Preview
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NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK: PART 7
----------------------------------------------------X
NORMA KNOPF and MICHAEL KNOPF,
Plaintiffs, Index No. 150315/2019
- against -
Justice Lebovits
FRANK M. ESPOSITO,
DORSEY & WHITNEY, LLP,
NATHANIEL H. AKERMAN,
EDWARD S. FELDMAN,
MICHAEL HAYDEN SANFORD
and SP VOYAGER FUND, LLC,
Defendants.
----------------------------------------------------X (Motion Sequence 4)
The Knopfs’ Memorandum of Law in Further Opposition
to the Motions to Dismiss the Amended Complaint
BERRY LAW PLLC
Attorneys for plaintiffs
Norma Knopf and Michael Knopf
745 FIFTH AVENUE, 5TH FLOOR
NEW YORK, NEW YORK 10151
212-355-0777
New York, New York
December 23, 2020
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TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES....................................................................................... ii
SELECTED NEW EVIDENCE................................................................................... 1
ARGUMENT...............................................................................................................
4
Point I
The Second Circuit Decision in the Federal Case, the
First Department Decision in the Esposito Turnover
Proceeding, and this Court’s July 18, 2019 Decision
Defeat All Collateral Estoppel Arguments............................................ 4
Point II
The Knopfs Have Alleged Attorney
Deceit That is Egregious or Extreme............................................................... 13
CONCLUSION.............................................................................................................
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TABLE OF AUTHORITIES
Case Page(s)
Ambra v. Awad
2007 WL 2409600 (Sup. Ct., Nassau Co., August 6, 2007)............................ 15
Buechel v. Bain, 97 N.Y.2d 295, 740 N.Y.S.2d 252, 766 N.E.2d 914 (2001)
cert denied 535 U.S. 1096, 122 S.Ct. 2293, 152 L.Ed.2d 1051 (2002)........... 10, 12
Bill Birds, Inc. v. Stein Law Firm, P.C.
35 N.Y.3d 173, 126 N.Y.S.3d 50 (2020)......................................................... 15
Coinmach Corp. v. Fordham Hill Owners Corp.
3 AD3d 312, 770 N.Y.S.2d 310 (1st Dept. 2004)............................................. 5
Datatreasury Corp. v. Col
2012 WL 3058630 (Sup. Ct., Suffolk Co., July 5, 2012)................................ 18, 19
Dupree v. Voorhees,
24 Misc.3d 396, 876 N.Y.S.2d 840 (Sup. Ct., Suffolk Co. 2009)................... 16
Fuentes v. Shevin
407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972)......................................... 7
Go v. Rockefeller Univ., 280 F.R.D. 165 (S.D.N.Y. 2012).............................. 4
Gorbatov v. Tsirelman
155 A.D.3d 836, 65 N.Y.S.3d 71 (2d Dept. 2017).......................................... 9
Harris Trust and Savings Bank v. John Hancock Mutual Life Insurance Company
970 F.2d 1138 (2d Cir.1992)..............................................................................
4
Harvey v. Handelman, Witkowicz and Levitsky, LLP
130 A.D.3d 1439, 12 N.Y.S.3d 732 (4th Dept. 2015)...................................... 10
James ex rel. National Arts Club v. Bernard
2012 WL 934296 (Sup. Ct., New York Co., March 30, 2012)........................ 5
Knopf v. Esposito, 180 A.D.3d 508, 115 N.Y.S.3d 875 (1st Dept. 2020)........ 10
Knopf v. Esposito, 803 Fed.Appx. 448 (2d Cir. 2020).................................... passim
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Table of Authorities (con’d)
Case Page(s)
Knopf v. Feldman & Associates, PLLC
2019 WL 3211388 (Sup. Ct., New York Co., July 11, 2019)......................... 10
Knopf v. Sanford, 137 A.D.3d 662, 26 N.Y.S.3d 866 (1st Dept. 2016)............ 6
Knopf v. Sanford
65 Misc.3d at 471, 106 N.Y.S.3d at 785 (Sup. Ct., New York Co. 2019)....... 1, 13
In re Motors Liquidation Co., 829 F.3d 135 (2d Cir. 2016). cert den. sub nom.
General Motors LLC v. Elliott, 137 S.Ct. 1813 (2017)................................... 8, 9
Oikonomos, Inc. v. Bahrenberg
2013 WL 85225 (Sup. Ct., Suffolk Co., Jan. 5, 2013)..................................... 10
Ray v. Watnick, 182 F.Supp.3d 23 (S.D.N.Y. 2016)........................................ 14
Scott v. Greenberg, 2017 WL 1214441 (E.D.N.Y., Mar. 31, 2017)................ 15
Sykes v. Mel Harris and Associates, LLC
757 F. Supp.2d 413 (S.D.N.Y. 2010), aff’d, 780 F.3d 70 (2d Cir. 2015)........ 15
Trepel v. Dippold, 2005 WL 1107010, *4 (S.D.N.Y., May 9, 2005).............. 15
Trepel v. Dippold, 2006 WL 3054336 (S.D.N.Y., Oct. 27, 2006)................... 9
Statutes
11 U.S.C. §363.................................................................................................
8
CPLR Article 55..............................................................................................
5n.1
22 NYCRR § 202.7(f)......................................................................................
18, 18n.4
New York Judiciary Law §487........................................................................passim
-iii-
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Plaintiffs Norma Knopf and Michael Knopf respectfully submit this memorandum of law
in further opposition to defendants’ pending motions to dismiss (Motions Sequences 1-3).
SELECTED NEW EVIDENCE
The Knopfs assume that the Court will review the evidence submitted in their motion to
supplement the record, at NYSCEF Nos. 149-167.
Since then, additional information has been discovered.
Based on newly-discovered evidence, the timeline is tighter. On January 11, 2016, at
11:54 a.m. Esposito wrote to Sanford, and proposed a fee arrangement that called for Esposito
receiving $55,000. (Ex. 1 hereto, pp. 2-4.) Two minutes later, at 11:56 a.m., Sanford emailed
Akerman and Feldman, attaching a copy of the November 12, 2019 order and stating: “As a
matter of law, the full panel Order of Nov 12, 2015 [M-3660] dissolved the Oct 22, 2015 Interim
Order [M-5942] regarding an escrow of PHC proceeds .. “pending further court order' according
to appellate dept. The Nov 12,2015 Order the “further court order[,]” and attached the November
12, 2015 order. (Ex. 2.) Twelve minutes after, at 12:08 p.m., that Evan Glassman, a litigator at
Steptoe, returned Ringel’s call, using 212-506-3909. (Ex. 3.) Nine minutes after that, at 12:21
p.m., Sanford returned Esposito retainer, signed. (Ex. 2, pp. 5-7.) Seven minutes after that, at
12:28 p.m., Ringel and Glassman spoke (Ex. 3), and Ringel asked Glassman for help with
Frank’s case. Knopf v. Esposito, 65 Misc.3d 463, 480-481, 106 N.Y.S.3d 777, 791 (Sup. Ct.,
New York Co. 2019) (“Also on January 11, Ringel called Evan Glassman, Esq., a litigation
partner at Steptoe & Johnson LLP, to inquire whether Glassman would be interested in working
with Esposito on a pending matter.”) A the very same time, Esposito emailed Sanford “Let’s go
kick ass.” (Ex. 1, p. 8.) Forty-six minutes after that Feldman emailed Akerman and said he need
to set up a call with a female employed at the First Department. (Ex. 4.)
