To be Argued by:
DAVID C. ROSE
(Time Requested: 30 Minutes)
APL-2015-00052
Surrogate’s Court, New York County Clerk’s Index No. 2604/08
Court of Appeals
of the
State of New York
Proceeding of KEVIN AOKI, KANA AOKI NOOTENBOOM, KYLE AOKI
and KENNETH PODZIBA, as Trustees of the Benihana Protective Trust, for Relief
with Respect to the Benihana Protective Trust dated June 8, 1998 by and between
Rocky H. Aoki, as grantor, and Kevin Aoki and Darwin C. Dornbush, as trustees,
for the benefit of Rocky H. Aoki and others.
————————————————————————————
KEVIN AOKI, KANA AOKI NOOTENBOOM, KYLE AOKI and KENNETH PODZIBA,
Petitioners,
– against –
ECHO AOKI, OLIVIA YUMI NOOTENBOOM, NATALIE EMI NOOTENBOOM,
SKY AI AOKI, NOA AOKI, DEVON AOKI and STEVEN AOKI,
Respondents,
– and –
KEIKO ONO AOKI,
Appellant.
BRIEF FOR RESPONDENTS DEVON AOKI
and STEVEN AOKI
Of Counsel:
DAVID C. ROSE
ANDREW M. GOLDSMITH
PRYOR CASHMAN LLP
Attorneys for Respondents Devon Aoki
and Steven Aoki
7 Times Square
New York, New York 10036
Tel.: (212) 421-4100
Fax: (212) 326-0806
July 9, 2015
i
TABLE OF CONTENTS
TABLE OF AUTHORITIES .................................................................................... iv
COUNTERSTATEMENT OF
QUESTIONS PRESENTED ...................................................................................... 1
PRELIMINARY STATEMENT ............................................................................... 2
STATEMENT OF FACTS ...................................................................................... 10
A. Procedural History ..................................................................................... 11
B. Facts Relevant to the Motion For Summary Judgment ............................. 13
1. Rocky Creates the BPT ......................................................................... 15
2. Rocky Marries Keiko Who Refuses
to Sign a Postnuptial Agreement .......................................................... 15
3. The Releases Are Identified as a
Means of Effecting Rocky’s Wishes ...................................................... 18
4. The One-Page Releases Prominently
State They Are Irrevocable ................................................................... 20
5. The Releases Are Carefully Explained and Executed .......................... 21
6. Disputes Emerge Among Rocky, Dornbush and
Rocky’s Children Concerning Unrelated Issues .................................. 24
7. Keiko and Her Counsel Learn of the Releases ..................................... 25
8. Rocky Revises His Will and Dies Having
Never Challenged The Validity of The Releases .................................. 28
ii
ARGUMENT ........................................................................................................... 30
I. THE APPELLATE DIVISION CORRECTLY APPLIED
SETTLED JURISPRUDENCE OF CONSTRUCTIVE FRAUD .............. 30
A. The Decision Is Entirely Consistent
With Settled Jurisprudence of This State ........................................... 31
B. Keiko Proposes A Novel, Indefinite and
Impractical Rule That Would Fundamentally
Undermine the Public Policy of this State ......................................... 38
C. The Decision Is Entirely Consistent
With Settled Principles of Equity ...................................................... 45
D. The Decision Is Entirely Consistent
With the Law of Other States ............................................................. 49
II. THE APPELLATE DIVISION CORRECTLY
HELD THAT CONSTRUCTIVE FRAUD
IS NOT APPLICABLE TO THIS CASE ................................................... 53
A. Dornbush And Shaw Were Not Parties
To The Releases And Had No Interest In Them ................................ 53
1. Dornbush and Shaw Faithfully Served Rocky’s
Interests, Which Were United with Kana and Kevin’s ............... 55
2. The Dornbush Firm Did Not Form
an Attorney-Client Relationship with
Kana and Kevin with Respect to the Releases ............................ 62
3. Dornbush and Shaw Did Not
Benefit From the Transaction ...................................................... 65
III. THE DECISION ALSO SHOULD BE AFFIRMED OWING
TO THE ABSENCE OF ANY MISREPRESENTATION OR
CONCEALMENT AND THE ABSENCE OF REASONABLE
RELIANCE BY ROCKY .......................................................................... 68
iii
IV. AT MOST, THE COURT SHOULD REMIT THIS CASE TO
THE APPELLATE DIVISION TO PASS ON ISSUES RAISED
BUT NOT REACHED ON DEVON AND STEVEN’S APPEAL .......... 71
CONCLUSION ........................................................................................................ 73
iv
TABLE OF AUTHORITIES
CASES PAGE(s)
Addis v. Grange,
358 Ill. 127 (1934) ................................................................................. 49, 50, 51
Allen v. La Vaud,
213 N.Y. 322 (1915) ............................................................................ 5, 7, 32, 38
Aoki v. Benihana, Inc.,
58 F. Supp. 3d 439 (D. Del. 2014) ......................................................... 19, 29, 66
Baker v. Humphrey,
101 U.S. 494 (1880) .......................................................................................... 53
Benihana of Tokyo, Inc. v. Benihana, Inc.,
891 A.2d 150 (Del. Ch. 2005),
aff’d, 906 A.2d 114 (Del. 2006) ...................................................... 24, 58, 59, 67
Benihana of Tokyo, Inc. v. Benihana, Inc.,
No. 550-N, 2005 Del. Ch. LEXIS 19 (Del. Ch. Feb. 4, 2005) ........................... 24
Bibeau v. Ward,
228 A.D.2d 943 (3d Dep’t 1996) ....................................................................... 70
Brown v. Lockwood,
76 A.D.2d 721 (2d Dep’t 1980) ......................................................................... 70
Conti v. Polizzotto,
243 A.D.2d 672 (2d Dep’t 1997) ...................................................................... 64
Cowee v. Cornell,
75 N.Y. 91 (1878) ....................................................................................... passim
Cowen v. Adams,
78 F. 536 (6th Cir. 1897), aff’d, 177 U.S. 471 (1900) .......................... 50, 51, 52
Cron v. Cron,
8 A.D.3d 186 (1st Dep’t 2004) ........................................................................... 34
v
CASES PAGE(s)
Doheny v. Lacy,
168 N.Y. 213 (1901) ................................................................................. 5, 31, 38
Matter of Eckart,
39 N.Y.2d 493 (1976) .............................................................................. 6, 39, 45
Ehrlich-Bober & Co. v. University of Houston,
49 N.Y.2d 574 (1980) ............................................................................... 6, 31, 39
Fisher v. Bishop,
36 Hun. 112 (4th Dep’t 1885) ............................................................................ 36
Fisher v. Bishop,
108 N.Y. 25 (1888) ........................................................................... 35, 36, 37, 41
Franzek v. Calspan Corp.,
78 A.D.2d 134 (4th Dep’t 1980) ........................................................................ 43
Gardine v. Cottey,
360 Mo. 681 (1950) ...................................................................................... 52, 62
Gordon v. Bialystoker Center & Bikur Cholim, Inc.,
45 N.Y.2d 692 (1978) ............................................................................. 32, 35, 38
Greenfield v. Philles Records,
98 N.Y.2d 562 (2002) ..................................................................................... 6, 39
Matter of Greiff,
92 N.Y.2d 341 (1998) ................................................................................. passim
In re Haskell’s Trust,
59 Misc. 2d 797 (Sup. Ct. N.Y. Co. 1969), aff’d,
34 A.D.2d 734 (1st Dep’t 1970) ......................................................................... 20
Horn v. Municipal Info. Servs.,
282 A.D.2d 712 (2d Dep’t 2001) ....................................................................... 58
vi
CASES PAGE(s)
Jane St. Co. v. Rosenberg & Estis, P.C.,
192 A.D.2d 451 (1st Dep’t 1993) ....................................................................... 64
Jemrock Realty Co. v. Krugman,
13 N.Y.3d 924 (2010) ......................................................................................... 71
Kane v. Estia Greek Rest., Inc.,
4 A.D.3d 189 (1st Dep’t 2004) ........................................................................... 54
Levin v. Kitsis,
82 A.D.3d 1051 (2d Dep’t 2011) ....................................................................... 38
Mali v. De Forest & Duer,
160 A.D.2d 297 (1st Dep’t 1990) ....................................................................... 65
Matter of Aoki v. Aoki,
117 A.D.3d 499 (1st Dep’t 2014) ............................................................... passim
Matter of Aoki,
99 A.D.3d 253 (1st Dep’t 2012) ................................................................. passim
Matter of Barabash,
84 A.D.3d 1363 (2d Dep’t 2011) ....................................................................... 34
Matter of Nealon,
104 A.D.3d 1088 (3d Dep’t 2013),
aff’d w’out op., 22 N.Y.3d 1045 (2014) .............................................................. 38
Matter of O’Hara,
85 A.D.2d 669 (2d Dep’t 1981) ......................................................................... 38
Matter of Paul,
105 A.D.2d 928 (3d Dep’t 1984) ....................................................................... 43
Morby v. Di Siena Assocs. LPA,
291 A.D.2d 604 (3d Dep’t 2002) ................................................................. 42, 70
vii
CASES PAGE(s)
New York Tel. Co. v. Jamestown Tel. Corp.,
282 N.Y. 365 (1940) ........................................................................................... 47
Olitkowski v. St. Casimer’s Sav. & Loan,
302 Mich. 303 (1942) ......................................................................................... 52
Papell v. Calogero,
68 N.Y.2d 705 (1986) ......................................................................................... 71
Pimpinello v. Swift & Co.,
253 N.Y. 159 (1930) ............................................................................... 42, 43, 70
Richter v. Richter,
180 Ala. 218 (1913) ............................................................................................ 52
Roberson v. Rochester Folding Box Co.,
171 N.Y. 538 (1902) ........................................................................................... 45
Schneider v. Finmann,
15 N.Y.3d 306 (2010) ......................................................................................... 65
Shapiro v. Health Ins. Plan of Greater N.Y.,
7 N.Y.2d 56 (1959) ............................................................................................. 54
Matter of Smith,
243 A.D. 348 (4th Dep’t 1935) ........................................................................... 43
Smith v. Smith,
134 N.Y. 62 (1892) ............................................................................................. 43
Tajan v. Pavia & Harcourt,
257 A.D.2d 299 (1st Dep’t 1999) ....................................................................... 39
Ten Eyck v. Whitbeck,
156 N.Y.341 (1898) ............................................................................................ 32
Tropp v. Lumer,
23 A.D.3d 550 (2d Dep’t 2005) ......................................................................... 64
viii
CASES PAGE(s)
Zanett Lombardier, Ltd. v. Maslow,
29 A.D.3d 495 (1st Dep’t 2006) ......................................................................... 69
OTHER AUTHORITIES
27A Am. Jur. 2d Equity § 83 (2008) ...................................................................... 45
1 Story, Commentaries on Equity Jurisprudence (13th ed. 1886) .......................... 48
7 Arthur L. Corbin, Corbin On Contracts
(Joseph M. Perillio ed., Rev. ed. 2002) .............................................................. 43
Charles A. Wright & Arthur R. Miller, Federal Practice & Procedure
(3d ed. 2004) ....................................................................................................... 41
55 N.Y. Jur. Equity § 75 (2d ed.) ............................................................................. 45
Pomeroy’s Equity Jurisprudence
(Spencer W. Symons ed. 5th ed. 1941) .............................................................passim
Harvard Law Review, Appellate Review In The Federal Courts Of Findings
Requiring More Than A Preponderance Of The Evidence,
60 Harv. L. Rev. 111 (1946) .............................................................................. 41
Respondents Devon Aoki (“Devon”) and Steven Aoki (“Steven”),
respectfully submit this brief in opposition to the appeal of Appellant Keiko Ono
Aoki (“Keiko”), which seeks reversal of the Decision and Order of the Appellate
Division, First Department entered May 13, 2014 (the “Decision”). See Matter of
Aoki v. Aoki, 117 A.D.3d 499 (1st Dep’t 2014).
COUNTERSTATEMENT OF
QUESTIONS PRESENTED
1. Can a claim for constructive fraud by a fiduciary exist, and the burden
to prove the validity of a transaction shift to the proponent, where the fiduciary was
not a party to the transaction and gained no benefit from it?
The Appellate Division unanimously and correctly answered this question in
the negative. Respondents respectfully submit this Court should affirm.
2. Does a factual record require summary judgment dismissing a
constructive fraud claim where it is devoid of any competent, non-speculative
evidence to suggest that the party signing the document was misled as to its effect
or denied any information required to make an informed decision, and where, to
the contrary, the record objectively establishes that all reasonable efforts were
taken to apprise the signing party of the effect of the document, the signing party
was given the opportunity to read the document before signing it, the signing party
admitted through sworn testimony that he received a full explanation of the
document, and the signing party – being indisputably fully aware of the
2
document’s effect for at least five years prior to his death – never took any action
to invalidate the document or to hold those alleged to have defrauded him
accountable for purportedly having done so?
The Appellate Division unanimously and correctly answered this question in
the affirmative. Respondents respectfully submit this Court should affirm.
3. If the Appellate Division’s order granting summary judgment is not
affirmed, should the case be remitted to the Appellate Division for review of the
facts?
Respondents respectfully submit that should this Court need to reach this
question, the Court should answer it in the affirmative.
PRELIMINARY STATEMENT
Devon and Steven are two of seven children of Rocky Aoki, the founder of
the Benihana restaurant chain, which Rocky developed into an international
success. This action concerns distribution of the 1998 Benihana Protective Trust
(“BPT”), which holds assets relating to Benihana. The BPT Trust Agreement gave
Rocky the power to appoint the beneficiaries of the BPT through his will.
In September 2002, following his sudden marriage to Keiko, his third wife,
Rocky signed an irrevocable partial release of his testamentary power to appoint
the beneficiaries of the BPT (the “September Release”), which limited his ability to
appoint the beneficial interest in the BPT assets to only his descendants,
3
necessarily excluding Keiko. To address certain regulations concerning
nonresident aliens, Rocky signed a second, largely identical release in December
2002 (the “December Release,” together with the September Release, the
“Releases”). Besides being irrevocable as a matter of law, the one-page Releases
prominently and purposefully state that Rocky was “irrevocably” limiting his
power of appointment and amplify their permanence by further stating that “from
now on, I shall have only the following power.”
After Rocky died, Keiko sought to invalidate the Releases contending that
they were obtained through the “constructive fraud” of Rocky’s attorneys who
drafted them. Rocky, although indisputably aware of the limitations the Releases
imposed on his power of appointment for almost five years prior to his death, never
sought to invalidate the Releases or hold anyone to account for allegedly
defrauding him.
The Surrogate nevertheless held the Releases invalid as procured by the
constructive fraud of Rocky’s lawyers, though the lawyers were not parties to the
transaction and gained nothing by it. This was, as the Appellate Division
recognized in reversing the Surrogate – and granting Devon and Steven summary
judgment declaring the Releases valid – a total misapplication of the constructive
4
fraud doctrine, which doctrine puts a hard-to-sustain burden of proof on interested
fiduciaries who enter transactions with their principals.
1
Keiko now asks the Court to reverse the Appellate Division and to extend
the doctrine of constructive fraud to every case in which a fact-finder concludes
that lawyers have failed sufficiently to explain a transaction to their client. The
potential consequences of this rule – which is completely without precedent – are
disastrous. No will, contract or similar instrument would be safe from challenge
and none could be safely relied on; the validity of every document signed on a
lawyer’s advice would be subject to a case-by-case examination of how well the
lawyer did his or her job. Indeed, according to Keiko, any such instrument is
presumptively invalid unless a court later finds the lawyer’s explanation of it to be
without flaw, a standard few, if any, lawyers can meet.
