Dauphin v. Crownbrook ACC LLC

Filing 40

MEMORANDUM AND ORDER, Plaintiff's Motion for Partial Summary Judgment is granted. Entry of Judgment is deferred pending resolution of dft's counterclaims.. Ordered by Judge Allyne R. Ross on 4/10/2013. (Piper, Francine)

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UNITED STATES DISTRICT· COURT
EASTERN DISTRICT OF NEW YORK

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APR112013

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12-CV-2100 (ARR)(SMG)

RICHARD W. DAUPHIN,

NOT FOR ELECTRONIC
OR PRINT PUBLICATION

Plaintiff,
-against-

MEMORANDUM AND
ORDER

CROWNBROOK ACC LLC,
Defendant.

x
ROSS, United States District Judge:
Plaintiff Richard W. Dauphin ("plaintiff') is a former member of defendant Crownbrook
ACC LLC ("defendant" or "the LLC"). When plaintiff relinquished his membership, he and
defendant executed a promissory note whereby defendant promised to pay $1.25 million for
plaintiffs membership interest. Following plaintiff's withdrawal as a member, he remained an
employee of the LLC under a separate employment agreement. After making three quarterly
payments contemplated by the promissory note, defendant defaulted on the fourth payment.
Plaintiff then terminated his employment. Defendant continued to default on subsequent
payments, and plaintiff brought suit. He now moveS for partial summary judgment. Defendant
raises two affirmative defenses: First, defendant argues its obligations under the note were
discharged by plaintiff's termination of the employment agreement. Second, defendant argues
that New York law prevents it from paying because the LLC is insolvent. Neither argument
persuades. Accordingly, for the following reasons, plaintiffs motion for partial summary
judgment is granted.

BACKGROUND
The following facts are undisputed: prior to September 20 I 0, plaintiff owned a
membership interest in defendant Crownbrook ACC LLC. PI.'s Rule 56.1 Statement of
Undisputed Material Facts ("PI.'s Facts") ~ I. Pursuant to an employment agreement executed
on March 26, 2007 ("2007 employment agreement"), plaintiff also served as an employee of the
LLC. Id., Ex. A, at I. On September 7,2010, plaintiff and defendant entered into a letter
agreement whereby plaintiff agreed to sell his membership interest in the LLC to defendant for a
purchase price of $1.25 million. Id. The letter agreement contemplated that on the closing date,
several events would occur, including: (I) plaintiff would "transfer and assign his entire Interest"
in the LLC to defendant, id.; (2) in exchange, defendant would execute a promissory note,
agreeing to pay $ 1.25 million in twelve quarterly installments of $ 104, 166.66, the first to be paid
on the closing date, id.; (3) the 2007 employment agreement would be terminated and a new
employment agreement would commence, id., at 3. The closing date was to occur "on the earlier
of (x) March 26, 20 II and (y) 30 days following the termination of the [2007] Employment
Agreement." Id., at I; see Def.'s Mem. of Law in Opp'n to PI.'s Mot. for Partial Summ. J.
("Def.'s Mem.") 6.
On March 26, 2011, the parties executed the promissory note. PI.'s Facts ~ 3. As
contemplated in the letter agreement, the promissory note provided: "Principal payments under
this promissory note (this "Note") shall be made in twelve (12) consecutive quarterly principal
installments of$104,166.66 commencing March 26,2011, with the final such installment to be

