Aramid Entertainment Fund, LTD. v Wimbledon Fin. Master Fund, LTD

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Aramid Entertainment Fund, LTD. v Wimbledon Fin. Master Fund, LTD 2012 NY Slip Op 33189(U) February 8, 2012 Supreme Court, New York County Docket Number: 651532/2011 Judge: Melvin L. Schweitzer 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. [*FILED: NEW YORK COUNTY CLERK 03/22/2012 1] INDEX NO. 651532/2011 NYSCEF DOC. NO. 87 RECEIVED NYSCEF: 03/22/2012 SUPREME COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY PRESENT: .A!£.1yIAj L. SCHU1E:fTl.E1Z PART Justice MOTlOr~ t.lr- DATE ¢v MOTION SEQ NO. WI1--/8LeJ):)~ FII\J~NC..\N&- HIl.>TER. fi..t"'!), LTC. .:kc.:..QMOTION CAL. NO. The following'papers, numbered 1 to _ _ were read on thi~ motion tollor_ PArERS NUMBERED Notice of' Motion/ Order 10 Show Cause - Affidavits - Exhibits ... ~ 2! o « w (/) I Answering Affidavits -- Exhibits _ __ Replying Affidavits . _ _ __ I C· M· ross- . otlon: '-'1 ~.! Yes - ' ' ' - - -.. - - I No 0: C!l ~~ t;~ ::>-1 -,-1 of2 I-w o::r:: wI- 0:0: 0:0 :!:u.. ~ >- I ~ ~ ::> IL. Iw () n. (/) w 0: ~ w (/) « u Z o o ;:: 2 D.. ed,~~~~.7-QI",- f2Af:?~~~ MELVIN /' f Check one: YFINAL DISPOSITION Check if appropriate: o t: SCHWE SUBMIT ORDER/JUDG. DO NOT POST o U REFERENCE SETTLE ORDER /JUDG. [* 2] SUPRE!vlE COURT OF TIlE STATE OF NEW YORK COUNTY OF NEW YORK: P/\RT 45 ______________________________________________________ ------------------x ARAI'v1lD ENTERTAINMENT FUND. LTD .. ARAMID CAPITAL PAR11\ERS LLP, SCREEN CAPITAL INTERNATIONAl, CORP., Index No. 651532/2011 Plaintiffs. DECISION AND ORDER -against- WII'vfBLEJ)ON FINANCfNG MASTFR FUND. LTD .. WF!\1 HOI.DINGS LTD .. STILLWATER CAPITAL PARTI\I·:RS, I\)C, STILLWATER rv1ARKET NEUTRAL: FUND 111 SPC', (,EROVA FINANCJ:\L GR()l;P, LTD., FORTIS BANK CA YMAN, LTD .. JOSEPH BlANCO. DAVID BERGSTEIN, CHARLES. fREDERIC & CO., and JOHN ])Ol-::S 1-10, Motion Sequence.: No. OOS Defendants. --------------------------------------~---------------------------------x MEI.VI!\; L. SCllwE1TzEn,J.: Defendants have filed a 1110lioll to dismiss the complaint pursuant to CPLR 321 1 (a) (7). Ba ckgroull d This dispute is fundamentally a claim of t0l1ious intcr[cn:nce with a proposed transaction between th<: primary plaintiff, Aramid Entertainml:llt Fund. Ltd. (Aramid), anJ a third party, i\I3R Y P"rtncrs (ABRY). rhe primary defendants me CierovaFinancial Group, I,td. (Gcrova) and its j<:lI'll1er CEO. Joseph Bianco (Mr. Bianco). Additional plaintiffs arc ,\ramid Capital Partners aSP). which prO\'ides technical services to and holds the voting shares of J\ramid. and Screen Capital International C(lrp. (",S(T). a finance specialist v,:hieh provides advisory services \0 !\ramid. In early 20 I 0 Aramid sought to sell ilS asset P011folio. (;erova, a shareholder of /\ramid. presented a proposal in which Arall1jJ's porUolio would he purchased in exchange for restricted [* 3] common shares of Cierova stock. In.llll1c 2010, Aramid's shareholders rejcctcd this offer and Instead authorized Aramid's Board of Directors to pursue a transaction v. . ith a third party, ABRY. In JUlle 01'20]0, ABRY tendered an offer to purchase Aramid's assets for $130 million. At the request of the Aramid Board, ABR Y revised this offer to provide more favorable terms and resubmitted it in July of2010. Tile offer was subject only to specific conJirmalory diligence and the approval o1'lhc Aramid Bo;.u-d alld voting shareholders. Plaintiffs allege that in August 20 J0 Mr. Bianco participated in email and online discussions with Aramid shareholders in which he claimed that Aramid' s assets were overvalued and thdl the sh:]!"cholders were being defrauded. Plaintiffs allege that ~vfr. Bianco did this "in order to deliberately create discord within plaintiffs' relationships with its shareholders" in revenge for the rejection of his pfClposal. i lowcvcr, the amended complaint also alleges that 1\vh. Bianco did this "to acquire /\ramiJ's diverse and \aluabh.: portfolio o/" eniertainment asseis 'on the cheap. ". PlaintilTTSP is the sole holder of the voting shares of /\famid. Alter the intewclions hctv,·cl..'n tvIr. Bianco and other Aramid shareholders, TSP concluded that "because of shareholder turmoil, and the vcry real possihilit: oJ'shareholder lawsuits ... TSJ> was unable to appro\'<.; the ARBYoffer." 