Judicial Notice of Internet Evidence — LEXIS Results, Governmental, Newspaper, Party Websites — Notice Doesn’t Convert 12(b)(6) to Summary Judgment — Improperly Raising New Arguments by Letter after Oral Argument without Permission

Wells Fargo Bank, N.A. v. Wrights Mill Holdings, LLC, 2015 U.S. Dist. LEXIS 115610 (S.D.N.Y. Aug. 31, 2015): 

At issue in this interpleader action is whether Wells Fargo Bank, N.A. ("Wells Fargo"), the Trustee responsible for the assets held in a collateralized debt obligation ("CDO"), is obliged, under the terms of the indenture under which the CDO was formed, to sell particular collateral. Under the relevant indenture provision, so long as there is a valid first offer to buy collateral of the CDO, the CDO's most junior stakeholders (the "Preferred Shareholders") are empowered to decide, by a two-thirds vote among them, whether to approve the sale of that collateral pursuant to a second and higher offer. The Preferred Shareholders have that authority even though they are, [*3]  by now, all but certain to be unaffected by the sale of any asset: The CDO's value has dropped so precipitously from its inception that only the holders of top-priority security interests (the "Noteholders") are likely to recover any payouts.

The Preferred Shareholders have approved a sale of certain collateral here, in response to a second offer. The decisive issue is whether the unusual first offer for that collateral was valid. To induce the Preferred Shareholders to approve the sale of particular collateral, the entity that made the first offer included, in addition to a $500,000 payment for the collateral, a separate $250,000 side payment to be kept by the Preferred Shareholders. The Noteholders describe this $250,000 side payment as a "bribe," and as upending the CDO's payout structure. They argue that the first offer was therefore invalid, and thus could not trigger the indenture provision that empowers the Preferred Shareholders to approve a second, superior offer. However, the second offeror disputes the point. It has demanded that Wells Fargo, as Trustee, approve its offer.

Wells Fargo brought this interpleader action to resolve this dispute. Several parties have now moved [*4]  for judgment on the pleadings. For the reasons that follow, the Court holds that the first offer to buy the collateral was not valid, and that Wells Fargo therefore is not required (or authorized) to sell the collateral in question in response to the second offer.

***

 

5   Ten days after argument, Gubin submitted an unsolicited letter seeking to supplement his merits arguments, Dkt. 149; a few days later, Montrose submitted a reply, Dkt. 150. The Court disregards these letters in this decision because Gubin's letter [*17]  improperly raises new arguments after the close of briefing and argument, without having sought or obtained permission for such a submission. See Direxion Shares, ETF Trust v. Leveraged Innovations L.L.C., No. 14 Civ. 1777 (KBF), 2014 U.S. Dist. LEXIS 161469, 2014 WL 6469084, at *1 n.2 (S.D.N.Y. Nov. 18, 2014) (disregarding "submission without permission and after all briefing had been submitted and oral argument on the motion had occurred"). In any event, having reviewed these letters, they would not disturb the Court's analysis or holdings here.

***

II. Analysis

The Court first addresses Gubin's motion to strike 10 exhibits in Waterfall's declaration, and then analyzes Gubin's and Montrose's competing motions for judgment on the pleadings.

 

A. Gubin's Motion to Strike Waterfall's Exhibits

Attached to Waterfall's submissions in opposition to Gubin's motion for judgment on the pleadings were 12 exhibits. See Dkt. 133-34. These provide, Waterfall asserts, documentary support for its allegation that Gubin, Brogno, and WMH have improperly colluded to strip the CDO of value for their private benefit. Specifically, Waterfall alleges, Brogno and Gubin made successive, and plainly inadequate, offers to purchase the Security, and induced WMH by means of the promise of monetary payments, to approve Gubin's second offer. See, e.g., Waterfall Opp. Br. 8-9. Waterfall [*18]  claims that there is "an elaborate network" of business and personal connections between Gubin, Brogno, and WMH. Id. at 9. It further asserts that material factual disputes remain as to "whether 'Gubin or his designee' are, in fact, purchasers separate and apart from Brogno." Id. at 17. It argues that a valid "§ 12.2 purchase" requires, inter alia, that the two offers have been from separate bidders. Id. at 19. Gubin counters that these 10 of these 12 exhibits should be stricken.