2

due and payable on December 26,2013." Id. ~ 5; Ex. B, at I.' The note did not specifically
mention the new employment agreement, though it referenced other agreements between plaintiff
and defendant. Id. at 2.
On the same day, the parties executed the new employment agreement ("20 II
employment agreement"). Id., Ex. C, at 1. The 2011 employment agreement referenced that
defendant had delivered the promissory note toplaintiff. Id. at 1. The 2011 employment
agreement also set as its termination date "the date on which the remaining unpaid principal
amount under the Note is zero" or "the termination of [plaintiffs] employment pursuant to this
Agreement." Id. at 3. The agreement then went on to describe plaintiffs compensation and
benefits for his employment. Id., at 3-4. The agreement permitted defendant to terminate
plaintiff at will, under which circumstance plaintiff would be entitled to a cash lump sum
payment for any salary earned but not yet paid (the "Compensation Payment"). Id. at 4-5. In the
event of voluntary termination by plaintiff, section 6.4 of the agreement contemplated the
following (referring to plaintiff as "Executive" and defendant as "the Company");
In the event that Executive's employment is terminated ... by Executive for any
reason ... prior to the Termination Date, Executive shall only be entitled to
receive the Compensation Payment. The Compensation Payment shall be paid to
Executive in a single lump sum on the 30th day following such termination of
Executive's employment. Executive shall not be entitled to any other payments or

'The note also provided that, in the event that a principal payment was not made in full on
the due date,
interest on the unpaid principal amount that was due and payable shall accrue
from the date that such principal amount was due and payable until such amount
is paid in full at a rate per annum equal to the rate per annum published by The
Wall Street Journal from time to time as its prime rate.
Id., Ex. B, at 1.
3

benefits from the Company. After the termination of Executive's employment
under this Section 6.4, the obligations of the Company under this Agreement to
make any further payments, or provide any benefits herein, to Executive shall
thereupon cease and terminate.
Id. at 6.
Following the execution of the note and 2011 employment agreement, defendant made
three installment payments under the note. PI.'s Facts ~ 6. However, on December 26, 2011,
defendant did not pay the fourth installment. Id. ~ 7. The following February, plaintiff
terminated his employment with defendant. Id. ~ 13. Defendant thereafter made no further
payments on the note. Id. ~~ 8-10; see Def.'s Mem. 3; Statement of Disputed Facts Pursuant to
Local Civil Rule 56.1 (b) ("Def's Facts") ~~ 8-10.
Plaintiff brought suit in this court seeking damages for the unpaid installments. Dkt. # 1,
at 2-4. Defendant's first amended answer, Dkt. #13, raised several affirmative defenses,
including arguing that it was "prohibited from redeeming or purchasing its own membership
interests," id. ~ 25, by New York Business Corporation Law § 513 because defendant "is either
insolvent or, should defendant be compelled to make the payments set forth in the complaint,
which represent the consideration for the purchase by the defendant of its own membership
interests, defendant will be made insolvent," id. ~ 26. 2 With respect to this affirmative defense,
plaintiff moved for summary judgment, arguing that defendant is an LLC, not a corporation, and
is therefore not subject to the Business Corporation Law. PI.'s Mem. of Law in Supp. of Mot. for
Summ. J. 9-12. Defendant opposed summary judgment, arguing, inter alia, that the Business
Corporation Law either applies by analogy, or defendant is prohibited from making payments

'Defendant also raised counterclaims in its first amended answer. Id. ~~ 31-62.

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under similar provisions of New York's Limited Liability Company Law. Defs Mem. 10-12. In
his reply brief, plaintiff disputed these legal claims and also pointed out that defendant had not
produced any evidence to support its claim of insolvency. PI.'s Reply Mem. of Law in Supp. of
Mot. for Summ. J. 7-11.
After the motion was fully briefed, defendant sent the court a fax, Dkt. #39, at 1-2, calling
plaintiff's argument about lack of evidence of insolvency "preposterous" and stating, "[h]ad the
motion papers called for it, defendant would have submitted ... financial statements." Id. at 2.
Defendant requested leave ofthe court to submit financial statements under seal. Id. Plaintiff
responded that the motion was fully briefed and no further submissions should be permitted. Id.
at 3. In light of defendant's fax, Chief Magistrate Judge Steven M. Gold held a conference to
discuss any additional discovery required for the motion. Judge Gold permitted defendant to
submit a supplement to its opposition under seal, with the understanding that the court might
order unsealing to the extent the submission formed the basis for ajudicial ruling. Dkt. #35.
Defendant thereafter filed a supplemental affidavit of David Krinsky, along with financial
r

documents filed under seal. Dkt. #36. l With Judge Gold's permission, plaintiff filed a sur-reply.
Dkt. #38.

