Cortlandt Street Recovery Corp., Plaintiff, Wilmington Trust Company, Respondent,v.David Bonderman, et al., Appellants, Hellas Telecommunications, II, et al., Defendants. (And Three Other Actions.)

Brief

N.Y.January 9, 2018

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 REPLY 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 Attorneys for TPG-related Defendants-Appellants 1633 Broadway New York, New York 10019 Tel.: (212) 506-1700 Fax: (212) 506-1800 Date Completed: June 28, 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 TABLE OF CONTENTS Page PRELIMINARY STATEMENT ...............................................................................1 ARGUMENT .............................................................................................................3 I. WTC LACKS STANDING UNDER SECTION 6.03 OF THE INDENTURE ..................................................................................................3 A. The Plain Language of Section 6.03 Is Dispositive ..............................3 B. The No-Action Clause Does Not Support WTC’s Interpretation of Section 6.03.......................................................................................7 II. THE COMPLAINT FAILS TO ALLEGE THAT APPELLANTS ARE LIABLE TO REPAY THE NOTES BASED ON AN ALTER EGO THEORY..............................................................................................11 A. Alter Ego Is Not an Independent Cause of Action..............................11 B. WTC’s Conclusory, Group Allegations Are Insufficient ...................12 C. The Complaint Does Not Allege Abuse of the Corporate Form to Perpetrate a Fraud or Wrong on the Noteholders ...........................15 CONCLUSION........................................................................................................19 ii TABLE OF AUTHORITIES Cases Page(s) 2406-12 Amsterdam Assocs. LLC v. Alianza LLC, 136 A.D.3d 512 (1st Dep’t 2016) .......................................................................15 Automated Transaction LLC v. New York Comm. Bank, 2013 WL 992423 (E.D.N.Y. March 13, 2013)...................................................13 Continental Bank, N.A. v. Caton, 1990 WL 129452 (D. Kan. Aug. 6, 1990)........................................................4, 5 Cornwall Mgmt Ltd. v. Kambolin, 140 A.D.3d 507 (1st Dep’t 2016) .......................................................................15 D. Klein & Son, Inc. v. Good Decision, Inc. 147 F. App’x 195 (2d Cir. 2005) ..................................................................15, 16 Feldbaum v. McCrory Corp., 1992 WL 119095 (Del. Ch. 1992) ................................................................10, 11 Holme v. Glob. Minerals & Metals Corp., 2009 WL 387034 (Sup. Ct., N.Y. Cty 2009)......................................................15 Holmes v. Allstate Corp., 2012 WL 627238 (S.D.N.Y. Jan. 27, 2012) .......................................................13 Lakah v. UBS AG, 996 F. Supp. 2d 250 (S.D.N.Y. 2014) ................................................................16 Lange v. Citibank, 2002 WL 2005728 (Del. Ch. 2002) ....................................................................10 Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135 (1993) .........................................................................................12 Premier Bank v. Tierney, 114 F. Supp. 2d 877 (W.D. Mo. 2000).................................................................5 Quadrant Structured Products Co., Ltd. v. Vertin, 23 N.Y.3d 549 (2014) .......................................................................................8, 9 iii Regions Bank v. Blount Parrish & Co., Inc., 2001 WL 726989 (N.D. Ill. June 27, 2001)......................................................4, 5 Secon Serv. Sys., Inc. v. St. Joseph Bank & Trust Co., 855 F.2d 406 (7th Cir. 1988) ........................................................................ 