Chambers v Weinstein

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Chambers v Weinstein 2014 NY Slip Op 32253(U) August 22, 2014 Supreme Court, New York County Docket Number: 157781/2013 Judge: O. Peter Sherwood Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [* 1] SlJPREME COURT OF THE STATE OF NE\V YORK COUNTY OF NEVV YORK: COJ\IMERCIAL DIVISION PART 49 -- ----- ------- ------ -----·- ------·- ---------- -:x GERALD CHA!\IIBERS, JOCELYN CHAMBERS, JULIAN CHAl'VIBERS, and SASKA.TOON FINANCIAL LIMITED, Plaintiffs, DECISlON AND ORDER l\1fotion Sequence Nos: 001, 002, 003 -and- 004 index No.: 157781/2013 ELIYAHU \'VEINSTEIN, FIU:l)ERiCK T()l)D,-148 IN'VESTMENTS, .J.;LC, TODD,· FERENTZ & EDEl;STElN,'LLP, ALEX scn:LEIDE~ DAVID SCHLEIDER, AARON TuiUSCHELi MEND-AM LLC~ SHEL~AM CORP~,.DAYID STEINlVIETZ, NAFTALI KUNSTLINGER, . KUNSTLINGER STElNlViETZLLP, AARON GLIJCKS.MAN, DIVERSlFIEDHOLDINGS L~C, FRE}DE,RICK TOOi), as trustee of the J!:RA.STINO TRUST'i 121 PARK REALTY LLC~ CONGREGATION KAHAL MlNCHASCHI1WUCH, CHAU\i BABAD, NEV~1 YORJ\ Lf?SS MlTIGA'fION INC., ARTHUR GOLDEN, GREENBERG TRAURIG, LLP, MlCHAELBURNBAUM,PROSKAUE;R:ROSE Ll.. P, and .HENOCI! ¢PF,:ARL, D.efeudants. 0. PETER SHERWOOD, .L: ln the it1stantaction, plaintiffs Gerald Chambers; Jocelyn Chambers, Julian Chambers and Saskatoon FinancialLhnitcd (collectivciy, Plaintiffa) seek monetary damages for a fraudulent Ponzi scheme allegedly pt~rpefrated b)' the above-ilamed defendants against Plaintiffs. The verified complaint, dated August 23.j 2013 {Complaint), is 47 pages long and asserts 33 causes of action. This decision and r1rder addtcsse:s the motions to dismiss filed by the follmving defendants: ProskauerRose LLP (Proskaucr; motion sequence nurnber 001); Congregation Kahal Minchas Chinuch{Kahal\ 121 Part<; Realty I.LG(I21 Park) and Chaim Babad(Babab, the president ofKahal) (collectively, the Kahal Defendants; motion sequence nmnber 002); Greenberg Traurig, LLP (Greenberg; mofrtni sequence 11umber 003); and David Steinmetz; Naft:ali Kunstlinger and Kru1stHngerSteinmetzLLP (collectively,theKSDefendants; motion sequence number 004), These [* 2] motions are consolidated for disposition. For the reasons set fotth below, the motions are granted to the extent stated herein. Background The foUowing information is derived from the Complaint, \.Vhich is assumed to be true for purposes of the instant motions. Only those allegations that arerelevant to these motions to dismiss are summarized below. The individual plaintiffs are New Zealand residents. The corporate plaintiff is a Cayman 1slan<l business entity. Complaint, ~4"[ l-4. Starting in September 2011, defendants Eliyahu \Veinstein (W.einstein}, Frederick Todd (Todd), Alex Schleider (Schleider) and Aaron Muschel {MuscheI) targeted Plaintiffs with a scheme to defraud them in real estate and other investment transactions. Id, ~ 27. The Complaint avers, among other things, that based on Schleider' s false representations that he would invest in certain investment transactions and take steps to protect those investments, Plaintiffs lent up to $6.7 million to defendant 148 Investment LLC (148), a company owned by Todd. Id,~~ 30-31. Schleider engaged the KS Dcfentlants to represent Plaintiffs in transactions \Vith 148. Id,~· 32. In February and March of 2012, based on Schleider's representation that \Veinste.in had access to large blocks of Facebook shares that they intended to purchase tlu-ough 148 pri<Jr to an initial public offering (IPO) and then sell them at a substantially higher price, Plaintiffs lent a total of $3.025 million to 148 to purchase pre-IPO shares in three separate transactions. How·ever, 148 purchased no Facebook shares and did not otherwise invest the money. Jd., 4;~ 35-50. Instead, Todd, Schlieder, Weinstein~ Muschel and 148 engaged in self-dealings and used Plaintiffs' money for their own personal expenses. Id, 151. To further the fraudulent Facebook scheme, Todd represented to Plaintiffs that the transactions would be secured by collateral valued at $12 million, consisting of mortgages 148 held against a pr<;Jperty known as 17 41-1751 Park Avenue, Ne\v York (Park Avenue Property). Id, ii 75. The complaint avers that defendant 121 Park had made a $6 million mortgage to Kahal securing the Park Avenue Property and recorded same in March 2008.i Id,~ 76. In November 2011; Kahal 1 Based D.n pleadings filedin this action (motion sequence number 005), it appears that 121 Park is the owner of the Park A venue Property and had executed a mortgage in favor of Kahal. It also appears that 121 :Park may be affiliated with Kahal, as these entities are 2 [* 3] assigned the mortgage to 148; which ¢vas recorded in June 20 l 2. However, in or about March 2012, 148 reassigned the rnottgage to Kahal.. Both oftl'W collateral assigmnents \Vere performed \Vi th out any consideration., butn:i:ther were made to deceive Plaintiffs; Id, ~~· 79-81, 88. The Complaint also avers that in September 2011, Belle Glade Gardens Realty Group, LLC (BGG), a Florida coµ1pan.y ov.11ed and controlled by Schleider, enteredlnto an agreement \'v'ith Prince of BellcGlade . Gardens~ LLCto purchase . Belle·Glade ·Gardens, a 384-unitapartment complex, for $l 6A million: Complaint,~~ 1 18~120, Schleider retained defendant Greenberg to represent BGG in the transaction. .Id Although BGG deposited$12Q,000, Greenberg returned the dow11-:payment to BGG in Ntwember 201 l, thus terinirta.ting ·fue purchase agreement Id, ,I 12l~·122.. In February and April2012, Schleiderreprcsented to PlaintiffsthattheBGGtransactionwfts still active and thathe ¢Vould be matching their investment therein. Id, 1~ 123. Based on the representation. Plaintiffs \Vired $2; 5 million to Greenberg in February 2012, which \Vas deposited into an escrow account for Schleider and asubaccouritforBGG. Id.,fil 124..;125. Sch1eidersuhsequently directed Greenberg to wire $25 million to 148, butmisr~presented to l:>laintiffs that the $2.5 million was being held by Greenberg for the. transactiqn, ld.,·~.· 12$. Ir1April 2012, Schleider induced Plaintiffs to rµake)m additional $330,000 investment, but later directed Greenberg to deduct its legai fees from the $330,000 wired by Plaintiffs:, 'Vithout disclosing that the BGG deal was no longer active. Id., ~~i 129«132. Schleider intendedtO and fraudulently tumed over the BGG funds to 148 for use b]; Schleider; Todd, \V.einstein and 148.. Id, ~ 133, In 2011, \Veinsrein \Vas prosecuted by· the United States in the. ¢ United· States District Court ofNe\.vJersey{2011 Action).Proskauetr:epresentedWeinstein from December 31, 2012to May30, 2U13in the20ll Action. Complaint, ~226, As compensationforits services, Proskauer.charged Weinstein$ I million as a h1inimum non-refundable fee~ On December 20, 2012, Kahal paid the fee with a check containing a refore11ce stating ''Loan Return for 148 LLC." Id,~~ 227-228, Tfo.: Complaint alleges that Proskauer did. not.perform. adequate due diligence to insure that the retainer ftmds were not ·proceeds of Vileinstein's. criminal. activities, and that Proskauer had ''actual represented in this action by the same counsel. By order of this court dated March 5, 2014, the Clerk ofNew· York County was direc.tedtp canceLPiaintiffs' notice ofpendency filed against the Park Avent1eProperty. 3 [* 4] knowledge" that \\leinstein was prohibited by the government in the 2011 Action from engaging in financial transactions of more than $1,000. Jd., ~~230-231. On January 3, 2012, \Veinstein entered into a plea agreement whereby he admitted to committing \Vire fraud and money laundering. On May 20, 2013, \Veinstein vvas charged by the United States \Vith various criminal activities (2013 Action). The indictment alleges that Proskauer received $1 million. The Complaint alleges that Proskauer spent the $1 million \Vithin two weeks of its receipt from Kahal, and that Proskauer paid "an unknown portion of these funds to persons unknown" for the, benefit of VVeinstein, and "thereby intentionally engaged in a scheme to defraud Plaintiffs by agreeing to 'launder' funds for Defendant \Veinstein and prevent their recovery by Plaintiffs." Id, i;iJ 240-241. Proskauer moved to be reH evcd as Weinstein's attorney in the 2011 Action, in light of the allegations in the 2013 Action. The motion 1\1{ was grante· on 1·nay 30·, 201"' l'i ~1 ..,_, -,._.