Feltman, not individually but solely in his capaci v. Tri-State Employment Service, Inc. et al

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re
TS EMPLOYMENT, INC.,
Debtor.
FOR PUBLICATION
Case No. 15-10243 (MG)
Chapter 11
JAMES S. FELTMAN, not individually but solely
as chapter 11 trustee for TS Employment, Inc.,
Plaintiff,
v.
TRI-STATE EMPLOYMENT SERVICE, INC.,
TRI-STATE EMPLOYMENT SERVICES, INC.,
BROADWAY PEO, INC., CARUSSO STAFFING
CORP., STS GROUP, INC., TRISTATE SC, INC.,
ODYSSEY ASSOCIATES, INC., TRI-STATE
NORTH CAROLINA, INC., TSE-PEO, INC.,
ROBERT CASSERA, JOHN MESSINA, JAMES
FOLEY and JOSEPH CASSERA,
Defendants,
and
JOFAZ TRANSPORTATION, INC.; Y&M
TRANSIT CORP.; SCHOOL BUS BY SUPERIOR;
and THIRD AVENUE TRANSIT, INC.,
Third-Party Respondents.
Adv. Proc. No. 17-1013 (MG)
MEMORANDUM OPINION, INCLUDING PROPOSED FINDINGS OF FACT
AND CONCLUSIONS OF LAW, RECOMMENDING GRANT OF TRUSTEE’S
PARTIAL SUMMARY JUDGMENT MOTION
A P P E A R A N C E S:
JENNER & BLOCK LLP
Attorneys for James Feltman, Chapter 11 Trustee
1155 Avenue of the Americas
New York, NY 10036
By: 	Vincent Lazar, Esq.
Carl N. Wedoff, Esq.
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LAWRENCE A. GARVEY & ASSOCIATES, PC
Attorneys for Third-Party Respondents Jofaz Transportation, Inc., et al.
235 Main Street
Suite 630
White Plains, NY 10601
By: 	Lawrence A. Garvey, Esq.
Joseph Reiter, Esq.
MARTIN GLENN
CHIEF UNITED STATES BANKRUPTCY JUDGE
On June 18, 2019, this Court entered a Default Judgment in Adversary Proceeding
(“Default Judgment,” ECF Doc. # 60) in favor of James S. Feltman, solely as the Chapter 11
trustee (“Trustee”) for the bankruptcy estate of TS Employment, Inc. (“TSE” or “Judgment
Creditor”) and against Tri-State Employment Service, Inc. (“Tri-State” or “Judgment Debtor”) in
the amount of $98,176,412 (the “Judgment”). To partially satisfy the Judgment, the Trustee filed
a motion under Rule 69 of the Federal Rules of Civil Procedure (“Rule 69”)1 and section 5227 of
the New York Civil Practice Law and Rules (“NY CPLR”) seeking to collect all amounts owing
from Jofaz Transportation, Inc. (“Jofaz”), Y&M Transit Corp. (“Y&M”), and Third Avenue
Transit, Inc. (“Third Avenue,” and collectively with Jofaz, and Y&M, the “Respondents”) to the
Judgment Debtor. (Motion for an Order Directing Payment of Funds to Judgment Creditor
(“Turnover Motion”), ECF Doc. # 66.) The Trustee now moves for partial summary judgment
on the Turnover Motion (“Partial Summary Judgment Motion,” ECF Doc. # 95) seeking to
collect $1,391,569.75, plus pre-judgment interest, from the Respondents. (Memorandum of Law
in Support of Trustee’s Motion for Summary Judgment on Trustee’s Motion for Order Directing
Payment of Funds to Judgment Creditor (“Summary Judgment Memo”), ECF Doc. # 96 ¶ 5.)2
1 	Rule 69 is made applicable here by Rule 7069 of the Federal Rules of Bankruptcy Procedure (the
“Bankruptcy Rules”). F ED. R. BANKR . P. 7069.
2 	Contemporaneously with the Summary Judgment Memo, the Trustee filed a declaration by Carl. W.
Wedoff (“Mr. Wedoff”) in support of the Partial Summary Judgment Motion. (“Wedoff Decl.,” ECF Doc. # 97.)
On February 4, 2022, the Trustee filed the Trustee’s Statement of Undisputed Material Facts in Support of Trustee’s
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The Respondents filed an opposition to the Partial Summary Judgment Motion (“Opposition,”
ECF Doc. # 104),3 and the Trustee filed a reply in support of the Partial Summary Judgment
Motion (“Reply,” ECF Doc. # 106).4 A hearing on the Partial Summary Judgment Motion was
held on May 24, 2022 (the “May 24 Hearing”).
On June 2, 2022, the Court directed the Trustee’s counsel and the Respondents’ counsel
to submit proposed findings of fact and conclusions of law by June 16, 2022 (ECF Doc. # 111),
and this deadline was later extended upon request to June 30, 2022 (ECF Doc. # 114). On June
30, 2022, the Respondents filed their proposed findings of fact and conclusions of law
(“Respondents’ PFFCL,” ECF Doc. # 115), and the Trustee filed his proposed findings of fact
and conclusions of law (“Trustee’s PFFCL,” ECF Doc. # 116).5
For the reasons provided below, the Court recommends that the Trustee’s Partial
Summary Judgment Motion be GRANTED, and that judgment should be entered against the
Respondents as follows: against Jofaz in the amount of $1,104,465.64;6 against Y&M in the
amount of $197,192.04; and against Third Avenue in the amount of $89,912.07. Pre-judgment
interest at the rate of 9% calculated from January 25, 2016 until the entry of judgment must be
added to each judgment.
Motion for Summary Judgment on Trustee’s Motion for Order Directing Payment of Funds to Judgment Creditor.
(“Trustee’s Statement of Facts,” ECF Doc. # 100.)
3 	Contemporaneously with the Opposition, the Respondents filed (i) a response to the Trustee’s Statement of
Facts (“Respondents’ Counterstatement of Facts,” ECF Doc. # 102), and (ii) a declaration by Lawrence A. Garvey in
opposition to the Partial Summary Judgment Motion (“Garvey Decl.,” ECF Doc. # 103).
