Benchmark Plus Inst. Partners, L.L.C. v Sacchetti
Index No. 655662/2024
Supreme Court, New York County
June 10, 2025
2025 NY Slip Op 32089(U)
Judge: Anar Rathod Patel
Cases posted with a “30000” identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System‘s eCourts Service. This opinion is uncorrected and not selected for official publication.
BENCHMARK PLUS INSTITUTIONAL PARTNERS, L.L.C., BENCHMARK PLUS PARTNERS, L.L.C., Plaintiffs, - v - DARIO SACCHETTI, JONATHAN HOWARD, TAAVI DAVIES, ARTHUR DZAGHGOUNI, ANAVIO EQUITY CAPITAL MARKETS FUND GP LIMITED, ANAVIO CAPITAL PARTNERS LLP, ANAVIO EQUITY CAPITAL MARKETS FUND LP Defendants.
DECISION + ORDER ON MOTION
HON. ANAR RATHOD PATEL:
The following e-filed documents, listed by NYSCEF document number (Motion 007) 124–130, 135–140, 151 were read on this motion to/for DISMISS.
Relevant Factual1 and Procedural History
The Court incorporates, by reference, the factual and procedural summary and defined terms from its Decision and Order on Motion Sequence Number 004. NYSCEF Doc. No. 131 (4/24/25 D&O).2 This case arises from Plaintiffs’ investment in the Delaware Fund, which resulted from the Delaware Fund’s investment in COPL.
Defendant Taavi Davies (“Davies”) was a director of the Fund GP and the Master Fund until at least November 7, 2023, and is a resident of Luxembourg. NYSCEF Doc. No. 2 at ¶ 17. Defendant Arthur Dzaghghouni (“Dzaghghouni”, together with Davies, the “Directors”) was a director of the Fund GP and the Master Fund until at least December 31, 2023, and is a resident of the Cayman Islands. Id. at ¶ 18. The Fund GP is organized under the laws of the Cayman Islands with its registered office address in the Cayman Islands. Id. at ¶ 16. The Delaware Fund is a limited partnership registered in Delaware with its registered office address in Delaware. Id. at
Plaintiffs’ allegations stem from the Directors’: (1) respective roles and responsibilities vis-a-vis the General Partner; and (2) inclusion on the Valuation Committee as two of the three members.
I. Allegations as Directors of the Fund GP
Defendants Davies and Dzaghgouni were the sole directors of the Fund GP, which otherwise had no other managers nor employees. Id. at ¶¶ 17–18; NYSCEF Doc. No. 74 at 3, 9, 41 (Private Placement Memorandum (“PPM”)). Pursuant to the PPM, the Fund GP was ultimately responsible for managing and operating the Delaware Fund and the Master Fund as well as “the investment decisions made on behalf of the Master Fund.” Id. at ¶¶ 161, 212. “[T]he [Fund GP] knew that Anavio had used the Funds’ investment money to acquire enormous positions in COPL that violated Anavio’s risk policies… [and] likewise knew that Anavio’s over concentration in COPL… violated its investment strategy and objectives and was not an appropriate investment….” Id. at ¶¶ 163–64. As the sole employees and directors of the Fund GP, Plaintiffs allege that the Directors were uniquely responsible for the actions or inactions of the Fund GP in allowing extensive investment in COPL and failing to correct investments that did not comply with the risk policy.
Pursuant to the LPA, the Fund GP acted as the General Partner while Plaintiffs acted as Limited Partners. Id. at ¶ 75. “On behalf of the General Partner, Defendants Davies and Dzaghgouni had express responsibility for approving Anavio’s risk policies, monitoring Anavio’s adherence to its policies and guidelines and appropriate standards of risk management, ensuring that risk policies continued to be appropriate, and rectifying breaches of the risk policy.” Id. at ¶ 59–60. Defendants reiterated in their DDQ responses to Plaintiffs, that the Directors: (1) “‘remain[] responsible for approving the Fund’s Risk Policy and Risk Framework and for ensuring that it continues to be appropriate for the Fund;’” and (2) were “‘responsible for monitoring that service providers (Including [Anavio]) adhere to the policy and appropriate standards of risk management.’” Id. at ¶ 224.
