FILED: WESTCHESTER COUNTY CLERK 12/09/ :36 PM INDEX NO /2014 NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 12/09/2014

Transcription

1 FILED: WESTCHESTER COUNTY CLERK 12/09/ :36 PM INDEX NO /2014 NYSCEF DOC. NO. 2 RECEIVED NYSCEF: 12/09/2014 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF WESTCHESTER x WILLIAM E. STEMPEL and KATHERINE S. STEMPEL, -against- Plaintiffs, Index No. VERIFIED COMPLAINT JTH DEVELOPMENT, INC., JAMES T. HOWARD, EMILY B. HOWARD, KLAFF S INC. and JOHN DOES (1-10) 9 Defendants x Plaintiffs William B. Stempel and Katherine S. Stempel, through their attorneys, Nesenoff & Miltenberg, LLP, by way of Complaint against Defendants JTH Development, Inc., James T. Howard, Emily B. Howard, Kiaff s, Inc. and John Does, (1-10), says: County. PARTIES, JURISDICTION AND VENUE 1. Plaintiff, William E. Stempel, is a natural person who is a resident of Westchester 2. Plaintiff, Katherine S. Stempel, is a natural person who is a resident of Westchester County. Plaintiffs are husband and wife. 3. Defendant, JTH Development, Inc. ("JTH Development") is on information and belief a corporation formed under the laws of the State of New York with an address of 20 Crescent Avenue, Rye, NY Defendant James T. Howard is a natural person with a principal place of residence of 20 Crescent Avenue, Rye, NY Upon information and belief, he is a shareholder of Defendant JTH Development and involved in its management. 1

2 5. Defendant Emily B. Howard is a natural person with a principal place of residence of 20 Crescent Avenue, Rye, NY Upon information and belief, she is a shareholder of Defendant JTH Development and involved in its management. On information and belief, Defendants James T. Howard and Emily B. Howard are husband and wife. 6. Defendant Klaff s, Inc. ("Klaffs") is a corporation formed under the laws of the State of Connecticut, which is registered to do business in the State of New York. It has a place of business at 341 South Central Ave, Scarsdale, NY Defendants John Does (1-10) are individuals whose identity is currently unknown, who participated in the tortious conduct that is the basis of this action. 8. There is general jurisdiction over the individual Defendants, James T. Howard and Emily B. Howard, because they reside in the State of New York, 9. There is general jurisdiction over Defendant JTH Development, because it was formed under the laws of the State of New York. 10. There is general jurisdiction over Defendant Kiaff s because it has a regular and continuous presence in the State of New York and because it registered to do business in the State of New York. 11. Venue is proper in Westchester County pursuant to CPLR 503(a) because the Plaintiffs reside in said county. FACTS COMMON TO ALL CAUSES OF ACTION 12. On or about May 18, 2013, Plaintiffs entered into a contract (hereinafter the "Contract") with Defendants James T. Howard, Emily B. Howard and JTH Development for the construction of a single-family residence at One Highland Park Place, Rye, New York (the 2

3 "Property"). 13. The Contract was for an aggregate purchase price for the acquisition and construction of the Property in the amount of Two Million Five Hundred Eighty Seven Thousand Dollars ($2,587,000), consisting of an assignment and assumption of an existing purchase contract for the land on which the residence would be constructed in the amount of One Million One Hundred Thousand Dollars ($1,100,000), payment of an assignment fee to Defendants James T. Howard and Emily B. Howard in the amount of One Hundred Ninety Three Thousand Five Hundred Dollars ($193,500) and a construction contract with Defendant JTH Development in the amount of One Million Two Hundred Ninety Three Thousand Five Hundred Dollars ($1,293,500). The assignment fee was purported to be for the assignment of the contract for the sale of the land on which the residence was to be constructed, but in actuality the assignment fee was part of the aggregate purchase price agreed to by Plaintiffs and Defendants James T. Howard, Emily B. Howard and JTH Development for the purchase of the land and construction of the single family home. 14. On April 25, 2013, Defendant James T. Howard informed Plaintiffs of the allocation of the aggregate purchase price of $2,587,000 between the land acquisition, the so-called assignment fee and the construction contract. 15. To date, Plaintiffs have paid Defendants James T. Howard, Emily B. Howard and JTH Development $2,284, (inclusive of $1,100,000 payable to the seller of the land under the purchase contract for the land on which the residence would be constructed, the $193,500 "assignment fee" and $105, in "allowances" under the Contract which were paid by Plaintiffs to third-party vendors and are deducted from the contract sum payable). Subtracting the 3

