Preview
INDEX NO. 703104/2012
(FILED: QUEENS COUNTY CLERK 12/07/2012)
NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 12/07/2012
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF QUEENS
wane cen nn nnn en neem
nnmeenennneen K
KINGSLAND DAIRY, INC. and Index No.
DERLE FARMS, INC.,
Plaintiffs, SUMMONS
Vv, Plaintiff designates Queens
County as the place of trial
ELMHURST DAIRY, INC.,
Defendant. The basis of venue is Plaintiff’s and
Defendant’s residence.
wee
To the above-named defendant:
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 plaintiff’s attorney within twenty (20) days after the service of this summons,
exclusive of the day of service, or within thirty (30) days after service is complete if this
summons is not personally delivered to you within the State of New York. In case of your
failure to appear or answer, judgment will be taken against you by default for the relief
demanded in the complaint.
This is an action to obtain relief for breach of contract.
Dated: New York, New York
December 7, 2012
MOSES & SINGE LLP
By:
David Rabinowitz
Attorneys for the Plaintiffs
405 Lexington Avenue, 12" Floor
New York, New York 10174
Tel: (212) 554-7669
To: Elmhurst Dairy, Inc.
Attn: Mr. Jay Valentine
155-25 Styler Road
Jamaica, New York 11433
919825v1 013916.0101
Hodgson Russ LLP
Attn: Robert Fluskey, Esq.
Attorneys for Defendant
140 Pearl Street, Suite 100
Buffalo, New York 14202
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF QUEENS
wen een ene ene ene ene ne
KINGSLAND DAIRY, INC. and Index No.
DERLE FARMS, INC.,
COMPLAINT
Plaintiffs,
-against-
ELMHURST DAIRY, INC.,
Defendant.
ene ee nn eee eee
Plaintiffs, Kingsland Dairy, Inc. and Derle Farms, Inc., by their undersigned attorneys,
Moses & Singer LLP, for their complaint against the defendant Elmhurst Dairy, Inc., state as
follows:
NATURE OF ACTION
1 This is an action for breach of contract and for injunctive relief against Elmhurst
Diary, Inc. “Elmhurst” or “Defendant”) for repudiating the parties’ milk and milk products
supply agreement (the “Supply Agreement”), pursuant to which plaintiffs and defendant have
been doing business for 16 years.
2. On December 5, 2012, Elmhurst falsely declaring a monetary default by plaintiffs
Kingsland Dairy, Inc. (“Kingsland”) and Derle Farms, Inc. (“Derle”; together with Kingsland,
“Plaintiffs”) and stated that it would cut off plaintiffs’ supply of milk and milk products unless
paid on aC.O.D. basis commencing immediately, despite Elmhurst’s obligation under the
Supply Agreement to supply product to Plaintiffs on credit. This sudden demand for C.O.D.
payments would have the effect of requiring Plaintiffs to double their payments to Elmhurst from
about $800,000 per week to about $1,600,000, a level of financial drain that Plaintiffs cannot
sustain. A mandatory preliminary injunction is necessary to prevent irreparable harm to
Plaintiffs by virtue of Defendant’s repudiation the Supply Agreement -- specifically, Plaintiffs’
business will likely be shut down if Defendant does not perform under the Supply Agreement.
THE PARTIES
3 Plaintiff Kingsland Dairy, Inc. is a New York corporation with its principal office
located in Brooklyn, New York.
4. Plaintiff Derle Farms, Inc. is a New York corporation with its principal office
located in Queens, New York.
5 Defendant Elmhurst Dairy, Inc. is a New York corporation with its principal
office located in Queens, New York.
6. The basis of venue herein is the residence of Derle and the residence of Elmhurst.
FACTUAL BACKGROUND
q
Plaintiffs Kingsland and Derle are two of the largest wholesale distributors of
quality dairy products in the New York metropolitan area. The companies are family owned and
presently employ over 100 individuals.
8 Elmhurst is engaged in the business of pasteurizing, processing and packaging
milk and milk products.
9 For the past 16 years, Elmhurst has been supplying Kingsland and Derle with
milk and milk products. Kingsland and Derle distribute those products to businesses in the
metropolitan area, including nursing homes, senior-centers, daycare centers, supermarkets and
neighborhood delis.
