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SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK
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SCOTT KASEN,

Index No.: 652506/2017

Plaintiff,

-Against-

MISSION CANTINA, LLC, A New York

Limited Liability Company,

Defendant,
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DEFENDANTS MEMORANDUM OF LAW IN OPPOSITION TO PLAINTIFFS

MOTION FOR SUMMARY JUDGMENT IN LIEU OF COMPLAINT

NEIL L. POSTRYGACZ
ATTORNEY AT LAW, P.C.
175 Varick Street
New York, NY 10014
(p) 212.392.4945
(f) 646.514.1997
neil@neilesq.com

Yan Margolin, Esq.

Of-Counsel

Attorneys for Defendant

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TABLE OF CONTENTS

TABLE OF AUTHORITIES ............................................................................................. ...i

PRELIMINARY STATEMENT...1

STATEMENT OF FACTS1

ARGUMENT ..................................................................................................................... ..7

I. Legal Standard .7

II. The Note Is Void, As It Was Not Unanimously Agreed To By All Managers ...9

III. The Note Is Not On Commercially Reasonable Terms and Lacks Consideration..10

IV. The Note Is The Product Of A Breach Of Fiduciary Duty By Plaintiffs.12

CONCLUSION.13

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TABLE OF AUTHORITIES

Cases:

1230 Park Associates, LLC v. Northern Source, LLC, 48 A.D.3d 355

(1st Dept 2008)...8, 10

American Realty Corp. of NY v. Sukhu, 90 A.D.3d 792, 793 (2nd Dept 2011)...........8, 10
Amirana v. Howland, 202 A.D.2d 783, 784 (3rd Dept 1994).8
Channel Excavators, Inc. v. Amato Trucking Corp., 48 Misc.2d 429
(Sup. Ct. Nassau Co. 1965) ..7

Cohen v. Gateway Builders Realty, Inc., 41 Misc.3d 1240(A), 3 (Sup. Ct. Kings Co. 2013).........8, 12
First International Bank, Ltd. v. L. Blankstein & Son, Inc., 59 N.Y.2d 436 (1983).7
Friends Lumber Inc. v. Cornell Development Corp., 243 A.D.2d 886 (3rd Dept 1997)..7, 12
K.S. Finance Corp. v. A.R.B. Inc., 12 Misc.3d 1038, 1043 (Civil Ct. N.Y. Co. 2006)8
Nader & Sons, LLC v. Hazak Associates LLC, 149 A.D.3d 503 (1 st Dept 2017)..8, 9
Overhoff v. Scarp, Inc., 12 Misc.3d 350, 362 (Sup. Ct. Erie Co. 2005).. .8
TIC Holdings, LLC v. HR Software, Acquisition Group, Inc., 194 Misc.2d 106, 109
(Sup. Ct. N.Y. Co. 2002) ..8, 9

Statutes:
CPLR 3213 ......7, 9
LLCL 412...8,9
LLCL 411..8, 9, 10
LLCL 409 ..11

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PRELIMINARY STATEMENT

This Memorandum of Law is submitted in opposition to Plaintiff Scott Kasens

(Plaintiff) motion for summary judgment in lieu of a complaint for a money judgment in

the amount of $425,940.82, plus interest, costs and fees against Mission Cantina, LLC

(Company or Defendant.) There are triable issues of fact that require the denial of this

motion, including the fact that the instrument under which this motion is brought is

defective on its face, and the Plaintiff and Defendant did not have the authority to allegedly

enter into said instrument.

STATEMENT OF FACTS

Mission Cantina was a Mexican restaurant that was a spin-off from the famous and well-

renowned Mission Chinese Food restaurant. The Plaintiff, however, is not associated with the

previous iterations of this brand; instead, Mission Chinese Food is owned by four men: famed

chef James Daniel Bowien (Bowien), and his friends Anthony Myint (Myint), Greg Wong

(Wong) and Dennis Kim (Kim, cumulatively referred to as the Common Members.) In

early 2013, the Plaintiff and his associate, Francis Falcinelli (Falcinelli, cumulatively referred to

as the Investor Members) approached Mr. Bowien regarding investing in a new brand of

Mission food service. The pitched idea was the Investor Members would provide most of the

financial outlay for a new venture, and the Common Members would provide intellectual

property, their accumulated goodwill, funds and services (sweat equity) to the new venture. Mr.