15-16 Skansa USA Bldg. Inc. v. Atlantic Yards B2 Owner, LLC, 146 A.D.3d 1 (1st Dep’t 2016) ...........................................................................15 Tap Holdings, LLC v. Orix Finance Corp., 109 A.D.3d 167 (1st Dep’t 2013) .......................................................................14 Thecheck.com, LLC v. NEMC Fin. Serv’s Grp. Inc., 2017 WL 267912 (S.D.N.Y. June 16, 2017) ......................................................13 TNS Holdings v. MKI Sec. Corp., 92 N.Y.2d 335 (1998) ...................................................................................15, 18 U.S. Bank, N.A. v. U.S. Timberlands Klamath Falls, LLC, 864 A.2d 930 (Del. Ch. 2004) ........................................................................9, 10 United Bonding Ins. Co. v. Alexander, 413 F.2d 1025 (5th Cir. 1969) ..............................................................................6 Wilmington Trust Co. v. Hellas Telecommunications, S.a.r.l., 2016 WL 7339112 (S.D.N.Y. Aug. 4, 2016)......................................................13 Other Authorities 211 Pleading in the Federal and Lower Courts Compared, Siegel, N.Y. Prac. § 211 (5th ed.) ...................................................................................13 Appellants-Defendants (“Appellants”) submit this reply brief in response to the Brief for Plaintiff-Respondent (the “Opposition”) (cited herein as “Resp. Br.”) and in further support of their appeal from the Decision of the Appellate Division, First Department, holding that Plaintiff-Respondent Wilmington Trust Company (“WTC”) has standing and that the complaint states a cause of action for alter ego liability.1 PRELIMINARY STATEMENT WTC is unable to refute Appellants’ showing that the plain language of the “remedies” clause, Section 6.03 of the Indenture, does not authorize the trustee to pursue non-contractual claims against non-parties to the Notes. As a result, WTC resorts to labels, calling its Third-Party Claims the “Collection and Enforcement Claims” to make them appear consonant with Section 6.03’s authorizing language. No label, however, can avoid the conclusion that non-contractual claims against non- parties to the Notes are not, as required by Section 6.03, claims “to collect the payment of principal, premium, if any, and interest on the Notes.” Nor does WTC’s reliance on the phrase “any available remedy” in Section 6.03 help its cause because that phrase is immediately followed by language (“to collect the payment of principal, premium, if any, and interest on the Notes”) that expressly limits the scope 1 Unless otherwise defined herein, capitalized terms in this reply brief shall have the meanings ascribed to them in the Joint Brief For Defendants-Appellants (the “Opening Brief”) (cited herein as “App. Br.”). 2 of the available remedies. Section 6.03 simply does not, as WTC would have it, give the trustee unlimited authority to pursue any claim against any defendant it may choose to sue. Similarly unavailing is WTC’s argument that Section 6.03 should be interpreted to permit the Third-Party Claims in light of the “no-action” clause, Section 6.06 of the Indenture. That clause governs the rights of “Holders” (i.e., registered Noteholders) to pursue non-contractual claims in the event of a default on the Notes. WTC argues that Section 6.06 bars Holders from pursuing non- contractual claims, and that such claims therefore cannot be brought at all unless the trustee is authorized to pursue such claims under Section 6.03. WTC is incorrect. Under Section 6.06, either the trustee, in the first instance, or Holders may pursue non-contractual claims, subject only to compliance with specified conditions, including that Holders of at least 25% of the principal amount of Notes outstanding request the trustee to pursue the claims. Section 6.06 thus does not support an interpretation of Section 6.03 that authorizes the trustee unilaterally to pursue the Third-Party Claims. As to WTC’s claim that Appellants are liable on the Notes as alter egos of the Hellas Obligors, WTC fails to refute Appellants’ showing that the complaint’s conclusory, group allegations are inadequate because they fail to apprise the 24 differently situated Appellants of the factual basis of the claim against each of them. 3 Moreover, it is undisputed that the Noteholders, with full knowledge that Sponsor investment funds advised by Apax and TPG owned Hellas, contracted only with the Hellas Obligors and expressly agreed that they would have no recourse against the Hellas Obligors’ owners or related third parties. Under these circumstances, WTC cannot successfully claim an abuse of the corporate form such that equity should intervene to impose alter ego liability on the four Sponsor Appellants, much less the 20 non-Sponsor Appellants who are even further removed from the Hellas Obligors and the Notes issuance. For all these reasons and others discussed below, the Decision of the First Department should be reversed, and the complaint should be dismissed in its entirety. ARGUMENT I. WTC LACKS STANDING UNDER SECTION 6.03 OF THE INDENTURE A. The Plain Language of Section 6.03 Is Dispositive It is undisputed that WTC lacks standing to pursue the