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NYSCEF DOC. NO. 234 RECEIVED NYSCEF: 09/11/2018
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
------------------- --------- X
JOHNATHAN BLOOSTEIN, ET AL.,
Index No.: 651242/12
Plaintiffs,
IAS PART 53
-against-
MOTION SEQUENCE #007
MORRISON COHEN BRIAN and DOES 1-
LLP, SNARR,
10,
Defendants.
_________________________ _____ X
MORRISON COHEN LLP, BRIAN SNARR, and DOES
1-10,
Third-Party Plaintiffs,
-against-
BROWN RUDNICK LLP,
Third Party-Defendant.
------------------------------------------------------ X
THIRD-PARTY DEFENDANT BROWN RUDNICK LLP'S RULE 19-A STATEMENT
OF MATERIAL FACTS AS TO WHICH THERE IS NO
GENUINE ISSUE TO BE TRIED
Third-Party Defendant Brown Rudnick LLP, by its attorneys Lewis Brisbois Bisgaard &
Smith, LLP, pursuant to Rule 19-a of the Rules ofthe Justices of the Commercial Division, Supreme
Court, New York County, submits the following statement of material facts in support of itsmotion
for summary judgment, and as to which Brown Rudnick, the moving party, contends there is no
genuine issue to be tried:
1. Plaintiffs allege that they are small to mid-sized business owners who sold shares of
their businesses to their employees through Employee Stock Ownership Plan ("ESOP") transactions.
11th
See the affidavit of Jamie R. Wozman sworn to on the day of September, 2018 ("Wozman Aff.")
at Exhibit A, ¶ 16.
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2. Plaintiffs allege that they sought to defer capital gains, and thus capital gains taxes, on
their ESOP sales by reinvesting the proceeds from the sales into qualifying U.S. corporate bonds
(hereinafter, "Underlying Bonds"). See the Wozman Aff. at Exhibit A, ¶ 17.
3. Former Third-Party Defendant Stonebridge Capital, LLC, a financial services
company, was allegedly engaged by Plaintiffs to structure the reinvestment of the proceeds Plaintiffs
made from their respective ESOP sales (hereinafter, the "Transaction"). See the Wozman Aff. at
Exhibit A, ¶ 18.
4. Stonebridge allegedly retained Brown Rudnick to represent their interests in the
Transaction. See the Wozman Aff. at Exhibit B without exhibits,¶ 12.
5. Plaintiffs are alleged to have engaged Morrison Cohen "as attorneys to represent and
advise them in connection with the ESOP Transactions, with respect to the Reinvestment
Transactions and with regard to matters relating to those transactions, including, without limitation,
Proceeds."
the long-term, permanent deferral of capital gains and capital gains taxes on ESOP See
the Wozman Aff. at Exhibit A, ¶ 20.
6. Plaintiffs allege that the Transaction was intended to allow them to realize economic
benefits, including cash from the ESOP proceeds, while deferring capital gains and thus capital gains
taxes on those proceeds by investing them in the aforementioned Underlying Bonds. See the
Wozman Aff. at Exhibit A, ¶ 19.
7. At the direction of Stonebridge, Brown Rudnick provided a tax opinion set forth in a
September 26, 2007 letter (hereinafter, "Tax Opinion Letter"). That opinion was with regard to
whether this reinvestment Transaction as itwas structured would for "non-
specifically qualify
recognition treatment under Section 1042 of the Code"1, i.e., whether the maññêr in which the
'
See page 8 ofthe Tax Opinion Letterwhich isannexed to theWozman Aff. atExhibit C.
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proceeds were reinvested would be deemed a loan or a sale by the IRS and whether itwould allow
Plaintiffs to defer capital gains and thus capital gains taxes.
8. The Tax Opinion Letter sets forth the tax advice Brown Rudnick was to provide via
the letter: advice "regarding the requirements concerning QRP under Section 1042(c)(4) of the
Code,"
as well as Brown Rudnick's "opinion regarding the treatment of the Transaction under
Code."
Section 1042 of the Wozman Aff., Exhibit C, p. 8.
9. Brown Rudnick was asked to opine on "whether the purchase of the Underlying
Bonds through Section 1042 Investor's LLC would qualify as a purchase of QRP in accordance with
1042."
Code Section Id.
10. In an economic analysis Stonebridge prepared in connection with the Transaction
(hereinafter, "Stonebridge Economic Analysis"), Stonebridge explained that "Brown Rudnick is
providing a legal opinion on whether the financing provided by Stonebridge to the LLCs ("Loan")
purposes."
results in a deemed sale or disposition of the QRP for Federal Income tax See the
Wozman Aff. at Exhibit D, p. 1.
11. The Tax Opinion Letter expressly labeled that section of the letter containing Brown
Rudnick's actual opinion regarding the purchase of the Underlying Bonds through the Section 1042
Investors' "Opinion"
LLC's. That section appears at page 33 of the letter under the heading and
continues onto page 34. See the Wozman Aff. at Exhibit C, pp. 33-34.
