FILED: NEW YORK COUNTY CLERK 01/07/2021 05:47 PM
`NYSCEF DOC. NO. 50
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`INDEX NO. 657399/2020
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`RECEIVED NYSCEF: 01/07/2021
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`SUPREME COURT OF THE STATE OF NEW YORK
`COUNTY OF NEW YORK _______________________
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`DANIELLE EPSTEIN, JASON GOODMAN,
`And WARD GUILDAY,
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`Petitioners,
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`Index No. 657399/2020
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`-against-
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`SECAUCUS INVESTORS, LLC,
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`Respondent.
`_____________________________________________
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`MEMORANDUM OF LAW IN SUPPORT OF PETITION FOR PROVISIONAL
`REMEDY OR ATTACHMENT IN AID OF ARBITRATION
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`FILED: NEW YORK COUNTY CLERK 01/07/2021 05:47 PM
`NYSCEF DOC. NO. 50
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`INDEX NO. 657399/2020
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`RECEIVED NYSCEF: 01/07/2021
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`TABLE OF CONTENTS
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`PRELIMINARY STATEMENT ................................................................................................. 1
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`STATEMENT OF FACTS .......................................................................................................... 2
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`ARGUMENT .............................................................................................................................. 4
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`I.
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`II.
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`III.
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`IV.
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`The Documentary Evidence Demonstrates That Petitioners are Likely to
`Prevail on Their Breach of Contract, Conversion, and Similar Claims to be
`Asserted in Arbitration ......................................................................................... 6
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`Petitioners Will Suffer Irreparable Harm Absent an Injunction Because
`Respondent will Intentionally Divest Itself of the Payments to Which
`Petitioners are Entitled and Render Itself Insolvent .............................................. 8
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`The Balance of Equities is Entirely in Petitioners’ Favor and an Arbitration
`Award Would be Rendered Ineffectual Absent Injunctive Relief .......................... 9
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`Temporary and Preliminary Injunctions or, in the Alternative, Attachment
`are Appropriate Remedies .................................................................................. 10
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`V.
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`The Court Should Grant the Relief Ex Parte Until a Hearing Can Be Held ......... 12
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`VI.
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`The Court Should Not Order Any Undertaking or Other Security ....................... 13
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`CONCLUSION ......................................................................................................................... 13
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`TABLE OF AUTHORITIES
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`Cases
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`Page(s)
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`Aetna Ins. Co. v. Capasso,
`75 N.Y.2d 860, 552 N.Y.S.2d 918 (1990) ........................................................................ 5
`
`
`Am. Hosp. Supply Corp. v. Hosp. Prods. Ltd.,
`780 F.2d 589 (7th Cir. 1986) ........................................................................................... 8
`
`
`Archdiocese of Ethiopian Orthodox Church in the United States and Canada, Inc. v. Yesehaq,
`232 A.D.2d 332, 648 N.Y.S.2d 605 (1st Dep’t 1996) ....................................................... 5
`
`
`Beatty v. Guggenheim Exploration Co.,
`225 N.Y. 380 (1919) ........................................................................................................ 7
`
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`Blumenthal v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
`910 F.2d 1049 (2d Cir. 1990) ......................................................................................... 10
`
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`County Natwest Sec. Corp. USA v. Jesup, Josephthal & Co.,
`180 A.D.2d 468, 579 N.Y.S.2d 376 (1st Dep’t 1992) .................................................... 10
`
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`CRP/Extell Parcel I, L.P. v. Cuomo,
`394 F. App’x 779 (2d Cir. 2010) ...................................................................................... 8
`
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`Habitations Ltd. v. BKL Realty Sales Corp.,
`160 A.D.2d 423, 554 N.Y.S.2d 117 (1st Dep’t 1990) .................................................. 8,12
`
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`Harris v. Seward Park Housing Corp.,
`79 A.D.3d 425, 913 N.Y.S.2d 161 (1st Dep’t 2010) ......................................................... 6
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`Matter of Guarini (Severini),
`233 A.D.2d 196, 650 N.Y.S.2d 4 (1st Dep’t 1996) ........................................................ 10