non-contractual Third- Party Claims unless those claims come within the scope of the authority granted to the trustee in Section 6.03 of the Indenture. In arguing that the claims are encompassed by Section 6.03, WTC focuses on the phrase “any available remedy.” Resp. Br. at 10-14. This is unavailing. The phrase cannot be read in isolation, divorced from the words that immediately follow and qualify it, i.e., “to collect the 4 payment of principal, premium, if any, and interest on the Notes . . . .” A.485, § 6.03. This qualifying language makes it clear, for the reasons discussed at length in the Opening Brief, that Section 6.03 permits the trustee only to pursue contractual remedies against the two Hellas Obligors (the Issuer and the Guarantor) that agreed to pay amounts due on the Notes.2 Moreover, WTC’s argument is directly refuted by the case law precedent discussed in the Opening Brief. Most significantly, in construing a remedies clause virtually identical to Section 6.03 here, the court in Regions Bank v. Blount Parrish & Co., Inc., 2001 WL 726989, at *5 (N.D. Ill. June 27, 2001) squarely rejected the indenture trustee’s argument that the phrase “any available remedy” conferred authority on the trustee to pursue non-contractual claims against third parties. The court reasoned that because “any available remedy” was immediately followed by “to collect the principal of, premium, if any, or interest on the Bonds” – the same authorizing language in Section 6.03 here – the trustee was limited to pursuing breach of contract claims and lacked standing to pursue securities fraud and common law fraud claims against non-parties to the bonds and indenture. Id. Other cases discussed in the Opening Brief reach the same conclusion. See Continental Bank, N.A. v. Caton, 1990 WL 129452, at *4-5 (D. Kan. Aug. 6, 1990) (remedies clause 2 Section 6.03 also permits the trustee to pursue remedies to “enforce the performance of any provision of the Notes or Indenture.” WTC does not contend that the Third-Party Claims seek such relief, and there is no claim for specific performance in the complaint. 5 that permitted trustee to bring “any such suit” was limited to “action[s] ‘under’ the [indenture]” such that trustee could not assert securities or tort claims); Premier Bank v. Tierney, 114 F. Supp. 2d 877, 881 (W.D. Mo. 2000) (same). These cases confirm that when the phrase “any available remedy” is qualified and limited as it is in Section 6.03, the trustee’s authority does not extend to pursuing non-contractual claims against third parties. In attempting to distinguish Regions Bank, Continental Bank, and Premier Bank, WTC misstates their holdings, asserting that the trustees in those cases pursued claims “that belong[ed] to individual bondholders for their particular, unique injuries.” Resp. Br. at 19 (emphasis in original). In fact, in each case, the trustee, like WTC here, brought non-contractual third-party claims on behalf of all of the bondholders. And the court in each case held that the trustee lacked standing based on the language of the indenture’s remedies clause, not on the ground that the claim involved injuries that were unique to a particular bondholder or group of bondholders. See Regions Bank, 2001 WL 726989, at *1 (trustee lacked standing to pursue fraud claims “brought on behalf of all persons who purchased resource recovery bonds”); Continental Bank, 1990 WL 129452, at *7 (trustee lacked standing to pursue fraud claims “on behalf of the bondholders”); Premier Bank, 114 F. Supp. 2d at 881 (trustee lacked standing “to pursue the bondholders’ freestanding tort claims”). 6 As to the other provisions of the Indenture that shed light on the limited scope of Section 6.03, WTC fails to refute that, in contrast to Section 6.03’s reference to claims for payment “on the” Notes, Sections 14.07 and 14.09 use the phrases “in respect of,” “arising out of,” and “relating to” the Notes (and Indenture) to describe the scope of the covered claims. App. Br. at 19-22. Moreover, Section 6.06(a) of the Indenture (discussed further below) uses the phrase “with respect to” the Notes to describe non-contractual claims that may be brought in the event of non-payment. A.486. These sections of the Indenture show that when the drafters intended to describe Notes-related claims broadly to include non-contractual claims, they knew how to do so; and that Section 6.03’s narrow reference to claims for “payment of principal, premium, if any, and interest on the Notes,” was intended to limit the trustee to claims for breach of the Notes’ payment terms. App. Br. at 19-22.3 This conclusion is further supported by the United Bonding case cited by Appellants in the Opening Brief in which the Fifth Circuit held that a suit “on a bond” means a contractual claim, i.e., “a suit against one bound by [the bond’s] terms for a breach of duty arising under it.” United Bonding Ins. Co. v. Alexander, 413 F.2d 1025, 1026 (5th Cir. 1969). Notably, the Opposition does not address this decision. 