12. The actual opinion provides that "it is our opinion that if the matter was properly
briefed and presented a U.S. federal court of competent jurisdiction more likely than not would hold
that the remaining components of the Transaction would not cause a Section 1042 Investor to be
Code."
treated as having disposed of the Underlying Bonds for purposes of Section 1042(e) of the
Wozman Aff., Exhibit C, p. 34.
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13. Thereunder, the letter states in bold that "This Opinion is limited to the Federal tax
Opinion."
treatment of the transactions or matters that are the subject of this Id. The Tax
Opinion Letter continues in bold "This Opinion does not consider or provide a conclusion with
issues."
respect to any additional Id.
14. In connection with the Transaction, Plaintiffs allege that they issued promissory notes
to an entity named Stonebridge Pass-Through Trust ("Stonebridge Trust") in exchange for loans.
The loans were secured by the Underlying Bonds. See the Wozman Aff., at Exhibit A, ¶ 3 l.
15. In order to obtain money to fund its loans to Plaintiffs, Plaintiffs allege that the
Stonebridge Trust securitized itsloans by issuing notes to Nomura International PLC ("Nomura") in
exchange for a loan from Nomura. See the Wozman Aff., at Exhibit A, ¶¶ 28-29.
16. Plaintiffs allege that the loans from Nomura to the Stonebridge Trust were secured
and collateralized by the Underlying Bonds. See the Wozman Aff., at Exhibit A, ¶ 31.
17. Plaintiffs allege that in order to protect Nomura in the event there was a decline in the
value of the Underlying Bonds, the trust indentures, which were part of the Transaction documents,
included a rating event of default trigger. If a triggering event occurred, Nomura could declare an
event of default under the applicable trust indenture and cause the Underlying Bonds to be sold (the
"Event of Default Trigger"). See the Wozman Aff., at Exhibit A, ¶ 32.
18. Plaintiffs allege that shortly before the closing ofthe Transaction, there was a revision
to the Event of Default Trigger provision in the draft trust indentures. See the Wozman Aff., at
Exhibit A, ¶ 38.
19. This revision is alleged to have created a new basis for Nomura to call a default and
according to the Plaintiffs created a fundamental risk in the Transaction to which Plaintiffs claim
they had not previously agreed. See the Wozman Aff. at Exhibit A, ¶ 41.
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20. While the original provision (hereinafter, "Original Event of Default Trigger") tied
the triggering event to the rating of the Underlying Bond (See the Wozman Aff. at Exhibit B, ¶ 21)
the revision (hereinafter, "Revised Event of Default Trigger") is alleged to have tied the triggering
event to the rating of any financial guaranty insurance policy relating to any Underlying Bond. See
the Wozman Aff. at Exhibit B, ¶ 24.
21. The Revised Event of Default Trigger provision was incorporated into the Tax
Opinion Letter. See the Wozman Aff. at Exhibit C, at pp. 4, 6, 8, 17 and 26
22. The Revised Event of Default Trigger appears in the Tax Opinion Letter a total of six
times at pages 4, 6, 8, 17 and 26 of the 35-page letter. Id.
23. The Tax Opinion Letter also contains a singular reference to the Original Event of
Default Trigger provision at page 25 of the letter. See the Wozman Aff. at Exhibit C, p. 25.
24. The Transaction is alleged to have closed with the Revised Event of Default Trigger
incorporated into the trust indentures. See the Wozman Aff. at Exhibit B, ¶ 25.
25. Ultimately, the event set forth in the Revised Event of Default Trigger provision is
alleged to have occurred, resulting in Nomura invoking "the Event of Default Trigger to declare
Indentures."
Events of Default under the Trust Wozman Aff., at Exhibit A, ¶ 43.
26. In connection to Nomura's invocation of the Event of Default under the trust
indentures, on or about April 17, 2012, Plaintiffs commenced the Main Action against Morrison
Cohen, alleging that Morrison Cohen was negligent in "failing to notice, perceive and/or address the
inclusion of the Rating Trigger in the Trust Indentures and/or allowing and advising Plaintiffs to
Trigger."
respectively execute Trust Indentures containing the Rating Wozman Aff., at Exhibit A,
53.
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27. On or about January 9, 2015, Morison Cohen filedthe Third-Party Complaint against
Brown Rudnick, asserting claims sounding in contribution and indemnification. See the Wozman
Aff. at Exhibit B.
28. The only surviving claim in the Third-Party Complaint sounds in contribution and
relates to Brown Rudnick's issuance of the Tax Opinion Letter. See the Wozman Aff. at Exhibit B,
¶¶ 65-70.
29. The claim alleges that the contents of the Tax Opinion Letter, which is not at issue in
the Main Action, let alone referenced in the Main Action Amended Complaint, was inaccurate
because itcontained "interchangeable references to the Revised Rating Trigger and Original Rating
Trigger"
Wozman Aff., at Exhibit B, ¶ 32.
30. Morrison Cohen alleges that by "conflating the Original and Revised Rating Triggers
throughout the Tax Opinion Letter, Brown Rudnick misrepresented elements of the Transaction's
provisions."
default trigger Wozman Aff. at Exhibit B, ¶ 36.
