Capmark Financial Group Inc. et al v. Goldman Sachs Credit Partners L.P. et al

Filing 39

OPINION re: 31 MOTION to Dismiss the Amended Complaint filed by Goldman Sachs Mortgage Company, Goldman Sachs Credit Partners L.P., Goldman Sachs Lending Partners LLC, Goldman Sachs Canada Credit Partners Co. Based on the conclusions set forth above and the prior proceedings, the motion of the Goldman Lenders is granted and the AC is dismissed with prejudice. (Signed by Judge Robert W. Sweet on 4/8/2013) (cd)

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK -----X CAPMARK FINANCIAL GROUP INC.; SUMMIT CREST VENTURES, LLCi CAPMARK CAPITAL LLC (F!K!A CAPMARK CAPITAL INC.); CAPMARK FINANCE LLC (F!K!A CAPMARK FINANCE INC.) i COMMERCIAL EQUITY INVESTMENTS LLC (F!K!A COMMERCIAL EQUITY INVESTMENTS INC.); MORTGAGE INVESTMENTS LLCi NET LEASE ACQUISITION LLCi SJM CAP, LLCi CAPMARK AFFORDABLE EQUITY HOLDINGS LLC (F!K!A CAPMARK AFFORDABLE EQUITY HOLDINGS INC.); CAPMARK REO HOLDING LLCi AND CAPMARK INVESTMENTS LP, 11 Civ. 7511 OPINION Plaintiffs, -against GOLDMAN SACHS CREDIT PARTNERS L.P.; GOLDMAN SACHS CANADA CREDIT PARTNERS CO.; GOLDMAN SACHS MORTGAGE COMPANY; AND GOLDMAN SACHS LENDING PARTNERS LLC, Defendants. ----- X A P PEA RAN C E S: aintiff KASOWITZ, BENSON, TORRES & FRIEDMAN LLP 1633 Broadway New York, NY 10019 By: Michael C. Harwood, Esq. Adam L. Shiff, Esq. At for Defendants DAVIS POLK & WARDWELL LLP 450 Lexington Avenue New York, NY 10017 By: amin S. Kaminetzky, Esq. Andrew D. Schlichter, Esq. Sweet, D.J. Defendants Goldman Sachs Credit Partners L.P., Goldman Sachs Canada Credit Partners CO' I Goldman Sachs Mortgage Company I and Goldman Sachs Lending Partners LLC (the "Goldman Lenders" or the "Defendants") I have moved pursuant to Rule 12 (b) (6) of the Federal Rule of Civil Procedure to dismiss the Amended Complaint (the "AC") of Group Inc. aintiffs Capmark Financial ( "CFGI II), Summi t Crest Ventures, LLC, Capmark Capital LLC (f/k/a Capmark Capital Inc.), Capmark Finance LLC (f/k/a Capmark Finance Inc.), Commercial Equity Investments LLC (f/k/a Commercial Equity Investments I Inc.), Mortgage Investments, LLC, Net Lease Acquisition LLC, SJM Cap, LLC I Capmark fordable Equity Holdings LLC (f/k/a Capmark Affordable Equity Holdings Inc.), Capmark REO Holding LLC, and Capmark Investments LP (collectively, with CFGI, the "Plaintiffs The issues present here lf or "Capmark lf ). se out of the complex transactions surrounding the $8.7 billion leveraged buyout of CFGI 2006, a restructuring of its debt and its bankruptcy in 2009, in which the Goldman Lenders and other entities or affiliates of the Goldman Sachs Group Inc. Group") I (the "Goldman Sachs the parent of the Goldman Lenders were involved. 1 The AC asserts claims that the $145 million payment to the Goldman that must be avoided because Lenders was a preferential trans the Goldman , though its affiliates, were statutory and non-statutory iders. iffs seek to overcome the The PI Goldman Lenders corporate differentiations and their preservation. Able counsel has presented ist upon complicated issues with skill and diligence. These distinctions form are relied upon by participants in structuring complex financial transactions such as those presented here and iff's present position is a reversal of their prior representations. set below, the motion of the Goldman Upon the conclusions is granted and the AC is dismissed. I. Prior Proceedings The Plaintiffs' predecessors (the "Debtors") entered into two unsecured credit facilities in March 2006, pursuant to which they incurred $8.7 billion in unsecured debt from various 1 , including Defendants. In connection with this loan, Goldman Sachs Group managed the PIA Funds, which along with other lenders, a limited liability company that 2 owned 74% CFGI. In May 2009, the Debtors partially repaid this debt by entering into a $1.5 bill secured credit facility. According to the Plaintiffs, as a lender with a member on CFGI's Board of Directors, the Goldman Lenders stood on both sides of this new loan. iffs contend that, as a The PI of this transaction, the Defendants received $147 million to reduce their unsecured loan was ter positioned to held a new secured loan payment in full