4 cost of the land from the equation, the total consideration Plaintiffs paid to Defendants James T. Howard, Emily B. Howard and JTH Development is $1,184, Pursuant to the Contract, Defendant JTH Development was required to complete construction within one (1) year, with time being of the essence. 17. Pursuant to the terms of the Contract, in addition to the $193,500 "assignment fee", Plaintiffs were to pay $1,293,500 in installments for the construction of the Property as Defendant JTH Development completed certain stages or benchmarks of construction. These payments were payable pursuant to a schedule that was annexed to the Contract as Exhibit C. 18. Almost immediately after executing the Contract, Plaintiffs discovered that Defendant JTH Development had not yet filed for the necessary paperwork to construct the residence and misrepresented the time frames in which the construction of the residence would commence. In fact, despite agreeing to a "time is of the essence" completion date for the construction of the Property, Defendant JTH Development did not have any of the required permits and was only in the beginning stages of gathering the required information to obtain such permits. 19. Defendant JTH Development repeatedly misrepresented that work was done when that was not the case to receive installment payments that it was not entitled to receive. 20. Defendant JTH Development repeatedly misrepresented that it ordered materials that it did not order to receive installment payments that it was not entitled to receive. 21. Defendant JTH Development repeatedly failed to pay subcontractors and suppliers for work done and items ordered for which Plaintiffs paid it. 22. Defendant JTH Development made the following specific false representations to

5 Plaintiffs: 23. On or about March 26, 2014, Defendant James T. Howard, acting on behalf of Defendant JTH Development, falsely represented that construction was eight weeks behind schedule. 24. On or about May 10, 2014, Defendant James T. Howard, acting on behalf of Defendant JTH Development, falsely represented that construction was ten weeks behind schedule. 25. On or about June 3, 2014, Defendant James T. Howard, acting on behalf of Defendant JTH Development, falsely represented that the central vacuum system, alarm system and sprinkler system were "complete" in order to induce Plaintiffs to release a disbursement to Defendant JTH Development when in fact the installation of such items were not complete and Defendant JTH Development was in arrears to each of the vendors providing such services. 26. Defendant James T. Howard, acting on behalf of Defendant JTH Development, gave repeated false explanations for why construction was behind schedule to conceal the true reason that the project was delayed was because Defendant JTH Development was not paying subcontractors to work with the funds received from Plaintiff under the Contract. 27. As an example, on May 31, 2014, after Plaintiffs inquired why there was no work being done at the house, Defendant James T. Howard responded by falsely claiming that a neighbor called the police to stop work from being done. Plaintiffs confirmed with the Rye and Harrison Police Departments that this claim was false as no police reports were filed in either precinct. 28. On or about June 3, 2014, Defendant James T. Howard, acting on behalf of 5

6 Defendant JTH Development, falsely represented that the exterior of the house was complete to induce Plaintiffs to make a disbursement under the Contract. 29. At the time Defendant James T. Howard made this representation, it was false as the garage doors, exterior siding, front porch and stairs to the front and rear door were all incomplete. 30. Defendant James T. Howard, acting on behalf of Defendant JTH Development, falsely represented that that kitchen cabinets and bathroom vanities were in production (with a scheduled delivery date) when in reality the production was shut down for lack of payments by Defendant JTH Development. 31. Defendant James T. Howard, acting on behalf of Defendant JTH Development, falsely requisitioned for the costs to install an ejector in the basement of the residence when an ejector was already included in the Contract. 32. Defendant James T. Howard, acting on behalf of Defendant JTH Development, sent numerous invoices that were intentionally inflated and attempted to charge Plaintiffs for work plainly included under the Contract. Defendant James T. Howard, d tcl1ng 011 hlhdii of Defendant I Lndant Jill Development, requisitioned for "change orders" for the cost of installing additional water lines for a refrigerator, dishwasher and coffee maker but, despite Plaintiffs timely making such payments for these "change orders", Defendant JTH Development never installed the water lines. 34. Defendant James T. Howard, acting on behalf of Defendant JTH Development, requisitioned for a "change order" for the cost of staining the garage door but, despite Plaintiffs timely making such payments for this "change order", Defendant JTH Development never stained 6