> ¢ d · · -'· c., 11 1 "3'6 ')""'7 Anplieable Legal Standards In considering a CPLR 321 l (a) (7) motion to dismiss, the court is to detennine \Vhether the plaintiff's pleadings state a cause of action. "The motion must be denied if from the pleadings' four corners, factual allegations are discerned \ ¢/hich taken together manifest any cause of action cognizable at la\v.'' Rlchbell Info. Servs., inc. v Jupiter Partners, 309 AD2d 288, 289 [1st Dept 2003] (internal quotatior1 marks omitted), quoting 51 J W". 231nd Ovmers C01p. v Jenn!.fer Realty Corp,, 98 NY2d 144, J 51-152 [2002]. The pleadings are afforded a "liberal c<.)nstruction,'' and the court is to ''accord plaintiffs the benefit of every possible favorable inforence. ~-. Leon v 1Hrn·tinez, 84 NY2d 83, 87 [1994]. HO\vever, while factual allegations ina complaint should be accorded a favorable inference, "'bare legal conclusions" and "inherently inf.lredible" facts are not entitled to preferential consideration. Matter ofSud v Sud, 211 AD2d 423, 424 [1st Dept 1995]. Moreover, "[\v]hen the mming party {seeks dismissal pursuant to CPLR 3211 (a) (1) and] offers evidentiary material, the court is required to determine whether the proponent of the [complaint] has a cause of action, not \Vhether (he or] she has stated one.'' Asgahar v Tringali Real(v. Inc., 18 AD3d 408, 409 [2d Dept 2005]. If the complaint's allegations consist of bare legal conclusions and "'documentary evidence flatly contradicts the factual claims, the entitlement to the presumption of truth and the favorable 4 [* 5] inference is rebutted ..'' Scott v Bell Atl. Corp.~ 282 AD2d 180, 183 [1st Dept 2001], Discussion I. Proskauer motion to dismiss {motion sequence number 001) The Complaint asserts fi,1e causes of action against Proskauer: aiding and abetting fraud (23rd); conversion (24th), accounting (25th); fraudulent conveyance (27th) and unjust enrichrne.nt (30th). Proskauer seeks to dismiss all causes of action against it pursuant to CPLR 3211 (a) (7). 1. Aiding and Abetting Fraud (23rd Cause of Action) To state a claim for aiding and abetting fraud, a plaintiff must allege the existence of the underlying fraud, actual knO\vledge, andsubstantial assistance. Oster v Kirschner, 77 AD3d 51, 55 [1st Dept 201 O]; Stanfield O.ffshore Leveraged Assets, Ltd. v Afetro. L[fe ins. Co., 64 AD3 d 472, 476 [I st Dept 2009]. In this case, the parties do notdisputethatV/einsteincommitted fraud prior to 2011 involving victims other than Plaintiffs. In fact, \Veinstein was sentenced for fraud in the 2011 Action. The dispute in this case lies in whether fraud perpetrated against Plaintiffs in 2012 is adequately stated in the Complaint, and \vhether Proskauer had "actual knowledge" and gave "substantial assistance.'' Notably, Plaintiffs' allegations in the Complaint are primarily based on s\vom statements, dated May 13, 2013, made by an FBI agent, Karl Ubellacker, in connection with the government's: complaint filed in the 2()13 Action, A copy of Agent Ubellacker's statement is annexed as exhibit B to Plaintiffs' opposition to Proskauer~s mDtion to dfamiss. In opposition to the motion, Plaintiffs contend that Proskauer's actual intent can be interred from the following factual circumstances . Pr<Jskauer knew of the allegations against \\Feinstein in the 2011 Action because it served as his defense counsel. It lale\v that Vv' einstein was prohibited from engaging in transactions over $1,000 without the approval of the government's special counsel. It kne\v that the $1 million retainer was "'probably directly or indirectly" proceeds of the 2011 Action. Kahal paid Proskauer's retainer vvith a check bearing a notation that it \Vas a "'Loan Return for 148 LLC." Proskauer accordingly knew that the check never went to 148, but \.Vas diverted to pay Weinstein's legal fees, just as he had diverted funds in the 2011 Action. Additionally, after learning that the government rnight try to seize the diverted funds, Proskauer \vas told by Weinstein to "minimally~' inquire about the source of funds \Vith Todd, \Vho replied in a manner as directed by 5 [* 6] Weinstein. Lastly, \Vei;n~te.in ¢(l{hnitted·thatthe fraudulent scherne in the .2011 and ·2013 Actions '\vas a key.component of both}" PlaJintiffs~ oppositi()n,1i1 ·s3~63. Plair1tiffs' cont¢nti¢>ns ar~ insu:fficient to defeat the motion. That a la1v finn a client accused of a prior fraud ag;;iin$tce.:rtain victims does not.support an inference that the firm knew about, much les!'; aided. aprj abctteti, a subsequent fraud co1wnitted by the client victims. other Here, the goverrirnent~s complaints Jn the 201Lancl2013 Actions named ¢"i ¢i"T,,,.,,,,t sets of victims and Plaintiffs were notr1all1ed in the2U n Action. Thus,. Weinstein's retention of Proskauer as defense counsel in connections with the 201·1 Actiondt}es not support an knew ofthe subsequent fraud aHcgedlyperpetratedagainstthe Plaintiffs, which subject National Westminisler Bank v T;Veksel, 124 AD2d 144, 1~87) of the 201 J Action. (while a law finn gains ae-cess to information in the course of representing a client, representation, even as to transactions allegedly the subject of subsequent nranr> ¢ support the inference ofthe high degree of scienter necessary to ek'tend.fraud .......,"u"'-' t~li.?:3ln:st firm] on an aiding and abetting theory"). Plaintiffs' attempt to overcome this flaw by relying on Vleihstein 'srecent motion, filed by his ne\V counsel. in the New Jersey federal court, seeking "'sp~ci.ti¢ plea agreement made with the government in connection \vi th the 201 ·l ¢chatge~P 1s also :niisplact;?d. l$v14r1; if his argument in mcmc1n \Vere true (i.e., the fraud scheme .in.the2Qf1 a_nct 4013 ActiOns . was '"a key component it does not giverise to an inference.thatPtoskatier.knew Qf theft~u,d concerning the t<ac:eOc>oK 201J t\ctio11. Forthe sa:me retainer foe :was paid yia a third~party 9heck, \1-.rith a notation that it was a reason, the " does not infer that Proskauer "substantifl;lly assisted" Weinstein in "Loan Return laundering fonqs that were···~progablY·directly or indirecdy··fraudvlent defrauding . Plaintiffs prpcee(is~· other transactions implicated in the I The 2011 Action did not involv~ ,Pll:liritifl~, 148 or the Kahal Defend&'its. there 1suoal1¢gationth.:itProskauer had "actu~l kno\:vle~e ·~{as opposed to· Plaintiffs' The ni¢1ion appa_re11tlys9ughtto predude the.government from pursuing additional charges. against hi.fu in.the 201 J Action in the· guise of enti;rcement of the plea he struck in the 2011 Action 6 [* 7] Plaintiffs at. the time the· retainer was paid. This remains true even if Proskaucr "knew" that \\lein:stein >Vas prohibited from engaging in financial transadions of tnore than $1,000 or failed to perform sufficient ~'due diligence" as to the .source of the funds. Moreover, even though the intent to commit fraud may be divined from the surrounding circumstances, "substantial assistance'~ in aiding and a.betting fraud ''means more than just perfonning routine business services forthc alleged fraudster.'' CRT lnvs .. Ltd. v BDO Seidman, LLP, 85 AD3d 470, 472 {1st Dept 2011] (citations omitted). Here, it is not alleged that Proskauer provided substantial assistance to Vv"einstein, other than routine legal representation in the 2011 .Action, by making fraudulent misrepresentation or inducing Plaintiffs in connection with transactions implicated in the 2013 Action. Further, when a plaintiff seeks to extend an alleged fraud beyond the principal actors, the requirement ofCPLR 3016(b) must be ''strictly adhered" to because ''the alleged aider andabetter. by hypothesis, has not made any fraudulent misrepresentation and should not be called to account for the intentional tort ofanother unlessthecircwnstances ofhis connection therewith can be alleged· in detail from the. outset" J\lational Westminster~ 124 AD2d at 149. The allegations against Prnskauer dclnotmeet CP:LR3016.