Dwight P. Bostwick, etc., Plaintiff-Appellant,
Credit Agricole Corporate and Investment Bank New York Branch, formerly known as Calyon New York Branch, et al., Defendants-Respondents.
Zuckerman Spaeder LLP, New York (Andrew N. Goldfarb of
counsel), for appellant.
& Case LLP, New York (John Christopher Shore of counsel),
J.P., Moskowitz, Feinman, Gische, Kapnick, JJ.
Supreme Court, New York County (Barbara Jaffe, J.), entered
September 28, 2016, dismissing the amended complaint,
unanimously reversed, on the law, without costs, and the
amended complaint reinstated to the extent indicated herein.
Appeal from order, same court and Justice, entered on or
about April 28, 2016, which granted defendants' motion to
dismiss the amended complaint for failure to state a cause of
action, unanimously dismissed, without costs, as subsumed in
the appeal from the judgment.
action stems from defendants' conduct in a bankruptcy
proceeding involving plaintiff's entities, which are the
debtors in that proceeding. Plaintiff is the successor
trustee of the GSC Liquidating Trust, which is composed of a
group of affiliated entities (GSC entities), some of which
borrowed substantial sums of money from lenders, including
defendants, which held a minority position in the main
secured loan. In order to secure the loan, the GSC entities
pledged collateral composed of almost all of their assets,
and entered into a credit agreement and a security agreement
with the creditors; defendants are among the secured
6.1 of the security agreement states:
"[T]his Agreement may be enforced only by the action of
the Collateral Agent... acting upon the instructions of the
Required Banks ... [N]o other Secured Creditor [i.e.,
no Secured Creditor other than the Collateral Agent acting on
the instructions of the Required Banks] shall have any right
individually to seek to enforce or to enforce this Agreement
or to realize upon the security to be granted hereby."
7.1(a) of the Security Agreement provides in pertinent part:
"Each Grantor ... agrees to (i) pay all reasonable
out-of-pocket costs and expenses of the Collateral Agent and
each other Secured Creditor in connection with the
enforcement of this Agreement, and, after an Event of Default
shall have occurred and be continuing, the protection of the
rights of the Collateral Agent and each other Secured
Creditor hereunder... and (ii)... indemnify... and hold the
Collateral Agent [and] each other Secured Creditor...
harmless from any and all liabilities, obligations, damages,
... claims, ... actions, suits, judgments and any and all
costs, expenses or disbursements... of whatsoever kind and
nature... in any way relating to or arising out of this
Agreement... or any other document executed in connection
herewith... or in any way connected with the administration
of the transactions contemplated hereby... or the enforcement
of any of the terms of, or the preservation of any rights
under any thereof, or in any way relating to or arising out
of the... sale... or other disposition... of the
Collateral...; provided that... no Secured Creditor... shall
be indemnified... for losses, damages or liabilities to the
extent caused by the bad faith... or willful misconduct of
any such Indemnitee."
the GSC entities defaulted on the loan, and in 2010 they
filed for bankruptcy. At the time the GSC entities filed for
bankruptcy, the defendants as minority lenders acknowledged
that any disputes they had with the majority lender -
nonparty Black Diamond Capital Management, LLC - were
intercreditor issues that did not belong in bankruptcy court
(see In re GSC, Inc., 453 BR 132, 185 [Bankr S.D. NY
an unsuccessful attempt at reorganization, an auction of the
assets was planned. The GSC entities and the collateral agent
then agreed on bidding procedures for the auction that would
allow for individual lenders to place bids. Defendants
objected to the auction and bidding procedures and asked the
bankruptcy court to delay the sale. Although the objections
were ultimately resolved without court intervention after the
parties engaged in discovery and negotiations, plaintiff
alleges that defendants' objection caused them to incur
substantial attorney and financial advisor fees.
the bankruptcy court approved the final bidding procedures, a
financial advisor hired by the GSC entities determined that
allowing certain bidders - especially Black Diamond and the
collateral agent - to submit joint bids on the assets would
provide for more competitive bids. At the same time, the
advisor recognized that there was a risk that such a joint
bid could result in the allocation of a greater percentage of
assets to Black Diamond, which would be to defendants'
that reason, before the court permitted any such joint bids,
the issue was discussed with defendants, who on October 27,
2010 executed a letter agreement consenting to the
modification of the bidding procedures to include joint
bidding. In the letter agreement, defendants reserved all
claims and causes of action that they might have against the
collateral agent and Black Diamond.
October 29, 2010, the GSC entities determined that the joint
Black Diamond/collateral agent bid was the winning bid, as it