throbber
Case 1-17-01143-cec Doc 1 Filed 09/20/17 Entered 09/20/17 18:31:35
`INDEX NO. 514542/2015
`FILED: KINGS COUNTY CLERK 10/12/2017 12:04 AM
`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
`
`
`
`LAMONICA HERBST & MANISCALCO, LLP
`3305 Jerusalem Avenue, Suite 201
`Wantagh, New York 11793
`Tel. (516) 826-6500
`Gary F. Herbst, Esq.
`David A. Blansky, Esq.
`Jacqulyn S. Loftin, Esq.
`Attorneys for Gregory Messer, Chapter 7 Trustee
`
`
`UNITED STATES BANKRUPTCY COURT
`EASTERN DISTRICT OF NEW YORK
`------------------------------------------------------------------x
`In Re:
`
`Hypnotic Taxi LLC, et al.,1
`
`Debtors.
`
`
`
`------------------------------------------------------------------x
`Gregory Messer, as Chapter 7 Trustee of Hypnotic Taxi
`LLC, et al.,
`
`
`
` -against-
`
`
`Evgeny Freidman, 28th Street Management, Inc.,
`Downtown Taxi Management, Inc., Woodside
`Management, Inc., and Tunnel Taxi Management, LLC,
`
`Defendants.
`
`
`
`------------------------------------------------------------------x
`
`
`COMPLAINT
`
`
`
`
`
`Plaintiff,
`
`
`
`
`Chapter 7
`
`Case No. 15-43300 (CEC)
`(Jointly Administered)
`
`
`
`Adversary Proc. No. 17-
`
`
`
`
`
`Gregory Messer, as Chapter 7 Trustee (the “Trustee” or “Plaintiff”) of the estates of the
`
`debtor Hypnotic Taxi LLC and affiliated Debtors (collectively, the “Debtors”), brings this
`
`complaint to avoid and/or recover over $16 million and for other relief against Evgeny Freidman
`
`(“Freidman”), 28th Street Management, Inc. (“28th Street”), Downtown Taxi Management, Inc.
`
`(“Downtown”), Woodside Management, Inc. (“Woodside”) and Tunnel Taxi Management, LLC
`
`(“Tunnel”).
`
`1 Debtors are Hypnotic Taxi LLC (“Hypnotic”)(Case No. 15-43300), Vodka Taxi LLC (“Vodka”)(Case No. 15- 43320), Pudding Taxi LLC (“Pudding”)(Case No.
`15-43318), Chopard Taxi Inc. (“Chopard”)(Case No. 15-43306), Iceberg Taxi Inc. (“Iceberg”)(Case No. 15-43311), Milkyway Cab Corp. (“Milkyway”)(Case No.
`15-43314), VSOP Taxi Inc. (“VSOP”)(Case No. 15-43321), Cupcake Taxi LLC (“Cupcake”)(Case No. 15-43307), Dorit Transit Inc. (“Dorit”)(Case No. 15-43308),
`Hennessey Taxi Inc. (“Hennessey”)(Case No. 15-43310), Candy Apple Taxi LLC (“Candy”)(Case No. 15-43304), Stoli Taxi Inc. (“Stoli”)(Case No. 15-43319),
`Pointer Taxi Inc. (“Pointer”)(Case No. 15-43317), Palermo Taxi, Inc. (“Palermo”)(Case No. 15-43315), Marseille Taxi LLC (“Marseille”)(Case No. 43312),
`Bombshell Taxi LLC (“Bombshell”)(Case No. 15-43301), Merlot Taxi LLC (“Merlot”)(Case No. 15-43313), France Taxi LLC (“France”)(Case No. 15-43309),
`Bourbon Taxi LLC (“Bourbon”)(Case No. 15-43302), Chianti Taxi LLC (“Chianti”)(Case No. 15-433045), Pinot Noir Taxi LLC (“Pinot”)(Case No. 15-43316) and
`Butterfly Taxi LLC (“Butterfly”)(Case No. 15-43303) (collectively, “Debtors” or individually “Debtor”) are the Debtors in these jointly administered cases.
`
`
`
`1
`
`