Nonetheless, the Fund GP “failed to take any action to cause Anavio to divest from COPL or abide by its own risk policies….” Id. at ¶ 165. Further, the Directors, in their individual capacities, did not communicate to Plaintiffs the accurate COPL position and went so far as to approve the inaccurate financial reporting to Plaintiffs, thereby concealing the Delaware Fund’s COPL position. Id. at ¶¶ 166–67, 215–17, 225; NYSCEF Doc. No. 138 at § 14.
II. Allegations as Members of the Valuation Committee
Plaintiffs also allege that, as members of the Valuation Committee, the Directors participated in Defendants’ disputed actions. Defendant Anavio created the Valuation Committee comprised of Defendant Howard and the Directors. Id. at ¶ 146. “The Valuation Committee was responsible for overseeing adherence to valuation policy and was responsible for resolving any valuation issues.” Id. These valuations were used to calculate Anavio’s management and incentive fees. Id. at ¶ 144.
After COPL filed for bankruptcy, Anavio was obligated to write down the Master Fund’s NAV by $47 million, “much of which was supposed unrealized ‘gains’ on COPL.” Id. at ¶ 149. However, prior to COPL’s bankruptcy, Anavio paid itself $2.3 million in incentive fees based on unrealized profits from COPL trades in 2022 and $875,000 in management fees in 2022 and 2023 based on the same unrealized COPL profits. Id. at ¶ 150. No material profits linked to Anavio’s COPL trades were ever realized. Id. at ¶ 151. The Defendants “intentionally overvalued the COPL securities to create a false impression that the Funds were performing well and to pay Anavio hefty management and incentive fees.” Id.; see also NYSCEF Doc. No. 138.
Plaintiffs allege that the Fund GP and, accordingly, the Directors (collectively “GP Defendants”) “either knew that Anavio had abandoned all of its stated risk policies and investment objectives or were recklessly indifferent to the same.” Id. at ¶ 217. The GP Defendants “(a) knew the truth about the COPL trades and the Funds’ true COPL positions; (b) knew that those trades and positions violated all of Anavio’s risk policies; (c) knew that the COPL valuations presented in Anavio’s financial reporting (including year-end 2022 financial statements) were baseless; and (c) decided not to disclose to Benchmark the true information about the COPL trades, positions, value, and Anavio’s abandonment of its risk policies.” Id.; see also NYSCEF Doc. No. 138 at § 14.
On October 25, 2024, Plaintiff commenced the present action by filing the Summons and Complaint. NYSCEF Doc. Nos. 1–2. The Complaint alleges four causes of action: (1) breach of contract against Anavio and the Fund GP; (2) fraud and intentional misrepresentation against all defendants; (3) breach of fiduciary duty against all defendants; and (4) aiding and abetting breaches of fiduciary duty against all defendants. Id. at ¶¶ 182–249.
On March 28, 2025, the Directors moved to dismiss the Amended Complaint as the counts alleged against them with prejudice. NYSCEF Doc. No. 124–130. On April 28, 2025, Plaintiffs filed its opposition to the Directors’ Motion. NYSCEF Doc. Nos. 135–140. The Directors filed their reply on May 13, 2025. NYSCEF Doc. No. 151.
Legal Analysis
The Directors seek to dismiss the Complaint for: (1) lack of personal jurisdiction; and (2) failure to state a claim. NYSCEF Doc. No. 125. The relevant documents designate Delaware law as applicable to the underlying agreement. NYSCEF Doc. Nos. 75–76. “Choice of law provisions apply to substantive issues, and matters of procedure are governed by the law of the forum state.” FIA Leveraged Fund Ltd. v. Grant Thornton LLP, 150 A.D.3d 492, 496 (1st Dept. 2017) Accordingly, the Court analyzes the Directors’ arguments relating to personal jurisdiction pursuant to New York law; while the Directors’ arguments regarding failure to state a claim are analyzed pursuant to Delaware law.
