Supreme Court, Nassau County, January 3, 2023

Terenzi & Confusione, P.C. (Ronald M. Terenzi of counsel) and Kaufman Borgeest & Ryan LLP (David Bloom of counsel) for defendants.

Colonna Cohen Law, PLLC (Ashlee Victoria Colonna Cohen of counsel) for plaintiffs.

The motion filed by the defendant, David Fogel, P.C., for an order pursuant to CPLR 3211 (a) (7), dismissing the complaint against David Fogel, P.C. in its entirety, with prejudice, based upon the plaintiffs' failure to state a cause of action; and pursuant to CPLR 3211 (a) (5), dismissing the plaintiffs' time-barred claims against David Fogel, P.C., based upon the expiration of the applicable statute of limitations; and pursuant to CPLR 3211 (a) (3), dismissing the complaint against David Fogel, P.C. in its entirety, with prejudice, based upon plaintiffs' lack of standing; and pursuant to CPLR 3211 (a) (1), dismissing the complaint against David Fogel, P.C. in its entirety, with prejudice, based upon the documentary evidence; and pursuant to 22 NYCRR 130-1.1 (a), imposing costs, sanctions and reasonable attorney's fees against plaintiffs for engaging in frivolous conduct (seq 002); and the cross-motion filed by the plaintiffs, Zomongo.TV USA Inc., doing business as Zomongo.TV USA, Jocelyne Lisa Hughes-Ostrowski, and Jeremy Gene Ostrowski (collectively, plaintiffs), for an order pursuant to CPLR 3025, for [*2]leave to file an amended complaint pursuant to new controlling case law decided by the Court of Appeals (seq 004), are determined as hereinafter follows:

The plaintiffs commenced this action on May 26, 2021, by filing a summons and complaint. In their initial complaint, the plaintiffs assert numerous allegations against defendants GTR Source, LLC, Tsvi Davis, and Tzvi Reich, including that the{**78 Misc 3d at 463} plaintiffs were allegedly solicited by those defendants to enter into two so-called merchant cash agreements (MCA), the first referred to as the "February agreement" and the second referred to as the "April agreement." The plaintiffs allege that those defendants breached the February agreement by, inter alia, failing to deliver the purchase price agreed-upon in that agreement, and by engaging in accelerated collection of withdrawals from the plaintiffs' account through unauthorized ACH debits.

The plaintiffs further allege that the defendants inflated the balance owed by the plaintiffs to the defendants when the parties entered into the second MCA, i.e., the April agreement, and that the defendants failed to deliver the purchase price of that second MCA, in that GTR delivered only $124,840 of the $400,916 that the plaintiffs were contractually owed (leaving $276,076 unpaid). The plaintiffs allege that on April 12, 2018, the previous balance owed by the plaintiffs to the defendants under the February agreement was satisfied, and that on that same day, after such satisfaction, GTR nonetheless collected an additional $5,996 from the plaintiffs' account. The plaintiffs allege that the additional $5,996 was never returned or applied to the parties' April agreement.

The allegations asserted in the initial complaint against the movant defendant David Fogel, P.C. are limited to that defendant's role in filing and obtaining, on GTR's behalf, a judgment by confession against the plaintiffs in Nassau County. They allege that the proposed judgment submitted by defendant David Fogel, P.C. on behalf of GTR states that the amount confessed was $1,274,150, less any payments made (which as of May 10th GTR claimed totaled $243,912.74), and which included interest from April 11, 2018 (even though the alleged default date was May 7, 2018), and included unsubstantiated attorney's fees in the amount of $259,209.08. They allege that "Judgment was entered on May 10, 2018, at 4:05 PM, for a total of $1,297,132.68 ($22,982.68 more than the April Agreement's Purchase Price)."

They further allege that defendant David Fogel, P.C., and its agents, made certain misrepresentations and engaged in certain misconduct, including exerting undue pressure on the plaintiffs, with respect to agreeing to a conditional release of funds to the defendants in order to remove the restraint imposed on the plaintiffs' bank accounts.

