SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ----------------------------------------------------------------------x XCHARLES F. GIBBS,

Plaintiff,

- against -

HOLLAND & KNIGHT, LLP,

Defendant. ----------------------------------------------------------------------x

Index No. 159345/2014

Part 54

Hon. Shirley W. Kornreich

PLAINTIFF CHARLES F. GIBBS’ MEMORANDUM OF LAW IN SUPPORT OF HIS MOTION TO DISMISS THE PETITION, IN OPPOSITION TO DEFENDANT HOLLAND & KNIGHT’S

MOTION FOR A PRELIMINARY INJUNCTION, AND IN SUPPORT OF GIBBS’ CROSS-MOTION TO RENEW

HOLLAND & KNIGHT’S MOTION TO COMPEL ARBITRATION

BLANK ROME LLP Leslie D. Corwin Simon J.K. Miller Martin S. Krezalek 405 Lexington Avenue New York, New York 10174 (212) 885-5000 Attorneys for Plaintiff Charles F. Gibbs

FILED: NEW YORK COUNTY CLERK 07/20/2015 06:09 PM INDEX NO. 159345/2014

NYSCEF DOC. NO. 69 RECEIVED NYSCEF: 07/20/2015

i

TABLE OF CONTENTS

Page

PRELIMINARY STATEMENT .....................................................................................................1

STATEMENT OF FACTS ..............................................................................................................2

A. H&K’s Motion to Stay this Action and to Compel Arbitration. ..............................2

B. The Surrogate’s Court Awards to Gibbs. .................................................................2

1. The Wasserstein Trusts. ...............................................................................2

2. The Robles Estate. .......................................................................................3

C. H&K’s Pending Petition. .........................................................................................4

ARGUMENT ...................................................................................................................................4

POINT I H&K DID NOT DEMONSTRATE IRREPARABLE HARM .......................................5

A. H&K Will Not Be Irreparably Harmed. ..................................................................5

B. H&K’s 2012 Partnership Agreement is not Dispositive of its Requirement to Establish Irreparable Harm. .................................................................................7

C. H&K has not Demonstrated that an Arbitration Award would be Ineffectual. ...............................................................................................................8

D. An Attachment is Not Warranted ..........................................................................10

POINT II H&K HAS NO LIKELIHOOD OF SUCCEEDING ON THE MERITS ..................12

A. The Petition Must be Dismissed Because this Court Does Not Have Jurisdiction to Grant Relief Under CPLR § 7502(c) .............................................12

B. Any Alleged Damages Suffered by H&K are Subject to Set-Off. ........................14

C. This Action Has Been Stayed. ...............................................................................15

D. H&K Should Be Judicially Estopped From Seeking Affirmative Relief From this Court. .....................................................................................................15

POINT III THE BALANCE OF THE EQUITIES TIPS AGAINST THE INJUNCTION ..........16

ii

POINT IV THE COURT SHOULD GRANT RENEWAL OF H&K’S MOTION TO COMPEL ARBITRATION ................................................................17

A. H&K Has Waived its Rights Under the Arbitration Clause. .................................17

CONCLUSION ..............................................................................................................................21

iii

TABLE OF AUTHORITIES

Page(s) CASES

Adelphi Enterprises, Inc. v. Mirpa, Inc., 33 A.D.2d 1019 (2d Dep’t 1970) .............................................................................................14

Advanced Digital Sec. Solutions, Inc. v. Samsung Techwin Co., 53 A.D.3d 612 ( 2d Dep’t 2008) ................................................................................................4

Aetna Ins. Co. v. Capasso, 75 N.Y.2d 860, 552 N.E.2d 166 (1990) .....................................................................................4

AIU Ins. Co. v. Robert Plan Corp., 17 Misc. 3d 1104(A), 851 N.Y.S.2d 56 (N.Y. Sup. Ct. N.Y. Co. Sept. 26, 2007) ..........................................................................................................................................6

Almontaser v. New York City Dep’t of Educ., 519 F.3d 505 (2d Cir. 2008).....................................................................................................13

Baker’s Aid, Div. of M. Raubvogel Co. v. Hussmann Foodservice Co., 830 F.2d 13 (2d Cir. 1987).........................................................................................................7

Beecher v. Peter A. Vogt Mfg. Co., 227 N.Y. 468, 125 N.E. 831 (1920) .........................................................................................13

BLDG ABI Enterprises, LLC v. 711 Second Ave Corp., 116 A.D.3d 617 (1st Dep’t 2014) ............................................................................................20

Broadway 500 W. Monroe Mezz II LLC v. Transwestern Mezzanine Realty Partners II, LLC, 80 A.D.3d 483 (1st Dep’t 2011) .....................................................................................16

Cotugno v. Bartkowski, 37 Misc. 3d 917, 952 N.Y.S.2d 421 (N.Y. Sup. Ct. Suffolk Co. Oct. 5, 2012) .......................20

Credit Index, L.L.C. v. Riskwise Int’l L.L.C., 282 A.D.2d 246 (1st Dep’t 2001) ......................................................................................15, 16

DeLury v. City of New York, 48 A.D.2d 595 (1st Dep’t 1975) ................................................................................................5

DiFabio v. Omnipoint Commc’ns, Inc., 66 A.D.3d 635 (2d Dep’t 2009) .................................................................................................5

EarthWeb, Inc. v. Schlack, 71 F. Supp. 2d 299 (S.D.N.Y. 1999) ..........................................................................................5

iv

EdCia Corp. v. McCormack, 44 A.D.3d 991 (2d Dep’t 2007) .................................................................................................5

Erber v. Catalyst Trading, LLC., 303 A.D.2d 165 (1st Dep’t 2003) ............................................................................................14

Erickson v. Kidder Peabody & Co., 166 Misc.2d 1, 630 N.Y.S.2d 861 (N.Y. Sup Ct. N.Y. Co. June 22, 1995) ........................9, 12

Esquire Indus., Inc. v. E. Bay Textiles, Inc., 68 A.D.2d 845 (1st Dep’t 1979) ........................................................................................17, 19

Faberge Intl. v. Di Pino, 109 A.D.2d 235 (1st Dep’t 1985) ..............................................................................................6

Falls St. Leasing Corp. v. City of Niagara Falls, 295 A.D.2d 1005 (4th Dep’t 2002) ............................................................................................6

Founders Ins. Co. v. Everest Nat. Ins. Co., 41 A.D.3d 350 (1st Dep’t 2007) ..............................................................................................12

Goldstone v. Gracie Terrace Apartment Corp., 110 A.D.3d 101 (1st Dep’t 2013) ............................................................................................16

Gonzalez v. Vigo Const. Corp., 69 A.D.3d 565 (2d Dep’t 2010) ...............................................................................................16

H.D. Smith Wholesale Drug Co. v. Mittelmark, 33 Misc. 3d 1227(A), 941 N.Y.S.2d 538 (N.Y. Sup. Ct. N.Y. Co. 2011) .............................6, 7

