Alesco Preferred Funding VIII, Ltd. v. ACP Re, Ltd.

Alesco Preferred Funding VIII, Ltd. v ACP Re, Ltd.

2026 NY Slip Op 06059 October 20, 2026 Appellate Division, First Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This decision is uncorrected and subject to revision before publication in the Official Reports. Alesco Preferred Funding VIII, Ltd., et al., Plaintiffs-Respondents, v

ACP Re, Ltd., et al., Defendants-Appellants, William F. Dove et al., Defendants. Preferred Term Securities XXV, Ltd., et al., Plaintiffs-Respondents,

Decided and Entered: October 20, 2026

Index No. 655881/17, 653820/22|Appeal No. 6776-6777-6778 M-1993 M-1994|Case No. 2025-05802, 2025-07913| Before: Manzanet-Daniels, J.P., Kennedy, Mendez, Michael, Hagler, JJ.

Quinn Emanuel Urquhart & Sullivan, LLP, Austin, TX (John Bash of the bar of the District of Columbia and State of Texas, admitted pro hac vice, of counsel), for ACP RE, LTD., Castlepoint Bermuda Holding, LTD., Castlepoint Management Corp., Preserver Group, Inc., Tower Group, Inc. and Tower Group International, LTD., appellants. Pillsbury Winthrop Shaw Pittman LLP, New York (Rolando T. Acosta of counsel), for

William F. Fox, William E. Hitselberger, Michael H. Lee, Elliot S. Orol and Steven W. Schuster, appellants. Dorf Nelson & Zauderer LLP, New York (Mark C. Zauderer of counsel), for The Estate of Michael Karfunkel, Leah Karfunkel, Barry Zyskind, Michael Karfunkel Family 2005 Trust, Michael Karfunkel 2005 Grantor Retained Annuity Trust, AmTrust Financial Services, Inc., National General Holdings Corp., ACP Re Holdings, LLC, Integon National Insurance Company, Inc. and Technology Insurance Company, Inc., appellants.

Wollmuth Maher & Deutsch LLP, New York (Timothy A. DeLange of the bar of the State of California, admitted pro hac vice, of counsel), for respondents.

Murray & Di Bella LLP, New York (Martin J. Murray of counsel), for James P. Corcoran, amicus curiae. Robinson & Cole LLP, New York (Benjamin M. Daniels of counsel), for American Property Casualty Insurance Association, amicus curiae.

[*1]

Order, Supreme Court, New York County (Andrew Borrok, J.), entered on or about August 12, 2025, which, insofar appealed from as limited by the briefs, granted plaintiffs' motions for summary judgment dismissing defendants' affirmative defenses, and denied defendants' motions for summary judgment dismissing the claims against them, unanimously modified, on the law, to grant the motions for summary judgment of defendants Amtrust Financial Services, Inc. (AmTrust), Integon National Insurance Company, National General Holdings Corp. (Nat Gen), Technology Insurance Company, Inc., ACP Re Holdings, LLC (ACP Holdings), ACP Re, Ltd. (ACP Re), Tower Group International, Ltd., George Karfunkel, Leah Karfunkel, Estate of Michael Karfunkel, Barry Zyskind, Michael Karfunkel Family 2005 Trust, the Michael Karfunkel 2005 Grantor Retained Annuity Trust (Michael Karfunkel 2005 GRAT), William F. Fox Jr., William Hitselberger, Michael H. Lee, Elliott S. Orol, and Steven W. Schuster, and Tower Group, Inc., except for defendants Preserver Group, Inc. (Preserver), CastlePoint Bermuda Holdings, Ltd. (CastlePoint Bermuda), CastlePoint Management Corp. (CastlePoint Management), and Tower Group, Inc. (TGI) in their capacity as issuers (collectively, the Issuers), and otherwise affirmed, without costs.

Appeals from judgments, same court and Justice, entered November 15, 2025, in plaintiffs' favor against Preserver, CastlePoint Bermuda, CastlePoint Management, and TGI, in its capacity as Issuers, unanimously dismissed, without costs, as abandoned.

