Pequot 1 LLC v DeGroff

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Pequot 1 LLC v DeGroff 2005 NY Slip Op 30467(U) December 6, 2005 Supreme Court, New York County Docket Number: 601442/2004 Judge: Walter B. Tolub Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [* 1] YORK SUPREME COURT OF THE STATE OF NE - NEW YORK WALTER B. TOLUB PRESENT: COUNTY PART I$ Justice PEQUOT 1, LLC, 00 1447 /ZOO4 INDEX NO. Plalnttff, MOTION DATE BANQUE DEQROOF, 2/18/05 MOTION s m . NO. - v * 001 Defendants. MOTION CAL. NO, The following papers, numbered 1 to were read on thin motlon tolfor PAPERS NUblBEREP Notice of Motlonl Ordrr to Show Cause - Affidavltu - Exhibits ... Answering Affldavlti - Exhlblts Replying Affidavits Cross-Motion: 0 Yes y No Upon the foregoing paperr, thin motion I decided In accordance with the sccompanylng s c memorandum dmolrlon. ,/' 1 WALTER B. $LUB, Check one: p FINAL DISPOSITION Check if appropriate: E J :f DO NOT POST d J.S.C. N N-FINAL DISPOSITION REFERENCE [* 2] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: IAS PART 15 X ---____fl-___-_______________________II_ PEQUOT 1 LLC, Indrx No. 601442/2004 Mtn Ssq. 001 Plaintiff, -against- BANQUE DEGROOF Defend nts. _ _ _ _ _ _ _ _ _ _ _ _ - - - - - - - - _ _ _ _ _ _ _ _ _ _ _ _ _ _ I _ _ _ _ -X WALTER B. TOLUB, J.: By this motion, defendant seeks dismissal o f verified complaint pursuant to CPLR 3211. contention in s u p p o r t of plaintiff's Defendant's its motion is t h a t primary this court l a c k s personal jurisdiction.' Ba ckground Hi s tory Plaintiff is a Delaware o f f i c e located at Holm From November 1, Ei limited liability company w i t h an D r a t h LLP, 400 P a r k Avenue i n N e w York. 2 0 0 1 until November 24, 2003, plaintiff was comprised of t h r e e "member companies": Second Sibling LLC, managed b y Steven I. Holm; J o l i LLC, managed b y John Voloshin; and Y&O Investments, of which Yoav Rubinstein was the president. Messrs. Holm, V o l o s h i n , and Rubinstein s e r v e d a s P l a i n t i f f ' s managers. Defendant is a commercial b a n k c h a r t e r e d in 1 9 8 7 u n d e r t h e I Contained within the papers is also a n argument concerning whether o r n o t service was p r o p e r l y e f f e c t u a t e d on d e f e n d a n t p u r s u a n t to B a n k i n g Law 5 2 0 7 . Inasmuch as d e f e n d a n t f a i l e d to move to dismiss the complaint within sixty days a f t e r s e r v i c e of the answer, a n y defense based on improper service is waived (CPLR 3211 (e); Aretakis v T a r a n t i n o , 3 0 0 AD2d 160 [ l e tDept. 2 0 0 2 1 ) . [* 3] laws of the Grand Duchy of Luxembourg, with a l l of i t s offices are located i n Luxembourg. D e f e n d a n t does not maintain a bank branch in N e w York, has no offices in New York, does not s o l i c i t business in N e w York, and has no a g e n t for any purpose in New Y o r k . Defendant does however maintain a correspondent bank account with JP Morgan Chase & Co, and since 2000, has had a custodian account and broker representation with Brown B r o t h e r s Harriman(Aff1davit o f J e a n - F r a n c o i s Leidner in S u p p o r t of Motion to Dismiss).2 On J a n u a r y 3 , 2 0 0 1 , defendant issued a written l o a n commitment to plaintiff in the amount of $2,500,000 i n connection w i t h p l a i n t i f f s investment with E a g l e Rode Center LLC ( E a g l e ) , a non- New Y o r k limited liability company.3 T h i s loan commitment l e t t e r , addressed to Mr. Rubinstein at a 5 l S t Street