Hosking v. TPG Capital Mgmt., L.P. (In re Hellas Telecomms. (Luxembourg) II SCA)

• Decision Date: 19 August 2015
• Docket Number: Case No. 12–10631 MG,Adv. Proc. No. 14–01848 MG
• Citation: 535 B.R. 543
• Parties: In re: Hellas Telecommunications (Luxembourg) II SCA, Debtor in a Foreign Proceeding. Andrew Lawrence Hosking and Simon James Bonney, in their capacity as joint compulsory liquidators and duly authorized foreign representative s of Hellas Telecommunications (Luxembourg) II SCA, Plaintiffs, v. TPG Capital Management, L.P., et al., Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

535 B.R. 543

In re: Hellas Telecommunications (Luxembourg) II SCA, Debtor in a Foreign Proceeding.Andrew Lawrence Hosking and Simon James Bonney, in their capacity as joint compulsory liquidators and duly authorized foreign representative s of Hellas Telecommunications (Luxembourg) II SCA, Plaintiffs

v.TPG Capital Management, L.P., et al., Defendants.

Case No. 12–10631 MG

Adv. Proc. No. 14–01848 MG

United States Bankruptcy Court, S.D. New York.

Signed August 19, 2015

Chadbourne & Parke LLP, Attorneys for Plaintiffs as against All Defendants except Defendant Deutsche Bank AG, 1301 Avenue of the Americas, New York, New York 10019, By: Howard Seife, Esq., Andrew Rosenblatt, Esq., Marc D. Ashley, Esq.

Wolf Haldenstein Adler Freeman & Herz LLP, Attorneys for Plaintiffs as against Defendant Deutsche Bank AG, 270 Madison Avenue, New York, New York 10016, By: Alan McDowell, Esq., Jeremy Cohen, Esq.

Kasowitz, Benson, Torres & Friedman LLP, Attorneys for the TPG Defendants, 1633 Broadway, New York, New York 10019, By: Paul M. O'Connor III, Esq., Andrew K. Glenn, Esq.

Ropes & Gray LLP, Attorneys for Defendant Apax Partners, L.P., 1211 Avenue of the Americas, New York, New York 10036, By: Robert S. Fischler, Esq., Stephen C. Moeller–Sally, Esq.

Cahill Gordon & Reindel LLP, Attorneys for Defendant Deutsche Bank AG, 80 Pine Street, New York, New York 10005, By: Charles A. Gilman, Esq., Kevin J. Burke, Esq., Philip V. Tisne, Esq., Frederick W. Vaughan, Esq.

Latham & Watkins LLP, Attorneys for the TCW Defendants, 355 South Grand Avenue, Los Angeles, California 90071, By: Wayne S. Flick, Esq. (pro hac vice ), Amy C. Quartarolo, Esq. (pro hac vice )

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR LEAVE TO AMEND COMPLAINT

MARTIN GLENN, UNITED STATES BANKRUPTCY JUDGE

Andrew Lawrence Hosking and Bruce Mackay (together, the “Plaintiffs”), in their capacity as Joint Compulsory Liquidators of Hellas Telecommunications (Luxembourg) II SCA (“Hellas II”), filed a complaint (the “Complaint,” ECF Doc. # 1), seeking to avoid and recover an initial transfer made by Hellas II to its parent entity in the amount of approximately €1.57 billion and to avoid and recover approximately €973.7 million of subsequent transfers allegedly made to several named defendants and an unnamed class of transferees (together, the “Original Defendants”). The Complaint asserted actual and constructive fraudulent transfer causes of action under the New York Debtor and Creditor Law (“NYDCL”) against each of the Original Defendants, and an unjust enrichment claim under unspecified law against the Original Defendants affiliated with the private equity firms Apax Partners LLP (“Apax Partners”) and TPG Capital Management, L.P. (“TPG Capital”).

The Original Defendants moved to dismiss the Complaint on various grounds, including lack of standing, lack of subject matter jurisdiction, lack of personal jurisdiction, and failure to state a claim. The Court granted in part and denied in part the motions to dismiss. See Hosking v. TPG Capital Mgmt., L.P. (In re Hellas Telecomms. (Lux.) II SCA), 524 B.R. 488 (Bankr.S.D.N.Y.2015) (“Hosking I ”). The Complaint was dismissed for lack of personal jurisdiction as to Apax Partners and the foreign-based Original Defendants affiliated with Apax Partners and TPG Capital, see id. at 512 ; however, the Court concluded that personal jurisdiction could be exercised over each of the other Original Defendants, see id. at 513.¹ The Plaintiffs' NYDCL fraudulent transfer claims were dismissed for lack of standing.² See id. at 529 & n. 41. Only the unjust enrichment claim survived against the United States (“U.S.”)-based Original Defendants affiliated with Apax Partners and TPG Capital. See id. at 529, 539.

The Plaintiffs now seek leave to file a first amended complaint (the “First Amended Complaint” or “FAC,” Ashley Decl. Ex. A) that: (1) joins additional proposed defendants (the “Proposed Defendants”);³ (2) withdraws the unjust enrichment claim against Apax NY; (3) removes TCW Asset Management Company (“TCW Asset”) and TCW Group Inc. (“TCW Group”) as Defendants; and (4) pleads new causes of action sounding in fraudulent transfer under UK and Luxembourg law (the “Additional Claims”) against several of the Original Defendants and the Proposed Defendants (together, the “Defendants”). ⁴

(See the “Motion,” ECF Doc. # 153 at 1–3.)

