FILED: KINGS COUNTY CLERK 01/04/ :58 PM INDEX NO /2016 NYSCEF DOC. NO. 60 RECEIVED NYSCEF: 01/04/2017

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1 FILED: KINGS COUNTY CLERK 01/04/ :58 PM INDEX NO /2016 NYSCEF DOC. NO. 60 RECEIVED NYSCEF: 01/04/2017 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS X Index No / OWNERS CORP, Plaintiff, AFFIRMATION IN SUPPORT OF CROSS MOTION AND - against - IN OPPOSITION TO PLAINTIFF S MOTION GUTMAN MANAGEMENT CO. INC., BSD GENESIS HOLDINGS, LLC, ROCHELLE DEUTSCH a/k/a ROCHELLE GUTMAN, ESTER M. BERMAN, HARRY DRYFUS and KASOVITZ ENETERPRISES LLC, Defendants X STATE OF NEW YORK ) COUNTY OF NEW YORK )ss: David Binson, Esq., admitted to practice law in the State of New York affirms the following under penalties of perjury: 1. I represent Defendants Harry Dreyfuss, sued herein incorrectly as Harry Dryfus, and Kasovitz Eneterprises LLC ( Dreyfuss and Kasovitz ) in this action, I am fully familiar with the facts and circumstances of this case, and I submit this affirmation in support of Dreyfuss and Kasovitz s cross motion and in opposition to Plaintiff s motion As demonstrated below, the motion of Dreyfuss and Kasovitz should be granted and the complaint against them should be dismissed. 3. Plaintiff s cause of action for Usurpation of Corporate 1 Copies of the Summons and Complaint, Dreyfuss and Kasovitz s Verified Answer, the Amended Answers of Defendants Gutman Management Co. Inc., BSD Genesis Holdings, LLC, Rochelle Deutsch a/k/a Rochelle Gutman and Ester M. Berman, and Plaintiff s Replies, are attached hereto as Composite Exhibit of 9

2 Opportunity should be dismissed since: a Owners Corp. did not have an interest or tangible expectancy in purchasing the shares since the Coop is a non-profit corporation and is not in the business of purchasing apartments at foreclosure auctions; b. Purchasing the shares at the auction was neither necessary for, nor essential to, 1925 Owners Corp s business, which is to run and manage a cooperative apartment building; c. Plaintiff failed to allege any benefit to Dreyfuss and Kasovitz from the purported diverted opportunity. In any event, neither Dreyfuss nor Kasovitz made any profit from its transfer. 4. The complaint should also be dismissed against Dreyfuss and Kasovitz since the shares were transferred in accordance with the Proprietary Lease, which specifically authorizes the managing agent to approve transfer of shares by a Lender when a lessee defaults and that approval shall not be unreasonably withheld or delayed. 5. Plaintiff s fifth cause of action sounding in fraud should also be dismissed since it fails to meet the specificity requirements of CPLR 3016(b), and fails to state a claim for fraud altogether. 6. Plaintiff s complaint should also be dismissed against Defendant Kasovitz Eneterprises LLC in its entirety since Plaintiff has failed to state a claim against this Defendant of 9

3 7. Moreover, although Plaintiff s motion does not seek any relief against Dreyfuss or Kasovitz, since the motion seeks an injunction and alleges likelihood of success on the merits, Defendants Dreyfuss and Kasovitz oppose the motion on that ground. 8. Plaintiff s motion should be denied since Plaintiff fails to demonstrate a likelihood of success on the merits because the proprietary lease gives the managing agent authority to transfer the shares and that approval shall not be unreasonably withheld or delayed. Moreover, Plaintiff failed to state a cause of action against Dreyfuss and Kasovitz. PLAINTIFF S CAUSE OF ACTION FOR USURPATION OF CORPORATE OPPORTUNITY SHOULD BE DISMISSED SINCE PLAINTIFF FAILED TO DEMONSTRATE THAT A CORPORATE OPPORTUNITY WAS DIVERTED, AND FAILED TO SHOW THAT DREYFUSS AND KASOVITZ PROFITED FROM THE TRANSFER 9. Plaintiff s complaint should be dismissed since it failed to state a claim for Usurpation of Corporate Opportunity. 10. There are various tests used by Courts to decide wether a venture is a corporate opportunity. Veritas Capital Mgt. L.L.C. v. Campbell, 22 Misc. 3d 1107(A), 2008 N.Y. Misc. LEXIS 10791, 2008 NY Slip Op 52608(U) (2008) (Sup. Ct, NY County 2008); Alexander & Alexander, Inc. v. Fritzen, 147 A.D.2d 241, 542 N.Y.S.2d 530 (1st Dept. 1989). 11. One of the tests is to determine if the corporation has an interest or tangible expectancy in the opportunity. Veritas, Supra, Alexander, Supra. 12. A second test applied by some Courts is whether the -3-3 of 9

