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SHLD, LLC v. Hall

United States District Court, S.D. New York

March 30, 2017

SHLD, LLC, DAVID MONTEAU, HARVEY NEWMAN, STUART SALLES, and LAURENCE WILNEFF, Plaintiffs,
v.
NICHOLAS HALL, AMAR SHAH, TIER HALL, LTD., TIER HALL CONSULTING, LTD., INDEPENDENT SERVICES GROUP, LTD., INDEPENDENT BROKING SOLUTIONS, LTD., THE IVY GROUP, LLC, MINORIES LAW LIMITED, JEREMY BLOOMER, and NIGEL FRUDD, Defendants.

          REPORT AND RECOMMENDATION

          JAMES C. FRANCIS IV UNITED STATES MAGISTRATE JUDGE

         This action centers on a scheme to deliver "investor-funded life insurance to employee associations and union groups in New York." (Second Amended Complaint ("SAC"), ¶ 181). Alleging that the defendants breached an agreement to "create and structure a bond that would provide the needed capital" for the program (SAC, ¶ 3), the plaintiffs - SHLD, LLC ("SHLD"), David Monteau, Harvey Newman, Stuart Salles, and Laurence Wilneff - filed this action for breach of contract, as well as conversion and other torts. When defendants Nicholas Hall, Amar Shah, and Tier Hall Consulting, Ltd. (collectively, the "Defaulting Defendants") failed to answer, certificates of default were entered and the case was referred to me for a hearing on damages. The Defaulting Defendants failed to appear at the inquest held on February 14, 2017. The following findings are therefore based on evidence provided by the plaintiffs. I recommend that the plaintiffs be awarded $265, 000 in damages plus prejudgment interest measured at 9% from March 11, 2015, until the date judgment is entered, and $710.00 in costs.

         Background

         The individual plaintiffs in this action are the members of SHLD; each is a citizen of the United States and resides in either Illinois or New York. (SAC, ¶¶ 10-13, 194; Plaintiffs' Proposed Findings of Fact and Conclusions of Law (“Proposed Findings”), ¶ 2). The Defaulting Defendants are (or were, in the case of Tier Hall Consulting, Ltd. (“Tier Hall Consulting”)) citizens of the United Kingdom; Nicholas Hall and Amar Shah were the principals and owners of Tier Hall Consulting. (SAC, ¶¶ 15, 20-21; Proposed Findings, ¶¶ 3, 5). Most of the other defendants -- Tier Hall, Ltd. (“Tier Hall”), Independent Broking Solutions, Ltd., Independent Services Group, Ltd., Minories Law Ltd., and Nigel Frudd -- are citizens of the United Kingdom. (SAC, ¶¶ 14, 16-17, 19, 22; Proposed Findings, ¶¶ 4, 6-8). The Ivy Group, LLC, has its principal place of business in Connecticut, and its members are domiciled in Connecticut or Massachusetts; its principal, Jeremy Bloomer, is a citizen of the United States and is domiciled in Massachusetts.[1] (SAC, ¶¶ 18, 23; Proposed Findings, ¶ 9).

         The individual plaintiffs “conceived of The Amalgamated Life Insurance and Annuity Network Trust of New York (“ALIANT”) as a project to deliver investor-funded life insurance to employee associations and union groups in New York State.” (Proposed Findings, ¶ 10; SAC, ¶ 180). Between January and September 2013, the individual defendants met with Mr. Hall and Mr. Shah in New York and elsewhere to discuss the project. (SAC, ¶¶ 183-184, 192; Proposed Findings, ¶¶ 11-18). More specifically, a meeting in New York between the individual plaintiffs and Mr. Hall on July 22, 2013, culminated in a draft proposal by which Tier Hall, Ltd., would manage the creation and structuring of an investment vehicle. (SAC, ¶¶ 187-188; Draft Proposal, attached as Exh. 1 to SAC; Proposed Findings, ¶¶ 13-14). For an initial investment from the plaintiffs of $300, 000, Tier Hall would engage advisors with an eye to recruiting investors and developing a business plan within two to three months. (SAC, ¶¶ 190-191; Draft Proposal; Proposed Findings, ¶¶ 14-16). After a September 30, 2013 meeting in New York among the individual plaintiffs and Mr. Shah, a non-disclosure agreement was entered into, with Mr. Shah signing on behalf of Tier Hall. (SAC, ¶¶ 192-193; Proposed Findings, ¶¶ 18-19).

