SUPREME COURT: STATE OF NEW YORK COUNTY OF NASSAU. PRESENT: HON. IRA B. WARSHAWSKY, Justice. TRIAL/IAS PART 8. Plaintiff. Defendants.

Transcription

1 SCAN SHORT FORM ORDER SUPREME COURT: STATE OF NEW YORK COUNTY OF NASSAU PRESENT: HON. IRA B. WARSHAWSKY, Justice. TRIAL/IAS PART 8 FULL TIME FITNESS CORP. - against - Plaintiff INDEX NO.: /2009 MOTION DATE: 03/29/2010 MOTION SEQUENCE: 002 ACTION NO. J&B FITNESS, INC. and BRIAN BRA TKOWSKY Defendants. BRIAN BRATKOWSKY and GARY BUTLER Individually and as Shareholders of FULL TIME FITNESS, INC., d//a GOLD' S GYM OF BELLMORE INDEX NO. : /2009 Plaintiffs ACTION NO. -against - ANTHONY CALIENDO, GLEN MORALE and FULL TIME FITNESS, INC, d//a GOLD' S GYM OF BELLMORE Defendants.

2 JUAN MA YORAL, Individually and as a Shareholder of TIME FOR FITNESS INC., d//a GOLD' S GYM OF GARDEN CITY PARK -against - Plaintiffs INDEX NO. : /2009 ACTION NO. ANTHONY CALIENDO, GLENN MORALE, and TIME FOR FITNESS, INC., d//a GOLD' S GYM OF GARDEN CITY PARK Defendants. The following papers read on this motion: Order to Show Cause, Affirmation & Exhibits Anexed... 1 Affirmation in Opposition, Affirmation, Affidavit & Exhibits Anexed... 2 Supplemental Affrmation of Stuar R. Berg & Exhibits Anexed... 3 PRELIMINARY STATEMENT The motion is brought on behalf ofthe defendants in Action No. 1 and the plaintiffs in Actions Nos. 2 and 3. They seek the following relief: Action No. Order dismissing the complaint and scheduling an inquest upon defendants counterclaims, together with counsel fees and sanctions. Action No. Striking the Answer of defendants upon their failure to notify plaintiff of a time and date to permit plaintiffs' computer expert to examine the computers at defendants ' locations, and for failure to produce discovery as directed by the Cour. Alternatively, the imposition of sanctions and attorney fees against defendants; the scheduling of a date for an expert to examine, clone and copy hard drives of computers located at

3 defendants' gym locations, as well as laptop computers of the individual defendants that have information regarding the corporate defendants; immediate production of all documents and discovery items requested. Plaintiff further requests the appointment of a Receiver over the operations of the corporate defendants pursuant to Civil Practice Law and Rules 6401 and a prohibition against defendants ' use of corporate fuds to pay legal fees, and that money paid to date be accounted for and the individual defendants be directed to reimburse the corporate defendant. Action No. Plaintiff seeks the same relief as in Action No. BACKGROUN The underlying controversy concerns agreements between Anthony Caliendo, as principal of Full Time Fitness and Time For Fitness, d//a Gold' s Gyms of Bellmore and Garden City Park. Brian Bratkowsky is the principal of J&B Fitness and a 10% shareholder of Full Time Fitness. Juan Mayoral is a shareholder of Time For Fitness of Garden City Park. Bratkowsky and Mayoral are personal fitness trainers, whose arrangements with Gold' Gyms called for them to pay 20% of the gross proceeds of their fees from customers at the respective gyms. Action No. 1 claimed that Bratkowsky and J&B Fitness failed to remit their percentage earnings as required. Defendants counterclaimed that the Plaintiffs had failed to maintain the premises to a level which would attract and retain clientele, and that they were obligated to make expenditures to maintain the premises for which they claimed a setoff. Plainff in Action- No. 1 moved for summary judgment, which was denied. Th curent motion is based on the claimed disregard of the Order and a further So Ordered stipulation dated January 22, Actions Nos. 2 and 3 have been joined for the puroses of discovery. Actions Nos. 2 and 3 are brought on behalf of Bratkowsky and Mayoral against Caliendo and Morale, the operators of the Bellmore and Garden City Park Gold' s Gyms respectively. The January Order referred the parties in Action No. 1 to Thomas Dana, Esq, Court Attorney/Referee and directed them to appear on February and produce witnesses and documentation referable to the monthly payment called for in the agreement, and statements and receipts for payments allegedly made to perform necessary maintenance at the premises. The Order further directed that plaintiff in Action No. 1 file a Note of Issue and pay all

