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TURKISH v. KASENETZ

May 22, 1997

ARTHUR TURKISH, as Co-Trustee of an Express Trust for the benefit of ADA TURKISH TRASK; and ADA TURKISH TRASK, individually, as Grantor and Beneficiary of that Trust, as beneficiary of an Express Trust established by Jacob Cohen, as beneficiary of the Estate of Jacob Cohen and as a member of the Dora and Jacob Cohen Charitable Foundation, Inc., Plaintiffs, against ROSE KASENETZ, JERROLD KASENETZ, JOHN W. DELROSSO, IVER KASENETZ, as personal representatives of the Estate of WILLIAM KASENETZ, JOEL COHEN, ALAN COHEN, in his individual capacity and as personal representative of the ESTATE OF SAMUEL COHEN, SETH RUBINSTEIN, as personal representative of the ESTATE OF DANIEL EISENBERG, HARRY REBELL, IVER KASENETZ, in his individual capacity, and GARY FREIDMAN, Defendants.

Eugene H. Nickerson, U.S.D.J.


The opinion of the court was delivered by: NICKERSON

NICKERSON, District Judge:

 Plaintiffs Ada Turkish Trask (Trask) and her son Arthur Turkish (Turkish) brought this action against various family members and their associates alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-1968, and state law. The dispute has a twenty-year history and, given the bitterness that attends family disputes over money, seems unlikely to end in this century. The pertinent facts are described in the court's previous orders, see Trask v. Kasenetz, 818 F. Supp. 39 (E.D.N.Y. 1993); Turkish v. Kasenetz, 832 F. Supp. 565 (E.D.N.Y. 1993), rev'd, 27 F.3d 23 (2d Cir. 1994), as well as in the decision of the Court of Appeals for the Second Circuit, Turkish v. Kasenetz, 27 F.3d 23 (2d Cir. 1994), familiarity with which is assumed. A summary of those facts is given here.

 I.

 In the 1920s, Jacob Cohen and two of his six children, Samuel and Louis, started a business consisting of various corporations and partnerships primarily involved in real estate ventures in New York and Florida (the Family Business). In 1961, he set up a series of inter vivos trusts, in which he placed half of his fifty percent interest in the Family Business. One of these trusts Jacob Cohen created for the benefit of his daughter, Trask (the Cohen-Trask Trust). Trask has since transferred her property in that trust to a trust she created in 1981 with herself as sole beneficiary and her son, Turkish, as trustee (the Trask Trust).

 Jacob Cohen died in 1974. His attorney, Daniel Eisenberg, and his son-in-law, William Kasenetz, became co-executors of his estate. In 1975 the estate sold his remaining twenty-five percent interest in the Family Business to Kasenetz and the sons of Samuel Cohen (Jacob Cohen's son), Alan and Joel Cohen. Plaintiffs say that to induce Trask to agree to the sale, Kasenetz and Alan and Joel Cohen fraudulently concealed, among other things, amounts they and Samuel Cohen owed to the Family Business.

 In 1979 Trask brought an action in Nassau County Supreme Court to compel an accounting of the Cohen-Trask Trust created by her father. In 1981 Trask brought a federal RICO action in this district alleging that Kasenetz, Samuel Cohen, Alan Cohen, Joel Cohen, and Eisenberg had failed to make material disclosures to Trask as beneficiary of Jacob Cohen's estate in connection with the 1975 sale of Jacob Cohen's interest in the Family Business.

 In 1987 the parties entered into a global settlement agreement to resolve both the state and federal litigation (the Settlement Agreement). In that agreement, Joel Cohen, Alan Cohen, the estate of Samuel Cohen, and Kasenetz represented, based on the advice of accountants, that all loans made by entities in which Trask's trusts had any interest had been fully repaid with interest.

 Paragraph 12(E) of the Settlement Agreement provided that: "In the event that the foregoing representations are inaccurate to any extent, then the sole remedy of the Releasors shall be to require William Kasenetz, Alan Cohen, Joel Cohen or the Estate of Samuel Cohen, respectively, to make payment in full of the balance of any such unpaid loans to the extent of their several obligations, together with interest at the rate of six (6%) percent simple interest."