In re Bennet Funding Group, 146 F.3d 136 (2d Cir. 1998).....................................................................................................13

In re Cullman Ventures, Inc., 252 A.D.2d 222, 682 N.Y.S.2d 391 (1st Dep’t 1998) ...............................................................4

In re Rice, 105 A.D.3d 962 (2d Dep’t 2013) ...............................................................................................5

J.O.M. Corp. v. Dep’t of Health of State of N.Y., 173 A.D.2d 153 (1st Dep’t 1991) ..............................................................................................5

Johanson Res. Inc. v. La Vallee, 271 A.D.2d 832 (3d Dep’t 2000) .............................................................................................20

Kadish v. First Midwest Sec., Inc., 115 A.D.3d 445 (1st Dep’t 2014) ............................................................................................12

v

Koob v. IDS Fin. Servs., Inc., 213 A.D.2d 26, 629 N.Y.S.2d 426 (1st Dep’t 1995) .................................................................5

LDC USA Holdings, Inc. v. Taly Diamonds, LLC, 121 A.D.3d 529 (1st Dep’t 2014) ..............................................................................................7

Lincoln First Bank, N.A. v. Employers Ins. of Wausau, 120 A.D.2d 975 (4th Dep’t 1986) ............................................................................................14

Lorenzo v. Kahn, 100 A.D.3d 1480 (4th Dep’t 2012) ..........................................................................................15

Maas v. Cornell Univ., 253 A.D.2d 1 (3d Dep’t 1999) .................................................................................................15

Markovits v. Venture Info Capital, Inc., 129 F.Supp.2d 647 (S.D.N.Y. 2001) ..........................................................................................7

Matter of Beiny, 132 A.D.2d 190 (1st Dep’t 1987) ............................................................................................20

Miller v. Macri, 132 A.D.2d 691 (2d Dep’t 1987) .............................................................................................20

New York City Off-Track Betting Corp. v. New York Racing Ass’n, Inc., 250 A.D.2d 437 (1st Dep’t 1998) ..............................................................................................9

Nobu Next Door, LLC v. Fine Arts Hous., Inc., 4 N.Y.3d 839, 833 N.E.2d 191 (2005) .......................................................................................4

Petro, Inc. v. Serio, 9 Misc.3d 805 (N.Y. Sup Ct, N.Y. Co. 2005) ............................................................................6

Sandler v. United Indus. Bank, 23 A.D.2d 567 (2d Dep’t 1965) ...............................................................................................13

Scammon v. Kimball, 92 U.S. 362 (1875) ...................................................................................................................13

Scotto v. Mei, 219 A.D.2d 181 (1st Dep’t 1996) ..........................................................................................4, 5

Second on Second Cafe, Inc. v. Hing Sing Trading, Inc., 66 A.D.3d 255 (1st Dep’t 2009) ..............................................................................................13

Shah v. Commercial Bank Ob’Edinennyi Investitsionnyi Bank, No. 09 CV 6121(HB), 2010 WL 743043 (S.D.N.Y. Mar. 4, 2010) ........................................12

vi

Singas Famous Pizza Brands Corp. v. New York Adver. LLC, No. 10 CIV. 8976 RJH, 2011 WL 497978 (S.D.N.Y. Feb. 10, 2011) aff’d, 468 F. App’x 43 (2d Cir. 2012) ........................................................................................................7

Sivault Sys., Inc. v. Wondernet, Ltd., No. 05 CIV.0890 (RWS), 2005 WL 681457 (S.D.N.Y. Mar. 25, 2005) .................................11

Soloway v. Morgan Stanley Smith Barney LLC, 34 Misc. 3d 1217(A), 950 N.Y.S.2d 494 (N.Y. Sup. Ct. N.Y. Co. 2012) ...............................17

Spirs Trading Co. v. Occidental Yarns, Inc., 73 A.D.2d 542 (1st Dep’t 1979) ..............................................................................................17

SportsChannel Am. Associates v. Nat’l Hockey League, 186 A.D.2d 417 (1st Dep’t 1992) ..............................................................................................5

Straus v. Tradesmen’s Nat’l Bank, 122 N.Y. 379, 25 N.E. 372 (1890) ...........................................................................................13

Sullivan v. Kisly, 93 A.D.2d 783 (1st Dep’t 1983) (N.Y. App. Div. 1983) .........................................................19

Tengtu Int’l Corp. v. Pak Kwan Cheung, 24 A.D.3d 170 (1st Dep’t 2005) ........................................................................................18, 19

Tishman Const. Corp. of New York v. City of New York, 280 A.D.2d 374 (1st Dep’t 2001) ............................................................................................16

U.S. Re Companies, Inc. v. Scheerer, 41 A.D.3d 152 (1st Dep’t 2007) ................................................................................................7

VisionChina Media Inc. v. S’holder Representative Servs., LLC, 109 A.D.3d 49 (1st Dep’t 2013) ........................................................................................11, 12

Winter v. Brown, 49 A.D.3d 526 (2d Dep’t 2008) ...............................................................................................10

OTHER AUTHORITIES

N.Y. C.P.L.R. § 63 ...........................................................................................................................4

N.Y. C.P.L.R. § 2221 .................................................................................................................1, 20

N.Y. C.P.L.R. § 2221(e)(2) ............................................................................................................16

N.Y. C.P.L.R. § 6201 .....................................................................................................................11

N.Y. C.P.L.R. § 6301 .............................................................................................1, 4, 5, 11, 14, 17

vii

N.Y. C.P.L.R. § 7502 .......................................................................................................................1

N.Y. C.P.L.R. § 7502(c) ........................................................................4, 5, 8, 9, 10, 11, 12, 15, 17

1

Plaintiff Charles F. Gibbs (“Gibbs”) respectfully submits this memorandum of law: (i) in

support of Gibbs’ motion to dismiss defendant Holland & Knight LLP’s (“H&K”) petition,

pursuant to CPLR § 7502, in aid of arbitration; (ii) in opposition to H&K’s motion, pursuant to

CPLR § 6301, for a preliminary injunction; and (iii) in support of Gibbs’ cross-motion, pursuant

to CPLR § 2221, to renew H&K’s motion to stay this action and compel arbitration.1

PRELIMINARY STATEMENT

Gibbs commenced this action seeking only a declaratory judgment that a 2002 agreement

between himself and H&K, which provided, inter alia, the terms for Gibbs’ annual compensation

from H&K, governed his claims against H&K for unpaid compensation. This Court’s decision

and order, dated April 28, 2015 (the “April 28 Decision”), granted H&K’s motion to stay this

action and held that Gibbs’ underlying claims be mediated and arbitrated pursuant to H&K’s

2012 Partnership Agreement which Gibbs did not sign.2

Despite this transfer to Arbitration, H&K now petitions this Court for a temporary

restraining order and preliminary injunction with respect to two Surrogate’s Court awards to

