FILED: NEW YORK COUNTY CLERK 05/23/2013 INDEX NO /2013 NYSCEF DOC. NO. 18 RECEIVED NYSCEF: 05/23/2013

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1 FILED: NEW YORK COUNTY CLERK 05/23/2013 INDEX NO /2013 NYSCEF DOC. NO. 18 RECEIVED NYSCEF: 05/23/2013 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X SPRUCE INTERIORS, LI.0 d/b/a SPRUCE INTERIOR DESIGN, -against- Plaintiff, BH 25 PIERREPONT LLC, EREZ ITZHAKI and SHEERLEE ITZHAKI, Defendants X Index No /2013 MEMORANDUM OF LAW IN SUPPORT OF SUPRUCE INTERIORS, LLC d/b/a SPRUCE INTERIOR DESIGN'S ORDER TO SHOW CAUSE FOR TEMPORARY RESTRAINING ORDER AND INJUNCTION On the Brief: Bruce W. Bieber, Esq. ZIMMET BIEBER ~~P Attorneys for Plaintiff, Spruce Interiors, LLC d/b/a Spruce Interior Design 437 Madison Avenue, 40t" FI. New York, N.Y (212)

2 TABLE OF CONTENTS papa Tableof Authorities...i PreliminaryStatement...1 Statementof Facts...1 Argument...10 A. SPRUCE INTERIOR DESIGN IS ENTITLED TO A PRELIMINARY INJUNCTION AND TEMPORARY RESTRAININGORDER...10 B. THIS COURT SHOULD WAIVE THE POSTING OF AN UNDERTAKING...13 Conclusion...14

3 TABLE OF AUTHORITIES Cases Page Appio v. Mel Lyn Office Supplying, 222 A.D.2d 541, 635 N.Y.S.2d 651 (2nd Dept. 1995)...:11 Betesh v. Jemal, 209 A.D.2d 568, 619 N.Y.S.2d 94 (2nd Dept. 1994)...11 Doe v. Axelrod, 73 N.Y.2d 748, 532 N.E.2d 1272, 536 N.Y.S.2d 44 (1988)...11 Gardino v. Rescighano, 152 A.D.2d 911, 544 N.Y.S.2d 392 (4t" Dept. 1989)...13 Skaggs-Walsh, Inc. v. Chmiel, 224 A.D.2d 68Q, 638 N.Y.S.2d 698 (2nd Dept. 1996)...11 Walsh v. Design Concepts, Ltd., 221 A.D.2d 454, 633 N.Y.S.2d 579 (2nd Dept. 1995)...11 Statutes C.P.L. R (N.Y. McKinney's 2012)...11 C.P.L. R (N.Y. McKinney's 2012)...13

4 PRELIMINARY STATEMENT Plaintiff, Spruce Interiors, LLC d/b/a Spruce Interior Design ("Spruce Interior Design"), respectfully submits the within Memorandum of Law in support of its Order to Show Cause, pursuant to C.P.L.R. 6301, seeking an Order (a) enjoining and restraining Defendant, BH 25 Pierrepont LLC, including its officers, directors, members, employees, servants, agents and representatives, and all persons acting under them or on their behalf (collectively, "Pierrepont"), from selling, transferring, pledging, encumbering, assigning, negotiating or in any way disposing of any and/or all property owned, rented, loaned, provided, procured and/or supplied by Spruce Interior Design to Pierrepont, including but not limited to, furniture and home furnishings (excluding items paid for by Pierrepont) for use in the renovation and staging of a townhouse owned by Pierrepont, located at 152 Willow Street, Brooklyn, New York (the "Townhouse"); and (b) authorizing Spruce Interior Design (without breaching the peace) and/or the Sheriff of the City of New York (with force, if necessary) to gain entry to the Townhouse for the purpose of removing any and all furniture and/or home furnishings, which were rented, loaned and/or procured by Spruce Interior Design (as more particularly described below and in the exhibits hereto) for the benefit of Pierrepont, but not purchased by Pierrepont. STATEMENT OF FACTS The relevant facts are set forth in detail in the accompanying affidavit of Susan Galvani, sworn to May 22, 2013 (the "Galvani Affidavit"). Spruce Interior Design respectfully refers the Court to the Galvani Affidavit for a complete recitation of the facts. By way of background, Spruce Interior Design is a small interior design company

