In this action to recover damages for breach of an indemnification agreement, the defendants Alexander Forkosh (Mr. Forkosh) and Mansiana Ocean Residencies, LLC (Mansiana and collectively with Mr. Forkosh, defendants) move for an order, pursuant to CPLR 3126, [*2]3211 (a) (1), 3211 (a) (7), and/or 3212, dismissing the complaint of the plaintiffs Bond Safeguard Insurance Company and Lexon Insurance Company (collectively, plaintiffs) (seq. No. 8). Plaintiffs cross-move for an order awarding sanctions, pursuant to part 130 of the Rules of the Chief Administrator, against Mr. Forkosh in the amount of attorneys' fees they incurred in responding to defendants' aforementioned motion (seq. No. 9).

On Dec. 3, 2009, plaintiffs commenced the instant action to recover money defendants owe to plaintiffs under the General Agreement of Indemnity, dated Nov. 13, 2007 (the indemnity agreement), which Mr. Forkosh signed twice — once as the managing member of Mansiana and once individually. Plaintiffs in their complaint asserted four causes of action against each of Mr. Forkosh and Mansiana: (1) indemnity, (2) exoneration, (3) attorneys' fees and costs, and (4) breach of contract — failure to pay bond premiums. On May 15, 2010, Mr. Forkosh answered the complaint. In his answer which raised nine affirmative defenses, Mr. Forkosh did not allege that the indemnity agreement was procured by fraud; nor did he assert any counterclaims against defendants.^[FN1] On Mar. 31, 2011, plaintiffs moved for partial summary judgment against Mr. Forkosh for their past and future losses under the underlying bonds for which Mr. Forkosh acted as a co-indemnitor under the indemnity agreement. In support of their motion, plaintiffs submitted, in addition to the indemnity agreement and the underlying documents, the affidavits of the insurance broker (C. Scott Hull and Hardy Mitchell of Willis of Alabama, Inc.) and two affidavits of plaintiffs' president (David E. Campbell), all claiming that both the language of the indemnity agreement and the circumstances leading to its execution demonstrated that Mr. Forkosh was personally liable under the indemnity agreement. On June 20, 2011, defendants opposed plaintiffs' motion. In their opposition, defendants proffered, in addition to the indemnity agreement and the underlying documents, (1) a June 13, 2011, affidavit of Mr. Forkosh, denying that he assumed any personal liability under the indemnity agreement, (2) a June 13, 2011, affidavit of Daniel Tantleff (Mr. Tantleff), the Portfolio Director for nonparty Forkosh Development Group and a Mansiana agent, describing the circumstances surrounding the execution of the indemnity agreement and further stating that, based on his (Mr. Tantleff's) dealings with Mr. Forkosh and the insurance broker, Mr. Forkosh did not intend to be personally liable under the indemnity agreement, (3) an affidavit of Mr. Forkosh's accountant (Cris Alcamo) explaining that Mr. Forkosh previously had provided his personal financial information to plaintiffs merely to demonstrate to them that Mr. Forkosh was a "person[ ] of substance" with a net worth of $100 million, and (4) an affidavit of a real estate investor and consultant (Thomas K. Graf) opining, as a matter of real estate financing practice, that Mr. Forkosh's prior submission of his [*3]personal financial information to plaintiffs did not suggest his intention to be personally liable under the indemnity agreement. The parties' entire submissions, judging from the record on appeal on file with the County Clerk's office, totaled 503 pages.

By decision and order, dated Oct. 28, 2011, Justice Kramer of this Court denied plaintiffs' motion for partial summary judgment against Mr. Forkosh, finding the existence of two genuine issues of material fact. Specifically, Justice Kramer held:

"First, the use of the word by' preceding the signature of Mr. Forkosh in conjunction with the dual-signature and the word individually' beneath the signature [in the indemnity agreement] creates ambiguities in the contract, which must be construed against the drafter, the plaintiff[s]. Furthermore, as the contract does not specifically name Mr. Forkosh within its terms and Mr. Forkosh testified [by way of his affidavit] that he routinely provides personal financial data[,] the plaintiff[s] have failed to prove that [Mr. Forkosh] explicitly intended to bind himself personally as a guarant[or]."