7 the garage door (or even ordered it). 35. Defendant James T. Howard, acting on behalf of Defendant JTH Development, falsely claimed that he was working on connecting the residence to the water and sewer line but did not connect the residence to the water and sewer line (and in fact never filed for permits or even excavated to the water or sewer connection!). 36. On information and belief, Defendant James T. Howard, acting on behalf of Defendant JTH Development, falsely marked-up pricing from third-party subcontractors and suppliers and then charged a 20% general contractor s fee on top of the inflated prices. 37. Defendant James T. Howard, acting on behalf of Defendant JTH Development, falsely claimed that electric/plumbing had already been installed in the laundry room of the residence and sought to charge Plaintiffs for the "cost" of such electric/plumbing work after Plaintiffs corrected a design error in Defendant JTH Development s plans, when no electric or plumbing had been installed at that point in time. 38. Defendant James T. Howard, acting on behalf of Defendant JTI-I 1)evelopment, shut down construction on multiple OCCaSIOnS to coerce Plaintiffs to make additional payments that were not required under the Contract. 39. In the weeks preceding the August 15th termination of the Contract, Defendant James T. Howard, acting on behalf of Defendant JTH Development, ceased all communication with the Plaintiffs except for erratic threatening s demanding additional payments of money not due under the Contract. 40. In the weeks preceding the August 15th termination of the Contract, Defendant James T. Howard, acting on behalf of Defendant JTH Development, shut down all construction at 7

8 the Property and threatened Plaintiffs that construction would only recommence upon payments of additional monies and seeking to modify the terms of the Contract by. "signing another agreement." 41. On August 15, 2014, Plaintiffs elected to terminate the Contract because of Defendants James T. Howard, Emily B. Howard and JTH Development s failure to complete construction in a timely manner as required under the Contract. 42. Pursuant to the express terms of the Contract, upon termination Plaintiffs have the right to complete the construction of the residence and, upon completion, Defendant JTH Development is required to pay the Plaintiffs cost in excess of the remaining balance due under the Contract at the time of termination. 43. At the time Plaintiffs terminated the Contract, $319, of the original contract sum remained undisbursed to Defendant JTH Development. 44. After terminating the Contract, Plaintiffs learned that Defendants James T. Howard, Emily B Howard and JTH Development were in significant arrears to virtually ALL subcontractors and suppliers who provided construction services related to the Property. 45. In fact, Plaintiffs discovered that notwithstanding the "time is of the essence" completion date of May 18, 2014, as of August 15, 2014 Defendants James T. Howard, Emily B. Howard and JTH Development had not even ordered the bathroom vanities (which require a 4-6 week lead time) and construction of the kitchen cabinets by JTH Development s vendor had been shut down for non-payment. 46. After terminating the Contract, Plaintiffs learned that Defendants James T. Howard, Emily B. Howard and JTH Development had not ordered the door hardware from [,] [4]

9 Defendant Klaffs notwithstanding that Plaintiff s provided the complete order to Defendant James T. Howard on May 30, 2014 and Defendant James T. Howard represented that such order had been processed with Defendant Kiaff s. 47. In fact, after terminating the Contract, Plaintiffs learned that Defendant James T. Howard instructed Jody Butler, an employee of Kiaff s, to secretly modify the Plaintiffs door hardware order and replace Plaintiffs order with lower priced alternatives without Plaintiffs consent, in breach of Defendant JT1I Development s obligations under the Contract. 48. After terminating the Contract, Plaintiffs learned that Defendants James T. Howard, Emily B. Howard and JTH Development had failed to order (or pay for) numerous long-lead items that were Defendant JTH Development s obligations under the contract including, without limitation, carpeting for the basement and attic, cabinetry for the laundry room, the wine cellar for the basement, shutters for the exterior of the residence and any landscaping required under the Contract for the Property. 49. After terminating the Contract, Plaintiffs learned that Defendants James T. Howard, on behalf of Defendant JTH Development, instructed each subcontractor, vendor and supplier who provided services for the construction of the Property that Defendant JTH Development would not be making any further payments for past-due invoices (many of which were in significant arrears) and such subcontractor, vendor and supplier should seek payment from Plaintiffs (even for past due invoices) in contravention of the Contract and the Lien Law. 50. In fact, after terminating the Contract, Plaintiffs learned (on information and belief) that Defendant James T. Howard, on behalf of Defendant JTH Development, had instructed numerous subcontractors that their contracts were with Defendant JTH Development and 9

