Seagrape Investors LLC v. Tuzman et al

Filing 78

OPINION & ORDER re: 48 FIRST MOTION to Dismiss First Amended Complaint. filed by Kenneth A. Elan, 42 MOTION to Dismiss Notice of Motion to Dismiss. filed by KIT Capital Ltd., Obra Pia Ltd., KIT Capital (Nevis) LLC, Obra Pia Management, GP, Ltd., Obra Pia (US) Feeder, LP, Kaleil Isaza Tuzman, Obra Pia Ltd., Surcusal Colombia, 39 MOTION to Dismiss the First Amended Complaint. filed by Joseph P. Garland, 43 MOTION to Dismiss Declaration o f John Giardino. filed by KIT Capital Ltd., Obra Pia Ltd., KIT Capital (Nevis) LLC, Obra Pia Management, GP, Ltd., Obra Pia (US) Feeder, LP, Kaleil Isaza Tuzman, Obra Pia Ltd., Surcusal Colombia, 44 MOTION to Dismiss Memorand um of Law in Support of Motion to Dismiss. filed by KIT Capital Ltd., Obra Pia Ltd., KIT Capital (Nevis) LLC, Obra Pia Management, GP, Ltd., Obra Pia (US) Feeder, LP, Kaleil Isaza Tuzman, Obra Pia Ltd., Surcusal Colombia. For the reas ons set forth above, the OP Defendants motion to dismiss is granted in part and denied in part. Specifically, the Court grants their motion as to Seagrapes first cause of action for violations of Section 10(b) and Rule 10b-5, second cause of action f or common law fraud, and fourth cause of action for breach of fiduciary duties, but denies it as to Seagrapes third cause of action for breach of contract. Defendants Garlands and Elans motions to dismiss are granted in full. According to the docket, Defendants Blaurock and Davi have not yet appeared in this action. No later than October 2, 2020, Seagrape shall file a letter explaining when and how it effectuated service upon Defendants Blaurock and Davi, whether it has been in contact with these Defendants, and whether it intends to move for a default judgment against them. The Clerk of Court is respectfully directed to terminate the motions pending at Dkts. 39, 42, 43, 44, and 48. (Signed by Judge Ronnie Abrams on 9/25/2020) (rj)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

USDC-SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC#:
DATE FILED: 9/25/2020

SEAGRAPE INVESTORS LLC,
Plaintiff,
v.
KALEIL ISAZA TUZMAN, KIT CAPITAL,
LTD., KIT CAPITAL (NEVIS) LLC, OBRA
PIA LTD., OBRA PIA (US) FEEDER, LP,
OBRA PIA MANAGEMENT, GP, LTD.,
OBRA PIA LTD., SURCUSAL
COLOMBIA, AMANDA BLAUROCK,
ROSARIO DAVI, JOSEPH P. GARLAND,
AND KENNETH A. ELAN,

No. 19-CV-9736 (RA)
OPINION & ORDER

Defendants.
RONNIE ABRAMS, United States District Judge:
Plaintiff Seagrape Investors LLC (“Seagrape”) brings this related action against Defendants
Kaleil Isaza Tuzman (“Tuzman”), KIT Capital, Ltd. (“KIT Capital”), KIT Capital (Nevis) LLC (“KIT
Nevis”), Obra Pia Ltd. (“Obra Pia”), Obra Pia (U.S.) Feeder, LP (“OP Feeder”), Obra Pia
Management, GP, Ltd. (“OP Manager”), Obra Pia Ltd., Surcusal Colombia (“OP Colombia,” and
collectively with the aforementioned Defendants, the “OP Defendants”), as well as individuals
Amanda Blaurock (KIT Nevis’s General Counsel), Rosario Davi (KIT Nevis’s CFO), and Joseph
Garland and Kenneth Elan (the OP Defendants’ prior counsel). 1

Against certain of the OP

Defendants, Seagrape asserts claims for federal securities fraud under Section 10(b) and Rule 10-b5,

This action is related to Obra Pia Ltd. et al. v. Seagrape Investors LLC et al., No. 19-cv-7840 (the “Obra Pia Action”),
in which this Court is simultaneously issuing an opinion granting Defendants’ motion to dismiss (the “Obra Pia Opinion”),
see Obra Pia Action Dkt. 85. The Obra Pia Action was initially commenced in New York state court on June 24, 2019
and removed to this Court on August 21, 2019. An amended complaint in that action was filed on September 18, 2019
(the “Obra Pia Complaint”).
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common law fraud, and breach of contract, and––along with Defendants Blaurock and Davi––a claim
for breach of fiduciary duties. As to Defendants Garland and Elan, Seagrape asserts claims for aiding
and abetting breach of fiduciary duty, as well as violations of New York Judiciary Law § 487.
Now before the Court are three motions to dismiss for failure to state a claim under Federal
Rule of Civil Procedure 12(b)(6): one filed by the OP Defendants, one filed by Garland, and one filed
by Elan. For the reasons that follow, the OP Defendants’ motion is granted in part and denied in part,
and Garland and Elan’s motions are both granted in full.
BACKGROUND
I.

Factual Background
The following facts are drawn from Seagrape’s First Amended Complaint (the “FAC” or

“Complaint”), Dkt. 35, and are assumed to be true for the purpose of this motion. See Stadnick v.
Vivint Solar, Inc., 861 F.3d 31, 35 (2d Cir. 2017).
A. Prior Relationship Between Mullen and Tuzman
According to the Complaint, Tuzman and Edward Mullen, Seagrape’s principal, have had a
“long history of friendship and business dealings” since the 1990s. See FAC ¶ 25. Seagrape asserts,
for instance, that prior to 2013, Mullen “agreed to lend and invest various sums of money to Tuzman
to fund one or more of his transactions.” Id. ¶ 28. As to his prior ventures, Seagrape maintains that,
between 2001 and 2010, Tuzman bought and sold technology and media-related companies through
a vehicle named “KIT Capital, Inc.,” 2 and that he established an internet-video technology company
named KIT Digital, Inc. (“KIT Digital”). Id. ¶ 27.

Seagrape refers to both Plaintiff KIT Capital (Nevis) LLC and KIT Capital, Inc.––an entity that does not appear to be a
party in this case––as “KIT Capital.” See FAC ¶¶ 13, 27. It refers to Plaintiff KIT Capital, Ltd. as “KIT Capital Dubai.”
See id. ¶ 12. For the avoidance of doubt, the Court will refer to Plaintiff KIT Capital, Ltd. as “KIT Capital,” as it did in
the Obra Pia Opinion, and to Plaintiff KIT Capital (Nevis) LLC as “KIT Nevis.” To the extent the Court can discern
when Seagrape is referring to KIT Capital, Inc., as opposed to KIT Capital, Ltd. or KIT Capital Nevis (LLC), it will refer
to it simply as “KIT Capital, Inc.”

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B. The Investment Agreement
On May 1, 2013, Mullen, his entity Oaktree Partners, LLLP (“Oaktree”), Tuzman, and his
entity KIT Media, Ltd. (“KIT Media”) entered into the Investment Agreement. Id. ¶ 29; see also OP
FAC Ex. 1 (“Investment Agreement”). 3 Seagrape asserts that Mullen and Oaktree entered into the
Investment Agreement “as lenders.” See FAC ¶ 29. Pursuant to the Agreement, Mullen and Oaktree
were identified as “Investors,” while KIT Media was listed as the “Recipient” and Tuzman the
“Guarantor.” Investment Agreement at 1. The Investment Agreement specified that Mullen and
Oaktree had “previously [] invested the sum of $1,885,513” (the “Prior Amount”), and that they
“agreed to lend KIT Media” an additional $1,850,000 (the “New Amount”). See FAC ¶ 29 &
Investment Agreement at 1. In connection with the “Prior Amount,” the parties agreed that KIT Media
would pay $2,161,492, including a “guaranteed return” of $275,979, by December 31, 2013 (the “Due
Date”), and that, upon such payment, Mullen and Oaktree would “transfer their previously owned
shares in KIT Media to KIT Capital.” FAC ¶ 30 & Investment Agreement § 3.1. The parties agreed
further that, by the Due Date, KIT Media would pay the New Amount to Mullen and Oaktree, in
addition to a “return based on a 20% share in [KIT Media’s] profits over the time period of such
investment.” Id. As security for both the Prior Amount and the New Amount, Tuzman agreed to
grant Mullen a “first mortgage and security interest” on two properties––identified as the
“Collateral”––in Cannes, France and Park City, Utah. See Investment Agreement §§ 1.1, 5.1 & FAC
¶ 31. According to Seagrape, Tuzman “represented to Mullen that these two properties provided
ample security for the amounts due under the Investment Agreement.” FAC ¶ 31. Additionally,

The Court finds that the relevant agreements cited and described in the Complaint are “incorporated into the complaint
by reference.” ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007). Because the Obra Pia Complaint
attached these documents as exhibits, but the Seagrape Complaint did not, the Court refers to the Obra Pia Complaint’s
exhibits, and does so by using the “OP FAC Ex.” prefix.
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Seagrape maintains that “Tuzman’s pledge of these security interests confirms that the Investment
Agreement was in the nature of a loan.” Id.
Pursuant to the Investment Agreement, Tuzman agreed to “personally guarantee each of the
obligations of KIT Media and its holding company, including payment of the Prior and New
Amounts.” FAC ¶ 32 & Investment Agreement § 5.6. Section 5.6 provided further that the guarantee
contained therein “shall survive the death, disability, insolvency, bankruptcy and transfer for the
benefit of creditors or otherwise of [Tuzman, as the] Guarantor,” and that it would be “binding upon
and become the obligation of [Tuzman’s] heirs, executors, personal representatives, trustees,
successors and assigns.” Id.
The Investment Agreement expressly provided for certain situations that would constitute a
“default.” See Investment Agreement § 7.2. Among other things, a default would occur if KIT Media
failed “to make any of its payment obligations under the Agreement by the Due Date,” as well as if
Tuzman failed to “perform any of his obligations under the Agreement, including [by] failing to
perfect a first mortgage on the Collateral.” FAC ¶ 33.
The Investment Agreement contains a New York choice-of-law provision, which provides that
the Agreement “shall be governed by and construed in all respects in accordance with the laws of the
State of New York.” Investment Agreement § 11.
Seagrape alleges that, in 2013, KIT Media defaulted on its payment obligations under the
Investment Agreement, and that Tuzman “likewise defaulted on his obligation to execute documents
perfecting [Mullen and Oaktree’s] security interest in the Collateral.” FAC ¶ 36. Despite these
defaults, Tuzman allegedly “assured Mullen that business was going well and that he would soon be
paid.” Id. Seagrape maintains that, because of their “close personal friendship,” Mullen “allowed
Tuzman additional time” to satisfy his, and his entity’s, obligations under the Investment Agreement.
See id.
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C. The Project
As detailed in the Obra Pia Opinion, this dispute arises from Seagrape’s investment in the
development of a luxury hotel project in Cartagena, Colombia, known as “Convento Obra Pia” (the
“Development” or the “Project”). See id. ¶ 1. According to the Complaint, Tuzman first advised
Mullen about the Project in approximately 2014, and at that point, he “began soliciting a loan or
investment by Mullen into the Project.” Id. ¶ 37. Seagrape alleges that Tuzman needed funding for
the Project. See id. ¶ 38. It asserts further that Tuzman himself “held a substantial equity position”
in the Project and therefore “stood to benefit personally from any funding by Mullen––to the extent
that such funding enabled Tuzman to complete and sell the Project, and to achieve a return on his
equity.” See id. As to Mullen in particular, Seagrape alleges that Tuzman “stood to benefit from
inducing Mullen to fund the Project” because “Tuzman and others freely used the cash and assets of
the Project for their own personal benefit, including to purchase hundreds of thousands . . . of dollars’
worth of luxury goods” that had “no proper purpose in a real estate development.” Id.
D. Tuzman’s Alleged Misrepresentations Regarding the Project
Seagrape asserts that it subsequently discovered that Tuzman had “fraudulently induced” it
“into making the loans and investments” for the Project based on “materially false representations of
fact concerning the Project, including vast overstatements of the amount that Tuzman and his entities
had personally invested in the Project.” Id. ¶ 4; see also id. ¶ 38 (alleging that Tuzman “made a
number of misrepresentations and omissions to induce Mullen to invest in and fund the Project”).
First, Tuzman allegedly stated that he “held the Project through his ownership and control of
[KIT Nevis] and [Obra Pia], the Colombian subsidiary of which . . . held title to five parcels of real
estate, as well as all relevant construction licenses and entitlements, related to the Project.” Id. ¶ 39.
He also allegedly stated that had a contract with Viceroy Hotel Group to “serve as the manager of a
102-key Viceroy-branded hotel.” Id. ¶ 40. According to Seagrape, Tuzman also stated that he was
5

