Preview
FILED: NEW YORK COUNTY CLERK 09/16/2016 05:56 PM INDEX NO. 650159/2010
NYSCEF DOC. NO. 378 RECEIVED NYSCEF: 09/16/2016
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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HARVEY RUDMAN and HAROLD KUPLESKY, :
on Behalf of Each of Them Individually and :
on Behalf of Starrett City Preservation LLC, :
Derivatively, :
:
Plaintiffs, : Index No. 650159/2010
:
-against- : ORAL ARGUMENT REQUESTED
:
CAROL GRAM DEANE, THE ESTATE OF : Motion Seq. No. 10
DISQUE D. DEANE by CAROL G. DEANE, :
as TEMPORARY EXECUTRIX, SALT :
KETTLE LLC, ST. GERVAIS LLC, and :
STARRETT CITY PRESERVATION LLC, :
DD SPRING CREEK LLC, SK SPRING :
CREEK LLC, SPRING CREEK PLAZA :
LLC, DD SHOPPING CENTER LLC and :
SK SHOPPING CENTER LLC, :
:
Defendants. :
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MEMORANDUM OF LAW IN SUPPORT OF
DEFENDANT SPRING CREEK PLAZA LLC’S MOTION
TO CONFIRM THAT ALL CLAIMS AGAINST IT HAVE BEEN RESOLVED
FOLEY & LARDNER LLP
Peter N. Wang
Jonathan H. Friedman
90 Park Avenue
New York, New York 10016
Tel: (212) 682-7474
Attorneys for Defendant Spring
Creek Plaza LLC
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TABLE OF CONTENTS
PRELIMINARY STATEMENT .................................................................................................... 1
STATEMENT OF FACTS ............................................................................................................. 2
ARGUMENT .................................................................................................................................. 4
I. This Court’s Judgment that Plaintiffs Are Not Entitled to Non-Cash Assets Resolves
Claim Against Spring Creek. .............................................................................................. 4
II. Declaratory Judgment Is Unavailable Against Spring Creek ............................................. 6
III. If Any Claims Against Spring Creek Had Survived, They Would Be Limited As
Described By, and For the Reasons Presented By, Other Defendants................................ 6
CONCLUSION ............................................................................................................................... 7
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TABLE OF AUTHORITIES
Cases Page(s)
Rudman v. Deane,
138 A.D.3d 537 (1st Dep’t 2016) ..............................................................................................4
Other Authorities
CPLR § 3001....................................................................................................................................6
CPLR § 3017(b) ...............................................................................................................................6
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Defendant Spring Creek Plaza LLC (“Spring Creek”) submits this Memorandum of Law
in support of its Motion to Confirm that All Claims Against It Have Been Resolved, pursuant to
the Court’s instruction at the telephonic conference on August 9, 2016 to submit a motion
clarifying which claims survive after the First Department affirmed this Court’s grant of partial
summary judgment.
PRELIMINARY STATEMENT
Spring Creek never belonged in this case, which is simply a contract dispute between the
parties to the Preservation Agreement, and this Court’s summary judgment decision rejected the
last remaining pretext for Spring Creek’s inclusion. After the Court granted a motion to dismiss
all claims alleging wrongdoing by Spring Creek on May 23, 2012, Plaintiffs were left with only a
vestigial declaratory judgment claim against Spring Creek (and all other Defendants) seeking a
declaration that other Defendants should not have transferred certain assets to Spring Creek. This
dubious claim cannot be maintained against Spring Creek, and Spring Creek should be released
from the case, for two primary reasons.
First, the Court’s summary judgment decision on July 28, 2014 held that the Preservation
Agreement entitled Plaintiffs to a share only of cash distributions—and not to non-cash assets
like the shopping center and land parcels that were transferred to Spring Creek. This decision
thus conclusively rejects Plaintiffs’ request for a declaratory judgment with respect to the non-
cash assets, which are the overwhelming majority of the Spring Creek assets at issue.
Second, the allegation that Spring Creek also received a transfer of $3,273,307 in cash
(Second Amended Compl. (“SAC”) ¶ 81) likewise cannot support a claim for declaratory
judgment against Spring Creek. Because Plaintiffs’ recovery is limited to cash, complete relief
can be obtained from the defendants against whom Plaintiffs have claims that would permit
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recovery. Complete relief would consist of, at most, the tiny fraction of the $3,273,307 to which
Plaintiffs allege they are entitled (likely less than $23,000 for Kuplesky at his reduced sharing
ratio). An aggrieved plaintiff cannot maintain a declaratory judgment action against a third party
simply because the third party received money from a defendant. Moreover, because all claims
that would permit Plaintiffs to recover from Spring Creek have been dismissed, any resolution of
this declaratory judgment claim would be simply academic with respect to Spring Creek and,
thus, there is no justiciable controversy with respect to Spring Creek.
