Opinion
Civil Action No. 97-CV-2550 (ILG)
July 24, 2001
MEMORANDUM ORDER
The plaintiffs obtained an order directing the defendants to show cause why they should not be ordered to "release any hold put on the Machne Menachem account;" prohibited "from entering the camp without the plaintiffs' authorization;" and prohibited "from interfering in any way, with the administration of the affairs of Camp Machne Menachem."
Although the relief requested is sought against all the named defendants who were similarly enjoined by an order issued on July 1, 1997 (see docket entry #18), on September 17, 1997, that order was modified to enjoin specifically Aaron Hershkop, Schneur Hershkop and Levi Hartrman. The latter order and others (see docket entries numbered 31, 83 and 92), suggest that the three named in the modified order of September 17, 1997, are still subject to the injunction originally issued on July 1, 1997 and are named superfluously in this motion.
A hearing was held at which testimony was elicited from Yakov Spritzer and Yosef Goldman. At the conclusion of that hearing, the Court found that the gravamen of the bases prompting the request for the relief sought occurred between the months of January and March, some three months prior to the commencement of this year's Camp season. Also before the Court as a basis for the relief sought were letters written by Goldman and Mendel Hershkop to the Pennsylvania Departments of Agriculture and Labor and to the agency insuring the Camp alleging the absence of certificates of occupancy for a number of camp buildings and uncorrected violations in the camp kitchen and canteen.
The uncontroverted evidence established that there are currently upwards of 300 children attending the camp which is staffed by approximately 100 persons. The continued operation of the Camp permits the conclusion that no agency of the state of Pennsylvania with jurisdiction regarding health and safety has found a reason to order that any buildings in the Camp be vacated or that the camp suspend operations. The hold caused to be placed upon the Camp account with the EAB Bank has been lifted and that issue is moot.
The factors guiding the judgment of a court in a motion for injunctive relief are: (1) the threat of irreparable harm; (2) likelihood success on the merit; or (3) a reasonable question going to the merits with the balance of hardship tipping in favor of the movant. Jackson Dairy Inc. v. H.P. Hood Sons, Inc., 596 F.2d 70 (2d Cir. 1979).
The conduct of the defendants alleged to have occurred months ago do not now, or for the immediate future, constitute a threat of irreparable harm. The failure to establish which requires that the request for injunctive relief be denied.
Pending before the Court is a motion pursuant to an unspecified section of Rule 12 Fed.R.Civ.P. made by the defendants Mendel Hershkop, Shmuel Heber and Joseph Goldman, to dismiss the complaint for the reason that the plaintiffs lack the capacity to bring this action. See Fed.R.Civ.P. § 17(b). Also sought by the defendants was a declaration from the Court as to who were the lawful directors of Machne Menachem, Inc.
The Court deferred ruling on those motions heretofore in the sincerely held hope that the best interests of the parties, the Crown Heights Community which has become inextricably embroiled and divided by this lawsuit, and of the children intended to be benefitted by the existence of the camp, could best be served by an amicable resolution of it. Towards that end, countless conferences have been held with the parties and acrimonious correspondence and submissions, which by now fill a sizable carton, have been aimed at the Court. Professor Aaron Twerski, a respected scholar with a unique understanding of the community to which the parties belong, was prevailed upon by the Court to mediate their dispute. A meeting for that purpose lasting several hours, which at first held some promise of success, eventually ended unsuccessfully with no prospect that a meaningful further effort would be useful. The hope for a peaceable resolution which the Court continued to harbor has been frustrated. Compounding the inherent intransigence of the parties and the progress of this case has been the appearance of the defendants pro Se, although the papers they submit are obviously drafted for them by a lawyer who, anonymously and invisibly, lurks in the background.
