CITIGROUP GLOBAL MARKETS INC v. SCIP CAPITAL MANAGEMENT LLC (2026)

Judgment, Supreme Court, New York County (Margaret A. Chan, J.), entered May 1, 2025, which, to the extent appealed from as limited by the briefs, after a nonjury trial, awarded plaintiffs $8,853,952 plus prejudgment interest and dismissed SCIP Capital Management and The Silverfern Group, Inc.’s (defendants) counterclaim for breach of contract, and bringing up for review an order, same court (O. Peter Sherwood, J.), entered on or about December 13, 2019, which partially granted plaintiffs’ motion to dismiss defendants’ counterclaims, unanimously affirmed, with costs.  Appeal from order, same court and Justice, entered on or about February 27, 2025, which directed entry of the aforesaid judgment, unanimously dismissed, without costs, as subsumed in the appeal from the judgment.

This appeal arises from a dispute concerning a private equity club formed pursuant to the parties’ Distribution Agreement, dated January 12, 2012, which culminated in an eight-day nonjury trial.  Defendants did not demonstrate at trial that plaintiffs breached the Distribution Agreement.  The trial court correctly interpreted the plain language of the provision describing “Investment Partnerships” and “Transactions” as those offered to members of the parties’ “equity club” only (see Global Reins. Corp. of Am. v. Century Indem. Co., 30 N.Y.3d 508, 518, 69 N.Y.S.3d 207, 91 N.E.3d 1186 [2017] [an agreement must be “read as a whole, and every part will be interpreted with reference to the whole”] [internal quotation marks omitted]).  Thus, plaintiffs’ April 2016 letter discussing defendants’ marketing of other investment vehicles that were outside of the equity club did not require defendants’ prior written consent under section 1(c)(A) of the agreement.

Further, defendants’ contention that the April 2016 letter to their investors and certain other internal communications by plaintiffs in 2016 and 2017 reflected breaches of plaintiffs’ best-efforts obligation under section 1(a) is belied by the record.  On an earlier appeal in this matter, we found that the best-efforts clause under section 1(a), as defined by section 1(c), was sufficiently specific to be enforceable (Citigroup Global Mkts. Inc. v. SCIP Capital Mgt., LLC, 225 A.D.3d 420, 421, 206 N.Y.S.3d 578 [1st Dept. 2024]).  The trial record establishes by a preponderance of the evidence that plaintiffs adequately performed their obligations under this provision, and that the communications at issue reflected plaintiffs’ “exercise of good faith business judgment” to avoid violating the law in jurisdictions with heightened regulatory protections (Digital Broadcast Corp. v. Ladenburg, Thalmann & Co., Inc., 63 A.D.3d 647, 647, 883 N.Y.S.2d 186 [1st Dept. 2009], lv denied 14 N.Y.3d 737, 898 N.Y.S.2d 75, 925 N.E.2d 75 [2010]).

On the other hand, plaintiffs established at trial all the elements of their breach of contract claim.  After plaintiffs fully performed under the Distribution Agreement, defendants breached the agreement by failing to pay the Incentive Fees and Placement Fees that were due.  The trial court therefore correctly awarded damages to plaintiffs in the amount stipulated by the parties before trial.

Finally, we reject defendants’ attempt to revive their counterclaims for breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, fraud, and tortious interference with prospective business relations, which were properly dismissed at the pleadings stage six years ago.

We have considered defendants’ remaining contentions and find them unavailing.