Relevant Facts

Plaintiffs, sophisticated investors that purchased trust preferred securities (TruPS) contend that defendants are obligated, or assumed the obligation, to pay the TruPS investors. TruPS are, according to plaintiffs' own expert, "riskier than other debt securities," are "deeply subordinated," and "of low rank in the capital structure of their sponsor."

Plaintiffs are the holders of TruPS with an aggregate principal amount of $228 million. Between 2003 and 2007, the Issuers issued TruPS. The Issuers' operating subsidiaries â​​ insurance companies â​​ were the source for payment of the TruPS. All the Issuers are foreign entities; Preserver is a New Jersey corporation, CastlePoint Bermuda is a Bermuda company, and CastlePoint Management and TGI are Delaware corporations.

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[*2] The indentures under which the TruPS were issued are governed by New York law. Sections 11.1 and 11.2 of the indentures provide that if a Company, defined as the issuer and its "successors and assigns," is not the surviving entity after a consolidation, merger, sale, conveyance, transfer, or lease of the Company property, then the obligation to pay the securities shall be assumed by the surviving entity. The indenture's defined terms clarify that the Company's

"successors and assigns" are "subject to the provisions of Article [11]". Except for the Preserver indenture, the indentures (sections 14.1 and 14.11) also provide that they are binding on the Company "and its successors and assigns whether so expressed or not." The indentures do not specifically define "successors."

Between 2007 and 2009, one of the Issuers, TGI, acquired all of Preserver's stock and acquired indirect ownership of CastlePoint Management and CastlePoint Bermuda through the stock purchase of their parent CastlePoint Holdings. In 2013, TGI completed a reverse-merger transaction with nonparty Canopius Holdings Bermuda Ltd. (Canopius Holdings Bermuda). As part of the merger, a subsidiary of Canopius Holdings Bermuda was merged into TGI. Canopius Holdings Bermuda was then renamed Tower Group International, Ltd. (TGIL), and TGIL became the ultimate parent holding company of TGI. Thus, as of the end of 2013, the Issuers were subsidiaries of TGIL. TGIL is a Bermuda exempted company headquartered in Bermuda.

In late 2013, TGIL and its insurance operating subsidiaries experienced financial difficulties and, as reflected in its public statements, was effectively insolvent and on the brink of collapse. In June and July 2014, the Issuers provided notice that they would start deferring payment of interest on the TruPS pursuant to the terms of the indentures. TGIL solicited proposals for an acquisition or other corporate transactions to avert eventual failure and insolvency of its insurers. In January 2014, TGIL accepted a proposal from ACP Re under which ACP Re became the parent company of TGIL. Prior to this transaction closing, TGIL issued an approximate 600-page proxy statement to its shareholders seeking their approval of the merger. The proxy statement defined "the Company" as Tower Group International, Ltd. â​​ that is, TGIL â​​ and reflected that the outstanding TruPS were TGIL's debt. The proxy statement also represented that the proposed deal provided the best opportunity for the TruPS debt to be repaid or "assumed" by ACP Re. [*3]

Specifically, the proxy statement provided that "[t]he material factors considered by [TGIL's] board [when deciding to accept ACP Re's proposal]" included that "the merger would provide the best opportunity for the Company [that is, TGIL] to protect [its] existing policyholders and provide for the assumption or repayment of [its] indebtedness, including [$150 million of] Convertible Notes [maturing in September 2014] and the Company's $235 million in outstanding principal of [TruPS]."

In August 2014, over 98% of TGIL shareholders voted to approve the merger and ACP Re subsequently became the direct 100% owner of and acquired all the equity of the surviving TGIL entity. The TGIL-ACP Re merger closed on September 15, 2014.

