Spinner Family Holdings, LLC v. GRG Chubb1 LLC (In re Garces Rest. Grp., Inc.)

• Decision Date: 09 July 2019
• Docket Number: Case No.:18-19054 (JNP),Adv. Pro. No. 18-1507 (JNP)
• Parties: In re: GARCES RESTAURANT GROUP, INC., d/b/a GARCES GROUP, et al., Debtors. SPINNER FAMILY HOLDINGS, LLC., TOM SPINNER AND MARIA SPINNER, Plaintiffs, v. GRG CHUBB1 LLC, GRGAC4 LLC, GRG2401 LLC, JOSE GARES, THE GARCES GROUP, JOHN FIORETTI, WFP RETAIL CO., AND UBS FINANCIAL SERVICES INC., Defendants.
• Court: U.S. Bankruptcy Court — District of New Jersey

In re: GARCES RESTAURANT GROUP, INC., d/b/a GARCES GROUP, et al., Debtors.

SPINNER FAMILY HOLDINGS, LLC., TOM SPINNER AND MARIA SPINNER, Plaintiffs, v. GRG CHUBB1 LLC, GRGAC4 LLC, GRG2401 LLC, JOSE GARES, THE GARCES GROUP, JOHN FIORETTI,WFP RETAIL CO., AND UBS FINANCIAL SERVICES INC., Defendants.

Case No.:18-19054 (JNP)

Adv. Pro. No. 18-1507 (JNP)

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY

July 9, 2019

Caption in Compliance with D.N.J. L.B.R. 9004-1(b)

(Jointly Administered)

Chapter 11

Judge: Jerrold N. Poslusny, Jr.

OPINION GRANTING IN PART, DENYING IN PART, THE PLAINTIFFS' MOTION

TO AMEND THE COMPLAINT, AND TO REMAND TO STATE COURT

Before the Court is the motion to amend the complaint and remand the adversary proceeding to state court (the "Motion"), filed on behalf of the plaintiff Spinner Family Holdings ("SFH") and the proposed additional plaintiffs VWONE LLC ("VWONE"), TJJ REAL CO LTD ("TJJ"), GRGNY1 LCC ("Amada, NY"), GARCES BPNY HOLDINGS LLC ("BPNY"), and GARCES REVEL HOLDINGS ("Revel Holdings" and, collectively with the other plaintiffs and proposed plaintiffs the "Plaintiffs"). Dkt. No. 8. Jose Garces ("Garces"), John Fioretti ("Fioretti") and the Garces Restaurant Group, Inc. ("Garces Group") filed opposition to the Motion and a cross-motion to dismiss the complaint (the "Cross-Motion"). Dkt. No. 16. For the reasons detailed below, the Court will grant the Motion in part, deny it in part, and remand the remaining counts to the state court. The Court will deny the Cross-Motion, without prejudice.

Background

SFH, along with Tom and Maria Spinner, filed a complaint (the "Action") in the Superior Court of New Jersey, Monmouth County (the "State Court") naming Garces, Fioretti, the Garces Group, GRG Chubb 1 LLC, GRGAC4 LLC, WFP Retail Co, and UBS Financial Services Inc. as defendants. Dkt. No. 1. Following this, beginning on May 2, 2018, the Garces Group and multiple other corporate entities, including several of the named defendants in the Action filed petitions for relief pursuant to Title 11 of the United States Code (the "Bankruptcy Code"). Dkt. No. 1 in Case No. 18-19054 ("Main Case"). The Action was removed to Federal Court and referred to this Court on September 28, 2018. Dkt. No. 1.

On July 11, 2018, this Court entered an order in the Main Case approving the sale of the assets (the "Sale Order") of the following debtors: GRGAC1, LLC, ("GRGAC1") d/b/a Amada, GRGAC2, LLC, ("GRGAC2") d/b/a Village Whiskey, GRGAC3, LLC, ("GRGAC3") d/b/a Distrito Cantina, GRGAC4, LLC ("GRGAC4"), Garces Group, Latin Valley 2130, LLC, La Casa Culinary, LLC, ("LCC") d/b/a Amada Restaurant ("Amada PA"), Garces Catering 300, LLC d/b/a Garces Catering, Latin Quarter Concepts, LLC ("LQ") d/b/a Tinto d/b/a Village Whiskey, Urban Farm, LLC d/b/a JG Domestic, GR300, LLC ("GRG300") d/b/a Volver, GRG2401, LLC, ("GRG2401") GRG Chubb1, LLC ("Chubb1"), GRGKC1, LLC, GRGWildwood, LLC, GRGNY2, LLC, GRGDC2, LLC d/b/a Latin Market, GRGBookies, LLC, and GRGAC5, LLC, (collectively, the "Debtors"). Main Case Dkt. No. 403.

