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Rothberg v. Chloe Foods Corp.

January 29, 2008

SHERRILL BONDER ROTHBERG, PLAINTIFF,
v.
CHLOE FOODS CORPORATION, A/K/A CHLOE FOODS ANUFACTURING; CHLOE FOODS, INC., D/B/A BLUE RIDGE FARMS, INC.; CHLOE FOODS S.A.; BRF ACQUISITION, LLC; 3301 ATLANTIC (CPS)(KAM) AVENUE, LLC; GREENVALE FINANCIAL CENTER, INC.; ANPERG, INC.; BLUE RIDGE FARMS (ILLINOIS), INC.; THOMAS KONTOGIANNIS; ANNETTE APERGIS; NICK TISINENKIAS; JEFFREY SIEGEL; RICHARD SIEGEL; JUNE SIEGEL; JUNE SIEGEL IN HER CAPACITY AS PERSONAL REPRESENTATIVE OF THE ESTATE OF SEYMOUR SIEGEL; JOHN AND JANE DOES 1 THROUGH 10; AND ABC CORPS. 1 THROUGH 10, DEFENDANTS.



The opinion of the court was delivered by: Charles P. Sifton (electronically signed) United States District Judge

MEMORANDUM OPINION AND ORDER

SIFTON, Senior Judge.

Plaintiff Sherrill Bonder Rothberg commenced this action in October 2006 against corporate defendants Chloe Foods Corporation, a/k/a Chloe Foods Manufacturing; Chloe Foods, Inc., d/b/a Blue Ridge Farms, Inc.; Chloe Foods S.A.; BRF Acquisition, LLC; 3301 Atlantic Avenue, LLC; Greenvale Financial Center, Inc.; Anperg, Inc.; and Blue Ridge Farms (Illinois), Inc. ("Corporate Defendants"); and against individual defendants Thomas Kontogiannis; Annette Apergis; Nick Tisinenkias; Jeffrey Siegel; Richard Siegal; and June Siegal both individually and in her capacity as personal representative of the estate of Seymour Siegel (the "Individual Defendants").*fn1

According to plaintiff's amended complaint ("Amended Complaint"), defendants defrauded her in order to avoid payment of a debt owed by Blue Ridge Farms, Inc. ("Blue Ridge Farms") and of a judgment*fn2 subsequently obtained pursuant to that debt ("Blue Ridge Judgment"). Specifically, plaintiff claims that (1) Kontogiannis, Apergis, Jeffrey Siegel, and Richard Siegel fraudulently transferred the assets of Blue Ridge Farms through a pattern of racketeering activity in order to avoid their obligation to plaintiff and other creditors, in violation of RICO, 18 U.S.C. § 1962 et seq.;*fn3 (2) the Corporate Defendants became successors to Blue Ridge Farms and are liable for its debts, including the Blue Ridge Judgment; (3) all defendants fraudulently transferred assets in violation of New York Debtor and Creditor Law §§ 273, 274, 275 and 276; (4) all defendants breached their contractual obligations to plaintiff; (5) the Individual Defendants breached their fiduciary duties to plaintiff; and (6) all defendants unjustly enriched themselves at the expense of plaintiff.*fn4

Plaintiff now alleges that after a series of settlement conferences before the Magistrate Judge and negotiations thereafter between the parties, a settlement was reached, which defendants breached. Now before this Court are plaintiff's applications for: 1) an order of attachment; 2) a preliminary injunction restraining defendants from transferring assets pending the entry of the Court's decision on plaintiff's application for enforcement of the purported settlement agreement between the parties; and 3) enforcement of the settlement agreement and entry of final judgment against the Corporate Defendants. Based on the findings of fact and conclusions of law set forth below, the applications are denied.

Background

What follows sets forth the findings of fact and conclusions of law on the basis of which these applications are decided, which are derived from the underlying allegations in plaintiff's Complaint and affidavits submitted by plaintiff and defendants in connection with these applications. Disputes are noted.

