### Life Ins. Fund Elite, LLC v Hamburg Commercial Bank AG 2024 NY Slip Op 30014(U) January 3, 2024 Supreme Court, New York County Docket Number: Index No. 153100/2023 Judge: Melissa A. Crane 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.NYSCEF DOC. NO. 49 INDEX NO. 153100/2023 RECEIVED NYSCEF: 01/03/2024

PRESENT: 

### SUPREME COURT OF THE STATE OF NEWYORK NEWYORK COUNTY HON. MELISSA A. CRANE PART Justice 60M

----------------------------------------------------------------- ----------------X INDEX NO. 153100/2023

LIFE INSURANCE FUND ELITE, LLC., Plaintiff,

- V - HAMBURG COMMERCIAL BANK AG, CERBERUS EUROPEAN CAPITAL ADVISORS, LLP., PROMONTORIA HOLDING 260 BV, Defendant.

------------------------------------------------------------------- --------------X MOTION DATE 09/12/2023 MOTION SEQ. NO. 002
DECISION + ORDER ON MOTION

The following e-filed documents, listed by NYSCEF document number (Motion 002) 19, 20, 21, 22, 23, 34,40,41,42,43,44,46,47 were read on this motion to/for DISMISS Defendants Hamburg Commercial Bank AG ("HCOB"), Cerberus European Capital Advisors, LLP ("Cerberus European"), and Promontoria Holding 260 BV ("Promontoria") have movedto dismiss PlaintiffLifeInsuranceFundElite, LLC's("LIFE") complaintpursuantto CPLR 321 l(a)(l), (5), (7), and (8). Atoral argument on September 12, 2023, the court dismissedthe third
cause ofaction (breach offiduciary duty against HCOB), sixth cause ofaction (civil conspiracy against Cerberus European), and seventh cause of action (demand for an accounting against HCOB). The court denied dismissal ofthe first cause ofaction (2013 breach ofduty ofcommercial reasonableness against HCOB). The court otheiwise reserved on the motion to dismiss. For the following reasons, the court denies the remainder ofDefendants' motion to dismiss in its entirety. 

### FACTUAL AND PROCEDURAL BACKGROUND This case arises from Defendants' alleged failure to dispose ofcollateral in a reasonable
manner that Defendants obtained from Plaintiff after Plaintiff defaulted on a loan. LIFE is a "private equity fund that invested in life insurance policies held by a non-discretionary trust"

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(Complaint, NYSCEF Doc. No. 1, 

### i1 2). As part of this business, HSH Nordbank ("HSH"), HCOB'spredecessor, agreed to loanLIFEup to $150,000,000 in 2007pursuantto aLoan Security Agreement between HSH, LIFE, and LIFE's subsidiary ISM Insurance Agency, LLC ("ISM Agency") (id., 

### ,i 20; Loan Security Agreement ["LSA"], NYSCEF Doc. No. 2). A portfolio oflife insurance policies secured the loan (Complaint, 

### ,i,i 21-25). Under the LSA, HSH could "at any time sell to one ormore Qualified Purchasing Lenders 1 (an 'Assignee'), all or any part ofits rights and obligations under [the] Agreement" (LSA, § 11.14[a]). Additionally, while HSH could "sell
or offer to sell participating interests in the Note
...without the consent of, ornotice to, [LIFE]
.

. . [HSH] [ would] retain the sole right and responsibility to exercise the rights of [HSH], and enforce the obligations ofthe Loan Parties" (id., § 11.14[b]). In the event ofa sale ofparticipating interests in the Note, "[ n]o Participant [ would] have anyrights
...to receivepayment ofprincipal, interest or any other amount payable hereunder except through a Lender and as provided in this Section 11.14(b)" (id.). In January 2013, after LIFE defaulted on the loan, it agreed, along with ISM Agency, to tum over to HSH the collateral that secured the loan pursuant to a Standstill Agreement (Complaint, 

### ,i,i 22-24; Standstill Agreement, NYSCEF Doc. No. 3). According to the Standstill Agreement, LIFE and ISM Agency owed HSH an aggregate principal amount "not less than $55,000,000" plus interest, costs, expenses, attorneys' fees, and other charges or contractual obligations (Standstill Agreement, Recitals, § C). Pursuant to the Standstill Agreement, LIFE agreed that "[s]ubjectto the occurrence ofa Trigger Event
... [LIFE] hereby surrenders, delivers, grants and turns overto CollateralAgent [WellsFargo Bank, N.A.], and Guarantors [ISM Agency]

1 The LSA defines a "QualifiedPurchasingLender" as a "financial institution organized under the laws ofa country which is a member of the Organization for Economic Co-operation and Development and that has a long-term unsecured senior debt rating ofleast A and A by S&P andMoody's, respectively (orthe equivalentthereof)" (LSA, § 1.1).

