Court Opinion

ID: 9964086
Source: CourtListenerOpinion
Date Created: 2024-04-26 20:10:38.147402+00
Date Added: 2024-06-11T08:25:09.809471
License: Public Domain

Khan v Garg
               2024 NY Slip Op 31418(U)
                     April 18, 2024
           Supreme Court, New York County
        Docket Number: Index No. 652334/2013
                  Judge: Andrea Masley
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
 Op 30001(U), are republished from various New York
 State and local government sources, 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~                                                                      INDEX NO. 652334/2013
  NYSCEF DOC. NO. 1803                                                                                            RECEIVED NYSCEF: 04/18/2024

            SUPREME COURT OF THE STATE OF NEW YORK
            COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 48
            ----------------------------------------------------------------------------------- X

                RAZA KHAN,                                                                          INDEX NO.         652334/2013

                                                          Plaintiff,
                                                                                                    MOTION DATE
                                                - V -
                                                                                                    MOTION SEQ. NO.    030 035 039
                VISHAL GARG, EDUCATION INVESTMENT FINANCE
                CORPORATION, 1/0 CAPITAL LLC, and EMBARK
                HOLDCO I, LLC,                                                                       AMENDED DECISION+
                                                                                                      ORDER ON MOTION
                                                          Defendants.
            ----------------------------------------------------------------------------------- X

            HON. ANDREA MASLEY:

            The following 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

            The following 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

            The following 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 July 2, 2013, plaintiff Raza Khan initiated this action, individually and

            derivatively, against his childhood friend defendant Vishal Garg, their company

            Education Investment Finance Corporation (EIFC) (of which each party owns 50%), 1/0

            1
              The 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,
            2024 were not considered.
                652334/2013 KHAN, RAZA vs. GARG, VISHAL                                                                Page 1 of 15
                Motion No. 030 035 039

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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 behalf of EIFC. (NYSCEF 1, Complaint.)

                   The remaining claims are: (I) corporate deadlock as to EIFC requesting that "one

            party ... be ordered to buy out the other'' (NYSCEF 335, FAC        ,m 151-154); (11) breach of
            fiduciary duty of loyalty and good faith against Garg for (i) converting EIFC's funds; (ii)

            falsifying EIFC's financial records; (iii) failing to file EIFC's tax returns since 2009; (vi)

            "failing to assign the asset purchases of the Senior Secured Term Note to EIFC"; (viii)

            "using EIFC's funds to benefit MRU Lending"; (ix) "improperly seizing EIFC equipment

            on June 24, 2013"; and (xii) "amending EIFC's tax returns with false financial

            information" (id. ,m 155-159); (111) conversion against Garg and Embark for "wrongfully
            transferr[ing] funds [or using funds] belong to EIFC and EIFC-related entities" (id. ,m

            160-168); (VII) conversion against Garg for transferring EIFC funds to another entity,

            MRU Lending (id.     ,m 187-190); (VIII) unjust enrichment against Garg for transferring

            2 1/0 Capital, LLC is dismissed from this action.Plaintiff's first motion to amend the
            complaint to 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 February 2,
            2017, on consent, plaintiff was permitted to amend the complaint to add 1/0 Capital LLC
            and Embark Holdco I LLC. (NYSCEF 335, First Amended 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 Order at 13 [mot. seq. no. 027].) Plaintiff's motion
            to amend Count V for tortious interference against 1/0 Capital LLC by adding 1/0 Holdco
            LLC and 1/0 Capital Ltd. was denied. (Id.) Count V against 1/0 Capital LLC continued
            until April 13, 2023, when the court granted summary judgment dismissing Count V.
            (NYSCEF 1349, April 13, 2023 Decision and Order at 13 [mot. seq. no. 026]; see also
            NYSCEF 1598, August 15, 2023 tr 31 :8-9 ["As Your Honor may recall, 1/0 Capital, I
            believe, was dismissed from the case"].)
             652334/2013 KHAN, RAZA vs. GARG, VISHAL                                           Page 2 of 15
             Motion No. 030 035 039

