Valdin Invs. Corp. v. Oxbridge Capital Mgmt., LLC
| Decision Date | 26 May 2015 |
| Docket Number | No. 08–cv–4325 (ADS).,08–cv–4325 (ADS). |
| Citation | 106 F.Supp.3d 316 |
| Parties | VALDIN INVESTMENTS CORP., Plaintiff, v. OXBRIDGE CAPITAL MANAGEMENT, LLC, Oxbridge Capital Fund I, LLC, Oxbridge Capital Fund II, LLC, Oxbridge Capital Fund III, LLC, Oxbridge Capital Fund IV, LLC, Oxbridge Capital Fund V, LLC, Oxbridge Capital Fund VI, LLC, Oxbridge Capital Fund VII, LLC, Oxbridge Capital Fund VIII, LLC, and Oxbridge Capital Fund IX, LLC, Defendant. |
| Court | U.S. District Court — Eastern District of New York |
Jeffrey L. Rosenberg & Associates, LLC by Jeffrey L. Rosenberg, Esq., of Counsel, New York, NY, for the Plaintiff.
Arkin Solbakken Rice LLP by Alan R. Arkin, Esq., of Counsel, New York, NY, for the Defendants.
On February 27, 2015, the Plaintiff Valdin Investments Corp. (the "Plaintiff") filed a motion to enforce (i) a stipulation of settlement so ordered by this Court on March 5, 2009 (the "First Stipulation"); (ii) an order of attachment so ordered by this Court on the same date (the "Attachment Order"); and (iii) a second stipulation of settlement entered into by the parties on February 11, 2010 (the "Second Stipulation," and collectively, the "Settlement Orders").
This case had been administratively closed since March 6, 2009.
In its present motion, the Plaintiff alleges that the Defendants Oxbridge Capital Management, LLC, Oxbridge Capital Fund I, LLC, Oxbridge Capital Fund II, LLC, Oxbridge Capital Fund III, LLC, Oxbridge Capital Fund IV, LLC, Oxbridge Capital Fund V, LLC, Oxbridge Capital Fund VI, LLC, Oxbridge Capital Fund VII, LLC, Oxbridge Capital Fund VIII, LLC, and Oxbridge Capital Fund IX, LLC (collectively, the "Defendants") breached the terms of the Settlement Orders.
In light of the alleged breaches by the Defendants, the Plaintiff seeks (i) an order re-opening this case and "directing [the] Defendant and others to submit to and provide all appropriate discovery to aid in the Motion to Enforce and to establish damages"; and (ii) an award of legal fees and costs incurred by the Plaintiff in filing this motion.
For the reasons set forth below, the Court denies the motion by the Plaintiff and directs the Clerk of the Court to continue to mark this action as closed.
The Plaintiff is a Panama corporation with its principal place of business also located in Panama. (Compl. at ¶ 3.) The Plaintiff does not set forth its business in detail other than to state that it provides "investment advisory services." (Id. at ¶ 4.) Lance Valdez ("Valdez") owned and controlled the Plaintiff prior to its alleged dissolution on August 10, 2010. (Sweeney Decl. at ¶ 18.)
The Defendant Oxbridge Capital Management, LLC ("Oxbridge Capital") is a New York limited liability company with its principal place of business located in Valley Stream, New York. (Compl. at ¶ 18.) It manages funds that use money from investors to invest in "structured, over the counter, European-style, cash-settled equity barrier call options." (Id. at ¶¶ 5, 18; Answer at ¶¶ 5, 18.) It is not clear from the record what "equity barrier call options" are, nor is it clear how they function.
From 2003 through 2005, Oxbridge Capital formed the following funds for the purpose of carrying out its investments: the Defendants Oxbridge Capital Fund I, LLC, Oxbridge Capital Fund II, LLC, Oxbridge Capital Fund III, LLC, Oxbridge Capital Fund IV, LLC, Oxbridge Capital Fund V, LLC, Oxbridge Capital Fund VI, LLC, Oxbridge Capital Fund VII, LLC, Oxbridge Capital Fund VIII, LLC, and Oxbridge Capital Fund IX, LLC (collectively, the "Funds"). They are also New York limited liability companies. (Id. )
The purpose of each of the Funds is to solicit investor money and to use that money to purchase equity barrier call options. (Rosenberg Decl., Ex. B, at 1.) The value of each Fund is determined based on the performance of the options that the Fund purchases. (Id. ) Thus, if the options purchased by the Fund perform well, then the Fund will be worth more money, and investors, in turn, will make a profit. (See id. ) If the options do not perform well, then the Fund will be worth less, and the investors will not make a profit. (See id. )
Oxbridge Capital manages each Fund. (Id. at 5) In compensation for its work, it receives a Management Fee from each Fund equal to .75% of the value of the options purchased. (Id. ) This fee is paid to Oxbridge Capital on a quarterly basis on June 30th and December 31st of each year. (Id. ) In addition, Oxbridge Capital receives an Incentive Fee of 5% of any annual net gain in the value of the Fund during any fiscal year in excess of the first 5% of such gain. (Id. ) That means that if the Fund has an annual net gain of less than 5%, Oxbridge Capital will not receive an Incentive Fee. (See id. ) If the Fund gains more than 5% in a given fiscal year, Oxbridge Capital will receive an Incentive Fee.
