Motion,Ex Parte: Sang Cheol Woo v. Charles C. Spackman

On May 23, 2017 a Motion,Ex Parte was filed involving a dispute between Sang Cheol Woo, and Charles C. Spackman, for Commercial Division in the District Court of New York County.

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FILED: NEW YORK COUNTY CLERK 05/09/2019 09:43 PM INDEX NO. 652795/2017
NYSCEF DOC. NO. 109 RECEIVED NYSCEF: 05/09/2019

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK

SANG CHEOL WOO, Index No.: 652795/2017
Plaintiff/Judgment Creditor, Hon. Justice O. Peter Sherwood, J.S.C.
Part 49
v.
Motion Sequence # 3
CHARLES C. SPACKMAN,

Defendant/Judgment Debtor

MATALON SHWEKY ELMAN PLLC AND ELMAN FREIBERG PLLC’S REPLY IN
SUPPORT OF THEIR MOTION FOR A PROTECTIVE ORDER AND RESPONSE IN
OPPOSITION TO SANG CHEOL WOO’S CROSS-MOTION FOR GARNISHMENT

Howard I. Elman
Judd R. Spray
ELMAN FREIBERG PLLC
450 Seventh Avenue, 33rd Floor
New York, New York 10123
(646) 780-8100

May 9, 2019

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TABLE OF CONTENTS
PAGE(S)

TABLE OF AUTHORITIES ........................................................................................................
ii

PRELIMINARY STATEMENT ................................................................................................... 1

ARGUMENT ................................................................................................................................ 2

I. The Court Has the Authority To Issue a
Protective Order Pursuant To CPLR § 5240........................................................... 2

A. Mr. Woo’s Claim to the Retainer Is Not
Superior to the Claims of MSE and EF. ........................................................... 3

B. Even if the Retainer Currently Belongs To Mr. Spackman,
the Court Has the Authority To Issue a Protective Order
Enjoining Mr. Woo From Enforcing the Restraining Notices. ......................... 5

II. The Court Should Issue a Protective Order
Because the Equities Favor MSE and EF. .............................................................. 6

CONCLUSION ..............................................................................................................................9

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TABLE OF AUTHORITIES

CASES

PAGE(S)

Anderson Kill, P.C. v. Anderson Kill, P.C.,
46 Misc. 3d 1219(A) (N.Y. Sup. Ct., New York County, Feb. 10, 2015) .............................. 6

Colonial Surety Co. v. Lakeview Advisors, LLC,
93 A.D.3d 1253 (4th Dep’t 2012) ........................................................................................... 6

Guardian Loan Co. v. Early,
47 N.Y.2d 515 (1979).............................................................................................................. 5

JPMorgan Chase Bank, N.A. v. Motorola, Inc.,
47 A.D.3d 293 (1st Dep’t 2007) .............................................................................................. 5

M.M. v. T.M.,
50 Misc. 3d 565 (N.Y. Sup. Ct., Monroe County, Aug. 10, 2015) ......................................... 4

Nat’l Collegiate Student Loan Trust 2004-1 v. Ogunbiyi,
2018 Ill. App. (1st) 170861 (Ill. App. Ct. 2018) ..................................................................... 4

Potter v. MacLean,
75 A.D.3d 686 (3d Dep’t 2010) .......................................................................................... 3, 4

Ray v. JAMA Productions, Inc.,
74 A.D.2d 845 (2d Dep’t 1980) .............................................................................................. 3

STATUTES

passim
CPLR § 5240 ........................................................................................................................

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PRELIMINARY STATEMENT

In his opposition to MSE 1 and EF’s Motion for a Protective Order (the “Motion”), Mr.

Woo fails to address the mathematical fact that the $35,000 Retainer represents barely one-

quarter of one percent of Mr. Woo’s Judgment against Mr. Spackman. Mr. Woo does, however,

confirm that he is seeking to satisfy his Judgment all over the world. In addition to this action, he

has initiated legal proceedings in Singapore, Hong Kong, and the British Virgin Islands. He has

registered his New York Judgment in California, and has taken discovery in New York,

Massachusetts, Connecticut, and the BVI. He claims to have secured worldwide freezes over Mr.

Spackman’s assets and the assets of several of his purported nominees. In other words, exactly as

MSE and EF asserted in their moving brief, turning the Retainer over to Mr. Woo would make

no practical difference in his ongoing efforts to satisfy the Judgment.

Mr. Woo also fails even to cite CPLR § 5240, the statutory basis for the Motion. Instead,

Mr. Woo argues that the Retainer belongs to Mr. Spackman, and that the Court should therefore

order MSE and EF to turn the Retainer over to Mr. Woo as Mr. Spackman’s judgment creditor.

