<partyblock><br><table width="75%" border="1" cellspacing="1" cellpadding="4" align="center"><tr><td><br><div align="center"><b><font size="+1">Acacia Investments,B.S.C.(C), Plaintiff,<br><br>against<br><br>West End Equity I, Ltd., WEST END EQUITY II, LTD., WESTEND EQUITY III, LTD., WEST END EQUITY IV, LTD., WEST END EQUITY V, LTD., DCDAMERICA, INC., AION PARTNERS, LLC,AION REALTY, LLC,AION HOLDINGS, INC.,SIRAJ DADABHOY, SHABIR RANDEREE, MICHAEL BETANCOURT,Defendant.</font></b></div><br><br></td></tr></table><br><br>161709/2018<br><br><br><br>For Plaintiffs: Riker Danzig Scherer Hyland &amp; Perretti<br><br>ForDefendants AION Partners, AION Realty, and AION Holdings: DLA Piper US LLP, 1251Avenue of the Americas, NY NY 10020<br><br>For Defendant Michael Betancourt: MeisterSeelig &amp; Fein, LLP, 125 Park Avenue, 7th Fl., NY NY 10017<br><br>For DefendantsSiraj Dadabhoy and Shabir Randeree: Kasowitz Benson, Torres, LLP, 1633 Broadway, NY NY10019<br>Andrew Borrok, J.<p>Upon the foregoing documents and for the reasons set forth on the record (2/13/2020), (i) theAION Defendants' (hereinafter defined) motion to dismiss (Mtn. Seq. No. 002) is granted solelywith respect to the first (piercing the corporate veil) and fifth (accounting) causes of action, and(ii) Michael Bettencourt's motion to dismiss (Mtn. Seq. No. 003) and (iii) Siraj Dadabhoy andShabir Randeree's motion to dismiss (Mtn. Seq. No. 004) are granted in their entirety and thecomplaint against these individual defendants is dismissed, without prejudice, for the reasons setforth herein. </p><p></p><div align="center"><b>THE FACTS RELEVANT TO THE INSTANTMOTIONS</b></div><p>This is a judgment collection action alleging a complexfraudulent scheme by the defendants and seeking to pierce the corporate veil between (i) DCDAmerica, Inc. (<b>DCD</b>) and West End Equity I, Ltd., West End Equity II, Ltd., West EndEquity III, Ltd., West End Equity IV, Ltd., and West End Equity V, Ltd. (collectively, the<b>West End Entities</b>), and (ii) AION Partners, LLC (<b>AION Partners</b>), AIONRealty, LLC (<b>AION Realty</b>), AION Holdings, Inc. (<b>AION Holdings</b>, andcollectively with AION Partners and AION Realty as the <b>AION Entities</b>) and SirajDadabhoy, Shabir Randeree and Michael Betancourt.</p><p>In 2011, non-party TAIB Bank, B.S.C.(c) (<b>TAIB</b>) commenced an action againstDCD and the West End Entities in New York State Supreme Court (DCD and the West EndEntities, collectively, hereinafter, the <b>State Court Defendants</b>) (the <b>TAIBAction</b>) (Index No. 652669/2011). The Complaint alleges that the TAIB Action was basedon a 2007 loan (the <b>Loan</b>) made by TAIB to the West End Entities for $17 million,which was secured by a guaranty (the <b>Guaranty</b>) of up to $10 million from the West EndEntities' parent company, DCD. The Loan was part of a transaction for the purchase of two officebuildings in Washington, D.C (the <b>Transaction</b>). The State Court Defendants haddefaulted on the Loan in 2010. Acacia Investments, B.S.C.(c)'s (<b>Acacia</b>) wholly ownedsubsidiary, Acacia Real Estate Limited, also loaned the West End Entities $3.25 million as partof the Transaction, which it claims it never recovered.</p><p>Ultimately, following some protracted litigation, in 2016, TAIB prevailed and obtained (i) ajudgment (the <b>West Entities Judgment</b>) against the West End Entities in the total sum$40,409,650, and (ii) a judgment (the<b> DCD Judgment</b>) against DCD for a total sum of$17,366,351, plus interest on both judgments running from December 19, 2016 (the West EndEntities Judgment and the DCD Judgment, together, the <b>Judgment</b>). To date, theJudgment remains due and owning.</p><p>Over the next two years, TAIB sought to collect on the Judgment, serving over 20 subpoenason the State Court Defendants, their former counsel, their employees and accountants, and onother related entities (O'Donnel Aff., ¶ 5). According to the Complaint, this post-judgmentdiscovery revealed that DCD fraudulently transferred its assets in connection with a 2012dissolution (Compl., ¶¶ 47-51). More specifically, the Complaint alleges thatunbeknownst to TAIB and Acacia at the time, DCD began winding up its operations as early as2009 — after the State Court Defendants defaulted on the Loan — and dissolved onDecember 31, 2012, four years before TAIB obtained its Judgment (<i>id.</i>, 47). Asreferenced in the Complaint, Michael <font color="FF0000">[*2]</font>Betancourt, a directorof both DCD and the AION Entities, testified that DCD decided to dissolve starting in 2009because:</p><blockquote>I think it's really a function of as I stated earlier, the profitability of DCD waspurely, or largely dependent on the generation of promotes, or exit fees in the event that aninvestor made a return above a specific hurdle, as outlined in the joint venture agreement. It wasclear to the group at that time that DCD really wasn't � the transactions as cited in this May23rd, 2007 minutes from our staff meeting, a lot of these trades were busted. And it was �we used it as an opportunity to really rebrand, start anew. So I think that's really what led to DCDgoing away.