Court Opinion

ID: 9916476
Source: CourtListenerOpinion
Date Created: 2024-01-10 01:07:33.585284+00
Date Added: 2024-06-11T13:25:29.835887
License: Public Domain

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.
                                                                                                                      INDEX NO. 153100/2023
  NYSCEF DOC. NO. 49                                                                                            RECEIVED NYSCEF: 01/03/2024

                                   SUPREME COURT OF THE STATE OF NEW YORK
                                             NEW YORK COUNTY
            PRESENT:             HON. MELISSA A. CRANE                                            PART                              60M
                                                                                      Justice
            ----------------------------------------------------------------- ----------------X
                                                                                                  INDEX NO.          153100/2023
             LIFE INSURANCE FUND ELITE, LLC.,
                                                                                                  MOTION DATE         09/12/2023
                                                         Plaintiff,
                                                                                                  MOTION SEQ. NO.         002
                                                 - V -

             HAMBURG COMMERCIAL BANK AG, CERBERUS
             EUROPEAN CAPITAL ADVISORS, LLP., PROMONTORIA                                           DECISION + ORDER ON
             HOLDING 260 BV,                                                                              MOTION

                                                         Defendant.
            ------------------------------------------------------------------- --------------X

            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

            moved to dismiss Plaintiff Life Insurance Fund Elite, LLC' s ("LIFE") complaint pursuant to CPLR

            321 l(a)(l), (5), (7), and (8). At oral argument on September 12, 2023, the court dismissed the third

            cause of action (breach of fiduciary duty against HCOB), sixth cause of action (civil conspiracy

            against Cerberus European), and seventh cause of action (demand for an accounting against

            HCOB). The court denied dismissal of the first cause of action (2013 breach of duty of commercial

            reasonableness against HCOB). The court otheiwise reserved on the motion to dismiss. For the

            following reasons, the court denies the remainder of Defendants' motion to dismiss in its entirety.

                                         FACTUAL AND PROCEDURAL BACKGROUND

                      This case arises from Defendants' alleged failure to dispose of collateral 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"

             153100/2023 LIFE INSURANCE FUND ELITE, LLC. vs. HAMBURG COMMERCIAL BANK AG ET                           Page 1 of 18
             AL
             Motion No. 002

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            (Complaint, NYSCEF Doc. No. 1, i1 2). As part of this business, HSH Nordbank ("HSH"),

            HCOB's predecessor, agreed to loan LIFE up to $150,000,000 in 2007 pursuant to a Loan 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 or more Qualified Purchasing Lenders 1 (an 'Assignee'), all or any part of its 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, or notice to, [LIFE] .

            . . [HSH] [would] retain the sole right and responsibility to exercise the rights of [HSH], and

            enforce the obligations of the Loan Parties" (id., § 11.14[b ]). In the event of a sale of participating

            interests in the Note, "[n]o Participant [would] have any rights ... to receive payment of principal,

            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]ubject to the occurrence of a Trigger Event ... [LIFE] hereby surrenders, delivers,

            grants and turns over to Collateral Agent [Wells Fargo Bank, N.A. ], and Guarantors [ISM Agency]

            1
             The LSA defines a "Qualified Purchasing Lender" as a "financial institution organized under the laws of a country
            which is a member of the Organization for Economic Co-operation and Development and that has a long-term
            unsecured senior debt rating of least A and A by S&P and Moody's, respectively (or the equivalent thereof)" (LSA, §
            1.1).
                153100/2023 LIFE INSURANCE FUND ELITE, LLC. vs. HAMBURG COMMERCIAL BANK AG ET                 Page 2 of 18
                AL
                Motion No. 002

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            hereby acknowledge and consent to such surrender, delivery, grant and turnover by [LIFE] to

            Collateral Agent, peaceful possession of the Collateral" (id., §§ 2.1-2.1 [a]). Additionally, LIFE

            and ISM Agency "waive[ d] all of their respective rights to notification" as to the "sale or other

            disposition by Collateral Agent of the Collateral" pursuant to the UCC (id., § 2.1 [b ]).

