Opinion
INDEX NO. 654844/2016
10-04-2019
BRADFORD BILLET, Plaintiff, v. JODI DREXLER-BILLET, RYAN DREXLER, HALBERT DREXLER, ESTATE OF FRANCINE DREXLER, MUSCLEPHARM CORP., CONSAC LLC, NY, CONSAC LLC, DE, CONSAC MANAGER LLC, CONSAC RE, LLC, COUNTRY LIFE, LLC, COUNTRY LIFE MANUFACTURING, LLC, CONSAC INDUSTRIES, INC., MOTOR PARKWAY, LLC, SABRE STREET, LLC, DREXLER ASSOCIATES, LLC, THE JODI-DREXLER BILLET (2006) DYNASTY TRUST, SASHA GREENE, THE JODI DREXLER-BILLET (2006) LONG TERM TRUST, JARROD KAHN, WESTHAMPTON (2006) LLC, BRIDGEHAMPTON (2006) LLC, AMAGANSETT (2006) LLC, TROY L. SATTLER, DENNIS DUBAN, SATTLER CAPITAL MANAGEMENT, LLC, DUBAN SATTLER AND ASSOCIATES, LLC, DUBAN SATTLER AND ASSOCIATES, LLP, DUBAN ACCOUNTANCY, LLP, DLD ACCOUNTANCY LLP, MATT LAROCHELLE, HELENE NISHIZAWA, RICK THIEDIG, FRANKLIN MONTGOMERY, MICHAEL E. CIRENZA, AND ANCHIN, BLOCK AND ANCHIN, Defendants.
NYSCEF DOC. NO. 186 DECISION/ORDER
Motion Seq. Nos. 002, 004, 005 MICHAEL L. KATZ, J. :
Motions sequence number 002, 004, and 005 are consolidated for disposition.
In motion sequence 002, defendants Jodi Drexler-Billet ("Ms. Drexler") Ryan Drexler, Halbert Drexler, MusclePharm Corp., Amagansett (2006) LLC, Bridgehampton (2006) LLC, Consac Industries, Inc., Consac LLC, DE, Consac Manager, LLC, Country Life Manufacturing, LLC, Drexler Associates, Inc., Estate of Francine Drexler, Motor Parkway, LLC, Sabre Street, LLC, Westhampton (2006) LLC, The Jodi Drexler-Billet (2006) Dynasty Trust, The Jodi Drexler-Billet (2006) Long Term Trust, DLD Accountancy LLP, Rick Thiedig, Jarrod Kahn, Michael E. Cirenza and Sasha Greene move for an order pursuant to CPLR § 3211 (a) (4), (5), (7) and/or (8), dismissing the Complaint against them, or, in the alternative, pursuant to CPLR § 2201, staying this action pending the resolution of the related matrimonial action.
Drexler Associates, Inc. is named in the First Amended Complaint as defendant Drexler Associates, LLC. Pursuant to a Stipulation dated July 30, 2018, this action was discontinued without prejudice as against defendant Country Life, LLC.
Counsel for the moving defendants agreed on the record on July 25, 2018 that their arguments in support of dismissing the original Complaint should be considered in connection with the First Amended Complaint which was filed on June 25, 2018.
In motion sequence number 004, defendant Franklin Montgomery moves for an order pursuant to CPLR § 3211 (a) (1), (5) and (7), dismissing the complaint against him.
In motion sequence number 005, defendants Matt LaRochelle, Dennis Duban, Duban Accountancy LLP, and Duban Sattler and Associates, LLP move for an order pursuant to CPLR § 3211 (a) (4), (5), (7) or (8), dismissing the Complaint against them, or, in the alternative, pursuant to CPLR § 2201, staying the action.
Plaintiff Bradford Billet opposes the motions and cross-moves for limited expedited discovery concerning the assets of defendants Ryan Drexler and MusclePharm Corp.
Pursuant to Stipulation dated July 30, 2018, this action was discontinued without prejudice as against defendant Country Life LLC.
Background
Plaintiff alleges in the Amended Complaint that he and defendant Ms. Drexler were married on October 19, 1996; that Ms. Drexler served as the chief marketing executive at her family business, The Country Life Group ("Country Life"), a nutrition supplement and vitamin business during the marriage; that Ms. Drexler acquired a majority of her interests in Country Life through her efforts and the direct and indirect efforts of plaintiff; that Ms. Drexler's interests in Country Life substantially appreciated; that the sale of Country Life was completed in April 2006; and that Ms. Drexler received a substantial share of the proceeds of that sale.
In the related matrimonial action, Anonymous v Anonymous , under Index No. 350090/13, which is pending before this Court, plaintiff alleges that the proceeds of the sale of Country Life are part of the marital estate; that members of Ms. Drexler's family diverted those proceeds in order to keep them from him; and that he is entitled to his equitable share of the present value of the interests that Ms. Drexler held in entities that were part of Country Life.
Specifically, plaintiff alleges that at the time of the marriage, Ms. Drexler held:
(1) a 20% ownership interest in defendant Consac Inc., a wholesale distributor of vitamins/supplements, which Ms. Drexler allegedly received in 1995 as a gift and was then worth less than $400,000;
(2) a 33.33% interest in defendant Drexler Associates, LLC, "a real estate entity which held the company's corporate office;" and
(3) a 50% interest in nonparty Tea Tree Solutions Inc., "a minor sales affiliate."
