Trafalgar Power Inc. v. Aetna Life Ins. Co.
| Decision Date | 06 November 2008 |
| Docket Number | Adversary No. 02-80005.,Bankruptcy No. 5:00-CV-1246.,Bankruptcy No. 5:99-CV-1238. |
| Citation | 396 B.R. 584 |
| Parties | TRAFALGAR POWER INC. and Christine Falls Corporation, Plaintiffs, v. AETNA LIFE INSURANCE COMPANY; Algonquin Power Corporation, Inc.; Algonquin Power Income Fund; and Algonquin Power Fund (Canada) Inc.; Defendants. Algonquin Power Corporation, Inc.; Algonquin Power Income Fund; and Franklin Industrial Complex, Inc.; Plaintiffs, v. Trafalgar Power, Inc.; Christine Falls Corporation; and Pine Run of Virginia, Inc.; Defendants. In re Marina Development, Inc.; Franklin Industrial Complex, Inc.; Christine Falls of New York, Inc.; Trafalgar Power, Inc.; Pine Run of Virginia, Inc.; Debtors. Marina Development, Inc.; Trafalgar Power, Inc.; Christine Falls of New York, Inc.; Franklin Industrial Complex, Inc.; and Pine Run of Virginia, Inc.; Plaintiffs, v. Algonquin Power Corporation, Inc.; Algonquin Power Systems, Inc.; Algonquin Power Fund (Canada), Inc.; Algonquin Power Income Fund; Algonquin Power Systems New Hampshire, Inc.; Algonquin Power (U.S.) Holdings, Inc.; Aetna Life Insurance Company; CIT Credit Group, Inc., FKA Newcourt Credit Group, Inc.; Canadian Income Partners I Limited Partnership; Defendants. |
| Court | U.S. District Court — Northern District of New York |
Paul J. Yesawich, III, Esq., Harris Beach PLLC, Pittsford, NY, for Trafalgar Power Parties.
Edward J. Normand, Esq., Jason Cyrulnik, Esq., Bois, Schiller & Flexner LLP, Armonk, NY, for Marina Development, Inc.
Mitchell J. Katz, Esq., Menter Rudin & Trivelpiece, Syracuse, NY, Alan B. Rubenstein, Esq., Rackemann Sawyer & Brewster, Boston, MA, for Algonquin Power Parties.
After various proceedings and motion practice since this action was initiated in 1999, the following claims remain for adjudication: (1) Adversary Proceeding Cause of Action 12—Conversion; (2) Adversary Proceeding Cause of Action 14—Breach of Fiduciary Duty; (3) Adversary Proceeding Cause of Action 15—Negligent Management; (4) Adversary Counterclaim Count I—Declaratory Judgment Default under Terms of B Note Occurred; (5) Adversary Counterclaim Count III—Judgment for Amounts Due under B Note; (6) Adversary Counterclaim Count IV—Expenses of Enforcement of Pledge Agreements.
The Algonquin parties (collectively "Algonquin") move for summary judgment dismissing all remaining claims brought by Trafalgar Power, Inc. ("TPI") and Christine Falls Corporation ("CFC") (collectively "Trafalgar"). Algonquin also moves for partial summary judgment (liability) on its counterclaims. Trafalgar opposes and cross-moves for leave to file a Second Amended and Supplemental Complaint ("proposed complaint"). Oral argument was heard on October 17, 2008, in Utica, New York. Decision was reserved.