                      The complaint alleges that, after HSH took control of the collateral insurance policies and

            paid $500,000 in reinstatement fees, the policies were worth $70 million (Complaint, ,i 30). In

            addition to the value of the insurance policies, the trust also allegedly held a $62 million receivable

            from Avon Capital LLC ("Avon"), a former defaulting member of Plaintiff, bringing the total

            value of the 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, one that treated LIFE as a subsidiary ofHSH and one that treated the relationship

            as a loan, "in connection with which the bank sent LIFE phony quarterly cash and collateral

            reports" (id., ,i,i 58-61 ). Subsequently, HSH allegedly pursued the trust's breach of contract claim

            against Avon, obtained a judgment for the trust of over $86 million in a 2016 arbitration, but then

            took no steps to collect the award (id., ,i 71). LIFE alleges, that through booking the trust's

           judgment as its own asset and using that asset as leverage to settle a different lawsuit against Avon,

            HSH engaged in another improper disposition of assets (id.).

                      In 2018, Promontoria, a company consisting of a "consortium of private equity investors"

            led by Cerberus Capital Management LP ("Cerberus"),2 purportedly purchased a portfolio ofloans

            2
              The complaint alleges that Defendant Cerberus European is a subsidiary of Cerberus, which is not a party to this
            litigation (Complaint, ,r 10).
                153100/2023 LIFE INSURANCE FUND ELITE, LLC. vs. HAMBURG COMMERCIAL BANK AG ET                Page 3 of 18
                AL
                Motion No. 002

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            from HSH, including the LIFE loan (id., ,i,i 76, 78; Loan Sale and Purchase Agreement ["LSPA"],

            NYSCEF Doc. No. 23). 3 According to the Promontoria February 22, 2018 management board

            resolution approving the transaction, the board "intended that 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 of Promontoria Holding 260 B.V. ["Promontoria Resolution"],§ 1.1.1).

            Under the LSP A, 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

            LSP A contemplated, Promontoria allegedly "sub-participated the Loan into a Master Fund Sub-

            participation 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 after this inquiry, counsel for HCOB and Cerberus informed LIFE

            that a different bidder purchased the collateral (id.). LIFE later learned that the purchaser bought

            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 of HSH' s compliance with a European Commission mandate to
            undergo privatization by 2018, that ultimately resulted in HSH being sold to a consortium of private equity investors
            led by Cerberus and being "rebranded" as defendant HCOB (see Complaint, ,r 75).
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                AL
                Motion No. 002

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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 of the

            duty of commercial reasonableness related to the 2019 auction. Upon a motion to dismiss for

            failure to state a cause of action, the court dismissed the negligence and implied covenant of good

            faith and fair dealing claims, but denied dismissal of the breach of the duty of commercial

            reasonableness claim (see Life Ins. Fund Elite LLC v Hamburg Commercial Bank AG, 545 F Supp

            3d 86, 91-93 [SDNY 2021]). However, the parties ultimately stipulated to voluntarily dismiss that

            federal action without prejudice (PACER, Life Ins. Fund Elite LLC v Hamburg Commercial Bank

           AG, 20-cv-8553, Doc. No. 62), and the court later dismissed a separate federal action for lack of

            subject matter jurisdiction (see Life Ins. Fund Elite LLC v Hamburg Commercial Bank AG, 2023

            WL 1797169, *3 [SDNY Feb 7, 2023]).

                      LIFE then filed the complaint in this action on April 4, 2023, alleging causes of action 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 of the Avon arbitration award (count II), breach of fiduciary 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 of the Collateral to itself in 2013 and
            assuming HCOB retained rights to dispose of the Collateral after the 2018 Portfolio Transaction, HCOB was obligated
            to dispose of the Collateral in a commercially reasonable manner," but, apparently in the 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).
                153100/2023 LIFE INSURANCE FUND ELITE, LLC. vs. HAMBURG COMMERCIAL BANK AG ET                     Page 5 of 18
                AL
                Motion No. 002

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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 of action, denied dismissal of

            the first cause of action, 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

            alleged in the complaint as true, accord plaintiffs the benefit of every possible 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]; see also Chapman, Spira & Carson, LLCv Helix BioPharma

            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 of law" (Leon, 84 NY2d at 88; Chen v Romona Keveza

            Collection LLC, 208 AD3d 152, 157 [1st Dept 2022]).

