DGL Group Ltd. v ETG Capial Advisors LLC

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DGL Group Ltd. v ETG Capial Advisors LLC 2020 NY Slip Op 31863(U) June 10, 2020 Supreme Court, New York County Docket Number: 655266/2018 Judge: Debra A. James Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: 1] NEW YORK COUNTY CLERK 06/15/2020 02:52 PM INDEX NO. 655266/2018 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 06/15/2020 SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY lAS MOTION 59EFM PART HaN. DEBRA A. JAMES PRESENT: Justice ---------------------------------------------------------------------------- X INDEX .NO. DGL GROUP LTD and HAPPY THREADS LLC 655266/2018 MOTION DATE Plaintiffs, 08/16/2019 MOTION SEQ. NO. 002 - vDECISION + ORDER ON MOTION ETG CAPITAL ADVISORS LLC and ETG CAPITAL LLC, Defendants. ------------------------------------------------------------------------------ X The following e-filed documents, listed by NYSCEF document number (Motion 002) 170, 171, 172, 173, 174,176,177,178,179,180,181,182,183,184,185 DISMISS were read on this motion to/for ORDER Upon the foregoing ORDERED complaint, entirety; that defendants' pursuant complaint, entirety; motion to CPLR 3211 that the defendants' pursuant to dismiss the amended (a) (7) is denied in its to CPLR 3211 motion to dismiss (a) (1) is denied the amended in its and it is further ORDERED that the defendants to the complaint order with notice ORDERED preliminary Motion it is and it is further ORDERED 655266/2018 documents, within are directed 20 days after service to serve an answer of a copy of this of entry; and it is further that counsel conference are directed to appear to be held at the Supreme DGL GROUP LTD vs. ETG CAPITAL ADVISORS LLC No. 002 1 of 11 for a Court, 60 Page 1 of 11 [*FILED: 2] NEW YORK COUNTY CLERK 06/15/2020 02:52 PM INDEX NO. 655266/2018 NYSCEF DOC. NO. 187 Centre RECEIVED NYSCEF: 06/15/2020 Street, New York, New York, lAS Part 59, Room 331, by court approved operations video platform, permit, or, to the extent court on the 4th day of August in person, 2020 at 10:00 A.M. DECISION In this breach of contract Advisors LLC pursuant to CPLR 3211 (Happy Threads), the defendants defendants, and ETG Capital (a) (1) and Plaintiffs, complaint. LLC (Advisors), action, (Capital), move (7), to dismiss DGL Group Ltd. oppose LLC ETG Capital the amended (DGL) and Happy Threads such motion, to which opposition, submit a reply. Background Plaintiffs retailers, including TRU commenced Chapter are in the business a Chapter 11 of Title 34666-klp, Virginia Toys "R" Us (TRU). 11 bankruptcy (the.Bankruptcy On September proceeding defendants, payment 19, 2017, pursuant during Court for the Eastern Court). Plaintiffs TRU's bankruptcy; to proceeding, plaintiffs separately who were in the business when a purchaser, District agreed however, risk that they would not be able to recover bankruptcy goods to 11 of the U.S. Code, under Case No. 17- in the Bankruptcy to be suppliers of selling of to continue to hedge the from TRU in the contracted of guaranteeing such as TRU, is experiencing with or insuring liquidity issues or is in bankruptcy. 655266/2018 DGL GROUP LTD vs. ETG CAPITAL ADVISORS Motion No. 002 LLC 2 of 11 Page 2 of 11 [*FILED: 3] NEW YORK COUNTY CLERK 06/15/2020 02:52 PM NYSCEF DOC. NO. 187 INDEX NO. 655266/2018 RECEIVED NYSCEF: 06/15/2020 ) Under to two separate Master Claims Purchase (the Master Agreement[s]) and Confirmation between DGL and Advisors, and Happy Threads parties acknowledged more "Puts" certain of its post-petition defendants No.2) . setting account The Confirmation forth specific administrative orders: Company 7 of the Bankruptcy to cease operating (3) confirming Chapter administrative expense in full of the Accounts VS. Event contained (NYSCEF Doc. provisions relating to the sale TRU for sums owed on Agreement at 2-6). The as a Bankruptcy Chapter final 11 case to a case (2) authorizing the its business in the ordinary course, plan of reorganization an orderly the Company 655266/2018 DGL GROUP LTD Motion No. 002 to Code, a liquidating 11 to commence (4) authorizing receivable Court has entered the Company's into one or to Put Put is defined the Bankruptcy (1) converting under Chapter a the plaintiffs claim against (Confirmation Event triggering Event, which means entering of a Specified