To BE SUBMITf£D BY:
CRAIG AVEDISIAN, ESQ.
~upr£me Qto urt of tbe ~tate of J}~£hl ~ork
~ppeHate 11Btbil1ion: jfirst tmepartment
ROSEi\1ARIE A. flERlvfAN, individually, as beneficiary of the trust create.d_by
Harold Herman as Grantor under agreement dated March 1, 1990 and as benefic-iary of
the trust created by Rosemarie A. Herman as Grantor dated Nov~mber 27, 1991 ar::d
on behalfof MAYFAIR YORK LLC, 'WINDSOR PLAZA LLC, a New York Limited
Liability Company,
Plaintiffs-Respondents,
A VON BARD LLC, MERIT MANAGEMENT LLC, PR.lMROSE MANAGEMENT
LLC, KEYSTONE MANAGEMENT LLC by their 50% owner of their membership
interests ROSEMARIE A. HERMAN as Natural Guardian for--and
-·-·individually, as beneficiaries o f rhe trust created by Harold
Hennan as Grantor under agreement dated March 1, 1990 and as beneficiaries of the
uust created by Rosemarie /\.. Hemlan as Grantor dated November 27, 1991,
Plaintiffs,
-against-
JULIAN MAURICE HER.iv1AN; .f. MAURICE HERMAN, as Trustee of the
J. Maurice Herman Revocable Trust dated October 28, 2002;
J. MAURICE HERMAN, as Trustee of the trust created by Harold
Hennan as Gran tor under agreement dated March 1, 1990,
Defendants-Appellants,
(C.aption contimled on inside cover)
BRIEl" FOR PLAINTIFFS-RESPONDENTS
AND THIRD~PARTY-DE·FENDANT
LAW OFFICES OF C RAIG AVEDTSIA~, P.C.
60 East 42nd Street, 40th Floor
New York, New York 10165
(21 2) 687-8360
craig@avedisian.net
NATASHA SH!SHOV
STEVEN R. SCHLESINGER
JASPAN SCHLESINGER, LLP
300 Garden City,
1'-lew York 11530
(5 16) 746-8000
nshishov@jaspanllp.com
sschJesinger@jaspru1llp.com
Attorneys for Plaintiffs-Respondents
and Third-Party-Defendant
Supreme Court, New York County, Index No. 650205111
DICK BAILEY SERVICE. Inc. · 1-800-531 -2028
[REPRODUCED ON RECYCLED PAPER]
dickbailey.com
· ·. ••••WIJ&C*"&WiMlMIIINIMN!i41MiMLIN!rt Mldllj1liiM 7 ew• @ J e ' 'ftlt WWiri' .. r•••e .....
~ ~
I
MICHAEL OFFIT; MICHAEL OFFIT, as Trustee of the trust created by Harold
Herman as Grantor under agreement dated March 1, 1990;
MICHAEL OFFIT, as Trustee ofthe trust created by Rosemarie A.
Herman as Grantor dated November 27, 1991; MAYFAIR YORK LLC;
WINDSOR PLAZA LLC, a New York Limited Liabiiity Company; WINDSOR
PLAZA LLC, a Delaware Limited Liabiiity Company, A VON BARD LLC; MER-
IT MANAGEMENT LLC; PRIMROSE MANAGEMENT LLC; KEYSTONE
MANAGEMENT LLC; CONSOLIDATED REALTY HOLDINGS LLC; SETON
INDUSTRIAL CORP.; ARDENT INVESTMENTS LLC; TRUST FOR
ARCHITECTURAL EASEMENTS; "ABC COMPANY #1" through "ABC COM-
1' ANY # 1 0", the last ten entities b-eing fictitious and unknown to the Plaintiffs, the
entities intended being the entities, if any, invelved in the acts or omissi-ons
described in the Complaint; and "JOb'N DOE# 1" through "JOHN DOE # 1 0", the
last ten names being fictitious and unknown to the Plaintiffs, the persons intended
being the persons, if any, involved in the acts or omissions described in the
Complaint,
Defendants-Respondents.
JULIAN MAURICE HERMAN,
Third-Party Plaintiff-Appellant,
-against-
JOSEPH ESMAIL,
Third-Party Defendant,
SO LIT A N. HERMAN,
Third-Party Defendant-Respondent.
:·
TABLE OF CONTENTS
TABLE OF AUTHORITIES
PRELIMINARY STATEMENT
COUNTERSTATEMENT OF QUESTIONS PRESENTED
A. Underlying Traversable Fact Allegations Now Judicially
Established
B. Maurice's Disobedience that Led to the Default Order
C. Maurice's Continued Disobedience After the Default
Order
ARGUMENT
POINT I
Ill
l
3
6
14
15
27
27
PRECLUSION OF MAURICE'S PARTICIPATION WAS WITHIN THE lAS COURT'S
POINT II
AUTHORITY 27
A. The lAS Court Has the Power to Preclude Participation
in the Inquest as a Matter of Law 27
B. Preclusion Is Warranted Notwithstanding Whether
Damages Are for a "Sum Certain" 30
35
MAURlCE DISOBEYED THE DEFAULT ORDER, THE SCEOND CHANCE ORDER
POINT III
AND THE THIRD ORDER 35
A. Disobedience of the Default Order
B. Disobedience of the Second Chance Order
C. Disobedience of the Third Order
36
40
42
48
MAURICE HAS NO EXCUSE FOR HIS INTENTIONAL DISOBEDIENCE 48
POINT IV 49
MAURICE'S CROSS-MOTION TO LIMIT THE EVIDENCE AT THE INQUEST TO
1998 WAS PROPERLY DENIED AND DEMONSTRATES HE HAS NO
MERITORIOUS POSITION ON DAMAGES 49
A. The lAS Court Addressed and Rejected the Cross-
Motion
B. Maurice's Motion Was an Attempt to Participate in the
Inquest
C. Plaintiffs Are Entitled to the Damages Demanded in the
Complaint ·
49
50
50
CONCLUSION
PRINTING SPECIFICATION STATEMENT
11
55
56
TABLE OF AUTHORITIES
CASES -PAGE(S)
105 E. Second St. Associates v. Bobrow,
175 A.D.2d 746, (1st Dep't 1991) ........................ -. ....... ......................................... 50
23KT Gold Collectibles, LTD. v. Daily News,
30 Misc.3d 1241(A), *2 (Sup. Ct. N.Y. Cty. 2011) .................................. .. .. ... M .... 35
Allen v. Strough,
301 A.D.2d 11 (2nd Dep't 2002) ...... ..................... ......................... r ........................ 5
Amusement Bus. Underwriters v. Am. Int'l Grp., Inc.,
66 N.Y.2d 878 (1985) .................................................................................... ........ 31
BPP Wealth, Inc. v. Weiser Capital Mgmt., LLC,
623 F. App'x 7 (2d Cir. 2015) ................................................................................. 53
CDR Creances S.A.S. v. Cohen,
23 N.Y.3d 307 (2014) ... .... .... .. .................... ........ .. ............. ... ................................. 31
Currier v. Woodlawn Cemetery,
300 N.Y. 162 (1949) ............. ................ ..... ........................................................... : .. 5
DiDomenicov. C&S Aeromatik Supplies,
252 A.D.2d 41,49 (2d Dep't 1998) ...................................................................... 29
Gardner v. Florida,
430 U.S. 349 (1977) ............................................................................ ... ............... 31
Guard-Life Corp. v. S. Parker Hardware Mfg. Corp.,
50 N.Y.2d 183, 197 n. 6 (1980) ............................................................................. 52
Gibbs v. St. Barnabas Hosp.,
16 N.Y.3d 74,82 (2010) ........................................................................................ 49
Herman v. Herman,
134 A.D.3d 442 (1st Dep't 2015) ................................................................. .. ...... .48
iii
!CD Group v. Israel Foreign Trade Co.,
221 A._D.2d 152 (1st Dep't 1995) .............................. ~ ........................................... 28
Jnt'l Minerals & Res., S.A. v. Pappas,
96 F.3d 586, 597 (2d Cir. 1996) ...................... H •••••••••••••••••••••••••••••• -•••••••••••••••••••••• 52
Keller v. Merch. Capital Portfolios, LLC,
103 A.D.3d 532, 533 (1st Dep't 2013) ................................................ 36, 46, 47,49
Kenford Co. v. Erie Cnty.,
108 A.D.2d 132, 137 (4th Dep't 1985) affd, 67 N.Y.2d 257 (1986) ................... 52
Kihl v. Pfeffer,
94 NY2d 118, 123, 722 N.E.2d 55, 700 N.Y.S.2d 87 (1999) ......................... 35, 47
Langer v. Miller,
281 A.D.2d 338 (1st Dep't 2001) .............................................................. H-.......... 30
Matter of Rothko,
43 N.Y.2d 305 (1977) ............................................................................................ 51
Pace v. Perk,
81 A.D.2d 444, 454-455 (2d Dep't 1981) ............................................................. 51
Roberts v. Tishman Speyer_ Properties, L.P.,
13 N.Y.3d 270, 282 (2009) ........................................................... , .......................... 54
Rokina Optical Co. v. Camera King, Inc.,
63 N.Y.2d 728 (1984) .................................................................................. 27, 29, 30
Schatzki v. Weiser Capital Mgmt., LLC,
995 F. Supp. 2d 251,253, (S.D.N.Y. 2014) ............................................................ 53
Settembrini v. Settembrini,
270 A.D.2d 408, 409 (1st Dep't 2000) .................................................. 27, 28, 29, 34
Simonds v. Simonds,
45 N.Y.2d 233, 243 (1978) ....................................... , .............................................. 53
iv
Vazquez v. Lambert Houses Redevelopment Co.,
110 .A .. D.3d 4-so, 451 (1st Dep't 2013) .................................................................... 46
JiVechsler v. Bowman,
285 N.Y. 284, 291 (1941) ........................................................................................ 51
Wilson v. Galicia Contr. & Restoration Corp.,
10 N.Y.3d ·827 (2008) .............................................................................................. 36
Winters v. Uniland Dev. Corp.,
2015 NY Slip Op 00111 (4th Dep't 2015) .............................................................. 36
Wolfv. Flowers,
122 A.D.3d 728, 728 (2d Dep't 2014) ..................................................................... 29
Zietz v. Wetanson,
67 N.Y.2d 711_, 713 (1986) ......................................................................... 28, 29, 30
Statutes/Regulations/Miscellaneous
22 NYCRR §202.5(e) .............................................................................................. 24
C.P.L.R. § 3126 ................................................................................................ .passim
C.P.L.R. § 3126(2) ................................................................................................... 28
C.P.L.R. § 3126(3) ................................................................................................... 28
C.P.L.R. § 3215 ........................................................................................................ 31
C.P.L.R. § 3215(b) ............................................................................................ passim
v
PRELIMINARY STATEMENT
Defendants-Appellants 1 ask this Court to reverse the decision of the IAS
Court, dated May 2, 2016, which held that they are precluded from participating in
the damages inquest (the "Preclusion Order"). Namely, by relying on a self-serving
perception of the facts, and arguments which were not raised in the underlying
motion, Defendants-Appellants contend that: (1) there is no legal authority for the
Preclusion Order, notwithstanding the clear language of C.P.L.R. § 3126 and
relevant precedent; (2) the lAS Court abused its discretion in precluding Defendants-
Appellants., when in fact it had issued a number of orders, including two conditional
orders, all of which were disobeyed and all of which must be enforced as a matter of
law; and (3) there is an "excuse" for their continuing pattern of willful non-
compliance even though Defendants-Appellants admitted to failing to comply with
conditional orders and an Order of this Court.
