Legal Document: Sandra Layne, David Rafy v. Philip Rafiy, P.R. Associates Lp, Nominal Defendant

On December 15, 2023 a MEMORANDUM OF LAW was filed involving a dispute between David Rafy, Sandra Layne, and Philip Rafiy, P.R. Associates Lp, Nominal Defendant, for Commercial Division - Business Entity in the District Court of Nassau County.

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FILED: NASSAU COUNTY CLERK 12/15/2023 10:52 AM INDEX NO. 620339/2023
NYSCEF DOC. NO. 8 RECEIVED NYSCEF: 12/15/2023

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NASSAU: COMMERCIAL DIVISION

SANDRA LAYNE and DAVID RAFIY, as members of and
on behalf of P.R. ASSOCIATES, L.P., Index No.: _____________

Plaintiffs,

-against-

PHILIP RAFIY,

Defendant,

-and-

P.R. ASSOCIATES, LP,

Nominal Defendant.

MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS’ APPLICATION FOR
TEMPORARY RESTRAINING ORDER AND INJUNCTIVE RELIEF

LYNN GARTNER DUNNE, LLP
Attorneys for Plaintiffs
330 Old Country Road, Suite 103
Mineola, New York 11501
(516) 742-6200

Of Counsel
Tiffany D. Frigenti
Jaclyn M. Ruggirello

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Table of Contents

PRELIMINARY STATEMENT .................................................................................................... 1
BACKGROUND ............................................................................................................................ 2
ARGUMENT .................................................................................................................................. 2
I. Plaintiffs’ Application for Injunctive Relief and Temporary Restraining Order Should Be
Granted ........................................................................................................................................ 2
A. Plaintiffs are Likely to Succeed on the Merits ............................................................. 3
B. Plaintiffs Face Irreparable Harm if Injunctive Relief is Not Granted .......................... 6
C. The Balance of Equities Favor Plaintiffs ...................................................................... 7
CONCLUSION ............................................................................................................................... 8

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Table of Authorities
Page(s)

Cases

American Medical and Life Ins. Co. v. Crosssummit Enterprises, Inc.,
2009 WL 1574129 (N.Y. Sup. Ct., Nassau Co. May 18, 2009) ................................................. 6
Brooklyn Heights Ass'n, Inc. v. Nat'l Park Serv.,
777 F. Supp. 2d 424 (E.D.N.Y. 2011) ........................................................................................ 6
Cohen v. Cohen,
179 A.D.3d 1012 (2d Dep’t 2020) .............................................................................................. 5
Dong-Pyo Yang v. 75 Rockefeller Café Corp.,
50 A.D.3d 320 (1st Dep’t 2008) ................................................................................................. 8
Edgeworth Food Corp. v. Stephenson,
53 A.D.2d 588 (1st Dep’t 1976) ................................................................................................. 7
Gramercy Co. v. Benenson,
223 A.D.2d 497, 637 N.Y.S.2d 383 (1st Dep’t 1996) ................................................................ 8
Huang v. Sy,
18 Misc. 3d 1141(A), 859 N.Y.S.2d 903 (Sup. Ct. Queens Cty.) .............................................. 5
LMEG Wireless, LLC v. Farro,
190 A.D.3d 716, 140 N.Y.S.3d 593 (2d Dep’t 2021) ................................................................. 5
Masjid Usman, Inc. v. Beech 140, LLC,
68 A.D.3d 942 (2d Dep’t 2009) .................................................................................................. 2
McLaughlin, Piven, Vogel, Inc. v. W.J. Nolan & Co., Inc.,
114 A.D.2d 165 (2d Dep’t 1986) ................................................................................................ 3
McNeil v. Mohammed,
32 A.D.3d 829 (2d Dep’t 2006) .................................................................................................. 7
Slocum Realty Corp. v. Schlesinger,
162 A.D.3d 939 (2d Dep’t 2018) ................................................................................................ 3
Swezey v. A. Trenkmann Est., Inc.,
58 Misc. 3d 1213(A) (N.Y. Sup. Ct. 2018)................................................................................. 2
Terrell v. Terrell,
279 A.D.2d 301 (1st Dep’t 2001) ............................................................................................... 3
Yung Fung Moy v. Hohi Umeki,
10 A.D.3d 604 (2d Dep’t 2004) .................................................................................................. 3

