FILED: NEW YORK COUNTY CLERK 12/06/ :57 PM INDEX NO /2016 NYSCEF DOC. NO. 73 RECEIVED NYSCEF: 12/06/2016

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1 FILED: NEW YORK COUNTY CLERK 12/06/ :57 PM INDEX NO /2016 NYSCEF DOC. NO. 73 RECEIVED NYSCEF: 12/06/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK Mascis Investment Partnership and Les Pyrennees Investment Partnership, -against- SG Capital Corporation, Plaintiffs, Index No /16 IAS Part 60 Hon. Marcy S. Friedman Mot. Seq. No. 2 Defendant. DEFENDANT SG CAPITAL CORPORATION S MEMORANDUM OF LAW IN OPPOSITION TO PLAINTIFFS MOTION FOR AN ORDER OF ATTACHMENT AND TEMPORARY RESTRAINING ORDER Dan Tan DAN TAN LAW 305 Broadway, Suite 750 New York, New York T: (646) Noah Shube THE LAW OFFICES OF NOAH SHUBE 401 Broadway, Suite 2115 New York, NY T: (212) Andrew B. Kratenstein Monica S. Asher McDERMOTT WILL & EMERY LLP 340 Madison Avenue New York, New York T: (212) F: (212) Attorneys for SG Capital Corporation 1 of 26

2 TABLE OF CONTENTS Page TABLE OF AUTHORITIES... ii PRELIMINARY STATEMENT... 1 STATEMENT OF FACTS... 3 ARGUMENT... 9 I. THE HIGH LEGAL STANDARD PLAINTIFFS MUST MEET TO OBTAIN AN ATTACHMENT HAS NOT CHANGED AS A RESULT OF THE CANADIAN ARBITRATION... 9 II. PLAINTIFFS CANNOT DEMONSTRATE A LIKELIHOOD OF SUCCESS ON THE MERITS OF THEIR CLAIMS, WHICH NOW MUST BE ADJUDICATED IN THE PENDING CANADIAN ARBITRATION III. PLAINTIFFS WILL NOT BE IRREPARABLY HARMED ABSENT AN ATTACHMENT OR INJUNCTION IV. THE BALANCE OF THE EQUITIES WEIGHT AGAINST GRANTING AN ATTACHMENT OR INJUNCTION V. AN ARBITRATION AWARD WOULD NOT BE RENDERED INEFFECTUAL ABSENT AN ATTACHMENT OR INJUNCTION CONCLUSION i- 2 of 26

3 Table of Authorities Page(s) Cases 424 W. 33rd St., LLC v. Planned Parenthood Fed n of Am., Inc., 911 N.Y.S.2d 46 (1st Dep t 2010) Aquavella v. Harvey, 69 Misc. 2d 606 (Sup. Ct. Monroe Co. 1972), aff d, 337 N.Y.S.2d 611 (4th Dep t 1972) Blueberries Gourmet, Inc. v. Aris Realty Corp., 680 N.Y.S.2d 557 (2d Dep t 1998) Boss v. Am. Express Fin. Advisors, Inc., 791 N.Y.S.2d 12 (1st Dep t 2005), aff d, 6 N.Y.3d 242 (2006) Compunnel Software Grp., Inc. v. Spectrasoft Techs., Inc., 21 Misc. 3d 1129(A) (Civ. Ct. N.Y. Co. 2008) Discover Growth Fund v. 6D Global Techs. Inc., No. 15-CV-7618 PKC, 2015 WL (S.D.N.Y. Oct. 30, 2015) Edgewater Growth Capital Partners, L.P. v. Greenstar N. Am. Holdings, Inc., 891 N.Y.S.2d 278 (1st Dep t 2010) Erber v. Catalyst Trading, LLC., 754 N.Y.S.2d 885 (1st Dep t 2003) Ermakova v. Backman, 33 Misc. 3d 1209(A) (Sup. Ct. N.Y. Co. 2011) Family-Friendly Media, Inc. v. Recorder Television Network, 903 N.Y.S.2d 80 (2d Dep t 2010) G Builders IV, LLC v. Madison Park Owner, LLC, 924 N.Y.S.2d 75 (1st Dep t 2011)... 10, 14 Golden v. Steam Heat, Inc., 628 N.Y.S.2d 375 (2d Dep t 1995) Guastaferro v. The Walt Disney Co., No /2010, 2011 WL (Sup. Ct. N.Y. Co. 2011) Interoil LNG Holdings, Inc. v. Merrill Lynch PNG LNG Corp., 874 N.Y.S.2d 439 (1st Dep t 2009)... 9 ii 3 of 26

4 JJM Sunrise Auto., LLC v. Volkswagen Group of Am., Inc., 49 Misc. 3d 1208(A) (Sup. Ct. Nassau Co. 2015) Marine Midland Bank, N.A. v. United Missouri Bank, N.A., 643 N.Y.S.2d 528 (1st Dep t 1996) Mead Johnson & Co. v. Carlton Drug, Inc., 40 Misc.2d 951 (Sup. Ct. N.Y. Co. 1962) Mercury Serv. Sys. v. Schmidt, 375 N.Y.S.2d 12 (1st Dep t 1975) Michaels v. Chem. Bank, 110 Misc. 2d 74 (Sup. Ct. N.Y. Co. 1981) Midland Steel Warehouse Corp. v. Godinger Silver Art Ltd., 714 N.Y.S.2d 466 (1st Dep t 2000) Motichka v. MP 1291 Trust, 23 N.Y.S.3d 892 (1st Dep t 2016) O Hara v. Corp. Audit Co., Inc., 555 N.Y.S.2d 82 (1st Dep t 1990) Preferred Equities Corp. v. Ziegelman, 547 N.Y.S.2d 355 (2d Dep t 1989) Rockwood Pigments NA, Inc. v. Elementis Chromium LP, 2 N.Y.S.3d 94 (1st Dep t 2015)... 9 Ruso v. Morrison, 695 F. Supp. 2d 33 (S.D.N.Y. 2010) SG Cowen Sec. Corp. v. Messih, 224 F.3d 79 (2d Cir. 2000) Simonds v. Simonds, 45 N.Y.2d 233 (1978) Sportschannel Am. Ass n v. Nat l Hockey League, 589 N.Y.S.2d 2 (1st Dep t 1992) Sur La Table Ltd. v. Rosenthal, AG, 575 N.Y.S.2d 281 (1st Dep t 1991) Sutphin Retail One, LLC v. Sutphin Airtrain Realty, LLC, 40 N.Y.S.3d 457 (2d Dep t 2016) iii 4 of 26

