Justinian Capital SPC, Appellant,v.WestLB AG,, et al., Respondents.

Brief

N.Y.Sep 14, 2016

To Be Argued By: JAMES J. SABELLA Time Requested: 20 Minutes APL-2015-00231 New York County Clerk’s Index No. 600975/10 Court of Appeals STATE OF NEW YORK JUSTINIAN CAPITAL SPC for and on behalf of BLUE HERON SEGREGATED PORTFOLIO, Plaintiff-Appellant, —against— WESTLB AG, NEW YORK BRANCH, WESTLB ASSET MANAGEMENT (US) LLC, and BRIGHTWATER CAPITAL MANAGEMENT LLC, Defendants-Respondents. REPLY BRIEF FOR PLAINTIFF-APPELLANT d JAY W. EISENHOFER JAMES J. SABELLA DEBORAH A. ELMAN ROBERT D. GERSON GRANT & EISENHOFER P.A. 485 Lexington Avenue, 29th Floor New York, New York 10017 Telephone: (646) 722-8500 Facsimile: (646) 722-8501 Attorneys for Plaintiff-Appellant December 28, 2015 TABLE OF CONTENTS Page TABLE OF AUTHORITIES ..................................................................................... ii PRELIMINARY STATEMENT ............................................................................... 1 I. WESTLB'S ASSERTION THAT THE TRANSACTION IS A "SHAM" CANNOT SUPPORT AFFIRMANCE .................................. 3 A. THE BASE PURCHASE PRICE Is A BONA FIDE, BINDING COMMITMENT ........................................................................................ 5 B. DPAG's RIGHTS UNDER THE SPA Do NOT UNDERMINE THE BONA FIDES OF THE TRANSACTION ................................................. 7 II. THE APPELLATE DIVISION ERRED IN HOLDING THAT THE TRANSACTION DOES NOT SATISFY THE SAFE HARBOR OF JUD. LAW § 489(2) .............................................................. 10 A. A BINDING OBLIGATION TO TRANSFER $500,000 TO THE SELLER Is SUFFICIENT TO SATISFY THE SAFE HARBOR ........................ 10 B. THE FACT THAT THE TRANSACTION WAS DELIBERATELY STRUCTURED TO FIT WITHIN THE SAFE HARBOR DOES NOT VITIATE RELIANCE ON THE SAFE HARBOR ........................................... 13 III. THE APPELLATE DIVISION ERRED IN UPHOLDING SUMMARY JUDGMENT THAT THE ASSIGNMENT WAS CHAMPERTOUS ......................................................................................... 14 A. FACTUAL ISSUES PRECLUDE ANY FINDING THAT THE TRANSACTION STIRRED UP LITIGATION THAT WOULD NOT OTHERWISE HAVE OCCURRED ............................................................. 14 B. JUSTINIAN'S INTENT WAS NOT SOLELY TO BRING LITIGATION ........... 17 CONCLUSION ....................................................................................................... 21 1 TABLE OF ALTHORITIES Page(s) CASES 71 Clinton St. Apts. LLC v. 71 Clinton Inc., 114 AD.3d 583 (lst Dep't 2014) ................................................................. 14-15 Banque de Gestion Privee-SIB v. La Republica de Paraguay, 787 F. Supp. 53 (S.D.N.Y. 1992) .......................................................................... 8 Bluebird Partners, L.P. v. First Fid. Bank, NA., 94 N.Y.2d 726 (2000) ............................................................................. 18-19,21 Bottenus v. Blackman, 43 AD.2d 846 (2d Dep't 1974) ......................................................................... 21 Concord Landscapers, Inc. v. Pincus, 41 AD.2d 759 (2d Dep't 1973) ......................................................................... 21 Couch v. Perales, 78 N.Y.2d 595 (1991) ................................................................................... 11-12 De Freitas v. Holley, 93 AD.2d 852 (2d Dep't 1983) ........................................................................... .4 Elliott Assocs., L.P. v. Banco de la Nacion, 194 F.3d 363 (2d Cir. 1999) ............................................................................... 20 Elliott Assocs., L.P. v. Republic of Panama, 975 F. Supp. 332 (S.D.N.Y. 1997) .................................................................... 18 Elliott Assocs., L.P. v. Republic of Peru, 948 F. Supp. 1203 (S.D.NY 1996) ............................................................ 17, 18 Fairchild Hiller Corp. v. McDonnell Douglas Corp., 28 N.Y.2d 325 (1971) ........................................................................................... 8 Frank H Zindle, Inc. v. Friedman's Express, Inc., 258 AD. 636 (1st Dep't 1940) ............................................................................. 8 ii G.G.F. Dev. Corp. v. Andreadis, 251 A.D.2d 624 (2d Dep't 1998) .................................................................. 20-21 Intrepid Invs., LLC v. Selling Source, LLC, No. 65429112013,2015 N.Y. Misc. LEXIS 2333 (Sup. Ct. N.Y. Co. June 26, 2015) ....................................................................... 4 Jones v. Bill, 10 N.Y.3d 550 (2008) ........................................................................................ 11 Justinian Capital SPC v. WestLB AG, 128 A.D.3d 553 (1st Dep't 2015) ................................................................... 