Opinion
21-CV-9030 (AT) (RWL)
03-14-2023
STEFANO FARSURA and SF CAPITAL PARTNERS LLC, Plaintiffs, v. QC TERME U.S. CORP., Defendant.
REPORT AND RECOMMENDATION TO HON. ANALISA TORRES: PLAINTIFFS' MOTION TO AMEND
ROBERT W. LEHRBURGER UNITED STATES MAGISTRATE JUDGE
Plaintiffs Stefano Farsura and SF Capital Partners, LLC (collectively “Plaintiffs” or “Farsura”) claim that Defendant QC Terme U.S. Corp. (“Defendant” or “QC Terme US”) breached its contractual and fiduciary duties to Farsura with respect to the development of spa facilities in the United States, including on Governors Island, New York City. Farsura's Complaint initially named three additional defendants - Italian entities MAP s.r.l. (“MAP”), Whitebridge Investments S.p.A. (“Whitebridge”), and Giuturna Investments S.p.A (collectively, the “Italian Defendants”). Judge Torres granted the Italian Defendants' motion to dismiss for lack of personal jurisdiction. In the wake of that decision, and based in part on information purportedly learned during discovery, Farsura sought leave to amend the Complaint to include additional allegations establishing personal jurisdiction over Whitebridge and QC Terme s.r.l., in its own right and as the successor of MAP and another company, Quadratec s.r.l (“Quadratec”). This Court initially granted leave to amend based on the parties' letter briefs and oral argument. After revisiting the issue on a more complete record at the request of QC Terme US, the Court finds that Farsura has not demonstrated good cause to amend. Accordingly, the Court vacates its prior order granting leave to amend, and recommends that Farsura's motion to amend be denied.
Although a motion to amend often is non-dispositive, the Court frames its opinion as a report and recommendation in this instance because denying Farsura's motion to amend may be considered dispositive of his claims against the Italian Defendants. See Williams v. Beemiller, Inc., 527 F.3d 259, 265 (2d Cir. 2008) (magistrate judge may not make an order that is “functionally equivalent to an order of dismissal”) (internal quotation marks omitted).
BACKGROUND
A detailed account of this action's history is contained in the Court's prior decision and order granting leave to amend entered on November 21, 2022 (the “November 2022 Order”). (Dkt. 223.) The Court recounts here only the facts most pertinent to the present motion.
A. Dismissal And Farsura's Letter Motion For Leave To Amend
On September 13, 2022, Judge Torres issued an order dismissing the Italian Defendants due to Farsura's failure to sufficiently allege facts establishing personal jurisdiction over them (the “Dismissal Order”). (Dkt. 163 at 7-12.) Fact discovery closed on October 7, 2022. (See Dkt. 79 (granting request to modify discovery schedule).) Depositions of the Italian Defendants were scheduled to take place in September 2022, but were cancelled, over Farsura's objections, after entry of the Dismissal Order. (See Dkt. 219 at 4.) At the parties' request, the Court stayed expert discovery in part due to the parties' intent to file summary judgment motions addressing the existence of an enforceable contract. (Dkts. 190, 194.)
On October 10, 2022, Farsura requested leave to file an amended complaint to bolster allegations that would establish personal jurisdiction over the Italian Defendants. (Dkts. 192-93.) The allegations Farsura sought to add were based in part on information that Farsura had in hand before filing the original Complaint. Farsura claimed, however, that additional proposed allegations were based on information first learned during discovery, including after entry of the Dismissal Order. QC Terme U.S. opposed, arguing that the additional allegations were either known to Farsura or publicly available at the outset of the action; that the allegations are futile as they merely add details to allegations that the Court already found deficient to establish personal jurisdiction; and that QC Terme US, as well as the Italian Defendants, would be prejudiced by the amendment given the closure of fact discovery and the case being ripe for summary judgment motions. (Dkt. 198.) The parties filed letter briefs with exhibits. (See Dkts. 193, 198, 219.) The Court heard oral argument during a conference on November 17, 2022, and indicated to the parties that it would decide the motion to amend based on the parties' letters and oral argument. (Dkt. 231 at 4.)
B. The November 2022 Order
On November 21, 2022, the Court granted Plaintiffs' motion for leave to amend. The Court's order identified the “pivotal issue” as whether Plaintiffs were “sufficiently diligent” in moving to amend. (November 2022 Order at 5.) The Court assessed each of eleven “new facts” pled in the proposed amended complaint and charted by Defendants in Appendix A to their letter in opposition. (See Dkt. 198 at ECF 6-8.) Based on the information before it at the time, the Court granted Plaintiffs' motion to amend, concluding that Farsura had been diligent and had presented certain key facts that were obtained only late in discovery. At the same time, the Court noted that Farsura's showing was “somewhat thin.” (November 2022 Order at 9-10.)
C. The Request To Vacate And Reconsider On Fuller Briefing
On November 23, 2022, Defendant QC Terme U.S. filed a letter requesting that the Court vacate the order permitting amendment and allow for full briefing on Farsura's motion to amend. QC Terme U.S. cited additional documents, not previously before the Court, that purportedly both demonstrated Farsura's pre-suit knowledge of all of the allegedly new facts and debunked several factual inaccuracies. (Dkt. 227.) On November 29, 2022, Farsura responded, arguing that QC Terme U.S. did not meet the standard for reconsideration, that the Court was entitled to decide the motion on the basis of pre-motion letters, and that Defendant's examples did not show that Farsura was aware of the facts giving rise to jurisdiction before the deadline to amend. (Dkt. 233.) QC Terme U.S. replied on December 2, 2022, explaining further how Farsura was previously aware of allegedly new facts and asserting that the proposed amendments fail to cure the jurisdictional deficits identified in the Dismissal Order. (Dkt. 237.)
On December 6, 2022, the Court issued an order stating that it was “persuaded that [the November 2022 Order] was based on an incomplete record and that reconsideration is warranted.” (Dkt. 243 at 2.) The Court therefore held its November 2022 Order in abeyance and set a schedule for fulsome briefing.
D. The Present Motion
Farsura filed its formal motion for leave to amend on December 20, 2022. (Dkts. 246-48.) On January 6, 2023, QC Terme U.S. filed its brief, arguing that Farsura was not diligent and thus cannot demonstrate “good cause” to amend, as required under Federal Rule of Civil Procedure 16(b) (“Rule 16(b)”). (See generally QC Mem.) In support, QC Terme U.S. included as exhibits many documents produced in discovery that had not previously been put before the Court with the parties' earlier letter briefs. Separate from QC Terme US's brief, the Italian Defendants (QC Terme s.r.l. and Whitebridge) filed a brief arguing that Farsura's proposed amendments are futile because they fail to cure the jurisdictional deficiencies identified in the Dismissal Order as well as substantive pleading deficiencies. (See generally Italian Mem.)
“QC Mem.” refers to Defendant QC Terme U.S. Corp's Memorandum Of Law In Opposition To Plaintiffs' Motion To File Amended Complaint at Dkt. 254.
“Italian Mem.” refers to the Dismissed Italian Defendants' Memorandum Of Law In Opposition To Plaintiffs' Motion To Amend The Complaint at Dkt. 256.
On January 9, 2023, Farsura requested an extension of the time to reply and for up to ten additional pages, in light of separate briefs having been submitted in opposition. (Dkt. 257.) The Court granted the request and admonished Defendants for filing two briefs without seeking the Court's leave. (Dkt. 258.) Farsura filed his reply on February 3, 2023. (Dkts. 262-64.) On February 14, 2023, Defendants requested leave to file a sur-reply to address new arguments raised by Farsura for the first time in reply. (Dkt. 267.) Defendants' letter request set forth the substance of the proposed sur-reply. Accordingly, the Court accepted Defendants' letter as a sur-reply but denied further briefing. (Dkt. 268.)
LEGAL STANDARDS
Plaintiffs ask the Court to apply the legal standard for a motion for reconsideration, rather than the standard for a motion to amend de novo. (Pl. Mem. at 7-8.) The Court, however, already determined that reconsideration and full briefing were warranted given the incomplete record before it. (Dkt. 243 at 2.) The Court therefore considers Plaintiffs' motion anew based on the complete record.
“Pl. Mem.” refers to Plaintiffs' Memorandum Of Law In Support Of Motion For Leave To Amend at Dkt. 249.