ACP Re, a Bermuda based reinsurance company, is a subsidiary of defendant ACP Holdings, which is owned by defendant Michael Karfunkel Family 2005 Trust, of which defendant Leah Karfunkel is trustee. Leah Karfunkel and the Michael Karfunkel 2005 GRAT are shareholders of ACP Re. Before his death, Michael Karfunkel was a director of ACP Re, chairman and shareholder of defendant AmTrust, and CEO and shareholder of defendant Nat Gen. As part of the TGIL-ACP Re merger, AmTrust and Nat Gen agreed to reinsure certain policies issued by TGIL's subsidiaries. AmTrust and Nat Gen paid ceding commissions to the subsidiaries and, in return, received the premium that the subsidiaries otherwise would have received. The parties disagree as to ACP Re's motivation for merging with TGIL, with plaintiffs arguing that defendants had a nefarious motive to strip TGIL of assets for their own benefit, and defendants arguing that they acted to save failing insurance companies.

Some ten days after the TGIL-ACP Re transaction closed, nonparty Doug Duncan, the managing director of nonparty Wolf River Capital Management, which presumably manages the Wolf River plaintiffs, sent an email to his broker with an excerpt of the above-quoted proxy statement and commented, "[s]o, yes, we would love to own AmTrust debt[.]" At his deposition, Duncan clarified that he understood from the proxy statement that the TGIL debt, including the TruPS, had been assumed by ACP Re and their controlling entities (including AmTrust), and thus considered the TruPS to be a desirable investment.

[*4]

The following year, in July 2015, Duncan had a phone conversation with defendant Hitselberger, who was CFO and executive vice president of TGIL; CFO and senior vice president of TGI; CFO, executive vice president, and a director of Preserver; and a director of CastlePoint Management and CastlePoint Bermuda. According to Duncan, Hitselberger said to him, among other things, that "we feel good about our capital levels . . . I would expect that we would start paying interest by the end of 2015 or 2016 on our trust preferreds." Duncan testified, and claims his contemporaneous notes support, that his understanding from this conversation was that ACP Re had assumed TGIL's balance sheet, including the TruPS. In reliance on this call, Duncan maintains that he decided not to sell the TruPS he had purchased on behalf of Wolf River shortly after the deal closed.

As a result of deferrals and other events, including an order placing TGIL insurance companies into a California conservatorship, the entire principal and all accrued interest on the TruPS at issue became due and payable in July 2016. The Issuers, now defunct entities, have not paid the amount owed under the TruPS. Judgment against the Issuers in plaintiffs' favor has been entered and is not at issue on appeal.

Unable to recover from the Issuers, plaintiffs have sought to recover their investment losses from the remaining defendants. The Alesco plaintiffs are hedge funds and collaterized debt obligations (CDOs) holding TruPS, who are

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domiciled in the Cayman Islands, Tennessee, and Delaware. The Preferred plaintiffs are CDOs holding TruPS and are domiciled in the Cayman Islands.

As relevant on appeal, the Alesco plaintiffs have alleged that (1) the Issuers and TGIL/ACP Re, as the Issuers'

successors and alter egos, breached the indentures; (2) ACP Re and the Karfunkel defendants (defined as ACP Holdings, AmTrust, Integon, Nat Gen, Technology Insurance, Geroge Karfunkel, Leah Karfunkel, Estate of Michael Karfunkel, Barry Zyskind, Michael Karfunkel Family 2005 Trust, and Michael Karfunkel 2005 GRAT) tortiously interfered with the indentures; (3) TGIL and defendant Hitselberger committed fraud based on TGIL's proxy statement and Hitselberger's statements to Duncan; (4) the Karfunkel defendants and ACP Re aided and abetted such fraud; (5) ACP Re and the individual director and officer defendants (the D&O defendants, which includes William F. Fox Jr., Hitselberger, Michael H. Lee, Elliot S. Orol, and Steven W. Schuster) breached their fiduciary duties owing to plaintiff;

(6) the Karfunkel defendants aided and abetted such breaches of fiduciary duty; (7) the Karfunkel defendants are alter egos of ACP Re and the Issuers and thus liable for their breaches; and (8) the Karfunkel defendants are successors of the Issuers and thus liable under this alternate theory. The Preferred plaintiffs have brought a sole claim for breach of the indentures.

[*5]

Initially, the definition of "Karfunkel Defendants" in plaintiffs' appellate brief omits George Karfunkel and Barry Zyskind. Hence, all claims against those defendants are dismissed. As for the remaining defendants, except for the Issuer defendants, Supreme Court should have granted the motions for summary judgment dismissing the claims against them.

