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First Keystone Consultants, Inc. v. Schlesinger Electrical

May 15, 2012

FIRST KEYSTONE CONSULTANTS, INC. ROBERT H. SOLOMON AND JANE SOLOMON PLAINTIFFS,
v.
SCHLESINGER ELECTRICAL CONTRACTORS, INC. DEFENDANT.



The opinion of the court was delivered by: Kiyo A. Matsumoto, United States District Judge:

MEMORANDUM & ORDER

Presently before the court is a motion filed by defendant and counterclaim-plaintiff Schlesinger Electrical Contractors, Inc. ("SEC" or "defendant") seeking summary judgment on its first through fifth counterclaims against plaintiffs and counterclaim-defendants First Keystone Consultants, Inc. ("FKC"), Robert H. Solomon and Jane Solomon (together, the "Solomons," and collectively with FKC, "the FKC Plaintiffs"). (ECF No. 137-1, Notice of Motion for Partial Summary Judgment, dated 12/15/2011 ("Not. of Mot.").) For the reasons set forth below, SEC's motion for summary judgment is granted.

BACKGROUND

The following facts are undisputed unless noted. The court has considered whether the parties have proffered admissible evidence in support of their positions and has viewed the facts in the light most favorable to the nonmoving FKC Plaintiffs.

In support of its motion, SEC filed an initial memorandum of law (ECF No. 137-32, Memorandum of Law of Defendant-Counterclaimant Schlesinger Electrical Contractors, Inc. in Support of Motion for Summary Judgment on its First-Fifth Counterclaims, dated 12/15/2011 ("Def. Mem.")); a reply memorandum of law (ECF No. 138-15, Reply Memorandum of Law of Defendant-Counterclaimant Schlesinger Electrical Contractors, Inc. in Support of Motion for Summary Judgment on its First-Fifth Counterclaims, dated 2/10/2012 ("Def. Reply Mem.")); a statement of material facts not in dispute pursuant to Local Civil Rule 56.1 (ECF No. 137-33, Statement of Material Facts of Schlesinger Electrical Contracts, Inc., dated 12/15/2011 ("DSOF")); two declarations supported by exhibits by Jacob Levita, the president of SEC, stating that he is "fully familiar with the facts and circumstances set forth" therein (ECF No. 137-3, Declaration of Jacob Levita in Support of Schlesinger's Motion for Partial Summary Judgment, dated 12/15/2011 ("Levita Decl.") ¶ 1; ECF No. 138-2, Reply Declaration of Jacob Levita in Support of Schlesinger's Motion for Partial Summary Judgment, dated 2/9/2012 ("Levita Reply Decl.") ¶ 1); and two declarations by Melvin Kalish, Esq., SEC's counsel, stating that he is "fully familiar with the facts and circumstances set forth" therein and attaching several exhibits (ECF No. 137-2, Declaration of Melvin J. Kalish in Support of Schlesinger Motion for Partial Summary Judgment, dated 12/15/2011 ("Kalish Decl.") ¶ 1; ECF No. 138-1, Reply Declaration of Melvin J. Kalish in Support of Schlesinger Motion for Partial Summary Judgment, dated 2/10/2012 ("Kalish Reply Decl.") ¶ 1).

In opposing SEC's motion for summary judgment, the FKC Plaintiffs filed a memorandum of law, which attached several exhibits. (ECF No. 139, Plaintiffs' Opposition to Defendant's Motion for Partial Summary Judgment, dated 1/16/2012 ("Pl. Opp.").) The FKC Plaintiffs did not file a counter Rule 56.1 statement or any declaration or other admissible evidence in opposition to SEC's motion.