94946Sv1 009016.0104
10. Kingsland and Derle have for the past several years purchased and continue to
purchase more than $800,000 worth of product from Elmhurst every week. They have timely
made payment to Elmhurst and have otherwise always lived up to the terms of the parties’
Supply Agreement.
The Supply Agreement and Its Credit Arrangement
11. On September 12, 1996, Kingsland and Derle entered into a Supply Agreement
(Exhibit A) with Elmhurst pursuant to which Kingsland and Derle agreed to purchase from
Elmhurst certain pasteurized milk and milk products.
12. The Supply Agreement expressly requires Elmhurst to sell its products to
Kingsland and Derle on a credit, not cash, basis, and sets the terms of the credit arrangement,
which has been amended over the years. The “Billing” provision of the Agreement originally
provided that “[f]or the purpose of this Paragraph, a week shall be deemed to end on Saturday.
[Elmhurst] shall render a bill to [Kingsland] by the following Wednesday and shall be paid by
[Kingsland] no later than the third Friday following the Invoice date.” (Ex. A. §7.0)
13. The Supply Agreement has been amended to increase the time allowed Derle and
Kingsland three times: twice in writing and once orally.
14. A May 28, 2003 Amendment to the Supply Agreement (Exhibit B) provided that
Elmhurst would render its weekly bill to Kingsland “by the following Wednesday” for the
previous week’s milk and milk products, and that the bill was to “be paid by [Kingsland] no later
than the sixth Friday following the invoice date.” (Ex. B. {10)
15. A December 14, 2009 Amendment to the Supply Agreement (Exhibit C) provided
that Elmhurst would render its weekly bill to Kingsland “by the following Wednesday” and that
949465v1 009016.0104
bill was to “be paid by [Kingsland] no later than the seventh (7") Wednesday following the
invoice date.”
16. In July 2010, plaintiffs’ Vice President, Louis Abramson, met with Jay Valentine,
Elmburst’s Vice President, and discussed further changing the parties’ credit arrangement so that
the bills rendered to Kingsland and Derle could be paid no later than the seventh (7) Friday
following the invoice date instead of the seventh 7") Wednesday. At that time, Kingsland and
Derle had been facing certain financial difficulties, which is why they had asked Mr. Valentine
for the additional 2 days’ credit. Mr. Valentine spoke to his boss, Henry, who agreed to
plaintiffs’ request.
17. For the more than two years since the July 2010 agreement, through today,
Kingsland and Derle have faithfully and punctually paid Elmhurst no later than the seventh
Friday following the invoice date. In fact, a check is cut to Elmhurst every week and an
Elmhurst representative picks up that check in person every Friday. Pursuant to the July 2010
agreement, Elmhurst has always accepted and cashed those checks.
18, Kingsland and Derle have not once tendered a bad check to Elmhurst and have
otherwise met all of their obligations under the Supply Agreement.
Negotiations to Renew the Supply Agreement End Unsuccessfully
19. Pursuant to the 2004 Amendment No. 3 of the Supply Agreement, the Supply
Agreement was to terminate on January 14, 2013. Because the parties were attempting to
negotiate a new agreement, it was agreed on October 24, 2012 that the term of the Supply
Agreement would be extended to January 21, 2013. (Exhibit D) On October 26, 2012, the term
949465v1 009016.0104
was again extended to January 28, 2013. (Exhibit E) Negotiations continued and on November 7,
2012, the term was extended to February 11, 2013 (Exhibit F); and again on November 23, 2012,
the term was extended to February 18, 2013. (Exhibit G)
20. Kingsland and Derle were not successful at negotiating a new contract with
Elmhurst and discussions have ended.
The December 5" Demand Letter
21. Shortly after discussions to extend the Supply Agreement ended, on December 6,
2012, plaintiffs received a letter dated December 5, 2012 from Rob Fluskey, Esq. of Hodgson
Russ LLP, counsel for Elmhurst. (Exhibit H). The letter suddenly accused Kingsland and Derle
of paying late, in violation of the Supply Agreement. Specifically Mr. Fluskey asserted that by
not paying Elmhurst’s October 20, 2012 invoice (Invoice Number 1704135) (Exhibit I) on the
seventh Wednesday after it was rendered (December 5" rather than the seventh Friday,
plaintiffs had been doing pursuant to agreement for over two years, Derle had breached the
Supply Agreement.