Discussion

On appeal, plaintiffs concede that they are not seeking to hold the Karfunkel defendants liable as successors of the Issuers. Plaintiffs only seek to hold TGI, TGIL, and ACP Re liable for breach of the indentures. Supreme Court erred in denying defendants' motions for summary dismissal of this cause of action.

As noted, the indentures contain provisions intended to protect investors in the event that the Issuers were merged with or acquired by another entity. Defendants argue on appeal that New York law does not permit imposing the debt on them because they did not affirmatively consent to liability, regardless of the language of the indentures, because they are not parties to those contracts. We have considered and rejected this argument on two prior occasions, which is now law of the case (Alesco Preferred Funding VIII, Ltd v ACP Re, Ltd, 209 AD3d 558 [1st Dept 2022] [Alesco]; Preferred Term Sec., XXV, Ltd. v ACP Re, Ltd., 233 AD3d 453 [1st Dept 2024]). However, Supreme Court improperly found that it is the law of the case that TGI and the Karfunkel defendants are liable as successors for breach of contract pursuant to sections 14.1 and 14.11 of the indentures. Supreme Court relied on this Court's decision in Alesco; however, there is no mention of sections 14.1 or 14.11 of the indentures in that decision. Rather, in Alesco we closely analyzed section 11.1 and the "triggers" for the successor liability provisions. Section 11.1 provides that "[n]othing . . . shall prevent any consolidation or merger of the Company . . . provided, however, that . . . upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other disposition, the due and punctual payment of . . . the Debentures . . . shall be expressly assumed by supplemental indenture satisfactory in form to the Trustee."

[*6]

Upon review of this language, we concluded that an issuer can be a surviving entity even if it has not been "entirely extinguished" by the transaction and the issuer "continued as an indirect subsidiary of the merger counterparty"

(Alesco, 209 AD3d at 559). While we did not determine whether the Issuers fit within the scope of this language, we concluded that we must look to section 11.1 to determine whether a party is a "successor" within other provisions of the contract (id.). As noted above, the indenture's defined terms clarify that the Issuers' "successors and assigns" are

"subject to the provisions of Article [11]." Accordingly, Alesco is not law of the case insofar as sections 14.1 and 14.11 are concerned (see Carmona v Mathisson, 92 AD3d 492, 492-493 [1st Dept 2012]).

Plaintiffs argue that defendants TGI, TGIL, and ACP Re are the successors and surviving entities following the mergers, and thus are liable for payment of the debentures under the indentures. As noted above, we must look to section 11.1 of the indentures to determine which parties are "successors," which requires a finding that the Issuers were not the

"surviving corporation[s]" to the various merger transactions. On defendants' motions for summary judgment, they submitted an expert affidavit providing that Preserver survived the transaction and retained the substantial majority of its property thereafter, and its insurance operating subsidiaries continued substantially the same business operations as they had prior to the transaction, with largely the same assets and directors, managers, and staff, each of which were predominantly separate from the operations, assets and employees of TGI. The expert provided similar statements with regard to the other Issuers â​​ CastlePoint Bermuda, CastlePoint Management, and TGI, including with regard to TGI merging into TGIL. Finally, the expert opined similarly with regard to TGIL's merger into ACP Re.

In all, defendants' expert testimony set forth that (1) Preserver was "the surviving entity" under its indenture after TGI bought its shares; (2) CastlePoint Bermuda and CastlePoint Management were the surviving corporations under their indentures after TGI bought the shares of their parent, CastlePoint Holdings; (3) TGI was the surviving corporation under its indentures after it merged into TGIL; and (4) TGIL was the surviving corporation after it merged into ACP Re. Plaintiffs failed to rebut defendants' expert's opinions in this regard.

On appeal, we are called upon to decide whether defendants' expert report was in itself sufficient to eliminate factual issues as to whether they may be deemed the Issuers' "successors" under the indentures.