Plaintiff brought this action to, inter alia, enforce and collect the Blue Ridge Judgment. By way of this action, plaintiff sought to assert the Blue Ridge Judgment against the assets of the Corporate Defendants, various entities she alleges are incarnations of Blue Ridge Farms, and the Individual Defendants, who she alleges control the Corporate Defendants. The Individual Defendants include Thomas Kontogiannis and Annette Apergis, Kontogiannis' daughter and the Chief Financial Officer and Chairwoman of the Board of Chloe Foods Corp., as well as other former or current officers of the Corporate Defendants. Plaintiff also sought to reverse various alleged fraudulent conveyances of Blue Ridge Farms' assets and recover damages against the various defendants for their involvement in what plaintiff alleges was a conspiracy to defraud plaintiff and other creditors of Blue Ridge Farms.

On October 16, 2007, prior to the commencement of deposition discovery in this matter, the parties appeared before the Magistrate Judge for a settlement conference. At the conference the case did not settle, but the plaintiff, and defendants Kontogiannis and Apergis, all of whom were present, participated in negotiations seeking a settlement. Kontogiannis asserted that defendant Chloe Foods Corporation ("Chloe Foods") was not able to pay plaintiff's entire claim all at once and that if there were to be a settlement, plaintiff would have to be paid over time. Defendants further assured Plaintiff that if she agreed to such a proposal, adequate collateral security would be provided. Kontogiannis stated that Chloe Foods had unencumbered equipment of significant value that could be used to secure her claim for payment. The case did not settle at this conference, but the parties agreed to continue negotiating through their counsel.

On October 30, 2007, the parties again appeared before the Magistrate Judge, by telephone conference. On November 12, 2007, an agreement on several of the terms of a settlement was reached. On November 20, 2007, plaintiff's counsel emailed defendants' counsel, noting he was working "on a draft Stipulation and Order for Settlement to reflect the settlement terms." Falanga Cert., Ex. A (Nov. 20, 2007, 2:49 P.M. E-Mail from S. Falanga to J. Fornari). In this e-mail, Mr. Falanga, plaintiff's counsel, set forth the terms of the settlement as he understood them as follows:

! $800,000 settlement amount paid as follows:

" $250,000 cash upon signing of agreement no later than December 15th, 2007

" $550,000 over three years with monthly interest payments at 10% (we propose to be due on the first of each calendar month)

" $61,111 to be paid on the first of each of the following months: July, August and September of 2008, 2009 and 2010.

! A first priority security interest in equipment to be named that would have a value exceeding the amount of settlement obligation and a lien on the companies' trademarks and intellectual property.

! Confessions of Judgment from each of the corporate defendants for the full amount of the judgment plus post-judgment interest, which plaintiff could seek to enforce in the event of a default

! A right to collect attorney's fees in the event of a default . . . ! Mutual general releases between all parties that would be held in escrow pending completion of the payments provided that the RICO claim would be released upon the payment of the $250,000 at signing. ! A tolling agreement to preserve statute of limitation issues for the non-RICO claims in the complaint [to permit] plaintiff . . . to reinstitute suit [in the event] of a default. ! [Retention of jurisdiction in the] District Court . . . to enforce the terms of the settlement and . . . dismiss[al of the case] without prejudice to become with prejudice upon completion of the payments.

Id. Counsel's e-mail continued:

As you know, the settlement is conditioned upon my client's satisfaction that the proposed collateral is sufficient to secure the amounts due under the settlement. We are working on preparing draft settlement documentation and once your clients have identified the collateral and the representations as to ownership and no liens etc, I will forward the draft agreement to you for your review. Until we are satisfied with the collateral, however, expending time and resources in formalizing and finalizing the settlement is premature.

In light of the holiday week, we ask that by Monday you identify the collateral subject to our client's lien. In light of the pending Court deadlines on completion of fact discovery, if we do not hear from your clients by Monday, we will have no choice but to resume discovery and reserve all rights. . .

Id. Mr. Fornari, defendants' counsel, e-mailed later that afternoon:

When we last spoke, you said you would have the settlement documents drafted while we were getting the equipment information to you... please do not now start with the "expending time and resources in formalizing and finalizing the settlement documents is premature." [sic] posturing. Also, the 10% is on the outstanding balance, not on the 550K for three years Payment should be in the middle of each month 5 business day cure period I have no idea what you mean by "once your clients have identified the collateral and the ...


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