“forming a Real Estate Investment Trust” (a “REIT” or “Fideicomiso”) in Colombia to “hold the
Project,” and that he was “in the process of filing registration documents with the Colombian
securities authorities.” Id. ¶ 43
Second, in an April 7, 2014 email, Tuzman purportedly explained to Mullen that KIT Capital
had a $20 million “bank loan” “in place” and had begun work “about a month ago” with an “expected
construction completion date” of December 2015, and that it had also received a “$5 million equity
investment from Mubadala, an investment fund based in Abu Dhabi.” Id. ¶ 41. Seagrape alleges that
Tuzman made these representations even though he knew that “the $20 million bank loan was not ‘in
place’ and Mubadala had not invested in the Project.” Id. Seagrape contends further that it
subsequently learned that “no construction at all took place on the Project until at least November
2014, thus there could not have been any substantial additional costs and expenses,” and that
“Mubadala had not invested $5 million in equity in the Project.” Id. ¶ 53.
Third, in a July 3, 2014 email, Tuzman allegedly represented to Mullen that he had personally
invested $10 million in the Project and that the existing property had been “appraised by the bank” in
its current state at $27.5 million, i.e., “approximately three times Tuzman’s alleged investment.” Id.
¶ 42. He also again allegedly stated that he had obtained a $20 million bank loan to develop the
property. See id. According to Seagrape, however, these “representations were materially false and
misleading,” id., because, as Seagrape later discovered, Tuzman paid no more than $5.5 million to
purchase all five parcels of real estate comprising the Project, not $10 million, id. ¶ 53, and a “$20
million bank loan had not been secured for the Project,” id. ¶ 63. Seagrape also alleges that Tuzman
“omitted to disclose” that he had “misapplied substantial sums provided by Mullen under the
Investment Agreement to Tuzman’s own personal expenses.” Id. ¶ 42; see also id. ¶ 4 (alleging that
Tuzman improperly “applied over $379,000 [] in invested capital to personal luxury items” with “no
proper purpose in a real estate development,” such as “cars, clothing and watches,” and that he did so
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with Defendants Davi and Blaurock’s “acquiescence”); id. ¶ 81 (alleging that, between February and
May 2015, Tuzman spent “no less than $379,000 on apparent personal items using [KIT Nevis’s]
American Express Black Card”). Seagrape asserts further that KIT Nevis had “far less financially at
risk in the Project than Tuzman claimed,” and that it had thus been “asked to make an outsized loan
and investment of essentially the same amount as [KIT Nevis]/Tuzman,” as opposed to the “fraction
of the capital invested in the Project” that it thought Tuzman had invested. Id. ¶ 54
E. The Hybrid Round
According to Seagrape, during a “luxury yacht trip in Turkey” in August 2014, Tuzman asked
Mullen to invest in “a $6 million [] friends and family round of funding for the Project,” known as
the “Hybrid Round.” Id. ¶ 44. Seagrape asserts that the Hybrid Round was “structured as a purchase
of limited partnership units” (the “LP Units”) in OP Feeder. Id. ¶ 45. OP Feeder “held a 12.5%
promissory note issued by [Obra Pia], convertible into shares of [Obra Pia].” See id.
On September 14, 2014, Tuzman provided Mullen with a “draft term sheet” and “draft
disclosure documents” in connection with the Hybrid Round. See id. ¶ 45. Seagrape contends that
neither the draft term sheet nor the draft disclosure documents “correct[ed] [Tuzman’s] prior
materially false and misleading statements.” Id. Two days later, on September 16, 2014, Tuzman
provided Mullen with a “draft Subscription Agreement for the LP Units of OP Feeder,” which
Seagrape maintains similarly “did not correct his prior materially false and misleading statements.”
Id. On September 24, 2014, Tuzman gave Mullen a “revised draft version of the Hybrid Round Term
Sheet and Subscription Agreement,” which again “did not correct Tuzman’s prior affirmative
misrepresentations and omissions concerning the Project.” Id. ¶ 49.
On September 28, 2014, Tuzman provided Mullen with “an email investor letter,” as well as
“access to a complete library of documents related to the Hybrid Round offering” (the “Hybrid Round
Documents”). Id. ¶ 50. These documents, again, allegedly failed to “correct Tuzman’s prior
7

affirmative misrepresentations and omissions concerning the Project.”

Id.

Additionally, on

November 12, 2014, Tuzman apparently sent Mullen “the latest version of the teaser, term sheet, LP
agreement and investment flow chart,” which likewise did not correct any such statements or
omissions. See id. ¶ 51.
Seagrape also asserts that, in connection with the Hybrid Round, an entity in which Defendant
Blaurock “holds an interest”––known as “New Col Holdings, LLC” or “New Col”––“received LP
Units as an alleged commission in connection with Blaurock’s alleged role in raising capital pursuant
to the fraudulent Hybrid Round Documents.” Id. ¶ 61. Although Seagrape acknowledges that
“Blaurock did not procure Mullen or Seagrape as an investor,” id., it nonetheless contends that
Blaurock “received through New Col over $200,000 in LP Units of OP Feeder,” id. ¶ 62.
F. The Addendum
Seagrape alleges that, on September 17, 2014, Tuzman emailed Mullen regarding a “setback
on the Project.” Id. ¶ 46. In particular, Tuzman explained that he needed additional funds in order to
submit the Project’s “REIT prospectus,” and that he was “attempting to raise those funds, to eliminate
the issue.” Id. The next day, on September 18, 2014, Tuzman allegedly “proposed that Mullen lend
the funds needed to pay the [requisite] taxes and permit expenses” in connection with the REIT
application. Id. ¶ 47. He thus presented Mullen with a proposed amendment to the May 2013
Investment Agreement, under which Mullen “would extend a further loan of $343,646 to pay the
taxes and expenses.” See id. Tuzman also apparently “proposed to substitute the Project [itself] as
the Collateral under the amended agreement.” See id.
On September 19, 2014, the parties entered into an “Addendum to Investment Agreement”
(the “Addendum”). See id. ¶ 48; see also OP FAC Ex. 2 (“Addendum”) at 1 (identifying September
19, 2014 as the “Effective Date”). Seagrape maintains that the September 19, 2014 version of the
Addendum was merely a “proposed draft,” and that Mullen only “agreed in principle to [its] terms”
8

in September 2014. See FAC ¶ 48. According to Seagrape, “after reaching an agreement in principle,
the parties continued to negotiate numerous terms of the Addendum, until a final executed version
was reached on November 27, 2014.” Id. Nonetheless, Seagrape alleges, Mullen entered into the
Addendum based on “Tuzman’s prior representations and omissions concerning the Project.” Id. 4
Pursuant to the Addendum, Seagrape replaced Mullen and Oaktree as the “Investor” and OP
Feeder replaced KIT Media as the “Recipient.” See id. ¶ 55. Tuzman remained listed as a
“Guarantor,” although KIT Capital and Obra Pia were also added as “Guarantors.” See id. The
Addendum noted that the Investment Agreement was “incorporated by reference into this
Addendum,” and provided in particular that “[a]ny terms in the [Investment] Agreement not explicitly
changed or overwritten by this Addendum will continue to apply to the business dealings between the
Parties.” Addendum at 1 & FAC ¶ 55.
In the Addendum, the Collateral in Cannes, France and Park City, Utah was replaced with
“New Collateral,” defined as four properties in Cartagena de Indias, Colombia that Obra Pia owned
and that KIT Capital beneficially owned, see Addendum §§ 3.1, 3.2, which Seagrape alleges
constituted the Guarantors’ “interests in the Project,” FAC ¶ 60. According to Seagrape, the
Guarantors had represented that such property was appraised at $28.2 million “by an appraisal firm
appointed by a major Latin American banking institution.” Id. Under the Addendum, OP Feeder and
the Guarantors also expressly represented that, “to the best of their knowledge,” the $28.2 million
valuation was “a fair and reasonably accurate determination of the current Fair Market Value of such
properties.” Addendum § 3.2 & FAC ¶ 60.

According to Seagrape, under the “draft Addendum,” it agreed to “apply a portion of the existing debt to the purchase
of [$1 million] in LP Units in OP Feeder.” See id. ¶ 49. To the extent the “draft Addendum” referenced herein differs
from the executed Addendum attached as Exhibit 2 to the Obra Pia Complaint, the “draft” document is not presently
before the Court.
4

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The Addendum acknowledged that, in January 2014, KIT Capital had made a “partial
redemption” to Seagrape in the amount of $50,000. See Addendum at 2. The parties acknowledged
further, however, that “the amounts due under the Investment Agreement for both the Prior and New
Amounts were not paid.” FAC ¶ 56 & Addendum at 3. Accordingly, in light of the $50,000 partial
redemption, the total “2013 Amount Due” was calculated as $4,331,492. See id. In addition, the
parties agreed that a “reasonable preferred return”––at 10% per annum, compounded monthly (the
“Delay Preferred Return”)––would be applied to the 2013 Amount Due of $4,331,492, starting
January 1, 2014. See Addendum at 3; Addendum § 1.3. Thus, the “New Amount Due” to Seagrape,
including the Delay Preferred Return, was $4,656,354. See FAC ¶ 56 & Addendum § 1.4. The due
date for payment of the New Amount Due (the “New Due Date”) was identified as March 31, 2015.
See Addendum §§ 1.1 & FAC ¶ 56.
Pursuant to the Addendum, Seagrape also made an “additional capital investment” in OP
Feeder in the amount of $343,646 (the “Additional Investment”). See Addendum § 2.1. Seagrape
contends that this sum was a loan that “would be used to pay the outstanding taxes and operational
expenses of the Project.” FAC ¶ 57. The Delay Preferred Return rate of 10% applied to the Additional
Investment, but began to accrue only as of October 1, 2014. See Addendum § 2.2 & FAC ¶ 57.
The parties further agreed that, including “both the New Amount Due and the Additional
Investment,” the “total amount due to Seagrape” was $5 million, “plus the Delay Preferred Return.”
FAC ¶ 58 & Addendum § 2.5. The “Current Amount Due,” however, was identified as $4 million.
See Addendum § 2.5. Specifically, “[i]n exchange for a reduction of the balance” from $5 million to
$4 million, OP Feeder “agreed to issue Seagrape 500 limited partnership interests in OP Feeder,” 100
of which were defined as “Ongoing Investment Interests” and the remaining 400 of which “would be
returned upon redemption by OP Feeder of the Current Amount Due.” FAC ¶ 59; see also Addendum
§§ 2.3, 2.5. Seagrape alleges that, consistent with the Addendum and “in reliance upon Tuzman’s
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good faith,” Seagrape also executed a “Limited Partnership Agreement of OP Feeder” on November
28, 2014. FAC ¶ 59. 5
G. The DTZ Memorandum
Seagrape asserts that, even after the Hybrid Round, the OP Defendants still “required
substantial bank financing to complete construction of the Project,” and thus, in approximately 2015,
Tuzman retained the firm “Cassidy Turley Commercial Real Estate Services, Inc. d/b/a DTZ”
(“DTZ”) in order to “raise potential bank or other financing.” Id. ¶ 63.
In approximately June 2015, Tuzman and Blaurock allegedly provided Seagrape with “an
offering memorandum prepared by DTZ on behalf of [KIT Nevis],” known as the “DTZ
Memorandum,” seeking additional financing for the Project in the amount of $23,561,213. Id. ¶ 64.
Seagrape alleges that––based on representations from Tuzman, Davi, and Blaurock––the DTZ
Memorandum represented that KIT Nevis had begun construction on the Project in November 2014,
and that it had “‘already invested $27.8 million in equity to date, including $22.5 million in ‘predevelopment’ land acquisition costs, $2,971,000 in construction costs[,] and $2,522,000 in indirect
development costs.” Id. ¶ 65 (internal quotation marks omitted). Seagrape maintains, however, that
it subsequently learned that “these representations were false” because KIT Nevis “had not invested
anything close to $27.8 million in equity, or $22.5 million in pre-development land acquisition costs.”
Id. ¶ 66. Seagrape asserts further that these numbers were “designed to, and did, give comfort to
existing and potential investors that the equity holders had substantial skin in the game––and thus had
a strong incentive to complete the Project in order to obtain a return on their tens of millions of capital
invested.” Id.

5

The OP Feeder Limited Partnership Agreement has not been submitted with any of the motion papers in this action.

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H. Tuzman’s Indictment
In September 2015, Tuzman was indicted in the Southern District of New York for federal
securities and accounting fraud in connection with KIT Digital, a business unrelated to this dispute.
See id. ¶¶ 2, 68. Seagrape alleges, however, that “the viability of the Project was severely impacted”
by Tuzman’s indictment and ultimate conviction. See id. ¶ 2. Seagrape asserts further that, for several
years thereafter, Mullen “allowed Tuzman an opportunity to sell or complete the Project, and to pay
back his investors, including Seagrape.” Id. ¶ 3.
On September 7, 2015, Tuzman allegedly emailed Mullen, requesting that he loan him an
additional $400,000 as a “backstop” to “cover payroll and other expenses,” i.e., “to protect the
Project.” Id. ¶ 70. Seagrape contends that, at that point, Tuzman failed to disclose that he had recently
been indicted. See id. According to the Complaint, Mullen “dutifully wired” the money to Davi, KIT
Nevis’s CFO. See id. A few weeks later, Seagrape alleges, Tuzman requested that Mullen loan KIT
Nevis an additional $41,000, which Mullen also did. See id. Seagrape asserts that, “when Tuzman
asked Mullen for [this] $441,000 as a ‘backstop’ for [KIT Nevis] upon his arrest, it was not to keep
the Project on track,” but rather, “to cover [KIT Nevis’s] enormous American Express Black Card
bill” for certain “personal luxury items.” Id. ¶ 82.
Tuzman was ultimately found guilty of the charges of conspiracy to commit securities fraud
and conspiracy to commit wire fraud on which he was indicted. See id. ¶ 71. Seagrape alleges that
Tuzman’s indictment “impacted the viability of the Project[] and placed Seagrape’s loans and
investments at risk.” Id. ¶ 72.
I. Attempts to Sell the Project
According to Seagrape, as a result of certain “difficulties” that stemmed from Tuzman’s
indictment, Tuzman “agreed to seek out a third-party that would purchase the Project in its unfinished
state,” which would allow Seagrape and other investors to receive a return on their “troubled
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investments.” Id. Mullen also apparently “agreed to help identify such a suitable purchaser or
investor.” Id.
On November 19, 2015, Blaurock, who was “acting President of [KIT Nevis]” at the time,
circulated an “outreach” email to Mullen, which represented that $19 million in cash had been spent
since 2010. Id. ¶ 73. On December 16, 2015, Davi sent an email to investors, including Mullen,
which again asserted that KIT Nevis “had spent $19 million in ‘hard cash’ on the Project since 2010.”
Id. ¶ 74. And on December 21, 2015, Tuzman sent an email, on which Mullen was copied,
“reiterat[ing] his claim that $19 million in ‘hard cash’ had been spent on the Project.” Id. At some
point thereafter, Tuzman, Davi, and Blaurock “began to receive offers to purchase the Project,
including a non-binding offer valuing the Project at $27 million”––an amount which, Seagrape
contends, would have been sufficient to “result in a full return to Seagrape, the senior secured
creditor” at the time. Id. ¶ 75.
Seagrape asserts that, on December 29, 2015, KIT Nevis’s counsel sent Mullen an email,
confirming that Seagrape was “owed in excess of $7 million,” plus “interest [that was] continuing to
accrue on the amounts owed to Seagrape.” Id. ¶ 76. KIT Nevis’s counsel also allegedly confirmed
that the “Obra Parties” were “currently engaged in a sale process/capital raise” such that “Seagrape
[would] be paid off in whole or in part at the closing of the transaction.” See id. According to
Seagrape, in early 2016, Tuzman, Davi, and Blaurock also informed it that KIT Nevis had “received
a number of offers for the Project in the $20 million range,” but that they were “not interested in these
offers” and thus did not pursue them because, Seagrape maintains, “they would not result in any
substantial payment to [Tuzman, Davi, Blaurock] and [KIT Nevis] as the residual equity owners.” Id.
¶ 79.
Additionally, during this time, Mullen allegedly informed Tuzman and his colleagues about
certain defaults and non-payments. On January 15, 2016, for instance, Mullen informed Blaurock
13