31. Morrison Cohen's contribution claim further alleges that the Tax Opinion Letter
Stonebridge"
"repeatedly references an economic analysis prepared by (the "Stonebridge Economic
Analysis") which was based upon the Original Rating Trigger instead ofthe Revised Rating Trigger.
See Wozman Aff., at Exhibit B, ¶ 38. See the Wozman Aff. at Exhibit D.
32. Morrison Cohen does not allege that the Plaintiffs read, understood, or knew the
contents of the Stonebridge Economic Analysis. See the Wozman Aff. at Exhibit B.
33. Morrison Cohen does not allege that the Plaintiffs knew that the Stonebridge
Economic Analysis was based on the Original Event of Default Rating Trigger. See the Wozman
Aff. at Exhibit B.
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34. Morrison Cohen alleges that Brown Rudnick breached its duty to the Plaintiffs by
Analysis"
"relying on the flawed Stonebridge Economic prepared by Stonebridge, and by including
Trigger."
inaccurate and misleading "descriptions of the Rating See the Wozman Aff. at Exhibit B, ¶
66.
35. Morrison Cohen then alleges that Plaintiffs relied upon the Tax Opinion Letter in
deciding to enter into the Transaction, which "they confirmed by signing contemporaneous Letter
opinion"
Agreements acknowledging that they had read, understood and relied on the tax (Wozman
Aff., Exhibit B, ¶ 68) and that Brown Rudnick's negligence and breaches proximately caused
injuries or damages suffered by the Plaintiffs. See Wozman Aff. at Exhibit B, ¶ 69.
36. Each of the five remaining individually named plaintiffs have been deposed in this
matter. See Wozman Aff., at Exhibits F-J.
37. Plaintiff David Greenberg testified that he "didn't read the tax opinion letteruntil
transaction."
after the See p. 100 of the transcript of the April 25, 2017 deposition of plaintiff David
Greenberg annexed to the Wozman Aff. at Exhibit F.
38. Plaintiff Greenberg also submitted a verification to Brown Rudnick's Interrogatories,
which stated that he had not read the Tax Opinion Letter prior to the closing of the Transaction. See
the Wozman Aff. at Exhibit F, pp. 86-87.
documents"
39. When questioned about whether he read any ofthe "transaction before he
"No."
signed them, Plaintiff Greenberg answered Wozman Aff., at Exhibit F, p. 72.
all"
40. Plaintiff Greenberg testified that he did "not recall Brown Rudnick at and that he
only recently looked at the Tax Opinion Letter. See the Wozman Aff. at Exhibit F, p. 99.
41. Plaintiff Jonathan Bloostein testified that he read the Tax Opinion Letter prior to the
closing of the Transaction, and that "There was a lot of it Iskipped over because I simply didn't
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it."
understand See p. 84 of the transcript of Jonathan Bloostein's March 29, 2017 deposition
annexed to the Wozman Aff. at Exhibit G.
42. Plaintiff Bloostein further testified that while he relied upon the Tax Opinion Letter in
deciding whether to enter into the Transaction, that reliance was on the letter's opinion as tohow the
IRS would treat the Transaction and that he did not rely upon the Tax Opinion Letter for anything
else. See the Wozman Aff. at Exhibit G at p. 83.
43. Plaintiff Bloostein also testified that he did not recall the Tax Opinion Letter
referencing an event of default. See the Wozman Aff. at Exhibit, p. 86.
44. Plaintiff Richard Huang testified that he read the Tax Opinion Letter, but could not
recall ifit was before or during the closing of the Transaction. See p. 72 of the transcript of the April
27, 2017 deposition of plaintiff Richard Huang annexed to the Wozman Aff. at Exhibit H.
45. Plaintiff Huang further testified that he relied upon the opinion contained in the Tax
Opinion Letter when deciding to enter into the Transaction based upon Morrison Cohen telling him
go."
that itwas "ready to Wozman Aff. at Exhibit H, p. 74.
46. Plaintiff Huang explained that his reliance upon the Tax Opinion Letter was in
connection to the tax opinion provided therein and that he did not rely upon the letter for any other
purpose. See the Wozman Aff. at Exhibit H, pp. 73-74.
47. Plaintiff Huang testified that he did not recall the Tax Opinion Letter containing a
reference to an event of default trigger. See the Wozman Aff. at Exhibit H, pp. 73-74.
through"2
48. Plaintiff Joseph Rosenheck testified that he "thumbed the Tax Opinion
Letter when he received it.
2
See page 37 ofthe transcriptof he June 7, 2017 deposition of plaintiff
Joseph Rosenheck annexed to theWozman
Aff. at ExhibitI.
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"indirectly"
49. Plaintiff Rosenheck testified that he relied upon the Tax Opinion Letter
in deciding whether to enter into the Transaction. See the Wozman Aff. at Exhibit I,p. 38.