5 Taub v. Kaplan, 15 Misc.3d 1145(A) (Sup. Ct. Nassau Co. 2007) Tough Traveler, Ltd. v. Outbound Prods., 60 F.3d 964 (2d Cir. 1995) Valentine v. Schembri, 622 N.Y.S.2d 257 (1st Dep t 1995) Weissman v. Sinorm Deli, Inc., 88 N.Y.2d 437 (1996) Statutes CPLR CPLR 6212(a) CPLR , 9, 10 iv 5 of 26

6 Defendant SG Capital Corporation ( SG Capital or Defendant ) respectfully submits this memorandum of law in opposition to the application by plaintiffs Mascis Investment Partnership ( Mascis ) and Les Pyrennees Investment Partnership ( Les Pyrennees, collectively with Mascis, Plaintiffs ) for an attachment, pursuant to New York Civil Procedure Law and Rule ( CPLR ) For the reasons set forth below, Plaintiffs motion should be denied. PRELIMINARY STATEMENT In their latest brief, Plaintiffs ask this Court to look at the big picture. (Pl. Mem. (ECF No. 61) at 12.) SG Capital agrees that the Court should do just that. The big picture confirms that Plaintiffs are trying to renegotiate a deal that they made and largely performed until they reneged. The relief they seek should be denied and the parties should resolve their dispute where it belongs in arbitration in Canada. Mascis is a partnership between Great Wall Holdings Partnership ( Great Wall ) and Les Pyrennees. Between January and November 2015, Fernando Cisneros ( Cisneros ), on behalf of Great Wall, and Jorge Massa Dustou ( Massa ), on behalf of Mascis and Les Pyrennees, negotiated an agreement as to Great Wall s exit from Mascis, including how Mascis assets and liabilities would be split. This agreement was part of a larger agreement (the big picture ) as to how Massa s and Cisneros business interests would be split. The agreement was heavily negotiated and took almost a year to reach. It provided for a split date of March 31, The agreement was almost entirely performed, with almost half of Mascis assets being transferred to SG Capital as agreed, Mascis retaining contingent liabilities for entities associated with Massa, and Cisneros (or entities affiliated with him) paying off or assuming various obligations that had previously been joint obligations through Mascis. 1 6 of 26

7 Over six months after the asset transfer, Massa initiated this action in a misguided effort to renegotiate that agreement by asserting meritless claims and seeking to attach funds to pressure Cisneros back to the table. This Court should not aid in that effort. After Plaintiffs filed this action, Great Wall initiated arbitration in Canada (the Canadian Arbitration ) pursuant to the arbitration clause in the Mascis Partnership Agreement. Plaintiffs recently counterclaimed in the arbitration, added SG Capital as a party, and asserted the same claims that Plaintiffs assert in this Court. Thus, Plaintiffs claims will now be arbitrated in Canada. Plaintiffs cannot meet the high standard for obtaining injunctive relief or an attachment in aid of that arbitration under Civil Practice Law and Rules ( CPLR ) Articles 62, 63, or 75. First, Plaintiffs cannot demonstrate a likelihood of success on the merits of its claims. The evidence demonstrates that there was a heavily-negotiated enforceable agreement as to how the assets and liabilities of Mascis (as well as Cisneros and Massa s other business interests) would be split. The parties substantially performed in accordance with that agreement until Plaintiffs (directed by Massa or individuals under his control such as his daughters or his revocable trusts) breached the agreement. Plaintiffs and Massa cannot now change the terms to which they agreed. Second, there is no threat of imminent or irreparable harm to Plaintiffs. The liabilities that Mascis seeks to foist on Great Wall are not current liabilities of Mascis. Rather they are Mascis contingent guarantees of loans made to companies in which Massa holds a controlling interest through his personal trusts. Those loans are not in default and thus there is no imminent danger to Plaintiffs if an attachment is denied. Third, and by contrast, there is a threat of irreparable harm to SG Capital if an attachment is granted. SG Capital is not a shell corporation as Plaintiffs contend. It is an active company with its own debts and obligations that must be serviced. An attachment would prevent SG Capital from servicing those debts, causing defaults and threatening SG Capital s viability. 2 7 of 26

8 Fourth and finally, there is no danger that an arbitration award in Plaintiffs favor would be rendered ineffectual for largely the same reasons that there is no imminent threat of irreparable harm. Again, all of the Mascis liabilities that Massa wants transferred to SG Capital are actually all contingent liabilities of companies in which Massa holds a controlling interest through his revocable trusts. Plaintiffs make no allegation that a default is imminent such that that Mascis guaranty of those liabilities will be invoked. There is also no risk of dissipation of the funds at issue pending resolution of Plaintiffs claims as most of the funds are illiquid and certain of the funds also serve as collateral for SG Capital s obligations. For all of these reasons, and the reasons detailed further below, Plaintiffs motion for an attachment should be denied, and the parties should proceed to resolve their dispute in the Canadian Arbitration to which they are all now parties. STATEMENT OF FACTS Though Plaintiffs attempt to frame this case as an ordinary business dispute, it is not. Cisneros parents tragically died in an aircraft incident in February 13, (Cisneros Aff. 5.)1 Cisneros was a child at the time of the incident and so his aunt, Ana Antonia Cisneros Rendiles ( Anita ), became his legal guardian. (Id. 6.) Massa is Anita s husband and together he and Anita raised Cisneros alongside their two daughters. (Id.) As a result of his parents death, Cisneros inherited a sizeable patrimony. (Id. 5.) In March 2002, Anita formed an irrevocable trust, Titanium Trust ( Titanium ), to hold and protect Cisneros inherited assets. (Id. 7.) Anita and Massa were members of the Protector and Management Committees of Titanium and had wide ranging powers to control the trust. (Id. 11.) 1 Cisneros Aff. refers to the Affirmation of Fernando Cisneros in Opposition to Plaintiffs Motion for an Order of Attachment and Temporary Restraining Order, dated October 5, 2016 (ECF No. 23). 3 8 of 26

