The opinion
ISZO Capital LP v Jefferies LLC
2024 NY Slip Op 34267(U)
November 29, 2024
Supreme Court, New York County
Docket Number: Index No. 651562/2024
Judge: Nancy M. Bannon
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
Op 30001(U), are republished from various New York
State and local government sources, including the New
York State Unified Court System's eCourts Service.
This opinion is uncorrected and not selected for official
publication.
INDEX NO. 651562/2024
NYSCEF DOC. NO. 58 RECEIVED NYSCEF: 12/01/2024
SUPREME COURT OF THE STATE OF NEW YORK
NEW YORK COUNTY
PRESENT: HON. NANCY M. BANNON PART 61M
Justice
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ISZO CAPITAL LP,
Plaintiff, MOTION DATE , 08/08/2024
- V -
MOTION SEQ. NO. _ _0_0_1_0_0_3__
JEFFERIES LLC, DECISION + ORDER ON
Defendant. MOTION
------------------------------------------------------------------- --------------X
The following e-filed documents, listed by NYSCEF document number (Motion 001) 8, 9, 10, 11, 12, 13,
14, 15,24,25,48
were read on this motion to/for COMPEL ARBITRATION
The following e-filed documents, listed by NYSCEF document number (Motion 003) 28, 29, 30, 31, 32,
33, 34, 35,41,45, 51, 52, 54, 55
were read on this motion to/for DISCONTINUE
In this action for declaratory and injunctive relief, commenced on March 26, 2024, the
plaintiff sought an order directing the defendant to take actions necessary to allow the plaintiff's
broker to close out the plaintiff's short position (the "Gordmans Short Position") in the common
stock of a company (the "Gordmans Stock") that has been liquidated in bankruptcy. Specifically,
the plaintiff seeks to have the court declare that it is impossible for the plaintiff to purchase
Gordmans Stock and to direct the defendant, a lender from whom the plaintiff's broker was
borrowing Gordmans Stock, to terminate its stock loan. On April 22, 2024, the defendant
moved, pre-answer, to compel arbitration pursuant to CPLR 7503(a) to be held before the same
FINRA panel that has recently ruled in favor of the defendant, or, in the alternative, to dismiss
the complaint on the grounds of res judicata, collateral estoppel or statute of limitations (CPLR
1
3211 [a][S]) and failure to state a cause of action (CPLR 3211 [a][?]) (MOT SEQ 001).
1
The FINRA arbitration award, issued February 29, 2024, in which the arbitrator, inter alia,
rejected the plaintiffs claim that the defendant could or should unilaterally close a short position so that
the plaintiff no longer had to pay to maintain that position, was confirmed by an order of this court (Crane,
J.) dated May 22, 2024 (Jeffries LLC et al. v ISZO Capital LP et al., Index No. 651394/2024.) The
defendant represents that the plaintiff has not paid the $1 million in attorney's fees it was ordered to pay.
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Motion No. 001 003
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NYSCEF DOC. NO. 58 RECEIVED NYSCEF: 12/01/2024
As stated in the affidavit of the plaintiff's Chief Legal Officer, Cindy Delano, filed in MOT
SEQ 003, on the same day the defendant filed MOT SEQ 001, the plaintiff learned from its
broker that the Depository Trust Company ("OTC") had removed shares of Gordmans Stock
from its records, thereby allowing the plaintiff's broker to close out the Gordmans Short Position
without any action by the defendant. Both parties agree that, as the Gordmans Short Position
has now been closed, this action, as well as the defendant's motion to compel arbitration or
dismiss the complaint, are moot. In light of these developments, the plaintiff did not oppose the
motion and sought the defendant's consent to discontinue this action without prejudice. The
defendant agreed the action should be discontinued but opposed the "without prejudice" request
and sought attorney's fees and costs from the plaintiff.
Consequently, on May 21, 2024, the plaintiff moved pursuant to CPLR 3217(b) to
discontinue this action without prejudice (MOT SEQ 003). The defendant opposes the motion to
the extent it seeks a discontinuance without prejudice, and cross-moves for sanctions pursuant
to 22 NYCRR § 130-1.1(a), in the form of an award of attorney" fees and costs incurred in
litigating this motion. The plaintiff opposes the cross-motion.
After oral argument was held on the MOT SEQ 003, the parties were given a final
opportunity to settle. On or about August 7, 2024, the plaintiff provided the defendant with a
proposed Stipulation of Discontinuance Without Prejudice, with no provision for payment of
attorney's fees and costs. The defendant rejected the proposal.
