Opinion
Index. 653357/2011
04-21-2022
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-NEWYORK., 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-IINVEST 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, Defendant.
ROBERT R. REED, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 020) 764, 765, 766, 767, 768, 769, 770, 771, 772, 773, 774, 779, 784, 789, 791
were read on this motion to/forREARGUMENT/RECONSIDERATION.
This decision will address motion sequence #20.
Defendants Giancarlo Aliberti ("Aliberti"), Matthias Calice ("Calice"), 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., and Apax Partners, L.P. (now known as Apax Partners US, LLC) (collectively, the "defendants") seek, pursuant to CPLR § 2221(d), reargument of the portions of the Court's Decision and Order, issued on November 10 (the "Decision"), holding that (1) the forum selection clause in the indenture applies to judgment enforcement proceedings; (2) the merger doctrine does not bar the amended complaint's claims for breach of the notes; and (3) defendants are judicially estopped from arguing that Luxembourg law governs plaintiffs' alter ego claims.
BACKGROUND
As the successor trustee under the notes indenture (the "indenture"), Wilmington Trust Company ("WTC" or "plaintiffs") filed this action in 2011 (Defendants' Memorandum of law in support of their motion to reargue, NYSCEF Doc. No. 774). At that time, WTC also filed an action in New York Supreme Court against the Luxembourg entity that issued the notes, Hellas Telecommunications Finance SCA ("Hellas Finance"), and the Luxembourg entity that guaranteed the Notes, Hellas Telecommunications I ("Hellas I") (id.). WTC alleged that Hellas Finance and Hellas I breached their payment obligations under the notes, on which Hellas Finance had defaulted in late 2009 (id.). The court granted summary judgment to WTC and entered a stipulated judgment (the "judgment") against Hellas Finance and Hellas I (together, the "judgment debtors") in the amount of ꆢ million (Cortlandt St. Recovery Corp. v. Hellas Telecomms., S.a.r.l., 47 Misc.3d 544, 560-66 [Sup Ct NY Cnty 2014]).
WTC then sought to enforce the judgment in federal court against the judgment debtors and several of the defendants in this case, but the federal court dismissed WTC's third amended complaint in 2016 on multiple grounds (Wilmington Tr. Co. v. Hellas Telecomms., S.a.r.l., 2016 WL 7339112, at *4-12 [SD NY 2016]). In April 2019, WTC filed an amended complaint in this action seeking to enforce the judgment on which it had sued in federal court. (Ex. B, Amended Complaint, NYSCEF Doc. No. 767). The amended complaint alleges 10 separate causes of action against 26 European and U.S. defendants who allegedly had some role in the recapitalization transaction in which the notes were issued (id. at 53-73). Among other things, WTC alleges that all defendants are alter egos of the judgment debtors, and that they therefore are liable for breach of the notes (the first and third causes of action) and for the judgment (the third cause of action). The amended complaint also seeks to recover under multiple other theories, including fraudulent conveyance, conversion, and unjust enrichment (id).
In May 2019, all of the original defendants moved to dismiss the amended complaint (the "dismissal motion"). Fourteen defendants (the "jurisdiction movants"), including Aliberti and Calice, sought dismissal for lack of personal jurisdiction, and all defendants moved to dismiss for failure to state a cause of action (Ex. D; Ex. E; Ex. F; Ex. G; Ex. H; NYSCEF Doc. No. 769-773). Three defendants also moved to dismiss for lack of capacity to be sued.
On November 10, 2021, this court issued a decision resolving the dismissal motion. The court (1) dismissed the amended complaint in its entirety for lack of personal jurisdiction against all jurisdiction movants except Aliberti and Calice, as to whom it held that jurisdiction may be exercised under the forum selection clause, including with respect to the judgment enforcement claims; (2) dismissed the amended complaint in its entirety against two defendants for lack of capacity to be sued; and (3) as against the remaining 12 defendants, severed the action and dismissed for failure to state a cause of action on all claims except the first cause of action (for breach of the Notes on alter ego grounds), the third cause of action (for liability on the judgment on alter ego grounds), and the ninth cause of action (for liability on the judgment based on unjust enrichment). (Ex. A, Decision and Order issued on November 10, 2021, NYSCEF Doc. No. 766). The decision was entered by the New York County Clerk on November 15, 2021, and WTC served notice of entry on November 16, 2021 (id.).
