FILED: NEW YORK COUNTY CLERK 06/14/ :19 PM INDEX NO /2016 NYSCEF DOC. NO. 30 RECEIVED NYSCEF: 06/14/2018

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK FIDELITY AND GUARANTY INSURANCE Index No /2016 COMPANY, Plaintiff, AFFIRMATION IN - against - OPPOSITION TO PLAINTIFF'S APPLE BUILDERS AND RENOVATORS, INC., MOTION FOR SUMMARY JAGANNATHAN KUTTAMBAKKAM, and JUDGMENT SAILAJA CHITTA, Defendants. SCOTT M. YAFFE, an attorney duly admitted to practice law in the State of New York, affirms the following under the penalties of perjury: 1. I am of counsel to the law firm of Lindabury, McCormick, Estabrook & Cooper, P.C., attorneys for the defendants in this action. Both sides have moved for summary judgment. I make this affirmation in opposition to the plaintiff's motion for summary judgment. (" Fidelity" 2. The plaintiff Fidelity and Guarantee Insurance Company ("Fidelity") moves for judgment supporting its claims for indemnification for legal and accounting fees it says it expended defending itself in the action Javier Rodriguez v. Apple Builders & Renovators, Inc., index number /2005, and for legal fees in this action. The defendants pled eight affirmative defenses, none of which are boilerplate and each of which are supported by facts. (Exhibit C to moving papers). Fidelity does not address any of them in making this motion. 3. As discussed in the moving papers, the second sentence of the I 1 of 8

2 General Agreement of Indemnity (the "GAI") requires the defendants only to have to pay to Fidelity "such sum as may be necessary to exonerate and hold it harmless," and the third sentence limits Fidelity's entitlement to charge for disbursements to those "made by it in good faith... or that it was necessary or expedient to make such disbursements" (emphasis added). (Exhibit B to the moving papers, pp. 2-3.) The first affirmative defense, which is supported by evidence in the moving papers, is that the defendants provided and offered legal representation for Fidelity in the Rodriguez action that Fidelity declined. While Fidelity did not have to accept the representation, by declining the representation it gave up any claim for reimbursement for legal fees. Fidelity's separate and duplicative incurrence of legal fees was unnecessary and a failure to mitigate damages. 4. The defendants third affirmative defense, which is also discussed in the moving papers, is that most of the claim for attorney's fees for the Rodriguez action is time barred. The second sentence of the relevant GAI states that the defendants are obligated to pay "as soon as liability exists or is asserted against the SURETY, whether or not the Surety shall have made a payment therefor." Liability for legal fees was asserted against Fidelity by the rendering of each bill. Because the parties agreed that this action was commenced as of June 25, 2015, the indemnification of any bill older than June 25, 2009, (six years earlier) is barred by the statute of limitations. 5. The fourth affirmative defense, also discussed in the defendants moving papers, is that the claim for auditing fees is time barred. The bills from the auditor Nihill all predate June 25, 2009, as they are dated from March 21, 2008, through December 4, 2008 (Exhibit I to the moving papers). 2 of 8

3 Additional Defenses Regarding the Audit Fees Defendants Did Not Indemnify Centennial's Breach 6. Even if not time-barred, the defendants are not liable for the auditing fees. Dated December 4, 2007, the three surety defendants in the Rodriguez action, Fidelity, (" Centennial" Centennial Insurance Company ("Centennial") and Greenwich Insurance Company (" Greenwich" ("Greenwich"), retained the accounting firm of Nihill & Riedley ("Nihill") to determine defendant Apple Builders and Renovators, Inc.'s, ("Apple's") prevailing wage obligations to the plaintiffs for each of the projects bonded by the sureties. The retainer agreement is annexed as Exhibit E to the moving papers. The retainer agreement states: We understand that our fees will be apportioned amongst the sureties based upon the percentage of the potential liability for each bonded project as compared to the total liability for all of the projects subject to the audit. To the extent that fees are due and owing prior to a determination of liability, those fees will be shared equally and paid by each respective surety and thereafter the sureties will reallocate amongst themselves any such payments after a determination of the potential liabilities. Annexed as Exhibit F to the defendants moving papers is a letter dated October 5, 2010, from Fidelity's counsel to Centennial's stating that the audit showed Fidelity had no liability and Centennial's counsel was in possession of a check from Centennial to Fidelity in the amount of $50, to reimburse Fidelity for the auditing fees it had paid to Nihill. The letter asked for the check to be sent. 7. Fidelity has not shown what it did with the check or whether it was received. Its papers state only that it was "forced" to pay the auditing fees, an allegation contradicted by the voluntary retainer agreement it entered into with the other sureties. 3 of 8