4 !Viz v. Schum, 75 N.Y.2d 25 (1989) .......................................................................................... 17 Madison 96th Assocs., LLC v. 17 E. 96th Owners Corp., 120 A.D.3d 409 (1st Dep't 2014) ....................................................................... 15 Olmedo-Garcia v. Dobson, 31 A.D.3d 727 (2d Dep't 2006) "'"'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' 4 People v. Middlebrooks, 25 N.Y.3d 516 (2015) ........................................................................................ 11 People v. Santi, 3 N.Y.3d 234 (2000) .......................................................................................... 11 Phelps v. Phelps, 128 A.D.3d 1545 (4th Dep't 2015) ...................................................................... 4 Polygram Holding, Inc. v. Cafaro, 42 A.D.3d 339 (1st Dep't 2007) ........................................................................... 4 Riley v. Cnty. of Broome, 95 N.Y.2d 455 (2000) ........................................................................................ 11 SCR Joint Venture L.P. v. Warshawsky, 559 F.3d 133 (2d Cir. 2009) ............................................................................... 20 Shannon v. Westchester Cnty. Dep 't of Social Servs., 25 N. Y.3d 345 (2015) ........................................... ,,,,,,,,,,,,,,, ......................... 10-11 111 Tompkins Cnty. Support Collection Unit ex reI. Chamberlin v. Chamberlin, 99 N.Y.2d 328 (2003) ........................................................................................ 11 Trust for Certificate Holders of Merrill Lynch Mortg. Investors, Inc. Mortg. Pass-Through Certificates, Series J999-CJ v. Love Funding CO/p., 13 N.Y.3d 190 (2009) .................................................................................. 14, 17 STATUTES N.Y. JUD. LAW § 489(2) ...................................................... ............................. passim IV PRELIMINARY STATEMENT Reminiscent ofa famous courtroom scene in a Woody Allen movie/ the Brief for Defendants-Respondents ("WestLB Br.") proceeds on the basis that if it repeats the word "sham" enough times,2 the Court will be sufficiently distracted from the legal issues presented on this appeal. Thus, rather than focus on the question of whether N.Y. JUD. LAW § 489(2) requires $500,000 to actually change hands before the safe harbor can apply - which is the rationale adopted by the Appellate Division - WestLB argues instead that the case was decided on the basis of a factual finding by the Court that the transaction is a sham. But if that were the basis for the decision, reversal must follow, because the factual question as to the bona fides of the transaction, involving numerous hotly contested factual issues, cannot be decided on summary judgment. WestLB's brief adopts the strategy of ignoring the material set forth in Justinian's opening brief/ apparently in the hope that this Court will overlook such evidence and arguments - a strategy unlikely to succeed. For example: 1 In Bananas, Woody Allen's character addresses the judge as follows: This trial is a travesty. It's a travesty of a mockery of a sham of a mockery of a travesty of two mockeries of a sham. 2 The word "sham" appears 10 times in WestLB's brief, not counting the Table of Contents. 3 Brief for Plaintiff-Appellant, dated October 26, 2015 ("Justinian Br."). Terms are used herein as defined in Justinian Br. 1 • Justinian's brief showed thatJustinian tried to raise the money to pay the $1 million Base Purchase Price, offering half of its interest in the Notes in exchange for such financing. Justinian Br. at 27. This demonstrates that the obligation to pay the $1 million is real; Justinian hardly would have been willing to surrender half of its interest in order to raise the money if it felt it had no obligation to pay it. Yet, WestLB totally ignores this evidence and fails to address these facts. • Justinian's brief pointed out that the fact that Justinian needed financing to pay the $1 million does not prove that the obligation is a sham, any more than the fact that a home buyer needs a mortgage proves that the contract to buy a house is a sham. Justinian Br. at 27. WestLB ignores the argument. • Justinian's brief demonstrated that the restrictions in the SPA concerning transfer ofthe Notes are akin to the protections that a mortgagee or other secured lender obtains concerning a loan, which do not mean that the mortgagee retains or obtains title to the asset. Justinian Br. at 39-40. WestLB ignores the point. • Justinian's brief showed that Justinian tried to open negotiations with WestLB at a very early stage, but WestLB did not respond. Justinian Br. at 38-39. This underscores that Justinian's intent was not simply to litigate, but WestLB's brief ignores this evidence. 