245 Park Member LLC v. HNA Group Company Limited

Background

The court had previously confirmed an arbitration award totaling $185,412,763.60 in favor of 245 Park Member LLC and against HNA Group (International) Company Limited (HNA International). The award arose from a guaranty connected to 245 Park’s preferred-equity investment in 245 Park JV LLC, which acquired a commercial property at 245 Park Avenue in New York City. The arbitrator found HNA International liable for the redemption amount, attorney’s fees and costs, and arbitration-related fees. The Clerk later entered judgment against HNA International.

The guaranty required unconditional and complete payment of the guaranteed obligations and stated that the obligations would end only upon full and final payment. The court had also entered an order requiring advance notice of certain asset sales.

After the judgment, 245 Park acquired the common equity of 245 Park JV LLC through a bankruptcy sale. Its bid included approximately $61 million in bankruptcy-related expenses and a $40 million credit bid of its preferred-equity interest. The bankruptcy court approved the sale and preserved 245 Park’s rights to collect from HNA International under the guaranty.

245 Park then sought enforcement of the judgment by requiring HNA International to turn over its 100% membership interest in HNA North America, a Delaware limited liability company. HNA International’s corporate representative identified HNA North America as HNA International’s most valuable asset. HNA North America indirectly held interests in a Chicago building and a conference center in Rockland County, New York. The court also considered evidence that HNA International and its affiliates had attempted to transfer assets in ways that hindered 245 Park’s collection efforts.

HNA International’s motion for relief from the judgment

HNA International moved under Federal Rule of Civil Procedure 60(b)(5) and 60(b)(6), which allow relief from a final judgment when the judgment has been satisfied or when another reason justifies relief. It argued that the arbitration award had effectively converted or extinguished 245 Park’s equity interest and that 245 Park had already recovered the judgment’s full value through the bankruptcy sale. Alternatively, it asked the court to reduce the judgment by $40 million, the amount of the credit bid.

The court rejected the argument that the arbitration award extinguished 245 Park’s rights or capped HNA International’s liability. The guaranty required payment in full and did not limit the guaranteed obligations to a specific amount. Because HNA International had not paid those obligations in full, the court concluded that the guaranty and the payment obligations remained in effect.

The court also rejected HNA International’s argument that the bankruptcy purchase made continued enforcement inequitable. The court emphasized that 245 Park acquired the company’s common equity, not the property directly; that the company was burdened by substantial debt; that 245 Park paid approximately $61 million in bankruptcy-related expenses and made a $40 million credit bid; and that the bankruptcy court had found the sale fair, conducted in good faith, and designed to maximize value. The court found no basis to assign additional value to the acquired assets or to conclude that the judgment had been fully satisfied.

The court further determined that a contractual provision concerning a forced sale did not apply because 245 Park had not invoked that provision, had purchased the company rather than the property, and had made the purchase in connection with a bankruptcy. The court therefore denied HNA International’s motion for relief from the judgment without prejudice. The court explained that HNA International could renew the motion if it later satisfied the judgment.

Turnover motion

Under Federal Rule of Civil Procedure 69, federal judgment-enforcement procedures follow the law of the state where the federal court sits. The court therefore applied New York enforcement law, including New York Civil Practice Law and Rules § 5225(a). That provision allows a judgment creditor to obtain an order requiring a judgment debtor to turn over money or personal property in which the debtor has an interest.

The court held that HNA International’s 100% membership interest in HNA North America was property subject to turnover. HNA International did not dispute that it owned and possessed the interest. The court rejected HNA International’s argument that Delaware law governed because HNA North America was a Delaware limited liability company. The guaranty selected New York law and consented to New York jurisdiction for enforcement matters, and New York law permits turnover of membership interests in out-of-state limited liability companies.

The court also rejected the argument that New York law allowed only a charging order, which is a lien-like remedy against an ownership interest. The court concluded that a charging order was not the exclusive remedy and that New York law permits a turnover of the membership interest itself.

Direct transfer

The court considered whether the interest should be delivered to a sheriff for sale or transferred directly to 245 Park. Under New York law, the court may modify enforcement procedures. It found direct transfer appropriate because the value of HNA International’s interest in HNA North America was uncertain and because HNA International and its affiliates had obstructed 245 Park’s collection efforts. The court cited the attempted transfer of the Chicago property for no consideration and the attempted sale of the conference center without the required advance notice.

Disposition

Judge John G. Koeltl denied without prejudice HNA International’s motion for relief from the judgment and granted 245 Park’s motion for turnover. The court ordered HNA International to turn over its 100% membership interest in HNA North America directly to 245 Park within seven business days. It directed the Clerk of Court to close ECF Nos. 80 and 111.