Beach v. Touradji Capital Mgmt., LP

• Decision Date: 22 November 2016
• Citation: 144 A.D.3d 557,42 N.Y.S.3d 96,2016 N.Y. Slip Op. 07852
• Parties: Gentry T. BEACH, et al., Plaintiffs–Respondents–Appellants, v. TOURADJI CAPITAL MANAGEMENT, LP, et al., Defendants–Appellants–Respondents. Touradji Capital Management, LP, et al., Counterclaim Plaintiffs–Appellants–Respondents, v. Gentry T. Beach, et al., Counterclaim Defendants–Respondents–Appellants. Touradji Capital Management, LP, et al., Counterclaim Plaintiffs–Appellants–Respondents, v. Vollero Beach Capital Partners LLC, et al., Counterclaim Defendants–Respondents–Appellants, Gary Beach, Counterclaim Defendant.
• Court: New York Supreme Court — Appellate Division

144 A.D.3d 557

42 N.Y.S.3d 96

2016 N.Y. Slip Op. 07852

Gentry T. BEACH, et al., Plaintiffs–Respondents–Appellants,

v.TOURADJI CAPITAL MANAGEMENT, LP, et al., Defendants–Appellants–Respondents.

Touradji Capital Management, LP, et al., Counterclaim Plaintiffs–Appellants–Respondents,

v.Gentry T. Beach, et al., Counterclaim Defendants–Respondents–Appellants.

Touradji Capital Management, LP, et al., Counterclaim Plaintiffs–Appellants–Respondents,

v.Vollero Beach Capital Partners LLC, et al., Counterclaim Defendants–Respondents–Appellants,Gary Beach, Counterclaim Defendant.

Supreme Court, Appellate Division, First Department, New York.

Nov. 22, 2016.

O'Brien LLP, New York (Sean O'Brien of counsel), for appellants-respondents.

Liddle & Robinson, LLP, New York (Matthew J. McDonald of counsel), for respondents-appellants.

MAZZARELLI, J.P., SWEENY, ANDRIAS, WEBBER, GESMER, JJ.

Order, Supreme Court, New York County (Anil C. Singh, J.), entered May 7, 2015, which granted in part and denied in part the motion of plaintiffs/counterclaim defendants Gentry T. Beach (Gentry), Robert A. Vollero (Mr. Vollero), and counterclaim defendants Vollero Beach Capital Partners LLC, Vollero Beach Capital Fund, LP, Vollero Beach Associates LLC, and Vollero Beach Capital Offshore, Ltd. (the Vollero Beach Funds) for summary judgment dismissing the counterclaims, unanimously modified, on the law, to (1) deny the motion as to (a) so much of the first counterclaim as alleges that Mr. Vollero breached his fiduciary duty to defendant/counterclaim plaintiff Touradji Capital Management, LP (TCM) by destroying documents and remaining at TCM in an attempt to collect information for use in plaintiffs' lawsuit and to concoct a lawsuit, (b) so much of the first counterclaim as alleges that Gentry breached his fiduciary duty to TCM and counterclaim plaintiff DeepRock Venture Partners, LP (DeepRock) by misrepresenting counterclaim defendant Gary Beach's (Gary) contribution to Playa Oil & Gas LP, conspiring with Gary to steal investor funds from Playa, and withholding information about Madagascar Oil and Gas, Ltd., (c) so much of the first counterclaim as alleges that plaintiffs breached their fiduciary duty to TCM by misappropriating its proprietary research, positions, etc., (d) so much of the second counterclaim as alleges that plaintiffs and Vollero Beach Capital Partners engaged in unfair competition against TCM and defendant/counterclaim plaintiff Paul Touradji (Mr. Touradji) by misrepresenting plaintiffs' track record and misappropriating TCM's proprietary research, etc., (e) so much of the third counterclaim as alleges that plaintiffs stole TCM's proprietary research, etc., (f) the fifth counterclaim, with respect to Gentry's involvement in the statements to Amaranth about TCM and Mr. Touradji, and (g) the sixth counterclaim by TCM against plaintiffs; and (2) grant the motion as to (a) so much of the first counterclaim as is asserted by Mr. Touradji, (b) so much of the first counterclaim as alleges that plaintiffs breached their fiduciary duties when Mr. Vollero spoke to Gentry's counsel, and (c) so much of the seventh counterclaim as is asserted by Mr. Touradji and TCM, and otherwise affirmed, without costs.

The motion court did not have the benefit of our decision on the most recent prior appeal (the prior decision), in which we concluded that the breach of fiduciary duty counterclaim based on destruction of documents stated a cause of action as against Mr. Vollero but not as against Gentry (142 A.D.3d 442, 444, 36 N.Y.S.3d 637 [2016] ). Thus, the counterclaim should be reinstated as against Mr. Vollero. Our reasoning as to Mr. Vollero's destruction of his notes also applies to the part of the first counterclaim alleging that Mr. Vollero breached his fiduciary duty by remaining at TCM in an attempt to collect and fabricate information for use in plaintiffs' lawsuit against the firm and to concoct a lawsuit against the firm. Thus, that part of the first counterclaim should be reinstated as against Mr. Vollero.

We concluded, in the prior decision, that Mr. Vollero's conversation with Gentry's lawyer, which the referee determined was for his own representation, was privileged and that, in engaging in it, Mr. Vollero did not violate his fiduciary duty to TCM (id. at 445, 36 N.Y.S.3d 637 ). Therefore, the counterclaim based on Mr. Vollero's conversation with Gentry's lawyer should be dismissed.