Plaintiff further alleges that "[d]uring the course of the marriage, [Ms. Drexler] co-founded and acquired other and further interests in entities and assets that became part of the growing Country Life Group," including:
(1) a 44% interest in defendant Country Life Manufacturing LLC, which manufactured supplements;
(2) an additional 11.67% membership interest in Drexler Associates, LLC, (bringing her total interest in that entity to 45%);
(3) a 45% interest in defendant Motor Parkway LLC, which purchased land and a building in Hauppauge, New York that was used as a manufacturing facility for Country Life Manufacturing LLC; and
(4) a 45% interest in defendant Sabre Street, LLC ("Sabre Street"), which purchased land and a building in Hayward, California that was used as Country Life's west coast distribution facility. Amended Complaint, ¶ 62.
Plaintiff alleges that the new interests that Ms. Drexler acquired during the marriage "were not gifts, but rather were issued to Jodi as a founder of these entities or as compensation for her services on behalf of" Country Life. Amended. Complaint, ¶ 63.
Plaintiff further alleges that in or about 2001, Sabre Street sold its property in California, and that substantial proceeds of the sale were reinvested into Country Life, "thus commingling the marital assets of Jodi and Bradford with the general assets of the Country Life Group." Amended Complaint, ¶¶ 64-65.
Plaintiff further alleges that, in 2003 and 2004, he "endorsed over $200,000 of his own tax refunds to Jodi, wh[ich] she invested into the Country Life Group." Amended Complaint, ¶ 65.
Sale of Country Life to Kikkoman
Plaintiff alleges that in or about 2005, Jodi Drexler; her late father, defendant Halbert Drexler; her brother, defendant Ryan Drexler; and her late mother, Francine Drexler (collectively referred to herein as "the Drexler defendants") entered into an agreement to sell Country Life to a subsidiary of Kikkoman Corporation ("Kikkoman") in two stages.
In the first stage, Kikkoman agreed to pay "nearly $50 million for approximately a 50% interest" in Country Life Group, which would continue to be operated by the Drexler Family, including Jodi Drexler, in collaboration with Kikkoman. Amended Complaint, ¶ 68. Plaintiff alleges that neither Ms. Drexler nor any of the other Drexler defendants advised him of this transaction, which he contends constituted "the liquidation of [a] substantial marital asset." Amended Complaint, ¶¶ 69-70.
Plaintiff further alleges that in preparation for the first stage of the transaction, the assets and liabilities of each of the entities then comprising Country Life, including Consac Industries, Country Life Manufacturing, Drexler Associates, Tea Tree Solutions, and Motor Parkway were "commingled and contributed into three newly-formed" entities, defendants Consac LLC, Consac Manager LLC, and Consac RE LLC (the "Consac Defendants"). Amended Complaint, ¶ 71. He further contends that the assets and liabilities of these Consac Defendants "were further commingled and contributed to another newly formed entity, defendant Country Life LLC," the entity that was ultimately sold to Kikkoman. Amended Complaint, ¶ 72.
Plaintiff further alleges that on April 14, 2006, Kikkoman purchased the remainder of Country Life, LLC for approximately $50 million. Amended Complaint, ¶ 73. Plaintiff contends that he "had no knowledge of the terms or magnitude of the Kikkoman Transaction, or of the amount of Jodi's share of the Kikkoman Proceeds, which constituted marital assets." Amended Complaint, ¶ 76.
Plaintiff alleges that the Drexler defendants asked him to sign a post-nuptial agreement, "which would have excluded him from any interest in marital assets derived from the Country Life Group," but that he refused. Amended Complaint, ¶ 80.
Plaintiff claims that Halbert Drexler threatened that if he "did not sign a post-nuptial agreement, the Drexler defendants would take all steps necessary to conceal Jodi's share of the family business, and that Bradford would 'never see a cent' of his interest in these marital assets in the event of a divorce." Amended Complaint ¶ 81.
Plaintiff alleges that the Drexler defendants, in conjunction with the co-defendants, "agreed to and did conduct and participate in a pattern of racketeering activity for the unlawful purpose of intentionally defrauding [him] of his fair and equitable share of marital assets." Amended Complaint, ¶ 84.
Specifically, plaintiff claims that the Drexler defendants, acting through Franklin Montgomery, a New York attorney, formed defendant The Jodi Drexler-Billet (2006) Long Term Trust ("the Long Term Trust") on April 6, 2006, just prior to the second stage of the Kikkoman transaction. Jodi Drexler's aunt, defendant Sasha Greene, was designated as the trust advisor. Jodi Drexler allegedly "'conveyed' the initial assets of the trust - along with amounts to be subsequently conveyed - to be 'held, administered and distributed' by the Trustee." Amended Complaint, ¶ 87.
Plaintiff further claims that the Drexler defendants, acting through defendant Montgomery, formed defendant Amagansett (2006) LLC ("Amagansett") on April 5, 2006. Plaintiff alleges that Jodi Drexler, the sole member of Amagansett, simultaneously "transferred to Amagansett her interests in Drexler Associates (45% share), Motor Parkway, LLC (45% share) and Country Life Manufacturing, LLC (44% share) - each of which owned percentage interests in the Consac Defendants." Amended Complaint, ¶ 88.
