FILED: QUEENS COUNTY CLERK 09/04/ :47 AM INDEX NO /2018 NYSCEF DOC. NO. 58 RECEIVED NYSCEF: 09/04/2018

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF QUEENS ASTORIA ATLAS HOLDINGS, LLC, CALIX REALTY HOLDINGS, LLC, OLYMPIA HAVEN REALTY LLC, and ACROPOLIS ASSOCIATES LLC, -against- Plaintiffs, METROPOLITAN PACIFIC PROPERTIES, INC., STEVE H. OSMAN, DEBBIE VAZQUEZ, UMAIR SHEIKH, ANTOINE (TONY) MARZOUKA, ELIZABETH ZIANGUS, C. ANTHONY SHIPPAM, ROBERT BASS, MICHAEL BASS, HARRY BAKALIS, ANDREW BADER, BRIAN McNAMARA, BRANDON OSMAN, CLAIRE OSMAN, THE BACK OFFICE, INC., DEJESU MAIO & ASSOCIATES PC, MEYER LIEBER, TONY CHENG, SEAFAX CONSULTING, INC., MONARCH HOLDINGS, LLC, AEON CAPITAL LLC, ZPN CAPITAL LLC, 1010 DEVELOPMENT LLC, BRE MANAGEMENT, INC., LITHOS LLC, THOMAS ANAGNOSTOPOULOS, FUTURA BUILDERS, INC., BABA HOLDINGS LLC, SAGA HOLDINGS, LLC, and VOYAGER ENTERPRISES CORP., Defendants, -and- Hon. Leonard Livote Index No /2018 Mot. Seq. No. 001 COMMERCIAL DIVISION Oral Argument Requested ACROPOLIS GARDENS REALTY CORP., Nominal Defendant. PLAINTIFFS MEMORANDUM OF LAW IN SUPPORT OF THEIR MOTION BY ORDER TO SHOW CAUSE FOR A RECEIVER AND PRELIMINARY INJUNCTION WITH TEMPORARY RESTRAINTS MEISTER SEELIG & FEIN LLP 125 Park Avenue, 7 th Floor, New York, NY Tel: (212) LAW OFFICES OF CHENG & ASSOCIATES PLLC Thomson Avenue, Suite 447, Long Island City, NY Tel: (718) WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP 270 Madison Avenue, New York, NY Tel: (212) Attorneys for Plaintiffs 1 of 30

2 TABLE OF CONTENTS TABLE OF AUTHORITIES... ii PRELIMINARY STATEMENT...1 STATEMENT OF FACTS...4 Improper and Unauthorized Money Transfers to MetPac, Monarch, and Claire Osman...6 Commingling of AGRC Funds with Other Properties Managed by MetPac...7 Numerous Defendants Failed to Pay Monthly Maintenance...7 Loan Default and Impending Refinance...8 ARGUMENT...9 I. A TEMPORARY RECEIVER SHOULD BE APPOINTED TO MANAGE AGRC...9 A. AGRC is in Danger of Irreparable Loss or Damage...12 B. Appointment of a Receiver is Necessary to Protect Plaintiffs Interests in AGRC...16 II. ABSENT A RECEIVER, PLAINTIFFS ARE ENTITLED TO A PRELIMINARY INJUNCTION AND A TEMPORARY RESTRAINING ORDER...18 A. Plaintiffs Have Demonstrated A Likelihood Of Success On The Merits...20 B. Failure to Grant Plaintiffs Immediate Injunctive Relief Will Irreparably Harm AGRC and Plaintiffs...21 C. The Balancing Of The Equities Tips Sharply In Plaintiffs Favor...23 D. Plaintiffs Should Not Be Required to Post More Than a De Minimis Bond...24 CONCLUSION...24 [7937-1/ /1] i 2 of 30

3 TABLE OF AUTHORITIES Cases 1659 Ralph Ave. Laundromat Corp. v. Ben David Enters., LLC, 307 A.D.2d 288 (2d Dep t 2003)...19 Aetna Insurance Co. v. Capasso, 75 N.Y.2d 860 (1990)...19 Aiello v. Aiello, 23 Misc. 2d 276 (Sup. Ct. Kings Co. 1960)...10 Amity Loans, Inc. v. Sterling National Bank & Trust Co. of New York, 177 A.D.2d 277 (1st Dep t 1991)...22 AQ Asset Management LLC v. Levine, 111 A.D.3d 245 (1st Dep t 2013)...22 Beatty v. Williams, 227 A.D.2d 912 (4th Dep t 1996)...10 Burmax Co., Inc. v. B&S Industries, 135 A.D.2d 599 (2d Dep t 1987)...23 Clayton v. Whitton, 233 A.D.2d 828, 650 N.Y.S.2d 404 (3d Dep t 1996)...23 Demartini v. Chatham Green, Inc., 169 A.D.2d 689 (1st Dep t 1991)...20 Dolgoff v. Projectavision, Inc., 235 A.D.2d 311, (1st Dep t 1997)...9 Four Times Square Associates L.L.C. v. Cigna Investments, Inc., 306 A.D.2d 4 (1st Dep t 2003)...19 Gambar Enterprises, Inc. v. Kelly Services, Inc., [7937-1/ /1] ii 3 of 30

4 69 A.D.2d 297 (4th Dep t 1979)...21 Gimbel v. Reibman, 78 A.D.2d 897 (2d Dep t 1980)...10, 11 Groh v. Halloran, 86 A.D.2d 30 (1st Dep t 1982)...10 Hahn v Garay, 54 A.D.2d 629 (1st Dep t 1976)...10 Han-Mo Song v. Dreamtouch, Inc., 2001 WL (S.D.N.Y. May 8, 2001)...18 Hoppman v. Riverview Equities Corp., 16 A.D.2d 631 (1st Dep t 1962)...22 Konishi v. Por Kung Lin, 88 A.D.2d 905 (2d Dep t 1982)...23 Lefebvre v. Shea, 212 A.D.2d 884 (3d Dep t 1995)...10, 12 McLaughlin, Piven, Vogel, Inc. v. W.J. Nolan & Co., 114 A.D.2d 165 (2d Dep t 1986)...18, 20 Modern Telecommunications, Inc. v. Dalessandro, 185 A.D.2d 218 (1st Dep t 1992)...10 Mr. Natural, Inc., v. Unadulterated Food Products, Inc., 152 A.D.2d 729 (2d Dep t 1989)...21 Nelson v. Nelson, 99 A.D.2d 917 (3d Dep t 1984)...10 Nesis v. Paris Int l Lighting, Inc., 184 A.D.2d 485 (1st Dep t 1992)...9, 10 [7937-1/ /1] iii 4 of 30