4 	Contemporaneously with the Reply, the Trustee filed a supplemental declaration of Mr. Wedoff in further
support of the Partial Summary Judgment Motion. (“Supp. Wedoff Decl.,” ECF Doc. # 107.)
5 	On July 1, 2022, the Respondents filed a letter objection to the Trustee’s PFFCL. (ECF Doc. # 118.) The
Court overrules the Respondents’ objection.
6 	The Trustee asserts that the amount of the judgment against Jofaz should be $1,104,455.64. (Summary
Judgment Memo ¶ 5; Trustee’s PFFCL ¶ 65.) However, as set forth below, Jofaz’s unpaid invoices equal
$1,193,603.58 (Summary Judgment Memo ¶ 23; Trustee’s PFFCL ¶ 65), and Jofaz’s offsetting liabilities equal
$89,137.94. (Summary Judgment Memo ¶¶ 34 (offset of $8,803.39), 36 (offset of $80,334.55).) The difference
between Jofaz’s unpaid invoices amount and its offsets amount is $1,104,465.64.
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I. 	BACKGROUND
A. 	The Adversary Proceeding
TSE filed a voluntary Chapter 11 bankruptcy petition in this Court on February 2, 2015.
(Case No. 15-10243 (“Main Case”), ECF Doc. #1.) On February 27, 2015, the United States
Trustee appointed the Trustee as TSE’s Chapter 11 trustee under section 1104(a) of the
Bankruptcy Code. (Main Case ECF Doc. # 33.)
On January 31, 2017, the Trustee filed this adversary proceeding against, inter alia, Tri-
State, Tri-State Employment Services, Inc. (“Tri-State Services”), Broadway PEO, Inc.
(“Broadway”), Robert Cassera (“Mr. Cassera”), John Messina, James Foley, and Joseph Cassera
(collectively, the “Defendants”) to recover hundreds of millions of dollars allegedly transferred
by TSE to or for the benefit of the Defendants. (Summary Judgment Memo ¶ 6.)
On June 18, 2019, the Court entered the Default Judgment in favor of the Trustee and
against Tri-State in the amount of $98,176,412, against Tri-State Services in the amount of
$137,030,343, and against Broadway in the amount of $31,930,387, plus post-judgment interest
compounded at the rate prescribed by 28 U.S.C. § 1961. (ECF Doc. # 60; Feltman v. Tri-State
Emp. Serv., Inc. (In re TS Emp., Inc.), 602 B.R. 840 (Bankr. S.D.N.Y. 2019).) On the same day,
the Court entered an order closing this adversary proceeding. (ECF Doc. # 59.)
In September 2019, the Trustee filed a motion to reopen this adversary proceeding (ECF
Doc. # 61), and on October 2, 2019, the Court granted the motion (ECF Doc. # 65).
B. 	The Turnover Motion
On October 10, 2019, the Trustee filed the Turnover Motion seeking entry of an order
under Rule 69 and NY CPLR 5227 directing the Respondents (which are related entities) to pay
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the Trustee all amounts that are due and owing from the Respondents to the Judgment Debtor.7
(Turnover Motion at 1.) The Trustee asserted that the Respondents owe Tri-State $1,964,961.22
on account of unpaid invoices for services provided by Tri-State to the Respondents (Jofaz owes
$1,187,734.87, Y&M owes $686,248.76, and Third Avenue owes $90,977.59). (Id. ¶ 8.) That
demand was based on a summary of unpaid outstanding receivables (“Tri-State Receivables
Summary,” ECF Doc. # 97-1) that Tri-State, acting through its principal Mr. Cassera, provided
to the Trustee. (Summary Judgment Memo ¶ 9.)
On March 6, 2020, the Trustee served requests for production on each Respondent. (Id. ¶
10 (citing ECF Doc. # 97-2).) In August 2020, the Trustee conducted Rule 30(b)(6) depositions
of Joseph Fazzia (“Mr. Fazzia”), the Respondents’ President, and Al Rizzo (“Mr. Rizzo”), the
Respondents’ Office Manager and Comptroller. (Id. ¶ 12 (citing ECF Doc. ## 97-4, 97-5).)
Between September 15, 2020 and December 7, 2020, the Respondents produced 6,634 pages of
additional documents in four document productions. (Id. ¶ 14.)
On October 7, 2020, the Respondents filed an objection and opposition to the Turnover
Motion (“Turnover Opposition,” ECF Doc. # 83-1), making the following arguments: (i) the
Turnover Motion was not properly brought under NY CPLR 5227 because the Respondents
dispute the debt they owe to Tri-State; (ii) the Court could not consider the Turnover Motion
because the Respondents asserted a right to a jury trial; (iii) the Court lacked jurisdiction over the
Turnover Motion; (iv) Tri-State’s involvement in a broader fraud precluded any recovery by the
Trustee; and (v) the Turnover Motion should be denied for lack of evidentiary support. (See
Turnover Opposition; Respondents’ PFFCL ¶ 14; see also Summary Judgment Memo ¶ 15.)
7 	The Turnover Motion also sought to collect receivables owed to Tri-State by School Bus By Superior
(“Superior”). The Trustee does not seek to collect these amounts from the Respondents and does not seek summary
judgment on his claims against Superior in the Partial Summary Judgment Motion. (Summary Judgment Memo at
11 n.3.)
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C. 	The Respondents’ Motion to Withdraw the Reference
Prior to the Court issuing a decision on the Turnover Motion, the Respondents filed a
motion to withdraw the reference to this Court. (“Withdrawal Motion,” ECF Doc. # 87.) The
Withdrawal Motion was fully briefed, and on November 2, 2021, District Judge John P. Cronan
denied the Withdrawal Motion without prejudice. (“Withdrawal Opinion and Order,” ECF Doc.
