Nama Holdings, LLC v Greenberg Traurig, LLP

[*1] Nama Holdings, LLC v Greenberg Traurig, LLP 2008 NY Slip Op 52704(U) [26 Misc 3d 1214(A)] Decided on November 18, 2008 Supreme Court, New York County Lowe, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on November 18, 2008
Supreme Court, New York County

Nama Holdings, LLC, a Nevada limited liability company, for itself and derivatively on behalf of Alliance Network, LLC, a Nevada limited liability company, Alliance Network Holdings, LLC, a Delaware limited liability company, and Network World Market Center, LLC, a Delaware limited liability company, Plaintiff,

against

Greenberg Traurig, LLP, a Delaware limited liability partnership and Robert J. Ivanhoe, an individual, Defendants.



601054/08



Berger and Webb LLP for Plaintiff

Martin I Kaminsky for Defendant

Richard B. Lowe, J.

Defendants Greenberg Traurig, LLP and Robert J. Ivanhoe move, pursuant to CPLR 3211 (a) (1), (3), (4), (5), and (7), for an order dismissing the complaint, or, in the alternative, pursuant to CPLR 2201, staying this action pending the resolution of an arbitration that Alliance Network, LLC (Alliance Network) commenced against plaintiff, NAMA Holdings, LLC (NAMA), a Nevada limited liability company, before the International Center for Dispute Resolution of the American Arbitration Association (Pending Arbitration).

Background

NAMA commenced this action on its own behalf and derivatively on behalf of Alliance Network, Alliance Network Holdings, LLC (Network Holdings), a Delaware limited liability company and subsidiary of Alliance Network, and Network World Market Center, LLC, a Delaware limited liability company and a subsidiary of Network Holdings. In seeking dismissal, defendants argue that (1) NAMA lacks standing or the right to bring this derivative action, (2) the prior-filed Pending Arbitration will resolve or moot the issues in this proceeding, (3) res judicata and collateral estoppel bar some of the claims, (4) NAMA is improperly seeking by this action to circumvent prior rulings against it in the Pending Arbitration and in an earlier action in the Delaware courts, and (5) expedition and judicial economy warrant a grant of the motion. [*2]

As set forth in the complaint, NAMA claims that defendants Greenberg Traurig, a Delaware limited liability partnership engaged in the practice of law, and Robert J. Ivanhoe ("Ivanhoe"), chairman of Greenberg Traurig's real estate group, violated their fiduciary duties owed to their client Alliance Network, and its majority member, NAMA.

One of the projects involving Alliance Network is the "WMC Project" — an extensive real estate development in downtown Las Vegas called World Market Center, which is a multi-phase, mixed use development, anticipated to include a showroom complex, convention center and hotel, and related and auxiliary facilities. Allegedly, defendants covertly engaged in a secret partnership with the managers of Alliance Network (Shawn Samson and Jack Kashani) (Managers) to develop a competing project called the "Blue Diamond Venture" (BDV) in which Ivanhoe improperly took a financial interest. Allegedly, the BDV wrongfully appropriates intellectual property and business opportunities belonging to Alliance Network, and it violates the "Manager-Managed Operating Agreement of Alliance," effective as of July 20, 2000 (Operating Agreement) governing Alliance Network.

The complaint alleges further that defendants, acting in concert with the Managers, sought to divest the other members of Alliance Network of their interests by (1) avoiding the distribution of millions of dollars to which NAMA was legally entitled, (2) designing and delivering significant, improper, and unnecessary capital calls, (3) withholding and concealing crucial information from NAMA, (4) engaging in a deceptive scheme to coerce the remaining members of Alliance Network to relinquish substantial benefits to which they were contractually entitled, and (5) concocting a bogus assignment of NAMA's interest to Mendi Gertner and Moises Gertner, who were the managers and Ivanhoe's partners in the BDV, as well as clients of defendants.

The complaint contains six causes of action. The first alleges that defendants, acting independently and in concert with the Managers and others, have breached their fiduciary duties to Alliance Network and NAMA by, among other things, usurping corporate opportunities belonging exclusively to Alliance Network, misleading Alliance Network, and disclosing confidential information.

The second cause of action alleges that defendants aided and abetted the breach of fiduciary duty by the Managers.

The third cause of action for tortious interference with prospective economic advantage alleges that defendants intentionally interfered with Alliance Network's rights and benefits under the Alliance Network agreements, including, but not limited to, the right to own, participate in, and develop the BDV and other projects.

The fourth cause of action for legal malpractice alleges that, because of the simultaneous representation of the Managers by defendants, defendants faced an irreconcilable conflict of interest.

The fifth cause of action for unjust enrichment alleges that, because of Ivanhoe's active involvement in the competing BDV, his active concealment of same, and his having obtained a personal financial interest in the BDV, he has obtained a benefit by improper means and without adequately compensating Alliance Network and NAMA.

The sixth cause of action seeks a declaration that defendants may not continue as attorneys for Alliance Network, its subsidiaries, and affiliates. [*3]

In seeking dismissal of the complaint, defendants first argue that NAMA lacks standing or the right to bring this derivative action, because the Operating Agreement does not permit such derivative suit. Instead, defendants contend, the Operating Agreement expressly gives the Managers sole authority to bring lawsuits on behalf of Alliance Network, and they cite sections 4.01 (a); 4.01 (c) (vi), (x), (xi), (xiv); and (e) (i), (iii) of the Operating Agreement in support. Because Alliance Network is a Nevada company, and Nevada law permits an operating agreement to prohibit a member of a Nevada company from bringing a derivative action (Nevada Business Associations Law § 86.483), defendants contend that NAMA may not maintain this action.

