Ekstein v. Polito Assocs.
| Decision Date | 15 March 2022 |
| Docket Number | 20 Civ. 1878 (JCM) |
| Parties | DAVID EKSTEIN, SARA EKSTEIN GAVRIEL ALEXANDER, Plaintiffs, v. POLITO ASSOCIATES LLC, Defendant. POLITO ASSOCIATES LLC, Counterclaim-Plaintiff, v. DAVID EKSTEIN, SARA EKSTEIN, GAVRIEL ALEXANDER and 9 POLITO LLC, Counterclaim-Defendants |
| Court | U.S. District Court — Southern District of New York |
Presently before the Court is plaintiffs and counterclaim-defendants David Ekstein, Sara Ekstein and Gavriel Alexander's (“Guarantors”) and counterclaim-defendant 9 Polito LLC's (“Borrower”) motion to compel defendant and counterclaim-plaintiff Polito Associates LLC (“Polito Associates”) to produce eight categories of documents set forth in the Guarantors' and Borrower's Third Request for Production of Documents dated June 30, 2021. (Docket No. 40; see also Docket Nos. 41-43). Polito Associates opposed the Guarantors' and Borrower's motion, (Docket No. 44), and the Guarantors and Borrower replied, (Docket No. 45). For the following reasons, the Guarantors' and Borrower's motion is granted.
This action concerns a $42, 650, 000.00 loan dated February 17 2016 by Customers Bank (“Customers Bank”) to the Borrower secured by a first priority mortgage on real property in Lyndhurst, New Jersey (“Property”). (Docket No. 1-1 ¶¶ 1, 8, 10). In connection with the loan, the Borrower executed and delivered to Customers Bank a promissory note (“Note”), and the Guarantors executed and delivered to Customers Bank three guaranties. (Id. ¶¶ 9, 14). On January 3, 2020, the loan matured and the Borrower was unable to satisfy the amounts outstanding under the loan. (Id. ¶ 30). On January 7, 2020, Customers Bank issued a notice of default asserting, among other things, that the Guarantors owed $7, 662, 500.00 under the guaranties. (Id. ¶¶ 33-34).
On February 7, 2020, the Guarantors commenced the instant action by filing a complaint against Customers Bank in the Supreme Court, County of Rockland, seeking a declaratory judgment that these guaranties had been fully discharged and that the Guarantors had no present liability thereunder. (See id. ¶¶ 34-57). On March 3, 2020, Customers Bank removed the action to this Court pursuant to 28 U.S.C. § 1332, (Docket No. 1), and filed an answer with counterclaims against the Borrower and Guarantors for breach of the Note and guaranties on March 6, 2020, (Docket No. 5). Customers Bank amended its answer and counterclaims on April 17, 2020. (Docket No. 17). On May 8, 2020, in response to such counterclaims, the Borrower and Guarantors asserted as an affirmative defense that any judgment “should be reduced by the fair market value of the collateral securing the loan underlying the [g]uaranties at issue . . . [, ] [and] [t]he Guarantors are entitled to a fair market value credit in an amount equal to the fair market value of the collateral securing the loan.” (Docket No. 18 at 14). On September 24, 2020, Customers Bank sold, assigned, transferred and delivered its rights, title and interest in the Note, mortgage and related loan documents to Polito Associates. (Docket No. 20 at 2). Polito Associates was substituted into the case as the defendant and counterclaim-plaintiff on October 19, 2020. (Docket No. 21).
Meanwhile, Customers Bank commenced a foreclosure action in the Superior Court of New Jersey, Chancery Division, Bergen County, to enforce its mortgage and foreclose on the equity of redemption held on the Property by the Borrower and Guarantors (the “Foreclosure Action”). (Docket No. 41 ¶ 5). Polito Associates, as successor-in-interest to Customers Bank, obtained a judgment of foreclosure on January 7, 2021, authorizing and directing that the Property be sold via a sheriff's sale to pay the debt owed to Polito Associates. (Docket Nos. 41 ¶ 5; 41-1). At the sheriff's sale, which took place on June 11, 2021, Polito Associates was the successful bidder with a credit bid of $8, 000, 100.00. (Docket No. 41 ¶ 5).
