Preview
FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023
NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023
EXHIBIT 20
FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023
NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023
KASOWITZ BENSON TORRES LLP
1633 BROADWAY ATLANTA
HOUSTON
NEW YORK, NEW YORK 10019 LOS ANGELES
MARK W. LERNER MIAMI
DIRECT DIAL: (212) 506-1728 (212) 506-1700
NEWARK
DIRECT FAX: (212) 835-5028 SAN FRANCISCO
MLERNER@KASOWITZ.COM
FAX: (212) 506-1800
SILICON VALLEY
WASHINGTON DC
October 17, 2023
Via E-mail
Kevin M. Brown, Esq.
Mintz & Gold, LLP
600 Third Avenue, 25th Floor
New York, NY 10016
brown@mintzandgold.com
Re: Notice of Intent to Pursue Sanctions for Violations of 12 NYCRR § 130-1.1
Dear Mr. Brown:
On behalf of Saw Mill Capital LLC, Saw Mill Capital Associates, LP, and Saw Mill
Capital Holdings, LP (collectively, “SMC”), we write to demand that you voluntarily dismiss the
action John J. Shaia v. Saw Mill Capital LLC, et al., Index No: 67017/2023 (the “Action”)1, with
prejudice, and to inform you of our intent to seek all available costs and sanctions pursuant to
12 NYCRR § 130-1.1 if this action is not timely dismissed.
Since 2006, your client, John Shaia (“Shaia”), has pursued a malicious scheme to enrich
himself at the expense of his former employer SMC. His scheme was exposed in the compre-
hensive 2017 Decision After Trial (see John J. Shaia v. Saw Mill Capital LLC, et al., Index No.
59787/2014, NYSCEF Doc No. 311 (August 25, 2017) (the “Decision After Trial”), in which the
Honorable Alan D. Scheinkman repeatedly found Shaia to be incredible, to have deceived and
threatened his partners, and to have filed meritless claims against the same defendants named in
the present Action. Before meticulously cataloguing his adverse findings, Judge Scheinkman
opened his Decision After Trial with the following comment:
[T]he Court has serious issues with aspects of Shaia’s testimony, finding that
his testimony was not credible on key points . . . . The Court finds that Shaia is
bitter and disappointed at having eventually been terminated by SMC and is
determined to try to extract monies from SMC as profits on investments as if
he had participated in taking on the risks in those investments, though he
specifically and repeatedly declined to accept such risks.
1
You commenced this Action by filing a Summons and Complaint against Saw Mill on September 19, 2023. See
NYSCEF No. 1. The Complaint alleges the following causes of action against Saw Mill: breach of contract (“Count
I”), quantum meruit (“Count II”), unjust enrichment (“Count III”), and declaratory judgment (“Count IV”).
FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023
NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023
Mr. Kevin Brown
October 17, 2023
Page 2
Id. at 5. Throughout the decision, he described a venal and manipulative individual who
“developed a plan” to obtain all of the upside benefits of working for a private equity firm while
taking on none of the risks—including the risks that investments would fail. See, e.g., Decision
After Trial at 10, 39-40. Judge Scheinkman quoted from the pleadings themselves in the 2014
litigation as evidencing how Shaia “seeks to pick and choose” among the investments in a
collective investment pool, and how the Amended Complaint’s “litany of demands under the
unjust enrichment claim bespeaks an effort by Shaia to enrich himself at Defendants’ expense.”
Id. at 40.
Since 2017 and on each of his appeals, Mintz & Gold represented Shaia. You therefore
know that Shaia’s improper motivations and actions were exposed by Judge Scheinkman,
Shaia’s claims and testimony were discredited, judgment was awarded to SMC on each of
Shaia’s claims you now reassert in this Action, and Shaia then lost each of his successive
appeals. Even the Appellate Division, Second Judicial Department (“Appellate Division”), after
indicating that their “authority is as broad as that of the trial court,” highlighted your client’s
“deliberate and intentional” actions, and his “inconsistent and not credible” explanations. See
Shaia v. Saw Mill Capital, LLC, 200 A.D.3d 731 (2021).
The new Action you have just filed is barred, abusive and frivolous. It is undertaken
primarily to harass and maliciously injure SMC, and it asserts false material factual statements,
all of which are sanctionable under 12 NYCRR § 130-1.1. Although this information should be
obvious, set forth below are some, but not all, of the reasons that demonstrate this Action falls
within 12 NYCRR § 130-1.1:
First, this Action is barred the doctrine of res judicata. As you know, Shaia already
litigated the same claims against SMC for breach of contract, quantum meruit, and unjust
enrichment in the 2014 action (the “Prior Action”). See Shaia v. Unger, Index No. 59787/2014,
NYSCEF Nos. 2 [Complaint], 138 [First Amended Complaint]. Following a bench trial, on
October 30, 2017, final judgment in favor of SMC was entered on each of these claims (the
“Decision and Judgment”). For the next six years, the parties litigated Shaia’s appeals relating to
the Decision and Judgment before the Appellate Division, including a frivolous motion for
reargument, and the New York Court of Appeals. The Appellate Division affirmed the Decision
and Judgment and denied your client’s request for reargument, and the Court of Appeals denied
your client’s request for leave to appeal. All of the operative facts and transactions are the same
in the Prior Action and the instant Action.
