Opinion
Index No. 652743/2018
01-14-2022
Norma KNOPF, Plaintiff, v. Michael SANFORD and Pursuit Holdings, LLC, Defendants.
Berry Law PLLC, New York, NY (Eric W. Berry of counsel), attorney for plaintiff. Michael H. Sanford, Montauk, NY, defendant pro se on motion sequences 003 and 004. Osborn Law, P.C., New York, NY (Daniel A. Osborn ), attorney for defendant Sanford on motion sequence 005.
Berry Law PLLC, New York, NY (Eric W. Berry of counsel), attorney for plaintiff.
Michael H. Sanford, Montauk, NY, defendant pro se on motion sequences 003 and 004.
Osborn Law, P.C., New York, NY (Daniel A. Osborn ), attorney for defendant Sanford on motion sequence 005.
Gerald Lebovits, J.
This proceeding is an effort by Norma Knopf (plaintiff here) to enforce a multi-million-dollar judgment against defendant Michael Sanford. Knopf obtained this judgment against Sanford based on loans that Knopf and her late husband made to Sanford's wholly owned limited-liability company, defendant Pursuit Holdings LLC, and which Pursuit and Sanford failed to repay.
In February 2016, while the Knopfs were heatedly litigating against Pursuit and Sanford over these loans, Pursuit sold an Upper East Side penthouse apartment to a third party, netting more than $2 million. Knopf contends that Sanford and his former attorneys conspired with a then-special master in the Appellate Division, First Department, Melissa Ringel, to evade an October 2015 First Department order that would have required putting the proceeds of this sale into escrow—and that Sanford then dissipated the proceeds instead of satisfying his obligations to the Knopfs.
In February 2018, this court entered judgment against Pursuit related to those obligations for $9,867,832.61. (See Knopf v Sanford , 2019 NY Slip Op 30269[U], at *1 [Sup Ct, NY County Feb. 4, 2019]; see also Index No. 113227/2009, NYSCEF No. 1, at 1 [County Clerk minutes].) The Knopfs then brought this post-judgment proceeding against Sanford to have him held personally liable on the judgment against Pursuit. In February 2019, this court held that Sanford is also liable (on an alter-ego or veil-piercing theory) for Pursuit's judgment debt owed to the Knopfs. (See Sanford , 2019 NY Slip Op 30269[U], at *1, *9.)
In the summer of 2021, Knopf served post-judgment information subpoenas on third parties, seeking Sanford's cellphone records and bank records of a business entity controlled by Sanford. In motion sequence 003, Sanford moves to quash the telephone-records subpoena. In motion sequences 004 and 005, Sanford moves to quash the bank-records subpoena.
The record does not reflect why the bank-records subpoena is the subject of two motions (although the court notes that one motion was filed by Sanford pro se, and the other by an attorney on Sanford's behalf). It does appear, though, that both motions address the same subpoena directed to the same bank for records of the same Sanford-controlled business entity. This decision therefore addresses the two bank-records motions together.
Motion sequences 003, 004, and 005 are consolidated here for disposition. The motions to quash are granted.
DISCUSSION
Knopf's first subpoena is directed to AT & T Mobility, Sanford's cellphone provider. (See generally NYSCEF No. 189.) The subpoena seeks "records of phone calls," "[t]ext message details," and other information for a specified cell number, and any other number "assigned to Michael Hayden Sanford" or "to ‘Sanford Partners,’ " for the "period October 1, 2015 through August 15, 2017." (NYSCEF No. 189 at 4.) The second subpoena is directed to Dime Community Bank for several categories of account and transaction records for SP Voyager Fund, LLC, a business entity controlled solely by Sanford. (See NYSCEF No. 293 at 2-3.)
Sanford makes subpoena-specific arguments why the two subpoenas are invalid and should be quashed. These arguments are cogent. But this court need not definitively decide whether Sanford's subpoena-specific contentions warrant granting his motions to quash: Instead, this court is persuaded by Sanford's broader argument that Knopf has no judgment against him that she may validly seek to enforce.
With respect to the telephone-records subpoena, Sanford contends that it "seeks highly personal information" that is "irrelevant for collection" of any judgment held by Knopf against Sanford and Pursuit. (NYSCEF No. 188 at ¶¶ 5-6.) With respect to the bank-records subpoena, Sanford argues that a post-judgment enforcement subpoena is an improper means of obtaining what is, in essence, discovery in aid of unwinding an assertedly fraudulent conveyance. (See NYSCEF No. 339 at ¶¶ 13-14, 16-17.)
The telephone-records subpoena seeks more than 20 months of detailed telephone records for a personal cellphone, premised only on the possibility that "the subpoenaed records may show who Sanford conducts his off-the-books business with, lead to the source of his funds, and permit a modest collection on Mrs. Knopf's behalf." (NYSCEF No. 192 at ¶ 26 [emphasis added].) The bank records subpoena seeks extensive nonparty account and transaction records based on a limited, five-year-old showing of transfers from Pursuit to that nonparty. (See NYSCEF No. 314 at ¶¶ 33-35.)
It is undisputed that in November 2019, the Knopfs and Sanford executed an agreement under which (i) the Knopfs would cease all efforts to enforce the judgment against Sanford, and (ii) execute a stipulation vacating that judgment as against Sanford. (See NYSCEF No. 296 at 1.) It is also undisputed that the Knopfs executed the stipulation of vacatur. (See NYSCEF No. 190.) Therefore, Sanford contends, no judgment supports the subpoenas at issue here.