On December 16, 2021, the remaining defendants in this action submitted a memorandum of law in support of their motion, pursuant to CPLR § 2221(d), to reargue portions of the court's Decision and Order holding that (1) the forum selection clause in the indenture applies to judgment enforcement proceedings as it relates to Aliberti and Calice; (2) the merger doctrine does not bar the amended complaint's claims for breach of the notes; and (3) that all defendants are judicially estopped from arguing that Luxembourg law governs plaintiffs' alter ego claims (defendants' memorandum of law in support of their motion to reargue, NYSCEF Doc. No. 774).
ARGUMENTS
First, defendants Aliberti and Calice seek to reargue whether the forum selection clause in the governing indenture (the "forum clause") applies to judgment enforcement claims. The court held that it does and that Aliberti and Calice, both of whom reside in Europe, therefore are subject to the personal jurisdiction of this court. Aliberti and Calice maintain that this court overlooked or misapprehended case law and policy with respect to the application of the forum clause in judgment enforcement proceedings (id. at 5-9).
In response, plaintiffs argue that the plain language of the forum clause encompasses a judgment enforcement proceeding and that this court can assert personal jurisdiction by applying principles of the closely-related doctrine. Plaintiffs also claim that the doctrine applies to Aliberti and Calice because both Aliberti and Calice signed the note and the indenture, served on the board of directors for judgment debtors, and were senior members of the Apax and TPAG deal team, which was responsible for the transaction that culminated in the judgment debtors' default (plaintiffs' memorandum of law in opposition to defendants' motion to reargue, NYSCEF Doc. No. 784 at 3-11).
Second, all remaining defendants seek to reargue whether the merger doctrine bars WTC's claims for breach of the notes at issue in this action. By applying principles of the merger doctrine, this court held that plaintiffs were barred from asserting a new breach of contract claim against the judgment debtors themselves but were allowed to assert such claim against defendants as the judgment debtors' alter egos. Now defendants argue that the court erred in distinguishing between the judgment debtors and their alleged alter egos for purposes of the merger doctrine because alter ego is not an independent cause of action, but a theory that may result in third-party liability where the corporation is liable. Defendants also assert that the court misconstrued underlying res judicata principles (NYSCEF Doc. No. 774 at 10-14).
Plaintiffs respond by arguing that while the merger doctrine would prohibit plaintiffs from raising an alter ego liability claim in instances where a corporation does not owe a debt in the first place, here, the judgment debtors do owe a debt, and defendants, as alter egos, can be held liable for such debt. In essence, plaintiffs are not trying to relitigate their claim as basis for an independent action, but, rather, plaintiffs' claim against defendants for their role in causing the breach of the notes is merely a theory for holding them liable for the judgment as alter egos of the judgment debtors (NYSCEF Doc. No. 778 at 11-17).
Third, all remaining defendants seek to reargue the court's holding that defendants are judicially estopped from arguing that WTC's alter ego claims are governed by Luxembourg law. Defendants now assert that this court misconstrued critical facts regarding their objection to the application of New York law (NYSCEF Doc. No. 774 at 15-17).
In response, plaintiffs argue that defendants abandoned this issue by failing to raise it on an appeal and consented to the application of the New York laws (NYSCEF Doc. No. 778 at 18-20).
DISCUSSION
A motion for leave to reargue, addressed to the sound discretion of the court, may be granted upon a showing that the court overlooked or misapprehended the relevant facts or misapplied any controlling principle of law (CPLR 2221[d] [2]; Frenchman v Lynch, 97 A.D.3d 632, 633 [2d Dept 2012]; William P. Pahl Equip. Corp. v Kassis, 182 A.D.2d 22, 27 [1st Dept 1992], lv dismissed in part and denied in part 80 N.Y.2d 1005 [1992], rearg denied 81 N.Y.2d 782 [1993]; Foley v Roche, 68 A.D.2d 558, 567 [1st Dept 1979]). Reargument is "not designed to provide an unsuccessful party with successive opportunities to reargue issues previously decided, or to present arguments different from those originally presented" (McGill v Goldman, 261 A.D.2d 593, 594 [2d Dept 1999]; see also Levi v Utica First Ins. Co., 12 A.D.3d 256, 258 [1st Dept 2004]).
Here, defendants have failed to demonstrate that the court misapprehended or overlooked the facts or the law. The court considered the arguments and the relevant law in rendering the prior decision.