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`Mishcon de Reya New York LLP v. Grail Semiconductor, Inc.,
`No. 11 CIV. 04971 RJH, 2011 WL 6957595 (S.D.N.Y. Dec. 28, 2011) ................. 5,11,12
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`Peters Griffin Woodward, Inc. v. WCSC, Inc.,
`88 A.D.2d 883, 452 N.Y.S.2d 599 (1st Dep’t 1982) ......................................................... 7
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`Plenty v. Randell,
`No. 95 Civ. 5850, 1995 WL 694661 (S.D.N.Y. Nov.22, 1995) ...................................... 11
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`Republic of Haiti v. Duvalier,
`211 A.D.2d 379, 384, 626 N.Y.S.2d 472, 475 (1st Dep’t 1995)........................................ 7
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`Rex Med. L.P. v. Angiotech Pharm. (US), Inc.,
`754 F. Supp. 2d 616 (S.D.N.Y. 2010) .............................................................................. 9
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`Shah v. Commercial Bank Ob'Edinennyi Investitsionnyi Bank,
`No. 09 CV 6121(HB), 2010 WL 743043 (S.D.N.Y. Mar. 4, 2010) ................................. 12
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`Simonds v. Simonds,
`45 N.Y.2d 233 (1978) ...................................................................................................... 7
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`Swift Splash Ltd. v. Rice Corp.,
`No. 10 Civ. 6448, 2010 WL 3767131 (S.D.N.Y. Sept.27, 2010) ................................... 12
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`Veeco Instruments, Inc. v. Candido,
`70 Misc. 2d 333, 334 N.Y.S.2d 321 (Sup. Ct. Nassau Co. 1972) ..................................... 7
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`
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`Rules and Statutes
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`CPLR § 6201 .................................................................................................................... 5,11,12
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`CPLR § 6211 ............................................................................................................................ 13
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`CPLR § 6301 ......................................................................................................................... 5,10
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`CPLR § 6313 ............................................................................................................................ 13
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`CPLR § 7502(c) ................................................................................................................. passim
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`Secondary Sources
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`13 Weinstein, Korn & Miller, N.Y. Civ. Prac. ¶ 7502.20 ............................................................. 5
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`FILED: NEW YORK COUNTY CLERK 01/07/2021 05:47 PM
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`INDEX NO. 657399/2020
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`Petitioners Danielle Epstein, Jason Goodman, and Ward Guilday (collectively,
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`“Petitioners”), by their attorneys, respectfully submit this Memorandum of Law in support of their
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`application for an ex parte temporary restraining order and, pursuant to CPLR § 7502(c), either an
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`injunction or, in the alternative, attachment in aid of arbitration against Secaucus Investors, LLC
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`(“Secaucus”).
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`PRELIMINARY STATEMENT
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`Secaucus is stealing from Petitioners. Petitioners participated in a loan, then in the amount
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`of $10 million, to non-party United States Division of the International Foundation a/k/a
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`Foundation Harmony (“Harmony International”) and Harmony Foundation of New Jersey, Inc.
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`(“Harmony Foundation” and, with Harmony International, “Harmony”). Petitioners’ contribution
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`to that $10 million loan is $1.25 million. Harmony made partial repayments under the loan of
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`approximately $2.6 million, but Secaucus has not paid Petitioners a cent of those repayments to
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`which they are contractually entitled. Secaucus, in fact, hid those repayments from Petitioners and
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`now, in an arbitration that does not involve Petitioners, falsely claims that it was unaware and did
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`not authorize Petitioners’ investment. Secaucus’ claim directly contradicts its own writings and
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`actions.
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`Fortunately, Petitioners discovered Secaucus’ misconduct before it is too late. Petitioners
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`will initiate an arbitration against Secaucus as soon as possible to enforce their rights. Now, they
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`ask this Court to maintain the status quo to avoid any further theft and prevent an ineffectual
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`arbitration award.
