Knopf v. Phillips, et al.
Filing
263
MEMORANDUM OPINION & ORDER.....Phillipss July 10, 2018 motion for attorneys fees is denied. (Signed by Judge Denise L. Cote on 8/27/2018) (gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
NORMA KNOPF and MICHAEL KNOPF,
:
:
Plaintiffs, :
:
-v:
:
MICHAEL PHILLIPS, PURSUIT HOLDINGS,
:
LLC., and MICHAEL H. SANFORD,
:
:
Defendants. :
:
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APPEARANCES
16cv6601(DLC)
MEMORANDUM OPINION
& ORDER
For the plaintiffs:
Eric W. Berry
Berry Law PLLC
745 Fifth Avenue, 5th Floor
New York, New York 10151
For defendant Michael Phillips:
Lorraine Nadel
Adam Hanan
Michael Ciarlo
Nadel & Ciarlo P.C.
527 Madison Avenue, 7th Floor
New York, New York 10022
DENISE COTE, District Judge:
This case was dismissed on February 1, 2018.
On July 10,
defendant Michael Phillips moved for sanctions under 28 U.S.C.
§ 1927 and the court’s inherent power against Eric W. Berry,
attorney for the plaintiffs.
the motion is denied.
For the reasons explained below,
Background
The extensive history of this litigation will only be
briefly recounted.
Plaintiffs Norma and Michael Knopf (the
“Knopfs”) and their attorney, Berry, have filed a number of
lawsuits against defendant Michael Sanford and against people
and entities associated with Sanford.
The lawsuits arise out of
a loan agreement made between Sanford and the Knopfs in 2006 for
the purchase of Manhattan real estate (the “Properties”).
See
Knopf v. Phillips, No. 16cv6601(DLC), 2016 WL 7192102, at *1
(S.D.N.Y. Dec. 12, 2016) (“Phillips I”).
In this lawsuit, the Knopfs principally claimed that the
sale of one of the Properties (“PHC”) by defendant Pursuit
Holidngs, LLC (“Pursuit”), a company controlled by Sanford, to
Phillips constituted an actual or constructive fraudulent
conveyance.
See Knopf v. Phillips, No. 16cv6601(DLC), 2017 WL
6561163, at *6-10 (S.D.N.Y. Dec. 22, 2017) (“Phillips II”).
The
Knopfs initially sued only Phillips and Pursuit, but at a
conference held on September 15, 2016, Sanford appeared and
requested to be added to the case as a defendant.
See Knopf v.
Phillips, No. 16cv6601(DLC), 2018 WL 1320267, at *1 (S.D.N.Y.
Feb. 1, 2018) (“Phillips III”).
Sanford’s request was granted.
On the consent of the parties,
See id.
The Knopfs then filed a
second amended complaint (“SAC”), which re-asserted the
fraudulent conveyance claims and added claims of breach of
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fiduciary duty, alter ego, and constructive trust against
Sanford.
See id.
The defendants’ motions to dismiss were granted in part in
December 2016, after which remained fraudulent conveyance claims
against Phillips and Pursuit, and alter ego, breach of fiduciary
duty, and constructive trust claims against Sanford.1
Phillips I, 2016 WL 7192102, at *9.
See
The parties then engaged in
discovery and, in late 2017, all parties moved for summary
judgment.
In December 2017, the Knopfs were granted summary
judgment on their alter ego claim against Sanford.
II, 2017 WL 6561163, at *13.
See Phillips
Phillips was granted summary
judgment on the Knopfs’ fraudulent conveyance claims, and no
claims remained against him.
See id.
The claims of fraudulent
conveyance, breach of fiduciary duty, and constructive trust
against Sanford were then set for trial.
On January 25, 2018, the Court issued an order explaining
that the plaintiffs’ pretrial materials “appeared to assert
different theories of liability than were pleaded in the SAC for
their actual fraudulent conveyance and breach of fiduciary duty
claims against Sanford.”
Phillips III, 2018 WL 1320267, at *2.
After discussing this issue with the parties at a conference
The Court ordered entry of default against Pursuit on December
2, 2016, because no counsel had entered a notice of appearance
on its behalf.
1
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held on January 31, the Court dismissed the remaining claims
with prejudice and vacated the default judgment against Pursuit.
See id. at *2-3.
An order explaining the reasons for the
dismissal was issued on February 1, and final judgment was
entered on February 5, 2018.
The Knopfs appealed the February 5 judgment on March 6.
On
July 10, Phillips filed a motion for attorneys’ fees pursuant to
28 U.S.C. § 1927.
The motion became fully submitted on August
3, 2018.