3 WTC’s reliance on Section 7.01 of the Indenture is misplaced, as that section merely provides that the trustee may exercise “the rights and powers vested in it by this Indenture,” but does not purport to expand the authority given to the trustee in Section 6.03. 7 WTC also suggests that Section 6.03 should be interpreted to authorize non- contractual claims where the trustee seeks a “measure of damages” equal to the amount due on the Notes. Resp. Br. at 21. This too is incorrect, as Section 6.03 is silent concerning the measure of damages and speaks only to the nature of the remedy that may be pursued. In all events, if the measure of damages were the test, the complaint would be deficient because, although it seeks total damages against all Appellants in the amount due on the Notes, it is undisputed that the potential recovery against each Appellant is limited to the amount of Notes proceeds received by that Appellant. App. Br. at 15. B. The No-Action Clause Does Not Support WTC’s Interpretation of Section 6.03 WTC next argues that the “no-action” clause at Section 6.06 of the Indenture precludes the Noteholders from pursuing non-contractual claims and that, as a result, unless Section 6.03 is interpreted to authorize WTC to pursue them, “neither the noteholders nor the trustee would have authority to assert” the Third-Party Claims. Resp. Br. at 14-15. WTC is incorrect. Rather than precluding non-contractual claims by the Noteholders, Section 6.06 authorizes both the trustee and “Holders” (i.e., registered Noteholders) to pursue non-contractual claims, subject only to compliance with conditions that are not alleged to have been satisfied here. Section 6.06 provides that “Holders of at least 25% in principal amount of the outstanding Notes” may request that the trustee pursue a non-contractual remedy 8 with respect to the Indenture or the Notes. A. 486, § 6.06(a), (a)(2). It then authorizes the Holders to pursue the remedy if the trustee fails to do so within 60 days of receipt of a proper request. Id., § 6.06(a)(4). Thus, Section 6.06 implicitly authorizes a properly requested trustee, in the first instance, to pursue a non-contractual remedy, while expressly authorizing the Holders to do so if a properly requested trustee declines to act. It therefore is not the case, as WTC contends, that if the trustee lacks authority under Section 6.03 unilaterally to pursue non-contractual claims, such claims cannot be brought. To the contrary, they can be brought, under Section 6.06, subject only to the conditions therein.4 Thus, while Section 6.06 is a potentially independent basis for the pursuit of non-contractual claims, it does not expand the limited authority granted to the trustee under Section 6.03. Indeed, interpreting Section 6.03 to allow the trustee unilaterally to pursue non-contractual claims would vitiate the condition in Section 6.06 that Holders of at least 25% of the principal amount of the outstanding Notes request that the trustee pursue such claims. WTC’s reliance on this Court’s decision in Quadrant Structured Products Co., Ltd. v. Vertin, 23 N.Y.3d 549 (2014), is misplaced. The issue there did not involve a remedies clause in an indenture, but instead whether a securityholder’s (not an indenture trustee’s) claims were within the scope of a no-action clause. The 4 WTC does not, because it cannot, allege that it was requested by the requisite Holders (or indeed any Holder) to pursue the Third-Party Claims. Thus, WTC does not argue that it has standing in this case under Section 6.06. 