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FILED: KINGS COUNTY CLERK 06/19/2017 04:45 PM INDEX NO.

509504/2016
NYSCEF DOC. NO. 124 RECEIVED NYSCEF: 06/16/2017

At an lAS Term, Com 11 of the Supreme


Court of the State of New York, held in and
for the County of Kings, at the Courthouse,
at Civic Center, Brooklyn, New York, on the
12th of June 2017.

PRES ENT:

HON. SYLVIA G. ASH,


Justice.
______________- - - - - - - - - - - - - - - - - - - - - - - - - -x
MORDECHAI ITZKOWITZ, et aI.,

Plaintiffs, Decision / Order

- against- Index No. 509504/-q:~ ~ ~

ALAN J. GINSBURG, et aI.,

Defendants.
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The following papers numbered 1 to 4 read herein: Papers Numbered

Notice of Motion/Order to Show Cause/


Petition/Cross Motion and
Affidavits (Affirmations) Annexed _ 1- 5
Opposing Affidavits (Affirmations) _ 6
Reply Affidavits (Affirmations) _ 7-9

Defendants, Alan J. Ginsburg ("Ginsburg"), Mega Funding, LLC ("Mega"), Green Apple
Cab Company, LLC ("Green Apple") and GLS Transit, Inc. ("GLS"), (collectively the "Ginsburg
Defendants"), move to dismiss the complaint, or in the alternative, to sever Plaintiffs' claims.
Additionally, the Ginsburg Defendants move to vacate and quash a non-party subpoena served
upon Signature Bank ("Signature") and obtain a protective order.

Defendants, Yitzchok Mattis Swerdloff ("Swerdloff') and Dale & Crne, LLC ("Dale" and
collectively the "Swerdloff Defendants") also move to dismiss the complaint. Plaintiffs oppose
and cross-move to amend the complaint. Plaintiffs, 17B LLC, 50P LLC, 307P LLC, GORN LLC,
MKGT LLC, MM MMGT LC, MUNIT LLC, SC BSD LLC, SN S&N LLC, SS N&S LLC,
YM1875 LLC (collectively the "LLC Plaintiffs"), move to discontinue their claims against
Defendants without prejudice.

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For the reasons set forth below, the Ginsburg and Swerd10ff Defendants' motions to
dismiss the complaint or in the alternative to sever Plaintiffs' claims are GRANTED in part and
DENIED in part. The Ginsburg Defendants' motion to vacate and quash the subpoena and to obtain
a protective order is DENIED in its entirety. Plaintiffs' cross-motion to amend the complaint is
GRANTED. The LLC Plaintiffs' motion to discontinue their claims against Defendants without
prejudice is GRANTED.
Background
Alleged fraud, perpetuated in connection with business transactions, precipitated this
action. According to Plaintiffs, starting in 2014, Ginsburg with the assistance of Swerd10ff and
Judah Langer ("Langer"), concocted a scheme to extract money from unwitting investors, of which
Plaintiffs numbered. The alleged scheme centered around inducing investors to purchase Boro
Taxi Permits ("Permits"), issued under the New York City Taxi & Limousine Commission's Street
Hail Livery Program, from initial permit-holders. In purchasing the Permits, the investors were
allegedly led to believe that they would earn profits and obtain tax benefits by selling the Permits
and renting out taxicabs.
In exchange for a series of advance payments, Ginsburg, Swerd10ff and Langer allegedly
promised Plaintiffs, among other things, the following: (1) that they would transfer Permit
ownership from the original permit-holders to Plaintiffs, after one year; (2) that drivers, willing to
pay a weekly rental fee for the taxicabs, would be at Plaintiffs' disposal; (3) that Plaintiffs would
receive a $15,000 government rebate for making existing taxicabs wheelchair-accessible and a
$10,000 tax credit for new vehicles; and (4) that management and other services, including parking
space for the vehicles, would be provided to Plaintiffs. Relying upon Ginsburg and Swerd10ff s
alleged representations, Plaintiffs invested in the alleged scheme.