5 Olabi v. Mayfield, 8 A.D.3d 459 (2d Dep t 2004)...19 Oliva v. Lucero, 212 A.D.2d 407 (1st Dep t 1995)...15, 16 Parkmed Co. v. Pro-Life Counselling, Inc., 91 A.D.2d 551, (1st Dep t 1982)...20 Rossan v. Vassell, 257 A.D.2d 436 (1st Dep t 1999)...10 Sandfield v. Goldstein, 29 A.D.2d 999 (3d Dep t 1968)...10 Schlosser v. United Presbyterian Home of Syosset, Inc., 56 A.D.2d 615 (2d Dep t 1977)...19 Somerville House Mgmt., Ltd. v. American Tele. Syndication Co., Inc., 100 A.D.2d 821 (1st Dep t 1984)...10, 11 Terrell v. Terrell, 279 A.D.2d 301 (1st Dep t 2001)...20 Zanghi v. State, 204 A.D.2d 313 (2d Dep't 1994)...19 Rules CPLR CPLR , 19 CPLR CPLR , 11 [7937-1/ /1] iv 5 of 30

6 Plaintiffs Astoria Atlas Holdings, LLC ( Astoria Atlas ), Calix Realty Holdings, LLC ( Calix Realty ), Olympia Haven Realty LLC ( Olympia Haven ), and Acropolis Associates LLC ( Acropolis Associates ) (collectively, Plaintiffs ) derivatively on behalf of Acropolis Gardens Realty Corp. ( AGRC or the Cooperative ) respectfully submit this memorandum of law in support of their motion, by order to show cause, for a receiver to protect the interests of the Cooperative from the brazen and ongoing malfeasance of its managing agent, defendant Metropolitan Pacific Properties, Inc. ( MetPac ), MetPac s principal, defendant Steve H. Osman ( Osman ) (collectively, the Osman Defendants), and the AGRC Board of Directors comprised of defendants Debbie Vasquez, Umair Sheikh, Elizabeth Ziangus, Antonie Marzouka, and Anthony Shippam (collectively, the Board ). 1 PRELIMINARY STATEMENT More than a decade ago, Osman and MetPac began looting AGRC s funds by misappropriating AGRC s assets, acquiring apartments for inadequate or no consideration, collecting rents from tenants but not paying maintenance on cooperative units owned and controlled by Osman, all while failing to use AGRC proceeds for necessary repairs and payments, thus allowing the Cooperative to fall into a state of disrepair. Indeed, Osman, through MetPac, has used AGRC as his personal ATM machine, diverting funds from monthly Cooperative Maintenance payments and loan disbursements to himself and his cronies. From June 2011 through February 2018, Osman has improperly transferred more than $6 million from AGRC to his management company (MetPac) and over $1 million directly to himself. Despite a recent $45 million cash-out mortgage refinancing on or about April 24, 2017 with non-party Natixis Real Estate Capital LLC ( Natixis ), the trustee of which is Wells Fargo, 1 The specific relief sought by Plaintiffs is set forth in the [Proposed] Order to Show Cause submitted herewith. Capitalized terms used but not defined herein shall have the same meaning as in the [Proposed] Order to Show Cause. [7937-1/ /1] 1 6 of 30

7 AGRC is not only struggling to pay its bills, its employees, and its vendors due to the looting by Osman but Osman has caused a default on the $45 million mortgage. On August 20, 2018, Wells Fargo s counsel indicated that a subsequent refinancing of AGRC s mortgage is pending, thereby necessitating the urgency of this emergency motion. (Affirmation of Stephen B. Meister ( Meister Aff. ), 17). AGRC, under the management of Osman, has failed to repair hundreds of violations cited by the NYC Department of Buildings ( DOB ), Environmental Control Board, and The New York City Fire Department as required by law and the terms of the Natixis refinancing. Pursuant to a special proceeding (Astoria Atlas et al. v. AGRC et al., Index No /2017 (N.Y. Sup., Queens County) (Livote, J.) (the Books and Records Proceeding ) to inspect AGRC s books and records, which AGRC s Board of Directors (the Board ) and MetPac vigorously opposed, Plaintiffs received documents from AGRC s mortgage refinancing from Natixis, Titan Capital ID, LLC ( Titan ), Sterling National Bank ( Sterling ), and Signature Bank. Through those documents, Plaintiffs were able to confirm the extent of the outrageous looting and misappropriation of Cooperative Maintenance funds and refinancing payments. Defendants Osman and MetPac, with their complicit Board, year after year improperly dissipated all of AGRC s funds by burdening AGRC with unsustainable debt using the cash out proceeds from one refinancing after the other for their own purposes. Between 2013 and 2017, AGRC s debt load increased nearly 400% from $12.5 million to $45 million in multiple refinancings with virtually no improvements, repairs, or upgrades to show for it. Faced with the Osman Defendants widespread looting of AGRC s assets, Plaintiffs, as a precautionary measure, deposited their July and August 2018 Cooperative Maintenance payments, approximately $100,000 per month, into an attorney escrow account. Plaintiffs are also planning [7937-1/ /1] 2 7 of 30

