Court Opinion

ID: 9916517
Source: CourtListenerOpinion
Date Created: 2024-01-10 01:09:01.611115+00
Date Added: 2024-06-11T13:25:32.316627
License: Public Domain

Cortlandt St. Recovery Corp. v Hellas
              Telecommunications II, S.C.A.
                 2023 NY Slip Op 34553(U)
                     December 28, 2023
             Supreme Court, New York County
          Docket Number: Index No. 653181/2011
                   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
I   York State Unified Court System's eCourts Service. I
   This opinion is uncorrected and not selected for official
                         publication.
                                                                                                            INDEX NO. 653181/2011
NYSCEF DOC. NO. 364                                                                                   RECEIVED NYSCEF: 12/28/2023

                              SUPREME COURT OF THE STATE OF NEW YORK
                                        NEW YORK COUNTY

          PRESENT:        , HON. MELISSA A. CRANE                                       PART                          60M
                                                                           Justice
               -------------- ----------------------------------------X                 INDEX NO.          653181/2011

           CORTLANDT STREET RECOVERY CORPORATION,                                                          08/14/2023
                                                                                        MOTION DATE

                                                  Plaintiff,
                                                                                        MOTION SEQ. NO. ----'0_0_9_ _
                                           - V-

           HELLAS TELECOMMUNICATIONS II, S.C.A., HELLAS
           TELECOMMUNICATIONS I, S. R.L., HELLAS .
           TELECOMMUNICATIONS, S. R.L., APAX PARTNERS,
           LLP, TPG CAPITAL, L.P., DAVID SONDERMAN, JAMES
           COULTER, MARTIN HALUSA, JOHN MEGRUE,
           GIANCARLO ALIBERTI, MATTHIAS CALICE, TPG
           CAPITAL-N.Y., LLP, APAX PARTNERS, L.P. D/B/A APAX.
           PARTNERS OF NEW YORK, TPG PARTNERS IV, L.P.,
           TPG ADVISORS IV., INC.,TPG GENPAR IV, L.P., TPG
           ADVISORS II, INC.,T3 GENPAR II, L.P., T3 PARTNERS 11,
           L.P., T3 PARALLEL II, L.P., APAX PARTNERS EUROPE
           MANAGERS LIMITED, APAX EUROPE VI GP CO.                                        DECISION + ORDER ON
           LIMITED, APAX EUROPE VI GP., LP., APAX EUROPE VI-
                                                                                                MOTION
           A, L.P., APAX EUROPE VI-I, L.P., TROY, L.P. INC.,APAX
           WW NOMINEES LTD., TPG TROY, LLC,T3 TROY,
           LLC,HELLAS TELECOMMUNICA TIONS CO-INVEST LTD.,
           HELLAS TELECOMMUNICA TIONS EMPLOYEES LTD.,
           TCW HT-CO-INVEST I L.P., TCW HT CO-INVEST II L.P.,
           MARGARET ELIZABETH MILLS, ALAN MICHAEL
           HUDSON, ERNST & YOUNG, LLP, ADMINISTRATORS OF
           HELLAS TELECOMMUNICA TIONS II, S.C.A., BANK OF
           NEW YORK MELLON, COMMON DEPOSITORY FOR THE
           GLOBAL SUBORDINATED NOTES OF HELLAS
           TELECOMMUNICATIONS, II, S.C.A.,

                                                  Defendant.

          -------------------------------------------------------. ---------------x·
          The following e-filed documents, listed by NYSCEF document number (Motion 009) 343, 344, 345, 346,
          347,348,349,350, 351,352,353,354, 355,356,357,358, 359,360,361
          were read on this motion to/for                                              MISCELLANEOUS

          Upon the foregoing documents, it is

                   By this motion, plaintiff moves for entry of a consent judgment that the only remaining

          defendant Hellas Telecommunications (Luxembourg) II, S.C.A. (Hellas II) has agreed to after

           653181/2011 CORTLANDT STREET RECOVERY vs. HELLAS TELECOMMUNICATIONS                              Page 1 of 9
           Motion No. 009

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NYSCEF DOC. NO. 364                                                                      RECEIVED NYSCEF: 12/28/2023

          negotiations. This is the second such motion. The court denied the first attempt to gain a court

          signature on a consent judgment back on November 7, 2022 [EDOC 38].

