This action arises from defendant Newman & Newman P.C.'s (Newman & Newman) alleged [*2]breach of its express contractual and fiduciary obligations owed to plaintiff CMI II LLC (CMI II) pursuant to a pledge agreement dated September 29, 2004 (the Pledge Agreement). CMI II purchased certain preferred stock from Interactive Brand Development (IBD) in September 2004. In connection with that purchase, CMI II, IBD, and its affiliates entered into multiple written agreements, including the Pledge Agreement. Newman & Newman was appointed Collateral Agent under the Pledge Agreement, which granted CMI II a first priority security interest in certain securities and membership interests belonging to IBD and one of its affiliates.

CMI II now moves for an order, pursuant to CPLR 3212, granting it summary judgment against Newman & Newman in connection with the first, second and third causes of action of the complaint, and striking Newman & Newman's answer and dismissing its interpleader defense.

Newman & Newman cross-moves for an order: (1) dismissing the complaint, discharging it from any liability to CMI II, and directing that the pledged collateral in its possession be deposited into the court; and (2) awarding it its costs and reasonable attorneys' fees incurred in connection with this action.

For the reasons set forth below, CMI II's motion for summary judgment is granted, and Newman & Newman's cross motion is denied.

IBD and its affiliate, Media Billing Company, LLC (Media Billing) (collectively, the Pledgors), previously raised millions of dollars by selling 10% convertible preferred stock of IBD (the Series F Stock) to CMI II's predecessor, and others (Aff. of Alex Mazier, ¶ 2). CMI II"s predecessor paid IBD $3.25 million, and exchanged certain stock, in exchange for 52,500 shares of the Series F Stock pursuant to numerous written agreements, including, among others, a Subscription Agreement dated September 28, 2004 (the Subscription Agreement), the IBD Certificate of Designation of Preferences and Rights of Series F Convertible Redeemable Secured Preferred Stock (the Certificate of Designation), an Unconditional and Irrevocable Guaranty dated September 23, 2004 (the Guaranty), and the Pledge Agreement (collectively, the Operative Documents).

The Subscription Agreement and the Certificate of Designation each require IBD to pay semi-annual dividends to CMI II:

The Series F Senior Preferred Stock being offered and sold by [IBD] shall ... pay an annual dividend ... at the rate of 10% per annum, payable semi-annually on June 30th and December 31st, based on a 360 day calendar year . . . .

Subscription Agreement, § 1 (A) (a) (i) (Aff. of Marc C. Rosen, Exh 3); Certificate of Designation, § 4 (Rosen Aff., Exh 4).

The Certification of Designation further provides that the holders of Series F Stock are entitled to require mandatory redemption of their stock by IBD in the event that IBD fails to pay any dividend when due, or if IBD breaches any material covenant or other term of the Certificate of Designation or Subscription Agreement, and that IBD must redeem the Series F Stock within 10 business days after written demand from a holder of Series F Senior Preferred Stock (Certificate of Designation, § 9 [b] [i] and [ii]).

Pursuant to the Guaranty, the payment and performance of all of IBD's obligations under the Operative Documents are guaranteed by Media Billing and Internet Billing Company LLC (iBill), its wholly-owned subsidiary (Guaranty, at 1 [Rosen Aff., Exh 5]).

With IBD's express permission, one of the original purchasers of Series F Stock assigned all [*3]of its rights under the Operative Documents to CMI II (see Rosen Aff., Exh 6).

In order to induce CMI II"s purchase of the Series F Stock, the Pledgors executed the Pledge Agreement, and agreed that their obligations to the holders of the Series F Stock (collectively, the Pledgees) would be secured by the pledge of certain securities (the Pledged Securities or the Collateral), and granted the Pledgees a "first priority security interest" in the Pledged Securities "as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise)" of the Pledgors' obligations to the Pledgees (Pledge Agreement, at 1, § 2 [Rosen Aff., Exh 1]).

The Pledged Securities consist of 105,168 shares of common stock of Penthouse Media Group Inc. f/k/a General Media, Inc. (PMG), owned by IBD, and 26.59% of the membership interests in iBill, owned by Media Billing (id., § 2).