8 to deposit their September Cooperative Maintenance into an attorney escrow account. To be clear, in doing so, Plaintiffs do not seek control of the Board or management of the Cooperative. Rather, Plaintiffs want to preserve the value of their investment in the Cooperative and ensure the continued viability of AGRC for the benefit of its shareholders and tenants. As long as Osman and his supine Board are still controlling AGRC, Plaintiffs will not pay their Cooperative Maintenance to AGRC. Plaintiffs will, however, pay their Cooperative Maintenance as the Court instructs, whether that be directly to the lender, to an escrow account, or to an account not controlled by Osman. Now, it is imperative for the prosperity of AGRC that a temporary receiver be appointed to manage the Cooperative, as AGRC is faced with yet another mortgage default and impending refinance. Osman must be stopped from continuing his vicious cycle of looting and refinancing AGRC, all at the expense of its shareholders and tenants. The aims of this motion protecting AGRC s remaining assets and preventing the Osman Defendants and the Board from further depleting AGRC s assets to line their own pockets are linked, as the Osman Defendants and the Board have improperly diverted monthly Cooperative Maintenance and refinancing proceeds to accounts unrelated to AGRC. Depleting AGRC s assets whether through embezzlement or outright transferring funds to himself, as Osman did to the tune of $6 million also serves Osman s aim of draining AGRC s funds in order to frustrate the relief Plaintiffs seek in the Derivative Complaint. Unless a temporary receiver is appointed to manage AGRC or, alternatively, the proceeds from monthly Cooperative Maintenance payments and/or refinancing of AGRC s mortgage are paid into escrow, Osman will continue to exercise sole managerial authority, notwithstanding the clear evidence of wrongdoing, and completely deplete AGRC s assets. At minimum, if a [7937-1/ /1] 3 8 of 30

9 temporary receiver is not appointed to manage AGRC, the Osman Defendants and the Board should be enjoined from releasing the monthly Cooperative Maintenance to anyone, except into an escrow account or directly to the lender. STATEMENT OF FACTS 2 AGRC s principal asset is the Residential Condominium Unit which constitutes 98% of the non-party Acropolis Gardens Condominium. (Compl. 10). The remaining 2% of the Acropolis Gardens Condominium consists of a commercial condominium unit made up of several retail spaces which together comprise the Commercial Condominium Unit of Acropolis Gardens Condominium. (Id.). The Residential Condominium Unit owned by AGRC has been further divided into 618 Cooperative Units, 40 of which are owed by Plaintiff Acropolis Associates. The remaining Cooperative Units are owned by non-parties including innocent individual third party owners, who include among their ranks firemen, teachers and police officers. AGRC is controlled by defendant Osman with the help of his complicit and supine Board. Osman is the principal of MetPac and directs its day to day operations including its management of AGRC. (Id. at 13). Osman, through MetPac, has been the managing agent of AGRC since at least (Id. at 11). Osman is also the managing member of defendant Monarch Holdings LLC ( Monarch ), which has the same address as MetPac and has owned and continues to own multiple cooperative units at AGRC but fails to pay monthly maintenance totaling hundreds of thousands of dollars. (Id. at 11, 12, 31). MetPac and AGRC purportedly entered into a ten-year Management Agreement dated December 1, 2009 (the Management Agreement ), which is allegedly in effect until November 2 For a detailed statement of the facts, the Court is respectfully referred to the Verified Derivative Complaint and the accompanying Meister Aff. The Verified Complaint ( Compl. ) is attached to the accompanying Meister Aff. as Exhibit 1 thereto. [7937-1/ /1] 4 9 of 30

10 2019. (Id. at 12). Pursuant to the Management Agreement, MetPac is AGRC s agent and responsible for maintaining and operating the Cooperative as a first class property; cleaning and maintaining the Cooperative s common areas; making necessary repairs; entering into contracts on behalf of the Cooperative upon the Board s advance approval; paying the Cooperative s bills upon the Board s approval; billing and collecting maintenance from the Cooperative s shareholders; maintaining a duplicate set of the Cooperative s books; and other duties. (Id.) MetPac s management fee under the Management Agreement is $210,000 annually, payable $17,500 monthly. (Id.) On June 21, 2013 Osman refinanced AGRC s existing mortgage with non-party M&T Bank totaling approximately $12.5 million by causing AGRC to borrow $19.5 million from National Consumer Cooperative Bank ( NCCB ), incurring over $1.7 million in refinancing costs including approximately $1.3 million in prepayment penalties and late fees, thereby increasing AGRC s net indebtedness by approximately $5.8 million. (Id. at 50). Only a year later, on July 17, 2014, Osman rolled over AGRC s $19.5 million loan from NCCB into a $27 million refinancing with Sterling National Bank ( Sterling ), incurring refinancing costs of over $3.4 million including over $2 million in prepayment penalties to NCCB. (Id.) This refinancing increased the Cooperative s indebtedness by $7.5 million. (Id.) Having secured the $27 million loan and a $2 million line of credit with Sterling, Osman then caused AGRC to default by failing to comply with the terms of the loan. (Id. at 53). While AGRC was in default, Sterling sold the note to a hard-money lender, Titan Capital ID, LLC ( Titan ), which charged AGRC interest at the default rate. (Id.) Shortly thereafter, the Board and Osman rolled over AGRC s $27 million loan and $2 million line of credit into a new [7937-1/ /1] 5 10 of 30

11 $36 million loan with Titan at 8.25% interest which closed on or about December 23, (Id.) This refinancing increased the Cooperative s indebtedness by an additional $9 million. (Id.) In 2017, the Board and Osman caused AGRC to refinance, yet again, the balance of its $36 million loan from Titan into a $45 million loan from Natixis, adding an additional $9 million in indebtedness only months after closing the hard money loan with Titan. (Id. at 55). The Natixis loan closed on April 24, (Id.) Osman paid money to his cronies and himself from the cash out of $3,702,764.30, depleting substantially all of the funds from the Natixis refinancing in a matter of four months. (Id.) Despite millions of dollars in additional financing, Osman and MetPac failed to pay AGRC s water and sewer bills, vendors and suppliers such as fuel delivery, union fees and property taxes, and became subject to liens, penalties and fines. (Id. at 63). Improper and Unauthorized Money Transfers to MetPac, Monarch, and Claire Osman Osman opened bank accounts at Signature Bank for AGRC and AGRC s wholly-owned subsidiary, Acropolis Holdings, LLC ( Acropolis Holdings ) in June (Id. at 73). At the same time that he opened bank accounts for AGRC and Acropolis Holdings, Osman opened accounts at Signature Bank for MetPac as well. (Id.) Having all these accounts at Signature Bank allowed Osman to freely transfer money from the accounts to himself, his cronies and his entities, looting the AGRC and Acropolis Holdings bank accounts. (Id.) The bank statements and other documents produced by Signature Bank in the Books and Records Proceeding confirm that Osman improperly transferred at least $6,453, from AGRC to MetPac from June 2011 through March 2018, exclusive of the monthly $17,500 transfers for MetPac s management fee under its Management Agreement. (Id. at 74). In December 2017 alone, Osman improperly transferred $70,000 from AGRC s Signature Bank account to MetPac s Signature Bank account. (Meister Aff., 7, Exh. 2). [7937-1/ /1] 6 11 of 30

