Bernheim v. Elia et al

Filing 73

REPORT AND RECOMMENDATIONS re 46 MOTION for Partial Summary Judgment; 43 Cross MOTION to Strike; and 41 MOTION to Dismiss. Objections due ten days from receipt.. Signed by Hon. H. Kenneth Schroeder, Jr on 3/26/2009. (KER)

UNITED STATES DISTRICT COURT W E S T E R N DISTRICT OF NEW YORK

L . ANDREW BERNHEIM P la in t if f , -vD AV ID ELIA, et al., D e fe n d a n ts 0 5 - C V - 0 1 1 8 A( S r )

R E P O R T RECOMMENDATION AND ORDER

This case was referred to the undersigned by the Hon. Richard J. Arcara, pursuant to 28 U.S.C. § 636(b)(1), for all pretrial matters and to hear and report upon dispositive motions. Dkt. #37.

C u rre n tly before the Court is defendants' motion to dismiss the complaint a s barred by the statute of limitations (Dkt. #41); plaintiff's motion to strike defendants' a tto rn e y's affidavits and statement of facts in support of defendants' motion to dismiss (D k t. #43), and plaintiff's motion for partial summary judgment. Dkt. #46. For the fo llo w in g reasons, it is recommended that defendants' motion to dismiss the complaint be d e n ie d ; plaintiff's motion to strike be denied; and plaintiff's motion for partial summary ju d g m e n t be granted.

BACKGROUND
P la in tiff filed a Chapter 11 bankruptcy petition in the United States B a n k ru p tc y Court, District of New Jersey, on October 6, 1982. Dkt. #1, ¶ 11.

In 1987, plaintiff purchased a one-third interest in D.A. Elia Construction C o rp o ra tio n ("Elia Construction"). Dkt. #41-2, ¶¶ 5-6; Dkt. #41-9, ¶ 2.

On March 30, 1994, Elia Construction filed a Chapter 11 Bankruptcy P e titio n in the Bankruptcy Court for the W e s te rn District of New York. Dkt. #41-9, ¶ 7. Plaintiff filed a Proof of Claim alleging an ownership interest in Elia Construction. Dkt. # 4 4 , ¶ 4. Elia Construction objected to plaintiff's claim. Dkt. #41-9, ¶ 8.

On December 1, 1997, Judge Kaplan approved a settlement of all claims p e n d in g between United States Fidelity & Guaranty Company ("USF&G"), and Elia C o n s tru c tio n . Dkt. #1, ¶ 18. USF&G paid a total of $4.6 million. Dkt. #1, ¶ 18. Pursuant to an Allocation Agreement, $3,521,976 was directed to Elia Construction; $540,650 was p a id to David Elia; and $537,374 was paid to Alfred and Daniel Elia. Dkt. #1, ¶ 18.

Plaintiff had filed Proof of Claim No. 1 against Elia Construction in an a m o u n t exceeding $1 million, but Elia Construction objected to the claim in April of 1998. Dkt. #1, ¶ 20.

By Order entered June 1, 1998, with consent of plaintiff, Judge Kaplan s u b o rd in a te d plaintiff's claim as a creditor to those of non-insider creditors, held

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distribution to insider creditors pending further order of the Court and suspended further p ro c e e d in g s pending resolution of the New Jersey bankruptcy proceeding. Dkt. #1, ¶ 22. Thereafter, by Supplemental Order entered June 4, 1998, Judge Kaplan further Ordered that Bernheim's response to the Debtor's o b je c tio n to claim #1 is deemed to be a request that this C o u rt abstain from hearing the objection to claim #1 in favor o f a resolution of various issues pending before the B a n k ru p tc y Court for the District of New Jersey. Bernheim's re s p o n s e is also deemed to be a request that this Court lift th e stay in these proceedings to a limited extent so as to allow th e matters in the Bankruptcy Court for the District of New J e rs e y to proceed. It is further O R D E R E D that this Court will abstain from hearing the D e b to r's objection to claim #1 of Bernheim, in favor of a re s o lu tio n of related matters in the Bankruptcy Court for the D is tric t of New Jersey; and it is ORDERED that to the extent that lift of the automatic s ta y is necessary in order to have a full adjudication with re s p e c t to claims of ownership in the Debtor-corporation, the s ta y is lifted . . . . D k t. #41-3.

By Order entered October 20, 1998, Judge Kaplan confirmed that the order o f June 1, 1998 remained in effect and that Elia Construction "shall not expend any of its fu n d s towards restarting its business until: a) all general unsecured creditors in this case h a v e been paid as allowed; and b) there is a resolution to the claim(s) of Bernheim." Dkt. # 1 , ¶ 25.