22. Mr. Fluskey admits in his letter that Derle had been regularly paying Elmhurst’s
weekly invoices on the Friday following the seventh Wednesday after the respective dates of the
invoice, but claims that this was a breach of the Supply Agreement rather than the system that
was expressly agreed to in July 2010 and adhered to since then. Fluskey’s allegation that those
payments were late is simply not true. It is evident that Elmhurst has tried to ambush plaintiffs
only because Kingsland and Derle have recently decided not to renew the Supply Agreement.
949465v1 009016.0104
23. Mr. Fluskey fails to acknowledge the fact that Mr. Valentine and Mr. Abramson
had agreed in July 2010 that Derle would pay Elmhurst’s bills on the Friday following the
seventh Wednesday after the respective dates of the invoice and that the parties have been
faithfully abiding by that agreement for more than two years now. Consistent with their practice
over the past 2 years, Kingsland and Derle were indeed prepared to make payment on the
October 20" invoice on December 7" and in fact are doing so. A copy of the check is annexed
hereto as Exhibit J.
24. Mr. Fluskey’s letter demands that “[bJecause Derle has failed to make payments
when due under the Agreement, upon receipt of this Notice, Derle must pay for all milk and milk
products supplied by Elmhurst on a cash on delivery (“C.O.D.”) basis, as required by Paragraph
1.2 of the Agreement” and that “[fJor clarity, this C.O.D. payment requirement shall apply for
the remainder of the term of the Agreement irrespective of whether Derle pays the past due
amounts as requested by this Notice and irrespective of whether Derle stays within the payment
terms required under the Agreement thereafter.” In fact, Paragraph 1.2 of the Supply Agreement
requires no such thing.
25. The Supply Agreement provides that it can be terminated by Elmburst if “(i)
(Kingsland] fails to make any required payment hereunder when due after ten (10) days written
notice. Upon the receipt of said written notice by [Kingsland], [Kingsland] agrees to pay for
goods and merchandise delivered by [Elmhurst] cash on delivery (C.O.D.) . ..” Exh. A, Para.
1.2(i). There has been no failure to make any required payment under the Supply Agreement and
no failure to respond to any proper written notice of such a failure.
949465v1 009016.0104
26. In his letter Fluskey states also that Elmhurst has a past due amount of $99,085.82
under the Agreement for “bridge-related” fees and that a monthly payment of $25,833.33 owed
by Derle to Elmhurst under a certain Note is also currently past due. With respect to the
$25,833.33 monthly payment, plaintiffs have made that payment during the first week of the
month for the past two years. Consistent with that practice, on December 7, 2012 plaintiffs made
the $25,833.33 monthly payment for December 2012. A copy of the check is annexed hereto as
Exhibit K. Moreover, there remains only one payment due under the Note.
27. With respect to the “bridge-related” fees, no such fees are due under the
Agreement. Defendant had requested that plaintiffs contribute to certain fees defendant was
charged in connection with its trucks having to cross certain bridges. Plaintiffs had gratuitously
paid towards those fees for several months but stopped making any contributions 3 years ago.
Accordingly, plaintiffs do not owe Elmhurst $99,085.82.
28. Kingsland and Derle would suffer severe and irreparable injury if they were now
suddenly required to pay for milk and milk products C.O.D., on top of making their regular
weekly payments every Friday.
29, First, Kingsland and Derle neither have the cash flow nor can they borrow the
amount of money that would be needed to pay Elmhurst for product each day that it is delivered.
This is especially so where they would, at the same time, be required to continue to pay on the
contractual credit arrangement for product that was received from Elmhurst prior to December
6". In substance, Kingsland and Derle would have to pay simultaneously for both the week’s
milk from seven weeks earlier and for the current week’s milk. This would require them to pay
949465v1 009016.0104
at double the rate of what is actually due under the Supply Agreement — an added expense of
about $800,000 per week.
30. Second, it would be impossible for Kingsland and Derle to find a new supplier in
time to save their business, because no new supplier will be able to provide a supply of milk
equivalent to what is presently being supplied by Elmhurst on such short notice. Most simply
stated, if Kingsland and Derle are required to pay Elmhurst C.O.D. at this time, the companies
will likely have to shut down, leaving many individuals unemployed and many businesses
without milk and milk products. Such a drastic result is entirely unwarranted especially where
Elmhurst is undoubtedly acting in bad faith.
