COURT OF CHANCERY

OF THE 

STATE OF DELAWARE

 JOHN W. NOBLE 417 SOUTH STATE STREET

VICE CHANCELLOR DOVER, DELAWARE 19901

 TELEPHONE: (302) 739-4397

 FACSIMILE: (302) 739-6179

July 3, 2014

Kevin W. Gibson, Esquire John D. Balaguer, Esquire

Gibson & Perkins P.C. White and Williams LLP

1326 King Street 824 N. Market Street, Suite 902

Wilmington, DE 19801 Wilmington, DE 19801

William J. Cattie, III, Esquire

Rawle & Henderson LLP

300 Delaware Avenue, Suite 1015

Wilmington, DE 19801

Re: CCC Atlantic, LLC v. Grey

C.A. No. 8739-VCN

Date Submitted: February 19, 2014

Dear Counsel:

Plaintiffs, CCC Atlantic, LLC (“CCC”) and Karman Development Group, 

LLC (“Karman Development”), brought claims against Defendants and ThirdParty Plaintiffs Joseph Grey, Esq. (“Grey”) and his law firm, Cross & Simon, LLC 

(“C&S”), arising from Grey’s and C&S’s representation of CCC in a bankruptcy 

EFiled: Jul 03 2014 04:29PM EDT 

Transaction ID 55683848

Case No. 8739-VCN
CCC Atlantic, LLC v. Grey

C.A. No. 8739-VCN

July 3, 2014

Page 2

proceeding in Delaware.1 CCC owned certain condominium units in Linwood, 

New Jersey, and Karman Development developed those units and managed the 

complex. CCC owed an outstanding loan balance of $41 million to certain lenders. 

In 2011, a tax abatement program ended, which resulted in CCC’s lenders making 

payments out of the real estate tax escrow account and created a shortfall in the

account. CCC apparently proposed a plan to pay back that shortfall and sought to 

negotiate with its lenders, but they instead declared the loan to be in default. 

In January 2012, the lenders’ trustee filed a complaint in the United States 

District Court for the District of New Jersey against CCC seeking foreclosure of,

and the appointment of a receiver for, the Linwood property. The court agreed that 

appointment of a receiver would be appropriate. In reaching its conclusion, it 

found that “the value of the mortgaged CCC is less than the amounts due and 

owing under the Note and Mortgage.”2 It determined that an affidavit from a loan 

servicing officer was more persuasive than an affidavit from CCC’s managing 

member, in which she explained that she was advised that more than $7 million in

 

1 CCC, Karman Development, and C&S are all Delaware limited liability companies. The facts 

are drawn from Plaintiffs’ Verified Complaint in Equity (“Compl.”) ¶¶ 1-38.

2

Id. ¶ 18.
CCC Atlantic, LLC v. Grey

C.A. No. 8739-VCN

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Page 3

equity existed in CCC. The parties to the litigation had not exchanged any 

appraisals or provided appraisals to the court. CCC was represented by Kevin J. 

Silverang, Esq. (“Silverang”), Philip S. Rosenzweig, Esq. (“Rosenzweig”), and

their law firm, Silverang, Donohoe, Rosenzweig & Haltzman, LLC (“SD”)3

(collectively, the “Third-Party Defendants”). 

When it appeared that it would be unable to avoid the appointment of a 

receiver, CCC retained Grey and filed a voluntary petition for relief under 

Chapter 11 in the United States Bankruptcy Court for the District of Delaware (the 

“Bankruptcy Court”). In January 2013, the lenders moved to dismiss the 

bankruptcy action, arguing that it was a single asset bankruptcy with no “real” 

creditors aside from the lenders and that the bankruptcy had been filed in bad faith 

because the mortgage debt on the property exceeded the property’s value.4 The 

lenders submitted a March 2012 appraisal to support their argument that the

property had less value than the outstanding mortgage debt. Defendants apparently 

 

3

SD is a Pennsylvania limited liability company.

4 Compl. ¶¶ 22-23.
CCC Atlantic, LLC v. Grey

C.A. No. 8739-VCN

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Page 4

had a November 2011 appraisal of the property (the “Appraisal”) demonstrating 

that its value exceeded the mortgage debt. 

The Bankruptcy Court heard the parties’ arguments on the motion to dismiss 

on February 6, 2013. Plaintiffs claim that Defendants, over Plaintiffs’ express 

instructions, did not introduce the Appraisal to rebut the lenders’ argument that the 

amounts due on the property exceeded its value. The court, when ruling from the 

bench, chastised CCC’s counsel for not introducing appropriate documentation of 

the property’s value. The Bankruptcy Court dismissed CCC’s bankruptcy 

proceeding on February 8, 2013. On February 15, 2013, a receiver was appointed 

in the New Jersey proceeding; the order authorizing the receiver to act on CCC’s 

behalf became effective on February 26, 2013.