The plaintiffs allege that on May 30, 2018, Marshal Biegel levied $1,339,158.14 from Zomongo's Arizona bank account,{**78 Misc 3d at 464} and that on June 1, 2018, GTR filed a satisfaction of judgment. On June 15, 2018, the satisfaction was recorded. The plaintiffs allege that between the February and April GTR agreements, Zomongo received approximately $465,000 (if Queen and ML Factors were indeed paid $100,511 each), and that GTR collected a total of $1,765,537.14 from Zomongo. They allege that GTR made over a 379% return within only 82 days due to its fraudulent and criminal conduct, and that the annual interest rate is absurd considering there were only 42 business days during the time frame of collection—an unbelievable 2,430%. They allege that the interest rate required to get a total amount, principal plus interest, of $1,765,537.14 from simple interest on a principal of $465,022 over 42 days is 6.6587% per day. They allege that calculating the annual rate 6.6587%/day x 365 days/year = 2,430.4255% per year. [*3]

The plaintiffs allege that Zomongo has been absolutely decimated by the loss of over $1.3 million through GTR's fraud, that Zomongo has not been able to operate since August of 2018, that Zomongo did not default pursuant to the April agreement, and that GTR had no authority to enter judgment against the plaintiffs, especially when it continued to collect funds from Zomongo's bank account, and defrauded them from the beginning. They further allege that the execution and levy was void from inception, that the judgment should have never been entered, and that the $1,339,158.14 taken from Zomongo's Arizona bank account must be returned.

The plaintiffs' complaint asserts the following causes of action against defendant David Fogel, P.C.: (1) civil RICO—collection of an unlawful debt; (2) wrongful restraint and execution; (3) abuse of process; (4) trespass to chattel; (5) conversion; and (6) unjust enrichment/money had and received.

Movant defendant argues that all of the causes of action asserted against it should be dismissed pursuant to CPLR 3211 (a) (7), for the plaintiffs' failure to state a claim, as well as due to, inter alia, the expiration of the applicable statute of limitations.

However, in the plaintiffs' cross-motion to amend their complaint and their opposition to the defendant's motion to dismiss, the plaintiffs contend that, based on the New York Court of Appeals decision in Plymouth Venture Partners, II, L.P. v GTR Source, LLC (37 NY3d 591 [2021]), they wish to amend their complaint to withdraw all of the causes of action previously asserted against defendant David Fogel, P.C., and to{**78 Misc 3d at 465} assert only a single claim for unjust enrichment/quantum meruit against that defendant. The plaintiffs contend that in Plymouth Venture Partners, the Court of Appeals conclusively decided that the proper avenue for litigating claims like the plaintiffs' claims concerning the issuance of an unlawful levy is by filing a CPLR 5240 motion under the index number from which the levy stemmed. Accordingly, the plaintiffs cross-move to withdraw those of their claims which they feel are improper under Plymouth Venture Partners, and to assert a single claim of unjust enrichment/quantum meruit against the movant defendant.

Defendant Fogel does not object to the plaintiffs' request to withdraw the tort-based claims previously asserted against it, and asserts that the plaintiffs "finally concede, as they must, that none of the tort-based claims asserted in the initial complaint can survive Fogel's motion to dismiss following Plymouth Venture Partners, II, LP v GTR Source." (Mem of law in opp to plaintiffs' cross-mot to amend the complaint and in further support of defendant David Fogel, P.C.'s mot to dismiss and for costs and sanctions [Fogel's MOL in opp to cross-mot] at 1.) Defendant Fogel opposes the plaintiffs' motion to amend to the extent it seeks to assert a new cause of action for unjust enrichment/quantum meruit, arising from the attorney's fees obtained by David Fogel, P.C.

The parties agree that by cross-moving to amend their complaint, the plaintiffs seek to withdraw the third through eighth causes of action previously included in their initial complaint, and that their proposed amended complaint consists of, inter alia, a single claim asserted against defendant David Fogel, P.C. which is "fundamentally different than the claims against the Fogel Firm in the [initial] Complaint." (Mem of law in opp to mot to dismiss and in support of cross-mot to amend complaint at 5; Fogel's MOL in opp to cross-mot at 4.)

As defendant David Fogel, P.C. does not oppose that portion of the plaintiffs' cross-motion which seeks to withdraw the third through eighth causes of action previously included in their complaint, and the court has received no opposition papers to the plaintiffs' cross-motion [*4]to amend from any other party in this action, the portion of the plaintiffs' cross-motion which seeks to withdraw the third through eighth causes of action in their complaint is granted, and defendant Fogel's motion to dismiss such causes of action is denied, as moot.

The remaining issue is therefore whether the plaintiffs should further be permitted to amend their complaint to, inter{**78 Misc 3d at 466} alia, assert a "fundamentally different" cause of action against defendant David Fogel, P.C. for unjust enrichment/quantum meruit arising from defendant David Fogel, P.C.'s legal fees that were to be paid for by the plaintiffs.

