Monday, November 22, 2010

Who is the OK?

At an IAS Term, Part 42 of the Supreme Court of the State of New York, held in and for the County of Kings, at the Courthouse, at Civic Center, Brooklyn, New York, on the 7* day of June, 2005.








- against -

DON JOEL LEVY, et al.,



The following papers numbered I to 9 read on tliis motion:

Papers Numbered

Notice of Motion/Order to Show Cause/

Petition/Cross Motion and

Affidavits (Affirmations) Annexed 1- 2 3-6

Opposing Affidavits (Affirmations) 7-8

Reply Affidavits (Affirmations) 9

Affidavit (Affirmation)

Other Papers

Upon the foregoing papers in this action by plaintiff Chana Levy, as Executrix of the Estate of Eliezer Levy, Deceased (plaintiff) for an accounting, defendants Don Joel Levy (Rabbi Don Yoel), Donel Corporation (Donel Corp.), Committee for the Furtherance of Torah Observance (the CFTO), Va'ad Hakashrut D'America (the Va'ad), and Committee for the Advancement of Torah (CAT) (collectively, defendants) move for summary judgment dismissing plaintiffs complaint as against them. Plaintiff cross moves, pursuant to CPLR 2221, for leave to renew her opposition to defendants' prior motion to dismiss the second cause of action of her amended complaint, which resulted in the October 7, 2004 decision and order dismissing said cause of action. Plaintiff requests such renewal based upon the ground of allegedly newly discovered evidence that the signature of Eliezer Levy (Eliezer) on the April 6, 1998 assignment was forged.

Plaintiff seeks, upon such renewal, an order vacating the October 7,2004 decision and order, and leave to amend her amended complaint to state a claim that the assignment is void and of no force and effect because Eliezer's signature thereon was a forgery. Plaintiff further seeks, in her cross motion, an order, pursuant to CPLR 3126, compelling defendants to produce evidence in response to her Decembe • 8, 2003 notice to produce.

George Goldstein d/b/a O.K. Laboratories was in the business of, inter alia, providing kosher food certification under trademarked symbols, i.e., the Circle K Marks (a circle with the letter k inside). O.K. Laboratories would inspect facilities of food manufacturers and certify fiat their products were prepared in accordance with Jewish dietary (kashruth) laws, and, if certified, the manufacturers were permitted to print the Circle K Marks on their products. In February 1968, pursuant to an Agreemeni of Sale, George Goldstein d/b/a O.K. Laboratories sold to Rabbi Bernard Levy and the Va'ad, a non-profit religious corporation which was formed on December 15, 1963, his business, which included the business of publishing a kosher food guide (the Jewish Homemaker), the Circle K Marks, the goodwill thereof, and the renewal of contracts with companies which with George Goldstein did business.

While the Agreement of Sale did not allocate the assets as between Rabbi Bernard Levy and the Va'ad, Rabbi Bernard Levy allocated to himself the Circle K Marks and the right to license them, and he allocated the renewal contracts and client lists to the Va'ad for use in its kashruth certification business.

Beginning with the purchase of George Goldstein's kashruth certification business and continuing until September 1971, Rabbi Bernard Levy, as the owner of the Circle K Marks, licensed ihe Circle K Marks to the Va'ad, which continued its operations of providing kashruth certification to food manufacturers and using the Circle K Marks to identify products which met the standards represented by these marks, as set by Rabbi Bernard Levy. Rabbi Bernard Levy and his wife, Thelma Levy, were trustees of the Va'ad and there were four other trustees. Rabbi Bernard Levy was also employed by the Va'ad and received a salary from it.

In September 1971, Rabbi Bernard Levy and others formed the CFTO, a non-profit religious corporation which succeeded to the Va'ad in providing kashruth certification under the Circle K Marks. Rabbi Bernard Levy, together with Zvi Gartenhaus and Frumma Gartenhaus (his son-in-law and daughter), were trustees of the CFTO, and Rabbi Bernard Levy was employed by and received a salary from the CFTO.

Both the Va'ad and the CFTO operated under the trade name, O.K. Laboratories and variants thereof (OK Labs, Organized Kashuth Laboratories). Rabbi Bernard Levy licensed the Circle K Marks and the O.K. Laboratories trade names to the Va'ad and the CFTO on a royalty-free, exclusive basis. All fees paid by the food manufacturers were paid to the Va'ad and the CFTO.

