Sun Forest Corp. v. Shvili
| Decision Date | 29 May 2001 |
| Docket Number | No. 01 CIV 0086 (GEL).,01 CIV 0086 (GEL). |
| Citation | 152 F.Supp.2d 367 |
| Parties | SUN FOREST CORP., Plaintiff, v. Eli SHVILI and Paula Shvili, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Arthur M. Handler, Handler & Goodman LLP (Kristin T. Roy, of counsel), New York City, for Plaintiff Sun Forest Corp.
Franklin B. Velie, Salans, Hertzfeld, Heilbronn, Christy & Viener (Mark H. Goldey, of counsel), New York City, for Defendants Eli Shvili and Paula Shvili.
Plaintiff Sun Forest Corp. ("Sun Forest"), a New York corporation, originally brought an action styled "motion for summary judgment in lieu of complaint" against Defendants Eli and Paula Shvili (collectively, "the Shvilis"1) in the Supreme Court of New York, New York County, after the Shvilis failed to make payment on two promissory notes (the "Notes") held by Sun Forest. Following removal of the action to this Court by the Shvilis, who are citizens of Canada,2 pursuant to 28 U.S.C. § 1441(a), Sun Forest renewed its summary judgment motion, and the Shvilis cross-moved to dismiss for lack of personal jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(2), and under the doctrine of forum non conveniens.
For the reasons that follow, the Shvilis' cross-motions to dismiss are denied. With regard to Sun Forest's motion for summary judgment, given that the record regarding Eli and Paula Shvili's dealings with Lenard Mandel, Sun Forest's principal, contains disputed issues of material fact that cannot be resolved without additional discovery (and, perhaps, a trial), the Court denies Sun Forest's motion, without prejudice to renewal at a later stage of the case.
The essential issues in this case concern the genesis of the Notes on which Plaintiff relies — both how the Notes came to be signed and what underlying transactions gave rise to the Notes. The following facts are drawn from the various affidavits submitted by the parties. Where the parties disagree, the disagreements are set forth. Where no dispute is noted, the facts are not controverted by the parties.
Eli Shvili is a real estate developer whose business is primarily based in Toronto, Ontario. For at least the past several years, Eli and his affiliated entities have been involved in a variety of real estate and project finance ventures in North America and the Middle East. (Eli Shvili Aff. ¶¶ 4-5.)
In the summer of 1997, Eli Shvili and his personal attorney, Eli Gutstadt, traveled to New York City to meet with Lenard Mandel, a real estate attorney.3 (Mandel Reply Aff. ¶¶ 8-9.) Mandel is a retired member of the Manhattan law firm White & Case LLP ("White & Case"), who, at that time, was denominated either a "partner emeritus" or "of counsel" to the firm and maintained an office there. (Id. ¶ 8; Goldey Aff. Exs. B & C.) In addition to his affiliation with White & Case, Mandel is also the principal of Mid-City Realty LLC ("Mid-City") and Sun Forest Corp. ("Sun Forest"), entities that conduct business for the benefit of Mandel and his family members. (Mandel Reply Aff. ¶¶ 1, 8.) He resides in New York. (Id. ¶ 73.)
During the meeting, Eli Shvili told Mandel that he intended to form a joint venture called the Harlem Group LLC (the "Harlem Group") with two other Toronto families — the Kerbels (of which Paula is a member) and the Muzzos — and a non-profit organization called the Consortium for Central Harlem Development, Inc. ("Consortium").4 The Harlem Group, Eli said, planned to construct a major residential housing effort in conjunction with a large urban revitalization project called the Bradhurst Project, and requested Mandel's assistance in facilitating the joint venture. (Id. ¶¶ 10-11.)
Mandel contends that Paula Shvili was also heavily involved in the financing, planning and subsequent business activities of the Harlem Group (Id. ¶¶ 9, 11), and that at meetings with Mandel she "spoke knowledgeably about the businesses in which she is involved and actively participated in meetings and discussions concerning the direction of her interests." (Id. ¶ 49.) However, Paula denies Mandel's assertions about her participation in the development project. Instead, she avers that she is "essentially a housewife" whose sole forays into the real estate business have consisted of certain investments "managed by my family, investment professionals and by my husband." (Paula Shvili Aff. ¶¶ 3-4; see also Bernholtz Aff. ¶ 4 & Gutstadt Aff. ¶ 3.) She acknowledges having accompanied Eli to New York, and even having met with Mandel, but contends that she came essentially for shopping and cultural activities, and that she did not participate in substantial business discussions. (2d Paula Shvili Aff. ¶ 3.)5 Paula also contends, among other things, that she has neither maintained a bank account in New York nor "engaged in business" in this state. (Paula Shvili Aff. ¶ 3.)
