Opinion
Index No. 651532/2011 Motion Sequence No. 005
02-08-2012
ARAMID ENTERTAINMENT FUND, LTD., ARAMID CAPITAL PARTNERS LLP, SCREEN CAPITAL INTERNATIONAL CORP., Plaintiffs, v. WIMBLEDON FINANCING MASTER FUND, LTD., WFM HOLDINGS LTD., STILLWATER CAPITAL PARTNERS, INC., STILLWATER MARKET NEUTRAL FUND III SPC, GEROVA FINANCIAL GROUP, LTD., FORTIS BANK CAYMAN, LTD., JOSEPH BIANCO, DAVID BERGSTEIN, CHARLES, FREDERIC & CO., and JOHN DOES 1-10, Defendants.
DECISION AND ORDER
MELVIN L. SCHWEITZER , J.:
Defendants have filed a motion to dismiss the complaint pursuant to CPLR 3211 (a)(7).
Background
This dispute is fundamentally a claim of tortious interference with a proposed transaction between the primary plaintiff, Aramid Entertainment Fund. Ltd. (Aramid), and a third party, ABRY Partners (ABRY). The primary defendants are Gerova Financial Group, Ltd. (Gerova) and its former CEO. Joseph Bianco (Mr. Bianco). Additional plaintiffs are Aramid Capital Partners (TSP). which provides technical services lo and holds the voting shares of Aramid, and Screen Capital International Corp. ("SCJ"). a finance specialist which provides advisory services to Aramid.
In early 2010 Aramid sought to sell its asset portfolio. Gerova, a shareholder of Aramid. presented a proposal in which Aramid's portfolio would be purchased in exchange for restricted common shares of Gerova stock. In June 2010, Aramid's shareholders rejected this oiler and instead authorized Aramid's Board of Directors to pursue a transaction with a third party, ABRY.
In June of 2010, ABRY tendered an offer to purchase Aramid's assets for $130 million. At the request of the Aramid Board. ABRY revised this offer to provide more favorable terms and resubmitted it in July of 2010. The offer was subject Only to specific confirmatory diligence and the approval of the Aram id Board and voting shareholders.
Plaintiffs allege that in August 2010 Mr. Bianco participated in email and online discussions with Arainid shareholders in which he claimed that Aramid's assets were overvalued and that the shareholders were being defrauded. Plaintiffs allege that Mr. Bianco did this ''inorder to deliberately create discord within plaintiffs' relationships with its shareholders'' in revenge for the rejection of his proposal. However. the amended complaint also alleges that Mr. Bianco did this "to acquire Aramid's diverse and valuable portfolio of entertainment assets 'on the cheap.'"
Plaintiff TSP is the sole holder of the voting shares of Aramid. After the interactions between Mr. Bianco and other Aramid shareholders, TSP concluded that "because of shareholder turmoil, and the very real possibility of shareholder lawsuits . . . TSP was unable to approve the ARBY offer." It seems from the complaint that ARBY did not withdraw the offer; instead, plaintiffs declined it and then chose to sue for tortious interference.
The complaint is significantly complicated by the inclusion of many other defendants and an alleged connection between the events recited above and an unrelated bankruptcy filing. In March 2010. plaintiffs allege that Aramid led a group of creditors in forcing five holding companies into involuntary bankruptcy. These companies were controlled by defendant David Bergstein (Mr. Bergstein), allegedly a business confederate of Mr. Bianco. Plaintiffs claim that this bankruptcy filing was an additional reason Mr. Bianco sought revenge on Aramid, and allege that Mr. Bergstein made several threatening statements to David Molner. a principal of TSP and SCI, and made false statements about the financial health of Aramid to the entertainment industry press. Additionally, plaintiffs base their claims against Mr. Bianco on a declaration he made in the bankruptcy proceeding in which he claimed that Aramid was in financial distress.
Additional defendants include Wimbledon Financing Master Fund. Ltd., WFM Holdings Ltd., Stillwater Capital Partners. Inc., and Stillwater Market Neutral fund III SPC. Plaintiffs allege that these entities held non-voting shares of Aramid and merged with Gerova during 2010. Also named as defendants are Fort is Bank Cayman Ltd. and Charles. Frederick & Co.. registered custodians for Wimbledon Financing Master Fund and Stillwater Market Neutral Fund, respectively, and John Does I-10. which are not mentioned in the complaint. The purported basis for any of these entities' liability is not clear.
Plaintiffs have alleged causes of action for tortious interference with prospective economic advantage, prima facie tort, and willful misconduct. Defendants move to dismiss pursuant to CPLR 3211 (a)(7).
Discussion
Plaintiffs' first claim is for tortious interference with prospective economic advantage. A tortious interference claim requires that plaintiffs allege that defendants' actions caused economic harm to the plaintiffs. Plaintiffs must allege that they would have received some economic advantage "but for" the interference of defendants. See Gebbia v Toronto-Dominion Bunk, 306 AD2d 37, 38 (1st Dept 2003) (dismissing a claim because there was no sufficient allegation that a contract would have been entered into but tor defendant's interference); Risley v Rubin. 272 A D2d 198, 199 (1st Dept 2000) (dismissing a claim because plaintiff did not demonstrate he would have received economic advantage but for the interference). Plaintitis do not allege that Mr. Bianco's actions caused the failure of the deal between Aramid and ABRY. Instead, the complaint, admits that one of the plaintiffs, TSP, voluntarily chose not to accept ABRY's offer. While this choice may have been motivated by shareholder dissent, plaintiffs do not allege that any of the defendants took actions which caused ABRY to withdraw the offer, or in any way made it impossible for TSP to accept the offer. Plaintiffs have not alleged causation.
Plaintiff's second claim is for prima facie tort, which requires both special damages and the allegation that defendants were "solely motivated by malice or "disinterested malevolence.'" Gohib v Esquire Pub. Inc., 124 AD2d 528, 529 (1st Dept 1986); see also Posner v Lewis, 80 AD3d 308, 312 (1st Dept 2010). Plaintiffs' claim fails on both fronts. Not only is there a plausible motivation, other than disinterested malevolence, for defendants" alleged behavior, plaintiffs themselves describe this economic motivation in the amended complaint. Plaintiffs also fail to allege special damages.
Finally, plaintiffs' third claim for willful misconduct is not a cause of action under New York law. Plaintiffs cite one ease in support. Coco Investments. LLC v Zamir Manager River Terrace LLC. However, liability for willful misconduct" in that case was established by contract. 2010 NY Slip Op. 50332U, at *6 (Sup. Ct. 2010). Furthermore, the specific definition of willful misconduct which plaintiffs cite is from Delaware law.
Conclusion
Plaintiffs have failed to stale a cause of action for tortious interference, prima facie tort, or willful misconduct.
Accordingly, it is
ORDERED that all claims by plaintiffs are dismissed.
ENTER:
_________
MELVIN L. SCHWEITZER
J.S.C.