Case Information
‐ ‐ cv Protective Servs., In the
United States Court of Appeals
for the Second Circuit A UGUST T ERM No. ‐ cv
K EESHA M ITCHELL , T HERESA C AMPBELL , S EANNETTE C AMPBELL , T ANISHA S ELBY , Plaintiffs ‐ Appellees ,
G ARRISON P ROTECTIVE S ERVICES , I NC .,
Interested Party Appellant , L YONS P ROFESSIONAL S ERVICES I NC ., R ICHARD T RIM , T ERRY T ATUM C HRISTOPHER M. L YONS Defendants.
On Appeal United States Eastern
S UBMITTED : A PRIL D ECIDED : A PRIL
Before: K EARSE C ABRANES C HIN Circuit Judges .
This primarily involves challenge by interested party ‐ appellant Garrison Protective Services, Inc. (“Garrison”) various factual determinations made District (Brian M. Cogan, Judge ) course granting motion enforce judgment. We conclude District did err, much less clearly err, those determinations, therefore AFFIRM June judgment Court. also conclude properly construed plaintiffs’ pursuant New Civil Practice Law Rules (“CPLR”) plenary York’s substantive law fraudulent transfers.
Chidi A. Eze, Brooklyn, NY, Plaintiffs ‐ Appellees .
Raymond A. Giusto, Offices Raymond A. Giusto, P.C., West Bay Shore, NY, Interested Party Appellant.
P ER C URIAM :
Interested party appellant Protective Services, (“Garrison”) appeals June *3 Court, which followed a decision of June 2015, granting a motion by plaintiffs appellants Keesha Mitchell, Theresa Campbell, Seannette Campbell, Tanisha Selby (“plaintiffs”) to enforce a judgment.
This originated in sex discrimination lawsuit by plaintiffs against their former employer, Lyons Professional Services, Inc. (“LPS”), security guard company. described the underlying in Professional Services, 465– (“ I ”). Plaintiffs obtained default judgment of $266,590, then sought enforce pursuant to Rule 69(a) of Federal Rules Civil Procedure. Rule 69(a)(1) provides, in relevant part, “procedure execution” in federal court upon money judgment “must accord with procedure state where court is located.” Accordingly, because sought enforce judgment in Eastern New York, they made their New York state law— specifically, Civil Practice Rules (“CPLR”) relevant here, alleged LPS, acting through its sole shareholder, Christopher Lyons (“Lyons”), fraudulently its assets to Garrison, another security guard company, in violation of Debtor Creditor (“DCL”) ‐ a. Following bench trial, the found Lyons had entered into “Consulting Agreement” with seven weeks after entry the default judgment. Lyons Prof’l Servs., No. Civ. ‐ (BMC), WL *1 (E.D.N.Y. Sept. (“ II ”). The further found “[a]s part contract, agreed to attempt to steer accounts clients then serviced by LPS to in exchange for consulting fee the transferee, the court shall require such person to pay the money, or so much it as is sufficient to satisfy the judgment, to the judgment creditor and, if the amount to be so paid is insufficient to satisfy the judgment, to deliver any other personal property, or so much as sufficient value to satisfy the judgment, to designated sheriff. Costs the proceeding shall not be awarded against person who did dispute judgment debtor ʹ s interest or right possession. Notice proceeding shall also served upon judgment debtor in same manner as summons or registered or certified mail, return receipt requested. The court may permit judgment debtor intervene in proceeding. The court may permit any adverse claimant intervene proceeding may determine his rights in accordance with section DCL provides “[e]very conveyance made without fair
consideration when person making defendant an action damages judgment action been docketed him, fraudulent plaintiff without regard actual intent defendant if, after final plaintiff, defendant fails satisfy judgment.” *5 based on the annual revenues that they generated.” Mitchell Garrison Protective Servs., F. App’x (“ III ”). “LPS received nothing agreement,” and after “Garrison took over LPS accounts, LPS was essentially shut down.” Id. (internal quotation marks omitted).
Based on these and other findings, District Court determined that customer accounts question—also known LPS’s “book business”—were assets LPS had fraudulently Garrison, and value those assets exceeded value plaintiffs’ default judgment. Accordingly, granted plaintiffs’ and entered judgment against jointly severally, $266,590. Id.
Garrison appealed. relevant here, Garrison argued LPS’s book business was not subject enforcement CPLR 5225(b). That section authorizes execution only against assets specified CPLR 5201(b), which provides relevant part “[a] may be enforced any property which could assigned or transferred.” LPS’s book business was assignable or transferrable, argued, because consisted only contracts were terminable on thirty days’ notice. determined record was insufficient rule conclusively Garrison’s argument, we remanded cause further clarification. III F. App’x In particular, asked consider whether book business assignable transferrable: “If book *6 business was, fact, LPS then property purposes of § 5201(b). If, however, LPS clients simply took their business elsewhere, not.” Id. also asked consider whether book of business “contained other property, as customer lists or other proprietary information,” might have been transferrable. Id.
On remand, reframed our question. Because brought their CPLR § 5225(b), we had treated this as turning whether LPS’s book of business transferrable property under CPLR 5201(b). See III , F. App’x But as rightly points out, as recognized III , 5225(b) creates procedural mechanism which creditors can enforce judgment, rather than new substantive right. See N. Mariana Islands Canadian Imperial Bank of Commerce F.3d (2d Cir. 2013).