However, Plaintiffs claim that the primary objective of the alleged scheme, to enrich
Defendants at the expense of investors, soon revealed itself. Plaintiffs allege that Ginsburg, the
scheme's ringleader, enlisted Swerd10ff and Langer, assigned them roles and supervised their
work. Plaintiffs further claim that Swerd10ff was tasked with, among other duties, recruiting
unsuspecting investors into the scheme. Langer allegedly served as the titular head of the scheme,
managing its day-to-day operations. Ginsburg, Swerd10ff and Langer are further alleged to have
used Mega, Green Apple, Dale and GLS as shell corporations to contract with Plaintiffs and to
funnel the scheme's alleged ill-gotten gains to their personal bank accounts.

In furtherance of the scheme, vehicles were allegedly purchased outside of the State of
New York and retrofitted in the State of Maryland. Ginsburg, along with his partners, are said to
have recruited investors in the states of New York, Maryland and New Jersey via emai1s and
telephone calls. In their complaint, Plaintiffs assert, among other claims, racketeering (RICO),
fraud, breach of contract and unjust enrichment.
The Ginsburg Defendants now move to dismiss Plaintiffs' complaint. The Ginsburg
Defendants argue that Plaintiffs' RICO claims are without merit. According to the Ginsburg
Defendants, Plaintiffs' reliance on a single interstate phone call made to a potential investor, is
insufficient to constitute racketeering activity under the RICO statute. Further, the Ginsburg

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Defendants argue that Plaintiffs fail to demonstrate that Defendants' alleged actions were related
for purposes of the RICO statute.
Additionally, the Ginsburg Defendants argue that Plaintiffs' fraud claims are barred by the
contracts that Plaintiffs entered into with Mega, Green Apple, Dale and GLS. The Ginsburg
Defendants point to the following contractual language in support: "[i]t is understood and
acknowledged [by Plaintiffs] that any investment made in the Company was and will not be done
in reliance on any statement or omissions by [Mega, Green Apple, GLS, and Dale]".

As to Plaintiffs' breach of contract and unjust enrichment claims, the Ginsburg Defendants
argue that those claims are duplicative and insufficiently pled. And that Individual Plaintiffs,
Chaim Neger and Green Medallion One, LLC (collectively, "Neger"), executed a general release
on June 17,2015, resolving all of his claims against Defendants. In the alternative to their motion
to dismiss, the Ginsburg Defendants argue that Plaintiffs' claims should be severed because
Plaintiffs' claims are unrelated to one another.
In addition to moving to dismiss Plaintiffs' complaint, the Ginsburg Defendants also move
to vacate and quash a non-party subpoena served upon Signature on July 8, 2016. The subpoena
seeks to obtain all documents relating to the Ginsburg Defendants' bank accounts, including bank
statements, cancelled checks and deposit tickets, starting from January 1, 2014. The Ginsburg
Defendants argue that the subpoena is overly broad, improperly noticed, and seeks to obtain
information that falls outside the scope of discovery. The Ginsburg Defendants, designating the
subpoena a tool of harassment, seek to obtain a protective order.

The Swerdloff Defendants similarly move to dismiss Plaintiffs' complaint and adopts the
Ginsburg Defendants' arguments regarding Plaintiffs' RICO claims. As to Plaintiffs' fraud claims,
the Swerdloff Defendants argue that Plaintiffs fail to identify any actionable statements by the
Swerdloff Defendants to support those claims. Similarly, the Swerdloff Defendants maintain that
the complaint fails to allege the existence of a contractual relationship between the parties or that
the Swerdloff Defendants have been unjustly enriched.