5 specializing in high-end residences. Spruce Interior design is owned and operated by Susan Galvani ("Galvani"). Pierrepont is a real estate developer specializing in highend residences. (Galvani Aff. at 5). In or about summer 2012, Pierrepont approached Galvani about having Spruce Interior Design provide design services (the "Services") in connection with the renovation and sale of the Townhouse. On or about August 30, 2012, Spruce Interior Design and Pierrepont entered into a design agreement (the "Design Agreement"). The Design Agreement identifies, among~other things, (a) the scope of the project; (b) the phases of the project; (c) the Services to be rendered by Spruce Interior Design; (d) the fees and expenses to be charged by Spruce Interior Design; and (e) additional terms governing the relationship between Spruce Interior Design and Pierrepont. Under the terms of the Design Agreement, Pierrepont agreed to timely remit payment to Spruce Interior Design for the Services rendered at Spruce Interior Designs' standard hourly rate, to wit, $150 per hour. Under the terms of the Design Agreement, Pierrepont also agreed to reimburse Spruce Interior Design for all expenses incurred on Pierrepont's behalf in furtherance of the project. In particular, Pierrepont agreed to reimburse Spruce Interior Design for all furniture and furnishings purchased and/or rented on behalf of and/or for the benefit of Pierrepont. Pierrepont also agreed to reimburse Spruce Interior Design for all contractors and service providers retained/hired by Spruce Interior Design on behalf of and/or for the benefit of Pierrepont. (Galvani Aff. at 6 - From the outset, Erez, Pierrepont's Managing Member, expressed his desire to make the Townhouse "high-end". Pierrepont was developing the Townhouse as a 2

6 lavish residence to be sold for millions of dollars. As such, Erez directed Galvani to utilize high-end products and artisans in connection with Townhouse (e.g. stone, floor and wall coverings, landscaping, kitchen, bathroom finishings, furniture rentals, etc.). (Galvani Aff. at 9). On multiple occasions, Galvani advised Erez that utilizing highend finishings, furnishings and contractors would be expensive. Each time, Erez made it clear that the Townhouse was being marketed to wealthy purchasers, and that it was crucial that all details appeared lavish and expensive. Spruce Interior Design followed Erez's directions and made sure that Pierrepont ended-up with a beautiful product. (Galvani Aff. at 10). Once the construction of the Townhouse was completed, Spruce Interior Design was directed to "stage" the Townhouse for sale. In other words, Erez wanted Spruce Interior Design to furnish the Townhouse and property with furniture and household furnishings to make it appear as if somebody was living there. With high-end new construction, staging is quite common, as it makes it easier for potential purchasers to visualize living in the residence. Just as Erez insisted upon with regard to the finishings, in connection with the staging of the home, Erez insisted that Spruce Interior Design utilize high-end furniture and furnishings. Once again, Galvani made it clear to Erez that while she would be able to accommodate his request, it would not be cheap. In response, Erez emphasized that discerning purchasers needed to be able to walk into a beautifully furnished home and that he was prepared to spend the money necessary to impress potential purchasers. (Galvani Aff. at 11). In response to Pierrepont's request, Spruce Interior Design and Galvani spent a considerable amount of time and effort searching for suitable contractors, furniture and 3