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As the Court is aware, the Akerman/Feldman call to Ms. Ringel was part of Mr.
Sanford’s alleged efforts to obtain “clarity” concerning whether a December 29, 2015 Appellate
Division order created a title problem hindering Sanford’s ability to sell real estate located at 67th
Street without escrowing the proceeds. E.g., NYSCEF No. 52, at DORSEY0000035 (Feldman’s
January 11, 2016 email to Akerman stating: “I need to set up a time for a conference call with
the counsel to Fidelity and the Appellate Division Clerk to confirm that no restraints exist on the
sale to Michael Phillips. Once I know when everyone is available I will call the clerk to get her
time and availability.”)
Defendants continue to broadly deny orchestration or collusion, and rely on claims that
Akerman’s call was randomly transferred to Ringel and allege that it was a mere coincidence
that the call was transferred to someone whose husband was already connected to the case.
However, recently the Knopfs obtained an email from Esposito to Sanford that was sent at 1:59
p.m., approximately three hours after the phone conference among Ringel, Akerman and
Feldman. The email (NYSCEF No. 232) indicates that one or more of the participants in the call
(Ringel, Akerman and/or Feldman) communicated to Esposito afterwards that the call solved the
title problem, and that Esposito forwarded that information to Sanford. Id. (“The Title company
should be satisfied at this point.”)
Sanford was deposed in the related Knopf v. Esposito federal civil rights action on
November 24, 2020 and in that deposition admitted that he knew that Ringel would answer
Akerman’s call to the Court:
Q. Before you received that . . . 1:59 e-mail on January 12th, did you have
any reason to think that the call would end up being answered by Ms. Ringel?
A. I thought it was a possibility. I asked Frank if she felt
it was a problem and he said no, she is allowed to.
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Ex. 4, p. 169, lines 14-20.
There is also evidence that it was either Akerman or Feldman, rather than Ringel, who
between the completion of their call and 1:59 p.m., informed Esposito that the title company
should be satisfied. In particular, the Knopfs propounded the following request for admission
and Esposito provided the following response:
7. Admit that Frank Esposito and Melissa Ringel communicated between
10:43 a.m. and 1:59 p.m. on January 12, 2016 concerning either: (a) one or more
Appellate Division orders in Knopf v. Sanford case (NY Co. Index No.
113227/09); (b) a perceived or alleged title problem relating to the ability of
Pursuit Holdings, LLC to sell property located at 44 East 67th Street, PHC, New
York, New York ("the 67th Street property") without escrowing the proceeds;
and/or (c) one or more telephone calls Ms. Ringel had received from Nathaniel
Akerman and/or Edward Feldman earlier that day.
Response: Esposito denies the allegations contained in this Request.
Compare Ex. 6, at Request No. 7 with Ex. 6, at Response No. 7.
Responses to requests for admissions are deemed to be under oath. Go v. Rockefeller
Univ., 280 F.R.D. 165, 180 (S.D.N.Y. 2012) (certification that responses to requests for
admission are truthful "is inherent in the attorney's signature and need not be expressly written").
Esposito's denial of the allegation that Ringel told him about the call indicates that his
knowledge that "the title company should be satisfied at this point" came from one of the other
two participants in the call, Akerman or Feldman. Esposito's denial thus undermines Akerman's
claim that Akerman was not himself a knowing participant in the entire scheme.
The possibility that Akerman and/or Feldman, rather than Ringel, told Esposito about the call
satisfying Phillips’ title company is also suggested by Sanford’s deposition. While Akerman and
Feldman have claimed that they did not know who Esposito was at the time of the call, Sanford’s
deposition testimony indicates that he believed that Akerman and Feldman wouldn’t have – not
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that they couldn’t have – told Esposito about the call. Regarding the 1:59 p.m. email he received
from Esposito on January 12, 2016, Sanford testified:
A. So – so I didn't know it was wrong. It just it felt weird to me that if
his wife was just doing a procedural thing, why the hell was she so interested in
my life to call Frank and tell him, because I don’t think Nick called, and I don't
think Ed called.
Ex. 5, p. 168, line 25 - p. 169, line 7 (emphasis added).
ARGUMENT
Point I
The Second Circuit Decision in the Federal Case, the
First Department Decision in the Esposito Turnover
Proceeding, and this Court’s July 18, 2019 Decision
Defeat All Collateral Estoppel Arguments
Defendants cite Judge Cote’s December 7, 2017, March 5, 2018 and July 25, 2018 orders
as providing a broad collateral estoppel defense to the Knopfs’ claims in this action.
However, each of those orders was vacated by the Second Circuit in its February 25, 2020
decision. Knopf v. Esposito, 803 Fed.Appx. 448, 456 (2d Cir. 2020) (“we VACATE the
judgment and post-judgment orders of the district court”). Accordingly, those orders no longer
have any preclusive or collateral estoppel effect. Harris Trust and Savings Bank v. John
Hancock Mutual Life Insurance Company, 970 F.2d 1138, 1146 (2d Cir.1992) (“It is well-settled
in this circuit that a vacated order has no collateral estoppel effect.”)
The Dorsey Defendants also rely on a November 12, 2015 First Department order (Ex. 2,
p. 2.) That order denied a motion by the Knopfs’ for a preliminary injunction against the sale of
Pursuit’s properties pending the appeals that the Knopfs had noticed on July 23, 2020, and
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perfected on September 8, 2020. See the July 24, 2015 notice of motion annexed as Exhibit 8.1
As a matter of law, a request for a provisional remedy, such as a preliminary injunction or a pre-
judgment attachment, does not have any collateral estoppel effect. James ex rel. National Arts
Club v. Bernard, 2012 WL 934296,*6 (Sup. Ct., New York Co., March 30, 2012) (“The grant
or denial of a preliminary injunction . . . has no collateral estoppel effect.”); cf. Coinmach Corp.
v. Fordham Hill Owners Corp., 3 AD3d 312, 314, 770 N.Y.S.2d 310, 313 (1st Dept. 2004) (“It is
settled law that the grant or denial of a request for a preliminary injunction, a provisional remedy
designed for the narrow purpose of maintaining the status quo, is not an adjudication on the
merits and will not be given res judicata effect[.]”)
The Dorsey Defendants’ reliance on the November 12, 2015 order denying the
preliminary injunction (Ex. 2, p. 2) also ignores the fact that when that when that appeal was
decided on March 24, 2016, the Court reversed the November 12, 2015 ruling and granted the
injunction. The First Department’s March 24, 2016 decision enjoined Pursuit, pending an
evidentiary hearing on the attachment motion, from: “transferring, or further diminishing,
impairing or encumbering the properties it acquired with real estate loans from plaintiffs, . . . as
well as any proceeds derived from the sale of such properties prior to the date of this order[.]”
Knopf v. Sanford, 137 A.D.3d 662, 663, 26 N.Y.S.3d 866 (1st Dept. 2016). Dorsey’s position
1
The November 12, 2015 order incorrectly described the motion as one for an attachment,
rather than one for a preliminary injunction pending the Knopfs’ appeal in which they sought an
attachment. Compare Ex. 2, p. 2 with Ex. 8. In fact, CPLR Article 55 does not give the
Appellate Division authority to issue an order of attachment, only an injunction, pending an
appeal.