</blockquote><br><br>(Compl., ¶ 51).<p>However, and significantly, DCD allegedly never provided notice to TAIB that it waswinding up. Rather, at the same time that they were winding up DCD, the defendants created theAION Entities to conduct the same business (Compl., ¶ 54). Most of DCD's employeesbegan working at AION Partners in the same capacity as they had previously worked at DCD(<i>id.</i>, ¶¶ 56-57). In addition, AION Partners took over DCD's office lease andcontinued to operate out of the same office, using the same phone and fax numbers as DCD(<i>id</i>., ¶ 58). DCD also transferred some of its contracts to the AION Entities as partof the dissolution (<i>id.</i>, 61). Certain properties previously listed as being in DCD's"portfolio" in 2008 are currently listed on the AION Partner's website as being in the AION"portfolio" (<i>id.</i>  ¶ 59). Property records allegedly confirm that five of theseproperties were purchased <b><i>before</i></b> AION Partners was formed and one of the fivewas actually sold in 2006, which Acacia maintains is a further indication that AION Partnerstreats DCD's assets as its own (<i>id.</i>). Acacia claims that the AION Entities never paidDCD for the business they assumed.</p><p>Acacia also claims that TAIB's asset discovery was thwarted due to its inability to obtainbank account and other financial information from the State Court Defendants that would haveprovided more insight into their assets and transfers of same because (i) such records were neverretained and (ii) the defendants concealed information when specifically asked about them. Forexample, AION Realty CFO Nafis Khan, who had previously served as controller with DCD,testified that he was never instructed to retain DCD's financial records and does not know wherethey could be, notwithstanding the active litigation of the TAIB action during the time of DCD'sdissolution (Compl., ¶69; Khan EBT, 49:21-50:9; 88:5-12; 89:12-18). AION's accountant,Nadem Hasan, who had previously worked for DCD, likewise claims that he was never told toretain any documents (Hasan EBT, p. 17:2-4). In fact, in response to TAIB's 2017 informationsubpoena, the State Court Defendants stated that they "are not aware of" any business assetsbeing transferred by DCD since 2009 and that, "to the extent that DCD America may havetransferred any business asset . . . it was not significant" (3/17/17 Responses, O'Donnell Affirm.,Ex. 5, No. 12, NYSCEF Doc. No. 74). However, DCD's tax returns from 2010 and 2011allegedly showed over $5 million in assets and $0 in assets by the end of 2012 (Compl., ¶124). DCD's 2012 balance statement also allegedly showed a net income of $2,063,293.13 in2012. The Complaint alleges that DCD transferred all of those assets to either the AION Entitiesor the individual defendants in or around 2012 in an effort to thwart TAIB's collection efforts(<i>id.</i>, ¶¶ 125-127). </p><p>The Complaint asserts four causes of action for (1) piercing the corporate veil, (2) actualfraudulent conveyance, (3) constructive fraudulent conveyance, (4) director liability (i.e., against<font color="FF0000">[*3]</font>the individual defendants only), and (5) accounting.</p><br><br><b>Motion Seq. 002</b><p>In moving to dismiss the claims against them, the AION Entities argue that the Complaintfails to state a claim and because, per Acacia's own allegations as set forth in the Complaint,TAIB/Acacia had ample notice (or that, at least, they were on inquiry notice) of the transfersduring the pendency of the TAIB action and, therefore, the claims are time barred. The AIONEntities also argue that this action violates New York's anti-champerty statute.</p><br><br><b>I. Failure to State a Claim</b><p><b>A. Piercing the Corporate Veil (First Cause of Action) is Dismissed as a Separate Causeof Action</b></p><p>With respect to the first cause of action for piercing the corporate veil, the AION Entitiesargue that New York does not recognize a separate cause of action to pierce the corporate veil(citing <a href="../2016/2016_05094.htm" target="_blank"><i>Chiomenti Studio Legale, LLC vProdos Capital Mgmt. LLC</i> (140 AD3d 635</a> [1st Dept 2016]; <a href="../2014/2014_03460.htm" target="_blank"><i>Shugrue v Stahl </i>(117 AD3d 527</a>[1st Dept 2014]). Although the AION Entities are correct that piercing the corporate veil is not aseparate cause of action under New York law, the right to pierce the corporate veil is "establishedwhen the facts and circumstances compel a court to impose the corporate obligation on itsowners, who are otherwise shielded from liability" (<a href="../2013/2013_05293.htm" target="_blank"><i>Tap Holdings, LLC v Orix Fin. Corp.</i>, 109 AD3d 167</a>, 174 [1stDept 2013]). Accordingly, while the specific cause of action for piercing the corporate veil mustbe dismissed, the AION Entities may still be liable for the fraudulent conveyance causes ofaction (<i>see Chiomenti Studio Legale, LLC v Prodos Capital Mgmt. LLC, </i>2015 WL1095700, *5 [Sup Ct NY Cnty 2015] [explaining that while piercing the corporate veil is not anindependent cause of action, defendant may be liable under the other asserted causes of action][<i>affd</i>, 140 AD3d 635 (1st Dept 2016)]).