Preview
FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019
NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022
SUPREME COURT OF THE STATE OF NEW YORK Return Date: 7/19/2022
COUNTY OF NASSAU Hon. Erica L. Prager
-------------------------------------------------------------------------x Index No. 001052/2019
JAMES MORAN,
Plaintiff,
-against-
GRAND SLAM VENTURES, LLC, JON STEINBERG,
GLENN A. REINER, JG REAL ESTATE VENTURES,
LLC, and "JOHN DOES" # 1-10 inclusive, the last ten
names being fictitious and unknown to plaintiff,
Defendants.
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PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT
OF MOTION FOR SANCTIONS
James Moran
Plaintiff pro se
28 Carrie Avenue
Bethpage, New York 11714
Tel: (516) 302-6581
Emc1.il;jim.cc1.tlc1.wl@gmrul.com
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TABLE OF CONTENTS
TABLE OF AUTHORITIES .......................................................................................................... ii
THE NATURE OF THIS ACTION ................................................................................................ 1
PROCEDURAL HISTORY AND STATEMENT OF FACTS ....................................................... 1
PLAINTIFF'S INSTANTMOTION ............................................................................................... 1
POINT I:
PLAINTIFF IS ENTITLED TO SANCTIONS ........................................................................ .2
a. DEFENDANTS SPOLIATION OF EVIDENCE .................................................... 3
1. DEFENDANTS' OBLIGATION TO
PRESERVE BANKING RECORDS .................................................................... 4
11. BANKING RECORDS WERE DESTROYED
WITH A CULPABLE STATE OF MIND ........................................................... 6
111. BANKING RECORDS WERE RELEVANT
TO CLAIMS AND DEFENSES ........................................................................... 8
IV. APPROPRIATE SANCTION ············································································13
b. DEFENDANTS' FAILURE TO COMPLY
WITH COURT ORDERS ...................................................................................... 15
CONCLUSION .............................................................................................................................. 22
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TABLE OF AUTHORITIES
Page(s)
Cases:
Baglio v. St. John's Queens Hosp.,
303 A.D.2d 341,342, 755 N.Y.S.2d 427,428 (2d Dept., 2003) ................................................ 13
Bank of New York v. Meridi en Biao Bank Tanz.,
171 F.R.D. 135,146 (S.D.N.Y. 1997) ........................................................................................ 17
Birch Hill Farm, Inc. v. Reed,
272 A.D.2d 282,282, 707 N.Y.S.2d 188, 189 (2d Dept., 2000) ................................................ 15
Cheek v. Brooks,
188 A.D.3d 785, 786, 135 N.Y.S.3d 478,480 (2d Dept., 2020) .................................................. 8
Commonwealth of the N. Mariana Is. v. Canadian Imperial Bank of Commerce,
21 N.Y.3d 55, 62, 990 N.E.2d 114, 119, 967 N.Y.S.2d 876, 881 (N.Y., 2013) ......................... l 7
Delmur, Inc. v. Sch. Constr. Auth.,
174 A.D.3d 784, 787, 106 N.Y.S.3d 146, 150 (2d Dept., 2019) ................................................ 14
DiDomenico v. C & S Aeromatik Supplies, Inc.,
252 A.D.2d 41, 52,682 N.Y.S.2d 452,459 (2d Dept. 1998) ..................................... 6, 12, 13, 15
Ferraro v. Koncal Assocs.,
97 A.D.2d 429,429,467 N.Y.S.2d 284,284 (2d Dept., 1983) .................................................. 16
Foncette v. LA Express,
295 A.D.2d 471,472, 744 N.Y.S.2d 429, 430-31 (2d Dept., 2002) ........................................... 14
Horace Mann Ins. Co. v. E.T. Appliances, Inc.,
290 A.D.2d 418,419, 736 N.Y.S.2d 79, 80 (2d Dept. 2002) ..................................................... 13
Ingoglia v. Barnes & Noble Coll. Booksellers, Inc.,
48 A.D.3d 636,637, 852 N.Y.S.2d 337,338 (2d Dept., 2008) .............................................. 3, 13
Kihl v. Pfeffer,
94 N.Y.2d 118, 122, 700 N.Y.S.2d 87, 90, 722 N.E.2d 55, 58 (N.Y., 1999) ...................... .16, 21
Lucas v. Starn,
147 A.D.3d 921,925, 48 N.Y.S.3d 150, 155 (2d Dept., 2017) .................................................. 15
Matter of Agai v. Diontech Consulting, Inc.,
138 A.D.3d 736, 737, 29 N.Y.S.3d 441,442 (2d Dept., 2016) .................................................. 12
11
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Matter of CIT Grp./Cornrnercial Servs., Inc. v.
160-09 Jamaica Ave. Ltd. P'ship.
25 A.D.3d 301,303, 808 N.Y.S.2d 187, 189 (1 st Dept., 2006) .................................................... 8
Metlife Auto & Horne v. Joe Basil Chevrolet, Inc.,
1 N.Y.3d 478, 482-83, 775 N.Y.S.2d 754, 755-56, 807 N.E.2d 865, 866-67 (N.Y., 2004) ........ .3
New York Central Mut. Fire Ins. Co. v. Turnerson's Electric, Inc.,
280 A.D.2d 652, 721 N.Y.S.2d 92 (2d Dept., 2001) .................................................................. 14
Oak Beach Inn Corp. v. Babylon Beacon, Inc.,
62 N.Y.2d 158,166,464 N.E.2d 967,970,476 N.Y.S.2d 269,272 (N.Y., 1984) ..................... 15
Ortega v. City ofN.Y.,
9 N.Y.3d 69, 76,845 N.Y.S.2d 773,776,876 N.E.2d 1189, 1192 (N.Y., 2007) ....................... 13
Palrnerone v. Staples,
195 A.D.3d 736, 737-38, 150 N.Y.S.3d 723, 725-26 (2d Dept., 2021) ........................................ 8
Palermo Mason Constr. v. Aark Holding Corp.,
300 A.D.2d 458, 460, 752 N.Y.S.2d 99, 101 (2d Dept., 2002) .................................................... 9
Pegasus Aviation I, Inc. v. Varig Logistica S.A.,
26 N.Y.3d 543,547, 26 N.Y.S.3d 218,219, 46 N.E.3d 601,602 (N.Y., 2015) ................... 3, 6, 7
Pryzant v. City ofN.Y.,
300 A.D.2d 383, 750 N.Y.S.2d 779, 779 (2d Dept., 2002) ........................................................ 16
Richter v. BMW ofN. Arn., LLC,
166 A.D.3d 1029, 1030, 88 N.Y.S.3d 454, 456-57 (2d Dept., 2018) ........................................... 6
Rokach v. Taback,
148 A.D.3d 1195, 1196, 50 N.Y.S.3d 499, 501 (2d Dept., 2017) .............................................. 14
Sage Realty Corp. v. Proskauer Rose LLP,
275 A.D.2d 11, 16, 713 N.Y.S.2d 155, 159 (1st Dept., 2000) ..................................................... .3
Samaroo v. Bogopa Serv. Corp.,
106 A.D.3d 713,714,964 N.Y.S.2d 255,256 (2d Dept., 2013) ................................................ 15
Sawh v. Bridges,
120 A.D.2d 74, 79, 507 N.Y.S.2d 632,635 (2d Dept. 1986) .................................................... .21
Sguillacioti v. Indep. Grp. Horne Living Program, Inc.,
167 A.D.3d 673,675, 90 N.Y.S.3d 51, 53-54 (2d Dept., 2018) ................................................. 13
111
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Turner v. Hudson Transit Lines, Inc.,
142 F.R.D. 68, 73 (S.D.N.Y. 1991) .............................................................................................. 4
VOOM HD Holdings LLC v EchoStar Satellite L.L.C,
93 AD3d 33, 41, 939 N.Y.S.2d 321 (1 st Dept., 2012) ............................................................. .4, 6
West v. Goodyear Tire & Rubber Co.,
167 F.3d 776, 779 (2d Cir. 1999) .................................................................................................. 3
Wilensky v. JRB Mktg. & Op. Research, Inc.,
161 A.D.2d 761, 763, 556 N.Y.S.2d 356,358 (2d Dept., 1990) ................................................ 17
Zletz v. Wetanson,
67 N.Y.2d 711,713,499 N.Y.S.2d 933,934,490 N.E.2d 852,853 (N.Y., 1986) ..................... 16
Statutes & Other Authorities:
CPLR §3120 ............................................................................................................................... 17
CPLR §3126 ................................................................................................................. 1, 3, 15, 16
DCL §271 ..................................................................................................................................... 8
DCL §272 ................................................................................................................................. 8, 9
DCL §273 ..................................................................................................................................... 8
IV
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THE NATURE OF THIS ACTION
This is an action brought under former Debtor and Creditor Law article 10 for the fraudulent
conveyance of real property commonly known as 219 Hempstead Turnpike, West Hempstead,
New York 11552 (the subject "Property") from Defendant Grand Slam Ventures, LLC
("Defendant Grand Slam") to Defendant JG Real Estate Ventures, LLC, ("Defendant JG Real
Estate") which occurred on September 26, 2013, and to pierce the corporate veils.