I. Personal Jurisdiction
In its previous Decision and Order, the Court held that the Forum Selection Clause of the LPA unambiguously designated New York as the forum for “any proceedings arising out of the terms and conditions of this Agreement.” NYSCEF Doc. No. 131 at § I.A. The Court further held that the Side Letter acted as an amendment to the LPA and did not supersede the mandatory Forum Selection Clause. Id. Finally, the Court held that Defendants Howard and Sacchetti, were either closely-related and/or intended third party beneficiaries. Id. at §§ 1.B–1.C. Accordingly, the Court held that: (1) the Forum Selection Clause of the LPA was binding on the Anavio corporate entities; and (2) that Defendants Howard and Sacchetti were sufficiently closely-related to be subject to personal jurisdiction in this matter. Id. at § 1.
Here, the Directors argue that the Court does not have personal jurisdiction over Defendants Davies and Dzaghgouni as: (1) they did not sign the LPA and Side Letter in their individual capacities; and (2) they are not closely-related to the General Partner, the signatory, as they are Independent Directors of the Defendant entities and were not involved in the alleged scheme.
“It is a general principle that only the parties to a contract are bound by its terms. A non-signatory may be bound by a contract under certain limited circumstances, including as a third-party beneficiary or an alter ego of a signatory or where it is a party to another related agreement that forms part of the same transaction.” Highland Crusader Offshore Partners, L.P. v. Targeted Delivery Techs. Holdings, Ltd., 184 A.D.3d 116, 121–22 (1st Dept. 2020) (internal citations omitted). When extending the terms of a contract to confer personal jurisdiction upon a non-signatory, “[t]he relationship between the nonparty and the signatory in such cases must be sufficiently close so that enforcement of the clause is foreseeable by virtue of the relationship between them.” Freeford Ltd. v. Pendleton, 53 A.D.3d 32, 39 (1st Dept. 2008). Further, a contract containing a forum selection clause and defining the bound parties to include related entities should be upheld by the Court. Oberon Sec., LLC v. Titanic Ent. Holdings LLC, 153 N.Y.S.3d 838 (1st Dept. 2021) (holding that a forum selection clause which defined the bound parties to include defendant’s “affiliates, subsidiaries, and subsequently formed entities,” was sufficient to confer jurisdiction on defendant’s related corporate entities).
However, “[j]urisdiction over individual defendants employed by a non-domiciliary corporation is appropriate under Section 302(a)(1) where the out-of-state corporate officers were
A. Personal Jurisdiction as Directors of Fund GP
The Complaint alleges that the Fund GP acted as the General Partner and had: (1) control over; and (2) the responsibility to monitor the assets of the Delaware Fund. NYSCEF Doc. No. 2 at ¶ 161, 163–64, 224. Plaintiffs further allege that the Fund GP was ultimately responsible for managing and operating the Delaware Fund, the Master Fund as well as “the investment decisions made on behalf of the Master Fund.” Id. at ¶¶ 161, 212. Plaintiffs allege that Defendants Davies and Dzaghgouni were the sole Directors of the Fund GP. Id. at ¶ 17–18. Defendants reassured Plaintiffs, that: (1) the Directors “‘remain[] responsible for approving the [Delaware] Fund’s Risk Policy and Risk Framework and for ensuring that it continues to be appropriate for the [Delaware] Fund;’” and (2) the Directors were “‘responsible for monitoring that service providers (Including [Anavio]) adhere to the policy and appropriate standards of risk management.’” Id. at 224. Furthermore, Plaintiffs’ filings manifest that the Directors reviewed and approved the financial statements provided to Plaintiffs, which allegedly contained the relevant misrepresentations. NYSCEF Doc. No. 138 at § 14. Based on these allegations, Defendants Davies and Dzaghgouni were directly involved in the Defendants’ disputed actions and/or had control of the assets of the Defendants. Accordingly, the Court can assert personal jurisdiction over the Defendants Davies and Dzaghgouni as the sole directors of Defendant Fund GP.
