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  • Prestige Home Fitness, Llc a/k/a Gymguyz Bay Ridge v. Gymguyz Franchising, LlcCommercial - Contract document preview
  • Prestige Home Fitness, Llc a/k/a Gymguyz Bay Ridge v. Gymguyz Franchising, LlcCommercial - Contract document preview
  • Prestige Home Fitness, Llc a/k/a Gymguyz Bay Ridge v. Gymguyz Franchising, LlcCommercial - Contract document preview
  • Prestige Home Fitness, Llc a/k/a Gymguyz Bay Ridge v. Gymguyz Franchising, LlcCommercial - Contract document preview
  • Prestige Home Fitness, Llc a/k/a Gymguyz Bay Ridge v. Gymguyz Franchising, LlcCommercial - Contract document preview
  • Prestige Home Fitness, Llc a/k/a Gymguyz Bay Ridge v. Gymguyz Franchising, LlcCommercial - Contract document preview
  • Prestige Home Fitness, Llc a/k/a Gymguyz Bay Ridge v. Gymguyz Franchising, LlcCommercial - Contract document preview
  • Prestige Home Fitness, Llc a/k/a Gymguyz Bay Ridge v. Gymguyz Franchising, LlcCommercial - Contract document preview
						
                                

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FILED: KINGS COUNTY CLERK 05/08/2023 06:13 PM INDEX NO. 515251/2021 NYSCEF DOC. NO. 66 RECEIVED NYSCEF: 05/08/2023 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS ------------------------------------------------------------------X PRESTIGE HOME FITNESS, LLC A/K/A GYMGUYZ BAY RIDGE, Index No.: 515251/2021 Plaintiff, REPLY AFFIRMATION -against- GYMGUYZ FRANCHISING, LLC, Defendant. ------------------------------------------------------------------X NANCY L. KOURLAND, ESQ., an attorney duly admitted to practice before the courts of the state of New York, affirms as follows, upon penalty of perjury: 1. I am a Senior Counsel at Lasser Law Group, PLLC, attorneys for Defendant GYMGUYZ FRANCHISING, LLC (“GymGuyz” of “Defendant”). As such, I have personal knowledge of the facts, circumstances and pleadings set forth herein. 2. I make this Reply Affirmation in further support of Defendant’s motion, pursuant to CPLR § 317, seeking an order vacating the default judgment dated November 16, 2022 and entered on December 5, 2022 [Motion Seq. No 3; NYSCEF Doc. No, 29] and compelling Plaintiff Prestige Home Fitness, LLC a/k/a GymGuyz Bay Ridge (“Prestige”) to accept its September 8, 2021 answer with counterclaims (the “Answer”) [NYSECF Doc. No. 13], and for such other and further relief as this Court deems just and proper. 3. GymGuyz did not receive actual notice of the Complaint until after its time to answer or otherwise respond to the Complaint expired and seeks to vacate its default and Prestige has no evidence that the default was deliberate or intentional. In fact, the documentary evidence conclusively establishes that GymGuyz’s default was caused by the failure of the New York Secretary of State to mail the summons and complaint timely. 1 of 8 FILED: KINGS COUNTY CLERK 05/08/2023 06:13 PM INDEX NO. 515251/2021 NYSCEF DOC. NO. 66 RECEIVED NYSCEF: 05/08/2023 4. In addition, GymGuyz has a meritorious defense to this commercial breach of contract action because Prestige unequivocally and positively repudiated the contract by expressing its intent in writing to GymGuyz that it would cease, and indeed did cease, performing under it. 5. Thus, because GymGuyz did not receive notice in time to defend and has a meritorious defense, this Court should vacate the Default Judgment under CPLR § 317. PROCEDURAL HISTORY Commencement of the Action 6. Prestige commenced this commercial breach of contract action against GymGuyz on June 22, 2021 by filing a Summons and the Complaint in