The plaintiffs Fillmore West Fund, L.P. ("Fillmore West") and Fillmore West JPM Finance Subsidiary ("Fillmore Subsidiary") (collectively, "plaintiffs" or "Fillmore") bring this action for specific performance to enforce their right to purchase 5,911,119 units (equal to a 1.5% equity interest)(the "Units") in non-party Station Holdco LLC ("Station Holdco"). (Compl. ¶ 1.)

Station Holdco is an entity established to hold all of the non-voting equity interests in defendant Station Casinos LLC ("Station Casinos"), which operates casinos in Las Vegas, Nevada. (Id.) Station Casinos was created in accordance with an approved Chapter 11 restructuring plan (the "Chapter 11 Plan") for non-party Station Casinos, Inc. ("SCI"), a major operator of casinos on the Las Vegas strip, which declared bankruptcy in 2009. (Id.) The SCI Chapter 11 Plan, as amended, was approved by the United States Bankruptcy Court for the District of Nevada in August 2010 and became effective on or about June 17, 2011. (Id.)^[FN2]

Plaintiffs allege that their rights stem from an agreement that they (and other mezzanine lenders) reached with SCI's two secured creditors, defendants JP Morgan Chase Bank, N.A. ("JPM") and German American Capital Corp. ("GACC"), to support the restructuring plan that the secured creditors and the company's founding family, the Fertittas, had devised.^[FN3] (Compl. ¶ 2.) According to plaintiffs, in return for the mezzanine lenders' support for the plan, JPM agreed that each such lender would be granted, inter alia, an option to acquire a limited percentage of JPM's equity interest in the restructured business (hereinafter referred to as the "Buy-In Equity").^[FN4] (Id.) [*2]

To induce Fillmore Subsidiary and the other junior mezzanine lenders to support their proposed restructuring plan, JPM and GACC offered, and the parties subsequently agreed, that the mezzanine lenders would be afforded the opportunity to acquire certain limited percentages of non-voting equity in the restructured business. (Compl. ¶ 24.) According to plaintiffs, JPM and GACC ultimately proposed that the mezzanine lenders (1) would be granted so-called "lender warrants" (which are not at issue in this action) to acquire up to a 2.5% interest in the equity of the restructured business (denominated "New PropCo"), and (2) would separately be granted options acquired up to 4.375% of JPM's interest in that entity. (Id.)

Accordingly, JPM, GACC, Fillmore Subsidiary and the other junior mezzanine lenders entered into an agreement entitled "Settlement Agreement" (hereinafter, the "Settlement Agreement"), (Compl. ¶ 25) which provides, in relevant part, as follows:

Section 3. Additional Consideration to Junior CMBS Lenders

As additional consideration to the Junior CMBS Lenders in connection with and conditioned upon: (a) confirmation of and the occurrence of the effective date for the Specified Plan, and (b) support of the Junior CMBS Lenders of such Restructuring in accordance with the terms hereof, and subject to the effectiveness of the releases contemplated in Section 4 below, JPM shall grant the Junior CMBS Lenders the right to purchase (the "Equity Options") up to 4.375% (or such lesser percentage that may be applicable pursuant to the second to last paragraph of this Section 3) of the non-voting equity of New PropCo (before giving effect to any equity issuable upon exercise of warrants), subject to the same transfer and right of first refusal restrictions and other restrictions specified in the Term Sheet, with no rights of designation for VoteCo Equityholders (the "PropCo Buy-in Equity"), at a purchase price equal to the per share value of the equity, as determined in accordance with the Specified Plan, as follows:

(a)55% of the Equity Options shall be allocated on account of the Mezz 2 Loans;

(b)30% of the Equity Options shall be allocated on account of the Mezz 3 Loans; and

(c)15% of the Equity Options shall be allocated on account of the Mezz 4 Loans ^[FN5] . . . .