9 Cisneros and Massa Reach a Global Separation Agreement In January 2015, as a result of differing business visions with Massa and a desire to control the assets he had inherited, Cisneros sought to gain control of Titanium and to separate his economic interests from Massa and Anita. (Id. 10; Second Affirmation of Fernando Cisneros in Opposition to Plaintiff s Motion for an Order of Attachment, dated December 5, 2016, and submitted herewith ( Second Cisneros Aff. ) 5, Ex. 22.) This separation process was long and arduous. (Second Cisneros Aff. 6-13, Ex. 22; Cisneros Aff. 9-32; Exs ) Massa and Anita initially resisted relinquishing control of Titanium and used their privileged position as members of the Protector and Management Committees to avoid doing so. Indeed, Massa and Anita did not agree to resign from the committees until May (Cisneros Aff ) In addition to separating their interests in Titanium, Cisneros and Massa also sought to separate their business interests in a global separation agreement. (Second Cisneros Aff. 5-13, Ex. 22; Cisneros Aff. 9-32; Exs ) Cisneros had participated in several businesses that were ultimately owned by Massa and Anita. (Cisneros Aff. 9.) One of these businesses was the plaintiff Mascis, in which Cisneros and Massa were partners through Great Wall and Les Pyrennees, respectively.2 (Id. 8, Ex. 1.) In November 2015, as detailed in Cisneros Affirmations and accompanying exhibits, Massa and Cisneros reached an agreement to separate their business interests. (Cisneros Aff , Exs. 2-8; Second Cisneros Aff ) Plaintiffs acknowledge that a separation agreement existed. (Compl. 5.) Under that agreement: i. Mascis assets would be evenly split between Les Pyrennees and Great Wall; 2 Great Wall is nearly wholly owned by Titanium Trust, which benefits Mr. Cisneros. Les Pyrennees is wholly owned by two trusts, Les Invalides Trust and Trocadero Trust, which benefit Massa and/or his family. Great Wall and Les Pyrennees were equal partners in Mascis. (Cisneros Aff. 2-8.) 4 9 of 26

10 ii. Titanium s minority shareholdings in several Venezuelan operating companies, majority controlled and managed by Massa, would be transferred to Massa, in exchange for which Cisneros would receive the value of the investments that he had made in these companies over the years, at cost and without interest ($11.3 million); iii. Certain real estate in Venezuela would be transferred to Cisneros in partial payment of the $11.3 million due to Cisneros; and iv. Certain real estate in the United States would be transferred to Cisneros, in exchange for cash payments by Cisneros and his assumption of $4.225 million of mortgages. (Cisneros Aff. 13; Second Cisneros Aff ) Massa and Cisneros specifically discussed the allocation of Mascis liabilities. Most of these liabilities were only contingent liabilities, as Mascis had agreed to guarantee loans taken by Massa s businesses. (Cisneros Aff ; Second Cisneros Aff ; Exs ) None of these loans was or is in default. (Second Cisneros Aff. 23.) Thus, the guaranty has not been triggered. (Id.) As part of the separation agreement, Massa agreed that Mascis would retain the liabilities associated with his trusts and business interests, and to transfer to Great Wall only those liabilities relating to Cisneros personal investments of approximately US$2.448 million. (Cisneros Aff. 2324, Exs. 5-6; Second Cisneros Aff ) This arrangement made perfect sense because Les Pyrennees the Mascis partner affiliated with Massa would in effect be assuming contingent liabilities of Massa s or his trusts business interests, while Great Wall the Mascis partner affiliated with Cisneros would assume Cisneros related liabilities. The assets were always going to be split 50/50, based on their respective ownership percentage. (Cisneros Aff , Exs. 2-6; Second Cisneros Aff ) Massa acknowledged this agreement in several s. For example, Massa wrote in an dated November 1, 2015: Dear Fernando, Your mother has asked me to try to settle this situation and reach a final agreement. You shall understand that the total liability falls on my shoulders, freeing you completely from 5 10 of 26

11 everything except your personal debt + that of Titedry (50%).... I have decided to close these negotiations accepting your price and taking on the liability of Mascis, UBS, Suppliers and JMD. (Cisneros Aff. Ex. 2) (emphasis added.) In a subsequent dated November 26, 2015, Massa s representative included a chart showing the agreed-upon liability split. (Cisneros Aff. Ex. 5.) The Separation Agreement Is Partially Performed Before Massa Directs A Breach After the agreement as to the liabilities that would be assumed by each party and which assets were to be transferred to whom, Massa, Cisneros, their affiliated entities and their advisors then substantially performed the agreement. On March 2, 2016, Massa, Anita, and Cisneros each signed a direction letter to Northern Trust, the trustee of the trusts that are the ultimate owners of Mascis, instructing that half of Mascis assets be transferred to SG Capital as had been agreed. (Cisneros Aff. Ex. 8.) Crucially, both Massa and Anita acknowledged that, in signing the direction letter that instructed the trustee to transfer the assets from Mascis to SG Capital, they were fully appraised of and understood all the consequences of the asset-transfer transaction that they were authorizing, but now seek to undo: 6 11 of 26