Plaintiff also claims that the Drexler defendants, acting through defendant Montgomery, formed defendant Westhampton (2006) LLC ("Westhampton"), on April 6, 2006. Defendant Jarrod Kahn was a director and defendants Bridgehampton (2006) LLC and the Long Term Trust were members. Plaintiff alleges that "in a private annuity agreement, dated April 7, 2006, Jodi 'sold' her 100% interest in Amagansett to Westhampton," and "[i]n exchange, Westhampton agreed to make fixed annual payments to Jodi for life." Amended Complaint, ¶ 89.
Finally, plaintiff claims that the Drexler defendants, acting through defendant Montgomery, formed defendant Dynasty Trust on April 6, 2006. Defendant Sasha Greene was a trustee. Plaintiff alleges that "[p]ursuant to Article I of the Dynasty Trust, Jodi 'transferred' the initial assets of the trust - along with amounts to be subsequently conveyed - to be 'held, administered and distributed' by the trustee. Amended Complaint, ¶ 90.
Specifically, plaintiff alleges that Jodi Drexler "transferred to the Dynasty Trust her ownership of 40 shares in Consac Industries, Inc. (20% interest) in exchange for the Dynasty Trust's promise to make fixed annual payments to Jodi." Amended Complaint, ¶ 90.
Plaintiff further alleges that, with Jodi's knowledge and approval, Ryan, Halbert, and Francine Drexler, with the assistance of the Duban Defendants, "caused Consac Defendants to divert tens of millions of dollars of marital property to themselves, but not to Jodi, to secrete and dissipate Jodi's share in the proceeds and to deprive Bradford of his rightful share of marital assets," and that "[t]he vast bulk of these marital assets were distributed to Ryan." Amended Complaint, ¶ 99.
Defendants Dennis Duban; Troy L. Sattler, Matt LaRochelle, Helene Nishizawa, Rick Thiedig, DLD Accountancy LLP, Duban Accountancy, LLP; Duban Sattler and Associates, LLP; Duban Sattler and Associates, LLC; and Sattler Capital Management LLC are collectively referred to in the Amended Complaint as "the Duban Defendants."
According to plaintiff, the Drexler defendants terminated the Dynasty Trust and the LT Trust in late 2012, and caused the trusts to void the private annuities and transfer their remaining assets and interests back to Ms. Drexler. He further claims that Jodi Drexler's "request for a divorce was the culmination of a long and bitter campaign by Halbert and Ryan (a) to remove Bradford from the family, in retaliation for Bradford's refusal to sign a post-nuptial agreement; (b) to finally eliminate the potential for Bradford to share in any of the marital assets created during his marriage with Jodi; and (c) to shield the Drexler defendants from liability." Amended Complaint, ¶ 110.
According to plaintiff, these transactions "were not in the best interest of Jodi, because they replaced the greater, liquidated amounts promised in the private annuities with interests in the substantially depleted Consac Defendants." Amended Complaint, ¶ 114.
The Amended Complaint further alleges that "at the Drexler Defendants' request, the Duban Defendants created false tax returns to conceal the millions of dollars of funds diverted to Ryan, Halbert, and Francine." Amended Complaint, ¶ 121.
Plaintiff claims that Ryan Drexler diverted the proceeds from the Kikkoman Transaction into MusclePharm. Ryan Drexler is the chairman, CEO and a controlling shareholder of that company. Amended Complaint, ¶ 136.
Causes of action
The Amended Complaint sets forth the following causes of action:
(1) against all defendants, for racketeering activity as defined in 18 USC § 1961(1) (Racketeering Influenced and Corruption Organization Act [RICO]), including mail fraud (18 USC § 1341), wire fraud (18 USC § 1343), bank fraud (18 USC § 1344), and money laundering (first cause of action);
(2) against all defendants, for conspiracy to violate RICO (second cause of action);
(3) against defendant Jodi Drexler, for breach of fiduciary duty (third cause of action);
(4) against all defendants other than defendant Jodi Drexler, for aiding and abetting the breach of fiduciary duty (fourth cause of action);
(5) against defendant Jodi Drexler, for fraud (fifth cause of action);
(6) against all defendants other than defendant Jodi Drexler, for aiding and abetting fraud (sixth cause of action);
(7) against the Drexler defendants, the Trust Defendants, the Consac Defendants, and defendant MusclePharm, for fraudulent conveyances in violation of Debtor and Creditor Law (DCL) §§ 273, 273-a, 275, 276, 276-a (seventh cause of action);
(8) against all defendants, for civil conspiracy (eighth cause of action);
(9) against defendants Consac, LLC, Ryan Drexler, Halbert Drexler, and the Estate of Francine Drexler, for the imposition of a constructive trust (ninth cause of action);
(10) for the imposition of a resulting trust against the assets of the defendants (tenth cause of action); and
(11) against all defendants, for unjust enrichment (eleventh cause of action).
Plaintiff also commenced a federal action in the United States District Court for the Central District of California, captioned Bradford Billet v Estate of Francine Drexler, et. al, case no. cv-07900-17 (DMG) (JC), in which plaintiff has asserted substantially similar claims. Pursuant to a Decision/Order dated June 27, 2018, the District Court stayed that action pending the resolution of these motions with respect to issues of personal jurisdiction.
Motion Sequence Number 002
Prior action pending
"Pursuant to CPLR 3211(a)(4), a court has broad discretion in determining whether an action should be dismissed based upon another pending action where there is a substantial identity of the parties, the two actions are sufficiently similar, and the relief sought is substantially the same (citation omitted)." "The critical element is that both suits arise out of the same subject matter or series of alleged wrongs (citation omitted)."Cooper v Thao, 162 AD3d 980, 981 (2nd Dep't 2018).