Although Justice Kramer was presented with numerous affidavits in opposition to plaintiffs' motion, his order indicates that he relied solely on Mr. Forkosh's affidavit to find that plaintiffs have failed to prove that he (Mr. Forkosh) explicitly intended to bind himself personally as an indemnitor. Justice Kramer, according to his order, did not rely on any of the other affidavits submitted by defendants, such as the affidavit from Mr. Tantleff, the Portfolio Director for Forkosh Development Group and a Mansiana agent.

Plaintiffs appealed Justice Kramer's order to the Second Department. Their appeal was from Justice Kramer's denial of their summary judgment motion on their first (indemnity) and their fourth (breach of contract — failure to pay bond premiums) causes of action against Mr. Forkosh.^[FN2] On Aug. 31, 2012, briefing was completed by both sides. In his appellee brief, Mr. Forkosh urged the Second Department, in addition to affirming Justice Kramer's order, to go further by searching the record and awarding him summary judgment.^[FN3] Indeed, Mr. Forkosh, in his appellee brief (at page 3), [*4]gratuitously characterized Justice Kramer's "consideration of extrinsic evidence, and denial of [plaintiffs'] motion so that additional discovery could be obtained, [as] . . . actually favors to Plaintiffs, who were given an unwarranted opportunity to prove their interpretation of the purportedly ambiguous agreement that they drafted" (emphasis added).

After the Second Department briefing was completed on Aug. 31, 2012, but prior to oral argument before it on May 6, 2013, several unusual, out-of-court events occurred. On Oct. 12, 2012, plaintiffs made their first document production to defendants. This document production revealed many e-mails showing that, in violation of the repeated and explicit prohibitions that defense counsel had separately issued to Mr. Tantleff and to plaintiffs' counsel in Sept. 2011, Mr. Tantleff and plaintiffs/plaintiffs' counsel frequently communicated with each other without knowledge of either defense counsel or Mr. Forkosh.^[FN4] These e-mails, produced by plaintiffs to defendants on Oct. 12, 2012, revealed that Mr. Tantleff, while remaining in the employ of Forkosh Development Group and Mansiana, acted as a paid consultant to plaintiffs some time between Oct. 2011 and Dec. 2012.^[FN5] As part of his consulting arrangement with plaintiffs, Mr. Tantleff worked with bond claimants and their attorneys to minimize plaintiffs' pay-outs on the underlying bonds and, by extension, to minimize Mr. Forkosh's potential personal liability exposure to plaintiffs under the indemnity agreement. But Mr. Tantleff, who was then suffering from prescription drug addiction and alcohol abuse, went above and beyond in pledging his allegiance to plaintiffs. In his e-mails to plaintiffs and their counsel, he promised them that, as an inside man close to Mr. Forkosh, he could persuade his boss to settle this litigation. [*5]

On Jan. 17, 2013, plaintiffs released their second document production to defendants. The second batch of documents included a proposed June 2012 affidavit to be signed by Mr. Tantleff for the express purpose of recanting his original, June 13, 2011, affidavit. For reasons never made clear in the record, Mr. Tantleff never signed the recanting affidavit, although he remained on plaintiffs' payroll as their consultant. During his consultancy with plaintiffs, he received a total of $60,000 in compensation and an additional $6,000 in expense reimbursement.