As stated in the Court's prior order, motions to amend are principally governed by Federal Rule of Civil Procedure 15(a) (“Rule 15(a)”). That rule provides that “[t]he court should freely give leave when justice so requires.” Fed.R.Civ.P. 15(a)(2); see Aetna Casualty and Surety Co. v. Aniero Concrete Co., 404 F.3d 566, 603 (2d Cir. 2005). A district court, however, “has discretion to deny leave for good reason.” McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007). The Second Circuit has held that a Rule 15(a) motion “should be denied only for such reasons as undue delay, bad faith, futility of the amendment, and perhaps most important, the resulting prejudice to the opposing party.” Aetna Casualty, 404 F.3d at 603-04 (quoting Richardson Greenshields Securities, Inc. v. Lau, 825 F.2d 647, 653 n.6 (2d Cir. 1987)). Delay alone generally is an insufficient justification for the denial of a motion to amend under Rule 15(a). Block v. First Blood Associates, 988 F.2d 344, 350 (2d Cir. 1993).
Delay becomes more significant, however, when a party files a motion to amend after the deadline for doing so established in a court's scheduling order. Under Rule 16(b), leave to amend requires “good cause” following expiration of the deadline. Fed. R. Civ. P. 16(b)(4). That is a more exacting standard than Rule 15(a): “Under Rule 16(b), a party moving to amend after the applicable deadline must demonstrate good cause. Whether good cause exists depends on the diligence of the moving party. In other words, the movant must show that the deadlines [could not have been] reasonably met despite its diligence.” Volunteer Fire Association of Tappan, Inc. v. County of Rockland, No. 09-CV-4622, 2010 WL 4968247, at *3 (S.D.N.Y. Nov. 24, 2010) (internal citations and quotation marks omitted); accord Parker v. Columbia Pictures Industries, 204 F.3d 326, 340 (2d Cir. 2000) (“despite the lenient standard of Rule 15(a), a district court does not abuse its discretion in denying leave to amend the pleadings after the deadline set in the scheduling order where the moving party has failed to establish good cause. Moreover, we agree that a finding of ‘good cause' depends on the diligence of the moving party”).
The burden of showing diligence is borne by the moving party. Fresh Del Monte Produce, Inc. v. Del Monte Foods, Inc., 304 F.R.D. 170, 175 (S.D.N.Y. 2014). “A party is not considered to have acted diligently where the proposed amendment is based on information that the party knew, or should have known, in advance of the motion deadline.” Id. at 174-75 (internal quotation marks omitted). Although “the primary consideration is whether the moving party can demonstrate diligence,” however, “[i]t is not ... the only consideration.” Kassner v. 2nd Avenue Delicatessen Inc., 496 F.3d 229, 244 (2d Cir. 2007). “[W]here a party's motion to amend would require altering a court's scheduling order, the party must satisfy both Federal Rules of Civil Procedure 15 and 16 to be permitted to amend.” International Technologies Marketing, Inc. v. Verint Systems, Ltd., 850 Fed.Appx. 38, 43 (2d Cir. 2021) (internal quotation marks omitted) (emphasis in original).
Here, the Court's scheduling order required that any motion to amend the pleadings be made by February 3, 2022. (See Dkt. 29 at No. 3 (setting deadline to file amended pleadings as 30 days from entry of the scheduling order, entered on January 4, 2022).) Accordingly, the “good cause” standard of diligence applies, together with considerations of futility, bad faith, and prejudice. See also Judge Torres Individual Practices Rule III.B.iv (generally requiring good cause be shown where plaintiff fails to address deficiencies identified by defendant prior to filing of motion to dismiss).
DISCUSSION
The following analysis addresses the same three groups of “new” facts discussed in the November 2022 Order. The Court previously held that a number of the purportedly new facts were previously known to Farsura prior to filing suit (the “Previously Known Facts”) such that Farsura cannot claim good cause for failing to plead them sooner. (See November 2022 Order at 7; FAC ¶¶ 23(b)-(c), (g), (h).) The Court does not disturb that finding here. Next, the Court addresses the facts which Defendants previously claimed were available to Farsura from public materials on the Italian Chamber of Commerce's website (the “Chamber of Commerce Facts”). (See November 2022 Order at 8; FAC ¶¶ 11, 23(a)-(b), (e).) The Court previously found that those public documents did not clearly disclose the entity for which particular individuals were acting. (November 2022 Order at 8.) Having received and reviewed additional material produced in discovery, the Court now finds that Farsura could have gleaned the relevant information from other documents and communications available to him prior to the lawsuit. Farsura thus does not have good cause to amend based on those facts.
“FAC” refers to Farsura's proposed First Amended Complaint filed at Dkt. 230.
The Court then turns to the facts it previously found, based on the incomplete record, were truly new and material (the “‘New' Facts”). The Court holds that one such fact concerning Quadratec, at FAC ¶ 23(d), was known to Farsura well before filing this lawsuit for the same reasons Farsura is deemed to have known of the Chamber of Commerce Facts. The remaining facts, at FAC ¶¶ 24(a)-(c), primarily concern Whitebridge. Of those, the Court finds that only one was not previously known to Farsura but would be a futile amendment because it does not provide sufficient additional basis for exercising personal jurisdiction over Whitebridge.
In sum, based on lack of diligence and futility, Plaintiffs' motion for leave to amend should be denied. Having found no good cause to amend, the Court does not reach the arguments raised by the Italian Defendants that the proposed claims against them are “substantively meritless.” (Italian Mem. at 1.)
The Court previously warned that it was “inclined to strike the Italian Defendants' opposition papers” because the Court granted neither leave for 50 pages of briefing nor for the dismissed Italian Defendants to file any papers in the first place. (Dkt. 258.) The Court now declines to do so. First, the Plaintiffs had the opportunity to respond to its contents through their reply, for which the Court granted additional time and pages. (Id.) Second, the Court does not reach the non-jurisdictional arguments raised by the Italian Defendants which comprise the majority of their briefing. See Lfoundry Rousset SAS v. Atmel Corp., No. 14-CV-1476, 2015 WL 4461617, at *7 (S.D.N.Y. July 21, 2015) (denying as moot motion to strike because it was “unnecessary for the Court to rely on” the document to decide the motion).
A. Previously Known Facts
In its November 2022 Order, the Court held that “four-and-a-half” of the eleven allegedly new facts were previously known to Farsura “as demonstrated by reference to specific documents that were produced by Farsura.” (November 2022 Order at 7.) Those Previously Known Facts are: Saverio and Andrea Quadrio Curzio (“QC”) admitted to authorizing Mr. Farsura's 22% stake in QC Terme U.S. Holding in exchange for his services to be rendered in New York in connection with, inter alia, the Governors Island project (FAC ¶ 23(c)); Saverio QC has acted on behalf of MAP in matters related to QC Terme U.S. (FAC ¶ 23(b)-(c)); sub-contractors in New York who worked on the Governors Island spa facility were paid from Quadratec's Italian bank accounts (FAC ¶ 23(g)); and MAP financed the construction of the Governors Island spa through credit originating from Italian banks (FAC ¶ 23(h)). Farsura's opening brief does not address those Previously Known Facts. QC Terme US's brief reiterates the arguments about those facts set forth in its earlier letter briefing and attaches exhibits supporting its position. (See QC Mem. at 10-12 and Exs. C, D, F.) Farsura's reply does not counter QC Terme US's arguments. Therefore, the Court's prior holding as to these Previously Known Facts stands.
B. Chamber of Commerce Facts And The “New” Fact At FAC ¶ 23(d) (The “Acting On Behalf Of” Facts)
In its November 2022 Order, the Court held that Plaintiffs were diligent as to the Chamber of Commerce Facts because “the Chamber of Commerce material [cited by Defendant] ... does not supply certain specific facts learned by Farsura at deposition that are critical to Farsura's personal jurisdiction allegations,” specifically, which entities certain Italian individuals were acting on behalf of at certain times. (November 2022 Order at 8.) Those facts are that Francesco Varni (“Varni”) was acting on behalf of Quadratec s.r.l. when he offered Farsura a proposal for a partnership stake in the QC Terme North American business (FAC ¶ 23(a)); both QC brothers were board members of MAP (FAC ¶ 23(c)); Saverio QC and Francesco Varni were acting on behalf of Quadratec when they traveled to New York in 2013 to meet with representatives of the Trust of Governors Island (“the Trust”) (FAC ¶ 23(e)); and that MAP and Quadratec were merged into a successor entity, QC Terme s.r.l., in September 2018 (FAC ¶ 11). The Court also held that the fact that the proposal to develop a spa on Governors Island made to the Trust in March 2013 was made on behalf of Quadratec at FAC ¶ 23(d) was a new fact based on Farsura's representation that he had only learned this fact through Varni's deposition. (November 2022 Order at 6-7 n.5.)