Mr. Woo’s argument is overstated and ultimately irrelevant: regardless of whether the Retainer

presently belongs to Mr. Spackman, which is hardly settled by the scant authorities Mr. Woo

cites, the Court unquestionably has the authority to enjoin Mr. Woo from enforcing his

Restraining Notices against MSE and EF (who are also creditors of Mr. Spackman).

The very purpose of CPLR § 5240—the statute that Mr. Woo dares not even mention—is

to grant New York courts the authority to deny, limit, condition, regulate, extend or modify the

use of any enforcement procedure that a judgment creditor might otherwise pursue. The issue

1
All defined terms in MSE and EF’s moving brief (Dckt. #88) have the same meaning here.

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before the Court is therefore not whether Mr. Woo could theoretically garnish the Retainer in his

capacity as Mr. Spackman’s judgment creditor, but rather whether the equities favor MSE and

EF’s interests in the Retainer over any interest of Mr. Woo’s. On that issue, Mr. Woo utterly fails

to refute MSE and EF’s showing that they should be allowed to use the Retainer to satisfy their

own invoices to Mr. Spackman.

Mr. Woo can only throw feeble jabs at the factors favoring MSE and EF, and he fails

entirely to identify factors even purportedly weighing in his favor. In the end, he merely repeats

that the Judgment has not yet been satisfied. If that were enough to defeat a motion pursuant to

§ 5240, then the statute would be meaningless—every creditor with an outstanding judgment

would prevail over any third party in possession of funds belonging (or arguably belonging) to

the judgment debtor. That is not how New York courts have applied § 5240, and it is not enough

to tip the scales in favor of Mr. Woo.

For all of the reasons already set forth by MSE and EF, and discussed further below, the

equities plainly weigh in favor of MSE and EF. The Court should exercise its indisputable

authority to enjoin Mr. Woo from enforcing his Restraining Notices against MSE and EF.

ARGUMENT

I. THE COURT HAS THE AUTHORITY TO ISSUE A
PROTECTIVE ORDER PURSUANT TO CPLR § 5240

Mr. Woo devotes the entire first section of his argument to his assertion that the Retainer

currently belongs to Mr. Spackman because Mr. Woo served the Restraining Notices on MSE,

and then EF, before either firm had invoiced Mr. Spackman for its services. (Memorandum of

Law of Sang Cheol Woo (Dckt. #96) (“Woo Memo”) at 7-9.) Mr. Woo further argues that under

“governing law,” his claim to the Retainer is therefore superior to MSE and EF’s. (Id.) These

questions are not settled, however, and MSE and EF contend that their claim to the Retainer is

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superior to Mr. Woo’s. But this issue is not dispositive on the pending motions in any event,

because the Court has the authority under § 5240 to enjoin Mr. Woo from enforcing the

Restraining Notices even if the Retainer currently belongs to Mr. Spackman.

A. Mr. Woo’s Claim to the Retainer Is Not
Superior to the Claims of MSE and EF.

Mr. Woo cites no authority from the Court of Appeals or First Department in support of

his argument that the Retainer belongs to Mr. Spackman. Instead, he relies exclusively on a

Third Department decision, a Second Department decision from an entirely different context, and

an opinion of the Supreme Court of Monroe County. Contrary to Mr. Woo’s feigned assurance,

those authorities are hardly dispositive on the pending motions.

The Third Department’s decision, Potter v. MacLean, 75 A.D.3d 686 (3d Dep’t 2010),

concerns a father who willfully violated a child support order. The Third Department held that

the County Support Collections Unit could restrain the retainer funds the father had provided to

his attorneys. Id. at 686-87. As MSE and EF noted previously, Potter was explicitly decided

“solely upon the factual circumstances presented in this case” and “the long-standing

significance and emphasis placed upon a parent’s duty to provide child support for his or her

children.” Id. at 687 (emphasis added). The Potter opinion does not support Mr. Woo’s

argument, under the facts of this case, that Mr. Woo’s claim to the Retainer is superior to that of

MSE and EF.

The Second Department’s decision, Ray v. JAMA Productions, Inc., 74 A.D.2d 845 (2d

Dep’t 1980), stands for the proposition that a judgment creditor may, under certain

circumstances, restrain one third party from paying another third party in a manner that would

directly benefit the judgment debtor. Id. at 845-46. The opinion does not concern an attorney

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retainer, does not consider whether attorneys who have earned a fee can be restrained from using

retainer funds to pay their fee, and is simply inapposite here.

