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Antarctica Star I, LP v. Gibbs International, Inc.

United States District Court, S.D. New York

February 14, 2017

ANTARTICA STAR I, LP, et al., Plaintiffs and Counterclaim Defendants,
GIBBS INTERNATIONAL, INC, Defendant and Counterclaim/Third-Party Plaintiff,
ACRE, LLC, et al., Third-Party Defendants.

          OPINION & ORDER


         This dispute arises out of a failed multi-billion dollar property transaction with the State of California. The crux of the dispute is whether Gibbs International, Inc. (“Gibbs”) is entitled to, inter alia, some portion of a settlement related to this failed transaction.

         In an agreement signed in the fall of 2010 (the “Funding Agreement”), plaintiffs and counterclaim defendants, Antarctica Star I, LP and Antarctica Star, LLC (jointly, “Antarctica”), agreed to pay Gibbs a fee in exchange for its assistance in securing funding for the purchase of eleven properties owned by the State of California (the “State”). The State ultimately abandoned the transaction and litigation between it and Antarctica-related entities ensued. Not to be left high and dry, Gibbs demanded that Antarctica pay it for services already provided under the Funding Agreement. Antarctica refused, maintaining that the State's abandonment of the transaction terminated any obligation under the Funding Agreement to pay Gibbs. Instead of litigating this dispute immediately, however, the parties decided to toll their claims against each other while the suit against the State unfolded. They entered into an agreement (the “Settlement Agreement”) that included, inter alia, a provision whereby Gibbs would be paid a portion of any proceeds that resulted from that litigation. That agreement also provided for a right to terminate after a certain period of time. In 2015, when it became clear that the litigation with the State would settle, Antarctica terminated the Settlement Agreement. Termination did not end Antarctica's dispute with Gibbs, however: Gibbs continued to press for payment.

         In 2015, Antarctica brought a declaratory judgment and breach of contract action against Gibbs. Gibbs counterclaimed against Antarctica and brought a third-party complaint against ACRE, LLC (“ACRE”) and Chandra Patel.[1] All claims are based on the question of whether Antarctica owes Gibbs payment under the Settlement Agreement or the Funding Agreement. Antarctica has moved to dismiss Gibbs's counterclaims and third-party complaint.[2]

         Ultimately, this Court finds the agreements unambiguous and not supportive of Gibbs's claims. For the reasons stated below, Antarctica's motion is GRANTED.


         A. Procedural History

         Antarctica Star I, LP and Antarctica Star, LLC commenced this action on April 3, 2015 and filed an amended complaint ten days later. (Compl., ECF No. 2; Am. Compl., ECF No. 4.) On May 10, 2016, Gibbs filed the operative counterclaims against plaintiffs and a third-party complaint against ACRE and Patel. Gibbs brings claims for a declaratory judgment (Count One); breach of contract (Count Two); breach of the implied covenant of good faith and fair dealing (Count Three); unjust enrichment (Count Four); promissory estoppel (Count Five); breach of a third-party beneficiary contract (Count Six); alter ego and/or single enterprise and general partnership liability (Count Seven); fraudulent conduct (Count Eight); tortious interference (Count Nine); and civil conspiracy (Count Ten). (Am. Countercl. & Third-Party Compl. (“Am. CC & TPC”) ¶¶ 39-107, ECF No. 76.)

         On May 31, 2016, Antarctica moved to dismiss both the amended counterclaims and third-party complaint. (Mot. Dismiss, ECF No. 79.) That motion was fully submitted as of June 27, 2016. (Reply, ECF No. 85.) On November 22, 2016, this case was transferred from the Honorable Analisa Torres to the undersigned. On December 6, 2016, the Court informed the parties that it intended to resolve the motion to dismiss as a motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). (Order, ECF No. 95.) Pursuant to that order, the parties filed supplemental briefs. (Antarctica Suppl. Br., ECF No. 96; Gibbs Suppl. Br., ECF No. 97.)

         B. Factual History

         In an attempt to reduce the State's budget shortfall, California's Department of General Services (“CDGS”) contracted to sell to and lease back from California First, LP and California First, LLC (collectively, “California First” or the “California First entities”) eleven state-owned properties for $2.33 billion (the “Golden State transaction” or “transaction”). (Am. CC & TPC ¶¶ 8, 9.) The California First entities, which are controlled by ACRE and Patel, were created for the purpose of acquiring the state-owned properties. (Id. ¶ 10.) Antarctica Star I, LP and its general partner, Antarctica Star, LLC, were responsible for implementing the Golden State transaction. (Id.) California First and CDGS entered into a Purchase and Sale Agreement (“PSA”) on November 15, 2010. (Id. ¶ 9; Sherman Decl. Ex. 2, ECF No. 80-2.)

