Opinion
Index No. 653357/2011
11-10-2021
CORTLANDT STREET RECOVERY CORP., Wilmington Trust Company, as Trustee, Plaintiff, v. David BONDERMAN, James Coulter, Martin Halusa, John Megrue, Giancarlo Aliberti, Matthias Calice, TPG Capital-New York, Inc., 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, T3 Troy, LLC, TCW HT-Co-Invest I L.P., TCW HT Co-Invest II L.P., TPG Capital, L.P., TPG Partners IV, L.P., T3 Partners II, L.P., Apax Partners LLP, Apax Partners, L.P., John and Jane Does No.1-99, Defendants.
The following e-filed documents, listed by NYSCEF document number (Motion 018) 503, 504, 505, 506, 507, 508, 509, 510, 511, 512, 513, 514, 515, 516, 517, 518, 519, 520, 521, 522, 523, 524, 525, 526, 527, 528, 529, 530, 531, 532, 533, 536, 537, 538, 539, 540, 541, 542, 543, 544, 545, 546, 547, 548, 549, 550, 551, 552, 553, 554, 555, 556, 557, 558, 559, 560, 561, 562, 563, 564, 565, 566, 567, 568, 569, 570, 571, 572, 573, 574, 575, 576, 577, 578, 579, 580, 581, 582, 583, 584, 585, 586, 587, 588, 589, 590, 591, 592, 593, 594, 595, 596, 597, 598, 599, 600, 601, 602, 603, 604, 605, 606, 607, 608, 609, 610, 611, 612, 613, 614, 615, 616, 617, 618, 619, 620, 621, 622, 623, 624, 625, 626, 627, 628, 629, 630, 631, 632, 633, 634, 635, 636, 637, 638, 639, 640, 641, 642, 643, 644, 645, 646, 647, 648, 652, 656, 657, 658, 659, 660, 661, 662, 663, 664, 665, 666, 667, 668, 669, 670, 671, 672, 673, 674, 675, 676, 677, 678, 679, 680, 681, 682, 683, 684, 685, 686, 687, 688, 689, 690, 691, 692, 693, 694, 695, 696, 697, 698, 699, 700, 701, 702, 703, 704, 705, 706, 707, 708, 709, 710, 711, 712, 713, 714, 715, 716, 717, 718, 734, 735, 736, 737, 738, 739, 740, 741, 742, 743, 744, 745, 746, 747, 748, 749, 750, 751, 752, 753 were read on this motion to DISMISS.
Plaintiff Wilmington Trust Company (WTC) seeks to recover on a judgment obtained against Hellas Telecommunications I, S.á.r.l. (Hellas I) and Hellas Telecommunications Finance, S.C.A. (Hellas Finance) (together, Judgment Debtors). Hellas Finance issued €200 million in payment-in-kind (PIK) notes that were guaranteed by Hellas I.
Defendants Apax Partners LLP (Apax), Apax Partners LP, Apax Partners Europe Managers Ltd., Apax Europe VI GP Co. Ltd., Apax Europe VI-A, L.P., Apax Europe VI-1, L.P., Apax WW Nominees, Ltd., Apax Europe VI GP, L.P., Troy LP Inc., Giancarlo Aliberti (Aliberti), Martin Halusa (Halusa), and John F. Megrue, Jr. (Megrue) (the Apax defendants) and TPG Capital, L.P. (TPG), TPG Capital-New York, Inc., 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 (Bonderman), James Coulter (Coulter), and Matthias Calice (Calice) (the TPG defendants) move for an order: (1) pursuant to CPLR 3211 (a) (5) and (8), to dismiss the amended complaint for lack of personal jurisdiction; (2) pursuant to CPLR 3211 (a) (1) and (7), to dismiss the amended complaint for failure to state a cause of action; (3) pursuant to CPLR 3211 (a) (2) and (a) (7), to dismiss the amended complaint against certain defendants based upon prior dissolution; and (4) pursuant to CPLR 327, to dismiss the amended complaint based upon forum non conveniens.
BACKGROUND
WTC alleges that global private equity firms TPG and Apax and their affiliated firms, limited general partners, managers, funds, and individual principals, created, controlled, and used their shell-entity alter egos, the Judgment Debtors, as instruments to borrow and then fraudulently transfer more than €200 million to themselves, leaving the Judgment Debtors insolvent and unable to satisfy their debts under the PIK notes. WTC seeks to collect amounts due under the notes and enforce the judgment against the Judgment Debtors’ affiliates and alter egos.
The Parties
The following facts are taken from the amended complaint. WTC is the successor trustee under the indenture associated with the PIK notes (NY St Cts Elec Filing [NYSCEF] Doc No. 491, amended complaint ¶ 7). WTC is a Delaware corporation with its principal place of business in Delaware, with offices in Manhattan (id. ).
Hellas Finance and Hellas I, the issuer and guarantor of the notes, consented to jurisdiction in New York in a forum selection clause in the indenture (id. ¶¶ 43, 44).
WTC alleges that the following defendants are entities organized under either U.K. or Guernsey law: Apax; Apax Partners Europe Managers Ltd.; Apax Europe VI-A, L.P.; Apax Europe VI-1, L.P.; Apax Europe VI GP, L.P.; Apax Europe VI GP Co. Ltd.; Troy L.P. Inc.; and Apax WW Nominees, Ltd. (id. ¶¶ 17, 36, 37) (hereinafter, the European entities).
WTC further alleges that Bonderman and Coulter are founding partners of TPG (id. ¶¶ 28, 29). Bonderman was the chairman of the board of directors and president of the TPG funds that owned Hellas Telecommunications S.à.r.l. (Hellas), with an office and place of business in Fort Worth, Texas (id. ¶ 28). Coulter was the director and vice president of the TPG funds that owned Hellas with a principal place of business in San Francisco, California (id. ¶ 29).
Halusa served as the chief executive officer of Apax, which had an office and place of business in London, England (id. ¶ 25). Megrue was the chief executive officer of Apax Partners, L.P., a Delaware limited partnership which had an office and place of business in Manhattan (id. ¶¶ 18, 26).
Aliberti and Calice were members of the Apax and TPG "deal teams," assigned to acquire, advise, manage, and ultimately sell the shell companies (id. ¶ 33). According to WTC, Aliberti and Calice each signed the notes and indenture (id. ). Both Aliberti and Calice were members of the board of managers of Hellas and Hellas Finance in December 2006 and were directors of Troy GAC Telecommunications S.A. (id. ).
The Transaction that Allegedly Defrauded the Noteholders
According to WTC, in March 2005, TPG and Apax created a group of shell companies incorporated in Luxembourg to acquire TIM Hellas Communications (TIM Hellas), a Greek cellular telephone company (id. ¶ 99). At the time, TIM Hellas was profitable and nearly debt free (id. ¶ 101). As alleged by WTC, the consortium of companies (the Hellas Group) included Hellas, the parent company of Hellas Finance, Hellas I, and Hellas Telecommunications II, S.C.A. (Hellas II) (id. ¶ 102).
WTC alleges that, by the end of 2005, the Hellas Group owed about €1.6 billion in debt, but only had €38,028,000 in equity and zero retained earnings (id. ¶ 107). WTC alleges that the Hellas Group borrowed heavily and used such funds to pay defendants substantial profits on their investments, while senior creditors were not paid (id. ¶ 108). By mid-2006, the Hellas Group's long-term debt increased to about €2 billion, and shareholders’ equity of €11.4 million (id. ¶ 110).
On December 21, 2006, as part of the Hellas Group's recapitalization, Hellas Finance issued €200 million in PIK notes, which were guaranteed by Hellas I, and are governed by the subject indenture (id. ¶ 121). WTC alleges that the recapitalization was "dressed up" as a "refinancing" of existing debt, but, in effect, served the improper purpose of funding illegal distributions to defendants (id. ¶ 123). From those proceeds, approximately €1.185 billion were paid to defendants through redemption of convertible preferred equity certificates (CPECs) (id. ¶ 121). Specifically, on the same date, Hellas redeemed CPECs that had been issued to and held by Hellas I for €979,000,000 (id. ¶ 122). Hellas also redeemed preferred equity certificates (PECs) issued to and held by defendants for €211,660,427 (id. ). WTC alleges that the enterprise value used to calculate the CPEC redemption was not independently verified, and that the CPECs were redeemed at a highly inflated rate (id. ¶¶ 131-139). According to WTC, the terms of the CPECs and PECs prohibited redemption where senior debt existed and had to be paid or provided for payment (id. ¶¶ 158-160). Two months later, in early February 2007, defendants sold the Hellas Group to an investor, Weather Investments S.p.A. (id. ¶ 140).
As a result of the improper distributions, the Judgment Debtors defaulted on the notes (id. ¶ 165). On November 27, 2009, WTC gave notice that an event of default had occurred and accelerated payment under the notes, declaring all outstanding principal and interest due and immediately payable as provided in the indenture in the event of a default (id. ¶ 94).