when iffs' predecessor entity declared bankruptcy in Oc 2009. After several months of unsuccessful attempts to negotiate a comprehens out-of-court restructuring, on October 25, 2009, Capmark commenced voluntary Chapter 11 proceedings in the United States Bankruptcy Court for the Dis before the Honorable ct of Delaware stopher S. Sontchi. According to Defendants, on August 10, 2010, the Official Committee Unsecured Creditors (the "Committee") filed a motion seeking standing to pursue, among other things, the same preference claims against the Goldman Lenders that are 3 ter briefing and discovery now at issue in this litigation. on the Committee's standing motion and a closely-related settlement involving broader claims against all secured lenders on October 14, 2010, Judge Sontchi commenced a five-day evidentiary hearing to consider both the settlement and the Committee's standing motion. Capmark took the position that the Committee's preference claims "cannot satisfy the test for colorability" and "are insufficient to survive the pleadings stage, much less present any likelihood of success on the merits." (Kaminetzky Decl., Ex. D. at ~~ 43, 80). On November 1, 2010, Judge Sontchi issued a ninety three document entitled "Findings of Fact and Conclusions" of Law (the "Findings and Conclusions") in which he, among other things, approved the settlement and denied as moot the Committee's motion for standing to pursue the preference claims. The Committee filed a motion for reconsideration as to its standing to pursue the preference claims. Judge Sontchi held a hearing on the Committee's reconsideration motion on April 11, 2011. According to the Defendants t at that hearing t Judge Sontchi explained that while he did not consciously intend to characterize the Committeets preference claims as moot t 4 '''*i.'_______ w,......,.­ stood ready to expand upon address those claims. s Findings and Conclusions to The Defendants contend that when it became increasingly apparent that Judge Sontchi might issue a definitive adverse ruling on the merits as to the preference claims, the Committee sought to withdraw its standing motion without prejudice with leave to refile. When Judge Sontchi refused, stating that any dismissal or withdrawal of the motion would be with prejudice, the Committee withdrew with prejudice s motion for standing to pursue the preference claims. Plaintif The 'disagree with the Defendants' characterization of the April 2011 hearing, instead noting that the Bankruptcy Court acknowledged that its opinion was not intended to address the Committee's standing to bring the insider preference claims, which were independent of the approved settlement. According to the Defendants, Judge Sontchi, in s order approving the Committee's withdrawal of its standing motion with prejudice, expressly reserved the Goldman Sachs creditors' right to argue that the Plaintiffs, as the reorganized entity emerging out are the the Chapter 11 proceedings, ter ego of the Committee, and, as such, are likewise precluded from asserting the preference claims. The Defendants also contend that the Bankruptcy Court reserved jurisdiction 5 over this issue. The Plaintiffs dispute this characterization the Bankruptcy Court's order. According to the Plaintiffs, on August 24, 2011, Judge Sontchi confirmed the debtors' plan or reorganization, under which the Plaintiffs retained the right to prosecute the insider preference claims that are the subject of this action. On September 30, 2011, Capmark emerged from bankruptcy, the Committee was dissolved, and the Committee's constituents acquired over 99% of the equity in the Plaintiffs, who constitute the reorganized debtor that emerged from the bankruptcy proceedings. On October 24, 2011, the Plaintiffs commenced the present action in the Southern District of New York seeking to recover, as insider preferences, $147 million in trans rs made by the Plaintiffs' predecessors to the Defendants within a year before the Debtors filed their petitions for reorganization in bankruptcy. According to the Defendants, the Plaintiffs in this action are the Committee in a different guise, represented by the same counsel, seeking the same relief that the Committee earlier sought before Judge Sontchi. 