10 demanded that the subcontractors not discuss the terms of their contracts with Plaintiffs, presumably to hide impermissible mark-ups that Defendant JTH Development improperly passed on to Plaintiffs. 51. After terminating the Contract, Defendant James T. Howard pleaded with Plaintiffs attorney to be permitted to continue to work under the Contract, ignoring the many months of threats, extortion and delays caused by Defendant JTI-1 Development s malfeasance. 52. in fact, on August 15, 2014, just hours after Plaintiffs terminated the Contract, in an effort to induce Plaintiffs to rescind the termination notice and continue progress payments to Defendant JTH Development, Defendant James T. 1-Toward, on behalf of Defendant JTH Development, brazenly told Plaintiffs legal counsel that "[c]abinetry is scheduled to be delivered starting Monday [August when Defendant James T. Howard knew that the cabinetry production had been shut down weeks prior due to non-payment to the cabinet vendor by Defendant JTH Development and, even if production were to recommence immediately, the lead-time for construction, painting and delivery was at least 4-6 weeks away. 53 After terminating the Contract, Plaintiffs demanded a full accounting of all monies paid by Defendants James T. Howard, Emily B. Howard and JTH Development in connection with the construction of the Property. To date, Defendants James T. Howard, Emily B. Howard and JTH Development have failed to produce any documentation regarding such accounting records. 54. Plaintiffs have paid hundreds of thousands of dollars in excess of the $319, remaining balance due under the Contract at the time of termination to complete construction of the residence on the Property, in part due to the significant arrears to subcontractors and suppliers that Plaintiff had to assume to complete construction of the Property under the Contract. 10

11 55. Plaintiffs estimate that completing the work contracted for under the Contract will cost an amount not less than $500,000, with Defendants James T. Howard, Emily B. Howard and JTH Development liable to Plaintiffs for the difference between such sum and the $319, remaining balance due under the Contract. FIRST CAUSE OF ACTION (Diversion of Construction Trust Funds under Article 3A, 70 et. seq. of the New York Lien Law Against JTH Development, James T. Howard and Emily B. Howard) the Contract. 56. Plaintiffs repeat each of the above paragraphs as if stated herein. 57. Defendant, JTH Development performed construction services in connection with 58. Pursuant to the Contract, Plaintiffs gave Defendant JTH Development payments to be held as construction trust funds as defined pursuant to Lien Law Article 3A, 70 in order to pay for various construction and improvements required under the Contract. 59. The payments constituted an individual trust for the job or project as defined by Lien Law Article 3A. 60. Defendants accepted and received the trust funds as construction trust funds as defined pursuant to Lien Law Article 3A. Their receipt of the funds is an acknowledgement that such monies were intended for the sole purpose of the payment of the work, labor and services performed and materials furnished in connection with the construction and improvement pursuant to the Contract. 61. In breach of their fiduciary duties to Plaintiffs and others, Defendants James T. Howard, Emily B. Howard and JTH Development have, upon information and belief, failed, neglected and/or refused to hold these monies in trust for the benefit of various subcontractors and 11

12 suppliers performing work, labor and services in connection with the construction under the Contract. 62. In further breach of their fiduciary duties to Plaintiffs and others, Defendants James T. Howard, Emily B. Howard and JTH Development have, upon information and belief, converted, diverted, and misapplied the payments for impermissible purposes beyond the scope of Lien Law Defendants James T. Howard, Emily B. Howard and JTH Development have therefore violated the terms of the trust provisions and the fiduciary relationship as set forth in Article 3-A of the Lien Law of the State of New York and are liable to the Plaintiffs for payments made to Defendants James T. Howard, Emily B. Howard and JTH Development that should have been paid, but were not, by Defendants James T. Howard, Emily B. Howard and JTI-I Development to various subcontractors and suppliers. 64. More than one year has not elapsed since the completion and acceptance of the construction and improvements on the Property and this action is maintainable under the provisions of Article 3A of Lien Law As a direct and proximate cause of the acts and omissions set forth above, Plaintiffs have suffered and will continue to suffer damages as a consequence of Defendants James T. Howard, Emily B. Howard and JTH Development s breaches of their contractual and fiduciary duties and their obligations pursuant to the Lien Law. SECOND CAUSE OF ACTION (Breach of Contract Against JTH Development) 66. Plaintiffs repeat each of the above paragraphs as if stated herein. 67. The Contract is a binding contract. 12