         The individual plaintiffs formed SHLD in October 2013 as “a vehicle to develop and fund the administrative structure and reserves required for ALIANT through the bond” that Mr. Hall, Mr. Shah, and Tier Hall Consulting were to create. (SAC, ¶ 194, Proposed Findings, ¶ 20). Immediately afterward, Mr. Shah informed the plaintiffs that an additional $30, 000 would be needed to form an Irish bond company to hold the portfolio of “life settlements” that would back the bond.[2] (SAC, ¶¶ 194-195; Proposed Findings, ¶¶ 20-21). This additional amount was incorporated into a “Heads of Terms” agreement between SHLD and Tier Hall Consulting, [3] which Mr. Hall Dated: behalf of Tier Hall Consulting. (SAC, ¶¶ 198-199; Heads of Terms Agreement; Proposed Findings, ¶¶ 22-23). That agreement required Tier Hall Consulting to form the aforementioned Irish bond company within three to six months of the payment of the plaintiffs' $330, 000. (SAC, ¶ 207; Head of Terms Agreement at 1; Proposed Findings, ¶ 29). It further required, among other things, that within three to six months of the execution of a binding agreement, Tier Hall Consulting would (1) hire the company's board and legal, actuarial, and accountancy teams; (2) work with the bond distribution platform, (3) execute a service agreement with the charitable trust that would own the bond company, (4) “project manage the whole transaction including the professional advisors, ” and (5) recruit potential investors and develop a business plan. (SAC, ¶¶ 207-211; Heads of Terms Agreement at 1; Proposed Findings, ¶¶ 29-33).

         The Heads of Terms Agreement was later incorporated into the parties' final contract, which Mr. Hall signed as “partner” and Mr. Shah signed as “director” of Tier Hall Consulting. (SAC, ¶ 202; Letter of David G. Monteau dated Oct. 31, 2013 (“Monteau Letter”), attached as part of Exh. 3 to SAC; Proposed Findings, ¶ 24). The final contract was to be governed by the laws of the United States, and required Tier Hall Consultants to perform the services outlined in the Heads of Terms Agreement “in accordance with [its] performance milestones, ” supply periodic progress reports, and provide a list of subcontractors, among other things (SAC, ¶¶ 203-204, 212; Terms and Conditions of Engagement (“Final Contract”), attached as part of Exh. 3 to SAC, ¶¶ 3.1, 3.2, 3.6, 12.5.1 & Schedule 1; Proposed Findings, ¶¶ 25-26, 34). If Tier Hall Consulting failed to complete the services it was contracted to perform, failed to complete them to SHLD's satisfaction, or failed to complete them on time, SHLD could demand a refund, terminate the agreement, or both. (SAC, ¶¶ 205-206; Final Contract, ¶¶ 9, 10.1-10.3; Proposed Findings, ¶¶ 27-28).

         By November 15, 2013, the plaintiffs had made the entire $330, 000 payment. (SAC, ¶ 213; Proposed Findings, ¶ 35). Three months later, Mr. Shah provided a draft “teaser” for prospective investors and informed the plaintiffs that he was “a month behind.” (SAC, ¶ 218; Proposed Findings, ¶ 37). The plaintiffs expressed their dissatisfaction with the teaser, as well as with the absence of monthly reports and lack of overall progress. (SAC, ¶ 219; Proposed Findings, ¶ 38). Over the next months, Tier Hall Consulting continued to miss deadlines and failed to show progress on funding. (SAC, ¶ 221-39; Proposed Findings, ¶ 40). When no investors had been found by December 2014, the plaintiffs requested a list of itemized expenditures from Mr. Hall. (SAC, ¶ 239, 242; Proposed Findings, ¶¶ 40-41). Mr. Hall detailed the following expenditures:

1. $40, 000 to legal advisors Minories Law Limited;
2. $85, 000 to The Ivy Group;
3. $65, 000 to Independent Services Group;
4. $120, 000 to Tier Hall Consulting; and
5. $20, 000 in general expenses.

(SAC, ¶ 243; Proposed Findings, ¶ 42). These expenses were either unauthorized and therefore in violation of the parties' agreement, or unearned in light of the lack of “reasonably competent or timely work-product.” (SAC, ¶ 248, Proposed Findings, ¶¶ 44-48). In addition, as the bond company was never formed, the “defendants [] put to other uses the $30, 000 that had been added to the start-up fee allegedly to address additional expenses relating to the formation of the bond company.” (Proposed Findings, ¶ 43; SAC, ¶ 247). The plaintiffs terminated the contract on March 11, 2015, and demanded a refund of ...


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