11 seems from the complaint tbai ARBY did not I,\ithdraw the olTer; instead, plaintiffs declined it and then elmse to Slle ("or tm1ioLls interference. The complaint is significantly complicated hy the inclusion of many other defendants and an alleged connection between the events recited ahove and an unrelated bankruptcy Jiling. In March 20] O. plaintiffs allege that Ar,Hllid led a group or creditors ill forcing five holding companies into involuntary bankruptcy. Tllese companies were controlled by defendant David 2 [* 4] 13ere.stcin (lvlr. Berl'.stein), allegedly a business confederate of .V1r. Bianco. PlaintifI-; claim that ,. .... this bankruptcy filing was an additional reason Iv1r. Bianco sought revenge on Aramid, and 411lege that i'\'1r. Ikrgstein made sC\'lT<l1 threatening statements to David Molner. a principal of TSP ::mel SCJ, and J;wdc falsc statements about the linancial health of luamid to the entertainment industry press. Additionally, plaintiffs base their claims against Mr. Bianco on a declaration he made in the bankruptcy proceeding in \\-hich he claimed that Aramid was in linancial distress. Additional defendants include Wimbledon Financing Maskr Fund, r,(d., WFM Holdings I.td .. Stilh'\1ter Capital Partners. Inc .. and Stillwater IV1arket Neutral Fund HI SPC. Plaintiffs allege that these entities held non-voting shares oj' Aramid and merged with Gcrova during 2010. A Iso !lamed as defendants arc Fortis Hank Cayman Ltd. and Charles, Frederick & Co., registered cLlstouimlS for Wimbledon Financing Master Fund and Stillwater tV1arket Neutral Fund, respectively. and Joh1l Docs J-J O. which arc not mentioned ill the complaint. The purported basis for any of these entities' liability is not clear. Plainti fr" have alleged causes of action for tortioLls interference with prospective ecollomic aunll1tage, prima facie tort, and wiJlfulmisconduct. Dekndants 1110ve to dismiss pursuant to ("PLR 32) I (3) (7). Discussion Plaintiffs' first claim is for tortious interft:rcllcc with prospective economic advantage. A tortious interference claim requires (hat plaintiffs allege that delendants' actions caused economic harm to the plaintiff.'). PbintilTo;; must allege that they would have received some economic adval1tuge "but for" the illh.:rfcrencc of dcfcndants . .';tle Gehbia v j'ol'OlIlo-/)ominion Bal1k, 306 AJ)2d 37,38 (1st Dept 2003) (dismissing a claim because there was no sufficient :3 [* 5] allegation that a contract v.'Oule! have b(:cn entered into but lor defendant's interference): Risley I' RlIhin. 272 AD2d198, 199 (1 st Dept 2(00) (dismissing a claim because plaintiff did not demonstrate he would have received economic advantage but for the interference). Plaintiffs do not allege that Mr. Bianco's actions caused the failure of the (kal between Aramid and ABRY. Instead, the compJaint admits that one of tile plaintiffs, TSP, voluntarily chose not to accept ;\BRY's offer. While this choice may have heen motivated by shareholder dissent. plaintiffs do 110t allege that any orlhe defendants (OOK actions which caused ABRY 10 withdraw the offer, or in any \'.a)' made it impossihle {(H' TSf> to accept the ofter. Plaintiffs have not alleged causation. Plaintifrs second claim is for prima l~lCic tor1, which requires both spcL'ial dumages and the allegation that defenuants were "solcly motivated by malice or 'disinterested malevolence ... , (foil//) \' l';slju;re PI/h. 117C., 124 AD2d 52X, 529 (J st Dept 19R(i): sec also Posner A])]d 308, 312 (] st Dept 20] 0). PJ(jintifl~'i' I' lewiS, 80 claim fails on both fronts. Not only is there a plausihk motivation, other than disinterested malevolencc. for defendants' alleged behavior, plaintitIs thl:l11sc1ves describe this economic. motivation in the amended complaint. Plaintiffs also fail to allege special damages. Finally. plailltif1~<;' third claim for willful misconduct is flut a cause ofaelion under New York law. Plaintiffs cite one case ill support, Coco II1l'cSlll1el1fs. LI.e l' 20m;/" Manager River Terrace LIe. Ilo\,\ever, liahilitv for "willful misconduct"· in that case "vas established bv ¢ ~ "J cuntract. 2010 NY Slip Op. 50332U, at *6 (S1.lp. Ct. 20]0). Furthermore, the specific definition of willful misconduct which plaintiffs cite is from Delaware len'>. 4 [* 6] Conclusion PlainLi rfs have 1~lj led LO state a cause of action for tortiolls interference, prima facie tort, or willful misconduct. Accordingly, it is ORDLRI:J) that all claims hy plaintiffs arc dismissed. Dated: February [f,2012 -MELVIN L. SCHWEITZ J.S 5

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