Kasen came with substantial financial backing, and had his lawyers process the entirety of the

formation documents for the Company. The Common Members were still somewhat staggered by

their conflict with their landlord at a separate location of the franchise (where this firm

represented them) and were willing to allow the wealthy and well-connected Plaintiff and his legal

team to manage the formation of the Company and acquisition of a space.

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From its assumption of the lease at 172 Orchard Street (the Premises), the venture

encountered severe problems. Upon purchase of the space from the previous occupant (an entity

named the Pan Asian Bistro LES), the members discovered that there was an income tax lien

placed upon the property by New York State for unpaid sales taxes owed by Pan Asian Bistro.

According to documents filed by attorneys representing the Company but retained by Mr. Kasen,

the law firm that represented the Company in assuming the lease failed to properly file certain

sales documents, which resulted in the Company being liable for no less than $66,000 in taxes and

fees that where attached to the space due to the unscrupulous business practices of the former

tenant. Needless to say, this start to the venture was nothing less than crippling.

On or about February 4, 2014, under the direction of Mr. Kasens attorneys, the

Companys first Operating Agreement (Operating Agreement) was drafted. A copy of the

Operating Agreement is annexed hereto as Exhibit A. The Operating Agreement divided the

members into the two aforementioned groups, being the Common Members and the Investor

Members. The ownership of interest in the Company was divided as follows:

Bowien at 51%

Kim at 1%

Myint at 7%

Wong at 2%

Kasen at 33%

Falcinelli at 6%

The Common Members contributed their services and goodwill, as well as funds while

the Investor Members were required to contribute initial capital, with Kasen contributing

$330,000, and Falcinelli contributing $60,000. The Operating Agreement featured several other

provisions that are extremely relevant to this matter. Provision 5.3, entitled Status of Capital

Contributions stated that no Member shall have the right to withdraw or demand a return of any

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of such Members Capital Contribution or Capital Account, except upon dissolution or liquidation

of the Company to the extent specifically provided herein. No Member shall have the right to

receive property other than cash except as may be specifically provided in this Agreement.

Provision 5.4, entitled Loans to the Company, allowed a Member to make a loan to the

Company, upon the request of the Members, on commercially reasonable terms and

conditions. (Emphasis Added).

More crucially, Section 7 deals with Management of the Company. Section 7.1

designated a Management Committee to exert management and control over the Company.

Section 7.3 stated that the Management Committee shall be comprised of three Managers (being

the only managers of the LLC): Bowien, Myint, and Kasen (referred to herein collectively as the

Managers).
The most integral sections of the Operating Agreement to this action are sections 7.5 and

7.6. 7.5 states that except as otherwise provided in this Agreement, all matters that are to be

decided by the Management Committee are to be determined by a majority of the Managers.

Section 7.6 represents the carve-outs to the majority requirement, stating that notwithstanding the

foregoing Section 7.5, the following acts of the Company shall require the unanimous consent of

all the Managers. (Emphasis Added). Bullet-point (f) included in said unanimous-consent

decisions states the following:

Borrowing money, guaranteeing indebtedness and other liabilities and issuing

evidence of indebtedness on behalf of the Company, including without
limitation, negotiating and executing all notes, mortgages and other documents
and certificates in connection with such financing, to the extent such
obligations exceed one thousand dollars ($1,000) (Emphasis Added)

Section 7.8(b) states that until the Investor Members are repaid their Capital Contributions,

Bowien will receive an annual salary set at $50,000. Mr. Bowien has never received this salary.

Section 9 addresses Dissolution of the Company. To date, no dissolution has been

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undertaken, whether judicially or otherwise. Notably, Section 9.2(a)(i) requires that, upon the

initiation of dissolution proceedings, debts must first be paid, and reserves established from which

the Management Committee deems reasonably necessary for any contingent or unforeseen

liabilities or obligations of the Company to be paid from. No such reserves have been

established. Only then would any Investor Members be paid back any share of their Capital

Contributions.

