Opinion
INDEX NO. 651176/2017
10-22-2020
CORTLANDT STREET RECOVERY CORP., Plaintiff, v. TPG CAPITAL MANAGEMENT, L.P., APAX PARTNERS LLP, DAVID BONDERMAN, JAMES COULTER, TPG GENPAR IV, L.P., TPG PARTNERS IV, L.P., TPG ADVISORS IV, INC.,T3 GENPAR II, L.P., T3 PARTNERS II, L.P., T3 PARALLEL II, L.P., APAX EUROPE VI GP, L.P., APAX PARTNERS EUROPE MANAGERS LTD., APAX WW NOMINEES LTD., APAX PARTNERS, L.P., APAX EUROPE VI-A, L.P., APAX EUROPE VI-I, L.P., APAX EUROPE VI GP CO. LTD., Defendant.
NYSCEF DOC. NO. 141 PRESENT: HON. CAROL R. EDMEAD Justice MOTION DATE 9/24/2020 MOTION SEQ. NO. 002 003 004
DECISION + ORDER ON MOTION
The following e-filed documents, listed by NYSCEF document number (Motion 002) 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 84, 85, 86, 87, 90, 92, 93, 100, 135 were read on this motion to/for DISMISSAL. The following e-filed documents, listed by NYSCEF document number (Motion 003) 101, 102, 103, 104, 105, 106, 109, 110, 111, 117, 118, 122, 123, 127, 128, 129 were read on this motion to/for MISCELLANEOUS. The following e-filed documents, listed by NYSCEF document number (Motion 004) 112, 113, 114, 115, 116, 119, 120, 121, 126, 131, 132 were read on this motion to/for AMEND CAPTION/PLEADINGS. Upon the foregoing documents, it is hereby
ORDERED that the motion (sequence number 002) of defendants Apax Partners LLP, Apax Europe VI GP Co., Ltd., Apax Europe VI GP, Ltd., Apax Partners Europe Managers, Ltd., Apax Europe VI-A, L.P., Apax Europe VI-1, L.P., Apax WW Nominees, Ltd., Apax Partners, L.P., David Bonderman, James Coulter, TPG Capital Management, L.P., TPG Partners IV, L.P., TPG Advisors IV, Inc., TPG Genpar IV, L.P., T3 GenPar II, L.P., T3 Partners II, L.P., and T3 Parallel II, L.P. is granted to the extent of:
(1) severing and dismissing the complaint as against defendants Apax Partners LLP, Apax Europe VI GP Co., Ltd., Apax Europe VI GP, L.P., Apax Partners Europe Managers, Ltd., Apax Europe VI-A, L.P., Apax Europe VI-1, L.P., Apax WW Nominees, Ltd., Apax Partners, L.P., TPG Capital Management, L.P., TPG GenPar IV, L.P., TPG Partners IV, L.P., TPG Advisors IV, Inc., T3 GenPar II, L.P., T3 Partners II, L.P., and T3 Parallel II, L.P.,
(2) dismissing the putative class claims; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly; and it is further
ORDERED that counsel for defendants shall serve a copy of this order along with notice of entry on all parties within twenty (20) days; and it is further
ORDERED that the branch of defendants' motion as to defendants David Bonderman and James Coulter is denied without prejudice to renewal after completion of jurisdictional discovery; and it is further
ORDERED that the motion (sequence number 003) of proposed intervenor Basil Vasiliou for leave to intervene in this action is denied; and it is further
ORDERED that the motion (sequence number 004) of plaintiff Cortlandt Street Recovery Corporation for leave to amend the complaint to discontinue the class allegations is denied as moot.
MEMORANDUM DECISION
Motion sequence numbers 002, 003, and 004 are consolidated for disposition.
Plaintiff Cortlandt Street Recovery Corp. (Cortlandt), brings this action on its own behalf and on behalf of a class of holders of promissory notes known as the "Floating Rate Subordinated Notes due 2015" (the Sub Notes) which were issued by a nonnparty shell company called Hellas Telecommunications (Luxembourg) II, S.C.A. (Hellas II) in December 2006.
Defendants Apax Partners, LLP, Apax Europe VI GP Co. Ltd., Apax Europe VI GP, L.P., Apax Partners Europe Managers Ltd., Apax Europe VI-A, L.P., Apax Europe VI-1, L.P., Apax WW Nominees, Ltd. (the European defendants), David Bonderman (Bonderman), and James Coulter (Coulter) move, pursuant to CPLR 3211 (a) (8) and (a) (5), for an order dismissing the complaint as against them for lack of personal jurisdiction.
The European defendants, Bonderman, Coulter, and defendants Apax Partners, L.P., TPG Capital Management, L.P., TPG Partners IV, L.P., TPG Advisors IV, Inc., TPG GenPar IV, L.P., T3 GenPar II, L.P., T3 Partners II, L.P., and T3 Parallel II, L.P. (collectively, Apax Partners, L.P. and the TPG defendants) also move for an order: (1) pursuant to CPLR 3211 (a) (5) and (a) (7), dismissing the complaint for failure to state a cause of action based, in part, on collateral estoppel; (2) pursuant to CPLR 3211 (a) (3), dismissing the complaint for lack of standing; and (3) pursuant to CPLR 3211 (a) (5), dismissing the putative class claims as time-barred (motion sequence number 002).
Proposed intervenor Basil Vasiliou (Vasiliou) moves, pursuant to CPLR 1012 and 1013, for an order permitting him to intervene as a plaintiff in this action (motion sequence number 003).
Cortlandt moves, pursuant to CPLR 3025, for leave to amend the complaint to delete the class allegations and discontinue the putative class claims (motion sequence number 004).
BACKGROUND
Prior Action
Cortlandt filed an action in 2011 under Index No. 653181/11, asserting claims on behalf of its purported assignors to collect sums due under the Sub Notes. On September 26, 2014, the court (Friedman, J.) dismissed Cortlandt's claims for lack of standing (see Cortlandt St. Recovery Corp. v Hellas Telecom., S.à.r.l., 47 Misc 3d 544 [Sup Ct, NY County 2114], affd as mod 142 AD3d 833 [1st Dept 2016], affd 30 NY3d 40 [2018]). Cortlandt thereafter filed this action, relying on CPLR 205 (a).
Factual Allegations
The following facts are taken from the complaint. Cortlandt, a New York corporation, is the assignee of the claims of some owners of interests in the Sub Notes (NY St Cts Elec Filing [NYSCEF] Doc No. 50, complaint, ¶ 10). Cortlandt brings this action "on behalf of a class of investors who own interests in promissory notes, against Defendants who sold those interests to investors through a shell by the use of a false and misleading offering memorandum" (id., ¶ 1). Defendants are "members of a consortium of investment funds affiliated with or advised and managed by TPG Capital Management, L.P. (TPG) and Apax Partners, LLP (Apax)" (id., ¶ 2).
