Legal Document: Galvan Housing Resources Inc. f/k/a Housing Resources of Columbia County, Inc., Hudson City Housing Development Fund Company, Inc., Hrcc Homes, Llc, individually and derivatively on behalf of HUDSON KTD LIMITED PARTNERSHIP v. Crosswinds Hudson, Llc, Wnc Housing, L.P., Wnc Institutional Tax Credit Fund X New York Series 7, L.P., Hudson Ktd Limited Partnership Nominal Defendant

On October 06, 2023 a MEMORANDUM OF LAW IN SUPPORT (Motion #2) - Defendants' Memo of Law in Support of Their Motion to Compel Arbitration was filed involving a dispute between Galvan Housing Resources Inc. F K A Housing Resources Of Columbia County, Inc., Hrcc Homes, Llc, Individually And Derivatively On Behalf Of Hudson Ktd Limited Partnership, Hudson City Housing Development Fund Company, Inc., and Crosswinds Hudson, Llc, Hudson Ktd Limited Partnership Nominal Defendant, Wnc Housing, L.P., Wnc Institutional Tax Credit Fund X New York Series 7, L.P., for Commercial - Business Entity in the District Court of Columbia County.

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FILED: COLUMBIA COUNTY CLERK 01/05/2024 05:21 PM INDEX NO. E012023021189
NYSCEF DOC. NO. 31 RECEIVED NYSCEF: 01/05/2024

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF COLUMBIA
--------------------------------------------------------------------X
GALVAN HOUSING RESOURCES INC., f/k/a
HOUSING RESOURCES OF COLUMBIA
COUNTY, INC., HUDSON CITY HOUSING Index No.: E012023021189
DEVELOPMENT FUND COMPANY, INC., and
HRCC HOMES, LLC, individually and derivatively
on behalf of HUDSON KTD LIMITED
PARTNERSHIP,

Plaintiffs,
-against-

CROSSWINDS HUDSON, LLC, WNC HOUSING,
L.P., and WNC INSTITUTIONAL TAX CREDIT
FUND X NEW YORK SERIES 7, L.P.,

Defendants,

-and-

HUDSON KTD LIMITED PARTNERSHIP,

Nominal Defendant.
----------------------------------------------------------------------X
DEFENDANTS’ MEMORANDUM OF LAW IN SUPPORT OF THEIR
MOTION TO COMPEL ARBITRATION

MCCABE COLEMAN VENTOSA & PATTERSON PLLC
Jennifer J. Clark, Esq.
42 Catherine Street
Poughkeepsie, New York 12601
Tel. (845) 379-2222
jennifer@mccabecoleman.com

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TABLE OF CONTENTS

INTRODUCTION ......................................................................... Error! Bookmark not defined.
BACKGROUND ............................................................................................................................1
ARGUMENT ..................................................................................................................................3
I. New York Law Favors Arbitration Agreements .................................................................3
II. The Arbitration Agreement at Section 5.12 of the Parties' LPA Covers
This Dispute ........................................................................................................................4
III. The Court Should Stay the Action or, Alternatively, Extend Defendants'
Time to Answer ...................................................................................................................5
CONCLUSION ...............................................................................................................................5
CERTIFICATION . .........................................................................................................................7

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TABLE OF AUTHORITIES

Page(s)

Cases

166 Mamaroneck Ave. Corp. v 151 E. Post Rd. Corp.,
78 NY2d 88 (1991) ..................................................................................................................... 3
Nationwide Gen. Ins. Co. v Inv’rs Ins. Co.,
37 NY2d 91 (1975) ................................................................................................................. 3, 4
Siegel v Lewis,
40 NY2d 687 (1976) ................................................................................................................... 4

Rules

CPLR 3012(d) ................................................................................................................................. 5
CPLR 7502(b) ................................................................................................................................. 4
CPLR 7503(a) ........................................................................................................................ passim

Regulations

22 NYCRR § 202.8-b(c), I.............................................................................................................. 7

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Defendants Crosswinds Hudson, LLC, WNC Housing, L.P., and WNC Institutional Tax

Credit Fund X New York Series 7, L.P. (“Defendants”), respectfully submit this Memorandum of

Law in Support of their Motion to Compel Arbitration (the “Motion”) under CPLR 7503(a). As

explained below, this Court should grant the Motion and stay these proceedings.