2 • Justinian's brief discussed and distinguished the cases relied on by WestLB and the Court below where champerty had been found. Justinian Br. at 36- 37 n.20; id. at 41. WestLB' s brief again relies on these cases, never mentioning or addressing the discussion in Justinian's briefthat demonstrates that the cases are inapposite. The Appellate Division erred in holding that the safe harbor was not satisfied because the $1 million that Justinian is obligated to pay DP AG had not actually changed hands, and nothing said in WestLB's brief demonstrates the contrary. The Appellate Division also erred in upholding summary judgment that the transaction is champertous, because such determination involves resolution of disputed issues of fact. WestLB' s brief merely underscores the existence of such factual issues and the inappropriateness of summary judgment. I. WESTLB'S ASSERTION THAT THE TRANSACTION IS A "SHAM" CANNOT SUPPORT AFFIRMANCE WestLB suggests that the decision below did not turn on the legal issue as to whether JUD. LAW § 489(2) is satisfied by a binding commitment to pay $500,000, as opposed to an actual transfer ofthe money. Instead, WestLB argues, the Appellate Division held that the transaction here is a sham and that § 489(2) does not protect sham transactions. WestLB Br. at 2, 14. WestLB's assertion as to the 3 basis for the Appellate Division's decision is belied by that Court's opinion, which states: Plaintiff argues that actual payment is not required, and that the mere recitation of payment, or a promise to pay, is sufficient. We disagree .... [W]e conclude that the intent underlying Judiciary Law § 489(2) requires actual payment of at least $500,000. 128 AD.3d at 554-55 (A8-9). But ifWestLB were correct that the decision below rests on a fmding that the transaction is a sham, then summary judgment is clearly inappropriate, as such a finding involves resolution of contested factual issues which should be decided at trial by the trier of the facts. See, e.g., Phelps v. Phelps, 128 A.D.3d 1545,1548 (4th Dep't 2015) (whether a transaction was a "sham" and whether money was "never intended to be repaid" presented "issues of fact" precluding summary judgment); Polygram Holding, Inc. v. Cafaro, 42 AD.3d 339,340 (lst Dep't 2007) (whether alleged loans were '''sham' transactions, which were never meant to be binding" presents "triable issues of fact"); Olmedo-Garcia v. Dobson, 31 A.D.3d 727, 728 (2d Dep't 2006) (litigant's "status as a bona fide purchaser" raises factual issues that cannot be decided on summary judgment); De Freitas v. Holley, 93 AD.2d 852, 853 (2d Dep't 1983) (same); Intrepid Invs., LLC v. Selling Source, LLC, No. 654291/2013,2015 N.Y. Misc. LEXIS 2333, at *20 (Sup. Ct. N.Y. Co. June 26, 2015) (whether a transaction was "bona fide" is "a question offact"). 4 A. THE BASE PURCHASE PRICE Is A BONA FIDE, BINDING COMMITMENT Justinian's initial brief demonstrated that Justinian's obligation to pay the $1 million Base Purchase Price is a bona fide, binding commitment. Justinian Br. at 23-28. Among other things, Justinian demonstrated that under the SPA the obligation to pay the $1 million is not contingent on the result of this litigation, SPA § 3.1.2 (A199), see A446-47, A586; that there are significant economic consequences to Justinian from non-payment of the $1 million, SPA § § 3.2, 5 .2(b) (A199, A200); and that Justinian has undertaken efforts to raise the funds to pay the $1 million, including offering to give up a significant portion of its interest in the case in exchange for the funds needed to pay the $1 million, A463, A620 - a step that no one would take if it thought that it was not obligated to pay the $1 million.4 WestLB' s brief ignores these points, which at a minimum raise a factual issue, precluding summary judgment, as to the bona fides of the Base Purchase Price. Instead, WestLB attacks the legitimacy ofthe Base Purchase Price on the basis that DP AG has "no remedy for non-payment" of the $1 million, WestLB Br. 4 It may be noted that in Justinian's other case against WestLB that WestLB's brief mentions (WestLB Br. at 13), Justinian was able to raise the money and did, in fact, pay the base purchase price. A448. Justinian wanted to do the same thing here, but thus far has been unable to obtain the financing, in large part due to WestLB's motion. A463. 