v. Gold Scollar Moshan, PLLC et al

Filing 49

OPINION & ORDER: For the foregoing reasons, the Court finds that Plaintiff has made a prima facie showing that exercising personal jurisdiction over Gold at this stage is proper. Accordingly, Gold's motion to dismiss the complaint and cross-claim is denied. (As further set forth in this Order) (Signed by Judge John F. Keenan on 10/30/2015) (kl)

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: 10/30/2015

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT DISTRICTYORK
UNITED STATES OF NEW COURT
-----------------------------------X
SOUTHERN DISTRICT OF NEW YORK
HUI YE,
:
-----------------------------------------------------------x
: :
In re FANNIE MAE 2008 SECURITIES
08 Civ. 7831 (PAC)
Plaintiff,
: :
LITIGATION
09 MD 2013 (PAC)
: :
No. 14 Civ. 7683 (JFK)
-against: :
OPINION & ORDER
:
OPINION & ORDER
-----------------------------------------------------------x
GOLD SCOLLAR MOSHAN PLLC, ALLISON, :
SCOLLAR, MICHAEL J. MOSHAN,
:
KATHERINE KOKKOSIS, and ROBERT B. :
GOLD,
:
HONORABLE PAUL A. CROTTY, United States District Judge:
:
Defendants.
:
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BACKGROUND1

APPEARANCES
The early years of this decade saw a boom in home financing which was fueled, among
FOR PLAINTIFF by low YE:
other things, HUI interest rates and lax credit conditions. New lending instruments, such as
Vivian Chen
WONG, mortgages (high credit risk P.C.
subprime WONG & ASSOCIATES, loans) and Alt-A mortgages (low-documentation loans)
FOR DEFENDANT ROBERT B. GOLD:
kept the boom going. Borrowers played a role too; they took on unmanageable risks on the
Edward L. Powers
ZUCKERMAN the market would continue to rise and that
assumption thatGORE BRANDEIS & CROSSMAN, LLPrefinancing options would always be
JOHN available in the future. Lending discipline was lacking in the system. Mortgage originators did
F. KEENAN, United States District Judge:
not hold these high-risk mortgage loans. Rather than carry the rising risk on theirto
Before the Court is Defendant Robert B. Gold’s motion books, the
originators sold their personal jurisdiction. For the reasons that
dismiss for lack ofloans into the secondary mortgage market, often as securitized packages
known as motion is denied.
follow, the mortgage-backed securities (“MBSs”). MBS markets grew almost exponentially.
But then the housing bubble burst. In 2006, the demand for housing dropped abruptly
I. Background
and home prices began to fall. are drawn from the complaintbanks modified their
The following facts In light of the changing housing market, and
lending documents, and are accepted as true only for purposes
supportingpractices and became unwilling to refinance home mortgages without refinancing.

of this motion.

Plaintiff Hui Ye is a resident of the People’s

1

Unless otherwise indicated, all references 4.) Defendant Gold Scollar Moshan,
Republic of China. (Compl. ¶ cited as “(¶ _)” or to the “Complaint” are to the Amended Complaint,
dated June 22, 2009. For purposes of this Motion, all allegations in the Amended Complaint are taken as true.

PLLC (“GSM”) is a New York law firm organized under New York
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law. (Id. ¶ 5.)

Defendants Robert B. Gold, Allison Scollar,

Michael Moshan, and Katherine Kokkosis (together with GSM, the
“Defendants”) are identified in the complaint as attorneys who
worked for GSM during the time period at issue. (Id. ¶¶ 6-9.)
In or around 2013, Plaintiff retained GSM to represent her
in connection with the purchase of an apartment at 400 Central
Park West, New York, New York. (Id. ¶ 12.)

Thereafter,

Plaintiff informed Defendants that she did not plan to appear in
person at the closing on the apartment, which was scheduled to
take place at the end of August 2014. (Id. ¶¶ 13, 18.)
Defendants allegedly advised Plaintiff that she did not need to
attend the closing in person as long as she wired the funds
required to complete the purchase into GSM’s Interest-on-Lawyer
Account (the “IOLA Account”). (Id. ¶ 14.)