13 68. Plaintiff fully performed under the Contract. 69. Defendant JTJ1 Development breached the Contract by, inter a/ia, failing to complete the construction within the required time. 70. Defendant JTH Development breached the implied covenant of good faith and fair dealings contained in all contracts by, inter a/ia, falsely misrepresenting when construction would be completed and the reason why it was not being completed in the required time. 71. As a result of same, Plaintiffs suffered damages, inter a/ia, (a) the cost of completing construction in excess of the $319, remaining balance due under the Contract at the time of termination, (b) rental payments for the time that Plaintiffs could not reside in the residence as a result of Defendant JTH Development s delay in completing construction, (c) interest expenses for the time that Plaintiffs could not reside in the residence as a result of Defendant JTH Development s delay in completing construction, (d) insurance costs for the time that Plaintiffs could not reside in the residence as a result of Defendant JTFJ Development s delay in completing construction, and (e) property taxes for the time that Plaintiffs could not reside in the residence as a result of Defendant JTH Development s delay in completing construction. THIRD CAUSE OF ACTION (Fraud Against JTH Development, James T. Howard and Emily B. Howard) 72. Plaintiffs repeat each of the above paragraphs as if stated herein. 73. Defendants made the false representations previously stated in paragraphs Defendants were aware that these representations were false when made. 75. Plaintiffs reasonably relied on these false representations in making installment payments under the Contract. 76. As a result of same, Plaintiffs suffered damages. 13

14 FOURTH CAUSE OF ACTION (Aiding and Abetting in a Fraud Against Kiaff s) 77. Plaintiffs repeat each of the above paragraphs as if stated herein. 78. Jody Butler, an employee of Defendant Kiaff s, falsely informed Plaintiffs that Defendant JTH Development ordered door hardware for Plaintiffs under the Contract in an effort to induce Plaintiffs to make an installment payment to JTH Development. 79. On information and belief, Jody Butler knew this statement was false when made but did so at the behest of Defendants James T. Howard and JTH Development with the purpose of assisting in its fraud. 80. Plaintiffs reasonably relied on the false statements to their detriment. 81. Defendant Kiaff s is responsible for its employee s actions under the doctrine of respondeal superior. FIFTH CAUSE OF ACTION (Breach of Fiduciary Duty Against JTH Development, James T. Howard and Emily B. Howard) 82. Plaintiffs repeat each of the above paragraphs as if stated herein. 83. As trustee of construction trust funds pursuant to the Lien Law, Defendants James T. Howard, Emily B. Howard and JTH Development owed a fiduciary duty to Plaintiffs and the subcontractors and suppliers. 84. Separate and apart from its obligations under the Lien Law, Defendants James T. Howard, Emily B. Howard and JTH Development had an independent fiduciary duty to Plaintiffs to use the funds that Plaintiffs entrusted to them for the purpose for which they were intended, specifically, the payment of various subcontractors and suppliers. 85. In connection with its fiduciary obligations, Defendants James T. Howard, Emily 14

15 B. Howard and JTH Development were obligated to pay the subcontractors and suppliers with money paid to it by Plaintiffs, and were required to exercise due care, diligence and skill in management of the assets entrusted to them. 86 Defendants James T Howard, Emily B Howard and JTH Development, in breach of their fiduciary obligations, used the monies entrusted to them for other improper purposes and disbursements to non-trust fund beneficiaries. 87. Defendants James T. Howard, Emily B. Howard and JTH Development s actions, as detailed above, are in deliberate violation of the Lien Law, were taken in bad faith, and constitute a breach of the requisite due care, diligence and management of the trust fund assets required of fiduciaries such as Defendants James T. Howard, Emily B. Howard and JTH Development. 88. As a direct and proximate cause of the acts and omissions set forth above, Plaintiffs have suffered and will continue to suffer damages as a consequence of Defendants James T. l-lov ard. Emily B. Howard and.jti I Developments breaches of their contractual and fiduciary duties, and their obligations pursuant to the Lien Law. SIXTH CAUSE OF ACTION (Piercing the Corporate Veil Against JTH Development, James T Howard and Emily B. Howard) 89. Plaintiffs repeat each of the above paragraphs as if stated herein. 90. Defendant James T. Howard requested that money due under the Contract be paid to Defendants James T. Howard, Emily B. Howard personally. 91. Upon information and belief, Defendants James T. Howard and Emily B. Howard failed to observe corporate formalities for JTH Development, undercapitalized JTH Development, 15