address in New York, identified the security i n t e r e s t for the loan a s all of plaintiff s 83.33% membership interest in Eagle. The latter additionally indicated that t h e terms of t h e loan were to be governed and construed u n d e r the laws of t h e Grand Duchy of Luxembourg (Loan Commitment Letter, ¶ 7 ( d ) Affidavit of J e a n - F r a n c o i s ; Leidner in 2 D e f e n d a n t additionally admits t o having retained legal counsel in New York in o r d e r to obtain advice on various l e g a l matters involving t h i s c a s e (Id.). 3 The court identifies Eagle in t h i s manner because although defendant s affidavits i n d i c a t e t h a t E a g l e is a Delaware LLC, t h e Loan Commitment l e t t e r as well as the other loan documents submitted i d e n t i f y Eagle as being a Connecticut LLC. Confusion a s i d e , the o n l y r e l e v a n t f a c t f o r t h e purposes of this decision, is that the s e c u r i t y interest f o r the s u b j e c t loan is neither incorporated n o r l o c a t e d in New Y o r k . 2 [* 4] S u p p o r t of Motion t o Dismiss, Exhibit A). O n May 30, 2001, Mr. Rubenstein, on b e h a l f of and w i t h the a u t h o r i t y of plaintiff, executed both the promissory note and P l e d g e Agreement, d a t e d J a n u a r y 3, 2 0 0 1 , with d e f e n d a n t . These documents were e x e c u t e d in Defendant s Luxembourg o F f i c e (Affidavit of Jean-Francois Leidner; Affidavit of Yoav Rubenstein in Support of Motion to Dismiss). the l o a n commitment l e t t e r , both As w i t h the promissory note and the p l e d g e agreement c l e a r l y indicate that the respective terms of the documents were to be governed a n d c o n s t r u e d under the l a w s of the Grand Duchy o f Luxembourg ( P e q u o t I LLC Promissory N o t e , ¶ 11; Pledge Agreement, ¶ 15; See, Affidavit of J e a n - F r a n c o i s Leidner, E x h i b i t s E-C). P u r s u a n t to the terms of the promissory n o t e , p l a i n t i f f P e q u o t I, LLC was to pay d e f e n d a n t on a q u a r t e r l y b a s i s Lender s bank, Boulevard Joseph 11, No. 7 , L-1840 Luxembourg, or a t such o t h e r b a n k or p l a c e outside t h e Un i t e d States ( P e q u o t I LLC Note, page 1 (emphasis a d d e d ) ; A f f i d a v i t of Yoav at Rubenstein, Ex. B; Affidavit of Jean-Francois L e i d n e r , Ex. E), Notwithstanding this provision however, plaintiff made the r e q u i r e d l o a n payments b y utilizing defendant s c o r r e s p o n d e n t account i n N e w York. The court n o t e s t h a t while d e f e n d a n t c o u l d have rejected payment in t h i s manner as it was n o t in conformity with the Promissory note, d e f e n d a n t chose to a c c e p t the payments. A t Some Point p r i o r to t h e note s final payment d a t e in J u n e , 3 [* 5] 2 0 0 3 , plaintiff's members began negotiations to sell the membership interests in p l a i n t i f f t h a t were h e l d b y Second Sibling and Y & O Investments t o J o l i LLC. What happened next: i s a b i t unclear, but t h e p a p e r s submitted indicate that several m a j o r events t r a n s p i r e d , the most significant of which is that p l a i n t i f f failed t o m a k e the last r e q u i r e d l o a n payment and defaulted under the note. The parties t h e n apparently e n t e r e d into some kind of loan extension agreement with defendant, rendered which defendant for various f e e s . plaintiff Although the p a r t i e s ' liable to papers are devoid of any l o a n e