### Khan v Garg 2024 NY Slip Op 31418(U) April 18, 2024 Supreme Court, New York County Docket Number: Index No. 652334/2013 Judge: AndreaMasley Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York State and local governmentsources, including the New

York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.

### [FILED: NEW YORK COUNTY CLERK 04/18/2024 04:59 P~ NYSCEF DOC. NO. 1803



### SUPREMECOURTOFTHE STATEOFNEWYORK COUNTYOFNEWYORK: COMMERCIALDIVISIONPART

### 48

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RAZA KHAN, INDEX NO. Plaintiff, MOTION DATE

- V - INDEX NO. 652334/2013 RECEIVED NYSCEF: 04/18/2024

652334/2013

VISHAL GARG, EDUCATION INVESTMENT FINANCE CORPORATION, 1/0 CAPITAL LLC, and EMBARK HOLDCO I, LLC, MOTION SEQ. NO. 030 035 039

Defendants.

-----------------------------------------------------------------------------------X HON. ANDREA MASLEY: AMENDEDDECISION+ ORDERONMOTION

Thefollowing e-filed documents, listed by NYSCEF document number (Motion 030) 1382, 1383, 1384, 1396, 1397, 1457, 1461, 1484, 1485, 1486, 1487, 1488, 1489, 1490, 1491, 1492, 1493, 1494, 1495, 1496, 1497, 1498, 1530, 1531, 1532, 1543, 1598, 1649 were read on this motion to/for PRECLUDE
Thefollowing e-filed documents, listed by NYSCEF document number (Motion 035) 1418, 1419, 1420, 1421, 1422, 1423, 1424, 1434, 1436, 1438, 1472, 1476, 1524, 1542, 1600, 1651 were read on this motion to/for PRECLUDE
Thefollowing e-filed documents, listed by NYSCEF document number (Motion 039) 1500, 1501, 1502, 1503, 1504, 1505, 1506, 1507, 1508, 1509, 1510, 1511, 1512, 1513, 1514, 1515, 1516, 1517, 1518, 1519, 1520, 1521, 1523, 1528, 1535, 1554, 1555, 1556, 1557, 1558, 1559, 1560, 1561, 1562, 1563, 1564, 1565, 1566, 1567, 1568, 1575, 1576, 1577, 1578, 1579, 1580, 1594, 1595, 1627 were read on this motion to/for RENEW/REARGUE/RESETTLE/RECONSIDER 1 Upon the foregoing documents, it is On July2, 2013, plaintiff Raza Khan initiated this action, individually and derivatively, against his childhood friend defendantVishal Garg, their company Education Investment Finance Corporation (EIFC) (ofwhich each party owns 50%), 1/0

1The court amends its April 12, 2024 Decision and Order based on the discussion on the record on April 15, 2024. The parties' letters dated April 15, 2024 and April 16, 2024were not considered.

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Capital, LLC (Garg's company), 2 and Embark Holdco I, LLC (Embark) (EIFC owns 25% of Embark.) (NYSCEF Doc. No. [NYSCEF] 1, Complaint; NYSCEF 316, August 10, 2016 Decision and Order at 1 [mot. seq. no. 010]; NYSCEF 1507, Organizational Chart.) Khan's derivative claims are on behalfofEIFC. (NYSCEF 1, Complaint.) The remaining claims are: (I) corporate deadlockas to EIFC requesting that "one party
... be ordered to buy outthe other'' (NYSCEF 335, FAC

# ,m 151-154); 

### (11) breach of fiduciary dutyof loyalty and goodfaith against Garg for (i) converting EIFC'sfunds; (ii) falsifying EIFC'sfinancial records; (iii) failing to file EIFC's tax returns since 2009; (vi) "failing to assign the asset purchases ofthe Senior Secured Term Note to EIFC"; (viii) "using EIFC'sfunds to benefit MRU Lending"; (ix) "improperlyseizing EIFC equipment
on June 24, 2013"; and (xii) "amending EIFC's tax returns with falsefinancial information" 

### (id.

# ,m 155-159); 

### (111) conversion against Garg and Embarkfor "wrongfully transferr[ing] funds [or using funds] belong to EIFC and EIFC-related entities" 