(bfs requirements. Plaintiffs' reliance on Eurycleia Partners, LP vSeward& Kissel, LLF (12 N'Y3d 553 [20091) is also misplaced. Indeed,· in Eurycle ia, the Court of Appeals dismissed the aiding and abetting fraud claim against the law firm that prepared the offering memoranda for a hedge fund that <later collapsed. The· Court held that even though "a plaintiff need notproduce absolute proofof fraud," the allegations in the amended complaint \Vere '"'condusory"and did.not.giverise toa "reasonable inference" that the lawfirrn committed frm.id or aided and abetted fraudulent·:activities., Id ·560-561. Here, the Complaint fails to allege that Proskauer knevtandsubstantiallyassisted Weinstein in those transactions in \VhichPlaintiffs assert they \Vere defrauded. Thus, the. aiding and abetting fraud claim shall be dismissed. 2. Conversion {24th Cav~fAction} The Complaintallegestbat t 48 (through Weinstein) lent the Kahal Defendants $3.88 mill ion. Complaint, ml 24 7;.250. ·Weinstein then directed Kahal to pay $1 million of those funds to Proskauer as a retainer. Id. Proskauerknewor should have knmvn that the funds \Vere probably proceeds of his frm1duleni activities. Jd. TheComplaintaversthatProskauer improperly retained and ex.pended 7 [* 8] the fonds for its benefit, and demands the return of fonds. Id, il4! 252-253. As noted, these allegations are largely based on the statements made by FBI Agent Ubellacker in the 2013 Action. Plaintiffs' opposition, 1f~ 79-81. In their opposition papers, Plaintiffs also attached a document, v. .foch purports to show the $1 million payment made by Kahal to Proskauer, in a credit/debit schedule. Id, exhibit 0. In such regard, Plaintiffs contend that they are "entitled to the inference that all of the funds sent to [Kahal] by 148 \Vere Plaintiffs' funds." Id,~ 84. A claim for conversion of money can be established "where there is a specific, i<lentifiabie fund and an obligation to return or other.vise treat in a particular manner the specific fund in question." Thys v Fortis .S~c., LLC, 74 AD3d 546; 547 [1st Dept 2010] (internal quotation marks and citation omitted). "Although the action must be for recovery of a partjcular and definite sum of the money, specific bills need not be identified." Id (citation omitted). The conversion claim fails. Despite the allegation that Proskaucr "kne\V or should have knov.m" that the money it received from Kahal were proceeds of \Veinstein' s fraud,. the Complaint does not establish that Proskauer knew or should have knmvn that the money it received from Kahal \vere "specific, identifiable funds" belonging to Plaintiffs and, thus, had '"an obligation to rellu-n [same to Plairttiffa] or otherwise treat in a particular manner the specific fond in question." 3. A£_couillillg (25th Cause of Actionf The Comp la.int alleges that Proskauer accepted $1 million from Vl einstein or "other persons for the benefit of' Weinstein, and seeks to have Proskauer "provide an accounting of all sums received directly or indirectly from or for the benefit of Defendant Weinstein," because such funds ''belonged to and originated from Plaintiffs." Complaint;~~ 257-259. To establish an accounting claim, a plaintiff must show "'a fiduciary relationship between plaintiff and defondants.'~ AA1P.Servs. Ltd v fValanpatrias Found., 34 AD3d 231, 233 [1st Dept Here, the Complaint does not allege a fiduciary relationship between Plaintiffs and 2006). Proskauer. Yet, Plaintiffs argue that ~'Pr<Jskauer, as a la\V finn, is held to a higher obligation \Vith respect t-0 the mDnies ofthird parties in its possession than ordinary defendants Plaintiffs' opposition, ~ 90." The:y re.ly on Rule l .15(a) of the Rules of Professional Conduct ("A la'vvyer in possession of 3 At oral argument held on April 8, 2014, the court dismissed the 25th (acc.ounting) and 27th (fraudulent conveyance) causes of action. Transcript at 17-18 (NYSCEF Doc. No. 175). 8 [* 9] any funds or other property belonging to another person ... is a fiduciary ... "). This argument has no foundation in la...\'. The Court of Appeals has held that '"an ethical violation will not, in and of itsel±: create a duty that gives rise to a c:ause of action that vmuld othenvise not exist at la\.v.'' Shapiro v Jvlc/lleill, 92 NY2d 91, 97 [1998]. A fiduciary relationship arises "between two persons when one·ofthem is under a duty to act for or to give advice for the benefit of another upon matters lvithinthe scope ofthe relation'' or "when confidence is reposed on one side and there is resulting superiority and influence on 1he other." Eurycleia, 12 NY3d at 561 (citations omitted). Plaintiffs have not met either test in Eurycleia. Plaintiffs' other argument that Proskaucr's v,,rithdrav,.cal from its representation of Weinstein without completing same vitiates its entitlement to the retainer (Plaintiffs' opposition, 1[~ &8, 91) is baseless because Proskauer does not represent Plaintiffs in any action. or proceeding. Thus, the accotmting claim is dismissed. 4, Fraudulent Convevance {27th Cause of Action) This cause of action is asse1tedagainst many defendants and alleges that they "received funds ·which \Vere given by Defen(fants 148, Todd, Schleider; or \Veinstein \Vith actual intentto defraud Plairrtiffa . " Complaint, ~270{emphasis added} Apparently; Plaintiffs rely on Debtor & Creditor La"v (DCL), section 276~ t\'hich st<ites, in relevant part; that "[eJvery conveyance made and every obligation incurred \vith actualintent .. ,to hinder, delay or defraud either present or future creditors is fraudulent as to both present and future. creditQrs." DCL § 276 (emphasis added). Proskauer argues thatthe Co111plaintfails to plead this claim in detail pursuant to CPLR 3016(b). Even assuming. it adequately allegys "a scheme to defraud the debtor" (i.e,, Plaintiffs as "debtor") invoh>irtg certain defendants) it does not support a claim against other defendants (Le,; Proskauer) if it "?oes not aHe.ge that the: transfers were made in furthenmce of the scheme .... ~' Proskauer;s briefat 13, citing Nisselson v Ford Alotor Co. (Jn re Ford Afonahan Ford CoqJ. qf Flushing), 340 BR 1, 39 (B+inkr ED NY 2006)(motion to dismiss the intentional fraudulent conveyar).teclaim againsfFord\.vasdi:stnissed beeause the ''badges of fraud" were insufficiently pled against Ford). [n opposition, Plaintiffs contend, am.ong other things, that they have adequately pled this clairn against the Kahal Defendar1ts. The Complaint, in paragraph 79, alleges that the Kahal 9 [* 10] DefendWJts "agreed to assist" \Veinstein, Todd and 148 '\vith their schemi;: to defraud Plah1tiffs," and Proskauer received $1 ntHlion frb!JJ Kahal as payment for Weinstein's legal foes, \Vlth the notation that itwas a "Lo(lJ1.R.eturfiForl48 Lil\'' providing ''further evidence of their fraudulent intent.'' Plaintiffs' ·opposition~ ~~93-99. To allege a clairrtu11der DCL § 216, the .clai.mant must allege that ;'( l )·the thing tmnsferred has value ofsvhich the e.reditor coµld have t(;;aliz~d a portion of its claim; (2) that this thing was . ' ·" trWJsferred or· disposed ·of by the debtor and that· the transfer· W"aS done \\'ith actual intent to defraud.'' .lv'is&elson, 340 BRat37, ·!mportantlyfaclaim ofactual fraudulent conveyance mustplead the requisite('actuaJ intenf'withpartietilanty,ru1d the burden ofproving same is on theparty seeking to set aside the conveyance. .Partuli,grn .Bio[>evices, Inc. v Vi'scoglisoi Bros., LLC, 842 F Supp 2d 661, 667-668 lSP NY 2012].(a)laiyzfagDCL § 276 and dismissing the. fraudulent ~ransfor claim against all defendants other than thl! sole beneficiaty of the transfor). Applyii'lg thefotegQiU.gto thi~tase, while the actual· inte11t of Weinstein to defraud }>laintfffs is undisputed} the Complaint dues not eonfain ''sufficiently particularized aHegatiornl' that the trans.fer by Kahal to Proskaue:r was.1nade ·~in furtherance ofthe scheme to defraud" for purposes of DCL§ Nisselsim, . 