7 household furnishings. In so doing, Galvani reached-out to Spruce Interior Design's best vendors and called-in multiple personal favors. Based upon Galvani's industry connections, she was able to procure furniture and furnishings that would not be available to the public and/or most interior designers. Because of Galvani's connections, she was also able to procure several of these items at discounted prices. As discussed below, she was even able to procure several items on loan, free of charge. (Galvani Aff. at 12). Ultimately, Spruce Interior Design presented Pierrepont with a proposed list of furniture and furnishings to be utilized in the staging (the "Preliminary Schedule of Furnishings"). Upon presenting the Preliminary Schedule of Furnishings to Pierrepont, Galvani made it clear that the schedule was subject to change and that it was only an approximation of the costs and type of items involved in the staging, as certain items may not be available and pricing could change. As an experienced developer, Erez made it clear that he was aware of same and told Galvani to go forward with obtaining those items and more. Upon doing so, Erez reiterated the need to stage the Townhouse lavishly. On multiple occasions, Erez also advised Galvani that she should not worry about spending more than the amount identified in the Preliminary Schedule of Furnishings, to wit, $50,523, and that Pierrepont would timely remit payment of all obligations. (Galvani Aff. at 13). The Preliminary Schedule of Furnishings identified specific items which may be rented or purchased for the staging and the prices being charged for same. For those items being rented, the Preliminary Schedule of Furnishings also identified the periods covered by the rental agreements (e.g. one or three months). Spruce Interior Design's 4

8 efforts and the staging were a huge success and the Townhouse was listed for sale at $3,295,000. Pierrepont often lauded Galvani's work. Moreover, as a result of her efforts and accomplishments, Pierrepont was able to increase the asking price for the Townhouse by $250,000. (Galvani Aff. at 14 and 15). Erez was so confident in Galvani's abilities that he asked Galvani if she would consider providing interior design services in connection with a renovation project underway at his residence in Englewood, New Jersey. Erez also advised Galvani that he wanted to retain Spruce Interior Design in connection with several other projects he was working on. Galvani accepted Erez's offer to work with him and his wife in connection with the renovation of their home and worked closely with them for several months. To date, the Itzhakis have not paid $1 for such services. Considering that Spruce Interior Design only invoiced the Itzhakis $5,025 for services and reimbursables valued at in excess of $15,000, their refusal to remit payment is astounding. When it became apparent that Spruce Interior Design had been deceived by the Itzhakis, she started pushing Erez for payment. All requests for payment were ignored. (Galvani Aff. at 16 and 17). While the project on the Itzhakis home was underway, Spruce Interior Design continued to work on the Townhouse. On multiple occasions, Erez and Pierrepont requested Spruce Interior Design me to expand the scope of Services. As such, the final invoice for Services rendered exceeded the estimate set forth in the initial proposal. More importantly, the hours expended in furtherance of the project were significantly greater than the hours invoiced. In other words, as a courtesy to Erez and

9 Pierrepont, Spruce Interior Design wrote-off a significant amount of charges (time and expenses). (Galvani Aff. at 18). Because of repeated requests by Erez to make the Townhouse appear more lavish (so that Pierrepont could justify the $3,295,000 asking price), the costs of the finishes, furnishings and furniture were slightly higher than as set forth in the Initial Schedule of Furnishings. As the project proceeded, Galvani alerted Erez to the added expense. Each time, he acknowledged that the expenditures were necessary and authorized same. (Galvani Aff. at 19). Initially, it was not known how long the staging would last. Not surprisingly, the vendors had differing rental terms and said terms were clearly set forth in the Initial Schedule of Furnishings. As a result of the vendors' differing policies, Pierrepont's initial payment of $50,523 included three month rentals on numerous items and one month rentals on others. While the three month rentals covered the months of February, March and April, 2013, the one month rentals only covered the month of February, As such, from the beginning, Pierrepont was aware that unless the furniture and furnishings were returned by the end of February, 2013, additional rent would need to be paid. As a result of Pierrepont's default, rental fees continue to get charged to Galvani's credit card monthly. For reasons unknown, Pierrepont has refused and/or failed to pay for any of the items rented on a month-to-month (except for the rental due for the month of February, 2013). Moreover, for those items rented for a three month term, Pierrepont has refused and/or failed to pay for the month of May, (Galvani Aff. at 20-22). Additionally, several of the items procured on Pierrepont's behalf cost more than initially anticipated (because of Erez's requests to C