Forum Clause
This court has personal jurisdiction over defendants Aliberti and Calice because the forum clause applies to each of the two defendants. The forum clause designates Manhattan courts, whether state or federal, as an appropriate forum for initiating any suits, actions or proceedings that arise out of, are based on, or relate to the note or indenture associated with the transaction which resulted in the default of the judgment debtors. In its entirety, the forum clause reads as follows:
The Parent Guarantor [Hellas I] or the Issuer [Hellas Finance] irrevocably agree that any legal suit, action or proceeding against the Parent Guarantor or the Issuer arising out of, based on, or relating to the Notes, this Indenture or the transactions contemplated thereby may be instituted in any U.S. Federal or state court in the Borough of Manhattan in the City of New York and (ii) waive, to the fullest extent they may effectively do so, any objection which they may have now or hereafter have to the laying of venue of any such proceeding.
(NYSCEF Doc No. 506, indenture§ 14.07) (emphasis added).
In the November 10, 2021 Decision, this court explained that the language of the forum clause encompasses a judgment enforcement proceeding because "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 Found., Inc., 241 F.3d 123, 128 [2d Cir. 2001]). Because plaintiffs' "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" (Ex. A, NYSCEF Doc. No. 766 at 12).
As an initial matter, defendants argue that a judgment enforcement claim is an entirely different cause of action from the claim that resulted in the judgment and that judgment proceedings require a separate and distinct basis for asserting jurisdiction. According to defendants, such jurisdictional basis cannot be established here. In their memo of law in support of the motion to reargue, defendants further argue that this court's reliance on Coregis Ins. is misplaced and, in their efforts to show that this court misapprehended the law, the defendants cite to multiple cases which held that where a forum selection clause expressly applies to actions "related to" the parties' contract, but is silent as to judgment enforcement proceedings, the forum selection clause does not apply to such enforcement proceedings (NYSCEF Doc. No. 774 at 10). In other words, defendants maintain that although the forum clause may provide jurisdiction over Aliberti and Calice in proceedings which involve, for example, breach of contract claims, the court has no jurisdiction to enforce judgements related to the previously established breach. (id.)
To support this argument, defendants rely on cases such as Batbrothers LLC v. Paushok, in which Justice Borrok held that a forum selection clause designating Moscow as the forum for all disputes "arising out of" the contract did not preclude a judgment enforcement proceeding in New York because such a proceeding "is not an action to resolve a dispute arising out of" the contract (2018 WL 3118573, at *3 [Sup Ct NY Cnty 2018]; aff'd 172 A.D.3d 529 [1st Dept 2019]). Defendants also rely on Soc'y of Lloyd's v. Siemon-Netto, in which the court held that the plaintiff properly sought enforcement of an English court judgment in New York, notwithstanding a forum selection clause that provided for disputes "arising out of or relating to" to the contract to be brought in England (457 F.3d 94, 104 [DC Cir 2006]). Similarly, defendants cite to Frediani & Delgreco, S.P.A. v. Gina Imports, Ltd., which held that where a forum selection clause provided for contract-related litigation in Italy, plaintiff had "the ability to enforce an Italian judgment in [Illinois]" (870 F.Supp. 217, 221-22 [ND Ill. 1994]).
None of the cases that defendants cite supports defendants' position that this court has no personal jurisdiction over Aliberti and Calice. As stated above, this court can assert jurisdiction by virtue of applying the plain language of the forum clause. In Batbrothers, Justice Borrok held that a forum selection clause designating Moscow as a forum for settling all disputes "arising out" of the contract did not preclude plaintiffs from enforcing a judgment in courts located in New York. However, Justice Borrok did not hold that Moscow courts could not enforce the judgment, only that some other courts also have jurisdiction to do so. Batbrothers, like all other cited cases, holds that, under certain circumstances, a successful plaintiff can enforce a judgment in jurisdictions other than in those provided for by the forum selection clause. None of the cases cited by defendants hold that a successful plaintiff cannot enforce a judgment in a jurisdiction which was designated by the forum selection clause and in which a plaintiff previously obtained a successful judgment. The cases that defendants rely upon aim to expand the scope of the forum selection clause as it relates to plaintiff's right to enforce a judgment. The decisions do not, as defendants suggest, limit the jurisdiction of the courts with respect to the enforcement of judgments.
Additionally, defendants ignore this court's finding that the enforcement of the forum clause against Calice and Aliberti is appropriate under the closely-related doctrine. As already explained:
"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 A.D.3d 171, 179 [1st Dep't 2017] [citation omitted].)(Ex. A, NYSCEF Doc. No. 766 at 15).