5 at 1, 4, because non-payment "is not a default or even a breach ofthe Agreement." Id. However, this is not so. Lowe explained that he removed such non-payment as an event of default because he did not want non-payment "to be a trigger event for notice of default which would enable [DP AG] to take the asset back." A458. But that did not leave DP AG without a remedy. While non-payment is not an event of default, the SPA nevertheless creates a debt in favor ofDPAG. The SPA "allow[s] them to collect this as a debt and enforce it as a debt." A458. As Lowe testified, "what this does is it creates a liability that they become a creditor to us - they become our creditor for a million dollars, and they would have the rights of a creditor, which have in no way been excluded to enforce that liability." A459. The evidence demonstrated what some of those rights are. First, DPAG could go against the assets of the portfolio, i.e., the Blue Heron Notes. SPA § 2.1 (A198). As DPAG paid €180 million for these Notes, and they do not mature until 2047, there is at least a factual issue as to whether DPAG could expect to recover the $1 million from the portfolio. But contrary to WestLB's assertions, DPAG's recourse is not "limited to the Blue Heron notes." WestLB Br. at 1. Lowe's uncontradicted testimony explained how a creditor might be able to reach other assets, such as assets ofJustinian's principals. A460-61. This presents factual issues and, on a motion for summary judgment, it would not be appropriate to hold that DP AG has no remedy. 6 WestLB misleads in asserting that DPAG's CEO, Glynn, stated that Justinian had no duty to pay the $1 million unless there was a recovery, and that the failure to pay the $1 million "merely increased the amount of[DPAG's] share of any recovery." WestLB Br. at 5. While the cited document (A398) notes that a consequence of non-payment is that DP AG' s share of any recovery increases, it nowhere suggests that DP AG has no other option or remedy if the $1 million is not paid. Glynn was unequivocal that payment ofthe $1 million "was required under the documents." A514. Similarly inaccurate is WestLB' s assertion that DP AG' s accounting department did not include the $1 million as a receivable in the bank's accounts, "[b]ecause there was no genuine obligation to pay" it. WestLB at 5-6. First, as Glynn testified, it was considered a receivable. A529-30. Second, it was not recognized as income in the profit and loss statement because revenue recognition requires "a very high certainty of payment." A530. Nothing in the testimony or the document cited by WestLB states that the $1 million was not included in the P/L statement "[b]ecause there was no genuine obligation to pay" it. B. DP AG's RIGHTS UNDER THE SPA Do NOT UNDERMINE THE BONA FIDES OF THE TRANSACTION WestLB stresses that DPAG will receive 85% of any recovery on the Notes. 7 WestLB Br. at 6.5 As shown in Justinian's initial brief, such common sharing arrangement does not destroy the legitimacy of the assignment. See Justinian Br. at 41-44; see also Banque de Gestion Privee-SIB v. La Republica de Paraguay, 787 F. Supp. 53, 58 (S.D.N.Y. 1992) ("the sharing agreements do not create an inference of champerty"). 6 Justinian's opening brief demonstrated that the provisions in the SPA providing protection to DP AG, such as restrictions on transferring the Notes, are similar to the common protections that a mortgagee or other secured lender obtains when making a loan, which do not render the transaction a sham. See Justinian Br. at 39-40. WestLB fails to respond to this point. WestLB stresses that DPAG can object to a settlement. WestLB Br. at 7. But Justinian can nevertheless proceed to settle the claims if Justinian's counsel renders an opinion that the objections are not reasonable. SPA § 8.4.2 (A204). WestLB's brief acknowledges this point but is somewhat opaque as to whose counsel would render the opinion, referring to an opinion by "its litigation counsel" without clearly specifying to whom the pronoun "its" refers. See WestLB Br. at 7. 5 DPAG's interest originally was 80%, but because Justinian did not pay the Base Purchase Price on time, DPAG's interest rose to 85%. SPA § 5.2(b) (A200). 6 In Banque de Gestion Privee-SIB, Judge Mukasey relied on this Court's decision in Fairchild Hiller Corp. v. McDonnell Douglas COIp., 28 N.Y.2d 325 (1971), and rejected the defendants' reliance on Frank H Zindle, Inc. v. Friedman's Express, Inc., 258 A.D. 636 (1st Dep't 1940), which is one of the cases that WestLB relies on here, see WestLB Br. at 19. 8 Under the SPA, it is Justinian's counsel, not DPAG's counsel, who renders the opinion. SPA § 8.4 (A204).7 WestLB's argues that the SPA limits Justinian to a list of250 or so law fInns to handle this case, WestLB Br. at 7, but that hardly interferes with Justinian's control over the lawsuit. For perceived prejudicial impact, WestLB continually asserts, as it did below, that the Notes are held in a bank "lockbox." WestLB Br. at 1,2, 7. This is a fIgment ofthe imagination of WestLB's counsel; there is no such thing, and WestLB cites nothing to support the assertion of a "lockbox." WestLB also relies on a promotional presentation that Justinian had provided to potential clients long before the SPA was drafted, WestLB Br. at 8 (citing A31 0-25), as if a business development brochure constituted binding documentation reflecting an actual transaction. Lowe explained: "This is a marketing presentation. It's not what we guarantee by any agreement. And it's not what we - what anyone's asked us to do and forced us to do or what we agreed to do .... [I]t's a generic presentation." A453. While WestLB relies on this presentation for the proposition that Justinian "promised" that DP AG "would 7 While Lowe testified that he thought DP AG could nevertheless sue Justinian despite such opinion (A464), he was in error, as nothing in the SPA gives DPAG any such right. See SPA §§ 8, 10 (A203-06). 