# 91.)
D. Pre-Motion Conference
On November 3, 2021, the Trustee filed a letter with the Court stating that he believed the
Trustee’s claims against the Respondents were ripe for partial summary judgment and seeking a
pre-motion conference. (ECF Doc. # 92; Respondents’ PFFCL ¶ 23.) On December 16, 2021,
the Court held a pre-motion conference and authorized the parties to submit cross-motions for
summary judgment. (Trustee’s PFFCL ¶ 21 (citing ECF Doc. # 107-1 at 17:19–22).)
II. 	THE PARTIAL SUMMARY JUDGMENT MOTION
A. The Summary Judgment Memo
The Trustee asserts that Tri-State’s Business Records (defined below) show that the
Respondents owe Tri-State $1,960,206.43 (the “Unpaid Invoice Amount”)8 for professional
employer organization (“PEO”) services that Tri-State provided for the Respondents from
November 30, 2015 through December 27, 2015.9 (Summary Judgment Memo ¶¶ 22, 23.) The
8 	Jofaz has unpaid invoices of $1,193,603.58, Y&M has unpaid invoices of $675,980.91, and Third Avenue
has unpaid invoices of $90,621.94. (Summary Judgment Memo ¶ 23; Trustee’s PFFCL ¶ 65.)
The Unpaid Invoice Amount ($1,960,206.43) is $4,754.79 less than the amount the Trustee sought in the
Turnover Motion ($1,964,961.22) because the Turnover Motion was based on the Tri-State Receivables Summary,
which contained “24 small entries for which Respondents did not produce invoices or other documentation, and
which included several entries in negative amounts.” (Summary Judgment Memo at 15 n.6.) The Trustee states he
will not be pursuing any claims with respect to the additional $4,754.79. (Id.)
9 	The Respondents each operate school bus companies in New York City. (Trustee’s PFFCL ¶ 26 (citing
ECF Doc. # 97-4 at 12:14–13:6).) Pursuant to the PEO services, the Respondents would report employee hours and
wages to Tri-State; Tri-State would remit payroll taxes and insurance payments to the relevant authorities and
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Trustee states that the Respondents have identified $568,636.68 in potential offsets (the
“Offsets”) to the Unpaid Invoice Amount. Therefore, the Trustee asserts that the undisputed
facts entitle the Trustee to collect from the Respondents $1,391,569.75, plus pre-judgment
interest under NY CPLR 5001 and 5004,10 and partial summary judgment should be granted in
that amount. (Id. ¶ 5.)
The Trustee states that, in response to his discovery requests, the Respondents produced
ten sets of their business records (collectively, the “Business Records,” ECF Doc. ## 97-8–97-
17) consisting of Tri-State invoices (“Tri-State Invoices”), copies of check stubs, and
handwritten notations. (Id. ¶ 22 (citing Business Records).) The Business Records related to
PEO services rendered by Tri-State to the Respondents from November 30, 2015 through
December 27, 2015, for which the relevant Tri-State Invoices aggregated $2,723,670.57. (Id.)
Of that amount, the Business Records show that the Respondents satisfied $763,464.14 through
partial payment of certain December 2015 invoices on or about January 25, 2016, leaving the
Unpaid Invoice Amount due and owing. (Id.)
prepare paychecks for distribution to the Respondents’ employees; and then the Respondents would reimburse Tri-
State for these charges in addition to an administrative fee for Tri-State’s services. (Id. ¶ 27 (citing ECF Doc. # 97-4
at 26:14–23).)
10 	NY CPLR 5001(a) provides:
Interest shall be recovered upon a sum awarded because of a breach of performance of a contract,
or because of an act or omission depriving or otherwise interfering with title to, or possession or
enjoyment of, property, except that in an action of an equitable nature, interest and the rate and date
from which it shall be computed shall be in the court’s discretion.
NY CPLR 5001(a). NY CPLR 5001(b) provides, in relevant part, that “[i]nterest shall be computed from the earliest
ascertainable date the cause of action existed . . . .” NY CPLR 5001(b). NY CPLR 5004 provides, in relevant part,
that “[i]nterest shall be at the rate of nine per centum per annum[.]”
The Trustee contends that it is entitled to 9% interest from the date that each unpaid Tri-State Invoice
amount became due (January 25, 2016) through the date of judgment “because the Turnover Motion seeks to collect
payment based on Respondents’ ‘act[s] or omissions depriving or otherwise interfering with title to, or possession or
enjoyment of, property.’” (Summary Judgment Memo at 10 n. 2 (quoting NY CPLR 5001(a)).)
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The Trustee contends that the Respondents’ Unpaid Invoice Amount and the $763,464.14
partial payment are confirmed by Mr. Fazzia’s testimony in his Rule 30(b)(6) deposition, and by
the Respondents’ QuickBooks accounting records (the “QuickBooks Records,” ECF Doc. ## 97-
18–97-20). (Id. ¶¶ 26–28, 31.) Mr. Fazzia testified that around December 2015, he first directed
the Respondents to stop payment on checks to Tri-State (id. ¶ 26 (citing ECF Doc. # 97-4 at
35:7–9), and later he directed the Respondents to pay only one set of invoices in order to secure
the release of W-2 tax forms for the Respondents’ employees. (Id. ¶ 28 (citing ECF Doc # 97-4
at 43:16–20).) The Trustee states that the Respondents’ QuickBooks Records confirmed that the
Business Records, and Mr. Fazzia’s testimony that only one set of payments had been made,
were accurate. (Id. ¶ 31.)
According to the Trustee, the Respondents have identified $568,636.6811 in potential
Offsets made up of the following: (a) reimbursement checks in the amount of $12,641.30, issued
by the Respondents to sixteen employees who had been issued payroll checks by Tri-State that
were later dishonored (“Dishonored Paychecks”); (b) interest and tax penalties in the amount of
$44,313.17, incurred by the Respondents due to Tri-State’s failure to timely remit certain tax
payments (“Tax Penalties”); (c) payments totaling $122,140.29, made by the Respondents for
New York State unemployment insurance obligations for the fourth quarter of 2015 (“4Q2015
Tax Payments”); and (d) payments totaling $389,541.92, made by Y&M to the New York State
Department of Labor to satisfy its underpayments in quarterly unemployment insurance
contributions from the third quarter of 2013 through the fourth quarter of 2015 (“Y&M
Underpayments,” and together with the 4Q2015 Tax Payments, the “Disputed Offsets”). (Id. ¶¶
34–37.) The Trustee does not contest the validity of the Offsets for Dishonored Paychecks and
11 	Jofaz’s offsets equal $89,137.94 (see Summary Judgment Memo ¶¶ 34, 36); Y&M’s offsets equal
$478,788.87 (see id. ¶¶ 34, 35, 36, 37); and Third Avenue’s offsets equal $709.87 (see id. ¶¶ 34, 35, 36).