`

`Case 1-17-01143-cec Doc 1 Filed 09/20/17 Entered 09/20/17 18:31:35
`INDEX NO. 514542/2015
`FILED: KINGS COUNTY CLERK 10/12/2017 12:04 AM
`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
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`
`
`
`NATURE OF THE PROCEEDING
`
`
`
`1.
`
`This adversary proceeding is brought to recover sums due the Debtors by the
`
`Defendants or to avoid and recover transfers made by the Debtors to the Defendants or funds
`
`withheld by the Defendants due the Debtors under §§ 502, 541, 542, 549, and 550 of Title 11,
`
`United States Code (the “Bankruptcy Code”), and Rule 7001 of the Federal Rules of
`
`Bankruptcy Procedure (the “Bankruptcy Rules”) and to hold Defendants liable for, among other
`
`things, unjust enrichment, breach of contract, conversion, money had and received, and breach
`
`of fiduciary duty.
`
`2.
`
`Since this action arises under the Debtors’ pending Chapter 7 bankruptcy cases,
`
`the United States Bankruptcy Court for the Eastern District of New York (the “Court”) has
`
`jurisdiction over this action under 28 U.S.C. §§ 157 and 1334 and Bankruptcy Rules 6009 and
`
`7001.
`
`3.
`
`The statutory predicates for the claims asserted herein are 11 U.S.C. §§ 105, 502,
`
`541, 542, 548, 549, 550, and 551, New York Business Corporation Law §§ 520, 713, 714, 715,
`
`717, 719 and 720, New York Limited Liability Company Law §§ 409, 411, 417, 508 and 611,
`
`general common law, and Bankruptcy Rules 6009 and 7001.
`
`4.
`
`This is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(1), 157(b)(2)(A),
`
`157(b)(2)(B), 157(b)(2)(H) and 157(b)(2)(O).
`
`5.
`
`6.
`
`Venue is proper in this Court pursuant to 28 U.S.C. § 1409(a).
`
`In accordance with Local Bankruptcy Rule 7008-1, Plaintiff consents to the entry
`
`of final orders and judgment by this Court if it is determined that this Court, absent the consent
`
`of the parties, cannot enter final orders or judgment consistent with Article III of the United
`
`States Constitution.
`
`
`
`2
`
`

`

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`INDEX NO. 514542/2015
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`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
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`
`
`
`Procedural Background
`
`
`
`7.
`
`On July 22, 2015 (the “Filing Date”), the Debtors each filed separate voluntary
`
`petitions for relief pursuant to Chapter 11 of Title 11 of the United States Code (the “Bankruptcy
`
`Code”) in this Court [Dkt. Nos. 1].
`
`8.
`
`By Order dated August 10, 2015 [Dkt. No. 26], the Debtors’ cases were jointly
`
`administered under Hypnotic Taxi LLC [Case No. 15-43300-CEC].
`
`9.
`
`On September 24, 2015, the United States Trustee (the “UST”) filed an amended
`
`appointment of the Official Committee of Unsecured Creditors (the “Committee”) in the
`
`Debtors’ cases [Dkt. No. 64].
`
`10.
`
`By Order dated October 30, 2015 [Dkt. No. 107], Joshua Rizack was appointed as
`
`the Chief Restructuring Officer (the “CRO”) to the debtors in possession during the Chapter 11
`
`proceedings.
`
`11.
`
`By Order dated September 22, 2016 [Dkt. No. 368], the Debtors’ cases were
`
`converted to ones under Chapter 7 of the Bankruptcy Code (the “Conversion Date”).
`
`12.
`
`By Notice of Appointment dated September 23, 2016 [Dkt. No. 370], Gregory M.
`
`Messer (the “Trustee” or “Plaintiff”) was appointed as the interim Chapter 7 Trustee of the
`
`Debtors’ jointly administered estates.
`
`13.
`
`Plaintiff has duly qualified and is now the permanent Trustee administering the
`
`Debtors’ estates.
`
`THE PARTIES
`
`14.
`
`As the permanent Trustee of the Debtors’ estates, Plaintiff is authorized to
`
`commence this Adversary Proceeding, pursuant to Bankruptcy Code § 323 and Bankruptcy Rule
`
`6009.
`
`
`
`3
`
`

`

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`INDEX NO. 514542/2015
`FILED: KINGS COUNTY CLERK 10/12/2017 12:04 AM
`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
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`
`
`
`15.
`
`Each of the Debtors is either a limited liability company or a corporation
`
`organized under the laws of the State of New York.
`
`
`
`16.
`
`At all times relevant, the Debtors maintained an office at 330 Butler Street,
`
`Brooklyn, New York 11217 and the Debtors’ Medallions and taxi vehicles were maintained or
`
`utilized at this location.
`
`17.
`
`Defendant Freidman is an individual residing at 502 Park Avenue, New York,
`
`New York 10065.
`
`18.
`
`As of the Filing Date and through the Conversion Date, Freidman was sole
`
`member of the limited liability company Debtors and the president and 100% stockholder of the
`
`corporation Debtors.
`
`19.
`
`At all times relevant, the Debtors had no other officers or employees beside
`
`Freidman.
`
`20.
`
`At all times relevant, Freidman was the individual responsible for and familiar
`
`with the Debtors’ day-to-day operations, their books and records, their business affairs and their
`
`financial condition.
`
`21.
`
`Defendant 28th Street Management, Inc. (“28th Street”) is a corporation with its
`
`primary place of a business located at 313 10th Avenue, New York, New York 10001.
`
`22.
`
`Defendant Downtown Taxi LLC (“Downtown”) is a limited liability company
`
`with its primary place of a business located at 330 Butler Street, Brooklyn, New York 11217.
`
`23.
`
`Defendant Woodside Management, Inc. (“Woodside”) is corporation with its
`
`primary place of a business located at 4913 Roosevelt Avenue, Woodside, New York 11377.
`
`24.
`
`Defendant Tunnel Taxi Management, LLC (“Tunnel”) is a limited liability
`
`company with its primary place of a business located at 4407 Vernon Boulevard, Long Island
`
`
`
`4
`
`

