RDLF Fin. Servs., LLC v Bernstein
Annotate this CaseDecided on May 10, 2010
Supreme Court, New York County
RDLF Financial Services, LLC, and RONI DERSOVITZ, Plaintiffs,
against
Marc A. Bernstein, BERNSTEIN & BERNSTEIN LLP and NORTH FORK BANK, Defendants.
119185/06
The attorneys on the matter were Joseph Capobianco, Esq., of Reisman, Peirez & Reisman, LLP (for the plaintiff), and Michael J. Collesano, Esq., of Michael J. Collesano, LL.M., PC (for defendant Bernstein).
Eileen Bransten, J.
Defendants Marc A. Bernstein and Bernstein & Bernstein LLP ("B &
B")[FN1] move for an order
vacating a settlement agreement between the parties, vacating a default for failing to answer the
complaint and vacating a default in connection with plaintiff RDLF Financial Services, LLC's
("RDLF") summary judgment motion. Plaintiffs RDLF and Roni Dersovitz (collectively referred
to as "RDLF") oppose the motion.
BACKGROUND
RD Legal Funding LLC ("RD") — not a party to this action — provides financing to attorneys by purchasing attorneys' fees earned through settlements (Verified Compl at ¶ 6).
On November 2, 2005, RD and B & B entered into an Assignment and Sale Agreement (the "Agreement") (id. at ¶ 7). B & B sold and assigned to RD a $607,500.00 legal fee (the "Legal Fee") in connection with an action entitled Albury v Maimonides Medical Center and Eugene Ellis, M.D., [*2]index No. 24976/1999 (Sup Ct, Kings County) (the "Albury Action") (id.). Under the Agreement, B & B sold its interest "in and to the Legal Fee free and clear of all claims, liens, interests and encumbrances" to RD for $500.000.00 (id. at ¶ 8). The Agreement provided that the Legal Fee would be paid directly to RD (id. at ¶ 9). The Agreement further provided that if the Legal Fee changed in any way, RD could require B & B to repurchase the Legal Fee for the full amount of $607,500.00 (id. at ¶ 11).
To secure its obligation under the Agreement, B & B granted RD a security interest in and to the Legal Fee and in all of B & B's present and future accounts, among other collateral (the "Collateral") (id. at ¶ 12).
After execution of the Agreement, RD assigned the Agreement to RDLF (id. at ¶ 16). Additionally, the Court in the Albury Action issued an Infant's Compromise Order ordering $509,659.90 be paid to B & B (id. at ¶ 19).
RDLF contends that B & B has violated the terms of the Agreement by transferring an interest in the Legal Fee to another entity, Esquire Capital, despite RDLF's sole ownership of the entire Legal Fee (id. at ¶ 17).
Notwithstanding the asserted violation, B & B, RDLF and Esquire Capital agreed that a check in the amount of $509,659.90 would be made payable to B & B, RDLF and Esquire Capital and that it would be delivered to B & B (id. at ¶ 20). On October 25, 2006, a check in the amount of $506,659.90 [FN2] (the "Settlement Check") payable to "Bernstein Bernstein, LLP, Esquire Capital and R.D. Legal Funding" was issued and delivered to Bernstein and B & B (id. at ¶ 21).
RDLF avers that, without the authorization, consent or knowledge of RDLF, Bernstein and B & B forged RD's endorsement to the Settlement Check and deposited it into B & B's operating account with North Fork Bank (id. at ¶ 23).
On June 27, 2008, the parties entered into a Stipulation of Settlement resolving all the issues in the case.
RDLF contends that Bernstein defaulted under the terms of the Stipulation of Settlement.
On October 29, 2008, RDLF moved for summary judgment against Bernstein and B & B pursuant to the terms of the Stipulation of Settlement. On May 6, 2009, this Court granted without opposition RDLF's motion for judgment against Bernstein and B & B. Judgment was entered on June 10, 2009.
Bernstein and B & B now move for an order vacating the Stipulation of Settlement, vacating
the default for failing to answer the complaint and vacating the default in connection with
RDLF's summary judgment motion.