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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 dismiss Amended 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 Order at 13 [decision on mot. seq. no. 026

            for summary judgment dismissing Count II (iv), (v), (vii), (x), (xi), (xiv), and (xv), Count V

            and Count VI].) Plaintiff seeks damages for Counts II, Ill, VII, and VIII. (NYSCEF 335,

            FAC at 31-33.) Defendants have counterclaims for breach of fiduciary 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) pursuant to CPLR

            2221(e), "granting Plaintiff's motion for leave to renew his opposition to Defendants'

            Motion for Partial Summary Judgment dated December 31, 2020 4 ('Defendants' MSJ');

            (2) pursuant to CPLR 5015(a), reversing Hon. Justice Jeffrey Oing's prior decision

            denying Plaintiff's Motion to Reject Settlements 5 (NYSCEF 316, [Mot Seq 010, August

            3
              After trial in the related case Embark Corp. v Kahn, Index. No. 652801/2013, the
            complaint and counterclaims were dismissed. (NYSCEF 684, July 14, 2022 Trial
            Decision at 20.)
            4
              In motion 026, defendants moved for summary judgment (1) dismissing plaintiff's
            fiduciary duty claims (Count II, Subcounts (iv), (v), (vii), (x), (xi), (xiv) and(xv), tortious
            interference claim (Count V), and claim for failure to execute corporate paperwork
            (Count IV); and (2) granting Garg's counterclaim for conversion (Count II). (NYSCEF
            1116, OSC.)
            5
              The following actions were settled: Education Investment Finance Corporation (EIFC)
            (on behalf of Activist Special Advisory Services, LLC [ASAS]) and Phoenix Real Estate
            Solutions Ltd. [PRES] in the arbitration captioned Activist Special Advisory Services,
            LLC v Phoenix Real Estate Solutions, Case No. 011400002627, pending before the
            American Arbitration Association; and (2) EIFC and Embark Corporation and Embark
                652334/2013 KHAN, RAZA vs. GARG, VISHAL                                        Page 3 of 15
                Motion No. 030 035 039

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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 of fiduciary duty claims

            alleged in his First Amended Complaint." (NYSCEF 1500, OSC, Mot Seq 039;

            NYSCEF 1349, April 13, 2023, Decision granting summary judgment and dismissing

            Count II (iv), (v), (vii), (x), (xi), (xiv) and (xv), tortious interference claim (Count V), and

            claim for failure to execute corporate paperwork (Count VI).) With this motion, plaintiff

            seeks to vacate prior decisions, including a 2016 decision by Justice Oing. The issue

            here is whether PRES, Garg's company owns the IP allegedly purloined from EIFC.

                    In October 2014, EIFC and its subsidiary ASAS 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 pursuant to which EIFC's subsidiary ASAS performed due diligence and

            other services for PRES for which PRES paid EIFC a monthly fee. (Id.) Plaintiff alleges

            that in June 2013, the contract was terminated and the next day, the ASAS services

            were provided by Phoenix Advisors 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 subsidiary of Embark commenced an action against Embark for

            summary judgment in lieu of complaint for nonpayment of a note. (Id.)

            Holdco I, LLC, in the matters captioned EIFC v Embark Corp., Index No. 155818/2014,
            and Embark Holdco I, LLC v Embark Corp., et al., Index No. 652552/14.
             652334/2013 KHAN, RAZA vs. GARG, VISHAL                                               Page 4 of 15
             Motion No. 030 035 039

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                      On March 4, 2015, Justice Oing removed Khan and appointed Garg to lead EIFC

            and Embark. (NYSCEF 248, tr at 47-52.)

                      On March 13, 2015, the Embark actions were 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 new facts not offered on

            the prior motion that would change the prior determination ... and shall contain

            reasonable justification for the failure to present such facts on the prior motion" (CPLR

            2221 [e] [2], [3]). Plaintiff certainly has justification for not offering facts that did not exist

            at the time for the motions. However, plaintiff's motion is denied because the new facts

            presented do not change the prior determination.