 The Settlement Agreement also provided that the estate of Samuel Cohen would pay $ 1,163,529 to Trask or the Trask Trust; Kasenetz would pay $ 36,471 to Trask and $ 520,000 to Spizz & Cooper, Trask's counsel. In exchange, Trask and Turkish agreed to release defendants from all legal claims against them.

 Plaintiffs say that in the fall of 1989 they became suspicious that the loans had not been fully repaid as represented. Plaintiffs' accountant examined the books and allegedly discovered a substantial underpayment.

 In 1991, shortly after plaintiffs say they discovered the alleged underpayment, Eisenberg offered a deal to Trask and Turkish. He proposed that the Dora and Jacob Cohen Charitable Foundation, Inc. (the Foundation), of which he was a trustee, donate all its assets to an orthodox synagogue in Florida that Trask and Turkish were eager to support. In return Trask and Turkish would release the defendants in this action and others from all legal claims. Trask feared that if she refused the offer she would not be re-elected as Foundation trustee or receive timely distributions from the Cohen-Trask Trust and the estate of Jacob Cohen. Nevertheless, Trask and Turkish refused the offer.

 Several months thereafter, the Foundation's members held an annual meeting and, for the first time in many years, failed to re-elect Trask as trustee.

 Kasenetz and Eisenberg, as co-executors of the estate of Jacob Cohen, failed to distribute more than $ 500,000 in estate assets to Trask until after this action was brought and plaintiffs allege that approximately $ 1.3 million in liquid assets remaining in the Cohen-Trask Trust have still not been distributed.

 II.

 Plaintiffs originally brought two separate actions in New York Supreme Court, Nassau County, against Kasenetz, Joel Cohen, Alan Cohen, the Estate of Samuel Cohen, Eisenberg, Harry Rebell (the family accountant and a trustee of the Cohen-Trask Trust), Iver Kasenetz (Kasenetz's son and a Foundation trustee) and Gary B. Freidman (Eisenberg's law partner and a Foundation trustee).

 In the First Action plaintiffs alleged that defendants fraudulently procured the 1987 Settlement Agreement by falsely representing to plaintiffs that they had repaid certain loans. The Second Action alleged that defendants had perpetrated a fraud upon the Foundation in 1991 by proposing the release-for-grant scheme. Both cases alleged RICO violations, 18 U.S.C. §§ 1961-1968, and state law.

 On August 24, 1992 defendants removed both actions to federal court. The First Action, 92-CV-4036, was assigned to Judge Denis R. Hurley and the Second, 92-CV-4037, was assigned to this court. By Memorandum and Order dated April 9, 1993 this court dismissed the RICO claims made on behalf of the Foundation, concluding, among other things, that the complaint did not allege that the Foundation had been injured in its "business or property" and in any event, that the single alleged act of attempted extortion did not constitute a "pattern of racketeering activity." The court remanded the remaining state claims to state court. Trask v. Kasenetz, 818 F. Supp. 39 (E.D.N.Y. 1993).

 On June 7, 1993 the First Action was transferred from Judge Hurley to this court. Plaintiffs moved in both cases to submit a second amended complaint (the Complaint), which in effect consolidated what had previously been two separate RICO claims. By Memorandum and Order dated September 14, 1993 the court found that although plaintiffs had adequately pleaded one predicate act--attempted extortion in connection with the 1991 release-for-grant scheme--the alleged settlement fraud did not constitute a second predicate act because the limitations of liability clause in the 1987 Settlement Agreement precluded plaintiffs from seeking a RICO remedy and because the complaint did not plead scienter with adequate specificity. Turkish v. Kasenetz, 832 F. Supp. 565 (E.D.N.Y. 1993), rev'd, 27 F.3d 23 (2d Cir. 1994).

 On June 2, 1994 the United States Court of Appeals for the Second Circuit reversed the judgment of this court and remanded the case for further proceedings. Turkish v. Kasenetz, 27 F.3d 23 (2d Cir. 1994). The Court of Appeals said that the remedy provided for in the 1987 Settlement Agreement did not bar plaintiffs' settlement fraud claim under RICO and that plaintiffs had adequately pleaded scienter. Thus, because defendants did not dispute that plaintiffs had adequately pleaded attempted extortion, the Complaint alleged a violation of RICO by setting out two predicate acts.

 Following the remand, defendants moved for summary judgment. The court held defendants' motion in abeyance pending further discovery. Plaintiffs have now ...


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