The Firm obtained a significant appellate victory in the Supreme Court of the State of New York, Appellate Division, First Department, 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. See Alesco Preferred Funding VIII, Ltd. v. ACP Re, Ltd., No. 2021-01519 (1st Dep’t 2022) (NYSCEF No. 40).
Plaintiffs’ TruPS are in default and the failure to pay is a breach of the TruPS’ Indentures. Unfortunately, the TruPS issuers apparently no longer have the assets available to pay the TruPS. Plaintiffs’ complaint alleges that, in 2013-2014, certain individual defendants, and certain entities they dominate and control, took advantage of the Tower Insurance Group’s financial distress by engaging in a series of transactions that triggered the successor obligor provisions of the Indentures, without the successor entity assuming the TruPS’ obligations.
The First Department’s ruling almost entirely rejected Defendants’ appeal of two decisions by Commercial Division Justice Andrew Borrok that largely denied Defendants’ motions to dismiss. The First Department permitted the following claims to proceed in the trial court:
- breach of contract, including breach of the successor obligor provisions
- tortious interference with contract
- fraud, and aiding & abetting fraud
- derivative claims for breach of fiduciary duty, and for aiding & abetting breach of fiduciary duty
- alter ego and common law successor liability theories of liability for each of the above-referenced claims
The litigation now proceeds with discovery in the trial court.
A copy of the First Department’s decision is available here.