### (id.

# ,m 160-168); (VII) conversion against Garg fortransferring EIFC funds to anotherentity, MRU Lending 

### (id.

# ,m 187-190); (VIII) unjust enrichment against Garg fortransferring

2 1/0 Capital, LLC is dismissed from this action. Plaintiff'sfirst motion to amend the complaintto add 1/0 Capital LLC and Embark Holdco I, LLC was denied. (NYSCEF 168, June 29, 2014, Decision and Order [mot. seq. no. 005].) However, on February2, 2017, on consent, plaintiffwas permitted to amend the complaintto add 1/0 Capital LLC and Embark Holdco I LLC. (NYSCEF 335, FirstAmended Complaint [FAC]; NYSCEF 339, Order.) Plaintiff's motion 027 to add as defendants 1/0 Holdco LLC and 1/0 Capital Ltd. was denied. (NYSCEF 1180, Proposed Second Amended Complaint; NYSCEF 1346, January 16, 2023 Decision and Orderat 13 [mot. seq. no. 027].) Plaintiff's motion to amend CountV fortortious interference against 1/0 Capital LLC by adding 1/0 Holdco LLC and 1/0 Capital Ltd. was denied. (Id.) CountV against 1/0 Capital LLC continued until April 13, 2023, when the court granted summaryjudgment dismissing CountV. (NYSCEF 1349, April 13, 2023 Decision and Orderat 13 [mot. seq. no. 026]; see also NYSCEF 1598, August 15, 2023 tr31 :8-9 ["As Your Honor may recall, 1/0 Capital, I believe, was dismissed from the case"].)

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funds belonging to EIFC 

### (id.

# ,m 191-195); and (IX) an accounting of EIFC's books and records. (Id.

# ,m 196-201; see also NYSCEF 360, May 30, 2018 Decision and Order at 10-11 [decision on mot. seq. no. 012 to dismissAmended Complaint dismissing Count IV against all defendants and Counts I, II, IV, V, VI, VII, VIII and IX against Embark]; NYSCEF 1349, April 13, 2023 Decision and Orderat 13 [decision on mot. seq. no. 026 for summaryjudgmentdismissing Count II (iv), (v), (vii), (x), (xi), (xiv), and (xv), CountV and CountVI].) Plaintiffseeks damagesfor Counts II, Ill, VII, and VIII. (NYSCEF 335, FAC at 31-33.) Defendants have counterclaims for breach offiduciary duty, corporate waste and mismanagement, and conversion. (NYSCEF 334, June 9, 2017 First Amended Answer and Counterclaims

# ,m 67-79.) The trial is scheduled to begin on May 6, 2024. 3 In motion 039, plaintiff Raza Khan moves for an order (1) pursuantto CPLR 2221(e), "granting Plaintiff's motion for leave to renew his opposition to Defendants' Motion for Partial SummaryJudgment dated December31, 20204 ('Defendants' MSJ'); (2) pursuantto CPLR 5015(a), reversing Hon. Justice Jeffrey Oing's prior decision denying Plaintiff's Motion to Reject Settlements5 (NYSCEF 316, [Mot Seq 010, August

3Aftertrial in the related case Embark Corp. vKahn, Index. No. 652801/2013, the complaint and counterclaimswere dismissed. (NYSCEF 684, July 14, 2022 Trial Decision at 20.) 4 In motion 026, defendants moved forsummaryjudgment (1) dismissing plaintiff's fiduciary dutyclaims (Count II, Subcounts (iv), (v), (vii), (x), (xi), (xiv) and(xv), tortious interference claim (CountV), and claim forfailure to execute corporate paperwork (Count IV); and (2) granting Garg's counterclaim for conversion (Count II). (NYSCEF 1116, OSC.) 5The following actionswere settled: Education Investment Finance Corporation (EIFC) (on behalfofActivist Special Advisory Services, LLC [ASAS]) and Phoenix Real Estate Solutions Ltd. [PRES] in the arbitration captioned ActivistSpecialAdvisoryServices, LLC vPhoenixRealEstate Solutions, Case No. 011400002627, pending before the American Arbitration Association; and (2) EIFC and Embark Corporation and Embark

