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EXHIBIT 3
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- 1ST DEPT 02/16/2024 06:33 1:44
FILED: APPELLATE DIVISION - 2023-01142
NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 02/20/2024
SUPREME COURT OF THE STATE OF NEW YORK
APPELLATE DIVISION: FIRST DEPARTMENT
X
CMB EXPORT INFRASTRUCTURE INVESTMENT Index No. 653821/22
GROUP 48, LP, Case Nos. 2023-01142
2023-01955
Plaintiff-Respondent, 2023-01979
-- against -
- 2023-03818
MOTCOMB ESTATES, LTD., REUBEN BROTHERS, NOTICE OF MOTION FOR
LTD., LEAVE TO RENEW AND
REARGUE OR, IN THE
Defendants-Appellant, ALTERNATIVE, FOR LEAVE TO
-- and -— APPEAL TO THE COURT OF
APPEALS
CDCF W CENTURY MEZZ, LLC, and NCPMB, LLC,
Defendants.
X
PLEASE TAKE NOTICE that, upon the annexed affirmation of Peter T. Shapiro dated
February 17, 2024, and the Decisions and Orders of this Court dated January 18, 2024, and upon all
prior papers and proceedings in this action including the Record on Appeal and the parties' briefs,
Plaintiffs-Respondent, CMB Export Infrastructure Investment Group, LP ("CMB or "Plaintiff-
Respondent"), by and through its attorneys Lewis Brisbois Bisgaard & Smith LLP, will move this
Court in the Supreme Court of the State of New York, Appellate Division, First Department, 27
Madison Avenue, New York, New York 10010, on the 11th day of March, 2024, at 10:00 a.m., or as
soon thereafter as Counsel can be heard, for an Order:
(a) Pursuant to CPLR 2221(e) and 22 NYCRR 1250.16(d) granting CMB leave to renew and
reargue this Court's Decisions and Orders dated January 18, 2024 and, upon reargument,
affirming the following Decisions and Orders:
(i) Amended Decision and Order of the Supreme Court, New York County (Barry
R. Ostrager, J.), entered February 28, 2023, granting Plaintiff-Respondent's
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motion for a preliminary injunction and enjoining Defendants-Appellants'
planned Senior Mezzanine Loan foreclosure sale (the "Preliminary Injunction");
(ii) Decision and Order of the Supreme Court, same Justice, entered April 13, 2023,
denying Defendants-Appellants' Motion to Renew and Reargue the grant of the
Preliminary Injunction; and
(iii) Decisions and Orders of the Supreme Court, same Justice, on June 20, 2023 and
June 23, 2023, denying Defendants-Appellants' motion to dismiss Plaintiff-
Respondent's Verified Complaint; or
(b) Alternatively, pursuant to CPLR 5602 and 22 NYCRR 1250.16(d), granting Plaintiff-
Respondent leave to appeal to the Court of Appeals from this Court's Decisions and Orders
dated January 18, 2024; and
(c) For such other and further relief as the Court deems just and proper.
PLEASE TAKE FURTHER NOTICE that answering affidavits, if any, must be served
upon the undersigned pursuant to CPLR 2214(b) and on the return date the motion will be marked
submitted with no appearance of counsel permitted or required.
Dated: New York, New York
February 17, 2024
LEWIS BRISBOIS BISGAARD & SMITH LLP
By: -
Pet r T. Shape
77 Water Street, Suite 2100
New York, New York 10005
(212) 232-1322
Peter.Shapiro@lewisbrisbois.com
Attorneysfor Plaintiff-Respondent
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SUPREME COURT OF THE STATE OF NEW YORK
APPELLATE DIVISION: FIRST DEPARTMENT
X
CMB EXPORT INFRASTRUCTURE INVESTMENT
GROUP 48, LP, Index No. 65382/22
Plaintiff-Respondent, Case Nos. 2023-01142
-
- against - - 2023-01955
2023-01979
MOTCOMB ESTATES, LTD., REUBEN BROTHERS, 2023-03818
LTD.,
AFFIRMATION IN SUPPORT OF
Defendants-Appellant, PLAINTIFF-RESPONDENT'S
-- and -— MOTION TO RENEW AND
REARGUE AND/OR FOR LEAVE
CDCF W CENTURY MEZZ, LLC, and NCPMB, LLC, TO APPEAL TO THE COURT OF
APPEALS
Defendants.
X
PETER T. SHAPIRO, an attorney duly admitted to the practice of law in the State of New
York, affirms the following to be true under penalty of perjury:
1. I am a Partner with the law firm Lewis Brisbois Bisgaard and Smith LLP, attorneys
for Plaintiff-Respondent CMB Export Infrastructure Investment Group 48, LP ("CMB" or
"Plaintiff-Respondent") in this matter. I am fully familiar with the facts and circumstances of this
action and appeal.
2. I submit this Affirmation in support of Plaintiff-Respondent's Motion to Renew
and Reargue or, in the alternative, for Leave to Appeal to the New York Court of Appeals, with
respect to the Orders entered by this Court on January 18, 2024 as follows: (a) Decision and Order
Reversing the Amended Order of the Supreme Court, New York County (Bally R. Ostrager, J.),
entered February 28, 2023, granting Plaintiff-Respondent's motion for a preliminary injunction
and enjoining Defendants-Appellants' planned Senior Mezzanine Loan foreclosure sale (the
"Preliminary Injunction"); (b) Decision and Order Reversing the Order of the Supreme Court,
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same Justice, entered April 13, 2023, denying Defendants-Appellants' Motion to Renew and
Reargue the grant of preliminary injunctive relief in favor of Plaintiff-Respondent; and (c)
Decision and Order Reversing Orders of the Supreme Court, same Justice, on June 20, 2023 and
June 23, 2023, denying Defendants-Appellants' motion to dismiss Plaintiff-Respondent's Verified
Complaint.
3. True copies of the Decisions and Orders of the Court identified in Paragraph 2
above, together with true copies of the Notice of Entry dated January 18, 2024, are annexed hereto
as Exhibits A, B, C, and D, respectively.
4. The aforementioned Decisions and Orders of the Court directed the Clerk to enter
Judgment vacating the Preliminary Injunction and dismissing the Verified Complaint.
5. Upon renewal and reargument, and for the reasons set forth herein, CMB
respectfully requests that both the Verified Complaint and the Preliminary Injunction be re-
instated. CMB respectfully submits, inter alia, that this Court overlooked controlling principles
of law that constrain New York courts from deciding highly fact-sensitive issues at the CPLR 3211
motion to dismiss stage.
6. This motion has been timely filed within 30 days of filing of Notice of Entry of the
Orders on January 18, 2024.
7. In support of its motion to renew, CMB respectfully requests that this Court give
consideration to certain documents obtained by CMB in discovery after the filing of Defendants-
Appellants' briefs for these appeals.1 Pursuant to CPLR 2221(e), CMB requests that these newly
1 Because Defendants-Appellants designated these documents as "CONFIDENTIAL," CMB will
file a separate motion for leave to file the documents under seal pursuant to 22 NYCRR §§
1250.1(e)(3) and (4). Pending the Court's determination of CMB's motion for leave to file under
seal, the contents of the newly obtained documents will be fully redacted in these papers.
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obtained documents be considered because (a) they have the capacity to change this Court's
reversal of the lower court's decisions; (b) were included in a document production made by
Defendants-Appellants on August 28, 2023, and were not identified through ongoing document
review until after the filing of Plaintiff-Respondent's Briefs on September 15, 2023; and (c)
underscore why it was improper for this Court to have prematurely decided issues of fact at the
CPLR 3211 motion to dismiss stage.
PRELIMINARY STATEMENT
8. In its Decisions and Orders, this Court effectively held that CMB's awareness of a
certain "Draft Term Sheet" prepared by Defendant-Appellant Reuben Brothers, which (a) made
no mention of CMB or its Junior Mezzanine Loan interest in the Project at issue, (b) predated any
decision by the Project borrowers to obtain additional Senior Mezzanine funding from Reuben
Brothers, and (c) gave no hint whatsoever that Reuben Brothers would act to prohibit other
holder(s) of interests in the Senior Mezzanine Loan from selling their interest(s) to CMB if it were
-- conclusively, and as a matter of law
to become a new lender to the Project, put CMB on notice --
-- that Reuben Brothers was planning to make CMB such a "prohibited transferee."
--
9. In so holding, this Court decided questions fact that should not, and cannot, be
decided during the preliminary stages of a litigation under a CPLR 3211 motion to dismiss.