330 BR at.38-39. ·the.Complaint al~o does not allege that.Plainti±Is·\vete ''present or future c.TeditorS.'~ of Ktth~I., when the payn1enttoi~roskauer was. madeasrequire(lby DCL § 276'. Instead, the Complain.tJists Proskau1er aincing Hi defendants who allegedly rec.eived fraudulenttransfers.fromthl'¢e.otl1~.rdeferidants. ·There±ore~.fheftau<lulent·conveyanct:cla.iwagainst Proskuuefls dismissed. Unjust Entichn1enifJ()thCause of Attfon) ''The essefatial inqtriry fri any action tbr unjllstenrichment ' . . whether it is against equity and good consdenet'.lfo}le!'mitth~ def~11dantto retain \Vhat is sought to recovered/' lvfanilarin 1'rading Ltd. v lVildensteiii, 16 NY3d J73, 182 [2011 J(citation omitted), To establish· this c.Iaiin, a plaintHI nmst .show: '~(!)tlw o~er party· wait enriched~. (2) at that partfs expense, and {3Jthat 'it is against equity m1d good constien.te ·to permit ·(the other party] to retain What. is soughtto be recovered'/' Jd at 182 (citations prijitted), W'hile p.rivity is not required, the.complaint must stHl show there is a C(lQllCCtiort between the parties that is not ''toq attenuated,,, Id Similarto the< fraudulent cprtveya.n!JC claim, ·the unj µ$t enrichment claim is asserted. against. multiple defendants. The(Z6n~plaint atlege'8 thatithe detendants, including. P.roskaucr,.·"acc¢pted 10 [* 11] monies directly or indirectry transactions described herein'' and the "retention said monies would unjustly end¢h said defendants," Complaint, 'f'm 297 ..298. As to Proskaueri the $1 rniUionretainertowhichtheyhav~madeaclaim.notrequiringProskauer,asafiduciary, to return the funds would unjustly eiJdcb P:m$k:AUer; particularly whenii voluntadly \vithdrev;r as Weinstein's cout1Sei while keeping the 1.meamedfee. Plainttffs'·Opposition, >]~·101-104, Plaintiffs' argument~ are t.trlayailing, As discussed above, Proskauer not Plaintiffs" fiduciary. The retainer\vas pai{ibyKah:al~ on behalfof\Veinstein, Proskauer's fact that Plaintiffs have made a claim again$t the retainer does not establish that a be11e1tt upon Proskauer. Also, the cases cited by Plaintiffs (Plaintiffs' Opposition, , their assertion because the plaintiffs in those cases bestowed a benefit directly un.nn·:in ¢~aeirenaru1ts. Herc, the facts show that any benefit bestowed upon Proskauer came from.the not Plaintiffs. Thus, the m1just enrichment claim against Proskauermustbe dis:n:usse.d. IL Kahal Defendants' rnotion to dismiss (motion sequence number 002) The Complaint four cause:s of action against the Kahal .L>"'"1ivu.ua1.n;i.. <>.!"- ¢"''"' and abetting fraud ~ Collateral Assignment (6th); aiding and abetting fraud (8th); ..,.,..,.,,,,.,,,,,,."'"' ·"" and. constructive trust (26th); and unjust enriclunent (30th). 1. Aiding and Abett.ing Fraud (6thand 8th} The Kahal (see Kahal The argul11eI1tis in"elevant because the clairn against them is aidfog and abetting fraud, which has diffcrentelements, as discussed above inSection L 1. In their reply brief, the Kahal Defondant$·arguetliatPlairttiffsate ~'sophisticated hwestors who knowfo.giy~hoseto do business \\:1th an tral1dster; ¢ and that Plaintiffs m1re(lSo:l'lably relied on the fraudulent assign1nent} mad.e by ·W~instein.. arid . his accomplices, the Kahal Defendants al$o ayer that ¢ ~·Plaintiff~ have fatkd wassert one of the m0$t b'lsi~ i;tement$ of.ai4,ing~4"ah@tti:l'lg fraud. ,. reliance." Kahal reply brief at, 1'-2, 4-6. I-Ioweveio; ~'reliance' is n(}t an cle1llent ofan aiding ·Md abetting ffatid. claim and n1e.rits no further representations ·Park Aveµue Property disci1ssfon. Relying .r;Jn Stiiitfie/(j~ 64)\.Dldat47S.-476, the Kahal Defendants contend thatfu~,aiding aml ahetting cl?.ith sht1uJd be dismissed because '~Plaintiffs have failed to allege any fidud~ry duty 11 [* 12] or other independent duty owed to them by Kahal/' Kahal brief at 11. The reliance on Stw!field is misplaced because fiduciary duty must be alleged only if a plaintiff alleges a failure to disclose by the aider and abetter. Here, Plaintiffs allege that the Kahal Defendants affirmatively assisted 148 and \Veinstein in the fraud, not a failure to disclose the fraud. In opposition to the Kahal Defendants' motion, Plaintiffs contend that the Kahal Defendants knew of the fraudulent scheme and provided ''substantial assistance" in furtherance of the scheme. Plaintiffs argue the folfowi.ng: timing ofKahal's assignment of the Park Avenue Property mortgage to 148 to induce and defraud Plaintiffs to loan to 148 the funds for the purported Facebook transactions and the mortgage reassignment by 148 to Kahal after the loans were made; manipulation of collateral and cooperation 'Arith Vleinstein and cohorts to establish nonexiste-nt assets for 148; borrowing of money by Kahal and repaying same \Vhen directed by \Veinstein, including the $1 million payment to Proskauer for the benefit of \Veinstein when such payment should have gone to 148; absence of documentation and/or explanation to account for Kahal's transactions vdth other undisclosed, but seemingly Weinstein-related, entities; unsubstantiated and conclusory statements made by Babad in his affirmation regarding the Wlderlying transactions. 4 Plaintiffs Opposition, 41~ In response, the Kahal Defendants submitted two documents: (I) Loan Agreement and Amendment to Letter of Intent (the Amendment) executed by Todd (on behalf of 148) and Babad (on behalf of Kahal)~ and (2) Promissory Note signed by Babad (on bahalf of Kahal). The Kahal Defendants argue that the aiding and abetting claims should be dismissed because the promissory note shows "\vhat monies 14& bad to lend'' in consideration for the mortgage assignment (thus rebutting the allegation that the assignment \vas not supported by consideration). Kahal Reply 7~9. Additionally, the Amendment shows that Plaintiffs misunderstood "the timing and nature of the 4 Attached to the Babad affirmation were cop1cs of checks, a bank statement and a credit/debit schedule with little or no explanation. The affirmation also contained general statements \vithout details,, such as: "lt was originally contemplated that 14& \vould loan in excess of $8,000}000 to Kahal ... but at no time did Kahal borrow from 148 more than $2,250,000. Additional funds were provided to Kahal frnm entities other than 148 ... As security other than the Park .Avenue Mortgage was being held in escrow, the Park A venue 1'v1ortgage \0vas assigned back to Kahal, even though the foll loan had not been repaid at that time. , ." Plaintiffs' Opposition, exhibit L (Ba.bad affinnation). 12 [* 13] transactions,''hecause Plaintiffs "rely uponthe dates when the underlyingd:ocuments [the mortgag~ assignments] were signedi not t<lking a(lcoqnt \'Vh~therthosedocuments were held in esccrmv pending final perfo.t11la,nce ofthe agreed.11pon ten:ns~" Jd. The Kahal Defendants alsq assert that Kahal did notassign the mottgagetol48onNovemher 42, 2011. (although th~re";<.wdh1g docmnent in tneNew York City registry showed th;; dpc~f1l.1;;nt date as ll-21-201 l) because "'negotiations bet\\'een the parties regarding the assignment contirni,e long aft.erthatdate" and the Amendment stated that it was "'effective as.of F~btual)' 14; 2014t 1d at9. The Kahal Deferniants contend thatthis evid¢nce '~demonstrates the probie111 with Plaintiffs' timeline amLahrogates the implication that the Kahal Defendants knew pf, and assisted, ,yith; \Veinstejn.'sftaud.'' lei Contrary.to such c:m1teritio.11~ the Complaint ;itates that Plaintiffs made ·three separateloans to 148: $L2 million on 21512012;. $L65 million on 2/15/2012; and $1 ,g25 million on 3/4/2012, .. Complaint,~ 38, 43 and49. The Complaint also states that on 2/15/2012 and 3/4/2012, 148 Uhroug,h Todd) repre.sertted tu Plaintifts that 148 had collateral of $12 million,. inchtding the rnortgage on the Pl.'lrk Avenue Property. These statements an:: consistent vr1th and provide St;tpport fora teastmableinference, afleast \\iithrespect to the 2/15/2012 andJ/4/2012 loans that post'-dated the Amendment;tlia(the collater!!llasstgnmentbetvieen l4& and K~bal· was orehestrated.to induce Plaintiffs in. making th~se.Jomrs, "PartfoipantsirtaftaµdQ.o notaftitmatively declare. , . that they are engagedin the p~rp~tratio11 ofa fraud . ~ .. an intent to commit fraud is tq be .tiivined frmn surrounding circumstances;'' Oster v Kirschner, AIHd 5J, 5$;..