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Sep 19, 2014 - 238 A.D.2d 111, 111, 655 N.Y.D.2d 40, 40 (1st Dept. ... Inc., v. Sahagen,. No. Civ. 6412, 2007 WL 747861
FILED: NEW YORK COUNTY CLERK 09/24/2014 11:14 PM NYSCEF DOC. NO. 46

INDEX NO. 158388/2014 RECEIVED NYSCEF: 09/24/2014

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ---------------------------------------------------x

CITY NATIONAL BANK Plaintiff,

Hon. Jeffrey K. Oing Index No.: 158388/2014

-againstMORELLI RATHER,P.C., BENEDICT B. MORELLI AND ARLENE P. MORELLI,

Motion Seq. No. 002

Defendants.

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PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF ITS APPLICATION BY ORDER TO SHOW CAUSE FOR AN ORDER OF ATTACHMENT AND TEMPORARY RESTRAINING ORDER

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Attorneysfor Plaintiff September 19, 2014

TABLE OF CONTENTS Page

PRELIMINARYSTATEMENT .................................................................................................... 1 STATEMENTOF FACTS ............................................................................................................. 3 A. City National Bank Is Likely To Prevail Because the Loan and Letter of Credit Establish That Defendants Owe City National Bank Over $3 Million........................... 3 B. Defendants Have Encumbered Their Assets To Frustrate City National Bank's Collection Of Its Judgment ............................................................................................. 4 C. Defendants' Transfers Have Left Morelli Ratner Without The Means To Pay Its Debts............................................................................................................................... 8 D. Defendants Have Moved Their Assets Out Of This State And Breached Their Guaranty By Encumbering Assets Pledged to City National Bank .............................. 10 ARGUMENT................................................................................................................................ 11 A. City National Bank Has A Cause of Action and Will Likely Succeed on the Meritsof Its Claim ........................................................................................................ 11 B. City National Bank Is Entitled to Prejudgment Attachment Under CPLR § 6201(3) Because Defendants Have Encumbered Their Assets and Removed Them From New York with the Intent to Defraud City National Bank ....................... 13 C. The Claims Defendants Purport to Bring Against City National Bank Should BeDisregarded .............................................................................................................. 17 D. City National Bank Is Entitled to A Temporary Restraining Order Enjoining the Alienation of Defendants' Assets Until the Hearing Date ............................................ 19

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CONCLUSION............................................................................................................................. 20

TABLE OF AUTHORITIES Page

Cases Algonquin Power Corp., Inc. v. Trafalger Power Inc., No. CIVAS:OOCV1246,2000 WL 33963085 (N.D.N.Y. Nov. 8, 2000).................................. 17 Bank China, New York Branch v. NBM, LLC, 192 F. Supp. 2d 183(S.D.N.Y. 2002)....................................................................................... 11 Bank Leumi Trust Co. v. Istim, Inc., 892 F. Supp. 478,482(S.D.N.Y. 1995).................................................................. 12, 13, 17, 20 Citibank N.A. v. Plapinger, 66 N.Y.2d 90,95, 495 N.Y.S. 2d 309, 311-12(2d Dep't 1985).............................................. 13 Considar Inc. v. Redi Corp. Estab., 238 A.D.2d 111, 111,655 N.Y.D.2d 40, 40 (1st Dept. 1997)........................................... 11, 12 Gafco, Inc. v. H.D. S. Mercantile Corp., 47 Misc. 2d 661, 664, 263 N.Y.S.2d 109, 114(N.Y. Civ. Ct. 1965)........................... 15, 16, 19 .ISC Forezgn Econ. Assn Technostroyexport v. Intl Dev. & Ti^ade Servs., 306 F. Supp. Zd 482,484-85(S.DN.Y. 2004)................................................................... 11, 14 Marina B. Creation, S.A. v. Mau~ier, 86 Civ. 9748, 1988 WL 10873 (S.D.N.Y. Feb. 9, 1988).......................................................... 16 N.Y. Dist. Coicnczl ofCarpenters Pension Fund v. K. W. Const., Inc., No. 07 Civ. 8008,2008 WL 2115225(S.DN.Y. May 16, 2008)............................................. 17 N.Y. Janitorial Serv., Inc. v. Easthampton Dewitt Corp., 100 Misc. 2d 814, 815, 420 N.Y.S. 2d 100, 101 (N.Y. Sup. Ct. 1979).................................... 21 Pen Pak Corp. v. LaSalle Nat. Bank ofChicago, 240 A.D.2d 384, 386,658 N.Y.S.2d 407, 408(2d Dep't 1997 ................................................ 15 Robles Transp. Prod. Corp. v. Dura-Wear Prod. Corp., 97 N.Y.S.2d 837(N.Y. Sup. Ct. 1950)..................................................................................... 20 Societe Generale Alsacienne De Banque v. Flemingdon Dev. Corp., 118 A.D.2d 769, 500 N.Y.S.2d 278(2d Dep't. 1986).............................................................. 19 Swiss Bank Corp. v. Eatessami, 26 A.D. 2d 287,290, 273 N.Y.S.2d 935 (lst Dept. 1966) i

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TABLE OF AUTHORITIES (continued) Page

Thronapple Assocs. Inc., v. Sahagen, No. Civ. 6412,2007 WL 747861 at *3 (S.D.N.Y. Mar. 12, 2007)........................................... 12 Statutes CPLR§ 6201....................................................................................................................... 2, 14, 18 CPLR§ 6210................................................................................................................................... 2 CPLR§ 6212..................................................................................................................... 11, 19, 20 Treatises 13 Weinstein, Korn &Miller, New York Civil Practice § 6210.01 ............................................. 21