That portion of the motion seeking to dismiss the Amended Complaint pursuant to CPLR § 3211 (a)(4) is denied, as this Court finds that "the relief sought in this action is not substantially the same as the relief sought in the matrimonial action, and there is not a substantial identity of the parties" because the additional parties in this action are alleged to have engaged in tortious conduct. Swartz v Swartz, 145 AD3d 818, 822 (2nd Dep't 2016).
Personal Jurisdiction
Defendants next move to dismiss the Amended Complaint against Ryan and Halbert Drexler for lack of jurisdiction on the grounds that Halbert Drexler was a resident of California and Ryan Drexler is domiciled in California.
With respect to Halbert Drexler, plaintiff alleges, in relevant part, that: (i) Halbert Drexler owned, through a trust, and occupied an apartment located in Manhattan, "in which Defendants performed substantial acts in furtherance of their conspiracy against Bradford" (Amended Complaint, ¶ 14); and (ii) Halbert summoned plaintiff to his Manhattan apartment and while inside "threatened Bradford that if [he] did not sign a post-nuptial agreement, the Drexler defendants would take all steps necessary to conceal Jodi's share of the family business, and that Bradford would 'never see a cent' of his interest in these marital assets in the event of a divorce." Amended Complaint, ¶ 81.
With respect to Ryan Drexler, plaintiff alleges, in relevant part, that Ryan Drexler maintained an apartment in Manhattan "at relevant times during Defendants' conspiracy." Amended Complaint, ¶ 15. The Amended Complaint further alleges that he was the President of the Consac defendants, as well as non-party Tea Tree Solutions, "each of which was organized under the laws of the State of New York and, at all relevant times, had its principal place of business in New York" and "the Co-Trustee - and later the sole Trustee - of the Jodi Drexler-Billet Dynasty Trust, which was formed in New York." Amended Complaint, ¶ 15.
In addition, the Amended Complaint alleges that the Drexler defendants acted through their agent, Franklin Montgomery, in the State of New York. Pursuant to CPLR § 302 (a) (2), a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent "commits a tortious act within the state,..." Based on the foregoing, this Court finds that the Amended Complaint contains sufficient allegations, if proved, to confer jurisdiction over defendants Ryan and Halbert Drexler. See, AMP Servs. Ltd. v Walanpatrias Foundation, 34 AD3d 231, 232 (1st Dep't 2006).
Accordingly, that portion of the motion seeking to dismiss the Amended Complaint against Ryan Drexler and Halbert Drexler for lack of personal jurisdiction is denied.
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The moving defendants also seek to dismiss the Amended Complaint against MusclePharm for lack of personal jurisdiction.
The Amended Complaint alleges that MusclePharm is a Delaware corporation, with a principal place of business in Colorado, and that it is a publicly traded company that "engages in substantial sales and marketing of its sports nutritional products in interstate commerce, including in the State of New York." Amended Complaint, ¶ 47.
According to the Drexler defendants, MusclePharm is actually a Nevada corporation, which maintains its principle place of business in California.
The Amended Complaint further alleges that Ryan Drexler diverted marital assets from the Consac defendants which "he invested, loaned or otherwise laundered ... through other business entities," including MusclePharm (Amended Complaint, ¶ 125) and acquired "a controlling interest of approximately 59% of the common stock of MusclePharm." Amended Complaint at ¶ 126.
However, the Amended Complaint contains no allegations that Ryan Drexler's acquisition of MusclePharm's shares was made without adequate consideration, or that MusclePharm acted with Ryan Drexler to fraudulently place marital assets out of plaintiff's reach. Therefore, this Court finds that plaintiff has failed to allege sufficient facts to exercise long-arm jurisdiction over MusclePharm.
This case is thus distinguishable from instances where the complaint alleged that transactions occurred without adequate consideration. See, e.g., Ed Moore Adv. Agency, Inc. v I.H.R., Inc., 114 AD2d 484, 486 (2nd Dep't 1985); Neilson v Sal Martorano, Inc., 36 AD2d 625, 626 (2nd Dep't 1971).
That branch of the motion seeking to dismiss plaintiff's claims against MusclePharm is accordingly granted. RICO claims (first and second causes of action)
To sustain a RICO claim under 18 U.S.C. § 1962(c), a plaintiff must show "(1) that the defendant (2) through the commission of two or more acts (3) constituting a 'pattern' (4) of 'racketeering activity' (5) directly or indirectly invests in, or maintains and interest in, or participates in (6) an 'enterprise' (7) the activities of which affect interstate or foreign commerce." (citations omitted).Williams v Affinion Group, LLC, 889 F3d 116, 123-124 (2nd Cir. 2018).
"[A] RICO plaintiff 'only has standing if, and can only recover to the extent that, he has been injured in his business or property by the conduct constituting the violation' (citation omitted)." Den Hollander v Flash Dancers Topless Club, 173 F. Appx. 15, 17 (2nd Cir. 2006).
A party's "mere expectation of a favorable decree awarding her a share of [her spouse's] assets in [a] state court matrimonial action does not constitute a property interest protected under RICO. (citation omitted)." Capasso v Cigna Ins. Co., 765 FSupp 839, 842 (SDNY 1991), quoting Pohlot v Pohlot, 664 FSupp 112, 116 (SDNY 1987).
Defendants argue that the RICO claim must be dismissed for failure to state a cause of action on the ground that plaintiff has no interest in any of the alleged marital property, but merely a speculative expectation of acquiring an interest in the context of the matrimonial action.
