Court Opinion

ID: 9927367
Source: CourtListenerOpinion
Date Created: 2024-01-26 21:07:28.51476+00
Date Added: 2024-06-11T09:25:18.900261
License: Public Domain

Spiegel Legal LLC v Asman
               2024 NY Slip Op 30290(U)
                    January 23, 2024
           Supreme Court, New York County
        Docket Number: Index No. 650992/2023
                 Judge: Gerald Lebovits
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                       publication.
                                                                                                                        INDEX NO. 650992/2023
  NYSCEF DOC. NO. 27                                                                                              RECEIVED NYSCEF: 01/23/2024

                                   SUPREME COURT OF THE STATE OF NEW YORK
                                             NEW YORK COUNTY
            PRESENT:             HON. GERALD LEBOVITS                                               PART                             07
                                                                                      Justice
            ---------------------------------------------------------------------------------X      INDEX NO.          650992/2023
                SPIEGEL LEGAL LLC,
                                                                                                    MOTION DATE         10/24/2023
                                                         Plaintiff,
                                                                                                    MOTION SEQ. NO.        001
                                                 -v-
                STEVEN ASMAN, RUTH ASMAN, JILL ASMAN WAGNER,
                                                                                                      DECISION + ORDER ON
                and JETLINE HOLDINGS, LLC
                                                                                                            MOTION
                                                         Defendants.
            ---------------------------------------------------------------------------------X

            The following e-filed documents, listed by NYSCEF document number (Motion 001) 16, 17, 18, 19, 20,
            21, 22, 23, 24, 25, 26
            were read on this motion for                                                         SUMMARY JUDGMENT                    .

            Spiegel Legal, LLC, Florida, NY (Steven J. Spiegel of counsel), plaintiff pro se.
            The Russell Friedman Law Group, LLP, Garden City, NY (Pablo A. Fernandez and Spencer D.
            Shapiro of counsel), for interpleader defendants Steven Asman, Ruth Asman, and Jill Asman
            Wagner, and for purported third-party defendants, The Gustbuster, Ltd., Innoventions
            Enterprises, LTD., Raintamer, Ltd., and Uncle Sam’s Umbrella Shop of New York, Ltd.
            No appearance for interpleader defendant Jetline Holdings, LLC.1

            Gerald Lebovits, J.:

                    This interpleader action concerns whether an escrow agent may (or must) release shares
            held in escrow under a promissory note and pledge agreement. Interpleader plaintiff, Spiegel
            Legal LLC, moves for an order directing it to release the escrowed shares to the holder of the
            promissory note, and for other related relief. The motion is denied.

                                                                   BACKGROUND

                    In November 2017, several companies (The Gustbuster, Ltd., Innoventions Enterprises,
            Ltd., Raintamer, Ltd., and Uncle Sam’s Umbrella Shop of New York, Ltd.) executed a
            promissory note in favor of Jetline Holdings, LLC. (NYSCEF No. 2 at 10.) Under the note,
            Jetline would loan up to $3 million to the companies, to be paid back in installments; Jetline
            would receive 5% of the total common stock shares in the companies; and the companies would

            1
             Plaintiff Spiegel Legal repeatedly refers to itself in filings on this motion as counsel for Jetline
            Holdings, LLC. But Spiegel Legal has never entered an appearance for Jetline. It is unclear to the
            court what basis exists for Spiegel Legal to be considered counsel for Jetline in this action as it
            now stands.

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            cause their shareholders, which include interpleader defendants Steven Asman, Ruth Asman, and
            Jill Asman Wagner, to put all their common stock shares in the companies into escrow. (Id. at
            12, 13, 17, ¶¶ 5, 6[a], 9.)

                   Jetline, the companies, Spiegel Legal, and one shareholder (Steven Asman) also signed a
            pledge agreement, dated October 2018. (NYSCEF No. 2 at 1, 7-8.) The pledge agreement
            incorporated the promissory note and designated Spiegel Legal to receive delivery of the shares
            from the shareholders and to hold them in escrow. (Id. at 2.)