Agreements by and and Capital, terms and conditions of goods sold Specified TRU accounts upon the occurrence of plaintiffs' Agreement(s), that they anticipated (Put[s]), which would entitle Agreements liquidation ETG CAPITAL ADVISORS or to that do not provide Receivable . of its assets, to make distributions creditors under for payment (NYSCEF Doc. No. 2 at 1). LLC 3 of 11 Page 3 of 11 [*FILED: 4] NEW YORK COUNTY CLERK 06/15/2020 02:52 PM NYSCEF DOC. NO. 187 INDEX NO. 655266/2018 RECEIVED NYSCEF: 06/15/2020 DGL/Advisors The DGL/Advisors Agreement, dated satisfaction option Purchase Agreement February ,8, 2018, provides of certain conditions (the Put Option) $200,000.00 Bankruptcy February Court. to require Advisors The parties ending August coverage DGL would have the to purchase claims allowed executed 8, 2018, for $200,000.00 that, upon precedent, of DGL's administrative for the six-month and Confirmation up to by the a Letter Agreement of TRU accounts period beginning dated receivable, February 8, 2018 and 7, 2018, at a Put rate of 3.45% per month, for total put fee of $41,400.00. Happy Threads/Capital The Happy Threads/Capital Confirmation Agreement, upon satisfaction purchase claims dated December of certain would have the option conditions (the Put Option) up to $80,000.00 allowed Purchase Agreement Letter Agreement dated December for the six-month December 11, 2017 and ending March that, Happy Threads to require Advisors to administrative executed 11, 2017 for $80,000.00 receivable, 655266/2018 precedent, Court. The parties accounts 2.25% per month, 11, 2017, provided of Happy Threads' by the Bankruptcy and coverage period a of TRU beginning 31, 2018, at a Put rate of for total put fee of $6,561.29. DGL GROUP LTD vs. ETG CAPITAL ADVISORS Motion No. 002 LLC 4 of 11 Page 4 of 11 [*FILED: 5] NEW YORK COUNTY CLERK 06/15/2020 02:52 PM INDEX NO. 655266/2018 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 06/15/2020 \ To exercise require a Put, Section plaintiffs 4 of the Master to notify defendants Agreements of .their intention to (Account Claims), by , sell, transfer irrevocable and assign account written notice claims Notl'ce) (NYSCEF 0oc. (the Assignment No. 2 at 4).' If a Specified Event occurs prior to the expiration date set forth in Item 5 of the Letter Agreement, plaintiffs must deliver the Assignment p.m. on the date that is within Specified Event Agreements Account conditions precedent assigning the net account must. execute Agreement) value of the Accounts of a claim to defendants Assignment Agreement and satisfy sale and purchase certain the Assignment selling, transferring, Receivable attachments of Claim in an amount that plaintiffs and equal to (id.). deliver the proof a copy of the Proof as an exhibit to the (id.). In the event that plaintiffs Notices to purchase 8 (a) specifically and shall include with all necessary by 5 8 of the Master satisfying Claims to defendants 8 (b) further mandates of Claims obligation to plaintiffs (the Assignment the Account Section (id. at 5). Section that plaintiffs Agreements Section Additionally, is subject to defendants 20 days of the date, of the states that defendants' Claims provides (id.). Notice properly the conditions of the Account issue Assignment precedent, Claims closing of the is to occur at 9:00 a.m. Page 5 of 11 655266/2018 DGL GROUP LTD VS. ETG CAPITAL ADVISORS LLC Motion No. 002 5 of 11 [*FILED: 6] NEW YORK COUNTY CLERK 06/15/2020 02:52 PM NYSCEF DOC. NO. 187 INDEX NO. 655266/2018 RECEIVED NYSCEF: 06/15/2020 (New York time) at defendants' offices, other electronic at least 5 days and not transmission, by facsimile, more than 20 days after the satisfaction conditions precedent (id. at 4). a final order of the Bankruptcy claims, pursuant Pursuant to Section to Section conditions further On March operations Down Order, discharged to plaintiffs authorizing expense having been issued between constituted the and will to that Put its argue that the Wind- the effective a Specified dates of Event. On March 29, 2018, DGL filed a proof of claim with the Bankruptcy in the sum of $244,494.00 claim for $131,076.75 On March Notices 655266/2018 Mntlnn IIIn acknowledged DGL GROUP LTD nn? VS. Court filed a proof of (NYSCEF Doc. No.4). 