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10, 2016 Decision]);" (3) "denying Defendants' MSJ seeking dismissal of sub-counts (iv), (v), (vii), (x), (xiv), (x), (xiv) and (xv) of Plaintiff's breach offiduciary duty claims alleged in his FirstAmended Complaint." (NYSCEF 1500, OSC, Mot Seq 039; NYSCEF 1349, April 13, 2023, Decision granting summaryjudgment and dismissing Count II (iv), (v), (vii), (x), (xi), (xiv) and (xv), tortious interference claim (CountV), and claim forfailure to execute corporate paperwork (CountVI).) With this motion, plaintiff seeks to vacate priordecisions, including a 2016 decision byJustice Oing. The issue here is whether PRES, Garg's company owns the IP allegedly purloined from EIFC. In October2014, EIFC and its subsidiaryASAS commenced an arbitration against PRES alleging misappropriation of EIFC's IP. (NYSCEF 316, August 10, 2016 Decision at 5-6.) Garg founded PRES in 2011. (Id. at 4.) EIFC and PRES entered into
a contract pursuantto which EIFC's subsidiaryASAS performed due diligence and otherservices for PRES forwhich PRES paid EIFC a monthlyfee. (Id.) Plaintiffalleges that in June 2013, the contractwas terminated and the next day, theASAS services
were provided by PhoenixAdvisors and Managers, Ltd. (PAM), another Garg owned entity. (Id.) "In June 2014, EIFC commenced an action

... against Embark

...arising from Embark's alleged failure to pay EIFC for certain services and for invoices paid on Embark's behalf by EIFC." (Id. at 5.) In 2014, a subsidiaryof Embark commenced an action against Embarkfor summaryjudgment in lieu ofcomplaint for nonpayment ofa note. (Id.)

Holdco I, LLC, in the matters captioned EIFC vEmbark Corp., Index No. 155818/2014, and EmbarkHoldco I, LLC vEmbark Corp., etal., Index No. 652552/14.

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On March 4, 2015, Justice Oing removed Khan and appointed Garg to lead EIFC and Embark. (NYSCEF 248, trat47-52.) On March 13, 2015, the Embarkactionswere settled. (NYSCEF 316, Decision at 6.) Justice Oing approved the Activist settlement on August 10, 2016. (NYSCEF 316, Decision at 12.) "A motion for leave to renew ... shall be based upon newfacts not offered on the prior motion thatwould change the prior determination

... and shall contain reasonablejustificationforthe failure to present such facts on the prior motion" (CPLR 2221 [e] [2], [3]). Plaintiffcertainly hasjustification for not offering facts that did not exist at the time forthe motions. However, plaintiff's motion is denied becausethe newfacts presented do not change the prior determination. Plaintiffasserts that Garg, and others related to Garg, disclosed in a 2018 federal action (TrusteeAction), 6 in which PRES seeks payment of unpaid invoices, that PRES
owns the IP which Garg denied owning in this case. In this action on plaintiff's motion to reject the settlements, Garg defended the Activist settlement and denied that PRES owned the allegedly purloined IP. (NYSCEF 1509, MOL at 3 ["Phoenix has pressed the position in the arbitration proceeding and in settlement discussions that regardless ofthe merits ofthe dispute it is thewrong party named and cannot be liable because the intellectual propertythat Raza Khan claims Phoenix misappropriated was neithercontrolled norowned by Phoenix at anytime, but

6 The "TrusteeAction" herein refers to the U.S. BankNationalAssociation v Triaxx AssetManagementLLC et. al., Case No. 1:18-cv-04044 (BCM), filed in the United States District Court ofthe Southern District of NewYork.

