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Jeff Kurtz v. James Burt


July 16, 2012


On appeal from the Superior Court of New Jersey, Chancery Division and Law Division, Bergen County, Docket Nos. C-349-09 and L-6899-10.

Per curiam.


Argued April 24, 2012

Before Judges Payne, Reisner and Hayden.

Plaintiff Jeff Kurtz appeals from an interlocutory trial court order dated June 28, 2010, granting summary judgment. That order became appealable as of right after the court entered a final order dated March 4, 2011. We affirm.


The underlying litigation arose from a dispute over an account at Morgan Stanley & Co, Inc., that defendants James and Colleen Burt (the Burts or buyers) used as collateral for their purchase of a business from Kurtz. In connection with the purchase, Kurtz and the Burts entered into a Master Pledge Agreement (the Agreement) on August 30, 2007, in which the buyers pledged as collateral "common shares of The New York Stock Exchange . . . (the NYSE stock) . . . with a market value totaling $1,000,000."

On April 10, 2008, the Burts and Kurtz entered into an Amendment to Master Pledge Agreement (Amended Agreement), which provided in pertinent part that the parties agreed to amend the original Master Agreement by deleting all references to the NYSE Stock and replacing those reference with the following language: "Municipal Auction Rate Securities or a laddered municipal bond portfolio . . . all consisting of New Jersey high quality issued municipals of Investment Grade with a Rating of 'BB' or better and with a market value totaling $1,000,000." [emphasis added] The next paragraph provided that the Municipal Auction Rate Securities instruments (MARSs) "will be 7 day, 28 day or 35 day currently priced for purchase and liquidation at Par." The Amended Agreement did not contain any requirement that the buyers deposit or maintain cash in the account instead of MARSs.

On this record, there is no dispute that at some point, the issuers of some of the MARSs redeemed them, leaving $516,000 in cash in the Morgan Stanley account. The Burts withdrew the cash and replaced it with additional MARSs. Kurtz filed a complaint and order to show cause (OSC) against the Burts and Morgan Stanley, alleging that the Burts wrongfully withdrew the $516,000 in cash from the account, and complaining that the MARSs in the account were "worth far less than the $1,000,000 market value" required by the Amended Agreement.

Morgan Stanley filed a motion to dismiss the complaint or for summary judgment. The motion was supported by account statements showing the value of the MARSs in the pledged account.*fn1 The motion was also supported by two articles from financial journals explaining what MARSs are, and how they are traded. It is clear from the articles that MARSs are safe investments, in the sense that they retain their par value over the long term, however, they are also long-term investments that are not liquid in the same way that stocks are liquid, i.e., readily convertible into cash. They are traded through a Dutch-auction process that may or may not result in a sale. See Dow Corning Corp. v. BB&T Corp., Fed. Sec. L. Rep. (CCH) ¶ 95,967 (D.N.J. Nov. 23, 2010). An issuer can force a redemption of its MARSs by "calling" them, but there is no "put" option by which the buyer of the MARSs can force the issuer to redeem the MARSs prior to the maturity or redemption date. That was what Kurtz bargained for when he agreed that the Burts could pledge MARSs as collateral.

Kurtz's responding papers did not deny that the MARSs in the account had a par value of $1 million or more; rather, the response asserted that the MARSs were "illiquid" and could not be immediately sold. While Kurtz objected to Morgan Stanley's submission of financial journal articles instead of expert reports, his responding papers did not deny that, as investment vehicles, MARSs functioned as the articles described them. Notably, the opposition to the motion was not supported by a certification from Kurtz himself.

In a written opinion, Judge Ellen Koblitz concluded that Kurtz failed to state a cause of action because he did not plead or prove that defendants' alleged wrongful action caused him any damages. Using the summary judgment standard, because she considered matters outside the pleadings, the judge found that the parties bargained for collateral consisting of MARSs and that was what the Burts provided. The court found that the Amendment required the securities in the account to be MARSs. While the parties' instruction letter to Morgan Stanley did not allow withdrawals without plaintiff's written consent, it did allow Morgan Stanley to "execute trades at the discretion of" the Burts.