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`STATEMENT OF FACTS
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`As set forth in much greater detail in the Petition dated December 31, 2020 (Dkt. No. 1,
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`“Petition”), Petitioners are individuals who participated in a loan from Secaucus to Harmony.
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`(Petition1 at ¶¶ 11-13, 23, 26-27; Petitioners’ Affs. at Exs. A, respectively; Bortnick Aff. Ex. G).
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`Petitioners provided a total of $1,250,000 to Secaucus to fund a portion of its loan to Harmony.
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`(Petition at ¶¶ 11-13; Petitioners’ Affs. at Exs. B, respectively). Petitioners’ funds saved Harmony
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`from going out of business (before its business even really started). (Petition at ¶ 24).
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`In exchange for their $1,250,000, Petitioners received contractual rights to pro rata
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`distributions of repayments from Harmony. (Petition at ¶¶ 11-13, 23, 26-27; Petitioners’ Affs. at
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`Exs. A, respectively). Those contractual rights are extensively set forth in Participation Agreements
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`which are fully executed by Petitioners and Secaucus. (Petitioners’ Affs. at Exs. A, respectively).
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`Secaucus was established for the purposes of making the loan to Harmony, and the loan to
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`Harmony is Secaucus’ only asset. (Petition at ¶¶ 1, 9, 18).
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`Harmony has repaid at approximately $2,600,000 of the loan to Secaucus. (Petition at ¶ 48;
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`Bortnick Aff. Ex. C at ¶ 28). In violation of the Participation Agreements, Secaucus did not
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`distribute any of that money to Petitioners. (Petition at ¶¶ 48-49). Rather, Secaucus hid those
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`payments from Petitioners, who only found out about the repayments through currently pending
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`litigation between Harmony and Secaucus. (Petition at ¶ 54). In that litigation – which does not
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`involve Petitioners – Secaucus falsely claims that it was unaware of and did not authorize
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`Petitioners’ investment. (Petition at ¶ 53). Secaucus further breached the Participation Agreements
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`by failing to inform Petitioners of the litigation with Harmony. (Petition at ¶¶ 52, 64).
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`1 In order to simplify citations, all references to the Petition should be deemed to include an
`additional citation to paragraph 2 of the Petitioners’ affidavits submitted with the Petition, in which
`each of the Petitioners confirm the fact allegations of the Petition.
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`Most troublingly, the litigation filings show Secaucus arguing that they are not even aware
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`of Petitioners and their rights showing a clear intention to continue to take their money. (Bortnick
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`Aff. Ex. A at p. 44). Secaucus is clearly aware of Petitioners and their rights because: (1) Petitioners
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`funds were paid to Secaucus (indeed to its’ bank account), (2) Secaucus executed the Participation
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`Agreements with Petitioners, and (3) prior to its false position that Petitioners’ rights do not exist,
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`Secaucus previously acknowledged that Petitioners’ were entitled to pro-rata portions of
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`Harmony’s repayments. (Petition ¶¶ 11-13, 23; Bortnick Aff. Ex. B at pp. 9-10 (internal Exhibit
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`A) (Declaration submitted to the New Jersey court by Secaucus containing a 2018 acknowledgment
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`of Petitioners’ investments); Petitioners’ Affs. at Exs. A and B, respectively). Secaucus is directly
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`stealing from Petitioners and appears set on continuing to do so.
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`When Petitioners discovered Secaucus’ misconduct, they sent a demand letter to Secaucus.
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`(Bortnick Aff. Ex. D; Petition at ¶ 60). Secaucus ignored that letter. (Id. at ¶ 63; Bortnick Aff. at
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`¶ 5). Petitioners will file an arbitration against Secaucus seeking an award of the past distributions
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`to which it is entitled and future payments thereof. (Petition at ¶ 8; Petitioners’ Aff. Exs. A at ¶ 14,
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`respectively). That arbitration will obviously take time. In that time, however, based on Secaucus’
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`prior actions and continuing rejection of the validity of Petitioners’ Participation Agreements,
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`Secaucus will have disposed of its only asset (the loan to Harmony) and/or wrongfully distributed
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`future loan repayments. (Petition at ¶¶ 48-49, 52-54, 64; Bortnick Aff. Ex. A at p. 44). Thus, in aid
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`of that arbitration, Petitioners seek this Court’s intervention to:
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`A.
