FILED: NEW YORK COUNTY CLERK 12/15/ :17 PM INDEX NO /2015 NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 12/15/2015

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1 FILED: NEW YORK COUNTY CLERK 12/15/ :17 PM INDEX NO /2015 NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 12/15/2015 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK WIMBLEDON FINANCING MASTER FUND, LTD., -against- Plaintiff, Index No /2015 Part 54 Commercial Division WESTON CAPITAL MANAGEMENT LLC, WESTON CAPITAL ASSET MANAGEMENT LLC, PBC- WESTON HOLDINGS, LLC, ALBERT HALLAC, JEFFREY HALLAC, KEITH WELLNER, JASON GALANIS, JOSEPH BIANCO, GARY HIRST, EUGENE SCHER, MARSHALL MANLEY, ARIE JAN VAN ROON, LEONARD DE WAAL, ARIE BOS, KEITH LASLOP, MICHAEL KANTOR, JACK DOUECK, KIA JAM, PAUL PARMAR, ALEX WEINGARTEN, DAVID BERGSTEIN, DPRE ENTERPRISES LLC, GION FUNDING SETTLEMENTS INC., KAMBE ASSET MANAGEMENT GROUP INC., GRAYBOX LLC, SWARTZ IP SERVICES, INC., and JOHN DOE(S) 1-10, Defendants. MEMORANDUM OF LAW OPPOSITION TO PLAINTIFF S MOTION TO EXTEND TIME TO FILE COMPLAINT AND IN FURTHER SUPPORT OF MANLEY S MOTION TO DISMISS PURSUANT TO CPLR 3012(b) Paul H. Aloe David N. Saponara KUDMAN TRACHTEN ALOE LLP 350 Fifth Avenue, 68 th Floor New York, New York Tel: (212) Attorneys for Defendant Marshall Manley

2 TABLE OF CONTENTS TABLE OF CONTENTS... i TABLE OF AUTHORITIES... ii PRELIMINARY STATEMENT... 1 STATEMENT OF FACTS... 2 ARGUMENT... 3 I. Manley Properly Served a Demand for Service of the Complaint... 5 A. The Cases on Which Plaintiff Relies Are Distinguishable... 6 B. Manley Was Permitted to Demand a Complaint Before Service Was Complete... 8 II. The Court Should Not Extend Plaintiff s Time to Serve a Complaint A. Plaintiffs Have Not Demonstrated a Reasonable Excuse for the Delay B. Prejudice is Not a Consideration under a CPLR 3012(b) Motion to Dismiss C. Plaintiff s Counsel s Affirmation of Merit Is Insufficient to Establish a Potentially Meritorious Claim CONCLUSION i

3 TABLE OF AUTHORITIES Cases Alvarado v. New York City Hous. Auth., 192 A.D.2d 461, 596 N.Y.S.2d 410 (1st Dep t 1993)... 3 AQ Asset Mgmt., LLC v. Levine, 119 A.D.3d 457, 990 N.Y.S.2d 465 (1st Dep t 2014) Dunefsky v. Petco Animal Supplies Inc., 303 A.D.2d 620, 756 N.Y.S.2d 771 (2d Dep t 2003) Haegeland v. Massa, 75 A.D.2d 864, 864, 427 N.Y.S.2d 887 (2d Dep t 1980) Helfand v. Cohen, 110 A.D.2d 751, 487 N.Y.S.2d 836 (2d Dep t 1985)... 9 Howard B. Spivak Architect, P.C. v. Zilberman, 59 A.D.3d 343, 874 N.Y.S.2d 412 (1st Dep t 2009)... 5, 7 Kel Mgmt. Corp. v. Rogers & Wells, 64 N.Y.2d 904, 488 N.Y.S.2d 156 (1985)... 13, 15, 16 Lancaster v. Kindor, 98 A.D.2d N.Y.S.2d 573 (1st Dep t 1984), aff'd, 65 N.Y.2d 804, 493 N.Y.S.2d 127 (1985)... 8, 9 Marion v. Notre Dame Acad. High Sch., 133 A.D.2d 614, 519 N.Y.S.2d 721 (2d Dep t 1987) Micro-Spy, Inc. v. Small, 9 A.D.3d 122, 778 N.Y.S.2d 86 (2d Dep t 2004)... 5, 6, 10, 11 Nolan v. Lechner, 60 A.D.3d 473, 874 N.Y.S.2d 107 (1st Dep t 2009) Oversby v. Linde Div. of Union Carbide Corp., 121 A.D.2d 373, 503 N.Y.S.2d 85 (2d Dep t 1986) Reporter Co. v. Tomicki, 60 A.D.2d 947, 401 N.Y.S.2d 322 (3d Dep t 1978)... 9 ii