CPLR 3217(a) provides that a plaintiff may discontinue an action without prejudice
without a court order if it serves the Notice of Discontinuance without Prejudice prior to the
service of a responsive pleading. The defendant served its motion to dismiss before the plaintiff
sought to discontinue, therefore requiring a court order. CPLR 3217(b) provides that, upon an
order of the court, an action may be voluntarily discontinued "upon terms and conditions, as the
court deems proper." CPLR 3217(c) provides that any discontinuance is without prejudice
"unless otherwise stated in the notice, stipulation or order of discontinuance." The authority to
grant or deny a motion pursuant to CPLR 3217(b) is within the sound discretion of the trial court.
See Tucker v Tucker, 55 NY2d 378 (1982); Wells Fargo Bank, N.A. v Chaplin, 107 AD3d 881
(2 nd Dept. 2013). The general rule is that "in the absence of special circumstances, such a
prejudice to a substantial right of the defendant, or other improper consequences, a motion for
voluntary discontinuance should be granted." Wilmington Savings Fund Society, FSB v Moore,
220 AD3d at 656 (2 nd Dept. 2023) quoting Wells Fargo Bank, N.A. v Chaplin, supra at 881. That
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Motion No. 001 003
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is, "[p]rejudice to the defendant and other special circumstances will [generally] preclude
granting a motion for a discontinuance without prejudice." Reid v Brown, 165 AD3d 949, 950
(2 nd Dept. 2018) quoting Brenhouse v Anthony Indus., 156 AD2d 411, 412 (2 nd Dept. 1989); see
Hersch v Cohen, 171 AD3d 1062 (2 nd Dept. 2019) [dismissal with prejudice warranted where
petitioner caused delays in litigation].
The defendant correctly argues that it would be "just and proper'' for the action to be
discontinued with prejudice as special circumstances exist and a substantial right would be
prejudiced if the action were discontinued without prejudice. No reasonable argument can be
made that the closing of the Gordmans Short Position did not bring the parties' dispute to a final
resolution, and the plaintiff proffers no cogent basis for leaving open an avenue to relitigate the
same issues. As noted, the plaintiff did not oppose the defendant's motion (MOT SEQ 001) due
it being rendered moot. Nor does the plaintiff provide a reason for commencing this action in
light of the prior arbitration award in favor of the defendant except to state, by way of the
affidavit of its Chief Legal Officer, Cindy Delano, in support of MOT SEQ 003, that its
relationship with Jeffries had "fractured" and it did not trust that Jeffries would abide by a court
order or act reasonably. This is insufficient. Should the plaintiff be permitted to bring the same
claims again, the defendant would be prejudiced by having to incur additional litigation costs in
again moving to dismiss. In any event, in light of the discontinuance of this action with prejudice,
MOT SEQ 001 is denied as moot.
In cross-moving for sanctions, the defendant argues that the plaintiff engaged in
frivolous conduct by commencing an action barred by res judicata and collateral estoppel based
on the award in the prior FINRA arbitration. While the defendant's argument has merit, the court
need not rule on the dismissal motion as it is moot. Therefore, while the plaintiff's conduct in
this action was questionable, it was not shown to be "frivolous" within the meaning of 22
NYCRR § 130-1.1 (a). The court declines to impose sanctions at this juncture.
Accordingly, it is
ORDERED that the defendant's motion pursuant to CPLR 7503 to compel arbitration or
dismiss the complaint (MOT SEQ 001) is denied as moot; and it is further
ORDERED that the plaintiff's motion pursuant to CPLR 3217 to discontinue this action
without prejudice (MOT SEQ 003) is granted to the extent that the plaintiff shall be permitted to
discontinue the action, but the dismissal shall be with prejudice, and it is further
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Motion No. 001 003
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NYSCEF DOC. NO. 58 RECEIVED NYSCEF: 12/01/2024
ORDERED that the defendant's cross-motion pursuant to 22 NYCRR § 130-1.1 (a) for
sanctions (MOT SEQ 003) is denied without prejudice.
This constitutes the Decision and Order of the court.
11/29/2024
~t;NON0 AAS
DATE NANCY M. BANNON, J.S.C.
CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION
GRANTED □ DENIED GRANTED IN PART □ OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE
651562/2024 1520 CAPITAL LP vs. JEFFERIES LLC Page 4 of 4
Motion No. 001 003
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