AEA Middle Mkt. Debt Funding v. Marblegate Asset Mgmt.
| Decision Date | 18 November 2021 |
| Docket Number | Index No. 650413/2019,Motion Seq. No. 008 |
| Citation | 2021 NY Slip Op 33848 (U) |
| Parties | AEA MIDDLE MARKET DEBT FUNDING LLC, AEA MIDDLE MARKET DEBT II FUNDING LLC, BANCALLIANCE INC., MIDCAP FINANCIAL TRUST, MIDCAP FUNDING XVIII TRUST, and SUN LIFE ASSURANCE COMPANY OF CANADA, individually and derivatively on behalf of ARCHWAY MARKETING SERVICES, INC., Plaintiffs, v. MARBLEGATE ASSET MANAGEMENT, LLC, MARBLEGATE SPECIAL OPPORTUNITIES MASTER FUND L.P., P. MARBLEGATE LTD., MARBLEGATE STRATEGIC OPPORTUNITIES MASTER FUND I, L.P., MARBLEGATE PARTNERS MASTER FUND I, L.P., NEW TERACO, INC., FIELD POINT AGENCY SERVICES, INC., AWM HOLDINGS, INC., ARCHWAY MARKETING HOLDINGS, INC., ARCHWAY MARKETING SERVICES, INC., CORPORATE SERVICES, INC., and JOHN BRECKER, Defendants. |
| Court | New York Supreme Court |
DECISION + ORDER ON MOTION
The following e-filed documents, listed by NYSCEF document number (Motion 008) 160, 161, 162, 163, 164,165, 166, 206, 207, 209 were read on this motion to/for DISMISS.
This dispute arises from restructuring a syndicated loan that turned plaintiffs' secured loans into unsecured loans. Defendants Marblegate Asset Management, LLC (Marblegate Asset), Marblegate Special Opportunities Master Fund L.P., P Marblegate Ltd., Marblegate Strategic Opportunities Master Fund I, L.P., Marblegate Partners Master Fund I, L.P. (collectively, the Marblegate Funds) (with Marblegate Asset Marblegate), New Teraco, Inc. (Teraco), Field Point Agency Services, Inc. (Field Point), AWM Holdings, Inc. (AWM), Archway Marketing Holdings, Inc. (AMH), Archway Marketing Services, Inc. (Archway), Corporate Services, Inc. (Corporate Services) (with AWM, AMH and Archway, the Archway Defendants), and John Brecker (Brecker) (collectively, defendants) move, pursuant to CPLR 3211 (a) (1) and (a) (7), to dismiss with prejudice the second amended complaint brought by plaintiffs AEA Middle Market Debt Funding LLC, AEA Middle Market Debt II Funding LLC (together, AEA), BancAlliance Inc. (BancAlliance),' Midcap Financial Trust (Midcap), Midcap Funding XVIII Trust (Midcap Funding), and Sun Life Assurance Company of Canada (Sun Life), individually and derivatively on behalf of Archway Marketing Services, Inc. (collectively, plaintiffs).
The following facts are from the second amended complaint (the complaint) and the exhibits referenced therein unless otherwise indicated and are assumed to be true for purposes of this motion[1] (see Kronos, Inc. v AVX Corp., 81 N.Y.2d 90, 92 [1993]).
Archway a Delaware corporation with headquarters in Rogers, Minnesota, is engaged in the business of furnishing marketing logistics and fulfillment and supply chain management services (NY St Cts Elec Filing [NYSCEF] Doc No. 158, complaint, ¶¶ 30 and 36). Archway's parent corporation, AMH, and AWM are organized in Delaware (id., ¶¶ 28-29). Corporate Services is organized in Indiana (id., ¶ 31).
Pursuant to a $165 million credit facility agreement dated July 2, 2012 (the Credit Agreement), plaintiffs and Marblegate,[2] as "lenders" or "secured parties," loaned $122 million to the "credit parties," namely the Archway Defendants. The funds were to finance AWM's acquisition of all the capital stock of AMH and its subsidiaries[3] (id., ¶¶ 1 and 37-38). The Credit Agreement involved different types of loans, including "Term Loans" and those made on "Revolving Credit" (NYSCEF Doc No. 59, Nannette McNally [McNally] aff, exhibit A at 34-43 [§1.1]). Several provisions in the Credit Agreement granted the "Required Lenders" the authority to dictate certain actions. The Credit Agreement defines the "Required Lenders" to mean:
"at any time (a) Lenders then holding more than fifty percent (50%) of the sum of the Aggregate Revolving Loan Commitment then in effect plus the aggregate unpaid principal balance of the Term Loans ... then outstanding plus the unfunded portion of the Aggregate Delayed Draw Term Loan Commitment then in effect, or (b) if the Aggregate Revolving Loan Commitments have terminated, Lenders then holding more than fifty percent (50%) of the sum of the aggregate unpaid principal amount of Loans (other than Swing Loans) then outstanding, outstanding Letter of Credit Obligations, amounts of participations in Swing Loans, the principal amount of unparticipated portions of Swing Loans and the unfunded portion of the Aggregate Delayed Draw Term Loan Commitment then in effect"
(id. at 176 [§11.1]). .
