To be Argued by: ROBERT S. FISCHLER and PAUL M. O’CONNOR III (Time Requested: 30 Minutes) APL 2017-00014 New York County Clerk’s Index Nos. 651693/10, 653357/11, 653363/11 and 653181/1l Court of Appeals of the State of New York CORTLANDT STREET RECOVERY CORP., Plaintiff, - against - HELLAS TELECOMMUNICATIONS, S.À.R.L., HELLAS TELECOMMUNICATIONS FINANCE, S.C.A., HELLAS TELECOMMUNICATIONS I, S.À.R.L., APAX PARTNERS, LLP and TPG CAPITAL, L.P., Defendants. ------------------------------- (For Continuation of Caption See Inside Cover) JOINT BRIEF FOR DEFENDANTS-APPELLANTS ROPES & GRAY LLP Attorneys for Apax-related Defendants-Appellants 1211 Avenue of the Americas New York, New York 10036 Tel.: (212) 596-9000 Fax: (212) 596-9090 KASOWITZ BENSON TORRES LLP Attorney for TPG-related Defendants-Appellants 1633 Broadway New York, New York 10019 Tel.: (212) 506-1700 Fax: (212) 506-1800 Date Completed: March 24, 2017 Index No. 651693/10 CORTLANDT STREET RECOVERY CORP., Plaintiff, - and - WILMINGTON TRUST COMPANY, as Trustee, Plaintiff-Respondent, - against - DAVID BONDERMAN, JAMES COULTER, MARTIN HALUSA, JOHN MEGRUE, GIANCARLO ALIBERTI, MATTHIAS CALICE, TPG CAPITAL- N.Y., LLP, APAX PARTNERS, L.P., d/b/a Apax Partners of New York, TPG PARTNERS IV, L.P., TPG ADVISORS IV, INC., TPG GENPAR IV, L.P., TPG ADVISORS II, INC., T3 GENPAR II, L.P., T3 PARTNERS II, L.P., T3 PARALLEL II, L.P., APAX PARTNERS EUROPE MANAGERS LIMITED, APAX EUROPE VI GP CO. LIMITED, APAX EUROPE VI GP, L.P., APAX EUROPE VI-A, L.P., APAX EUROPE VI-I, L.P., TROY, L.P. INC., APAX WW NOMINEES LTD., TPG TROY, LLC and T3 TROY, LLC, Defendants-Appellants, - and - HELLAS TELECOMMUNICATIONS II, S.C.A., HELLAS TELECOMMUNICATIONS CO-INVEST LTD., HELLAS TELECOMMUNICATIONS EMPLOYEES LTD., TCW HT-CO-INVEST I L.P. and TCW HT CO-INVEST II L.P., Defendants. ------------------------------- WILMINGTON TRUST COMPANY, as Trustee, and CORTLANDT STREET RECOVERY CORP., Plaintiffs, - against - HELLAS TELECOMMUNICATIONS FINANCE, S.C.A. and HELLAS TELECOMMUNICATIONS I, S.À.R.L., Defendants. ------------------------------- Index No. 653357/11 Index No. 653363/11 CORTLANDT STREET RECOVERY CORP., Plaintiff, - against - HELLAS TELECOMMUNICATIONS II, S.C.A., HELLAS TELECOMMUNICATIONS CO-INVEST LTD., HELLAS TELECOMMUNICATIONS EMPLOYEES LTD., TCW HT-CO-INVEST I L.P. and TCW HT CO-INVEST II L.P., Defendants, - and - HELLAS TELECOMMUNICATIONS I, S.À.R.L., HELLAS TELECOMMUNICATIONS, S.À.R.L., APAX PARTNERS, LLP, TPG CAPITAL, L.P., DAVID BONDERMAN, JAMES COULTER, MARTIN HALUSA, JOHN MEGRUE, GIANCARLO ALIBERTI, MATTHIAS CALICE, TPG CAPITAL-N.Y., LLP, APAX PARTNERS, L.P., d/b/a Apax Partners of New York, TPG PARTNERS IV, L.P., TPG ADVISORS IV, INC., TPG GENPAR IV, L.P., TPG ADVISORS II, INC., T3 GENPAR II, L.P., T3 PARTNERS II, L.P., T3 PARALLEL II, L.P., APAX PARTNERS EUROPE MANAGERS LIMITED, APAX EUROPE VI GP CO. LIMITED, APAX EUROPE VI GP, L.P., APAX EUROPE VI-A, L.P., APAX EUROPE VI-I, L.P., TROY, L.P. INC., APAX WW NOMINEES LTD., TPG TROY, LLC and T3 TROY, LLC, Defendants, - and - MARGARET ELIZABETH MILLS, ALAN MICHAEL HUDSON, ERNST & YOUNG, LLP, Administrators of Hellas Telecommunications II, S.C.A. and BANK OF NEW YORK MELLON, Common Depository for the Global Subordinated Notes of Hellas Telecommunications II, S.C.A., Additional Defendants. Index No. 653181/11 i DISCLOSURE STATEMENT PURSUANT TO § 500.1(f) OF THE RULES OF THE COURT OF APPEALS Pursuant to Rule 500.1(f) of the Rules of Practice of the Court of Appeals State of New York, Defendants-Appellants TPG Capital N.Y., Inc. (incorrectly named as TPG Capital-N.Y., LLP), TPG Partners IV, L.P., TPG Advisors IV, Inc., TPG GenPar IV, L.P., TPG Advisors II, Inc., T3 GenPar II, L.P., T3 Partners II, L.P., T3 Parallel II, L.P., TPG Troy LLC and T3 Troy LLC (collectively, the “TPG Entity-Appellants”) certify that the following are parents, subsidiaries and/or affiliates of the TPG Entity-Appellants: TPG Global, LLC T3 Advisors II, Inc. TPG Associates IV, L.P. TPG Coinvestment IV, L.P. TPG Equity IV-A, L.P. TPG Equity IV-B, L.P. TPG Equity IV-C, L.P. TPG Equity IV-D, L.P. TPG FOF IV-QP, L.P. TPG Management IV-A, L.P. TPG Management IV-B, L.P. TPG Management IV-C, L.P. TPG Umbrella IV, L.P. Pursuant to Rule 500.1(f) of the Rules of Practice of the Court of Appeals State of New York, Defendants-Appellants Apax Partners L.P., Apax Partners Europe Managers Ltd., Apax Europe VI GP Co. Limited, Apax Euorpe VI GP, L.P., Apax Europe VI-A, L.P., Apax Europe VI-1, L.P., Troy, L.P., Inc., and Apax WW Nominees Ltd. (collectively the “Apax Entity-Appellants”) certify that the ii following are parents, subsidiaries and/or affiliates of one or more of the Apax Entity-Appellants: A8 Coinvestment L.P. (Eur) A8 Coinvestment L.P. (USD) A8-A (Feeder) L.P. A8-B (Feeder) L.P. AE VII Co-Investment GP Co. Limited AIOF - Feeder L.P. AMI GP L.P. Inc. AMI Opportunities A - L.P. Apax Europe V GP, L.P. Apax Europe V-1 L.P. Apax Europe V-2 L.P. Apax Europe V-A L.P. Apax Europe V-B L.P. Apax Europe V-D L.P. Apax Europe V-E L.P. Apax Europe VI CI L.P. Apax Europe VI Founder L.P. Apax Europe VI No.2 Nominees Ltd Apax Europe VI Nominees Ltd Apax Europe VII Co-Investment L.P. Apax Europe VII Founder GP Co. Limited Apax Europe VII Founder L.P. Apax Europe VII GP Co. Ltd. Apax Europe VII GP L.P. Inc. Apax Europe VII Nominees Ltd Apax Europe VII-1 L.P. Apax Europe VII-A (ERISA Feeder) L.P. Apax Europe VII-A (Feeder) L.P. Apax Europe VII-A L.P. Apax Europe VII-B L.P. Apax Excelsior V Partners, L.P. Apax Excelsior V, L.P. Apax Excelsior VI Partners, L.P. Apax Excelsior VI, L.P. Apax Excelsior VI-A C.V. Apax Excelsior VI-B C.V. iii Apax Global Alpha, Ltd. Apax Guernsey (Holdco) PCC Limited Apax Guernsey Managers, Ltd. Apax Investment Management (Shanghai) Company Ltd. Apax Managers Inc. Apax Partners (Israel) Ltd. Apax Partners Beteilgungsberatung GMBH Apax Partners Brazil Consultoria Ltda. Apax Partners Fund Services Ltd. Apax Partners Holdings Ltd. Apax Partners Hong Kong Ltd. Apax Partners Inc. Apax Partners India Advisers Private Ltd. Apax Partners LLC Apax Partners LLP Apax Partners UK Ltd. Apax Partners US Holdings Ltd Apax Partners Worldwide Holdings Ltd. Apax QLP GP LLP Apax US VII GP, L.P. Apax US VII, L.P. Apax VIII Co-Investment GP Co. Limited (Guernsey) Apax VIII GP L.P. Inc. Apax VIII-1 L.P. Apax VIII-2 L.P. Apax VIII-A L.P. Apax VIII-B L.P. Apax WW No.2 Nominees Ltd. Patricof Private Investment Club II, L.P. Patricof Private Investment Club III, L.P. Peartree Limited SKM Equity Fund III, L.P. SKM Partners, LLC Stitching Apax Excelsior VI, LP i TABLE OF CONTENTS Page PRELIMINARY STATEMENT ............................................................................... 1 QUESTIONS PRESENTED ...................................................................................... 3 STATEMENT OF JURISDICTION.......................................................................... 4 STATEMENT OF THE CASE .................................................................................. 5 I. Background ........................................................................................................ 5 A. The Parties ............................................................................................. 5 B. The Notes And The CPEC Redemption ................................................ 5 C. The Sponsors Sell Hellas In Early 2007 ............................................... 7 II. The Proceedings Below ...................................................................................... 8 A. The Complaint ....................................................................................... 8 B. The Trial Court Dismissal Order ........................................................... 8 C. The Appellate Division Decision ........................................................ 10 D. Appellants’ Motion For Leave To Appeal .......................................... 10 ARGUMENT ........................................................................................................... 11 I. The First Department Erred In Holding That WTC Has Standing Under The Indenture To Assert The Third-Party Claims ........................................... 11 A. Section 6.03 Of The Indenture Does Not Authorize WTC To Bring The Third-Party Claims ............................................................. 12 1. Governing Legal Principles .......................................................... 