Bravia Capital Hong Kong Limited v. SL Green Realty Corporation

Background

Bravia held a New York state-court judgment for $12,986,660.70 against Palisades Member 2 LLC (PM2). Bravia alleged that, while its state-court case was pending, PM2’s subsidiary, Palisades Training Center NY LLC (PTC), transferred the Palisades Premier Conference Center to Palisades Fee Owner LLC (PFO), a newly formed subsidiary of SL Green Realty Corporation, for zero dollars. Bravia alleged that the transfer left PM2 without assets of value and was intended to prevent collection of the judgment.

Bravia sued SL Green, PFO, 245 Park Member LLC, Palisades Member 1 LLC, PM2, PTC, Andrew S. Levine, and Harrison Sitomer. It asserted a fraudulent-transfer claim under New York’s Debtor and Creditor Law (Count 1), including a theory that the defendants conspired to carry out the transfer. Counts 2 through 7 sought to enforce the state-court judgment using sections 5225 and 5227 of New York’s Civil Practice Law and Rules. The defendants moved to dismiss under Rules 12(b)(1) and 12(b)(6), which address subject-matter jurisdiction and failure to state a legally sufficient claim.

Judgment-enforcement claims

The court held that New York Civil Practice Law and Rules sections 5225 and 5227 are procedural mechanisms for enforcing money judgments, not substantive causes of action. Because Bravia relied on those provisions alone for Counts 2 through 7, the court held that it lacked subject-matter jurisdiction over those counts. The court dismissed Counts 2, 3, 4, 5, 6, and 7 without prejudice for lack of subject-matter jurisdiction.

The court rejected the defendants’ argument that the case had to be dismissed because judgment enforcement was ancillary to the state-court action. It explained that the ancillary-proceeding doctrine did not apply because this case was not removed from state court.

Fraudulent-transfer claim

The court held that Bravia could pursue a substantive fraudulent-transfer claim under the New York Debtor and Creditor Law in federal court based on diversity jurisdiction. At the pleading stage, Bravia had to allege plausibly that PTC was an alter ego of PM2, the judgment debtor. The court concluded that Bravia adequately alleged domination and control, including common officers, shared offices and records, lack of independent discretion, lack of bank accounts, common outside counsel, and the transfer of PTC’s principal asset for zero dollars.

The court also concluded that Bravia plausibly alleged the unfairness needed to disregard the separate corporate entities. Bravia alleged that SL Green controlled PTC and transferred the conference center to PFO without consideration while Bravia’s summary-judgment motion against PM2 was pending and after Bravia had notified 245 Park of the judgment debt. The court stated that the allegations plausibly showed an effort to leave PM2 unable to pay the judgment. It further held that Bravia plausibly alleged that PFO was an alter ego of SL Green.

The court cautioned that the alleged basis for veil piercing was limited. Bravia had plausibly alleged that PM2, SL Green, and PTC were alter egos for purposes of the judgment debt, but it had not alleged facts supporting direct piercing of PM2’s corporate veil to reach PTC’s assets based on PM2’s original debt.

The court also held that Bravia plausibly alleged actual and constructive fraudulent-transfer theories. The alleged facts included a transfer between insiders, continued control of the property by SL Green, the transfer while Bravia’s state-court summary-judgment motion was pending, and allegations that the transfer occurred for no consideration and left PTC or PM2 insolvent or without valuable assets.

Under the Debtor and Creditor Law, however, a money-damages claim generally may be brought only against the transferee or a party that controlled or benefited from the transferred asset. The court therefore held that the direct fraudulent-transfer claim could proceed only against SL Green and PFO. It could not proceed directly against the Individual Defendants, PTC, PM2, PM1, or 245 Park.

Conspiracy allegations

The court explained that New York does not recognize conspiracy as an independent tort, but conspiracy allegations may connect separate defendants to an otherwise actionable fraudulent-transfer claim. The court found the allegations insufficient against PM1, 245 Park, and Sitomer and dismissed Count 1 without prejudice as to those defendants.

The court found the conspiracy allegations sufficient at the pleading stage against PM2, PTC, and Levine. It relied on allegations that PM2 caused delays in the state-court case, that PTC transferred the property through its officers, and that Levine signed transfer documents for both the buyer and seller. Count 1 therefore survived against SL Green and PFO on a direct fraudulent-transfer theory and against PM2, PTC, and Levine on a conspiracy theory.

Disposition

Judge Koeltl granted in part and denied in part the defendants’ motion to dismiss. Count 1 survives against SL Green, PM2, PTC, PFO, and Andrew S. Levine, and is dismissed without prejudice against PM1, 245 Park, and Harrison Sitomer. Counts 2 through 7 are dismissed without prejudice for lack of subject-matter jurisdiction. The court denied Bravia’s request for jurisdictional discovery as moot because Count 1 survived against some defendants. Bravia may file a second amended complaint by March 14, 2025.