W h e n Daniel Elia sold his stock back to the corporation in 1998 or 1999, p la in tiff alleges that he and David Elia each became 50% shareholders in D.A. Elia C o rp o ra tio n . Dkt. #1, ¶ 14.

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By Stipulation and Order entered June 5, 2000 by Judge Gindin, David and B e rn a d e tte Elia, Alfred and Josephine Elia, Daniel and Tina Elia, the Alfred Elia Trust and E lia Construction agreed that "[s]ubject to the Confidential Settlement Agreement entered in to by Bernheim, the Elia's and [Elia Construction], Bernheim was the sole owner of [Elia C o n s tru c tio n ] for the years 1987 through 1999, inclusive." Dkt. #46-3, p.3.

O n June 15, 2000, Judge Gindin entered an "Amended Order Directing R e tu rn By New York State Department Of Taxation And Finance Of All Payments Made T o It By The Elia Parties From January 1, 1987 Through December 31, 1999." Dkt. #463 , p.14.

On June 21, 2000, Judge Gindin entered a "Final Order Approving Global S e ttle m e n t Between Bernheim and Related Debtors, and Elia Debtor and Related Parties a n d Determining and Fixing All Tax Liabilities from the Beginning of Time Through D e c e m b e r 31, 1999 as to all New York and New Jersey Taxing Authorities, Internal R e v e n u e Service and United States of America as to Above-Named Debtors and Related E lia Parties." Dkt. #46-3, p.18.

The Agreement, dated October 24, 2000, provides, inter alia, that: 7 . T h is document shall serve as a closing document and B e rn h e im is selling all of his stock in [Elia Construction] to the E lia 's or their designees for the consideration set forth. 7 a . T h e job of the arbitrator is to determine the total amount d u e L. Andrew Bernheim. 8 . T h is document is to be interpreted and deemed a c o m p le tio n of sale as per all sections of Section 363 of the

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Bankruptcy Code; however, until all payments of monies a ttrib u ta b le to the value of the stock (as opposed to tax s a v in g s ) are made the stock is to be held jointly by Jeffrey P o s ta , Esq. and Bernard Schenckler, in an escrow account as to be decided by them. *** 10. This document is binding upon the wiring of the monies s e t forth above and receipt of said monies in the account of L. A n d re w Bernheim, by 5 p.m. time of the essence, October 2 4 th. D k t. #46-3, pp.10-11.

Plaintiff affirms that he "never received the compensation contemplated by th e Agreement for the contemplated sale." Dkt. #46-2, ¶ 5. Plaintiff also affirms that he m a in ta in s possession of the stock certificate reflecting that he is the owner of all a u th o rize d and issued shares of Elia Construction. Dkt. #46-2, ¶ 6. Moreover, plaintiff a ffirm s that: P u rs u a n t to the Agreement, the consideration to be received b y me for the sale was to be determined by an arbitrator, with tim e being of the essence. No arbitration ever took place, a n d hence the total consideration for the sale was never d e te rm in e d . Moreover, the Elia's failed to pay certain c o n s id e ra tio n for the sale that had been fixed by the Court in its June 21, 2000 Order, in that they failed to pay $200,000 to th e firm of Sterns, W e in ro th for the benefit of my bankruptcy c re d ito rs . In addition, my stock certificate was never placed in e s c ro w as called for by the Agreement, and I continue to have s o le possession of the certificate today. At the time the O c to b e r 24, 2000 Agreement was executed the appeal a lre a d y was pending and, pursuant to the express terms of th e Agreement, it could not be consummated until the June 1 5 and 21, 2000 Orders became final and non-appealable. Dkt. #44-6, ¶ 9.

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The Internal Revenue Service appealed Judge Gindin's Orders to the U n ite d States District Court for the District of New Jersey. Dkt. #46-3, p.30. By M e m o ra n d u m and Order entered December 13, 2000, the Hon. Anne E. Thompson, U .S .D .J ., vacated Judge Gindin's Orders entered June 15, 2000 and June 21, 2000 and re m a n d e d the matter back to the bankruptcy court. Dkt. #46-3, pp.30-31.