9 retain true ownership" ofthe Notes, the SPA transferred full title to the Notes to Justinian, SPA § 3.1.1 (A199); the Notes are recorded in the records of the custodian bank as belonging to Justinian's "Blue Heron Portfolio," A554; and DPAG recognized that under the SPA, DPAG "wouldn't retain control of the asset," A505, and "[w]e are no longer owners of the" Notes. A547. None ofDPAG's rights under the SPA convert the transaction into a sham. In any event, the issue is one for the jury, not a summary judgment motion. II. THE APPELLATE DIVISION ERRED IN HOLDING THAT THE TRANSACTION DOES NOT SATISFY THE SAFE HARBOR OF JUD. LAW § 489(2) A. A BINDING OBLIGATION TO TRANSFER $500,000 TO THE SELLER Is SUFFICIENT TO SATISFY THE SAFE HARBOR WestLB argues that in evaluating whether a binding commitment to pay $500,000 is enough to satisfy § 489(2), or whether the money must actually have changed hands, the Court must go beyond the words of the statute and consider its legislative history. WestLB Br. at 15-16. This is not so, but even if the Court were to look beyond the text of the statute, consideration oflegislative history supports Justinian's position, not WestLB's. "Inasmuch as the clearest indicator oflegislative intent is the statutory text, the starting point in any case of interpretation must always be the language itself, giving effect to the plain meaning thereof," and only if "the language is 10 ambiguous, we may examine the statute's legislative history." Shannon v. Westchester Cnty. Dep 'f o/Social Servs., 25 N.Y.3d 345,351 (2015) (internal quotation marks and citation omitted); see People v. Middlebrooks, 25 N.y'3d 516, 523 (2015) ("when the statutory language is clear and unambiguous, it should be construed so as to give effect to the plain meaning of the words used") (internal quotation marks and citation omitted). 8 Because § 489(2) does not state that money must have changed hands in order for the safe harbor to apply, its legislative history need not be examined. See Jones v. Bill, 10 N.Y.3d 550 (2008) ("Although defendants urge us to glean congressional intent from the floor minutes surrounding the enactment of this contentious legislation ... where the language of a statute is clear there is little room to add to or take away from that meaning.") (internal quotation marks and citation omitted); see also Couch v. Perales, 78 N.Y.2d 595,603 (1991) ("We find 8 In the case principally relied on by WestLB, People v. Santi, 3 N.y'3d 234 (2000) (WestLB Br. at 15), the Court reviewed the legislative history of the relevant statute only in order to "avoid an unreasonable or absurd application ofthe law" that was being suggested by the defendant. 3 N.Y.3d at 244 (internal quotation marks and citation omitted). Contrary to WestLB's implication, no such unreasonable or absurd result will obtain here if the Court gives effect to the plain language of § 489(2). WestLB ignores that the other case it cites, Tompkins Cnty. Support Collection Unit ex rel. Chamberlin v. Chamberlin, 99 N.Y.2d 328 (2003), itself quotes a case in which this Court stated that "[a]s a general rule, unambiguous language of a statute is alone determinative." Riley v. Cnty. of Broome, 95 N.Y.2d 455, 463 (2000). 11 no ambiguity in the statute and thus have no occasion to resort to an examination of Congress' intent."). Even if the Court were to examine the legislative history, nothing therein suggests that the legislature was concerned with whether the $500,000 had actually changed hands, and use of the word "paid" in the bill jacket (A411) or an affidavit (A406) does not suggest otherwise. There is no indication that the authors of § 489(2) were drawing any distinction between transferring funds as opposed to being obligated to do so. The notion that the main intent of the statute was to insulate from champerty claims only purchasers who have "paid," but not those who committed to pay, cannot be sustained. The purpose of the statute was to facilitate and maintain New York's prominent position in the marketplace for large transactions in distressed debt. See Justinian Br. at 17-19; A405-06, A410-11. As the New York State Assembly's Memorandum