This court found that the doctrine applied to Calice and Aliberti because each signed the notes and indenture which contain a forum selection clause providing for a forum in New York, were on the judgment debtors' boards of directors, and were senior members of Apax/TPG's deal team, making it foreseeable that the clause would bind them. Defendants do nothing to dispute these findings. For all the reasons outlined above, this court finds that defendants have not established that this court overlooked the relevant facts or misapplied any controlling principle of law. The court will not grant reargument on whether the forum clause applies to judgment enforcement claims as it relates to Aliberti and Calice.
The Merger Doctrine
The merger doctrine does not bar plaintiffs' claims for breach of the notes. Under New York's merger doctrine, "[w]here a judgment is in favor of the plaintiff, the claim in the underlying the action is merged in the judgment and cannot thereafter be used as a basis for an independent action" (Craven v. Rigas, 85 A.D.3d 1524, 1527 [3d Dept 2011] quoting Brown v. Lockwood, 76 A.D.2d 721, 735 [2d Dept 1980] (emphasis in original)), appeal dismissed, 17 N.Y.2d 932 [2011]).
Applying this principle, this court, in its previous decision, concluded that in light of the judgment for breach of the notes, plaintiffs were barred from asserting a new breach claim against the judgment debtors. But the court held that plaintiffs may assert breach claims against defendants as the judgment debtors' alleged alter egos (Ex. A, NYSCEF Doc. No. 766 at 24).
Here, defendants did not establish that this court overlooked any relevant facts or misapplied any controlling principle of law.
Defendants accuse this court of misapprehending the "essential theory" of the alter ego doctrine, in that the alter ego is not an independent cause of action, but a theory that may result in third party liability where the "corporation is liable" (NYSCEF Doc. No. 774 at 16, quoting Morris v NY State Dept of Tax and Fin., 82 N.Y.2d 135, 144 [1993]). In Morris, the Court of Appeals rejected the plaintiff's claim as "inconsistent with the essential theory" of the alter ego doctrine because the plaintiff sought to hold an alleged alter ego liable "for a debt [the corporation] d[id] not owe" (id. at 141). Further, defendants argue that the decision is inconsistent with the essential theory of alter ego because the judgment debtors do not owe a debt on the notes; under the merger doctrine, their only debt is the judgment debt.
Defendants' reliance on Morris is misplaced. While Morris holds that there can be no alter ego liability where a corporation does not owe a debt in the first place, here, the judgment debtors do owe a debt - the judgment - which is more than $717,000,000 and has remained unpaid. Moreover, defendants' argument that the judgment debtors only owe the debt on the judgment and not on the notes does not hold because that is exactly what plaintiffs pursue here - collection of that judgment from alter egos of the judgment debtors. As this court already noted:
"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 recover[y]- "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."(Ex. A, NYSCEF Doc. No. 766 at 23 quoting NYSCEF Doc. No. 491, Amended Complaint ¶194).
Furthermore, defendants' argument that this court misconstrued res judicata principles is equally unconvincing. Res judicata bars the relitigation of issues that were or could have been raised in a prior action and applies to parties to the prior action and those in privity with them (Paramount Pictures Corp. v Allianz Risk Transfer AG, 31 N.Y.3d 64, 72 [2018]). Here, defendants argue that by seeking to impose alter ego liability on them, plaintiffs necessarily allege that defendants were in privity with the judgment debtors. As a result, defendants claim, res judicata bars claims for breach of the notes not only against the judgment debtors, but against defendants as well (NYSCEF Doc. No. 774 at 17).
This argument has been squarely rejected. As American Federated made clear, alter ego liability is a basis for recovering against a third party on a judgment:
[T]he Grosses cannot have been in privity with the judgment debtors with respect to any previously litigated veil-piercing claim because there was no previously litigated veil-piercing claim. Defendants' argument would also logically imply that all post judgment veil-piercing claims against a corporation's owners are barred by res judicata because those owners are necessarily in privity with the corporation against which the judgment was rendered. The cases cited above that entertained post-judgment veil-piercing claims pursuant to CPLR § 5225(b) are sufficient to illustrate that Defendants' position is not the law
Moreover, on Defendants' theory, any time a plaintiff sues a corporation, it would effectively be required to join the corporation's owners or be barred from later recovering on the judgment from the owners in a separate veil-piercing action. Again, the fact that courts have entertained post-judgment veilpiercing claims under CPLR § 5225(b) implies that Defendants cannot be correct.(39 F.Supp.3d at 523-24 at 15).