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[*7] As noted by Supreme Court, there are indicia in the record that TGIL and ACP Re understood that they had assumed the TruPS debt and made statements to this effect internally and to the market. For example, as we noted in Alesco, TGIL's proxy statement issued to shareholders prior to the TGIL-ACP Re transaction reflected that TGIL was "deemed"

TGI's successor (Alesco, 209 AD3d at 559). The proxy statement also referred unequivocally to "the Company's" (i.e., TGIL's) indebtedness in the form of "$235 million in outstanding principal of trust preferred securities." Internal documents suggest that ACP Re had an understanding that it acquired the TruPS debt obligation from TGIL in connection with the merger; for example, an internal ACP Re memorandum leading up to the merger in April 2014 stated that "the outstanding trust preferred securities, including those which were assumed by [TGIL] through acquisitions, are summarized in the following table," and went on to list an internal presentation to the board setting forth that "ACP Re will retain all the liabilities of [TGIL]." Finally, ACP Re's unconsolidated balance sheet from September 2015 listed a liability for the TruPS in the amount of $235 million.

We have considered this evidence and other evidence in the record, and while we agree that it provides support for plaintiffs' position that TGIL and ACP Re may have believed that they assumed the debt leading up to the merger and thereafter, this evidence does not speak to whether these defendants were in fact successors under the indentures. Thus, the expert report was sufficient to eliminate factual issues as to whether defendants were contractual successors, which, as noted, requires a finding that the Issuers were not the "surviving corporations" to the various merger transactions. The unrebutted expert report establishes that defendants were not contractual successors. Accordingly, there is no contractual basis to impose liability on TGI as the successor of Preserver and the CastlePoint entities, on TGIL as the successor of TGI, or on ACP Re as the successor of TGIL.

II.

Plaintiffs also seek to hold TGIL and ACP Re liable under a common-law successor liability theory. A conflict of laws exists because Bermuda law does not recognize common-law successor liability separate from the contractual or statutory assumption of liability, whereas New York does.

[*8]

Assuming, as the parties do, that successor liability is a tort issue, New York engages in an interest analysis. This interest analysis applies "the law of the jurisdiction having the greatest interest in resolving the particular issue"

(Cooney v Osgood Mach., 81 NY2d 66, 72 [1993]). Federal courts applying a New York interest analysis "have generally held that successor liability claims are governed by the law of the state of incorporation" (Matter of General Motors LLC Ignition Switch Litig., 2017 WL 3382071 *13, 2017 US Dist LEXIS 123740, *378 [SD NY, Aug. 3, 2017, 14-MD-2543 [JMF]]; see also Hau Yin To v HSBC Holdings, PLC, 700 Fed Appx 66, 69 [2d Cir 2017]). The Court of Appeals has also held that, with "rare exception," the substantive law of the place of incorporation applies to disputes involving a corporation's internal affairs (Eccles v Shamrock Capital Advisors, LLC, 42 NY3d 321, 328 [2024]). The Eccles Court clarified that the substantive law of a company's place of incorporation presumptively applies, and to establish the applicability of the law of another jurisdiction a party must demonstrate both that the interest of the place of incorporation is "minimal" â​​ that is, that the company has "virtually no contact with the place of incorporation other than the fact of its incorporation" and that the other jurisdiction has a "dominant interest in applying its own substantive law" (id. at 339). More recent Court of Appeals' precedent is consistent with this rationale, noting that "a corporation's . . . liabilities [] are created, fixed, limited and qualified . . . by the law of the State granting the charter"

(Ezrasons, Inc. v Rudd, 44 NY3d 532, 538 [2025][internal quotation marks omitted]).

Applying this framework as to TGIL, this case does not present a "rare exception" to the general rule (Eccles,42 NY3d at 328). Thus, Bermuda law applies.