12 (Id.) [ ] Further, I acknowledge that I have been provided copies of all relevant documents, including but not limited to the Operating Agreement, and have consulted with my own advisors as to tax, legal, accounting and related matters concerning this LLC investment, and on that basis understand the financial, legal, tax, accounting and related consequences of the transfer of the ownership of the investments from MASCIS Investment Partnership to SG Capital Investment Corporation. [ ] Great Wall and Cisneros also performed their part of the bargain by paying off certain debts and separating other liabilities, including paying off $2.448 million of their debt at J.P. Morgan, which was guaranteed by Mascis, and Cisneros also assumed mortgages on two apartments in Colorado. (Cisneros Aff. 31; Exs ; Second Cisneros Aff , Ex. 36.) Then, in April 2016, Massa stopped the asset transfer after it was mostly complete (so that approximately $6.4 million in assets that should have been transferred were not), and then sought to renegotiate the parties agreement. (Cisneros Aff. 34, Ex. 17; Second Cisneros Aff. 39.) Plaintiffs then waited six months to commence this action. Though Plaintiffs dispute is with Great Wall, Plaintiffs chose to file an action against SG Capital in New York, presumably in an effort to avoid an arbitration clause contained in the Mascis Partnership Agreement. (Cisneros Aff. Ex ) Despite all the evidence to the contrary, Plaintiffs now claim that there was no agreement and that Great Wall is required to pay back to Mascis $21,824,690 of the amount transferred from Mascis to SG Capital, which is half of the amount of Mascis alleged contingent liabilities. (Compl. 17, 23.) Plaintiffs complaint asserts causes of action for unjust enrichment and constructive trust against SG Capital. (Id ) Plaintiffs also sought to attach the $21,824,690 pursuant to CPLR Article 62. (Mot. Seq. No. 1.) 7 12 of 26

13 The Canadian Arbitration Is Commenced Concerning the Same Issues Raised in This Case In responding to Plaintiffs application for an attachment, SG Capital argued that this case belonged in Canadian arbitration under Section 17 of the Mascis Partnership Agreement. (Def. Opp n (ECF No. 22) at 4, ) Thus, on October 12, 2016, Great Wall commenced the Canadian Arbitration in Ontario, Canada, against Les Pyrennees and Mascis, seeking to enforce the separation agreement. (Zaslowsky Aff. Ex. 1.) 3 The Canadian Arbitration poses the same ultimate question in this case whether there was an agreement as to the split of Mascis assets and liabilities between Les Pyrennees and Great Wall, and, if so, how Mascis liabilities were allocated pursuant to that agreement. After Great Wall filed the arbitration, Plaintiffs asked for permission to submit supplemental briefing at a hearing held on October 27, After noting that the procedural course that Plaintiffs have taken has made for a great deal of extra work for the Court and for S.G. Capital the Court stated that it would reluctantly grant the application, but would award SG Capital costs. (10/27/16 Hearing Tr. (ECF No. 58) at 19:5-25.) On November 9, 2016 Les Pyrennees belatedly filed its response in the Canadian Arbitration. (Zaslowsky Aff. Ex. 2.) In its response, Les Pyrennees added Mascis to the proceeding, and they together asserted a counterclaim against SG Capital and Great Wall seeking the same relief they seek from this Court. Among other requests, Plaintiffs seek by their counterclaim:... (ii) (iii) A declaration stating that, upon separation from Les Pyrennees with respect to Mascis, Great Wall was responsible for 50 percent of the liabilities of Mascis; An interim and final order requiring Great Wall/SG Capital to return $21,824,690 to Mascis; 3 Zaslowsky Aff. refers to the Affirmation of David Zaslowsky in Support of Motion for Attachment, dated November 9, 2016 (ECF No. 62) of 26

14 (iv) A declaration of constructive trust in favour of Mascis and/or Les Pyrennees in the amount of $21,824,690, as against Great Wall/SG Capital... (Zaslowsky Aff. Ex ) The claims that the Plaintiffs brought in this Court will now be heard where they always belonged under the Mascis Partnership Agreement in a Canadian arbitration. At the Court s direction, in light of the initiation of the Canadian Arbitration, Plaintiffs filed a new order to show cause seeking an attachment in aid of arbitration, pursuant to CPLR 7502(c), which SG Capital now opposes. ARGUMENT Plaintiffs did not meet their burden under CPLR 6201 or 7502 on their initial application for an attachment of SG Capital s assets. They have not met their burden on their second attempt. Their claims against SG Capital which must now be arbitrated in Canada have no merit because, under applicable Canadian law, there is an enforceable separation agreement. Plaintiffs also will not be irreparably harmed absent an attachment or injunction, the balance of equities favors SG Capital, and the Canadian Arbitration award will not be rendered ineffectual if Plaintiffs application is denied. I. THE HIGH LEGAL STANDARD PLAINTIFFS MUST MEET TO OBTAIN AN ATTACHMENT HAS NOT CHANGED AS A RESULT OF THE CANADIAN ARBITRATION As an initial matter, Plaintiffs substantial burden of proof has not changed because the Canadian Arbitration was filed. Under CPLR 7502, [i]n addition to showing that the arbitration award could be rendered ineffectual, a party seeking an injunction in aid of arbitration must demonstrate the traditional factors for injunctive relief under CPLR article 63. Interoil LNG Holdings, Inc. v. Merrill Lynch PNG LNG Corp., 874 N.Y.S.2d 439, 440 (1st Dep t 2009) (emphasis added); see also Rockwood Pigments NA, Inc. v. Elementis Chromium LP, 2 N.Y.S.3d 94 (1st Dep t 2015) (applying the traditional three-prong test for a preliminary injunction, in addition to the CPLR 9 14 of 26