From 2004 through 2007, each Fund entered into separate letter agreements with the Plaintiff that had nearly identical terms (the "Advisory Agreements"). (Compl. at ¶ 27.) Under the terms of the Advisory Agreements, the Plaintiff agreed to "act as Investment Advisor ... with respect to the selection, reallocation, monitoring and termination of ... over-the-counter, European-style, cash settled equity barrier call options." (Rosenberg Decl., Ex. A, at 1.) Oxbridge Capital, the manager of each Fund, agreed to pay the Plaintiff "at the rate of $75,000 per year ... in equal semi-annual increments of $37,500 on or about the times Oxbridge Capital Management, LLC received payments of its Management Fees[.]" (Rosenberg Decl., Ex. A, at 1.)
The term of each Advisory Agreement is "coincident with the term of the Options initially purchased by [the Fund], subject to termination on such earlier date as the Options may be entirely terminated and liquidated in accordance with their terms." (Id. at 1.) In addition, the Advisory Agreements provide the Funds with the right to terminate the Advisory Agreements "immediately upon notice to [the Plaintiff] if the Financial Institution gives Oxbridge a ‘Barrier Notice’ (or similar notice) calling for the payment of additional premium under the Confirmation (or similar document) setting forth the terms of the Options." (Id. )
The Advisory Agreements also give both the Funds and the Plaintiff the right to terminate the contracts "after the first anniversary of the date of the initial purchase of the Options by [the Funds]" upon thirty days written notice from the terminating party. (Id. at 1.) If Oxbridge Capital terminates the agreements under the terms of this provision, it must also pay a $225,000 termination fee. (Id. )
On October 23, 2008, the Plaintiff commenced this action against the Defendants to recover compensation fees allegedly due to them under the Investment Advisory Agreements. (Compl. at ¶ 32.) The Plaintiff asserted common law claims against the Defendants for (i) breach of contract; (ii) breach of fiduciary duty; and (iii) an accounting of management fees it received. (Compl. at ¶¶ 41–59.)
On November 26, 2008, the Plaintiff moved pursuant to Federal Rule of Civil Procedure ("Fed. R. Civ.P.") 64 and Section 6201 of the New York Civil Practice Law and Rules ("CPLR") for an order of attachment, which sought to require the Defendants "to make and provide for adequate capital reserves for the payment of [the] Plaintiff's reasonably anticipated damages." (Rosenberg Decl., Dkt. No. 9, at ¶ 2.)
Under Rule 64, attachment is available in the manner provided by the law of the state in which the district court proceeding is pending. "New York law requires that a plaintiff seeking attachment must show by affidavit (1) that there is a cause of action, (2) that there is a probability of success on the merits, (3) that a ground for attachment listed in [CPLR] § 6201 exists, and (4) that the amount demanded from defendants exceeds all counterclaims known to plaintiff."
Flame S.A. v. Primera Mar. (Hellas) Ltd., No. 09 CIV. 8138(KTD), 2010 WL 481075, at *4 (S.D.N.Y. Feb. 2, 2010) ; see also Capital Ventures Int'l v. Republic of Argentina, 443 F.3d 214, 222 (2d Cir.2006).
CPLR § 6201, in turn, provides that the "an order of attachment may be granted where ... the defendant, with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in [the] plaintiff's favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts."
In support of the Plaintiff's motion, Jeffrey L. Rosenberg ("Rosenberg"), counsel for the Plaintiff, submitted a declaration stating that Robert Eide, President of Oxbridge Capital, told him during a telephone conversation that Oxbridge Capital did not intend to pay the Plaintiff its fees under the Advisory Agreements and indicated that Oxbridge Capital planned to dissolve the Funds in January 2009. (Rosenberg Decl., Dkt. No. 9, at ¶ 23, 24.)
On December 30, 2008, the Court denied the Plaintiff's motion without prejudice but granted it leave to re-file the motion in compliance with the Court's Individual Rules. (Dkt. No. 16.) The Plaintiff did not re-file its motion.
On March 6, 2009, the Court so-ordered the First Stipulation entered into by the parties to settle and discontinue this action, with prejudice.
The First Stipulation states that the Plaintiff was not paid for its services during three periods: (i) July 1 through December 31, 2007 ("Period I"); (ii) January 1 through June 30, 2008 ("Period II"); and (iii) July 1 through December 31, 2008 ("Period III"). (Rosenberg Decl., Ex. C., at p. 2.)
Under the terms of the First Stipulation, the Defendants agreed to pay the Plaintiff $625,000 to compensate the Plaintiff for the services it provided to the Defendants...
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