On December 5, 2011, WTC commenced an action captioned Wilmington Trust Co. v Hellas Telecom. Fin., S.C.A. , Index No. 653363/11 (Sup Ct, NY County) against the Judgment Debtors for non-payment of the notes (id. ¶ 96). The court (Friedman, J.) granted WTC's motion for summary judgment in lieu of complaint against the Judgment Debtors (id. ¶ 97). The Clerk thereafter entered judgment against the Judgment Debtors in the amount of $565,363,952.80, plus post-judgment interest, fees, and costs (id. ¶ 97; NYSCEF Doc No. 87 in index no. 653363/11).
Procedural History
By decision and order dated September 16, 2014, Justice Friedman granted defendants’ motion to dismiss the complaint ( Cortlandt St. Recovery Corp. v Hellas Telecom., S.à.r.l. , 47 Misc 3d 544 [Sup Ct, NY County 2014], affd as mod 142 AD3d 833 [1st Dept 2016], affd 31 NY3d 30 [2018] ). The court held that the indenture failed to authorize the trustee to prosecute the causes of action pleaded in the complaint, and dismissed the fourth cause of action, asserting liability on an alter ego theory to pierce the corporate veil, as insufficiently pleaded (id. ).
The First Department reversed the court's dismissal of the complaint, finding that WTC had standing under the indenture and that WTC adequately alleged alter ego liability ( Cortlandt St. Recovery Corp. , 142 AD3d at 833-834 ). The Court of Appeals affirmed, holding, in relevant part, that:
"Defendants argue that the complaint is inadequate because it fails to plead with specificity the conduct alleged against each defendant that would support alter ego liability. While the complaint refers to the "Private Equity Defendants" throughout, the complaint also alleges various details about Apax-and TPG-affiliated entities, as well as the individuals that manage the funds that owned Hellas, which suggests a strong suspicion of fraud. It points to various individuals and entities tasked with directing Apax and TPG's day-to-day activities at the time of the fraudulent conveyances, it lists their titles and management positions, and it also identifies specific transferees of the fraudulent conveyance proceeds. It would be unreasonable to require greater detail from WTC as to each individual's daily conduct and involvement in the fraud at this pre-answer, pre-discovery stage (see Tap Holding s, 109 AD3d at 175 [allegations against "Senior Lenders" adequate])"
( Cortlandt St. Recovery Corp. , 31 NY3d at 49 ).
WTC subsequently moved to amend the complaint to add parties and to add causes of action to enforce the judgment. On April 24, 2019, Justice Friedman granted WTC's motion to amend the complaint (NYSCEF Doc No. 489).
The amended complaint seeks to collect amounts due under the notes and indenture, and asserts the following 10 causes of action against all defendants: (1) breach of contract; (2) violation of prohibitions on distributions pursuant to Business Corporation Law (BCL) §§ 510, 513, 629, 719 and 720 and Penal Law § 190.35 ; (3) satisfaction of the notes and judgments as alter egos of Judgment Debtors; (4), (5), (6), (7), and (8) fraudulent conveyances pursuant to Debtor and Creditor Law (DCL) §§ 273 through 277 ; (9) unjust enrichment and imposition of a constructive trust; and (10) conversion (NYSCEF Doc No. 491, amended complaint ¶¶ 166-176, 177-185, 186-194, 195-206, 207-216, 217-225, 226-235, 236-245, 246-253, 254-259). WTC seeks $565,363,952.80, together with post-judgment fees, attorneys’ fees, and costs and disbursements (id. , wherefore clause).
I. The Branch of Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction
A. Whether WTC is Barred from Relitigating Personal Jurisdiction over the European Entities Based Upon the Collateral Estoppel Doctrine
Defendants argue that WTC is barred from relitigating the issue of personal jurisdiction over the European entities based upon the United States District Court for the Southern District of New York's determination in Wilmington Trust Co. v Hellas Telecom., S.à.r.l. (2016 WL 7339112,*4-*5, *7-*9, 2016 US Dist LEXIS 102879, *10-*12 [SD NY 2016] ). According to defendants, the court dismissed three European entities — Apax Europe VI-A L.P., Apax Europe VI-1 L.P., and Apax WW Nominees, Ltd., two for lack of subject matter jurisdiction and one for lack personal jurisdiction. Defendants argue that, given that the court expressly held that it lacked personal jurisdiction over Apax WW Nominees, Ltd., WTC is estopped from relitigating jurisdiction over that entity in this action. Defendants argue that the federal court's determination is also dispositive as to Apax Europe VI-A, L.P. and Apax Europe VI-1, L.P. in this case because WTC made the same jurisdictional allegations here as to these entities. Further, defendants contend that WTC should be precluded from relitigating personal jurisdiction as to five defendants that were not parties to the federal action.
In response, WTC contends that the Court of Appeals’ decision is determinative of the issue of personal jurisdiction and the law of the case. Thus, WTC maintains that it should not be precluded from relitigating the issue of personal jurisdiction because the Court of Appeals’ decision in Cortlandt St. Recovery Corp. is a dispositive new fact. In addition, WTC argues that it has uncovered overwhelming facts establishing alter ego jurisdiction in this action. According to WTC, even if collateral estoppel applies, it would only apply to Apax WW Nominees, Ltd. WTC further asserts that it named the movants as defendants in this action, well before the federal action was filed.
Pursuant to CPLR 3211 (a) (5), "a party may move for judgment dismissing one or more causes of action asserted against him or her on the ground that ... the cause of action may not be maintained because of ... collateral estoppel."
"[C]ollateral estoppel ... precludes a party from relitigating in a subsequent action or proceeding an issue clearly raised in a prior action or proceeding and decided against that party or those in privity, whether or not the tribunals or causes of action are the same" ( Ryan v New York Tel. Co. , 62 NY2d 494, 500 [1984] ). The doctrine of collateral estoppel requires that: (1) the identical issue was necessarily decided in the prior proceeding and is decisive in the present action; and (2) the party to be precluded had a full and fair opportunity to contest the prior determination ( Buechel v Bain , 97 NY2d 295, 303-304 [2001], cert denied 535 US 1096 [2002] ; D'Arata v New York Cent. Mut. Fire Ins. Co. , 76 NY2d 659, 665-666 [1990] ). "The party seeking the benefit of collateral estoppel has the burden of demonstrating the identity of the issues in the present litigation and the prior determination, whereas the party attempting to defeat its application has the burden of establishing the absence of a full and fair opportunity to litigate the issue in the prior action" ( Kaufman v Eli Lilly & Co. , 65 NY2d 449, 456 [1985] ).
The collateral estoppel doctrine applies to parties to the prior action or proceeding and those in privity with those parties ( Buechel , 97 NY2d at 304 ). " ‘Generally, a nonparty to a prior litigation may be collaterally estopped by a determination in that litigation by having a relationship with a party to the prior litigation such that his own rights or obligations in the subsequent proceeding are conditioned in one way or another on, or derivative of, the rights of the party to the prior litigation’ " ( Nationwide Mut. Ins. Co. v U.S. Underwriters Ins. Co. , 151 AD3d 504, 505 [1st Dept 2017], quoting D'Arata , 76 NY2d at 664 ). "[T]o establish privity the connection between the parties must be such that the interests of the nonparty can be said to have been represented in the prior proceeding" ( Green v Santa Fe Indus. , 70 NY2d 244, 253 [1987] ; see also Russell v New York Cent. Mut. Fire Ins. Co. , 11 AD3d 668 [2d Dept 2004] ).
Contrary to WTC's contention, the Court of Appeals’ decision is not determinative as to the issue of personal jurisdiction. "The doctrine of the ‘law of the case’ is a rule of practice, an articulation of sound policy that, when an issue is once judicially determined, that should be the end of the matter as far as Judges and courts of co-ordinate jurisdiction are concerned" ( Martin v City of Cohoes , 37 NY2d 162, 165 [1975], rearg denied 37 NY2d 817 [1975] ). However, the doctrine applies "only to issues that have been judicially determined" ( Edgewater Constr. Co., Inc. v 81 & 3 of Watertown, Inc. , 24 AD3d 1229, 1231 [4th Dept 2005] ). The Court of Appeals only determined that the complaint sufficiently pleaded alter ego liability claims, but did not specifically address alter ego jurisdiction (see Cortlandt St. Recovery Corp. , 31 NY3d at 47-48 ).