1 The cover on the record on appeal and the brief submitted by the Defendants-Appellants is not
accurate. Pursuant to the notice of appeal and pre-argument statement, the Defendants-Appellants
are "J. Maurice Herman, individually and as trustee of the J. Maurice Herman Revocable Trust,
dated October 28, 2002, and as trustee of the trust created by Harold Herman as grantor under
agreement dated March 1, 1990, Windsor Plaza LLC, (the Delaware corporation [sic]) and
Windsor Plaza LLC (the New York corporation [sic])." (Rl.) The cover to the record and the
brief omit the two Windsor Plaza LLCs as Defendants-Appellants, listing them only as Defendants
notwithstanding the notice of appeal and even the brief in support of the appeal which includes
"Windsor Plaza LLC" in the definition of "Maurice." (Br., 1.) Similarly, the record and brief
covers misidentify the Plaintiffs-Respondents by including some of Rosemarie Herman's
representative capacities and arbitrarily omitting others, including her capacities in respect of her
children. This brief is therefore filed on behalf of all Plaintiffs in this action as well as on behalf
of Third-Party-Defendant-Respondent Joseph Esmail.
These Orders all stem from the lAS Court's Order, dated July 13, 2015 (the
"Default Order"), which defaulted Defendants-Appellants and struck their pleadings
due to multiple egregious violations of discovery misconduct over a nearly four-year
period. Specifically, the Default Order required Defendant-Appellant J. Maurice
Herman to produce his tax returns, with limited redactions, as well as
communications with his accountant, Kenneth Kaufman, or be precluded from
contesting damages. In fact, Mr. Herman admits he did not even try to comply with
the twenty-day deadline set forth in the Default Order. Shockingly, he disobeyed
the Default Order notwithstanding that Justice Saxe of this Court denied Mr.
Herman's application for a TRO regarding the tax returns and Kaufman
communications expressly ruling that the Default Order "remained extant" pending
a decision on Mr. Herman's motion. The facts, which are documented and cannot
be disputed, lead to the inevitable conclusion that Mr. Herman willfully violated: (1)
the conditional Default Order, which was unanimously affirmed by this Court; (2)
three additional orders of the lAS Court after the Default Order, resulting in the lAS
Court stating Maurice "has been given perhaps more chances than the law allows to
comply with the conditional orders"; and (3) the Order of this Court, which expressly
ruled that the Default Order "remains extant and law of the case." Indeed, he is still
violating the conditional orders. As fully set forth infra, the Preclusion Order must
be affirmed.
2
Furthermore, Defendants-Appellants appeal the portion of their cross-motion
whkh sought to limit damages temporally to 1998, a position that ignores that all
the ca-uses of action and factual allegations in th·e Complaint are deemed admitted as
a matter of law pursuant to the now-affirmed Default Order. In addition, as a result
of the Default Order, Plaintiffs-Respondents are entitled to the damages set forth in
the Complaint pursuant to C.P.L.R. § 32T5(b) which provides that damages on a
default "judgment shall not ... differ in type from that demanded in the complaint."
(Italics added.) Further still, based upon Mr. Herman's now established breaches of
fiduciary duty and liability for numerous other claims in the Complaint, well-settled
law dictates that Plaintiffs-Respondents are independently and alternatively entitled
to the gain realized as a result of the subsequent sale of the relevant properties as
damages,. Finally, Maurice's cross-motion was improper as it was clearly a de facto
attempt to file a motion in limine for the damages inquest from which he was
precluded from participating. Accordingly, and as fully set forth herein, the
Preclusion Order must be affirmed in all respects.
COUNTERSTATEMENT OF QUESTIONS PRESENTED
1. Did the lAS Court have the legal authority to preclude Defendants-Appellants
from participating in a damages inquest?
Yes.
3
2. Did the lAS Court properly preclude Appellants-Respondents from
participating in the damages inquest by enforcing the conditional Default
Order and a subsequent conditional Order, both of which Defendants-
Appellants violated?
Yes.
3. Did the lAS Court properly enforce the conditional Default Order and a
subsequent conditional order when Defendant-Appellants admitted they did
not even try to comply with the Default Order prior to the deadline and did
not comply with numerous subsequent Orders?
Yes.
4. Did the lAS Court properly deny Defendants-Appellants' cross-motion to
limit damages which, if granted, would have precluded Plaintiffs-
Respondents from obtaining remedies and damages expressly sought in the
Complaint and which are expressly authorized by law after a default?
Yes.
5. Did the lAS Court properly deny Defendants-Appellants' cross-motion to
limit damages when Plaintiffs-Respondents' claims entitled them to the gains
realized as a result of the subsequent sale of the relevant real property as a
matter of law?
Yes.
4
STATEMENT OF THE FACTS
Defendants-Appellants' "Statement ofthe Case" is wholly improper because
this appeal concerns and is limited to Defendants-Appellants' long history of
-discovery misc.o11duct that resulted in the Default Order, not their unsupported
"version" of the facts. Specifically, the Default Order: (I) defaulted Defendants-
Appe-Ilants; (2) required Mr. Herman to produce his tax returns and communications
with his accountant, Kenneth Kaufman ("Kaufman"); and (3) automatically
precluded participation in the damages inquest if he did not timely produce said
documents. This Court unanimously affirmed the Default Order and denied a
motion for leave to appeal or reargue it. Accordingly, the relevant facts to be recited
in respect of the issues on this appeal are: ( 1) the traversable allegations of the
Complaint2 in this action (the "Complaint") that are now judicially established;3 (2)
2 Unless otherwise defined, capitalized terms have the same meaning ascribed to them in the
Complaint.
3 While Defendants-Appellants saw fit to include at least one document dehors the record, they
failed to include the Complaint notwithstanding both the default and their challenge to the evidence
adducible regarding damages for the liability that is now established thereby. Moreover, Plaintiffs-
Respondents' Notice of Motion expressly incorporated all docket filings referred to in the papers,
(R244), as the lAS Court has directed the parties not tore-file papers previously filed and instead
refer the lAS Court to the docket numbers. (R244; R250, n.6.) Nevertheless, Defendants-
Appellants have made no effort to include those documents in the record. Fortunately, this Court
may nevertheless take judicial notice of the Complaint under applicable law. E.g., Allen v.
Strough, 301 A.D.2d 11, 18 (2nd Dep't 2002)("In New York, courts may take judicial notice of a
record in the same court of either the pending matter or of some other action")( citing, inter alia,
Currier v. Woodlawn Cemetery, 300 N.Y. 162, 170 (1949)). The Complaint may be found in the
NYSECF system at Docket 1 through 1-18 (Dockets 1-1 through 1-18 are exhibits 1 through 18 to
the Complaint). The Court is respectfully referred to the docket for all citations to the Complaint
and its exhibits and to the other documents previously filed in the NYSECF system as set forth
infra.
5
the discovery misconduct that led to the Default Order; and (3) Maurice's
contumacious disobedience of the Default Order and an Order of this Court that led
to the Preclusion Order.
A. Underlying Traversable Fact Ailegations Now Judicially Established
Notwithstanding Defendants-Appellants' arguments regarding the damages to
which Pla-intiffs-Respondents are entitled under the law as a result of the default,
they simply ignore the relevant facts and fill half of their two-and-a-half-page
recitation regarding the underlying case with their own irrelevant, discredited and
stricken allegations, without a single citation to the record. (Br. 3-6.) Accordingly,
Defendants-Appellants fact section must be disregarded.
The Complaint averred a multitude of misdeeds by, inter alia: (1) Mr.
Herman, individually, as Trustee of a trust created by his father in 1990 (the "1990
Trust"), and as Trustee of the J. Maurice Herman Revocable Trust, dated October
28, 2002 (collectively, "Maurice"); (2) Windsor Plaza LLC, the New York company
("New York Windsor"); (3) Windsor Plaza LLC, the Delaware company ("Delaware
Windsor"); and ( 4) Michael Offit individually and as Trustee of a trust settled by
Rosemarie Herman ("Rosemarie") in 1991 (the "1991 Trust") and as a Trustee of
the 1990 Trust, (collectively, "Offit").
Specifically, through a series of unlawful step-transactions, Maurice and Offit
conspired to deprive Rosemarie, Gavin Esmail ("Gavin") and/ or Jesse Esmail
6
("Jesse") (collectively, "Plaintiffs-Respondents") of their 50% interests in six prime
apartment buildings in tv1anhattan (the "Herman Properties"). (Compl., ~~53-98.)
Each of the Herman Properties were in desirable Manhattan neighborhoods, three of
whi-ch were in exclusive historic neighborhoods (952 Fifth Avenue, 36 Gramercy
Park East and 10 We-st 74th Street directly across from the San Remo just off Central
Park West). (Compl., ~~4, ~53, ~100.) The Herman Properties were acquired by
Rosemarie and Maurice from or through their parents, (Compl., ~1 ), five of which
were acquired by Rosemarie and Maurice in or about 1990 and/or 1991, and the sixth
in 1997, (Compl., ~~57-58).
In 1991, ownership of the Herman Properties, other than 36 Gramercy Park
East, was transferred: (a) with respect to Maurice's interests, to Maurice
individually; and (b) with respect to Rosemarie's interests, to the 1991 Trust.
(Compl., ~58.) Solita Herman ("Solita"), Rosemarie and Maurice's mother, served
as the original trustee of the 1991 Trust until1997. (Compl., ~59.) The 1991 Trust
provided that Offit would serve as successor trustee if Solita should cease to act as
trustee. (Compl., ~59 & Ex. 2 at Art. IX(B)). The trust was amendable and
revocable, but only with the consent of Offit. (Compl., ~58; Ex.2 at Art. XIV.)
The sixth property, 36 Gramercy Park East, was put into the 1990 Trust.
(Compl., ~57 & Ex. 1 at Sch. A.) Maurice served as trustee of the 1990 Trust until
at least March 2, 1997. (Compl., ~57 & Ex. 3.) Pursuant to the terms of the 1990
7
Trust, after March 1, 1997 Rosemarie was the income beneficiary of one half of the
principal of the 1990 Trust, although income distributions were. in the "absolute
discretion" of the trustee. (Compl., ~57 & Ex. 1 at Art. ·SECOND.) Accordingly,
by March 1997, Rosemarie beneficially owned 50% of 36 Gramercy Park East
through the 1990· Trust, and 50% of the other Herman Properties via the 1991 Trust.
(Compl., -~~57-60.)