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PRELIMINARY STATEMENT Defendant Morelli Ratner borrowed money from Plaintiff City National Bank and did not pay it back. The loan came due on August 1, 2012. City National Bank extended the time for payment twice, once in January 2013 and then in June 2013. The debt came due in full in September 2013 and over $3 million remains outstanding. Defendants Benedict Morelli and Arlene Morelli unconditionally guaranteed the debt, but have not honored their guaranty. Instead, while the debt was due and unpaid, all three defendants took deliberate and intentional steps to hinder City National Bank's attempts to collect on its debt by fraudulently conveying assets to an entity controlled by Mr. Morelli and by transferring assets out ofthe state. Specifically, while the debt to City National Bank was outstanding, due and unpaid, in October 2012 the Morellis transferred millions of dollars to Florida to invest in a $4.5 million condominium that is now encumbered by mortgages of $4.2 million. In addition, while the debt was outstanding and in order to avoid City National Bank's filed security interest in all of the assets of Morelli Ratner, in November 2013 Mr. Morelli created a new firm named Morelli Alters Ratner, PC("Morelli Alters Ratner"). Mr. Morelli contends that the two firms are separate and that Morelli Alters Ratner is not a successor firm. Notwithstanding the supposed "separateness" of the two firms, Mr. Morelli transferred assets from Morelli Ratner to Morelli Alters Ratner without apparent consideration. For example, Morelli Ratner transferred over 200 personal injury cases it had filed and worked on relating to the use of Chantix—a drug designed to assist people to stop smoking—to Morelli Alters Ratner. Although Morelli Ratner had pledged its right to be compensated for the work it performed on the Chantix cases to City National Bank as security for its loan in 2011, Morelli Alters Ratner has pledged the proceeds ofthose same cases to Esquire Bank.

According to published reports, the Chantix cases were settled for millions of dollars while the City National Bank Loan was in default. Morelli Alters Ratner filed stipulations of dismissal with prejudice for the Chantix cases filed by Morelli Ratner. The compensation for these cases was owed to Morelli Ratner and pledged to City National Bank, but went to Morelli Alters Ratner instead. A similar pattern was followed for numerous outstanding Morelli Ratner cases. The result of the fraudulent conveyance of Morelli Ratner's right to be paid for the work it did on its existing cases was to strip Morelli Ratner of its assets and to leave it without the means to pay back its debt to City National Bank (or its other creditors). See Affirmation of Robert Weigel ("Weigel Aff.")at ¶¶ 27-32. The transfer of substantially all ofthe assets from Morelli Ratner— a professional corporation owned and controlled by Mr. Morelli—to another professional corporation controlled by Mr. Morelli for no apparent consideration, left Morelli Ratner insolvent and unable to pay its debts. Multiple creditors have been forced to sue Morelli Ratner to recover payments on equipment leases for such basic office equipment as copiers and printers. In short, the transfer of substantially all of Morelli Ratner's assets to a related company wears many badges of fraud. City National Bank is entitled to a prejudgment attachment pursuant to CPLR § 6201 to ensure that any judgment rendered by this Court will not be a futile exercise. In addition, pursuant to CPLR § 6210, City National Bank respectfully requests that this Court enter a temporary restraining order enjoining Defendants, their successors, assigns, agents, officers, employees, agents or attorneys, in either their individual or corporate capacities, from alienating, transferring, encumbering or otherwise diminishing any assets until such time as the Court issues or denies an order of attachment.

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STATEMENT OF FACTS A.

City National Bank Is Likely To Prevail Because the Loan and Letter of Credit Establish That Defendants Owe City National Bank Over $3 Million As set forth in the Affidavits of Raymond Forgette filed in support of Plaintiff's motion

for summary judgment and this motion for attachment, in July 2011 Plaintiff made a $10 million loan to Morelli Ratner, the Borrower, of which Mr. Morelli is the President and sole shareholder, and provided it with a $140,000 letter of credit facility. See Affidavit of Raymond Forgette, dated August 21, 2014("Forgette Summary Judgment Aff.")¶~ 2-3, 8; Affidavit of Raymond Forgette dated September 18, 2014("Forgette Aff."), Ex. 2; Weigel Aff. Ex. 2. Morelli Ratner granted City National Bank a continuing security interest in, among other things: Each case arising out of or in connection with the rendering of services by [Morelli Ratner, P.C] including, without limitation, [Morelli Ratner, P.C.'s] right to be compensated for its services and reimbursed for related costs and expenses incurred, amounts disbursed or obligations incurred for the account of the [Morelli Ratner P.C.'s] clients for fees paid or payable to or goods or services obtained from [Morelli Ratner P.C.'s], partners and employees or third parties, whether or not the borrower has rendered a bill for such services or disbursements or entered the value of such services or disbursements in its books as accounts receivable whether or not sLich services or disbursements have been completed and whether or not an express or implied agreement for compensation for such services or reimbursement for such disbursements exists and all rights now or hereinafter existing in and to all retainer agreements, security agreements and all other contracts securing or otherwise relatin two anv such accounts, contract rights instruments chattel paper general intangibles or obligations and all proceeds of anv and all of the foregoing (including, without limitation, proceeds which constitute property or the type described in this section, cash, and all business records and information relating to any ofthe foregoing....(emphasis added) Forgette Summary Judgment Aff., Ex. A at p.17. City National Bank recorded its lien in a UCC Statement. Forgette Aff. Ex. 3. As further security for the loan and letter of credit facility, the Morellis unconditionally guaranteed Morelli Ratner's obligations and agreed that City National Bank could proceed directly against them for any unpaid "Indebtedness" of Morelli Ratner. Forgette Summary Judgment Aff. Ex. E.