On March 21, 2001, the Hon. Raymond T. Lyons, Jr., U.S.B.J., New Jersey B a n k ru p tc y Court, found that "from the point of view of 28 U.S.C. Section 1334, making a d e te rm in a tio n of the tax liability of Mr. Bernheim is not related to the administration of a b a n k ru p tc y estate and therefore this Court lacks jurisdiction." Dkt. #44-2, p.33. Judge L yo n s then granted the Elia's alternate motion to dismiss the adversary proceeding for la c k of jurisdiction, stating: T h e cause of action here does not belong to the bankruptcy e s ta te or to the liquidating trustee. It belongs solely to the d e b to r and is based solely on post confirmation transactions. It was not an asset of the debtor at the time he filed b a n k ru p tc y. It was not an asset of the debtor at the time his p la n was confirmed. And it never became an asset of the e s ta te in administration. Therefore I hold that this Court does n o t have jurisdiction over the complaint under 28 U.S.C. 1334. Dkt. #44-2, p.36.

On February 23, 2004, David Elia, as the purported CEO of Elia C o n s tru c tio n , filed a Final Report and Account with the bankruptcy court in the W e s te rn D is tric t of New York indicating that $1,590,038.00 had been paid to the holders of u n s e c u re d claims; $180,000 had been paid as salary to David Elia; and a surplus of

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$759,6000 remained. Dkt. #1, ¶ 35. Debtor's counsel objected to the Final Report, a rg u in g that there should be approximately $2 million available. Dkt. #1, ¶ 36.

Plaintiff commenced this action on February 23, 2005, asserting diversity ju ris d ic tio n , seeking: (1 ) a declaration that, by virtue of the Stipulation and Order of J u n e 5, 2000, plaintiff is the sole shareholder of Elia C o n s tr u c tio n ; (2 ) alternatively, a declaration that plaintiff is a 50% s h a re h o ld e r of Elia Construction; (3 ) damages for conversion of Elia Construction funds; (4 ) imposition of a constructive trust upon Elia Construction a s s e ts which were misappropriated and converted; (5 ) damages for breach of fiduciary duty; (6 ) damages for fraud related to defendants' representation th a t insider creditors would not be paid and that Elia C o n s tru c tio n funds would not be used to re-establish the b u s in e s s ; (7 ) damages caused by defendants' conspiracy to divert fu n d s from Elia Construction; (8) damages caused by defendants' facilitation of conversion, b re a c h of fiduciary duty and fraud; (9) an injunction preventing further depletion of Elia C o n s tru c tio n 's assets; and (1 0 ) an accounting of Elia Construction's assets. D k t. #1.

On January 10, 2006, the Hon. John T. Elfvin dismissed the complaint w ith o u t prejudice to refiling subsequent to the completion of the bankruptcy proceeding.

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Dkt. #26. Judge Elfvin wrote: In 1994, [Elia construction] filed a Chapter Eleven bankruptcy P e titio n in the W e s te rn District of New York Bankruptcy Court . . . . The Bankruptcy Proceeding was a Surplus 11 B a n k ru p tc y, in which all the creditors were paid in full and the d e b to r corporation, [Elia Construction], has funds remaining in th e surplus . . . . Currently, the Bankruptcy Proceeding is still o p e n pending the resolution of an appeal before Chief Judge R ic h a rd J. Arcara, 04-CV-0975A, of the Bankruptcy Court's O c to b e r 19, 2004 Order approving Damon & Morey, LLP's F e e Applications (hereafter "Damon & Morey Matter"). Plaintiff has moved to intervene in the Damon & Morey M a tte r, on which motion a decision has not as yet been is s u e d .1 T h e size of [Elia Construction's] Surplus is entirely c o n tin g e n t upon the resolution of the Damon & Morey Matter. Once the Damon & Morey Matter is resolved, [Elia C o n s tru c tio n ] will have to file a Debtor-in-Possession Final R e p o rt and Account in Bankruptcy Court ("Final Report") and th e Bankruptcy Proceeding will be closed. Only then will any o f [Elia Construction's] shareholders and/or owners ­ one of w h o m plaintiff claims to be ­ have a claim to Elia's Surplus. Plaintiff makes various factual allegations in his C o m p la in t, the relevant ones of which depend on the Final R e p o rt filed with the Bankruptcy Court. As such, all of p la in tiff's claims except for that of declaratory judgment will n o t be ripe for adjudication until the Final Report is filed with th e Bankruptcy Court. * * * As plaintiff has moved to intervene in the Damon & Morey Matter and as the Bankruptcy P ro c e e d in g is still pending, the undersigned does not see h o w the interests of judicial economy or administrative e ffic ie n c y will be served by determining the rights of the p a rtie s without being able to determine the benefits that may flo w from those rights until matters pending before other c o u rts are resolved. Therefore, the Court will dismiss p la in tiff's claims without prejudice and allow plaintiff to refile h is claims subsequent to a determination of the Damon & M o re y Matter and the close of the Bankruptcy Proceeding. D k t. #26. Plaintiff appealed to the Court of Appeals for the Second Circuit. Dkt. #28.

