Brusco v Koff
2012 NY Slip Op 31009(U)
April 16, 2012
Sup Ct, Richmond County
Docket Number: 103606/11
Judge: Philip G. Minardo
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF RICHMOND
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ANTHONY BRUSCO,
Plaintiff,
DCM PART 6
Present:
HON. PHILIP G. MINARDO
-againstDECISION and ORDER
MITCHELL KOFF and RONALD KOFF,
Index No. 103606/11
Motion No. 4310-002
Defendants.
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The following papers numbered 1 through 2 were fully submitted on the 12th day of
January, 2012.
Papers
Numbered
Notice of Motion to Dismiss of Defendants MITCHELL KOFF and
RONALD KOFF, with Supporting Papers, Exhibits
(dated November 29, 2011)
1
Affirmation in Opposition by Plaintiff, with Exhibits
(dated January 5, 2012)
2
Upon the foregoing papers, defendantsâ motion to dismiss the complaint is decided
as follows:
Plaintiff ANTHONY BRUSCO (hereinafter âBRUSCOâ) commenced this action to
recover monies allegedly owed to him under a consulting agreement which he executed
in January 2006 with defendants MITCHELL and RONALD KOFF (hereinafter the
âKOFFsâ) on behalf of their company Astoria Graphics, Inc. (hereinafter âAstoria
Graphicsâ). The multi-year agreement provided for total payments in the amount of
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$594,000 in return for consulting services to be provided by BRUSCO. The complaint
alleges that in addition to signing in their corporate capacities, the KOFFs agreed
individually, jointly, severally and unconditionally to guarantee both the payment and
performance obligations of Astoria Graphics.
On or about March 2010, the KOFFs apparently entered into a contract to sell the
business of Astoria Graphics to Content Critical, LLC (hereinafter âContent Criticalâ),
including all of its rights and obligations under the consulting services agreement with
BRUSCO which were assigned to Content Critical as part of the transaction. BRUSCO
allegedly continued to receive payments under the aforementioned agreement through
February 2011.
In support of dismissal, the KOFFs allege that barely one month later, i.e., on April
20, 2010, the creditors of Astoria Graphics filed a Chapter 7 involuntary bankruptcy petition
against it and, pursuant to same, an interim trustee was appointed by a Bankruptcy Judge
in New Jersey. This trustee demanded that BRUSCO return all of the payments he had
received from Content Critical under the assigned contract, and in a subsequent
proceeding commenced against BRUSCO and Content Critical. In the Bankruptcy Court,
it was alleged, inter alia, that the payments made to the former by the latter constituted the
wrongful misuse of assets that were entitled to be held by the bankruptcy trustee for the
benefit of the creditors of Astoria Graphics. In addition, the retention of certain other funds
presently held by Content Critical were drawn into question, as was the possibility of fraud
in its assumption of Astoria Graphicâs contract with BRUSCO. Thus, the bankruptcy
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trustee, in essence, was seeking to compel BRUSCO to turn over any payments that he
may have received from Content Critical under the assigned contract. BRUSCOâs answer
in the bankruptcy proceeding apparently admitted the facts of the underlying transactions,
but denied any wrongdoing or liability to the trustee.1 Thereafter, BRUSCO commenced
this action against the KOFFs individually in the Supreme Court of Richmond County
based on the lattersâ alleged personal guarantee of payment under the original consulting
agreement with Astoria Graphics.
The motion to dismiss BRUSCOâs complaint in the Supreme Court is predicated on
CPLR 3211(a)(4), i.e., the pendency of another action between the same parties in
Bankruptcy Court. According to the KOFFs, (1) both actions arise out of the same
transaction with Astoria Graphics; (2) the nature of the two actions is essentially similar in
that both the bankruptcy trustee and BRUSCO have asserted claims to the funds received
from Content Critical under the assigned contract; and (3) the only material difference
between the current action and the bankruptcy proceeding is that BRUSCO has not
asserted any claims against Content Critical in the Supreme Court notwithstanding its
alleged status as the primary obligor under the assigned contract. According to the
KOFFs, all of the issues concerning the validity of the assignment and the right to payment
under the terms of the âAstoria Graphicsâ contract should be resolved in the first action
commenced, i.e., the bankruptcy proceeding pending in New Jersey.