It is worthy of note that on March 2, 1999, an order dated February 25, 1999, was entered dismissing this case against the corporate plaintiff on the Court's own motion, for failure to prosecute. A motion filed thereafter, pursuant to Rule 60(b)(1) Fed.R.Civ.P. seeking to relieve the corporate plaintiff from the order of dismissal was denied in a Memorandum and Order dated May 12, 1999, which recites the unsteady history of the litigation to that point and with which familiarity is assumed. In a letter addressed to Yosef Goldman dated July 13, 1999, which was incorporated by reference in an order of that date, I vacated the order of February 2th for the reason, among others, that the substantial resources and judicial effort which had been expended thus far, moved the Court, in the exercise of discretion, to retain jurisdiction over it. Hindsight would suggest that discretion was not providently exercised. The dismissal of the corporate plaintiff would have removed the linchpin of federal jurisdiction, the state claims would have nothing to which they could be pendent and the parties would have been relegated to the state court.
Succumbing to the conclusion that an amicable resolution is beyond reach, the motions will now be addressed.
By way of background, this action is brought pursuant to 18 U.S.C. § 1961 et seq., (the RICO statutes) and alleging, too, claims governed entirely by state law. The plaintiff corporation was formed in July 1995, pursuant to the provision of the New York Not-ForProfit Corporation Law ("NPCL"), by the three moving defendants and the plaintiff Spritzer, who were named as the corporation's four directors. The purpose of the corporation was to provide a recreational and educational summer camp for orthodox Jewish children from the Crown Heights community in Brooklyn.
Beginning in 1996, two groups fought for control of the camp — one represented by Spriizer and the other by the moving defendants. Each group alleges that the other has engaged in fiscal mismanagement and threatening conduct. A hearing was conducted before the Beth Din Tzedek of Crown Heights, a community elected Rabbinical Court. The Beth Din ruled on November 21, 1996, that the Spritzer group should have control over the camp. Compl. ¶ 35. The parties dispute the findings of the Beth Din and there is disagreement over which parties submitted to its jurisdiction. Plaintiffs filed this action in May 1997.
The moving defendants assert that they have not resigned as directors of Machne Menachem, Inc., nor have they been removed by a vote of its Board of Directors. Therefore, according to the defendants, this suit has not been properly brought by the Menachem corporation because its directors have not authorized such action as required by the NPCL. Plaintiffs argue that the moving defendants have either resigned or were removed as directors and the suit was properly brought by the Board of Menachem as it was constituted at that time. In the alternative, plaintiffs argue that the suit is properly brought as a derivative action pursuant to NPCL § 720.
As of this date, there are 229 docket entries spread over 24 docket sheets.
Discussion
I. Dismissal for Lack of CapacityA. Motion to dismiss is Not Appropriate
The moving defendants have not designated the particular section of Rule 12 of the Federal Rules of Civil Procedure under which they move to dismiss the case. Courts in this Circuit have held that where a defect appears on the face of the complaint, a motion under Rule 12 (b)(6) is the appropriate means for asserting a lack of capacity to sue. Weiner v. Winters, 50 F.R.D. 306, 307-308 (S.D.N.Y. 1970); Klevanow v. New York Produce Exchange, 344 F.2d 294, 296 n. 1 (2d Cir. 1965). In the present case, there is no such defect. The Complaint alleges that two of the three movants were no longer directors of Menachem at the time this suit was brought and other directors took their place:
After the 1995 Summer season, defendant Shmuel Heber resigned from the Board of Directors after he was asked to make a financial contribution to the camp. Subsequently, defendant Yosef Goldman, who was the Director of Registration, was removed from the Board of Directors for taking approximately $12,000 from the camp's receipts without authorization. His removal by the Camp's Board of Directors was upheld by the Rabbinical Court in June, 1996.
Prior to the 1996 Summer season, Meir Schreiber . . . joined the Camp's Board of Directors along with Yosef Spalter. Defendant Meir Hershkop also joined the board at this time.
Comp. ¶ 20-21. By way of affidavit, the moving defendants deny these allegations and assert that there have been no changes in the composition of the Board since Menachem was first incorporated and therefore, the Board did not consent to bringing this motion.