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instead was controlled and owned by a consultant for Phoenix."] As plaintiff's papers demonstrate, Garg has consistently maintained that the disputed IP does not belong to PRES. (NYSCEF 1509, EIFC's Memo of Law in Opposition to Khan's Motion to Reject Settlements on Mot Seq 010 at 11-12; NYSCEF 275, Khan's Memo of Lawto Reject Settlements on Mot Seq 010 at 35; NYSCEF 1168, Defendants' MOL in Support of Partial SummaryJudgment (Mot Seq 026) fn 8 at 29.) Plaintiff's motion is denied. First, Justice Oing's decision is not based on the ownership ofthe IP. (NYSCEF 316, August 10, 2016 Decision.) Likewise, this court's decision granting defendant's motion for summaryjudgment is not based on the ownership ofthe IP. (NYSCEF 1349, April 13, 2023 Decision.)7 The court rejects plaintiff's "evidence" of PRES's ownership ofthe IP. The Legal and Analytical Consulting ServicesAgreement8 (Consulting Agreement) between PRES and Phoenix concerning work product, 9 is irrelevantto the ownership ofthe IP at issue

1The court dismissed Breach of Fiduciary Duty (iv) and (v) because plaintiff's assertion oftheft of IP was insufficient. Plaintifffails to identifythe stolen IP. (NYSCEF 1349, April 13, 2023 SummaryJudgment Decision at 9-10.) This decision is not based on anything Garg said ordid. Rather, it is based on plaintiff'sfailure to prove his claim. 8 Likewise, alonewithout more, the Consulting Agreement is inconclusive as to whether the IP addressed therein is the same as the IP allegedly purloined from EIFC. Rather, this record would suggestthat Tang and Jonsson invested significanttime in creating something new. 9 It states: "All inventions, discoveries, trade secrets, confidential information, proprietary information, software, databases, tangible and intangibleworks, and all rights therein, which directly or indirectly relates to the analytical services provided by [PAM] hereunder (collectively, "Work Product"), created, made conceived, authored, reduced to practice ordeveloped by [PAM] personnel shall, in all cases, be owned jointly by [PAM] and [PRES]. In furtherance ofthe foregoing, [PRES] and [PAM] shall cooperate in any manner requested bythe other in obtaining, protecting and asserting any and all rights in and to the Work Product." (NYSCEF 1511, 

### ,i 7). PAM is PhoenixAdvisors and Mangers Ltd., an entity related to Garg. Underthe agreement, PRES engages PAM as a consultant to "provide to [PRES] and to its clients, as advised by [PRES] analytical serviceswith respect to legal and data analysis ofcertain COO securities for general

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in this case as between Jonsson and PRES. (NYSCEF 1511, July 1, 2013 Legal and Analytical Consulting Service Agreement

### ,T7.) Further, plaintiff's reliance on the Trial Declaration of Nicholas J. Calamari, General Counsel at 1/0 Capital LLC until December 2020 and who provided services to PRES, is misplaced. His statementthat "PRES, working with subcontractors including PAM, provided proprietarytechnology and analysis ofcertain ofthe residential mortgage-backed securities ('RMBS') held by the Triaxx CDOs," is equivocal as to who owns the proprietarytechnology and is not inconsistentwith Garg's position that PRES does not own the IP. (NYSCEF 1518, Calamari Declaration 

### ,T 10.) Indeed, the statement itselfthat PRES "provided proprietarytechnology" working with subcontractors, is consistent with statements made in this case. (Id.) Plaintiff's reliance on Calamari's statement as "evidence" is a clear distortion which undermines plaintiff's argument. Likewise, plaintiff's repeated insertion ofthe balded term "its 

### own" "in its papers, without quotes since it is not a quote from defendants, does not make it so. (NYSCEF 1556, Plaintiff's MOL at 6, 11.) Finally, while Jonsson did not testify in the Trustee Action as to ownership ofthe IP, he submitted an affidavit in this action wherein he declares that he is creatorand ownerof the IP thatActivist used pursuantto a license agreement. (NYSCEF 989, Jonsson April 5, 2019 aff

### ,T,T 7, 15, 17.) Nothing plaintiff has submitted effectivelycontradicts Jonsson's statement.

portfolio management, advisoryand trading purposes as requested by [PRES]. The mannerand means bywhich [PAM] chooses to perform the Services are in [PAM's] sole discretion and control. [PAM] shall perform the Services in accordancewith applicable professional standardswith all due care, skill and ability." 