Here, the issue of personal jurisdiction over Apax WW Nominees, Ltd. was decided in the federal action (see DirecTV Latin Am., LLC v Pratola , 94 AD3d 628, 628 [1st Dept 2012], lv denied 19 NY3d 812 [2012] ; Keeler v West Mtn. Corp. , 105 AD2d 953, 955 [3d Dept 1984] ). The District Court held that it lacked alter ego jurisdiction over Apax WW Nominees, Ltd., and dismissed all claims against it ( Wilmington Trust Co. , 2016 WL 7339112, *10-*11, 2016 US Dist LEXIS 102879, *30 ). Although defendants argue that the District Court's determination is preclusive as to Apax Europe VI-A, L.P. and Apax Europe VI-1, L.P., the District Court did not decide those issues — the District Court dismissed those entities for lack of subject matter jurisdiction, not personal jurisdiction (see DirecTV Latin Am., LLC , 94 AD3d at 629 [collateral estoppel did not apply where "(n)o determination was made in the federal action as to personal jurisdiction over defendant Zunda"]). Thus, defendants have only met their burden that the identical issue was decided in the federal action as to Apax WW Nominees, Ltd.
WTC argues that the issue of personal jurisdiction over Apax WW Nominees, Ltd. is not identical because it "alleges new material facts that could not have been previously discovered in the exercise of due diligence" ( Deitrick v Cibolo Capital Partners I, LLC , 2018 WL 1603869, *4 2018 US Dist LEXIS 53271, *11 [SD NY, Mar. 28, 2018, 17 Civ. 04165 (ER)]). WTC has not identified any new material facts. Rather, the Court of Appeals’ decision is an application of the law to the facts, as alleged by WTC. WTC also does not claim that it exercised due diligence in the federal action by requesting jurisdictional discovery. Even if WTC sought to assert jurisdiction based upon a different theory, collateral estoppel "applies to claims actually litigated or that could have been litigated, and despite the fact that the claims are based on a different theory or seek a different remedy" ( Corvetti v Town of Lake Pleasant , 146 AD3d 1118, 1121 [3d Dept 2017] [internal quotation marks and citation omitted]). And the legal standards governing the personal jurisdiction issues over Apax WW Nominees, Ltd. do not substantially differ in the two actions. Therefore, WTC may not relitigate the issue of personal jurisdiction over Apax WW Nominees, Ltd.
In view of the foregoing, Apax WW Nominees, Ltd. is entitled to dismissal of the amended complaint.
B. Personal Jurisdiction over the European Entities Except Apax WW Nominees, Ltd. and Individual Defendants
CPLR 3211 (a) (8) permits a party to move to dismiss claims against a defendant on the ground that "the court has not jurisdiction of the person of the defendant." As the party seeking to assert personal jurisdiction, the plaintiff bears the ultimate burden of proof on the issue (see Stewart v Volkswagen of Am. , 81 NY2d 203, 207 [1993] ). However, in opposing a motion to dismiss, the plaintiff need only make a "sufficient start" in demonstrating its position to be not frivolous ( Peterson v Spartan Indus. , 33 NY2d 463, 467 [1974] ; Avilon Auto. Group v Leontiev , 168 AD3d 78, 89 [1st Dept 2019] ["Where a defendant moves to dismiss for lack of jurisdiction under CPLR 3211 (a) (8), a plaintiff need not present definitive proof of personal jurisdiction but only make a ‘sufficient start’ in demonstrating such jurisdiction by reference to pleadings, affidavits, and other suitable documentation"]).
The court turns to WTC's asserted bases for personal jurisdiction against defendants in response to their motion.
WTC contends that: (1) the court has personal jurisdiction over the Judgment Debtors, having assumed jurisdiction over them through a forum selection clause; and (2) the Judgment Debtors are alter egos of the movants.
Anticipating WTC's arguments, defendants argue that the forum selection clause does not apply to judgment enforcement claims. In the forum selection clause in the indenture, the Parent Guarantor (Hellas I) and the Issuer (Hellas Finance) "expressly consent[ed] to the jurisdiction of any such court" "in any U.S. Federal or state court located in the Borough of Manhattan in The City of New York" "in any actions arising out of, based on, or related to the Notes, this Indenture or the transactions contemplated hereby" (NYSCEF Doc No. 506, indenture § 14.09 [emphasis supplied]). The term "related to" is defined as "connected by reason of an established or discoverable relation" (Merriam—Webster Online Dictionary, related [http://www.merriam-webster.com/dictionary/related]). "The term ‘related to’ ... is not necessarily tied to the concept of a causal connection," and courts have held this phrase to be broader than "arising out of" ( Coregis Ins. Co. v American Health Foundation, Inc. , 241 F3d 123, 128 [2d Cir 2001] ). Here, WTC's judgment enforcement claim is unquestionably "connected" with the Judgment Debtors’ default under the notes. The language of the forum selection clause is broad enough to encompass judgment enforcement claims, even though it does not mention judgments.
Defendants further assert that the forum selection clause is no longer operative and, therefore, cannot provide a basis for personal jurisdiction. This argument is unpersuasive. "The ‘merger’ of the contract debt with the judgment debt does not extinguish the underlying contract itself" ( NML Capital, Ltd. v Republic of Argentina , 2015 WL 3542535, *4, 2015 US Dist LEXIS 73521, *59 [SD NY, June 15, 2015, No. 14 Civ. 8601 (TPG)]). "This would inappropriately ‘weaken rights or destroy identities which the prevailing party had in his original cause’ " (id. , quoting Jay's Stores, Inc. v Ann Lewis Shops, Inc. , 15 NY2d 141, 147 [1965] ). Notably, defendants themselves rely on provisions of the indenture, including the no recourse provision.
1. European Entities as Mere Departments of the Judgment Debtors
As a general rule, the presence of a local corporation does not create jurisdiction over a related, but independently managed, foreign corporation ( Delagi v Volkswagenwerk AG of Wolfsburg, Germany , 29 NY2d 426, 432 [1972], rearg denied 30 NY2d 694 [1972] ). "Establishing the exercise of personal jurisdiction over an alleged alter ego requires application of a less stringent standard than that necessary to pierce the corporate veil for purposes of liability" ( GEM Advisors, Inc. v Corporacion Sidenor, S.A. , 667 F Supp 2d 308, 319 [SD NY 2009] [internal quotation marks and citation omitted]). "In fact, when veil piercing is only being used to assert jurisdiction, the question is only whether the allegedly controlled entity was a shell for the allegedly controlling party; it is not necessary to show also that the shell was used to commit a fraud, which is normally required to pierce the corporate veil for liability" (id. [internal quotation marks and citation omitted]).
The factors considered in determining whether one corporation is a "mere department" of another, as formulated in the seminal case, Volkswagenwerk Aktiengesellschaft v Beech Aircraft Corp. , 751 F2d 117, 120-122 (2d Cir 1984), are: (1) "common ownership"; (2) "financial dependency of the subsidiary on the parent"; (3) the "degree to which the parent interferes in the selection and assignment of the subsidiary's executive personnel and fails to observe corporate formalities"; and (4) "the degree of the parent's control of the subsidiary's marketing and operational policies." This test has been adopted by the First Department ( FIA Leveraged Fund Ltd. v Grant Thornton LLP , 150 AD3d 492, 493 [1st Dept 2017] ).
"New York courts regard one factor as essential to the assertion of jurisdiction over a foreign related corporation ... Th[at] essential factor is common ownership ... [N]early identical ownership interests must exist before one corporation can be considered a department of another corporation for jurisdiction purposes"
( OneBeacon Am. Ins. Co. v Newmont Min. Corp. , 82 AD3d 554, 555 [1st Dept 2011] [internal quotation marks and citation omitted]).
Here, WTC fails to allege, and has not submitted any evidence indicating, that the European entities own a majority interest in the Judgment Debtors (see id. [foreign corporation was not subject to personal jurisdiction as mere department of domestic corporation where domestic corporation owned 51% of foreign corporation and the remaining 49% was owned by another entity]; see also FIMBank P.L.C. v Woori Fin. Holdings Co. Ltd. , 104 AD3d 602, 602-603 [1st Dept 2013] [finding alter ego jurisdiction did not exist, where the plaintiff only showed one factor]).
As noted above, the European entities are defined as the following eight defendants: Apax; Apax Partners Europe Managers Ltd; Apax Europe VI-A, L.P.; Apax Europe VI-1, L.P.; Apax Europe VI GP, L.P., Apax Europe VI GP Co. Ltd.; Troy L.P., Inc.; and Apax WW Nominees Ltd. (NYSCEF Doc No. 531 at 2), which are all entities organized under U.K. or Guernsey law.
WTC relies heavily on an unsworn expert report and expert rebuttal report, which are not in admissible form ( 101 Maiden Lane Realty Co. LLC v Tran Han Ho , 88 AD3d 596, 596 [1st Dept 2011] ). Even if the court were to consider this evidence, it merely shows that Troy L.P., Inc. and TPG Troy, LLC owned, at most, 41% of Hellas, the Judgment Debtors’ parent company (NYSCEF Doc No. 739, Spindler rebuttal report ¶¶ 49-50; see also NYSCEF Doc No. 491, amended complaint ¶¶ 36-37). This is insufficient to constitute common ownership.