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Tax Penalties. (Id. ¶¶ 34, 35.) The Trustee does contest the Disputed Offsets, but he
acknowledges that the Respondents have raised a genuine issue of material fact as to them. (Id.
¶¶ 36, 38.) Therefore, the Trustee deducts the entire Offsets amount ($568,636.68) from the
Unpaid Invoice Amount, leaving $1,391,569.75.12 (Id. ¶ 39.)
The Trustee argues that the Respondents’ arguments in the Turnover Opposition lack
merit. First, in response to the Respondents’ argument that the Turnover Motion fails to state a
claim under NY CPLR 5227 because the Respondents’ dispute their debt to Tri-State, the
Trustee argues (i) the plain text of NY CPLR 5227 contemplates disputes over the existence of a
debt (id. ¶ 51 (citing NY CPLR 5227 (“Costs of the proceeding shall not be awarded against a
person who did not dispute the indebtedness.”))), and (ii) whether a debt exists can be litigated in
a NY CPLR 5227 action. (Id. ¶ 52 (citing cases).)13 Further, the Trustee contends that the
“special proceeding” requirement in NY CPLR 5227 “can be satisfied in federal court by filing a
motion seeking relief against a third party.” (Id. ¶ 45 (citing CSX Transportation, Inc. v. Island
Rail Terminal, Inc., 879 F.3d 462, 469 (2d Cir. 2018).)
Second, the Trustee argues that the Turnover Motion is supported by sufficient evidence
because the Respondents’ own document production to the Trustee and the testimony of their
12 	In a letter to the Court, dated May 27, 2022 (ECF Doc. # 110), the Trustee’s counsel stated that in the event
the Court recommends the grant of partial summary judgment, “the Trustee does not intend to pursue the balance of
the claims asserted in the Turnover Motion, and would consent to dismissal of those claims. In that case, the Court
could enter proposed findings of facts and conclusions of law in accordance with Rule 9033 of the Federal Rules of
Bankruptcy Procedure and Local Bankruptcy Rule 9033-1 fully disposing of the Turnover Motion.”
Because the Turnover Motion raises a “related-to,” non-core matter arising under state law, and the Trustee
has agreed to consent to dismissal of the remaining claims if summary judgment is granted, a Bankruptcy Court may
not enter a final order or judgment absent consent. Rather, proposed findings of fact must be filed, and the
procedure set forth in Federal Rule of Bankruptcy Procedure 9033 must be followed. See O’Toole v. McTaggart (In
re Trinsum Group, Inc.), 467 B.R. 734, 739–41 (Bankr. S.D.N.Y. 2012).
13 	The Trustee also points out that the Respondents have only disputed a fraction of their liability to Tri-State
(i.e., the Offsets) and so the undisputed portion of their liability is subject to summary disposition even under the
Respondents’ argument. (Id. ¶ 51.)
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corporate representatives confirm the Respondents’ liability to Tri-State. (Id. ¶¶ 54, 56 (citing
American Honda Finance Corp. v. Route 57 Dev., LLC, No. 713CV0260GTSATB, 2016 WL
843377, at *2 n.2, 14 (N.D.N.Y. Mar. 1, 2016) (holding that documents the respondents
produced to the plaintiff in a NY CPLR 5225(b) action were admissible and the summary
judgment motion was therefore supported by sufficient evidence)).)
Third, the Trustee contends that the Respondents’ fraud defense—that Tri-State’s
involvement in a broader fraud precludes any recovery by the Trustee—fails. The Trustee
argues that the Respondents failed to identify any TSE fraud directed at or otherwise implicating
the Respondents, and even if Tri-State had been a participant in TSE’s fraud, there is no
suggestion that TSE’s fraud affected Tri-State’s PEO services to the Respondents. (Id. ¶¶ 58–
60.)
Finally, the Trustee argues that the Court has “related to” jurisdiction over the Turnover
Motion under 28 U.S.C. § 1334(b) because the Trustee seeks recovery for the benefit of the
TSE’s Chapter 11 estate. (Id. ¶¶ 62–63.) The Trustee also argues that the Respondents’ demand
for a jury trial does not interfere with the Court’s authority to grant summary judgment because
only a portion of the Respondents’ liability ($568,636.68) is subject to any genuine factual
dispute, and the balance ($1,391,569.75) is appropriate for partial summary disposition by the
Court. (Id. ¶ 57.)
B. 	Opposition
The Respondents raise several objections to the Partial Summary Judgment Motion in
their Opposition. First, the Respondents argue that summary judgment is premature because
there has been no decision by the Court on the Turnover Motion and the Turnover Opposition.
(Opposition at 17.) According to the Respondents, the Withdrawal Opinion and Order
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“recognized Respondents’ [Turnover] Opposition to be the equivalent of a motion for dismissal,”
and implicitly understood, if not directed, that the Court would determine the Turnover Motion
and Turnover Opposition. (Id. at 17–18 (citing Withdrawal Opinion and Order at 6).)