</p><p><b>B. The Complaint States a Claim for Actual Fraudulent Conveyance (Second Cause ofAction</b></p><p>To state a claim for fraudulent conveyance under NY Debtor &amp; Creditor Law §276, a plaintiff must allege that (1) a transfer was made (2) with the actual intent to hinder, delayor defraud either present or future creditors (NY Debt &amp; Cred § 276). The New Yorkstatute on fraudulent conveyances is interpreted broadly, defining a conveyance as "everypayment of money, assignment, release, transfer, lease, mortgage or pledge of tangible orintangible property, and also the creation of any lien or incumbrance" (<i>id.,</i> § 270).Claims alleging fraudulent conveyance are subject to CPLR 3016(b)'s heightened pleadingstandard (<a href="../2018/2018_02436.htm" target="_blank"><i>Carlyle, LLC v Quik Park1633 Garage LLC</i>, 160 AD3d 476</a> [1st Dept 2018] [dismissing fraudulent conveyanceclaim where fraudulent intent was not alleged with sufficient particularity but upon informationand belief only]). </p><p>Here, the AION Entities contend that this claim fails because Acacia does not identify withparticularity the transfers which are alleged to be fraudulent and because the Complaint <font color="FF0000">[*4]</font>engages in group pleading rather than alleging "exactly whichdefendant engaged in what activity and when, in furtherance of the alleged fraud" (citing<a href="../2011/2011_08678.htm" target="_blank"><i> 3 E. 54th St. NY, LLC v PatriarchPartners, LLC</i>, 90 AD3d 418</a>, 419 [1st Dept 2011]). This argument, however, fails.Among other things, the Complaint alleges that all of the following were done for noconsideration: (i) the transfer of contracts from DCD to the AION Entities, including a propertymanagement contract from a DCD affiliate to "AION Realty LLC, a wholly-owned subsidiary ofAION Holdings, Inc, an affiliate"), (ii) the transfer of over $5 million from DCD by the end of2012, (iii) the transfer of properties from DCD's portfolio to AION Partners' portfolio, (iv) thetransfer of DCD's contractual right to fee from a DCD project to AION Partners, (v) the transferof "asset management responsibilities" from DCD's subsidiary to AION Partners, (vi) the transferof all assets to the AION Entities, and Messrs. Randeree and/or Dadabhoy, and (vii) a DCDsubsidiary changing its name to "AION." (Compl., ¶¶ 59-64, 72-75, 121, 126).Although the AION Entities allege that Acacia improperly engages in group pleading, Acaciasufficiently sets forth the specific transfers, their approximate dates of transfers and thetransferors/transferees. As the Court of Appeals made clear in <i>Pludeman v North LeasingSys., Inc.</i>, "section 3016(b) may be met when the facts are sufficient to permit a reasonableinference of the alleged conduct" (10 NY3d 486, 492 [2008]). The Court explained:</p><blockquote>  we have never required talismanic, unbending allegations. Simply put, sometimessuch facts are unavailable prior to discovery. Lest we willfully ignore the obvious — orthe strong suspicion of a fraud — we have always acknowledged that, in certain cases, lessthan plainly observable facts may be supplemented by the circumstances surrounding the allegedfraud.</blockquote><br><br>(<i>id</i>.).<p>As has been observed by other courts, "[d]irect evidence of fraud is often elusive" at thepleading stage (<i>Pen Pak Corp. v LaSalle Nat. Bank of Chicago</i>, 240 AD2d 384, 386 [2dDept 1997). For purposes of this motion to dismiss, the complaint here sufficiently alleges thetransactions complained of so as to give them proper notice of the claims against them.</p><p>Next, the AION Entities argue that even if Acacia has alleged an actual transaction, its claimfails because it does not allege the requisite fraudulent intent. The Court of Appeals has statedthat the intent to commit fraud is to be divined from the surrounding circumstances (<a href="../2009/2009_04299.htm" target="_blank"><i>Eurycleia Partners, LP v Seward &amp;Kissel, LLP</i>, 12 NY3d 553</a> [2009]; <a href="../2010/2010_05981.htm" target="_blank"><i>Oster v Kirschner</i>, 77 AD3d 51</a>, 56 [1st Dept 2010]). The AIONEntities claim that there can be no fraudulent intent here as a matter of law because thedissolution of DCD and the transfer of its assets to the AION Entities was done completely out inthe open. To wit, AION Partners publicly announced its existence and relationship with DCD in2009 � seven years before TAIB obtained its judgments, two years before the TAIB Actionwas commenced, and approximately a year before the default notice was even issued, and per thecomplaint, DCD's operations were also slowly wound down over a three-year period, there are noallegations that any of the AION Entities are shell corporations or not actually conductinglegitimate business, the 2009 formation of AION Partners and its role with certain DCDproperties was publicized in press releases and news articles, and Mr. Betancourt told TAIB in2010 that "AION Partners LLC ha[d] assumed asset management responsibilities from West EndSponsor, LLC by assignment" (Compl., ¶¶ 55, 36, 66-67). In short, the AION Entitiesmaintain that, by Acacia's own account, all of this was done out in the open and, therefore,Acacia's allegations establish "the opposite of fraudulent intent" <font color="FF0000">[*5]</font>(AION Entities Supp. Memo., p. 12). The argument, however, alsofails.