Gibbs as a Guardian ad Litem (“GAL”), and asserts five affirmative counter-claims against

Gibbs, based on its 2012 Partnership Agreement thereby warranting this Court to vacate its April

28 Decision.

1 On June 16, 2016, H&K moved before this Court by Order to Show Cause for a Preliminary Injunction and a Temporary Restraining Order, and submitted the following documents in connection with its application: Defendant/Respondent Holland & Knight, LLP’s unverified Petition for Temporary Restraining Order and Preliminary Injunction in Aid of Arbitration Pursuant to CPLR §§ 6301 and 7502 (“H&K’s Petition”); Memorandum of Law in Support of Defendant/Respondent Holland & Knight, LLP’s Petition for Temporary Restraining Order and Preliminary Injunction in Aid of Arbitration Pursuant to CPLR §§ 6301 and 7502 (“H&K Sup. Memo”); Emergency Affirmation in Support of Defendant/Respondent Holland & Knight, LLP’s Petition for Temporary Restraining Order and Preliminary Injunction in Aid of Arbitration Pursuant to CPLR §§ 6301 and 7502 (“H&K Emergency Aff.”) with exhibits A-H attached thereto. 2 Gibbs has appealed the April 28 Decision.

2

STATEMENT OF FACTS

A. H&K’s Motion to Stay this Action and to Compel Arbitration.

Gibbs was a partner in H&K until March 28, 2014. See Affirmation of Charles F. Gibbs,

duly affirmed on July 20, 2015 (the “Gibbs Aff.”) ¶ 2. Gibbs commenced the above-captioned

action following the termination of his employment by H&K. Id. Gibbs asserted that an

Agreement between Gibbs and H&K, effective December 1, 2002 (“Employment Agreement”),

governed substantive provisions of his employment with H&K, including his compensation.

Such Employment Agreement provided explicitly that the venue for resolution of any disputes

between the parties shall be in New York, New York and that the law of New York governed.

Id. at ¶ 3.

On April 28, 2015, this Court granted H&K’s Motion to Compel arbitration before the

International Institute for Conflict Prevention & Resolution (“CPR”) and stayed this action.

April 28 Decision at p. 9. The only provision in the April 28 Decision for lifting the stay was

limited to a party’s application to “confirm, modify, or vacate the CPR arbitration award.” Id.

B. The Surrogate’s Court Awards to Gibbs.

1. The Wasserstein Trusts.

On September 2, 2011, the Surrogate’s Court of New York County appointed Gibbs as

GAL for two of the minor sons of the deceased, Bruce Wasserstein (“BW”), who were

beneficiaries of eight trusts created by BW directly or indirectly. See Gibbs Aff. ¶ 5; H&K

Emergency Aff., Exh. E ¶ 2. After Gibbs had concluded his duties and reported to the Court, the

Court, by eight decrees dated May 22, 2015, settled the accountings of the BW trusts and

awarded Gibbs a total of $480,100.00 for his services as GAL in the eight proceedings. See

Gibbs Aff. ¶ 6; H&K Emergency Aff., Exh. C. Gibbs was aided during his tenure at H&K by

H&K lawyers and staff ending March 28, 2014. See Gibbs Aff. ¶ 7; H&K Emergency Aff., Exh.

3

E ¶ 2. During his subsequent tenure at the law firm of Solomon, Blum and Heymann (“SBH”),

Gibbs was aided by an SBH partner and staff. Gibbs Aff. ¶ 8. Gibbs has received payments

from the trusts totaling $480,100.00. Id.

2. The Robles Estate.

On April 30, 2012, the Surrogate’s Court of New York County appointed Gibbs as GAL

for the minor son and minor daughter of the deceased, Reyna Robles (“RR”). See Gibbs Aff. ¶

9; H&K Emergency Aff., Exh. D ¶ 2. Gibbs was charged with the duty of reviewing the

settlement of a wrongful death action on behalf of RR against the Metropolitan Hospital Center,

and reviewing the account of proceedings of the administrator of her estate and their proposal to

divide the settlement proceeds among Gibbs’ wards and their father. Gibbs Aff. ¶ 9; H&K

Emergency Aff., Exh. D ¶ 3. After Gibbs had concluded his duties and reported to the Court, the

Court, by a decree dated April 29, 2015, awarded Gibbs a total of $18,000.00 for his services as

GAL. See Gibbs Aff. ¶ 10; H&K Emergency Aff., Exh. B at p. 5. Gibbs was aided during his

tenure at H&K by H&K lawyers and staff ending February 19, 2013. Gibbs Aff. ¶ 10. Gibbs

was aided thereafter by colleagues at SBH. Id. Gibbs has received payments from the RR estate

totaling $18,000.00. Id.

Gibbs continued to provide guardian ad litem services on the matters from which the

awards were decreed after his March 28, 2014 dissociation from H&K. See H&K Petition, Exh.

E at p.4, ¶ 2 (affirming that Gibbs continued rendering guardian ad litem services at his new

firm, Solomon Blum Heyman from April 2014 through June 2014). Accordingly, a formal

allocation (probably involving principles of quantum meruit) will be necessary to apportion the

amounts due to H&K, SBH, and Gibbs respectively.

4

C. H&K’s Pending Petition.

On June 16, 2015, H&K filed an unverified “Petition”3 seeking the provisional remedy of

a temporary restraining order and preliminary injunction enjoining Gibbs “from retaining,

converting, wasting, or diverting from H&K the Robles award and H&K’s proportionately

allocable share of the Wasserstein awards and from failing and refusing to collect and remit

promptly said sums to H&K.” H&K Petition at p. 20. Despite the Petition’s cleverly muddled

language, the injunctive relief that H&K is requesting is plainly a mandatory injunction

compelling Gibbs to turn over the Surrogate’s Court awards to H&K.

In addition to the injunctive relief, H&K’s unverified Petition also asserts five (5)

affirmative counter-claims against Gibbs, to wit: breach of contract, declaratory judgment,

breach of fiduciary duty, conversion, and an imposition of a constructive trust and equitable lien

– all based upon Gibbs’ refusal to transfer the two Surrogate’s Court awards to H&K.

ARGUMENT

To obtain a preliminary injunction under CPLR § 6301, the movant must demonstrate a

probability of success on the merits, the likelihood of irreparable harm in the absence of an

injunction, and a balance of the equities in favor of granting the injunction. Nobu Next Door,

LLC v. Fine Arts Hous., Inc., 4 N.Y.3d 839, 840, 833 N.E.2d 191, 192 (2005); Aetna Ins. Co. v.

Capasso, 75 N.Y.2d 860, 862, 552 N.E.2d 166, 167 (1990); see also N.Y. C.P.L.R. § 6301

(McKinney).

Preliminary injunctions are “drastic” remedies” which should not be granted unless

plaintiff has clearly satisfied all three elements. Scotto v. Mei, 219 A.D.2d 181, 182 (1st Dep’t

1996).