4 Roberts v. Northington, 128 A.D.3d 1487, 8 N.Y.S.3d 814 (4th Dep t 2015) Ryan v. High Rock Dev., LLC, 124 A.D.3d 751, 2 N.Y.S.3d 519 (2d Dep t 2015)... 5, 6, 7 Sinder v. 345 Cypress Realty Corp., 34 A.D.2d 777, 311 N.Y.S.2d 127 (2d Dep t 1970) Stan Winston Creatures, Inc. v. Toys R Us, Inc., 314 F. Supp. 2d 177 (S.D.N.Y. 2003) Whitaker v. Am. Telecasting, Inc., 261 F.3d 196 (2d Cir. 2001)... 12, 15 Statutes 28 U.S.C CPLR CPLR CPLR Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 883 N.Y.S.2d 147 (2009) Other Authorities 1 N.Y. ADV. COMM. REP. 60 (1957) Jack B. Weinstein, Proposed Revision of New York Civil Practice, 60 COLUM. L. REV. 50, 73 (1960)... 11, 13 Treatises 5 WEINSTEIN, KORN & MILLER, NEW YORK CIVIL PRACTICE: CPLR iii

5 PRELIMINARY STATEMENT Defendant Marshall Manley ( Manley ) respectfully submits this memorandum of law in opposition to plaintiff s cross-motion seeking an extension of time to serve a complaint under CPLR 3012(d) and in further support of his motion seeking dismissal of this action under CPLR 3012(b) based on plaintiff s failure to serve a complaint within twenty days after service of his demand. Plaintiff s argument that Manley s demand for a complaint is a nullity because he made it before substitute service on him was complete under CPLR 308(2) is plainly wrong. It is delivery of the summons not the filing of proof of service that confers jurisdiction on the court and enables a defendant to appear, demand a complaint, or answer, as the case may be. The completion of substitute service, on the other hand, merely starts the countdown to the last day by which a defendant must appear in the action or answer the complaint in order to avoid a default. Thus, Manley s demand for a complaint on November 3, 2015, was valid and required plaintiff to serve a complaint by November 23, Plaintiff did not timely serve a complaint in response to Manley s demand. Under precedent from the Court of Appeals, to avoid dismissal under CPLR 3012(b), plaintiff must demonstrate a reasonable excuse for the delay and submit an affidavit of merit setting forth a potentially meritorious claim against Manley. Plaintiff s proffered excuse is that it is still investigating the relevant facts and incorporating its findings into the complaint. This is no excuse at all. Plaintiff commenced this case nearly two months ago, and the relevant facts date back to as early as If plaintiff was not prepared to plead its claims against all defendants named in the summons with notice, then it should not have commenced the case until it was ready.

6 Even if plaintiff had a reasonable excuse for the delay, it failed to submit an affidavit of merit from an individual with personal knowledge. Instead, plaintiff submitted an affirmation from its counsel that contains nothing but hearsay statements. The affirmation does not even identify the specific sources of the information used to support the statements. In any event, even if the Court credits the statements of plaintiff s counsel, those statements do not contain evidentiary facts sufficient to establish a prima facie case against Manley under any of plaintiff s theories. Accordingly, for the reasons set forth below and in the accompanying affirmation of Paul H. Aloe, Esq., Manley respectfully requests that the Court enter an order granting Manley s motion to dismiss this action pursuant to CPLR 3012(b), denying plaintiff s cross-motion for an extension of time to serve the complaint pursuant to CPLR 3012(d), and granting such other and further relief as the Court deems just and proper. STATEMENT OF FACTS Plaintiff commenced this action on October 16, 2015, by filing a summons with notice. NYSCEF No. 1. Plaintiff purportedly served Manley with a copy of the summons with notice on October 28, 2015, by leaving a copy of the summons with notice with Manley s housekeeper at his home in Florida and mailing a copy to Manley s home by first class mail that same day. NYSCEF No. 13. Manley served a demand for the complaint on November 3, NYSCEF No. 2. Under CPLR 3012(b), [s]ervice of the complaint shall be made within twenty days after service of the demand. Thus, plaintiff was required to serve the complaint on or before November 23, However, plaintiff did not serve the complaint by November 23, On November 24, 2015, Manley brought this motion to dismiss the action under CPLR 3012(b) based on plaintiff s failure to timely serve a complaint in response to his demand. See NYSCEF Nos Plaintiff responded with an order to show cause seeking, among other 2