                   A bit of background is important for a .clear understanding of this decision. Hellas II

          defaulted on bonds underlying this litigation (the "Sub Notes"). Hellas II submitted itself to an

          insolvency proceeding in the UK High Court of Justice on November 26, 2009. In 2010,

          plaintiff Cortlandt became the assignee of many of those Sub Notes. (See Kellogg Ex. C (Second

          Witness Statement of Laurence Sudwarts) at ~ 4 (explaining, in a submission in the UK

          insolvency proceedings, that Cortlandt was created as a "collection entity" in late 2010 to

          facilitate claims on behalf creditors [EDOC 352] . On November 15, 2011, Cortlandt filed this

          lawsuit against Hellas II and others for defaulting on the Sub Notes. On March 14, 2012, Hellas

          II filed for liquidation in the United Kingdom and consequently this suit became stayed as

          against defen(Jant Hellas II only. That stay was only lifted on September 27, 2022, ten years

          later.

                   Meanwhile, on September 22, 2014, Justice Friedman granted all the other defendants'

          motions to dismiss because Cortlandt lacked standing. Justice Friedman reasoned that an

          assignment conveying only a right "to collect" was insufficient to confer standing:

                        "The court holds that the assignments to Cortlandt for both the PIK and
                 Sub Notes were assignments of a right of collection, not of title to the claims,
                 and are accordingly insufficient as a matter of law to confer standing upon
                 Cortlapdt"
           (47 Misc 3d 545, 555 [New York County 2014]). However, the court did hold that this lack of

          standing was curable and therefore dismissed without prejudice. The Appellate Division, First

          Department affirmed on this issue (142 AD3d 833, 834-35 [1st Dep't 2016] ).

                   After the Appellate Division, First Department affirmed Justice Friedman's dismissal of

          the original complaint in this case, but before Hellas II's bankruptcy stay was lifted, Cortlandt

           653181/2011   CORTLANDT STREET RECOVERY vs. HELLAS TELECOMMUNICATIONS                  Page2 of 9
           Motion No. 009

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NYSCEF DOC. NO. 364                                                                                    RECEIVED NYSCEF: 12/28/2023

          commenced yet another action 1: Cortlandt Street Recovery Corp., v TPG Capital Mgmt, L.P. et

          al, Index No., 651176/2017 (Cortlandt II). Cortlandt II is quite similar to this case, except that

          Hellas II is not a defendant.

                  In Cortlandt II, on October 22, 2020, Justice Edmead, as Justice Friedman had before

          her, found that Cortlandt lacked standing to bring its claims. However, as Justice Friedman had

          done in this case, Justice Edmead granted Cortlandt leave to amend the complaint in Cortlandt II

          once it had corrected the standing issue.

                   On April 5, 2021, Cortlandt filed an amended complaint in Cortlandt II. Following

          motions to dismiss, in October 2022, Justice Reed ruled that Cortlandt had standing to proceed

          on some notes, but not others. Specifically, Justice Reed ruled that Cortlandt had standing with

          respect to the 'Euroclear' notes but not with respect to the 'Clearstream' notes. This decision is

          currently on appeal, but still a year later has not been perfected.

                  Meanwhile, in this action, also in October 2022, Cortlandt moved for this court to

          approve a prior consent judgment similar to the one at issue on this motion, The court denied this

          motion without prejudice for two primary reasons. First, Cortlandt had not done anything to cure

          its standing problem that Justice Freedman had identified 8 years prior when she dismissed the

          action against' all defendants (except Hellas II against whom the action at the time was

          stayed). Second, it was an end run around Judge Reed's decision that Cortlandt lacked standing

          to sue on the Clearstream notes. Cortlandt claims it now has standing on all the notes underlying

