Universal Investment Advisory SA v. Bakrie Telecom Pte., Ltd.
154 A.D.3d 171
N.Y. App. Div.2017Background
- Issuer Bakrie Telecom Pte. Ltd. issued $380 million of guaranteed senior notes (2010/2011 indenture); BTEL (parent) guaranteed and received the offering proceeds via intercompany loan; interest reserve maintained in New York under BNY Mellon trustee.
- Plaintiffs hold more than 25% of the notes; after missed interest payments in Nov. 2012, Nov. 2013, May and Nov. 2014, plaintiffs accelerated the notes and sued (complaint asserts breach of contract, fraud, aiding and abetting, fiduciary duty, aiding and abetting fiduciary breach, no-impairment clause breach, and declaratory relief relating to an Indonesian PKPU restructuring process).
- Defendants include BTEL, issuer, two BTEL subsidiaries (guarantors), PT Bakrie & Brothers (B & B, ultimate parent/39.6% shareholder), and individual directors/commissioners (some pre- and some post-offering). B & B and the individuals did not sign the indenture or guarantee the notes.
- Indenture contains a New York choice-of-law and forum-selection clause and a "no impairment" clause (Section 6.07) protecting holders' right to payment and to sue.
- Plaintiffs allege the offering memoranda misrepresented BTEL’s financial condition and that defendants staged an Indonesian restructuring (PKPU) to disallow plaintiffs’ claims and undermine their rights under the indenture.
- Motion court granted plaintiffs summary judgment on liability for nonpayment, denied dismissal of certain fraud claims and standing challenges, but dismissed aiding-and-abetting claims against B & B and individual defendants for lack of personal jurisdiction and dismissed the no-impairment contract claim as duplicative.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over nonsignatories (B & B, individual directors) via forum-selection clause | Nonsignatories were closely related to signatories: played central management/decision roles, authorized/promoted offering, had actual knowledge and control, so clause should bind them | Nonsignatories never signed indenture; lack direct involvement with indenture transaction so forum clause cannot be invoked | Reversed dismissal; denied without prejudice and ordered jurisdictional discovery to determine if close-relationship theory supports binding the nonsignatories |
| Champerty / standing of Universal Investment and Vaquero to assert breach claim | They hold legal title (assignments) and preexisting proprietary interests; assignments were to enforce, not to monetize litigation — not champertous | Defendants argued assignments were champertous (acquired to bring suit) | Assignments not champertous; plaintiffs had standing to sue (assignors retained beneficial interest; assignees entitled only to reimbursement of costs) |
| Conversion to summary judgment & summary judgment on breach of notes/indenture | Plaintiffs provided documentation: unpaid notes, notice of acceleration; nonpayment undisputed | Defendants contested only champerty/standing and otherwise failed to raise material fact | Plaintiffs entitled to summary judgment on liability for breach/nonpayment; damages reserved for later determination |
| Duplicative fraud claim based on post-offering assurances to pay interest | Fraud claim alleges post-offering misrepresentations and out-of-pocket damages (loss in value) | Defendants argued fraud claim duplicates breach claim for nonpayment | Post-offering fraud claim (fourth cause) is duplicative of the breach claim and must be dismissed; pre-offering fraud claim (second cause) survives |
| Breach of "no impairment" clause (section 6.07) based on PKPU restructuring | PKPU allegedly staged to disallow plaintiffs' claims and impair holders' rights — distinct contract-based injury beyond mere nonpayment; available damages include costs from PKPU | Defendants argued claim duplicates the breach claim for nonpayment and should be dismissed | Claim alleging breach of section 6.07 survives; dismissal was improper because interference with holders' enforcement rights is distinct from nonpayment |
Key Cases Cited
- Peterson v. Spartan Industries, 33 N.Y.2d 463 (1974) (jurisdictional discovery warranted when plaintiff shows facts may exist to oppose a dismissal motion)
- Trust for Certificate Holders of Merrill Lynch Mortgage Investors, Inc. v. Love Funding Corp., 13 N.Y.3d 190 (2009) (distinguishes enforcement assignments from champerty where assignee holds a preexisting proprietary interest)
- Justinian Capital SPC v. WestLB AG, N.Y. Branch, 28 N.Y.3d 160 (2016) (New York champerty analysis; primary purpose rule)
- Tate & Lyle Ingredients Americas, Inc. v. Whitefox Tech. USA, Inc., 98 A.D.3d 401 (1st Dept. 2012) (closely related entities and decision-making involvement can bind nonsignatories to forum clauses)
- Mañas v. VMS Associates, LLC, 53 A.D.3d 451 (1st Dept. 2008) (fraud claim based on nonpayment may be duplicative of breach of contract claim)