B. Personal Jurisdiction as Members of Valuation Committee
Furthermore, Plaintiffs allege that the Directors represented two-thirds of the Valuation Committee. Id. at ¶ 146. The Directors do not dispute their involvement as members of the Valuation Committee. NYSCEF Doc. Nos. 129–30. The Valuation Committee was “responsible for overseeing adherence to valuation policy and for resolving any valuation issues.” NYSCEF Doc. No. 2 at ¶ 146. Over the course of the parties’ partnership, the Valuation Committee allowed for continued trading of the COPL investment and overvalued the same, resulting in increased management fees paid out to the Defendants. Id. at ¶¶ 143–51. Furthermore, Plaintiffs allege that
Taking these allegations in the light most favorable to the non-moving party, Plaintiffs have established that the Directors likely consulted with the other Defendants regarding decisions surrounding the COPL investments and their valuation, and were involved in the decision-making process. Accordingly, the Directors are similarly bound by the forum selection clause of the LPA as they are closely-related to the General Partner.4
II. Failure to State a Claim
On a motion to dismiss brought pursuant to
A. Breach of Fiduciary Duty
“The equitable tort for breach of fiduciary duty has only two formal elements: (i) the existence of a fiduciary duty and (ii) a breach of that duty.” Basho Techs. Holdco B, Ltd. Liab. Co. v. Georgetown Basho Inv’rs, Ltd. Liab. Co., 2018 Del. Ch. LEXIS 222, at *55 (Del. Ch. July 6, 2018). The Directors argue that they did not owe a fiduciary duty to the Plaintiff as the Independent Directors of Fund GP because Plaintiffs do not allege that: (1) the Directors had control over the General Partner; and (2) the Directors engaged in self-dealing.
“It is well settled that, unless limited by the limited partnership agreement, the general partner of a Delaware limited partnership and the directors of a corporate General Partner who control the partnership, like the directors of a Delaware corporation, have the fiduciary duty to manage the partnership in the partnership’s interests and the interests of the limited partners.” In re Boston Celtics Ltd. Partn. Shareholders Litig., 1999 WL 641902, at *4 (Del. Ch. Aug. 6, 1999). “While the contours of the fiduciary obligations have been debated, it is well established that, at a
As discussed, supra, Plaintiffs allege that: (1) the Directors were two of the three members of the Valuation Committee created by Defendant Anavio; and (2) the Valuation Committee was tasked with overseeing the General Partner’s adherence to the valuation policy. NYSCEF Doc. No. 2 at ¶¶ 143–51. Further, Plaintiffs repeatedly allege that the Directors, as the sole employees of the General Partner, knew the amount invested in COPL, that the financial reports provided to the Plaintiffs were inaccurate, and that these investments violated the espoused risk policy. Id. at ¶¶ 167, 215, 232, 248. Plaintiffs also allege that the Directors were responsible for authorizing investment decisions while considering the decisions’ compliance with the established risk policy. Id. at ¶¶ 59–60, 224–25.5
The Directors argue that Plaintiffs’ allegations fail as Plaintiffs only allege that the Directors had the ability to control the partnership’s assets, not actual control over the partnership’s assets. NYSCEF Doc. No. 151 at 14. However, the Director’s argument in this regard betrays common sense. Plaintiffs allege that the Fund GP was responsible for managing and operating the Delaware Fund and the Master Fund as well as “the investment decisions made on behalf of the Master Fund.” Id. at ¶¶ 161, 212. The Fund GP had no employees and had only two directors, Defendants Davies and Dzaghgouni. Id. at ¶¶ 17–18; NYSCEF Doc. No. 74 at 3, 9, 41. The Directors were tasked with approving and adhering to risk policies. Id. at ¶ 224. Absent an ability to control the investments, the Directors’ roles within the Fund GP would be inconsequential. Accordingly, it is reasonably conceivable that the Directors had actual authority to take actions concerning the COPL trades at issue here.