                1. Breach of Duty of Commercial Reasonableness -Avon Arbitration Award (HCOB)

                   The court denies dismissal of the second cause of action for breach of the duty of

            commercial reasonableness based on the allegedly improper disposition of the 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]; HSBC Bank USA, Nat. Ass'n v Amagli, 18 Misc3d 139(A), *1 [App Term

             153100/2023 LIFE INSURANCE FUND ELITE, LLC. vs. HAMBURG COMMERCIAL BANK AG ET         Page 6 of 18
             AL
             Motion No. 002

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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 of commercial reasonableness does not apply to the

            Avon arbitration award because HCOB did not dispose of collateral. 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 of any or all of the 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 AD2d 94, 107 [2d Dept 1990] [finding outstanding issues of fact as to whether

            disposition was commercially reasonable where defendants contended collateral was "worth

            approximately $99,450 and that the plaintiff or the SBA should have sold it rather than abandoning

            it," but the plaintiff argued "that the collateral was uniformly old and in poor condition and that

            the cost ofremoval would have exceeded its resale value"] 5; see also Bank of 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 of credit when the shipping documents

            were properly presented to it" and that Chan raised an issue of fact "as to the commercial

            reasonableness of the Bank's handling of the 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)").
                153100/2023 LIFE INSURANCE FUND ELITE, LLC. vs. HAMBURG COMMERCIAL BANK AG ET             Page 7 of 18
                AL
                Motion No. 002

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                   Courts outside New York, that have interpreted the phrase "otherwise dispose" under

            Article 9 of the UCC, have found that the inclusion of the term "disposition" separate from the

            term "sale" indicates that a "disposition of collateral need not necessarily be in the form of a sale"

            (Williams v Regency Financial Corp., 309 F3d 1045, 1048-49 [8th Cir 2002], citing In 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"]; see also In re Godfrey, 557 BR 469,475 [ND W Va Sept

            12, 2016] ["Many courts have considered the definition of 'disposition' under Article 9, and

            concluded that it encompasses various types of permanent transfers of possession."]).

                   Therefore, while HSH allegedly recording the Avon arbitration award as an asset may not

            have been a "sale," Plaintiff has sufficiently alleged that HSH executed an "other disposition" of

            the collateral. Plaintiff has alleged that the "Trust" held the breach of contract claim against Avon

            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

            of the judgment and effected a permanent transfer of the Avon award from the trust to itself, by

            recording it as an asset. As such, there is at least an issue of fact as to whether HSH "disposed" of

            the award.

                   In addition, Plaintiffs allegations that HSH disposed of the 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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             Motion No. 002

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            market; (2) at the price current in any recognized market at the time of the disposition; or (3)

            otherwise in conformity with reasonable commercial practices among dealers in the type of

            property that was the subject of the disposition" (UCC 9-627(b ); Atlas MF Mezzanine Borrower,

            LLC v Macquarie Texas Loan Holder LLC, 174 AD3d 150, 163 [1st Dept 2019] [emphasis added]

            [internal quotation marks omitted]). The secured creditor ultimately has the "burden of establishing

            the commercial reasonableness of every aspect of the disposition of the collateral" ( General Elec.

            Credit Corp. v Durante Bros. & Sons, Inc., 79 AD2d 509, 510 [1st Dept 1980]; Highland CDO

            Opportunity Master Fund, L.P. v Citibank, NA., 2016 WL 1267781, *18 [SDNY Mar 30, 2016]).

            The commercial reasonableness of a disposition of collateral is generally an issue of fact that the

            court cannot decide at the motion to dismiss stage (Atlas, 174 AD3d at 165; see also NatWest Bank

            NA. v Grauberd, 228 AD2d 337, 337 [1st Dept 1996] [finding that summary judgment should

            have been denied because there were triable issues of fact "as to the commercial reasonableness

            of plaintiff bank's conduct regarding the preservation of its 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

            recover the judgment from Avon given its financial distress and that an unsuccessful pursuit of the

            award would have simply increased the balance of the loan (Reply in Further Support of Motion,

            NYSCEF Doc. No. 46, p. 8). While Defendants may succeed at summary judgment or at trial with

            this argument, it is not sufficient to succeed at this stage (see Weinsten v Fleet Factors Corp., 210

            AD2d 74, 74 [1st Dept 1994] ["issues of fact whether defendant acted in a commercially

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             AL
             Motion No. 002

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            reasonable manner in disposing of certain assets of the debtor"]; cf CCO Condo Portfolio (AZ)

            Junior Mezzanine, LLC v Feldman, 2022 WL 3867910, *6 [SDNY Aug 30, 2022]).

                   The Second Department's decision in Marine Midland Bank v CMR Industries ( 159 AD2d

            94 [1st Dept 1990]) (supra, p. 7), is directly applicable. There, the court found that there were

            triable issues of fact where the defendants contended "the plaintiff or 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 of disposition 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 had no duty to apply the Avon award to the loan balance because an

            arbitration award is not a type of noncash 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). Plaintiff is correct.