Second, the Respondents argue that many of the Trustee’s undisputed facts are not
supported by admissible evidence because the facts rely on assertions made in the Wedoff
Declaration, and Mr. Wedoff’s contentions may not have been made on “personal knowledge” as
required under Federal Rule of Civil Procedure 56(c)(4). See FED. R. CIV. P. 56(c)(2) and (4);
(Opposition at 19–20 (quoting the Wedoff Decl. ¶ 3)). Additionally, the Respondents argue that
the Trustee’s conclusions drawn from the Business Records present triable issues of fact, and not
undisputed facts, because a Certified Public Accountant (“CPA”) is required to interpret the
Business Records. (Opposition at 26–27.)14
Third, the Respondents argue that Tri-State’s involvement in a broader fraud precludes
any recovery by the Trustee. (Id. at 28.) The Respondents contend that “[t]he fact that Tri-State
14 	The Respondents also argue that the Tri-State Receivables Summary is not admissible evidence because it
cannot be authenticated by Mr. Wedoff since he has no personal knowledge of the document, and even if the Tri-
State Receivables Summary could be authenticated, its contents are still inadmissible hearsay that do not qualify as a
regularly conducted activity under FED. R. EVID. 803(6) (“Records of a Regularly Conducted Activity”). (Id. at 21–
23 (citing F ED. R. EVID. 803(6)(A)–(E)).) However, the Trustee points out in his Reply that he is not relying on the
Tri-State Receivables Summary to establish the Respondents’ liability to Tri-State but is instead relying upon the
Business Records that the Respondents produced and on the testimony of the Respondents’ Rule 30(b)(6) witnesses.
(Reply ¶ 12.)
The Respondents also ignore Federal Rule of Evidence 1006, Summaries to Prove Contents, which
provides:
The proponent may use a summary, chart, or calculation to prove the content of voluminous
writings, recordings, or photographs that cannot be conveniently examined in court. The proponent
must make the originals or duplicates available for examination or copying, or both, by other parties
at a reasonable time and place. And the court may order the proponent to produce them in court.
FED. R. EVID. 1006.
The chart prepared by the Trustee’s counsel is a summary of Respondents’ own records which they
produced to the Trustee during discovery.
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has failed to pay their own payroll taxes . . . is highly relevant to Respondents’ claim that Tri-
State did not remit payroll taxes, and Workers’ Compensation payments, as required by the
agreements with Respondents.” (Id.) According to the Respondents, “[t]he Trustee’s
insinuation, that Robert Cassera’s fraud was limited to TSE, is disingenuous and contradicted by
his own allegations.” (Id. at 28–29.)
Finally, the Respondents renew their arguments made in the Turnover Opposition that (1)
NY CPLR 5227 does not authorize the underlying Turnover Motion because the “mere
allegation of a debt owed to the judgment debtor is not sufficient grounds for executing the
judgment against a third party under CPLR Article 52” and “certainty” is required under NY
CPLR 5201 (id. at 7–8 (citing Colonial Press of Miami, Inc. v. Banko/Commerce, 71 Misc. 2d
987, 988 (App. Term 1972); Glassman v. Hyder, 23 N.Y.2d 354, 358–60 (1968) (“Where a duty
to pay is conditioned on the creditor’s future performance, or upon contractual contingencies,
there is no debt certain to become due.”) (citing Sheehy v. Madison Sq. Garden Corp., 266 N.Y.
44, 47 (1934)); Herrmann & Grace v. City of New York, 114 N.Y.S. 1107 (App. Div. 1909)));
(2) the Respondents have a Constitutional Right to have the disputed factual issues determined
by a jury; and (3) the Court lacks jurisdiction to hear or decide the Turnover Motion. (Id. at 7–
8.)
C. 	Reply
In his Reply, the Trustee argues that the Turnover Motion is properly brought under NY
CPLR 5227 because the Respondents’ debt owed to Tri-State is not contingent or conditional
simply because the Respondents dispute some portion of their liability. (Reply ¶ 9.) Next, the
Trustee argues that the Respondents’ jury demand has no bearing on the relief being requested
because facts are not tried at summary judgment. (Id. ¶ 10.)
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The Trustee states that the Business Records upon which he relies are uncomplicated and
do not require the expertise of a CPA nor any specialized knowledge. (Id. ¶ 13.) Additionally,
the QuickBooks Records are admissible as business records under Fed. R. Evid. 803(6),
statements of party-opponents under Fed. R. Evid. 802(d)(2), and the residual exception under
Fed. R. Evid. 807. (Id. ¶ 14.)
The Trustee reiterates his argument that the Respondents’ allegations that Tri-State
participated in TSE’s fraud “has no bearing on this matter because the Trustee already has taken
those offsets into account in calculating the amount owed” and the Respondents have not
presented any basis under which Tri-State’s alleged offsetting liabilities would extinguish all of
the Respondents’ liability to Tri-State. (Id. ¶ 21.)
D. 	The May 24 Hearing
At the May 24 Hearing, the Court admitted the Business Records and QuickBooks
Records into evidence over objections from the Respondents’ counsel. (“May 24 Hr’g Tr.,” ECF
Doc. # 112 at 11:16–12:20; 17:14–15). The Court also admitted four letters into evidence: (1) a
letter from Mr. Rizzo to the New York State Department of Labor, dated February 25, 2016
(ECF Doc. # 103-6), (2) a letter from Mr. Cassera to Mr. Fazzia, dated October 13, 2016 (“First
Cassera Letter,” ECF Doc. # 103-7), (3) a second letter from Mr. Cassera to Mr. Fazzia, dated
October 19, 2016 (“Second Cassera Letter,” ECF Doc. # 103-8), and (4) a letter from the
Respondents’ counsel to Mr. Casssera, dated October 21, 2016 (ECF Doc. # 103-9). (Id. at
50:17–51:3; 51:4–12; 51:16–24; 51:25–52:8.)
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III. 	LEGAL STANDARD
A. 	Jurisdiction
The district courts have original and exclusive jurisdiction of bankruptcy cases, and
original but not exclusive jurisdiction of civil proceedings arising under title 11, or arising in or
related to cases under title 11. 28 U.S.C. § 1334(a) & (b). If the district courts have jurisdiction
over bankruptcy cases and proceedings, so do the bankruptcy courts under 28 U.S.C. § 157(a)
and a district’s order of reference. See, e.g., General Order M-431 (Bankr. S.D.N.Y. Feb. 1,
2012) (“Pursuant to 28 U.S.C. Section 157(a) any or all cases under title 11 and any or all
proceedings arising under title 11 or arising in or related to a case under title 11 are referred to
the bankruptcy judges for this district.”); see also Stern v. Marshall, 564 U.S. 462, 480 (2011)
(“Section 157 allocates the authority to enter final judgment between the bankruptcy court and
the district court. See §§ 157(b)(1), (c)(1). That allocation does not implicate questions of
subject matter jurisdiction.”).
