Excelsior Capital LLC v. AllenExcelsior Capital LLC v. Allen
Case Information
*1 12-4432-cv Excelsior Capital LLC v. Allen
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At а stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 6 th day of Seрtember, two thousand thirteen.
PRESENT: CHESTER J. STRAUB,
REENA RAGGI,
Circuit Judges ,
BRIAN M. COGAN,
District Judge. [*]
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EXCELSIOR CAPITAL LLC,
Plaintiff-Appellant ,
No. 12-4432-cv v.
HERBERT A. ALLEN, TERRY ALLEN KRAMER,
TERENCE C. MCCARTHY,
Defendants-Appellees .
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APPEARING FOR APPELLANT: JUDD BURSTEIN, Esq., New York, New
York.
APPEARING FOR APPELLEES: PAUL VIZCARRONDO, JR. (Stephen P.
Winter, on the brief ), Wachtell, Lipton, Rosen *2 & Katz, New York, New York, for Appellee Herbert A. Allen .
Gary P. Naftalis, Scott Ruskay-Kidd, Kramer Levin Naftalis & Frankel LLP, New York, New York, for Appellee Terry Allen Kramer. Richard A. Martin, Ihsan Dogramaci, Orrick, Herrington & Sutcliffe LLP, New York, New York, for Appellee Terence C. McCarthy. Appeal from a judgment of the United Statеs District Court for the Southern District of New York (Colleen McMahon, Judge ).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment entered on October 2, 2012, is AFFIRMED.
Plaintiff Excelsior Capital LLC (“Excelsior”) appeals from the dismissal pursuant to Fed. R. Civ. P. 12(b) of its claims of fraudulent conveyance under Arizona’s Uniform Fraudulent Transfer Act, see Ariz. Rev. Stat. § 44-1001, et seq., as well as related state
law claims of conspiracy to commit and aiding and abetting a fraudulent conveyance against defendants, descendants of the founder of investment bank Allen & Company. Excelsior alleges that, while their relative C. Robert Allen III (“decedent”) was hospitalized shortly before his death, some combination of defendants forged decedent’s signature on a document transferring his approximately 18% interest in a family-owned Arizona ranch to a newly created limited liability company (the “LLC”). Excelsior claims that this transaction was intended to frustrate its recovеry on an impending money *3 judgment against decedent, who had guaranteed repayment of certain defaulted loans by Excelsior. Because the LLC reconveyed deсedent’s former interest in the subject ranch to his estate on the day Excelsior commenced this action, Excelsior concedes that its claims for compensatоry damages and equitable relief are now moot. It contends that the district court nevertheless erred in dismissing its request for punitive damages.
We review the challenged dismissal de nоvo, accepting the complaint’s factual allegations as true and drawing all reasonable inferences in Excelsior’s favor. See Bryant v. N.Y. State Educ. Dep’t, 692 F.3d 202, 210 (2d Cir. 2012). We assume the parties’ familiarity with the facts and record of prior proceedings, which we reference only as necessary to explain our decision to affirm.
1. Punitive Damages
The distriсt court found it “simply inconceivable that [Excelsior] still has any
viable claim for relief to pursue in this action” given Excelsior’s admission “that it has
suffered no compensable injury” and the court’s view that “no court would ever charge a
jury on the issue of punitive damages” on the facts alleged. Excelsior Capital LLC v.
Allen, No. 11 Civ. 7373 (CM), 2012 WL 4471262, at *7–8 (S.D.N.Y. Sept. 26, 2012).
Rather than resolve the issue, the court proceeded to analyze Excelsior’s substantive
claim of fraudulent conveyance, concluding that it was deficient as a matter of law. See
id. at *8–13. Defendants argue on appeal, as they did in the district court, that punitive
damages are legally unavailable to Excelsior. We agree and affirm on that ground. Sеe
*4
10 Ellicott Square Ct. Corp. v. Mountain Valley Indem. Co.,
“While a viable claim for damages generally avoids mootness of the action,” Cook
v. Colgate Univ.,
We had occasion to examine this principle in Action House, Inc. v. Koolik, 54 F.3d 1009 (2d Cir. 1995), in the context of reviewing the district court’s jury instructions on punitivе damages. There, the plaintiff corporation sought compensatory and punitive damages from Koolik, the owner of half of its shares, under various tort and contract theories, claiming, among other things, that Koolik had taken more than his one-half share of the corporation’s profits in the three years preceding his withdrawal from the сorporation. Id. at 1010. Koolik argued that he had repaid any excessive withdrawal of Action House funds through a stock purchase agreement that the parties exеcuted. Id. The district court’s instructions to the jury allowed it to award punitive damages without making an award of compensatory damages, and the jury therefore returned an award of $362,000 in punitive damages and $0 in compensatory damages. Id. at 1011–12. The district court granted Koolik’s motion to vacate the punitive damages award. Id. at 1012. We found the instructions tо be inconsistent with New York law, “which requires a finding of actual damages before punitive damages may be awarded.” Id. at 1013 (citing Bryce v. Wilde, 39 A.D.2d 291, 294, 333 N.Y.S.2d 614, 616 (3d Dep’t 1972), aff’d, 31 N.Y.2d 882, 340 N.Y.S.2d 185 (1972)). We also held that had nominаl damages been awarded, an award of punitive damages would have been consistent with New York law, and remanded the case for the district court to determine “whether Koolik *6 repaid all sums wrongfully withdrawn from Action House’s checking account and petty cash fund.” Id. at 1013–15.
Excelsior offers no argument as to why these decisions do not bar its punitive
dаmages demand. Nor will we devise one. While there may be instances in which a
defendant’s unilateral post-filing conduct, though it attempts to make the plaintiff
financially whole, does not preclude recovery of punitive damages, cf. Already, LLC v.
Nike, Inc.,
2. Attorney’s Fees
Excelsior also claims an entitlement to attorney’s fees under New York Debtor
and Creditor Law § 276-a (authorizing award of “reasonable аttorney’s fees” where
*7
fraudulent conveyance “is found to have been made by the debtor and received by the
transferee with actual intent . . . to hinder, delay or defraud either present or future
creditors”). But “fraudulent conveyance claims cannot be prosecuted for the sole
purpose of obtaining a finding of actual intent to deceive and thus an award of attorneys’
fees.” Murphy v. RMTS Assocs., LLC, 71 A.D.3d 582, 583, 897 N.Y.S.2d 417, 419
(1st Dep’t 2010).
More importantly, such an “interest in attorney’s fees
is . . . insufficient to create an Article III case or controversy where none exists on the
merits of the underlying claim.” Lewis v. Cont’l Bank Corp.,
The judgment of the district court is AFFIRMED.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
[*] Judgе Brian M. Cogan, of the United States District Court for the Eastern District of New York, sitting by designation.
Notes
[1] We apply New York law because “where the parties agree that New York law controls,
this is sufficient to establish choice of law.” Fed. Ins. Co. v. Am. Home Assurance Co.,
[2] Insofar as we have held that “punitive awards were not vitiated by the absence of
compеnsatory or nominal damages awards,” we have done so in cases involving federal
rather than New York law. King v. Macri,
[3] Because we conclude that Excеlsior cannot pursue an otherwise moot cause of action based solely on a claim for punitive damages, we need not decide whether the district court erred in dismissing Excelsior’s fraudulent conveyance claims under Arizona law for failure to allege adequately the transfer of a property interest.