According to the

complaint, Plaintiff did so on or about January 8, 2014, wiring
$1,044,533 (the “Closing Funds”) into the IOLA Account (Id. ¶
16.)
On August 11, 2014, GSM sent a letter to Plaintiff
informing her that her funds had gone missing. (Id. ¶ 19.)
letter read as follows:
Dear Sir/Madam,
I wanted to let you know that we have recently
identified a significant shortfall in our Attorney
Trust account.

I am sorry to say that this makes it
2

The

impossible to proceed with your closing.

We have

hired a forensic accounting firm to help us figure out
exactly what happened, but until their work is further
along, I cannot say much more.

I am horrified by what

has occurred and am working as quickly as possible to
understand and address what happened.

We will let you

know as soon as I can say anything more.
(Decl. of Vivian Chen, Ex. B, ECF No. 45.)

The letter was

signed by Defendant Michael Moshan.
Plaintiff alleges that, despite repeated demands, GSM has
not returned the Closing Funds. (Compl. ¶ 22.)

As a result,

Plaintiff filed a complaint with this Court on September 23,
2014, asserting claims against all Defendants for legal
malpractice, breach of fiduciary duty, misappropriation,
conversion, and fraud.

Plaintiff’s allegations include that

“instead of holding on to the [Closing Funds] on behalf of
Plaintiff . . . , Defendants have retained the [Closing Funds]
to [sic] their own use.” (Id. ¶ 20.)

Plaintiff also alleges

that “Defendants, and each of them, stand as fiduciaries with
respect to Plaintiff,” and “violated their fiduciary duties by
negligently failing to maintain and preserve Plaintiff’s
[Closing Funds].” (Id. ¶¶ 44, 49.)

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In response to the complaint, the Defendants have filed
various cross-claims, including a cross-claim by Defendant
Scollar against Defendant Gold and the other named Defendants.
Gold now moves to dismiss the complaint and cross-claim for
lack of personal jurisdiction.

In his motion and supporting

declarations, Gold disputes his involvement in the alleged
misconduct and asserts that he has had no association with GSM
since 2009. (Decl. of Robert B. Gold, ECF No. 40 ¶¶ 5, 11.)
Gold also states that, although he owns a summer home in
Southampton, New York, he now lives and works in California.
(Id. ¶¶ 2, 14.)

In response, Plaintiff contends that Gold

continued his association with GSM from California after 2009,
and that Gold’s alleged tortious acts committed from California
give rise to jurisdiction under New York’s long-arm statute.
(Pl.’s Mem. at 5-8.)
II. Discussion
A. Motion to Dismiss Standard
Where a motion to dismiss under Rule 12(b)(2) is brought
prior to discovery, to defeat the motion a plaintiff must only
make a prima facie showing of jurisdiction through the
allegations in the complaint and any supporting documents. See
Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir.
1981) (recognizing that, until an evidentiary hearing is held,
“a prima facie showing suffices, notwithstanding any
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controverting presentation by the moving party”).

In so doing,

the plaintiff must show that jurisdiction is proper under the
laws of the state in which the court sits, and is consistent
with federal due process standards. See Bank Brussels Lambert v.
Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 124 (2d Cir. 2002).
Where the defendant is properly before the court on the claims
asserted in the complaint, the court may also exercise personal
jurisdiction over related cross-claims. See United States v. All
Right, Title & Interest in Accounts at Morgan Guar. Trust Co.,
No. 95 CIV. 10929 HB THK, 1996 WL 695671, at *13 (S.D.N.Y. Dec.
5, 1996).
B. Analysis
1. New York law
Turning first to New York’s jurisdictional requirements,
the Court finds that Plaintiff has made a prima facie showing
that jurisdiction is proper under New York’s long-arm statute,
N.Y. C.P.L.R. § 302(a).

