SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK --------------------------------------------------------------------)( RSSM CPA LLP, - against - QUIL VEST USA, INC, et al., Plaintiff, Defendants. Index No. 651843/2015 (Rakower,1.) AFFIRMATION IN SUPPORT OF MOTION FOR STAY --------------------------------------------------------------------)( DAVID P. KASAKOVE, an attorney duly admitted to practice before the Courts of the State of New York hereby affirms, under penalty of perjury, that: 1. I am a member of the law firm of Bryan Cave LLP ("Bryan Cave"), counsel of record to Defendants Quilvest USA, Inc. et al. ("Defendants" or "Quilvest") in the above-titled matter. I am fully familiar with the facts and circumstances concerning this motion. 2. I submit this affirmation in support of Defendants' motion to stay discovery and all future proceedings in this action pending resolution ofthe related prior litigation against former RSSM partner Michael Bernstein ("Bernstein"), RSSM CPA, LLP v. Corey D. Bell. et al (Sup. Ct. NY Co., Index No. 65353312014) (the "Bell Litigation") and for such other and further relief as this Court may deem just and proper. 3. This case involves claims by Plaintiff, the former accounting firm for Defendants, alleging that Defendants have failed to pay for certain accounting services provided to Defendants. Plaintiff has conceded that Bernstein was the RSSM "relationship partner for Quilvest.i.and had full authority over Quilvest billing and collections" while at RSSM. (See, Affirmation of Raymond J. Cardinali, Esq., dated February 8,2017 in Opposition to Motion to C063999/021656111970819.2.3 1 of 6
Quash Nonparty Subpoena, Docket No. 68). As stated by Mr. Cardinali, Plaintiffs counsel: "[t]he gravamen of this Action is that... Quilvest was underbilled or not billed at all by RSSM's agent, Bernstein, for certain Services, and that Quilvest knew or should have known that they were underbilled or not billed." (Docket No. 68, ~4.) As alleged by RSSM's managing partner Neil Sonenberg in his Affidavit in Opposition of Motion to Quash Nonparty Subpoena, sworn to on February 8, 2017, "Upon Bernstein's departure [from RSSM], and in connection with RSSM winding up its business, it was discovered in internal audits ofrssm that Quilvest was either underbilled or not billed at all for certain services." (Docket No. 69, ~5). 4. Infact, evidence will show that everyone of the invoices sent contemporaneously by RSSM during the relationship with Quilvest was paid by Quilvest. 5. Plaintiffs claim for approximately $969,431.02 in unpaid fees is based on allegations that Bernstein (a) gave Quilvest improper write-offs or discounts for services provided to Quilvest ("Write-Offs"); and (b) under-billed for certain services while at RSSM and then billed Quilvest for these very same services ("Delayed Billing") after joining the accounting firm Mazars USA (formerly WeiserMazars LLP) ("Weiser"), which currently provides accounting services to Quilvest. Purported invoices for the aggregate amount of the Write-Offs and Delayed Billing were created by RSSM solely for the purposes ofthis litigation, long after Quilvest was no longer a client ofrssm. Thus, in order to succeed in this litigation, Plaintiff must prove that Bernstein gave improper Write-Offs to Quilvest and took part in Delayed Billing. 6. These same two issues are central to RSSM's claims in the Bell Litigation, in which RSSM has sued many of its former partners, including Bernstein, and many of those partners' current employers, including the accounting firm Weiser. The Bell Litigation was C063999/021656111970819.2.3 2 2 of 6
commenced by Plaintiff prior to the present action. (See Affidavit of Michael Bernstein, Docket No. 62.) 7. As in this action, in the Bell Litigation, RSSM alleges, inter alia, that Bernstein harmed RSSM by allegedly giving RSSM clients, including Quilvest, improper Write-Offs and by taking part in Delayed Billing practices. 8. Each of these allegations has been specifically addressed by Justice Kornreich in the Court's January 6, 2017, 48-page decision, granting partial summary judgment (the "Bell Order") in favor of Bernstein and Weiser. In rejecting Plaintiffs claim that Bernstein gave his clients, including Quilvest, improper Write-Offs, the Court found that "RSSM did not... present any evidence concerning the Write-Offs, such as the bills and clients involved." (Bell Order, p. 27.1) The Court dismissed RSSM's claims against Bernstein based on Write-Offs. Id. Therefore, any claims in this case that Defendants (clients of Bernstein) were given improper Write-Offs by Bernstein are barred by res judicata and collateral estoppel. 9. The Bell Order also addressed RSSM's allegations of Delayed Billing, denying Bernstein's motion to dismiss on summary judgment based on the Court's finding that issues of fact remained concerning this issue, requiring further discovery. extent there are any other issues left open concerning Bernstein's (See Bell Order, p. 26.) To the billing practices and Quilvest's payment for such services to RSSM in the Bell Litigation, those issues are being addressed as part of the extensive discovery in the Bell Litigation. Id. 10. In light of the fact that the limited remaining issues concerning Bernstein's billing practices and payments by Quilvest to RSSM are actively being litigated in the Bell Litigation, 1 A copy of the January 6, 2017 order granting partial summary judgment to Bernstein and Weiser in the Bell Litigation (the "Bell Order") is annexed hereto as Exhibit 1. C063999/021656l11970819.2.3 3 3 of 6