To secure their obligations on the Credit Agreement, the Archway Defendants, as "grantors," executed a "Guaranty and Security Agreement" dated July 2, 2012 (the Security Agreement) in which they granted a lien on substantially all of the Archway Defendants' assets (NYSCEF Doc No. 158, ¶ 38). The Security Agreement defined the "collateral" (the Collateral) serving as security as "all of the following property now owned or at any time hereafter acquired by a Grantor or in which a Grantor now has or at any time in the future may acquire any right, title or interests," such as accounts, commercial tort claims, and all proceeds of the foregoing, among other items (NYSCEF Doc No. 60, McNally aff, exhibit B at 14 [§3.1]).
Field Point was designated as the lenders' administrative agent on the Credit Agreement[4](NYSCEF Doc No. 158, ¶ 4). Field Point is a Delaware corporation. Marblegate owns, controls, and shares staff and office space with Field Point (id., ¶¶ 4 and 27). Field Point's obligations and duties as the agent included taking "such action on [each lender's] behalf and to exercise all rights, powers and remedies and perform the duties as are expressly delegated to Agent" under the Credit and Security Agreements (together, the Loan Documents) (NYSCEF Doc No. 59 at 114-115 [§8.1 (a)(ii)] and 169 [§11.1]). Field Point had the sole and exclusive right to act as the "Collateral and Disbursing Agent" with the responsibility to "manage, supervise, and otherwise deal with the Collateral" and to "exercise all remedies given to Agent and the other Secured Parties with respect to the Credit Parties and/or the Collateral, whether under the Loan Documents, applicable Requirements of Law or otherwise" (id. at 115 [§8.1 (b)(iv) and (b)(vi)]). Section 8.3(c) vests the exclusive authority to enforce the rights and remedies under the Loan Documents in Field Point "for the benefit of all the Lenders" (id. at 116). Otherwise, Field Point's duties were limited under Section 8.1(c):
"(i) is acting solely on behalf of the Secured Parties ... with duties that are entirely administrative in nature ..., (ii) is not assuming any obligation under any Loan Document other than as expressly set forth therein or any role as agent... and (iii) shall have no implied 1 functions, responsibilities, duties, obligations or other liabilities under-any Loan Document, and each Secured Party, by accepting the benefits of the Loan Documents, hereby waives and agrees not to assert any claim against Agent based on the roles, duties and legal relationships expressly disclaimed in clauses (i) through (iii) above"
(id. at 115). Section 8.3(a), titled No Action without Instructions," also states that:
(id. [§8.2]). Section 8.5 contains an exculpatory clause in subsection (b) (id. at 117).
The non-payment of the principal, interest and other fees when due constitutes an "Event of Default" under Section'7.1(a) of the Credit Agreement (NYSCEF Doc No. 59 at 110-111). Additionally, a "Specified Event of Default" includes a default under section 7.1(a) (id. at 178 [§11.1]). When an Event of Default occurs, Section 7.2 provides that the "Agent shall at the request of the Required Lenders ... (c) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law," subject to certain conditions not relevant here (id. at 113-114). Article VI of the Security Agreement also describes the remedies available when a default occurs. Section 6.1(a) provides that the "Agent may exercise ... all rights and remedies of a secured party under the UCC" and Section 6.1(d) specifies that the "Agent shall apply the cash proceeds of any action taken by it pursuant to this Section 6.1 ... to the payment in whole or in part of the Secured Obligations, as set forth in the Credit Agreement" (NYSCEF Doc No. 60 at 23-24).
Beginning in mid-2018, Archway began experiencing cash flow difficulties. This caused it to miss paying the principal interest and fees due on July 2,2018 (NYSCEF Doc No. 158, ¶ 39). Section 9.1 of the Credit Agreement governs the process for amending or modifying the Loan Documents (NYSCEF.Doc No. 59 at 123), and, on September 14, 2018, the Archway Defendants, Marblegate and all plaintiffs...
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