$6 (1st Dept 20 lO);. Here, "dQcumenti:U)' evidenc.e" (:)ll W~foh tbeI<..ahal· Defendants rely.for dismissal of the !;lidin:gandabetting fraud claitn, purs:uantto CPLR3211 (a) (l), does nott1atly contradictthe. factuaJ claim. Goshen 1> lvfuL Life lits: 98 NY .2d J 14(40()2}. 'I:hi.Js, ·the sixth and eighth causes Qf acUo1l sounding in, aiding <ind abetting fraud are erttidedt<:> every favorable infel'ence and.survive the motion to dismiss. 2. Accounting and Cmistruetive Trust.(261h ·Canse of Action) Plaintiffs cuntendthatthe.accountingc;laim does not require Jrt:iduciary relationship because it is "hm;ed up(,)flart .equitable principle" antf because Kahal aided and abetted. fraud, They .rely on Kaminsky 11 Kahn{23 AD2d 231,228 Tlst Dept 1965]) {"[iJt gei1eraUy held that equity has jurisdiction tLl cofupeJ aJ+<aCCOUll~tfig. \Vhene\fer Onf party has profits in tvhit.h. another is entitled to share·regatdless oftherelationship.bcliveen·theparti1tsat.the time.the· profits '"'~re earned'') ·(internal 13 [* 14] brackets and quotation marks omitted}to support such a proposition. Such reliance is misplaced. The Kaminsky defendant was the majority shareholder as well as chain.nan of the boatd of directors, and had a duty to exercise good faith tmvard minority shareholders, including the plaintiff. Thus, the above quoted language is dicta, as theappellate court directed an accounting under the ":special circumstances" in that case. Id In any event, Kaminsky \Vas decided in 1965 and the current law requires a fiduciary relationship as an clement of an accounting claim. Seee.g..j AMP Servs.~ 34 A.D3dat233;Z.,vskindvFacecakelvfktg. Tech, !nc.,110 AD3d444, 446 [1st Dept2013] (accounting claim dismissed because it did not allege a fiduciary relationship). Likewise, the constrnctive trust claim should be dismissed because it has been held that a confidential relation is a required element. See Sharp v Kosmalski, 40 NY2d 119, ] 21 [ 1976]. Indeed, a plaintiff seeking the imposition of a constmctive trust tnust allege four elements: a fiduciary relationship; a promise; express or implied; a transfer in reliance thereon; and u11just enrichment. See Abacus Fed Sav, Bank v Lim~ 75 AD3d 472; 473 [1st Dept 2010]. Here, Plaintiffs have not pled all the elements required for a constructive trust claim. Therefure, the 26th cause of aclion shall be dismissed. 3. Unh1st Enrichment {30th Cause of Action) As discussaj abo\'e fo· Section 15, even though privity is not required for an unjust enrichment claimithe complaint must show there is a connection \\rJth the plaintiff and the defendant thaf is not '"too attenuated." llifanddrin Tmdiitg, 16 NY3d at 182; see also Ceor,!}ia Malone & Co._, Inc. v Rieder, 19 NY3d 5 l l, 516 [2:012] (relying on case precedent and requiring a "'sufficiently close relationship" for an unjust enrichment claim). Even assi1ming the truth of the allegations in the Cm11plaint and giving the facts alleged every favorable inference, the fact that Plaintiffs and the Kahal Defendants ''had no dealings \vi th each other" requires dismissal of this claim. See Georgia A1alone, 19 HYJd at 51 &. UI. Greenberg motion to dismiss (motion sequence number 003j The Complaint asserts< six causes of action against Greenberg: aiding and abetting fraud (12th); breachoffidudary duty (13th); negligence (14th); conversion ( 15th}; _fraudulent conveyance (27th); and unjust enricfurierit {30th), L Aiding and Abetting Fraud02thCa1i,~e of Action) As discussed in the background section above, Schleider retai11ed Greenberg to represent 14 [* 15] BGG, a cmnpany he controlled, ir1 c01mcction \Vith BGG's purchase of Bell Glade Gardens. ln October 2011, Schleider deposited $120,000 \Vith Greenberg, but the deposit \Vas returned in. November 201 L Plaintiffs claim this terminated the BOG transaction and Greenberg knew about it. On February 23, 2012, Schleider .represented to Plaintiffs that the BOG transaction \Vas stm active, so they vvircd $2.5 million to Greenberg. Four days later, Schleider told Greenberg to wire the funds to 148 without also telling Plaintiffs. In April 2012, Plaintiffs wired another $330,000 to Greenberg. Thereafter, Schleider directed Greenberg to deduct its legal fees from the $330,000 and wire the balance to 148. In June 2013, Plaintffts demanded repayment of the $2.83 million, and Greenberg refused. Plaintiffs allege that Greenberg aided and abetted Schleider in the fraud. To rebut the allegation that Greenberg ~'knev./' the BGG transaction had been terminated in November 2011, Greenberg submitted emails, copies of \Vhich are annexed as exhibits to the Lehrfield affidavit in support oft.he motion to dismiss, as document(;lry evidence. The emails reflected com.munications bem'een Schleider, Lehrfield (a Greenberg attomey on the BGG transaction) and Levine (deputy counsel of Greystone, the o\vner of Belle Glade Gardens), and indicated that the BGG transaction remained undernegotiations in February through April 2012, Plaintiffs contend thatthe emails are "'not documentary evidence and do not conclusively 1 establish a defense asamatter oflaw," Plaintiffs' Opposition at 5, citing H'eil; Gotshal & Afanges, LLF v F'ashion Boutique ofShon Hills. Inc. (10 AD3d 267, 270-271 [Ist Dept 2004]) for the proposition that emails cannot he considered documentary evidence, This reading of the lmv is too narrow and the,·reliance thereon by Plaintiffs is misplaced. The appellate court in Weil Gotshal determined that the motion CQurt had erred by disregarding the fact that the email was ''only an overview of[the \Vitness's]testim<.my arid viewed it as the whole of her testimony." Id. at 271, In such regard; the.casescitedby Plaintiffs.only held thatthe subject documentary evidence, such.as emails, were instttficient dtte to the particular facts in those cases, and cannot be taken as an ironw dad proposition oflaw, Inany evenrand contrary to Plaintiffs' conclusory al legation that Greenberg ¢<mev\"'' thatthe BOG transaction.had tenninated in 2011 (and thus ''knew'' about the fraud}, the etnails show that the parties to the transaction \Veresti11 negotiating during the period, Febnu1ry to ApriLof2012 \:vhen Plaintiffs wired the funds to Greenberg. Notably, Plaintiffs have not submitted 15 [* 16] any contradictory evidence. The allegations that (l ) Greenberg '"knew" about the fraud because Greenberg knew that the wired funds came from Plaintiffs and not from Schleider; and (2} Greenberg substantially assisted Schleider in the fraud by wiring the fonds to 148 and not returning same to Plaintiffs in light of its notice of their rights in the funds (Plaintiffs' Opposition, at 8-11) are also insuflicient. In Shapiro v AfcA'eill, 92 NY2d 91, 95 (1998], the Court of Appeals dismissed the complaint against the defendant lawyer based on facts similar kl this case. The Shapiro plaintiff made checks payable to the lmvyer for the accused fraudster \Vhen he became "leery of the [fraudster' s Jarrangement," noting that they \Vere for specific transactions.. See id The fraudster then delivered the checks to his la\-\1yer and said they were payments earned by him on the sale of investments to Shapiro, and the checks were deposited into the lawyer's escrow acco:i.mt. See id The escrow funds \\"ere later disbursed by the lav·iyer according to the fraudster-client's .instructions without notice to plaintiff. See id The Court dismissed plaintiffs claim and held that the defondant lav.yer did not owe plaintiff, a nonclient, a legal duty. See id. .at 99. Here, Greenberg disbursed the funds as directed by its client Plaintiffs never communicated \Vlth Greenberg nor gave any instructions or demands with respect to the wire funds unti I \veH after the disbursal of such funds. The allegations that Greenberg \Vas an escrow agent for Plaintiffs \Yi th respect to the wired funds, and that Greenberg became afiduciary of Plaintiffs, are also unavailing. The app el late courts have dismissed such duims on similar facts. See e.g, Shapiro v Snow Becker Krauss, 208 AD2d 461, 461 [1st Dept ,1994] (plaintiffs' check payable to defendant lmvyer's escrow account "'did not transform defendant into an escrow agent with a fiduciary duty to inquire of plaintiffs as to any conditions attached to the payment of checks")~ Ehrlich v Froehlich, 72 AD3d 10 l 0, l 012 [2d Dept 201 OJ (nondient plaintiff who \Yired funds into defendant lav~ryer's account could not prevail on a breach of contract ciaim \Vhen defendant made a prima fade showing that no escrow agreement existed and plaintiffs unsubstantiated claim to the contrary \Vas without merit and warranted dismissal). Here, there is no escrow agreement, written or oral, behveen Plaintiffs and Greenberg. Plaintiffs' voluntary wiring offt.mds does not make Greenberg an esc-row agellt or a fiduciary of Plaintiffs. 