DISCUSSION

1.

Summary Judgment Standard
"The court shall grant summary judgment if the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R.

lIn a related order released today, I ordered the affidavit and financial documents
unsealed.

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Civ. P. 56(a). The function of the court is not to resolve disputed issues, but to determine
whether there is a genuine issue to be tried. See Anderson v. Liberty Lobby. Inc., 477 U.S. 242,
249 (1986). "While genuineness runs to whether disputed factual issues can reasonably be
resolved in favor of either party, materiality runs to whether the dispute matters, i.e., whether it
concerns facts that can affect the outcome under the applicable substantive law." McPherson v.
Coombe, 174 F.3d 276, 280 (2d Cir. 1999) (quoting Graham v. Henderson, 89 F.3d 75, 79 (2d
Cir. 1996) (internal quotation marks and ellipses omitted)).

In assessing whether summary judgment is appropriate, the court considers "the
pleadings, depositions, answers to interrogatories and admissions on file, together with any other
firsthand information including but not limited to affidavits." Nnebe v. Daus, 644 F.3d 147, 156
(2d Cir. 2011) (quoting In re Bennett Funding Gm., Inc., 336 F.3d 94, 99 (2d Cir. 2003) (internal
quotation marks omitted)); see Celotex Com. v. Catrett, 477 U.S. 317, 322-23 (1986). The
moving party carries the burden of proving that there is no genuine dispute respecting any
material fact and "may obtain summary judgment by showing that little or no evidence may be
found in support of the nonmoving party's case." Gallo v. Prudential Residential Servs., 22 F.3d
1219, 1223 (2d Cir. 1994). Once this burden is met, in order to avoid the entry of summary
judgment against it, the non-moving party "must come forward with specific facts showing that
there is a genuine issue for trial." LaBounty v. Coughlin, 137 F.3d 68, 73 (2d Cir. 1998); accord
Celotex Com., 477 U.S. at 324 (if moving party shows absence ofa genuine issue of material
fact, nonmoving party must "go beyond the pleadings" and identifY facts that show a genuine
issue for trial).

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"Where a plaintiff uses a summary judgment motion, in part, to challenge the legal
sufficiency of an affirmative defense-on which the defendant bears the burden of proof at trial-a
plaintiff may satisfy its Rule 56 burden by showing that there is an absence of evidence to
support [an essential element of] the [non-lT)oving party's) case." F.D.I.C. v. Giammettei, 34
F.3d 51,54 (2d Cir. 1994) (alterations in original) (internal quotation marks omitted). "While
whatever evidence there is to support an essential element of an affirmative defense will be
construed in a light most favorable to the non-moving defendant, there is 'no express or implied
requirement in Rule 56 that the moving party support its motion with affidavits or other similar
materials negating the opponent's claim.'" Id. (quoting Celotex Com., 477 U.S. at 323)
(emphases in original). "After all, in cases where there is an absence of evidence to support an
essential element of a defense, with respect to that defense there can be no genuine issue as to
any material fact since a complete failure of proof concerning an essential element of the
[defendant's affirmative defense) necessarily renders all other facts immaterial." Id. at 54-55
(alteration in original) (internal quotation marks omitted).
II.

Interpretation o/the Contract
Defendant argues that the sentence in section 6.4 of the 20 II employment agreement,

"Executive shall not be entitled to any other payments or benefits from the Company," Pl.'s
Facts, Ex. C, at 6, references payments under the note. Alternatively, defendant argues that the
sentence is ambiguous, thus precluding summary judgment for plaintiff. Moreover, the sentence
is followed by, "After the termination of Executive's employment under this Section 6.4, the
obligations of the Company under this Agreement to make any further payments, or provide any
benefits herein, to Executive shall thereupon cease and terminate." Id. Therefore, according to
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defendant, the first sentence cannot reference payments only under the employment agreement,
because such a reading would render the second sentence superfluous.
Under New York law, "the initial question for the court on a motion for summary
judgment with respect to a contract claim is 'whether the contract is unambiguous with respect to
the question disputed by the parties.'" Law Debenture Trust Co. ofN.Y. v. Maverick Tube

