AP Links, LLC. et al v. Russ et al

Filing 187

MEMORANDUM & ORDER denying 173 Motion for Partial Summary Judgment; granting 182 Motion to Strike; Plaintiffs' motion to strike (Docket Entry 182) is GRANTED, and Defendants' motion for partial summary judgment (Docket Entry 173) is DENIED. The parties shall file letters within fourteen (14) days of the date of this Memorandum and Order setting forth their respective positions on scheduling a settlement conference with Judge Tomlinson. So Ordered by Judge Joanna Seybert on 8/7/2017. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-------------------------------------X
AP LINKS, LLC and ST. ANNES
DEVELOPMENT COMPANY, LLC,
Plaintiffs,

MEMORANDUM & ORDER
09-CV-5437(JS)(AKT)

-against–
JAY EDMUND RUSS and RUSS & RUSS P.C.,
Defendants.
-------------------------------------X
APPEARANCES
For Plaintiffs:
Kenneth Adam Novikoff, Esq.
Laura L. Shockley, Esq.
Rivkin Radler, LLP
EAB Plaza, 926 RXR Plaza
Uniondale, NY 11556
Steven B. Gould, Esq.
Brown & Gould, LLP
7700 Old Georgetown Road, Suite 500
Bethesda, MD 20814
For Defendants:

Nicholas P. Chrysanthem, Esq.
Marshall Dennehey Warner Coleman & Goggin
Wall Street Plaza
88 Pine Street, 21st Floor
New York, NY 10005
Caitlin Nell Nutter, Esq.
McManus & Richter PC
48 Wall Street, 25th Floor
New York, NY 10005
Daniel P. Rosenthal, Esq.
Russ & Russ, P.C.
543 Broadway
Massapequa, NY 11758

SEYBERT, District Judge:
This dispute arises out of a series of business dealings
between AP Links, LLC (“AP Links”), St. Anne’s Development Company,
LLC (“SADC” and collectively, “Plaintiffs”) and Global Golf, Inc.
(“Global Golf”), a client of Defendant Jay Edmund Russ (“Russ”)
and Russ & Russ, P.C. (collectively “Defendants”).

Currently

pending before the Court is Defendants’ motion for partial summary
judgment.

(Defs.’ Mot., Docket Entry 173.)

For the following

reasons, Defendants’ motion is DENIED.
BACKGROUND
I.

Factual Background1
AP

Links

and

SADC

are

limited

liability

companies

operated by Maryland residents Aaron Young (“Young”) and Peter
Rubin (“Rubin”).

(Defs.’ 56.1 Stmt., Docket Entry 174, ¶¶ 6-7;

Pls.’ 56.1 Counterstmt., Docket Entry 177, ¶¶ 82-84.)

Global Golf

was operated by Neal Trabich (“Trabich”), a New York resident, and
was engaged in the golf course management business.2
Counterstmt. ¶¶ 85-86.)

(Pls.’ 56.1

In 2000, AP Links and Global Golf entered

The following material facts are drawn from Defendants’ Local
Civil Rule 56.1 Statement and Plaintiffs’ Local Civil Rule 56.1
Counterstatement. Any relevant factual disputes are noted. All
internal quotation marks and citations have been omitted.
1

According to Trabich, from approximately 2000 and 2006, he
developed a personal and business relationship with Young.
(Pls.’ Counterstmt. ¶ 104; Sept. 14 Trial Tr., Pls.’ Ex. 15,
Docket Entry 177-15, 40:19-41:5.)
2

2

into a consulting agreement (the “Consulting Agreement”) whereby
AP Links agreed to provide consulting services to Global Golf “with
respect to the development, management and operation of golf
courses and/or related activities.”

(Defs.’ 56.1 Stmt. ¶¶ 3, 9.)

As part of that transaction, AP Links loaned Global Golf $600,000,
and Global Golf agreed to pay AP Links $720,000 during the term of
the agreement.

(Pls.’ Counterstmt. ¶¶ 89, 91; Defs.’ 56.1 Stmt.

¶ 1; Sept. 14 Trial Tr., 41:20-42:1; Consulting Agreement, Pls.’
Ex. 16, Docket Entry 177-16, ¶ 4.)3

The parties dispute whether

any consulting services were ever provided by AP Links, and
Defendants

claim

that

the

consulting

fees

were

“disguised

interest.”4

(Defs.’ 56.1 Stmt. ¶¶ 19-22; Pls.’ 56.1 Counterstmt.

¶¶ 96-103.)

At some point, Global Golf refused to continue paying

AP Links.

(Defs.’ 56.1 Stmt. ¶ 18.)
The current dispute centers around a facility agreement

(the “Facility Agreement”) signed by SADC, Trabich, Trabich’s wife
(“Mrs. Trabich or T. Trabich” and, together with Trabich, “the
Trabiches”), and their business partners Ron and Irene Coruzzi

With the exception of trial and deposition transcripts, the
Court will use the pagination assigned by the Electronic Case
Filing System when referring to the exhibits.
3

Defendants allege that the members of AP Links--Young and
Rubin--had no experience developing, managing or operating a
golf course when the Consulting Agreement was signed. (Defs.’
56.1 Stmt. ¶ 10, 12-17.) Plaintiffs contend that “AP Links was
ready, willing and able to provide consulting services . . . and
in fact did.” (Pls.’ 56.1 Counterstmt. ¶ 10.)
4

3

(“the Coruzzis”) on May 2, 2006.
56.1 Counterstmt. ¶ 115.)

(Defs.’ 56.1 Stmt. ¶ 52; Pls.’

Pursuant to the Facility Agreement,

SADC arranged “a facility for Trabich with a third party lender .
. . to enable it to borrow on a revolving credit basis up to One
Million

($1,000,000)

Dollars . . .

construction of the Saint
30,000

square

foot

to

help

finance

the

Anne[’]s golf course, together with a

clubhouse . . . situated

in

the

Town

of

Middletown, New Castle County, Delaware.” (Pls.’ 56.1 Stmt. ¶ 117;
Facility Agreement, Pls.’ Ex. 23, Docket Entry 177-23, at 1.)

