United States District Court, S.D. New York
OPINION & ORDER
WILLIAM H. PAULEY, III U.S.D.J.
Kortright Capital Partners LP and its co-founders, Matthew
Taylor and Ty Popplewell (collectively,
“Kortright”), bring this action against Defendant
Investcorp Investment Advisers Limited
(“Investcorp”) for negligent misrepresentation,
negligence, breach of contract, breach of the implied
covenant of good faith and fair dealing, and promissory
estoppel. Investcorp moves to dismiss the Complaint.
Investcorp's motion is granted in part and denied in
allegations in the Complaint are presumed to be true for
purposes of this motion. Kortright Capital Partners was an
SEC-registered investment adviser that managed capital for
high net worth individuals and institutional investors.
(Compl. ¶ 31.) In November 2013, Investcorp, another
SEC-registered investment adviser, entered into a
“Project Agreement” with Kortright. (Compl.
¶¶ 27, 35; Compl. Ex. A.) The Project Agreement
required Investcorp to invest $50 million of its proprietary
capital in Kortright for a minimum of two years. (Compl.
¶ 39.) At the start of the Project Agreement, Investcorp
also invested $40 million of its clients' capital in the
Kortright funds. (Compl. ¶ 39.) The Project Agreement
also contemplated that Investcorp would help market the
Kortright funds. (Compl. ¶¶ 38, 42.)
exchange for its seed capital and marketing assistance,
Kortright granted Investcorp a share of its operating revenue
(Compl. ¶ 46), veto power over certain corporate actions
(Compl. ¶ 44), and access to Kortright's
confidential information (Compl. ¶ 44, 48).
January 2015, Man Group plc, an independent alternative asset
management company and competitor of Investcorp, approached
Kortright to discuss a possible acquisition of Kortright.
(Compl. ¶¶ 55-57.) Their discussions spanned
fourteen months and were not disclosed to Investcorp.
Ultimately, Man Group and Kortright focused on either
bringing the Kortright funds under the Man Group umbrella or
winding down the Kortright funds and having Kortright's
employees join the Man Group. (Compl. ¶ 58.)
April 2016, Kortright disclosed to Investcorp that it had
been exploring a new business relationship with Man Group.
(Compl. ¶ 61.) Investcorp indicated its preference for
an absorption of the Kortright funds into Man Group, provided
that Investcorp was able to redeem its proprietary capital
prior to the acquisition. (Compl. ¶ 63.) Investcorp
proposed to leave its clients' capital with Kortright.
(Compl. ¶ 63.) Kortright discussed with Investcorp
“the length of time that such client capital would need
to remain invested to satisfy [Kortright and the Man
Group]” and the benefits Investcorp would receive
“in return for maintaining its [clients'
investment] for a period of time.” (Compl. ¶ 63.)
Following these discussions, Kortright outlined the basic
terms of its new relationship with Investcorp in an email.
(Compl. ¶ 64.) Specifically, (1) the Kortright funds
would become part of the Man Group, (2) Investcorp would
redeem its proprietary capital and permit its clients'
capital to continue to be invested in Kortright, and (3)
Investcorp would maintain at least 80% of its account balance
at closing for six quarters in order to continue to receive
its revenue sharing benefits. (Compl. ¶ 64.) Subsequent
conversations focused on the minimum investment threshold for
Investcorp to maintain its revenue sharing benefits. (Compl.
those discussions with Investcorp, Kortright and Man Group
structured their transaction to transfer the Kortright funds
to the Man Group. (Compl. ¶ 65.) In May 2016, Investcorp
withdrew its proprietary capital. (Compl. ¶ 118.)
16, 2016, Kortright and the Man Group entered into their
agreement (“the Man Transaction Agreement”).
(Compl. ¶ 67.) Under the Man Transaction Agreement, the
Man Group committed to invest at least $300 million of its
clients' capital in Kortright funds, which would be
managed by Taylor and Popplewell as employees of Man Group.
(Compl. ¶¶ 67-68.) A condition of closing in the
Man Transaction Agreement required Kortright to bring a
minimum level of investment from Investcorp to the Man Group.
(Compl. ¶¶ 70, 89.)
Kortright and Investcorp entered into two new agreements: a
“Termination Agreement” and a “Revenue
Sharing Agreement.” (Compl. ¶ 74; Compl. Exs. B
and C.) The Termination Agreement ended the parties'
relationship under the Project Agreement (Compl. ¶¶
72-73; Compl. Ex. C), while the Revenue Sharing Agreement set
new terms for the parties' relationship in view of the
Man Transaction Agreement (Compl. ¶¶ 74-79; Compl.
Ex. B). Under the Revenue Sharing Agreement, Investcorp would
continue to receive revenue sharing benefits. (Compl. ¶
74.) The Revenue Sharing Agreement also contained a
termination provision in the event Investcorp redeemed
capital in excess of a threshold amount. (Compl. ¶¶
75-76.) Importantly, the Revenue Sharing Agreement did not
set a fixed term for Investcorp to maintain its investment.
(Compl. ¶¶ 74-79.)
after the Man Transaction Agreement was executed, Kortright
notified its investors and sought consent to transfer their
investments to the Man Group. (Compl. ¶ 83.) The letters
to investors also indicated that Investcorp planned to
continue its partnership with Kortright. (Compl. ¶ 83.)
The Election Form included with the letters provided, among
other things, that the investor was making an independent
decision to invest in the fund and that the investor had all
requisite power and authority to make the investment. (Compl.
as a client of Kortright, returned its consent forms within a
week, and Kortright began to wind down its funds. (Compl.
¶¶ 84, 89.) However, two business days later,
Investcorp revoked that consent on the basis that it was
required to obtain its own clients' consents to the
transfer of investments. (Compl. ¶¶ 86-88.) Because
Investcorp's clients declined to consent, the client
capital was subject to mandatory redemption. (Compl. ¶
result, a condition of the Man Transaction Agreement was not
satisfied and Man Group was relieved of its obligation to
close the transaction. (Compl. ¶ 89.) Thereafter, the
Man Group informed Kortright that it would not proceed with
the Man Transaction or the employment of Taylor or
Popplewell. (Compl. ¶ 90.)
motion to dismiss, the factual allegations in a complaint are
accepted as true and all reasonable inferences are drawn in
the plaintiff's favor. Gonzalez v. Hasty, 802
F.3d 212, 219 (2d Cir. 2015). To withstand dismissal, a
pleading “must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is
plausible on its face.'” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). On
such motions, courts “may consider only the complaint,
any written instrument attached to the complaint as an
exhibit, any statements or documents incorporated in it by
reference, and any document upon which the complaint heavily
relies.” ASARCO LLC v. Goodwin, 756 F.3d 191,
198 (2d Cir. 2014) (quoting In re Thelen LLP, 736
F.3d 213, 219 (2d Cir. 2013)).
state a claim for negligent misrepresentation under New York
law, the Complaint must allege:
(1) the defendant had a duty, as a result of a special
relationship, to give correct information; (2) the defendant
made a false representation that he or she should have known
was incorrect; (3) the information supplied in the
representation was known by the defendant to be desired by
the plaintiff for a serious purpose; (4) the plaintiff
intended to ...