In or about March and April1997, when Maurice caused Offit (Compl., ~~7,
38), to qualify as trustee of the 1990 Trust and the 1991 Trust instead ofRosemarie's
mother (collectively, the "Trusts"), (Compl., ~~62, 66-67 & Ex. 4), serious
misconduct began.
In or about 1997 and/or January 1998, Maurice purportedly caused the
Herman Properties to be transferred into separate limited liability companies of
which Maurice was the sole managing member. (Compl., ~~64, 68 & Exs. 5-6.)
Maurice thereby gave himself control over the LLCs, even though he was not a
majority owner, for no consideration. (Compl., ~~378(a), 384(a).) The transfer of
36 Gramercy Park East into Mayfair York LLC is averred as a purported transfer
because the deed was signed by Maurice as trustee of the 1990 Trust on April 24,
. 1997, (Compl., Ex. 5), while Maurice's resignation as trustee of the 1990 Trust, is
dated March 2, 1997, (Compl., ~3 & Ex. 4), over 7 weeks prior to the execution of
the deed. (Compl., Ex. 5.) Holding title through the limited liability companies
8
l
l
j
permitted Maurice to transfer the interests in the Herman Properties privately
through transfers of the limited liability company membership interests rather than
through publicly fi-led deeds f-year leases
for them. (Compl., ~~30, 154(g).) Offit too concealed the misconduct. This fact is
documented through communications wherein Offit specifically avoids responding
to Rosemarie's email inquiries about the Herman Properties. (Compl., ~150-52.)
Further, Offit has admitted under oath that Maurice asked him to conceal the facts
. of the 1998 Deal and 2002 Deal from Rosemarie. (Docket 1135, ~~18-19, 23-24.)
The misconduct was finally exposed after Maurice commenced an action
seeking to have his mother Solita declared mentally incapacitated and Solita's
attorney discovered that Maurice claimed 100% ownership of 952 Fifth Avenue.
(Compl., ~~155-56.) Rosemarie contacted attorneys at Cadwalader Wickersham &
Taft LLP who demanded an accounting from Offit and Offit's attorneys finally
disclosed selective documentation regarding the 1998 Deal. (I d.)
Based on the foregoing facts, and numerous other facts, the Complaint asserts
numerous causes of action against Defendants-Appellants, including, but not limited
to the following, all of which have survived the motions to dismiss:
1. Breach of fiduciary duty
3. Tortious interference with fiduciary duties; aiding and abetting
breach of fiduciary duty
4. Tortious interference with contractual relations
12
.<
6. Conspiracy to commit fraud
8. Conspiracy to commit construc-tive fraud
11. Breach of fiduciary duty (separate factual basis from first cause
of action)
13. Breach oflimited liability agreements
14. Breach of fiduciary duty (derivatively)
18. Unjust enrichment
19. Constructive trust
The foregoing facts, and the liability of Defendants-Respondents based upon
those facts, are now all judicially established as a matter of law because, as fully
outlined in the Default Order and infra, Maurice engaged in egregious documented
discovery misconduct from 2011 until 2015 (which continues even today). The
Default Order has been unanimously affirmed by this Court conclusively: (1)
striking Defendants-Appellants' Answer, Counterclaims and Third-Party Claims;
(2) defaulting him on liability; and (3) requiring Maurice to produce
communications with Kaufman and his tax returns with limited redactions or be
precluded from participating in the damages inquest. Maurice did not comply with
the discovery obligation as a continuation of his contumacious behavior throughout
this action. Maurice's disobedience mandates the enforcement of the conditional
Default Order.
l3
!
i
' i
I
I
·}
B. Maurice's Disobedience that Led to the Default Order
Defendants-Appellants contend that the lAS Court improperly struck his
pleadings because he purportedly complied with the IAS Court's discovery
directives. (Br. 6.) However, Maurice completely ignores his prior discovery
misconduct violated over twenty Court directives in eleven discovery orders,
(Docket 1278 at 15-16), which, standing alone, justifies his preclusion from
participation in the inquest. He does so, in the hope that the Court will not remember
the totality of his egregious discovery misconduct.
Maurice's pre-Default Order discovery misconduct extended to, at least, seven
different areas, as follows: 8
1. Maurice withheld over 3,000 pages of documents, (Docket 1240,
,120), central and critical to the facts in this case from 2011 to 2014
after corrupting the chain of custody of those documents by
obtaining them from his prior law firm approximately six months
after the litigation commenced. (R271-272; R276; R294-95;
Docket 851, ~~42-43.) Not surprisingly, the critical documents
withheld were damning to Maurice, (I d.), and the lAS Court
specifically noted that Maurice had lied and his counsel had
submitted a false affirmation in respect of these documents being
withheld, (R271 );
2. Maurice deleted emails after the parties signed and filed an ESl
Preservation Stipulation with the Court, (R270, R275);
3. Maurice destroyed his wills and at least one trust after four Orders
by the lAS Court ordered him to submit them for in camera review,
8 The Court is respectfully referred to the Record on Appeal filed in this Court in connection with
the appeal of the Default Order, Docket Nos. 16287-16288-16289N, for further details of the
misconduct that led to the affirmed Default Order.
14
. . ,
·!'·
f
(R280-282; Docket 747 (fourth Order not mentioned in Default
Order));
4. Maurice failed to properly log documents he claimed were
privileged .and refused to turn over correspondence with opposing
counsel in the 2002 Deal upon a claim of privilege, (R272-280;
R282-283);
S. Maurice and his accountant falsely stated they did not have tax
.returns for the LLCs at issue when in fact they had them all along
and misled Plaintiffs about who had possession of the tax returns.
(R283-289.) The lAS Court described the tax return shenanigans as
a "veritable three-card monte," (R286);
6. Maurice lied in his interrogatory responses stating he was not
involved in creating the 1991 Trust, (Docket 1142, ~1(a)), when the
notes from the attorneys show Maurice instructed the attorneys to
create the trust and state that Maurice did '4-not want Rosie to get all
the income," (Docket 1139); and
7. Maurice solicited Kaufman to destroy tax returns and stated he could
refuse to produce documents with impunity, and Kaufman checked
with his information technology specialist to see if he could get
away with it, (Docket 961, pp. 5-6; Docket 983).9
* * *
This misconduct, which is outlined in the Default Order, resulted in Maurice
violating at least, twenty directives in eleven Court Orders. As a result, the lAS
Court issued the Default Order.
C. Maurice's Continued Disobedience After the Default Order
Recognizing that outstanding discovery sought from Maurice relates to other
defendants in this action and the issue of damages, the Default Order directed
9 While the facts in items six and seven are documented, the Default Order did not rely on them.
15
Maurice to produce the communications with Kaufman and his tax returns with
limited redactions. While one might expect that the default would have caused
~1aurice to change his approach to discovery and start complying with discovery
orders, that did not occur. The Default Order contained the following conditional
discovery directives:
Maurice shall produce the portions of his unsigned personal
returns in Kaufman's custody that repmt income, expenses, deductions,
loans, losses, interest, management fees and/or any other benefit he
received or deduction he took related to the LLCs in 1998 through 2003,
including the K-ls issued to him. Maurice may redact information on
his personal returns that is unrelated to the LLCs, except he shall not
redact the tax year, the taxing authority's information, his name, his
address, the preparer's information, the date, the signature lines and/or
any part of the tax form Cas opposed to entries thereon) ... .
* * *
ORDERED that ... the prong of the motion to compel production
of Maurice's communications with Kenneth Kaufman and his
accounting firm, Savastano Kaufman & Company, LLC, is granted in
the absence of opposition and Maurice shall produce said
communications; the prong of the motion to compel . production of
Maurice's personal tax returns is granted to the extent that his unsigned
personal returns for the years 1998 through 2003 shall be produced
redacted in accordance with this opinion; and unless Maurice produces
said redacted personal returns by the deadline, he is precluded from
contesting damages at the inquest .. .. ;
* * *
ORDERED that all documents ordered to be produced herein
shall by produced within 20 days after this decision and order is filed
in the New York State Courts Electronic Fil ing System ....
(R289-90; R295-96, emphasis added.) The Default Order was re-filed on July 15,
2015. (R267.) Accordingly, absent a stay, Maurice was required to comply by
16
August 5, 2015. (RIO.) The lAS Court correctly described the Default Order as "a
self-executing order." (Rl 0.)
On July 17, 2015, Maurice filed an emergency Order to Show Cause in this
Court seeking "a temporary restraining order, preliminary injunction and stay of
proceedings preventing Plaintiffs and the Trial Comt from enforcing the Trial
Court's July 13, 2015 Decision & Order ... which compels the production of ...
confidential and personal tax records." (R249; R317.) In respect of the tax returns,
after Justice Saxe, the presiding emergency justice, was informed that a
confidentiality order was in place, he told Maurice's counsel that he had "no
grounds" to withhold the tax returns. (R249.) Indeed, the TRO request was almost
entirely denied as Justice Saxe wrote "Justice Kornreich's Decision and Order
remains extant and law of the case" with just two exceptions not related to the tax
returns. 10 (R299 .) In other words, Maurice was required to comply with the
directives regarding his tax returns not only by the Default Order, but also by the
Order of this Court.11
Notwithstanding the foregoing, the August 5, 2015 deadline came and went
with no production by Maurice of: (I) the tax reh1rns; or (2) the communications
10 The only two limitations of the Order, a stay of discovery of other alleged privileged materials
and not filing a note of issue, were agreed to by all of the parties. (R249, n.5; R299.)
11 On October 13,2015, this Court denied Maurice's motion for a preliminary injunction in respect
of the Default Order and vacated even the agreed-to limited TRO signed by Justice Saxe. (R304.)
17
;r-,
with Kaufman. After Maurice moved to reargue the Default Order in the lAS Court,
Plaintiffs cross-moved on August 18, 2015 to enforce the discovery pro.visions in
the Default Order based on Maurice's disobedience thereof. (R250.)
On September 9, 2015, over a month late, and just one day before his
opposition to the cross-motion was due, Mauric·e's counsel finally emailed "redacted
copies of Maurice's personal tax returns-that were located-in the possession of SK&C
.. .. " (Rl1; R250; R339.)12 In opposing the cross-motion, Maurice admitted he did
not even try to comply with the discovery provisions in the Default Order on time,
(Rll ), and it was evident that Maurice had improperly and overly redacted the tax
returns.
alia:
Plaintiffs-Respondents responded in reply on their cross-motion that, inter
a. Maurice only had (an unstated person at) Kaufman's firm review
and redact the returns, not Maurice's counsel to assure compliance
with the Default Order's precise directives concerning redactions;
b. Maurice improperly redacted the tax returns, including, but not
limited to, redactions related to:
1. Sheffield Associates, Inc. ("Sheffield"), a company solely owned
by Maurice, since documents produced by Kaufman in 2015
showed the LLCs had paid commissions to Sheffield, and the
LLCs' 1998 returns showed over $200,000 in commissions; and
12 This statement was in and of itself misleading because, as the Default Order made clear,
Kaufman admitted he already found and had possession of Maurice's 1998-2003 tax returns.
