Opinion
601260-2009.
Decided on January 7, 2010.
Brune Richard, LLP, New York, New York, By: David Elbaum, Esq., for Plaintiffs.
Rocke McLean Sbar, P.A., Tampa, Florida, By: Robert L. Rocke, Esq., for Defendants.
Before me is a motion to dismiss the complaint in this action concerning a series of financing agreements, including a Secured Term Note ("Note"), and related Guarantees (collectively, the "Agreements"), entered into between defendants Hopkins Capital Partners, Inc., Hopkins Capital Group, LLC, and Hopkins Capital Group II, LLC (collectively, "Hopkins"), and Calliope Capital Corporation ("Calliope"), around August 14, 2007.
According to the complaint, Calliope, the original lender and named party to the Agreements, assigned the rights and obligations under the Agreements, including the Note, to plaintiffs Valens U.S. SPVI, LLC ("Valens U.S.") and Valens Offshore SPVI, Ltd. ("Valens Offshore"), (collectively, "Valens"). (Compl. ¶ 30.)
Plaintiffs allege that Hopkins failed to pay amounts due under the Note, which matured on August 14, 2008, and failed to deposit certain shares of stock in a Citigroup account, which were supposed to secure Hopkins' obligations under the Note. Valens contends that, in consequence of Hopkins' breaches of the Agreements, Valens is entitled to payment of the principal, default interest, and a default payment, totaling over $9 million.
Hopkins moves to dismiss the complaint on several grounds: (a) the Court lacks personal jurisdiction over defendants, under CPLR § 3211(a)(8); (b) the forum selection clauses in the Agreements are unenforceable because they are unjust; and (c) this action should be dismissed in favor of a related Florida lawsuit, under CPLR § 3211(a)(4) or based on forum non conveniens. For the reasons that follow, the motion is denied.
Valens U.S. SPV I, LLC v. Hopkins Capital Partners, Inc., Case No. 09-11157 (Fla. Cir. Ct.).
I will concentrate on defendants' argument based on personal jurisdiction, which I consider to be the heart of this motion. The complaint asserts that the basis of personal jurisdiction over defendants, which are admittedly not New York entities, pursuant to CPLR § 301, is that, "Defendants consented to the jurisdiction of the State and Federal Courts located within the County of New York, State of New York in the Financing Agreements." (Compl. ¶ 14.) In their opposition papers, plaintiffs assert no additional basis for the assertion of personal jurisdiction over defendants, other than these forum selection clauses in the Agreements.
"[I]t is the well-settled policy of the courts of this State'" to enforce contractual forum selection provisions. Sterling Nat'l Bank v. E. Shipping Worldwide, Inc. , 35 AD3d 222 , 222 (1st Dept. 2006) (quoting Koob v. IDS Fin. Servs., Inc., 213 AD2d 26, 33 (1st Dept. 1995)).
Defendants do not deny that they signed the Agreements at issue, containing the forum selection provisions, in which they consented to the jurisdiction of the New York state courts. Defendants do, however, challenge plaintiffs' ability to sue them here based on the forum selection clauses, because plaintiffs are not parties to the Agreements. Defendants argue that plaintiffs have no ability to assert claims against defendants under the forum selection clauses in the Agreements, because the complaint's allegation that the Agreements were assigned by Calliope to plaintiffs is contradicted by the language of the assignments.
Although defendants frame their argument as jurisdictional, I consider the question before me to be one of standing: do plaintiffs have standing to sue for breaches of the Agreements, which they indisputably did not sign, based on the documents purporting to assign Calliope's rights and duties under those Agreements to plaintiffs?
When reviewing a motion to dismiss, I am generally bound to accept allegations of personal jurisdiction in the complaint. See Quantum Corporate Funding, Ltd. v. Southwestern Bell Telephone, LP , 45 AD3d 505 , 505-06 (1st Dept. 2007) (upholding denial of motion to dismiss a complaint seeking to enforce terms of a contract, based on the argument that defendant was not bound by the contract and therefore the forum selection clause was unenforceable, where a factual issue existed as to whether defendant executed the contract). A plaintiff is generally permitted to supplement the record as necessary to defeat a CPLR § 3211 motion to dismiss. See Rovello v. Orofino Realty Co., 40 NY2d 633, 635-36 (1976) (addressing § 3211(a)(7) dismissal motion). But insofar as the plaintiff's allegations are contradicted by documentary evidence, or legal conclusions that are unsupportable in the face of undisputed facts, those allegations must be disregarded. Zanett Lombardier, Ltd. v. Maslow , 29 AD3d 495 , 495 (1st Dept. 2006); see also Miglietta v. Kennecott Copper Corp., 25 AD2d 57, 58 (1st Dept. 1966).