6 On May 18 1 2012 that 1 Plaintiffs filed the AC I alleging Goldman Lenders were Capmark insiders transfers l and that legedly made to the Goldman Lenders in connection with the Secured credit Facility beyond the normal ninety-day preference period can be avoided pursuant to 11 U.S.C. 547 (b) (4) (B) . (AC " 82-102). § Plaintiffs also allege that the Goldman Lenders were statutory insiders pursuant to 11 U.S.C. § 101[ and non-statutory insiders under applicable case law. The instant motion to dismiss the AC was heard and marked fully submitted on November 141 2012. II. Background The facts are taken from the AC and the declarations submitted by the part s and are not in dispute except as noted below. 7 The Goldman Lenders are four lender subs The Goldman Sachs Group. The aries of aintiffs are CFGI and ten of its debtor affiliates. 1 On March 23, 2006, several affiliates of The Goldman Sachs Group entered into a package of intertwined agreements constituting leveraged buyout became CFGI. "LBO Transaction") of what (AC ~~ 2, 29-36). PIA Funds along with investors became members of GMACCH, which acquired approximately 75% controlling ownership stake in CGFI. (Id. ~~ 2, 29). PIA Funds are four legally and operationally distinct limited partnerships primarily consisting of investor capital and 1 Investment Area. 2 managed by The Goldman Sachs Group's PIA Funds held a 19.8% ownership interest in GMACCH and with its legedly became a maj llow LLC members. Capmark's Board ty owner of CFGI together (Id. ~~ 2, 29). One designee to Directors was appointed by the PIA Funds. All references to CFGI and its reorganized debtor affiliates as they existed prior to the effective date of the Third Amended Joint Plan of Capmark Financial Group, Inc. and certain of its affiliated proponent debtors under chapter 11 of the Bankruptcy Code (the "Plan") shall be to CFGI and its affiliates as they existed prior to consummation of the Plan. 1 2 The PIA Funds consist of CS Capital Partners V Fund, L.P., GS Capital Partners V Offshore Fund, L.P., GS Capital Partners V GmbH & Co. KG, and GS Capital Partners V Institutional, L.P. 8 The Goldman Lenders acquired positions in two loans to Capmark to finance the LBO Transaction: (i) a $5.5 billion Unsecured Credit Facility dated March 23, 2006 (the "2006 Credit Facility") with Defendant Goldman Sachs Credit Partners L.P. as the Documentation Agenti and (ii) a $5.25 billion Unsecured Bridge Loan dated March 23, 2006 (the "Bridge Loan"), with Defendant Goldman Sachs Credit Partners L.P. acting as a Documentation Agent, Joint Lead Arranger, and Joint Bookrunner. Id. ~ 31). According to the Plaintiffs, the debt and equity aspects of the investment in Capmark were inextricably intertwined, as neither the loans nor the acquisition would have occurred without the other. Id. ~ 33). The acquisition by GMACCH was conditioned on the execution of the Pre Petition Credit Facilities by the Goldman Lenders pursuant to a commitment letter issued by, among others, Defendant Goldman Sachs Credit Partners L.P. At the same March 23, 2006 closing, CFGI also entered into an agreement to retain Goldman Sachs & Co. to provide management, monitoring, and advisory services to Capmark for a of approximately $4 million per 9 year, to increase by 5% annually, regardless of whether any (Id. ~ 35). services were provided. From 2006 through 2009, three managing directors of Goldman Sachs Group, including Stephen Trevor ("Trevor"), Stuart Katz ("Katz") and Bradley Gross ~ the Capmark Board. throughout the managing ("Gross") served in seriatim on 38). According to the Plaintif rectors' respective tenures, each acted as an agent and representat of Defendants, Goldman Sachs Group. and the Goldman Lenders. a member (Id.). Each also became the Capmark Board's Risk, Controls and Finance Committee ("Finance Committee") . (Id. ~~ 2, 38). In addition, Gross allegedly remained in regular communication regarding CGFI with Goldman Sachs' employees involved in both its lending and Id. ~ 52). investment business. Plaintif allege that over the span of two years, the CFGI Board approved the private placement of certain notes and engaged in an exchange Lenders. fer which benefited the Goldman For example, CGFI refinanced some of the LBO Transaction, which allowed the Goldman Lenders to receive early repayment of some debt and to reduce some of the debt burden of the company it now allegedly owned. 