</p><p>Although many of the underlying actions took place as early as 2009, before the TAIBAction was ever commenced, Acacia alleges sufficient additional facts to survive a motion todismiss. Among other things, the Loan's maturity date was allegedly extended to 2011 in 2009,which Acacia claims lulled TAIB into not pursuing its rights while DCD siphoned away its assets(Acacia Opp. Memo., Seq. 002, p. 13, citing <i>O'Donnell Aff.</i>, Exs. 9-10). Moreover, theComplaint sufficiently alleges that DCD purposefully failed to retain records and otherwiseobstructed or evaded TAIB and/or Acacia's efforts at obtaining discovery, both pre and postjudgment. The AION Entities cannot have it both ways: they cannot fail to retain records andproduce evidence in response to information subpoenas and then also criticize Acacia for lackingsufficient details regarding same (<i>Pludeman, supra</i>, 10 NY3d at 491 [denying motion todismiss "where concrete facts 'are peculiarly within the knowledge of the party' charged with thefraud"). This conclusion is bolstered by the timing of the alleged transfers, which were made atleast in part while TAIB was pursuing DCD on its Loan, and which further underscores thenecessity for DCD to have retained its financial records as to its transfers at the time of itsdissolution (<i>Miller v Miller, </i>276 AD2d 758 [2d Dept 2000]; <i>Grumman AerospaceCorp. v Rice</i>, 199 AD2d 365, 367 [2d Dept 1993]). And, although the creation of AION mayhave been made public, the transfers for what Acacia alleges to be zero consideration were not.Accordingly, the motion to dismiss the second cause of action for failure to state a claim isdenied.</p><p><b>C. The Complaint States a Claim for Constructive Fraudulent Conveyance (Third Causeof Action)</b></p><p>Acacia also maintains that the Complaint fails to state a claim for constructive fraudulentconveyance (the third cause of action). To state such a claim under NY Debtor &amp; CreditorLaw § 273, a plaintiff must allege that: (1) a transfer was made without fair consideration,and (2) the transfer rendered the conveyor insolvent (NY Debt &amp; Cred § 273).Alternatively, under § 273-a a plaintiff must allege that: (1) a transfer was made without fairconsideration, (2) at the time of transfer, the conveyor was a defendant in an action for moneydamages or had a judgment in such an action docketed against him; and (3) a final judgment hasbeen rendered against the conveyor that remains unsatisfied (NY Debt &amp; Cred §273-a). Fair consideration is defined as: (i) "[w]hen in exchange for such property, or obligation,as a fair equivalent therefor, and in good faith, property is conveyed or an antecedent debt issatisfied," or (ii) "[w]hen such property, or obligation is received in good faith to secure a presentadvance or antecedent debt in amount not disproportionately small as compared with the value ofthe property, or obligation obtained" (NY Debt &amp; Cred § 272). </p><p>Unlike claims under NY Debtor &amp; Creditor Law § 276, the transferor's actualintent is irrelevant under § 273. A person/entity is considered insolvent when "the presentfair salable value of his assets is less than the amount that will be required to pay his probableliability on his existing debts as they become absolute and matured" (NY Debt &amp; Cred§271[1]). The AION Entities do not dispute that DCD became insolvent. As referenced inthe Complaint, the tax returns are clear that DCD had over $5,000,000 in assets in 2010/2011while liable on a potential $10,000,000 guaranty to TAIB. Thus, the only question is whether theconveyances from DCD to the AION Entities were made for fair consideration. This is not aquestion that can be determined on the facts here at the pleading stage. For purposes of thismotion, it is sufficient <font color="FF0000">[*6]</font>that Acacia alleges that the AIONEntities paid <b><i>no consideration</i></b> for DCD's assets and the AION Entities have notput forth any evidence to the contrary. The motion to dismiss the third cause of action for failureto state a claim, therefore, must be denied at this stage of the proceeding.</p><p><b>D. The Complaint Fails to State a Claim for an Accounting (Fifth Cause ofAction)</b></p><p>With respect to the accounting claim (the fifth cause of action), the AION Entities argue thatthis claim fails as there is no fiduciary relationship between the parties as required for anaccounting cause of action. Generally, "[t]he right to an accounting rests on the existence of atrust or fiduciary relationship regarding the subject matter of the controversy at issue" (<a href="../2012/2012_07266.htm" target="_blank"><i>DiTolla v Doral Dental IPA of NY,LLC</i>, 100 AD3d 586</a>, 587 [2d Dept 2012]). Although Acacia may be entitled to certainfinancial information regarding DCD's dissolution and the AION Entities' assets, it is not entitledto an accounting simply as a judgment creditor. Accordingly, this claim is dismissed.