Estate of Rosenberg v 470 Kent Owner LLC

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Estate of Rosenberg v 470 Kent Owner LLC 2018 NY Slip Op 31613(U) July 10, 2018 Supreme Court, New York County Docket Number: 651770/2017 Judge: Eileen Bransten Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [* 1] INDEX NO. 651770/2017 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 07/11/2018 SUPRE:fvlli COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: IAS PART 3 -----------------------------------------------------------------------x THE ESTATE OF ISACK ROSENBERG, ABRAHA.rv1 ROSENBERG, IS.ACK ROSENBERG 2012 FAl\tHLY TRUST, ABRARA!v1 ROSENBERG 2012 F AJ\HLY TRUST, IRREVOCABLE TRUST FBO OF DESCENDENTS OF ABRAHAJ\II ROSENBERG U/A 12/31 /12, IRREVOCABLE TRUST FBO OF DESCENDENTS OF ISACK ROSENBERG U/A 12/31/12, \V/\ TERFRONT REALTY II LLC, CLC OWNERS LLC, and CL SPE LLC Petitioners, Index No.: 651770/2017 -against..... .tvloL Seq. Nos. 003 470 lillNT Ov\lNERLLC, Respondents. ------------------------------------------------------------------------x EILEEEN BRANSTEN, J.S.C.: On motion sequence No. 003, Petitioners move under Section 753 of the Judiciary Law for sanctions against Respondent, 470 Kent Ovvner LLC for its alleged failure to comply with a confirmed arbitration m.vard. BACKGROUND This underlying action involves a real estate transaction concerning property located at 470 Kent /\venue, Brooklyn, New York (the "Property") governed by a letter agreement and a contribution agreement Petitioners acquired the Property in 1981. Israel Rosenberg Ajjid., ~[4. Since I 871 to Present, the Property was, at various times, 2 of 10 [* 2] INDEX NO. 651770/2017 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 07/11/2018 Rosenberg v. 470 Kent 0\vner LLC 651770/2017 Page 2 of9 used as a manufactured gas plant, a ban-cl maker, molasses storage, a sugar refinery, a warehouse, a brewer-bottler, and most recently, a lumber yard. Id., ~17. Between 2004 and 2014, six environmental investigations of the Property revealed the follm.ving contaminants: petroleum, semi~volatile organic compounds, metals, pesticides, and PCBs in soils; and petroleum, chlorinated solvents, semi-volatile organic compounds, metals pesticides and PCBs in groundwater. Id, ~8. The enviromnental investigations did not identify when the pollution occurred, but the reports described the appearance of contaminants as ""weathered" and degraded, indicating that the pollution occmTed many years ago. The investigations attributed the contamination to the placement of historic fill materials at the site, the storage of petroleum, and general, long-term industrial operations. id., 1[9. The existing structures on the Property were built in 1939, 1940, and 1979. Id., ~10. In or about early 2014, non-party l'vlr. Roy Stillman expressed an interest in forming a joint venture to acquire the Propeny for redevelopment under the New York environmental Brmvnfield Cleanup Prograrn. id, 1!15. Ultimately, under this joint venture, IV1r. Stillman would obtain rezoning, perform environmental remediation, and ultimately own the Property. In turn, the Rosenberg Family would purchase additional properties for themselves. id, ~;i 8. 2 3 of 10 [* 3] INDEX NO. 651770/2017 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 07/11/2018 Rosenberg v. 4 70 Kent Owner LLC 651770/2017 Page 3 of9 On or about ~1av 28., 2015 Petitioner and I'Yfr. Stillman entered into a Letter . Agreement relating to the Property. Specifically, the Letter Agreement mernorialized the terms under which l\ik Stillman's companies (Imperial Companies, Stillman Development International and/or affiliates thereof) would be willing to form a joint venture to invest in the Property with the existing Property Owners (Petitioners). Id, ~19. l\1.r. Stillman and his affiliates were given exclusivity, requiring Petitioners to cease negotiations \Vith other potential buyers in exchange for the provision of documents and assignment of rights under the Brownfield Program if the acquisition of membership interests in the Property Owners was not consummated. id., ir2 I. On December 31, 2015, Petitioners and Respondent, 470 Kent Owner LLC, (a company once wholly owned and controlled by J\..1r. Stillman) entered into a Contribution Agreement (the '"Contribution Agreement") consistent with the proposed terms of the Letter .A.greement Id, ~23. Under the Contribution Agreement, Respondent agreed to make payments (the "Payments") and provide guaranties (the "Guaranties") in exchange for a member interest in the Property Ovmers and control of the Prope1ty. Id Respondent failed to comply and the matter was taken to arbitration. Significantly, the only parties who pai1icipated in arbitration \Vere the instant Petitioners and Respondent, 470Kent Owners. Neither Mr. Stillman nor 470 Kent Avenue LLC (another company owned and controlled by Mr. Stillman) participated in the arbitration. 