10. The Fourth Amendment to Intercreditor Agreement that CMB signed with Reuben
-- i.e., the document wherein CMB consented to Reuben Brothers
Brothers on September 1, 2020 --
-- preserved CMB's ability under Section 4(c) of the original
becoming a Project lender --
Intercreditor Agreement to protect its Junior Mezzanine interest by purchasing a stake in the Senior
Mezzanine Loan.
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11. Yet, the very same day, Reuben Brothers signed a side agreement with the other
Senior Mezzanine Loan holder, CDCF W Century Mezz, LLC ("CDCF"), taking that ability away
by expressly labeling CMB as a prohibited transferee. Neither Reuben Brothers nor CDCF
disclosed this prohibition to CMB. Nor did they list their side agreement on the Schedule of Senior
Mezzanine Loan documents provided to CMB as inducement to sign the Fourth Amendment to
Intercreditor Agreement.
12. Moreover, and as set forth herein, Defendants-Appellants have adamantly and
steadfastly argued in this litigation that CMB had no right to know the contents of their side
agreement (the Participation Agreement), including their naming of CMB as a prohibited
transferee.
13. This Court's ruling that the Draft Term Sheet conclusively put CMB on notice that
Reuben Brothers was planning to weaken CMB's position by making it a prohibited transferee
overlooked, and deviated from, three (3) core legal principles.
14. First, the Court overlooked and deviated from the rule that courts should not attempt
to resolve issues of fact on a CPLR 3211 motion to dismiss. Leon v. Martine, 84 N.Y.2d 83, 87
(1994).
15. Second, the question of whether ordinary diligence and intelligence would have led
to the discovery of a concealed fact, for purposes of determining liability for fraudulent
concealment under the special facts doctrine, is a particularly fact intensive analysis that should
not be decided at the motion to dismiss stage. See P. T. Bank Cent. Asia. V. ABNAmbro Bank, 301
A.D.2d 373, 378 (1' Dep't 2003); Swersky v. Dreyer & Traub, 219 A.D.2d 321, 327 (1' Dep't
1996). CMB respectfully submits that this Court overlooked and deviated from this principle as
well in reversing the lower court's Decisions and Orders.
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16. Third, CMB respectfully submits that this Court overlooked and deviated from the
rule that a motion to dismiss which relies on a document outside of the four corners of the pleadings
(here, Defendants-Appellants' motion to renew and reargue based upon the "Draft Term Sheet")
should be denied unless the extraneous document conclusively negates a cause of action. See
Foster v. Kovner, 44 A.D.3d 23, 28 (1' Dep't 2007)(dismissal reversed where documentary
evidence relied upon by movant did not conclusively establish a defense to the asserted claims as
a matter of law); Richbell Info. Servs. V. Jupiter Partners, L.P., 309 A.D.2d 288, 281 (1' Dep't
2003) (dismissal reversed where documentary evidence submitted failed to "utterly refute" the
allegations of the complaint and conclusively establish a defense as a matter of law); Art & Fashion
Group Corp. v. Cyclops Prod. Inc., 120 A.D.3d 436, 438 (1' Dep't 2014) (affirming denial of
dismissal where documentary evidence submitted did not conclusively refute allegations set forth
in the complaint).
17. Plaintiff-Respondent presumes the Court's familiarity with the underlying facts of
this matter based upon the Court's Orders and the Record and briefs previously filed by the parties
in connection with Defendants-Appellants' appeals under the above-referenced case numbers. For
purposes of brevity, Plaintiff-Respondent therefore respectfully incorporates by reference the
factual background set forth in its Respondents' Briefs (Appellate Doc. No. 38 (Index No. 2023-
01142), Appellate Doc. No. 9 (Index No. 2023-01955), and Appellate Doc. No. 10 (Index Nos.
2023-01979 and 2023-03818)) and all facts contained within the Records on Appeal (Appellate
Doc. Nos. 17 -- 22 (Index No. 2023-01142), Appellate Doc. No. 3 (Index No. 2023-01955),
Appellate Doc. Nos. 3 and 5 (Index Nos. 2023-01979 and 2023-03818.))
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18. The record includes, inter alia, the direct testimony affidavits of the parties and the
transcript from the lower court's full-day evidentiary conducted on February 6, 2023, during which
the court heard and considered the testimony of six (6) witnesses.
19. Following the evidentiary hearing and its careful consideration of the evidence
presented by the parties, the lower court issued its Decision and Order dated February 28, 2023 in
which it ruled, well within the bounds of its sound discretion, that "[t]he testimony adduced at the
preliminary injunction hearing established a likelihood that, had plaintiff known that CDCF and
Reuben Brothers were simultaneously entering into a side letter (or Participation Agreement)
prohibiting CDCF from selling any of its interest in the Senior Mezzanine Loan (the "Tranche B"
interest) to [CMB] without the approval of Reuben Brothers, [CMB] would never have agreed to
the Fourth Amendment to Intercreditor Agreement" that allowed Reuben Brothers to become a
lender, and obtain a security interest against, the Project property. R. 2809, Index No. 2023-01142.
20. After listening to a full day of witness testimony, Justice Ostrager found the
testimony of CMB's primary witness, Patrick Hogan, to have been creditable and compelling in
this regard. The lower court's fmdings were within its sound discretion, consistent with the law,
and should not have been disturbed.
21. An abbreviated summary of the factual background of this matter now follows for
the Court's convenience.
FACTUAL BACKGROUND
22. This is an intercreditor dispute arising from the construction financing for the
Century Plaza Hotel project in Los Angeles, California (the "Project"). The financing for the
Project consists of three tiers of loans, as follows: (i) a Senior Loan originally made by JP Morgan
Chase ("JP Morgan") to the Project owner, Next Century Partners, LLC ("Next Century") (ii) a
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Senior Mezzanine Loan originally made by defendant CDCF W Century Mezz, LLC ("CDCF
IV") to NCPMB, LLC ("NCPMB"), the 100% owner of Next Century, and (iii) a Junior Mezzanine
Loan made by CMB to CPMB, LLC, the indirect 100% owner of NCPMB. R. 1828, Index No.
2023-01142.
A. The Project Financing
23. The original Senior Loan amount was $466 million. The original Senior Mezzanine
Loan amount was $120 million. The original Junior Mezzanine Loan Amount was (and continues
to be, exclusive of interest and fees) $450 million. R. 52, Index No. 2023-01979.
24. The Senior Loan is secured by a Deed of Trust to the Project property. The Senior
Mezzanine Loan is secured by a pledge of NCPMB's 100% ownership of Next Century. The
Junior Mezzanine Loan is secured by a pledge of CPMB's indirect 100% ownership of NCPMB.
Thus, all three loans are collateralized by a direct or indirect 100% ownership of the Project. R.
1828, Index No. 2023-01142.
25. The Project Lenders were (and are) parties to an Intercreditor Agreement originally
dated July 15, 2016. The Intercreditor Agreement, which has been amended four times, provides
that the Project borrowers' monetary obligations under the Senior Loan and Senior Mezzanine
Loan may not be materially increased without CMB's prior written consent. R. 178, Index No.
2023-01979.
26. Construction of the Project (consisting generally of the renovation of the historic
Century Plaza Hotel and the construction of two, 44-story residential condominium towers,
approximately 96,542 rentable square feet of retail space and related amenities), was originally
planned to reach completion in various phases between 2019 and 2020 but was delayed by several
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factors, including a steel embargo, supply chain delays, and Covid 19 interruptions and labor
shortages. R. 52, Index No. 2023-01979.
B. Reuben Brothers' Involvement in the Senior Mezzanine Loan
27. Reuben Brothers emerged when JP Morgan declared the Senior Loan to be "out of
balance" in March of 2020 and questioned whether Next Century had sufficient capital to complete
the Project with the anticipated, but not yet fully understood, obstacles that would be presented by
the Covid 19 pandemic. JP Morgan estimated that Next Century would need an additional $100
to $150 million in financing to achieve Final Completion of the Project construction. R. 1829,
Index No. 2023-01142.
28. Until that additional fmancing was obtained, however, JP Morgan would not allow
Next Century to continue making ordinary construction draws under the Senior Loan, which only
accrued interest at 5% to 6% per annum. In the Spring and Summer of 2020, three (3) Protective
Advances were made to fund Project costs under the Senior Mezzanine Loan. Protective Advances
under the Senior Mezzanine Loan, however, carried interest at the rate of 18% per annum. Id.