12 The bank statements and other documents produced by Signature Bank in the Books and Records Proceeding confirm that Osman improperly transferred $274, from AGRC to Monarch from September 2012 through May 2016, and $21,680 from Acropolis Holdings to Monarch from April 2012 through November 2012, for a total of $296, (Compl. at 83). The bank statements produced by Signature Bank also confirmed there were at least three transfers from AGRC to Osman s mother, defendant Claire Osman, totaling $220,000 between April 3, 2012 and July 28, (Compl. at 85). Osman also improperly wrote checks to Claire Osman from AGRC s account, including a check for $120,000 on March 27, (Meister Aff. 11, Exh. 6). Commingling of AGRC Funds with Other Properties Managed by MetPac The bank statements and other documents produced by Signature Bank in the Books and Records Proceeding show that $426, was transferred from Bowne House a cooperative building in Flushing having nothing to do with AGRC other than being managed by Osman to AGRC from March 2012 through January 2016, while $241,500 was transferred from AGRC to Bowne House from March 2012 to October 2017, including $30,000 in October 2017 alone. (Id. at 79; Meister Aff. 8, Exh. 3). The bank records also show that $115, was transferred from 2 Dag Hammarskjold units cooperative units in a Manhattan building also managed by Osman but otherwise having no relationship with AGRC to AGRC from May 2016 to February 2018, including a $100,000 transfer on February 7, (Id.) Numerous Defendants Failed to Pay Monthly Maintenance Monarch did not pay monthly maintenance at any time while it allegedly owned 27 units from July 2010 to March (Compl. 129). The unpaid maintenance deprived AGRC of revenue totaling $1,259, and continuing. (Id.) Particularly outrageous is that Debbie [7937-1/ /1] 7 12 of 30

13 Vazquez, the Board President, who signed off on the Titan and Natixis refinancings to increase the debt on the property by millions of dollars, failed to pay monthly maintenance on her apartment totaling at least $50, from January 1, 2013 through March 31, In addition, over $39,000 in outstanding maintenance arrears owed by Vazquez, the new President of the Board at the time, was written off in order to close the Titan loan. (Id. at 135). The Cooperative s occupancy ledger obtained in the Books and Records Proceeding reflects the notation that her unpaid maintenance charges were Remove[d] per lawyer. (Id.) Loan Default and Impending Refinance Wells Fargo is the trustee of the current noteholder on the Cooperative s mortgage, which purchased the note from Natixis. (Meister Aff., 15, Exh. 10). On July 13, 2018 and August 8, 2018, Wells Fargo provided notice to AGRC and the managing agent, MetPac, that certain Events of Default had occurred under the Loan Agreement, dated April 24, 2017, as a result of AGRC s failure to pay monthly amounts due and owing in connection with the loan and made further demand on AGRC to cure certain other breaches thereunder. (Meister Aff. 12, 13, Exhs. 7, 8). On August 17, 2018, Wells Fargo accelerated the indebtedness owed in connection with the loan and the loan agreement. (Meister Aff. 16, Exh. 11). Pursuant to the acceleration notice, Wells Fargo directed MetPac to hold all monthly maintenance payments in trust for the benefit of Wells Fargo. (Id.) As the holder of the wraparound mortgage, Plaintiff Acropolis Associates was provided notice of the default and acceleration. (Id.) Given the allegations in the Derivative Complaint and the confirmation of the Osman Defendants misappropriation of AGRC funds, Plaintiffs have deposited their July and August monthly maintenance into an attorney escrow account as a precautionary measure. (Meister Aff. 14, Exh. 9) Plaintiffs are also planning to wire their September Cooperative Maintenance into an [7937-1/ /1] 8 13 of 30

14 attorney escrow account. (Meister Aff., 15, 18, Exhs. 10, 12). Plaintiffs are not seeking to manage or control AGRC and stand ready to immediately pay all past and future Cooperative Maintenance to the Court appointed Receiver or directly to Wells Fargo. (Id.) Plaintiffs have urged Wells Fargo to replace the malfeasant property manager, MetPac, and its complicit Board, controlled by Osman, as it has the right to do under the loan documents. (Id.) Indeed, under the loan documents, Wells Fargo which purchased the loan from Natixis has the right upon the event of default to immediately terminate the Management Agreement without the payment of any penalty or early termination fee. (Id.) Moreover, under the loan documents, Wells Fargo has the right to replace the Board members who have already executed resignation letters that may be effectuated upon an event of default. (Id.) However, to date, Wells Fargo, has not exercised its rights. (Id.) Wells Fargo s counsel has indicated that a subsequent refinancing of AGRC s mortgage is pending. (Meister Aff., 17). If such a refinancing is allowed to go forward increasing the debt on the property and/or the interest rate on the loan, particularly while Osman and the Board are in control, AGRC and its shareholders will be irreparably harmed. ARGUMENT I. A TEMPORARY RECEIVER SHOULD BE APPOINTED TO MANAGE AGRC An order appointing a temporary receiver is appropriate where the movant establishes a danger that the property will be removed from the state, or lost, materially injured or destroyed. CPLR 6401(a). Such test is satisfied where, as here, there is a history of the improper conversion of corporate assets and other self-dealing. Dolgoff v. Projectavision, Inc., 235 A.D.2d 311, 312, (1st Dep t 1997) (temporary receiver warranted where defendants self-dealing injured plaintiff and public shareholders); Nesis v. Paris Int l Lighting, Inc., 184 A.D.2d 485, 486 (1st Dep t 1992) (temporary receiver appointed where defendant fraudulently transferred assets). A temporary [7937-1/ /1] 9 14 of 30