7 things, an extension of plaintiff s to file a complaint to and including December 30, See NYSCEF Nos Manley opposed the order to show cause on the ground that it was an attempt by plaintiff to subvert Manley s motion to dismiss and was unnecessary because there was no urgency or need for preliminary relief. See NYSCEF No On December 15, 2015, the Court denied plaintiff s order to show cause. NYSCEF No. 66. On December 9, 2015, plaintiff opposed this motion and cross-moved for an extension of time to serve a complaint under CPLR 3012(d), arguing that Manley s demand for a complaint was a nullity and, in the alternative, that plaintiff has a reasonable excuse for the delay and a potentially meritorious claim against Manley. See NYSCEF Nos ARGUMENT Under CPLR 3012(b), 1 [t]he court upon motion may dismiss the action if service of the complaint is not made as provided in this subdivision. CPLR 3012(b); see Alvarado v. New York City Hous. Auth., 192 A.D.2d 461, , 596 N.Y.S.2d 410, 410 (1st Dep t 1993) ( When a summons is served without a complaint and the defendant demands a complaint, the plaintiff has 20 days to serve it or face dismissal of the action. ). Manley served his demand for a complaint on plaintiff on November 3, Thus, under CPLR 3012(b), plaintiff was required to serve a complaint no later than November 23, CPLR 3012(b) provides as follows: If the complaint is not served with the summons, the defendant may serve a written demand for the complaint within the time provided in subdivision (a) of rule 320 for an appearance. Service of the complaint shall be made within twenty days after service of the demand. Service of the demand shall extend the time to appear until twenty days after service of the complaint. If no demand is made, the complaint shall be served within twenty days after service of the notice of appearance. The court upon motion may dismiss the action if service of the complaint is not made as provided in this subdivision. A demand or motion under this subdivision does not of itself constitute an appearance in the action. 3

8 Plaintiff contends that, since it served Manley by substitute service under CPLR 308(2), Manley could not demand a complaint until service was complete. Specifically, plaintiff argues that Manley could not demand a complaint until November 27, 2015, which is ten days after plaintiff filed its proof of service. Attempting to support this position, plaintiff relies on inapposite cases involving distinguishable situations where the defendants demanded complaints before any service had occurred. Those cases are not on point and do not invalidate Manley s demand. The Court obtains jurisdiction upon delivery of the summons here, by leaving the summons with notice with Manley s housekeeper and mailing a copy by first class mail. Plaintiff s filing of proof of service merely set the outside date by which Manley was required to appear and demand a complaint. Thus, neither the CPLR nor the applicable case law prevented Manley from demanding a complaint before the completion of service. For this reason, Manley s demand was valid, and plaintiff failed to time serve a complaint in response to Manley s demand. The Court of Appeals has held on more than one occasion that the only way a plaintiff can avoid dismissal under CPLR 3012(b) for failing to timely serve a complaint under is by demonstrating a reasonable excuse for the delay and submitting an affidavit of merit setting forth a meritorious cause of action. Plaintiff has not satisfied either requirement. Plaintiff has had more than sufficient time to gather facts and prepare its complaint. That it is still conducting its investigation does not justify its failure to timely respond to Manley s demand. Moreover, instead of submitting an affidavit of merit from an individual with firsthand knowledge, plaintiff submitted an affirmation from its counsel. The affirmation contains nothing more than hearsay, and its allegations do not establish a prima facie case against Manley under any of plaintiff s proffered theories. 4

9 For these reasons, Manley respectfully submits that the Court must grant his motion to dismiss under CPLR 3012(b) and deny plaintiff s cross-motion for an extension of time to file a complaint under CPLR 3012(d). I. Manley Properly Served a Demand for Service of the Complaint Plaintiffs mistakenly rely on Ryan v. High Rock Dev., LLC, 124 A.D.3d 751, 2 N.Y.S.3d 519 (2d Dep t 2015), Howard B. Spivak Architect, P.C. v. Zilberman, 59 A.D.3d 343, 874 N.Y.S.2d 412 (1st Dep t 2009), and Micro-Spy, Inc. v. Small, 9 A.D.3d 122, 778 N.Y.S.2d 86 (2d Dep t 2004) as support for its argument that Manley s demand for a complaint was a nullity. Specifically, plaintiff argues that, because it effected substitute service on Manley under CPLR 308(2) by leaving a copy of the summons with notice with Manley s housekeeper at his home in Florida and mailing a copy by first class mail, Manley was not officially served until November 27, 2015 i.e., ten days after plaintiff filed its affidavit of service. Plaintiff s argument is contrary to logic, the relevant provisions of the CPLR, and the cases on which plaintiff attempts to rely on in support of its position. A defendant is permitted to appear, demand a complaint, or answer, as the case may be, as soon as the plaintiff properly effects service on the defendant. In the case of substitute service under CPLR 308(2), service is first effected when the summons is left with a person of suitable age and discretion and mailed to the defendant s residence by first class mail. The filing of the affidavit of service is not a jurisdictional requirement and exists only to set the outer limit of a defendant s time to answer. In other words, the completion of substitute service does not trigger a defendant s ability to answer it merely starts the countdown to the last day by which the defendant must appear or answer to avoid defaulting. 5