31. On December 6, 2012, the first day that Elmhurst refused to supply product
except on C.O.D. basis, a payment of $150,000 was made to Elmhurst under protest for that
day’s supply of milk and milk products. A copy of the letter sent to Elmburst with that payment
is annexed hereto as Exhibit L. Derle and Kingsland cannot sustain such daily payments while
simultaneously paying under their contractual credit arrangement for milk already delivered, and
would run out of money in short order.
FIRST CAUSE OF ACTION
(Breach of Contract)
32. Plaintiffs hereby repeat and reallege each of the allegations set forth in Paragraphs
1 through 31 above as if fully set forth at length herein.
33. As stated above, Plaintiffs and Defendant are parties to a Supply Agreement,
dated September 12, 1996, periodically amended and modified, including, without limitation, by
a July 2010 oral modification, pursuant to which the parties’ credit agreement was changed so
that the bills rendered to Kingsland and Derle by Elmhurst could be paid no later than the
949465v1 009016,0104
seventh (7) Friday following the invoice date instead of as previously required, the seventh (7")
Wednesday.
34, Defendant is currently in breach of its obligations under the Supply Agreement by
falsely declaring a monetary default by Plaintiffs, and repudiating the credit payment terms in the
Supply Agreement, including, inter alia by claiming that plaintiffs breached the Supply
Agreement by not paying their bills on the seventh (7") Wednesday, but instead paying on the 7
Friday, and demanding that plaintiffs pay for product C.O.D.
35. By reason of the foregoing, Plaintiffs are entitled to a judgment against Defendant
ordering Defendant to specifically perform its obligations under the Supply Agreement, to refund
or credit to Plaintiffs the money they have been unlawfully coerced to pay on a C.O.D. basis and
for such other damages as Plaintiffs may sustain.
WHEREFORE, Plaintiffs demand judgment against Defendant as follows:
(A) On their breach of contract action:
(ay For preliminary and permanent injunctions:
a) Enjoining defendant from declaring a monetary default under the parties’
Supply Agreement based upon payments made to Defendant in
accordance with the credit arrangements between the parties, and
b) Ordering Defendant to resume and continue performance of the Supply
Agreement in accordance with its terms for the remainder of the life of
that agreement.
(2) For such damages as Plaintiffs have sustained and may sustain by reason
of Defendant’s breach of contract, including without limitation, a refund
or credit to Plaintiffs the money they have been unlawfully coerced to pay
on aC.O.D. basis,
(B) For the costs and disbursements of this action, and
(C) For such other and further relief as the Court deems just and proper.
Dated: December 7, 2012
New York, New York
949465v1 009016.0104
MOSES & SINGER LLP
Attorneys for Plaintiffs
dau
David Rabinowitz
Jason Canales
Jennifer Nigro
405 Lexington Avenue
New York, New York 10174
Telephone: (212) 554-7800
949465v1 009016.0104 10
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF QUEENS
KINGSLAND DAIRY, INC. and Index No.
DERLE FARMS, INC.,
Plaintiffs, AFFIRMATION PURSUANT
TO RULE 202.7(f)
-against-
ELMHURST DAIRY, INC.,
Defendant.
anne
nn
DAVID RABINOWITZ, an attorney admitted to practice law in the State of New York. +
hereby affirms under the penalty of perjury:
1 lam a Member of the law firm of Moses & Singer LLP, counsel for plaintiffs
Kingsland Dairy, Inc., and Derle Farms Inc. (together, “Plaintiffs”).
2. Lsubmit this affirmation, pursuant to 22 NYCRR § 202.7. This affirmation is
made based on my personal knowledge.
3. On December 7, 2012, at approximately 10:15 a.m., I called Robert J. Fluskey,
Esq., of Hodgson Russ LLP, counsel for Elmhurst Dairy, Inc., the defendant herein, and
informed him of Plaintiffs’ intention to file the instant complaint, annexed hereto as Exhibit 1,
and to bring a Motion for a Preliminary Injunction with a Temporary Restraining Order on this
matter to the Court today.