PROCEDURAL HISTORY AND STATEMENT OF FACTS
The pertinent background facts and procedural history relevant to Plaintiffs instant motion
are set forth in the accompanying affidavit of James Moran, sworn to June 23, 2022. 1 ("Plaintiff'
and/or "Moran") More detailed facts concerning this action can found in Moran's affidavits
sworn to February 11, 2020 and June 15, 2022. (See, NYSCEF2 Doc. #'s 6 & 8)
PLAINTIFF'S INSTANT MOTION
Plaintiffs instant motion seeks an Order; a) striking Defendants' Verified Answer or
precluding the Defendants from contesting that Defendant Grand Slam was insolvent and/or
rendered insolvent as a result of the conveyance and/or that fair consideration was given for the
conveyance of the subject Property for Defendants' willful spoliation of relevant evidence;
and/or b) pursuant to CPLR §3126, striking Defendants' Verified Answer and/or precluding
Defendants from introducing, on motion and/or at trial, any evidence not produced in accordance
with the Order of this Court dated August 30, 2021; and/or c) for such other, further and different
relief as this Honorable Court may deem just, proper and equitable.
1 References herein to "Exhibit" are those annexed by reference to the affidavit of James Moran sworn to June 23,
2022.
2New York State Courts Electronic Filing James Moran v. Grand Slam Ventures, LLC, Jon Steinberg, Glenn A.
Reiner, JG Real Estate Ventures, LLC, et al, Nassau County Index No. 001052/2019
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POINT I
PLAINTIFF IS ENTITLED TO SANCTIONS
This Court [Sullivan, J.] issued an Order dated August 30, 2021 granting Defendants' cross-
motion seeking a protective order to extent of requiring Defendants to respond to Plaintiffs
documents demands numbered 1, 5, 6, 8, 18, 22, 23, 25, 43 and 47 and Plaintiffs Interrogatories
numbered 1, 2, 5, 6, 13, 14, 16, 17, 23, and 24. (See, Exhibit "8")
Plaintiffs Demand for Discovery and Inspection, document demands numbered 8 and 25,
required Defendants to produce Defendant Grand Siam's and Defendant JG Real Estate's
" ... banking records including, but not limited to, monthly account statements, cancelled
checks, deposit slips and copies of checks deposited ... " for the years 2012 through 2014, as was
limited by the Court's August 30, 2021 Order. (See, Exhibit "3" at ,r,r8 & 25 and Exhibit "8")
Defendants failed to produce any banking records for the years 2012 through 2014 claiming:
"Defendants are not in possession of the requested documents". (See, Exhibit "9" at ,r,r8 & 25)
Defendant Glenn A. Reiner ("Defendant Reiner") has submitted an affidavit alleging that he
"reached out to the financial institution used by both corporate Defendants, TD Bank, to inquire
as to whether or not they maintained the corporate Defendants' bank records from 2012 through
2014" and he was informed that TD Bank typically retains banking records for seven (7) years
and that Defendant Grand Siam's and Defendant JG Real Estate's banking records were disposed
of electronically by TD Bank prior to his inquiry. (See, Exhibit "13" at ,r,r3-6)
Defendants have intentionally and willfully destroyed relevant evidence, i.e., banking records
and have foiled and refused to comply with the Court's Order dated August 30, 2021 (See,
Exhibit "8") by refusing to, inter alia, properly respond to Plaintiffs interrogatory number 24
and produce documents in response to Plaintiffs document demands numbered 8, 25 and 47.
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a. DEFENDANTS' SPOLIATION OF EVIDENCE
Spoliation has been defined as "the destruction or significant alteration of evidence, or the
failure to preserve property for another's use as evidence in pending or reasonably foreseeable
litigation." West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999)
A party asserting that it is aggrieved by the spoliation of evidence may seek sanctions either
on an independent, per se, basis or pursuant to CPLR §3126. See, Metlife Auto & Home v. Joe
Basil Chevrolet, Inc., 1 N.Y.3d 478, 482-83, 775 N.Y.S.2d 754, 755-56, 807 N.E.2d 865, 866-67
(N.Y., 2004); Sage Realty Corp. v. Proskauer Rose LLP, 275 A.D.2d 11, 16, 713 N.Y.S.2d 155,
159 (1st Dept., 2000) ["Whether we review on the basis ofthe common-law doctrine
of spoliation, allowing dismissal when key evidence is destroyed prior to examination by the
opposing party, in which case willfulness or bad faith may not be necessary predicates, or on a
proper exercise of the court's discretion under CPLR 3126, addressing willful conduct by a
nondisclosing party ... " (citation omitted)]; Ingoglia v. Barnes & Noble Coll. Booksellers, Inc., 48
A.D.3d 636, 637, 852 N.Y.S.2d 337, 338 (2d Dept., 2008) [when a party negligently loses or
intentionally destroys relevant evidence, the responsible party may be sanctioned under CPLR
§3126]
A party that seeks sanctions for spoliation of evidence must show; i) that the party having
control over the evidence possessed an obligation to preserve it at the time of its destruction; ii)
that the evidence was destroyed with a "culpable state of mind"; and iii) ''that the destroyed
evidence was relevant to the party's claim or defense such that the trier of fact could find that the
evidence would support that claim or defense". Quoting, Pegasus Aviation I, Inc. v. Varig
Logistica S.A., 26 N.Y.3d 543, 547, 26 N.Y.S.3d 218,219, 46 N.E.3d 601,602 (N.Y., 2015)
3
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1. DEFENDANTS' OBLIGATION TO PRESERVE BANKING RECORDS
The obligation to preserve evidence is triggered once a party reasonably anticipates litigation.
See, VOOM HD Holdings LLC v. EchoStar Satellite L.L.C., 93 A.D.3d 33, 43, 939 N.Y.S.2d
321, 329 (1 st Dept., 2012) ["The 'reasonable anticipation of litigation,' as discussed
by Zubulake and its progeny, is such time when a party is on notice of a credible probability that
it will become involved in litigation."]
It is particularly clear that the duty of preservation attaches once a formal discovery request
has actually been served. See, Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 73 (S.D.N.Y.
1991) ["Of course, a party is on notice once it has received a discovery request."]
Money judgments were entered against Defendant Grand Slam and in favor of Plaintiff on
September 28, 2018 (See, Exhibit "14") and on May 9, 2019 (See, Exhibit "15") and Defendants
were served with subpoenas on June 28, 2019 (See, Exhibits "16") which required the production
of, inter alia, Defendant Grand Slam's and Defendant JG Real Estate's banking records and the
Court subsequently denied motions to quash. (See, Exhibit "18")
Plaintiff then commenced this action on September 25, 2019 (See, Exhibit "l ") and served
Defendants with discovery demands on December 6, 2019 which sought, inter alia, Defendant
Grand Slam's and Defendant JG Real Estate's banking records. (See, Exhibit "3" at ~~8 & 25)
On December 17, 2019 a Preliminary Conference Order ("PC Order") was entered requiring
Defendants to respond to Plaintiffs discovery demands seeking, inter alia, Defendant Grand
Slam's and Defendant JG Real Estate's banking records. (See, Exhibit "5")
On January 24, 2020 this Court [Libert, J] issued an Order requiring Defendants to respond
to Plaintiffs discovery demands seeking, inter alia, Defendant Grand Slam's and Defendant JG
Real Estate's banking records. (See, Exhibit "7")
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On August 30, 2021 this Court [Sullivan, J.] issued an Order granting Defendants a
protective order to extent of requiring Defendants to produce, inter alia, Defendant Grand
Slam's and Defendant JG Real Estate's banking records limited to the period of 2012 through
2014. (See, Exhibit "8") (Plaintiffs document demands numbered 8 & 25)
It is quite clear that Defendants were obligated to preserve Defendant Grand Slam's and
Defendant JG Real Estate's banking records when served with subpoenas on June 28, 2019,
when Plaintiff commenced this action on September 25, 2019, when they were served with
Plaintiffs discovery demands on December 6, 2019, when the PC Order was entered on
December 17, 2019, when this Court issued its January 24, 2020 Order and when this Court
issued its Order dated August 30, 2021.
It must be noted, during a conference with the Court [Libert, J.], the following colloquy took
place:
THE COURT: So let's go ahead with discovery. That's all that we can do.
MR. MORAN: On that issue, your Honor, we have a PC order that defendants
were supposed to serve responses to my discovery demands by January 17th.
And I've been informed -- I haven't gotten them. And I've also been informed
that defendants haven't served them
THE COURT: And why is that?