Chief Judge Arcara issued a Decision and Order denying plaintiff's m o tio n to intervene and a f f ir m in g the bankruptcy's October 19, 2004 Order awarding attorney fees on June 19, 2006. Dkt. #21. P la in tif f and Elia Construction appealed the decision, which was affirm e d by the United States Court of A p p e a ls for the Second Circuit on Septem b e r 17, 2007. Dkt. #33.

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By Order entered August 11, 2006, Judge Kaplan stated as follows: B y letter received by e-mail on August 4, 2006, the Court h a s been informed of events subsequent to its June 1, 1998 O rd e r abstaining from hearing certain matters concerning o w n e rs h ip of the surplus assets of this Debtor. That a b s te n tio n deferred to the then-pending Chapter 11 case, in th e District of New Jersey, of one of the asserted owners. It is this Court's understanding that that purported owner h a s commenced plenary litigation in the U.S. District for the W e s te rn District of New York, which litigation encompasses a n y dispute among purported owners, that might otherwise h a v e been properly before this Court. Consequently, this Court orders, in the interests of justice a n d the convenience of the parties, that all disputes among p u rp o rte d owners, including, but not limited to the claims of L. A n d re w Bernheim against the assets of this Debtor are moot in this court, and are dismissed without prejudice to pursuit in a n y other Court of appropriate jurisdiction. T h e debtor here is directed to file, forthwith, a Final R e p o rt and Account and Application for Final Decree, so that th is Estate may be closed, with all surplus assets of the E s ta te to be held or disbursed by the Debtor only in a c c o rd a n c e with the Orders of the U.S. District Court of the W e s te rn District of New York. Dkt. #44-2, pp.43-44.

In a summary order entered July 20, 2007, the Court of Appeals stated as f o llo w s : B e rn h e im 's status as a shareholder in [Elia Construction] ­ a n d the rights that flow from that status ­ remains in dispute a n d is the issue upon which his right to relief in this action d e p e n d s . It is also an issue relevant to both Bernheim's s ta n d in g to intervene in the bankruptcy fee dispute and the v a lid ity of the claim he filed in D.A. Elia's Chapter 11 p ro c e e d in g s in 1994. Thus, in light of "the necessity of a v o id in g duplicative litigations, thereby conserving judicial re s o u rc e s ," First City Nat. Bank and Trust Co. v. Simmons, 8 7 8 F.2d 76, 80 (2d Cir. 1989), Judge Elfvin acted well within h is discretion when he dismissed Bernheim's claims without p re ju d ic e and allowed Bernheim's status as a shareholder to b e resolved by the Court which first had occasion to consider it. See Curtis v. Citibank, N.A., 226 F.3d 133, 138 (2d Cir.

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2000) ("Because of the obvious difficulties of anticipating the c la im or issue-preclusion effects of a case that is still pending, a court faced with a duplicative suit will commonly . . . dismiss it without prejudice . . . ."). S u b s e q u e n t to Judge Elfvin's dismissal, however, it b e c a m e clear that Bernheim's shareholder status will not be re s o lv e d either by the Bankruptcy Court, see Findings of Fact, C o n c lu s io n s of Law and Recommendation to the District C o u rt, No. 94-10866 K at 2, 4 (Bankr. W .D .N .Y. Oct. 2, 2006) (B a n k ru p tc y Court stating that it directed the Debtor to close th e case, that it considered all claims related to the estate to h a v e been resolved and was of the view that all remaining m a tte rs in the case would be resolved "in a new civil action by B e rn h e im , such as has been dismissed by Judge Elfvin `w ith o u t prejudice'"), nor by the District Court in the context of B e rn h e im 's motion to intervene, see D.A. Elia Construction C o rp . v. Damon & Morey, LLP, No. 04-CV0975A, 2006 W L 1 7 2 0 3 6 1 , at *4 (W .D .N .Y. June 19, 2006) (declining to resolve B e rn h e im 's shareholder status and noting the issue to have b e e n the subject of litigation pending before Judge Elfvin). Thus, because the threat of duplicative litigation no longer e x is ts , and the W e s te rn District of New York is the proper fo ru m for the adjudication of Bernheim's claims, we now v a c a te the District Court's dismissal of those claims and re m a n d with the instruction that the District Court reinstate B e rn h e im 's complaint. Dkt. #35.