As the Company continued to operate Cantina, despite the initial shock of the sales tax

crisis, the Members determined more money was necessary. This was obtained through several

loans made by Mr. Kasen, Mr. Bowien and Mr. Myint. The Plaintiffs Memorandum in this

action only briefly mentions (without attaching) Mr. Kasens previous notes, while utterly

ignoring Bowiens and Myints loans to the Company. Mr. Kasen was issued two notes in his

favor by the Company in exchange for additional funds: one on February 26th, 2015 for $30,000,

and another on December 29th, 2015 for $12,885. A copy of these two notes are cumulatively

annexed as Exhibit B. Both notes were drafted by Mr. Kasens attorneys, and there is no

documented evidence that all three Managers of the Company agreed to them. It should further be

noted that these loans were used for non-essential improvements to the space that Mr. Kasen alone

felt were needed (despite not having any actual restaurant-related history or knowledge himself).

The Company continued to hemorrhage money during its course of business. It became

clear that the Mission brand did not translate as well into Mexican food as it did in its Chinese

food incarnation. By the third quarter of 2016, the Member seriously discussed either turning the

restaurant into a Vietnamese food concept (and moving to a new space) or shutting down entirely.

The Management Committee held meetings every other Friday at the Company office, and the

agenda for November 11, 2016 shows that the Members discussed their final move for the failing

business.

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The Members decided that the best plan was to concurrently close Cantina, and open a

Vietnamese restaurant at a space on Canal Street that was for a highly reduced rent (based on

Bowiens personal connections and relationships). The plan was to initially close at the end of

2016, but a horrendous start to December resulted in the Members closing the business for good

on December 15, 2017. The Members realized that they needed to pay back rent and other costs

associated with allowing the landlord to abandon the Premises well before the term of the lease

expires. Mr. Kasen demanded that he be allowed to hire an expensive law firm for this process,

which requested a $10,000 retainer. He then promised to advance this amount in exchange for

another promissory note.

Mr. Kasen emailed Mr. Bowien (and not Mr. Myint) a copy of a retainer for an attorney

named Alan Halperin on December 6, 2016. Mr. Halperins firm demanded a $10,000 retainer

to settle the matter. Mr. Bowien responded that he was unable to presently afford to pay his pro-

rata portion of the amount in question. On December 9, 2016, Mr. Kasen responded with a copy

of the Note, which he stated was consideration for his advancing the $10,000 fee. It is not known

which firm prepared this Note for Mr. Kasen, though Mr. Halperin was carbon-copied on the

email. A copy of this email chain is cumulatively annexed as Exhibit C.

The very next day, Mr. Kasen presented Mr. Bowien with documents purporting to be

related to the planned shift into Mission Vietnamese. Imbedded in these documents was the

present Note. (the Note). A copy of the Note is annexed hereto as Exhibit D. The Note,

however, did not reflect the $10,000 advance for counsel. Instead, it served to consolidate all

alleged totals owed to Mr. Kasen in one note, and secure it with assets of the Company. Most

importantly, the sum of the Note ($425,940.82) substantially outstrips the consideration provided

for said Note, being the advancement, on behalf of the Company, of a mere $10,000 to pay the

attorneys of Mr. Kasens unilateral choice to represent the Company in surrendering its lease. The

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terms of the Note allow Mr. Kasen to demand payment, and seize Company assets, immediately

upon any of the extremely-broad Default provisions in the Note. This turned Mr. Kasen into a

superior creditor to not only third-parties, but to Mr. Bowien and Mr. Myint, who were also owed

money on loaned to the Company. Additionally, Bowien is the sole guarantor of numerous

Cantina vendors, bearing personal responsibility for Company liabilities. Simply put, the Note

was not supported by consideration, as the amount of $425,940.82 is far more than the sum of the

three loans given by Mr. Kasen. It appears Mr. Kasen improperly included the amount of his

initial contribution to the Company in this secured Note.

Furthermore, the Note allows Mr. Kasen to have an immediate lien upon all assets of the

Company in the event of a Default. The events described as Default are legion, including

any failure of Company to perform or comply with any covenant of provision of this Note, as

well as having any assets of the Company targeted by an attachment or lien by any third party.

Upon information and belief, Mr. Kasen and his attorneys (who drafted this Note without any

informed consent from the other Members that they represented Mr. Kasens interests) are

attempting to take the $330,000 initial contribution made by Mr. Kasen, which is subordinate to

creditor claims, and turn it into a loan to the Company, thus securing Mr. Kasen a spot as the

premier creditor of the Company, to the exclusion and at the detriment of his co-Members, to

whom he owes a fiduciary duty.