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`Issue a preliminary injunction, including an order directing Secaucus to place any
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`repayment of the Harmony Loan2 up to a total amount of $3 million into an escrow
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`account or, if the payor has received notice of the order, directly into such escrow
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`“Loan” is defined in the Petition.
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`account thereby bypassing Secaucus, and preventing Secaucus from assigning,
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`transferring, hypothecating, or encumbering the Loan, or taking any other act with
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`respect to the Loan that may have the effect of rendering Petitioners’ arbitration
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`award ineffectual, pending further Order of this Court; or in the alternative
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`B.
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`grant Petitioners an attachment of the Loan in an amount not less than $3 million,
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`such that all repayments up to such amount shall be attached pending further Order
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`of this Court;
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`C.
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`pending the hearing and decision of this Court, a Temporary Restraining Order
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`against Secaucus, preventing it from assigning, transferring, hypothecating, or
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`encumbering the Loan, or taking any other act with respect to the Loan that may
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`have the effect of rendering Petitioners’ arbitration award ineffectual, or in the
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`alternative, ex parte attachment of all repayments on the Harmony Loan; and
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`D.
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`grant such other relief as may be permitted under applicable law and which the
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`Court deems appropriate under the circumstances.
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`ARGUMENT
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`CPLR § 7502(c) provides, in pertinent part, that the Supreme Court in the county in which
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`an arbitration is pending or will be filed, has the authority to grant either injunctive relief or an
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`attachment in aid of such arbitration “upon the ground that the award to which the applicant may
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`be entitled may be rendered ineffectual without such provisional relief.” CPLR § 7502(c)
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`(emphasis added). Thus, CPLR § 7502(c) specifically authorizes the Court to issue these
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`provisional remedies where, as in this case, the ultimate relief which the Petitioners seek may be
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`rendered ineffectual, and indeed meaningless, if a provisional remedy is not immediately granted.3
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`Stopping Secaucus’ theft from Petitioners so that Petitioners can obtain an arbitration award
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`regarding that theft, falls well within the contemplated relief and should be granted here.
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`Arbitration does not alter the Petitioners’ traditional preliminary injunction burden of proof
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`requiring Petitioners to show: (1) a likelihood of success on the merits, (2) the potential for
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`irreparable harm if the injunction is not granted, and (3) a balance of equities in their favor. See
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`Aetna Ins. Co. v. Capasso, 75 N.Y.2d 860, 862, 552 N.Y.S.2d 918, 919 (1990); Archdiocese of
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`Ethiopian Orthodox Church in the United States and Canada, Inc. v. Yesehaq, 232 A.D.2d 332,
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`333, 648 N.Y.S.2d 605, 606 (1st Dep’t 1996). Moreover, “[a] temporary restraining order may be
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`granted pending a hearing for a preliminary injunction where it appears that immediate and
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`irreparable injury, loss or damage will result unless the defendant is restrained before the hearing
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`can be had.” CPLR § 6301.
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`As discussed in greater detail below, if the Court chooses attachment as the alternative to
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`a restraining order, CPLR § 7502(c) replaces the grounds for attachment in aid of arbitration from
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`those set forth in CPLR § 6201. The sole ground set forth in CPLR § 7502(c) is a more lenient
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`standard that permits attachment where the arbitration award the petitioner seeks “may be rendered
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`ineffectual.” See Mishcon de Reya New York LLP v. Grail Semiconductor, Inc., No. 11 CIV. 04971
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`RJH, 2011 WL 6957595, at *9 (S.D.N.Y. Dec. 28, 2011) (emphasis added). Absent action by this
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`Court, the ultimate award will be unenforceable due to Secaucus disposing of its only asset.
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`(Petition at ¶¶ 1, 9, 18).
