Preview
FILED: KINGS COUNTY CLERK 05/24/2018 01:50 PM INDEX NO. 510914/2016
NYSCEF DOC. NO. 167 RECEIVED NYSCEF: 05/24/2018
SUPREME COURT OF NEW YORK
COUNTY OF KINGS
____________ _________---------------------------------------------X
ADAM JOSEPH, individually and as a Member of Index No. 510914/2016
Legs Media, LLC and Milk Agency, LLC,
Assigned to:
Plaintiff, Hon. Francois A. Rivera
Return Date: June 15, 2018
-against-
Motion Sequence No. 008
MAZDACK RASSI, individually and as a Member of
Legs Media, LLC and Milk Agency, LLC; MOISHE
MANA, individually and as a Member of Legs Media,
LLC and Milk Agency, LLC; EREZ SHTERNLICHT,
individually and as a Member of Legs Media, LLC
and Milk Agency, LLC; MILK STUDIOS, LLC;
LEGS MEDIA, LLC; MILK AGENCY, LLC; MILK
MAKEUP, LLC; MILK MAKEUP HOLDINGS, LLC;
MILK MAKEUP MANAGEMENT, LLC; and
SCOTT SASSA,
Defendants.
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DEFENDANTS'
MEMORANDUM OF LAW IN
SUPPORT OF MOTION TO BIFURCATE
MORITT HOCK & HAMROFF LLP
Attorneys for Defendants
400 Garden City Plaza
Garden City, NY 11530
(516) 873-2000
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TABLE OF CONTENTS
Page
PRELIMINARY STATEMENT .................................................................................................... 1
STATEMENT OF FACTS AND PROCEDURAL HISTORY...................................................... 2
A. Background.........................................................................................................................2
B. The Complaint .................................................................................................................... 3
Defendants'
C. Answer ............................................................................................................ 4
D. Discovery ............................................................................................................................ 5
ARGUMENT................................................................................................................................... . . . .. ... .. .. .. . .. 6
THE COURT SI4OULD BIFURCATE PRE-TRIAL DISCOVERY
AND TRIAL OF THIS ACTION CONCERNING LIABILITY AND DAMAGES..................... 6
A. Standard For Bifurcation..................................................................................................... . ........ .. ... ... 6
B. Bifurcation Will Promote the Efficient and Orderly Resolution of this Action ................. 7
CONCLUSION............................................................................................................................. . . .. ..... .. . . .... 12
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TABLE OF AUTHORITIES
Page
Cases
Helie, v. McDermott, Will 4 Emery,
18 Misc. 3d 673, 684, 852 N.Y.S.2d 701, 708. .......................................................................... 11
Bankers Trust Co. v. Hogan,
196 A.D.2d 469, 601 N.Y.S.2d 469 (1st Dep't 1993) .................................................................. 7
Don Buchwald & Assocs. v. Marber Rich,
305 A.D. 2d 338, 338, 761 N.Y.S.2d 617, 618 (1st Dep't 2003)....................................... ....6,8,11
6, 8,
...,6,8, 11
Duke Media Sales v. Jakel Corp.,
215 A.D.2d 237, 237, 626 N.Y.S.2d 195, 196 (1st Dep't 1995)..................................................
. ...... ... .... .. ..77
Equities Holding Co.v. Kiam,
90 A.D.2d 759, 759, 456 N.Y.S.2d 60, t 61 (1st Dep'tr 1982).........................................................
/ .. 12
Imaging Int'l v. Hell Graphic Sys., Inc.,
2006 N.Y. Misc. LEXIS 9411, 2006 N.Y. Slip Op 30688(U) (Sup. Ct. N.Y. Cty. 2006).......... 8
Jackson v. Monteflore Med. Ctr.,
109 A.D.3d 762, 763, 971 N.Y.S.2d 528, 530 (1st Dept. 2013)..................................................
. ........
...... ....... ... . 6
...........
Kahn v. Rodman,
91 A.D.2d 910, 911, 457 N.Y.S.2d 480, 481 (Ist Dep't 1983)............................................................................
.....,...... „,...... 12
LSY International, Inc. v. Kerzner,
140 A.D.2d 256, 528 N.Y.S.2d 561 (1st Dep't 1988)...................................................................
...,..........,. „....,.......... 12
9th
Norton Co. v. C-TC Ave. Partnership,
198 A.D.2d 696, 603 N.Y.S.2d 364 (3d Dep't 1993)...................................................................
..................................................................
..........................................,....................... 7
Peak v. Northway Travel Trailers, Inc.,
260 A.D.2d 840, 688 N.Y.S.2d 738 (3d Dep't 1999)................................................................... 7
Plainview Water Dist. v. Exxon Mobil Corp.,
66 A.D.3d 754, 755, 888 N.Y.S.2d 521, 523 (2d Dep't,. 2009)..........................................................,...............
.................... 6
Raiport v. Gowanda Elecs. Corp.,
190 Misc. 2d 353, 355, 739 N.Y.S.2d 811, 812 (Sup. Ct. Cattaraugus Cty. 2001)................
....,...........