The

Trabiches and the Corruzzis agreed to pay SADC “a fee of ten (10%)
percent per annum upon all principal amounts borrowed by Trabich
from the Facility,” and “an annual consulting fee” of $100,000 per
year for the first ten years and $75,000 per year for the remaining
ten years. (Defs.’ 56.1 Stmt. ¶ 53; Pls.’ 56.1 Counterstmt. ¶ 118;
Facility Agreement ¶ 2(a)-(b).)
Additionally,

“as

security

for

the

performance

of

[their] obligations” under the Facility Agreement, Mrs. Trabich
agreed to deliver “to SADC as mortgagee an original fully executed
and notarized mortgage” on the Trabiches’ home in Laurel Hollow,
New York (the “Property”) in the amount of $1,000,000 (the “SADC
Mortgage”).

(Defs.’ 56.1 Stmt. ¶ 54; Pls.’ 56.1 Counterstmt.

¶ 119; Facility Agreement ¶ 3.) However, SADC agreed not to record
the mortgage unless (1) the Trabiches and Corruzzis defaulted and
the default remained uncured for ten days or (2) the Trabiches
4

received notice and gave consent.

(Defs.’ 56.1 Stmt. ¶ 55; Pl.’s

56.1 Counterstmt. ¶ 121; Facility Agreement ¶ 3.)

The Trabiches

represented that, at that time, the Property was encumbered only
by a mortgage and lien held by Countrywide Home Loans, Inc. in the
approximate amount of $1,500,000.
Facility

Agreement

¶

3(b).)

(Pls.’ 56.1 Counterstmt. ¶ 120;
They

further

“warrant[ed]

and

represent[ed], as a further condition of th[e] Agreement, that
they shall not place or allow to be placed upon the Collateral
Property, any further liens or other encumbrances ahead of SADC
and the Mortgage executed SADC as security for and accompanying
this

(Facility

Agreement.”5

Agreement

¶

3(b).)

After

the

agreement was executed, SADC arranged the credit facility, Mrs.
Trabich delivered the mortgage to SADC, and SADC did not record
the mortgage.

(Defs.’ 56.1 Stmt. ¶ 54; Pls.’ 56.1 Counterstmt.

¶¶ 123-25; Sept. 14 Trial Tr. 74:21-75:12.)

By the end of that

month, Trabich had borrowed the entire amount available under the
line of credit.

(Pls.’ 56.1 Counterstmt. ¶ 123; Sept. 14 Trial

Tr. 75:8-12.)
Several months later, in the fall of 2006, the Trabiches
retained

Defendants.

(Defs.’

56.1

Stmt.

¶

23;

Pls.’

56.1

Counterstmt. ¶ 126; Russ Dep., Pls.’ Ex. 25, Docket Entry 177-25,

Plaintiffs allege that Trabich separately promised Young that
he would notify Young if the couple’s financial situation
changed so that SADC could record its mortgage. (Pls.’ 56.1
Counterstmt. ¶ 122.)
5

5

73:15-18.)6

According to Russ, he was retained to assist with the

Trabiches “legal and financial issues.”7

(Russ Dep. 73:19-24.)

Although the Trabiches and Russ did not execute a written fee
agreement, Russ later testified that he believed the parties had
an “understanding . . . that [he] would charge for [his] services
. . . [g]enerally by the hour.”

(Russ Dep. 76:13-25.)

Based on

a series of e-mails between Trabich and Russ, Plaintiffs allege
that the Trabiches wanted to pay off the $1,000,000 loan, and in
order to accomplish this, Trabich and Russ discussed strategies
for

nullifying

the

Facility

Agreement

and

the

Consulting

Agreement. (Pls.’ 56.1 Counterstmt. ¶¶ 130-34.) Plaintiffs allege
that Trabich and Russ discussed the possibility of litigation,
including seeking to void the agreements based on a criminal usury
theory.
allege

(Pls.’ 56.1 Counterstmt. ¶ 131.)
that

Trabich

and

reviewing the relevant law.

Russ

abandoned

However, Plaintiffs
those

efforts

after

(Pls.’ 56.1 Counterstmt. ¶ 134.)

Thereafter, Russ testified that he approached Gordon
Lenz (“Lenz”) to gauge his interest in purchasing one of Global
Golf’s assets--the rights to manage the golf course concessions at

Although Defendants did not specify the exact date, they allege
that the Facility Agreement was executed before they were
retained. (Defs.’ 56.1 Stmt. ¶ 56.)
6

Defendants allege that Trabich considered Russ’ advice to be
legal advice, not business advice. (Defs.’ 56.1 Stmt. ¶¶ 2426.) Plaintiffs deny that Russ provided only legal advice.
(Pls.’ 56.1 Counterstmt. ¶ 24.)
7

6

Bethpage State Park (the “Bethpage Transaction”).8

(Pls.’ 56.1

Counterstmt. ¶¶ 87, 137; Sept. 14 Trial Tr. 34:7-36:14; Russ Dep.
95:24-96:8.)

Russ testified that either he or an attorney in his

office formed a limited liability company called Confer Bethpage
(“Confer Bethpage”) to facilitate the transaction, and Lenz was
the sole member.

(Pls.’ 56.1 Counterstmt. ¶¶ 139-40; Russ Dep.

102:7-21, 105:14-18.)

In December 2006, the State of New York

approved the assignment of the license to Confer Bethpage, and
Global

Golf

and

Confer

Agreement (the “APA”).

Bethpage

executed

an

Asset

Purchase

(Defs.’ 56.1 Stmt. ¶¶ 27-28; Pls.’ 56.1

Counterstmt. ¶¶ 163-64.)

The parties also entered into an escrow

agreement whereby Russ was designated as the escrow agent for the
Bethpage Transaction.

(Defs.’ 56.1 Stmt. ¶¶ 31-32.)