16 [* 17] 2. Breach. of Fid~fJ<:U'.'£ Duty. (l3th Cause of Action}' Plaintiffs allege that Oreeriltierg, as escrowee, breached its fiduciary <luty Plaintiff5~ it disbnrsed wired fonds ''ithouttheir knm.vledge and consent because the Professional Conduct ofNe'.l.v York andF\Orid1;1 irajJosed afiduciary duty on attorneys who are possession of funds of a third party. The breach of fiduciary duty daim lacks support in law and must be dismissed. Because there is no attorney-client r¢:lati{.)t1Ship, no escrow agreement or any coII1munication behveen Greenberg and Plaintiffs, :a fl,d:u¢iaiy d~ty does not lie. Moreover, as nf)ted above,. the New York Cotiq ofApperushas held "'an ethical violation will not create· a duty that gives rise to a cause ofactinnthat'l.vouldotherwisenotexistat1(lw.r ¢ Shapiro~92NY2dat97;accordArt Capital Group, LLC v Neuhaiv;, 70 AD3d 605, 607T1st Dept 201 O] ("[s]tanding alone, an ethical violation will not create a duty giving rise to a cause qt action.that would oth¢rwise n-0t exist at law"). The result is the same in Florida. Ff..0.ltqn i> Florida, 2007 WL 951726, *3 [MD preamble to the rules regulatit}gthe Flo.ti<:la bar states 28, 20-07] (the violation of a tule should not give rise to a cause of action, nor sl:)ould it create any presumption that a Jegal duty has breached," and court dismissed a le:gal .n:ialptaotice cJaiinagainst the attorney). 3. Negligence fl4th cause ofAction)l) Even though there is no ptiVi~y·between Plaintiffs and Greenberg, plaintiffs contend that a daimJor professionafµ¢g~1g~~eeltes w~en there is fraud, c-0llusion or othermal icioru; act committed the attorney. See Estate qfSahntffde:r vFh1mcmn, 15 NY3d 306~308<HJ9 [2.0lD];Prudential/ns. Of.Am. v DeJ~'ey; Ballantine, B:z~.s#Y, Palfi1ei& W'ood, 170 AD2d 108:, 118 [lstDept 1991}. While the propositionoflaw cited by Plaintiffa in the foregoing cases is correcti the neglig~nce claim fails hecii11s~, as qisc.ussed in Sect~o:n. HLC Plaintiffs have fail~d to aHege that Greenberg knew· of the· fraud and gave substantial. a&sistancelo it 4. at Conversion {15th Caifise<of Action) ~· At oral argtu:nen:t~ th~ ~~,9\JJ"tdismis~-ed this breach of fiduciary duty (NYSCEF Do~.Nq, 17$), 6 At oral atgtirilent> the court also dismissed this negligence claim. 17 See Transcript id.. at 42. [* 18] Plaintiffs contendthatconv~rsi:on.offunds.occurred when Greenberg wired their $2.83 million to 148 onJ'ehn.mry 27, 2:fU? '\fithouttheirauthorization or consent, and that the conversion dklnotadva:nce the BOG ttaris.a,ction.for which Plaintiffs' funds were intended. See Ptaintiffs' Opposition at 16--17. The conversion ciairns.hould be dismissed because, as discussed} Plaintiffanever provided instructions to Greenberg regarding the wired funds~ and they did notdemand a return of funds until morethauayearafterdisbutsementto·l48. See fJmtedCreditCorp. v.ll.E. Indus. , 251 AD2d 70 [lstDept 1998] (conversion claim dismissed because ''[pJlaintiff failed to raise an · in respOn.."{e to defendant attorney's showing that he had disbursed [the funds] before letter demanding that he turn over the proceeds of the check"). Moreover, as discussed, ..Plaintiffs have f:ai1ed to allege that Greenberg owed them a fiduciary duty as to the wired funds. 5. Fraudulent Convevance (27th Cause of Action} The three elem~.nts of a DCL § 276 cause of action are set forth in Section IA. Plaintiffs argue that they satisfied all elements because (I) $2.83 million is a ''thing of value;" Greenberg had no privity and not an escrowee, its retention of the funds established a, debtor- creditor relationship and it became a "debtor;~· and (3) Greenberg's wiring offw::tds to l4Kin$tead of returning same to Plaintiffs '~intent to defraud." Plaintifls' Opposition at 18, Plaintiffs' arguments must be rejected as to elements two and tlu·ee .be9iluse pk,lintiff!!! huve provided no legal authority responsibility, to instmction. Thus, allegation is conclusory discussed, Greenberg has no 1egalduty, a.ndthtJs no the f:\mds \\'ere \\tired to 148 in accordance vdth frs bec1orrre a "'debtor" of Plaintiffs. The "intent to defraud~~ not knmv of the fraud, and~·actual knmvledge'~ a crucial element Q1.ian.i2t1Ulllll~atid 2Lbettn1gttm..u~i-~~ ¢.,... Accord.ingly;the fraudulent conveyance claim should be dismissed. 6. thc;rein, eventhottgh prlVi~y is not reg,uited for the claim, a plaintiffmust show it has a. conne<;ti.qn withtJw rlefandaQt Phtintiffa arg1.JethatGreenberg tnust have atleast been 18 [* 19] aware ofthbirexfatence becausethey wired fundsto Greenberg designated for the BOG transttction. iVfctndarirt Trading, '1here are no indida of an enrichment th.at \Vas unjust Ho\vev ¢er; as \Vhere the pleadings failecl .fo indicate ¢a relationship behveen the parties that could have caused reliance or inducement'' 16 NY3d at 182; Here, it ii,; undisputed that Greenberg neither commu.nicated with Plaintiffs, which could have caused them torely upon in \viring the funds, nor induced Plaintiffs to wire the funds. In any eve1"lt, Greenberg did not retain the fees and become ''enriched." Instead, foes it wfredthefunds acc;c)rdingtoits client's instructions and di;ducte<l the legal for. services rendered; There is no allegation that the were unreasonable or excessive. Accordingly, the un.just eti:rfohment claim must be dismissed. IV. The KS Defendants' motion to dismiss (motio11 segyence number 004) The Complaint asserts the follo\ving causes of action Defendants: breachof fidu<:iary duty ( 18th, 19th and 20th); aiding and abetting .ff~tid fraudulent conveyance {27th); and unjust enrichment (30th). The Complaint alleges that represent Plaintiffs' interest in specifictransactionsperpetrated the KS Defendants to fraudsters. As a result ofsuch representation, Plaintiffs assert three claims ofbteach of fiduciary.duty against the KS Defendants: failure to disclose their prior representation ofcerta.in.defenq(lritsifijh.if~ to perform due diligence as to the fraudsters' assets and drafted transaction ~otutnertts thattru~portei.i\y provided security for failure. to provide advice which led to Ffai:Qtii)1;' r¢lease of a lien on a Plaintiffs' Tennessee .....r, ...,,,.+., KS Defendants ·The 3211 (a) that was pledged to secure ·Orie ofthe loans. Plaintiffs also allege that the and abetted fraud. Defendants·n1oveto dismissthe complaint onthreegtom1ds: (1) pursuant to CPLR (lack·ofpersonaljurisdfotion);.(2)pursµarittQCPLR 324.(a) (forum non conveniens); and (3) ..,-. ¢.,~.,.,.,,.,",.. 3211(a)(l)(docwri.