WTC did not request additional jurisdictional discovery (see CPLR 3211 [d] ), and has failed to offer some tangible evidence indicating that alter ego jurisdiction could exist against the European entities (see Peterson , 33 NY2d at 467 ; IMAX Corp. v The Essel Group , 154 AD3d 464, 465 [1st Dept 2017] ; SNS Bank v Citibank , 7 AD3d 352, 354 [1st Dept 2004] ; Excel Prods., Inc. v American Independent Ins. Co. , 65 Misc 3d 157[A], *2, 2019 NY Slip Op 51964[U] [App Term, 2d Dept 2019] ["neither the unverified complaint nor the conclusory affirmation of plaintiff's counsel in opposition to defendant's motion constituted the ‘tangible evidence’ necessary to substantiate plaintiff's allegations that jurisdiction could exist"]).
WTC suggests that the court should defer decision on personal jurisdiction until the trial. The Court of Appeals has held that "Liability may be considered only after it is decided ... that the defendant is subject to the in personam jurisdiction of our courts" (Kreutter v McFadden Oil Corp. , 71 NY2d 460, 470 [1988] ). In Goel v Ramachandran (111 AD3d 783, 789 [2d Dept 2013] ), the Court held that the trial court erred in denying a motion to dismiss pursuant to CPLR 3211 (a) (8) "without prejudice to the assertion of such a jurisdictional defense at trial." The Court held that "[b]y permitting the case to move forward in such a manner, the Supreme Court exposed Bunge S.A. to the full panoply of burdens inherent in defending this case, despite the fact that the court may not have jurisdiction over it" (id. ). Here, however, WTC has failed to make a sufficient start as to most of the defendants that challenged jurisdiction.
2. Whether the Individual Defendants are Alter Egos of the Judgment Debtors
WTC alleges that Bonderman, Coulter, Halusa, Megrue, Aliberti, and Calice were officers and directors of various Apax and TPG entities and/or were members of the "deal team" responsible for investment in Hellas (NYSCEF Doc No. 491, amended complaint ¶¶ 25-34).
"A corporation's consent to jurisdiction under a forum selection clause can be applied to obtain jurisdiction over an individual officer by disregarding the corporate entity under the doctrine of piercing the corporate veil" ( Packer v TDI Sys., Inc. , 959 F Supp 192, 202 [SD NY 1997] ). In evaluating whether a corporation is an alter ego of another party, courts consider various indicia, including:
"(1) the absence of the formalities and paraphernalia that are part and parcel of the corporate existence, i.e., issuance of stock, election of directors, keeping of corporate records and the like, (2) inadequate capitalization, (3) whether funds are put in and taken out of the corporation for personal rather than corporate purposes, (4) overlap in ownership, officers, directors, and personnel, (5) common office space, address and telephone numbers of corporate entities, (6) the amount of business discretion displayed by the allegedly dominated corporation, (7) whether the related corporations deal with the dominated corporation at arms length, (8) whether the corporations are treated as independent profit centers, (9) the payment or guarantee of debts of the dominated corporation by other corporations in the group, and (10) whether the corporation in question had property that was used by other of the corporations as if it were its own"
( Shisgal v Brown , 21 AD3d 845, 848 [1st Dept 2005], citing Wm. Passalacqua Bldrs. v Resnick Developers South, Inc. , 933 F2d 131, 139 [2d Cir 1991] ). In general, "alter egos are treated as one entity" for jurisdictional purposes ( Wm. Passalacqua Bldrs. , 933 F2d at 142-143 ).
WTC did not request additional jurisdictional discovery, and has failed to make a sufficient start indicating that alter ego jurisdiction may exist against Bonderman, Coulter, Halusa, and Megrue with respect to the Hellas recapitalization. For example, Bonderman, a founding partner of TPG, testified that he had "no idea" what he did with the information that a second recapitalization was planned, and that he did "not remember what [his] reaction was" (NYSCEF Doc No. 746, Bonderman tr at 192-193). He sent a congratulatory note "because they got the recap done," and "[b]ecause it looked like a reasonably substantial transaction" (id. at 193). This evidence does not indicate that Bonderman that he was actively involved in the planning, execution or negotiation of the recapitalization or that he used any entity to advance his own personal interests. While WTC asserts that Megrue, the chief executive officer of Apax Partners, L.P., reviewed monthly reports and attended a meeting on December 4, 2006 concerning the issuance of the notes (NYSCEF Doc No. 536 at 21), this does not show that he completely dominated the Judgment Debtors, or that he abused the corporate form to cause harm to the noteholders. The fact that Bonderman and Coulter asked questions about the recapitalization to Hellas’ "deal team" member does not show misuse of the corporate form (NYSCEF Doc Nos. 614, 615).
These individual defendants are either residents of Europe or states outside New York (NYSCEF Doc No. 524, Halusa aff, ¶ 3; NYSCEF Doc No. 525, Megrue aff, ¶ 2; NYSCEF Doc No. 528, Bonderman aff, ¶ 6; NYSCEF Doc No. 529, Coulter aff, ¶ 6). However, as discussed infra, WTC has proven jurisdiction over Aliberti and Calice under the closely-related doctrine. Accordingly, the court need not determine whether WTC has shown alter ego jurisdiction or any other theory of jurisdiction over Aliberti and Calice.
3. Closely-Related Doctrine
"Under New York law, a signatory to a contract may invoke a forum selection clause against a non-signatory if the non-signatory is ‘closely related’ to one of the signatories such that ‘enforcement of the forum selection clause is foreseeable by virtue of the relationship between the signatory and the party sought to be bound’ "
( Universal Inv. Advisory SA v Bakrie Telecom Pte., Ltd. , 154 AD3d 171, 179 [1st Dept 2017] [citation omitted]). In Bakrie, supra , the First Department explained that:
"[i]f the nonsignatory party has an ownership interest or a direct or indirect controlling interest in the signing party or, the entities or individuals consulted with each other regarding decisions and were intimately involved in the decision-making process, then, a finding of personal jurisdiction based on a forum selection clause may be proper"
(id. [citations omitted]).
"The rationale for binding non-signatories is based on the notion that forum selection clauses promote stable and dependable trade relations, and thus, that it would be contrary to public policy to allow non-signatory entities through which a party acts to evade the forum selection clause" ( Highland Crusader Offshore Partners, L.P. v Targeted Delivery Tech. Holdings, Ltd. , 184 AD3d 116, 122 [1st Dept 2020] [internal quotation marks and citation omitted]).
WTC argues that defendants "created and controlled" the Judgment Debtors. Nevertheless, the European entities did not have any ownership interest in the Judgment Debtors, nor did they have a direct or indirect controlling interest in the Judgment Debtors (NYSCEF Doc No. 521, Aliberti aff, ¶ 12). WTC did not request additional jurisdictional discovery, and has failed to make a sufficient start that it could establish these factors, or that the European entities were actively involved in the issuance of the notes or CPEC redemption (cf. Tate & Lyle Ingredients Ams., Inc. v Whitefox Tech. USA, Inc. , 98 AD3d 401, 403 [1st Dept 2012] [British public limited company was closely related to American subsidiary and with the dispute to support enforcement of forum selection clause where public limited company's chief executive officer made the decision not to return licensed technology, and to institute litigation]).
Moreover, WTC has failed to offer some tangible evidence that Bonderman, Coulter, Halusa, and Megrue were intimately involved in the decision-making process of the note offering or the CPEC redemption.
WTC has, however, proven jurisdiction over Aliberti and Calice. On behalf of Hellas I and Hellas Finance, Aliberti and Calice each signed the notes and indenture which contained the forum selection clause (NYSCEF Doc No. 675; NYSCEF Doc No. 521, Aliberti aff, ¶ 24 n 2; NYSCEF Doc No. 527, Calice aff, ¶ 7). Aliberti and Calice admit that they were on Hellas's board of directors, and that they were senior members of Apax and TPG's "deal team" responsible for investment in Hellas (NYSCEF Doc No. 521, Aliberti aff, ¶¶ 7, 22; NYSCEF Doc No. 527, Calice aff, ¶¶ 3, 5). Thus, it was foreseeable that Aliberti and Calice would be bound by the forum selection clause (see Firefly Equities, LLC v Ultimate Combustion Co., Inc. , 736 F Supp 2d 797, 800 [SD NY 2010] [where president signed memorandum of understanding containing a forum selection clause, "albeit in his representative rather than individual capacity), it was—or should have been—foreseeable to him that the clause might have application to disputes arising under that agreement that also involved him"]; Nanopierce Techs., Inc. v Southridge Capital Mgt., LLC , 2003 WL 22882137, *6, 2003 US Dist LEXIS 21858, *16 [SD NY, Dec. 4, 2003, No. 02 Civ. 0767(LBS) ] [holding that chief financial officer was "closely related" to transaction such that she would be bound by forum selection clause contained in purchase agreement]).