4 of 10 [* 4] INDEX NO. 651770/2017 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 07/11/2018 Rosenberg v. 470 Kent Owner LLC 651770/2017 Page 4 of9 On iv:Iarch 3, 2017 a final Arbitration Award was renderedo See, Exhibit "B'' to Boyle Supplemental Affirm. In the Award, Petitioners Rosenberg, et aL were awarded judgment against Respondent 4 70 Kent Owner LLC insonmch as 470 Kent Owner was directed to turn over the Brmvnfield Rights and Information to Petitioners, at no cost to Petitioners. Id. After appearing for oral argument on I\fay 21, 2017 before Judge Olng, on June 21, 20 l 7 Justice Oing granted Petitioner's l'vfotion to confirm the arbitration in part. Of note, Petitioner requested Justice Oing extend the judgment to non-party 4 70 Kent Avenue LLC and Roy Stillman, which he declined to do. On June 12, 2017, Petitioners sent Respondent and Stillman a demand letter with an unentered copy of the Judgment via email and U.S, 1V1ail, requesting cornpHance with the Judgment. Wood A/7idavit, Exhibit C Like-vvise, Respondent -vvas served with the entered Judgment on June 28, 2017, Entry <~lJudg,tnent (Docket No. 57). Respondent and Stillman never replied. Pet, A1emo in Supp at 6, On i\ugust 3) 2017, Petitioners' designee filed an Application to Arnend the Brownfield Cleanup Agreement (the "Application to Amend") to facilitate a transfer pursuant to the Judgn1ent, and on September 15, 2017, Petitioners sent Stillman a letter requesting that he execute the same, Wood Affidavit, Exhibits J and K On September 18, 2017, Respondent replied stating that it had searched its records and "dete1mined that it 4 5 of 10 [* 5] INDEX NO. 651770/2017 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 07/11/2018 Rosenberg v. 470 Kent Owner LLC 651770/2017 Page 5 of9 has not now, nor at any time, held any right in its name under the Brownfield Program relating to 470 Kent Avenue,. Brooklvn, New ...... "" York'~ FVood A/l7davit, Exhibit L .... On Se<ptember 27, 2017, at Petitioners' request the Departrnent of Environmental Conservation ("DEC') sent Stillman, as managing member of 470 Kent A venuei a letter compelllng him to execute the Application to Amend and stating that the DEC would process the amendment without Stillman's signature in thirty days if StiHman failed to sign. Wood Affidavit, Exhibit A:f On October 13, 2017, Respondent replied to the DEC threatening litigation and stating it would allegedly suffer unspecified "significant money damages'~ if the DEC transfoned the Brownfield Cleanup Agreement to Petitioners' designee without Respondent's consent. Wood Aflfdavit, Exhibit N. Petitioners now complain Respondent has failed to comply vvith the confirmed Arbitration Award and seeks to hold Respondent in conternpt for such failure. Respondent opposes. DISCUSSION Pursuant to Section 753 of the Judiciary Law, "A court of record has pmver to punish, by fine and imprlsonrnent, or either,. , . fa] party to the action or special proceeding ... or other person .. , i{)r any .. , disobedience to a lavvfuI mandate of the court". Judiciary Lmv § 753(A)(3). 5 6 of 10 [* 6] INDEX NO. 651770/2017 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 07/11/2018 Rosenberg Vo 470 Kent Ovvner LLC 651770/2017 Page 6 of~J To support a finding of civil contempt, the following elements must be established by clear and convincing evidence: (1) "it must be detem1ined that a lawful order of the court, clearly expressing an unequivocal mandate, \Vas in effect;" (2) "[i]t must appear, \vith reasonable certainty, that the order has been disobeyed;" (3) "the party to be held in contempt must have had knowledge of the court's order, although it is not necessary that the order actually have been served upon the party;" and (4) "prejudice to the right of a party to the litigation must be demonstrated." El-Dehdan v. El-Dehdan, 26 N. Y.Jd 19, 29 This matter, which very clearly has a belabored history, is presenting itself to this Part for the first time in light of Justice Oing,s elevation to the Appellate Division. Justice Oing conducted a lengthy oral argument prior to confirming the arbitration award in iv1ay 2017. While he did not ultimately decide the issue, he did entertain discussions on vvhether the judgrnent/arbitration m.vard was intended to andior should encompass more than just Respondent, 4 70 Kent Owners, the only party explicitly directed to perfonIL (ernphasis added). \Ve now find ourselves vvith the proverbial '\vho has the ball" analysis. Petitioners argue 470 Kent Owners made several representations during the arbitration hearing that it had the Brownfield Rights. Specifica.Uy, in an August 15, 2016 Affidavit offered by Mr, Stillman, he swore: "Claimant [470 Kent Owner LLC] entered into a Brownfield Agreement