„,............. 7, 8
Schreier v. Mascola,
81 A.D.2d 909, 909, 439 N.Y.S.2d 197, 197 (2d Dep't 1981)...................................................... 12
11
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Wolther v. Samuel,
110 A.D.2d 506, 50.7, 487 N.Y.S.2d 45, 46 (1st Dep't 1985)....................................................... 12
Statutes
CPLR § 603................................................................................................................................ ...... ..... .... .1,6
1, 6
CPLR § 3108 ................................................................................................................................ 11
111
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PRELIMINARY STATEMENT
Defendants respectfully submit this Memorandum of Law in support of their motion,
pursuant to New York Civil Practice Law and Rules ("CPLR") § 603, to bifurcate pre-trial
and the trial of certain complicated damages issues relating to the valuation (the
discovery
Issues"
"Valuation Issues") of Milk Makeup, LLC, Milk Makeup Holdings, LLC, Milk Makeup
Makeup"
Management, LLC (collectively, "Milk Makeup").
As is set forth in greater detail below, discovery relating to the Valuation Issues will be
extraordinarily complicated, will require the engagement of numerous valuation and investment
banking experts to testify about the valuation of Milk Makeup and market surveys of comparable
companies, and inay entail third-party discovery which will be disruptive of Milk Makeup's
business relationships with its suppliers and customers. It is also estimated that trial of the
Valuation Issues concerning Milk Makeup will add at least two weeks to the time required to try
this case, which will impose an extreme burden upon the Court and any potential jurors.
The proofs relating to the Valuation Issues are entirely separate and distinct from those
relating to the proof of liability on Plaintiffs other damage claims, and the need to take discovery
relating to the Valuation Issues will be wholly unnecessary unless Plaintiff first proves he is
somehow an owner of Milk Makeup or entitled to damages equal to an ownership interest in its .
business.
Accordingly, this Court should enter an Order staying discovery and bifurcating the trial
of the issue of damages relating to Plaintiffs First Cause of Action (for misappropriation of the
Milk Makeup corporate opportunity), Third Cause of Action (for misappropriation of the Milk
Makeup concept) and Sixth Cause of Action (for civil conspiracy to steal the Milk Makeup
concept), until after Plaintiff first proves liability on these claims, and for such other relief as
may be deemed just and equitable. .
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STATEMENT OF FACTS AND PROCEDURAL HISTORY
A. . Background
Plaintiff alleges that Milk Studios, LLC is a photography rental studio owned by
(" Mana"
Defendants Mazdack Rassi ("Rassi"), Moishe Mana ("Mana") and Erez Shternlicht
("Shternlicht"), and that in 2003 he joined a casting company called House Casting, which is also
owned by Defendants Rassi, Mana and Shternlicht. (A copy of the Complaint is annexed to the
accompanying Affirmation of Stephen J. Ginsberg, Esq. (the "Ginsberg Aff.") as Ex. "A", ¶¶ 7,
27).'
18 & 27). Plaintiff then alleges that after working for House Casting for approximately six
years, in 2008 he started a production company with Rassi, Mana and Shternlicht called Legs
(" Media"
Media, LLC ("Legs Media") / which is owned 25% byv each of them (id., ¶¶
II 9, 39, 45, 70 & 73).
("
Plaintiff alleges that in 2013, Rassi, Mana and Shternlicht formed Milk Agency, LLC ("Milk
Agency"
Agency"), a marketing and advertising company, and granted Plaintiff a 25% interest in that
entity (id., ¶¶ 94-99).
. .
Plaintiff alleges that during a meeting he attended in January 2012 with Rassi and
Georgie Greville (a Legs Media employee), Rassi brought up an idea to form a cosmetics
company (id., ¶ 110). Plaintiff then alleges that Ms. Greville developed a slide deck for Rassi
describing her view of the concept (id., ¶¶ 113-118). Plaintiff does not allege that he assisted
Ms. Greville with the development of the slide deck, or that he was in any way involved with the
creation of it.
Plaintiff alleges that in June 2014 -- 2.5 years later -- Rassi told Plaintiff
approximately
that he, Shternlicht and Mana were going to create a makeup company; form an entity; and
contribute $200,000 each to that entity in seed investment (id., ¶ 124). Plaintiff alleges that when
he asked Rassi to invest, Rassi said no (id.).
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Whenever applicable, the facts are taken from Plaintiffs Complaint herein for purpose of this motion only.
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Plaintiff alleges that in February 2015, Defendant Scott Sassa ("Sassa"), a former media
executive with the Hearst Corporation, was asked by Rassi and Shternlicht to create and
implement a plan for consolidating Legs Media and Milk Agency into one entity called Milk
Media with the goal of raising capital from outside investors (id., ¶¶ 139, 165, 166, 171, 179,
201). Although an investor did express interest in making a significant investment in Milk
Media, that transaction ultimately fell through (id, ¶¶ 201, 209, 212, 221). Legs Media and Milk.
Agency were never consolidated.
