In re AMC Investors, LLC
| Decision Date | 27 January 2022 |
| Docket Number | Case No. 08-12264 (CSS), Case No. 08-12265 (CSS), Adv. Case No. 11-52317 Related, Adv. Docket Nos.: 281, 283, Adv. Case No. 11-52318Related , Adv. Docket Nos.: 236, 238 |
| Citation | 637 B.R. 43 |
| Parties | IN RE: AMC INVESTORS, LLC, Debtor. In re: AMC Investors II, LLC, Debtor. Eugenia VI Venture Holdings, Ltd., on Behalf of AMC Investors, LLC and AMC Investors II, LLC, Plaintiff, v. MapleWood Holdings LLC, MapleWood Management LP, MapleWood Partners LP, Robert V. Glaser, and Robert J. Reale Defendants. |
| Court | U.S. Bankruptcy Court — District of Delaware |
MORRIS, NICHOLS, ARSHT & TUNNELL LLP, Curtis S. Miller, 1201 North Market Street, Wilmington, Delaware 19899 -and- AKERMAN LLP, Brian P. Miller, Samantha J. Kavanaugh, James A. Bombulie, One Southeast Third Avenue, 25th Floor, Miami, Florida 33131, Counsel for Defendants
RICHARDS, LAYTON & FINGER, P.A., Mark D. Collins, Marcos A. Ramos, Cory D. Kandstein, One Rodney Square, 902 North King Street, P.O. Box 551, Wilmington, Delaware 19899 -and- GIBSON, DUNN, & CRUTCHER LLP, Mitchell A. Karlan, 200 Park Avenue, 50th Floor, New York, New York 10166, Counsel for Plaintiff
Before the Court are Defendants’ Motion for Summary Judgment on Threshold Affirmative Defenses3 and Defendants’ Motion for Summary Judgment on the Merits .4 Defendants argue that summary judgment on their affirmative defenses is appropriate because, not only are Plaintiff's breach of fiduciary duty claims statutorily time-barred, but they are also precluded under the doctrines of res judicata and collateral estoppel.
Independently, Defendants argue that summary judgment should be granted in their favor on the merits of Plaintiffs’ claims.
For the reasons stated herein, the Court finds that Plaintiffs’ breach of fiduciary duty and aiding and abetting breach of fiduciary duty claims are barred by Delaware's statute of limitations, res judicata , and collateral estoppel. Accordingly, Defendants’ Motion for Summary Judgment on Threshold Affirmative Defenses is granted, and the Motion for Summary Judgment on the Merits is moot.
This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. Venue is proper in the Bankruptcy Court for the District of Delaware pursuant to 28 U.S.C. §§ 1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2) and, thus, this Court has the judicial power to enter a final order.5
These related but unconsolidated Adversary Proceedings allege breaches of fiduciary duties and aiding and abetting breaches of fiduciary duties in connection with the Defendants’ alleged mismanagement of AMC Computer Corp. ("AMC Computer").7
Eugenia VI Venture Holdings, Ltd. ("Eugenia") filed suit derivatively on behalf of the Debtors, AMC Investors, LLC ("Investors") and AMC Investors II, LLC ("Investors II") (collectively, the "Debtors" and together with Eugenia, the "Plaintiffs").8 At all pertinent times, the Debtors were shareholders of AMC Computer, and the Defendants were officers, directors, and/or shareholders of AMC Computer and controlled both the Debtors and AMC Computer.9
Investors has five members: Casita, L.P. ("Casita"), General Electric Capital Corp., Emirates Insurance Co., MapleWood Equity Partners LP, and MapleWood Equity Partners Offshore Ltd. ("MapleWood Offshore").10 Investors II has two members: MapleWood Offshore11 and MapleWood Equity Partners LP.12 The Debtors’ sole purpose was to effectuate an investment in the equity of AMC Computer.