Detailed factual background and procedural history may be found in prior decisions in this case, the engineering malpractice case, and the bankruptcy proceedings. See Trafalgar Power, Inc. v. Aetna Life Ins. Co., 427 F.Supp.2d 202 (N.D.N.Y. Apr.12, 2006); Trafalgar Power, Inc. v. Aetna Life Ins. Co., Nos. 99-CV-1238, 00-CV-1246, 2001 WL 640908 ; Trafalgar Power, Inc. v. Aetna Life Ins. Co., 146 F.Supp.2d 155 (N.D.N.Y. Apr.23, 2001) (McCurn, J.); Trafalgar Power, Inc. v. Aetna Life Ins. Co., 131 F.Supp.2d 341 (N.D.N.Y. Jan.16, 2001) (Mccurn, J.) (); Hydro Investors, Inc. v. Trafalgar Power, Inc., 63 F.Supp.2d 225 (N.D.N.Y.1999) (denying post-trial motions), aff'd in part, vacated & remanded in part, 227 F.3d 8 (2d Cir.2000) (); see also In re Franklin Indus. Complex, Inc., Nos. 01-67459, 01-67458, 01-67457, 2008 WL 3992233 (Bankr. N.D.N.Y. Aug.21, 2008); In re Franklin Indus. Complex, Inc., Nos. 01-67459, 01-67458, 0167457, 2008 WL 3200244 (Bankr. N.D.N.Y. Aug.5, 2008); In re Franklin Indus. Complex, Inc., 386 B.R. 5 (Bankr. N.D.N.Y. Apr.8, 2008); In re Franklin Indus. Complex, Inc., 377 B.R. 32 (Bankr. N.D.N.Y. Oct.30, 2007); In re Franklin Indus. Complex, Inc., Nos. 01-67459, 06-80254, 01-67458, 01-67457, 2007 WL 2509709 (Bankr.N.D.N.Y. Aug.30, 2007). The facts are set forth only in sufficient detail to provide context for the analysis.
Algonquin Power Corporation, Inc. ("Algonquin Power") became manager of hydroelectric power plants owned by Trafalgar in June 1995, pursuant to a letter agreement. From that time forward, Algonquin held itself out as an agent of Trafalgar. Because of a default on its loan from Aetna Life Insurance Company ("Aetna"), Trafalgar needed to restructure its debt. As part of the restructuring, Aetna required that a manager be hired to operate the plants. To that end, Trafalgar and Algonquin Power entered into a Management Agreement effective January 15, 1996. The Management Agreement provided that "the relationship ... shall not be deemed to constitute a ... trust or fiduciary relationship." Under the Management Agreement, Algonquin operated and managed the power plants. All of the income generated from the plants was deposited with State Street Bank, the Security Trustee, in an Account. Algonquin made draw requests for its management fee and otherwise directed the Security Trustee to disburse funds from the Account to continue operations of the plants.
The debt was structured as A and B Notes and a Line of Credit, the terms of which are set forth in an Indenture Agreement. To secure the Notes Marina Development, Inc. ("Marina"), TPI's parent company, pledged all of the stock of TPI, and TPI pledged all of the stock of CFC.
Pursuant to the Indenture Agreement, the parties were required to keep the properties free from liens and to pay taxes when due. A default existed if the provision was not complied with and the noncompliance continued for 10 days after an executive officer was aware of the default. In the event of a default, the Security Trustee could declare the note and all interest due and payable.
In 1997, Aetna sold the B Note to Algonquin. Aetna subsequently sold the A Note to Algonquin. The A Note has since been paid off. Eventually the B Note was sold to Algonquin Power Income Fund (the "Fund"), which remains the holder of that Note.
On July 1, 1999, the IRS issued a Notice of Intent to Levy on the power projects. The failure to pay income tax related to a combined corporate return by Trafalgar and Marina. The loan documents permitted a combined corporate return. On July 20, 1999, Algonquin sent Trafalgar notice of default. Trafalgar responded denying the default. Trafalgar states that it attempted to have Algonquin, as manager of the projects, pay the taxes from the Account but Algonquin refused to do so. Trafalgar further states that it also attempted to have the Security Trustee (State Street Bank) pay the taxes from the Account but that also did not occur.
On July 22, 1999, Algonquin Power, as agent for the Fund (the holder of the B Note), and Algonquin Canada, sent a Notice of Default and demanded that the taxes be paid by August 2, 1999. There was no response and the taxes remained unpaid.