### (,T 2.) The agreement is not signed byTang orJonsson.

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Plaintiffalso relies on PRES's Proposed Findings of Fact and Conclusions of Law (PFFCL) in the Trustee Action as evidence of defendants' "admission" that PRES
owns the IP: "In March 2011, PRES began to analyze the hundreds ofthousands of loans underlying the CDOs' RMBS collateral to identify evidence ofwrongdoing by originators, servicers, and trustees. (Tang

# ,m 30-33, 38, 42-45; Jonsson

# ,m 18- 20, 23, 26-31; Tr. 723:8-14.) PRES initially performed this analysis manually, on a loan-by-loan basis. (Tang

# ,m 38, 42; Jonsson

# ,m 24, 26.) To do the work at scale, Tang and Jonsson built a unique database of loan level data forthe Triaxx CDOs' RMBS collateral. (Tang

# ,m 34-37, Jonsson

# ,m 19-22.) Such a database did not exist anywhere in the market. (Tang 

### ,i 34, Jonsson 

### ,i 20.) PRES also built from scratch advanced proprietary algorithms to analyzethe data. (Tang 

### ,i,i 37-41, 46; Jonsson 

### ,i,i 23- 26, 32; Tr. 846:8-847:14.) The database and algorithmswere time-consuming and costlyto build. (Tang 

### ,i,i 36, 41; Jonsson 

### ,i 22; Tr. 847:3-14.) Tang estimated PRES's cost to build the database and algorithmswas $10 to $20 million. (Tang 

### ,i 41; Tr. 848:2-22.)" (NYSCEF 1510, PRES's PFFCL ,I17.) PRES submitted the PFFCLto Judge Moses in the Trustee action in support of its request for payment of its invoices. However, Ownership of IP was notthe issue atthe hearing in the Trustee Action. Plaintiff's snippet is insufficient evidence ofownership. First, the court cannot confirm manyof the unquoted statements in ,i17. Plaintiff provided atranscript to the courtfrom the Trustee Action which ends at page 825 (NYSCEF 1506), but the quotes in ,i17 are from pages 846-848. Plaintifffailed to provide the Tang Declaration so the court cannot read Tang's actual statements. The court reviewed the Declaration ofSigurgeirJonsson which is quoted in ,i17 and finds that plaintiff's snippet10 omits context importantto this proceeding but not

10The court appreciates that plaintiff place greatweight on the fact that defendants submitted this snippet in the TrusteeAction, but that does not stop plaintifffrom connecting it to the record and supporting thatwhich it is relying on. The snippet itself is not enough.

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importantto the Trustee Action. For example, paragraphs 11-18 ofJonsson's Declaration explain howTang and Jonsson came to be working to find and analyze defective loans in RMBS trusts. (NYSCEF 1514, Jonsson Declaration.) Jonsson explainstheirsearch leading to the statementthat "Tang and Jonsson built a unique database" using the DataQuick database and adding other propertyand borrower information and details the circumstances underwhich theyworked to do so. 

### (Id.

# ,m 19- 22.) Likewise, the statements "PRES paid to acquire access to DataQuick's database" 

### (Id. ,I22), while "DrTang and [Jonsson] developed the algorithm ourselves" do not preclude the possibilitythatTan and Jonsson provided thatworkfor the benefit of PAM which was engaged by PRES. 

### (Id. ,I24.) It is clearfrom the declaration that Jonsson
was working forARAM Global which was engaged by PRES. (,I,I13-14; see also NYSCEF 1506 tr718:2-723:7.) Likewise, the court cannot inferJonsson's relationship with PAM from Calamari's testimony that Jonsson was "at" PAM and Jonsson sent invoices to the trustee. (NYSCEF 1506, tr 11-13.) Meanwhile, plaintiff insists that Tang and Jonsson worked for EIFC. (NYSCEF 275, Khan's Memo of Law on Mot Seq 010 at 35.) Finally, the statement "PRES also built from scratch advanced proprietary algorithms to analyze the data. (Tang 