B. The Complaint
On or about June 27, 2016, Plaintiff commenced this action by filing a Summons with
Notice (Ginsberg Aff., ¶12). In response, Defendants filed a motion to dismiss, which was
denied, and Plaintiff filed a Complaint dated October 31, 2016 (Ginsberg Aff., Ex. "A").
After Plaintiff filed his Complaint, Defendants filed a motion to dismiss (Ginsberg Aff.,
"Decision"
¶l3). The Court issued a Decision & Order (the "Decision") dated January 10, 2018 dismissing
the Fourth Cause of Action for unjust enrichment, Fifth Cause of Action for conversion, and
Sixth Cause of Action for misappropriation of a trade secret, and denying the remaining portion
Defendants'
of motion to dismiss. (A true and correct copy of the Decision is annexed to the
Ginsberg Aff. as Ex. "B"). A summary of the remaining causes of action contained in the
Complaint is set forth below.
In his First Cause of Action, Plaintiff alleges that Defendants Rassi, Mana and Shternlicht
are liable for breaching their fiduciary duties by: (1) requiring Legs Media and Milk Agency to
perform work on other Milk branded entities for free or at substantial discounts; (2) instructing
Legs Media's employee (Georgie Greville) to stop performing her duties for Legs Media; (3)
diverting resources of Legs Media and Milk Agency to other entities; and (4) misappropriating
the Milk Makeup concept (Ginsberg Aff., Ex. "A", First Cause of Action).
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Plaintiffs Second Cause of Action alleges that Rassi, Mana and Shternlicht wasted the
corporate assets of Legs Media and Milk Agency by taking over large portions of Legs Media's
office space for their other Milk branded entities, directing Legs Media and Milk Agency
employees to work on other Milk branded entities for free or at substantially reduced fees, and
Legs Media to write off fees for other Milk branded entities (id., Second Cause of
forcing
Action).
Plaintiffs Third Cause of Action alleges that Rassi, Mana and Shternlicht
misappropriated the Milk Makeup concept from Legs Media, and his Sixth Cause of Action
alleges that Rassi, Mana, Shternlicht, along with Defendant Scott Sassa ("Sassa"), conspired
together to steal the value of Legs Media and Milk Agency (i.e., the Milk Makeup concept) (id.,
Third and Sixth Causes of Action).
Plaintiffs Seventh Cause of Action seeks a declaration that Plaintiff is an equal owner of
the equity of Milk Makeup with Rassi, Mana and Shternlicht and his Eighth Cause of Action
seeks a declaration that Legs Media and Milk Agency collectively own all intellectual property
rights to use the Milk brand name for media purposes (id., Seventh and Eighth Causes of
Action).
Importantly, only the fourth subpart of Plaintiffs First Cause of Action and Plaintiffs
Third and Sixth Causes of Action seek damages based upon the valuation of Milk Makeup.
Defendants'
C. Answer
"Answer"
On March 5, 2018, Defendants filed their Verified Answer (the "Answer"). (A true and
Defendants'
correct copy of Answer is annexed to the Ginsberg Aff. as Ex. "C"). In it,
Defendants deny.the material allegations alleged by Plaintiff in his Complaint, and raise a variety
of affirmative defenses, including (without limitation) that: (i) Plaintiff accepted and/or ratified
the formation and operation of Milk Makeup by Rassi, Mana and Shternlicht (Fifth Affirmative
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Plaintiff did not have a tangible expectation in Milk Makeup (Fourteenth
Defense); (ii)
Affirmative Defense); and the development, manufacturing, marketing, distribution and
(iii)
sales of cosmetic-related products is not consistent with Legs Media's or Milk Agency's line of
business and is not essential to their business (Sixteenth Affirmative Defense).
D. Discovery
On March 9, 2018, counsel for the parties appeared for a Preliminary Conference, at
which time the Court entered a Preliminary Conference Order. (A true and correct copy of the
Conference Order annexed to the Ginsberg Aff. as Ex. "D"). The Preliminary
Preliminary
Conference Order directs the parties to, among other things, serve their document demands by
April 6, 2018 and produce responsive documents by.August 3, 2018. (Id.).
As of the date of the filing of this motion, Plaintiff has not served his document demands.
Rather, Plaintiff skipped over party discovery, and served non-party subpoenas on Milk
Makeup's customers seeking substantial financial disclosure to determine the valuation of Milk
Makeup. (Copies of the Subpoenas Duces Tecum served upon Sephora USA, Inc. and Urban
"E"
Outfitters, Inc. are annexed to the Ginsberg Aff. as Exs. and "F", respectively).
As demonstrated below, it would be substantially more efficient for both the parties and
the Court to first determine whether Plaintiff is an owner of Milk Makeup or entitled to damages
equal to such ownership interest, before allowing Plaintiff to obtain a comprehensive accounting
of the valuation of Milk Makeup and conducting a trial addressing the Valuation Issue. Not only
is the valuation of Milk Makeup a distinct issue in this case, but if Plaintiff is unable to prove
liability on his misappropriation and conspiracy claims, then the parties and the Court would
avoid the expenditure of considerable resources determining the Valuation Issue.
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