in support ofthe bill creating the safe harbor stated: A411. Markets have developed for the purchase and sale of claims including claims that are in default. The ability to collect on these claims without fear of champerty litigation is essential to the fluidity of commerce in New York. It is thus necessary to amend this section of law to achieve clarity and certainty in certain transactions and to avoid driving markets for such claims out of New York. 12 Thus, the legislature sought to protect large transactions in distressed debt from the specter of defenses based on New York's "archaic" champerty doctrine. A 410-11. That was the intent, not a concern about distinguishing between payment as opposed to a commitment to pay. And that true intent can only be furthered by the construction that Justinian urges here. Also, in deciding what § 489(2) requires, it is important to bear in mind that a safe harbor is designed to provide clear, bright-line rules, so that market participants have a reasonable degree of certainty as to the applicability of the safe harbor. That goal would be undermined if application of the safe harbor turns on a court's evaluation, years later, of whether the transaction is sufficiently bona fide to qualify for the safe harbor. Suppose the purchaser were Goldman Sachs instead of Justinian. Would it make any sense to hold that a binding commitment to pay $500,000 is insufficient, and that § 489(2) requires that the money actually change hands? This Court's ruling on whether the statute requires that the $500,000 actually change hands will apply to all transactions. B. THE FACT THAT THE TRANSACTION WAS DELffiERATELY STRUCTURED TO FIT WITHIN THE SAFE HARBOR DOES NOT VITIATE RELIANCE ON THE SAFE HARBOR WestLB argues that the SPA was deliberately structured to '" get into the safe harbor on NY champerty. '" WestLB Br. at 5. It asserts that the Base 13 Purchase Price "was not based on any assessment of the value of the Blue Heron notes" but "simply was the minimum amount provided in" § 489(2). Id. So what? Parties seldom find themselves in a safe harbor by accident, but rather, usually navigate into it deliberately. The purpose of a safe harbor is to provide a bright- line test and take intent out ofthe equation. III. THE APPELLATE DIVISION ERRED IN UPHOLDING SUMMARY JUDGMENT THAT THE ASSIGNMENT WAS CHAMPERTOUS A. FACTUAL ISSUES PRECLUDE ANY FINDING THAT THE TRANSACTION STIRRED UP LITIGATION THAT WOULD NOT OTHERWISE HAVE OCCURRED WestLB's effort to minimize the importance of whether an assignment stirred up litigation that otherwise would not have been brought, WestLB Br. at 22, should be rejected. As this Court stated in Trust for Certificate Holders of Merrill Lynch Mortg. Investors, Inc. Mortg. Pass-Through Certificates, Series J999-Cl v. Love Funding Corp., 13 N.Y.3d 190,201 (2009), the champerty statute "prohibits ... the purchase of claims with the intent and for the purpose of bringing an action ... where such claims would not be prosecuted if not stirred up '" in [an] effort to secure costs" (internal quotation marks and citation omitted).9 9 WestLB suggests that this Court's reference to the stirring up ofiitigation is a historical anachronism. WestLB Br. at 22. This overlooks that the recent champerty decisions continually refer to the importance of whether allegedly champertous claims "would ... be prosecuted if not stirred up ' .. in an effort to secure costs." 71 Clinton St. Apts. LLC v. 71 Clinton Inc., 114 (Cont'd) 14 Apparently cognizant that its effort to brush aside Love Funding will fail, WestLB devotes considerable time trying to show that DP AG was unwilling to sue WestLB directly. WestLB Br. at 10. Its argument, however, merely illustrates the disputed issues of fact that preclude summary judgment. While WestLB boldly claims that "[t]he evidence completely supports" the position that DP AG "would not have sued WestLB directly," id. (emphasis added), it is easy to demonstrate the extent to which WestLB has exaggerated. As set forth in an email that Glynn sent on October 23,2009, he "received further board approval this summer to move forward with two Blue Heron transactions managed by WestLB on a direct litigation basis." A351. In light of this document, WestLB' s assertion that DP AG "never obtained final approval from its board to sue WestLB directly," WestLB Br. at 10, is truly inexplicable. While the board gave approval to suing WestLB directly, it also expressed "concern about repercussions from any direct suit we would bring against WestLB." A351. Therefore, although he had board approval to sue WestLB in DPAG's name, Glynn prudently decided to explore other options. Thereafter, in December 2009, he circulated to the board a presentation setting forth three A.D.3d 583,585 (lst Dep't 2014); see Madison 96th Assocs., LLC v. 17 E. 96th Owners Corp., 120 A.D.3d 409 (1st Dep't 2014). 