Accordingly, I have considered, in addition to the parties' briefs, a Management Agreement between Calliope and Laurus Capital Management, LLC ("Laurus Capital"), an affidavit by Patrick Regan, senior managing director of Laurus Capital, the investment manager for Calliope, attaching the five assignments, and various documents filed in the Florida lawsuits. I have also considered three sets of documents submitted by the parties after this motion was fully submitted, insofar as they support plaintiffs' complaint: (a) plaintiffs' September 11, 2009 letter attaching a supplemental affidavit by Regan, attaching a document entitled: "Assignment, Reaffirmation and Acknowledgment Regarding Assignment Agreements and Conveyance of Loan, Loan Documents and Security Interests," (the "Reaffirmation"); (b) defendants' September 17, 2009 letter attaching the September 16, 2009 Rocke Affidavit, containing attachments from one of the related Florida lawsuits, as supplemented by the courtesy copy attached to defendants' October 9, 2009 letter; and (c) plaintiffs' September 23, 2009 reply letter .
The Management Agreement between Calliope and Laurus Capital was attached as Exhibit 13 to plaintiffs' answer and cross-claim filed in another Florida lawsuit, Citigroup Global Markets, Inc. v. Hopkins Capital Group II, LLC, Case No. 09-18096 (Fla. Cir. Ct.), which I permitted to be submitted to supplement the record on this motion.
Plaintiffs are hereby instructed to file this letter electronically immediately, as directed in my Part 60 Practices, which are available on the Commercial Division website and in my courtroom.
No one has asked me to convert this motion into one for summary judgment, pursuant to CPLR § 3211(c).
The Regan Affidavit, with the attached assignments, supplements the allegations in the complaint by positing that Calliope assigned its interest in the Note to Valens in five separate assignments between September 12, 2007 and April 1, 2008. It appears, from a review of the five assignments, that the first assignment was executed by Laurus Master Fund, Ltd. ("Laurus Master Fund"), as assignor, and Valens Capital, as investment manager for Valens U.S., the assignee. The other four assignments were executed by Laurus Capital, as investment manager for Calliope, the assignor, and by Valens Capital, as investment manager for Valens Offshore, the assignee.
Defendants contend that the assignments are ineffective, because they were not executed by Calliope. They were executed by either Laurus Capital or Laurus Master Fund — another entity of which Laurus Capital is the investment manager — as assignor.
The assignments were not executed by plaintiffs, but by their investment manager, Valens Capital, as assignees. Defendants did not raise this fact as a reason to disregard the assignments, however, until their October 9, 2009 letter. I have not incorporated as part of the record the substantive new arguments raised in defendants' October 9, 2009 letter, as defendants were not authorized to add new allegations in that letter.
I first address the four assignments to Valens Offshore on behalf of Calliope, signed by Laurus Capital. In paragraph 1(a) of the Management Agreement between Calliope and Laurus Capital, Calliope appoints Laurus Capital as "its agent and attorney-in-fact with full power, discretion and authority . . . to make all investment decisions concerning [Calliope], to enter into agreements and commitments on behalf of and in the name of [Calliope], . . . and to effect transactions on behalf of [Calliope]." Supplemented by this document, which indicates that Laurus Capital had authority to enter into the four assignments to Valens Offshore on behalf of Calliope, the complaint's allegations that Calliope assigned certain rights and obligations under the Agreements to Valens Offshore cannot be disregarded. Based on the record before me on this motion, I conclude that plaintiffs have standing to bring this suit against Valens Offshore.