10 A. The Cases on Which Plaintiff Relies Are Distinguishable In Micro-Spy, the plaintiff commenced the action by filing a summons with notice. Micro- Spy, 9 A.D.3d at 123. Approximately three months later before she was served with the summons with notice the defendant served a notice of appearance and demand for a complaint. Id. The plaintiff served the defendant with the summons with notice a few days later and, nearly one month after the defendant s demand, served the defendant with the verified complaint. Id. The defendant responded with a motion to dismiss under CPLR 3012(b), claiming that the plaintiff s service of the verified complaint untimely because it was not made within twenty days after her demand. Id. The plaintiff opposed the defendant s motion on the ground that the demand was premature because the defendant was never served with the summons with notice before it appeared and demanded a complaint and cross-moved for an extension of time to serve the complaint under CPLR 3012(d). Id. at The Supreme Court granted the defendants motion and denied the plaintiff s cross-motion. Id. at 124. On appeal, the Second Department determined that CPLR 3012(b) must be read in conjunction with CPLR 320(a), which provides that [a]n appearance shall be made within twenty days after service of the summons. Based on this statement in CPLR 320(a), the Second Department determined that the defendant's demand for a complaint pursuant to CPLR 3012(b) prior to service of the summons was premature and did not invoke the time limitations of CPLR 3012(b). Id. at 126. The facts of Ryan closely follow the facts of Micro-Spy. The plaintiffs commenced the action by filing a summons with notice, but they never served the summons with notice on the defendants. Ryan, 124 A.D.3d at 751. Nevertheless, defendants filed a notice of appearance and demand for a complaint. Id. One month later, the defendants moved to dismiss under CPLR 6

11 3012(b) based on the plaintiffs failure to timely serve the complaint. Citing Micro-Spy, the Second Department reversed the trial court s order dismissing the complaint and held that the defendants pre-service notice of appearance and demand for a complaint was a nullity and the 20 day period within which the complaint had to be served pursuant to CPLR 3012(b) had not begun to run. Id. at 752. The facts of Howard B. Spivak Architect, P.C., differ slightly from Micro-Spy and Ryan, but they are still distinguishable from the facts of this case. In Howard B. Spivak Architect, P.C., the plaintiff commenced the action by filing a summons with notice and, one week later, mailed a courtesy copy of the summons with notice to the defendants counsel. Howard B. Spivak Architect, P.C., 59 A.D.3d at 343. A few days later, the defendants served a notice of appearance. Id. The defendants were not formally served with the summons with notice until more than three weeks later. Id. One day after the defendants move to dismiss under CPLR 3012(b), the plaintiffs served the complaint on defendants. Id. The plaintiffs also opposed the motion and cross-moved for an extension of time to serve the complaint. Id. The trial court granted the motion to dismiss and denied the cross-motion. Id. at On appeal, the First Department recited the portion of CPLR 320(a) relied upon by the Second Department in Micro-Spy and Ryan and determined that, [b]ecause defendants did not answer or serve a notice of appearance after they were served with the summons with notice, plaintiff's time to serve them with the complaint did not begin to run. Id. at 344. The First Department also rebuffed the notion that the courtesy copy sent to the defendants counsel constituted proper service because there was no evidence that the defendants designated their attorney as their agent under CPLR 318. Id. 7

12 To summarize, Micro-Spy, Ryan, and Howard B. Spivak Architect, P.C. all involved situations in which the defendant appeared and demanded the complaint before being served with the summons with notice. For this reason, not one of these cases is directly on point with the facts of this case, where Manley demanded the complaint after plaintiff left a copy of the summons with notice with Manley s housekeeper in Florida and sent a copy to his home by first class mail, but before plaintiff filed its affidavit of service. This distinction is critically important, because the propriety of service informs not just the defendant s time to appear or answer, but also the court s jurisdiction over the case. B. Manley Was Permitted to Demand a Complaint Before Service Was Complete Plaintiff is essentially arguing that, where substitute service is effected under CPLR 308(2), a defendant is required to wait until ten days after a plaintiff files its affidavit of service before it is permitted to appear in the action, demand a complaint, or answer the complaint, as the case may be. Indeed, under plaintiff s worldview, any action taken by a defendant before service is complete is a nullity. This means that, if a plaintiff serves a defendant with a summons and complaint by substitute service, the defendant could not validly serve an answer until ten days after the plaintiff filed its proof of service. Neither the CPLR nor the case law interpreting its relevant provisions support plaintiff s bizarre position. In fact, appellate authority is directly to the contrary, holding that the filing of the affidavit of service is merely a procedural step in the process, one that does not affect the court s jurisdiction. In Lancaster v. Kindor, 98 A.D.2d 300, 306, 471 N.Y.S.2d 573, (1st Dep t 1984), aff'd, 65 N.Y.2d 804, 493 N.Y.S.2d 127 (1985), the First Department stated that a plaintiff s [d]elay in filing proof of service under CPLR 308 is merely a procedural irregularity, not jurisdictional, and may be corrected nunc pro tunc by the court. Lancaster, 98 A.D.2d at 306. The 8