Thus, at issue is whether this Court should expand the doctrine of
constructive fraud and depart from the centuries-old imperative that the burden of
proof shifts to the proponent of an instrument to disprove fraud only where a
confidential relationship exists “between the contracting parties” or where the
fiduciary involved with the subject transaction “has secured what appears to be a
1
Owing to the validity of the Releases, pursuant to Rocky’s will, Devon and Steven will each
receive one-half of the BPT assets when they turn 45, respectively, with Keiko serving as
Trustee and controlling those assets in the interim. As discussed below, the Releases were
purposefully drafted to allow Rocky to appoint the BPT assets in trust so that he could name
whomever he liked as the trustee to control the assets for the benefit of whichever of his
descendants he ultimately appointed the beneficial interest in those assets.
5
gratuitous benefit or undue advantage” at the expense of the confiding party.
Cowee v. Cornell, 75 N.Y. 91, 99-100 (1878); Allen v. La Vaud, 213 N.Y. 322, 326
(1915). That well-formed principle persists because where a confidential
relationship exists “between contracting parties,” or where a fiduciary stands to
obtain an advantage at the expense of the confiding party, the danger of
exploitation of the confiding party’s trust by the fiduciary for his own advantage is
deemed so great, that fraud is presumed. Doheny v. Lacy, 168 N.Y. 213, 223
(1901); Cowee, 75 N.Y. 99-100.
Departing from that long-standing rule, which the Appellate Division
correctly applied below, and embracing the “malleable,” unbounded construct that
Keiko proposes, would undercut and infect this state’s equity jurisprudence.
Indeed, expanding the doctrine of constructive fraud as Keiko requests would
extend the ability of a person to invalidate a document to any situation where a
lawyer (and thus a fiduciary) drafted a document for a client and is alleged to have
inadequately explained it, even where the lawyer is not a party to the document or
interested in the transaction sought to be avoided. The proposed rule would
obviate a client’s obligation to read and understand documents he is signing when
drafted by his attorney and instead, make an attorney responsible for having
explained every word to the subjective satisfaction of a reviewing court years
later. That rule will allow parties to come back, when circumstances have changed,
6
memories have faded and witnesses have died, and claim they did not know what
they were signing, in an effort to invalidate documents and transactions they no
longer desire. This standard will spawn protracted fact-based litigation and imperil
the rights of parties to or benefitted by documents based on the alleged omissions
of another’s counsel.
Thus, the indefinite, boundless rule Keiko proposes would erode
jurisprudential stability, undermine the certainty and confidence parties can place
in the permanence and enforceability of signed commercial and personal
documentation and irrevocably impair New York’s “undisputed status as the pre-
eminent commercial and financial nerve center of the Nation and the world …
which dispassionately administers a known, stable, and commercially sophisticated
body of law … .” Ehrlich-Bober & Co. v. University of Houston, 49 N.Y.2d 574,
581 (1980) (internal citations omitted); see also Matter of Eckart, 39 N.Y.2d 493,
500 (1976) (stability in judicial pronouncements is especially important when the
question involves rules concerning the transfer of property or testamentary
dispositions); Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 573 (2002)
(judicial decisions should aim to “ensure stability in the law and provide guidance
to parties weighing the risks and advantages of entering a binding agreement”).
The negative impact on commerce cannot be over emphasized.
7
Once the flaws in Keiko’s legal analysis are recognized, the facts of this case,
as the Appellate Division recognized, require summary judgment for Devon and
Steven.
Keiko’s assertion that Rocky’s lawyers were interested fiduciaries is simply
baseless. Entirely absent from the present record is evidence that a confidential
relationship existed “between the contracting parties” or that the fiduciaries
(Rocky’s attorneys) abused their position of power to obtain “a gratuitous benefit”
or an “undue advantage” at the expense of the confiding party (Rocky). Cowee, 75
N.Y. 99-100; Allen, 213 N.Y. at 326. Indeed, Keiko’s repeated accusations against
Rocky’s attorneys – that they “secretly worked” for two of Rocky’s seven children,
Kana Aoki Nootenboom (“Kana”) and Kevin Aoki (“Kevin”), behind his back and
against his wishes and that they “secretly worked” to “cement” their position as
advisors to Benihana – have not a single record reference as support. Keiko has
simply made up that theory.
2
In fact, the actual record overwhelmingly and objectively establishes that:
Rocky actively participated in the process that led to the Releases
being executed in 2002;
When Rocky signed the Releases in 2002, he and his children were
united in interest and shared a common goal in ensuring that Benihana
assets would remain within the family notwithstanding his sudden
marriage to Keiko two months earlier;
2
There is no allegation that Devon and Steven engaged with Rocky’s attorneys or that they had
any connection to the creation or execution of the Releases.
8
Rocky’s attorneys faithfully advanced Rocky’s interests, which were
communicated to them by Rocky himself, and “took all reasonable
efforts to apprise Rocky” of the substance and effect of the Releases;
Rocky signed the Releases after being provided an opportunity to read
them and ask any questions regarding them on two separate occasions;
Rocky admitted through sworn testimony that his attorney explained
what the Releases were “all about”;
Rocky consciously elected not to read the September Release because
he did not want to “waste everybody’s time”;
When Keiko belatedly learned of the Releases and confronted Rocky,
he told her he had signed them to “make [his] children happy;” and
Rocky died in 2008 – six years after signing the Releases and five
years after Keiko learned of their existence – without ever seeking to
invalidate them or to hold those Keiko alone has alleged defrauded
him accountable for purportedly doing so.
See pp. 13-29 infra.
Fundamentally, Rocky did not remotely exhibit the conduct of someone
deceived into limiting the persons to whom he could leave the BPT assets. To the
contrary, and as the Appellate Division aptly recognized (Aoki, 117 A.D.3d at 504),
the notion that Rocky was the victim of fraud or misled is objectively undermined
by the fact that despite being indisputably aware that the Releases were irrevocable
for almost five years prior to his death, he never undertook any effort to invalidate
them or to hold those Keiko alleges defrauded him accountable. That indisputable
fact manifests an intention that the Releases not be disturbed, or at the least, a
9
recognition by Rocky that he could not contend he did not understand they were
irrevocable when he signed them in 2002. That fact also establishes that no
advantage was taken of Rocky and that there is no circumstance for equity to
address in this case.
It is important to understand that Rocky was not averse to litigation with his
children or his attorneys when he felt aggrieved. As discussed below, in the years
following execution of the Releases, Rocky sued his children and one of the
attorneys who had drafted the Releases concerning unrelated issues pertaining to
governance of the BPT and Benihana.
3
But Rocky never sued anyone regarding
the Releases. And it was Rocky’s decision – not Keiko’s – to seek to rescind the
Releases if he thought he had been defrauded by his lawyers or if the Releases did
not comport with his ultimate wishes. Rocky consciously never did so and this
Court should not do for Keiko after Rocky died what Rocky was unwilling to do
for her while he was alive. Indeed, invalidation of the Releases now, will allow
judicial speculation and conjecture to supplant Rocky’s actual and purposeful
conduct.
Ultimately, the Appellate Division correctly determined that constructive
fraud has no application to the facts of this case because Rocky’s attorneys were
not parties to or interested in the Releases, Keiko failed to adduce any competent,
3
Rocky sued Kana and Kevin, not Devon and Steven.
10
non-speculative evidence even to suggest the existence of a conspiracy among
Rocky’s children and his lawyers to defraud Rocky and Rocky himself never
sought to invalidate the Releases despite having been aware of the limitations they
imposed on the disposition of the BPT assets. Accordingly, Devon and Steven
respectfully request that the Decision appealed from be affirmed in its entirety.
Finally, even if this Court were to accept all of Keiko’s arguments, it cannot,
as Keiko requests, reinstate the Surrogate’s order. If Devon and Steven are not
entitled to summary judgment, the Appellate Division must review the Surrogate’s
findings of fact. The trial record shows that Rocky signed perfectly clear Releases
that were explained to him in simple English by his lawyers. The Releases meant,
the lawyers told Rocky: “you can only leave [the property at issue] to your
children.” The Appellate Division would, on factual review, have a more than
ample basis to find that the Releases were valid and binding.
STATEMENT OF FACTS
Before narrating the procedural history and the facts in the record, Devon
and Steven must call attention to one serious misstatement in Keiko’s brief. She
says, at page 3: “The lawyers’ motive for participating in the scheme was a desire
to find favor with the children and thereby secure for themselves millions of
dollars in future legal and consulting fees.”
11
This statement is wholly false, and has no foundation in the record. Keiko
did not even try to argue anything like this before the Appellate Division (and thus
it is not preserved for appeal). The assertion in Keiko’s brief is made without any
citation to the record, for the obvious reason that nothing supports it.
This inaccuracy is no small matter because, as the Appellate Division held
and as demonstrated below, the absence of any personal interest or involvement of
the lawyers in the transaction in suit is fatal to Keiko’s case.
4
A. Procedural History
The former Trustees of the BPT commenced this proceeding in the
Surrogate’s Court to determine the validity of the Releases to know how to
distribute BPT assets and to address certain estate tax issues. R.46.
Following discovery, Devon and Steven moved for summary judgment to
dismiss Keiko’s defenses and counterclaims that sought to invalidate the Releases
and, thus, to declare the Releases valid. R.736. Keiko opposed the motion
contending, among other things, that the Releases were procured by the
constructive fraud of Rocky’s attorneys. R.795.
4
Keiko’s approach in this regard is not limited to the foregoing misstatement. The essence of
her argument exudes it. In seeking to convince this Court to invalidate the Releases based on the
speculative, unsupportable assertion that Rocky was somehow deceived by faithless fiduciaries
when his own conduct manifests the very opposite, Keiko asks this Court to upend the
jurisprudence of this state in service of her vain, purely self-interested pursuit to achieve for
herself, now that Rocky has died, something Rocky was never prepared to do for her.
12
Invoking the doctrine of constructive fraud, the Surrogate denied summary
judgment with respect to Keiko’s affirmative defense of fraud and shifted the
burden to Devon and Steven to disprove fraud on the part of Rocky’s attorneys
who represented him with respect to the Releases because those attorneys, who
were not parties to or interested in the Releases and never found to be, owed Rocky
a fiduciary duty. R.730-733.
5
The specific issues identified by the Surrogate for
trial were: “(1) whether Rocky was unaware that he was irrevocably giving up his
power to assign his interest in the BPT to anyone (including his wife Keiko) other
than certain of his descendants and, (2) if he was unaware, whether the proponents
of the releases can meet their burden of showing that his signature was nonetheless
voluntary and not the result of misrepresentation or omission by his counsel and
fiduciaries, [Darwin] Dornbush and [Norman] Shaw.” R.733 (emphasis in
original).
The case was tried to the Surrogate (Glen, S.) on September 13-15, 2010,
with the record left open to address certain evidentiary issues, which occurred after
unsuccessful settlement efforts. R.14; R.467.
Ultimately, the Surrogate issued a trial decision on December 27, 2012
holding the Releases invalid (the “Trial Decision”). R.14. A decree declaring the
5
The Surrogate dismissed, or Keiko otherwise abandoned, her remaining defenses. R.733-734.
13
Releases invalid pursuant to the Trial Decision was entered on March 5, 2013 (the
“Decree”). R.12.
On July 9, 2013, the Appellate Division, First Department stayed the Decree
as to the transfer of the BPT’s non-cash assets, denied Keiko’s request for a bond
and denied a request for a stay of distribution of cash to Keiko.
Thereafter, on May 13, 2014, the Appellate Division, First Department
unanimously reversed the Surrogate’s denial of summary judgment to Devon and
Steven and declared the Releases valid, holding, as a matter of law, that the
Releases were not procured through fraud. Aoki, 117 A.D.3d at 502-504. The
Appellate Division denied Keiko’s motion for leave to appeal to this Court on
October 14, 2014.
On February 24, 2015, this Court granted Keiko leave to appeal.
B. Facts Relevant to the Motion For Summary Judgment
In stating the facts, Devon and Steven will cite, as Keiko does, evidence
both from the summary judgment motion and the trial. Both tell essentially the
same story, and the trial record is more detailed. It is important to remember,
however, that in granting summary judgment to Devon and Steven, the Appellate
Division based its decision on the summary judgment record, which, like the trial
record, establishes that Rocky’s attorneys were not parties to or interested in the
Releases, that they undertook all reasonable efforts to apprise Rocky of the
14
substance and effect of the Releases, that Rocky signed the Releases after being
provided an opportunity to read them, that Rocky admitted through sworn
testimony that his attorney explained what the September Release was “all about,”
that Rocky claimed he consciously elected not to read that Release because he did
not want to “waste everybody’s time” and that Rocky signed the Releases to “make
[his] children happy.” See Aoki, 117 A.D.3d at 503; R.804-805 (105:10-106:3);
R.594 (143:16-22); see also pp. 15-29 infra.
Notwithstanding the fact that the Appellate Division granted summary
judgment to Devon and Steven, Keiko’s brief improperly and heavily relies on the
trial record, and the demonstrably speculative inferences drawn from it in the Trial
Decision, while asserting that the Appellate Division “disregarded the Surrogate’s
findings” and “did not declare any of the Surrogate’s findings erroneous.” See
Keiko Br. 24, 44. That is not true. The Appellate Division did not reach the
factual findings of the Surrogate in the Trial Decision – erroneous as they were –
precisely because it awarded summary judgment to Devon and Steven.
Regardless, and since the trial record actually reinforces the propriety of the
Appellate Division’s Decision, Devon and Steven recount the entire factual Record
to provide the Court with full context.
15
1. Rocky Creates the BPT
Rocky, one of the most successful businessmen of the last century, created
the BPT in 1998 to hold stock and other assets relating to Benihana. R.499.
6
Rocky retained a power of appointment over the BPT, allowing him to appoint it in
his will to anyone except himself, his estate, his creditors or the creditors of his
estate. R.501. Among the trustees Rocky selected for the BPT were two of his
seven children (Kana and Kevin) and his long-time attorney, Darwin Dornbush
(“Dornbush”). R.499.
2. Rocky Marries Keiko Who Refuses to Sign a Postnuptial Agreement
Rocky secretly married Keiko, his third wife, in a City Hall ceremony in the
summer of 2002. See Matter of Aoki, 99 A.D.3d 253, 256 (1st Dep’t 2012).
7
He
told his son Kevin he did so because Keiko’s astrologist said they had to get
married on a particular date. R.277 (193:13-21). Kevin, who had been “really
involved in [his] father’s life,” asked Rocky if he signed a prenuptial agreement,
because when Kevin had gotten married, Rocky helped him obtain one. R.279
(195:12-21); see also R.792-793 (101:23:102:7); R.802 (94:9-12). Rocky said he
6
Rocky created the BPT after he had been accused of insider trading. R.722-723. Benihana,
Inc. and a company called Benihana of Tokyo, Inc. (“BOT”) became concerned that liquor
licenses for the restaurants could be revoked. Id. Rocky had previously sold many restaurants to
Benihana, Inc., a public company, retaining a block of its stock through BOT. Id.
7
This decision was issued in a proceeding regarding the probate of Rocky’s Will.