10 (Id. ~ 39). Specifically, in May 2007, CGFI issued $2.55 billion of senior unsecured notes in a private placement. Goldman, Sachs & Co., which was (Id.). over 98% owned by The Goldman Sachs Group served as the Global Coordinator and Bookrunner of the Note offering, for which it (Id.). received substantial compensation. I In addition, nearly the proceeds from the Note issuance were used to repay a portion of the Bridge Loan that was owed to Defendants. (Id.) . Plaintiffs contend that The Goldman Sachs Group's controlled filiates possessed a controlling interest Capmark, as the lead lenders, managers and advisors, and had a Id. ~~ 29, 31, 34 36). representative on Capmark's Board. They aver that the participants in the LBO Transaction intended, understood, and represented to the investing public that all parts of LBO Transaction were and should be viewed as one unified transaction. Id. ~ 37). By virtue of this LBO Transaction, the Goldman Lenders and their affiliated parent and Goldman Investors allegedly acted jointly to become lenders, owners, and managers of CFGI. In May 2008, CFGI Id. ~ 36). so engaged in an exchange offer pursuant to which it exchanged $2.55 billion of privately offered 2007 Notes for publicly tradable notes. 11 (Id. ~ 40) . Goldman I Sachs & Co. was chosen as the underwriter of the 2008 exchange offer for which it again received substantial l compensation. Board noted that Goldman Sachs & Id. role as lead underwriter made it necessary for CFGI to CO./S file an SEC Form S-l shelf Sachs l affiliation with stration disclosing "Goldman Company by virtue of its ownership ation. interest and Board distinguish in the SEC fil serving as an owner I ~ (Id. II 42). CFGI did not among the various Goldman entities a Board member I a lender l and an underwriter when it disclosed "Goldman Sachs l affiliation. 1I Id. In late 2008 1 because of -market turmoil and a related decline in the value of its mortgage-related holdings I CFGI found itself in a challenging financial situation and expected to incur a substantial loss in Id. ~~ 41 53). AccordinglYI CFGI explored at extending the maturity of their debt converting debt to equity to stabilize the (Id.). long term. The Debtors l most lenge was the impending March 23 1 2009 fourth quarter. ternatives aimed potentially ance sheet for financial e for the principal balance of $833 million on the Bridge Loan owed to the Goldman Lenders I among others. (rd.) . 12 To deal with these financial difficulties, CFGI's Board appointed a special committee (the "Special Committee") to consider strategic restructuring alternatives. Id. ~ 54). According to Plaintiffs, Gross and other Goldman employees participated in numerous Special Committee and Board meetings and were involved with major decisions regarding how to deal Id. ~~ 52, 54 63). with the impending debt payment. After extensive negotiations, on May 29, 2009, CFGI other debtor guarantors, with CFGI Board's approval,3 entered into the 2006 Credit Facility or Bridge Loan with the Goldman Lenders and various other lenders. Pursuant to that agreement, CFGI secured a new $1.5 billion secured term loan facility (the "Secured Credit Facility") to pay down the same amount of the 2006 Credit Facility. Id. ~~ 44, 47). CFGI also granted security interests in nearly all its u.S. and Canadian mortgage loan assets and foreclosed real estate, other than its ownership of and the assets of Capmark Bank. Id. ~~ 45 46). According to Plaintiffs, the Secured Credit Facility thus replaced unsecured debt with Secured Debt, which was better 3 Although Gross participated in the Board's discussions of this loan, he ultimately abstained from the vote on the resolution to protect Goldman's conflicted positions. rd. ~~ 4, 52, 60}. 