                     The pledge agreement provides that upon a default under the promissory note, and “after
            the giving of notice and the expiration of any applicable cure period . . . and upon Jetline's
            written notice to Escrow Agent of Jetline’s election to require the delivery of the Pledged Shares
            to Jetline,” Spiegel Legal is “directed” to transfer the escrowed shares to Jetline. (Id. at 3, ¶ 5 [a]
            [ii].) The pledge agreement also provides that if Spiegel Legal receives a bona fide objection to a
            release of the escrowed shares, it “may . . . rely on any provision of this Agreement entitling [it]
            to release [the shares] from Escrow notwithstanding such objection, or, otherwise (absent such
            provision) shall continue to hold the Escrow.” (Id. at 3, ¶ 5 [d].)

                    In December 2018, Gustbuster and Innoventions submitted the stock certificates of Steve
            Asman, Ruth Asman, Jill Asman Wagner, and Jetline in those companies to Spiegel Legal to
            hold in escrow. (Id. at 52-65.)

                    In October 2022, Spiegel Legal sent the companies and their shareholders a notice of
            default and intent to release the escrowed shares. (NYSCEF No. 3.) Spiegel Legal stated in the
            notice that Jetline notified Spiegel Legal of the companies’ default under the promissory note.
            (Id.) Spiegel Legal further stated that unless the loan was paid or a bona fide objection was
            made, it would release the escrowed shares to Jetline. (Id.)

                    Gustbuster objected to the intended release of the escrowed shares. It argued that the
            pledge agreement was not signed “by several of the existing shareholders of Gustbuster and, as
            such, is unenforceable and violative of New York law.” (NYSCEF No. 4.) Gustbuster also
            demanded that Spiegel Legal bring an interpleader action before releasing any shares. (Id.)

                    Spiegel Legal brought this interpleader action in February 2023.2 (NYSCEF No. 1.)
            Spiegel Legal asserted causes of action for statutory impleader, declaratory relief and attorney
            fees and costs against the interpleader defendants: Steven Asman, Ruth Asman, Jill Asman
            Wagner, and Jetline. (Id.) The three Asman defendants answered in March 2023. (NYSCEF
            No. 8.)

            2
             Spiegel Legal represents that it chose to bring this interpleader action “because of valid
            concerns that the release of shares from escrow by escrow agent without court intervention (A)
            would not provide sufficient finality as to the ownership of shares, . . . and (B) might expose
            Spiegel Legal to allegations of professional ethical violations regardless of the lack of merit of
            any such allegations.” (NYSCEF No. 13 at 10.)

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                    Spiegel Legal now moves for relief under CPLR 3212, 3213, or 3211. It also requests that
            this court grant orders directing it to release the escrowed shares to Jetline and declaring that
            Jetline owns those shares. The motion is denied.

                                                     DISCUSSION

                I.     CPLR 3212 Motion and Related Orders

                     Siegel Legal seeks summary judgment on its complaint under CPLR 3212. Relatedly, it
            asks this court to issue two orders: One directing Spiegel Legal to release the escrowed shares to
            Jetline, the other declaring that Jetline owns those shares and has control over the companies and
            their assets. (NYSCEF Nos. 12, 16.)

                    In opposition, the Asman defendants and companies do not dispute that the companies
            defaulted on the promissory note. Nor do they dispute that the prerequisites to releasing the
            shares under the pledge agreement were satisfied. They contend, however, that any relief sought
            against the companies must be denied because Spiegel Legal did not properly commence an
            action against the companies and they were not served with a third-party summons. (NYSCEF
            No. 20 at 4.) Spiegel Legal contends that the relief it requests does not require that a summons be
            served on the companies. It contends that it could obtain relief through the Asman defendants
            alone and that the forms of relief requested do “not involve the necessity of third party
            defendants.” (NYSCEF No. 22 at 7-8.) The court agrees with defendants.