On or about June 18, 2021, the Borrower and Guarantors filed a motion in the Foreclosure Action objecting to the sale and seeking a credit against the mortgage debt equal to the fair market value of the Property (the “Fair Market Value Credit Motion”). (Id. ¶ 6). In support of that motion, they submitted an appraisal valuing the Property between $37, 000, 000.00 and $44, 000, 000.00, depending on its particular usage. (Id.; see also Docket No. 41-2-41-5). The appraisal set forth three valuations for three separate uses of the Property: (1) an “As-Is” value, valuing the Property in its current, distressed condition, with numerous leasehold vacancies; (2) a “Stabilized” value, valuing the Property as if it were leased under normal market conditions outside of the foreclosure process; and (3) an “As Converted to Apartment” value, valuing the Property as if it had been converted from its current commercial use to mixed residential/retail use, under the same normal market conditions. (Docket Nos. 41 ¶ 6; 41-2-41-5). According to the Guarantors and Borrower, the third valuation was “not borne of thin air, ” as the managing member of Polito Associates, Jack Morris, “expressly” advised Gavriel Alexander (“Mr. Alexander”) “that he intended to cause [Polito Associates] to convert the Property from commercial use . . . to residential use and/or mixed commercial, retail, and/or residential use.” (Docket No. 41 ¶ 7).
Polito Associates objected to the Fair Market Value Credit Motion and its supporting appraisal, arguing that the valuations were “flawed” and that the “As Converted to Apartment” valuation was “speculative.” (Docket Nos. 41 ¶ 8; 43 at 12). However, the court in the Foreclosure Action declined to consider the motion on the grounds that this Court has “priority jurisdiction over the issue because this action was commenced first in time, ” and because the Borrower and Guarantors' affirmative defenses in this action raise the issue of the Property's fair market value. (Docket No. 41 ¶ 8).
As a result, on or about June 30, 2021, the Borrower and Guarantors sought discovery in this action from Polito Associates related to Polito Associates' “anticipated conversion of the Property.” (Id. ¶ 9; see also Docket No. 42 ¶ 2). Specifically, the Borrower and Guarantors seek eight categories of documents[1] “relating specifically to the valuation of the Property . . . as converted to residential use and/or mixed commercial, retail and/or residential use, ” including (a) “[a]ll plans, designs, drawings, or renderings relating to” any such proposed conversion, and all written and electronic correspondence relating thereto; (b) “[a]ll appraisals and/or valuations of the Property under any proposed form or use, . . . and any written or electronic correspondence relating thereto;” (b) “[a]ll agreements with architects, contractors, engineers, and consultants relating to or concerning” any such proposed conversion, and all written and electronic correspondence with any architects, contractors, engineers, and consultants relating thereto; (c) “[a]ll estimates of costs and expenses associated with, relating to, or concerning” any such proposed conversion; (d) “[a]ll financial projections, budgets, forecasts, pro formas, or other financial documents relating to or concerning” any such proposed conversion; and (e) “[a]ll marketing plans with respect to the Property in its present form and use, and any written or electronic correspondence relating thereto.” (Docket No. 42 ¶ 2; see also Docket Nos. 42-3; 44 at 3 & n.1). Polito Associates objected to these requests on relevance grounds, arguing that “[t]he value of the Property as of the date of the Sheriff's Sale is the only relevant date for the purposes of the Property's valuation in connection with this lawsuit.” (Docket No. 42-2). Counsel engaged in good-faith efforts to resolve this dispute on October 18, 2021, to no avail. (Docket No. 42 ¶ 4). The Court heard oral argument on November 12, 2021, and set a briefing schedule for the present motion.
Under Federal Rule of Civil Procedure 26(b) (“Rule 26(b)”), “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claim or defense and proportional to the needs of the case.” Fed.R.Civ.P. 26(b)(1). To evaluate what information is discoverable, the court “consider[s] the importance of the issues at stake in the action, the amount in controversy, the parties' relative access to relevant information, the parties' resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” (Id.).
When moving to compel discovery, the discovering party “has the burden of demonstrating that the information sought is relevant to the subject matter of the pending action.” United States v. Int'l Bus. Machines Corp., 66 F.R.D. 215, 218 (S.D.N.Y. 1974); see also Citizens Union of City of New York v. Attorney Gen. of New York, 269 F.Supp.3d 124, 139 (S.D.N.Y. 2017). “Once relevance has been shown, it is up to the responding party to justify curtailing discovery.” Fireman's Fund Ins. Co. v. Great Am. Ins. Co. of N.Y., 284 F.R.D. 132, 135 (S.D.N.Y. 2012) (quoting Trilegiant Corp. v. Sitel Corp., 275 F.R.D. 428, 431 (S.D.N.Y. 2011)) (internal quotations omitted). District courts have broad discretion to manage the scope of discovery and decide motions to compel. See Mason Tenders Dist. Council of Greater N.Y. v. Phase Constr. Servs., Inc., 318 F.R.D. 28, 36 (S.D.N.Y. 2016); see also Grand Cent. P'ship, Inc. v. Cuomo, 166 F.3d 473, 488 (2d Cir. 1999).
Relevance is “‘construed broadly to encompass any matter that bears on, or that reasonably could lead to other matter that could bear on' any party's claim...
To continue reading
Request your trial