We note that, as reflected in the proxy statement and elsewhere in the record, TGIL is a Bermuda "exempted" company, which by definition means that the company's business operations take place outside of Bermuda (Bermuda Companies Act of 1981 §§ 127-129). TGIL also had significant New York contacts, given that it was a publicly traded company on the NASDAQ stock exchange and issued debt governed by New York law, operated out of New York, and negotiated the TGIL-ACP Re transaction in New York while relying on their attorneys in New York. However, it is also undisputed that TGIL maintained an executive principal office in Bermuda (where TGIL claims to have conducted business), employed outside counsel in Bermuda, and was subject to regulatory oversight in Bermuda. We thus must apply the substantive law of Bermuda, and dismiss the common-law successor liability claim as it pertains to TGIL. [*9]

However, the same does not hold true with respect to ACP Re. ACP Re is a holding company that, like TGIL, was incorporated in Bermuda as a Bermuda exempted entity. However, there is nothing other than ministerial and regulatory contacts that tie ACP Re to Bermuda. Indeed, as pointed out at oral argument, defendants attempt to lump TGIL and ACP Re's Bermuda contacts together and have not provided evidence to establish that ACP Re had substantive contacts or a physical presence there.

Instead, the record reflects that ACP Re is a wholly-owned subsidiary of another ACP entity that is an LLC incorporated in Delaware, and wholly owned by Michael Karfunkel and his family trust that is located in New York. ACP Re's auditor described ACP Re as a "holding company organized to provide reinsurance business solutions. . . to property and casualty insurance companies located in the United States." In addition, while the merger agreement designated that the TGIL -ACP Re transaction would close in Bermuda by operation of law, plaintiffs deny that the closing actually occurred in Bermuda, and defendants do not refute this.

Under these circumstances, applying a mechanical rule that Bermuda law should govern the successor liability issue as

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to ACP Re simply because it was incorporated as an exempted Bermuda entity and filed some ministerial paperwork there would not give effect to the law of the jurisdiction having the greatest interest in the litigation, which, under these circumstances, is New York.

Applying New York law, a corporation that purchases the assets of another corporation is "generally not liable for the seller's liabilities" unless one of four exceptions are met (New York v Natl Serv. Indus., Inc., 460 F3d 201, 209 [2d Cir 2006]). However, given that there is no basis for imposing successor liability on TGIL (as discussed above), ACP Re could not possibly have succeeded to the obligation for the TruPS through the TGIL-ACP Re transaction. Accordingly, we must dismiss the common-law successor liability claims asserted against ACP Re as well.

III.

On appeal, plaintiffs concede that they are not seeking to hold TGI, TGIL, and ACP Re liable as alter egos of the Issuers. Additionally, plaintiffs have abandoned their claims that certain Karfunkel defendants â​​ Leah Karfunkel, George Karfunkel, Barry Zyskind, ACP Holdings, Integon, and Technology Insuranceâ​​ are liable as alter egos of ACP Re. However, plaintiffs seek to hold the remaining Karfunkel defendants â​​ AmTrust, Nat Gen, Estate of Michael Karfunkel, the Michael Karfunkel Family 2005 Trust, and the Michael Karfunkel 2005 GRATâ​​ liable as alter egos of ACP Re. At the outset, we note that this issue is largely academic given that we are dismissing the substantive claims against ACP Re for contractual liability and common law successor liability. However, for the avoidance of doubt, we also find that dismissal of the alter ego claims against the Karfunkel defendants is warranted on the merits. [*10]

Bermuda and New York law conflict on piercing corporate veils (see Highland Crusader Offshore Partners, L.P. v Celtic Pharma Phinco B.V., 205 AD3d 520, 521 [1st Dept 2022]). As with common-law successor liability, New York law governs this issue because ACP Re's connections with Bermuda were "minimal" (id. at 522; Serio v Ardra Ins. Co., 304 AD2d 362, 362 [1st Dept 2003], lv denied 100 NY2d 516 [2003]).

