Genger v. Genger (In re Orly Genger)

Decision Date12 August 2021
Docket NumberAd. 20-01010-jlg,19-13895-JLG
CourtU.S. Bankruptcy Court — Southern District of New York


FOLEY & LARDNER LLP Attorney for Dalia Genger By: Paul J Labov, Esq.

LAW OFFICE OF IRA DANIEL TOKAYER Attorney for Dalia Genger By Ira Daniel Tokayer, Esq.

TARTER KRINSKY & DROGIN LLP Attorneys for Deborah J. Piazza, By Rocco A. Cavaliere, Esq.

TOGUT SEGAL & SEGAL LLP Counsel for Arie Genger One Penn Plaza, Frank A. Oswald, Esq. Jared C. Borriello, Esq.

KASOWITZ BENSON TORRES LLP Attorneys for Michael Bowen and Eric Herschmann 1633 Broadway New York, New York 10019 By: Eric D. Herschmann, Esq. Michael Paul Bowen, Esq.

HUGHES HUBBARD & REED LLP Attorneys for ADBG, LLC, Arnold Broser, David Broser and Tedco, Inc. By: Christopher Gartman, Esq.

REITLER KAILAS & ROSENBLATT LLC Attorneys for Debtor Orly Genger Yann Geron, Esq. Lance Harris, Esq. Trustee of The Genger Litigation Trust Lance Harris, Esq.



Orly Genger ("Orly")[2] is a chapter 7 debtor herein.[3] In 2004, her parents, Dalia and Arie, divorced. Under their 2004 Divorce Agreement, Dalia relinquished her marital claim to the economic benefit (the "Rights") of 794.40 shares of TRI stock (the "Distributed TRI Shares") and those shares were distributed equally between trusts settled for the benefit of Orly and her brother, Sagi (defined below as the "Orly Trust" and "Sagi Trust," respectively). In connection with the transfer of the Distributed TRI Shares to the trusts, Sagi promised Dalia that upon her requests, he would pay her, in the aggregate, an amount equal to the value of the Distributed TRI Shares, and Orly agreed to indemnify Sagi in an amount equal to one-half of his payment obligations to Dalia on account of the promise. Those commitments are memorialized in, respectively, the 2004 Promise and 2004 Indemnity. Dalia maintains that pursuant to those agreements, Orly promised to set aside and pay funds to her that Orly realizes from her beneficial ownership of the Distributed TRI Shares deposited in the Orly Trust. Dalia contends that in 2013, Orly monetized the TRI shares in the Orly Trust (including the Distributed TRI Shares therein) for substantial consideration, including two unmatured promissory notes for $7.5 million (the "Trump Notes"), and a $17.3 million cash payment (with the Trump Notes, collectively, the "Proceeds"). She maintains that $12.25 million of the Proceeds represents Orly's monetization of Dalia's Rights in the Distributed TRI Shares.

Deborah Piazza, Esq. is the chapter 7 trustee of Orly's estate (the "Trustee"). In this adversary proceeding, in addition to Orly and Ms. Piazza, Dalia has named the following individuals and entities as defendants in her Amended Complaint:[4] Arie, the Genger Litigation Trust, Arnold Broser, David Broser, ADBG LLC, TEDCO, Inc., Michael Bowen and Eric Herschmann (with Orly, collectively, the "Transferees," and together with the Trustee, the "Defendants"). The Amended Complaint contains four claims for relief: (i) a request for the entry of a declaratory judgment that the Proceeds, including the Trump Notes, up to $12.25 million plus interest, are held by Orly and the Transferees in constructive trust and/or subject to an equitable lien for Dalia's benefit whose interest at all relevant times is and was superior to the interests of Orly, the Transferees and Debtors' other creditors (Count One); (ii) the specific enforcement of the remedy of a constructive trust in Dalia's favor and for her benefit upon the Proceeds, including the Trump Notes, up to $12.25 million plus interest, and a demand that Bowen deliver the Trump Notes, in whole or in part, to Dalia (Count Two); (iii) the specific enforcement of an equitable lien in Dalia's favor and for her benefit upon the Proceeds, including the Trump Notes, up to $12.25 million plus interest, and a demand that Bowen deliver the Trump Notes, in whole or in part, to Dalia (Count Three); and (iv) a temporary, preliminary and/or permanent injunction enjoining and restraining Defendants from selling, transferring, assigning, encumbering, hypothecating, or otherwise alienating the Trump Notes and mandating that Defendants take all actions necessary for Dalia to receive the Proceeds, including the Trump Notes (Count Four).

