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Hsh Nordbank Ag New York Branch, As v. Brian N. Street

July 18, 2012

HSH NORDBANK AG NEW YORK BRANCH, AS ADMINISTRATIVE AGENT FOR ITSELF AND CERTAIN LENDERS,
PLAINTIFF,
v.
BRIAN N. STREET, INDIVIDUALLY, AND AS CO-TRUSTEE OF BRIAN STREET FAMILY TRUST U/A 8/25/06, LINDA STREET, EVAN J. BRODY, AS CO-TRUSTEE OF BRIAN STREET FAMILY TRUST U/A 8/25/06 AND AS CO- TRUSTEE OF KASSKO TRUST #3, JAMES H. COHEN, MICHELE COHEN, KASSKO TRUST #3, WILLIAM RHEUBAN, AS CO-TRUSTEE OF KASSKO TRUST #3, AND ANDREW PHILIP COHEN, AS CO-TRUSTEE OF KASSKO TRUST : #3, DEFENDANTS.



The opinion of the court was delivered by: Denise Cote, District Judge:

OPINION & ORDER

Plaintiff HSH Nordbank AG New York Branch ("HSH") holds a judgment in the amount of approximately $75 million against defendants Brian N. Street ("Street") and James H. Cohen ("Cohen") (collectively "the Judgment Debtors"). To enforce that judgment, HSH brings this action to unwind allegedly fraudulent conveyances made by Street and Cohen in conjunction with the remaining defendants (collectively the "Transferee Defendants"), Linda Street, Michele Cohen, the Brian Street Family Trust U/A 8/25/06 (the "Street Trust") and its co-trustees, and the Kassko Trust #3 (the "Kassko Trust") and its co-trustees. The defendants move to dismiss HSH's complaint for lack of personal jurisdiction. In the alternative, the defendants move to transfer or stay the case. Finally, the defendants move to dismiss HSH's claims under §§ 274 and 276 of the New York Debtor and Creditor Law pursuant to Rule 12(b)(6), Fed. R. Civ. P. For the following reasons, the motion to dismiss for lack of personal jurisdiction brought by Cohen and his affiliated defendants is granted. The motion brought by Street and his affiliated defendants is denied.

BACKGROUND

I. The Guaranties On December 15, 2005, HSH agreed to loan up to $192 million to Holly Hill I Associates, Ltd. (the "Borrower"), a single-purpose entity of which the Judgment Debtors and Michael Swerdlow ("Swerdlow") were principals, to finance the development of a residential condominium project in Holly Hill, Florida. Contemporaneous with the December 15 loan agreement, the Judgment Debtors and Swerdlow executed a personal guaranty in support of their obligations under the loan agreement. The Judgment Debtors and Swerdlow jointly and separately guaranteed, inter alia, "full payment when due of all interest on the Loan . . . and all expenses (including reasonable counsel fees and expenses) incurred by [HSH] in enforcing any rights under this Guaranty". In July 2006, as consideration for HSH's consent to certain modifications of the loan agreement, the Judgment Debtors and Swerdlow jointly and severally guaranteed, inter alia, the "payment when due . . . of the outstanding principal balance of the Loan . . . up to but not in excess of $40,000,000," as well as "any and all expenses (including reasonable counsel fees and expenses) incurred by [HSH] in enforcing any rights under this Guaranty".

A series of crises hit the Borrower's development project in mid-late 2007 through early 2008, coinciding with a weakening of the local and national real estate market. See HSH Nordbank AG New York Branch v. Swerdlow, 672 F.Supp.2d 409, 414-15 (S.D.N.Y. 2009). It rapidly became apparent that the Borrower might default on its loan repayment obligation to HSH. While HSH advanced additional loan proceeds to the Borrower in January and February 2008, it ceased funding the loan on March 3. On April 3, HSH accelerated the balance due on the loan and declared all sums outstanding to be immediately due and payable in full. On April 4, HSH notified the Judgment Debtors that the Borrower had defaulted, and demanded immediate payment of all sums owed under the December 2005 and July 2006 guaranties. On May 16, HSH notified the Judgment Debtors and Swerdlow that they were in breach of their obligations under the guaranties.

