Opinion
INDEX NO. 652940/2011
03-18-2019
DAUM GLOBAL HOLDINGS CORP., Plaintiff, v. YBRANT DIGITAL LIMITED, YBRANT MEDIA ACQUISITION INC., Defendants.
NYSCEF DOC. NO. 231 PRESENT: ANDREA MASLEY Justice MOTION DATE 11/26/2018 MOTION SEQ. NO. 010
DECISION AND ORDER
The following e-filed documents, listed by NYSCEF document number (Motion 010) 217, 218, 219, 220, 221, 222, 223, 224, 225, 226, 227, 228, 229, 230 were read on this motion to/for INJUNCTION/RESTRAINING ORDER. Masley, J.:
Upon the foregoing documents, it is ordered that plaintiff's motion to convert an existing preliminary injunction imposed against defendants into a permanent injunction and release the undertaking is denied in part and granted in part.
This case arises from defendants' failure to pay plaintiff for defendants' purchase of the internet company, Lycos, Inc. (Lycos). Plaintiff brought this action in 2011 seeking (1) damages from defendant Ybrant Digital Limited (Ybrant Digital) for its failure to pay moneys owed under a guaranty which guaranteed payment of all obligations and liabilities of Ybrant Digital's subsidiary, defendant Ybrant Media Acquisition, Inc. (Ybrant Media); (2) a declaratory judgment against defendant Ybrant Digital "upon its Guaranty to pay further delinquent amount of its subsidiary defendant Ybrant Media as shall be established through an arbitration proceeding"; and (3) a preliminary injunction enjoining defendants from taking and/or transferring Lycos's cash and assets or diminishing, encumbering, and/or transferring Lycos's shares, and compelling defendant Ybrant Media to join plaintiff in selecting an independent accounting firm to aid in the resolution of arbitration.
On October 26, 2011, the day this action was commenced, plaintiff moved, by order to show cause, for a preliminary injunction (NYSCEF Doc. No. 2). On January 31, 2012, this court (Oing. J.) issued a preliminary injunction enjoining defendants, pending enforcement of an arbitration agreement and guarantee agreement, "from taking cash or other assets from Lycos, Inc., or causing the same to be transferred outside the ordinary course of business, or otherwise diminishing the value of Lycos, Inc. shares in which plaintiff holds a security or ownership interest, or encumbering or transferring Lycos, Inc. shares held by defendants" (NYSCEF Doc. No. .61). Plaintiff posted an undertaking of $20 million which was later reduced to $500,000 (NYSCEF Doc. No. 149).
On September 24, 2014, the ICC International Court of Arbitration (ICC) issued its final arbitration award, which ordered Ybrant Media to pay the principal sum of $33,547,883, plus interest, and Ybrant Digital to pay any unpaid portion of the award pursuant to the guaranty. The ICC also ordered that, if defendants failed to satisfy the award, plaintiff was entitled to the 44% Lycos ownership interest that had been placed in escrow (Escrow Shares) pursuant to the original purchase and escrow agreements (NYSCEF Doc. No. 133). On May 5, 2015, Judge Alison J. Nathan, District Court Judge of the Southern District of New York (SDNY), confirmed the final arbitration award and directed the Clerk of the SDNY Court to enter judgment (NYSCEF Doc. No. 181).
As structured in the Lycos sale transaction, partial payment of the sale price was delivered to plaintiff and the remaining sum was to be paid approximately one year later; in exchange for the initial payment, defendants received a majority (56%) ownership interest and plaintiff retained a security interest in the outstanding payment by placing the remaining 44% Lycos shares in escrow. That subsequent payment was never tendered, so the Escrow Shares were not released to defendants (see NYSCEF Doc. No. 3). --------
In an effort to collect on the judgment, plaintiff filed a motion in the SDNY seeking a turnover order, compelling defendants to turn over their stock certificates in a variety of wholly-owned subsidiaries to satisfy the award and execute the judgment. On October 6, 2015, Judge Nathan found that plaintiff was entitled to the value of the final award less the value of Lycos shares plaintiff then possessed—the Escrow Shares, amounting to 44% Lycos ownership interest, which were disbursed to plaintiff due to defendants' defaulted obligation to complete payment for the sale. Judge Nathan further ordered defendants to either pay plaintiff the judgment value, less the value of the Escrow Shares, or to deliver the remaining 56% ownership stake of Lycos shares in defendants' control to satisfy the judgment (NYSCEF Doc. No. 222). Defendants failed to comply with that order and neither paid or transferred the stock certificates to plaintiff, prompting plaintiff's motions, before Judge Nathan in SDNY, for partial enforcement of the turnover order and for the appointment of a receiver for defendants' ownership interest in Lycos (see NYSCEF Doc. No. 223). By order, dated May 8, 2018, Judge Nathan granted the receivership motion and appointed plaintiff the receiver of Ybrant Media's 56% L ownership interest in Lycos (NYSCEF Doc. No. 223). Thus, plaintiff was granted a broad array of rights to possess and exercise effectively-exclusive authority over Lycos as receiver of defendants' 56% Lycos interest and the holder of the remaining 44% interest in its capacity as judgment creditor, alone (id.).