(R289, citing Docket 1156.)
18
11. payroll-related deductions, including a $600,000 salary paid to
Maurice in 1998 from Avon Bard LLC, an LLC that held title to
one of the Herman Properties, that was not included on Avon
Bard:s tax return;
c. For the tax year 2003, Kaufman rampantly disobeyed the Default
Order by improperly redacting thirteen different categories of
entries, including:
1. At least four entries that actually had the name of Defendant-
Respondent Windsor Plaza LLC, one of the LLCs covered byJhe
Default Order, (R327, ~18); and
n. Entries concerning the sale of the LLCs in the 2002 Deal in the
amounts of $41,031,887, $46,765,876, $50,962,500,
$67,125,031 and $86,729,155, (R328-329, ~~18-20);
d. No K-ls were .produced; and
e. No effort was made by Maurice to compare the personal returns with
the LLCs' returns as directed by the Default Order.
(R325-330, ~~211 -25.) Further still, Maurice failed to produce all the pages of the
redacted returns, but, rather, only produced selected pages in direct disobedience of
the Default Order which precluded the redaction of "any part of the tax form as
opposed to entries thereon)." (R289-290). Indeed, almost all the pages were omitted.
(R327, ~17; R339-354). Accordingly, Maurice in no way complied with the
conditional Default Order, which should have resulted in the preclusion to contest
damages.
Nevertheless, on October 20, 2015, the lAS Court issued an Order giving
Defendants-Appellants yet another chance to comply (the "Second Chance Order")
stating and decreeing:
19
.·-
Maurice belatedly produced heavily redacted versions of the
unsigned personal returns, an_d plaintiffs objected to the redactions. On
October 1 and 7, 2015, during court conferences, the court informally
directed Maurice to submit unredacted copies of his unsigned personal
returns for in camera inspection, together whh copies of the redacted
returns he had provided to the other parties. On October 13, 2015,
Maurice only partially complied Dkt 1314 & 1315. The unredacted
copy of the crucial 1998 return submitted for in camera review had
blank entries on the first 5 pages in place·s where the redacted version
indicated that there were redacted entries. On October 15, 2015,
following a conference call, Maurice supplied the missing 5 pages to
the court. Dkt 1321. After in camera review, the court believes that
some of the redacted entries on the unsigned personal returns require
further explanation by Maurice in order for the court to determine
whether all of Maurice's redactions were proper.
In light of Maurice's belated attempts to comply with the Default
Decision, the court will give him one last chance to avoid preclusion at
the inquest.
(R309, emphasis added). Accordingly, the Court gave Maurice until "November 6,
2015 at 5 pm" to: (1) produce the Kaufman Communications, or provide an
explanatory affidavit; and (2) "submit an affidavit for in camera review stating
whether any of the redacted entries on his 1998 through 2003 personal returns reflect
monies paid to Maurice by entities listed thereon for any transaction, fee, service, or
loan connected with the LLCs, and if so, Maurice shall state which entity or entities
paid him, how much each one paid him, on which returns, and why he was paid by
each one" and the lAS Court then specifically:
ORDERED that if Maurice fails to comply in any respect, on time, with
the foregoing decretal paragraph, the cross-motion is granted and he is
precluded from offering evidence at the inquest without the necessity
of a further motion.
20 __ .. ____________________________________________ _
(R31 0, emphasis added.) The IAS Court correctly stated the Second Chance Order
"was the second self-executing order." (Rl2.)
Maurice submitted the in camera affidavit on November 6, 2015. After
reviewing the in camera affidavit, the lAS Court ruled:
Maurice avers that in turning over his 1998 through 2002 ·personal
returns, he did not redact "amounts reported for" Consolidated andi or
the LLCs. He states that plaintiffs already have his unredacted 200.3
personal return. However, he admits that the Returns reflect income he
received through Integrated Realty Holdings LLC NY (Integrated) and
Seton because they owned fractional interests in the LLCs. He further
admits that proceeds from the 2002 transaction received by Ardent are
reflected on his 2002 and 2003 personal returns, but he claims that
plaintiffs know this from other sources. He avers that Tudor Investment
Holdings Corp. (Tudor) received certain rights to continue litigation
against tenants as part of the 2002 Transaction, although he does not
say how this is reflected on the Returns. Finally, he gives no dollar
amounts for any of the monies received from any of these entities. Nor
does he say why he was paid by any of them.
* * *
Maurice, therefore, shall produce his 1998 through 2002 Returns with
all unredacted entries relating to the entities he mentions in his affidavit.
(R312, italics added.) Accordingly, at this point, not only was Maurice still violating
the Default Order, he also was violating the Second Chance Order, which outlined
the exact requirements for his affidavit. On November 16, 2015, the lAS Court
issued another Order (the "Third Order") which specifically:
ORDERED that by November 23, 2015, Julian Maurice Herman shall
produce copies of his 1998 through 2002 personal tax returns, which
shall not redact the tax year, the taxing authorities' information,
Maurice's name, the preparer's information, the date, the signature lines,
any part of the tax form (as opposed to entries thereon), and any entries
21
relating to the LLCs, Consolidated, Integrated, Seton, Ardent, and
Tudor.
(R313_, italics added.) 13
Maurice made his additional production on_ November 20, 2015, but they were
still improperly redacted. As a result, Plaintiffs sent a letter to the Court on
November 30·, 2015, (R395-572), which, together with subsequent letters, (R573-
593), showed that:
a. Maurice redacted sums on his return when the sums were comprised
of both amounts that were related to the LLCs and amounts not
related to the LLCs ("Mixed Amounts"), (R253);
b. Notwithstanding that the Plaintiffs specifically raised the issue of
Sheffield payroll and commissions on their cross-motion in
September, (R326, ~14), Maurice redacted entries concerning
Sheffield when:
1. Maurice does not dispute that Sheffield, owned solely by him,
received commission payments from the LLCs, (R574-75;
R588), and documents show that the LLCs paid approximately
$200,000 in commissions in 1998, (R326, ~14), and that the
LLCs paid approximately $575,000 in commissions in 2002,
(R564-69);
11. Maurice admits several LLCs made payments on behalf of
Sheffield commissions to a company owned by Michael Offit,
Stanton & Burroughs Building Corp. ("Stanton"), (R574), which
payments began in November 2002, less than one month after
Offit signed releases that Maurice used in the 2002 Deal, (R564-
69);
111. Maurice admits that the LLCs made payroll payments, or
possibly made only accounting entries, to Sheffield, and from
13 All the additional entities listed were related to the LLCs, (R312), so the Third Order did not
broaden the Default Order, but only clarified that these entries were required by the Default Order.
22
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Sheffield to Avon Bard LLC, (R575), the LLC that Maurice
reported receiving a $600,000 salary check from, but whose tax
return does not show a corresponding deduction, (R254 citing
Docket 268); and
1v. Sheffield was part of the corporate tax structure of the LLCs
through at least 1999, (R599) .
While Maurice proffered excuses in his letters to the lAS Court, in the end,
the foregoing facts regarding Sheffield and the LLCs remained undisputed.
On December 10, 2015, a conference call was held, wherein the Court
recognized that Maurice's redactions clearly dealt with the LLCs stating, in relevant
part, "MS. PORDER: Okay. We have established that money went from the LLCs
to Sheffield for two things then, for payroll and for commission .... " (R824.)
Thereafter, while not required pursuant to the Default Order, Second Chance Order
(which specifically stated that if there is further non-compliance, Maurice "is
precluded from offering evidence at the inquest without the necessity of a further
motion") and Third Order, the Court nevertheless ordered a formal motion giving
Maurice yet another chance to explain himself and further ordered:
1) after in camera review of Maurice's personal tax returns & reading
letters submitted by counsel, Maurice shall provide the other parties
with copies of his 1998 through 2003 personal tax returns (Returns) that
reveal all entries for Sheffield Associates, Inc. (Sheffield). The LLCs
did pay monies to Sheffield, which is wholly-owned by Maurice. Dkt
1341, p 3; Dkt 1350, p 2. Maurice redacted entries on the Returns
relating to benefits he received from the LLCs through Sheffield. 2)
Plaintiffs may move on formal papers to preclude Maurice from
participating in the inquest ....
23
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(R314-15.) Each return Maurice produced on December 18, 2015 had entries for
Sheffield, (R603-807), 14 showing that all prior productions were in contravention of
the Default Order, Second Chance Order and Third Order. In short, it took until the
Fourth Order before Maurice reduced his redactions to the point where the Court
could no longer detect transgressions of the Default Order. Furthermore, Maurice
has never provided the _Kaufman Communications required by the Default Order.
Rather, on November 6, 2016, Maurice admitted that there were communications
with Kaufman~ but claimed they were not relevant.
Plaintiffs timely filedtheir motion noting the following grounds for preclusion
under the conditional discovery provisions in the Default Order:
(a) Mamice made no attempt to timely comply with the Default Order;
(b) the Sheffield redactions were inappropriate because the LLCs made
commission payments directly to Sheffield;
(c) the Sheffield redactions were inappropriate because the LLCs made
commission payments to Stanton on behalf of Sheffield;
(d) the Sheffield redactions were inappropriate because the LLCs made
payroll payments, or at least accounting entries, among the LLCs
and Sheffield and to A von Bard LLC;
(e) the Sheffield redactions were inappropriate because Sheffield was
part ofthe corporate tax structure of the LLCs at least through 1999;
(f) Maurice redacted entries which contain amounts related to the
LLCs when they are mixed with amounts not related to the LLCs;
14 Redactions that state "REDACTED" were made by Plaintiffs pursuant to 22 NYCRR §202.5(e),
all others were made by Maurice and/or Kaufman.
24
(g) Maurice did not produce his thirteen e-mail communications with
Kaufman; and
(h) Maurice's in camera affidavit did not comply with the Second
Chance Order.
(Rl067; R256-64.)
Nowhere in Maurice's opposition papers, (R839-1 044), did he oppose
arguments a, e, ~ g, and h, (Rl 067), although he admitted argument a, (Rll, Rl 067).
Maurice also admitted arguments b and d. (Rl2; see also Rl069-1073 .)
Accordingly, the lAS Court ruled that Maurice was precluded from participating in
the inquest on the basis of grounds a, b, d, g & h as follows:
Contemptuously, Maurice did not produce the Unsigned Returns that
were in Kaufman's possession by the August 5 deadline.
* * *
[Maurice] also admitted in his affidavit that he did not even ask
Kaufman's firm to produce them until August 17, 2015, two weeks after
the deadline had passed. ld, ~1 00. He feebly argued that August 17
was when his lawyer got a letter from the IRS advising that it did not
have copies of his personal returns, and that Kaufman personnel were
out of town until after Labor Day (he did not say when they left,
although he had known since mid-July that he was obligated to produce
the Unsigned Returns). !d. With respect to the Kaufman
Communications, Maurice's affidavit averred that he "routinely" did
not "retain emails or documents that are not important." Id, ~~7 & 120
& fn 7, p 39. However, Maurice did not say that there were no Kaufman
Communications to produce. In addition, Maurice heavily redacted the
Unsigned Returns that he produced belatedly, including improper
redactions of entries related to benefits he received from the LLCs,
which the Default Decision had required him to produce.