### ,i,i 37-41, 46; Jonsson 

### ,i,i 23- 26, 32; Tr. 846:8- 847:14)" is equivocal as to whether PRES's employees built it or it used independent contractors or collaborated with others. Likewise, Tang'stestimony is equivocal: "Q: In your declaration you stated from 2011 to 2018, you performed work on behalfof [PRES]? A: Yes." WithoutTang's Declaration, it is unclearforwhom Tang actually worked, ifat all, and in what capacity; he could have worked as an independent contractor. Further, from Jonsson's Declaration and the portion ofthe transcript

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provided, it appears that PRES, ARAM, Tang and Jonsson were working collaboratively, but the ownership ofthe work product between them is not addressed
as it was not the issue in the TrusteeAction. (NYSCEF 1514, Jonsson Declaration ,i,i11-14, 18.) Plaintiff has not satisfied his burden to showthat PRES owned the IP. It is not the court's burden to search the record to connectthe dotswhere plaintiff has failed to do so. Motion 039 is denied. In motion 030, defendants movefor an order precluding plaintifffrom raising evidence, argument ortheories at trial related to the following: 1. The facts and issues thatwere alleged and settled in Activist Special Advisory Services, LLC v. Phoenix Real Estate Solutions (the "PRESL Arbitration"), Case No. 011400002627, American Arbitration Proceeding. 2. Documents obtained and used in the PRESL Arbitration. 3. Documents obtained and used in Embark Holdco I, LLC v. Embark Corp., et al., Index No. 652552/2014. 4. Any argumentsthat the settlements reached in the above actionswere contraryto the interests of EIFC and Khan. 5. Any argumentthat Garg subverted the PRESL Arbitration byfailing to produce documents. 6. Any evidence relating to employment agreements executed by Mingsung Tang and ZiggyJonsson. 7. Any argumentthat Garg hired Tang and Jonsson to workfor Defendant 1/0 Capital and steal or destroy intellectual property belonging to EIFC. 8. Any argumentthat Garg and 1/0 Capital intentionally induced PRES to terminate its contractwith ASAS and to divertthe contract to 1/0 Capital. 9. Any argumentthat Better Mortgage or Garg utilized EIFC intellectual propertyand/ordata at Better Mortgage. 10.Any argumentthat Better Mortgagewas funded with moneythat belonged to, orwas owed to, Kahn or EIFC. 11.Anyargumentthat Garg and 1/0 Capital tortiously interfered with Khan or EIFC's prospective business relations with Betteror Better's predecessor, Avex. 12.Anyargumentthat Garg (i) misappropriated EIFC proprietary information, clients, relationships or business opportunities or (ii) set up competing businesses by stealing EIFC's core business and misappropriating its proprietary information, business opportunities or clients.

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13.Anyargumentthat Garg converted distributions that Phoenix Holdco allegedly owed to Khan. 14.Anytestimony at trial from PeterVinella regarding misappropriation of EIFC intellectual property; and 15.Certain damages theories asserted by J. Duross O'Bryan, CPA. (NYSCEF 1382, OSC [mot. seq. no. 030].) Defendants' motion is denied as to number2 above. Plaintiff may use any documents produced by defendants. Plaintiff need not produce documents backto defendants. However, any documents in plaintiff's possession, but not in defendants' possession, and not produced to defendants may not be used at trial. Defendants' motion is denied as to number3 above because Garg's alleged failure to assign the Senior Secured Term Note to EIFC was carved out of paragraph 7 ofthe Embarksettlement. (NYSCEF 1495, Confidential SettlementAgreement 

### & Release 

### ,i 7.) Defendants' motion is granted as to numbers 4, 11 and 13 abovewhich are not addressed by plaintiff in his opposition. Defendants' motion is granted as to number5 above because whether Garg subverted the arbitration, or not, is not relevant to whether Khan's initiation ofthe arbitration was frivolous. Defendants' motion is granted as to numbers 9 and 14above concerning Garg's alleged use of EIFC's intellectual property and Vinella's opinion on Garg's alleged misappropriation of EIFC's intellectual property because the court dismissed those claims. Specifically, plaintiff now asserts here that defendants improperly seized EIFC's equipment on June24, 2013where EIFC's intellectual property resided which was used by Garg at Better Mortgage. However, the fiduciary duty claim subcount (xv) for "misappropriat[ion of] EIFC's intellectual and other property 652334/2013 KHAN, RAZAvs. GARG, VISHAL Motion No. 030 035 039