29. In late 2020, Reuben Brothers offered to make an additional $275 million in
fmancing available to put the Project debt "back into balance" so that Final Completion could be
achieved using ordinary construction draws, without the need for further, exorbitantly Protective
Advance money. (R. 1829 -- 1830, Index No. 2023-01142). Reuben Brothers proposed to make
these funds available through an "upsizing" of the Senior Mezzanine Loan, which at the time was
held by CDCF, but would subsequently be held by Reuben Brothers and CDCF (with Reuben
Brothers as the "Participation A" holder and CDCF as the "Participation B" holder.) R. 46, Index
No. 2023-01979; R. 1829 -1830, Index No. 2023-01142.
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30. As alluded to above, such an upsizing of the Senior Mezzanine Loan would require
CMB's consent under Section 7 (b) of the Intercreditor Agreement. R. 178 -180, Index No. 2023-
01979. The purpose for allowing Reuben Brothers into the stack of Project lenders was set forth
in the Recitals to the Third Amended and Restated Senior Mezzanine Loan Agreement dated
September 1, 2020, which state in pertinent part as follows:
WHEREAS, notwithstanding the Initial Maturity Date in the
Existing Loan Agreement, Borrower has requested the Lenders to
extend the maturity date and increase their Commitments under the
Existing Loan Agreement by up to Two Hundred Seventy Five
Million and 00/100 Dollars ($275,000,000) pursuant to this
Agreement to fund certain costs of renovating and redeveloping the
Project (as defined herein), to construct the Required Improvements
(as defined herein), and to fund certain other costs associated with
the Project, including (without limitation) costs and expenses of
marketing the Project and the sale of Residential Units and Sale
Components (as defined herein).
R. 298, Index No. 2023-01979.
C. Reuben Brothers Obtains its Security Interest in the Senior Mezzanine Loan Collateral by
Fraudulently Concealing Essential Information from CMB
31. On September 1, 2020, JP Morgan, CMB and defendant Motcomb Estates, Ltd. (as
agent for Reuben Brothers) signed a Fourth Amendment to Intercreditor Agreement whereby CMB
consented to Reuben Brothers' participation as a Project lender through the $275 million
"upsizing" of the Senior Mezzanine Loan. R. 271, Index No. 2023-01979. At the time that it
executed the Fourth Amendment to Intercreditor Agreement, however, CMB did not know, and
had no reason to know, that Reuben Brothers was already devising ways to wipe-out CMB's junior
mezzanine interest. R. 57, Index No. 2023-01979.
32. Appellants concealed from CMB the fact that they had included a clause in the
document governing the relationship between Reuben Brothers and CDCF (the "Participation
Agreement," also dated September 1, 2020) whereby CDCF would be forbidden from transferring
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its "Participation B" interest in the Senior Mezzanine Loan to CMB without Reuben Brothers'
prior written consent. Section 14.3 of the Participation Agreement specifically targeted CMB by
stating:
Restriction on Transfers to Borrower and Borrower Parties.
Notwithstanding anything to the contrary contained herein, no
Holder shall Transfer the Loan, any Participation or any portion of
either of the foregoing or participation or sub-participation therein
to the Borrower, a Borrower Party, EB-5 Lender or any Affiliate
thereof, in each case, without consent of the other Holders. Any
Transfer in violation of this Section 14.3 shall be void ab initio.
R. 108, Index No. 2023-01979. CMB is the "EB-5 Lender" to which this prohibition refers.
33. Critically, the Intercreditor Agreement contained no such prohibition against CMB
purchasing an interest or partial interest in the Senior Mezzanine Loan. Section 4 (c) of the
Intercreditor Agreement states as follows:
Subject to, as between Senior Agent and Senior Mezzanine Agent
only, the terms and conditions set forth in any other intercreditor
agreement entered into between Senior Agent and Senior Mezzanine
Agent, Senior Mezzanine Agent or any holder of an interest in the
Senior Mezzanine Loan (including any Senior Mezzanine Lender)
may, from time to time, Transfer all or any of the Senior Mezzanine
Loan or any interest therein (including, without limitation, a pledge
of the Senior Mezzanine Loan) without consent of Senior Agent or
Junior Mezzanine Lender[.]
***
Notwithstanding anything contained herein to the contrary, neither
Senior Mezzanine Agent nor any holder of an interest in the Senior
Mezzanine Loan (including any Senior Mezzanine Lender) may
Transfer all or any portion of its beneficial interest in the Senior
Mezzanine Loan or any direct or indirect interest in the Senior
Mezzanine Loan to Borrower, Senior Mezzanine Borrower, or
Junior Mezzanine Borrower or any Affiliate of any of the
foregoing[.]
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R. 169 -- 170, Index No. 2023-01979. The Intercreditor Agreement therefore prohibits the
assignment of interests or partial interests in the Senior Mezzanine Loan to the Project borrowers,
but not to CMB.
34. At the evidentiary hearing, CMB's witness Patrick F. Hogan testified that a junior
lender's ability to negotiate a purchase of a senior lender's interest, or partial interest, is an essential
means of protecting the junior interest from being wiped out by mounting senior debt, that this
was an essential protection for which CMB had bargained in the Intercreditor Agreement, and that
CMB would never have consented to Reuben Brothers' participation as a lender had it known that
Reuben Brothers had been devising ways from the outset to squeeze-out CMB's junior interest by
making it a prohibited transferee. R. 1832, Index No. 2023-01142.
35. At the evidentiary hearing, CMB also learned for the first time that Reuben Brothers
had already purchased a partial interest in the Senior Loan as of June of 2020, paying $107 million
to participate in a loan that was, at the time, in distress and in the middle of Covid 19 shut-downs.
R. 2602 -- 2603, Index No. 2023-01142.
D. The Draft Term Sheet
36. The Draft Term Sheet, which references a "Participation Agreement," was provided
to CMB and its outside counsel Lewis Brisbois Bisgaard & Smith LLP ("LBBS") by the Senior
Mezzanine Borrower, NCPMB -- -- in July of 2020
-- and not by any of the Defendants-Respondents --
when three different lenders were still being considered for the additional Senior Mezzanine
fmancing needed to bring the Project debt back into balance: CMB, Reuben Brothers, and Sail
Harbor. R. 253, Index No. 2023-01955.
37. In or about early August of 2020, the borrower selected Reuben Brothers as the
source of the upsized Senior Mezzanine funding. Reuben Brothers would not interact directly with
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CMB as the documents for the proposed upsizing were being reviewed and negotiated, so the
borrower's attorneys at Gibson, Dunn & Crutcher, LP ("Gibson Dunn") would provide the
documents to CMB and LBBS, and CMB and LBBS would direct their questions, comments and
proposed revisions back to Gibson Dunn. Id.
38. CMB and LBBS were aware that CDCF and Reuben Brothers would be co-
participants in the upsized Senior Mezzanine Loan. LBBS did not necessarily expect to see a draft
of any agreement governing the relationship of the Participation A and B holders, however,
because it had no reason to suspect that their agreement, assuming they had one, would affect
CMB. For example, an agreement that addressed voting rights among the participation holders
and other similar governance matters between them would not be material to CMB. Id. at paras.
8 and 9.
39. LBBS of course reviewed the drafts of the Fourth Amendment Intercreditor
Agreement which, as set forth above, kept CMB's ability to purchase an interest in the Senior
-- as per Section 4 (c) of the original Intercreditor Agreement --
Mezzanine Loan -- -- intact. As part
of its review, LBBS also confirmed that Section 15.1 of the draft Third Amended and Restated
Senior Mezzanine Loan Agreement, governing transferability of participation interests in the
Senior Mezzanine Loan, did not make CMB a prohibited transferee. If Reuben Brothers and
CDCF had a separate agreement that purported to modify Section 15.1 in any way, including by
making CMB a prohibited transferee, LBBS would have expected to be given a copy of that
document before allowing the Fourth Amendment to Intercreditor Agreement to be signed by
CMB. Otherwise, LBBS would have expected that the restrictions on transferability referenced
by the Draft Term Sheet would align with the transferability provisions of the Intercreditor
Agreement and the upsized Senior Mezzanine Loan. Id. at paras. 11 and 12.
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40. It is noteworthy that the title of Section 14.3 of the Participation Agreement
("Restrictions on Transfers to Borrower Parties") tracks, at least initially, Section 4 (c) of the
Intercreditor Agreement, which only lists the borrower parties as prohibited transferees. CMB was
actively attempting to buy CDCF's interest in the Senior Mezzanine Loan as of August 2020, and
it appears that CMB was surreptitiously added to the list of prohibited transferees as that was
occurring.
