Preview
FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014
NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024
EXHIBIT D
FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014
NYSCEF
IüD
DOC. NO. 269
KINGS
RECEIVED
INDEX NYSCEF:
NO. 03/04/2024
503863/2014
(F i COUNTY CLERK 0 5 / 01/ 2014|
NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 05/07/2014
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF KINGS Date Purchased: 5/1/2014
--.-...---..---.....--..___.----......---...Ç
Index No.
BENJAMIN GOLDSTEIN,
suing individually and derivatively on behalf
of 189 20TH STREET REALTY LLC, Plaintiff designates
Plaintiffs, KINGS County as
the place of trial
- against -
Basis of Venue:
LOUIS SCHWARTZ A/K/A ARI SCHWARTZ; Property is Situated in
189 PROPERTY LLC; CAPITAL ONE, KINOS County
NATIONAL ASSOCIATION; and
189 20TH STREET RBALTY LLC as nominal defendant,
Defendants.
SUMMONS
---..----------___...---..--_____Ç
TO THE ABOVE NAMED DEFENDANT(S)
YOU ARE HEREBY SUMMONED, to answer the Complaint in this action and to serve
a copy of your answer, or, if the Complaint is not served with this Summons, to serve a Notice of
Appearance, on the Plaintiffs Attorney within TWENTY (20) days after the service of this
Summons, exclusive of the date of service (or within THIRTY (30) days after service is
complete, as provided by law, if this Summons is not personally delivered to any person other
than you personally, or is served outside the State of New York, or by publication); and in case
of your failure to appear or answer, judgment will be entered against you by default, for the relief
demanded in the Complaint, with interest thereon as well as the costs and disbursements of this
action.
Dated: New York, New York Orrin Jo I wi z, Esq.
May 1, 2014 STEIN FARKAS SCHWARTZ & FISH LLP
Attorneys for Plaintiff
49 West 37th Street, 9th Floor
New York, NY 10018
(212) 385-0503
FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014
NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF KINGS
_______..----......____...______Ç
BENJAMIN GOLDSTEIN Index No.:
suing individually and derivatively on behalf
of 189 20TH STREET REALTY LLC, COMPLAINT
Plaintiffs,
-against-
LOUIS SCHWARTZ A/K/A ARI SCHWARTZ;
189 PROPERTY LLC; CAPITAL ONE,
NATIONAL ASSOCIATION; and
189 20TH STREET REALTY LLC as nominal defendant,
Defendants.
-------..--..--------------.-x
The plaintiffs by their attorneys, STEIN FARKAS SCHWARTZ & FISH LLP,
complaining of the defendants respectfully alleges to this Court as follows:
1. At all times hereinafter mentioned, plaintiff BENJAMIN GOLDSTEIN,
(hereinafter "Goldstein") is an individual who was and is a resident of the County of Nassau,
State of New York and is an 85% member/owner of 189 20TH STREET REALTY LLC (the
"LLC"),
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NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024
2. Defendant Louis Schwartza/k/a Ari Schwartz is an individual whose
("Schwartz")
22nd
address was and is, upon information and belief, 1400 East Street, Brooldyn, NY I 1210
and/or 1386 Coney Island Avenue, Brooklyn, NY 11230 and is a 15% member/owner of the LLC.
3. The LLC is a New York limited liability company organized on or about July 25,
2002.
4. Upon information and belief, 189 PROPERTY LLC, ("Grantee") is a New York
limited liability company, organized on or about October 5, 2007.
5. Upon information and belief, defendant CAPITAL ONE, NATIONAL
ASSOCIATION ("Capital One") is a National Bank with branch offices throughout the State of
New York, including Kings County.
FACTUAL ALLEGATIONS
6. In or about August, 2002, Goldstein and Schwartz formed the LLC for the
purposes of purchasing, owning, managing, developing and operating the premises located at 189
200'
Street, Brooklyn, NY; Section 2, Block 637, Lot 73 in Kings County (the "Property").
7. The Operating Agreement was to be executed on or about August 27, 2002 (the
"Operating Agreement"). .