Crucially, Mr. Kasen did not obtain the unanimous consent of the Managers of the LLC,

and also did not provide any notice of this decision to demand and execute an additional debt

instrument in his favor. As stated by Mr. Myint in his hereto-annexed affidavit, Mr. Myint was

not aware of this Note. The only signature is that of Mr. Bowien (on behalf of the Company),

who, relying on his co-Manager Mr. Kasens statements that this Note was solely related to the

legal fees advance of $10,000, executed the Note. As argued below, the Note is therefore

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unenforceable ab initio, and may not be collected upon.

Since this Notes execution, Mr. Bowien has been personally targeted by suits and

collection demands by numerous vendors whose Cantina accounts Mr. Bowien personally

guaranteed. Mr. Bowien has made payments to some of these vendors and is negotiating

settlement with the others.

Mr. Kasen has misused his partners trust, and his control of the LLCs legal team to push

himself upwards in the line of creditors and beneficiaries of the Companys remaining assets,

which are, first and foremost, the possible proceeds of the suit against the former tenants of the

Premises and Cantinas former lawyer in connection with the Company being burdened with

someone elses tax dues. If this Note is enforced, Mr. Bowien suffers from having no protection

from the Companys true creditors (who are pursuing him personally) while Mr. Kasen is treated

as if he was an innocent third-party lender rather than a participant in an investment gone sour.

LEGAL ARGUMENT

I. Legal Standard

The Plaintiff has moved under CPLR 3213 for summary judgment in lieu of a

complaint. Such a motion may only be granted when it is clear that no triable issues or real

question of fact is presented. First International Bank, Ltd. v. L. Blankstein & Son, Inc., 59

N.Y.2d 436 (1983). Where facts outside the instrument itself are required to prove liability or

damages, this method of accelerated adjudication is not appropriate. Channel Excavators, Inc.

v. Amato Trucking Corp., 48 Misc.2d 429 (Sup. Ct. Nassau Co. 1965). A movants initial

burden under CPLR 3213 is to show execution of the note and defendants default in

payment. Friends Lumber Inc. v. Cornell Development Corp., 243 A.D.2d 886 (3 rd Dept

1997). If the Plaintiff makes out his or her prima facie case, the Defendant may then defeat

summary judgment by showing proof demonstrating the existence of a triable issue of fact

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with respect to a bona fide defense. Id. A lack of consideration for the note in question is

one such defense. American Realty Corp. of NY v. Sukhu, 90 A.D.3d 792, 793 (2 nd Dept

2011). Another is that the instrument is void. K.S. Finance Corp. v. A.R.B. Inc., 12 Misc.3d

1038, 1043 (Civil Ct. N.Y. Co. 2006); Amirana v. Howland, 202 A.D.2d 783, 784 (3rd Dept

1994). A defense of breach of fiduciary duty is grounds to deny a 3213 motion, even where it

merely seeks an offset. Cohen v. Gateway Builders Realty, Inc., 41 Misc.3d 1240(A), 3 (Sup.

Ct. Kings Co. 2013).

As a limited liability company, Cantina is governed by the New York Limited Liability

Company Law (LLCL). LLCL 412 states that an unauthorized action taken by a manager

that would otherwise bind the company is non-binding if the manager so acting had no

authority to act for the company, and the person with whom he or she was dealing had

knowledge of the lack of said authority by the manager. A manager who lacks authority to

bind the LLC may not take said action without sufficient approval according to the operating

agreement, and the action in question is void. 1230 Park Associates, LLC v. Northern Source,

LLC, 48 A.D.3d 355 (1 st Dept 2008). A contract or decision of an LLC that was

consummated without sufficient consent of the necessary number of managers or members is

void ab initio. TIC Holdings, LLC v. HR Software, Acquisition Group, Inc., 194 Misc.2d

106, 109 (Sup. Ct. N.Y. Co. 2002); Overhoff v. Scarp, Inc., 12 Misc.3d 350, 362 (Sup. Ct. Erie

Co. 2005). An action taken by a member or manager is null and void if consent of other

members or managers was required, and the acting member knew that no such consent

occurred. Nader & Sons, LLC v. Hazak Associates LLC, 149 A.D.3d 503 (1 st Dept 2017).