On Dec. 21, 2012, plaintiffs deposed Mr. Tantleff as part of this litigation.^[FN6] Although he was nominally a defendants' witness, Mr. Tantleff was treated by his own (defense) counsel as a hostile witness.^[FN7] At his pretrial deposition, Mr. Tantleff identified the ex parte e-mails he sent to plaintiffs and their counsel. At the same time, however, he reaffirmed the truthfulness of each sentence of his June 13, 2011, affidavit which, as noted, defendants submitted in opposition to plaintiffs' motion. Within hours after the conclusion of his deposition on Dec. 21, 2012 (which was the Friday before Christmas), Mr. Tantleff was summarily dismissed from his job with Mr. Forkosh's entities with no severance or recommendation of any kind. On Feb. 21, 2013, Mr. Tantleff entered a rehabilitation center for treatment of his addiction to prescription drugs and alcohol, following his arrest for driving under the influence earlier that month. During his 30-day stay at the rehabilitation center, he sent to Mr. Forkosh numerous letters of apology, interspersed with bitter complaints about defense counsel's mistreatment of him. Mr. Forkosh did not re-hire Mr. Tantleff.

Although defendants were aware of Mr. Tantleff's alleged misconduct as early as Oct. 12, 2012, which awareness was reinforced on Jan. 17, 2013, when plaintiffs produced in discovery his proposed recanting affidavit, defendants never notified the Second Department and failed to immediately seek intervention from this Court. Rather, defendants elected to let plaintiffs exhaust their appeal to the Second Department. On May 6, 2013, the parties appeared before the Second Department for oral argument.^[FN8] A week later, May 13, 2013, defendants served the instant motion requesting that this Court dismiss plaintiffs' complaint.

Before the instant motion was fully submitted, the Second Department on June 12, 2013, issued a memorandum decision reversing the portion of Justice Kramer's order relating to the indemnity agreement. The Second Department ruled that the indemnity agreement was clear and unambiguous on its face, precluding consideration of extrinsic evidence to vary its terms. The Second Department's holding, which is critical to the disposition of defendants' motion, is worth quoting in full herein: [*6]

"The plaintiffs demonstrated their prima facie entitlement to judgment as a matter of law on their first and fourth causes of action insofar as asserted against [Mr.] Forkosh. In particular, contrary to Forkosh's contention, the plaintiffs demonstrated, prima facie, that he signed the indemnity agreement in his individual capacity, such that he could be held personally liable under the agreement. An agent who signs an agreement on behalf of a disclosed principal will not be held liable for its performance unless the agent clearly and explicitly assumes such personal liability. Here, the indemnity agreement refers to indemnitors' in the plural, and Forkosh signed the agreement twice, in the place designated for the Name of Indemnitors.' The first signature was preceded by the name of the corporation, was followed by Forkosh's title, i.e., Managing Member, and was adjacent to the corporate mailing address. The second signature was not preceded by the name of the corporation, but by the word individually,' and was adjacent to Forkosh's home address. The agreement therefore unambiguously demonstrated that Forkosh, a sophisticated business person, clearly and explicitly intended to assume personal responsibility as an indemnitor under the agreement.

In opposition, Forkosh failed to raise a triable issue of fact. Since the written contract between the parties was unambiguous, parol evidence with respect to a contrary intent was not admissible."

The Second Department's recent decision, and particularly its holding that no parol evidence is admissible to vary the plain terms of the indemnity agreement, has taken the wind out of the sails of defendants' argument that Mr. Tantleff has been a crucial witness to the interpretation of the indemnity agreement. Whatever transpired between Mr. Tantleff on the one hand and plaintiffs and their counsel on the other hand, is immaterial to the Second Department's holding that Mr. Forkosh is personally liable under the indemnity agreement as a matter of law. What's more, while the Second Department explicitly imposed personal liability on Mr. Forkosh under the indemnity agreement, it implicitly rejected defendants' request, advanced in their appellee brief, to search the [*7]record and award him summary judgment.