16
had not, but Keiko was “willing to sign anything.” R.279 (195:12-21); see also
R.813 (54:20-25).
Thereafter, Kevin and his sister Kana expressed to Dornbush “their concern
that their father had gotten married and that there was no prenuptial agreement.”
R.847 (56:6:17); see also R.305 (221:10-23). Dornbush responded, “we’ve got to
talk to your dad. This is up to him.”
R.305 (221:10-23); R.847 (57:18-24).
8
When Rocky learned of Kana and Kevin’s concern, he began “looking for a
way to assuage” his children because he “wanted to bring peace between himself
and his children.” R.813 (55:13-56:15); R.770-771 (64:22-65:2); see also R.783
(83:11-21); R.314 (230:11-20).
Thereafter, to address Rocky’s concerns, Dornbush and Rocky “discussed
and belabored” the issue where Rocky was “the focal point” and where Rocky was
at all meetings and on all calls. R.308-309, 311 (224:24-225:17, 227:2-8); see also
R.770-771 (64:8-65:2). Indeed, Dornbush unequivocally testified that “Rocky
asked what could be done to solve his problem,” that Dornbush viewed it as
“Rocky’s problem” and that Dornbush “did what [Rocky] wanted accomplished,
which [was] to get back in favor with his children.” R.852 (95:13-20) (emphasis
added); R.314 (230:11-20); see also R.317 (233:12-25) (Dornbush: “it was Rocky
who was upset, and it was Rocky who I was trying to accommodate”).
8
Devon and Steven played no part in these discussions and are not alleged to have done so.
17
Regarding the first effort to address the situation, Dornbush testified:
Q: Did you ever meet with Rocky and Keiko to discuss the
problem that had been brought to your attention?
A: Backing up to the beginning of this process, before the
children had asked Keiko, as I understand they did, to sign the
postnuptial agreement, I asked Rocky if he and I could meet with
Keiko and her representative, and he said he would – yes, he would
like to do that. And he made an appointment, I remember, to meet at
a particular restaurant, at a particular time, and Rocky came alone and
merely said that Keiko didn’t want to come, she didn’t feel well.
R.311 (227:12-21); see also R.771-773 (65:24-67:3).
After Keiko did not come to the meeting, Kana and Kevin “proposed to
Keiko, during a dinner arranged by Rocky in September 2002 for that purpose, that
she and Rocky sign a postnuptial agreement.” R.723 (emphasis added). Keiko
“refused to sign any documents.” R.280 (196:24-197:5); R.813 (54:20-55:12).
Later, Rocky suggested a second dinner; Kevin arranged it and he, Rocky and
Keiko attended. R.284-285 (200:11-201:13). When Kevin raised the postnuptial
agreement, Keiko “got excited,” Rocky said words to the effect of “take it easy,
we’ll figure this out” and no further discussion occurred. Id. Rocky had asked his
children to raise the concept of a postnuptial agreement because he felt
“uncomfortable asking.” R.793 (102:11-17).
Accordingly, Keiko’s insinuation that Dornbush discussed the concept of a
postnuptial agreement with Kana and Kevin behind Rocky’s back and without his
knowledge, conflicts with a voluminous factual record establishing otherwise.
18
3. The Releases Are Identified as a Means of Effecting Rocky’s Wishes
Owing to Keiko’s refusal to sign a postnuptial agreement, Dornbush testified
he asked his partner, Norman Shaw (“Shaw”) to explore an alternative means of
accomplishing Rocky’s wishes, and Shaw thereafter identified the possibility of
Rocky partially releasing his power of appointment. R.313-314 (229:21-230:20);
see also R.852 (94:12-22). Before drafting the Releases, however, Shaw drafted
two memoranda, one titled, “Action Plan for Rocky’s Consideration,” and one
titled, “Discussion Outline for Meeting with Rocky Aoki,” which reveal a
thoughtful approach and confirm Rocky’s active participation in the process
leading to the Releases. R.894; R.573.
9
Critically, Shaw indicated in a subsequent August 2003 memorandum that
when seeking to implement what Rocky wanted to do, he rejected a complete
release of Rocky’s power of appointment. R.905. Instead, because the BPT was
intended to “leave [Rocky] with as close as possible to the outright ownership of
the BOT shares as he then had, [Dornbush and Shaw] presented Rocky with the
least restrictive alternative,” i.e., the partial Release. Id. As Shaw explained, while
the Release limited Rocky’s power so that he could appoint beneficial interests in
the BPT property only to his descendants, it allowed him to “pick and choose
9
While Keiko speculates that Dornbush and Shaw never provided copies of these memos to
Rocky, the memos nevertheless objectively manifest an intention on the part of Dornbush and
Shaw to focus on Rocky, to meet with Rocky on the subject and to achieve what he wanted
accomplished.
19
among his descendants, and even to cut out any one or more of them.” Id. More
importantly, the Release also left Rocky with the power to appoint the BPT assets
in trust for his descendants, with the trustee who would actually control the assets
being entirely his choice and unrestricted in any way. R.906.
The control purposefully reposed in and retained by Rocky is demonstrated
by the fact that while he left the Releases undisturbed, ensuring the BPT assets
would remain in the family, he designated Keiko as trustee and she will control the
BPT assets – and more importantly, the Benihana “purse strings” – until Devon
and Steven are 45. R.547-500, 555 (Article VI, VIII and XVII); see also Aoki v.
Benihana, Inc., 58 F. Supp. 3d 439, 442 (D. Del. 2014).
Thus, the Releases were drafted to accomplish Rocky’s goal of assuring his
children that Keiko would not seize the BPT assets, while giving Rocky complete
control to decide: (i) which of his descendants received the assets; (ii) when they
received them; (iii) how they received them; and (iv) who controlled them.
Notably, even though a postnuptial agreement was “off the table” and
“Keiko would not sign,” Dornbush sought to persuade Rocky to put it back on the
table. R.315-316 (231:19-232:5). Dornbush testified that: “[a]t lunch one time I
mentioned to Rocky, if you could persuade Keiko to sign a postnuptial agreement,
Rocky, you could still do what you want to do in your Will, but not if you sign [the
20
Release].” R.306 (222:13-21). Keiko still refused. Ultimately, Rocky instructed
Dornbush to “go ahead” with the Release. R.321 (237:10-12).
Simply put, Rocky asked Dornbush to help him allay the concerns he shared
with his children, and, as Keiko testified, when she confronted Rocky about the
Releases – which he had never told her about – Rocky acknowledged he signed
them to make his children happy. R.594 (143:16-22).
4. The One-Page Releases Prominently State They Are Irrevocable
The September Release limited Rocky’s power of appointment to only his
descendants and was irrevocable as a matter of law. See, e.g., In re Haskell’s Trust,
59 Misc. 2d 797 (Sup. Ct. N.Y. Co. 1969), aff’d, 34 A.D.2d 734 (1st Dep’t 1970).
Shaw testified that since the Release was irrevocable as a matter of law, he
purposefully drafted it to include the word “irrevocably” to make its permanence
clear and because “when you are showing a document to somebody, I’m sort of
expanding on this now, you want to make sure that he or she understands what it is
they are signing.” R.399 (315:5-26); see also R.788-789 (95:25-96:21). Thus, the
operative clause of the one-page September Release conspicuously states:
I hereby irrevocably partially release the power of appointment [in
Article V(a) of the BPT agreement] so that, from now on, I shall have
only the following power:
I shall have a testamentary power to appoint any of the principal and
accumulated net income remaining at my death to or for the benefit of
any one or more of my descendants.
21
R.744 (emphasis added).
Shaw also aptly noted that “[i]f the release was not irrevocable, then it was
pointless.” R.399 (315:5-19). Rocky did not need to sign anything if he wanted to
retain the ability to leave Keiko the BPT assets.
5. The Releases Are Carefully Explained and Executed
After Shaw prepared the September Release, Shaw, Dornbush and Rocky
met in Dornbush’s office where it was explained to Rocky. R.320-321 (236:18-
237:18); see also R.788-789 (95:25-96:21); R.856 (107:5-20).
10
As Dornbush testified:
I said, “Rocky, when you sign this piece of paper,” this was on the
23rd and/or the 24th, “Rocky, when you sign this piece of paper, that
means you will no longer be entitled in your will to leave the BOT
stock to anyone you choose. Right now you can give it to the ASPCA.
After you sign this piece of paper, you can only leave it to your
children,” I don’t know if I used the word descendants, I probably
said children, in whatever amounts and however disproportionately or
to none that you want,” that’s what I told him the effect of signing the
partial release was all about.
R.365 (281:4-20) (emphasis added); see also R.856 (107:5-20).
11
Dornbush also
testified that he read the Release to Rocky twice because he “thought it was kind of
10
Dornbush’s time-sheets show that Dornbush met with Rocky, Kevin and Kana on
September 23, 2002 and again on September 24, 2002, the day Rocky signed the September
Release. R.897.
11
Keiko argues that Dornbush’s explanation falls short because he did not use the word
“irrevocable” in describing the Release to Rocky and because his testimony was purportedly
self-serving given the contention that he was involved in a scheme to defraud Rocky. Keiko Br.
p. 43. However, if Dornbush’s testimony was motived by self-interest, he could have
“remembered” he used the word “irrevocably” with Rocky. To the contrary, Dornbush’s
22
important that he knew what he was signing,” and he told Rocky that after signing
the Release, his children would be “the only group that can get the stock.” R.319-
323 (235:8-239-12); see also R.856 (107:5-20). Dornbush also saw Rocky read
the Release. R.325 (241:2-3).
12
Likewise, Shaw also took care to explain the Release:
THE WITNESS: … in the context of his having had a meeting for
approximately an hour beforehand with the lawyer with whom he
dealt most of the time in the Dornbush firm, namely, Darwin
Dornbush … I said to him in substance, “Rocky, you understand you
are giving up your power to appoint the Benihana stock so that from
now on you can only appoint to your children or descendants,” or
words to that effect.
R.411-412 (327:11-328:2) (emphasis added); see also R.788-789 (95:25-96:21);
R.829 (197:12-16) (Shaw: “I explained it to [Rocky] as best I could”). Thus, Shaw
advised Rocky he was “giving up” his power to appoint the BPT to anyone but his
children, necessarily excluding Keiko. Id. That Dornbush and Shaw did not
specifically mention Keiko or use the word “wife” is of no consequence. Rocky
could not claim confusion as to whether Keiko was one of his children.
testimony that he did not use that word was remarkably candid for someone accused of
concealing irrevocability in a scheme to defraud Rocky. If anything, Dornbush’s admission that
he did not use the word “irrevocable” makes highly credible his recitation of the plain language
explanation he provided to ensure Rocky did understand the document and establishes his
credibility generally.
12
It is undisputed that Rocky conducted his business in English and that former Supreme Court
Justice Ira Gammerman determined Rocky spoke English “quite well.” R.935-936 (9:8-10:14).
23
Critically, Rocky admitted in a deposition he gave in an unrelated
proceeding that he received a full explanation of the Release: when asked “Did
Norman [Shaw] tell you what [the September Release] was all about?” Rocky
responded unequivocally, “Yes.” R.804-805 (105:23-106:3); see also Aoki, 117
A.D.3d at 503. Indeed, when Keiko confronted Rocky about the Releases, which
Rocky knew he had signed but never disclosed to her (R.805 (107:4-6)), he told
Keiko he signed them “to make [his] children happy.” R.594 (143:16-22).
13
In short, nothing about the Releases or their effect was concealed from
Rocky; everything was affirmatively explained to him. Indeed, “[t]here is no
evidence in the record that either Dornbush or Shaw ever represented to [Rocky]
that the waivers were anything but irrevocable.” Aoki, 117 A.D.3d at 503.
14
As the Appellate Division correctly held, Dornbush and Shaw “took all
reasonable efforts to apprise Rocky of the effect of what he was signing” and
Rocky had an opportunity to read the one-page Releases – on two separate
occasions – before signing them from which he also would have known they
13
Keiko misleadingly states the Release was “buried in a stack of papers during a meeting
scheduled for other purposes.” Keiko Br. p. 3. That “stack” consisted of six pages of paper;
each concerned Rocky’s estate planning and the BPT. R.522-523 (amendment to BPT); R.541-
542 (the Release); R.591-592 (codicil to prior will).
14
Keiko’s speculation that the explanations of the Releases in the deposition testimony of
Dornbush and Shaw might not have adequately conveyed permanence is belied by the plain
language they used.
24
irrevocably limited his ability to give the BPT assets to only his descendants. Aoki,
117 A.D.3d at 503.
6. Disputes Emerge Among Rocky, Dornbush and
Rocky’s Children Concerning Unrelated Issues
In “early 2003” – before Keiko discovered the existence of the Releases,
which Rocky had concealed from her, and before Rocky executed a codicil to his
will as described below – Rocky had become displeased with certain of his
advisors and family members, including Kana, Kevin and Dornbush, as a result of
their perceived mismanagement of Benihana and the BPT. See Benihana of Tokyo,
Inc. v. Benihana, Inc., 891 A.2d 150, 158 (Del. Ch. 2005), aff’d, 906 A.2d 114
(Del. 2006); Benihana of Tokyo, Inc. v. Benihana Inc., No. 550-N, 2005 Del. Ch.
LEXIS 19, at *7-8 (Del. Ch. Feb. 4, 2005).
15
Ultimately, these disputes led to Rocky suing Dornbush in Delaware (see id.)
and separately suing Kana and Kevin in an action commenced in Supreme Court,
New York County under Index No. 601500/2006.
16
To be clear, these lawsuits
concerned issues relating to governance of Benihana and the children’s conduct as
trustees of the BPT; they had nothing to do with the Releases.
15
In particular, the Benihana Board added two additional directors who were “friends” of a third
director whom Rocky disliked without consulting Rocky. 2005 Del. Ch. LEXIS 19, at *7.
Rocky later wrote to Dornbush in June 2003 to voice his displeasure. Id. at *8.
16
Dornbush prevailed at trial and was exonerated of wrongdoing. Rocky never accused Devon
or Steven of wrongdoing.
25
Thus, Rocky commenced litigation when he felt aggrieved. Critically,
however, Rocky never sued his attorneys, his children or anyone else regarding the
Releases.
7. Keiko and Her Counsel Learn of the Releases
On August 5, 2003, nearly a year after execution of the September Release
and after disputes first arose among Rocky, Dornbush and Rocky’s children,
Joseph Manson III (“Manson”), Keiko’s “regular counsel,” wrote Dornbush and
informed him that Rocky had executed a codicil to his will (the “Codicil”) and that
Dornbush would no longer be the executor of Rocky’s estate. R.607; Aoki, 117
A.D.3d at 501.
17
During a breakfast meeting on August 28, 2003, Manson asked
Dornbush to opine on the validity of the Codicil, which purported to give Keiko a
beneficial interest in the BPT. R.344-345 (260:11-261:2); R.648.
18
When
Dornbush explained that he needed Rocky’s authorization to evaluate the Codicil,
Rocky purportedly faxed it. R.656. To be sure it was truly Rocky’s desire to have
17
Notably, the legal fees associated with the changes to Rocky’s testamentary plans were billed
to Keiko’s company, Altesse. See Aoki, 99 A.D.3d at 259.
18
Keiko adopts the Surrogate’s erroneous speculation in the Trial Decision that Rocky’s
execution of the Codicil and the request that Dornbush confirm its validity indicates that Rocky
did not know the Releases were irrevocable. Keiko Br. pp. 18-19. That position should be
rejected given the demonstrable involvement of Rocky in the process leading to execution of the
Releases discussed above. Moreover, the Surrogate ruled at trial that the Codicil was hearsay
and could not be used as evidence that Rocky sought to exercise the power he had released.