50. Plaintiff Rosenheck explained that his indirect reliance on the Tax Opinion Letter was
upon the opinion contained therein as to how the IRS would treat the Transaction and that there was
nothing else in the letter that he relied upon. Id.
through"
51. Plaintiff Rosenheck testified that when he "thumbed the Tax Opinion Letter
he did not notice a reference to the event of default trigger. See the Wozman Aff. at Exhibit I,pp.
37-38.
52. Plaintiff Steven Brandis testified that he read through the Tax Opinion Letter as much
"layman," 3
as a could understand itand that he may have read it prior to the closing of the
Transaction, but could not say for certain. See the Wozman Aff. at Exhibit J, p. 27.
53. Plaintiff Brandis further testified that he did not recall the Tax Opinion Letter
containing any references to the event of default trigger. Id.
54. Plaintiff Brandis testified that he relied upon Larry Kaplan of Stonebridge and Brian
Snarr of Morrison Cohen to tell him that the opinion contained in the Tax Opinion Letter was
favorable. See the Wozman Aff. at Exhibit J, pp. 20-21.
Plaintiffs'
55. Prior to filing of the note of issue, Plaintiffs and Brown Rudnick identified
tax expert witnesses; exchanged expert reports of their respective tax experts; and produced their
experts for deposition. See the Wozman Aff., at ¶ 62.
Plaintiffs'
56. tax expert witness, Alexis Gelinas, Esq., the head of Sadis & Goldberg
LLP's Tax and ERIS practice groups provided an expert report which states that the tax opinion
3
See page 20 ofthe transcriptof theJune 29,2017 deposition of plaintiff
Steven Brandi isannexed hereto as Exhibit
J.
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contained in the Tax Opinion Letter "is correct with regard to its conclusion that the securities
purchased would qualify for tax deferral under Section 1042 of the Internal Revenue Code of 1986
amended."
as See the Wozman Aff. at Exhibit K.
Gelinas' "well-written"
57. At Mr. deposition he testified that the Tax Opinion Letter was
transactions."
and "very similar to other opinion letters that I've seen on these kind of See the
Wozman Aff. at Exhibit L, p. 52.
58. Stanley E. Bulua, Esq., Brown Rudnick's tax expert witness and the head of the tax,
estate planning and employee benefits department at Robinson Brog Leinwand Greene Genovese
and Gluck PC, provided an expert report, appeared for deposition, and submitted an affidavit in
support of the instant motion on behalf of Brown Rudnick. See the Wozman Aff., at ¶ 65.
59. Mr. Bulua attests that itis "his professional opinion that the Tax Opinion Letter was
care,"
prepared in accordance with the accepted standard of and that "the conclusions set forth in the
law."
Tax Opinion Letter are supported by the See paragraph 7 of Mr. Bulua's accompanying
affidavit sworn to on the 6th day of September, 2018.
60. Mr. Bulua further attests that the conclusions set forth in the Tax Opinion Letter
would not have changed if the singular reference to the Original Event of Default Trigger was not
included in the letter or if the Stonebridge Economic Analysis had described the Rating Trigger as
the Revised Event of Default Rating Trigger. Id.
61. Morrison Cohen has not identified a tax expert in connection with their surviving
contribution claim related to the Tax Opinion Letter. See the Wozman Aff. at ¶ 62.
62. Morrison Cohen has not produced an expert report by a tax expert in connection to
their Tax Opinion Letter contribution claim. See the Wozman Aff. at ¶ 62.
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63. Morrison Cohen has not produced a tax expert for deposition to testify regarding the
Tax Opinion Letter. See the Wozman Aff. at ¶ 62.
64. Pursuant to the provisions of the applicable New York State law there are no legally
cognizable facts sufficient to defeat Brown Rudnick's within motion for summary judgment entitling
Brown Rudnick to the relief ithas requested in all respects.
Dated: New York, New York
September 1 1,2018
Yours, etc.