The 10 exhibits at issue in Waterfall's declaration are:

   1. A printout obtained from the Illinois Secretary of State website, listing the managers of United RX, LLC.

   2. A printout obtained from the Indiana Secretary of State website, concerning United RX, LLC.

   3. Records obtained from the Indiana Secretary of State website, concerning New Boys Management.

   4. A document titled "Midwest Torah Center, The Torah Telegraph," available on Midwest Torah's website.

   5. A printout of records obtained from the Indiana Secretary of State website, concerning the Midwest Torah Center.

   6. Search results obtained from a LexisNexis database for businesses associated with Moishe Gubin.

   7. A printout from the Medicare.gov website, which states it is the official U.S. [*19]  Government website for Medicare, providing ownership information for the Blossom North Nursing and Rehabilitation Center.

   8. A printout from the website www.evansteamny.com/BoardofDirectors.aspx, for "Evan's Team" charity, showing its Board of Directors.

   9. A printout from the Medicare.gov website, which states it is the official U.S. Government website for Medicare, providing ownership information for the Batavia Health Care Center.

   10. Property records obtained from the Westchester County clerk's website, for 16 Wrights Mill Road, Armonk, NY, 10504.

Hanin Decl., Exs. 3-12; see also Gubin Strike Br.

1. Applicable Legal Standards

Under Federal Rule of Evidence 201, a court may take judicial notice, at "any stage of the proceeding," of any fact "that is not subject to reasonable dispute because" it "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b)(2), (d). When considering a Rule 12(b)(6) or Rule 12(c) motion, the Court may take judicial notice of certain matters of public record without converting the motion into one for summary judgment. See, e.g., Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S. Ct. 2499, 168 L. Ed. 2d 179 (2007) ("[C]ourts must consider the complaint in its entirety, as well as . . . documents incorporated into the complaint by reference, and matters of which [*20]  a court may take judicial notice."); Staehr v. Hartford Fin. Servs. Grp., Inc., 547 F.3d 406, 426 (2d Cir. 2008) ("[M]atters judicially noticed by the District Court are not considered matters outside the pleadings.") (citing 5 Charles Alan Wright & Arthur R. Miller, Fed. Prac. & Pro. § 1366 & n.33 (3d ed. 2004)); Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir. 1991) (court may "take judicial notice of the contents of relevant public disclosure documents . . . as facts 'capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned'").

Pursuant to Rule 201, courts have considered newspaper articles, documents publicly filed with the SEC or FINRA, documents filed with a Secretary of State, documents filed with governmental entities and available on their official websites, and information publicly announced on certain non-governmental websites, such as a party's official website. See, e.g., N.J. Carpenters Health Fund v. Royal Bank of Scot. Group, PLC, 709 F.3d 109, 126-27 & n.11 (2d Cir. 2013) (newspaper articles); Forgione v. Gaglio, No. 13 Civ. 9061 (KPF), 2015 U.S. Dist. LEXIS 21644, 2015 WL 718270, at *17 (S.D.N.Y. Feb. 13, 2015) (FINRA filings); Chevron Corp. v. Salazar, 807 F. Supp. 2d 189, 193 n.5 (S.D.N.Y. 2011) (merger agreement filed with Delaware Secretary of State); Am. Cas. Co. of Reading, PA v. Lee Brands, Inc., No. 05 Civ. 6701 (SCR), 2010 U.S. Dist. LEXIS 19028, 2010 WL 743839, at *4 (S.D.N.Y. Mar. 3, 2010) (corporate certificate of dissolution filed with California Secretary of State); Doron Precision Sys., Inc. v. FAAC, Inc., 423 F. Supp. 2d 173, 179 n.8 (S.D.N.Y. 2006) ("For purposes of a 12(b)(6) motion to dismiss, a court may take judicial notice of information publicly announced on a party's website, as long as the website's authenticity is not in dispute and 'it is capable of accurate [*21]  and ready determination.'").