Farsura maintains in his opening brief that Varni's deposition testimony “made clear that jurisdictionally-significant actions by Saverio QC and Franceso Varni were taken on behalf of ... Quadratec [ ] acting on its own as opposed to as an agent of MAP.” (Pl. Mem. at 17.) Farsura asserts that he had “no way of knowing” prior to Varni's deposition "that “Varni [sent] his November 2011 proposal on Quadratec's behalf as opposed to MAP, and that Quadratec was not merely an agent for MAP in its dealings with the Trust of Governors' Island.” (Pl. Mem. at 18.) Not so. In addition to the Italian Chamber of Commerce documents cited previously, additional documentation demonstrates that Farsura was aware of the facts that Varni and Saverio QC were acting on behalf of Quadratec as to particular conduct in New York.
1. Farsura Was Aware Of The “Acting On Behalf Of” Facts
The fact that Varni was acting on behalf of Quadratec when offering Farsura a partnership stake in the QC Terme North American business (see FAC ¶ 23(a)) was known to Farsura well before his Complaint was filed, let alone before Varni's September 26, 2022 deposition. In addition to the January 2012 draft Quadratec Advisory And Consulting Service Agreement between Quadratec and Farsura that Defendants cited in their letter brief, Defendants point to several emails providing the context for that draft agreement and demonstrating that Varni was acting on behalf of Quadratec.
Plaintiffs' attempts to characterize the January 2012 draft Quadratec Advisory And Consulting Service Agreement as an insignificant “stray draft agreement” entirely unrelated to the November 2011 email from Varni initially proposing a potential partnership are unpersuasive. (See Pl. Mem. at 18; Pl. Reply at 9.) Emails dating back to November 2011, after Farsura and Saverio QC met in New York, indicate that the draft agreement sent in 2012 was “following up on” the parties' discussions that started from that New York meeting and continued throughout 2012. The November 2011 email chain between Varni and Farsura discusses “professional consulting activities .. [Farsura is] potentially able to offer” including the “search for investors, financing, and construction,” and that such services would be “reward[ed] in terms of equity.” (QC Mem. Ex. A at 1415.) A December 8, 2011 email from Saverio QC to Farsura states that “Francesco [Varni] said he's working on the agreement and I think you'll have that, too, by next week.” (Id. at 19.) A March 20, 2012 email from Varni to Farsura attaches an amended version of the Quadratec Advisory And Consulting Service Agreement that, as Varni states, “now provides for the possibility of your stake in the local parent company.” (Id. at 27.) These emails demonstrate that the draft agreement was part of Varni's ongoing negotiations of a potential New York partnership. The fact that the draft agreements identify Quadratec as a party suggests that Varni was acting on Quadratec's behalf in the negotiations with Farsura; the additional communications explaining the role of Quadratec among the different corporate entities confirms it.
The November 2011 email chain between Varni and Farsura that began after Saverio QC visited New York does not explicitly identify Quadratec as the entity on whose behalf Varni was acting to negotiate the potential partnership with Farsura, but other communications make clear that the partnership proposal was on Quadratrec's behalf. In one email in this chain, Varni states that “we ... propose, in a nutshell, ... the transfer to you ... a minority stake in the capital of the new.Co for which our holding company will give life . we imagine proceeding with the corporate structure currently adopted in Italy.” (QC Mem. Ex. A at 15.) Prior communications explaining the activities of Quadratec and its connections with the other Italian entities elucidate the “corporate structure currently adopted in Italy” and, based on the entities' relationships and roles, indicate that Varni was acting for Quadratec in the negotiations.
In October 2011, Farsura emailed Saverio QC that, “in anticipation of [Saverio QC's] visit,” he was “investigating the possibility of obtaining financing to help us in your expansion transaction” in New York and asked for Saverio QC's help to “better understand” MAP's public financial statements. (QC Mem. Ex. A at 50.) Saverio QC responded that “we are organized with a holding company that is called MAP” and further elaborated on the relationship between Quadratec and MAP. (Id. at 48-49.) Saverio QC informed Farsura that various subsidiaries of Quadratec had been established as “newcos” to manage various spa sites, and that Quadratec performs services for those subsidiaries. (Id. at 48.) He told Farsura that “Quadratec is the company that does all the projects” for the subsidiaries, and that debts in Quadratec's financial statements “are covered by the receivable from MAP to which it sold the equity stakes.” (Id. at 48.) That explanation, and Saverio QC's use of “we” to refer to Quadratec and not MAP, clearly informed Farsura of the roles of the different entities in the nascent North American venture and thereby provides the context not immediately clear on the face of the November 2011 emails.
The allegedly new facts that Varni and Saverio QC were acting on behalf of Quadratec when they traveled to New York in 2013 to meet with representatives of the Trust in connection with the bid for constructing the Governors Island spa facility, and that the proposal to the Trust was made on behalf of Quadratec, were similarly known to Farsura before he filed this action. (FAC ¶¶ 23(d)-(e).) QC Terme U.S. provides emails, signed proposals and designation letters, and invoices that Farsura either wrote himself or was provided with that indicate Varni and Saverio QC held themselves out as representatives of Quadratec in their dealings with the Trust before and after their 2013 trip to New York. (See generally QC Mem. Ex. B.) For example, Varni provided Farsura with Quadratec's proposal in response to the Trust's request for proposals (“RFP”) for development on Governors Island. Quadratec's proposal was provided to the Trust on Quadratec letterhead and signed by Varni as the General Manager of Quadratec. (QC Mem. Ex. B at 1-2, 4.) The proposal included a summary of the “Quadrio Curzio Group” subtitled “Quadratec Srl; QC Terme” as well as a profile of Saverio QC identifying him as “CEO of Quadratec S.r.l” and a profile of Varni identifying him as “General Manager of Quadratec S.r.l.” (Id. at 10-11, 13.) The Trust's email to Varni, forwarded to Saverio QC and Farsura, has the subject line “Quadratec Spa - Governors Island RFP” and invites “[Varni's] team for an interview with the selection committee” at the Trust's office on Governors Island. (Id. at 15.) The email requests the presence of Varni and “the principals listed in the proposal, Saverio [QC] and Andrea [QC].” (Id.) Subsequent emails in response, shared with Farsura by Varni, involve logistical planning for the visit between Varni and the Trust's representative, including that “[Varni] and Saverio [QC] will travel to New York and attend the interview in person,” again under the subject line “Quadratec Spa - Governors Island RFP.” (Id. at 19-20.)
Farsura's knowledge of the relevant relationships is further demonstrated by Varni's having sent to Farsura on April 18, 2013 a draft of responses to the Trust's questions to be discussed at their 2013 in-person interview in New York. (QC Mem. Ex. B at 26-28.) The responses, which were on Quadratec letterhead, included a graphic demonstrating the relationships between the different entities in the “QC Terme Group.”
The graphic identified MAP as the holding company which held a 66.64% interest in Quadratec. (Id. at 28.) Quadratec was identified as the “engineering and service” company which provides for “general managing; administration and finance services; contractual and legal; activities needed for the development of new spas, hotels, and resorts; procurement services; [and] plant and facilities maintenance.” (Id.) Accordingly, Farsura knew, or at least certainly should have known, well before filing his Complaint that Varni and Saverio QC were acting on behalf of Quadratec when they submitted a proposal in response to the Trust's RFP and visited New York to discuss the proposal in 2013. (FAC ¶¶ 23(d)-(e).)
