Alliance Network, LLC v. Sidley Austin LLP

• Decision Date: 20 March 2014
• Citation: 987 N.Y.S.2d 794,2014 N.Y. Slip Op. 24076,43 Misc.3d 848
• Court: New York Supreme Court
• Parties: ALLIANCE NETWORK, LLC, Alliance Network Holdings, LLC, and Network World Market Center, LLC, Plaintiffs, v. SIDLEY AUSTIN LLP, Howard J. Rubinroit, Ronald C. Cohen, Berger & Webb, LLP, Steven A. Berger, Jonathan Rogin, The Law Offices of Ronald P. Slates, P.C., Ronald P. Slates, J. Steven Bingman, Mousa Alliance, Nigel Alliance, and John Does 1 through 10, Defendants.

43 Misc.3d 848
987 N.Y.S.2d 794
2014 N.Y. Slip Op. 24076

ALLIANCE NETWORK, LLC, Alliance Network Holdings, LLC, and Network World Market Center, LLC, Plaintiffs,
v.
SIDLEY AUSTIN LLP, Howard J. Rubinroit, Ronald C. Cohen, Berger & Webb, LLP, Steven A. Berger, Jonathan Rogin, The Law Offices of Ronald P. Slates, P.C., Ronald P. Slates, J. Steven Bingman, Mousa Alliance, Nigel Alliance, and John Does 1 through 10, Defendants.

Supreme Court, New York County, New York.

March 20, 2014.

[987 N.Y.S.2d 797]

Jerome Tarnoff, Fred H. Perkins, Evan Lupion, Morrison Cohen LLP, Andrew Lavoott Bluestone, Law Firm of Andrew Lavoot Bluestone, for Plaintiffs.

Eric Seiler, Katherine L. Pringle, Emily L. Chang, Freidman Kaplan Seiler & Adelman LLP, for Defendants Steven A. Berger, Jonathan Rogin, and Berger & Webb LLP.

Michael T. Hensley, Diana C. Manning, Bressler, Amery & Ross, P.C., for Defendants Ronald P. Slates, J. Steven Bingman, and the Law Offices of Ronald P. Slates, P.C.

Richard J. Davis, for Defendants Mousa Alliance and Nigel Alliance.

John S. Kiernan, Mary Beth Hogan, Philip A. Fortino, Debevoise & Plimpton LLP, for Defendants Sidley Austin LLP, Howard J. Rubinroit, and Ronald C. Cohen.

EILEEN BRANSTEN, J.

Motion sequence numbers 005, 006, 007, and 008 are consolidated herein for disposition.

This action is the most recent in a series of litigations stemming from a real estate development in Las Vegas called the World Market Center (“WMC Project”). In the instant action, Plaintiffs complain that Defendants Mousa Alliance and Nigel Alliance (“Alliance Brothers”) failed to provide promised funding for the WMC Project. Beyond seeking redress for that alleged breach, Plaintiffs likewise bring claims against attorneys that represented non-party NAMA Holding, Inc. in related litigations (the “Attorney Defendants”).

Presently before the Court are four motions to dismiss the Amended Complaint, filed on behalf of all Defendants:

Defendants Steven A. Berger, Jonathan Rogin, and Berger & Webb LLP (collectively “the Berger Defendants ”) seek dismissal, pursuant to CPLR 3211(a)(7), of the fraud and Judiciary Law § 487 claims asserted against them (motion sequence 005);

Defendants The Law Offices of Ronald P. Slates, P.C., Ronald P. Slates, and J. Steven Bingman (collectively “the Slates Defendants”) move for dismissal of fraud and Section 487 claims pursuant to CPLR 3211(a)(7) & (8) (motion sequence 006);

Defendants Alliance Brothers request dismissal of all claims in the Amended Complaint pursuant to CPLR 3211(a)(5) & (7) (motion sequence 007); and,

Defendants Sidley Austin LLP, Howard J. Rubinroit, Ronald C. Cohen (collectively “the Sidley Defendants”) seek dismissal of the same claims asserted against the Berger and Slates Defendants pursuant to CPLR 3211(a)(7) (motion sequence 008).

For the reasons that follow, Defendants' motion to dismiss are granted, and the Amended Complaint is dismissed in its entirety.

I. Background

The instant litigation is brought by Plaintiffs Alliance Network, LLC (“Alliance Network”), Alliance Network Holdings, LLC, and Network World Market

[987 N.Y.S.2d 798]

Center, LLC (collectively, the “Alliance Companies”). The relationships between the parties trace back to the Alliance Network. Plaintiff Alliance Network was formed by non-parties Shawn Samson and Jack Kashani (together, the “Alliance Managers”) to develop the WMC Project. (Am.Compl. ¶ 60.) Non-party NAMA Holdings, LLC (“NAMA”) was a member of the Alliance Network, and Defendant Alliance Brothers were the individual members of NAMA. Id. ¶¶ 24–25, 61. The Berger Defendants, Sidley Defendants, and Slates Defendants each represented NAMA in litigation against either the Alliance Managers or the Alliance Companies. Id. ¶¶ 55–56.

A. The California Litigation

On March 26, 2007, the Alliance Companies—the Plaintiffs in this action—commenced an arbitration proceeding in California against NAMA. Id. ¶ 97. The Alliance Companies alleged that NAMA improperly refused to provide funding for the third phase of the WMC Project. Id. ¶¶ 66, 68, 96.