“[A] civil proceeding is related to a title 11 case if the action’s outcome might have any
conceivable effect on the bankrupt estate.” Parmalat Capital Fin. Ltd. v. Bank of Am. Corp., 639
F.3d 572, 579 (2d Cir. 2011) (quoting In re Cuyahoga Equip. Corp., 980 F.2d 110, 114 (2d Cir.
1992) (internal quotation marks omitted) (emphasis added); Sub-Culture, LLC v. Rogers Invs. (In
re Culture Project), 571 B.R. 555, 561 (Bankr. S.D.N.Y. 2017) (citing Residential Funding Co.
LLC v. UBS Real Estate Securities (In re Residential Capital, LLC), 515 B.R. 52, 63 n.12
(Bankr. S.D.N.Y. 2014)). To come within the scope of “related to” jurisdiction, the litigation
must have a “significant connection” with the bankruptcy. In re 19 Court St. Assocs., LLC, 190
B.R. 983, 996 (Bankr. S.D.N.Y. 1996) (citing In re Turner, 724 F.2d 338, 340–41 (2d Cir.
1983)). Jurisdiction is not present where the “related” controversy is too tangential to the
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bankruptcy case. Turner, 724 F.2d at 341; Enron Corp. v. Citigroup, Inc. (In re Enron Corp.),
353 B.R. 51, 60 (Bankr. S.D.N.Y. 2006). “Related to” jurisdiction will be lacking if claims have
no potential to “increase the assets or affect the liability of the debtor.” 19 Court St. Assocs., 190
B.R. at 996. However, “[c]ertainty, or even likelihood, is not required to satisfy the ‘conceivable
effect’ test; jurisdiction will exist so long as it is possible that the proceeding may affect the
debtor’s rights or the administration of the estate.” In re Ampal-American Israel Corp., No. 15-
CV-7949 (JSR), 2016 WL 859352, at *2 (S.D.N.Y. Feb. 28, 2016) (citation and quotation marks
omitted). Accordingly, “[i]t is not difficult to conclude that the ‘conceivable effect’ test is
satisfied” in an action brought by a trustee under state law to recover assets for a bankruptcy
estate. See Parmalat, 639 F.3d at 579.
B. 	Summary Judgment Standard
Federal Rule of Civil Procedure 56, which is made applicable here by Bankruptcy Rule
7056, provides that a court shall grant summary judgment if “there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P.
56(a). The movant bears the initial burden of demonstrating the absence of a question of
material fact and, in making this determination, the Court must view all facts in the light most
favorable to the nonmoving party. Holcomb v. Iona Coll., 521 F.3d 130, 132, 137 (2d Cir.
2008); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
If the movant meets its burden “[t]hen the onus shifts to the party resisting summary
judgment.” Holcomb, 521 F.3d at 137. “‘[A] party may not rely on mere speculation or
conjecture as to the true nature of the facts to overcome a motion for summary judgment.’” In re
Kao, 612 B.R. 272, 280 (Bankr. S.D.N.Y. 2020) (quoting Hicks v. Baines, 593 F.3d 159, 166 (2d
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Cir. 2010)). Instead, the opposing party must establish a genuine issue of fact by “citing to
particular parts of materials in the record.” FED. R. CIV. P. 56(c)(1)(A).
C. 	NY CPLR 5227
Rule 69, made applicable to adversary proceedings by Bankruptcy Rule 7069, governs
motions to enforce a money judgment. Rule 69 provides that “proceedings supplementary to and
in aid of judgment or execution—must accord with the procedure of the state where the court is
located, but a federal statute governs to the extent it applies.” FED. R. CIV. P. 69(a)(1).
NY CPLR 5201 provides, in relevant part, that “[a] money judgment may be enforced
against any debt, which is past due or which is yet to become due, certainly or upon demand of
the judgment debtor,” and “[a] money judgment may be enforced against any property which
could be assigned or transferred, whether it consists of a present or future right or interest and
whether or not it is vested.” NY CPLR 5201(a)–(b).
In New York, NY CPLR 5227 “supplies the procedure for executing a money judgment
against a third party who owes a debt to a judgment debtor.” Trustees of 1199/SEIU Greater
New York Ben. Fund v. Sieger, No. 07 Civ. 9744(DLC), 2010 WL 3911474, at *6 (S.D.N.Y. Oct.
5, 2010). NY CPLR 5227 provides, in relevant part:
Upon a special proceeding commenced by the judgment creditor, against any
person who it is shown is or will become indebted to the judgment debtor, the court
may require such person to pay to the judgment creditor the debt upon maturity, or
so much of it as is sufficient to satisfy the judgment, and to execute and deliver any
document necessary to effect payment; or it may direct that a judgment be entered
against such person in favor of the judgment creditor. Costs of the proceeding shall
not be awarded against a person who did not dispute the indebtedness.
NY CPLR 5227.
Although a special proceeding does not have an equivalent under the Federal Rules of
Civil Procedure, the Second Circuit has held that a party seeking to collect a money judgment
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under NY CPLR article 52 “may proceed by motion and need not commence a special
proceeding.” CSX Transportation, Inc., 879 F.3d at 469; see also Vera v. Republic of Cuba, 802
F.3d 242, 245 (2d Cir. 2015) (“We note . . . that we have summarily indicated that the filing
requirements of a ‘special proceeding’ under New York law need not be strictly adhered to as
long as there is no prejudice to the opposing party in giving notice of the claims and framing the
issues.”).