15 receiver may be appointed to protect specifically identifiable funds, such as the Cooperative Maintenance proceeds. Somerville House Mgmt., Ltd. v. American Tele. Syndication Co., Inc., 100 A.D.2d 821 (1st Dep t 1984). While appointment of a temporary receiver is an extreme remedy which is not lightly granted, Gimbel v. Reibman, 78 A.D.2d 897, 897 (2d Dep t 1980); see Hahn v. Garay, 54 A.D.2d 629 (1st Dep t 1976), it is appropriate when a plaintiff demonstrates by clear and convincing evidence that there is a danger of irreparable loss or damage and a receiver is necessary for the protection of the parties and their interests. Groh v. Halloran, 86 A.D.2d 30, 34 (1st Dep t 1982); see Beatty v. Williams, 227 A.D.2d 912 (4th Dep t 1996) (affirming appointment of receiver where plaintiff established by clear and convincing evidence that there was a likelihood "of irreparable loss or damage" if a receiver were not appointed). Accordingly, New York courts readily appoint temporary receivers when there is a threat that assets will be dissipated. 3 Lefebvre is strikingly analogous to the present case. There, the administrator of an estate sued the decedent s conservator for fraud, conversion, breach of fiduciary duties, and misappropriation of the conservatee s funds, and moved for the appointment of a temporary receiver to collect rent from an apartment building owned by the defendants. Lefebvre, 212 A.D.2d at 885. The court was persuaded by evidence that assets of the decedent s estate were being dissipated by the defendants: 3 See Lefebvre v. Shea, 212 A.D.2d 884 (3d Dep t 1995); Somerville House Management, Ltd. v. A.T.S., 100 A.D.2d 821 (1st Dep t 1984) (receiver appointed to prevent corporate officers from dissipating assets ); Sandfield v. Goldstein, 29 A.D.2d 999 (3d Dep t 1968) (findings as to waste and mismanagement ); Nesis v. Paris Int l Lighting, Inc., 184 A.D.2d 485 (1st Dep t 1992) ( likelihood of waste by the defendant corporation ); Nelson v. Nelson, 99 A.D.2d 917 (3d Dep t 1984) (assets in danger of dissipation. ); Aiello v. Aiello, 23 Misc. 2d 276 (Sup. Ct. Kings Co. 1960); Modern Telecommunications, Inc. v. Dalessandro, 185 A.D.2d 218, 218 (1st Dep t 1992) (struggle for corporate control threaten[ed] the wellbeing and continued viability of [the corporation] ); Rossan v. Vassell, 257 A.D.2d 436, 437 (1st Dep t 1999) ( compelling evidence of a struggle within the subject corporation threatening its continued viability ). [7937-1/ /1] of 30

16 Significantly, the record... provides ample indication that defendants commingled estate funds with their own, and engaged in conduct in connection with their management of the conservatorship assets that is highly suspect, if not fraudulent the disposition of some $790,000 is inadequately accounted for or insufficiently explained. It also appears that a considerable portion of the estate assets may have been funneled into defendants personal bank accounts.... Id. As a result, the court held that the plaintiff had met his burden of demonstrating a likelihood that the estate s funds would be materially injured or destroyed if a receiver were not appointed (CPLR 6401(a)). Id. Likewise, in Somerville, the defendant contracted to distribute plaintiff s television programs and collect and deposit distribution proceeds in separate trust accounts on plaintiff s behalf. Somerville, 100 A.D.2d at 822. When the defendant failed to deposit the distribution proceeds in separate accounts, the plaintiff sued for breach of contract and moved for the appointment of a temporary receiver to oversee collection of future proceeds. Id. The court granted plaintiff s motion because the defendant s mismanagement of the proceeds threatened to dissipate [plaintiff s] assets. Id. Finally, in Gimbel, the plaintiff moved for the appointment of a temporary receiver in an action to partition real property jointly owned by the parties. Gimbel, 78 A.D.2d at 897. Plaintiff established that the defendants had commingled rent from the property with income derived from other properties. Id. At 898. The court appointed a temporary receiver finding that defendants actions create[d] a situation ripe for dilution of the income assets and harm to the interests of the [plaintiff]. Id. Here, Plaintiffs have alleged, inter alia, in the Derivative Complaint that the Osman Defendants have breached their fiduciary duties to AGRC and misappropriated AGRC funds by improperly transferring the Cooperative Maintenance payments from AGRC s bank account to [7937-1/ /1] of 30

17 accounts held by Osman and his cronies. The bank statements produced by Signature Bank in the Books and Records Proceeding confirm that the Osman Defendants have breached their fiduciary duties to AGRC by siphoning more than $6 million from AGRC in ten years. Each month since 2011, Osman made transfers from AGRC s Signature Bank account to MetPac s Signature Bank account. MetPac was entitled to $17,500 each month for its management fee under the Management Agreement. However, Osman often transferred $17,500 from AGRC to MetPac multiple times in a single month. In December 2017 alone, Osman made four transfers all in the amount of $17,500 from AGRC to MetPac, for a total of $70,000. (Meister Aff. 7, Exh. 2). From June 2011 to February 2018, Osman made a total of $6,194, in transfers from AGRC to MetPac, exclusive of the monthly $17,500 transfers for MetPac s management fee. Osman also made several improper transfers from AGRC s Signature Bank account to his personal account and to his mother s account. In four years, Osman transferred $1,895, to his personal bank account and $140,000 to his mother, all from AGRC s bank account. Instead of applying the Cooperative Maintenance payments to necessary building repairs, the Osman Defendants lined their pockets with the proceeds and commingled funds between separate cooperatives. (Meister Aff. 8, Exh. 3). The Osman Defendants actions continue to threaten the viability of AGRC and its assets, warranting the appointment of a receiver. See Lefebvre v. Shea, 212 A.D.2d 884, 885 (3d Dep t 1995) (holding that the Supreme Court acted prudently in appointing a receiver to preserve the property pending resolution of plaintiff's claims thereto. ). A. AGRC is in Danger of Irreparable Loss or Damage As long as AGRC is managed by the Osman Defendants and run by the Board, the Cooperative is in danger of irreparable loss and damage, making the immediate appointment of a [7937-1/ /1] of 30