R.179-180 (95:12-96:15). The Surrogate also ruled that Rocky’s request for a review of the
Codicil could not be used to show that Rocky thought the Codicil was valid or actually wanted
confirmation of its validity. R.201-202 (117:15-118:12). Yet, in an effort to reach a particular
result, Keiko compounds the Surrogate’s error and improperly tries to use the Codicil for those
very precluded purposes.
26
the Codicil evaluated and the Releases disclosed to Manson and Keiko, Shaw
asked to speak with Rocky directly. R.419 (335:8-19); R.635.
Dornbush memorialized the August 28, 2003 meeting in a memorandum that
same day (R.749), which he dictated but did not read, resulting in objective
imprecision. R.348 (264:10-19). The memo – which was placed in Rocky’s estate
planning file, to which Rocky had access (R.348-349 (264:20-265:5)) – contains
several drafting errors, one of which states, “[u]ndoubtedly, the fur will fly when
Manson and his clients, Keiko and Rocky, discover the existence of the executed
Partial Release.” R.749.
19
At trial, the Surrogate questioned Dornbush directly
about this:
THE COURT: Did you, at the time that you wrote this, believe
that Rocky did not know of the existence of the partial release?
THE WITNESS: No, Your Honor, but that was sloppy on my
part. I was persuaded beyond belief that Rocky knew about the partial
release but I do not believe that he told Keiko that he signed the
document. And that’s what I meant that the fur would fly when Keiko
and Mr. Manson found out, when they found out about the existence
of the partial release.
R.352 (268:7-19); see also R.863 (230:10-233:14).
Dornbush’s explanation is objectively corroborated. He could not possibly
have believed Rocky did not know about the Releases. As shown, Rocky actively
participated in the process that led to the Releases, Rocky testified he did not tell
19
Other errors include Manson’s name is misspelled “Mansion,” and Dornbush’s comment about
internecine warfare in the Aoki family was written as “intersene.”
27
Keiko about the Releases after signing them, indicating he knew he had signed
them and, understandably, did not want Keiko to learn of their existence, Keiko
testified that when she confronted Rocky about the Releases, he conceded he
signed them to “make [his] children happy,” further establishing he knew about
them and why he had signed them, and Rocky testified that Shaw explained what
the September Release was “all about.” See pp. 15-24 supra.
Most critically, and as the Appellate Division rightly observed, despite being
indisputably aware for almost five years that the Releases were irrevocable and
that he could not give Keiko a beneficial interest in the BPT assets, “at no time
prior to his death in July 2008 did Rocky take any steps to declare the releases
invalid, or otherwise challenge their execution.” Aoki, 117 A.D.3d at 501. Nor did
Rocky sue Dornbush or Shaw or anyone else regarding the Releases.
On September 8, 2003, Shaw sent the opinion Manson had requested, stating
that the portion of the Codicil giving Keiko a beneficial interest in the BPT was
invalid because the Releases rendered Keiko an impermissible appointee. R.911.
20
20
At that time, when it was clear Manson represented Rocky and it was apparent that there
would likely be a dispute between Rocky and his children, the Dornbush firm sought to find the
BPT trustees, who included Kevin and Kana, new counsel because of what Shaw described to
new counsel as “disagreements that are evolving with their father,” disagreements that did not
exist in 2002 when Rocky signed the Releases. R.657 (emphasis added). Keiko contends that
arranging counsel for the BPT trustees and sending counsel documents the trustees, as trustees,
and their counsel had every right to possess (R.657-58), somehow demonstrates disloyalty to
Rocky. Actually, the Dornbush firm’s efforts in that regard underscore the utmost loyalty to
Rocky, confirming the Dornbush firm would not take a position adverse to him even though he
was now represented by Manson.
28
Thereafter, Shaw sent an opinion letter to the trustees of the BPT, including Kana
and Kevin, expressing substantially the same opinion. R.636.
21
8. Rocky Revises His Will and Dies Having
Never Challenged The Validity of The Releases
On September 7, 2007, approximately four years after delivery of the
September 8, 2003 opinion – and having taken no action to invalidate the Releases
or to hold his lawyers accountable for allegedly deceiving him – Rocky executed
his final Will (the “Will”) which provided for alternate dispositions of the BPT
contingent on the validity of the Releases. R.545. If the Releases are affirmed as
valid, Devon and Steven each receive 50% of the BPT assets upon attaining the
age of 45, with Keiko serving as trustee until that time. R.547-500, 555 (Article VI,
VIII and XVII). If the Releases are invalid, Keiko would receive 25% of the BPT
outright, receive the income from the remaining 75% for her life and decide which
of Rocky’s issue would receive that remainder when she died. Id.
22
21
The Dornbush firm had represented the BPT Trustees, and as trustees they were entitled to
such an opinion. Keiko’s grasping suggestion that Kana and Kevin “reward[ed]” Dornbush and
Shaw for allegedly deceiving Rocky with legal fees by requesting that letter should be
disregarded.
22
While Rocky stated in his 2007 Will that the Releases were “contrary to [his] desires” at that
time, that is not probative of what Rocky knew and intended when he signed them under very
different circumstances in 2002. Further, if Rocky’s purported desire in 2007 actually accorded
with his intent in 2002, and if his 2007 Will was anything more than an effort to placate Keiko,
Rocky would have given effect to it and challenged the Releases while alive. However,
everything that followed revelation of the Releases to Keiko in September 2003 supports the
conclusion that Rocky was trying to placate his wife while refraining from taking direct action to
rescind the documents. Keiko can only speculate as to why Rocky did not seek to invalidate the
Releases. The fact of the matter is that he did not and his manifest, objective choice in that
regard should not be judicially second guessed now that he has died.
29
Rocky died in July 2008 and Keiko became trustee of the BPT assets when
the Will was admitted to probate in 2010. Aoki, 99 A.D.3d at 255, 259-60. Keiko
remains trustee to this day, is in full control of the BPT assets and has appointed
herself CEO of BOT, installed her own management team and eliminated
Dornbush from the Benihana business. See Aoki, 58 F. Supp. 3d at 442.
23
Thus,
owing to the control purposely reposed in and retained by Rocky with respect to
the Releases, Keiko as trustee – and not Rocky’s children – presently controls the
BOT “purse strings.” Keiko also was named Executrix of Rocky’s estate and
received a substantial inheritance of real property, cash and other assets under the
Will. R.545, 555.
Ultimately, however, any claim of fraud with regard to the Releases –
whether actual or constructive – is rendered illusory and is objectively refuted by
Rocky’s own conduct in never seeking to invalidate the Releases or to hold those
alleged to have defrauded him accountable for purportedly doing so.
23
See also < http://www.benihana-of-tokyo.com/corporate_activities.php?activity_page_id=3>
30
ARGUMENT
I. THE APPELLATE DIVISION CORRECTLY APPLIED
SETTLED JURISPRUDENCE OF CONSTRUCTIVE FRAUD
Erroneously invoking the doctrine of constructive fraud, the Surrogate held
that because Rocky’s attorneys – who were not parties to or interested in the
Releases – owed him a fiduciary duty, Keiko did not need to prove that Rocky was
defrauded, but rather that the burden should shift to Devon and Steven to prove
that Rocky signed the Releases voluntarily and not because of misrepresentation or
omission by his attorneys. R.731-733. In applying constructive fraud, however,
the Surrogate eliminated the fundamental requirement that the fiduciary exploit the
relationship of trust for his or her own benefit.
Recognizing the Surrogate’s error, the Appellate Division reversed and
correctly applied the enduring rule that “for constructive fraud to apply, the
fiduciary must be a party to or have an interest in the subject transaction.” Aoki,
117 A.D.3d at 502-503 (citations omitted) That rule, which has been applied and
reaffirmed by New York courts for more than a century, fully accords with general
principles of equity, fosters commercial certainty, maintains the confidence parties
can place in the permanence and reliability of signed documentation and upholds
New York’s “undisputed status as the pre-eminent commercial and financial nerve
center of the Nation and the world … which dispassionately administers a known,
31
stable, and commercially sophisticated body of law…” Ehrlich-Bober & Co. v.
University of Houston, 49 N.Y.2d 574, 581 (1980) (internal citations omitted).
A. The Decision Is Entirely Consistent
With Settled Jurisprudence of This State
In 1878, this Court set forth the standard of constructive fraud:
It may be stated as universally true that fraud vitiates all contracts, but
as a general thing it is not presumed but must be proved by the party
seeking to relieve himself from an obligation on that ground.
Whenever, however, the relations between the contracting parties
appear to be of such a character as to render it certain that they do not
deal on terms of equality but that either on the one side from superior
knowledge of the matter derived from a fiduciary relation, or from
overmastering influence, or on the other from weakness, dependence,
or trust justifiably reposed, unfair advantage in a transaction is
rendered probable, there the burden is shifted, the transaction is
presumed void, and it is incumbent upon the stronger party to show
affirmatively that no deception was practiced, no undue influence was
used, and that all was fair, open, voluntary and well understood.
Cowee v. Cornell, 75 N.Y. 91, 99-100 (1878) (emphasis added) (citations omitted).
That rule, which has been affirmed and reaffirmed countless times,
manifests the justifiable concern that where a confidential relationship exists
between contracting parties, or where a fiduciary has an interest in the subject
transaction, the fiduciary may – even without intent – exploit the relationship of
trust for his or her own benefit. See, e.g., Doheny v. Lacy, 168 N.Y. 213, 223
(1901) (the burden-shift only applies “where the circumstances have created what
the law regards as a fiduciary relation and where, as a safer general assumption, it
regards one as the stronger party and, therefore, as bound, in every transaction with
32
the other, to establish, affirmatively, its good faith and propriety”); Allen v. La
Vaud, 213 N.Y. 322, 326 (1915) (the burden-shift applies “where the dominating
party has secured what appears to be a gratuitous benefit or undue advantage”);
Gordon v. Bialystoker Ctr. and Bikur Cholim, Inc., 45 N.Y.2d 692, 698 (1978)
(“where a fiduciary relationship exists between parties, ‘transactions between them
are scrutinized with extreme vigilance …’”), quoting, Ten Eyck v. Whitbeck, 156
N.Y.341, 353 (1898).
Thus, crucial to the application of constructive fraud – and entirely absent
from the present record – is competent, non-speculative evidence that the stronger
party abused his position of power to obtain “a gratuitous benefit” or an “undue
advantage” at the expense of the confiding party. Allen, 213 N.Y. at 326. Stated
differently:
Whenever two persons stand in such a relation, that while it continues,
confidence is necessarily reposed by one, and the influence which
naturally grows out of that confidence is possessed by the other, and
this confidence is abused, or the influence is exerted to obtain an
advantage at the expense of the confiding party, the person so availing
himself of his position will not be permitted to retain the advantage …
3 Pomeroy’s Equity Jurisprudence § 956 (Spencer W. Symons ed. 5th ed. 1941)
(emphasis added; citation omitted).
Here, the Appellate Division declined to apply constructive fraud precisely
because Dornbush and Shaw were not parties to and had no interest in the Releases.
Aoki, 117 A.D.3d at 502-504. As a consequence, there was no occasion for
33
Dornbush and Shaw to take “undue advantage” of Rocky or to obtain a “gratuitous
benefit” from him.
24
While Keiko focuses on the “superior knowledge” Dornbush
and Shaw purportedly possessed with respect to the Releases, she overlooks that
Dornbush and Shaw did not use that “superior knowledge” for their own benefit.
25
To the contrary, the Appellate Division properly rejected Keiko’s unsupported
speculation that Dornbush and Shaw “secretly deployed” their “superior
knowledge” to further their own interests, or those of Kana and Kevin, and
correctly recognized that Dornbush and Shaw had no interest in the Releases. Id.;
see also pp. 53-68 infra.
This Court’s most recent examination of constructive fraud fully accords
with its prior precedent and reinforces that constructive fraud applies when a
confidential relationship exists “between the contracting parties” or where a
fiduciary abuses his position of power for his own benefit. Matter of Greiff, 92
N.Y.2d 341, 345 (1998) (citations & quotations omitted). Keiko relies heavily on
Greiff, but fundamentally misconstrues the case and the rule it articulates.
In Greiff, a husband and wife had entered into reciprocal prenuptial
agreements pursuant to which each waived his and her statutory right of election.
24
In fact, the Releases eliminated Dornbush and Shaw as potential beneficiaries of the BPT.
25
That Dornbush and Shaw may have possessed “superior knowledge” with regard to the
Releases is no different from any transaction in which an attorney counsels his or her client.
That fact illustrates the danger that the unbounded, result-oriented rule of constructive fraud
Keiko conjures poses to the attorney-client relationship.
34
92 N.Y.2d at 343-344. Upon her husband’s death, Mrs. Greiff contended the
prenuptial agreements had been procured through fraud. Id. at 344. The narrow
question assessed by this Court was whether the “special relationship” that exists
between betrothed parties rises to the level of a confidential relationship in which
one party could take advantage of the other, which would then warrant the
application of constructive fraud to transactions entered between them. Id. at 343.
In assessing the nature of the contracting parties’ relationship, this Court
“eschew[ed] absolutist rubrics” and declined to supply a “categorical rule” to the
determination of whether a confidential relationship exists in connection with
prenuptial agreements. Id. at 346.
26
In that regard, this Court concluded that the
burden-shift “can be applicable in the context of prenuptial agreements” if – given
the facts of a particular case – a confidential, unequal relationship existed between
the contracting parties. Id. at 345 (emphasis added); see also Matter of Barabash,
84 A.D.3d 1363, 1364 (2d Dep’t 2011) (declining to apply burden shift because
spouse failed to demonstrate a “fact-based particularized inequality”) (citation &
quotation omitted); Cron v. Cron, 8 A.D.3d 186, 186 (1st Dep’t 2004) (citing
26
The fact based inquiry the Court mandated in Greiff was expressly intended “to clarify,
harmonize and find a happy medium of views reflected in the cases” addressing whether
prenuptial agreements were presumptively fraudulent owing to the nature of the relationship
between the parties intending to marry. Greiff, 92 N.Y.2d at 346. Older cases, employing
outdated social norms, had held that prospective spouses stood in a confidential relationship
because the man “‘naturally’ had disproportionate influence over the woman he was to marry.’”
Id. (citations omitted). Later and more progressive cases rejected the “inherent inequality
assumption as between men and women … .” Id. (citations omitted). The Court in Greiff sought
to resolve these differing views.
35
Greiff and finding the opponent of a prenuptial agreement “failed to carry her
burden to demonstrate that the agreement was the product of fraud … .”).
Thus, Greiff did not expand the doctrine of constructive fraud. The
discussion in Greiff of “absolutist rubrics” and rigid “legalisms” solely concerned
the question of whether betrothed parties in a particular case occupy a confidential
relationship, not whether constructive fraud may be invoked where a fiduciary is
not a party to, and has no interest in, the transaction. Indeed, by quoting from its
earlier decisions, this Court expressly reaffirmed in Greiff that for constructive
fraud to apply, the party standing in a confidential relationship must have an actual
interest in the transaction:
Whenever … the relations between the contracting parties appear to
be of such a character as to render it certain that … either on the one
side from superior knowledge of the matter derived from a fiduciary
relation … unfair advantage in a transaction is rendered probable … it
is incumbent upon the stronger party to show affirmatively that no
deception was practiced, no undue influence was used, and that all
was fair, open, voluntary and well understood.
