United States District Court, S.D. New York
[Copyrighted Material Omitted]
For Cobalt Multifamily Investors I, LLC, Cobalt Multifamily Co. I, LLC, Cobalt Capital Funding, LLC., Vail Mountain Trust, by Anthony Paduano as Receiver, Plaintiffs, Cross Defendants: Joseph E. Gasperetti, Leonard Weintraub, LEAD ATTORNEYS, Paduano & Weintraub, New York, NY.
Robert F. Cohen, Esq., Defendant, Pro se, Hartford, CT.
For Anthony Paduano, Receiver: Anthony Paduano, Leonard Weintraub, Paduano & Weintraub, New York, NY.
Robert F. Cohen, Esq., Cross Claimant, Pro se, Hartford, CT.
Robert F. Cohen, Esq., Cross Defendant, Pro se, Hartford, CT.
For Lum, Danzis, Drasco & Positan, LLC, Cross Claimant: Russel David Francisco, Wolff and Samson, NY, NY; William E. Goydan, Wolff & Samson, P.C., (NJ), West Orange, NJ.
For Philip L. Chapman, Cross Claimant, Cross Defendant: Anne Patrice Richter, Scott Christopher Tuttle, LEAD ATTORNEYS, McManus, Collura & Richter, New York, NY; Russel David Francisco, Wolff and Samson, NY, NY; William E. Goydan, Wolff & Samson, P.C., (NJ), West Orange, NJ.
For Philip L. Chapman, Cross Defendant: Scott Christopher Tuttle, McManus, Collura & Richter, New York, NY.
For Lum, Danzis, Drasco & Positan, LLC, Cross Defendant, Cross Claimant: David M. Dugan, William E. Goydan, Gage Andretta, Wolff & Samson, P.C., (NJ), West Orange, NJ; Russel David Francisco, Wolff and Samson, NY, NY.
OPINION & ORDER
Kimba M. Wood, United States District Judge.
Anthony Paduano, the court-appointed receiver (the " Receiver" ) for Plaintiffs Cobalt Multifamily Investors I, LLC, and its related entities, including Vail Mountain Trust (the " Trust" ) (collectively, " Cobalt" ) has moved for summary judgment against defendants Robert F. Cohen (" Cohen" ), an attorney, and his law firm, Cohen & Werz LLC (" C& W" ) (collectively, the " Cohen Defendants" ) on claims of breach of fiduciary duty, unjust enrichment, conversion, and aiding and abetting. [Dkt. No. 211]. For the following reasons, the Receiver's motion for summary judgment is GRANTED in part and DENIED in part.
I. PROCEDURAL BACKGROUND
This case is related to an enforcement action filed by the Securities and Exchange
Commission (the " SEC" ) in May 2006. See S.E.C. v. Cobalt Multifamily Investors I, Inc., 06 Civ. 2360 (S.D.N.Y.) [hereinafter the " SEC Enforcement Action " ]. The SEC's action arose out of a massive fraud perpetrated by three of Cobalt's principals--Mark A. Shapiro (" Shapiro" ), Irving J. Stitsky (" Stitsky" ), and William B. Foster (" Foster" ) (collectively, the " Cobalt Principals" )--who allegedly " issued numerous false and misleading private placement memoranda and brochures," " engaged in a widespread cold-calling scheme to persuade members of the public to invest millions of dollars in the Cobalt entities," and " then siphoned off much of the invested funds for their own personal use, and for other fraudulent purposes." SEC Enforcement Action, 542 F.Supp.2d 277, 279 (S.D.N.Y. 2008) (Wood, J.). In a criminal case charging the Cobalt Principals with the same conduct, all three were found guilty after a jury trial on substantive and conspiratorial counts of securities fraud, wire fraud, and mail fraud. See United States v. Shapiro, 06 Cr. 357 (S.D.N.Y.).
