Cardell Fin. Corp. v. Suchodolskt Assocs., Inc.
| Decision Date | 17 July 2012 |
| Docket Number | 09 Civ. 6148 (VM)(MHD) |
| Parties | CARDELL FINANCIAL CORP., et al., Petitioners, v. SUCHODOLSKT ASSOCIATES, INC., et al., Respondents. |
| Court | U.S. District Court — Southern District of New York |
REPORT & RECOMMENDATION
Cardell Financial Corp. ("Cardell"), Deltec Holdings, Inc. ("Deltec"), Anastacio Empreendimentos Imobiliaros e Participates Ltda. ("Anastacio"), and Companhia City de Desenvolvimento ("Cia City") (collectively, "movants") have filed a motion for civil contempt and sanctions against Consultora WorldStar S.A. ("WorldStar"), the Estate of Nelson Baeta Neves ("the Estate") and Beno Suchdolski ("Suchodolski") (collectively, "respondents"). They seek this remedy for alleged violations of an amended judgment issued by the District Court on May 24, 2010 (the "Amended Judgment"). That judgment embodied an arbitral award in favor of movants.
Movants allege that respondents have violated an anti-suitinjunction contained in the Amended Judgment by filing a pair of lawsuits in Brazil. In addition, in the event that the court does not find sufficient proof of contempt with respect to respondent Suchodolski, movants request permission to conduct discovery on the issue of whether Suchodolski violated the Amended Judgment.
Respondents contest the contempt motion on a variety of bases. Respondent WorldStar has moved to compel arbitration or for a stay of the contempt motion pending arbitration. In essence, WorldStar argues that the issue of whether there has been a violation of the anti-suit injunction is itself an arbitrable issue and therefore must be determined by an arbitral tribunal. It further argues that even the issue of arbitrability must be determined by an arbitral tribunal. Alternatively, WorldStar contests the merits of movants' motion. The Neves Estate and Beno Suchodolski challenge the contempt motion on the basis that the court lacks personal jurisdiction over them. The Estate further asserts that in the event that the court exercises jurisdiction over it, the Amended Judgment is not binding on it and the court should deny recognition and enforcement of the anti-suit injunction as to it. Beno Suchodolski also urges the court that the injunction is not binding on him and additionally challenges the motion on its merits. He opposes movants' request to open discovery.
For the reasons that follow, we recommend denial of respondent WorldStar's motion to compel arbitration or stay proceedings and further recommend that movants' motion for contempt and sanctions be granted in part. In particular, we recommend a grant of the motion for contempt against respondent WorldStar, and a denial of the motion with respect to the Neves Estate. We grant movants' request to conduct discovery on the issue of whether Suchodolski has violated the Amended Judgment.
The events giving rise to the contempt motion stem from transactions entered into in New York City in 2001. In that year, four entities -- three of which are parties here formed a company called Brastar Corporation ("Brastar"), which issued 100 shares of stock, distributed in equal amounts to the four entities, so that each was a twenty-five percent shareholder. Those four shareholders were WorldStar1 , Cardell2 , Suchodolski Associates, Inc.("SAI")3 and Metropolis Shipping and Business, Inc. ("Metropolis")4 . (See Kensington July 26, 2011 Decl. ¶ 13). Each of those companies then made loans to Brastar to enable it to purchase Deltec Holdings, Inc. ("Deltec"). (See id. ¶¶ 13-14). Cardell's loan was in the amount of $12.8 million. The other three entities each loaned Brastar $333,333.33 (id. ¶ 14), for an aggregate additional loan of $1 million.
The interest in purchasing Deltec stemmed from that company's real estate assets, in particular, a property known as "Jaragua" -- an undeveloped parcel of land in Brazil. (See id. Ex. H, Opinion ("First Award") at 1). It was apparently through the efforts of Beno Suchodolski that the four entities came together to purchase Deltec. He saw the "potential for riches" available if properauthorization could be obtained to develop Jaragua. (Id. at 1-2)
Brastar purchased all the shares of Deltec, and the surviving corporation assumed the name of Deltec. (See Kensington July 26, 2011 Decl. ¶¶ 21-22; First Award at 2-3; Final Award ¶¶ 19-20). The four shareholders of Brastar thus became shareholders in Deltec, and the rights and obligations of Brastar became the rights and obligations of Deltec. (July 26, 2011 Kensington Decl. ¶ 22). Deltec thus became a Panamanian corporation operating as a holding company for the four shareholders, with assets consisting of real estate properties in Sao Paolo, Brazil, (See Final Award at 1 ; First Award at 1).
As part of the transactions that resulted in the acquisition of Deltec, the parties entered into a number of agreements (the "November 2001 Agreements"). (Final Award ¶ 20). These included -- in addition to the loan agreement between Cardell and Brastar/Deltec for the purchase of Deltec -- a contract pledging stock, a contract of guaranty, and a subordination agreement. (Id. ¶ 21; First Award at 2-3). The agreements -- including the subordination agreement -- contain identical arbitrationprovisions. (See, e.g., Decl. of Helen J. Williamson in Further Supp. of Pet. to Confirm Arbit. Award ( .
The Term Loan Agreement between Cardell, Brastar and Deltec (as successor to Brastar) evidences the $12.8 million loan made by Cardell. Under the agreement, Cardell received security interests in assets belonging to Deltec and Deltec's subsidiaries. (Final Award ¶ 23).
(Id. at 2-3, § 2(a); see also id. at 2-3, §§ 2(b)-(c) (discussing Permitted Payments)).
The subordinated promissory notes are each in the amount of $333,333.33. (See, e.g., Kensington July 26, 2011 Decl. Ex. E (Metropolis subordinated promissory note)). Movants aver that no part of the Senior Debt has yet been paid. (Id. ¶ 20).
The Subordination Agreement also contains an arbitrationprovision, which states, in relevant part:
The parties agree that any dispute arising out of, or in connection with, the execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of these arbitration provisions) shall be settled by arbitration conducted in the English language, in accordance with the commercial arbitration rules of the American Arbitration Association ("AAA") by a panel of three arbitrators. . . . The decision of the AAA shall be final, binding and not subject to further review, and judgment on the award of the AAA may be entered in and enforced by any court having jurisdiction over the parties or their assets. . . .
The parties also entered into a Non-Recourse Stock Pledge Agreement ("SPA"). In that agreement, SAI, WorldStar, and Metropolis are the pledgors and Cardell is the secured party. The three pledgor entities each pledged their twenty-five shares of stock in Brastar/Deltec. (See Kensington July 26, 2011 Decl. ¶ 40).
An additional security agreement, the Guaranty Agreement, provided that Cardell was granted priority on certain mortgages byDeltec's subsidiaries -- Anastacio and Cia City -- as well as on the shares, receivables, and intellectual property assets of those entities. (See Final Award ¶ 32).
The Loan Agreement provided that the final maturity date for all unpaid principal and interest was to be May 30, 2003. (See Kensington July 26, 2011 Decl. ¶ 38). Pursuant to the agreements, upon default by Deltec, Cardell was entitled to foreclose on the Deltec shares held by WorldStar, Metropolis, and SAI. (Final Award ¶ 28). As the date of default approached, Suchodolski undertook to obtain an alternative financing arrangement with a leading Brazilian real estate developer. While it appears that proposals were made, no agreement came to fruition. (See First Award at 3-6; see also ...
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