INTRODUCTION

Although Plaintiffs’ Complaint is lengthy and complex, the resolution of this motion is

simple. Plaintiffs’ Complaint alleges that Defendants breached the terms of, and duties arising

under, the Parties’ Amended and Restated Agreement of Limited Partnership (“LPA”), including

an Amended and Restated Purchase Option and Right of First Refusal Agreement (“POA”)

allegedly incorporated into the LPA. The LPA contains a broad and mandatory arbitration clause

covering Plaintiffs’ allegations. Because the mandatory arbitration clause is valid and enforceable

under New York law, this Court should compel the Parties to arbitrate the claims and allegations

in Plaintiffs’ Complaint and stay these proceedings while they do so.

BACKGROUND

This dispute relates to a 70-unit affordable housing development (the “Property”) that “was

developed and operated pursuant to the federal Low-Income Housing Tax Credit (‘LIHTC’)

program (Clark Affirm. Ex. 1 at ¶ 1). The Property is the sole asset of Hudson KTD Limited

Partnership (“the “Partnership”), a New York State partnership formed for the purpose of

acquiring, constructing, owning, and operating the Property (Clark Affirm., Ex 1 at ¶ 15). The

Plaintiffs are the Partnership’s general partners and their corporate parent (Clark Affirm., Ex. 1 at

¶¶ 8–11, 16). The Defendants are the Plaintiffs’ business partners in the Partnership—specifically,

its managing general partner and limited partner (Clark Affirm., Ex. 1 at ¶¶ 12–14).

As Plaintiffs acknowledge, the Partnership is governed by the LPA (Clark Affirm., Ex. 1

at ¶¶ 47–48, Ex. 2). Plaintiffs allege that the LPA incorporates by reference an Amended and

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Restated Purchase Option and Right of First Refusal Agreement (“POA”) (Clark Affirm. Ex. 1 at

¶¶ 5, 154, Ex. 2). Plaintiffs allege that the LPA “is a valid and binding contract,” (Clark Affirm.

Ex. 1 at ¶ 152), which, along with its incorporated POA, “governs the parties’ respective rights

and obligations in the Partnership” (Clark Affirm., Ex. 1 at ¶ 47).

The LPA includes a “Mandatory Arbitration” provision that is broad and unequivocal.

See LPA § 5.12. It states:

5.12 Mandatory Arbitration. Any person enforcing this Agreement may require
that all disputes, claims, counterclaims, and defenses (“Claims”) relating in any
way to this Agreement or any transaction of which this Agreement is a part (the
“Transaction”), be settled by binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association and Title 9
of the U.S. Code. All claims will be subject to the statutes of limitation applicable
if they were litigated.

If arbitration occurs, one neutral arbitrator will decide all issues unless either
Party’s Claim is $100,000 or more, in which case three neutral arbitrators will
decide all issues. All arbitrators will be active New York State Bar members in
good standing. In addition to all other powers, the arbitrator(s) shall have the
exclusive right to determine all issues of arbitrability. Judgment on any arbitration
award may be entered in any court with jurisdiction.

If either Party institutes any judicial proceeding relating to the Transaction, such
action shall not be a waiver of the right to submit any Claim to arbitration. In
addition, both Parties have the right before, during, and after any arbitration to
exercise any of the following remedies, in any order or concurrently: (i) setoff,
(ii) self-help repossession, (iii) judicial or non-judicial foreclosure against real or
personal property collateral, (iv) provisional remedies, including injunction,
appointment of receiver, attachment, claim and delivery, and replevin.

This arbitration clause cannot be modified or waived by either Party except in a
writing that refers to this arbitration clause and is signed by both Parties.

(Clark Affirm., Ex. 2 at § 5.12). The POA similarly mandates arbitration in the event that the

Parties fail to agree on a purchase price for the Property in connection with the POA’s purchase

option and right of first refusal. (Clark Affirm., Ex. 3 at §§ 6, 7).