Other aspects of the prior decision support the order appealed from. For example, we concluded that since plaintiffs' violation of a securities regulation caused their employer (TCM) to incur penalties, it was directly against TCM's interests; we also concluded that the securities regulation counterclaim related back to the complaint (id. at 444, 36 N.Y.S.3d 637 ). Hence, the portion of the fiduciary duty counterclaim based on plaintiffs' violation of a securities regulation was correctly sustained.

In the prior decision, we affirmed the denial of the motion to amend the defamation counterclaim (id. at 445, 36 N.Y.S.3d 637 ). Thus, the operative defamation counterclaim is the original one, which alleged that plaintiffs stated to TCM investors, and other businesses in the financial industry, that TCM “ ‘broke its word’ and breached a supposed contract with them” regarding their compensation. However, the amended counterclaim omitted this allegation, which, on appeal, counterclaim plaintiffs do not address. Hence, the “broke its word” part of the defamation counterclaim was correctly dismissed.

With respect to the part of the defamation counterclaim that deals with Amaranth Advisors LLC, the court erroneously looked at the original pleading, rather than at the evidence submitted on the summary judgment motion (see e.g. Alvord & Swift v. Muller Constr. Co., 46 N.Y.2d 276, 280–281, 413 N.Y.S.2d 309, 385 N.E.2d 1238 [1978] ). Counterclaim plaintiffs submitted evidence that Gary went to Amaranth's office in Greenwich, Connecticut, in June 2009, and at that meeting told Josh Goldstein of Amaranth that TCM “either traded against Amaranth's book or used that information to benefit it[self] to the detriment of Amaranth.” Gary also gave Goldstein a report by Fortress Global. There is sufficient evidence that Gentry conspired with Gary, as the motion court found in addressing a cause of action not at issue on this appeal (tortious interference with contract). By contrast, there is no evidence that either Mr. Vollero or the Vollero Beach Funds conspired with Gary. Indeed, in the prior decision, we found that “the amended counterclaims lack factual allegations that [Mr.] Vollero induced [former TCM employee] [Benjamin] Bram to breach his contract with [TCM] or that [Mr.] Vollero conspired with [Gentry] with regard to this deed,” and dismissed the new tortious interference counterclaim as against Mr. Vollero (142 A.D.3d at 443, 36 N.Y.S.3d 637).

Gentry is not entitled, as a matter of law, to judgment dismissing the Amaranth portion of the defamation counterclaim as against him, except to the extent that DeepRock is not a proper plaintiff on this counterclaim (since there is no evidence that defamatory statements were made about it). As to his assertion of the litigation privilege, counterclaim plaintiffs presented evidence that the Beaches duped Amaranth into bringing a sham lawsuit that defamed TCM and Mr. Touradji (see Flomenhaft v. Finkelstein, 127 A.D.3d 634, 638, 8 N.Y.S.3d 161 [1st Dept.2015] ). Nor did Gentry meet his burden of showing, as he contends, that TCM and Mr. Touradji are involuntary limited public figures (see Krauss v. Globe Intl., 251 A.D.2d 191, 192, 674 N.Y.S.2d 662 [1st Dept.1998] ). Of the articles cited by plaintiffs, the few that mention Amaranth at all merely report on its lawsuit, which is insufficient (see Dameron v. Washington Mag., Inc., 779 F.2d 736, 741 [D.C. Cir.1985], cert. denied 476 U.S. 1141, 106 S.Ct. 2247, 90 L.Ed.2d 693 [1986] ).¹ Moreover, the dispute between Amaranth and TCM was merely a private one (see Waldbaum v. Fairchild Publs., Inc., 627 F.2d 1287, 1296 [D.C. Cir.1980], cert. denied 449 U.S. 898, 101 S.Ct. 266, 66 L.Ed.2d 128 [1980] ).²

Since we are reinstating the defamation counterclaim, the sixth counterclaim (tortious interference with business relationships) should also be reinstated to the extent of allowing TCM (but not the other counterclaim plaintiffs) to assert this claim against plaintiffs (but not against the Vollero Beach Funds). Malice on plaintiffs' part need not be shown, because there is evidence that plaintiffs used improper or illegal means, i.e., defamation (see Amaranth LLC v. J.P. Morgan Chase & Co., 71 A.D.3d 40, 47, 888 N.Y.S.2d 489 [1st Dept.2009], lv. dismissed in part, denied in part

14 N.Y.3d 736, 898 N.Y.S.2d 74, 925 N.E.2d 73 [2010] ). As to injury to TCM's relationship with its clients (see id. ), Mr. Touradji's affidavit raises an issue of fact as to whether any client ceased doing business with TCM as a result of plaintiffs' remarks. Resolution of the conflict between Mr. Touradji's affidavit and the deposition testimony of David Mooney is for the trier of fact.

Based on Ashland Mgt. Inc. v. Altair Invs. NA, LLC, 14 N.Y.3d 774 (2010), the court correctly found that the contact list that Mikolaj Sibila sent to Gentry at the latter's request was not a trade secret, and thus correctly dismissed the portion of the second and third counterclaims based on this contact list.

By contrast, Ashland does not require dismissal of the part of the second counterclaim based on performance data. In Ashland, the relevant performance data was available to the public (59 A.D.3d 97,...