DISCUSSION AND ANALYSIS
D e fe n d a n ts move to dismiss the complaint pursuant to Rule 12(b)(6) of the F e d e ra l Rules of Civil Procedure on the ground that plaintiff's claims are barred by the s ta tu te of limitations. Dkt. #41.

Plaintiff opposes defendants' motion, moves to strike defendants' motion to d is m is s and moves for summary judgment with respect to the first cause of action. Dkt. # # 4 3 & 46.

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Defendants' Motion to Dismiss D e fe n d a n ts argue that plaintiff's claims accrued prior to 1990, when plaintiff firs t brought an adversarial proceeding against defendants as part of his bankruptcy case in New Jersey, and are, therefore, time-barred. Dkt. #41-8.

Plaintiff responds that his claims were tolled by the Bankruptcy Court's a u to m a tic stay and that the statute of limitations should be equitably tolled. Dkt. #45.

"A complaint is subject to dismissal for failure to state a claim upon which re lie f can be granted if the allegations `show that relief is barred by the applicable statute o f limitations.'" Kermanshah v. Kermanshah, 580 F. Supp.2d 247, 259 (S.D.N.Y. 2008), q u o tin g , Jones v. Bock, 549 U.S. 199, 215 (2007). "It is well established that state law ­ h e re , New York law ­ determines the applicable statute of limitations in federal diversity c a s e s ." Id. In New York, the limitations period generally begins to run when the relevant c a u s e of action "accrues." Id., quoting N.Y. C.P.L.R. § 203(a).

First Cause of Action ­ Declaratory Judgment P la in tiff's first cause of action seeks a declaration that he is the sole s h a re h o ld e r of Elia Construction by virtue of the June 5, 2000 Stipulation and Order. Dkt. # 1 , ¶ 40. "The statute of limitations period for a declaratory judgment action is based on th e underlying substantive claims upon which it is premised." Kermanshah, 580 F. S u p p .2 d at 268. "A stipulation is a contract between parties." In re Neuman, 55 B.R. 7 0 2 , 705 (S.D.N.Y. 1985); Kleinberg v. Ambassador Assocs., 103 A.D.2d 347, 347 (1 st D e p 't) ("A stipulation is in the nature of a contract and is subject to the rules governing

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contracts."), aff'd 64 N.Y.2d 733 (1984). As plaintiff is essentially seeking to enforce a c o n tra c t, the appropriate statute of limitations is six years. N.Y. C.P.L.R. § 213(2). Thus, th e filing of this action on February 23, 2005, seeking to enforce the Stipulation and Order o f June 5, 2000, is timely.

Second Cause of Action ­ Declaratory Judgment P la in tiff's second cause of action seeks a declaration, in the event that p la in tiff does not prevail on his first cause of action, that he is a fifty percent shareholder in Elia Construction. Dkt. #1, ¶ 44. This cause of action is based upon plaintiff's a lle g a tio n that he and David Elia each became fifty percent shareholders when Daniel E lia sold his stock back to the corporation in 1998 or 1999. Dkt. #1, ¶ 14. This cause of a c tio n is subject to a three year statute of limitation, as plaintiff is essentially seeking re tu rn of his ownership interest in the corporation. See N.Y.C.P.L.R. § 214 (3). As p la in tiff alleges that this cause of action accrued in 1998 or 1999, it is barred by the s ta tu te of limitations.

Third Cause of Action ­ Conversion P la in tiff's third cause of action alleges that defendants improperly converted p ro fits , dividends, and/or cash distributions of Elia Construction to themselves. Dkt. #1, ¶ 4 7 . As the statute of limitations for conversion is three years, any claim of conversion p rio r to February 23, 2002 would be time-barred. N.Y.C.P.L.R. § 214(3).

Fourth Cause of Action ­ Constructive Trust P la in tiff's fourth cause of action seeks to impose a constructive trust upon

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the assets misappropriated and improperly converted from Elia Construction to d e fe n d a n ts . Dkt. #1, ¶ 52.

"A constructive trust is a remedial device imposed in favor of one entitled to p ro p e rty that is wrongfully withheld or where to allow the present holder to retain the p ro p e rty would result in unjust enrichment." Stone v. Williams, 970 F.2d 1043, 1051 (2d C ir. 1992), cert. denied, 508 U.S. 906 (1993). A cause of action for a constructive trust is g o v e rn e d by New York's six-year statute of limitations and "runs from the occurrence of th e wrongful act or event which creates a duty of restitution." Dolmetta v. Uintah Nat. C o rp ., 712 F.2d 15, 18 (2d Cir. 1983). Thus, plaintiff's cause of action seeking a c o n s tru c tiv e trust would be timely with respect to any misappropriations which occurred s u b s e q u e n t to February 22, 1999.