18 receiver entirely necessary. For more than a decade, Osman has treated AGRC as his personal ATM machine. Osman has freely and improperly transferred AGRC funds into MetPac s bank account, his personal bank account, his mother s bank account, and Monarch s bank account. Osman has also commingled AGRC s funds with the funds of other cooperatives managed by him, including Bowne House Owners Corporation and 2 Dag Hammarskjold. Osman s transfers were not only breaches of his fiduciary duty, but they were also in violation of the Management Agreement, which states that MetPac, as the managing agent, must obtain the Board s prior approval for expenditures of over $5,000. (Compl. 206). Further, as Osman has admitted in his July 31, 2018 affidavit produced in the Books and Records Proceeding, MetPac has no documents supporting his transfers in its possession, custody, or control. (Meister Aff. 9, Exh. 4). In fact, after stating in his affidavit on July 31, 2018 that AGRC s audited financial statements for 2017 have not been completed, MetPac s counsel provided Plaintiffs undersigned counsel with a copy of the purported 2017 audited financials on August 21, (Meister Aff. 9, 10, Exhs. 4, 5). Yet, those purported audited financials appear to be spurious possibly concocted in order to obtain a new loan. First, the cover letter by AGRC s auditor (defendant Meyer Lieber) that accompanied the financials is dated January 27, 2018 and is thus inconsistent with Osman s affidavit from six months after stating that the 2017 financials were not yet ready. (Meister Aff. 10, Exhs. 4, 5). Second, although the financials are for the year ended June 30, 2017, there is no mention at all of the $45 million Natixis refinancing, which closed April 24, 2017, in the Notes to Financial Statements that specifically address mortgages on the property. (See Meister Aff., Exh. 5, at Note 1 (titled Mortgages ) and Note 7). Third, the last sentence of Note 7 in the putative financials states: It is anticipated that the Corporation will obtain a conventional mortgage, with interest rates of 3.65%-4%, by April of (Id.) As these [7937-1/ /1] of 30

19 financials are purportedly as of June 30, 2017, they should contain an update to reflect the $45 million Natixis refinancing that occurred two months earlier, in April But there is none. The sole reference to the refinancing comes as a $45 million line item in the balance sheet under Liabilities and Stockholders Equity (Deficit), as Mortgage Payable. (Meister Aff. 10, Exh. 5). However, even that obfuscates more than it reveals, as there is no specific reference to the refinancing, but rather to Notes 1 and 7, which, as stated above, do not disclose or discuss the $45 million Natixis loan at all. (Id.) Based on discussions with lender s counsel who have declared a default on the loan and recently sent a notice of acceleration to AGRC, we believe these (purported) 2017 financials were hastily prepared because Osman is on the verge of engineering yet another refinancing from a hard money lender to take out the Natixis loan and further increase the debt on the property. Under the Management Agreement, MetPac was entitled to receive $17,500 per month in management fees from AGRC. However, Osman transferred more than $17,500 each month from AGRC to MetPac. In a failed attempt to conceal his misappropriation of AGRC s funds, Osman made several transfers in the amount of $17,500 from AGRC to MetPac in single months the correct management payment amount of $17,500 but made repeatedly. For example, in December 2017, Osman made four transfers all in the amount of $17,500 from AGRC s Signature Bank account to MetPac s Signature Bank account, for a total of $70,000. (Meister Aff. 7, Exh. 2). From June 2011 to February 2018, Osman made a total of $6,194, in transfers from AGRC to MetPac, exclusive of the monthly $17,500 transfers for MetPac s management fee under its Management Agreement. Osman s diversion of Cooperative funds was far more expansive than transfers from AGRC s bank account to MetPac s bank account. Osman also made a total of $1,895, [7937-1/ /1] of 30

20 transfers to his personal bank account and $140,000 to his mother, Claire Osman, all from AGRC s bank account. Claire Osman is not on AGRC s payroll, nor does she have any professional position within MetPac. Despite this, Osman personally signed checks from AGRC that his mother endorsed and deposited. For example, on April 3, 2012, Osman wrote a check from AGRC to Claire Osman for $120,000. (Meister Aff. 11, Exh. 6). There is no possible legitimate business purpose for Osman to issue checks to his mother from AGRC s bank account. Indeed, the repeated transfers are nothing more than the misappropriation of AGRC s assets, which threaten the viability of the Cooperative and justify the appointment of a receiver to manage AGRC. See Oliva v. Lucero, 212 A.D.2d 407, 408 (1st Dep t 1995) ( plaintiff showed that a temporary receiver is justified because the parties are antagonists [who] threaten the wellbeing and continued viability of [the entity] ) (internal quotation marks omitted). AGRC s need for a receiver is also evident through Osman s inability to properly manage his separate cooperative entities and their respective finances. In addition to AGRC, Osman also manages Bowne House Owners Corporation, 2 Dag Hammarskjold, and he owns Monarch Holdings LLC, which has the same address as MetPac. From June 2011 to February 2018, Osman excessively commingled AGRC s funds with the funds of his other companies, in blatant contravention to his fiduciary duties and the terms of the Management Agreement. (Compl. 206, Management Agreement, Section 4, requiring that MetPac keep AGRC s funds in a segregated bank account approved by AGRC, which funds shall not be commingled with other funds held or collected by MetPac and the signatories for which shall bear the names of those designated solely by the Board ). From 2011 through February 2018, Osman transferred $426, to Bowne House Owners Corporation, $115, to 2 Dag Hammarskjold, and $36,000 to Monarch Holdings [7937-1/ /1] of 30

21 LLC, all from AGRC s Signature Bank account. Again, no documents produced in the Books and Records proceeding indicate that Osman received or even requested consent from the Board for these transfers, even though such request likely would have been superfluous given the Board s alignment with Osman. The Signature Bank statements, which were produced in the Books and Records Proceeding, confirm and detail Osman s repeated improper transfers. (Meister Aff., Exhs. 2, 3). Plaintiffs currently possess AGRC s Signature Bank statements up through February 2018, meaning that Osman is likely still looting AGRC s funds for the benefit of himself and his cronies, at the expense of Plaintiffs and the other AGRC shareholders. Osman has placed AGRC s assets in danger of complete dissipation, requiring the immediate appointment of a receiver. See Oliva v. Lucero, 212 A.D.2d 407, 408 (1st Dep t 1995) ( plaintiff showed that a temporary receiver is justified because the parties are antagonists [who] threaten the wellbeing and continued viability of [the entity] ) (internal quotation marks omitted). B. Appointment of a Receiver is Necessary to Protect Plaintiffs Interests in AGRC The immediate appointment of a receiver to manage AGRC and replace Osman is also necessary to protect the shareholders of AGRC, including Plaintiffs, and their interests in AGRC. As detailed in Wells Fargo s letters to AGRC and MetPac, AGRC is in default on its mortgage. (Meister Aff. 12, 13, Exhs. 7, 8). Osman s repeated conversion of the monthly Cooperative Maintenance payments has caused AGRC to default. The well-being and continued viability of AGRC is threatened if Osman continues to improperly manage AGRC and its funds. A receiver must be appointed to manage AGRC and ensure its future viability. See Rosan v. Vassell, 257 A.D.2d 436, 437 (1st Dep t 1999) ( In light of the compelling evidence of a struggle within the subject corporation threatening its continued viability, the motion court s appointment of a temporary receiver for the corporation was a provident exercise of discretion. ). [7937-1/ /1] of 30

