## Facts

- Osborne Computer Corporation borrowed $15 million from Security Pacific National Bank in January 1983, and Security Pacific perfected its security interest by filing a UCC-1 financing statement.
- In April 1983, Security Pacific, Chemical Bank, and National Westminster Bank USA entered a $25 million syndicated credit facility for Osborne, with Security Pacific supplying 60% of the funds and Chemical and Westminster the remainder.
- The credit agreement designated Security Pacific as the lenders’ “agent” and limited the agent’s liability to “gross negligence or willful misconduct.”
- No new financing statement was filed after the syndicated facility to reflect or perfect Chemical’s and Westminster’s interests; only Security Pacific’s earlier perfected filing remained of record.
- Osborne filed for bankruptcy in September 1983; Security Pacific was treated as a secured creditor and was paid in full.
- Security Pacific distributed 40% of its recovery to Chemical and Westminster under the syndication agreement, but Chemical and Westminster were treated in bankruptcy as unsecured creditors for the portions not protected by a perfected filing.
- Chemical and Westminster sued Security Pacific, alleging the agent negligently failed to perfect security for the benefit of all lenders and breached fiduciary duties arising from its agency role.
- The district court granted summary judgment for Chemical and Westminster on negligence, but granted summary judgment for Security Pacific on breach of fiduciary duty.
- Both sides appealed.

## Issues

1. Whether the credit agreement’s exculpatory clause limiting the agent’s liability to “gross negligence or willful misconduct” barred recovery for an alleged failure to file a financing statement that, at most, constituted ordinary negligence.
2. Whether an “agent” designation in a syndicated credit agreement creates fiduciary duties to participating lenders beyond the duties stated in the agreement.

## Decision

- The Ninth Circuit reversed the negligence judgment for Chemical and Westminster.
- The court enforced the contractual limitation of liability and held the alleged failure to file did not meet the “gross negligence or willful misconduct” standard.
- The Ninth Circuit affirmed summary judgment for Security Pacific on the fiduciary-duty claim.
- The court held the agency role in this syndicated lending arrangement did not create a broad fiduciary relationship beyond the contract’s stated duties.

## Legal Principles

- In syndicated lending among sophisticated financial institutions, an agent bank’s duties to other lenders are defined primarily by the credit agreement, and clearly stated exculpatory clauses limiting liability (e.g., to gross negligence or willful misconduct) are generally enforceable.
- A participant lender cannot recover from the agent bank for conduct amounting only to ordinary negligence when the parties’ agreement contractually restricts liability to a heightened fault standard.
- Labeling a lender as “agent” in a syndicated loan does not, by itself, impose broad fiduciary obligations; absent explicit contractual undertaking, the agent’s obligations are limited to administrative and other duties specified in the agreement.

## Conclusion

The Ninth Circuit held that the lenders’ agreement controlled: the agent bank was not liable for ordinary negligence due to the exculpatory clause and did not owe participant lenders a broader fiduciary duty based solely on its role as “agent” in the syndicated credit facility.


Chemical Bank v. Sec. Pac. Nat'l Bank, 20 F.3d 375 (9th Cir. 1994)