2. Farsura Has Not Demonstrated Good Cause To Amend To Include The “Acting On Behalf Of” Facts
Confronted with the assorted documents undermining Farsura's claim that he “had no way of knowing” that Varni and Saverio QC were acting on behalf of Quadratec (Pl. Mem. at 18), Farsura, in reply, pivots to a different argument that the “information ... was [not] previously obvious” and there was “potential confusion” as to who acted on behalf of whom. (Pl. Reply at 9-10.) That far weaker assertion is no more credible given the substantial documentary evidence provided by Defendants, much of which comes from Farsura's own document production.
To be sure, an organizational chart cited by Farsura demonstrates that the ultimate tenant of the Governor's Island project was QC Terme NY LLC, in which Quadratec did not itself hold ownership. (See Pl. Reply at 9; Goldman Decl. Ex. B.) That chart, however, does not negate the numerous other communications and documents demonstrating that earlier actions by Varni and Saverio QC were made on behalf of Quadratec. Farsura also claims that an April 30, 2014 email ironing out the ownership of QC Terme U.S. between MAP and Farsura's LLC raises enough “potential confusion” to justify Farsura failing to attribute to Quadratec the dealings of Varni and Saverio QC's dealings the with Trust. (Pl. Reply at 10, Goldman Decl. Ex. E.) But the fact that the ultimate entity designated as Tenant was not directly owned by Quadratec does not detract from the evidence that Varni and Saverio QC acted for Quadratec in their negotiations with the Trust. Nor does this fact indicate that the 2011 partnership agreement negotiations, which occurred long before the Governors Island project was contemplated, were on behalf of an entity other than Quadratec. And the fact that Varni and Saverio QC were board members of MAP does not negate or sow confusion about their roles as General Manager and CEO of Quadratec, respectively, or make it any less apparent that they acted on behalf of the entity of which they were officers (Quadratec) rather than the entity for which they were board members (MAP) at certain times. (See Pl. Reply at 9-10.)
“Goldman Decl.” refers to the Declaration Of Brian T. Goldman In Support Of Plaintiffs' Motion For Leave To Amend at Dkt. 264.
Indeed, the Trust's letter designating Quadratec as Tenant accounted for the possibility of the ultimate Tenant being a different entity. (QC Mem. Ex. B at 30-32.)
Those negotiations also contemplated the creation of a “newco” to own each new spa location in accordance with the business model developed in Italy to open QC Terme-branded spa locations. (See QC Mem. Ex A at 15, 48.)
Farsura's proposed amended complaint belies the argument that he did not know or was confused about on which entity's behalf certain individuals were acting. Farsura pleads that “Varni confirmed in his September 2022 deposition that this proposal [for Farsura to take a stake of up to 20% in a new company] was made on behalf of Quadratec” (FAC ¶ 23 (a)); “Saverio and Andrea QC ... confirmed in their depositions that, in connection with work Farsura had done and/or would do on the QC Terme Governors' Island spa facility and the formation of further spa facilities across North America, they authorized that Farsura be granted a 22% stake in QC Terme U.S. Holding” (FAC ¶ 23(c)); and “Varni confirmed at his deposition that QC Terme executives were [on Governor's Island in 2013] on behalf of Quadratec” (FAC ¶ 23(e)). (FAC ¶¶ 23(a), (c), (e) (emphasis added).) Use of the term “confirmed” suggests that Farsura already had a good faith basis to make the allegations concerning actions taken by others on behalf of Quadratec.
The full record demonstrates that all facts concerning the purportedly “jurisdictionally-significant” actions of QC Terme s.r.l., the merger of MAP and Quadratec, and who was acting on behalf of whom were in Plaintiffs' possession or could have been gleaned from public sources. The cases cited by Farsura in support of amendment due to “potential confusion” thus are inapt. See, e.g., Qanouni v. D&H Ladies Apparel LLC, No. 18-CV-2763, 2021 WL 9036182, at *10 (S.D.N.Y. March 23, 2021) (permitting amendment where nothing in previously-known documents “identifie[d] [the correct entity] much less [described] its relationship to [the named defendant]”). The sole case Farsura cites from this District finding good cause to amend under Rule 16 to correct a named corporate defendant held that the plaintiff did exercise diligence to move to amend after discovering the identity of the correct defendant and also found “the conduct alleged in the proposed Amended Complaint is the same as the conduct alleged in the original Complaint. The only significant change is the addition of [the correct corporate entity].” Perez v. MVNBC Corp, No. 15-CV-6127, 2016 WL 6996179, at *5 (S.D.N.Y. Nov. 29, 2016). In contrast, Plaintiffs in this case did not exercise diligence and now seek to capitalize on “potential confusion” to propose amendments that do far more than simply substitute in the correct defendant.
Plaintiffs also claim in their opening brief that “Defendants are wrong that Plaintiffs knew or should have known at the time of the original complaint that MAP had been succeeded into QC Terme s.r.l.” (Pl. Mem. at 22) to justify the proposed amendment at FAC ¶ 24 asserting jurisdiction over “QC Terme s.r.l. in its own right.” (FAC ¶ 24.) The Court previously held that the fact of the merger itself was discoverable through information in Farsura's possession and publicly available information prior to the amendment deadline, but allowed amendment because the Italian Chamber of Commerce documents did not tell the full story as far as which predecessor entity acted vis-a-vis Farsura and the Trust in New York. (November 2022 Order at 8.) The full record completes the story by making clear on which predecessor entity's behalf individuals were acting prior to the merger.
Farsura made his “potential confusion” argument for the first time in reply, which would be grounds alone to reject the argument. “Generally, a court does not consider issues raised in a reply brief for the first time because if a party raises a new argument in a reply brief the opposing party may not have an adequate opportunity to respond to it.” Sacchi v. Verizon Online LLC, 14-CV-423, 2015 WL 1729796, at *1 n.1 (S.D.N.Y. Apr. 14, 2015) (internal quotation marks and brackets omitted). However, the “Second Circuit has made it abundantly clear that a district court has discretion to consider a belatedly-raised argument American Hotel International Group, Inc v. OneBeacon Insurance Co., 611 F.Supp.2d 373, 375 (S.D.N.Y. 2009) (original emphasis omitted). Because QC Terme U.S. responded to this argument in its letter seeking a sur-reply, the Court exercises its discretion to consider the argument.
Several of Plaintiffs' cases also apply Rule 15 and not the more exacting standard of Rule 16, which this Court previously held applies to its determination of Plaintiffs' motion for leave to amend. See Qanouni, 2021 WL 9036182, at *8 (analyzing motion to amend under Rule 15 only because “neither the original Case Management Plan nor any modification of that plan, as requested by the parties over time, included an amendment deadline”); A.V.E.L.A., Inc. v. Estate of Monroe, 34 F.Supp.3d 311, 316-20 (S.D.N.Y. 2014) (applying Rule 15 factors but not Rule 16 “good cause” standard).
Farsura's potential confusion argument fails for two additional reasons. Confusion may provide good cause for an untimely amendment where the defendants obfuscate or mislead during discovery. See, e.g., Olaf Soot Design, LLC v. Daktronics, Inc., 299 F.Supp.3d 395, 398 (S.D.N.Y. 2017) (no lack of diligence, and good cause to amend, where “Defendants' representations during the discovery process could reasonably have led Plaintiff to conclude additional fact-finding ... would be unnecessary”); Perez, 2016 WL 6996179, at *4 (no lack of diligence where there was “potential confusion” as to correct corporate entity and “Defendants did not respond substantively to Plaintiffs' discovery requests” on the topic for a prolonged period). Here, Plaintiffs do not allege an attempt by Defendants to obscure the relationship between related corporate entities or to mislead Plaintiffs as to which entity they were dealing with during the events alleged in the Complaint.
Second, “potential confusion” is no excuse for not amending earlier where the purported confusion could have been remedied before the amendment deadline through analysis of sources available to the plaintiffs. See, e.g., Thomas v. ConAgra Foods, No. 20-CV-6239, 2022 WL 3227644, at *4 n.5 (W.D.N.Y. Apr. 21,2022), R. & R. adopted sub nom. Thomas v. ConAgra Foods, Inc., 2022 WL 3699408 (W.D.N.Y. Aug. 26, 2022) (“While the [Court] could perhaps find diligence if the information arose through discovery, the undersigned cannot find diligence where attorney oversight caused accessible information not to be included in the complaint's allegations); Dukes v. City of Albany, 492 F.Supp.3d 4, 11 (N.D.N.Y. 2020) (“reasonable confusion followed by prompt, diligent remedial action will often justify or excuse out-of-time amendments. But at a certain point a parties' admitted knowledge of a constellation of peripheral facts gives rise to an obligation to investigate further rather than persist in some state of continued ignorance”). As explained above, Farsura had more than ample sources of material that by themselves or with further investigation would have resolved any confusion about Quadratec.