`

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`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
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`
`
`City, New York 11101 (Tunnel, together with Downtown and Woodside, are collectively
`
`referred to herein as the “Former Managers”).
`
`
`
`25.
`
`Upon information and belief, Freidman is the sole owner of 28th Street and
`
`Woodside.
`
`26.
`
`Upon information and belief, Freidman possesses a one-third (1/3) interest in each
`
`of Downtown and Tunnel.
`
`27.
`
`Upon information and belief, Mamed Dzhanyev and Yladimia Basin are the other
`
`equity owners of Downtown and Tunnel and each holds a one-third (1/3) interest in Downtown
`
`and Tunnel.
`
`A.
`
`The Debtors’ Assets
`
`FACTUAL BACKGROUND
`
`28.
`
`As of the Filing Date, the Debtors each owned either two or three medallions
`
`(“Medallions”) issued by the New York City Taxi and Limousine Commission (“TLC”) that
`
`permit taxi services to be performed by the Debtors.
`
`29.
`
`As of the Filing Date, the Debtors also owed 46 vehicles which are operated with
`
`the permission granted through their respective Medallions (the “Taxi Vehicles”).
`
`30.
`
`The Trustee currently has 39 Taxi Vehicles and 46 Medallions in his possession.
`
`B.
`
`Citibank Loans
`
`31.
`
`Each of the Debtors is individually obligated to Citibank, N.A. (“Citibank”) with
`
`respect to various loans obtained from Citibank in 2012.
`
`32.
`
`One group of these loans, totaling $10 million, was approved by Citibank on
`
`January 11, 2012 (collectively, the “$10 Million Citibank Loans”).
`
`
`
`5
`
`

`

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`FILED: KINGS COUNTY CLERK 10/12/2017 12:04 AM
`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
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`
`
`
`33.
`
`On December 21, 2012, Citibank approved additional loans totaling $21 million
`
`(collectively, the “$21 Million Citibank Loans”). (The $10 Million Citibank Loans, the $21
`
`
`
`Million Citibank Loans and the $1.5 Million Taxi Club Loan (defined below) are also referred to
`
`collectively as the “Citibank Loans”).
`
`34. With respect to the $10 Million Citibank Loans, the proceeds were “used to fund
`
`term loans … for the refinance or purchase of New York taxi medallions….”
`
`
`
`35.
`
`Seven Debtors – Bourbon, Butterfly, Chianti, Hypnotic, Merlot, Pinot and Vodka
`
`(collectively, the “$10 Million Citibank Borrowers”) – were the borrowers and executed
`
`individual notes and security agreements evidencing each of the $10 Million Citibank Loans.
`
`36.
`
`As security for the $10 Million Citibank Loans, Citibank has asserted that it holds
`
`a duly perfected security interest in the $10 Million Borrowers’ Medallions (the “$10 Million
`
`Medallion Liens”) as well as in “all substitutions for, all additions to and all proceeds and
`
`products of [the Medallions] in any form whatsoever (including, without limitation, all proceeds
`
`of insurance thereon)” (the “$10 Million Citibank Loan Collateral”).
`
`37. With respect to the $21 Million Citibank Loans, the proceeds were “used to fund
`
`term loans…for the refinance or purchase of New York City taxi medallions….”
`
`38.
`
`Fourteen Debtors, namely Pudding, Chopard, Iceberg, Milky Way, VSOP,
`
`Cupcake, Dorit, Hennessey, Candy, Stoli, Pointer, Palermo, Marseille, and Bombshell
`
`(collectively, the “$21 Million Citibank Borrowers”), were the borrowers and executed
`
`individual notes and security agreements evidencing each of the $21 Million Citibank Loans.
`
`39.
`
`As security for the $21 Million Citibank Loans, Citibank has asserted that it holds
`
`a duly perfected security interest in the $21 Million Borrowers’ Medallions (the “$21 Million
`
`Medallion Liens”) as well as in “all substitutions for, all additions to and all proceeds and
`
`
`
`6
`
`