3 Hence, the instant application is jurisdictionally defective as personal knowledge of the alleged facts has not been verified.

5

Where, as here, the injunction is sought pursuant to CPLR § 7502(c), the traditional

equitable criteria for the granting of temporary relief must nonetheless be met. See Advanced

Digital Sec. Solutions, Inc. v. Samsung Techwin Co., 53 A.D.3d 612, 613 ( 2d Dep’t 2008); (“[A]

party seeking relief under CPLR 7502(c) must also make a showing of the traditional equitable

criteria for the granting of temporary relief under CPLR article 63.”); In re Cullman Ventures,

Inc., 252 A.D.2d 222, 682 N.Y.S.2d 391, 396 (1st Dep’t 1998) (“[W]e apply the general criteria

governing the issuance of injunctive relief to an application for a preliminary injunction under

CPLR 7502(c)”); Koob v. IDS Fin. Servs., Inc., 213 A.D.2d 26, 629 N.Y.S.2d 426, 432 (1st

Dep’t 1995) (“It is . . . imperative that a grant of preliminary injunctive relief [pursuant to §

7502(c)] proceed from an evaluation of petitioner’s circumstance in light of the customary

equitable criteria.”).

POINT I H&K DID NOT DEMONSTRATE IRREPARABLE HARM

A. H&K Will Not Be Irreparably Harmed.

H&K cannot obtain a preliminary injunction pursuant to CPLR § 6301 or CPLR §

7502(c) because it did not, and cannot, show any danger of irreparable injury in the absence of

an injunction. “A demonstration of irreparable harm is the single most important prerequisite for

the issuance of a preliminary injunction.” EarthWeb, Inc. v. Schlack, 71 F. Supp. 2d 299, 308

(S.D.N.Y. 1999). “Irreparable injury, for purposes of equity, has been held to mean any injury

for which money damages are insufficient.” In re Rice, 105 A.D.3d 962, 963 (2d Dep’t 2013)

(“[E]conomic loss, which is compensable by money damages, does not constitute irreparable

harm”); DiFabio v. Omnipoint Commc’ns, Inc., 66 A.D.3d 635, 636-37 (2d Dep’t 2009); EdCia

Corp. v. McCormack, 44 A.D.3d 991, 994 (2d Dep’t 2007) (same); Scotto v. Mei, 219 A.D.2d

181, 184 (1st Dep’t 1996) (“Damages compensable in money and capable of calculation, albeit

6

with some difficulty, are not irreparable”); SportsChannel Am. Associates v. Nat’l Hockey

League, 186 A.D.2d 417, 418 (1st Dep’t 1992) (same); J.O.M. Corp. v. Dep't of Health of State

of N.Y., 173 A.D.2d 153, 154 (1st Dep’t 1991) (“petitioner did not show irreparable

harm . . . since monetary harm which can be compensated by damages does not constitute

irreparable injury”); DeLury v. City of New York, 48 A.D.2d 595, 599 (1st Dep’t 1975) (“ . . .in

the event that plaintiffs succeed at the trial, then, of course, they will recover back pay and

reinstatement to their positions . . . [h]ence, where is the irreparable damage?”).

As this Court has explained, “[p]roof establishing [the requisite preliminary injunction]

elements must be by affidavit and other competent proof, with evidentiary detail. If key facts are

in dispute, the relief will be denied.” H.D. Smith Wholesale Drug Co. v. Mittelmark, 33 Misc. 3d

1227(A), *4, 941 N.Y.S.2d 538 (N.Y. Sup. Ct. N.Y. Co. 2011) (Kornreich, J.) (citing Faberge

Intl. v. Di Pino, 109 A.D.2d 235, 240 (1st Dep’t 1985). Bare allegations that money damages

will be inadequate and that future judgments will likely be uncollectible do not satisfy the burden

of showing irreparable harm. See AIU Ins. Co. v. Robert Plan Corp., 17 Misc. 3d 1104(A), 851

N.Y.S.2d 56 (N.Y. Sup. Ct. N.Y. Co. Sept. 26, 2007) (allegation that future judgments will be

uncollectible do not to support a claim for injunctive relief); Petro, Inc. v. Serio, 9 Misc.3d 805,

820 (N.Y. Sup Ct, N.Y. Co. 2005) (speculation that party might be unable to perform due to

potential insolvency insufficient to satisfy irreparable harm test); see also Falls St. Leasing Corp.

v. City of Niagara Falls, 295 A.D.2d 1005, 1006 (4th Dep’t 2002) (“conclusory allegations of

plaintiffs with respect to irreparable injury are insufficient to support [their] motion for a

preliminary injunction”).

Here, in its unverified Petition, H&K claims entitlement to a money damages award for

Gibbs’ refusal to pay over to H&K the aforesaid Surrogate’s Court awards to Gibbs. H&K’s

7

specious claim totally ignores that Gibbs’ claims against H&K for unpaid compensation exceed

$1,000,000.00, far exceeding H&K’s claim to the GAL awards. See Gibbs Aff. ¶ 15.

The two Surrogate’s Court awards must be allocated among Gibbs, H&K, and SBH, by

Arbitration or by this Court under the Code of Professional Responsibility, the NY Court Rules

and New York case law with respect to the requirement that legal fees be fair and reasonable.

Following such allocation, any money due to H&K will be easily quantifiable, thus extinguishing

all of H&K’s alleged and unavailing irreparable harm argument. See U.S. Re Companies, Inc. v.

Scheerer, 41 A.D.3d 152, 155 (1st Dep’t 2007) (the availability of a quantifiable remedy

precludes a finding of irreparable harm); H.D. Smith Wholesale Drug Co., 33 Misc. 3d 1227(A),

at *8.

B. H&K’s 2012 Partnership Agreement is not Dispositive of its Requirement to Establish Irreparable Harm.

H&K makes the untenable argument that Section 23.2 of its 2012 Partnership Agreement,

which provides that “the Firm and the Partners will be damaged irreparably if any of the

provisions of [the Agreement] are not performed” is an admission by Gibbs which “begins and

ends the inquiry on the issue of irreparable harm.” H&K Sup. Memo at p. 15.

The law is clear that the requirement of H&K to demonstrate irreparable harm for

injunctive relief is not satisfied where a party allegedly has “admitted” that non-irreparable harm

occurrences evolve into irreparable harm. Courts have broad discretion to deny preliminary

injunctions where the alleged harm is compensable by money damages. See Baker’s Aid, Div. of

M. Raubvogel Co. v. Hussmann Foodservice Co., 830 F.2d 13, 16 (2d Cir. 1987) (“contractual

language declaring money damages inadequate in the event of a breach does not control the

question whether preliminary injunctive relief is appropriate.”); LDC USA Holdings, Inc. v. Taly

Diamonds, LLC, 121 A.D.3d 529 (1st Dep’t 2014).