As part of the Sale Order, this Court approved the release of all claims by and among the Debtors, and Jose Garces, M&T Bank ("M&T"), and 3BM1, LLC ("Buyer"). The releases state:

11. Releases Among M&T Bank, the Buyer, the Committee and/or Jose Garces: Except for the obligations of the parties under the Agreement, the Term Sheet or this Order, effective as of the Closing, (a) M&T Bank, (b) the Buyer, (c) the Committee and (d) Jose Garces and each of them forever release, waive and discharge any and all liabilities, claims and causes of action, including without limitation, breach of fiduciary duty, avoidance actions, successor liability and fraudulent transfer claims, by among or against each other, and/or their respective current, and former officers, directors, stockholders, partners, managers, employees, agents, affiliates, successors, assigns, consultants, attorneys and their professionals retained in connection with this matter as applicable, whether pursued directly, derivatively, or otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity, or otherwise, that are based in whole or in part on any act, omission, transaction, event, or other occurrence taking place on or prior to the Closing.

12. Releases by the Debtors and the Debtors' Estates: Except for the obligations of the parties under the Agreement, the Term Sheet or this Order, effective as of the Closing, the Debtors and the Debtors' Estates forever release, waive and discharge any and all liabilities, claims and causes of action, including without limitation, breach of fiduciary duty, avoidance actions, successor liability and fraudulent transfer claims, against (a) M&T Bank, (b) the Buyer, (c) the Committee and (d) Jose Garces and each of them, and/or their respective current, and former officers, directors, stockholders, partners, managers, employees, agents, affiliates, successors, assigns, consultants, attorneys and their professionals retained in connection with this matter as applicable, (including the Debtors and the Debtors' Estates, each a "Settling Party," and collectively, the "Settling Parties"), whether pursued directly, derivatively, or otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity, or otherwise, that are based in whole or in part on any act, omission, transaction, event, or other occurrence taking place on or prior to the Closing.

13. Releases of the Debtors and the Debtors' Estates: Except for the obligations of the parties under the Agreement, the Term Sheet or this Order, effective as of the Closing, (a) M&T Bank, (b) the Buyer, (c) the Committee and/or (d) Jose Garces forever release, waive and discharge any and all liabilities, claims and causes ofaction, including without limitation, breach of fiduciary duty, avoidance actions, successor liability and fraudulent transfer claims, against the Debtors and/or the Debtors' estates, and/or their respective current, and former officers, directors, partners, managers, employees, agents, consultants, attorneys and their professionals retained in connection with this matter as applicable, whether pursued directly, derivatively, or otherwise, liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity, or otherwise, that are based in whole or in part on any act, omission, transaction, event, or other occurrence taking place on or prior to the Closing; provided, however, that the foregoing release given by Garces in not intended to and shall not be construed to release any indemnification claims of Garces to the extent such claims are covered by available insurance coverage.

Main Case Dkt. No. 403 ¶¶ 11-13. However, to ensure that the Sale Order did not infringe upon the rights of third parties, in particular SFH and the Spinners, a paragraph was added carving out (the "Carveout") of this settlement language, any direct claims parties may have against M&T, Garces, the Buyer, or any other party. The Carveout states:

Nothing herein shall be construed to (a) affect, impair, or prejudice any direct claims, causes of action, and/or defenses that any non-Settling Party (including, but not limited to, Jim Sorkin, Julius Silvert, Inc., Thomas Spinner, and Spinner Family Holdings, LLC) may have against any Settling Party or other non-Settling Party in any manner, whether now existing or hereafter arising (the "Third Party Claims"), all of which are expressly retained; or (b) have any preclusive effect on the Third Party Claims for any reason whatsoever including, but not limited to, under the doctrines of resjudicata and collateral estoppel.

Id. ¶ 14.

SFH then filed this Motion to: (a) amend the complaint and (b) remand this Action the State Court. Dkt. No. 8. The Motion attaches a proposed amended complaint (the "Proposed Amended Complaint") which includes twenty-six causes of action against: Garces, Fioretti, Robert Keddie ("Keddie"), Yousaf Hassan ("Hassan"), Condor Latin Concepts, LLC, GRG Dilworth, LLC, GRGNY1, LLC. ("Amada, NY"), Luna Farms, LLC, GRGFC1 ("BuenaOnda"), M&T, and John Does 1-10 (collectively, the "Defendants"). The Proposed Amended Complaint also removes Tom and Maria Spinner as plaintiffs, and adds the proposed additional plaintiffs listed above.

Defendants Garces, Fioretti, and the Garces Group filed the Cross-Motion primarily arguing that the Plaintiffs lack standing to bring the claims in the Proposed Amended Complaint, and that the claims are futile. Dkt. No. 16. The Defendants argue that the claims are derivative claims owned by the corporations, and so each of these claims is barred by the Sale Order, The Defendants do not oppose remanding any remaining counts to the State Court. Id. M&T also filed opposition (the "M&T Opposition") to the Motion. Dkt, No. 15. SFH's reply argues that a motion to dismiss a presently pending amended complaint is procedurally improper. Dkt. No. 18. It also argues that the Cross-Motion is incorrect in arguing that the Sale Order released these claims, and that the proposed claims are direct claims, not derivative. Finally, SFH argues that M&T lacks standing to oppose the Motion, as it is not presently a party to the Action. Dkt. No. 20.

Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157(a) and (b)(1). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409. Consideration of this Motion constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(N), (O).

Discussion

A. Scope of This Decision

The Proposed Amended Complaint does not name any of the Debtors as defendants or as proposed plaintiffs. Dkt. No. 8. However, the Defendants argue that many of the...