Defendants challenge the constitutionality of the "close-relationship" test. In Highland , supra , the First Department expressly ruled that "a consent to jurisdiction by virtue of the ‘close relationship’ between the non-signatory and contracting party obviat[es] the need for a separate analysis of constitutional propriety" ( Highland, 184 AD3d at 123 ). The Court also distinguished Arcadia Biosciences, Inc. v Vilmorin & Cie (356 F Supp 3d 379 [SD NY 2019] ), a case cited by defendants. The Arcadia Court found that it was not foreseeable that a future affiliate — formed eight years after the contract had been executed — would be bound by the forum selection clause (id. ). By contrast, in this case, it was foreseeable that, by signing the notes and indenture, Aliberti and Calice would be bound by the forum selection clause consenting to jurisdiction in New York.
4. Long-Arm Jurisdiction- CPLR 302 (a) (1)
CPLR 302 (a) (1), New York's long-arm jurisdiction statute, has two prongs. Under section 302 (a) (1), "proof of one transaction in New York is sufficient to invoke jurisdiction, even though the defendant never enters New York, so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted" ( Deutsche Bank Sec., Inc. v Montana Bd. of Invs. , 7 NY3d 65, 71 [2006] [internal quotation marks omitted], cert denied 549 US 1095 [2006] ). "Purposeful activities are those with which a defendant, through volitional acts, ‘avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws’ " ( Fischbarg v Doucet , 9 NY3d 375, 380 [2007], quoting McKee Elec. Co. v Rauland-Borg Corp. , 20 NY2d 377 [1967] ). The court must examine the nature and quality of these contacts ( Fischbarg , 9 NY3d at 382 ).
With respect to the second prong, the Court of Appeals has instructed that "causation is not required," but "there must be an ‘articulable nexus’ or ‘substantial relationship’ between the business transaction and the claim asserted" ( Licci v Lebanese Can. Bank, SAL , 20 NY3d 327, 339 [2012], quoting McGowan v Smith , 52 NY2d 268, 272 [1981] and Kreutter , 71 NY2d at 467 ). "[J]urisdiction is not justified where the relationship between the claim and transaction is too attenuated" ( Johnson v Ward , 4 NY3d 516, 520 [2005] ).
While WTC argues that "the Global Transaction ... involved the borrowing of funds pursuant to the New York Notes and Indenture, and subsequent diversion of such funds" (NYSCEF Doc No. 491, amended complaint ¶¶ 79-90), WTC "has offered nothing but conclusory assertions to support long-arm jurisdiction under CPLR 302 (a) (1)" ( Cotia (USA) Ltd. v Lynn Steel Corp. , 134 AD3d 483, 484 [1st Dept 2015] ).
Moreover, to the extent that WTC alleges that defendants transferred notes proceeds to recipients in New York, i.e., certain limited partners in the funds (NYSCEF Doc No. 491, amended complaint ¶¶ 50, 78-90), WTC's claims do not arise from these contacts. "[W]here at least one element arises from the New York contacts, the relationship between the business transaction and the claim asserted supports specific jurisdiction under the statute" ( Licci , 20 NY3d at 341 ). The transfers to limited partners in New York are not the transfers that WTC seeks to unwind. The CPEC redemption transfers that are central to this case took place outside New York (NYSCEF Doc No. 515 at 5-9). Accordingly, WTC has failed to provide a basis to assert long-arm jurisdiction.
5. Agency Jurisdiction
"To establish that a defendant acted through an agent, a plaintiff must ‘convince the court that [the New York actors] engaged in purposeful activities in this State in relation to [the] transaction for the benefit of and with the knowledge and consent of [the defendant] and that [the defendant] exercised some control over [the New York actors]’ " ( Coast to Coast Energy, Inc. v Gasarch , 149 AD3d 485, 486-487 [1st Dept 2017], quoting Kreutter , 71 NY2d at 467 ). "The activities of a representative of a nondomiciliary in New York may be attributed to it ... if it requested the performance of those activities and the activities benefit it" ( Barbarotto Intl. Sales Corp. v Tullar , 188 AD2d 503, 504 [2d Dept 1992] ). "The critical factor is the degree of control the defendant principal exercises over the agent" (id. ).
Applying these principles, WTC only asserts vague and conclusory allegations that Apax L.P. "engaged in activities in New York solely for the benefit of Apax Partners, LLP" and that "[if] Apax NY did not exist in New York, Apax would necessarily have to engage in raising capital and servicing investors and limited partners in the name of Apax" (NYSCEF Doc No. 491, amended complaint ¶¶ 59, 60). This is insufficient (see Coast to Coast Energy, Inc. , 149 AD3d at 487 ["plaintiff's allegations must sufficiently detail the defendant's conduct so as to persuade a court that the defendant was a ‘primary actor’ in the specific matter in question; control cannot be shown based merely upon a defendant's title or position within the corporation, or upon conclusory allegations that the defendant controls the corporation"]).
6. General Jurisdiction
WTC argues that the court has general jurisdiction over Apax, a U.K. limited liability partnership with an office in London (NYSCEF Doc No. 491, amended complaint ¶ 17). "General jurisdiction is provided for in CPLR 301, which allows a court to exercise ‘such jurisdiction over persons, property, or status as might have been exercised heretofore" ( Lowy v Chalkable, LLC , 186 AD3d 590, 591 [2d Dept 2020] ). A court may exercise general jurisdiction over foreign corporations "when their affiliations with the State are so continuous and systematic as to render them essentially at home in the forum State" ( Goodyear Dunlop Tires Operations, S.A. v Brown , 564 US 915, 919 [2011] [internal quotation marks omitted]; see also Daimler AG v Bauman , 571 US 117, 127 [2014] ). Therefore, the court lacks general jurisdiction over Apax (see Brown v Lockheed Martin Corp. , 814 F3d 619, 629 [2d Cir 2016] ["(W)hen a corporation is neither incorporated nor maintains its principal place of business in a state, mere contacts, no matter how ‘systematic and continuous,’ are extraordinarily unlikely to add up to an ‘exceptional case’ "]).
WTC argues that the court has general jurisdiction over TPG. Defendants did not move to dismiss the amended complaint against TPG for lack of personal jurisdiction (NYSCEF Doc No. 531 at 2).
In sum, WTC has failed to demonstrate personal jurisdiction or show a sufficient start as to defendants Apax, Apax Partners Europe Managers, Ltd., Apax Europe VI-A, L.P., Apax Europe VI-1, L.P., Apax Europe VI GP, L.P., Apax Europe VI GP Co. Ltd., Troy L.P., Inc., Bonderman, Coulter, Halusa, and Megrue. Accordingly, these defendants are entitled to dismissal of the amended complaint.
II. The Branch of Defendants’ Motion to Dismiss on Grounds Other than Personal Jurisdiction
Only 14 of the 26 defendants move to dismiss based on personal jurisdiction. Nine defendants—TPG Troy LLC, T3 Troy LLC, 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., and T3 Parallel, L.P.—previously consented to jurisdiction (NYSCEF Doc No. 641, O'Connor affirmation ¶ 5).
"On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction," and the court must "accept the facts as alleged in the complaint as true, accord the plaintiffs the benefit of every favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (Leon v Martinez , 84 NY3d 83, 87-88 [1994]). However, "factual allegations that do not state a viable cause of action, that consist of bare legal conclusions, or that are inherently incredible or clearly contradicted by documentary evidence are not entitled to such consideration" ( Skillgames, LLC v Brody , 1 AD3d 247, 250 [1st Dept 2003] ). Where extrinsic evidence is submitted in connection with the motion, the appropriate standard of review " ‘is whether the proponent of the pleading has a cause of action, not whether he [or she] has stated one’ " ( Dollard v WB/Stellar IP Owner, LLC , 96 AD3d 533, 533 [1st Dept 2012], quoting Leon , 84 NY2d at 88 ).
Dismissal is warranted, pursuant to CPLR 3211 (a) (1), where the documentary evidence "resolves all factual issues as a matter of law, and conclusively disposes of the plaintiff's claim" ( Fortis Fin. Servs. v Fimat Futures USA , 290 AD2d 383, 383 [1st Dept 2002] [internal quotation marks and citation omitted]). "[T]o be considered ‘documentary,’ evidence must be unambiguous and of undisputed authenticity" ( Fontanetta v John Doe 1 , 73 AD3d 78, 86 [2d Dept 2010], citing Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR 3211:10, at 21-22).
A. Whether WTC's Claims Are Barred by the Merger Doctrine
As a preliminary matter, defendants argue that the merger doctrine bars each cause of action to the extent that it seeks to recover on the notes. Defendants contend that the amended complaint impermissibly "seeks separate judgments on the Notes and Judgment for the same losses" (NYSCEF Doc No. 532 at 4).
The court finds that the amended complaint does not seek to recover separate judgments for the same losses, as argued by defendants. To the contrary, the amended complaint seeks one recovery — "the amounts due under the Notes as liquidated pursuant to the Judgment ... totaling $717,000,000 [the Judgment plus interest, fees and costs] ... in satisfaction of the amounts due under the Notes and Judgment" (NYSCEF Doc No. 491, amended complaint ¶ 194).
