Kolodny v Byrne

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Kolodny v Byrne 2016 NY Slip Op 32542(U) December 7, 2016 Supreme Court, Suffolk County Docket Number: 11-28718 Judge: Jr., Andrew G. Tarantino 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] INDEX No. CAL. No. SHORT FORM ORDER 11-28718 l 6-00264CO SUPREME COURT - STATE OF NEW YORK I.A.S. PART 50 - SUFFOLK COUNTY PRESENT: Hon. ANDREW G. TARANTINO. JR. Acting Justice of the Supreme Court MOTION DATE 6-29-16 (009) ADJ. DATE _._7_.-1=2--=- _ __ - 1-=--6 Mot. Seq. # 009 - MotD ----------------------------------------------------------------)( ERIK KOLODNY, Plaintiff, GREENBLATT & AGULNICK, P.C. Attorney for Plaintiff 55 Northern Boulevard, Suite 302 Great Neck, New York 11021 - against BRENDAN B. BYRNE, AMY BETH BYRNE (a/k/a AMY BETH STERN), EPIPHANY CAPITAL MANAGEMENT LLC (formally known as EPIPHANY TRADING LLC), EPIPHANY SOLUTIONS INC., ANONYMOUS CAPITAL LLC, FRANK MCDONALD, MASSETO LLC, ELECTRONIC TRANSACTION CLEARING, INC., EMPIRE TRADING SERVICES, LLC, BRYAN LIBARDl, PENSION FINANCIAL SERVICES, INC. and EMPIRE E)(ECUTIONS, LLC, THE LAW OFFICE OF MICHAEL S. PERNESIGLlO, PLLC Attorney for Defendant Brendan B. Byrne 300 Rabro Drive, Suite 126 Hauppauge, New York 11768 l KILLORAN LAW, P.C. Attorney for Defendant Amy Beth Bryne 132 - 13 Main Street Westhampton Beach, New York 11978 l l Defendants. --------------, -------------------------------------------------)( Upon the following papers numbered 1 to _JQQ_ read on this motion for partial summary judgment; Notice of Motion/ Order to Show Cause and supporting papers I - 86 ; Notice of Cross Motion and supporting papers _ ; Answering Affidavits and supporting papers 87 - 88; 89 - 98 ; Replying Affidavits and supporting papers 99 - I 00 ; Othe1 _ _ , (and M'te1 he111 i11g eo1:111sel in support 11t1d opposed to the motio11) it is, ORDERED that the motfon by plaintiff for summary judgment in his favor on the issue of liability piercing the corporate veil of the defaulting defendant Epiphany Capital Management LLC is granted as to defendant Brendan P. Byrne, and denied as to defendant Amy Beth Byrne. Plaintiff Erik Kolodny commenced this action to recover money that he deposited into the named corporate entities pursuant to a written agreement, and for money he allegedly earned from successful stock [* 2] Kolodny v Byrne Index o. 11-28718 Pagc;;2 trading under that agreement Plaintiff alleges that he entered into a trader consulting agreement with defendants Epiphany Capital Management LLC (formerly known as Epiphany Trading LLC), Epiphany Solutions Jnc., and Anonymous Capital LLC, and that he became a customer and day trader entitled to access to defendants' website. computer programs and capital accounts. Plaintiff alleges that he deposited $30,000.00 into an escrow account pursuant to the agreement, began trading, and, as a result of his success, was entitled to commi ssions. He alleges that when earned commissions were not paid, he terminated the agreement and demanded the return of his deposit and earned commissions. Plaintiffinitially alleged causes of actions for breach of contract, fraud and conversion. On October 1L2012. thi s court (LaSalle, J. ) dismissed the second cause of action alleging fraud. finding the complaint was ''not pleaded with particularity, as there were no allegations concerning specific mi srepresentations and when they were made." Defendants Empire Trading Services LLC, Empire Executions LLC and Anonymous Capital, LLC did not join issue. Defendants Brendan P. Byrne. Amy Beth Byrne, Frank McDonald, Epiphany Capital Management and Epiphany Solutions answered and joined issue. On March 14, 20 14, this court (Tarantino. J.). pursuant to 22 NYC RR 202.27, cntl:!rcd a default judgment against Brendan Byrne, /\my Byrne. Epiphany Capital Management. Epiphany Solutions, Frank McDonald and l3ryan Libardi and the non-appearing defendants and an inquest was scheduled. On June 3, 2014. the default judgment against defendants Brendan Byrne and /\my Byrne was vacated and their counsel was relieved. The default judgment against defendant Epiphany Capital Management was not vacated. The claims against defondants Frank McDonald, Masscto LLC, Electronic Transaction C learing, Inc .. and Bryan Libardi have been discontinued. Plaintiff now moves for summary judgment in his favor to pierce the corporate veil of the defaulting defendant Epiphany Capital Management LLC against defendants Brendan Byrne and Arny Byrne. In support of the motion plaintiff submits, among other things, the pleadings: his own aflidavit: the deposition transcripts of Brendan Byrne: the trader consulting agreement; various checks and bank records: various correspondences: various debt card records; an affidavit of Amy Byrne; and tax records of Bri ght Red Marketing & Promotions, LLC. Jn oppositi<.H), dcfondant Brendan Byrne subm its his own affidavit; audit