which it sets forth five (5) causes of action alleging that GymGuyz breached a certain Self-Direction Agreement, dated December 17, 2019, by and between GymGuyz and Prestige and engaged in fraudulent concealment with respect to its books and records as to amounts allegedly owed to Prestige. Prestige seeks (a) unspecified damages, (b) an accounting, and (c) a declaratory judgment that the Self-Direction Agreement continues in perpetuity. Service on GymGuyz via the Secretary of State 7. The Affidavits of Service [NYSCEF Doc. No. 2 and NYSCEF Doc. No. 3] reflect that Prestige served the Summons and the Complaint on GymGuyz by personally delivering them to the New York Secretary of State on July 6, 2021 in accordance with Section 303 (“Service of Process on Limited Liability Companies”) of the New York Limited Liability Law. 8. Service of process on GymGuyz was complete on July 6, 2021 and, pursuant to CPLR §320[a], GymGuyz had until August 5, 2021, i.e., 30 days, to appear or answer. See CPLR §320[a], §3012[c]; Paez v. 1610 St. Nicholas Ave., L.P., 103 AD3d 553 [1st Dept 2013]. 2 2 of 8 FILED: KINGS COUNTY CLERK 05/08/2023 06:13 PM INDEX NO. 515251/2021 NYSCEF DOC. NO. 66 RECEIVED NYSCEF: 05/08/2023 9. The Secretary of State, however, did not mail the Summons and Complaint to GymGuyz at its corporate address on file until August 16, 2021. The Secretary of State sent the Summons and Complaint to GymGuyz by USPS certified mail, return receipt requested. See NYSCEF Doc. No. 32. 10. USPS delivered the Summons and Complaint to GymGuyz on August 19, 2021. See NYSCEF Doc. No. 33. 11. On August 30, 2021, Prestige filed its motion for a default judgment. See NYSCEF Doc. No. 4; Motion Seq. No. 1. 12. On September 9, 2021, GymGuyz filed its Answer [NYSCEF Doc. No. 13]. 13. On September 9, 2021, Prestige rejected the Answer as untimely under CPLR § 320, pursuant to a Notice of Rejection [NYSCEF Doc. No. 15]. 14. On July 19, 2022, Prestige’s motion for a default judgment was denied based on its failure to submit a CPLR §3215(g) affidavit of additional mailing. [NYSCEF Doc. No. 16]. 15. On July 25, 2022, Prestige filed a motion to reargue [NYSCEF Doc. No. 18; Motion Seq. No. 2]. 16. On November 16, 2022, Prestige’s motion to reargue was granted and, upon reargument, this Court entered a default judgment. [NYSCEF Doc. No. 27]. GymGuyz Did Not Receive Notice in Time to Defend 17. GymGuyz did not receive notice of the action in time to defend. 18. As provided by Section 303 of the LLC Law, Prestige served process on GymGuyz through the Secretary of State on July 6, 2021 and service was complete on that date. Pursuant to CPLR §320[a], GymGuyz had until August 5, 2021, i.e., 30 days, to appear or answer. See CPLR §320[a], §3012[c]; Paez v. 1610 St. Nicholas Ave., L.P., 103 AD3d 553 [1st Dept 2013]. 3 3 of 8 FILED: KINGS COUNTY CLERK 05/08/2023 06:13 PM INDEX NO. 515251/2021 NYSCEF DOC. NO. 66 RECEIVED NYSCEF: 05/08/2023 19. Here, however, the New York Secretary of State’s cover letter to GymGuyz is dated August 16, 2022 and the USPS tracking information reflects that the Summons and Complaint were delivered to GymGuyz at its address on file on August 19, 2021, a date that is after GymGuyz’s time to answer or appear lapsed. See NYSCEF Doc. No. 32 and NYSCEF Doc. No. 33. 20. Notwithstanding the above, GymGuyz promptly retained counsel and filed its Answer [NYSCEF Doc. No. 13] on September 9, 2021, thus establishing that GymGuyz did not deliberately attempt to avoid notice of the action. Eugene Di Lorenzo, Inc. v. A.C. Dutton Lumber Co., 67 NY2d 138, 143 [1986]. 