Plaintiffs oppose both the Ginsburg and the Swerdloff Defendants' motions and cross-
move to amend the complaint. Plaintiffs dispute the Ginsburg Defendants' allegation that the
complaint relies on a single interstate phone call to satisfy the racketeering activity requirement of
the RICO statute. Plaintiffs point to the complaint's allegation that Defendants made a number of
phone calls and sent a number of email messages to out-of-state investors, in furtherance of the
scheme. Further, Plaintiffs maintain that the complaint sufficiently asserts fraud claims. And that
the contractual language cited by the Ginsburg Defendants, which purportedly bars fraud claims,
is too broad in nature and does not apply to Ginsburg and Swerdloff, in their individual capacities.

Further, Plaintiffs argue that they have successfully asserted breach of contract because the
complaint alleges that Defendants failed to, among other things, provide Plaintiffs the promised
Permits. Plaintiffs insist that Defendants have been unjustly enriched by the alleged scheme
because Defendants collected Plaintiffs' money without providing the promised benefits. With
regards to Neger's alleged release of his claims against Defendants, Plaintiffs argue that the
release's period of effectiveness extends only to June 17, 2015. According to Plaintiffs,

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Defendants' misrepresentations and inducement ofNeger to invest in the alleged scheme occurred
after June 17, 2015. As to the Ginsburg Defendants' request that Plaintiffs' claims be severed,
Plaintiffs argue against severance due to what Plaintiffs claim to be the claims' legal and factual
similarities.
Plaintiffs also oppose the Ginsburg Defendants' motion to vacate and squash the subpoena
and to obtain a protective order. Plaintiffs argue that the subpoena appropriately seek to obtain
relevant financial information from Signature. To support the relevancy of the information
requested of Signature, Plaintiffs point to the complaints' allegations that Defendants commingled
the scheme's ill-gotten funds with their own personal monies. Plaintiffs argue that the subpoena is
not overly broad because the subpoena seeks to obtain specific documents for a limited period of
time, starting January 2014. Plaintiffs dispute the Ginsburg Defendants' contention that the
subpoena was improperly noticed. According to Plaintiffs, the Ginsburg Defendants received
notice of the subpoena on July 18,2016,20 days prior to the subpoena's return date on August 10,
2016.
Argument

A motion to dismiss pursuant to CPLR S 3211 (a)(1) will be granted only if the
"documentary evidence resolves all factual issues as a matter of law, and conclusively disposes of
the plaintiffs claim" (see Leon v Martinez, 84 NY2d 83, 88 [1994]). However, on a motion to
dismiss pursuant to CPLR S 3211 (a) (7), the pleading is to be afforded a liberal construction (see,
CPLR 3026). The facts, as alleged in the complaint must be accepted as true; the plaintiff accorded
the benefit of every possible favorable inference; and the court must only determine whether the
facts as alleged fit within any cognizable legal theory (see Morone v Morone, 50 NY2d 481, 484
[1980]; Rovello v Orofino Realty Co., 40 NY2d 633 [1976]). The Court will consider the validity
of the contested claims based on the aforementioned principals.

First, both the Ginsburg and Swerdloff Defendants argue that Plaintiffs' RICO claims are
deficient. To establish a RICO claim under 18 U.S.C. 1962(c), "a plaintiff must show that he was
injured by defendants' (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering
activity" Azrielli v. Cohen Law Offices, 21 F3d 512, 520 [2d Cir. 1994]). RICO defines "pattern of
racketeering activity" as requiring "at least two acts of racketeering activity" committed in a 10-
year period (18 U.S.c. S 1961(5); see also Azrielli, 21 F3d at 520).

To establish a pattern of racketeering activity, a plaintiff must also make a showing that
the predicate acts of racketeering activity by a defendant are "related, and that they amount to or
pose a threat of continued criminal activity" (see H J, Inc. v. Northwestern Bell Tel. Co., 492 US
229, 239 [1989]). The continuity necessary to prove a pattern can be either "open-ended
continuity," (i.e., past criminal conduct coupled with a threat of future criminal conduct) or
"closed-ended continuity" (i.e., criminal conduct "extending over a substantial period of time")
see GICC Capital Corp. v Technology Finance Group, Inc., 67 F3d 463, 467 (2d Cir 1995). A
matter occurring over a number of years satisfies as a substantial period of time for continuity
purposes (id.).