                     Under CPLR 1006, the statute governing interpleader actions, an escrow agent may bring
            an interpleader action against possible claimants to property held in escrow. (See Manufacturer’s
            & Traders Trust Co. v. Reliance Ins. Co., 8 NY3d 583, 587 [2007] [interpleader action brought
            by escrow agent].) And under CPLR 1001 (a), “an individual or entity is a necessary party to
            litigation ‘if complete relief is to be accorded between the persons who are parties to the action’
            or if the entity ‘might be inequitably affected by a judgment in the action.’” (Swezey v Merrill
            Lynch, Pierce, Fenner & Smith, Inc., 19 NY3d 543, 550 [2012], quoting CPLR 1001 [a].) In
            determining whether a party is necessary to the litigation, “it must be decided if the proposed
            party has such an interest in the litigation that the court cannot settle the controversy without
            necessarily considering the interests of the proposed party.” (Joanne S. v Carey, 115 AD2d 4, 7
            [1st Dept 1986].) The court concludes that the record on this motion reflects that the companies
            are necessary parties that have not been joined in the action.

                    The companies are parties to the promissory note and pledge agreement, and likely
            should have been joined on that basis alone. (See Mariaux v Turtle Bay Towers Corp., 301 AD2d
            460, 460-461 [1st Dept 2003] [denying summary judgment “to obtain the release of funds held in
            escrow under agreements” when parties to the agreement were not joined to the action].)
            Additionally, if the court were to decide that the escrowed shares should be delivered to Jetline,
            Jetline would become the majority shareholder in both companies.3 A change of control in the

            3
              Spiegel Legal’s evidence does not show that the individual shareholders escrowed their shares
            in Uncle Sam’s or Raintamer. It also does not show that individual shareholders DNS Capital
            Ventures, LLC or the Mennen Trust submitted their shares in any of the companies to Spiegel

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            companies would presumably have a significant effect on the companies and their assets.
            Although the precise extent of that effect is not clear on the current record, this court has little
            doubt that it is sufficient to require joining the companies as party defendants for interpleader
            purposes. (Cf. L-3 Communications Corp. v SafeNet, Inc., 45 AD3d 1, 10 [1st Dept 2007]
            [finding that a company that was not joined was a necessary party when judgment would prevent
            the company from selling its products and “disgorg[ing] its profits from those sales”].)

                    Absent joinder of the companies, Spiegel Legal has not shown that this court should grant
            summary judgment or direct transfer of the shares—and their ownership—to Jetline. Spiegel
            Legal’s CPLR 3212 motion is denied. Given this disposition of the motion, this court does not
            reach the Asman defendants’ argument that the promissory note and pledge agreement are un
            enforceable.

               II.     CPLR 3211 and 3213

                   Spiegel Legal also moves under CPLR 3213 for summary judgment in lieu of complaint
            on behalf of Jetline and against the companies.

                   Spiegel Legal appears to be taking the position that there are two separate actions before
            the court: the interpleader action and a third-party action commenced under CPLR 3213.
            (NYSCEF No. 22 at 7, 23 at 11.) It contends that it properly served the companies by email with
            a summons and the prior pleadings, after having brought a third-party action under CPLR 3213.
            Alternatively, Spiegel Legal moves on behalf of Jetline for leave to move to dismiss the Asman
            defendants’ affirmative defenses to the interpleader action under CPLR 3211 and for an order
            granting that motion.

                    There are several difficulties with Spiegel Legal’s position. Jetline has not answered the
            interpleader complaint—a precondition to bringing a third-party action. (See CPLR 1007.) Nor
            has Jetline filed a third-party summons and complaint, or third-party motion for summary
            judgment in lieu of complaint, with the Clerk of the Court, as required by CPLR 304, CPLR 305
            (a), CPLR 2102, and CPLR 3213.4 More fundamentally, the docket reflects that Jetline has not

