Ithaca Capital Invs. I S.A. v. Trump Pan. Hotel Mgmt. LLC

450 F.Supp.3d 358

ITHACA CAPITAL INVESTMENTS I S.A., Ithaca Capital Investments II S.A., and Orestes Fintiklis, Plaintiffs,

v.TRUMP PANAMA HOTEL MANAGEMENT LLC and Trump International Hotels Management LLC, Defendant.

Trump Panama Hotel Management LLC and Trump International Hotels Management LLC, Counter Claimants,

v.Ithaca Capital Investments I S.A., Ithaca Capital Investments II S.A., and Orestes Fintiklis, Counter Defendants.

18 Civ. 390 (ER)

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

Signed March 30, 2020

Mark Stuart Lafayette, Akerman LLP, New York, NY, for Plaintiffs.

Darryl Robert Graham, Kathleen Marie Prystowsky, Ruma B. Mazumdar, Joshua David Bernstein, Akerman LLP, New York, NY, Vanessa Isabel Garcia, White & Case LLP, Los Angeles, CA, for Counter Defendants/Plaintiffs.

Todd Evan Soloway, Bryan Thomas Mohler, Giovanna Maria Marchese, Marion Ramsey Harris, Perry M. Amsellem, Todd Barry Marcus, Pryor Cashman LLP, New York, NY, for Counter Claimants/Defendant.

OPINION AND ORDER

RAMOS, D.J.:

Ithaca Capital Investments I S.A. ("Ithaca I"), Ithaca Capital Investments II S.A. ("Ithaca II"), and Orestes Fintiklis ("Fintiklis")(collectively, "Plaintiffs"), bring this action against Trump Panama Hotel Management LLC and Trump International Hotels Management (jointly, "Defendants"), seeking a declaratory judgment that they are not subject to the jurisdiction of the International Chamber of Commerce ("ICC") and injunctive relief barring Defendants from further prosecuting Plaintiffs before the ICC. After this Court issued a preliminary injunction in favor of Plaintiffs, Defendants answered with eight counterclaims sounding in fraud, tortious interference with contract, and breach of contract. Plaintiffs now move to dismiss the counterclaims for fraud, and tortious interference with contract as against Ithaca I and II, and all counterclaims as against Fintiklis. In addition, Plaintiffs move for leave to file an amended complaint to assert their own claims sounding fraud, conversion and breach of contract. For the reasons set forth below, Plaintiffs' motion to dismiss is GRANTED in part and DENIED in part, and Plaintiffs' motion for leave to file an amended complaint is GRANTED.

I. BACKGROUND

A. Factual Background¹

This dispute concerns a breakdown in the relationship between Plaintiffs, the owners of a number of units in a Panamanian condominium hotel named the Trump International Hotel & Tower Panama (the "Hotel"), and Defendants, the companies that previously managed the Hotel. Fintiklis is the president and principal of Ithaca I and II, two Panamanian capital investment entities that currently own 215 of 369 units in the Hotel. Countercl. ¶¶ 20-22.

Until March 2018, Defendants managed the Hotel under a 2011 hotel management agreement (the "HMA") between themselves and non-parties Newland International Properties Corp. ("Newland") the Hotel's developer and promoter and owner of the Hotel's amenities units,² and the Hotel TOC Foundation ("Hotel TOC").³ See Doc. 38 Ex.1.

In 2015, there was a prior ICC proceeding related to management of the Hotel between Defendants and Gary Lundgren ("Lundgren"), an owner of fifty condominium units in the Hotel. Countercl. ¶¶ 4, 9. That proceeding was settled in February 2016, and the resulting settlement agreement (the "Lundgren Settlement Agreement") provides, in relevant part, that Lundgren will take no actions to interfere with Defendants' management of the Hotel. Id. ¶ 5. According to Defendants, Fintiklis had at all relevant times "actual knowledge of" and was "fully aware of the covenants in the Lundgren Settlement Agreement." Id. ¶¶ 33, 151.

Newland went bankrupt in 2016, and offered their 202 Hotel condominium units and 13 amenities units for sale in May that year. Id. ¶¶ 34-35. Fintiklis first met with Defendants about a proposed bulk purchase of those units in June 2016. Id. ¶ 6.

According to Plaintiffs, while they were conducting due diligence on the Hotel's financials in connection with the potential purchase, the parties had several meetings during which Defendants made misrepresentations about the Hotel's performance. At a meeting on August 1, 2016, Defendants' representative falsely stated, among other things, that they had "[s]uperior market share⁴ " and "the Hotel was achieving better financial results than the market in Panama, which was due to [Defendants'] operation of the Hotel." Am. Comp. ¶¶ 40-45. Plaintiffs allegedly relied on these representations in their later decision to purchase the units. Id. ¶ 52. Plaintiffs further allege that despite reviewing the Hotel's financials, they could not have known at the time that the records provided by Defendants artificially deflated the Hotel's expenses, as they discovered later after taking control of the Hotel in March 2018. Am. Compl. ¶ 63.

