Swartz v. Swartz
145 A.D.3d 818
| N.Y. App. Div. | 2016Background
- Starnette Swartz filed this action alleging Jerome Swartz transferred assets to family members, corporate entities, and accountants (the King defendants) to hide assets from her equitable distribution in pending matrimonial litigation.
- The complaint named Jerome, his adult children (Shanah Swartz‑Gordon, Nikola Swartz‑Hennes, Joshua Swartz), 27 corporate/partnership entities, additional entities added later, and the King accounting firm and principal.
- Plaintiff sought a preliminary injunction restraining transfers, and pleaded causes of action including fraud, aiding and abetting, conversion, unjust enrichment, breach of fiduciary duty, constructive trust, accounting malpractice, and multiple Debtor & Creditor Law (DCL) claims (§§ 273, 275, 276, 276‑a, 278).
- Defendants moved under CPLR 3211(a)(4) and (7) to dismiss many claims and for sanctions; King moved alternatively to stay; plaintiff cross‑moved for sanctions.
- Supreme Court: denied preliminary injunction and plaintiff’s sanctions; granted many dismissal branches under CPLR 3211(a)(7); stayed certain claims pending resolution of the matrimonial action. Both parties appealed/cross‑appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Preliminary injunction to freeze alleged transferred assets | Plaintiff argued transfers would deprive her of equitable distribution and monetary relief would be inadequate | Defendants argued plaintiff failed to show irreparable harm or balance of equities | Denied — plaintiff failed to show irreparable injury; court properly exercised discretion |
| Fraud and fraudulent concealment against King, daughters, corporate defendants | Plaintiff alleged misrepresentations, omitted transfers, false accountings and concealment to prevent discovery of assets | Defendants said allegations lack particularity and no duty to disclose; many allegations conclusory | Dismissed — fraud claims insufficiently pleaded under CPLR 3016(b) against King, daughters, corporate defendants |
| Aiding and abetting fraud | Plaintiff alleged defendants knowingly assisted Jerome’s fraud | Defendants disputed existence of underlying fraud and required particularity | Dismissed — failed to plead underlying fraud and assistance with required detail |
| Debtor & Creditor Law § 276 (actual intent fraudulent conveyance) vs § 273/275 (insolvency) | Plaintiff pointed to badges of fraud, transfers to family, inadequate consideration, transfers after divorce action | Defendants argued facts do not show intent or insolvency; many corporate defendants not described | §276 pleaded adequately as to daughters (badges of fraud); §276‑a and declaratory relief likewise OK as to daughters. Claims under §§273/275 dismissed for daughters and corporate defendants for failing to allege insolvency. Many corporate DCL claims dismissed for lack of particularity. |
| Unjust enrichment against King, daughters, corporate defendants | Plaintiff alleged defendants were enriched at her expense by receiving or controlling her assets | Defendants argued allegations are conclusory and lack specific tracing | King: unjust enrichment claim survives (sufficient allegation of enrichment at plaintiff’s expense). Daughters/corporate defendants: dismissed for conclusory pleading |
| Conversion against daughters | Plaintiff alleged daughters received/controlled specified sums that belonged to her | Defendants contended claims were conclusory or inadequately alleged | Conversion claim not dismissed — court found adequate allegations of unauthorized control/possession; litigation of conversion stayed pending matrimonial action |
Key Cases Cited
- M.H. Mandelbaum Orthotic & Prosthetic Servs., Inc. v. Werner, 126 A.D.3d 859 (App. Div. 2015) (standard for preliminary injunction)
- Arthur J. Gallagher & Co. v. Marchese, 96 A.D.3d 791 (App. Div. 2012) (discretion on injunction motions)
- Stortini v. Pollis, 138 A.D.3d 977 (App. Div. 2016) (elements of breach of fiduciary duty)
- Ginsburg Dev. Cos., LLC v. Carbone, 134 A.D.3d 890 (App. Div. 2015) (elements of fraud and aiding and abetting fraud)
- High Tides, LLC v. DeMichele, 88 A.D.3d 954 (App. Div. 2011) (aiding and abetting fraud requirements)
- Federal Deposit Ins. Corp. v. Porco, 75 N.Y.2d 840 (Ct. of Appeals 1990) (standing and transferee principles under DCL)
- Mazzei v. Kyriacou, 139 A.D.3d 823 (App. Div. 2016) (constructive trust and CPLR 3211(a)(4) analysis)