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Here, the complaint sufficiently alleges conduct that falls within the ambit of the RICO
statute. Contrary to the Ginsburg and Swerdloff Defendants' contention, the complaint does not
simply rely upon one interstate phone call to demonstrate racketeering activity. Rather, the
complaint alleges that Defendants recruited investors in three different states, via numerous emails
and telephone calls to take part in the alleged scheme. Further, the complaint sufficiently alleges a
pattern of racketeering activity because Defendants' alleged misconduct is said to have extended
over a substantial period of time. Therefore, the Ginsburg and Swerdloff Defendants' motions to
dismiss Plaintiffs' RICO claims are DENIED.
Next, the Ginsburg and Swerdloff Defendants argue that Plaintiffs either fail to properly
assert fraud claims or that Plaintiffs' fraud claims are barred by the contracts entered into with
Mega, Green Apple, Dale and GLS. "The elements of a cause of action sounding in fraud are a
material misrepresentation of an existing fact, made with knowledge of the falsity, an intent to
induce reliance thereon, justifiable reliance upon the misrepresentation, and damages" (lntrona v
Huntington Learning Ctrs., Inc., 78 AD3d 896, 898 [2d Dept 2010]; see Eurycleia Partners, LP v
Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]).

Here, the complaint sufficiently alleges fraud claims because Plaintiffs maintain that
Defendants misled and induced them to invest in the alleged scheme. However, the parties'
contract bars Plaintiffs from asserting fraud claims based upon statements or omissions made by
Mega, Green Apple, Dale and GLS. As such, to the extent that Plaintiffs' fraud claims are based
upon statements or omissions made by Mega, Green Apple, Dale and GLS, they are dismissed.
The Ginsburg and Swerdloff Defendants' motion to dismiss Plaintiffs' fraud claims is otherwise
DENIED.
The Ginsburg and SwerdloffDefendants also move to dismiss Plaintiffs' breach of contract
and unjust enrichment claims. The elements of a cause of action to recover damages for breach of
contract are (1) the existence of a contact, (2) the plaintiffs performance under the contract, (3)
the defendant's breach of the contract, and (4) resulting damages (see Jp Morgan Chase v JH
Elec. of NY, Inc., 69 AD3d 802, 803 [2d Dept 20 10]). However, the existence of a valid and
enforceable written contract governing a particular subject matter ordinarily precludes recovery in
quasi contract for events arising out of the same subject matter (Clark-Fitzpatrick, Inc. v. Long
Island R. Co., 70 NY2d 382 [1987]). A "quasi contract" only applies in the absence of an express
agreement, and is not really a contract at all, but rather a legal obligation imposed in order to
prevent a party's unjust enrichment (Farash v Sykes Datatronics, 59 NY2d 500, 504 [1983]).

Here, the complaint sufficiently alleges claims for breach of contract against Mega, Green
Apple, GLS and Dale because Plaintiffs claim that they were not provided the benefits called for
by the parties' contract. However, the existence ofa valid contract between Plaintiffs, Mega, Green
Apple, GLS and Dale necessarily prevents Plaintiffs from asserting unjust enrichment against
those entities. Therefore, the Ginsburg and Swerdloff Defendants' motion to dismiss Plaintiffs'
unjust enrichment claims as against Mega, Green Apple, Dale and GLS is GRANTED.

However, Plaintiffs are permitted to assert both breach of contract and unjust enrichment
claims against Ginsburg and Swerdloff in their individual capacities. As such, the Ginsburg and

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..

