Cortlandt St. Recovery Corp. v. Hellas Telecomms.

• Decision Date: 15 September 2016
• Parties: CORTLANDT STREET RECOVERY CORP., et al., Plaintiffs–Appellants, v. HELLAS TELECOMMUNICATIONS, S.À.R.L., et al., Defendants–Respondents, Hellas Telecommunications Finances, etc., et al., Defendants. Cortlandt Street Recovery Corp., et al., Plaintiffs–Appellants, v. David Bonderman, et al., Defendants–Respondents, Hellas Telecommunications, II etc., et al., Defendants. [And Another Action]. Cortlandt Street Recovery Corp., Plaintiff–Appellant, v. Hellas Telecommunications, II etc., et al., Defendants, Hellas Telecommunications, S.à.r.l., et al., Defendants–Respondents.
• Court: New York Supreme Court — Appellate Division

142 A.D.3d 833

37 N.Y.S.3d 505

2016 N.Y. Slip Op. 06051

CORTLANDT STREET RECOVERY CORP., et al., Plaintiffs–Appellants,

v.HELLAS TELECOMMUNICATIONS, S.À.R.L., et al., Defendants–Respondents,Hellas Telecommunications Finances, etc., et al., Defendants.

Cortlandt Street Recovery Corp., et al., Plaintiffs–Appellants,

v.David Bonderman, et al., Defendants–Respondents,Hellas Telecommunications, II etc., et al., Defendants.

[And Another Action].

Cortlandt Street Recovery Corp., Plaintiff–Appellant,

v.Hellas Telecommunications, II etc., et al., Defendants,Hellas Telecommunications, S.à.r.l., et al., Defendants–Respondents.

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

Sept. 15, 2016.

Flemming Zulack Williamson Zauderer LLP, New York (Mark C. Zauderer of counsel), for appellants.

Jared B. Stamell, Andrew R. Goldenberg, Stamell & Schager, LLP, New York, for appellants.

White & Case LLP, New York (Paul B. Carberry of counsel), for Hellas Telecommunications, S.à.r.l., respondent.

Ropes & Gray LLP, New York (Robert S. Fischler of counsel), for Apax respondents.

Kasowitz, Benson, Torres & Friedman LLP, New York (Paul M. O'Connor III of counsel), for TPG respondents.

TOM, J.P., MAZZARELLI, FRIEDMAN, RICHTER, KAHN, JJ.

Orders, Supreme Court, New York County (Marcy S. Friedman, J.), entered on or about September 22, 2014, which, insofar as appealed from as limited by the briefs, granted defendants' motions to dismiss the complaint in each of three separate actions, unanimously modified, on the law, to deny the motion to dismiss the complaint in the action bearing Index No. 653357/11 insofar as asserted by plaintiff Wilmington Trust Company, as indenture trustee, and otherwise affirmed, without costs. Appeal from order, same court and Justice, entered on or about February 6, 2015, which, upon renewal, adhered to the prior determination granting defendants' motions to dismiss the complaint in Index No. 653357/11, unanimously dismissed, without costs, as academic.

Supreme Court erred in dismissing the complaint in the action bearing Index No. 653357/11 to the extent that the complaint in that action has been filed by plaintiff Wilmington Trust Company, as indenture trustee (the Trustee). In its complaint, the Trustee asserts, in addition to breach of contract claims, causes of action for fraudulent conveyance, for unlawful corporate distribution, for unjust enrichment, and based on an alter ego theory. Section 6.03 of the indenture governing the notes provides, in pertinent part: “If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes.” This provision confers standing on the Trustee to pursue, not only the breach of contract claims, but also the fraudulent conveyance and other aforementioned claims, which seek recovery solely of the amounts due under the notes, for the benefit of all noteholders on a pro rata basis, as a remedy for an alleged injury suffered ratably by all noteholders by reason of their status as noteholders (see Feldbaum v. McCrory Corp., 1992 WL 119095, *8, 1992 Del.Ch. LEXIS 113, *27–28 [Del.Ch. June 1, 1992] [“Given the derivative character of these (fraudulent conveyance) claims, it is clear that they can be prosecuted by the trustees representing the bondholders as a group”]; see also Lange v. Citibank, N.A., 2002 WL 2005728, *7, 2002 Del.Ch. LEXIS 101, *20 [Del.Ch. Aug 13, 2002] [same] ). Significantly, the Trustee does not assert causes of action for fraudulent misrepresentation or other claims seeking recovery for particular injuries unique to individual noteholders, nor does the Trustee seek a measure of damages other than the amounts due under the notes (cf. Regions Bank v. Blount Parrish & Co., 2001 WL 726989, *1, 2001 U.S. Dist. LEXIS 8814, *1 [ND.Ill. June 27, 2001] [holding that an indenture trustee did not have standing to sue the underwriter upon the bondholders' individual claims for fraud, under the common law and the federal securities laws, based on the underwriter's alleged making of ...