Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Hewlett Packard Co. v. Computer Specialists

May 15, 2007

THE HEWLETT PACKARD COMPANY, PLAINTIFF,
v.
THE COMPUTER SPECIALISTS, INC., DEFENDANT.



The opinion of the court was delivered by: Robert P. Patterson, Jr., U.S.D.J.

OPINION AND ORDER

On January 2, 2007, Third-Party Defendants, TCSweb Communications, Inc. ("TCSweb") and CSI Realty LLC ("CSI Realty"), moved for reconsideration of, and for relief from pursuant to Rule 60(b)(6) of the Federal Rules of Civil Procedure, this Court's December 14, 2006 judgment in favor of Plaintiff on the grounds that the judgment was erroneous and will be an extreme and undue hardship for TCSweb and CSI Realty. Third-Party Defendants' motion is denied.

I. BACKGROUND

On March 31, 2006 in this case, a default judgment was entered in favor of The Hewlett Packard Company ("HP") against Defendant, The Computer Specialists, Inc. ("TCS") for $439,798.92. In pursuing enforcement, HP retained an investigative firm that produced two reports, dated May 9, 2006 and June 12, 2006. On September 15, 2006, based on the information in the reports, HP moved that TCSweb and CSI Realty be held liable for the default judgment on the theory that they were alter egos of TCS. On December 14, 2006, after receiving papers in support from each party,*fn1 this Court heard oral argument on Plaintiff's motion and rendered oral judgment in favor of Plaintiff.*fn2 On January 2, 2007, Third-Party Defendants moved for reconsideration pursuant to Local Civil Rule 6.3 and for relief from the judgment pursuant to Rule 60(b)(6) of the Federal Rules of Civil Procedure.*fn3 The Court ordered an evidentiary hearing and, on February 28 and March 1, 2007, Charles P. Kokoska testified.*fn4

A. TCS

TCS was formed in September 1989 and engaged in the sale and maintenance of computer hardware and software, as well as limited consulting and training related to the hardware and software until December 2005, when a unanimous resolution by the shareholders directed that the corporation be dissolved as soon as practically possible. (Charles Kokoska Aff. I ¶ 1-2.)

The President, and owner of approximately 30.7% of the outstanding stock of TCS is Charles P. Kokoska. (Id. ¶ 1.) His wife Donna Kokoska, the former CFO and current Director, owns approximately 50.4% of the outstanding stock. (Donna Kokoska Aff. ¶ 1.) Charles Hereth IV, a former Vice President and current Director, controls approximately 14.2% of the outstanding stock. (Hereth Aff. ¶ 1.)*fn5 Shirley Petrie, a former Vice President and current Director, owns approximately 3.6% of the outstanding stock. (Petrie Aff. ¶ 1.)*fn6

B. Formation of CSI Realty and the Lease Agreements

In October 1998, approximately nine years after TCS commenced business, its major owners formed CSI Realty, a New York Limited Liability Corporation, to acquire, manage, and maintain 307-317 Oriskany Boulevard, Whitesboro, NY 13492 ("Clock Tower Plaza") with TCS as the major tenant. (Charles Kokoska Aff. I ¶ 3; Fischer Decl. Ex. L at 1.)*fn7 A month later, on November 20, 1998, TCS entered into a fifteen-year lease with CSI Realty requiring TCS to pay monthly rent in addition to maintenance costs and a share of the property taxes on Clock Tower Plaza. (Third-Party Defs.' Ex. 1 ("Lease Agreement").) The lease was negotiated with separate counsel representing TCS and CSI Realty. (Tr. 10-11.) CSI Realty's mortgagor for Clock Tower Plaza required certain clauses in the lease between CSI Realty and TCS to ensure that CSI Realty could obtain suitable rent from TCS. (Charles Kokoska Aff. II ¶ 4.)*fn8 The Lease Agreement provides:

(3) If LESSEE shall fail to pay LESSOR any rent or additional rent when the rent shall become due and shall not make the payment within a three day grace period after written notice thereof by LESSOR to LESSEE [it shall constitute a default or breach of this lease].

a. In the event of such nonpayment, and only when no other breach or default exists, LESSEE shall have the option, after curing said breach, to expand such grace period and all others afforded for in this lease agreement, to a length mutually acceptable between LESSOR and LESSEE provided LESSEE establishes a suitable method of security acceptable to LESSOR and/or LESSOR'S mortgagor for insuring the payment of future rents and additional rents as specified herein.

(Lease Agreement § 12(3).) Based on this provision, at a later time CSI Realty and TCS entered into a written agreement to satisfy the mortgagor's request, which allowed CSI Realty to garnish or marshal rent from TCS's operating account. (Tr. 136-37.)*fn9 The attorney who drafted this agreement represented CSI Realty. (Id.) TCS did not retain its own attorney to review the agreement. (Tr. 137.)

Originally, TCS leased 23,000 square feet of the plaza's 50,000 plus square feet. (Tr. 12.) This was later increased to 34,000 square feet. (Tr. 12-13.) On June 27, 2005, following tardy rent payments by TCS, CSI Realty executed a Resolution of Board of Directors that called for tenant TCS to vacate its space within ninety days and move into a smaller area of the plaza for the balance of the lease period. (Fischer Decl. Ex. B at 6; Tr. 151-52.) During the period from June 2005 to December 2005, CSI Realty was paid $8000 monthly for TCS's rent, in addition to periodic property taxes and maintenance fees. (Charles Kokoska Aff. II ¶ 10; Tr. 13.) On November 30, 2005, CSI Realty executed a Resolution of Board of Directors to evict TCS within thirty days. (Fischer Decl. Ex. B at 7; Tr. 14.)

From 1999 until December 2005, TCS was the major tenant at Clock Tower Plaza. (Fischer Decl. Ex. L at 2-3.) TCS owned the telephone system for the entire plaza, (Tr. 101), and could be reached through the plaza's central telephone number, (Fischer Decl. Ex. L at 2-3).*fn10 Due to TCS's inability to pay full rent while occupying space at Clock Tower Plaza, TCS has a current outstanding debt of over $100,000 to CSI Realty. (Tr. 151-52, 178-79.)

C. CSI Realty's "9942" TCS Operating Account*fn11

In 2004, the mortgagor on Clock Tower Plaza had adopted more stringent evaluation criteria. (Charles Kokoska Aff. II ¶ 5.) Due to inconsistency in TCS's rent payments, the mortgagor requested that CSI Realty exercise its option under the lease to garnish rent from TCS when appropriate. (Id.)*fn12 TCS decided to "put all the money together" and use CSI Realty's 0466 Account as TCS's operating account instead of TCS's own 0425 Account. (Tr. 100.) However, TCS's attorney and accountant "went absolutely nuts [and said t]here is no way we can let you do that." (Id.) Instead, the accountant said "let's get separate accounts and we will do it that way." (Id.)

On November 17, 2004, TCS executed a "Special Resolution of Board of Directors Marshaling TCS Checking Account" signed by Donna Kokoska as Secretary for TCS:

RESOLVED, That the Corporation acting in its best interests to maintain adequate and suitable space for continued operations, and having found no other such alternative space or option readily available for same, and having previously agreed to such conditions as a special and required term of the existing lease in the event of a continued breach thereof which can not or has not been reasonably cured, does hereby approve the demand of its Landlord ([CSI Realty]) to effectively marshal and exercise ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.