"Pursuant to settled principles of res judicata, ‘[w]here a judgment is in favor of the plaintiff the claim underlying the action is merged in the judgment and cannot thereafter be used as a basis for an independent action" ( Craven v Rigas , 85 AD3d 1524, 1527 [3d Dept 2011], appeal dismissed , 17 NY2d 932 [2011], quoting Brown v Lockwood , 76 AD2d 721, 735 [2d Dept 1980] ). "When a valid and final judgment is rendered in favor of the plaintiff ... [t]he plaintiff cannot thereafter maintain an action on the original claim or any part thereof, although he [or she] may be able to maintain an action on the judgment" ( Restatement [Second] of Judgments § 18 [1982] ). "When the plaintiff recovers a valid and final personal judgment, his [or her] original claim is extinguished and rights upon the judgment are substituted for it" (id. , Comment A).
As the Court of Appeals has explained, "[t]he theory of merger of a judgment and its underlying cause of action, while it has served some other functions is based on a policy to prevent successive actions on the same cause. Hence it is closely related to the doctrine of res judicata" ( Jay's Stores , 15 NY2d at 147 ). Thus, "merger by judgment does not destroy all of the identifying characteristics or relationships of the cause of action which the judgment determines" (id. ).
Here, WTC does not seek to relitigate its breach of contract claim against the Judgment Debtors. Rather, WTC seeks to collect amounts due under the notes from defendants based upon an alter ego theory and based upon their alleged receipt of fraudulent conveyances. Accordingly, the merger doctrine does not apply (see American Federated Title Corp. v GFI Mgt. Serv., Inc. , 39 F Supp 3d 516, 523 [SD NY 2014] ["the issue of contractual liability was litigated in a proceeding in which Defendants here were not parties, and it involved issues distinct from whether Defendants are liable on a veil piercing theory"]). Moreover, the policy behind the merger doctrine would not be served here, as this is not a successive action on the same cause of action (see Jay's Stores , 15 NY2d at 147 ).
B. Whether WTC's First and Third Causes of Action Are Barred By the No Recourse Clause
Defendants next contend that the first and third causes of action, which seek to impose liability on an alter ego theory, are barred by the no recourse provision in the indenture, which provides as follows:
"Section 14.07 No Personal Liability of Directors, Officers, Employees and Stockholders
"No director, officer, employee, incorporator, member or stockholder of the Parent Guarantor, the Issuer or any Guarantor will have any liability for any obligations of the Parent Guarantor, the Issuer or any Guarantor under the Notes ... or this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes"
(NYSCEF Doc No. 506, indenture § 14.07).
Under New York law, no recourse provisions bar only contract claims, not equitable claims, and alter ego liability claims are equitable in nature (see Small v Sullivan , 245 NY 343, 356 [1927], rearg denied 245 NY 621 [1927] [no recourse provision "did not and could not cover the future fraudulent acts of the directors"]; LaSalle Natl. Bank v Perelman , 141 F Supp 2d 451, 463 [D Del 2001] [alter ego liability claim "was an equitable claim, and as such, it was not barred by the no recourse provision"]; accord New York Wheel Owner LLC v Mammoet Holding B.V. , 481 F Supp 3d 216, 230 [SD NY 2020] [applying Delaware law] ). Given that WTC's alter ego liability claims are equitable in nature, they are not barred by the indenture's no-recourse provision (see LaSalle Natl. Bank , 141 F Supp 2d at 463 ; see also Mabon, Nugent & Co. v Texas American Energy Corp. , 1988 WL 5492, *3, 1988 Del Ch LEXIS 11, *8 [Del Ch Jan 27, 1988] ["plaintiffs’ equitable claims are not barred by the Indenture"]).
Defendants assert that the alter ego claims "would render the No Recourse Provision meaningless — and of no value to the third parties it is intended to protect — because alter ego is the only legal theory under which contract liability may be imposed on non-parties to the Notes and Indenture" (NYSCEF Doc No. 532 at 8). Nevertheless, the result here does not turn on the exact language of the no recourse provision (see New York Wheel Owner LLC , 481 F Supp 3d at 230 ). In light of the authority of Small , LaSalle , and Mabon , the court finds that WTC's alter ego liability claims are distinct from contract claims, and are not barred by the no-recourse provision. At this stage, the first and third causes of action are sufficient to survive defendants’ motion to dismiss (see Fortis Fin. Servs. , 290 AD2d at 383 ).
C. Whether the First and Third Causes of Action Are Governed by Luxembourg Law
Defendants further contend that the first and third causes of action are governed by Luxembourg law. As support, defendants submit an affidavit from a purported expert on Luxembourg law, André Prüm (Prüm), a Professor of Law at the University of Luxembourg who has published widely in the field of banking and financial law, transnational commercial law, and European commercial law (NYSCEF Doc No. 517, Prüm aff, ¶ 1). Prüm states that Luxembourg law does not recognize equitable remedies, including the concept of piercing the corporate veil/alter ego, and that no Luxembourg court has applied the doctrine to impose liability on a Luxembourg owner for the corporation's debts (id. , ¶¶ 9-16).
In response to defendants’ choice-of-law argument, WTC contends that the Court of Appeals’ decision necessarily decided the choice-of-law issue, and that defendants waived and/or are estopped from taking an inconsistent position on the choice-of-law for WTC's alter ego claims now. WTC asserts that, even if the court were to reach the choice-of-law issue, there are at least three principles similar to alter ego liability under Luxembourg law (NYSCEF Doc No. 740, Thewes tr at 122-124; NYSCEF Doc No. 749, Thewes aff, ¶¶ 157-159).
"Under the doctrine of judicial estoppel, or estoppel against inconsistent positions, a party is precluded from inequitably adopting a position directly contrary to or inconsistent with an earlier assumed position in the same proceeding" ( Nestor v Britt , 270 AD2d 192, 193 [1st Dept 2000] [internal quotation marks and citation omitted]). The First Department has applied the doctrine to choice-of-law issues (see e.g. Public Adm'r of County of NY v Frota Oceanica Brasileira , 222 AD2d 332, 333 [1st Dept 1995], lv dismissed 88 NY2d 920 [1996] ).
In this case, defendants are judicially estopped from asserting their position on choice of law, as they consistently argued to Justice Friedman, the First Department and the Court of Appeals that New York law governed the alter ego liability claims (see Bank Hapoalim B.M. v WestLB AG , 121 AD3d 531, 535 [1st Dept 2014], lv denied 24 NY3d 914 [2015] ["plaintiffs are judicially estopped from asserting their position on choice of law, as they consistently argued to the motion court that New York law governed the case and that their arguments relied on New York law"]; Maas v Cornell Univ. , 253 AD2d 1, 5 [3d Dept 1999], affd 94 NY2d 87 [1999] ["Having obviously made a tactical decision to pursue his eight causes of action in a plenary action and having succeeded on his prior objection to conversion, plaintiff may not now, owing to changed interests since all claims in this action have been dismissed"]; AIG Trading Corp. v Valero Gas Mktg. , 254 AD2d 117, 118 [1st Dept 1998] ["defendant-appellant was estopped from contending that New York law did not apply after having relied on it in this litigation"]). In short, New York law governs the alter ego liability claims.
D. Fraudulent Conveyance
The fourth through eighth causes of action assert fraudulent conveyance claims pursuant to DCL §§ 273 through 277.
Defendants contend that these claims should be dismissed because: (1) WTC's causes of action impermissibly seek extraterritorial application of New York's fraudulent conveyance statutes; (2) the constructive fraudulent conveyance claims are governed by either U.K. or Luxembourg law, which do not recognize constructive fraudulent conveyance; (3) the original investors consented to the CPEC redemption; and (4) WTC fails to allege insolvency.
"Under New York law, it is a settled rule of statutory interpretation, that unless stated otherwise, no legislation is presumed to be intended to operate outside the territorial jurisdiction of the state enacting it" ( Rodriguez v KGA Inc. , 155 AD3d 452, 452 [1st Dept 2017] [internal quotation marks and citation omitted]; see also Global Reins. Corp.-U.S. Branch v Equitas Ltd. , 18 NY3d 722, 736 [2012] ["For a Donnelly Act claim to reach a purely extraterritorial conspiracy, there would ... have to be a very close nexus between the conspiracy and injury to competition in this state"]).
DCL former §§ 273, 274, and 275 govern transfers deemed to be constructive fraudulent conveyances (see In re Sharp Intl. Corp. , 403 F3d 43, 53 [2d Cir 2005] ["Under the DCL, a conveyance by a debtor is deemed constructively fraudulent if it is made without ‘fair consideration,’ and (inter alia) if one of the following conditions is met: (i) the transferor is insolvent or will be rendered insolvent by the transfer in question, DCL § 273 ; (ii) the transferor is engaged in or is about to engage in a business transaction for which its remaining property constitutes unreasonably small capital, DCL § 274 ; or (iii) the transferor believes that it will incur debt beyond its ability to pay, DCL § 275"]). DCL former § 277, also a constructive fraud statute concerning partnership property, provides that:
The Debtor and Creditor Law was subsequently amended, which became effective on April 4, 2020.