Pursuant to

the APA, Confer Bethpage agreed to pay $2,400,000 for the license
and related assets.

(Pls.’ 56.1 Counterstmt. ¶ 164; APA, Pls.’

Ex. 6, Docket Entry 177-6, at 2.)

Lenz also loaned Mrs. Trabich

$500,000, and in exchange, Mrs. Trabich granted Lenz a mortgage on
the

Trabiches’

home

in

Laurel

Hollow

(the

“Lenz

Mortgage”).

(Defs.’ 56.1 Stmt. ¶¶ 37-38; Pls.’ 56.1 Counterstmt. ¶ 173.)
Lenz Mortgage was recorded on January 5, 2007.

(Defs. 56.1 Stmt.

¶ 39.)

Plaintiffs allege that Lenz and Russ were “long-time close
friend[s].” (Pls.’ 56.1 Counterstmt. ¶ 135.)
8

7

The

Russ’ role in the Bethpage Transaction is disputed by
the parties.

For example, Plaintiffs allege that Russ represented

both parties to the transaction.

(Pls.’ 56.1 Counterstmt. ¶ 171.)

They allege that a questionnaire submitted to New York State in
connection with the Bethpage Transaction was completed by Russ on
Lenz’s behalf.

(Pls.’ 56.1 Counterstmt. ¶ 162.)

Further, the

questionnaire lists Russ as “counsel” and the “authorized contact
for this questionnaire.” (Questionnaire, Pls.’ Ex. 36, Docket
Entry 177-36, at 1.)

In subsequent statements, both Trabich and

Lenz testified that they believed that Russ was representing both
parties.9

(Pls.’ 56.1 Counterstmt. ¶¶ 168-69; Lenz Dep., Pls.’

Ex. 11, Docket Entry 177-11, 123:10-13; Trabich 2008 Dep., Pls.’
Ex. 2, Docket Entry 177-2, 299:11-22.)

However, Russ testified

that “as a technical matter . . . [he] was the attorney for Global
Golf and representing the seller” and explained this to Lenz, but
that due to their long-standing relationship, Lenz “always [saw]
[Russ] as a person responsible to him.”10

(Russ Dep. 80:15-81:24.)

Russ also testified that as far as he knew, Confer Bethpage and

When Russ was asked whether he received conflict of interest
waivers, he testified that he did not receive written waivers,
but he believed he received a verbal conflict of interest waiver
from Lenz or Confer Bethpage. (Pls.’ 56.1 Counterstmt. ¶ 172;
Russ Dep. 82:14-22.) Defendants allege that the escrow
agreement contained “Waiver of Conflict clauses.” (Defs.’ 56.1
Stmt. ¶ 34.)
9

Russ also said that he felt responsible to Lenz in connection
with the Bethpage Transaction. (Russ Dep. 81:25-82:4.)
10

8

Lenz were not being represented by separate counsel.
Counterstmt. ¶ 170; Russ Dep. 89:11-20.)

(Pls.’ 56.1

Plaintiffs allege that

Russ and Trabich agreed that Russ would be paid a “finder’s fee”
if the sale of the Bethpage license was successful.
Counterstmt. ¶ 129.)

(Pls.’ 56.1

At his deposition, Russ testified that he

did not believe that they agreed on a finder’s fee, but “there was
a suggestion . . . that [he] might be entitled to a bonus or
finder’s fee or something in relation to the Bethpage transaction.”
(Russ Dep. 77:4-10.)

As part of the Bethpage Transaction, Trabich

was also offered a position with Confer Bethpage.

(Russ Dep.

150:22-25.)
The Trabiches later testified that they knew that
granting the mortgage to Lenz was a violation of the Facility
Agreement with SADC.11

(Pls.’ 56.1 Counterstmt. ¶ 174; Trabich

2008 Dep. 278:14-280:7; T. Trabich 2009 Dep., Pls.’ Ex. 38, Docket
Entry 177-38, 421:16-422:7.)
Russ

advised

the

Trabiches

However, the parties dispute whether
to

execute

the

Lenz

Mortgage.

Plaintiffs allege that Mrs. Trabich granted Lenz the mortgage
“based on advice received from Russ.”
¶ 174.)

(Pls.’ 56.1 Counterstmt.

Specifically, Mrs. Trabich testified during a deposition

that she granted Lenz the mortgage “because [she] felt that the

Plaintiffs allege that Trabich and Lenz believed that Russ was
representing both the Trabiches and Lenz in the loan
transaction. (Pls.’ 56.1 Counterstmt. ¶¶ 175-76.)
11

9

[Facility Agreement] . . . would not be valid” based on discussions
with Russ.

(T. Trabich 2009 Dep., 421:23-422:7.)

However,

Defendants allege that the “decision to breach the SADC Facility
Agreement

was

not

based

on

advice

of

counsel”

and

refer

to

Trabich’s testimony from a 2008 deposition to that effect. (Defs.’
56.1 Stmt. ¶ 74.) Defendants also allege that Russ “did not advise
Neal Trabich not to tell Plaintiffs about the filing of the Lenz
[M]ortgage.”12
whether

the

(Defs.’ 56.1 Stmt. ¶ 73.)
Lenz

Mortgage

and

the

The parties also dispute

Bethpage

Transaction

were

connected; Plaintiffs allege that Lenz would not have loaned the
Trabiches $500,000 if the sale to Confer Bethpage did not go
through, while Defendants allege that there was “no link” between
the loan and the assignment transaction.

(Defs.’ 56.1 Stmt. ¶ 75;

Pls.’ 56.1 Counterstmt. ¶ 180.)
On November 3, 2006, in the midst of negotiations with
Lenz, Russ filed a lawsuit on behalf of the Trabiches against,
among others, AP Links and SADC, seeking a judgment declaring the
Consulting

Agreement

and

the

Facility

Agreement

to

be

void.

