12-4432-cv

Excelsior Capital LLC v. Allen

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A 

SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED 

BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. 

WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY 

MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE 

NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY 

OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held 

at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New 

York, on the 6

th

 day of September, two thousand thirteen.

PRESENT: CHESTER J. STRAUB,

REENA RAGGI,

Circuit Judges,

BRIAN M. COGAN,

District Judge.*

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*

Judge Brian M. Cogan, of the United States District Court for the Eastern District of 

New York, sitting by designation.

EXCELSIOR CAPITAL LLC,

Plaintiff-Appellant,

No. 12-4432-cv

v.

HERBERT A. ALLEN, TERRY ALLEN KRAMER,

TERENCE C. MCCARTHY,

Defendants-Appellees.

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APPEARING FOR APPELLANT: JUDD BURSTEIN, Esq., New York, New 

York.

APPEARING FOR APPELLEES: PAUL VIZCARRONDO, JR. (Stephen P. 

Winter, on the brief), Wachtell, Lipton, Rosen 
2

& Katz, New York, New York, for Appellee 

Herbert A. Allen.

Gary P. Naftalis, Scott Ruskay-Kidd, Kramer 

Levin Naftalis & Frankel LLP, New York, New 

York, for Appellee Terry Allen Kramer.

Richard A. Martin, Ihsan Dogramaci, Orrick, 

Herrington & Sutcliffe LLP, New York, New 

York, for Appellee Terence C. McCarthy.

Appeal from a judgment of the United States District Court for the Southern 

District of New York (Colleen McMahon, Judge).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, 

AND DECREED that the judgment entered on October 2, 2012, is AFFIRMED.

Plaintiff Excelsior Capital LLC (“Excelsior”) appeals from the dismissal pursuant 

to Fed. R. Civ. P. 12(b) of its claims of fraudulent conveyance under Arizona’s Uniform 

Fraudulent Transfer Act, see Ariz. Rev. Stat. § 44-1001, et seq., as well as related state

law claims of conspiracy to commit and aiding and abetting a fraudulent conveyance 

against defendants, descendants of the founder of investment bank Allen & Company. 

Excelsior alleges that, while their relative C. Robert Allen III (“decedent”) was 

hospitalized shortly before his death, some combination of defendants forged decedent’s 

signature on a document transferring his approximately 18% interest in a family-owned 

Arizona ranch to a newly created limited liability company (the “LLC”). Excelsior 

claims that this transaction was intended to frustrate its recovery on an impending money 
3

judgment against decedent, who had guaranteed repayment of certain defaulted loans by 

Excelsior. Because the LLC reconveyed decedent’s former interest in the subject ranch 

to his estate on the day Excelsior commenced this action, Excelsior concedes that its 

claims for compensatory damages and equitable relief are now moot. It contends that 

the district court nevertheless erred in dismissing its request for punitive damages. 

We review the challenged dismissal de novo, accepting the complaint’s factual 

allegations as true and drawing all reasonable inferences in Excelsior’s favor. See

Bryant v. N.Y. State Educ. Dep’t, 692 F.3d 202, 210 (2d Cir. 2012). We assume the 

parties’ familiarity with the facts and record of prior proceedings, which we reference 

only as necessary to explain our decision to affirm.

1. Punitive Damages

The district court found it “simply inconceivable that [Excelsior] still has any 

viable claim for relief to pursue in this action” given Excelsior’s admission “that it has 

suffered no compensable injury” and the court’s view that “no court would ever charge a 

jury on the issue of punitive damages” on the facts alleged. Excelsior Capital LLC v. 

Allen, No. 11 Civ. 7373 (CM), 2012 WL 4471262, at *7–8 (S.D.N.Y. Sept. 26, 2012). 

Rather than resolve the issue, the court proceeded to analyze Excelsior’s substantive 

claim of fraudulent conveyance, concluding that it was deficient as a matter of law. See

id. at *8–13. Defendants argue on appeal, as they did in the district court, that punitive 

damages are legally unavailable to Excelsior. We agree and affirm on that ground. See
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10 Ellicott Square Ct. Corp. v. Mountain Valley Indem. Co., 634 F.3d 112, 125 (2d Cir. 

2011) (reiterating that we may affirm on any basis supported by record).1

“While a viable claim for damages generally avoids mootness of the action,” Cook 

v. Colgate Univ., 992 F.2d 17, 19 (2d Cir. 1993) (emphasis added), a request for punitive 

damages in New York is nonviable “absent a valid claim for compensatory damages,” 

Hubbell v. Trans World Life Ins. Co. of N.Y., 50 N.Y.2d 899, 901, 430 N.Y.S.2d 589, 

590 (1980) (holding punitive damages unavailable where res judicata barred underlying 

claim); accord Prote Contracting Co. v. Bd. of Educ., 276 A.D.2d 309, 310, 714 

N.Y.S.2d 36, 37–38 (1st Dep’t 2000) (directing vacatur of punitive damages award in 

light of claims’ dismissal, even absent objection to award at trial, because to “allow the 

verdict on punitive damages to stand in the absence of a substantive cause of 

action . . . would constitute fundamental error”); Omansky v. 64 N. Moore Assocs., 269 

A.D.2d 336, 337, 703 N.Y.S.2d 471, 472 (1st Dep’t 2000) (affirming dismissal of 

punitive damages request where “only cause of action on which such prayer was based 

ha[d] been dismissed for mootness”). As the New York Court of Appeals has explained, 

a demand for punitive damages is not a freestanding claim; rather, it “is parasitic and 

possesses no viability absent its attachment to a substantive cause of action. . . .” 