Relying on Cohen v Cohen, 993 FSupp 2d 414, 424 (SDNY 2014), plaintiff argues that he does, in fact, hold a present ownership interest in the alleged marital property. In Cohen, the parties entered into a separation agreement, which listed their marital assets, including particular real property. Thus, the court concluded there was "no question" of the spouse's interest accruing upon divorce. Cohen v Cohen, supra, at 424.
In the instant case, however, the parties never entered into an agreement (either prior to or during the marriage) entitling plaintiff to Jodi Drexler's interest in Country Life. Plaintiff's "mere expectation that [he] might be awarded some share in [his wife's] property is too speculative to support a RICO claim." Capasso v Cigna Ins. Co., supra at 842.
Significantly, plaintiff was never a member or shareholder of any of the LLCs and corporations that comprised Country Life. Aside from an allegation that he once invested a tax refund into the company, any contribution that plaintiff may have made to the growth of Ms. Drexler's interest in Country Life was indirect.
Moreover, "among the myriad burdens that a plaintiff must meet to proceed on a RICO claim is to allege facts showing that the defendants engaged in a 'pattern' of racketeering. (citations omitted)." Rosner v Rosner, 766 FSupp2d 422, 425 (EDNY 2011). In that case, the court observed that the plaintiff, as here, alleged
a single goal of all of this activity: to hide marital property from her. In the Court's view, this does not rise to the level of alleged wrongdoing required to state a valid RICO claim. There is only one victim in this alleged scheme—namely, the plaintiff—and the alleged societal effect here is minimal. The plaintiff is not the first person involved in a matrimonial case to attempt to bring a RICO claim against a spouse for allegedly hiding marital assets. The courts that have previously addressed this type of allegation have almost universally found such claims to be a misuse of the RICO statute.Rosner v Rosner, supra at 426.
Accordingly, those portions of the motion seeking to dismiss the first and second causes of action are granted.
Breach of Fiduciary Duty (third cause of action)
In the third cause of action, plaintiff alleges that Jodi Drexler breached her fiduciary duty to him by (a) transferring and attempting to transfer marital assets to prevent him from asserting his equitable or legal rights to such assets; (b) deliberately refraining from exercising her right to have her fair share of the Consac Defendants' assets paid or returned to her, in order to defraud him of his rights to those purported marital assets; (c) conspiring with the other defendants to carry out a scheme to divert and secrete marital assets from him; (d) participating in the creation of trusts that would be placed under the control of persons nominated by Ryan Drexler, as part of the alleged scheme to divert and secrete marital assets from plaintiff; and (e) causing the Trust Defendants to be dissolved and conveying annuity rights in which plaintiff had a prospective interest, as part of the alleged scheme to divert and secrete marital assets from him.
It is well settled that "[a] fiduciary duty exists 'between two persons when one of them is under a duty to act for or to give advice for the benefit of another upon matters within the scope of the relation' (citations omitted)." Wilson v Dantas, 29 NY3d 1051, 1063-1064 (2017).
"[T]he ongoing conduct between parties may give rise to a fiduciary relationship that will be recognized by the courts." Wiener v Lazard Freres & Co., 241 AD2d 114, 122 (1st Dep't 1998). See also, Sergeants Benevolent Assn. Annuity Fund v Renck, 19 AD3d 107, 110 (1st Dep't 2005). "Such a relationship, necessarily fact-specific, is grounded in a higher level of trust than normally present in the marketplace between those involved in arm's length business transactions." EBC I, Inc. v Goldman Sachs & Co., 5 NY3d 11, 19 (2005).
New York courts have held that agreements between spouses require "the utmost of good faith" (Christian v Christian, 42 NY2d 63, 72 [1977]), "[s]ince spouses stand in a fiduciary relationship to each other" with respect to those agreements (Etzion v Etzion, 62 AD3d 646, 651 [2nd Dep't 2009]; see also, Levine v Levine, 56 NY2d 42, 47 [1982]; Petracca v Petracca, 101 AD3d 695, 698 [2nd Dep't 2012]).
Here, however, there is no allegation regarding the existence of an agreement between the parties.
Family members may also be determined to "stand in a fiduciary relationship toward one another in a co-owned business venture (citations omitted)." Braddock v Braddock, 60 AD3d 84, 88 (1st Dep't 2009). Here, however, plaintiff had no ownership in any of the entities involved in the alleged transactions.
Moreover, defendant "did not have a duty arising out of the marital relationship to volunteer information freely available in the public domain" (Etzion v Etzion, supra at 654), and plaintiff has acknowledged that he learned about Kikkoman's purchase of Country Life from a public announcement. Amended Complaint, ¶¶ 69, 74.
Accordingly, that portion of the motion seeking to dismiss the third cause of action for breach of fiduciary duty and the fourth cause of action for alleged aiding and abetting the breach of fiduciary duty, is granted.
Fraud (fifth cause of action)
In the fifth cause of action, plaintiff alleges that "[b]eginning in 2005 and continuing to the present, Jodi has concealed, failed to disclose or made false statements about the disposition of marital assets, including but not limited to: continually representing both orally and in writing that there are few, if any marital assets to share; falsely representing that Jodi was not entitled to distributions from the Consac Companies; presenting tax returns which contain false and misleading information that Jodi did receive distributions from the Consac Companies; and failing to disclose that marital assets were diverted to the Trust Defendants, and/or the Drexler Defendants." Amended Complaint, ¶ 170.