(Defs.’ 56.1 Stmt. ¶ 57; Pls.’ 56.1 Counterstmt. ¶¶ 143-44.)
Trabich later confirmed that the purpose of the lawsuit was to
“reduce the amount of payments to the maximum extent possible under

Regarding other mortgages on the Property, Lenz testified that
he learned from Russ that “there was at least one mortgage on
[the] house.” (Pls.’ 56.1 Counterstmt. ¶ 179; Lenz Dep. 72:512.)
12

10

the law.”
¶ 145.)

(Sept. 14 Trial Tr. 113:2-6; Pls.’ 56.1 Counterstmt.

Several days later, Trabich contacted Russ.

Counterstmt. ¶ 151.)

(Pls.’ 56.1

Plaintiffs allege that Trabich “wanted to

‘make a deal’ with SADC to restructure or eliminate some of the
SADC loan.”

(Pls.’ 56.1 Counterstmt. ¶ 151; Nov. 9 Email, Pls.’

Ex. 32, Docket Entry 177-32.)

They further allege that “Russ

exerted enormous control and influence over Trabich and strongly
advised Trabich not to contact Young,” a member of AP Links and
SADC.13

(Pls.’ 56.1 Counterstmt. ¶ 152.)

Young later testified

that he did not become aware of the lawsuit until February 2007.
(Pls.’ 56.1 Counterstmt. ¶¶ 153-61; Sept. 15 Trial Tr., Pls.’ Ex.
13, Docket Entry 177-13, 386:15-19.)

The lawsuit was eventually

dismissed due to a forum selection clause designating Maryland as
the proper venue for any dispute.

(Defs.’ 56.1 Stmt. ¶ 58;

Facility Agreement ¶ 9 at 5.)
A wave of litigation in Maryland and New York followed.
SADC sued the Trabiches and Corruzzis for breach of contract and
fraud, and AP Links sued Global Golf, the Trabiches, Lenz and
Confer Bethpage for breach of contract and related claims.

SADC

and AP Links prevailed in their respective cases. (Pls.’ 56.1

Russ wrote to Trabich, “Should you approach this CREDITOR
before making some moves and taking some needed precautions? . .
I think NOT. Neal, do as you wish . . . but if I’m at the helm
of this wooden, broken, damaged, sinking ship for the moment,
then please go below deck . . . oh, put on your life
jacket . . .” (Nov. 9 Email (alterations in original).)
13

11

Counterstmt. ¶¶ 185-90, 193; Aug. 2010 Order, Defs.’ Ex. I, Docket
Entry 180-1, at 1-2; AP Links v. Global Golf Docket Sheet, Pls.’
Ex. 42, Docket Entry 177-42, at 23.)

SADC also brought suit

against Lenz, and SADC and Lenz eventually settled that case.
(Pls.’ 56.1 Counterstmt. ¶ 191; SADC v. Lenz Docket Sheet, Pls.’
Ex. 44, Docket Entry 177-44, at 15-16.)
Russ

sued

SADC

and

Young

for

Additionally, Lenz and

defamation

in

connection

statements allegedly made by Young to local newspapers.14
56.1 Counterstmt. ¶¶ 200-01.)
dismissed.

with

(Pls.’

The defamation case was later

(Pls.’ 56.1 Counterstmt. ¶ 205.)
As discussed, Russ was the escrow agent for the Bethpage

Transaction.

(Defs.’ 56.1 Stmt. ¶ 32.)

On January 25, 2007,

shortly after the transaction closed, Russ paid his firm $250,000
from the escrow account. (Pls.’ 56.1 Counterstmt. ¶ 220; Escrow
Stmt., Pls.’ Ex. 54, Docket Entry 177-54, at 1.) Defendants allege
that this payment was compensation for legal work.
Stmt. ¶ 76.)

(Defs.’ 56.1

They point to Trabich’s 2012 testimony that the

Around this time, there were several newspaper stories about
the Trabiches. Specifically, Trabich pleaded guilty to grand
larceny, forgery, offering a false instrument and bribery on
August 12, 2008. (Defs.’ 56.1 Stmt. ¶ 48.) Trabich was
subsequently terminated by Confer Bethpage. (Pls.’ 56.1
Counterstmt. ¶ 196.) Plaintiffs allege that Russ drafted an
Acknowledgement and General Release, pursuant to which Trabich
released Confer Bethpage from all claims and received severance
payments, “on behalf of Confer Bethpage and negotiated its terms
with Confer Bethpage on behalf of Mr. Trabich.” (Pls.’ 56.1
Counterstmt. ¶¶ 197-98.)
14

12

payment was for “legal fees.”

(Defs.’ 56.1 Stmt. ¶ 76; Trabich

2012 Dep., Defs.’ Ex. P, Docket Entry 174-1, at 49, 145:18-20.)
Defendants further allege that Trabich “agreed on and approved the
payment,” that the legal fees were “reasonable and fair based on
the work that had been done,” and that Russ “would not make any
payments out of the escrow without consulting with [ ] Trabich”
based on Trabich’s testimony in 2012.
78, 80.)

(Defs.’ 56.1 Stmt. ¶¶ 77-

Plaintiffs admit that Trabich approved the $250,000

payment, but allege that the payment was a finder’s fee related to
the Bethpage Transaction.15

(Pls.’ 56.1 Counterstmt. ¶¶ 77, 223.)

For support, they point to Russ’ testimony that he did not document
the time he spent on the Bethpage Transaction and did not provide
a bill to the Trabiches; rather, he testified that they discussed
the work he had done and agreed on an appropriate fee.
56.1 Counterstmt. ¶¶ 221-22; Russ Dep. 89:21-91:9.)

(Pls.’
In 2015

depositions, the Trabiches both referred to the $250,000 payment
as a “finder’s fee.” (Pls.’ Counterstmt. ¶ 224; Trabich 2015 Dep.,
Pls.’ Ex. 7, Docket Entry 177-7, 238:6-12; T. Trabich 2015 Dep.,
Pls.’ Ex. 55, Docket Entry 177-55, 47:7-17.)