2
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NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024
8. In the Operating Agreement, Goldstein was listed as the member with a
majority
percentage interest of 85%,
9. Schwartz was allocated 15% of the membership/ownership interest in the LLC.
10. Schwartz was also listed as the managing member for the LLC pursuant to
paragraph 5 of the Operating Agreement.
11. Paragraph 6 of the Operating Agreement enumerated the powers of the managing
member.
12. However, paragraph 17 of the Operating Agreement specifically limited those
powers by stating, the "Managing Member shall not have the right to sell or refinance any, all or
any part of the assets of the LLC without the written consent of the Members holding a majority
interest."
13. Despite this clause in the Operating Agreement, Schwartz obtained numerous
fraudulent loans on behalf of the LLC without the consent of the members holding a majority
interest in the LLC.
14. Upon information and belief, in further breach of his contractual obligations and
also in breach of his statutory and fiduciary duties, Schwartz, in his capacity as managing member
3
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NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024
of the LLC, falsely represented to the institutions that he had the full power and
lending authority
and the legal right to execute the loan documents on behalf of the LLC, and that the debt
constituted a valid and binding obligation of the borrower.
15. Upon information and belief, Schwartz presented the lending institutions with false
LLC documents, account information, and financial statements in order to facilitate the loans.
16. Said representations were false and in breach of such contractual obligations and
fiduciary duties as alleged above, in that the consent of the members holding a majority interest in
the LLC was required, as per paragraph 17 of the Operating Agreement.
17. Schwartz neither sought nor obtained the consent of the majority of the members
of the LLC and as a result such misrepresentation could possibly be considered a default under
the terms of the loan documents and which default could cause the lenders to demand the
repayment of the loans, with interest and penalties, to the ultimate detriment of the LLC and
thereby irreparably damage and jeopardize the value and viability of the LLC and the underlying
investments.
18. Additionally, upon information and belief, Schwartz diverted the proceeds and
funds from the refmances to himself and used the proceeds for his own personal use.
4.
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19. Upon information and belief, Schwartz has diverted additional assets and funds of
the LLC to other projects and/or to himself, without making any accounting thereof to the
plaintiff or the LLC.
20. Moreover, on or about June 14, 2010, Schwartz, on behalf of the LLC, in direct
violation of his fiduciary duties and contractual obligations, without the prior written consent of
the members holding a majority interest, deeded the to the Grantee.
fraudulently Property
21. On or about October 1, 2010, Capital One was assigned a mortgage on the
Property by JP Morgan Chase, NA (which had been fraudulently obtained by Schwartz, as set
forth above), which assignment was recorded under CRFN 2010000341141 in the Office of the
City Register, Kings County.
22. Subsequently, Capital One lent additional funds to Grantee, and took a mortgage
on the Property, recorded under CRFN 2010000341142 in the Oflice of the City Register, Kings
County.
23. Capital One and Grantee consolidated and extended the outstanding mortgages, in
an agreement recorded under CRFN 2010000341143 in the Office of the City Register, Kings
County.
5
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24. On or about November 21, 2013, Capital One lent additional funds to Grantee and
took another mortgage on the Property, recorded under CRFN 2013000501054 in the Office of
the City Register, Kings County.
25. Capital One and Orantee again consolidated and extended the outstanding
mortgages, in an agreement recorded under CRFN 2013000501055 in the Office of the City
Register, Kings County.
26. The total principal balance of the most recent consolidation agreement between
Capital One and Grantee is $1,500.000.00.
27. Schwartz has absconded with all proceeds from the June 2010 transfer and has
failed to provide an accounting from the transfer to the Grantee nor turned over any proceeds to
the LLC or to Goldstein.
28. Goldstein requested K-1's and other tax documents from Schwartz numerous times
but to no avail. Schwartz never provided any tax information or documents to Goldstein.
plaintiffs'
29. Additionally, despite a request from counsel by letter requesting
including but not limited to, an accounting, information concerning the loan closings, or a list of
any funds used or taken from the LLC accounts, Schwartz has failed to turn over any information.
6
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NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024
30. Demand on the LLC itself would be futile as Schwartz is the member of
managing
theLLC.