* * *
In his November 6, 2015 affidavit, Maurice averred that he had found
13 Kaufman Communications, which he had not turned over
25
previously, but which he claimed were irrelevant. 11/6/15 Maurice
Herman Affidavit, Dkt 1333, ~13 . In his in camera affidavit conc.eming
the Unsigned Returns, he admitted that some of the redactions related
to his reportable income due to ownership of entities with interests in
the LLCs, but he omitted dollar amounts and/or the reasons why he
received money from the entities, in violation of the Reargument
Decision.
* * *
Subsequently, in a December letter, Maurice's attorney, Darren Traub,
admitted that ·an entity owned by Maurice, Sheffield, received payroll
payments and commissions from the LLCs that had been redacted from
the Unsigned Returns.
(R10-R12, all emphasis in original.) While Defendants-Appellants make
conclusory statements and arguments regarding Maurice's alleged compliance with
the Court 's Orders, (E.g., Br., 23-27), nowhere do they ever argue:
a. Maurice produced properly redacted tax returns by August 5,
2015, or that he even tried to do so;
b. the LLCs did not make commission payments to Sheffield;
d. the LLCs did not make payroll payments, or at least accounting
entries, among the LLCs and Sheffield and to A von Bard LLC;
g. Maurice produced the communications with Kaufman; or
h. Maurice's in camera affidavit complied with the Second Chance
Order.
Accordingly, the lAS Court's specific factual findings are not challenged on this
appeal.
26
ARGUMENT
POINT I
PRECLUSION OF MAURICE'S PARTICIPATION
WAS WITHIN THE lAS COURT'S AUTHORITY
A. The lAS Court Has the Power ta Preclude
Participation in the Inquest as a Matter of Law
A ware that they cannot reverse the Preclusion Order in light of the discovery
misconduct outlined supra, Defendants-Appellants contend that the IAS -Court was
prohibited as a matter of law from precluding them from participation in the inquest.
Specifically, Defendants-Appellants argue "[ e ]ven under the broad discretion
afforded pursuant to CPLR § 3126, there is no authority" to preclude. (Br., 17.) In
fact, Defendants-Appellants go so far as to contend that Rokina Optical Co. v.
Camera King, Inc., 63 N.Y.2d 728 (1984) stands for the proposition that a defendant
must always have "a full opportunity to cross-examine witnesses, give testimony
and offer proof in mitigation of damages." (Br., 16.) This is not a correct statement
of the law.
First, after Rokina was decided, this Court affirmed a preclusion of
participation in a damages inquest. Settembrini v. Settembrini, 270 A.D.2d 408, 409
(1st Dep't 2000) ("the Supreme Court did not err in striking the defendant's answer
or in precluding his counsel from participating at the inquest.") The Court stated:
For more than a year, the defendant had willfully disobeyed a
multitude of court orders. He repeatedly frustrated disclosure, purloined
marital assets, falsified financial documents, refused to appear for an
27
. '
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examination before trial, and defied requests for medical records to
substantiate his claims of ill health. Although the defendant was able to
travel to Italy, Portugal, and Canada, he claimed to be tDo ill to make
any court appearances, including an appearance on the date which was
scheduled for trial. Accordingly, the Supreme Court properly imposed
the maximum penalty on the defendant pursuant to CPLR 3126. (see,
e.g., Zletz-v Wetanson, 67 NY2d 711,713 .... "
!d. (italics added, citations omitted). Accordingly, it is clear that the "maximum
penalty" available under C.P.L.R. § 3-126 i-s preclusion from participa-tion in a
damages inquest.
Second, C.P .L.R. § 3126(3) expressly authorizes "rendering a judgment by
default against the disobedient party." (Italics added.) In addition, § 3126(2)
expressly authorizes the Court to issue an order "prohibiting the disobedient party
from ... producing in evidence designated things or items of testimony, or from ...
using certain witnesses." Accordingly, it is clear from both precedent and the CPLR
that the Court has discretion to award the type of punishment it deems appropriate
in light of the parties' misconduct. This can range from precluding a defendant from
cross-examining witnesses or introducing evidence concerning a specific affirmative
defense, !CD Group v. Israel Foreign Trade Co., 221 A.D.2d 152 (Ist Dep't 1995),
to precluding a party from participating in the damages inquest, Settembrini, supra.
Third, not only did Maurice fail to make this argument to the lAS Court, which
alone is fatal, Maurice affirmatively argued to the !AS Court, "[t]he nature and
degree of the sanction to be imposed on a motion pursuant to C.P.L.R. § 3126 is
28
within the broad discretion of the motion court" citing Wolfv. Flowers, 122 A.D.3d
728, 728 (2d Dep't 2014), (R854), and further argued '"[t]he statute's proposed
penalties were not intended to be exhaustive. The Practice Commentaries to
C.P . .L.R. § 3126 encourage the courts to exercise their ingenuity .... ' DiDomenicov.
C&S Aeromatik Supplies, 252 A.D.2d 41, 49 (2d Dep't 1998)," (R851). Given the
lAS Court's power to order remedies beyond the express provisions of§ 3126, there
was no reason why it could not order the remedies stated within it.
Further, Defendant-Appellants' reliance on Rokina is inapposite. In Rokina,
the defendant was not precluded from contesting damages under C.P .L.R. § 3126,
rather, it was only defaulted on liability. Further, the limit on evidence to be
introduced at trial was a result of the detem1ination that certain evidence was not
relevant to damages specifically, not an analysis of whether a defendant can be
barred from participating in a damages trial as punishment for disobeying court
orders. The issues are entirely distinguishable with the issue before this Court:
Whether a court has the legal authority to preclude a litigant from participating in a
damages inquest. Based on precedent of this Court and C.P.L.R. § 3126, it does.
In this regard, the citation to Zletz by this Court in Settembrini is illuminating.
In Zletz, the Court of Appeals affirmed the dismissal of a Complaint against a
plaintiff for discovery misconduct that culminated in the Plaintiffs "disregard of an
order compelling him to answer [one of the defendants'] interrogatories, which were
29
found to be relevant and appropriate." Zletz v. Wetanson, 67 N.Y.2d 711, 713
(1986). In other words, Plaintiff lost his entire case as a result of the discovery
misconduct. Accordingly, unless a harmed party is to have lesser rights than a
wrongdoer, a defendant should likewise be subject to a total loss of a litigation for
discovery misconduct just like a plaintiff.
Finally, Defendants-Appellants are unable to harmonize their argument with
Langer v. Miller, 281 A.D.2d 338 (1st Dep't 2001). In Langer, then-Justice, now
Judge, Abdus-Salaam had precluded the defendants "from putting in any affirmative
proof at inquest" and this Court specifically affirmed that remedy. Id. at 339. If
Defendants-Appellants were correct in their interpretation of Rokina that a defendant
must always have the opportunity to "give testimony and offer proof in mitigation
of damages," (Br. 16), the prohibition against affirmative proof would not have been
ordered and affirmed. This is especially true in this case as the discovery Maurice
withheld related to monies he unlawfully diverted from theLLCs to the detriment of
Plaintiffs-Respondents .
B. Preclusion Is Warranted Notwithstanding
Whether Damages Are for a "Sum Certain"
Defendants-Appellants further contend that since Plaintiffs-Respondents'
claims are purportedly not for a sum certain, they must be pennitted to participate in
the inquest. None of the cases relied upon by Defendants-Respondents address the
issue of whether a defendant can be precluded from contesting damages as a sanction
30
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under C.P.L.R. § 3126. Rather, the defendants in CDR Creances S.A.S. v. Cohen,
23 N.Y.3d 307 (2014) and Amusement Bus. Underwriters v. Am. Int'l Grp., Inc., 66
N.Y.2d 878 (1985), the only two cases relied upon by Defendants-Appellants
involving a default pursuant to C.P.L.R. § 3126, were defaulted on liability only.
All Defendants-Appellants' remaining cases concern a defendant failing to appear.
Accordingly, the issue of whether a preclusion order is appropriate was not analyzed
in any of Defendants-Appellants' cases. Alternatively, the law outlined supra
regarding the authority of the lAS Court specifically addresses this issue.
Further, the reference to "sum certain" in C.P.LR. § 3215 refers· to whether a
clerk has the unilateral authority to enter judgment or whether the amount of the
judgment must be set by the Court, not whether a court can prevent a party from
participating in a proceeding. Accordingly, Defendants-Appellants attempt to
contrive an argument based on this language is meritless.
Nevertheless, Defendants-Appellants contend that the value of the Herman
Properties in 1998 will determine damages, and, since the value has been contested,
they must be permitted to participate.15 Defendants-Appellants cite no authority for
15 Defendants-Appellants' reliance on Gardner v. Florida, 430 U.S. 349 (1977), (Br., 20), is
meritless, as that case dealt with the determination of whether a petitioner was denied due process
when the death penalty was imposed against him "on the basis of information that he had no
opportunity to deny or explain."
31
this position. Rather, this is nothing more than a thinly-veiled attempt to contest
damages when Defendants-Appellants have been precluded from doing so.
When a default is issued, plaintiffs are entitled to the relief sought in the
Complaint, no more, but no les-s and no different. C.P .L.R. § 3215(b) ("judgment
shall not exceed in amount or differ in type from that demanded in the complaint
.... ") (italics added). Here, Defendants-Appellants mislead the Court by stating
"Plaintiffs concede that the majority of their claims are not for a sum certain amount.
(R1065)." (Br. 22.) Plaintiffs-Respondents' position is that "the central and most
valuable claim in the Complaint can be made certain through a computation."
(R1065.) Specifically, there are three categories of actual relief sought in the
Complaint for which evidence will be submitted to the referee and, ultimately, the
lAS Court.
The first remedy seeks the return of Plaintiffs-Respondents' 50% interest in
952 Fifth Avenue. This does not involve damages, it is sirriply a return of property.
The second, and most valuable, remedy seeks damages measured by the
difference between the 1998 Deal amount for the five other properties and the 2002
Deal amount. The damages for this can be made certain through calculations based
upon amounts set forth in the complaint, minus half of (1) the applicable transfer
taxes, which can be calculated based upon the statutory tax rates; (2) the brokerage
commission of $1,033,687.50, which is documented in the agreement produced by
32
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Maurice, (R1125-29); and (3) the legal fees charged to Maurice by Loeb, for which
documents have- been produced by Maurice. 16
The third remedy seeks damages for half of the income from the five
properties sold in the 2002 Deal between 1999 and 2002 and half of the income from
952 Fifth Avenue from 1999 through the present. These claims will be based almost
entirely on documents produced ·by Maurice and Kaufman, although some public
records will be used. 17
The argument that damages will be calculated based on valuation, while it
does not prevent an order of preclusion, is simply not true. Valuation of the six
properties in 1998 is only relevant if the Plaintiffs-Respondents are compelled to
accept a remedy not sought in the Complaint. To the contrary, the Complaint seeks
the return of half of 952 Fifth Avenue and damages for the other five properties
based on the actual amounts that Maurice received in the 2002 Deal. What Maurice,
16 This claim also seeks title to the other 50% of952 Fifth Avenue owned by Maurice pursuant to
a constructive trust claim but with a reduction to the monetary damages equal to one half of the
value of 952 Fifth Avenue as of the time of trial as determined by a Court-appointed expert.