I next address the assignment to Valens U.S. on behalf of Calliope, signed by Laurus Master Fund. In his Affidavit, Regan, who is Senior Managing Director of Laurus Capital, avers that Laurus Master Fund, of which Laurus Capital is investment manager, was authorized to assign Calliope's interest in the Note to Valens U.S. (Regan Aff. ¶¶ 1, 2, 6.) The record before me indicates that Regan is an agent of Laurus Capital, and Laurus Capital is an agent of Calliope. Therefore, I conclude that Regan has the authority to make such an averment on behalf of Calliope. With the complaint bolstered by this averment, I must accept its allegation that Calliope assigned certain rights and obligations under the Agreements to Valens U.S.
Defendants contend, however, that I cannot consider Regan's Affidavit, because Regan has no "standing" to make representations or to submit the assignments on Valens' behalf. I consider Regan's Affidavit as a set of sworn statements by Laurus Capital, of which he is Senior Managing Director, not by plaintiffs. I am unaware of a rule restricting plaintiffs' ability to submit affidavits by agents of Laurus Capital or Calliope to bolster the allegations of their complaint.
Defendants also urge me to discredit Regan's Affidavit and its attachments, because: (a) Regan's Supplemental Affidavit and the attached Reaffirmation are unreliable, (b) a similar affidavit filed in one of the related Florida actions was discredited by the Florida court, and (c) Regan's Florida affidavit contradicts the Affidavit he filed in this action.
I first address the alleged unreliability of Regan's Supplemental Affidavit and the attached Reaffirmation.
The Reaffirmation states that it was "executed and delivered effective as of April 1, 2008" and was "made by and between" Calliope, acting through Laurus Capital, on the one hand, and Valens U.S. and Valens Offshore, on the other. In the text of the Reaffirmation, Calliope "acknowledges and agrees" that the September 12, 2007 assignment by Laurus Master Fund to Valens U.S. was made pursuant to Calliope's authorization, on its behalf, and with its approval, and was ratified by Calliope. (Reaffirm. ¶ H.) Calliope further "represents and warrants" to Valens a list of representations concerning that assignment. (Reaffirm. at 3-4.) It is executed by Regan, on behalf of both Calliope and Laurus Master Fund, as well as two "witnesses," one of whom is identified as "Associate Counsel." No date appears on its signature page, but the signatures follow the statement: "this Assignment has been duly executed and delivered the day and year first written above. The only date it could mean is the "as of" date noted on the first page: April 1, 2008.
Plaintiffs insist that the Reaffirmation can be enforced as if it were signed on April 1, 2008, under caselaw holding that parties can enter into contracts that are effective "as of" a particular date, even where the contract does not indicate the date it was actually signed. See, e.g., Elescano v. Eighth-19th Co., LLC , 13 AD3d 80 , 81 (1st Dept. 2004) (enforcing contract that did not contain a date of its execution, according to the date as of which it was to be effective); Moore v. Comm'r of Internal Revenue, T.C. Memo. 2007-134, 2007 WL 1555852, at *16 (U.S. Tax Ct. May 30, 2007) (enforcing effective date provision in contract that reduced to writing a prior oral understanding among the parties, where it was not an attempt to retroactively obtain a tax benefit because it was not misleading to the reader, under Georgia law).
These decisions are inapposite, because they involved agreements executed at arms-length, which courts found did not mislead the reader. The Reaffirmation, in contrast, is not an agreement executed at arms' length, and it does tend to mislead the reader. While the Reaffirmation purports to be "made by and between" Calliope and Valens, it is executed by only one person — Regan, purportedly on behalf of both Calliope and Laurus Master Fund. It is signed by two "witnesses," but it does not identify the entity of which the signatory is "Associate Counsel" or otherwise identify on whose behalf these witnesses are signing. Furthermore, the Reaffirmation goes further than stating that it is effective "as of" an earlier date; it actually states that it was "executed and delivered" on April 1, 2008 — which plaintiffs now concede is inaccurate. Even if the Reaffirmation were properly backdated, plaintiffs' September 11, 2009 letter and Regan's supplemental affidavit give the reader the impression that the Reaffirmation was executed on April 1, 2008. Both documents state that the Reaffirmation was "recently" executed, but "recently" is easily understood by the reader to mean April 1, 2008, since it is the only date to appear in either document and is a fairly recent date. Nowhere in plaintiffs' submissions to the Court do plaintiffs acknowledge that the Reaffirmation was executed in August 2009 — a few weeks prior to oral argument on this motion and after the motion papers had been fully submitted.
