Global Gaming Philippines, LLC v. Razon, Jr.

Background

Global Gaming Philippines, LLC (GGAM) sued Bloomberry Resorts and Hotels, Inc. (BRHI), Sureste Properties, Inc., and Enrique K. Razon, Jr. GGAM sought to confirm and enforce a final foreign arbitration award against BRHI and Sureste, which the opinion calls the “Debtor Defendants.” GGAM also sought to enforce the award against Razon on the theory that the Debtor Defendants were his alter egos, meaning that the companies and Razon were not sufficiently separate for purposes of liability. GGAM separately alleged that Razon committed trespass to chattels by interfering with GGAM’s ownership interest in shares of Bloomberry Resorts Company (BRC).

The dispute arose from a 2011 Management Services Agreement under which GGAM provided services related to the development, construction, and operation of Solaire, a casino and resort in Manila. The agreement included an option for GGAM to purchase an equity interest. After the Debtor Defendants terminated the agreement, an arbitral panel found that they had breached it and later issued a final award of damages to GGAM. The Debtor Defendants unsuccessfully challenged the arbitration decisions in Singapore.

The parties filed cross-motions for summary judgment, which asks whether the record shows that no important facts are genuinely disputed and that one side is entitled to judgment under the law. Each side also sought to exclude opposing expert testimony.

Personal Jurisdiction Over the Debtor Defendants

The court held that genuine disputes of important fact prevented summary judgment on whether it had personal jurisdiction over BRHI and Sureste. GGAM relied on several possible bases for jurisdiction: the companies’ alleged business activities in New York, their alleged status as Razon’s alter egos, consent in the Management Services Agreement, and Federal Rule of Civil Procedure 4(k)(2).

The court found factual disputes about whether the Debtor Defendants transacted business in New York under New York’s long-arm statute. The disputed evidence concerned Razon’s communications and possible presence in New York during negotiations, the companies’ dealings with Cantor Fitzgerald and its affiliates, the exchange of agreement documents, services allegedly performed from New York, negotiations concerning the equity option agreement, and a New York roadshow intended to attract investment in BRC and help fund Solaire. Viewed in favor of GGAM, the evidence could support jurisdiction; viewed in favor of the Debtor Defendants, it could support the opposite conclusion.

The court rejected the Debtor Defendants’ arguments that issue preclusion or judicial estoppel barred GGAM from relying on certain New York contacts. The court concluded that the issues previously addressed in the arbitration were not identical to the jurisdictional issues presented here, and that the Debtor Defendants had not shown that GGAM had persuaded the arbitral panel to adopt a contrary position.

The court also held that the Management Services Agreement did not clearly consent to personal jurisdiction in every court. Its provision stating that the arbitration decision would be enforceable in all jurisdictions was an entry-of-judgment provision, not a clear waiver of objections to personal jurisdiction. The court further stated that it was unlikely that Rule 4(k)(2) would provide jurisdiction where the conduct did not satisfy New York’s long-arm statute, although GGAM had only reserved its right to present evidence under that rule.

Accordingly, the Debtor Defendants’ and GGAM’s cross-motions for summary judgment on personal jurisdiction were denied. Because jurisdiction remained unresolved, GGAM’s motion to confirm the final award against the Debtor Defendants was denied without prejudice to renewal if and when personal jurisdiction was established. GGAM’s motion to exclude expert testimony concerning that confirmation motion was also denied without prejudice to renewal.

Alter-Ego Claim Against Razon

The court applied federal common law to GGAM’s effort to enforce the arbitration award against Razon as an alleged alter ego. Under the standard described by the court, veil piercing may be appropriate either to prevent fraud or another wrong, or when one person or entity dominates and controls another so extensively that treating the entities as separate would produce an inequitable result. The inquiry is fact-specific and equitable.

Both sides offered evidence supporting their positions. Razon presented evidence that the Debtor Defendants followed corporate formalities, were solvent and had assets sufficient to satisfy the award, did not transfer money to him personally apart from generally distributed dividends, and did not rely on his assets for loans. He also presented evidence that GGAM knew about the corporate structure and Razon’s influence before entering the agreements.

GGAM presented evidence that Razon controlled nearly all of the shares of BRHI and Sureste, served as chairman and chief executive officer of those companies and BRC, controlled director selection, and was treated as the ultimate decision-maker concerning the agreements and the equity option. GGAM also presented evidence that Razon used his control to prevent trading in BRC shares in order to maintain control over BRC and the Debtor Defendants.

Because a reasonable fact finder could rule for either side, the court denied GGAM’s and Razon’s cross-motions for summary judgment on alter-ego liability. The court also denied without prejudice Razon’s motion to exclude GGAM expert Troy Dahlberg’s testimony because it was unnecessary to decide that motion at this stage.

Trespass to Chattels Claim

The court granted Razon’s motion for summary judgment on GGAM’s trespass-to-chattels claim. The claim alleged that Razon interfered with GGAM’s ownership interest in BRC shares by halting trading, using Philippine court proceedings to block their sale, causing Deutsche Bank not to release the shares, making public statements about the shares, and causing the bonds supporting attachment orders to be renewed.

The court held that the three-year statute of limitations limited the claim to alleged interference occurring after March 29, 2018. The first two alleged acts occurred before that date and therefore could not support the claim. The court found that BRC’s statements in annual reports merely described legal advice and that GGAM offered no evidence showing that the disclosures affected its ability to dispose of the shares.

The court also found that Deutsche Bank was an apparently neutral custodian complying with Philippine court orders and that GGAM offered no evidence that Razon pressured Deutsche Bank by means other than seeking and renewing the attachment orders. The renewal of those orders, standing alone, could not support trespass, particularly because the record contained no evidence that the orders or related bonds were invalid under Philippine law. The court therefore granted Razon summary judgment on the trespass claim.

Disposition

Judge Schofield denied GGAM’s motion for summary judgment. The court stated that the defendants’ motions were granted in part and denied in part, with these specific rulings:

- The Debtor Defendants’ and GGAM’s cross-motions for summary judgment on personal jurisdiction over the Debtor Defendants were denied. - GGAM’s and Razon’s cross-motions for summary judgment on enforcing the arbitration award against Razon as the Debtor Defendants’ alter ego were denied. - Razon’s motion for summary judgment on the trespass claim was granted. - GGAM’s motion to confirm the final award was denied without prejudice. - GGAM’s motion to exclude the Debtor Defendants’ expert testimony and Razon’s motion to exclude GGAM’s expert testimony were denied without prejudice. - The parties’ joint request for oral argument was denied as moot.

The court directed the parties to meet and confer and submit a joint status letter concerning next steps in the litigation.