding Pool

Accounts. Returnable metal represented in a Customer Pool Account does not

pertain to specific, segregated, or identifiable metal; rather, it represents a future

obligation of RMC to return common inventory of gold, silver, platinum,

palladium, or metals owed to Customer. RMC reserves the right to return precious

metals to Customer of like kind representing the ounces of precious metals owed

to Customer.

Hornung Decl., Ex. A; Bucket One Decision at 736. The Court concluded in the Bucket One

Decision that these Standard Terms established a sale as opposed to a bailment relationship given

that the Debtors were under no obligation to return the same metal deposited by the customer.

Bucket One Decision at 735-36.

In January 2015, Mr. Levine approached RMC to discuss income-generating alternatives

to simply storing the metals. Senior Lenders’ 7056 Statement re Levine ¶ 30; Levine’s 7056

Statement ¶ 15. Beginning in February 2015 and continuing through October of 2018—the

month preceding the Petition Date of these chapter 11 cases—RMC paid a monthly fee to Mr.

Levine and Erie Management. Levine’s 7056 Statement ¶¶ 16-17; Senior Lenders’ 7056

Statement re Levine ¶ 32. These payments were calculated by multiplying the precious metal

pool account balances of the Levine Parties by the average daily second London fix price, and

then by the agreed upon rate of 1.35 percent. Levine’s 7056 Statement ¶ 16; Senior Lenders’

7056 Statement re Levine ¶ 32. RMC’s monthly fee invoices to the Levine Parties state that

these fees were governed by RMC’s Standard Terms. Senior Lenders’ 7056 Statement re Levine

¶ 32.

While Mr. Levine confirms that he executed the Standard Terms on three occasions, he

disputes that those terms govern the parties’ relationship to the extent that his metals were

delivered to RMC before the execution of the Standard Terms. Levine’s 7056 Response ¶ 21.

As all of Mr. Levine’s metals were delivered prior to 2008 and all of Erie Management’s by

2011 (according to the Levine Parties), the Levine Parties contend that these metals should be

treated differently than the other pool account customers addressed in the Bucket One Decision.

Senior Lenders’ 7056 Statement re Levine ¶ 28, 29; Levine’s 7056 Response ¶ 21. Because the

Levine Parties contend that their pool account balances were largely consistent before the first

Standard Terms were signed in 2011, the Levine Parties believe the Standard Terms should not

usurp the existing relationship under which the metals previously had been held. Levine’s 7056

Response ¶ 21. In short, Mr. Levine contends that his relationship with the Debtor RMC should

be governed by Mr. Levine’s original agreement with Richard Rubin. Id. (citing Levine Tr. and

the Declaration of Mitchell Levine in Support of Motion for Summary Judgement [ECF No.

1754] (the “Levine Decl.”) ¶ 9). As for the fee, Mr. Levine believes that RMC stored his metal

and paid him rent, citing compliance documentation whereby RMC was used “for storage.”

Levine’s 7056 Statement ¶ 8. While no written lease has been provided by either party to the

Court, Senior Lenders’ 7056 Statement re Levine ¶ 33; Levine’s 7056 Response ¶ 33, the Levine

Parties rely upon Section 2A-204 of the Uniform Commercial Code (the “U.C.C.”), to argue that

a lease was created. Levine’s Motion at 25. The Levine Parties contend that the parties used the

standard form for the lease invoices because “the system wasn’t set up to have a specific lease

fee letterhead or label.” Levine’s 7056 Response ¶ 32 (citing Jason Rubin Tr.). They contend

that the “invoices were sent using RMC’s form ‘purchase invoice’ (which therefore necessarily

included its form language that purchases were governed by RMC’s Standard Terms).” Id. 8

The Senior Lenders contend that the metal in question is not the property of the Levine

Parties and instead was owned by RMC. Senior Lenders’ 7056 Response re Levine ¶ 6. Citing

to the Standard Terms and this Court’s Bucket One Decision, the Senior Lenders purport the

deposit of these metals to be akin to a sale as governed by RMC’s Standard Terms. Senior

Lenders’ 7056 Response re Levine ¶ 6. They assert that upon delivery to RMC for refining,

therefore, title to the raw materials transferred to RMC pursuant to Section 2-401 of the U.C.C.

Senior Lenders’ 7056 Response re Levine ¶ 5.

