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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK SAID HAKIM, and SAID HAKIM on behalf of RANELL FREEZE COMPANY, and SAID HAKIM on behalf of RANELL FREEZE CORPORATION, Against Plaintiff, KAMRAN HAKIM, MASUD HAKIM, and RANELL FREEZE COMPANY and RANELL FREEZE CORPORATION, Defendants. Index No /05 Hon. Karla Moskowitz PLAINTIFFS REPLY MEMORANDUM OF LAW IN SUPPORT OF (1) CROSS- MOTION FOR RENEWAL AND REARGUMENT OF DEFENDANTS CROSS- MOTION DATED NOVEMBER 15, 2005 SEEKING DISMISSAL BASED ON CPLR 3211 AND CPLR 3212 AND UPON RENEWAL AND REARGUMENT DENYING DEFNDANTS MOTION IN ITS ENTIRETY; (2) AND CROSS-MOTION FOR LEAVE TO FILE AND SERVE A THIRD AMENDED COMPLAINT

2 PRELIMINARY STATEMENT Defendant s opposition (1) misstates crucial facts; (2) mischaracterizes the Court s prior ruling by insinuating the Court relied on the Statute of Frauds in its prior ruling, when that argument was never even raised by defendants until its brief in opposition to plaintiffs crossmotion; and (3) misstates and misapplies the law relevant to Plaintiffs cross-motion for renewal and reargument concerning defendant Kamran Hakim s motion for summary judgment and for leave to file a Third Amended Complaint. Although plaintiffs Memorandum of Law identified the specific facts plaintiffs contend the Court overlooked and identified those instances in which plaintiffs contend that the Court applied the wrong legal standard (and provided plaintiffs position as to the correct standard the Court should have applied), defendants make the remarkable statement that plaintiffs have not provided a basis for renewal and reargument. If anything, defendants opposition makes stronger the case for renewal and reargument, as it now injects two additional facts of significance. First, the Affidavit of Bertram Weiss supplied by defendants demonstrates -- just as Said Hakim has alleged that Kamran Hakim has purchased New York real estate solely in Kamran Hakim s name and not on behalf of all of the partners in Ranell Freeze Company. Second, Masud Hakim s remarkable Affidavit supplied in support of Kamran Hakim s opposition does a complete about-face from allegations made in Masud s own pleading filed less than two weeks earlier, at which time he acknowledged the existence of such a partnership agreement to invest in New York real estate in his responses to Paragraphs 86 and 87 of his Answer and affirmatively made the same allegations in Paragraphs 6 through 8 of his Counterclaims. Two weeks ago, Masud indicated that the partnership assets included three properties, but in Paragraph 2 of his current Affidavit, he denies that Said has an interest in any properties other than 536 East 89 th

3 Street. Clearly, Masud will now say whatever Kamran asks him to say, and Kamran s desire and ability to get Masud to change his version of the facts to suit Kamran s litigation needs lends credence to Said Hakim s fraud claims. Said Hakim has alleged the existence of a fraudulent plan to deprive him of his interest in certain New York real estate that was to be purchased in his name. The Affidavits supplied with the opposition -- which concede the purchase of other properties by Kamran and reflect Kamran s apparent ability to convince Masud to contradict Masud s own pleading for the sake of an opposition to a motion not even directed at Masud add further information supporting renewal and reveal the need for the Court to allow discovery to occur before considering the dismissal of plaintiffs claims. Said Hakim is entitled to develop a record through discovery to support his claims. As shown in his motion for renewal and reargument, the Court s decision on virtually no record was premature and did not apply the right standards to determine if Said Hakim s claims could be dismissed as a matter of law at this early juncture. The filing of this motion for renewal and reargument has resulted in the discovery of even more support for Said Hakim s claims. Therefore, for the reasons stated in plaintiffs initial papers on this Cross-Motion and herein, the Court should grant the motion for renewal and reargument and vacate its dismissal of certain causes of action or limitations on Said Hakim s claims. Further, the Court should grant leave to amend Said Hakim s pleading, as plaintiffs moving papers make clear that such leave should be granted and defendants have failed to provide a single cogent reason to deny that motion. 2