Plaintiff further alleges that Jodi Drexler "made the false representations, omissions and concealments with the intent to induce Bradford not to take steps to protect his share of marital assets so that Jodi could succeed in her scheme to divert, embezzle, dissipate or otherwise place such assets out of Bradford's reach." Amended Complaint, ¶ 173.
He claims that had he "been aware of the true status of the marital assets, he would have taken steps to protect his interest in marital assets and to prevent their diversion/dissipation by the Defendants." Amended Complaint, ¶ 174.
It is well settled that "[i]n an action to recover damages for fraud, the plaintiff must prove a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury (citations omitted)." Lama Holding Co. v Smith Barney, 88 NY2d 413, 421 (1996). See also, Kaufman v Cohen, 307 AD2d 113, 119-120 (1st Dep't 2003). The factual allegations supporting each of the foregoing elements must "be stated in detail." CPLR § 3016(b). See also, Monaco v New York Univ. Med. Ctr., 213 AD2d 167, 169 (1st Dep't 1995).
The Amended Complaint fails to sufficiently allege that plaintiff (who, for the reasons set forth above, did not maintain a fiduciary relationship with Jodi Drexler in connection with the transactions at issue) justifiably relied on the alleged misrepresentations, and that these misrepresentations were the direct and proximate cause of his losses. See, Ambac Assur. Corp. v Countrywide Home Loans, Inc., 151 AD3d 83, 86 (1st Dep't 2017).
Significantly, plaintiff acknowledges that he attended a meeting with an attorney, Kim Baptiste, in 2006, the same year that he learned from public announcements about Kikkoman's acquisition of Country Life. The purpose of the meeting was to discuss a proposed post-nuptial agreement in which plaintiff would have waived any direct or indirect interest in Country Life. Amended Complaint, ¶¶ 73-74; 79-80. Therefore, plaintiff was on notice, as early as 2006, that Ms. Drexler and/or her family members were trying to exclude him from Ms. Drexler's interest in Country Life.
Plaintiff thus cannot claim that he justifiably relied on Jodi Drexler's statements or misrepresentations, and that her allegedly false statements or purported acts of concealment directly and proximately caused his claimed losses. See, Ambac Assur. Corp. v Countrywide Home Loans, Inc., supra at 86; Peach Parking Corp. v 346 W. 40th St., LLC, 42 AD3d 82, 87 (1st Dep't 2007).
Accordingly, that portion of the motion seeking to dismiss the fifth cause of action for fraud and the sixth cause of action for aiding and abetting fraud, must be granted.
Fraudulent Conveyance (seventh cause of action)
Plaintiff's seventh cause of action alleges violations of DCL §§ 273, 273-a, 275, 276, and 276-a. Amended Complaint, ¶¶ 99-101; 185-186. See, generally, Planned Consumer Mktg. v Coats & Clark, 71 NY2d 442, 450 (1988). Specifically, plaintiff claims that defendant transferred assets, without consideration, in order to impinge on his rights to equitable distribution of marital assets in the divorce action.
Defendants argue that plaintiff lacks standing to challenge the allegedly fraudulent transfers because he is not a creditor of defendants.
Under the Debtor Creditor Law, a creditor is a person who has "any claim, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent." DCL § 270. Thus, a party may be deemed a creditor to his spouse "as to equitable distribution of assets in a pending divorce even though the claim may be unmature and unliquidated at the time of the conveyance." Henry v Soto-Henry, 89 AD3d 617, 618 (1st Dep't 2011). See also, Swartz v Swartz, supra at 826. Therefore, this Court finds that plaintiff has standing to assert the seventh cause of action against Jodi Drexler.
The motion to dismiss the seventh cause of action is, however, granted against the remaining defendants, plaintiff having failed to establish his status as a creditor of any of the defendants (other than Jodi Drexler). See, Galgano v Ortiz, 287 AD2d 688 (2nd Dep't 2001); In re Hellas Telcoms. (Lux.) II SCA, 524 B.R. 488, 521 (Bankr. S.D.N.Y. 2015).
Significantly, many of the purported transfers occurred while Bradford Billet and Jodi Drexler were still living together as husband and wife, several years prior to the commencement of the action for divorce by Mr. Billet. See, Galgano v Ortiz, supra at 688.
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Defendants argue that plaintiff's fraudulent conveyance claim against Jodi Drexler is time barred on the ground that it was not brought within six years from the date the cause of action accrued, or two years from the time plaintiff discovered the alleged fraudulent conveyance, "or could with reasonable diligence have discovered it." CPLR § 213. See also, Island Holding, LLC v O'Brien, 6 AD3d 498, 499-500 (2nd Dep't 2004).
The instant action was commenced by filing on September 13, 2016.
Plaintiff argues that this Court should find that the limitations period was equitably tolled because defendants concealed both the marital assets and the purported scheme to transfer those assets to Ryan Drexler. See, Collins v Davirro, 160 Ad3d 1343, 1344 (4th Dep't 2018), which held that under the doctrine of equitable estoppel,
"a defendant is estopped from pleading a statute of limitations defense if the 'plaintiff was induced by fraud, misrepresentations or deception to refrain from filing a timely action'" (Ross v Louise Wise Servs., Inc., 8 NY3d 478, 491 [2007], quoting Simcuski v Saeli, 44 NY2d 442, 449 [1978]; see Putter v North Shore Univ. Hosp., 7 NY3d 548, 552-553 [2006]), and the plaintiff's reliance on the fraud, misrepresentations or deception was reasonable (see Putter, 7 NY3d at 552-553). "Although there are exceptions, 'the question of whether a defendant should be equitably estopped is generally a question of fact'" (citations omitted).