Rabbi Bernard Levy died on April 4,1987, and, in December 1988, Thelma Levy, as the Executrix of his estate, filed a Certificate of Discontinuance of Business of O.K. Laboratories, "for the reason that [she]... ha[d] sold, transferred and assigned all of the said unincorporated business (including, without limitation, the goodwill and business name)" to Rabbi Don Yoel and Eliezer, who were her and Rabbi Bernard Levy's sons. The December 1988 assignment provided that Thelma Levy, as Executrix of the Estate of Bernard Levy, assigned to Rabbi Don Yoel and Eliezer "all of the interest of said Estate in and to the unincorporated business O.K. Laboratories, including without limitation, the goodwill and the name of said business." By a separate assignment dated December 29, 1988, Thelma Levy, as Executrix, assigned to Rabbi Don Yoel and Eliezer, doing business as O.K. Laboratories, "all rights, title, and interest in and to the [Circle K trademark (one of the Circle K Marks^L toeether with the goodwill of the business symbolized by the mark." The Certificate of Discontinuance of Business further provided that Rabbi Don Yoel and Eliezer would conduct business in partnership and would simultaneously file a Business Certificate for Partners.

A Business Certificate for Partners, which certified that Rabbi Don Yoel and Eliezer were conducting business as members of a partnership under the name of O.K. Laboratories, was filed by them on December 29, 1988. There was no written partnership agreement relating to this partnership. As partners, Eliezer and Rabbi Don Yoel continued licensing the use of the Circle K Marks royalty-free to the CFTO. After Rabbi Bernard Levy's death, Thelma Levy, Malka Levy, and Rabbi Don Yoel became the trustees of the CFTO.

On October 9,1996 Rabbi Don Yoel and Eliezer formed the corporation, Donel Corp., under Business Corporation Law § 402, with each of them holding 50% of its shares. By assignment dated January 15,1997, Rabbi Don Yoel and Eliezer assigned to Donel Corp. "all right, title, and interest in [the Circle K Marks, the OK Labs trademark, and other marks owned by them], together with the goodwill of the business symbolized by and associated with said rademarks, service marks and certification marks." On December 16,1997, CAT, a successor to the CFTO, was formed as a non-profit religious corporation. The trustees of CAT were Rabbi Don Yoel, Rikal Fogelman, and Thelma Levy. Rabbi Don Yoel was the president of CAT and Thelma Levy was its secretary and treasurer. All kosher certification agreements held by the CFTO were assigned to CAT. CAT provided kashruth certification to manufacturers, and operated under the trade name O.K. Laboratories. Donel Corp. licensed CAT to use the Circle K Marks royalty-free.

By a document entitled "General Assignment," dated April 6,1998, Eliezer assigned his 50% shares of Donel Corp. to Rabbi Don Yoel. The assignment is executed by Eliezer in two places and by Thelma Levy. It contains a statement by Thelma Levy that as long as she and E.iezer are alive, she "will use [her] influence as a director of [CAT] that [he] should be compensated at a salary of $81,640 - - which will be subject to cost of living increases," and that "[t]his is with the assumption that [he] will perform [his] duties in the same manner as [he] performed them in the past."

On July 29, 1998, Eliezer died. On June 9, 2003, plaintiff, as the Executrix of Eliezer's estate, commenced this action, setting forth a cause of action for an accounting of the partnership between Eliezer and Rabbi Don Yoel. On June 30, 2004, plaintiff amended her comp aint to assert a second cause of action for a judgment declaring the April 6, 1998 assignment of Eliezer's shares in Donel Corp. to Rabbi Don Yoel null and void based upon the ground that it was made for inadequate consideration. By decision and order dated October 7, 2004, the court found that since the assignment was in writing and signed, the amount of consideration could not affect its validity, and that the assignment was valid and enforceaVle. It, therefore, dismissed plaintiffs second cause of action.