31. By reason of the allegations, Schwartz has engaged in objectionable
foregoing
conduct, waste and mismanagement of the LLC, has injured and harmed the LLC, and
irreparably
has caused the LLC to bedeprived of assets rightfully belonging to the LLC.
32. Additionally, by Schwartz's objectionable conduct, waste and mismanagement,
Schwartz has irreparably injured and harmed the individual members/investors, and has caused
the members/investors to be deprived of their investments and the income earned on their
investments.
33. Schwartz's breaches and misconduct were wrongful, willful, intentional, deceitful,
not in good faith, constitute objectionable conduct, and were in violation of the Operating
Agreement. Therefore Schwartz is not entitled to indemnification under the Operating
Agreement, and the Court should restrain and prohibit Schwartz from obtaining any
indemnification or any other payments or access to any of the LLC's documents, records, and/or
assets.
7
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AS AND FOR A FIRST CAUSE OF ACTION - BREACH OF CONTRACT
BROUGHT DERIVATIVELY ON BEHALF OF THE LLC
"I"
34. Plaintiffs repeat and reallege each and allegation contained in paragraphs
every
"33"
through of the complaint with the same force and effect as if set forth herein at length.
35. Defendant Schwartz has materially breached his contractual obligations and
participated in breaches against the LLC and the Operating Agreement as set forth above.
36, The Operating Agreement has a specific carve-out from the exculpation of
members clause when a member's acts are in "bad faith or involved intentional misconduct or a
law."
knowing violation of
37. Plaintiffs have performed all of the terms of the Operating Agreement on their part
required to be performed.
38. Due to Schwartz's breaches the LLC has suffered losses, and owes substantial
sums of money, including principal and interest, on unauthorized loans, and other potential fees
and penalties.
39. Additionally, Schwartz breached the Operating Agreement when he transferred the
Property to the Grantee without the written consent of the members holding a majority interest as
required by the Operating Agreement.
8
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40. The LLC has suffered losses of assets by reason of such breaches and bas been
damaged in the sum of not less than $2,000,000.00.
AS AND FOR A SECOND CAUSE OF ACTION - BREACH OF CONTRACT
ON BEHALF OF PLAINTIFF BENJAMIN GOLDSTEIN
4 l. Plaintiff Goldstein repeats and realleges each and every allegation contained in
"1" "40"
paragraphs through of the complaint with the same force and effect as if set forth herein
at length,
42. Defendant Schwartz has materially breached his contractual obligations in the
Operating Agreement and participated in breaches against the members of the LLC as set forth
above.
43. The Operating Agreement has a specific carve-out from the exculpation of
members clause when a member's acts are in "bad faith or involved intentional misconduct or a
law."
knowing violation of
44. Due to Schwartz's breaches the members have suffered losses and owe substantial
sums of money, including principal and interest, on unauthorized loans, and other potential fees
and penalties.
9
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NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024
45. Plaintiff Goldstein has performed all of the terms of the Agreement on
Operating
his part required to be performed.
46, By reason of Schwartz's breaches, Goldstein, has suffered losses of assets and has
been damaged in the sum of not less than $2,000,000.00.
AS AND FOR A THIRD CAUSE OF ACTION - FRAUDULENT INDUCEMENT AND
RESTITUTION, BROUGHT DERIVATIVELY ON BEHALF OF THE LLC
"1"
47. Plaintiffs repeat and reallege each and every allegation contained in paragraphs
"46"
through of the complaint with the same force and effect as if set forth herein at length.
48. Upon information and belief, Defendant Schwartz made material false
representations to entities which nominally lent funds to the LLC, including that he had the right
to refinance on behalf of the LLC, encumber the property(ies) of the LLC, and sign and execute
documents on behalf of the LLC.
49. Upon information and belief, Schwartz also made material and false
representations to the Grantee and other persons and entities who relied on Schwartz's
representations in connection thereto, including, but not limited to the Grantee's title company,
title closer or notary public, Grantee's lender, if any, Grantee's lender's attorney, the Office of the
City Register for the County of Kings and the Kings County Clerk,
10
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50. Upon information and belief, said statements were made to induce the Grantee and
the lenders to provide funds to Schwartz and/or the LLC, and Schwartz absconded with
ultimately
the funds for himself.