13 pos ioned to be paid in full when the Debtors entered Id. ~ 48). bankruptcy five months later. The Secured Credit Facility had repayment terms that were allegedly less favorable to CFGI than the 2006 Credit Facility and Bridge Loan, including a higher "Base Rate" interest rate, an additional "Applicable Margin" of 1.5% per year above the "Base Rate," and an additional "Applicable Margin" of 2.5% per year for "Eurodollar Rate Advances," as well as imposing liens on most of its non­ CGFI Bank properties. (Id. ~~ 46, 51). In addition, the Goldman Lenders, as Lenders on the 2006 Credit Facility and Bridge Loan, received $145,623,054 from CFGI's Secured Credit Facility and cash payment, as further detailed in the AC. (Id. ~~ 91-93). Less than 90 days later, the CFGI Board considered filing for bankruptcy within the 90 day preference period that would have required the Goldman Lenders to return these payments regardless of whether they were insiders, but the Board, including Gross, decided to wait until after the preference period expired. Id. ~~ 7, 67). CFGI filed its Chapter 11 petition less than two months after this preference period expired. Id. ~~ 7,68). III. The Applicable Standard 14 In considering a motion to dismiss pursuant to Rule 12(b) (6), the Court construes the complaint I rally, accepting all factual allegations as true and drawing all reasonable inferences in the plaintiff's favor. ---=-­., 12 F.3d 1170, 1174 Mills v. Polar Molecular (2d Cir. 1993). The issue "is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." ViII 1995) Inc. v. Town of Darien, 56 F.3d 375, 378 (2d Cir. (quoting Scheuer v. Rhodes, 416 U.S. 232, 235-36, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974)). To survive dismi , \\a complaint must contain sUfficient factual matter, accepted as true, to 'state a claim to relief that is plaus ," e on its Ashcroft v. I 556 U.S. 662, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (quoting --------------~------------~ , 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). suffic facts to "nudge [ conceivable to plausible." (2009) aintiffs must allege ir claims across the line from Twombly, 550 U.S. at 570. "The plausibility standard is not akin to a 'probability requirement, I but it asks for more than a sheer poss a defendant has acted unlawfully." 15 lity that Cohen v. Stevanovich, 772 F. Supp. 2d 416, 423 (S.D.N.Y. 2010). Though the court must accept the factual allegations of a complaint as true, it is "not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678. (quoting Twombly, 550 U.S. at 555) . IV. Discussion Plaintiffs contend that the AC has adequately alleged that (i) Defendants were statutory insiders of the Debtors at the time of the Secured Credit Facility because they had acquired their Capmark stock collectively with a group of investors who together became members of GMACCH, a limited liability company that owned approximately 74% of Capmark or (ii) in the alternative, that Defendants were non-statutory insiders in their own right. On the other hand, Defendants contend that there is no basis for Plaintiffs' statutory insider claims against the Goldman Lenders as they are separate corporate entities from the PIA Funds and The Goldman Sachs Group, and that no facts have been alleged supporting veil piercing of these entities. addition, Defendants argue that Plaintiffs have failed to 16 In identify the basic emebts of a non statutory insi let alone allege facts that support one. dismissal of Plaintif 'claims wi They seek the prejudice. A) The Allegations Of The Statutory Insider Claims Are Insufficient the term "insider u of a The Bankruptcy Code def corporate debtor as including a "(i) director,u "(ii) officer,u "(iii) person in control,u "(iv) general partner u the debtor, "(v) a relat of U one of those, or an "affiliate, or an insider of an filiate as if such affiliate were the debtor. u 11 U.S.C. §§ "entity that 101 (31) (B), 101 (31) (E). An "affil rectly or indirectly owns, cont e U is an s, or holds with power to vote, 20 percent or more of the outstanding voting securities of the debtor . addition, " II 11 U.S.C § 101 (31) (2) (A) . language of section 547(b) (4) (B) states that an insider relationship is to be determined on the exact the challenged transfer." n.113 In of 5 Collier on Bankruptcy ~ 547.03[6] (Alan N. Resnick & Henry J. Sommer ., 16 th ed. rev.). "Where the allegedly inequitable conduct was