OPINION & ORDER This case arises from competing claims by creditors to recover money from a convicted fraudster, David Bergstein (“Bergstein”). Plaintiff Wimbledon Financing Master Fund Ltd. (“Wimbledon”), a creditor of Bergstein’s, obtained an $8,497,578.75 money judgment against Bergstein and others. After Wimbledon had served a restraining notice on Bergstein, but before it took other steps to secure its priority, Bergstein, through his lawyer Steven J. Katzman (“Katzman”), negotiated a settlement agreement with a different Bergstein creditor, The Wimbledon Fund, SPC (“Class TT”). Katzman then facilitated two sequential wire transfers from Bergstein to Class TT to satisfy the settlement agreement, one for $2.412 million and the next for $5 million. As pled, these transfers left Bergstein without funds to pay the judgment against Wimbledon. Wimbledon initially sought relief in New York state court against Katzman, his law firm, Bienert Miller & Katzman PLC (“BMK”), and Bergstein. Wimbledon, not knowing then of the second wire transfer, moved for contempt against them based on the first of the wire transfers to Class TT. The action resulted in a finding of contempt against Katzman, BMK, and Bergstein, with the state court requiring Katzman and BMK to pay Wimbledon’s attorneys’ fees and associated costs. The state court declined to order Katzman and BMK to pay to Wimbledon the $2.412 million diverted in violation of the restraining notice, finding such a remedy excessive. Wimbledon then sought relief against Katzman and BMK (together, “defendants”) in this Court, claiming negligence and gross negligence as to the $2.412 million and $5 million transfers. Following the parties’ first round of cross-motions for summary judgment, the Court (1) granted defendants’ motion for summary judgment as to the claims arising from the $2.412 million transfer, on the grounds that the state court action precluded those claims, and (2) denied summary judgment as to the claims arising from the $5 million transfer. Dkt. 102 (“MSJ Opinion”) at 23, 27. With respect to the latter, the Court found that the material facts established that defendants had owed to Wimbledon a duty to refrain from assisting their client, Bergstein, in violating the restraining notice and that their participation in the transfer of $5 million to Class TT breached that duty. Id. at 28-31. Noting the thinness of the parties’ briefing on the causation element of the negligence claims, the Court was unable to resolve the summary judgment motions on that element. Id. at 33-35, 35 n.6. Accordingly, the Court commissioned the currently pending summary judgment motions, directed to the causation element, and held argument on that point. For the following reasons, the Court finds in favor of Wimbledon on the causation element of its negligence and gross negligence claims as to the $5 million transfer, and resolves that element of the pending cross-motions accordingly. (The Court also denies as moot Wimbledon’s motion to strike certain arguments in defendants’ reply brief.) This decision leaves unresolved the question of damages. The Court directs the parties, in accordance with this opinion, to conduct limited discovery regarding intervening events that may implicate the quantity of Wimbledon’s damages. Upon conclusion of such discovery, the Court will put in place a briefing schedule as to damages. I. Background A. Factual Background1 The Court incorporates by reference the account of the underlying facts of this case included in the first summary judgment decision, see id. at 2-16, and includes here only those facts necessary to explain its decision on the pending motions. 1. Parties and Relevant Non-Parties Plaintiff Wimbledon is an exempted liability company organized under Cayman Islands law. JSF 1. Non-party Class TT is a Cayman Islands segregated portfolio company, id. 9, and non-party Weston Capital Partners Master Fund II, Ltd. (“Partners II”) is an investment fund organized under Cayman Islands law, id. 8. Wimbledon, Class TT, and Partners II were victims of a fraud perpetrated by Bergstein, who is not a defendant in this suit. On March 1, 2018, a jury in this District found Bergstein guilty of seven counts of securities fraud, investment advisor fraud, wire fraud, and conspiracy to commit those offenses against Wimbledon, Class TT, and Partners II. Id. 64. On September 26, 2018, Judge Castel ordered Bergstein to forfeit approximately $22.6 million and pay restitution of approximately $15.2 million. United States v. Bergstein, No. 16 Cr. 746 (PKC), Dkts. 464-65. Among the victims listed in the restitution order is Wimbledon, which is stated to be owed $5.9 million. United States v. Bergstein, No. 16 Cr. 746 (PKC), Dkt. 465. On September 16, 2019, the Second Circuit affirmed the judgment and orders of restitution and forfeiture. United States v. Bergstein, No. 16 Cr. 746 (PKC), Dkt. 503. Bergstein is currently incarcerated in California. JSF 6. Defendant BMK was a California professional legal corporation with an office located in San Clemente, California. Id. 3. Defendant Katzman was a BMK shareholder. Id. 4. BMK and Katzman represented Bergstein and non-party Graybox LLC (“Graybox”), a limited liability company, in various civil suits. Id.
7, 25, 32. Bergstein is the sole owner and officer of Graybox. Wimbledon 56.1 1. 2. Events Leading to Wimbledon’s Claim to Bergstein’s Funds Wimbledon’s claims against Bergstein arise from its efforts to enforce a judgment assigned to it by Partners II. JSF