9 Court’s interpretation of the no-action clause in Quadrant arguably supports the conclusion (which Appellants do not dispute) that the Third-Party Claims here are within the scope of Section 6.06 of the Indenture. As a result, under Quadrant, it could be argued that WTC would have standing under Section 6.06 to pursue the Third-Party Claims if it had been requested to do so by the requisite percentage of Holders.5 But Quadrant does not support WTC’s argument that it has authority under Section 6.03 unilaterally to pursue the Third-Party Claims. U.S. Bank, N.A. v. U.S. Timberlands Klamath Falls, LLC, 864 A.2d 930 (Del. Ch. 2004), vacated on other grounds, 875 A.2d 632 (Del. 2005), on which WTC also relies, refutes its position. There, the indenture contained remedies and no- action clauses similar to Sections 6.03 and 6.06 here. The court held that the trustee was authorized to pursue non-contractual claims under the no-action clause after the requisite securityholders directed the trustee to do so, but made clear that the trustee had no authority to assert such claims directly under the remedies clause. Id. at 942 (“Since section 6.6 [the no-action clause] requires noteholders to make demand upon the Trustee, that section must implicitly recognize the power of the Trustee to bring the claims, in response to a properly made demand even where the Trustee would 5 Similarly, the no-action clause in Quadrant authorized a trustee suit only upon approval of a specified percentage of securityholders. 23 N.Y.3d at 561 (“This part of the no-action clause permits the trustee to sue in its own name, after notice by a securityholder of a continuing default and upon approval of the suit by a majority of securityholders.”) (emphasis added). 10 lack that power under section 6.3 [the remedies clause] without a demand. Since demand was made in accordance with Section 6.6 [the no-action clause], the Trustee has the power to bring the non-contractual claims.”) (emphasis added). Thus, U.S. Bank supports the conclusions that (i) a no-action clause similar to Section 6.06 here will confer standing on a trustee to pursue non-contractual claims only when the requisite securityholders request that the trustee sue; and (ii) a remedies clause similar to Section 6.03 here provides no authority for a trustee unilaterally to pursue non-contractual claims.6 Finally, WTC’s reliance on the unpublished decisions of the Delaware Court of Chancery in Feldbaum v. McCrory Corp., 1992 WL 119095 (Del. Ch. 1992), and Lange v. Citibank, 2002 WL 2005728 (Del. Ch. 2002), is unavailing. Like Quadrant, those cases did not consider an indenture trustee’s standing, but instead analyzed the viability of securityholder claims under a no-action clause. In holding that the claims in both cases were barred, the courts noted that, in theory, they could have been be 6 WTC incorrectly contends that U.S. Bank described the outcome urged by Appellants here as an “absurd result.” Resp. Br. at 14-15. In fact, the court’s decision makes clear that it was referring to a situation where the securityholders, under the no-action clause, make a proper demand on the trustee to sue and (i) the trustee agrees to sue but its claims are dismissed for lack of standing; and (ii) the no-action clause bars the securityholders from suing because the trustee has not declined to sue. 864 A.2d at 941 (“If [the securityholders] brought the non-contractual claims on their own behalf, then the claims would be barred by the no-action clause. If they followed the requirements of the no-action clause and the trustee agreed to bring suit, then the claims would be dismissed for lack of standing.”) Here, because there is no allegation of any request by the requisite securityholders that WTC pursue the non-contractual claims, there is no possibility of the “absurd result” described in U.S. Bank. 11 brought by the trustee. But contrary to WTC’s suggestion, the decisions do not hold that a trustee may circumvent a proper direction under a no-action clause by unilaterally pursuing non-contractual claims under a remedies clause. Thus, the statement in Feldbaum that no-action clauses “delegat[e] to the trustee the right to prosecute such a suit in the first instance,” 1992 WL 119095 at *6, was not a holding that the trustee was authorized unilaterally to pursue non-contractual claims. Instead, the court appears to have been referring to the fact that under the no-action clause, the trustee could have pursued the claims if a proper demand was made by the securityholders, who then would have been able to sue in their own name if the trustee failed to act.7 II. THE COMPLAINT FAILS TO ALLEGE THAT APPELLANTS ARE LIABLE TO REPAY THE NOTES BASED ON AN ALTER EGO THEORY A. Alter Ego Is Not an Independent Cause of Action The Opposition does not dispute Appellants’ showing that alter ego is not an independent cause of action under New York law. App. Br. at 33. Thus, the Fourth Cause of Action (alleging alter ego liability for the alleged breach of contract under the Second Cause of Action) cannot stand as a separate cause of action. In all events, 7 As discussed in the Opening Brief, WTC argued below that, if it lacked standing under Section 6.03 of the Indenture, it nevertheless had standing under Section 6.05 of the Indenture based on a purported direction to sue given to WTC by Cortlandt. App. Br. at 22-24. WTC has not addressed the point in its Opposition and thus has abandoned this argument. Insofar as the Opposition addresses Section 6.05, WTC concedes that it “does not alter” the scope of the authority given to the trustee under Section 6.03. Resp. Br. at 22. 