~ntllry ~\id~nc~) and (a.)f?) (failure to state a cause ofaction}. L athresholdmatter,the·KSDefendants contend that the Complaint should be msim1ssea because this courtdoes not have personal jurisdiction over them. Plaintiffs counter thatthe Defendants '.vaived thiS d~ffense by seeking to extend their time to answer pursuant to CPLR [* 20] which states, in part: ''[t]he defendattt appears by serving an answer ... or by making a motion whichhas the effect of.extendiµg thetime to answer." Plalntiffs assert that because KS Defendants' counsel appeared onNov'etnbet22,20l3 and requested an extensionoftii:neto ans"ver or move, they waived this defense,. See Plaintiffs' opposition at 7. Plaintiffs' argumentis utterly meritlcss because CPLR 320 (c)(2) states plainly that art appearance is not equival~nt to personal service if the objection "'asserted by motion or. in the ans\Ver as provided in rule 32U," See also lvfatterof l-..Tfcola v Board of Ass~essors ofTown ofN Elba, 46 AD3d 1161~ 1162 [3d Pept 2007] ("an appearance will operate.to waive objections to the court's personal jurisdiction "unless an objection tojurisdiction [ u1tder CPLR32J l (a)(S}] is asserted by motion or· in th.e answer as provided hi rule 1 3211 '~). .. Here, the. objectiun.is made in .a pte~artswer motion; Thfi! personalj urisdiction defense has nofbecn waived, Regarding·that.branchofrnotionto dismiss that is bast;:da CPLR 3211 (a) (8), it.has been heldthat "fa]s the party s~ek,ingto assettpersonaljurisdiction, the pktintiffbears the ultimate burden ofproof onthis issue.'; Doe vlvJcCormack, fOOAD3d 684, 6&4 [2d Dept 20121 (citation omitted). However, '~in <;>pposlng tir11otion to dismiSs pursuant to CPI.R 3211 (a) (8) on the ground that discovery 011 the issue o.f personal jurisdictionj$ necessary, piaintiffs need hot make a ptima facie sho\ving of jurisdiction, bi:ttil1stead n11.lst onJy ~etforth a sttfficient start, and show their pcisition ngt to be frivolou~.-'; Id (brackets, quotation marks aml citation omitted). fn Ne\vYork, there ~re hvo fypes t1fpersona! Jurisdiction: CPLR 3() t (general j urisdktion) and. CPLR 302 (specific or fong""anrtjuri$diction}(Mc:Kinney; $ 2014). Plaintiffs eon1:eild that thi& court· has both general·. attd specific jurisUictfon over the KS Detendai1ts. General jurisciicfa:m, permit~ a court to exercise petsonal}t1risdictior1 <JVet.i;t defendant in. its ''"hmne" forum ba,se~fon. the defendant's QveraU eont!tcts w1ththaffd.rum. even if the· claim has no connection to it. The United St1ites Supreme C9ttrt has held that in order for a court; to assert personal jurisdiction over a nonresident d.efondant, the plaintiffmust establish tli<It the defendant has a substantial presence in the forum state SO that the exercise ofjurisdicflotl over fhe ·defendant V.'OU.ld COinp()r( vdth. the traditfonal notions offair playiu1d s$h~ta.ntial j11stice. Jf'orld-''Wide Volkni·a.gen Cotp, v Woodson, 444 US '486, 292 [1980], citing1ntL Sht1e C'o; v Washingt<m,326.US 310, ·316 [1945]. Ne,'\' York law is esser1tiaUy the same.. Withrespect to CPLR 301, "the authority of the N e\vYork C{mtts<to 20 [* 21] that the defendant· 1s exercise jurisdiction over<a forci.gn CQrf.-"Otation isbased solely upon the engaged in such a coniin11:Q\ls and .systemati~ c{)tirse bfdoing btusin:¢ss here as to warrant a finding ofits presence in tliisjurisdfotlon, 1" Lc1t~fer v Ostro, 55 NY2d 305, 309:.31n [1982] (brackets, quotation marks an.ddtations omitted), Here, Pllrintiffs allege that the KS Defendants have engaged in a ''continuous antj syste!l}~~k" course of doing business in New· York and, thus~ this court has generaljurisdiction thett1pursua:nno CPLR 30L In2014, the ¢U.S. Stiprerjle(::ourtmodified. the "continuous and systemic'' .standard in its analysis of general jurisdiction. DaiftderAGvIJauman, -·US 1 S 746 [2014J. Inthat case,. Daimler AG, a Gennan cotporatfon, was sued by Argentinian ""'"'"'""...'"' alleging that it::; Argentinian subsidiary committed tortfous acts in Argentina; th~ wils riioiUitrlt in a federal court MBUSA See in California based on services perfonned in California by L#UU.lU..,J id a1 750-751. The question before the Supreme Court was California are sufficient to subject it to the ge11eral (all purpose) "'"'''Q"""" courts." id. at In its analysis, the Supreme Court stated that ofthatStater s a limited set of affiliations \Vith a forum will render a defondant amenable to alJ..:purpose jurisdiction. '' id at 760. "'For an individual, the paradigm forum for the exercise of .g~ne,r~Ljurisdiction is the individuars domicile" and "[w]ith respect to a corporation, the place pfincotpotation and principal place of business" are the paradigm bases for generaljutisdiction. ld. (citations qmitte~t,. quotatjontriarks in original). In so the Supreme Court disagreed \:villi the formulation that \Vould allow the exercise of ge11er.11 juri.sdiction in every state in which a ~orporation continuous grasping:~ id In nscas;e anu as·noted abbve,the DS Defendants are DayjciSteiru::netz (DS} and.Naftali are niembers of Kunstlinger Steinmetz; Firn1). DS .and NK are !aw in New York and .Ne~v Jersey~ and ·both ·are tesidents of New attorneys ucemieo uracm~e Jersey'. fo1111ed in2HmibyNK and DS~ is a New Jersey law firm haVillg itS priricipal place ofbusines.sinLak~wood,NewJersey.Itis not authorized to do business in NewYork. Based on the holding irtDaim1et, this c:ourtlacksgeneral jurisdiction over the DS 21 [* 22] Dctcnda.nts.1 Plairttiffs also argue· that th(!KS Defendants, and. DS and. NKh1 particular, al'e licensed to practice law in New York but failed to comply ~vi th J udfoiary Law § 470, c.vhich requi~s them to maintain a law of11<:.e inNe~v York.. Plaintiff's therefore contend that the KS Defendants can deemed tp have given implied consenttothe general jurisdiction of this court. Plaintiffs citeno ¢Iaw for the p:ro}">osition. Judj.ciaryl"aw § 470 statesth~t ''taJ person,regµlarly admitted to prac.tice as an attorney ... in the courts ofteco:rd of this state, whose office for the transaction law business is within the state, maypra.ctlc~as such~tf-0rne)1 ¢ ¢ ¢ ¢ , althot1gh he resides fo arratljoinh1g state." Thus, under §·470, attorneys ·who donot1naintafr1an nffice in New ·York may not practice ·iaw here. A.lthough they haveheet1admitt~dtopractice la~v inNe'i-v York, DS.and NK do nothavea New York office~ !ilS requir~d to practice h¢re by § 470}1 Plaintiffa argue that the KS Defendants, who are attempting to use their lack pf an office to avoid personal j'Urisdiction ''should be treated, for jurisdictional purposes., asifthey had ·complied." Plaintiffs' Opposhion at 9- l 0 .. Plaintiffs rely on an an::haic case ¢ ¢ i\ritmer qfBurnham (5$ Misc. 516, 570[Sup Ct Special Tenn, NY County 1908])~ forthe propositipn that an attprney; as an officerofthe court, cannotescape thesummaryjurisdfotion of the court to compel him to )lc¢{)ufli for and return mpnies to.his client that he was n,ot entitled tb 'Even fftpis courtweretoapplythe ;'continuous and systemic'' standard, the foctual . evidence set forthirt the affi@11vits ttfKiaffirmatio~s submitted bythe parties niflitates against Plaintiffs, because they have.notsustained. the ultim.;:lte hiltden pf establishing general jurisdiction. The statute· was ¢~alleoP.edin Schoenefeld v Stale oflve~v 1'ork (907. F Supp 2d 252. [NP NY2011 ]}, \vherethe federatdistrictcoUl'~held thatthela\vW~i>un~onstitutional b~1auseit violated the Privilege~a11d h~unit~es clause of!heltS. Constitution. On appeal, the. question as to what minimum requirer)l~J;lts would satisf'y the statute<mandatinganonresident.attorney to mah1tainan office forthe trans~~tion ~flaw bu.siness in N~w Yor~ \vas certified by the. Second Circuit to the New York Cotlrt of Appeals, .OrrMay 6, 2014; the Court ofAppeals accepted the certified question. See Shoepefelf!, ~JNY3d 941 (2014), ·On fh_e other fomd, in March2QlZ\ aft~r the federal court issued the Schoen~{eld decision, the Appellate Division ruledth(tttheplaiptiff s counsel's <failure to maintait1a11 in-st~te offi~e viol~ted the statu~~' Vl'ithout discussing its cnnstitutionaHty, Webb v GreaierllY..Auto.Dealers Assn.. Inc., 93 ..· .· . ·. ·. [lst Dept2G12J See also l!.'JC Assoc., Inc .. v l'<lac.ire~cr En:vt/, Servs. . .·.·.Inc., . 4012. \\1L 100-08215. [Sup Ct, NY County August 27, .2Ql2Jfdccisionsta~~Jhat the foderal cQurfs Schoenefeld decision was not binding upon the co'4tt, \v11i:¢h was required to follo'.