The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge
Plaintiff, Jet Star Enterprises Ltd. ("Jet Star") brought this action for, inter alia, intentional and constructive fraudulent conveyance and unjust enrichment*fn1 against defendants George Soros ("Soros"), Pernendu Chatterjee ("Chatterjee"), Deutsche Bank Trust Company Americas and the MB Statutory Trust (collectively, "Deutsche Bank").*fn2
On July 27, 2006, the parties appeared before me for oral argument on defendants' motion for summary judgment. For the reasons that follow, Deutsche Bank's motion is GRANTED and Soros and Chatterjee's motions are GRANTED in part and DENIED in part.*fn3
The facts set forth below are taken from the testimony and exhibits submitted in connection with this motion. This action arises out of a prior litigation between Jet Star and CS Aviation, a commercial aircraft management company (hereinafter referred to as the "Jet Star I litigation"). Jet Star contracted with CS Aviation to buy several aircraft. After Jet Star had made several payments, and received one plane in return, the deal went south. Jet Star sued CS Aviation and, in the midst of discovery, Sidley Austin (which had been representing CS Aviation and its co-defendant Wells Fargo) withdrew from the litigation due to unpaid fees. On July 15, 2003, a default judgment was entered against CS Aviation and Wells Fargo in the amount of $3,432,867. It is plaintiff's attempt to collect on that judgment that precipitated the instant suit.
According to plaintiff, the Jet Star I judgment became collectible on July 25, 2003. Just before the judgment went "live," the defendants effectively shut down CS Aviation. Soros and Chatterjee, longtime partners in a variety of investments, had started CS Aviation in 1994. Soros invested capital while Chatterjee managed the investment and served as CS Aviation's sole shareholder. In 1998, Soros and Chatterjee parted ways. They agreed that control of CS Aviation would be transferred to Soros Funds Management LLC ("SFM"). However, Chatterjee remained, on paper, CS Aviation's sole shareholder. Soros began operating CS Aviation through SFM's private equity division.
CS Aviation was in the business of leasing and selling commercial aircraft. The aircraft themselves were owned by trusts. CS Aviation managed the aircraft pursuant to management agreements with the trusts' beneficiaries. Legal title to the trusts was held by Wells Fargo. The beneficial owners of the trusts were a series of holding companies (hereinafter referred to as the "LLCs") controlled by Soros, Chatterjee and various affiliated investment funds. In 1999 (after Soros had tried, unsuccessfully, to sell CS Aviation) Deutsche Bank, acting as administrative agent for a syndicate of lenders, loaned the LLCs approximately $210 million to finance upgrades to the aircraft. The loan was secured by various forms of collateral including: 1) mortgages on the aircraft themselves; 2) a security interest in the LLCs' equity; and 3) a security interest in certain bank accounts at Deutsche Bank into which the aircraft lease proceeds were deposited (the "Lease Accounts").
After September 11, 2001, the aircraft industry experienced a downturn. In January of 2003, the LLCs defaulted on their payments under the Deutsche Bank loan. In the spring of 2003, Sidley Austin notified CS Aviation of its intent to withdraw from the Jet Star I litigation. Neither CS Aviation, SFM, nor Deutsche Bank took any action to prevent the default.*fn4 On July 25, 2003, Deutsche Bank entered into an "Acceptance Agreement" with its borrowers, taking equity interests in certain LLCs in partial satisfaction of the outstanding loan. Deutsche Bank placed these assets in a trust (the "MB statutory trust"). Deutsche Bank did not formally foreclose on the aircraft.
Receipt of the equity interests in the aircraft holding LLCs, the cash in the Lease Accounts, and funds held in the LLCs' names at Natexis Bleichroeder ("Bleichroeder") bank, was deemed to satisfy only $10,000 of the $147 million dollars outstanding on the Deutsche Bank loan. The Acceptance Agreement also terminated all CS Aviation employees. The management of the aircraft (as well as the services of all former CS Aviation employees except for its president, Jim Walsh) were transferred to a new entity, Wind-shear Leasing, that was set up by Deutsche Bank. For several months after the closing, Wind-shear operated out of the same offices at SFM's headquarters that had been previously occupied by CS Aviation. In addition, approximately $600,000 of CS Aviation's money was transferred to an escrow account at Akin Gump to pay final expenses, including severance payments to CS Aviation employees and Akin Gump's fees.
The Acceptance Agreement provided that Deutsche Bank would assume "exclusive control" over all aspects of the Jet Star I litigation, and retain the right to any recovery from that litigation. However, the agreement also provided that Deutsche Bank would assume no duties or obligations to CS Aviation with respect to the Jet Star I litigation. In addition, a separate litigation was then pending in this District between Wells Fargo, as trustee of certain aircraft holding trusts,*fn5 and TACA Airlines (the "TACA litigation"). Pursuant to the Acceptance Agreement, Deutsche Bank received the right to any proceeds from the TACA litigation. In June 2003 (prior to the execution of the Acceptance Agreement), a $32 million judgment had been entered in favor of Wells Fargo in the TACA litigation. Ultimately, Deutsche Bank successfully collected $23 million dollars from that judgment. However, when plaintiff attempted to collect on its default judgment against CS Aviation, it discovered that CS Aviation was no more.
A court will not grant a motion for summary judgment unless it determines that there is no genuine issue of material fact and the undisputed facts are sufficient to warrant judgment as a matter of law. Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby Inc., 477 U.S. 242, 250 (1986). In determining whether there is a genuine issue of material fact, the Court must resolve all ambiguities, and draw all inferences, against the moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam); Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57 (2d Cir. 1987). However, a disputed issue of material fact alone is insufficient to deny a motion for summary judgment, the disputed issue must be "material to the outcome of the litigation," Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir. 1986), and must be backed by evidence that would allow "a rational trier of fact to find for the non-moving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
To prove a claim for constructive fraudulent conveyance under ...