4 RESPONSES TO DEFENDANTS OPPOSITION As a preliminary matter, plaintiffs must address several material misstatements in the opposition. First, defendant repeatedly incorrectly states that Said Hakim alleges the existence of an oral agreement to purchase New York real estate in the name of all of the Hakim brothers. As stated clearly on page 3 of Said Hakim s Memorandum of Law in support of this motion In fact, as Said Hakim noted in an earlier Affidavit, his claim (now backed by Masud Hakim) that a partnership existed that was to encompass all New York real estate purchased by Kamran was corroborated by a written agreement and that an accounting of all partnership transactions would occur. Although Said Hakim could not take a copy of that document with him when he fled Iran, on information and belief, Kamran Hakim possesses a copy of that document. It is simply inaccurate and a blatant distortion of the record to state that Said Hakim alleges the existence of an oral agreement. Said Hakim contends just the opposite is true and alleges that Kamran Hakim possesses a copy of that document. Kamran Hakim has never directly denied this allegation. Although Bertram Weiss provides an Affidavit to accompany defendants opposition, what Mr. Weiss carefully-constructed Affidavit states is that [n]o document exists in this organization [the Kamran entities] which refer to any partnership interest held by Said or Masud in the Kamran entities. This statement has nothing to do with the question whether the Hakim brothers has executed a written partnership agreement many years before in Iran. It merely states that, in his eighteen years of serving as controller of real estate business entities known as the Kamran entities, Weiss has not seen any Kamran Entities records on this issue. What is conspicuously missing from this record is a direct statement by Kamran Hakim that such a written partnership agreement does not exist. 3

5 In fact, Masud Hakim s pleading of March 2, 2006, specifically admitted the existence of that same agreement Said Hakim alleges existed in Masud s responses to Paragraphs 86 and 87 of the Second Amended Complaint. Further, Paragraphs 6 through 8 of Masud s Counterclaim stated 6. The Hakim Brothers entered into an agreement to jointly purchase, for investment, real properties in the State of New York, each having equal interests therein, as partners. 7. Kamran Hakim, who was an experienced real estate investor and who was living in New York, located and helped to purchase for the Hakim Brothers at least three properties in the City of New York, respectively located at 536 East 89th Street, New York, New York; 456 West 57 th Street, New York, New York; and 121 Lexington Avenue, New York, New York (the New York Properties ). 8. The New York Properties were to be purchased under the individual names of the Hakim Brothers, Ranell Freeze Company, Ranell Freeze Corporation, or any other entities set up by Kamran Hakim. The information in Masud s pleading buttressed Said s claim that such an agreement does exists and was one of the reasons why plaintiffs filed their renewal motion. Masud s abrupt 360 degree turn on this issue in his Affidavit in support of his brother Kamran s opposition does not change the fact that he has made a prior contradictory statement nor weaken the argument for renewal. If anything, the ability of Kamran to secure an Affidavit from his brother Masud that directly contradicts assertions Masud made in a pleading just two weeks earlier lends further support to Said Hakim s claim that Kamran Hakim has engaged in fraudulent acts aimed at depriving Said Hakim of his share of the partnership s profits. Defendants repeated statements that Said alleges an oral agreement are just wrong. As a second matter, defendants opposition makes repeated reference to the fact that plaintiffs claims are barred by the Statute of Frauds and insinuates that the Court s prior 4

6 determination rested in whole or in part on that basis. However, a review of all of the papers submitted, of the transcript for oral argument, and of the Court s order reveals that the Statute of Frauds was not mentioned a single time by counsel or the Court. For that reason, defendants statement in Paragraphs 2 and 9 of their counsel s Affirmation to the effect that the Counts were properly dismissed because of the applicability of the Statute of Frauds injects not only a ground upon which the Court did not rule, but an issue not even raised in the papers on the original motion. Perhaps of even greater importance, even if defendants had raised the Statute of Frauds earlier, that doctrine simply has no application on these facts. Defendants repeatedly state that Said Hakim s claims are not supported because he cannot provide a shred of evidence to support his claim that a partnership agreement existed, and that the Statute of Frauds would bar the assertion of such a partnership agreement in such a circumstance. Defendants are wrong on both counts. Said Hakim has noted over and over again that this document did exist, that Said left behind his copy when fleeing Iran, and that he believes Kamran possesses a copy of the agreement. Further, Masud also indicated in a pleading filed two weeks ago in this action that such an agreement existed (at least until he tried to recant that assertion in an Affidavit supplied for Kamran Hakim s opposition). Thus, there is evidence in the record concerning the existence of the agreement. Further, New York law is clear that the loss or destruction of a written instrument does not deprive the agreement of its effect, and the contents of the document may be proved by extrinsic evidence. Lynch v. Savarese, 217 A.D.2d 648, 629 N.Y.S.2d 804 (2d Dep t 1995) (citing Posner v. Rosenbaum, 240 App. Div. 543, 270 N.Y.S. 849 (1934)). Thus, Said Hakim is not required to produce a copy of the document, even if the Statute of Frauds would ordinarily 5