                   Comment 3 provides an "Example" of the application of subsection (c), in which a secured

            party takes possession of an automobile following a default on an automobile loan (UCC 9-615 [c],

            Comment 3). After selling the automobile on credit, the secured party is left with chattel paper that

            it could potentially credit against the defaulting debtor's debt (id.). The comment explains that the

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             Motion No. 002

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            secured creditor is required to "apply the value of the chattel paper to the original debtor's secured

            obligation" under UCC 9-615( c) because the chattel paper is the type of noncash proceeds that the

            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" of when failure to apply noncash proceeds would be unreasonable, it does not remotely

            suggest that this example is exclusive and that noncash proceeds must be generated in the ordinary

            course of business 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 of the award as an asset, Defendants have simply not

            met their burden to establish that the failure to apply the award to Plaintiffs loan was commercially

            reasonable. Therefore, the court denies dismissal of this cause of action.

               2. Breach of Contract (HCOB)

                   The court denies Defendants' motion to dismiss the fourth cause of action for breach of

            contract. To state a cause of action for breach of contract, a plaintiff must allege "the existence of

            a contract, the plaintiffs performance thereunder, the defendant's breach thereof, and resulting

            damages" (Second Source Funding, LLC v 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 LLCv AIG Empl. Servs., Inc., 157 AD3d 416,416 [1st Dept 2018]). A contract

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             Motion No. 002

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            is ambiguous if the provisions "are reasonably or fairly susceptible of different interpretations"

            (id. [internal quotation marks and citations omitted]; LDIR, LLC v DB Structured Prods., Inc., 172

            AD3d 1, 4 [1st Dept 2019]; Ladder Capital Finance LLC v 1250 North SD Mezz LLC, 211 AD3d

            608, 608 [1st Dept 2022] [holding that lower court properly denied motion to dismiss where

            plaintiffs interpretation of the contract was reasonable, but defendants' interpretation was "also

            reasonable"]).

                   Here, Plaintiff alleges 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 of action 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 of the LSP A 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 of such participation shall not relieve such Lender of

            its obligations" (LSA, § 11.14[b] [emphasis added]). Further, the LSP A that effectuated the 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 seller would

            "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 of the collateral and that, therefore, the transaction

            did not breach the LSA.

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                    However, other documentary evidence suggests that the transfer of interest was, indeed, a

            sale. Section 1.1 of the LSP A defines the "Portfolio Items" at issue as "All rights, 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 LSP A

            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 LSP A) with respect to the sale and

            purchase of certain loan portfolio items by the Company from HSH Nordbank AG" (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 of only commercial title, or, whether that transfer was, in fact, a sale of all

            rights associated with the collateral. Therefore, the court cannot determine at this juncture if HSH

            breached the LSA through entering into the LSP A with Promontoria. The court, therefore, denies

            the motion to dismiss the fourth cause of action.

                3. Breach of Duty of Commercial Reasonableness - 2019 Sale (HCOB and Promontoria)

                    At oral argument, the court reserved decision on the fifth cause of action for breach of the

            duty of commercial reasonableness because of Promontoria' s challenge to personal jurisdiction.

            The court rejects this challenge because there is personal jurisdiction over Promontoria. A New

            York court may not exercise personal jurisdiction over a non-domiciliary unless "the action is

            permissible under New York's long-arm statute, and the 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 personal jurisdiction over Promontoria pursuant to CPLR 302(a)(l).

                   Under CPLR 302(a)(l), a court may exercise personal jurisdiction over a non-domiciliary

            where the party, in person or through an agent, "transacts any business 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

            party because of its agreement with a different party to "act as its agent to sell [a] painting in New

            York"]). Determining whether long-arm jurisdiction exists pursuant to CPLR 302( a)(l) is a "two-

            pronged jurisdictional 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

            personal jurisdiction under CPLR 302(a)(l), the plaintiff's claims "must have an articulable nexus

            with the defendant's transactions within [the] state" (id. [internal quotation marks and citation

            omitted]; 4069 Rosen Assoc., LLC v Tournamentone Corp., 206 AD3d 464, 465 [1st Dept 2022]

            [finding personal jurisdiction under CPLR 302(a)(l) where defendant's "New York activities were

            purposeful and substantially related to plaintiffs' claims"]; Great Lakes Insurance SE v American

            Steamship Owners Mutual Protection and Indemnity Association Inc., 214 AD3d 593, 594 [1st

            Dept 2023] [finding personal jurisdiction under 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 personal jurisdiction 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 if Promontoria did not allegedly take action itself in New York, Promontoria did

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            ultimately sign the LSP A and allegedly acted through Houlihan Lokey employees in New York.

