The opinion of the court was delivered by: Peter K. Leisure, District Judge:
Familiarity with the prior decisions relating to this case is assumed.
Except as otherwise indicated, for purposes of these motions, the parties
have stipulated to, or do not otherwise contest, the following facts as
noted in the original summary judgment decision, which are repeated below
in their entirety, from that earlier decision. See Wechsler v. Hunt
Health Sys., Ltd., No. 94 Civ. 8294, 1999 WL 397751 (S.D.N.Y. June 16,
1999) ("Welchsler I"), at *1-*3.
1. The Accounts Receivable Purchase Contract
On July 10, 1991, Towers executed an accounts receivable purchase
contract (the "HCP Agreement") with Hunt Health, a Texas limited
partnership formed in 1991, to operate a drug and alcohol dependency
rehabilitation center located in Hunt, Texas doing business as "La
Hacienda Treatment Center," or "La Hacienda." Plaintiffs
Counter-Statement Pursuant to Local Civil Rule 56.1(b), dated July 29,
1998 (hereinafter "Pl. 56.1 Counter-Statement"), ¶ 1. The HCP
Agreement provides that Hunt Health will offer to sell to Towers the
"Reimbursable Accounts" receivable of Hunt Health, defined by the
agreement as "clean claim obligation[s] payable in whole or in part by a
governmental entity . . . or by an insurance company or other entity
approved by [Towers]". Defendants' Response to Plaintiffs Statement
Pursuant to Local Civil Rule 56.1, dated July 24, 1998 (hereinafter
"Def. 56.1 Response"), ¶ 22.
The contractual purchase price for a Reimbursable Account is 95% of the
amount Towers actually recovers on the account, plus 95% of any remaining
"Reimbursable Value", defined as "the amount that is represented by [Hunt
Health] to be due and payable by a Third Party Obligor with respect to
such Account." See exhibits attached to the affidavits of Jeffrey B.
Finnell, Esq. (hereinafter "Pl. Ex."), Ex. 22, ¶ 3. The parties have
referred to the difference between the discounted value paid by Towers
and its full face value as a "factoring fee".
Towers's payment for purchased accounts is to occur in two
installments. The first installment, consisting of 50% of the
Reimbursable Value of the account, is due upon purchase. See id. The
remaining balance is due upon the earlier of (i) receipt by Towers of
full payment on the account, (ii) 30 days from the date a third party
obligor informs Towers that the account will not be paid, or (iii) 365
days after the date of purchase. See id. Upon Towers's payment of the
initial installment, Hunt Health's rights, title and interest in the
accounts, including Hunt Health's right to payment on the accounts,
transfers to Towers. See id. ¶ 4.
The final relevant contemporaneous agreements are letter agreements
(the "Guaranties") entered into with Towers by P&G Enterprises, Inc.
("P&G"), and MHTJ Investments, Inc. ("MHTJ"), Texas corporations that
each have a 50% ownership interest in Hunt Health.*fn3 The letter
agreements set forth absolute and unconditional guaranties by P&G and
MHTJ of Hunt Health's obligations and liabilities to Towers, if any. See
Pl. Exs. 26, 27.
2. The September 1992 Agreements
In September 1992, Towers and Hunt Health effected several changes in
their contractual relationship. On September 25, 1992, the parties
executed an amendment (the "Amendment") to the HCP Agreement allowing
Hunt Health to elect early termination. See Pl. Ex. 29. In the event of
such election, the Amendment provides that Hunt Health must pay Towers
liquidated damages equal to $10,000 for each month or part thereof
remaining prior to the HCP Agreement's original termination date. See
In addition, that same day, Towers and Hunt Health executed a more
elaborate security agreement regarding Towers' lien on Hunt Health's
assets (the "Security Agreement") and a separate letter agreement
altering the method for determining the factoring fee charged by Towers.
See Pl. Exs. 28, 74.
Finally, on September 30, 1992, Towers and Hunt Health entered into a
letter agreement (the "Letter Agreement") providing in part that "the
amount of Accounts [Hunt Healthl offer[s] to [Towers] under the Contract
can result in maximum initial payments outstanding from Towers to Hunt
[Health] of One Million ($1,000,000.00) Dollars". Pl. Ex. 30.*fn4
3. The Unraveling of Towers's Fraudulent Note and Bond Sale Schemes
On February 8, 1993, the United States Securities and Exchange
Commission ("S.E.C.") brought suit against Towers and several of its
executives, seeking, among other things, to enjoin disposal of Towers's
assets outside the ordinary course of business. See Exhibits attached to
the affidavits of Brooks Banker, Jr., Esq. (hereinafter "Def. Ex."), Ex.