Pursuant to the Pledge Agreement, the Pledgees appointed Newman & Newman as Collateral Agent to hold the Pledged Securities (id., § 1). Similarly, the Pledgors irrevocably appointed Newman & Newman as attorney-in-fact to act in the name of the Pledgors for the purposes of carrying out the terms of the Pledge Agreement:

The Pledgors hereby irrevocably constitute[] and appoint[] Collateral Agent and any officer or agent of Collateral Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Pledgors and in the name of the Pledgors and in Collateral Agent's own name, from time to time in Collateral Agent's discretion, for the purpose of carrying out the terms of this Pledge Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Pledge Agreement, including, without limitation, any financial statement, endorsement, assignment or other instruments of transfer.

Id., § 12 (a).

The Pledgors were obligated under the Pledge Agreement to deliver to Newman & Newman certificates representing the Pledged Securities simultaneously with or prior to the execution and delivery of the Pledge Agreement, or promptly upon the receipt thereof by or on behalf of the Pledgors (id., ¶ 3[a]).

Newman & Newman's fiduciary obligations to CMI II were explicitly set forth in the Pledge Agreement:

[C]ollateral Agent hereby acknowledges and agrees that it has a fiduciary duty to the Pledgees to act with the utmost integrity, fidelity and good faith and has an obligation to provide undivided services and loyalty to the Pledgees.

Id., §§ 13 (a), 13 (d).

The occurrence of any of the following events constitutes an "Event of Default" under the Pledge Agreement:

(a)An Event of Default shall occur and be continuing under the Note, the [Subscription] Agreement or the Certificate of Designation ...

(b)The Pledgors shall fail or refuse to pay dividends [under the Operative Documents], when due ... [*4]

(c)The Pledgors shall fail to perform or observe any covenant or condition to be performed or observed [under the Pledge Agreement] within thirty (30) days of the occurrence thereof.

Id., § 9 (a), (b), (c).

The Pledge Agreement provides that, by virtue of the occurrence and continuation of any Event of Default under the Pledge Agreement, Newman & Newman has broad power and responsibility to sell or dispose of the Pledged Securities and to forward the proceeds of any such sale or disposal to CMI II and the other holders of the Series F Stock:

If an Event of Default shall have occurred and be continuing, Collateral Agent shall exercise ... all rights and remedies of a secured party under the Code. Without limiting the generality of the foregoing, Collateral Agent ... may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give an option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof ... upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit for future delivery without assumption of any credit risk. Collateral Agent shall apply the Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale ... to the payment in whole or in part of the Secured Obligations [owed by Pledgors to CMI II and the holders of Series F Stock under the Operative Documents]....

Id., § 10 (b).

In December 2004, the Pledged Securities were delivered to Newman & Newman, which remain in its possession.

However, following execution of the Pledge Agreement, Media Billing promptly failed to deliver the iBill certificates to Newman & Newman, constituting a breach of the Pledge Agreement, which provides that an "Event of Default" takes place when "[t]he Pledgors shall fail to perform or observe any covenant or condition to be performed or observed [under the Pledge Agreement] within thirty (30) days of the occurrence thereof (Pledge Agreement, § 9 [c]; Mazier Aff., ¶ 4). Newman & Newman did not inform CMI II of this breach until after CMI II made inquiries of Newman & Newman regarding the iBill Certificates (Mazier Aff., ¶ 4).

Pursuant to the Subscription Agreement and the Certificate of Designation, the Pledgors were also required to make semi-annual dividend payments to CMI II. Shortly following consummation of the transaction, however, the Pledgors ceased making all dividend payments, and to date, has missed at least the last six dividend payments owed to CMI II, constituting a breach of the Pledge Agreement, which provides that an "Event of Default" takes place when "[a]n Event of Default shall occur and be continuing under ... the [Subscription Agreement or the Certificate of Designation" (Pledge Agreement, § 9 [a]; Mazier Aff., ¶ 5).

Subsequently, CMI II commenced an action against IBD, Media Billing and iBill in this court, entitled CMI II, LLC v Interactive Brand Development, et al., Index No. 600589/05 (the IBD Action), predicated upon IBD's failure to pay dividends, Media Billing's failure to turn over the iBill certificates, and numerous other breaches by IBD, Media Billing and iBill (Mazier Aff., ¶ 6; see CMI II's Second Amended Complaint [Rosen Aff., Exh DD]). [*5]

By letter dated February 14, 2005, CMI II directed Newman & Newman in writing "to urgently take all actions necessary or appropriate to pursue all rights and remedies permitted by the Pledge Agreement, the [Uniform Commercial] Code and other applicable laws to foreclose and realize upon the Collateral" (id., Exh 7). By letter dated May 27, 2005, CMI II provided Newman & Newman with written instructions "to take all legally permissible action necessary to obtain" the iBill certificates that Media Billing failed to deliver to Newman & Newman in violation of the Pledge Agreement (id., Exh 8). By letter dated June 13, 2005, CMI II also wrote Newman & Newman, requesting that the firm "take all actions necessary to protect the interests of CMI II," and "pursue all remedies available ... under the Pledge Agreement" in light of the Pledgors' breaches (id., Exh 9).