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`3 Although the Court may evaluate the legal and factual issues to determine whether injunctive
`relief is appropriate, CPLR § 7502(c) is clearly not intended to alter the basic arbitration process.
`Rather, it provides a provisional remedy which will prevent the arbitration process from being
`defeated. 13 Weinstein, Korn & Miller, N.Y. Civ. Prac. ¶ 7502.20.
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`As set forth below, Petitioners’ rights are demonstrated by clear, fully-executed contracts
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`which demonstrate their likelihood to succeed on the merits of each of their claims. (Petitioners’
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`Aff. Exs. A, respectively). In addition, Petitioners will suffer irreparable harm if the relief is not
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`granted because the Harmony Loan is Secaucus’ only asset – the theft itself is intended to succeed
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`by taking away the only avenue for Petitioners’ recovery. (Petition at ¶¶ 1, 9, 18). Finally,
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`Petitioners come to the Court with clean hands while Secaucus is engaged in fraud and theft with
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`the clear intent to render any arbitration award ineffectual if the relief sought herein is not granted.
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`As such, a restraining order and, in the alternative, attachment, are appropriate.
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`I.
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`THAT
`DEMONSTRATES
`EVIDENCE
`DOCUMENTARY
`THE
`PETITIONERS ARE LIKELY TO PREVAIL ON THEIR BREACH OF
`CONTACT, CONVERSION, AND SIMILAR CLAIMS TO BE ASSERTED IN
`ARBITRATION.
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`Once asserted in arbitration, to prevail on their claims for breach of the Participation
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`Agreements, Petitioners must establish (1) the existence of a valid contract; (2) that Petitioners
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`performed under the contract; (3) a breach of the contract; and (4) damages resulting from the
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`breach. See Harris v. Seward Park Housing Corp., 79 A.D.3d 425, 426, 913 N.Y.S.2d 161, 162
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`(1st Dep’t 2010). Those elements are clear here. Petitioners present the Court with the fully-
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`executed documents, including signatures by Secaucus. (Petition at ¶¶ 11-13; Danielle Epstein
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`Aff. at Ex. A, p. 12; Jason Goodman Aff. at Ex. A, p. 11; Ward Guilday Aff. at Ex. A, p. 11).
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`Petitioners’ only obligation under the Participation Agreements was to provide funds, which they
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`deposited directly with Secaucus. (Petition at ¶¶ 11-13; Petitioners’ Affs. at Exs. B, respectively).
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`The Participation Agreements require Secaucus to distribute payments to Petitioners pro rata.
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`(Petition at ¶¶ 11-13, 23, 26-27; Petitioners’ Affs. at Exs. A at ¶ 2.2, respectively). Secaucus
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`received at least $2.6 million in repayments but failed to distribute any to Petitioners. (Petition at
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`¶ 48; Bortnick Aff. Ex. C at ¶ 28). Thus, Petitioners have been damaged by the failure to receive
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`compensation to which they are entitled. In addition, Secaucus has demonstrated its intent to deny
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`future repayments to Petitioners by falsely claiming that Petitioners’ interest in the Harmony Loan
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`does not exist. (Bortnick Aff. Ex. A at p. 44).
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`Secaucus’ misconduct gives rise to additional causes of action upon which Petitioners are
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`likely to prevail as well. For example, the tort of conversion is established when one who owns
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`and has a right to possession of personal property proves that the property is in the unauthorized
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`possession of another who has acted to exclude the rights of the owner. See Republic of Haiti v.
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`Duvalier, 211 A.D.2d 379, 384, 626 N.Y.S.2d 472, 475 (1st Dep’t 1995); Peters Griffin
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`Woodward, Inc. v. WCSC, Inc., 88 A.D.2d 883, 883, 452 N.Y.S.2d 599, 600 (1st Dep’t 1982)
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`(“conversion is an unauthorized assumption and exercise of the right of ownership over goods
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`belonging to another to the exclusion of the owner’s rights”). “[A]ny use of such property beyond
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`the authority which the owner conferred upon the user, or in violation of the instructions given, is
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`conversion.” Veeco Instruments, Inc. v. Candido, 70 Misc. 2d 333, 334, 334 N.Y.S.2d 321 (Sup.