MR. DEL VALLE: We're still trying to unearth the documents, your
Honor. These are documents from years ago from a company that hasn't been
doing business in 7 years. (emphasis added)
(See, Exhibit "6" at page 6 lines 6-18)
It is respectfully submitted; Defendants had the obligation to preserve Defendant Grand
Siam's and Defendant JG Real Estate's banking records since June 28, 2019 at the latest, when
subpoenas were served. (See, Exhibit "16")
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ii. BANKING RECORDS WERE DESTROYED
WITH A CULPABLE STATE OF MIND
For purposes of spoliation,. the requisite culpable state of mind can be demonstrated through
intentional or willful conduct, gross negligence or ordinary negligence and where evidence was
negligently destroyed, the party seeking sanctions must establish that the destroyed evidence was
relevant to the party's claim or defense. See, Richter v. BMW of N. Am., LLC, 166 A.D.3d
1029, 1030, 88 N.Y.S.3d 454, 456-57 (2d Dept., 2018)
However, "[w]here a noticed party discards evidence without moving for a protective order,
a 'negative inference' may be drawn that the destruction was deliberate (i.e., 'wilful')" Quoting,
DiDomenico v. C & S Aeromatik Supplies, Inc., 252 A.D.2d 41, 52,682 N.Y.S.2d 452,459 (2d
Dept. 1998) and "[w]here the evidence is determined to have been intentionally or wilfully
destroyed, the relevancy of the destroyed documents is presumed" Quoting, Pegasus Aviation I,
Inc. v. Varig Logistica S.A., supra, 547, although this presumption is rebuttable. See, VOOM
HD Holdings LLC v. Echostar Satellite L.L.C., supra, at 45.
While Defendant Reiner alleges that he "reached out to the financial institution used by both
corporate Defendants, TD Bank, and was informed that TD Bank typically retains bank records
for seven (7) years and that Defendant Grand Siam's and Defendant JG Real Estate's banking
records were disposed of electronically by TD Bank prior to his inquiry, Defendant Reiner fails
to state when the banking records were disposed of by the Defendants themselves and fails to
indicate when his first inquiry to TD Bank was made. (See, Exhibit "13")
Defendants were unquestionably on notice to preserve Defendant Grand Siam's and
Defendant JG Real Estate's banking records when served with subpoenas (See, Exhibit "16") yet
made no effort to obtain them from TD Bank and have made no claim that they ever instructed
TD Bank to impose a litigation hold.
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Further, the deposition of Defendant Jon Steinberg ("Defendant Steinberg"), held on October
30, 2019, was adjourned upon the agreement that he obtains the banking records and tax records
for Defendant Grand Slam and Defendant JG Real Estate and appears for the continuation of his
examination. (See, Exhibit "19" at pages 62-63 lines 19-25 & 2-10) In fact, it was stated on the
record "I think a simple phone call to the bank, even if somebody doesn't have the actual,
physical, copies could be produced in a week or two." (See, Exhibit "19" at page 53 lines 8-11)
Defendant Steinberg apparently never sought to get the banking records from TD Bank and
after Defendant Reiner failed to produce the required bank records (See, Exhibit "20" at page 25
lines 3-5), Plaintiff sought to continue the deposition of Defendant Steinberg as was agreed (See,
Exhibit "19" at pages 62-63 lines 19-25 & 2-10) and Defendant Steinberg's attorney directed
him not to appear. (See, Exhibit "21")
Defendants' bad faith and willful, contumacious conduct is further exhibited by Defendants'
refusal to respond to Plaintiffs demands for discovery served in this action, Court Orders
directing that responses to Plaintiffs discovery demands be served and delaying the exchange of
records until they were disposed of electronically by TD Bank in the regular course of business.
It is respectfully submitted; Defendants intentionally and willfully disposed of Defendant
Grand Siam's and Defendant JG Real Estate's banking records for the period of 2012 through
2014 or said banking records were disposed of as the result of gross negligence and, as such,
the relevancy of the disposed banking records is presumed. See, Pegasus Aviation I, Inc. v. Varig
Logistica S.A., supra, 547.
Even asswning for the sake of argwnent that Defendant Grand Slam's and Defendant JG
Real Estate's banking records were disposed of as a result of ordinary negligence, said banking
records are relevant as demonstrated below.
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iii. BANKING RECORDS WERE RELEVANT
TO CLAIMS AND DEFENSES
Plaintiffs Verified Complaint alleges that the conveyance of the subject Property from
Defendant Grand Slam to Defendant JG Real Estate on September 26, 2013 was fraudulent
under various sections of former Debtor and Creditor Law article 10. (See, Exhibit "1 ")
In order to establish a fraudulent transfer claim under former DCL §273 it is necessary to
establish that the transferor was insolvent or rendered insolvent by the conveyance within the
meaning of former DCL §271; Cheek v. Brooks, 188 A.D.3d 785, 786, 135 N.Y.S.3d 478, 480
(2d Dept., 2020) ["Insolvency is a 'prerequisite[] to a finding of constructive fraud under
[former] section 273"'] and generally the burden of proving insolvency is on the party
challenging the conveyance. See, Palmerone v. Staples, 195 A.D.3d 736, 738, 150 N.Y.S.3d 723,
726 (2d Dept., 2021)
Defendant Grand Slam's banking records would have provided relevant evidence regarding
the issue of Defendant Grand Slam' s solvency during the pertinent time period. See e.g., Matter
of CIT Grp./Commercial Servs., Inc. v. 160-09 Jamaica Ave. Ltd. P'ship, 25 A.D.3d 301, 303,
808 N.Y.S.2d 187, 189 (1 st Dept., 2006) ["In addition, uncontroverted bank records show that
CIT's claim exceeded CMS's assets, rendering CMS either insolvent or nearly insolvent at the
time of the subject payment."]
Also, the consideration given for the transfer of the subject Property is a material element of
Plaintiffs causes of action. See, DCL §272; Cheek v. Brooks, 188 A.D.3d 785, 786, 135
N.Y.S.3d 478, 480 (2d Dept., 2020) ["To constitute fair consideration, the value given in
exchange must be fairly equivalent and proportionate to the value of the property conveyed"]
Palmerone v. Staples, 195 A.D.3d 736, 737-38, 150 N.Y.S.3d 723, 725-26 (2d Dept., 2021)
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DCL §272 defines "fair consideration" to include the satisfaction of an antecedent debt or
obligation. See, DCL §272(a)-(h); Palermo Mason Constr. v. Aark Holding Corp., 300 A.D.2d
458, 460, 752 N.Y.S.2d 99, 101 (2d Dept., 2002) ["Satisfaction of an antecedent debt or
obligation constitutes fair consideration"]
Defendant Reiner's affidavit alleges "Defendants JG, Mr. Steinberg, and I" paid various tax
liens and real property taxes for the subject Property for a total amount of $104,593.19, paid the
insurance premium for the subject Property in the amount of $3,950.00, paid $69,365.00 to have
the subject Property cleaned and repaired and " ... paid the investors in the mortgage held by
Grand Slam on the property to relieve Grand Slam of the obligation." (See, Exhibit "13")
Defendant Reiner also testified under oath in the supplementary proceedings that Defendant
JG Real Estate issued a check directly to Fidelity National Title for them to pay the Nassau
County Treasurer the taxes due.
Q. Mr. Reiner, I believe I asked you what consideration JG Real Estate Ventures
gave to Grand Slam Ventures to the winning bid. Am I correct?
A. Correct. Yes.
Q. Do you recall when that was? I think you might have answered just to pick up
where we kind of left off.
A. Somewhere around the timing of the transfer of the assignment of the bid. I
don't have exact dates.
Q. Okay. How did JG Real Estate Ventures pay that consideration?
A. By check.
Q. To who?
A. Nassau County Treasurer probably directly, actually directly to Fidelity
National Title for them to pay to the Nassau County Treasurer.
Q. So JG Real Estate Ventures issued a check to Fidelity, to give to
Nassau County Treasurer to pay the taxes?
A. Pretty certain that's what happened, yes.
(See, Exhibit "20" at pages 18-19 lines 11-25 and 2-10)
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Defendant Steinberg, however, testified that Defendant Grand Slam paid the taxes and
insurance testifying as follows:
Q. So you took your money out of your bank account and put it into Grand
Slam's and got money from the investors and then paid the taxes and
insurance?
A. Yeah.
(See, Exhibit "19" at page 15 lines 9-13)
Defendant Steinberg further contradicted Defendant Reiner's affidavit when he testified
under oath in the supplementary proceedings that the only consideration given for the subject
Property was $10.00.
Q. JG Real Estate Ventures acquired the property from Grand Slam
Ventures for $10, the winning bid, correct?
A. Yes.
Q. Did JG Real Estate Ventures invest any other money into the
property?
A. I don't believe so.
(See, Exhibit "19" at page 48 lines 15-21)
Q. Grand Slam transferred the winning bid, the property, to JG Real
Estate Ventures for $1 0?