4 8. The retainer agreement and the letter prove that the parties liable to Fidelity for the audit fees are Centennial and Greenwich, and Centennial's counsel. None of the defendants in this action are parties to the retainer agreement, and they are not even mentioned in the retainer agreement. 9. The GAI (Exhibit A to Fidelity's moving papers) does not obligate the defendants to stand behind and guarantee a payment obligation by Centennial to Fidelity. The GAI requires the defendants to indemnify Fidelity for expenses incurred "by reason of' its bond, not by reason a breach of an agreement by a third party. 10. If the defendants are forced to pay Fidelity for the auditing fees contractually owed by Centennial, the defendants would be left with no recourse. The defendants do not and would not have a right to sue Centennial for these fees as the claim is contractual and the defendants were not parties to the contract. Fidelity Failed to Mitigate 11. Even if Fidelity has a right to the audit fees under the GAI, as noted in the moving papers Fidelity must mitigate its damages as a prerequisite. "The law imposes upon a party subjected to injury from breach of contract, the duty of making reasonable injury..." exertions to minimize the injury..." Holy Props. Ltd.,,L.P. v. Kenneth Cole Prods., 87 N.Y.2d 130, 133, 637 N.Y.S.2d 964, 966, 661 N.E.2d 694, 696 (1995); see Losei Realty Corp. v City of (" New York, 254 N.Y. 41, 47, 171 N.E. 899 (1930) ("The law wisely imposes upon a party subjected to injury from the breach of a contract the active duty to make reasonable efforts to render the injury as light as possible."). Except herein, to the knowledge Fidelity has never taken any legal action to collect the audit fees. It has claims against Centennial, Greenwich 4 of 8

5 and Centennial's counsel whom the letter (Exhibit F to the moving papers) indicates was in possession of the payment. It is reasonable to require Fidelity to have pursued its legal rights against these parties as a prerequisite to a claim against the defendants. 12. In 2010 Centennial went into rehabilitation and in 2011 it was converted to a liquidation. Claimants against Centennial had a right to present their claims to the liquidator for payment. Annexed as Defendants' Defendants Exhibit L is the Bar Date Notice setting December 15, 2013, as the last date for the presentment to the Liquidator of claims against Centennial. The defendants issued interrogatories to Fidelity. The fifth interrogatory asked whether Fidelity presented a claim to the Liquidator for Centennial. Fidelity answered, "no claim was presented." Annexed as Exhibit M are Fidelity's interrogatory responses. It is reasonable to require that Fidelity have filed a claim with the Liquidator as a prerequisite to a claim against the defendants. Nonjoinder of Parties 13. Centennial and Greenwich are required to reimburse Fidelity for the auditing fees under the terms of the Nihill retainer agreement (Exhibit E to the moving papers). The law firm of McElroy Deutsch Mulvaney & Carpenter, LLP, is also liable as according to the letter annexed as Exhibit F to the moving papers it was in possession of the reimbursement funds. CPLR 1001 provides: "Persons who ought to be parties if complete relief is to be accorded between the persons who are parities to the action... shall be made... defendants." And, CPLR 1003 provides: "Nonjoinder of a party who should be joined under section 1001 is a ground for dismissal of an action without prejudice... The court may order any claim against a party severed and proceeded with separately." Because there are parties that are liable for the auditing fees they are necessary parties. The claim for auditing fees, if not 5 of 8