4 opportunity is the same as, necessary for, or essential to the line of plaintiffs business. Id. 13. Finally, some Courts have applied a third test which is to determine if the parties understood, or it is reasonable to conclude that they understood, that the agent would simultaneously pursue other interests, even if related to, or in competition with, the company. Id. 14. The Court should note that not all the tests need to be met to make the determination, and that while the cases in this jurisdiction have generally announced reliance on the interest or tangible expectancy test, in some instances consideration has been given to the other tests. (See Alexander, Supra, where the Court found that no corporate opportunity was diverted despite the third test not having been met). 15. As demonstrated below, none of these tests has been met by Plaintiff. 16. At the outset, a cooperative corporation is treated as a non-profit corporation. Cooperative Corporation Law 3(d) specifically provides that: A cooperative corporation shall be classed as a non-profit corporation, since its primary object is not to make profits for itself as such, or to pay dividends on invested capital, but to provide service and means whereby its members may have the economic advantage of cooperative action, including a reasonable and fair return for their product and service. 17. In this case, purchasing cooperative apartments at -4-4 of 9

5 foreclosure auctions is not within the scope of 1925 Owners Corp s purpose since it cannot invest in the shares for profit. 18. Nor can 1925 Owner s Corp. justify spending its cash reserves on foreclosed shares when that is not within its primary corporate purpose. 19. In addition, as can be seen from the Affidavit of Harry Dreyfuss, sworn to on January 3, 2017 (the Drefyuss Affidavit ) 1925 Owners Corp. was not in a financial position to purchase the shares at the foreclosure auction since it only had approximately $13,000 in its operating account. 20. Furthermore, Plaintiff fails to specify or even allege the corporate opportunity purportedly usurped, and if so, how the opportunity would have benefitted Plaintiff. 21. Plaintiff also failed to allege that Defendants Dreyfuss and Kasovitz benefitted from the purported diverted corporate opportunity, which in and if itself warrants dismissal of this cause of action for failure to state a claim (See Veritas Capital Mgt. L.L.C. v. Campbell, 22 Misc. 3d 1107(A), 2008 N.Y. Misc. LEXIS 10791, 2008 NY Slip Op 52608(U) (2008) (Sup. Ct, NY County 2008); 22. In any event, neither Dreyfuss nor Kasovitz made any profit from the transfer of the shares (See Dreyfuss Affidavit). 23. Furthermore, as demonstrated more fully below in paragraphs 29 through 32, the proprietary lease permits the managing agent alone to transfer the shares in the event of a -5-5 of 9

6 foreclosure sale, and also prohibits unreasonable withholding of consent. 24. In sum, Plaintiff cannot meet either the first or second test since it cannot show, nor does Plaintiff even allege, that it had an interest or tangible expectancy in the foreclosed shares, or that the shares were necessary for, or essential to the line of plaintiffs business. 25. Plaintiff also cannot meet the third test. At the outset, the third test is inapplicable since Defendants did not divert any corporate opportunity. They did not bid at the auction, and they did not purchase the shares. 26. Notwithstanding the foregoing, even assuming arguendo that the third test were applicable, as demonstrated in paragraph paragraphs 29 through 32, the Proprietary Lease gives the managing agent authority to transfer the shares. Therefore, the parties understood and it is reasonable to conclude that the shares could be transferred by the managing agent in such a manner. 27. The Court should also note that, notwithstanding the fact that Plaintiff labeled the second cause of action usurpation of corporate opportunity Against All Defendants, Plaintiff fails to seek any relief from Drefyuss and Kasovitz. Therefore, Plaintiff fails to state a cause of action. 28. In light of the foregoing, Plaintiff s second cause of action for usurpation of corporate opportunity should be dismissed -6-6 of 9