15 7502(c) requirement that an arbitration award would be rendered ineffectual without such provisional relief); G Builders IV, LLC v. Madison Park Owner, LLC, 924 N.Y.S.2d 75, 77 (1st Dep t 2011) (holding that petitioner failed to show irreparable harm on CPLR 7502(c) application); Erber v. Catalyst Trading, LLC., 754 N.Y.S.2d 885, 885 (1st Dep t 2003) ( [T]he criteria for provisional relief set forth in CPLR articles 62 and 63 are not relaxed when such relief is sought in aid of arbitration pursuant to CPLR 7502(c). ); SG Cowen Sec. Corp. v. Messih, 224 F.3d 79, (2d Cir. 2000) (holding that the district court properly applied Article 63 preliminary injunction criteria to motion under CPLR 7502(c)); Discover Growth Fund v. 6D Global Techs. Inc., No. 15-CV-7618 PKC, 2015 WL , at *3 (S.D.N.Y. Oct. 30, 2015) (holding that on an application for attachment under CPLR 7502(c), petitioner must satisfy the requirements of CPLR 6212(a)). As discussed below, Plaintiffs cannot meet their heavy burden. II. PLAINTIFFS CANNOT DEMONSTRATE A LIKELIHOOD OF SUCCESS ON THE MERITS OF THEIR CLAIMS, WHICH NOW MUST BE ADJUDICATED IN THE PENDING CANADIAN ARBITRATION Plaintiffs do not have a likelihood of success on their claims for unjust enrichment and a constructive trust, which will now be litigated in the Canadian Arbitration. The Mascis Partnership Agreement provides in Section 17 for all such disputes arising out of or relating to the agreement to be arbitrated in Canada: Arbitration. All disputes, disagreements, controversies, questions or claims arising out of or relating to this Agreement, including, without limitation, without respect to its formation, execution, validity, application, interpretation, performance, breach, termination or enforcement ( Disputes ) shall be determined by arbitration under the Arbitration Act, 1991 (Ontario) (the Arbitration Act ), provided that: (a) any hearing in the course of the arbitration shall be held in Toronto.... (Cisneros Aff. Ex ) After this action was initiated by Plaintiffs, SG Capital argued that this dispute belongs in a Canadian arbitration, as required by the Mascis Partnership Agreement. Great Wall initiated that arbitration on October 12, (Zaslowsky Aff. Ex. 1.) After this Court heard of 26

16 argument on October 27, 2016, Plaintiffs filed a counterclaim in the Canadian Arbitration and joined SG Capital as a party to the Canadian Arbitration. 4 (Zaslowsky Aff. Ex. 2.) No matter the forum in which Plaintiffs claims are litigated, Plaintiffs are unlikely to prevail. The evidence overwhelmingly demonstrates that there was an agreement that: (1) half of Mascis assets would be transferred to SG Capital; (2) Mascis would retain contingent liabilities for entities associated with Massa; and (3) Cisneros (or entities affiliated with him) would pay off or assume various obligations that had previously been joint obligations through Mascis. That agreement was substantially performed before Massa directed a breach. Thus, SG Capital was not unjustly enriched. 5 To the contrary, SG Capital is still owed approximately $6.4 million (Second Cisneros Aff ), which is being pursued in the Canadian Arbitration (Zaslowsky Aff. Ex. 1). As the Court observed at the hearing held on October 27, 2016, There are a lot of s attached to the papers. And there is a very sharp dispute here as to whether the parties reached an agreement as to the transfer of liabilities and not only as to the transfer of assets. (10/27/16 Tr. (ECF No. 58) at 8:9-13.) Though SG Capital maintains that the evidence clearly demonstrates that an agreement was reached, the existence of even a sharp dispute negates Plaintiffs argument that there is a likelihood of success on the merits and requires denial of their request for provisional 4 Now that all parties to this case are also parties to the Canadian Arbitration, this Court no longer has jurisdiction to adjudicate the underlying merits of this case. See Edgewater Growth Capital Partners, L.P. v. Greenstar N. Am. Holdings, Inc., 891 N.Y.S.2d 278, (1st Dep t 2010) (affirming lower court order compelling arbitration and staying litigation pursuant to CPLR 7503(a) where the parties claims fit within the scope of the arbitration clause in the agreement entered into by the parties); 424 W. 33rd St., LLC v. Planned Parenthood Fed n of Am., Inc., 911 N.Y.S.2d 46, 48 (1st Dep t 2010) (same); Sutphin Retail One, LLC v. Sutphin Airtrain Realty, LLC, 40 N.Y.S.3d 457, at *2 (2d Dep t 2016) (holding that the parties dispute involved the application of a provision of the parties agreement and is subject to arbitration, and thus, the lower court should have granted defendants motion to compel arbitration and stay all proceedings in the action pending arbitration ); Guastaferro v. The Walt Disney Co., No /2010, 2011 WL , at *5-6 (Sup. Ct. N.Y. Co. 2011) (holding that plaintiff was bound by arbitration provision of agreement and staying the court proceeding pending arbitration pursuant to CPLR 7503(a)). Consistent with Court s direction at the conference on October 27, 2016 (10/27/16 Hearing Tr. (ECF No. 58) at 21:21-22:6), SG Capital intends to move to dismiss and/or stay this action after the Court rules on Plaintiffs attachment application. 5 Plaintiffs claim for a constructive trust cannot succeed if their claim for unjust enrichment fails, as unjust enrichment is an element of a cause of cause of action for a constructive trust. Simonds v. Simonds, 45 N.Y.2d 233, 242 (1978) ( [T]he purpose of the constructive trust is prevention of unjust enrichment. ) of 26