Rocanova v. Equitable Life Assurance Soc’y. of U.S., 83 N.Y.2d 603, 616, 612 N.Y.S.2d 

 

1 We apply New York law because “where the parties agree that New York law controls, 

this is sufficient to establish choice of law.” Fed. Ins. Co. v. Am. Home Assurance Co.,

639 F.3d 557, 566 (2d Cir. 2011).
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339, 344–45 (1994) (directing dismissal of punitive damages request where underlying 

claims were barred by release).

We had occasion to examine this principle in Action House, Inc. v. Koolik, 54 

F.3d 1009 (2d Cir. 1995), in the context of reviewing the district court’s jury instructions 

on punitive damages. There, the plaintiff corporation sought compensatory and punitive 

damages from Koolik, the owner of half of its shares, under various tort and contract 

theories, claiming, among other things, that Koolik had taken more than his one-half 

share of the corporation’s profits in the three years preceding his withdrawal from the 

corporation. Id. at 1010. Koolik argued that he had repaid any excessive withdrawal of 

Action House funds through a stock purchase agreement that the parties executed. Id. 

The district court’s instructions to the jury allowed it to award punitive damages without 

making an award of compensatory damages, and the jury therefore returned an award of 

$362,000 in punitive damages and $0 in compensatory damages. Id. at 1011–12. The 

district court granted Koolik’s motion to vacate the punitive damages award. Id. at 

1012. We found the instructions to be inconsistent with New York law, “which requires 

a finding of actual damages before punitive damages may be awarded.” Id. at 1013 

(citing Bryce v. Wilde, 39 A.D.2d 291, 294, 333 N.Y.S.2d 614, 616 (3d Dep’t 1972), 

aff’d, 31 N.Y.2d 882, 340 N.Y.S.2d 185 (1972)). We also held that had nominal 

damages been awarded, an award of punitive damages would have been consistent with 

New York law, and remanded the case for the district court to determine “whether Koolik 
6

repaid all sums wrongfully withdrawn from Action House’s checking account and petty 

cash fund.” Id. at 1013–15.2

Excelsior offers no argument as to why these decisions do not bar its punitive 

damages demand. Nor will we devise one. While there may be instances in which a 

defendant’s unilateral post-filing conduct, though it attempts to make the plaintiff 

financially whole, does not preclude recovery of punitive damages, cf. Already, LLC v. 

Nike, Inc., 133 S. Ct. 721, 727 (2013) (“[A] defendant cannot automatically moot a case 

simply by ending its unlawful conduct once sued.”), that is not this case. Given 

Excelsior’s concessions that its compensatory and equitable claims are moot and that it 

has “no damages,” J.A. 189, its parasitic request for punitive damages fails under New 

York law.

2. Attorney’s Fees

Excelsior also claims an entitlement to attorney’s fees under New York Debtor

and Creditor Law § 276-a (authorizing award of “reasonable attorney’s fees” where 

 

2

Insofar as we have held that “punitive awards were not vitiated by the absence of 

compensatory or nominal damages awards,” we have done so in cases involving federal 

rather than New York law. King v. Macri, 993 F.2d 294, 298 (2d Cir. 1993) (42 U.S.C. 

§ 1983 excessive force claim); see also Cush-Crawford v. Adchem Corp., 271 F.3d 352, 

359 (2d Cir. 2001) (Title VII discrimination claim). Moreover, unlike the case here, 

both cases presented live controversies regarding the respective defendants’ liability that 

persisted to verdict, making an award of compensatory damages available. See

Cush-Crawford , 271 F.3d at 359; King, 993 F.2d at 298; see also Virgilio v. City of New 

York, 407 F.3d 105, 117 n.12 (“King involved a jury verdict[;] it did not extrapolate the 

effect of a release of a compensatory claim on the viability of a request for punitive 

damages arising out of the same conduct.”).
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fraudulent conveyance “is found to have been made by the debtor and received by the 

transferee with actual intent . . . to hinder, delay or defraud either present or future 

creditors”). But “fraudulent conveyance claims cannot be prosecuted for the sole 

purpose of obtaining a finding of actual intent to deceive and thus an award of attorneys’ 

fees.” Murphy v. RMTS Assocs., LLC, 71 A.D.3d 582, 583, 897 N.Y.S.2d 417, 419

(1st Dep’t 2010). More importantly, such an “interest in attorney’s fees 

is . . . insufficient to create an Article III case or controversy where none exists on the 

merits of the underlying claim.” Lewis v. Cont’l Bank Corp., 494 U.S. 472, 480 (1990); 

accord Lamar Adver. of Penn, LLC v. Town of Orchard Park, 356 F.3d 365, 378 (2d Cir. 

2004); Cook, 992 F.2d at 19; see also Vt. Agency of Natural Res. v. United States ex rel. 

Stevens, 529 U.S. 765, 773 (2000) (“[A]n interest that is merely a byproduct of the suit 

itself cannot give rise to a cognizable injury in fact for Article III standing purposes.” 

(internal quotation marks omitted)).3

The judgment of the district court is AFFIRMED.

FOR THE COURT: 

CATHERINE O’HAGAN WOLFE, Clerk of Court

 

3 Because we conclude that Excelsior cannot pursue an otherwise moot cause of action 

based solely on a claim for punitive damages, we need not decide whether the district 

court erred in dismissing Excelsior’s fraudulent conveyance claims under Arizona law for 

failure to allege adequately the transfer of a property interest.