and secured a permit to undertake certain remedial activities 6 7 of 10 [* 7] INDEX NO. 651770/2017 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 07/11/2018 Rosenberg v. 470 Kent Owner LLC 651770/2017 Page 7 of9 related to the Property ... " due to our swift action, we were able to secure a Brownfield Permit .. " Ex. D to Boyle Supplemental Affid., ~[7( d). Additionally, during the arbitration proceedings l\1r. Stillman also swore he was the sole, l'v1anaging ~fomber of 470 Kent Owner LLC. '-)'ee, Id~6 and Exhibit "E" to Boyle Supplemental Affid., 309: l 3- 310:2. Despite these admissions, 4 70 Kent Owner LLC now denies it has possession of the Brovvnfield documents. In short, it seems Mr. Stillman, as the individual who executed the Brownfield Agreement, is the person best positioned to advise who has the requested information. That aside, however, ~fr. Stillman represents he cunently is only a 50% shareholder of 4 70 Kent Owner and therefore, is not the alter ego of 4 70 Kent Owner. Blumenstein Affirm. ifs. The Court notes while it is clear ~1r. Stillman initially owned 100% of 470 Kent Ovmer LLC, it is unclear when his interest decreased to 50?.li). Armed with this information Petitioner requests this Court sanction 4 70 Kent Owner for failing to provide the Brownfield documents in compliance with the confirmed arbitration award. The Petitioner also asks thls Court to direct i\1Ir. Stillman to prmride the documents on 470Kent Owner~s behalf. lt seems obvious to the Court that either tvk Stillman has the documents produce or 4 70 Kent Owner --- itself- has the documents. The Court, at this moment, only has jurisdiction over 470 Kent Owners. As that is the only Respondent named to the Petition, the Court can only address the relief sought against 470 Kent Owner. In that vein, the Court cannot punish a party for not providing 7 8 of 10 [* 8] INDEX NO. 651770/2017 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 07/11/2018 Rosenberg v. 470 Kent O'vvner LLC 651770i2017 Page 8of9 that which it does not have. There have been sworn statements offered to this court that, indeed, 4 70 Kent Owner does not have the Brmvnsfield Documents to turn over. Blurnenstein -1.tfirm., ~23, Now, the Court win note, it has not been provided any evidence as to when !vir. Stillman's ownership in 470 Kent Owner decreased to 50%. Therefore, if there is any evidence l'vk Stillman transfeffed his ownership interest after the arbitration mvard was confirmed, a strong argument could be made the transfer was done fraudulently to avoid satisfying the arbitration award, See, NY. Debt & Cred. Lairi> §2 76 ("Every conveyance made ... with actual intent, as disting11ished from intent presumed in law?. to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors."). At this juncture, ho\vever, there has not been a sufficient shmving of "alter ego" between 470 Kent Owner and J\fr. Stillman sufficient that the judgment against 470 Kent Owner can be extended to Ivk Stillman and/or 470 Kent Avenue (this has already been !\vice attempted by Petitioners and twice rejected). Now, however, because the universe of potential document holders appears to be limited to .Mr. StiHman and/or 4 70 Kent Avenue; Petitioners were previously questioned at their November 20, 2017 appearance why they had not sought relief specifica11y against 1v1r. Stillman and/or 470 Kent Avenue. In response, Petitioners advised they had, indeed, commenced an action which \Vas "being routed to this Part" (Nov. 20, 2017 Tr: 14:18-16:19), Nearly 8 months later, the Court has not been apprised of the status of such a matter. 8 9 of 10 [* 9] INDEX NO. 651770/2017 NYSCEF DOC. NO. 126 RECEIVED NYSCEF: 07/11/2018 Rosenberg v. 470 Kent Owner LLC 651770i2017 Page 9of9 \Vhik the Court is sympathetic to Petitioners' position, the Court cannot direct one party to produce what it does not have. Further, as the parties to the ';related'' action are not before this Part, the Court cannot enjoin any further transfor be taken to the Documents. The Court can., and does, however, direct 470 Kent Owner (including Jv1r. documents held by ?vlr. Stillrnan when he ··Nas the l 00% o\vner) to turn over the Brownsfield documents that are currently in its possession and/or were in its possession i±Uh~J!m~Jhe m:J2!1r~!i9JL~Y~t~LQQJJ:firm.~4 ··· tvfay 24, 2017, If Petitioners present evidence to this Court that the Brmvnsfield documents were in the possession of 470 Ke~1t Ovmer nevertheless transferred the documents to a non-party, sanctions wiH be issued. Petitioners lvfotion for sanctions is DENIED \Vithout prejudice as stated herein. This constitutes the Decision and Order of the Court July :JO _ ,2018 ENTER: .. , ~··"""-.,\ l } . C2..)\,<~.,~~°'' ~···:>:>£'-~· J\:.: HON. EILEEN BRA,NSTEN, J.S,C. 9 10 of 10 . . .,,

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