Newman & Newman ignored CMI II's demands, and failed to take necessary action to secure possession of the iBill certificates, and to foreclose and realize upon the iBill and PMG Collateral (Mazier Aff., ¶¶ 7-8). Consequently, on June 23, 2005, CMI II commenced this action against Newman & Newman, asserting causes of action for breach of contract, breach of fiduciary duty, and specific performance.

Newman & Newman filed an answer to the complaint, and claimed that it is "ignorant of the respective rights of CMI II, IBD, and [Media Billing]" (Answer, ¶ 54). In addition, Newman & Newman filed an Interpleader Complaint against IBD and Media Billing, joining them as interpleaded defendants, and containing similar allegations as those in its answer. In its Interpleader Complaint, Newman & Newman alleges that:

The breaches by IBD alleged by CMI II are the subject of a separate lawsuit pending in this Court. ... [T]he dispute concerning whether Newman & Newman is required to take action to foreclose upon [the Collateral] is one that must be resolved fully and finally by and between CMI II ... and IBD and [Media Billing]. ... By reason of the claims asserted by CMI II in this action, and the positions taken by IBD and [Media Billing] with respect to those claims, Newman is in doubt as to how it should proceed.

Id., ¶¶ 52-54.

CMI II moved for summary judgment in the IBD Action. On September 26, 2006, I granted summary judgment in favor of CMI II and against IBD, Media Billing and iBill, with respect to CMI II's sixth, seventh, eighth, ninth, tenth and fourteenth causes of action, dismissed each affirmative defense raised by IBD, Media Billing and iBill, and referred the matter to a Special Referee in order to hear and report on CMI II's damages (the Decision).

In the Decision, I held that:

IBD does not dispute that it failed to pay dividends due to plaintiff on June 30, 2005 and December 31, 2005 .... IBD also does not dispute that plaintiff exercised its option to demand redemption of its Series F Stock ... and that IBD did not honor that demand. IBD does not contend that any of the documents at issue are ambiguous. Thus, in light of the unambiguous agreements between plaintiff and IBD, and defendants' failure to make the dividend payments or honor plaintiff's redemption demand pursuant to those agreements, plaintiff has clearly established a breach of contract by IBD. [*6]

Decision, at 7.

An inquest was held on November 28, 2006. I subsequently confirmed the Special Referee's recommendation that IBD pay CMI II damages in the amount of $6,156,878.82, plus pre-judgment interest, and that Media Billing and iBill pay CMI II damages in the amount of $6,734,856.11, plus pre-judgment interest (see Rosen Aff., Exh 27).

IBD, Media Billing and iBill then filed a motion for reargument or renewal of the Decision in the IBD Action. On May 2, 2007, I denied the motion.

On October 12, 2006, CMI II provided a copy of the Decision to Newman & Newman, again demanding in writing that it carry out its obligations under the Pledge Agreement and immediately assign, transfer ownership and deliver the PMG Collateral to CMI II:

Based on the decision quoted above, CMI II is entitled to foreclose on the Collateral presently being held by Newman & Newman. Pursuant to the Pledge Agreement, Newman & Newman is empowered to act as attorney-in-fact in the name of IBD and Media Billing for the purposes of carrying out the terms of the Pledge Agreement and is required to effect "[a]ll actions, rights and remedies" inuring to the benefit of CMI II (Pledge Agreement, §§ 12 (a), 13 (b)). CMI II hereby demands, in accordance with the Court's Decision and Order, and pursuant to Newman & Newman's obligations to CMI II as Collateral Agent and fiduciary, that Newman & Newman immediately assign, transfer and deliver the Collateral (being held for CMI II) to CMI II.

10/12/06 Letter from David Parker to Lawrence S. Hirsch and Marc L. Abrams (Rosen Aff., Exh 29).

Newman & Newman has taken no actions in response to CMI II's letter and the Decision (Mazier Aff., ¶¶ 7-8).

