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Cobalt Multifamily Investors I, LLC v. Shapiro

United States District Court, S.D. New York

October 21, 2014

MARK A. SHAPIRO, et al., Defendants.


KIMBA M. WOOD, District Judge.

In its March 28, 2014 Opinion and Order, the Court found Defendant Robert F. Cohen liable on claims of unjust enrichment, conversion, breach of fiduciary duty, and breach of duty of loyalty brought by Anthony Paduano, the court-appointed receiver ("Receiver") for Plaintiffs Cobalt Multifamily Investors I, LLC, and its related entities, including Vail Mountain Trust (the "Trust") (collectively, "Cobalt"). See Cobalt Multifamily Investors I, LLC v. Shapiro, No. 06-CV-6468, 2014 WL 1282538, at *10 (S.D.N.Y. Mar. 28, 2014) [hereinafter " Cobalt I "] (Wood, J.). The Court reserved judgment regarding damages, however, and ordered the Receiver to submit a separate motion for summary judgment on the issue. The Receiver filed that motion, with an accompanying Rule 56.1 statement, on April 28, 2014. See (Mem. of Law in Supp. of Receiver's Mot. for Summ. J. on Damages ("Receiver's Damages Mem.") [ECF No. 239]); (Receiver's Rule 56.1 Stmt. [ECF No. 238]). Both submissions are unopposed. For the following reasons, the Receiver's motion for summary judgment is GRANTED in part and DENIED in part.

Additionally, Cohen has filed a motion for reconsideration of the Court's prior Opinion finding Cohen liable on the Receiver's claims. For the reasons discussed below, Cohen's motion is DENIED.


Both the procedural and factual background of this case were discussed at length in Cobalt I. Only the procedural and factual information pertinent to the current motion for summary judgment as to damages is detailed below.

A. Procedural Background

This case stems from an enforcement action filed by the Securities and Exchange Commission in May 2006. See S.E.C. v. Cobalt Multifamily Investors I, Inc., No. 06-CV-2360 (S.D.N.Y.) [hereinafter " SEC Enforcement Action "]. A later criminal case charged the three Cobalt principals-Mark Shapiro, Irving Stitsky, and William Foster (collectively the "Principals")-with "issu[ing] numerous false and misleading private placement memoranda and brochures, " "engag[ing] in a widespread cold-calling scheme to persuade members of the public to invest millions of dollars in the Cobalt entities, " and "then siphon[ing] 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.); see also United States v. Shapiro, No. 06-CR-357 (S.D.N.Y.).

With respect to the Principal's scheme, the Court in Cobalt I found Cohen liable for unjust enrichment, conversion, and breach of fiduciary duty, based on his failure to properly oversee the Trust and several bank accounts over which he was trustee. See Cobalt I, 2014 WL 1282538, at *10.

B. 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.

At Shapiro's request, Cohen prepared documents for the creation of the Trust and served as its trustee. (Receiver's 56.1 Stmt. [ECF No. 238] at ¶¶ 4-5). During this time, Cohen distributed money from the Trust to himself, Shapiro, Stitsky, and Foster. He also made payments to certain companies using Trust account funds, at least some of which were for Shapiro's benefit. ( Id. ¶ 7-8.). Cohen signed, or allowed his name to be signed on, checks from the Trust account payable to:

• Cohen, or his law firm, totaling $166, 752.98. ( Id. ¶ 15).
• Shapiro, totaling $20, 259.85. ( Id. ¶ 12).
• Stitsky, totaling $54, 200.00. ( Id. ¶ 13).
• Foster, totaling $22, 500.00. ( Id. ¶ 14).
• Car companies for cars purchased or leased for Shapiro's benefit, totaling $130, 660.50. ( Id. ¶ 10).
• Construction companies and architects, at least some of whom worked on projects that involved Shapiro's residences, ...

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