Section 3 of the Settlement Agreement further provides that:

It shall be a condition precedent to any Junior CMBS Lender acquiring PropCo Buy-In Equity that such Junior CMBS Lender nor any direct or indirect equity owner of such Junior CMBS Lender (excluding for this purpose any direct or indirect equity owner who would not be deemed to own an interest in the capital or profits of New PropCo for purposes of Section 267 of the Internal Revenue Code of 1986, as amended (the "Code"), including by reason of Section 267(e)(3)(B), through its interest in such Junior CMBS Lender) own or be deemed to own, any interest in the stock of OpCo ^[FN6] for purposes of Section 267 of the Code and the Treasury regulations promulgated thereunder, including any deemed ownership resulting from the application of the constructive ownership provisions of Section 267(c) of the Code, which shall include but not be limited to any deemed ownership of OpCo stock as a result of an ownership interest in any fund managed or operated by Colonial Capital that holds an indirect interest in OpCo stock. Each Junior CMBS Lender acquiring any PropCo Buy-In Equity shall be required to represent that the foregoing is true in the instrument through which it obtains such PropCo Buy-In Equity.

In or around April 2010, Fillmore advised JPM and GACC that it wished to exercise its "Equity Option" and acquire the equity interest in the restructured business allocated to it in the Settlement Agreement. (Compl. ¶ 28.)

On or about July 28, 2010, SCI and the other debtors filed an amended plan of reorganization and a proposed disclosure statement. (Compl. ¶ 29.) The plan identified various protocols and standards to be used to determine whether certain creditors would be permitted to acquire an equity interest in the restructured business, including ones designed to assure that the transaction would not result in the disallowance of the debtor's tax losses pursuant to Section 267 of the Internal Revenue Code (the "Code"). (Id.) On August 27, 2010, the United States Bankruptcy Court for the District of Nevada issued an order (the "Bankruptcy Court Order") approving the amended plan of reorganization for SCI and the other debtors (the "Approved Plan"). (Compl. ¶ 30.)

The Approved Plan contains the following provision, in relevant part:^[FN7]

G.Further Assurances

The Debtors or the Plan Administrator, as applicable, all Holders of Claims and Equity Interests receiving distributions hereunder and all other Entities shall, from time to time, prepare, execute and deliver any agreements or documents and take any other actions as may be necessary or advisable to effectuate the provisions and intent of this Plan or the Confirmation Order . . . .

In or around November 2010, JPM advised Fillmore that Ernst & Young ("E & Y") was hired to gather information and make various calculations (denominated the "clearinghouse process") to assure that the limits set down in Section 267 for common ownership among the transacting parties were not exceeded. (Compl. ¶ 3, 35.) On or about November 18, 2010, Fillmore and E & Y entered into a non-disclosure agreement (the "NDA"), which governed the use of the information to be provided by Fillmore to E & Y. (Compl. ¶ 36.) E & Y's analysis with respect to Fillmore, however, concluded on or around September 17, 2011, when E & Y notified Fillmore that it had reached a conclusion with respect to the Section 267 issues arising from Fillmore's prospective investment in the restructured business. (Compl. ¶ 39.) E & Y advised Fillmore that it would not release its conclusions, however, until each of the participants in the clearinghouse process - Fillmore, JPM, GACC, Station Casinos and Colony Capital - entered into new non-disclosure agreements with E & Y that would permit E & Y to discuss such conclusions and/or the underlying analysis.^[FN8] (Compl. ¶ 49.) E & Y and Fillmore then entered into a supplemental and amended non-disclosure agreement on or about September 28, 2011. (Compl. ¶ 52.)

According to the Complaint, around the same time that E & Y finished its analysis of Fillmore's prospective investment, JPM and

Fillmore entered into a letter agreement dated September 15, 2011 (the "Commitment Letter"), which set forth the terms pursuant to which Fillmore would acquire its allocated share of the Buy-In Equity.^[FN9] (Compl. ¶ 43.)

The Commitment Letter states, in relevant part:

Notwithstanding the passage of the Commitment Deadline set forth in Section 3 of the Settlement Agreement, JPM agrees to sell and the undersigned Fillmore West Fund, L.P. (the "Purchaser") . . ., hereby agrees to purchase 5,911,119 units, representing 1.5% of the outstanding membership interests of Station Holdco LLC, a Delaware [*5]limited liability company (the "Holdco") for $8.75 Million with payment due upon transfer of such membership interests subject to the terms and conditions set forth herein (the "Commitment").