On August 5, 1999, the Fund declared a Default under the Indenture and accelerated the B Note. This prompted Trafalgar to file the Lead Case, No. 99-CV-1238, on August 9, 1999, challenging the legality of the Aetna's sales of the Notes to Algonquin. Aetna's sale of the B Note to Algonquin Power was upheld in prior proceedings. See 427 F.Supp.2d at 212.
On August 20, 1999, the IRS issued a Notice of Levy. On September 9, 1999, Algonquin Power, again as agent for the Fund and Algonquin Canada, requested that the Security Trustee take possession of TPI and CFC stock pursuant to the Pledges. Algonquin subsequently directed the Security Trustee to pay the IRS Lien out of funds in the Account.
On May 23, 2001, District Judge Neal P. McCurn entered a Memorandum-Decision and Order granting Algonquin's motion to compel arbitration and stay litigation of Claim 7 (conversion) in the Lead Case. Accordingly, Claim 7 was severed from the action.
On June 21, 2001, Magistrate Judge David Peebles entered a Memorandum-Decision and Order that, among other things, denied Trafalgar's motion to amend the complaint to assert a conversion cause of action. Judge Peebles reasoned that it would be futile to assert a conversion cause of action because it would not survive a Rule 12(b)(6) motion to dismiss. However, Judge Peebles specifically permitted Trafalgar to engage in additional discovery and again seek to amend to conceivably state causes of action including conversion. Accordingly, the deadline for amendment of pleadings was extended to September 1, 2001.
TPI and CFC filed for bankruptcy protection on August 27, 2001, in North Carolina. The bankruptcy case was transferred to the Northern District of New York in December 2001. Trafalgar filed an adversary proceeding on August 28, 2001, the reference of which was withdrawn as to the remaining claims as set forth above. The claims in the adversary proceeding for which the reference was withdrawn were consolidated with the Lead Case. The adversary complaint cause of action 12 is virtually identical to the original conversion count 7 in the Lead Case and the conversion claim in the proposed amended pleading that Judge Peebles denied permission to file.
Summary judgment must be granted when the pleadings, depositions, answers to interrogatories, admissions and affidavits show that there is no genuine issue as to any material fact, and that the moving party is entitled to summary judgment as a matter of law. Fed.R.Civ.P. 56; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d...
To continue reading
Request your trial
-
Matana v. J. Ezra Merkin & Gabriel Capital Corp.
...(E.D.N.Y. Sept. 13, 2012), report and recommendation adopted by2012 WL 5289587 (E.D.N.Y. Oct. 24, 2012); Trafalgar Power Inc. v. Aetna Life Ins. Co., 396 B.R. 584, 595 (N.D.N.Y.2008), vacated in part and aff'd in relevant part,401 Fed.Appx. 584 (2d Cir.2010) (summary order). These claims ar......
-
Christine Falls of N.Y., Inc. v. Algonquin Power Corp. (In re Franklin Indus. Complex, Inc.)
...of New York, Inc.,No. 6:09–CV–226, 2009 WL 4884470, 2009 U.S. Dist. LEXIS 115854 (N.D.N.Y. Dec. 10, 2009); Trafalgar Power, Inc. v. Aetna Life Ins. Co.,396 B.R. 584 (N.D.N.Y.2008), aff'd in part, vacated & remanded in part sub nomChristine Falls Corp. v. Algonquin Power Fund, Inc.,401 Fed.A......
-
In re Parmalat Securities Litigation
...all, but rather a legal obligation imposed in order to prevent a party's unjust enrichment."); see also Trafalgar Power Inc. v. Aetna Life Ins. Co., 396 B.R. 584, 594-595 (N.D.N.Y.2008) ("A claim for unjust enrichment only applies in the absence of an express ...
-
Trafalgar Power, Inc. v. U.S. Bank Nat'l Ass'n
...decision/summary order) dismissing Trafalgar's claims regarding Aetna's sale of the notes to Algonquin. It affirmed the order of November 6, 2008, 396 B.R. 584, to the extent that it (1) denied Trafalgar leave to amend its complaint and (2) dismissed the claims for conversion, breach of imp......