LLFW Prevails on Summary Judgment, Defeating an Unconscionability Challenge to an ISDA Interest Rate Swap.

On July 16, 2012, the Supreme Court of New York, New York County granted LLFW's client, a money center investment bank, summary judgment on a suit to collect the early termination amount due under an interest rate swap under the International Swaps and Derivatives Association ("ISDA") Master Agreement. The defendant did not challenge the amount owed, but maintained that the contract was procedurally and substantively unconscionable.

The Court held that the contract was not procedurally unconscionable because defendant had sufficient time and resources to engage counsel to review the contracts, even though it failed to do so. And, on a question of first impression, the Court held that the additional early termination provisions of the ISDA Master Agreement, which gave LLFW's client a unilateral right to terminate the swap under the circumstances, were not substantively unconscionable. Rather, the Court held that those provisions were a reasonable allocation of risk, even if the results happened to be unfavorable to the bank's counterparty in this instance. The Court directed that judgment should be entered in favor of the bank, with attorneys' fees and interest.

The Court's decision can be found here.

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