Defendants disregard this holding.
Finally, defendants argue that by not dismissing plaintiffs' claims for breach of the notes under the merger doctrine, the court allowed duplicative causes of action to proceed. More specifically, defendants state that plaintiffs' claims for breach of the notes in the first cause of action are duplicative of the claim in the third cause of action to enforce the judgment, as each is allegedly based on the same facts and each seeks the same remedy (NYSCEF Doc. No. 774 at 19).
This reasoning is wrong. The claims are not duplicative because the first cause of action concerns the breach created when defendants, as alter egos of the judgment debtors breached the notes and indenture, while the third cause of action seeks to hold defendants responsible for what is already owed on the existing judgements and notes. And most importantly, as this court already recognized in its previous decision, plaintiffs seek only one recovery, whether on Count I or Count III.
Defendants have not established that this court overlooked the relevant facts or misapplied any controlling principle of law when it determined that the merger doctrine does not bar plaintiffs' claim for breach of the notes.
Governing Law
Because defendants previously waived the argument that Luxembourg law applies to the claims at issue, defendants are not allowed to assert now, some 10 years after this dispute was commenced, that Luxembourg law should govern this litigation. In the November 10, 2021 Decision, this court held that defendants are judicially estopped from making the choice of law argument because in the previous motions submitted to various courts, defendants continuously relied on the New York statutes and New York cases to support their positions and arguments (Ex. A, NYSCEF Doc. No. 766 at 26). Defendants argue that the doctrine of judicial estoppel as it relates to the choice of law issues applies only to plaintiffs who were previously successful in pursuing their claim, and not to the unsuccessful defendants. Thus, defendants' argument goes, they should not be estopped from arguing that the Luxembourg law should govern the dispute (NYSCEF Doc. No. 774 at 20-21).
Assuming arguendo that such analysis were correct, defendants would still be estopped from arguing the choice of law issue at this stage of litigation because of the doctrine of abandonment. Arguments raised in original motions but not pursued on appeal are generally deemed abandoned (McHale v Anthony, 839 N.Y.S.2d 33, 35 [1st Dept 2007]; see also M & E 73-75, LLC v 57 Fusion LLC, 189 A.D.3d 1, 6 [1st Dept 2020], leave to appeal dismissed, 36 N.Y.3d 1086 [2021] [finding plaintiff-appellant abandoned its appeal from the dismissal of the certain claims by failing to make any arguments as to those claims in its appellate brief]; Adams Drug Co. v Knobel, 172 A.D.2d 470, 470-71 [1st Dept 1991] ["Plaintiff abandoned claim when it failed to raise the issue on appeal to the Court of Appeals from a prior determination in this matter"]; In re MF Glob. Holdings Ltd., 571 B.R. 80, 84 n.6 [Bankr. S.D. NY], leave to appeal denied, 296 F.Supp.3d 662 [SD NY. 2017] [where defendant "purport[ed] to reserve its arguments regarding [issue, but defendant] expressly declined to press the issue [on appeal], although it clearly had an opportunity to do so," court held that defendant "waived its right to contest" the issue in subsequent stage of proceedings]; Tesla Wall Sys., LLC v Related Companies, L.P., 2018 WL 4360777, at *3 [SD NY Aug. 15, 2018] [judicial estoppel barred party from raising choice of law issue "because this Court has repeatedly applied New York law to [party's] state law claims in reliance on (party's) representations"]).
Although defendants stated in their original answer that Luxembourg law should govern the dispute in question, the defendants never raised this issue on appeal either to the Appellate Division or the Court of Appeals, despite appealing multiple decisions to both courts. In fact, defendants, as respondents at the Appellate Division, and appellants before the Court of Appeals, argued New York legal principles and cited nearly exclusively to New York law. Defendants cannot now reverse course and argue that Luxembourg law should instead apply.
Defendants have not established that this court overlooked the relevant facts or misapplied any controlling principle of law when it held that Luxembourg law does not apply to plaintiffs' alter ego claims.
CONCLUSION
Here, defendants have failed to demonstrate that the court misapprehended or overlooked the facts or the law. The court considered the arguments and the relevant law in rendering the prior decision.
Accordingly, it is hereby
ORDERED that defendants' motion for leave to reargue is denied.