Alternatively, the KOFFS request the entry of an order staying the within action
1
The position of Content Critical in the bankruptcy proceedings is unreported.
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pursuant to CPLR 2201 pending the outcome of the bankruptcy proceeding. According to
the KOFFs, a court has broad discretion to stay an action in the Supreme Court where
there is another action pending between the same parties in another court, and that such
a stay is justifiable here in order to avoid the possibility of inconsistent verdicts and the
allied waste of judicial resources, as well as to safeguard the orderly functioning of the
judicial system.
In opposition, BRUSCO argues that the automatic stay in bankruptcy does not bar
him from proceeding against the KOFFs personally in state court on their written
guarantee, as neither KOFF is a party in the bankruptcy proceedings and while they may
have made a bad business decision when they decided to sell their business to Content
Critical, they cannot now disclaim their liability under the guarantee in the original
consulting agreement. In addition, BRUSCO notes that neither the validity of the original
âconsulting agreementâ, nor that of the KOFFâs unconditional guarantee of payment has
been challenged in Bankruptcy Court. According to BRUSCO, the very intention of the
KOFFsâ guarantee was to assure his payment notwithstanding the success or failure of
their business venture, over which BRUSCO had no control. Thus, plaintiff argues that
defendantsâ motion to dismiss is simply a frivolous attempt by the KOFFs to avoid liability
on their guarantee.
It is well settled that dismissal is authorized under CPLR 3211(a)(4) whenever there
is another action pending between the same parties for the same cause of action in a court
of any state or of the United States (see Cherico, Cherico & Assoc v. Midollo, 67 AD3d
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622). Moreover, the statute clearly affords a court broad discretion in determining whether
an action should be dismissed on this ground or such other order be entered as justice
may require (see Whitney v. Whitney, 57 NY2d 731, 732). As was held, e.g., in Cherico,
Cherico & Associates v. Midollo (67 AD3d at 622), a dismissal is permitted whenever there
is a substantial identity of the parties and the causes of action. The precise legal theories
to be litigated in each need not be the same, as long as both lawsuits arise out of the same
subject matter or series of alleged wrongs as to render the respective actions duplicative
of one another (id.; see Montalvo v. Air Dock Sys, 37 AD3d 567; see also White Light
Prods v. On the Scene Prods, 231 AD2d 90).
Here, it is the opinion of this Court that the within action should be stayed pending
the resolution of the New Jersey bankruptcy action. While both actions arise generally out
the same subject matter, i.e., the execution and later assignment of Astoria Graphics
contract with BRUSCO, neither the identity of the parties in the two actions nor the causes
of action themselves are sufficiently the same to warrant dismissal.
The KOFFs are not parties in the bankruptcy proceeding and, therefore, would not
be individually bound by any judgment rendered therein. Moreover, while the series of
alleged transactions are inter-related (see Kent Dev. Co. v. Liccione, 37 NY2d 899, 901),
the gravamen of the action in Bankruptcy Court involves the possibility that BRUSCO
and/or Content Critical were parties to a fraud against the general creditors of Astoria
Graphics, while the gravamen of this action relates solely to the personal liability of the
KOFFs (if any) under the terms of their individual guarantees. While the outcome of the
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former may affect the extent of defendantsâ liability in this action, any resolution reached
by the Bankruptcy Court will neither bind the KOFFs nor settle the question of their
personal liability to BRUSCO.
Accordingly, it is
ORDERED that defendantsâ motion, inter alia, to dismiss the complaint pursuant to
CPLR 3211(a)(4) is denied; and it is further
ORDERED that the proceedings in this action be stayed pending the determination
of the proceedings now pending before the Bankruptcy Court in Newark, New Jersey under
Case No. 10-21948.
E N T E R,
/s/ Philip G. Minardo
J.S.C.
Dated: April 16, 2012
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