Caesars Entm't Operating Co. v. Appaloosa Inv. Ltd. P'ship I

• Decision Date: 20 July 2015
• Docket Number: No. 652392/2014.,652392/2014.
• Citation: 18 N.Y.S.3d 577 (Table)
• Parties: CAESARS ENTERTAINMENT OPERATING COMPANY, INC. and Caesars Entertainment Corporation, Plaintiffs, v. APPALOOSA INVESTMENT LIMITED PARTNERSHIP I, Palomino Fund Ltd., Thoroughbred Fund L.P., Thoroughbred Master Ltd., Avenue Credit Strategies Fund, Avenue Investments, LP, Avenue–Coppers Opportunities Fund, L.P., Avenue International Master, LP, Lyxor/Avenue Opportunities Fund Limited, Managed Accounts Master Fund Services–Map10, Avenue SS Fund VI (Master), LP, Avenue Special Opportunities Fund I, L.P., Canyon Capital Advisors LLC, On Behalf of All of its Participating Funds and Managed Accounts that are Beneficial Holders of the Notes, Caspian Capital LP, Centerbridge Credit Partners, L.P.Centerbridge Credit Partners Master, L.P., Centerbridge Special Credit Partners II, L.P., Contrarian Capital Management L.L.C. On Behalf of all Managed Accounts and Affiliated Entities that are Beneficial Holders of the Notes, Elliott Management Corporation, Oaktree Value Opportunities Fund Holdings, L .P., OCM Opportunities Fund VII Delaware, L.P., OCM Opportunities Fund VII Delaware, L.P., Oaktree Opportunities Fund VIII Delaware, L .P., Oaktree Opportunities Fund VIII Delaware, L.P., Oaktree FF Investment Fund, L.P. —Class B, Special Value Expansion Fund, LLC, Special Value, Opportunities Fund, LLC, Tennenbaum Opportunities Partners V, LP, Third Avenue focused Credit Fund, and Wilmington Savings Fund Society, FSB, in its capacity as successor Indenture Trustee for the 10% Second Priority Senior Secured Notes due 2018, Defendants.
• Court: New York Supreme Court

18 N.Y.S.3d 577 (Table)

CAESARS ENTERTAINMENT OPERATING COMPANY, INC. and Caesars Entertainment Corporation, Plaintiffs
v.
APPALOOSA INVESTMENT LIMITED PARTNERSHIP I, Palomino Fund Ltd., Thoroughbred Fund L.P., Thoroughbred Master Ltd., Avenue Credit Strategies Fund, Avenue Investments, LP, Avenue–Coppers Opportunities Fund, L.P., Avenue International Master, LP, Lyxor/Avenue Opportunities Fund Limited, Managed Accounts Master Fund Services–Map10, Avenue SS Fund VI (Master), LP, Avenue Special Opportunities Fund I, L.P., Canyon Capital Advisors LLC, On Behalf of All of its Participating Funds and Managed Accounts that are Beneficial Holders of the Notes, Caspian Capital LP, Centerbridge Credit Partners, L.P.Centerbridge Credit Partners Master, L.P., Centerbridge Special Credit Partners II, L.P., Contrarian Capital Management L.L.C. On Behalf of all Managed Accounts and Affiliated Entities that are Beneficial Holders of the Notes, Elliott Management Corporation, Oaktree Value Opportunities Fund Holdings, L .P., OCM Opportunities Fund VII Delaware, L.P., OCM Opportunities Fund VII Delaware, L.P., Oaktree Opportunities Fund VIII Delaware, L .P., Oaktree Opportunities Fund VIII Delaware, L.P., Oaktree FF Investment Fund, L.P. —Class B, Special Value Expansion Fund, LLC, Special Value, Opportunities Fund, LLC, Tennenbaum Opportunities Partners V, LP, Third Avenue focused Credit Fund, and Wilmington Savings Fund Society, FSB, in its capacity as successor Indenture Trustee for the 10% Second Priority Senior Secured Notes due 2018, Defendants.

No. 652392/2014.

Supreme Court, New York County, New York.

July 20, 2015.

Friedman Kaplan Seiler & Adelman LLP, for plaintiff Caesars Entertainment Corp.

Jones Day, for the Second Lien Note–Holder Defendants.

Opinion

SHIRLEY WERNER KORNREICH, J.

In this action concerning Caesars-affiliated properties, all that remains is the first cause of action in the amended complaint (the AC) by plaintiff Caesars Entertainment Corporation (CEC) against the Second Lien Holders.¹ Before the court is the Second Lien Holders' motion, as limited by the parties' stipulations,² for dismissal of the first cause of action with prejudice for failure to state a claim. For the reasons that follow, the motion is granted.

I. Background

CEC is a publicly traded Delaware corporation. Its subsidiary, former plaintiff Caesars Entertainment Operating Company, Inc. (CEOC), also is incorporated in Delaware. CEC and CEOC (collectively, Caesars), through various affiliates, own, operate, and manage casinos in the United States and have a principal place of business in Las Vegas, Nevada. Caesars is currently embroiled in multi-forum litigation with its creditors, most notably in the Court of Chancery of Delaware and the United States Bankruptcy Court for the Northern District of Illinois. See Wilmington Savings Fund Society, FSB v. Caesars Entm't Corp., 2015 WL 1306754 (Del Ch Mar. 18, 2015) ; In re Caesars Entm't Operating Co., 526 BR 265 (Bankr ND Ill Mar. 9, 2015) ; see also In re Caesars Entm't Operating Co., 2015 WL 495259 (Bankr D Del Feb. 2, 2015) (determining that bankruptcy proceedings shall proceed in Illinois). Familiarity with these actions is presumed.