`

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`INDEX NO. 514542/2015
`FILED: KINGS COUNTY CLERK 10/12/2017 12:04 AM
`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
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`
`
`products of [the Medallions] in any form whatsoever (including, without limitation, all proceeds
`
`of insurance thereon)” (the “$21 Million Citibank Loan Collateral”).
`
`
`
`40.
`
`On January 31, 2012 and December 20, 2012, respectively, Freidman executed
`
`personal guarantees pursuant to which Citibank asserts he unconditionally guaranteed payment
`
`of the $10 Million Citibank Borrowers’ obligations and the $21 Million Citibank Borrowers’
`
`obligations to Citibank.
`
`41.
`
`On July 1, 2013, Citibank made a third loan consisting of a $1.5 million loan (the
`
`“$1.5 Million Taxi Club Loan”) to non-Debtor and Taxi Club Management, LLC, another entity
`
`owned and controlled by Freidman.
`
`42.
`
`The $1.5 Million Taxi Club Loan was evidenced by a revolving credit note and
`
`security agreement in favor of Citibank and was guaranteed by the Debtors (the “Taxi Club
`
`Guaranty”) and by Freidman.
`
`43.
`
`The $1.5 Million Taxi Club Loan is further secured by the same Medallions that
`
`secure the $10 Million Citibank Loans and the $21 Million Citibank Loans (collectively, the
`
`“Medallion Collateral”).
`
`C.
`
`Citibank Loan Defaults
`
`44.
`
`45.
`
`Each of the Citibank Loans had a payment due on December 1, 2014.
`
`Upon information and belief, the payments due Citibank on December 1, 2014
`
`were not made.
`
`46.
`
`On December 4, 2014, Citibank declared a default and accelerated the Citibank
`
`Loans.
`
`47.
`
`Upon information and belief, further defaults also subsequently occurred.
`
`
`
`7
`
`

`

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`INDEX NO. 514542/2015
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`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
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`
`
`
`48.
`
`On March 5, 2015, Citibank filed an action in the Supreme Court of the State of
`
`New York (the “State Court”) seeking, among other things, a judgment against Freidman for
`
`
`
`$31.5 million as guarantor of the Citibank Loans (the “Citibank State Court Action”).
`
`49.
`
`On May 19, 2015, the State Court granted Citibank’s motion for an order of
`
`seizure (the “Seizure Order”) allowing Citibank to seize the Medallion Collateral.
`
`50.
`
`After the Debtors’ Chapter 11 petitions were filed, the Debtors removed the
`
`Citibank State Court Action to this Court.
`
`D.
`
`So-Called “Shareholder Loans”
`
`51.
`
`The Schedule L balance sheets to the Debtors’ income tax returns available to
`
`Plaintiff reflect that as of January 1, 2011, the Debtors showed combined “Shareholder Loan”
`
`balances owed by Freidman of no less than $4,893,211. A schedule reflecting the Shareholder
`
`Loan balances between January 1, 2011 and December 31, 2014 is annexed as Exhibit “A”.
`
`52.
`
`The Shareholder Loan balances increased by $922,402 in 2011, to $5,815,613 as
`
`of December 31, 2011.
`
`53.
`
`The Shareholder Loan balances increased by $5,342,030 between December 31,
`
`2011 and December 31, 2012 and were $11,157,643 as of December 31, 2012.
`
`54.
`
`Between December 31, 2011 and December 31, 2012, the Debtors borrowed $31
`
`million from Citibank through the $10 million Citi Loans and $21 million Citi Loans.
`
`55.
`
`The Shareholder Loan balances increased by $367,013 between December 31,
`
`2012 and December 31, 2013 and were $11,524,656 as of December 31, 2013.
`
`56.
`
`The Shareholder Loan balances increased by $345,741 between December 31,
`
`2013 and December 31, 2013 and were $11,870,397 as of December 31, 2014 (the “Outstanding
`
`Shareholder Loan Balances”).
`
`
`
`8
`
`