17 relief. See Motichka v. MP 1291 Trust, 23 N.Y.S.3d 892, 892 (1st Dep t 2016) (holding that the lower court properly denied plaintiff s motion for preliminary injunction where the evidence raises sharp issues of fact and therefore did not make the required showing for a preliminary injunction) (internal quotation marks omitted); Sur La Table Ltd. v. Rosenthal, AG, 575 N.Y.S.2d 281, 281 (1st Dep t 1991) (holding that [w]here, as in the case at bar, there exist sharp factual disputes... injunctive relief should be denied ); O Hara v. Corp. Audit Co., Inc., 555 N.Y.S.2d 82, 83 (1st Dep t 1990) (denying request for preliminary injunction where conflicting affidavits presented sharp issues of fact, which, standing alone, was sufficient reason to deny the relief sought ); Blueberries Gourmet, Inc. v. Aris Realty Corp., 680 N.Y.S.2d 557, 559 (2d Dep t 1998) (holding that [w]here the facts are in sharp dispute, a temporary injunction will not be granted ). Whether there was an enforceable separation agreement concerning the assets and liabilities of Mascis is governed by the Mascis Partnership Agreement. That agreement provides in Section 19(d) for the application of Canadian law: This Agreement shall be governed by and construed in accordance with the law of the Province of Ontario and the laws of Canada applicable therein. (Cisneros Aff. Ex. 1 19(d).) It is the well-settled policy of the courts of this State to enforce contractual provisions for choice of law and selection of a forum for litigation. Boss v. Am. Express Fin. Advisors, Inc., 791 N.Y.S.2d 12, 14 (1st Dep t 2005) (internal quotation marks omitted), aff d, 6 N.Y.3d 242 (2006); see also Marine Midland Bank, N.A. v. United Missouri Bank, N.A., 643 N.Y.S.2d 528, 530 (1st Dep t 1996) (holding that choice of law provisions are valid and enforceable); Compunnel Software Grp., Inc. v. Spectrasoft Techs., Inc., 21 Misc. 3d 1129(A), at *2 (Civ. Ct. N.Y. Co. 2008) (same). Under the law of Ontario, Canada, the separation agreement splitting Massa s and Cisneros respective business interests including their respective interests in Mascis is fully enforceable. As discussed in the accompanying Affirmation of Anthony Daimsis ( Daimsis Aff. ), a Canadian legal of 26

18 expert, a contract exists under Ontario law when the parties: (1) had a mutual intention to create a legally binding contract; and (2) reached agreement on all of the essential terms. (Daimsis Aff , Exs. 2-4.) Ontario courts determine the parties respective intentions based on their outward and objective expressions, rather than evaluating their actual unexpressed and subjective state of mind. (Id , Exs. 2, 5.) Accordingly, Ontario courts will often evaluate the conduct of the parties, particularly whether there has been any performance of the alleged agreement. (Id. 20, Exs. 3, 6-10.) Here, the extensive correspondence submitted by the parties including correspondence with Northern Trust, the trustee of Mascis, Great Wall, and Les Pyrennees demonstrates that there was a meeting of the minds about the terms of the separation, including the distribution of Mascis assets and liabilities. (Cisneros Aff. Exs. 2-20; Second Cisneros Aff. Exs. 22, ) The agreement was then almost entirely performed by the parties before Massa directed that the asset transfer be halted. (Cisneros Aff , Ex. 17; Second Cisneros Aff. 39.) Thus, a Canadian arbitral panel applying Ontario law should find that the agreement is enforceable. (Daimsis Aff ) Plaintiffs argue that the separation agreement is unenforceable because under Section 19(c) of the General Partnership Agreement, such a change to the Agreement required an amendment signed by the parties. (Pl. Mem. (ECF No. 61) at ) But courts in Canada s common-law provinces have repeatedly held that oral or conduct-based amendments to contracts are enforceable and binding on the parties, even where the contract in question contains a clause stipulating that amendments must be in a signed writing. (Daimsis Aff. 21, Exs ) Moreover, the exhibits submitted by the parties are themselves writings evidencing consent to the amendment by all parties in interest (including Northern Trust, the trustee of Mascis, Great Wall, and Les Pyrennees), which was then confirmed by almost full performance before Massa directed a breach. (Cisneros Aff. Exs. 2-20; Second Cisneros Aff. Exs. 22, ) of 26

19 In short, there was no unjust enrichment because there was a valid and enforceable agreement to separate Mascis assets. (Daimsis Aff , Ex. 16.) The interested parties agreed to a separation pursuant to which Mascis would retain the contingent liabilities associated with Massa s companies. Great Wall and SG Capital were not obligated to take on any of those liabilities that Plaintiffs now seek to apportion to them. Thus, there was no unjust enrichment of SG Capital at Mascis expense. III. PLAINTIFFS WILL NOT BE IRREPARABLY HARMED ABSENT AN ATTACHMENT OR INJUNCTION Plaintiffs also cannot show that they will be irreparably harmed if their application is denied. To satisfy the requisite burden, irreparable harm must be imminent and not speculative. See G Builders, 924 N.Y.S.2d at 77 (holding that the mere possibility of harm does not constitute irreparable harm because it is speculative ); Valentine v. Schembri, 622 N.Y.S.2d 257, 258 (1st Dep t 1995) (holding that lower court abused its discretion in granting plaintiff a restraining order, where plaintiff s claim of possible harm was speculative and could not constitute irreparable harm); Family-Friendly Media, Inc. v. Recorder Television Network, 903 N.Y.S.2d 80, 82 (2d Dep t 2010) (holding that [t]he movant must show that the irreparable harm is imminent, not remote or speculative ) (internal quotation marks omitted); Golden v. Steam Heat, Inc., 628 N.Y.S.2d 375, 377 (2d Dep t 1995) (holding that the irreparable harm must be shown by the moving party to be imminent, not remote or speculative ); Ermakova v. Backman, 33 Misc. 3d 1209(A), at *4 (Sup. Ct. N.Y. Co. 2011) (denying preliminary injunction where plaintiff s claim of injury was mere speculation, with no evidentiary support ). Plaintiffs will not be irreparably harmed absent an attachment because the liabilities that they seek to transfer to SG Capital are purely contingent liabilities. The underlying liabilities are loans made to companies in which Massa, through his trusts, has a controlling interest they are not loans issued to Mascis. (Second Cisneros Aff , Exs ) Mascis is merely a guarantor of of 26