Cortlandt alleges that, in 2005, the private equity firms Apax and TPG organized the consortium and incorporated Hellas II in Luxembourg as one of several shell companies (id., ¶¶ 55, 58, 59). Hellas II was to act as the consortium's alter ego in connection with the acquisition of TIM Hellas Telecommunications (TIM Hellas), a Greek mobile telecommunications company (id., ¶¶ 55, 100-108). In April 2005, TPG and Apax purchased 80.87% of TIM Hellas for €1.14 billion (id. ¶ 55). Later, in August 2005, TPG and Apax purchased the remaining 19.13% in TIM Hellas (id., ¶ 56). Cortlandt alleges that, when TIM Hellas was acquired in 2005, it had few debts and was profitable (id., ¶ 67). However, by mid-2006, TPG and Apax turned these profits into losses (id., ¶ 68).
According to Cortlandt, defendants caused Hellas II and other shell companies to issue securities called convertible preferred equity certificates (CPECs) to their shareholders, including consortium members, in proportion to the equity owned by each shareholder in each respective entity (id., ¶¶ 58, 65).
Notwithstanding its heavy debt-to-equity ratio, on December 21, 2006, Hellas II sold €1.2 billion of interests in the Sub Notes which are currently owned by class members (id., ¶¶ 7, 88). Cortlandt alleges that the offering memorandum for the Sub Notes stated that the CPECs would be pledged as collateral to secure the Sub Notes and failed to disclose that the loan proceeds would be used to redeem the CPECs (id., ¶¶ 86, 87). However, according to Cortlandt, the loan proceeds from the sale of the Sub Notes were used to purchase and redeem the CPECs from defendants (id.).
Immediately after the Sub Notes were sold, Hellas II redeemed the CPECs using the approximately €1 billion loan proceeds (id., ¶ 88). Defendants pocketed the "lion's share" (id., ¶¶ 44, 88). According to Cortlandt, Hellas II was rendered insolvent and unable to pay its debts (id., ¶ 91). On October 15, 2009, Hellas II defaulted on an interest payment, and the Sub Notes were declared immediately due and payable (id., ¶¶ 92, 104). Hellas II filed for bankruptcy in the U.K. on November 26, 2009 (id., ¶ 92). The Instant Complaint
Cortlandt filed this action on March 16, 2017 by filing a summons with notice. Cortlandt subsequently filed the complaint on September 15, 2017, asserting 10 causes of action: (1) fraud (id., ¶¶ 93-99); (2) liability to pay the Sub Notes as alter egos (id., ¶¶ 100-108); (3) breach of contract (id., ¶¶ 109-115); (4) violations of prohibitions on distributions pursuant to Business Corporation Law §§ 510, 513, 629, and 729 and Penal Law § 190.35 (id., ¶¶ 116-125); (5) fraudulent conveyances in violation of Debtor and Creditor Law (DCL) § 273 (id., ¶¶ 126-134); (6) fraudulent conveyances by persons in business in violation of DCL § 274 (id., ¶¶ 135-141); (7) fraudulent conveyances made with intent to incur debt beyond the ability to pay in violation of DCL § 275 (id., ¶¶ 142-147); (8) intentional fraudulent conveyances in violation of DCL § 276 (id., ¶¶ 148-153); (9) fraudulent conveyances of partnership property in violation of DCL § 277 (id., ¶¶ 154-160); and (10) unjust enrichment and imposition of a constructive trust (id., ¶¶ 161-166).
European Defendants' Affidavit
Giancarlo Aliberti (Aliberti), a member of Apax Partners, LLP, avers that Apax Partners, LLP is a limited liability partnership registered under the laws of England and Wales, with its principal place of business in London, England (NYSCEF Doc No. 45, Aliberti aff, ¶ 4). Apax Partners, LLP provides investment advisory services to private investment funds or their managers (id.). Apax Europe VI-A, L.P., and Apax Europe VI-1, L.P. are limited partnerships organized under the laws of England and Wales, with principal places of business in St. Peter Port, Guernsey (id., ¶ 8). Apax Europe VI GP, L.P., and Apax Europe VI GP Co. Limited are limited partnerships organized under the laws of Guernsey, with principal places of business in St. Peter Port, Guernsey (id., ¶¶ 9-10). Apax WW Nominees Ltd. and Apax Partners Europe Managers Ltd. are limited companies organized under the laws of England and Wales, with principal places of business in London, England (id., ¶¶ 11, 12).
Bonderman and Coulter's Affidavits
Bonderman and Coulter are co-founders and chairman and chief executive officer of TPG, respectively (NYSCEF Doc No. 46, Bonderman aff, ¶ 1; NYSCEF Doc No. 47, Coulter aff, ¶ 1). Bonderman indicates that he resides in Fort Worth, Texas, where he has resided since 1983 (NYSCEF Doc No. 46, Bonderman aff, ¶ 7). Coulter states that he is a resident of San Francisco, California, where he has lived since at least 1993 (NYSCEF Doc No. 47, Coulter aff, ¶ 7).
DISCUSSION
A. The Branch of Defendants' Motion to Dismiss for Lack of Personal Jurisdiction Over the European Defendants, Bonderman, and Coulter (Motion Sequence Number 002)
Defendants contend that Cortlandt is collaterally estopped from relitigating personal jurisdiction over the European defendants. According to defendants, the official liquidators of Hellas II (the Liquidators) brought an adversary proceeding before the United States Bankruptcy Court for the Southern District of New York (see In re Hellas Telecom. [Luxembourg] II SCA, 524 BR 488 [Bankr Ct, SD NY 2015]). The Bankruptcy Court determined that the European defendants were not subject to personal jurisdiction in New York, and Cortlandt was in privity with the Liquidators who brought that adversary proceeding. Defendants contend that the Liquidators represented the notes creditors' interests. Defendants further argue that, even if the court finds that collateral estoppel does not apply, Cortlandt cannot prove personal jurisdiction over the European defendants based upon the forum selection clause in the indenture. Further, Cortlandt cannot prove jurisdiction under CPLR 302 (a) (1). In addition, defendants maintain that the court does not have jurisdiction over Bonderman or Coulter based upon the forum selection clause or pursuant to CPLR 302 (a) (1).
Cortlandt counters that the complaint sufficiently alleges alter ego facts, which establish personal jurisdiction, as well as liability for payment on the Sub Notes. Cortlandt points out that the Court of Appeals' decision in Cortlandt St. Recovery Corp. v Bonderman (31 NY3d 30 [2018]) shows that the allegations in that related action sufficiently alleged an alter ego theory of liability, based upon identical alter ego allegations. According to Cortlandt, personal jurisdiction and defendants' liability must be determined at a jury trial.
In Cortlandt St. Recovery Corp., supra, the indenture trustee brought an action to recover for defendants' alleged fraudulent redemption scheme intended to siphon off assets, leaving the obligors unable to pay their debts (Cortlandt St. Recovery Corp., 31 NY3d at 34). That case involved payment-in-kind notes (id.). The Court held that the indenture authorized the trustee to bring an action on behalf of the noteholders (id. at 46). In addition, the Court determined that the complaint sufficiently alleged an alter ego theory of liability to pierce the corporate veil (id. at 46-50).