A. Yes.
Q. You had testified there was no other consideration?
A. Correct.
Q. So JG Real Estate Ventures took no loss. They pay nothing for the
property, $10 for the property?
A. Correct.
(See, Exhibit "19" at page 50 lines 6-11 and 18-21)
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In fact, Defendant Reiner's affidavit sworn to April 14, 2022 (See, Exhibit "13") contradicts
his own Reply Affidavit submitted in support of Defendants' motion for a protective order
wherein at i!45 Defendant Reiner alleged that "Mr. Steinberg and I, not the corporate
Defendants, paid for the maintenance of the Premises, a point worthy of clarification." (emphasis
added) (See, NYSCEF Doc. #9 at i!45)
Further, when questioned in the supplementary proceedings, Defendant Reiner was asked the
following questions and gave the following responses:
Q. Did you have any other involvement with Grand Slam Ventures
other than acting as their attorney?
A. No.
Q. Do you ever invest any money in Grand Slam Ventures?
A. No.
Q. Did you ever loan any money to Grand Slam Ventures?
A. No.
Q. Did you ever pay any bills or expenses on behalf of Grand Slam
Ventures?
A. Not that I remember.
Q. I would ask the same questions with regards to your law firm. Did
your law firm ever pay any bills or expenses with regards to Grand
Slam Ventures?
A. We may have laid out money but we were probably reimbursed but
I don't remember off the top of my head.
Q. Did your law firm invest any money?
A. No.
Q. Loan any money?
A. No.
Q. So the only thing is you might have paid some bills or expenses on
behalf of them?
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A. We often will pay client disbursements and get reimbursed
afterwards.
Q. Would what would those disbursements be for court costs?
A. Court costs, filing fees, formation of documents. Court services.
Q. Anything outside that area?
A. No, not typically.
Q. Would you have paid any taxes or insurance?
A. No.
(See, Exhibit "20" at pages 7-8 lines 7-25 and 2-22)
Accordingly, Defendant Grand Slam's and Defendant JG Real Estate's banking records are
relevant to the issues of Defendant Grand Slam's solvency and whether "fair consideration" was
given for the conveyance of the subject Property and, as such, Defendants' intentional and
willful destruction of Defendant Grand Slam's and Defendant JG Real Estate's banking records
for the period of 2012 through 2014 has deprived Plaintiff of appropriate means to confront
Defendant Reiner' s contradicting and conclusory claims with incisive evidence.
Considering Defendants conflicting testimony, without Defendant Grand Slam's and
Defendant JG Real Estate's banking records, the trial would "be based on rank swearing
contests" See, DiDomenico v. C&S Aeromatik Supplies, Inc., supra at 53. [quotations omitted]
Plaintiff's Verified Complaint also seeks to pierce the corporate veils (See, Exhibit "1") and
Defendant Grand Slam's and Defendant JG Real Estate's banking records would have evinced
whether corporate funds were being commingled and/or whether funds were put in and taken out
of the corporate accounts for personal rather than corporate purposes which are factors to be
considered in this action. See, Matter of Agai v. Diontech Consulting, Inc., 138 A.D.3d 736, 737,
29 N.Y.S.3d 441, 442 (2d Dept., 2016) [Personal use of corporate funds is one of the factors to
be considered in piercing the corporate veil]
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1v. APPROPRIATE SANCTION
The Court is empowered with broad discretion in determining the appropriate sanction
for spoliation of evidence. See, Horace Mann Ins. Co. v. E.T. Appliances, Inc., 290 A.D.2d 418,
419, 736 N.Y.S.2d 79, 80 (2d Dept. 2002) These sanctions include "precluding proof favorable
to the spoliator to restore balance to the litigation, requiring the spoliator to pay costs to the
injured party associated with the development of replacement evidence, or employing an adverse
inference instruction at the trial of the action. Where appropriate, a court can impose the ultimate
sanction of dismissing the action or striking responsive pleadings, thereby rendering a judgment
by default against the offending party" Quoting, Ortega v. City of N.Y., 9 N.Y.3d 69, 76, 845
N.Y.S.2d 773, 776, 876 N.E.2d 1189, 1192 (N.Y., 2007) [citations omitted]
It is respectfully submitted, this case is not one of negligent destruction that would justify
giving only an adverse inference charge. See e.g., Squillacioti v. Indep. Grp. Home Living
Program, Inc., 167 A.D.3d 673, 675, 90 N.Y.S.3d 51, 53-54 (2d Dept., 2018) ["Where evidence
has been found to have been negligently destroyed, adverse inference charges have been found to
be appropriate"]
Where the intentional destruction deprives the non-responsible party from being able to
prove its claim or defense pleadings will be struck. See, e.g., Ingoglia v. Barnes & Noble College
Booksellers, Inc., 48 A.D.3d 636, 852 N.Y.S.2d 337 (2d Dept., 2008); Baglio v. St. John's
Queens Hosp., 303 A.D.2d 341, 755 N.Y.S.2d 427 (2d Dept., 2003); Di Domenico v. C & S
Aeromatik Supplies, supra, 682 ["Where, as here, a party destroys key physical evidence 'such
that its opponents are 'prejudicially bereft of appropriate means to confront a claim with incisive
evidence,' 'the spoliator may be punished by the striking of its pleading"']
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In the case at bar, Defendants' intentional and willful destruction of Defendant Grand Siam's
and Defendant JG Real Estate's banking records for the period of 2012 through 2014,
significantly compromises Plaintiffs ability to present evidence relevant to the issues of
Defendant Grand Siam's solvency and whether "fair consideration" was given for the
conveyance of the subject Property and to support Plaintiffs claims to pierce the corporate veils
warranting the drastic sanction of striking Defendants' Verified Answer. See, Foncette v. LA
Express, 295 A.D.2d 471, 472, 744 N.Y.S.2d 429, 430-31 (2d Dept., 2002) [" ... under the
common-law doctrine of spoliation, where a party destroys essential physical evidence and the
party seeking that physical evidence is 'prejudicially bereft of appropriate means to confront a
claim with incisive evidence,' the spoliator may be sanctioned by the striking of its pleading"];
N.Y. Cent. Mut. Fire Ins. Co. v. Tumerson's Elec., 280 A.D.2d 652, 653, 721 N.Y.S.2d 92, 93
(2d Dept. 2001) (same); Delmur, Inc. v. Sch. Constr. Auth., 174 A.D.3d 784, 787, 106 N.Y.S.3d
146, 150 (2d Dept., 2019) [" ... the defendants demonstrated that their ability to prove their
defense had been significantly, if not fatally, compromised by the loss of the truck. Under the
circumstances presented, the sanction of striking the complaint was appropriate"]
In the alternative, the remedy of preclusion is available if the Court finds that Defendants'
intentional and willful destruction of Defendant Grand Siam's and Defendant JG Real Estate's
banking records does not deprive Plaintiff the ability to prove its claims. See e.g., Rokach v.
Taback, 148 A.D.3d 1195, 1196, 50 N.Y.S.3d 499, 501 (2d Dept., 2017) ["since the destruction
of the evidence did not deprive the plaintiff of her ability to prove her claim so as to warrant the
drastic sanction of striking the defendants' answer, the appropriate sanction for the spoliation
herein is to preclude the defendants from offering any evidence in this action regarding the
alleged contents of the erased surveillance video"]
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b. DEFENDANTS' FAILURE TO COMPLY WITH COURT ORDERS
CPLR §3126 provides that if a party "refuses to obey an order for disclosure or wilfully fails
to disclose information which the court finds ought to have been disclosed . . . , the court may
make such orders ... as are just."
The penalties authorized by CPLR §3126 are designed" ... to prevent a party who has refused
to disclose evidence from affirmatively exploiting or benefiting from the unavailability of the
proof during the pending civil action" Quoting, Oak Beach Inn Corp. v. Babylon Beacon, Inc.,
62 N.Y.2d 158,166,464 N.E.2d 967,970,476 N.Y.S.2d 269,272 (N.Y., 1984)
The nature and degree of the penalty to be imposed on a motion pursuant to CPLR 3126 is
within the broad discretion of the Court. See, Samaroo v. Bogopa Serv. Corp., 106 A.D.3d 713,
714, 964 N.Y.S.2d 255,256 (2d Dept., 2013)
Courts have ruled that it is appropriate to strike a defendant's answer where its failure to
comply with discovery demands is willful, contumacious, or in bad faith. See e.g., Birch Hill
Farm, Inc. v. Reed, 272 A.D.2d 282, 282, 707 N.Y.S.2d 188, 189 (2d Dept., 2000) ["striking a
pleading is appropriate where there is a clear showing that the failure to comply with discovery
demands is willful, contumacious, or in bad faith"]; DiDomenico v. C & S Aeromatik Supplies,
Inc., supra, 52 ["it is appropriate to strike a defendant's answer where its failure to comply with
discovery demands is wilful, contumacious, or in bad faith."]