As the Prior Action was brought to a final conclusion, it is well-established that “all other
claims arising out of the same transaction or series of transactions are barred, even if based upon
different theories or if seeking a different remedy.” In re Hunter, 4 N.Y.3d 260, 271 (2005)
(citing O’Brien v. City of Syracuse, 54 N.Y.2d 353 (1981)). It is indisputable that the claims in
this Action involve the same parties and arise out of Shaia’s employment at SMC and his claims
for greater compensation and certain investment returns. By way of example only, all of the
FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023
NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023
Mr. Kevin Brown
October 17, 2023
Page 3
following claims central to the Action were litigated by Shaia in the Prior Action, and all of them
were dismissed after trial:
Shaia’s claim that Defendants breached his 2002 employment contract, as
amended;
Shaia’s claim that he is entitled to be paid 11.25% of the carried interest
from the Main Fund;
Shaia’s claim that he is entitled to 1.3455% of the incentive carry in the
Main Fund;
Shaia’s claim that he is entitled to returns on invested capital; and
Shaia’s claim that he is entitled to return of certain invested capital.
Attached hereto as Appendix 1 is a comparison of a small fraction of the parallels
between the complaints your client filed in the Prior Action and this Action, which we will detail
in full to the Court should you fail to dismiss this case.
Second, this Action is barred by the doctrine of collateral estoppel. All of the issues
Shaia raises in this Action—including the issues Shaia now alleges reflect “justiciable
controvers[ies]” in Count IV, the declaratory judgment claim—are “identical to [] issue[s] which
[were] raised, necessarily decided and material in the [Prior Action] and [that Shaia] had a full
and fair opportunity to litigate in the [Prior Action].” Manko v. Gabay, 175 A.D.3d 484, 486 (2d
Dept. 2019).
You undoubtedly are aware that Shaia had a full and fair opportunity to litigate the issues
he raises (again) in this Action, because you previously and repeatedly briefed these same issues
to the Court of Appeals and the Appellate Division on behalf of Shaia. Among other things,
before the Court of Appeals you summarized the claims and issues in the Prior Action as
follows:
At trial, Mr. Shaia sought the proceeds from his carried interest in the Main Fund
under two alternate theories. First, Mr. Shaia argued that the SMC Parties owed
Mr. Shaia proceeds from his Main Fund carried interest because SMC had a
contractual obligation to pay Mr. Shaia such proceeds—under the 2002
Employment Contract’s vesting schedule or under an alternative vesting
schedule (if permitted by the 2002 Employment Contract). In failing to provide
Mr. Shaia with his carried interest from the Main Fund, SMC breached the 2002
Employment Contract. Failing that, Mr. Shaia argued in the alternative that SMC
should be compelled to pay Mr. Shaia such proceeds under theories of quasi
contract and notions of basic fairness because of SMC’s repeated, written
promises to pay Mr. Shaia carried interest (investment profits) in exchange for his
contributions to SMC. In the December 1 Decision, the Appellate Division
affirmed the Trial Court’s rejection of both theories.
FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023
NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023
Mr. Kevin Brown
October 17, 2023
Page 4
(Mot. for Leave to Appeal, p. 36-37) (emphasis added) (internal citations omitted). This is the
same relief Shaia is seeking in this Action. Appendix 2, attached hereto, lists only a few
examples of the arguments you previously made in the Prior Action concerning the very issues
you and your clients seek to re-litigate in this Action.
Finally, this Action is barred by the statute of limitations. Your client’s employment
with SMC terminated in April 2011. Even assuming the parties had not litigated these claims
and issues for the past nine years, each cause of action accrued more than six years before the
Action was filed. Any attempt to rely on your specious argument that SMC has “not yet”
“breached” or “been unjustly enriched” is belied by your client’s decision to sue SMC nine years
ago for the same alleged misconduct he alleges in this Action.
Not only is the case barred by these doctrines, but the new filing is replete with false
statements about the Prior Action and the Judge Scheinkman’s determinations, in an apparent
effort to reanimate factual assertions and legal claims that were soundly rejected in the trial
court’s 46-page opinion. As you well know, contrary to what you plead in the complaint in the
instant Action, Shaia’s claims for carried interest, incentive carried interest, investment proceeds,
return of capital, and each and every other element of the relief claimed in the instant Action
were litigated, found meritless and dismissed with prejudice, which determinations were
affirmed multiple times in the appellate courts.
In sum, Shaia previously litigated all of the issues and claims he raises in the Action. If
there are any new claims or new theories in the Action—and we see absolutely none—they were
required to have been brought in the Prior Action and are barred for that reason as well.
