GILBERT v. POWERS (2026)

Order, Supreme Court, New York County (Andrew Borrok, J.), entered November 21, 2024, which granted plaintiffs' motion for partial summary judgment and denied defendants' motion for summary judgment dismissing the action, unanimously modified, on the law, to deny plaintiffs' motion except to the extent premised on Bradford Winston's bad faith litigation conduct in the underlying action, and otherwise affirmed, without costs.  Order, same court and Justice, entered on or about September 18, 2024, which, insofar as appealed from, granted the motion of nonparties Michael Davis and Parc 56, LLC to quash defendants' subpoenas, unanimously reversed, on the law and in the exercise of discretion, without costs, and the motion denied.

None of the individual defendant board members except Bradford Winston was named in the underlying action, Parc 56, LLC v Board of Managers of the Parc Vendome Condominium, and under the circumstances they should not be collaterally estopped from defending against allegations that they exercised their duties in bad faith (see IKB Intl. S.A. v. Morgan Stanley, 225 AD3d 542, 544–545 [1st Dept 2024];  see also Simmons v. Trans Express Inc., 37 NY3d 107, 112 [2021];  Buechel v. Bain, 97 N.Y.2d 295, 303–304 [2001], cert denied 535 U.S. 1096 [2002] ).  Several of the individual defendant board members did not hold their positions for significant durations of the period relevant to the underlying action's allegations (see Buechel, 97 N.Y.2d at 303–304).  Defendant Karyn Beck, for example, did not join the board until May 2022, well after the dispute with Parc 56 began and after Parc 56 commenced the underlying action.  More importantly, the court's findings in the underlying action focused almost entirely on the board as a collective entity, not the actions of individual members (see id.).

In contrast, Winston was named as an individual defendant in the underlying action.  Broad application of collateral estoppel against Winston's estate in this action is nevertheless unwarranted.  Because the underlying action was decided by the award of summary judgment after the court struck Winston and the board's answer (see Parc 56, LLC v Board of Mgrs. of the Parc Vendome Condominium, 217 AD3d 416, 419 [1st Dept 2023] ), the allegations contained in the underlying complaint were not necessarily decided (see Buechel, 97 N.Y.2d at 303–304;  see also Kaufman v. Eli Lilly & Co., 65 N.Y.2d 449, 456–457 [1985] ).

Although there is a “limited exception” for parties that have “appeared in the prior action or proceeding and ha[ve], by deliberate action, refused to defend or litigate the charge or allegation that is the subject of the preclusion request” (Matter of Abady, 22 AD3d 71, 83–84 [1st Dept 2005];  see Kanat v. Ochsner, 301 A.D.2d 456, 458 [1st Dept 2003] ), collateral estoppel remains “a flexible doctrine” (Abromovage v. Deutsche Bank Sec. Inc., 250 AD3d 121, 124 [1st Dept 2026], quoting Lennon v 56th & Park [NY] Owner, LLC, 199 AD3d 64, 69 [2d Dept 2021] [“Collateral estoppel is described as a flexible doctrine, and a determination of whether a party had a full and fair opportunity to litigate in the prior proceeding requires a practical inquiry into the realities of [the prior] litigation”] [internal quotation marks and citation omitted] ).  Here, considerations properly include the underlying defendants' collective representation, as well as the reality that the underlying findings concentrated almost exclusively on the board.  Under the circumstances, both weigh against broad application of the doctrine (see Lennon, 199 AD3d at 69).

The doctrine should apply, however, to the limited extent of preventing Winston from arguing that he did not engage in bad faith litigation conduct in the underlying action.  That Winston engaged in bad faith in this respect is a matter fully found and affirmed by this Court, and it was necessarily determined in deciding to strike his answer (see Parc 56, LLC, 217 AD3d at 419).

Defendants' argument that they are entitled to summary judgment based on the advice of counsel defense is without merit.  However, the defense does raise issues of fact precluding summary judgment in plaintiffs' favor as to the defendants and issues to which collateral estoppel does not apply.  In particular, the record presents conflicting evidence as to whether defendants were making business decisions, which are not protected by the advice of counsel defense (see Matter of Rothko, 43 N.Y.2d 305, 320 [1977];  Bluebird Partners v. First Fid. Bank, N.J., 248 A.D.2d 219, 223 [1st Dept 1998], lv dismissed 92 N.Y.2d 946 [1998] ), as opposed to legal decisions, which are protected.  Even as to the legal decisions, based on the verified complaint in the underlying action, there is an issue of fact as to whether Winston “specifically [sought] out legal advice that would support [his] desired course of conduct” (Matter of Bank of N.Y. Mellon, 127 AD3d 120, 126 [1st Dept 2015] ).

Plaintiffs contend that they are entitled to summary judgment because all of the individual defendants except Winston stated in response to certain discovery requests that the issue of whether they met their fiduciary duties was not relevant to the parties' claims or defenses.  However, the record does not show that plaintiffs moved for an order pursuant to CPLR 3126(2).  Therefore, the court has not yet determined whether defendants willfully failed to disclose information that should have been disclosed, much less issued a preclusion order.

In the exercise of discretion, the motion to quash should be denied (see Andon v. 302–304 Mott St. Assoc., 94 N.Y.2d 740, 745 [2000] ).  Parc 56 and Davis did not establish that “the discovery sought is utterly irrelevant ․ or that the futility of the process to uncover anything legitimate is inevitable or obvious” (Matter of Kapon v. Koch, 23 NY3d 32, 34 [2014] [internal quotation marks omitted];  see also id. at 38).

We have considered the parties' remaining arguments and find them unavailing.