Defendants' instant motion seeks summaryjudgment dismissing plaintiffs complaint, which consists of her remaining cause of action for an accounting. In addressing such motion, the court notes that the six-year Statute of Limitations for an action seeking an accounting begins to run when the partnership is dissolved (Partnership Law § 74; CPLR 213 [1]; Mills v O'Donnell, 188 AD2d 692, 693 [1992]). Thus, where partners transfer a partnership's assets to a corporation that takes over the business of the partnership, the partnership is considered dissolved upon such transfer, and the cause of action for an

accounting accrues at that time (see Judelson v Weintraub, 55 AD2d 906, 907 [1977]; Hutchinson v Sperry, 158 App Div 704, 708 [1913], affd 214 NY 616 [1915]).

Defendants, in support of their motion, assert that the partnership between Eliezer and Rabbi Do a Yoel was dissolved when, on January 15,1997, they assigned the Circle K Marks, "together with the goodwill of the business symbolized by and associated with said trademarks, service marks and certification marks" to Donel Corp. They assert that the Statute of Limitations on plaintiffs cause of action for an accounting, therefore, accrued at that time, and, since plaintiff failed to commence this action until more than six years from that time, her present action is barred by the applicable Statute of Limitations (see Mills, 188 AD2d at 693-694; Hutchinson, 158 App Div at 708).

Plaintiff, in opposition, argues that the partnership's kashruth certification business was bein^ run and carried on through the various religious corporations (i.e., the Va'ad, the CFTO, ar d CAT), which employed the kashruth inspectors, paid their salaries and all other expenses of the business, and collected all of the fees paid by the food manufacturers who wished to be certified. She states that the Levy family received their personal income from the religious corporations, and that Donel Corp. received no income and held the trademark as its only asset which, on a tax return, it assigned a value of only $2,500. Plaintiff contends that no p.rt of the kosher certification business whatsoever was passed on to Donel Corp. other than the ownership of the Circle K Marks, which was licensed back to the religious corporation, and that this trademark was merely one component of the partnership business of Eliezer and Rabbi Don Yoel. She argues that the kashruth certification business did not merge into Donel Corp., but that, instead, the actual partnership business continued to be carried or through the religious corporations. She claims that defendants have thus denied her and her children a share in the family business.

On a motion for summary judgment, however, once the moving party has established that it is entitled to summary judgment, the opposing party must lay bare its proof and demonstrate the existence of a triable issue of fact {Roberts v Rubio, 189 AD2d 867, 867 [1993]). Here, plaintiff has failed to submit any evidentiary facts showing that after the ownership interests in the Circle K Marks were transferred to Donel Corp., any other business was conducted by Eliezer and Rabbi Don Yoel as partners. Rather, the evidentiary facts subr litted show that prior to the January 15, 1997 assignment to Donel Corp., the only business that Rabbi Don Yoel and Eliezer had conducted as partners was to hold the ownership interest in, and right to exploit, the Circle K Marks. They did not perform any services, but only set the standards for using the Circle K Marks and licensed the right to use the marks royalty-free to the religious corporations. Both before and after the transfer of the Circle K Marks to Donel Corp., the certification of kosher products was carried out by the religious corporations.

As noted above, the trustees and officers of the religious corporations were persons other than Eliezer. There is no evidence that Eliezer received any profits from the religious corporations, and the evidence discloses that Eliezer never reported income from any purported interest in the kashruth certification business on his tax returns. Eliezer is not alleged to have exercised control over the religious corporations through which the purported partnership is alleged to have conducted its affairs. Indeed, at plaintiffs deposition, plaintiff testified that Eliezer did not say anything to her that indicated that he had an ownership interest in a kosher supervision business, and she could not recall him ever telling her that he was a partner in a kosher certification business, or him ever complaining that he was not receiving his share of any such business.

Moreover, Eliezer had no ownership interest in the religious corporations. The religious corporations are subject to article 10 of the Religious Corporations Law, and the Religious Corporations Law prescribes and limits the powers and duties of the trustees and other officers {see Religious Corporations Law § 5). The powers of the religious corporations with respect to the handling of funds are expressly set forth in the Religious Corporations Law. The assets of a religious corporation do not belong to any one individual or group, and the trustees must administer the religious corporation's property or revenues "in accordance with the discipline, rules and usages of the corporation and of the ecclesiastical governing body, if any, to which the corporation is subject" (Walker Memorial Bapist Church v Saunders, 285 NY 462, 467 [1941], quoting Religious Corporations Law § 5; see also Beth Jacob ofBoro Park v Morgen Appliances, 196 Misc 677, 678 [1949]). Here, pla'ntiff has not shown that Eliezer ever received any monies from business with, through, or conducted by the religious corporations during his lifetime other than receiving a salary for work performed by him.

