RSB Bedford Assocs. v. Ricky's Williamsburg, Inc.
| Decision Date | 10 January 2022 |
| Docket Number | Index 653647/2018 |
| Citation | 2022 NY Slip Op 30230 (U) |
| Parties | RSB BEDFORD ASSOCIATES LLC, Plaintiff, v. RICKY'S WILLIAMSBURG, INC., RICKY'S HOLDINGS, INC., RICKY'S GROUP, INC., and GLENN NUSSDORF Defendants. NYSCEF Doc. No. 93 Motion Seq. No. 003 |
| Court | New York Supreme Court |
DECISION, ORDER + JUDGMENT ON MOTION
The following e-filed documents, listed by NYSCEF document number (Motion 003) 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92 were read on this motion to/for SUMMARY JUDGMENT/DEFAULT JUDGMENT .
This is an action to enforce a judgment entered on July 20, 2012, in favor of the plaintiff in the action captioned RSB Bedford Associates, LLC v Ricky's Williamsburg, Inc d/b/a/ Ricky's NYC and Ricky's Holdings, Inc., Index No. 602303/2009 (the underlying action), against defendants Ricky's Williamsburg, Inc. (Ricky's Williamsburg), and Ricky's Holdings, Inc. (Ricky's Holdings, and together with Ricky's Williamsburg, the judgment debtors), jointly and severally, for the total sum of $1, 048, 708.97. The defendant Glenn Nussdorf (Nussdorf) moves pursuant to CPLR 3212 for summary judgment dismissing the complaint as against him. The plaintiff opposes the motion and cross-moves pursuant to CPLR 3215 for leave to enter a default judgment against defendant Ricky's Group, Inc. (Ricky's Group), in the principal sum of $1, 048, 708.97 on the first, second, and third causes of action of the complaint. The plaintiff further seeks an order pursuant to CPLR 603 and CPLR 3215(a) severing the claims against defendant Ricky's Group. No opposition is submitted to the plaintiff's cross-motion.
For the following reasons, defendant Nussdorf's motion is denied and the plaintiff's cross-motion is granted.
Ricky's is a chain of beauty supply stores that operates in New York City. One Ricky's store, Ricky's Williamsburg, previously leased property from the plaintiff in Brooklyn pursuant to a commercial lease agreement (the lease). Ricky's Holdings guaranteed the lease pursuant to a guaranty agreement (the guaranty). The guaranty executed by Ricky's Holdings provides that it shall be binding upon the guarantor's "heirs, personal representatives, successors, and assigns, as the case may be."
The plaintiff brought the underlying action to recover damages for the alleged breach of the subject lease and guaranty. By order dated April 12, 2010, the court (Fried, J.) granted the plaintiff summary judgment on the issue of liability as against Ricky's Williamsburg and Ricky's Holdings. The court referred the issue of damages to a special referee to hear and report. On July 20, 2012, a judgment in the sum of $1, 048, 708.97 (the judgment) was entered against the judgment debtors. On December 24, 2013, the Appellate Division, First Department unanimously affirmed the judgment. The judgment was never satisfied.
In an effort to enforce the judgment, the plaintiff served the judgment debtors with information subpoenas and subpoenas duces tecum in December 2014. In response, the plaintiff received information about an HSBC bank account belonging to Ricky's Holdings (the HSBC account). As of January 2010, that bank account had a balance of more than $1.3 million. By January 2011, the account was depleted to only $374.03. Within the year between January 2010 and January 2011, on March 31, 2010, Ricky's Group was formed.
No further enforcement proceedings were taken until October 26, 2017, when the plaintiff served supplemental subpoenas to ascertain further details regarding the nature of the relationship between Ricky's Holdings and Ricky's Group. Ricky's Holdings did not respond. Ricky's Group provided no documents and categorically objected to virtually every question. Consequently, the plaintiff moved to compel Ricky's Holdings and Ricky's Group to comply with the subpoenas. While Ricky's Holdings did not respond to the motion, Ricky's Group opposed it, arguing it was a third-party that should not be compelled to participate in post-judgment disclosure. The court (Friedman, J.) denied the plaintiff's application without prejudice to its commencing a special proceeding to enforce the judgment pursuant to article 52 of the CPLR.