          1
            Cortlandt commenced cases in New York County under index nos. 653357/2011, 653363/2011, 653181/2011, as
          well as various federal suits. In one of the federal cases, the Second Circuit held Cortlandt did not have standing to
          bring suit on the,notes (see Cortlandt St. Recovery Cmp. v. Hellas Telecommunications, S.a.r.l, 790 F.3d 411 [2d
          Cir. 2015])

           653181/2011 CORTLANDT STREET RECOVERY vs. HELLAS TELECOMMUNICATIONS                                   Page 3 of 9
           Motion No. 009

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NYSCEF DOC. NO. 364                                                                      RECEIVED NYSCEF: 12/28/2023

          the consent judgment as they are all "currently custodied" at Euroclear and Justice Reed has

          ruled that Cortlandt has standing to pursue the Euroclear notes.

                 Therefore, on April 28, 2023, Cortlandt filed an amended complaint in this case [EDOC

          340]. The caption of the amended complaint lists all the former defendants. However, because

          the relief requested portion of the amended complaint only seeks relief against Hellas II, and the

          motion papers refer to certain defendants other than Hellas II as "non-parties" or "would be

          intervenors," the court assumes that Hellas II is the only defendant plaintiff intended to sue in

          this amended complaint

                 Plaintiff and defendant Hellas II have negotiated a resolution to the disputes alleged in

          the Amended Complaint (Dkt. 340). That settlement involves the entry of a consent judgment

          the form of which both sides have agreed as follows: (1) on plaintiffs breach of contract claim

          approximately €121,836,000 with interest to be calculated at the three-month EURIBOR plus

          6%, reset two days before the beginning of each quarterly interest period (being the interest rate

          of the euro-denominated Sub Notes as referred to in the Offering Memorandum) and the three

          month LIBOR plus 5.75%, reset two days before the beginning of each quarterly interest period

          (being the interest rate of the dollar-denominated Sub Notes as referred to in the Offering

          Memorandum), from October 15, 2009. Additional interest is to be calculated on the overdue

          principal at the rate of l % per annum in excess of the then applicable interest rate of the Sub

          Notes (as referred to in clause 4.01 of the Sub Note Indenture) from 30 days after the default in

          the payment of interest (which is defined as an Event of Default in clause 6.0l(a) of the Sub

          Note Indenture) and (2) on its claim for fraud for fraud allegedly perpetrated on the Original

          Purchasers, at least €121,836,000, with interest to be calculated at the statutory rate of 9% from

          December 21, 2006, plus attorney's fees and costs.

           653181/2011 CORTLANDT STREET RECOVERY vs. HELLAS TELECOMMUNICATIONS                   Page 4 of 9
           Motion No. 009 •

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NYSCEF DOC. NO. 364                                                                      RECEIVED NYSCEF: 12/28/2023

                   Rather than simply .settle, Plaintiffs and the Joint Liquidators agreed to the proposed

          consent judgment (EDOC 344), that they want the court to sign, presumably for Plaintiffs to then

          proceed against nonparties elsewhere, such as under an alter ego theory in Cortlandt II.

                   Some of these nonparties have vigorously objected to this consent judgment. Nonparty

          and objector Apax Partners US, LLC is an investment advisory firm organized under the laws of

          Delaware, with its office in New York City. Nonparty and objector TPG Capital-New York, Inc.

          is a corporation organized under the laws of Delaware with an office in New York City. Apax

          and TPG and their affiliates have been involved in the Hellas II transactions. None of these

          entities have moved to re-enter this action. Although this court need not entertain arguments

          from nonparties who have not even tried to intervene, in an abundance of caution, the court will

          address their arguments.

              1.   The Nonparties' "Collusion" Assertion

                   The Nonparties do not dispute that Hellas II defaulted on the Sub Notes in or around

          November 2009, and the notes remain in default. However, they allude to collusion between

          plaintiffs and the Joint Liquidators. In particular, the nonparties claim the proposed consent

          judgment is collusive "on its face because it is the result of cooperation between Cortlandt and

          Hellas II's liquidators for the purpose of allowing Cortlandt to seek judgment against" them

         · (Opp Br. EDOC 348 at pg 17). They claim that the liquidators are engaging in collusion because

          they have admitted to fraud on Hellas II's behalf and have consented to a massive judgment

          against Hellas II. However, the nonparties point to no real evidence of collusion.