"[e]very conveyance of partnership property and every partnership obligation incurred when the partnership is or will be thereby rendered insolvent, is fraudulent as to partnership creditors, if the conveyance is made or obligation is incurred, ... [t]o a partner, whether with or without a promise by him to pay partnership debt, or [t]o a person not a partner without fair consideration to the partnership as distinguished from consideration to the individual partners."
DCL former § 276, which governs claims for actual fraudulent conveyances, provides that "[e]very conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors." "This may be shown through ‘badges of fraud,’ such as ‘a close relationship between the parties to the alleged fraudulent transaction; a questionable transfer not in the usual course of business; inadequacy of the consideration; the transferor's knowledge of the creditor's claim and the inability to pay it; and retention of control of the property by the transferor after the conveyance’ " ( Boyd v 254 PAS Prop. LLC , 185 AD3d 428, 429 [1st Dept 2020], quoting Wall St. Assoc. v Brodsky , 257 AD2d 526, 527 [1st Dept 1999] ).
WTC's fraudulent conveyance claims must be dismissed because they impermissibly seek extraterritorial application of New York law. WTC has pleaded these claims exclusively under New York law. The statutes do not allow for application outside of New York. WTC's assertion that the subject transfers were not "manifestly foreign," but instead "stemmed from the New York Indenture and Notes" is directly contradicted, by among other things, the wire transfers showing transfers from and to Luxembourg entities from a foreign bank account (NYSCEF Doc No. 515 at 5-9). Moreover, WTC has not identified any New York investor that bought notes in the recapitalization.
With respect to the constructive fraudulent conveyance claims, the parties dispute which law applies — defendants argue that either U.K. law or Luxembourg law applies, while WTC urges that New York law applies.
In arguing that U.K. law and Luxembourg law do not recognize constructive fraudulent conveyance, defendants rely on In re Hellas Telecom. (Luxembourg) II S.C.A. (524 BR 488 [Bankr SD NY 2015], adhered to by 526 BR 499 [2015] ), a bankruptcy proceeding brought by the U.K. liquidators of Hellas II. There, the court held that an actual conflict existed between New York law, on the one hand, and U.K. and Luxembourg law, on the other hand (id. at 518). The court dismissed the plaintiff's constructive fraud claim, since the claim was governed by U.K. law or Luxembourg law, and the liquidators pleaded their claim under New York law (id. at 521).
"The first step in any case presenting a potential choice of law issue is to determine whether there is an actual conflict between the laws of the jurisdictions involved" ( Matter of Allstate Ins. Co. [Stolarz] , 81 NY2d 219, 223 [1993] ). "In the context of tort law, New York utilizes interest analysis to determine which of two competing jurisdictions has the greater interest in having its law applied in the litigation" (Matter of Wimbledon Fund, SPC (Class TT) v Weston Capital Partners Master Fund II, Ltd. , 184 AD3d 448, 450 [1st Dept 2020] [internal quotation marks omitted]).
"Given that fraudulent conveyance laws are ‘conduct regulating,’ ‘the law of the jurisdiction where the tort occurred will generally apply because that jurisdiction has the greatest interest in regulating behavior within its borders’ " ( Atsco Ltd. v Swanson , 29 AD3d 465, 466 [1st Dept 2006], citing Cooney v Osgood Mach. , 81 NY2d 66, 72 [1993] [citation omitted]). " ‘[T]he locus jurisdiction's interests in protecting the reasonable expectations of the parties who relied on it to govern their primary conduct[,] and in the admonitory effect that applying its law will have on similar conduct in the future[,] assume critical importance ....’ " ( Atsco Ltd. , 29 AD3d at 466, citing Schultz v Boy Scouts of Am. , 65 NY2d 189, 198 [1985] ).
Here, the Bankruptcy Court found an "actual conflict" between New York law, on the one hand, and U.K. and Luxembourg law, on the other (see In re Hellas Telecom. (Luxembourg) II SCA , 524 BR at 517 ["the proffered U.K. and Luxembourg law equivalents to the NYDCL require proof of some degree of purpose or intent"]). The court finds the Bankruptcy Court's reasoning persuasive. Neither U.K. law nor Luxembourg law recognizes constructive fraudulent conveyance. Moreover, the court finds that either the U.K. or Luxembourg has a greater interest in having its law applied to these claims. The allegedly fraudulent transfers occurred in Europe (see NYSCEF Doc No. 515 at 5-9). Therefore, either U.K. law or Luxembourg law applies to the fourth, fifth, sixth, and eighth causes of action. It should be noted that WTC has not identified any New York creditors that purchased the PIK notes (see Atsco Ltd. , 29 AD3d at 466 ["the purpose of fraudulent conveyance laws is to aid creditors who have been defrauded by the transfer of property"]). Accordingly, the constructive fraudulent conveyance claims must be dismissed.
Therefore, the fourth through eighth causes of action are dismissed. The court need not reach defendants’ alternative arguments regarding consent and insolvency.
E. Conversion
Defendants argue that WTC's conversion claim is insufficient because it merely asserts a right to payment of unidentified assets or money to satisfy its judgment.
"A conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person's right of possession" ( Colavito v New York Organ Donor Network, Inc. , 8 NY3d 43, 49-50 [2006] ). It is well settled that "when a conversion claim is asserted with respect to money, the funds must be specifically identifiable and be subject to an obligation to be returned or to be otherwise treated in a particular manner" (Matter of Clark , 146 AD3d 495, 496 [1st Dept 2017], lv dismissed 29 NY3d 907 [2017] ). Here, the amended complaint fails to state a cause of action for conversion. As argued by defendants, the amended complaint alleges that WTC "is entitled to a turnover of real and personal property with a value of, or to otherwise receive payment of a sum of money totaling $717,000,000 ...." (NYSCEF Doc No. 491, amended complaint ¶ 259). But "[t]he mere right to payment cannot be the basis for a cause of action alleging conversion; the essence of such a cause of action is the ‘unauthorized dominion over the thing in question’ " ( Selinger Enters., Inc. v Cassuto , 50 AD3d 766, 768 [2d Dept 2008], quoting Fiorenti v Central Emergency Physicians , 302 AD2d 453, 454-455 [2d Dept 2003] ). To the degree that WTC relies on a "flow of funds" document created in the bankruptcy proceeding, WTC fails to allege that any funds are in a segregated account such that they are specifically identifiable (see McBride v KMPG Intl. , 135 AD3d 576, 580 [1st Dept 2016] ). Therefore, the tenth cause of action is dismissed.
F. Unjust Enrichment
Defendants argue that WTC's unjust enrichment claim should be dismissed because it is duplicative of its other claims, WTC fails to plead that the noteholders had a sufficient relationship with each defendant, and that it fails to plead that defendants’ alleged enrichment was "unjust."
" ‘The theory of unjust enrichment lies as a quasi-contract claim’ " ( IDT Corp. v Morgan Stanley Dean Witter & Co. , 12 NY3d 132, 142 [2009], rearg denied 12 NY3d 889 [2009], quoting Goldman v Metropolitan Life Ins. Co. , 5 NY3d 561, 572 [2005] ). "The essential inquiry in any action for unjust enrichment or restitution is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered" ( Paramount Film Distrib. Corp. v State of New York , 30 NY2d 415, 421 [1972] ). To adequately plead an unjust enrichment claim, the plaintiff must allege "that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered" ( Georgia Malone & Co., Inc. v Rieder , 19 NY3d 511, 516 [2012] [internal quotation marks and citation omitted]). "Although privity is not required for an unjust enrichment claim, a claim will not be supported if the connection between the parties is too attenuated" ( Mandarin Trading Ltd. v Wildenstein , 16 NY3d 173, 182 [2011] ).
WTC adequately alleges that "[d]efendants, who were the owners of, and formed and controlled the Hellas Entities, were enriched by the conveyance of the proceeds of money borrowed by Hellas Finance by issuing the Notes, and using the Note proceeds to improperly and illegally redeem the PECs and CPECs, violating the terms of same" (NYSCEF Doc No. 491, amended complaint ¶ 248). Moreover, WTC has pleaded a sufficient relationship between the parties to sustain an unjust enrichment claim. WTC is not required to plead privity. Viewing WTC's allegations in the most favorable light, it has alleged that defendants knowingly received the notes proceeds and benefitted from the wrongdoing (see Metropolitan Bank & Trust Co. v Lopez , 189 AD3d 443, 445 [1st Dept 2020] ; Philips Intl. Invs., LLC v Pektor , 117 AD3d 1, 7 [1st Dept 2014] ["a plaintiff could satisfy this requirement by alleging that the benefit was conferred at the behest of the defendant"]). As such, defendants are not entitled to dismissal of the unjust enrichment claim for failure to state a cause of action.
