Kravitz v. Binda
| Decision Date | 31 March 2022 |
| Docket Number | 1:17-CV-7461-ALC-SN |
| Parties | Peter Kravitz, in his capacity as the Creditor Trustee of the Creditor Trust of Advance Watch Company, Ltd. Plaintiff, v. Marcello Binda & Simone Binda, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Plaintiff Peter Kravitz, acting in his capacity as the Creditor Trustee (“Plaintiff” or “Kravitz”) of the Creditor Trust of Advance Watch Company Ltd. (“Advance Watch” or “Company”) brings this action against Defendants Marcello Binda and Simone Binda (collectively, “the Bindas” or “Defendants”) for breach of fiduciary duties and common law commercial waste. Before the Court is Defendants' motion for summary judgment on the sole remaining claim of breach of fiduciary duties. For the reasons stated herein, the motion for summary judgment is hereby GRANTED IN PART and DENIED IN PART.
Unless stated otherwise, the facts are derived from the Parties' Local Civil Rule 56.1 Statements, declarations, and exhibits. Where the facts are subject to legitimate dispute, they are construed in favor of the non-moving party. See Tindall v. Poultney High Sch. Dist., 414 F.3d 281, 284 (2d Cir. 2005).
Advance Watch Company, Ltd. (“Advance Watch” or “Company”) is a privately held Michigan corporation headquartered in New York. Defendants' Rule 56.1 Statement ¶ 1; Pl.'s Response to Defendants' Rule 56.1 Statement ¶ 1. GWG International, Ltd. (“GWGI”) is a Delaware corporation that was wholly owned by Advance Watch. Defs.' Stmt. ¶ 3; Pl.'s Resp. to Defs.' Stmt. ¶ 3. Advance Watch, GWGI, and their affiliates operated under the name Geneva Watch Group (“GWG”), which “designed, assembled marketed, and distributed” watches in the United States under exclusive licenses for different brands, including its own company brands. Defs.' Stmt. ¶ 2; Pl.'s Resp. to Defs.' Stmt. ¶ 2. For Advance Watch, Dolce & Gabbana, Betsey Johnson, Kenneth Cole and Tommy Bahama were among the main licensed brands. Simone Binda Declaration ¶ 11; Marcello Binda Declaration ¶ 5.
Defendants Marcello and Simone Binda were the owners and co-CEOs of Binda Italia Srl f/k/a Binda SpA S.R.L. (“Binda Italy”), an Italian company headquartered in Milan that manufactures and sells watches and accessories worldwide. Defs.' Stmt. ¶ 4; Pl.'s Resp. to Defs.' Stmt. ¶ 4. In 2008, to enter the U.S. market, Binda Italy formed Binda USA Holdings, Inc. (“Binda USA”), a Delaware corporation, which acquired Advance Watch from hedge fund D.E. Shaw Laminar Portfolios LLC. Defs.' Stmt. ¶ 5; Pl.'s Resp. to Defs.' Stmt. ¶ 5; S. Binda Decl. ¶ 8, 9. Upon the acquisition, Binda Italy became parent to Binda USA, which wholly owned Advance Watch. Defs.' Stmt. ¶ 6; Pl.'s Resp. to Defs.' Stmt. ¶ 6.
Advance Watch functioned as the operating company for GWG and shared the same directors and officers with Binda USA and GWGI. Defs.' Stmt. ¶ 7, 9; Pl.'s Resp. to Defs.' Stmt. ¶ 7, 9. As of July 31, 2012, the officers for Advance Watch, Binda USA, and GWGI (collectively, “Advance Watch and its affiliates”) were Jeffrey L. Gregg as President, CEO, and Secretary, John Cuccurullo as CFO and Treasurer, and Nick Lancellotti as Vice President. Defs.'
Stmt. ¶ 9, 10; Pl.'s Resp. to Defs.' Stmt. ¶ 9, 10. Its directors were Simone Binda (as Board Chairman), Marcello Binda, and Gregg. Id. Simone Binda sat on the Board of Advance Watch from at least 2010 through 2015, and Marcello was a director from at least 2008 through 2015. Plaintiff's Rule 56.1 Statement ¶ 51, 53, 54; Defendants' Response to Plaintiff's Rule 56.1 Statement ¶ 51, 53, 54. Neither of the Bindas participated in Board meetings, but after preparation by an Advance Watch executive and review by outside counsel, they would review and sign documents. Pl.'s Stmt. ¶ 57, 67; Defs.' Resp. to Stmt. ¶ 57, 67. Marcello Binda was rarely involved in board meeting discussions or financial- or business-related matters. Pl.'s Stmt. ¶ 57, 67; Defs.' Resp. to Stmt. ¶ 57, 67. Gregg never had any discussions regarding financial or business matters with Marcello Binda. Pl.'s Stmt. ¶ 58, 60; Defs.' Resp. to Stmt. ¶ 58, 60.