30, 2018, plaintiffs to defendants Defendants and Happy Threads (id.) an order to wind-down Plaintiffs (id.) shall have no Court entered the debtors by the Put shall and terminated with respect (NYSCEF Doc. No. -5). the Letter Agreement, are allowed fail to satisfy and defendants 22, 2018, the Bankruptcy (Wind-Down Order) of the 5 (a) of the Master Agreement or rewritten, obligation Claims 8'within the 25-day period, canceled, not be reinstated by plaintiffs Court as administrative 5 (b), if plaintiffs in Section be automatically Account or by delivered the Assignment (NYSCEF Doc. No. 173 at Exhibits receipt E 1-3) in its email to plaintiffs 6 of LLC 11 ETG CAPITAL ADVISORS dated Page 6 of 11 [*FILED: 7] NEW YORK COUNTY CLERK 06/15/2020 02:52 PM INDEX NO. 655266/2018 NYSCEF DOC. NO. 187 April RECEIVED NYSCEF: 06/15/2020 5, 2018. amended On May 25, 2018, the Bankruptcy order (Procedure Order) €stablishing claim procedures the Procedure to reconcile Order dated May 25, 2018 allowed order of the Bankruptcy notified defendants, allowed in the amount Doc. No. 11-12). of plaintiffs' satisfied demand email. of $316,453.49 Plaintiffs 6, 2018. the Wind-Down prerequisites On September purchase agreement of contract against the credit their obligations judgment interest 6, defendants plaintiffs' it was proceeds a final order. one cause of against Advisors and one of contract breached insured money receivables. in the sum of approximately from August against the terms of the to insure risk, and then in bad faith refusing to purchase a notified claiming insurance for breach claim defendants by accepting receipt by timely making both notices cause of action by Happy Threads money confirmed filed the lawsuit at bar alleging Plaintiffs (NYSCEF further argue that they Order did not constitute action by DGL for breach Capital. and $131,076.75 to pay either of plaintiffs' Plaintiffs further On July 27, 2018 plaintiffs that it was rejecting not required for the debtors via email, that their claims would be their contractual plaintiffs argue that claims without On July 27, 2018, defendants on August because Court. an administrative Plaintiffs (NYSCEF Doc. No. 174). and allow administrative Court entered DGL seeks a $200,000.00, 16, 2018, and costs, expenses to honor plus and Page 7 of 11 655266/2018 DGL GROUP LTD vs. ETG CAPITAL ADVISORS Motion No. 002 LLC 7 of 11 [*FILED: 8] NEW YORK COUNTY CLERK 06/15/2020 02:52 PM INDEX NO. 655266/2018 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 06/15/2020 attorneys' fees. sum $80,000.00, expenses plus interest and attorneys' Defendants complaint, from August Bankruptcy Court in the 15, 2018, and costs, the amended (a) (1), (7), based on and failure to state a cause of action1• argue that plaintiffs' delivered judgment fees. to CPLR 3211 evidence Defendants seeks a money move for an order dismissing pursuant documentary timely Happy Threads because notices said notices of claims were not were dated prior to the issuing a Final Order allowing plaintiffs' claims. DISCUSSION A party may move for judgment dismissing of action on the ground of action for which relief may be granted On a motion to dismiss court must afford accept motion pursuant the pleadings the facts alleged plaintiff Morone, that the pleadings the benefit in the complaint of every favorable 50 NY2d 481, 484 [1980]). to dismiss is whether fail to state a cause (CPLR ~ 3211 to CPLR ~ 3211 a liberal one or more causes [a] [7]). (a) (7), the construction and as true, according inference The court's the facts alleged the (Morone v inquiry on a fit within any Plaintiffs' original complaint was filed on October 23, 2018./ In response to the defendants' first motion to dismiss (mot. Sequence number 001), plaintiffs filed their amended complaint on February 11, 2019 and defendants withdrew their prior motion to dismiss. I 655266/2018 DGL GROUP LTD vs. ETG CAPITAL ADVISORS LLC Motion No. 002 8 of 11 Page 8 of 11 [*FILED: 9] NEW YORK COUNTY CLERK 06/15/2020 02:52 PM NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 06/15/2020 cognizable accorded legal theory favorable as true [1st Dept 1999J). documentary inferences, Bare legal conclusions however, pursuant Hill House Apt. .Corp., 257 AD2d pursuant to,CPLR where the documentary are not and need not be accepted A party may also move to dismiss evidence to dismiss Mutual (id.). (Biondi v Beekman defense INDEX NO. 655266/2018 to CPLR 3211 ~ (a) (1). on