13 First Department also expressly stated that [t]he action is commenced with the delivery of a summons, and cannot thereafter be defeated simply by reason of a belated filing of proof of service. Id. Moreover, the purpose of requiring filing of proof of service, along with the ten-day grace period, pertains solely to the time within which the defendant must answer, and does not relate to the jurisdiction acquired by service of the summons. Id. Thus, this Court obtained jurisdiction upon the act of service of the summons with notice on Manley i.e., when plaintiff s process server left the summons with notice with Manley s housekeeper and mailed a copy to his residence by first class mail. Nothing else including the filing of proof of service within twenty days was required to confer jurisdiction. In fact, had plaintiff failed to timely file its proof of service, the Court s jurisdiction would have been unaffected. See Reporter Co. v. Tomicki, 60 A.D.2d 947, 947, 401 N.Y.S.2d 322, 323 (3d Dep t 1978) ( The purpose of requiring the filing of proof of service pertains to the time within which the defendant must answer and does not relate to the jurisdiction acquired by the court upon the service of the summons. ). This reality is further demonstrated by the case law. In Helfand v. Cohen, 110 A.D.2d 751, 487 N.Y.S.2d 836 (2d Dep t 1985), the Second Department held that the trial court had jurisdiction to hear a motion for a preliminary injunction where the plaintiff s substitute service on the defendants was not yet complete as of the return date of the motion, because [t]he purpose of requiring filing of proof of service, along with the 10-day grace period, pertains solely to the time within which a defendant must answer, and does not relate to the jurisdiction acquired by service of the summons. Helfand, 110 A.D.2d at If a court has sufficient jurisdiction to entertain a motion seeking a preliminary injunction before the completion of service, then a defendant s actions taken before the completion of service necessarily cannot be deemed a nullity. If they were, then the plaintiff in Helfand would have been 9

14 able to proceed with its motion unimpeded, as any attempt by the defendants to oppose the motion before the completion of service would have been a nullity. This is only one of a number of possible examples of the absurd results that would ensue if plaintiff s position were correct. The ten-day grace period exists for a defendant s benefit. However, there is nothing in the CPLR or the relevant case law that prohibits a properly served defendant from foregoing the grace period and appearing in the action before the expiration of its time to do so. Indeed, since the time for a defendant who has been served with a summons and complaint to answer, and the time for a defendant who has been served with a summons with notice to appear or demand a complaint, are governed by the same provision of CPLR 320, the necessary corollary of plaintiff s argument is that a defendant could not serve an answer until ten days after the affidavit of service is filed. But not only is a such a defendant allowed to answer before the affidavit of service has been filed, defendants have been held in default even though the affidavit of service was only filed on the day that the default motion was made. See Haegeland v. Massa, 75 A.D.2d 864, 864, 427 N.Y.S.2d 887, 888 (2d Dep t 1980) (holding that the trial court improperly failed to enter default judgment where the plaintiff filed proof of service on the same day the default judgment was entered because the plaintiff's delay in filing proof of service was a mere procedural irregularity to be corrected by an order nunc pro tunc). Plaintiff s argument to the contrary turns CPLR 3012(b) on its head. As explained in detail in Micro-Spy, the time frame for a defendant to appear in the action or demand a complaint was added by Chapter 528 of the Laws of 1978 at the suggestion of the Advisory Committee on Civil Practice Law and Rules. See Micro-Spy, 9 A.D.3d at 125. The Committee had considered removing the summons with notice option for a plaintiff because it was long felt that any lawyer, before starting his action, should be sufficiently familiar with it to be able to prepare his complaint. Jack 10

