Ithaca Capital Investments I S.A. v. Trump Panama Hotel Management LLC

Background

Ithaca Capital Investments I S.A., Ithaca Capital Investments II S.A., and Orestes Fintiklis sued Trump Panama Hotel Management LLC and Trump International Hotels Management LLC. The plaintiffs sought a declaration that they were not subject to International Chamber of Commerce arbitration and an injunction preventing the defendants from continuing to pursue arbitration against them.

The dispute involved the Trump International Hotel & Tower Panama. Fintiklis was the president and principal of Ithaca I and Ithaca II, which owned 215 of the hotel’s 369 units. The defendants had managed the hotel under a 2011 hotel management agreement. In 2017, Ithaca I and Ithaca II purchased hotel units under a bulk sale agreement. That agreement included provisions concerning the defendants’ rights under the management agreement and required disputes under the bulk sale agreement to be brought in New York.

The defendants alleged that the plaintiffs interfered with the defendants’ management rights and with a prior settlement agreement involving a hotel unit owner. They asserted eight counterclaims, including fraud, fraudulent inducement, fraudulent concealment, tortious interference with the hotel management agreement, tortious interference with the prior settlement agreement, and breach of contract. The plaintiffs moved to dismiss the fraud and tortious-interference counterclaims as to Ithaca I and Ithaca II and all counterclaims against Fintiklis. They also sought permission to amend their complaint to add claims for fraud, conversion, and breach of contract.

Motion to Dismiss the Fraud Counterclaims

The court dismissed the counterclaims for fraud, fraudulent inducement, and fraudulent concealment. Applying New York law, the court held that these claims were duplicative of the defendants’ breach-of-contract claim. The alleged promises and statements concerned the plaintiffs’ promise to comply with their contractual obligations under the bulk sale agreement, rather than a separate duty or a statement collateral to the contract.

The court also found that the defendants had not adequately alleged reliance on the statements concerning an October 14, 2017 meeting. The defendants’ own allegations showed that they contacted the plaintiffs about the meeting, confirmed the plaintiffs’ contractual obligations, and arranged for their general manager to attend. The court concluded that the defendants’ general allegations that they were delayed from protecting their rights were insufficient.

Tortious-Interference Counterclaims

The court denied the plaintiffs’ motion to dismiss the counterclaims alleging tortious interference with the hotel management agreement and the prior settlement agreement. It rejected the argument that the plaintiffs’ financial interest in the hotel alone established an economic-interest defense at the pleading stage. The defendants had also alleged that the plaintiffs acted with an improper motive and used allegedly unlawful means, including forcible entry and burglary.

The court also held that Ithaca II’s status as a successor owner bound by the hotel management agreement did not require dismissal. Under the allegations, Ithaca II and the hotel’s governing organization had separate rights and duties under that agreement. The court further held that the defendants adequately alleged that the plaintiffs knew about the prior settlement agreement.

Claims Against Fintiklis

The court rejected the plaintiffs’ argument that the defendants first had to pierce the corporate veil to bring claims against Fintiklis. A corporate officer may be personally liable for torts in which he actively participates. The defendants alleged that Fintiklis controlled Ithaca I and Ithaca II and personally participated in the alleged tortious conduct. The court therefore declined to dismiss the counterclaims against him on that basis.

Motion to Amend

The court granted the plaintiffs’ motion for leave to file an amended complaint. The proposed claims concerned alleged misrepresentations about the hotel’s financial performance, alleged mismanagement and contractual breaches, and alleged conversion of hotel revenues and reserve funds.

The court rejected the defendants’ arguments that judicial estoppel, delay, bad faith, or futility barred amendment. It held that the plaintiffs had not taken a position inconsistent with one previously adopted by the court. It also found that delay alone was insufficient and that the defendants had not shown bad faith or undue prejudice.

The court further held that the proposed conversion claim was not futile because the plaintiffs identified specific funds they alleged the defendants improperly took. The proposed fraudulent-inducement claim was also not futile because the alleged statements about the hotel’s financial performance were sufficiently definite to potentially be actionable, and the plaintiffs alleged that the defendants possessed information they could not independently verify. The court did not decide whether the proposed claims would ultimately succeed.

Disposition

The court ordered that the plaintiffs’ motion to dismiss was granted in part and denied in part. The defendants’ first, second, and third counterclaims—for fraud, fraudulent inducement, and fraudulent concealment—were dismissed, while the remaining counterclaims were not dismissed. The plaintiffs’ motion for leave to file an amended complaint was granted. The parties were directed to appear for a telephonic conference on April 24, 2020.