Hosking v. TPG Capital Mgmt., L.P. (In re Hellas Telecomms. (Luxembourg) II Sca)

526 B.R. 499

In re: Hellas Telecommunications (Luxembourg) II SCA, Debtor in a Foreign Proceeding.Andrew Lawrence Hosking and Simon James Bonney, in their capacity as joint compulsory liquidators and duly authorized foreign representative s of Hellas Telecommunications (Luxembourg) II SCA, Plaintiffs,

v.TPG Capital Management, L.P., et al., Defendants.

Case No. 12–10631 (MG)

Adv. Proc. No. 14–01848 (MG)

United States Bankruptcy Court, S.D. New York.

Signed March 9, 2015

Andrew K. Glenn, Esq., KASOWITZ, BENSON, TORRES & FRIEDMAN LLP, Attorneys for the TPG Defendants, 1633 Broadway, New York, N.Y. 10019, By: Paul M. O'Connor III, Esq.,

ROPES & GRAY LLP, Attorneys for Apax Partners, L.P., 1211 Avenue of the Americas, New York, N.Y. 10036, By: Robert S. Fischler, Esq., Stephen C. Moeller–Sally, Esq.

CHADBOURNE & PARKE LLP, Attorneys for Plaintiffs, 1301 Avenue of the Americas, New York, N.Y. 10019, By: Howard Seife, Esq., Andrew Rosenblatt, Esq., Marc D. Ashley, Esq.

MEMORANDUM OPINION AND ORDER GRANTING MOTION FOR LIMITED REARGUMENT OF MOTION TO DISMISS ADVERSARY PROCEEDING SOLELY WITH RESPECT TO 11 U.S.C. § 546(e) AND DENYING MOTION TO DISMISS UNJUST ENRICHMENT CLAIM

MARTIN GLENN, UNITED STATES BANKRUPTCY JUDGE

Pending before the Court is the Motion of TPG Defendants and Apax Partners, L.P. for Limited Reargument of Motion to Dismiss Adversary Proceeding Solely with Respect to 11 U.S.C. § 546(e) (the “Reargument Motion,” ECF Doc. # 139),¹ filed by defendants TPG Capital Management, L.P., David Bonderman, James Coulter, TPG Advisors IV, Inc., TPG GenPar IV, L.P., TPG Partners IV, L.P., T ³ Advisors II, Inc., T ³ GenPar II, L.P., T ³ Partners II, L.P., T ³ Parallel II, L.P. (collectively, the “TPG Defendants”), and Apax Partners, L.P. (“Apax,” and together with the TPG Defendants, the “Movants”). The plaintiffs (the “Plaintiffs”) filed an objection to the Reargument Motion (the “Objection,” ECF Doc. # 144),² and the Movants filed a reply (the “Reply,” ECF Doc. # 146).

On January 29, 2015, the Court issued its Memorandum Opinion and Order Granting in Part and Denying in Part Defendants' Motions to Dismiss (the “Prior Opinion,” ECF Doc. # 135), granting the motion to dismiss (the “Motion to Dismiss,” ECF Doc. # 41) ³ the complaint (the “Complaint,” ECF Doc. # 1) filed in the above-captioned adversary proceeding (the “Adversary Proceeding”) as to the Plaintiffs' New York Debtor and Creditor Law (“NYDCL”) claims asserted against all of the named defendants (the “Defendants”) ( see Prior Opinion at 46, 59), and dismissing the Complaint as to certain foreign-based defendants (the “Non–U.S. Defendants”) for lack of personal jurisdiction ( see id. at 32); ⁴ but the Plaintiffs' unjust enrichment claim against the Movants survived ( see id. at 60, 72). See Hosking v. TPG Capital Management, L.P.(In re Hellas Telecommunications (Luxembourg) II SCA, 524 B.R. 488 (Bankr.S.D.N.Y.2015).

On February 13, 2015, the Movants filed the Reargument Motion seeking limited reargument of their Motion to Dismiss.⁵ The Reargument Motion rests on the assertion that the Plaintiffs' unjust enrichment claim is barred by section 546(e) of the Bankruptcy Code. ( See Rearg. Mot. at 1–2.) The Movants previously raised this argument in their Motion to Dismiss and now assert that the Court failed to consider this argument in its Prior Opinion. The Reargument Motion also asserts that the Second Circuit's decision, In re Bernard L. Madoff Investment Securities LLC, 773 F.3d 411 (2d Cir.2014), regarding section 546(e), “constitutes an intervening change in controlling law” that the Movants could not address in their Motion to Dismiss. (Rearg. Mot. ¶ 28.)

The Plaintiffs object to the Reargument Motion on the grounds that it (i) is untimely by one day; (ii) improperly raises new arguments not set forth in the Motion to Dismiss; (iii) fails to identify an intervening change in controlling law; (iv) fails to identify any controlling authority overlooked by the Court; and (v) fails to successfully set forth that section 546(e) preempts the Plaintiffs' unjust enrichment claim. (Obj. at 1.)