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The Loan originally came due on August 1, 2012. Forgette Aff. ¶ 12. Mr. Morelli formed Morelli Alters Ratner—a new law firm controlled by Mr. Morelli and with the same address as Morelli Ratner—in November 2012. Weigel Aff. Exs. 1, 2. City National Bank agreed to extend the time for payment twice, once in January 2013 and then in June 2013. Forgette Aff. Ex. 4. Those extensions were signed by all ofthe Defendants. Forgette Af£ Ex. 4. The Loan, as extended, came due in September 2013 and the Letter of Credit was completely drawn down by Morelli Ratner/Morelli Alters Ratner's landlord in January 2014. Forgette Summary Judgment Aff. ¶¶ 10, 13; Forgette Aff. Ex. 6. City National Bank notified Defendants of their default in February 2014. Forgette Summary Judgment Aff. ¶ 20, Exs. F, G. The total amount owed and unpaid by Morelli Ratner—and for which the Defendants are liable—was $3,100,894.54 as of August 21, 2014. See Forgette Summary Judgment Af£ ¶ 29. The amount owed continues to increase. Id. B.

Defendants Have Encumbered Their Assets To Frustrate City National Bank's Collection OfIts Judgment Despite representations to City National Bank that Morelli Ratner would receive the

proceeds of the cases that Morelli Ratner had filed before the formation of Morelli Alters Ratner, Morelli Ratner fraudulently conveyed those cases to Morelli Alters Ratner—which Mr. Morelli controls as he controlled Morelli Ratner. Forgette Aff. Ex. 2; Weigel Aff. Ex. 2. For example between 2009 and June 2012, Morelli Ratner filed a series of personal injury cases related to Chantix, a drug to help people stop smoking (the "Chantix cases"). The Chantix cases were included on a list of cases that Mr. Morelli provided to City National Bank to assure City National Bank of Morelli Ratner's expected income stream in 2013. Forgette Af£ Ex. 5. Mr. Morelli represented to City National Bank that he expected to receive a portion of an expected

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settlement of $6 million from the Chantix cases. Id. Morelli Ratner was included in "Plaintiffs' Leadership Structure" as evidenced by a February 1, 2010 order. Weigel Aff. Ex. 4. Despite the fact that Morelli Ratner filed those 207 cases and worked on them for years, on or before Apri12013, Mr. Morelli caused Morelli Ratner to transfer all 207 cases to Morelli Alters Ratner. Among the other documents evidencing the transfer, on January 9, 2014, one lawyer from Morelli Alters Ratner withdrew from the Chantix cases and Morelli Alters Ratner indicated that plaintiffs in the 207 cases filed by Morelli Ratner would "continue to be represented by David S. Ratner of Morelli Alters Ratner, P.C."(emphasis added) Weigel Aff. Ex. 7. Morelli Alters Ratner then apparently borrowed additional money on the fees to be generated by the cases that had been filed and advanced by Morelli Ratner. On April 26, 2013, Esquire Bank filed a UCC filing statement in Florida against Morelli Alters Ratner purporting to grant Esquire Bank a lien over the "right, title, and interest in any and all of the funds or payments" from certain claims pending in the Chantix cases and "all rights under a Certain Confidential Settlement Agreement Between Certain Claimants with Claims Relating to Chantix Represented by [Morelli Alters Ratner] and Pfizer, and all proceeds of any and all ofthe foregoing, including all rights to payment with respect to any of the foregoing." Weigel Af£ ¶ 11, Ex. 5. The 207 cases that Morelli Alters Ratner represented that they were counsel on were withdrawn with prejudice in March 2014. Weigel Aff. Ex. 8. The amounts of those settlements have not been made public. Although the proceeds of those cases were pledged to City National Bank as security—City National Bank has not been informed ofthe amounts of such settlements or been notified of the payment of any fees. Forgette Aff. ~ 14.

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Numerous other cases were transferred from Morelli Ratner to Morelli Alters Ratner to defraud City National Bank and Morelli Ratner's others creditors. For example:

— On July 12, 2010, Morelli Ratner filed an action entitled Li v. Chacon, No. 109371/10 in New York Supreme Court for damages allegedly suffered by plaintiff from having been struck by a vehicle while bicycling through an intersection. Weigel Af£ Ex. 9. On or before September 26, 2013, Morelli Alters Ratner began representing the plaintiffs formerly represented by Morelli Ratner. Weigel Af£ Ex. 10. The verdict of$7,217,999 was named by VerdictSearch as number 25 on a list of the top 30 New York Verdicts of 2013. Weigel Aff. Ex. 11. —

On Apri125, 2012, Morelli Ratner filed an action entitled Priore v. Merck & Co., No. 1:12-cv-02031 (E.D.N.Y. 2012), for damages allegedly suffered by plaintiff due to Propecia, a hair loss treatment. Weigel Af£ Ex. 12. On or before May 1, 2013, Morelli Alters Ratner began representing the plaintiffs formerly represented by Morelli Ratner. Weigel Aff. Ex. 13. This action is still pending.

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On June 15, 2012, Morelli Ratner filed an action entitled Castillo v. Yorkville Dental, No. 805142/2012 in New York Supreme Court bringing malpractice claims against a dentist. Weigel Ex. 14. On or before June 4, 2014, Morelli Alters Ratner began representing the plaintiff formerly represented by Morelli Ratner. Weigel Aff. Ex. 15.

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On July 20, 2012, Morelli Ratner filed an action entitled Peritore v. Anna &Diane Cab Corp., No. 154738/2012, in New York Supreme Court for personal injuries suffered by Mr. Peritore when he allegedly was stuck by a taxicab. Weigel Af£ Ex. 16. On or before July 23, 2014, Morelli Alters Ratner began representing Mr. Peritore. Weigel Aff. Ex. 17.

— On August 14, 2012, Morelli Ratner filed an action entitled Cunningham v. Park South Tenants Corp., No. 155451/2012 in New York Supreme Court for aslip-and-fall case for personal injuries allegedly suffered by plaintiff while he was working at premises controlled by defendants. Weigel Af£ Ex. 18. On or before February 26, 2013, Morelli Alters Ratner began representing plaintiff. Weigel Aff. Ex. 19. —

On August 15, 2012, Morelli Ratner filed an action entitled Cruz v. ATCO Raceway, Inc., No. 1:12-cv-05143 (D.N.J. 2012)for a personal injury suffered by Jose Cruz during a drag race which resulted in his death. Weigel Af£ Ex. 20. On or before July 24, 2013, Morelli Alters Ratner began representing plaintiff. Weigel Aff. Ex. 21. That action is still pending.