This court relies on the undisputed material facts set forth in SEC's Rule 56.1 statement because the FKC Plaintiffs either have admitted such facts or have not disputed the facts with citations to admissible evidence. Pursuant to Local Civil Rule 56.1(b), a party opposing a motion for summary judgment must include with its opposition papers "a correspondingly numbered paragraph responding to each numbered paragraph in the statement of the moving party, and if necessary, additional paragraphs containing a separate, short and concise statement of additional material facts as to which it is contended that there exists a genuine issue to be tried." Here, however, the opposition papers submitted by the FKC Plaintiffs failed to include a statement pursuant to Local Civil Rule 56.1(b) or respond to each numbered paragraph in SEC's Rule 56.1 statement. Moreover, the FKC Plaintiffs have failed to offer any admissible evidence in support of its opposition to SEC's motion. Accordingly, the court is entitled to conclude that the facts asserted in SEC's Rule 56.1 statement are uncontested. T.Y. v. N.Y. City Dep't of Educ., 584 F.3d 412, 418 (2d Cir. 2009) (citing Gubitosi v. Kapica, 154 F.3d 30, 31 n.1 (2d Cir. 1998) (per curiam)); see also Giannullo v. City of New York, 322 F.3d 139, 140 (2d Cir. 2003) ("If the opposing party . . . fails to controvert a fact so set forth in the moving party's Rule 56.1 statement, that fact will be deemed admitted.").

I.The Parties

SEC is a New York corporation that performs public and private commercial and industrial electrical work, both as a prime contractor and as a subcontractor. (DSOF ¶¶ 1-3; Levita Decl. ¶¶ 4-6; ECF No. 1, Complaint filed 2/17/2010 ("Compl.")

¶ 10.) FKC is a Pennsylvania corporation authorized to do business in New York. (DSOF ¶¶ 4-5; Kalish Decl. Ex. Q, Testimony of Robert Solomon before Arbitration Panel, dated 6/30/2009 ("Robert Solomon 6/30/2009 Arb. Tr.") at 1053-54; Compl. ¶ 8.) Robert Solomon and Jane Solomon are husband and wife, and are residents of Florida. (DSOF ¶ 8; Levita Decl. ¶ 8; Kalish Decl. ¶ 6; ECF No. 141, [Solomons'] Response to Order to Show Cause, filed 2/29/2012, ¶ 5; Compl. ¶¶ 8-9.) Jane Solomon is FKC's president, and she owns 100 percent of FKC's shares. (DSOF ¶¶ 6-7; Levita Decl. ¶ 8; Kalish Decl. ¶ 6; Compl. ¶ 8.) Robert Solomon is FKC's vice president. (DSOF ¶ 8; Levita Decl. ¶ 8; Compl. ¶ 8.) FKC's letterhead lists as its business address 1629 Southeast Ballantrae Boulevard, Port St. Lucie, Florida, which is the Solomons' personal home address. (DSOF ¶¶ 133-34; Kalish Decl. Ex. Z, Letter dated 12/31/2007 on FKC Letterhead, at 1; Kalish Decl. Ex. H, Deposition of Jane Solomon, dated 6/13/2011 ("Jane Solomon 6/13/2011 Dep.") at 5-6.)

Jane Solomon testified that she gave Robert Solomon permission to sign documents on behalf of FKC, including authorizing him to sign her name to documents. (DSOF ¶ 131; Kalish Decl. Ex. H, Jane Solomon 6/13/2011 Dep. at 150; Kalish Decl. Ex. H, Deposition of Jane Solomon, dated 4/14/2010 ("Jane Solomon 4/14/2010 Dep.") at 21-22.) Jane Solomon further testified that she and Robert Solomon loaned money to FKC whenever they determined that FKC needed money, and that they received repayment of their loans from FKC "when we had money." (DSOF ¶ 132; Kalish Decl. Ex. H, Jane Solomon 6/13/2011 Dep. at 141-42.) The Solomons and FKC did not have any signed agreements regarding such loans. (Kalish Decl. Ex. H, Jane Solomon 6/13/2011 Dep. at 140-41.)

II.The Coney Island Joint Venture

On or about January 21, 2004, SEC and FKC entered into a joint venture agreement to bid on and perform work as an electrical subcontractor in connection with a New York City Department of Environmental Protection project on Coney Island (the "Coney Island Joint Venture"). (Levita Decl. ¶¶ 10-11.) Pursuant to the joint venture agreement, SEC and FKC agreed to share in all profits and losses of the Coney Island Joint Venture as fifty-fifty partners. (DSOF ¶ 10; Levita Decl. ¶ 11.)