On July 31, 2008, Binda Italy entered into a Revolving Credit Agreement with Advance Watch whereby Binda Italy would provide working capital to Advance Watch, and Advance Watch would repay cash in return to Binda Italy (the “Revolving Credit Facility”). Defs.' Stmt. ¶ 12; Pl.'s Resp. to Defs.' Stmt. ¶ 12. The Revolving Credit Facility created a process by which Binda Italy could provide working capital to Advance Watch and its affiliates, and to repay cash to Binda Italy. Defs.' Stmt. ¶ 13; Pl.'s Resp. to Defs.' Stmt. ¶ 13. Whether lending and borrowing under the Revolving Credit Facility required approval of the Bindas, either in their capacities as CEOs or owners of Binda Italy or directors of Advance Watch, is disputed. Defs.' Stmt. ¶ 16-19; Pl.'s Resp. to Defs.' Stmt. ¶ 16-19; S. Binda Decl. ¶ 22; M. Binda Decl. ¶ 14. Binda Italy had other credit facilities with some of its subsidiaries. S. Binda Decl. ¶ 15; Marcello Binda Decl. ¶ 8. It is undisputed that Advance Watch typically repaid money to Binda Italy in December and would borrow the same amount the following January under the Revolving Credit Facility. Defs.' Stmt. ¶ 16, 17; Pl.'s Resp. to Defs.' Stmt. ¶ 16, 17. From fiscal years 2009 to 2013, audited financials show that Advance Watch owed increasing balances between $21-$27 million under the Revolving Credit Facility. See Jason W. Burge Declaration, Exs. O, P.
In 2010, the Betsey Johnson license was terminated, which accounted for approximately $8.1 million in annual revenue for Advance Watch and its affiliates. Steven M. Cordero, Ex. 13 ¶ 28-33 (Bankruptcy Declaration ¶ 28-33). In 2013, the Dolce & Gabbana license expired, resulting in a $25-30 million decline in annual revenue for Advance Watch and its affiliates. Id. The loss of these licenses occurred before Advance Watch prepared its fiscal year 2014 budget. Pl.'s Stmt. ¶ 76; Defs.' Resp. to Stmt. ¶ 76.
Gregg assumed that Advance Watch would receive approximately $10 million in additional financing from a new and separate third-party line of credit, beyond the revolving credit line with Binda Italy, to pay down accounts with vendors, and the company accounted for the additional working capital in preparing its budget for fiscal year 2014. Pl.'s Stmt. ¶ 84; Defs.' Resp. to Stmt. ¶ 84. Gregg testified that Advance Watch stretched several of its major vendors to continue supplying goods in the hopes of using the supplemental liquidity to help relieve some of the stress on vendors. Pl.'s Stmt. ¶ 83-84, 86; Defs.' Resp. to Stmt. ¶ 83-84, 86. He testified that the “plan was to use some of the capital . . . to start to bring those vendors current over a period of time.” Gregg Depo. 42:14-16. When Gregg originally mentioned this plan to Simone Binda and others at Binda Italy, there was no objection. Pl.'s Stmt. ¶ 90; Defs.' Resp. to Stmt. ¶ 90. Whether Marcello Binda was ever informed of this business plan is in dispute. Id. According to Gregg, Advance Watch operated on the assumption that none of the financing set aside for the Company would be used to pay down the Revolving Credit Facility when preparing its budget for 2014. Pl.'s Stmt. ¶ 87; Defs.' Resp. to Stmt. ¶ 87. Documents from independent auditor Deloitte & Touche, LLP (“Deloitte”) show projected positive gross profit from FY14 through FY18. See Burge Decl., Ex. I. The workpapers further note that gross profit margins “are expected to increase through FY18 due to [a] decrease in [Dolce & Gabbana] licensing fee[s].”[1]Id. Gregg testified that the Board of Advance Watch adopted a resolution approving the 2014 budget. Gregg Depo. 45:3-5.
A few days prior to closing on the credit agreement that would provide the anticipated $10 million in financing, Binda Italy CFO Mauro Valenti informed Gregg that Binda Italy was calling on Advance Watch to make a $14, 857, 380 repayment to pay down the Revolving Credit Facility, which both upset and surprised him.[2] Pl.'s Stmt. ¶ 91-92; Defs.' Resp. to Stmt. ¶ 91-92. Gregg testified that Simone Binda and Valenti informed him that Binda Italy would require the repayment. Gregg Depo. 102:17-103:16. Marcello never had any discussions with Gregg about the Wells Fargo Credit Agreement and how to use its funds. Pl.'s Stmt. ¶ 57, 60; Defs.' Resp. to Stmt. ¶ 57, 60. Gregg acknowledged that the decision to spend $14.8 million of the Wells Fargo loan proceeds on the Revolving Credit Facility would not allow Advance Watch to honor its commitment to its vendors. Pl.'s Stmt. ¶ 94; Defs.' Resp. to Stmt. ¶ 94.
On June 21, 2013, Advance Watch and its affiliates, including subsidiaries, [3] entered into a credit agreement with Wells Fargo Bank, N.A. (“Wells Fargo”), which provided a $45 million asset-based line of credit (“Wells Fargo Credit Agreement”), and repaid $14, 857, 380 to Binda Italy through the Revolving Credit Facility (the “June 2013 Repayment”). Defs.' Stmt. ¶ 21, 28; Pl.'s Resp. to Defs.' Stmt. ¶ 21, 28. The Wells Fargo Credit Agreement permitted borrowers to use its proceeds (no more than $21.5 million) to make repayments on the outstanding balance under the Revolving Credit Facility. Defs.' Stmt. ¶ 30-31; Pl.'s Resp. to Defs.' Stmt. ¶ 30-31; Cordero Decl. Ex. 10. The Revolving Credit Facility was subordinated to the Wells Fargo loan (“Subordination Agreement”) in conjunction with the Wells Fargo Credit Agreement. Defs.' Stmt. ¶ 31; Pl.'s Resp. to Defs.' Stmt. ¶ 31; Cordero Decl Ex. 11. The Subordination...
To continue reading
Request your trial