51. Such intentional misconduct was wrongful, willful and deceitful and constitutes
intentional misconduct not protected by the Operating Agreement.
52, As such, the LLC has been injured and damaged by Schwartz's intentional
misconduct and the plaintiffs demand rescission of the Operating Agreement, restitution, and
damages to the LLC. Plaintiffs also demand that any funds received by Schwartz, believed to be
approximately $1,400,000.00, in connection with the transfer of the Property, be turned over to
the LLC. Additionally, Plaintiffs demand punitive damages in the amount of $2,000,000.00 as a
penalty for and deterrent against such egregious, wantonly dishonest and harmful conduct
implicating fraudulent motive and criminal indifference on the part of Schwartz to his civil
contractual and fiduciary obligations.
AS AND FOR A FOURTH CAUSE OF ACTION - FRAUDULENT INDUCEMENT AND
RESTITUTION, ON BEHALF OF PLAINTIFF BENJAMIN GOLDSTIEN
53. Plaintiff Goldstein repeats and realleges each and every allegation contained in
"1" "52"
paragraphs through of the complaint with the same force and effect as if set forth herein
at length.
11
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NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024
54. Defendant Schwartz made material false representations to entities which
nominally lent funds to the LLC, including that he had the right to refinance on behalf of the
LLC, encumber the property(ies) of the LLC, and sign and execute documents on behalf of the
LLC,
55, Upon information and belief, said statements were made to induce the Grantee
and/or lenders to provide funds to Schwartz and/or the LLC, and Schwartz ultimately absconded
with the funds for himself.
56. Schwartz did not have authority, in the form of written consent of the Members
holding a majority interest, to transfer the Property.
57. Such conduct was wrongful, willful and deceitful and constitutes intentional
misconduct not protected by the Operating Agreement.
58. As such, Goldstein has been injmed and damaged by Schwartz's intentional
misconduct and Goldstein demands rescission of the Operating Agreement, restitution, and
damages. Goldstein additionally demands punitive damages in the amount of $2,000,000.00 as
a penalty for and deterrent against such egregious, wantonly dishonest and harmful conduct
implicating fraudulent motive and criminal indifference on the part of Schwartz to his civil
contractual and fiduciary obligations.
12
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NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024
AS AND FOR A FIFTH CAUS
Preview
FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 EXHIBIT D FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF IüD DOC. NO. 269 KINGS RECEIVED INDEX NYSCEF: NO. 03/04/2024 503863/2014 (F i COUNTY CLERK 0 5 / 01/ 2014| NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 05/07/2014 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS Date Purchased: 5/1/2014 --.-...---..---.....--..___.----......---...Ç Index No. BENJAMIN GOLDSTEIN, suing individually and derivatively on behalf of 189 20TH STREET REALTY LLC, Plaintiff designates Plaintiffs, KINGS County as the place of trial - against - Basis of Venue: LOUIS SCHWARTZ A/K/A ARI SCHWARTZ; Property is Situated in 189 PROPERTY LLC; CAPITAL ONE, KINOS County NATIONAL ASSOCIATION; and 189 20TH STREET RBALTY LLC as nominal defendant, Defendants. SUMMONS ---..----------___...---..--_____Ç TO THE ABOVE NAMED DEFENDANT(S) YOU ARE HEREBY SUMMONED, to answer the Complaint in this action and to serve a copy of your answer, or, if the Complaint is not served with this Summons, to serve a Notice of Appearance, on the Plaintiffs Attorney within TWENTY (20) days after the service of this Summons, exclusive of the date of service (or within THIRTY (30) days after service is complete, as provided by law, if this Summons is not personally delivered to any person other than you personally, or is served outside the State of New York, or by publication); and in case of your failure to appear or answer, judgment will be entered against you by default, for the relief demanded in the Complaint, with interest thereon as well as the costs and disbursements of this action. Dated: New York, New York Orrin Jo I wi z, Esq. May 1, 2014 STEIN FARKAS SCHWARTZ & FISH LLP Attorneys for Plaintiff 49 West 37th Street, 9th Floor New York, NY 10018 (212) 385-0503 FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS _______..----......____...______Ç BENJAMIN GOLDSTEIN Index No.: suing individually and derivatively on behalf of 189 20TH STREET REALTY LLC, COMPLAINT Plaintiffs, -against- LOUIS SCHWARTZ A/K/A ARI SCHWARTZ; 189 PROPERTY LLC; CAPITAL ONE, NATIONAL ASSOCIATION; and 189 20TH STREET REALTY LLC as nominal defendant, Defendants. -------..