7 in its entirety. THE COMPLAINT SHOULD BE DISMISSED SINCE THE SHARES WERE TRANSFERRED IN ACCORDANCE WITH THE PROPRIETARY LEASE WHICH: A) AUTHORIZES THE MANAGING AGENT TO APPROVE TRANSFER OF THE SHARES BY THE LENDER IN CASE OF LESSEE S DEFAULT; AND B) APPROVAL BY THE MANAGING AGENT SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED 29. Plaintiff s complaint should be dismissed since the proprietary lease authorized the transfer of the shares and, in fact, prohibited unreasonable delay or withholding of consent to the transfer. 30. The Proprietary Lease provides in paragraph 17(b) in relevant part that if the lease is terminated by the Lender because of lessee s default, the Lender can sell the shares subject only to the approval of the managing agent and that the managing agent cannot unreasonably withhold its approval. See a copy of the Proprietary Lease attached to Plaintiff s motion as Exhibit E. 31. Thus, the managing agent was not only authorized to transfer the shares in this case, but was required to since it did not have authority to withhold consent to such transfer. 32. Therefore, Plaintiff s entire suit is frivolous and the second and fifth causes of action should be dismissed as against Dreyfuss and Kasovitz. PLAINTIFF FAILED TO STATE A CAUSE OF ACTION FOR FRAUD 33. As demonstrated below, Plaintiff failed to state a cause of action for fraud, warranting dismissal of the fifth cause of action of 9

8 34. Defendant s fraud claim fails since it lacks the requisite particularity in violation of CPLR 3016(b) because it does not specify any detail as to the circumstances surrounding the alleged fraud, nor did Plaintiff allege any of the elements of fraud altogether Moreover, Plaintiff s fifth cause of action fails to state a claim against Dreyfuss and Kasovits at all. 36. Therefore, Plaintiff s fifth cause of action for fraud should be dismissed in its entirety. THE CLAIMS AGAINST DEFENDANT KASOVITZ ENETERPRISES LLC SHOULD BE DISMISSED SINCE PLAINTIFF FAILED TO STATE A CLAIM 37. Moreover, the complaint should be dismissed against Defendant Kasovitz Eneterprises LLC. 38. Plaintiff failed to allege any cause of action against this Defendant warranting dismissal of the complaint against Kasovitz in its entirety. PLAINTIFF FAILED TO STATE A CLAIM FOR PUNITIVE DAMAGES 39. Plaintiff s claim for an award of punitive damages should be dismissed. 40. It is well settled that punitive damages are recoverable only in cases of gross fraud involving a high moral culpability against the general public. Varveris v. Hermitage Ins. Co., 24 2 To the extent that Plaintiff is claiming conspiracy, said claim should be dismissed as well since the Courts in New York do not recognize an independent cause of action for civil conspiracy. Dickinson v. Igoni, 76 A.D.3d 943, 908 N.Y.S.2d 85 (2d Dept. 2010); Rose v. Different Twist Pretzel, Inc., 123 A.D.3d 897, 999 N.Y.S.2d 438 (2d Dept. 2014) of 9

9 A.D.3d 537, 806 N.Y.S.2d 688 (2d Dept. 2005); M.S.R. Associates, Ltd. v. Consolidated Mut. Ins. Co., 58 A.D.2d 858, 396 N.Y.S.2d 684 (2d Dept. 1977). made. 41. In this case, no such allegations or showing have been PLAINTIFF FAILED TO DEMONSTRATE LIKELIHOOD OF SUCCESS ON THE MERITS 42. As demonstrated by the foregoing, Plaintiff failed to demonstrate a likelihood of success on the merits, warranting denial of Plaintiff s motion. WHEREFORE, it is respectfully requested that Defendant s Dreyfuss and Kasovitz s motion be granted and Plaintiff s motion be denied in all respects, together with such other and further relief as may be just and proper. Dated: New York, New York January 4, 2017 /S/ David Binson -9-9 of 9