— On August 21,2012, Morelli Ratner filed Mentor v. MVG Properties, LLC,No. 155665/12 in New York Supreme Court for personal injury suffered from aslip-and-fall incident in the stairwell of 311 Church Street. Weigel Aff. Ex. 22. On or before February 21, 2014, Morelli Alters Ratner began representing plaintiff. Weigel Aff. Ex. 23.

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– On September 14, 2012, Morelli Ratner filed an action entitled Markey v. Lapolla Industries, Inc., No. 2:12-cv-04622(N.D.N.Y. 2012), alleging that plaintiffs were residents of buildings containing defective spray polyurethane foam insulation. Weigel Af£ Ex. 24. On or before May 10, 2013, Morelli Alters Ratner began representing plaintiffs. Weigel Af£ Ex. 25. That action is still pending. – On September 25, 2012, Morelli Ratner filed another "spray foam" action. The class action complaint in Schrader v. Demilec, No. 2:12-cv-06074(D.N.J. 2012)alleges that plaintiffs were residents of buildings containing defective spray polyurethane foam insulation. Weigel Aff. Ex. 26. On or before July 22, 2014, Morelli Alters Ratner took over representation ofthe plaintiffs. Weigel Aff. Ex. 27. Mr. Morelli apparently caused Morelli Alters Ratner to borrow money from BankUnited and used as security fees on the cases filed by Morelli Ratner—fees that already had been pledged to City National Bank. On Apri17, 2014 BankUnited filed a UCC filing statement in New York against Morelli Alters Ratner, and the next day BankUnited filed two more UCC filing statements in Florida against Morelli Alters Ratner, all purporting to give blanket liens to BankUnited over, among other things: all of the funds or payments [Morelli Alters Ratner] is entitled to receive under and pursuant to any and all court orders or settlements in connection with litigation that [Morelli Alters Ratner] represented one or more plaintiffs, or class, and any and all proceeds of any and all of the foregoing, including rights to payment with respect to any and all ofthe foregoing, whether such settlements or court orders, or rights of payment thereunder is classified as an `account' or `general intangible' or other form of personal property, and any and all proceeds ofthe foregoing. Weigel Af£ Ex. 28. A number of other UCC statements have been filed purporting to record liens against Morelli Alters Ratner for cases that were filed and worked on by Morelli Ratner, for example: – Morelli Ratner filed the case entitled Sharlene Garcia as Administratrix ofthe Estate ofMarilyn Diaz, Deceased v. Garcia in 2007. Although Morelli Ratner worked on the case for years and pledged the fees that it earned to City National Bank, on August 23,2013, Plaintiff Holding V,LLC,filed a UCC statement against Morelli Alters Ratner and Mr. Morelli that purports to give Plaintiff Holding V,LLC a lien on "attorneys' fees on the matter of Sharlene Garcia as Administratrix ofthe Estate of Marilyn Diaz, Deceased v. Jose Garcia...". Weigel Aff. Ex. 29. Morelli Alters Ratner sought approval of and was granted attorneys' fees of$261,817.23 and reimbursements of$37,885.12 in expenses on October 30, 2013. Weigel Aft: Ex. 30.

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The UCC was terminated by Plaintiff Holding V,LLC on July 17, 2014, suggesting that proceeds of City National Bank's collateral had been used to satisfy Plaintiff Holding V instead. Weigel Af£ Ex. 31. – Morelli Ratner filed the case entitled Lin v. Rothberger in 2011. Although Morelli Ratner worked on the case for years and pledged the fees that it earned to City National Bank, on August 23,2013, Plaintiff Holding V,LLC,filed a second UCC against Morelli Alters Ratner and Mr. Morelli that purports to give Plaintiff Holding V,LLC a lien on "attorneys' fees on the matter of Xiu Ying Zhang as Administratrix ofthe estate of Tian Sheng Lin and Zhang,Ind. v. Rothberger, Nechama Bracha and Alan H. Rothberger pending in the Supreme Court ofthe State of New York, Kings County, Index #1012/2011". Weigel Aff. Ex. 32. – Morelli Ratner filed the case entitled Stawski v. Pasternack in 1995. Although Morelli Ratner worked on the case for years and pledged the fees that it earned to City National Bank, on January 21,2014—while the Loan remained outstanding— Plaintiff Holding V,LLC filed another UCC Statement, against Morelli Alters Ratner and Mr. Morelli purporting to give Plaintiff Holding V,LLC a lien on "attorney fees on the matter of Adam Stawski by Gary S. Jacobson as Chapter 7 Bankruptcy Trustee v. Pasternack, Popish &Reif, et al., Supreme Court of the State of New York, New York County, Index #100195/1995"...". Weigel Af£ Ex. 33. C.

Defendants' Transfers Have Left Morelli Ratner Without The Means To Pay Its Debts The conveyance of Morelli Ratner's assets to Morelli Alters Ratner has left Morelli

Ratner without the means to pay its debts. In addition to the $3,100,894.54 that Morelli Ratner owes City National Bank, Morelli Ratner has been sued by a number of its creditors for failing to pay its debts—including for basic office equipment—evidencing that the transfer of assets from Morelli Ratner to Morelli Alters Ratner rendered Morelli Ratner insolvent. Between September 2012 and January 2013 at least five actions were brought by creditors demanding between $79,952.60 and $298,325.67 for Morelli Ratner's failure to pay them monthly payments for leased office equipment. Weigel Aff. ¶¶ 27-32. For example: – On September 14, 2012, CoActiv Capital Partners("CoActiv")filed an action in the United States District Court for the Eastern District of Pennsylvania, No. 2:12-cv-05301, against Morelli Ratner asserting that Morelli Ratner failed to make monthly payments under an equipment lease. Weigel Aff. Ex. 34. Morelli Ratner stopped making monthly payments as of June 15, 2012. Id. at ¶ 8. CoActive sought to recover $79,952.60. Id. at