The plaintiff states that, at the time it commenced the underlying action, millions of dollars flowed through Ricky's Holding's bank account each month. However, just before the judgment was issued, all assets were siphoned out of Ricky's Holdings and the company ceased operations. Based on information it acquired in the course of post-judgment enforcement proceedings, the plaintiff contends that Ricky's Group stepped into the shoes of Ricky's Holdings and carried out the operations of Ricky's Holdings under the name Ricky's Group. The plaintiff described this conduct as a game of "asset whack-o-mole." Accordingly, the plaintiff asserts that Ricky's Group is liable for the judgment debt of Ricky's Holding as its successor in interest.
The record demonstrates that prior to the entry of judgment, the HSBC account served as an operating account for various Ricky's stores, which generally maintained a substantial balance. To be sure, prior to the court granting the plaintiff summary judgment in the underlying action, the average monthly closing balance for the HSBC account was about $500, 000.00. Further, between January and June 2010, approximately $3, 000, 000.00 - $3, 500, 00.00 flowed through the HSBC account each month. However, by July 29, 2010, only $36, 957.17 remained in the HSBC account. The plaintiff submits that Ricky's "cleaned out" the HSBC account via atypical transactions. For example, the record demonstrates that in July 2010 alone Ricky's Holdings issued 300 checks, for a total sum in excess of $2, 000, 000.00. The HSBC account continued to dwindle over the course of 2010 and had a balance of merely $6, 799.03 as of December 13, 2010. At such time, according to the plaintiff, Ricky's stores continued to operate throughout New York City.
Ricky's Group, an entity with the same chief executive officer and principal executive office as Ricky's Holdings, was formed on March 31, 2010. In an affidavit submitted in the underlying action, the president of Ricky's Group confirmed that two payments were made from Ricky's Holdings to Ricky's Group during the pendency of the underlying litigation. However, the president failed to provide any explanation or further detail with regard to the payments. Ricky's Group also funded the judgment debtors' legal expenses in connection with the underlying litigation.
On January 13, 2014, and January 14, 2014, weeks after the Appellate Division, First Department affirmed the judgment, the three corporate defendants in this action filed UCC Financing Statements (UCC-1 filings or liens) naming defendant Nussdorf as the secured party. Nussdorf is the CEO of Ricky's Holdings and, until recently, was the CEO of Ricky's Group.
The plaintiff avers that the subject UCC-1 filings were "intended to frustrate [its] ability to collect the [j]udgment."
The plaintiff commenced this action on July 20, 2018, by filing of a summons with notice. On January 11, 2019, the plaintiff filed the complaint, alleging, in sum, that the defendants participated in a scheme to evade the judgment entered against the judgment debtors. The complaint asserts seven causes of action: (1) a declaration that Ricky's Group is the successor-in-interest to Ricky's Holdings and is liable for the subject judgment, plus statutory interest (the first cause of action); (2) successor liability/de facto merger as against Ricky's Group, finding it liable for the debts of its predecessor, Ricky's Holdings, including the subject judgment (the second cause of action); (3) alter ego liability as against Ricky's Group (the third cause of action); (4) fraudulent conveyance pursuant to Debtor and Creditor Law (DCL) § 273-a as against Ricky's Group (the fourth cause of action); (5) fraudulent conveyance pursuant to DCL § 273-a as against Nussdorf (the fifth cause of action); (6) fraudulent conveyance pursuant to DCL § 276 as against Ricky's Group (the sixth cause of action); and (7) fraudulent conveyance pursuant to DCL § 276 as against Nussdorf (the seventh cause of action).
In lieu of filing an answer, on March 15, 2019, defendants Ricky's Group and Nussdorf moved pursuant to CPLR 3211 to dismiss the complaint. By order dated May 1, 2020, the court denied the pre-answer motion to dismiss and directed the movants to file an answer within 45 days. On June 15, 2020, defendant Nussdorf filed an answer in which he denies or disputes the plaintiff's claims and asserts five affirmative defenses. As relevant to the instant motions, Nussdorf's second affirmative defense is that the plaintiff's fifth and second causes of action are moot because the subject UCC liens are not currently in force and effect. Defendant Ricky's Group did not file an answer.
By amended order dated September 10, 2020, the court granted the application of counsel for Ricky's Group to be relieved on the grounds that Ricky's Group was no longer in business and had no assets. The court further advised that "any corporation or limited liability company must appear by an attorney (see CPLR 321[a])." The court also imposed a 30-day stay as against Ricky's Group. No notice of appearance was filed. The instant motion and cross-motion ensued.
It is well settled...
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