Faced with the more complete record set forth by QC Terme US, Farsura urges the Court to allow amendment even if it finds lack of diligence. (Pl. Mem. at 22-24; Pl. Reply at 10-12.) There is legal support for doing so. “[I]n appropriate circumstances, a district court has discretion to grant a motion to amend even where the moving party has not shown diligence in complying with a deadline for amendments in a Rule 16 scheduling order.” Fresh Del Monte Produce, 304 F.R.D. at 176; accord Shi Ming Chen v. Hunan Manor Enterprise, Inc., 437 F.Supp.3d 361, 365 (S.D.N.Y. 2020) (“we recognize that we have discretion to apply the more liberal standard that applies to motions to amend under Fed.R.Civ.P. 15 rather than the more exacting standard that applies to extending a deadline set under Fed.R.Civ.P. 16”). But while some courts have exercised discretion to allow amendment despite lack of diligence, this Court already squarely declined to do so as to the Previously Known Facts, which now include the “Acting On Behalf Of” Facts. (See November 2022 Order at 7 (citing, inter alia, Securities and Exchange Commission v. Rio Tinto plc, No. 17-CV-7994, 2020 WL 2504008, at *8 (S.D.N.Y. March 9, 2020), R. & R. adopted, 2021 WL 807020 (S.D.N.Y. March 3, 2021)); accord Gullo v. City of New York, 540 Fed.Appx. 45, 47 (2d Cir. 2013) (“That defendants suffered no prejudice does not change the fact that plaintiffs failed to pursue amendment with diligence”).)
Nothing in Plaintiffs' full briefs provides reason to alter the Court's determination, in this case, to allow leave to amend only if Plaintiffs can prove diligence. Because Plaintiffs have not demonstrated diligence, the Court recommends denial of leave to amend, notwithstanding whether Plaintiffs can satisfy any or all of the Rule 15 factors. See Parker, 204 F.3d at 340 (2d Cir. 2000) (“despite the lenient standard of Rule 15(a), a district court does not abuse its discretion in denying leave to amend the pleadings after the deadline set in the scheduling order where the moving party has failed to establish good cause”); accord International Technologies Marketing, Inc., 850 Fed.Appx. at 43 (“A lack of diligence is ... reason alone to deny leave to amend”); Anzovino v. Wingate of Dutchess, Inc., No. 21-CV-7625, 2022 WL 17076750, at *2 (S.D.N.Y. Nov. 18, 2022) (“the decision as to whether to let Rule 16(b) stand as a bar to amendment lies within the court's discretion”) (quoting Qanouni, 2021 WL 9036182, at *8).
C. “New” Facts Concerning Whitebridge (FAC ¶¶ 24(a)-(c))
The remaining “new” facts in the proposed FAC concern Whitebridge's involvement in the so-called “Wrongful Asset Transfer,” by which Defendant QC Terme U.S. Corp. bought QC Terme U.S. Holding's entire equity interest in QC Terme NY LLC.Farsura alleges that this transaction was “a classic case of self-dealing in which the majority member of an LLC purchased all the company's assets for itself” and breached QC Terme US's fiduciary duties, the parties' Operating Agreement, and the 2011 joint venture agreement or contract negotiated between Farsura and Quadratec. (See Compl. ¶¶ 88-90; FAC ¶¶ 89-91.)
As described in the Complaint and the FAC, QC Terme NY LLC was incorporated in January 2016 to serve as the named tenant on the lease of the Governors Island spa project. QC Terme U.S. Holding was incorporated at the same time to hold all of the equity interest in QC Terme NY LLC and that of any other future subsidiaries incorporated to operate additional spa facilities in North America. QC Terme U.S. Holding was owned 78% by QC Terme U.S. Corp., a Delaware corporation wholly owned by MAP, and Plaintiff SF Capital Partners, the New York LLC owned by Farsura. (Compl. ¶ 59; FAC ¶ 60.) The Court uses Plaintiffs' term for this transaction for ease of reference but does not decide whether it was actually “wrongful.”
The proposed amendments allege that Whitebridge made the decision with QC Terme s.r.l. for the Wrongful Asset Transfer to occur, that Whitebridge “jointly” retained New York counsel with QC Terme s.r.l. to effectuate that transfer, and that QC Terme s.r.l. and Whitebridge expect to derive substantial revenues from the Governors Island project in specific amounts. (See FAC ¶¶ 24(a)-(c); November 2022 Order at 6-7 n.5.) Based on the record now before it, the Court finds that: i) Farsura did not exercise diligence as to the fact of Whitebridge's expected New York revenues, which precludes amendment on that basis; ii) Farsura exercised diligence in moving to amend after learning of Whitebridge's involvement in QC Terme s.r.l.'s retention of New York counsel; and iii) notwithstanding that diligence, the proposed amendments based on that fact fail to state an adequate basis for jurisdiction over Whitebridge.
1. Farsura Did Not Demonstrate Diligence As To The “New” Fact At FAC ¶ 24(c) Concerning Expected Revenue
Farsura's proposed amended complaint states that “Defendant QC Terme s.r.l. and Defendant Whitebridge have derived and will continue to derive substantial revenue from goods used or consumed or services rendered in New York. According to financial estimations Whitebridge prepared in connection with its investment into MAP, s.r.l., Whitebridge expected that its investment would entitle it to 47% - and QC Terme s.r.l. 53% - of the U.S. dollar equivalent of €2,394,000 in EBIDTA this year from the Governor's Island project, which opened in March 2022.” (FAC ¶ 24(c).) Farsura cites a 2020 projection of profits produced in discovery and claims good cause to amend because earlier-available projections were either made before Whitebridge officially acquired its stake in QC Terme s.r.l. and before the COVID-19 pandemic changed the financial realities of the project, or were otherwise “illegitimate.” (Pl. Mem. at 14-15.) The Court finds otherwise. Farsura had ample information about Whitebridge's expected revenue from the Governors Island spa project prior to filing the Complaint that it could have, but failed to, plead earlier. Farsura thus has not demonstrated diligence in amending to add this fact, notwithstanding the production of an additional, newer revenue projection in discovery.
QC Terme U.S. asserts that Farsura has been in possession of “substantially similar” revenue projections for “years.” (QC Mem. at 19.) Indeed, QC Terme US provides several examples of email and letter correspondence in which Farsura receives, and in some cases relies on, projections of revenues for the Governors Island spa. For example, in October 2017, Farsura emailed the September 2017 Information Memorandum for “Project Relax” (i.e., Whitebridge's investment in MAP) which contained information about the Governors Island project. (QC Mem. Ex. I at 54-117.) That document stated that Whitebridge, through investment vehicle Giuturna, would hold a 45.5% stake in MAP (id. at 64), and provided revenue projections through 2022 (id. at 106). Farsura relied on the content of this Information Memorandum, in particular the 2022 revenue projections, to support his valuation of his purported 22% stake in the Governors Island project and subsequent North American spa projects when attempting to negotiate with QC Terme s.r.l. in 2018. (Id. at 122-26; 133-36, 139.)
The 2020 Information Memorandum now relied on by Farsura is quite similar in form and substance to the 2017 Information Memorandum, albeit with updated projections and information to reflect, inter alia, a later opening of the spa and to discuss the impact on the COVID-19 pandemic on QC Terme s.r.l.'s existing spa businesses. (See id. at 27, 33.) But, as detailed above, the core facts that Whitebridge had a percentage ownership in MAP (now QC Terme s.r.l.) and that Whitebridge expected to earn revenues from the Governors Island spa project in 2022 by virtue of its stake in MAP were known to Farsura much earlier than QC Terme US's production of the 2020 Information Memorandum in discovery.