Accordingly, we demand that you immediately dismiss the Action. If you refuse to do so, we
will bring a motion for sanctions pursuant to 12 NYCRR § 130-1.1 at the appropriate time
seeking all available remedies, including but not limited to costs and attorneys’ fees. Please
inform us of your decision not later than by 5:30 p.m. on October 23, 2023.
The SMC parties reserve all rights. Nothing contained in or omitted from this letter is, or
should be construed as, a limitation, restriction or waiver, express or implied, of any of their
rights and remedies in connection with any of the matters raised herein, all of which are
expressly reserved.
Sincerely,
Mark W. Lerner
cc: Steven G. Mintz, General Counsel
Encls.
FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023
NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023
APPENDIX 1
Allegations in Prior Action Allegations in This Action
“According to the terms of this agreement “As damages for his First Cause of Action for
with SMC, Associates, and Holdings, Shaia Breach of Contract, Mr. Shaia seeks damages
would receive increased base compensation, from SMC, and from Associates and Holdings
increased annual bonuses, and 11.25% as relief defendants, of the sum of:11.25% of
carried interest in profits generated by the the carried interest generated by the Main Fund
Main Fund . . . Shaia’s actual damages for . . .”
the Defendants’ breach amount to: 11.25%
of the carried interest in all profits generated (Complaint at 30, NYSCEF 1.)
by the Main Fund . . . .”
(Am. Compl. ¶¶ 119-25, Prior Action,
NYSCEF No. 138.)
“Alternatively, if the Court should find Shaia “If the Court should find that Mr. Shaia cannot
cannot recover under the first cause of recover under the first cause of action for
action, Shaia is entitled to recover from breach of contract, Mr. Shaia is entitled to
SMC, Associates, and Holdings the fair recover the fair value of the labor and services
value of the labor and services he rendered.” he rendered, for years, at the Defendants’
behest.”
(Am. Compl. ¶ 127, Prior Action,
NYSCEF No. 138.) (Complaint at ¶189, NYSCEF 1.)
“Alternatively, if the Court should find Shaia “If the Court should find Mr. Shaia cannot
cannot recover under the first two causes of recover under the first two causes of action for
action, Shaia is entitled to recover from breach of contract and quantum meruit, Mr.
SMC, Associates, and Holdings his Shaia is entitled to recover from SMC,
investments and the value of his services, Associates, and Holdings his investments, the
including the value created by his returns on those investments, and the value of
investments. Permitting the Defendants to his services.”
retain Shaia’s money and the value of his
services without compensating him (Complaint at ¶196, NYSCEF 1.)
appropriately is unjust.”
(Am. Compl. ¶ 131, Prior Action, NYSCEF
No. 138.)
FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023
NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023
APPENDIX 2
Examples of the Arguments Mintz & Gold Made On Behalf of Shaia in Briefing in the
Prior Action Concerning the 2002 Agreement and Shaia’s Right to Equitable Relief
Opening Brief Before the Appellate Division, pp. 39, 42,56- 57 (emphasis added) (internal
citations omitted):
There is no dispute that the parties formed a contract, the Employment Contract, [defined
by Shaia as the “2002 employment agreement”], which Unger and Shaia agree governed
Shaia’s entire employment, i.e., including the Main Fund. As for performance, SMC does
not dispute that Shaia performed his job duties. Unger even praised his performance. Thus,
SMC breached the Employment Contract, because: (i) the Employment Contract required
SMC to provide Shaia both base and incentive carry; (ii) the Main Fund generated base
carry proceeds and Shaia earned incentive carry; and (iii) SMC refused to distribute either
form of carry proceeds . . .
The unambiguous language of the Employment Contract is corroborated by the
uncontradicted evidence adduced at trial: base carry was an element of Shaia’s
compensation for the Main Fund. SMC concedes that the Main Fund generated base carry
proceeds. Indeed, SMC must do so as it reported that income to the IRS Thus, under the
Employment Contract, Shaia was entitled to receive base carry proceeds and the Trial
Court Decision refusing to award Shaia such proceeds should be reversed . . .
[The vesting schedule allegedly modified in 2006] should be applied to Shaia’s base carry
vesting for the entire Main Fund. Moreover, if there was a defect in the 2006 amendment
to the vesting schedule, the 2002 Vesting Schedule would still apply, making Shaia
100% vested. . .
Should this Court nevertheless conclude that some element of that agreement or its
amendment is defective—or adopt the Trial Court’s odd suggestion that the Employment
Contract is effectively unenforceable, because SMC owes Shaia carry, but has a right to
hold those proceeds indefinitely—we respectfully submit that Shaia is entitled to recover
in quasi-contract, under either Quantum Meruit or unjust enrichment.