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hereby acknowledge and consent to such surrender, delivery, grant and turnover by [LIFE] to Collateral Agent, peaceful possession ofthe Collateral" (id., §§ 2.1-2.1 [a]). Additionally, LIFE and ISM Agency "waive[d] all oftheir respective rights to notification" as to the "sale or other disposition by Collateral Agent ofthe Collateral" pursuant to the UCC (id., § 2.1 [b]). The complaint alleges that, after HSH took control ofthe collateral insurance policies and paid $500,000 in reinstatement fees, the policies were worth $70 million (Complaint, ,i 30). In addition to the value oftheinsurance policies, the trust also allegedlyheld a $62 millionreceivable from Avon Capital LLC ("Avon"), a former defaulting member of Plaintiff, bringing the total value ofthe LIFE assets HSH held to $132 million (id., ,i,i 32-36). LIFE alleges, that after taking control of the assets, HSH effected an unauthorized disposition of collateral by improperly claiming in disclosures to have merged with LIFE and treating income from the life insurance policies as "Other operating income" on its balance sheet (Complaint, ,i,i 57, 67). The complaint alleges that HSH concealed this improper purported merger by keeping two separate sets of financial records, onethattreatedLIFE as a subsidiaryofHSHand onethattreatedtherelationship
as a loan, "in connection with which the bank sent LIFE phony quarterly cash and collateral reports" (id., ,i,i 58-61). Subsequently, HSH allegedlypursuedthe trust'sbreach ofcontract claim against Avon, obtained ajudgment for the trust ofover $86 million in a 2016 arbitration, butthen took no steps to collect the award (id., ,i 71). LIFE alleges, that through booking the trust's judgmentas its own asset andusing that asset as leverage to settle a differentlawsuit againstAvon, HSH engaged in another improper disposition ofassets (id.). In 2018, Promontoria, a company consisting ofa "consortium ofprivate equity investors" ledbyCerberus Capital ManagementLP ("Cerberus"),2 purportedlypurchased aportfolio ofloans

2 The complaint alleges that Defendant Cerberus European is a subsidiary ofCerberus, which is not a party to this litigation (Complaint, 

### ,r 10).

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from HSH, including the LIFEloan (id., 

### ,i,i 76, 78; Loan Sale andPurchase Agreement ["LSPA"], NYSCEF Doc. No. 23). 3 According to the Promontoria February 22, 2018 management board resolution approving the transaction, the board "intendedthat the Company enters [sic] into a loan sale and purchase agreement (the LSPA) with respect to the sale and purchase of certain loan portfolio items by the Company from HSH Nordbank AG(the Seller)" (id., Written Resolution of the Management Board ofPromontoria Holding 260 B.V. ["Promontoria Resolution"],§ 1.1.1). Under the LSPA, Promontoria would first pay the purchase price to HSH, and then Promontoria
or an assignee and HSH would enter into a sub-participation agreement" (id., § 4.7[a][i]-[ii]). Pursuant to the sub-participation agreement, HSH would provide "commercial title" to the portfolio items to Promontoria or the assignee, but HSH would "retain legal title" (id.). As the LSPA contemplated, Promontoria allegedly "sub-participated the Loan into a Master Fund Subparticipation and Trust Agreement ('MFSPA'), in which HCOB and another Cerberus-controlled entity, Promontoria North Designated Activity Company ('Promontoria North'), were participants" (Complaint, 

### ,i 80). In 2019, Cerberus European allegedly initiated a process to sell the LIFE portfolio of insurance policies on Promontoria's behalf, retaining the investment bank Houlihan Lokey, Inc. ("Houlihan Lokey") (id., 

### ,i,i 90-91). After discovering the impending sale, LIFE allegedly indicated to counsel for HCOB and Cerberus that it was prepared to make a bid itself for the collateral (id., 

### ,i 114). Two days afterthis inquiry, counsel for HCOB and Cerberus informedLIFE that a different bidder purchased the collateral (id.). LIFE later learned that the purchaserbought the collateral at what LIFE contends was an "unreasonably low sales price" of$31.5 million (id.,

3 The complaint alleges that this transaction was part ofHSH's compliance witha European Commission mandate to undergo privatizationby 2018, that ultimately resulted in HSH being soldto a consortium ofprivate equity investors led by Cerberus andbeing "rebranded" as defendant HCOB (see Complaint, 