On October 14, 2016, Fintiklis along with Newland's representatives went in Defendants' New York offices to discuss the potential purchase. Id. ¶ 36. Four days later, Fintiklis sent an email to all the attendees of that meeting, stating that he "looked forward to closing the transaction and working together to turning around this wonderful property." Thereafter, the parties negotiated the terms of a bulk sale agreement (the "BSA"). See Doc. 38 Ex. 4. In February 2017, the parties executed the BSA and closed the purchase. Countercl. ¶¶ 42-46. At Fintiklis' request, the BSA identifies Ithaca I as the purchaser of 202 condominium units, and Ithaca II as the purchaser of the 13 amenities units. Under section 3(A) of the BSA, Ithaca II agreed that it "shall be bound by the terms and conditions of the [HMA] as successor to the Hotel [a]menities [u]nits [o]wner." See Doc. 38 Ex. 4 at 3. In exchange for Defendants' consent to the purchase,⁵ Plaintiffs agreed in section 3(D) of the BSA that they "shall not directly or indirectly take any actions to interfere with or undermine [Defendants]' rights under...the HMA...[or] exercise their voting rights in a way adverse to [Defendants]." Countercl. ¶¶ 39-40; see also Doc. 38 Ex. 4 at 4. The BSA also contained a forum selection clause that provides that all disputes with respect to the BSA "shall be brought only in the State of New York." See id. at 9.

On October 3, 2017, while he was meeting with Defendants on how to improve the Hotel's performance, Fintiklis sent a mass email to all the owners of the Hotel's condominium units requesting their attendance at "a meeting of the beneficiaries of [the Hotel TOC] on [October 14, 2017]." In the email, he called the meeting an opportunity to meet as many owners as possible and "hear their thoughts and ideas." Id. ¶ 49. Upon learning about this, Defendants contacted Fintiklis to remind him of his obligations under the BSA, and section 3(D) thereunder, and requested to have their general manager attend the meeting. Id. ¶¶ 50-51. In response, Fintiklis confirmed his awareness of his obligations, agreed to have Defendants' general manager attend the meeting, and claimed that the meeting was "merely an informal lunch... a good way to meet everyone." Id. ¶ 52.

On October 14, 2017, Plaintiffs held the meeting⁶ and with Lundgren's vote, managed to install Fintiklis, his lawyer Alfredo Guerra and Jaime Fernandez⁷ on the Hotel TOC's board. Id. ¶¶ 54-73. On that same day, the newly reorganized Hotel TOC served Defendants with a notice of default, asserting various grounds for default including but not limited to, plummeting occupancy levels, failure to take reasonable cost saving measures, and failure to maintain the Hotel's financial records. Id. ¶¶ 74,77; see also Doc. 38 Ex. 10 ("Notice of Default"). Also later that day, Hotel TOC filed a request for arbitration before the ICC.⁸ Id. ¶¶ 12, 75.

According to Defendants, rather than waiting for the ICC arbitration, Plaintiffs, along with Lundgren, engaged in a series of self-help measures from late February to early March 2018. Id. ¶¶ 85-98. These measures included physically removing Defendants from the Hotel, cutting off power, attempting to forcibly enter the Hotel's executive offices, locking Defendants' employees out of the Hotel through hacking its security system and disabling all the doors, and burglarizing the Hotel's information technology room. Id. They also physically removed Defendants' trademarks and brand from the Hotel. Id.

Plaintiffs do not dispute that they took control of the Hotel in March 2018. According to Plaintiffs, with full access to the Hotel and its books and records, they discovered that Defendants had underreported their management fees and employees' salaries, failed to pay income taxes thereon, employed a flawed sales and marketing strategy, failed to make monthly distributions to the Hotel's owners, failed to properly maintain the Hotel's financial records, commingled the Hotels' revenues and capital reserves, and pocketed some of the Hotel's capital reserve funds as management fees that they were not entitled to. See generally Am. Compl.

B. Procedural Background

On January 16, 2018, Plaintiffs commenced this action. Doc. 1. On March 22, 2018, a hearing was held, during which the Court granted Plaintiffs' motion for a preliminary injunction enjoining Defendants from pursuing against Plaintiffs the ICC arbitration captioned Hotel TOC, Inc (Claimant). v. Trump Panama Hotel Management LLC and Trump International Hotels Management, LLC (Respondents/Third-Party Claimants) v. Ithaca Capital Investments I S.A., Ithaca Capital Investments II S.A., Orestes Fintiklis, et al. (Third Party Respondents) , ICC Case 23149/MK. See Doc. 55 Ex. F ("Prelim. Inj. Hr'g"). On April 23, 2018, Defendants answered and counterclaimed. Doc. 38. On July 31, 2018, Plaintiffs moved to stay the action pending the ICC arbitration. Doc. 53. The Court denied the motion to stay.⁹ Doc. 61. On June 3, 2019, Plaintiffs moved to dismiss and for leave to file an amended complaint. Docs. 72, 75. On October 17, 2019, Plaintiffs moved to stay the instant action again, Doc. 103,...