Opening Brief Before the Appellate Division, p. 42, n. 42 (emphasis added):
The Trial Court appears to conclude that Shaia is entitled to base carry proceeds, but
that, under the Employment Contract, SMC can withhold those proceeds indefinitely
without breaching the contract. (See R-45-46 (noting that “SMC did not make any
promises with regard to when the investments would be realized and proceeds
distributed”).) SMC, therefore, cannot have breached, because payment is not yet due
and is potentially never due. But, SMC has distributed base carry proceeds to all
others with carry, and SMC has reported to the IRS that it distributed such proceeds
to Shaia. Moreover, the notion that SMC can owe Shaia carry proceeds, but never be
obligated to distribute those proceeds to him is absurd. As is discussed below, at a
minimum, that reading of the Employment Contract would favor application of quasi-
contractual remedies.
FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023
NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023
APPENDIX 2
Reply Brief Before the Appellate Division, pp. 5-8, 26-27 (emphasis added):
The Employment Contract, executed in 2002, provides that, as compensation for his work
for SMC, in addition to cash, Shaia would be provided with a set percentage:
of the carried interest in each investment closed by [SMC], which [SMC]
expect[ed] would be worth at least $2 million per fiscal year . . . , and
which [SMC] expect[e] [would] vest 20% upon the closing of each
transaction, and then 20% per annum on a monthly basis over the next 4
years (as we discussed, however, we reserve the right to review and
modify the firm’s vesting schedule on future transactions from time to
time as circumstances dictate).
That language is outcome determinative for this appeal. Shaia’s Employment Contract
states unequivocally and with certainty that Shaia’s compensation includes base carry for
each transaction. The Main Fund’s an SMC transaction. SMC, therefore, is obligated to
provide Shaia with carry as part of his Main-Fund compensation. SMC has refused to do
so. Thus, SMC has breached the Employment Contract, and the Trial Court Decision must
be reversed. . . .
Respondents portray Shaia’s claim for breach of the Employment Contract as a new claim.
But, it has been part of the dispute before the Trial Court from the operative pleading
through post-trial briefing. Respondents, themselves, acknowledged the centrality of the
Employment Contract. Unger testified that the Employment Contract governed the entirety
of Shaia’s employment. And Respondents’ post-trial brief stated that “Shaia and SMC
entered into a valid and binding employment agreement on or about January 31, 2002 . . .
which governed Shaia’s employment and compensation at SMC[,]”and “Shaia’s rights
with respect to carried interest in future SMC investments are set forth in the Employment
Agreement.” Respondents’ brief even relies upon the applicability of the Employment
Contract to the Main Fund multiple times. Thus, Main- Fund carry is not separate and
distinct from the rights governed by the Employment Contract, and the parties have
long agreed that resolving this case requires application of the Employment Contract,
as it governed the entirety of Shaia’s employment with SMC. . .
If this Court either finds some defect in Shaia’s contractual claims—it should not—or affirms
the Trial Court’s odd finding that the Employment Contract is binding, but Respondents are
not in breach because SMC has no deadline to provide proceeds to Shaia, Shaia’s appeal should
nevertheless be granted, because he was entitled to recover either under quantum meruit or
unjust enrichment.
Memo. of Law in Support of Motion for Re-Argument Before the Appellate Division, at pp. 2-3,
19 (emphasis added):
FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023
NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023
APPENDIX 2
At that point, the Court had to determine whether Mr. Shaia’s claim that SMC breached
that very agreement by failing to pay Mr. Shaia carried interest as consideration and
compensation was properly dismissed by the Trial Court. This Court concluded, without
more, that the Trial Court was correct in determining that Mr. Shaia failed to prove a breach
by SMC of his 2002 employment contract. There is no discussion or analysis, however, of
the 2002 employment contract, no review of its terms, and no consideration of Mr. Shaia
and SMC’s compliance or noncompliance with that contract’s obligations. . . .
SMC breached its 2002 employment contract with Mr. Shaia and stopped doing so. SMC
unmistakably promised Mr. Shaia carried interest “in each investment closed by” SMC. . .
In fact, Mr. Shaia’s position is—and has always been—unequivocal. His contractual
claim sought to enforce the 2002 Employment Contract—and his right to recover his
Main Fund carried interest flows from the 2002 Employment Contract—not the 2010
Amended Associates Agreement that Mr. Shaia never signed.
Motion for Leave to Appeal Before the Court of Appeals, at pp. 36-37 (emphasis added):
At trial, Mr. Shaia sought the proceeds from his carried interest in the Main Fund under
two alternate theories. First, Mr. Shaia argued that the SMC Parties owed Mr. Shaia
proceeds from his Main Fund carried interest because SMC had a contractual obligation to
pay Mr. Shaia such proceeds—under the 2002 Employment Contract’s vesting schedule or
under an alternative vesting schedule (if permitted by the 2002 Employment Contract). In
failing to provide Mr. Shaia with his carried interest from the Main Fund, SMC
breached the 2002 Employment Contract. Failing that, Mr. Shaia argued in the
alternative that SMC should be compelled to pay Mr. Shaia such proceeds under
theories of quasi contract and notions of basic fairness because of SMC’s repeated,
written promises to pay Mr. Shaia carried interest (investment profits) in exchange
for his contributions to SMC. In the December 1 Decision, the Appellate Division
affirmed the Trial Court’s rejection of both theories.