            This is sufficient to confer personal jurisdiction under CPLR 302(a)(l) (see Front, Inc. v Khalil,

            103 AD3d 481, 482 [1st Dept 2013] [finding personal jurisdiction under CPLR 302(a)(l) where

            the allegations were sufficient to establish that particular defendants "transacted business 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

           jurisdiction where plaintiff made a prima facie showing that the defendants "engaged in a sustained

            and substantial transaction of business with [] a New York business"]).

                   Additionally, the court's exercise of personal jurisdiction over Promontoria would comport

            with due process. Due process requires both that the defendant have "minimum contacts with the

            forum state such that the defendant should reasonably anticipate being haled into court there" and

            that "the prospect of having to defend a suit in New York comports with traditional notions of fair

            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

            purposefully avails itself of the privilege of conducting activities within [New York], thus invoking

            the benefits and protection of its laws" (Wilson v Dantas, 128 AD3d 176, 182 [1st Dept 2015]

            [citations and internal quotation marks omitted]; Al Rushaid 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 bank with 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, Promontoria purposely availed itself of this 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 comport with traditional notions of fair play and substantial justice, 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 of controversies, and the shared interest of the

            several States in furthering fundamental substantive social policies" (Al Rushaid, 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 that jurisdiction would be unreasonable under this prong (id.).

                   Here, Promontoria has failed to address this aspect of the due process analysis at all and

            has, therefore, failed to meet this burden. Regardless, any burden to Promontoria would be minimal

            measured against this forum's significant interest in having this dispute adjudicated here. While

            Promontoria is a Dutch domiciliary, the burden of taking part in this matter is reduced with the

            advent ofremote proceedings (see Al Rushaid, 28 NY3d at 331 ["Here, while the parties are foreign

            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 of the 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 of lack of personal jurisdiction.

                   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 of the duty of commercial reasonableness against both Promontoria and HCOB based on

            the sale of the 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 of the collateral and that

            "HCOB and/or Promontoria Holding also ... accepted a sales price below what LIFE was willing

            to bid" (id., ,i,i 173-74). Defendants argue that the cause of action 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

            commercially unreasonable (Opening Memo., pp. 11-12).

                    However, as Judge Marrero already found in the first federal action, whether or not a

            disposition of collateral was commercially reasonable is a "necessarily fact intensive" question,

            and the dispute over the reasonableness of the sales price is "not [] appropriate to resolve [] at this

            stage of the litigation" (Life Insurance Fund Elite LLC v Hamburg Commercial Bank AG, 545 F

            Supp 3d 86, 91 [SDNY 2021] [holding that the fund had adequately pled breach of the duty of

            commercial reasonableness through allegations of "the value of collateral compared to the

            apparent sale price and the lack of notice to interested parties"]; cf Atlas MF Mezzanine Borrower

            LLC v Macquarie Texas Loan Holder LLC, 199 AD3d 439, 440 [1st Dept 2021] [finding after

            trial that the evidence did not "support a finding that the price received for the properties at auction

            was 'so inadequate as to shock the court's conscience"'] [internal citation omitted]). UCC 9-610

            requires that "[e]very aspect of a disposition of collateral ... 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 of the disposition." Plaintiff

            has alleged that as a result of not 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, it is

                    ORDERED that the third cause of action (breach of fiduciary duty against HCOB), sixth

            cause of action (civil conspiracy against Cerberus European), and seventh cause of action (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 of action (2013 breach of

            duty of commercial reasonableness against HCOB) is denied for the reasons stated on the record

            at oral argument on September 12, 2023; and it is further

                    ORDERED that the remainder of Defendants' motion to dismiss is denied as expressed in

            this decision and order; and it is further

                    ORDERED that Defendants must answer the complaint within 20 days of the efiled date

            of this decision and order.

                   01/03/2024
                     DATE                                                       MELISSA A. CRANE, J.S.C.

            CHECK ONE:                    CASE DISPOSED                 NON-FINAL DISPOSITION

                                    ~
                                          GRANTED         □DENIED       GRANTED IN PART            [JoTHER
            APPLICATION:                  SETTLE ORDER                  SUBMIT ORDER
            CHECK IF APPROPRIATE:         INCLUDES TRANSFER/REASSIGN    FIDUCIARY APPOINTMENT      □REFERENCE

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