12 2. The Plain Language Of Section 6.03 Is Dispositive ..................... 13 3. Other Sections Of The Indenture Support Appellants’ Interpretation Of Section 6.03 ...................................................... 19 B. WTC Does Not Have Standing As A Result Of The Cortlandt Direction To Pursue Its Non-Contractual Claims Against Third Parties ........................................................................................ 22 ii II. The First Department Erred In Holding That The Complaint Sufficiently Alleges Alter Ego Liability .............................................................................. 24 A. WTC Failed To Adequately Allege Facts That Support Piercing The Corporate Veil .............................................................................. 25 B. The Trial Court Correctly Held That The Alter Ego Claim Fails For The Additional Reason That It Is Not An Independent Cause Of Action And Is Duplicative Of The Other Causes Of Action That WTC Lacks Standing To Maintain ................................. 32 CONCLUSION ........................................................................................................ 34 iii TABLE OF AUTHORITIES Cases Page(s) 501 Fifth Ave. Co. LLC. v. Alvona LLC, 110 A.D.3d 494 (1st Dep’t 2013) ................................................................. 27, 30 Aetna Cas. & Sur. Co. v. Merchants Mut. Ins. Co., 84 A.D.2d 736 (1st Dep’t 1981) ......................................................................... 27 AG Capital Funding Partners, L.P. v. State St. Bank & Trust Co., 11 N.Y.3d 146 (2008) ......................................................................................... 13 Amusement Indus., Inc. v. Midland Ave. Assocs., 820 F. Supp. 2d 510 (S.D.N.Y. 2011) ................................................................ 15 Bd. of Managers of Caton Court Condo. v. Caton Dev. L.P. 41 Misc. 3d 1231(A) (N.Y. Sup. Ct. 2013) ........................................................ 27 Bd. of Managers of Gansevoort Condo. v. 325 W. 13th, LLC, 121 A.D.3d 554 (1st Dep’t 2014) ................................................................. 26, 30 Central Bank of Denver, N.A. v. Deloitte & Touche, 928 P.2d 754 (Colo. App. 1996) ......................................................................... 19 Cleo Realty Assocs. L.P. v. Uptown Birds, LLC, 135 A.D.3d 432 (1st Dep’t 2016) ....................................................................... 29 Cobalt Partners, L.P. v. GSC Capital Corp., 97 A.D.3d 35 (1st Dep’t 2012) ..................................................................... 25, 26 Continental Bank, N.A. v. Caton, 1990 WL 129452 (D. Kan. Aug 6, 1990) ........................................................... 18 CS First Boston Ltd. v. Behar, 1996 WL 384893 (S.D.N.Y. July 9, 1996) ......................................................... 21 D. Klein & Son, Inc. v. Good Decision, Inc., 147 Fed. App’x 195 (2d Cir. 2005) .................................................................... 31 Delagi v. Volkswagenwerk AG of Wolfsburg, Ger., 29 N.Y.2d 426 (1972) ......................................................................................... 29 iv E. Hampton Union Free Sch. Dist. v. Sandpebble Builders, Inc., 16 N.Y.3d 775 (2011) ................................................................................... 25, 26 Feigen v. Advance Capital Mgmt. Corp., 150 A.D.2d 281 (1st Dep’t 1989) ....................................................................... 26 Feldbaum v. McCrory Corp., 1992 WL 119095 (Del. Ch. June 1, 1992) .................................................... 14, 21 Ferro Fabricators, Inc. v. 1807-1811 Park Ave. Dev. Corp., 127 A.D.3d 479 (1st Dep’t 2015) ................................................................. 26, 33 Goel v. Ramachandran, 111 A.D.3d 783 (2d Dep’t 2013) ........................................................................ 33 Lange v. Citibank N.A., 2002 WL 2005728 (Del. Ch. Aug. 13, 2002) ......................................... 14, 21, 22 Morris v. N.Y. State Dep’t of Taxation & Fin., 82 N.Y.2d 135 (1993) ................................................................................... 25, 29 Oxbow Calcining USA Inc. v. Am. Indus. Partners, 96 A.D.3d 646 (1st Dep’t 2012) ......................................................................... 28 Premier Bank v. Tierney, 114 F. Supp. 2d 877 (W.D. Mo. 2000) ............................................................... 19 Quadrant Structured Prods. Co., Ltd. v. Vertin, 23 N.Y.3d 549 (2014) ................................................................................... 12, 21 Regions Bank v. Blount Parrish & Co. Inc., 2001 WL 726989 (N.D. Ill. June 27, 2001) ........................................................ 16 Secon Serv. Sys., Inc. v. St. Joseph Bank & Trust Co., 855 F.2d 406 (7th Cir. 1988) .............................................................................. 31 Sound Commc’ns, Inc. v. Rack & Roll, Inc., 88 A.D.3d 523 (1st Dep’t 2011) ......................................................................... 30 TNS Holdings v. MKI Sec. Corp., 92 N.Y.2d 335 (1998) ................................................................................... 25, 31 v United Bonding Ins. Co. v. Alexander, 413 F.2d 1025 (5th Cir. 1969) ............................................................................ 14 Vermont Teddy Bear Co. v. 583 Madison Realty Co., 1 N.Y.3d 470 (2004) ........................................................................................... 12 Walkovsky v. Carlton, 18 N.Y.2d 414 (1966) ................................................................................... 26, 27 In re Wash. Pub. Power Supply Sys. Sec. Litig., 623 F. Supp. 1466 (W.D. Wash. 1985) .............................................................. 17 Wilmington Trust Co. v. Hellas Telecommunications, S.a.r.l., 2016 WL 7339112 (S.D.N.Y. Aug. 4, 2016) ................................................ 30, 31 Statutes N.Y. Debt. & Cred. Law §§ 270-281 ....................................................................... 15 New York Contract Law § 10.13 (West’s N.Y. Prac. Series 2006) ........................ 21 Other Authorities CPLR 5713 ............................................................................................................... 11 1 Defendants-Appellants (collectively, “Appellants”) respectfully submit this brief in support of their appeal from certain portions of the Decision and Order of the Appellate Division, First Department, entered September 15, 2016 (the “Decision”), which modified the Decision and Order of Supreme Court, New York County (Friedman, J.), dated September 16, 2014 (the “Dismissal Order”), granting Appellants’ motion to dismiss the complaint in each of three separate actions (Index Nos. 651693/10, 653357/11, 653181/11). This appeal pertains only to Index No. 653357/11 (referred to below as “Cortlandt II”). Appellants seek reversal of the Decision to the extent it held that (i) Plaintiff-Respondent Wilmington Trust Company (“WTC”), as indenture trustee, has standing to assert the fraudulent conveyance and other non-contractual claims brought against Appellants (the “Third-Party Claims”); and (ii) the complaint sufficiently alleges breach of contract against Appellants on the theory that they were alter egos of the companies that issued and guaranteed the promissory notes at issue. PRELIMINARY STATEMENT The standing issue on this appeal concerns the interpretation of an indenture contract entered into among the issuer of debt securities, a trustee, and the security holders. Indentures govern the administration of the lending relationship and typically contain a “remedies” clause that defines the right of the indenture trustee 2 to sue on behalf of the security holders if the issuer of the debt defaults. The question here is whether the remedies clause in the Indenture authorized the trustee to bring the Third-Party Claims asserted against Appellants, none of which is a party to the Indenture or the Notes. 