***

JPM's and the Purchaser's obligations under this letter agreement are subject to the satisfaction of the following conditions, prior to October 15, 2011:

(a)Entry into a purchase agreement among JPM and Purchaser containing representations and warranties made by Purchaser in form and substance to be mutually agreed to by JPM and the Purchaser and, including, without limitation, such representations as may be reasonably requested by the Purchaser, JPM, GACC and Station Casinos LLC, Fertitta Entertainment LLC and FI Station Investor LLC (who shall be beneficiaries of such representations) to the effect that, as of each of June 17, 2011 and the date of this Commitment, neither Purchaser nor any of its direct or indirect equity owners (as determined in accordance with Section 267 of the Internal Revenue Code of 1986, as amended (the "Code")), own or are deemed to own any stock of Station Casinos, Inc., a Nevada corporation ("Opco") for purposes of Section 267 of the Code and the Treasury regulations promulgated thereunder (with the exception of any stock ownership overlap (the "Overlap Amount") that has been cleared through the Clearinghouse process in accordance with part (b) below), including any deemed ownership resulting from the application of Section 267(c) of the Code, which shall include, but not be limited to, any deemed ownership of Opco stock as a result of an ownership interest in any fund managed or operated by Colony Capital that holds an indirect interest in Opco stock (the "267 Condition");

(b)Receipt of confirmation that the findings of the Clearinghouse as to the Overlap Amount or potential Overlap Amount with respect to Purchase as of each of June 17, 2011 and the date of this Commitment are acceptable to each of JPM, GACC, Fertitta Entertainment LLC and FI Station Investor LLC in their sole discretion; and

(c)Receipt of all governmental, regulatory or administrative [*6]agency approvals necessary or appropriate in connection with the transfer of PropCo Buy-In Equity from JPM to Purchaser prior to the date of transfer of the PropCo Buy-In Equity from JPM to Purchaser.

***

. . . This Commitment shall automatically terminate upon the failure of any of the conditions or agreements set forth herein to be satisfied prior to the required date for satisfaction of such condition or agreement set forth herein.

Plaintiffs allege that in October 2011, they were informed that certain of the other clearinghouse process participants - GACC and Colony Capital in particular - were having difficulty reaching agreement with E & Y concerning the terms of a non-disclosure agreement. (Compl. ¶ 53.) Fillmore claims that it was repeatedly advised that GACC, Colony Capital and the other participants continued to work towards the finalization of acceptable non-disclosure agreements, (Compl. ¶ 55), until January 2012, when it was advised that the other participants had suspended their involvement, that E & Y would not share its conclusions and that JPM would not proceed with the sale of the Units to Fillmore. (Compl. ¶ 56.)

On or about February 7, 2012, Station Casinos announced that the Fertittas, specifically defendant FI Station Investor, LLC ("FI") had entered into an agreement with JPM to acquire JPM's entire interest in Station Holdco. (Compl. ¶ 68.)

By letter dated February 21, 2012, Fillmore demanded that JPM, as well as the other clearinghouse process participants, proceed with the sale of the Units to Fillmore, and put said parties on notice of its intention to enforce its rights to acquire said Units. (Compl. ¶¶ 60, 69.)

Fillmore alleges that according to Station Casinos' 10-Q for the quarter ending March 31, 2012, FI closed on its acquisition of JPM's entire ownership interest in Station Holdco, effective April 30, 2012. (Compl. ¶ 70.)

Subsequent to the failure of the clearinghouse process, Fillmore learned that in July 2010, E & Y, on behalf of SCI, applied to the Internal Revenue Service ("IRS") to obtain certain rulings with respect to the tax treatment of the proposed restructuring. (Compl. ¶ 70.) Although E & Y did not expressly disclose to the IRS that JPM had granted similar options to Fillmore and the other mezzanine lenders, (Compl. ¶ 64), Fillmore contends that the reasoning put forth by E & Y in its application to the IRS supports the notion that JPM and the other plan proponents knew or should have known that Fillmore's option to acquire equity in the restructured business would not jeopardize the debtor's tax deductions. (Compl. ¶¶ 65-66.) Accordingly, Fillmore alleges that JPM and the other plan proponents should be estopped from invoking the Section 267 conditions as a basis for preventing Fillmore from acquiring its allocated share of the Buy-In Equity. (Compl. ¶ 66.) [*7]