(Compl., ad damnum ~2.)
17 Plaintiffs have to resort to public records because, contrary to the statement by the Defendants-
Appellants that there "currently are no outstanding discovery demands due from Maurice," (Br.,
24), and in addition to his refusal to produce the communications with Kaufman as required by the
Default Order noted supra, Maurice is refusing to tum over the tax returns, bank statements and
other financial records relating to 952 Fifth Avenue from 2011 through 2015 . He refuses to do so
notwithstanding his discovery obligation to supplement his prior production of those records in
2011 covering the period from 2005 to 2010. Accordingly, Maurice is arguing the inquest will not
be fair to him while he is withholding evidence regarding the income from 2011 through 2015 .
33
the judicially-established wrongdoer, wants to do is limit Plaintiffs-Respondents to
\vhat he is arguing is a lower damages amount so that he can still have the bounty .of
the corrupt 1998 Deal, the proceeds of the sale from 2002 and keep 952 Fifth
Avenue. This is not the law as it pertains to defaulting defendants under C.P.L.R.
§ 3215Gb) and is not the law as it applies to the damages to be applied to Plaintiffs-
Respondents' specific claims. See Point IV, infra. Further still, Defendant-
Appellants' position that the lAS Court has already determined that damages must
be calculated based on valuation is simply wrong. The only time the issue of what
damages must be applied was briefed for the lAS Court was in c~mnection with
Defendants-Appellants' cross-motion on appeal herein, which was specifically
considered and correctly denied by the lAS Court.
Based on all of the foregoing, Defendants-Appellants are simply incorrect on
the law, as preclusion from participation was and is within the Court's power under
Settembrini, the express language of C .P .L.R. § 3126 and other case-law regarding
the flexibility afforded to the discretion of IAS Courts under 3126. Moreover, the
• 1 vast majority of Plaintiffs-Respondents' claims can be made certain with
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calculations. The remaining income claim that requires proof can be proven with
documentary evidence produced by Maurice, Kaufman and/or public records.
Finally, Maurice's positon would force the Plaintiffs-Respondents, the judicially-
34
established harmed parties, to accept a remedy the Complaint does not seek in
contravention ofC.P.L.R. § 3215(b).
In short, Defendants-Appellants propose that a party can disregard extensive
Court orders and thwart discovery and can never be subject to the preclusion ordered
by the IAS Court. They have failed to introduce any authority that states this, but,
rather, contrive an argument cherry-pi-cking statutory language and case-law all the
while ignoring their own egregious and continuing misconduct. This cannot be and
is not the law that applies to conditional orders:
The Court of Appeals bas taken the position that in order to maintain
the credibility of court orders and the integrity of the judicial system,
litigants cannot ignore such orders without consequence. Kihl v.
Pfeffer, 94 NY2d 118, 123,722 N.E.2d 55, 700 N.Y.S.2d 87 (1999) ....
According to the Court of Appeals, the self-executing nature of the
conditional order coupled with the defendants' failure to comply
rendered the order "absolute," and prevented the defendant from
introducing evidence "tending to defeat plaintiffs cause of action." !d.
at 830.
23KT Gold Collectibles, LTD. v. Daily News, 30 Misc. 3d 1241(A), *2 (Sup. Ct. N .Y.
Cty. 2011). The Preclusion Order must be affirmed as a matter of law.
POINT II
MAURICE DISOBEYED THE DEFAULT ORDER, THE SCEOND
CHANCE ORDER AND THE THIRD ORDER
Defendants-Appellants next argue that the IAS Court abused its discretion in
precluding Maurice because he "made a good faith effort to comply with the lAS
court's discovery orders" and his non-compliance is not willful. (Br. 23, 25.) Even
35
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if one accepts Maurice's farcical argument that he made "good faith effort'; to
comp-ly when it is not disputed that: (1) he did not even attempt-to comply on time~
(2) has not, to this day, complied in respect of the Kaufman communications; and
(3)four Orders of the lAS Court were issued in respect of Maurice's tax returns, two
of which were conditional, which mandates preclusion. Wilson v. Galicia Contr. &
Restoration Corp., 10 N.Y.3d 827 (2008) ("As the conditional order was self-
executing and appellant's "failure to produce [requested] items on or before the date
certain" rendered it "absolute")(internal citation omitted); Winters v. Uniland Dev.
Corp., 2015 NY Slip Op 00111 (4th Dep't 2015) (answer deemed stricken where
"Defendants failed to comply with [the Court's discovery] order and, because it was
self-executing, it became absolute and binding upon defendants' failure to comply
with it."). The lAS Court itself stated "[t]he First Department has held that it is
reversible error not to enforce a conditional order that has been disobeyed without a
reasonable excuse. Keller v. Merch. Capital Portfolios, LLC, 103 A.D.3d 532, 533
(1st Dep't 2013)." (R13.) There is no question that the Default Order and Second
Chance Order were disobeyed, and Maurice has no reasonable excuse for the
disobedience.
A. Disobedience of the Default Order
Maurice's disobedience of the Default Order is not disputed. In fact, Maurice
"admitted in his affidavit that he did not even ask Kaufman's firm to produce [his
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returns] until August 17,2015, two weeks after the deadline had passed." (R11,
citing Maurice 's September 9, 2015 affidavit, emphasis in original.) This was a
month after the IAS Court issued the Default Order and this Court -denied his request
for a stay. Maurice's purported excuse, which the IAS Court correctly characterized
as feeble, was that he received notification from the IRS on August 17, 2015 that
they did not have copies of his returns. (R11 .) The purported reason was a non-
sequitur absurdity because the Default Order pertained to the returns that Kaufman
already had in his possession, not returns being requested from the IRS. 18
Parenthetically, waiting to see if the IRS still had cop.ies of his tax returns provided
Maurice the opportunity to have leeway in what he would produce as responsive tax
returns.
Further, Maurice argues that he could not obtain the returns from Kaufman
earlier because "the personnel at SK&C who could obtain and produce the
documents were out on vacation and would produce the documents upon their
return." (Br., 9-10). However, in the underlying motion: (1) Maurice failed to
submit an affidavit from this purported individual testifying that they were in fact on
vacation; (2) Maurice failed to explain why it was one particular person who was
only able to obtain these documents; (3) Maurice failed to explain why they could
18 Moreover, in 2011, Maurice stipulated in the Tax Court proceeding that the IRS had already
destroyed his 1998 return in the ordinary course of business. (R324, ~9; R335-37.) Accordingly,
he was well aware that the IRS would not produce his returns.
37
not be 0btained when the Kaufman's counsel previously advised the lAS Court that
the returns were located; and (4) Maurice, having knowledge of the directives in the
Default Order, failed to explain why, even if the foregoing were true, he did not seek
an extension from the lAS Court. All of the foregoing occurred in the context of
this Court's-denial ofl\1aurice's application for a stay in which his counsel was told
on. July 17, 2015 that he had "no grounds'} to withhold the tax returns and issued an
Order that the lAS Court's Order remained extant and law of the case. (R249, R299.)
In reality, Maurice's conduct demonstrates nothing more than complete disregard
for this Court,. the lAS Court and proper discovery.
Defendants-Appellants argue that "Maurice was able to subsequently comply
. , with the Court's order by obtaining and producing his 1998-2003 personal tax
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returns .. .. " (Br., 23, italics added.) First, even this inaccurate statement admits the
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production was after the deadline. Second, the statement omits that Maurice did not
produce the returns until September 9, 2015, over a month late. (Rll; R250; R339.)
Third, the statement is false as, even putting aside the untimeliness, Maurice
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manifestly did not "comply" with the Default Order when he did produce the returns.
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With respect to the tax returns, it is not disputed that Maurice redacted entries
related to the LLCs when the Default Order expressly provided "Maurice may redact
information on his personal returns that is unrelated to the LLCs." (R289, italics
added.) Maurice's own in camera affidavit "admitted that some of the redactions
38
related to his reportable income due to ownership of entities with interests in the
LLCs." (Rl2; see also R861, n.14.) Moreover, Plaintiffs chronicled numerous
redactions on Maurice's 2003 tax return related to the LLCs, including four entries
with one of the LLC's name itself (R328-329, ~~18-20_)19 Further still, it is not
disputed that Maurice failed to produce all fhe pages of his tax returns, producing
only se-lected pages, (R327, ~17; R33-9-354), when the Default Order specifically
said that he "shall not redact . . . any part of the tax form (as opposed to entries
thereon)." (R289.) There is no question that Maurice redacted information on his
returns related to the LLCs, which the. Default Order expressly forbade. (R289.)
Aside from the tax returns, Maurice failed to comply with the Default Order
because he did not produce any communications with Kaufman on September 9th
(or ever). The lAS Court expressly found that Maurice offered nonsensical
arguments regarding the Kaufman communications and that he further implied,
falsely as it turned out, that no communications existed because it is his "custom and
practice to delete my emails each month." (R308.)
19 Defendants-Appellants accuse Plaintiffs of not revealing possession of Maurice's 2003 tax
return prior to Maurice's production. (Br., 24.) This is patently false. Plaintiffs-Appellants
disclosed they had the 2003 return (from the Tax Court proceeding) to Kaufman and Maurice's
attorneys, as well as the Court, no later than April 30, 2015, (R327, ~ 18), which was e-filed on
May 11, 2015, (Docket 1127), obviously before the Default Order, let alone Kaufman's blatantly
improper redactions .
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Based on the foregoing, the lAS Court could have, and should have, precluded
Mauric-e pursuant to the Default Order, but, after conference calls on the issues and
submissions of the redacted and unredacted tax returns to the Court, it generously
gave Maurice another chance and issued the Second Chance Order.
B. Disobedience of the Second Chance Order
The lAS Court's October 20, 2015 Second Chance Order required Mauric-e,
inter alia, to:
by November 6, 2015 at 5 pm, 1) Maurice shall produce all of his
communications with Kenneth Kaufman and his firm, Savastano,
Kaufman & Company, LLC, that are responsive to pla~ntiffs' demands,
or an affidavit explaining why none exist, detailing his efforts to search
for them, and stating whether they were deleted or discarded, when they
were deleted or discarded, by whom they were deleted or discarded,
and if they were deleted, from where (e.g., what email account,
computer, server, etc.); and 2) Maurice shall submit an affidavit for in
camera review stating whether any of the redacted entries on his 1998
through 2003 personal returns reflect monies paid to Maurice by
entities listed thereon for any transaction, fee, service, or loan
connected with the LLCs, and if so, Maurice shall state which entity or
entities paid him, how much each one paid him, on which returns, and
why he was paid by each one ....
