FILED: NEW YORK COUNTY CLERK 04/11/ :48 PM INDEX NO /2013 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 04/11/2017

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X KATARINA SCOLA, Plaintiff, Index. No.: /2013 -against- AFFIRMATION IN SUPPORT RICHARD KROMKA and BLUE STAR ADVISORS, INC., Defendant X MICHAEL P. MANGAN, an attorney duly admitted to practice law in the State of New York, fully familiar with the facts of this matter and the instant application based on discussions with my client and review of the file, under the penalties of perjury, affirms as follows: MOTION SUMMARY 1. In this action for unpaid interest against a guarantor on a loan, which principal was fully repaid, defendant Richard Kromka moves to dismiss this action pursuant to CPLR 5015 (a)(4) due to a lack of personal jurisdiction and for sanctions against Plaintiff for executing a false judgment, after misrepresenting to the bank that there was an entered judgment against him. According to the face of the affidavit of service against Kromka, plaintiff failed to personally serve him, as is required under The Hague Convention rules for service upon a natural person. Compounding this failure, plaintiff took steps to enforce a default judgment that was never entered in court, and misrepresented to Kromka s bank that a Judgment was entered on April 12, 2016 when no judgment as been entered. Defendant Kromka seeks to have the action dismissed for failing for (1) failing to serve the summons and complaint on defendant and, alternatively, (2) failing to timely enter judgment. Plaintiff must also be sanctioned in the form of attorney s fees and restitution for falsely removing Kromka s bank funds without a judgment. 1 of 10

2 FACTS & PROCEDURAL HISTORY 2. On August 4, 2008, Plaintiff Katarina Scola entered into an investment contract with Defendant Blue Star Advisors Inc. ( Blue Star ) whereby Scola invested $100,000 for a 10% return on the investment, for a term of two two-year periods, and Kromka personally guaranteed the investment. (See, Investment Term Sheet, attached hereto as Exhibit 1. ) 3. When Blue Star defaulted on the payments to Scola in November 2012, Kromka agreed to repay Scola for her unpaid investment, which he did. In fact, Kromka paid Scola more than her original investment, he also made payment of some interest, for a total amount paid of $118,950. (See, dated Mar. 14, 2013, attached hereto as Exhibit 2.) 4. Dissatisfied with the amount received against Kromka, plaintiff commenced an action against him in Supreme Court, New York County, for the unpaid amount of $32,455, by filing her summons and complaint on December 24, On July 17, 2014, Plaintiff filed an affidavit of service asserting that she achieved legal process on individual defendant Richard Kromka in Hong Kong on June 20, 201 by leaving the summons and complaint with a receptionist of Regus business center in Hong Kong. (See, Aff. of Service dated Jun. 20, 2014, attached hereto as Exhibit 3. ) The purported date of service was 178 days after the summons and complaint was filed. Scola then filed her affidavit of service 27 after the date she claims to have served Kromka. (Id.) 6. The Hague Convention rules for process service in Hong Kong require that for service upon a natural person that the service accomplished must be personal service. (See, Hong Kong Service Rules Excerpt, attached hereto as Exhibit 4. ) 7. According to the affidavit of service filed by plaintiff, on June 20, 2014 a Hong Kong process server, Kelvin Ko, attempted service on Richard Kromka by leaving a copy of the 2 of 10