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that an order denying a motion pursuant to CPLR 5518 for provisional relief pending appeal
somehow survives a decision on the appeal granting that relief is clearly incorrect.
Defendants purport to rely on the second June 16, 2016 order, which indicated that the
November 12, 2015 order superceded or terminated the October 22, 2015 escrow requirement.
Several courts have rejected argument that the amended June 16, 2016 order precludes claims
similar to those the Knopfs are prosecuting in this case. In particular, defendants posit that the
amended June 16, 2016 order meant that Ringel had been correct in her ex parte opinion that no
escrow requirement was in place (even though it was rendered shortly after the First Department
upheld the escrow requirement on December 29). Working backwards, defendants assert that,
since Ringel’s opinion (in their view) had been correct, she did nothing wrong in stating it and
Akerman did nothing wrong in soliciting it without notice to the Knopfs. In other words,
defendants contend that the Knopfs were not deprived of an opportunity to make correct legal
arguments, and therefore were not injured.
However, the Second Circuit’s Knopf v. Esposito decision, rejected defendants’
arguments in reasoning that is fully applicable here. First, it pointed out that the Knopfs were
not injured by the substance of the advice that Ringel gave but from their exclusion from the call,
and that the amended June 16, 2016 gloss on Ringel’s opinion was therefore irrelevant:
. . . [T]o the extent that defendants propose that the Appellate Division’s
June 2016 Order estops any further litigation of whether the October 2015 escrow
requirement was in effect when the attorneys placed the January 2016 phone call,
they miss the point. That issue does not affect the viability of the Knopfs’ claims,
which derive from the harm done by the January 2016 phone call, not the effects
of any of the state court orders.
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Knopf v. Esposito, 803 Fed.Appx. 448, 455 (2020) (emphasis added).
The Second Circuit’s reasoning as to why the Knopfs were injured by Akerman’s and
Feldman’s call to Ringel, rather than by any of the First Department orders, is identical to that
the case law concerning proximate cause and damages under Judiciary Law §487. In Knopf v.
Esposito, the Second Circuit explained:
. . . [T]he District Court erred when it concluded that the harm the Knopfs
complained of – that is, losing their rightful collateral and a priority claim on the
sale’s proceeds – resulted from the Appellate Division’s orders declining to
enjoin the sale of the PHC, and not the January 2016 phone call in which Ringel
advised the lawyers that the orders were no longer in effect. The Knopfs
sufficiently alleged in the District Court that the sale of the PHC (and Sanford’s
subsequent disposal of the assets from that sale) would not have occurred absent
the January 2016 phone call because they also plausibly alleged that the
prospective buyer refused to close on the sale while any judicial restraints
remained. The opinion that Ringel gave on the January phone call was what
ultimately assuaged the buyer’s concerns and allowed the sale to go forward,
according to the Knopfs. The Knopfs also alleged that Sanford’s attorneys
initiated the call to Ringel for the express purpose of dissuading the buyer’s
attorney from filing a motion for clarification. Thus, contrary to the District
Court’s conclusion, the complaint plausibly alleged that the Knopfs would not
have been harmed had the phone call to Ringel not taken place. If the Knopfs had
at least participated in the phone call, they would have been aware that Sanford
and the buyer intended to act on Ringel’s opinion, and they could have sought
emergency relief in time to force the escrow of the sale proceeds. In any event,
the Knopfs stated a colorable due process claim, even if Ringel’s interpretation of
the orders were correct, because “[t]he right to be heard does not depend upon an
advance showing that one will surely prevail at the hearing.” See Fuentes v.
Shevin, 407 U.S. 67, 87, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972).
Knopf v. Esposito, supra, 803 Fed.Appx. at 454 (emphasis added).
The Second Circuit thus rejected defendants’ argument that damages can only arise from
a procedural defect that deprives the plaintiffs of the opportunity to make a correct legal
argument. Instead, it recognized that, had the Knopfs’ lawyers been on the call, they could have
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obtained a new escrow order to clear up the confusion before the proceeds were distributed. The
decision thus means that it was irrelevant whether Ringel’s the Court Attorney’s opinion were
correct or incorrect, since had the Knopfs attorneys been on the call, they could have protected
their clients.
The Second Circuit’s Knopf v. Esposito decision is consistent with its 2016 ruling in In re
Motors Liquidation Co., 829 F.3d 135, 162 (2d Cir. 2016). cert den. sub nom. General Motors
LLC v. Elliott, 137 S.Ct. 1813 (2017). Motors Liquidation ruled that a class of creditors, whose
claims were extinguished by a bankruptcy court order approving she sale of “Old GM” assets to
“New GM” in connection with the 2009 auto industry bailout, were prejudiced by the lack of
actual notice of the sale. It reached this result even though the Court simultaneously rejected the
very same legal argument these claimants would have made had they had an opportunity to
object to the sale (i.e., that successor liability claims survive a §363 sale). Motors Liquidation
held that: “[T]he entire record must be considered and the probable effect of the error determined
in light of all the evidence. [I]f [the court] cannot say, with fair assurance, after pondering all that
happened . . . that the judgment was not substantially swayed by the error,” then it must find a
procedural due process violation. 829 F.2d at 162-163. Motors Liquidation then held that
because adequate notice would have given the absent creditors an opportunity to negotiate
compensation for their claims, they had been prejudice by the deprivation of that opportunity,
notwithstanding that the legal argument that they would have advanced turned out to be wrong.
Thus both Knopf v. Esposito and Motors Liquidation hold that prejudice is not limited to a lost
opportunity to make a correct legal argument, it also includes deprivation of a chance to avoid or
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mitigate damages by practical means, such as negotiations (in Motors Liquidation) or seeking a
provisional remedy (in Knopf v. Esposito).
The Second Circuit is articulating the same standard of proximate or “but for” causation
applied in cases under Judiciary Law §487. Here, the Knopfs’ attorneys “would have acted
differently,” by seeking immediate relief before the sale had they been on the call. In Trepel v.
Dippold, 2006 WL 3054336, *5 (S.D.N.Y., Oct. 27, 2006), Judge Cote, in upholding a §487
claim, held that the plaintiff’s damages included the lost ability to collect as a result of the
representation by the defendants’ attorneys that the defendant would not remove assets from the
country because:
. . . Judge Lynch would have issued an attachment order earlier [before
rather than after the assets were transferred overseas] and Trepel’s attorneys may
have acted differently [by forcing a decision on their motion earlier] had Dippold
not made misrepresentations [that property would not be removed from the
jurisdiction] during the attachment hearing or had Dippold not delayed in
reporting Diop’s car shipments.