Cortlandt further contends that the Bankruptcy Court's decision cannot be given collateral estoppel effect. The Bankruptcy Court did not decide the identical issue, since: (1) the Liquidators did not allege claims to recover on the Sub Notes; and (2) the Liquidators did not attempt to assert jurisdiction based upon a theory of alter ego jurisdiction. The Bankruptcy Court also held, Cortlandt argues, that the Liquidators did not have standing to pursue creditor claims. Moreover, Cortlandt did not have a full and fair opportunity to contest personal jurisdiction based on an alter ego theory. Furthermore, Cortlandt maintains that defendants are judicially estopped from asserting that Cortlandt is in privity with the Liquidators, given that defendants successfully persuaded the Bankruptcy Court that the Liquidators did not have standing to bring creditor claims. Finally, Cortlandt contends that defendants are estopped from denying application of the forum selection clause, pursuant to which Hellas II consented to jurisdiction in New York. It was foreseeable that they would be bound by the forum selection clause, given their close relationship to Hellas II.
1. European Defendants
Pursuant to CPLR 3211 (a) (5), a cause of action may be dismissed "because of . . . collateral estoppel. . . payment, release, [and/or] res judicata . . . ."
"[C]ollateral estoppel . . . precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same" (Ryan v New York Tel. Co., 62 NY2d 494, 500 [1984]). The doctrine of collateral estoppel requires that: (1) the identical issue was necessarily decided in the prior proceeding and is decisive in the present action; and (2) the party to be precluded had a full and fair opportunity to contest the prior determination (Buechel v Bain, 97 NY2d 295, 303-304 [2001], cert denied 535 US 1096 [2002]; D'Arata v New York Cent. Mut. Fire Ins. Co., 76 NY2d 659, 665-666 [1990]). "[T]he party seeking to invoke collateral estoppel has the burden to show the identity of the issues, while the party trying to avoid application of the doctrine must establish the lack of a full and fair opportunity to litigate" (Matter of Dunn, 24 NY3d 699, 704 [2015]).
The collateral estoppel doctrine applies to parties to the prior action or proceeding and those in privity with those parties (Buechel, 97 NY2d at 304). Privity has been described as "an amorphous term not susceptible to ease of application" (Gramatan Home Invs. Corp. v Lopez, 46 NY2d 481, 486 [1979]). "[T]o establish privity the connection between the parties must be such that the interests of the nonparty can be said to have been represented in the prior proceeding" (Green v Santa Fe Indus., 70 NY2d 244, 253 [1987]; see also Russell v New York Cent. Mut. Fire Ins. Co., 11 AD3d 668, 669 [2d Dept 2004]). Thus, courts have held privity may "make a judgment in an action brought by a trustee in bankruptcy a bar in a subsequent action by a creditor" (Green, 70 NY2d at 253, citing Stissing Natl. Bank v Kaplan, 28 AD2d 1159, 1160 [3d Dept 1967]; see also In re Walker LLC, 2014 WL 1228835, *2 , 2014 Bankr LEXIS 1160 [Bankr SD NY 2014] [unsecured creditors were in privity with debtor for collateral estoppel purposes]).
Here, the issue of personal jurisdiction over the European defendants was decided by the Bankruptcy Court (see In re Hellas Telecom. [Luxembourg] II SCA, 524 BR at 503-512). The Bankruptcy Court held that it had neither general jurisdiction nor specific jurisdiction over the European defendants (see id.). Cortlandt argues that the identity of issue element is not satisfied because the Liquidators did not rely on an alter ego theory of jurisdiction. However, collateral estoppel "applies to claims actually litigated or that could have been litigated, and despite that the fact that the claims are based on a different theory or seek a different remedy" (Thomas v City of New York, 239 AD2d 180, 180 [1st Dept 1997] [emphasis supplied]).
Moreover, defendants have established that Cortlandt was in privity with the Liquidators (see Green, 70 NY2d at 253). The Liquidators brought their adversary proceeding complaint "for the benefit" of notes creditors (NYSCEF Doc No. 56 ¶ 1). Thus, their interests were aligned. Similar to a trustee in bankruptcy, the Liquidators were required to "carry out the winding up of [Hellas II's] affairs by collecting assets and distributing them among the creditors . . . ." (NYSCEF Doc No. 59, In re Pantmaenog Timber Co., Ltd., [2004] 1 AC 158 ¶ 51).
The court finds Cortlandt's contention that it did not have a full and fair opportunity to contest personal jurisdiction over the European defendants to be unpersuasive. Cortlandt argues that it did not have a full and fair opportunity to litigate personal jurisdiction, because the Liquidators did not have standing to pursue creditor claims. In considering whether the opponent of collateral estoppel had a full and fair opportunity to litigate an issue, the court must consider "the realities of the [prior] litigation, including the context and other circumstances which . . . may have had the practical effect of discouraging or deterring a party from fully litigating the determination which is not asserted against" (Ryan, 62 NY2d at 501 [internal quotation marks and citation omitted]).
"Among the specific factors to be considered are the nature of the forum and the importance of the claim in the prior litigation, the incentive and initiative to litigate and the actual extent of litigation, the competence and expertise of counsel, the availability of new evidence, the differences in the applicable law and the foreseeability of future litigation"(id.). The Liquidators, represented by competent counsel, vigorously opposed the European defendants' motion to dismiss for lack of personal jurisdiction before the Bankruptcy Court (see In re Hellas Telecom. [Luxembourg] II SCA, 524 BR at 503-512). Moreover, the Bankruptcy Court only determined that the Liquidators lacked standing to assert a claim under DCL § 276 (id. at 526). However, the court also held that the Liquidators adequately alleged standing to bring their unjust enrichment claim (id. at 529-534).
Furthermore, contrary to Cortlandt's contention, the doctrine of judicial estoppel is inapplicable. The doctrine of judicial estoppel "precludes a party who assumed a certain position in a prior legal proceeding and who secured a judgment in his or her favor from assuming a contrary position in another action simply because his or her interests have changed" (Wells Fargo Bank, N.A. v Webster Bus. Credit Corp., 113 AD3d 513, 516 [1st Dept 2014], lv denied 23 NY3d 902 [2014] [internal quotation marks and citation omitted]). The doctrine "rests upon the principle that a litigant 'should not be permitted * * * to lead a court to find a fact one way and then contend in another judicial proceeding that the same fact should be found otherwise" (All Terrain Props. v Hoy, 265 AD2d 87, 93 [1st Dept 2000] [citation omitted]). "The submission of a legal argument is of a different character . . . than an inconsistent framing of one's factual pleadings, and therefore not a basis for judicial estoppel" (Matter of Excelsior 57th Corp. [Kern], 218 AD2d 528, 529-530 [1st Dept 1995]). Defendants' legal argument that the Liquidators did not have standing to pursue a DCL § 276 claim is not a proper basis for judicial estoppel. Moreover, defendants' standing argument for a DCL § 276 claim is not so fundamentally inconsistent with their present position that the Cortlandt was in privity with the Liquidators for collateral estoppel purposes.
Thus, Cortlandt is collaterally estopped from relitigating the issue of personal jurisdiction over the European defendants.
Accordingly, the European defendants are entitled to dismissal of the complaint.