1 The First Department erred in holding, contrary to the trial court’s well-reasoned Dismissal Order and case law construing similar remedies clauses, that the trustee (WTC) has standing to assert the Third- Party Claims. In reaching this erroneous conclusion, the First Department failed to give effect to the plain terms of the remedies clause, Section 6.03 of the Indenture, which limits the trustee to bringing claims “to collect the payment of principal, premium, if any, and interest on the Notes.” This language authorizes claims for payment only against the two parties that agreed to make payment of “principal, premium, if any, and interest on the Notes,” namely the Issuer and the Guarantor of the Notes. This language does not authorize the trustee to bring non-contractual claims against third parties, as WTC seeks to do in this case. Instead of giving effect to the plain terms of Section 6.03, the First Department erroneously relied on extraneous factors, including whether the trustee was suing on behalf of all Noteholders and the amount of damages sought by the trustee. The other issue on this appeal concerns the legal sufficiency of the complaint’s allegations that each of the 24 Appellants are contractually liable to 1 Capitalized terms not defined in this Preliminary Statement are defined infra. 3 repay the Notes as alter egos of the Issuer and the Guarantor. In a single sentence, the Decision reversed the trial court’s holding that the alter ego allegations are insufficient because they are “wholly conclusory” and rely on “group pleading” that collectively pleads against the Appellants as a single entity using the defined term “Private Equity Defendants.” The trial court’s holding was correct and consistent with settled law, as the complaint fails to allege facts that show for each Appellant how that Appellant supposedly (i) controlled the Issuer and Guarantor; and (ii) used that control to commit a fraud or other wrong against the Noteholders. In addition, no legally sufficient alter ego allegations could be asserted against any Appellant because the Noteholders knew that they contracted only with the Issuer and Guarantor and could not look to related corporate entities, let alone unrelated third parties (such as Appellants), for repayment in the event of a default. For these reasons and others discussed more below, the Decision should be reversed insofar as it held that WTC has standing to sue and that it has sufficiently alleged alter ego liability. QUESTIONS PRESENTED 1. Whether the remedies provision in Section 6.03 of the Indenture, allowing the trustee to bring claims to collect the “payment of principal, premium, if any, and interest on the Notes,” confers standing on the trustee to bring the Third-Party Claims asserted by WTC. 4 Answer: No. The plain language of Section 6.03 authorizes the trustee only to bring contract claims against the Issuer and the Guarantor, the only parties that agreed to pay “principal, premium, if any, and interest on the Notes.” The Third- Party Claims therefore are not authorized by Section 6.03. 2. Whether a purported direction to WTC by unauthorized “holders” to join a lawsuit separate and distinct from this action conferred standing on WTC to bring the Third-Party Claims in this action. Answer: No. The purported direction was ineffective to confer standing on WTC to sue because, among other reasons, it was not given by authorized “Holders” and the purported direction pertained to another action. 3. Whether the complaint’s conclusory, “group” allegations, pleaded collectively against numerous and disparate Appellants, sufficiently state a claim for alter ego liability against each of the Appellants. Answer: No. The complaint insufficiently alleges alter ego liability because, among other reasons, the relevant allegations are wholly conclusory and improperly rely on “group pleading” that does not give adequate notice to each Appellant of the conduct alleged against it. STATEMENT OF JURISDICTION On January 10, 2017, the First Department granted Appellants’ motion for leave to appeal the Decision to this Court to the extent the Decision pertains to 5 WTC’s claims in this action. (A.1144-46). All arguments raised on this appeal have been made to the courts below and, therefore, are preserved for this Court’s review. STATEMENT OF THE CASE I. BACKGROUND A. THE PARTIES Respondent WTC is a trust company with its principal place of business in Wilmington, Delaware. (A.524 ¶ 6). WTC alleges that it is the successor trustee under the Indenture. Cortlandt Street Recovery Corp. (“Cortlandt”), a co-plaintiff named in the complaint that is not a party to this appeal, is a shell company that allegedly was assigned rights to collect on the Notes. (A.524 ¶ 9). Appellants are 24 of the defendants in this action. They are all entities and individuals that, at the relevant time, were associated with private equity firms Apax Partners LLP (“Apax Partners”) and TPG Capital Management, L.P. (“TPG Capital”) or related entities.2 (A.528 ¶ 27). B. THE NOTES AND THE CPEC REDEMPTION In June 2005, investment funds (the “Sponsors”) that were managed or 2 The Appellants are Apax Partners L.P., Apax Partners Europe Managers Limited, Apax Europe VI GP Co. Ltd., Apax Europe VI GP, L.P., Apax Europe VI-A, L.P., Apax Europe VI-I, L.P., Troy L.P. Inc., Apax WW Nominees Ltd., Martin Halusa, John F. Megrue, Jr., and Giancarlo Aliberti (collectively, the “Apax Appellants”) TPG Capital N.Y., Inc. (incorrectly named as TPG Capital-N.Y., LLP), TPG Partners IV, L.P., TPG Advisors IV, Inc., TPG GenPar IV, L.P., TPG Advisors II, Inc., T3 GenPar II, L.P., T3 Partners II, L.P., T3 Parallel II, L.P., TPG Troy LLC, T3 Troy LLC, David Bonderman, James Coulter, and Matthias Calice (collectively, the “TPG Appellants,” and with the Apax Appellants, “Appellants”). 6 advised by entities associated with Apax Partners, TPG Capital, or related entities acquired a majority stake in TIM Hellas Telecommunications S.A. (“TIM Hellas”), a Greek company that provided mobile telecommunications services in Greece. (A.267). Later in 2005, the Sponsors bought the remaining shares in TIM Hellas and acquired all of the shares of the ultimate parent of the Hellas companies (the “Hellas Group”), Hellas Telecommunications, S.à.r.l. (“Hellas”). (Id.) In December 2006, the Hellas Group was recapitalized in a series of transactions that included the issuance of new debt. A portion of that debt was evidenced by notes issued by Hellas Telecommunications Finance, S.C.A. (the “Issuer”) in the face amount of €200 million (the “Notes”). (A.549 ¶ 134). The Notes were guaranteed by the Issuer’s direct parent, Hellas Telecommunications I, S.à.r.l. (the “Guarantor” and, together with the Issuer, the “Hellas Obligors”). Administration of the Notes and the lending relationship are governed by an indenture dated December 21, 2006 (the “Indenture”) that sets forth the rights and obligations of the Hellas Obligors, the trustee, the purchasers of the Notes (the “Noteholders”), and the financial institutions that served as paying and security agents for the Notes. (A.407). No Appellant is a party to the Notes or the Indenture. The use of the proceeds of the new debt was detailed in the December 18, 2006 offering memorandum issued in connection with the Indenture (“Offering Memorandum”), which explained that €544.7 million of debt raised by affiliated 7 entities would be used to reduce the outstanding debt of the Issuer, leaving the Issuer with substantially less debt than it had prior to the Hellas Group recapitalization. (A.277, A.319). The recapitalization also included the redemption by Hellas of convertible Luxembourg securities known as “CPECs” held by the Sponsors for total consideration of €973.7 million (the “CPEC Redemption”). As discussed below, the core allegations in this case are that the CPEC Redemption was a fraudulent conveyance under the New York Debtor and Creditor Law, and that each Appellant was an “ultimate transferee” of redemption proceeds, and as such, is liable for the proceeds it received. (A.559-66 ¶¶ 187-221). C. THE SPONSORS SELL HELLAS IN EARLY 2007 In February 2007, approximately two months after the CPEC Redemption, the Sponsors agreed to sell the Hellas Group to Weather Investments S.p.A. (“Weather”) for €3.4 billion (including assumed debt). Under the management of its new owner, the Issuer continued to meet its payment obligations on the Notes for almost three years after the December 2006 CPEC Redemption. As alleged in WTC’s complaint, it was not until late 2009, in the wake of the global financial crisis, and long after the Hellas Group was acquired by Weather, that the Issuer defaulted on the Notes. 