                      Plaintiff asserts that Garg, and others related to Garg, disclosed in a 2018 federal

            action (Trustee Action), 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 of the merits of the dispute it is the wrong party

            named and cannot be liable because the intellectual property that Raza Khan claims

            Phoenix misappropriated was neither controlled nor owned by Phoenix at any time, but

            6
             The "Trustee Action" herein refers to the U.S. Bank National Association v Triaxx
            Asset Management LLC et. al., Case No. 1: 18-cv-04044 (BCM), filed in the United
            States District Court of the Southern District of New York.
                652334/2013 KHAN, RAZA vs. GARG, VISHAL                                          Page 5 of 15
                Motion No. 030 035 039

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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 Law to Reject

            Settlements on Mot Seq 010 at 35; NYSCEF 1168, Defendants' MOL in Support of

            Partial Summary Judgment (Mot Seq 026) fn 8 at 29.)

                      Plaintiff's motion is denied. First, Justice Oing's decision is not based on the

            ownership of the IP. (NYSCEF 316, August 10, 2016 Decision.) Likewise, this court's

            decision granting defendant's motion for summary judgment is not based on the

            ownership of the IP. (NYSCEF 1349, April 13, 2023 Decision.) 7

                      The court rejects plaintiff's "evidence" of PRES's ownership of the IP. The Legal

            and Analytical Consulting Services Agreement 8 (Consulting Agreement) between PRES

            and Phoenix concerning work product, 9 is irrelevant to the ownership of the IP at issue

            1
              The court dismissed Breach of Fiduciary Duty (iv) and (v) because plaintiff's assertion
            of theft of IP was insufficient. Plaintiff fails to identify the stolen IP. (NYSCEF 1349,
            April 13, 2023 Summary Judgment Decision at 9-10.) This decision is not based on
            anything Garg said or did. Rather, it is based on plaintiff's failure to prove his claim.
            8
               Likewise, alone without 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 suggest that Tang and Jonsson invested significant time in creating
            something new.
            9
              It states: "All inventions, discoveries, trade secrets, confidential information, proprietary
            information, software, databases, tangible and intangible works, 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 or developed by [PAM] personnel shall, in all cases, be owned jointly by
            [PAM] and [PRES]. In furtherance of the foregoing, [PRES] and [PAM] shall cooperate
            in any manner requested by the other in obtaining, protecting and asserting any and all
            rights in and to the Work Product." (NYSCEF 1511, ,i 7). PAM is Phoenix Advisors and
            Mangers Ltd., an entity related to Garg. Under the agreement, PRES engages PAM as
            a consultant to "provide to [PRES] and to its clients, as advised by [PRES] analytical
            services with respect to legal and data analysis of certain COO securities for general
                652334/2013 KHAN, RAZA vs. GARG, VISHAL                                       Page 6 of 15
                Motion No. 030 035 039

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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 statement that "PRES,

            working with subcontractors including PAM, provided proprietary technology and

            analysis of certain of the residential mortgage-backed securities ('RMBS') held by the

            Triaxx CDOs," is equivocal as to who owns the proprietary technology and is not

            inconsistent with Garg's position that PRES does not own the IP. (NYSCEF 1518,

            Calamari Declaration ,T 10.) Indeed, the statement itself that PRES "provided

            proprietary technology" 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

            of the 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 of the IP, he

            submitted an affidavit in this action wherein he declares that he is creator and owner of

            the IP that Activist used pursuant to a license agreement. (NYSCEF 989, Jonsson April

            5, 2019 aff ,T,T 7, 15, 17.) Nothing plaintiff has submitted effectively contradicts

            Jonsson's statement.

            portfolio management, advisory and trading purposes as requested by [PRES]. The
            manner and means by which [PAM] chooses to perform the Services are in [PAM's]
            sole discretion and control. [PAM] shall perform the Services in accordance with
            applicable professional standards with all due care, skill and ability." (,T 2.) The
            agreement is not signed by Tang or Jonsson.
             652334/2013 KHAN, RAZA vs. GARG, VISHAL                                         Page 7 of 15
             Motion No. 030 035 039

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                   Plaintiff also 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 of thousands of loans
                   underlying the CDOs' RMBS collateral to identify evidence of wrongdoing 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 for the 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 analyze the data. (Tang ,i,i
                   37-41, 46; Jonsson ,i,i 23- 26, 32; Tr. 846:8-847:14.) The database and
                   algorithms were time-consuming and costly to build. (Tang ,i,i 36, 41; Jonsson ,i
                   22; Tr. 847:3-14.) Tang estimated PRES's cost to build the database and
                   algorithms was $10 to $20 million. (Tang ,i 41; Tr. 848:2-22.)"