Plaintiff points to the fact that in a March 30, 1995 letter (submitted in connection with trademark infringement litigation), defendants stated that Rabbi Don Yoel was a principal nember of and employee of CFTO. This same letter, however, states that while Rabbi Don Yoel and Eliezer owned the trademark and licensed it to O.K. Laboratories and were its employees, "neither [of them] conducted business as O.K. Laboratories or otherwise performed certification services other than as an employee of O.K. Laboratories." Thus, plaintiff cannot establish that a partnership continued to conduct business by relying upon the kashnth certification work carried out by the religious corporations that Eliezer did not control and from which he did not receive any profits.

PU intiff srelianceupon5/a«£v5/a«A:(222 AD2d 851,852-853 [1995]), which states the established general principle that persons can form a corporation and still be partners as between fiemselves, is misplaced. Blank (222 AD2d at 852) involved a motion to dismiss, pursuant to CPLR 3211 (a) (7), wherein the alleged facts in the complaint were required to be accepted as true and accorded the benefit of every possible inference in the plaintiffs favor. S'milarly, plaintiffs reliance upon Sagamore Corp. v Diamond West Energy Corporation (806 F2d 373,379 [2dCir 1986]), Arditi vDubitzky (354 F2d483,486-487 [2d Cir 1965]), and Paretti v Cavalier Label Co. (702 F Supp 81, 84 [SD NY 1988]), is also misplaced. In Sagamore (806 F2d at 379), there were evidentiary facts that the parties therein c1 early intended the joint venture agreement to survive the formation of the corporation; in Arditi (354 F2d at 487), the plaintiff was permitted to show that it was the intention of the parties to set up the corporation only as a means of carrying out a joint venture; and in Paretti (702 F Supp at 84), there was evidentiary proof of an ongoing partnership conducted in corporate form. Here, plaintiff, in response to defendants' prima facie showing on this motion, has failed to sustain her burden of producing any evidentiary proof so as to raise a triable issue of fact as to whether any partnership activity took place following the January 15, 1997 assignment to Donel Corp. Consequently, defendants' motion for summary judgment must be granted {see CPLR 213 [1], 3211 [a] [5], 3212 [b]; Partnership Law § 74).

Plaintiff, by her cross motion, now seeks leave to renew her opposition to defendants' prior motion to dismiss her second cause of action. She bases her request for renewal on the ground that she has newly discovered evidence. Specifically, she asserts that she has now retained new counsel, who retained two handwriting experts. These two handwriting experts have coir pared the two signatures of Eliezcr on a copy of the April 6. 199,9 General Assignment with original cancelled checks bearing Eliezer's signature, and opine that the signatures on the assignment are forgeries. Defendants' handwriting expert disputes the findings of plaintiff s experts and points out that such experts did not review the original document. Defendants also point to plaintiff s deposition testimony that Eliezer told her that "he signed some paper" that would "assure that after [Thelma Levy] passed away [Rabbi] Don [Y]o J1 would keep paying him," and that the signature on the assignment "look[ed] like" Eliezer's signature.

In any event, is well settled that "[a] motion for leave to renew must be 'based upon new facts not offered on the prior motion that would change the prior determination,' and the movant must state a 'reasonable justification for the failure to present such facts on the prior motion'" (Yarde v New York City Tr. Auth., 4 AD3d 352, 353 [2004], quoting CPLR 2221 [e]; see also Greene v New York City Hous. Auth., 283 AD2d 458, 459 [2001]). A motion jp renew j5 "-npj a sccpnd chance freely given to parties w&Q have nv< exerei'seo! due diligence in making their first factual presentation'" (Welch Foods v Wilson, 247 AD2d 830, 830-831 [1998], quoting Mundo v SMSHasenclever Maschinenfabrik, 224 AD2d 343, 344 [ 1996]). If the evidence that is asserted to be newly discovered could have been discovered with due diligence, the motion to renew should be denied (Welch Foods, 247 AD2d at 830-831; Mundo, 224 AD2d at 344; Ulster Sav. Bank v Goldman, 183 Misc 2d 893, 895-896 [2000]).