Because the one claim arguably asserted against Spring Creek that survived the motion to
dismiss—the declaratory judgment claim in Count X—cannot be maintained, Spring Creek
should be released from the case.
STATEMENT OF FACTS
As described at length in prior submissions to the Court, and in multiple decisions by the
Court, this action arises from Plaintiffs’ allegation that the Preservation Agreement obligates
certain Defendants to distribute to them additional proceeds of the Refinancing. Plaintiffs alleged
that the following assets were proceeds of the Refinancing that were transferred to Spring Creek:
a shopping center, seven land parcels with an estimated value of $53.9 million that were donated
in exchange for a charitable tax deduction of allegedly equal value, and a cash payment of
$3,273,307. SAC ¶¶ 79, 81; see also Decision on Spring Creek’s Motion to Dismiss, Dkt. No.
94, at 6-7. Plaintiffs asserted claims against Spring Creek (among other Defendants) for aiding
and abetting breaches of fiduciary duty, conversion, and tortious interference with contract, as
well as a declaratory judgment claim (Count X) asserting that because Deane’s and SKI’s
economic interests as general partners of SCA were assigned to Preservation in the Omnibus
Assignments, “the subsequent purported assignments of such interests to third parties are void
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and unenforceable” and seeking judicial declarations that: (1) the transfers or assignments were
“ineffective to the extent that they purport to transfer the MGP’s or SKI’s economic interests [in
SCA]” and (2) “Preservation is entitled to receive 19.9% of any economic benefit received by
any Defendant from the transfer of the MGP’s or SKI’s economic interest in SCA or its assets,
including without limitation 19.9% of (a) any tax deduction arising from the charitable donation
of the vacant parcels, (b) any distributions of profits of Spring Creek, and (c) any proceeds of
any transaction (sale, refinancing or otherwise) concerning Spring Creek or the shopping center.”
SAC ¶¶ 172-80. 1
Spring Creek moved to dismiss all claims against it. In a decision dated May 23, 2012,
the Court granted the motion to dismiss all remaining claims against Spring Creek with the
exception of the declaratory judgment claim. Dkt. No. 94.
After discovery, all Defendants moved for partial summary judgment. In a decision dated
July 28, 2014, the Court granted this motion. Summary Judgment Decision, Dkt. No. 347. In its
decision, one of the issues the Court addressed was whether Plaintiffs were entitled to
distribution of non-cash assets. The Court squarely rejected this position, holding that such non-
cash assets were “not subject to distribution” and thus “not ‘payments’ that needed to be
transferred to Preservation.” Id. at 23.
Plaintiffs appealed the grant of partial summary judgment and, in a decision dated April
19, 2016, the Appellate Division unanimously affirmed the decision, modifying it only to add a
declaration that “Preservation’s Managing Member has the power to reallocate the Sharing
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Count IX separately sought a declaratory judgment that “Plaintiffs’ Sharing Ratios in
Preservation cannot be reduced under Section 3.3 of the Preservation Agreement . . . .” (SAC
¶ 171.) This count does not mention or purport to apply to Spring Creek.
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Ratios of any Member once Preservation has distributed to its Members, in accordance with
Section 4.2, at least $10 million . . . .” Rudman v. Deane, 138 A.D.3d 537 (1st Dep’t 2016).
On August 9, 2016, the parties participated in a telephone conference with this Court,
during which the parties expressed disagreements regarding which portions of Plaintiffs’ claim
survived the summary judgment decision. The Court instructed Defendants to submit motions on
September 16, 2016 to address this question.
ARGUMENT
I. This Court’s Judgment that Plaintiffs Are Not Entitled to Non-Cash Assets Resolves
Claim Against Spring Creek.
In granting partial summary judgment, this Court held that Plaintiffs are not entitled to a
share of any non-cash assets. Summary Judgment Decision at 21-24, 30. As a result, Plaintiffs
have no claim relating to the land parcels allegedly valued at $53.9 million, the related charitable
deduction, or the shopping center that they allege were transferred to Spring Creek. These assets
constitute the overwhelming majority of assets transferred to Spring Creek. The Court’s holding
resolves all claims against Spring Creek at least with respect to these non-cash assets.