(Bracketed material supplied); accord: Gorbatov v. Tsirelman, 155 A.D.3d 836, 65 N.Y.S.3d 71
(2d Dept. 2017) (applying proximate cause standard and reinstating §487 claims that alleged that
the attorney participated in a conspiracy “to convert funds received from insurers in recovery of
the plaintiffs’ claims, or violated their duties to ensure that the plaintiffs received the funds”);
Harvey v. Handelman, Witkowicz and Levitsky, LLP, 130 A.D.3d 1439, 1441, 12 N.Y.S.3d 732,
734 (4th Dept. 2015) (reinstating a §487 claim since “proximate cause” standard was met where
the violation deprived the plaintiff of an appeal that was “likely to succeed”). See generally:
Oikonomos, Inc. v. Bahrenberg, 2013 WL 85225, *14 (Sup. Ct., Suffolk Co., Jan. 5, 2013)
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(denying a motion to dismiss a §487 claims and holding that “ the ‘but for’ causation standard
does not require a greater or more direct degree of causation than the ‘proximate cause’ standard
or require a showing that the defendants’ conduct was “the sole proximate clause, rather than a
substantial cause,” of the plaintiffs injury).
Both the First Department and this Court have held that the amended version of the June
16, 2016 order does not satisfy the requirements of issue preclusion. The Second Circuit has
strongly suggested that it agrees.
In 2019, this Court awarded the Knopfs $50,000 in a turn over proceeding against
Esposito. Knopf v. Feldman & Associates, PLLC, 2019 WL 3211388 (Sup. Ct., New York Co.,
July 11, 2019). Esposito appealed and, though he was successful in that appeal, the First
Department rejected Esposito’s argument that the amended June 16, 2016 order precluded the
turn over claim, stating:
Contrary to respondents’ [i.e., Esposito’s] contention, petitioners’ [i.e., the
Knopfs’] claims are not barred by the doctrine of collateral estoppel (see Buechel
v. Bain, 97 N.Y.2d 295, 303-304, 740 N.Y.S.2d 252, 766 N.E.2d 914 [2001], cert
denied 535 U.S. 1096, 122 S.Ct. 2293, 152 L.Ed.2d 1051 [2002]).
Knopf v. Esposito, 180 A.D.3d 508, 115 N.Y.S.3d 875, 876 (1st Dept. 2020) (emphasis added).
The First Department was referring to Esposito’s collateral estoppel defense based on
the amended June 16, 2016 order. At oral argument the following dialogue occurred between
Justice Richter and the Knopfs’ attorney in which Justice Richter specified that she was asking
about the collateral estoppel effect of the June 16, 2016 order:
JUSTICE RICHTER: . . . [H]ow does Judge Lebovits decide that
your clients have a right to these funds in light of the prior orders of this court?
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MR. BERRY: In light of --
JUSTICE RICHTER: The prior decisions of this court.
THE BERRY: Well, there are several prior decisions of this court. There
is Judge Sweeny’s order, which says --
JUSTICE RICHTER: The one that says that the injunction eliminated the
earlier decisions. [Sic]
MR. BERRY: You’re talking about the revised version of the June 16,
2016 decision.
JUSTICE RICHTER: I am.
Ex. 9, page 7, line 25 - page 8, line 16.2
The First Department thus specifically held that the amended June 16, 2016 order did not
preclude the Knopfs’ turnover proceeding against Esposito (though it found other reasons to
reject that claim). It is also clear from the that the First Department’s citation to Buechel v. Bain
that the Court agreed with the Knopfs that the amended June 16, 2016 order lacked collateral
estoppel either because of a lack of identity of the issues or because the Knopfs had not received
a full and fair opportunity to litigate that decision. As Mr. Esposito opined the last time these
motions were argued on February 20, 2020: “It is pretty clear, if you understand First
Department decisions and how the First Department relies on the cases it cites to make their
points in connection with their rulings.” NYSCEF No. 188, p. 22, lines 18-21. Here, the citation
to Buechel v. Bain, 97 N.Y.2d at 303-304 does just that. The carry-over sentence from page 303
to 304 in the official reporter states:
Two requirements must be met before collateral estoppel can be invoked.
There must be an identity of issue which has necessarily been *304 decided in the
prior action and is decisive of the present action, and there must have been a full
2
The certified transcript of the argument (Ex. 9) is prepared from the First Department
video archives.
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and fair opportunity to contest the decision now said to be controlling [citation
omitted].
Id. 97 N.Y.2d at 303-304. The First Department decision in the turnover case thus recognizes
that the June 16, 2016 decision did preclude the Knopfs’ claim that Esposito wrongly received
$50,000 out of the proceeds. Based on the citation to Buechel v. Bain, the First Department
concluded either that (a) the issue in the Esposito turnover case was not identical to that decided
on June 16 or (b) that Knopfs’ lacked a full and fair opportunity to litigate the motion decided by
the June 16 decision.
If the Knopfs’ allegation that the transfer to Esposito violated their rights is not
“identical” to that decided by the amended June 16, 2016 order – option (a) above – then their
claims that other transfers from those proceeds, e.g., to Sanford, Dechert, Dorsey, Feldman, etc.,
violated their rights is likewise, according to the First Department, not identical to the issues
decided by the amended June 16, 2016 order. If the Knopfs’ did not have a full and fair
opportunity to litigate the motions decided by the amended June 16, 2016 order – option (b)
above – then that order simply has no preclusive effect regarding any issues. In either event, the
First Department has effectively held that the amended June 16, 2016 order does not preclude the
claims the Knopfs assert in this action.
This Court has specifically held that the Knopfs did not have the full and fair opportunity
to litigate the motion decided by the amended June 16, 2016 order. Following entry of judgment
against Pursuit, the Knopfs moved to overcome the Dorsey Defendants’ assertion of the attorney
client privilege regarding certain of their communications with Sanford based, inter alia, on New
12
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York’s “wrongful act” exception to that privilege, similar to the crime-fraud exception
recognized by federal case law. The Dorsey Defendants argued, as they do here, that the
amended June 16, 2016 order meant that the ex parte solicitation of Ringel’s interpretation of
the First Department orders at issue hadn’t prejudiced the Knopfs since – for want of a better
term – it “kosherized” Ringel’s opinion. In response to the Dorsey Defendants’ arguments, the
Knopfs pointed out, in opposing the contempt motion that was decided in the amended June 16,
2016 order, Sanford had proffered the view of an unidentified First Department “Court
Attorney” that he had not acted in contempt of an escrow requirement, without disclosing that
the Court Attorney was married to his own lawyer, and that the Court attorney’s husband had
been paid out of the proceeds of the real estate sale her advice had facilitated.
In overruling the attorney client privilege claim based on the “wrongful act” exception,
this Court agreed with the Knopfs. Knopf v. Sanford, supra, 65 Misc.3d at 471, 106 N.Y.S.3d at
785 (Sup. Ct., New York Co. 2019) (“[Had] the First Department panel that issued the June 2016
order . . , known the truth about what happened in their Court when it considered the Knopfs’
contempt motion, the Justices might have rejected Sanford’s claim that the escrow order had
already been dissolved when Pursuit sold the PHC – and therefore ruled against him, rather than
for him.”).
Similarly, the Second Circuit ruling reinstating the Knopfs’ civil rights claim noted:
The Knopfs’ arguments that collateral estoppel would not bar the
relitigation of the meaning of the Appellate Division orders because they did not
have a full and fair opportunity to contest that reasoning is at least arguably
colorable and may in the end prevail.
13
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Knopf v. Esposito, 803 Fed.Appx. at 455 n. 4 (emphasis added).