7 require that the agreement be in writing. Finally, the agreement Said Hakim states was made created a partnership at will, a document not required to be in writing to be enforceable under New York s Statute of Frauds. Prince v. O Brien, 234 A.D.2d 12, 650 N.Y.S.2d 157 (1 st Dep t 1996). Thus, the statute does not bar Said Hakim s claims. The Court did not rely on the Statute of Frauds in its earlier decision, defendants did not rely on it, and most important the Statute of Frauds clearly does not apply on the facts. LEGAL ARGUMENT 1. RENEWAL AND REARGUMENT ARE APPROPRIATE Renewal motions are permitted under CPLR 2221(e) when new facts are provided that were not available at the time of initial argument, which facts would change the initial determination. This motion involves material that was not available at the time of the initial hearing namely Masud Hakim s pleading, and now Masud s later Affidavit and the Affidavit of Bertram Weiss. This evidence was not available at the time of the original motion hearing, and these materials buttress Said Hakim s claims that Kamran Hakim was to purchase New York properties on behalf of the partnership, that an accounting encompassing all partnership business was contemplated, and that Kamran Hakim wrongfully purchased properties in his name only and fraudulently concealed such purchases from Said Hakim. The fact that Masud has now completely recanted allegations made in his own pleading filed just two weeks previously -- to assist Kamran Hakim in opposition to a motion not even directed to Masud Hakim -- does not change the fact that Masud s pleading is evidential. Given that Said Hakim s claims are based in fraud, Kamran s apparent ability to secure such an Affidavit from Masud is perhaps even more telling. 6

8 Moreover, renewal appears are even more appropriate now in light of the submission of an Affidavit by Bertram Weiss that indicates that Kamran has apparently invested in New York real estate through the Kamran Entities. This corroborates the allegation that Kamran was purchasing properties in New York for himself in contravention of the partnership agreement. At a minimum, even if the Court finds that claims related to sales of the other properties named in said Hakim s pleading are barred, more recent purchases might not be outside the statue of limitations, even as limited by the Court s prior ruling. Discovery is required before the Court can dismiss plaintiffs causes of action, as some of these purchases by the Kamran Entities may have occurred within the past six years, and thus be within even the Court s narrow determination of when the statute of limitations would have run on Said Hakim s fraud claims, or two years, if the Court concludes that such a claim is a breach of contract claim. Said Hakim does not believe the Court should limit discovery to such transactions, but that he is entitled to at least that information before the Court can determine if dismissal of his claims because of the statute of limitations is appropriate. Given all of this new and relevant evidence, the Court can and should permit renewal REARGUMENT IS APPROPRIATE Motions for reargument are designed to afford a party an opportunity to establish that the court overlooked or misapprehended the relevant facts, or misapplied any controlling principle of law. Foley v. Roche, 68 A.D.2d 558, 418 N.Y.S.2d 588 (1 st Dep t 1979). Here, as 1 Defendants claim that the law of the case doctrines bars renewal or reargument here is nonsensical, as the doctrine applies only if a judge were faced with the same issue previously decided by another judge of equal jurisdiction or where, in relation to a new legal issue, a subordinate ruling to that issue has already been decided. See McKinney s comments to 2221, noting that doctrine applies when Judge Two is asked to review a decision by Judge One. To apply the doctrine as defendant urges writes out of the court rules those pertaining to motions to renew or reargue. 7