15 B. Weinstein, Proposed Revision of New York Civil Practice, 60 COLUM. L. REV. 50, 73 (1960); see also 5 WEINSTEIN, KORN & MILLER, NEW YORK CIVIL PRACTICE: CPLR The Committee felt, however, that there were certain emergency situations where a summons might have to be served without the complaint: In emergencies the use of the summons without a complaint remains a useful device. An attorney may be away from his office when he learns of the defendant s temporary presence in the jurisdiction. The time consumed in preparing a complaint might make the difference between using or losing an opportunity to obtain personal jurisdiction of a nonresident. As long as we adhere for better or worse to the doctrine of transient jurisdiction, we might as well enable the lawyer to use it. To write out a summons in longhand takes only minutes even if it contains a 305(b) notice; not so to prepare even a simple emergency complaint. Moreover, articulating the grievances in a pleading often embitters the atmosphere and dims the hope for a settlement. The service of a summons without a complaint avoids these undesirable side effects; yet it evidences the claimant s determination to press his claim N.Y. ADV. COMM. REP. 60 (1957). Thus, as the Second Department pointed out in Micro-Spy, the use of a summons with notice should be confined to those situations where there is insufficient time to draft a complaint. However, if a defendant was permitted to demand a complaint before service of the summons, the purpose of the summons with notice would be vitiated. Micro-Spy, 9 A.D.3d at 126 (emphasis in original). That same logic has no application where a defendant has been served under CPLR 308(2). Service under CPLR 308(2) is service nonetheless. CPLR 308(2) says that service is not complete until ten days after the affidavit is filed, but it does not say that service is not made at all. While a defendant served with a summons with notice might choose to wait until the last possible day to appear a demand or claim, it need not do so. For example, where, as here, the summons with notice contains serious charges of fraud, breach of fiduciary duty, and violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C et seq. ( RICO ), the defendant is 11

16 entitled to know those charges in detail. Moreover, since the defendant s receipt of a summons with notice can start the clock for removal to federal court running, see 28 U.S.C. 1446(b); Whitaker v. Am. Telecasting, Inc., 261 F.3d 196, (2d Cir. 2001) (holding that summons with notice constitutes initial pleading for the purposes of removal under 28 U.S.C. 1446), a defendant is entitled to serve his demand promptly and receive the complaint before the thirty-day deadline for removal. Nothing in CPLR 320(a) or 3012(b) is designed to allow a plaintiff to gather the essential facts for his or her complaint after the action is commenced. As noted above, the plaintiff s counsel should have had those facts before commencing the action. Here, the action was commenced on October 17, 2015, and plaintiff did not have to serve the complaint until November 23, That is more than sufficient time for plaintiff s counsel to draft the complaint. Thus, Manley s ability to demand a complaint was not contingent on, or tied to, plaintiff s completion of service. Manley s could and indeed did properly demand a complaint at any point following delivery of the summons with notice in accordance with CPLR 308(2). In sum, Manley s demand for a complaint was valid, making plaintiff s complaint due by November 23, Since plaintiff did not timely serve a complaint in response to Manley s demand, the Court must dismiss this action under CPLR 3012(b). II. The Court Should Not Extend Plaintiff s Time to Serve a Complaint As demonstrated above, plaintiff failed to timely serve a complaint in response to Manley s properly served demand. Plaintiff now faces Manley s motion to dismiss under CPLR 3012(b). A party who has commenced an action by service of a summons without complaint and fails to serve a complaint within 20 days of a demand must demonstrate the merits of the action and a reasonable excuse for the delay in order to avoid dismissal. Nolan v. Lechner, 60 A.D.3d 473, 473,

17 N.Y.S.2d 107, 108 (1st Dep t 2009). The affidavit of merit must contain evidentiary facts sufficient to establish a prima facie case. Kel Mgmt. Corp. v. Rogers & Wells, 64 N.Y.2d 904, 905, 488 N.Y.S.2d 156, 156 (1985) (holding it was error, as a matter of law, not to grant the motion to dismiss without condition where plaintiff failed to submit an affidavit of merit); see also Dunefsky v. Petco Animal Supplies Inc., 303 A.D.2d 620, 621, 756 N.Y.S.2d 771, 772 (2d Dep t 2003) ( The Supreme Court erred in denying the appellant's motion pursuant to CPLR 3012(b) to dismiss the action. The plaintiffs failed to demonstrate a reasonable excuse for the delay, and the affidavit of merit did not establish a meritorious cause of action. ). Plaintiff s submissions in opposition to Manley s motion to dismiss and in support of its cross-motion for an extension of time to serve a complaint fail to meet either requirement. Plaintiff s reasonable excuse amounts to a clear admission that it is still developing its theory of the case and that it does not yet have sufficient facts to bring the claims referenced in the summons with notice. Moreover, plaintiff did not submit an affidavit of merit from an individual with firsthand knowledge of the relevant facts. Instead, plaintiff submitted a hearsay affirmation from its counsel, which, even if it had the proper evidentiary foundation, does not set forth a prima facie case against Manley under any of the theories listed in plaintiff s summons with notice. For these reasons, the Court must deny plaintiff s cross-motion and grant Manley s motion to dismiss. A. Plaintiffs Have Not Demonstrated a Reasonable Excuse for the Delay Plaintiff claims that its delay in serving a complaint is reasonable under the circumstances of this case because there are 26 defendants in the case and it is still conducting its investigation into the alleged fraud. Plaintiff s proffered excuses are not reasonable. If plaintiff chose to name 26 defendants, then it was the obligation of plaintiff s counsel to be sufficiently familiar with the facts to be able to prepare a complaint. See Weinstein, supra, at 73. The ability of plaintiff s 13