Point II
The Knopfs Have Alleged Attorney
Deceit That is Egregious or Extreme
After surveying the New York State court decisions, Ray v. Watnick, 182 F.Supp.3d 23
(S.D.N.Y. 2016) observed:
To be sure, there appears to be no ruling from the New York Court of
Appeals on whether deceitful statements must be
Preview
FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 7 ----------------------------------------------------X NORMA KNOPF and MICHAEL KNOPF, Plaintiffs, Index No. 150315/2019 - against - Justice Lebovits FRANK M. ESPOSITO, DORSEY & WHITNEY, LLP, NATHANIEL H. AKERMAN, EDWARD S. FELDMAN, MICHAEL HAYDEN SANFORD and SP VOYAGER FUND, LLC, Defendants. ----------------------------------------------------X (Motion Sequence 4) The Knopfs’ Memorandum of Law in Further Opposition to the Motions to Dismiss the Amended Complaint BERRY LAW PLLC Attorneys for plaintiffs Norma Knopf and Michael Knopf 745 FIFTH AVENUE, 5TH FLOOR NEW YORK, NEW YORK 10151 212-355-0777 New York, New York December 23, 2020 1 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 TABLE OF CONTENTS Page TABLE OF AUTHORITIES....................................................................................... ii SELECTED NEW EVIDENCE................................................................................... 1 ARGUMENT............................................................................................................... 4 Point I The Second Circuit Decision in the Federal Case, the First Department Decision in the Esposito Turnover Proceeding, and this Court’s July 18, 2019 Decision Defeat All Collateral Estoppel Arguments............................................ 4 Point II The Knopfs Have Alleged Attorney Deceit That is Egregious or Extreme............................................................... 13 CONCLUSION............................................................................................................. 19 2 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 TABLE OF AUTHORITIES Case Page(s) Ambra v. Awad 2007 WL 2409600 (Sup. Ct., Nassau Co., August 6, 2007)............................ 15 Buechel v. Bain, 97 N.Y.2d 295, 740 N.Y.S.2d 252, 766 N.E.2d 914 (2001) cert denied 535 U.S. 1096, 122 S.Ct. 2293, 152 L.Ed.2d 1051 (2002)........... 10, 12 Bill Birds, Inc. v. Stein Law Firm, P.C. 35 N.Y.3d 173, 126 N.Y.S.3d 50 (2020)......................................................... 15 Coinmach Corp. v. Fordham Hill Owners Corp. 3 AD3d 312, 770 N.Y.S.2d 310 (1st Dept. 2004)............................................. 5 Datatreasury Corp. v. Col 2012 WL 3058630 (Sup. Ct., Suffolk Co., July 5, 2012)................................ 18, 19 Dupree v. Voorhees, 24 Misc.3d 396, 876 N.Y.S.2d 840 (Sup. Ct., Suffolk Co. 2009)................... 16 Fuentes v. Shevin 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972)......................................... 7 Go v. Rockefeller Univ., 280 F.R.D. 165 (S.D.N.Y. 2012).............................. 4 Gorbatov v. Tsirelman 155 A.D.3d 836, 65 N.Y.S.3d 71 (2d Dept. 2017).......................................... 9 Harris Trust and Savings Bank v. John Hancock Mutual Life Insurance Company 970 F.2d 1138 (2d Cir.1992).............................................................................. 4 Harvey v. Handelman, Witkowicz and Levitsky, LLP 130 A.D.3d 1439, 12 N.Y.S.3d 732 (4th Dept. 2015)...................................... 10 James ex rel. National Arts Club v. Bernard 2012 WL 934296 (Sup. Ct., New York Co., March 30, 2012)........................ 5 Knopf v. Esposito, 180 A.D.3d 508, 115 N.Y.S.3d 875 (1st Dept. 2020)........ 10 Knopf v. Esposito, 803 Fed.Appx. 448 (2d Cir. 2020).................................... passim -ii- 3 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 Table of Authorities (con’d) Case Page(s) Knopf v. Feldman & Associates, PLLC 2019 WL 3211388 (Sup. Ct., New York Co., July 11, 2019)......................... 10 Knopf v. Sanford, 137 A.D.3d 662, 26 N.Y.S.3d 866 (1st Dept. 2016)............ 6 Knopf v. Sanford 65 Misc.3d at 471, 106 N.Y.S.3d at 785 (Sup. Ct., New York Co. 2019)....... 1, 13 In re Motors Liquidation Co., 829 F.3d 135 (2d Cir. 2016). cert den. sub nom. General Motors LLC v. Elliott, 137 S.Ct. 1813 (2017)................................... 8, 9 Oikonomos, Inc. v. Bahrenberg 2013 WL 85225 (Sup. Ct., Suffolk Co., Jan. 5, 2013)..................................... 10 Ray v. Watnick, 182 F.Supp.3d 23 (S.D.N.Y. 2016)........................................ 14 Scott v. Greenberg, 2017 WL 1214441 (E.D.N.Y., Mar. 31, 2017)................ 15 Sykes v. Mel Harris and Associates, LLC 757 F. Supp.2d 413 (S.D.N.Y. 2010), aff’d, 780 F.3d 70 (2d Cir. 2015)........ 15 Trepel v. Dippold, 2005 WL 1107010, *4 (S.D.N.Y., May 9, 2005).............. 15 Trepel v. Dippold, 2006 WL 3054336 (S.D.N.Y., Oct. 27, 2006)................... 9 Statutes 11 U.S.C. §363................................................................................................. 8 CPLR Article 55.............................................................................................. 5n.1 22 NYCRR § 202.7(f)...................................................................................... 18, 18n.4 New York Judiciary Law §487........................................................................passim -iii- 4 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 Plaintiffs Norma Knopf and Michael Knopf respectfully submit this memorandum of law in further opposition to defendants’ pending motions to dismiss (Motions Sequences 1-3). SELECTED NEW EVIDENCE The Knopfs assume that the Court will review the evidence submitted in their motion to supplement the record, at NYSCEF Nos. 149-167. Since then, additional information has been discovered. Based on newly-discovered evidence, the timeline is tighter. On January 11, 2016, at 11:54 a.m. Esposito wrote to Sanford, and proposed a fee arrangement that called for Esposito receiving $55,000. (Ex. 1 hereto, pp. 2-4.) Two minutes later, at 11:56 a.m., Sanford emailed Akerman and Feldman, attaching a copy of the November 12, 2019 order and stating: “As a matter of law, the full panel Order of Nov 12, 2015 [M-3660] dissolved the Oct 22, 2015 Interim Order [M-5942] regarding an escrow of PHC proceeds .. “pending further court order' according to appellate dept. The Nov 12,2015 Order the “further court order[,]” and attached the November 12, 2015 order. (Ex. 2.) Twelve minutes after, at 12:08 p.m., that Evan Glassman, a litigator at Steptoe, returned Ringel’s call, using 212-506-3909. (Ex. 3.) Nine minutes after that, at 12:21 p.m., Sanford returned Esposito retainer, signed. (Ex. 2, pp. 5-7.) Seven minutes after that, at 12:28 p.m., Ringel and Glassman spoke (Ex. 3), and Ringel asked Glassman for help with Frank’s case. Knopf v. Esposito, 65 Misc.3d 463, 480-481, 106 N.Y.S.3d 777, 791 (Sup. Ct., New York Co. 2019) (“Also on January 11, Ringel called Evan Glassman, Esq., a litigation partner at Steptoe & Johnson LLP, to inquire whether Glassman would be interested in working with Esposito on a pending matter.”) A the very same time, Esposito emailed Sanford “Let’s go kick ass.” (Ex. 1, p. 8.) Forty-six minutes after that Feldman emailed Akerman and said he need to set up a call with a female employed at the First Department. (Ex. 4.) 