14-3155-cv
US Bank N.A. v. NNN Realty Advisors, Inc.


                                UNITED STATES COURT OF APPEALS
                                    FOR THE SECOND CIRCUIT

                                            SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY
OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

       At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New
York, on the 23rd day of June, two thousand fifteen.

PRESENT: RALPH K. WINTER,
                 PIERRE N. LEVAL,
                 REENA RAGGI,
                                 Circuit Judges.
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US BANK NATIONAL ASSOCIATION, in its capacity
as trustee for the registered holders of LB-UBS
COMMERCIAL MORTGAGE TRUST 2007-C2,
COMMERCIAL                MORTGAGE              PASS-THROUGH
CERTIFICATES, SERIES 2007-C2, acting by and
through its Special Servicer, ORIX CAPITAL
MARKETS, LLC, under the Pooling and Service
Agreement dated as of April 11, 2007,
                                 Plaintiff-Appellee,

                              v.                                         No. 14-3155-cv

NNN REALTY ADVISORS, INC.,
                  Defendant-Appellant,

NNN 200 GALLERIA, LLC,
                                 Defendant.
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FOR APPELLANT:                           Sameer Rastogi, Sichenzia Ross Friedman
                                         Ference LLP, New York, New York.

FOR APPELLEE:                            Keith M. Brandofino, Stefanie Kennedy,
                                         Kilpatrick Townsend & Stockton LLP, New
                                         York, New York.

      Appeal from a judgment of the United States District Court for the Southern

District of New York (Alvin K. Hellerstein, Judge).

      UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,

AND DECREED that the judgment entered on July 21, 2014, is AFFIRMED.

      Defendant NNN Realty Advisors, Inc. (“NNN Realty”) appeals from an award of

summary judgment in favor of plaintiff US Bank National Association (“US Bank”) on

its breach-of-contract claim. The district court concluded, as a matter of law, that NNN

200 Galleria, LLC (“NNN 200”) had defaulted on its loan agreement with US Bank’s

predecessor-in-interest by “permit[ting] a Sale or Pledge of an interest in [a] Restricted

Party . . . without . . . prior written consent,” App. 117, thereby triggering recourse

liability against both NNN 200 and NNN Realty. The district court entered judgment

for US Bank in the amount of $21,821,050.23, with liability capped at $10 million as

against NNN Realty.

      We review an award of summary judgment de novo, and we will affirm only if the

record, viewed in the light most favorable to the nonmoving party, reveals no genuine

issue of material fact. See Fed. R. Civ. P. 56(a); Zann Kwan v. Andalex Grp. LLC, 737

F.3d 834, 842–43 (2d Cir. 2013). We assume the parties’ familiarity with the facts and



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record of prior proceedings, which we reference only as necessary to explain our decision

to affirm.

1.     Breach of Contract

       NNN Realty argues that the district court erred in concluding, as a matter of law,

that (1) NNN Realty’s merger with Grubb and Ellis, Co. (“Grubb Ellis”) involved the

“Sale or Pledge” of an interest in a “Restricted Party,” within the meaning of the loan

agreement between NNN 200 and US Bank’s predecessor-in-interest; and (2) NNN 200

“permit[ted] a Sale or Pledge of an interest in [a] Restricted Party . . . without . . . prior

written consent.” App. 117. We are not persuaded.

       First, NNN Realty does not dispute that it was a “Restricted Party” under the loan

agreement. Nor does it dispute that the net result of its merger agreement with Grubb

Ellis was a “newly formed company,” 59% of which was controlled by NNN Realty and

41% of which was controlled by Grubb Ellis. App. 985. Thus, as the district court

correctly recognized, even if the merger resulted in NNN Realty emerging as the

predominant force in the new entity, the transaction was transformative of the merger

partners and, thus, properly viewed as a sale or pledge, directly or indirectly, of their own

interests to the new company. Accordingly, the district court correctly concluded that

this merger of a Restricted Party was a transaction requiring written consent under the

loan agreement.

       Second, NNN Realty does not dispute that NNN 200 never obtained the lender’s

written consent to the aforesaid merger. Instead, NNN Realty argues that because NNN


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200 was its subsidiary—not vice versa, as the district court mistakenly thought—NNN

200 lacked authority to prevent such a sale. The argument is unconvincing because the

exact relationship between NNN 200 and NNN Realty is irrelevant here. There is no

doubt that NNN Realty was a “Restricted Party” under the loan agreement. See App. 71

(identifying both members and owners of NNN 200 as Restricted Parties); see also

Special App. 7 (“[NNN Realty] is the sole member of NNN Realty Investors, LLC which

is in turn the sole member of NNN 200.”); App. 962 (same). And, under the loan

agreement, NNN 200 was obligated not to permit the transfer of “an interest in any

Restricted Party . . . without . . . the prior written consent of Lender . . . .” App. 117

(emphasis added). Thus, the loan agreement cannot be construed, as NNN Realty urges,

to obligate NNN 200 to secure written consents only of transfers of interests in Restricted

Parties that are its subsidiaries. See Galli v. Metz, 973 F.2d 145, 149 (2d Cir. 1992)

(“[A]n interpretation that gives a reasonable and effective meaning to all terms of a

contract is generally preferred to one that leaves a part unreasonable or of no effect.”

(internal quotation marks omitted)); accord LaSalle Bank N.A. v. Nomura Asset Capital

Corp., 424 F.3d 195, 206 (2d Cir. 2005). NNN 200 was equally obliged to obtain

written consent for transfers of interests in Restricted Parties that were, directly or

indirectly, its beneficial owners. Accordingly, the district court correctly concluded that

NNN 200 breached the loan agreement when it permitted Restricted Party and guarantor

NNN Realty to merge its interests into a new entity—even one where it exercised

majority control—without prior written consent of the Lender.


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2.    Discovery

      NNN Realty argues that the district court erred in awarding summary judgment to

plaintiff without permitting discovery. See, e.g., Hellstrom v. U.S. Dep’t of Veterans

Affairs, 201 F.3d 94, 97 (2d Cir. 2000) (observing that nonmoving party must have

“opportunity to discover information that is essential to his opposition” to summary

judgment motion (internal quotation marks and citations omitted)). But neither NNN

Realty nor NNN 200 provided an affidavit describing the discovery sought or their efforts

to obtain it. See Fed. R. Civ. P. 56(d); Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d

292, 303 (2d Cir. 2003) (detailing required showing when summary judgment resisted on

ground that opposing party needs discovery). To the extent NNN Realty argues that

discovery should have been allowed as to its ownership and merger, the argument rings

hollow, given that it presumably possesses information relevant to both issues and, in any

event, has made no showing that US Bank had any relevant information on these issues.

Accordingly, we identify no error in the district court’s decision to award summary

judgment without permitting discovery.

3.    Conclusion

      We have considered NNN Realty’s remaining arguments, and we conclude that

they are without merit. Accordingly, the judgment of district court is AFFIRMED.

                                  FOR THE COURT:
                                  CATHERINE O’HAGAN WOLFE, Clerk of Court




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