2. Bonderman and Coulter
Where a motion to dismiss is made, the plaintiff has the burden of proving a basis for personal jurisdiction (see Fischbarg v Doucet, 9 NY3d 375, 381 n 5 [2007]). However, in opposing a motion to dismiss pursuant to CPLR 3211 (a) (8) on the ground that discovery on the issue of personal jurisdiction is necessary, plaintiffs need not make a prima facie showing of jurisdiction, but instead must only set forth "a sufficient start, and show [ ] their position not to be frivolous" (Peterson v Spartan Indus., 33 NY2d 463, 467 [1974]). "[T]he jurisdictional issue is likely to be complex. Discovery is, therefore, desirable, indeed may be essential, and should quite probably lead to a more accurate judgment than one made solely on the basis of inconclusive preliminary affidavits" (id.).
a. Alter Ego Jurisdiction
"[A]lter egos are treated as one entity" for jurisdictional purposes (Wm. Passalacqua Bldrs., Inc. v Resnick Devs. S., Inc., 933 F2d 131, 143 [2d Cir 1991]; see also Transfield ER Cape Ltd. v Industrial Carriers, Inc., 571 F3d 221, 224 [2d Cir 2009] ["it is compatible with due process for a court to exercise personal jurisdiction over an individual or corporation that would not ordinarily be subject to personal jurisdiction in that court when the individual or corporation is an alter ego or successor of a corporation that would be subject to personal jurisdiction in that court"] [internal quotation marks and citation omitted]; see also Patin v Thoroughbred Power Boats Inc., 294 F3d 640, 654 [5th Cir 2002]).
"A corporation's consent to jurisdiction under a forum selection clause can be applied to obtain jurisdiction over an individual officer by disregarding the corporate entity under the doctrine of piercing the corporate veil" (Packer v TDI Sys., Inc., 959 F Supp 192, 202 [SD NY 1997]). In evaluating whether a corporation is an alter ego of another party,
"courts look to a variety of factors, including (1) the failure to observe corporate formalities; (2) whether the corporation is undercapitalized; (3) any intermingling of personal and corporate funds; (4) the sharing of common office space or telephone numbers; (5) an overlap of ownership, directors, officers or other personnel; and (6) whether the corporation has been used to perpetrate a wrongful act against the plaintiff . . . . No one factor is determinative, but rather the key inquiry is whether the corporation is being used by the alleged dominating entity to advance its own personal interests as opposed to furthering the corporate ends"(Bell v Koss, 2020 WL 4570439, *4, 2020 US Dist LEXIS 14894, *10-11 [SD NY 2020] [internal quotation marks and citation omitted]).
Here, Cortlandt has alleged sufficient facts that may give rise to alter ego jurisdiction over Bonderman and Coulter (see Starr Russia Invs. III B.V. v Deloitte Touche Tohumatsu Ltd., 169 AD3d 421, 422 [1st Dept 2019]; Avilon Auto. Group v Leontiev, 168 AD3d 78, 89 [1st Dept 2019]). Pursuant to section 14.09 of the indenture, Hellas II consented to jurisdiction in New York (NYSCEF Doc No. 74 at 102). Cortlandt alleges that Bonderman and Coulter are the founding partners of and joint chief executive officers of TPG, and are the "ultimate decision makers of the consortium" (NYSCEF Doc No. 50, complaint, ¶ 23). The complaint further alleges that defendants "owned, managed and controlled 100% of Hellas II," "[r]epresentatives of Defendants were the managing directors of Hellas II and controlled Hellas II," and "[d]efendants controlled the terms, and by their representatives, signed the Sub Notes and Indenture and borrowed money to pay to themselves," and that "defendants treated and disposed of the proceeds of the corporate loans as if [they were] their money" (id., complaint, ¶ 107 [a], [b], [c], [k]). Cortlandt also alleges that, on December 28, 2006, Bonderman received a distribution of $2,106,306 from the proceeds of the sale of the Sub Notes from defendant TPG GenPar IV, L.P and a distribution of $1,318,706 from defendant T3 GenPar II, L.P., totaling $3,479,382 (id., ¶ 27). Coulter allegedly received a distribution of proceeds from the sale of the Sub Notes of $7,053,790 from defendant TPG GenPar IV, L.P., a distribution of $1,383,781 from defendant T3 GenPar II, L.P., and a distribution of $125,192 from a related fund that is not a defendant, totaling $8,562,763 (id., ¶ 29). "When a corporation is deemed the 'alter ego' of an individual, then those entities are considered to be one and the same under the law: 'the corporation's acts must be deemed to be [the individual's] own'" (Patin, 294 F3d at 654, quoting Packer, 959 F Supp at 203). In view of these allegations, Cortlandt has made a sufficient showing that there are facts that may give rise to alter ego jurisdiction over Bonderman and Coulter, and that its position is not frivolous. Accordingly, Cortlandt is entitled to jurisdictional discovery as to Bonderman and Coulter.
b. Closely-Related Doctrine
"Under New York law, a signatory to a contract may invoke a forum selection clause against a non-signatory if the non-signatory is 'closely related' to one of the signatories such that enforcement of the forum selection clause is foreseeable by virtue of the relationship between the signatory and the party sought to be bound"(Universal Inv. Advisory SA v Bakrie Telecom Pte., Ltd., 154 AD3d 171, 179 [1st Dept 2017] [internal quotation marks and citation omitted]). The reasoning behind the doctrine is to "promote stable and dependable trade relations" (Highland Crusader Offshore Partners, L.P. v Targeted Delivery Tech. Holdings, Ltd., 184 AD3d 116, 122 [1st Dept 2020] [internal quotation marks and citation omitted]).
"If the nonsignatory party has an ownership interest or a direct or indirect controlling interest in the signing party or, . . . the entities or individuals consulted with each other regarding decisions and were intimately involved in the decision-making process . . . , then, a finding of personal jurisdiction based on a forum selection clause may be proper"(Universal Inv. Advisory SA, 154 AD3d at 179 [citations omitted]).
In Universal Inv. Advisory SA, supra, the plaintiffs alleged that a defendant parent company and the individual defendants had actual knowledge at the time of a note offering that the principal guarantor was insolvent and would be incapable of meeting its obligations under the notes (id.). The plaintiffs further alleged that the defendants authorized, participated in, and promoted the offering memoranda to be distributed into the marketplace (id.). The First Department held that these allegations were sufficient to allow:
"jurisdictional discovery as to the nature of B&B's and the individual defendants' actual knowledge and role in the offering of the notes, and their responsibilities connected thereto, because this information, which may result in a determination that the nonsignatories are indeed 'closely related' to the signing parties, is a fact that cannot be presently known to plaintiffs, but rather, is within the exclusive control of defendants"(id. at 179-180).
As in Universal Inv. Advisory SA, Cortlandt sufficiently alleges that Bonderman and Coulter are closely related to Hellas II such that enforcement of the forum selection clause against them is foreseeable. As discussed above, Cortlandt alleges that representatives of defendants "were the managing directors or Hellas II and controlled Hellas II," and that defendants "controlled the terms, and by their representatives, signed the Sub Notes and Indenture and borrowed money to pay themselves" (NYSCEF Doc No. 50, complaint, ¶ 107 [b], [c]). Thus, Cortlandt's allegations are sufficient to permit jurisdictional discovery as to Bonderman and Coulter's knowledge and role in the Sub Note offerings.