CMI II now moves for summary judgment on its first, second and third causes of action for breach of contract, breach of fiduciary duty and specific performance, and striking Newman & Newman's answer and dismissing its interpleader defense. As set forth below, CMI II has established its entitlement to summary judgment on its first, second and third causes of action, and Newman & Newman has failed to raise any triable issues of fact precluding CMI II's entitlement to the relief demanded.

To establish a right to recover for breach of contract, a party must prove (1) the existence of a contract; (2) performance of the contract by the injured party; (3) breach by the other party; and (4) damages (Noise In Attic Prods., Inc. v London Records, 10 AD3d 303 [1st Dept 2004]; accord J&L Am. Enters., Ltd. v DSA Direct, LLC, 10 Misc 3d 1076(A) [Sup Ct, NY County 2006]).

The New York Court of Appeals has consistently held that "when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms" (W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990]; accord R/S Assoc. v New York Job Dev. Auth., 98 NY2d 29 [2002]). Thus, "[w]here the intent of the parties can be determined from the face of the agreement, interpretation is a matter of law and the case is ripe for summary judgment" (American Express Bank Ltd. v Uniroyal, Inc., 164 AD2d 275, 277 [1st Dept 1990], lv denied 77 NY2d 807 [1991] [citations omitted]). Accordingly, where, as here, evidence of the terms of a contract and of one party's breach is clear, summary judgment is appropriate (Baby Togs, Inc. v IMI Sys., Inc., 205 AD2d 335 [1st Dept 1994], lv dismissed 84 NY2d 1026 [1995]; Benjamin Elec. Eng'g. Works v Rampart Constr. Assoc., 173 AD2d 370 [1st Dept], lv dismissed 78 NY2d 1006 [1991]). [*7]

Newman & Newman's obligations are unambiguously set forth in the Pledge Agreement. Pursuant to the Pledge Agreement, an "Event of Default" includes any breach by the Pledgors of "the [Subscription ] Agreement or the Certificate of Designation," the Pledgors' refusal " to pay dividends" or "redeem any then outstanding shares," or their failure to "deliver to the Collateral Agent ... all certificates representing the Collateral" (Pledge Agreement, §§ 3 [a], 9 [a], [b] and [c]). The Pledgors unequivocally breached the Pledge Agreement when they refused to pay dividends to CMI II, and to honor CMI II's redemption demands, in violation of the Subscription Agreement and Certificate of Designation. The Pledgors also breached the Pledge Agreement when they failed to "deliver to the Collateral Agent on behalf of the Pledgees ... all certificates representing the Collateral" (id., § 3 [a]). Upon the occurrence of an "Event of Default," Newman & Newman is contractually obligated to comply with CMI II's instructions and foreclose and realize upon the Pledged Securities the PMG stock and the iBill certificates but Newman & Newman has refused to do so.

Newman & Newman does not contend that the terms of the Pledge Agreement are unambiguous, or dispute the fact that it failed to foreclose upon the Collateral in compliance with the terms of the Pledge Agreement. Rather, Newman & Newman relies on the pendency of the IBD Action as a justification for its failure to foreclose upon the Collateral. However, the Decision, and the denial of the reargument/renewal motion, has resolved any dispute between CMI II and IBD concerning IBD's failure to make the required dividend payments. By virtue of the finding of fact in the IBD Action that IBD "failed to pay dividends due to plaintiff" under the Subscription Agreement and Certificate of Designation, it is now undisputed that an "Event of Default" has occurred under Section 9 of the Pledge Agreement. Accordingly, Newman & Newman's conduct in failing to foreclose on the Collateral constitutes a clear breach of the Pledge Agreement, and CMI II must be awarded summary judgment in connection with its first cause of action ^[FN1].

CMI II must also be awarded summary judgment on its second cause of action for breach of fiduciary duty. To state a cause of action for breach of fiduciary duty, a plaintiff must show both the existence of a fiduciary relationship, and misconduct by the defendant (see Kurtzman v Bergstol, 40 AD3d 588 [2d Dept 2007]; Ozelkan v Tyree Bros. Environmental Svs., Inc., 29 AD3d 877 [2d Dept 2006]). In the Pledge Agreement, Newman & Newman agreed in writing that it had a "fiduciary duty" requiring it to "act with the utmost integrity, fidelity and good faith and ... provide undivided services and loyalty" to CMI II (id., §§ 13 [a] and [d]). Newman & Newman breached this fiduciary obligation by admittedly refusing to take any action to secure possession of the iBill certificates, and to foreclose and realize upon the Collateral and distribute the proceeds to CMI II following the Pledgors' multiple defaults under the Pledge Agreement, and following the Decision, despite CMI II's repeated requests that it do so.