Swerdloff Defendants' motion to dismiss Plaintiffs' breach of contract and unjust enrichment
claims as Ginsburg and Swerdloffis DENIED.
The Ginsburg Defendants also move to vacate and quash the subpoena and obtain a
protective order. Pursuant to CPLR S 3101(a)(4), a party may obtain discovery from a non-party
in possession of material and necessary evidence, provided that the non-party is informed of the
circumstances or reasons disclosure is sought (emphasis added). CPLR S 3101 provides in
pertinent part: (a) "[t]here shall be full disclosure of all matter material and necessary in the
prosecution or defense of an action, regardless of the burden of proof by: [....] (4) any other person,
upon notice stating the circumstances or reason such disclosure is sought or required."

"The phrase material and necessary' is to be interpreted liberally to require disclosure,


upon request, of any facts bearing on the controversy which will assist preparation for trial by
sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason"
(Allen v. Crowell-Collier Publ. Co., 21 NY2d 403,406 [1968]; see also Yoshida v. Hsueh-Chih
Chin, 111 AD3d 704, 705 [2d Dept 2013].
CPLR S 3101 (a)( 4) also contains a notice requirement with regard to non-parties, wherein
the subpoenaing party must first state either on the face of the subpoena, or in a notice
accompanying it, "the circumstances or reasons such disclosure is sought or required" (Matter of
Kapon v. Koch, 23 NY3d 32, 34 [2014]). Generally, the standard to be applied on a motion to
quash a subpoena "is whether the requested information is 'utterly irrelevant' to any proper inquiry"
(Gertz v Richards, 233 AD2d 366, 366 [1996]). The person challenging the subpoena bears the
burden of demonstrating the utter irrelevancy of the demands (id.; see Matter of Hogan v Cuomo,
67 AD3d 1144 [2009]).
Here, the information sought by the subpoena is material and relevant because the
complaint alleges that Defendants transferred the alleged scheme's ill-gotten gains to their own
personal bank accounts. Further, the subpoena is not overly broad because the subpoena seeks to
obtain the Ginsburg Defendants' financial information for a specific period of time, starting
January 2014. The subpoena was properly noticed because the Ginsburg Defendants were notified
of the subpoena on July 18,2016,20 days prior to the subpoena's return date on August 10,2016.
As such, the Ginsburg Defendants' motion to vacate and squash the subpoena and to obtain a
protective order is DENIED.
In addition, the Ginsburg Defendants move to sever Plaintiffs' claims. "Although it is
within a trial court's discretion to grant a severance, this discretion should be exercised sparingly"
(Shanley v Callanan Indus., 54 NY2d 52, 57 [1981]). Severance is generally "inappropriate where
the claims against the defendants involve common factual and legal issues, and the interests of
judicial economy and consistency of verdicts will be served by having a single trial" (New York
Cent. Mut. Ins. Co. v McGee, 87 AD3d 622 [2d Dept 2011]). Here, severance of Plaintiffs' claims
would be ill-advised because the claims involve common factual and legal issues. As such, the
Ginsburg Defendants' motion to sever is DENIED.
Turning now to Plaintiffs' cross-motion to amend, applications for leave to amend
pleadings should be freely granted except when the delay in seeking leave to amend would directly

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cause undue prejudice or surprise to the opposing party, or when the proposed amendment is
palpably insufficient or patentlydevoid!of merit (see CPLR 3025 [b]; Lucido v Mancuso, 49 AD3d
220,222 [2d Dept 2008]). Here, Plaintiffs' proposed amendments will not cause undue prejudice
nor serve as a surprise to Defendants aJ the action is in the beginning stages and Plaintiffs seek to
add factual allegations and claims to thbir complaint. Therefore, Plaintiffs' cross-motion to amend
is GRANTED. I
With regards to the Ginsburg befendants' motion to dismiss Neger claims based on the
June 17, 2015 release, that motion i~ DENIED because a dispute exists as to the release's
applicability in the instant case. I
Lastly, the LLC Plaintiffs' motion to voluntarily discontinue their claims against
I
Defendants without prejudice, is GRANTED. .

This constitutes the Decision aAd Order of the Court.

lil
Sylvia G. Ash, J.S.C

HON. SYlVfA GASH. JSC

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