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

Decision Date29 January 2015
Docket NumberAdv. Proc. No. 14–01848 MG,Case No. 12–10631 MG
Citation524 B.R. 488
PartiesIn 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.
CourtU.S. Bankruptcy Court — Southern District of New York

Chadbourne & Parke LLP, Attorneys for Plaintiffs as against all Defendants except 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 Deutsche Bank AG, 270 Madison Avenue, New York, New York 10016 By: Alexander H. Schmidt, Esq., 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 the Apax Defendants, 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.

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), Thomas Rickeman, Esq. (pro hac vice)



Pending before the Court are four motions to dismiss (the Motions to Dismiss) the adversary proceeding complaint (the “Complaint,” ECF Doc. # 1)1 filed by Andrew Lawrence Hosking and Bruce Mackay2 (the Plaintiffs), in their capacity as Joint Compulsory Liquidators of Hellas Telecommunications (Luxembourg) II SCA (“Hellas II” or the “Debtor”).

The Plaintiffs seek to avoid and recover initial transfers of approximately € 1.57 billion made by Hellas II from bank accounts outside the United States (the “U.S.”) to parent entities, and to avoid and recover subsequent transfers of approximately €973.7 million made to the defendants in this case. The defendants allegedly played various roles in an orchestrated restructuring, whereby Hellas II and its related entities issued over €1 billion in debt securities to fund the redemption of convertible equity securities issued by Hellas II's parent and held by special purpose vehicles controlled by many of the defendants. The Plaintiffs also seek to recover certain amounts paid by Hellas II as consulting fees to two groups of defendants based on an unjust enrichment claim.

The foreign main proceeding underlying the Debtor's chapter 15 case, in which Hosking and Mackay were appointed as liquidators, is pending in the United Kingdom (the “U.K.”); however, Hellas II and several of its related companies were previously based in Luxembourg, and Hellas II's underlying business was a Greek telecommunications company. Some, but not all, of the money transferred from accounts outside the U.S. found its way to transferees in the U.S.; some, but not all, of that money found its way to transferees in New York.

The 27 named defendants in this case include 16 entities and individuals that are organized and have their principal places of business or residences in the U.S., but not in New York.3 One Defendant—who allegedly marketed the Hellas II debt issued to fund the challenged transfers—is a bank organized and headquartered in Germany, but with a large office and numerous employees in New York. Nine Defendants are organized and have their principal places of business outside the U.S., with no offices in New York or the U.S., although some of their affiliates are organized and have their principal places of business in the U.S. All but one Defendant—the only one organized and with its principal place of business in New York—move to dismiss the complaint for lack of personal jurisdiction. A separate Motion to Dismiss the Complaint on other grounds was also filed by the Defendants.4

The Plaintiffs allege actual and constructive fraudulent transfer claims against all of the named Defendants and an unnamed class of transferees (the “Transferee Class”) based only on the application of the New York Debtor and Creditor Law (“NYDCL”).5 The avoidance claims asserted under the NYDCL, where all of the initial transfers were made from outside the U.S., raise a host of issues: whether the Plaintiffs can obtain personal jurisdiction over each Defendant and hale domestic or foreign-based Defendants, that are not organized under New York law and are not “at home” in New York, into the bankruptcy court in New York; whether under applicable choice of law principles, New York law or foreign law should apply to the transfers if the NYDCL could be given extraterritorial effect; whether the avoidance claims can be brought in an adversary proceeding related to a chapter 15 case in light of section 1521(a)(7) of the Bankruptcy Code ; whether the Plaintiffs, as Joint Compulsory Liquidators of the Debtor, have standing to bring the avoidance claims (which are “creditor” claims); and whether the NYDCL has extraterritorial effect to reach the transfers. With respect to the unjust enrichment claim, the Defendants assert that the Plaintiffs do not have standing to bring this claim because the so-called Wagoner rule and in pari delicto doctrine deny standing to a trustee to assert claims against third-parties on behalf of a debtor if the debtor was complicit in the alleged wrongdoing. Several other issues are presented as well.

Resolution of these issues requires considerable analysis and results in this lengthy opinion. As explained below, not all of the issues need to be resolved to dispose of the pending Motions to Dismiss. The Court concludes that the Plaintiffs have established a sufficient basis to assert personal jurisdiction against some, but not all, of the Defendants; choice of law principles require dismissal of the NYDCL constructive fraudulent conveyance claim, because an actual conflict exists between the laws of New York, on the one hand, and of U.K. and Luxembourg (which do not recognize a constructive fraudulent conveyance cause of action), on the other hand, and those two foreign jurisdictions have a more significant interest in applying their laws in this case; the Plaintiffs lack standing under New York law and U.K. law to bring the NYDCL actual fraudulent conveyance claim; and it is unnecessary to decide whether the NYDCL may be given extraterritorial effect to the transfers, or whether the Plaintiffs may bring the avoidance claims in light of Bankruptcy Code section 1521(a)(7), because the NYDCL avoidance claims must be dismissed on other grounds. The Court also concludes that the Complaint sufficiently alleges that the Defendants named in the unjust enrichment claim should be treated as “insiders” that controlled Hellas II and directed or authorized the transfers, such that at this stage the Complaint overcomes the asserted prudential standing challenges.

For the reasons detailed below, the Motions to Dismiss for lack of personal jurisdiction are granted in part and denied in part. The Motions to Dismiss on all other grounds are granted in part and denied in part.

A. Factual Background

In June 2005, eight investment funds (the “Sponsors”), allegedly created by TPG Capital and Apax Partners, acquired approximately 80% of the equity in TIM Hellas Communications S.A. (“TIM Hellas”), a Greek telecommunications services provider, through a special purpose vehicle (Troy GAC) in a leveraged transaction. (See Compl. ¶¶ 84–89.) In preparation for the acquisition of TIM Hellas, in March 2005 TPG and Apax allegedly organized a group of entities under Luxembourg law, including Hellas Telecommunications, S.àr.l. (“Hellas”), Hellas Telecommunications I, S.à.r.l. (“Hellas I”), Hellas II, Hellas Telecommunications Finance SCA (“Hellas Finance”), and other related entities. (See Compl. ¶ 86.) Hellas II and Hellas Finance were wholly owned by Hellas I, which in turn was wholly owned by Hellas. (Id. ¶ 87.) 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. ¶ 91.) 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. ¶ 92.)

Also in mid-June 2005, Hellas issued 490,000 convertible preferred equity certificates (“CPECs”) to the Sponsors with a par value of €49 million. (Id. ¶ 97.) At the same time, Hellas I—the direct subsidiary of Hellas and direct parent of Hellas II—issued 490,000 CPECs to Hellas, and Hellas II issued an equivalent number of CPECs to Hellas I. (Id. )

TPG and Apax allegedly used Hellas and its related entities to acquire Q–Telecom, a business unit of a large mobile network operator in Greece, in a stock purchase deal that closed on January 31, 2006. (See id. ¶ 104.) The acquisition was principally financed with debt issued by a subsidiary of Hellas II and cash contributed by certain other Hellas II subsidiaries. (See id. ¶ 105.) In exchange for the transfer of €28.3 million from the Sponsors to Hellas, Hellas issued an additional 282,681 CPECs to the Sponsors.6 (Id. ¶ 106.)

The Plaintiffs allege that TPG and Apax “put in motion plans to dispose of [Hellas II]'s subsidiaries in a sale to a third party in June 2006. (Id. ¶ 112.) However, the sale process purportedly did not...

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