United States Securities and Exchange Commission et al v. Platinum Management (NY) LLC et al

Filing 353

MEMORANDUM DECISION AND ORDER dated 7/16/18 denying Non-Party Navidea Biopharmaceuticals, Inc. 342 Motion Non-party Navidea Biopharmaceuticals, Inc. seeks an order lifting the litigation stay in this receivership case so that it may implead one o f the companies in receivership in an action pending outside the receivership. Because the costs to the Receivership and resulting prejudice to other parties-in-interest outweigh the prejudice that Navidea might suffer from deferring its litigation, the motion is denied. ( Ordered by Judge Brian M. Cogan on 7/16/2018 ) (Guzzi, Roseann)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------------------------------SECURITIES AND EXCHANGE
COMMISSION,

,

Plaintiff,
- against PLATINUM MANAGEMENT (NY) LLC;
PLATINUM CREDIT MANAGEMENT, L.P.;
MARK NORDLICHT; DAVID LEVY;
DANIEL SMALL; URI LANDESMAN;
JOSEPH MANN; JOSEPH SANFILIPPO; and
JEFFREY SHULSE,
Defendants.
-----------------------------------------------------------

X
:
:
:
:
:
:
:
:
:
:

MEMORANDUM DECISION
& ORDER
16-cv-6848 (BMC)

X

COGAN, District Judge.
Non-party Navidea Biopharmaceuticals, Inc. seeks an order lifting the litigation stay in
this receivership case so that it may implead one of the companies in receivership in an action
pending outside the receivership. Because the costs to the Receivership and resulting prejudice
to other parties-in-interest outweigh the prejudice that Navidea might suffer from deferring its
litigation, the motion is denied.
BACKGROUND
In 2012, Navidea, as borrower, and Platinum-Montaur Life Sciences LLC (“PlatinumMontaur”), as lender, entered into a loan agreement and related promissory note. At all relevant
times, Platinum Partners Value Arbitrage Fund L.P. (“PPVA”) was the holder of roughly 99% of
the membership interests in Platinum-Montaur. In 2016, Platinum-Montaur assigned certain of
its assets to Platinum Partners Credit Opportunities Master Fund LP (“PPCO”), including the

right to payments due under the note. 1 Navidea contends that Platinum-Montaur and PPCO are
affiliated entities.
At the end of 2016, the Securities and Exchange Commission filed this case, and the
Court entered an Order placing PPCO into receivership, along with certain affiliated companies.
Roughly about the same time, the Financial Services Division of the Grand Court of the Cayman
Islands directed the winding up of PPVA, and appointed joint liquidators. PPVA, including
Platinum-Montaur, is part of a separate group of entities, not part of this Court’s receivership.
In February 2017, the Receiver made a demand on Navidea for it to repay the portion of
the note owed to PPCO. At the same time, Platinum-Montaur demanded that Navidea repay a
separate portion of the note.
After these two demands – from PPCO and Platinum-Montaur – Navidea repaid PPCO.
The Repayment Agreement between Navidea and PPCO contained an indemnification provision,
stating:
To the extent that any Cause of Action is made against any of the Released Parties
by any affiliate(s) of Lender, Lender agrees to reimburse, indemnify, and hold
harmless, the Released Parties against and in respect of any and all Liabilities
incurred or suffered by any of them as a result of such Cause of Action.
Navidea did not remit payment to Platinum-Montaur, and Platinum-Montaur has commenced an
action to recover that portion of the note that it asserts is payable.
Navidea wrote to the Receiver, requesting that PPCO reimburse and indemnify it against
all liabilities, including Platinum-Montaur’s claim. The Receiver declined. Navidea therefore
seeks to lift the litigation stay so to allow it to file a third-party complaint for indemnification
against PPCO in the Platinum-Montaur litigation.

1

There seems to be some dispute about whether this assignment was complete or partial, but as will be explained
below, this motion can be decided without resolving that question.

