Opinion
Index No. 656042/2020
12-22-2022
CEDAR CAPITAL MANAGEMENT GROUP INC., Cadmus Asset Management, Ltd., CTC Trading Ltd., Citadel Holdings Inc., Plaintiff, v. Brian LILLIE, Enterprise Holdings Group Ltd., Enterprise Holdings Group LLC, EHG Capital Management Limited, EHG Equities Limited, Lilliham Holdings Limited, Tracy Lillie, Andrew George Michael, Seyed Morteza Vanaki, Chris Cioffi, Tim Carr, Gulf Atlantic Traders, LLC, Tom Kent, Custodial Account and Transaction Services LLC, e-Creative Group, Inc., Three Wide Media, LLC, Jane Doe, John Doe, ABC Inc., XYZ Corp., Defendant. Brian Lillie, Plaintiff, v. Wael Chehab, Juri Patrick Brandt aka JP Bradley, Logan Andrews, Rising Sun Consulting, Defendant.
The following e-filed documents, listed by NYSCEF document number (Motion 015) 244, 245, 246, 247, 248, 249, 250, 251, 252, 253, 254, 255, 256, 257, 258, 259, 260, 261, 262, 263, 264, 265, 333 were read on this motion for JUDGMENT - DEFAULT.
The action at hand involves claims of fraud, along with fraud-related charges, a breach of contract claim, and an unjust enrichment claim. Very generally, the complaint asserts that plaintiffs relied on defendants to purchase debentures in EHG Ltd. and EHG LLC, that plaintiffs wired defendants significant amounts of money in connection with these purported purchases, that defendants promised plaintiffs monthly returns on their investments, and that plaintiffs only received a fraction of the money to which they were entitled. In addition, the complaint states that plaintiffs and defendants EHG Ltd. and EHG LLC settled their dispute over these matters in March 2016. However, the complaint asserts that EHG Ltd., several London affiliates of EHG, and Gulf Atlantic were dissolved after this settlement agreement was signed. The complaint alleges that plaintiffs have only received $130,000 of the millions of dollars that defendants agreed to pay in settlement of the claim. Collectively, the complaint seeks a minimum of $30,000,000, along with attorneys’ fees, expenses, costs, disbursements, and interest. Wa-el Chehab ("Chehab"), who holds positions in each of the three corporate defendants, has verified the complaint.
By notice of motion, plaintiffs move for default judgment against defendants Chris Cioffi a/k/a Chris M. Cioffi (Cioffi) and Gulf Atlantic Traders, LLC (Gulf Atlantic) (collectively, the Cioffi defendants) on all causes of action in the complaint. It asks for an inquest upon the disposition of this matter against all defendants. There is no opposition to this motion.
Plaintiffs divide defendants into three groups. The first group is the Cioffi defendants. Second is the Lillie Defendants, including Brian Lillie, Enterprise Holdings Group Ltd. d/b/a Enterprise Holdings Group, Ltd. (EHG Ltd.), Enterprise Holdings Group LLC (EHG LLC), EHG Capital Management Limited, EHG Equities Limited, Lilliham Holdings Limited, Tracy Lillie a/k/a Kay Lillie, Three Wide Media, LLC, and e-Creative Group, Inc. Third, plaintiffs refer to the CAT defendants, consisting of Tim Carr, Tom Kent, and Custodial Account and Transaction Services LLC (CAT).
As is relevant here, the amended complaint asserts that Cioffi is the vice-president and managing member of Gulf Atlantic (NYSCEF Doc. No. 72, 67). The complaint states that Chehab, who was seeking investment opportunities, met Cioffi through an intermediary in March 2015 (id. , 101). Cioffi, in turn, introduced Chehab to Brian Lillie, referring to him as the partner who handled the investments at issue (id. , 103). Further, Cioffi signed three lease agreements with Cioffi and Carr, both of whom signed on behalf Gulf Atlantic (see, e.g. , id. , 108, 122, 135). Plaintiffs refer to these as "the First Bucket PPMs." Plaintiffs allege that the Cioffi defendants are liable with respect to the First Bucket PPMs, and they allege that the Cioffi defendants are liable under first, second, and third causes of action. It appears that they also allege they are liable under the portions of the tenth, and eleventh causes of action related to the First Bucket PPMs.
In this motion, plaintiffs contend that the Cioffi defendants are liable under the remaining causes of action and are currently in default. Plaintiffs note that, on January 29, 2021, the court granted the Cioffi defendants’ motion for an extension of time in which to answer the complaint (NYSCEF Doc. No. 63), and gave these defendants until February 16, 2021 to interpose an answer. Although Cioffi subsequently began participating in this action on his and Gulf Atlantic's behalf, plaintiffs note that the Cioffi defendants have not answered the complaint. Plaintiffs also include a copy of a nonmilitary affidavit that shows they exercised due diligence in determining that Cioffi does not serve in the military (NYSCEF Doc. No. 260). The Cioffi defendants submit no opposition.
The Cioffi defendants are purportedly domiciled in Florida. At NYSCEF doc. no. 248, Chehab sets forth the basis for jurisdiction over these defendants. Specifically, he states that Cioffi told him that he and defendant Brian Lillie "were actively recruiting investors from New York City," and that Lillie reiterated this statement in a later conversation (id. , 11-12). Chehab states that Cioffi was aware that Cedar, a Delaware corporation that operates in New York, would be funding and managing the investments (id. , 14). The affidavit details the Cioffi defendants’ interactions with the New York-based plaintiffs. The Cioffi defendants have not opposed this motion and they did not challenge personal jurisdiction in their application to extend time to answer the complaint (see NYSCEF Doc. No. 36). Thus, they have waived the objection (see Peralta v City of New York , 206 AD3d 415, 415-416 [1st Dept 2022] ).
Plaintiffs have sufficiently asserted liability as against Gulf Atlantic through the documents, affidavits, and amended verified complaint. However, plaintiffs have not provided sufficient evidence to show that Cioffi is liable as an alter ego of Gulf Atlantic. The allegations in the complaint about the commingling of assets and domination of Cioffi over Gulf Atlantic are stated on information and belief, and the Chehab affidavit of merit relies exclusively on the complaint. As these allegations are "wholly on information and belief, without the slightest reference to the source of the information or the grounds for the belief," they are insufficient ( Zelnik v Bidermann Indus. U.S.A. , 242 AD2d 227, 228 [1st Dept 1997] [vacating default judgment]; see Yu v BuyerGenomics Tech. LLC , 67 Misc 3d 1237 [A], 2020 NY Slip Op 50774 [U], *3 [Sup Ct, NY County 2020] [considering opposed motion to dismiss and finding alter ego liability could not be established on information and belief]).
Accordingly, it is
ORDERED that the motion is granted with respect to Gulf Atlantic, and default judgment is granted against Gulf Atlantic, with damages to be assessed at the time of the resolution of this matter; and it is further
ORDERED that the motion is denied without prejudice as against Cioffi, with leave to renew upon proper evidence.