                   The concern that two nominally adverse parties would conspire to produce a judgment to

          use against third parties is simply not present here. This is a real debt that would be owed one

          way or the other. The Joint Liquidators in England are akin to a bankruptcy trustee in this

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           Motion No. 009

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          country. The court in England appointed them. Each side had separate counsel. The nonparties

          have pointed to nothing to indicate that the Joint Liquidators are not independent.

                 There is a reason there is no proof of collusion. The Joint Liquidators have a fiduciary

          obligation to act on behalf of all the creditors. Counsel for the Joint Liquidators was wise not to

          throw money -away on lawyers when it was apparent that Hellas II o,wed on the Sub Notes. And,

          there is nothing wrong with the Joint Liquidators cooperating in the consent judgment so that

          Cortlandt can use it to go after other nonparty wrongdoers. Moreover, Hellas Ilalso benefits

          because the consent judgment places a ceiling on its own liability in this action.

                 Finally, the consent judgment is not collusive because the parties have agreed it will not

          have res judicata effect: "The following Recitals reflect the agreement of the parties and the

          bases for their consent to judgment; the Recitals do not constitute independent findings of fact or

          conclusions oflaw made by the Court" [EDOC 344 at 1].

                 Thus, collusion is not a concern. The consent judgment is merely a way to resolve this

          case against the only remaining defendant without more litigation.

                 However, what is concerning is the amount of the consent judgment under the unique

          procedural circumstances present here. Unlike the motion in the related case of Fortellus Funds

          Investment Trust v Hellas II, 2023 WL 5531747 (New York County 2023), there is nothing on

          this motion tc, indicate the amount to which the Joint Liquidators agreed represents even a

          reasonable approximation of the amount Hellas II truly owes to Cortlandt. This is because in

          Cortlandt IL Justice Reed has ruled that Cortlandt does not have standing with respect to the

          Clearstream notes. While this holding may or may not be subject to change depending on where

          those notes are "currently custodied," that is up to Justice Reed who has not yet ruled on this

          issue (see EDOC 327 under Index No. 651176/2017 ["to the extent that any of the sub notes have

           653181/2011 CORTLANDT STREET RECOVERY vs. HELLAS TELECOMMUNICATIONS                   Page 6 of 9
           Motion No. 009

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          been custodied at both clearing houses, that issue may be addressed in the upcoming stages of

          this litigation."]). Thus, while it is perfectly reasonable not to continue litigation in order to

          preserve resm;trces for creditors, especially when the identical issues are before another judge in

          another case, the court cannot, at this juncture, determine with certainty whether the amount the

          consent judgment lists is correct, because what is owed depends on the outcome in Cortlandt 11

                  Accordingly, rather than proceed with this very old case that no party has any desire to

          continue, the court will render the amount of the consent judgment, €121,836,000 subject to

          subsequent court order in Cortlandt II. This way, the consent order is not an end run around the

          decision in Cortlandt II holding that Cortlandt does not have standing to pursue the Clearstream

          notes. Also, this way any amount against the nonparties will be fully tested in Cortlandt II,

          thereby allaying any concern about collusion. The nonparties are still free to maintain whatever

          defenses they have in that case.

              2. Standing

                  As discussed above, standing was a bar to this lawsuit by virtue of decisions from Justice

          Friedman in this case is 2014 and Justice Edmead to 2020 in Cortlandt II. However, now there

          is a holding in Cortlandt II that Cortlandt does have standing with respect to the same Euroclear

          notes that Cortlandt has sued on in this case. This takes care of the standing problem in this case,

          at least in part.

              3. Champerty

                  The non-parties claim the assignment to Cortlandt is champertous and therefore void,

          because the primary purpose of the assignment was to allow Cortlandt to sue.on the notes.