41. The S.E.C. lawsuit was premised on allegations that Towers had sold
over $400 million worth of promissory notes and unregistered bonds from
1989 to 1993 based on materially false and misleading statements
regarding Towers's financial condition, the risks of investing in the
securities and the intended use by Towers of proceeds of the note and
bond sales. See Def. Exs. 40, 41.
In the separate action initiated by the S.E.C., a preliminary
injunction issued on February 17, 1993, prohibiting Towers from, inter
alia, disposing of its assets except in the ordinary course of business.
See Pl. Ex. 117.
4. Hunt Health's Notice of Termination of the HCP Agreement
As of January 1993, Hunt Health had begun to make arrangements to
switch to a different factoring service provider, MediMax, Inc., a
competitor of Towers. See Def. 56.1 Response, ¶ 56. By February 22,
1993, Hunt Health expected the transfer of Towers's servicing to MediMax
to occur by that Friday, February 26, 1993. See id. ¶ 57. On that
Friday, Hunt Health gave Towers notice of Hunt Health's intention to
terminate the HCP Agreement. See Def. 56.1 Response, ¶ 58; Pl. Ex.
Of serious contention between the parties are the events, if any,
occurring the previous day, February 25, 1993. Defendants assert that on
that date Hunt Health requested from Towers a $60,000 payment pursuant to
the Letter Agreement. Plaintiff disputes whether Hunt Health made the
request. In all events, it is undisputed that Towers remitted no funds to
Hunt Health on that day or, indeed, on any day after February 19, 1993.
Towers' final purchases of Hunt Health's accounts receivable occurred at
some point between February 19 and 26, 1993. See Def. Ex.77, ¶ 2.
A month later, on March 26, 1993, Towers filed a voluntary petition for
relief under chapter 11 of the United States Bankruptcy Code, and a
chapter 11 trustee was subsequently appointed. See Def. 56.1 Response,
On April 2, 1993, Esperanza, a Texas limited partnership, was formed by
P&G and Friendship, a Texas corporation created that same day by Givens,
Mehendale and Thomas. By written agreement executed as of that date, Hunt
Health agreed to sell Esperanza certain of Hunt Health's assets in
exchange for Esperanza's assumption of certain of Hunt Health's
liabilities. See Pl. Ex. 38. The decision of Esperanza and Hunt Health to
execute the agreement was made by the same persons on both sides, and
Gaines and Givens executed the agreement on behalf of both entities.*fn5
See Def. 56.1 Response, ¶¶ 92, 95.
On November 11, 1994, pursuant to his authorization by the bankruptcy
court, the chapter 11 trustee initiated this action. Upon confirmation of
Towers's plan of reorganization on December 8, 1994, the remaining assets
of Towers were transferred to an administrative trust (the "Trust"), with
Raymond Wechsler designated as administrative trustee (the "Trustee").
See id. ¶ 4. Pursuant to the plan of reorganization, the Trustee
pursued this litigation in the place of the chapter 11 trustee. See id.
On June 16, 1996, this Court issued an Opinion and Order regarding
plaintiffs motion for summary judgment on most of its claims and
defendants' cross-motion for partial summary judgment regarding certain
of their breach-of-contract claims. See Wechsler I, No. 94 Civ. 8294,
1999 WL 397751 (S.D.N.Y. June 16, 1999). The Court,inter alia, granted
partial summary judgment to plaintiff and denied defendants' motion for
summary judgment. See id. at *1.
One of the many breach-of-contract claims addressed in the Opinion was
Hunt Health's assertion that Towers breached a letter agreement ("the
Letter Agreement"), by failing to make a $60,000 payment Hunt Health
allegedly requested. See id. at *10-*14 Plaintiff responded in its
opposition papers that the Letter Agreement had expired by the time of the
alleged request. See id. at *11. Defendants later moved to preclude
plaintiffs assertion of the "expiration argument" because plaintiff had
failed to disclose it in response to relevant contention interrogatories
during the discovery phase of this action. On August 27, 2001 this Court
granted defendants' motion to preclude plaintiff from asserting that the