The court rejects Bonderman and Coulter's contention that jurisdiction and liability must be determined at a jury trial. "Liability may be considered only after it is decided . . . that the defendant is subject to the in personam jurisdiction of our courts" (Kreutter v McFadden Oil Corp., 71 NY2d 460, 470 [1988]). In Goel v Ramachandran (111 AD3d 783, 789 [2d Dept 2013]), the Court held that the trial court erred in denying a motion to dismiss pursuant to CPLR 3211 (a) (8) "without prejudice to the assertion of such a jurisdictional defense at trial." The Court explained that "[b]y permitting the case to move forward in such a manner, the Supreme Court exposed Bunge S.A. to the full panoply of burdens inherent in defending this case, despite the fact that the court may not have jurisdiction over it" (id.). Therefore, the Court held that the court should have denied the motion without prejudice to renewal after limited jurisdiction discovery (id.).
Therefore, Cortlandt is entitled to jurisdictional discovery as to Bonderman and Coulter. Bonderman and Coulter may renew their motion to dismiss upon completion of this discovery.
B. The Branch of Defendants' Motion to Dismiss for Failure to State a Cause of Action, Lack of Standing, and on Statute of Limitations Grounds
Apax Partners, L.P. and the TPG defendants do not contest personal jurisdiction. Unlike the similarly-named European defendants, Apax Partners, L.P. is a New York-based entity (NYSCEF Doc No. 66 at 3 n 2).
On a motion to dismiss pursuant to CPLR 3211 (a) (7), the court must "'accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory'" (Cortlandt St. Recovery Corp., 31 NY3d at 46, quoting Leon v Martinez, 84 NY2d 83, 87-88 [1994]; see also JFK Holding Co., KKC v City of New York, 68 AD3d 477, 477 [1st Dept 2009]). However, "bare legal conclusions, as well as factual claims either inherently incredible or flatly contradicted by documentary evidence are not presumed to be true and accorded every favorable inference" (Biondi v Beekman Hill House Apt. Corp., 257 AD2d 76, 81 [1st Dept 1999], affd 94 NY2d 659 [2001] [internal quotation marks and citation omitted]). Where extrinsic evidence is submitted in connection with the motion, the appropriate standard of review "is whether the proponent of the pleading has a cause of action, not whether he has stated one" (Dollard v WB/Stellar IP Owner, LLC, 96 AD3d 533, 533 [1st Dept 2012]). "Whether the plaintiff will ultimately be successful in establishing those allegations is not part of the calculus" (Landon v Kroll Lab. Specialists, Inc., 22 NY3d 1, 6 [2013], rearg denied 22 NY3d 1084 [2014] [internal quotation marks and citation omitted]).
"On a defendant's motion to dismiss the complaint based upon the plaintiff's alleged lack of standing, the burden is on the moving defendant to establish, prima facie, the plaintiff's lack of standing as a matter of law" (Berger v Friedman, 151 AD3d 678, 679 [2d Dept 2017] [internal quotation marks omitted]; see also CPLR 3211 [a] [3]). "To defeat the motion, a plaintiff must submit evidence which raises a question of fact as to its standing" (Arch Bay Holdings, LLC-Series 2010B v Smith, 136 AD3d 719, 719 [2d Dept 2016]).
"On a motion to dismiss a cause of action pursuant to CPLR 3211 (a) (5) on the ground that it is barred by the statute of limitations, a defendant bears the initial burden of establishing, prima facie that the time in which to sue has expired. In considering the motion, a court must take the allegations in the complaint as true and resolve all inferences in favor of the plaintiff"(Benn v Benn, 82 AD3d 548, 548 [1st Dept 2011], quoting Island ADC, Inc. v Baldassano Architectural Group, P.C., 49 AD3d 815, 816 [2d Dept 2008]). "To meet its burden, the defendant must establish, inter alia, when the plaintiff's cause of action accrued" (Lebedev v Blavatnik, 144 AD3d 24, 28 [1st Dept 2016] [internal quotation marks and citation omitted]). "If the defendant meets that burden, then the burden shifts to the plaintiff to aver evidentiary facts establishing that the cause of action was timely or to raise a question of fact as to whether the cause of action was timely" (Lake v New York Hosp. Med. Ctr. of Queens, 119 AD3d 843, 844 [2d Dept 2014] [internal quotation marks and citation omitted]; see MTGLQ Inv'rs, LP v Wozencraft, 172 AD3d 644, 645, leave to appeal dismissed, 34 NY3d 1010 [2019]). "The plaintiff may do so by averring evidentiary facts establishing that the statute of limitations has not expired, that is tolled, or that an exception to the statute of limitations applies" (CRC Litig. Trust v Marcum, LLP, 132 AD3d 938, 938-939 [2d Dept 2015]).
1. Whether Cortlandt's Claims Are Barred By the No-Action Clause
Defendants contend that Cortlandt's claims are barred by section 6.06 of the indenture, a no-action clause.
Section 6.06, entitled "Limitation on Suits," provides that:
"Except to enforce the right to payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to this Indenture or the Notes unless:(NYSCEF Doc No. 60 at 82).
(1) such Holder has previously given the Trustee notice that an Event of Default is continuing;
(2) Holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee to pursue the remedy;
(3) such Holders have offered the security or indemnity satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security; and
(5) Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period"
According to defendants, Cortlandt fails to plead that: (1) it is a holder of Sub Notes of at least 25% in the principal amount of the outstanding Notes (€292.5 million); or (2) it requested that the Trustee to pursue its claims and that the Trustee declined to do so.
Cortlandt counters that the no-action clause does not limit its right to sue post-maturity of the Sub Notes. In support, Cortlandt points out that section 6.06 provides an exception "to enforce the right to receive payment of principal, premium (if any), and interest when due." In addition, Cortlandt contends that section 6.07 of the indenture, entitled "Rights of Holders of Notes to Receive Payment," specifically provides:
"Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and interest on the Note on or after the respective due date expressed in the Note . . . or to bring suit for the enforcement of any such payment on or after such respective date shall not be impaired or affected without the consent of such Holder"(NYSCEF Doc No. 74 at 83).
In reply, defendants contend that Cortlandt does not dispute that it failed to comply with the no-action clause. Thus, defendants assert that all of Cortlandt's claims must be dismissed except the second and third causes of action, which assert breach of the Sub Notes' payment terms.
"An indenture is essentially a written agreement that bestows legal title of the securities in a single Trustee to protect the interests of individual investors who may be so numerous or unknown to each other" (Quadrant Structured Prods. Co., Ltd. v Vertin, 23 NY3d 549, 555 [2014]). "The contract, or indenture, identifies the rights of all parties concerned, as well as the duties of the trustee (a third-party administrator), the obligations of the borrower, and the remedies available to the investors" (id. [citation omitted]). Thus, "[i]nterpretation of indenture provisions is a matter of basis contract law" (id. at 559 [internal quotation marks and citation omitted].
