Marino v. Grupo Mundial Tenedora, S.A.

• Decision Date: 30 August 2011
• Docket Number: No. 10 Civ. 4126.,10 Civ. 4126.
• Citation: 810 F.Supp.2d 601
• Parties: Luis MARINO and Gustavo Serpa, Plaintiffs, v. GRUPO MUNDIAL TENEDORA, S.A., Belnovo, S.A., Global Plus+ Investment Management LLC, and GPIM Holdings, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

810 F.Supp.2d 601

Luis MARINO and Gustavo Serpa, Plaintiffs,

v.GRUPO MUNDIAL TENEDORA, S.A., Belnovo, S.A., Global Plus+ Investment Management LLC, and GPIM Holdings, Inc., Defendants.

No. 10 Civ. 4126.

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

Aug. 30, 2011.

Yeskoo, Hogan & Tamlyn LLP, by: Stephen Hogan, Esq., New York, NY, for Plaintiffs.

Curtis, Mallet–Prevost, Colt and Mosle LLP, by: Theresa Ann Foudy, Esq., Brian M. White, Esq., New York, NY, for Defendants.

OPINION

SWEET, District Judge.

Defendants Belnovo, S.A. (“Belnovo”) and Grupo Mundial Tenedora, S.A. (“GM”) (collectively, the “Defendants”) have moved pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6) to dismiss the Second Amended Complaint (“SAC”) ¹ of plaintiffs Luis Marino (“Marino”) and Gustavo Serpa (“Serpa”) (collectively, the “Plaintiffs”) for failure to plead fraud with particularity and failure to state a claim. Upon the conclusions set forth below, Defendants' motion to dismiss the SAC as to GM and Belnovo is granted, and the Plaintiffs are granted leave to replead within twenty days.

Prior Proceedings

This action was commenced by the Plaintiffs on May 19, 2010. The Amended Complaint (“AC”) was filed on June 2, 2010, and the SAC was filed on April 5, 2011.

On September 7, 2010, Defendants GPIM Holdings, Inc. (“GPIM Holdings”) and Global Plus+ Investment Management LLC (“GPIM”) moved to dismiss the AC, a motion which was denied in part and granted in party by the opinion of March 17, 2011 (the “March 17 Opinion”). Plaintiffs filed a motion to file a Second Amended Complaint on October 1, 2010, which was granted in the March 17 Opinion.

The allegations of the SAC as described in the March 17 Opinion are repeated in part as relevant to the issue presented by the instant motion.

According to the Second Amended Complaint, Plaintiffs were employees of Pali Capital (“Pali”), who decided together with Pali to form GPIM in order to manage Pali's investment funds. (SAC ¶ 13.) The parties entered into a Limited Liability Company Agreement (the “LLC Agreement”) in January of 2008 for that purpose. ( Id. ¶ 16.) By the LLC Agreement, Belnovo, Pali Holdings Asset Management LLC (a wholly-owned subsidiary of Pali Capital, also denoted “Pali”), and the Plaintiffs became members in GPIM. The voting interests in GPIM were split two ways: 72.5% for Pali and 27.5% for Belnovo. ( Id.; LLC Agreement § 4.1., Schedule A) The economic interests were divided four ways: Belnovo maintained the same 27.5% interest that it had for voting; but Pali's 72.5% interest was split among Pali (21.75%), Marino (25.375%), and Serpa (25.375%). (SAC ¶ 16; LLC Agreement § 4.1, Schedule A.)

GPIM was to be managed by a seven-member “Board of Managers,” consisting of four managers appointed by Pali, two by Belnovo, and one by the “Senior Managing Director,” who was Marino. (LLC Agreement §§ 3.2(a), 3.6(b).) Serpa was named a “Managing Director” and the Senior Managing Director's nominee to the Board of Managers. ( Id. §§ 3.2(a), 3.6(c).) In terms of capital contributions, Belnovo contributed $1.5 million; Pali contributed certain costs, goodwill, and services; and Marino and Serpa contributed nothing. ( See id. § 5.2.)

The LLC Agreement specified that the Managing Directors (namely, Plaintiffs) “shall owe to the Members duties of loyalty and due care of the type owed by the officers of a corporation to such corporation and its stockholders under the laws of the State of Delaware.” ( Id. §§ 3.5, 3.6(c).) In contrast, with respect to Members, the LLC Agreement stated:

No Member, including any Manager or Managing Director in its capacity as such, shall have any liability under this Agreement or under the [Delaware Limited Liability Company] Act except as provided herein or as required by the Act ....; provided, however, that the liability of a Member shall not be eliminated or limited if a judgment or other final adjudication adverse to such Member establishes (i) that its acts were committed in bad faith or were the result of active or deliberate dishonesty or (ii) that such Member personally gained in fact a financial profit or other advantage to which such Member was not entitled.

( Id. § 4.3.)

The LLC Agreement contained specific provisions regarding the transfer of membership interests. In particular, it stated that each of Pali and Belnovo could transfer its own respective interest at any time to an “Affiliate.” ( Id. § 7.1.) If either Pali or Belnovo wished to transfer its interest other than to its own affiliate, it had to first give the other a right of first offer (“ROFO”). ( Id. § 7.2.) Under Section 7.3(a), if Belnovo failed to exercise its ROFO after receiving notice that Pali desired to sell its interest, Pali was given the authority to approve a sale of 100% of the membership interests and force the other Members (namely, Belnovo and Plaintiffs) to sell their interests on the same terms (a “Required Sale”). ( Id. § 7.3(a).)