In deciding a Rule 12(b)(6) motion, this Court's function is to determine whether the complaint is legally sufficient. See Festa v. Local 3 Int' l. Bhd. of Elec. Workers, 905 F.2d 35, 37 (2d Cir. 1990). A motion to dismiss must be denied "unless it appears beyond a reasonable doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In reviewing a plaintiff's complaint, this Court must accept as true the plaintiff's factual allegations, drawing all reasonable inferences in their favor. See Bolt Elec., Inc. v. City of New York, 53 F.3d 465, 469 (2d Cir. 1995). Since this is not a case where the alleged defect in capacity is evident from the face of the Complaint, a motion to dismiss is not the appropriate means by which defendants may challenge plaintiffs' capacity. In order for this Court to make a proper determination as to the standing of Menachem to bring this suit, it will have to consider matters outside the pleadings, including affidavits of the parties and the facts surrounding the decisions of the Beth Din. In such a case, the Court must treat the motion as one for summary judgment pursuant to Fed.R.Civ.P. 56(b). See Klebanow v. New York Produce Exchange, 344 F.2d 294, 296 n. 1 (2d Cir. 1965); Wright Miller 5 Fed. Prac. Proc. Civ. 2d § 1294.
B. The Summary judgment Standard
Summary judgment under Rule 56 is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the burden of proof on such motion. See United States v. All Funds, 832 F. Supp. 542, 550-51 (E.D.N.Y. 1993).
If the summary judgment movant satisfies its initial burden of production, the burden of proof shifts to the nonmovant who must demonstrate that a genuine issue of fact exists for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). A genuine factual issue exists if there is sufficient evidence favoring the nonmovant such that a jury could return a verdict in its favor. Id. The nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rule 56(e) "requires the nonmoving party to go beyond the pleadings and by [its] own affidavits, or by the "depositions, answers to interrogatories, and admissions on file,' designate "specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324. Once the nonmovant has adduced evidence of a genuine issue of material fact, its "allegations [will be] taken as true, and [it] will receive the benefit of the doubt when [its] assertions conflict with those of the movant." Samuels v. Mockry, et al., 77 F.3d 34, 26 (2d Cir. 1996).
The sharply conflicting versions of past events touching upon the status of the moving defendants vis a vis the corporation preclude a determination of the motion on the papers and similarly preclude a determination of the motion by a cursory or even an extended discussion of the relevant sections of the NPCL. See, e.g., NPCL §§ 701(a) and 707. In addition, any claim advanced by the plaintiffs that a prior pronouncement by a Beth Din is dispositive of the issue would be rejected for the reason that any such pronouncement purporting to be an award was never confirmed in accordance with N Y CPLR § 7510 or 9 U.S.C.A. § 9, Teachers' Assoc. of Tarrytown v. Tarrytown Board of Education, 59 A.D.2d 890, 399 N.Y.S.2d 45 (2d Dept. 1977); Allciti Insurance Co. v. Vitucci, 151 A.D.2d 430, 431, 543 N.Y.S.2d 86, 87 (1st Dept. 1989) and for the additional reason that the purported decision of the Beth Din was "imperfectly executed" and ambiguous at best. See Kozlowski v. Seville Syndicate, Inc., 74 Misc.2d 109. 119, 314 N.Y.S.2d 439, 450 (S.Ct. N.Y.Co. 1970).
The declaration by the Court as to who are the directors of the corporation that is sought by the defendants would also require an evidentiary hearing given the diametrically opposed view of the facts and, in any event, is a declaration sought of an issue having no federal jurisdiction predicate. As a practical matter that issue will be implicitly embraced by a determination of the motion based upon lack of capacity to sue.
Any motion to dismiss the complaint for failure to state a claim generally would likewise be denied for the reasons already discussed in dismissing that motion predicated upon a claimed lack of capacity to sue. Conley v. Gibson, supra.
To the extent that discovery has not yet been closed, the parties are directed to complete their discovery requirements within 30 days from the date of this order. The parties are, in addition, directed to appear at 2:00 p.m. on September 10, 2001, for an evidentiary hearing on the plaintiffs' capacity to sue immediately following which, should that motion be denied, a bench trial of the RICO cause of action and the state claims alleged in the amended complaint will begin.
SO ORDERED.