20 these loans. (Id , Exs ) Mascis has no obligations under the guaranty unless and until Massa s businesses default on their loans, which they have not. (Id. 23.) Thus, Mascis has no current liability on those loans. Under New York law, a guarantor s liability accrues only after default on the part of the principal obligor. Midland Steel Warehouse Corp. v. Godinger Silver Art Ltd., 714 N.Y.S.2d 466, 468 (1st Dep t 2000); see also Weissman v. Sinorm Deli, Inc., 88 N.Y.2d 437, 446 (1996) (explaining that a guaranty is a contract of secondary liability, and thus, a guarantor will be required to make payment only when the primary obligor has first defaulted ); Aquavella v. Harvey, 69 Misc. 2d 606, 609 (Sup. Ct. Monroe Co. 1972) (holding that [i]n [the] case of a guaranty of payment the guarantor s liability accrues on the date the guaranteed debt or a part thereof becomes due according to the terms of the contract, and the principal fails to pay ), aff d, 337 N.Y.S.2d 611 (4th Dep t 1972); Michaels v. Chem. Bank, 110 Misc. 2d 74, 76 (Sup. Ct. N.Y. Co. 1981) ( [A guaranty] is a secondary obligation in that it is collateral, and only meaningful in relation to, the independent obligation to pay (i.e., the debt) of the primary obligor, and is contingent upon his default... [and] while a guarantee neither is a debt, nor initially makes a guarantor a debtor to the primary obligor s creditor, it binds the guarantor to a relationship under which he may become so indebted in the future if, and when, the debtor defaults. ) (internal citations omitted); Ruso v. Morrison, 695 F. Supp. 2d 33, 45 (S.D.N.Y. 2010) (noting that a contract of guaranty is but an inchoate obligation since the condition precedent to its operation (viz. default by the debtor) may never occur ). Here, again, the loans at issue were incurred by businesses in which Massa through his trusts owns a controlling interest. (Second Cisneros Aff , Exs ) The loans were only guaranteed by Mascis. (Id.) Mascis has no matured liability because the condition precedent for its liability to accrue (default by Massa s business) has not occurred. There is no current harm to of 26

21 Mascis and allegation of any imminent threat of harm because there is no debt or liability that would be compromised absent an attachment. Plaintiffs own behavior confirms that they themselves never thought that there was any prospect of imminent harm. They waited until six months after the transfer of assets to SG Capital to file this action and seek equitable relief. Plaintiffs delay belies their argument that there is an immediate risk to Plaintiffs of irreparable harm, and militates against awarding them the relief they seek. See Sportschannel Am. Ass n v. Nat l Hockey League, 589 N.Y.S.2d 2, 3-4 (1st Dep t 1992) (holding that plaintiff s delay in not seeking the injunction until broadcast plans were required to be finalized, less than a month before the commencement of the regular season weighed against plaintiff on a balancing of the equities); Mercury Serv. Sys. v. Schmidt, 375 N.Y.S.2d 12, 12 (1st Dep t 1975) (affirming trial court s denial of a preliminary injunction as amply justified by delay of three and one-half months in seeking this relief ); Mead Johnson & Co. v. Carlton Drug, Inc., 40 Misc. 2d 951, 952 (Sup. Ct. N.Y. Co. 1962) (denying injunctive relief and explaining, Keeping in mind the unexplained delay [of several months] in the prosecution of its application [for preliminary injunction] by the plaintiff, it is obvious that plaintiff s claim that it would be irretrievably prejudiced unless preliminary injunction is granted is quite unconvincing. ); Tough Traveler, Ltd. v. Outbound Prods., 60 F.3d 964, 968 (2d Cir. 1995) ( [T]he failure to act sooner undercuts the sense of urgency that ordinarily accompanies a motion for preliminary relief and suggests that there is, in fact, no irreparable injury[.]... [If not] explainable, delay alone may justify denial of a preliminary injunction. ) (internal quotation marks omitted) of 26

22 IV. THE BALANCE OF THE EQUITIES WEIGH AGAINST GRANTING AN ATTACHMENT OR INJUNCTION Though there is no risk of irreparable harm to Plaintiffs absent an attachment, there is a substantial risk of harm to SG Capital if an attachment is issued. Thus, the balance of the equities favors denying Plaintiffs application. Contrary to Plaintiffs assertions, SG Capital is not a shell corporation that conducts no business in the U.S., or anywhere else. (Pl. Mem. (ECF No. 61) at 8.) Rather, SG Capital has its own real and current liabilities and obligations. SG Capital s J.P. Morgan account services approximately $8 million in debt issued by J.P. Morgan to SG Capital. (Second Cisneros Aff ) This debt is all due in less than six months, and is being serviced by SG Capital. (Id ) These debts were incurred primarily to fund SG Capital s ongoing real estate operations in Peru. (Id ) The real estate development companies in Peru have over 300 employees and are involved in multiple real estate development projects, including: (1) A 200-unit condo beach project in San Bartolo, Peru, with approximately $42 million in sales. The first 100 units are to be delivered to owners in February 2017; (2) A mix use commercial/residential project, est. 100,000 sq. feet to be built in a land lot of 14,000 sq. feet in Lima, Peru. The lot was recently acquired with a payment schedule that goes through the end of this year; it is in the process of being developed; and (3) An 800,000 square foot plot of land in the process of urbanization in Cañete, Peru. The commercial launch of which is expected to occur by January (Id. 43.) An attachment of SG Capital s assets would prevent those assets from continuing to serve as collateral for the J.P. Morgan debt, thus potentially forcing SG Capital to partially or fully default on the debt. (Id. 46.) SG Capital thus faces a real and present danger of significant and irreparable of 26