In the SEC Enforcement Action, Judge Mukasey appointed Anthony Paduano to act as temporary Receiver for Cobalt. See SEC Enforcement Action, Dkt. No. 2 at 21-24 (S.D.N.Y. March 25, 2006). On July 20, 2006, Judge Mukasey made the Receiver's appointment permanent. See id., Dkt. No. 56 at 1 (S.D.N.Y. July 20, 2006).
In August 2006, the Receiver filed this suit against the Cohen Defendants, as well as other defendants who have since settled or been dismissed. On April 30, 2013, the Receiver moved for summary judgment against the Cohen Defendants. [Dkt. No. 211]. Pursuant to Rule 56.1 of the Local Civil Rules of the United States District Courts for the Southern and Eastern Districts of New York (" Local Rule 56.1" ), the Receiver submitted a Local Rule 56.1 Statement of Material Facts. [Dkt. No. 214].
At the time the Receiver moved for summary judgment, the Cohen Defendants were represented by legal counsel. Prior to responding to the Receiver's motion,
however, Cohen removed his counsel and began representing himself and his former law firm pro se. [Dkt. Nos. 215, 220].
On July 8, 2013, the Cohen Defendants submitted a memorandum of law in opposition to the Receiver's motion for summary judgment, [Dkt. No. 221], but they failed to submit a Responsive Statement of Material Facts, as required by Local Rule 56.1(b), despite referencing Local Rule 56.1 in their memorandum's opening sentence. Because the Cohen Defendants were represented when the Receiver moved for summary judgment, they did not receive a Local Rule 56.2 Notice. (Local Rule 56.2 requires " [a]ny represented party moving for summary judgment against a party proceeding pro se " to submit a notice to the pro se litigant explaining the requirements of Local Rule 56.1 and the importance of summary judgment. Local R. 56.2.) On December 5, 2013, the Court issued an Order attaching the Local Rule 56.2 Notice and giving the Cohen Defendants an additional opportunity to file a Responsive Statement of Material Facts pursuant to Local Rule 56.1(b). [Dkt. No. 232 (citing Fed.R.Civ.P. 56(e)(1))]. Even after having been permitted this second opportunity, however, the Cohen Defendants did not file a Responsive Statement of Material Facts.
II. FACTUAL BACKGROUND
" A nonmoving party's failure to respond to a Rule 56.1 statement permits the court to conclude that the facts asserted in the statement are uncontested and admissible." T.Y. v. New York City Dep't of Educ., 584 F.3d 412, 418 (2d Cir. 2009). Under Local Rule 56.1(c), if a nonmoving party " fails to controvert a fact so set forth in the moving party's Rule 56.1 statement, that fact will be deemed admitted." Giannullo v. City of New York, 322 F.3d 139, 140 (2d Cir. 2003); see also Fed.R.Civ.P. 56(e)(2). However, " '[t]he local rule does not absolve the party seeking summary judgment of the burden of showing that it is entitled to judgment as a matter of law, and a Local Rule 56.1 statement is not itself a vehicle for making factual assertions that are otherwise unsupported in the record.'" Giannullo, 322 F.3d at 140 (quoting Holtz v. Rockefeller & Co., Inc., 258 F.3d 62, 74 (2d Cir. 2001)). The Court has therefore reviewed the supporting evidence for those paragraphs of the Receiver's Rule 56.1 Statement that are cited herein, and the Court finds those paragraphs to be adequately supported.
Cobalt's purported business was to acquire, develop, and market residential housing properties. (Receiver's 56.1 Stmt. ¶ 17). Cobalt raised capital for its operations through the sale of securities of Cobalt Multifamily Investors I, LLC to public investors. ( Id. ¶ 15). Cobalt solicited investors to purchase these securities through private placement memoranda, which contained numerous misrepresentations. ( Id. ¶ ¶ 16, 18). For instance, the private placement memoranda made no mention of Shapiro's or Stitsky's roles at Cobalt or their criminal histories; in 2001, Shapiro was convicted of bank fraud and conspiracy ...