15 options, including litigation on a direct basis and also selling the Notes to Justinian. AS64. While DP AG ultimately decided on the Justinian option, this does not undermine the incontrovertible fact that Glynn was authorized to sue directly in DPAG's name. This hotly contested factual question as to whether or not the SPA stirred up litigation that would not otherwise have been brought simply cannot be resolved on summary judgment. Finally, WestLB fails to explain how the fact that Justinian's Complaint did not mention DPAG somehow shows that DPAG would not have sued in its own name. WestLB Br. at 11. While WestLB criticizes the Complaint for alleging that Justinian was the "successor in interest" to the "original purchasers," id., that is unquestionably true. Similarly, Justinian's allegations that it had "right and title" to the Notes, id. at 12, was also unquestionably true. SPA § 3.1.1 (A199); see Justinian Br. at 10-11, 40. WestLB's reliance on Justinian's promotional literature for the notion that DPAG expected that its involvement in the case would not be revealed, WestLB Br. at 8, is misplaced, as the DPAG board told Glynn prior to execution ofthe SPA that that was not realistic. ASll; see also AS08. JO 10 WestLB' s argument that DP AG's alleged "unwillingness to sue in its own name is demonstrated by, among other things, the fact that it did not sue in its own name," WestLB Br. at 22, merely shows how WestLB is grasping at straws. 16 WestLB states that the decision below that the transaction is champertous rests on "factual findings" by the Courts below that DP AG was not willing to sue in its own name. WestLB Br. at 21. Given that these facts are hotly disputed, such fact finding is inappropriate on a motion for summary judgment. See Kriz v. Schum, 75 N.Y.2d 25,33 (1989) (on a motion for summary judgment, "the court's role is limited to issue finding, not issue resolution"). B. JUSTINIAN'S INTENT WAS NOT SOLELY TO BRING LITIGATION Arguing that the sole purpose of the SPA was litigation, WestLB points to the fact that suit was commenced three days after the SPA was signed. WestLB Br. at 9. This argument overlooks that because the negotiations over the SPA took so long, the statute oflimitations was expiring and filing suit could not be delayed. A443, A455, A522. WestLB also ignores that before filing the Complaint, 11 Justinian tried to open a dialogue with WestLB, but WestLB did not respond. Justinian Br. at 38-39; A444.12 In any event, "if a party acquires a debt instrument for the purpose of enforcing it, that is not champerty simply because the party intends to do so by litigation." Love Funding, 13 N.Y.3d at 200; see Bluebird 11 In light of the time pressure, the case was commenced by filing a summons with notice rather than a summons and complaint. 12 See Elliott Assocs .. L.P. v. Republic a/Peru, 948 F. Supp. 1203,1210 (S.D.N.Y. 1996) (applying New York law) ("inference of champertous intent is countered" where the assignee met with the obligor "in an effort to negotiate a resolution"). 17 Partners, L.P. v. First Fid. Bank, NA., 94 N.Y.2d 726, 735 (2000) ("mere intent to bring a suit on a claim purchased does not constitute the offense; the purchase must be made for the very purpose of bringing such suit, and this implies an exclusion of any other purpose") (internal quotation marks omitted). Justinian contemplated various ways that it might realize value on the Notes, not solely through a lawsuit. As Lowe testified, "there might have been an insolvency. There might have been a restructuring. Might have been a distribution. These notes aren't due until 2047." A443. Courts have found that the possibility of non-litigation value realization rebuts an inference of champerty. See, e.g., Elliott Assocs., L.P. v. Republic a/Panama, 975 F. Supp. 332, 340 (S.D.N.Y. 1997) (applying New York law) ("there also existed the possibility that the economy of Panama would improve and that, as a consequence, Panama would have the ability to repay the loans in full or at a discount"); Elliott Assocs., L.P. v. Republic of Peru, 948 F. Supp. at 1210 (applying New York law) ("it is conceivable that Elliott anticipated an increase in the value of the debt independent of litigation-induced increases"). WestLB asserts that "[ d]iscovery did not reveal a single document in which Justinian or Deutsche Pfandbriefbank discussed any means of pursuing claims 18 against WestLB other than through litigation." WestLB Br. at 9.13 This is highly misleading. Glynn testified that prior to execution of the SPA, Lowe indicated that Justinian would try to "maximize the value" of the Notes through a variety of mechanisms, such as "[a]gitating the trustee to take action; to approach the person that did the harm, whether that was an underwriter