The Complaint alleges the following causes of action: (1) breach of the Settlement Agreement by JPM and GACC; (2) breach of the Commitment Letter by JPM; and (3) breach of contract against all of the defendants for breach of their obligations under the Approved Plan by frustrating the clearinghouse process. Fillmore alleges that it has no adequate remedy at law (Compl. ¶¶ 77, 83, 89) and asks this Court to (1) direct the defendants to take such steps as are or may be required to effectuate the sale of the Units to Fillmore West for the sum of $8.75 million; and (2) direct Station Casinos to make such distributions to Fillmore West as Fillmore West would have been entitled to receive if it had been the record owner of the Units as of February 1, 2012, or such other date as the Court may determine (collectively referred to herein as, "specific performance").

In motion sequence 002, GACC moves for an order pursuant to CPLR 3211(a)(1), (5) and (7) dismissing the Complaint. In motion sequence 003, Station Casinos, Fertitta Entertainment LLC and FI (together, the "Station Defendants") move for an order dismissing the Complaint pursuant to CPLR 3211(a)(1), (7), and (8). In motion sequence 004, JPM moves for an order pursuant to CPLR 3211(a)(1), (5) and (7) dismissing the Complaint with prejudice.

Discussion

Motion Sequence 002 and 004

Specific Performance

Under New York law, specific performance requires a showing that a plaintiff "[is] willing and able to perform its remaining obligations, that defendant [is] able to convey the property, and that there [is] no adequate remedy at law." Vertical Indus. Park Assocs. v. Hilco Real Estate, LLC, 19 Misc 3d 1117(A), at *2 (Sup. Ct. Nassau Co., Apr. 8, 2008). It is well settled that specific performance may be properly denied as impossible where the defendant lacks title or control over the underlying property. Matter of Wynyard v. Beiny, 214 AD2d 344, 344 (1st Dep't 1995) (citing Newman v. Resnick, 38 Misc 2d 94, 96 (Sup. Ct. NY Co., Feb. 18, 1963) ("The court is, [] without power to grant plaintiffs specific performance of this contractual provision. Specific performance may be decreed only where it is possible for a defendant to perform, for the court will not grant a vain judgment . . . . The rule applies even where defendant's inability to perform is caused by his own wrongful act.")); see also Strategic Value Master Fund, Ltd. v. Cargill Fin. Servs., Corp., 421 F. Supp. 2d 741, 760 (SDNY 2006) ("[T]his Court cannot issue a decree for specific performance if effectuation of the performance sought is . . . impossible . . . .")

Although courts have held that whether a plaintiff may be entitled to specific performance is an issue that should not be determined on a motion to dismiss, see, e.g., Sokoloff v. Harriman Estates Dev. Corp., 96 NY2d 409, 415 (2001); Cho v. 401-403 57th St. Realty Corp., 300 AD2d 174, 175 (1st Dep't 2002), in those cases the question was not whether specific performance was impossible, only whether it was appropriate as compared to money damages.

However, in a case where specific performance was no longer available, the Appellate Division, First Department remarked as follows:

We were advised at the argument that the premises have since been [*8]conveyed, a development which, although not part of the record, renders academic plaintiff's request for injunctive relief and reinstatement of the lis pendens. In this connection we note also that the complaint pleads a cause of action for specific performance only, a form of relief which, with this recent development, is no longer available. Thus, plaintiff may be left with only a claim for damages. Where a plaintiff succeeds in proving his entitlement to equitable relief, and the granting of such relief "appears to be impossible or impracticable, equity may award damages in lieu of the desired equitable remedy."

Here, there can be no dispute that the specific performance requested of JPM and GACC is impossible; the Complaint itself alleges that JPM sold its entire ownership interest in Station Holdco to FI, effective April 30, 2012 (Compl. ¶ 70) and it never alleges that GACC ever owned or controlled any of the Units. While the Court would have the power to award damages in lieu of the desired equitable remedy, here, plaintiffs have made it clear that they ". . . have no [money] damages." (Tr. 53:11-55:8, Feb. 27, 2013.)