ANALYSIS
[*3]I. The Stipulation of Settlement
The recognized grounds for vacatur of a settlement agreement are duress, illegality, fraud or mutual mistake (Calavano v New York City Health & Hosps. Corp, 246 AD2d 317, 319 [1st Dept 1998]).
"Settlement agreements are judicially favored and may not be lightly set aside" (Philips S. Beach, LLC v ZC Specialty Ins. Co., 55 AD3d 493, 493 [1st Dept 2008]).
Bernstein avers that the Stipulation of Settlement was executed under duress (Affirmation In Support of Marc A. Bernstein ["Bernstein Aff"] at ¶¶ 18, 21).
"A valid claim of duress has two components, (1) threats of an unlawful act by one party which (2) compels performance by the other party of an act which it had a legal right to abstain from performing" (Chase Manhattan Bank v State, 13 AD3d 873, 874 [3d Dept 2004]).
Bernstein and B & B's evidence in support of its motion solely consists of Bernstein's affirmation. Bernstein alleges that Dersovitz made threats to Bernstein "that he would turn [Bernstein] in to [Dersovitz's] investors for executing agreements with him on unsettled cases, despite his full knowledge that it [was not] true and threatened after agreeing to adjourn or withdraw the action to enter a default judgment" (Bernstein Aff at ¶ 18). Bernstein further alleges "that Dersovitz committed fraudulent acts, stole money from investors and tried to pass it off on to the Bernstein defendant's [sic] and then threatened exposure if [Bernstein and B & B] did not do what [Dersovitz] demanded" (id. at ¶ 20).
Based on Bernstein's vague and conclusory allegations, it is entirely unclear what act or a threat of action by Dersovitz from which Bernstein was entitled to be free (see Gerstein v 532 Broad Hollow Road Co., 75 AD2d 292, 297 [1st Dept 1980] [duress "must involve an act or a threat of action from which the person sought to be influenced is entitled to be free'"], quoting Kazaras v Manufacturers Trust Co., 4 AD2d 227, 237 [1st Dept 1957], affd 4 NY2d 930 [1958]).
Bernstein and B & B expressly acknowledged in the Stipulation of Settlement that "they are attorneys, have waived their right to have other counsel, that they understand the contents [of the Stipulation of Settlement] and that no duress of any kind was exercised upon them in connection with the execution of [the] [Stipulation of Settlement]" (Affirmation in Opposition to Motion to Vacate of Jerome Reisman, Ex 5 at ¶ 14; see also Affidavit in Opposition to Motion to Vacate of Roni Dersovitz ["Dersovitz Aff"] at ¶ 34, Exs 4, 7, 8, 9).
Additionally, "[o]ne who wants to repudiate a contract procured by duress, must act promptly, or he is deemed to have elected to affirm it" (Edison Stone Corp. v 42nd St. Dev. Corp., 145 AD2d 249, 253 [1st Dept 1989]).
Bernstein waited approximately nine months after executing the Stipulation of Settlement before seeking to avoid his obligations under the Stipulation of Settlement. Rather than repudiate the Stipulation of Settlement, Bernstein paid an initial amount of $50,000.00 to RDLF pursuant to the terms of the Stipulation of Settlement (Dersovitz Aff at ¶ 29). Furthermore, although he defaulted in making the second payment, Bernstein cured [*4]the default by making another payment of $50,000.00 after the scheduled date (id.).
Accordingly, based on the above, Bernstein and B & B fail to sustain their burden to vacate
the Stipulation of Settlement.
II. Default in answering the complaint and opposing RDLF's motion for summary judgment
A motion to vacate the default should be denied if the defendant's "moving papers fail to demonstrate an acceptable excuse for its delay in appearing and answering [the plaintiff's] complaint and a meritorious defense to the action" (Gray v B. R. Trucking Co., 59 NY2d 649, 650 [1983] [defendant's speculative assertions did not "relate to the merits of the main action and (were) legally insufficient"]).
Bernstein avers that his default in answering the complaint is excused because, after the summons and complaint was served on him, Dersovitz "advised him that [he] did not have to answer the complaint, that [he] would continually be given extensions of time while [Dersovitz] figured out how to deal with his lenders" (Bernstein Aff at ¶ 12).