9 demonstrated in plaintiffs Memorandum of Law in support of its Cross-Motion, the Court s earlier decision applied an improper standard in dismissing certain claims or granting summary judgment based on the Court s weighing of evidence and decisions on disputed issues of material facts. As noted in plaintiff s moving papers, the Court based its dismissal largely on the Court s conclusion that based on the evidence before the Court at the time of the motion, Said Hakim could have discovered the fraudulent acts of Kamran Hakim. As demonstrated in Said Hakim s request for reargument, however, that was not the relevant test the Court should have applied. Under New York law the issue of when a plaintiff, acting with reasonable diligence, could have discovered any alleged fraud turns upon whether the plaintiff possessed knowledge of facts from which he [or she] could reasonably have inferred the fraud, an inquiry that ordinarily presents a mixed question of law and fact Notably, in cases where it does not conclusively appear that plaintiffs had knowledge of facts from which the alleged fraud might reasonably be inferred, their cause of action should not be dismissed because knowledge of the fraudulent act is required and mere suspicion will not constitute a sufficient substitute for imputing a knowledge of the fraud. Jeffrey BB v. Cardinal McCloskey Sch. and Home for Children, 257 A.D.2d 21, (3d Dep t 1999) (internal citations omitted) (emphasis added). The Court s decision in Kaufman is also instructive, as it involved another instance in which some evidence of potential fraud could be seen, but the question whether dismissal was appropriate turned on a determination by a factfinder. There, the court reversing the dismissal stated In view of plaintiffs' submissions, it was error for the IAS court to rule as a matter of law that they could have, with reasonable diligence, discovered the fraud in 1994 (see Yatter v. William Morris Agency, 268 A.D.2d 335, 336, 702 N.Y.S.2d 243). A clear question of fact exists as to whether plaintiffs could reasonably have inferred from the April 1994 letter, or from public 8

10 documents relating to the foreclosure sale, that a fraud was perpetrated upon them (id.). Accordingly, defendants' motion to dismiss the fraud and breach of fiduciary duty claims as timebarred should have been denied. 307 A.D.2d at 123, 760 N.Y.S.2d at Here, the evidence on the issue of whether Said Hakim should have suspected fraud is also such that a factfinder must determine, on a full record, whether he would be found to have knowledge of the fraudulent act as opposed to mere suspicion. See Jeffrey BB, supra, 257 A.D.2d at The Court instead made a final factual determination on this issue without allowing plaintiffs any chance to take discovery. The scant record that the Court relied on is simply not sufficient to state that Said Hakim should have discovered Kamran s fraud. The Court similarly engaged in its own weighing of the evidence on the question of equitable tolling of the statute of limitations. This was in error, for it is clear that the issue of whether defendant should be equitably estopped from asserting the Statute of Limitations as an affirmative defense to plaintiff s complaint is not a question of law, but rather a question of fact, which should be fully developed and determined upon a trial of the action. Schirano v. Paggioli, 99 A.D.2d 802, 804 (2d Dep t 1984) (emphasis added). Defendants reliance on Kotlyarsky v. New York Post, 195 Misc.2d 150, 757 N.Y.S.2d 701 (Kings Cty. 2003), is missplaced. As a first matter, it is a trial level decision that was not even the subject of appellate review, and thus to the extent that it might conflict with Schirano is not binding on this Court, which is required to apply Schirano, which provides that ths issue of whether equitable estoppel applies is a factual issue. Furthermore Kotlyarsky involved an instance in whuch the plaintiff was specifically aware of the defendant s alleged wrongdoing (the publication of an article the plaintiff claimed was slanderous) and delayed in filing suit allegedly because the newspaper had indicated that it would print file a retraction. The case thus differs 9

11 from the present one, where Kamran Hakim s fraudulent conduct continued to conceal his original wrongful action. Here, Said Hakim has noted that Kamran Hakim had complete control over corporate records and the advantage of his brother living on the opposite coast of the United States. Moreover, Said has stated that, given his familial relationship with Kamran, he had placed trust in his brother. Further, the financial information regarding the partnership that he recieved gave no indication that the properties had been sold. Moreover, Said has stated that his brother had informed him that the properties in question were being kept vacant to increase their value. This is therefore not a case where the record is devoid of evidence on the question whether equitable estoppel applies. Were the Court to sit as a factfinder after discovery, it might reach the factual conclusion that these facts ultimately do not support application of the doctrine of equitable estoppel in this case, but that is simply not the Court s role, particularly when the Court makes the determination without providing the claimant with the opportunity to take any discovery whatsoever. As on its decision on the statute of limitations and equitable estoppel issues, the Court viewed the facts before it and made the Court s own factual determination. This was improper for the reasons stated above. 2 2 Defendants claim that plaintiffs rely on the same facts to support their fraud claims and the equitable estoppel argument, and that this is not permissible. Defendant s contention is wrong. The original misappropriation of assets without disclosure is the initial fraud perpetrated, and each subsequent act that concealed the initial fraud (whether that be the furnishing of a false K-1 that did not reflect the company s assets correctly or misleading oral statements in response to inquiries by Said) is a separate and independent act from the initial fraud that justifies the application of equitable estoppel with respect to assertion of the statute of limitations. Kaufman v. Cohen, 307 A.D.2d 113, 760 N.Y.S.2d 157 (1 st Dep t 2003), does not hold otherwise, as that case did not involve repeated fraudulent concealment after the initial wrongful act but instead involved a single act that was asserted as the basis of the fraud and the basis for equitable estoppel. 10