            (NYSCEF 1510, PRES's PFFCL ,I17.) PRES submitted the PFFCL to Judge Moses in

            the Trustee action in support of its request for payment of its invoices. However,

            Ownership of IP was not the issue at the hearing in the Trustee Action. Plaintiff's

            snippet is insufficient evidence of ownership. First, the court cannot confirm many of

            the unquoted statements in ,i17. Plaintiff provided a transcript to the court from the

            Trustee Action which ends at page 825 (NYSCEF 1506), but the quotes in ,i17 are from

            pages 846-848. Plaintiff failed to provide the Tang Declaration so the court cannot read

            Tang's actual statements.

                   The court reviewed the Declaration of Sigurgeir Jonsson which is quoted in ,i17

            and finds that plaintiff's snippet 10 omits context important to this proceeding but not

             The court appreciates that plaintiff place great weight on the fact that defendants
            10

            submitted this snippet in the Trustee Action, but that does not stop plaintiff from
            connecting it to the record and supporting that which it is relying on. The snippet itself is
            not enough.
             652334/2013 KHAN, RAZA vs. GARG, VISHAL                                         Page 8 of 15
             Motion No. 030 035 039

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            important to the Trustee Action. For example, paragraphs 11-18 of Jonsson's

            Declaration explain how Tang and Jonsson came to be working to find and analyze

            defective loans in RMBS trusts. (NYSCEF 1514, Jonsson Declaration.) Jonsson

            explains their search leading to the statement that "Tang and Jonsson built a unique

            database" using the DataQuick database and adding other property and borrower

            information and details the circumstances under which they worked to do so. (Id.      ,m 19-
            22.) Likewise, the statements "PRES paid to acquire access to DataQuick's database"

            (Id. ,I22), while "Dr Tang and [Jonsson] developed the algorithm ourselves" do not

            preclude the possibility that Tan and Jonsson provided that work for the benefit of PAM

            which was engaged by PRES. (Id. ,I24.) It is clear from the declaration that Jonsson

            was working for ARAM Global which was engaged by PRES. (,I,I13-14; see also

            NYSCEF 1506 tr 718:2-723:7.) Likewise, the court cannot infer Jonsson'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's testimony is equivocal: "Q: In

            your declaration you stated from 2011 to 2018, you performed work on behalf of

            [PRES]? A: Yes." Without Tang's Declaration, it is unclear for whom Tang actually

            worked, if at all, and in what capacity; he could have worked as an independent

            contractor. Further, from Jonsson's Declaration and the portion of the transcript

             652334/2013 KHAN, RAZA vs. GARG, VISHAL                                      Page 9 of 15
             Motion No. 030 035 039

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            provided, it appears that PRES, ARAM, Tang and Jonsson were working

            collaboratively, but the ownership of the work product between them is not addressed

            as it was not the issue in the Trustee Action.   (NYSCEF 1514, Jonsson Declaration

            ,i,i11-14, 18.)

                   Plaintiff has not satisfied his burden to show that PRES owned the IP. It is not

            the court's burden to search the record to connect the dots where plaintiff has failed to

            do so. Motion 039 is denied.

                   In motion 030, defendants move for an order precluding plaintiff from raising

            evidence, argument or theories at trial related to the following:

                       1. The facts and issues that were 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 arguments that the settlements reached in the above actions were
                           contrary to the interests of EIFC and Khan.
                       5. Any argument that Garg subverted the PRESL Arbitration by failing to
                           produce documents.
                       6. Any evidence relating to employment agreements executed by Mingsung
                           Tang and Ziggy Jonsson.
                       7. Any argument that Garg hired Tang and Jonsson to work for Defendant
                           1/0 Capital and steal or destroy intellectual property belonging to EIFC.
                       8. Any argument that Garg and 1/0 Capital intentionally induced PRES to
                           terminate its contract with ASAS and to divert the contract to 1/0 Capital.
                       9. Any argument that Better Mortgage or Garg utilized EIFC intellectual
                           property and/or data at Better Mortgage.
                       10. Any argument that Better Mortgage was funded with money that belonged
                           to, or was owed to, Kahn or EIFC.
                       11.Any argument that Garg and 1/0 Capital tortiously interfered with Khan or
                           EIFC's prospective business relations with Better or Better's predecessor,
                           Avex.
                       12.Any argument that 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.