            Legal. Therefore, the only shares that appear eligible for release (assuming the note and pledge
            agreement are enforceable) would be the Asman defendants’ shares in Gustbuster and
            Innoventions. There are 200 outstanding shares both in Gustbuster and in Innoventions. Steven
            Asman, Ruth Asman, and Jill Wagner Asman collectively own 144.4 shares. Jetline currently
            owns 10 shares. (NYSCEF No. 2 at 54-65.)
            4
              On reply, Spiegel Legal submits a copy of a third-party summons for summary judgment in lieu
            of complaint. (See NYSCEF No. 25.) Aside from the absence of any indication that Spiegel
            Legal filed this summons with the Clerk of the Court and paid the required index-number fee
            (see CPLR 305; CPLR 1007), Spiegel appears to have served this summons only through
            NYSCEF and email. (See NYSCEF Nos. 25, 26; NYSCEF No. 23 at ¶¶ 7-8.) But service of a
            summons to commence an action (including a third-party action) must be made through the
            means set forth in CPLR article 3—not through the means set forth in CPLR article 21 used to
            serve a paper filed in an ongoing action against a party that has appeared. (See Rosenblum v 170
            W. Vill. Assocs., 175 AD2d 702, 703 [1st Dept 1991] [reversing motion court and dismissing

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            appeared in the action at all. A defendant that has not appeared may not bring motions or engage
            in third-party practice.

                      Spiegel Legal’s requests for relief under CPLR 3211 and 3213 on behalf of Jetline are
            denied.

                   Given this court’s conclusion that Spiegel Legal’s motion should be denied for lack of
            necessary parties—without reaching the ultimate question of Spiegel’s entitlement to the relief it
            seeks—Spiegel’s request on this motion for an award of attorney fees is denied without
            prejudice.

                      Accordingly, it is

                 ORDERED that the branch of Spiegel Legal’s motion seeking summary judgment under
            CPLR 3212 is denied; and it is further

                    ORDERED that Spiegel Legal’s request for an order directing Spiegel Legal to release
            the escrowed shares in the companies to Jetline is denied; and it is further

                    ORDERED that Spiegel Legal’s request for an order declaring Jetline the lawful owner
            of the escrowed shares with full rights and authority over them; and declaring that Jetline has
            ownership of, and corporate control over, the companies is denied; and it is further

                   ORDERED that Spiegel Legal’s request for an order to prevent the Asman defendants
            from interfering in the business relationships of, and using assets belonging to, the companies is
            denied; and it is further

                  ORDERED that Spiegel Legal must within 30 days of entry of this order summon the
            companies to this interpleader action, and must serve the supplemental summons on the
            companies by the means set forth in CPLR article 3; and it is further

                     ORDERED that the branch of Spiegel Legal’s motion asking this court to permit Jetline
            to move under CPLR 3211 to dismiss the Asman defendants’ affirmative defenses is denied; and
            it is further

                 ORDERED that the branch of Spiegel Legal’s motion asking this court to grant Jetline
            summary judgment in lieu of complaint under CPLR 3213 is denied; and it is further

                    ORDERED that the branch of Spiegel Legal’s motion for an award of attorney fees and
            costs is denied without prejudice; and it is further

                    ORDERED that Spiegel Legal serve a copy of this order with notice of its entry on all
            parties appearing in this action by e-filing on NYSCEF; on Jetline by certified mail, return

            third-party claim for lack of personal jurisdiction for failure to serve a third-party summons in
            “strict compliance with the statutorily mandated procedures”].)

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            receipt requested, directed to Jetline’s last-known address; and on the companies by certified
            mail, return receipt requested, directed to their respective last-known addresses.

                    1/23/2024                                                                $SIG$
                      DATE
             CHECK ONE:                 CASE DISPOSED                  X   NON-FINAL DISPOSITION

                                        GRANTED          X    DENIED       GRANTED IN PART             OTHER

             APPLICATION:               SETTLE ORDER                       SUBMIT ORDER

             CHECK IF APPROPRIATE:      INCLUDES TRANSFER/REASSIGN         FIDUCIARY APPOINTMENT       REFERENCE

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