or an asset manager; litigation; pretty much anything else. I'm sure he mentioned those three." A498. Glynn further testified that Lowe told him that Justinian "would like to have a discussion with WestLB before bringing a suit." A508. Glynn gave Lowe the name of a person at WestLB to contact, A523, and Lowe proceeded to try to do so, A444- although the WestLB person never returned the call. !d. Since testimony is not, strictly speaking, a "document," WestLB's statement that there is no "document" that discusses any means of pursuing claims against WestLB other than through litigation might conceivably be deemed technically true, but it is very misleading. But there is also a "document" that undermines WestLB' s statement. The Justinian promotional material provided to DP AG which WestLB cites, see WestLB Br. at 8 (citing A310-25), discusses that Justinian could employ "specialist financial and legal expertise," "influenc[ e] the liquidation process," 13 For reasons as to which one can only speculate, while the decision below uses the acronym "DPAG" to refer to Deutsche Pfandbriefbank, WestLB's brief insists on writing out the name in full each time the bank is referenced. 19 "communicat[ e] with the administrators or liquidators," and "manage [assets] through appointment of portfolio managers specialized in relevant assets." A313, A315; see A320-21. The document completely gives the lie to WestLB's claim that "Justinian was not in a position to provide Deutsche Pfandbriefbank with any service of value in this action." WestLB Br. at 10. WestLB's discussion of cases holding various assignments to be champertous, see WestLB Br. at 21, is perplexing. While WestLB represents that these cases involved "transactions like the one between Justinian and Deutsche Pfandbriefbank," WestLB Br. at 19, Justinian's opening brief discusses these cases and demonstrates the sharp distinctions between them and the transaction here. See Justinian Br. at 36-37 n.20; id. at 41. WestLB's brief completely ignores all of the distinctions pointed out by Justinian and does not even allude to the fact that Justinian's opening brief already addressed these cases.14 14 WestLB makes no serious effort to address the caselaw relied on by Justinian, instead attempting blithely to sweep those cases aside in a few sentences with broad assertions such as that the assignees in those cases had a "pre-existing interest" in the claim. WestLB Br. at 2l. The caselaw is not so easily disposed of. For example, courts have made clear that assignments made to entities with no such preexisting interest may be found not to be champertous. See, e.g., Elliott Assocs., L.P. v. Banco de la Nacion, 194 FJd 363,368 (2d Cir. 1999) (finding no champerty notwithstanding that the assignee investment fund had no preexisting interest in the Peruvian sovereign debt and that the assignee "did not seriously consider alternatives to bringing an action") (internal quotation marks omitted). Other cases denying champerty defenses in suits brought by assignees lacking any preexisting interest include SCR Joint Venture L.P. v. Warshawsky, 559 F.3d 133 (2d Cir. 2009); G.G.F Dev. Corp. v. Andreadis, 251 A.D.2d 624 (2d (Cont'd) 20 "[T]he question of intent and purpose of the purchaser or assignee of a claim is usually a factual one to be decided by the trier of facts." Bluebird, 94 N.Y.2d at 738. That is clearly true here. CONCLUSION As the Assembly's memorandum in support of the legislation creating the safe harbor stated, "[0 ]bligors who have no defense to the claims in the hands of their original creditors are quick to assert a champerty defense merely because the claim has been purchased." A411. 15 This is just such a case, but the safe harbor prevents that affirmative defense from succeeding here. At a minimum, the inappropriate resolution of disputed issues of fact by the Courts below make the grant of summary judgment reversible error. It is respectfully submitted that the decision below should be reversed, with costs. Dep't 1998); Bottenus v. Blackman, 43 A.D.2d 846 (2d Dep't 1974); and Concord Landscapers, Inc. v. Pincus, 41 A.D.2d 759 (2d Dep't 1973). 15 Trying to suggest that it has a defense on the merits, WestLB refers to the dismissal of a different case involving a different investment and different facts. See WestLB Br. at 13. The result in that case obviously has no relevance here, and Justinian will not waste the Court's time demonstrating the differences between that case and the case at bar. 21 Dated: New York, New York December 28,2015 22 Respectfully submitted, GRANT & EISENHOFER P .A. By:---+-~_~:1---L'7_<0_k_t:~_" _ Jay W. Eisenhofer James J. Sabella Deborah A. Elman Robert D. Gerson 485 Lexington Avenue New York, New York 10017 Telephone: (646) 722-8500 Facsimile: (646) 722-8501 Attorneys for Plaintiff-Appellant