Lash 68 LLC v Interior Mgt., LLC
Annotate this CaseDecided on September 8, 2023
Supreme Court, New York County
Lash 68 LLC aka Lash 68, LLC, Plaintiff,
against
Interior Management, LLC, Sydney Wolfe aka Syd Wolfe, Albert Martinez, Ulrike D. Martinez Marital Trust B, John Doe, and Jane Doe, Defendants.
Index No. 651674/2023
Belkin Burden Goldman, LLP, New York, NY (Brian Bendy of counsel), for plaintiff.
Moss & Kalish, PLLC, New York, NY (David B. Gelfarb of counsel), for defendants Sydney Wolfe and Albert Martinez.
Gerald Lebovits, J.
This is an action for breach of contract, conversion, and fraud. Plaintiff, Lash 68 LLC, has alleged that defendants Sydney Wolfe, Albert Martinez, and the Ulrike D. Martinez Marital Trust, managers of defendant Interior Management, LLC, misappropriated $558,742.79, which plaintiff had advanced to defendants to cover the cost of labor and materials on a construction project, and which defendants were required to hold in trust for the project under the Lien Law.
On August 1, 2023, this court entered a preliminary injunction barring Wolfe from disbursing any sums from any bank account he wholly or partly controlled, except for $500/month for daily living expenses, until defendants paid into court the $558,742.79. Wolfe now seeks leave to increase his monthly-living-expenses spending to $15,763.26, and to pay his counsel $15,000. Wolfe's applications are denied.
BACKGROUND
1. On motion sequence 001, plaintiff moved by order to show cause for a preliminary injunction and temporary restraining order. (NYSCEF No. 5.) This court granted the TRO following a hearing. (See NYSCEF No. 27 [signed OSC/TRO]; NYSCEF No. 42 [TRO-hearing transcript].) Following oral argument on the preliminary-injunction motion, this court issued an order on July 26, 2023, granting the motion in part and denying it in part (as set out in a decision delivered on the record), and directing the parties to submit proposed orders. (NYSCEF No. 53.) After considering the parties' submissions, the court signed plaintiff's proposed order on July 28, [*2]2023. (NYSCEF No. 58.)[FN1] The court rejected defendants' proposed counter-order (submitted in redline at NYSCEF No. 57) as seeking to reargue the court's determinations at oral argument, rather than to memorialize and implement those determinations. (See NYSCEF No. 58 at 3.)
2. This court's injunction contained several components. Among other things, the injunction bars defendants from disbursing any funds from any bank accounts controlled by them, until and unless they pay into court the disputed $558,742.79. (See NYSCEF No. 58 at 2 [order].) The sole exception to this bar is that defendants Wolfe and Martinez may each disburse $500/month from their accounts to "pay for daily necessities of life (food, toiletries, and the like)." (Id. at 2-3.) The injunction allow Wolfe and Martinez to file letter applications to increase the monthly daily-necessities exception. The applications must be supported by "financial backup showing why the daily necessity exception should be increased." (Id. at 3.)
The injunction also requires defendants to produce to plaintiff, on or before July 31, 2023, bank records and statements for defendant Interior Management from July 1, 2022, to date. Defendants must also produce detailed records and documents about defendants' handling of the Lien Law trust funds advanced to them by plaintiff—and where those funds have ended up.
3. On August 2, 2023—the day after entry of this court's order—Wolfe and Martinez filed letter applications seeking increases in the monthly amount permitted to be disbursed for daily necessities, from $500/month each to approximately $15,000/month each. (See NYSCEF Nos. 63 [Martinez application]; 64 [Wolfe application].) Plaintiff has filed a joint opposition to these applications. (NYSCEF No. 65.) Wolfe and Martinez did not file a reply (or seek leave to do so). Wolfe, however, filed a second application, for leave to pay counsel an additional $15,000 to represent him in this and several other related actions. (NYSCEF No. 67.)