Newman & Newman's arguments that "it is not responsible for any failure to deliver [*8]Collateral as no escrow was created with respect to that which Newman never received," and that "Newman's sole fiduciary obligation to the parties was to preserve the Collateral actually delivered" (Newman & Newman Mem., at 13) are baseless. The Pledge Agreement specifically required Newman & Newman "to take any and all appropriate action and to execute upon any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Pledge Agreement," and "[i]f an Event of Default shall have occurred ... [to] forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof" (Pledge Agreement, §§ 10 [b], 12 [a]). It is undisputed that Newman & Newman did not do so.

Thus, summary judgment must be granted on CMI II's its second cause of action for breach of fiduciary duty.

Although CMI II contends that it has been damaged by Newman & Newman's actions in connection with the first and second causes of action, since it has yet to receive, let alone realize proceeds from, the collateral held by Newman & Newman, it fails to submit any papers detailing the amount of such damages. As such, summary judgment is granted as to liability only, and the issue of the amount of damages to which CMI II is entitled will be referred to a Special Referee to hear and report.

In its third cause of action for specific performance, CMI II seeks a mandatory injunction directing Newman & Newman to carry out its contractual and fiduciary obligations to secure possession of the iBill certificates, and to foreclose and realize upon the Collateral. Newman & Newman is expressly required to do this pursuant to Section 10 (b) of the Pledge Agreement ["If an Event of Default shall have occurred and be continuing, Collateral Agent shall exercise ... all rights and remedies of a secured party under the Code ... [and] may collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give an option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof ... upon such terms and conditions as it may deem advisable"]). As such, CMI II is entitled to injunctive relief enforcing the terms of the Pledge Agreement (see Singer Asset Fin. Co., LLC v Melvin, 33 AD2d 355 [1st Dept 2006] [granting summary judgment on cause of action seeking injunctive relief to enforce the agreement]).

Although CMI II also seeks an order striking Newman & Newman's answer and discharging its interpleader defense, "[u]nconditionally striking a pleading pursuant to CPLR 3126 is appropriate [only] where the resisting party's default is deliberate and contumacious" (Pimental v City of New York, 246 AD2d 467, 468 [1st Dept 1998]; see also DiDomenico v C & S Aeromatik Supplies, Inc., 252 AD2d 41 [2d Dept 1998]). CMI II has not presented any evidence demonstrating such deliberate and contumacious behavior. As such, this branch of the motion is denied.

In support of its cross motion for discharge and other relief, Newman & Newman does not dispute that it is obligated under the Pledge Agreement to secure possession of the iBill certificates, and that it is responsible for foreclosing and realizing upon the Collateral. Rather, its asserts that it is a mere stakeholder in a dispute between competing claimants.

Newman & Newman's cross motion is denied. Newman & Newman is not a neutral party in this action, and this case is not merely about CMI II's entitlement to the collateral being held by Newman & Newman. To the contrary, Newman & Newman affirmatively breached its contractual and fiduciary obligations owed to CMI II under the Pledge Agreement. Because Newman & Newman is independently liable to CMI II, its liability cannot be discharged. "Where there is an [*9]issue of independent liability ... the interpleading party does not stand as a disinterested stakeholder" (National Cold Storage Co. v Tiya Caviar Co., 52 Misc 2d 289, 290 [Sup Ct, NY County 1966]; see also Inovlotska v Greenpoint Bank, 8 AD3d 623, 624-625 [2d Dept 2004] ["Greenpoint [Bank] was a named defendant against whom the plaintiff asserted independent liability, and as such, was not a mere stakeholder, notwithstanding the fact that bank claimed no interest in the disputed funds"]).