10 obtain more and higher quality items). To date, Pierrepont has refused and/or failed to reimburse Spruce Interior Design the additional costs associated with same. An example of Pierrepont's desire to obtain high quality and expensive items for the Townhouse involved covers for the HVAC units. In an exchange with Erez on January 23, 2013, Erez advised Galvani and the realtor as follows: "I understand that the covers r expensive but we need them to look right." (Galvani Aff. at 23). It should be noted that while it is custom in the interior design industry for designers to mark-up invoices of vendors and contractors (this is how interior designers traditionally earn a portion of their compensation), as a courtesy to Pierrepont, Spruce Interior Design did not mark-up any of the invoices. Instead, Spruce Interior Design passed-on the invoices and requested Pierrepont to reimburse the exact amount charged by the vendors and contractors. (Galvani Aff. at 24). Not only did Spruce Interior Design not mark-up invoices, in one instance, Galvani called-in a personal favor from a vendor to obtain on loan -three expensive area rugs free of charge. Specifically, as a result of a long-term relationship with Madeline Weinrib Showroom, said vendor allowed Spruce Interior Design to stage the Townhouse with three rugs with an aggregate retail cost of $15,800. Typically, such items would be subject to a three month rental fee of 20% of the retail sales price (assuming that the vendor would even rent the items). However, based upon Galvani's then excellent relationship with Madeline Weinrib Showroom, they agreed to provide the rugs free of charge. Despite multiple requests to return the rugs, Pierrepont has refused to do so and has converted them. As a result, Madeline Weinrib Showroom is extremely upset about the situation and Galvani's relationship with one of her preferred 7

11 vendors has been irreparably damaged. Moreover, Spruce Interior Design is in jeopardy of being charged $15,800 for the rugs (even though they were not purchased and/or rented by or for the benefit of Pierrepont). (Galvani Aff. at 25 and 26). Despite multiple requests, Pierrepont has refused to remit payment for (a) furniture and furnishing rentals; (b) items purchased on Pierrepont's behalf; (c) contractor services; (d) design Services (beyond the initial payments); and/or (e) other reimbursable expenses. As of today, there is an outstanding balance owed to Spruce Interior C~esign in connection with the Townhouse in the amount of $50, (said sum exceeds the amount sought in the Complaint, as rental fees continue to accrue and the Complaint does not include several obligations owed to contractors). (Galvani Aff. at 27). To eliminate any and all disputes/claims that Pierrepont may have about the charges, Pierrepont has been provided with copies of each and every receipt and invoice evidencing purchases and rentals made on Pierrepont's behalf. At the same time, Pierrepont has been provided with an itemized report identifying all charges incurred (the "Detailed Customer Report"). To date, Pierrepont has not objected to a single invoice, receipt and/or purchase. In other words, Pierrepont does not contend that any of the items purchased and/or rented were not authorized. Pierrepont also does not contend that any of the items purchased and/or rented were inappropriate. Moreover, Pierrepont does not contend that any of the items purchased and/or rented were improperly marked-up in price. Despite the foregoing and without providing any reason or justification, Pierrepont refuses to remit payment and/or return any of the furniture and furnishings. (Galvani Aff. at 2$).

12 As set forth in the Detailed Customer Report, to date, Spruce Interior Design has expended $31, on items purchased for the Townhouse on behalf of Pierrepont. Spruce Interior Design has also incurred rental charges on behalf of Pierrepont for furniture and home furnishings in the amount of $23, Because Pierrepont has (a) locked Spruce Interior Design out of the Townhouse; (b) refused to remit payment for the rental of the furniture and furnishings; and (c) refused to return the rented furniture and furnishings to Spruce Interior Designs' vendors, this amount continues to grow. Additional costs, totaling $26,047.46, have also been incurred by Spruce Interior Design on behalf of Pierrepont for items/services requested by Pierrepont. These costs include window treatments, landscaping, closet build-outs, movers, messengers and delivery charges. The Detailed Customer Report identifies each and every one of these charges. Pierrepont has been provided with receipts evidencing all such expenditures. (Galvani Aff. at 29and 30). Spruce Interior Design has made repeated requests for payment. Mast importantly, Spruce Interior Design has made repeated requests to Pierrepont to return the rented and loaned furniture and furnishings. However, each request was denied or ignored. As such, with each passing day, Spruce Interior Design's financial exposure increases, causing irreparable harm to its business and ability to remain operational. Not only has Pierrepont refused to return any of the furniture and furnishings, Pierrepont recently changed the locks to the Townhouse, thereby preventing Spruce Interior Design' vendors from viewing and/or taking back their belongings. As such, with each passing day, Spruce Interior Design's financial exposure increases, causing irreparable harm to the business. (Galvani Aff. at 31-32). ~7