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`Ct. Nassau Co. 1972).
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`Petitioners own a pro rata portion of the loan repayments from Harmony – both such
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`repayments in the past and those Harmony makes in the future. (Petition at ¶¶ 11-13, 23, 26-27;
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`Petitioners’ Affs. at Exs. A at ¶ 2.2, respectively). Given Secaucus’ wrongful denial of Petitioners’
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`prior distributions and current claim that no such rights exist, Secaucus is guilty of conversion.
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`Secaucus’ collection of Petitioners’ portion of the repayments also establishes constructive
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`trust and other duties to Petitioners that were breached.4 Each of these many causes of action
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`4 “‘A constructive trust is the formula through which the conscience of equity finds expression.
`When property has been acquired in such circumstances that the holder of the legal title may not
`in good conscience retain the beneficial interest, equity converts him into a trustee.’” Simonds v.
`Simonds, 45 N.Y.2d 233, 241 (1978) (quoting Beatty v. Guggenheim Exploration Co., 225 N.Y.
`380, 386 (1919) (Cardozo, J.)). The doctrine of constructive trust is of “broad scope.” Simonds, 45
`N.Y.2d at 241.
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`independently establishes Petitioners’ likelihood of success.
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`Petitioners and Respondent contractually agreed to arbitrate Petitioners’ claims in New
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`York City, and Petitioners intend to initiate such an arbitration promptly. (Petition at ¶ 8;
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`Petitioners’ Aff. Exs. A at ¶ 14, respectively). In aid of that arbitration, at which Petitioners will
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`prevail, injunctive relief to keep the status quo and protect further theft of Petitioners’ funds is
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`appropriate.
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`II.
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`IRREPARABLE HARM ABSENT AN
`PETITIONERS WILL SUFFER
`INJUNCTION BECAUSE RESPONDENT WILL INTENTIONALLY DIVEST
`ITSELF OF THE PAYMENTS TO WHICH PETITIONERS ARE ENTITILED
`AND RENDER ITSELF INSOLVENT.
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`Secaucus’ only asset is the loan repayments from Harmony. (Petition at ¶¶ 1, 9, 18).
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`Petitioners are entitled to a portion of those repayments. (Petition at ¶¶ 11-13, 23, 26-27;
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`Petitioners’ Affs. at Exs. A at ¶ 2.2, respectively).
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`Secaucus has ignored its contractual obligations to Petitioners and has demonstrated its
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`intention to continue to do so. (Bortnick Aff. Ex. A at p. 44). The pending litigation between
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`Secaucus and Harmony addresses repayment of the loans. (Bortnick Aff. Exs. A and C).
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`Thus, by the time Petitioners obtain an arbitration award, it is likely that Secaucus’ only
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`asset will be gone (e.g., because it refuses to recognize Petitioners’ investments and has already
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`fraudulently siphoned away the payments they were entitled to) and future payments thereunder
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`will have been wrongfully distributed. (Petition at ¶ 6; Bortnick Aff. Ex. A at p. 44). At that point,
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`Petitioners’ arbitration victory will be hollow and they will be irreparably harmed. See, e.g.,
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`CRP/Extell Parcel I, L.P. v. Cuomo, 394 F. App’x 779, 781–82 (2d Cir. 2010) (“we have held that
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`a finding of irreparable harm may lie in connection with an action for money damages where the
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`claim involves an obligation owed by an insolvent or a party on the brink of insolvency”), Am.
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`Hosp. Supply Corp. v. Hosp. Prods. Ltd., 780 F.2d 589, 594, 596 (7th Cir. 1986) (insolvency
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`supports finding of irreparable harm because “[t]he premise of the preliminary injunction is that
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`the remedy available at the end of trial will not make the plaintiff whole.”).