Generally, "willfulness" can be inferred from a party's repeated failure to respond to
demands and/or to comply with disclosure orders, coupled with inadequate excuses for its
default:,;. Su:, Lucu:s v. Stum, 147 A.D.3d 921, 925, 48 N.Y.S.3d 150, 155 (2d Dept., 2017) ["The
Supreme Court properly inferred the willful and contumacious character of the defendants'
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FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 SUPREME COURT OF THE STATE OF NEW YORK Return Date: 7/19/2022 COUNTY OF NASSAU Hon. Erica L. Prager -------------------------------------------------------------------------x Index No. 001052/2019 JAMES MORAN, Plaintiff, -against- GRAND SLAM VENTURES, LLC, JON STEINBERG, GLENN A. REINER, JG REAL ESTATE VENTURES, LLC, and "JOHN DOES" # 1-10 inclusive, the last ten names being fictitious and unknown to plaintiff, Defendants. -------------------------------------------------------------------------x PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR SANCTIONS James Moran Plaintiff pro se 28 Carrie Avenue Bethpage, New York 11714 Tel: (516) 302-6581 Emc1.il;jim.cc1.tlc1.wl@gmrul.com 1 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 TABLE OF CONTENTS TABLE OF AUTHORITIES .......................................................................................................... ii THE NATURE OF THIS ACTION ................................................................................................ 1 PROCEDURAL HISTORY AND STATEMENT OF FACTS ....................................................... 1 PLAINTIFF'S INSTANTMOTION ............................................................................................... 1 POINT I: PLAINTIFF IS ENTITLED TO SANCTIONS ........................................................................ .2 a. DEFENDANTS SPOLIATION OF EVIDENCE .................................................... 3 1. DEFENDANTS' OBLIGATION TO PRESERVE BANKING RECORDS .................................................................... 4 11. BANKING RECORDS WERE DESTROYED WITH A CULPABLE STATE OF MIND ........................................................... 6 111. BANKING RECORDS WERE RELEVANT TO CLAIMS AND DEFENSES ........................................................................... 8 IV. APPROPRIATE SANCTION ············································································13 b. DEFENDANTS' FAILURE TO COMPLY WITH COURT ORDERS ...................................................................................... 15 CONCLUSION .............................................................................................................................. 22 1 2 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 TABLE OF AUTHORITIES Page(s) Cases: Baglio v. St. John's Queens Hosp., 303 A.D.2d 341,342, 755 N.Y.S.2d 427,428 (2d Dept., 2003) ................................................ 13 Bank of New York v. Meridi en Biao Bank Tanz., 171 F.R.D. 135,146 (S.D.N.Y. 1997) ........................................................................................ 17 Birch Hill Farm, Inc. v. Reed, 272 A.D.2d 282,282, 707 N.Y.S.2d 188, 189 (2d Dept., 2000) ................................................ 15 Cheek v. Brooks, 188 A.D.3d 785, 786, 135 N.Y.S.3d 478,480 (2d Dept., 2020) .................................................. 8 Commonwealth of the N. Mariana Is. v. Canadian Imperial Bank of Commerce, 21 N.Y.3d 55, 62, 990 N.E.2d 114, 119, 967 N.Y.S.2d 876, 881 (N.Y., 2013) ......................... l 7 Delmur, Inc. v. Sch. Constr. Auth., 174 A.D.3d 784, 787, 106 N.Y.S.3d 146, 150 (2d Dept., 2019) ................................................ 14 DiDomenico v. C & S Aeromatik Supplies, Inc., 252 A.D.2d 41, 52,682 N.Y.S.2d 452,459 (2d Dept. 1998) ..................................... 6, 12, 13, 15 Ferraro v. Koncal Assocs., 97 A.D.2d 429,429,467 N.Y.S.2d 284,284 (2d Dept., 1983) .................................................. 16 Foncette v. LA Express, 295 A.D.2d 471,472, 744 N.Y.S.2d 429, 430-31 (2d Dept., 2002) ........................................... 14 Horace Mann Ins. Co. v. E.T. Appliances, Inc., 290 A.D.2d 418,419, 736 N.Y.S.2d 79, 80 (2d Dept. 2002) ..................................................... 13 Ingoglia v. Barnes & Noble Coll. Booksellers, Inc., 48 A.D.3d 636,637, 852 N.Y.S.2d 337,338 (2d Dept., 2008) .............................................. 3, 13 Kihl v. Pfeffer, 94 N.Y.2d 118, 122, 700 N.Y.S.2d 87, 90, 722 N.E.2d 55, 58 (N.Y., 1999) ...................... .16, 21 Lucas v. Starn, 147 A.D.3d 921,925, 48 N.Y.S.3d 150, 155 (2d Dept., 2017) .................................................. 15 Matter of Agai v. Diontech Consulting, Inc., 138 A.D.3d 736, 737, 29 N.Y.S.3d 441,442 (2d Dept., 2016) .................................................. 12 11 3 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 Matter of CIT Grp./Cornrnercial Servs., Inc. v. 160-09 Jamaica Ave. Ltd. P'ship. 25 A.D.3d 301,303, 808 N.Y.S.2d 187, 189 (1 st Dept., 2006) .................................................... 8 Metlife Auto & Horne v. Joe Basil Chevrolet, Inc., 1 N.Y.3d 478, 482-83, 775 N.Y.S.2d 754, 755-56, 807 N.E.2d 865, 866-67 (N.Y., 2004) ........ .3 New York Central Mut. Fire Ins. Co. v. Turnerson's Electric, Inc., 280 A.D.2d 652, 721 N.Y.S.2d 92 (2d Dept., 2001) .................................................................. 14 Oak Beach Inn Corp. v. Babylon Beacon, Inc., 62 N.Y.2d 158,166,464 N.E.2d 967,970,476 N.Y.S.2d 269,272 (N.Y., 1984) ..................... 15 Ortega v. City ofN.Y., 9 N.Y.3d 69, 76,845 N.Y.S.2d 773,776,876 N.E.2d 1189, 1192 (N.Y., 2007) ....................... 13 Palrnerone v. Staples, 195 A.D.3d 736, 737-38, 150 N.Y.S.3d 723, 725-26 (2d Dept., 2021) ........................................ 8 Palermo Mason Constr. v. Aark Holding Corp., 300 A.D.2d 458, 460, 752 N.Y.S.2d 99, 101 (2d Dept., 2002) .................................................... 9 Pegasus Aviation I, Inc. v. Varig Logistica S.A., 26 N.Y.3d 543,547, 26 N.Y.S.3d 218,219, 46 N.E.3d 601,602 (N.Y., 2015) ................... 3, 6, 7 Pryzant v. City ofN.Y., 300 A.D.2d 383, 750 N.Y.S.2d 779, 779 (2d Dept., 2002) ........................................................ 16 Richter v. BMW ofN. Arn., LLC, 166 A.D.3d 1029, 1030, 88 N.Y.S.3d 454, 456-57 (2d Dept., 2018) ........................................... 6 Rokach v. Taback, 148 A.D.3d 1195, 1196, 50 N.Y.S.3d 499, 501 (2d Dept., 2017) .............................................. 14 Sage Realty Corp. v. Proskauer Rose LLP, 275 A.D.2d 11, 16, 713 N.Y.S.2d 155, 159 (1st Dept., 2000) ..................................................... .3 Samaroo v. Bogopa Serv. Corp., 106 A.D.3d 713,714,964 N.Y.S.2d 255,256 (2d Dept., 2013) ................................................ 15 Sawh v. Bridges, 120 A.D.2d 74, 79, 507 N.Y.S.2d 632,635 (2d Dept. 1986) .................................................... .21 Sguillacioti v. Indep. Grp. Horne Living Program, Inc., 167 A.D.3d 673,675, 90 N.Y.S.3d 51, 53-54 (2d Dept., 2018) ................................................. 13 111 4 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 73 (S.D.N.Y. 1991) .............................................................................................. 4 VOOM HD Holdings LLC v EchoStar Satellite L.L.C, 93 AD3d 33, 41, 939 N.Y.S.2d 321 (1 st Dept., 2012) ............................................................. .4, 6 West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999) .................................................................................................. 3 Wilensky v. JRB Mktg. & Op. Research, Inc., 161 A.D.2d 761, 763, 556 N.Y.S.2d 356,358 (2d Dept., 1990) ................................................ 17 Zletz v. Wetanson, 67 N.Y.2d 711,713,499 N.Y.S.2d 933,934,490 N.E.2d 852,853 (N.Y., 1986) ..................... 16 Statutes & Other Authorities: CPLR §3120 ............................................................................................................................... 17 CPLR §3126 ................................................................................................................. 1, 3, 15, 16 DCL §271 ..................................................................................................................................... 8 DCL §272 ................................................................................................................................. 8, 9 DCL §273 ..................................................................................................................................... 8 IV 5 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 THE NATURE OF THIS ACTION This is an action brought under former Debtor and Creditor Law article 10 for the fraudulent conveyance of real property commonly known as 219 Hempstead Turnpike, West Hempstead, New York 11552 (the subject "Property") from Defendant Grand Slam Ventures, LLC ("Defendant Grand Slam") to Defendant JG Real Estate Ventures, LLC, ("Defendant JG Real Estate") which occurred on September 26, 2013, and to pierce the corporate veils. PROCEDURAL HISTORY AND STATEMENT OF FACTS The pertinent background facts and procedural history relevant to Plaintiffs instant motion are set forth in the accompanying affidavit of James Moran, sworn to June 23, 2022. 