Farsura incorrectly suggests that the Dismissal Order endorsed the view that Farsura could not rely on the 2017 projections made a few days before Whitebridge's investment in MAP became final. In particular, Farsura invokes Judge Torres' observation that “allegations about MAP's finances say nothing about whether the Whitebridge Defendants ‘derive[] substantial revenue from interstate or international commerce.'” (Pl. Mem. at 14-15 (citing Dismissal Order at 11 n.7); Pl. Reply at 3).) But Farsura overlooks the context in which that statement was made. In the Dismissal Order, Judge Torres identified as a jurisdictional defect the Complaint's failure to plead any facts, beyond conclusory statements, to support Whitebridge's revenues in New York or internationally. (Dismissal Order at 10-11.) In so doing, Judge Torres observed that “allegations about MAP's finances say nothing about whether the Whitebridge Defendants ‘derive[] substantial revenue from interstate or international commerce.'” (Id. at 11.) That statement responded to Farsura's argument that pleading Whitebridge's ownership interest in MAP was sufficient to establish that Whitebridge derived substantial revenue from interstate or international commerce, even though the Complaint did not identify the source of the revenue. (Id. at 11 n. 7.) The missing link - i.e. that revenue was expected to be generated in New York by the Governors Island spa and that Whitebridge would receive a substantial portion of that revenue - was known to Farsura at the time of filing the Complaint. (See QC Mem. Ex. I at 64, 106.)
Similarly, rather than precluding reliance on Whitebridge's stake in MAP, Judge Torres concluded that the Complaint's allegations of revenues derived specifically from New York were too “sparse” and conclusory and failed to include “a statement of the facts upon which the belief [that Whitebridge derives substantial revenues in New York was] based.” (Dismissal Order at 11-12.) As demonstrated above, the “facts upon which the belief [was] based” were known to Farsura years before filing suit, even if the details of the projections changed over time. Plaintiffs have not demonstrated diligence in pleading Whitebridge's projected New York-derived revenues. Accordingly, there is not good cause to amend the Complaint to add this fact.
2. Farsura Has Demonstrated Diligence As To The New Fact At FAC ¶ 24(b)
Farsura alleges that the facts concerning Whitebridge's involvement in QC Terme s.r.l.'s decision to retain New York counsel were first learned when Defendants asserted the common interest privilege over communications between Whitebridge and QC Terme s.r.l. in September 2022, and that these facts support jurisdiction over Whitebridge. (Pl. Mem. at 11-17.) The Court finds that Farsura did exercise diligence in moving to amend to add this fact but that the amendment would ultimately be futile.
In opposition, QC Terme U.S. offers a transcript of a phone conversation between Farsura and Saverio QC (QC Mem. Ex. G), and emails involving Farsura and QC Terme s.r.l.'s counsel and an engagement letter (QC Mem. Ex. H) to demonstrate Farsura's awareness of Whitebridge's involvement, and that the allegation that Whitebridge and QC Terme s.r.l. “jointly” retained New York counsel is “made up.” (QC Mem. at 16-18.) The portion of the phone call transcript on which QC Terme U.S. relies reads:
STEFANO [FARSURA]: What was said is that my shares would become yours from one day to the next; I said no, not like that, I mean, not like that, that's not how it works, not after we worked for six years based on good faith, when we did a project like this together and managed to achieve certain goals that we had. . . shall we say, that we had planned. We did it together, I did what I was supposed to do.
SAVERIO [QC]: this is water under the bridge, Stefano. I. . . this is the situation now. The shareholders, together with us, went to attorney [PH] Erede, and attorney [PH] Erede, who you're well aware of, is the biggest lawyer in Italy and is also a shareholder in Giuturna, so a shareholder in QC Terme, suggested we go to a New York lawyer and then he. . . I know they saw things that I, to be honest, I didn't even go. I know that our shareholders together with the directors of the company together with Francesco, they decided on this strategy together.(QC Mem. Ex. G at 14.)
According to QC Terme US, this exchange unequivocally refers to the Wrongful Asset Transfer and “our shareholders” could not refer to any shareholders other than those of Whitebridge. (QC Mem. at 17.) The Court agrees inasmuch as this communication obviously refers to the Wrongful Asset Transfer and hints at Whitebridge's involvement. Farsura knew before filing his Complaint that Giuturna was a Whitebridge-owned entity, knew Whitebridge was a shareholder in QC Terme s.r.l., and premised a large portion of his Complaint on Whitebridge engineering his “squeeze out” from the North American spa business. (See Compl. ¶¶ 11, 13, 14, 180, 187-90, 196.) The phone call indisputably supports Farsura's prior knowledge of the “new” allegation at FAC ¶ 24(a) that “Whitebridge directly participated in the decision to implement the Wrongful Asset Transfer.”
But neither the phone call, nor the documents collected at QC Terme s.r.l.'s Exhibit H, demonstrate the new facts that “Defendant QC Terme s.r.l. and Defendant Whitebridge directly participated in retaining deal counsel to actually implement the Wrongful Asset Transfer through QC Terme US's purchase of QC Terme NY LLC from QC Terme U.S. Holding LLC,” and that “Whitebridge and Defendant QC Terme s.r.l. jointly retained an attorney from the New York offices of law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP to advise on the purchase of QC Terme NY LLC.” (FAC ¶ 24(b) (internal quotation marks omitted).) QC Terme U.S. does not contend that Farsura knew or could have discovered these facts before the amendment deadline but instead claims they are “made up.” (QC Mem. at 17.) As detailed below, the Court does find that these “facts” about joint action overstate the contents of the affidavits and privilege log on which Farsura relies. Nonetheless, nothing cited by QC Terme U.S. demonstrates that Farsura could have known, prior to Defendants' submission of the Varni Affidavit in August 2022, that Whitebridge was involved in QC Terme s.r.l.'s decision to retain particular New York counsel to advise on the Wrongful Asset Transfer. Plaintiffs therefore acted with diligence as to this proposed new fact. See Permatex, Inc. v. Loctite Corp., No. 03-CV-943, 2004 WL 1354253, at *3 (S.D.N.Y. 2004) (finding diligence where plaintiffs moved to amend almost two months after deposition revealed new information).
The “Varni Affidavit” or “Varni Aff.” refers to the Affidavit Of Francesco Varni In Support Of Defendants' Claim Of Common-Interest Privilege, dated August 12, 2022. It was originally filed at Dkt. 131 and is Exhibit B to the Declaration of Priyanka Timblo In Support Of Plaintiffs' Motion For Leave To Amend (“Timblo Decl.”) filed at Dkt. 250.
3. Notwithstanding Plaintiffs' Diligence, The Proposed Amendment At FAC ¶ 24(b) Is Futile
Farsura contends that the proposed amendment at FAC ¶ 23(b) and underlying facts in support thereof are sufficient to establish jurisdiction over Whitebridge under NY CPLR § 302(a)(1). The Court disagrees. Judge Torres previously found Farsura's allegations about Whitebridge to be insufficient to establish personal jurisdiction. The new allegations about Whitebridge's involvement with New York counsel do not alter that conclusion.
a. Legal Standards - Futility
As noted above, when deciding a motion to amend, “the primary consideration is whether the moving party can demonstrate diligence,” but “[i]t is not ... the only consideration.” Kassner, 496 F.3d at 244 (2d Cir. 2007). Where leave to amend is sought after the deadline for amending pleadings in a scheduling order has passed, the Court considers whether plaintiff exercised diligence as well as the Rule 15 factors of futility, bad faith, and prejudice. International Technologies Marketing, Inc., 850 Fed.Appx. at 43 (2d Cir. 2021). “An amended pleading is futile when, as a matter of law, the proposed complaint would not survive a Rule 12 motion, such as a Rule 12(b)(1) motion for lack of subject matter jurisdiction or a Rule 12(b)(2) motion for lack of personal jurisdiction.” Oppedisano v. Zur, No. 20-CV-5395, 2022 WL 4134436, at *2 (S.D.N.Y. Sept. 12, 2022) (citing Spiegel v. Schulmann, 604 F.3d 72, 76 (2d Cir. 2010) (per curiam) (applying Rule 12(b)(2) to hold amendment was futile)).