18 counsel to serve a summons with notice was never intended to overcome this fundamental requirement. If plaintiff s counsel did not have sufficient facts to make out a complaint against each of the defendants that plaintiffs chose to sue, then those defendants should not have been named in the first place. Plaintiff has had more than reasonable amount of time to prepare its complaint. The underlying facts, at least from the indictment, date back to According to the indictment, the liquidation proceedings for Gerova commenced in July See Rice Affirm., Ex. A 1. There has been more than sufficient time for plaintiff s counsel to gather facts necessary to prepare plaintiff s complaint. Moreover, plaintiff commenced this action on October 16, The complaint, under Manley s demand, was due November 23, 2015 five weeks after plaintiff commenced this action. That is obviously more than enough time for even the slowest draftsman to draft a complaint. Plaintiff simply has not come forward with a sufficient reason for the delay. It should have had the complaint at the ready and spent the time it had wasted on things like an unnecessary order to show cause on preparation of a complaint. B. Prejudice is Not a Consideration under a CPLR 3012(b) Motion to Dismiss Plaintiff contends that its request for an extension should be granted because Manley has not demonstrated any prejudice. However, for the purposes of Manley s motion to dismiss under CPLR 3012(b), [t]he fact that defendant may not have been prejudiced is immaterial. Sinder v. 345 Cypress Realty Corp., 34 A.D.2d 777, 777, 311 N.Y.S.2d 127, 128 (2d Dep t 1970) (citing Coban v. Wil-Sade Realties, Inc., 19 A.D.2d 605, 241 N.Y.S.2d 146 (1st Dep t 1963) and Garcia v. Sentry-Norden Oil and Heating Co., Inc., 18 A.D.2d 789, 236 N.Y.S.2d 633 (1st Dep t 1963)). As noted above, the Court of Appeals is clear on this issue the only way a plaintiff can defeat a CPLR 3012(b) motion to dismiss is by demonstrating a reasonable excuse for the delay and 14

19 submitting an affidavit of merit that sets forth sufficient facts to establish a prima facie case. See Kel Mgmt. Corp., 64 N.Y.2d at 905. Whether or not a defendant will suffer prejudice is not a consideration. Nonetheless, Manley has already been prejudiced as a result of plaintiff s failure to timely serve the complaint in response to his demand. Plaintiff s summons with notice indicated that its complaint would include civil RICO claims. The inclusion of a federal claim gave Manley and the other defendants the option of removing the case to federal court. However, the notice of removal as well as written consents from all of the defendants had to be filed within thirty days after service of the summons with notice. See Whitaker, 261 F.3d at (2d Cir. 2001) (holding that summons with notice constitutes initial pleading for the purposes of removal under 28 U.S.C. 1446). Moreover, under federal law, Manley s thirty-day period to file a notice of removal began not when service was complete under CPLR 308(2), but when plaintiff s process server left the summons with notice with his housekeeper and mailed a copy by first class mail. See Stan Winston Creatures, Inc. v. Toys R Us, Inc., 314 F. Supp. 2d 177, 181 (S.D.N.Y. 2003) ( In this case, however, the resident defendant, Eyler, was clearly served, in any ordinary sense of the word, when process was delivered to his office in accordance with CPLR 308(2).... Federal court jurisdiction is not dependent on the technicality of New York state procedure requiring ten days after filing proof of service for service to be deemed complete. ). Had plaintiff timely served its complaint, Manley would have had at least a few days to consider the allegations and claims in the complaint before deciding whether to remove the case to federal court. Plaintiff took that opportunity away from Manley by failing to timely serve its complaint, forcing Manley to decide whether to remove based solely on a summons with notice 15