8

Contractual language is “merely one factor that must be considered in deciding whether

irreparable harm would result if an injunction did not issue.” Singas Famous Pizza Brands Corp.

v. New York Adver. LLC, No. 10 CIV. 8976 RJH, 2011 WL 497978, *7 (S.D.N.Y. Feb. 10, 2011)

aff’d, 468 F. App’x 43 (2d Cir. 2012); Markovits v. Venture Info Capital, Inc., 129 F.Supp.2d

647, 661 (S.D.N.Y. 2001); H.D. Smith Wholesale Drug Co., 33 Misc. 3d 1227(A), at *4 (“As for

the element of irreparable harm, the key determinant is whether or not that harm may be

compensated by money damages if the motion is not granted”). Here, as set forth above, and

notwithstanding the language of Section 23.2, any harm allegedly sustained by H&K is

absolutely compensable by money damages.4

C. H&K has not Demonstrated that an Arbitration Award would be Ineffectual.

Even if relief under CPLR § 7502(c) was available to H&K (and as set forth in Section

II(A) below, it is not), “CPLR 7502(c) permits injunctive relief in connection with an arbitration

only upon the ground that the award to which the applicant may be entitled may be rendered

ineffectual without the injunction.” New York City Off-Track Betting Corp. v. New York Racing

Ass’n, Inc., 250 A.D.2d 437, 440 (1st Dep’t 1998) (internal quotation omitted). “CPLR 7502(c)

does not entitle petitioners to a guaranty that their awards following arbitration will be satisfied.

The statute requires petitioners to show that their awards ‘may’ be rendered ineffectual, that is,

that there is at least some likelihood or possibility of this occurring. Erickson v. Kidder Peabody

& Co., 166 Misc.2d 1, 630 N.Y.S.2d 861 (N.Y. Sup Ct. N.Y. Co. June 22, 1995).

4 Gibbs has appealed this Court’s holding that he embraced Article XXII of the H&K 2012 Partnership Agreement although he did not sign it. Whether Gibbs’ “acknowledging his relation” to H&K is the equivalent of knowingly signing the H&K 2012 Partnership Agreement has yet to be finally determined.

9

First, H&K has not demonstrated any likelihood that it will receive even $1.00 from

Arbitration. Gibbs claims that H&K owes him over $1,000,000.00. H&K has failed to show

that Gibbs owes the firm even $1.00.

H&K’s contention that any Arbitration award would be ineffectual

. . . if H&K is forced to wait until a full arbitration hearing occurring months in the future to obtain injunctive relief, any arbitration award would be rendered ineffectual, inasmuch as H&K has already suffered irreparable harm. . .

(H&K Sup. Memo at p. 17) is circular and nonsensical. The cause of action in the captioned

action seeks a declaration of H&K’s obligation to Gibbs for over $1,000,000.00 of

compensation. H&K has not shown irreparable harm, nor any harm, and cannot show

irreparable harm in the absence of an injunction. As H&K owes Gibbs far more than the

Surrogate’s Court GAL awards, H&K has not met, and cannot meet, the burden of demonstrating

that any potential Arbitration award it might receive will not be paid.

As noted above, H&K seeks money, to wit: the Surrogate’s Court GAL awards to Gibbs.

As money is fungible, H&K cannot articulate how a potential Arbitration award in its favor

would be rendered ineffectual absent an injunction. New York courts have rejected the

proposition that contractual amounts allegedly due are equivalent of a specific thing that needs to

be preserved. In Winter v. Brown, 49 A.D.3d 526, 528 (2d Dep’t 2008), plaintiff moved for

preliminary injunction in aid of an arbitration seeking to prevent defendants from disposing of

certain funds during the pendency of the action. The crux of plaintiff’s claim was that defendant,

who purchased a business from plaintiffs and agreed to pay plaintiff 20% of the net fees

collected thereafter by the business, breached the purchase agreement by failing to pay the

amounts owed. Id. at 528. The court ruled that plaintiff failed to demonstrate that an arbitration

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award would be rendered ineffectual without the grant of provisional relief because plaintiff

could not show that the money was part of any specific res or fund which could rightly be

regarded as the “subject of the action.” Id. at 529.

H&K has not shown, and cannot demonstrate, how an Arbitration award would be

ineffectual if Gibbs is not compelled by this Court to remit the Surrogate’s Court GAL awards to

H&K. Accordingly, its Petition for relief under CPLR § 7502(c) must be dismissed.

D. An Attachment is Not Warranted

H&K seems implicitly to be requesting an attachment of the Surrogate’s Court GAL

awards: H&K asks that this Court prevent Gibbs from “retaining personal control” (H&K Sup.

Memo at p. 16) over assets that allegedly belong to the H&K partnership. H&K claims that,

absent an injunction, there is a

. . . serious and substantial risk of continued irreparable injury to H&K, with its assets in the meantime unsecured and at the mercy of Plaintiff’s unfettered discretion. . .

H&K Sup. Memo at p. 4.

H&K has failed to identify that it has sustained any “irreparable injury,” nor any injury.

Hence, H&K’s claim of “substantial risk” of continued irreparable injury is regrettably specious.

H&K has not come close to meeting the standard for an attachment (of funds over which

ownership is disputed). CPLR § 6201 provides, in relevant part, that

[a]n order of attachment may be granted . . . when . . . the defendant, with intent to defraud his creditors or frustrate the enforcement of a judgment that might be rendered in plaintiff’s favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts

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N.Y. C.P.L.R. § 6201 (McKinney).5 An “attachment is recognized to be a harsh and

extraordinary remedy.” Sivault Sys., Inc., 2005 WL 681457 at *3. “[T]he party seeking

attachment must demonstrate an identifiable risk that the defendant will not be able to satisfy the

judgment.” See VisionChina Media Inc. v. S’holder Representative Servs., LLC, 109 A.D.3d 49,

60 (1st Dep’t 2013).

H&K has not, nor can it, articulate an “identifiable” suspicion that Gibbs is about to

secret or remove property from New York. Notably, it was Gibbs, a New York lawyer, who

submitted to the jurisdiction of this Court. Courts have invariably declined to order an

attachment in aid of arbitration where, as here, the applicant fails to show that the alleged debtor

may spirit away money, lacks sufficient assets, or may otherwise have no money when an

arbitration award is rendered. See, e.g., Shah v. Commercial Bank Ob’Edinennyi Investitsionnyi

Bank, No. 09 CV 6121(HB), 2010 WL 743043, at *3 (S.D.N.Y. Mar. 4, 2010) (attachment in aid

of arbitration not warranted where applicant did not provide any evidence that defendant would

deliberately hide any remaining funds or allege that defendant intended to transfer the funds to

frustrate enforcement); Kadish v. First Midwest Sec., Inc., 115 A.D.3d 445, 446 (1st Dep’t 2014)

(CPLR § 7502(c) application for an attachment to secure an eventual arbitration award denied

where no competent evidence to rebut the likelihood that hypothetical arbitration award would

be covered); VisionChina Media Inc., 109 A.D.3d at 62 (attachment not warranted where sellers

showed no evidence that buyers lacked sufficient assets, or that they would choose to hide or

otherwise dispose of their assets); Founders Ins. Co. v. Everest Nat. Ins. Co., 41 A.D.3d 350, 351

(1st Dep’t 2007) (petitioner not entitled to injunction under CPLR § 7502(c) where no

5 CPLR §§ 6201 and 6301, which set forth the rules pertaining to prejudgment attachments and preliminary injunctions, respectively, are applicable to petitions brought under Section 7502(c). See N.Y. C.P.L.R. § 6201 et seq.; N.Y. C.P.L.R. § 6301; see also Sivault Sys., Inc. v. Wondernet, Ltd., No. 05 CIV.0890 (RWS), 2005 WL 681457, at *3 (S.D.N.Y. Mar. 25, 2005).