LEWIS BR O B SGAARD & SMITH LLP
By:
M rk K. elh
Ja ie R. ozman
Att neys or Third-Party Defendant
Bro Ru nick LLP
21"
77 Wa treet, Floor
New York, New York 10005
(212) 232-1300
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FILED: NEW YORK COUNTY CLERK 09/11/2018 03:45 PM INDEX NO. 651242/2012 NYSCEF DOC. NO. 234 RECEIVED NYSCEF: 09/11/2018 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ------------------- --------- X JOHNATHAN BLOOSTEIN, ET AL., Index No.: 651242/12 Plaintiffs, IAS PART 53 -against- MOTION SEQUENCE #007 MORRISON COHEN BRIAN and DOES 1- LLP, SNARR, 10, Defendants. _________________________ _____ X MORRISON COHEN LLP, BRIAN SNARR, and DOES 1-10, Third-Party Plaintiffs, -against- BROWN RUDNICK LLP, Third Party-Defendant. ------------------------------------------------------ X THIRD-PARTY DEFENDANT BROWN RUDNICK LLP'S RULE 19-A STATEMENT OF MATERIAL FACTS AS TO WHICH THERE IS NO GENUINE ISSUE TO BE TRIED Third-Party Defendant Brown Rudnick LLP, by its attorneys Lewis Brisbois Bisgaard & Smith, LLP, pursuant to Rule 19-a of the Rules ofthe Justices of the Commercial Division, Supreme Court, New York County, submits the following statement of material facts in support of itsmotion for summary judgment, and as to which Brown Rudnick, the moving party, contends there is no genuine issue to be tried: 1. Plaintiffs allege that they are small to mid-sized business owners who sold shares of their businesses to their employees through Employee Stock Ownership Plan ("ESOP") transactions. 11th See the affidavit of Jamie R. Wozman sworn to on the day of September, 2018 ("Wozman Aff.") at Exhibit A, ¶ 16. 1 1 of 11 FILED: NEW YORK COUNTY CLERK 09/11/2018 03:45 PM INDEX NO. 651242/2012 NYSCEF DOC. NO. 234 RECEIVED NYSCEF: 09/11/2018 2. Plaintiffs allege that they sought to defer capital gains, and thus capital gains taxes, on their ESOP sales by reinvesting the proceeds from the sales into qualifying U.S. corporate bonds (hereinafter, "Underlying Bonds"). See the Wozman Aff. at Exhibit A, ¶ 17. 3. Former Third-Party Defendant Stonebridge Capital, LLC, a financial services company, was allegedly engaged by Plaintiffs to structure the reinvestment of the proceeds Plaintiffs made from their respective ESOP sales (hereinafter, the "Transaction"). See the Wozman Aff. at Exhibit A, ¶ 18. 4. Stonebridge allegedly retained Brown Rudnick to represent their interests in the Transaction. See the Wozman Aff. at Exhibit B without exhibits,¶ 12. 5. Plaintiffs are alleged to have engaged Morrison Cohen "as attorneys to represent and advise them in connection with the ESOP Transactions, with respect to the Reinvestment Transactions and with regard to matters relating to those transactions, including, without limitation, Proceeds." the long-term, permanent deferral of capital gains and capital gains taxes on ESOP See the Wozman Aff. at Exhibit A, ¶ 20. 6. Plaintiffs allege that the Transaction was intended to allow them to realize economic benefits, including cash from the ESOP proceeds, while deferring capital gains and thus capital gains taxes on those proceeds by investing them in the aforementioned Underlying Bonds. See the Wozman Aff. at Exhibit A, ¶ 19. 7. At the direction of Stonebridge, Brown Rudnick provided a tax opinion set forth in a September 26, 2007 letter (hereinafter, "Tax Opinion Letter"). That opinion was with regard to whether this reinvestment Transaction as itwas structured would for "non- specifically qualify recognition treatment under Section 1042 of the Code"1, i.e., whether the maññêr in which the ' See page 8 ofthe Tax Opinion Letterwhich isannexed to theWozman Aff. atExhibit C. 2 2 of 11 FILED: NEW YORK COUNTY CLERK 09/11/2018 03:45 PM INDEX NO. 651242/2012 NYSCEF DOC. NO. 234 RECEIVED NYSCEF: 09/11/2018 proceeds were reinvested would be deemed a loan or a sale by the IRS and whether itwould allow Plaintiffs to defer capital gains and thus capital gains taxes. 8. The Tax Opinion Letter sets forth the tax advice Brown Rudnick was to provide via the letter: advice "regarding the requirements concerning QRP under Section 1042(c)(4) of the Code," as well as Brown Rudnick's "opinion regarding the treatment of the Transaction under Code." Section 1042 of the Wozman Aff., Exhibit C, p. 8. 9. Brown Rudnick was asked to opine on "whether the purchase of the Underlying Bonds through Section 1042 Investor's LLC would qualify as a purchase of QRP in accordance with 1042." Code Section Id. 10. In an economic analysis Stonebridge prepared in connection with the Transaction (hereinafter, "Stonebridge Economic Analysis"), Stonebridge explained that "Brown Rudnick is providing a legal opinion on whether the financing provided by Stonebridge to the LLCs ("Loan") purposes." results in a deemed sale or disposition of the QRP for Federal Income tax See the Wozman Aff. at Exhibit D, p. 1. 