After twenty-six days of hearings, the arbitration panel issued its final award on August 3, 2009. The decision was largely in NAMA's favor. While the panel deemed NAMA's tender of funds for phase three of the WMC Project to be “ineffective” and found NAMA to be in default under the parties' April 2004 Settlement Agreement, the panel rejected the remainder of the Alliance Companies' theories and awarded it no damages. Id. Ex. 4 at 20 (arbitration award). Conversely, the panel awarded over $12.75 million in damages against Alliance Network to NAMA, as well as $400,000 in sanctions to NAMA for the Alliance Companies' spoliation of evidence to be paid within thirty days of the award. Id. Ex. 4 at 24–25.

In addition, the panel awarded declaratory relief, ruling, inter alia, that Alliance Network was barred from making distributions to parties other than NAMA until all liens on the WMC Project property, other than those on the phase three building, were released. Id. Ex. 4 at 23–24.

The Alliance Companies then filed a petition in the California Superior Court to vacate the award. Id. ¶ 105. NAMA likewise filed a cross-petition to have the award confirmed. Id. On June 25, 2010, the court confirmed the arbitration award in its entirety, and the California Court of Appeal and California Supreme Court later affirmed the judgment. Id.; see also Affirmation of Mary Beth Hogan (“Hogan Affirm.”) Ex. 50, 52.¹

B. The New York Litigation

After the issuance of the arbitration award, the focus of the parties' efforts, as

[987 N.Y.S.2d 799]

relevant to the instant motion, turned to New York state. In support of their fraud and Judiciary Law § 487 claims, Plaintiffs's Amended Complaint highlights three events: (1) NAMA's TRO application before Justice Lowe; (2) the September 7, 2010 Stipulation staying the enforcement of a First Department order reversing the TRO granted by Justice Lowe; and, (3) NAMA's representations to this Court regarding its percentage ownership of the Alliance Companies. Each of these events is described below.

1. NAMA's TRO Application

After the arbitration award, but before the California court order confirming it, NAMA applied for a temporary restraining order in this Court in the NAMA Holdings, LLC v. Greenberg Traurig et al. case, Index No. 601054/2008. (Am.Compl. ¶ 109.) NAMA sought a restraining order against the Alliance Managers, Shawn Samson and Jack Kashani, and was represented by the Sidley Defendants and the Berger Defendants. See Hogan Affirm. Ex. 36 (NAMA's Moving Br. in Support of TRO).

In support of its application, NAMA argued that there was “a substantial likelihood that defendants Samson and Kashani (the Alliance Companies' managers) will imminently cause the companies to wrongfully distribute as much as $9.2 million dollars (or more) to their own company, Prime Associates Group, LLC (Prime'), and/or other third-parties, in direct violation of a recent arbitral award that explicitly prohibits such a distribution.” See Hogan Affirm. Ex. 36 at 1 (emphasis in original). Counsel for the Alliance Managers opposed the motion and disputed NAMA's arguments. Notably, the Alliance Managers argued that, contrary to NAMA's assertion, the lien conditions imposed by the arbitration panel did not bar distributions by the Alliance Network, as no such liens existed. See Hogan Affirm. Ex. 41 at 22: 12–21 (11/16/09 Oral Argument Tr.). Further, the Alliance Managers contended that, while the Alliance Companies' had $9.2 million in assets, “[t]here is no intention to use any portion of the accrued [assets] to make any distribution ...” Id. Ex. 38 ¶ 6 (Affidavit of Katherine Venezia in opposition to NAMA's TRO application).

After hearing the parties' arguments, Justice Lowe granted the TRO to “preserve the status quo of the findings of the arbitration panel.” Id. Ex. 41 at 43:5 (Nov. 18, 2009 Oral Arg. Tr.); Am. Compl. ¶ 112. Noting the Alliance Managers' contention that there was “no intention” to make a distribution of the $9.2 million at issue, Justice Lowe stated that the TRO was “going to make sure that that intention is solidified.” Id. at 43: 2–3. Although the Alliance Managers expressed concern that the TRO would render them unable to pay ordinary business expenses, Justice Lowe informed the parties that, if they were unable to come to an agreement on expenses, the Alliance Managers could petition the court to obtain approval for an expenditure. Id. at 58:12–25; Am. Compl. ¶ 12.

2. Stipulation Concerning Enforcement of the California Judgment

On June 25, 2010, the arbitration award was confirmed in California state court. See Am. Compl. ¶ 115. Upon entering the judgment, the California court stayed enforcement to allow the Alliance Companies time to post an appellate bond. Id.

At a July 30, 2010 hearing, the California court addressed whether NAMA could

[987 N.Y.S.2d 800]

take procedural steps before the expiration of the stay to expedite enforcement of the judgment once the stay expired on August 19, 2010. See Hogan Affirm. Ex. 43 at 50: 7–24 (7/30/10 Oral Arg. Tr.). The court granted this request, stating that NAMA could perform preparatory tasks, such as filing motions and applications for writs of attachment, while the stay was pending. Id. at 50: 7–11. The court clarified, however, that NAMA could not “levy or attach anything.” Id. at 50: 21–23.

Shortly thereafter, the Alliance Managers brought an emergency application in the First Department, seeking to modify the TRO entered by Justice Lowe to permit Alliance Companies' funds to be used to post the bond in the California action. (Am.Compl. ¶ 117.) In response to this application, Justice Helen Freedman issued an order restraining NAMA from “executing on [the] California judgment pending a determination of [this] motion by [the] full panel.” Id. Ex. 7 (the “August 12th Order”).

The Berger Defendants, as counsel for NAMA, wrote to Justice Freedman,...