committed by an 'insider' of the debtor, that conduct will be 'rigorously scrutini , by the courts.U Pan Am . v. Del --------~~~--------~~~~~~~ 17 Inc., 175 B.R. 438, 499 (S.D.N.Y. 1994) "Once (citing cases). the debtor produces material evidence of inequitable conduct by an insider, the burden of proof shifts to the insider to demonstrate the good faith and inherent 'fairness' of his conduct toward the debtor and the other creditors." Id. Here, the AC does not allege that the Goldman Lenders, as distinct from the PIA Funds, 11 within any of the statutory insider categories set forth in 11 U.S.C. § 101(31) Plaintiffs have not alleged that any of the Goldman Lenders were (a) directors, officers, or general partners of a Debtor in the CFGI bankruptcy; (b) "person[s] in control" of a Debtor; or (c) affiliates, or insiders of an §§ 101 (31) (B), 101 (31) (E). filiate, of a Debtor. 11 U.S.C. There are also no allegations that any Goldman Lenders had an ownership interest, managerial position, or any other role that allowed for control over a Debtor. Instead, Plaintiffs' allegations relate exclusively to the Goldman Lenders through the PIA Funds' 19.8% interest in GMACCH. (AC " 85, 87). The AC therefore does not allege that the Goldman Lenders were, by themselves, statutory insiders. In addition, the AC has not alleged that the PIA Funds held any equity interest in the Debtors or had any power to 18 the Plaintiffs' predecessors directly to be statutory iders. The Plaintiffs have only alleged that held a 19.8% stake in GMACCH, a Delaware limi PIA Funds liability company that in turn held 74% of the Debtors' equity. 85, 87). The allegation that the PIA Funds' GMACCH allowed the PIA Funds to "extens (AC " ty stake in [ly] control" GMACCH, without more, is insufficient to demonstrate that PIA had actual a "person[s] in control" authority or control GMACCH required claim under § 101 (31) (B) (iii). 99-5068, 225 F.3d 645, at *5 See In re 455 CPW Assocs., No. (2d Cir. have required evidence of ext ens 14,2000) ("[C]ourts control before finding insider status under [identical "person in control" provision of] § 101 (31) (C) (v) ."). Nor would allegation, even if true, establish that the PIA Funds had the substantial control rights required for a 11 U.S.C. Wolverine Proctor & Schwartz Mass. 2011) i § 101(31) (B) (i) claim. See In re LLC, 447 B.R. 1, 31 ------------------~------------~---- (Bankr. D. , 461 B.R. 440, 477 (Bankr. S.D. Ohio 2011) . Plaintiffs aver that Rules 13d-3 and 13d-5 under the Securities Exchange Act or 1934 (the "Exchange Act") render the PIA Funds as statutory Specifically, PIa iders. (Memo in Opp. at 10). iffs advance that if persons agree to act 19 together for the purposes of purchasing an issuer's person "'shall be deemed' to be the benefic equity securities of that issuer benefici member of the group." Cir.2007) ----------------- , (quoting 17 C.F.R. § , each owner 'of all ly owned by any' 489 F.3d 499, 508 (2d 240.13d 5(b) (1)). By their "purposes of terms, Rules 13d-3 and 13d 5 apply Sections 13(d) and 13(g) of the Act," and are intended to ensure that stockholders cannot avoid reporting requirements in a corporate takeover. 17 C.F.R. § 240.13d-3, 13d-5; see _C_S_X____~_.___.__ v C_h_l_·______ __I_n_v . __ '_s __ F_u_n_d _~____~__~L L_P, 654 _ __ F.3d 276, 283 n.6, 283-85 (2d. Congress' purpose in enact r. 2011) (explaining that section 13(d) and Rule 13d-5 was "to insure that public shareholders who are confronted by a cash tender offer for their stock will not be required to respond without adequate intentions of the ion regarding the qualifications and ing party.") . cases cited by Plaintiffs for the proposition that "courts have zed Rule 13d in the bankruptcy context" (Memo. in Opp. at 10) do not suggest that Rules 13d 3 and 13d-5 under Exchange Act should supplant the definition "ins set out in the Bankruptcy Code. has The Second rcuit similar attempts to supplant definitions set out in 20 the Bankruptcy Code with dissimilar definitions from the Exchange Act. See Enron Creditors Recovery Corp. v. Alfa, B.A.B. de C.V., 651 F.3d 329, 339 n.4 (2d Cir. 2011) (stating that when a "case calls on us to interpret a provision of the Bankruptcy Code. It