In response, Knopf argues that the November 2019 settlement agreement between she and Sanford was conditioned on Sanford's providing truthful testimony at his deposition (see NYSCEF No. 290 at 2), and that Sanford did not do so (see NYSCEF No. 292 at ¶¶ 11, 14).
Knopf emphasizes Sanford's deposition testimony about the circumstances surrounding a January 12, 2016, telephone call between counsel for Sanford and Ringel. Knopf contends that call enabled Sanford to evade the First Department's October 2015 order requiring proceeds of any sale of the penthouse apartment to be put into escrow. The day before the January 12 call, Sanford hired Ringel's husband, Frank Esposito, to serve for sixth months as general counsel to a business entity controlled by Sanford in exchange for a $55,000 non-refundable fee. (See Knopf v Esposito , 2021 NY Slip Op 50250[U], at *4, *30 [Sup Ct, NY County Mar. 4, 2021].) In the call itself, Ringel gave Sanford's attorneys an ex parte opinion that the October 2015 escrow order was no longer in place. That order, if given effect, would have effectively blocked the apartment sale altogether: Sanford was not willing to close if he had to escrow the sale proceeds. Ringel's ex parte opinion thus allowed the sale of the penthouse apartment to close and Sanford to exercise full control over the millions in resulting proceeds, without having to pay those proceeds over to the Knopfs to satisfy their judgment against him. (See generally id. at *3-*6, *16, *19, *27.)
When the Knopfs asked Sanford at his deposition why he had agreed to pay Esposito a $55,000 fee the day before the ex parte call, Sanford testified that he paid Esposito that sum essentially as a referral fee "to get Dechert" to take him and Pursuit on as a client in his ongoing litigation with the Knopfs and to "shepherd it through." (See NYSCEF No. 297 at Tr. 87-88.) Retired First Department Justice James M. McGuire, then a partner at Dechert LLP, represented Sanford in that litigation beginning in February 2016.
Knopf contends that Sanford's testimony was false—that the $55,000 payment to Esposito was instead a bribe to secure the ex parte opinion from Ringel that no escrow order restricted the closing of the sale of the penthouse apartment. (See NYSCEF No. 292 at 5-9; see also Esposito , 2021 NY Slip Op 50250[U], at *29-*30 [discussing these allegations].) As this court has discussed in prior decisions, Knopf's characterization of the call as the product of a bribe has considerable force. At the same time, one might understand Sanford's testimony as truthfully (if cagily) acknowledging that the $55,000 payment was intended both to buy Esposito and Ringel's help in obtaining legal representation for Sanford from McGuire, in particular, and also their help in allegedly evading the First Department escrow order.
See Esposito , 2021 NY Slip Op 50250[U], at *19-*30; see also Knopf v Sanford , 65 Misc 3d 463, 483-489, 492-501, 515-516 [Sup Ct, NY County 2019].)
Ringel had served as McGuire's court attorney when he was a First Department justice. And she first contacted him about the possibility of representing Sanford only two days after the ex parte call with Sanford's other attorneys—and thus only three days after Sanford agreed to pay Esposito $55,000. (See Sanford , 65 Misc 3d at 482 & n 20.)
Even if Knopf were correct that Sanford gave false testimony at his November 2019 deposition, that would not avail her here. Whether or not a court should hold that Sanford breached the 2019 settlement agreement, thereby freeing her from her reciprocal obligations under that agreement, it is undisputed that no court has , in fact, declared the agreement breached and therefore unenforceable. Knopf does not explain why, in these circumstances, this court may simply disregard the 2019 settlement agreement (and the ensuing stipulation vacating the judgment against Sanford) for purposes of the current judgment-enforcement subpoena.
Nor, for that matter, does Knopf now ask this court to declare the settlement agreement breached and unenforceable. To the contrary, the same day Knopf filed her opposition here to Sanford's motion to quash, she brought an action in Supreme Court, Suffolk County, to have the 2019 settlement agreement voided based on Sanford's alleged breaches of the agreement. (See Complaint, Knopf v Sanford , Index No. 619288/2021, NYSCEF No. 2 [Sup Ct, Suffolk County Oct. 12, 2021].) Knopf's opposition papers on the bank-records-subpoena motions before this court represent that the Suffolk County declaratory-judgment action—not these motions—is the proper forum for deciding the issue of "the enforceability of the Settlement Agreement." (NYSCEF No. 292 at ¶ 31.)
The record does not disclose why Knopf waited until October 2021 to seek a declaration that the settlement agreement is unenforceable, given that the assertedly false testimony by Sanford on which Knopf relies was offered in November 2019.
This court sees no justification for addressing the issue of enforceability before Supreme Court, Suffolk County, has had a full opportunity to resolve that question. By the same token, though, this court is obliged—at least for now—to treat Knopf as contractually barred from undertaking any effort to enforce the judgment she had previously obtained against Sanford. The phone- and bank-records subpoenas at issue on these motions thus lack a proper basis.
Accordingly, for the foregoing reasons, it is hereby
ORDERED that Sanford's motions to quash are granted; and it is further
ORDERED that Knopf shall, by January 17, 2022, serve a copy of this order on the recipients of the two subpoenas and notify the recipients in writing that they need not comply with the subpoenas.