Plaintiffs allege that CCC provided to Grey all the documents necessary to 

file a confirmable plan of reorganization shortly after the Chapter 11 petition was 

filed. Grey apparently advised CCC that a plan of reorganization did not need to 

be filed until 90 days after the Chapter 11 filing. CCC contends that this was a 

grave error; if the judge presiding over the bankruptcy proceeding had the plan, it 

argues, he would have denied the lenders’ motion to dismiss or would have 
CCC Atlantic, LLC v. Grey

C.A. No. 8739-VCN

July 3, 2014

Page 5

delayed ruling while the plan options were considered. CCC asserts that, in the 

absence of such information, the Bankruptcy Court was constrained to dismiss 

CCC’s bankruptcy effort. After the bench ruling, Grey sought to bring the 

Appraisal to the court’s attention, but his attempt to re-open the record failed. 

* * *

Plaintiffs now assert claims for legal malpractice, breach of fiduciary duty 

for holding $125,000 from a settlement in another lawsuit in C&S’s escrow

account, conversion of those funds, and injunctive relief against Grey and C&S. 

Grey and C&S filed a counterclaim against CCC seeking legal fees for their 

representation in the bankruptcy proceeding. They also filed a third-party 

complaint against the Third-Party Defendants.

5

 Grey and C&S claim contribution 

or indemnification from Third-Party Defendants, contending that their conduct in 

the New Jersey receivership action is the proximate cause of Plaintiffs’ damages. 

Grey and C&S have moved to dismiss, or for summary judgment on, 

Karman Development’s claims because Grey and C&S never acted as Karman

Development’s counsel and thus owed it no duties. Grey and C&S have moved to 

 

5 Defs.’ and Third-Party Pls.’ Verified Answer to Verified Compl., Countercl. and Third-Party 

Compl.
CCC Atlantic, LLC v. Grey

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dismiss, or for summary judgment on, CCC’s claims for breach of fiduciary duty, 

conversion, and injunctive relief. They argue that CCC lacks standing to recover 

the $125,000 held in a C&S escrow account because it has no claim to that sum, 

that no action for conversion of money may be sustained, and that Plaintiffs have 

pled no grounds supporting injunctive relief. SD moved for judgment on the 

pleadings, asserting that Grey and C&S lacked standing to assert the claims in their 

third-party complaint against SD. The Court grants Defendants’ motion to dismiss 

CCC’s fiduciary duty claim. The dismissal of Plaintiffs’ equitable claim raises the 

question of whether the Court should retain subject matter jurisdiction, an issue 

that should be addressed separately.

* * *

Defendants have moved to dismiss, or for summary judgment on, CCC’s 

breach of fiduciary duty claim under Court of Chancery Rules 12(b), 17(a), and 56. 

A motion to dismiss will be denied if a plaintiff’s well-pled factual allegations 

entitle her to relief under a “reasonably conceivable” set of circumstances. The 

Court will accept well-pled facts as true and draw all reasonable inferences in favor 
CCC Atlantic, LLC v. Grey

C.A. No. 8739-VCN

July 3, 2014

Page 7

of the non-moving party.6 The Court may consider an extrinsic document if it is 

integral to the plaintiff’s claim and is incorporated into the complaint.7 

Plaintiffs contend that Grey breached the fiduciary duties he owed to CCC

when he refused to turn over $125,000 of settlement proceeds from a separate 

dispute in New Jersey.8 Plaintiffs allege that while the other lawsuits were 

pending, CCC had “ongoing litigation with a number of contractors who failed to 

repair the Property’s roof in a workman-like manner.”9 The contractors agreed to 

settle that litigation with the $125,000 settlement payment.10 Defendants argue 

that CCC lacks standing to bring a fiduciary duty claim because CCC has no 

cognizable interest in the $125,000. They contend that other parties had interests 

senior to CCC which thereby extinguished CCC’s claim to the funds. Specifically, 

they assert that the receiver order was effective on February 26, 2013 and that CCC 

 

6 Cent. Mortg. Co. v. Morgan Stanley Mortg. Capital Hldgs. LLC, 27 A.3d 531, 536-37 (Del. 

2011).

7

Vanderbilt Income & Growth Assocs., L.L.C. v. Arvida/JMB Managers, Inc., 691 A.2d 609, 

613 (Del. 1996). Because the claim may be resolved under Rule 12(b)(6), the Court does not 

consider the standards under Rules 17(a) or 56.

8 Although Defendants also sought to dismiss Counts Four and Five of Plaintiffs’ complaint, for 

conversion and injunctive relief respectively, Plaintiffs stated they will withdraw those claims. 

Pls.’ Answer to Defs.’ Mot. to Dismiss/Mot. for Summary J. at 13. Those claims are therefore 

dismissed.

9 Compl. ¶ 53.

10 Id. ¶ 54.
CCC Atlantic, LLC v. Grey

C.A. No. 8739-VCN

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assigned the proceeds from the litigation which generated the settlement to The 

Bancorp Bank (“Bancorp”) in January 2012. 