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demonstrated risk that respondent would not be able to pay the award); Erickson, 166 Misc.2d at

*5, 630 N.Y.S.2d at 863 (“Absent a showing that Kidder Peabody intends to compromise its

assets to the detriment of petitioners, provisional relief pursuant to CPLR 7502(c) is not

appropriate”).

POINT II H&K HAS NO LIKELIHOOD OF SUCCEEDING ON THE MERITS

“[A]n injunction altering, rather than maintaining, the status quo . . . must meet the more

rigorous standard of demonstrating a clear or substantial showing of a likelihood of success on

the merits.” Almontaser v. New York City Dep’t of Educ., 519 F.3d 505, 508 (2d Cir. 2008);

Second on Second Cafe, Inc. v. Hing Sing Trading, Inc., 66 A.D.3d 255, 265 (1st Dep’t 2009)

(“ . . . courts are generally reluctant to grant mandatory preliminary injunctions . . . such relief

will be granted only where the right [thereto] is clearly established”) (internal citations omitted).

Initially, this Court does not have jurisdiction to entertain a petition pursuant to CPLR §

7502(c) because no Arbitration is pending. Moreover, H&K has not proffered any evidence on

its claims of breach of contract, alleged conversion, and breach of fiduciary duties with respect to

Gibbs’ refusal to remit to H&K the Surrogate’s Court awards and H&K cannot clearly establish

that it is likely to prevail on these unsupported claims. Gibbs has shown that (i) H&K owes him

substantially more money than the Surrogate’s Court awards, and (ii) only a portion of the

Surrogate’s Court awards sought by H&K can possibly be the subject of a claim by H&K.

A. The Petition Must be Dismissed Because this Court Does Not Have Jurisdiction to Grant Relief Under CPLR § 7502(c).

This Court does not have jurisdiction to hear a motion pursuant to CPLR § 7502(c)

because no Arbitration is pending. CPLR § 7502(c) expressly provides that:

. . . The supreme court in the county in which an arbitration is pending or in a county specified in subdivision (a) of this

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section, may entertain an application for an order of attachment or for a preliminary injunction in connection with an arbitration that is pending or that is to be commenced inside or outside this state

N.Y. C.P.L.R. § 7502(c) (McKinney) (emphasis added).

It is undisputed that no Arbitration has yet been commenced. See H&K Sup. Memo at p.

3. Nor can it be said that Arbitration “is to be commenced” because the alternative dispute

resolution clause that this Court held to apply to Gibbs’ dispute with H&K (and would arguably

apply to the instant dispute) requires the parties to first go through negotiations, and then formal

mediation before an Arbitration may be commenced. See H&K Sup. Memo ¶ 34 (explaining

that “Article XXII of the 2012 H&K Partnership Agreement [] sets forth a procedure requiring

first an attempt at resolution through negotiations; and, if negotiation does not produce a

resolution, mediation under the then current CPR Mediation Procedure.”)

As Gibbs’ compensation dispute, and the instant dispute over what portions of the

Surrogate’s Court awards are owed to H&K, have yet to progress through mediation, it is not

certain that Arbitration will ever be “commenced.” See H&K Petition ¶ 1 (explaining that H&K

“is commencing mediation, and, if necessary arbitration proceedings . . .”) (emphasis added).6

Accordingly, this Court’s jurisdiction under CPLR § 7502(c) to entertain an application for an

order of attachment or for a preliminary injunction in connection with an Arbitration that is

pending, or that is to be commenced, is not applicable to the instant motion. This dooms H&K’s

unverified Petition to be dismissed.

6 Despite the three-step process set forth in Article XXII of the 2012 H&K Partnership Agreement, H&K breached the agreement by commencing a mediation instead of invoking the first step of negotiating. Nevertheless, without prejudice to either party, Gibbs and H&K have agreed to mediate the underlying dispute.

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B. Any Alleged Damages Suffered by H&K are Subject to Set-Off.

New York has “long recognized a common law right of setoff.” In re Bennet Funding

Group, 146 F.3d 136, 139 (2d Cir. 1998) (citing Straus v. Tradesmen’s Nat’l Bank, 122 N.Y.

379, 25 N.E. 372, 372 (1890)). Set-off permits one party to apply a debt owed to it by another

party to satisfy all or part of a debt that the first party owes to that other party. Scammon v.

Kimball, 92 U.S. 362, 366 (1875) (“where there are mutual debts, one debt may be set against the

other”); Beecher v. Peter A. Vogt Mfg. Co., 227 N.Y. 468, 473, 125 N.E. 831, 833 (1920); see

also Sandler v. United Indus. Bank, 23 A.D.2d 567, 567 (2d Dep’t 1965).

The compensation owed to Gibbs by H&K under the Employment Agreement, on the one

hand, and a fair and reasonable portion of the Surrogate’s Court awards that Gibbs’ may owe to

H&K, on the other hand, may be applied against each other as a matter of law.

Gibbs was appointed as guardian ad litem in his personal capacity. As H&K

acknowledges, Gibbs is now a “Dissociated Partner” of H&K and even if it were to succeed on

its claims, H&K would only be entitled to a fair and reasonable share of the awards under the

Code of Professional Responsibility, the New York Court Rules and New York case law.

H&K’s accounts receivable, i.e. its time charges does not equal fair and reasonable fees. See

Gibbs Aff. ¶ 13. H&K has no engagement letter with Gibbs, who concedes that H&K can take a

credit for a quantum meruit share of the guardian ad litem awards reducing the amount H&K

owes to Gibbs.

As H&K is effectively secured with respect to the portions of the Surrogate’s Court

awards that may be due to H&K, H&K will not able to clearly establish damages – a requisite

element of each of its claims. Since H&K fails to demonstrate that it is likely to prevail on the

merits of the dispute that is to be arbitrated, its Petition for an injunction and CPLR § 6301

motion must fail. See Erber v. Catalyst Trading, LLC., 303 A.D.2d 165, 165 (1st Dep’t 2003).

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C. This Action Has Been Stayed.