</p><br><br><b>II. The Statute of Limitations Does Not Bar Recovery</b><p>The statute of limitations for fraudulent conveyance claims is the later of (1) six years fromthe alleged fraudulent conveyance or (2) years from inquiry notice of the alleged fraudulentconveyance (CPLR 213; CPLR 203[g]; <i>Avalon LLC v Coronet Props. Co.</i>, 306 AD2d 62[1st Dept 2003]). The instant complaint was filed on December 14, 2018. The AION defendantsargue that the claims therein are untimely because DCD began winding up its operations in 2009,AION Partners was created in 2009, and Mr. Betancourt told TAIB in 2010 that AION hadassumed asset management responsibilities. However, as Acacia points out, DCD did notactually dissolve until December 31, 2012, less than six years before the filing of the Complaintand Acacia alleges fraudulent transactions occurred as a result of this dissolution process (e.g.,Compl., ¶¶ 47, 49). In addition, Acacia alleges that it did not discover many (if notall) of the fraudulent transfers at issue <b><i>until 2018</i></b> when it finally obtainedfinancial documents from DCD and deposed Messrs. Betancourt, Hasan and Khan. Although theAION Entities argue that Acacia had "inquiry notice" of the fraudulent transfers, the facts theyreference suggest only that another company (AION) was created and becoming involved inDCD's business. It is simply not sufficient without more to give inquiry notice of transferswithout consideration to Acacia (or its predecessor in interest, TAIB) justifying dismissal at thisstage of the proceeding, particularly in light of the State Court Defendants' total denial that theytransferred any significant assets as late as March 2017, as discussed above (3/17/17 Responses,O'Donnell Aff., Ex. 5, No. 12, NYSCEF Doc. No. 74). Put another way, on this motion and atthis stage of the proceedings, the court accepts Acacia's account that it was not until tax returnsand balance sheets were produced in 2018 that it became evident that the State Court Defendants'denials were false (<i>see McGuinness v Standard Drywall Corp., </i>193 AD2d 518, 518 [1stDept 1993] [("Although the alleged fraudulent transfers commenced in 1983 and the action wasnot brought until 1990, after investigations in connection with attempts to satisfy the judgments,plaintiffs utilized reasonable diligence in discovering the transfers, which transfers werepeculiarly within the knowledge of defendants, and the failure of plaintiffs to ascertain the truthby inspecting public records is not determinative"]). Certainly, it cannot be said here thatAcacia/TAIB sat on its hands here rather than pursue its rights, both in the underlying TAIBAction and in its efforts to collect the judgment. For the avoidance of doubt, the statute oflimitations may be raised at a <font color="FF0000">[*7]</font>later point, but on the recordbefore the court, dismissal on this record at this stage would not be appropriate.</p><br><br><b>III. The Prohibition on Champerty</b> <b>Does Not ProhibitRecovery</b><p>"The doctrine of champerty developed 'to prevent or curtail the commercialization of ortrading in litigation'" (<a href="../2009/2009_07323.htm" target="_blank"><i>Trust forCertificate Holders of Merrill Lynch Mtge. Invs. v Love Funding Corp.</i>, 13 NY3d 190</a>,198 [2009] [citation omitted]). However, New York cases are clear that,"if a party acquires adebt instrument for the purpose of enforcing it, that is not champerty simply because the partyintends to do so by litigation" (<i>id.</i> at 200). Accordingly, champerty does not preventrecovery here.</p><br><br><b>Motion Seq. 003</b><p><b>I. The Complaint is Dismissed Against Mr. Betancourt Inasmuch as the DirectorLiability Claim (Fourth Cause of Action) is Dismissed Against the Individual DefendantsWithout Prejudice</b></p><p>Mr. Betancourt's motion (seq. no. 003) is directed solely at the fourth cause of action fordirector liability as that is the only claim that is asserted against him directly. This claim is alsoasserted against Messrs. Dadabhoy and Randeree and is subject to Messrs. Dadabhoy andRanderee's motion to dismiss (seq. no. 004). As the arguments made by all the individualdefendants with respect to this claim are substantially identical, the court will address the claimas to <b><i>all</i></b> the individual defendants here.</p><p>With respect to the fourth cause of action, Acacia alleges that, "[a]s directors of DCD,[Mssrs.] Dadabhoy, Randeree and Betancourt had a duty to DCD's creditors, includingTAIB/Acacia, to not siphon DCD's assets to its shareholders before dissolution and to retainrecords during the [TAIB] litigation" and that the individual defendants breached these duties(Compl., ¶¶ 144-45). New York courts generally apply the internal affairs doctrine toclaims that are based on the "duties and obligations of directors," and hold that such claims aregoverned by the substantive law of the state of incorporation — i.e., in this case, Delaware(<i>Diamond v Oreamuno</i>, 24 NY2d 494, 503-04 [1969]).