¶ 12. The action was withdrawn with prejudice at CoActive's request on February 20, 2013. Weigel Aff. Ex. 35. — On October 26, 2012, shortly before the announcement of the formation of Morelli Alters Ratner, De Lage Landen Financial Services, Inc.("De Lange")filed an action in New York Supreme Court against Morelli Ratner, No. 653774/2012, asserting that Morelli Ratner failed to make monthly payments of$2,320.70 under a commercial equipment lease. Weigel Af£ Ex. 36. De Lange alleged that Morelli Ratner had failed to make payments as from June 15, 2012 and sought to recover $20,627.60. Id. at ¶ 11. — On December 5, 2012, Leaf Capital Funding, LCC("Leaf Capital"), filed an action in New York Supreme Court against Morelli Ratner, No. 654233/2012, asserting that Morelli Ratner failed to make monthly payments of $2,112.17 under an equipment lease. Weigel Aff. Ex. 37. Morelli Ratner stopped making such payments as of June 25,2012 and Leaf Capital sought to recover $93,489.38 or the return of such equipment. Id. at ¶ 5. — On October 3, 2012, Canon Financial Services("Canon")filed an action in New York Supreme Court against Morelli Ratner, asserting that Morelli Ratner failed to make monthly payments under three equipment lease agreements. Weigel Af£ Ex. 38. Morelli Ratner stopped making monthly payments as of June 10, 2012 and Canon seeks to recover $298,325.67 or the return of its equipment. Id. at ¶ 8. — On January 15, 2013, CIT Technology Financing Services("CIT")filed an action in New York Supreme Court against Morelli Alters Ratner, No. 650140/2013, asserting that Morelli Ratner failed to make monthly payments under two equipment leases for office equipment, specifically copy machines and printers. Weigel Af£ Ex. 39. Morelli Ratner stopped making such payments as of May 12, 2012. Id. at ¶ 5. CIT seeks to recover $134,154.30. Id. Morelli Alters Ratner appeared pro se and brought a summary judgment motion, arguing that there was no contractual relationship between CIT and Morelli Alters Ratner. Weigel Aff. Ex. 40. On September 24, 2013, Judge Rakower denied Morelli Alters Ratner's motion. Weigel Af£ Ex. 41. Well after Morelli Ratner was notified that it was in default under the City National Bank Loan and Letter of Credit, on Apri17, 2014, BankUnited filed a UCC filing statement, against Morelli Ratner that purports to give BankUnited a blanket lien on, among other things: all of[Morelli Ranters] presently owned or hereafter acquired right, title and interest in and to any and all funds or payments [Morelli Ratner] is entitled to receive under and pursuant to any and all court orders or settlements in connection with litigation that [Morelli Ratner] represented one or more plaintiffs, or class, and any and all proceeds of any and all of the foregoing, including the right to payment with respect to any ofthe foregoing, whether such settlements or court order, or rights of payment with respect to any ofthe foregoing, whether such settlements or court orders, or rights or payment thereunder is classified as an `account' or `general intangible' or other form of personal property, and any and all proceeds ofthe foregoing.

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Weigel Aff. Ex. 42. Apparently, Morelli Ratner attempted to pledge the same assets to two different banks. D.

Defendants Have Moved Their Assets Out Of This State And Breached Their Guaranty By Encumbering Assets Pledged to City National Bank After the Loan originally came due on August 1, 2012 and before the first forbearance

agreement was signed, on October 17, 2012, the Morellis purchased a $4.5 million condominium at the Saint Regis Bal Harbor Resort in Miami, Florida and encumbered it with a mortgage in the amount of $2.2 million for the purchase ofthat condominium. Forgette Aff. ¶ 12, Ex. 4; Weigel Aff. Ex. 43. Through their purchase of that real estate, the Morellis transferred assets out of New York. Weigel Af£ ~ 34. The Loan as extended came due in September 2013 and the Letter of Credit was drawn down by Morelli Ratner's landlord in January 2014. Forgette Summary Judgment Aff. ¶ 15; Forgette AfF. ¶ 15, Ex. 6. On February 4, 2014, the Morellis encumbered the Miami condominium again with a second mortgage in the amount of$2 million. Weigel Aff. Ex. 44. In addition, on or before March 5, 2014, a UCC was filed against Mr. and Mrs. Morelli recording a lien against an emerald cut diamond weighing 10.06 carats. Weigel Aff. Ex. 45. The numerous encumbrances that the Morellis have placed on their real and personal property violate the terms of their guaranty to City National Bank, by which they promised to: not sell, transfer, assign, pledge, grant a security interest in, provide a deed of trust, mortgage, or assume or permit to exist any lien or encumbrance whatsoever on any property except for deeds or trust, mortgages and liens, pledges and security interests in favor of CNB and the mortgages to North Jersey Community Bank outstanding on the date hereof. See Forgette Summary Judgment Aff., Ex. E, p. 4.

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ARGUMENT Under New York law, a plaintiff is entitled to prejudgment attachment if it can show that: "(1)there is a cause of action;(2)it is probable that the plaintiff will succeed on the merits;(3) one or more of the §6201 grounds for attachment exist, and (4)the amount demanded from the defendant exceeds all counterclaims known to the plaintiff'. CPLR § 6212(a); see also Bank China, New York Branch v. NBM, LLC, 192 F. Supp. 2d 183 (S.D.N.Y. 2002)(applying New York law); JSC Foreign Econ. Assn Technostroyexport v. Intl Dev. &Trade Servs., 306 F. Supp. 2d 482,484-85 (S.D.N.Y. 2004)(same). As set forth below, Plaintiff has satisfied all of these requirements for an order of attachment against all Defendants. A.