Significantly, at no time in the course of this litigation has Mr. Forkosh claimed that he was fraudulently induced into signing the indemnity agreement. Neither in his answer to the complaint nor at any time thereafter has he asserted that he did not know that he was signing an indemnity agreement. He always maintained the position that the indemnity agreement was limited to Mansiana, rather than that he did not know whether the indemnity agreement was fraudulent. In a last-ditch effort to save the day, he now asserts (in ¶ 50 of his May 10, 2013, affidavit) that "Mr. Tantleff, a sender or recipient of . . . e-mails [to plaintiffs and their counsel] has concealed or destroyed those communications, along with any other communications he had with plaintiffs that might address the fraud, or might even show that the fraud began earlier in time, perhaps even prior to the execution of the Indemnification Agreement" (emphasis added). Because the record evidence is devoid of any factual support for his claim, the Court declines to address it.

Not one of the CPLR provisions which defendants cite in support of the instant motion to dismiss is applicable. CPLR 3126, which imposes penalties for refusal to comply with discovery-related orders, is inapposite because at no time did defendants obtain (or even seek) any court order prohibiting Mr. Tantleff from communicating with plaintiffs or their counsel, or vice-versa.^[FN10] Defendants' claim of spoliation of evidence and witness tampering fails because, even if true, the same did not prejudice or hamper defendants' position in any way in this litigation, did not delay or disrupt this litigation, and did not hamper the enforcement of any court order. The indemnity agreement, as the Second Department has recently interpreted it, is — for all intents and purposes — the sole and exclusive basis for the imposition of personal liability on Mr. Forkosh. Matters outside the indemnity agreement are excluded.

Turning to CPLR 3211 (a) (1), which allows dismissal of a claim based on "documentary evidence," the Court finds that this rule is inapposite because the only evidence qualifying as documentary — the indemnity agreement — goes against Mr. Forkosh's theory that he is not personally liable. The two alternate defenses — CPLR 3211 (a) (7) (dismissal for failure to state a cause of action) and CPLR 3212 (dismissal on summary judgment) — are indisputably irrelevant.

Defendants' reliance on the Court's "inherent powers" doctrine is ill-founded. Although the Court is "vested with all powers reasonably required to enable it to . . . perform efficiently its judicial functions, to protect its dignity, independence and integrity, and to make its lawful actions effective,"^[FN11] "[r]ules and statutes limit the exercise of inherent authority,"^[FN12] and defendants have [*8]identified no rules or statutes that have been violated, at least insofar as defendants are concerned. Equally important, no "fraud on the court"^[FN13] was committed at any time in this litigation. Defendants have identified no fraudulent evidence that either party submitted to the Court in this litigation.^[FN14] Mr. Tantleff never signed a recanting affidavit, and, at his pretrial deposition, he adopted his original, June 13, 2011, affidavit which defendants prepared and submitted to Justice Kramer and which, in any event, Justice Kramer did not consider in rendering his order.

Finally and crucially, defendants' finger-pointing to Mr. Tantleff, plaintiffs, and their counsel is wide off the mark. The record indicates that defendants have taken a somewhat opportunistic approach to this litigation. Although aware (at least since Oct. 12, 2012) of Mr. Tantleff's alleged misconduct, defendants knowingly hedged their bets between the outcome of plaintiffs' appeal to the Second Department and the ultimate outcome of this litigation before this Court. On May 6, 2013, defendants argued before the Second Department in opposition of plaintiffs' appeal, in the hope of obtaining an affirmance of Justice Kramer's order. A week later, on May 13, 2013, defendants served the instant motion to dismiss this litigation before this Court. If, as defendants assert, plaintiffs and their counsel had been guilty of "witness tampering, commercial bribery, and related frauds," the proper course of action for them to undertake would have been to immediately bring this alleged misconduct (1) to the attention of the Second Department so that the appellate court would not be wasting time and resources by considering briefs and issuing, under defendants' post hac rationalization, a "fortuitous" decision, and (2) to the attention of this Court (as successor to Justice Kramer) to afford this Justice an opportunity to review Justice Kramer's order in light of the intervening events. Defendants' hedging of their bets between the Second Department and this Court is reaffirmed in their reply brief, which they filed after the Second Department issued its decision. In their reply brief, defendants, for the first time, cite to CPLR 5015 (a) (2) and (3), which permit the Court to vacate an order on the basis of newly discovered evidence (CPLR 5015 [a] [2]) or on the basis of "fraud, misrepresentation, or other misconduct of an adverse party" (CPLR 5015 [a] [3]). These rules are inapplicable to the instant motion because defendants seek dismissal of plaintiffs' [*9]complaint, rather than a vacatur of Justice Kramer's order to the extent it was reversed by the Second Department.