Pursuant to Section 302(a)(3) of that

provision, New York courts may exercise jurisdiction over an
out-of-state defendant where the non-domiciliary “commits a
tortious act without the state causing injury to person or
property within the state,” if he “regularly does or solicits
business, or engages in any other persistent course of conduct
in New York.” C.P.L.R. § 302(a)(3)(i).

Courts within New York

have interpreted this provision as requiring four elements:
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(1) that the defendant committed a tortious act outside New
York; (2) that the cause of action arises from that act; (3)
that the act caused injury to a person or property in New York;
and (4) that the defendant regularly does or solicits business,
or engages in any other persistent course of conduct in the
state. Virgin Enterprises Ltd. v. Virgin Eyes LAC, No. 08 CV
8564(LAP), 2009 WL 3241529, at *5 (S.D.N.Y. Sept. 30, 2009).
Although Gold disputes his involvement in the alleged
misconduct, at this stage the Court must view the facts in the
light most favorable to Plaintiff and resolve any factual
disputes in Plaintiff’s favor. See Marine Midland Bank, N.A. v.
Miller, 664 F.2d 899, 904 (2d Cir. 1981) (recognizing that
before an evidentiary hearing is held, “a prima facie showing
[of jurisdiction] suffices, notwithstanding any controverting
presentation by the moving party”) see also Dorchester Fin.
Sec., Inc. v. Banco BRJ, S.A., 722 F.3d 81, 84 (2d Cir. 2013)
(finding that the district court erred in resolving a factual
dispute in the defendant’s favor despite the defendant’s
production of “direct, highly specific testimonial evidence
regarding a fact essential to jurisdiction”).
Here, Plaintiff alleges that she retained all of the named
Defendants in connection with the purchase of a New York City
apartment. (Compl. ¶ 12.)

Based on this alleged relationship,

the Defendants, including Gold, would have owed Plaintiff a
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fiduciary duty to safeguard property that Plaintiff entrusted to
them. See In re Hayes, 183 F.3d 162, 168 (2d Cir. 1999)
(recognizing that an attorney’s fiduciary duties to his or her
client include the duty to safeguard client property).
Plaintiff asserts that Gold breached this duty from California
by allowing the $1,044,533 Plaintiff transferred to GSM to be
converted and misappropriated from the firm’s IOLA Account—an
account on which Gold allegedly served as an authorized
signatory. (See Compl. ¶¶ 44, 49, 53; Chen Decl., Ex. D.; Pl.’s
Mem. at 5-7.)

Taken together, these allegations establish a

“colorable cause of action” against Gold for breach of fiduciary
duty, which is sufficient to satisfy the first element under
Section 302(a)(3)(i). Bank Brussels, 305 F.3d at 125.
Gold also argues that jurisdiction is improper because no
affirmative “act” by Gold is alleged in the complaint.

In so

arguing, Gold seems to suggest that Section 302(a)(3)’s
requirement of a “tortious act” precludes jurisdiction over
claims arising from acts of omission.

This unsupported

suggestion is controverted by Second Circuit case law. See Bank
Brussels, 305 F.3d at 125-27 (finding jurisdiction under Section
302(a)(3) proper on the basis of a law firm’s alleged tortious
failure to disclose information to its client); see also Penguin
Grp. (USA) Inc. v. Am. Buddha, 609 F.3d 30, 37-38 (2d Cir. 2010)
(recognizing that “the New York State Legislature adopted
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section 302(a)(3) for the purpose of broaden[ing] New York's
long-arm jurisdiction so as to include non-residents who cause
tortious injury in the state by an act or omission without the
state.” (internal quotation marks omitted) (emphasis added)).
Thus, even if the complaint did fail to allege an affirmative
act by Gold, that fact would not render jurisdiction improper.
The next two elements required for jurisdiction under
Section 302(a)(3)(i) do not appear to be in dispute.