22 As a precautionary measure, given the serious allegations of looting in the Derivative Complaint, and the confirmation of such looting in the Signature Bank statements, Plaintiffs have timely deposited their monthly maintenance for July and August 2018 into an attorney escrow account (Meister Aff. 14, Exh. 9) and offered to AGRC s counsel to pay it directly to lender Rialto Capital Management LLC (Meister Aff. 18, Exh. 12). Plaintiffs also plan to deposit their September 2018 Cooperative Maintenance to an attorney escrow account. (Id.) Plaintiffs payment of two months Cooperative Maintenance into an escrow account did not cause AGRC to default on its mortgage loan. Even without Plaintiffs monthly Cooperative Maintenance payments, AGRC should have had more than enough funds to pay its lender. However, because of Osman s widespread diversion of AGRC s funds for more than a decade and other AGRC shareholders paying disproportionate or no Cooperative Maintenance at all, AGRC defaulted under the management of Osman and his complicit board. Plaintiffs are prepared to pay their monthly Cooperative Maintenance to a temporary receiver or to Wells Fargo or an escrow agent, as the Court may instruct. Plaintiffs will not pay their Cooperative Maintenance to Osman or any entity owned and controlled by Osman. AGRC, under the control of Osman, has repeatedly defaulted and refinanced its mortgage loans. In fact, Osman and the Board have refinanced AGRC s mortgage four times since 2013, with another refinancing apparently imminent now that AGRC has defaulted on its current mortgage held by Natixis. Despite each new refinance and corresponding influx of cash, no improvements are made on the Cooperative s buildings. The refinancings are diverted by Osman from AGRC to his own pockets, to the detriment of AGRC and its shareholders and tenants, instead of funding repairs the Cooperative s buildings desperately require. 4 4 The most recent example is the Natixis refinancing. Osman depleted the net funds of $3,702, from the Natixis refinancing within four months. (Compl. 55). More than $1.3 million of the funds from the Natixis refinancing was [7937-1/ /1] of 30

23 The Osman Defendants have proved that they cannot help themselves from self-dealing when it comes to AGRC. Osman brazenly transferred Cooperative Maintenance proceeds to his own personal account, to his mother, and to his cronies. Without the watchful eye and stewardship of a temporary receiver, the remaining assets of AGRC are certain to disappear. These facts warrant the appointment of a temporary receiver. 5 II. ABSENT A RECEIVER, PLAINTIFFS ARE ENTITLED TO A PRELIMINARY INJUNCTION AND A TEMPORARY RESTRAINING ORDER In the alternative to the appointment of a receiver, Plaintiffs are entitled to a preliminary injunction and a temporary restraining order so that the monthly Cooperative Maintenance payments do not continue dissipating. Section 6301 of the CPLR provides, inter alia (with emphasis added): A preliminary injunction may be granted in any action where it appears that the defendant threatens or is about to do, or is doing or procuring or suffering to be done, an act in violation of the plaintiff s rights respecting the subject of the action, and tending to render the judgment ineffectual, or in any action where the plaintiff has demanded and would be entitled to a judgment restraining the defendant from the commission or continuance of an act, which, if committed or continued during the pendency of the action, would produce injury to the plaintiff. A temporary restraining order may be granted pending a hearing for a preliminary injunction where it appears that immediate and irreparable injury, loss or damage will result unless the defendant is restrained before the hearing can be had. The principal objective of preliminary relief is to maintain the status quo pending the outcome of litigation between the parties. See McLaughlin, Piven, Vogel, Inc. v. W.J. Nolan & transferred from AGRC to MetPac by Osman. (Id. at 127). AGRC has nothing to show for its $45 million of indebtedness incurred over the course of four refinancings with four separate lenders, other than hundreds of DOB fines for building violations, unpaid water and sewer bills and visible disrepair of the Cooperative s buildings. (Id. at 63). 5 See Han-Mo Song v. Dreamtouch, Inc., No. 01 Civ (AGS), 2001 WL , *17-18 (S.D.N.Y. May 8, 2001) ( New York courts have appointed receivers in cases where the actions of various antagonists with interdependent rights in certain property threaten the well-being or continued viability of the corporation.). [7937-1/ /1] of 30

24 Co., 114 A.D.2d 165 (2d Dep t 1986), appeal denied, 67 N.Y.2d 606 (1986); Schlosser v. United Presbyterian Home of Syosset, Inc., 56 A.D.2d 615 (2d Dep t 1977). To obtain preliminary injunctive relief, a party must generally make a showing: (i) the probability of its success on the merits of his underlying claim; (ii) the danger of irreparable injury absent the issuance of the injunction; and (iii) a balance of equities weighing in its favor. Aetna Insurance Co. v. Capasso, 75 N.Y.2d 860 (1990); Olabi v. Mayfield, 8 A.D.3d 459, (2d Dep t 2004); 1659 Ralph Ave. Laundromat Corp. v. Ben David Enters., LLC, 307 A.D.2d 288, 289 (2d Dep t 2003); Zanghi v. State, 204 A.D.2d 313 (2d Dep't 1994). The party seeking injunctive relief only needs to make a prima facie showing of a right to relief the movant does not actually have to prove its case. Four Times Square Associates L.L.C. v. Cigna Investments, Inc., 306 A.D.2d 4, 6 (1st Dep t 2003). Importantly, subdivision (c) of CPLR Section 6312 states: [p]rovided that the elements required for the issuance of a preliminary injunction are demonstrated in the plaintiff s papers, the presentation by the defendant of evidence sufficient to raise an issue of fact as to any of such elements shall not in itself be grounds for denial of the motion. Moreover, [a] temporary restraining order may be granted where it appears that immediate and irreparable injury, loss or damage will result unless the defendant is restrained before the hearing can be had. CPLR Plaintiffs easily satisfy the standards herein. The alternative preliminary injunctive relief sought here has been surgically tailored so that the minimum judicial intervention is used to protect AGRC and the holders of the Cooperative Apartments. Although the irrefutable documentary evidence of millions of dollars in outright theft compellingly demonstrates the need for the appointment of a receiver, should the Court decline to appoint a receiver, the alternative relief merely assures against further theft by Osman, by requiring [7937-1/ /1] of 30

