Saadeh v. Kagan

Background

Rafic Saadeh made a $130,000 loan to Irving Kagan in 2017. Irving died on January 12, 2020, before repaying the loan. Saadeh later sued in the U.S. District Court for the Southern District of New York, which entered a default judgment against Irving’s Estate on September 27, 2021. Saadeh therefore became a judgment creditor of the Estate.

The Estate appeared to have two assets: a house in Pennsylvania and an interest in fees connected to Irving’s legal work in litigation in the United Kingdom. Saadeh alleged that Michael Kagan and Joshua Kagan were using bad-faith tactics to divert the U.K. settlement funds away from the Estate. He specifically claimed that Michael intended to pay litigation funders, including Joshua and other family members, before the remaining proceeds reached the Estate.

Motions and Report

Saadeh first moved for a preliminary injunction under Federal Rule of Civil Procedure 65. He later sought temporary relief under Rule 69, which governs enforcement of federal money judgments, and New York Civil Practice Law and Rules § 5222. That state-law provision allows a judgment creditor to obtain a restraining notice that limits the transfer of property or debts connected to the judgment debtor.

Magistrate Judge Sarah Netburn recommended granting Saadeh’s motion to the extent it relied on Rule 69 and denying it to the extent it relied on Rule 65. She concluded that Saadeh could seek a restraining notice against proper assets of the Estate. She also concluded that the state-law restriction cited by the defendants did not apply because the judgment debtor was the Estate and the judgment was entered after Irving’s death.

The recommendation limited the restraint. Saadeh had not shown that all proceeds from the U.K. litigation were Estate assets. Funds belonging exclusively to third parties, or held by parties outside the court’s jurisdiction, could not be restrained. But funds first held by the Estate were to remain restrained until further order, including funds later distributed to secured creditors. The recommendation also denied relief against Michael and Joshua in their individual capacities.

District Court’s Review

Michael objected only to the definition of “Estate Assets.” He argued that a restraining notice under New York law could reach only property in which the judgment debtor had an interest, not funds that merely passed through the Estate and ultimately belonged to third-party litigation funders.

The court rejected that objection. It explained that the recommendation expressly excluded property belonging exclusively to third parties. Although some restrained funds might later be shown not to belong to the Estate, the record was unclear about which funds those were. The court also noted that Michael had not supplemented the record with facts supporting a narrower restraint. The court therefore adopted the recommendation’s definition of “Estate Assets.”

No party objected to the remaining parts of the recommendation. After finding no clear error in those portions, the court adopted the Report and Recommendation in full.

Disposition

The court granted Saadeh’s motion for a preliminary injunction. Under the adopted recommendation, the motion was granted to the extent it was based on Rule 69 and denied to the extent it was based on Rule 65. The restraint applied to funds first held by the Estate until further order, did not cover funds exclusively belonging to third parties outside the court’s reach, and did not enjoin Michael or Joshua in their individual capacities. The Clerk of Court was directed to terminate the motion at docket entry 130.