41. Indeed, discovery has shown that, from July of 2020 through August 30, 2020, all
of Reuben Brothers' and CDCF's drafts of the Participation Agreement named the Project
borrowers --
-- but not CMB --
-- as Prohibited Transferees. True copies of pertinent sections of
Defendants-Appellants' draft Participation Agreement as of August 11, 2020 (produced by
Defendants-Appellants in discovery as Motcomb_NY-0022807, 0022808 and 0022813) are
annexed hereto as Exhibit E, fully redacted pending determination of CMB's motion for leave to
file under sea1.2
42. -- one day before Reuben Brothers induced CMB
It was not until August 31, 2020 --
-- that Reuben Brothers and CDCF
to sign the Fourth Amendment to Intercreditor Agreement --
furtively changed the Participation Agreement's restrictions on transfers to specifically target and
label CMB as a prohibited transferee. A true copy of the August 31, 2020 draft version of the
Participation Agreement (produced by Defendants-Appellants in discovery as
Motcomb NY0055529 et seq.) is annexed hereto Exhibit F, fully redacted pending determination
of CMB's motion for leave to file under seal.
2 While documents outside the Record on Appeal would not ordinarily be submitted on a motion
to reargue, CMB submits the same here as part of its motion to renew and to underscore that it was
premature for this Court to have dismissed CMB's causes of action prior to the completion of
discovery based on a misapprehension of the facts caused, CMB respectfully submits, by an
incomplete factual record.
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43. CMB and LBBS were never made aware of this and, as alleged in the Verified
Complaint, never saw the Participation Agreement until they obtained a copy of CDCF's lawsuit
against Reuben Brothers in March of 2022.
E. Reuben Brothers' Stranglehold on the Project
44. The proofs at the Evidentiary Hearing also demonstrated the extent to which
Reuben Brothers has had the Project in a stranglehold since 2020. Reuben Brothers did not, in
fact, honor its promise to make $275 million available for Project completion. Instead, Reuben
Brothers only allowed the Project borrowers to use $119 million of the "upsized" loan amount for
actual Project construction. R. 602, Index No. 2023-01142.
45. The Senior Mezzanine Loan had an Initial Maturity Date of July 9, 2021, which
was only ten (10) months after the upsized loan documents were signed on September 1, 2020. R.
1861, Index No. 2023-01142. When that date came, Reuben Brothers immediately declared
default on July 13, 2021 (R. 1613, Index No. 2023-01142), did not allow for any reasonable
extension of the loan even though the Project was moving close to completion3, and started forcing
the Project borrowers to take Protective Advance money again, this time at a rate of 20% per
annum, in August of 2021. R. 1830, Index No. 2023-01142.
46. At the time Reuben Brothers started forcing Protective Advances on the Project,
$262,534,854 remained available (i.e., un-drawn) for ordinary construction draws under the Senior
Loan and Senior Mezzanine Loan combined, without the need for Protective Advance money and
the punishing 20% per annum interest it carried. Id. In this fashion, Reuben Brothers was able to
3 The Hotel re-opened for business in September of 2021 (three months after Reuben Brothers
declared default), and the Temporary Certificate of Occupancy for the residential units was issued
in May of 2022. R. 1864, Index No. 2023-01142.
135195992.1 14
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bury the Project with $269,807,671 in interest, under the Senior Mezzanine Loan alone, through
July of 2022. R. 174, Index No. 2023-01142.
47. The Third Amended and Restated Senior Mezzanine Loan (dated September 2,
2020) did provide that $75 million of Reuben Brothers' supposed $275 million tranche would be
used to pay-down the Senior Loan. R. 2609, Index No. 2023-01142.
48. Unbeknownst to CMB, however, Reuben Brothers had by that time already
purchased a $107 million stake in the Senior Loan from JP Morgan as of June of 2020 (3 months
before becoming a Senior Mezzanine Lender).
49. Reuben Brothers likewise did not disclose to CMB that it was already planning by
the Summer of 2020 to acquire 100% control of the Senior Loan, which it did in October 2021
(immediately after declaring default under the Senior Mezzanine Loan). R. 2619 -- 2622, Index
No. 2023-01142.
50. In other words, Reuben Brothers is now charging default rate of interest (20% per
annum) on $75 million in loan "proceeds" that it essentially used to make a down payment on its
own purchase of the Senior Loan. R. 2609 -- 2610, Index No. 2023-01142.
51. Discovery has since supported CMB's claim that Reuben Brothers had a
preconceived plan, from the outset, to take over the Project without ever having to make all of its
supposed $275 tranche available for Project completion.
52. For example, in an email dated June 10, 2020, Simon Reuben commented that
[CONTENTS REDACTED PENDING DETERMINATION OF CMB 'S MOTION FOR LEAVE TO
FILE UNDER SEAL]. A true copy of the June 10, 2020 email (produced by Defendants-Appellants
in discovery as Motcomb 0066320) is annexed hereto as Exhibit G, fully redacted pending
determination of CMB's motion for leave to file under seal.
135195992.1 15
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F. CMB Makes Another Attempt to Purchase an Interest in the Senior Mezzanine Loan
53. CMB again approached CDCF about buying its interest in the Senior Mezzanine
Loan in March of 2022. CDCF advised CMB that CMB would first have to obtain Reuben
Brothers' consent to such a sale.
54. CMB sought Reuben Brothers' consent to negotiate a purchase of CDCF's interest,
but Reuben Brothers withheld its consent. R. 2557 -- 2558, Index No. 2023-01142.
G. Defendants-Appellants' Assertions that CMB Was Not Entitled to Know the Terms of the
Participation Agreement
55. Reuben Brothers and Motcomb have steadfastly argued that CMB had no right to
know the terms of any agreement(s) governing the relationship between the Participation A and B
holders. See R. 979, Index No. 2023-01979 (Defendants-Appellants' Reply Brief in Support of
Motion to Dismiss Verified Complaint, page 7) (arguing that CMB had no right to see the
Participation Agreement because "the Mezzanine Loan Agreement expressly authorizes the
Mezzanine Lender to create participation interests in the Mezzanine Loan and disclaims any duty
on the part of the Mezzanine Lender to disclose to any party the terms of such participation.") See
also R. 932, Index No. 2023-01979 (Defendants-Appellants' 12/13/2022 Brief in Support of
Motion to Dismiss Verified Complaint, page 15) (arguing that CMB had no need to see the
Participation Agreement because "the Participation Agreement did not modify any terms of the
Mezzanine Loan" [a statement that is patently untrue] and "did not modify any rights under the
ICA" [also untrue]).
56. As set forth within, these adamant judicial admissions alone create an issue of fact
as to whether CMB would have been able to discover Defendants-Appellants' naming of CMB as
a prohibited transferee even if CMB had made direct demand upon Reuben Brothers for all side
agreements signed by and among the Senior Mezzanine Loan holders.
135195992.1 16
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H. Other Facts Adduced During the Evidentiary Hearing
57. During the evidentiary hearing CMB also learned from the testimony of Reuben
Brothers' representative that there had been an opportunity in October of 2021 to restructure the
Senior Loan, so that a Senior Loan foreclosure could be averted, if the junior lenders (including
CMB) would agree contribute additional fmancing for Project completion. R. 2487, Index No.
2023-01142. Reuben Brother and Motcomb kept this too a secret from CMB, which had earlier
offered to contribute an additional $150 million in financing in order prevent any predatory lender
from becoming involved with the Project. R. 56, Index No. 2023-01979.
LEGAL ARGUMENT
POINT I
THE COURT SHOULD GRANT LEAVE TO RENEW AND
REARGUE AND, UPON REARGUMENT, AFFIRM THE
LOWER COURT'S DENIAL OF DEFENDANTS-
APPELLANTS' MOTION TO DISMISS CMB'S VERIFIED
COMPLAINT
58. In accordance with CPLR Section 2221(d), a motion for leave to reargue "shall be
addressed to the discretion of the court [and] is designed to afford a party an opportunity to
establish that the court overlooked or misapprehended the relevant facts, or misapplied any
controlling principle of law." Foley v. Roche, 68 A.D.2d 558, 567 (1' Dep't 1979).
59. A motion for reargument shall briefly set forth the points alleged to have been
overlooked or misapprehended by the Court.
60. As demonstrated below, the Court failed to follow three (3) controlling principles
of law that constrain courts from deciding issues of fact at the preliminary stages of a case on a
CPLR 3211(a)(7) motion to dismiss.