and Davi, among others, that Obra Pia was “currently in default” because it had “failed to make
several payments to Seagrape that became due throughout the past year, going back as far as March
2015.” See id. ¶ 77. Mullen also apparently explained that Seagrape had “held off on foreclosing on
the entire project up until this point,” based on certain representations made by Tuzman and “the
entities he represents” that the present “funding round will ensure Seagrape is paid in full.” Id. On
January 17, 2016, Mullen also allegedly emailed Tuzman directly, asking him to acknowledge that he
was in default and to confirm that Mullen and Seagrape were owed at least $5 million based on the
money they had provided to Tuzman over the years. See id. ¶ 78.
Ultimately, in 2016, GACP Latin American Partners LLC (“GACP”) entered into a “nonbinding letter of intent to purchase the Project.” Id. ¶ 3. Specifically, GACP entered into this Letter
of Intent (“LOI”) on August 23, 2016, agreeing to an “upfront purchase of shares and a commitment
to fund the completion of the [D]evelopment.” Id. ¶ 83. Seagrape asserts that GACP did so “based
upon an alleged valuation of the Project as completed at $50.2 million.” Id.
J. Credit and Security Acknowledgement
Seagrape alleges that, in “connection with entering into the LOI with GACP,” it also entered
into a Credit and Security Acknowledgement (the “CSA”) on August 25, 2016. Id. ¶ 84; see also id.
¶ 3 (alleging that it entered into the CSA in order to “facilitate a potential purchase” of the Project by
GACP). Seagrape entered into the CSA with Tuzman, Obra Pia, OP Colombia, OP Manager, and KIT
Nevis. See OP FAC Ex. 3 (“CSA”). Seagrape asserts that it entered into the CSA “as lender,” FAC ¶
85, although the CSA does not expressly define Seagrape’s role. See CSA at 1. Tuzman, Obra Pia,
OP Colombia, OP Manager, and KIT Nevis, however, were collectively identified as the “Debtors.”
See CSA at 1 & FAC ¶ 85. The CSA specifically provided that the Addendum, executed on September

14

19, 2014, and the Investment Agreement, executed on April 30, 2013, 6 were “ratified and confirmed
in their entirety, except as superseded or modified by [the CSA].” CSA § 4. The CSA referred to the
Investment Agreement and the Addendum together as the “Previous Agreements.” Id. The CSA
provided, moreover, that “any contradiction between the Previous Agreements, on the one hand, and
[the CSA], on the other, shall be resolved in favor of [the CSA].” CSA § 9.
Seagrape asserts that the “principal purpose” of the CSA was to “induce Seagrape to forbear
from foreclosing upon the Project for a limited time” and to “enable GACP to execute the
contemplated purchase of the Project.” FAC ¶ 84. The CSA provided that Seagrape was “owed by
the Debtors related to funds lent and invested, and penalties and interest levied, by Seagrape and
related parties over time . . . in the [Project].” CSA § 1. The parties acknowledged in the CSA that
the Debtors had “not repaid all of the funds lent by Seagrape when due” pursuant to the Previous
Agreements. See CSA § 2. The CSA thus provided that, as of July 31, 2016, Seagrape was due
$4,694,806 (the “Cash Amount Due”), which was to accrue interest from August 1, 2016 at the rate
of 15% per annum “or the maximum rate allowed by applicable law.” See CSA § 2 & FAC ¶ 86. 7 In
entering into the CSA, Seagrape agreed, among other things, to “forbear from ‘foreclosing’ against
the assets of the Project”––i.e., on its “mature claim to a ‘Cash Amount Due’ of $4,694,806”––until
after March 31, 2017 (the “Foreclosure Date”). 8 See FAC ¶ 3.
In the CSA, Seagrape agreed “not to foreclose” on the “Secured Assets”––defined as the “realestate security for the Cash Amount Due,” which consisted of “the Personal Guarantee” defined in

Although the CSA states that the Investment Agreement was “executed between a number of the Parties on April 30,
2013,” see CSA § 4, the “Execution Date” of the Investment Agreement is May 1, 2013, see Investment Agreement at 1.

6

Although the Complaint states that Seagrape was due this amount as of July 1, 2016, the Court assumes that Seagrape
intended to write July 31, 2016, as provided in CSA § 2.

7

While the initial Foreclosure Date was January 2, 2017, see CSA § 10, the parties agreed that, in the event that either
Debtors or “a third-party on behalf of Debtors” paid Seagrape at least $1 million by January 2, 2017, the Foreclosure Date
would be “extended to March 31, 2017,” see CSA § 11. Seagrape contends that “[n]o further extension or forbearance
was provided or agreed.” FAC ¶ 88.
8

15

Investment Agreement § 5.6 “for the Guaranteed Balance” and the properties defined as “New
Collateral” in the Addendum, see CSA § 5––or on “any other collateral” until the Foreclosure Date
had passed, “as long as all Debtors completely fulfill their obligations under [the CSA].” CSA § 11.
The other parties––Tuzman, Obra Pia, OP Colombia, OP Manager, and KIT Nevis––in turn, agreed
to “fully cooperate to facilitate Seagrape’s foreclosing on the property” and to “not block such
foreclosure or cooperate with anyone seeking to block it.” CSA § 11 & FAC ¶¶ 3, 89.
The CSA provided further that Seagrape was “entitled to a total of 237.5 LP Interests” in OP
Feeder, “as a result of its original investment and certain Penalty LP Interests.” See CSA § 2 & FAC
¶ 86. According to the CSA, Seagrape’s 237.5 “beneficially-owned LP Interests” had a “conversion
rate,” as of July 31, 2016, of $2,882,018. See id. Seagrape maintains that it relied on the OP
Defendants’ “prior misrepresentations and omissions concerning the Project, including that there was
$19 million in ‘hard cash’ invested into the Project” and that “Tuzman himself had invested over $10
million,” when agreeing to “accept the additional 137.5 LP Units in OP Feeder.” FAC ¶ 87.
Additionally, the CSA provided that, in general, “any modification to the property rights of
any of the Debtors on the Secured Assets, including any sale, mortgage, encumbrance, lien, or
establishment of trust agreements in favor of any party, including equity holders, other than Seagrape,
among others, must be first authorized in writing by Seagrape unless at the closing of such transaction
or transactions the Cash Amount Due is immediately paid to Seagrape in full.” CSA § 6 & FAC ¶
118.
The CSA contains a New York choice-of-law provision, providing that it “shall be governed
by the laws of the State of New York . . . without regard to its rules of conflicts of law.” CSA § 12.
K. Subordination Agreement
According to the Complaint, GACP agreed to provide Obra Pia with a $1.5 million “bridge
loan” (the “Senior Loan”) in October 2016. FAC ¶ 91. The $1.5 million Senior Loan was divided
16

into a $1 million payment to Seagrape and a $500,000 payment going towards “expenses of the
Project.” See id. Seagrape alleges that, in order to “enable GACP to make the Senior Loan,” it entered
into a Subordination Agreement with GACP, OP Feeder, Obra Pia (Non-U.S.) Feeder, KIT Capital,
and Obra Pia on October 14, 2016 (the “Subordination Agreement”). See id. ¶ 92 & OP FAC Ex. 4
(“Subordination Agreement”). As the “holder[] of the Senior Loan,” GACP was identified as the
“Senior Lender.” Subordination Agreement at 1. Seagrape, OP Feeder, Obra Pia (Non-U.S.) Feeder,
and KIT Capital were each identified as a “Subordinated Lender,” and Obra Pia was identified as the
“Borrower.” Id.
Seagrape asserts that it entered into the Subordination Agreement directly with GACP in order
to “enable GACP to lend funds for a partial payment to Seagrape.” FAC ¶ 3. In particular, the parties
expressly agreed that “all debt owed by [Obra Pia] to any of the Subordinated Lenders”––i.e.,
Seagrape, OP Feeder, Obra Pia (Non-U.S.) Feeder, and KIT Capital––“is and shall be subordinate and
junior in right of payment to the prior payment in full of the Senior Loan and the obligations under
the Senior Loan Documents, . . . and that the subordination is for the benefit and enforceable by
[GACP].” Subordination Agreement § 1(a) & FAC ¶ 92. Seagrape thus “agreed to subordinate its
claim for the Cash Amount Due to the Senior Loan.” FAC ¶ 92.
The Subordination Agreement confirmed the Foreclosure Date of March 31, 2017. See
Subordination Agreement § 1(b) & FAC ¶ 93. The Subordinated Lenders, including Seagrape, agreed
further that they would not “declare a default with respect to any Subordinated Loan or exercise any
rights with respect to any collateral securing the Subordinated Loans without providing [GACP] at
least three [] months advanced notice.” Subordination Agreement § 1(a); see also FAC ¶ 3 (alleging
that, in entering into the Subordination Agreement, Seagrape “promised GACP that [it] would
‘provide [GACP] at least three [] months advance notice’ before ‘declar[ing] a default with respect to
any Subordinated Loan or exercis[ing] any rights with respect to the collateral securing the
17

Subordination Loans”). Other than the “March 31, 2017 date” and the “notice requirement,” Seagrape
contends, “the Subordination Agreement [did] not limit Seagrape’s rights as a creditor under the CSA,
Addendum[,] and Investment Agreement.” FAC ¶ 94.
The Subordination Agreement contains a New York choice-of-law provision, providing that
the Agreement, “and all disputes or controversies arising out of or relating to [the Subordination
Agreement] or the transactions contemplated hereby[,] shall be governed by, and construed in
accordance with, the laws of the State of New York.” Subordination Agreement § 12.
L. Failure to Close GACP Transaction and Seagrape’s Notice of Default
After execution of the Subordination Agreement, GACP made the Senior Loan and thereby
“funded the payment of [$1 million] to Seagrape, which extended the Foreclosure Date to March 31,
2017.”

FAC ¶ 96.

Nonetheless, Seagrape maintains that “upon further diligence,” GACP

“substantially reduced the amount of its original offer” from $50.2 million to $43.9 million. Id. ¶ 97.
This was done through an “Amendment to the LOI, dated December 5, 2016.” See id. In that
Amendment, GACP also apparently agreed “to purchase shares for $20.85 million” and “to fund no
more than $18.7 million to complete the Project.” Id. Seagrape alleges, however, that Tuzman
ultimately “failed to close a transaction with GACP by March 31, 2017.” Id. ¶ 98. Indeed, Tuzman
allegedly “held out for terms unacceptable to GACP” in order to “conceal the OP Defendants’
previous fraud and inflated valuation of the Project,” and “in the hope of achieving a return on his
equity at the expense of his creditors.” Id. ¶ 5.
On April 27, 2017, Seagrape thus “gave GACP written notice of Seagrape’s intent to declare
a default and to enforce all of its rights, including against the assets of the Project.” Id. Specifically,
Seagrape allegedly sent GACP a letter on this date (the “Senior Lender Notice”), providing “formal

18

written notice to GACP of its intent to declare a default under the Loan Agreements, and to proceed
in enforcing all of its rights, including against the Secured Assets.” 9 See id. ¶ 98.
According to the Complaint, Tuzman “continued negotiating with GACP” even after Seagrape
sent the Senior Lender Notice. 10 Id. ¶ 99. GACP, however, subsequently “further reduced its
valuation of the Project to less than $30 million.” Id. Seagrape alleges that Tuzman then “began
colluding with GACP to induce Seagrape to accept less than a full recovery[] so that [KIT Nevis]
could receive a recovery on its residual equity.” Id. Seagrape asserts further that Tuzman “proposed
a secret side-deal” to GACP in order to “dupe creditors, including Seagrape, to accept a substantial
haircut in order to fund a return for Tuzman’s entity, [KIT Nevis], as an equity holder,” as well as a
“discount to GACP.” Id. ¶ 102. For instance, in a May 5, 2017 email, Tuzman, Davi, and Blaurock
apparently informed “Hybrid Round investors, including Seagrape,” that GACP and KIT Nevis had
“conducted ‘a detailed joint legal analysis’ to determine the timeframe for effective foreclosure efforts
by Seagrape.” Id. ¶ 100. And in an October 22, 2017 email that was “obtained by Mullen,” Tuzman
allegedly “suggested to GACP that rather than insist upon a further reduction of the total price,”
GACP should instead continue to “offer the total of the previous LOI valuation,” i.e. $27,824,000,
“collaborate” with KIT Nevis “on getting creditors to receive less than face value,” and “share[] a
50% benefit . . . on any savings realized from face value” with KIT Nevis, with the “other 50% just
reduc[ing] the amount that [GACP] pay for the asset.” Id. ¶ 101.
M. SDS Complaints
On November 6, 2017, Seagrape filed a complaint with the Colombian Superintendencia de
Sociedades (the “SDS”), requesting that the SDS investigate “irregularities” at Obra Pia’s Colombian
9

“Loan Agreements” is not a defined term in the Complaint.