At issue in this action were controversies between Caesars and certain holders of its First Lien Notes (former defendant Elliott Management Corporation) and Second Lien Notes (the Second Lien Holders).³ Since the gravamen of the parties' disputes is no longer before this court, the facts recited here are limited to those pertinent to the remaining cause of action, tortious interference with prospective business relations, alleged against the Second Lien Holders. The complex structured finance issues at the heart of the parties' other lawsuits are neither legally relevant nor necessary for contextual purposes.

II. Procedural History

Caesars commenced the instant action on August 5, 2014 (see Dkt. 2 [original complaint] ) and filed the AC on September 15, 2014. See Dkt. 54. The AC contained three causes of action for tortious interference with prospective business relations, declaratory judgment, and breach of contract. As a result of the parties' stipulations of discontinuance, what remains is the tortious interference claim as asserted by CEC against the Second Lien Holders.

On October 15, 2014, the Second Lien Holders moved to dismiss the AC. Prior to oral argument, Caesars offered to withdraw the first cause of action without prejudice, albeit with leave to possibly refile in one of the other pending actions.⁴ The Second Lien Holders refused to consent to a without-prejudice dismissal, arguing the first cause of action should be dismissed on the merits and with prejudice. This motion followed. See Dkt. 159 (6/30/15 Tr.).

III. The Alleged Defamation

Since this is a motion to dismiss, the facts recited below are taken from the AC unless otherwise indicated.

CEC's tortious interference with business relations cause of action is predicated upon defamation claims. Those defamation claims are based on four categories of communications.

A. Letter to Caesars

The first communication occurred on March 21, 2014, when “the Second Lien Holders sent a threatening letter to [Caesars] and their respective counsel, alleging that CEC and CEOC had breached their fiduciary duties and that CEOC had decided to cede valuable assets of CEOC to affiliated entities for inadequate consideration.” ' AC ¶ 95. While this letter was a private communication, CEC claims that “[a]s these defendants knew and intended, CEC was obligated to disclose their statements” in an SEC filing⁵ and, therefore:

[O]n March 26, 2014, CEC reported in an 8–K that it had received a letter from a law firm acting on behalf of clients who claimed to hold second-priority secured notes of CEOC, alleging, inter alia, that CEOC's owners improperly transferred or seek to transfer valuable assets of CEOC to affiliated entities” and that the letter “includes allegations that these transactions constitute or will constitute voidable fraudulent transfers and represent breaches of alleged fiduciary duties owed to CEOC creditors,” and demands “that the transactions be rescinded or terminated.”

AC ¶ 96. Two days later, on March 28, 2014, the press reported on this disclosure. ¶ 97; see also ¶ 100 (subsequent press reports in April, May, and July 2014).

B. LGCB Hearings

Next, Caesars alleges that:

On April 24, 2014, the legal and financial advisors for the Second Lien Holders appeared before the Louisiana Gaming Control Board (the “LGCB”) and [ ] asserted that (a) the Four Properties Transaction⁶ constituted a fraudulent transfer because the assets being sold by CEOC to Growth were purportedly worth “between $1.1 and $2.2 billion more” than Growth would be paying for them—notwithstanding the Special Committee's independent evaluation and vigorous negotiation of that Transaction, with the advice of independent legal and financial advisors, and (b) there was “a fair likelihood” that their clients would “institute proceedings to unwind the transactions under the applicable fraudulent transfer laws of this country, and rescind it so it becomes voidable.” Thereafter, counsel for the Second Lien Holders met with officials with the Nevada Gaming Control Board and made similar statements to those they made to the LGCB.

AC ¶¶ 102–03.

The following month, “[o]n May 13, 2014, letters from counsel for the Second Lien Holders accompanied by slide decks apparently prepared by their financial advisors, were submitted to the LGCB. Both sets of submissions alleged that the sale of Harrah's New Orleans was a fraudulent transfer and urged the LGCB not to approve it.” ¶ 104. “On May 19, 2014, the Second Lien Holders again appeared, through their legal and financial advisors, before the LGCB, and urged it not to approve the transfer of Harrah's New Orleans to Growth.” ¶ 105. Caesars alleges that the Second Lien Holders “knew and intended that their false statements made at the LGCB hearings would be disseminated to the public through the press. The Wall Street Journal and Bloomberg obtained transcripts of the LGCB hearings and in articles dated May 28, 2014 and June 24, 2014, respectively, reported on the hearings and the false statements made by these defendants' representatives on their behalf, including their threats of litigation.” ¶ 106.

C. IGB Hearings

Caesars alleges that the Second Lien Holders “also attempted to impede, delay, or prevent the closing of the CEOC Refinancing.”⁷ ¶ 107. A hearing on Caesars' application for approval of the CEOC Refinancing was originally scheduled to take place before the Illinois Gaming Board (the IGB) on June 26, 2014. Id. After a June 24, 2014 Bloomberg report noted that Second Lien Holders planned to testify at the hearing, the hearing was rescheduled for July 24, 2014. Id. Then:

On July 24, 2014, counsel for the Second Lien Holders appeared at the IGB hearing and asserted to the IGB the same [allegedly] false assertions they previously made, including asserting that certain transactions entered into by CEOC were “significantly below their fair market value.” The Second Lien Holders' representative

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