In 2008 and 2009,

Plaintiffs further allege that Trabich later questioned
whether Defendants’ fees were reasonable and that he did not
approve every payment made from the account. (Defs.’ 56.1 Stmt.
¶¶ 78, 80; Pls.’ 56.1 Counterstmt. ¶¶ 78, 80.) Plaintiffs also
claim that certain payments from the account to Defendants in
2009 were not supported by any records, and when asked, Russ
could not recall the legal services performed that led to those
payments. (Pls.’ 56.1 Counterstmt. ¶¶ 225-26.)
15

13

Plaintiffs

allege

that

Russ

made

payments

to

an

attorney

representing Russ and Lenz in the defamation case and Lenz in the
separate case against him filed by SADC, despite the fact that
there was no written agreement that Global Golf would pay such
fees.16

(Pls.’ 56.1 Counterstmt. ¶¶ 229-44.)
As

discussed,

the

Lenz

Mortgage

was

recorded

on

January 5, 2007. (Defs. 56.1 Stmt. ¶ 39.) In 2008, Lenz commenced
a foreclosure action, but discontinued the action on May 3, 2010.
(Defs.’ 56.1 Stmt. ¶¶ 60-61; Foreclosure Conf. Part Order, Defs.’
Ex. W, Docket Entry 174-2, at 72.)

On April 6, 2007, SADC recorded

its mortgage and subsequently commenced a foreclosure action.
(Defs.’ 56.1 Stmt. ¶¶ 62-63.)

Judge Karen V. Murphy (“Judge

Murphy”) of the Supreme Court, Nassau County dismissed SADC’s
foreclosure action on April 28, 2008 (“Murphy Decision”).

(Defs.’

56.1 Stmt. ¶ 64; Murphy Decision, Defs.’ Ex. Y, Docket Entry 1743, at 49.)

She found that Plaintiff “ha[d] failed in its burden

to show a default under the mortgage,” because the foreclosure
action

was

based

on

the

Trabiches’

breach

of

the

Facility

Interestingly, before Trabich was deposed in this action, Russ
forwarded him a copy of Russ’ deposition transcript and asked
him to read it. (Pls.’ 56.1 Counterstmt. ¶ 255; Nov. 18 Email,
Pls.’ Ex. 57, Docket Entry 177-57.) Trabich responded, “[a]s
Abe Lincoln would have stated: ‘I will not divide this Union on
principles that are based on man’s inhumanity to man.’ Gould
must yield to our will! I have completed the reading of the
document and noted all salient points. I await our meeting.”
(Nov. 19 Email, Pls.’ Ex. 58, Docket Entry 177-58.) Trabich and
Russ then arranged a meeting. (Nov. 19 Email.)
16

14

Agreement, and those promises “d[id] not appear in the mortgage
agreement . . . [or] in the non-existent note.”

(Murphy Decision

at 51.) She also noted that it was possible the foreclosure action
could proceed based on non-payment of the underlying debt, but
“there [was] no default in payment alleged.”
51.)

(Murphy Decision at

Finally, Judge Murphy declined to grant SADC a preliminary

injunction to prevent the Trabiches from further encumbering the
Property

because

SADC

recording

its

priority over any junior lienholders.
II.

mortgage

guaranteed

SADC

(Murphy Decision at 52.)

Procedural History
Plaintiffs commenced this lawsuit on December 11, 2009.

(Compl., Docket Entry 1.)

The Complaint asserts claims on behalf

of AP Links for breach of fiduciary duty and breach of a duty to
a third party beneficiary and a claim on behalf of SADC for
tortious

interference

with

contract.

(Compl.

¶¶

68-82.)

Plaintiffs demand $3,809,792.70 in compensatory damages and at
least

$3,000,000

in

punitive

damages.

(Compl.

at

15.)

On

September 14, 2010, Defendants filed a motion to dismiss, which
was denied by Judge Thomas C. Platt on March 14, 2011.17

(Mot. to

Dismiss, Docket Entry 16; March 2011 Order, Docket Entry 20.)
Relevant to this motion, Judge Platt held that Plaintiffs stated
a claim for tortious interference because “[a]lthough normally an

The case was reassigned to the undersigned on July 8, 2014.
(See July 8, 2014 Electronic Order.)
17

15

agent may not be held liable for inducing its principal to breach,”
in light of Plaintiffs’ allegation that “Russ colluded with Trabich
and Lenz in his capacity as a broker and as an attorney . . . Russ
acted outside the realm of agent.”

(March 2011 Order at 16.)

Defendants filed their Answer on April 7, 2011.
Entry 23.)

(Answer, Docket

Discovery was contentious, and the parties litigated

numerous discovery disputes.
On June 14, 2016, Defendants filed a motion for partial
summary judgment on the tortious interference claim only.

(Defs.’

Mot.,

on

Docket

Entry

173.)

Defendants

are

not

moving

fiduciary duty and third party beneficiary claims.

the

On July 18,

2016, Plaintiffs filed their opposition brief, and Defendants
filed their reply brief on July 29, 2016.
Entry 176; Defs.’ Reply, Docket Entry 180.)

(Pls.’ Opp., Docket
On August 3, 2016,

Plaintiffs filed a motion to strike a section of Defendants’ reply
brief.

(Mot. to Strike, Docket Entry 182.)

Defendants opposed

the motion to strike on August 17, 2016, and Plaintiffs filed a
reply brief in further support of their motion on August 30, 2016.
(Defs.’ Strike Opp., Docket Entry 183; Pls.’ Strike Reply at 185.)
DISCUSSION
I.

Motion to Strike
Plaintiffs move to strike the arguments under Point I

and

under

sections

A

and

Defendants’ reply brief.

B

of

the

Preliminary

Statement

in

(Pls.’ Strike Br., Docket Entry 182-1,
16

at 1.)

Plaintiffs argue that these sections of Defendants’ reply

advance a new argument--specifically, that Plaintiffs cannot prove
“but for” causation.

(Pls.’ Strike Br. at 1.)