20 that does not mention his name in any place other than the caption. Thus, even though Manley has no obligation to demonstrate prejudice under CPLR 3012(b), he has certainly done so. C. Plaintiff s Counsel s Affirmation of Merit Is Insufficient to Establish a Potentially Meritorious Claim Citing Interboro Ins. Co. v. Perez, 112 A.D.3d 483, 976 N.Y.S.2d 378 (1st Dep t 2013) and Hirsch v. New York City Dep t of Educ., 105 A.D.3d 522, 961 N.Y.S.2d 923 (1st Dep t 2013), plaintiff contends that CPLR 3012(d) does not require it to set forth a meritorious claim against Manley as a condition of obtaining an extension of time to file a complaint. That may be true under ordinary circumstances i.e., if plaintiff had moved for an extension before the deadline for Manley s demand expired or before Manley moved to dismiss under CPLR 3012(b) but the Court of Appeals could not have been any clearer when it stated that a party opposing a CPLR 3012(b) motion to dismiss based upon law office failure is obligated to submit an affidavit of merit containing evidentiary facts sufficient to establish a prima facie case. Kel Mgmt. Corp., 64 N.Y.2d at 905. Thus, plaintiff must not only demonstrate a meritorious cause of action against Manley, it must do so with an affidavit of merit that establishes a prima facie case. Plaintiff fails to fulfill either requirement. Plaintiff s counsel s affirmation does not qualify as an affidavit of merit because she does not have firsthand knowledge of the facts supporting the statements made in the document. See Roberts v. Northington, 128 A.D.3d 1487, 1488, 8 N.Y.S.3d 814, 815 (4th Dep t 2015) (holding that trial court erred in vacating order based on plaintiff s failure to serve complaint under CPLR 3012(b) because plaintiff submitted only the affirmation of her attorney, who has no personal knowledge of the relevant facts, and plaintiff thus failed to meet her burden ); Marion v. Notre Dame Acad. High Sch., 133 A.D.2d 614, 614, 519 N.Y.S.2d 721, 722 (2d Dep t 1987) ( The plaintiffs' attorney's affirmation and the complaint verified by the attorney were insufficient to 16

21 demonstrate the legal merit of the plaintiffs' claims. Neither document was submitted by someone with personal or firsthand knowledge of the underlying facts of the plaintiff Kimberly Marion's fall and the alleged negligence of the defendant. ); Oversby v. Linde Div. of Union Carbide Corp., 121 A.D.2d 373, 373, 503 N.Y.S.2d 85, 86 (2d Dep t 1986) ( The plaintiff failed to make an adequate showing that his claim has legal merit. It must be noted in that regard that the plaintiff did not submit an affidavit of merit and his attorney's affirmation was not a valid substitute as it was not based upon personal knowledge and did not set forth sufficient evidentiary facts relating to the plaintiff's action. ). The affirmation does not even identify the specific sources of information relied on in formulating the allegations. The claims mentioned in the summons with notice are predicated on allegations of fraud and civil RICO. These claims are subject to a heightened pleading standard under CPLR 3016(b), which requires that the circumstances constituting the wrong shall be stated in detail. See AQ Asset Mgmt., LLC v. Levine, 119 A.D.3d 457, 463, 990 N.Y.S.2d 465, 472 (1st Dep t 2014) (affirming dismissal of fraud claim for failure to satisfy the heightened pleading requirement of CPLR 3016(b) ). Plaintiff s counsel s affirmation does not contain specific facts sufficient to make out fraud claims against Manley. It is well established a cause of action for fraud require[s] a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages and that a claim rooted in fraud must be pleaded with the requisite particularity under CPLR 3016(b). Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559, 883 N.Y.S.2d 147, 150 (2009). While plaintiff s counsel alleges in a conclusory fashion lacking any specificity that Manley induced plaintiff s investors to approve the transaction with Gerova, she does not set forth a single misrepresentation that Manley made, when it was made, or who it was 17

22 relied upon; how anyone changed his or her position in reliance on an alleged misrepresentation; or any of the other elements required to set forth a claim of fraud. The majority of the allegations in plaintiff s counsel s affirmation focus on the acts of other defendants primarily Galanis and unsubstantiated conclusions about what Manley ought to have known as the Gerova s CEO for a period of four months. These allegations fall far short of meeting the specificity required under CPLR 3016(b). Coupled with the fact that they are coming from a hearsay affirmation from plaintiff s counsel, the Court should afford these allegations no weight at all. In sum, plaintiff has failed to submit an affidavit of merit that sets forth a prima facie claim against Manley. For this reason, the Court must dismiss the action under CPLR 3012(b). CONCLUSION For the reasons set forth above and in the accompanying affirmation of Paul H. Aloe, Esq., Manley respectfully requests that the Court enter an order granting Manley s motion to dismiss this action pursuant to CPLR 3012(b), denying plaintiff s cross-motion for an extension of time to serve the complaint pursuant to CPLR 3012(d), and granting such other and further relief as the Court deems just and proper. Dated: New York, New York December 15, 2015 By: Paul H. Aloe David N. Saponara KUDMAN TRACHTEN ALOE LLP Empire State Building 350 Fifth Avenue, 68 th Floor New York, New York Tel: (212) Attorneys for Defendant Marshall Manley 18