2

DISCUSSION
The parties agree on the factors the Court should consider in deciding whether to lift the
stay:
1) whether refusing to lift the stay genuinely preserves the status quo or whether
the moving party will suffer substantial injury if not permitted to proceed; (2) the
time in the course of the receivership at which the motion for relief from the stay
is made; and (3) the merit of the moving party’s underlying claim.
S.E.C. v. Byers, 592 F. Supp. 2d 532, 536 (S.D.N.Y. 2008), aff’d, 609 F.3d 87 (2d Cir. 2010)
(citing S.E.C. v. Wencke, 742 F.2d 1230, 1231 (9th Cir. 1984)); see also United States v. JHW
Greentree Capital, L.P., No. 3:12-CV-00116, 2014 WL 2608516, at *4 (D. Conn. June 11, 2014)
(noting that this test “has been applied by courts in the Second Circuit,” along with multiple
other Circuit Courts.).
The three-factor test “simply requires the district court to balance the interests of the
Receiver and the moving party.” S.E.C. v. Universal Fin., 760 F.2d 1034, 1038 (9th Cir. 1985).
“[T]he interests of the Receiver are very broad and include not only protection of the
receivership res, but also protection of defrauded investors and considerations of judicial
economy.” Id. Accordingly, the Court’s power to enter a stay “is broader than [its] authority to
grant or deny injunctive relief.” Id. “The movant bears the burden of proving that the balance of
the factors weighs in favor of lifting the stay.” JHW Greentree Capital, 2014 WL 2608516, at
*4.
The parties disagree about the merits of Navidea’s potential claim against PPCO, but the
Court need not reach that issue. Navidea can only secure the ultimate relief it seeks (to the
extent it has a meritorious claim) if Platinum-Montaur prevails against it in the currently pending
litigation. If not, Navidea will suffer no loss for which PPCO might have an indemnification
obligation. Rather than force the Receiver to engage in costly, time-consuming, distracting, and

3

– most significantly – potentially unnecessary litigation, it makes more sense to wait and see the
outcome of the currently pending litigation. See United States v. Acorn Tech. Fund, L.P., 429
F.3d 438, 443 (3d Cir. 2005) (“A district court should give appropriately substantial weight to
the receiver’s need to proceed unhindered by litigation, and the very real danger of litigation
expenses diminishing the receivership estate.”); Liberte Capital Grp., LLC v. Capwill, 462 F.3d
543, 551 (6th Cir. 2006) (“The receivership court has a valid interest in both the value of the
claims themselves and the costs of defending any suit as a drain on receivership assets.”).
Otherwise, the Receiver would simply run up costs in anticipation of a claim that might become
moot.
Navidea, too, will be no worse off for having to wait. Even if PPCO is found to have an
indemnification obligation, Navidea does not argue that it is entitled to any kind of
reimbursement at this time. In fact, the line of cases Navidea cites expressly say otherwise. See
Di Perna v. Am. Broad. Companies, Inc., 200 A.D.2d 267, 270-71, 612 N.Y.S.2d 564, 567
(1994) (“The impleader of a third-party defendant does not vitiate the requirement of a showing
of actual loss before there may be recovery.”) (internal quotations omitted); McCabe v.
Queensboro Farm Prod., Inc., 22 N.Y.2d 204, 208 (1968) (“Since the third-party judgment would
not be subject to execution until there is proof of such payment of the main judgment – whether
by the filing of a satisfaction piece or other means – the third-party action conveys no greater
rights than could be obtained if the action were brought independently.”). Navidea claims only
that it would benefit from “prompt determination . . . of its indemnification right.”
Navidea’s uncertainty as to its potential future rights is not the kind of “substantial

4

injury” that merits lifting the litigation stay. It does not come close to outweighing the costs to
the Receivership in defending against Navidea’s proposed action.
SO ORDERED.

Digitally signed by Brian
M. Cogan

______________________________________
U.S.D.J.
Dated: Brooklyn, New York
July 16, 2018

5