Plaintiffs respond by arguing that Defendants’ failure to turn over the funds 

to CCC’s receiver in response to an earlier email amounts to unclean hands. They 

claim that Defendants have taken inconsistent legal positions by retaining the 

settlement proceeds and arguing that the receiver’s interest has extinguished 

CCC’s interest. Plaintiffs’ argument is rejected. Defendants explain that they 

believe themselves to have an attorneys’ lien which grants them a claim superior to 

all other parties asserting a right to the settlement funds. Defendants refused to pay 

CCC’s receiver because they believe their lien is superior to its interest. However, 

they also argue that CCC has no remaining interest, because the receiver order 

granted CCC’s receiver the rights to the settlement proceeds to the exclusion of 

CCC (or because Bancorp’s interest is superior to CCC’s interest). These positions 

are not inconsistent and do not cause Defendants to have unclean hands.

The receiver order was integrated into Plaintiffs’ complaint by their 

references to the appointment of a receiver and thus this Court may review it when 
CCC Atlantic, LLC v. Grey

C.A. No. 8739-VCN

July 3, 2014

Page 9

considering Defendants’ motion to dismiss.11 The receiver order clearly grants 

CCC’s receiver all rights to the settlement proceeds and thereby permits the 

receiver to stand in CCC’s shoes for the purposes of its claim to the settlement 

funds. The receiver order provides that the receiver shall have possession of the 

“Property, including the . . . rents and all other property subject to the mortgage 

and shall have full power and authority to protect, possess, control, manage and 

operate such property.”12 The “Property” is defined by reference to the Linwood 

property’s mortgage, which includes the “condominium units and all related rights, 

property and interest” described in an exhibit and within a list of defined assets in 

the mortgage.13 These defined assets include “[a]ny and all other rights of 

Borrower in and to the items set forth” in various subsections, which include the 

right to conduct legal actions.

14

 The receiver order permits the receiver to 

 

11 Plaintiffs discuss the appointment of the receiver and the great financial loss and distress CCC 

suffered as a result. Compl. ¶ 45. Plaintiffs also explained the circumstances leading to the 

approval of a receiver for CCC’s creditors. Id. ¶¶ 16-19. Moreover, the Court is entitled to take 

judicial notice of “certain facts that are of public record.” See In re Wheelabrator Techs. Inc. 

S’holders Litig., 18 Del. J. Corp. L. 778, 801 (1992) (quoting Diceon Elecs., Inc. v. Calvary P’rs, 

L.P., 772 F. Supp. 859, 861 (D. Del. 1991)).

12 See Defendants’ and Countercl. Pls.’ Mot. to Dismiss, or, in the Alternative, Mot. for 

Summary J. Against Pl. CCC Atlantic, LLC on Counts Three, Four and Five of the Verified 

Compl. (“DOB”) Ex. J at 3, ¶ 3. 

13 DOB, Ex. K §§ 2.01-.02. 

14 See id. § 2.02(k) & (m). 
CCC Atlantic, LLC v. Grey

C.A. No. 8739-VCN

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“institute, prosecute, defend and/or settle such legal proceedings as the Receiver 

deems necessary relating to the care, preservation or possession of the Property and 

to collect any such sums which may be due from any source relating to use of the 

Property . . . .”15 Thus, because the settlement proceeds arose from litigation 

concerning the maintenance of the condominium units, the receiver order grants 

CCC’s receiver the right to the proceeds as a sum due from any source relating to 

use of the Property.16 

CCC therefore has no claim to the funds and no standing to pursue a breach 

of fiduciary duty claim related to possession or control of those funds.

17

 Count 

Three of CCC’s complaint is therefore dismissed under Court of Chancery 

Rule 12(b)(6).

18

 

 

15 DOB, Ex. J at 6, ¶ 3(m) (the broad legal authority of CCC’s receiver is only limited by an 

exception, not implicated here, preventing it from directing, participating in, or becoming a party 

to the foreclosure proceedings with respect to the Property). 

16 The Court therefore need not address the parties’ additional standing arguments, for example 

Defendants’ argument that Bancorp’s pledge somehow extinguished CCC’s claim to the 

settlement funds.

17 No party has raised the issue of whether CCC is properly able to institute legal proceedings on 

its own behalf in light of the receiver order granting the receiver broad rights to control legal 

proceedings concerning the “Property.” See DOB, Ex. J at 6, ¶ 3(m).

18 CCC has abandoned Counts Four and Five of its complaint, and those counts are also 

dismissed. Defendants included summary judgment within their motion and could also have 

achieved dismissal under that process. Ultimately, the receiver order, from its plain text, 
CCC Atlantic, LLC v. Grey

C.A. No. 8739-VCN

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Page 11

* * * 

An implementing order will be entered.

Very truly yours,

/s/ John W. Noble

JWN/cap

cc: Barry M. Willoughby, Esquire

Bradley P. Lehman, Esquire

Register in Chancery-K

 

deprived CCC of any interest in the settlement funds and thus deprived it of standing to assert 

fiduciary duty claims regarding those funds.