makes little sense to look to a definition from a different statutory scheme, particularly when that definition contradicts the Bankruptcy Code's."). The AC therefore fails to adequately allege that the Goldman Lenders or the PIA Funds were statutory insiders at the time of the alleged preferential transfers. PI iffs Have Not All Plaintiffs have not pled facts that would permit the mUltiple corporate veils separating the Goldman Lenders, the PIA Funds, and The Goldman Sachs Group to be disregarded. Plaintiffs contend that they are not required to allege veil piercing or alter ego theories to recover the preferential transfers in the instant case. They aver that Goldman Sachs Group "had a three-year, multi-faceted relationship with Capmark, through various subsidiaries" and made no distinction between its roles as an investor in and lender to Capmark[.]" 21 (Memo in Opp. at 12-13). Alternatively, Plaintiffs assert that a federal common law of veil piercing applies here because the case is "solely on federal questions under Bankruptcy Code sections 547 and 550, and not diversity jurisdiction." (Memo in Opp. at 13). "Well-established precedent holds that in order for one company to be held responsible for the actions of a related company, it is necessary that there be sufficient facts to pierce the corporate veil." Ins. Co. of N. Am. v. Cohn (In re Cohn), 54 F. 3d 1108, 1117 (3d Cir. 1995) i see Clear Thinking Group LLC v. Brightstar US, Inc. (In re KCMVNO, Inc.), No. 08­ 10600 (BLS) , Adv. Pro. No. 10-50730 (BLS) , 2010 WL 4064832, at *3 (Bankr. D. Del. Oct. 15, 2010) (to survive a motion to dismiss a claim that an alleged insider's conduct can be imputed to an affiliated creditor, a plaintiff must allege facts sufficient to support veil piercing) i see also Official Comm. of Unsecured Creditors of Champion Enters., Inc. v. Credit Suisse (In re Champion Enters., Inc.), No. 09-14014 10-50514 (KG), 2010 WL 3522132, at *10 2010) (KG), Adv. Pro. No. (Bankr. D. Del. Sept. 1, (dismissing insider claims based on insufficient veil­ piercing allegations) . 22 veil is a state law theory of "Piercing the liability that requires s establishing that a controlling entity ignored the legal status of, and dominated the affairs of, a controlled entity." of law rules, "the law of Id. Under New York's choice state of incorporation determines when the corporate form will be disregarded." Fletcher v. Atex, Inc., 68 F.3d 1451, 1456 (2d r. 1995) quotation marks omitted) . , Delaware law governs the analysis for Goldman Sachs (citation and internal Partners LLC (a Delaware LLC) and Goldman Sachs Credit Partners, L.P. (a Bermuda limited partnership with a Delaware LLC as its York law governs the analysis for the partner); New dman Sachs Mortgage Company (a New York limited partnership with a New York corporation as its general partner); and Nova Scotia law governs analysis for Goldman Sachs Canada Credit Partners Co. Nova Scotia unlimited company). See e. (a NetJets Aviation ------~~--------------------~ Inc. v. LCH Commc'ns, LLC, 537 F.3d 168, 177 (2d Cir. 2008) (Delaware law governs veil-piercing claims involving Delaware LLCs) i In re Digital Music Antitrust Litig., 812 F. Supp. 2d 390, 418 (S.D.N.Y. 2011) (New York law governs 1 against New York corporations) ; Sudan v. (S.D.N.Y. 2006) ing Church Inc., 453 F. Supp. 2d 633, 684-87 (applying the laws of Mauritius and 23 Netherlands to corporations organized under those countries l laws) . A claim premised on veil piercing can survive a motion complaint all to dismiss if facts sufficient to show that (1) the parent exercised "complete domination and control ll over the subsidiary such that the subsidiary had no "legal or independent significance of [its] own l ll and (2) to perpetrate some form of injustice or fraud. form was Wallace v. Wood Fletcher the corporate 752 A.2d 1175 / 1183 I (Del. Ch. 1999); see also 68 F.3d at 1457-58 (under Delaware law l requires a dual showing that l parent and subs 1 piercing "operated as a single economic enti tyll such that subsidiary was a "mere instrument itylll and "that an overall element of ustice or unfairness is present ll ) ; MAG Portfolio Consult l GMBH v. Merlin ------------~---- York