IV. 	DISCUSSION
A. 	The Respondents’ Procedural Arguments Fail
1. 	The Court Has Jurisdiction Over the Turnover Motion
Under 28 U.S.C. § 1334(b), “a civil proceeding is related to a title 11 case if the action’s
outcome might have any conceivable effect on the bankrupt estate.” In re Culture Project, 571
B.R. at 561 (citing Residential Funding Co. LLC, 515 B.R. at 63 n.12). Here, the “conceivable
effect” on the TSE estate is clear. Through the Partial Summary Judgment Motion, the Trustee
seeks recovery of $1,391,569.75, plus pre-judgment interest, in unpaid Tri-State Invoices for the
direct benefit of TSE’s Chapter 11 estate. (Summary Judgment Memo ¶ 63.) Therefore, the
Turnover Motion is “related to” the chapter 11 case, which establishes jurisdiction under 28
U.S.C. § 1334(b).
The Court rejects the Respondents’ argument that because the Turnover Motion involves
state law, the Court lacks jurisdiction. (Turnover Opposition at 13–14.) Regardless of this
characterization, any recovery from the Turnover Motion would undeniably contribute to the
benefit of TSE’s bankruptcy estate. (Summary Judgment Memo ¶ 63.) The outcome of the
Partial Summary Judgment Motion easily satisfies the “conceivable effect” test and establishes
“related to” jurisdiction. (Id.) See Parmalat, 639 F.3d at 579 (holding that it was “not difficult
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to conclude that the ‘conceivable effect’ test is satisfied” in an action brought by a trustee under
state law to recover assets for a bankruptcy estate).
2. 	The Partial Summary Judgment Determination is Not Premature
The Respondents assert that since there was no decision on the Turnover Opposition then,
“accordingly, the Trustee’s Motion for Summary Judgment is premature.” (Opposition at 17–
18.) Their argument rests on the premise that the Court cannot grant summary judgment because
the Turnover Opposition was filed in response to the Turnover Motion and the Court has not
issued a ruling on those pleadings. (Id.) The Respondents cite to no authority to support this
assertion, apart from an “implicit . . . understanding, if not direction” from the District Court’s
Withdrawal Opinion and Order that the Court would determine the Opposition Motion. (Id. at
11.) The Court has reviewed the Withdrawal Opinion and Order and finds there was no such
directive—implicit or otherwise—requiring the Court to decide the Turnover Motion and
Turnover Opposition prior to deciding the Partial Summary Judgment Motion. Therefore, the
Respondents’ argument fails.
3. 	A Right to a Jury Trial is Irrelevant in the Absence of Genuine Issues
of Material Fact
Respondents assert they have a right to a jury trial. (Turnover Opposition at 9–11.) To
the extent there are genuine issues of material fact, the Trustee agrees that the Respondents are
entitled to have them decided by a jury. (Summary Judgment Memo ¶ 57.) However, only a
fraction of the Respondents’ liability is subject to any genuine factual dispute. (Id.) Further, to
the extent the Respondents did raise issues of fact, the Trustee excluded the amounts from the
Partial Summary Judgment Motion. (Id.; see also May 24 Hr’g Tr. at 9:4–6.) The Court finds
that because this is a motion for partial summary judgement, decided upon only undisputed
issues of fact, the Respondents’ jury rights are not implicated. (Summary Judgment Memo ¶
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57.) Bankruptcy courts routinely decide motions for summary judgment on non-core matters
that do not involve disputed issues of fact. (Id. (citing In re Hypnotic Taxi LLC, 2017 WL
1207471, at *15 (Bankr. E.D.N.Y. Mar. 31, 2017)).)
4. 	The Turnover Motion States a Claim Under NY CPLR 5227
The Turnover Motion states a valid claim under NY CPLR 5227. A motion brought
under NY CPLR 5227 must satisfy the requirements in NY CPLR 5201. See Colonial Press of
Miami, Inc., 71 Misc. 2d at 988; see also Mitchell v. Lyons Pro. Servs., Inc., 109 F. Supp. 3d
555, 562 (E.D.N.Y. 2015), aff’d sub nom. Mitchell v. Garrison Protective Servs., Inc., 819 F.3d
636 (2d Cir. 2016) (stating that NY CPLR 5225 must satisfy requirement in CPLR 5201 because
NY CPLR 5225 “is part of the ‘Enforcement of Judgments’ provision of that statute”).
The cases cited by the Respondents in their Opposition each held that a specific debt in
question was too contingent or conditional to satisfy NY CPLR 5201(a).15 See Glassman, 23
N.Y. 2d at 359 (holding that future rents are not debts certain to become due and so are not
property subject to enforcement under NY CPLR 5201); Colonial Press of Miami, Inc., 71 Misc.
2d at 989 (holding that “a claim for facilitating an allegedly unauthorized diversion of corporate
funds” was too contingent under NY CPLR 5201); Supreme Merch Co., 70 N.Y.2d at 350
(holding that a negotiable letter of credit was a contingent debt outside the scope of NY CPLR
5201). Unlike the debts in question in those cases, the Respondents’ debt owing to Tri-State is
not contingent or conditional on some future event. The Respondents’ debt to Tri-State arises
from previously unpaid PEO services as reflected in the Business Records. See Bata Shoe Co.,
Inc. v. Silvestre Segarra e Hijos, S.A., 396 N.Y.S.2d 369, 371 (App. Div. 1977) (“The obligation
15 	“A money judgment may be enforced against any debt, which is past due or which is yet to become due,
certainly or upon demand of the judgment debtor.” NY CPLR 5201(a) (emphasis added).
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evidenced by an account receivable does not depend on the occurrence of a future, uncertain
event; it is a debt already arisen between the contracting parties.”). The Court finds that the
Respondents’ debt owed to Tri-State satisfies the requirements of NY CPLR 5201, and the
Turnover Motion states a valid claim under NY CPLR 5227.
B. 	The Undisputed Facts Show the Trustee is Entitled to Partial Summary
Judgment
The Trustee has met his burden of showing that there is no genuine dispute as to any
material fact and he is entitled to partial summary judgment as a matter of law. FED. R. CIV. P.
56(a). The Trustee has shown that there is no dispute that (i) Tri-State provided PEO services to
the Respondents (Respondents’ Counterstatement of Facts ¶ 19; Opposition at 6), (ii) the
Respondents produced the Business Records related to Tri-State’s PEO services rendered from
November 30, 2015 through December 27, 2015 (Respondents’ Counterstatement of Facts ¶ 21),
and (iii) the Respondents maintained the QuickBooks Records that they produced to the Trustee.