### ,r 75).

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,i 116). LIFE asserts that the policies "would have sold for more if LIFE had been given an opportunity to bid" (id.). LIFE initially filed an action in federal court against HCOB, including for breach ofthe duty of commercial reasonableness related to the 2019 auction. Upon a motion to dismiss for failure to state a cause ofaction, the court dismissed the negligence and implied covenant ofgood faith and fair dealing claims, but denied dismissal of the breach of the duty of commercial reasonableness claim (see LifeIns. FundEliteLLCvHamburg CommercialBankAG, 545 F Supp 3d 86, 91-93 [SDNY 2021]). However, the parties ultimately stipulated to voluntarily dismiss that federal action without prejudice (PACER, LifeIns. FundEliteLLCvHamburg CommercialBank AG, 20-cv-8553, Doc. No. 62), and the court later dismissed a separate federal action for lack of subject matterjurisdiction (see LifeIns. FundElite LLCv Hamburg CommercialBankAG, 2023 WL 1797169, *3 [SDNY Feb 7, 2023]). LIFE then filed the complaint in this action on April 4, 2023, alleging causes ofaction for breach of the duty of commercial reasonableness based on the alleged 2013 disposition of collateral (count I), breach of the duty of commercial reasonableness based on the alleged disposition ofthe Avon arbitration award (count II), breach offiduciary duty (count III), breach of contract (count IV), breach of the duty of commercial reasonableness based on HCOB and/or Promontoria's4 2019 auction of the policies (count V), civil conspiracy (count VI), and an accounting (count VII).

4 The complaint alleges that "[a]ssuming HSH Nordbank had not disposed ofthe Collateral to itself in 2013 and assuming HCOB retainedrights to dispose ofthe Collateral afterthe 2018 Portfolio Transaction, HCOB was obligated to dispose ofthe Collateral ina commercially reasonable manner," but, apparently inthe alternative, that"[ a]ssuming Promontoria Holding acquired any rights in the Collateral, it was obligated to dispose of it in a commercially reasonable manner" (Complaint, ir,r 167-68).

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On June 5, 2023, Defendants moved to dismiss the complaint pursuant to CPLR 321 l(a)(l), (5), (7), and (8). On September 12, 2023, the court held oral argument. At oral argument, the court dismissed the third, sixth, and seventh causes ofaction, denied dismissal of the first cause ofaction, and reserved decision on the remainder. DISCUSSION On a motion to dismiss pursuant to CPLR 321 l(a)(7), the court must "accept the facts as allegedin the complaint as true, accordplaintiffs thebenefit ofeverypossible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (Leon v Martinez, 84 NY2d 83, 87-88 [1994]; seealso Chapman, Spira & Carson, LLCvHelixBioPharma Corp., 115 AD3d 526, 527 [1st Dept 2014]). On a motion to dismiss under CPLR 321 l(a)(l), "dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter oflaw" (Leon, 84 NY2d at 88; Chen v Romona Keveza Collection LLC, 208 AD3d 152, 157 [1st Dept 2022]). 1. Breach ofDuty ofCommercial Reasonableness -AvonArbitration Award (HCOB) The court denies dismissal ofthe second cause ofaction for breach ofthe duty of commercial reasonableness based on the allegedly improper disposition ofthe Avon arbitration award. Under UCC 9-610(a)-(b), "[a]fter default, a secured party may sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or following any commercially reasonable preparation or processing" but "[e]very aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable" (TAP Holdings, LLC v Orix Finance Corp., 45 Misc3d 1217(A), *16 [Sup Ct, NY County Nov 7, 2014]; HSBCBank USA, Nat. Ass'n vAmagli, 18 Misc3d 139(A), *1 [App Term

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2nd and 11th Dist. Feb 26, 2008]; North Hill Funding of New York, LLC v Maiden & Madison Holdings, LLC, 131 AD3d 836, 838 [1st Dept 2015]). Here, Defendants argue that the duty ofcommercial reasonableness does not apply to the Avon arbitration awardbecause HCOB did not dispose ofcollateral. Rather, HCOB merely failed to pursue the judgment and "record[ed] the award as an 'asset' in [its] financial statements" (Opening Memo., NYSCEF Doc. No. 20, p. 10 [citing Complaint, 