Notably, no claims are pending for this Court to resolve in this action. The Court’s April

28 Decision stayed this action and compelled Arbitration. Accordingly, the mandatory

injunctive relief that H&K seeks under CPLR § 6301 is incompatible with the April 28 Decision.

See Adelphi Enterprises, Inc. v. Mirpa, Inc., 33 A.D.2d 1019, 1019 (2d Dep’t 1970) (“The power

of the court is limited to staying the action and carrying out the terms of the contract by directing

that the parties proceed to arbitration”).

The only provision in the April 28 Decision for lifting the stay is expressly limited to a

party’s application to “confirm, modify, or vacate the CPR arbitration award.” See April 28

Decision at p. 9. H&K’s motion is therefore an improper motion brought during the pendency of

a stay and cannot be granted. See Lincoln First Bank, N.A. v. Employers Ins. of Wausau, 120

A.D.2d 975, 975 (4th Dep’t 1986) (cross-motion for summary judgment was improperly brought

during a period when there was in effect an order staying all proceedings pending arbitration).

D. H&K Should Be Judicially Estopped From Seeking Affirmative Relief From this Court.

“Under the doctrine of judicial estoppel, or estoppel against inconsistent positions, a party

is precluded from inequitably adopting a position directly contrary to or inconsistent with an

earlier assumed position in the same proceeding.” Maas v. Cornell Univ., 253 A.D.2d 1, 5 (3d

Dep’t 1999).

H&K’s application to have this Court necessarily wade into the merits of a dispute arising

out of Gibbs’ purported obligations under the 2012 Partnership Agreement is inconsistent with

the position it has taken in this litigation – i.e. that this action must be stayed and referred to

Arbitration.

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The fact that H&K styles its motion as one made in aid of Arbitration is of no moment.

As explained above, this Court does not have jurisdiction to hear a motion pursuant to CPLR §

7502(c) because no Arbitration is pending, or is about to be commenced. Consequently, the

instant motion invokes this court’s general equitable jurisdiction: i.e., the same judicial power

that only a few months ago H&K argued was “not an option” because “[a]lternative dispute

resolution [was] mandatory.” H&K Motion to Compel Memo at p. 3. Judicial estoppel applies

precisely in instances such as this. See Lorenzo v. Kahn, 100 A.D.3d 1480, 1483 (4th Dep’t

2012) (judicial estoppel properly invoked to prevent plaintiffs from taking position directly

contrary to or inconsistent with an position plaintiffs assumed earlier in the same litigation and

where plaintiffs prevailed with respect to that position).

POINT III THE BALANCE OF THE EQUITIES TIPS AGAINST THE INJUNCTION

In balancing the equities, the court must weigh the harm each side would suffer in the

absence or face of injunctive relief. Credit Index, L.L.C. v. Riskwise Int’l L.L.C., 282 A.D.2d

246, 247 (1st Dep’t 2001).

Here, as Gibbs is owed substantially more than he may owe to H&K, a mandatory

injunction compelling him to remit the Surrogate’s Court awards to H&K – prior to a proper

allocation of such awards under the Code of Professional Responsibility and New York law –

would eradicate Gibbs’ sole-security with respect to his compensation claim against H&K.

Conversely, H&K would not suffer any harm in the absence of an injunction as H&K has never

asserted a money claim against Gibbs, nor are there are any H&K allegations that money would

not be available to cover an arbitration net award against Gibbs. Moreover, since H&K is

already fully secured with respect to its claims against Gibbs, H&K is already in a better position

than Gibbs. The equities, therefore, tip in favor of Gibbs. See Goldstone v. Gracie Terrace

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Apartment Corp., 110 A.D.3d 101, 106 (1st Dep’t 2013); Broadway 500 W. Monroe Mezz II LLC

v. Transwestern Mezzanine Realty Partners II, LLC, 80 A.D.3d 483, 484 (1st Dep’t 2011);

Credit Index, L.L.C., 282 A.D.2d at 247.

POINT IV THE COURT SHOULD GRANT RENEWAL

OF H&K’S MOTION TO COMPEL ARBITRATION

A. H&K Has Waived its Rights Under the Arbitration Clause.

A “motion for leave to renew shall be based upon new facts not offered on the prior

motion that would change the prior determination” and “shall contain reasonable justification for

the failure to present such facts on the prior motion.” N.Y. C.P.L.R. § 2221(e)(2) (McKinney);

Gonzalez v. Vigo Const. Corp., 69 A.D.3d 565, 566 (2d Dep’t 2010); Tishman Const. Corp. of

New York v. City of New York, 280 A.D.2d 374, 376 (1st Dep’t 2001).

Since the Motion to Compel was decided, events have transpired that would have

changed the adjudication of the Motion to Compel. To wit, H&K has taken an affirmative action

constituting a waiver of its right to arbitrate claims arising out of the 2012 Partnership

Agreement. The instant motion for mandatory injunctive relief seeks to compel Gibbs “to

facilitate the collection of” Surrogate’s Court awards for fees and disbursements owed to Gibbs

for GAL services he provided, and to “remit” such awards to H&K. H&K Sup. Memo at p. 1.

H&K moves for relief not just under CPLR § 7502(c), but also under CPLR § 6301. See H&K

Sup. Memo at p. 1. Thus, in addition to its motion purportedly in aid of Arbitration, H&K’s

motion independently invokes this Court’s general equitable jurisdiction under CPLR § 6301.

What is more, H&K has asserted five affirmative counter-claims against Gibbs, thereby placing

the merits of the issues to be litigated squarely before this Court.

As set forth below, H&K’s application for mandatory injunctive relief and its affirmative

claims constitute an affirmative use of the judicial process to prosecute claims also encompassed

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by the Arbitration clause in Article XXII of the 2012 H&K Partnership Agreement. This new

fact – i.e. H&K’s waiver of its rights to Arbitration – would change the Court’s prior

determination that arbitration of the parties’ dispute regarding Gibbs’ compensation was

compelled.

“[T]he right to arbitrate is not unfettered and irrevocable.” Spirs Trading Co. v.

Occidental Yarns, Inc., 73 A.D.2d 542, 542 (1st Dep’t 1979). “An arbitration provision in a

contract like any other provision of a contract may be waived or abandoned by the parties, and

such waiver may be evidenced by their conduct in seeking judicial relief instead of arbitration.”

Esquire Indus., Inc. v. E. Bay Textiles, Inc., 68 A.D.2d 845, 845 (1st Dep’t 1979). Under New

York law, the “affirmative use of the judicial process to prosecute claims also encompassed by

the arbitration agreement [] result in a waiver of the right to arbitration.” Soloway v. Morgan

Stanley Smith Barney LLC, 34 Misc. 3d 1217(A), 950 N.Y.S.2d 494 (N.Y. Sup. Ct. N.Y. Co.

2012).