It is well established that "when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms. Evidence outside the four corners of the document as to what was really intended but unstated or misstated is generally inadmissible to add to or vary the writing" (W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990]). "'The words and phrases used by the parties must, as in all cases involving contract interpretation, be given their plain meaning'" (Ellington v EMI Music, Inc., 24 NY3d 239, 244 [2014], quoting Brooke Group v JCH Syndicate, 87 NY2d 530, 534 [1996]). Whether or not an agreement is ambiguous is an issue of law for the court (W.W.W. Assoc., 77 NY2d at 162). "Ambiguity arises when the contract, read as a whole, . . . fails to disclose its purpose and the parties' intent" (Ellington, 24 NY3d at 244), or when "the agreement on its face is reasonably susceptible of more than one interpretation" (Chimart Assoc. v Paul, 66 NY2d 570, 573 [1986]). Moreover, in deciding whether an agreement is ambiguous, the court "should examine the entire contract and consider the relation of the parties and the circumstances under which it was executed' (Kass v Kass, 91 NY2d 554, 566 [1998] [internal quotation marks and citation omitted]). "[A] contract is not rendered ambiguous just because one of the parties attaches a different, subjective meaning to one of its terms" (Moore v Kopel, 237 AD2d 124, 125 [1st Dept 1997]).
Moreover, the Court of Appeals has held that "no-action clauses should be read to 'give effect to the precise words and language used' and should be 'strictly construed'" (Alden Global Value Recovery Master Fund, L.P. v KeyBank N.A., 159 AD3d 618, 626 [1st Dept 2018], quoting Quadrant, 23 NY3d at 560).
In Quadrant, the no-action clause provided that no securityholder "shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or with respect to this Indenture" (Quadrant, 23 NY3d at 560). The Court of Appeals held that:
"This no-action clause, with its specific limit on the enforcement of indenture contract rights, is in contrast to no-action clauses which extend beyond the four corners of the indenture agreement to cover securities-based claims. As the cases illustrate, where the no-action clause refers to both the indenture and the securities the securityholder's claims are subject to the terms of the clause, whether those claims be contractual in nature and based on the indenture agreement, or arise from common law and statute"(id. at 561). Therefore, the court held that the no-action clause only applied to bar contract claims under the indenture, and not to the plaintiff's common-law and statutory claims (id. at 564).
In Feldbaum v McCrory Corp. (1992 WL 119095, *5, 18 Del J Corp. L 630, 641 [Del Ch 1992]), a case which interpreted no-action clauses under New York law, the Delaware Court of Chancery explained that:
"Absent an allegation of fraud in the inducement of the purchase, clauses of this sort are generally applied to foreclose bondholder suits under the indenture, where the plaintiff has not complied.
***
[N]o matter what legal theory a plaintiff advances, if the trustee is capable of satisfying its obligations, then any claim that can be enforced by the trustee on behalf of all bonds, other than a claim a claim for the recovery of past due interest or principle, is subject to the terms of a no-action clause of this type."
Here, the no-action clause is clear and unambiguous. It provides that "no Holder may pursue any remedy with respect to this Indenture or the Notes," "[e]xcept to enforce the right to receive payment of principal, premium (if any) or interest when due" (NYSCEF Doc No. 74 at 82 [emphasis supplied]). By referring to the indenture and the notes, the noteholders' claims are subject to the terms of the clause, whether contractual arising under the indenture or statutory and common-law claims. Giving effect to the precise words and language used, the no-action clause, read in conjunction with section 6.07, does not bar claims by securityholders seeking "payment of principal, premium (if any) or interest when due," i.e., for enforcement of the notes (id.). This is consistent with "the primary purpose of a no-action . . . [which] is to protect issuers from the expense involved in defending [individual] lawsuits that are either frivolous or otherwise not in the economic interest of the corporation and its creditors" (Quadrant, 23 NY3d at 565 [internal quotation marks and citation omitted]). Cortlandt fails to plead compliance with the no-action clause. Therefore, Cortlandt's claims are barred with the exception of the breach of contract and fraudulent inducement claims (see Cruden v Bank of New York, 957 F2d 961, 968 [2d Cir 1992] ["Notwithstanding the 'no action' clause, the debenture holders have an absolute right to institute suit after nonpayment of principal or interest"]; Upic & Co. v Kinder-Care Learning Ctrs., Inc., 793 F Supp 448, 454, 455 [SD NY 1992] [no-action clause did not bar affect plaintiff's right "to receive payment of principal of ... the Security, on or after the due date [ ] expressed in the Security"]; see also Feldbaum, 1992 WL 119095, *5, *641, 18 Del J Corp. at 641).
2. Fraud (First Cause of Action)
The first cause of action, labeled fraud, alleges that the offering memorandum included untrue statements of material fact and made omissions about risk factors (NYSCEF Doc No. 50, complaint, ¶¶ 94-99).
Defendants argue that Cortlandt does not have standing to sue for fraud. In addition, defendants argue that, even it has standing to sue for fraud, Cortlandt has failed to plead fraud with particularity.
Cortlandt contends that it has standing to bring fraud claims pursuant to the language of its assignment and General Obligations Law § 13-107 (1). In addition, Cortlandt maintains that it has sufficiently stated a cause of action for fraud because material facts were omitted from the offering memorandum, rendering the entire document false and fraudulent.
"In order to state a cause of action for fraudulent inducement, the claim must allege a 'material representation, known to be false, made with the intention of inducing reliance, upon which the victim actually relies, consequentially sustaining a detriment'" (Rivera v JRJ Land Prop. Corp., 27 AD3d 361, 364 [1st Dept 2006], quoting Merrill Lynch, Pierce Fenner & Smith, Inc. v Wise Metals Group, LLC, 19 AD3d 273, 275 [1st Dept 2005]). Fraudulent concealment requires a duty to disclose material information, which arises where a fiduciary or confidential relationship exists between the parties (Dembeck v 220 Cent. Park S., LLC, 33 AD3d 491, 492 [1st Dept 2006]; Kaufman v Cohen, 307 AD2d 113, 119-120 [1st Dept 2003]). Additionally, CPLR 3016 (b) requires that "the circumstances constituting the wrong shall be stated in detail." Here, even if Cortlandt has standing to sue for fraud, the complaint fails to allege any misrepresentation of fact (NYSCEF Doc No. 50, complaint, ¶ 95). Moreover, to the extent that the complaint alleges that the offering memorandum omitted facts (see id.), Cortlandt has failed to plead a confidential or fiduciary relationship among the parties. Therefore, the complaint fails to state a cause of action for fraud.
3. Alter Ego Liability and Breach of Contract (Second and Third Causes of Action)
The third cause of action, labeled breach of contract, alleges that defendants, as Hellas II's alter egos, breached the terms of the Sub Notes, the indenture, and the offering memorandum by redeeming CPECs without paying or providing for payment of the Sub Notes (NYSCEF Doc No. 50, complaint ¶¶ 109-115). The second cause of action seeks to hold defendants liable for sums due on the Sub Notes as alter egos of Hellas II (id., ¶¶ 100-108).