In particular, the Court explained that certain “net cash proceeds” referenced in Section
3.03 of the SCA partnership agreement “were the distributions SCA owed to its partners, which
Preservation was obligated to pass on to its Members under Section 4.2.” Summary Judgment
Decision at 21-22. As the Court noted, Plaintiffs did not even try to argue that non-cash assets
“somehow fall within the meaning of ‘payments’ as used in Section 4.2 [of the Preservation
Agreement].” Rather, Plaintiffs’ only argument that they were entitled to non-cash assets
“rel[ied] on the final sentence of Section 3.3, which states that the ‘reallocation power . . . is
intended to facilitate providing a new management incentive program after the full distribution
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from the proceeds of a substantial refinancing pursuant to Section 3.02 or 3.03 of SCA’s
partnership agreement.” Id. at 23-24. The Court rejected this argument:
Assets not subject to distribution cannot be part of [the waterflow
set forth in Section 4.2]. Ergo, Preservation’s membership in SCA,
Spring Creek (which remained an asset of the SCA partners), and
the charitable deduction allocated among the SCA partners for
income tax purposes were not “payments” that needed to be
transferred to Preservation, as they were not assets “distributed” by
SCA (or Spring Creek).
Summary Judgment Decision at 23. “To summarize, the court concludes that as Members of
Preservation, plaintiffs were only entitled to their share of the ‘payments’, i.e., cash distributions,
that Preservation received from SCA on behalf of the partnership’s managing general partner and
general partner.” Id. at 24, 30 (emphasis added). The First Department likewise addressed
Plaintiffs’ attempt to expand their entitlement by appealing to the final sentence of Section 3.3—
and likewise rejected the attempt squarely, holding that this final sentence “is merely a statement
of intention; it does not actually require the full distribution of proceeds.” Rudman, 138 A.D.3d
at 539.
Indeed, there is no dispute that the Court’s decision and order precluded Plaintiffs’
entitlement to non-cash assets. When Plaintiffs submitted a proposed order attempting to
summarize the Court’s holding, their proposed order stated: “[T]he Court has determined that the
word ‘payments’ in Section 4.2 of the Agreement refers to Plaintiffs’ share of ‘cash
distributions’ . . . .” Plaintiffs’ Proposed Counterorder Declaration and Judgment on Motion for
Partial Summary Judgment, Dkt. No 356, at 4.
Because the sole remaining basis for Spring Creek’s involvement in this case is its receipt
of assets that are overwhelmingly non-cash assets, the Court’s holding that Plaintiffs have no
entitlement to such non-cash assets precludes the one remaining claim against Spring Creek, at
least with respect to these non-cash assets.
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II. Declaratory Judgment Is Unavailable Against Spring Creek
The declaratory judgment claim is unsupportable in its entirety, including with respect to
the cash transfer to Spring Creek, for several independent reasons.
First, a declaratory judgment is inappropriate absent a “justiciable controversy.” CPLR §
3001. Here, Plaintiffs have no remaining claims alleging wrongdoing by Spring Creek or that
would otherwise permit them to recover from Spring Creek. Indeed, Plaintiffs have not even
attempted to fulfill the requirement of CPLR § 3017(b) that they “state whether further or
consequential relief is or could be claimed and the nature and extent of any such relief which is
claimed.” Plaintiffs have failed to fulfill this requirement and failed to identify any reason that
obtaining the declaration they request would not be simply academic with respect to Spring
Creek. In short, there is no justiciable controversy with respect to Spring Creek.
Second, the transfer of cash, the consummate fungible asset, from a defendant whose
conduct is at issue in this case to Spring Creek provides no basis for a claim against Spring
Creek. Permitting such a claim against a mere transferee of cash would be especially
inappropriate where Plaintiffs are not even suggesting an inability to recover their small share of
this transferred cash from their counterparties to the Preservation Agreement. A rule that would
permit recovery from Spring Creek in this context would allow actions against any third party to
whom any defendant transferred money—an unfathomable outcome that is clearly not the law.
III. If Any Claims Against Spring Creek Had Survived, They Would Be Limited As
Described By, and For the Reasons Presented By, Other Defendants
Spring Creek hereby incorporates by reference all arguments made by Spring Creek’s co-
defendants in support of their motion submitted today.
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CONCLUSION
For the reasons stated herein, Spring Creek’s Motion to Confirm that All Claims Against
It Have Been Resolved should be granted, and Spring Creek should be released from the case.
Dated: New York, New York Respectfully submitted,
September 16, 2016 FOLEY & LARDNER LLP
By: /s/ Peter N. Wang
Peter N. Wang (pwang@foley.com)
Jonathan H. Friedman (jfriedman@foley.com)
90 Park Avenue
New York, New York 10016
Tel.: (212) 682-7474
Fax: (212) 687-2329
pwang@foley.com
jfriedman@foley.com
Attorneys for Defendant Spring Creek Plaza, LLC
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