3 documents with a receptionist at Regus office center, located in Hong Kong, on the basis that Richard Kromka s employer, EuroConsultAsia, receives mail at Regus office center. (Exhibit 3.) According to Mr. Ko s affidavit of service, Richard Kromka does not himself go to the Regus business center offices in Hong Kong. (Id. at p. 5.) 8. On August 28, 2014, Scola filed for default judgment against Kromka and Blue Star, and the clerk of court rejected the application due to the plaintiff s failure to file affidavits of service pursuant to CPLR 308(2), and because additional affirmations and a bill of costs were required. 9. Scola then waited for October 26, 2015 before she moved to extend her time to file her affidavits of service. (See, Mot. To Extend, attached hereto as Exhibit 5. ) The Court granted plaintiff an extension to file proof of service, on December 1, 2015, and she filed the affidavit of service for Kromka s purported service on that day. (See, Decision and Order dated Dec. 1, 2015, attached hereto as Exhibit 6 ; NYSCEF e-filing printout attached hereto as Exhibit 7. ) 10. On February 5, 2016, Plaintiff tried again to file her motion for a default judgment against Kromka, and the clerk of court again rejected the application because the motion was made longer than a year after the purported July 2014 default. (See, Mack Affirm. dated Feb. 5, 2016, attached hereto as Exhibit 8. ) 11. On March 17, 2016, plaintiff sought a default judgment against Kromka a third time by moving for an Order to direct the clerk to enter default judgment against both defendants, Kromka and Blue Star, even though plaintiff never filed an affidavit of service for Blue Star. (See, Mot. to Enter Default Judg., attached hereto as Exhibit 9. ) Plaintiff s application for the clerk to enter a default judgment against Kromka and Blue Star was granted on April 8, (See, Apr. 8, 2016 Order, attached hereto as Exhibit 10. ) 3 of 10

4 12. However, Plaintiff never submitted a proposed judgment for entry with the Clerk after this Court s April 8, 2016 Order, and no judgment was ever entered. (See, Exhibit 7.) Nor did Plaintiff ever serve Kromka with a notice of entered judgment. 13. Yet, on or about April 14, 2016, Plaintiff served a restraining notice and subpoena on Citibank, where Kromka maintained a personal bank account, claiming that a Judgment was entered on April 12, 2016, in favor of Judgment Creditor Katarina Scola and against Judgment Debtors Richard Kromka and Blue Star Advisors, Inc. (See, Restraining Notice, attached herein as Exhibit 11.) 14. Plaintiff received approximately $4, from Citibank resulting from the April 14, 2016 Restraining Notice, and defendant Kromka was charged an additional $ as a legal processing fee, as a result of Plaintiff s misrepresentation that a judgment was filed on her behalf. 15. Plaintiff has still not submitted a proposed judgment to the Clerk, and therefore still does not have a judgment in this case. 16. On October 17, 2016, Plaintiff filed a motion to enforce an information subpoena, failed to appear and then refiled the exact same motion on December 5, There is still no judgment in this case, however the Court issued an Order granting Plaintiff s motion to enforce the subpoena on February 23, (See, Feb. 23, 2017 Order, attached hereto as Exhibit 13. ) 4 of 10

5 ARGUMENT I. SUMMONS AND COMPLAINT MUST BE DISMISSED FOR LACK OF PERSONAL JURISDICTION PURSUANT TO CPLR 5015 (a)(4) & 3211 (a)(8). 17. Plaintiff never served either defendant. Admittedly, plaintiff was required to serve defendant Kromka, a natural person via personal service but instead attempted to serve the summons and complaint with a supposed agent of Kromka s employer. (Exhibit 3.) According to The Hague Convention rules for service on a natural person, service could only be made by personal service. 18. Plaintiff s affidavit of service is defective on its face because plaintiff admits that she did not obtain personal service of defendant Kromka, as required by The Hague Convention of Hong Kong. Instead, plaintiff attempted service at Regus, a third-party that is not authorized to accept service on behalf of defendant Kromka, at a location where Kromka does not work and has no presence. These facts are admitted to in the affidavit of service. ( Exhibit 3.) Regus is also not authorized to accept service on behalf of Kromka s employer, EuroConsultAsia. (See, Affidavit of Richard Kromka.) 19. The burden of proof for obtaining personal jurisdiction belongs to the plaintiff. Although an affidavit of service provides prima facie evidence of service process, where there is a sworn denial of service by the defendant, the affidavit of service is rebutted and the plaintiff must establish jurisdiction by a preponderance of the evidence at a hearing. NYCTL Trust v. Rabinowitz, 7 A.D.3d 459, 460 (1st Dept. 2004); Skyline Agency, Inc. v. Ambrose Coppotelli, Inc., 117 A.D.2d 135, 139 (2nd Dept. 1986). 20. Plaintiff s basis for alleged personal jurisdiction over Kromka was that substituted service was effected pursuant to CPLR 308(2), as a domiciliary of New York who was served outside the state in a manner prescribed by New York law pursuant to CPLR 313. The Hague Convention is 5 of 10

