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Ra Global Services, Inc. F/K/A Realamerica Co. and George E. Burch Iii v. Avicenna Overseas Corp.

September 7, 2011

RA GLOBAL SERVICES, INC. F/K/A REALAMERICA CO. AND GEORGE E. BURCH III, PLAINTIFFS,
v.
AVICENNA OVERSEAS CORP., HUSEYIN GUN, TODD PETERSON, AND NIXON PEABODY LLP,
DEFENDANTS.



The opinion of the court was delivered by: Naomi Reice Buchwald United States District Judge

MEMORANDUM AND ORDER

Plaintiffs RA Global Services, Inc. f/k/a RealAmerica Co. ("RA Global") and George E. Burch III ("Burch" and together with RA Global, "plaintiffs") bring this diversity action against defendants Avicenna Overseas Corp., Huseyin Gun, Todd Peterson, and Nixon Peabody LLP ("Nixon"), seeking damages and a declaratory judgment. Presently before the Court is Nixon's motion to dismiss on the grounds that plaintiffs' four claims against Nixon are each barred by the applicable statute of limitations. In opposition, plaintiffs contend that this action was timely commenced.

For the reasons stated herein, we grant Nixon's motion to dismiss.

BACKGROUND

I. Factual Background

A. Parties

Plaintiff RA Global is a publicly-traded corporation that is incorporated in Delaware and has its principal place of business in Texas.*fn1 (FAC ¶ 2.) The company provides global oilfield services and has operations in the United States, Canada, Africa, the Middle East, Central Asia, and Russia. (FAC ¶ 16.) In 2005, RA Global was in need of capital to fund its business operations and expansion plans. (FAC ¶ 16.) Plaintiff Burch, a Texas resident, is an executive officer of RA Global and Chairman of its Board of Directors. (FAC ¶ 3.)

Defendant Avicenna Overseas Corp. ("Avicenna") is an entity organized under the laws of the British Virgin Islands. (FAC ¶ 4.) As described in further detail below, Avicenna provided secured loans to RA Global in 2005 and 2006. (FAC ¶ 25.) Defendant Huseyin Gun ("Gun"), a citizen of the United Kingdom, is a principal of Avicenna. (FAC ¶ 5.)

Defendant Todd Peterson is a citizen of New York and, during some of the relevant time period, was a partner at Nixon, a New York-based law firm. (FAC ¶¶ 6-7.) Peterson left Nixon in or about August 2007 and joined the law firm of Edwards Angell Palmer and Dodge LLP. (FAC ¶ 33.) Peterson and Nixon acted as outside counsel to defendant Avicenna. (FAC ¶ 23.)

B. Transactions

In 2005, RA Global determined that it needed an infusion of capital and turned to a company called CapitalinQ Limited ("CapitalinQ") for financial advice. (FAC ¶¶ 11, 17.) In response, CapitalinQ introduced RA Global to potential investors and lenders, including Avicenna and an entity called GEM Management Limited ("GEM"). (FAC ¶¶ 13, 17-22.) According to plaintiffs, CapitalinQ had undisclosed connections to both Avicenna and GEM. (FAC ¶¶ 19-22.)

Plaintiffs were also introduced to Peterson, who was then acting as outside counsel to Avicenna. (FAC ¶ 23.) Following the introduction, Peterson informed plaintiffs that he and Nixon would act as counsel to plaintiffs. (FAC ¶ 23.) Plaintiffs further allege that Peterson and Nixon in fact represented plaintiffs from July 2005 through October 2006 in connection with a series of transactions. (FAC ¶¶ 23, 44-45.) These transactions are described in further detail below.

1. Loans to RA Global

On July 26, 2005, RA Global and Avicenna entered into a loan agreement ("First Loan Agreement"), pursuant to which Avicenna agreed to lend $600,000 to RA Global. RA Global executed a promissory note and Burch executed a personal guaranty to secure the loan. (FAC ¶ 25.) According to the complaint, Peterson and Nixon represented both the lender, Avicenna, and the borrower, RA Global, in connection with the First Loan Agreement.*fn2 (FAC ¶¶ 23, 44-45.)

On June 28, 2006, RA Global and Avicenna entered into another loan agreement ("Second Loan Agreement"), pursuant to which Avicenna agreed to lend an additional $150,000 to RA Global. Again, RA Global executed a promissory note and Burch executed a personal guaranty to secure the loan. (FAC ¶ 25.) According to the complaint, Peterson and Nixon represented both lender and borrower in connection with the Second Loan Agreement.*fn3 (FAC ¶¶ 23, 44-45.)

On August 25, 2006, RA Global entered into a Memorandum of Understanding ("MOU") with several of its creditors, including Avicenna, GEM, and CapitalinQ. (FAC ¶¶ 25, 30.) The MOU restructured RA Global's loans, extending the maturity date of the company's outstanding debt and requiring an additional personal guaranty from Burch. (FAC ¶ 32.) Again, plaintiffs allege that Peterson and Nixon represented both Avicenna and plaintiffs in connection with the MOU.*fn4 (FAC ¶¶ 23, 44-45.)