There are two motions to dismiss the Amended Complaint before the Court (collectively, the "Motions"). One is filed by the Trustee (the "Trustee Motion")[5] and the other (the "Transferee Motion") [6] is filed on behalf of Orly, Arie, the Genger Litigation Trust, Arnold Broser, David Broser, ADBG LLC, and TEDCO, Inc. (the "Transferee Defendants"). Messrs. Bowen and Herschmann (collectively with the Transferee Defendants and the Trustee, the "Movants") filed a joinder to the Transferee Motion.[7] The Trustee and Transferee Defendants seek to dismiss the Amended Complaint with prejudice, and make substantially the same arguments in support of their respective motions. For that reason, the Court considers the Motions together. Moreover, because the Transferee Defendants have borne the "laboring oar" in connection with the prosecution of the Motions, in assessing the merits of the Motions, the Court will focus its discussion on the Transferee Motion (and cite to the Trustee Motion, as appropriate). In short, the Movants contend that the Court must dismiss the Amended Complaint because Dalia lacks standing to obtain the relief she seeks therein. Alternatively, they contend that the Court must dismiss the Amended Complaint because it is time-barred and because, in any event, it fails to state claims for relief against them, and must be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6).[8] Dalia filed a single objection to the Motions (the "Opposition"), [9] which includes a Cross-Motion for Summary Judgment. The Trustee and Transferee Defendants filed replies to the Opposition, including objections to the Cross Motion for Summary Judgment.[10] Messrs. Bowen and Herschmann filed a Reply Brief in further support of the Motions.[11]

The Court heard argument on the Motions. At that time, Dalia agreed to dismiss Mr. Bowen as a defendant in the Amended Complaint, subject to his commitment, as escrow agent of the Trump Notes, not to further alienate the Trump Notes and to adhere to a final judgment on the Motions. Dalia also agreed to dismiss Count One as subsumed in Counts Two and Three. At the hearing, the Court denied the Cross-Motion for Summary Judgment on procedural grounds, without prejudice. Accordingly, in this Memorandum Decision and Order, the Court considers whether to dismiss Counts Two, Three and/or Four of the Amended Complaint.

As explained below, the Court grants the Motions, without leave to replead.


The Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Amended Standing Order of Reference of Cases to Bankruptcy Judges of the United States District Court for the Southern District of New York, dated January 31, 2012 (Preska, C.J.). This is a core proceeding pursuant to 28 U.S.C. § 157(b).


In 1985, the Genger family owned a holding company known as TPR Investment Associates, Inc. ("TPR"). Arie was TPR's majority shareholder (51%) and Dalia, the Sagi Genger 1993 Trust (the "Sagi Trust") and the Orly Genger 1993 Trust (the "Orly Trust"), respectively, collectively held the 49% minority shareholder interests in TPR.[13] In 1985, Arie formed Trans-Resources Inc. ("TRI"), a Delaware corporation that specializes in manufacturing fertilizer and producing chemicals for agricultural use, as TPR's wholly owned subsidiary.[14]

Stockholders Agreement

By 2001, TRI had run into financial difficulty and its $230 million in bonds were trading at a fraction of their face value. Jules Trump and his brother, Eddie Trump, organized a group of investors (the "Trump Group") which purchased $220 million (face value) of TRI's bonds for $25 million.[15] Thereafter, the Trump Group entered into an agreement with TPR and TRI, pursuant to which it converted its bond holdings into a 47.15% equity stake in TRI, with TPR retaining 52.85% of the shares (the "Stockholders Agreement").[16] Among other things, the agreement identified a limited universe of permitted transferees of the TRI shares, and called for a transferring shareholder to give prior written notice to all shareholders of a proposed transfer. Under the agreement, a share transfer in violation of the restrictions under the Stockholders Agreement was void and non-transferring shareholders had the right to purchase any invalidly transferred shares (the "Purchase Rights").[17]

The 2004 Stock Transfers

On October 26, 2004, Arie and Dalia Genger divorced.[18] At that time, Arie held 250 shares of TPR, and TPR owned 3, 000 shares of common stock in TRI. On October 26, 2004, pursuant to the Stipulation of Settlement entered in the divorce action (the "2004 Divorce Agreement"), [19] Arie transferred his interests in TPR to Dalia, [20] and caused TPR to transfer 100% of its holdings in TRI, as follows: 794.40 shares of TRI representing 13.99% of TRI's common stock to Arie himself (the "Arie Shares"); 1, 102.80 shares of TRI representing approximately 19.43% of TRI's common stock to each of the Sagi Trust (the "Sagi Trust Shares") and the Orly...

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