6 an international treaty that controls international service of process. Article 5(b) of The Hague Convention permits parties to be served by a particular method of service that is requested by the applicant as long as it is not incompatible with the law of the country where service is to be performed. 21. Plaintiff failed to meet the requirements of service pursuant to CPLR 313 and The Hague Convention of Hong Kong because Kromka was not personally served nor was service effected upon an individual authorized to accept service upon his behalf. Furthermore, Plaintiff s affidavit of service is not filled out correctly pursuant to the requirements of The Hague Convention of Hong Kong. 22. Regus Corporation is an internationally-recognized business center with over 1,800 locations worldwide providing both executive suite and virtual office services to its clients, professional process servers should know that Regus employees are not authorized agents to accept service of process on behalf of Regus s clients Plaintiff s process server had actual notice that the Ms. Cheng at Regus was neither an employee of EuroConsultAsia nor an employee of Kromka. Ms. Cheng told the process servers that Kromka did not visit the office. (See, Exhibit 3.) The process servers never asked Ms. Cheng whether she would notify Kromka that she received papers on his behalf. 24. The document submitted as part of the affidavit of service that was stamped by Ms. Cheng on the second page of the Request for Service Abroad of Judicial or Extrajudicial Documents 1 See Nedgam Prods., LLC v. Bizparentz Found., 2010 U.S. Dist. Lexis (D. Ct. Conn., Apr. 29, 2010) (recognizing Regus as a virtual office space provider); see also Natures Way Marine, LLC v. Everclear of Ohio, Ltd., CV (S.D. Ala., Jan. 18, 2013) (recognizing service could not be made at a Regus location since no employees of the defendant worked at the location); see also Moletech Global Hong Kong Ltd. v. Pojery Trading Co., CV (N.D. Cal., Feb. 27, 2009) (recognizing that Regus employee was not authorized to accept service of process on behalf of defendant). 6 of 10

7 does not state that the documents the person is signing for are for legal process; which is required by The Hague Convention of Hong Kong. (Id.) 25. Additionally, the certificate of service does not check box b regarding what particular method of service was performed. (Id.) The individual certifying service signed the document in a way that does not identify who is certifying. (Id.) Although Plaintiff s counsel filed the proof of service and attached a letter from the process serving company describing how process was served, the certificate page on the Request for Service Abroad of Judicial or Extrajudicial Documents is in direct violation of the rules of The Hague Convention because it does not indicate that any supporting documents establishing the service are attached. (Id.) 26. Kromka also states, in sworn affidavit, that he did not receive notice of this lawsuit via the service made upon the office at the Hong Kong Regus business center. (See, Affidavit of Richard Kromka.) 27. Plaintiff s affidavit of service fails to make out a prima facie proof of the service, and admits that plaintiff failed to serve Kromka pursuant to The Hague Convention rules of Hong Kong, and therefore, plaintiff never obtained personal jurisdiction over Kromka. A motion to dismiss can be brought at any time before service of the responsive pleading is required. CPLR 3211(e). The defendant may make a motion to dismiss an action against him if the court does not have personal jurisdiction of the defendant. CPLR 3211(a)(8); Al-Dohan v. Kouyoumjian, 93 A.D.2d 714 (1st Dept. 1983). The motion for default judgment must be vacated and the summons and complaint dismissed. 7 of 10