12 the complaint’s allegations fail to state a basis for alter ego liability, as discussed further below. B. WTC’s Conclusory, Group Allegations Are Insufficient As WTC acknowledges, CPLR 3013 requires that allegations in a complaint be “sufficiently particular to apprise the court and parties” of the claims against each defendant. Resp. Br. at 23 (citing Foley v. D’Agostino, 21 A.D.2d 60, 63 (1st Dep’t 1964)). This requirement is especially important where a plaintiff seeks to pierce the corporate veil, a limitation on the fundamental principles that “a corporation exists independently of its owners, as a separate legal entity, [and] that the owners are normally not liable for the debts of the corporation.” Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135, 140 (1993); App. Br. at 29 & n. 11. Here, the complaint fails to apprise each Appellant how it (or he) supposedly dominated and controlled the Hellas Obligors or used that control to abuse the corporate form so as to perpetrate a fraud or other wrong on the Noteholders. Instead, the complaint lumps all 24 Appellants together as “Private Equity Defendants”8 and pleads against them collectively as a homogenous group, notwithstanding, as is undisputed, that the Appellants are differently situated regarding their relationship, 8 In addition to the 24 Appellants, the defined term “Private Equity Defendants” includes six entities that either never were or are no longer parties to this action. See A.528, ¶ 27, A.534-35 ¶ 49. Accordingly, it is impossible to determine whether the group allegations levied against the so-called “Private Equity Defendants” are being made against a specific Appellant or a non-party. 13 if any, with both the Hellas Obligors and the Notes issuance.9 In addition, the alter ego allegations are largely conclusory, replete with rote incantations of “control” in lieu of alleged facts from which control (let alone improper use of control) may be reasonably inferred. See, e.g., A.528 ¶ 29. The Opposition quotes allegations in the complaint that, according to WTC, show that it has satisfied its pleading burden. Resp. Br. at 24-26. In fact, as the following examples demonstrate, these allegations show the opposite because they highlight that the allegations are conclusory, fail to account for material differences among the Appellants, and in some cases are demonstrably false or hopelessly confused:  The Opposition quotes the allegation that the “Hellas Entities” issued the Notes “at the direction and under the control of the Appellants,” Resp. Br. at 24 (second bullet). Critically, however, this allegation fails to describe what Appellants, let alone any particular Appellant, did to “direct” or “control” the issuance of 9 As discussed in the Opening Brief, in a related alter ego case filed by WTC based on more specific allegations than it makes here, the Southern District of New York rejected WTC’s complaint on group pleading and other grounds. See Wilmington Trust Co. v. Hellas Telecommunications, S.a.r.l., 2016 WL 7339112, at *10 & n.1 (S.D.N.Y. Aug. 4, 2016) (“As to the individual defendants, the Complaint engages in impermissible group pleading and does not allege facts to show that the corporate defendants are the alter egos of the individual defendants.”). Numerous other federal cases also have rejected group pleading as insufficient under Rule 8 of the Federal Rules of Civil Procedure. See, e.g., Thecheck.com, LLC v. NEMC Fin. Serv’s Grp. Inc., 2017 WL 267912, at *2 (S.D.N.Y. June 16, 2017); Automated Transaction LLC v. New York Comm. Bank, 2013 WL 992423, *4 (E.D.N.Y. March 13, 2013); Holmes v. Allstate Corp., 2012 WL 627238, at *22 (S.D.N.Y. Jan. 27, 2012), adopted by 2012 WL 626262 (S.D.N.Y. Feb 27, 2012). The rationale employed by these courts applies equally to WTC’s complaint here given that Rule 8 and CPLR 3013 are “for all practical purposes the same” and “the measure of whether the pleading passes muster should be the same.” § 211 Pleading in the Federal and Lower Courts Compared, Siegel, N.Y. Prac. § 211 (5th ed.). 14 the Notes. This type of fact-free, “group” allegation is entitled to no weight.  