Discussion
Phillips styles his motion as one for fees pursuant to the
Section 1927 and the Court’s inherent powers.
His papers,
however, make no argument why the Court should exercise its
inherent powers to sanction Berry or the Knopfs.
Accordingly,
Phillips is not entitled to sanctions under the Court’s inherent
powers.
Section 1927 provides that
[a]ny attorney or other person admitted to conduct
cases in any court of the United States or any
Territory thereof who so multiplies the proceedings in
any case unreasonably and vexatiously may be required
by the court to satisfy personally the excess costs,
expenses, and attorneys' fees reasonably incurred
because of such conduct.
28 U.S.C. § 1927.
Sanctions may be imposed pursuant to Section
1927 “only when there is a finding of conduct constituting or
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akin to bad faith.”
16 Casa Duse, LLC v. Merkin, 791 F.3d 247,
264 (2d Cir. 2015) (citation omitted).
The attorney’s actions
must be “so completely without merit as to require the
conclusion that they must have been undertaken for some improper
purpose such as delay.”
Id. (citation omitted).
Phillips principally advances two grounds in support of his
motion.
First, he argues that Berry engaged in bad faith
conduct during the discovery process such that proceedings were
multiplied.
Second, Phillips asserts that this action was filed
in bad faith to multiply proceedings against parties and
entities associated with Sanford.
Neither argument is
persuasive.
First, the record of the discovery process in this case
does not support a finding that Berry “unreasonably and
vexatiously” multiplied proceedings.
28 U.S.C. § 1927.
Phillips relies on the fact that the plaintiffs deposed six nonparty witnesses as evidence of multiplied proceedings.
Berry
acted in a less-than-admirable manner throughout this action and
the related federal actions.
But, the docket reflects that
Phillips did not object contemporaneously to this Court, which
was supervising discovery, to the number of non-party
depositions Berry took, or to the manner in which Berry
conducted himself, during the ten months of discovery in this
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action.2
He did not raise the issue at all until he filed this
motion in July 2018, nearly seven months after the claims
against him were dismissed -- and nine months after the close of
discovery.3
This delay undermines his claim that Berry’s actions
were so vexatious as to constitute bad faith.
Phillips’s second argument attempts to align this case with
the related action Knopf v. Esposito, in which Section 1927
sanctions were granted against Berry.
See Knopf v. Espotio, No.
17cv5833(DLC), 2018 WL 1226023, at *4-6, *7 (S.D.N.Y. Mar. 5,
2018) (granting Section 1927 sanctions against Berry); Knopf v.
Esposito, No. 17cv5833(DLC), 2018 WL 3579104, *5-6 (S.D.N.Y.
July 25, 2018) (reducing the sanctions award in light of newly
discovered evidence).
Phillips’s attempt to analogize the two
actions fails.
In Knopf v. Esposito, orders of the New York Appellate
Division expressly refuted the plaintiffs’ theory of liability.
See 2018 WL 3579104, at *5.
This rendered the sole federal
claim frivolous before it was filed.
See id.
In this case, the
And, as the Knopfs point out, one of these depositions was
initiated by Sanford, not by the Knopfs.
2
Section 1927 motions are expressly exempted by Rule
54(d)(2)(E), Fed. R. Civ. P., from the usual 14-day time limit
to bring a motion for attorneys’ fees. See Fed. R. Civ. P.
54(d)(2)(B)(i). The Second Circuit has not established a time
limit for filing motions for Section 1927 sanctions. The Court
does not address the timeliness of Phillips’s motion because it
fails on the merits.
3
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actual and constructive fraudulent conveyance claims brought
against Phillips survived a motion to dismiss.
Even the claims
against Sanford, which were later dismissed, were not dismissed
because they were frivolous, but rather because the Knopfs’
theories of liability had varied so significantly between the
SAC and the pretrial materials.
Moreover, it is significant
that the Knopfs brought this suit against the actual parties to
the PHC transaction, as opposed to Knopf v. Esposito, where a
number of attorneys “with the most tenuous connection to the
sale of PHC” were named as defendants.
2018 WL 1226023, at *6.
Phillips may not have been party to a fraudulent conveyance, but
he was the actual buyer of PHC, and thus far more closely
related to the transaction than were several of the Knopf v.
Esposito defendants.
Therefore, and unlike in the Knopf v.
Esposito action, it does not appear that this case was filed to
target individuals solely because of their association with
Sanford.
Conclusion
Phillips’s July 10, 2018 motion for attorneys’ fees is
denied.
Dated:
New York, New York
August 27, 2018
____________________________
DENISE COTE
United States District Judge
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