LLCL 411 also requires that any manager who is interested or has a conflict of

interest with any transaction with the company disclose all relevant information to other

managers in good faith. Subsection (b) states that that if there was no such disclosure or

knowledge by the other managers, or if the vote of the interested manager was necessary for

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the approval of said transaction or contract, the company may avoid said contract. The only

exclusion is then if the interested manager can establish affirmatively that the contract or

transaction was fair and reasonable to the limited liability company at the time it was

approved.

II. The Note Is Void, As It Was Not Unanimously Agreed To By All Managers

A contract or decision of an LLC that was consummated without sufficient consent of

the necessary number of managers or members is void ab initio. TIC Holdings, LLC v. HR

Software, Acquisition Group, Inc. at 109. An action taken by a member or manager is null and

void if consent of other members or managers was required, and the acting member knew that

no such consent occurred. Nader & Sons, LLC v. Hazak Associates LLC.

In presenting Mr. Bowien with the Note, Mr. Kasen, who was represented by counsel,

did not provide the required notice that an action of the Company would be consummated

without a normally-required Manager meeting, as is required by Subsection 7.4(b) of the

Operating Agreement. The emails were sent only to Mr. Bowien, and not Mr. Myint (Exhibit

C) and did not give warning of any vote or action at all. The Note requested that Mr. Bowien

sign on behalf of the Company. However, as a Manager of the Company and signatory to the

Operating Agreement, Mr. Kasen knew or should have known that even if this arrangement

were reasonable and commerciable, which it is not, Section 7.6 of the Operating Agreement

requires all three Managers to consent to such an instrument of debt. As seen in Mr. Myints

affidavit, no such consent was acquired, or even broached.

Section 7.4(a) requires all Managers to be notified with 24-hour notice of any decision

that the Management Committee seeks to make without a meeting. Neither Mr. Myint nor Mr.

Bowien were alerted ahead of time about Mr. Kasens proposal that an above-$400,000 debt

instrument in his favor, secured by the Company assets, and featuring default provisions which

had already occurred at the time of the signing, was to issued in his favor.

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LLCL 412(a) states that an unauthorized action taken by a manager that would

otherwise bind the company is non-binding if the manager so acting had no authority to act

for the company, and the person with whom he or she was dealing had knowledge of the lack

of said authority by the manager. A manager who lacks authority to bind the LLC may not

take said action without sufficient approval according to the operating agreement, and the

action in question is void. 1230 Park Associates, LLC v. Northern Source, LLC. In this case,

the manager acting is Mr. Bowien himself, who had no authority to bind the Company to the

Note without Mr. Myints involvement, and the person with whom he was dealing is Mr.

Kasen, who, as a Manager of the LLC, knew full well that a haphazard and un-noticed action

by only Mr. Bowien could not bind the Company in contravention of the Operating

Agreement.

On its face, therefore, the Note is unenforceable. Not only were the circumstances of

the Notes execution and purpose suspect (as discussed elsewhere), but the Operating

Agreement sets certain requirements that Mr. Kasen did not abide by, and the law, cited above,

acts to nullify actions taken in knowing or negligent contravention of the Operating Agreement

by a Manager. This failure goes further than simply being a defense with a triable issue of

fact; it goes towards nullifying the prima-facie requirements of proving the debt instrument

under CPLR 3213, as the Note was, in essence, not executed.

III. The Note Is Not On Commercially Reasonable Terms and Lacks Consideration

LLCL 411(b) allows the company to avoid a transaction with an interested manager if full

disclosure of the conflict was not given, or if the interested managers vote was necessary to

approve the transaction, unless the interested manager can show that the transaction was fair and

reasonable. Independently, the Courts of this State have ruled that a defense to a summary

judgment motion to collect upon a promissory note can include lack of consideration. American

Realty Corp. of NY v. Sukhu at 1043.