DISCUSSION

I. LEGAL STANDARDS

A. Summary Judgment

Federal Rule of Civil Procedure 56, as made applicable by Federal Rule of Bankruptcy

Procedure 7056, provides that summary judgment should be granted “if the movant shows that

there is no genuine dispute as to any material fact and the movant is entitled to judgment as a

8 But the Levine Parties also refuse to concede that no written lease exists. Levine’s 7056 Response ¶ 33

(citing Levine Decl. ¶ 21, Ex. 6 and Levine Tr.). They rely on a February 26, 2015 email from David Comite, CEO

of RMC, to Mr. Levine that “the required paperwork” for a lease proposal was being prepared and testimony from

Mr. Levine that he executed such a written lease. Id.; Levine Decl. Ex. 6 [ECF No. 1808]. Mr. Levine and Erie

Partners attribute the absence of the written lease to RMC’s failure to share a copy contemporaneously or produce it

with these bankruptcy proceedings. Levine’s 7056 Response ¶ 33.

matter of law.” Fed. R. Civ. P. 56. Summary judgment is proper “if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if any, show that

there is no genuine issue as to any material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 322

(1986) (quoting Fed. R. Civ. P. 56). A fact is “material” if it “might affect the outcome of the

suit under governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “The

party seeking summary judgment bears the burden of establishing that no genuine issue of

material fact exists.” Rodriguez v. City of New York, 72 F.3d 1051, 1060–61 (2d Cir. 1995). If

“the record taken as a whole could not lead a rational trier of fact to find for the nonmoving

party, there is no ‘genuine issue for trial.’” Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,

475 U.S. 574, 587 (1986) (quoting First Nat’l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253,

288 (1968)). “When the movant demonstrates through competent evidence that no material facts

are genuinely in dispute, the non-movant ‘must set forth specific facts showing that there is a

genuine issue for trial.’” Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d

Cir.1990) (quoting Fed. R. Civ. P. 56(e)); see also Lipton v. Nature Co., 71 F.3d 464, 469 (2d

Cir. 1995).

“In deciding whether material factual issues exist, all ambiguities must be resolved and

all reasonable inferences must be drawn in favor of the nonmoving party.” In re Ampal-Am.

Israel Corp., 2015 WL 5176395, at *10 (Bankr. S.D.N.Y. Sept. 2, 2015) (citing Matsushita Elec.

Indus., 475 U.S. at 587). “[T]he mere existence of some alleged factual dispute between the

parties will not defeat an otherwise properly supported motion for summary judgment[.]”

Anderson, 477 U.S. at 247–48. Properly supported facts included in a statement of material facts

that are not specifically controverted by an opposing party are deemed admitted. See S.D.N.Y.

Local Bankruptcy Rule 7056-1(d) (“Each numbered paragraph in the statement of material facts

required to be served by the moving party shall be deemed admitted for purposes of the motion

unless specifically controverted by a correspondingly numbered paragraph in the statement

required to be served by the opposing party.”).

Where a party has filed a cross-motion for summary judgment, as is the case here, the

Court must “pay particular attention to the parties’ respective burdens of proof, persuasion, and

production.” In re WorldCom, Inc., 339 B.R. 56, 23 (Bankr. S.D.N.Y. 2006). First, “[w]hen

faced with a cross-motion for summary judgment, the court must consider the merits of each

motion independently of the other.” Id. (citing Heublein, Inc. v. United States, 996 F.2d 1455,

1461 (2d Cir. 1993)). It may be implied through the filing of a cross-motion that the parties

agree no material issues of fact exist, but this Court is not bound by any such implicit

assumption. Id.; Aviall, Inc. v. Ryder System, Inc., 913 F. Supp. 826, 828 (S.D.N.Y. 1996), aff'd,

110 F.3d 892 (2d Cir.1997).

B. Choice of Law

The Senior Lenders and SCMI both agree that New York law applies to the Master

Agreement between SCMI and Debtor RMC and all disputes arising thereunder. Master

Agreement, Section 12.2; Reply Memorandum of Law in Further Support of the Senior Lenders’

Motion for Summary Judgment as to the Customer Statement of SCMI US Inc. and in

Opposition to SCMI US Inc.’s Cross-Motion for Summary Judgment [ECF No. 1791] (“Senior

Lenders’ Reply to SCMI”) at 18; SCMI’s Motion at 19.9

9 Despite a discussion in various pleadings of the law of the United Kingdom—and an expert on such law—

the parties agree that this dispute is not governed by English law. Reply Memorandum of Law of SCMI US Inc. in

Further Support of Cross-Motion for Summary Judgment and in Opposition to the Senior Lenders’ Motion for

Summary Judgement [ECF No. 1822] (“SCMI’s Reply”) at 15; Senior Lenders’ Reply to SCMI at 17.