. . . . if Maurice fails to comply in any respect, on time, with the
foregoing decretal paragraph, the cross-motion is granted and he is
precluded from offering evidence at the inquest without the necessity
of a further motion.
(R31 0, italics added.) Defendants-Appellants vaguely state that "the lAS [C]ourt's
October 20, 2015 Order directed Maurice to produce an affidavit explaining the
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redactions as it relates to the LLCs, which he did." Defendants-Appellants leave out
that the IAS Court, after reviewing the· in camera affidavit, stated:
Maurice avers that in turning over his 1998 tb.rough 2002 personal
returns, he did not redact "amounts reported for~' Consolidated and/or
the LLCs .... However, he admits that the Returns reflect income he
received through Integrated Realty Holdings LLCNY (Integrated) and
Seton because they owned fractional inter:ests in the LLCs. He further
admits that proceeds from the 2002 transaction received by Ardent are
reflected on his 2002 and 2003 personal.r..eturns .... He avers that Tudor
Investment Holdings Corp. (Tudor) received certain rights to continue
litigation against tenants as part of the 2002 Transaction, although he
does not say how this is ref1ected on the Returns. Finally, he gives no
dollar amounts for any of the monies received from any of these entities.
Nor does he say why he was paid by any of them.
(R312, italics added.) The IAS Court therefore ordered Maurice not to redact entries
relating to, inter alia, Integrated, Seton, Ardent, and Tudor. (R313.) In other words,
Maurice not only admitted that be redacted entries related to the LLCs, but also failed
to include in his affidavit the amounts he was paid or why as expressly required by
the Second Chance Order. Accordingly, the Court issued the Third Order.
In respect of the communications with Kaufman, (R3 1 0), Maurice, having
previously implied that he had no documents of such communications, now admitted
he had emails of communications with Kaufman, but submitted an affidavit
contending that he is aware of the legal issues in this case and did not unilaterally
believed that the emails were relevant to a limited list of issues. This assertion
merely implies that they were not relevant to all of the issues in this action but does
not affirmatively so state. (R261-262, ~26.) Plaintiffs-Respondents' counsel stated
41
they would accept a written representation from Maurice's counsel that, after
counsel 's personal review, the emails were non responsive, but no such
representation was ever provided-nor were the emails produced. (R262, ~27.)
C. Dis·obedience .of the Third Order
The lAS Court's November 16, 2015 Third Order required Maurice, inter
l . .. a za, ·to:
produce copies of his 1998 through 2002 personal tax returns, which shall not
redact ... any entries relating to the LLCs, Consolidated, Integrated, Seton,
Ardent, and Tudor.
Again, Maurice's in camera affidavit admitted that the named entities were all
related to the LLCs, but putting that aside and assuming that Maurice complied with
that portion of the Third Order, he continued to redact other entries related to the
LLCs, specifically, entries related to Sheffield. Interestingly, Defendants-
Appellants argument ceases its specific analysis of the lAS Court's Orders at this
point and resorts to a conclusory assertion that the four orders issued by the Court
each required Maurice to produce new discovery items or modifying redactions
based on new information. (Br., 25.) This is simply not true. All of the Court's
requirements for production fell within the scope of the Default Order's original
requirement that "Maurice may redact information on his personal returns that is
unrelated to the LLCs." (R289.)
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Accordingly, Plaintiffs sent correspondence to the lAS Court arguing, inter
alia, that Maurice had redacted entries regarding Sheffield when Sheffield was
receiving hundreds of thousands of dollars of commissions from all six LLCs and
that payroll payments were being made by the LLCs to Sheffield. (R395-96.)20
Plaintiffs supported their arguments with documents produced by Kaufman. (R563-
72~) Maurice tried to confuse and obfuscate the issues, but at the end of the day he
could not escape the fact that, in the words of his own attorney:
That is exactly what these commission payments represented, an accounting
entry to represent a month's rent for every new lease entered into as an
additional tax reduction benefit to the properties.
(R575.?1 Whether paid or not, expenses were charged to the LLCs for amounts
.. \ paid, or at least reported to, Sheffield. Moreover, it matters not whether the impact
I is legitimate or fraudulent, ultimately revenue positive, negative or neutral. All that
matters is that the amounts on the returns for Sheffield related to the LLCs. Maurice
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disobeyed the Default Order, Second Chance Order and Third Order on this basis
alone.
In respect of the payroll payments, Maurice argued either payments were
made from the LLCs to Sheffield and later returned to the LLCs through one of the
LLCs (A von Bard LLC) to offset the earlier payments, or accounting entries were
20 All of the entries were relevant to, at least, Plaintiffs-Respondents' income claim. (R396.)
21 While the word "properties" was used, the properties were owned by the LLCs.
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made on the books of Sheffield and the LLCs each year to the same effect. (R575.)
Assuming this is true, it means that the amounts on Sheffield's returns include two
entries regarding each 6f the LLCs, one paying in and one paying out. The amounts
on the returns, being comprised of entries relating to the LLCs could not be redacted
by Maurice pursuant to the Default Order or Second Chance Order.
The foregoing was admitted on a December 10, 2015 conference call with the
lAS Court between the lAS Court's clerk, Deborah Porder, Esq. and Maurice's
attorney, Darren Traub, Esq., as follows:
MS. PORDER: Okay. We have established that money went from the
LLCS to Sheffield for two things then, for payroll and
for commission and then whatever Sheffield did with
it later is what you are saying is the reason why it's not
relevant, right?
MR. TRAUB: Correct because then, in other words, it was then paid
directly out of Sheffield to a third party per the
instructions of the LLCs.
MS. PORDER: Okay. Now let me ask you another question, are there
any other owners of Sheffield besides Maurice
Herman?
MR. TRAUB: No, from what I understand Sheffield is 100 percent
owned by Maurice Herman.
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(R824.) Accordingly, the lAS Court ultimately ordered Maurice to re-produce his
tax returns without redacting entries for Sheffield as those entries clearly "relate to
the LLCs.'m (R314.)
In respect of the emails with Kaufman, Plaintiffs-Respondents again noted
they had not received an appropriate representation that they were not responsive to
Plaintiffs-Respondents' document demands nor the documents themselves, and
counsel for Maurice agreed to provide a "clean representation," (R827-828), but
never did so, (R262).
In sum, the lAS Court's three subsequent Orders never changed the
requirements from the Default Order. The test was always whether entries were
related to the LLCs. Rather, it took three additional Orders and significant Court
resources to get Maurice to do what he should have done, but did not even try to do,
by August 5, 2015. In addition, Maurice never produced the emails with Kaufman
and his attorney never provided any representation that the emails were irrelevant
prior to the reply on the motion to preclude, (Rl 068, ~40), or even to this very day.
Accordingly, Maurice is in violation of the Default Order right now.23
22 Defendants-Appellants twice state that the lAS Court ordered "fully unredacted" returns. (Br.,
24, 25.) That is false, the last Order on December 15, 2015 only required Maurice not to redact
entries for Sheffield. (R314.)
23 Defendant-Respondents assertion that there "currently are no outstanding discovery demands
due from Maurice," (Br., 24), is false.
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In accordance with the foregoing disobedience of the Default Order and
Second Chance Order, under the law applicable to conditional orders-, Maurice is
precluded from participating in the damages inquest. Keller v. Merch Capital
Portfolios, LLC, 103 A.D.3d 532, 533, (1st Dep't 2013) (reversible error not to
en-force conditional order); Vazquez v. Lambert Houses Redevelopm.ent Co., 110
A.D.3d 450, 451 (1st Dep't 2013) ("Having failed to proffer an acceptab-le excuse
for its default, it is unnecessary to determine whether a meritorious defense exists
.... ")
Defendants-Appellants next argue that the "conditional"[O]rder was not 'self-
executing' because the sanction contemplated did not become absolute at a certain
juncture." (Br., 25.) First, the Default Order was conditional even if not self-
executing. Second, the Default Order expressly provides that "unless Maurice
produces said redacted personal returns by the deadline, he is precluded from
contesting damages" and "ORDERED that all documents ordered to be produced
herein shall by produced within 20 days after this decision and order is filed in the
New York State Courts Electronic Filing System." (R295-96.) That the lAS Court
generously gave Maurice additional opportunities and gave him the additional due
process of a motion, only underscores the lAS Court's point that Maurice "has been
given perhaps more chances than the law allows to comply with the conditional
orders." (R 13.)
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Defendants-Appellants next argue that the· IAS Court's sanction was not
commensurate with the misconduct and that the Plaintiffs-Respondents have not
been prejudiced. (Br., 26-27.) By-that logic, a litigant can continue to thwart court
orders and discovery for years as has been done herein, wasting the resources of the
court and its opponent without any consequence. This is not the intention of the law
as it applies to conditional orders, which obviously derive from prior discovery
misconduct and only requires a limited showing of disobedience as demonstrated
supra. Kihl v. Pfeffer, 94 N.Y.2d 118; Keller, supra,· C.P.L.R. § 3126. Further, the
preclusion is minimal in light of the fact that, other than the damages associated with
the income claim, which are minimal in comparison to the remaining claims, the
damages are established as a matter of law and simple. math (i .e. the return of 952
Fifth A venue and Plaintiffs-Respondents' share of the difference between the 1998
Deal and 2002 Deal).
Finally, contrary to Defendants-Respondents' argtiments, Maurice's multi-
million-dollar misconduct, which is now judicially established, continues to harm
and prejudice Rosemarie and her children. Namely, Maurice has had the unilateral
benefit of profiting from the 2002 Deal and continuing to own and profit from 952
Fifth A venue to the exclusion of Rosemarie and her children. The undisputed fact
that Maurice destroyed documents (including emails and his wills) and refuses to
this day to tum over documents of his communications with Kaufman leads to the
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undeniable conclusion that the truth can never be ascertained as a result of Maurice's
discovery misconduct. In this regard, Maurice's continued "filibuster" approach that
has obstructed, and continues to obstruct, justice and cause prejudice to Rosemarie
and her children. Justice delayed is justice denied. (R13, finding Maurice's action
"contumacious" and that he "delayed the action and wasted judicial resources.")
This Court has held that this exact type of prejudice is sufficient to affirm the Default
Order. See Herman v. Herman, 134 A.D.3d 442 (1st Dep't 2015)(holding that
Maurice's continued discovery conduct prejudiced plainbffs by "forcing [them] to
spend enormous amounts of money and time to prove [their] case and was an
unnecessary drain on limited court resources")(intemal citation omitted).
This Court cannot permit Maurice, or any party, to disrespect the process as
much as he has. Not imposing the sanction will have the opposite effect of rewarding
misconduct, which continues to this very day, and reinforcing Maurice's belief that
he can defy the Court with impunity. (R295.)