`

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`INDEX NO. 514542/2015
`FILED: KINGS COUNTY CLERK 10/12/2017 12:04 AM
`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
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`
`
`
`57.
`
`Upon information and belief, the Shareholder Loan balances reflect the amounts
`
`of the Debtors’ cash that were advanced to Freidman or for his benefit near the time the Citibank
`
`
`
`Loans were funded.
`
`58.
`
`Upon information and belief, the Shareholder Loans were recorded in various
`
`amounts on the books of the respective Debtors to which Freidman was indebted over the
`
`relevant time periods.
`
`59.
`
`As of the Filing Date, the Outstanding Shareholder Loan Balances due from
`
`Freidman remained unpaid.
`
`60.
`
`As Plaintiff does not know if additional Shareholder Loans were made between
`
`December 31, 2014 and the Filing Date, Plaintiff therefore reserves his right to add further
`
`allegations with respect to Shareholder Loans for 2015.
`
`61.
`
`The amount of the Debtors’ funds transferred to or for the benefit of Freidman
`
`and characterized as Shareholder Loans are currently believed to total no less than $11,870,397.
`
`62.
`
`Subsequent Transfers of the Proceeds of the outstanding Shareholder Loan
`
`Balances, of which Plaintiff is not currently aware, may also have occurred.
`
`63.
`
`It appears that Freidman used his position of ownership, domination and control
`
`of the Debtors to strip and divert assets and substantial value from the Debtors for his personal
`
`benefit, to the detriment and injury of the Debtors and their unsecured creditors.
`
`E.
`
`Equity in Debtors Recharacterized as Loans to Freidman
`
`64.
`
`According to the Schedule L balance sheets to the Debtors’ 2011 taxi returns
`
`presently available to Plaintiff, as of December 31, 2011, the scheduled amount of “Additional
`
`Paid-In Capital” (“APIC”) was, collectively, $2,032,889 at the end of 2011. A schedule
`
`reflecting the APIC balances and “loan from Shareholder” balances is annexed as Exhibit “B”.
`
`
`
`9
`
`

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`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
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`
`
`
`65.
`
`APIC is typically defined as the excess paid in by an investor over par value for
`
`common or preferred stock, (i.e. an equity investment) not debt.
`
`
`
`66.
`
`Ten Debtors reported APIC as of December 31, 2011 in the following amounts:
`
`Debtor Name
`
`
`Hypnotic Taxi LLC
`Bombshell Taxi LLC
`Bourbon Taxi LLC
`Butterfly Taxi LLC
`Candy Apple Taxi LLC
`Chianti Taxi LLC
`Cupcake Taxi LLC
`Hennessey Taxi Inc.
`Iceberg Taxi Inc.
`VSOP Taxi Inc.
`
`
`
`
`
`APIC
`
`$202,633
`$455,678
`$202,633
`$202,633
`$320,638
`$202,633
`$325,541
`$20,000
`$80,000
`$20,500
`$2,032,889
`
`67.
`
`According to the Schedule L balance sheets to the Debtors’ 2012 taxi returns
`
`presently available to Plaintiff, as of January 1, 2012 the Debtors’ reported “Loan from
`
`Shareholder” balances (i.e. loans from Freidman) of $2,572,984 as of that date.
`
`68.
`
`Twelve Debtors reported a Loan from Shareholder as of January 1, 2012 in the
`
`following amounts:
`
`Debtor
`Hypnotic Taxi LLC
`Bombshell Taxi LLC
`Bourbon Taxi LLC
`Butterfly Taxi LLC
`Candy Apple Taxi LLC
`Chianti Taxi LLC
`Cupcake Taxi LLC
`France Taxi LLC
`Marseille Taxi LLC
`Pinot Noir Taxi LLC
`
`Loan from Shareholder
`202,633
`445,678
`202,633
`202,633
`320,638
`202,633
`325,541
`19,670
`86,927
`202,630
`
`
`
`10
`
`

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`Case 1-17-01143-cec Doc 1 Filed 09/20/17 Entered 09/20/17 18:31:35
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`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
`
`
`
`
`Pudding Taxi LLC
`Vodka Taxi LLC
`
`
`
`
`
`
`
`315,642
`45,726
`2,572,984
`
`69.
`
`Except for the APIC balances on the Schedule L balance sheets for the Debtors
`
`Hennessey Taxi, Iceberg Taxi and VSOP Taxi, each of the other APIC balances existing as of
`
`December 31, 2011 were recharacterized as a “Loan from Shareholder” as of January 1, 2012.
`
`70.
`
`$1,912,389.00 of the APIC balances on the books of nine of the Debtors as of
`
`December 31, 2011 were recharacterized as “Loans from Shareholder” as of January 1, 2012.
`
`71.
`
`Upon information and belief, the reclassification of APIC to “Loans from
`
`Shareholder” was intended to convert Freidman’s equity investments in nine (9) of the Debtors
`
`into debts due Freidman.
`
`72.
`
`According to the Schedule L balance sheets to the Debtors’ 2012 taxi returns
`
`presently available to Plaintiff, as of December 31, 2012, all the “Loans from Shareholder” had
`
`been repaid except for a $105,036 “Loan from Shareholder” balance due from the Debtor
`
`Bombshell Taxi.
`
`73.
`
`In total, $2,467,948 of the APIC recharacterized as “Loans from Shareholder” and
`
`preexisting “Loans from Shareholder” were repaid during 2012 (the “2012 Transfers”).
`
`74.
`
`To the extent this re-characterization was unlawful and/or without economic
`
`substance and was undertaken to the detriment of the Debtors and their creditors, it should be re-
`
`characterized as equity, as it was originally presented and characterized in the respective
`
`Debtors’ books and records in 2011, and the payments made by those Debtors on account of the
`
`APIC should be returned to the Debtors’ respective estates, plus interest and any other amounts
`
`to which these Debtors’ estates are entitled.
`
`
`
`
`
`
`
`11
`
`