x t e n s i o n document ( s ) , defendant's a f f i d a v i t , a s do t h e affidavits s u b m i t t e d b y Second Sibling and Y & O Investments confirm t h e existence of some k i n d of l o a n extension agreement. In June or J u l y of 2 0 0 3 , plaintiff's members (Second Sibling, Y&O Investments a n d Joli LLC) e n t e r e d into a n "Agreement of S a l e o f Membership I n t e r e s t s " t o effectuate t h e sale and t r a n s f e r of Second Sibling and Y & O Investments interests in p l a i n t i f ¬ to J o l i LLC. This agreement, which i s not included in the papers, was then e x t e n d e d by an extension agreement'. T h i s agreement, signed by t h e representatives of plaintiff's members in November, 2003 included language DeGroof's rendering the liable for portions of Banque parties extension f e e s . These fees were p a i d by plaintiff's 4 T h e extension agreement is included as Exhibit A to the A f f i d a v i t of Steven I. Holm, Esq. in Support of the Motion to Dismiss. 4 [* 6] members5 on plaintiff's behalf (Exhibit A, Affidavit of S t e v e n I. Holm, Esq. in S u p p o r t of the Motion to Dismiss). On November 12, 2 0 0 3 , Joli LLC, which h a d a p p a r e n t l y filed for C h a p t e r 11 Bankruptcy, was granted an order dismissing its Chapter 11 c a s e by Connecticut.' the United States Bankruptcy Court, D i s t r i c t of During t h e latter part of November 2 0 0 3 , plaintiff p a i d o f f t h e remaining p r i n c i p a l b a l a n c e of the Note, including a l l accrued i n t e r e s t a n d other charges due t o d e f e n d a n t . asserts' extension that it was feese that f o r c e d to p a y it not did Plaintiff now a total $115,000 in l o a n agree to pay. Plaintiff subsequently commenced the instant a c t i o n alleging two causes of s $ 4 0 , 0 0 0 was p a i d by Second Sibling a n d Y & O i n June, 2 0 0 3 ( $ 2 0 , 0 0 0 of which was reimbursed by J o l i a s Joli's payment on b e h a l f of Pequot); Joli p a i d $ 5 0 , 0 0 0 in fees in August, 2 0 0 3 ; a n d 2 5 , 0 0 0 in fees was paid i n A u g u s t , $15,000 of which contributed by J o l i . 6 By the terms of t h e B a n k r u p t c y Court's o r d e r , a November 5 , 2 0 0 3 Order granting a previously made motion to assume an e x e c u t o r y contract was t o s u r v i v e t h e dismissal o f t h e Chapter 11 c a s e and was deemed binding on the parties, successors, a n d assigns, remaining in full force a n d e f f e c t . Furthermore, Joli LLC was precluded from e n j o i n i n g enforcement or s e e k i n g modification of t h e November 5, 2 0 0 3 o r d e r in a n y S t a t e or F e d e r a l Court (Affidavit of Steven I. Holm, Esq., in Support of the M o t i o n to Dismiss, Ex. B). Inasmuch as plaintiff's opposition to this motion was solely based on the Affirmation of c o u n s e l , and did n o t i n c l u d e an affidavit from anyone affiliated with plaintiff with personal knowledge, this c o u r t bases all f a c t u a l allegations made by plaintiff solely on t h e complaint, a n d disregards all of the factual allegations in counsel's Affirmation in Opposition ( s e e , D i S a b a t o v. Soffes, 9 Ad2d 2 9 7 [ l a ' D e p t . 19.591. These fees a r e referenced in f o o t n o t e 4, s u p r a . 