Rules

CPLR 6312(c) ................................................................................................................................. 3
CPLR § 6301............................................................................................................................... 2, 7

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Plaintiffs Sandra Layne (“Sandra”) and David Rafiy (“David”), as members of and on

behalf of P.R. Associates, L.P. (collectively “Plaintiffs”), submit this memorandum of law in

support of their order to show cause why a temporary restraining order and preliminary injunction

should not be issued preliminarily enjoining and restraining Defendant Philip Rafiy (“Philip” or

“Defendant”) from making any payments from the nominal defendant’s account(s) without the

approval of the Plaintiffs and awarding Plaintiffs such other and further relief as this Court may

deem just, proper and equitable, including, but not limited to, an award of Plaintiffs’ attorney’s

fees, costs and disbursements.

PRELIMINARY STATEMENT

This case concerns the gross mismanagement, self-dealing and fiduciary breaches of

Defendant resulting from his impermissible syphoning of partnership funds. Defendant is the

general partner and owner of 30% interest in nominal defendant P.R. Associates, L.P. (“P.R.

Associates”); Plaintiffs—Defendant’s siblings—are limited partners who own a cumulative 14%

interest. In March 2023, Plaintiffs uncovered that Defendant had issued three checks totaling

$799,420.00 on the account of P.R. Associates and deposited them into his own personal account.

Plaintiffs also learned that Defendants’ self-dealing went far beyond these three checks. For years

Defendant had been paying himself significant fees, disguised as “Administrative Fees” and

“Construction Fees,” none of which Defendant is entitled to under the partnership agreement.

Defendant also used P.R. Associates’ funds to pay for his personal expenses. When confronted

about his obvious self-payment and despite Plaintiffs’ demand, Defendant has refused to provide

complete books and records, and has instead produced bogus invoices, and, where his misconduct

is so blatant it cannot be explained away, he has fallen on the proverbial “sword” and issued partial

refunds. Without the scrutiny and oversight of Plaintiffs, Defendant will continue this pattern of

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self-payment out of P.R. Associates’ funds. Unless enjoined, Defendant will continue his breaches

of his fiduciary duties (and worse) to the detriment of P.R. Associates’ legitimate interests. For

the reasons set forth below, it is therefore respectfully requested that this Court grant in its entirety

the Plaintiffs’ Order to Show Cause with Temporary Restraining Order.

BACKGROUND

The facts relevant to the instant motion are set forth in the accompanying Affidavit of

David Rafiy, sworn to December 6, 2023 (“David Affidavit” or “David Aff.”); Affidavit of Sandra

Layne, sworn to December 7, 2023 (“Sandra Affidavit” or “Sandra Aff.”); Affirmation of Tiffany

D. Frigenti, dated December 12, 2023 (“Frigenti Aff.”); and the Verified Complaint, which are

incorporated herein by reference.

ARGUMENT

I. Plaintiffs’ Application for Injunctive Relief and Temporary Restraining Order
Should Be Granted

Plaintiffs are entitled to injunctive relief because they can show: (a) a likelihood of success

on the merits on their claims for breach of fiduciary duty, accounting, dissolution, and injunctive

relief; (b) that they will suffer irreparable harm in the absence of injunctive relief; and (c) that the

equities are balanced in their favor. See Masjid Usman, Inc. v. Beech 140, LLC, 68 A.D.3d 942,

942 (2d Dep’t 2009); see also CPLR § 6301, et. seq. Plaintiffs are further entitled to a temporary

restraining order because immediate and irreparable injury, loss, or damage will result unless

Defendant, as the general partner and sole manager of P.R. Associates, is restrained before the

hearing can be had. See CPLR § 6301; Swezey v. A. Trenkmann Est., Inc., 58 Misc. 3d 1213(A),

*3 (N.Y. Sup. Ct. 2018).