11. The Tax Opinion Letter expressly labeled that section of the letter containing Brown Rudnick's actual opinion regarding the purchase of the Underlying Bonds through the Section 1042 Investors' "Opinion" LLC's. That section appears at page 33 of the letter under the heading and continues onto page 34. See the Wozman Aff. at Exhibit C, pp. 33-34. 12. The actual opinion provides that "it is our opinion that if the matter was properly briefed and presented a U.S. federal court of competent jurisdiction more likely than not would hold that the remaining components of the Transaction would not cause a Section 1042 Investor to be Code." treated as having disposed of the Underlying Bonds for purposes of Section 1042(e) of the Wozman Aff., Exhibit C, p. 34. 3 3 of 11 FILED: NEW YORK COUNTY CLERK 09/11/2018 03:45 PM INDEX NO. 651242/2012 NYSCEF DOC. NO. 234 RECEIVED NYSCEF: 09/11/2018 13. Thereunder, the letter states in bold that "This Opinion is limited to the Federal tax Opinion." treatment of the transactions or matters that are the subject of this Id. The Tax Opinion Letter continues in bold "This Opinion does not consider or provide a conclusion with issues." respect to any additional Id. 14. In connection with the Transaction, Plaintiffs allege that they issued promissory notes to an entity named Stonebridge Pass-Through Trust ("Stonebridge Trust") in exchange for loans. The loans were secured by the Underlying Bonds. See the Wozman Aff., at Exhibit A, ¶ 3 l. 15. In order to obtain money to fund its loans to Plaintiffs, Plaintiffs allege that the Stonebridge Trust securitized itsloans by issuing notes to Nomura International PLC ("Nomura") in exchange for a loan from Nomura. See the Wozman Aff., at Exhibit A, ¶¶ 28-29. 16. Plaintiffs allege that the loans from Nomura to the Stonebridge Trust were secured and collateralized by the Underlying Bonds. See the Wozman Aff., at Exhibit A, ¶ 31. 17. Plaintiffs allege that in order to protect Nomura in the event there was a decline in the value of the Underlying Bonds, the trust indentures, which were part of the Transaction documents, included a rating event of default trigger. If a triggering event occurred, Nomura could declare an event of default under the applicable trust indenture and cause the Underlying Bonds to be sold (the "Event of Default Trigger"). See the Wozman Aff., at Exhibit A, ¶ 32. 18. Plaintiffs allege that shortly before the closing ofthe Transaction, there was a revision to the Event of Default Trigger provision in the draft trust indentures. See the Wozman Aff., at Exhibit A, ¶ 38. 19. This revision is alleged to have created a new basis for Nomura to call a default and according to the Plaintiffs created a fundamental risk in the Transaction to which Plaintiffs claim they had not previously agreed. See the Wozman Aff. at Exhibit A, ¶ 41. 4 4 of 11 FILED: NEW YORK COUNTY CLERK 09/11/2018 03:45 PM INDEX NO. 651242/2012 NYSCEF DOC. NO. 234 RECEIVED NYSCEF: 09/11/2018 20. While the original provision (hereinafter, "Original Event of Default Trigger") tied the triggering event to the rating of the Underlying Bond (See the Wozman Aff. at Exhibit B, ¶ 21) the revision (hereinafter, "Revised Event of Default Trigger") is alleged to have tied the triggering event to the rating of any financial guaranty insurance policy relating to any Underlying Bond. See the Wozman Aff. at Exhibit B, ¶ 24. 21. The Revised Event of Default Trigger provision was incorporated into the Tax Opinion Letter. See the Wozman Aff. at Exhibit C, at pp. 4, 6, 8, 17 and 26 22. The Revised Event of Default Trigger appears in the Tax Opinion Letter a total of six times at pages 4, 6, 8, 17 and 26 of the 35-page letter. Id. 23. The Tax Opinion Letter also contains a singular reference to the Original Event of Default Trigger provision at page 25 of the letter. See the Wozman Aff. at Exhibit C, p. 25. 24. The Transaction is alleged to have closed with the Revised Event of Default Trigger incorporated into the trust indentures. See the Wozman Aff. at Exhibit B, ¶ 25. 25. Ultimately, the event set forth in the Revised Event of Default Trigger provision is alleged to have occurred, resulting in Nomura invoking "the Event of Default Trigger to declare Indentures." Events of Default under the Trust Wozman Aff., at Exhibit A, ¶ 43. 26. In connection to Nomura's invocation of the Event of Default under the trust indentures, on or about April 17, 2012, Plaintiffs commenced the Main Action against Morrison Cohen, alleging that Morrison Cohen was negligent in "failing to notice, perceive and/or address the inclusion of the Rating Trigger in the Trust Indentures and/or allowing and advising Plaintiffs to Trigger." respectively execute Trust Indentures containing the Rating Wozman Aff., at Exhibit A, 53. 5 5 of 11 FILED: NEW YORK COUNTY CLERK 09/11/2018 03:45 PM INDEX NO. 651242/2012 NYSCEF DOC. NO. 234 RECEIVED NYSCEF: 09/11/2018 27. On or about January 9, 2015, Morison Cohen filedthe Third-Party Complaint against Brown Rudnick, asserting claims sounding in contribution and indemnification. See the Wozman Aff. at Exhibit B. 28. The only surviving claim in the Third-Party Complaint sounds in contribution and relates to Brown Rudnick's issuance of the Tax Opinion Letter. See the Wozman Aff. at Exhibit B, ¶¶ 65-70. 