Here, plaintiff, to justify her failure to submit these expert opinions in opposing defendant' prior motion, only asserts that she did not previously submit this allegedly new evidence of forgery because the idea of forgery would not have occurred to her in her "darkest dreams." Such assertion, however, does not provide reasonable justification for renewal of the motion. Plaintiff has been in possession of the April 6,1998 assignment since it was produced to her in a prior litigation by defendants in February 2000, more than five years ago. Plaintiff does not adequately explain why she did not seek to have the assignment analyzed earlier {see Greene, 283 AD2d at 459; Cole Hatchard v Grand Union, 270 AD2d 447, 448 [2000]; Welch Foods, 247 AD2d at 831; Mundo, 224 AD2d at 344).

Moreover, there are no newly discovered facts, but only new opinions by experts hired by plainti rf concerning the veracity of a document which plaintiff has had in her possession for at least five years. This does not constitute a legitimate basis for renewal {see Sample v Levada, 8 AD3d 465, 467 [2004]; Matter of Shapiro v State of New York, 259 AD2d 753, 753-754 [1999]; Welch Foods, 247 AD2d at 830-831; Mundo, 224 AD2d at 344).

Plaintiff, in support of her cross motion, also argues that Donel Corp.'s Shareholders' Agreement provided a mechanism for the transfer of shares which was not followed with respect to Eliezer's shares. Such argument, however, is a new argument, which was not raised in opposition to defendants' prior motion, and a motion to reargue was not timely brought herein (see CPLR 2221 [d]; Foley v Roche, 68 AD2d 558, 567-568 [1979]). Furtherm >re, parties to a written agreement may modify it and vary or waive its terms {see e.g. General Elec. Capital Commercial Automotive Finance v Spartan Motors, Ltd., 246 AD2d 41, 52 [1998]; Matter of Estate of Prime, 184 Misc 2d 796, 799 [2000]). Consequently, inasmuch as plaintiff has failed to set forth a valid basis for renewal, or any good cause shown to replead her second cause of action, her cross motion, to the extent that it seeks such relief, must be denied.

Plaintiff, by her cross motion, also seeks an order compelling defendants to produce financial records of O.K. Laboratories, Donel Corp., the Va'ad, the CFTO, and CAT. However, "discovery as to fiscal matters in an action for an accounting may not be obtained in the usual situation unless and until [the] plaintiff establishes a right to an accounting" (Woltherv Samuel, 110 AD2d 506,507 [19S5]; see also LSYIntl. vKerzner, 140AD2d256, 256 [1988]). Here, as discussed above, plaintiff has failed to demonstrate such a right, and plaintiff has not demonstrated how these financial records are necessary in order for her to oppose defendants' motion (see CPLR 3212 [f]).

Plaintiff asserts that financial discovery will show that the corporations were merely subordina-e entities in an overall partnership which ran a multi-million dollar business, of which the trademark was just one component. To support this assertion, plaintiff only states that these documents should demonstrate the payment of salaries and personal expenses to members of the Levy family. The payment of salaries to employees of the religious corporations, though, is admitted by defendants, and plaintiffs speculation regarding improprieties in pnvments cannot establish any interest by Eliezer in the alleged partnership at issue or provide a basis for postponing the granting of defendants' motion for summary judgment (see generally Dunn v 726 Main & Pine, Inc., 255 AD2d 981,982 [1998]; Limpar Realty Corp. vUswiss Realty Holding, 112 AD2d 834,837 [1985]; La ScalavD'Angelo, 104 AD2d 930, 931 [1984]). Therefore, plaintiffs cross motion, insofar as it seeks an order compelling the production of these documents, must be denied.

Accordingly, defendants' motion for summary judgment dismissing plaintiffs complaint as against them, is granted. Plaintiffs cross motion for leave to renew her opposition to defendants' prior motion to dismiss her second cause of action, and an order, pursuant to CPLR 3126, compelling defendants to produce evidence in response to her December 8, 2003 notice to produce, is denied in its entirety.

This constitutes the decision, order, and judgment of the court.

JUDGE of the Supreme Court