A. The Court Overlooked and Deviated from Standards Governing Motions to Dismiss Made
under CPLR 3211
135195992.1 17
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61. It is well-settled that courts should not decide fact-intensive issues on a CPLR
3211(a)(7) motion to dismiss. Williams v. Citigroup, Inc., 104 A.D.3d 521, 522 (1
Preview
FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 EXHIBIT 3 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 - 1ST DEPT 02/16/2024 06:33 1:44 FILED: APPELLATE DIVISION - 2023-01142 NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 02/20/2024 SUPREME COURT OF THE STATE OF NEW YORK APPELLATE DIVISION: FIRST DEPARTMENT X CMB EXPORT INFRASTRUCTURE INVESTMENT Index No. 653821/22 GROUP 48, LP, Case Nos. 2023-01142 2023-01955 Plaintiff-Respondent, 2023-01979 -- against - - 2023-03818 MOTCOMB ESTATES, LTD., REUBEN BROTHERS, NOTICE OF MOTION FOR LTD., LEAVE TO RENEW AND REARGUE OR, IN THE Defendants-Appellant, ALTERNATIVE, FOR LEAVE TO -- and -— APPEAL TO THE COURT OF APPEALS CDCF W CENTURY MEZZ, LLC, and NCPMB, LLC, Defendants. X PLEASE TAKE NOTICE that, upon the annexed affirmation of Peter T. Shapiro dated February 17, 2024, and the Decisions and Orders of this Court dated January 18, 2024, and upon all prior papers and proceedings in this action including the Record on Appeal and the parties' briefs, Plaintiffs-Respondent, CMB Export Infrastructure Investment Group, LP ("CMB or "Plaintiff- Respondent"), by and through its attorneys Lewis Brisbois Bisgaard & Smith LLP, will move this Court in the Supreme Court of the State of New York, Appellate Division, First Department, 27 Madison Avenue, New York, New York 10010, on the 11th day of March, 2024, at 10:00 a.m., or as soon thereafter as Counsel can be heard, for an Order: (a) Pursuant to CPLR 2221(e) and 22 NYCRR 1250.16(d) granting CMB leave to renew and reargue this Court's Decisions and Orders dated January 18, 2024 and, upon reargument, affirming the following Decisions and Orders: (i) Amended Decision and Order of the Supreme Court, New York County (Barry R. Ostrager, J.), entered February 28, 2023, granting Plaintiff-Respondent's 136092918.1 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 motion for a preliminary injunction and enjoining Defendants-Appellants' planned Senior Mezzanine Loan foreclosure sale (the "Preliminary Injunction"); (ii) Decision and Order of the Supreme Court, same Justice, entered April 13, 2023, denying Defendants-Appellants' Motion to Renew and Reargue the grant of the Preliminary Injunction; and (iii) Decisions and Orders of the Supreme Court, same Justice, on June 20, 2023 and June 23, 2023, denying Defendants-Appellants' motion to dismiss Plaintiff- Respondent's Verified Complaint; or (b) Alternatively, pursuant to CPLR 5602 and 22 NYCRR 1250.16(d), granting Plaintiff- Respondent leave to appeal to the Court of Appeals from this Court's Decisions and Orders dated January 18, 2024; and (c) For such other and further relief as the Court deems just and proper. PLEASE TAKE FURTHER NOTICE that answering affidavits, if any, must be served upon the undersigned pursuant to CPLR 2214(b) and on the return date the motion will be marked submitted with no appearance of counsel permitted or required. Dated: New York, New York February 17, 2024 LEWIS BRISBOIS BISGAARD & SMITH LLP By: - Pet r T. Shape 77 Water Street, Suite 2100 New York, New York 10005 (212) 232-1322 Peter.Shapiro@lewisbrisbois.com Attorneysfor Plaintiff-Respondent 136092918.1 2 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 SUPREME COURT OF THE STATE OF NEW YORK APPELLATE DIVISION: FIRST DEPARTMENT X CMB EXPORT INFRASTRUCTURE INVESTMENT GROUP 48, LP, Index No. 65382/22 Plaintiff-Respondent, Case Nos. 2023-01142 - - against - - 2023-01955 2023-01979 MOTCOMB ESTATES, LTD., REUBEN BROTHERS, 2023-03818 LTD., AFFIRMATION IN SUPPORT OF Defendants-Appellant, PLAINTIFF-RESPONDENT'S -- and -— MOTION TO RENEW AND REARGUE AND/OR FOR LEAVE CDCF W CENTURY MEZZ, LLC, and NCPMB, LLC, TO APPEAL TO THE COURT OF APPEALS Defendants. X PETER T. SHAPIRO, an attorney duly admitted to the practice of law in the State of New York, affirms the following to be true under penalty of perjury: 1. I am a Partner with the law firm Lewis Brisbois Bisgaard and Smith LLP, attorneys for Plaintiff-Respondent CMB Export Infrastructure Investment Group 48, LP ("CMB" or "Plaintiff-Respondent") in this matter. I am fully familiar with the facts and circumstances of this action and appeal. 2. I submit this Affirmation in support of Plaintiff-Respondent's Motion to Renew and Reargue or, in the alternative, for Leave to Appeal to the New York Court of Appeals, with respect to the Orders entered by this Court on January 18, 2024 as follows: (a) Decision and Order Reversing the Amended Order of the Supreme Court, New York County (Bally R. Ostrager, J.), entered February 28, 2023, granting Plaintiff-Respondent's motion for a preliminary injunction and enjoining Defendants-Appellants' planned Senior Mezzanine Loan foreclosure sale (the "Preliminary Injunction"); (b) Decision and Order Reversing the Order of the Supreme Court, 135195992.1 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 same Justice, entered April 13, 2023, denying Defendants-Appellants' Motion to Renew and Reargue the grant of preliminary injunctive relief in favor of Plaintiff-Respondent; and (c) Decision and Order Reversing Orders of the Supreme Court, same Justice, on June 20, 2023 and June 23, 2023, denying Defendants-Appellants' motion to dismiss Plaintiff-Respondent's Verified Complaint. 3. True copies of the Decisions and Orders of the Court identified in Paragraph 2 above, together with true copies of the Notice of Entry dated January 18, 2024, are annexed hereto as Exhibits A, B, C, and D, respectively. 4. The aforementioned Decisions and Orders of the Court directed the Clerk to enter Judgment vacating the Preliminary Injunction and dismissing the Verified Complaint. 5. Upon renewal and reargument, and for the reasons set forth herein, CMB respectfully requests that both the Verified Complaint and the Preliminary Injunction be re- instated. CMB respectfully submits, inter alia, that this Court overlooked controlling principles of law that constrain New York courts from deciding highly fact-sensitive issues at the CPLR 3211 motion to dismiss stage. 6. This motion has been timely filed within 30 days of filing of Notice of Entry of the Orders on January 18, 2024. 7. In support of its motion to renew, CMB respectfully requests that this Court give consideration to certain documents obtained by CMB in discovery after the filing of Defendants- Appellants' briefs for these appeals.1 Pursuant to CPLR 2221(e), CMB requests that these newly 1 Because Defendants-Appellants designated these documents as "CONFIDENTIAL," CMB will file a separate motion for leave to file the documents under seal pursuant to 22 NYCRR §§ 1250.1(e)(3) and (4). Pending the Court's determination of CMB's motion for leave to file under seal, the contents of the newly obtained documents will be fully redacted in these papers. 135195992.1 2 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 obtained documents be considered because (a) they have the capacity to change this Court's reversal of the lower court's decisions; (b) were included in a document production made by Defendants-Appellants on August 28, 2023, and were not identified through ongoing document review until after the filing of Plaintiff-Respondent's Briefs on September 15, 2023; and (c) underscore why it was improper for this Court to have prematurely decided issues of fact at the CPLR 3211 motion to dismiss stage. PRELIMINARY STATEMENT 8. In its Decisions and Orders, this Court effectively held that CMB's awareness of a certain "Draft Term Sheet" prepared by Defendant-Appellant Reuben Brothers, which (a) made no mention of CMB or its Junior Mezzanine Loan interest in the Project at issue, (b) predated any decision by the Project borrowers to obtain additional Senior Mezzanine funding from Reuben Brothers, and (c) gave no hint whatsoever that Reuben Brothers would act to prohibit other holder(s) of interests in the Senior Mezzanine Loan from selling their interest(s) to CMB if it were -- conclusively, and as a matter of law to become a new lender to the Project, put CMB on notice -- -- that Reuben Brothers was planning to make CMB such a "prohibited transferee." -- 9. In so holding, this Court decided questions fact that should not, and cannot, be decided during the preliminary stages of a litigation under a CPLR 3211 motion to dismiss. 10. The Fourth Amendment to Intercreditor Agreement that CMB signed with Reuben -- i.e., the document wherein CMB consented to Reuben Brothers Brothers on September 1, 2020 -- -- preserved CMB's ability under Section 4(c) of the original becoming a Project lender -- Intercreditor Agreement to protect its Junior Mezzanine interest by purchasing a stake in the Senior Mezzanine Loan. 135195992.1 3 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 11. Yet, the very same day, Reuben Brothers signed a side agreement with the other Senior Mezzanine Loan holder, CDCF W Century Mezz, LLC ("CDCF"), taking that ability away by expressly labeling CMB as a prohibited transferee. Neither Reuben Brothers nor CDCF disclosed this prohibition to CMB. Nor did they list their side agreement on the Schedule of Senior Mezzanine Loan documents provided to CMB as inducement to sign the Fourth Amendment to Intercreditor Agreement. 