The Movants counter each of the Plaintiffs' arguments in the Reply. First, the Movants contend that the Reargument Motion was timely filed under the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) because the purported deadline to file the Reargument Motion fell on a holiday, giving them an extra day to file. ( See Reply ¶¶ 1–4.) Second, the Movants assert that the Reargument Motion does not improperly raise a new argument; rather, it is premised on the Court purportedly overlooking an argument raised in the Motion to Dismiss, which is further supported by the Second Circuit's Madoff decision. ( Seeid. 5–7.) Third, the Movants argue that Madoff does constitute an intervening change in controlling law under the circumstances. ( See id. ¶¶ 8–11.) Fourth, the Movants assert that the language of the Prior Opinion indicates that the Court may have overlooked their argument that section 546(e) preempts the Plaintiffs' unjust enrichment claim, and, “[c]ontrary to the Objection ..., there is no requirement that the argument the Court overlooked be based on controlling authority.” ( Id. ¶ 13 (emphasis omitted).) Finally, the Movants argue that the Plaintiffs are incorrect on the merits—section 546(e) indeed preempts the unjust enrichment claim. ( See id. ¶¶ 14–17.)

As a preliminary matter, the Court holds that the Reargument Motion was timely filed pursuant to Bankruptcy Rule 9006(a). The Court further finds that the Reargument Motion establishes a sufficient basis for the Court to review the limited portion of its Prior Opinion at issue and therefore GRANTS the Reargument Motion. As explained more fully below, the Movants are correct that the Prior Opinion did not address the merits of the Movants' argument that section 546(e) bars the Plaintiffs' unjust enrichment claim. Rather, the Prior Opinion only mentioned section 546(e) in the context of the Plaintiffs' NYDCL claims, finding it unnecessary to address the provision's applicability because the NYDCL claims were dismissed on other grounds. ( See Prior Opinion at 15 n.23.) Accordingly, the Court addresses the Movants' section 546(e) argument as it pertains to the Plaintiffs' unjust enrichment claim below. Nevertheless, the Court concludes that the unjust enrichment claim alleged in the Complaint does not fall within section 546(e)'s bar and that issues regarding the extraterritorial reach of section 546(e) and choice of law render a conclusion based on the current pleadings premature. Therefore, the Court adheres to its holding in the Prior Opinion and DENIES the Motion to Dismiss the unjust enrichment claim against the Movants under section 546(e).

I. BACKGROUND⁶

The Plaintiffs filed the Complaint alleging that in December 2006, Hellas Telecommunications (Luxembourg) II S.C.A. (“Hellas II”) issued 960 million and $275 million of Floating Rate Subordinated Notes (the “Sub Notes”), the proceeds of which were used to pay certain advisor fees (the “Consulting Fees Transfer”) and fund the multi-step redemption (the “December 2006 CPEC Redemption”) of convertible preferred equity certificates (“CPECs”). ( See Compl. ¶¶ 12, 118.) According to the Plaintiffs, the December 2006 CPEC Redemption was executed as follows: Nearly 1 billion of the proceeds of the Sub Notes issued by Hellas II were used to redeem CPECs that Hellas II had issued to its parent, Hellas Telecommunications I, S.a.r.l. (“Hellas I”) ( id. ¶¶ 118–119); Hellas I used the proceeds of this redemption to redeem CPECs that Hellas I had issued to its parent, Hellas Telecommunications S.a.r.l. (“Hellas,” and together with Hellas I and Hellas II, the “Hellas Entities”); and Hellas used the proceeds of this redemption to redeem CPECs that Hellas had issued to eight investment funds that owned and controlled the Hellas Entities (the “Sponsors”) ( id. ¶¶ 40, 118–119).⁷ Through the Sponsors, the Movants and the Non–U.S. Defendants allegedly caused the Hellas Entities to effectuate the December 2006 CPEC Redemption in order to transfer payments to the Defendants to the detriment of Hellas II. ( See id. ¶¶ 23–74, 118.) The Plaintiffs allege that the transfers the Defendants received in connection with the December 2006 CPEC Redemption constitute actual and constructive fraudulent transfers under the NYDCL. ( See id. ¶¶ 155–168.) Additionally, the Plaintiffs allege that the Movants and the Non–U.S. Defendants were unjustly enriched by the amounts they received in connection with the December 2006 CPEC Redemption and the Consulting Fees Transfer. ( See id. ¶¶ 169–173.)

In the Prior Opinion, the Court dismissed all claims asserted against the Non–U.S. Defendants for lack of personal jurisdiction ( see Prior Opinion at 32), but held that the Movants are subject to personal jurisdiction ( seeid. at 33). The Court also granted the Motion to Dismiss the Plaintiffs' NYDCL claims ( seeid. at 46, 59), but denied the Motion to Dismiss the unjust enrichment claim against the Movants ( seeid. at 60). The Court considered and rejected the Movants' arguments that the unjust enrichment claim must be dismissed for lack of standing, untimeliness, and failure to state a claim. ( Seeid. at 60–71.) However, the Prior Opinion did not address the Movants' argument that section 546(e) of the Bankruptcy Code bars the Plaintiffs' unjust enrichment claim.

In the Motion to Dismiss, the Movants' section 546(e) argument averred that all of the Plaintiffs' claims were barred by the statute, which applies to chapter 15 cases via section 561(d), because the December 2006 CPEC Redemption constitutes a “settlement payment,” as that term is used in section 546(e), and was made by, to, or for the benefit of a financial institution. (MTD at 39–42 (citing 11 U.S.C. § 561(d)).) According to the Movants, the definition of a “settlement payment” is broadly construed and includes...