The facts here are largely undisputed. On September 4, 2001, Eugenia entered into a revolving line of credit with AMC Computer. Subsequently, in January 2003, Eugenia and AMC Computer entered into a Credit Agreement whereby Eugenia agreed to lend AMC Computer up to $16 million to finance its operations, secured by AMC Computer's working capital (the "Credit Agreement").13 The Debtors executed an unconditional guaranty of AMC Computer's obligations under the Credit Agreement.14
Pursuant to the terms of the Credit Agreement, AMC Computer was permitted to borrow up to 85% of its of its eligible accounts receivable (as defined in the Credit Agreement).15 According to Eugenia, the Defendants misrepresented the size of AMC Computer's collateral by falsifying information in borrowing base certificates, permitting it to borrow more money than the Credit Agreement allowed. It is alleged that, on May 5, 2005, "Eugenia was informed by other members of [AMC Computer's] board of directors that [AMC Computer] had submitted falsified borrowing base certificates in order to fraudulently obtain greater funding from [Eugenia] under the Credit Agreement."16
Specifically, it is undisputed that, on May 5, 2005, Defendant Robert V. Glaser ("Glaser"), who was the managing member of the general partner of the Debtors’ manager,17 informed Mr. Hassels-Weiler, who controlled Eugenia and Casita18 , of potential accounting misstatements at AMC Computer.19 As a result, on May 6, 2005,
Eugenia declared a default under the Credit Agreement, putting AMC Computer out of business. Thereafter, starting in June 2005, Eugenia filed a slew of lawsuits against various individuals and entities involved with AMC Computer, including Debtors, in New York State and federal courts alleging, among other things, fraud, breach of contract, and breach of fiduciary duties.20
Starting around June 2005, Eugenia brought several related suits in the District Court for the Southern District of New York, suing both directly, and derivatively, on behalf of AMC Computer. Eugenia alleged fraud and breaches of fiduciary duty in connection with AMC Computer's default under the Credit Agreement. The defendants in those actions were officers, directors, and/or shareholders of AMC Computer.22
Eventually, the Southern District of New York granted the defendants’ joint motion for summary judgment, finding that Eugenia had suffered no damages in connection with its breach of fiduciary duty claims, and that Eugenia had not proven reasonable reliance in connection with its fraud claims.23 The Second Circuit affirmed.24
Also, in June25 and September 2005, Eugenia filed suit against the Debtors in New York State court to collect on the unconditional guaranty. Although the Debtors did not contest liability, they did contest the amount of damages being sought. Eventually, in July 2007, the New York State court entered a judgment in Eugenia's favor in the amount of roughly $10.7 million (the "Guaranty Judgment"),26 which Eugenia claims as Debtors’ damages against Defendants in these actions.27 The Debtors appealed, but prior to oral argument, on September 30, 2008, Eugenia filed Involuntary Petitions against the Debtors in this Court.
On June 3, 2011, after this Court granted Eugenia standing to sue derivatively on behalf of Debtors,28 Eugenia filed the instant Adversary Proceedings for breach of fiduciary duty and aiding and abetting fiduciary duty. The Defendants answered together and raised the affirmative defenses of statute of limitations, as well as claim and issue preclusion.29 Plaintiffs then filed a motion for partial summary judgment as to these defenses.30 On January 23, 2015, this Court issued an Opinion with respect to Plaintiffs’ motion for partial summary judgment.31
In denying Plaintiffs’ motion for partial summary judgment in its entirety, with respect to res judicata , this Court found that:
• The parties agree that the Second Circuit's grant of summary judgment in the AMC Computer litigation constitutes a final judgment on the merits.
• The prior and present actions are the same claim because both arise out of the same transaction, the alleged mismanagement of AMC Computer during the life of the Credit Agreement.
• Whether the parties are in privity is a genuine question of fact and more information would be necessary to determine the extent to which either the Debtors or Eugenia controlled the earlier litigation.33
Next, in denying Plaintiffs’ motion with respect to collateral estoppel, this Court found that:
• The Second Circuit's finding that AMC Computer was already insolvent when it entered into the Credit Agreement was both actually determined and necessary to the dismissal of Eugenia's claims for breach of fiduciary duty.
• The timing of AMC's insolvency is decisive because, "[i]f the company was already insolvent, then it is immaterial whether it was this set of defendants or the previous that was responsible for mismanaging AMC during the life of the Agreement."34
• Gibson, Dunn & Crutcher represented Debtors previously and represent Debtors now, which indicates that the Debtors do not question adequacy of legal representation.
• There is a genuine dispute as to whether Debtors have had a full and fair opportunity to represent their interests in the previous litigation.
• The same privity issue that the Court discussed with respect to res judicata is present with respect to collateral estoppel.
Lastly, in denying Plaintiffs’ motion with respect to statute of limitations, this Court found that:
• Delaware's three-year statute of limitations is applicable to the breach of fiduciary duty claims.
• The limitations period runs from the date of the alleged harm, which is January 2003-May 2005 under the circumstances presented.
• Plaintiffs brought this action in June 2011, so, without a basis for tolling the statute of limitations, its claims are barred as untimely.
• Delaware does not recognize adverse domination or lack of standing as reasons to toll the statute of limitations.
• The record did not justify tolling the statute of limitations because it was clear that Eugenia knew about Defendants’ conduct by June 2005, when it commenced litigation in the Southern District of New York.
Based on this Court's ruling with respect to the statute of limitations, the parties stipulated that Defendants were entitled to summary judgment...
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