City National Bank Has A Cause of Action and Will Likely Succeed on the Merits of Its Claim City National Bank has a cause of action and will likely succeed on the merits of its

claims. New York has liberal standards for establishing the first two grounds under CPLR § 6212(a)—a cause of action and probable success on the merits. The "`court must give the plaintiff the benefit of all legitimate inferences that can be drawn from the facts"' when considering both requirements. Considar Inc. v. Redi Corp. Estab., 238 A.D.2d 111, 111,655 N.Y.D.2d 40, 40(1st Dept. 1997); Swiss Bcznk Corp. v. Eatessami, 26 A.D. 2d 287, 290,273 N.Y.S.2d 935 (lst Dept. 1966);13ank China, 189 F. Supp. 2d at 187; BankLeumi Trust Co. v. Istim, Inc., 892 F. Supp. 478,482(S.D.N.Y. 1995). First, "[u]nless the plaintiff's papers clearly establish that the plaintiff must ultimately be defeated, a cause of action exists." Thronapple Assocs. Inc., v. Sahagen, No. Civ. 6412,2007 WL 747861 at *3(S.D.N.Y. Mar. 12, 2007). Here, City National Bank's papers clearly establish a cause of action. Defendants' monetary obligations are due and remain outstanding. Forgette Summary Judgment Aff. ¶¶ 2-4. Bank

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Leumi, 892 F. Supp. at 482(finding the first two requirements met through evidence that a loan

was made and defendant's failure to prove that it had repaid the loan). Second, to show a probability of success on the merits, a plaintiff must present facts sufficient to establish a prima facie case. See Considar, 238 A.D.2d at 111,655 N.Y.S. 2d at 40. The documentary evidence establishes that City National Bank will likely succeed on the merits of its claims. By this lawsuit, City National Bank seeks to recover $3,100,894.54 with interest. Forgette Summary Judgment Aff. ¶ 2. As set forth in further detail in City National Bank's summary judgment papers, the Forgette Summary Judgment Affidavit submitted in support of that motion provides the documentary evidence establishing that:(1)the Promissory Note is due and has not been repaid by Defendants;(2)the letter of credit was drawn down and has not been repaid; and (3)the Morellis executed a continuing, unconditional guaranty to cover both the Promissory Note and Letter of Credit and have failed to honor their guaranty. Bank Leumi Trust Co., 892 F. Supp. at 482(finding under New York law that this requirement was met based on evidence that the loan had been made, came due and was not repaid); see Forgette Summary Judgment Aff. ¶¶ 2--4. Moreover, in the Guaranty, the Morellis waive: any defense arising by reason of(i) any disability or other defense of[Morelli Ratner]; (ii) the cessation from any cause whatsoever of the liability of[Morelli Ratner) for the Indebtedness for any reason other than payment in full and final satisfaction; or (iii) the non-perfection of any security or support for the Indebtedness, this Guaranty, or any other guaranty of the Indebtedness. Forgette Summary Judgment Aff. Ex. E at p.2. New York Courts have held time and time again that adefendant-guarantor, like the Morellis, is barred, as a matter of law,from raising defenses to his guaranty obligation if he has unequivocally waived or released the right to do so. See, e.g., Citibank N.A. v. Plapinger,66 N.Y.2d 90, 95, 495 N.Y.S. 2d 309, 311-12(2d Dep't 1985)

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(concluding that summary judgment in plaintiff's favor was warranted because defendantsguarantors, as a matter of law, had waived any defenses to their guaranty obligations). Therefore, on the face of the documentary evidence before the Court, City National Bank is likely to succeed on the merits of this action. B.

City National Bank Is Entitled to Prejudgment Attachment Under CPLR § 6201(3) Because Defendants Have Encumbered Their Assets and Removed Them From New York with the Intent to Defraud City National Bank City National Bank is entitled to a prejudgment attachment because the Defendants'

conduct meets the requirements of CPLR § 6201(3). Section 6201 ofthe CPLR provides for the attachment of property where "the defendant with the intent to defraud [their] 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". CPLR § 6201(3). Morelli Ratner has transferred its assets to another law firm created and controlled by Mr. Morelli, Morelli Alters Ratner. Those transfers left Morelli Ratner unable to repay its debts. After transferring those assets, both Morelli Ratner and Morelli Alters Ratner pledged assets that were pledged as security to City National Bank to other creditors. Finally, when their debt to City National Bank came due, the Morellis moved assets outside of this state and subsequently breached their guaranty to City National Bank by further encumbering their property. Because direct evidence of intent to defraud or frustrate the enforcement ofjudgments is rare, the intent required may be inferred from the circumstances. See.ISC Foreign Econ. Assn Technostroyexport, 306 F. Supp. 2d at 487. The "issue offraud is commonly determined by

certain recognized indicia, denominated `badges offraud' which are circumstances so frequently attending fraudulent transfers that an interference offraud arises from them". Gafco, Inc. v. H.D.

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S. Mercantile Corp., 47 Misc. 2d 661, 664, 263 N.Y.S.2d 109, 114(N.Y. Civ. Ct. 1965) (citations omitted); see also Pen Pak Corp. v. LaSalle Nat. Bank ofChicago, 240 A.D.2d 384, 386,658 N.Y.S.2d 407,408(2d Dep't 1997)(citations omitted). "Badges offraud" include:(1) a close relationship between the parties to the alleged fraudulent transaction;(2)a questionable transfer not in the usual course of business;(3)inadequacy ofthe consideration;(4)the transferor's knowledge ofthe creditor's claim and the inability to pay it; and(5)retention of control of the property by the transferor after the conveyance. Wall St. Assoc. v. Brodsky, 257 A.D.2d 526, 529,684 N.Y.S.2d 244, 248 (1st Dept 1999). "No effort to hinder or delay creditors is more severely condemned by the law than an attempt by a debtor to place his property where he can still enjoy it and at the same time require his creditors to remain unsatisfied." Gafco, 47 Misc. 2d at 664, 263 N.Y.S. 2d at 114 (internal quotations and citations omitted). And, a "concurrence of several badges will always make out a strong case." Id. at 665. (citations omitted).