Preview
FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023 NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023 EXHIBIT 20 FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023 NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023 KASOWITZ BENSON TORRES LLP 1633 BROADWAY ATLANTA HOUSTON NEW YORK, NEW YORK 10019 LOS ANGELES MARK W. LERNER MIAMI DIRECT DIAL: (212) 506-1728 (212) 506-1700 NEWARK DIRECT FAX: (212) 835-5028 SAN FRANCISCO MLERNER@KASOWITZ.COM FAX: (212) 506-1800 SILICON VALLEY WASHINGTON DC October 17, 2023 Via E-mail Kevin M. Brown, Esq. Mintz & Gold, LLP 600 Third Avenue, 25th Floor New York, NY 10016 brown@mintzandgold.com Re: Notice of Intent to Pursue Sanctions for Violations of 12 NYCRR § 130-1.1 Dear Mr. Brown: On behalf of Saw Mill Capital LLC, Saw Mill Capital Associates, LP, and Saw Mill Capital Holdings, LP (collectively, “SMC”), we write to demand that you voluntarily dismiss the action John J. Shaia v. Saw Mill Capital LLC, et al., Index No: 67017/2023 (the “Action”)1, with prejudice, and to inform you of our intent to seek all available costs and sanctions pursuant to 12 NYCRR § 130-1.1 if this action is not timely dismissed. Since 2006, your client, John Shaia (“Shaia”), has pursued a malicious scheme to enrich himself at the expense of his former employer SMC. His scheme was exposed in the compre- hensive 2017 Decision After Trial (see John J. Shaia v. Saw Mill Capital LLC, et al., Index No. 59787/2014, NYSCEF Doc No. 311 (August 25, 2017) (the “Decision After Trial”), in which the Honorable Alan D. Scheinkman repeatedly found Shaia to be incredible, to have deceived and threatened his partners, and to have filed meritless claims against the same defendants named in the present Action. Before meticulously cataloguing his adverse findings, Judge Scheinkman opened his Decision After Trial with the following comment: [T]he Court has serious issues with aspects of Shaia’s testimony, finding that his testimony was not credible on key points . . . . The Court finds that Shaia is bitter and disappointed at having eventually been terminated by SMC and is determined to try to extract monies from SMC as profits on investments as if he had participated in taking on the risks in those investments, though he specifically and repeatedly declined to accept such risks. 1 You commenced this Action by filing a Summons and Complaint against Saw Mill on September 19, 2023. See NYSCEF No. 1. The Complaint alleges the following causes of action against Saw Mill: breach of contract (“Count I”), quantum meruit (“Count II”), unjust enrichment (“Count III”), and declaratory judgment (“Count IV”). FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023 NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023 Mr. Kevin Brown October 17, 2023 Page 2 Id. at 5. Throughout the decision, he described a venal and manipulative individual who “developed a plan” to obtain all of the upside benefits of working for a private equity firm while taking on none of the risks—including the risks that investments would fail. See, e.g., Decision After Trial at 10, 39-40. Judge Scheinkman quoted from the pleadings themselves in the 2014 litigation as evidencing how Shaia “seeks to pick and choose” among the investments in a collective investment pool, and how the Amended Complaint’s “litany of demands under the unjust enrichment claim bespeaks an effort by Shaia to enrich himself at Defendants’ expense.” Id. at 40. Since 2017 and on each of his appeals, Mintz & Gold represented Shaia. You therefore know that Shaia’s improper motivations and actions were exposed by Judge Scheinkman, Shaia’s claims and testimony were discredited, judgment was awarded to SMC on each of Shaia’s claims you now reassert in this Action, and Shaia then lost each of his successive appeals. Even the Appellate Division, Second Judicial Department (“Appellate Division”), after indicating that their “authority is as broad as that of the trial court,” highlighted your client’s “deliberate and intentional” actions, and his “inconsistent and not credible” explanations. See Shaia v. Saw Mill Capital, LLC, 200 A.D.3d 731 (2021). The new Action you have just filed is barred, abusive and frivolous. It is undertaken primarily to harass and maliciously injure SMC, and it asserts false material factual statements, all of which are sanctionable under 12 NYCRR § 130-1.1. Although this information should be obvious, set forth below are some, but not all, of the reasons that demonstrate this Action falls within 12 NYCRR § 130-1.1: First, this Action is barred the doctrine of res judicata. As you know, Shaia already litigated the same claims against SMC for breach of contract, quantum meruit, and unjust enrichment in the 2014 action (the “Prior Action”). See Shaia v. Unger, Index No. 59787/2014, NYSCEF Nos. 2 [Complaint], 138 [First Amended Complaint]. Following a bench trial, on October 30, 2017, final judgment in favor of SMC was entered on each of these claims (the “Decision and Judgment”). For the next six years, the parties litigated Shaia’s appeals relating to the Decision and Judgment before the Appellate Division, including a frivolous motion for reargument, and the New York Court of Appeals. The Appellate Division affirmed the Decision and Judgment and denied your client’s request for reargument, and the Court of Appeals denied your client’s request for leave to appeal. All of the operative facts and transactions are