             652334/2013 KHAN, RAZA vs. GARG, VISHAL                                     Page 10 of 15
             Motion No. 030 035 039

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                       13.Any argument that Garg converted distributions that Phoenix Holdco
                           allegedly owed to Khan.
                       14.Any testimony at trial from Peter Vinella 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 number 2 above. Plaintiff may use any

               documents produced by defendants. Plaintiff need not produce documents back to

               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 number 3 above because Garg's alleged

               failure to assign the Senior Secured Term Note to EIFC was carved out of paragraph

               7 of the Embark settlement. (NYSCEF 1495, Confidential Settlement Agreement &

               Release ,i 7.)

                       Defendants' motion is granted as to numbers 4, 11 and 13 above which are

               not addressed by plaintiff in his opposition.

                       Defendants' motion is granted as to number 5 above because whether Garg

               subverted the arbitration, or not, is not relevant to whether Khan's initiation of the

               arbitration was frivolous.

                       Defendants' motion is granted as to numbers 9 and 14 above 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 June 24, 2013 where 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, RAZA vs. GARG, VISHAL                                       Page 11 of 15
             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 summary judgment that Garg used the intellectual property, data,

                   and proprietary information to pitch investors for Better Mortgage, plaintiff cannot

                   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 Mortgage with EIFC funds or used funds owed to Kahn to fund Better

                   Mortgage is relevant to the breach of fiduciary duty claim (i) for converting funds to

                   make asset purchases.

                           Defendants' motion is denied as to number 15 above because O'Bryan's

                   damages testimony regarding COO analytics and lost prospective customers is

                   relevant to plaintiff's breach of fiduciary duty claims for (i) converting EIFC's funds,

                   (ii) falsifying EIFC's financial records, and (iii) failing to file EIFC's tax returns since

                   2009. Plaintiff intends to present evidence at trial that "these particular breaches of

                   Garg's fiduciary duties, individually and collectively, led to the attrition of EIFC's

                   employees and customers base, and ultimately the complete destruction of EIFC's

                   enterprise value." (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

                   testify to damages arising from the alleged breach of fiduciary duty by (i) converting

            11
                 NYSCEF pagination.
                 652334/2013 KHAN, RAZA vs. GARG, VISHAL                                           Page 12 of 15
                 Motion No. 030 035 039

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               EIFC's funds and (ix) improperly seizing EIFC's equipment and Garg's alleged

               conversion of EIFC's funds to make asset purchases.

                       Defendants cannot preclude evidence necessary for plaintiff to defend against

               defendants' counterclaims which are:

                   Count I, Breach of Fiduciary duty: for "(i) removing Garg's access to EIFC's
                   operations and finances prior to commencing this litigation; (ii) knowingly causing
                   false and misleading tax returns to be filed on behalf of EIFC; (iii) knowingly
                   directing the filing of frivolous litigation on behalf of EIFC and expending EIFC
                   funds and resources to pursue these claims as a result of a 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 transfer of
                   certain assets to EIFC to be delayed; (v) refusing to return money to 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,
                   First Amended 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 any access to the same or
                   records regarding the same. Khan did this by, inter alia, using EIFC funds to
                   fund multiple lawsuits against and investigations into wrongdoing by Garg in an
                   effort to harm his estranged friend and business-partner. (Id. ,i 72.)