1 ("Plaintiff' and/or "Moran") More detailed facts concerning this action can found in Moran's affidavits sworn to February 11, 2020 and June 15, 2022. (See, NYSCEF2 Doc. #'s 6 & 8) PLAINTIFF'S INSTANT MOTION Plaintiffs instant motion seeks an Order; a) striking Defendants' Verified Answer or precluding the Defendants from contesting that Defendant Grand Slam was insolvent and/or rendered insolvent as a result of the conveyance and/or that fair consideration was given for the conveyance of the subject Property for Defendants' willful spoliation of relevant evidence; and/or b) pursuant to CPLR §3126, striking Defendants' Verified Answer and/or precluding Defendants from introducing, on motion and/or at trial, any evidence not produced in accordance with the Order of this Court dated August 30, 2021; and/or c) for such other, further and different relief as this Honorable Court may deem just, proper and equitable. 1 References herein to "Exhibit" are those annexed by reference to the affidavit of James Moran sworn to June 23, 2022. 2New York State Courts Electronic Filing James Moran v. Grand Slam Ventures, LLC, Jon Steinberg, Glenn A. Reiner, JG Real Estate Ventures, LLC, et al, Nassau County Index No. 001052/2019 1 6 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 POINT I PLAINTIFF IS ENTITLED TO SANCTIONS This Court [Sullivan, J.] issued an Order dated August 30, 2021 granting Defendants' cross- motion seeking a protective order to extent of requiring Defendants to respond to Plaintiffs documents demands numbered 1, 5, 6, 8, 18, 22, 23, 25, 43 and 47 and Plaintiffs Interrogatories numbered 1, 2, 5, 6, 13, 14, 16, 17, 23, and 24. (See, Exhibit "8") Plaintiffs Demand for Discovery and Inspection, document demands numbered 8 and 25, required Defendants to produce Defendant Grand Siam's and Defendant JG Real Estate's " ... banking records including, but not limited to, monthly account statements, cancelled checks, deposit slips and copies of checks deposited ... " for the years 2012 through 2014, as was limited by the Court's August 30, 2021 Order. (See, Exhibit "3" at ,r,r8 & 25 and Exhibit "8") Defendants failed to produce any banking records for the years 2012 through 2014 claiming: "Defendants are not in possession of the requested documents". (See, Exhibit "9" at ,r,r8 & 25) Defendant Glenn A. Reiner ("Defendant Reiner") has submitted an affidavit alleging that he "reached out to the financial institution used by both corporate Defendants, TD Bank, to inquire as to whether or not they maintained the corporate Defendants' bank records from 2012 through 2014" and he was informed that TD Bank typically retains banking records for seven (7) years and that Defendant Grand Siam's and Defendant JG Real Estate's banking records were disposed of electronically by TD Bank prior to his inquiry. (See, Exhibit "13" at ,r,r3-6) Defendants have intentionally and willfully destroyed relevant evidence, i.e., banking records and have foiled and refused to comply with the Court's Order dated August 30, 2021 (See, Exhibit "8") by refusing to, inter alia, properly respond to Plaintiffs interrogatory number 24 and produce documents in response to Plaintiffs document demands numbered 8, 25 and 47. 2 7 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 a. DEFENDANTS' SPOLIATION OF EVIDENCE Spoliation has been defined as "the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence in pending or reasonably foreseeable litigation." West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999) A party asserting that it is aggrieved by the spoliation of evidence may seek sanctions either on an independent, per se, basis or pursuant to CPLR §3126. See, Metlife Auto & Home v. Joe Basil Chevrolet, Inc., 1 N.Y.3d 478, 482-83, 775 N.Y.S.2d 754, 755-56, 807 N.E.2d 865, 866-67 (N.Y., 2004); Sage Realty Corp. v. Proskauer Rose LLP, 275 A.D.2d 11, 16, 713 N.Y.S.2d 155, 159 (1st Dept., 2000) ["Whether we review on the basis ofthe common-law doctrine of spoliation, allowing dismissal when key evidence is destroyed prior to examination by the opposing party, in which case willfulness or bad faith may not be necessary predicates, or on a proper exercise of the court's discretion under CPLR 3126, addressing willful conduct by a nondisclosing party ... " (citation omitted)]; Ingoglia v. Barnes & Noble Coll. Booksellers, Inc., 48 A.D.3d 636, 637, 852 N.Y.S.2d 337, 338 (2d Dept., 2008) [when a party negligently loses or intentionally destroys relevant evidence, the responsible party may be sanctioned under CPLR §3126] A party that seeks sanctions for spoliation of evidence must show; i) that the party having control over the evidence possessed an obligation to preserve it at the time of its destruction; ii) that the evidence was destroyed with a "culpable state of mind"; and iii) ''that the destroyed evidence was relevant to the party's claim or defense such that the trier of fact could find that the evidence would support that claim or defense". Quoting, Pegasus Aviation I, Inc. v. Varig Logistica S.A., 26 N.Y.3d 543, 547, 26 N.Y.S.3d 218,219, 46 N.E.3d 601,602 (N.Y., 2015) 3 8 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 1. DEFENDANTS' OBLIGATION TO PRESERVE BANKING RECORDS The obligation to preserve evidence is triggered once a party reasonably anticipates litigation. See, VOOM HD Holdings LLC v. EchoStar Satellite L.L.C., 93 A.D.3d 33, 43, 939 N.Y.S.2d 321, 329 (1 st Dept., 2012) ["The 'reasonable anticipation of litigation,' as discussed by Zubulake and its progeny, is such time when a party is on notice of a credible probability that it will become involved in litigation."] It is particularly clear that the duty of preservation attaches once a formal discovery request has actually been served. See, Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 73 (S.D.N.Y. 1991) ["Of course, a party is on notice once it has received a discovery request."] Money judgments were entered against Defendant Grand Slam and in favor of Plaintiff on September 28, 2018 (See, Exhibit "14") and on May 9, 2019 (See, Exhibit "15") and Defendants were served with subpoenas on June 28, 2019 (See, Exhibits "16") which required the production of, inter alia, Defendant Grand Slam's and Defendant JG Real Estate's banking records and the Court subsequently denied motions to quash. (See, Exhibit "18") Plaintiff then commenced this action on September 25, 2019 (See, Exhibit "l ") and served Defendants with discovery demands on December 6, 2019 which sought, inter alia, Defendant Grand Slam's and Defendant JG Real Estate's banking records. (See, Exhibit "3" at ~~8 & 25) On December 17, 2019 a Preliminary Conference Order ("PC Order") was entered requiring Defendants to respond to Plaintiffs discovery demands seeking, inter alia, Defendant Grand Slam's and Defendant JG Real Estate's banking records. (See, Exhibit "5") On January 24, 2020 this Court [Libert, J] issued an Order requiring Defendants to respond to Plaintiffs discovery demands seeking, inter alia, Defendant Grand Slam's and Defendant JG Real Estate's banking records. (See, Exhibit "7") 4 9 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 On August 30, 2021 this Court [Sullivan, J.] issued an Order granting Defendants a protective order to extent of requiring Defendants to produce, inter alia, Defendant Grand Slam's and Defendant JG Real Estate's banking records limited to the period of 2012 through 2014. (See, Exhibit "8") (Plaintiffs document demands numbered 8 & 25) It is quite clear that Defendants were obligated to preserve Defendant Grand Slam's and Defendant JG Real Estate's banking records when served with subpoenas on June 28, 2019, when Plaintiff commenced this action on September 25, 2019, when they were served with Plaintiffs discovery demands on December 6, 2019, when the PC Order was entered on December 17, 2019, when this Court issued its January 24, 2020 Order and when this Court issued its Order dated August 30, 2021. It must be noted, during a conference with the Court [Libert, J.], the following colloquy took place: THE COURT: So let's go ahead with discovery. That's all that we can do. MR. MORAN: On that issue, your Honor, we have a PC order that defendants were supposed to serve responses to my discovery demands by January 17th. And I've been informed -- I haven't gotten them. And I've also been informed that defendants haven't served them THE COURT: And why is that? MR. DEL VALLE: We're still trying to unearth the documents, your Honor. These are documents from years ago from a company that hasn't been doing business in 7 years. (emphasis added) (See, Exhibit "6" at page 6 lines 6-18) It is respectfully submitted; Defendants had the obligation to preserve Defendant Grand Siam's and Defendant JG Real Estate's banking records since June 28, 2019 at the latest, when subpoenas were served. (See, Exhibit "16") 5 10 