the same in the Prior Action and the instant Action. As the Prior Action was brought to a final conclusion, it is well-established that “all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy.” In re Hunter, 4 N.Y.3d 260, 271 (2005) (citing O’Brien v. City of Syracuse, 54 N.Y.2d 353 (1981)). It is indisputable that the claims in this Action involve the same parties and arise out of Shaia’s employment at SMC and his claims for greater compensation and certain investment returns. By way of example only, all of the FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023 NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023 Mr. Kevin Brown October 17, 2023 Page 3 following claims central to the Action were litigated by Shaia in the Prior Action, and all of them were dismissed after trial: Shaia’s claim that Defendants breached his 2002 employment contract, as amended; Shaia’s claim that he is entitled to be paid 11.25% of the carried interest from the Main Fund; Shaia’s claim that he is entitled to 1.3455% of the incentive carry in the Main Fund; Shaia’s claim that he is entitled to returns on invested capital; and Shaia’s claim that he is entitled to return of certain invested capital. Attached hereto as Appendix 1 is a comparison of a small fraction of the parallels between the complaints your client filed in the Prior Action and this Action, which we will detail in full to the Court should you fail to dismiss this case. Second, this Action is barred by the doctrine of collateral estoppel. All of the issues Shaia raises in this Action—including the issues Shaia now alleges reflect “justiciable controvers[ies]” in Count IV, the declaratory judgment claim—are “identical to [] issue[s] which [were] raised, necessarily decided and material in the [Prior Action] and [that Shaia] had a full and fair opportunity to litigate in the [Prior Action].” Manko v. Gabay, 175 A.D.3d 484, 486 (2d Dept. 2019). You undoubtedly are aware that Shaia had a full and fair opportunity to litigate the issues he raises (again) in this Action, because you previously and repeatedly briefed these same issues to the Court of Appeals and the Appellate Division on behalf of Shaia. Among other things, before the Court of Appeals you summarized the claims and issues in the Prior Action as follows: At trial, Mr. Shaia sought the proceeds from his carried interest in the Main Fund under two alternate theories. First, Mr. Shaia argued that the SMC Parties owed Mr. Shaia proceeds from his Main Fund carried interest because SMC had a contractual obligation to pay Mr. Shaia such proceeds—under the 2002 Employment Contract’s vesting schedule or under an alternative vesting schedule (if permitted by the 2002 Employment Contract). In failing to provide Mr. Shaia with his carried interest from the Main Fund, SMC breached the 2002 Employment Contract. Failing that, Mr. Shaia argued in the alternative that SMC should be compelled to pay Mr. Shaia such proceeds under theories of quasi contract and notions of basic fairness because of SMC’s repeated, written promises to pay Mr. Shaia carried interest (investment profits) in exchange for his contributions to SMC. In the December 1 Decision, the Appellate Division affirmed the Trial Court’s rejection of both theories. FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023 NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023 Mr. Kevin Brown October 17, 2023 Page 4 (Mot. for Leave to Appeal, p. 36-37) (emphasis added) (internal citations omitted). This is the same relief Shaia is seeking in this Action. Appendix 2, attached hereto, lists only a few examples of the arguments you previously made in the Prior Action concerning the very issues you and your clients seek to re-litigate in this Action. Finally, this Action is barred by the statute of limitations. Your client’s employment with SMC terminated in April 2011. Even assuming the parties had not litigated these claims and issues for the past nine years, each cause of action accrued more than six years before the Action was filed. Any attempt to rely on your specious argument that SMC has “not yet” “breached” or “been unjustly enriched” is belied by your client’s decision to sue SMC nine years ago for the same alleged misconduct he alleges in this Action. Not only is the case barred by these doctrines, but the new filing is replete with false statements about the Prior Action and the Judge Scheinkman’s determinations, in an apparent effort to reanimate factual assertions and legal claims that were soundly rejected in the trial court’s 46-page opinion. As you well know, contrary to what you plead in the complaint in the instant Action, Shaia’s claims for carried interest, incentive carried interest, investment proceeds, return of capital, and each and every other element of the relief claimed in the instant Action were litigated, found meritless and dismissed with prejudice, which determinations were affirmed multiple times in the appellate courts. In sum, Shaia previously litigated all of the issues and claims he raises in the Action. If there are any new claims or new theories in the Action—and we see absolutely none—they were required to have been brought in the Prior Action and are barred for that reason as well. Accordingly, we demand that you immediately dismiss the Action. If you refuse to do so, we will bring a motion for sanctions pursuant to 12 NYCRR § 130-1.1 at the appropriate time seeking all available