4. I further informed Mr. Fluskey of my intention to send him a copy of Plaintiffs’
complaint and motion papers via email (PDF) before leaving for Court.
Dated: December 7, 2012
New York, New York
DAVID RAB ITZ
949425v1 009016.0104
Preview
INDEX NO. 703104/2012 (FILED: QUEENS COUNTY CLERK 12/07/2012) NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 12/07/2012 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF QUEENS wane cen nn nnn en neem nnmeenennneen K KINGSLAND DAIRY, INC. and Index No. DERLE FARMS, INC., Plaintiffs, SUMMONS Vv, Plaintiff designates Queens County as the place of trial ELMHURST DAIRY, INC., Defendant. The basis of venue is Plaintiff’s and Defendant’s residence. wee To the above-named defendant: 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 plaintiff’s attorney within twenty (20) days after the service of this summons, exclusive of the day of service, or within thirty (30) days after service is complete if this summons is not personally delivered to you within the State of New York. In case of your failure to appear or answer, judgment will be taken against you by default for the relief demanded in the complaint. This is an action to obtain relief for breach of contract. Dated: New York, New York December 7, 2012 MOSES & SINGE LLP By: David Rabinowitz Attorneys for the Plaintiffs 405 Lexington Avenue, 12" Floor New York, New York 10174 Tel: (212) 554-7669 To: Elmhurst Dairy, Inc. Attn: Mr. Jay Valentine 155-25 Styler Road Jamaica, New York 11433 919825v1 013916.0101 Hodgson Russ LLP Attn: Robert Fluskey, Esq. Attorneys for Defendant 140 Pearl Street, Suite 100 Buffalo, New York 14202 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF QUEENS wen een ene ene ene ene ne KINGSLAND DAIRY, INC. and Index No. DERLE FARMS, INC., COMPLAINT Plaintiffs, -against- ELMHURST DAIRY, INC., Defendant. ene ee nn eee eee Plaintiffs, Kingsland Dairy, Inc. and Derle Farms, Inc., by their undersigned attorneys, Moses & Singer LLP, for their complaint against the defendant Elmhurst Dairy, Inc., state as follows: NATURE OF ACTION 1 This is an action for breach of contract and for injunctive relief against Elmhurst Diary, Inc. “Elmhurst” or “Defendant”) for repudiating the parties’ milk and milk products supply agreement (the “Supply Agreement”), pursuant to which plaintiffs and defendant have been doing business for 16 years. 2. On December 5, 2012, Elmhurst falsely declaring a monetary default by plaintiffs Kingsland Dairy, Inc. (“Kingsland”) and Derle Farms, Inc. (“Derle”; together with Kingsland, “Plaintiffs”) and stated that it would cut off plaintiffs’ supply of milk and milk products unless paid on aC.O.D. basis commencing immediately, despite Elmhurst’s obligation under the Supply Agreement to supply product to Plaintiffs on credit. This sudden demand for C.O.D. payments would have the effect of requiring Plaintiffs to double their payments to Elmhurst from about $800,000 per week to about $1,600,000, a level of financial drain that Plaintiffs cannot sustain. A mandatory preliminary injunction is necessary to prevent irreparable harm to Plaintiffs by virtue of Defendant’s repudiation the Supply Agreement -- specifically, Plaintiffs’ business will likely be shut down if Defendant does not perform under the Supply Agreement. THE PARTIES 3 Plaintiff Kingsland Dairy, Inc. is a New York corporation with its principal office located in Brooklyn, New York. 4. Plaintiff Derle Farms, Inc. is a New York corporation with its principal office located in Queens, New York. 5 Defendant Elmhurst Dairy, Inc. is a New York corporation with its principal office located in Queens, New York. 6. The basis of venue herein is the residence of Derle and the residence of Elmhurst. FACTUAL BACKGROUND q Plaintiffs Kingsland and Derle are two of the largest wholesale distributors of quality dairy products in the New York metropolitan area. The companies are family owned and presently employ over 100 individuals. 8 Elmhurst is engaged in the business of pasteurizing, processing and packaging milk and milk products. 9 For the past 16 years, Elmhurst has been supplying Kingsland and Derle with milk and milk products. Kingsland and Derle distribute those products to businesses in the metropolitan area, including nursing homes, senior-centers, daycare centers, supermarkets and neighborhood delis. 