8 II. IN THE ALTERNATIVE, PURSUANT TO CPLR 3215(c) THIS CASE SHOULD BE DEEMED ABANDONED BECAUSE PLAINTIFF DID NOT FILE FOR DEFAULT JUDGMENT WITHIN ONE YEAR. 28. If the plaintiff fails to file for default judgment within one year of default, the court shall dismiss the complaint as abandoned. CPLR 3215(c). To avoid dismissal of the complaint as abandoned under such circumstances, a plaintiff must offer a reasonable excuse for the delay in moving for leave to enter a default judgment, and must demonstrate that the complaint is meritorious Cty. of Nassau v. Chmela, 45 A.D.3d 722 (App. Div. 2nd Dept. 2007); see also Kay Waterproofing Corp. v. Ray Realty Fulton, Inc., 23 A.D.3d 625 (App. Div. 2nd Dept. 2007). 29. In Plaintiff s Affirmation in support of her motion requesting the Court to direct the clerk to enter default judgment, Plaintiff argues that her application for default judgment is timely because default doesn t begin until proof of service is filed, thus completing service. (See, Exhibit 9 at p.4., No. 18.) CPLR 3215(c) requires the Plaintiff to provide a reasonable excuse for the delay in filing for default judgment. However, Plaintiff never provided any explanation for why she was delayed for over a year before asking the Court to allow her to file her proof of service late, which allowed the Plaintiff to skirt the requirements of CPLR 3215(c) by then claiming that due to her untimely filing of proof of service, her application for default judgment was then timely. In this situation, the Plaintiff should be held to the same standard as required in CPLR 3215(c) and be required to provide a reasonable excuse for failing to file the proof of service timely, resulting in an unreasonable delay in filing for default judgment, and causing such a grave delay in asking for relief to file the same late. 30. Allowing the Plaintiff to create an unreasonable delay in filing for default judgment by using her own multitude of procedural defects with service (supra), would only frustrate the intent of the legislature in regards to CPLR 3215(c) and gravely prejudice defendant. Defendant did not 8 of 10

9 receive proper service and as such, had no notice of Plaintiff s motion for default judgment. If this Court were to determine that dismissal due to improper service is improper, in the alternative, this Court should deem this case abandoned and dismiss this case for Plaintiff s failure to provide adequate excuse for its undue delay. III. THE COURT SHOULD IMPOSE ATTORNEY S FEES AND COSTS AND LOSS OF FUNDS AS A SANCTION PURSUANT TO 22 NYCRR Plaintiff misrepresented to the bank that she had obtained a judgment and had authority to levy Defendant s bank account. Both actions had the intent to deceive the bank into relying on his misrepresentations so that they would levy Kromka s account, which they did, resulting in thousands of dollars in damages. 32. In Levy v. Carol Mgt. Corp., the Appellate Division First Department stated that when determining the imposition of sanctions, the court must look at the broad pattern of conduct. 260 A.D.2d 27 (1st Dept. 1999). The Levy court also held that sanctions are retributive and they are useful in not only punishing past conduct, but deterring future frivolous conduct. Id. In situations where attorneys act frivolously, sanctions are appropriate to prevent the waste of judicial resources and deterring vexatious litigation and malicious litigation tactics. Id. at 35. In determining whether an attorney has reached the level of conduct deserving of sanctions, the court must ask whether the attorney followed the standards of a reasonable attorney. Sakow v. Columbia Bagel Inc., 6 Misc.3d 939 (Sup Ct, N.Y. County 2004); Principe v. Assay Partners, 154 Misc.2d 702 (Sup Ct, N.Y. County 1992). 33. Plaintiff should be sanctioned for frivolous conduct by levying Defendant s bank account upon a bad faith misrepresentation of a material fact. This Court, in its discretion, may award to any party or attorney in any civil proceeding before the court costs in the form of reimbursement for actual expenses reasonably incurred and reasonable attorney s fees, resulting from frivolous 9 of 10

10 conduct. 22 NYCRR The Court, in its discretion may [also] impose financial sanctions upon any party or attorney who engages in frivolous conduct. Id. WHEREFORE, for the above-mentioned reasons, it is respectfully requested that this Honorable Court grant Defendants Motion to Dismiss and for Sanctions in its entirely and for any such other further relief as this Court deems just, equitable and proper. Dated: New York, New York April 10, 2017 Respectfully submitted, /s/ Michael P. Mangan MANGAN GINSBERG LLP Attorneys for Defendants 80 Maiden Lane, Suite 304 New York, New York (212) TO: Sean Mack, Esq. PASHMAN STEIN Counsel for Plaintiff 1375 Broadway, 10 th Floor New York, NY of 10