5 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 As the Court is aware, the Akerman/Feldman call to Ms. Ringel was part of Mr. Sanford’s alleged efforts to obtain “clarity” concerning whether a December 29, 2015 Appellate Division order created a title problem hindering Sanford’s ability to sell real estate located at 67th Street without escrowing the proceeds. E.g., NYSCEF No. 52, at DORSEY0000035 (Feldman’s January 11, 2016 email to Akerman stating: “I need to set up a time for a conference call with the counsel to Fidelity and the Appellate Division Clerk to confirm that no restraints exist on the sale to Michael Phillips. Once I know when everyone is available I will call the clerk to get her time and availability.”) Defendants continue to broadly deny orchestration or collusion, and rely on claims that Akerman’s call was randomly transferred to Ringel and allege that it was a mere coincidence that the call was transferred to someone whose husband was already connected to the case. However, recently the Knopfs obtained an email from Esposito to Sanford that was sent at 1:59 p.m., approximately three hours after the phone conference among Ringel, Akerman and Feldman. The email (NYSCEF No. 232) indicates that one or more of the participants in the call (Ringel, Akerman and/or Feldman) communicated to Esposito afterwards that the call solved the title problem, and that Esposito forwarded that information to Sanford. Id. (“The Title company should be satisfied at this point.”) Sanford was deposed in the related Knopf v. Esposito federal civil rights action on November 24, 2020 and in that deposition admitted that he knew that Ringel would answer Akerman’s call to the Court: Q. Before you received that . . . 1:59 e-mail on January 12th, did you have any reason to think that the call would end up being answered by Ms. Ringel? A. I thought it was a possibility. I asked Frank if she felt it was a problem and he said no, she is allowed to. 2 6 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 Ex. 4, p. 169, lines 14-20. There is also evidence that it was either Akerman or Feldman, rather than Ringel, who between the completion of their call and 1:59 p.m., informed Esposito that the title company should be satisfied. In particular, the Knopfs propounded the following request for admission and Esposito provided the following response: 7. Admit that Frank Esposito and Melissa Ringel communicated between 10:43 a.m. and 1:59 p.m. on January 12, 2016 concerning either: (a) one or more Appellate Division orders in Knopf v. Sanford case (NY Co. Index No. 113227/09); (b) a perceived or alleged title problem relating to the ability of Pursuit Holdings, LLC to sell property located at 44 East 67th Street, PHC, New York, New York ("the 67th Street property") without escrowing the proceeds; and/or (c) one or more telephone calls Ms. Ringel had received from Nathaniel Akerman and/or Edward Feldman earlier that day. Response: Esposito denies the allegations contained in this Request. Compare Ex. 6, at Request No. 7 with Ex. 6, at Response No. 7. Responses to requests for admissions are deemed to be under oath. Go v. Rockefeller Univ., 280 F.R.D. 165, 180 (S.D.N.Y. 2012) (certification that responses to requests for admission are truthful "is inherent in the attorney's signature and need not be expressly written"). Esposito's denial of the allegation that Ringel told him about the call indicates that his knowledge that "the title company should be satisfied at this point" came from one of the other two participants in the call, Akerman or Feldman. Esposito's denial thus undermines Akerman's claim that Akerman was not himself a knowing participant in the entire scheme. The possibility that Akerman and/or Feldman, rather than Ringel, told Esposito about the call satisfying Phillips’ title company is also suggested by Sanford’s deposition. While Akerman and Feldman have claimed that they did not know who Esposito was at the time of the call, Sanford’s deposition testimony indicates that he believed that Akerman and Feldman wouldn’t have – not 3 7 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 that they couldn’t have – told Esposito about the call. Regarding the 1:59 p.m. email he received from Esposito on January 12, 2016, Sanford testified: A. So – so I didn't know it was wrong. It just it felt weird to me that if his wife was just doing a procedural thing, why the hell was she so interested in my life to call Frank and tell him, because I don’t think Nick called, and I don't think Ed called. Ex. 5, p. 168, line 25 - p. 169, line 7 (emphasis added). ARGUMENT Point I The Second Circuit Decision in the Federal Case, the First Department Decision in the Esposito Turnover Proceeding, and this Court’s July 18, 2019 Decision Defeat All Collateral Estoppel Arguments Defendants cite Judge Cote’s December 7, 2017, March 5, 2018 and July 25, 2018 orders as providing a broad collateral estoppel defense to the Knopfs’ claims in this action. However, each of those orders was vacated by the Second Circuit in its February 25, 2020 decision. Knopf v. Esposito, 803 Fed.Appx. 448, 456 (2d Cir. 2020) (“we VACATE the judgment and post-judgment orders of the district court”). Accordingly, those orders no longer have any preclusive or collateral estoppel effect. Harris Trust and Savings Bank v. John Hancock Mutual Life Insurance Company, 970 F.2d 1138, 1146 (2d Cir.1992) (“It is well-settled in this circuit that a vacated order has no collateral estoppel effect.”) The Dorsey Defendants also rely on a November 12, 2015 First Department order (Ex. 2, p. 2.) That order denied a motion by the Knopfs’ for a preliminary injunction against the sale of Pursuit’s properties pending the appeals that the Knopfs had noticed on July 23, 2020, and 4 8 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 perfected on September 8, 2020. See the July 24, 2015 notice of motion annexed as Exhibit 8.1 As a matter of law, a request for a provisional remedy, such as a preliminary injunction or a pre- judgment attachment, does not have any collateral estoppel effect. James ex rel. National Arts Club v. Bernard, 2012 WL 934296,*6 (Sup. Ct., New York Co., March 30, 2012) (“The grant or denial of a preliminary injunction . . . has no collateral estoppel effect.”); cf. Coinmach Corp. v. Fordham Hill Owners Corp., 3 AD3d 312, 314, 770 N.Y.S.2d 310, 313 (1st Dept. 2004) (“It is settled law that the grant or denial of a request for a preliminary injunction, a provisional remedy designed for the narrow purpose of maintaining the status quo, is not an adjudication on the merits and will not be given res judicata effect[.]”) The Dorsey Defendants’ reliance on the November 12, 2015 order denying the preliminary injunction (Ex. 2, p. 2) also ignores the fact that when that when that appeal was decided on March 24, 2016, the Court reversed the November 12, 2015 ruling and granted the injunction. The First Department’s March 24, 2016 decision enjoined Pursuit, pending an evidentiary hearing on the attachment motion, from: “transferring, or further diminishing, impairing or encumbering the properties it acquired with real estate loans from plaintiffs, . . . as well as any proceeds derived from the sale of such properties prior to the date of this order[.]” Knopf v. Sanford, 137 A.D.3d 662, 663, 26 N.Y.S.3d 866 (1st Dept. 2016). Dorsey’s position 1 The November 12, 2015 order incorrectly described the motion as one for an attachment, rather than one for a preliminary injunction pending the Knopfs’ appeal in which they sought an attachment. Compare Ex. 2, p. 2 with Ex. 8. In fact, CPLR Article 55 does not give the Appellate Division authority to issue an order of attachment, only an injunction, pending an appeal. 