94946Sv1 009016.0104 10. Kingsland and Derle have for the past several years purchased and continue to purchase more than $800,000 worth of product from Elmhurst every week. They have timely made payment to Elmhurst and have otherwise always lived up to the terms of the parties’ Supply Agreement. The Supply Agreement and Its Credit Arrangement 11. On September 12, 1996, Kingsland and Derle entered into a Supply Agreement (Exhibit A) with Elmhurst pursuant to which Kingsland and Derle agreed to purchase from Elmhurst certain pasteurized milk and milk products. 12. The Supply Agreement expressly requires Elmhurst to sell its products to Kingsland and Derle on a credit, not cash, basis, and sets the terms of the credit arrangement, which has been amended over the years. The “Billing” provision of the Agreement originally provided that “[f]or the purpose of this Paragraph, a week shall be deemed to end on Saturday. [Elmhurst] shall render a bill to [Kingsland] by the following Wednesday and shall be paid by [Kingsland] no later than the third Friday following the Invoice date.” (Ex. A. §7.0) 13. The Supply Agreement has been amended to increase the time allowed Derle and Kingsland three times: twice in writing and once orally. 14. A May 28, 2003 Amendment to the Supply Agreement (Exhibit B) provided that Elmhurst would render its weekly bill to Kingsland “by the following Wednesday” for the previous week’s milk and milk products, and that the bill was to “be paid by [Kingsland] no later than the sixth Friday following the invoice date.” (Ex. B. {10) 15. A December 14, 2009 Amendment to the Supply Agreement (Exhibit C) provided that Elmhurst would render its weekly bill to Kingsland “by the following Wednesday” and that 949465v1 009016.0104 bill was to “be paid by [Kingsland] no later than the seventh (7") Wednesday following the invoice date.” 16. In July 2010, plaintiffs’ Vice President, Louis Abramson, met with Jay Valentine, Elmburst’s Vice President, and discussed further changing the parties’ credit arrangement so that the bills rendered to Kingsland and Derle could be paid no later than the seventh (7) Friday following the invoice date instead of the seventh 7") Wednesday. At that time, Kingsland and Derle had been facing certain financial difficulties, which is why they had asked Mr. Valentine for the additional 2 days’ credit. Mr. Valentine spoke to his boss, Henry, who agreed to plaintiffs’ request. 17. For the more than two years since the July 2010 agreement, through today, Kingsland and Derle have faithfully and punctually paid Elmhurst no later than the seventh Friday following the invoice date. In fact, a check is cut to Elmhurst every week and an Elmhurst representative picks up that check in person every Friday. Pursuant to the July 2010 agreement, Elmhurst has always accepted and cashed those checks. 18, Kingsland and Derle have not once tendered a bad check to Elmhurst and have otherwise met all of their obligations under the Supply Agreement. Negotiations to Renew the Supply Agreement End Unsuccessfully 19. Pursuant to the 2004 Amendment No. 3 of the Supply Agreement, the Supply Agreement was to terminate on January 14, 2013. Because the parties were attempting to negotiate a new agreement, it was agreed on October 24, 2012 that the term of the Supply Agreement would be extended to January 21, 2013. (Exhibit D) On October 26, 2012, the term 949465v1 009016.0104 was again extended to January 28, 2013. (Exhibit E) Negotiations continued and on November 7, 2012, the term was extended to February 11, 2013 (Exhibit F); and again on November 23, 2012, the term was extended to February 18, 2013. (Exhibit G) 20. Kingsland and Derle were not successful at negotiating a new contract with Elmhurst and discussions have ended. The December 5" Demand Letter 21. Shortly after discussions to extend the Supply Agreement ended, on December 6, 2012, plaintiffs received a letter dated December 5, 2012 from Rob Fluskey, Esq. of Hodgson Russ LLP, counsel for Elmhurst. (Exhibit H). The letter suddenly accused Kingsland and Derle of paying late, in violation of the Supply Agreement. Specifically Mr. Fluskey asserted that by not paying Elmhurst’s October 20, 2012 invoice (Invoice Number 1704135) (Exhibit I) on the seventh Wednesday after it was rendered (December 5" rather than the seventh Friday, plaintiffs had been doing pursuant to agreement for over two years, Derle had breached the Supply Agreement. 