The LLC Agreement contained certain conditions regarding a “Required Sale” and specified that “each Member hereby waives all dissenters' rights, appraisal rights, approval rights or other similar rights in connection with a Required Sale to the maximum extent permitted by law.” ( Id. § 7.3(a).)

The SAC alleges that, during 2008, GM had invested $20 million in Pali, but then “threatened to sue” Pali because Pali had failed to disclose material information before the investment was made. (SAC ¶¶ 24–26.) “Upon information and belief,” GM “desired to acquire total control of GPIM” and Pali “agreed to cede its membership interests in GPIM” to appease GM. ( Id. ¶ 28.) Thus, “upon information and belief,” Pali and Belnovo agreed to transfer GPIM to a GM-owned subsidiary at less than fair value in an act of “self-dealing.” ( Id. ¶ 29.)

According to the SAC, in order to avoid any methods of fair valuation, Pali and Belnovo “designed a scheme whereby Plaintiffs would be induced to make a below market offer at terms established by Defendants, which Defendants could then use as the ‘valuation’ of the company for their own self-dealing acquisition.” ( Id. ¶ 31.) In particular, at a meeting of the GPIM Board on January 7, 2009, the “GM representatives” (Rodrigo Diaz, Executive Vice President of GM, and Juan Carlos Barrera) allegedly informed Plaintiffs that GM had decided not to invest any more money in GPIM and suggested that Plaintiffs acquire Pali's interest themselves. ( Id. ¶ 32.) At a subsequent meeting on January 16, 2009, the “Board” (Diaz, Barrera, Joseph Schenk, CEO of Pali, John Mullin, CFO of Pali, Tricia Pessola, Pali Compliance Officer, and Derrell Janey, Pali Executive Vice President), informed Plaintiffs that Pali and GM had “decided to exit the business and divest themselves of ownership of GPIM.” ( Id. ¶¶ 32–33.) The “Board” asked Plaintiffs to prepare an offer to acquire GPIM and told them that it need not contain a significant cash component and that, if Plaintiffs did not acquire GPIM, GPIM would be dissolved. ( Id.) The SAC alleges, “on information and belief,” that these statements were “utter falsehoods” designed to “engineer a low offer from Plaintiffs so that [GM] could buy the interests of [Pali] and plaintiffs at that price” and that in fact “[n]either Pali ... nor Belnovo had any intention of selling their membership interests in GPIM to plaintiffs at any price because they had already agreed to transfer their interest to [GM's] subsidiary established to accomplish their scheme.” ( Id. ¶ 34.)

By a letter dated January 26, 2009, an attorney representing Plaintiffs forwarded to GPIM's Board Plaintiffs' offer to purchase GPIM. The letter and attached proposal stated that it was intended to address the requirements outlined during the January 16, 2009 Board meeting by Joseph A. Schenk, whom the SAC identifies as a Pali Board representative ( Id. ¶ 32). The proposal states that Plaintiffs would purchase for $1—and the assumption of GPIM's operating liabilities accruing on and after the closing—all the assets of GPIM plus certain additional assets of Pali and Mundial Asset Management.

The SAC alleges that after Plaintiffs refused to resign, they were fired. ( Id. ¶¶ 35–36.) The GPIM Board rejected Plaintiff's offer. ( Id. ¶ 36.)

Pali and Belnovo then sold their interests to GPIM Holdings, a wholly-owned subsidiary of GM, for $1,000 plus assumption of all liabilities. ( Id. ¶ 37.) By letters dated February 11, 2009, Pali issued notices to all three of Belnovo, Marino, and Serpa, informing them that Pali, following the offer by GPIM Holdings to purchase GPIM and Belnovo's failure to exercise its ROFO, was exercising its right to force Belnovo and Plaintiffs to sell their membership interests to GPIM Holdings in a “Required Sale” pursuant to Section 7.3 of the LLC Agreement. Plaintiffs assert that Defendants made no “effort to secure a fair price for GPIM” nor to “appraise the fair market value of the business.” ( Id. ¶ 38.)

The SAC asserts the following three claims for relief against Belnovo and GM. First, Plaintiffs allege that Belnovo breached a fiduciary duty not to sell GPIM at less than fair market value. ( Id. ¶¶ 50–53.) Second, Plaintiffs allege that Belnovo and GM conspired “to transfer GPIM to GPIM Holdings at an unfair price.” ( Id. ¶¶ 54–57.) Third, Plaintiffs allege that GM aided and abetted Belnovo's breach of fiduciary duty by establishing GPIM Holdings to purchase GPIM and by “exercising its financial power” over Pali to “execute a scheme to sell GPIM ... at an unfairly low price.” ( Id. ¶¶ 58–63.)

The SAC concludes that the Plaintiffs were thus each harmed “by not less than $2,000,000.” ( Id. ¶¶ 53, 57, 63.)

The instant motion was marked fully submitted on April 27, 2011.

The Appropriate Standards

Federal Rule of Civil Procedure 9(b) requires that, “in alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). The...