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Cobalt Multifamily Investors I, LLC v. Arden

United States District Court, S.D. New York

September 12, 2014

COBALT MULTIFAMILY INVESTORS I, LLC, et al., Plaintiffs,
v.
LISA ARDEN, et al., Defendants

Decided: September 11, 2014.

For Cobalt Multifamily Investors I, LLC, Cobalt Multifamily Co. I, LLC, Cobalt Capital Funding, LLC., Vail Mountain Trust, by Anthony Paduano, As Receiver, Plaintiffs: Joseph E. Gasperetti, Leonard Weintraub, LEAD ATTORNEYS, Paduano & Weintraub, New York, NY.

John Dundon, Defendant, Pro se.

Susan Kagan, Defendant, Pro se.

For Susan Kagan, Defendant: Howard Kagan, Howard Kagan Esq., Brooklyn, NY.

For David Kirschner, Defendant: James O Drucker, LEAD ATTORNEY, Kase & Druker, Garden City, NY.

For Jennifer Wilkov, Defendant: Steven T. Halperin, Halperin & Halperin, P.C., New York, NY.

For Anthony Paduano, Receiver: Anthony Paduano, Leonard Weintraub, Paduano & Weintraub, New York, NY.

For Micheal Eisemann, Counter Claimant: Vincent M Lentini, LEAD ATTORNEY, Vincent M. Lentini, Esq., Garden City, NY.

Page 358

OPINION & ORDER

Kimba M. Wood, United States District Judge.

The court-appointed receiver (the " Receiver" ) for Plaintiffs Cobalt Multifamily Investors I, LLC, and its related entities (collectively, " Cobalt" ) filed this action to recover commissions paid to Cobalt sales employees while Cobalt was engaged in securities fraud. Defendant Brett Stone (f/k/a Brett Stitsky) (" Defendant" ) moves for judgment on the pleadings, pursuant to Federal Rule of Civil Procedure 12(c). For the reasons stated below, Defendant's motion is GRANTED in part and DENIED in part.

I. BACKGROUND

This case is related to an enforcement action filed by the Securities and Exchange Commission (the " SEC" ) in March 2006. See S.E.C. v. Cobalt Multifamily Investors I, Inc., 06-CV-2360 (S.D.N.Y. complaint filed March 27, 2006) [hereinafter the " SEC Enforcement Action " ]. The SEC's action arose out of a fraud perpetrated by Cobalt's principals--Mark A. Shapiro, Irving J. Stitsky, and William B. 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 on substantive and conspiracy counts of securities fraud, wire fraud, and

Page 359

mail fraud. See United States v. Shapiro, 06-CR-357 (S.D.N.Y. Nov. 23, 2009).

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 ...


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