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`While pending insolvency may, by itself, constitute irreparable harm, the harm to
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`Petitioners here is a direct loss of the thing to which they are entitled: their pro rata portion of the
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`loan to Harmony. It is an asset with significant value. In addition to monetary relief, Petitioners
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`will also seek declaratory judgment that their interests in the loan to Harmony are valid and that
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`Petitioners are entitled to future repayments. The harm Petitioners seek to prevent is Secaucus’
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`continuing intentional theft of that asset from Petitioners to render Petitioners with no ability to
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`recover. Thus, an injunction, and a temporary restraining order in anticipation of that injunction,
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`are appropriate relief.
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`III. THE BALANCE OF EQUITIES IS ENTIRELY IN PETITIONERS’ FAVOR AND
`AN ARBITRATION AWARD WOULD BE RENDERED INEFFECTUAL
`ABSENT INJUNCTIVE RELIEF.
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`Secaucus is committing theft. Such misconduct cannot be countenanced. Both the public
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`interest and the private interests of the parties favors stopping such misconduct.
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`But even absent such intentional misconduct, equity would still favor injunctive relief. “All
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`that the Court is being asked to do is to enforce the parties’ bargained-for right[s] . . . . The public
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`has an interest in seeing that parties oblige by their contractual obligations and are not allowed to
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`skirt such obligations at another’s expense.” Rex Med. L.P. v. Angiotech Pharm. (US), Inc., 754 F.
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`Supp. 2d 616, 626 (S.D.N.Y. 2010).
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`In considering fairness, it also bears noting that Secaucus has no ongoing business
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`obligations. (Petition at ¶¶ 1, 9, 18). Secaucus exists for the sole purpose of extending and, now,
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`collecting, on the Harmony loan. (Id.) That business purpose does not involve ongoing monetary
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`obligations – it simply has to passively accept Harmony’s repayments (and then distribute those
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`repayments as dictated by the Participation Agreements which it is intentionally failing to do).
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`9
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`13 of 19
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`Thus, the injunction Petitioners seek will not have any impact on Secaucus’ “operations.”
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`Petitioners tried to avoid this proceeding. Petitioners attempted to remedy Respondent’s
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`misconduct through a demand letter. (Petition at ¶ 60; Bortnick Aff. at Ex. D). Respondent ignored
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`that demand letter demonstrating its intent to continue to ignore Petitioners’ rights and that
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`injunctive relief was necessary. (Petition at ¶ 63, Bortnick Aff. at ¶ 5). Respondent left Petitioners
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`with no choice but to seek this Court’s assistance.
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`IV.
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`IN THE
`INJUNCTIONS OR,
`TEMPORARY AND PRELIMINARY
`ALTERNATIVE, ATTACHMENT ARE APPROPRIATE REMEDIES.
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`CPLR § 6301 provides that:
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`A preliminary injunction may be granted in any action where it appears that
`the defendant threatens or is about to do, or is doing or procuring or
`suffering to be done, an act in violation of the plaintiff's rights respecting
`the subject of the action, and tending to render the judgment ineffectual, or
`in any action where the plaintiff has demanded and would be entitled to a
`judgment restraining the defendant from the commission or continuance of
`an act, which, if committed or continued during the pendency of the action,
`would produce injury to the plaintiff. A temporary restraining order may be
`granted pending a hearing for a preliminary injunction where it appears that
`immediate and irreparable injury, loss or damage will result unless the
`defendant is restrained before the hearing can be had.
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`Id. Here, Respondent threatens to continue to stealing Petitioners’ payments and distributing them
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`to others. As such, both a preliminary injunction, and a temporary restraining order in anticipation
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`thereof, are appropriate.
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`CPLR § 7502(c) contemplates both preliminary injunctions and attachment in aid of
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`arbitration. Id. “Arbitration can become a ‘hollow formality’ if parties are able to alter irreversibly
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`the status quo before the arbitrators are able to render a decision in the dispute.” Blumenthal v.