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 ii. BANKING RECORDS WERE DESTROYED WITH A CULPABLE STATE OF MIND For purposes of spoliation,. the requisite culpable state of mind can be demonstrated through intentional or willful conduct, gross negligence or ordinary negligence and where evidence was negligently destroyed, the party seeking sanctions must establish that the destroyed evidence was relevant to the party's claim or defense. See, Richter v. BMW of N. Am., LLC, 166 A.D.3d 1029, 1030, 88 N.Y.S.3d 454, 456-57 (2d Dept., 2018) However, "[w]here a noticed party discards evidence without moving for a protective order, a 'negative inference' may be drawn that the destruction was deliberate (i.e., 'wilful')" Quoting, DiDomenico v. C & S Aeromatik Supplies, Inc., 252 A.D.2d 41, 52,682 N.Y.S.2d 452,459 (2d Dept. 1998) and "[w]here the evidence is determined to have been intentionally or wilfully destroyed, the relevancy of the destroyed documents is presumed" Quoting, Pegasus Aviation I, Inc. v. Varig Logistica S.A., supra, 547, although this presumption is rebuttable. See, VOOM HD Holdings LLC v. Echostar Satellite L.L.C., supra, at 45. While Defendant Reiner alleges that he "reached out to the financial institution used by both corporate Defendants, TD Bank, and was informed that TD Bank typically retains bank records for seven (7) years and that Defendant Grand Siam's and Defendant JG Real Estate's banking records were disposed of electronically by TD Bank prior to his inquiry, Defendant Reiner fails to state when the banking records were disposed of by the Defendants themselves and fails to indicate when his first inquiry to TD Bank was made. (See, Exhibit "13") Defendants were unquestionably on notice to preserve Defendant Grand Siam's and Defendant JG Real Estate's banking records when served with subpoenas (See, Exhibit "16") yet made no effort to obtain them from TD Bank and have made no claim that they ever instructed TD Bank to impose a litigation hold. 6 11 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 Further, the deposition of Defendant Jon Steinberg ("Defendant Steinberg"), held on October 30, 2019, was adjourned upon the agreement that he obtains the banking records and tax records for Defendant Grand Slam and Defendant JG Real Estate and appears for the continuation of his examination. (See, Exhibit "19" at pages 62-63 lines 19-25 & 2-10) In fact, it was stated on the record "I think a simple phone call to the bank, even if somebody doesn't have the actual, physical, copies could be produced in a week or two." (See, Exhibit "19" at page 53 lines 8-11) Defendant Steinberg apparently never sought to get the banking records from TD Bank and after Defendant Reiner failed to produce the required bank records (See, Exhibit "20" at page 25 lines 3-5), Plaintiff sought to continue the deposition of Defendant Steinberg as was agreed (See, Exhibit "19" at pages 62-63 lines 19-25 & 2-10) and Defendant Steinberg's attorney directed him not to appear. (See, Exhibit "21") Defendants' bad faith and willful, contumacious conduct is further exhibited by Defendants' refusal to respond to Plaintiffs demands for discovery served in this action, Court Orders directing that responses to Plaintiffs discovery demands be served and delaying the exchange of records until they were disposed of electronically by TD Bank in the regular course of business. It is respectfully submitted; Defendants intentionally and willfully disposed of Defendant Grand Siam's and Defendant JG Real Estate's banking records for the period of 2012 through 2014 or said banking records were disposed of as the result of gross negligence and, as such, the relevancy of the disposed banking records is presumed. See, Pegasus Aviation I, Inc. v. Varig Logistica S.A., supra, 547. Even asswning for the sake of argwnent that Defendant Grand Slam's and Defendant JG Real Estate's banking records were disposed of as a result of ordinary negligence, said banking records are relevant as demonstrated below. 7 12 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 iii. BANKING RECORDS WERE RELEVANT TO CLAIMS AND DEFENSES Plaintiffs Verified Complaint alleges that the conveyance of the subject Property from Defendant Grand Slam to Defendant JG Real Estate on September 26, 2013 was fraudulent under various sections of former Debtor and Creditor Law article 10. (See, Exhibit "1 ") In order to establish a fraudulent transfer claim under former DCL §273 it is necessary to establish that the transferor was insolvent or rendered insolvent by the conveyance within the meaning of former DCL §271; Cheek v. Brooks, 188 A.D.3d 785, 786, 135 N.Y.S.3d 478, 480 (2d Dept., 2020) ["Insolvency is a 'prerequisite[] to a finding of constructive fraud under [former] section 273"'] and generally the burden of proving insolvency is on the party challenging the conveyance. See, Palmerone v. Staples, 195 A.D.3d 736, 738, 150 N.Y.S.3d 723, 726 (2d Dept., 2021) Defendant Grand Slam's banking records would have provided relevant evidence regarding the issue of Defendant Grand Slam' s solvency during the pertinent time period. See e.g., Matter of CIT Grp./Commercial Servs., Inc. v. 160-09 Jamaica Ave. Ltd. P'ship, 25 A.D.3d 301, 303, 808 N.Y.S.2d 187, 189 (1 st Dept., 2006) ["In addition, uncontroverted bank records show that CIT's claim exceeded CMS's assets, rendering CMS either insolvent or nearly insolvent at the time of the subject payment."] Also, the consideration given for the transfer of the subject Property is a material element of Plaintiffs causes of action. See, DCL §272; Cheek v. Brooks, 188 A.D.3d 785, 786, 135 N.Y.S.3d 478, 480 (2d Dept., 2020) ["To constitute fair consideration, the value given in exchange must be fairly equivalent and proportionate to the value of the property conveyed"] Palmerone v. Staples, 195 A.D.3d 736, 737-38, 150 N.Y.S.3d 723, 725-26 (2d Dept., 2021) 8 13 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 DCL §272 defines "fair consideration" to include the satisfaction of an antecedent debt or obligation. See, DCL §272(a)-(h); Palermo Mason Constr. v. Aark Holding Corp., 300 A.D.2d 458, 460, 752 N.Y.S.2d 99, 101 (2d Dept., 2002) ["Satisfaction of an antecedent debt or obligation constitutes fair consideration"] Defendant Reiner's affidavit alleges "Defendants JG, Mr. Steinberg, and I" paid various tax liens and real property taxes for the subject Property for a total amount of $104,593.19, paid the insurance premium for the subject Property in the amount of $3,950.00, paid $69,365.00 to have the subject Property cleaned and repaired and " ... paid the investors in the mortgage held by Grand Slam on the property to relieve Grand Slam of the obligation." (See, Exhibit "13") Defendant Reiner also testified under oath in the supplementary proceedings that Defendant JG Real Estate issued a check directly to Fidelity National Title for them to pay the Nassau County Treasurer the taxes due. Q. Mr. Reiner, I believe I asked you what consideration JG Real Estate Ventures gave to Grand Slam Ventures to the winning bid. Am I correct? A. Correct. Yes. Q. Do you recall when that was? I think you might have answered just to pick up where we kind of left off. A. Somewhere around the timing of the transfer of the assignment of the bid. I don't have exact dates. Q. Okay. How did JG Real Estate Ventures pay that consideration? A. By check. Q. To who? A. Nassau County Treasurer probably directly, actually directly to Fidelity National Title for them to pay to the Nassau County Treasurer. Q. So JG Real Estate Ventures issued a check to Fidelity, to give to Nassau County Treasurer to pay the taxes? A. Pretty certain that's what happened, yes. (See, Exhibit "20" at pages 18-19 lines 11-25 and 2-10) 9 14 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 Defendant Steinberg, however, testified that Defendant Grand Slam paid the taxes and insurance testifying as follows: Q. So you took your money out of your bank account and put it into Grand Slam's and got money from the investors and then paid the taxes and insurance? A. Yeah. (See, Exhibit "19" at page 15 lines 9-13) Defendant Steinberg further contradicted Defendant Reiner's affidavit when he testified under oath in the supplementary proceedings that the only consideration given for the subject Property was $10.00. Q. JG Real Estate Ventures acquired the property from Grand Slam Ventures for $10, the winning bid, correct? A. Yes. Q. Did JG Real Estate Ventures invest any other money into the property? A. I don't believe so. (See, Exhibit "19" at page 48 lines 15-21) Q. Grand Slam transferred the winning bid, the property, to JG Real Estate Ventures for $1 0? A. Yes. Q. You had testified there was no other consideration? A. Correct. Q. So JG Real Estate Ventures took no loss. They pay nothing for the property, $10 for the property? A. Correct. (See, Exhibit "19" at page 50 lines 6-11 and 18-21) 10 15 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 In fact, Defendant Reiner's affidavit sworn to April 14, 2022 (See, Exhibit "13") contradicts his own Reply Affidavit