Plaintiff

has alleged that her cause of action arises from Gold’s tortious
conduct, which satisfies the second element. (Compl. ¶¶ 52-55.)
Plaintiff has also sufficiently alleged an injury in New York
because “the first effect of the tort” would have been felt in
New York, where the funds were allegedly misappropriated and
where the closing on the apartment was scheduled to occur. See
Bank Brussels, 305 F.3d at 123.
Lastly, Plaintiff’s allegations and supporting documents
are sufficient at this stage to support a finding that Gold has
regularly done business or engaged in a “persistent course of
conduct” in New York. C.P.L.R. § 302(a)(3)(i).

Specifically,

Gold is alleged to have been member of GSM, a New York law firm,
during the time period at issue. (Compl. ¶ 9.)

This allegation

is supported by the fact that GSM’s August 11, 2014 letter to
Plaintiff listed Gold’s name on the firm’s letterhead. (Chen
Decl., Ex. B.)

Gold is also alleged to be a member of the New
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York bar. (Compl. ¶ 9.)

Furthermore, according to records

produced by Plaintiff, Gold served as a signatory on the New
York—based IOLA Account where Plaintiff’s funds were allegedly
deposited. (Chen Decl., Ex. D.)

Thus, resolving any factual

disputes over Gold’s continued involvement with GSM in
Plaintiff’s favor, Plaintiff has made a prima facie showing of
jurisdiction under Section 302(a)(3)(i).

The Court therefore

need not address Plaintiff’s alternative arguments for
jurisdiction under Sections 302(a)(1) and 302(a)(2).
2. Due Process
Having resolved the state-law jurisdictional questions, the
Court must next determine whether exercising jurisdiction would
comport with federal due process requirements.

For jurisdiction

to be consistent with due process, the defendant must have
“certain minimum contacts” with the forum, which “exist where
the defendant purposefully availed itself of the privilege of
doing business in [New York] and could foresee being haled into
court there.” Licci, 732 F.3d at 170.

If the court finds that

such contacts exist, it must then determine “whether the
assertion of personal jurisdiction would comport with fair play
and substantial justice.” Burger King Corp. v. Rudzewicz, 471
U.S. 462, 476 (1985) (internal quotation marks omitted).
doing, relevant factors may include:

In so

“(1) the burden that the

exercise of jurisdiction will impose on the defendant; (2) the
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interests of the forum state in adjudicating the case; [and] (3)
the plaintiff's interest in obtaining convenient and effective
relief.” Licci, 732 F.3d at 170.
Here, Gold’s alleged roles as a member and manager of GSM
and a signatory on the firm’s New York-based IOLA Account would
make it foreseeable that Gold could be haled to Court in New
York on claims arising from those contacts.

Furthermore, Gold

has failed to present any argument that “the presence of some
other considerations would render jurisdiction unreasonable.”
Licci, 732 F.3d at 173.

The Court nonetheless notes that, at

this stage, jurisdiction in New York does not appear
unreasonable.

New York courts have a significant interest in

resolving the claims at issue here as they involve alleged
misconduct by New York attorneys. See Diversified Grp., Inc. v.
Daugerdas, 139 F. Supp. 2d 445, 452 (S.D.N.Y. 2001).

Moreover,

as GSM is a New York law firm and the IOLA Account was
maintained at a New York bank, it appears that jurisdiction in
New York would advance Plaintiff’s interest in obtaining
convenient and effective relief.

Although jurisdiction in New

York may burden Gold to the extent he may be required to travel
from California to New York, this burden appears to be mitigated
by the fact that Gold owns a home in Southampton, New York.

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Thus, the Court finds that exercising jurisdiction at this stage
is reasonable and comports with the requirements of due process.
Conclusion

For the foregoing reasons, the Court finds that Plaintiff
has made a prima facie showing that exercising personal
jurisdiction over Gold at this stage is proper.

Accordingly,

Gold's motion to dismiss the complaint and cross-claim is
denied.
SO ORDERED.

Dated:

New York, New York
October 30, 2015

.~?:~
John F. Keenan

~

United States District Judge

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