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`Merrill Lynch, Pierce, Fenner & Smith, Inc., 910 F.2d 1049, 1053 (2d Cir. 1990); see also Matter
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`of Guarini (Severini), 233 A.D.2d 196, 196, 650 N.Y.S.2d 4, 5 (1st Dep’t 1996) (“preservation of
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`the status quo with respect to the subject corporation’s governance and assets is necessary to assure
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`10
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`14 of 19
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`its orderly dissolution, the relief petitioner seeks in arbitration, and that an undertaking of $200,000
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`is appropriate.”). The status quo must be preserved in order for Petitioners to be able to recover in
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`that arbitration.
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`With respect to attachment specifically, “to confirm an ex parte order of attachment, the
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`petitioner bears the burden of demonstrating that: (1) there is a cause of action; (2) it is probable
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`that the petitioner in the cause of action will succeed on the merits; (3) a ground for attachment
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`under N.Y. C.P.L.R. 6201 exists; and (4) the amount demanded from the respondent exceeds all
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`counterclaims known to the petitioner. See N.Y. C.P.L.R. 6212(a).” Mishcon de Reya New York
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`LLP, 2011 WL 6957595, at *3. Where the attachment is in aid of arbitration, CPLR § 7502(c)
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`provides that the “sole ground” eligible under the third element is that “the award to which the
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`applicant may be entitled may be rendered ineffectual without such provisional relief.” CPLR
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`§ 7502(c). As discussed above, Petitioners have breach of contract, conversion, constructive trust,
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`and similar causes of action that are highly likely to be successful. No counterclaims have been
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`asserted or are known. (Bortnick Aff. at ¶ 11). Thus, elements 1, 2, and 4 are satisfied.
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`With respect to the ground for attachment in aid of arbitration, “demonstrat[ing] the
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`possibility, if not the likelihood, that absent the attachment being requested, the ultimate arbitration
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`award would be severely compromised” satisfies the Petitioners’ burden. County Natwest Sec.
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`Corp. USA v. Jesup, Josephthal & Co., 180 A.D.2d 468, 468, 579 N.Y.S.2d 376 (1st Dep’t 1992).
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`Among the factors courts consider is the respondent’s history of paying creditors – here the failure
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`to pay Petitioners their portion of the repayments – see Habitations Ltd. v. BKL Realty Sales Corp.,
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`160 A.D.2d 423, 424, 554 N.Y.S.2d 117 (1st Dep’t 1990), and the stated intention to dispose of
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`assets that could be used to satisfy a future judgment – here demonstrated by Respondent’s filings
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`claiming that Petitioners’ contractual rights do not exist, see Plenty v. Randell, No. 95 Civ. 5850,
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`11
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`15 of 19
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`1995 WL 694661, at *1 (S.D.N.Y. Nov.22, 1995).
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`The Court may further consider the Petitioners’ demonstration of the Respondent’s
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`insolvency – here, the fact that Respondent’s only asset is the loan to Harmony. See Swift Splash
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`Ltd. v. Rice Corp., No. 10 Civ. 6448, 2010 WL 3767131, at *2 (S.D.N.Y. Sept.27, 2010).5 As such,
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`courts have found attachment appropriate where “the company is a shell with no appreciable assets,
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`historically failed to pay creditors, or has stated an intent to remove assets from the jurisdiction.”
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`Shah v. Commercial Bank Ob'Edinennyi Investitsionnyi Bank, No. 09 CV 6121(HB), 2010 WL
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`743043, at *3 (S.D.N.Y. Mar. 4, 2010) (citing Habitations Ltd., 160 A.D.2d at 424).
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`Respondent is poised to dispose of its only asset without paying the Petitioners the funds
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`to which they are entitled from that asset. Without attachment, Petitioners’ arbitration award would
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`be render ineffectual. See, e.g., Mishcon de Reya New York LLP, 2011 WL 6957595, at *10
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`(confirming ex parte order of attachment in aid of arbitration due to respondent’s intent to transfer
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`its sole asset).
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`V.
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`THE COURT SHOULD GRANT THE RELIEF EX PARTE UNTIL A HEARING
`CAN BE HELD
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`Secaucus o