2. Application

As to the seven documents retrieved from official government websites--to wit, the Illinois Secretary of State, the Indiana Secretary of State, Medicare.gov, and the Westchester County clerk--it is clearly proper to take judicial notice. Courts routinely take judicial notice of such governmental records. See, e.g., Lee Brands, Inc., 2010 U.S. Dist. LEXIS 19028, 2010 WL 743839, at *4 (corporate certificate of dissolution filed with California Secretary of State); Salazar, 807 F. Supp. 2d at 193 n.5 (merger agreement filed with Delaware Secretary of State); Big E. Entm't, Inc. v. Zomba Enters., Inc., 453 F. Supp. 2d 788, 797 (S.D.N.Y. 2006) (judicial notice of lack of a required filing with the New York Secretary of State), aff'd, 259 F. App'x 413 (2d Cir. 2008) (summary order); Coleman & Co. Sec. v. Giaquinto Family Trust, 236 F. Supp. 2d 288, 308-09 (S.D.N.Y. 2002) (records in SEC database). Accordingly, the Court denies Gubin's motion to strike as to these seven exhibits.

As to the remaining three documents: With respect to the LexisNexis database search, it is publicly available, and case law supports taking judicial notice of it. See, e.g., Sterling v. Interlake Indus. Inc., 154 F.R.D. 579, 586 (E.D.N.Y. 1994) ("[T]he Court takes judicial notice that a five minute exercise on the NEXIS database, or a review of Standard & Poor's Corporate Descriptions, would disclose, in detail, not only every subsidiary of Interlake and the relationship of Interlake to Redirack, but also that Redirack had merged into Acme Strapping [*22]  Inc."); Vox Amplification Ltd. v. Meussdorffer, No. 13 Civ. 4922 (ADS) (GRB), 2014 U.S. Dist. LEXIS 21577, 2014 WL 558866, at *8 (E.D.N.Y. Feb. 11, 2014), report and recommendation adopted, 50 F. Supp. 3d 355 (E.D.N.Y. 2014) ("Furthermore, based upon independent web searches, I take judicial notice that, as I had recalled, there are scores of stringed instruments featuring teardrop bodies . . . .") (citing United States v. Bari, 599 F.3d 176, 180 (2d Cir. 2010) (upholding judicial notice in a criminal case, noting "a judge need only take a few moments to confirm his intuition by conducting a basic Internet search")).

With respect to the final two documents--printouts from entities' websites--the case law applying Rule 201 states that, "[f]or purposes of a 12(b)(6) motion to dismiss, a court may take judicial notice of information publicly announced on a party's website, as long as the website's authenticity is not in dispute and 'it is capable of accurate and ready determination.'" Doron Precision Sys., 423 F. Supp. 2d at 179 n.8; accord Sarl Louis Feraud Int'l v. Viewfinder Inc., 406 F. Supp. 2d 274, 277 (S.D.N.Y. 2005) ("[A]ll of the facts relevant to the resolution of the matter are contained either in the complaint, or in materials (such as the records of the French proceedings or the defendant's websites) that are either referred to in the complaint or of which the Court may take judicial notice."), vacated and remanded on other grounds, 489 F.3d 474 (2d Cir. 2007). Here, Gubin does not actually dispute the factual material reflected [*23]  in these websites. He simply would prefer that the Court not consider these materials.

As a result, given the case law and the lack of any concrete dispute as to the accuracy of the materials at issue, the Court denies Gubin's motion to strike in its entirety.6

6   Because the Court has resolved this dispute on a different ground than the one to which these documents relate, the Court's resolution of Gubin's motion to strike has had no impact at all on the decision here that Wells Fargo is not obliged under § 12.2 to sell the collateral in response to Gubin's purchase offer.

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