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and assets" was alleged in the arbitration and settled, and thus, dismissed. (NYSCEF 1349, April 2023 Decision and Order at 8/13.) Further, having failed to establish facts on summaryjudgmentthat Garg used the intellectual property, data, and proprietary information to pitch investors for Better Mortgage, plaintiffcannot assert it at trial. The court dismissed plaintiff's misappropriation claim as speculative, based on Vinella's opinion which had no factual basis. 

### (Id. at 10/13.)11 Defendants' motion is denied as to number 10 above because whether Garg funded Better Mortgagewith EIFC funds or used funds owed to Kahn to fund Better Mortgage is relevant to the breach offiduciary dutyclaim (i) for converting funds to make asset purchases. Defendants' motion is denied as to number 15 above because O'Bryan's damagestestimony regarding COO analytics and lost prospective customers is relevant to plaintiff's breach offiduciary duty claims for (i) converting EIFC'sfunds, (ii) falsifying EIFC'sfinancial records, and (iii) failing to file EIFC'stax returns since 2009. Plaintiff intends to present evidence attrial that "these particular breaches of Garg'sfiduciary duties, individually and collectively, led to the attrition of EIFC's employees and customers base, and ultimatelythe complete destruction of EIFC's enterprisevalue." (NYSCEF 1532, MOL at 16; NYSCEF 1489, O'Bryan Report

### ,i 39.) Defendants' motion is denied as to number 15 above because O'Bryan will testifyto damages arising from the alleged breach offiduciary duty by (i) converting

11 NYSCEF pagination.

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EIFC'sfunds and (ix) improperlyseizing EIFC's equipment and Garg's alleged conversion of EIFC'sfunds to make asset purchases. Defendants cannot preclude evidence necessaryfor plaintiffto defend against defendants' counterclaims which are: Count I, Breach of Fiduciary duty: for "(i) removing Garg's access to EIFC's operations and finances priorto commencing this litigation; (ii) knowingly causing false and misleading tax returns to be filed on behalfof EIFC; (iii) knowingly directing the filing offrivolous litigation on behalfof EIFC and expending EIFC funds and resources to pursuethese claims as a result ofa personal vendetta against Garg; (iv) refusing, unreasonably, to sign corporate documents prepared by EIFC's counsel, which caused the filing of EIFC tax returns and the transferof certain assets to EIFC to be delayed; (v) refusing to return moneyto EIFC that he borrowed for personal investments; and (vi) failing to satisfy outstanding payments due to vendors that provided critical services to EIFC." (NYSCEF 334, FirstAmended Counterclaims 

### ,i 69.) Count II, Conversion: "Khan improperly exercised unauthorized dominion over monies belonging to EIFC and improperly prohibited Garg, who at all relevant times remained a 50% shareholder, from having anyaccess to the same or records regarding the same. Khan did this by, interalia, using EIFC funds to fund multiple lawsuits against and investigations into wrongdoing by Garg in an effortto harm his estranged friend and business-partner. (Id. 

### ,i 72.) Count Ill, Corporate Waste and Mismanagement: "Khan is a directorof EIFC and is required to act in EIFC's best interest. Khan violated that obligation by depleting EIFC ofthe majorityofcash it held in its company bank account and failing to payvendor costs. Khan alsoviolated that obligation when he unilaterally authorized excessive spending of EIFC'sfunds, including a payment ofat least $400,000 to Paul Hastings to conduct an 'investigation' in furtherance of his personal vendetta against Garg. The paymentto Paul Hastingswas the single largest expenditure madefrom EIFC funds in 2013 and represented more than 25% of EIFC's 2012 operating profit. Khan did not seekapproval or input from Garg or EIFC's counsel priorto spending those funds. He furtherviolated that obligation when he retained two different lawfirms and knowingly caused them to file litigations purportedly on behalfof EIFC, who was left funding the actions. One ofthesewas summarily dismissed and anotherwas stayed bythe Plaintifftwo weeks afterthe claim was brought. Khan did notseekapproval from Garg priorto making these expenditures because his real aim was to attack Garg personally by suing entities that Garg eitherowned orwas affiliated with while hiding behind EIFC." (Id. 