--..--------------.-x The plaintiffs by their attorneys, STEIN FARKAS SCHWARTZ & FISH LLP, complaining of the defendants respectfully alleges to this Court as follows: 1. At all times hereinafter mentioned, plaintiff BENJAMIN GOLDSTEIN, (hereinafter "Goldstein") is an individual who was and is a resident of the County of Nassau, State of New York and is an 85% member/owner of 189 20TH STREET REALTY LLC (the "LLC"), FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 2. Defendant Louis Schwartza/k/a Ari Schwartz is an individual whose ("Schwartz") 22nd address was and is, upon information and belief, 1400 East Street, Brooldyn, NY I 1210 and/or 1386 Coney Island Avenue, Brooklyn, NY 11230 and is a 15% member/owner of the LLC. 3. The LLC is a New York limited liability company organized on or about July 25, 2002. 4. Upon information and belief, 189 PROPERTY LLC, ("Grantee") is a New York limited liability company, organized on or about October 5, 2007. 5. Upon information and belief, defendant CAPITAL ONE, NATIONAL ASSOCIATION ("Capital One") is a National Bank with branch offices throughout the State of New York, including Kings County. FACTUAL ALLEGATIONS 6. In or about August, 2002, Goldstein and Schwartz formed the LLC for the purposes of purchasing, owning, managing, developing and operating the premises located at 189 200' Street, Brooklyn, NY; Section 2, Block 637, Lot 73 in Kings County (the "Property"). 7. The Operating Agreement was to be executed on or about August 27, 2002 (the "Operating Agreement"). . 2 FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 8. In the Operating Agreement, Goldstein was listed as the member with a majority percentage interest of 85%, 9. Schwartz was allocated 15% of the membership/ownership interest in the LLC. 10. Schwartz was also listed as the managing member for the LLC pursuant to paragraph 5 of the Operating Agreement. 11. Paragraph 6 of the Operating Agreement enumerated the powers of the managing member. 12. However, paragraph 17 of the Operating Agreement specifically limited those powers by stating, the "Managing Member shall not have the right to sell or refinance any, all or any part of the assets of the LLC without the written consent of the Members holding a majority interest." 13. Despite this clause in the Operating Agreement, Schwartz obtained numerous fraudulent loans on behalf of the LLC without the consent of the members holding a majority interest in the LLC. 14. Upon information and belief, in further breach of his contractual obligations and also in breach of his statutory and fiduciary duties, Schwartz, in his capacity as managing member 3 FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 of the LLC, falsely represented to the institutions that he had the full power and lending authority and the legal right to execute the loan documents on behalf of the LLC, and that the debt constituted a valid and binding obligation of the borrower. 15. Upon information and belief, Schwartz presented the lending institutions with false LLC documents, account information, and financial statements in order to facilitate the loans. 16. Said representations were false and in breach of such contractual obligations and fiduciary duties as alleged above, in that the consent of the members holding a majority interest in the LLC was required, as per paragraph 17 of the Operating Agreement. 17. Schwartz neither sought nor obtained the consent of the majority of the members of the LLC and as a result such misrepresentation could possibly be considered a default under the terms of the loan documents and which default could cause the lenders to demand the repayment of the loans, with interest and penalties, to the ultimate detriment of the LLC and thereby irreparably damage and jeopardize the value and viability of the LLC and the underlying investments. 18. Additionally, upon information and belief, Schwartz diverted the proceeds and funds from the refmances to himself and used the proceeds for his own personal use. 4. FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 19. Upon information and belief, Schwartz has diverted additional assets and funds of the LLC to other projects and/or to himself, without making any accounting thereof to the plaintiff or the LLC. 20. Moreover, on or about June 14, 2010, Schwartz, on behalf of the LLC, in direct violation of his fiduciary duties and contractual obligations, without the prior written consent of the members holding a majority interest, deeded the to the Grantee. fraudulently Property 21. On or about October 1, 2010, Capital One was assigned a mortgage on the Property by JP Morgan Chase, NA (which had been fraudulently obtained by Schwartz, as set forth above), which assignment was recorded under CRFN 2010000341141 in the Office of the City Register, Kings County. 