The court noted that, on many prior occasions, defendants used the cash proceeds of a call on existing MARSs to purchase new MARSs directly, with no record of plaintiff's either consenting or objecting. The July 2009 transactions at issue were to the same net effect, but plaintiff considered them improper because they proceeded differently, in that the Burts bought the new MARSs with outside funds and then made a corresponding cash withdrawal.*fn2

The court found that the new MARSs were "exactly the type of collateral agreed upon by the parties," that there were no further qualifications for account collateral, and that "[t]he terms of the agreements authorized the defendants to execute transactions that converted cash into" MARSs without prescribing any particular mechanism. She found that even if defendants were not so authorized, that would have been immaterial, because "the end result" nonetheless "put plaintiff in the exact position for which he contracted." The "current economic climate" may have rendered the account less desirable as a form of collateral than the parties "likely anticipated at the outset," but she reasoned that a court may not "place a party in a position better than the one he bargained for."

The judge also ruled that delaying summary judgment for discovery would be pointless, because plaintiff did not indicate how discovery "would prove the existence of damages." She did not distinguish between plaintiff's contractual and tort claims other than to rule that plaintiff "provides no basis" for his "contention" that discovery would "reveal" any alleged "collusion and conspiracy between Morgan Stanley and the Burts."

She ruled that defendants were thus entitled to judgment as a matter of law.*fn3

Kurtz filed a reconsideration motion, supported by his own self-serving certification, asserting among other things that he understood that the Amended Agreement guaranteed him liquid collateral. On August 19, 2010, Judge Harry Carroll denied plaintiff's reconsideration motion. In denying the motion, Judge Carroll declined to consider Kurtz's certification, reasoning that it contained information that was known to plaintiff and could have been submitted at the time of the original motion.


We review the trial court's summary judgment decision de novo. Prudential Prop. & Cas. Ins. Co., Inc. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). We consider whether there are material facts in dispute and, if not, whether the undisputed facts viewed in the light most favorable to the non-moving party nonetheless entitle the moving party to judgment as a matter of law. Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). We review the court's decision to deny a reconsideration motion for abuse of discretion. See DelVechhio v. Hemberger, 388 N.J. Super. 179, 189 (App. Div. 2006).

Having reviewed the record, we affirm, substantially for the reasons stated by Judge Koblitz and Judge Carroll in their respective opinions. Plaintiff's appellate contentions are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We add the following comments.

Plaintiff's appellate arguments revolve around one central premise - that the term "market value" implies "liquidity." Plaintiff's thesis is incorrect. As Judge Koblitz's opinion correctly concluded: "The record overwhelmingly establishes that [MARSs] were exactly the type of collateral agreed upon by the parties, as the Amendment executed by the parties expressly changed the form of collateral from NYSE stock to [MARSs]." And, as Judge Koblitz explained, MARSs are not "liquid" assets in the way that cash and NYSE stock are liquid. MARSs are long-term investments that are typically redeemed either on their maturity dates or through a Dutch-auction process that may result in a sale or may result in the issuer exercising a call option.

The issuer's exercise of such a call option resulted in the presence of $516,000 in cash in the Morgan Stanley account, representing the proceeds of the redeemed MARSs. Nothing in the Amended Agreement required the Burts to fund the Morgan Stanley account with cash. They withdrew the cash and replaced it with an equivalent amount of MARSs, the specific collateral called for in the Amended Agreement. Perhaps, in hindsight, plaintiff wishes he had bargained for a different type of collateral. But, as Judge Koblitz observed, it is not the courts' role to make a better bargain for the parties than the one they made for themselves. Kotkin v. Aronson, 175 N.J. 453, 455 (2003).

We also find no abuse of discretion in Judge Carroll's decision not to consider Kurtz's certification on the motion for reconsideration. A reconsideration motion is not an opportunity to supplement the record with material that could have been submitted on the original motion. See Cummings v. Bahr, 295 N.J. Super. 374, 384-85 (App. Div. 1996).


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