As to his default in opposing RDLF's summary judgment motion, Bernstein further alleges
that
"[a]gain after the motion [FN3] was made [Bernstein] contacted Dersovitz and
[Dersovitz] advised [Bernstein] he had to show investors he was going forward, [Bernstein]
[should not] worry and again the motion was delayed for months and months. [Bernstein] again,
mistakenly trusted him and then after he said the motion would be adjourned again, he told
[Bernstein] if [Bernstein] [did not] execute the [Stipulation of Settlement], the default would
have to be entered, but [Bernstein] [should not] worry, because he would never enforce the
[Settlement] [A]greement and that if [Bernstein] [did not] execute the [Settlement] [A]greement
he would have to turn [Bernstein] in to his investors telling them that [Bernstein] had done what
he had actually done, taken their money under false pretenses" (id.).
Bernstein's reliance on RDLF's purported assurances to adjourn the motion for summary judgment are unsubstantiated and devoid of facts. Significantly, Bernstein's allegations demonstrate that he not only expected to continually adjourn appearances, but that Bernstein never intended to defend the action on its merits. An unexpected end to numerous granted extensions does not constitute a reasonable excuse for Bernstein and B & B's default in opposing the motion (see generally Gartner v Unified Windows, Doors & Siding, Inc., __ Misc 3d __, 2010 NY Slip Op 01759, *1 [2d Dept 2010] ["lengthy delay before defending the action, without more, was insufficient to establish a reasonable excuse for the default"]).
Furthermore, as discussed above, Bernstein's asserted defense that the Stipulation of [*5]Settlement was entered under duress is without merit (see JP Morgan Chase Bank, N.A. v Bruno, 57 AD3d 362, 364 [1st Dept 2008]; Fekete v Camp Skwere, 16 AD3d 544, 545 [2d Dept 2005] ["While (defendant's) affidavit made conclusory assertions about the existence of valid and meritorious defenses,' and suggested the existence of issues relating to notice and comparative negligence, such statements were bereft of specifications and detail and could not serve as the basis for vacatur"]).
"There is strong public policy in favor of resolving cases on the merits, and a party who delays in opposing a summary judgment motion should not be deprived of his day in court where he proves the absence of an intent to abandon the action and a lack of prejudice . . . caused by the delay" (White v Inc. Vill. of Hempstead, 13 Misc 3d 471, 473 [Sup Ct, Nassau County 2006], citing Burgess v Brooklyn Jewish Hosp., 272 AD2d 285 [2d Dept 2000]).
Here, however, Bernstein and B & B fail to demonstrate that either objective of resolution on the merits or the absence of prejudice to RDLF caused by the delay would be served by vacating Bernstein and B & B's defaults. Indeed, restoration of this matter would undoubtedly result in prejudice to RDLF from the delay (see Westchester Med. Ctr. v Hartford Cas. Ins. Co., 58 AD3d 832, 833 [2d Dept 2009]).
Far from exhibiting a single instance of delay, Bernstein has allegedly defaulted on the Agreement, on the Stipulation of Settlement (twice), in answering the complaint and in opposing RDLF's motion for summary judgment (see Kyriacopoulos v Mendon Leasing Corp., 216 AD2d 532, 533 [2d Dept 1995] ["the defendants' failure to seek leave to serve a late answer, even after being repeatedly informed by the plaintiffs' counsel that he intended to obtain a default judgment, as well as the failure to even respond to the motion for leave to enter a default judgment, is tantamount to intentional default and as such is inexcusable"]). Accordingly, it is
ORDERED that the motion to vacate is denied.
This constitutes the Decision and Order of the Court.
May_____, 2010
ENTER:
________________________
Hon. Eileen Bransten, J.S.C.
Footnotes
Footnote 1: Pursuant to a Stipulation of
Settlement, RDLF discontinued the action as against North Fork Bank.
Footnote 2: Neither the complaint nor the
parties' moving papers explain the $3,000 difference between the amount that was agreed upon
and the amount for which the check was issued.
Footnote 3: Presumably, Bernstein is
referring to the summary judgment motion.
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