Under similar facts, this Court in Serio found that the trial court had properly concluded that New York law governed the veil-piercing issue with respect to a reinsurance company incorporated in Bermuda (Serio,304 AD2d at 362). This Court found that defendant's contacts with Bermuda were not sufficient where it was not authorized to sell insurance in Bermuda or to do business with Bermuda residents, and the reinsurance company was controlled by "defendant[s] . . . from New York" with the relevant transactions having occurred in New York (id.). This case compels the same result. Applying New York law, in order to pierce the corporate veil, a plaintiff must show that "(1) the owners exercised complete domination of the corporation in respect to the transaction" at issue, and "(2) such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff's injury" (Matter of Morris v New York State Dep't of Taxation & Finance, 82 NY2d 135, 141 [1993]). The record supports plaintiff's allegations that ACP Re was essentially a shell company being controlled by the Karfunkel defendants at the time it entered into the TGIL-ACP Re transaction and thereafter, having no independent employees, offices, or email domain. However, domination "standing alone" is insufficient to pierce a corporate veil (id. at141-42). Thus, this cause of action must be dismissed under New York law because, even assuming that certain Karfunkel defendants dominated ACP Re and TGI, plaintiffs have not provided evidence that they stripped them of their assets such that they were left without the ability to pay. We have considered the fact that Michael Karfunkel's emails were deleted following his death in 2006 despite being subject to a litigation hold in a separate matter, and that additional evidence favoring plaintiffs' position may have been uncovered if this had not occurred. However, defendants have submitted evidence showing that their actions were not the cause of plaintiffs' injuries (id.). Defendants' experts opined that, "[t]he primary, if not only, reason why the TruPS were not ultimately paid in full is because TGIL and its subsidiaries experienced extensive unforeseen adverse development in 2014 through 2016 on policies issued in 2013 and prior years . . . . This development . . . arose entirely from insurance policies issued by TGIL's insurance operating subsidiaries in 2013 and earlier." Plaintiffs failed to submit expert reports disputing these opinions.

[*11]

Further, while plaintiffs contend that the Karfunkel defendants used ACP Re as a means for escaping regulatory scrutiny and to otherwise mislead regulators, it is evident from the record that the TGIL-ACP Re transaction was an arm's-length deal and there were no other viable options. The TGIL-ACP Re transaction was approved by eight regulatory bodies, and James Corcoran (the former Superintendent of Insurance for the State of New York) has submitted an amicus brief opining that the merger was regulation compliant and that the regulators were not mislead in any way.

Accordingly, defendants' motion for summary judgment dismissing the alter ego cause of action should have been granted.

IV.

On appeal, plaintiffs do not argue that ACP Holdings, Integon, the Estate of Michael Karfunkel, Leah Karfunkel, the Michael Karfunkel Family 2005 Trust, or the Michael Karfunkel 2005 GRAT tortiously interfered with any contract. Therefore, as to these defendants, the tortious interference claims against them are deemed abandoned and dismissed. Plaintiffs allege that the remaining Karfunkel defendants tortiously interfered with the indentures when TGIL merged with ACP Re in 2014, resulting in defendants' failure to pay the debentures two years later in 2016. To maintain a cause of action for tortious interference with a contract, a plaintiff must allege: "[1] the existence of a valid contract between the plaintiff and a third party [i.e., the indentures], [2] defendant's knowledge of that contract, [3] defendant's intentional procurement of the third-party's breach of the contract without justification, [4] actual breach of the

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contract, and [5] damages resulting therefrom" (Lama Holding Co. v Smith Barney, 88 NY2d 413, 424 [1996]). A plaintiff must also allege that the contract would not have been breached "but for" the defendant's conduct (Burrowes v Combs, 25 AD3d 370, 373 [1st Dept 2006], lv denied 7 NY3d 704 [2006]).

Plaintiffs contend that the Karfunkel defendants and ACP Re were aware of the TruPS prior to the merger and made public statements about the assumption of the debt while privately intending for the TruPS to go unpaid. However, the majority (if not all) of the plaintiffs purchased TruPS after the September 2014 closing, and thus were not parties to the contracts at the time of the alleged procurement of the breach such that their rights could have been tortiously interfered with. Regardless, as touched upon above, even the plaintiffs holding the debt at the time of the 2014 transaction are unable to establish on this record that the indentures would not have gone into default "but for"

defendants' conduct (id.).

[*12]

To the extent this claim alleges tortious interference based on the Karfunkel defendants' alleged siphoning of assets after the transaction closed, the claim also fails. As noted above, plaintiffs have not provided evidence that defendants stripped the Issuers of their assets leaving them without the ability to pay or that any such action would have caused the TruPS to default. Thus, the claim fails on the merits.

In light of the above, we need not address the economic interest defense.