12 With respect to the Iran Tribunal Award, the claim relates to Kamran s fraudulent action in not disclosing receipt of the funds. It is this act, which was later discovered by Said, that gives rise to Said s claim for fraud rather than breach of contract. Furthermore, even if this claim were characterized as a breach of contract claim, Kamran s willful concealment of the receipt of such funds supports the application of equitable estoppel. At the very least, a factual dispute exists as to whether equitable estoppel would apply, which the Court cannot decide at this early stage prior to discovery. Likewise, the Court s limitation of any accounting to a single property is simply conrary to controlling New York law, and reargument is therefore appropriate. The court in Missan v. Schoenfeld, 95 A.D.2d 198, 465 N.Y.S.2d 706 (1 st Dep t 1983), expressly rejected the contention that an accounting should not include transactions that might be subject to a statute of limitations defense if suit were brought regarding such transactions, stating Equally without merit is defendants' contention that the Statute of Limitations bars any claim for the period 1969 to Under section 74 of the Partnership Law, the right to an accounting does not accrue until dissolution of the partnership, here December 31, 1978, six months prior to the commencement of this action (Nishman v De Marco, 76 AD2d 360, app dsmd 53 NY2d 642). If a partnership relationship is established, plaintiff need only show the transaction of business by the partnership producing profits and losses to be accounted for (Arrants v Dell Angelo, 73 AD2d 633). The Court s limitation on the extent of the accounting is therefore erroneous, and the Court should grant reargument on that issue and vacate its limitation on any accounting to a single property. 3. LEAVE TO AMEND SHOULD BE GRANTED The First Department has held Leave to amend the pleadings 'shall be freely given' absent prejudice or surprise resulting from the delay involved. (CPLR 11

13 3025 [b]; McCaskey, Davies and Associates, Inc. v. New York City Health & Hospitals Corporation, 59 N.Y.2d 755, 463 N.Y.S. 2d 434, 450 N.E.2d 240). Byrne v. Fordham University, 118 A.D.2d 525, 500 N.Y.S.2d 253 (1st Dept. 1986). When there is no showing of prejudice or surprise, Courts will grant such a motion at any time, including after the filing of the Note of Issue. Skinner v. Scobbo, 221 A.D.2d 334, 633 N.Y.S.2d 208 (2nd Dep t. 1985); Plattsburg Distributing Company, Inc. v. Hudson Valley Wine Company, 108 A.D.2d 1043, 485 N.Y.S.2d 616 (3rd Dept. 1985), McSweeney v. Levin, 32 A.D.2d 760, 301 N.Y.S.2d 347 (lst Dep t. 1969). Defendants have made no showing of prejudice because there is no possible prejudice to the granting of this motion. As noted in plaintiffs Memorandum of Law in support of this motion, the amended pleading is not a backdoor attempt to reargue or renew issues decided by the Court plaintiffs motion to reargue and renew are front door efforts to do that. And, as noted already, the Court can provide that any causes of action previously dismissed are deemed to be dismissed in this new pleading. There is no reason why the Court should not grant this motion, and it is necessary for the new pleading to retain even those causes of action dismissed by the Court to avoid any suggestion of waiver of those causes of actions. 12

14 CONCLUSION For all of the foregoing reasons, the Court should reverse its dismissal of various counts in its ruling of December 15, 2005, and modify its decision as requested herein and should grant Plaintiffs leave to file and serve a Third Amended Complaint. Dated March 21, 2006 New York, New York Law Office of Ian L. Blant s/ Ian L. Blant By Ian L. Blant, Esq. Attorneys for Plaintiff 475 Park Avenue South, 16 th Floor New York, New York (212) TO Leo Fox, Esq. Attorney for Defendants except Masud Hakim 630 Third Ave. New York, NY (212) Lankler & Carragher, LLP Attorney for Defendant Masud Hakim 845 Third Ave, 17 th Floor New York, NY (212) Gregory D. Miller, Esq. Podvey, Meanor, Catenacci, Hildner, Cocoziello & Chattman A Professional Corporation The Legal Center One Riverfront Plaza, 8th Floor Newark, NJ (973) Attorneys for Plaintiffs #