trails: hi s own deposition transcript and tbe deposition transcript of plaintiff; and various e-mai Is. Defendant /\my Bryne submits an affirmation of counsel. Plainti IT avers that Epiphany Capital Management (hereinafter Epiphany Capital). as an alter ego of Brendan and /\my Byrne. operated a ponzi scheme. Pursuant to the trader consulting agreement independent contractors, like plaintiff, deposited money with Epiphany Capital as a guarantee against potential stock trader losses, the right to use Epiphany 's website and computer programs and the right to trade with Epiphany·s capital. Plaintiff avers that the deposited money and the profits belonged lO the independent contractors Plaintiff avers that defendant Brendan Byrne siphoned off Epiphany Capital's assets, converting them to his personal use to finance a lavish lifestyle. incl uding purchasing personal property, paying personal expenses and purchasing interests in other companies. On May 15. 2007. plaintiff executed a trader consulting agreement with Epiphany Trading LLC. ln September of 20 I 0. the company was investigated by the SEC and plaintiff avers that he spent $24.508.0 I on attorney fees and that 13rendan Byrnl.! agreed to reimburse him for those fees. On November 1, 20 I 0. plain ti ff avers that Epiphany Capital replaced Epiphany Trading and his deposit and trading profits were transferred to the new entity. On August [* 3] Kolodny v Byrne Jndcx No. I l-28718 Pagc3 27, 2011, plaintiff terminated the trader consulting agreement and demanded return of his capital, including credit for attorney fees incurred. In that dcfondant Epiphany Capital has defaulted, it is deemed to have admitted all the factual allegations in the complaint and all reasonable inferences that flow from them (Rokina Opt. Co. •'Camera King. 63 NY2d 728. 480 NYS2d 197 [ 1984)). Therefore, as a matter oflaw, plaintiff has established that, with regard to Epiphany Capital, that he entered into a trader consulting agreement with it that he tendered $30,000.00 pursuant to the agreement, and that he was entitled to his trading profits. The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter oflaw, tendering sufficient evidence to eliminate any material issue of fact (see Alvarez v Prospect Hosp. , 68 NY2d 320, 508 NYS2d 923 [l 986L Wi11egrad v New York Univ. Med. Cellter, 64 NY2d 851. 487 NYS2d 316 l1985]; Andre v Pomeroy, 35 NY2d 361. 362 NYS2d 131 [19741). In determining a motion for summary judgment, the court's ftmction is not to resolve issues of fact or to determine matters of credibility but rather to determine whether issues of fact exist precluding summary judgment( see Roth v Barreto, 289 AD2d 557. 735NYS2d 197 f2d Dept 20011; O'Neill v Town ofFishkill, 134 AD2d 487, 521NYS2d272 l2d Dept 1987]). Thus, "[o]n a motion for summary judgment the facts are to be construed in a light most favorable to the non-moving party and should be denied where there is any significant doubt whether a material issue of fact exists or if there is even arguably such an issue" (see Bulger v Tri-Town Agency, 148 AD2d 44, 47, 543 NYS2d 217 lJd Dept l 989J). A plaintiff seeking to pierce the corporate veil must show that the individual defendants (1) exercised complete dominion and control over the corporation, and (2) used such dominion and control to commit a fraud or wrong against the plaintiff which resulted in injury (see Matter of Morris v New York State Dept. of Taxation and Fin., 82 NY2<l 135, 603 NYS2d 807 I 19931; Seufer v Lieberman, 229 AD2d 3 86. 644 NYS2d 566 f2d Dept l 996 j). The mere claim that the corporation was completely dominated by the defendants, or conclusory assertions that the corporation acted as their "alter ego," without more, will not suffice to support the equitable relief ofpicrcing the corporate veil (see Matter of Morris v New York State Dept. of Taxation a11d Fin. , supra; A belman v Shoratlantic Dev. Co., 153 AD2d 821, 545 NYS2d 333 12d Dept 1989]). It is well established that a business can lawfully be incorporated for tht; very purpose of enabling its proprietor to avoid personal liability (Seuter v Lieberman , supra). Absent a showing that "control and domination was used to commit wrong, fraud, or the breach of a legal duty, or a dishonest and mtjust act'' New York will not allow a piercing of the corporate veil (see Electronic Switching Indus., Inc. v Faradyne Elec. Corp. , 833 F2d 418. 424 r2d Cir l 9871). Factors to be considered by a court in determining whether to pierce the corporate veil include failure to adhere to corporate formalities, inadequate capitalization, commingling of assets, and use of corporate funds for personal use (see Millennium Const. v Loupo/o•1er, 44 AD3d 1016, 845 NYS2d 110 f2d Dept 2007]: Shisgal v Brown, 21 AD3d 845, 801 NYS2d 581 I J st Dept 2005 J). ln addition, the decision whether to pierce the corporate veil in a given instance depends on the particular facts and circumstances" (Weinstein v Willow Lake Corp. , 262 AD2d 634, 635, 692 NYS2d 667 [2d Dept 1999J). ''Vcil-pil.!rcing is a fact-laden claim that is not well suited for summary judgment resolution" (First Bank of Americlls v Motor Car Funding. 