Plaintiffs contend

that in Defendants’ opening brief, they argued that the SADC
Mortgage was unenforceable because it did not secure a note or the
promises in the Facility Agreement, and a result, SADC cannot show
actual damages.

(Pls.’ Strike Br. at 2.)

However, Plaintiffs

argue that in the reply, Defendants raised a different argument-that “Plaintiff’s damages argument is premature because it cannot
prove

that

‘but

for’

the

alleged

interference

by

the

Russ

Defendants . . . the Trabiches would have performed under the
Facility Agreement.”

(Pls.’ Strike Br. at 2.)

Defendants respond that the ‘but for’ causation argument
was rebutting the arguments in Plaintiffs’ opposition, and as such,
the ‘but for’ causation argument was properly raised.
Strike

Opp.

at

1.)

Further,

they

contend

that

(Defs.’

Plaintiffs’

opposition “obscure[d] the inherent requirement that damages be
causally related to the [D]efendant’s conduct,” and they were
entitled to rebut that argument.

(Defs.’ Strike Opp. at 1.)

Defendants also claim that they raised a causation argument in
their opening brief because they referred to the fact that the
Facility Agreement had already been breached.
at 4.)

(Defs.’ Strike Opp.

On reply, Plaintiffs contend that the “but for” causation

17

argument was not responsive to the arguments in their opposition.
(Pls.’ Strike Reply at 2-4.)
Generally, a “‘[a]rguments may not be made for the first
time in a reply brief.’”

Zirogiannis v. Seterus, Inc., 221 F.

Supp. 3d 292, 298 (E.D.N.Y. 2016) (quoting Knipe v. Skinner, 999
F.2d 708, 711 (2d Cir. 1993)) (alteration in original).

As a

result, arguments raised for the first time in a reply brief should
be disregarded unless the arguments respond to “new material issues
raised

in

the

opposition

papers.”

Gayle

v.

Harry’s

Nurses

Registry, No. 07-CV-4672, 2012 WL 4174401, at *1 (E.D.N.Y. Sept.
18, 2012), aff’d, 594 F. App’x 714 (2d Cir. 2014) (internal
quotation marks and citation omitted); see also Zirogiannis, 221
F. Supp. 3d at 298.
The Court finds that Defendants’ “but for” causation
argument, raised for the first time in their reply brief, is a new
argument that is not responsive to the arguments in Plaintiffs’
opposition.

Defendants did not argue in their opening brief that

there was no “but for” causation due to the Trabiches’ prior breach
of

the

Facility

Agreement.

While

Defendants

mentioned

the

purportedly “undisputed” fact that there had been a prior breach,
they did not attribute any significance to this fact or rely on it
to support their arguments.
11, at 4 n.4, 5-6.)
measure

of

damages

(See Defs.’ Br., Docket Entry 173-

In their opposition, Plaintiffs discussed the
for

tortious
18

interference

and

Defendants’

argument that the SADC Mortgage was unenforceable. (Pls.’ Opp. at
8-17.)

Neither

of

these

arguments

implicated

causation.

Accordingly, Plaintiffs’ motion to strike (Docket Entry 182) is
GRANTED.

The Court will not consider the causation argument under

Point I and sections A and B of the Preliminary Statement in
Defendants’ reply brief.
It is worth noting that even if the Court considered
Defendants’ causation argument, summary judgment is not warranted
based on the record before this Court.

Throughout their briefs,

Defendants allege that it is undisputed that the Trabiches breached
the Facility Agreement prior to the retention of Defendants;
however, they fail to cite any evidence in the record to establish
this.

(See, e.g., Defs.’ Br. at 4 n.4, 5-6.)

For example,

Defendants cite two documents in their reply brief to attempt to
establish this fact--their own memorandum of law and a Memorandum
Opinion by Judge William D. Quarles, Jr. in the Maryland action,
neither of which is sufficient to establish that the Trabiches
breached the Facility Agreement prior to the alleged interference
by Defendants.18

(See Defs.’ Reply Br., Docket Entry 181, at 2,

6.) Under Federal Rule of Civil Procedure 56, “[a] party asserting

Judge Quarles’ finding was based on evidence presented during a
bench trial. (Quarles Decision, Defs.’ Ex. I, Docket Entry 1801.) Defendants have not pointed to any evidence related to this
issue in the record before this Court, nor did they include it as
an undisputed fact in their Rule 56.1 Statement.
18

19

that a fact cannot be . . . genuinely disputed must support the
assertion by

. . . citing to particular parts of materials in the

record, including depositions, documents, electronically stored
information, affidavits or declarations, stipulations[,] . . .
admissions, interrogatory answers, or other materials.”

FED. R.

CIV. P. 56(c)(1)(A); see also Nnebe v. Daus, 644 F.3d 147, 156 (2d
Cir. 2011).

Establishing the Trabiches’ prior breach is essential

to Defendants’ causation argument and Defendants have failed to
cite

any

evidence

causation

establishing

argument,

even

if

that

fact.

properly

Thus,

raised,

Defendants’

would

not

be

successful.
II.

Motion for Summary Judgment
Summary

judgment

will

be

granted

where

the

movant

demonstrates 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. CIV. P. 56(a).

A genuine factual issue exists where “the

evidence is such that a reasonable jury could return a verdict for
the nonmoving party.”

Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed 2d 202 (1986).

In

determining whether an award of summary judgment is appropriate,
the Court considers the “pleadings, deposition testimony, answers
to interrogatories and admissions on file, together with any other
firsthand information including but not limited to affidavits.”
Nnebe, 644 F.3d at 156.
20

The movant bears the burden of establishing that there
are no genuine issues of material fact.

Gallo v. Prudential

Residential Servs., L.P., 22 F.3d 1219, 1223 (2d Cir. 1994).

Once

the movant makes such a showing, the non-movant must proffer
specific facts demonstrating “a genuine issue for trial.”