After Martinez filed his letter application, his counsel filed a notice of bankruptcy (NYSCEF No. 66), indicating that Martinez had filed for bankruptcy in federal bankruptcy court in Florida, thereby automatically staying the claims against Martinez in this action. This order therefore addresses only Wolfe's applications. To the extent Martinez believes that this court may properly address his application as well, notwithstanding the automatic bankruptcy stay, Martinez may ask this court to do so, by letter e-filed on NYSCEF and emailed to SFC-Part7-Clerk@nycourts.gov.
DISCUSSION
Wolfe's applications are unpersuasive—both taken on their own terms and in the context of defendants' (non)compliance with this court's August 1, 2023, order more broadly.
This court concluded, following oral argument, that plaintiff had made a sufficient showing that defendants had misappropriated the Lien Law trust funds at issue to warrant immediate and continuing production by defendants of detailed records for defendant, to enable plaintiff to determine the movement and current location of the funds at issue. (See NYSCEF No. 58 at 3.) Plaintiff's opposition to Wolfe's application contends—and Wolfe has not disputed—that defendants have failed to provide this court-ordered discovery. (See NYSCEF No. 65 at 1, 3.)
Wolfe is requesting, therefore, that the court-ordered restrictions on his monthly spending be significantly relaxed, while simultaneously failing to provide plaintiff with court-ordered [*3]discovery. This position is untenable as a matter of equity. And accepting it would make it harder for plaintiff to determine with confidence what funds were misappropriated and where they went, while making it easier for Wolfe to dissipate any misappropriated funds beyond the reach of plaintiff or this court.
Additionally, this court's order provides that any application to increase the amounts that may be spent on daily necessities must be supported by financial backup. Neither of Wolfe's applications provide that backup. With respect to income/assets, Wolfe supplies only documentation of his gross and take-home salary at his current job. (See NYSCEF No. 64 at 8-18). He does not indicate, let alone document, whether he has other financial assets that may be drawn on to pay for daily necessities. He does not address his wife's income and assets. And he does not he say whether and to what extent he has obtained, or may now obtain, financial assistance with daily expenses from anyone, such as relatives or other business interests.
With respect to expenses, Wolfe provides a detailed description of his and his family's asserted monthly expenses. (See id. at 2-5, 20-23.) As an initial matter, many of the claimed expenses are expressly based on the assumption that Wolfe is responsible for 50% of the total family expenses, whether or not that is, in fact, the case. (See id. at 2-3.) As noted above, Wolfe has not provided any information about his wife's income and assets, how they have previously allocated family expenses between them, or whether they have previously received assistance for expenses from other family members.
More fundamentally, Wolfe provides no documentation—at all—of the claimed expenses. (See generally NYSCEF No. 64 at 2-22.) This court expressly required "financial backup" for any application to increase permitted monthly spending. (NYSCEF No. 58 at 3.) The court declines to go back on that directive now and instead take Wolfe's word for it.
Wolfe's application to make a $15,000 payment to his counsel suffers from similar infirmities. Wolfe asserts that he should be permitted to make the payment because his initial retainer has been expended and because his counsel have undertaken substantial legal services that have not yet been paid for. (See NYSCEF No. 67 at ¶ 6.) But neither Wolfe nor his attorneys provide any documents to support these assertions—whether in the form of invoices, balance statements, billing letters, or otherwise. Nor does Wolfe say (or show) that the only way he can continue to pay his counsel is by disbursing money from the bank accounts covered by this court's order, rather than drawing down other assets. In these circumstances, Wolfe has not shown that he should be permitted to make the $15,000 payment from a source covered by this court's injunction.
Accordingly, it is
ORDERED that defendant Wolfe's letter applications filed on August 2, 2023, and September 6, 2023, are denied, without prejudice to their renewal with proper documentary support; and it is further
ORDERED that defendant Martinez's letter application filed on August 2, 2023, is held in abeyance in light of Martinez's subsequent bankruptcy proceeding, without prejudice to Martinez's requesting by letter that this court resolve that application.
Dated: September 8, 2023
Hon. Gerald Lebovits
J.S.C. Footnotes
Footnote 1:The signed order was entered on August 1, 2023.
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