Fifth Cause of Action ­ Breach of Fiduciary Duty P la in tiff's fifth cause of action, seeking monetary damages, alleges that d e fe n d a n ts , as officers and directors of Elia Construction, owed plaintiff a fiduciary duty a s a shareholder of Elia and breached that duty by wrongfully distributing funds and e x c lu d in g plaintiff from management of the affairs of Elia Construction. Dkt. #1, ¶ ¶ 555 6 . Such an action is governed by a three year statute of limitations which begins to run w h e n plaintiff knew or should have known of the facts underlying the claim. Grosso v. R a d ic e , No. 07-CV-3620, 2009 W L 749906, at *7 (E.D.N.Y. March 16, 2009). As it is u n c le a r when defendants distributed funds from the bankruptcy surplus, or when plaintiff b e c a m e aware of such distributions, the Court cannot assess the merits of the statute of lim ita tio n s argument. If, for example, plaintiff first became aware of the distribution of

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funds on August 9, 2004, when debtor's counsel noted Elia Construction's bank balance d u rin g proceedings with respect to counsel's fee application, the cause of action would b e timely. As a result, dismissal of this cause of action would be inappropriate at this tim e .

Sixth Cause of Action ­ Fraud P la in tiff's sixth cause of action alleges that plaintiff subordinated his claim b e fo re Judge Kaplan in reliance upon defendants' misrepresentation that defendants w o u ld not distribute any funds to enable Elia Construction to resume operations. Dkt. #1, ¶ 59. A cause of action for fraud must be commenced within six years of the date the c a u s e of action accrued or two years from the time the plaintiff discovered, or with re a s o n a b le diligence could have discovered, the fraud. N.Y.C.P.L.R. § 213(8). As it is u n c le a r when defendants distributed funds from the bankruptcy surplus, or when plaintiff b e c a m e aware of such distributions, the Court cannot assess the merits of the statute of lim ita tio n s argument. If, for example, plaintiff first became aware of the distribution of fu n d s on August 9, 2004, when debtor's counsel noted Elia Construction's bank balance d u rin g proceedings with respect to counsel's fee application, the cause of action would b e timely. As a result, dismissal of this cause of action would be inappropriate at this tim e .

Seventh Cause of Action ­ Conspiracy P la in tiff's seventh cause of action alleges that defendants conspired to w ro n g fu lly deprive plaintiff of Elia Construction's profits by committing conversion, breach o f fiduciary duty and fraud. Dkt. #1, ¶ 65. Under New York law, civil conspiracy is not an

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independent tort and is time-barred when the substantive tort upon which it depends is tim e -b a rre d . See Jacobs v. Baum, No. 1:07-cv-167, 2008 W L 819037, at *11 (N.D.N.Y. M a rc h 24, 2008). Thus, this aspect of defendants' motion to dismiss would be governed b y the analysis set forth with respect to plaintiff's third, fifth and sixth causes of action.

Eighth Cause of Action ­ Aiding and Abetting P la in tiff alleges that defendants each knowingly provided substantial a s s is ta n c e and thereby facilitated the commission of conversion, breach of fiduciary duty a n d fraud. Dkt. #1, ¶ 70. Claims for aiding and abetting are governed by the statute of lim ita tio n s applicable to the cause of action defendants are alleged to have aided and a b e tte d . See Ackerman v. National Property Analysists, Inc., 887 F. Supp. 494, 508 (S .D .N .Y. 1992). Thus, this aspect of defendants' motion to dismiss would also be g o v e rn e d by the analysis set forth with respect to plaintiff's third, fifth and sixth causes of a c tio n .

Ninth Cause of Action ­ Injunctive Relief P la in tiff seeks an injunction to prevent defendants from further depleting the re s o u rc e s remaining in the bankruptcy estate. Dkt. #1, ¶ 75. "Traditionally and for good re a s o n s , statutes of limitation are not controlling measures of equitable relief." Holmberg v . Armbrecht, 327 U.S. 392, 396 (1946). Thus, "a suit in equity may lie though a c o m p a ra b le cause of action at law would be barred." Id. at 396.

Tenth Cause of Action ­ Accounting P la in tiff seeks an accounting of all monies distributed to defendants from

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Elia Construction. Dkt. #1, ¶ 79. The statute of limitations in New York for claims of a c c o u n tin g is six years. N.Y.C.P.L.R. § 213(7). Thus, plaintiff's request for an accounting is timely as far back as February 23, 2005.