Morelli Ratner's transfer of all of its assets to a different law firm controlled by Mr. Morelli wears several badges of fraud. First, there is a close relationship between Morelli Ratner and Morelli Alters Ratner—not only do they have a similar name, but they share the same offices and are controlled by the same manMr. Morelli. Weigel Af£ Exs.l, 2. Mr. Morelli retains control ofthe cases. He has sworn before this Courtin an action brought by one of Morelli Ratner's creditors for Morelli Ratner's alleged failure to pay for its basic office equipment—that he is the President of both Morelli Ratner and Morelli Alters Ratner. Weigel Aff. ¶¶ 7-8,Ex. 2.

Second, by transferring cases—Morelli Ratner's only form ofincome—from Morelli Ratner to Morelli Alters Ratner, Mr. Morelli essentially transferred them from his left pocket into his right pocket. Mr. Morelli remains a name partner in Morelli Alters Ratner and President of 14

both law firms. Weigel Aff. ¶¶ 7-8, Ex. 2. See Marina B. Creation, S.A. v. Maurier, 86 Civ. 9748, 1988 WL 10873(S.D.N.Y. Feb. 9, 1988)(applying New York law and confirming an expane order of attachment on the basis of, among other things, intent to defraud through the formation of companies to secrete assets through inter-company transfers). There is no question that Morelli Alters Ratner now represents plaintiffs in the cases initiated and worked on by Morelli Ratner. Weigel Aff. ¶¶ 9-26.

Third, there was no apparent consideration for the transfer ofthe cases from Morelli Ratner to Morelli Alters Ratner. The transfer of cases left Morelli Ratner unable to pay debts— even for its leases of office equipment such as printers. Weigel Aff. ~(~ 27-32; Exs. 34-41. Furthermore,"a voluntary conveyance without consideration by one who is a debtor raises a presumption offraud." Gafco,47 Misc. 2d at 664, 263 N.Y.S. 2d at 114.

Fourth, there is no question that Mr. Morelli and Morelli Ratner were aware of City National Bank's claim and have not repaid it. After its obligations to repay the Loan had come due in August 2012, Morelli Ratner proceeded to transfer the pending cases it had pledged to City National Bank as security—to Morelli Alters Ratner. Then—through Morelli Alters Ratner, Mr. Morelli used those same cases that he had pledged to City National Bank and which City National Bank has a lien on the proceeds of—to secure loans from other creditors such a Esquire Bank and BankUnited. See, e.g., Algonquin Power Corp., Inc. v. Trafalger Power Inc., No. CIVAS:OOCV1246,2000 WL 33963085 (N.D.N.Y. Nov. 8, 2000)(examining the badges of fraud under New York law and finding that the timing ofthe transfer of the relevant claims— specifically a transfer with knowledge of the counterparty's claims—was another factor weighing in favor of finding fraudulent intent or an intent to thwart enforcement).

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The "intent to avoid or frustrate judgment can be inferred from the timing of dissolution and its systematic nature." Bank Leumi,892 F. Supp. at 483,486; N.Y. Dist. Council of Carpenters Pension Fund v. K W. Const., Inc., 07 Civ. 8008,2008 WL 2115225 (S.D.N.Y. May

16, 2008); Wall St. Assoc., 257 A.D. 2d at 529,684 N.Y.S.2d at 244(finding the badges of fraud present when stock was issued and then transferred to a family member with the express intent to remove the assets from anticipated judgment creditors' reach). The systematic nature of the transfer and encumberment ofthe assets that were pledged to City National Bank, combined with their timing and the circumstances surrounding the transfer clearly indicated that Mr. Morelli undertook them with fraudulent intent. The timing of the encumberment—over a year after the formation of Morelli Alters Ratner and shortly after having been notified of their default under the Loan (and likely with the prospect of incoming funds from the settlement of over 200 cases) strongly suggests that Defendants have attempted to frustrate the enforcement of a judgment that may be rendered in City National Bank's favor. CPLR § 6201(3). For example, here over 200 cases relating to Chantix that Morelli Ratner initiated and worked on and which were pledged as security to City National Bank in 2011 were transferred to Morelli Alters Ratner for no apparent consideration when money from settlements was expected to be incoming and then pledged to Esquire Bank. Weigel Aff. at ¶ 11, Ex. 5. After transferring Morelli Ratner's cases to Morelli Alters Ratner, Mr. Morelli, through Morelli Ratner and Morelli Alters Ratner, granted blanket liens covering its income stream from cases pledged to City National Bank as security to BankUnited after it was in default under the Loan and Letter of Credit and had received notice thereof. Weigel Aff. at ¶ 23, Ex. 28; Forgette Summary Judgment Af£ Exs. F, G.

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That same intent was present when Mr. and Mrs. Morellijust two months after the Loan became due and before they co-signed a forbearance agreement—purchased a $4.5 million condominium and removed at least $2.2 million from this state. Weigel Aff. ¶ 33, Ex. 43. The Loan as extended came due in September 2013 and the Letter of Credit was drawn down by Morelli Ratner's landlord in January 2014. Forgette Aff. ¶¶ 13-15. On February 4,2014,the Morellis encumbered the Miami condominium again with a second mortgage in the amount of $2 million. Weigel Af£ Ex. 44. The Morellis' purchase of a condominium and removal oftheir assets from this state while their obligations—stemming from a loan to support Mr. Morelli's law firm—were outstanding evidences their intent to defraud City National Bank—or at the very least to frustrate City National Bank's attempts to recover the money rightly due to it. See Gafco, 47 Misc. 2d at 664, 263 N.Y.S. 2d at 114("[n]o effort to hinder or delay creditors is more

severely condemned by the law than an attempt by a debtor to place his property where he can still enjoy it and at the same time require his creditors to remain unsatisfied.")(internal quotations and citations omitted). Removing funds from this state, when coupled with other evidence of attempts to defraud creditors suggests that an attachment should be granted. See Societe Generale Alsacienne De Banque v. Flemingdon Dev. Corp., 118 A.D.2d 769, 500

N.Y.S.2d 278(2d Dep't. 1986)(intent to secrete assets to frustrate collection on a check evidenced an intent to defraud creditors). C.