POINT III
MAURICE HAS NO EXCUSE FOR HIS INTENTIONAL DISOBEDIENCE
Maurice next tries to excuse the inexcusable with the same feeble arguments
the lAS Court rejected and which have been shown to be without merit supra. We
only add that: (1) even now Maurice offers no excuse for his failure to provide the
information required in his in camera affidavit required by the Second Chance Order
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and his failure to produce the communications with Kaufman; and (2) the argument
that Maurice's misconduct was not willful, (Br. 29-30), is without merit, as the lAS
Court correctly ruled, (R13), willfulness need not be shown in respect of a
conditional order. Gibbs v. St. Barnabas Hosp., 16 N.Y.3d 74, 82 (2010)(with
respect to violations of conditional orders "the court relieves itself of the
unrewarding inquiry into whether a party's resistance was willful")( citation omitted);
Keller 103 A.D. 3d at 533 (same, citing Gibbs).
POINT IV
MAURICE'S CROSS-MOTION TO LIMIT THE EVIDENCE AT THE
INQUEST TO 1998 WAS PROPERLY DENIED AND DEMONSTRATES
HE HAS NO MERITORIOUS POSITION ON DAMAGES
Finally, Maurice seeks to reverse the lAS Court's denial of his motion to limit
evidence at the inquest temporally to 1998, arguing: (a) the lAS Court "failed to
address Maurice's cross-motion"; and (b) the Plaintiffs-Respondents may only
recover the difference between the actual value of the properties in 1998 and what
Maurice "paid" for them in the 1998 Deal because of the damages rule applicable to
fraud claims. (Br. 30-32.)
A. The lAS Court Addressed and Rejected the Cross-Motion
Defendants-Appellants are simply incorrect that the lAS Court "failed to
address" his motion seeking to limit damages. The lAS Court stated Maurice "cross-
moves to preclude plaintiff from offering evidence at the inquest on the value of the
LLCs after 1998." (R1 0.) The lAS Court also stated the "remaining arguments of
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the parties have been considered and found to be non-germane or without merit."
(R16.) Immediately thereafter, the lAS Court ruled Maurice's "cross-motion is
denied." Quite obviously, the IAS Court was cognizant of the cross-motion and
found it to be so devoid of merit that it did not warrant analysis.
-B. Maurice's Motion Was an Attempt to Participate in the Inquest
Maurice's cross-motion is in reality a motion in limine and therefore was
improper procedurally because he was barred from participating in the inquest.
(R1057, ~19.) The denial of the cross-motion should be affirmed on this basis
alone.
C. Plaintiffs Are Entitled to the Damages Demanded in the Complaint
Even if the Court entertains Maurice's "argument," it is wholly without rrierit
as it rests on the false premise that the only liability established by the default is for
fraud. The undeniable reality is that Maurice has been defaulted on liability on all
ten causes of action that survived the motions to dismiss stated supra.
Accordingly, liability is in no way limited to fraud. For example, this Court
has specifically held in a fiduciary duty property case that the:
measure of damages for breach of fiduciary duty is the amount of loss
sustained, including lost opportunities for profit on the properties by
reason of the faithless fiduciary's conduct.
I 05 E. Second St. Associates v. Bobrow, 175 A.D.2d 746, (1st Dep't 1991)
(unauthorized mortgaging of real property). Moreover, merely aiding and abetting
a breach of fiduciary duty makes a defendant liable for lost profits:
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Where a person in a fiduciary relation to another violates his duty as
fiduciary, a third person who participa-tes in ·the violation of .duty is
liable tD the beneficiary. If the third person makes a profit through such
participation, he is chargeable as constructive trustee of the profit so
made.
* * *
Anyone who knowingly participates with a fiduciary in a breach of tmst
is liable for the full amount of the damage caused thereby to the cestuis
que trust" (Wechsler v. Bowman, 285 N.Y. 284,291 [1941] ...
Pace v. Perk, 81 A.D.2d 444, 454-435 (2d Dep't 1981) (citing Scott on Tmsts)
(italics added). Accordingly, as liability is fully established against Maurice on both
the first and third causes of action, he is liable at least in the amount of the difference
between the 1998 Deal "price" and the 2002 Deal price as it applies to the five
properties sold.
Furthermore, the fact that there is fraud and deceit involved in the misconduct
is a reason to include the future profits, not exclude them, as Maurice perversely
argues. In Matter of Rothko, 43 N.Y.2d 305 (1977), the Court of Appeals
unanimously rejected the contention that lost profits damages were impermissible:
where the breach consists of some misfeasance, other than solely for
selling 'for too low a price' or 'for too little', appreciation damages may
be appropriate .. .. [T]he tmstee may be held liable for appreciation
damages if it was his or her duty to retain the property, the theory being
that the beneficiaries are entitled to be placed in the same position they
would have been in had the breach not consisted of a sale of property
that should have been retained. The same mle should apply where the
breach oftmst consists of a serious conflict of interest-which is more
than merely selling for too little.
* * *
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Here, the executors, though authorized to sell, did not merely err in the
amount they accepted but sold to one with whom [they] had a self-
interest. ... [S]i-nce the paintings cannot be retumed, the esiate is
therefore entitled to their value at the time of the decree, i.e.,
appreciation damages. These are not punitive damages in a true sense,
rather they are damages intended to make the estate whole. Of course,
as to [the executors and consignees], these damages might be
considered by some to be exemplary in a sense in that they serve as a
warning to others . . . , but their true character is ascertained when
viewed in the light of overriding policy considerations and in the
realization that the sale and consignment were not mere-ly sales below
value but inherently wrongful transfers which should allow the owner
to be made whole"
Id. at 321-322. In this regard, the lAS Court previously stated the "Action is based
upon serious allegations of fiduciary fraud and wrongdoing .... " (Rl 060.) Those
allegations in the Complaint, summarized supra, are now fully established as to
Maurice.
The remaining causes of action, all of which have liability established, also
are not limited to 1998:
a. Tortious Interference with contractual relations. Int'l Minerals & Res.,
SA. v. Pappas, 96 F.3d 586, 597 (2d Cir. 1996) ("a plaintiff in a tortious
interference with contract case is entitled to damages in the amount of
the full pecuniary loss of the benefits of the contract, and that 'the
elements of damages, including consequential damages, [are] those
recognized under the more liberal rules applicable to tort actions."'
citing Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y.2d
183, 197 n. 6 (1980)).
b. Breach of limited liability agreements. Kenford Co. v. Erie Cnty., 108
A.D.2d 132, 137 (4th Dep't 1985) aff'd, 67 N.Y.2d 257 (1986) ("It is
well settled in New York that in a breach of contract case a plaintiff
may recover not only losses sustained, but also gains prevented .. . , and
where damage is certain, recovery will not be denied because the
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amount is uncertain; the breaching party bears the risk of the
uncertainty created by his breach .... ") (citations omitted).
c. Unjust enrichment. Schatzki v. Weiser Capital Mgmt., LLC, 995 F.
Supp. 2d 251,253, (S.D.N.Y. 2014) affd sub nom. BPP Wealth, Inc. v.
Weiser Capital J\1gmt., LLC, 623 F. App'x 7 (2d Cir. 2015) ("the
measure of damages for an unjust enrichment claim "is restricted to the
reasonable value of the benefit conferred upon the defendants," and is
"measured by a defendant's unjust gain, rather than by a plaintiffs.
loss.")
d. Constructive trust. Simonds v. Simonds, 45 N.Y.2d 233, 243 (1978)
("A court of equity in decreeing a constructive trust is bound by no
unyielding formula. The equity of the transaction must shape the
measure of relief').
Based on the foregoing clear law, the calculation of damages as to the five
buildings sold in the 2002 Deal is the correct measure of damages. Furthermore, it
is just.
Documents withheld by Maurice from 2011 to 2014 established that Maurice
began marketing the sale of five of the Herman Properties immediately after the 1998
Deal. (R1121, ~3; R1124). Accordingly, the scope and object of the misconduct
was not merely to acquire Rosemarie's interests in the properties at a discount, but
rather to acquire them and then sell the five properties so that she would not receive
50% of the profits of the sale. The remedy of lost profits therefore addresses the
specific intent of Maurice's misconduct.
Further still, as Maurice has been defaulted, Plaintiffs-Respondents are
entitled to the relief sought in the Complaint. C.P.L.R. § 3215(b) ("judgment shall
not exceed in amount or differ in type from that demanded in the complaint .... ")
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(italics added). As the Complaint specifically seeks damages based on the difference
between the 1998 Deal and the 2002 Deal, ~Aaurice's position is contrary to the
CPLR.
In addition, the default applies to the income claim concerning the five
properties prior to their being sold in 2002 and for 952 Fifth Avenue through the
present. Accordingly, the income generated since the 199·8 Deal is relevant to
damages for that claim.
Finally, we cannot help but point out Maurice's hypocrisy. Maurice relies on
potential future liabilities from rent stabilized tenants regarding J-5 1 abatements
based on Roberts v. Tishman Speyer Properties, L.P., 13 N.Y.3d 270, 282 (2009).
(Br., 21.) Maurice cannot demand that post-1998 evidence be excluded all while
arguing that post-1998 events support his "valuation." 24
As the foregoing makes clear, Defendants-Appellants' arguments regarding
damages simply have no merit and the lAS Court was entirely correct in stating that
24 Maurice offers a supposed expert report arguing Rosemarie's membership interests were worth
$14,100,000 in 1998. (Br., 20-21.) That amount is partly based on 36 Gramercy Park East being
worth $4,1 14,133 prior to a 25% a "partial" interest discount (the partial interest was 50%), which
reduced the amount to approximately $3,100,000. Remarkably, Maurice's expert values a 75-year
lease for one apartment in the building at $5,735,784, approximately $2,635,000 more than the
fee simple interest in the entire building. (Rl 063, 1[31.) It could not be more clear that the "expert"
report is a farce. Maurice's other arguments regarding J-51 tax abatements, (Br., 21), resulted
from the decision in Roberts v. Tishman Speyer Properties, L.P., 13 N.Y.3d 270 (2009), well after
both transactions, and there is simply no evidence that the ruling affected property values nine
years prior to its being issued.
54
Maurice's cross-motion seeking to limit damages to 1998 was "non-germane or
without merit.'' (R16.)
CONCLUSION
The Preclusion Order should be affirmed in all respects.
Dated: New York, New York
August 10, 2016
LAW OFFICES OF CRAIG
AVEDISIAN, P.C.
By:Cr~~~
Craig Avedisian, Esq.
One Grand Central Place
60 East 42nd Street, 40th Floor
New York, New York 10165
(212) 687-8360
Attorneys for Plaintiffs-Respondents
55
JASPAN SCHLESINGERLLP
By:N~S~
Natasha Shishov, Esq.
Steven R. Schlesinger, Esq.
300 Garden City Plaza, 5th Floor
Garden City, New York 11530
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Dated: August 10,2016
New York, New York
LAW OFFICES OF CRAIG AVEDISIAN, P.C.
Attorneys for Plaintiffs-Respondents
By: tra!j Ave-0~
Craig Avedisian
60 East 42nd Street, 40th Floor
New York, New York 10165
(212) 687-8360
56