Greiff, 92 N.Y.2d at 345, quoting Gordon, 45 N.Y.2d at 698-699, quoting, Cowee,
75 N.Y. at 99-100 (emphasis added; italicized emphasis in original).
Likewise, Fisher v. Bishop, 108 N.Y. 25 (1888) – also heavily relied on but
misconstrued by Keiko – fully reinforces the propriety of the Decision. In Fisher,
this Court invoked the doctrine of undue influence to set aside a mortgage
36
extracted from an elderly farmer by his creditors, including Sluman L. Wattles,
who had served as the farmer’s longtime legal advisor.
27
The Appellate Division’s underlying decision in Fisher, which included a
fuller recitation of the facts than this Court’s decision in the case, shows that
Wattles, in addition to the other defendant, Bishop, was in fact a party to the
mortgage and a creditor of the farmer. Fisher v. Bishop, 36 Hun. 112, 115 (4th
Dep’t 1885) (“Wattles and Bishop took undue advantage of the plaintiff, and by
means thereof and the duress found, secured to themselves the bond and
mortgage.”) (emphasis added); see also id. at 113 (Wattles “secured from the
plaintiff the bond and mortgage”).
28
That Wattles was a party to the mortgage
accorded with this Court’s equally important finding that Wattles obtained a
“personal advantage” from the transaction. 108 N.Y. at 30.
Seeking to overcome these inconvenient facts, Keiko contends that this
Court’s decision did not “hing[e] on Wattles being a party to the transaction or
27
Seizing upon this Court’s allegedly cursory discussion of the factual record, Keiko erroneously
proclaimed in her motion for leave that: “[t]his Court held that the mortgage had to be set aside,
even though Wattles was evidently not among the [farmer’s] creditors or a party to the
mortgage.” See Keiko Lv. Br. p. 27. Keiko further posited that “[t]he logical conclusion to be
drawn … is that Wattles was the farmer’s fiduciary, but not his creditor.” Id. at p. 28 n. 15. In
that regard, Keiko argued that this Court’s statement, that the “defendants” – i.e., Wattles and the
other defendant, Bishop – “obtained the bond and mortgage in suit” (108 N.Y. at 27), did not
prove that Wattles was a party to the mortgage since the Court “lump[ed] Wattles in among the
other ‘defendants’ as a matter of shorthand.” See Keiko Lv. Br. p. 28 n. 15. Apparently, Keiko
still subscribes to that mistaken notion, erroneously claiming “this Court did not even mention”
that Wattles was a party to the mortgage. See Keiko Br. p. 33.
28
A copy of the Appellate Division’s decision is attached as Exhibit A.
37
having an interest in it.” Keiko Br. p. 33. To Keiko, this Court’s holding rested on
Wattle’s exploitation “of his position of trust ‘to the detriment or disadvantage’” of
his client. Id., quoting, Fisher, 108 N.Y. at 29. But Keiko ignores the necessary
and corresponding finding that Wattles gained a “personal advantage” through his
exploitation of the farmer’s trust and that Wattles and Bishop “procure[d] from
[the farmer] a valuable security to which they had no legal right.” Fisher, 108 N.Y.
at 30; see also id. at 29 (“When [a confidential] relation is shown to exist it
imposes the burden of proof upon the person taking securities, or making contracts
inuring to his benefit, to show that the transaction is just and fair, and that he has
derived no unfair advantage from his fiduciary relation”) (citation omitted;
emphasis added).
Thus, Fisher only reinforces that for constructive fraud to apply, a fiduciary
must be a party to, or have an interest in, the subject transaction. Keiko’s
continued reliance on Fisher – and her careful obfuscation of the facts – confirms
the complete absence of legal authority to support her position.
Indeed, Keiko’s brief strains to read the basic requirement of an interested
fiduciary out of this Court’s long-standing rule. And, in doing so, she is forced to
make the incredible, unsupportable suggestion that the statement of that
requirement again and again, by court after court, is simply a form of “shorthand”
38
and is not really what all of those courts have meant for well over a century. See
Keiko Br. p. 35.
Ultimately, however, the Appellate Division here correctly applied settled
principles of constructive fraud, principles that have been the law of this state for
more than a century and reaffirmed and relied upon repeatedly. See, e.g., Cowee,
75 N.Y. at 99-100; Gordon, 45 N.Y.2d at 698-699; Greiff, 92 N.Y.2d at 345;
Doheny, 168 N.Y. at 223; Allen, 213 N.Y. at 326; Levin v. Kitsis, 82 A.D.3d 1051,
1054 (2d Dep’t 2011); Matter of Nealon, 104 A.D.3d 1088, 1088-1089 (3d Dep’t
2013), aff’d w’out op., 22 N.Y.3d 1045 (2014).
29
B. Keiko Proposes A Novel, Indefinite and Impractical Rule That
Would Fundamentally Undermine the Public Policy of this State
The settled formulation of constructive fraud, articulated by this Court in
Cowee and correctly applied by the Appellate Division below, serves several
fundamental ends.
Properly applied, this Court’s rule fosters commercial certainty and
jurisprudential stability, it upholds the confidence parties can place in the
permanence and enforceability of signed documentation and it promotes New
York’s “undisputed status as the pre-eminent commercial and financial nerve
29
Likewise, Matter of O’Hara, 85 A.D.2d 669 (2d Dep’t 1981), also reinforces the propriety of
the Decision. In O’Hara, the Second Department rejected the application of constructive fraud
precisely because the attorneys at issue were not fiduciaries of the plaintiff at the time of
contracting with her. Id. at 671.
39
center of the Nation and the world … which dispassionately administers a known,
stable, and commercially sophisticated body of law … .” Ehrlich-Bober, 49
N.Y.2d at 581 (internal citations omitted). As this Court has found, stability in
judicial pronouncements is especially important when the question involves rules
concerning the transfer of property or testamentary dispositions. Matter of Eckart,
39 N.Y.2d 493, 500 (1976); see also Greenfield v. Philles Records, Inc., 98 N.Y.2d
562, 573 (2002) (judicial decisions should aim to “ensure stability in the law and
provide guidance to parties weighing the risks and advantages of entering a
binding agreement”).
Indeed, this Court’s rule ensures that legal documents will not be held
“‘forever hostage to legal afterthoughts’” and prevents parties from disavowing an
understanding of a document after the document later becomes undesirable simply
because that party’s lawyer (i.e., a fiduciary) drafted it and is alleged to have
explained it inadequately. Aoki, 117 A.D.3d at 503, quoting, Tajan v. Pavia &
Harcourt, 257 A.D.2d 299, 306 (1st Dep’t 1999).
The nebulous rule that Keiko proposes – where the burden-shift is to be
decided on a case-by-case basis “when circumstances warrant” – would shift to
attorneys (and innocent counterparties) the risk of clients not reading documents
drafted for them, obviate clients’ obligation to read and understand documents and
make attorneys responsible for explaining every word and permutation of a
40
document to the satisfaction of the reviewing court years later when circumstances
have changed, memories have faded and witnesses have died. That rule would
prevail and protracted fact based litigation – with all its attendant uncertainty –
would be engendered even where, as here, the lawyers are not parties to or
interested in the subject transaction and the predicate factual record
overwhelmingly evinces that the attorneys “took all reasonable efforts to apprise
Rocky of the effect of what he was signing.” Aoki, 117 A.D.3d at 503.
Such a standard would fundamentally alter the attorney-client relationship,
imperil the rights of parties to or benefitted by documents based on the alleged
omissions of another’s counsel and dramatically increase claims for legal
malpractice (and fraud). It also would create manifest uncertainty among those
signing commercial contracts and estate planning documents – particularly in
delicate intra-family settings – as to whether such documents will ultimately be
enforced.
Departing from the rule this Court articulated in Cowee, and which the
Appellate Division correctly applied below, would allow for parties like Keiko to
shift the burden of proof upon the barest of speculation and conjecture. That rule
would upend the centuries-old requirement that a party asserting fraud must allege
fraud with particularity and prove each and every element with clear and
convincing evidence. Notably, the clear and convincing evidence standard exists,
41
among other reasons, because fraud claims are “inherently subject to fabrication.”
Harvard Law Review, Appellate Review In The Federal Courts Of Findings
Requiring More Than A Preponderance Of The Evidence, 60 Harv. L. Rev. 111,
112 (1946); see also Charles A. Wright & Arthur R. Miller, Federal Practice &
Procedure § 1296 (3d ed. 2004) (“The utility of promoting stability in economic
transactions has considerable force and might be compromised if fraud claims were
easy to assert”).
Instead, this Court’s enduring rule of constructive fraud properly calibrates
the risk that a fiduciary may, even without intent, exploit the relationship of trust
for his own benefit when the fiduciary is a party to or has an interest in the subject
transaction. The burden-shift simply has no place in the absence of such
circumstances and extending constructive fraud beyond its present confines would
wreak incalculable havoc on the jurisprudence of this state.
Recognizing the inherent impracticality of the “malleable” rule she
proposes, Keiko, at one point, relying on Fisher (which as noted above she
misconstrues), separately posits what she calls the “appropriate rule,” contending
that it requires constructive fraud to be applied where “a party’s trusted fiduciary
secretly works to advance the interests of another party to a transaction” and
thereby abuses the confidential relationship to obtain an advantage which he
cannot conscientiously retain. See Keiko Br. p. 33. However, a party cannot be
42
permitted simply to allege with speculation and surmise that a conspiracy exists
and thereby shift the burden of proof to the alleged conspirators. Not an iota of
evidence exists to demonstrate, or even to suggest, that Dornbush and Shaw
“secretly worked” for Kana and Kevin to advance the latter’s interests or abused
their relationship with Rocky to obtain any advantage for themselves in connection
with the Releases. See pp. 15-29 supra; pp. 53-68 infra. That unrebutted fact
renders the “appropriate rule” Keiko posits wholly inapplicable to the facts of this
case, leaving only Keiko’s amorphous, impractical rule, which should be rejected
for the reasons set forth above.
Finally, an independent and additional reason that the rule set forth in Cowee
should be reaffirmed resides in the fact that New York courts uniformly prohibit
parties from evading the effect of documents by later claiming they did not
understand what they were signing:
Ordinarily, the signer of a deed or other instrument, expressive of a
jural act, is conclusively bound thereby. That his mind never gave
assent to the terms expressed is not material. If the signer could read
the instrument, not to have read it was gross negligence; if he could
not read it, not to procure it to be read was equally negligent; in either
case the writing binds him
Pimpinello v. Swift & Co., 253 N.Y. 159, 162-163 (1930) (internal & other
citations omitted; emphasis added); see also Morby v. Di Siena Assocs. LPA, 291
A.D.2d 604, 606 (3d Dep’t 2002) (“the allegedly fraudulent misrepresentation …
could have been readily discovered upon the reading of the document, and plaintiff
43
cannot now avoid his obligations under a release he did not read merely by
asserting that he ‘thought’ it was something else”) (citation omitted).
And while “there is an exception to the general rule that places the burden of
reading on the signing party where a person is induced to sign a legal document by
one standing in a fiduciary relation to that person,” that rule only applies “where
the fiduciary has an interest in the document’s execution.” 7 Arthur L. Corbin,
Corbin On Contracts, § 29.9 (Joseph M. Perillio ed., Rev. ed. 2002) (expressing the
rule with the conjunction “and”) (citation omitted); see also Franzek v. Calspan
Corp., 78 A.D.2d 134, 138 (4th Dep’t 1980) (duty to read applies unless there is a
showing of positive fraud or “a special relationship exist[s] between the
parties…”) (emphasis added).
30
Thus, a party cannot be permitted to manufacture his own ignorance and
then seek to invalidate a document by claiming his attorney did not explain it
30
Concededly, where the other party positively and intentionally misrepresents the contents of
the document to the signer, the writing is void, “unless the signer be negligent … .” Pimpinello,
253 N.Y. at 163. The cases upon which Keiko relies hold consistently. See, e.g., Smith v. Smith,
134 N.Y. 62, 64 (1892) (duty to read overcome because counterparty “knowingly and falsely
represented” the contents of the document); Matter of Smith, 243 A.D. 348, 354 (4th Dep’t 1935)
(duty to read overcome since fiduciary, who gained personal benefit from transaction,
misrepresented the contents of the document, claiming it was a partnership agreement when, in
fact, it effected a relinquishment of the signer’s rights to the fiduciary’s property); Matter of
Paul, 105 A.D.2d 928, 929-30 (3d Dep’t 1984) (duty to read overcome because fiduciary
relationship existed between contracting parties and fiduciary directly benefitted from waiver
executed in his favor and did not provide a full and fair explanation of the document at issue).
Here, however, Dornbush and Shaw “took all reasonable efforts to apprise Rocky of the effect of
what he was signing.” Aoki, 117 A.D.3d at 503. Nor is there anything in the summary judgment
record to rebut Shaw’s sworn testimony that he explained the Releases to Rocky “as best [he]
could.” R.829 (197:12-16).
44
satisfactorily, especially where there is no evidence of any positive or intentional
misrepresentation.
Here, the record on summary judgment, as well as the trial record,
establishes that Rocky, on two separate occasions, had the opportunity to read the
one-page Releases, which prominently state they are irrevocable, that Rocky
consciously elected not to read the September Release because he did not want to
“waste everybody’s time,”
31
that Rocky admitted at his deposition that Shaw
explained what the September Release was “all about,” that Shaw explained the
September Release “as best [he] could” – stating “you’re giving up your power to
appoint to anybody other than your descendants” – and that Rocky signed the
Releases to “make [his] children happy.”
32
Thus, the perceived inadequacy of
Dornbush and Shaw’s explanation – based on nothing but surmise, conjecture and
subjective preferences as to what should have been said – cannot create an issue of
fact where Dornbush and Shaw were not parties to or interested in the
transaction.
33
31
In that regard, as the Appellate Division correctly recognized, “[t]he record is devoid of any
excuse, let alone a valid excuse, for [Rocky] failing to read the release prior to signing it.” Aoki,
117 A.D.3d at 503 (citations omitted).
32
See pp. 13-29 supra.
33
Rocky’s hearsay affidavit – signed a year after the Releases had been executed, after Keiko
injected herself into Rocky’s estate planning and after Kana and Kevin fell out of favor with
Rocky owing to unrelated disputes – in which he states he was unaware the Releases were
irrevocable, does not create an issue of fact for trial. The dispositive question is not what Rocky
subjectively understood, but rather, whether Dornbush and Shaw objectively defrauded Rocky
45
C. The Decision Is Entirely Consistent
With Settled Principles of Equity
Basic tenets of equity jurisprudence counsel that a court of equity “must be
guided by established rules and precedents” and cannot “act on its own notion of
what is right in a particular case.” 55 N.Y. Jur. Equity § 75 (2d ed.). While, in the
early days of chancery jurisdiction, courts of equity rendered judgments “without
regard to principles or precedents,” that “period of infancy” ultimately passed and
an orderly system characterized by adherence to principle and precedent took its
place. Roberson v. Rochester Folding Box Co., 171 N.Y. 538, 546-547 (1902),
superseded by statute on other grounds, citing, 1 Pomeroy’s, § 57.