My impression that plaintiffs' use of the April 1, 2008 date in the Reaffirmation and Regan's supplemental affidavit was misleading was only confirmed at oral argument, when counsel for Valens explained that the Reaffirmation was dated April 1, 2008, because that was the date on which the last of the assignments became effective. (Trans. at 43 (Sept. 21, 2009).) He explained that "if we had used, that this was dated sometime in August 2009, what Hopkins would argue is that there's been a concession that the assignment were invalid and not valid as of the time we filed the complaint in this case." (Trans. at 48.) This remark only underlines my impression that plaintiffs' use of the April 1, 2008 date in the Reaffirmation and Regan's supplemental affidavit is misleading.
Consequently, I disregard Regan's supplemental affidavit and the Reaffirmation.
But even so, based only on the allegations of the complaint, as supplemented by the other documents I have discussed, plaintiffs have adequately alleged a basis for standing to assert these claims against defendants.
The decisions of ComJet Aviation Management LLC v. Aviation Investors Holdings Ltd., 303 AD2d 272, (1st Dept. 2003) and Freidus v. Sardelli, 192 AD2d 578 (2d Dept. 1993) are distinguishable, because in those cases, the plaintiffs were indisputably not parties to the agreements at issue. Here, in contrast, plaintiffs have alleged that they are, in fact, parties to the Agreements, and the evidence submitted by the parties supports their allegation.
I disregard plaintiffs' two other main arguments in favor of disregarding Regan's Affidavit. I decline to import the credibility finding of the Florida court, based on a summary ruling after a preliminary injunction hearing on the equitable claims brought in that action. That ruling was issued in a different procedural posture, on different claims, and on a different record, and I decline to consider it binding on the motion before me. No one has asked me to hold a hearing on Regan's credibility. On the papers before me, I find no reason to make a credibility finding against Regan, for the purpose of this motion. The inconsistencies pointed out by defendants between the Affidavit submitted by Regan here and the one he submitted in Florida do not appear to undermine the averments at issue, which concern the authenticity of the five assignments and the authority of Laurus Master Fund to sign the assignment to Valens U.S. on behalf of Calliope, which has otherwise been unchallenged by defendants. I disregard altogether defendants' argument that the four assignments to Valens Offshore contradict Valens' allegations regarding the percentages of interest assigned; I am satisfied with plaintiffs' explanation of that apparent discrepancy.
I also reject as unconvincing Hopkins's argument that it would be unjust to enforce the forum selection clauses, on the ground that they restrict Hopkins's choices about forum and venue but give Valens a unilateral right to pursue litigation in any other jurisdiction. I do not find unjust or reasonable an arms'-length agreement between sophisticated parties, permitting one party to sue in a jurisdiction of its choosing while restricting the other party's right to sue to just one forum. When negotiating an agreement, parties ordinarily engage in give-and-take, trying to obtain favorable provisions and making concessions to the other side. On the papers before me, I have no reason to second-guess the reasonableness of their agreement.
Last, I reach defendants' arguments in favor of dismissing or staying this action in favor of a related Florida case. Defendants have not denied that they signed the Agreements, and that those Agreements contain substantially similar forum selection clauses. The forum selection provision in the Securities Purchase Agreement, for instance, states that Hopkins Capital Partners, Inc. "waives any objection that it may have based upon lack of personal jurisdiction, improper venue or forum non conveniens." (Securities Purchase Agt. § 11.1(b).) As I have already concluded that plaintiffs have standing to assert claims based on the Agreements, which defendants indisputably signed, I conclude, for purposes of this motion, that defendants have waived any objection to jurisdiction based on principles of comity and forum non conveniens. Therefore, I need not address the parties' arguments regarding dismissing or staying this action based on CPLR § 3221, Gen. Obligs. Law § 5-1402, CPLR § 327, or relevant caselaw.
For the foregoing reasons, the motion to dismiss is denied.