The proposed amended complaint asserts that GTR's April agreement contained a provision that, if Zomongo defaulted, GTR could charge the plaintiffs 25% of the outstanding balance at the time of default as a legal fee. It is further alleged that this provision was also listed in the affidavits of confession of judgment signed by Mr. and Mrs. Ostrowski that secured the February and April agreements. The plaintiffs allege that GTR retained the Fogel firm to file and obtain judgment by confession against the plaintiffs, and that GTR and defendant David Fogel, P.C. affirmed to the court that the outstanding balance on the April agreement was $1,030,237.26 and that GTR and David Fogel, P.C. were entitled to 25% of that amount as a legal fee to be paid for by plaintiffs.

The plaintiffs further allege that on May 10, 2018, judgment was entered against the plaintiffs for $1,297,132.68, which included a legal fee of $259,209.08 calculated by David Fogel, P.C., and that on May 30, 2018, $1,339,158.14 was levied from Zomongo's bank account at BMO Harris Bank in Arizona by Marshal Biegel. The plaintiffs further allege that David Fogel, P.C. received $259,209.08 as a legal fee paid for by the plaintiffs from the funds levied by the Marshal. The plaintiffs allege that the legal work performed by defendant David Fogel, P.C. consisted of drafting a two-page affidavit in support and a one-page proposed judgment, and the filing of same.

The plaintiffs' proposed amended complaint asserts a cause of action against David Fogel, P.C. for "unjust enrichment/quantum meruit." "The elements of unjust enrichment are that the defendants were enriched, at the plaintiff's expense, and that it is against equity and good conscience to permit the defendants to retain what is sought to be recovered." (County of Nassau v Expedia, Inc., 120 AD3d 1178, 1180 [2d Dept 2014] [citation omitted].) "The essence of unjust enrichment is that one party has received money or a benefit at the expense of another." (County of Nassau, 120 AD3d at 1180 [citations omitted].)

Defendant David Fogel, P.C. opposes the plaintiffs' cross-motion to amend the complaint to include this cause of action on the basis that the proposed new cause of action is time-barred, palpably improper, and without merit, and that the action against David Fogel, P.C. should be dismissed.{**78 Misc 3d at 467}

The plaintiffs' cross-motion to amend is filed pursuant to CPLR 3025, which provides that the court may grant leave to parties to amend or supplement their pleadings. "In the absence of prejudice or surprise resulting directly from the delay in seeking leave, such applications are to be freely granted unless the proposed amendment is palpably insufficient or patently devoid of merit." (Stein v Doukas, 128 AD3d 803, 804 [2d Dept 2015] [citations omitted].) "While '[n]o evidentiary showing of merit is required under CPLR 3025 (b),' the court must still determine 'whether the proposed amendment is "palpably insufficient" to state a cause of action or defense, or is patently devoid of merit.' " (Beharrie v MRAG Dev., LLC, 210 AD3d 945, 945-946 [2d Dept 2022] [citations omitted].)

David Fogel, P.C. argues that the proposed new claim for unjust enrichment/quantum [*5]meruit is time-barred under a three-year statute of limitations governed by CPLR 214 (3). CPLR 214 (3) is entitled "Actions to be commenced within three years," and provides, in pertinent part, as follows: "The following actions must be commenced within three years: . . . 3. an action to recover a chattel or damages for the taking or detaining of a chattel."

"The theory of unjust enrichment lies as a quasi-contract claim and contemplates an obligation imposed by equity to prevent injustice, in the absence of an actual agreement between the parties." (Siegler v Lippe, 189 AD3d 903, 905 [2d Dept 2020] [citation omitted].) "The essential inquiry in an action for unjust enrichment is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered." (Siegler, 189 AD3d at 905-906.) Contrary to the arguments advanced by the plaintiffs, the court finds that a three-year statute of limitations applies in this case, where the plaintiffs are ultimately seeking restitution in the form of money damages. "A three-year statute of limitations governs causes of action alleging unjust enrichment when the plaintiff is seeking monetary relief." (Siegler, 189 AD3d at 906, citing to CPLR 214 [3], and Ingrami v Rovner, 45 AD3d 806, 808 [2d Dept 2007].)