16 and carried on business in their personal capacity for purely personal rather than corporate ends. 92. Upon information and belief, Defendants James T. Howard and Emily B. Howard dominated and controlled JTH Development so as to overbear any mind, will, or existence of its own. 93. Upon information and belief, Defendants James T. Howard and Emily B. Howard used their domination and control to commit fraud wrongs, and/or other dishonest or unjust acts against Plaintiffs. 94. Upon information and belief, the conduct of Defendants James T. Howard and Emily B. Howard caused Plaintiffs losses. 95. By virtue of the foregoing, Defendants JTH Development, James T. Howard and Emily B Howard are liable, jointly and severally, to Plaintiffs SEVENTH CAUSE OF ACTION (Unjust Enrichment Against James T Howard and Emily B Howard) 96. Plaintiffs repeat each of the above paragraphs as if stated herein. 97. Plaintiffs paid money due to J FH Development under the Contract to Defendants James T. Howard and Emily B. Howard personally, at their request. 98. As such, Defendants James T. Howard and Emily B. Howard were enriched at Plaintiffs expense. 99. In light of the aforementioned conduct of Defendants James T. Howard and Emily B. Howard, it is against equity and good conscience to permit them to retain what they received. ncfh CAUSE OF ACTION (Constructive Trust Against I I I-I t)tit1opnitii1, James I Howard d and Emily B Howard) 100. Plaintiffs repeat each of the above paragraphs as if stated herein. 16

17 101. Defendants JTH Development, James T. Howard and Emily B. Howard are in position of fiduciaries with regard to funds received from Plaintiffs 102 Defendants JTH Development, James T Howard and Emily B Howard obtained funds from Plaintiffs by fraudulent means 103. As a result of same, Plaintiffs are entitled to have the funds treated as trust funds held by Defendants JTH Development, James T. Howard and Emily B. Howard. 104 Defendants JTH Development, James T. Howard and Emily B Howard would be inequitably enriched if they were allowed to keep the proceeds of any assets derived therefrom. 105 By reason of the circumstances set forth above, Plaintiffs are entitled to a finding that the funds be held in trust for their benefit PRAYER FOR RELIEF WHEREFORE, Plaintiffs William E Stempel and Katherine S Stempel demand judgment against as follows; i. On the FIRST CAUSE OF ACTION, compensatory and punitive damages, in an amount to be determined at trial but in no event less than $500,000, along with pre-judgment interest, attorneys fees, costs and disbursements, and such other relief which the Court deems just and proper, and; ii. On the SECOND CAUSE OF ACTION, compensatory and punitive damages, in an amount to be determined at trial but in no event less than $500,000, along with pre-judgment interest, attorneys fees, costs and disbursements, and such other relief which the Court deems just and proper, and, iii. On the THIRD CAUSE OF ACTION, compensatory and punitive damages, in an 17

18 amount to be determined at trial but in no event less than $500,000, along with pre-judgment interest, attorneys fees, costs and disbursements, and such other relief which the Court deems just and proper, and; iv. On the FOURTH CAUSE OF ACTION, compensatory and punitive damages, in an amount to be determined at trial but in no event less than $500,000, along with pre-judgment interest, attorneys fees, costs and disbursements, and such other relief which the Court deems just and proper, and; V. On the FIFTH CAUSE OF ACTION, compensatory and punitive damages, in an amount to be determined at trial but in no event less than $500,000, along with pre-judgment interest, attorneys fees, costs and disbursements, and such other relief which the Court deems just and proper, and; vi. On the SIXTH CAUSE OF ACTION, compensatory and punitive damages, in an amount to be determined at trial but in no event less than $500,000, along with pre-judgment interest, attorneys fees, costs and disbursements, and such other relief which the Court deems just and proper, and; vii. On the SEVENTH CAUSE OF ACTION, compensatory and punitive damages, in an amount to be determined at trial but in no event less than $500,000, along with pre-judgment interest, attorneys fees, costs and disbursements, and such other relief which the Court deems just and proper, and; 18

19 viii. On the EIGHTH CAUSE OF ACTION, for constructive trust on the proceeds of any funds that the Plaintiffs provided to the Defendants. Dated: New York, New York December 4, 2014 NES FF & MIL ENBE1.LLP Attor PIaznti s Andrew T. M.iltenbe 363 Seventh Avenue, 5th Floor New York, NY (212)

20 VERIFICATION I, William E. Stempel, am a Plaintiff in the within action, and state that I have read the foregoing Complaint and know the contents thereof. The contents are true to my knowledge as to those matters stated to be true, except as to the matters therein stated to be alleged upon information and belief, which I believe to be true. Dated: New York, NY December 2014 SwoIn before me, this I day of December, William E. Stempel MARIA L. CARUSO Notary Public, State of New York No. 01 CA Qu&ified in Queens County Commission Expires Jan Notary Public

21