Giglio

v. Buonnadonna Shoprite LLC, No. 06-CV-5191, 2009 WL 3150431, at
*4 (E.D.N.Y. Sept. 25, 2009) (internal quotation marks and citation
omitted).

Conclusory allegations or denials will not defeat

summary judgment.

Id.

However, in reviewing the summary judgment

record, “‘the court is required to resolve all ambiguities and
draw all permissible factual inferences in favor of the party
against whom summary judgment is sought.’”

Sheet Metal Workers’

Nat’l Pension Fund v. Vadaris Tech. Inc., No. 13-CV-5286, 2015 WL
6449420, at *2 (E.D.N.Y. Oct. 23, 2015) (quoting McLee v. Chrysler
Corp., 109 F.3d 130, 134 (2d Cir. 1997)).
To prevail on a tortious interference claim in New York,
a plaintiff must show: “(1) the existence of a valid contract
between the aggrieved party and a third party; (2) the alleged
tortfeasor’s

knowledge

tortfeasor’s

improper

of

the

contract;

intentional

(3)

the

interference

performance without justification; and (4) damages.”

alleged

with

its

Lader v.

Delgado, 941 F. Supp. 2d 267, 272 (E.D.N.Y. 2013); see also
Bernberg v. Health Mgmt. Sys., Inc., 303 A.D.2d 348, 349, 756
N.Y.S.2d 96, 98 (2d Dep’t 2003).
21

At a minimum, there is an issue of fact as to whether
Russ advised the Trabiches to execute the Lenz Mortgage and breach
the Facility Agreement.

Recognizing this, Defendants have focused

exclusively on the damages element in their motion.
at 2, 13.)

(Defs.’ Br.,

First, Defendants argue that, even if Plaintiffs could

prove that Defendants tortiously interfered with the Facility
Agreement,

they

are

entitled

to

summary

Plaintiffs cannot establish actual damages.
18.)

judgment

because

(Defs.’ Br. at 12-

Second, they argue that this controversy is moot.

(Defs.’

Br. at 18-20.)
A. Actual Damages
Defendants argue that the tortious interference claim
must be dismissed because Plaintiffs cannot show actual damages.
(Defs.’ Br. at 1.)

They contend that “Plaintiff[s] ha[ve] not

been damaged as a matter of law by the breach of the promise by
the Trabiches not to further encumber the Trabich property,”
because “Plaintiff[s] could never obtain lien priority regardless
of where in the chain of title its mortgage was recorded.” (Defs.’
Br. at 2.)

Defendants claim that this is true for two reasons:

first, the mortgage “did not provide for foreclosure in the event
of a breach of the promises made in the Facility Agreement” and
thus, the Facility Agreement was not secured by the mortgage, and
second, there was no “[n]ote between Plaintiff[s] and the Trabiches
given as security for the mortgage.”
22

(Defs.’ Br. at 2.)

Although

the mortgage refers to a note, Defendants allege that no note
between SADC and Mrs. Trabich exists, and because the mortgage
secured this missing note, it could not have been intended to
secure the promises in the Facility Agreement.
15.)

(Defs.’ Br. at

Moreover, Defendants contend that New York law prohibits

promises like the Trabiches’ promise not to encumber from securing
a mortgage.

(Defs.’ Br. at 17.)

Defendants equate the existence

of actual damages with the ability to foreclose and argue that
because
damages.

Plaintiffs

could

not

foreclose,

(Defs.’ Br. at 2, 17.)

there

are

no

actual

As support, Defendants cite the

decision of Judge Murphy dismissing SADC’s foreclosure action.
(Defs.’ Br. at 3.)
Plaintiffs

respond

that

Defendants

“fundamentally

misunderstand the proper measure of damages,” and point out that
under New York law, SADC is entitled to the damages it suffered as
a result of the Trabiches’ breach of the Facility Agreement.
(Pls.’ Opp. at 2.)

Specifically, they contend that “the issue is

not whether a specific monetary damage can be tied to the discrete
act of recording the Lenz [M]ortgage,” but rather what the “full
value of the contract [is] that the Trabiches breached when they
permitted the recordation of the Lenz [M]ortgage.”
10 (emphasis in original).)

(Pls.’ Opp. at

They claim that as a result of the

breach of the Facility Agreement, Defendants are responsible for
the $1,000,000 borrowed pursuant to the credit facility plus a ten
23

percent fee and $1,750,000 in consulting fees.19
11.)

(Pls.’ Opp. at

Moreover, Plaintiffs contend that even if the mortgage is

unenforceable, Mrs. Trabich had a duty to remedy any defects and
deliver a valid mortgage pursuant to the provisions of the Facility
Agreement.
“Defendants

(Pls.’
are

Opp.

simply

at

2-3.)

incorrect

Plaintiffs
that

the

maintain

mortgage

was

that
not

enforceable,” because “[t]here is no question that the mortgage
delivered to SADC was intended to secure all of the Trabiches’
obligations in the Facility Agreement.” (Pls.’ Opp. at 3 (emphasis
in original).)

They point to case law which provides that if a

mortgage reflects an intent to secure an underlying debt, it is
enforceable even in the absence of a note.
Finally,

they

contend

that

while

the

(Pls.’ Opp. at 14.)

foreclosure

action

was

dismissed, Judge Murphy found that the mortgage was enforceable
against junior lienholders, and as such, the mortgage is valid.
(Pls.’ Opp. at 15-16.)
On reply, Defendants emphasize that the mortgage is not
enforceable because it is “defective in content—-not in form,” and

Plaintiffs allege that, after the Trabiches defaulted on the
$1,000,000 loan arranged by SADC, SADC was required to pay off
the loan in full pursuant to a separate indemnification
agreement. As a result, Plaintiffs claim, SADC suffered the
entire $1,000,000 loss. (Pls.’ Opp. at 11 n.8.) In regard to
the consulting fees, Plaintiffs argue that the Facility
Agreement contained an acceleration clause, pursuant to which
Defendants are responsible for “all monies due, but unpaid,
under the Facility Agreement.” (Pls.’ Opp. at 12-13.)
19

24

argue that the fact that the mortgage is recorded does not mean
that Plaintiffs can foreclose on the mortgage.
3, 8 (emphasis in original).)
Court

should

reject

(Defs.’ Reply at

Further, Defendants argue that the

Plaintiffs’

invitation

to

“re-write

its

fatally defective mortgage” given the absence of a note and Judge
Murphy’s conclusion that a note does not exist.