V.

Plaintiffs allege that TGIL and Hitselberger committed fraud based on TGIL's proxy statement and the statements made by Hitselberger to Doug Duncan, and that the Karfunkel defendants and ACP Re aided and abetted such fraud. Unlike the majority of the other causes of action, the viability of fraud claims is not contingent on whether TGIL and ACP Re assumed the debt. Instead, plaintiffs contend that defendants made material misstatements that led them to believe that ACP Re and the Karfunkel defendants had assumed the debt, which turned out to be false. While a review of the record reveals that defendants made materially misleading statements and that plaintiffs actually relied on them, the fraud claims still fail because plaintiffs are unable to establish the other required elements.

"The elements of a fraud cause of action consist of a misrepresentation or a material omission of fact which was false and known to be false by [the] defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury" (Pasternack v Laboratory Corp. of Am. Holdings, 27 NY3d 817, 827 [2016][internal quotation marks omitted]).

TGIL's assertion in the proxy statement that "[t]he board . . . believed that the merger would provide the best opportunity for the Company [i.e. TGIL] to . . . provide for the assumption or repayment of [its] indebtedness, including .

. . the Company's $235 million in outstanding principal of [TruPS]" was materially misleading, if not false. This statement did not merely say that the board believed that the deal presented the best opportunity for the repayment of the company's indebtedness; rather, it represented that the Company (defined as TGIL) was liable for the TruPS debt and that ACP Re would at a minimum be endeavoring to assume that debt from TGIL.

[*13]

Defendants have maintained throughout this litigation (and continue to argue on appeal) that (1) the TruPS was not TGIL's debt, (2) neither TGIL, ACP Re, nor anyone else assumed or intended to assume the Issuers' debt, and (3) it was legally impossible for anyone but the Issuers to have been responsible for the debt under the various contractual and legal theories described above. Thus, accepting defendants' strongly-held litigation position at face value, Supreme Court was correct in finding that the proxy statement contained a material misstatement (see e.g. Curiale v Peat, Marwick, Mitchell & Co., 214 AD2d 16, 28 [1st Dept 1995]).

We also disagree with defendants' contention that this statement is not actionable because it is a mere statement of belief and/or a qualified prediction of a hoped-for future outcome (see Davidoff v Hershfield, 233 AD3d 926, 927 [2d Dept 2024]; Tahari v 860 Fifth Ave. Corp., 214 AD3d 491, 493 [1st Dept 2023]). With respect to the representation that the debt belonged to TGIL, this was a misstatement of present fact. Regardless,"[a]n expression or prediction of some future event, known by the author to be false or made despite the anticipation that the event will not occur, is deemed a statement of material existing fact, sufficient to support a fraud action" (Merrill Lynch, Pierce, Fenner & Smith, Inc., v Wise Metals Group, LLC, 19 AD3d 273, 275 [1st Dept 2005][internal quotation marks omitted]). Defendants' litigation position is that they neither "hoped" nor "anticipated" for the debt to be assumed by ACP Re (or anyone else). Nor is there any question that Doug Duncan, the director of Wolf River, actually relied upon the proxy statement. On September 25, 2024, he emailed his broker excerpting the language of the proxy statement discussed above, and commented "[s]o, yes, we would love to own AmTrust debt[.]" The following day, Duncan purchased the TruPS that had been issued by TGI on behalf of Wolf River. It is difficult to imagine a stronger piece of evidence to establish actual reliance.

Notwithstanding the above, however, we ultimately agree with defendants that the language in the proxy statement is not actionable because it was not "made for the purpose of inducing" the Wolf River plaintiffs to buy or continue holding TruPS (Pasternak, 27 NY3d at 827 [internal quotation marks omitted]); it was made for the purpose of getting TGIL's shareholders to vote in favor of the merger with ACP Re. And while an "indirect communication can establish a fraud claim, so long as the statement was made with the intent that it be communicated to the plaintiff and that the plaintiff rely on it" (id. at 828), plaintiffs submitted no evidence of this.

[*14]

Nor can plaintiffs, who are sophisticated investors and were aware of the financial risk involved in the investments,

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