That mechanism, known “special proceeding,” no equivalent Federal Rules Civil Procedure, which “recognize only ‘one form action—the civil action.’” See Vera Republic Cuba n.3 (quoting Fed. R. Civ. P. 2). It unclear, therefore, “how party federal court satisfies ‘special proceeding’ requirements of” *7 § 5225(b). See Vera , 802 F.3d at 244 n.3 (noting we have never addressed this question in a published opinion) .
What is clear, however, is a special proceeding under 5225(b) not only mechanism avoiding fraudulent transfer in New York. Rather, creditors may instead bring plenary action avoid transfer under New York substantive law. See, e.g. , Friedman Friedman N.Y.S.2d (2d Dep’t (“[T]he remedies provided in Debtor Creditor governing fraudulent conveyances . . . are properly sought way plenary action . . . .”).
Because there no thing as “special proceeding” in federal court, we have afforded district courts New York some leeway determining whether construe particular fraudulent ‐ transfer suit as plenary action special proceeding. For instance, we have suggested federal courts may construe action DCL as “a plenary based New York substantive law,” even if “the parties . . . assumed [§] 5225(b) provide[d] procedural basis” suit. See HBE Leasing Corp. Frank F.3d n.7 1995). Similarly, have indicated dicta “that filing requirements ‘special proceeding’ law need strictly adhered as long as there no prejudice opposing party giving notice claims framing issues.” See Vera n.3.
These considerations lead us conclude although initially described their having been filed to § 5225(b), Court properly construed it plenary action. Several observations specific this reinforce our conclusion. noted, many aspects proceeding below conformed more closely form plenary action than that special proceeding. [4] Moreover, Garrison has not shown that suffered any prejudice from Court’s decision recast plaintiffs’ motion, nor Garrison argued that plenary improper New York law Rule 69(a). [5] We note, finally, assert substantive right derived from DCL, not CPLR Article 52 itself. Cf. Cruz TD Bank, N.A. 742 520 2013) (noting Article 52 special proceeding exclusive mechanism relief violations Exempt Income Protection Act, which codified scattered sections CPLR Article 52).
*9 Accordingly, we agree with the District Court that plaintiffs’ claim depends solely definition of fraudulent transfer under DCL 273 a. To prevail under that section, “a plaintiff must establish (1) that conveyance was made without fair consideration; (2) that conveyor defendant in an action damages that in has been docketed him; and (3) that defendant failed satisfy judgment.” III , 579 F. App’x at 21 (quoting Grace v. Bank Leumi Trust Co. of N.Y., 443 F.3d 180, 188 (2d Cir. 2006)). agree with have met these requirements, and we reject as meritless Garrison’s argument erred (1) in finding LPS’s customer accounts were assets and in assigning them value, (2) finding LPS, rather than Lyons, had owned and transferred accounts and (3) finding accounts had been without payment of fair consideration.
Because this appeal follows bench trial, “we review district court’s findings fact clear error conclusions of law mixed questions de novo .” Connors Conn. Gen. Life Ins. Co. , 272 F.3d 127, (2d Cir. 2001). noted last time this was before us, company’s “book business” may asset law. See F. App’x (citing cases). The value particular asset question fact, whether transfer occurred whether fair consideration was paid. See, e.g. Citizens Bank Clearwater Hunt 711, (2d 1991); Matter Estate Corning N.Y.S.2d Dep’t 1985). Here, found book business question fact book business worth at least $300,000, originally belonged LPS (not Lyons), and LPS itself received no consideration transfer. We see nothing Court’s thorough opinion suggest erred making these factual findings, much less clearly erred.
CONCLUSION have reviewed all arguments raised by Garrison
appeal and find them be without merit. For foregoing reasons, AFFIRM June Court.
[1] CPLR 5225(b) provides full: (b) Property possession judgment debtor. Upon special proceeding commenced judgment creditor, against person possession or custody money or other personal property which judgment debtor interest, or person who transferee or other personal property judgment debtor, where shown judgment debtor entitled possession property creditor ʹ s rights property are superior those
[3] our use word “contained” suggests, term “book business” tends conflate physical list accounts or clients with value accounts clients themselves. Cf. Book Business Black’s Dictionary (10th ed. 2014).
[4] For instance, proceeding before involved more extensive discovery than would normally available special proceeding. See Prof’l Servs., F. Supp. 3d 555, (E.D.N.Y. (“ IV ”).
[5] For instance, Garrison notes plaintiffs’ “relied upon Debtor ‐ Creditor Law[ ] §§ 274, 278,” and “[t]hose statutes were only applicable law before basis upon which Garrison defended motion.” Garrison Br. Similarly, while Garrison’s brief appeal discusses DCL § related DCL provisions great detail, does cite CPLR much less argue its definition transferable property should control here. also note invoked early this litigation, which gave sufficient notice allow defend arguments relevant plenary action.
[6] Indeed, Garrison itself described LPS’s customer account list valuable “asset.” The Consulting Agreement between Garrison provided “the names addresses Garrison’s customers . . . are valuable special unique assets Garrison’s business, including customers procured [Lyons] .” App. (emphasis supplied). The Consulting Agreement further specified expected derive “annual revenues least $1,379,622.00” those accounts. App.