### ,i,i 138-39]). The court rejects this argument. While UCC 9-610(a) refers to a secured party's right to "sell" or "lease" collateral after a default, the section also refers to the secured party's right to "otherwise dispose ofany or all ofthe collateral" (UCC 9-610[a] [emphasis added]). New York courts have held that non-sale dispositions such as abandoning collateral may amount to dispositions of collateral subject to Article 9 of the UCC (see Marine Midland Bank v CMR Industries, Inc., 159 AD2d94, 107 [2dDept 1990] [finding outstandingissues offact as to whether disposition was commercially reasonable where defendants contended collateral was "worth approximately $99,450 and thatthe plaintifforthe SBA shouldhave solditratherthan abandoning it," but the plaintiffargued "that the collateral was uniformly old and in poor condition and that the cost ofremoval would have exceeded its resale value"] 5; see also Bankof China v Chan, 937 F2d 780, 784, 787 [2d Cir 1991] [finding that bank owed duty to "preserve the value of the accounts receivable by drawing down the master letters ofcredit when the shipping documents
were properly presented to it" and that Chan raised an issue of fact "as to the commercial reasonableness ofthe Bank's handling ofthe company's accounts receivable"]).

5 The court notes that, while Marine Midland Bank involved a defense under UCC 9-504 (id. at 103), it is still applicable here because UCC 9-504 was the previous iteration ofUCC 9-610 (see UCC 9-610, Comment 1 ("Source. Former Section 9-504(1), (3)").

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Courts outside New York, that have interpreted the phrase "otherwise dispose" under Article 9 ofthe UCC, have found that the inclusion ofthe term "disposition" separate from the term "sale" indicates that a "disposition ofcollateral need not necessarily be in the form ofa sale" (Williams v Regency Financial Corp., 309 F3d 1045, 1048-49 [8th Cir 2002], citingIn re Estate of Rothko, 84 Misc2d 830, 864 [Surrogate's Ct, NY County Dec 18, 1975] ["The phrase 'other disposition' implies the parting with, alienation or giving up property ... and were intended to include conveyances other than sales"]; seealso In re Godfrey, 557 BR469,475 [ND W Va Sept 12, 2016] ["Many courts have considered the definition of 'disposition' under Article 9, and concluded that it encompasses various types ofpermanenttransfers ofpossession."]). Therefore, while HSH allegedly recording the Avon arbitration award as an asset may not have been a "sale," Plaintiffhas sufficiently alleged that HSH executed an "other disposition" of the collateral. Plaintiffhas alleged that the "Trust" held the breach ofcontract claim againstAvon and that "HSH Nordbank pursued the claim, through the Trust, against Avon" (Complaint, 

### ,-i,i 135-37 [emphasis added]). Ultimately, "the Trust was awarded more than $86M at arbitration in 2016" but HSH allegedly "took no steps to collect the award" (id., ,i 71 [emphasis added]). Subsequently, HSH "recorded this award as an asset in its financial statements" (id., ,i 139). Even though HSH did not "sell" the Avon award, the complaint alleges that HSH abandoned the pursuit ofthejudgment and effected a permanent transfer ofthe Avon award from the trust to itself, by recording it as an asset. As such, there is at least an issue offact as to whether HSH "disposed" of the award. In addition, Plaintiffs allegations that HSH disposed ofthe Avon arbitration award in a commercially unreasonable manner are sufficient to survive this motion. UCC 9-627 defines a "commercially reasonable disposition" as one made "(l) in the usual manner on any recognized

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market; (2) at the price current in any recognized market at the time ofthe disposition; or (3) otherwise in conformity with reasonable commercial practices among dealers in the type of property that was the subject ofthe disposition" (UCC 9-627(b); AtlasMFMezzanine Borrower, LLCvMacquarie Texas LoanHolderLLC, 174 AD3d 150, 163 [1st Dept2019] [emphasis added] [internal quotationmarks omitted]). The securedcreditorultimatelyhas the "burdenofestablishing the commercial reasonableness ofevery aspect ofthe disposition ofthe collateral" (GeneralElec. Credit Corp. v Durante Bros. & Sons, Inc., 79 AD2d 509, 510 [1st Dept 1980]; Highland CDO OpportunityMasterFund, L.P. v Citibank, NA., 2016 WL 1267781, *18 [SDNY Mar 30, 2016]). The commercial reasonableness ofa disposition ofcollateral is generally an issue offact that the courtcannot decide at the motion to dismiss stage (Atlas, 174 AD3dat 165; seealsoNatWestBank NA. v Grauberd, 228 AD2d 337, 337 [1st Dept 1996] [finding that summaryjudgment should have been denied because there were triable issues offact "as to the commercial reasonableness ofplaintiffbank's conductregarding the preservation ofits collateral"]). Here, the complaint adequately alleges that HSH's disposition of the Avon award was commercially unreasonable. Plaintiff alleges that HSH improperly abandoned any attempt to collect on the Avon award, but still recorded the award as an asset on its own financial statements (Complaint, 