8 II. THE PROCEEDINGS BELOW A. THE COMPLAINT The complaint in this action was filed on December 5, 2011. It contains nine separate “Causes of Action” against Appellants, all of which pertain to the CPEC Redemption.3 WTC’s primary theory of recovery, set forth in the Fifth through Ninth Causes of Action, is that the CPEC Redemption (and subsequent transfers of redemption proceeds) were fraudulent conveyances under the New York Debtor and Creditor Law, and that Appellants, as “ultimate transferees” of redemption proceeds, are liable for the amounts they received. In addition, the complaint asserts claims for alleged violations of the New York Business Corporation Law (the Third Cause of Action), unjust enrichment (the Tenth Cause of Action), and breach of contract on the theory that Appellants are collectively liable on the Notes as alter egos of the Hellas Obligors (the Second and Fourth Causes of Action). (A.516-71). B. THE TRIAL COURT DISMISSAL ORDER On September 16, 2014, the Commercial Division of Supreme Court, New York County (Hon. Marcy S. Friedman) issued the Dismissal Order granting Appellants’ motions to dismiss this action (referred to in the Decision as Cortlandt II) and two related actions in their entirety. (A.7-38). The trial court dismissed the 3 The First Cause of Action in WTC’s complaint can be ignored because it is alleged against parties that are not parties to the action. See (A.525 ¶ 12(b); A.553-54 ¶¶ 147-60). 9 Third-Party Claims on the ground that WTC lacks standing under the Indenture to assert those claims. (A.30-37).4 In addition, in a footnote, the trial court held that the alter ego theory of contract liability was not sufficiently alleged because it was based on “wholly conclusory” allegations and improperly relied on “group pleading” that collectively pleaded against all 24 Appellants, as if they were a single entity, using the defined term “Private Equity Defendants.” (A.37 n.12); see (A.557-59 ¶¶ 181-85). WTC moved for reargument and renewal with respect to the Dismissal Order. (A.622). The motion argued that WTC was authorized to pursue the Third- Party Claims by a “direction” supposedly given to WTC by certain “holders” of Notes. (A.63). On February 5, 2015, the trial court denied reargument, granted leave to renew, and upon renewal, adhered to its initial decision dismissing the Third-Party Claims for lack of standing to sue. (A.61-64). The court reasoned that WTC’s new “direction” argument failed because, among other reasons, the purported direction did not, as WTC conceded, come from registered “Holders,” which were the only Noteholders permitted to give a valid direction to the trustee under the terms of the Indenture. (A.63). 4 The trial court held that Cortlandt lacked standing to sue because, among other reasons, the purported assignments from Noteholders transferred only a collection right, and not title to any claims. (A.12-17). The Decision affirmed the dismissal of Cortlandt’s claims, and they are not at issue on this appeal. 10 C. THE APPELLATE DIVISION DECISION WTC and Cortlandt appealed from the dismissal of the complaint in this action as well as the complaints in Index Nos. 651693/10 and 653181/11. On September 15, 2016, the First Department issued its Decision, in which it affirmed the Dismissal Order in all respects except for its holdings in this action that WTC lacked standing to sue and that it failed to plead adequately any alter ego claim. (A.1138-43). Regarding standing, the First Department held that, in authorizing the trustee to sue for payment of amounts due “on the Notes,” Section 6.03 of the Indenture authorized WTC’s Third-Party Claims. (A.1140-42). The First Department further held, in a single sentence, that the complaint sufficiently alleged an alter ego claim based on the complaint’s allegations that all of the 24 Appellants “controlled” the Hellas Obligors and that the Issuer was rendered insolvent by the CPEC Redemption. (A. 1141-42). D. APPELLANTS’ MOTION FOR LEAVE TO APPEAL On October 14, 2016, Appellants moved for leave to appeal to this Court from the portions of the Decision holding that WTC has standing to assert the Third-Party Claims and that it adequately alleged an alter ego claim against all Appellants. Appellants also moved, in the alternative, for reargument with respect to the alter ego claim. On January 10, 2017, the First Department granted Appellants’ motion seeking leave to appeal, while denying the motion for 11 reargument. (A.1144-46). Pursuant to CPLR 5713, the First Department certified the following question of law: “Was the order of the [First Department], which unanimously modified the order of the Supreme Court, properly made?” (A.1145). The court further certified that its determination was made as a matter of law and not in the exercise of discretion. (A.1146). ARGUMENT I. THE FIRST DEPARTMENT ERRED IN HOLDING THAT WTC HAS STANDING UNDER THE INDENTURE TO ASSERT THE THIRD-PARTY CLAIMS In the courts below, WTC’s principal argument was that it has standing to bring the Third-Party Claims on the ground that Section 6.03 of the Indenture provides an affirmative grant of authority to bring such claims. The trial court rejected this argument, but the First Department agreed with WTC and reversed. WTC secondarily argued that it had standing based on a purported direction from Cortlandt to join the action referred to below as “Cortlandt I.” The trial court rejected this argument, reasoning that even if WTC could theoretically obtain standing as a result of a valid direction to sue, the purported direction here was invalid. The First Department did not reach this prong of WTC’s argument. As discussed below, the trial court was correct in rejecting both of WTC’s arguments, and the First Department erred by not giving effect to the plain language of Section 6.03, which limits the trustee to a suit “to collect the payment 12 of principal, premium, if any, and interest on the Notes.” Instead, the First Department reasoned that Third-Party Claims were permissible because they were asserted for the benefit of all Noteholders and sought damages equal to the amount due on the Notes. These factors, however, do not determine whether a claim is within the ambit of Section 6.03. Instead, settled principles of New York law dictate that Section 6.03 be interpreted according to the plain meaning of its terms, and that the right of WTC to bring suit is defined exclusively by the terms of the Indenture. Application of these principles here compels the conclusion that the First Department erred in holding that Section 6.03 confers standing on WTC to assert the Third-Party Claims. A. SECTION 6.03 OF THE INDENTURE DOES NOT AUTHORIZE WTC TO BRING THE THIRD-PARTY CLAIMS 1. Governing Legal Principles “A trust indenture is a contract, and under New York law, interpretation of indenture provisions is a matter of basic contract law.” Quadrant Structured Prods. Co., Ltd. v. Vertin, 23 N.Y.3d 549, 559 (2014) (internal quotations omitted). “In construing a contract, [New York courts] look to its language, for ‘a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.’” Id. at 559-60 (quoting Greenfield v. Philles Records, 98 N.Y.2d 562, 569 (2002)); see also Vermont Teddy Bear Co. v. 583 Madison Realty Co., 1 N.Y.3d 470, 475 (2004) (In interpreting contracts, 13 absent ambiguity, courts “look solely to the language used by the parties to discern the contract’s meaning.”). Specifically, in the context of an indenture, a trustee only has so much authority to act on its own as is affirmatively granted to it by the express terms of the trust indenture contract, and no more. See AG Capital Funding Partners, L.P. v. State St. Bank & Trust Co., 11 N.Y.3d 146, 156 (2008) (“The trustee under a corporate indenture has his or her rights and duties defined … exclusively by the terms of the agreement.”) (internal quotations omitted). 2. The Plain Language Of Section 6.03 Is Dispositive WTC’s authority to bring suit if there is an Event of Default is set forth in Section 6.03 of the Indenture, which provides, in relevant part: If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. (A.485) (emphasis added). The issue here is whether the Third-Party Claims are “to collect the payment of principal, premium, if any, and interest on the Notes.”5 They are not, and therefore may not be asserted by WTC. Critically, only two parties - the Hellas Obligors - agreed to make “payment of principal, premium, if any, and interest on the Notes.” It follows, as a matter of 5 The trial court held that the Third-Party Claims were not encompassed by the grant of authority “to enforce the performance of any provision of the Notes or this Indenture.” (A.33). WTC did not contest that holding in the First Department. 