6 dismissed on other grounds, should be severed and dismissed for the nonjoinder of these parties. Laches 14. As part of the moving papers is an affidavit from Apple's owner and president Jagganathan Kuttambakkam. He states in paragraph 3: Apple did not receive any demands for payment for anything from Fidelity regarding the Rodriguez action. The first I or Apple learned of any claim was with the commencement of the present litigation. The first time I or Apple saw any bill to Fidelity for legal fees or audit fees regarding the Rodriguez action was when they were obtained from Fidelity in the course of this action and shown to me by our counsel. 15. As stated by New York Jurisprudence: "Laches" is defined as such neglect or omission to assert a right as, taken in conjunction with the lapse of time, more or less great, and other circumstances causing prejudice to an adverse party, operates as a bar in a court of equity. It applies when there has been a considerable delay resulting in a change of position, intervention of equities, loss of evidence, or other disadvantage. 75A N.Y. Jur. 2d Limitations and Laches More than $120,00 in alleged reimbursable expenses was simply sprung on the defendants ten years after the first of them and five years after the Rodriguez action ended. Fidelity has offered no excuse for its extensive delay. 17. When this action was first begun in federal court in 2015, I attempted to gather all existing relevant records. The correspondence between Apple's and Fidelity's counsel at the beginning of the Rodriguez action could not be found. Apple's counsel for the Rodriguez action, Eric Stuart of Ogletree, Deakins, Nash, Smoak & Stewart, P.C., simply could not remember events and conversations clearly enough from that time to swear to them. His firm 6 of 8

7 could not locate its files on the matter. Little was provided by the plaintiff in response to the document demand. Without the aid of the correspondence and his notes and other records to refresh his memory Mr. Stuart refused to give an affidavit for these summary judgment motions. Without Mr. Stuart, the defendant's have been unable to obtain evidence as to why Fidelity turned down Apple's offer of legal representation or what was said or agreed to about fees when representation was declined. 18. If Fidelity had intended to charge the defendants with these fees at the time they were incurred it should have forwarded the bills within a reasonable time after receiving them. The defendants cannot know about a reimbursable expense under the GAI if it is not told about it. The GAI requires the defendants to pay "as soon as liability exists or is asserted" against Fidelity, whether or not Fidelity has paid the expense, which implies that the defendants are to receive notice as soon as a bill is received. Had the defendants received reasonable notice they would have had an opportunity to react. They could have brought a declaratory judgment action to establish their non-liability for the expenses. Apple's counsel could have taken steps to minimize the work of Fidelity's counsel. 19. The defendants have been prejudiced by Fidelity's delay in making its claims and the facts establish a defense of laches. Fees for this Action 20. Fidelity also asks for judgment for its legal fees in bringing this action. As already discussed the test under the language of the GAI is whether the fees were necessary. Such a determination is a discretionary one for the Court. The burden of establishing necessity is with Fidelity. Certainly if Fidelity does not obtain a judgment for its fees in the Rodriguez action 7 of 8

8 then this action was unnecessary. Even if Fidelity obtains a judgment for a small part of these fees, this action was unnecessary. By claiming more than $120,00 if fees most of which are time-barred, Fidelity made its claims impossible to settle. If Fidelity had made demand only for non-time-barred fees, the parties would have compromised for a reasonable amount without the need for ligation. The number of $16, for the non-time-barred fees is just to small to justify the legal expense. WHEREFORE the defendants respectfully request that summary judgment be denied the plaintiff and the complaint dismissed or the defendants have such other and further relief as to the Court may seem just and proper. Dated: New York, New York June 14, 2018 LINDABURY, McCORMICK, ESTABR OK & COOPER, P.C. By: br Scott. fe Attorneys for the Defendants 21't 26 Broadway, Floor New York, New York (212) of 8