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A. Plaintiffs are Likely to Succeed on the Merits

In order to satisfy its burden on the “likelihood of success” prong of the test, the movant is

not required to show a certainty of success, but rather must only make a prima facie showing of

its right to relief. McLaughlin, Piven, Vogel, Inc. v. W.J. Nolan & Co., Inc., 114 A.D.2d 165, 172

(2d Dep’t 1986) (“As to the likelihood of success on the merits, a prima facie showing of right to

relief is sufficient; actual proof of the case should be left to further court proceedings….”); Terrell

v. Terrell, 279 A.D.2d 301 (1st Dep’t 2001) (evidence demonstrating a likelihood of success on

the merits need not be conclusive). The existence of an issue of fact as to any of the elements is

not sufficient grounds to deny a motion for a preliminary injunction or TRO. CPLR 6312(c); Yung

Fung Moy v. Hohi Umeki, 10 A.D.3d 604, 605 (2d Dep’t 2004) (“[A] court can find that a plaintiff

has a likelihood of success on the merits from the evidence presented though such evidence may

not be conclusive”).

Here, Plaintiffs easily satisfy the requirement of showing a likelihood of success on the

merits. The facts as stated in the accompanying David and Sandra Affidavits, and as alleged in

the Verified Complaint, demonstrate that, through a series of acts over the past twenty years,

Defendant has breached his fiduciary duties owed to P.R. Associates so that an accounting and

dissolution of the partnership is necessary.

First, Defendant has breached his fiduciary duties owed to P.R. Associates in numerous

ways. Slocum Realty Corp. v. Schlesinger, 162 A.D.3d 939, 944 (2d Dep’t 2018) (finding a general

partner owes a fiduciary duty to the partnership). In March 2023, Plaintiffs became aware that

Defendant issued P.R. Associates check numbers 3923, 3924, and 3925 in the respective amounts

of $349,500, $149,950, and $299,970, totaling $799,420 and deposited the same into his own

personal account. The checks were withdrawn from P.R. Associates’ account without Plaintiffs’

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knowledge or approval. When asked about these three payments, Defendant revealed that he has

been improperly charging P.R. Associates $34,950 per year as an Administrative Fee and $34,950

per year as a Contractor & Renovation Fee. According to Defendant, he has already used P.R.

Associates’ funds to pay himself $384,480 in fees from 2013 through 2022, and the most recent

transfer of $799,420 to his personal account is purportedly reimbursement for fees for the years

2003 through 2012. Notably, however, under the Agreement of Limited Partnership governing

P.R. Associates (the “LP Agreement”), Defendant as general partner is not entitled to receive a fee

for services performed for the partnership. See Verified Compl., Ex. 1, § 8.2. Indeed, the LP

Agreement provides that a general partner is not entitled receive a fee, however, “a reasonable fee

may be approved and set by a vote of fifty-one percent (51%) of the Limited Partners.” But even

this provision does not excuse Defendant’s extravagant self-payments because here, a vote was

never taken to authorize any fee paid to Defendant. Rather Defendant unilaterally caused P.R.

Associates to issue the self-payment to himself. Further, the self-payment Defendant has collected

is patently unreasonable. The Administrative Fee and Contractor and Renovation Fee Defendant

has paid to himself totals over 10% of the gross rent of the office building, well beyond the industry

standard of 3-4% of gross rent typically allocated for management fees. What is more, a

Management Fee is already paid by P.R. Associates to a designated property manager, causing

Defendants’ fees to be unnecessarily duplicative.

Second, Defendant has used P.R. Associates’ funds to pay for his personal expenses.

Specifically, Defendant has withdrawn additional funds from P.R. Associates’ account to pay for

expenses for his home, his medical practice, several of his Manhattan apartments, and even his

own personal criminal attorneys. When confronted with these additional payments, Defendant did

not deny this improper payment of personal expenses but rather issued a partial refund for

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approximately $227,000 for the improper expenditures. Such self-dealing by Defendant, wherein

he placed his personal interests in conflict with those of the limited partnership, constitutes a breach

of his fiduciary duties. See Cohen v. Cohen, 179 A.D.3d 1012, 1014 (2d Dep’t 2020) (finding

general partner breached his fiduciary duty to the partnership by engaging in self-dealing and

placing his personal interests in conflict with those of the partnership). Defendants’ ill motives

are further demonstrated by his use of phony invoices to attempt to substantiate his self-payment.