Equitable Tolling T o the extent that plaintiff's claims are barred by the applicable statute of lim ita tio n s , the Court recommends that the statute of limitations be equitably tolled.

"Equitable tolling is a doctrine that permits courts to extend a statute of lim ita tio n s on a case-by-case basis to prevent inequity." Warren v. Garvin, 219 F.3d 1 1 1 ,1 1 3 (2d Cir.), cert denied, 531 U.S. 968 (2000). The doctrine is applied as a matter o f fairness where a plaintiff has been prevented in some extraordinary way from e x e rc is in g his rights or has asserted his rights in the wrong forum. Johnson v. Nyack H o s p ., 86 F.3d 8, 12 (2d Cir. 1996). The doctrine "requires a party to pass with re a s o n a b le diligence through the period it seeks to have tolled." Id.

In the instant case, plaintiff has asserted his claim of ownership of Elia C o n s tru c tio n and wrongful deprivation of the benefits of that ownership in his own b a n k ru p tc y proceeding in New Jersey; in Elia Construction's bankruptcy proceeding in N e w York; and in this action. Defendants have participated in each of these forums as p la in tiff's claim of ownership was transferred from New York to New Jersey where it was p u rp o rte d ly settled before being reversed on appeal and ultimately dismissed, at which p o in t the bankruptcy court in New York dismissed plaintiff's claim of ownership in favor of a resolution by this Court, which dismissed the claim as premature pending resolution of

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the bankruptcy case. Plaintiff should not be barred from resolution of his claims by such p ro c e d u ra l complexities. Therefore, it is recommended that, to the extent that plaintiff's c la im s are barred by the statute of limitations, defendants' motion to dismiss those claims b e denied on the ground of equitable estoppel.

Motion to Strike P la in tiff seeks to strike portions of defense counsel's sworn statement c o n ta in in g improper argument and inadmissible hearsay. Dkt. #45, p.21. Plaintiff also s e e k s to strike defendants' statement of undisputed facts for failing to provide citation to e v id e n c e in the record. Dkt. #45, p.21.

The Court agrees that defendants' statement of undisputed facts in support o f its motion to dismiss (Dkt. #41-9), as well as defendants' statement of undisputed facts in opposition to plaintiff's motion for summary judgment (Dkt. #51), are improper as they g e n e ra lly fail to cite to admissible evidence within the record before the Court, as re q u ire d by Local Rule 56.1(d). Moreover, the Court agrees that the affidavits of d e fe n d a n ts ' attorney contain inadmissible hearsay and unsupported assertions in v io la tio n of Rule 56(e) of the Federal Rules of Civil Procedure.2 However, the Court finds th e s e documents useful to glean defendants' arguments. As a result, the Court will deny th e motion to strike and exercise its discretion to search the record and reach its re c o m m e n d a tio n based upon admissible evidence.

2

Rule 56(e) provides that S u p p o r tin g and opposing affidavits shall be m a d e on personal k n o w le d g e , shall set forth such facts as would be adm is s ib le in evidence, a n d shall show affirm a tiv e ly that the affiant is com p e te n t to testify to the m a tte r s stated therein.

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Motion for Summary Judgment P la in tiff seeks summary judgment declaring him to be the sole owner of all s h a re s of stock of Elia Construction. Dkt. #46. In support of his motion, plaintiff relies u p o n the Stipulation and Order entered by Judge Gindin on June 5, 2000. Dkt. #46-2, ¶ 3.

In opposition to the motion, defendants argue that the June 5, 2000 Stipulation and Order addresses Plaintiff's o w n e rs h ip interests in [Elia Construction] only between 1987 a n d 1999, inclusive. It does not purport to address ownership is s u e s thereafter. D k t. #50, ¶ 7. Defendants' attorney declares that defendants "assert that Plaintiff sold h is interest in [Elia Construction] pursuant to a settlement agreement and deny that P la in tiff has had any ownership interest in [Elia Construction] since 1999." Dkt. #50, ¶ 6. Defendants' attorney also declares that defendants "state that Plaintiff has received full c o m p e n s a tio n for selling his stock." Dkt. #50, ¶ 10.

The June 5, 2000 Stipulation and Order, signed by plaintiff and counsel for th e defendants, affords plaintiff sole ownership of Elia Construction for the years 1987 th ro u g h 1999, inclusive. Dkt. #46-3, p.3. Although it is clear that the stipulation was e n te re d into with the intent of resolving the parties' tax liabilities, the stipulation is not d e p e n d e n t upon and therefore could not have been disturbed by the Internal Revenue S e rv ic e 's appeal or the New Jersey District Court's decision vacating Judge Gindin's O rd e rs of June 15, 2000 and June 21, 2000. By its terms, the Stipulation and Order was subject only to the Confidential Settlement Agreement. Dkt. #46-3, p.3.