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ARGUMENT

There is no dispute that the LPA is a valid agreement that governs the Parties’ rights and

obligations in this case (Clark Affirm., Ex. 1 at ¶¶ 47, 152). Plaintiffs allege that Defendants

breached the LPA (Clark Affirm., Ex. 1 at ¶ 164). Plaintiffs allege that Crosswinds breached

fiduciary duties arising exclusively out of the LPA (Clark Affirm., Ex. 1 at ¶¶ 170, 186). Plaintiffs

seek a declaratory judgment regarding the parties’ rights and obligations under the LPA (Clark

Affirm., Ex. 1 at ¶¶ 179, 184). And Plaintiffs seek costs and expenses, including attorney’s fees,

pursuant to the LPA (Clark Affirm., Ex. 1 at ¶ 166).

Nor is there any dispute that the allegations, claims, and defenses in this case fall within

the scope of the LPA’s broad and mandatory arbitration clause. That clause applies to disputes

that “relate in any way” to the LPA or “or any transaction of which [the LPA] is a part.” (Clark

Affirm., Ex. 2 at § 5.12 (emphasis added)). Defendants have attempted to enforce the LPA by

refusing Plaintiffs’ improper and invalid efforts to acquire the Property for less than fair market

value through invocation of the LPA’s purchase option and right of first refusal provision (Clark

Affirm., Ex. 1 at ¶¶ 94, 108, 128). Defendants now also seek to enforce the LPA’s Mandatory

Arbitration clause.

Pursuant to the LPA and CPLR § 7503(a), Defendants are entitled to an order compelling

the Parties to arbitration this dispute and staying this case while they do so.

I. New York Law Favors Arbitration Agreements.

The LPA and its Mandatory Arbitration provision are governed by New York law (Clark

Affirm., Ex. 2 at § 5.2(c)). New York law “favors and encourages arbitration as a means of

conserving the time and resources of the courts and the contracting parties.” Nationwide Gen. Ins.

Co. v Inv’rs Ins. Co., 37 NY2d 91, 95 (1975). “New York courts interfere ‘as little as possible

with the freedom of consenting parties’ to submit disputes to arbitration.” 166 Mamaroneck Ave.

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Corp. v 151 E. Post Rd. Corp., 78 NY2d 88, 93 (1991) (quoting Siegel v Lewis, 40 NY2d 687,

689 (1976)).

When presented with a motion to compel arbitration under CPLR 7503(a), New York

courts “perform [an] initial screening process designed to determine in general terms whether the

parties have agreed that the subject matter under dispute should be submitted to arbitration.”

Nationwide, 37 NY2d at 96. “Where there is no substantial question whether a valid agreement

[to arbitrate] was made or complied with, and the claim sought to be arbitrated is not barred by

limitation under subdivision (b) of section 7502, the court shall direct the parties to arbitrate.” See

CPLR § 7503(a) (emphasis added). 1

II. The Arbitration Agreement at Section 5.12 of the Parties’ LPA Covers
This Dispute.

The LPA’s Mandatory Arbitration clause covers this dispute. “Any person enforcing [the

LPA] may require that all disputes, claims, counterclaims, and defenses (“Claims”) relating in any

way to [the LPA] or any transaction of which [the LPA] is a part . . . be settled by binding

arbitration.” (Clark Affirm., Ex. 2 at § 5.12 (emphasis added)). Here, Plaintiffs expressly allege

that Defendants breached the LPA and that Crosswinds breached fiduciary duties arising from the

LPA (Clark Affirm., Ex. 1 at ¶¶ 164, 170, 186). It is impossible for any trier of fact or tribunal to

resolve the claims without interpretation and application of the language of the LPA.