Nevada Business Associations Law § 86.483 provides: "A member, including a noneconomic member unless otherwise prohibited by the terms of the articles of organization or operating agreement, may bring an action in the right of a limited liability company to recover a judgment in its favor if managers or members with authority to do so have refused to bring the action or if an effort to cause those managers or members to bring the action is not likely to succeed."

Accordingly, a member may bring a derivative action "unless otherwise prohibited." The statute bars a derivative action if prohibited, rather than allowing a derivative action if expressly permitted. Hence, defendants' argument fails because the Operating Agreement does not prohibit a member company from bringing a derivative action. Because the statutory terms are clear, the court is to construe them so as to give effect to the plain meaning of the words used (Matter of Orens v Novello, 99 NY2d 180, 185 [2002]). Moreover, the dispute in the opposition and reply papers as to the effect of the absence of a comma in the statute after the words "noneconomic member" is inconsequential, because of the foregoing analysis, and resort to legislative history is unnecessary because of the unambiguity of the statutory language (see Matter of Amorosi v South Colonie Ind. Cent. School Dist., 9 NY3d 367, 372-73 [2007]).

Defendants next argue that the court should dismiss this action because the Pending Arbitration will resolve or moot the issues in this proceeding. Defendants allege that Alliance Network commenced the Pending Arbitration in March 2007, and in it NAMA asserted "counterdemands," seeking relief as to the same transactions and matters at issue here.

CPLR 3211 (a) (4) permits a party to move for dismissal of a complaint on the ground of another action pending between the same parties for the same cause of action in a court of any state or the United States (L-3 Communications Corp. v SafeNet, Inc., 45 AD3d 1 [1st Dept 2007]). Although substantial (rather than complete) identity of the parties is adequate (see Josephs v Bank of New York, 302 AD2d 318 [1st Dept 2003]), the two proceedings at issue here lack even substantial identity of the parties because the only defendants in this action (Greenberg Traurig and Ivanhoe) are not parties to the Pending Arbitration.

Defendants also argue that some of the claims (sixth cause of action for declaratory relief and discovery demands) are barred by the doctrines of res judicata and collateral estoppel. The sixth cause of action alleges that defendants have breached their fiduciary duties to Alliance Network and NAMA and aided and abetted the Manager's breach of duty by concurrently representing the Managers individually and various individuals and entities involved in the BDV, [*4]which directly competes with the WMC Project and usurps Alliance Network's interests. NAMA seeks a declaration that defendants may not continue as attorneys for Alliance Network, its subsidiaries and affiliates.

Defendants argue that NAMA is improperly seeking by these claims to circumvent prior rulings against it in the Pending Arbitration and in an earlier action in the Delaware courts. NAMA brought an action in Delaware in 2007 against "World Market Center Venture" seeking an inspection of the project's books and records. They contend that the arbitrators in the Prior Arbitration have already determined that defendants should not be disqualified from continuing to represent Alliance Network.

In its decision, the arbitration panel stated: "Respondent NAMA seeks disqualification of Greenberg Traurig LLP as counsel for claimant Alliance Network, LLC, and all of its subsidiary and affiliate companies involved in the present arbitration. NAMA advances two bases for this request: First, NAMA contends that it has a contractual right to demand such disqualification pursuant to Section 3.07(b)(i) of the Alliance Operating Agreement. Second, NAMA contends that Greenberg Traurig LLP has conflicts of interest violative of applicable attorney ethics rules that compel disqualification. Claimants oppose this motion. The panel disagrees with NAMA with respect to both of its contentions. NAMA's request for disqualification of Greenberg Traurig is denied."

There are two requirements of collateral estoppel: (1) that an issue in the present proceeding be identical to that necessarily decided in the prior proceeding, and (2) that, in the prior proceeding, the party against whom preclusion is sought was accorded a full and fair opportunity to contest the issue (Safchik v Board of Educ. of City of NY, 158 AD2d 277 [1st Dept 1990]). Under the doctrine of res judicata, once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or seeking a different remedy (O'Brien v City of Syracuse, 54 NY2d 353 [1981]). At this juncture, the record does not demonstrate that the requirements for either collateral estoppel or res judicata have been met. The statement by the panel that it "disagrees with NAMA with respect to both of its contentions" and that " NAMA's request for disqualification of Greenberg Traurig is denied " does not demonstrate conclusively that NAMA had a "full" opportunity to contest the issue, or that the issue has been brought to final conclusion. Defendants do not dispute the assertion that there was no hearing on the matter in the arbitration. Significantly, the panel specifically limited its finding to whether defendants could continue representation "in the present arbitration." The foregoing analysis applies equally to the issue involving the discovery requests in this action.

Alternatively, defendants argue that this action should be stayed. This, too, is denied, because of the lack of substantial identities of the parties, as well as the identity of the claims and relief sought (Middlebury Off. Park Ltd. Partnership v General Datacomm Indus., 248 AD2d 313 [1st Dept 1998]).

Accordingly, it is

ORDERED that the motion is denied; and it is further [*5]

ORDERED that defendants are directed to serve their answers to the complaint within 20 days after service of a copy of this order with notice of entry.

Dated: November 18, 2008ENTER:

________________

J.S.C.