Between July 28, 2004 and December 28, 2004, FKC and SEC each took $964,000 in advance draws against future profits of the Coney Island Joint Venture. (DSOF ¶ 13; Levita Decl. ¶¶ 14-15.) The last advance draw against future profits was made on December 28, 2004. (Levita Decl. ¶ 16.) Ultimately, however, the Coney Island Joint Venture earned only $1,075,563.04 in net profits. (DSOF ¶ 16; Kalish Decl. Ex. A, Award of Arbitrators, dated 10/12/2009 ("Arb. Award").) FKC failed to return any of the $964,000 in advance draws or to pay its share of the Coney Island Joint Venture's expenses. (DSOF ¶¶ 17-20; Levita Decl. ¶¶ 17-20.)

III.The Arbitration Award and Judgment

On or about September 12, 2008, SEC served and filed a Demand for Arbitration on FKC seeking repayment of the excess amounts drawn by FKC against unearned future profits from the Coney Island Joint Venture. (DSOF ¶ 21; Levita Decl. ¶ 27.) On or about October 12, 2009, a three-member arbitration panel found that FKC had received $426,218.48 in excess advance distributions of profit from the Coney Island Joint Venture, and that FKC had breached its fiduciary obligations to SEC, resulting in damages of $67,500.00. (DSOF ¶¶ 23, 26; Levita Decl. ¶ 28; Kalish Decl. Ex. A, Arb. Award at 2.) The arbitration panel issued an award (the "Arbitration Award") in favor of SEC and against FKC in the amount of $493,718.48 with interest at a rate of five percent from September 24, 2007 to October 26, 2009, for a total of $545,147.48. (Kalish Decl. Ex. A, Arb. Award at 2; Levita Decl. ¶ 28.) Interest was to accrue at a rate of nine percent per annum beginning 30 days after the award was transmitted to the parties. (Kalish Decl. Ex. A, Arb. Award at 2; Levita Decl. ¶ 28.)

On or about October 21, 2009, SEC filed an action to confirm the Arbitration Award in New York Supreme Court, Kings County. (DSOF ¶ 30; Kalish Decl. ¶ 16; Kalish Decl. Ex. O, Notice of Petition, filed 10/21/2009.) On or about November 27, 2009, FKC filed a cross-motion seeking to modify the Arbitration Award, but FKC subsequently withdrew that motion on December 31, 2009. (DSOF ¶¶ 33-37; Kalish Decl. ¶ 17; Kalish Decl. Ex. B, Order and Judgment, dated 1/6/2010 ("Arb. Judgment"), at 2.) On January 6, 2010, the Kings County Supreme Court entered a judgment in favor of SEC and against FKC in the amount of $545,147.48 plus interest at nine percent per annum from November 13, 2009 (the "Arbitration Judgment"). (DSOF ¶ 38; Levita Decl. ¶ 30; Kalish Decl. Ex. B, Arb. Judgment at 3.)

SEC has presented the sworn declaration of its president asserting that FKC has not paid any part of the Arbitration Judgment and that SEC has received no payments toward the Arbitration Judgment from any third parties. (Levita Decl. ¶ 30; Levita Reply Decl. ¶¶ 19-21; DSOF ¶¶ 39, 53.) The FKC Plaintiffs, on the other hand, assert in their memorandum of law that SEC has collected $1,947.29 against the Arbitration Judgment from FKC's bank account and received $87,500 against the Arbitration Judgment from Siemens Industry, Inc. ("SII"). (Pl. Opp. ¶¶ 4, 13, 35.) The FKC Plaintiffs, however, have not cited to any admissible evidence to support this assertion.