</p><p>In support of dismissal, the individual defendants rely on <i>North Am. Catholic Edu.Programming Foundation, Inc. v Gheewalla</i>, in which the Supreme Court of Delawarerejected a <b><i>direct</i></b>breach of fiduciary duty claim by the creditors of corporation inthe "zone of insolvency" or otherwise insolvent (930 A2d 92 [DE 2007]). In <i>Gheewalla</i>, acreditor alleged claims for breach of fiduciary duty against three individual directors of acompany that had become insolvent. The Supreme Court of Delaware held that individualcreditors of an insolvent corporation could assert a derivative claim against the corporatedirectors for breach of fiduciary duties owed to the corporation, but had no right to assert suchclaims directly. The court explained:</p><blockquote>It is well settled that directors owe fiduciary duties to the corporation. When acorporation is <b><i>solvent</i></b>, those duties may be enforced by its shareholders, whohave standing to bring <b><i>derivative</i></b>actions on behalf of the corporation becausethey are the ultimate beneficiaries <font color="FF0000">[*8]</font>of the corporation's growthand increased value. When a corporation is <b><i>insolvent</i></b>, however, its creditors takethe place of the shareholders as the residual beneficiaries in any increase invalue.</blockquote><blockquote>Consequently, the creditors of an<b><i>insolvent</i></b> corporation have standing to maintain derivative claims againstdirectors on behalf of the corporation for breaches of fiduciary duties. The corporation'sinsolvency makes creditors the principal constituency injured by any fiduciary breaches thatdiminish the firm's value. Therefore, equitable considerations give creditors standing to pursuederivative claims against the directors of an insolvent corporation. Individual creditors of aninsolvent corporation have the same incentive to pursue valid derivative claims on its behalf thatshareholders have when the corporation is solvent.</blockquote><br><br>(<i>Gheewalla</i>, 930 A2d at 101-02 [quotation and citation omitted] [emphasis inoriginal]). <p>The court explained that to find otherwise and recognize that "directors of an insolventcorporation owe <b><i>direct</i></b>fiduciary duties to creditors, would create uncertainty fordirectors who have a fiduciary duty to exercise their business judgment in the best interest of theinsolvent corporation," and would "create a conflict between those directors' duty to maximizethe value of the insolvent corporation for the benefit of all those having an interest in it, and thenewly recognized direct fiduciary duty to individual creditors" (<i>id.</i> at 103 [emphasisadded]). After all, creditors are already protected by "strong covenants, liens on assets, and othernegotiated contractual protections," as well as the implied covenant of good faith and fairdealing, and, as significant here, by "<b><i>the law of fraudulent conveyance</i></b>"(<i>id.</i> at 100<i>, </i>quoting <i>Production Resources Group L.L. v NCT Group, Inc.</i>,863 A2d 772, 790 [Del Ch 2004] [emphasis added]).</p><p>To the extent that Acacia argues that a distinction should be made here because DCD wasactually <b><i>dissolved</i></b>, and <b><i>not insolvent</i></b>, Acacia does not cite anycase law in support of such a distinction. Rather, it relies on Del. Code Ann. Tit. 8, §§280 and 281 to argue that because notice was not provided, direct claims by the creditors againstthe directors must be permitted. The argument however inappropriately conflates two differentissues: immunity and standing.</p><p>Del. Code Ann. Tit. 8, §§ 280 and 281 provide a process by which dissolvingcorporations may wind up their affairs and provide notice to creditors and potential creditors ofthe pending dissolution to allow creditors to make claims and to establish a "safe harbor" fordirectors who comply with these statutory provisions. Directors who elect to follow therequirements set forth in the statute are entitled to safe harbor protection against suit (<i>In reRegO Co.</i>, 623 A2d 92 [Del Ch 1991] [discussing purpose of the "innovative" provisions of§§ 280-282]). To wit, as the Delaware chancery court explained in <i>In re RegO</i>,§§ 280-282 were enacted to address the scope of director and shareholder liability forcorporate obligations following a corporation's dissolution. That court noted that:</p><blockquote>At an early stage of our law, that law was clear, if harsh. Dissolution of acorporation was its civil death; not only could the corporation not thereafter be sued, but pendingsuits against it abated. Corporate dissolution thus stood as a substantial risk to corporatecreditors, threatening to deprive them of a party to sue on their claims.</blockquote><br><br>(<i>id.</i>, 623 A2d at 95).<p>To address this issue, courts created the trust fund doctrine, in part, to offer some <font color="FF0000">[*9]</font>protection to corporate creditors when dissolution occurred(<i>id.</i>). Among the "core concepts" of the trust fund doctrine is that "on dissolutioncorporate directors have obligations to creditors and that creditors, at least creditors of whom thecorporation had reason to know, have an equitable right to follow corporate assets and to impressa constructive trust upon them in the hands of shareholders" (<i>id</i>.). Now, however, there isa "formal winding-up period in which claims can be asserted, settled or adjudicated," and anypending suit against a corporation that is filed before or during the wind-up period does not abateeven on expiration of the wind-up period (<i>id.