22. Mr. Fluskey admits in his letter that Derle had been regularly paying Elmhurst’s weekly invoices on the Friday following the seventh Wednesday after the respective dates of the invoice, but claims that this was a breach of the Supply Agreement rather than the system that was expressly agreed to in July 2010 and adhered to since then. Fluskey’s allegation that those payments were late is simply not true. It is evident that Elmhurst has tried to ambush plaintiffs only because Kingsland and Derle have recently decided not to renew the Supply Agreement. 949465v1 009016.0104 23. Mr. Fluskey fails to acknowledge the fact that Mr. Valentine and Mr. Abramson had agreed in July 2010 that Derle would pay Elmhurst’s bills on the Friday following the seventh Wednesday after the respective dates of the invoice and that the parties have been faithfully abiding by that agreement for more than two years now. Consistent with their practice over the past 2 years, Kingsland and Derle were indeed prepared to make payment on the October 20" invoice on December 7" and in fact are doing so. A copy of the check is annexed hereto as Exhibit J. 24. Mr. Fluskey’s letter demands that “[bJecause Derle has failed to make payments when due under the Agreement, upon receipt of this Notice, Derle must pay for all milk and milk products supplied by Elmhurst on a cash on delivery (“C.O.D.”) basis, as required by Paragraph 1.2 of the Agreement” and that “[fJor clarity, this C.O.D. payment requirement shall apply for the remainder of the term of the Agreement irrespective of whether Derle pays the past due amounts as requested by this Notice and irrespective of whether Derle stays within the payment terms required under the Agreement thereafter.” In fact, Paragraph 1.2 of the Supply Agreement requires no such thing. 25. The Supply Agreement provides that it can be terminated by Elmburst if “(i) (Kingsland] fails to make any required payment hereunder when due after ten (10) days written notice. Upon the receipt of said written notice by [Kingsland], [Kingsland] agrees to pay for goods and merchandise delivered by [Elmhurst] cash on delivery (C.O.D.) . ..” Exh. A, Para. 1.2(i). There has been no failure to make any required payment under the Supply Agreement and no failure to respond to any proper written notice of such a failure. 949465v1 009016.0104 26. In his letter Fluskey states also that Elmhurst has a past due amount of $99,085.82 under the Agreement for “bridge-related” fees and that a monthly payment of $25,833.33 owed by Derle to Elmhurst under a certain Note is also currently past due. With respect to the $25,833.33 monthly payment, plaintiffs have made that payment during the first week of the month for the past two years. Consistent with that practice, on December 7, 2012 plaintiffs made the $25,833.33 monthly payment for December 2012. A copy of the check is annexed hereto as Exhibit K. Moreover, there remains only one payment due under the Note. 27. With respect to the “bridge-related” fees, no such fees are due under the Agreement. Defendant had requested that plaintiffs contribute to certain fees defendant was charged in connection with its trucks having to cross certain bridges. Plaintiffs had gratuitously paid towards those fees for several months but stopped making any contributions 3 years ago. Accordingly, plaintiffs do not owe Elmhurst $99,085.82. 28. Kingsland and Derle would suffer severe and irreparable injury if they were now suddenly required to pay for milk and milk products C.O.D., on top of making their regular weekly payments every Friday. 29, First, Kingsland and Derle neither have the cash flow nor can they borrow the amount of money that would be needed to pay Elmhurst for product each day that it is delivered. This is especially so where they would, at the same time, be required to continue to pay on the contractual credit arrangement for product that was received from Elmhurst prior to December 6". In substance, Kingsland and Derle would have to pay simultaneously for both the week’s milk from seven weeks earlier and for the current week’s milk. This would require them to pay 949465v1 009016.0104 at double the rate of what is actually due under the Supply Agreement — an added expense of about $800,000 per week. 30. Second, it would be impossible for Kingsland and Derle to find a new supplier in time to save their business, because no new supplier will be able to provide a supply of milk equivalent to what is presently being supplied by Elmhurst on such short notice. Most simply stated, if Kingsland and Derle are required to pay Elmhurst C.O.D. at this time, the companies will likely have to shut down, leaving many individuals unemployed and many businesses without milk and milk products. Such a drastic result is entirely unwarranted especially where Elmhurst is undoubtedly acting in bad faith. 