The Directors also argue that USACafes and its progeny does not impose a fiduciary duty on the Directors, but rather a duty of loyalty which was not breached. NYSCEF Doc. No. 151 at 14–15 (“Under Delaware’s well-established doctrine pertaining to directors of general partners, the Independent Director Defendants at most owed Plaintiffs a duty not to engage in self-dealing—and Plaintiffs have not alleged that they engaged in any self-dealing.”). “In practice, the cases applying USACafes have not ventured beyond the clear application stated in USACafes: ‘the duty not to use control over the partnership’s property to advantage the corporate director at the expense of the partnership.’” Bay Ctr. Apartments Owner, LLC v. Emery Bay PKI, LLC, 2009 WL 1124451, at *10 (Del. Ch. Apr. 20, 2009). Even assuming, arguendo, that the Directors only owed a duty of loyalty, the Complaint sufficiently alleges a breach of said duty. As the sole employees of Defendant Fund GP, and a majority of the Valuation Committee, the Directors were responsible for accurately valuing and reporting the valuation of the partnership’s assets. NYSCEF Doc. No 2 at ¶ 146. Plaintiffs allege that the Defendants overvalued the COPL investment by 267%, garnering $2.3 million in incentive fees and $875,000 in management fees in 2022 and 2023. Id.
B. Aiding and Abetting Breach of Fiduciary Duty
The Directors next argue that the cause of action for aiding and abetting breach of fiduciary duty fails for Plaintiffs’ failure to plead: (1) an underlying breach of a fiduciary duty; and (2) knowing participation by the Directors. NYSCEF Doc. No. 125 at 21–23. The Directors’ first argument has been rendered academic.
Under Delaware law, a valid claim for aiding and abetting a breach of fiduciary duty requires: (1) the existence of a fiduciary relationship; (2) the fiduciary breached its duty; (3) a defendant, who is not a fiduciary, knowingly participated in a breach; and (4) damages to the plaintiff resulted from the concerted action of the fiduciary and the nonfiduciary.
Globis Partners, L.P. v. Plumtree Software, Inc., 2007 WL 4292024, at *15 (Del. Ch. Nov. 30, 2007). This Court has previously held that the remaining defendants owed a fiduciary duty to the Plaintiff and breached the same. NYSCEF Doc. No. 131 at § 2.C. Accordingly, the Directors’ first argument is moot.
The Court now turns to the Directors’ second argument. “To withstand a motion to dismiss, a plaintiff must plead facts making it reasonably conceivable that the defendant knowingly supported a breach of duty and that his resulting assistance to the primary actor constituted substantial assistance in causing the breach.” In re Oracle Corp. Derivative Litig., 2020 Del. Ch. LEXIS 218, at *33 (Del. Ch. June 22, 2020). “[T]o survive a [motion to dismiss,] the Complaint must either allege facts establishing either that [the defendants] conspired to breach a fiduciary duty, or must otherwise contain ‘some factual allegations from which knowing participation can be inferred.’” McGowan v. Ferro, 2002 WL 77712, at *2 (Del. Ch. Jan. 11, 2002). Again, the Directors represented a majority of the Valuation Committee, created to oversee adherence to valuation policy and to resolve any valuation issues which were used to calculate the fees received by the Defendants. NYSCEF Doc. No. 2 at ¶¶ 143–51. Meanwhile, as Directors, they were tasked with “‘approving the Fund’s Risk Policy and Risk Framework and for ensuring that it continues to be appropriate for the Fund;’” and “‘monitoring that service providers (Including [Anavio]) adhere to the policy and appropriate standards of risk management.’” Id. at 224. Nonetheless, after COPL went bankrupt, the Valuation Committee was forced to write down the Master Fund’s NAV by $47 million. Id. at ¶ 149. As such, Plaintiffs allege that the Directors knew the amount invested in COPL and, despite knowing that these investments did not adhere to the risk policy, approved, or failed to prevent them. Id. at ¶¶ 165, 215, 224–25, 248. Furthermore, the Directors knew the financial reports provided to the Plaintiffs were inaccurate and that the COPL investments were overvalued. Id. at ¶¶ 167, 232–33.