remedies, including but not limited to costs and attorneys’ fees. Please inform us of your decision not later than by 5:30 p.m. on October 23, 2023. The SMC parties reserve all rights. Nothing contained in or omitted from this letter is, or should be construed as, a limitation, restriction or waiver, express or implied, of any of their rights and remedies in connection with any of the matters raised herein, all of which are expressly reserved. Sincerely, Mark W. Lerner cc: Steven G. Mintz, General Counsel Encls. FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023 NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023 APPENDIX 1 Allegations in Prior Action Allegations in This Action “According to the terms of this agreement “As damages for his First Cause of Action for with SMC, Associates, and Holdings, Shaia Breach of Contract, Mr. Shaia seeks damages would receive increased base compensation, from SMC, and from Associates and Holdings increased annual bonuses, and 11.25% as relief defendants, of the sum of:11.25% of carried interest in profits generated by the the carried interest generated by the Main Fund Main Fund . . . Shaia’s actual damages for . . .” the Defendants’ breach amount to: 11.25% of the carried interest in all profits generated (Complaint at 30, NYSCEF 1.) by the Main Fund . . . .” (Am. Compl. ¶¶ 119-25, Prior Action, NYSCEF No. 138.) “Alternatively, if the Court should find Shaia “If the Court should find that Mr. Shaia cannot cannot recover under the first cause of recover under the first cause of action for action, Shaia is entitled to recover from breach of contract, Mr. Shaia is entitled to SMC, Associates, and Holdings the fair recover the fair value of the labor and services value of the labor and services he rendered.” he rendered, for years, at the Defendants’ behest.” (Am. Compl. ¶ 127, Prior Action, NYSCEF No. 138.) (Complaint at ¶189, NYSCEF 1.) “Alternatively, if the Court should find Shaia “If the Court should find Mr. Shaia cannot cannot recover under the first two causes of recover under the first two causes of action for action, Shaia is entitled to recover from breach of contract and quantum meruit, Mr. SMC, Associates, and Holdings his Shaia is entitled to recover from SMC, investments and the value of his services, Associates, and Holdings his investments, the including the value created by his returns on those investments, and the value of investments. Permitting the Defendants to his services.” retain Shaia’s money and the value of his services without compensating him (Complaint at ¶196, NYSCEF 1.) appropriately is unjust.” (Am. Compl. ¶ 131, Prior Action, NYSCEF No. 138.) FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023 NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023 APPENDIX 2 Examples of the Arguments Mintz & Gold Made On Behalf of Shaia in Briefing in the Prior Action Concerning the 2002 Agreement and Shaia’s Right to Equitable Relief Opening Brief Before the Appellate Division, pp. 39, 42,56- 57 (emphasis added) (internal citations omitted): There is no dispute that the parties formed a contract, the Employment Contract, [defined by Shaia as the “2002 employment agreement”], which Unger and Shaia agree governed Shaia’s entire employment, i.e., including the Main Fund. As for performance, SMC does not dispute that Shaia performed his job duties. Unger even praised his performance. Thus, SMC breached the Employment Contract, because: (i) the Employment Contract required SMC to provide Shaia both base and incentive carry; (ii) the Main Fund generated base carry proceeds and Shaia earned incentive carry; and (iii) SMC refused to distribute either form of carry proceeds . . . The unambiguous language of the Employment Contract is corroborated by the uncontradicted evidence adduced at trial: base carry was an element of Shaia’s compensation for the Main Fund. SMC concedes that the Main Fund generated base carry proceeds. Indeed, SMC must do so as it reported that income to the IRS Thus, under the Employment Contract, Shaia was entitled to receive base carry proceeds and the Trial Court Decision refusing to award Shaia such proceeds should be reversed . . . [The vesting schedule allegedly modified in 2006] should be applied to Shaia’s base carry vesting for the entire Main Fund. Moreover, if there was a defect in the 2006 amendment to the vesting schedule, the 2002 Vesting Schedule would still apply, making Shaia 100% vested. . . Should this Court nevertheless conclude that some element of that agreement or its amendment is defective—or adopt the Trial Court’s odd suggestion that the Employment Contract is effectively unenforceable, because SMC owes Shaia carry, but has a right to hold those proceeds indefinitely—we respectfully submit that Shaia is entitled to recover in quasi-contract, under either Quantum Meruit or unjust enrichment. Opening Brief Before the Appellate Division, p. 42, n. 42 (emphasis added): The Trial Court appears to conclude that Shaia is entitled to base carry proceeds, but that, under the Employment Contract, SMC can withhold those proceeds indefinitely without breaching the contract. (See R-45-46 (noting that “SMC did not make any promises with regard to when the investments would be realized and proceeds distributed”).) SMC, therefore, cannot have breached, because payment is not yet due and is potentially never due. But, SMC has distributed base carry proceeds to all others with carry, and SMC has