Indeed, courts of equity have embraced stare decisis, and an observance of
legal maxims more generally, recognizing that “the mischief which [would] finally
result” from engaging in an extemporary approach would be “almost
incalculable.” Id. Thus, “courts of equity may not depart from precedent and
assume an unregulated power of administering abstract justice or act merely upon
their own concept of what is right or wrong in a particular case.” 27A Am. Jur. 2d
Equity § 83 (2d ed.); see also Eckart, 39 N.Y.2d at 500 (stability in judicial
and whether Dornbush and Shaw objectively were parties to, or had an interest in, the Releases.
Neither is true nor supported by any evidence raising a genuine issue of fact, thus requiring that
the Decision be affirmed. Notably, in his affidavit, Rocky never states he was defrauded, never
states he was misled, never states he was duped and never states he was taken advantage of. To
the contrary, the most Rocky is willing to say after the Releases were discovered by Keiko is that
he did not realize he could not later change his mind. And, critically, Rocky never sought to
invalidate the Releases or to hold his attorneys liable for purportedly misleading him.
46
pronouncements is particularly important when the nature of the question involves
rules concerning the transfer of property or testamentary dispositions) (citation
omitted).
Accordingly, settled principles of equity jurisprudence require that the
Decision be affirmed since it fully comports with this Court’s centuries-old
precedent. Keiko’s result-oriented supposition, that the “hallmark of equity
jurisprudence” is “flexibility” and that this Court can and should depart from
established precedent and “mould” its decision “to the necessities” of this case
(Keiko Br. p. 28), has no basis and only underscores Keiko’s manifest
understanding that the Decision fully accords with the law of New York.
34
In that regard, this state has applied and reapplied the settled formulation of
constructive fraud, as articulated in Cowee, for more than a century without ever
offending basic notions of fairness. That is because, in addition to constructive
fraud, a fiduciary him- or herself may always be held accountable to the one he or
she deceives under a multitude of discrete legal doctrines. Thus, Keiko’s
speculation, that courts of equity could be prevented “from protecting victims of
fiduciary malfeasance” absent a “malleable” constructive fraud doctrine (Keiko Br.
p. 4, 41), is incorrect. Indeed, had Rocky truly been deceived or taken advantage
34
Further, the Decision allows for sufficient “flexibility” in its application by permitting a party
to invoke constructive fraud where a fiduciary has a cognizable interest in the subject
transaction. Aoki, 117 A.D.3d at 502-503.
47
of by Dornbush and Shaw, he could have and would have asserted claims against
them for, among other things, breach of fiduciary duty, legal malpractice or actual
fraud.
Rocky consciously chose not to do so despite being aware of the Releases
and their effect for at least five years prior to his death. Aoki, 117 A.D.3d at 503-
504. Now, many years later, after Rocky had died, Keiko impermissibly asks this
Court to do for her what Rocky was not prepared to do while he was alive. See,
e.g., 3 Pomeroy’s, § 897 (avoiding a transaction on the basis of fraud “require[s]
great punctuality and promptness of action by the deceived party upon discovery of
the fraud”); New York Tel. Co. v. Jamestown Tel. Corp., 282 N.Y. 365, 372 (1940)
(“as matter of law, right to rescind [a document] must be exercised promptly after
the injured party learns of the wrong”).
Moreover, Pomeroy’s – also relied on by Keiko – further confirms that when
a party is invoking the presence of a confidential relationship (as Keiko does here)
as the basis for a claim of constructive fraud, the fiduciary must be a party to or
have an interest in the subject transaction. See §§ 955 and 956. In a chapter on
constructive fraud titled “Transactions Presumptively Invalid between Persons in
Fiduciary Relations,” Pomeroy’s explains that “wherever there exists such a
confidence … the court will not allow any transaction between the parties to stand,
unless there has been the fullest and fairest explanation” of the transaction by the
48
person in whom confidence or trust is reposed. Id. at § 956 (citation & quotation
omitted; emphasis added).
35
In that regard, Pomeroy’s carefully distinguishes constructive fraud based on
the presence of a fiduciary relationship from other species of constructive fraud.
Specifically, Pomeroy’s explains that “[t]hree principal classes” of constructive
fraud exist: (i) “That apparent from the intrinsic nature and subject of the bargain
itself,” i.e., illegal contracts, contracts contrary to public policy or contracts for
which there exists an “[i]nadequacy of consideration” (3 Pomeroy’s, at §§ 923,
924); (ii) “That presumed from the circumstances and condition of the immediate
parties to the transaction,” (id. at § 923) i.e., transactions where there exists a
fiduciary relation “between the parties” to the transaction (id. at § 956; emphasis
added); and (iii) “That which is an imposition on third persons not parties to the
transaction,” (id. at § 923) i.e., fraudulent conveyances or “bargains in fraud of
compositions with creditors” (id. at § 966). See § 923. Thus, Keiko’s quotation of
Pomeroy’s for the proposition that “[c]onstructive fraud is simply a term applied to
a great variety of transactions” (Keiko Br. p. 30, quoting, 3 Pomeroy’s, § 922), is
misleading and inaccurate.
36
35
Also consistent with the Decision is 1 Story, Commentaries on Equity Jurisprudence § 308
(13th ed. 1886), which reaffirms that a fiduciary must refrain from “deriv[ing] advantage from
[his] circumstance” and must keep his influence “free from the taint of selfish interests … .”
36
Keiko also misunderstands the significance of Pomeroy’s when she quite correctly declares
that constructive fraud may exist where there is “an intention to deceive, towards a third person,
49
Accordingly, the Decision is entirely consistent with general principles of
equity.
D. The Decision Is Entirely Consistent
With the Law of Other States
Recognizing that not a single case from this state supports the untenable rule
she proposes, Keiko grasps at case law from other states. Yet, those cases only
reinforce the propriety of the Decision.
First, in Addis v. Grange, 358 Ill. 127 (1934), Lloyd, the president of the
local bank and Mrs. Addis’s “closest friend” and a trusted fiduciary, exerted
influence over Mrs. Addis – who, at that time, was “mentally incompetent to make
a deed” – and procured a conveyance of real property from Mrs. Addis to her
daughter, Grange. 358 Ill. at 131-132, 134. Critically, Grange owed Lloyd’s local
bank in excess of $9,000 and intended to use the proceeds from her mother’s
conveyance to satisfy that debt. Id. at 129, 131-132.
On those facts, the Illinois Court found Lloyd was “deeply interested” in the
transaction because he was the bank’s largest shareholder. Addis, 358 Ill. at 135.
The Court further held that “[t]he confidence which [Mrs. Addis] reposed in Lloyd
was betrayed to her detriment and to his advantage.” Id. at 134. Thus, Addis fully
accords with the law of New York and reaffirms that constructive fraud applies
not a party to the transaction.” Keiko Br. p. 30 (emphasis in original), citing, 3 Pomeroy’s, §
922 n. 2. But that is not the case here where the deception alleged was towards Rocky, a party to
the transaction. C.f. 3 Pomeroy’s, § 967.
50
where the fiduciary has an interest in the transaction. Keiko’s contention that
Lloyd “at most had an indirect financial motive” with respect to the transaction is
fundamentally erroneous.
Moreover, while Keiko seizes upon the court’s dicta that “[i]t is of no
consequence by whom the undue influence was exercised” (Keiko Br. p. 37,
quoting, Addis, 358 Ill. at 134), that passage addressed Grange’s exception to her
having to prove Lloyd’s good faith in the transaction when Grange herself was not
alleged to have practiced any deception, an exception correctly rejected by the
court. Id. But the Illinois court’s position in that regard, which is undisputed and
not at issue here, does not affect the prevailing rule that the fiduciaries at issue –
Lloyd in that case or the attorneys here – must be shown to have abused the
confidential relationship for their own benefit.
Second, in Cowen v. Adams, 78 F. 536, 543-544, 551-552 (6th Cir. 1897),
aff’d, 177 U.S. 471 (1900), William Means, a legatee under the decedent’s will and
an individual who had fallen upon “straitened circumstances” and had been
“broken in spirit and wavering in his purposes,” returned his entire legacy – which
comprised the entirety of his worth at the time – to the administrators of the
decedent’s estate who contended that William was indebted to the estate. In
pressuring William to renounce his legacy, the administrators, who owed William
a fiduciary duty as a legatee, obtained a benefit for the estate at William’s expense.
51
Id. at 551. Thus, the administrators had a direct interest in the transaction, which
was to benefit the estate. Accordingly, the Sixth Circuit set aside William’s gift to
the estate, noting that “[w]here [a] transfer is of a large sum, and constitutes the
whole of the property of the party making it … an almost insurmountable
presumption [arises] that there has either been some untoward influence or gross
misconception on the part of the party making it.” Id. at 553. The Court also
explained that to invoke such a presumption, “[t]here must be some relations
between the parties which compel[s] the one to make a full discovery to the other
or to abstain from all selfish projects.” Id. at 552-553. The U.S. Supreme Court
affirmed, finding William made “a gift to the administrators,” having no obligation
to do so, which the administrators then used to benefit the estate. 177 U.S. at 484.
While Keiko insists that the rule set forth in Adams should be applied to the
facts of this case since “Dornbush, after all, was a trustee of the BPT” (Keiko Br. p.
37), she fundamentally overlooks that unlike in Adams, the document at issue here
– the Releases – did not result in a benefit to the BPT or to Dornbush as a trustee of
it. Rather, Dornbush and Shaw drafted a document consistent with Rocky’s wish
to ensure the BPT assets would be left to his children. Adams is fully consistent
with Cowee and the Decision.
37
37
As with Addis, Keiko misleadingly quotes to a passage from Adams, which provides, “‘[i]t
makes no difference that the other legatees would ultimately obtain the benefit of the wrong,’
because ‘[h]owever innocent of it they may be, it would come tainted to their hands.’” Keiko Br.
52
Finally, additional cases from other states cited by Keiko also reinforce the
propriety of the Decision. For example, in Gardine v. Cottey, 360 Mo. 681, 695
(1950), the Supreme Court of Missouri found constructive fraud where an attorney,
Cottey, represented both spouses in a divorce, despite knowing their “interests
directly conflicted,” whereby he convinced the wife to execute an illegal contract
in which she “disposed of her property and marital rights” to the husband.
Significantly, Cottey had his “own interest” in the transaction as the executor of
the husband’s estate. Id. Indeed, the husband, “a sick man,” acquired all of the
wife’s property, which then became part of his estate and ultimately subject to
Cottey’s control. Id.
Likewise, in Olitkowski v. St. Casimer’s Sav. & Loan Ass’n, 302 Mich. 303,
325-326 (1942), the Supreme Court of Michigan found constructive fraud where
an attorney, Kolodziejski, advised his client to execute a contract and invest “in the
defendant association,” a company in which Kolodziejski held an “interest.”
Finally, Richter v. Richter, 180 Ala. 218, 227-230 (1913), is directly analogous to
Greiff. In that case, a husband abused his position of power to ensure his wife
p. 36, quoting, Adams, 78 F. at 553. That dicta addresses the undisputed rule, not at issue here,
that the ultimate proponents of documents obtained through constructive fraud must prove the
documents’ fairness despite their not being the fiduciary who abused the confidential relationship
to obtain a gratuitous benefit. See e.g. Greiff, 92 N.Y.2d at 344-345 (decedent husband’s
children from a prior marriage, who claimed rights arising from prenuptial agreements at issue,
were required to prove their father did not abuse his confidential relationship with respect to his
then-fiancé to obtain a personal advantage from his wife, namely her waiving her statutory right
of election).
53
relinquished “all her rights” in his estate, which rights were worth at least “seven
times” the consideration she paid.
38
Also consistent with the Decision is Baker v. Humphrey, 101 U.S. 494, 502
(1880), whereby Humphrey, the attorney at issue, “carefully concealed” from
Baker, his client, that defects in title existed with respect to the subject real
property, disclosed those defects to Baker’s counterparty, and upon the
counterparty declining to consummate the transaction with Baker, “bought the
property for himself.”
Accordingly, Keiko’s suggestion, that “many cases” – all from other
jurisdictions – “have applied constructive fraud where the disloyal fiduciary was
not a formal party to the transaction,” or otherwise interested in the transaction
(Keiko Br. p. 35), is fundamentally inaccurate.
II. THE APPELLATE DIVISION CORRECTLY HELD THAT
CONSTRUCTIVE FRAUD IS NOT APPLICABLE TO THIS CASE
A. Dornbush And Shaw Were Not Parties
To The Releases And Had No Interest In Them
The Appellate Division correctly concluded that constructive fraud has no
application to the facts of this case because Dornbush and Shaw were not parties to
the Releases and had no interest in them. Aoki, 117 A.D.3d 502-503.
38
The Supreme Court of Alabama also found the agreement unconscionable, noting that “no one
undeluded or not densely ignorant would for a moment entertain, and no fair, just man would
accept” the bargain at issue. Id. at 230.
54
While Keiko repeatedly speculates – without citing to any record evidence –
that Dornbush and Shaw “secretly worked” for Kana and Kevin, to the detriment
of Rocky in order to obtain a benefit for themselves, the record definitively
establishes otherwise. See pp. 15-29 supra; pp. 53-68 infra. Likewise, there is no
competent admissible evidence supporting the wild suggestion that Dornbush and
Shaw “secretly secured” the Releases to ensure continued legal and advisory fees
from Benihana. As this Court has recognized, Keiko’s unfounded speculation and
manifest conjecture in that regard cannot create an issue of fact for trial. Shapiro v.
Health Ins. Plan of Greater New York, 7 N.Y.2d 56, 63 (1959) (“a motion for
summary judgment may not be defeated by charges based upon surmise,
conjecture and suspicion”) (citations & quotations omitted); see also Kane v. Estia
Greek Rest., Inc., 4 A.D.3d 189, 190 (1st Dep’t 2004) (“[r]ank speculation is no
substitute for evidentiary proof in admissible form that is required to establish the
existence of a material issue of fact and, thus, defeat a motion for summary
judgment”) (citations and quotations omitted).
Indeed, Keiko’s conspiracy theory perfectly underscores why New York
courts require that fraud be pleaded with particularity and proved with clear and
convincing evidence. To permit Keiko to shift the burden of proof and proceed to
trial to invalidate a document on the grounds of fraud, based upon the barest of
speculation and conjecture would turn New York jurisprudence on its head. The
55
Appellate Division properly rejected Keiko’s speculation (Aoki, 117 A.D.3d at
502-503), and Devon and Steven respectfully submit that this Court should do the
same.
1. Dornbush and Shaw Faithfully Served Rocky’s
Interests, Which Were United with Kana and Kevin’s
The summary judgment record (as well as the trial record) overwhelmingly
and objectively establishes: (i) that Rocky actively participated in the process that
led to the Releases being executed; (ii) that when Rocky signed the Releases in
2002, he and his children were united in interest and shared the common goal that
Benihana assets would be available for his children notwithstanding his sudden
marriage to Keiko; and (iii) that Dornbush and Shaw faithfully advanced Rocky’s
interests, which were communicated to them by Rocky himself, taking all
reasonable efforts to apprise Rocky of the substance and effect of the Releases. To
reiterate:
When Kana and Kevin expressed their concern to Dornbush that
Rocky had gotten married without a prenuptial agreement, Dornbush
immediately told them “that we needed a meeting with their father.”
R.847 (57:18-24);
When Rocky learned of Kana and Kevin’s concern, he began “looking
for a way to assuage” them because he “wanted to bring peace
between himself and his children.” R.813-814 (55:13-56:15); R.770-
771 (64:22-65:2); see also R.783 (83:11-21);
Dornbush and Shaw discussed and belabored the issue, where Rocky
was the focal point and where Rocky attended “all of the meetings.”