Based on these allegations, it is reasonably conceivable that the Directors knowingly supported the remaining Defendants’ breach of fiduciary duties. Thus, the Directors’ argument in this regard is unconvincing.
C. Fraud
Finally, the Directors argue that Plaintiffs failed to sufficiently allege common law fraud because Plaintiffs did not allege that the Directors: (1) knowingly made misrepresentations of fact; or (2) failed to disclose a material misrepresentation when otherwise under a duty to correct. NYSCEF Doc. No. 151 at 17–19.
Common law fraud in Delaware requires: 1) the existence of a false representation, usually one of fact, made by the defendant; 2) the defendant had knowledge or belief that the representation was false, or made the representation with requisite indifference to the truth; 3) the defendant had the intent to induce the plaintiff to act or refrain from acting; 4) the plaintiff acted or did not act in justifiable reliance on the representation; and 5) the plaintiff suffered damages as a result of such reliance. In addition to overt representations, fraud may also occur through deliberate concealment of material facts, or by silence in the face of a duty to speak.
H-M Wexford LLC v. Encorp, Inc., 832 A.2d 129, 144 (Del. Ch. 2003). “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.”
The Directors’ argument, again, disregards the Plaintiffs’ allegations regarding their involvement in the Valuation Committee. The Directors represent: (1) the only two directors of the Fund GP; and (2) a majority of the Valuation Committee which was tasked with reviewing any investments made by the Defendants for compliance with the risk policies and either authorizing or denying the investment. NYSCEF Doc. No. 2 at ¶ 59–60, 146, 224–25, 232. Plaintiffs allege that the Directors knew the how much was invested in COPL, that the financial reports provided to the Plaintiffs were inaccurate, and that these investments violated the risk policy, but failed to correct these actions. Id. at ¶¶ 167, 209, 215, 232, 248. Plaintiffs allege that the Directors took these actions to decrease Plaintiffs’ redemptions and to prevent Plaintiffs from terminating the partnership. Id. at ¶ 219. Further, the inflated valuation of these investments was used to charge Plaintiffs millions of dollars in unearned fees. Id. at ¶¶ 148, 150. Thus, Plaintiffs have sufficiently alleged that the Directors, due to their respective roles: (1) either actively or passively made a misrepresentation of fact; (2) either knew or were in a position to know of the falsity or misrepresentation either with knowledge or reckless indifference to the truth; (3) to induce Plaintiffs to maintain their confidence in the partnership and pay millions of dollars in fees; (4)
The Court has considered the parties’ remaining contentions and finds them unavailing.
Accordingly, it is hereby
ORDERED that Defendants Taavi Davies and Arthur Dzaghgouni’s Motion to Dismiss Counts II, III, IV of the Amended Complaint is DENIED in its entirety; and it is further,
ORDERED that Defendants Taavi Davies and Arthur Dzaghgouni shall file their answer to the Amended Complaint within twenty (20) days of the e-file date of this Decision and Order.
The foregoing constitutes the Decision and Order of this Court.
ANAR RATHOD PATEL, A.J.S.C.
June 10, 2025
| CHECK ONE: | CASE DISPOSED | X | NON-FINAL DISPOSITION | ||
| GRANTED | X | DENIED | GRANTED IN PART | OTHER | |
| APPLICATION: | SETTLE ORDER | SUBMIT ORDER | |||
| CHECK IF APPROPRIATE: | INCLUDES TRANSFER/REASSIGN | FIDUCIARY APPOINTMENT | REFERENCE |