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JP Morgan Securities, Inc. v. Spiegel, Inc.
Citation: 175 F. App'x 409Docket: No. 05-4165-BK
Court: Court of Appeals for the Second Circuit; March 29, 2006; Federal Appellate Court
The judgment of the district court is vacated and the case is remanded for further proceedings. JP Morgan Securities, Inc. appealed the district court's ruling, which affirmed the bankruptcy court’s decision that Morgan was not entitled to a $3.5 million transaction fee for financial services provided to Spiegel, Inc. under an Engagement Letter. The Engagement Letter stipulated that a "Transaction" triggering the fee occurs when a new entity acquires a material portion of Spiegel's credit card business. Both lower courts determined that an agreement between Spiegel and World Financial Network National Bank, which granted World Financial exclusive rights to issue private label credit cards, did not qualify as a "Transaction" since it did not involve an acquisition of Spiegel's assets. The bankruptcy court concluded that the Engagement Letter required an actual sale, while the district court maintained that an "acquisition" necessitated continuity in the transferred assets. The appellate court agreed with the district court's rejection of the bankruptcy court’s reasoning, affirming that the Engagement Letter's terms do not mandate a sale. However, the appellate court found the district court's rationale for denying Morgan's claim flawed, noting that the credits processed by World Financial were not the same as those previously handled by Spiegel’s subsidiary, FCNB. The Engagement Letter does not explicitly require the transfer of the same transactions or credits to the acquiring entity. The bankruptcy court and district court's reasons for disallowing Morgan’s claim are rejected, but there is insufficient evidence to determine if Morgan was entitled to the fee. Although both parties assert that the contract terms are clear, they interpret those terms differently, indicating potential ambiguity. The court does not take a position on whether ambiguities exist in the Engagement Letter or other factual issues that may impact the dispute. The dismissal of Morgan’s claim is vacated, and the case is remanded for further proceedings. It is determined that the Engagement Letter clearly entitles Morgan to reimbursement for reasonable expenses incurred, regardless of any transaction conditions. The district court is instructed to assess the reasonableness of Morgan’s claimed expenses and award the appropriate amount.