13 Aside from Spruce Interior Design's financial exposure, Pierrepont's actions have destroyed Galvani's reputation in this close-knit industry. Throughout its existence, Spruce Interior Design never had a client refuse to return and/or pay for rented furniture and/or furnishings. While the default in payment can and will be pursued in the pending legal proceeding, Pierrepont's refusal to return the rented and loaned furniture and furnishings to their rightful owners has adversely impacted Galvani and Spruce Interior design in the industry. Unless the items are returned immediately, Spruce Interior Design will undoubtedly go out of business. Spruce Interior Design will no longer be able to rent furniture and/or furnishings on behalf of its customers. Spruce Interior Design will also no longer be able to procure loaners for the benefit of its clients. After having spent her entire career building a reputation as a talented and honest interior designer, the actions of Pierrepont have put Galvani's entire reputation in jeopardy. Moreover, because of the financial strain placed on Spruce Interior Design, the company is in serious jeopardy of not being able to procure any more services and/or furnishings on behalf of its paying clients. Absent immediate relief from the Court, it appears that Spruce Interior Design will be forced to close down. (Galvani Aff. at 33). ARGUMENT A. SPRUCE INTERIOR DESIGN IS ENTITLED TO A PRELIMINARY INJUNCTION AND TEMPORARY RESTRAINING ORDER. C.P.L. R provides in relevant part as follows: A preliminary injunction may be granted in any action where it appears that the Defendant threatens or is about to do, or is doing or is procuring or suffering to be done, an act in violation of the Plaintiff's rights respecting the subject of the action, intending to render the judgment ineffectual, or in any action where the Plaintiff has demanded and would be entitled to a judgment restraining the Defendant from the 10

14 commission or continuance of an act, which, if committed or continued during the pendency of the action, would produce injury to the Plaintiff. C. P. L.R. 6301(N.Y. McKinney's 2012). It is well established that "[t]o prevail upon a motion for a preliminary injunction, the moving party has the burden of demonstrating that (1) there is a likelihood that it will succeed on the merits of the action, (2) it will suffer irreparable injury absent the issuance of a preliminary injunction, and (3) the balance of equities is in its favor." Skaggs-Walsh, Inc. v. Chmiel, 224 A.D.2d 680, 638 N.Y.S.2d 698, 699 (2d Dept. 1996); Doe v. Axelrod, 73 N.Y.2d 748, 750, 532 N.E.2d 1272, 536 N.Y.S.2d 44 (1988); Appio v. Mel Lyn Office Supplying, 222 A.D.2d 541, 635 N.Y.S.2d 651, 652 (2d Dept. 1995); Walsh v. Design Concepts, Ltd., 221 A.D.2d 454, 633 N.Y.S.2d 579, 580 (2d Dept. 1995); and Betesh v. Jemal, 209 A.D.2d 568, 619 N.Y.S.2d 94, 95 (2d Dept. 1994). Applying this standard, Spruce Interior Design has set forth its entitlement to a preliminary injunction and temporary restraining order. First, there is a likelihood that Spruce Interior Design will succeed on the merits of this action. The pending application pertains to nothing more than a failure by Pierrepont to remit payment for furniture and furnishings rented and/or otherwise procured by Spruce Interior Design for Pierrepont (including $15,800 in rugs loaned to Pierrepont free of charge) at the request of Pierrepont and the failure of Pierrepont to return the rented and loaned items to their owners. The defaults are not in dispute. As such, it is uncontroverted that Spruce Interior Design will ultimately succeed on the merits of this action. The second element that must be established by Spruce Interior Design is that it would suffer irreparable harm if the temporary restraining order and injunction are not 11