Finally, Mr. Woo cites M.M. v. T.M., 50 Misc. 3d 565 (N.Y. Sup. Ct., Monroe County,

Aug. 10, 2015). That decision, like Potter, arose in the family law context: an ex-husband had

failed to satisfy two money judgments for unpaid maintenance. Id. at 568. The “powerful policy

involved in enforcing maintenance claims” led the M.M. court to hold that “no family member,

owed funds by a former spouse, should be denied the opportunity to collect those obligations

through CPLR 5222 even if the funds are tucked in the delinquent spouse’s attorney’s bank

account.” Id. at 572. The M.M. court relied on the same policy preference in declining to find

that the ex-husband’s attorney’s lien for services gave him a superior interest to that of the ex-

wife. Id. at 578.

To date, M.M. has been cited by exactly one subsequent judicial opinion, an Illinois case

that distinguishes M.M. on the ground that Illinois has no equivalent to CPLR § 5240. See Nat’l

Collegiate Student Loan Trust 2004-1 v. Ogunbiyi, 2018 Ill. App. (1st) 170861, at *4 (Ill. App.

Ct. 2018).

MSE and EF dispute Mr. Woo’s assertion that his interest in the Retainer is superior to

theirs by virtue of the Restraining Notices. The opinions in Potter and M.M., both of which are

expressly based on the strong public policy promoting collection of family support funds, do not

support Mr. Woo. MSE and EF provided legal services to Mr. Spackman and then timely

invoiced him pursuant to their retainer agreements. There is no dispute that Mr. Spackman owes

the firms for their services, and under normal circumstances, the firms would have drawn down

the Retainer to pay their invoices over six months ago. MSE and EF refrained from doing so

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without permission from the Court, but they nevertheless dispute that Mr. Woo has a superior

claim to the Retainer.

B. Even if the Retainer Currently Belongs to Mr. Spackman,
The Court Has the Authority To Issue a Protective Order
Enjoining Mr. Woo from Enforcing the Restraining Notices.

Whether the Retainer currently belongs to Mr. Spackman is ultimately not dispositive on

the pending motions, because even if it does, the Court has the authority to enjoin Mr. Woo from

enforcing his Restraining Notices against MSE and EF. The Court of Appeals has held that §

5240 grants courts “broad discretionary power to control and regulate the enforcement of a

money judgment under article 52 to prevent unreasonable annoyance, expense, embarrassment,

disadvantage, or other prejudice to any person or the courts.” Guardian Loan Co. v. Early, 47

N.Y.2d 515, 519 (1979) (internal quotation marks omitted). In Guardian Loan Co., the Court of

Appeals observed that § 5240 “is perhaps the most practical method to protect judgment debtors

from the often harsh results of lawful enforcement procedures.” Id. This protection extends not

only to judgment debtors, but to “any person.” Id. Courts routinely exercise their discretion

under § 5240 to enjoin or condition otherwise appropriate enforcement procedures. See, e.g.,

JPMorgan Chase Bank, N.A. v. Motorola, Inc., 47 A.D.3d 293, 308 (1st Dep’t 2007) (reversing

grant of garnishment petition to avoid risk of double liability to garnishee).

Applying these principles to the instant dispute, it is clear that even if the Retainer

belongs to Mr. Spackman, and Mr. Woo could hypothetically garnish it, § 5240 gives the Court

the authority to preclude Mr. Woo from doing so in order to prevent disadvantage or prejudice to

MSE and EF. Guardian Loan Co., 47 N.Y.2d at 519. For the reasons stated immediately below,

the Court should exercise that authority here.

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II. THE COURT SHOULD ISSUE A PROTECTIVE ORDER
BECAUSE THE EQUITIES FAVOR MSE AND EF.

MSE and EF have already demonstrated that the Court has broad discretion under § 5240

to weigh the equities between the parties. As stated by the Court in Anderson Kill P.C. v.

Anderson Kill P.C., 46 Misc. 3d 1219(A) (N.Y. Sup. Ct., N.Y. County, Feb. 10, 2015): “The

statute [§ 5240] serves as an equitable safety valve which allows a court to restrain execution

upon its judgment where unwarranted hardship would otherwise result. The decisional process

invoked is the balancing of harm likely to result from execution, against the necessity of using

that immediate means of attempted satisfaction.” Id. at *6 (quoting Colonial Surety Co. v.

Lakeview Advisors, LLC, 93 A.D.3d 1253, 1256 (4th Dep’t 2012)). In Anderson Kill, to prevent

disadvantage to an individual, the court denied a law firm’s petition for an order directing it to

release funds it was holding as an escrow agent. Id. at *7.