4 appropriate fees for the fiing on or before Februar By letter dated Januar 11, 2010, defendants reiterated certin discovery demands which had not been complied with by plaintiff. The Januar stipulation and order set out a schedule for the completion of such discovery demands. By letter dated Februar , counsel for Defendants stated that they had not received, nor could the Court or Clerk confrm the fiing of the Note ofissue by Februar 10, and noted that Mr. Dana would not conduct a hearing on the issues on Februar 25 in the absence of such filing. In fact, the hearing by Mr. Dana did not take place. DISCUSSION The authority under which Defendants in Action No. and 3 seek the appointment of a Receiver is contained in Ar. Rules, and provides in pertinent par as follows: 1 and Plaintiffs in Action Nos of the Civil Practice Law and Appointment and powers of temporary receiver (a) Appointment of temporary receiver; joinder of moving party. Upon motion of a person having an apparent interest in propert which is the subject of an action in the supreme or a county cour, a temporar receiver of the propert may be appointed, before or after service of sumons and at any time prior to judgment, or during the pendency of an appeal, where there is danger that the propert will be removed from the state, or lost materially injured or destroyed. A motion made by a person not already a par to the action constitutes an appearance in the action and the person shall be joined as a par. J&B Fitness and Bratkowsky have been terminated from their services at Gold' s Gym in Bellmore as Juan Mayoral at the West Hempstead location. They do remain as 10% shareholders of Full Time Fitness and Time for Fitness, Inc., and Time for Fitness, Inc., respectively, so they are persons with an apparent interest in the propert. The issue to be determined is whether the subject of the proposed receivership is in danger of being removed from the state, lost, materially injured or destroyed. The claim is that

5 the operators of Gold' s Gyms are failing to maintain the premises in a condition to attact or continue the existing clientele. The only possibility from the factual allegations, is that the income from the facilities may be reduced, thereby diluting the 10% share of Bratkowsky and Mayoral. A temporar receiver should not be appointed in the absence of a clear evidentiar showing of the need for conservation of the propert. 2010)). The determination is one left to the discretion of the Cour. (Quick v. Quick, 69 A.D. 3d 838 (2d Dept. At Exh. "H" to the moving papers counsel has anexed photographs evidencing water damage to the roof, and other areas, documentation showing failure to submit documentation to the Gold franchisor, $4 500 in outstanding bils from Island Publications, bils for past due jantorial services of $ , rubbish removal in the amount of$ , unpaid rent of $ , LIP A charges of $ (the curent LIP A bil is $4 008), CPA fees of$i 600; Cablevision bil of$ including past due $291.55; 90-dayoverdue bil of$2l1.20 from Am-Finn Sauna and Steam; overdue Slomin s bil of$436.67; AT&T overdue statement of $254.64; UPS overdue notice for $88.56; bil from National Grd for $ , of which $1 011 is past due; notice of past due medical insurance bil of $ ; cancellation of auto, liabilty, and umbrella policies; and retu of a check drawn on insufficient fuds. In the Supplemental Affrmation, they produced evidence that rental for equipment in the amount of$ was overdue, that Full Time Fitness is in arears in payment of sales taes and are in danger of losing their Certificate of Authority, that the air conditioning services are inadequate, and that some of the exercise machines have worn and frayed padding. In this case, the operator of the business is significantly behind in many areas, not the least significant is m nthly rental payments of$i 883 which wer $ in arear as Januar It does not appear that an eviction proceeding has yet been commenced, but it is likely that if the landlord could find another tenant, they would be likely to do so. In ths sense, the Plaintiff Full Time Fitness is in danger of losing the situs for its business. In Crispo v. Crispo-Crisafull 22 Misc.3d 1125(A) (Sup.NY 2009), an action for parition, plaintiff applied for a receivership. The Cour determined that real estate taxes and sewage and water charges were curent, insurance was paid, rents were being collected and repairs were being made, there was no imminent danger of the loss of the building for which receivership was sought. The request for the appointment of a receiver was denied.

6 Plaintiffs affrmation in opposition, anexes documents which reflect payment of most if not all, of the outstanding bils. The Cour's primar concerns deal with the maintenance of liability insurance and payment of rent. These are the most likely sources of disaster for the continuation of the business. The Cour has a fudamental reluctance to impose a receiver on a business which is at least minimally fuctional. The very cost of the receiver, up to 5% of the income and disbursements can in and of itself cause damage to the profitabilty of the enterprise. Under the present circumstances the Cour concludes that the appointment of a receiver is not waranted at the present time, and the motion for the appointment is denied. The motion also seeks the striking of the pleadings, not only in the action in which Plaintiff failed to file a Note ofissue in preparation for the hearng before the Cour Attorney/Referee, but also in the two actions which have been joined for the purose of discovery. The directive which counsel for Full Time Fitness allegedly breached, was pursuant to an Order of Reference on Action No. 1 only. While the other actions may be peripherally involved, the striking of answers in those cases would certnly be draconian. With respect to Action No., in which counsel for the plaintiff did fail to make the necessar fiing, and thereby, in the opinion of the Cour Attorney/Referee, mandated a cancellation of the hearing on the issue presented, the dismissal of the complaint would be unduly harsh, and would constitute judicial waste, since the claims of the plaintiff relate to 2009 payments, and a dismissal, not on the merits, would be without prejudice to are-filing of the complaint. Counsel for plaintiff in Action No. 1 has set fort pesona circumta 11 j tificatio for his failure to comply, despite timely notices from defendants. Sanctions at the level of the striking of pleadings is unwaranted. Defendants' counsel was proactive in determining that there was no Note of Issue fied and was not required to appear at the scheduled hearng. It is true that he expended time preparing his clients for their paricipation in the hearing, but ths preparation would have been necessar irrespective of the date of the hearing, and now it has been accomplished. The Cour declines to award attorney s fees under these circumstances. The paries are directed to re-schedule the previously aborted hearng before Thomas Dana, Esq. and to advise the Cour of the scheduled date.

7 This constitutes the Decision and Order of the Court. June 21, 2010 claj ENTERED JUN SF.U GOUI\)TY COUNTY CLERK' S OFFICE