>V p.rec,edent set. by the First Department). B [* 23] was hatted from ·practicing fa\.v. Plaintiffs' .reliance on Burnha.rn is keep, for which reason entirely misplaced because the: fact~there are distinguishable. and the. court's. rationale and hoiding In fact, the penalty for a violation of§ 470 thereforis inapplicableto prohibiting the attorney from .contirttti11g tb 8,pp¢£tr as com1sel ·i11 the cliSe ot striking the pleadings filed in that case. Fvrthet, as ackrtoWledged by Plaintiffs., an attorney is likely not subjed. to personal jurisdiction merely by virtue ofhaving once been admitted to the Bar of the York. See !v1angiaA1tdia1ne. v Universif)lP1j.1eli1fe, lnc. ¢ 849FSupp2d319, 322 Thus, the mere fact that DS and NK are Hcensedto practiceinNew York does not btecttnein (and the KS Firm) to the personal jurisdiction in this court. 2. Specific Jurisdiction CPLR 302 (a) sets fonh four different scenarios inwhich can exercise specific or long arn1 jurisdiction over non~domiciliary defendants. In this case, Plaintiffs allege that the KS Defendants are subject to the pursuant to CPLR (a) (1)~ York jurisdktion which states, in relevant part: ¢ ¢[aJsto a cause of action arising from any of the acts enumerated in this section, a court may exercise p¢r$onaljufi~qict~Qn over any nondomiciliary . . . who contracts anywhere supply goodsorservicesin the.state<" only ~'one New York transaction is sufficient" However, jurisdiction may attach under thissectfon state or contracts applicable· \Vhere thedaim. \Vhhin the state or (a}(l)isa"single act statute'' inthat.Ptwsical presence in.Ne,v·Ymkis Notably, not required person or through· an agent , ; . transacts. any as toa<,:ause ofaction "arising from~; the ttansaction ¢ ¢ofbusiness. within the to supply gtJods -0r services in the stat~}' Id. The statute ts· "only York activities were. purposeful and substantiaUy teiated to S.L. vl3adtga Oregario Falcon.Pin~ir(l, 90AD~d403,404{1 st Dept 20 l l l "Pi,lrptjscful liCtiyit~e§ a!'¢t1wsewith whfoh a defendant, throµgh volitional a(~ts, avails itseffofthe privile.ge ¢ofconducting actiVitieswithin the forum Statej thus invoking the ~11efits and pr~1tt;ctions ''Jd ·(citation 0I}1itt¢d, qu()ttltion marks in otiginal). Plaintiffs at;guethat CPLR'.302.{a) (l}jurisdictfon exists because (t) DS and KN are New York attomeys,. rir)~l py litigati11g it1 Nevi York ¢ courts they purposefully avai Ied themselves pf the [* 24] (2) ¢theyshou1d.have foreseen the prospectofdetf;:ndinga·suit in New York benefits beCiJ;USe the SUit cofuport~~·ifi\ t.raditicn1al notions offair play and Substantial justice; (3) this action inN¢w York{Le., the Park A venue Property) Md the KS Defendants affects were hired to. secure Plaintiffs'· fu1:id$ <.tga.i11st the mortgages that property;. and (4) Nev.,r York is the only possible venue for suitupon. all of Pfaintif:fs~ claims. See Plaintiffs' Opposition at 14.. 15. Notte ofth¢sei:easons,.exe-eptperhaps the third, is within the contemplation ofthe statute,. Also, none ofthe reasons are relevant for purposes of this inquiry is ·whether .the "defendant's. activities here \Vere act". statute, because an important purposeful aIJ.d [ \Vhethe1~ there lS a substantial relationship betweertthetransactiortand the asserted," Bank:rate, Inc, v Mainline Tavistock Inc., 18 Misc 3d ll27[AJ*5, 2008 Slip 3fUJ [Sup Ct, Kings Cow1ty quoting Kreutter v Mcfaddin Oil Cmp,, 71 [19&8). These factors are absent in case. As to the third reason, the record reflects Property, including negotiation and drafting of the activities related to the Park trru1sa1:11c~n documents, all occurred in Jersey, not in New York. Thus, the DS Defendants' conducted no activities and transacted no business in York within the meaningpfCPLR 302 (~)(1), have atfachedan emailtotheit papers\ appateritlY in a attempt to show that the Defendants rtonethdess conducted activities fo New Yotk ..relating t-0 tlie ·Park Avenue Property. Plaintiffs cite Bank Secs., Inc. i ¢ kfontana Qflnvs. .(7 NY3d 65, 71 [2006]), in which the CourtofAppealsheldthatthere wasjurisdiction underCPLR 30.2 (~)(l) over "commercial actors an(l rni've:5t:oirs using electronic an.d telephonic .rh~ail$t¢ project themselves into New York to conduct Jn thatcase, the Court of Appe~ls was ccmcerned that "technological atlVances in comJriunication'' ~h~{)leq parties to "transact enormous voll1mes of business within a state \VtthmitphysfoaUy entcrin:g it'' attd CPLR 302 (a)(l) W1)tdd cover those defendants who "proj~ct" th¢$~elves into Ne'V Y&rktran:Sacti(:lns via electronic means hy ,;initiating and pursuing'~ negotiations. .id. In this case, the subject email, attached as e~hibitT to Plaintifts' papers, tvrittel:l and seritb)' Schh~iqetfo 0¢ralcLChawbers, \1¥i.th a copy to DS. DS did not initiate the ClnaH nor did he projecthhttseJf into the btisiness transaction, Tlu1s, Deutsche Bank is inapplicable, Speci.ficjtidsdietionJs lioi a\faila.l.·Ue p'ltrsl.l.anlto CPLR 302 (a)(1). [* 25] Because the DS Defendants are not subje:ctto the personal jurisdiction of this c.ourt -- general and specific "''- it is unneces~ary ~o addresstheremainingissues raised by the parties, including the applicability· of foiut:rt .nunconvehicns a.rtd \.'Vhether the daims stated :causes of action tmder CPLR 3211 (a) (7), ('.ontlnsfon Based upon .aU.oftheforegoing,itis her~by ORl)ERJ.l:l)thatth~ motionby ProskauetRose LLP (moti.on sequence number 001) seeking dismissal ofph1intiffs' compfalntis granted, andthe.coropfa.int isdismissedinits entirety agait)_sfthis defendant with costs a!lddisbursement!)to the defendant as taxed by the Olerk of the Court, and the Clerk is directed to.enter jltdgment accordingly in favor of the qefendant, and the defendant severed. from this actio11; ang ifis further ORDERED thatthe motion byCongte&ationKahal Mine has Chinuch, I 21 Park Realty LLC and Chaim Babab (motion seqµence number. {)()2} seeking dismissal of plaintiffs' complaint is granted only to the ex~entofdismissJrrg the t\:venty..,sixth and thirtieth causes of action, and.the defenda11ts are directed to $etye an answer to the complaintvvithin :20 clays after service copy oflliis ('}rder \Vith t'lOtic;e ofenfry; andifis further ORDEREOthat the tnotion by Traurig, LLP (motion sequence number 003) seeking dismi$sal of plaintiffs' ooniphiiutis granted, and the contplaintis dismissed in its entirety against this defendanf\~·'ith costsJtnd disbursem1Jnfa to thedefendant~s.t~xed py thµ Clerk ofthe Cqurt, and the ~'lerki;;41reeted t9·¢nter jmigmentaccordingly infavor ofthe defendant,. and the defendant is severedfh.Jmthis action~ and it is further ORDEltEI) that th¢ JUQtiqq by Dayid Steit11n(ltZ, Naftali Kunstlinger and Kunstlinger Steimnetz LLP(motion sequertcei:twnber004) seeking dism.issalofplaintiffs' complaint is.granted, pursuani tp CPLR 32{1 ..(a) (8), in th~t this :court lacks jurisdiction ove1'· the defendants, and the defend~nts are SeVeted ftTlID this action} and it is further ORDERED that the t1ctfo11 is severW a.x1d c(Jntir1ued against the Q.efondants 11ot dismissed from the cas.e; and fr.I~ further OR.DEREil that· the caption be amendedto ret1ect the disinissfil and that an Juture. papers filed .. \\ith the court.beartbefQc116)Ving·arnended caption: 25 [* 26] SUPREME COURT OF THE ST ATE OF NEW YORK COUNTY OF NEW YORK: COMl'VlERCIAL DIVISION PART 49 ------------------- ~ ·- --.. --------· ----------- -x GERALD CHAlVIBERS, ~JOCELYN CHAiVIBERS, JULIAN CHAMBERS, and SASKATOON FINANCIAL LIMITED, Plaintiffs, -against~ IndexNo.: 157781/2013 ELIYAHU 'WEINSTEIN, FREDERICK TODD, 148 INVESTMENTS, LLC, TODD, FEU:ENTZ& EDELSTEIN, LLP, ALEX SCHLEID.ER, DAVID SCHLEIDER, AA:RON MUSCHEL, MEl~U'"'.AM LLC, SHEL.-AM CORP., AARON GLUCKSl\iAN, DIVERSIFIED. HOLDINGS LLC, FREDEIUCK TOOD, astrustee ofth~.ERASTIN(JTRUST, 121 PARK RE.ALTY LLC\ CONGRE.GATION KAHAL MlNCHAS C:SINtJCH, CHAIM BARAD, NE'W YORK toss l:\'IIJ'I(;ATIQN INC., AllTHURGOLDEN, MICHAEL BURNBA.U~1} and HENOCH PEARL, Defendants. - - - - - - - -·- .,. .,. - - .. -- - -- - -- - ,.; - .. ~ - "' -- "" .. .,. .. - - - ~-------X This constitutes the dedsion and order of the court DATED.: Aug11st 22,2014 ENTER, / ,, (,/ P.. ({M,,,~~? 0. P!i:TER SHER\VOOD .T.S.C.

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