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As stated in the affidavits of both Anthony Myint and Daniel Bowien, Mr. Kasen and

his lawyers did not disclose the effects of this Note upon the other obligations of the Company,

or that it would result in Mr. Kasen having a superior lien to the other members. Furthermore,

as stated above, Section 7.6 of the Operating Agreement required a new instrument of debt to

be authorized by all three Managers of the LLC. Therefore, by definition, Mr. Kasens vote

was necessary to approve the transaction, and the Company may set aside the transaction

pursuant to LLCL 411(b), unless Mr. Kasen can affirmatively show that the transaction is

fair and reasonable.

However, the $425,940.82 Note is clearly not reasonable. It purports to consolidate

previous notes, which it does not revoke, but does not reference the amounts therein. The

notes mentioned are the two annexed as Exhibit C, totaling $48,884, and additional, previous

notes referenced in the December 29, 2015 agreement, which Defendant does not believe

actually existed or were ever issued as debt, which amount to $220,000, for a grand total of

$268,884 (this number reflecting the best-case scenario for Mr. Kasen, whose seemingly can

only prove $48,884 in pre-existing debt in his favor). However, in return for an advance (not

even full payment) of the fees for Mr. Kasens new choice for Company attorney, Mr. Kasen

received a new promissory note that is approximately $150,000 more than he is owed in the

best-case scenario. Based on the previous course of conduct and the failing business, this was

done to turn Mr. Kasens previous Capital Contributions into a debt in his favor. This,

combined with the extremely-broad collateral, and highly vague default provisions in the Note,

make the Note far from being fair and reasonable. As stated in the affidavits of Mr. Myint and

Mr. Bowien, the Company would never have agreed to such terms in an arms-length

transaction with a third-party.

For the same reasons as above, the Note is also devoid of adequate consideration. The

$425,940.82 set by the Note is not remotely reflective of the amount received by the Company

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from Mr. Kasen for all of his loans combined, and instead seemingly imports amounts paid by

him as contributions for equity in the Company during its inception. As argued below, Mr.

Kasen owes the Company a fiduciary duty. His behavior of paying $10,000 (for which he may

well have been liable personally regardless) in exchange for a consolidation of debt that

eclipses the Companys existing obligations to him (for debt, rather than contributions) many-

fold. This failure of consideration, and well as the unfair and unreasonable terms of the Note,

is a sufficient defense to prevent summary judgment on the Note. Friends Lumber Inc. v.

Cornell Development Corp.

IV. The Note Is The Product Of A Breach Of Fiduciary Duty By Plaintiffs

Managing members of an LLC owe the company a fiduciary duty. LLCL 409(a). Where

a defense or counterclaim of breach of fiduciary duty is intertwined with the circumstances

surrounding the fiduciarys motion for summary judgment in complaint on a note in his favor,

summary judgment is precluded. Cohen v. Gateway Builders Realty, Inc. at 3.

In the present case, the entire transaction leading to this action reeks of self-dealing. Mr.

Kasen, having invested $330,000 as the purchase price of his 33% interest in the Company, began

demanding great decision-making powers as the Company neared its imminent demise. Mr. Kasen

then demands new counsel be hired to terminate the lease, and when the other members refuse, he

offers to pay personally, in exchange only for a small boon...which happens to make him the main

creditor of the Company, in essence transferring his interest (which he knew he would get back

only at a huge loss) into a credit. Furthermore, this transaction directly advanced his position at the

expense of Mr. Bowien, who would now be forced to bear the costs of various suits by Company

vendors without a reserve set aside, since this reserve would now be devoted to paying Mr. Kasen

as a creditor (rather than a mere member).

There exists, in the very least, a triable issue of fact as to whether Mr. Kasen violated his

fiduciary duty in demanding this Note (even if it is found valid notwithstanding the arguments

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above). Therefore, based upon the jurisprudence cited above, summary judgment should be denied

pending discovery.

CONCLUSION

For all the above reasons, this firm respectfully requests that this Court deny Plaintiffs

underhanded attempt at recouping his investment losses by repackaging them as debt against the

Company, convert this motion into a complaint, and allow Defendant to either answer or move to

dismiss.

Dated: July 24, 2017

New York, NY

Respectfully submitted,

NEIL L. POSTRYGACZ
ATTORNEY AT LAW, P.C.

Neil L. Postrygacz
Neil L. Postrygacz
175 Varick Street
New York, NY 10014
(p) 212.392.4945
(f) 646.514.1997

Attorneys for Defendant

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