12. Moreover, and as set forth herein, Defendants-Appellants have adamantly and steadfastly argued in this litigation that CMB had no right to know the contents of their side agreement (the Participation Agreement), including their naming of CMB as a prohibited transferee. 13. This Court's ruling that the Draft Term Sheet conclusively put CMB on notice that Reuben Brothers was planning to weaken CMB's position by making it a prohibited transferee overlooked, and deviated from, three (3) core legal principles. 14. First, the Court overlooked and deviated from the rule that courts should not attempt to resolve issues of fact on a CPLR 3211 motion to dismiss. Leon v. Martine, 84 N.Y.2d 83, 87 (1994). 15. Second, the question of whether ordinary diligence and intelligence would have led to the discovery of a concealed fact, for purposes of determining liability for fraudulent concealment under the special facts doctrine, is a particularly fact intensive analysis that should not be decided at the motion to dismiss stage. See P. T. Bank Cent. Asia. V. ABNAmbro Bank, 301 A.D.2d 373, 378 (1' Dep't 2003); Swersky v. Dreyer & Traub, 219 A.D.2d 321, 327 (1' Dep't 1996). CMB respectfully submits that this Court overlooked and deviated from this principle as well in reversing the lower court's Decisions and Orders. 135195992.1 4 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 16. Third, CMB respectfully submits that this Court overlooked and deviated from the rule that a motion to dismiss which relies on a document outside of the four corners of the pleadings (here, Defendants-Appellants' motion to renew and reargue based upon the "Draft Term Sheet") should be denied unless the extraneous document conclusively negates a cause of action. See Foster v. Kovner, 44 A.D.3d 23, 28 (1' Dep't 2007)(dismissal reversed where documentary evidence relied upon by movant did not conclusively establish a defense to the asserted claims as a matter of law); Richbell Info. Servs. V. Jupiter Partners, L.P., 309 A.D.2d 288, 281 (1' Dep't 2003) (dismissal reversed where documentary evidence submitted failed to "utterly refute" the allegations of the complaint and conclusively establish a defense as a matter of law); Art & Fashion Group Corp. v. Cyclops Prod. Inc., 120 A.D.3d 436, 438 (1' Dep't 2014) (affirming denial of dismissal where documentary evidence submitted did not conclusively refute allegations set forth in the complaint). 17. Plaintiff-Respondent presumes the Court's familiarity with the underlying facts of this matter based upon the Court's Orders and the Record and briefs previously filed by the parties in connection with Defendants-Appellants' appeals under the above-referenced case numbers. For purposes of brevity, Plaintiff-Respondent therefore respectfully incorporates by reference the factual background set forth in its Respondents' Briefs (Appellate Doc. No. 38 (Index No. 2023- 01142), Appellate Doc. No. 9 (Index No. 2023-01955), and Appellate Doc. No. 10 (Index Nos. 2023-01979 and 2023-03818)) and all facts contained within the Records on Appeal (Appellate Doc. Nos. 17 -- 22 (Index No. 2023-01142), Appellate Doc. No. 3 (Index No. 2023-01955), Appellate Doc. Nos. 3 and 5 (Index Nos. 2023-01979 and 2023-03818.)) 135195992.1 5 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 18. The record includes, inter alia, the direct testimony affidavits of the parties and the transcript from the lower court's full-day evidentiary conducted on February 6, 2023, during which the court heard and considered the testimony of six (6) witnesses. 19. Following the evidentiary hearing and its careful consideration of the evidence presented by the parties, the lower court issued its Decision and Order dated February 28, 2023 in which it ruled, well within the bounds of its sound discretion, that "[t]he testimony adduced at the preliminary injunction hearing established a likelihood that, had plaintiff known that CDCF and Reuben Brothers were simultaneously entering into a side letter (or Participation Agreement) prohibiting CDCF from selling any of its interest in the Senior Mezzanine Loan (the "Tranche B" interest) to [CMB] without the approval of Reuben Brothers, [CMB] would never have agreed to the Fourth Amendment to Intercreditor Agreement" that allowed Reuben Brothers to become a lender, and obtain a security interest against, the Project property. R. 2809, Index No. 2023-01142. 20. After listening to a full day of witness testimony, Justice Ostrager found the testimony of CMB's primary witness, Patrick Hogan, to have been creditable and compelling in this regard. The lower court's fmdings were within its sound discretion, consistent with the law, and should not have been disturbed. 21. An abbreviated summary of the factual background of this matter now follows for the Court's convenience. FACTUAL BACKGROUND 22. This is an intercreditor dispute arising from the construction financing for the Century Plaza Hotel project in Los Angeles, California (the "Project"). The financing for the Project consists of three tiers of loans, as follows: (i) a Senior Loan originally made by JP Morgan Chase ("JP Morgan") to the Project owner, Next Century Partners, LLC ("Next Century") (ii) a 135195992.1 6 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 Senior Mezzanine Loan originally made by defendant CDCF W Century Mezz, LLC ("CDCF IV") to NCPMB, LLC ("NCPMB"), the 100% owner of Next Century, and (iii) a Junior Mezzanine Loan made by CMB to CPMB, LLC, the indirect 100% owner of NCPMB. R. 1828, Index No. 2023-01142. A. The Project Financing 23. The original Senior Loan amount was $466 million. The original Senior Mezzanine Loan amount was $120 million. The original Junior Mezzanine Loan Amount was (and continues to be, exclusive of interest and fees) $450 million. R. 52, Index No. 2023-01979. 24. The Senior Loan is secured by a Deed of Trust to the Project property. The Senior Mezzanine Loan is secured by a pledge of NCPMB's 100% ownership of Next Century. The Junior Mezzanine Loan is secured by a pledge of CPMB's indirect 100% ownership of NCPMB. Thus, all three loans are collateralized by a direct or indirect 100% ownership of the Project. R. 1828, Index No. 2023-01142. 25. The Project Lenders were (and are) parties to an Intercreditor Agreement originally dated July 15, 2016. The Intercreditor Agreement, which has been amended four times, provides that the Project borrowers' monetary obligations under the Senior Loan and Senior Mezzanine Loan may not be materially increased without CMB's prior written consent. R. 178, Index No. 2023-01979. 26. Construction of the Project (consisting generally of the renovation of the historic Century Plaza Hotel and the construction of two, 44-story residential condominium towers, approximately 96,542 rentable square feet of retail space and related amenities), was originally planned to reach completion in various phases between 2019 and 2020 but was delayed by several 135195992.1 7 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 factors, including a steel embargo, supply chain delays, and Covid 19 interruptions and labor shortages. R. 52, Index No. 2023-01979. B. Reuben Brothers' Involvement in the Senior Mezzanine Loan 27. Reuben Brothers emerged when JP Morgan declared the Senior Loan to be "out of balance" in March of 2020 and questioned whether Next Century had sufficient capital to complete the Project with the anticipated, but not yet fully understood, obstacles that would be presented by the Covid 19 pandemic. JP Morgan estimated that Next Century would need an additional $100 to $150 million in financing to achieve Final Completion of the Project construction. R. 1829, Index No. 2023-01142. 28. Until that additional fmancing was obtained, however, JP Morgan would not allow Next Century to continue making ordinary construction draws under the Senior Loan, which only accrued interest at 5% to 6% per annum. In the Spring and Summer of 2020, three (3) Protective Advances were made to fund Project costs under the Senior Mezzanine Loan. Protective Advances under the Senior Mezzanine Loan, however, carried interest at the rate of 18% per annum. Id. 29. In late 2020, Reuben Brothers offered to make an additional $275 million in fmancing available to put the Project debt "back into balance" so that Final Completion could be achieved using ordinary construction draws, without the need for further, exorbitantly Protective Advance money. (R. 1829 -- 1830, Index No. 2023-01142). Reuben Brothers proposed to make these funds available through an "upsizing" of the Senior Mezzanine Loan, which at the time was held by CDCF, but would subsequently be held by Reuben Brothers and CDCF (with Reuben Brothers as the "Participation A" holder and CDCF as the "Participation B" holder.) R. 46, Index No. 2023-01979; R. 1829 -1830, Index No. 2023-01142. 