Alishaev Brothers Inc. v. LA Girl Jewelry Inc.

Background

The court had held a one-day non-jury trial on June 25, 2019. In an opinion issued March 27, 2020, it found four defendants liable to Alishaev Brothers, Inc.: individual defendants Pedram Shamekh and Robert Zendedel, and corporate defendants LA Girl Jewelry, Inc. and Ner Precious Metals, Inc. The court found liability for breach of contract, fraud, conversion, and an order of replevin. It also found that the plaintiff could set aside as fraudulent under New York Debtor and Creditor Law § 276 a September 2017 transfer by Zendedel to Shamekh of a deed of trust on Zendedel’s home. The court further found that Shamekh and Zendedel operated their respective companies as their alter egos for the transactions at issue and operated as partners by estoppel. The four defendants were therefore jointly and severally liable for all damages. The court did not award punitive damages and did not impose a constructive trust.

The court had not entered judgment in the March 27 opinion. It instead directed Alishaev Brothers to submit a proposed judgment and allowed defendants to submit objections or a competing judgment. The plaintiff’s proposed judgment stated that replevin was no longer necessary because the gold jewelry involved was no longer in defendants’ possession or had been melted down.

Defendants’ First Objection: Amendment to Conform to the Evidence

Defendants argued that the court could not set aside the September 2017 deed-of-trust transfer because the complaint did not specifically seek that relief, the joint pretrial order did not identify the deed of trust as the subject of the claim, the plaintiff’s pretrial proposed findings did not mention it, and the plaintiff had not argued at trial that the transfer violated the Debtor and Creditor Law.

The court agreed that the specific claim concerning the deed-of-trust transfer could not fairly be read into the complaint as originally written. The complaint instead alleged generally that defendants had violated the Debtor and Creditor Law by distributing corporate proceeds and assets to the individual defendants after the companies became insolvent, making the companies unable to satisfy a judgment.

The court nevertheless allowed the claim to be added after trial under Federal Rule of Civil Procedure 15(b)(2), which permits a pleading to be amended to match an issue that the parties actually tried with their express or implied consent. The court found implied consent because:

- The complaint and pretrial materials identified the Debtor and Creditor Law as a claim and generally alleged transfers intended to make the corporate defendants unable to satisfy a judgment. - The deed of trust appeared in the plaintiff’s exhibit list. - At trial, the plaintiff questioned Shamekh about the timing and purpose of the September 26, 2017 transfer. - Defendants did not object to the questioning or to the admission of the relevant exhibit. - Defendants did not object when the plaintiff expressly identified the deed-of-trust transfer in its post-trial proposed findings.

The court rejected defendants’ argument that the deed of trust had been introduced only to show that Zendedel and Shamekh had an earlier business relationship. It concluded that the questions about the timing of the transfer were directed to whether the transfer was an effort to hinder collection of the plaintiff’s claim.

The court also found no prejudice. Defendants did not identify evidence they would have offered at trial to challenge the fraudulent-transfer finding. The court concluded that the facts concerning the transfer were substantially similar to the facts underlying the pleaded claim that corporate assets had been transferred to the individual defendants to make the companies unable to satisfy a judgment.

Defendants’ Second Objection: Alter-Ego Liability

Defendants separately argued that the fraudulent-transfer finding was inconsistent with the alter-ego findings because, in their view, a party cannot fraudulently transfer property to itself. The court rejected that argument. It explained that it had not found Zendedel and Shamekh to be each other’s alter egos. Instead, it had found that each individual was the alter ego of a different corporate defendant and that the individuals operated as partners by estoppel.

The court held that the transfer from Zendedel to Shamekh was a transfer between two different defendants. It concluded that the transfer was properly set aside as fraudulent under New York Debtor and Creditor Law § 276 and that nothing in the alter-ego findings was inconsistent with that result.

Disposition

The court overruled defendants’ objections to the proposed judgment. It directed the Clerk to enter judgment as provided in the accompanying judgment, close any pending motions, and close the case.