In Fall 2017, defendants' counsel withdrew its representation of both defendant entities in this action (NYSCEF Doc. Nos. 201, 202). On April 3, 2018, after a failure to appear at a conference, this court ordered defendants, pursuant to CPLR 321 (a) to retained new counsel within in 45 days as required for corporate entities to properly appear (NYSCEF Doc. No. 208). This court's order was clear that failure to comply with CPLR 321 (a) would result in defendants' answer being stricken (id.). On October 10, 2018, after defendants again failed to appear, this court directed plaintiff to move for "all appropriate relief (NYSCEF Doc. No. 215). On November 26, 2018, plaintiff filed this motion to convert the January 31, 2012 preliminary injunction into a permanent injunction and to direct the release of the undertaking that plaintiff had posted to secure the preliminary injunction (NYSCEF Doc. No. 217). This motion is unopposed.
Since the preliminary injunction was issued by this court in January 2012, the circumstances of this case have drastically changed. First, Judge Nathan confirmed the final arbitration award as detailed above and a judgment was entered against the defendants in SDNY (NYSCEF Doc. No. 181). Second, Judge Nathan appointed plaintiff the receiver of Ybrant Media's 56% ownership interest, giving plaintiff 100% control over Lycos. Therefore, the purpose and circumstances that warranted the preliminary injunction awarded by Justice Oing in this court's January 31, 2012 order—a temporary measure enjoining defendants from transferring or otherwise diminishing the value of the Escrow Shares "or encumbering or transferring" the Lycos "shares held by defendants" "pending enforcement of arbitration agreement and guarantee agreement" (NYSCEF Doc. No. 61) have since been satisfied inasmuch as the arbitration and guarantee agreements were enforced, the final arbitration award in favor of plaintiff was affirmed in SDNY, in which plaintiff was awarded judgment against defendants, and, ultimately, plaintiff was disbursed his security interest Escrow Shares in Lycos and was appointed receiver of the remaining 56% of Lycos stock that was in possession of defendants.
Appointed by Judge Nathan in the SDNY action, a receiver now controls defendants' Lycos interest, and, conferred by that court, has the exclusive authority to use its broad powers to act in the furtherance of satisfying the SDNY judgment, and to act—on Lycos's behalf—to prevent or rectify any alleged wrongful use or transfer of Lycos's assets.
This action was not commenced by plaintiff in his capacity as the receiver. With a receiver now appointed, the relief here sought by plaintiff (in its capacity as judgment creditor) should be sought by the receiver in the court which appointed and empowered the receiver to act on Lycos's behalf. While this court could hypothetically entertain a contempt motion for alleged violations of the 2012 preliminary injunction, no such relief is here sought.
Plaintiff's remaining causes of action before this court were already resolved in arbitration with a final award, the final award was confirmed its entirety in SDNY, and judgment was entered in SDNY against both defendants, as defendants as debtor and guarantor. Relief under, and enforcement of, those orders belong in the court of issuance, which appointed, specifically to protect Lycos's assets and enforce the judgment against defendants. There is nothing left in the action filed in this court.
Finally, the preliminary injunction issued in this court by Justice Oing has been rendered superfluous as the arbitration proceedings are over, the final award confirmed, judgment entered against defendants, and the authority to enforce the judgment/protect the assets vested upon a receiver.
Accordingly, it is
ORDERED that the January 2012 preliminary injunction is vacated and the $500,000 undertaking supporting the January 2012 preliminary injunction is directed to be released; and it is further
ORDERED that the complaint is dismissed in its entirety and the action is disposed. 3/18/19
DATE
ENTER:
/s/ _________
ANDREA MASLEY, J.S.C.