15 issued. Should this Court refuse to grant the injunctive relief requested,- Pierrepont would be at liberty to continue to convert the furniture and furnishings. With the exception of the rugs (which were loaned to Spruce Interior Design as a personal favor to Galvani), the furniture and home furnishings were provided pursuant to short-term rental agreements with third-party vendors in order to stage the Townhouse for sale. Since high-end furniture is not typically available for rent, many of the items were procured as a personal favor to Galvani. For reasons unknown, Pierrepont has refused to return the items to their rightful owners (and/or remit payment for same). Pierrepont's actions, including but not limited to, changing the locks to the Townhouse, converting the furniture and furnishings, and refusing to return the rugs, is damaging Spruce Interior Design's reputation in a close-knit industry. Unless the items are returned immediately to their rightful owners, there is a significant concern that Spruce Interior Design's reputation will be irreparably damaged and Spruce Interior Design will be forced out of business, as it was made clear from the beginning that the items were provided on short-term rentals. Moreover, Spruce Interior Design cannot afford to continue to pay the rental charges on behalf of Pierrepont. Since Spruce Interior Design has proven that it will ultimately succeed on the merits and that it would suffer irreparable harm if the relief sought herein is not granted, the Court must next consider whether the balance of equities tips in favor of Spruce Interior Design. Spruce Interior Design provided Services, furniture and household furnishings to Pierrepont and expected to get paid in accordance with the Design Agreement. At a minimum, Spruce Interior Design expected that the rented furniture and furnishings would be returned to their owners at the end of the rental terms. 12

16 However, rather than providing any form of cooperation, Pierrepont changed the locks to the Townhouse and made it clear that they were converting the items for their own use. Clearly, the balance of equities tips decisively in favor of Spruce Interior Design. Based upon the foregoing, Spruce Interior Design has established its entitlement to a preliminary injunction. B. THIS COURT SHOULD WAIVE THE POSTING OF AN UNDERTAKING. C.P.L. R provides in relevant part as follows: If, on a motion for a preliminary injunction, the plaintiff shall show that immediate and irreparable injury, loss or damage will result unless the defendant is restrained before a hearing can be had, a temporary restraining order may be granted without notice... Prior to the granting of a temporary restraining order the court may, in its discretion, require the plaintiff to file an undertaking in an amount to be fixed by the court... C.P.L. R (N.Y. McKinney's 2012). The language of C.P.L. R makes it clear that the posting of an undertaking is not mandatory and that the Court may dispense with same. See Gardino v. Rescighano, 152 A.D.2d 911, 544 N.Y.S.2d 392 (4t" Dept. 1989). In the case at bar, it is respectfully requested that the Court dispense with the posting of an undertaking, as no harm can be caused as a result of the issuance of a preliminary injunction and/or temporary restraining order. 13

17 CONCLUSION Based upon the foregoing, it is respectfully requested that an Order be entered granting Spruce Interior Design a temporary restraining order and preliminary injunction, enjoining and restraining Pierrepont, including its officers, directors, members, employees, servants, agents and representatives, and all persons acting under them or on their behalf, from selling, transferring, pledging, encumbering, assigning, negotiating or in any way disposing of any and/or all property owned, rented, loaned, provided, procured and/or supplied by Spruce Interior Design to Pierrepont, including but not limited to, furniture and home furnishings (excluding items paid for by Pierrepont) for use in the renovation and staging of the Townhouse; and authorizing Spruce Interior Design (without breaching the peace) and/or the Sheriff of the City of New York (with force, if necessary) to gain entry to the Townhouse for the purpose of removing any and all furniture and/or furnishings, which were rented, loaned and/or procured by Spruce Interior Design far the benefit of Pierrepont, but not purchased by Pierrepont, together with such other and further relief as this Court deems just and proper. Dated: New York, N.Y. May 22, 2013 ZIMMET BIE R L~'P By: Bruce W. Bieber, Esq. Attorneys for Plaintiff, Spruce Interiors, LLC d/b/a Spruce Interior Design 437 Madison Avenue, 40t" FI. New York, N.Y (212)