Thanks for visiting! Welcome to a new way to research case law. You are viewing a free summary from Descrybe.ai. For citation and good law / bad law checking, legal issue analysis, and other advanced tools, explore our Legal Research Toolkit — not free, but close.
Gmac Commercial Corporation, Household Finance Corporation, Itt Commercial Finance Corporation, McDonnell Douglas Finance Corporation, and Westinghouse Credit Corporation v. Niagara Mohawk Power Corporation
Citations: 918 F.2d 19; 1990 U.S. App. LEXIS 19331Docket: 521
Court: Court of Appeals for the Second Circuit; October 31, 1990; Federal Appellate Court
Niagara Mohawk Power Corporation (NMPC) appealed a decision regarding its attempt to redeem preferred stock issued under agreements with institutional investors (Shareholders). The Shareholders were entitled to an 85% dividends received deduction (DRD) under tax law, which was reduced to 80% by the Tax Reform Act of 1986. This change triggered the Shareholders' right to indemnification from NMPC if their yield fell below a guaranteed level specified in the agreements. Although no Shareholders demanded indemnification, NMPC decided to redeem the stock, citing a substantial risk of indemnity payments. In July 1989, the Shareholders filed a lawsuit to declare NMPC's repurchase attempt void, claiming NMPC failed to make a good faith determination of risk. NMPC responded by seeking to compel arbitration based on the agreements. The district court denied this motion, referencing a similar case, McDonnell Douglas Fin. Corp. v. Pennsylvania Power & Light Co., which held that disputes regarding the utility's good faith did not fall under the arbitration clause. NMPC contended that distinguishing features in their case justified a different outcome, including differences in the arbitration clause language and prior affidavits from investors in McDonnell Douglas. However, the court found these distinctions irrelevant to the core conclusion of the McDonnell Douglas case, which focused on the arbitration clause's plain language and context. Consequently, the court affirmed the district court's decision, upholding the denial of NMPC's motion to compel arbitration.