257 AD2d 287, 294, 690 NYS2d 17 [ l 5t Dept 1999); see also Damianos Realty Group, LLC v Fracchia, 35 AD3d 344, 825 NYS2d 274 l2d Dept 2006]). A plaintiffs attempt to pierce the corporate veil is not a separate cause of action and a plaintiff may seek a [* 4] Kolodny v Byrne Index No. 11-28718 Page4 judgment against the corporation, and to pierce the corporate veil, all in one action (Rosen v Kessler, 51 AD3d 761, 856 NYS2d 861 r2d Dept 2008 J; Hart v Jassem , 43 AD3d 997. 843 NYS2d 121 [2d Dept 2007J; Fiber Collsultants, Inc. v Fiber Optek Interconnected Corp., 15 J\D3d 528, 792 NYS2d 89 pd Dept 2005'1; Samsung Am. v Yugoslav- Korean Consulting & Tradind Co. , 248 AD2d 290, 670 NYS2d 466 fl st Dept 19981). Here, plaintiff has established Brendan Byrne failed to adhere to corporate formalities, inadequately capitalized the subject business operation. commingled assets, and used corporate funds for personal use. More specifically, plaintiff has established that defendant Brendan Byrne exercised complete dominion and control over Epiphany Capital Management LLC. The documentary evidence reveals that Epiphany 's bank account was controlled by Brendan Byrne and used for personal expenses including travel , food, car payments, insurance, cable, shopping and a share in an airplane. When questioned at his deposition Brendan Byrne repeated answered that he did not know or did not recall the nature or the business expense of dozens of debit card transactions. Epiphany was fonned in Delaware and had one member. Brendan Byrne. While Brendan testified that the company had four members. including plaintiff. Drendan Byrne has not produced, pursuant to plaintiff's demands, a record of the capital contribution of each member, distributions of profits, and tax documents indicating that corporate formalities were not followed. Brendan Byrne has also failed lo produce any stock certificates, operating agreements or rules that were established. He testified that new members were voted in, however, no annual meetings were held, no corporate officers were designated, and no records were maintained by any member. The documentary evidence also establishes that defendant Brendan l3ryne commingled corporate funds with his own personal funds and wrongfully transfe1Ted money paid in and traders' profits in order to pay his personal expenses. In opposition. defendant Brendan Bryne argues the allegations of commingling is "greatly exaggerated and overstated" and that plajntiff "grossly inflated" the amounts in question. Defendant Brendan Byrne contends that plaintiff has not established a breach of contract against him individually, or an action for conversion. Defendant Amy Dryne contends that as she was not a party to the contract and, therefore, that she cannot he held liable for its breach. Defendant Brendan Byrne also maintains that plaintiff was reimbursed for his trader guarantee of $30,000.00 and disputes legal fees of $24,580.01. l lowevcr. he does not dispute plaintiffs right to gain net trader profits, in essence. acknowledging damages owed to plaintiffs. Accordingly, plaintiffs m otion to pierce the corporate veil as to defendant Brendan Byrne on the issue of liability is granted. Damages shall be detennined at the previously scheduled inquest or defendant Epiphany Capital. Finally, as lo defendant Amy Byrne. plaintiff has not established a prima facie case that she exercised dominion and control over .Epiphany. She was not a shareholder or member of the company, and sbc is not listed as an authorized signer on Epiphany ' s bank account. On March 27, 2011 , she received $I 0,878. 75 allegedly for marketing services through her company Bright Red Marketing & Promotions. LLC. Bright Red's corporate tax returns for 2011, however, only show gross receipts of $1 ,963.00. Brendan Byrne testified that Amy Byrne was paid $15,000.00 for marketing services on a monthly basis, but was only paid for one month. The transfor of $15,000.00 to defendant /\my l3yrne is indicative of defendant Brendan Byrne's alleged siphoning or corporate assets for personal gain. Despite the $15,000.00 transfer to Amy Byrne. insu11icicnt evidence exists to pierce the corporate veil as to her [* 5] Kolodny v Byrne Index No. I I -'.287 I 8 Page 5 there is no evidence demonstrating she exercised dom inion or control over the company (Matter of Morris v New York S tate Dept. of Taxation & Fin.. supra). /\ccordingly. plaintifrs motion to pierce the corporate veil as to defendant Amy Byrne is denied. as Dated: J>Ec. 7 1 " Z o - -· - - A .J.S.C. -ANrmtwC.TA~ANTThTf' llt FINAL DISPOSITION _ X _ NON-FI NA L DISPOSIT ION

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