(Id. ¶ 29; May 24 Hr’g Tr. at 17:10–13.)
In support of the Partial Summary Judgment Motion, the Trustee relies on the Business
Records and QuickBooks Records. The Respondents argue, without citing to any case law, that
a CPA or other expert is required to interpret the Business Records and QuickBooks Records.
(Opposition at 26–27.) The Court disagrees with the Respondents and finds that it does not
require a CPA or other expert to interpret the records. See Randolph v. Collectramatic, Inc., 590
F.2d 844, 848 (10th Cir. 1979) (“There is no fixed or general rule that [r]equires expert
testimony.”) The Business Records and QuickBooks Records show that the Respondents made a
partial payment to Tri-State in the amount of $763,464.14, leaving the Unpaid Invoice Amount
($1,960,206.43). (See Business Records; QuickBooks Records.) See White Diamond Co., Ltd. v.
Castco, Inc., 436 F. Supp. 2d 615, 623 (S.D.N.Y. 2006) (stating that “partial payment . . . after
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receipt of an account stated [is] evidence of assent to the account stated”). The Business Records
also show that the Respondents have identified the Offsets ($568,636.68), which leaves an
undisputed amount of $1,391,569.75. (See Business Records; QuickBooks Records.) Since the
Trustee met his initial burden of showing no genuine dispute as to this amount, the Respondents
have the burden to resist partial summary judgment by citing to specific materials in the record.
See Holcomb, 521 F.3d at 137; FED. R. CIV. P. 56(c)(1)(A).
To oppose the Partial Summary Judgment Motion, the Respondents rely primarily on
their argument that Tri-State’s involvement in a broader fraud precludes summary judgment.
(Opposition at 28–29.) However, in their Opposition the Respondents make only general
statements that TSE committed fraud and fail to cite to any “particular parts of materials in the
record” showing that TSE or Tri-State committed acts of fraud against the Respondents. FED. R.
CIV. P. 56(c)(1)(A); see also In re Kao, 612 B.R. at 280 (“[A] party may not rely on mere
speculation or conjecture as to the true nature of the facts to overcome a motion for summary
judgment.”) (quoting Hicks, 593 F.3d at 166). Additionally, at the May 24 Hearing, the Court
repeatedly asked Respondents’ counsel to identify evidence in the record showing that Tri-State
committed fraud against the Respondents, and counsel was unable to do so:
THE COURT: Is there any evidence in the record to show that Tri-State
invoiced the respondents a larger amount than it was remitting to the tax authorities
and pocketed the difference?
MR. REITER: I don’t have evidence of that.
(May 24 Hr’g Tr. at 53:13–16.)
THE COURT: I mean, either you have evidence in the record that shows
that the respondents were injured by fraud, and then I would say, well, what
specifically were the acts fraud that injured the respondents? And you can’t point
me to any specific evidence in the summary judgment record on that, correct?
MR. REITER: Correct.
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(Id. at 54:17–22.)
THE COURT: There’s nothing in either [the First Cassera Letter or Second
Cassera Letter] that shows that these were amounts that the respondents paid to Tri-
State and then Tri-State was supposed to forward payments to the tax authorities
[but did not], correct?
MR. REITER: Correct.
(Id. at 59:17–21.)
THE COURT: Mr. Reiter, show me the evidence that shows that your
clients were paying money to Tri-State that Tri-State was pocketing rather than
forwarding on to tax authorities.
MR. REITER: I have nothing else.
(Id. at 60:15–19.)
The Respondents failed to identify anything in the record that establishes a genuine issue
of material fact. FED. R. CIV. P. 56(c)(1)(A). For the reasons explained above, the Respondents
objections to the entry of partial summary judgment are OVERRULED. Therefore, the Trustee
is entitled to partial summary judgment.
The Trustee also requests the award of 9% pre-judgment interest under NY CPLR
5001(a), (b), and 5004. The Trustee provides that:
[b]ecause the Turnover Motion seeks to collect payment based on Respondents’
“act[s] or omissions depriving or otherwise interfering with title to, or possession
or enjoyment of, property,” the Trustee is entitled to 9% interest from the date each
unpaid invoice became due.
(Summary Judgment Memo at 10 n.2 (quoting NY CPLR 5001(a)).) The Trustee’s PFFCL
correctly points out that the Respondents did not object or challenge the Trustee’s entitlement to
pre-judgment interest. (Trustee’s PFFCL ¶ 74.)
NY CPLR 5001 provides as follows:
(b) Date from which computed. 	Interest shall be computed from the earliest
ascertainable date the cause of action existed, except that interest upon damages
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incurred thereafter shall be computed from the date incurred. Where such damages
were incurred at various times, interest shall be computed upon each item from the
date it was incurred or upon all of the damages from a single reasonable
intermediate date.
NY CPLR 5001(b). The Trustee asserts that “[c]onservatively, the invoices became due January
25, 2016, the date Respondents issued checks in partial payment of the December 2015 invoices
(and several weeks after stopping on the original checks).” (Reply ¶ 23 (citing QuickBooks
Records); see also Trustee’s PFFCL ¶ 74.) The Court finds and concludes that using the starting
date of January 25, 2016 for computing pre-judgment interest is reasonable. The precise amount
of pre-judgment interest that would be due cannot be determined until the date at which
judgment is entered.
V. 	CONCLUSION
For the reasons provided above, the Court recommends that the Trustee’s Partial
Summary Judgment Motion be GRANTED, and that judgment should be entered against the
Respondents as follows: against Jofaz in the amount of $1,104,465.64; against Y&M in the
amount of $197,192.04; and against Third Avenue in the amount of $89,912.07. Pre-judgment
interest at the rate of 9% calculated from January 25, 2016 until the entry of judgment must be
added to each judgment.
Dated: 	July 8, 2022
New York, New York
_____Martin Glenn____________
MARTIN GLENN
Chief United States Bankruptcy Judge
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