Q!m., 595 F.3d 458, 465 (2d Cir. 2010) (quoting Int'l Multifoods Com. v. Commercial Union
Ins. Co., 309 F.3d 76, 83 (2d Cir. 2002)). "The matter of whether the contract is ambiguous is a
question of law for the court." Id. Where the parties dispute the meaning of particular contract
clauses, the task of the court is "to determine whether such clauses are ambiguous when 'read in
the context of the entire agreement.'" Sayers v. Rochester Tel. Com. Supplemental Mgmt.
Pension Plan, 7 F.3d 1091, 1095 (2d Cir.1993) (quoting W.W.W. Assoc .. Inc. v. Giancontieri,
566 N.E.2d 639, 642 (N.Y. 1990). "Language whose meaning is otherwise plain does not
become ambiguous merely because the parties urge different interpretations in the litigation,"
Hunt Ltd. v. Lifschultz Fast Freight. Inc., 889 F.2d 1274,1277 (2d Cir. 1989), unless each is a
''reasonable'' interpretation, Seiden Assoc .. Inc. v. ANC Holdings. Inc., 959 F.2d 425, 428 (2d
Cir.1992). "Thus, the court should not find the contract ambiguous where the interpretation
urged by one party would 'strain [ 1the contract language beyond its reasonable and ordinary
meaning.'" Law Debenture Trust Co., 595 F.3d at 467 (alteration in original) (quoting
Bethlehem Steel Co. v. Turner Constr. Co., 141 N.E.2d 590,593 (N.Y. 1957»). "As a general
matter, the objective of contract interpretation is to give effect to the expressed intentions of the
parties." Hunt Ltd., 889 F.3d at 1277.

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While an interpretation of the contract that has the effect of rendering a clause
superfluous is "not preferred and will be avoided if possible," Garza v. Marine Transp. Lines.
Inc., 861 F.2d 23, 27 (2d Cir. 1988), even in such a case, the court must not "alter the plain terms
of an agreement or ... strain language beyond its reasonable and ordinary meaning." Shaw Gm.
Inc. v. Triplefine InCI Com., 322 F.3d lIS, 124 (2d Cir. 2003) (citing Metro. Life Ins. Co. v. RJR
Nabisco. Inc., 906 F.2d 884, 889 (2d Cir. 1990)).
Applying these principles to the contract at issue, it is plain that the payments mentioned
in section 6.4 of the 2011 employment agreement refer solely to payments under the employment
agreement itself, not to payments under the note.
First, read in context ofthe entire 20 II employment agreement, the references to
payments in section 6.4 are clearly limited to payments under the employment contract. Section
6.1, which permits defendant to terminate plaintiff at will, provides that in such a situation,
plaintiff will be paid a severance package of his base salary and benefits, in addition to the
"Compensation Payment." PI.'s Facts, Ex. C, at 5. By contrast, section 6.4 provides that if
plaintiff terminates the agreement, he will be entitled only to the "Compensation Payment," and,
by implication, not to the severance package. Id. at 6. The employment agreement nowhere
states that payments under the note are subject to fulfillment of the entire term of the employment
agreement. Instead, the note is mentioned merely in the preliminary recitals, as providing
consideration for plaintiffs membership interest in the LLC. Id. at 1. The recitals also make
clear that the employment agreement is entered into "in order to induce Executive to continue to
serve as the Vice President, and Head[] of Sales and Marketing for the Company." Id. Thus, the
"expressed intention[] of the parties," Hunt Ltd., 889 FJd at 1277, was to enter into an