### ,i,i 71, 138-39). In response, Defendants argue that HCOB may never be able to
recoverthejudgmentfrom Avongivenits financial distress and that an unsuccessful pursuit ofthe award would have simply increased the balance ofthe loan (Reply in Further Support ofMotion, NYSCEF Doc. No. 46, p. 8). While Defendants may succeed at summaryjudgmentor at trial with this argument, it is not sufficient to succeed at this stage (see Weinsten v FleetFactors Corp., 210 AD2d 74, 74 [1st Dept 1994] ["issues of fact whether defendant acted in a commercially

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reasonable manner in disposing ofcertain assets ofthe debtor"]; cf CCO Condo Portfolio (AZ) JuniorMezzanine, LLC vFeldman, 2022 WL 3867910, *6 [SDNY Aug 30, 2022]). The Second Department's decision inMarineMidlandBankv CMR Industries (159 AD2d 94 [1st Dept 1990]) (supra, p. 7), is directly applicable. There, the court found that there were triable issues offact where the defendants contended "the plaintiffor the SBA should have sold the collateral rather than abandoning it" (id. at 107). Just as in Marine Midland, the court cannot determine at this stage whether it was commercially reasonable for HSH to decline to pursue an $86 million award. Therefore, the court denies the motion to dismiss the UCC 9-610 claim. The court also rejects Defendants' argument that HCOB had no duty to apply the Avon award to Plaintiff's loan balance. The complaint alleges that HSH violated UCC 9-615(c) through recording the award as its own asset and failing to credit the award against the loan balance (Complaint, 

### ,i,i 139-40). Pursuant to UCC 9-615(c), a secured party "need not apply or pay over for application noncash proceeds ofdisposition under Section 9-610 unless the failure to do so would be commercially unreasonable" (UCC 9-615[c]). Defendants argue, based on comment 3 to UCC 9-615(c), that HCOB hadno duty to apply the Avon awardto the loanbalancebecause an arbitration awardis not a type ofnoncash proceeds that HCOB generates in the ordinary course of business (Opening Memo., p. 10). In response, Plaintiff asserts that Defendants have misread comment 3 and that there is no such requirement that the proceeds be the type generated in the ordinary course ofbusiness (Opposition, NYSCEF Doc. No. 40, pp. 16-17). Plaintiffis correct. Comment 3 provides an "Example" ofthe application ofsubsection (c), in which a secured partytakes possession ofan automobile following a default on an automobileloan (UCC 9-615[c], Comment 3). After selling the automobile on credit, the securedpartyis leftwith chattel paperthat it could potentially credit againstthe defaulting debtor's debt (id.). The comment explains that the

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secured creditoris required to "apply the value ofthe chattel paperto the original debtor's secured obligation" underUCC 9-615(c) because the chattel paperis the type ofnoncash proceeds thatthe secured creditor "regularly generates in the ordinary course of its financing business" (id.). Contrary to Defendants' argument, this comment does not resolve whether HSH violated UCC 9- 615(c) through failing to apply the Avon award to the loan. While the comment provides an "example" ofwhen failure to apply noncash proceeds wouldbeunreasonable, it does notremotely suggestthatthis example is exclusive andthat noncashproceeds mustbe generatedin the ordinary
course ofbusiness for UCC 9-615(c)'s reasonableness requirement to apply. Therefore, regardless of whether awards such as the Avon award are generated in the ordinary course of business, the court is left to apply the standard UCC 9-627 analysis in determining if the failure to apply the noncash proceeds to the loan, while simultaneously recording the award as an asset, was commercially unreasonable. As with HSH's failure to pursue the Avon award and subsequent recording ofthe award as an asset, Defendants have simply not mettheirburdento establishthatthe failure to apply the awardto Plaintiffsloanwas commercially reasonable. Therefore, the court denies dismissal ofthis cause ofaction. 2. Breach ofContract (HCOB) The court denies Defendants' motion to dismiss the fourth cause ofaction for breach of contract. To state a cause ofaction for breach ofcontract, a plaintiffmust allege "the existence of
a contract, the plaintiffs performance thereunder, the defendant's breach thereof, and resulting damages" (SecondSourceFunding, LLCv Yellowstone Capital, LLC, 144 AD3d 445, 445-46 [1st Dept 2016]; Chappo & Co., Inc. v Ion Geophysical Corp., 83 AD3d 499, 500 [1st Dept 2011]). However, a breach of contract claim should not be dismissed pre-answer where the contract is ambiguous (Almah LLCvAIGEmpl. Servs., Inc., 157 AD3d416,416 [1stDept2018]). A contract