“On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of showing that the court has jurisdiction over the defendant.” Metropolitan Life Insurance Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir. 1996). To carry that burden, “a plaintiff must make a prima facie showing that jurisdiction exists.” SPV Osus Ltd. v. UBS AG, 882 F.3d 333, 342 (2d Cir. 2018) (internal quotation marks omitted); accord A.I. Trade Finance, Inc. v. Petra Bank, 989 F.2d 76, 79 (2d Cir. 1993) (same). “‘Such a showing entails making legally sufficient allegations of jurisdiction, including an averment of facts that, if credited, would suffice to establish jurisdiction over the defendant.'” Dennis v. JPMorgan Chase & Co., 343 F.Supp.3d 122, 196-97 (S.D.N.Y. 2018) (brackets omitted) (quoting Charles Schwab Corp. v. Bank of America Corp., 883 F.3d 68, 81 (2d Cir. 2018)).
In evaluating whether a plaintiff has surpassed that threshold, the Court may consider the allegations proffered in plaintiff's complaint, along with plaintiff's “own affidavits and supporting materials,” construing such materials “in the light most favorable to plaintiffs.” Southern New England Telephone Co. v. Global NAPs Inc., 624 F.3d 123, 138 (2d Cir. 2010) (internal quotation marks omitted); see also A.I. Trade Finance, Inc., 989 F.2d at 79-80 (“where the issue is addressed on affidavits, all allegations are construed in the light most favorable to the plaintiff”). “Where a court does not hold an evidentiary hearing on the jurisdictional question, it may, nevertheless, consider matters outside the pleadings.” Lugones v. Pete & Gerry's Organic, LLC, 440 F.Supp.3d 226, 235 (S.D.N.Y. 2020) (citing Dorchester Financial Securities, Inc. v. Banco BRJ, S.A., 722 F.3d 81, 86 (2d Cir. 2013)).
b. Even With The New Fact About Whitebridge, Farsura Has Not Made A Prima Facie Showing Of Personal Jurisdiction
“A district court's personal jurisdiction is determined by the law of the state in which the court is located.” Spiegel, 604 F.3d at 76. Plaintiffs allege that Whitebridge's involvement in retaining New York counsel to effectuate the Wrongful Asset Transfer allows jurisdiction based on NY CPLR § 302(a)(1). Personal jurisdiction is established under NYCPLR § 302(a)(1) over a nondomiciliary “who in person or through an agent ... transacts any business within the state or contracts anywhere to supply goods or services in the state.” Plaintiffs claim that “[d]irecting New York counsel and agents to conduct an activity ultimately challenged as tortious constitutes ‘a transaction of business in New York' sufficient to justify the exercise of personal jurisdiction,” and so Whitebridge's involvement in the decision for QC Terme s.r.l. to retain Paul, Weiss to effectuate the Wrongful Asset Transfer subjects it to this Court's jurisdiction. (Pl. Mem. at 13-14 (citing, inter alia, Fischbarg v. Doucet, 9. N.Y.3d 375, 381, 849 N.Y.S.2d 501, 506 (2007).) But Whitebridge's involvement with QC Terme s.r.l.'s counsel, as pled by Farsura, falls well short of that required to “transact business” in New York.
The original Complaint does not assert CPLR § 302(a)(1) as a basis for jurisdiction over Whitebridge (Compl. ¶ 23), but does state that Whitebridge “engage[s] in regular business in New York through their holdings in QC Terme and other business dealings” (Compl. ¶ 23); that “upon information and belief” Whitebridge “hatched a plan to force out Farsura” (Compl. ¶ 72); and that “upon information and belief, [Whitebridge] encouraged and/or demanded that QC Terme squeeze out Plaintiff Farsura and Plaintiff SF Capital Partners from holding any equity stake in the North American business operations of QC Terme, and upon information and belief actively facilitated the squeeze-out” (Compl. ¶¶ 189, 196). Judge Torres held that the Complaint “provide[d] no specific facts which support the Court's exercise of jurisdiction over the Whitebridge Defendants under CPLR § 302(a)(1)” and found that the Complaint contained “nothing beyond conclusory allegations concerning the Whitebridge Defendants' business dealings and conduct in New York.” (Dismissal Order at 10-11.) As discussed above, the new facts about Whitebridge still do not allow the Court to conclude that Whitebridge is subject to the Court's jurisdiction under CPLR § 302(a)(1).
The Varni Affidavit states “QC Terme ... decided in October 2018 to retain Tarun M. Stewart of Paul, Weiss, Rifkind, Wharton & Garrison LLP ... the decision to retain Paul Weiss was . taken jointly with White Bridge.” (Varni Aff. ¶ 35.) Varni further stated the following to justify Defendants' assertion of the common interest privilege over communications related to the Wrongful Asset Transfer:
Communications related to QC Terme US's purchase of QC Terme NY LLC from QC Terme U.S. Holding LLC: This purchase, which took place in November 2018, was a central step that QC Terme U.S. took, after much discussion and deliberation, including at the QC Terme board level, and with representatives of White Bridge and outside counsel, to deal with the uncertainty created by Mr. Farsura's ownership claims. As I understand Mr. Farsura's Complaint, this is a primary part of this litigation. The legal advice and the related communications, which were shared at the board level and with White Bridge, were necessary to support QC Terme's and White Bridge's shared interest in making sure that QC Terme U.S. completed the purchase in a way that would legally protect QC Terme and White Bridge in the dispute with Mr. Farsura. (Varni Aff. ¶ 40.) Varni concluded that “legal advice and related communications were shared with representatives of White Bridge to further QC Terme's and White Bridge's shared legal interests in legally protecting QC Terme and White Bridge in the ongoing dispute with Mr. Farsura over his ownership claims and his threatened litigation, which now has become real in this case.” (Varni Aff. ¶ 41.)
Whitebridge Managing Director Stefano Devescovi described Whitebridge's retention of Italian firm Giovannelli e Associati, and QC Terme s.r.l.'s retention of “law firms such as ... Paul, Weiss...” for advice “concerning how to respond to Mr. Farsura's legal claims” and noted “communications with attorneys from firms retained by QC Terme were shared with . [Whitebridge] representatives” and vice versa. (Devescovi Aff. ¶ 26.) Those communications included discussion, inter alia, of “[t]he purchase of QC Terme NY LLC by QC Terme U.S. from QC Terme U.S. Holding for a promissory note and the corresponding assumption of the costs associated with the Governor's Island facility,” - i.e., the Wrongful Asset Transfer. (Devescovi Aff. ¶ 28(c).) As to that topic, “QC Terme and [Whitebridge] sought, and counsel provided, advice to QC Terme and [Whitebridge] leadership in dealing with Mr. Farsura while also fulfilling their responsibilities to protect QC Terme's and [Whitebridge's] individual and shared legal interests.” (Devescovi Aff. ¶ 28.)
“Devescovi Aff.” refers to the Affidavit Of Stefano Devescovi Regarding CommonInterest Privilege dated August 11, 2022, originally filed at Dkt. 133. (See also Timblo Decl. Ex. C.)
Based on the statements of Varni and Devescovi, Farsura's proposed amendment alleges that “Whitebridge and . QC Terme s.r.l. jointly retained an attorney from the New York offices of . Paul, Weiss . to advise on the purchase of QC Terme NY LLC.” (FAC ¶ 24(b) (internal quotation marks omitted).) Farsura characterizes the statements as proof of Whitebridge “[d]irecting New York counsel and agents” to conduct a tortious activity. (Pl. Mem. at 13-14.) Farsura further argues that the affidavits and Defendants' privilege log demonstrate that Whitebridge “sought and received legal advice from Paul Weiss in connection with the valuation of QC Terme NY LLC, the Wrongful Asset Transfer, and the dissolution of QC Terme U.S. Holding ... and, based on that legal advice and in communication with those New York lawyers, jointly decided with QC Terme to implement the Wrongful Asset Transfer and dissolution through New York counsel.” (Pl. Reply at 4-5 (original emphasis omitted).) Farsura contends that the affidavits and privilege log demonstrate that QC Terme s.r.l.'s counsel acted as Whitebridge's agent in New York because counsel “acted in New York for the benefit of White Bridge, with its knowledge and consent. (Pl. Reply at 4-5.) That conclusory leap does not stand up to scrutiny.