Mandel agreed to advise Eli Shvili as to the formation and operation of the Harlem Group, but asserts that he never formed an attorney-client relationship with either of the Shvilis with regard to that venture. Indeed, he states that he arranged for another attorney, Andrew Herz, of Richards & O'Neil LLP, to handle most of the legal work for the Harlem Group. (Mandel Reply Aff. ¶¶ 12-13.) The Shvilis counter by contending that, ever since the initial discussions about the Harlem Group, they have always viewed Mandel as "our lawyer." (Paula Shvili Aff. ¶ 5.) They also submit various correspondence from Mandel to or about them, including an August 28, 1997, letter to counsel for the Consortium for Central Harlem Development Inc., in which he referred to Eli Shvili as his "client" ,6 and billing records showing that Mandel billed Eli for attorney time in connection with one of Eli's Middle East transactions. (3d Goldey Aff. Ex. Y.)
The Harlem Group's project, of course, was centered on developing property in New York. During the course of its operations, it also maintained an account at Chase Manhattan Bank in New York. Eli Shvili had signatory authority for the account and, indeed, often drew checks from it to pay for various expenses that the entity incurred. (Mandel Reply Aff. ¶ 64 & Exs. 19 & 20.)
As Eli Shvili and his partners in the Harlem Group continued to develop their joint venture, Mandel determined that the venture needed an experienced public relations team to develop relationships with government agencies and burnish its image. (Mandel Reply Aff. ¶ 14.) Accordingly, Mandel arranged for Eli to meet with public relations agent Howard Rubenstein at Rubenstein's New York City offices in September 1997. Subsequently, Eli, acting on behalf of the Harlem Group, executed a letter agreement with Rubenstein's company (Rubenstein Associates, Inc.) on October 7, 1997.7 (Id. Ex. 14.) Rubenstein charged the Harlem Group $7,500 per month for his company's services. (Id. Ex. 14 at 2.) On March 9, 1998, Paula Shvili drew a check in the amount of $22,524.75 from her personal account at The Bank of Nova Scotia (located in Toronto) to pay Rubenstein Associates, Inc. (Id. Ex. 22.) The memo line of the check indicated that it was for a "CONSULTING FEE." (Id.)
Eli Shvili also hired a personal assistant, Nelson Dominguez, to assist him with the Harlem Group's Bradhurst Project. (Id. ¶ 15 & Ex. 16.) Dominguez worked out of an office located on Amsterdam Avenue in Harlem, and regularly copied Eli on invoices sent to the Harlem Group that reflect Dominguez's salary ($4,500 per month) and various expenses incurred as part of his work responsibilities. (Id. ¶¶ 15-16 & Exs. 16-18.) On March 9, 1998, Paula Shvili drew a check from her personal account in the amount of $9,000 to pay Dominguez his salary for January and February 1998. (Id. ¶ 16 & Ex. 21.) The memo line of the check indicated that it was for "SALARY Jan.-Feb. 1998." (Id.) Furthermore, Mandel contends that Paula attended various meetings at his offices concerning the Harlem Group and also went to some of the venture's publicity events, including a high-profile Alliance Dinner attended by "prominent members of the Harlem community." (Id. ¶ 66.)
Paula Shvili, however, avers that she wrote the checks at her husband's direction and — despite having described their intended purposes in the respective memo lines — does not know "what purposes these checks were for." (2d Paula Shvili Aff. ¶ 5.) She denies participating in the meetings at Mandel's offices (although she does not deny having been present at them) or attending the Alliance Dinner (although she does not deny having attended other publicity-related functions). (Id. ¶ 3.)
While Mandel was advising Eli (and perhaps Paula as well) about the Harlem Group's Bradhurst Project, he was also assisting Eli with a variety of business ventures that Eli was exploring outside North America.
In July 1997, Eli Shvili, acting through an entity called Shvili, Inc., entered into negotiations to construct a natural gas pipeline between Egypt and Israel. To assist Eli, Mandel referred him to counsel in Cairo and to a White & Case partner in the firm's London office. Eli often traveled to Mandel's office at White & Case in New York City to discuss the transaction, and was also billed by the firm for work performed in connection with the proposed deal.8 (Goldey Aff. Ex. C at 2; Mandel Reply Aff. ¶ 22(a).)
A few months later, Eli focused his attention on another project based in the Middle East. In March 1998, Eli met with Mandel at White & Case's New York City offices to discuss a natural gas transaction involving Gulf Interstate Co. ("Gulf Interstate"), a Lebanese entity. Eli subsequently returned to New York City for further meetings with his various attorneys. (Mandel Reply Aff. ¶...
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