Seagrape references both the “Senior Lender Notice” and the “Senior Notice Letter” in the Complaint. As “Senior
Notice Letter” is not a defined term, the Court assumes that both terms refer to the April 27, 2017 “Senior Lender Notice,”
as defined in paragraph 98.
10

19

subsidiary, OP Colombia. See id. ¶¶ 6, 103. According to Seagrape, the SDS then found “a number
of irregularities in the accounting and management” of OP Colombia, including that OP Colombia
“failed to record [certain] debts on its books,” and that there were “discrepancies between sworn
certifications concerning the value of the properties acquired for the Project[] and the value ascribed
to those properties in the company’s financial statements.” Id. ¶ 104. Pursuant to an order dated
January 18, 2018, the SDS allegedly required OP Colombia to submit an “improvement plan” to
address four specific “irregularities and deficiencies.” Id. ¶ 105.
Seagrape maintains that the SDS issued a “written Resolution,” dated August 20, 2019, which
“concurred with Seagrape that [Obra Pia’s] subsidiary was in ‘critical’ financial and administrative
condition.” Id. ¶ 6. As a result, Seagrape alleges, the SDS placed OP Colombia “under its
supervision” and required it to “implement substantial reforms.” See id.; see also id. ¶ 104 (alleging
that the SDS “indicat[ed]” that there was a “critical situation of accounting” and thus “mandate[ed]
that the company be supervised by the SDS”). The SDS also apparently noted that, as a result of the
“critical situation,” progress on the Project had been “suspended” as of September 2017, and “there
had been a ‘stoppage of payments.’” Id. ¶ 104.
N. BVI Statutory Demand and Subsequent Proceedings
On January 21, 2019, Seagrape served Obra Pia with a Statutory Demand under the BVI
Insolvency Act 2003, seeking “repayment of Seagrape’s Cash Amount Due,” which Seagrape asserts
totaled over $5 million––specifically, $5,099,917.49––at the time. See id. ¶¶ 7, 106. According to
Seagrape, “if payment is not made within 21 days of such a demand,” then––pursuant to BVI law––
“the debtor may be placed into liquidation.” Id. ¶ 106.
Obra Pia subsequently brought a legal proceeding against Seagrape in the BVI Court (the
“BVI Proceeding”), seeking to “set aside the [Statutory] Demand” on grounds that Obra Pia “had offsetting counterclaims against Seagrape arising under New York law.” Id. ¶ 107. In particular,
20

Seagrape alleges that Obra Pia’s attorney, Defendant Garland, filed an opposition, “based upon a
factually false and misleading legal opinion,” asserting that Obra Pia had such “off-setting
counterclaims.” Id. ¶ 7. Obra Pia’s local counsel also “made a sworn representation to the BVI
Court,” which Seagrape asserts was “demonstrably false” because it had represented that Seagrape
“had not served the Senior Lender Notice at least three months before proceeding to enforce its rights
with the Statutory Demand,” as was required by the Subordination Agreement. Id. ¶ 107.
In addition, Seagrape contends that, in support of its application in BVI Court, Obra Pia’s
local attorneys “submitted false and misleading affidavits from Tuzman and from Garland.” Id. ¶
109. For instance, Tuzman submitted an affidavit in which he allegedly “falsely represented to the
BVI Court that Seagrape ‘served a statutory demand on [Obra Pia] on January 21, 2019 without giving
any advance notice.’” Id. Seagrape alleges that Garland also submitted an affidavit, dated February
15, 2019, in which he similarly “misleadingly stated to the court that ‘[a]ccording to Mr. Tuzman,
Seagrape did not give the required notice and thus it did not have, and does not have, the right to seek
payment because the opportunity to cure any default has not begun.’” Id. ¶¶ 108-09. According to
Seagrape, Garland also “falsely represented” that by “failing to provide the requisite notice, Seagrape
breached its obligations to the Obra Entities” under the Subordination Agreement. Id. ¶ 109. Garland
further “falsely represented” to the BVI Court that “the SDS complaints were improper” and that the
“SDS inquiry/investigation did not turn up any malfeasance,” statements which––Seagrape
maintains––are contradicted by the SDS Resolution, “which makes clear that the SDS inquiry found
substantial malfeasance by [the OP Defendants] and ordered substantial remedial measures.” Id. ¶
110. Seagrape avers that, based on such “objectively false statements of fact,” Garland asserted in
his affidavit that, “rather than being liable to Seagrape under the CSA,” Obra Pia actually had
“meritorious off-setting counterclaims against Seagrape” for claims such as breach of contract and
breach of the implied duty of good faith and fair dealing. Id. ¶ 111.
21

Seagrape contends that the BVI Court was “[c]onfused by the objectively false statements of
fact” in the affidavits filed by Tuzman and Garland, which were “misleadingly proffered” by Obra
Pia’s local attorneys, id. ¶ 112, as well as “[u]ncertain of the merits of [the] claims under New York
law,” id. ¶ 7. As such, the BVI Court concluded that Obra Pia’s claims “potentially might have merit,”
as there were “‘triable issues’ concerning whether the SDS complaint was premature, and thus a
breach of the Subordination Agreement.” Id. ¶ 112. It therefore “abstain[ed] from attempting to
adjudicate” Obra Pia’s claims, and instead “conditionally set aside the Statutory Demand.” Id. ¶ 113.
The BVI Court apparently only did so, however, on the condition that Obra Pia must “commence[]
action on its claims in New York within thirty days.” Id. If Obra Pia “failed to do so, or failed to
diligently pursue its alleged claims in New York,” then Obra Pia’s debt to Seagrape would be
“payable immediately.” Id.
Seagrape alleges that, following the issuance of the BVI Court’s judgment, the OP Defendants
“elected to commence a frivolous lawsuit in New York,” instead of paying their obligations to
Seagrape, which they purportedly did “solely for the purpose of delay” and “to tarnish Mullen’s good
name and business reputation.” See id. ¶¶ 8, 114. In the New York lawsuit––initially brought in state
court and then removed to this Court in the Obra Pia Action––the OP Defendants and their counsel,
Defendants Garland and Elan, allegedly “asserted the same factually false claims” from the BVI
Proceeding, in “an attempt to defraud the [New York] court.” Id. ¶ 8. In particular, Garland and Elan
allegedly “ignor[ed] the [Senior Lender Notice]” and “falsely contended that the SDS Complaints and
Statutory Demand were premature––and thus in breach of the Subordination Agreement––because
‘[u]pon information and belief, Seagrape failed to provide the notice it was required to give pursuant
to the Subordination Agreement before” such filings. See id. ¶ 115. Seagrape also contends that the
OP Defendants wrongfully claimed that “they were entitled to an award of $20 million” and

22

“frivolously named” Mullen as a defendant––“solely to drag [Mullen] through the mud and damage
his good business reputation.” Id. ¶ 8.
According to Seagrape, Defendants Garland and Elan withdrew as counsel after receiving “a
Rule 11 safe harbor warning letter,” and the “fraudulent complaint” was subsequently “withdrawn
and replaced.” Id. ¶ 8; see also id. ¶ 116. The OP Defendants’ “new counsel” then filed a “First
Amended Complaint,” which does not “dispute” the Senior Lender Notice, and which “asserts
entirely new and different claims.” Id. ¶ 116.
O. Alleged Restructuring of the Project
Seagrape asserts that, on October 11, 2019––after the Obra Pia Action was filed––the OP
Defendants’ counsel informed it that “there had been a ‘restructuring’ of the Project, which involved
an injection of new capital.” Id. ¶ 119. Seagrape maintains further that Tuzman confirmed this “new
capital” in a text message to Mullen later that day. See id. Seagrape contends that, because the
“alleged restructuring was not done upon prior notice and authorization of Seagrape and did not
involve a complete payoff of the Cash Amount Due to Seagrape,” the “alleged restructuring” was in
breach of § 6 of the CSA. See id. ¶¶ 120-21.
II.

Procedural Background
Seagrape filed this action on October 22, 2019, Dkt. 1, and this Court accepted it as related to

the Obra Pia Action on November 4, 2019. On January 10, 2020, Seagrape filed the First Amended
Complaint––the operative complaint in this case. Dkt. 35. The OP Defendants filed a motion to
dismiss on January 24, 2020, Dkt. 42, which Seagrape opposed on February 14, 2020, Dkt. 51. The
OP Defendants did not file a reply brief. 11 Defendant Garland also filed a motion to dismiss on

On July 8, 2020, the Court ordered the OP Defendants to file their reply brief––which had been due by March 10, 2020
––no later than July 13, 2020. See Dkt. 68. To date, however, the OP Defendants have failed to file a reply brief or a
letter indicating that they did not intend to file any such reply.
11

23

January 24, 2020. Dkt. 39. Seagrape filed its opposition on February 14, 2020, Dkt. 53, and Garland
filed his reply on March 3, 2020, Dkt. 59. Finally, Defendant Elan filed a motion to dismiss on
February 7, 2020, Dkt. 48, to which Seagrape filed an opposition on February 28, 2020, Dkt. 57, and
Elan filed a reply on March 13, 2020, Dkt. 62. On August 27, 2020, the Court received supplemental
letter briefs from the parties regarding whether the law of New York or the law of the British Virgin
Islands applies to the claims in this case. See Dkt. 72 (Seagrape Supp. Ltr.); Dkt. 75 (OPD Supp.
Ltr.); Dkt. 71 (Garland Supp. Ltr.); Dkt. 73 (Elan Supp. Ltr.).
LEGAL STANDARD
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint
must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “Where a complaint pleads facts
that are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility
and plausibility of entitlement to relief.’” Id. (quoting Twombly, 550 U.S. at 557). On a Rule 12(b)(6)
motion, the question is “not whether [the plaintiff] will ultimately prevail,” but “whether [the]
complaint [is] sufficient to cross the federal court’s threshold.” Skinner v. Switzer, 562 U.S. 521,
529–30 (2011) (citation omitted). In answering this question, the Court must “accept[] all factual
allegations as true, but ‘giv[e] no effect to legal conclusions couched as factual allegations.’”
Stadnick, 861 F.3d at 35 (quoting Starr v. Sony BMG Music Entm’t, 592 F.3d 314, 321 (2d Cir. 2010)).
Moreover, on a motion to dismiss, a court “may consider any written instrument attached to the
complaint, statements or documents incorporated into the complaint by reference, legally required
public disclosure documents filed with the SEC, and documents possessed by or known to the plaintiff
and upon which it relied in bringing the suit.” ATSI Commc’ns, 493 F.3d at 98.
24

DISCUSSION
I.

The OP Defendants’ Motion to Dismiss
A. Securities Fraud Under Section 10(b) and Rule 10b-5
Seagrape first asserts a cause of action––against Tuzman, KIT Capital, Obra Pia, and OP

Feeder––for securities fraud violations under Section 10(b) of the Securities Exchange Act of 1934
and Rule 10b-5. Seagrape brings this claim in connection with the “purchase and sale of 100 LP
Units in OP Feeder in the Addendum, between August and November 28, 2014,” as well as the
“purchase of 137.5 LP Units in OP Feeder in the CSA, on August 25, 2016.” See FAC ¶ 124. It
alleges that, in order to “induce [Seagrape’s] purchase of [a total of] 237.5 LP Units in OP Feeder,”
Tuzman, KIT Capital, Obra Pia, and OP Feeder made various materially false and misleading
representations to Seagrape. See id. ¶ 125.
As an initial matter, the OP Defendants argue that Seagrape’s securities fraud claim is barred
by the applicable statutes of limitations and repose. See OPD Mot. at 11-14. “Private actions under
Section 10(b) of the Exchange Act are subject to a two-year statute of limitations and a five-year
statute of repose.” In re Bear Stearns Cos., Inc. Sec., Derivative, & ERISA Litig., 995 F. Supp. 2d
291, 299 (S.D.N.Y. 2014), aff’d sub nom. SRM Glob. Master Fund Ltd. P’ship v. Bear Stearns Cos.
L.L.C., 829 F.3d 173 (2d Cir. 2016). Specifically, “a private right of action that involves a claim of
fraud, deceit, manipulation, or contrivance in contravention of a regulatory requirement concerning
the securities laws,” defined to include the Exchange Act, “may be brought not later than the earlier
of (1) 2 years after the discovery of facts constituting the violation; or (2) 5 years after such violation.”
28 U.S.C. § 1658(b); see also P. Stolz Family P’ship L.P. v. Daum, 355 F.3d 92, 104 (2d Cir. 2004)
(interpreting the five-year limit in § 1658(b)(2) as a “statute of repose”). A district court may consider
timeliness on a motion to dismiss when the circumstances are “sufficiently clear on the face of the
complaint and related documents as to make the time-bar ruling appropriate on a motion to dismiss.”
25

Wiedis v. Dreambuilder Invs., LLC, 268 F. Supp. 3d 457, 465 (S.D.N.Y. 2017) (quoting Arco Capital
Corps. Ltd. v. Deutsche Bank AG, 949 F. Supp. 2d 532, 543 (S.D.N.Y. 2013)).
Statutes of limitations and statutes of repose differ in significant ways. Statutes of limitations,
on the one hand, “are designed to encourage plaintiffs to pursue diligent prosecution of known claims.
In accord with that objective, limitations periods begin to run when the cause of action accrues—that
is, when the plaintiff can file suit and obtain relief.” Cal. Pub. Emps.’ Ret. Sys. v. ANZ Sec., Inc., 137
S. Ct. 2042, 2049 (2017) (internal quotation marks and citation omitted); see also Bongiovanni v.
NASDAQ Stock Mkt. LLC, No. 17-CV-7570 (CM), 2017 WL 8777379, at *3 (S.D.N.Y. Dec. 6, 2017)
(“Section 1658(b)(1) is a statute of limitations, . . . [that] does not ‘begin to run until the plaintiff
discovers—or a reasonably diligent plaintiff would have discovered—the facts [showing the
defendant’s] mental state embracing [the] intent to deceive, manipulate, or defraud.’”) (quoting City
of Pontiac Gen. Emps. Ret. Sys. v. MBIA, Inc., 637 F.3d 169, 174 (2d Cir. 2011)). Statutes of repose,
on the other hand, “effect a legislative judgment that a defendant should be free from liability after
the legislatively determined period of time. For this reason, statutes of repose begin to run on the
date of the last culpable act or omission of the defendant.” ANZ Sec., 137 S. Ct. at 2049 (internal
quotation marks and citation omitted); see also Pasternack v. Shrader, 863 F.3d 162, 175 (2d Cir.
2017) (“[T]he time limit for a statute of limitations is measured from the time the plaintiff discovers
or should have discovered the injury, whereas the time limit for a claim subject to a statute of repose
is measured from the last culpable act of the defendant (meaning that the plaintiff’s discovery of the
injury is irrelevant for a statute of repose).”).
Thus, the five-year statute of repose under Section 1658 is “a fixed statutory cutoff, which is
independent of a plaintiff’s awareness of the violation [under Section 10(b)] and is not subject to
equitable tolling.” Arco Cap., 949 F. Supp. 2d at 543; see also Bongiovanni, 2017 WL 8777379, at
*3 (“Section 1658(b)(2), however, is a statute of repose, . . . which is ‘an absolute bar on a defendant’s
26

