PDL Biopharma, Inc. v. Wohlstadter

• Decision Date: 14 February 2017
• Citation: PDL Biopharma, Inc. v. Wohlstadter, 147 A.D.3d 494, 47 N.Y.S.3d 25 (N.Y. App. Div. 2017)
• Parties: PDL BIOPHARMA, INC., Plaintiff–Respondent, v. Samuel J. WOHLSTADTER, et al., Defendants–Appellants.
• Court: New York Supreme Court — Appellate Division

147 A.D.3d 494

47 N.Y.S.3d 25

PDL BIOPHARMA, INC., Plaintiff–Respondent,

v.Samuel J. WOHLSTADTER, et al., Defendants–Appellants.

Supreme Court, Appellate Division, First Department, New York.

Feb. 14, 2017.

Arnold & Porter Kaye Scholer LLP, New York (James M. Catterson of counsel), for appellants.

Gibson, Dunn & Crutcher LLP, New York (Robert L. Weigel of counsel), for respondent.

FRIEDMAN, J.P., RENWICK, SAXE, GISCHE, JJ.

Order, Supreme Court, New York County (Eileen Bransten, J.), entered July 29, 2016, which granted plaintiff's motion for summary judgment in lieu of complaint on liability pursuant to CPLR 3213 and denied, defendants' cross motion for summary judgment, unanimously modified, on the law, plaintiff's CPLR 3213 motion denied, and the matter remanded to be converted to a plenary action, and otherwise affirmed, without costs.

The issue to be addressed at this juncture is not whether the subject guaranties are or are not enforceable; it is solely whether the guaranties are entitled to the expedited treatment of CPLR 3213. We hold that the guaranties on which plaintiff seeks summary judgment in lieu of complaint do not qualify as instruments for the payment of money only.

"The prototypical example of an instrument within the ambit of [CPLR 3213 ] is of course a negotiable instrument for the payment of money—an unconditional promise to pay a sum certain, signed by the maker and due on demand or at a definite time" (Weissman v. Sinorm Deli, 88 N.Y.2d 437, 444, 646 N.Y.S.2d 308, 669 N.E.2d 242 [1996] ). CPLR 3213 is generally used to enforce "some variety of commercial paper in which the party to be charged has formally and explicitly acknowledged an indebtedness," so that "a prima facie case would be made out by the instrument and a failure to make the payments called for by its terms" (Interman Indus. Prods. v. R.S.M. Electron Power,

37 N.Y.2d 151, 154–155, 371 N.Y.S.2d 675, 332 N.E.2d 859 [1975] ). A document does not qualify for CPLR 3213 treatment if the court must consult other materials besides the bare document and proof of nonpayment, or if it must make a more than de minimis deviation from the face of the document (id. ).

Defendants Samuel Wohlstadter and Nadine Wohlstadter own non party Wellstat Diagnostics, LLC (Diagnostics), the diagnostic systems company that received the loan underlying the guaranties at issue in this motion. On November 2, 2012, Diagnostics borrowed $40 million from plaintiff PDL Biopharma to finance certain FDA development trials. The terms of the loan were memorialized in a Credit Agreement, a term note, a security agreement, and a patent security agreement, all dated November 2, 2012. Thereafter, following a default, PDL, Diagnostics and the Wohlstadters entered into a Forbearance Agreement dated February 28, 2013. The two guaranties that accompanied this Forbearance Agreement, one executed by the Wohlstadters, the other by the remaining defendants (entities owned by the Wohlstadters), are the subject of the present motion.

It is true that generally, an unconditional guaranty qualifies as an instrument amenable to CPLR 3213 treatment (Cooperatieve Centrale Raiffeisen–Boerenleenbank, B.A., "Rabobank Intl.," N.Y. Branch v. Navarro, 25 N.Y.3d 485, 492, 15 N.Y.S.3d 277, 36 N.E.3d 80 [2015] ). However, here, it is unclear whether that is the case. For one thing, the documents guarantee not only "payment" but also "performance" of the borrower's "obligations." The term "obligations" is not defined in either of the guaranties, although it is defined in the Credit Agreement as

"all liabilities, indebtedness and obligations (including interest accrued at the rate provided in the applicable Loan Document after the

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