FRAUDULENT CONVEYANCES Nassau Academy of Law CLE Live ...

443 F.3d 180 Page 3443 F.3d 180(Cite as: 443 F.3d 180)Movants-Defendants-Appellees David Mack, theEstate of Leo V. Berger, Apex Marine Corp., HarveySchwartz, Phyllis Sepe and Sigmund Kassap, Trusteeof the Leo V. Berger Grantor Trust No. 1 as PersonalRepresentative of the Estate of Leo V. Berger.CARDAMONE, CABRANES, and POOLER, CircuitJudges.POOLER, Circuit Judge.Three appeals have been consolidated in this case.On July 3, 1985, plaintiffs-appellants ("plaintiffs")commenced a federal *183 action, against BriggsLeasing Corporation ("Briggs"), Briggs AcquisitionCorporation ("BAC"), and individual defendants, inwhich plaintiffs asserted individual, class, and derivativeclaims for "equitable and other relief." On March17, 1994, the United States District Court for theEastern District of New York (Johnson, J.), entered adefault judgment against Briggs. A trial against defendantRobert Rosenstock and an inquest to fixdamages against Briggs were scheduled to begin inAugust 1997. On July 31, 1997, plaintiffs and RobertRosenstock entered into a stipulation of settlementagainst Briggs and Robert Rosenstock. On August 5,1997, the United States District Court for the EasternDistrict of New York (Trager, J.) approved the stipulationby order and directed the clerk to enter a finaljudgment, which the clerk did against Briggs on August15, 1997.In 2002, plaintiffs brought fraudulent conveyanceactions in the United States District Court for theSouthern District of New York, against non-partymovants-defendants-appellees ("movants"), underNew York Debtor and Creditor Laws ("DCL"),predicated upon the August 15, 1997, judgmentagainst Briggs. In late 2002, movants initiated proceedingsto vacate plaintiffs' judgment against Briggsunder Rules 60(b)(4) and 60(b)(6) of the FederalRules of Civil Procedure.The district court (Trager, J.) granted movants' motionto vacate. Grace v. Rosenstock, No. 85-cv-2039(E.D.N.Y. Oct. 4, 2004). The district court also dismissedthe fraudulent conveyance actions, becausewithout an uncollected judgment as a predicate, therecould be no cause of action for fraudulent conveyances.Grace v. Bank Leumi, No. 04-cv-0708(E.D.N.Y. Oct. 6, 2004); Grace v. Schwartz, No. 04-cv-1622 (E.D.N.Y. Oct. 14, 2004).We affirm.BackgroundPrior to 1985, Briggs was a publicly-held autoleasingcompany incorporated in New York. RobertRosenstock, his father Edward Rosenstock, andRobert Genser ("Genser") were officers and directorsof Briggs and owned, respectively, approximately 64percent, 3 percent, and 5 percent of its outstandingstock. In January 1985, Robert Rosenstock and Genserdecided to take Briggs private in a freeze-outmerger. [FN1] They incorporated BAC and plannedto merge BAC and Briggs, buy out Briggs's minorityshareholders, and make Briggs the surviving corporation.Rosenstock and Genser contributed all of theirBriggs shares to BAC. Rosenstock purchased hisfather's shares of Briggs stock and contributed themto BAC. As a result, BAC owned 72 percent of thestock of Briggs, with Rosenstock and Genser owningall of the stock of BAC.FN1. Under New York's Business CorporationLaw ("BCL"), a merger may be authorizedby the affirmative vote of two-thirds ofthe corporation's shares. See N.Y. BCL §903(a)(2) (McKinney 2006).Briggs outlined a plan for a merger with BAC in aJanuary 1985 proxy statement to its shareholders. Allshareholders would be bought out at $1.50 per share.Eighty-six percent of the minority shareholders, includingnamed plaintiffs, filed notices of election todissent. A February 1985 special meeting approvedthe merger based solely on BAC's vote. At the meeting,plaintiffs voted their shares against the merger.The merger was nevertheless consummated on February26, 1985, when Rosenstock and Genser becamethe sole holders of Briggs shares, owning approximately93 percent and 7 percent, respectively.*184 On May 20, 1985, plaintiffs brought an appraisalaction against Briggs in the Supreme Court ofthe State of New York, Nassau County, to fix the fairvalue of their shares as dissenting shareholders.[FN2] Briggs answered this action through counselon July 23, 1985. Plaintiffs also notified the statecourt of their intention to file a federal action andrequested that their appraisal action be held in abeyancepending the final determination of their case in© 2009 Thomson Reuters. No Claim to Orig. US Gov. Works.