temporal liability,’” and “is neither dependent on discovery nor subject to equitable tolling.”)
(citations omitted). Indeed, “a statute of repose begins to run without interruption once the necessary
triggering event has occurred, even if equitable considerations would warrant tolling or even if the
plaintiff has not yet, or could not yet have, discovered that she has a cause of action.” P Stolz Family
P’ship, 355 F.3d at 102-03; see also Dekalb Cty. Pension Fund v. Transocean Ltd., 36 F. Supp. 3d
279, 285 (S.D.N.Y. 2014), aff’d, 817 F.3d 393 (2d Cir. 2016), as amended (Apr. 29, 2016) (“Although
it may seem harsh for a statute of repose to bar a claim shortly before, or even after the plaintiff
discovers the claim, in contrast to statutes of limitations, ‘a statute of repose may bar a claim even
before the plaintiff suffers injury, leaving her without any remedy.’”) (quoting Police & Fire Ret. Sys.
of City of Detroit v. IndyMac MBS, Inc., 721 F.3d 95, 106 (2d Cir. 2013)) (emphasis in original).
In the context of federal securities claims in particular, the statute of repose begins to run “on
the date the parties have committed themselves to complete the purchase or sale transaction.” Arnold
v. KPMG LLP, 334 F. App’x 349, 351 (2d Cir. 2009) (citation omitted). In other words, the statute
begins to run on the date of the alleged violation. See Kaplan v. S.A.C. Capital Advisors, L.P., 40 F.
Supp. 3d 332, 343 (S.D.N.Y. 2014); see also Arnold, 334 F. App’x at 351 (rejecting the argument
that “the period of repose begins to run at the time of the last alleged misrepresentation (even when
made after the final purchase or sale of the securities),” explaining that such an argument “ignores
the applicable limitations period, and thus, is devoid of merit”). A violation under Section 10(b) and
Rule 10b-5, moreover, “occurs at each transaction for the purpose of calculating the repose date.
Thus, any claim under Section 10(b) and Rule 10b-5 relating to a sale or purchase of securities that
occurred outside the five-year statute of repose is time-barred.” Kaplan, 40 F. Supp. 3d at 343.
As noted, Seagrape brings its Section 10(b) claim in connection with its purchase of a total of
237.5 LP Units in OP Feeder. Pursuant to the Addendum, OP Feeder issued to Seagrape 500 LP
Units in OP Feeder “immediately upon the execution of this Addendum,” which represented a $5
27

million ownership interest in OP Feeder. See Addendum § 2.3. One hundred of the 500 LP Units,
for a value of approximately $1 million, were designated as “Ongoing Investment Interests.” See id.
Seagrape acknowledges that its securities fraud claim is based, at least in part, on its “purchase [of]
100 LP Units in OP Feeder in the Hybrid Round” for $1 million, and its agreement to “accept the
pledge of 400 additional LP Units as security for the Addendum.” Opp’n to OPD Mot. at 13.
Although Seagrape asserts that these transactions occurred on November 27, 2014––when Mullen,
on behalf of Seagrape “executed the final version of the Addendum, as well as the Hybrid Round
Subscription Agreement,” see FAC ¶ 52; Opp’n to OPD Mot. at 13––the Addendum plainly reflects
a transaction that occurred on September 19, 2014, not November 27, 2014. Indeed, the Addendum’s
“Effective Date” is clearly identified as September 19, 2014. See Addendum at 1. There is no
indication in the text of the Addendum that it did not go into effect, or was not fully executed, until
November 27, 2014. See Roberts v. Bliss, 229 F. Supp. 3d 240, 248 (S.D.N.Y. 2017) (“If a document
relied on in the complaint contradicts allegations in the complaint, the document, not the allegations,
control, and the court need not accept the allegations in the complaint as true.”) (citation omitted).
As the transaction involving the “purchase and sale of 100 LP Units in OP Feeder” occurred more
than five years prior to the filing of the initial complaint, which occurred on October 22, 2019,
Seagrape’s securities fraud claim under Section 10(b)––to the extent it relies on any alleged
misstatements that induced it to purchase the 100 LP Units or otherwise enter into the Addendum––
is time-barred under the statute of repose. See SRM Glob. Master Fund Ltd. P’ship v. Bear Stearns
Cos. L.L.C., 829 F.3d 173, 177 (2d Cir. 2016).
Whether Seagrape’s 10(b) claim––to the extent it is based on its receipt of an additional 137.5
LP Units through the CSA––is timely is a closer question. First, as to the CSA, Seagrape contends
that it purchased “a further 137.5 LP Units in connection with the CSA,” and that this transaction
therefore occurred “as part of the CSA” on August 25, 2016. See Opp’n to OPD Mot. at 13. The
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applicable section of the CSA states only that “[p]ursuant to the Previous Agreements”––defined as
the May 2013 Investment Agreement and the September 2014 Addendum together––Seagrape was
“entitled to a total of 237.5 LP Interests” in OP Feeder “as a result of its original investment and
certain Penalty LP Interests.” See CSA § 2. Section 2 provided further that, because Seagrape held
526.5 LP Interests in OP Feeder at that time, which constituted “many more LP Interests than it [was]
due,” Seagrape was required to “take all and necessary steps to surrender 325 of these LP Interests”
within 3 days after it was “repaid the entirety of the Cash Amount Due.” See id. In the CSA, the
parties acknowledged that Seagrape’s “237.5 beneficially-owned LP Interests” had a “conversion
value of [] $2,882,018 as of July 31, 2016,” see id., but it is not clear from the CSA itself that Seagrape
actually purchased an additional 137.5 LP Units pursuant to it, and not pursuant to some other
agreement. Nevertheless, construing all of Seagrape’s allegations in its favor, as the Court must at
this stage, any alleged misstatements made to induce Seagrape to purchase an additional 137.5 LP
Units pursuant to the CSA are timely under the statute of repose, as they would have occurred as of
August 26, 2015, when the CSA was executed. 12
The Court next turns to the merits of Seagrape’s Section 10(b) claim. Seagrape alleges that it
“relied upon the OP Defendants’ prior misrepresentations and omissions concerning the Project,
including that there was $19 million in ‘hard cash’ invested into the Project” and that “Tuzman himself
had invested over $10 million,” in “agreeing to accept the additional 137.5 LP Units in OP Feeder”
pursuant to the CSA. See FAC ¶¶ 86-87. Specifically, the OP Defendants allegedly made the
following misrepresentations: (1) on July 3, 2014, Defendants made “false representation[s] of fact”

The Court rejects the OP Defendants’ argument that Seagrape’s securities fraud claim is barred by the statute of
limitations because it “fail[ed] to bring a claim within two years after discovery of the facts constituting the violation.”
OPD Mot. at 12. As noted above, “the time limit for a statute of limitations is measured from the time the plaintiff
discovers or should have discovered the injury.” Pasternack, 863 F.3d at 175. It is not clear from the Complaint, however,
that Seagrape should have discovered the OP Defendants’ fraud prior to October 22, 2017.

12

29

that (a) “the Project was exceptionally profitable, and had nearly tripled in value since 2010,” (b)
“Tuzman had personally invested over $10 million to purchase all five parcels of real estate
comprising the Project,” (c) “Tuzman had obtained a $20 million [] bank loan to develop the Project,”
and (d) “Tuzman had obtained a $5 million equity investment from Mubadala”; (2) at some
unspecified point, Defendants made the “false representation” that Seagrape’s “investment of $1
million to acquire LP Units in OP Feeder would be used to develop the Project, rather than to fund
personal expenses of Tuzman”; and (3) in the DTZ Memorandum, Defendants made “false
representations of fact,” based on certain representations by Tuzman, Davi, and Blaurock, that “[KIT
Nevis] ‘began construction of the project [] in November 2014 and [had] already invested $27.8
million in equity to date,’ including $22.5 million in ‘pre-development’ land acquisition costs,
$2,971,000 in construction costs[,] and $2,522,000 in indirect development costs.” Id. ¶ 125.
Seagrape contends that, if it had “known the truth,” it “would not have purchased the LP Units or, at
a minimum, [it] would not have purchased the LP Units at the price it paid.” Id. ¶ 126.
“To state a claim under Section 10(b) and Rule 10b-5, a plaintiff ‘must prove (1) a material
misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the
misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the
misrepresentation or omission; (5) economic loss; and (6) loss causation.’” Axar Master Fund, Ltd.
v. Bedford, 806 F. App’x 35, 37 (2d Cir. 2020) (quoting Pac. Inv. Mgmt. Co. v. Mayer Brown LLP,
603 F.3d 144, 151 (2d Cir. 2010)). In addition to the requisite Rule 12(b)(6) pleading standards,
federal securities fraud claims are also subject to the heightened pleading requirements of Rule 9(b)
and the Private Securities Litigation Reform Act of 1995 (the “PSLRA”), 15 U.S.C. § 78u-4(b). See
ECA, Local 134 IBEW Joint Pension Tr. of Chicago v. J.P. Morgan Chase Co., 553 F.3d 187, 196 (2d
Cir. 2009). Under Rule 9(b), a plaintiff alleging fraud “must state with particularity the circumstances
constituting” the alleged fraud. Fed. R. Civ. P. 9(b). To do so successfully, “the plaintiff must ‘(1)
30

specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state
where and when the statements were made, and (4) explain why the statements were fraudulent.”
Anschutz Corp. v. Merrill Lynch & Co., 690 F.3d 98, 108 (2d Cir. 2012) (quoting Rombach v. Chang,
355 F.3d 164, 170 (2d Cir. 2004)); see also id. (explaining that the PSLRA expands on Rule 9(b) and
requires “that securities fraud complaints specify each misleading statement; that they set forth the
facts on which a belief that a statement is misleading was formed; and that they state with particularity
facts giving rise to a strong inference that the defendant acted with the required state of mind”)
(quoting Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 345 (2005)) (internal quotation marks omitted).
Here, even assuming that the OP Defendants made false and material statements about the
Project, and that Seagrape has pleaded the requisite scienter, Seagrape’s securities fraud claim
nonetheless fails because it has failed to adequately plead loss causation. “It is long settled that a
securities-fraud plaintiff must prove both transaction and loss causation.” Lentell v. Merrill Lynch &
Co., 396 F.3d 161, 172 (2d Cir. 2005) (internal quotation marks and citation omitted). “Loss
causation is the causal link between the alleged misconduct and the economic harm ultimately
suffered by the plaintiff.” Id. (internal quotation marks and citation omitted); see also Citibank, N.A.
v. K-H Corp., 968 F.2d 1489, 1494 (2d Cir. 1992) (defining loss causation as causation demonstrating
“that the misrepresentations or omission caused the economic harm,” and contrasting loss causation
with transaction causation, which is defined as causation demonstrating “that the violations in
question caused the plaintiff to engage in the transaction in question”) (citation omitted). “In other
words, plaintiffs must allege “that the misstatement or omission concealed something from the market
that, when disclosed, negatively affected the value of the security.” Axar Master Fund, 806 F. App’x
at 38 (quoting Lentell, 396 F.3d at 173). The Second Circuit has made clear that “loss causation has
to do with the relationship between the plaintiff’s investment loss and the information misstated or
concealed by the defendant.” Lentell, 396 F.3d at 174. “If that relationship is sufficiently direct, loss
31

causation is established, . . . but if the connection is attenuated, or if the plaintiff fails to demonstrate
a causal connection between the content of the alleged misstatements or omissions and the harm
actually suffered, . . . a fraud claim will not lie.” Id. (internal quotation marks and citations omitted).
“A plaintiff can establish loss causation,” for instance, “by showing that ‘the loss was
foreseeable and caused by the materialization of the risk concealed by the fraudulent statement.’”
Axar Master Fund, 806 F. App’x at 37-38 (quoting ATSI Commc’ns, 493 F.3d at 107); see also Suez
Equity Inv’rs, L.P. v. Toronto-Dominion Bank, 250 F.3d 87, 95 (2d Cir. 2001) (explaining that
plaintiffs must allege “that the subject of the fraudulent statement or omission was the cause of the
actual loss suffered”). But nonetheless, “[t]o establish loss causation a plaintiff must show[] that the
economic harm that it suffered occurred as a result of the alleged misrepresentations.” Citibank, 968
F.2d at 1495 (emphasis in original). Moreover, “[t]o prove loss causation, plaintiffs must distinguish
the alleged fraud from the tangle of other factors that affect a stock’s price.” In re Omnicom Grp.,
Inc. Sec. Litig., 541 F. Supp. 2d 546, 553 (S.D.N.Y. 2008), aff’d, 597 F.3d 501 (2d Cir. 2010)
(alterations, internal quotation marks, and citation omitted). The plaintiff has the burden of proving
loss causation. See Gross v. GFI Grp., Inc., 310 F. Supp. 3d 384, 397 (S.D.N.Y. 2018), aff’d, 784 F.
App’x 27 (2d Cir. 2019).
Seagrape fails to plausibly allege how the OP Defendants’ fraudulent statements about the
Project, its progress, and the money that had been invested in it “diminished the value of [their]
investments and resulted in a loss.” Szulik v. Tagliaferri, 966 F. Supp. 2d 339, 367 (S.D.N.Y. 2013).
The Complaint is devoid of allegations demonstrating that such purportedly false and misleading
statements were “the cause of the actual loss suffered,” Suez Equity Inv’rs, 250 F.3d at 95, or, in other
words, that any “economic harm that [Seagrape] suffered occurred as a result of the alleged
misrepresentations,” Citibank, 968 F.2d at 1495. In particular, Seagrape fails to “distinguish the
alleged fraud from the tangle of other factors” that may have affected any loss in its investment in the
32

