Weiss v. All Year Holdings Ltd. (In re All Year Holdings Ltd.)
| Citation | 645 B.R. 10 |
| Decision Date | 04 October 2022 |
| Docket Number | Case No. 21-12051 (MG),Adv. Proc. No. 22-01115 (MG) |
| Parties | IN RE: ALL YEAR HOLDINGS LIMITED, Debtor. Zelig Weiss, Plaintiff, v. All Year Holdings Limited, YG WV LLC, Defendants, and Wythe Berry Member LLC, Nominal Defendant. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Southern District of New York |
PAUL HASTINGS LLP, Counsel for Plaintiff Zelig Weiss, 200 Park Avenue, New York, New York 10166, By: Kristopher M. Hansen, Esq., Nicholas A. Bassett, Esq., Jason M. Pierce, Esq., Shlomo Maza, Esq., Will Clark Farmer, Esq.
WEIL, GOTSHAL & MANGES LLP, Counsel for Defendant All Year Holdings Limited, 767 Fifth Avenue, New York, New York 10153, By: Gary T. Holtzer, Esq., Matthew P. Goren, Esq., Robert S. Berezin, Esq., Richard D. Gage, Esq., Angelo G. Labate, Esq.
HERRICK, FEINSTEIN LLP, Counsel for Defendant All Year Holdings Limited, 2 Park Avenue, New York, NY 10016, By: Stephen B. Selbst, Esq., Avery S. Mehlman, Esq., Janice Goldberg, Esq., Rodger T. Quigley, Esq.
Pending before the Court are two motions. All Year Holdings Limited ("All Year"), the debtor in the main Chapter 11 case (Case No. 21-12051), along with its wholly-owned subsidiary YG WV LLC ("YGWV"), and Wythe Berry Member LLC ("Member LLC," and together with All Year and YGWV, the "Defendants,") have moved to dismiss all claims in the amended complaint ("Complaint," ECF Doc. # 10)1 filed by Plaintiff Zelig Weiss (the "Plaintiff"). ("Motion to Dismiss," ECF Doc. # 21.) Plaintiff opposes the Motion to Dismiss and has also moved for partial summary judgment on Claim III of its Complaint. ("Motion for Partial Summary Judgment," ECF Doc. # 11.)
Claims I through III in the Complaint seek declaratory judgments that: (I) All Year's transfer of interests in YGWV violates the Member LLC Agreement and Delaware Law (Complaint, ¶¶ 86–101); (II) All Year's transfer of interests in YGWV violates the implied covenant of good faith and fair dealing (id. ¶¶ 102–106); and (III) YGWV is dissolved and may not effectuate the transfer of its interests or manage Member LLC. (Id. ¶¶ 107–125). Claim IV seeks to enjoin Defendants from transferring All Year's interests in YGWV (id. ¶¶ 126–134); and Claim V seeks to enjoin All Year and YGWV from acting as managers of Member LLC. (Id. ¶¶ 135–142).
For the reasons explained below, the Court GRANTS Defendants’ Motion to Dismiss Plaintiff's Complaint. Accordingly, the Court DENIES Plaintiff's Motion for Partial Summary Judgment on Claim III.
This action relates to a dispute between individuals and entities with direct and indirect ownership interests in the William Vale, a luxury hotel property and community space in Brooklyn (the "WV Complex"). (Compl. ¶ 2.) According to the Complaint, Plaintiff Zelig Weiss originally conceived of and developed the WV Complex. (Id. ) Weiss invited Yoel Goldman ("Goldman"), former principal of All Year, to join him in the venture, and the two became co-owners of Wythe Berry LLC ("WB LLC"). (Id. ¶ 24.) WB LLC operated and held title to the WV Complex. Plaintiff and Goldman each owned 50% of WB LLC, and Plaintiff served as the managing member. (Id. ¶ 24.)
According to Plaintiff, Goldman's only role in WB LLC was to provide and/or arrange for its funding. (Id. ¶ 24.) In approximately September 2016, WB LLC required a refinancing transaction as the WV Complex finished construction, and Goldman proposed raising the funds needed by issuing bonds on the Israeli market. (Id. ¶ 25.) Goldman's proposal entailed using and/or creating additional entities to execute the refinancing transaction. First, Goldman proposed to use All Year to issue a bond series (the "Series C Bonds") tied exclusively to the WV Complex. (Id. ¶ 27.) All Year then would cause the proceeds of the bond issuance to be used to pay off/refinance an existing mortgage on the WV Complex and debts of WB LLC. (Id. ) Next, the proposed transaction involved transferring title of the WV Complex to a new entity, Wythe Berry Fee Owner, LLC ("Fee Owner"), with Fee Owner leasing the WV Complex back to WB LLC. (Id. ¶ 28.) Finally, Member LLC was created to become the exclusive owner of Fee Owner, with Weiss and Goldman each owning 50% of Member LLC, either individually or through other entities. (Id. )
Today, Plaintiff holds his 50% interest in Member LLC directly. Goldman's 50% interest in Member is owned by YGWV, which, in turn, is a wholly owned subsidiary of All Year. (Id. ¶ 3.) YGWV is the managing member of Member LLC. (See id. ¶ 37.) In his Complaint, Plaintiff explains that at earlier phases of the transaction, the parties first contemplated Goldman holding his 50% in Member LLC through All Year. (Id. ¶ 31–32.) Indeed, Plaintiff claims that All Year, through authorized representatives, negotiated the Member LLC agreement, and that YGWV was created during negotiations to serve as an intermediary and slotted into the draft Member LLC agreement in place of All Year. (Id. ¶ 32–38.) All Year established YGWV on or about February 1, 2017, upon the filing of articles of organization with the New York Secretary of State, and the YGWV LLC Agreement was executed on February 28, 2017. (Id. ¶ 88.) The Member LLC Agreement was executed that same day between YGWV and Plaintiff. (Id. ¶ 40.)