this case should be stayed until there is a final resolution of the Bell Litigation, since that case will resolve most, if not all, of the claims in this litigation. 11. Additionally, Defendants have learned, through their review of the Bell Litigation court filings, as well as the recently filed Motion to Quash, that Plaintiff has failed to comply with its discovery obligations in the Bell Litigation. In fact, the Bell Court is currently considering spoliation sanctions against Plaintiff for failure to preserve evidence, and has noted that Plaintiff has alleged that it is unable to comply with discovery orders because its secured lender has frozen its assets making it impossible for Plaintiff to pay its discovery vendors to undertake the review and production of electronic documents. 12. If Plaintiff is unable to afford its discovery obligations in the Bell Litigation, it necessarily follows that Plaintiff is not financially able to meet those obligations in this litigation as well. 2 13. The Court in the Bell Litigation has already overseen 16 discovery conferences, and is fully familiar with the facts and circumstances surrounding Plaintiff s discovery challenges. Therefore, Defendants seek a stay of discovery for the additional reason that resolution of the discovery disputes in the Bell Litigation will be instructive to the Court in this litigation. 14. Under CPLR 2201 the Court has discretion to stay discovery in this matter pending resolution of the Bell Litigation. N.Y. C.P.L.R. 2201 (McKinney 2015) ("Except where 2 Discovery has barely begun in this case. Both parties have served demands, and Plaintiff has made a document production in response to Defendants' demands which glaringly excludes electronic discovery, documents relevant to almost all of the requests, and highlights its spoliation of evidence and inability to make a fulsome production. Defendants have communicated to Plaintiff that the production received is entirely inadequate and unresponsive to the Requests. See Letter to Raymond Cardinali dated February 10,2017, annexed hereto as Exhibit 2. C063999/021 65611197081 9.2.3 4 4 of 6
otherwise prescribed by law, the court in which an action is pending may grant a stay of proceedings in a proper case, upon such terms as may be just."). 15. "A stay is appropriate where, as seems likely here, the decision in one action will determine all the questions in the other action or will, at least, reduce the issues in the other actions." Chan v. Zoullas, 34 Misc. 3d 1210(A), 943 N.Y.S.2d 790 (Sup. Ct. N.Y. Cnty. 2012) (staying state litigation pending resolution of motion in related federal action). The decisions already made by the Bell Court, and future decisions regarding Bernstein's billing practices, payments received by Quilvest, and Plaintiffs failure to produce documents and spoliation of evidence will undoubtedly apply in this case as well. 16. There is also a risk of unfair, inconsistent judgments if both proceedings continue. Where the Bell Court has already made decisions against RSSM, it smacks of forum shopping for RSSM to continue pursuing the same issues in this case while the Bell Litigation is still pending, in hopes of this Court entering judgments more favorable to it. Judicial resources will be wasted if both courts are required to adjudicate the same disputes regarding Bernstein's alleged Write-Offs and Delayed Billing, and Plaintiffs failure to make a fulsome document production. See Zonghetti v. Jeromack, 150 A.D.2d 561,562,541 N.Y.S.2d 235,237 (2d Dep't 1989) ("It is well settled that a court has broad discretion to grant a stay in order to avoid the risk of inconsistent adjudications, application of proof and potential waste of judicial resources. "). 17. Furthermore, there will be no prejudice to Plaintiff if the requested stay is granted. Plaintiff is fully able to appear and present any arguments or facts in its favor in the related Bell Litigation, and will of course be bound by any decision issued in that case. Any intermittent delay in this litigation will cause no harm to Plaintiff, but will serve the purposes of fairness and judicial economy. C063999/021656111970819.2.3 5 5 of 6
WHEREFORE, it is respectfully requested that this Court grant Defendants' motion to stay this action until the resolution of the Bell Litigation, and grant such other and different relief l as it may deem just and proper. Dated: New York, New York February 15,2017 DAVID P. KASAKOVE C0639991021656111970819.2.3 6 6 of 6