Project, In re Omnicom Grp., 541 F. Supp. 2d at 553, such as the filing of SDS Complaints and the
subsequent SDS supervision. See also, e.g., Leykin, 423 F. Supp. 2d at 246 (“The [complaint] does
not allege facts showing that it was the claimed concealment which caused plaintiffs’ losses, rather
than the [] market-wide Internet stock collapse—nor any way to separate the effect of the
misstatements (if there was any) from the general collapse or other causes.”).
In its opposition, Seagrape merely argues––in conclusory fashion––that the OP Defendants’
“fraud, self-dealing and mismanagement of the Project,” as well as their “refusal to honor the CSA
and sell the Project for the amounts offered by GACP and other bidders,” is the “clear cause of
Seagrape’s loss.” Opp’n to OPD Mot. at 19. Citing paragraphs 41-42, 65, 73-74, 82-84, and 125 of
the Complaint, it also asserts that it has “amply alleged that the OP Defendants’ fraud caused it to . .
. enter into the CSA,” among other things. See id. But the cited Complaint paragraphs do not lend
Seagrape much support as to loss causation. Rather, they simply describe Defendants’ alleged
misstatements and omissions, see FAC ¶¶ 41-42, 65, 73-74, 82, and the basic details of how and when
the relevant parties entered into the CSA, see id. ¶¶ 83-84. And, Seagrape’s assertions that the OP
Defendants caused it to suffer damage by inducing it to enter into the CSA and purchase 137.5
additional LP Units, see, e.g., id. ¶¶ 86-87, “more obviously allege transaction causation, i.e. had
[Seagrape] known of the fraud, [it] would not have continued to invest with [the OP Defendants],”
not loss causation. See Szulik, 966 F. Supp. 2d at 367 (emphasis added).
Moreover, while loss causation is “[t]ypically . . . demonstrated through a corrective
disclosure that reveals the falsity of previous information[,] . . . it may also be shown by the
‘materialization of risk’ method, whereby a concealed risk . . . comes to light in a series of revealing
events that negatively affect stock price over time.” Gross, 310 F. Supp. 3d at 398. Here, Seagrape
has not plausibly alleged either scenario. It does not sufficiently allege that the OP Defendants made
any particular “corrective disclosures,” which revealed the falsity of their challenged statements, nor
33

that a series of “revealing events” led to a “materialization of the risk.” See, e.g., Carpenters Pension
Tr. Fund of St. Louis v. Barclays PLC, 750 F.3d 227, 233 (2d Cir. 2014) (“In order to plead corrective
disclosure, plaintiffs must plausibly allege a disclosure of the fraud by which the available public
information regarding the company’s financial condition was corrected, . . . and that the market
reacted negatively to the corrective disclosure.”) (alterations, internal quotation marks, and citation
omitted); Salvani v. ADVFN PLC, 50 F. Supp. 3d 459, 475 (S.D.N.Y. 2014), aff’d sub nom. Salvani
v. InvestorsHub.com, Inc., 628 F. App’x 784 (2d Cir. 2015) (“In order to successfully plead loss
causation under the materialization of risk method, the ‘new information’ revealed must have been
previously concealed and fall within the ‘zone of risk’ concealed so that the events were foreseeable
consequences of the fraud.”) (internal quotation marks and citation omitted).
Because the Complaint fails to plausibly plead a connection between the risks concealed
through Defendants’ alleged misstatements, on the one hand, and Seagrape actual loss, on the other,
Seagrape’s securities fraud claim under Section 10(b) must be dismissed. See GE Inv’rs v. Gen. Elec.
Co., 447 F. App’x 229, 232 n.2 (2d Cir. 2011) (explaining that “plaintiffs’ failure to plead loss
causation is a sufficient basis on which to grant defendants’ motion to dismiss” and it is “thus
unnecessary to consider defendants’ [other arguments]” as to this claim).
B. Common Law Fraud
Seagrape also brings a common law fraud claim based largely on the same allegedly
“materially false representations” discussed above, which were made in connection with Seagrape’s
purchase of 100 LP Units in OP Feeder, as provided in the Addendum, and its purchase of 137.5 LP
Units in OP Feeder, as provided in the CSA. See FAC ¶ 129. Additionally, Seagrape asserts that, on
September 7, 2015, Tuzman falsely represented that the $441,000 that Seagrape loaned was “to be
used as a ‘backstop’ to cover payroll and other expenses, to protect the Project.” Id. ¶ 130. At that
point, however, Tuzman allegedly failed to disclose that he had been indicted for federal securities
34

fraud, see id. ¶ 131, and that KIT Nevis “had incurred at least $379,000 in personal expenses for
luxury items on its American Express Black Card, and that the principle [sic] purpose of the loan was,
not to fund the Project, but to pay Tuzman’s egregious personal expenses,” id. ¶ 132. As such, Tuzman
allegedly induced Seagrape to loan KIT Nevis $400,000, and then an additional $41,000, based on
these false representations. Id. ¶ 130.
To state a claim for common law fraud under New York law, a plaintiff must allege: “(1) a
misrepresentation or a material omission of fact which was false and known to be false by [the]
defendant, (2) made for the purpose of inducing the other party to rely upon it, (3) justifiable reliance
of the other party on the misrepresentation or material omission, and (4) injury.” Premium Mortg.
Corp. v. Equifax, Inc., 583 F.3d 103, 108 (2d Cir. 2009) (citations omitted). “The reliance requirement
means that it is insufficient for a fraud plaintiff to show merely that some chain of events beginning
with a false statement by defendants led to his injury.” Amusement Indus., Inc. v. Stern, 786 F. Supp.
2d 758, 775 (S.D.N.Y. 2011) (citation omitted). “To establish causation” with respect to a common
law fraud claim, the plaintiff “must show both that defendant’s misrepresentation induced plaintiff to
engage in the transaction in question (transaction causation) and that the misrepresentations directly
caused the loss about which plaintiff complains (loss causation).” Id. at 776 (citation omitted).
Indeed, “[t]he elements of common law fraud are [] essentially the same as those required to state a
claim under Section 10(b) and Rule 10b–5.” Wiedis, 268 F. Supp. 3d at 467 (citation omitted); see
also Amusement Indus., 786 F. Supp. 2d at 777 (“The loss causation requirement in a common law
fraud claim is equivalent to the ‘proximate’ cause concept found in other tort cases and in the federal
securities context.”). Thus, “claims of common law fraud, like federal securities claims, must satisfy
the requirements of Rule 9(b).” Special Situations Fund III QP, L.P. v. Deloitte Touche Tohmatsu
CPA, Ltd., 96 F. Supp. 3d 325, 347 (S.D.N.Y. 2015), aff’d, 645 F. App’x 72 (2d Cir. 2016) (citation
omitted).
35

Where a plaintiff brings both a Section 10(b) claim and a common law fraud claim, and the
former is dismissed for failure to state a claim under Fed. R. Civ. P. 12(b)(6)––including for failure
to adequately plead loss causation––courts in this Circuit have dismissed the common law claim as
well. See, e.g., Axar Master Fund, 806 F. App’x at 38 n.2 (affirming the “district court’s dismissal of
plaintiffs’ common law fraud claims after concluding that plaintiffs failed to state a claim for federal
securities fraud” because “the elements of claims for federal securities fraud and New York common
law fraud are nearly identical”); Alpha Capital Anstalt v. Schwell Wimpfheimer & Assocs. LLP, No.
17-CV-1235 (GHW), 2019 WL 1436993, at *12 (S.D.N.Y. Mar. 30, 2019) (“Because . . . Plaintiffs
fail to allege facts in the SAC to adequately plead loss causation with respect to their claims against
[Defendant] under Section 10b and Rule 10b-5, the Court also dismisses Plaintiff’s common-law
fraud claims.”); Solow v. Citigroup, Inc., 827 F. Supp. 2d 280, 293 (S.D.N.Y. 2011) (“Similar to the
FAC’s securities fraud claim, the common law fraud claim fails to establish causation and is therefore
dismissed.”). Here, for the same reasons discussed above, Seagrape fails to plausibly allege that the
OP Defendants’ alleged misstatements directly and proximately caused its loss. Its common law fraud
claim is thus also dismissed.
C. Breach of Contract
Seagrape next asserts a breach of contract claim against Tuzman, KIT Capital, KIT Nevis,
Obra Pia, OP Manager, and OP Colombia. “To state a claim for breach of contract under New York
law, a plaintiff must allege ‘(1) the existence of an agreement, (2) adequate performance of the
contract by the plaintiff, (3) breach of contract by the defendant, and (4) damages.’” Landmark
Ventures, Inc. v. Wave Sys. Corp., 513 F. App’x 109, 111 (2d Cir. 2013) (quoting Harsco Corp. v.
Segui, 91 F.3d 337, 348 (2d Cir. 1996)). Seagrape contends that the OP Defendants breached the
Investment Agreement, the Addendum, and the CSA by (1) failing to pay the amounts owed under
the Agreements when due, see FAC ¶ 138; (2) “bringing the BVI Proceeding to block the enforcement
36

of [Seagrape’s] rights as a creditor, in violation of their duty under § 11 of the CSA to ‘fully cooperate
to facilitate Seagrape’s foreclosing on the property and [to] not block such foreclosure or cooperate
with anyone seeking to block it,’” id. ¶ 141; and (3) “engaging in a ‘restructuring,’ including the
injection of new capital, without the prior notice and consent of [Seagrape],” id. ¶ 142.
First, Seagrape maintains that pursuant to the Investment Agreement, the Addendum, and the
CSA, it was due $4,694,806 (the “Cash Amount Due”) as of July 31, 2016, with interest commencing
August 1, 2016 at a rate of 15% per annum, although this amount was later reduced to $3,694,806
after the October 18, 2016 payment of $1 million. See FAC ¶ 136. 13 Ultimately, Seagrape contends,
the Cash Amount Due as of August 1, 2019, including accrued interest, was $5,391,452.87. See id.
Through the Investment Agreement, Mullen (who was later replaced by Seagrape as the “Investor”)
initially invested a total of $3,735,513. See Investment Agreement at 1. The Investment Agreement
provided for a redemption to Mullen on or before December 31, 2013. See Investment Agreement §
3.1 The Addendum, which “incorporated [the Investment Agreement] by reference,” see Addendum
at 1, identified the total amount due to Seagrape at that time as $4,331,492, see Addendum at 3, and
provided further that Seagrape would invest an additional $343,646, see Addendum § 2.1, and that
Seagrape’s investments were to be redeemed by March 31, 2015, see Addendum §§ 1.1, 1.2. The
“total redemption amount due” to Seagrape under the Addendum was thus $4 million (the “Current
Amount Due”), which included the additional investment of $343,646, but excluded the $1 million
worth of LP Units that Seagrape received. See Addendum § 2.5. Finally, pursuant to the CSA––
which expressly provided that the Addendum and the Investment Agreement were “ratified and
confirmed in their entirety, except as superseded or modified by [the CSA],” CSA § 4––the parties
recognized that the Debtors had “not repaid all of the funds lent by Seagrape when due” pursuant to

Again, while paragraph 136 of the Complaint states that Seagrape was due this amount as of July 1, 2016, the Court
assumes that Seagrape intended to write July 31, 2016, as provided in CSA § 2.
13

37

the Previous Agreements, and thus provided that, as of July 31, 2016, Seagrape was due $4,694,806
(the “Cash Amount Due”), which was to accrue interest from August 1, 2016 at the rate of 15% per
annum “or the maximum rate allowed by applicable law,” see CSA § 2. The CSA provided further
that the Debtors were required to pay Seagrape the Cash Amount Due, plus interest, by January 2,
2017, see CSA § 10, unless they or “a third-party on behalf of [them]” paid Seagrape at least $1
million by January 2, 2017, in which case the Foreclosure Date would be “extended to March 31,
2017,” see CSA§ 11. Because Seagrape has alleged that the OP Defendants have not paid the abovementioned amounts, and that the relevant due dates for payment have passed, see, e.g., FAC ¶¶ 36,
56, 86, it has plausibly alleged that these Defendants breached the Agreements.
Seagrape has not, however, plausibly alleged that the OP Defendants breached the CSA by
“bringing the BVI Proceeding to block the enforcement of [Seagrape’s] rights as a creditor,” id. ¶
141, or by “engaging in a ‘restructuring’” of the Project, “including the injection of new capital,
without the prior notice and consent of [Seagrape],” id. ¶ 142. First, it is unclear how the OP
Defendants violated CSA § 11 by “bringing the BVI Proceeding” when Seagrape clearly alleges that
it was Seagrape who first initiated proceedings within the BVI court system. According to the
Complaint, after Seagrape served a Statutory Demand on Obra Pia, Obra Pia “brought a legal
proceeding in the BVI . . . seeking to set aside [that] Demand” based on certain counterclaims. See
FAC ¶¶ 106-07. It is also not clear how the OP Defendants breached their obligation to “fully
cooperate to facilitate Seagrape’s foreclosing on the property and [] not [to] block such foreclosure or
cooperate with anyone seeking to block it,” CSA § 11, by responding to the Statutory Demand that
Seagrape filed with an assertion of potentially off-setting counterclaims. Second, although § 6 of the
CSA provided that “any modification to the property rights of any of the Debtors on the Secured
Assets, including any sale, mortgage, encumbrance, lien, or establishment of trust agreements in favor
of any party, including equity holders, other than Seagrape, among others, must be first authorized in
38

writing by Seagrape unless at the closing of such transaction or transactions the Cash Amount Due is
immediately paid to Seagrape in full,” CSA § 6, Seagrape has not sufficiently alleged that the OP
Defendants’ engaged in any “modification to [] property rights” that would rise to the level of a
violation of this section. Seagrape merely alleges that the OP Defendants’ counsel stated, in October
2019, “that there had been a ‘restructuring’ of the Project, which involved an injection of new capital,”
and that Tuzman represented that there was “another party in the mix” and “new cap[ital] structure
on our side.” FAC ¶ 119. These allegations, without more, are not sufficient to demonstrate that there
had been “any modification to the property rights of any of the Debtors on the Secured Assets” such
that authorization from Seagrape was necessary.
Nevertheless, the Court rejects the OP Defendants’ contention that Seagrape has failed to
plead a breach of the CSA because Seagrape had “no right to recover or to seek foreclosure upon
Obra Pia’s assets under the CSA absent conditions precedent that have not yet occurred,” namely,
that the “Senior Debt” be fully paid. 14 See OPD Mot. at 22. As an initial matter, this argument
appears to be focused not on the OP Defendants’ alleged breach, but rather, on Seagrape’s own
performance under the relevant agreements. While Seagrape agreed that the debt Obra Pia owed to
it would be “subordinate and junior in right of payment to the prior payment in full of the Senior Loan
and the obligations under the Senior Loan Documents,” and that it would not “declare a default with
respect to any Subordinated Loan” or “exercise any rights with respect to any collateral securing the
Subordinated Loans” without first providing the “Senior Lender,” i.e., GACP, “at least three (3)
months advanced notice,” Subordination Agreement § 1(a), there is no language in the CSA or the

As “Senior Debt” is defined in the Subordination Agreement as “all debt owed by [Obra Pia] to any of the Subordinated
Lenders,” which “is and shall be subordinate and junior in right of payment to the prior payment in full of the Senior Loan
and the obligations under the Senior Loan Documents, including any interest due thereunder,” see Subordination
Agreement Recital § 1(a), and “Senior Loan” is defined as the $1.5 million loan that GACP extended, see Subordination
Agreement, Recital 2, the Court assumes that the OP Defendants’ reference to “Senior Debt” in its motion, see, e.g., OPD
Mot. at 6, 22, refers to GACP’s $1.5 million loan, or the “Senior Loan.”