29. The claim alleges that the contents of the Tax Opinion Letter, which is not at issue in the Main Action, let alone referenced in the Main Action Amended Complaint, was inaccurate because itcontained "interchangeable references to the Revised Rating Trigger and Original Rating Trigger" Wozman Aff., at Exhibit B, ¶ 32. 30. Morrison Cohen alleges that by "conflating the Original and Revised Rating Triggers throughout the Tax Opinion Letter, Brown Rudnick misrepresented elements of the Transaction's provisions." default trigger Wozman Aff. at Exhibit B, ¶ 36. 31. Morrison Cohen's contribution claim further alleges that the Tax Opinion Letter Stonebridge" "repeatedly references an economic analysis prepared by (the "Stonebridge Economic Analysis") which was based upon the Original Rating Trigger instead ofthe Revised Rating Trigger. See Wozman Aff., at Exhibit B, ¶ 38. See the Wozman Aff. at Exhibit D. 32. Morrison Cohen does not allege that the Plaintiffs read, understood, or knew the contents of the Stonebridge Economic Analysis. See the Wozman Aff. at Exhibit B. 33. Morrison Cohen does not allege that the Plaintiffs knew that the Stonebridge Economic Analysis was based on the Original Event of Default Rating Trigger. See the Wozman Aff. at Exhibit B. 6 6 of 11 FILED: NEW YORK COUNTY CLERK 09/11/2018 03:45 PM INDEX NO. 651242/2012 NYSCEF DOC. NO. 234 RECEIVED NYSCEF: 09/11/2018 34. Morrison Cohen alleges that Brown Rudnick breached its duty to the Plaintiffs by Analysis" "relying on the flawed Stonebridge Economic prepared by Stonebridge, and by including Trigger." inaccurate and misleading "descriptions of the Rating See the Wozman Aff. at Exhibit B, ¶ 66. 35. Morrison Cohen then alleges that Plaintiffs relied upon the Tax Opinion Letter in deciding to enter into the Transaction, which "they confirmed by signing contemporaneous Letter opinion" Agreements acknowledging that they had read, understood and relied on the tax (Wozman Aff., Exhibit B, ¶ 68) and that Brown Rudnick's negligence and breaches proximately caused injuries or damages suffered by the Plaintiffs. See Wozman Aff. at Exhibit B, ¶ 69. 36. Each of the five remaining individually named plaintiffs have been deposed in this matter. See Wozman Aff., at Exhibits F-J. 37. Plaintiff David Greenberg testified that he "didn't read the tax opinion letteruntil transaction." after the See p. 100 of the transcript of the April 25, 2017 deposition of plaintiff David Greenberg annexed to the Wozman Aff. at Exhibit F. 38. Plaintiff Greenberg also submitted a verification to Brown Rudnick's Interrogatories, which stated that he had not read the Tax Opinion Letter prior to the closing of the Transaction. See the Wozman Aff. at Exhibit F, pp. 86-87. documents" 39. When questioned about whether he read any ofthe "transaction before he "No." signed them, Plaintiff Greenberg answered Wozman Aff., at Exhibit F, p. 72. all" 40. Plaintiff Greenberg testified that he did "not recall Brown Rudnick at and that he only recently looked at the Tax Opinion Letter. See the Wozman Aff. at Exhibit F, p. 99. 41. Plaintiff Jonathan Bloostein testified that he read the Tax Opinion Letter prior to the closing of the Transaction, and that "There was a lot of it Iskipped over because I simply didn't 7 7 of 11 FILED: NEW YORK COUNTY CLERK 09/11/2018 03:45 PM INDEX NO. 651242/2012 NYSCEF DOC. NO. 234 RECEIVED NYSCEF: 09/11/2018 it." understand See p. 84 of the transcript of Jonathan Bloostein's March 29, 2017 deposition annexed to the Wozman Aff. at Exhibit G. 42. Plaintiff Bloostein further testified that while he relied upon the Tax Opinion Letter in deciding whether to enter into the Transaction, that reliance was on the letter's opinion as tohow the IRS would treat the Transaction and that he did not rely upon the Tax Opinion Letter for anything else. See the Wozman Aff. at Exhibit G at p. 83. 43. Plaintiff Bloostein also testified that he did not recall the Tax Opinion Letter referencing an event of default. See the Wozman Aff. at Exhibit, p. 86. 44. Plaintiff Richard Huang testified that he read the Tax Opinion Letter, but could not recall ifit was before or during the closing of the Transaction. See p. 72 of the transcript of the April 27, 2017 deposition of plaintiff Richard Huang annexed to the Wozman Aff. at Exhibit H. 45. Plaintiff Huang further testified that he relied upon the opinion contained in the Tax Opinion Letter when deciding to enter into the Transaction based upon Morrison Cohen telling him go." that itwas "ready to Wozman Aff. at Exhibit H, p. 74. 46. Plaintiff Huang explained that his reliance upon the Tax Opinion Letter was in connection to the tax opinion provided therein and that he did not rely upon the letter for any other purpose. See the Wozman Aff. at Exhibit H, pp. 73-74. 