law l 1268 F.3d 58 1 63 (2d Cir. 2001) ("[U]nder New a court may pierce the corporate veil where 1) the owner exercised complete domination over the corporation with respect to the transaction at issue and 2) such domination was used to commit a fraud or wrong that injured the party seeking to Bus erce the veil. Laws of 1I (citations omitted)); Miller Thomson LLP I § 2:6 (2011) or lifting the corporate veil is to be 24 ("[T] remedy of piercing only in the most exceptional circumstances, such as cases involving fraud or flagrant injustice, a corporation being used for a sham for the individuals behind it, or based on principles of agency.") . In addition, the standard for veil-piercing is very demanding. Thus, "[d]isregard of the corporate form is warranted only in extraordinary circumstances, and conclusory allegations of dominance and control will not suffice to defeat a motion to dismiss." Societe d' Assurance de l'Est SPRL v. Citigroup, Inc., No. 10 Civ. 4754 (S . D . N . Y. Sep. 13, 2011). (JGK) , 2011 WL 4056306, at *5 "The unadorned invocation of dominion and control is simply not enough" to state a claim premised on veil piercing. In re Digital Music Antitrust Litig., 812 F. Supp. 2d at 419 (dismissing veil-piercing claims under New York and Delaware law) i see also Crosse v. BCBSD, Inc., 836 A.2d. 492, 497 (Del. 2003) (affirming dismissal of veil-piercing claim where a plaintiff failed to "plead facts supporting an inference that the corporation, through its alter-ego, has created a sham entity designed to defraud investors and creditors") . Courts evaluating insider status under the Bankruptcy Code have applied veil-piercing law. See e.g., In re Enter. Acquisition Partners, 319 B.R. 626, 634 25 (9 th Cir. BAP 2004) (finding that "[s]tate law controls whether it is appropriate for the bankruptcy court to pierce the corporate veil" in the context of a statutory insider preference claim) i Stern v. Singh Factors, LLC (In re Shore to Shore Realty, Inc.), No. 8-08­ 72760-reg, Adv. Proc. No. 8-09 08296-reg, 2011 WL 350526 1 at *5 6) (Bankr. E.D.N.Y. Feb. I, 2011) (applying New York veil­ piercing law to a section 548 fraudulent transfer claim) i see also In re Champion, 2010 WL 3522132, at *9-10 (applying state veil-piercing law in an equitable subordination case). This practice is consistent with the well established principle that any interest in the uniform application of federal statutes is "insuffi ent to justify displacing state law in favor of a federal common law rule." New York v. National Service Indus. Inc., 460 F.3d 201, 208-09 (2d Cir. 2006) (internal quotation marks omitted) . As a threshold matter, aintiffs have contended that a veil piercing requirement "would effectively destroy preference liability whenever an investor uses a separate lending entity to make and receive loan payments." at 10). (Memo in Opp. However, as discussed above 1 facts must be alleged to support a showing of domination, fraud or injustice. Thus, a basis for veil piercing exists when an investor exercises 26 sufficient dominion over a lender to use that entity for its own fraudulent or unjust purposes. Moreover, in Miller Avenue Professional and Partners, Inc.), the Ninth C Bankruptcy Appellate Panel considered and ected Plaintiff's position that a parent company's insi status claims can be imputed to its subsidiary absent veil piercing. 319 B.R. 626, 629 (9th Cir. BAP 2004) . In overturning the bankruptcy court's decision, Appellate Panel d that ""[t]he only way for [t Bankruptcy corporation] to qualify as a se insider is disregarded and the [corporation] to be treated as one and the same as [the statutory insider] is for veil ing, the court justification for expanding the def beyond what is plainly contained in the corporate form to be /I Id. at 633. Absent a ained, "there is no tion of per se insider statute." Id. at 632­ 33. Plaintif have also suggested that "Congress' adoption of the Bankruptcy Act demonstrated an intent to impose uniform federal laws on the subject of fraudulent trans preferences in bankrupt /I (Memo in Opp. at 14). and However, in 27 _ _ _ _ _ _ _ _ _ _ _ _ _ _..... _:_g!iJi~""""~------""

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