14

39

Subordination Agreement establishing that the Senior Loan must be fully repaid before Seagrape
could declare a default or exercise its rights as a creditor. To the contrary, based on the plain language
of § 1(a), it appears that all Seagrape had to do before declaring a default or exercising its rights––
assuming the Foreclosure Date had passed––was provide GACP three months notice of such an intent.
Nothing in § 1(a)––or elsewhere in the Subordination Agreement––contains language requiring the
Senior Loan to be fully repaid before Seagrape could “declare a default” or “exercise any rights with
respect to any collateral.” That Seagrape agreed to be “subordinate and junior” to GACP does not
change this conclusion. 15
Similarly, Seagrape has alleged its own performance under the relevant agreements. “Cases
dismissing breach of contract claims for failure to allege due performance have involved complaints
that ‘failed to make even a general allegation that [plaintiff] had performed its obligations under the
contract.’” Nat’l Gear & Piston, Inc. v. Cummins Power Sys., LLC, 861 F. Supp. 2d 344, 360 n.6
(S.D.N.Y. 2012) (quoting Conergy AG v. MEMC Elec. Materials, Inc., 651 F. Supp. 2d 51, 62 n. 97
(S.D.N.Y. 2009)) (collecting cases). Here, Seagrape has pleaded that it loaned the relevant amounts

Moreover, pursuant to § 1(b) of the Subordination Agreement, the parties agreed that, as to the “prior funding of Obra
Pia” and the Development, governed by the Investment Agreement, Addendum, and/or CSA, they would “not [] foreclose
until March 31st, 2017” and would “waive any [] restriction in any of the foregoing documents that might otherwise
restrict, prohibit, create a breach or an event of default thereunder in connection with the transaction contemplated under
the Senior Loan Documents.” Subordination Agreement § 1(b). This language evinces the parties’ intent to allow
Seagrape to foreclose under the terms of the CSA, so long as GACP was provided three months notice pursuant to § 1(a).
Based on a plain reading of the CSA and the Subordination Agreement, Seagrape was authorized to declare a default and
exercise its rights after March 31, 2017, as long as it provided the requisite notice to GACP. Additionally, § 2 of the
Subordination Agreement appears to contemplate that a Subordinated Lender may declare a default prior to the Senior
Loan being repaid in full. Section 2 provides that “[i]f during the continuation of an event of default . . . , a payment or
distribution is made to any Subordinated Lender that because of this Agreement should not have been made to them, such
Subordinated Lender who receives the distribution shall hold it in trust for the Senior Lender, segregated from other funds
and property held by such Subordinated Lender, and pay it over to the Senior Lender.” Subordination Agreement § 2.
The Agreement thus provided for the situation in which a Subordinated Lender, like Seagrape, declared a default and
received a certain amount, even before GACP’s loan was fully repaid. In that event, Seagrape would be required to hold
in trust the amount owed to GACP––i.e., the $1.5 million payment––and pay it over to GACP. If Seagrape was prohibited
from taking any such actions prior to GACP being repaid, as Plaintiffs contend, then § 2 would be superfluous. See
Hildene Capital Mgmt., LLC v. Friedman, Billings, Ramsey Grp., Inc., No. 11 Civ. 5832 (AJN), 2012 WL 3542196, at *5
(S.D.N.Y. Aug. 15, 2012) (“A contract should be read as a whole . . . to avoid an interpretation that would render a
provision superfluous.”).
15

40

of money under the Investment Agreement, the Addendum, and the CSA, see, e.g., FAC ¶¶ 56, 86,
and that it abstained from foreclosing, declaring a default, or otherwise exercising its rights as a
creditor until the March 31, 2017 Foreclosure Date elapsed and it provided GACP with the requisite
written notice, see id. ¶ 98. The Court finds that––particularly at this stage, where the allegations in
the Complaint must be accepted as true and all reasonable inferences drawn in Seagrape’s favor––it
has sufficiently pleaded “adequate performance” under the agreements.
Finally, the Complaint plausibly alleges damages for purposes of Seagrape’s breach of
contract claim. “[D]amages for breach of contract should put the plaintiff in the same economic
position he would have been in had the defendant fulfilled the contract.” Lucente v. Int’l Bus.
Machines Corp., 310 F.3d 243, 262 (2d Cir. 2002). Here, Seagrape pleads that, if the OP Defendants
had fulfilled their obligations under the agreements, it would have––at the least––been repaid the
Cash Amount Due. See, e.g., FAC ¶¶ 86, 136, 143.
For these reasons, Seagrape has stated a claim for breach of contract. Accordingly, the OP
Defendants’ motion to dismiss this cause of action is denied.
D. Breach of Fiduciary Duties
Against Tuzman, Davi, Blaurock, KIT Nevis, Obra Pia, OP Feeder, and OP Manager, Seagrape
asserts a cause of action for breach of fiduciary duties. Seagrape maintains that these Defendants
owned fiduciary duties of care and loyalty to Seagrape as a result of Seagrape’s investment in the LP
Units of OP Feeder. See FAC ¶ 148.
“To state a claim for breach of fiduciary duty under New York law, a plaintiff must allege ‘(1)
the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly
caused by the defendant’s misconduct.’” Mosdos Chofetz Chaim, Inc. v. RBS Citizens, N.A., 14 F.
Supp. 3d 191, 206 (S.D.N.Y. 2014) (quoting Varveris v. Zacharakos, 110 A.D.3d 1059, 1059 (2d Dep’t

41

2013)). 16 “A fiduciary relationship exists under New York law when one [person] is under a duty to
act for or to give advice for the benefit of another upon matters within the scope of the relation.”
Boccardi Capital Sys., Inc. v. D.E. Shaw Laminar Portfolios, L.L.C., 355 F. App’x 516, 519 (2d Cir.
2009) (quoting Flickinger v. Harold C. Brown & Co., 947 F.2d 595, 599 (2d Cir. 1991). “In
determining whether a fiduciary duty exists, the focus is on whether one person has reposed ‘trust or
confidence in another’ and whether the second person accepts the trust and confidence and ‘thereby
gains a resulting superiority or influence over the first.’” Indep. Asset Mgmt. LLC v. Zanger, 538 F.
Supp. 2d 704, 709 (S.D.N.Y. 2008) (quoting Regions Bank v. Wieder & Mastroianni, P.C., 423 F.
Supp. 2d 265, 270 (S.D.N.Y. 2006)); see also Grewal v. Cuneo, No. 13-CV-6836 RA, 2015 WL
4103660, at *11 (S.D.N.Y. July 7, 2015), aff’d sub nom. Grewal v. Cuneo Gilbert & LaDuca LLP,
803 F. App’x 457 (2d Cir. 2020) (“Under New York law, breach of fiduciary duty is a tort that arises
from a violation of a relationship of trust and confidence.”) (alteration, internal quotation marks, and
citation omitted); Kidz Cloz, Inc. v. Officially For Kids, Inc., No. 00 Civ. 6270 (DC), 2002 WL
392291, at *4 (S.D.N.Y. Mar. 13, 2002) (“New York courts typically focus on whether one person has
reposed trust or confidence in another who thereby gains a resulting superiority or influence over the
first.”) (citation omitted). Moreover, in order “to survive a motion to dismiss a claim for breach of
fiduciary duty, the plaintiff must set forth specific facts constituting the alleged relationship with
sufficient particularity to enable the court to determine whether, if true, such facts could give rise to
a fiduciary relationship.” Poon v. Roomorama, LLC, No. 09 Civ. 3224 (RMB), 2009 WL 3762115,
at *3 (S.D.N.Y. Nov. 10, 2009) (quoting World Wrestling Entm’t, Inc. v. Jakks Pacific, Inc., 530 F.

The Court rejects Seagrape’s argument that BVI law applies to its breach of fiduciary duties claim for the same reasons
discussed in the Obra Pia Opinion, see Obra Pia Opinion at 19-22, and in light of the fact that Seagrape cites only Second
Circuit and New York law––and no BVI law––in connection with this claim, see Opp’n to OPD Mot. at 25-26. As to the
remainder of the claims asserted against the OP Defendants in this action, the parties agree that New York law applies.
See Seagrape Supp. Ltr.; OPD Supp. Ltr.
16

42

Supp. 2d 486, 504 (S.D.N.Y. 2007)).
It appears that Seagrape alleges the existence of a fiduciary relationship solely based on its
investment in OP Feeder, as well as the assertion that “[KIT Nevis], [OP Manager], [Obra Pia],
Tuzman, Blaurock[,] and Davi” are “officers, directors[,] and affiliates” of OP Feeder. See Opp’n at
25; see also FAC ¶ 148 (“As a result of Plaintiff’s investment in LP Units of OP Feeder, Defendants
Tuzman, Blaurock, Davi, [KIT Nevis], [Obra Pia], OP Manager and OP Feeder owed Plaintiff
fiduciary duties of care and loyalty.”). To support the latter claim––regarding the individuals and
entities other than OP Feeder––Seagrape alleges that Tuzman, Blaurock, and Davi were “senior
officers of [KIT Nevis]” at all relevant times, FAC ¶ 145, that KIT Nevis was “the 100% owner” of
both OP Manager and Obra Pia, see id. ¶¶ 146-47, that OP Manager was “the General Partner of OP
Feeder,” and that OP Feeder “in turn held a convertible note issued by [Obra Pia],” id. ¶ 146.
OP Manager is the only entity that––according to the allegations in the Complaint––is
plausibly alleged to have owed Seagrape a fiduciary duty. A “managing or general partner of a limited
partnership is bound in a fiduciary relationship with the limited partners.” Miltland Raleigh-Durham
v. Myers, 807 F. Supp. 1025, 1058 (S.D.N.Y. 1992) (quoting Riviera Congress Assocs. v. Yassky, 18
N.Y.2d 540, 547 (1966)). Seagrape alleges that OP Manager “was the General Partner of OP Feeder,”
and that Seagrape––through its purchase of LP Units of OP Feeder––was a limited partner. See FAC
¶¶ 146, 148. As to the other Defendants, however, while it is well established that “partners owe
fiduciary duties to co-partners,” Meisel v. Grunberg, 651 F. Supp. 2d 98, 114 (S.D.N.Y. 2009), and
that both general partners and corporate directors alike owe fiduciary duties to “limited partners
[and/or] shareholders who rely on the integrity of the general partner and corporate directors . . . to
manage the business into which those passive investors have placed their funds,” Tucker Anthony
Realty Corp. v. Schlesinger, 888 F.2d 969, 973 (2d Cir. 1989), Seagrape has not plausibly alleged that
Tuzman, Davi, Blaurock, KIT Nevis, or Obra Pia were co-partners in OP Feeder, directors or officers
43

of OP Feeder, or otherwise owed Seagrape fiduciary duties simply because Seagrape was issued LP
Units in OP Feeder. Nor are any of these individuals or entities alleged to be the general partner of
OP Feeder. Moreover, Seagrape fails to plausibly allege––or argue in its opposition––that OP Feeder,
as the limited partnership itself, owed Seagrape, as a limited partner, any such fiduciary duties. Thus,
the only entity that reasonably owed Seagrape any fiduciary duties was OP Manager, as the General
Partner of OP Feeder. 17
Seagrape’s breach of fiduciary duties claim as to OP Manager nonetheless fails because
Seagrape has not plausibly alleged that OP Manager itself breached any fiduciary duties. Seagrape
contends generally that Tuzman, Davi, Blaurock, KIT Nevis, Obra Pia, OP Feeder, and OP Manager
all breached their fiduciary duties to Seagrape by: (1) making the material misrepresentations and
omissions discussed in the context of its fraud claims; (2) “[a]llowing [KIT Nevis] to apply at least
$379,000 of invested funds on personal luxury items” and “to apply a portion of the funds lent by
GACP to pay Tuzman’s own personal living expenses”; (3) “[f]alsely representing to investors,
including [Seagrape], that [KIT Nevis] had invested $19 million in ‘hard cash’ on the Project”; (4)
“refusing,” after Tuzman’s indictment, “to accept reasonable offers for the sale of the Project, which
would have fully paid [Seagrape]”; (5) “[c]olluding with GACP to induce [Seagrape] and other
investors to accept a haircut on their returns in exchange so that GACP could achieve a lower effective

Although the OP Defendants specifically argued in their motion that “Seagrape fails to allege the nature of duty owed
as to each Defendants,” among other things, see OPD Mot. at 24, in its opposition, Seagrape did not expand on what
duties these Defendants owed Seagrape or why. Rather, Seagrape merely asserted that “Defendants have not cited any
BVI law establishing that Seagrape cannot bring a cause of action for breach of fiduciary duties against OP Feeder.
However, even if Seagrape could not do so, that would not prevent Seagrape from stating such a claim against the officers,
directors and affiliates of OP Feeder . . . .” Opp’n to OPD Mot. at 25. Yet Seagrape cited no BVI law to support such a
proposition. In any event, Seagrape’s claim for breach of fiduciary duties would fail under BVI law as well. See, e.g.,
Seghers v. Thompson, No. 06-CV-308 (RMB) (KNF), 2006 WL 2807203, at *7 (S.D.N.Y. Sept. 27, 2006) (concluding
that the “breach of fiduciary duty claim fail[ed] under the laws of either New York or the British Virgin Islands” because,
among other things, “[g]enerally, under British law, directors owe duties to the company, and not the individual
stockholders”) (quoting Polar Int’l Brokerage Corp. v. Reeve, 187 F.R.D. 108, 116 (S.D.N.Y. 1999)); Dragon Inv. Co. II
LLC v. Shanahan, 49 A.D.3d 403, 404 (1st Dep’t 2008) (explaining that “under British Virgin Islands law, . . . which
follows English law, a director [] does not owe a fiduciary duty to shareholders [] unless there is a special factual
relationship between them”).
17

44

purchase price and [KIT Nevis]/Tuzman could achieve an unjustified return on equity”; (6)
“[r]esisting foreclosure by means of the Statutory Demand under BVI law”; and (7) “[f]ailing to
provide [Seagrape] with contemporaneous updates and financial information” about the Project. See
FAC ¶ 149. But the Complaint contains no factual allegations connecting any of the aforementioned
alleged breaches with OP Manager in particular. Indeed, Seagrape’s securities fraud and common
law fraud claims, for instance, are not even asserted against OP Manager. Accordingly, Seagrape fails
to plausibly allege that OP Manager breached any duty that it may have owed by virtue of its status
as General Partner of OP Feeder.
Because Seagrape has failed to sufficiently plead that it was in a fiduciary relationship with
Tuzman, Davi, Blaurock, KIT Nevis, Obra Pia, or OP Feeder, or that OP Manager breached any
fiduciary duties owed to it, its breach of fiduciary duties claim must be dismissed.
II.