The Additional Claims include: (1) an actual fraudulent transfer claim under section 423 of the UK's Insolvency Act 1986 (the “Insolvency Act”) against all Defendants except Apax NY (the “Section 423 Claim”);⁵ (2) a fraudulent trading claim under section 213 of the Insolvency Act against all Defendants except for the TPG Affiliate Defendants and the Transferee Class (the “Section 213 Claim”); and, (3) in the alternative to the Section 423 Claim and the Section 213 Claim, an actual fraudulent transfer claim under Article 1167 of the Luxembourg Civil Code and Article 448 of the Luxembourg Commercial Code against all Defendants except Apax NY (the “Article 1167 Claim”). (Id. at 2.) The First Amended Complaint also asserts an unjust enrichment claim against the TPG Capital Defendants, the TPG Advisors IV Defendants, and the T3 Advisors II Defendants under New York or, in the alternative, UK or Luxembourg law. (FAC ¶¶ 227–231.)

Oppositions to the Motion (collectively, the “Oppositions”) were filed by: (i) Apax NY (the “Apax Opposition,” ECF Doc. # 164);⁶ (ii) the TPG Defendants (the “TPG Opposition,” ECF Doc. # 161);⁷ (iii) TCW (the “TCW Opposition,” ECF Doc. # 158); and (iv) DB (the “DB Opposition,” ECF Doc. # 162).⁸ The Plaintiffs filed a reply (the “Reply,” ECF Doc. # 174).⁹ On July 22, 2013, the Court heard argument and took the Motion under submission.

The Defendants argue that the Motion should be denied because it was filed in bad faith, was unduly delayed, and is unduly prejudicial to the Defendants. According to the Defendants, the Plaintiffs made a poor decision to plead their original claims solely under New York law and now improperly seek a do-over after the parties spent months and millions of dollars litigating. The Defendants also argue that amending the Complaint is futile because each of the claims in the First Amended Complaint fails to state a plausible claim for relief: (1) a claim under section 423 of the Insolvency Act cannot be adjudicated by a court outside the UK; (2) the Section 213 Claim fails to adequately plead scienter; (3) the Plaintiffs lack standing to bring the Article 1167 Claim (a “creditor” claim); (4) the unjust enrichment claim is barred because (i) contracts governed the challenged transfers, (ii) the claim is duplicative of fraudulent transfer claims, (iii) section 546(e) of the Bankruptcy Code preempts the claim, and (iv) the claim is barred in a chapter 15 case by section 1521(a)(7) of the Bankruptcy Code because it seeks identical relief to a claim under section 548 (which cannot be brought in a chapter 15 case); (5) the claims should be dismissed on international comity grounds; and, finally, (6) the claims should be dismissed based on forum non conveniens. The Court must also address choice of law principles in deciding whether UK or Luxembourg law applies.

As explained below, the Court concludes that the First Amended Complaint was not filed in bad faith, was not unduly delayed, and is not unduly prejudicial to the Defendants; the Section 423 Claim can be adjudicated by this Court; UK law governs the Plaintiffs' claims because it has a palpably greater interest in the subject of the claims; the First Amended Complaint adequately pleads the Section 213 Claim against each applicable Defendant; the Article 1167 Claim is futile—the Plaintiffs lack standing to bring the claim because it belongs to creditors; the unjust enrichment claim is not futile for any of the reasons argued; the claims should not be dismissed on international comity grounds because permissive abstention is not available under the circumstances; and the claims should not be dismissed under the forum non conveniens doctrine because the Defendants have failed to establish that an adequate alternative forum exists to adjudicate the claims. Accordingly, the Motion for leave to file the First Amended Complaint is GRANTED in part and DENIED in part.

I. BACKGROUND

A. Facts Alleged in the First Amended Complaint¹⁰

In June 2005, eight investment funds (the “Sponsors”) allegedly formed by TPG Capital and Apax Partners used a special purpose vehicle (“Troy GAC”) to acquire approximately 80% of the equity in TIM Hellas Communications S.A. (“TIM Hellas”)—a Greek telecommunications services provider—in a leveraged transaction. (See FAC ¶¶ 111–116.) In March 2005, TPG¹¹ and Apax¹² allegedly organized a group of entities under Luxembourg law in preparation for the acquisition of TIM Hellas, including Hellas II, Hellas Telecommunications, S.à r.l. (“Hellas”), Hellas Telecommunications I, S.à r.l. (“Hellas I”), Hellas Telecommunications Finance SCA (“Hellas Finance”), and other related entities. (See id. ¶ 113.) Hellas II and Hellas Finance were wholly owned by Hellas I, which in turn was wholly owned by Hellas. (Id. ¶ 114.) Hellas, the ultimate parent of the Hellas entities, was wholly owned by the Sponsors. (Id. ) The Sponsors acquired the remaining shares of TIM Hellas in November 2005 through Troy GAC, and the acquisition was principally funded by debt issued by the Hellas entities. (See id. ¶ 118.) Subsequently, the Sponsors' equity interests in TIM Hellas were cancelled, and TIM Hellas merged into Troy GAC; the surviving entity became a wholly owned subsidiary of Hellas II. (See id. ¶ 119.)

On June 15, 2005, Hellas issued 490,000 convertible preferred equity certificates (“CPECs”) to the Sponsors with a par value of €49 million. (Id. ¶ 124.) The Sponsors transferred €49 million to Hellas in exchange for the CPECs. (Id. ) At the same time, Hellas I—the direct subsidiary of Hellas and direct parent of...