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is ambiguous ifthe provisions "are reasonably or fairly susceptible of different interpretations" (id. [internal quotationmarks and citations omitted]; LDIR, LLCvDBStructuredProds., Inc., 172 AD3d 1, 4 [1st Dept 2019]; Ladder CapitalFinanceLLCv 1250North SD MezzLLC, 211 AD3d 608, 608 [1st Dept 2022] [holding that lower court properly denied motion to dismiss where plaintiffs interpretation ofthe contract was reasonable, but defendants' interpretation was "also reasonable"]). Here, Plaintiffalleges that HSH/HCOB breached the contract by purportedly selling the collateral to Promontoria, despite Promontoria not being a qualified purchasing lender under the LSA, and subsequently failing to tum the collateral over to LIFE despite no longer having any rights in the collateral (Complaint, 

### ,i,i 156-60). Defendants argue that this cause ofaction should be dismissed because HCOB did not actually sell the collateral to Promontoria, but rather simply assigned an economic participation to Promontoria (Opening Memo., p. 20). The court denies dismissal because provisions ofthe LSPA with Promontoria conflict as to whether or not there
was an actual sale of the collateral. Defendants are correct that section 11.14(b) of the LSA permitted the lender to sell "participating interests in the Note
... without the consent of, or notice to, the Borrower and [that] the grant ofsuch participation shall not relieve such Lender of its obligations" (LSA, § 11.14[b] [emphasis added]). Further, the LSPA that effectuatedthe alleged sale between HSH and Promontoria stated that under the anticipated sub-participation agreement, "commercial title" to portfolio items would pass to the purchaser or assignee, but the sellerwould "retain legal title
... to the Portfolio Items" (LSPA, § 4.7[a][ii]). This suggests that Defendants
are correct that the transaction was not a sale ofthe collateral and that, therefore, the transaction did not breach the LSA.

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However, other documentary evidence suggests that the transfer ofinterest was, indeed, a sale. Section 1.1 ofthe LSPA defines the "Portfolio Items" at issue as "Allrights, title, interest and benefit in and to ... all present or future, conditional or unconditional receivables, rights
... ancillary rights, claims, contractual undertakings and contractual and quasi-contractual obligations" (LSPA, § 1. 1 ). Further, the HSH supervisory board resolution attached to the LSPA states that the board is resolving to approve a "sale of a loan portfolio" (HSH Nordbank Supervisory Board Resolution, § I.a [emphasis added]). Additionally, the Promontoria management board resolution attached to the LSPA states that it is "intended that the Company enters [sic] into a loan sale and purchase agreement (the LSPA) with respect to the sale and purchase ofcertain loan portfolio itemsbythe Companyfrom HSHNordbankAG" (Promontoria Resolution, § 1.1.1 [emphasis added]). Thus, there is a question of fact whether the transfer from HSH to Promontoria of the collateral was a transfer ofonly commercial title, or, whetherthattransferwas, in fact, a sale ofall rights associatedwith the collateral. Therefore, the court cannot determine at thisjunctureifHSH breached the LSA through entering into the LSPA with Promontoria. The court, therefore, denies the motion to dismiss the fourth cause ofaction. 3. Breach ofDuty ofCommercial Reasonableness

- 2019 Sale (HCOB and Promontoria) At oral argument, the courtreserved decision on the fifth cause ofaction for breach ofthe duty ofcommercial reasonableness because ofPromontoria's challenge to personaljurisdiction. The court rejects this challenge because there is personaljurisdiction over Promontoria. A New York court may not exercise personal jurisdiction over a non-domiciliary unless "the action is permissibleunderNew York's long-arm statute, andthe exercise of jurisdiction comports with due