It is well-established that "[i]nterpleader and discharge are not mandatory in every case" (Flon v Companion Life Ins. Co., 27 AD2d 513, 514 [1st Dept 1966]), and that courts have consistently declined to discharged purported interpleaders when they are subject to independent liability (see e.g. Inovlotska v Greenpoint Bank, 8 AD3d 623, supra; Birnbaum v Marine Midland Bank, N.A., 96 AD2d 776 [1st Dept 1983]; National Cold Storage Co. v Tiya Caviar Co., 52 Misc 2d 289, supra). In Birnbaum v Marine Midland Bank, N.A., for example, the First Department affirmatively denied Marine Midland's cross motion for interpleader relief on the ground that it was "not a mere stakeholder" (96 AD2d at 777). The Court held that "[w]hile we recognize that the bank has asserted no specific claim to the funds, under the circumstances of this case, involving, inter alia, a claim that the bank acted improperly and inconsistently with its depositor's instructions in honoring those checks, payment into court and discharge as stakeholder under CPLR § 1006 (f) ... would be inappropriate and unwarranted" (id.). Likewise, in Inovlotska v Greenpoint Bank (8 AD3d 623, supra), the plaintiff alleged that Greenpoint Bank had failed to comply with certain bank withdrawal requests. The Court ruled that Greenpoint Bank was "not a mere stakeholder," and that "before a determination was rendered as to ... the reasonableness of Greenpoint's conduct in refusing to honor the decedent's withdrawals, discharging Greenpoint was inappropriate and unwarranted" (id. at 624-625). National Cold Storage Co. v Tiya Caviar Co. (52 Misc 2d 289, supra) is also instructive. The court there held that the interpleading plaintiff was not a "disinterested stakeholder" because the counterclaiming defendants not only sought "merely recovery of the subject matter, but also sought a personal judgment against each plaintiff" (id. at 290).

CMI II commenced this action against Newman & Newman, seeking specific performance and damages for breach of its contractual and fiduciary obligations. This action and CMI II's claims are principally directed against Newman & Newman. Thus, it is not a mere stakeholder under CPLR 1006, and cannot be discharged from liability.

Moreover, it is clear that Newman & Newman did not reasonably rely upon IBD's purportedly adverse claim. CPLR 1006 (a) defines a stakeholder as a person who is "exposed to multiple liability as the result of adverse claims." Each adverse claim, however, "must rest upon some reasonable basis," and "[o]bviously, a bare assertion of a claim is not enough" (Nelson v Cross & Brown Co., 9 AD2d 140, 144 [1st Dept 1959]; accord Federal Ins. Co. v Ryder Truck Rental, Inc., 236 AD2d 229 [1st Dept 1997]; see also Pouch v The Prudential Ins. Co. of America, 204 NY 281, 285-286 [1912] ["The mere pretext of a conflicting claim is not enough to show that the [interpleading party] is in any danger of loss from an inability to determine to whom the debt in question should be paid"]).

Courts have regularly denied motions for discharge on the ground that an interpleading party does not reasonably face multiple liabilities (see e.g. The Royal Bank of Canada v Weiss, 172 AD2d 167, 169 [1st Dept 1991] ["[a]s the Bank does not face multiple liability it is not a stakeholder within the meaning of CPLR § 1006 [a] and, therefore, may not proceed by way of interpleader"]; Federal [*10]Ins. Co. v Ryder Truck Rental, Inc., 236 AD2d at 229 [citation omitted] [holding that interpleading party was "not a stakeholder exposed to multiple liability as the result of adverse claims'"]).

The Pledgors' purported "adverse claim" is really no claim at all, and Newman & Newman had no justifiable basis to rely on their instructions or claim. The Pledge Agreement expressly defines Events of Default. The Pledgors undeniably breached their obligations under the Pledge Agreement. Newman & Newman had an affirmative contractual and fiduciary duty to enforce CMI II's rights under the Pledge Agreement notwithstanding any unreasonable argument asserted by the Pledgors but did nothing. The Decision eliminated any possible doubt concerning Newman & Newman's purported basis for not taking any action on behalf of CMI II and foreclosing upon the collateral. Thus, the Pledgors' prior assertion that they did not breach any obligation to CMI II was obviously false. Since the Pledgors' claim was a "mere pretext," Newman & Newman is not subject to valid or colorable claims and liabilities by the Pledgors. Accordingly, its cross motion for discharge must be denied.

Although Newman & Newman also seeks an order awarding it its costs and reasonable attorneys' fees incurred in connection with this action, Newman & Newman is not entitled to such costs and expenses. "[T]he authorities are clear that ... costs including attorneys' fees ... should not be granted where the [interpleader] relief requested is denied" (Mac Queen Realty Co., Inc. v Emmi, 58 Misc 2d 54, 57 [Sup Ct, Monroe County 1968]; see also Burns v Burns, 113 Misc 2d 229, 235 [Sup Ct, NY County 1982] [denying counsel fees because purported interpleader was "not a mere stakeholder"]; CPLR 1006 [f]).