II. The Conveyances HSH alleges that Street and Cohen, in anticipation of the Borrower's default and the enforcement of the guaranties, sought in 2007 and 2008 to shield significant funds from HSH's reach by diverting millions of dollars into accounts held jointly with their spouses and into family trusts. As a result, HSH alleges, Street and Cohen were left insolvent. The following transfers are alleged in HSH's December 21 complaint.

A. Street In approximately 2007, the Blackstone Group ("Blackstone"), a prominent private equity firm, acquired RGIS, a company in which Street had a substantial interest. Street received $10-15 million in the transaction, funds which flowed to an entity called Impala RGIS Holdings LLC ("Impala"), a Connecticut LLC in which Street held an 8.5% membership interest. In 2008, Street individually received $16,347,449 in cash distributions from Impala. Street has testified at deposition that these funds were transferred into bank accounts held by Brian and Linda Street as tenants by the entirety and by the Street Trust. Street has produced bank statements indicating that on March 27, 2008, $4,377,305.65 was deposited into a joint account held by Brian and Linda Street at Bear Stearns in New York from a Wachovia Bank account in Connecticut. On April 15, additional funds were transferred to two other joint accounts: $1 million into a Bank of American International Account, and $3,377,287.56 into a Morgan Stanley account located in New York. An additional $1,879,510.40 was transferred into the Morgan Stanley account in June.

In late 2007, Street held $2.4 million in an individual Bear Stearns account and $5.1 million in a Bear Stearns account with Linda Street as joint tenants. Starting in late 2007, however, Street depleted these accounts through transfers into a New York Bear Stearns account held by the Street Trust and to the Morgan Stanley account held with Linda Street in a tenancy by the entirety.

B. Cohen

Cohen also held a substantial interest in RGIS through an 8.5% membership interest in Impala. In either 2007 or 2008, Cohen transferred approximately half of his interest in Impala to the Kassko Trust. Cohen's children are the beneficiaries of the Kassko Trust. As a result of the sale of RGIS to Blackstone, the Kassko Trust received $11,389,478 in cash distributions in 2008.

By virtue of Cohen's remaining stake in Impala, Cohen individually received $10,987,685 in cash distributions from Impala in 2008. Cohen transferred some of this money to bank accounts held jointly with Michele Cohen as tenants by the entirety, as well as to the Kassko Trust and other family trusts. Over seven million dollars, for example, was transferred into a Smith Barney account which James and Michele Cohen hold jointly as tenants by the entirety.

III. The Judgment On July 3, 2008, HSH filed a complaint in this District against the Judgment Debtors and Swerdlow, seeking to enforce the guaranties. See HSH Nordbank AG New York Branch v. Swerdlow et al., No. 08 Civ. 6131 (DLC). On November 23, 2009, the Court granted HSH's motion for summary judgment on the defendants' liability under the guarantees. 672 F.Supp.2d at 420. On March 26, 2010, after additional briefing on damages, attorneys' fees, costs, and interest owed by the defendants, the Court entered judgment against the defendants jointly and severally in the amount of $75,623,164.62 (the "Judgment"). The Judgment was affirmed by the Court of Appeals on May 4, 2011. 421 Fed.Appx. 70 (2d Cir. 2011).

On May 14, 2010, the Court granted HSH's motion pursuant to 28 U.S.C. § 1963 to register the Judgment in the United States District Court for the Southern District of Florida. On May 18, HSH registered the Judgment in the Southern District of Florida (the "Florida Action"). See HSH Nordbank AG New York Branch v. Street et al., No. 10 Civ. 21611 (UU).

HSH subsequently settled with Swerdlow, filing a stipulation of dismissal and acknowledgement of partial satisfaction of judgment, which the Court so-ordered on February 28, 2011. HSH has engaged in discovery both in this District and in the Florida Action to locate and execute upon assets of the Judgment Debtors and satisfy the Judgment.

PROCEDURAL HISTORY

On December 21, 2011, HSH filed its complaint in this action against the Judgment Debtors and the Transferee Defendants. The Judgment Debtors moved to dismiss HSH's complaint, or in the alternative to stay or transfer the case, on February 29, 2012. On the same date, the Transferee Defendants separately moved to dismiss the complaint, or in the alternative to stay or ...


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