IV.Conveyances Challenged by SEC

A.Conveyances from FKC to the Solomons before SEC filed the Demand for Arbitration on September 12, 2008

The financial records submitted by SEC in support of the instant motion demonstrate that FKC made the following conveyances of money to the Solomons before SEC filed and served FKC with the Demand for Arbitration on September 12, 2008.

Between January 3, 2005 and February 26, 2008, FKC transferred $732,600 to Jane Solomon. (DSOF ¶ 106; Kalish Decl. Exs. J-N, First Keystone General Ledgers as of 12/31/2005, 12/31/2006, 12/31/2007, 12/31/2008, and 12/31/2009 ("FKC 2005-2009 General Ledgers"); Kalish Decl. ¶ 77.) SEC asserts, and FKC has not disputed, that at no time since February 14, 2005, on which date FKC made a single transfer of $500,000 to Jane Solomon, has FKC had sufficient funds in its bank account to satisfy the $545,147.48 Arbitration Award and Judgment obtained by SEC. (DSOF ¶¶ 103-04; Kalish Decl. Ex. J, First Keystone General Ledger as of 12/31/2005 ("FKC 2005 General Ledger") at 1; Kalish Decl. ¶ 73.)

Between August 8, 2005 and December 28, 2006, FKC transferred $44,000 to Robert Solomon. (DSOF ¶ 107; Kalish Decl. Ex. J, FKC 2005 General Ledger; Kalish Decl. Ex. K, First Keystone General Ledger as of 12/31/2006 ("FKC 2006 General Ledger"); Kalish Decl. ¶ 78.)

B.Conveyances from FKC to the Solomons after SEC filed the Demand for Arbitration on September 12, 2008 In addition, it is undisputed that the following transfers occurred after SEC filed and served the Demand for Arbitration. On February 26, 2009, FKC transferred $1,000 to Robert Solomon via check number 2992. (DSOF ¶ 107; Kalish Decl. Ex. N, First Keystone General Ledger as of 12/31/2009 ("FKC 2009 General Ledger") at 2.) On September 13, 2009, FKC transferred $2,000 to Jane Solomon via check number 3041. (DSOF ¶ 90; Kalish Decl. Ex. N, FKC 2009 General Ledger at 4; Kalish Decl. ¶ 50.)

On October 8, 2009, FKC deposited $575,000 into its bank account. (DSOF ¶¶ 80, 109, 117; Kalish Decl. Ex. F, FKC Bank of America Combined Statement 10/1/2009 through 10/31/2009 ("FKC Oct. 2009 Bank Stmt.") at 3; Kalish Decl. Ex. N, FKC 2009 General Ledger at 4; Kalish Decl. ¶¶ 33, 86, 99 n.10.) The "description" next to this deposit on FKC's bank statement states, inter alia, "Siemens Energy & Des." (Kalish Decl. Ex. F, FKC Oct. 2009 Bank Stmt. at 3.) It is undisputed that FKC received those funds from Siemens Energy & Automation, Inc. ("SEA"), pursuant to a General Release and Settlement Agreement between FKC and SEA, dated September 23, 2009, which provided, inter alia, that SEA was to pay FKC $750,000, with $575,000 to be paid by SEA to Robert Solomon within ten business days of SEA's receipt of a fully executed copy of that agreement, and the remaining $175,000 to be paid by SEA to Robert Solomon no later than September 23, 2010. (DSOF ¶¶ 80, 109, 115-17; Pl. Opp. ¶ 55; Kalish Decl. Ex. R, General Release and Settlement Agreement by and between SEA and FKC, dated 9/23/2009, ¶ 3; Kalish Reply Decl. Ex. AA, Response to Information Subpoena by Siemens Industry, Inc.)

