Commercial Division Blog
Posted: December 9, 2022 / Written by: Jeffrey M. Eilender, Samuel L. Butt, Seth D. Allen, Joshua Wurtzel, Hillary S. Zilz / Categories Commercial, Jurisdiction
Court Grants Motion To Dismiss Individuals Due To Lack of Personal Jurisdiction
In an Opinion, dated October 25, 2022, in Cortlandt St. Recovery Corp. v. TPG Capital Mgt., L.P., Index Number 65117618/2017, Justice Robert R. Reed granted, inter alia, individual defendants’ motions to dismiss for lack of personal jurisdiction. Plaintiff had brought the action regarding promissory notes known as “floating rate subordinated notes due 2015” issued by a nonparty shell company. The Court rejected Cortlandt’s argument that it had jurisdiction over the individuals under an alter ego theory and the closely-related doctrine. The Court explained:
At best, Cortlandt asserts that (a) Bonderman and Coulter are the "co-founders and heads" of TPG Capital Management, L.P. and held "director and officer" positions at TPG Advisors IV, Inc. ("TPG Advisors IV"); (b) Bonderman and Coulter signed a board resolution in 2005 authorizing the purchase of TIM Hellas by TPG Advisors IV; (c) Bonderman had the highest ownership percentage of TPG in 2006; (d) Bonderman and Coulter were members of an investment review committee and if Bonderman were opposed to a proposed investment, it probably would not have gone forward"; and (e) Bonderman and Coulter were copied on and referenced in some communications about the deal, and wrote a couple of emails about it (Opp. Memo at 23-24).
These allegations fail to refute the sworn statements from Bonderman's and Coulter's affidavits submitted with the motion and affirming — that they "did not participate in the planning or executing" of the refinancing, and had no role in "negotiating, drafting, or approving" the indenture that governs the sub notes (Bonderman Aff. at 3-6; Coulter Aff. at 3). Thus, because of Bonderman's and Coulter's lack of involvement related to the relevant transactions, Courtland cannot establish alter-ego jurisdiction.
As to the closely related doctrine, the Court stated:
Cortlandt's arguments fail because the First Department has held that, for the closely-related doctrine to apply, there must be a showing that "the non-signatory party has an ownership interest or a direct or indirect controlling interest in the signing party, or the entities or individuals consulted with each other regarding decisions and were intimately involved in the decision-making process" (Universal Inv. Advisory SA v Bakrie Telecom Pte., Ltd., 154 AD3d 171, 179, 62 N.Y.S.3d 1 [1st Dep’t 2017]).
Cortlandt has failed to offer tangible evidence that Bonderman or Coulter were intimately involved in the decision-making process of the note offering or the CPEC redemption. At best, Bonderman or Coulter were the beneficiaries of these transactions, but they had no direct involvement in them, as indicated in their unrefuted affidavits submitted with this motion.
The attorneys at Schlam Stone & Dolan deal frequently with personal jurisdiction issues. Contact the Commercial Division Blog Committee at email@example.com if you or a client have questions concerning personal jurisdiction.