In light of Defendant’s wrongdoing, Plaintiffs are further entitled to an accounting because

of Defendant’s refusal to provide complete information regarding the disposition of partnership

funds. “To obtain an accounting, a plaintiff must show that there was some wrongdoing on the

part of a defendant with respect to the fiduciary relationship’ concerning property in which the

plaintiff has an interest.” LMEG Wireless, LLC v. Farro, 190 A.D.3d 716, 140 N.Y.S.3d 593, 598

(2d Dep’t 2021) (internal quotations omitted). “A partner has an obligation to account to the

partners and shall render on demand true and full information of all things affecting the

partnership.” Huang v. Sy, 18 Misc. 3d 1141(A), 859 N.Y.S.2d 903 (Sup. Ct. Queens Cty.),

judgment entered, (N.Y. Sup. Ct. 2008), aff'd, 62 A.D.3d 660, 878 N.Y.S.2d 398 (2009) (cleaned

up). The duty to account is mandatory and “requires that the managing partner account for any

secret profits he made.” Id.

Here, Defendant owes a duty to account. In April of 2023, Plaintiffs made several requests

for Defendant to provide an accounting of the partnership funds. Aware that Plaintiffs would find

P.R. Associates’ records riddled with improper payments to Defendant, Defendant sent Plaintiffs

on a wild goose chase, directing them to obtain relevant records on their own from the property

manager, some from P.R. Associates’ bank, and others from P.R. Associates’ accountant.

Plaintiffs are still not in possession of the relevant records or a full accounting. Judicial dissolution

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of P.R. Associates is also warranted because it is not reasonably practicable to carry on the business

of P.R. Associates in conformity with the LP Agreement. See Revised Limited Partnership Act §

121-802. Defendant’s wrongdoing as a general partner is grounds for dissolution. Therefore,

Plaintiffs are entitled to a decree dissolving and ordering the winding up of the partnership.

B. Plaintiffs Face Irreparable Harm if Injunctive Relief is Not Granted

Without the issuance of a temporary restraining order to prevent Defendant’s continuing

abuse, Plaintiffs and P.R. Associates face an imminent threat of ever being able to return to the

status quo. Irreparable harm exists when there is “a substantial chance that upon final resolution

of the action the parties cannot be returned to the positions they previously occupied.” American

Medical and Life Ins. Co. v. Crosssummit Enterprises, Inc., 2009 WL 1574129 (N.Y. Sup. Ct.,

Nassau Co. May 18, 2009) (internal quotation marks and citations omitted).

Plaintiffs have established a track record for Defendant that demonstrates that, unless he is

enjoined, Defendant will continue to use his status as general partner to strip P.R. Associates of its

assets. This includes continuing to transfer large sums of partnership funds to his personal

accounts as reimbursement for improper fees charged to P.R. Associates, as well as the use of

partnership funds to cover Defendant’s personal expenses. P.R. Associates will also be irreparably

harmed because the sale of the office building—P.R. Associates’ sole asset—hangs in the balance.

“[I]t is well-settled that unauthorized interference with a real property interest constitutes

irreparable harm as a matter of law, given that a piece of property is considered to be a unique

commodity for which a monetary remedy for injury is an inherently inadequate substitute.”

Brooklyn Heights Ass'n, Inc. v. Nat'l Park Serv., 777 F. Supp. 2d 424, 435 (E.D.N.Y. 2011). Since

June 2023, the purchase and sale agreement for the office building has been fully executed by both

buyer and seller and a downpayment has been received and is being held in escrow. P.R.

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Associates and the prospective buyer are now in the due diligence period. It is likely that the

prospective buyer is reviewing financial records relating to, inter alia, the expenses for the

building, which are overstated due to Philip’s excessive and impermissible fees. Inaccurate

records could cause the prospective buyer to walk away from the sale. There is no adequate

remedy at law for the loss of a potential buyer of real property.

