| New Media Holding Co. LLC v Kagalovsky |
| 2012 NY Slip Op 05597 [97 AD3d 463] |
| July 17, 2012 |
| Appellate Division, First Department |
| New Media Holding Company LLC,Respondent, v Konstantin Kagalovsky et al., Defendants/Counterclaim Plaintiffs, andAspida Ventures Ltd. et al., Appellants. Vladimir Gusinski, CounterclaimDefendants. |
—[*1] Covington & Burling LLP, New York (C. William Phillips of counsel), forrespondent.
Order, Supreme Court, New York County (Charles E. Ramos, J.), entered July 27, 2010,which granted plaintiff's motion for a default judgment as against defendants-appellants,unanimously reversed, on the law, and in the exercise of discretion, without costs, and the motiondenied. Judgment, same court and Justice, entered February 14, 2011, againstdefendants-appellants in plaintiff's favor, unanimously reversed, on the law, without costs, andthe judgment vacated. Appeal from orders, same court and Justice, entered July 13, 2011, andAugust 1, 2011, which denied defendants-appellants' motion to vacate the default judgmentagainst them, unanimously dismissed, without costs, as academic.
Plaintiff is a Delaware limited liability company headquartered in Connecticut. DefendantIota LP is an Isle of Jersey partnership, allegedly owned and controlled by defendant Kagalovsky,a Russian citizen who resides in London.
Plaintiff and defendant Iota LP are equal partners in nonparty Iota Ventures LLC, a Delawarelimited liability partnership (the Partnership). The Partnership was formed to own and operate anew television network in the Ukraine, named TVi. TVi was owned by nonpartyTeleradiocompanyTeleRadioSvit LLC (TRS), a Ukranian entity, which in turn was held througha series of companies owned directly or indirectly by the Partnership.
Plaintiff alleges that defendants-appellants, Aspida Ventures Ltd. and Seragill Holdings[*2]Ltd., Cypriot entities, were used by defendant Kagalovsky aspart of a conspiracy to effect the improper and surreptitious dilution of the Partnership's interestin TRS and TVi, in order to deprive plaintiff of its 50% ownership interest therein. Plaintiffbrings this action to restore its rights in TRS and TVi, to stop any further liquidation of itsownership interests, and for damages caused by defendants' allegedly improper actions.
The court properly exercised jurisdiction over defendants- appellants pursuant to CPLR 302(a) (1). "[P]roof of one transaction in New York is sufficient to invoke jurisdiction, even thoughthe defendant never enters New York, so long as the defendant's activities here were purposefuland there is a substantial relationship between the transaction and the claim asserted"(Kreutter v McFadden Oil Corp., 71 NY2d 460, 467 [1988]). Contrary todefendants-appellants' contention, there was no need to establish a formal agency relationshipbetween them and the other defendants, since it was shown that the other defendants actedpurposely in New York for their benefit and with their knowledge and consent, and thatdefendants-appellants exercised "some control" over the other defendants in the matter(id.). Defendant Kagalovsky's negotiation of the partnership agreement in New York anddefendant Iota LP's subsequent actions in New York, including its commencement of an action infederal court in New York based on the partnership agreement, are sufficient to show thatdefendants-appellants, "through an agent," transacted "any business within" the state (CPLR 302[a] [1]; see e.g. Soloman Ltd. v Biederman & Co., 177 AD2d 350 [1991]).
Moreover, for the purpose of these transactions, defendants-appellants and the otherdefendants were alter egos (see e.g.Holme v Global Mins. & Metals Corp., 63 AD3d 417 [2009]). Defendant Kagalovsky'sdeposition testimony explaining how and why he used defendants-appellants amply supportslong-arm jurisdiction under an alter-ego theory.
The court also properly exercised long-arm jurisdiction under CPLR 302 (a) (2) sincedefendants-appellants are alleged co-conspirators in the commission of a tort in New York Statethrough an agent (see CIBC Mellon Trust Co. v Mora Hotel Corp., 296 AD2d 81, 98[2002], affd 100 NY2d 215 [2003], cert denied 540 US 948 [2003]; see alsoReeves v Phillips, 54 AD2d 854 [1976]).
Having found that a basis for long-arm jurisdiction exists, we must now determine whetherthe court providently exercised its discretion in granting plaintiff's motion for the entry of adefault judgment.
"In order to successfully oppose a [motion for a] default judgment, a defendant mustdemonstrate a justifiable excuse for his default and a meritorious defense" (ICBC Broadcast Holdings-NY, Inc. vPrime Time Adv., Inc., 26 AD3d 239, 240 [2006]). "[W]hether there is a reasonableexcuse for a default is a discretionary, sui generis determination to be made by the court based onall relevant factors, including the extent of the delay, whether there has been prejudice to theopposing party, whether there has been willfulness, and the strong public policy in favor ofresolving cases on the merits" (Rickert vChestara, 56 AD3d 941, 942 [2008] [internal quotation marks omitted]; see Finkelstein v Sunshine, 47 AD3d882 [2008]). Moreover, courts have the inherent power to forgive even an unexplaineddefault "in the interest of justice" (B.U.D. Sheetmetal v Massachusetts Bay Ins. Co., 248AD2d 856, 856 [1998]). Applying these principles, this is not an appropriate case for departurefrom this State's preference for resolving controversies upon the merits and the interests of justicewarrant an exercise of discretion in favor of excusing the delay in answering at issue (see Zanelli v JMM Raceway, LLC, 83AD3d 697 [2011]).[*3]
The complaint was served on defendants-appellants inCyprus on December 15, 2009. On May 24, 2010, plaintiff moved for a default judgment. OnJune 7, 2010, defendants-appellants served their answers. When plaintiff rejected the answers,defendants- appellants timely opposed the motion for a default judgment, asserting a lack ofjurisdiction. Alternatively, they averred that there was a reasonable excuse for their failure totimely answer based on "th[eir] good faith and substantiated belief" that there was no basis forpersonal jurisdiction. Defendants-appellants also demonstrated, for the purposes of the motion, apotentially meritorious defense that the subject ownership transfers were for fair value, were notprohibited by any governing agreement or Ukrainian law, and were necessary to avoidbankruptcy (see Poree v Bynum, 56AD3d 261, 262 [2008]; Spira vNew York City Tr. Auth., 49 AD3d 478 [2008]). Further, and significantly, the causesof action asserted against defendants-appellants are derivative of the claims against Kagalovskyand Iota LP, who are vigorously defending the action.
Under these circumstances, "given the questions of fact as to merit, the brief delay, the lackof intention on defendants' part to default, the failure of plaintiff to demonstrate any prejudiceattributable to the delay and the policy preference in favor of resolving disputes on the merits, weconclude that defendants' untimeliness should have been excused in this instance" (Cerrone vFasulo, 245 AD2d 793, 794 [1997]). Concur—Andrias, J.P., Saxe, Acosta, Freedmanand Richter, JJ.