As for Levine and Erie Management, Senior Lenders and the Levine Parties agree that

Florida law governs this dispute but that both Florida and New York law would create the same

outcome. Senior Lenders’ Levine Motion at 17; Levine’s Motion at 25, n.15.10

Since the outcome of the disputes is the same under both Florida and New York law, the

Court need not distinguish a choice of law analysis and will cite to both Florida and New York

statutes and case law. IBM v. Liberty Mut. Ins. Co., 363 F.3d 137, 143 (2d Cir. 2004) (“Choice

of law does not matter, however, unless the laws of the competing jurisdictions are actually in

conflict. . . . In the absence of substantive difference, however, a New York court will dispense

with choice of law analysis[.]”).

C. Applicable State Law

State law determines whether an agreement should be characterized as either a lease or a

financing arrangement. Butner v. United States, 440 U.S. 48, 54 (1979). “Whether an agreement

is a true lease or a secured financing arrangement under the Bankruptcy Code is a question of

state law.” In re Continental Airlines, Inc., 932 F.2d 282, 294 (3d Cir. 1991) (citing H.R. Rep.

No. 95–595, at 314 (1978), reprinted in 1978 U.S.C.C.A.N. 5963, 6271). When a transaction is

denominated as a lease, the burden of proof is on the party purporting it to be something else. In

re Zaleha, 159 B.R. 581, 586 (Bankr. D. Idaho 1993) (“[W]here the transaction is denominated a

lease, the burden is upon the [opposing party] to demonstrate that the transaction is in fact a

disguised security interest rather than a true lease.”).

Both Florida and New York have adopted versions of the U.C.C. The U.C.C. defines the

term “lease” as distinct from a “sale.” A lease is “a transfer of the right to possession and use of

10 As discussed, the only written agreements that exist between the parties are the Standard Terms signed on

three occasions. Hornung Decl., Ex. A, B, C. These Standard Terms all have a “Forum/Jurisdiction” paragraph

designating state or federal courts sitting in Miami-Dade County, Florida to hear any dispute, but they are silent on

choice of law.

goods for a term in return for consideration, but a sale, including a sale on approval or a sale or

return, or retention or creation of a security interest is not a lease.” N.Y. U.C.C. § 2-A-103(1)(j)

(McKinney 1995); FLA. STAT. § 680.1031(j) (1990). “Under New York law, the transfer of

absolute control and possession at an agreed rental distinguishes a lease from a different

arrangement.” In re Euro-American Lodging Corp., 365 B.R. 421, 430 (Bankr. S.D.N.Y. 2007).

The U.C.C. provides that a lease may be made “in any manner sufficient to show agreement,

including conduct by both parties which recognizes the existence of a lease contract.” N.Y.

U.C.C. § 2-A-204; FLA. STAT. § 680.204(1).

“A familiar and eminently sensible proposition of law is that, when parties set down their

agreement in a clear, complete document, their writing should as a rule be enforced according to

its terms.” W.W.W. Assocs. v. Giancontieri, 77 N.Y. 2d 157, 163 (1990). “Under New York

law, written agreements are construed in accordance with the parties’ intent and ‘[t]he best

evidence of what parties to a written agreement intend is what they say in their writing.’” Schron

v. Troutman Sanders LLP, 20 N.Y.3d 430, 436 (2013) (citing Slamow v. Del Col, 79 N.Y.2d

1016, 1018 (1992)). The case law is the same in Florida; a written agreement that is clear and

unambiguous on its face must be enforced according to its terms, with the actual language used

in the contract being the best evidence of the parties’ intent. Gibney v. Pillifant, 32 So. 3d 784,

785 (Fla. 2d Dist. Ct. App. 2010). “Evidence outside the four corners of the document as to what

was really intended but unstated or misstated is generally inadmissible to add to or vary the

writing.” W.W.W. Assocs., 77 N.Y. 2d at 163; see also Landmark Am. Ins. Co. v. Pin-Pon Corp.,