Moreover, while ordinarily injunctive relief is not available in an action for money

damages, an exception lies where there is a claim to a specific fund which is the subject of the

action. See CPLR § 6301. “‘Subject of the action’ is typically a specific res in which the plaintiff

has a pre-existing interest.” Vincent C. Alexander, McKinney Practice Commentary, CPLR §

6301. Here, the proceeds from the sale of the building constitute a specific fund for which P.R.

Associates will suffer irreparable harm if it is dissipated by Defendant. See McNeil v. Mohammed,

32 A.D.3d 829, 829 (2d Dep’t 2006) (granting preliminary injunction seeking to restrain defendant

from transferring or otherwise disposing of funds realized from the sale of certain real property).

Defendant has indicated to Plaintiffs that Defendant intends to issue a further self-payment in the

amount of $214,130 for improper fees from the proceeds of the sale. The relief requested in the

TRO is narrowly tailored, and simply requests that Defendant be enjoined and restrained from

making any payments from P.R. Associates’ account(s) without the approval of Plaintiffs.

Plaintiffs’ requested injunctive relief is designed to preserve the status quo.

C. The Balance of Equities Favor Plaintiffs

In determining the balance of the equities, the court must weigh the harm suffered by the

plaintiff if the injunction were denied against the harm suffered by the defendant if the injunction

were granted. Edgeworth Food Corp. v. Stephenson, 53 A.D.2d 588, 588 (1st Dep’t 1976) (court

balanced “convenience and relative hardship—the harm to plaintiff from denial of the injunction

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as against the harm to defendant from granting it”). Where, as here, the requested injunction seeks

to maintain the status quo but would cause no particular harm to the Defendant, the relief should

be granted. See Gramercy Co. v. Benenson, 223 A.D.2d 497, 498, 637 N.Y.S.2d 383 (1st Dep’t

1996) (“balance of the equities tilts in favor of plaintiffs, who merely seek to maintain the status

quo”); Dong-Pyo Yang v. 75 Rockefeller Café Corp., 50 A.D.3d 320, 320 (1st Dep’t 2008)

(affirming grant of preliminary injunction and TRO preventing defendant from transferring shares

of corporation where “[Defendant] would not suffer injury as a result of the order maintaining the

status quo”).

Here, the balance tips decidedly in Plaintiffs’ favor. Plaintiffs seek to simply maintain the

status quo and prevent Defendant from committing further breaches of his fiduciary duties,

emptying P.R. Associates’ accounts to issue self-payments, and to place P.R. Associates in a

position so as to allow the pending sale of its office building to proceed. Defendant, by contrast,

will face no harm via an injunction that simply asks him to comply with his fiduciary

responsibilities.

CONCLUSION

For the foregoing reasons, Plaintiffs respectfully request that their application for a

temporary restraining order and preliminary injunction pending the trial of this action be granted

in its entirety, together with such other and further relief as this Court deems just, necessary, proper

and equitable.

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Dated: Mineola, New York
December 12, 2023
LYNN GARTNER DUNNE & FRIGENTI, LLP

By:
Tiffany D. Frigenti
Jaclyn M. Ruggirello
330 Old Country Road, Suite 103
Mineola, New York 11501
(516) 742-6200
rplynn@lgdlaw.com
jruggirello@lgdlaw.com
Attorneys for Plaintiffs

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WORD COUNT CERTIFICATION
PURSUANT TO 22 N.Y.C.R.R. § 202.8-b(c)

In accordance with 22 N.Y.C.R.R § 202.8-b(c), the undersigned certifies that the foregoing

Affirmation was prepared on a computer using a proportionally spaced typeface, as follows:

Name of typeface: Times New Roman

Point size: 12

Line spacing: Double

The total number of words in the Affirmation, inclusive of point headings and footnotes

and exclusive of pages containing the caption, signature block, and word count certification

statement, is 2451.

Dated: Mineola, New York
December 12, 2023

_____________________________
Tiffany D. Frigenti

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