The Claims Defendants Purport to Bring Against City National Bank Should Be Disregarded Finally, to obtain an attachment, a plaintiff must show "that the amount demanded from

the defendant exceeds all counterclaims known to the plaintiff." CPLR § 6212(a). Through the filing of a Summons with Notice—not aComplaint—Defendants have started a separate action against City National Bank whereby they purport to make a claim for "damages based upon

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claims, among others, for fraud, breach of contract, novation, promissory estoppel, and equitable estoppel in connection with a credit agreement, letter of credit agreement, guaranty and related documents", and claim "$3.5 million, plus statutory interest thereon, attorneys' fees and costs, and such other relief as the Court may award." Forgette Af£ ¶ 9. However,those claims do not alter Plaintiff's entitlement to prejudgment attachment. Courts "are to examine only the amount ofthe counterclaims that the plaintiff concedes are just." Robles Transp. Prod. Corp. v. Dura-Wear Prod. Corp.,97 N.Y.S.2d 837(N.Y. Sup. Ct. 1950)(reversing an order vacating warrant of attachment because "that the sum claimed is due over and above all counterclaims known to him' meant over and above all counterclaims which plaintiff was willing to concede as just"); Bank Leumi Trust Co., 892 F. Supp. at 482 (finding that because the plaintiff contends that the defendant's counterclaims "are entirely without merit, this requirement is satisfied"); Forgette Aff. ¶ 9. Here, Defendants' unsubstantiated claims are groundless and cannot be sustained, as set forth in the Affidavit of Raymond Forgette dated September 18, 2014, City National Bank does not concede that there are any just counterclaims against it. Forgette Af£ ¶ 9. Accordingly, Plaintiff has established that it is probable that it will succeed on its claim against the Defendants for a debt owed under their obligations, and that there are no just counterclaims known to Plaintiff for any amount. Accordingly, City National Bank has established that the grounds under CPLR § 6212 are met and that this Court should grant it the prejudgment attachment it seeks.

D.

City National Bank Is Entitled to A Temporary Restraining Order Enjoining the Alienation of Defendants' Assets Until the Hearing Date Because City National Bank is moving on notice for its prejudgment attachment,

pursuant to CPLR § 6210, City National Bank is seeking a temporary restraining order prohibiting the transfer of assets by Defendants, successors, assigns, agents, employees, officers, attorneys and all other persons acting in concert or in participation with any ofthem from transferring, disposing of, encumbering or otherwise diminishing or secreting any money, real or personal property until such time as an order of attachment is issue or denied. Where, as here, the plaintiff makes a motion upon notice for attachment,"the court may, without notice to the defendant, grant a temporary restraining order prohibiting the transfer of assets" so as to preserve the assets of the defendant pending the Court's decision on the motion for attachment. See CPLR § 6210. Temporary restraining orders are "designed to protect the plaintiff during the period which will elapse from the time the plaintiff moves for an order of attachment to the time when the sheriff is able to levy upon each garnishee under the order, after it has been granted." N.Y. Janitorial Serv., Inc, v. Easthampton Dewitt Corp., 100 Misc. 2d 814, 815, 420 N.Y.S. 2d 100,

101 (N.Y. Sup. Ct. 1979)("Attachment on notice has long been possible, but was seldom used since it offered plaintiffs no assurance whatever—even that of surprise—that assets would still be available by the time an order of attachment was granted...This defect has now been remedied by [section] 6210, which allows a plaintiff to obtain an ex parte temporary restraining order to protect its interests until a hearing can be held and an attachment order granted."); 13 Weinstein, Korn &Miller, New York Civil Practice § 6210.01.

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Morelli Ratner's efforts to move and encumber assets pledged as security to City National Bank by transferring them to Morelli Alters Ratner and pledging them to other creditors combined with the pending cases against Morelli Ratner for alleged failure to pay for basic office equipment indicate that City National Bank runs a significant risk of Morelli Ratner becoming judgment proof absent attachment and a temporary restraining order preventing the dissipation of Defendants' assets pending the order of attachment. As for the Morellis, there is a risk that they will continue to remove assets from this state and to encumber their assets to remove them from City National Bank's reach. Accordingly, City National Bank faces immediate and irreparable injury, loss and damages unless Defendants are restrained from transferring assets pending this Court's determination of City National Bank's request for an order of attachment. CONCLUSION For the foregoing reasons, Plaintiff respectfully requests that the Court issue an Order to Show Cause as to why an Order of Attachment directing the Sheriff to levy upon such property in which Defendants have an interest as will satisfy the amount of $3,100,894.54, which is the sum calculated to be due and owing by the Defendants as of August 21, 2014, plus probable interest, costs, attorneys' fees and the Sheriff's fees should not issue. Plaintiff also respectfully requests that the Court issue a Temporary Restraining Order enjoining and restraining Defendants, Morelli Ratner, P.C. and Benedict B. Morelli and Arlene P. Morelli, their successors, assigns, agents, employees, officers, attorneys and all other persons acting in concert or in participation with any ofthem from transferring, disposing of, alienating, encumbering or otherwise diminishing or secreting any money, real or personal property, or other assets of Defendants until such a time as the order of attachment is issued or denied.

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Dated: New York,New York September 19, 2414 Respectfully submitted,. GIBSON,DUNK & CRUTCHER LLP BY= ,_~ ~ Robert L. Wei e~ Victoria R. Orlowski 200 Park Avenue New York, New York 10166 Tel.:(212)351-4000 Attorneysfor Plaint~City National Bank

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