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process" (English v Avon Products, Inc., 206 AD3d 404, 405 [1st Dept 2022]). Plaintiff has asserted that the court has personaljurisdiction over Promontoriapursuant to CPLR 302(a)(l). Under CPLR 302(a)(l), a court may exercise personaljurisdiction over a non-domiciliary where the party, in person orthrough an agent, "transacts anybusiness within the state or contracts anywhere to supply goods or services in the state" (CPLR 302[a][l]; In re Estate of Stettiner, 148 AD3d 184, 192 [1st Dept 2017] [finding that the court acquired personal jurisdiction over one partybecause ofits agreement with a different party to "act as its agent to sell [a] painting in New York"]). Determining whetherlong-armjurisdiction exists pursuant to CPLR 302(a)(l) is a "twoprongedjurisdictional inquiry" in which the court first decides "whether defendant conducted sufficient activities to have transacted business within the state" and then decides "whether plaintiffs claims arise from the transactions" (English, 206 AD3d at 406). For the court to have personaljurisdictionunder CPLR 302(a)(l), the plaintiff's claims "musthave an articulable nexus with the defendant's transactions within [the] state" (id. [internal quotation marks and citation omitted]; 4069RosenAssoc., LLCv Tournamentone Corp., 206 AD3d 464, 465 [1st Dept 2022] [findingpersonaljurisdictionunderCPLR302(a)(l)where defendant's "NewYork activitieswere purposeful and substantially related to plaintiffs' claims"]; GreatLakesInsurance SEvAmerican Steamship Owners Mutual Protection andIndemnity Association Inc., 214 AD3d 593, 594 [1st Dept 2023] [finding personaljurisdictionunder CPLR 302(a)(l) where the complaint alleged that the individual defendants were the "primary actors with respect to the transaction[] at issue"]). Here, the court has personaljurisdiction over Promontoria pursuant to CPLR 302(a)(l). The complaint alleges that Promontoria "participat[ed] in the sales and marketing process with [investment bank] Houlihan Lokey and its personnel in New York" (Complaint, ,i 92 [emphasis added]). Even ifPromontoria did not allegedly take action itselfin New York, Promontoria did

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ultimately sign the LSPA and allegedly acted through Houlihan Lokey employees in New York. This is sufficient to confer personaljurisdiction under CPLR 302(a)(l) (see Front, Inc. v Khalil, 103 AD3d 481, 482 [1st Dept 2013] [finding personaljurisdiction under CPLR 302(a)(l) where the allegations were sufficient to establish that particular defendants "transactedbusiness in New York, through [a different defendant] as their agent"]; RP Business Marketing, Inc. v Timlin Industries, Inc., 67 Misc3d 1205(A), *5 [Sup Ct, NY County Apr 10, 2020] [finding long arm jurisdictionwhereplaintiffmade aprimafacie showingthatthe defendants "engagedin a sustained and substantial transaction ofbusiness with [] a New York business"]). Additionally, the court's exercise ofpersonaljurisdictionoverPromontoriawouldcomport with due process. Due process requires both that the defendant have "minimum contacts with the forum state such that the defendant shouldreasonably anticipate beinghaled into courtthere" and that "theprospect ofhaving to defend a suit in New York comports with traditional notions offair play and substantial justice" (State v Vayu, Inc., 39 NY3d 330, 337 [2023]; English v Avon Products, 206 AD3d 404, 406-07 [1st Dept 2022] [internal citations and quotation marks omitted]). Minimum contacts exist where the court finds "some act by which the defendant purposefullyavailsitselfoftheprivilegeofconducting activitieswithin [NewYork], thusinvoking the benefits and protection ofits laws" (Wilson v Dantas, 128 AD3d 176, 182 [1st Dept 2015] [citations and internal quotation marks omitted]; AlRushaid v Pictet & Cie, 28 NY3d 316, 331 [2016]; see also Clingerman v Ali, 212 AD3d 572, 572 [1st Dept 2023]). Promontoria has sufficient minimum contacts with the forum through allegedly participating in a sales and marketing process with Houlihan Lokey-an investment bankwith offices and personnel in New York and through employing attorneys based in New York from the firm Schulte Roth & Zabel LLP (Complaint, 