R.770-771 (64:8-65:2);
56
Dornbush unequivocally testified that “Rocky asked what could be
done to solve his problem,” that Dornbush and Shaw viewed it as
“Rocky’s problem” and that Dornbush and Shaw did what Rocky
wanted accomplished, which was to achieve “family harmony and
amity.” R.852 (95:16-96:6); R.813 (55:13-56:15);
At the beginning of the process, Dornbush suggested to Rocky that he
arrange a meeting with Keiko and her representative to discuss a
postnuptial agreement; Rocky and Dornbush made an appointment for
that purpose, but Keiko ultimately did not come. R.771-773 (65:24-
67:3);
Thereafter, Kana and Kevin “proposed to Keiko, during a dinner
arranged by Rocky in September 2002 for that purpose, that she and
Rocky sign a postnuptial agreement.” R.723 (emphasis added).
Rocky had asked his children to raise the concept of a postnuptial
agreement since he felt “uncomfortable asking.” R.793 (102:11-17);
Before drafting the Releases, Shaw drafted two memoranda – one
titled, “Action Plan for Rocky’s Consideration,” and one titled,
“Discussion Outline for Meeting with Rocky Aoki,” which confirm
Rocky’s active participation in the process. R.894; R.573;
39
Even though the word was unnecessary since they were irrevocable as
a matter of law, the one-page Releases prominently and purposefully
include the word “irrevocably” on their face. R.744; R.746;
Dornbush and Shaw carefully explained the Releases to Rocky and
advised him that after he signed, he could only leave the BPT assets to
his children, necessarily excluding Keiko. R.788-789 (95:25-96:21);
R.856 (107:5-20); R.829-830 (197:12-198:4);
As the Appellate Division found, Dornbush and Shaw “took all
reasonable efforts to apprise Rocky of the effect of what he was
39
Again, it is undisputed that Dornbush and Shaw discussed the substance of the memos with
Rocky. Keiko’s speculation that Dornbush and Shaw never provided copies of these memos to
Rocky is a red herring.
57
signing.” Aoki, 117 A.D.3d at 503; see also R.829 (197:12-16) (Shaw:
“I explained it to him as best I could”); and
Rocky admitted through sworn testimony that “Shaw did explain the
effect” of the Releases. Aoki, 117 A.D.3d at 503 (emphasis added);
see also R.804-805 (105:23-106:3).
In the face of these facts, Keiko’s often repeated accusation that Dornbush
and Shaw “secretly worked” for Kana and Kevin – behind Rocky’s back and
against his wishes to obtain a personal benefit for themselves – amounts to
fantastical speculation, which the Appellate Division properly rejected as
insufficient to create an issue of fact and fundamentally at odds with a voluminous
factual record evincing active participation of Rocky in every step of the process,
complete loyalty to Rocky by Dornbush and Shaw, a manifest desire by Rocky to
provide for his children given his recent marriage and a unity of interest among
Rocky and his children when Rocky signed the Releases in 2002.
40
For those reasons, Keiko is required to base her argument that the Dornbush
firm was conflicted in 2002, when the Releases were signed – a contention that
was never established as a factual matter – entirely on events and purported
40
In fact, even Keiko (and the Surrogate) acknowledge that “Dornbush believed he was acting in
Rocky’s – and the children’s – best interest.” See Keiko Br. p. 51 (emphasis in original),
quoting, R.43.
58
conduct that occurred many months after Rocky signed the Releases and when
circumstances had fundamentally changed.
41
For example, Keiko cites to Shaw’s August 2003 memorandum (R.903), a
memo that Shaw drafted after Keiko inserted herself into Rocky’s estate planning,
after Keiko’s regular counsel had informed Dornbush of the purported changes to
Rocky’s testamentary plans and after Kana and Kevin fell out of favor with Rocky
owing to unrelated disputes. See R.607; see also Aoki, 117 A.D.3d at 501;
Benihana of Tokyo, 891 A.2d at 158. As Shaw recounted, he drafted the memo as
he prepared to depart the Dornbush firm for historical perspective since he was a
“reservoir of technical legal knowledge on the matter.” R.421 (337:17-22); R.941.
The memo is simply an historical account and does not remotely manifest
disloyalty to Rocky. Shaw’s observation in 2003 that “sides” had developed in an
apparent dispute – one that did not exist in 2002 – and his comment as to the
leverage each side to that developing 2003 dispute might have, does not impact the
fact that Rocky and his children shared a common goal when the Releases were
41
Notably, as the proponent of a purported conflict of interest, the burden to establish its
existence rests with Keiko. See, e.g., Horn v. Municipal Info. Servs., 282 A.D.2d 712, 712 (2d
Dep’t 2001). By ignoring settled legal precepts concerning when an attorney-client relationship
forms and the fact that Kana and Kevin shared a common interest with Rocky when he signed
the Releases in 2002, the Surrogate erroneously found an issue of fact as to a conflict of interest
on summary judgment, which is the most she could have done when denying Devon and Steven
summary judgment. However, the Surrogate never found at trial that such a conflict actually
existed. Thus, the contention that Dornbush and Shaw were interested in or advantaged through
the Releases owing to a conflict of interest is simply wrong.
59
signed in 2002.
42
Nor does it suggest that Dornbush and Shaw ever represented the
interests of anyone but Rocky. Moreover, as alluded to, Shaw specifically
commented on the respective leverage each side might possess, listing potential
steps Keiko could take to divert BPT assets from Kana and Kevin, and vice versa.
R.908. Thus, Keiko’s contention that Shaw “expressed dismay that Rocky might
bequeath his fortune to Keiko” (Keiko Br. p. 51), is simply unsupported by the
Record.
On that point, Shaw also explained in his memo that he understood Kevin’s
concerns – of being left “out in the cold” – had been communicated “by Kevin to
Rocky” and that Rocky thereafter “apparently sought to find a way to assure
Kevin … that [he] would be protected … .” R.905 (emphasis added). At page 51
of her Brief, Keiko misleadingly omits the crucial language quoted above and
seeks to create the impression that it was Shaw, not Kevin who was concerned
about the children being left out in the cold. Thus, Keiko’s reliance on the August
memorandum as evidence that Shaw’s “animating concern” in drafting the
Releases was to serve the children, and not Rocky, is baseless.
42
As noted, in early 2003 – before Keiko discovered the existence of the Releases and before
Keiko’s lawyer drafted and Keiko’s company paid for the Codicil that Rocky executed – “Rocky
… became displeased with the actions of his trusted advisors and members of his family,”
including Kana, Kevin and Dornbush with respect to their perceived mismanagement of
Benihana. Benihana of Tokyo, 891 A.2d at 158. Ultimately, these disputes led to lawsuits being
commenced by Rocky against Dornbush and Kana and Kevin, respectively.
60
Likewise, Keiko’s over-played exploitation of a demonstrable drafting error
in Dornbush’s August 28, 2003 (“fur will fly”) memorandum should be rejected.
Crediting that memorandum as evidence that Dornbush and Shaw deceived
Rocky or that they worked at the for Kana and Kevin behind Rocky’s back and
against his wishes is inherently illogical. Had there actually been an effort by
Dornbush and Shaw to deceive Rocky or to benefit Kana and Kevin or themselves
to Rocky’s detriment, it is absurd to think Dornbush would have documented it in a
file memorandum to which Rocky had access and then produced it to Keiko’s
lawyer thereby subjecting himself to sanction and disciplinary action. The memo
was intended to reflect the view that once Keiko learned what Rocky had done, she
would be outraged (R.352 (268:7-19); R.863 (230:10-233:14)), which is precisely
what happened. And, it is Rocky’s response when confronted by her – that he
signed the Releases “to make [his] children happy” – that corroborates not only his
knowledge, but Dornbush’s explanation of the drafting error. R.594 (143:16-22).
Indeed, consider the absurdity of what Rocky did if he believed he had been
deceived by his lawyers. His sense of betrayal would have been enormous. A
complaint would have been filed with the Disciplinary Committee. A lawsuit
would have been commenced to rescind the Releases or to otherwise hold
Dornbush and Shaw liable. There would have been some condemnation of the
lawyers who purportedly misled him. Nothing like that ever occurred. Notably,
61
and as alluded to, Rocky did sue Dornbush and Kana and Kevin in unrelated
lawsuits, confirming Rocky had no aversion to litigation when he felt aggrieved.
Thus, Rocky’s conscious decision never to hold his lawyers – or anyone else –
accountable with respect to the Releases is profoundly incompatible with deception
of any kind having been practiced.
Most absurd is Keiko’s contention that a conspiracy among Dornbush and
the children is manifested by Shaw’s drafting in October 2003 of a third release
further limiting Rocky’s power of appointment. R.642. The drafting of a third
release only reinforces that Rocky signed the Releases fully aware they were
irrevocable and intended to exclude Keiko from any interest in the BPT assets.
Had Rocky not been on board with that course, it would have been pointless for the
third release to have been drafted by the very people alleged to have conspired
against him. If there had been a conspiracy to defraud Rocky – discovered when
Manson received Shaw’s September 8, 2003 opinion – there would have been no
purpose in perpetuating the exposed plot in October 2003 with a third, more
restrictive release. How exactly did the alleged conspirators expect to have Rocky
sign the document – now that he was “protected” by Manson and Keiko – if the
document was not consistent with what Rocky had wanted done in the first place?
Keiko’s speculation is, however, rendered illusory by Rocky’s own conduct
in never claiming a conspiracy or seeking to hold the alleged conspirators to
62
account.
43
Indeed, Rocky indisputably understood, from his active participation in
the process leading to the Releases being signed, that the intended effect of
whatever he signed would have been to benefit his children to the exclusion of
Keiko, whether it be a postnuptial agreement or the Releases.
44
As Keiko admitted,
Rocky signed the Releases to “make [his] children happy.” R.594 (143:16-22).
Fundamentally, Keiko has failed to adduce any competent evidence
demonstrating, or even suggesting, that Dornbush and Shaw “secretly worked” for
Kana and Kevin behind Rocky’s back or contrary to his wishes.
2. The Dornbush Firm Did Not Form an Attorney-Client
Relationship with Kana and Kevin with Respect to the Releases
Keiko failed to proffer any evidence that Dornbush and Shaw ever
undertook to perform a specific task for Kana and Kevin with respect to the
43
Seeking to overcome the foregoing, Keiko cites to Gardine, apparently suggesting that case is
analogous to the facts presented here since the plaintiff in Gardine “took ‘no steps to set aside
the contract and deed … until after her husband’s death.’” Keiko Br. P. 44, quoting, 360 Mo. at
691. That case has no application to this one. In Gardine, the victimized wife sued to set aside a
transaction after her ex-husband who had defrauded her, had died. Thus, unlike Rocky here, the
allegedly defrauded party was still alive and was the one brining the claim.
44
If Rocky truly wanted to retain the ability to give BPT assets to Keiko, there was no need for
him to sign anything. If Rocky truly intended for Keiko to receive BPT assets he would have
sought to rescind the Releases and not risked that they would be sustained. If the purported tax
consequences of the Releases that Keiko references mattered to Rocky, he would have rescinded
the Releases and not risked that his estate could not invoke the marital tax deduction. Likewise,
if those tax consequences mattered to Rocky, he would not have later sought to resolve the
family dispute by giving his children 6/7 of the BPT and Keiko 1/7 (Aoki, 99 A.D.3d at 266),
which would have eliminated the marital deduction for 6/7 of the BPT assets. Moreover, prior to
his marriage, Rocky could not benefit from the marital deduction, and nothing suggests he
married Keiko for tax reasons or that he intended to leave the BPT to her when he signed the
Releases three months after marrying her. Rocky’s conduct in each of those respects is
consistent with a purposeful intention that the Releases remain in effect.
63
Releases. Likewise, Keiko also failed to proffer any evidence that Kana and Kevin
ever asked Dornbush to perform a specific task for them; at most, they asked a
question as to whether a postnuptial agreement, or some other agreement, could
have the same effect as a prenuptial agreement.
45
Indeed, Dornbush’s unrebutted
testimony reveals that “Rocky asked what could be done to solve his problem,”
and that Dornbush “did what [Rocky] wanted accomplished, which [was] to get
back in favor with his children.” R.852 (95:16-96:6) (emphasis added); R.314
(230:11-20). Thus, Dornbush and Shaw drafted the Releases for Rocky and at his
direction. Id.; see also R.317 (233:12-25).
That Kana and Kevin brought to the attention of their father’s decades-long
lawyer and friend, an issue relating to their father that concerned them, does not
mean Dornbush was or became their lawyer regarding it.
46
Indeed, whether Kana
and Kevin “sought legal advice” from Dornbush is not probative of whom
Dornbush viewed as his client and whether an attorney-client relationship existed.
Moreover, there is no evidence of Kevin or Kana signing an engagement letter or
paying the Dornbush firm a fee with respect to the Releases.
45
Notably, there is no record evidence to suggest that either the attorney (Dornbush) or the
purported clients (Kana and Kevin) ever believed an attorney-client relationship had formed with
respect to the Releases.
46
That Rocky’s children would address family estate planning issues is not remarkable. Indeed,
Rocky specifically involved Kevin in the process of drafting the BPT Trust instrument in 1998
and Kevin provided comments to a draft that Rocky accepted. R.811 (27:20-29:7); R.904.
64
Critically, an attorney-client relationship does not arise from an individual
unilaterally approaching an attorney and seeking legal advice. Rather, “to establish
an attorney-client relationship there must be an explicit undertaking to perform a
specific task” and a “unilateral belief” is insufficient. Tropp v. Lumer, 23 A.D.3d
550, 551 (2d Dep’t 2005) (citation & quotations omitted); see also Jane St. Co. v.
Rosenberg & Estis, P.C., 192 A.D.2d 451, 451 (1st Dep’t 1993) (“nothing in the
record to indicate that defendant law firm either affirmatively led plaintiff to
believe it was acting on plaintiff’s behalf or knowingly allowed plaintiff to proceed
under this misconception”); Conti v. Polizzotto, 243 A.D.2d 672, 673 (2d Dep’t
1997) (no attorney-client relationship where nephews, and beneficiaries of will,
“arranged and paid for the drafting of [that] will” and “instructed” their aunt’s
attorney “to draft the instrument in accordance with the [aunt’s] expressed
intentions … .”).
47
Moreover, that in implementing Rocky’s wishes, his lawyers may have even
incidentally conferred a potential benefit on his children – something that occurs
frequently when testamentary documents are executed – does not change the fact
that they were acting as Rocky’s counsel in doing so. Possible beneficiaries do not
47
The Appellate Division’s innocuous use of the word “advised” – in that Dornbush and Shaw
“advised” Kana and Kevin a postnuptial agreement would allay their and Rocky’s concerns –
does not demonstrate the existence of an attorney-client relationship nor can the Decision be read
to imply one. See Aoki, 117 A.D.3d at 499. Dornbush and Shaw “advised” Kana and Kevin in
the same way this Court ultimately will “advise” the parties as to the outcome of this appeal.
65
become a lawyer’s client where a testamentary document potentially benefits them.
Schneider v. Finmann, 15 N.Y.3d 306, 310 (2010) (to find privity between
beneficiaries and attorney draftsmen “would produce undesirable results –
uncertainty and limitless liability”); Mali v. De Forest & Duer, 160 A.D.2d 297,
298 (1st Dep’t 1990) (attorney draftsmen do not possess attorney-client
relationships with beneficiaries of estate documents even where attorney represents
beneficiaries in other contexts).