An “agent” for purposes of CPLR § 302(a) is a person who “acted in the state for the benefit of, and with the knowledge and consent of the non-resident principal.” CutCo Industries, Inc. v. Naughton, 806 F.2d 361, 366 (2d Cir. 1986) (internal quotation marks omitted). In CutCo, the Second Circuit explained that, while not held to the standard of “traditional agency law,” “some control is necessary to establish agency for jurisdictional purposes.” Id.; accord, e.g., Grove Press, Inc. v. Angleton, 649 F.2d 121, 122 (2d Cir. 1981) (“a showing must be made that the alleged agent acted in New York for the benefit of, with the knowledge and consent of, and under some control by, the nonresident principal”); Spetner v. Palestine Investment Bank, 495 F.Supp.3d 96, 110 (E.D.N.Y. 2020) (“whether an agency relationship exists for the purpose of establishing personal jurisdiction under Section 302 ... turns on” whether “the in-forum intermediary acted (1) for the benefit of, (2) with the knowledge and consent of, and (3) under some degree of control of the non-resident principal”) .
The affidavits and privilege log on which Farsura relies demonstrate that Whitebridge and its Italian counsel discussed with QC Terme s.r.l. and its New York counsel the legal implications of the Wrongful Asset Transfer vis-a-vis the burgeoning threat of litigation from Farsura. Nothing in the documents provided, however, indicates that Whitebridge itself “sought and received legal advice from Paul Weiss” (Pl. Reply at 4), which renders much of Farsura's legal support for applying CLPR § 302(a)(1) to Whitebridge inapposite. Nor does the fact that Whitebridge and QC Terme s.r.l. and their separately-retained counsel discussed the Wrongful Asset Transfer equate to Whitebridge exercising control over QC Terme s.r.l.'s counsel as if he were its own. Farsura provides no authority, nor is the Court of aware of any, to support his contention that a co-party's assertion of common-interest privilege establishes an agency relationship with counsel for the other co-party. (See Pl. Reply at 5.)
Although the Devescovi Affidavit states that “QC Terme and [Whitebridge] sought, and counsel provided, advice to QC Terme and [Whitebridge] leadership” regarding the Wrongful Asset Transfer (Devescovi Aff. ¶ 28), the full context of the affidavit suggests this advice was sought by Whitebridge from its Italian counsel and separately sought by QC Terme s.r.l. from Paul, Weiss (id. ¶ 26). That is consistent with the privilege log entry concerning communications about the Wrongful Asset Transfer over which Defendants claimed common interest privilege, which lists both Paul, Weiss and Whitebridge's Italian counsel as attorneys, and both QC Terme- and Whitebridge-affiliated individuals as clients. (Compare Timblo Decl. Ex. E Row 2b with Pl. Mem. at 11.)
Plaintiffs' cases involve imputing to an out-of-state defendant the actions of the lawyer retained by the defendant to act in New York, which Plaintiff concedes is not the case here. (Pl. Reply at 5 n.5 (offering to “make a change to the Amended Complaint to clarify that they are not alleging that Whitebridge directly retained Paul Weiss.”) See, e.g., Fischbarg, 9 N.Y.3d at 383, 849 N.Y.S.2d at 507 (in action brought by New York lawyer to recover fees from out-of-state defendants, “defendants' solicitation of plaintiff in New York and their frequent communications with him in this state . form[ed] the basis of jurisdiction” under CPLR §302(a)(1)); PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1109 (2d Cir. 1997) (defendant retaining a New York lawyer to seek investments in his products and negotiate patent royalty agreements in New York, including a “persistent campaign” by the New York lawyer directed at the New York defendant, established jurisdiction under CPLR § 302(a)(1)).
Farsura's proposed amendments and supporting documentation thus fail to establish jurisdiction over Whitebridge through the actions of QC Terme s.r.l.'s New York counsel. See Charles Schwab Corp. v. Bank of America Corp., 883 F.3d 68, 86 (2d Cir. 2018) (general allegation that defendants “controlled or otherwise directed or materially participated in the operations of” purported agents in New York and “reaped proceeds or other financial benefits from” their actions did not allow Court to conclude that any of purported agents' conduct should be imputed to any defendant for purposes of personal jurisdiction under CPLR 302(a)(2)); Hau Yin To v. HSBC Holdings, PLC, 700 Fed.Appx. 66, 68 (2d Cir. 2017) (“It is not enough to allege that defendants had the legal ability to control the alleged agent; plaintiffs seeking to establish jurisdiction under C.P.L.R. § 302(a)(2) must allege the actual exercise of control, based on ‘the realities of the relationship'”) (summary order) (quoting CutCo, 806 F.2d at 366). Granting leave to amend so that Farsura can include the additional “new” Whitebridge facts would be futile. Accordingly, the motion should be denied. See Spiegel, 604 F.3d at 78 (affirming denial of leave to amend where “[n]either the Plaintiffs' third amended complaint nor the evidence adduced during discovery provided any basis to demonstrate that the district court would have had personal jurisdiction over [defendant]”).
D. The Court Does Not Recommend Entering Partial Judgement
Farsura requests that, in the event the Court denies his motion to amend, the Court enter a partial judgment under Rule 54(b) as to the original Italian Defendants “so that Plaintiffs may expeditiously appeal.” (Pl. Mem. at 25; see also Pl. Reply at 20.) Rule 54(b) provides that “the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay.” Fed.R.Civ.P. 54(b). Such relief, however, is the exception, not the rule. “Respect for the historic federal policy against piecemeal appeals requires that a Rule 54(b) certification not be granted routinely. The power should be used only in the infrequent harsh case where there exists some danger of hardship or injustice through delay which would be alleviated by immediate appeal.” Citizens Accord, Inc. v. Town of Rochester, NewYork, 235 F.3d 126, 128-29 (2d Cir. 2000) (per curiam) (internal citations and quotation marks omitted).
Here, the Court finds no reason for entry of partial judgment given the general policy discouraging piecemeal appeals and given the lack of any real hardship or injustice to Farsura in allowing the entire case to proceed to its conclusion before the possibility of appeal. See, e.g., Hogan v. Consolidated Rail Corp., 961 F.2d 1021, 1025 (2d Cir. 1992) (district court erred by entering Rule 54(b) certification where there was “no indication that the case was an exceptional one or that there would be any unusual hardship in requiring plaintiff ... to await, in accordance with normal federal practice, the disposition of the entire case before obtaining appellate review of the dismissal of their claims against [dismissed defendant]); Sussman Sales Co., Inc. v. VWR International, LLC, No. 20-CV-2869, 2021 WL 6065760, at *7 (S.D.N.Y. Dec. 21, 2021) (“the prejudice caused by having to wait until completion of a trial to pursue plaintiff's other claim is a hardship ‘inherent in every denial of Rule 54(b) certification, and hardly rise[s] to the level of hardships that warrant immediate appeal'”) (quoting TADCO Construction Group Corp. v. Dormitory Authority of New York, No. 08-CV-73, 2012 WL 3011735, at *6 (E.D.N.Y. July 23, 2012)).
Farsura's sole case offered in support of his position is inapposite. In Grand River Enterprises Six Nations, Ltd. v. Pryor, 425 F.3d 158 (2d Cir. 2005), the plaintiffs asserted, inter alia, antitrust claims against number of state Attorneys General. The Second Circuit held that certification for appeal under Rule 54(b) was appropriate in that instance because “it would make no sense to try the antitrust count against New York State alone if the dismissals of the other states or the other claims turned out to be in error.” 425 F.3d at 165. Here, in contrast, Farsura may pursue his remaining claims against QC Terme U.S. without relying on the presence or alleged conduct of the Italian Defendants.
CONCLUSION
For the foregoing reasons, the Court VACATES its November 2022 Order at Dkt. 223, and recommends that Plaintiffs' motion for leave to amend their Complaint be DENIED. To the extent not addressed herein, the Court has considered all of Plaintiffs' arguments and determined them to be without merit.
DEADLINE FOR FILING OBJECTIONS
Pursuant to 28 U.S.C. § 636(b)(1) and Rules 72, 6(a), and 6(d) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days to file written objections to this Report and Recommendation. Such objections shall be filed with the Clerk of the Court, with extra copies delivered to the Chambers of the Honorable Analisa Torres, United States Courthouse, 500 Pearl Street, New York, New York 10007, and to the Chambers of the undersigned, at United States Courthouse, 500 Pearl Street, New York, New York 10007. Failure to file timely objections will result in a waiver of the right to object and will preclude appellate review.