14 plain English, that Section 6.03 grants WTC authority to bring payment collection claims against the Hellas Obligors, and only the Hellas Obligors. Moreover, the only reasonable interpretation of a claim for payment “on the Notes” is that it must be for a payment due under the terms and conditions of the Notes. See United Bonding Ins. Co. v. Alexander, 413 F.2d 1025 (5th Cir. 1969) (“Section 1352 is applicable only to a suit on a bond, which means a suit against one bound by its terms for a breach of duty arising under it.”). Here, the Third-Party Claims are not brought to collect a payment due under the terms and conditions of the Notes, but instead primarily seek to avoid and recover, under the statutory authority of the New York Debtor & Creditor Law, funds alleged to have been fraudulently conveyed to 24 non-parties to the Notes and Indenture. While the alleged conveyances are in some sense “related to” the Notes in that they allegedly were funded in part with Notes proceeds, that does not bring the claims within Section 6.03’s requirement that a claim by WTC be for payment of amounts due “on the Notes.” If the drafters of the Indenture wished to give the trustee broad authority to assert all claims “related to” the Notes, it would have been easy enough to say so, as other Indenture sections make clear. See Point I.A.3, infra.6 6 Indeed, as discussed at Point I.A.3 infra, the cases cited by the First Department, Feldbaum v. McCrory Corp., 1992 WL 119095 (Del. Ch. June 1, 1992), and Lange v. Citibank N.A., 2002 WL 2005728 (Del. Ch. Aug. 13, 2002), illustrate the point. In both cases, “no-action” clauses that involved the rights of security holders (not indenture trustees) to sue were found to preclude fraudulent conveyance claims because the clauses covered claims “with respect to” the relevant securities. Similar language could have been, but was not, used in Section 6.03 here. 15 In addition, the Third-Party Claims are beyond the scope of Section 6.03 because they do not seek to collect the payment of “principal, premium, if any, and interest,” as Section 6.03 requires. Rather, as discussed above, the Third-Party Claims seek to avoid and recover conveyances allegedly made to third parties. If WTC were able to establish fraudulent conveyance liability under the relevant statutes (which it is not), each transferee would be liable only for the amount of the conveyance it received, not for the full amount of “principal, premium, if any, and interest” due on the Notes. See N.Y. Debt. & Cred. Law §§ 270-281 (McKinney) (fraudulent conveyance remedy is based on amount third party received from rather than amount owed by debtor to its creditors); Amusement Indus., Inc. v. Midland Ave. Assocs., 820 F. Supp. 2d 510, 528 (S.D.N.Y. 2011) (“A transferee’s liability is limited to a judgment in the amount of monies wrongfully received, regardless of the total amount of the conveyance.”) (applying New York law) (internal quotation omitted).7 The foregoing interpretation of Section 6.03 is also compelled by case law construing similar indenture provisions. Indeed, as discussed below, prior to the decision of the First Department in this case, virtually every court to consider 7 The First Department found it persuasive that WTC “seek[s] recovery solely of the amounts due under the notes, for the benefit of all noteholders on a pro rata basis, as a remedy for an alleged injury suffered ratably by all noteholders by reason of their status as noteholders.” (A.1140). This analysis is flawed because it confuses the amount of damages sought by WTC with the nature of its claims, which is the controlling factor under Section 6.03. 16 indenture clauses similar to Section 6.03 concluded that the clause did not authorize the indenture trustee to assert third-party claims. Regions Bank v. Blount Parrish & Co. Inc., 2001 WL 726989 (N.D. Ill. June 27, 2001), which involved a “remedies” clause virtually identical to Section 6.03, is particularly persuasive authority in this action. In that case, the remedies clause provided: If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the principal of, premium, if any, or interest on the Bonds or to enforce the performance of any provision of the Bonds, this Indenture, the Facility Lease Agreement or the Guaranty. Id. at *2 (emphasis added). There, the indenture trustee, in reliance on this clause, asserted that it had standing to pursue “any available remedy,” including a third- party fraud claim based on alleged misrepresentations in the offering memorandum for the defaulted bonds. Id. at *2-3. The court rejected the trustee’s position, holding that the phrase “any available remedy,” referred only to actions designed to “‘collect the principal of, premium, if any, or interest on the Bonds’ or to enforce the performance of any provision of the bonds or the Indenture.” Id. at *5 (emphasis added). As a result, the court held that the indenture “does not give [p]laintiff power to protect any and all rights of the bondholders or pursue bondholder’s tort claims,” and without being assigned such power, the trustee “cannot proceed with an action for fraud.” Id. (emphasis added). This analysis is 17 equally applicable to Section 6.03 at issue in this case, under which the trustee may pursue “any available remedy,” but only when seeking to collect “payment … on the Notes.” In the Decision, the First Department “decline[d] to follow” Regions Bank “to the extent Regions Bank precludes a trustee from asserting a fraudulent conveyance claim based on transactions that allegedly rendered the issuer insolvent after the issuance of the notes.” (A.1141). Regions Bank, however, does not stand for that general proposition, and Appellants do not urge that as a general proposition here. Instead, Regions Bank interpreted the particular remedies clause at issue in that case, and held that it did not authorize the third-party fraud claim asserted by the trustee. Here too, the question is not whether indenture trustees are, as a general proposition, precluded from bringing fraudulent conveyance or other third-party claims, but whether Section 6.03 of the Indenture authorizes the Third- Party Claims. If this Court answers that question in the negative, as it should, that would not preclude indenture trustees from bringing third-party claims where the indenture language authorizes such claims. Cf. In re Wash. Pub. Power Supply Sys. Sec. Litig., 623 F. Supp. 1466, 1483 (W.D. Wash. 1985), aff’d, 823 F.2d 1349 (9th Cir. 1987) (trustee had standing to assert fraud claims where indenture authorized trustee to “protect and enforce its rights and the rights of the holder of the Bonds … in the enforcement of any other legal or equitable right.”). 18 Consistent with Regions Bank, in Continental Bank, N.A. v. Caton, 1990 WL 129452 (D. Kan. Aug 6, 1990), another federal district court rejected an indenture trustee’s attempt to assert third-party claims. 1990 WL 129452, at *1-2. The relevant clause in the indenture provided: All rights of action (including the right to file proof of claims) under this Indenture or under any of the Bonds may be enforced by the Trustee without the possession of any of the bonds or the production thereof in any trial or other proceedings related thereto and any such suit or proceeding instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any Owner of the bonds, and recovery of judgment shall be for the equal and ratable benefit of all Owners of the outstanding Bonds. Id. at *4 (emphasis added and other emphasis omitted). In rejecting the trustee’s standing argument, the Continental Bank court reasoned that a claim “under this [Trust] Indenture or under any of the bonds” did not encompass third-party “tort claims or securities claims on behalf of all bondholders.” Id. at *7 (emphasis added). The court explained that the trustee “cannot successfully transform its general administrative authority under the Trust Indenture into a carte blanche assignment of the bondholders’ claims arising from the common law or the securities law.” Id. at *5. So too here, WTC lacks standing to pursue the Third- Party Claims under Section 6.03 of the Indenture, which does not include a carte blanche assignment of Noteholders’ claims to the trustee. 