`

`Case 1-17-01143-cec Doc 1 Filed 09/20/17 Entered 09/20/17 18:31:35
`INDEX NO. 514542/2015
`FILED: KINGS COUNTY CLERK 10/12/2017 12:04 AM
`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
`
`
`
`F.
`
`Operation of the Debtors’ Medallions and the Taxi Vehicles Pre-Petition
`
`
`
`75.
`
`Upon information and belief, prior to the Filing Date, the Former Managers and
`
`28th Street leased the Medallions and the related Taxi Vehicles directly from the respective
`
`Debtor and operated them.
`
`76.
`
`Upon information and belief, prior to the Filing Date, the Debtors were
`
`compensated for this leasing arrangement by way of the lease payments from the Former
`
`Managers and 28th Street.
`
`77.
`
`Upon information and belief, prior to the Filing Date, the monthly base lease
`
`obligation of the Former Managers and 28th Street owed to the Debtors is equal to the Debtors’
`
`historical monthly debt service on the Citibank Loans.
`
`78.
`
`Upon information and belief, prior to the Filing Date, the Management
`
`Companies made the payments—–in the amount of the debt service— directly to Citibank
`
`instead of to the Debtors.
`
`79.
`
`Upon information and belief, prior to the Filing Date, the Former Managers and
`
`28th Street received the gross revenues from the operation of the Taxi Vehicles.
`
`80.
`
`From the gross proceeds received, the Former Managers and 28th Street then paid
`
`the expenses associated with
`
`the operation of such Taxi Vehicles,
`
`including all
`
`insurance/bonding coverage, liability for personal bodily injury up to applicable insurance limits,
`
`property damage and other tort claims up to the minimum coverage amounts required by the
`
`TLC, vehicle maintenance and repairs, and fuel, as well as overheard expenses.
`
`81.
`
`Upon information and belief, prior to the Filing Date, each of the Former
`
`Managers and 28th Street was obligated to collect the sum of $0.50, or as may be adjusted from
`
`time to time, for each fare that originates within the City of New York and terminates either
`
`
`
`12
`
`

`

`Case 1-17-01143-cec Doc 1 Filed 09/20/17 Entered 09/20/17 18:31:35
`INDEX NO. 514542/2015
`FILED: KINGS COUNTY CLERK 10/12/2017 12:04 AM
`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
`
`
`
`within the City of New York or Westchester, Putnam, Orange, Dutchess, Nassau or Suffolk
`
`Counties Pursuant to 35 RCNY § 58-25(C)(vii) (the “MTA Tax”).
`
`
`
`82.
`
`Upon information and belief, prior to the Filing Date, each of the Former
`
`Managers and 28th Street was obligated to pay on behalf of each of the Debtors the MTA Tax as
`
`collected, in compliance with the TLC and New York State rules and regulations of the New
`
`York State Department of Taxation and Finance (“NYS”).
`
`83.
`
` In accordance with the TLC regulations, a $0.30, or as may be adjusted from time
`
`to time, per trip improvement surcharge must be collected for all hailed trips (the “Improvement
`
`Surcharge”).
`
`84.
`
`Upon information and belief, prior to the Filing Date, each of the Former
`
`Managers and 28th Street was obligated to pay on behalf of each of the Debtors the Improvement
`
`Surcharge as collected in compliance with the TLC rules and regulations
`
`85.
`
`Upon information and belief, prior to the Filing Date, the Improvement Surcharge
`
`was to be collected by each Former Manager and 28th Street and paid to the TLC in compliance
`
`with TLC regulations during their operational relationship.
`
`G.
`
`Operation of the Debtors’ Medallions in the Chapter 11 Proceeding
`
`86.
`
`On July 31, 2015 [Dkt No. 18], the Debtors submitted the application for entry of
`
`an order (i) authorizing The Rising Group Consulting Inc. to provide the Debtors with a CRO
`
`and additional personnel, and (ii) designating Joshua Rizack as CRO to the Debtors effective as
`
`of the Filing Date (the “CRO Application”).
`
`87.
`
`The CRO Application was granted on an interim basis by order dated September
`
`18, 2015 [Dkt. No. 62].
`
`
`
`13
`
`

