Cobalt Partners v. GSC Capital Corp.
Justice Karla Moskowitz
GSCP (NJ) L.P.a subsidiary of GSC Group Inc. (Group)owns a minority of GSC Capital Corp.'s (Fund) stock and is Fund's investment adviser. Relying on Group's and Fund's promises to register Fund's shares, Cobalt Partners bought $4 million in restricted shares. Supreme court dismissed Cobalt's suit charging Group with breach of oral contract, and charging all defendants with breaching an offering memorandum and a registration rights agreement. Despite affirming the bulk of supreme court's ruling, First Department held Cobalt alleged facts sufficient to pierce the corporate veil, and reversed dismissal of its claim that Group breached written contract. Ample evidence supported Group's domination and control of Fund. First Department found Cobalt alleged Group's misuse of the corporate form to commit a wrong. Group allegedly caused Fund to breach the offering memorandum and registration rights agreement. Further, Cobalt alleged that Group, as Fund's alter ego, failed to cause a registration statement to become effective because notes were worth less than $25 dollars per share. Once registered, Fund would have to repurchase the notes, thereby causing Group to lose money derived from GSCP's management fees.
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