25 the escrowing with an institutional escrow agent of any Excess Refinancing Proceeds and further Court order for disbursements other than to Wells Fargo or a new first mortgage lender. A. Plaintiffs Have Demonstrated A Likelihood Of Success On The Merits On a motion for preliminary injunctive relief, a plaintiff need only make a prima facie showing of a likelihood of success on the merits, and need not demonstrate certainty of success. Parkmed Co. v. Pro-Life Counselling, Inc., 91 A.D.2d 551, 553, (1st Dep t 1982); see also Terrell v. Terrell, 279 A.D.2d 301, 303 (1st Dep t 2001) (evidence showing likelihood of success on the merits need not be conclusive); Demartini v. Chatham Green, Inc., 169 A.D.2d 689 (1st Dep t 1991) (same). Thus, the moving party need only show that it is more likely than not to prevail on its claims. See McLaughlin, 114 A.D.2d at As to Plaintiffs causes of action for breach of fiduciary duty, conversion, and the appointment of a temporary receiver, there can be no question that Plaintiffs have established a probability of success on the merits of the underlying claims. In addition to the detailed facts in the Verified Complaint 6, Plaintiffs have also submitted numerous examples of Osman s siphoning of AGRC s assets through the Signature Bank statements produced in the Books and Records Proceeding. (Meister Aff., Exhs. 2, 3, 6). Osman has undoubtedly breached his fiduciary duty to AGRC by diverting AGRC s funds and monthly Cooperative Maintenance payments to his own personal bank account, his other companies bank accounts, and his mother s bank account. Osman has failed to manage the assets of AGRC and has commingled AGRC s funds with those of other, unrelated cooperatives. Osman has also breached the duty he owes to AGRC by misappropriating funds from four mortgage refinances, representing a total of $45 million of indebtedness and misappropriating apartment units. Osman 6 CPLR 105(u) provides that a verified pleading may be utilized as an affidavit whenever the latter is required. [7937-1/ /1] of 30

26 and the Board depleted the funds from the Natixis refinancing instead of using the funds to pay the lender and to make the required and necessary repairs. AGRC is now in default on its mortgage. (Meister Aff. 12,13, Exhs. 7, 8). In an attempt to conceal their misdeeds, Osman and the Board falsified AGRC s books and records and in some instances, failed to maintain any records at all. (Meister Aff., Exh. 4). Now that Osman and the Board are seeking yet another refinance of AGRC s mortgage, Osman s counsel has recently produced the 2017 Financials of AGRC, a document Osman previously claimed did not exist. (Meister Aff., Exhs. 4, 5). In the face of the detailed allegations in the Verified Complaint, based upon hard documentary evidence, the Board has utterly failed in its duty to protect the interests of AGRC by firing Osman as Managing Agent. B. Failure to Grant Plaintiffs Immediate Injunctive Relief Will Irreparably Harm AGRC and Plaintiffs The second prong required for a preliminary injunction, irreparable harm, is easily satisfied in this case as well. [T]he existence of a factual dispute will not bar the granting of a preliminary injunction if one is necessary to preserve the status quo. Mr. Natural, Inc., v. Unadulterated Food Products, Inc., 152 A.D.2d 729, 730 (2d Dep t 1989). In the case at bar, a preliminary injunction is needed to preserve the status quo. Without the granting of a preliminary injunction, the status quo cannot be maintained because the Osman Defendants and the Board will not only continue to utilize the funds they receive from the Cooperative Maintenance but will render any judgment against them ineffectual by bleeding AGRC of its assets. Plaintiffs will lose their entire interest in the cooperative units, by virtue of the dissipation of the Cooperative Maintenance proceeds. See Gambar Enterprises, Inc. v. Kelly Services, Inc., 69 A.D.2d 297 (4th Dep t 1979) ( [I]t is not for [a] court to determine finally the merits of an action upon a motion for a preliminary injunction; rather, the purpose of the [7937-1/ /1] of 30

27 interlocutory relief is to preserve the status quo until a decision is reached on the merits. ); see also Hoppman v. Riverview Equities Corp., 16 A.D.2d 631 (1st Dep t 1962) (holding that it was an improvident exercise of discretion to deny a temporary injunction where irreparable damage could be avoided by maintenance of the status quo pending determination of issues at trial). While, in general, irreparable harm will not lie where money damages are adequate, New York courts have uniformly recognized an exception to that rule where an identifiable corpus of funds is at issue, such as the Cooperative Maintenance at issue here. In such a case, injunctive relief is appropriate. See AQ Asset Management LLC v. Levine, 111 A.D.3d 245, 247 (1st Dep t 2013) (recognizing an exception to the rule that there can be no irreparable harm from the mere loss of money where the monies at issue are identifiable proceeds that are supposed to be held for the party seeking injunctive relief ); Amity Loans, Inc. v. Sterling National Bank & Trust Co. of New York, 177 A.D.2d 277, 279 (1st Dep t 1991) (stating that injunctive relief is appropriate to remedy the conversion of identifiable proceeds. ). Here, the Osman Defendants have failed to appropriately manage the Cooperative by improperly diverting Cooperative Maintenance to Osman and his cronies, including but not limited to, Osman s mother, MetPac, Monarch, Acropolis Homes, and Acropolis Holdings, rather than allocating the Cooperative Maintenance payments for necessary repairs and payment of AGRC s bills. At present, the Osman Defendants, along with Osman s complicit Board, are continuing the vicious cycle of dissipating the funds from every refinance of AGRC s mortgage, as they have done for more than a decade. Instead of applying each new mortgage refinance and monthly Cooperative Maintenance proceeds toward paying the lender, Osman is depositing the funds in his personal account and the accounts of his cronies. (Compl. 126, 127; Meister Aff. 7, 8, 11, [7937-1/ /1] of 30