Accordingly, motion sequence numbers 002 and 004 are granted. The first and second causes of action, and the third cause of action to the extent it is pled against JPM and GACC, are dismissed "not on the merits, but solely because the court is without power under the circumstances to grant specific performance." Newman, 38 Misc 2d at 97.

Motion Sequence 003

Personal Jurisdiction

The Station Defendants argue that they are not subject to either general or specific personal jurisdiction in New York. In their Omnibus Memorandum of Law in Opposition to Defendants' Motions to Dismiss, plaintiffs assert that it "seems likely that [they] will establish jurisdiction over the [Station] Defendants

under CPLR 302(a)(1)."^[FN10] (Opp. Mem. 41.) [*9]

CPLR 302(a)(1) provides as follows:

(a)Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent:

1.transacts any business within the state or contracts anywhere to supply goods or services in the state; . . . .

It is well settled under New York law that:

Under CPLR 302(a)(1), . . . long-arm jurisdiction over a nondomiciliary exists where a defendant [1.] transacted business within the state, and [2.] the cause of action arose from that transaction. "If either prong of the statute is not met, jurisdiction cannot be conferred." Under the statute, "proof of one transaction in New York is sufficient to invoke jurisdiction . . . so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted." "[J]urisdiction is not justified where the relationship between the claim and transaction is too attenuated."

Even if the out-of-state defendant's contacts with New York fall within the long-arm statute, the exercise of jurisdiction must also comply with due process. Copp, 62 AD3d at 30.

Due process is satisfied if (1) defendants had "minimum contacts" with New York State so they could reasonably foresee defending a suit here, and (2) the prospect of defending a suit in New York State comports with "traditional notions of fair play and substantial justice." In determining the second prong of the test, "[a] court must consider the burden on the defendant, the interests of the forum State, and the plaintiff's interest in obtaining relief," as well as "the interstate judicial system's interest in obtaining the most efficient resolution of controversies."

Here, plaintiffs must demonstrate that the Station Defendants transacted business in this State and that the third cause of action arises from that transaction of business. The third cause of action alleges breach of the Approved Plan:

86. . . . defendants[^[FN11]] were bound and enjoined by the Approved Plan, as well as by the terms of the Bankruptcy Court Order to execute and deliver such agreements and to take such actions as were necessary or advisable to effectuate the provisions and intent of the Approved Plan, including Fillmore's acquisition of the Units, subject to satisfaction of the Section 267-related conditions in accordance with the protocols recommended and/or adopted by the proponents of the plan.

87. By virtue of the foregoing . . . Fertitta Entertainment and FI breached their obligations under the Approved Plan by frustrating the clearinghouse process and thereby impermissibly depriving Fillmore of the rights granted to it under said Plan.

Fillmore argues that the Station Defendants "transacted business" in the state based on the [*11]following: (1) the Station Defendants were principal players in the prospective transaction that underlies this action; (2) the Commitment Letter, which the Station Defendants are not signatories to, but which contains a forum selection clause naming New York as the exclusive forum in which disputes arising under that document should be heard, identifies the Station Defendants as third-party beneficiaries; and (3) FI purchased the Units from JPM and therefore received property from New York.

Fillmore fails, however, to connect any of these "transactions" to the cause of action they have brought against the Station Defendants, which alleges a breach of the Further Assurances clause of the Approved Plan. The Approved Plan itself was approved by the United States Bankruptcy Court for the District of Nevada and is governed by Nevada law (Korot Aff. Ex. 2, at 94). There are no allegations to support a finding that plaintiffs have met the second prong of the CPLR 302(a)(1) test.

Accordingly, the Station Defendants' motion to dismiss the Complaint pursuant to CPLR 3211(a)(8) is granted, and the Court need not reach the remainder of the Station Defendants' arguments.

Thus, the Complaint is dismissed in its entirety as to all the defendants without costs or disbursements. The Clerk is directed to enter judgment accordingly.

This constitutes the decision and order of this Court.

Dated: October 15, 2013

BARBARA R. KAPNICK

J.S.C.