Garland’s and Elan’s Motions to Dismiss
Seagrape asserts two claims against the OP Defendants’ prior attorneys, Defendants Garland

and Elan: (1) aiding and abetting breach of fiduciary duty, and (2) violations of Judiciary Law § 487.
The Court addresses each in turn.
A. Aiding and Abetting Breach of Fiduciary Duty
First, Seagrape alleges a claim for aiding and abetting breach of fiduciary duty against Garland
and Elan, based the alleged breaches of fiduciary duties discussed above. To state a claim for aiding
and abetting a breach of fiduciary duty under New York law, 18 a plaintiff must allege: (1) “a breach

18
Although Seagrape argues generally in its supplemental letter that its aiding and abetting breach of fiduciary duty claim
is governed by BVI law “to the extent that [it] arise[s] from conduct by or relating to entities organized under the laws of
the BVI,” it also states that “[t]o the extent the claim[] arise[s] from conduct by or relating to entities not organized under
the law of the BVI, . . . the claim[] would be governed by New York law.” See Seagrape Supp. Ltr. at 2. Additionally,
in its motion papers, Seagrape cites only New York law in its oppositions to Garland’s and Elan’s motions to dismiss,
including with respect to the aiding and abetting breach of fiduciary duty claim. Moreover, the actions of Garland and
Elan underlying the aiding and abetting claim consist of their filings in the BVI Court and in connection with the Obra
Pia Action, and do not arise solely––or primarily––from conduct by or relating to OP Feeder alone. The Court thus finds
that New York law applies to this claim as well.

45

by a fiduciary of obligations to another, of which the aider and abettor had actual knowledge,” (2)
“that the defendant knowingly induced or participated in the breach,” and (3) “that plaintiff suffered
damage as a result of the breach.” In re Sharp Int’l Corp., 403 F.3d 43, 49 (2d Cir. 2005) (quoting
Kaufman v. Cohen, 307 A.D.2d 113, 125 (1st Dep’t 2003)) (internal quotation marks omitted). “To
participate knowingly means to have actual knowledge, as opposed to merely constructive
knowledge, . . . and a plaintiff may not merely rely on conclusory and sparse allegations that the aider
or abettor knew or should have known about the primary breach of fiduciary duty.” Meisel, 651 F.
Supp. 2d at 115 (alterations, internal quotation marks, and citation omitted). Additionally, “[t]he
aider and abettor must [] provide substantial assistance to the primary violator.” Id. Under New York
law, “[s]ubstantial assistance may only be found where the alleged aider and abettor ‘affirmatively
assists, helps conceal or fails to act when required to do so, thereby enabling the breach to occur.’” In
re Sharp Int’l, 403 F.3d at 50 (quoting Kaufman, 307 A.D.2d at 126). “Inaction,” however,
“constitutes substantial assistance only where the alleged aider and abettor owes a fiduciary duty
directly to the plaintiff.” Meisel, 651 F. Supp. 2d at 115.
Seagrape alleges that Garland and Elan knew, or were reckless in not knowing, that Seagrape
“duly provided the Senior Lender Notice to GACP on April 27, 2017 and, no more than three months
thereafter, was entitled to exercise its rights as a creditor under the CSA and Subordination
Agreement.” See FAC ¶ 153. Accordingly, Garland and Elan allegedly aided and abetted the primary
breaches of fiduciary duties by “filing the false and misleading” initial complaint in the related Obra
Pia Action, “without which”––Seagrape alleges––Obra Pia “would have [been] required to pay the
Cash Amount Due to Seagrape ‘immediately,’ or else face liquidation” under “the terms of the BVI
Court’s Judgment.” See id. ¶ 154. Garland also allegedly aided and abetted the breaches of fiduciary
duties by “presenting false and misleading statements of fact and law to the BVI Court,” which

46

purportedly “defrauded the BVI Court and induced it to set aside the Statutory Demand upon false
premises.” See id.
Because Seagrape has failed to allege a “primary breach of fiduciary duty” by Tuzman,
Blaurock, Davi, KIT Nevis, Obra Pia, OP Manager, or OP Feeder, however, it has “failed to state a
claim against [Garland and Elan] for aiding and abetting a breach of fiduciary duty.” Teachers Ins.
& Annuity Ass’n of Am. v. CRIIMI Mae Servs. Ltd. P’ship, No. 06 Civ. 0392 (LAK), 2007 WL
7569162, at *1 (S.D.N.Y. Sept. 7, 2007), aff’d, 481 F. App’x 686 (2d Cir. 2012); see also, e.g.,
Prickett v. N.Y. Life Ins. Co., 896 F. Supp. 2d 236, 251 (S.D.N.Y. 2012) (“With the dismissal of [the]
claim[] for . . . breach of fiduciary duty, the claim for aiding and abetting should be dismissed for
failure to plead a primary violation.”); DeBlasio v. Merrill Lynch & Co., No. 07 Civ. 318 (RJS), 2009
WL 2242605, at *27 (S.D.N.Y. July 27, 2009) (“Plaintiffs have not stated a claim for a breach of
fiduciary duty, and in the absence of sufficient allegations of a primary breach, the claim for aiding
and abetting a breach of fiduciary duty must also fail.”). Seagrape’s aiding and abetting breach of
fiduciary duty claim is therefore dismissed.
B. Judiciary Law § 487
“New York Judiciary Law § 487 gives an injured party a cause of action against an attorney
who ‘[i]s guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive
the court or any party.’” Haggerty v. Ciarelli & Dempsey, 374 F. App’x 92, 93 (2d Cir. 2010).
“Section 487 thus permits a civil action to be maintained by any party who is injured by an attorney’s
intentional deceit or collusion in New York on a court or on any party to litigation . . . .” Amalfitano
v. Rosenberg, 533 F.3d 117, 123 (2d Cir. 2008). To state a claim for a violation of Judiciary Law §
487, a plaintiff must show, “at a bare minimum, ‘that defendants: (1) are guilty of deceit or collusion,
or consent to any deceit or collusion; and (2) had an intent to deceive the court or any party.’” Ray v.
Watnick, 182 F. Supp. 3d 23, 28 (S.D.N.Y. 2016), as amended (May 4, 2016), aff’d, 688 F. App’x 41
47

(2d Cir. 2017) (citation omitted); see also Bryant v. Silverman, 284 F. Supp. 3d 458, 472 (S.D.N.Y.
2018) (explaining that § 487 “is not a codification of a common-law cause of action for fraud” and
that “the operative language at issue—‘guilty of any deceit’—focuses on the attorney’s intent to
deceive, not the deceit’s success”) (internal quotation marks and citation omitted). “[A] plaintiff also
has to establish that damages were caused by the deceit in order to succeed on a Section 487 claim.”
Michelo v. Nat’l Collegiate Student Loan Tr. 2007-2, 419 F. Supp. 3d 668, 710 (S.D.N.Y. 2019)
(internal quotation marks and citation omitted).
Moreover, “numerous New York State courts interpreting [§ 487], as well as federal courts
construing the state court decisions, have concluded that liability attaches under this law only if the
deceit is ‘extreme’ or ‘egregious.’” Ray, 182 F. Supp. 3d at 29 (collecting cases). Indeed, “[b]y
confining the reach of the statute to intentional egregious misconduct, this rigorous standard affords
attorneys wide latitude in the course of litigation to engage in written and oral expression consistent
with responsible, vigorous advocacy, thus excluding from liability statements to a court that fall well
within the bounds of the adversarial proceeding.” Id. (quoting O’Callaghan v. Sifre, 537 F. Supp. 2d
594, 596 (S.D.N.Y. 2008)) (internal quotation marks omitted). “Under this threshold, an action
grounded essentially on claims that an attorney made meritless or unfounded allegations in state court
proceedings would not be sufficient to make out a violation of § 487.” Id. In addition, there is also
“significant authority for the proposition that Section 487 should be applied only to a chronic and
extreme pattern of legal delinquency,” Kirk v. Heppt, 532 F. Supp. 2d 586, 593 (S.D.N.Y. 2008),
although “the Second Circuit has noted that no such requirement exists in the statute and that other
courts ‘have found attorneys liable under [] the statute for a single intentionally deceitful or collusive
act,’” Polanco v. NCO Portfolio Mgmt., Inc., 23 F. Supp. 3d 363, 375 (S.D.N.Y. 2014) (quoting
Amalfitano, 533 F.3d at 123-24).

48

Seagrape contends that Garland “engaged in deceit and collusion in New York,” with the
“intent to deceive both the BVI court in the BVI Proceeding and the court in the [related Obra Pia
Action]” by “knowingly basing [his] Affidavit in the BVI Proceeding and the Complaint in the
[related Obra Pia Action] upon materially false facts,” which––Seagrape alleges––was intended to
“block[] [Seagrape’s] due payment under the terms of the CSA, Investment Agreement and
Addendum.” See FAC ¶¶ 157-58. Similarly, Seagrape asserts that Elan “engaged in deceit and
collusion in the State of New York with the intent to deceive the court in the [related Obra Pia
Action].” Id. ¶ 157. According to Seagrape, both Garland and Elan violated § 487 by “falsely
represent[ing] to the Court, as a fact, that Seagrape had not provided the Senior Lender Notice, or
[by] unlawfully [failing] to disclose this fact.” Id. ¶ 159.
Seagrape’s § 487 claim fails because it has not plausibly alleged that either Garland or Elan
made any statements with “an intent to deceive the court or any party.” The Complaint is devoid of
allegations that, in either the BVI Proceeding or the related Obra Pia Action, Garland or Elan
knowingly made false statements with respect to whether Seagrape had delivered the requisite notice
under the Subordination Agreement. In fact, although Seagrape argues that Garland and Elan each
“knew” their representations in the BVI Proceeding and/or related Obra Pia Action “to be false,” see
Opp’n to Garland Mot. at 14; Opp’n to Elan Mot. at 15, it points to no factual allegations actually
demonstrating such knowledge. And indeed, there appear to be no such factual allegations in the
Complaint. Seagrape has thus failed to establish that any of their statements were “intentionally
deceitful”––a failure fatal to its § 487 claim against them. See, e.g., Ray, 182 F. Supp. 3d at 28-29
(“[P]laintiff has wholly failed to make out a plausible claim that defendants’ statements were
intentionally deceitful. On this ground alone, the Complaint must be dismissed.”); see also Bryant,
284 F. Supp. 3d at 472 (“[C]ourts have also held that an assertion of unfounded allegations in a
pleading, even if made for improper purposes, does not provide a basis for liability under Section
49

487.”) (quoting Tacopina v. Kerik, No. 14 Civ. 749 (LTS) (FM), 2016 WL 1268268, at *6 (S.D.N.Y.
Mar. 31, 2016)) (alterations and internal quotation marks omitted). Nor has Seagrape alleged that
any of Garland’s or Elan’s alleged deceit was “extreme” or “egregious,” or that either attorney’s
conduct was “indicative of ‘chronic and extreme delinquency.’” Kirk, 532 F. Supp. 2d at 593; see
also Ray, 182 F. Supp. 3d at 29 (“[E]ven assuming arguendo that at least one of the allegedly false
statements had been adequately alleged to be intentionally deceitful, the Complaint would still have
to be dismissed for failure to adequately allege that the deceit was extreme or egregious.”); Savitt v.
Greenberg Traurig, LLP, 126 A.D.3d 506, 507 (1st Dep’t 2015) (dismissing § 487 claims because
“the complaint fail[ed] to show either a deceit that reaches the level of egregious conduct or a chronic
and extreme pattern of behavior on the part of the defendant attorneys”) (internal quotation marks and
citation omitted). For this reason too, Seagrape’s § 487 claim fails. Accordingly, Seagrape’s claim
for violations of Judiciary Law § 487 must be dismissed.
CONCLUSION
For the reasons set forth above, the OP Defendants’ motion to dismiss is granted in part and
denied in part. Specifically, the Court grants their motion as to Seagrape’s first cause of action for
violations of Section 10(b) and Rule 10b-5, second cause of action for common law fraud, and fourth
cause of action for breach of fiduciary duties, but denies it as to Seagrape’s third cause of action for
breach of contract.

Defendants Garland’s and Elan’s motions to dismiss are granted in full.

According to the docket, Defendants Blaurock and Davi have not yet appeared in this action. No later
than October 2, 2020, Seagrape shall file a letter explaining when and how it effectuated service upon
Defendants Blaurock and Davi, whether it has been in contact with these Defendants, and whether it
intends to move for a default judgment against them.

50

The Clerk of Court is respectfully directed to terminate the motions pending at Dkts. 39, 42,
43, 44, and 48.
SO ORDERED.
Dated:

September 25, 2020
New York, New York
Ronnie Abrams
United States District Judge

51