reported to the IRS that it distributed such proceeds to Shaia. Moreover, the notion that SMC can owe Shaia carry proceeds, but never be obligated to distribute those proceeds to him is absurd. As is discussed below, at a minimum, that reading of the Employment Contract would favor application of quasi- contractual remedies. FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023 NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023 APPENDIX 2 Reply Brief Before the Appellate Division, pp. 5-8, 26-27 (emphasis added): The Employment Contract, executed in 2002, provides that, as compensation for his work for SMC, in addition to cash, Shaia would be provided with a set percentage: of the carried interest in each investment closed by [SMC], which [SMC] expect[ed] would be worth at least $2 million per fiscal year . . . , and which [SMC] expect[e] [would] vest 20% upon the closing of each transaction, and then 20% per annum on a monthly basis over the next 4 years (as we discussed, however, we reserve the right to review and modify the firm’s vesting schedule on future transactions from time to time as circumstances dictate). That language is outcome determinative for this appeal. Shaia’s Employment Contract states unequivocally and with certainty that Shaia’s compensation includes base carry for each transaction. The Main Fund’s an SMC transaction. SMC, therefore, is obligated to provide Shaia with carry as part of his Main-Fund compensation. SMC has refused to do so. Thus, SMC has breached the Employment Contract, and the Trial Court Decision must be reversed. . . . Respondents portray Shaia’s claim for breach of the Employment Contract as a new claim. But, it has been part of the dispute before the Trial Court from the operative pleading through post-trial briefing. Respondents, themselves, acknowledged the centrality of the Employment Contract. Unger testified that the Employment Contract governed the entirety of Shaia’s employment. And Respondents’ post-trial brief stated that “Shaia and SMC entered into a valid and binding employment agreement on or about January 31, 2002 . . . which governed Shaia’s employment and compensation at SMC[,]”and “Shaia’s rights with respect to carried interest in future SMC investments are set forth in the Employment Agreement.” Respondents’ brief even relies upon the applicability of the Employment Contract to the Main Fund multiple times. Thus, Main- Fund carry is not separate and distinct from the rights governed by the Employment Contract, and the parties have long agreed that resolving this case requires application of the Employment Contract, as it governed the entirety of Shaia’s employment with SMC. . . If this Court either finds some defect in Shaia’s contractual claims—it should not—or affirms the Trial Court’s odd finding that the Employment Contract is binding, but Respondents are not in breach because SMC has no deadline to provide proceeds to Shaia, Shaia’s appeal should nevertheless be granted, because he was entitled to recover either under quantum meruit or unjust enrichment. Memo. of Law in Support of Motion for Re-Argument Before the Appellate Division, at pp. 2-3, 19 (emphasis added): FILED: WESTCHESTER COUNTY CLERK 11/17/2023 08:29 PM INDEX NO. 67017/2023 NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 11/17/2023 APPENDIX 2 At that point, the Court had to determine whether Mr. Shaia’s claim that SMC breached that very agreement by failing to pay Mr. Shaia carried interest as consideration and compensation was properly dismissed by the Trial Court. This Court concluded, without more, that the Trial Court was correct in determining that Mr. Shaia failed to prove a breach by SMC of his 2002 employment contract. There is no discussion or analysis, however, of the 2002 employment contract, no review of its terms, and no consideration of Mr. Shaia and SMC’s compliance or noncompliance with that contract’s obligations. . . . SMC breached its 2002 employment contract with Mr. Shaia and stopped doing so. SMC unmistakably promised Mr. Shaia carried interest “in each investment closed by” SMC. . . In fact, Mr. Shaia’s position is—and has always been—unequivocal. His contractual claim sought to enforce the 2002 Employment Contract—and his right to recover his Main Fund carried interest flows from the 2002 Employment Contract—not the 2010 Amended Associates Agreement that Mr. Shaia never signed. Motion for Leave to Appeal Before the Court of Appeals, at pp. 36-37 (emphasis added): At trial, Mr. Shaia sought the proceeds from his carried interest in the Main Fund under two alternate theories. First, Mr. Shaia argued that the SMC Parties owed Mr. Shaia proceeds from his Main Fund carried interest because SMC had a contractual obligation to pay Mr. Shaia such proceeds—under the 2002 Employment Contract’s vesting schedule or under an alternative vesting schedule (if permitted by the 2002 Employment Contract). In failing to provide Mr. Shaia with his carried interest from the Main Fund, SMC breached the 2002 Employment Contract. Failing that, Mr. Shaia argued in the alternative that SMC should be compelled to pay Mr. Shaia such proceeds under theories of quasi contract and notions of basic fairness because of SMC’s repeated, written promises to pay Mr. Shaia carried interest (investment profits) in exchange for his contributions to SMC. In the December 1 Decision, the Appellate Division affirmed the Trial Court’s rejection of both theories.