         i. The Funding Agreement

         Antarctica contracted with Gibbs to help fund the Golden State transaction (the “Funding Agreement”). (Am. CC & TPC ¶¶ 14-15, 20, 22.) The terms of the Funding Agreement are contained in a letter agreement between Antarctica and Gibbs dated November 3, 2010, (Sherman Decl. Ex. 1 (“Funding Agreement”), ECF No. 80-1), which was amended on November 29, 2010, (id. Ex. 3 (“Funding Agreement Amendment”), ECF No. 80-3). Under the Funding Agreement, Gibbs agreed to (i) provide two deposits of $5 million each, (ii) provide $1.2 million in working capital, the availability of which was subject to a November 15, 2010 “Working Capital Letter, ”[4] (iii) use its best efforts to procure funding for the transaction, and (iv) provide any other services that may be agreed upon. (Am. CC & TPC ¶¶ 14, 20; Funding Agreement § 2; Funding Agreement Amendment 1.) In the event Gibbs provided these services, Antarctica agreed to pay Gibbs “no later than one business day” following the Golden State transaction's closing an amount equal to (i) Gibbs's deposits, (ii) a $6 million fee, (iii) the amount of working capital Gibbs advanced, and (iv) two times the amount of working capital provided by Gibbs (with the sum of the amounts in (ii) and (iv) constituting Gibbs's “fee”), along with a membership interest in Antarctica Star, LLC. (Funding Agreement § 3; Funding Agreement Amendment 2; Am. CC & TPC ¶¶ 15, 22.)

         The Funding Agreement also included a termination provision. Pursuant to this provision, the Agreement would terminate automatically “on the later of” (i) the closing of the Golden State transaction and the payment of Gibbs's fee, (ii) the abandonment of the Golden State transaction by Antarctica or the State, “and (iii) one year from the date hereof.” (Funding Agreement § 9.) The California First entities are not party to the Funding Agreement.

         On or about November 3, 2010, Gibbs wired the first $5 million deposit. (Am. CC & TPC ¶ 16.) On or about November 17, 2010, Gibbs wired $500, 000 in working capital. (Id. ¶ 19.) Gibbs requested additional information and documentation for additional expenses before it provided the balance of the working capital, but Antarctica refused to comply with the request. (Id.) On or about November 29, 2010, Gibbs wired the second $5 million deposit. (Id. ¶ 21.)

         ii. California First Litigation

         On or about February 9, 2011, the State gave notice that it would not proceed with the Golden State transaction. (Id. ¶ 24.) On March 3, 2011, California First, ACRE, and Patel entered into an agreement (the “Facilitation Agreement”) pursuant to which they agreed to cooperate in suing CDGS over its decision to terminate the transaction. (Id. ¶¶ 25, 26; Sherman Decl. Ex. 6 (“Facilitation Agreement”), ECF No. 80-6.) The Facilitation Agreement provided that, should “ACRE or any of its affiliates . . . provide proof of funds in the amount of $1 billion, ” and the litigation resulted in settlement or specific performance by the State, California First would pay ACRE $2 million and certain expenses. (Facilitation Agreement §§ 6, 8; see also Am. CC & TPC ¶ 26.) On or about March 10, 2011, California First filed a lawsuit seeking to compel CDGS to go through with the Golden State transaction (the “California First litigation”). (Am. CC & TPC ¶ 27.)

         iii. The Settlement Agreement

         At some point, Gibbs made a demand for payment, including but not limited to the $500, 000 in working capital Gibbs had provided; Antarctica refused its demand. (Id. ¶ 28.) Instead of immediately litigating their dispute, however, the parties entered into an agreement dated November 23, 2011 to toll the statute of limitations on claims against each other (the “Settlement Agreement”).[5] (Id. ¶ 29; Sherman Decl. Ex. 5 (“Settlement Agreement”), ECF No. 80-5.)

         The Settlement Agreement states that Gibbs had asserted, and Antarctica had disputed, that it “[was] entitled to a share of proceeds that may arise from” the California First litigation. (Settlement Agreement at Background.) The parties agreed to resolve these disagreements by automatically releasing any claims against each other, including those related to their prior agreements and the California First litigation, (id. § 2(c), (d)), should Gibbs receive $500, 000 or more pursuant to the terms of a concurrently executed Escrow Agreement, (id. § 2). If, however, Gibbs was not paid and the mutual releases did not become effective by December 31, 2012, then either party could “void” the Settlement Agreement through written notice. (Id.)

         The Escrow Agreement-entered into by Gibbs, Antarctica Star I, LP, ACRE, and Patel-provided that proceeds from a settlement that would otherwise be payable to ACRE under the Facilitation Agreement would instead be paid to an escrow agent, who would then disburse a certain percentage of those proceeds to Gibbs under a “waterfall payment formula.” (Id. § 1(a); id. Annex A (“Escrow Agreement”) §§ 1(c), 4; id. Annex C (“Amended Facilitation Agreement”); Am. CC & TPC ¶ 46.) The Escrow Agreement, the Facilitation Agreement, and the amendment to the Facilitation Agreement that identified the escrow account into which any amounts payable to ACRE would be deposited were all attached as annexes to the Settlement Agreement. None contains terms purporting to alter the termination provision in the Settlement Agreement; and none contains terms purporting to require payment to Gibbs in the event of the Settlement Agreement's termination.

         iv. Settlement

         When it became clear that the California First litigation would settle, Antarctica purported to terminate the Settlement Agreement. (Am. CC & TPC ¶¶ 35, 84, 88.) This occurred before June 19, 2015. On or about June 19, 2015, the California First litigation was dismissed, CDGS paid California First $24 million, and part of that payment went to Antarctica. (Id. ¶ 35.) None of those proceeds has been deposited into the escrow account, and Gibbs has not received any portion of the settlement. (Id. ¶¶ 30, 35.)

         By this point, approximately two-and-a-half years had passed since the termination provision of the Settlement Agreement became effective. Indeed, Gibbs had been on notice since January 1, 2013 that Antarctica could terminate the agreement at any time, and there ...

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