In FKC's Response to SEC's Examination of Judgment Debtor, which was prepared and reviewed by Jane and Robert Solomon, and signed by Jane Solomon on April 26, 2010, FKC denied having entered into an agreement with SII in September 2009. (DSOF ¶¶ 64-65, 118-20; Kalish Decl. Ex. I, Examination of Judgment Debtor, dated 4/26/2010, Rider; Kalish Decl. ¶¶ 93-94, 97-98.) In the FKC Plaintiffs' memorandum of law in opposition to the instant motion, their counsel explains that "had the question been correctly propounded [by identifying SEA, rather than SII, as the other party to the agreement], Mrs. Solomon would have answered that question in the affirmative and all further, related questions substantively." (Pl. Opp. ¶ 55.) Nevertheless, the parties agree that SEA was succeeded in interest by SII. (Kalish Reply Decl. ¶ 48; Compl. ¶ 18; Kalish Reply Decl. Ex. AA, Response to Information Subpoena by Siemens Industry, Inc (indicating that Siemens Industry, Inc. was formerly known as Siemens Energy & Automation, Inc.).)

It is undisputed that neither SEA nor SII ever paid FKC the additional $175,000 owed pursuant to the General Release and Settlement Agreement. (Levita Reply Decl. ¶¶ 24-25; Kalish Reply Decl. ¶¶ 88-93.) According to SEC, this final payment was never made because FKC breached the General Release and Settlement Agreement and therefore "was not due any portion of the second installment of $175,000 and would not be paid any portion of the $175,000." (Levita Reply Decl. ¶ 24; Kalish Reply Decl. ¶¶ 80-94.) The FKC Plaintiffs baldly allege in their memorandum of law, without reference to admissible evidence, that instead of paying FKC the $175,000, SII paid $87,500 to SEC, and that such amount should be applied against the Arbitration Judgment owed by FKC. (Pl. Opp. ¶¶ 4, 13, 35.) Through the sworn declaration of its president, however, SEC denies receiving $87,500 in payment against the Arbitration Judgment. (Levita Reply Decl. ¶ 21.)

The undisputed evidence in the record establishes that on October 8, 2009, the same date that FKC received $575,000 from SEA, FKC wired $300,000 to Jane Solomon's bank account. (DSOF ¶¶ 81-84, 111; Kalish Decl. Ex. F, FKC Oct. 2009 Bank Stmt. at 4; Kalish Decl. Ex. G, FKC Teller Log Statement, dated 10/8/2009, at 3; Kalish Decl. Ex. N, FKC 2009 General Ledger at 4; Kalish Decl. Ex. H, Jane Solomon 6/13/2011 Dep. at 62-63; Kalish Decl. ¶¶ 34-36, 86-87.) Jane Solomon testified at her deposition on June 13, 2011 that the October 8, 2009 conveyance of $300,000 from FKC's bank account to her bank account constituted a partial "repayment of loans" that she had made to FKC. (DSOF ¶ 95; Kalish Decl. Ex. H, Jane Solomon 6/13/2011 Dep. at 62-63; see also Kalish Decl. Ex. N, FKC 2009 General Ledger at 8-9 (listing September 13, October 8, and October 21, 2009 transactions, among others, under "Loan Payable -- J. Solomon").)

On October 21, 2009, FKC transferred $15,000 to Jane Solomon's bank account via check number 3054. (DSOF ¶¶ 92, 112; Kalish Decl. Ex. N, FKC 2009 General Ledger at 4; Kalish Decl.

¶¶ 50, 88.) Following this conveyance to Jane Solomon, FKC's bank account had a closing balance of negative $9,416.24. (DSOF

¶ 97; Kalish Decl. Ex. N, FKC 2009 General Ledger at 4; Kalish Decl. ¶ 61.)

C.Additional Expenditures

The financial records submitted by SEC in support of the instant motion also establish the following additional undisputed expenditures by FKC or the Solomons. Between 2005 and 2009, FKC made payments to Avalon Realty in the total amount of $282,171.18 for renting an apartment in the Avalon Riverview Apartment Complex, located at 201 50th Avenue in Long Island City, New York. (DSOF ¶¶ 135, 137-38; Kalish Decl. Exs. J-N, FKC 2005-2009 General Ledgers; Kalish Decl. Ex. T, Avalon Riverview Description as of 7/21/2010; Kalish Decl. ¶¶ 112, 115; Pl. Opp. ¶¶ 51-53.) Although the FKC Plaintiffs assert in their memorandum of law, without support, that the Solomons "utilize[ed] the apartment largely as an office" (Pl. Opp. ¶ 53), Robert Solomon previously testified during his deposition on April 14, 2010 that he and Jane Solomon "personally" rented the apartment on 50th Avenue in Long Island City and that "First Keystone does not rent that apartment" (DSOF ¶ 136; Kalish Decl. Ex. Q, Deposition of Robert Solomon, dated 4/14/2010 ("Robert Solomon 4/14/2010 Dep.") at 550; Kalish Decl. ¶ 113.)