Defendants argue in reply that there is no triable question of fact in this case because plaintiff's own Complaint establishes conclusively that he was on notice of the claim long before he filed this action, but took no action to investigate those claims.
Specifically, the Amended Complaint alleges that Halbert Drexler threatened plaintiff in the spring of 2006 that "if he did not sign a post-nuptial agreement, the Drexler defendants would take all steps necessary to conceal Jodi's share of the family business, and that Bradford would 'never see a cent' of his interest in these marital assets in the event of a divorce." Amended Complaint, § 81.
In addition, there is no dispute that articles regarding Kikkoman's acquisition of Consac's interests in Country Life were published in 2006. However, the Amended Complaint makes no reference to any specific inquiries by plaintiff into the potential claims and fails to allege that the alleged conduct could not, through reasonable diligence, have been discovered. In re Merrill Lynch Ltd. Partnerships Litigation, 154 F3d 56, 60 (2nd Cir. 1998).
Therefore, the seventh cause of action is time barred to the extent it concerns fraudulent conveyances which allegedly took place prior to September 13, 2010. Although the Amended Complaint contains allegations regarding transfers which purportedly took place after that date, the Amended Complaint does not allege that any of those transfers were initiated by Jodi Drexler.
Accordingly, the seventh cause of action is dismissed in its entirety. Civil Conspiracy (eighth cause of action)
Although New York does not recognize civil conspiracy to commit a tort . . . as an independent cause of action, a plaintiff may plead the existence of a conspiracy in
order to connect the actions of the individual defendants with an actionable, underlying tort and establish that those actions were part of a common schemeJP Morgan Chase Bank, N.A. v Hall, 122 AD3d 576, 580 [2nd Dep't 2014.
To establish a claim of civil conspiracy, the plaintiff "must demonstrate the primary tort, plus the following four elements: (1) an agreement between two or more parties; (2) an overt act in furtherance of the agreement; (3) the parties' intentional participation in the furtherance of a plan or purpose; and (4) resulting damage or injury (citation omitted)."Abacus Fed. Sav. Bank v Lim, 75 AD3d 472, 474 (1st Dep't 2010). See also, Perez v Lopez, 97 AD3d 558, 560 (2nd Dep't 2012).
In this respect, plaintiff alleges that "the Drexler Defendants retained . . . Montgomery to form the Trust Defendant" (Amended Complaint, ¶ 85), and that "Halbert or Ryan told Montgomery that Jodi was likely to get divorced in the future . . . and advised Montgomery . . . that a major concern for the Drexler Defendants was that some or all of Jodi's share of the Kikkoman Proceeds was marital property," and that "a major objective of Jodi's estate planning and asset protection strategy was to conceal and divert marital assets that later would be claimed by [plaintiff]." Amended Complaint, ¶ 86.
Plaintiff further alleges that both Sasha Greene, as the trustee of the Dynasty Trust, and Jarrod Kahn, as the director of Bridgehampton and Westhampton, "knew or recklessly disregarded the fact that some or all of the corpus of the Trust Defendants consisted of marital property," and that Greene and Kahn assisted the Drexler defendants in their fraudulent scheme by "allowing Halbert and Ryan to raid marital assets and transfer them to Ryan, the Ryan Drexler (2006) Long Term Trust (the 'Ryan Long Term Trust'), also formed in April 2006 by Montgomery, as well as to Halbert and Francine Drexler." Amended Complaint, ¶¶ 91-92.
Plaintiff further alleges that "Drexler Defendants conspired with [Franklin Montgomery, Jarrod Kahn, Michael E. Cirenza, Anchin, and Sasha Greene ("the Financial Consultant Defendants")] to conceal from [plaintiff] both the extent of the marital assets received by Jodi, and Jodi's transfer of marital assets to the Trust Defendants, by having Jodi file her own separate tax returns." Amended Complaint, ¶ 94. Plaintiff further alleges that "[t]he diversion of the Consac Defendants' assets to Ryan Drexler was carried out as part of a scheme, devised by the Drexler Defendants with assistance of the Financial Consultant Defendants and the Duban Defendants." Amended Complaint ¶ 100.
Plaintiff claims that the "Duban Defendants conspired with and/or aided the other Defendants in their scheme to divert marital assets to Ryan and Halbert," and that the Duban Defendants "were fully aware that the assets which they assisted in diverting included marital assets in which [plaintiff] has an interest." Amended Complaint, ¶ 119. The Duban Defendants allegedly prepared false and misleading tax forms and filings, maintained ledgers of amounts paid by Ryan to Jodi, and transferred Jodi's share of the Kikkoman proceeds to Ryan Drexler and Halbert Drexler. Amended Complaint, ¶¶ 36-46, 121.
However, it is well settled that "a creditor has no cause of action against a party who merely assists a debtor in transferring assets where . . . there was neither a lien on those assets nor a judgment on the debt." Fed. Deposit Ins. Corp. v Porco, 75 NY2d 840, 841-842 (1990). Plaintiff does not allege that Montgomery, the Duban Defendants, or the Financial Consultant Defendants were either "transferees of the assets" or "beneficiaries of the conveyance." The Amended Complaint merely alleges that said defendants assisted in the implementation of the alleged plan to conceal marital assets from plaintiff. Hence, plaintiff may not maintain this cause of action against any of these defendants.