19 Similarly, in Premier Bank v. Tierney, 114 F. Supp. 2d 877 (W.D. Mo. 2000), the court held that an indenture trustee lacked authority to bring third-party claims on behalf of bond purchasers. 114 F. Supp. 2d at 879-80. The relevant clause in the indenture in Premier Bank provided: All rights of action … under this Mortgage and Indenture of Trust or under any of the bonds or coupons may be enforced by the Trustee without the possession of any of the Bonds or coupons or the production thereof in any trial or other proceedings related thereto[,] and any such suit or proceeding instituted by the Trustee shall be brought in its name as Trustee without the necessity of joining as plaintiffs or defendants any holders of the Bonds …. Id. at 881 (emphasis and first ellipses in original). In holding that the trustee lacked standing to sue, the Premier Bank court explained that “[t]he language [of the quoted clause] speaks only of legal actions brought to enforce the Indenture, Mortgage, and bonds or coupons. No authority is conferred to pursue separate tort actions at all, much less against a party such as [defendant]-a party distinct from the obligor under the bonds.” Id. (emphasis added).8 3. Other Sections Of The Indenture Support Appellants’ Interpretation Of Section 6.03 Sections 14.07 and 14.09 of the Indenture further support Appellants’ interpretation of Section 6.03. These sections show that, when the drafters of the Indenture intended to describe claims against parties other than the Hellas Obligors, 8 See also Central Bank of Denver, N.A. v. Deloitte & Touche, 928 P.2d 754, 756-57 (Colo. App. 1996) (indenture permitting the trustee to “pursue any available remedy at law or in equity to enforce the payment” of the bonds did not authorize the trustee to sue a third party in tort). 20 they employed language far broader than that found in Section 6.03. Section 14.07 of the Indenture, a “no-recourse” clause that exculpates certain third parties from liability, provides: No director … will have any liability for any obligations of the Parent Guarantor … under the Notes, any Guarantee, any Security Document or this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. (A.507 (emphasis added)). Similarly, Section 14.09, which addresses service of process, provides: The Parent Guarantor and the Issuer have appointed [their Authorized Agent to accept service of process] in any actions arising out of, based on, or relating to the Notes, this Indenture or the transactions contemplated hereby or brought under U.S. Federal or state securities laws …. The Parent Guarantor and the Issuer irrevocably (i) agree that any legal suit, action or proceeding against the Parent Guarantor or the Issuer arising out of, based on, or relating to the Notes, this Indenture or the transactions contemplated hereby may be instituted in [New York state and federal courts] …. (A.507-08 (emphasis added)). As these clauses demonstrate, the drafters used phrases such as “in respect of the Notes,” “by reason of” the obligations under the Notes, “arising out of” or “relating to the Notes,” as well as proceedings “arising out of, based on, or relating to the transactions contemplated” by the Indenture, when they intended to describe a broad set of claims involving the Notes. In contrast, the fact that Section 6.03 is expressly limited to claims for payment of amounts due “on the Notes” is telling, 21 and precludes reading that section, by implication or otherwise, to include non- contractual, third-party claims. See Glen Banks, New York Contract Law § 10.13 (West’s N.Y. Prac. Series 2006) (“The maxim [expressio unius est exclusion alterius] also applies when reading contract clauses together to exclude reading into one clause language that is specifically used in other clauses.”); see also Quadrant Structured Prods. Co., 23 N.Y.3d at 560 (employing “the maxim expressio unius est exclusion alterius,” to interpret indenture’s no-action clause by comparing it to language used in standard no-action clauses); CS First Boston Ltd. v. Behar, 1996 WL 384893, at *5-6 (S.D.N.Y. July 9, 1996) (declining to interpret a contract clause, by implication, as encompassing language used in another contract provision). The distinction between the narrow phrase “on the Notes” and the broader phrases in Sections 14.07 and 14.09 is highlighted by two cases cited by the First Department in the Decision. In Feldbaum, the court construed a no-action clause stating that “[a] Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless” it complied with various conditions. 1992 WL 119095, at *5 (emphasis added). The court found “[t]he clause in question bars all action ‘with respect to’ the indenture or the securities,” and held that “[a] fraudulent conveyance action is such an action.” Id. at *7. Similarly, in Lange, the court held that holders could not assert fraudulent conveyance claims without 22 satisfying a no-action clause because the clause applied to claims “with respect to the Indenture or the Debentures themselves.” 2002 WL 2005728, at *7 (emphasis added). As these no-action cases plainly illustrate, the phrase “with respect to the indenture or the notes” is intended to capture claims not encompassed by the phrase “on the Notes” found in Section 6.03. Thus, the First Department’s reliance on Feldbaum and Lange to support its holding that the phrase “on the Notes” provides WTC with standing to assert the Third-Party Claims was erroneous, as the language in Feldbaum and Lange was broader than that contained in Section 6.03. B. WTC DOES NOT HAVE STANDING AS A RESULT OF THE CORTLANDT DIRECTION TO PURSUE ITS NON- CONTRACTUAL CLAIMS AGAINST THIRD PARTIES Having held that Section 6.03 grants WTC authority to bring the Third-Party Claims, the First Department did not address WTC’s alternative argument that it has standing by virtue of a direction from Cortlandt. This direction, in relevant part, purportedly directed WTC to “join, on behalf of all the Notes, the suit (the “Hellas Litigation”) commenced by [Cortlandt] under Index No. 651693/2010 [Cortlandt I, not this case on appeal] in New York Supreme Court ….” (A.630). As the trial court held, this direction is not effective to confer the standing on WTC. Cortlandt maintained that the direction was effective under Section 6.05 of the Indenture, which provides that: Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method 23 and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it …. (A.485 (emphasis added)). Thus, by its plain language, Section 6.05 requires that any direction to the Trustee must come from “Holders,” who are defined in the Indenture as “with respect to any Note, the Person in whose name such Note is registered in the register maintained by the registrar pursuant to the provisions of this Indenture.” (A.422). WTC conceded below that Cortlandt was not a Holder, and instead merely received assignments from owners of so-called “book entry interests.” (A.524 ¶ 9; A.62 (“[A]ccording to WTC, the trustee received the direction from Cortlandt and, as acknowledged by Cortlandt, Cortlandt was authorized to act by SPQR, which was a beneficial holder, ‘not a “Holder” within the meaning of the indenture.’”)). Indeed, as explained in the Offering Memorandum, “[s]o long as the Notes are outstanding in global form and the common depository for Euroclear and Clearstream is the registered owner of the Global Note, the common depository will be considered the sole owner or holder of the Notes represented by that Global Note for all purposes under the Indenture[].” (A.342 (emphasis added)). Faced with this disclosure, WTC conceded that Euroclear and Clearstream were the only Holders of Notes as defined in the Indenture. (A. 63). 24 Moreover, even if the alleged direction to WTC came from Holders, as required by Section 6.05 of the Indenture, it still would not provide WTC with standing to assert its Third-Party Claims in this action. The direction purports to direct WTC to “join” the Cortlandt I action, but not this case. (A.630). The direction by its terms does not purport to authorize WTC to commence this action against Appellants, none of whom were defendants in Cortlandt I. Thus, the direction does not provide standing to WTC to assert the Third-Party Claims. II. THE FIRST DEPARTMENT ERRED IN HOLDING THAT THE COMPLAINT SUFFICIENTLY ALLEGES ALTER EGO LIABILITY The First Department erroneously held that the complaint’s allegations that “defendants controlled the issuer of the notes and caused the issuer to divest itself of the proceeds of the sale of the notes … thereby rendering the issuer insolvent” - which is the principal basis on which WTC attempts to pierce the corporate veil - were sufficient to allege alter ego liability for the Notes against all 24 disparate entity and individual Appellants. (A.1141). As the trial court recognized, New York pleading standards require, at a minimum, non-conclusory allegations specifying the conduct alleged against each defendant that would support alter ego liability. As discussed below, the complaint here does not meet those standards. 