47. Plaintiff Huang testified that he did not recall the Tax Opinion Letter containing a reference to an event of default trigger. See the Wozman Aff. at Exhibit H, pp. 73-74. through"2 48. Plaintiff Joseph Rosenheck testified that he "thumbed the Tax Opinion Letter when he received it. 2 See page 37 ofthe transcriptof he June 7, 2017 deposition of plaintiff Joseph Rosenheck annexed to theWozman Aff. at ExhibitI. 8 8 of 11 FILED: NEW YORK COUNTY CLERK 09/11/2018 03:45 PM INDEX NO. 651242/2012 NYSCEF DOC. NO. 234 RECEIVED NYSCEF: 09/11/2018 "indirectly" 49. Plaintiff Rosenheck testified that he relied upon the Tax Opinion Letter in deciding whether to enter into the Transaction. See the Wozman Aff. at Exhibit I,p. 38. 50. Plaintiff Rosenheck explained that his indirect reliance on the Tax Opinion Letter was upon the opinion contained therein as to how the IRS would treat the Transaction and that there was nothing else in the letter that he relied upon. Id. through" 51. Plaintiff Rosenheck testified that when he "thumbed the Tax Opinion Letter he did not notice a reference to the event of default trigger. See the Wozman Aff. at Exhibit I,pp. 37-38. 52. Plaintiff Steven Brandis testified that he read through the Tax Opinion Letter as much "layman," 3 as a could understand itand that he may have read it prior to the closing of the Transaction, but could not say for certain. See the Wozman Aff. at Exhibit J, p. 27. 53. Plaintiff Brandis further testified that he did not recall the Tax Opinion Letter containing any references to the event of default trigger. Id. 54. Plaintiff Brandis testified that he relied upon Larry Kaplan of Stonebridge and Brian Snarr of Morrison Cohen to tell him that the opinion contained in the Tax Opinion Letter was favorable. See the Wozman Aff. at Exhibit J, pp. 20-21. Plaintiffs' 55. Prior to filing of the note of issue, Plaintiffs and Brown Rudnick identified tax expert witnesses; exchanged expert reports of their respective tax experts; and produced their experts for deposition. See the Wozman Aff., at ¶ 62. Plaintiffs' 56. tax expert witness, Alexis Gelinas, Esq., the head of Sadis & Goldberg LLP's Tax and ERIS practice groups provided an expert report which states that the tax opinion 3 See page 20 ofthe transcriptof theJune 29,2017 deposition of plaintiff Steven Brandi isannexed hereto as Exhibit J. 9 9 of 11 FILED: NEW YORK COUNTY CLERK 09/11/2018 03:45 PM INDEX NO. 651242/2012 NYSCEF DOC. NO. 234 RECEIVED NYSCEF: 09/11/2018 contained in the Tax Opinion Letter "is correct with regard to its conclusion that the securities purchased would qualify for tax deferral under Section 1042 of the Internal Revenue Code of 1986 amended." as See the Wozman Aff. at Exhibit K. Gelinas' "well-written" 57. At Mr. deposition he testified that the Tax Opinion Letter was transactions." and "very similar to other opinion letters that I've seen on these kind of See the Wozman Aff. at Exhibit L, p. 52. 58. Stanley E. Bulua, Esq., Brown Rudnick's tax expert witness and the head of the tax, estate planning and employee benefits department at Robinson Brog Leinwand Greene Genovese and Gluck PC, provided an expert report, appeared for deposition, and submitted an affidavit in support of the instant motion on behalf of Brown Rudnick. See the Wozman Aff., at ¶ 65. 59. Mr. Bulua attests that itis "his professional opinion that the Tax Opinion Letter was care," prepared in accordance with the accepted standard of and that "the conclusions set forth in the law." Tax Opinion Letter are supported by the See paragraph 7 of Mr. Bulua's accompanying affidavit sworn to on the 6th day of September, 2018. 60. Mr. Bulua further attests that the conclusions set forth in the Tax Opinion Letter would not have changed if the singular reference to the Original Event of Default Trigger was not included in the letter or if the Stonebridge Economic Analysis had described the Rating Trigger as the Revised Event of Default Rating Trigger. Id. 61. Morrison Cohen has not identified a tax expert in connection with their surviving contribution claim related to the Tax Opinion Letter. See the Wozman Aff. at ¶ 62. 62. Morrison Cohen has not produced an expert report by a tax expert in connection to their Tax Opinion Letter contribution claim. See the Wozman Aff. at ¶ 62. 10 10 of 11 FILED: NEW YORK COUNTY CLERK 09/11/2018 03:45 PM INDEX NO. 651242/2012 NYSCEF DOC. NO. 234 RECEIVED NYSCEF: 09/11/2018 63. Morrison Cohen has not produced a tax expert for deposition to testify regarding the Tax Opinion Letter. See the Wozman Aff. at ¶ 62. 64. Pursuant to the provisions of the applicable New York State law there are no legally cognizable facts sufficient to defeat Brown Rudnick's within motion for summary judgment entitling Brown Rudnick to the relief ithas requested in all respects. Dated: New York, New York September 1 1,2018 Yours, etc. LEWIS BR O B SGAARD & SMITH LLP By: M rk K. elh Ja ie R. ozman Att neys or Third-Party Defendant Bro Ru nick LLP 21" 77 Wa treet, Floor New York, New York 10005 (212) 232-1300 11 11 of 11