Pursuant to the MOU, RA Global had to make certain concessions to its lenders. For example, Avicenna was entitled to nominate a candidate to RA Global's Board of Directors. (FAC ¶ 33.) Avicenna's nominee was Peterson, the Nixon lawyer, who became a director as of the date of the MOU. (FAC ¶ 33; Declaration of Brian Gardner in Opposition to the Motion of Nixon Peabody LLP to Dismiss the First Amended Complaint ("Gardner Decl.") at Ex. A (MOU).) The MOU also required RA Global to hire two creditor-approved executives. (FAC ¶ 34.) As required, RA Global hired Jonathan Apps as Chief Financial Officer and Abid Hamid as Chief Executive Officer. (FAC ¶ 34.) After being hired, the new executives acted without necessary authority, withheld information from RA Global's Board of Directors, and otherwise harmed RA Global. (FAC ¶¶ 34, 40.) Additionally, the MOU required RA Global to issue 15.5 million shares of common stock for distribution to creditors. (FAC ¶ 35.) This greatly increased the creditors' equity stake in RA Global and reduced the equity stake of RA Global's original founders and management team. (FAC ¶ 35.)

2. RA Global's Acquisition of IGOMS

During the time period at issue, RA Global also acquired additional assets. Specifically, on April 25, 2006, RA Global purchased a forty-nine percent interest in Intergulf Oilfield and Marine Services, LLC ("IGOMS"), a marine vessel construction and repair company and fabrication operation. (FAC ¶¶ 27-29.) RA Global sought at least one of the above-mentioned loans to help finance its acquisition of IGOMS. (FAC ¶ 28.)

On October 8, 2006, plaintiffs executed an escrow deed concerning IGOMS ("Escrow Deed"). Pursuant to the Escrow Deed, RA Global transferred its shares of IGOMS stock to an escrow agent ("IGOMS Escrow Agent"). (FAC ¶ 36.) If RA Global failed to repay its debt by July 2007, the IGOMS Escrow Agent would disburse the IGOMS shares to GEM, one of RA Global's creditors; if RA Global repaid its debt by that time, the IGOMS Escrow Agent would disburse the IGOMS shares to RA Global. (FAC ¶ 37.)

Although Avicenna was not a party to the Escrow Deed, plaintiffs allege that Nixon represented both Avicenna and plaintiffs in connection therewith. (FAC ¶ 37; Warder Decl. Ex. D (Escrow Deed).*fn5

3. RA Global's Alleged Default

In July 2007, GEM, one of RA Global's lenders, sent RA Global a notice of default. In that notice, GEM stated that RA Global was in default and that more than $1.9 million was immediately due and payable to GEM. (FAC ¶ 47.) GEM also advised the IGOMS Escrow Agent that RA Global was in default and demanded that the IGOMS shares be transferred to GEM. (FAC ¶ 48.) The IGOMS shares were ultimately transferred to GEM. (FAC ¶ 48.)

As described in further detail below, litigation among the parties commenced shortly thereafter.

C. Allegations Concerning Nixon

Plaintiffs assert four causes of action against Nixon: for fraudulent inducement, malpractice, conspiracy, and unjust enrichment. These causes of action are based upon the central allegation that Peterson and Nixon were part of a "loan-to-own" scheme, which involved a conspiracy by CapitalinQ, GEM, Avicenna, Gun, and Peterson, among others, to take control of RA Global and to abscond with RA Global's assets. (FAC ¶¶ 27, 54.) In particular, plaintiffs allege that the object of defendants' scheme was to take possession of IGOMS, RA Global's recent and valuable acquisition. (FAC ¶ 27.)

More specifically, plaintiffs allege that Peterson and Nixon represented both Avicenna and plaintiffs in connection with the First Loan Agreement, the Second Loan Agreement, the MOU, and the Escrow Deed. (FAC ¶¶ 23, 44.) Plaintiffs allege that, despite this dual representation, neither Peterson nor Nixon discussed the conflict of interest with plaintiffs. (FAC ¶¶ 23, 45.) Similarly, plaintiffs assert that they never signed a conflict waiver, nor did Peterson or Nixon disclose to plaintiffs that they were "acting principally at the direction of the Avicenna Defendants for the primary interests of the Avicenna Defendants." (FAC ¶¶ 23-24, 45.) In addition to failing to disclose the conflict, plaintiffs allege that Nixon and Peterson failed to disclose the loan-to-own scheme, failed to adequately negotiate the above-mentioned agreements, and failed to properly advise RA Global concerning the substance of the agreements. (FAC ¶¶ 45, 73-80.)

Plaintiffs further allege that Nixon's and Peterson's conduct constituted more than bad advice. According to plaintiffs, Nixon and Peterson misrepresented and withheld material information for the purpose of inducing plaintiffs to enter into some or all of the above-mentioned transactions. (FAC ΒΆΒΆ 69-72.) Similarly, plaintiffs allege that "[t]he agreements entered into with the Avicenna Defendants were obtained only by way of ...


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