Accordingly, the eighth cause of action is dismissed in its entirety.
Constructive Trust (ninth cause of action)
In the ninth cause of action plaintiff seeks to impose a constructive trust, which is an equitable remedy, "upon monies held by Consac, LLC, and monies and property held by Ryan, Halbert, and the Estate of Francie Drexler in an amount equal to the wrongful distributions to them by the Consac Defendants." Amended Complaint, ¶ 202.
However, the imposition of a constructive trust on property which is fraudulently conveyed "has no explicit mention in the Debtor and Creditor Law." Marine Midland Bank v Murkoff, 120 AD2d 122, 133 (2nd Dep't 1986). See also, McKeown v Frederick, 39 Misc3d 1241(A), *4 (Sup Ct., Monroe Co. 2013).
Moreover, given the dismissal of the cause of action alleging fraudulent conveyances, the ninth cause of action must be dismissed.
Resulting Trust (tenth cause of action)
In the tenth cause of action for resulting trust, plaintiff alleges that "Ryan, Halbert, and the Estate of Francine Drexler took possession of the marital property in which Bradford has a right without Bradford's consent or knowledge." Amended Complaint, ¶ 204. Plaintiff further alleges that "Ryan caused Consac, LLC to purchase property with the money of Jodi" (Amended Complaint, ¶ 205), and seeks "the imposition of a resulting trust upon the assets of the Defendants in an amount equal to the wrongful distributions from the Consac Defendants, plus interest, costs, disbursements and attorneys' fees." Amended Complaint, ¶ 206.
"'[A] resulting trust arises where a transfer of property is made under circumstances which raise an inference that the person making the transfer or causing it to be made did not intend the transferee to have the beneficial interest in the property transferred' (citation omitted)." Broadbill Partners L.P. v Ambac Assurance Corp., 2014 WL 986776, *11 (Sup Ct., NY Co. 2014).
"There are three factual circumstances where a resulting trust can arise: '(1) where an express trust fails in whole or in part; (2) where an express trust is fully performed without exhausting the trust estate; [or] (3) where property is purchased and the purchase price is paid by one person and at his direction the vendor conveys the property to another person' (citation omitted)." In re Balgobin v Balgobin, 490 BR 13, 27 (Bankr. EDNY 2013).
In the instant case, the Amended Complaint fails to allege any of these factual circumstances.
That portion of the motion seeking to dismiss the tenth cause of action is, therefore, granted.
Unjust Enrichment (eleventh cause of action)
"' [T]he theory of unjust enrichment lies as a quasi-contract claim' and contemplates 'an obligation imposed by equity to prevent injustice, in the absence of an actual agreement between the parties (citations omitted).'" Georgia Malone & Co., Inc. v Rieder, 19 NY3d 511, 516 (2012).
"Although privity is not required for an unjust enrichment claim, a claim will not be supported if the connection between the parties is too attenuated." Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 182 (2011). See also, Schroeder v Pinterest Inc., 133 AD3d 12, 26 (1st Dep't 2015).
"The essential inquiry in any action for unjust enrichment . . . is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered (citation omitted)." A plaintiff must show "that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit [the other party] to retain what is sought to be recovered (citation omitted)."Mandarin Trading Ltd. v Wildenstein, supra at 182.
Here, plaintiff had no dealings with any of the defendants that would create the type of a relationship that is necessary to support an unjust enrichment cause of action. Plaintiff has not alleged that he conferred a benefit on any of the defendants, which they have retained without adequately compensating him. See, Nakamura v Fujii, 253 AD2d 387, 390 (1st Dep't 1998). The conclusory allegation that the defendants have been enriched at his expense, is insufficient to state a cause of action. See, Swartz v Swartz, supra at 829.
Therefore, that portion of the motion seeking to dismiss the eleventh cause of action is granted.
* * *
For the foregoing reasons, it is hereby
ORDERED that the motion by defendants Jodi Drexler-Billet, Ryan Drexler, Halbert Drexler, MusclePharm Corp., Amagansett (2006) LLC, Bridgehampton (2006) LLC, Consac Industries, Inc., Consac LLC, DE, Consac Manager, LLC, Country Life Manufacturing, LLC, Drexler Associates Inc. s/h/a Drexler Associates, LLC, Estate of Francine Drexler, Motor Parkway, LLC, Sabre Street, LLC, Westhampton (2006) LLC, The Jodi Drexler-Billet (2006) Dynasty Trust, The Jodi Drexler-Billet (2006) Long Term Trust, DLD Accountancy LLP, Rick Thiedig, Jarrod Kahn, Michael E. Cirenza, and Sasha Greene is granted and the Amended Complaint is dismissed against said defendants with prejudice and without costs or disbursements; and it is further
ORDERED that the motion by defendant Franklin Montgomery is granted and the Amended Complaint against said defendant is dismissed with prejudice and without costs or disbursements; and it is further
ORDERED that the motion by defendants Matt LaRochelle, Dennis Duban, Duban Accountancy LLP, and Duban Sattler and Associates, LLP is granted, and the Amended Complaint against said defendants is dismissed with prejudice and without costs or disbursements; and it is further
ORDERED that the Clerk may enter judgment accordingly.
This constitutes the decision and order of this Court. Dated: October 4, 2019
/s/_________
Michael L. Katz
J.S.C.