A motion 3211 ~ (a) (1) will be granted evidence to the plaintiff's based 76, 81 conclusively establishes cla'ims as a matter 'of law Life Ins. Co. of N.Y., 98 NY2d 314, 326 only a (Goshen v [2002J). DGL's First Cause of Action for Breach of Contract & Happy Threads' Second Cause of Action for Breach of Contract Plaintiffs each allege a cause of action based upon similar facts, terms and conditions, provisions establish on a breach "the existence performance 425, 426 of the express of the Master Agreements. To prevail resulting for breach thereunder, damages" of contract of a contract, the defendant's (Harris v Seward claim, a plaintiff must the plaintiff's breach thereof, Park Hous. Corp., and 79 AD3d [1st Dept 2010J). The amended Happy Threads and Capital and Confirm~tion enforceable complaint alleges are. parties Agreements, contracts that (1) DGL and Advisors to the Master Agreements which are valid, binding (amended compl. ~~ 11-14;45-48); 655266/2018 DGL GROUP LTD VS. ETG CAPITAL ADVISORS LLC Motion No. 002 9 of 11 and and (2) a Page 9 of 11 [*FILED: 10] NEW YORK COUNTY CLERK 06/15/2020 02:52 PM INDEX NO. 655266/2018 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 06/15/2020 (id. at enen 17; 52 [b]); (3) plaintiffs Specified Event occurred performed their obligations Confirmation Agreements defendants, under the Master Agreements by remitting which payments requirements the premium were accepted, timely providing assignment (id. at enen 18-36; obligations to exercise of the TRU receivables 52 [a]-66); and breached fair dealing by refusing pay plaintiffs (5) plaintiffs defendants' (4) defendants their and Confirmation of good faith and to accept assignment of and failing to suffered as a result monetary damages of (id. at en en 85,96). as true, the amended a cause of action defendants' second causes to defendants (id. at enen 43, 73); and pleads that basis, as well as breached their implied duties these allegations adequately the for their TRU receivables breaches Taking to of a specified Put Options, under the Master Agreements Agreements payments and by fulfilling for the notice of the occurrence event and their intention and motion for breach complaint of contract. to dismiss plaintiffs' of action, pursuant to CPLR 3211 On first and (a) (7) must be denied. Defendants move to dismiss plaintiffs' causes of action based upon documentary Defendants Claim Agreements represent 655266/2018 U_tinn Nn first and second evidence. rely on the Master Agreements to establish that plaintiffs and Assignment of did not timely (1) that a final order had been issued and 10 of DGL GROUP LTD VS. ETG CAPITAL ADVISORS nn, 11 LLC (2) provide an Page 10 of 11 [*FILED: 11] NEW YORK COUNTY CLERK 06/15/2020 02:52 PM INDEX NO. 655266/2018 NYSCEF DOC. NO. 187 RECEIVED NYSCEF: 06/15/2020 Assignment refute defense Agreement. The documentary the allegations as a matter in the amended of law. argue that plaintiffs' breach of contract of claim was untimely, unavailing. The amended Agreements complied that defendants under the Master and Court's Wind-Down plaintiffs a Specified constituted Event and which plaintiffs' Order pursuant also asserts Order, of 20 days which Event and Bankruptcy further allege constituted to the Master Agreement. that plaintiffs Assignment 30, 2018, within of the date of the Bankruptcy allege is likewise' that plaintiffs Notices on March a claim fails because alleges the Assignment to defendants or establish such argument with their obligations by sending Claim Agreements complaint does not utterly complaint To the extent their notice initially evidence The amended made timely demands a Final complaint on August 6, 2018, after the July 26 notice that the claims were approved. Taken as true, these allegations plaintiffs' requirements. documentary are sufficient claim that they complied Therefore, evidence with the notice the motion to dismiss of claim based upon shall be denied. 6/10/2020 DATE DEBRA A. JAMES, J.S.C. CASE DISPOSED CHECK ONE: GRANTED 0 NON.FINAL GRANTED DENIED ~ 655266/2018 DGL GROUP LTD Motion No, 002 INCLUDES VS, DISPOSITION IN PART SUBMIT ORDER SETTLE ORDER APPLICATION: CHECK IF APPROPRIATE: to support TRANSFER/REASSIGN ETG CAPITAL ADVISORS ~ LLC 11 of 11 FIDUCIARY APPOINTMENT D D OTHER REFERENCE Page 11 of 11

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