Accordingly, Keiko’s speculation that the Dornbush firm formed an
attorney-client relationship with Kana and Kevin simply because the children
shared a common interest with Dornbush’s actual client, Rocky, and asked
Dornbush – their father’s lawyer – a question concerning it, is insufficient to create
an issue of fact to defeat summary judgment.
3. Dornbush and Shaw Did Not Benefit From the Transaction
As a matter of objective fact, and as the Appellate Division correctly
recognized, Dornbush and Shaw had no “interest” with respect to the Releases and
were not benefitted by them. Aoki, 117 A.D.3d at 503.
At the outset, the Releases eliminated the potential for Dornbush and Shaw
to become beneficiaries of the BPT, restricting Rocky to appointing the BPT assets
to only his descendants. R.744; R.746.
66
More significantly, however, Rocky’s execution of the Releases did not
“secure” the Dornbush firm’s “lucrative” position as advisors to the Benihana
empire. Indeed, no objective causal connection exists between the legal effect of
the Releases – ensuring that the beneficial interest in the BPT assets remained with
Rocky’s children – and Dornbush’s continued role as advisor to Rocky and
Benihana. That is because Shaw purposefully drafted the Releases to leave Rocky
with the ability to appoint the BPT in trust with the trustee – ultimately Keiko –
being of his choosing. See pp. 18-20, 28-29 supra. As trustee, Keiko – and not the
beneficiaries and certainly not Dornbush or his firm – controls the Benihana “purse
strings.”
Indeed, as alluded to, Keiko ultimately was appointed trustee of the BPT, is
trustee to this day, is in full control of the BPT assets and, as a consequence, has
appointed herself CEO of BOT, installed her own management team and
eliminated Dornbush from the Benihana empire. See Aoki, 58 F. Supp. 3d at 442.
Had Dornbush and Shaw truly been motivated to secure their role as advisors to
Benihana (or to ensure that Kana and Kevin acceded to the Benihana empire), then
they would have actually drafted the Releases to guarantee that result. They would
not have drafted Releases that allowed Rocky to disinherit the very people they are
purported to have been working on behalf of or to appoint the assets in trust to be
controlled by whomever Rocky chose.
67
Moreover, had Dornbush and Shaw been motivated to ensure their continued
representation of Rocky and Benihana, then secretly defrauding Rocky, their
longtime client and friend, and risking his potentially discovering their deception
would not have served that end.
Thus, Keiko’s desperate, unsupported suggestion that the Releases “ensured
the children would maintain control over the Benihana empire for years if not
decades to come” is fundamentally inaccurate, illogical and inconsistent with
reality. It is based upon nothing but conjecture and distortions of the record.
48
Finally, also baseless is Keiko’s speculation that Dornbush’s testimony from
an unrelated lawsuit in Delaware (see Benihana of Tokyo, 891 A.2d at 150)
supports the proposition that Dornbush “secretly secured” the Releases to “cement”
his role at Benihana. That lawsuit addressed entirely unrelated governance issues
at Benihana and concerned a transaction entered into in the Spring of 2004, after
the Releases had been signed, after Keiko had inserted herself into Rocky’s estate
planning and most importantly, after Rocky executed the Codicil purporting to
give Keiko control of Benihana upon his death. 891 A.2d at 164-167. Thus, by
that time, Dornbush rightly feared Keiko might “remove all of the people who
48
Moreover, the suggestion that Kana and Kevin “reward[ed]” Dornbush and Shaw with legal
fees for allegedly deceiving Rocky when Kana and Kevin – as BPT trustees – requested an
opinion letter concerning the validity of Rocky’s subsequent Codicil is equally desperate and
baseless. The Dornbush firm had represented the BPT trustees in their capacities as trustees, and
as trustees of the BPT, Kana and Kevin were entitled to such an opinion.
68
were [at Benihana] for 20 years of service.” Id. at 186. Nevertheless, the
Chancery Court found Dornbush to be a “credible witness” and specifically
rejected the supposition that Dornbush allegedly facilitated a corporate transaction
“out of a motivation to entrench” himself in office. Id. at 187, 191, aff’d, 906 A.2d
at 122.
Ultimately, no competent admissible evidence exists even to suggest that
Dornbush and Shaw had an interest in the Releases or that they “secretly secured”
the Releases to “cement” their role as advisors to Benihana. The Appellate
Division properly rejected Keiko’s rank, unsupportable speculation in that regard
and this Court should affirm.
III. THE DECISION ALSO SHOULD BE AFFIRMED OWING TO THE
ABSENCE OF ANY MISREPRESENTATION OR CONCEALMENT
AND THE ABSENCE OF REASONABLE RELIANCE BY ROCKY
Regardless of whether the Court assesses this case as one of constructive
fraud, the Decision should be affirmed for two additional and independent reasons:
(i) Dornbush and Shaw, far from concealing or misrepresenting anything to Rocky,
affirmatively undertook all reasonable efforts to apprise him of the effect of the
Releases; and (ii) Keiko cannot demonstrate reasonable reliance by Rocky in any
event.
Indeed, as the Appellate Division correctly recognized:
The record does not support the claim that the releases are invalid
because Rocky did not understand that he was irrevocably
69
relinquishing his power to appoint the BPT assets to any person as he
saw fit. Rocky’s later allegations that he was not aware he was
signing an irrevocable waiver, that he did not read the document and
did not understand it are not sufficient to set aside the releases. There
is no evidence in the record that either Dornbush or Shaw ever
represented to him that the waivers were anything but irrevocable, or
misled him regarding their effect. There is nothing to indicate that the
attorneys either concealed from or did not affirmatively provide
Rocky with any information he needed to make an informed decision.
In fact, despite his later disclaimer, Rocky testified at his deposition
that Shaw did explain the effect of these waivers. The attorneys thus
took all reasonable efforts to apprise Rocky of the effect of what he
was signing. It is uncontested that Rocky had ample opportunity to
read the documents and ask any questions regarding them. He chose
not to do so, not once, but twice.
Aoki, 117 A.D.3d at 503 (emphasis added); see also pp. 15-29 supra.
Thus, the Appellate Division correctly found, based on the very language of
the Releases themselves – including the purposeful use of the word “irrevocably”
and the phrase “so that, from now on, I shall have only the following power …” –
as well as the explanations of the Releases by Dornbush and Shaw, that Dornbush
and Shaw sought to and did appropriately convey and explain the substance and
effect of the Releases to Rocky. See R.744-746; R.788-789 (95:25-96:21); R.804-
805 (105:23-106:3); R.856 (107:5-20); R.829-830 (197:12-198:4).
Moreover, it is settled that reasonable reliance is a predicate element of both
actual fraud and constructive fraud. Zanett Lombardier, Ltd. v. Maslow, 29 A.D.3d
495, 496 (1st Dep’t 2006) (dismissing actual and constructive fraud claims owing
to absence of reasonable reliance, where plaintiff “could have discovered” the
70
alleged omission “by ordinary intelligence or with reasonable investigation.”);
Bibeau v. Ward, 228 A.D.2d 943, 944 (3d Dep’t 1996) (even “accepting that a
fiduciary relationship existed between the parties, that will substitute only for the
element of scienter, not for reliance”) (internal citations omitted); Brown v.
Lockwood, 76 A.D.2d 721, 731 (2d Dep’t 1980). Thus, even when a fiduciary is
involved in a transaction, a party asserting fraud still must demonstrate that he or
she acted reasonably.
Here, Rocky’s admitted failure to read the Releases was not merely
unreasonable, it amounted to “gross negligence.” Pimpinello, 253 N.Y. at 162-163
(emphasis added); see also Morby, 291 A.D.2d at 605-606 (“the allegedly
fraudulent misrepresentation … could have been readily discovered upon the
reading of the document, and plaintiff cannot now avoid his obligations under a
release he did not read merely by asserting that he ‘thought’ it was something
else”).
49
On that point, the Appellate Division correctly observed, “[t]he record is
devoid of any excuse, let alone a valid excuse, for [Rocky] failing to read the
release prior to signing it.” Aoki, 117 A.D.3d at 503 (citations omitted). Thus, this
was not a situation where Rocky could not read the Releases, but rather one in
which he simply chose not to. That was unreasonable as a matter of law and
provides an additional and independent basis to sustain the Decision. Indeed, to
49
As noted, Rocky testified he conducted his business in English and retired Justice
Gammerman determined Rocky spoke English “quite well.” R.935-936 (9:8-10:14).
71
have any consistency in the law, a party cannot be permitted to manufacture his
own ignorance and then seek to evade the effect of the document by claiming he
did not know what he was signing, forcing the other party to prove that he did.
Accordingly, irrespective of whether he read them, and irrespective of
whether the Court analyzes this case as one of actual or constructive fraud, Rocky
was bound by the one-page Releases, which state on their face that “I hereby
irrevocably partially release that power of appointment so that, from now on, I
shall have only the following power … ” and thereafter limited the power to
Rocky’s descendants. R.744; R.746 (emphasis added).
IV. AT MOST, THE COURT SHOULD REMIT THIS CASE TO
THE APPELLATE DIVISION TO PASS ON ISSUES RAISED
BUT NOT REACHED ON DEVON AND STEVEN’S APPEAL
If the Court is not inclined to affirm the Decision, the Court should not, as
Keiko requests, reinstate the Decree of the Surrogate. At most, the case should be
remitted to the Appellate Division to review the Surrogate’s findings of fact and to
pass upon the other issues raised, but not reached, on Devon and Steven’s appeal to
that court. See, e.g., Jemrock Realty Co., LLC. v. Krugman, 13 N.Y.3d 924, 926
(2010); Papell v. Calogero, 68 N.Y.2d 705, 707 (1986). On review of these issues,
a more than ample basis exists to find the Releases valid and binding.
72
*** *** *** ***
Ultimately, as the Appellate Division stated “[m]ost significantly,” Rocky
was aware that he had irrevocably released his power of appointment for almost
five years prior to his death (and most likely longer), and never made any attempt
to have the Releases declared invalid. Aoki, 117 A.D.3d at 504. It was Rocky’s
prerogative – not Keiko’s and not a Court’s – to do so if he was unaware of what
he had done, believed he had been deceived and did not truly intend for the
Releases to remain effective. He left them undisturbed, however, knowing that
unless they were invalidated, he could only leave the BPT assets to his children.
CONCLUSION
For the foregoing reasons, Devon and Steven respectfully submit that the
Decision should be affirmed and that they be granted such other and further relief
that is just and proper.
If the Court is not inclined to affum the Decision, at most, the case should be
remitted to the Appellate Division to pass upon the issues raised, but not reached,
on Devon and Steven's appeal to that court.
Dated: New York, New York
July 9, 2015
73
PRYOR CASHMAN LLP
By:~ c.~="--
David C. Rose
Andrew M. Goldsmith
7 Times Square
New York, New York 10022
(212) 421 -4100
Attorneys for Respondents
Devon Aoki and Steven Aoki
EXHIBIT A
112 FISHEl{ v. BISHOP,
FouRTH DEP,.It'I'MENT, APRIL TEIIM, 1885.
wit, " that the recorder had jurisdiction to make the order in
question."
The order should be affirmed, with ten dollars costs and
disbursements.
BoARDMAN and FoLLETI', J J ., concurred.
t rder affirmed, witll ten dollHI'~ costs and disbursements.
HENRY E. FISIIER, Rt·:sPoNDENT, v. ENOCH R. BISHOP
AND SLUM.A.N L. wATTLES, APPELLANTS.
Duress- wl"'' a bond ancl mo1•tgage will be srtgage were executed under duress of mind through fear, and are
?illegal and void."
,.·: Two or three days before the execution of the bond and
:hl·ortgage, Ed ward M. Fisher, the son of the plaintiff, finding
~i'\nself largely indebted, executed a deed and transfer of per-
~··· .
~~~llitl property to his father to secure the debts dne to, and
•)$1~bilities incurred by his father for him. He was then a defaulter
:~~~·statipn agllnHo the New York and 0 .. M. Railroad Company. ·
·~e absconded from Sidney Centre, New York, leaving the
~~fimdants liable on his bond as his sureties to the railroad company
~~:r .$500, which amoutlt they were obliged to and did pay in Sep-
~~inber to the ra.ilroad company.
j;;,:The conveyances and transfers from Edward to the plaintiff
!ere drawn by the defendant Wattles, who had for many years
Been a j~stice of the peace and acted as legal adviser for the son
'a.rid father .
. · ·.The plaintiff did not receive enough property from his son to
;enable him to pay the debts clue him from the son and to satisfy
'the liabilities incurred for him.
, ••• It appeared from the evidence and findings that Wattles and
'~ishop, as soon as they ascertained they were liable to pay, and
·lilust pay for the default of Edward to the railroad company, began
their efforts tq induce the plaintiff to indemnify them against any
loss, and they finally on Monday, the 27th of July, 1~74, secured
from the plaintiff the bond and mortgage in snit. .
. W: H. Johnson, for the appellants.
W: &: G. W. Youmans, for the respondent.
HuN-VaL. XXXVI 16
114 FISHER v. BISHOP.
FoUIll assumed to act as a legal frrr;; who spoke for this court, in that case said :
"But we think that when ·threats of a lawful prosecution are pur·
p0sely resorted to for the purpose of overcoming the will of the
party threatened, by intimidating or terrifying him, they amount to
·such· duress or pressure as will avoid .a contract thereb-y obtainei
Eadie v. 8limmon (26 N. Y., 9), as we. understand the ·report ol·
the case, is in point. (See, also, Williams v. Braley, 35 L. J. Oh.;.;~
717; :' see also, opinion of FoLGER, J., in the same case, llayn~J.~ \·.·:;;
Rudd, 83 N. Y., 253.) :
Though the threats were made during the day-s prior to the exe-~;
mition ~f the papers they may be considered, and also the fact thiW~!
the action to set aside the papers was not brought until somo &t!J,~
years after the execution, may be considered hy a jury or _court .. i~fi
determining whether there was actual d nress or not. N etther. crrt~:!l
.cumstanoe stlmding alo~e, or both standing revealed as thev di;) hFJ.
'·
JONES v. U'l'lCA AND BLACK RIVER R. R. CO. 115
'
FouRTH DmPAI give. statu·to'71 Big·nals.
The plaintiff's intestate, a boy about ten years old, was killed while crossing the
defendant's tracks in a sleigh driven by one Thomas, and in which were the
intestate's mother and another person. In an action against the company to
recover the damages pccasioned by the death:
Held, that the intestate could not be rcquil·cd to use !he same judgment and dis-
cretion as woul~ be ,requited of nn ~tdult; and that ohe question of his con-
. tributory negligence was a question of fact, which wasvroperly left to the jury
~~¢ d.eceased was not struck by n regnla1· train. but by an engine running by
:::.it~~-!f O.t. the- rate of twenty-eight or thirty miles an hour. The evidence as to
; '\v~.etller or not the bell was rung continuonsly, for the eighty rods \)receding
lJle crossing, wascontlicting, and raised a question which was held to have been
, ·]1l.Qperly left to the jury. In the course of the charge tl;le jury were instructed
·'\liat they were to determine, first, whether the defendant" performed the POS·
···iti;ve duty of ringing the bell and giving the signal; and then as to whether
, or.:not they performed the general duty which they owe, with eve••y member of