(Defs.’ Reply at

8-9.)
“It is well-settled that, under New York law, a plaintiff
in a tortious interference with contract case is entitled to
damages in the amount of the full pecuniary loss of the benefits
of the contract, and that ‘the elements of damages, including
consequential

damages,

[are]

those

recognized

liberal rules applicable to tort actions.’”

under

the

more

Int’l Minerals and

Resources, S.A. v. Pappas, 96 F.3d 586, 597 (2d Cir. 1996) (quoting
Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y. 2d 183,
197 n.6, 428 N.Y.S.2d 628, 406 N.E.2d 445 (1980)) (alteration in
original).

Damages for tortious interference can include “‘(a)

the pecuniary loss of the benefits of the contract . . . ; (b)
consequential losses for which the interference is the legal cause;
and (c) emotional distress or actual harm to reputation, if they
are reasonably to be expected to result from the interference.’”
Pappas, 96 F.3d at 597 (quoting Restatement (Second) of Torts
§ 774A (1977)).

Thus, “the damages for a tortious interference

claim are linked to the damages for the breach of the underlying
25

contract.”

Design Partners, Inc. v. Five Star Electric Corp., No.

12-CV-2949, 2017 WL 818364, at *15 n.18 (E.D.N.Y. Mar. 1, 2017).
Consistent with these principles, if Plaintiffs can show
at trial that Defendants tortiously interfered with the Facility
Agreement between Plaintiffs and the Trabiches, Plaintiffs are
entitled to the “full pecuniary loss of the benefits of th[at]
contract.”

Pappas, 96 F.3d at 598.

Defendants have cited no

authority specifying a different measure of damages nor have they
argued that the well-established case law in this area does not
apply.

Additionally, the Court has been unable to locate any

authority to support an alternative measure of damages. Therefore,
Defendants’ arguments addressing the validity of the SADC Mortgage
are misplaced, and the Court declines to opine on its validity.
Based on the relevant law and the existence of clear
issues of fact related to the remaining elements of Plaintiffs’
claim, the Court DENIES summary judgment on this ground.
B. Mootness
Alternatively, Defendants argue that because the Lenz
Mortgage is “invalid and dischargeable,” the tortious interference
claim is moot.

(Defs.’ Br. at 3-4.)

Specifically, they contend

that because Lenz’s time to foreclose has elapsed under New York
Real Property and Procedures Law Section 1501(4), SADC now has the
priority

for

which

it

bargained.

(Defs.’

Br.

at

18-20.)

Plaintiffs respond that dismissal on mootness grounds is not
26

appropriate because “the Lenz [M]ortgage recordation damaged SADC
the moment it went on record, thereby depriving SADC a material
protection to which it was entitled.”

(Pls.’ Opp. at 3.)

They

also argue that “SADC went without the benefit of the protection
for which it bargained . . . for seven years,” and that “Defendants
do not and cannot assert that the lapse of the Lenz [M]ortgage
somehow provided SADC the full pecuniary benefits of the Facility
Agreement.”

(Pls.’ Opp. at 18 (emphasis in original).)

The Constitution “restricts the power of the federal
courts to ‘Cases’ and ‘Controversies.’”

Chafin v. Chafin, 568

U.S. 165, 172, 133 S. Ct. 1017, 1023, 185 L. Ed. 2d 1 (2013).
“There is . . . no case or controversy, and a suit becomes moot,
when the issues presented are no longer live or the parties lack
a legally cognizable interest in the outcome.”

Chafin, 568 U.S.

at 172, 133 S. Ct. at 1023, 185 L.Ed.2d 1 (internal quotation marks
and citation omitted); see also N.Y. City Emps.’ Ret. Sys. v. Dole
Food Co., Inc., 969 F.2d 1430, 1433 (2d Cir. 1992).

However, “a

case becomes moot only when it is impossible for a court to grant
any

effectual

relief

what[so]ever

to

the

prevailing

party.”

Chafin, 568 U.S. at 172, 133 S. Ct. at 1023, 185 L. Ed. 2d 1
(internal quotation marks and citation omitted).

Additionally,

the determination as to whether a case should be dismissed on
mootness grounds “‘lies within the sound discretion of the district
court . . . .’”

Davis v. City of N.Y., 812 F. Supp. 2d 333, 339
27

(S.D.N.Y. 2011) (quoting Harrison & Burrowes Bridge Constructors,
Inc. v. Cuomo, 981 F.2d 50, 59 (2d Cir. 1992)).
The fact that the Lenz Mortgage may be unenforceable at
this point does not moot this case.

As Plaintiffs point out, even

if Defendants’ theory about the enforceability of the Lenz Mortgage
is correct, the SADC Mortgage was subordinated to the Lenz Mortgage
for approximately seven years.

(Pls.’ Opp. at 18.)

During those

years, Plaintiffs claim that they were deprived of the protection
promised to them in the Facility Agreement and that they suffered
damages as a result.
application

here,

and

Accordingly, the mootness doctrine has no
Defendants’

motion

for

partial

summary

judgment on mootness grounds is DENIED.
CONCLUSION
Plaintiffs’
GRANTED,

and

motion

Defendants’

to

strike

motion

(Docket Entry 173) is DENIED.

for

(Docket

partial

Entry

summary

182)

is

judgment

The parties shall file letters

within fourteen (14) days of the date of this Memorandum and Order
setting

forth

their

respective

positions

on

scheduling

settlement conference with Judge Tomlinson.
SO ORDERED.

Dated:

August
7 , 2017
Central Islip, New York
28

/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.

a