22. Subsequently, Capital One lent additional funds to Grantee, and took a mortgage on the Property, recorded under CRFN 2010000341142 in the Oflice of the City Register, Kings County. 23. Capital One and Grantee consolidated and extended the outstanding mortgages, in an agreement recorded under CRFN 2010000341143 in the Office of the City Register, Kings County. 5 FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 24. On or about November 21, 2013, Capital One lent additional funds to Grantee and took another mortgage on the Property, recorded under CRFN 2013000501054 in the Office of the City Register, Kings County. 25. Capital One and Orantee again consolidated and extended the outstanding mortgages, in an agreement recorded under CRFN 2013000501055 in the Office of the City Register, Kings County. 26. The total principal balance of the most recent consolidation agreement between Capital One and Grantee is $1,500.000.00. 27. Schwartz has absconded with all proceeds from the June 2010 transfer and has failed to provide an accounting from the transfer to the Grantee nor turned over any proceeds to the LLC or to Goldstein. 28. Goldstein requested K-1's and other tax documents from Schwartz numerous times but to no avail. Schwartz never provided any tax information or documents to Goldstein. plaintiffs' 29. Additionally, despite a request from counsel by letter requesting including but not limited to, an accounting, information concerning the loan closings, or a list of any funds used or taken from the LLC accounts, Schwartz has failed to turn over any information. 6 FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 30. Demand on the LLC itself would be futile as Schwartz is the member of managing theLLC. 31. By reason of the allegations, Schwartz has engaged in objectionable foregoing conduct, waste and mismanagement of the LLC, has injured and harmed the LLC, and irreparably has caused the LLC to bedeprived of assets rightfully belonging to the LLC. 32. Additionally, by Schwartz's objectionable conduct, waste and mismanagement, Schwartz has irreparably injured and harmed the individual members/investors, and has caused the members/investors to be deprived of their investments and the income earned on their investments. 33. Schwartz's breaches and misconduct were wrongful, willful, intentional, deceitful, not in good faith, constitute objectionable conduct, and were in violation of the Operating Agreement. Therefore Schwartz is not entitled to indemnification under the Operating Agreement, and the Court should restrain and prohibit Schwartz from obtaining any indemnification or any other payments or access to any of the LLC's documents, records, and/or assets. 7 FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 AS AND FOR A FIRST CAUSE OF ACTION - BREACH OF CONTRACT BROUGHT DERIVATIVELY ON BEHALF OF THE LLC "I" 34. Plaintiffs repeat and reallege each and allegation contained in paragraphs every "33" through of the complaint with the same force and effect as if set forth herein at length. 35. Defendant Schwartz has materially breached his contractual obligations and participated in breaches against the LLC and the Operating Agreement as set forth above. 36, The Operating Agreement has a specific carve-out from the exculpation of members clause when a member's acts are in "bad faith or involved intentional misconduct or a law." knowing violation of 37. Plaintiffs have performed all of the terms of the Operating Agreement on their part required to be performed. 38. Due to Schwartz's breaches the LLC has suffered losses, and owes substantial sums of money, including principal and interest, on unauthorized loans, and other potential fees and penalties. 39. Additionally, Schwartz breached the Operating Agreement when he transferred the Property to the Grantee without the written consent of the members holding a majority interest as required by the Operating Agreement. 8 FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 40. The LLC has suffered losses of assets by reason of such breaches and bas been damaged in the sum of not less than $2,000,000.00. AS AND FOR A SECOND CAUSE OF ACTION - BREACH OF CONTRACT ON BEHALF OF PLAINTIFF BENJAMIN GOLDSTEIN 4 l. Plaintiff Goldstein repeats and realleges each and every allegation contained in "1" "40" paragraphs through of the complaint with the same force and effect as if set forth herein at length, 42. Defendant Schwartz has materially breached his contractual obligations in the Operating Agreement and participated in breaches against the members of the LLC as set forth above. 