25 A. WTC FAILED TO ADEQUATELY ALLEGE FACTS THAT SUPPORT PIERCING THE CORPORATE VEIL It is axiomatic that “New York law disfavors disregard of the corporate form.” Cobalt Partners, L.P. v. GSC Capital Corp., 97 A.D.3d 35, 40 (1st Dep’t 2012). Accordingly, this Court has held that “[t]hose seeking to pierce a corporate veil … bear a heavy burden of showing that the corporation was dominated as to the transaction attacked and that such domination was the instrument of fraud or otherwise resulted in wrongful or inequitable consequences. Evidence of domination alone does not suffice without an additional showing that it led to inequity, fraud or malfeasance.” TNS Holdings v. MKI Sec. Corp., 92 N.Y.2d 335, 339 (1998) (emphasis added) (internal citations omitted); see also E. Hampton Union Free Sch. Dist. v. Sandpebble Builders, Inc., 16 N.Y.3d 775, 776 (2011) (in order to pierce the corporate veil based on an alter ego theory, the plaintiff must allege that defendants, typically controlling shareholders, “exercised complete domination and control over the corporation” and “abused the privilege of doing business in the corporate form to perpetuate a wrong or injustice”); Morris v. N.Y. State Dep’t of Taxation & Fin., 82 N.Y.2d 135, 141 (1993) (“Generally … piercing the corporate veil requires a showing that: (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that 26 such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff’s injury.”).9 Given the “strict standard” for piercing the corporate veil under New York law, Cobalt Partners, 97 A.D.3d at 37, a plaintiff must plead “specific factual allegations” supporting its claim, Feigen v. Advance Capital Mgmt. Corp., 150 A.D.2d 281, 282 (1st Dep’t 1989). As a result, this Court has rejected conclusory piercing allegations and required alter ego plaintiffs to allege specific, particularized facts. See, e.g., E. Hampton Union Free Sch. Dist., 16 N.Y.3d at 776 (“Since, by definition, a corporation acts through its officers and directors, to hold a shareholder/officer … personally liable, a plaintiff must do more than merely allege that the individual defendant engaged in improper acts or acted in ‘bad faith’ while representing the corporation.”); Walkovsky v. Carlton, 18 N.Y.2d 414, 420 (1966) (complaint failed to allege “sufficiently particular” facts to substantiate claim that corporate veil should be pierced). The First Department, contrary to its holding in this case, also requires particularized alter ego allegations. See Ferro Fabricators, Inc. v. 1807-1811 Park Ave. Dev. Corp., 127 A.D.3d 479, 480 (1st Dep’t 2015) (complaint “fail[ed] … to plead any particularized facts”); Bd. of 9 Regarding the “fraud or wrong” prong of alter ego liability, WTC’s contention that the Hellas entities engaged in a fraudulent transaction has been specifically rejected on the merits by a three-judge panel in Luxembourg in a related case challenging the same redemption transaction at issue here. The Luxembourg court concluded that the redemption was a lawful transaction and was not fraudulent because of, among other reasons, the disclosures made in the Offering Memorandum governing those notes, which were essentially identical to the disclosures in the Offering Memorandum governing the Notes. 27 Managers of Gansevoort Condo. v. 325 W. 13th, LLC, 121 A.D.3d 554, 554 (1st Dep’t 2014) (“The allegations … that the sponsor … was undercapitalized, dominated by defendant and intermingled its assets with defendant’s, are conclusory and devoid of facts.”); 501 Fifth Ave. Co. LLC. v. Alvona LLC, 110 A.D.3d 494, 494 (1st Dep’t 2013) (rejecting “allegations of corporate domination [that] are wholly conclusory and consist of no more than a recitation of the elements of the claim”). In addition, alter ego may not be properly alleged against a group of defendants collectively by use of “group pleading.” Instead, each defendant is entitled to notice of how it allegedly dominated the alleged alter ego and abused the corporate form to perpetrate a fraud or wrong. See CPLR 3013; Walkovszky, 18 N.Y.2d at 420 (complaint insufficient under CPLR 3013 where it lacked “sufficiently particular[ized] statements” as to each defendant); Aetna Cas. & Sur. Co. v. Merchants Mut. Ins. Co., 84 A.D.2d 736 (1st Dep’t 1981) (causes of action “pleaded against all defendants collectively without specification as to precise tortious conduct charged to any particular defendant” do not satisfy CPLR 3013); Bd. of Managers of Caton Court Condo. v. Caton Dev. LP, 41 Misc. 3d 1231(A), at *7-8 (N.Y. Sup. Ct. 2013) (group pleading was insufficiently specific to support veil piercing claims, “even under the liberal notice pleading requirements of CPLR 3013”). 28 In reversing the trial court on the sufficiency of the alter ego claim, the Decision failed to recognize the well-settled requirement to plead, with respect to each defendant, specific facts demonstrating that the defendant was an alter ego of the relevant Hellas entities. 10 Indeed, the complaint is devoid of allegations explaining how each defendant supposedly controlled the Hellas Obligors or used that control to commit a fraud or other wrong against the Noteholders. First, rather than pleading against each defendant individually, the complaint defines all 24 of the variously situated Apax and TPG-related Respondents (and others) as the “Private Equity Defendants,” and pleads against this group collectively. See (A.557-58 ¶¶ 181-85 (reciting bare elements of alter ego liability against the “Private Equity Defendants.”)). For example, it is alleged that “[t]he Private Equity Defendants owned 100% of the Hellas Defendants” and the “Private Equity Defendants controlled the terms … [of] the notes.” (A.558 ¶ 184(a), (c)). Thus, in addition to being technically improper, the group allegations paint with the same broad brush some two dozen entities and individuals who were very differently situated in terms of their relationships (if any) with the Hellas Obligors. Indeed, on the critical issue of ownership of the allegedly dominated entities, some of the “Private Equity Defendants” held shares in the ultimate parent of the Issuer 10 The fact that certain entities (Apax WW Nominees Ltd., Troy L.P. Inc., TPG Troy LLC and T3 Troy LLC) are alleged to have indirectly owned shares in the issuer does not suffice to plead alter ego liability because “ownership of a subsidiary’s stock is [] insufficient, by itself, to pierce the corporate veil.” See Oxbow Calcining USA Inc. v. Am. Indus. Partners, 96 A.D.3d 646, 649 (1st Dep’t 2012). 29 and the Guarantor (and thus indirectly in the Hellas Obligors), while others held no shares, and were not in any position to exercise control.11 Moreover, other “Private Equity Defendants” are individuals who held no shares and played absolutely no role in the management of the Hellas Obligors. Similarly, the conclusory, group allegation that the “Private Equity Defendants” controlled the terms of the notes (A.558 ¶ 184(c)), fails to apprise any of the Appellants of any misconduct in which they supposedly engaged. In short, as the trial court recognized, WTC’s use of group pleading purports to subject numerous parties with no relationship to the Hellas entities to massive liability on the basis that they allegedly dominated those entities, with “[t]he roles of the individual defendants in the alleged ownership and domination of the Hellas entities [ ] largely undifferentiated.” (A.37 n.12); see Cleo Realty Assocs. L.P. v. Uptown Birds, LLC, 135 A.D.3d 432, 433-34 (1st Dep’t 2016) (distinguishing between individual and entity defendants and holding that alter ego was not adequately pleaded as to individuals, “one of whom was not even a member of the alleged successor entity.”). 