5 [* 7] action: one asserting breach of the terms of t h e Promissory Note a n d Pledge Agreement, and one for conversion of p l a i n t i f f ' s f u n d s . The instant motion to dismiss followed. Discussion As matter, preliminary a court the first must address challenge that this court does not have t h e requisite defendant's personal j u r i s d i c t i o n aver d e f e n d a n t to entertain this action. This requires an analysis pursuant to CPLR 3 0 2 , as it is under this provision that the courts may exercise jurisdiction o v e r a nondomiciliary provided t h a t t h e nan-domiciliary engages i n some k i n d of significant conduct which gives r i s e to plaintiff's cause of (CPLR action 302; generally, See Barr, Altman, Lipshie and Gerstman; New York C i v i l P r a c t i c e B e f o r e Trial [James Publishing 2 0 0 4 1 5 7 : 2 0 0 et s e q , ) . The conduct need n o t be ongoing; a l l t h a t is needed is a single transaction, and, if defendant's activities here were between purposeful the and transaction there and the is a substantial relationship claim asserted, that transaction m a y be sufficient to i n v o k e jurisdiction Acquisition Corp. v C a s t i l l o , - NYS2d Dept. 2 0 0 5 1 ; 11984 J ) Kreutter v. McFadden O i l C o r p . , Banco Ambrosiano S P A v Artoc B a n k [19881; ; 2005 _ I & single (Opticare WL 3005744 [2"' 71 NY2d 460, 467 T r u s t Ltd., 62 NY2d 65 . Plaintiff's argument t h a t defendant is s u b j e c t to this court's jurisdiction is l a r g e l y predicated upon the contention that the 6 [* 8] contract, i . e . t h e l o a n issued b y defendant, was performed within N e w York because payments were regularly made i n t o a c o r r e s p o n d e n t account bank located Luxembourg bank, in New Y o r k . Defendant, however, is a It i s not licensed to do business in New Y o r k State, owns no p r o p e r t y here, has no o f f i c e s or b a n k b r a n c h e s h e r e , and does not s o l i c i t business in New York. Defendant's only c o n t a c t in New York is a correspondent bank account which p l a i n t i f f used, c o n t r a r y to t h e terms of the l o a n agreement, to r e p a y a loan which originated in Luxembourg. A l t h o u g h jurisdiction under CPLR 3 0 2 ( a ) (1) m a y be established over an entity whose only contact maintenance of a correspondent a c c o u n t with this state is the (Chase M a n h a t t a n B a n k v B a n q u e G e n e r a l 8 d u Commerce, No. 9 6 Civ 5184(KMW) 1 9 9 7 WL 2 6 6 9 6 8 [SDNY 19971; Banco Ambrosiano, 62 NY2d 6 5 [19841), it is t h i s court's opinion t h a t the f a c t s of the instant c a s e do n o t s u p p o r t t h e argument that d e f e n d a n t has engaged in any business activities sufficlent to satisfy the requirements of CPLR 3 0 2 (Faxavelli v B a n k e r s T r u s t Co. , 0 5 AD2d 3 3 5 [l" Dept. 19821 , aff'd, [19831). bank 5 9 NY2d 615 Simply p u t , the f a c t that d e f e n d a n t h a d a correspondent account i n New York, which it did not i n t e n d to use for collection of the l o a n payments, jurisdiction u n d e r CPLR 3 0 2 . is not enough to establish Moreover, even if this c o u r t were to find jurisdiction, it would n o t retain j u r i s d i c t i o n since, on the f a c t s , P l a i n t i f f ' s claim does not have a substantial nexus w i t h New 7 [* 9] Y o r k (Banco Ambrosiano, 62 NY2d 6 5 ) , and w o u l d b e better resolved the under jurisdiction of the Grand Duchy of Luxembourg Accordingly, it is ORDERED that defendant!s motion to dismiss t h L ew i t h i n a c t i o n is granted. This memorandum opinion constitutes the decision and osder of the C o u r t . Dated : \a \h I' HON. WAL ER B. TOLUB, J . S . C .

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