Defendants argue that, even with respect to the second and third causes of action, Cortlandt fails to allege that it is a holder or that any factual basis for its authorization to sue exists. A party not having holder status may "obtain[] the registered holder's authorization to sue in its stead" (Springwell Nav. Corp. v Sanluis Corporacion, S.A., 81 AD3d 557, 558 [1st Dept 2011]; see generally Robert L. Haig, Commercial Litigation in New York State Courts § 83:53 [4th ed 2015] ["A party lacking holder status will have to plead and prove the circumstances showing its standing to enforce the instrument, e.g., because it is either a transferee of a prior holder or possesses a legal or equitable ownership interest in the instrument"]). The complaint alleges that Cortlandt's assignors "transferred to Cortlandt all right, title and interest to all claims, including ownership, proprietary, legal, equitable and beneficial interests in all claims arising from, related to, or concerning the Notes" (NYSCEF Doc No. 50, complaint, ¶ 11). It further alleges that Cortlandt's assignors "are authorized by the registered holders of the Sub Notes to maintain litigation against issuers, guarantors and third parties" (id., ¶ 12). However, Cortlandt's bare allegation that its assignors are "authorized" by holders to maintain litigation against issuers, guarantors, and third parties is a bare legal conclusion that is not entitled to any consideration (see Biondi, 257 AD2d at 81). Cortlandt did not address this argument in response to defendants' motion to dismiss. As a result, the complaint fails to allege compliance with the no-action clause, even with respect to the third cause of action. In addition, Cortlandt's "attempt . . . to pierce the corporate veil does not constitute a cause of action independent of that against the corporation; rather it is an assertion of facts and circumstances which will persuade the court to impose the corporate obligation on its owners" (Cortlandt St. Recovery Corp., 31 NY3d at 47 [internal quotation marks and citation omitted]). Therefore, Cortlandt's second cause of action must likewise be dismissed.
Accordingly, Cortlandt's claims must be dismissed against all defendants except for the European defendants, Bonderman and Coulter for failure to comply with the no-action clause.
4. Timeliness of Putative Class Claims
Defendants argue that the putative class claims are untimely, since the operative events occurred in 2006, and Cortlandt filed this action in 2017. Defendants further contend that Cortlandt cannot invoke CPLR 205 (a) to avoid the bar of the statute of limitations.
In response, Cortlandt argues that every Sub Noteholder is authorized by section 6.07 of the indenture to sue to enforce payment of principal post-maturity of the Sub Notes. In addition, Cortlandt contends that section 14.16 of the indenture provides 10 years to bring claims against the issuer, which includes Hellas II and defendants, as alter egos of Hellas II:
"Claims against the Issuer for the payment of principal or Additional Amounts, if any, on the Notes will be prescribed ten years after the applicable due date for payment thereof. Claims against the Issuer for the payment of interest on the Notes will be prescribed five years after the applicable due date for payment of interest"(NYSCEF Doc No. 74 at 103).
Cortlandt further argues that, even if CPLR 213 (2)'s six-year statute of limitations for breach of contract applies, the claims accrued the day after the Sub Notes matured, January 16, 2015.
In reply, defendants argue that the putative class members' breach of contract claims accrued when Hellas II breached its payment obligations under the notes. Thus, defendants argue that the putative class claims accrued in November 2009, when Hellas II filed for bankruptcy, causing all principal and interest on the notes to become due and payable. Furthermore, defendants contend that section 6.08 of the indenture does not extend the statute of limitations because: (1) it applies only to holders; and (2) an agreement to extend the statute of limitations that is entered into before the accrual date is unenforceable.
As a preliminary matter, the court finds the indenture's agreement to extend the statute of limitations to be unenforceable. "[A]n agreement which modifies the Statute of Limitations by specifying a shorter, but reasonable, period within which to commence an action is enforceable" (John J. Kassner & Co., Inc. v City of New York, 46 NY2d 544, 551 [1979]). "But the power of the parties to make enforceable agreements to which would extend the Statute of Limitations is, of course, more restricted" (id.). "If the agreement to 'waive' or extend the Statute of Limitations is made at the inception of liability it is unenforceable because a party cannot 'in advance, make a valid promise that a statute founded in public policy shall be inoperative" (id. [internal quotation marks and citation omitted]).
A cause of action for breach of contract is subject to a six-year statute of limitations (CPLR 213 [2]), and "[i]n New York, a breach of contract cause of action accrues at the time of the breach" (Ely-Cruikshank Co. v Bank of Montreal, 81 NY2d 399, 402 [1993]; see also Phoenix Acquisition Corp. v Campcore, Inc., 81 NY2d 138, 141 [1993] ["Without acceleration of the entire debt . . . [the debtor] was liable only for the payment of the installment which was due and payable and in default"]).
Accepting Cortlandt's allegations as true, and according them the benefit of every favorable inference (see Island ADC, Inc., 49 AD3d at 816), defendants have established that the putative class claims for breach of contract are untimely. Section 6.02 of the indenture, entitled "Acceleration," provides that:
"In the event of Default specified in clause (8) of Section 6.01 hereof, with respect to the [sic] or any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable immediately
without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable immediately"(NYSCEF Doc No. 74 at 81).
Cortlandt alleges that Hellas II issued the Sub Notes in 2006 (NYSCEF Doc No. 50, complaint, ¶ 7). Cortlandt further alleges that, on October 15, 2009, Hellas II defaulted on an interest payment, and that the Sub Notes were declared "due and payable immediately under the terms of the Indenture" (id., ¶¶ 92, 104). It is also undisputed that Hellas II filed for bankruptcy in November 2009, which caused the Sub Notes to be due and payable immediately without further action or notice (see NYSCEF Doc No. 84 at 10). Thus, the putative breach of contract claims accrued at the latest in 2009. Cortlandt commenced this action in 2017, more than six years later.
Although Cortlandt argues that the breach of contract claims accrued on the maturity date in 2015, the complaint alleges that the Sub Notes were declared due and immediately in 2009. In addition, Cortlandt has failed to present evidentiary facts establishing that the statute of limitations has not expired, that it is tolled, or that an exception to the statute of limitations applies (see CRC Litig. Trust, 132 AD3d at 938-939).
Accordingly, the putative class claims must be dismissed as untimely.
C. Vasiliou's Motion to Intervene (Motion Sequence Number 003)
Vasiliou moves to intervene in this action as an additional plaintiff. Vasiliou argues that he should be permitted to intervene because Cortlandt does not adequately represent his interests in this action.
To support his position, Vasiliou submits an affidavit, in which he avers that he owns an interest of €73,751,000 in the Sub Notes (NYSCEF Doc No. 128, Vasiliou aff, ¶ 3). According to Vasiliou, the registered owner of the Global Note is Clearstream Banking, S.A. (Clearstream) (id.). Clearstream holds his interest in an account in the name of his nominee, HSBC Bank PLC (id.). Vasiliou submits a letter dated October 24, 2018 from Clearstream, which "confirms that HSBC BK-Treaty Benefits/CL AC CLT and/or the beneficial owner is authorized to maintain proceedings against issuers, guarantors or any third party" on the €73,851,000 position identified in the letter (NYSCEF Doc No. 129). In addition, Vasiliou provides a letter dated November 7, 2018 from HSBC, which identifies Vasiliou as the beneficial owner of the €73,851,000 position (id.).
Vasiliou submits a proposed intervenor complaint, in which he seeks to add an eleventh cause of action seeking a declaration that, upon one or more defendants being found to be alter egos of or otherwise liable for the debts of Hellas II, that such defendants shall be liable for a judgment against Hellas II (NYSCEF Doc No. 104).
Cortlandt "takes no position regarding the intervention of a suitable class representative, as Cortlandt will be seeking leave to amend its complaint to delete the class allegations and proceed as an individual plaintiff (NYSCEF Doc No. 110 ¶ 2).
Defendants contend, however, that Vasiliou's motion should be denied because Vasiliou's claims are time-barred. Alternatively, defendants argue that Vasiliou's motion should be denied without prejudice or held in abeyance. Defendants also request that, in the event that the court grants Vasiliou's motion, the court should impose conditions on his participation in this action.