9

agreement, wholly separate from the promise to pay under the note, exchanging continued
employment for certain compensation and benefits.
Second, the last sentence of section 6.4, referring to payments under the employment
agreement, is not superfluous of its preceding sentence, but rather serves to explain it with
greater specificity. "Generally, a word used by the parties in one sense will be given the same
meaning throughout the contract in the absence of countervailing reasons." 11 Samuel Williston
& Richard A. Lord, A Treatise on the Law of Contracts § 32:6 (4th ed.). "The maxim noscitur a

sociis, that a word is known by the company it keeps, while not an inescapable rule, is often
wisely applied where a word is capable of many meanings." Jarecki v. G.D. Searle & Co., 367
U.S. 303, 307 (1961). Under the principle of noscitur a sociis, the meaning of unclear words in a
contract "may be gleaned by reference to other words associated with them." 11 Williston &
Lord, supra, § 32:6. Applying that principle here, "payments" in the first sentence plainly means
payments under the employment agreement, as explained in the second sentence. Such a reading
does not render the second sentence superfluous.
Third, it is inconceivable that plaintiff would have agreed to make receipt of payments
under the note contingent on his continuing employment with defendant. The note was executed
in exchange for plaintiffs membership interest in the LLC, which the parties determined was
worth $1.25 million. The 2011 employment agreement retains plaintiff as an employee at a rate
of $60,000 per annum, plus benefits. PI.'s Facts, Ex. C, at 3. It is terminable at will by either
party. It strains credulity to suppose that plaintiff would be willing to forego not just the $60,000
salary, but possibly over $1 million that he was bwed for relinquishing his membership interest,
in the event that the employment relationship did not continue. The reading of the contract that
10

defendant urges therefore strains the contract language "beyond its reasonable and ordinary
meaning," Law Debenture Trust Co., 595 F.3d at 467 (internal quotation marks omitted), and
would undermine the parties' intent in forming the contract.
Finally, the promissory note itself makes no reference to the employment agreement. At
most, the note states that it is being issued in connection with the letter agreement (though it
refers to the letter agreement as having been executed in July, not September, 2010). Id., Ex. B,
at 2. But the letter agreement contemplated only that the parties would enter into a new
employment agreement on the closing date, id., Ex. A, at 3; it made no reference to defendant's
obligation under the note being tied in any way to the terms of that new employment agreement. 4
Accordingly, even if the language regarding payments in the employment agreement were
ambiguous (which it is not), the note itself unambiguously creates an obligation to pay that is not
dependent on fulfillment of the employment agreement. Cf. Int'l Multifoods Corn., 309 F.3d at
88 & n.7 ("Resort to extrinsic evidence bearing on the intent of the parties" is appropriate only
where ambiguities exist within a contract).

4Defendant argues that the letter agreement "clearly links the obligation of Defendant to
redeem Plaintiff's interest with Plaintiff s empl@)ment status with Defendant." Def.' s Mem. 5.
Defendant points to the fact that
the letter agreement provides that the obligation of Defendant to redeem
Plaintiffs interest is triggered upon "the earlier of (x) March 26, 2011 and (y) 30
days following the termination of the Employment Agreement other than (i) for
Cause (as defined in the Employment Agreement), [or] (ii) as a result ofMr.
Dauphin's breach of voluntary termination of the Employment Agreement .... "
Def.'s Mem. 5-6 (quoting id., Ex. A, at I). However, defendant concedes that the employment
agreement referenced in this provision is the 2007 employment agreement, which was terminated
upon execution of the note. Consequently, this paragraph provides no link between the note and
the 2011 employment agreement.
II

The unambiguous terms of the contract thus support plaintiffs motion for partial
summary judgment.
III.