Between 2006 and 2009, FKC made payments to Robert Solomon's cardiologist, Dr. Martin L. Fox, in the total amount of $1,919.76. (DSOF ¶¶ 139-40, 142; Kalish Decl. Exs. J-N, FKC 2005-2009 General Ledgers; Kalish Decl. Ex. H, Jane Solomon 6/13/2011 Dep. at 36; Kalish Decl. ¶¶ 116-17.) In addition, on October 19, 2009, FKC paid Dr. Jeffrey L. Marx, a dermatologist, $465 via check number 3051. (DSOF ¶¶ 139-41; Kalish Decl. Ex. N, FKC 2009 General Ledger at 4; Kalish Decl. Ex. H, Jane Solomon 6/13/2011 Dep. at 36; Kalish Decl. ¶¶ 116-17.)

Between 2006 and 2007, FKC made payments to Robert Solomon's son, Neil Solomon, in the total amount of $113,000. (DSOF ¶¶ 143, 148-49; Kalish Decl. Exs. J-N, FKC 2005-2009 General Ledgers; Kalish Decl. Ex. H, Jane Solomon 6/13/2011 Dep. at 55; Kalish Decl. ¶ 124.) Jane Solomon testified that Neil Solomon worked for Schlesinger-Siemens Electrical, LLC, but did not perform any work for FKC or send invoices to FKC. (DSOF ¶¶ 144-47; Kalish Decl. Ex. H, Jane Solomon 6/13/2011 Dep. at 55; Kalish Decl. ¶¶ 120-22.)

The Solomons have made payments by personal check to Richard Agins, Esq. for representing FKC in at least one action in which the Solomons are not named as parties. (DSOF ¶¶ 152-54; Kalish Decl. Ex. S, Questionnaire of Judgment Debtor, dated 7/14/2010; Kalish Decl. ¶¶ 131-33; Pl. Opp. ¶ 50.)

The FKC Plaintiffs have advised the court that "FKC has no funds available to pay its other liabilities." (Pl. Opp. ¶ 50; DSOF ¶ 54; Kalish Decl. ¶ 56.)

V.Procedural History

The FKC Plaintiffs commenced the instant action on February 17, 2010 seeking, inter alia, distribution of funds allegedly owed to FKC by SEC.*fn1 (See generally Compl.) On March 12, 2010, SEC filed an answer and counterclaims, alleging, inter alia, breach of contract, breach of fiduciary duty, and fraudulent conveyances, and seeking to pierce FKC's corporate veil. (See generally ECF No. 10, Answer, Counterclaims and Cross-Claims of SEC and Levita, dated 3/12/2010 ("SEC Counterclaims").)

On March 28, 2012, the court granted SEC's motion to dismiss the FKC Plaintiffs' complaint, pursuant to the doctrine of abstention articulated by the United States Supreme Court in Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976), based on the concurrent parallel litigation in New York Supreme Court, Queens County. (ECF No. 144, Memorandum and Order, dated 3/28/2012.) See First Keystone Consultants, Inc. v. Schlesinger Elec. Contractors, Inc., No. 10-cv-696, 2012 U.S. Dist. LEXIS 43092 (E.D.N.Y. Mar. 28, 2012). The court entered judgment dismissing all of the FKC Plaintiffs' remaining causes of action, as well as SEC's sixth, seventh, eighth, and ninth counterclaims. (ECF No. 145, Clerk's Judgment dated ...


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