          The champerty doctrine is codified in Judiciary Law § 489(1 ), that states in relevant part:

                  No person or co-partnership, engaged directly or indirectly in the business of collection
                  and adjustment of claims, and no corporation or association, directly or indirectly, itself

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           Motion No. 009

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NYSCEF DOC. NO. 364                                                                        RECEIVED NYSCEF: 12/28/2023

                 .or by 9r through its officers, agents or employees, shall solicit, buy or take an assignment
                  of, or be in any manner interested in buying or taking an assignment of a bond,
                  promissory note, bill of exchange, book debt, or other thing in action,
                  or any claim or demand, with the intent and for the purpose of bringing an action or
                  proceeding thereon ...

                  Thus, champerty is a limited doctrine. It "does not apply when the purpose of an

          assignment is the collection of a legitimate claim" (Cert{ficate Holders ofMerrill Lynch

          Mortgage Inyestors inc. v Love Funding Corp., 13 N.Y.2d 190,201 [2009]). It merely prohibits

          the purchase of securities or claims with the primary purpose of bringing a lawsuit (Bluebird

          Partners v First Fid. Bank, 94 NY2d 726, 735-736 [2000]).

                  Here, there is evidence in the record that Cortlandt obtained an assignment after Hellas II

          defaulted on the notes as a "recovery corporation for the express purpose of enforcing the

          bonds." Cortlandt's acquisition of these "debt instrument[s]" for the purpose of "enforcing

          [them]" after the default by Bellas I1 is not champerty. See Love Funding, 591 F.3d at 121-22;

          BF Holdings I, Inc. v. S. Oak Holding, Inc., 251 A.D.2d 1 [1st Dep't 1998][champerty not

          applicable where the mortgage loan had already fallen into default and been accelerated before

          its assignment to plaintiff]).

                  Plaintiff argues the original noteholders made the assignments not to litigate, but instead

          to assert creditors' claims in the UK insolvency proceedings. Plaintiff points to the Sudwarts

          Witness Statement which states that because of the "uncertain implications of a dissolution of

          Hellas II on the rights of Bellas II creditors" to register their claims before the "expiry of the

          statute of limitations," the Bellas II creditors concluded that they should file their proof of claims

          "as soon as possible" in the UK insolvency proceedings. (Kellogg Ex.Cat~ 10.) Cortlandt was

          therefore created and utilized to facilitate that process, including by the bondholders assigning

          their rights to the newly formed company.

           653181/2011   CORTLANDT STREET RECOVERY vs. HELLAS TELECOMMUNICATIONS                   Page 8 of 9
           Motion No. 009

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NYSCEF DOC. NO. 364                                                                          RECEIVED NYSCEF: 12/28/2023

                 Certainly, filing claims in bankruptcy on behalf of creditors is not "litigation." Here,

          more than likely we simply have investors attempting to recover notes purchased after a default,

          with an apparent plan to seek that recovery from other possibly responsible parties later.

                 Although the underlying noteholders remain anonymous, Hellas II is not crying

          champerty. Moreover, the nonparties have not even tried to intervene in this case. Considering

          the very same' notes are before another court in Cortlandt II, this court sees no reason to prolong

          this case any further. Should the nonparties here who are actual defendants in Cortladnt II truly

          believe the assignments were made with a champertous purpose, they can raise their concern in

          that lawsuit.

                  The court finds the remaining contentions of the parties to be unavailing.

                  Accordingly, it is

                  ORDERED THAT the court grants the motion for an order entering the consent judgment

          with the limitations described in: this decision.

                        $
                  1212/112023
                    DATE

                                                                     ~
           CHECK ONE:                   CASE DISPOSED                    NON-FINAL DISPOSITION

                                        GRANTED         □ DENIED         GRANTED IN PART         □ OTHER
           APPLICATION:                 SETTLE ORDER                     SUBMIT ORDER

           CHECK IF APPROPRIATE:        INCLUDES TRANSFER/REASSIGN       FIDUCIARY APPOINTMENT    □ REFERENCE

           653181/2011 CORTLANDT STREET RECOVERY vs. HEI.LAS TELECOMMUNICATIONS                    Page 9 of 9
           Motion No. 009

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