The Opposition quotes the allegation that the “Consortium” that owned the Hellas Group included all of the “firms, funds, partners and individuals” sued herein. Resp. Br. at 24 (first bullet). This allegation is both demonstrably false and a transparent attempt to connect to the Hellas Obligors and the Notes issuance numerous Appellants with no relationship to either. As is clear from the Offering Memorandum, which WTC expressly relies on in the complaint, the eight Sponsor investment funds – and not the “firms, partners, and individuals” sued herein – owned Hellas, the ultimate parent of the Hellas Group. A.276 n.1, A.335.  The Opposition quotes the sweeping allegations that “Appellants Halusa, Megrue, Bonderman, and Coulter own, manage and control Appellants, exercising control of all related entities, funds and individuals” named as Defendants in the complaint. Resp. Br. at 25 (second bullet). These fact-free allegations, which improperly lump together differently situated Apax and TPG- related individuals, are entitled to no weight.  The Opposition quotes other allegations against individual Appellants that do not support alter ego liability because they merely allege, in general terms, the individuals’ roles or positions at unspecified TPG and Apax entities, without any specificity as to any Appellant’s alleged conduct. Resp. Br. at 25-26. WTC’s reliance on Tap Holdings, LLC v. Orix Finance Corp., 109 A.D.3d 167 (1st Dep’t 2013), is unavailing. There, the plaintiff alleged alter ego liability against 11 similarly situated members of a lending group that were collectively defined as the “Senior Lenders.” Id. at 170. Here, on the other hand, Appellants are a disparate group, not similarly situated in regard to the Hellas Obligors or the Notes issuance. Moreover, Tap Holdings was distinguished by the First Department in 15 Cornwall Mgmt Ltd. v. Kambolin, 140 A.D.3d 507 (1st Dep’t 2016), where the court rejected conclusory allegations of control and domination and reasoned that Tap Holdings “does not compel a different result.” Id. at 507.10 C. The Complaint Does Not Allege Abuse of the Corporate Form to Perpetrate a Fraud or Wrong on the Noteholders As discussed in the Opening Brief, where a plaintiff voluntarily enters into a contract and does not think it is “contracting with an entity other than [the contract counterparty],” the plaintiff should not be allowed, on alter ego grounds, to assert contractual rights against its counterparty’s owners (or other third parties). TNS Holdings v. MKI Sec. Corp., 92 N.Y.2d 335, 339 (1998); App. Br. at 31-32; see also Skansa USA Bldg. Inc. v. Atlantic Yards B2 Owner, LLC, 146 A.D.3d 1, 12-13 (1st Dep’t 2016) (dismissing veil-piercing claim because “[n]owhere in the complaint does plaintiff allege that it believed it was contracting with or had rights vis-à-vis FCRC or any entity other than [the counterparty].”); D. Klein & Son, Inc. v. Good Decision, Inc. 147 F. App’x 195, 198 (2d Cir. 2005) (summary order) (affirming alter ego judgment because plaintiff “reasonably thought it had contracted” with the larger entity of which the counterparty was a part); Secon Serv. Sys., Inc. v. St. Joseph 10 The others cases cited by WTC also are distinguishable because they involved allegations against similarly situated defendants. See Holme v. Glob. Minerals & Metals Corp., 2009 WL 387034, at *6 (Sup. Ct., N.Y. Cty 2009), aff’d, 63 A.D.3d 417 (1st Dep’t 2009) (defendants operated the “same business, at the same physical location, with the same assets, business operation, and many of the same employees”); 2406-12 Amsterdam Assocs. LLC v. Alianza LLC, 136 A.D.3d 512, 512 (1st Dep’t 2016) (shell corporation subsidiary of defendant had “no employees and no function but to hold those assets away from creditors”). 16 Bank & Trust Co., 855 F.2d 406, 415-16 (7th Cir. 1988) (“[U]nless the corporation engaged in some practice that might have misled its contract creditors into thinking they were dealing with another entity, there simply is no need to ‘protect’ them. Unlike tort claimants, they chose to deal with the corporation; to allow them access to shareholders or parent corporations when the deal goes sour is to give them more than the benefit of their bargain.”); Lakah v. UBS AG, 996 F. Supp. 2d 250, 268 (S.D.N.Y. 2014) (refusing to compel arbitration on veil-piercing theory where creditors knew, based on Eurobond offering memorandum, that they were contracting with a shell corporation, and that to permit recovery against owners would therefore give creditors more than “they