31. On December 6, 2012, the first day that Elmhurst refused to supply product except on C.O.D. basis, a payment of $150,000 was made to Elmhurst under protest for that day’s supply of milk and milk products. A copy of the letter sent to Elmburst with that payment is annexed hereto as Exhibit L. Derle and Kingsland cannot sustain such daily payments while simultaneously paying under their contractual credit arrangement for milk already delivered, and would run out of money in short order. FIRST CAUSE OF ACTION (Breach of Contract) 32. Plaintiffs hereby repeat and reallege each of the allegations set forth in Paragraphs 1 through 31 above as if fully set forth at length herein. 33. As stated above, Plaintiffs and Defendant are parties to a Supply Agreement, dated September 12, 1996, periodically amended and modified, including, without limitation, by a July 2010 oral modification, pursuant to which the parties’ credit agreement was changed so that the bills rendered to Kingsland and Derle by Elmhurst could be paid no later than the 949465v1 009016,0104 seventh (7) Friday following the invoice date instead of as previously required, the seventh (7") Wednesday. 34, Defendant is currently in breach of its obligations under the Supply Agreement by falsely declaring a monetary default by Plaintiffs, and repudiating the credit payment terms in the Supply Agreement, including, inter alia by claiming that plaintiffs breached the Supply Agreement by not paying their bills on the seventh (7") Wednesday, but instead paying on the 7 Friday, and demanding that plaintiffs pay for product C.O.D. 35. By reason of the foregoing, Plaintiffs are entitled to a judgment against Defendant ordering Defendant to specifically perform its obligations under the Supply Agreement, to refund or credit to Plaintiffs the money they have been unlawfully coerced to pay on a C.O.D. basis and for such other damages as Plaintiffs may sustain. WHEREFORE, Plaintiffs demand judgment against Defendant as follows: (A) On their breach of contract action: (ay For preliminary and permanent injunctions: a) Enjoining defendant from declaring a monetary default under the parties’ Supply Agreement based upon payments made to Defendant in accordance with the credit arrangements between the parties, and b) Ordering Defendant to resume and continue performance of the Supply Agreement in accordance with its terms for the remainder of the life of that agreement. (2) For such damages as Plaintiffs have sustained and may sustain by reason of Defendant’s breach of contract, including without limitation, a refund or credit to Plaintiffs the money they have been unlawfully coerced to pay on aC.O.D. basis, (B) For the costs and disbursements of this action, and (C) For such other and further relief as the Court deems just and proper. Dated: December 7, 2012 New York, New York 949465v1 009016.0104 MOSES & SINGER LLP Attorneys for Plaintiffs dau David Rabinowitz Jason Canales Jennifer Nigro 405 Lexington Avenue New York, New York 10174 Telephone: (212) 554-7800 949465v1 009016.0104 10 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF QUEENS KINGSLAND DAIRY, INC. and Index No. DERLE FARMS, INC., Plaintiffs, AFFIRMATION PURSUANT TO RULE 202.7(f) -against- ELMHURST DAIRY, INC., Defendant. anne nn DAVID RABINOWITZ, an attorney admitted to practice law in the State of New York. + hereby affirms under the penalty of perjury: 1 lam a Member of the law firm of Moses & Singer LLP, counsel for plaintiffs Kingsland Dairy, Inc., and Derle Farms Inc. (together, “Plaintiffs”). 2. Lsubmit this affirmation, pursuant to 22 NYCRR § 202.7. This affirmation is made based on my personal knowledge. 3. On December 7, 2012, at approximately 10:15 a.m., I called Robert J. Fluskey, Esq., of Hodgson Russ LLP, counsel for Elmhurst Dairy, Inc., the defendant herein, and informed him of Plaintiffs’ intention to file the instant complaint, annexed hereto as Exhibit 1, and to bring a Motion for a Preliminary Injunction with a Temporary Restraining Order on this matter to the Court today. 4. I further informed Mr. Fluskey of my intention to send him a copy of Plaintiffs’ complaint and motion papers via email (PDF) before leaving for Court. Dated: December 7, 2012 New York, New York DAVID RAB ITZ 949425v1 009016.0104