5 9 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 that an order denying a motion pursuant to CPLR 5518 for provisional relief pending appeal somehow survives a decision on the appeal granting that relief is clearly incorrect. Defendants purport to rely on the second June 16, 2016 order, which indicated that the November 12, 2015 order superceded or terminated the October 22, 2015 escrow requirement. Several courts have rejected argument that the amended June 16, 2016 order precludes claims similar to those the Knopfs are prosecuting in this case. In particular, defendants posit that the amended June 16, 2016 order meant that Ringel had been correct in her ex parte opinion that no escrow requirement was in place (even though it was rendered shortly after the First Department upheld the escrow requirement on December 29). Working backwards, defendants assert that, since Ringel’s opinion (in their view) had been correct, she did nothing wrong in stating it and Akerman did nothing wrong in soliciting it without notice to the Knopfs. In other words, defendants contend that the Knopfs were not deprived of an opportunity to make correct legal arguments, and therefore were not injured. However, the Second Circuit’s Knopf v. Esposito decision, rejected defendants’ arguments in reasoning that is fully applicable here. First, it pointed out that the Knopfs were not injured by the substance of the advice that Ringel gave but from their exclusion from the call, and that the amended June 16, 2016 gloss on Ringel’s opinion was therefore irrelevant: . . . [T]o the extent that defendants propose that the Appellate Division’s June 2016 Order estops any further litigation of whether the October 2015 escrow requirement was in effect when the attorneys placed the January 2016 phone call, they miss the point. That issue does not affect the viability of the Knopfs’ claims, which derive from the harm done by the January 2016 phone call, not the effects of any of the state court orders. 6 10 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 Knopf v. Esposito, 803 Fed.Appx. 448, 455 (2020) (emphasis added). The Second Circuit’s reasoning as to why the Knopfs were injured by Akerman’s and Feldman’s call to Ringel, rather than by any of the First Department orders, is identical to that the case law concerning proximate cause and damages under Judiciary Law §487. In Knopf v. Esposito, the Second Circuit explained: . . . [T]he District Court erred when it concluded that the harm the Knopfs complained of – that is, losing their rightful collateral and a priority claim on the sale’s proceeds – resulted from the Appellate Division’s orders declining to enjoin the sale of the PHC, and not the January 2016 phone call in which Ringel advised the lawyers that the orders were no longer in effect. The Knopfs sufficiently alleged in the District Court that the sale of the PHC (and Sanford’s subsequent disposal of the assets from that sale) would not have occurred absent the January 2016 phone call because they also plausibly alleged that the prospective buyer refused to close on the sale while any judicial restraints remained. The opinion that Ringel gave on the January phone call was what ultimately assuaged the buyer’s concerns and allowed the sale to go forward, according to the Knopfs. The Knopfs also alleged that Sanford’s attorneys initiated the call to Ringel for the express purpose of dissuading the buyer’s attorney from filing a motion for clarification. Thus, contrary to the District Court’s conclusion, the complaint plausibly alleged that the Knopfs would not have been harmed had the phone call to Ringel not taken place. If the Knopfs had at least participated in the phone call, they would have been aware that Sanford and the buyer intended to act on Ringel’s opinion, and they could have sought emergency relief in time to force the escrow of the sale proceeds. In any event, the Knopfs stated a colorable due process claim, even if Ringel’s interpretation of the orders were correct, because “[t]he right to be heard does not depend upon an advance showing that one will surely prevail at the hearing.” See Fuentes v. Shevin, 407 U.S. 67, 87, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972). Knopf v. Esposito, supra, 803 Fed.Appx. at 454 (emphasis added). The Second Circuit thus rejected defendants’ argument that damages can only arise from a procedural defect that deprives the plaintiffs of the opportunity to make a correct legal argument. Instead, it recognized that, had the Knopfs’ lawyers been on the call, they could have 7 11 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 obtained a new escrow order to clear up the confusion before the proceeds were distributed. The decision thus means that it was irrelevant whether Ringel’s the Court Attorney’s opinion were correct or incorrect, since had the Knopfs attorneys been on the call, they could have protected their clients. The Second Circuit’s Knopf v. Esposito decision is consistent with its 2016 ruling in In re Motors Liquidation Co., 829 F.3d 135, 162 (2d Cir. 2016). cert den. sub nom. General Motors LLC v. Elliott, 137 S.Ct. 1813 (2017). Motors Liquidation ruled that a class of creditors, whose claims were extinguished by a bankruptcy court order approving she sale of “Old GM” assets to “New GM” in connection with the 2009 auto industry bailout, were prejudiced by the lack of actual notice of the sale. It reached this result even though the Court simultaneously rejected the very same legal argument these claimants would have made had they had an opportunity to object to the sale (i.e., that successor liability claims survive a §363 sale). Motors Liquidation held that: “[T]he entire record must be considered and the probable effect of the error determined in light of all the evidence. [I]f [the court] cannot say, with fair assurance, after pondering all that happened . . . that the judgment was not substantially swayed by the error,” then it must find a procedural due process violation. 829 F.2d at 162-163. Motors Liquidation then held that because adequate notice would have given the absent creditors an opportunity to negotiate compensation for their claims, they had been prejudice by the deprivation of that opportunity, notwithstanding that the legal argument that they would have advanced turned out to be wrong. Thus both Knopf v. Esposito and Motors Liquidation hold that prejudice is not limited to a lost opportunity to make a correct legal argument, it also includes deprivation of a chance to avoid or 8 12 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 mitigate damages by practical means, such as negotiations (in Motors Liquidation) or seeking a provisional remedy (in Knopf v. Esposito). The Second Circuit is articulating the same standard of proximate or “but for” causation applied in cases under Judiciary Law §487. Here, the Knopfs’ attorneys “would have acted differently,” by seeking immediate relief before the sale had they been on the call. In Trepel v. Dippold, 2006 WL 3054336, *5 (S.D.N.Y., Oct. 27, 2006), Judge Cote, in upholding a §487 claim, held that the plaintiff’s damages included the lost ability to collect as a result of the representation by the defendants’ attorneys that the defendant would not remove assets from the country because: . . . Judge Lynch would have issued an attachment order earlier [before rather than after the assets were transferred overseas] and Trepel’s attorneys may have acted differently [by forcing a decision on their motion earlier] had Dippold not made misrepresentations [that property would not be removed from the jurisdiction] during the attachment hearing or had Dippold not delayed in reporting Diop’s car shipments. (Bracketed material supplied); accord: Gorbatov v. Tsirelman, 155 A.D.3d 836, 65 N.Y.S.3d 71 (2d Dept. 2017) (applying proximate cause standard and reinstating §487 claims that alleged that the attorney participated in a conspiracy “to convert funds received from insurers in recovery of the plaintiffs’ claims, or violated their duties to ensure that the plaintiffs received the funds”); Harvey v. Handelman, Witkowicz and Levitsky, LLP, 130 A.D.3d 1439, 1441, 12 N.Y.S.3d 732, 734 (4th Dept. 2015) (reinstating a §487 claim since “proximate cause” standard was met where the violation deprived the plaintiff of an appeal that was “likely to succeed”). See generally: Oikonomos, Inc. v. Bahrenberg, 2013 WL 85225, *14 (Sup. Ct., Suffolk Co., Jan. 5, 2013) 9 13 