43. The Operating Agreement has a specific carve-out from the exculpation of members clause when a member's acts are in "bad faith or involved intentional misconduct or a law." knowing violation of 44. Due to Schwartz's breaches the members have suffered losses and owe substantial sums of money, including principal and interest, on unauthorized loans, and other potential fees and penalties. 9 FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 45. Plaintiff Goldstein has performed all of the terms of the Agreement on Operating his part required to be performed. 46, By reason of Schwartz's breaches, Goldstein, has suffered losses of assets and has been damaged in the sum of not less than $2,000,000.00. AS AND FOR A THIRD CAUSE OF ACTION - FRAUDULENT INDUCEMENT AND RESTITUTION, BROUGHT DERIVATIVELY ON BEHALF OF THE LLC "1" 47. Plaintiffs repeat and reallege each and every allegation contained in paragraphs "46" through of the complaint with the same force and effect as if set forth herein at length. 48. Upon information and belief, Defendant Schwartz made material false representations to entities which nominally lent funds to the LLC, including that he had the right to refinance on behalf of the LLC, encumber the property(ies) of the LLC, and sign and execute documents on behalf of the LLC. 49. Upon information and belief, Schwartz also made material and false representations to the Grantee and other persons and entities who relied on Schwartz's representations in connection thereto, including, but not limited to the Grantee's title company, title closer or notary public, Grantee's lender, if any, Grantee's lender's attorney, the Office of the City Register for the County of Kings and the Kings County Clerk, 10 FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 50. Upon information and belief, said statements were made to induce the Grantee and the lenders to provide funds to Schwartz and/or the LLC, and Schwartz absconded with ultimately the funds for himself. 51. Such intentional misconduct was wrongful, willful and deceitful and constitutes intentional misconduct not protected by the Operating Agreement. 52, As such, the LLC has been injured and damaged by Schwartz's intentional misconduct and the plaintiffs demand rescission of the Operating Agreement, restitution, and damages to the LLC. Plaintiffs also demand that any funds received by Schwartz, believed to be approximately $1,400,000.00, in connection with the transfer of the Property, be turned over to the LLC. Additionally, Plaintiffs demand punitive damages in the amount of $2,000,000.00 as a penalty for and deterrent against such egregious, wantonly dishonest and harmful conduct implicating fraudulent motive and criminal indifference on the part of Schwartz to his civil contractual and fiduciary obligations. AS AND FOR A FOURTH CAUSE OF ACTION - FRAUDULENT INDUCEMENT AND RESTITUTION, ON BEHALF OF PLAINTIFF BENJAMIN GOLDSTIEN 53. Plaintiff Goldstein repeats and realleges each and every allegation contained in "1" "52" paragraphs through of the complaint with the same force and effect as if set forth herein at length. 11 FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 54. Defendant Schwartz made material false representations to entities which nominally lent funds to the LLC, including that he had the right to refinance on behalf of the LLC, encumber the property(ies) of the LLC, and sign and execute documents on behalf of the LLC, 55, Upon information and belief, said statements were made to induce the Grantee and/or lenders to provide funds to Schwartz and/or the LLC, and Schwartz ultimately absconded with the funds for himself. 56. Schwartz did not have authority, in the form of written consent of the Members holding a majority interest, to transfer the Property. 57. Such conduct was wrongful, willful and deceitful and constitutes intentional misconduct not protected by the Operating Agreement. 58. As such, Goldstein has been injmed and damaged by Schwartz's intentional misconduct and Goldstein demands rescission of the Operating Agreement, restitution, and damages. Goldstein additionally demands punitive damages in the amount of $2,000,000.00 as a penalty for and deterrent against such egregious, wantonly dishonest and harmful conduct implicating fraudulent motive and criminal indifference on the part of Schwartz to his civil contractual and fiduciary obligations. 12 FILED: KINGS COUNTY CLERK 03/04/2024 05:25 PM INDEX NO. 503863/2014 NYSCEF DOC. NO. 269 RECEIVED NYSCEF: 03/04/2024 AS AND FOR A FIFTH CAUS