The Firm recently obtained a favorable trial court ruling in New York State Court on behalf of its clients, holders of more than $200 million in Trust Preferred Securities (“TruPS”), against certain Defendants who allegedly facilitated and/or participated in wrongdoing that greatly diminished the value of Plaintiffs’ TruPS (the “April 2022 Decision”).
Plaintiffs’ complaint alleges that, in 2013-2014, certain individual defendants, and certain entities they dominate and control, sought to take advantage of the Tower Insurance Group’s financial distress by engaging in a series of transactions that triggered certain successor obligor provisions of the TruPS’ Indentures, without that successor entity assuming the TruPS’ obligations. Plaintiffs allege that the shareholders of the parent company of Tower Insurance Group were paid $143 million, ahead of the TruPS debenture holders, for worthless stock while the company was insolvent.
Previously, in June 2021, the Firm had obtained a significant victory in a related case when a California appellate court ruled that the California insolvency proceedings of the Tower Insurance Group’s operating insurance companies did not bar the bulk of Plaintiffs’ claims in New York. See In re CastlePoint Nat’l Ins. Co. (2021) 65 Cal.App.5th 668.
The April 2022 Decision provides full faith and credit to the California appellate court decision and squarely rejects Defendants’ position that the California appellate court decision actually carved back Plaintiffs’ claims in the New York litigation. The New York trial court determined that Plaintiffs could pursue the following claims against certain Defendants in the New York litigation:
● breach of contract for breach of successor liability provisions
● breach of contract for improper distributions and dividends
● tortious interference with contract
● fraud, and for aiding & abetting fraud
● derivative claims for breach of fiduciary duty, and for aiding & abetting breach of fiduciary duty
The New York Court also permitted Plaintiffs to pursue alter ego and common law successor liability theories of liability for each of the above-referenced claims to which they are applicable.
See Alesco Preferred Funding VIII, Ltd. v. ACP Re, Ltd., 2022 N.Y. Misc. LEXIS 1262, 2022 NY Slip Op 50258(U), 2022 WL 1087515 (Sup Ct. N.Y. County Apr. 11, 2022) (Borrok, J.)
A copy of the Court’s decision is available here and the supplemental decision is available here.