135195992.1 8 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 30. As alluded to above, such an upsizing of the Senior Mezzanine Loan would require CMB's consent under Section 7 (b) of the Intercreditor Agreement. R. 178 -180, Index No. 2023- 01979. The purpose for allowing Reuben Brothers into the stack of Project lenders was set forth in the Recitals to the Third Amended and Restated Senior Mezzanine Loan Agreement dated September 1, 2020, which state in pertinent part as follows: WHEREAS, notwithstanding the Initial Maturity Date in the Existing Loan Agreement, Borrower has requested the Lenders to extend the maturity date and increase their Commitments under the Existing Loan Agreement by up to Two Hundred Seventy Five Million and 00/100 Dollars ($275,000,000) pursuant to this Agreement to fund certain costs of renovating and redeveloping the Project (as defined herein), to construct the Required Improvements (as defined herein), and to fund certain other costs associated with the Project, including (without limitation) costs and expenses of marketing the Project and the sale of Residential Units and Sale Components (as defined herein). R. 298, Index No. 2023-01979. C. Reuben Brothers Obtains its Security Interest in the Senior Mezzanine Loan Collateral by Fraudulently Concealing Essential Information from CMB 31. On September 1, 2020, JP Morgan, CMB and defendant Motcomb Estates, Ltd. (as agent for Reuben Brothers) signed a Fourth Amendment to Intercreditor Agreement whereby CMB consented to Reuben Brothers' participation as a Project lender through the $275 million "upsizing" of the Senior Mezzanine Loan. R. 271, Index No. 2023-01979. At the time that it executed the Fourth Amendment to Intercreditor Agreement, however, CMB did not know, and had no reason to know, that Reuben Brothers was already devising ways to wipe-out CMB's junior mezzanine interest. R. 57, Index No. 2023-01979. 32. Appellants concealed from CMB the fact that they had included a clause in the document governing the relationship between Reuben Brothers and CDCF (the "Participation Agreement," also dated September 1, 2020) whereby CDCF would be forbidden from transferring 135195992.1 9 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 its "Participation B" interest in the Senior Mezzanine Loan to CMB without Reuben Brothers' prior written consent. Section 14.3 of the Participation Agreement specifically targeted CMB by stating: Restriction on Transfers to Borrower and Borrower Parties. Notwithstanding anything to the contrary contained herein, no Holder shall Transfer the Loan, any Participation or any portion of either of the foregoing or participation or sub-participation therein to the Borrower, a Borrower Party, EB-5 Lender or any Affiliate thereof, in each case, without consent of the other Holders. Any Transfer in violation of this Section 14.3 shall be void ab initio. R. 108, Index No. 2023-01979. CMB is the "EB-5 Lender" to which this prohibition refers. 33. Critically, the Intercreditor Agreement contained no such prohibition against CMB purchasing an interest or partial interest in the Senior Mezzanine Loan. Section 4 (c) of the Intercreditor Agreement states as follows: Subject to, as between Senior Agent and Senior Mezzanine Agent only, the terms and conditions set forth in any other intercreditor agreement entered into between Senior Agent and Senior Mezzanine Agent, Senior Mezzanine Agent or any holder of an interest in the Senior Mezzanine Loan (including any Senior Mezzanine Lender) may, from time to time, Transfer all or any of the Senior Mezzanine Loan or any interest therein (including, without limitation, a pledge of the Senior Mezzanine Loan) without consent of Senior Agent or Junior Mezzanine Lender[.] *** Notwithstanding anything contained herein to the contrary, neither Senior Mezzanine Agent nor any holder of an interest in the Senior Mezzanine Loan (including any Senior Mezzanine Lender) may Transfer all or any portion of its beneficial interest in the Senior Mezzanine Loan or any direct or indirect interest in the Senior Mezzanine Loan to Borrower, Senior Mezzanine Borrower, or Junior Mezzanine Borrower or any Affiliate of any of the foregoing[.] 135195992.1 10 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 R. 169 -- 170, Index No. 2023-01979. The Intercreditor Agreement therefore prohibits the assignment of interests or partial interests in the Senior Mezzanine Loan to the Project borrowers, but not to CMB. 34. At the evidentiary hearing, CMB's witness Patrick F. Hogan testified that a junior lender's ability to negotiate a purchase of a senior lender's interest, or partial interest, is an essential means of protecting the junior interest from being wiped out by mounting senior debt, that this was an essential protection for which CMB had bargained in the Intercreditor Agreement, and that CMB would never have consented to Reuben Brothers' participation as a lender had it known that Reuben Brothers had been devising ways from the outset to squeeze-out CMB's junior interest by making it a prohibited transferee. R. 1832, Index No. 2023-01142. 35. At the evidentiary hearing, CMB also learned for the first time that Reuben Brothers had already purchased a partial interest in the Senior Loan as of June of 2020, paying $107 million to participate in a loan that was, at the time, in distress and in the middle of Covid 19 shut-downs. R. 2602 -- 2603, Index No. 2023-01142. D. The Draft Term Sheet 36. The Draft Term Sheet, which references a "Participation Agreement," was provided to CMB and its outside counsel Lewis Brisbois Bisgaard & Smith LLP ("LBBS") by the Senior Mezzanine Borrower, NCPMB -- -- in July of 2020 -- and not by any of the Defendants-Respondents -- when three different lenders were still being considered for the additional Senior Mezzanine fmancing needed to bring the Project debt back into balance: CMB, Reuben Brothers, and Sail Harbor. R. 253, Index No. 2023-01955. 37. In or about early August of 2020, the borrower selected Reuben Brothers as the source of the upsized Senior Mezzanine funding. Reuben Brothers would not interact directly with 135195992.1 11 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 CMB as the documents for the proposed upsizing were being reviewed and negotiated, so the borrower's attorneys at Gibson, Dunn & Crutcher, LP ("Gibson Dunn") would provide the documents to CMB and LBBS, and CMB and LBBS would direct their questions, comments and proposed revisions back to Gibson Dunn. Id. 38. CMB and LBBS were aware that CDCF and Reuben Brothers would be co- participants in the upsized Senior Mezzanine Loan. LBBS did not necessarily expect to see a draft of any agreement governing the relationship of the Participation A and B holders, however, because it had no reason to suspect that their agreement, assuming they had one, would affect CMB. For example, an agreement that addressed voting rights among the participation holders and other similar governance matters between them would not be material to CMB. Id. at paras. 8 and 9. 39. LBBS of course reviewed the drafts of the Fourth Amendment Intercreditor Agreement which, as set forth above, kept CMB's ability to purchase an interest in the Senior -- as per Section 4 (c) of the original Intercreditor Agreement -- Mezzanine Loan -- -- intact. As part of its review, LBBS also confirmed that Section 15.1 of the draft Third Amended and Restated Senior Mezzanine Loan Agreement, governing transferability of participation interests in the Senior Mezzanine Loan, did not make CMB a prohibited transferee. If Reuben Brothers and CDCF had a separate agreement that purported to modify Section 15.1 in any way, including by making CMB a prohibited transferee, LBBS would have expected to be given a copy of that document before allowing the Fourth Amendment to Intercreditor Agreement to be signed by CMB. Otherwise, LBBS would have expected that the restrictions on transferability referenced by the Draft Term Sheet would align with the transferability provisions of the Intercreditor Agreement and the upsized Senior Mezzanine Loan. Id. at paras. 11 and 12. 135195992.1 12 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 40. It is noteworthy that the title of Section 14.3 of the Participation Agreement ("Restrictions on Transfers to Borrower Parties") tracks, at least initially, Section 4 (c) of the Intercreditor Agreement, which only lists the borrower parties as prohibited transferees. CMB was actively attempting to buy CDCF's interest in the Senior Mezzanine Loan as of August 2020, and it appears that CMB was surreptitiously added to the list of prohibited transferees as that was occurring. 