Plaintiffs further seek monetary damages, a declaratory judgment regarding the parties’

rights and obligations under the LPA, and costs and expenses—including attorney’s fees—

pursuant to the LPA (Clark Affirm., Ex. 1 at ¶ 166). Plaintiffs’ claims arise from Defendants’

1
CPLR 7502(b), which is not at issue here, allows a party to challenge a demand for arbitration
as untimely if “the claim sought to be arbitrated would have been barred by limitation of time
had it been asserted in a court of the state.”
4

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attempts to enforce their rights under the LPA and to hold Plaintiffs to the bargain the Parties

struck in that document. The core facts of this dispute both “relat[e]” to the LPA and to a

“transaction of which [the LPA] is a part”—namely, Plaintiffs’ improper attempts to acquire the

Property for less than fair market value via purchase option and right of first refusal clauses. And,

once again, resolution of these issues is impossible without interpretation and application of the

language of the LPA.

III. The Court Should Stay the Action or, Alternatively, Extend Defendants’
Time to Answer

An order compelling parties to arbitration “shall operate to stay a pending or subsequent

action, or so much of it as is referable to arbitration.” CPLR 7503(a). Because this dispute is

subject to the LPA’s Mandatory Arbitration clause, the Court should deem this case stayed to allow

the Parties to arbitrate as set out in the LPA. In the alternative, and in the event the Court denies

Defendants’ Motion to Compel, Defendants request that the Court extend Defendants’ time to

answer the Complaint, pursuant to CPLR 3012(d), and allow Defendants thirty days from any

denial of the Motion to Compel to answer or otherwise respond to the Complaint.

CONCLUSION

For the reasons set forth above, the Court should compel Plaintiffs to honor the bargain

they struck in the LPA, order the Parties to arbitrate this dispute, and stay the action pending them

doing so.

DATED: Poughkeepsie, New York
January 5, 2024
Respectfully submitted,

MCCABE COLEMAN VENTOSA &
PATTERSON PLLC

_________________________
Jennifer J. Clark, Esq.

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Attorney for Defendants
42 Catherine Street
Poughkeepsie, New York 12601
Tel. (845) 379-2222
jennifer@mccabecoleman.com

BAKER, DONELSON, BEARMAN, CALDWELL
& BERKOWITZ, PC

Steven F. Griffith, Jr., Esq.
Laura M. Carlisle, Esq.
Riley T. Svikhart, Esq.
201 St. Charles Avenue, Suite 3600
New Orleans, LA 70170
Telephone: (504) 566-5200
sgriffith@bakerdonelson.com
lcarlisle@bakerdonelson.com
rsvikhart@bakerdonelson.com

Matthew S. Mulqueen, Esq.
165 Madison Avenue, Suite 2000
Memphis, TN 38103
Telephone: (901) 577-8234
mmulqueen@bakerdonelson.com

Of Counsel (pro hac vice applications
forthcoming)

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CERTIFICATION

In accordance with 22 NYCRR § 202.8-b(c), I certify that this document complies with 22

NYCRR § 202.8-b(a), as it contains less than 7,000 words, exclusive of the caption and signature

block. Specifically, this document contains 1,593 words, as established using the word count

feature available on the word processing software used to prepare it.

Jennifer C. Clark

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Case Info

Judge

Richard Mott Track Judge’s New Case

Case No.

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Document Filed Date

January 05, 2024

Case Filing Date

October 06, 2023

County

Parties

CLARK, JENNIFER JEANNE Attorney for the Defendant
CROSSWINDS HUDSON, LLC Defendant
GALVAN HOUSING RESOURCES INC. f/k/a Housing Resources of Columbia County, Inc. Plaintiff
HRCC HOMES, LLC, individually and derivatively on behalf of HUDSON KTD LIMITED PARTNERSHIP Plaintiff
HUBBELL, DANIEL TAYLOR Attorney for the Plaintiff
HUDSON CITY HOUSING DEVELOPMENT FUND COMPANY, INC. Plaintiff
HUDSON KTD LIMITED PARTNERSHIP Nominal Defendant Defendant
MCDONALD, CHRISTOPHER MICHAEL Attorney for the Plaintiff
PATTERSON, STEVEN KELLY Attorney for the Defendant
WNC HOUSING, L.P. Defendant
WNC INSTITUTIONAL TAX CREDIT FUND X NEW YORK SERIES 7, L.P. Defendant
ZAROOGIAN, SEAN M. Attorney for the Plaintiff

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