Defendant's Insolvency Defense
Defendant argues that even if payment is required under the note, defendant cannot

satisfy its obligations to pay because it is insolvent. Defendant cites New York Business
Corporation Law § 513, which prohibits re~emp.tio~ of shares by a corporation when the
corporation is insolvent or such redemption would render the corporation insolvent. See N.Y.
Bus. Corp. L. § 513(a). Defendant cites, in the alternative, New York Limited Liability
Company Law § 508, which provides:
A limited liability company shall not make a distribution to a member to the
extent that, at the time of the distribution, after giving effect to the distribution, all
liabilities of the limited liability company, other than liabilities to members on
account of their membership interests and liabilities for which recourse of
creditors is limited to specified property of the limited liability company, exceed
the fair market value of the assets of the limited liability company ....
N.Y. Ltd. Liab. Co. L. § 508(a). In its supplemental opposition, defendant presents the affidavit
of David Krinsky, principal member of Crownbrook Acquisition II LLC, which is the principal
member of defendant. Supplemental Affirmati9'n of David Krinsky in Opp 'n to PI. 's Mot. for
;

,'.,

!

Partial Summ. J. ("Krinsky Aff.") ~ I. Krinsky states, "I have personal knowledge of the facts
set forth herein." Id. He then states, "Annexed hereto as Exhibit A are copies of financial
statements produced on August 22, 2012 to Dauphin's counsel." Id.

~

2. The financial

statements purportedly include "audited balanoesheets for 2009 and 2010" as well as "unaudited
balance sheets for 2011 and the first quarter of2012" that show, according to Krinsky, that
during those periods, "Crownbrook [ACC LLC]'s liabilities exceeded the fair market value of its

12

\. ,

assets." Id. '\13. Krinsky also states that the balance' sheet for 2011 and the first quarter of2012
contains a mistake, insofar as a liability categorized as "Due to Member" should instead read
"Due to Related Party." Id. '\14.'
Krinsky'S affidavit and the annexed financial statements are insufficient "to support an
essential element of [the] affirmative defense," Giammettei, 34 F.3d at 54; namely, that
defendant is, in fact, insolvent. "It is well settled that the 'burden is on the corporation to
establish that, at the time the payments were to be made ... , it lacked the necessary surplus to
make the payments or would thereby be rendered insolvent.'" Rehberger v. MRW Gm .. Inc., No.
05-CV-0210 (JS)(MLO), 2008 WL 919665, at *2 (E.D.N.Y. Mar. 31,2008) (alteration in

,

original) (quoting La Sorsa v. Algen Press Com., 841 N.Y.S.2d 716, 718 (App. Div. 1984));
accord Nakano v. Nakano McGlone Nightingale Adver .. Inc., 377 N.Y.S.2d 996, 1000 (Sup. Ct.
1975)). When a party against whom summary judgment is sought raises an affirmative defense,
the court will draw all reasonable inferences in the party's favor, but "it will not permit [the
party] to 'rely on mere conculsory allegations nor speCUlation, but instead' will require [the
party] to 'offer some hard evidence showing that [its] version ofthe events is not wholly
fanciful.'"

In re Livent, Inc. Noteholders Sec. Litig., 355 F. Supp. 2d 722, 729 (S.D.N.Y. 2005)

(quoting D' Amico v. City of N.Y., 132 F.3d 145, 149 (2d Cir. 1998)). "[O]ne who relies upon
an affirmative defense to defeat an otherwise meritorious motion for summary judgment must
adduce evidence which, ... drawing all reasonable inferences in favor of the non-moving party,
would permit judgment for the non,moving party on the basis of that defense." E. Sav. Bank,

'Krinsky does not identifY the related party in question, describing it only as "another
entity of which I am a member, and not ... [Crownbrook Acquisition II LLC)," id. '\14.
\3

FSB v. Rabito, No. II-CV-2501 (KAM), 2012 WL 3544755, at *3 (E.D.N.Y. Aug. 16,2012)
(quoting Frankel v. ICD Holdings SA, 930 F. Supp. 54, 65 (S.D.N.Y. 1996)). "[O]nly
admissible evidence need be considered by the trial court in ruling on a motion for summary
judgment." Raskin v. Wyatt Co., 125 FJd 55, 66 (2d Cir. 1997). "If the evidence [proffered by
the non-moving party] is merely colorable, or is not significantly probative, summary judgment
may be granted." Anderson, 477U$. at 249-51) (internal citations omitted).
Here, defendant has adduced no evidence that would support its affirmative defense or
create a genuine issue offact to defeat plaintiffs motion for summary judgment. Although
Krinsky professes to have personal knowledge "of the facts set forth" in his affidavit, he makes
no representation that he verified the accuracy of any of the figures itemized in the financial
documents. He does not even declare that the financial statements annexed to his affidavit are
true and correct copies of financial statements for defendant - merely that they are "copies"
produced to plaintiffs counsel well after the relevant time periods. There is no suggestion that
Krinsky has any personal knowledge that would relate to the contents or the accuracy of the
financial statements, or that he would be competent to testify about such matters at trial. Cf. Fed
,:

iJ '

R. Civ. P. 56(c)(4) ("An affidavit or declaration used to support or oppose a motion must be
made on personal knowledge, set out facts that would be admissible in evidence, and show that
the affiant or declarant is competent to testify on the matters stated."); Patterson v. County of
Oneida, 375 F.3d 206, 219 (2d Cir. 2004) (same). Defendant has thus failed to introduce
admissible evidence to establish its insolvency"': an essential element of the affirmative defense.
Even if the evidence were admissible, however, it is not probative. Contrary to Krinsky's
affidavit, the financial statements provided are plainly unaudited, and have, at best, been subject
14

to a "review" by an accounting finn, which expressly disclaimed its ability to express an opinion
regarding the financial statements. Dkt. #36-1, at 6; see Frankel, 930 F. Supp. At 65-66 (holding
that "review" of balance sheets, which was not an audit and expressed no opinion as to accuracy
of balance sheets, was insufficient factual basis to establish affinnative defense of fraud). In
addition, Krinsky himself admits that the financial documents "mischaracterize[J" at least one
line item, Krinksy Aff. , 4, further calling into question their accuracy.6
Defendant has therefore failed to adduce any admissible evidence of insolvency, and the
evidence it has presented through the Krinsky affidavit and the annexed financial statements does
not support defendant's claim of insolvency. Moreover, the court has afforded defendant ample
opportunity to support its affinnative defense. After defendant produced no affinnative evidence
of insolvency in its opposition to plaintiffs partial summary judgment motion, Judge Gold gave
defendant another chance to support its claim. See Dkt. #37. As discussed, in its supplemental
opposition, defendant failed again to support its contentions with any affidavit claiming personal
knowledge of the relevant facts, let alone the "hard evidence," In re Livent. Inc. Noteholders Sec.
Litig., 355 F. Supp. 2d at 729 (internal quotation marks omitted), required to support an
affinnative defense. Defendant has already had two bites at the apple; it does not deserve a third.

6The court notes that this supposed mischaracterization may actually be dispositive of the
affinnative defense. Krinsky claims that a $4 million liability that is listed as "Due to Member"
should actually be listed as "Due to Related,Parw." This is important because, if the liability
were due to a member on account of his membership interest, such liability would not be counted
as a liability under N.Y. Ltd. Liab. Co. L. § 508 (prohibiting redemption when liabilities "other
than liabilities to members on account of their membership interests" exceed assets). Given that
this is the single largest liability on the balance sheet for 2011, without which defendant's
liabilities could not possibly exceed its assets, it is convenient indeed that this item is, according
to Krinsky, mischaracterized.
15

Because there is "an absence of evidence to support an essential element" of the
affirmative defense - namely, defendant's insolvency - there is no genuine issue of material fact
with respect to this defense. Giammettei, 34 F.3d at 54; see Citizens Bank of Clearwater v. Hunt,
927 F.2d 707, 713 (2d Cir. 1991) (summary judgment appropriate where non-movant failed to
make a showing sufficient to establish insolvency). Accordingly, plaintiff is entitled to summary
judgment.

CONCLUSION
For the foregoing reasons, plaintiffs motion for partial summary judgment is granted.
Entry of judgment is deferred pending resolution of defendant's counterclaims.
SO ORDERED.

s/Allyne R. Ross
Allyne R
United St
Dated: April 10,2013
Brooklyn, New York

1;

I;

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