Tengtu Int’l Corp. v. Pak Kwan Cheung, 24 A.D.3d 170 (1st Dep’t 2005) illustrates how

a party waives its rights under a broad arbitration clause. In Tengtu Int’l, plaintiff Tengtu entered

into a consulting agreement with Cheung. Under the agreement, Cheung was named to a five-

year term as CEO and Chairman of Tengtu’s board of directors. The agreement included

incidental provisions for past, future and incentive compensation. The agreement also provided

that Comadex, a company controlled by Cheung, was to receive three million shares of Tengtu’s

stock. The agreement contained a broad arbitration clause, providing for arbitration of “[a]ny

dispute arising under or in connection with [the] [a]greement.” Id. at 170.

Upon Cheung’s termination as Chairman and CEO and removal as a director in 2002,

Cheung and Comadex commenced an arbitration against Tengtu. During the pendency of the

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arbitration, Comadex sought an order in federal court compelling Tengtu to remove a restrictive

legend from three million shares of plaintiff’s stock issued in accordance with the consulting

agreement and alleged, inter alia, that Tengtu had wrongfully and illegally removed Cheung

from the board. Id. at 171. Tengtu’s application to stay the arbitration because of Comadex’s

waiver by filing the federal court action. The motion was denied by the New York County

Supreme Court, which found that the judicial relief sought by Comadex was separate from the

arbitration.

Recognizing that the claims asserted in the federal action in fact embraced arbitrable

claims, the First Department reversed the Supreme Court’s finding that the claims interposed in

the federal action were separate and distinct from the arbitrable claims. Id. at 171. The court

held that it was “ . . . clear, given the broad arbitration clause, that the claims made in the federal

action [were] arbitrable.” Id. Consequently, Comadex’s affirmative election to seek judicial

relief waived its right to arbitrate. Id. at 172 (“While every foray into the courthouse does not

effect a waiver of the right to arbitrate, in our view, respondents’ conduct reflects a positive and

unequivocal election to litigate in the federal action and to forgo their arbitration rights”).

As in Tengtu Int’l, the claims asserted in H&K’s motion for a preliminary injunction

encompass claims that this Court would likely deem to be arbitrable. See April 28 Decision at

pp. 7-8 (finding that the 2012 Partnership Agreement contained a broad arbitration clause

providing that any controversy or claim arising out of the agreement was subject to alternative

dispute resolution).

Paradoxically, H&K asserts that the relief it ultimately seeks in its pending Petition is

subject to the Arbitration clause. H&K Sup Memo at p. 4 (“both [the claim at issue in this

motion and the issue of Gibbs’ compensation] raise disputes between a partner and the

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Partnership and are required to be resolved exclusively by the dispute resolution procedures of

the Partnership Agreement”). Moreover, in addition to the mandatory injunction, H&K’s

Petition has asserted directly five counter-claims against Gibbs. H&K’s actions are a clear-cut

example of an affirmative foray into the courthouse such as to waive any rights it may have had

under the alternative dispute resolution clause.

And just as in Tengtu, by pursuing affirmative judicial relief from this Court for Gibbs’

alleged breaches of his obligations under the 2012 Partnership Agreement, H&K has elected to

litigate its claims under the agreement and waived its right to arbitrate. See Tengtu Int’l, 24

A.D.3d at 172; see also Esquire Indus., Inc., 68 A.D.2d at 845 (parties waived their right to

arbitration by pursuing judicial relief); Sullivan v. Kisly, 93 A.D.2d 783, 783 (1st Dep’t 1983)

(“. . . where the defendant's participation in the lawsuit manifests an affirmative acceptance of

the judicial forum, with whatever advantages it may offer in the particular case, his actions are

then inconsistent with a later claim that only the arbitral forum is satisfactory.”) (internal citation

omitted).7

To be sure, a party does not automatically waive the right to arbitration merely by

moving in court for protective relief in order to preserve the status quo while at the same time

exercising its right under the contract to demand arbitration. Miller v. Macri, 132 A.D.2d 691,

693 (2d Dep’t 1987). Here, however, H&K is not merely seeking to preserve the status quo.

Rather, H&K seeks a mandatory injunction that would compel Gibbs to “collect” Surrogate’s

Court awards and “remit” them to H&K. H&K Sup. Memo at p. 14. A party waives its right to

arbitrate by seeking mandatory injunctive relief. Cotugno v. Bartkowski, 37 Misc. 3d 917, 919,

952 N.Y.S.2d 421, 423 (N.Y. Sup. Ct. Suffolk Co. Oct. 5, 2012) (“ . . . by seeking mandatory

7 No matter what H&K does from this point forward vis-à-vis the Arbitration, its waiver may not be rescinded. See Tengtu Int’l Corp., 24 A.D.3d at 172 (“[o]nce waived, the right to arbitrate cannot be regained”).

21

injunctive relief, the plaintiff manifested an intent to pursue the disgorgement claim through the

judicial process rather than to resolve it through arbitration”); see also Johanson Res. Inc. v. La

Vallee, 271 A.D.2d 832, 835 (3d Dep’t 2000).

A motion for renewal under CPLR § 2221 is properly made to the motion court to draw

its attention to material facts which were not known to the party seeking renewal when the

motion was originally made and, consequently, were not placed before the court. Matter of

Beiny, 132 A.D.2d 190, 209-10 (1st Dep’t 1987). In general, motions for renewal should be

based on newly discovered facts that could not be offered on the prior motion. BLDG ABI

Enterprises, LLC v. 711 Second Ave Corp., 116 A.D.3d 617, 618 (1st Dep’t 2014). A motion to

renew should be granted where the newly discovered facts would change the prior determination

of the motion.

Having opted to pursue claims against Gibbs through the judicial process rather than to

resolve it through arbitration, H&K has introduced a fact that would have changed this Court’s

determination that this action should be stayed in favor of arbitration. Accordingly, Gibbs’

cross-motion to renew the Motion to Compel should be granted, the relief requested in the

Motion to Compel should be denied, and the stay of this action should be lifted so that the claims

alleged in Gibbs’ Complaint and the claims alleged in H&K’s Petition all proceed before this

Court.8

CONCLUSION

For the foregoing reasons, Gibbs respectfully requests that this Court deny H&K’s

motion for preliminary injunction in its entirety, and grant Gibbs such other and further relief as

the Court may deem just, proper and equitable.

8 To the extent that the Court rules that H&K waived its rights under the Arbitration clause and finds that this case should proceed in this Court, Gibbs reserves the right to answer H&K’s five claims against Gibbs and deny the

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Dated: New York, New York July 20, 2015

BLANK ROME, LLP By:/s/ Leslie D. Corwin

Leslie D. Corwin Simon J.K. Miller Martin S. Krezalek

The Chrysler Building 405 Lexington Avenue New York, New York 10174 (212) 885-5000 lcorwin@blankrome.com sjkmiller@blankrome.com mkrezalek@blankrome.com Attorneys for Plaintiff Charles F. Gibbs

allegations therein by a responsive date to be set by this Court.