`

`Case 1-17-01143-cec Doc 1 Filed 09/20/17 Entered 09/20/17 18:31:35
`INDEX NO. 514542/2015
`FILED: KINGS COUNTY CLERK 10/12/2017 12:04 AM
`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
`
`
`
`
`88.
`
`On January 5, 2016, the CRO, on behalf of the Debtors’ estates, and Freidman, on
`
`behalf of Woodside, entered into a management agreement whereby Woodside agreed to manage
`
`
`
`certain of the Debtors’ Medallions (the “Woodside Chapter 11 Management Agreement”).
`
`89.
`
`The commencement date of the Woodside Chapter 11 Management Agreement
`
`was July 22, 2015 and continued on a consecutive monthly basis.
`
`90.
`
`Under the terms of the Woodside Chapter 11 Management Agreement, Woodside
`
`agreed to manage the following Medallions: 2V44, 2V45, 4N74, 4N75, 9V90, 9V91, 9J91, 9J92,
`
`6G58, 6G60, 2P21, 2P22, 2J62, 2J63, 9V96, 9V97, 2V84 and 2V85.
`
`91.
`
`On January 5, 2016, the CRO, on behalf of the Debtors’ estates, and Freidman, on
`
`behalf of Tunnel, entered into a management agreement whereby Tunnel agreed to manage
`
`certain of the Debtors’ Medallions (the “Tunnel Chapter 11 Management Agreement”).
`
`92.
`
`The commencement date of the Tunnel Chapter 11 Management Agreement was
`
`July 22, 2015 and continued on a consecutive monthly basis.
`
`93.
`
`Under the terms of the Tunnel Chapter 11 Management Agreement, Tunnel
`
`agreed to manage the following Medallions: 6V25 and 6V26.
`
`94.
`
`On January 5, 2016, the CRO, and Freidman, on behalf of Downtown, entered
`
`into a management agreement whereby Downtown agreed to manage certain of the Debtors’
`
`Medallions (the “Downtown Chapter 11 Management Agreement”).
`
`95.
`
`The commencement date of the Downtown Chapter 11 Management Agreement
`
`was July 22, 2015 and continued on a consecutive monthly basis.
`
`96.
`
`Under the terms of the Downtown Chapter 11 Management Agreement,
`
`Downtown managed the Debtors’ Medallions: 3P43, 3P44, 7P37, 7P38, 7P39, 2L29, 2L30,
`
`6V13, 6V14, 9V40, 9V41, 6V11, 6V12, 9K36, 9K37, 2L45 and 2L46.
`
`
`
`14
`
`

`

`Case 1-17-01143-cec Doc 1 Filed 09/20/17 Entered 09/20/17 18:31:35
`INDEX NO. 514542/2015
`FILED: KINGS COUNTY CLERK 10/12/2017 12:04 AM
`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
`
`
`
`
`97.
`
`On January 5, 2016, the CRO, and Freidman, on behalf of 28 Street, entered into a
`
`management agreement whereby 28th Street agreed to manage the Debtors’ Medallions (the “28th
`
`
`
`Street Chapter 11 Management Agreement”, along with the Tunnel, Woodside and Downtown
`
`Chapter 11 Management Agreements are referred to herein as the “Chapter 11 Management
`
`Agreements”).
`
`98.
`
`The commencement date of the Tunnel Chapter 11 Management Agreement was
`
`July 22, 2015 and continued on a consecutive monthly basis.
`
`99.
`
`Under the terms of the 28th Street Chapter 11 Management Agreement,
`
`Downtown agreed to operate the Debtors’ following Medallions: 2V82, 2V83, 9L48, 9L49,
`
`8P16, 8P17, 7P48, 7P49 and 7P50.
`
`100. The termination date of the Chapter 11 Management Agreements was January 22,
`
`2016 (the “Chapter 11 Termination Date”).
`
`101. Under the terms of each of the Chapter 11 Management Agreements, the Debtors,
`
`could terminate the Chapter 11 Management Agreements for cause after giving thirty (30) days
`
`written notice of such cause to the Former Managers or 28th Street with an opportunity to cure or
`
`commence cure.
`
`102. Under the terms of each of the Chapter 11 Management Agreements, the Debtors
`
`could terminate, without cause, upon thirty (30) days prior written notice to the Former
`
`Managers or 28th Street.
`
`103. Under the terms of each of the Chapter 11 Management Agreements, the Former
`
`Managers and 28th Street could terminate, without cause, upon thirty (30) days prior notice in
`
`writing to the Debtors.
`
`
`
`15
`
`