23 harm in the event of an attachment. The balance of the equities therefore tilts strongly against granting the relief that Plaintiffs seek. See Preferred Equities Corp. v. Ziegelman, 547 N.Y.S.2d 355, 356 (2d Dep t 1989) (denying motion for preliminary injunction to enjoin defendants from enforcing ownership rights under loan agreement where such injunctive relief could cause the defendants to default on their loans); JJM Sunrise Auto., LLC v. Volkswagen Group of Am., Inc., 49 Misc. 3d 1208(A), at *6 (Sup. Ct. Nassau Co. 2015) (holding that equity favored denying motion for preliminary injunction where an injunction would have cost defendants millions of dollars and lost business opportunities and revenue); Taub v. Kaplan, 15 Misc. 3d 1145(A), at *3 (Sup. Ct. Nassau Co. 2007) (holding that a balancing of the equities does not favor granting injunction where injunction would have prevented defendant from obtaining business loans which created the real possibility of defendant going out of business). V. AN ARBITRATION AWARD WOULD NOT BE RENDERED INEFFECTUAL ABSENT AN ATTACHMENT OR INJUNCTION Plaintiffs contend that the only issue now is whether the Canadian Arbitration award would be rendered ineffectual if the relief they seek is denied. As discussed above in Section I, Plaintiffs must also demonstrate a substantial likelihood of success on the merits, irreparable harm, and that the balance of equities favors them. In any event, the Canadian Arbitration award would not be rendered ineffectual absent an attachment or injunction. As discussed in Section III above, even if there is an arbitration award in Plaintiffs favor, the Mascis liabilities are, in reality, un-matured guaranties of loans to Mr. Massa s companies. Unless and until those liabilities mature, there is no risk to Mascis. As discussed in Section IV above, and contrary to Plaintiffs claims, SG Capital is an active company with its own current obligations. Those obligations prevent the sudden dissipation of assets, which are needed to service those obligations and operate a viable business. An attachment would cripple SG Capital s ability to meet those obligations of 26

24 In addition, the assets held by SG Capital are primarily illiquid and not easily moved. In fact, when the assets were divided, it was determined that Great Wall would receive Mascis more illiquid assets, with the more liquid assets left with Mascis so that Massa (through Mascis) could continue guaranteeing the loans issued to his companies, which his companies are servicing. (Cisneros Aff. 43, Ex. 20; Second Cisneros Aff. 27, Ex. 29.) Most of SG Capital s assets held at J.P. Morgan are interests in hedge funds, private equity, and limited partnerships, which are not easily liquidated or tradeable in the open market. Some of these assets cannot be liquidated in the short-term and some have lock up periods in place. (Second Cisneros Aff. 42.) Plaintiffs claim that this argument is belied by the fact that over $42 million in assets was transferred from Mascis to SG Capital in less than one month in April (Pl. Mem. (ECF No. 61) at 9.) Plaintiffs ignore that Mascis, Massa, the relevant trusts, and all of the respective financial advisors and bankers were well aware that the transfer was going to happen (and which assets were going to be transferred) and helped to facilitate the transfer. (Cisneros Aff , Exs. 2-20; Second Cisneros Aff. 3-38, Exs. 22, ) Cisneros was not acting unilaterally to pilfer funds from Mascis, as Plaintiffs would have the Court believe. Moreover, SG Capital now needs to maintain its assets in order to do business, and service its current debt obligations. In an ad hominem attack on Cisneros, Plaintiffs argue that there is a risk that the assets will be dissipated if Cisneros is permitted to manage them while the Canadian Arbitration is pending. (Pl. Mem. (ECF No. 61) at 9-10.) They contend that Cisneros previously lost $9 million that he was given in 2009 to start a hedge fund. (Id.) This allegation is false and misleading. To begin with, the amount Mr. Cisneros was transferred to start a hedge fund was $4.75 million, not $9 million. (Second Cisneros Aff. 49.) Massa also neglects to mention that he agreed to release these funds to Cisneros in order to offset the millions of dollars that Massa had withdrawn from Mascis over the years, with no benefit to Cisneros. (Id. 50.) In addition, the of 26

25 losses that the hedge fund experienced occurred during the financial crisis when many other investors lost substantial sums as a result of the economic times. (Id. 51.) Finally, if Plaintiffs and Massa were truly concerned about the dissipation of assets, they would not have waited until six months after the assets were transferred to commence this action. CONCLUSION Plaintiffs urge this Court to consider the big picture, but then attempt to distort it. The evidence unequivocally demonstrates that Massa directed that this lawsuit and attachment application be brought in an eleventh-hour attempt to renegotiate a deal he made with Cisneros. The law does not permit Massa to escape his agreement, and that issue will now be adjudicated in the Canadian Arbitration. Plaintiffs also cannot demonstrate that they will be irreparably harmed because the Mascis liabilities at issue are contingent liabilities of Massa s companies that are unmatured and that he agreed to assume. The balance of equities tilts heavily in SG Capital s favor as it will not be able to meet its own financial obligations if an attachment is awarded. Finally, the Canadian Arbitration award will not be rendered ineffectual absent an attachment or injunction because, even if Plaintiffs win the arbitration, the liabilities at issue are contingent and SG Capital has neither the incentive nor the ability to transfer most of its assets. Accordingly, Plaintiffs application for an attachment or injunction should be denied of 26

26 Dated: New York, New York. December 6, 2016 Respectfully submitted, MCDERMOTT WILL & EMERY LLP By: /s/ Andrew B. Kratenstein Andrew B. Kratenstein Monica S. Asher 340 Madison Avenue New York, New York (212) anddan Tan Dan Tan Law 305 Broadway, Suite 750, New York, NY Tel andnoah Shube The Law Offices of Noah Shube 401 Broadway, Suite 2115 New York, NY Attorneys for Defendant SG Capital Corporation of 26