In addition, courts have recognized that "costs, expenses, and legal fees related to the interpleader[ s] ... defense of counterclaims asserting independent liability [a]re not recoverable under CPLR § 1006" (Glazer v Jack Seid-Sylvia Seid Revocable Trust, 2003 WL 22757710, * 4 [District Court, Nassau County 2003]; see also National Cold Storage Co. v Tiya Caviar Co., 52 Misc 2d at 290 ["[w]here there is an issue of independent liability ... the interpleading party does not stand as a disinterested stakeholder ... and may not recover his expenses (under CPLR § 1006) in defending against that independent claim"]).

Accordingly, here, Newman & Newman is not entitled to any costs, expenses or disbursements, including attorneys' fees. Newman & Newman's costs and fees in this case relate primarily, if not entirely, to its defense of CMI II's claims against Newman & Newman for breach of contract and fiduciary duty, and to Newman & Newman's independent liability to CMI II..

Newman & Newman's request that CMI II indemnify it for its costs and attorneys' fees pursuant to Sections 13 (d) and 16 of the Pledge Agreement is also denied.

Paragraph 16 of the Pledge Agreement, entitled "Indemnification," provides that:

The Pledgors hereby agree to indemnify, defend and hold Collateral Agent, and its respective successors and assigns harmless from and against any and all damages, losses, claims, costs or expenses (including reasonable attorneys' fees).

However, CMI II is not a Pledgor under the Pledge Agreement; rather, Care Concepts I, Inc. and Media Billing are the Pledgors. Since CMI II is not a Pledgor, it is certainly not required to indemnify Newman & Newman under this provision. Accordingly, Newman & Newman's request for indemnification under this provision is denied.

Paragraph 13 (d) of the Pledge Agreement provides: [*11]

Each Pledgee does hereby agree to indemnify, defend and hold harmless the Collateral Agent from and against any cost, expense, liability or other obligation in connection with the performance of its duties hereunder as the Collateral Agent.

This paragraph also does not support Newman & Newman's indemnification request. This provision, which omits any reference to attorneys' fees, does not provide for indemnification of legal expenses in the event of a dispute between CMI II and Newman & Newman. Because the parties did not include a specific provision for the reimbursement of attorneys' fees in the event of a dispute, Newman & Newman may not recover its attorneys' fees (see Farrell Fritz P.C. v Zelman (2006 Misc LEXIS 3427 [Sup Ct, Nassau County 2006]).

Moreover, CMI II's litigation is predicated upon Newman & Newman's failure to perform its duties under the Pledge Agreement. Thus, by its terms, the indemnification provision does not apply here since Newman & Newman has not "perform[ed] ... its duties [under the Pledge Agreement" as the Collateral Agent."

Hence, Newman & Newman is not entitled to any costs or attorneys' fees pursuant to the Pledge Agreement.

I have considered the remaining claims, and I find them to be without merit.

Accordingly, it is

ORDERED that the motion of plaintiff CMI II, LLC for summary judgment on its first and second causes of action is granted as to liability only; and it is further

ORDERED that the issue of the amount of damages to which plaintiff is entitled with respect to its first cause of action for breach of contract and its second cause of action for breach of fiduciary duty is referred to a Special Referee to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties, as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shall determine the aforesaid issue; and it is further

ORDERED that this motion is held in abeyance pending receipt of the report and recommendations of the Special Referee and a motion pursuant to CPLR 4403 or receipt of the determination of the Special Referee or the designated referee; and it is further

ORDERED that counsel for the party seeking the reference or, absent such party, counsel for the plaintiff shall, within 30 days from the date of this order, serve a copy of this order with notice of entry, together with a completed Information Sheet ^[FN2], upon the Special Referee Clerk in the Motion Support Office in Rm. 119 at 60 Centre Street, who is directed to place this matter on the calendar of the Special Referee's Part (Part 50 R) for the earliest convenient date; and it is further

ORDERED that plaintiff's motion for summary judgment on its third cause of action for specific performance is granted, and plaintiff is directed to settle an order with respect to this cause of action; and it is further

ORDERED that plaintiff's motion for an order striking the answer of defendant Newman & Newman, P.C. is denied; and it is further

ORDERED that defendant's cross motion is denied. [*12]

Dated: ___________

ENTER:

_______________________

J.S.C.