Mr. Woo fails to refute MSE and EF’s showing that the proper “decisional process” here,

Anderson Kill P.C. at *6, leads to the conclusion that the Court should exercise its broad

discretion under § 5240 to enjoin further enforcement of the Restraining Notices.

First, Mr. Woo makes only a lackluster attempt to refute the equities weighing in MSE

and EF’s favor:

• Mr. Woo asserts that by continuing to represent Mr. Spackman diligently despite the

Restraining Notices, MSE and EF assumed the risk that they would never get paid.

(Woo Memo at 10.) A more generous interpretation is that MSE and EF chose to carry

out their professional obligations to Mr. Spackman. While this may seem like a fine

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distinction, it would be inequitable to disadvantage MSE and EF because they did not

immediately abandon a new client upon receiving the Restraining Notices. 2

• Mr. Woo asserts that Mr. Spackman uses the third party that wired the Retainer to

MSE and EF as a nominee, so that the third party is not entitled to any consideration in

the Court’s analysis. (Woo Memo at 11.) But this is merely Mr. Woo’s suspicion, and

there is certainly no law or regulation precluding Spackman Media Group from

providing retainer funds on Mr. Spackman’s behalf.

• Mr. Woo asserts that disposition of the Retainer will have “no forward looking

impact” on Mr. Spackman’s ability to engage attorneys because MSE and EF have

already provided their services to Mr. Spackman. (Woo Memo at 11.) Mr. Woo misses

the point of MSE and EF’s public policy argument. MSE and EF have already

provided legal services to Mr. Spackman in this case. But if the Court were to adopt a

blanket rule allowing foreign judgment creditors to restrain and garnish foreign

judgment debtors’ retainer funds, that blanket rule would effectively preclude debtors

from being able to retain counsel at all.

• Finally, as noted above, Mr. Woo does not even address fact that the Retainer

represents barely one-quarter of one percent of the Judgment. But he does confirm that

he is pursuing satisfaction of the Judgment all over the world, including New York,

Connecticut, Massachusetts, California, Singapore, Hong Kong, and the British Virgin

Islands. (See Affirmation of Darryl Stein, dated May 2, 2019, Ex. 1 (Dckt. #98).)

2
Mr. Woo also notes that “nearly 75%” of the fees MSE and EF billed to Mr. Spackman was for
work performed after MSE received the first Restraining Notice. (Woo Opp. 10.) Mr. Woo
simply ignores the implication that there should not be any dispute that MSE and EF are entitled
to retain the other 25% of their bills, or $8,685.

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Second, Mr. Woo fails entirely to identify any equities that purportedly weigh in his

favor. He merely states that “the equities here support using the retainer funds to satisfy the pre-

existing judgment against Mr. Spackman, which has not been paid even though it has been

nearly twenty years since Mr. Spackman defrauded Mr. Woo.” (Woo Memo at 9.) That is merely

a loaded way of saying that the Judgment is outstanding. The existence of an outstanding

judgment, however, is a condition precedent to any enforcement procedure under Article 52 of

the CPLR. Mr. Woo has failed to show any additional equitable factor weighing in his favor.

The relevant question on the pending motions is not whether there is a judgment, but

whether the harm from execution of the judgment outweighs “the necessity of using that

immediate means of attempted satisfaction.” Anderson Kill P.C. at *6. Mr. Woo’s papers show

that there is no necessity whatsoever of enforcing the Restraining Orders against MSE and EF, as

Mr. Woo is separately pursuing Mr. Spackman’s assets all over the United States and around the

world. The Retainer is no more than an afterthought in that global endeavor.

If Mr. Woo is going to satisfy the Judgment, it will be through his worldwide search for

Mr. Spackman’s assets, not by snatching $35,000 from two small New York City law firms that

diligently represented a client for less than two full months.

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CONCLUSION

For all of these reasons, the Court should grant MSE and EF’s Motion for a Protective

Order, deny Mr. Woo’s Cross-Motion for Garnishment, and issue a Protective Order restraining

Mr. Woo from enforcing the Restraining Notices against MSE and EF.

Dated: New York, New York
May 9, 2019
Respectfully submitted,
ELMAN FREIBERG PLLC

By: s/Howard I. Elman
Howard I. Elman
Judd R. Spray
450 Seventh Avenue, 33rd Floor
New York, New York 10123
(646) 780-8100

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Motion,Ex Parte: Sang Cheol Woo v. Charles C. Spackman

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