"The statute of limitations on such a cause of action begins to run on the occurrence of the wrongful act giving rise to the duty of restitution." (Siegler, 189 AD3d at 906.) Defendant David Fogel, P.C. asserts that the cause of action accrued no later than May 30, 2018, when the Marshal levied the attorney's fee{**78 Misc 3d at 468} of $259,209.08 from Zomongo's account. The plaintiffs contend that David Fogel, P.C. was unjustly enriched on or about June 1, 2018.

In either case, the plaintiffs' claim for unjust enrichment would be time-barred as of June 1, 2021, unless the relation-back doctrine applies.

"The CPLR 203 (f) relation-back rule provides that a 'claim asserted in an amended pleading is deemed to have been interposed at the time the claims in the original pleading were interposed, unless the original pleading does not give notice of the [transactions, occurrences, or] series of transactions or occurrences, to be proved pursuant to the amended pleading.' " (Rende v Cutrofello, 226 AD2d 694, 695 [2d Dept 1996], citing CPLR 203 [f].)

In this case, the court finds that the relation-back doctrine applies, because the initial complaint provided David Fogel, P.C. with notice of the facts and occurrences to be proved pursuant to the amended pleading, as the plaintiffs specifically alleged in paragraph 58 of the complaint that the proposed judgment submitted by David Fogel, P.C. on GTR's behalf included "unsubstantiated attorney's fees in the amount of $259,209.08," which "were apparently calculated as 25% of the outstanding balance, plus interest from April 11, 2018, the date plaintiffs signed the Agreement." As the court finds that the relation-back doctrine applies, the court finds that defendant David Fogel, P.C. has failed to prove that the proposed claim for unjust enrichment is time-barred.

The court further finds the defendant's arguments concerning lack of standing to bring the claim are unavailing. As the plaintiffs point out, the corporation Zomongo is already a party plaintiff in this matter and therefore, to the extent that the individual plaintiffs might lack standing to bring an individual claim against David Fogel, P.C., the corporate entity is already a plaintiff in this matter and undisputedly has standing to bring such claim against David Fogel, P.C. (See Fulgum v Town of Cortlandt Manor, 19 AD3d 444, 445-446 [2d Dept 2005].) The defendant has otherwise failed to establish that the plaintiffs lack standing to bring the unjust [*6]enrichment claim against it. (See Headquarters Rest. Corp. v Reliance Vending Co., 133 AD2d 444, 446 [2d Dept 1987], lv dismissed 71 NY2d 889 [1988].)

The court further finds that, based on the liberality with which the court is to grant a motion to amend, and after{**78 Misc 3d at 469} considering the allegations set forth in the proposed amended complaint, and considering the relative speed with which the law appears to be changing and forming as it concerns merchant cash agreements such as the two that are at the heart of this action, the proposed amended complaint is neither palpably insufficient nor patently devoid of merit. (Lucido v Mancuso, 49 AD3d 220, 233 [2d Dept 2008].) The proposed amended complaint makes out a claim against defendant David Fogel, P.C. for unjust enrichment and entitlement to a hearing on the reasonableness of attorney's fees (Headquarters Rest. Corp. v Reliance Vending Co., 133 AD2d 444, 446 [2d Dept 1987]), and the defendant has failed to establish that the plaintiffs delayed in seeking leave to amend their complaint such that the defendant was surprised or prejudiced. (Lucido, 49 AD3d at 233.) The court has not received any papers opposing the plaintiffs' cross-motion to amend other than those submitted by defendant David Fogel, P.C.

In light of the foregoing, the defendant's motion to dismiss is denied, as moot, and the plaintiffs' cross-motion to amend is granted as set forth below.

Accordingly, it is hereby ordered that the motion filed by the defendant, David Fogel, P.C., for an order dismissing the plaintiffs' complaint is denied, as moot; and it is further ordered that the cross-motion filed by the plaintiffs for an order pursuant to CPLR 3025 granting the plaintiffs leave to amend their complaint is granted, to the extent that the proposed amended complaint, submitted as New York State Courts Electronic Filing (NYSCEF) Document No. 83, will be deemed timely served and filed upon the plaintiffs' service upon the defendants in this matter with this court's decision and order together with notice of its entry; and it is further ordered that there shall be a certification conference in this matter, to be conducted on February 6, 2023, at 9:30 a.m., at which time it is anticipated that the parties shall certify this case ready to proceed to trial; and it is further ordered that all other requests for relief that are not specifically addressed herein shall be deemed denied.