</i>, citing Del. Code Ann. Tit. 8, § 278).Sections 280 through 282 of the Delaware General Corporation Law, in turn, (i) structurealternative mechanisms which, under certain circumstances, recognize "rights in unknown futurecorporate claimants and provide a level of assurance to such persons that, as part of the corporatedissolution process, reasonable provision will be made for their future claims," and (ii) —significant here — offer "directors and shareholders (and perhaps transferees) assurancethat, if the Court of Chancery approves security provisions [set forth in those statutes] forcorporate claimants, then they will be protected from potential future claims arising from thedecision to distribute the corporation's assets on dissolution" (<i>id.</i> at 96-97).</p><p>In other words, §§ 280 and 281 provide a mechanism through which the directors<b><i>could</i></b> <b><i>elect to proceed</i></b> to potentially protect themselves from"future claims arising from the decision to distribute the corporation's assets on dissolution.(<i>id.</i> at 97 [noting that compliance with these sections "will, in principal at least, always belitigable"]. Importantly, however, and contrary to Acacia's contention, the failure to comply with§§ 280 and 281 simply <b><i>does not create a basis for liability or otherwise conferstanding</i>.</b> That is simply not something the statutes address. <i>Ghewalla</i>, on theother hand, addressed the standing issue head on and held that only derivative claims may beasserted by creditors of a corporation in the "zone of insolvency" or otherwise insolvent forbreach of fiduciary duty.</p><p>Nor is a different result compelled by Section 720 of New York's Business Corporation Law,which simply provides that:</p><blockquote>An action may be brought against one or more directors or officers of a corporationto procure a judgment for the following relief   to compel the defendant to account for his officialconduct in the following cases: [t]he acquisition by himself, transfer to others, loss or waste ofcorporate assets due to any neglect of, or failure to perform, or other violation of hisduties.</blockquote><br><br>(NY BCL 720[a]).<p>Section 720 is procedural in nature and simply has no bearing to the issue. In contrast,"matters peculiar to the relationships among or between" the corporation and its officers anddirectors are "governed by the <b><i>substantive law</i></b> of the state or country ofincorporation" (<a href="../2016/2016_06796.htm" target="_blank"><i>New GreenwichLitigation Trustee, LLC v Citco Fund Servs. (Europe) B.V.</i>, 145 AD3d 16</a> [1st Dept2016] [emphasis added] [citing <i>Edgar v MITE Corp.</i>, 457 US 624, 645 [1982] and <a href="../2014/2014_03955.htm" target="_blank"><i>Culligan Soft Water v Clayton Dubilier&amp; Rice LLC</i>, 118 AD3d 422</a> [1st Dept 2014]). Here, the substantive law to beapplied is that of Delaware. To hold otherwise would impermissibly subject DCD to conflictingdemands because "only one State should have the authority to regulate a corporation's internalaffairs" (<i>Edgar</i>, 457 US at 645). And, under Delaware law (<i>Gheewalla), </i>theresimply cannot be a direct claim for breach of fiduciary duty by a creditor in this action.  <font color="FF0000">[*10]</font>Accordingly, the fourth cause of action is dismissed against all theindividual defendants without prejudice.</p><br><br><b>Motion Seq. 004</b><p>Mssrs. Dadabhoy and Randeree move to dismiss all five claims asserted against them. </p><p><b>I. The Fact that Mr. Randeree Resigned from DCD in 2010 is Insufficient to Dismiss theComplaint</b> <b>as Against Him</b></p><p>As an initial matter, Mr. Randeree argues that the claims against him must be denied becausehe resigned as a director of DCD In 2010. In support of this claim, Mr. Randeree submits aresignation letter (the <b>Resignation Letter</b>) dated June 16, 2010, which states:</p><blockquote>Please accept this letter as my formal resignation from the position of Officer andDirector of DCD Americas, Inc. As of the date herein, I will no longer be an Officer or Directorof DCD America, Inc. including subsidiaries and affiliates.</blockquote><br><br>(NYSCEF Doc. No. 58).<p>Mr. Randeree also attests in a brief, seven-paragraph affidavit that:</p><blockquote>4. The Complaint asserts claims against me based on the allegation that I am aprincipal and director of the defendant DCD America, Inc. ("DCD America")[].</blockquote><blockquote>5. However, I never had any equity interest in DCDAmerica.</blockquote><blockquote>6. Further, I resigned from the position of Officer andDirector of DCD America on June 16, 2010. []</blockquote><blockquote>7. DCDAmerica's Board of Directors accepted my resignation on September 30,2010.</blockquote><br><br>(NYSCEF Doc. No. 61).