CPLR 1012 (a) provides, "[u]pon timely motion," in subdivisions (2) and (3) that "any person shall be permitted to intervene" "when the representation of the person's interest by the parties is or may be inadequate and the person is or may be bound by the judgment" or "when the action involves the disposition or distribution of, or the title or a claim for damages for injury to, property and the person may be affected adversely by the judgment."
CPLR 1013 provides that:
"[u]pon timely motion, any person may be permitted to intervene in any action . . . when the person's claim or defense and the main action have a common question of law or fact. In exercising its discretion, the court shall consider whether the intervention will unduly delay the determination of the action or prejudice the substantial rights of any party."
"'Distinctions between intervention as of right and discretionary intervention are no longer sharply applied'" (Matter of HSBC Bank U.S.A., 135 AD3d 534, 534 [1st Dept 2016], quoting Yuppie Puppy Pet Prods., Inc. v Street Smart Realty, LLC, 77 AD3d 197, 201 [1st Dept 2010]).
"Whether intervention is sought as a matter of right under CPLR 1012 (a), or as a matter of discretion under CPLR 1013, is of little practical significance since a timely motion for leave to intervene should be granted, in either event, where the intervenor has a real and substantial interest in the outcome of the proceedings"(Wells Fargo Bank, N.A. v McLean, 70 AD3d 676, 677 [2d Dept 2010])
"Consideration of any motion to intervene begins with the question of whether the motion is timely" (Yuppie Puppy Pet Prods., Inc., 77 AD3d at 201). In light of the court's determination that the putative class claims for breach of contract are untimely, Vasiliou's intervention is unwarranted (see Agway Ins. Co. v P & R Truss Co., Inc., 11 AD3d 975, 976 [4th Dept 2004] [movant's motion to intervene as a party plaintiff was properly denied since his cause of action was time-barred]). Accordingly, Vasiliou's motion is denied.
D. Cortlandt's Motion for Leave to Amend the Complaint (Motion Sequence Number 004)
Cortlandt moves for: (1) leave to amend its complaint to delete the class allegations; and (2) permission to discontinue the putative class claims.
Defendants do not object to Cortlandt dropping the putative class claims.
Vasiliou argues, in opposition, that Cortlandt must give notice to all class members and schedule a hearing at its own expense. In addition, Vasiliou argues that the court should substitute him as a class representative and sever Cortlandt from the action so it can pursue its claims in a separate action.
It is well settled that "leave to amend a pleading should be freely granted in the absence of prejudice to the nonmoving party where the amendment is not patently lacking in merit . . . , and the decision whether to grant leave to amend a complaint is committed to the sound discretion of the court" (Davis v South Nassau Communities Hosp., 26 NY3d 563, 580 [2015] [internal quotation marks and citation omitted]; see also CPLR 3025 [b]). The First Department has held that "[o]n a motion for leave to amend, plaintiff need not establish the merit of its proposed new allegations . . . but simply show that the proffered amendment is not palpably insufficient or clearly devoid of merit" (MBIA Ins. Corp. v Greystone & Co., Inc., 74 AD3d 499, 499 [1st Dept 2010]; accord Cruz v Brown, 129 AD3d 455, 455 [1st Dept 2015]; Miller v Cohen, 93 AD3d 424, 425 [1st Dept 2012]). "Mere lateness is not a barrier to the amendment. It must be lateness coupled with significant prejudice to the other side, the very elements of the laches doctrine" (Edenwald Contr. Co. v City of New York, 60 NY2d 957, 959 [1983]). Prejudice "requires some indication that the [opposing party] has been hindered in the preparation of [its] case or has been prevented from taking some measure in support of [its] position" (Kocourek v Booz Allen Hamilton Inc., 85 AD3d 502, 504 [1st Dept 2011] [internal quotation marks and citation omitted]).
Here, as discussed above, the court has dismissed the putative class claims as time-barred. Accordingly, Cortlandt's request to amend the complaint to delete the class allegations is denied as moot.
Pursuant to CPLR 908, "[a] class action shall not be dismissed, discontinued or compromised without the approval of the court. Notice of the proposed dismissal, discontinuance or compromise shall be given to all members of the class in the manner in that it directs." CPLR 908 applies in the pre-certification context (see Desrosiers v Perry Ellis Menswear, LLC, 30 NY3d 488, 492 [2017]; Avena v Ford Motor Co., 85 AD2d 149, 153 [1st Dept 1982]).
The court must next consider what kind of notice is required.
"where, as here, there is: [1] an involuntary dismissal while the case is still in its early stages and prior to any class being certified, [2] no known benefit or consideration conferred upon the named representative on account of the dismissal, [3] otherwise no apparent prejudice to the putative class members and [4] notice would present an unfair burden on the defendants, no notice is required"(Ring v AXA Fin., Inc., 2010 WL 11643182, *1 [Sup Ct, NY County 2010]). "This is to be distinguished from a situation where the named plaintiff has effected an individual settlement on his/her own behalf and wishes to discontinue the class action" (id.). No such considerations are presented here. Therefore, Cortlandt is not required to notify the putative class members that the claims have been dismissed.
CONCLUSION
Accordingly, it is
ORDERED that the motion (sequence number 002) of defendants Apax Partners LLP, Apax Europe VI GP Co., Ltd., Apax Europe VI GP, Ltd., Apax Partners Europe Managers, Ltd., Apax Europe VI-A, L.P., Apax Europe VI-1, L.P., Apax WW Nominees, Ltd., Apax Partners, L.P., David Bonderman, James Coulter, TPG Capital Management, L.P., TPG Partners IV, L.P., TPG Advisors IV, Inc., TPG Genpar IV, L.P., T3 GenPar II, L.P., T3 Partners II, L.P., and T3 Parallel II, L.P. is granted to the extent of:
(3) severing and dismissing the complaint as against defendants Apax Partners LLP, Apax Europe VI GP Co., Ltd., Apax Europe VI GP, L.P., Apax Partners Europe Managers, Ltd., Apax Europe VI-A, L.P., Apax Europe VI-1, L.P., Apax WW Nominees, Ltd., Apax Partners, L.P., TPG Capital Management, L.P., TPG GenPar IV, L.P., TPG Partners IV, L.P., TPG Advisors IV, Inc., T3 GenPar II, L.P., T3 Partners II, L.P., and T3 Parallel II, L.P.,
(4) dismissing the putative class claims; and it is further
ORDERED that the Clerk is directed to enter judgment accordingly; and it is further
ORDERED that counsel for defendants shall serve a copy of this order along with notice of entry on all parties within twenty (20) days; and it is further
ORDERED that the branch of defendants' motion as to defendants David Bonderman and James Coulter is denied without prejudice to renewal after completion of jurisdictional discovery; and it is further
ORDERED that the motion (sequence number 003) of proposed intervenor Basil Vasiliou for leave to intervene in this action is denied; and it is further
ORDERED that the motion (sequence number 004) of plaintiff Cortlandt Street Recovery Corporation for leave to amend the complaint to discontinue the class allegations is denied as moot. 10/22/2020
DATE
/s/ _________
CAROL R. EDMEAD, J.S.C.