`

`Case 1-17-01143-cec Doc 1 Filed 09/20/17 Entered 09/20/17 18:31:35
`INDEX NO. 514542/2015
`FILED: KINGS COUNTY CLERK 10/12/2017 12:04 AM
`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
`
`
`
`
`104. By Order entered on November 23, 2015 [Dkt. No. 139], the Court, pursuant to
`
`Bankruptcy Code §§ 105 and 363(b), authorized and approved the Debtors’ continued business
`
`
`
`relationship with the Former Managers and 28th Street.
`
`105. Pursuant to the terms of each of the Chapter 11 Management Agreements, the
`
`Former Managers and 28th Street were obligated to pay $3,473.96 per month per Medallion for
`
`an aggregate monthly payment of $159,802.16 (the “Chapter 11 Monthly Payment”).
`
`106. Pursuant to the terms of each of the Chapter 11 Management Agreements, the
`
`Former Manager and 28th Street were obligated to pay the MTA Tax in compliance with the TLC
`
`and New York State rules and regulations to NYS.
`
`107. Pursuant to the terms of each of the Chapter 11 Management Agreement, the
`
`Improvement Surcharge was to be collected by each of the Former Managers and 28th Street and
`
`paid to the TLC in compliance with TLC regulations during the term of the Chapter 11
`
`Management Agreements.
`
`108. Pursuant to the terms of the Cash Collateral Stipulation with Citibank [Dkt. No.
`
`94], the Former Managers and 28th Street were obligated to pay the Chapter 11 Monthly Payment
`
`to Citibank.
`
`109. The Former Managers and/or 28th Street paid the Chapter 11 Monthly Payment
`
`from July 2015 through April 2016.
`
`110. The Former Managers and/or 28th Street did not pay the Chapter 11 Monthly
`
`Payment for May 2016.
`
`111. The Former Managers and/or 28th Street did not pay the Chapter 11 Monthly
`
`Payment for June 2016.
`
`
`
`16
`
`

`

`Case 1-17-01143-cec Doc 1 Filed 09/20/17 Entered 09/20/17 18:31:35
`INDEX NO. 514542/2015
`FILED: KINGS COUNTY CLERK 10/12/2017 12:04 AM
`NYSCEF DOC. NO. 46
`RECEIVED NYSCEF: 10/12/2017
`
`
`
`
`112. The Former Managers and/or 28th Street did not pay the Chapter 11 Monthly
`
`Payment for July 2016.
`
`
`
`113. The Former Managers and/or 28th Street did not pay the Chapter 11 Monthly
`
`Payment for August 2016.
`
`114. The Former Managers and/or 28th Street did not pay the Chapter 11 Monthly
`
`Payment pro rata portion for 22 days in the amount of $117,254.13 for September 2016.
`
`115. Pursuant to the terms of the Chapter 11 Management Agreements, the Former
`
`Managers and 28th Street owe the Debtors’ estates $756,822.13 in Chapter 11 Monthly Payments
`
`for the months of May through the Conversion Date of September 22, 2016.
`
`H.
`
`Operation of the Debtors’ Medallions in the Chapter 7 Proceeding
`
`116. After the Conversion Date, Plaintiff engaged in discussions with the Former
`
`Managers and their counsel to operate the Medallions on an interim basis.
`
`117. On November 2, 2016, Plaintiff, on behalf of the Debtors’ estates, and Freidman,
`
`on behalf of Woodside, entered into a management agreement whereby Woodside agreed to
`
`manage certain of the Debtors’ Medallions (the “Woodside Management Agreement”).
`
`118. The commencement date of the Woodside Management was September 23, 2016
`
`and continued on a monthly basis from the 23rd day of each month through the 22nd day of the
`
`consecutive month.
`
`119. Under the terms of the Woodside Management Agreement, Woodside agreed to
`
`manage the following Medallions: 2V44, 2V45, 4N74, 4N75, 9V90, 9V91, 9J91, 9J92, 6G58,
`
`6G60, 2P21, 2P22, 2J62, 2J63, 9V96, 9V97, 2V84, 2V85, 2V82, 2V83, 9L48, 9L49, 8P16, 8P17
`
`7P48, 7P49 and 7P50.
`
`
`
`17
`
`

`

`Case 1-17-01143-cec Doc 1 Filed 09/20/17 Entered 09/20/17 18:31:35
`INDEX NO. 514542/2015
`FILE

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