<p>The September 30, 2010 Board Minutes (the <b>Board Minutes</b>) for DCD —while submitted in heavily redacted form — also indicate that "the Board accepts theresignation of Shabir Randeree as the Officer and Director of DCD America Inc. and allsubsidiaries and put on record the valuable contribution made by him during the term of hisoffice." Mr. Randeree does not state in his affidavit whether he has or had any affiliation withany of the AION Entities following his resignation as a Director of DCD. The affidavit is silentas to anything he did subsequent to submitting his Resignation Letter.</p><p>In opposition, Acacia submits portions of Mr. Betancourt's testimony from April 18, 2018,wherein Mr. Betancourt testified: (i) that Messrs. Dadabhoy and Randeree <b><i>both</i></b>own AION Realty, (ii) that, to the best of his knowledge, the owners of DCD America wereMessrs. Dadabhoy and Randeree, and (iii) the owners of "AION" were also Messrs. Dadabhoyand Randeree (NYSCEF Doc. No. 98, pp. 14:22-24; 62:9-15). </p><p>Based on the foregoing, Mr. Randeree's role in DCD and the AION Entities is, at minimum,clearly disputed. At this stage of the proceedings, the court declines to dismiss Mr. Randereefrom these proceedings on the basis of the Resignation Letter, his very sparse affidavit and theheavily redacted Board Minutes given that another member of the AION Entities and <font color="FF0000">[*11]</font>DCD has testified that Mr. Randeree is and was involved withboth.</p><p><b>II. The Complaint Fails to State Claims Against Mssrs. Dadabhoy and RandereeIndividually</b></p><p>Turning to the remainder of Messrs. Dadabhoy and Randeree's arguments in favor ofdismissal, there is simply an insufficient basis here, at this point, to hold these individualspersonally liable on the fraudulent transfer claims. Under Delaware law, which, as discussedabove, applies here because DCD is a Delaware corporation, a corporate veil can be pierced tohold individual directors liable for the obligations of the corporation only if the corporation is a"sham and exist[s] for no other purpose than as a vehicle for fraud" (<i>Wallace v Wood</i>,752 A2d 1175, 1184 [Del Ch 1999]). The corporate veil generally cannot be pierced where acompany "is engaged in substantial business operations and was formed   for purposes relating tothe pursuit of normal business operations" (<i>In re Sunstates Corp. Shareholder Litig.</i>, 788A2d 530, 534 [Del Ch 2001]). To allege a claim against the individual officers and/or directors ofa Delaware corporation, Acacia must allege facts that, if taken as true, demonstrate the officers'and directors' complete domination of the company such that the company no longer has legal orindependent significance of its own (<i>see Wallace ex rel. Cencom Cable Income Partners II,Inc., L.P. v Wood</i>, 752 A2d 1175 [Del Ch 1999]). The Complaint does not do so here withrespect to the Messrs. Dadabhoy and Randeree. Piercing the corporate veil requires that thecorporate structure be such that it causes fraud or similar injustice (<i>id.</i> at 1184). TheComplaint alleges sufficient allegations of such fraud and injustice with respect to DCD and theAION Entities (e.g., same offices, same employees, same phone and fax numbers, samemanagement contracts, etc.), but contains insufficient allegations of such alleged fraud withrespect to Messrs. Dadabhoy and Randeree. Critically, the Complaint does not contain sufficientallegations of the Messrs. Dadabhoy and Randeree's complete domination and control over thecorporate entities or that the corporate formalities with respect to the corporate entities and thesedefendants were not observed. Therefore, Acacia has failed to meet its heavy burden of showingthat <b><i>the corporation was dominated by</i></b>Messrs. Dadabhoy and Randeree (asopposed to its showing that the AION Entities dominated DCD) for the purpose of holding theMessrs. Dadabhoy and Randeree personally liable with respect to the transactions attacked (<a href="../2009/2009_07457.htm" target="_blank"><i>see Do Gooder Prods., Inc. v AmericanJewish Theatre, Inc.</i>, 66 AD3d 527</a>, 528 [1st Dept 2009]). Therefore, the claims againstthem are dismissed without prejudice.</p><p>Accordingly, it is</p><p>ORDERED that motion seq. no. 002 is granted to extent of dismissing the first (piercing thecorporate veil) and fifth (accounting) causes of action in the complaint, the Clerk is directed toenter judgment accordingly and the moving defendants are directed to file an Answer to theComplaint within 20 days of this decision and order; and it is further</p><p>ORDERED that motion seq. no. 003 is granted and the complaint is dismissed, withoutprejudice, as against Michael Betancourt; and it is further</p><p>ORDERED that motion seq. no. 004 is granted and the complaint is dismissed, withoutprejudice, as against Messrs. Dadabhoy and Randeree; and it is further</p><p>ORDERED that the Clerk is directed to amend the caption accordingly, upon service on himof a copy of this decision by the defendants, together with notice of entry.</p><br><br><b><font color="FF0000">[*12]</font>DATE February 18, 2020</b><br><br><b>ANDREW BORROK, J.S.C.</b><br><br><div align="center"><form method="LINK" action="../../slipidx/com_div_idxtable.shtml"><input type="submit" value="Return to Decision List"></form></div></partyblock>