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 (denying a motion to dismiss a §487 claims and holding that “ the ‘but for’ causation standard does not require a greater or more direct degree of causation than the ‘proximate cause’ standard or require a showing that the defendants’ conduct was “the sole proximate clause, rather than a substantial cause,” of the plaintiffs injury). Both the First Department and this Court have held that the amended version of the June 16, 2016 order does not satisfy the requirements of issue preclusion. The Second Circuit has strongly suggested that it agrees. In 2019, this Court awarded the Knopfs $50,000 in a turn over proceeding against Esposito. Knopf v. Feldman & Associates, PLLC, 2019 WL 3211388 (Sup. Ct., New York Co., July 11, 2019). Esposito appealed and, though he was successful in that appeal, the First Department rejected Esposito’s argument that the amended June 16, 2016 order precluded the turn over claim, stating: Contrary to respondents’ [i.e., Esposito’s] contention, petitioners’ [i.e., the Knopfs’] claims are not barred by the doctrine of collateral estoppel (see Buechel v. Bain, 97 N.Y.2d 295, 303-304, 740 N.Y.S.2d 252, 766 N.E.2d 914 [2001], cert denied 535 U.S. 1096, 122 S.Ct. 2293, 152 L.Ed.2d 1051 [2002]). Knopf v. Esposito, 180 A.D.3d 508, 115 N.Y.S.3d 875, 876 (1st Dept. 2020) (emphasis added). The First Department was referring to Esposito’s collateral estoppel defense based on the amended June 16, 2016 order. At oral argument the following dialogue occurred between Justice Richter and the Knopfs’ attorney in which Justice Richter specified that she was asking about the collateral estoppel effect of the June 16, 2016 order: JUSTICE RICHTER: . . . [H]ow does Judge Lebovits decide that your clients have a right to these funds in light of the prior orders of this court? 10 14 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 MR. BERRY: In light of -- JUSTICE RICHTER: The prior decisions of this court. THE BERRY: Well, there are several prior decisions of this court. There is Judge Sweeny’s order, which says -- JUSTICE RICHTER: The one that says that the injunction eliminated the earlier decisions. [Sic] MR. BERRY: You’re talking about the revised version of the June 16, 2016 decision. JUSTICE RICHTER: I am. Ex. 9, page 7, line 25 - page 8, line 16.2 The First Department thus specifically held that the amended June 16, 2016 order did not preclude the Knopfs’ turnover proceeding against Esposito (though it found other reasons to reject that claim). It is also clear from the that the First Department’s citation to Buechel v. Bain that the Court agreed with the Knopfs that the amended June 16, 2016 order lacked collateral estoppel either because of a lack of identity of the issues or because the Knopfs had not received a full and fair opportunity to litigate that decision. As Mr. Esposito opined the last time these motions were argued on February 20, 2020: “It is pretty clear, if you understand First Department decisions and how the First Department relies on the cases it cites to make their points in connection with their rulings.” NYSCEF No. 188, p. 22, lines 18-21. Here, the citation to Buechel v. Bain, 97 N.Y.2d at 303-304 does just that. The carry-over sentence from page 303 to 304 in the official reporter states: Two requirements must be met before collateral estoppel can be invoked. There must be an identity of issue which has necessarily been *304 decided in the prior action and is decisive of the present action, and there must have been a full 2 The certified transcript of the argument (Ex. 9) is prepared from the First Department video archives. 11 15 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 and fair opportunity to contest the decision now said to be controlling [citation omitted]. Id. 97 N.Y.2d at 303-304. The First Department decision in the turnover case thus recognizes that the June 16, 2016 decision did preclude the Knopfs’ claim that Esposito wrongly received $50,000 out of the proceeds. Based on the citation to Buechel v. Bain, the First Department concluded either that (a) the issue in the Esposito turnover case was not identical to that decided on June 16 or (b) that Knopfs’ lacked a full and fair opportunity to litigate the motion decided by the June 16 decision. If the Knopfs’ allegation that the transfer to Esposito violated their rights is not “identical” to that decided by the amended June 16, 2016 order – option (a) above – then their claims that other transfers from those proceeds, e.g., to Sanford, Dechert, Dorsey, Feldman, etc., violated their rights is likewise, according to the First Department, not identical to the issues decided by the amended June 16, 2016 order. If the Knopfs’ did not have a full and fair opportunity to litigate the motions decided by the amended June 16, 2016 order – option (b) above – then that order simply has no preclusive effect regarding any issues. In either event, the First Department has effectively held that the amended June 16, 2016 order does not preclude the claims the Knopfs assert in this action. This Court has specifically held that the Knopfs did not have the full and fair opportunity to litigate the motion decided by the amended June 16, 2016 order. Following entry of judgment against Pursuit, the Knopfs moved to overcome the Dorsey Defendants’ assertion of the attorney client privilege regarding certain of their communications with Sanford based, inter alia, on New 12 16 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 York’s “wrongful act” exception to that privilege, similar to the crime-fraud exception recognized by federal case law. The Dorsey Defendants argued, as they do here, that the amended June 16, 2016 order meant that the ex parte solicitation of Ringel’s interpretation of the First Department orders at issue hadn’t prejudiced the Knopfs since – for want of a better term – it “kosherized” Ringel’s opinion. In response to the Dorsey Defendants’ arguments, the Knopfs pointed out, in opposing the contempt motion that was decided in the amended June 16, 2016 order, Sanford had proffered the view of an unidentified First Department “Court Attorney” that he had not acted in contempt of an escrow requirement, without disclosing that the Court Attorney was married to his own lawyer, and that the Court attorney’s husband had been paid out of the proceeds of the real estate sale her advice had facilitated. In overruling the attorney client privilege claim based on the “wrongful act” exception, this Court agreed with the Knopfs. Knopf v. Sanford, supra, 65 Misc.3d at 471, 106 N.Y.S.3d at 785 (Sup. Ct., New York Co. 2019) (“[Had] the First Department panel that issued the June 2016 order . . , known the truth about what happened in their Court when it considered the Knopfs’ contempt motion, the Justices might have rejected Sanford’s claim that the escrow order had already been dissolved when Pursuit sold the PHC – and therefore ruled against him, rather than for him.”). Similarly, the Second Circuit ruling reinstating the Knopfs’ civil rights claim noted: The Knopfs’ arguments that collateral estoppel would not bar the relitigation of the meaning of the Appellate Division orders because they did not have a full and fair opportunity to contest that reasoning is at least arguably colorable and may in the end prevail. 13 17 of 23 FILED: NEW YORK COUNTY CLERK 12/23/2020 06:04 PM INDEX NO. 150315/2019 NYSCEF DOC. NO. 260 RECEIVED NYSCEF: 12/23/2020 Knopf v. Esposito, 803 Fed.Appx. at 455 n. 4 (emphasis added). Point II The Knopfs Have Alleged Attorney Deceit That is Egregious or Extreme After surveying the New York State court decisions, Ray v. Watnick, 182 F.Supp.3d 23 (S.D.N.Y. 2016) observed: To be sure, there appears to be no ruling from the New York Court of Appeals on whether deceitful statements must be