11 See Morris, 82 N.Y.2d at 141 (“The concept of piercing the corporate veil is a limitation on the accepted principles that a corporation exists independently of its owners, as a separate legal entity, that the owners are normally not liable for the debts of the corporation, and that it is perfectly legal to incorporate for the express purpose of limiting the liability of the corporate owners.”); Delagi v. Volkswagenwerk AG of Wolfsburg, Ger., 29 N.Y.2d 426, 432 (1972) (“[T]his court has never held a foreign corporation present on the basis of control, unless there was in existence at least a parent-subsidiary relationship.”). 30 Second, as the trial court held, the alter ego allegations (which are pled “on information and belief,” (A.522)), are “wholly conclusory” (A.37 n.12), in that WTC largely offers rote incantations of the elements of alter ego liability. This is insufficient under New York law. See, e.g., Bd. of Managers of Gansevoort Condo., 121 A.D.3d at 554; 501 Fifth Ave., 110 A.D.3d at 494 (corporate veil claims properly dismissed where “[t]he allegations of corporation domination and control are wholly conclusory and consist of no more than a recitation of the elements of the claim, ‘upon information and belief’”); Sound Commc’ns, Inc. v. Rack & Roll, Inc., 88 A.D.3d 523, 524 (1st Dep’t 2011) (merely alleging “alter ego” insufficient to disregard status as a limited liability corporation). A recent decision from the Southern District of New York in a related case brought by WTC demonstrates the insufficiency of the alter ego allegations here. See Wilmington Trust Co. v. Hellas Telecommunications, S.a.r.l., 2016 WL 7339112 (S.D.N.Y. Aug. 4, 2016). That decision rejected on group pleading and other grounds the same alter ego claim at issue here.12 In addition to holding that WTC failed to plead specific facts alleging that the defendant dominated either of the Hellas Obligors, the court held that the use of group allegations (which were far 12 Judge Oetken specifically stated that it “would dismiss the Third Amended Complaint for engaging in improper group pleading under Fed. R. Civ. P. 8(a) … [which] requires that a plaintiff give each defendant fair notice of the claims against it.” Wilmington Trust, 2016 WL 7339112, at *10 n.1. 31 more detailed than those alleged here) that lumped multiple parties together was insufficient. 2016 WL 7339112, at *10. There is no basis for a different result in this case, where the group pleading is even more extreme than it was in WTC’s case in federal court. See id. Third, alter-ego liability is not possible here in view of this Court’s precedent making it clear that where a plaintiff understands, at the time the contract is entered into, that it is contracting only with the actual counterparties to its contract, the plaintiff may not later obtain “alter ego” recovery from related parties. See TNS Holdings, 92 N.Y.2d at 340 (rejecting alter ego claim where “[n]othing suggest[ed] that plaintiffs entered into the agreement involuntarily, or that they thought they were contracting with an entity other than [the contract counterparty.]”); see also D. Klein & Son, Inc. v. Good Decision, Inc., 147 Fed. App’x 195, 198 (2d Cir. 2005) (summary order) (“The reason veil piercing in the contract context is infrequent is because the party seeking relief ‘is presumed to have voluntarily and knowingly entered into an agreement with a corporate entity, and is expected to suffer the consequences of limited liability associated with the business form.”’) (quoting William Mead Fletcher, et al., Fletcher Cyclopedia of the Law of Private Corporations, § 41.85 (perm. ed. 1999)); Secon Serv. Sys., Inc. v. St. Joseph Bank & Trust Co., 855 F.2d 406, 413-14 (7th Cir. 1988) (Easterbrook, J.) (contract creditors “entered into a voluntary arrangement with the corporation, 32 which gave them an opportunity to negotiate terms reflecting any enhanced risk to which doing business with an entity enjoying limited liability exposed them. If they wanted guarantees from the investors, they could have negotiated for them.”). Here, it is not and could not be alleged that WTC believed it was contracting with any parties other than the two Hellas Obligors, including any of the Appellants. Indeed, although the Offering Memorandum set forth in great detail the corporate structure of the Hellas Group and the involvement of certain “Apax” and “TPG” advised funds as investors in Hellas, WTC and the Noteholders knowingly and voluntarily contracted with the Hellas Obligors -- and only the Hellas Obligors -- for repayment of the Notes.13 B. THE TRIAL COURT CORRECTLY HELD THAT THE ALTER EGO CLAIM FAILS FOR THE ADDITIONAL REASON THAT IT IS NOT AN INDEPENDENT CAUSE OF ACTION AND IS DUPLICATIVE OF THE OTHER CAUSES OF ACTION THAT WTC LACKS STANDING TO MAINTAIN The trial court correctly held that the alter ego claim fails for the separate reason that it is duplicative of the fraudulent conveyance claims. See (A.37 n.12 (“Although the alter ego cause of action is insufficiently pleaded … it is not maintainable in any event, as it is duplicative of the fraudulent conveyance causes 13 WTC’s and the Noteholders’ knowledge that they could look only to the Hellas Obligors for repayment of the Notes is further demonstrated by the Indenture’s “no-recourse” clause, discussed at section I.A.3 supra, wherein each Holder expressly “waives and releases all liability” as to third parties, including the stockholders of the Hellas Obligors, “for any obligations of the [Hellas Obligors] or any Guarantor under the Notes, any Guarantee, any Security Document or this Indenture or for any claim based on, in respect of, or by reason of such obligation of their creation.” (A.507). 33 of action which the trustee is not authorized to maintain.”)). Indeed, the separate alter ego cause of action is based on the same underlying conduct alleged in support of the fraudulent conveyance claims, and thus necessarily fails given the complaint’s failure to plead viable fraudulent conveyance claims. Consistent with the trial court, New York courts routinely hold that “alter- ego liability is not an independent cause of action.” Ferro Fabricators, Inc., 127 A.D.3d at 480. Indeed, “an attempt of a third party 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 [parent].” Goel v. Ramachandran, 111 A.D.3d 783, 793 (2d Dep’t 2013). Here, the alter ego cause of action is premised on the same fraudulent conveyances as the causes of action for fraudulent conveyance. See (A.558 ¶ 183 (“At the direction and under the control of the Private Equity Defendants, the Hellas Defendants borrowed money through the PIK Notes … and transferred the loan proceeds to their owners, the Private Equity Defendants, in a series of fraudulent conveyances as described above.”) (emphasis added)). The allegations supporting the alter ego claim are no different than the allegations supporting the fraudulent conveyance causes of action and were therefore properly dismissed by the trial court for this additional reason. CONCLUSION For the foregoing reasons, the Decision should be reversed to the extent that it held that (i) WTC has standing to pursue the Third-Party Claims; and (ii) the complaint sufficiently alleges alter ego liability. Dated: New York, New York March 23, 2017 ROPES & GRAY LLP C. Thomas Brown Paul S. Kellogg 1211 Avenue ofthe Americas New York, New York 10036 Telephone: (212) 596-9000 Facsimile: (212) 5 96-9090 Counsel for A pax Defendants- Appellants KASOWITZ, BENSON, TORRES & FRIEDMAN LLP By: Paul M. O'Connor III David J. Abrams Michelle G. Bernstein 1633 Broadway New York, New York 10019 Telephone: (212) 506-1700 Facsimile: (212) 506-1800 Counsel for TPG Defendants-Appellants 34 NEW YORK STATE COURT OF APPEALS CERTIFICATE OF COMPLIANCE I hereby certify pursuant to 22 NYCRR PART 500.1(j) that the foregoing brief was prepared on a computer using Microsoft Word. Type. A proportionally spaced typeface was used, as follows: Name of typeface: Times New Roman Point size: 14 Line spacing: Double Word Count. The total number of words in this brief, inclusive of point headings and footnotes and exclusive of pages containing the table of contents, table of citations, proof of service, certificate of compliance, corporate disclosure statement, statement of related cases, or any authorized addendum containing statutes, rules, regulations, etc., is 9747 words. Dated: March 23, 2017 Michelle G. Bernstein Kasowitz, Benson, Torres & Friedman LLP 1633 Broadway New York, New York 10019 Telephone: (212) 506-1700 Attorneys for TPG Defendants-Appellants