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Shortly after the Assignment Agreement was executed, City and the Trustees entered into a Trust Agreement. Among other things, the Trust Agreement provided that the Trustees were to “assume all the claims, liabilities, and obligations (including unascertained or contingent liabilities in expenses) of [City]” listed on Schedule I of the Trust Agreement. Without such indemnification, “[f]oreign investors would not have purchased Eurobond obligations ․ because the imposition of withholding taxes would decrease their [rate of] return on the Eurobond obligations.” Id. S.-Netherlands Income Tax Convention, as extended by protocol to the Netherlands Antilles.” Id. The IRS claimed that this subsidiary did not meet the requirements for exemption from United States withholding taxes.

Schedule I listed among the liabilities assumed “any cost, expense or liability associated with any claim asserted against City with respect to any act or omission attributable to its operations or affairs which has not been discharged in full or adequately provided for.” In addition, Schedule I included, as a liability of the Trust, the costs and liabilities incurred in the defense of any litigation arising after September 25, 1985, in which City Investing was a defendant. During this time, American companies looking to raise money in the Eurobond market often formed a wholly-owned subsidiary in the Netherlands Antilles, which would issue debt securities in the Eurobond market that were guaranteed by the American parent corporation. The Netherlands Antilles subsidiary would then lend the Eurobond offering proceeds to the U. In 1974, City formed a wholly-owned subsidiary in the Netherlands Antilles. “The payment of principal and interest on these notes was unconditionally guaranteed by City.” Id. The IRS later extended that claim to the period covering tax years 1981 through 1985.

Am Base also sought the recovery of .2 million in legal expenses and related costs that it had allegedly incurred in connection with the IRS dispute and the Tax Court litigation.

In particular, Am Base alleged that, when the IRS dispute arose during the 1980s, the Trustee Defendantsapparently taking the position that Am Base was primarily responsible for the alleged withholding obligation, caused Am Base to effectively assume the costs and expenses of defending against the alleged withholding obligation without obtaining independent professional advice or guidance concerning whether the alleged withholding obligation was the primary obligation of Ambase, or the Trust, as successor to [City].

A little over three-and-a-half years then passed, during which time Am Base did not claim that the Trust was primarily responsible for the withholding taxes. Delaware Action On August 14, 2000, Am Base filed a two-count complaint against the Trust and the Trustee Defendants for declaratory and injunctive relief in the Delaware Chancery Court, contending that the potential withholding tax obligation that it had been apprised of fourteen years earlier was not its primary responsibility under the Assignment Agreement.

Am Base sought a preliminary injunction preventing the Trust from making distributions that would endanger the Trust's ability to pay the withholding tax liability, which had by then grown to 1 million.

After recapping the facts of the case, the court characterized its prior discussion of when Am Base's claims accrued as follows: In sum, Am[B]ase's claims that the Trust [was] primarily responsible for the potential withholding tax liability, that it should be required to set aside assets sufficient to satisfy that liability, and that it and not Am[B]ase should bear the cost of contesting the liability were surely ripe as of 1995, if not in 1986. This rule against claim splitting “is based on the belief that it is fairer to require a plaintiff to present in one action all of his theories of recovery relating to a transaction, and all of the evidence relating to those theories, than to permit him to prosecute overlapping or repetitive actions in different courts or at different times.” Maldonado, 417 A.2d at 382.

As of March 1986, the accrued interest on that sum was about million.

On or about May 11, 1995, the IRS issued a Notice of Deficiency to Am Base, claiming entitlement to the funds that it alleged should have been withheld.

On or about June 29, 1995, Am Base filed a petition with the United States Tax Court on behalf of City contesting the alleged tax liability.

Competent and independent professional advisors likely would have informed management that the alleged withholding obligation was an obligation for which the Trust [was] primarily liable.

Count I of the complaint in the Delaware Action sought an order “declaring that the Trust, as successor to [City], is primarily liable for any alleged withholding obligation that is the subject of the [Tax Court litigation]” and alleged that such liability was based on “the Trust Agreement and the Assignment Agreement.” In Count II, captioned “Restitution and Implied Contract,” Am Base alleged that the Trust had been “unjustly enriched” by Am Base's expenditure of the .2 million in legal expenses associated with the Tax Court litigation and that “equity impose[d] an obligation on the Trust to repay [these] costs and expenses incurred on [the Trust's] behalf by Am Base,” which was “entitled to restitution from the Trust” for these expenditures.

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