                   Count Ill, Corporate Waste and Mismanagement: "Khan is a director of EIFC and
                   is required to act in EIFC's best interest. Khan violated that obligation by
                   depleting EIFC of the majority of cash it held in its company bank account and
                   failing to pay vendor costs. Khan also violated that obligation when he
                   unilaterally authorized excessive spending of EIFC's funds, including a payment
                   of at least $400,000 to Paul Hastings to conduct an 'investigation' in furtherance
                   of his personal vendetta against Garg. The payment to Paul Hastings was the
                   single largest expenditure made from EIFC funds in 2013 and represented more
                   than 25% of EIFC's 2012 operating profit. Khan did not seek approval or input
                   from Garg or EIFC's counsel prior to spending those funds. He further violated
                   that obligation when he retained two different law firms and knowingly caused
                   them to file litigations purportedly on behalf of EIFC, who was left funding the
                   actions. One of these was summarily dismissed and another was stayed by the
                   Plaintiff two weeks after the claim was brought. Khan did not seek approval from
                   Garg prior to making these expenditures because his real aim was to attack Garg
                   personally by suing entities that Garg either owned or was affiliated with while
                   hiding behind EIFC." (Id. ,I 76.)

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             Motion No. 030 035 039

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            As long as defendants proceed with their claims that Kahn's litigations were frivolous,

            the jury must hear evidence about the litigations to determine whether they were

            frivolous or not. Accordingly, defendants' motion is denied as to numbers 1, 2, 3, 6, 7,

            8, 10, 12, and 15 and granted as to 4, 5, 9, 11, 13, and 14.

                   In motion sequence 035, plaintiff moves to exclude some of the 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 or the impact on EIFC's taxes resulting from the

            challenged litigations, nor Taylor's October 23, 2020 rebuttal report critiquing plaintiff

            expert's damages analysis. Plaintiff's motion is denied because Taylor does not need a

            law degree to evaluate legal costs and whether they are objectively within the scope of

            the stated purpose of the representation, as reflected in the retainer agreement and

            other documents. Contrary to plaintiff's objection, Taylor's testimony is relevant and the

            jury may find it helpful; it is up to the jury to decide whether to give it any weight or not.

            Taylor's firm specializes in "the identification, quantification and valuation of damages,

            lost profits, business enterprise value and wasted costs in matters involving breach of

            contract and contract terminations." (NYSCCEF 1424 Taylor Report ,I 6.) However,

            Taylor is not qualified to opine on whether the litigation benefitted EIFC or not.

            Likewise, Taylor cannot opine on Khan's motive. (See Cohen v Am. Biltrite Inc., 62

            Misc 3d 861, 683 [Sup Ct, NY County 2018] [expert "may not testify regarding either

            entity's reasoning or motivations, of which he has no personal knowledge"].)

                   Accordingly, it is

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             Motion No. 030 035 039

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                    ORDERED that motion sequence 030 is granted, in part, to the extent that the

            arguments related to the following are precluded from being raised at trial:

                    4. Any arguments that the settlements reached in the above actions were
                    contrary to the interests of EIFC and Khan.

                    5. Any argument that Garg subverted the PRESL Arbitration by failing to produce
                    documents.

                    9. Any argument that Better Mortgage or Garg utilized EIFC intellectual property
                       and/or data at Better Mortgage.

                    11. Any argument that Garg and 1/0 Capital tortiously interfered with Khan or
                    EIFC's prospective business relations with Better or Better's predecessor, Avex.

                    13. Any argument that Garg converted distributions that Phoenix Holdco allegedly
                        owed to Khan.

                    14.Any testimony at trial from Peter Vinella regarding misappropriation of EIFC
                       intellectual property; and it is further

                    ORDERED that the balance of motion sequence 030 is denied; and it is further

                    ORDERED that motion sequence 035 is denied; and it is further

                    ORDERED that motion 039 is denied.

                    4/18/2024
                      DATE                                                    ANDREA MASLEY, J.S.C.

                                     ~
             CHECK ONE:                  CASE DISPOSED                NON-FINAL DISPOSITION

                                         GRANTED         □ DENIED     GRANTED IN PART          □ OTHER
             APPLICATION:                SETTLE ORDER                 SUBMIT ORDER

             CHECK IF APPROPRIATE:       INCLUDES TRANSFER/REASSIGN   FIDUCIARY APPOINTMENT    □ REFERENCE

             652334/2013 KHAN, RAZA vs. GARG, VISHAL                                           Page 15 of 15
             Motion No. 030 035 039

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