bargained for.”). These cases are based on the simple proposition that where a plaintiff “voluntarily and knowingly enter[s] into an agreement with a corporate entity,” it “is expected to suffer the consequences of limited liability associated with the business form.” D. Klein & Son, Inc., 147 Fed. App’x at 198, quoting 1 William Mead Fletcher et al., Fletcher Cyclopedia of the Law of Private Corporations § 41.85 (perm. ed. rev.vol.1999). Here, the complaint and the Offering Memorandum establish that WTC may not pierce the corporate veil so as to impose contractual liability on any Appellant. Critically, the complaint does not allege that the Noteholders were misled into thinking that they were dealing with, or would have recourse against, any party other 17 than the two Hellas Obligors.11 Indeed, no such allegations could be made. The Offering Memorandum detailed the structure of the Hellas Group, including the separate identities of the Hellas Obligors and other members of the Group, A. 276- 79, 289, 329, and repeatedly disclosed that Hellas (the Group’s ultimate parent) was owned by a consortium of eight Sponsor funds advised by Apax and TPG. A.275, 276 n.1, 305, 335. Knowing these facts, the Noteholders voluntarily elected to contract only with the Hellas Obligors, and not to negotiate any payment guarantees from any Appellant or other party related to Apax or TPG. As a result, WTC cannot show that the Noteholders were misled as to the identity of their counterparties or that they had any reason to believe that they would have recourse for non-payment against anyone but the Hellas Obligors. Indeed, as discussed in the Opening Brief, the Noteholders expressly agreed in the Indenture that they would not have recourse against Hellas Obligors’ shareholders and related third parties. App. Br. at 32 n.13; A. 507, § 14.07. For all these reasons, limiting WTC to contractual recourse against the Hellas Obligors would give the Noteholders exactly what they bargained for. There is no reason for equity to give them more. WTC’s only response is to argue that the very existence of the alter ego doctrine is inconsistent with Appellants’ position. Resp. Br. at 30-31. This is wholly 11 In view of the risks associated with the Notes, including the absence of payment guarantees from any party related to Apax or TPG, interest on the Notes was at the rate of three month EURIBOR plus 8%. A.252. 18 unpersuasive. As the cases cited by Appellants, including this Court’s decision in TNS Holdings, 92 N.Y.2d at 339-340, demonstrate, the complaint fails to allege any misuse of the corporate form that would support contractual alter ego liability.12 12 As discussed in the Opening Brief, the Second and Fourth Causes of Action, for breach of contract based on Appellants’ alleged alter ego relationships with the Hellas Obligors, should be dismissed for the additional reason that they are duplicative of the fraudulent conveyance claims in that the claims are all based on the same alleged conveyances of Notes proceeds. App. Br. at 32-33. The Opposition effectively admits the duplication. Resp. Br. at 32 (“By showing Appellants used the issuer as an alter ego [to fraudulently convey Notes proceeds], WTC will establish that Appellants are liable to pay the Notes because Appellants and the issuer constitute a single entity, so that each Appellant is regarded as a signatory on the Notes.”); see also id. at 24 (citing the alleged “series of fraudulent conveyances” as support for the alter ego claim). CONCLUSION For the foregoing reasons and those set forth in the Opening Brief, the Decision of the First Department should be reversed to the extent that it held that (i) WTC has standing to pursue the Third-Party Claims; and (ii) the complaint states a cause of action for alter ego liability. Dated: New York, New York June 28, 2017 ROPES & GRAY LLP C. Thomas Brown Paul S. Kellogg 1211 A venue of the Americas New York, New York 10036 Telephone: (212) 596-9000 Facsimile: (212) 596-9090 Attorneys for Apax-related Defendants-Appellants KASOWITZ BENSON TORRES LLP By: David J. Abrams Michelle G. Bernstein 1633 Broadway New York, New York 10019 Telephone: (212) 506-1700 Facsimile: (212) 506-1800 Attorneys for TPG-related Defendants-Appellants 19 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 Footnote point size: 12 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 5,464 words. Dated: June 28, 2017 Michelle G. Bernstein Kasowitz Benson Torres LLP 1633 Broadway New York, New York 10019 Telephone: (212) 506-1700 Attorneys for TPG-related Defendants-Appellants