Plaintiff alleges that, despite YGWV being the final signatory to the Member LLC Agreement, all essential terms of the Member LLC Agreement were negotiated and agreed upon between All Year and Plaintiff before the formation of YGWV, and that All Year conducted these negotiations through its authorized representatives, including All Year's Chief Financial Officer, Yizhar Shimoni ("Shimoni"). (Id. ¶¶ 31, 38.) Plaintiff further alleges that, regardless of the ownership structure, Plaintiff and Goldman's intentions were to co-own and operate the WV Complex exclusively with one another. (Id. ¶ 4.)
Following the creation of YGWV and the execution of the Member LLC Agreement, Goldman and Shimoni proceeded with the refinancing proposal, and Mishmeret Trust Company Ltd. ("Mishmeret"), as Trustee for the Series C Bondholders, eventually loaned the equivalent of $166,320,000 worth of New Israeli Shekels to All Year. (Id. ¶ 35.) All Year, in turn, loaned those funds (in dollars) to Fee Owner to be used for the payment of the debts of WB LLC, including the existing mortgage loan. (Id. ¶ 36.) Fee Owner issued to All Year a $166,320,000 promissory note and a mortgage against the WV Complex (respectively, the "Note" and "Mortgage"). All Year collaterally assigned the Note and Mortgage to Mishmeret to secure the Series C Bonds. (Id. ¶ 36.)
According to Plaintiff, he made an offer to purchase All Year's membership interest in YGWV on or about November 2, 2021, before All Year's filing of a voluntary Chapter 11 petition on December 14, 2021. See In re All Year Holdings Ltd. , Case No. 21-12051 (ECF Doc. # 1); (Id. ¶ 36.) Plaintiff continued to negotiate to purchase All Year's interest in YGWV, but the negotiations evolved into a draft Membership Interest Purchase Agreement (MIPA), whereby Plaintiff would purchase YGWV's interest in Member LLC, as opposed to All Year's interest in YGWV. (Id. ¶ 63–65.) After the MIPA was revised to require approval by this Court, Plaintiff claims that All Year and Plaintiff agreed on all terms of the revised MIPA and, with All Year's knowledge and approval, Mishmeret published the revised MIPA as an exhibit to a filing it made on the Tel Aviv Stock Exchange on or about March 27, 2022. (Id. ¶ 69.)
Plaintiff claims that All Year decided to abandon the transaction with him, and, instead, in or about April 2022, agreed to sell All Year's interest in YGWV to Paragraph Partners LLC ("Paragraph") for essentially the same consideration offered by Plaintiff. (Id. ¶ 69.)
All Year filed a Chapter 11 Plan of Reorganization (the "Plan") on May 31, 2022, with Paragraph as the Sponsor. See In re All Year Holdings Ltd. , Case No. 21-12051 (ECF Doc. # 123). Under the Plan, All Year seeks approval of an Investment Agreement dated March 11, 2022, by and among All Year, Paragraph, and, solely with respect to certain specified sections, Mishmeret, as trustee (the "Investment Agreement"). (Id. ¶ 77.)
Amendment 1 to the Investment Agreement provides that, if Paragraph closes on a separate transaction to acquire the outstanding promissory note and mortgage related to the WV Complex from Mishmeret, All Year will sell to Paragraph its membership interests in YGWV for $200,000. (Id. ¶ 78.) Consistent with the Investment Agreement, the initial proposed disclosure statement dated May 31, 2022 stated that the proposed Plan would "provide for the automatic transfer of [All Year's] interests [in YGWV] to the Sponsor." (Id. ¶ 79, n. 10.)
The Plan also contemplates All Year's possible transfer of the YGWV interests to Wind-Down Co., a new entity to be managed by a plan administrator at the direction of Mishmeret, if the Sponsor's agreement to acquire the note and mortgage does not close before the effective date of the Plan. (Id. ¶ 82.) This is important because Plaintiff alleges that Sponsor and Paragraph failed to close on its purchase of the note and mortgage by the July 24, 2022 outside date under such agreement, and that Mishmeret has declared that Sponsor breached the agreement.2 (Id. )
Plaintiff filed the operative Complaint seeking declaratory and injunctive relief to stop the transfer of All Year's interest in YGWV, whether to Paragraph under...
To continue reading
Request your trial