155 So. 3d 432, 437 (Fla. 4th Dist. Ct. App. 2015).

The plain meaning of terms in a written agreement is given serious weight. “[A] written

agreement that is complete, clear and unambiguous on its face must be enforced according to the

plain meaning of its terms.” Greenfield v. Philles Records, 98 N.Y. 2d 562, 569 (2002). “A

plain meaning analysis requires the term be associated with a meaning in a contract consistent

with its common usage.” Celotex Corp. v. AIU Ins. Co (In re Celotex Corp.), 175 B.R. 98, 107

(Bankr. M.D. Fla. 1994). “It is too well settled for citation that, if a written agreement contains

no obvious or latent ambiguities, neither the parties nor their privies may testify to what the

parties meant but failed to state.” Oxford Commercial Corp. v. Landau, 12 N.Y.2d 362, 364

(1963).

Thus, it is well established that “[p]arole evidence—evidence outside the four corners of

the document—is admissible only if a court finds an ambiguity in the contract.” Schron, 20

N.Y.3d at 436. The parole evidence rule “imparts stability to commercial transactions by

safeguarding against fraudulent claims, perjury, death of witnesses . . . infirmity of memory . . .

[and] the fear that the jury will improperly evaluate the extrinsic evidence.” W.W.W. Assocs.,

Inc., 77 N.Y.2d at 162 (citing Fisch, New York Evidence § 42, at 22 [2d ed.]).11

“Whether or not a contract provision is ambiguous is a question of law to be resolved by

a court.” Van Wagner Advert. Corp. v. S & M Enterprises, 67 N.Y.2d 186, 191 (1986). “[T]he

threshold decision on whether a writing is ambiguous is the exclusive province of the court.”

Sutton v. E. River Sav. Bank, 55 N.Y.2d 550, 554 (1982). In Florida, “[t]he determination of

whether the terms of a contract are ambiguous is a question of law.” PartyLite Gifts, Inc. v.

MacMillan, 895 F. Supp. 2d 1213, 1232 (M.D. Fla. 2012).

11 Under Florida law, parole evidence of a contemporaneous oral agreement is admissible—under the so-

called inducement exception—to vary, change or reform a written document, but not to directly contradict it.

Ungerleider v. Gordon, 214 F.3d 1279, 1284 (11th Cir. 2000). But the burden of proof for this inducement

exception is quite high, and no party here invokes this exception. See Ungerleider, 214 F.3d at 1285.

II. SCMI

Applying these legal standards to the undisputed facts, the Court concludes that the cross

motion for summary judgment as to SCMI must be denied. In short, the Master Agreement

between the parties is ambiguous as to whether the parties entered into a lease (as maintained by

SCMI) or a transaction that transferred ownership of the metal to Debtor RMC (as argued by the

Senior Lenders).

The Court must deny the Senior Lenders’ motion given the ample language in the Master

Agreement referring to this transaction as a lease. Both parties agree that Annex II of the parties’

agreement—entitled “Leases”—governs the transactions at issue. Senior Lenders’ 7056

Statement re SCMI ¶ 12; SCMI’s 7056 Statement ¶ 12. In describing the parties’ relationship,

Annex II repeatedly uses terms the term lease and other terms consistent with a lease transaction.

Master Agreement, Annex II. For example, it talks about the terms of the “Leases,” and refers to

a “Lessor,” “Lessee,” the “Leased Material, “and the “Lease Fee.”12 Master Agreement, Annex

II, § II.A.1; see N.Y. U.C.C. § 2-A-204 (McKinney 1995) (a lease may be formed “in any

manner sufficient to show agreement, including conduct which recognizes the existence of a

lease contract.”); FLA. STAT. § 680.204(1) (1990). The substantive terms of the agreement also

appear consistent with a lease. After the lease duration here, the Debtor RMC was required to

“redeliver” an equal amount of silver to SCMI or pay a default interest of LIBOR plus 1%.

Senior Lenders’ 7056 Statement re SCMI ¶ 20; SCMI’s 7056 Statement ¶ 20 (citing Master

Agreement §§ 1.1(7), 9.1(i)(b)).13

12 SCMI also points to numerous emails from around the time the Master Agreement was executed in October

of 2017, describing “leasing,” “lease transactions,” and “leasing AND trading.” SCMI’s 7056 Statement ¶¶ 48, 50,

52, 54-60, 63-69.

13 Alternatively, the parties could agree to extend the maturity date, commonly referred to as “rolling.” Id.;