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The Confidential Settlement Agreement, on the other hand, is dependent "u p o n the wiring of the monies as set forth above and receipt of said monies in the a c c o u n t of [plaintiff] by 5 p.m. time of the essence, October 24th . Dkt. #46-3. p.11. H o w e v e r, plaintiff affirms that he "never received the compensation contemplated by the A g re e m e n t for the contemplated sale." Dkt. #46-2, ¶ 5; see also Dkt. #44-6, ¶ 9. A d e c la ra tio n by defendants' attorney that defendants "assert that Plaintiff sold his interest in [Elia Construction] pursuant to a settlement agreement and deny that Plaintiff has had a n y ownership interest in [Elia Construction] since 1999"3 or that defendants "state that P la in tiff has received full compensation for selling his stock" (Dkt. #50, ¶¶ 6 &10), is in s u ffic ie n t to overcome the documentary evidence and affirmation submitted by plaintiff. "Unsupported factual assertions made only in attorney's affidavits or memoranda do not s u ffic e to raise triable issues of fact." Dean v. City of Buffalo, 579 F. Supp.2d 391, 408 (W .D .N .Y. 2008).

As the parties stipulated that plaintiff was the sole owner of all shares of s to c k of Elia Construction as of December 31, 1999, and there is no evidence in a d m is s ib le form to contest plaintiff's affirmation that the sale of that stock contemplated b y the Agreement dated October 24, 2000 did not transpire, logic dictates that plaintiff re m a in s the sole owner of all shares of stock of Elia Construction. Accordingly, it is re c o m m e n d e d that plaintiff's motion for partial summary judgment declaring him the sole o w n e r of all shares of stock of Elia Construction be granted.

The Court notes the inherent inconsistency in defendants' argum e n t that plaintiff had no o w n e r s h ip interest in Elia Construction subsequent to Decem b e r 31, 1999 and their argum e n t that plaintiff s o ld his interest in Elia Construction on October 24, 2000.

3

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CONCLUSION Based on the foregoing, it is RECOMMENDED that defendants' motion to
d is m is s the complaint as barred by the statute of limitations (Dkt. #41), be DENIED; p la in tiff's motion to strike defendants' attorney's affidavits and statement of facts in s u p p o rt of defendants' motion to dismiss (Dkt. #43), be DENIED; and plaintiff's motion for p a rtia l summary judgment (Dkt. #46), be GRANTED.

Accordingly, pursuant to 28 U.S.C. § 636(b)(1), it is hereby

ORDERED, that this Report, Recommendation and Order be filed with the Clerk of the Court.

ANY OBJECTIONS to this Report, Recommendation and Order must be filed with the Clerk of this Court within ten (10) days after receipt of a copy of this Report, Recommendation and Order in accordance with the above statute, Fed.R.Civ.P. 72(b) and Local Rule 72.3(a)(3).

The district judge will ordinarily refuse to consider de novo arguments, case law and/or evidentiary material which could have been, but was not presented to the magistrate judge in the first instance. See, e.g., Patterson-Leitch Co. v. Massachusetts Mun. Wholesale Electric Co., 840 F.2d 985 (1st Cir. 1988).

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Failure to file objections within the specified time or to request an extension of such time waives the right to appeal the District Court's Order. Thomas v. Arn, 474 U.S. 140, 106 S. Ct. 466, 88 L. Ed.2d 435 (1985); Wesolek v. Canadair Ltd., 838 F.2d 55 (2d Cir. 1988).

The parties are reminded that, pursuant to Rule 72.3(a)(3) of the Local Rules for the Western District of New York, "written objections shall specifically identify the portions of the proposed findings and recommendations to which objection is made and the basis for such objection and shall be supported by legal authority." Failure to comply with the provisions of Rule 72.3(a)(3), or with the similar provisions of Rule 72.3(a)(2) (concerning objections to a Magistrate Judge's Report, Recommendation and Order), may result in the District Judge's refusal to consider the objection.

The Clerk is hereby directed to send a copy of this Order and a copy of the Report and Recommendation to counsel for the parties.

S O ORDERED.

D a te d :

B u ffa lo , New York M a rc h 26, 2009 s/ H. Kenneth Schroeder, Jr. H. KENNETH SCHROEDER, JR. United States Magistrate Judge

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