submitted in support of Defendants' motion for a protective order wherein at i!45 Defendant Reiner alleged that "Mr. Steinberg and I, not the corporate Defendants, paid for the maintenance of the Premises, a point worthy of clarification." (emphasis added) (See, NYSCEF Doc. #9 at i!45) Further, when questioned in the supplementary proceedings, Defendant Reiner was asked the following questions and gave the following responses: Q. Did you have any other involvement with Grand Slam Ventures other than acting as their attorney? A. No. Q. Do you ever invest any money in Grand Slam Ventures? A. No. Q. Did you ever loan any money to Grand Slam Ventures? A. No. Q. Did you ever pay any bills or expenses on behalf of Grand Slam Ventures? A. Not that I remember. Q. I would ask the same questions with regards to your law firm. Did your law firm ever pay any bills or expenses with regards to Grand Slam Ventures? A. We may have laid out money but we were probably reimbursed but I don't remember off the top of my head. Q. Did your law firm invest any money? A. No. Q. Loan any money? A. No. Q. So the only thing is you might have paid some bills or expenses on behalf of them? 11 16 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 A. We often will pay client disbursements and get reimbursed afterwards. Q. Would what would those disbursements be for court costs? A. Court costs, filing fees, formation of documents. Court services. Q. Anything outside that area? A. No, not typically. Q. Would you have paid any taxes or insurance? A. No. (See, Exhibit "20" at pages 7-8 lines 7-25 and 2-22) Accordingly, Defendant Grand Slam's and Defendant JG Real Estate's banking records are relevant to the issues of Defendant Grand Slam's solvency and whether "fair consideration" was given for the conveyance of the subject Property and, as such, Defendants' intentional and willful destruction of Defendant Grand Slam's and Defendant JG Real Estate's banking records for the period of 2012 through 2014 has deprived Plaintiff of appropriate means to confront Defendant Reiner' s contradicting and conclusory claims with incisive evidence. Considering Defendants conflicting testimony, without Defendant Grand Slam's and Defendant JG Real Estate's banking records, the trial would "be based on rank swearing contests" See, DiDomenico v. C&S Aeromatik Supplies, Inc., supra at 53. [quotations omitted] Plaintiff's Verified Complaint also seeks to pierce the corporate veils (See, Exhibit "1") and Defendant Grand Slam's and Defendant JG Real Estate's banking records would have evinced whether corporate funds were being commingled and/or whether funds were put in and taken out of the corporate accounts for personal rather than corporate purposes which are factors to be considered in this action. See, Matter of Agai v. Diontech Consulting, Inc., 138 A.D.3d 736, 737, 29 N.Y.S.3d 441, 442 (2d Dept., 2016) [Personal use of corporate funds is one of the factors to be considered in piercing the corporate veil] 12 17 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 1v. APPROPRIATE SANCTION The Court is empowered with broad discretion in determining the appropriate sanction for spoliation of evidence. See, Horace Mann Ins. Co. v. E.T. Appliances, Inc., 290 A.D.2d 418, 419, 736 N.Y.S.2d 79, 80 (2d Dept. 2002) These sanctions include "precluding proof favorable to the spoliator to restore balance to the litigation, requiring the spoliator to pay costs to the injured party associated with the development of replacement evidence, or employing an adverse inference instruction at the trial of the action. Where appropriate, a court can impose the ultimate sanction of dismissing the action or striking responsive pleadings, thereby rendering a judgment by default against the offending party" Quoting, Ortega v. City of N.Y., 9 N.Y.3d 69, 76, 845 N.Y.S.2d 773, 776, 876 N.E.2d 1189, 1192 (N.Y., 2007) [citations omitted] It is respectfully submitted, this case is not one of negligent destruction that would justify giving only an adverse inference charge. See e.g., Squillacioti v. Indep. Grp. Home Living Program, Inc., 167 A.D.3d 673, 675, 90 N.Y.S.3d 51, 53-54 (2d Dept., 2018) ["Where evidence has been found to have been negligently destroyed, adverse inference charges have been found to be appropriate"] Where the intentional destruction deprives the non-responsible party from being able to prove its claim or defense pleadings will be struck. See, e.g., Ingoglia v. Barnes & Noble College Booksellers, Inc., 48 A.D.3d 636, 852 N.Y.S.2d 337 (2d Dept., 2008); Baglio v. St. John's Queens Hosp., 303 A.D.2d 341, 755 N.Y.S.2d 427 (2d Dept., 2003); Di Domenico v. C & S Aeromatik Supplies, supra, 682 ["Where, as here, a party destroys key physical evidence 'such that its opponents are 'prejudicially bereft of appropriate means to confront a claim with incisive evidence,' 'the spoliator may be punished by the striking of its pleading"'] 13 18 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 In the case at bar, Defendants' intentional and willful destruction of Defendant Grand Siam's and Defendant JG Real Estate's banking records for the period of 2012 through 2014, significantly compromises Plaintiffs ability to present evidence relevant to the issues of Defendant Grand Siam's solvency and whether "fair consideration" was given for the conveyance of the subject Property and to support Plaintiffs claims to pierce the corporate veils warranting the drastic sanction of striking Defendants' Verified Answer. See, Foncette v. LA Express, 295 A.D.2d 471, 472, 744 N.Y.S.2d 429, 430-31 (2d Dept., 2002) [" ... under the common-law doctrine of spoliation, where a party destroys essential physical evidence and the party seeking that physical evidence is 'prejudicially bereft of appropriate means to confront a claim with incisive evidence,' the spoliator may be sanctioned by the striking of its pleading"]; N.Y. Cent. Mut. Fire Ins. Co. v. Tumerson's Elec., 280 A.D.2d 652, 653, 721 N.Y.S.2d 92, 93 (2d Dept. 2001) (same); Delmur, Inc. v. Sch. Constr. Auth., 174 A.D.3d 784, 787, 106 N.Y.S.3d 146, 150 (2d Dept., 2019) [" ... the defendants demonstrated that their ability to prove their defense had been significantly, if not fatally, compromised by the loss of the truck. Under the circumstances presented, the sanction of striking the complaint was appropriate"] In the alternative, the remedy of preclusion is available if the Court finds that Defendants' intentional and willful destruction of Defendant Grand Siam's and Defendant JG Real Estate's banking records does not deprive Plaintiff the ability to prove its claims. See e.g., Rokach v. Taback, 148 A.D.3d 1195, 1196, 50 N.Y.S.3d 499, 501 (2d Dept., 2017) ["since the destruction of the evidence did not deprive the plaintiff of her ability to prove her claim so as to warrant the drastic sanction of striking the defendants' answer, the appropriate sanction for the spoliation herein is to preclude the defendants from offering any evidence in this action regarding the alleged contents of the erased surveillance video"] 14 19 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM INDEX NO. 001052/2019 NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/23/2022 b. DEFENDANTS' FAILURE TO COMPLY WITH COURT ORDERS CPLR §3126 provides that if a party "refuses to obey an order for disclosure or wilfully fails to disclose information which the court finds ought to have been disclosed . . . , the court may make such orders ... as are just." The penalties authorized by CPLR §3126 are designed" ... to prevent a party who has refused to disclose evidence from affirmatively exploiting or benefiting from the unavailability of the proof during the pending civil action" Quoting, Oak Beach Inn Corp. v. Babylon Beacon, Inc., 62 N.Y.2d 158,166,464 N.E.2d 967,970,476 N.Y.S.2d 269,272 (N.Y., 1984) The nature and degree of the penalty to be imposed on a motion pursuant to CPLR 3126 is within the broad discretion of the Court. See, Samaroo v. Bogopa Serv. Corp., 106 A.D.3d 713, 714, 964 N.Y.S.2d 255,256 (2d Dept., 2013) Courts have ruled that it is appropriate to strike a defendant's answer where its failure to comply with discovery demands is willful, contumacious, or in bad faith. See e.g., Birch Hill Farm, Inc. v. Reed, 272 A.D.2d 282, 282, 707 N.Y.S.2d 188, 189 (2d Dept., 2000) ["striking a pleading is appropriate where there is a clear showing that the failure to comply with discovery demands is willful, contumacious, or in bad faith"]; DiDomenico v. C & S Aeromatik Supplies, Inc., supra, 52 ["it is appropriate to strike a defendant's answer where its failure to comply with discovery demands is wilful, contumacious, or in bad faith."] Generally, "willfulness" can be inferred from a party's repeated failure to respond to demands and/or to comply with disclosure orders, coupled with inadequate excuses for its default:,;. Su:, Lucu:s v. Stum, 147 A.D.3d 921, 925, 48 N.Y.S.3d 150, 155 (2d Dept., 2017) ["The Supreme Court properly inferred the willful and contumacious character of the defendants' 15 20 of 28 FILED: NASSAU COUNTY CLERK 06/23/2022 05:18 PM