Each of the decisions defendants cite to invoke the Court's "inherent powers" to dismiss plaintiffs' complaint is distinguishable, as it involved a party who sought to obtain, by improper means, deposition or trial testimony that was essential to the resolution of his or her case. In Ramsey v Broy (2010 WL 1251199 [SD Ill 2010]), plaintiff attempted to bribe a neighbor by offering to share the winning proceeds of the lawsuit with him if the neighbor would lie and claim to have seen the incident, thereby giving support and credibility to the alleged beating and false arrest of plaintiff. In addition, the plaintiff in Ramsey directly violated a court order precluding him from contacting nonparties. Such misconduct was proved after an evidentiary hearing, and the United States District Court for the Southern District of Illinois held that dismissal was warranted. In Johnese v Jani-King, Inc. (2008 WL 631237 [ND Tex 2008]), plaintiff was specifically instructed not to provide answers to her husband at his telephonic deposition. However, she deliberately defied this clear directive and suborned perjury by writing and passing notes to him at his deposition. Plaintiff's misconduct merited dismissal of her complaint. In Lee v Sass (2006 WL 799176 [ED Mich 2006]), a material witness testified that plaintiff offered her financial incentives to provide perjured deposition testimony and threatened her with physical violence when she refused. Moreover, defendants submitted to the court handwritten correspondence from plaintiff outlining (with specificity) the perjured testimony the witness was to provide. The complaint was dismissed. Finally, in Sky Dev., Inc. v Vistaview Dev., Inc. (41 So 3d 918, 919-920 [Fla Dist Ct App 2010]), the appellate court affirmed the trial court's dismissal of plaintiff's complaint based on fraud on the court where (1) plaintiff's CFO tampered with a witness (plaintiff's manager) by passing a note to him during a deposition, and (2) at trial, plaintiff's sole shareholder, in turn, tampered with the CFO, during a sidebar while the CFO was still on the stand, by sending him two text messages.

Finally, it bears noting that, as framed by the pleadings, this is a legal action for breach of contract, rather than an equity proceeding. The Court declines defendants' invitation to clutter this straightforward legal action with extraneous matters having no bearing on its outcome. Whether plaintiffs, their counsel, and Mr. Tantleff should be given "a free pass for their misconduct" is a matter for another lawsuit for defendants to commence, if they be so advised. As the Second Department held, Mr. Forkosh is obligated to pay plaintiffs the sum of $3,874,953.91 on their first and fourth causes of action, with leave to plaintiffs to make an application to this Court, upon sustaining future losses, for judgment against him in the amount of such losses.

Defendants' motion to dismiss the complaint is denied.

Under the facts and circumstances of this case, plaintiffs' cross motion for an order awarding them sanctions, pursuant to part 130 of the Rules of the Chief Administrator, against Mr. Forkosh is denied as meritless.

Pursuant to CPLR 5016 (c), plaintiffs may submit a proposed judgment to the County Clerk in accordance (and together) with a certified copy of the Second Department's decision and order.

Plaintiffs' counsel shall serve a copy of this decision and order with notice of entry on defendants' counsel and shall file an affidavit of service with the County Clerk.

This constitutes the decision and order of the Court.

E N T E R,

J. S. C.