21. Prestige rejected the Answer the same day. [NYSCEF Doc. No. 15]. 22. The cases cited by Prestige are inapposite, as Prestige has failed to meet its burden to show that the default by GymGuyz was intentional. 23. First, in Pabone v. Jon-Bar Enterprises Corp, 140 AD2d 872 [3d Dept 1988], the Appellate Division vacated defendant’s default noting that there is no evidence in the record to establish that defendant’s default was deliberate or intentional. Moreover, as in Pabone, “it is relevant to note that plaintiff was aware of [GymGuyz’s] address,” and could have effectuated personal service, but chose not to. 24. Second, in New York Telephone Co v Don Siegel Const Co, Inc., 1 AD3d 329 [2d Dept. 2003], the plaintiff, unlike Prestige here, provided proof that the defendant received the summons and complaint in time to defend and its default was intentional. 25. In De La Barrera v. Handler, 290 AD2d 476, 477 [2d Dept 2002], the appellant failed to demonstrate that he did not receive actual notice of the summons in time to defend. 4 4 of 8 FILED: KINGS COUNTY CLERK 05/08/2023 06:13 PM INDEX NO. 515251/2021 NYSCEF DOC. NO. 66 RECEIVED NYSCEF: 05/08/2023 26. In P & K Marble, Inc v. Pearce, 168 AD2d 439 [2d Dept 1990], the record, which was developed at a hearing on the motion to vacate, established that the default “was the intended result of the conduct deliberately engaged in by the defense counsel.” 27. So, too, in Murphy v. Hall, 24 AD2d 892 [2d Dept 1965]. 28. Prestige cites Perielle v. Crimson’s Restaurant Ltd., 108 AD2d 903 [2d dept 1985], as being squarely on point. However, as with the other cases cited by it, Prestige cherry- picks facts and holdings. In Perielle, unlike here, all five (5) defendants were personally served with the summons and complaint and failed to offer any excuse for their default and Roussodimou v. Zarifiadis, 238 AD2d 568 [2d Dept 1997], concerned law office failure and the conduct of the attorney with whom the defendant made arrangements to defend him constituted repeated neglect. 29. Finally, in Sanchez v Avuben Realty LLC, 78 AD3d 589 [1st Dept 2010], the Appellate Division found that the “defendant received notice of the summons in time to interpose a defense and inexplicably failed to do so.” That is not the case here. GymGuyz Has a Meritorious Defense 30. As set forth in the Affidavit of Josh York [NYSCEF Doc. No. 35], GymGuyz has a meritorious defense to this breach of contract action and, thus, satisfies the second prong of CPLR § 317. 31. As admitted by Prestige in its Complaint, Prestige anticipatorily repudiated the Self-Direction Agreement when, “[o]n or about February 5, 2021, Plaintiff’s member Robin Hjalte indicated to [GymGuyz] that she did not intend to continue recruiting new franchisees to the Self-Direction [p]rogram.” Complaint at ¶ 18 [NYCEF Doc. No. 1] . The enrollment of new franchisees was an essential and material provision of the Self-Direction Agreement. 5 5 of 8 FILED: KINGS COUNTY CLERK 05/08/2023 06:13 PM INDEX NO. 515251/2021 NYSCEF DOC. NO. 66 RECEIVED NYSCEF: 05/08/2023 32. Prestige’s communication to GymGuyz was a positive and unequivocal statement by Prestige that it would no longer perform under the Self-Direction Agreement. Prestige’s repudiation of the Self-Direction Agreement was subsequently memorialized on March 10, 2021 in email correspondence between the parties, which emails are attached hereto. See NYSCEF Doc. No. 34. 