### ,i,i 92, 99). Thus, Promontoriapurposely availed itselfofthis forum.

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Further, the court's exercise of jurisdiction over Promontoria would comport with traditional notions of fair play and substantial justice. In order to determine if the exercise of jurisdiction would comportwith traditional notions offair play and substantialjustice, courts will
assess: "the burden on the defendant, the forum State's interest in adjudicating the dispute, the plaintiffs interest in obtaining convenient and effective relief, the interstate judicial system's interest in obtaining the most efficient resolution ofcontroversies, and the shared interest ofthe several States in furthering fundamental substantive socialpolicies" (AlRushaid, 28 NY3d at 331; In re Renren, Inc. v. XX¥, 67 Misc3d 1219(A), 15 [Sup Ct, NY County May 20, 2020]). It is the defendant's burden to establish thatjurisdiction wouldbe unreasonable underthis prong (id.). Here, Promontoria has failed to address this aspect ofthe due process analysis at all and has, therefore, failed tomeetthisburden. Regardless, anyburdento Promontoriawouldbeminimal measured against this forum's significant interest in having this dispute adjudicated here. While Promontoria is a Dutch domiciliary, the burden oftaking part in this matter is reduced with the adventofremoteproceedings (seeAlRushaid, 28 NY3dat 331 ["Here,whiletheparties areforeign nationals, the burden of litigation in New York is reduced by modem communication and transportation"] [internal quotation marks and citation omitted]). Further, New York has a substantial interest in resolving the claim against Promontoria related to the sale ofthe collateral where Promontoria allegedly hired New York investment bankers and New York lawyers from Schulte Roth & Zabel LLP, who allegedly brokered the transaction. Therefore, the court denies dismissal of the cause of action for breach of the duty of commercial reasonableness against Promontoria on the basis oflack ofpersonaljurisdiction. Additionally, the court denies the motion to dismiss the fifth cause of action against Promontoria and HCOB for failure to state a cause of action. The fifth cause of action alleges

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breach ofthe duty ofcommercial reasonableness against both Promontoria and HCOB based on the sale ofthe collateral in 2019. In particular, the complaint alleges that Promontoria failed to disclose details to LIFE about the prior loan sale or the upcoming sale ofthe collateral and that "HCOB and/orPromontoria Holding also
... accepted a sales pricebelow what LIFEwas willing to bid" (id., 

### ,i,i 173-74). Defendants argue that the cause ofaction should be dismissed because Plaintiffs mere disappointment with the price at which Defendants sold the collateral at auction is not a basis for showing that the sale was commercially unreasonable. Rather, according to Defendants, the sale price must "shock the conscience" to support a claim that the sale was commerciallyunreasonable (Opening Memo., pp. 11-12). However, as Judge Marrero already found in the first federal action, whether or not a disposition ofcollateral was commercially reasonable is a "necessarily fact intensive" question, and the dispute over the reasonableness ofthe sales price is "not [] appropriate to resolve [] at this stage ofthe litigation" (Life Insurance FundElite LLCvHamburg CommercialBankAG, 545 F Supp 3d 86, 91 [SDNY 2021] [holding that the fund had adequately pled breach ofthe duty of commercial reasonableness through allegations of "the value of collateral compared to the apparent sale price and the lack ofnotice to interestedparties"]; cfAtlasMFMezzanineBorrower LLC v Macquarie Texas Loan Holder LLC, 199 AD3d 439, 440 [1st Dept 2021] [finding after trialthatthe evidence did not "support afinding thatthe pricereceivedforthe properties at auction
was 'so inadequate as to shock the court's conscience"'] [internal citation omitted]). UCC 9-610 requires that "[e]very aspect ofa disposition ofcollateral
... be commercially reasonable," and UCC 9-627 states that part of the analysis of commercial reasonableness of a disposition of collateral is the "price current in any recognized market at the time ofthe disposition." Plaintiff has alleged that as a result ofnot being allowed to bid, the ultimate sale price was lower than it

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would have been if Plaintiff could have bid. Whether that price was so low as to "shock the conscience" is not for the court to decide at this stage. The court has considered the parties' remaining contentions and finds them unavailing. Accordingly, itis ORDERED that the third cause ofaction (breach offiduciary duty against HCOB), sixth
cause ofaction (civil conspiracyagainst Cerberus European), and seventhcause ofaction (demand for an accounting against HCOB) are dismissed for the reasons stated on the record at oral argument on September 12, 2023; and it is further ORDERED that Defendants' motion to dismiss the first cause ofaction (2013 breach of duty ofcommercial reasonableness against HCOB) is denied for the reasons stated on the record at oral argument on September 12, 2023; anditis further ORDEREDthattheremainder ofDefendants' motionto dismiss is denied as expressedin this decision and order; and it is further ORDERED that Defendants must answer the complaint within 20 days ofthe efiled date ofthis decision and order.

01/03/2024

DATE MELISSAA. CRANE, J.S.C.
CHECK ONE:
APPLICATION: CHECK IF APPROPRIATE: ~ CASE DISPOSED GRANTED**DENIED** SETTLE ORDER INCLUDES TRANSFER/REASSIGN NON-FINAL DISPOSITION GRANTED IN PART SUBMIT ORDER FIDUCIARY APPOINTMENT

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