41. Indeed, discovery has shown that, from July of 2020 through August 30, 2020, all of Reuben Brothers' and CDCF's drafts of the Participation Agreement named the Project borrowers -- -- but not CMB -- -- as Prohibited Transferees. True copies of pertinent sections of Defendants-Appellants' draft Participation Agreement as of August 11, 2020 (produced by Defendants-Appellants in discovery as Motcomb_NY-0022807, 0022808 and 0022813) are annexed hereto as Exhibit E, fully redacted pending determination of CMB's motion for leave to file under sea1.2 42. -- one day before Reuben Brothers induced CMB It was not until August 31, 2020 -- -- that Reuben Brothers and CDCF to sign the Fourth Amendment to Intercreditor Agreement -- furtively changed the Participation Agreement's restrictions on transfers to specifically target and label CMB as a prohibited transferee. A true copy of the August 31, 2020 draft version of the Participation Agreement (produced by Defendants-Appellants in discovery as Motcomb NY0055529 et seq.) is annexed hereto Exhibit F, fully redacted pending determination of CMB's motion for leave to file under seal. 2 While documents outside the Record on Appeal would not ordinarily be submitted on a motion to reargue, CMB submits the same here as part of its motion to renew and to underscore that it was premature for this Court to have dismissed CMB's causes of action prior to the completion of discovery based on a misapprehension of the facts caused, CMB respectfully submits, by an incomplete factual record. 135195992.1 13 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 43. CMB and LBBS were never made aware of this and, as alleged in the Verified Complaint, never saw the Participation Agreement until they obtained a copy of CDCF's lawsuit against Reuben Brothers in March of 2022. E. Reuben Brothers' Stranglehold on the Project 44. The proofs at the Evidentiary Hearing also demonstrated the extent to which Reuben Brothers has had the Project in a stranglehold since 2020. Reuben Brothers did not, in fact, honor its promise to make $275 million available for Project completion. Instead, Reuben Brothers only allowed the Project borrowers to use $119 million of the "upsized" loan amount for actual Project construction. R. 602, Index No. 2023-01142. 45. The Senior Mezzanine Loan had an Initial Maturity Date of July 9, 2021, which was only ten (10) months after the upsized loan documents were signed on September 1, 2020. R. 1861, Index No. 2023-01142. When that date came, Reuben Brothers immediately declared default on July 13, 2021 (R. 1613, Index No. 2023-01142), did not allow for any reasonable extension of the loan even though the Project was moving close to completion3, and started forcing the Project borrowers to take Protective Advance money again, this time at a rate of 20% per annum, in August of 2021. R. 1830, Index No. 2023-01142. 46. At the time Reuben Brothers started forcing Protective Advances on the Project, $262,534,854 remained available (i.e., un-drawn) for ordinary construction draws under the Senior Loan and Senior Mezzanine Loan combined, without the need for Protective Advance money and the punishing 20% per annum interest it carried. Id. In this fashion, Reuben Brothers was able to 3 The Hotel re-opened for business in September of 2021 (three months after Reuben Brothers declared default), and the Temporary Certificate of Occupancy for the residential units was issued in May of 2022. R. 1864, Index No. 2023-01142. 135195992.1 14 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 bury the Project with $269,807,671 in interest, under the Senior Mezzanine Loan alone, through July of 2022. R. 174, Index No. 2023-01142. 47. The Third Amended and Restated Senior Mezzanine Loan (dated September 2, 2020) did provide that $75 million of Reuben Brothers' supposed $275 million tranche would be used to pay-down the Senior Loan. R. 2609, Index No. 2023-01142. 48. Unbeknownst to CMB, however, Reuben Brothers had by that time already purchased a $107 million stake in the Senior Loan from JP Morgan as of June of 2020 (3 months before becoming a Senior Mezzanine Lender). 49. Reuben Brothers likewise did not disclose to CMB that it was already planning by the Summer of 2020 to acquire 100% control of the Senior Loan, which it did in October 2021 (immediately after declaring default under the Senior Mezzanine Loan). R. 2619 -- 2622, Index No. 2023-01142. 50. In other words, Reuben Brothers is now charging default rate of interest (20% per annum) on $75 million in loan "proceeds" that it essentially used to make a down payment on its own purchase of the Senior Loan. R. 2609 -- 2610, Index No. 2023-01142. 51. Discovery has since supported CMB's claim that Reuben Brothers had a preconceived plan, from the outset, to take over the Project without ever having to make all of its supposed $275 tranche available for Project completion. 52. For example, in an email dated June 10, 2020, Simon Reuben commented that [CONTENTS REDACTED PENDING DETERMINATION OF CMB 'S MOTION FOR LEAVE TO FILE UNDER SEAL]. A true copy of the June 10, 2020 email (produced by Defendants-Appellants in discovery as Motcomb 0066320) is annexed hereto as Exhibit G, fully redacted pending determination of CMB's motion for leave to file under seal. 135195992.1 15 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 F. CMB Makes Another Attempt to Purchase an Interest in the Senior Mezzanine Loan 53. CMB again approached CDCF about buying its interest in the Senior Mezzanine Loan in March of 2022. CDCF advised CMB that CMB would first have to obtain Reuben Brothers' consent to such a sale. 54. CMB sought Reuben Brothers' consent to negotiate a purchase of CDCF's interest, but Reuben Brothers withheld its consent. R. 2557 -- 2558, Index No. 2023-01142. G. Defendants-Appellants' Assertions that CMB Was Not Entitled to Know the Terms of the Participation Agreement 55. Reuben Brothers and Motcomb have steadfastly argued that CMB had no right to know the terms of any agreement(s) governing the relationship between the Participation A and B holders. See R. 979, Index No. 2023-01979 (Defendants-Appellants' Reply Brief in Support of Motion to Dismiss Verified Complaint, page 7) (arguing that CMB had no right to see the Participation Agreement because "the Mezzanine Loan Agreement expressly authorizes the Mezzanine Lender to create participation interests in the Mezzanine Loan and disclaims any duty on the part of the Mezzanine Lender to disclose to any party the terms of such participation.") See also R. 932, Index No. 2023-01979 (Defendants-Appellants' 12/13/2022 Brief in Support of Motion to Dismiss Verified Complaint, page 15) (arguing that CMB had no need to see the Participation Agreement because "the Participation Agreement did not modify any terms of the Mezzanine Loan" [a statement that is patently untrue] and "did not modify any rights under the ICA" [also untrue]). 56. As set forth within, these adamant judicial admissions alone create an issue of fact as to whether CMB would have been able to discover Defendants-Appellants' naming of CMB as a prohibited transferee even if CMB had made direct demand upon Reuben Brothers for all side agreements signed by and among the Senior Mezzanine Loan holders. 135195992.1 16 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 H. Other Facts Adduced During the Evidentiary Hearing 57. During the evidentiary hearing CMB also learned from the testimony of Reuben Brothers' representative that there had been an opportunity in October of 2021 to restructure the Senior Loan, so that a Senior Loan foreclosure could be averted, if the junior lenders (including CMB) would agree contribute additional fmancing for Project completion. R. 2487, Index No. 2023-01142. Reuben Brother and Motcomb kept this too a secret from CMB, which had earlier offered to contribute an additional $150 million in financing in order prevent any predatory lender from becoming involved with the Project. R. 56, Index No. 2023-01979. LEGAL ARGUMENT POINT I THE COURT SHOULD GRANT LEAVE TO RENEW AND REARGUE AND, UPON REARGUMENT, AFFIRM THE LOWER COURT'S DENIAL OF DEFENDANTS- APPELLANTS' MOTION TO DISMISS CMB'S VERIFIED COMPLAINT 58. In accordance with CPLR Section 2221(d), a motion for leave to reargue "shall be addressed to the discretion of the court [and] is designed to afford a party an opportunity to establish that the court overlooked or misapprehended the relevant facts, or misapplied any controlling principle of law." Foley v. Roche, 68 A.D.2d 558, 567 (1' Dep't 1979). 59. A motion for reargument shall briefly set forth the points alleged to have been overlooked or misapprehended by the Court. 60. As demonstrated below, the Court failed to follow three (3) controlling principles of law that constrain courts from deciding issues of fact at the preliminary stages of a case on a CPLR 3211(a)(7) motion to dismiss. A. The Court Overlooked and Deviated from Standards Governing Motions to Dismiss Made under CPLR 3211 135195992.1 17 FILED: NEW YORK COUNTY CLERK 06/26/2024 10:22 AM INDEX NO. 653821/2022 NYSCEF DOC. NO. 345 RECEIVED NYSCEF: 06/26/2024 61. It is well-settled that courts should not decide fact-intensive issues on a CPLR 3211(a)(7) motion to dismiss. Williams v. Citigroup, Inc., 104 A.D.3d 521, 522 (1