33. The emails recite that (a) Prestige would no longer perform under the Self- Direction Agreement, (b) Prestige had received its “last and final check” from GymGuyz in connection with its performance under the Self-Direction program, (c) GymGuyz intended to run the Self-Direction program itself henceforth, and (d) Prestige would cooperate and participate in the transition. 34. Thus, it is clear that Prestige anticipatorily breached the Self-Direction Agreement, which entitled GymGuyz to terminate it, which it did. 35. Anticipatory repudiation occurs “when, before the time for performance has arisen, a party to a contract declares [its] intention not to fulfill a contractual duty’” Condor Funding, LLC v. 176 Broadway Owners Corp., 147 AD3d 99, 101-102 [1st Dept 2017] (citing Kaplan v. Madison Park Group Owners, LLC, 94 AD3d 616, 618–619 [1st Dept 2012], lv. dismissed 19 NY3d 1012 [2012], lv. denied 20 NY3d 858 [2013]). 36. The Court of Appeals, in Rosenthal Paper Co. v. National Folding Box & Paper Co., 226 NY 313, 324 [1919], held that “the inexcusable breach of a contract . . . confer[s] [on the non-breaching party] the right to terminate it . . . .” 37. It “relieves the nonrepudiating party of its obligation of future performance and entitles that party to recover the present value of its damages from the repudiating party’s breach of the total contract.” Am. List Corp. v. U.S. News & World Rpt., Inc., 75 NY2d 38, 44 [1989]. “A repudiation can be either a statement by the obligor to the obligee indicating that the obligor 6 6 of 8 FILED: KINGS COUNTY CLERK 05/08/2023 06:13 PM INDEX NO. 515251/2021 NYSCEF DOC. NO. 66 RECEIVED NYSCEF: 05/08/2023 will commit a breach that would of itself give the obligee a claim for damages for total breach or a voluntary affirmative act which renders the obligor unable or apparently unable to perform without such a breach.” Norcon Power Partners, L.P. v. Niagara Mohawk Power Corp., 92 NY2d 458, 463 [1998] (citations omitted). “The announcement of intention not to perform by the repudiating party must be ‘positive and unequivocal.’” Tenavision, Inv. v. Neuman, 45 NY2d 145, 150 [1978]. 38. Here, Prestige’s indicated its intent to cease enrolling GymGuyz franchisees in the Self-Direction program and providing support to them repudiated the Self-Direction Agreement in February 2021. Thereafter, this repudiation excused any further performance by GymGuyz and provides it with an absolute defense to this action. WHEREFORE, GymGuyz respectfully requests that this Court grant its motion to vacate the default judgment pursuant to CPLR § 317and deem its Answer timely filed. Dated: New York, New York May 8, 2023 ________________________________ Nancy L. Kourland, Esq. 7 7 of 8 FILED: KINGS COUNTY CLERK 05/08/2023 06:13 PM INDEX NO. 515251/2021 NYSCEF DOC. NO. 66 RECEIVED NYSCEF: 05/08/2023 VERIFICATION STATE OF NEW YORK ) ): ss. COUNTY OF NEW YORK ) Nancy L. Kourland, Esq., being duly sworn, deposes and says: I am a Senior Counsel with the law firm of Lasser Law Group, PLLC, attorneys for the Defendant herein, and am admitted to practice law in New York State. I have read the foregoing Affirmation and know the contents thereof to be true to my own knowledge, except as to those matters which are alleged upon information and belief and, as to those, I believe them to be true. The grounds for my information and belief are oral statements, books and records maintained by the Defendant, conversations with managing agents and/or employees and material contained in the office files. Dated: New York, New York May 8, 2023 ___________________________ Nancy L. Kourland, Esq. Lasser Law Group, PLLC Attorneys for Defendant 633 Third Avenue, Suite 1301 New York, NY 10017 (212) 376-3205; nkourland@lasserlg.com 8 8 of 8