G. Violation of Prohibition Against Distributions Pursuant to the BCL
The second cause of action alleges violations of BCL §§ 510, 513, 629, 719, and 720 governing a corporation's payment of dividends (NYSCEF Doc No. 491, amended complaint ¶¶ 177-185).
Defendants argue that the allegedly unlawful dividend was not regulated by the BCL, and, that, in any event, WTC's claim seeks an impermissible extraterritorial application of New York law. WTC counters that the movants’ Global Transaction constitutes the "transaction of business" within New York, and authorizes the second cause of action under the BCL.
As argued by WTC, section 1317 of the BCL permits a cause of action against officers or directors "of a foreign corporation doing business in New York" (Business Corporation Law § 1317 [a] ). A plaintiff "may proceed with a cause of action under section 720 [of the BCL] if it is established that [the entity] was doing business in New York" ( Seghers v Thompson , 2006 WL 2807203, *6, 2006 US Dist LEXIS 71103, *18-19 [SD NY, Sept. 27, 2006, No. 06 CIV 308 Berman, J.] ). Nevertheless, as discussed above, the amended complaint only makes conclusory allegations that the foreign corporation defendants were doing business in New York (NYSCEF Doc No. 491, amended complaint ¶¶ 49-51, 74, 76, 79-90, 180). Consequently, the second cause of action must be dismissed.
H. Whether Troy L.P., Inc., TPG Troy LLC, and T3 Troy LLC Lack Legal Capacity to Be Sued
Defendants further contend that Troy L.P., Inc., TPG Troy LLC, and T3 Troy LLC are dissolved entities that lack the capacity to be sued (see Matter of New York City Asbestos Litig. , 116 AD3d 571 [1st Dept 2014], lv dismissed 23 NY3d 1030 [2014] ).
As indicated above, the court has dismissed the amended complaint against Troy L.P., Inc., a Guernsey corporation (NYSCEF Doc No. 491, amended complaint ¶ 37 [a]) for lack of personal jurisdiction. Accordingly, the court does not reach whether the amended complaint should be dismissed against Troy L.P., Inc. based upon prior dissolution (see Wyser-Pratte Mgt. Co., Inc. v Babcock Borsig AG , 23 AD3d 269, 269 [1st Dept 2005] ).
The court must determine, however, whether TPG Troy LLC and T3 Troy LLC lack legal capacity to be sued. According to the amended complaint, TPG Troy LLC and T3 Troy LLC are Delaware limited liability companies (NYSCEF Doc No. 491, amended complaint ¶ 37 [c], [d]). "A limited liability company cannot be sued under Delaware law once the company's certificate of cancellation has been filed unless the plaintiff successfully seeks to have the company's certificate of cancellation nullified on the ground that the company was not wound up in compliance with Delaware law" ( Soroof Trading Dev. Co. Ltd. v GE Fuel Cell Sys. LLC , 842 F Supp 2d 502, 520 [SD NY 2012] ; see also Del Code Ann tit 6, § 18—803 [b]).
Defendants submit certificates of cancellation for both Delaware entities that were filed in December 2007 (NYSCEF Doc No. 520, Bode aff, ¶¶ 13-15), before this action was filed in 2011. WTC does not allege that it sought to nullify these certificates (see Otto v Otto , 110 AD3d 620, 620 [1st Dept 2013] ). Because TPG Troy LLC and T3 Troy LLC have shown that they lack capacity to be sued, they are entitled to dismissal of the amended complaint.
I. Forum Non Conveniens
Finally, defendants argue that the amended complaint should be dismissed on forum non conveniens grounds. Defendants contend that the recapitalization occurred in Europe, many of the key witnesses are in Europe, and foreign law applies to many of WTC's claims.
" GOL 5-1402 permits parties to maintain an action in New York state courts pursuant to a contractual agreement providing for a choice of New York law and forum in cases involving $1 million or more" ( AIG Fin. Prods. Corp. v Penncara Energy, LLC , 83 AD3d 495, 496 [1st Dept 2011] ). "Thus, it ‘preclude[s] a New York court from declining jurisdiction even where the only nexus is the contractual agreement’ " (id. , quoting National Union Fire Ins. Co. of Pittsburgh, Pa. v Worley , 257 AD2d 228, 230 [1st Dept 1999] ).
CPLR 327 (b) provides that:
"the court shall not stay or dismiss any action on the ground of inconvenient forum, where the action arises out of or relates to a contract, agreement or undertaking to which section 5-1402 of the general obligations law applies, and the parties to the contract have agreed that the law of this state shall govern their rights or duties in whole or in part."
Given that defendants were not parties to the forum selection clause, the court shall analyze the relevant forum non conveniens factors.
CPLR 327 permits a court to dismiss an action when, in the interest of substantial justice, it should be heard in another forum. "The burden rests upon the defendant challenging the forum to demonstrate relevant private or public interest factors which militate against accepting the litigation," among which are "the burden on the New York courts, the potential hardship to the defendant, and the unavailability of an alternative forum in which plaintiff may bring suit .... The court may also consider that both parties to the action are nonresidents [citation omitted] and that the transaction out of which the cause of action arose occurred primarily in a foreign jurisdiction" ( Islamic Republic of Iran v Pahlavi , 62 NY2d 474, 479 [1984], cert denied 469 US 1108 [1985] ).
Considering the relevant factors, the court finds that defendants have failed to meet their heavy burden of establishing that New York law is an inconvenient forum. The parties dispute the transaction's connection with New York. However, the facts show some nexus between New York and the underlying transaction. WTC seeks to enforce its judgment obtained in New York based upon an alter ego theory, and two defendants, Apax Partners, L.P. and TPG Capital-N.Y., LLP, have offices in New York (NYSCEF Doc No. 491, amended complaint ¶¶ 18, 23).
With regard to the parties’ place of domicile, this factor is not dispositive. "A defendant's heavy burden remains despite the plaintiff's status as a non-resident" ( Bank Hapoalim (Switzerland) Ltd. v Banca Intesa S.p.A. , 26 AD3d 286, 287 [1st Dept 2006] ).
Although the recapitalization occurred in Europe, defendants have not shown that they would suffer any greater hardship by litigating this action in New York, given that the parties have extensively litigated this action for 10 years and have engaged in substantial pretrial discovery (see Intertec Contr. A/S v Turner Steiner Intl., S.A. , 6 AD3d 1, 5 [1st Dept 2004] ["Where the parties have engaged in substantial pre-trial discovery and invested a great deal of valuable time and resources, the presumption against dismissal on the basis of forum non conveniens greatly increases"]).
Moreover, the court notes that WTC's alter ego liability claims are governed by New York law, as determined by the Court of Appeals. Therefore, defendants are not entitled to dismissal of the amended complaint on forum non conveniens grounds.
CONCLUSION
Accordingly, it is
ORDERED that the motion (sequence number 018) of defendants Apax Partners LLP, Apax Partners LP, Apax Partners Europe Managers Ltd., Apax Europe VI GP Co. Ltd., Apax Europe VI-A, L.P., Apax Europe VI-1, L.P., Apax WW Nominees, Ltd., Apax Europe VI GP, L.P., Troy LP Inc., Giancarlo Aliberti, Martin Halusa, John F. Megrue, Jr., TPG Capital, L.P., TPG Capital-New York, Inc., 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 Mattias Calice to dismiss the amended complaint is granted to the extent of:
(1) dismissing the amended complaint in its entirety as against defendants Apax Partners, LLP, Apax Partners Europe Managers Ltd., Apax Europe VI-A, L.P., Apax Europe VI-1, L.P., Apax Europe VI GP, L.P., Apax Europe VI GP Co. Ltd, Troy L.P. Inc., Apax WW Nominees, Ltd., TPG Troy LLC, T3 Troy LLC, David Bonderman, James Coulter, Martin Halusa, John Megrue, with costs and disbursements to said defendants as taxed by the Clerk of the Court, and the Clerk is directed to enter judgment accordingly in favor of said defendants; and
(2) dismissing the second cause of action (violations of prohibitions on distributions pursuant to the Business Corporation Law), the fourth through eighth causes of action (fraudulent conveyance), and the tenth cause of action (conversion) as against the remaining defendants, and is otherwise denied; and it is further
ORDERED that the action is severed and continued against the remaining defendants; and it is further
ORDERED that the caption be amended to reflect the dismissal and that all future papers filed with the court bear the amended caption; and it is further
ORDERED that counsel for the moving party shall serve a copy of this order with notice of entry upon the Clerk of the Court (60 Centre Street, Room 141B) and the Clerk of the General Clerk's Office (60 Centre Street, Room 119), who are directed to mark the court's records to reflect the change in the caption herein; and it is further
ORDERED that such service upon the Clerk of the Court and the Clerk of the General Clerk's Office shall be made in accordance with the procedures set forth in the Protocol on Courthouse and County Clerk Procedures for Electronically Filed Cases (accessible at the "E-Filing" page on the court's website at the address www.nycourts.gov/supctmanh).