### ,I 76.)

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### [FILED: NEW YORK COUNTY CLERK 04/18/2024 04:59 P~ NYSCEF DOC. NO. 1803 INDEX NO. 652334/2013 RECEIVED NYSCEF: 04/18/2024

As long as defendants proceed with their claims that Kahn's litigationswerefrivolous, thejury must hearevidence aboutthe litigations to determinewhethertheywere frivolous or not. Accordingly, defendants' motion is denied as to numbers 1, 2, 3, 6, 7, 8, 10, 12, and 15and granted as to 4, 5, 9, 11, 13, and 14. In motion sequence 035, plaintiff moves to exclude some ofthe opinion testimony of defendants' expert Greig Taylor. Plaintiff's challenge is limited to Taylor's September 11, 2020 report related to the cost of EIFC's litigations against Garg and his entities. Plaintiff's motion does not address Taylor's opinions on the amount Khan owes EIFC for capital contributions orthe impact on EIFC's taxes resulting from the challenged litigations, norTaylor's October23, 2020 rebuttal report critiquing plaintiff expert's damages analysis. Plaintiff's motion is denied becauseTaylor does not need a law degree to evaluate legal costs and whethertheyare objectivelywithin the scope of the stated purpose ofthe representation, as reflected in the retainer agreement and otherdocuments. Contraryto plaintiff's objection, Taylor's testimony is relevant and the jury mayfind it helpful; it is up to thejuryto decidewhetherto give it anyweight or not. Taylor'sfirm specializes in "the identification, quantification and valuation ofdamages, lost profits, business enterprise value and wasted costs in matters involving breach of contract and contract terminations." (NYSCCEF 1424Taylor Report

### ,I 6.) However, Taylor is not qualified to opine on whetherthe litigation benefitted EIFC or not. Likewise, Taylor cannot opine on Khan's motive. (See Cohen vAm. Biltrite Inc., 62 Misc 3d 861, 683 [Sup Ct, NY County 2018] [expert "may nottestify regarding either entity's reasoning or motivations, ofwhich he has no personal knowledge"].) Accordingly, it is

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### [* 14]!FILED: NEW YORK COUNTY CLERK 04/18/2024 04:59 PM! NYSCEF DOC. NO. 1803 INDEX NO. 652334/2013 RECEIVED NYSCEF: 04/18/2024

ORDEREDthat motion sequence 030 is granted, in part, to the extentthatthe arguments related to thefollowing are precluded from being raised attrial: 4. Any arguments thatthe settlements reached in the above actionswere contraryto the interests of EIFC and Khan. 5. Any argumentthat Garg subverted the PRESLArbitration byfailing to produce documents. 9. Any argumentthat Better Mortgage orGarg utilized EIFC intellectual property and/ordata at Better Mortgage. 11. Any argumentthat Garg and 1 /0 Capital tortiously interfered with Khan or EIFC's prospective business relationswith Betteror Better's predecessor, Avex. 13.Any argumentthat Garg converted distributions that Phoenix Holdco allegedly owed to Khan. 14.Anytestimony attrial from PeterVinella regarding misappropriation ofEIFC intellectual property; and it is further ORDEREDthatthe balance ofmotion sequence 030 is denied; and it is further ORDEREDthat motion sequence 035 is denied; and it is further ORDEREDthat motion 039 is denied.

4/18/2024

DATE CHECKONE:

APPLICATION: CHECK IF APPROPRIATE:

# ~ CASE DISPOSED GRANTED**□** DENIED SETTLE ORDER INCLUDES TRANSFER/REASSIGN

652334/2013 KHAN, RAZAvs. GARG, VISHAL Motion No. 030 035 039

15 of 15 ANDREA MASLEY,J.S.C. NON-FINAL DISPOSITION GRANTED IN PART SUBMIT ORDER FIDUCIARYAPPOINTMENT

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