Hudson Private LP v. Creative Wealth Media Finance Corp.

Background

Hudson Private LP and Creative Wealth Media Finance Corporation entered into a promissory note on July 16, 2020, in connection with a $3 million loan to finance episodes of Shadowplay. Hudson Private claimed that the note required Creative Wealth to repay the principal and interest unconditionally by the earlier of the delivery of the series’ final episode or December 31, 2021. The note provided for 10% annual interest, compounded annually, and additional interest of 1.5% per month on the outstanding balance after the maturity date.

The parties also entered into a Loan and Security Agreement and a term sheet concerning the Shadowplay financing. The Loan and Security Agreement incorporated the note and term sheet. The term sheet stated under “Source of Repayment” that the loan, fees, interest, and other amounts “shall all be recouped from gross receipts generated by the Project, if any.” The parties disputed whether that language limited repayment to Shadowplay’s gross receipts.

Motion and Arguments

Before discovery, Hudson Private moved for summary judgment—a decision without a trial when the moving party claims there is no genuine dispute about the material facts. It sought judgment for $3 million in principal, contractual interest, additional interest after the maturity date, and attorneys’ fees and expenses related to enforcing the note.

Hudson Private argued that the note alone governed and that Creative Wealth had defaulted by failing to repay. It also relied on an April 19, 2021 attestation signed by Creative Wealth’s Managing Partner, Jason Cloth, which Hudson Private viewed as acknowledging the outstanding $3 million principal balance and accrued interest.

Creative Wealth argued that the note had to be interpreted together with the Loan and Security Agreement and term sheet. It contended that repayment was conditioned on sufficient gross receipts from Shadowplay, and that the series had not generated enough receipts to repay Hudson Private.

Court’s Analysis

The Court applied New York law because the note selected New York law and the parties analyzed the dispute under that law. Under New York law, documents executed at the same time, by the same parties, for the same purpose, and as part of the same transaction may be read together if the parties intended that result. Whether the parties intended the documents to operate together is generally a factual question.

The Court found that the documents pointed in conflicting directions. The note’s integration provision suggested that the note was the entire agreement concerning the debt. But the Loan and Security Agreement and the term sheet had their own integration provisions and appeared to support considering the term sheet’s repayment provision. The Court concluded that the conflict created a factual question about the parties’ intent and that this question could not reliably be resolved without discovery.

The Court also found that the Cloth attestation did not resolve the case. Although it showed a $3 million outstanding principal balance, the document included the handwritten notation “LSA” in response to a question about collateral. That notation appeared to treat the Loan and Security Agreement as relevant to Creative Wealth’s liability. The Court held that discovery was needed to determine the notation’s meaning and significance.

Finally, the Court rejected Hudson Private’s argument that the term sheet did not make Shadowplay’s gross receipts the exclusive source of payment. The Court stated that the language requiring the loan to be recouped from project gross receipts, “if any,” could plausibly be read to make those receipts the only reachable repayment source. The Court could not resolve that issue in Hudson Private’s favor before discovery.

Disposition

Judge Engelmayer denied Hudson Private’s motion for summary judgment. The Court directed the litigation to proceed to discovery and closed the motion at docket entry 46. The opinion states that the denial was without prejudice to Hudson Private’s right to seek summary judgment after discovery closes. The parties were directed to file a joint case management plan by June 7, 2023.