Opinion
22 Civ. 4094 (KPF)
07-24-2024
PLAINTIFF FUNDING HOLDING, LLC d/b/a LAWCASH, Plaintiff, v. BLUE OCEAN PARTNERS LLC d/b/a PLAINTIFF SUPPORT SERVICES, DEAN CHASE, and JOSEPH DINARDO, Defendants.
OPINION AND ORDER
KATHERINE POLK FAILLA, DISTRICT JUDGE
Plaintiff Funding Holding LLC d/b/a LawCash (“Plaintiff” or “LawCash”) brings this action against Defendants Blue Ocean Partners LLC d/b/a Plaintiff Support Services (“PSS”), Dean Chase, and Joseph DiNardo (collectively, “Defendants”), alleging a litany of claims in connection with a failed business arrangement in which Defendants allegedly agreed to find and refer litigation funding opportunities to Plaintiff in exchange for monetary consideration, all pursuant to the terms of an Origination and Services Agreement by and between LawCash and PSS (the “Agreement”).
Defendants PSS and DiNardo are presently in bankruptcy, and therefore this case is stayed as to them. (See Dkt. #64 (PSS Notice of Bankruptcy), 69 (DiNardo Notice of Bankruptcy)). Chase is not, however, and now before the Court is his motion to dismiss Counts IV and V of the Complaint, which counts allege that he tortiously interfered with the Agreement between Plaintiff and PSS, and that he tortiously interfered with Plaintiff's prospective economic advantage. For the reasons that follow, the Court finds that Plaintiff has plausibly alleged a claim against Chase for tortious interference with contract, but dismisses Plaintiff's claim for tortious interference with prospective economic advantage.
This Opinion draws its facts from the Complaint (“Compl.” (Dkt. #1)), the well-pleaded allegations of which are taken as true for purposes of this Opinion. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). For ease of reference, the Court refers to Chase's memorandum of law in support of his motion to dismiss as “Chase Br.” (Dkt. #47); to Plaintiff's combined memorandum of law in opposition to Chase and DiNardo's motions to dismiss as “Pl. Opp.” (Dkt. #49); to Chase's reply memorandum of law as “Chase Reply” (Dkt. #53); and to DiNardo's reply memorandum of law, incorporated by reference in the Chase Reply, as “DiNardo Reply” (Dkt. #50).
A. Factual Background
1. The Parties
LawCash, a Delaware limited liability corporation, is a provider of pre-and post-litigation funding to plaintiffs and attorneys. (Compl. ¶¶ 1, 10). PSS, a New York limited liability corporation, is similarly engaged in the business of litigation funding. (Id. ¶ 11). DiNardo is a board member of and special advisor to PSS, and was a principal at PSS when the company entered into the Agreement. (Id. ¶¶ 5, 7, 13). Chase is the President and Chief Executive Officer of PSS, and DiNardo's successor at the company. (Id. ¶¶ 5, 12).
2. The Origination and Services Agreement
On February 15, 2021, Plaintiff entered into the Origination and Services Agreement with PSS. (Compl. ¶ 21). Pursuant to the Agreement, PSS agreed to “identify and refer to [Plaintiff] on an exclusive basis ... all plaintiff and attorney Pre-Settlement Funding and Post Settlement Funding opportunities, interest, leads and inquiries ... from any and all sources.” (Id.). The Agreement defined “Pre-Settlement Funding” as “any funding provided to an attorney or a plaintiff who is pursuing a legal claim, in return for receiving an interest in the proceeds of that legal claim if that legal claim is resolved favorably for the attorney or plaintiff through a settlement or a judgment.” (Id. ¶ 22). Similarly, the Agreement defined “Post-Settlement Funding” as “any funding provided to an attorney or a plaintiff who has resolved favorably a legal claim through a settlement or a judgment, in return for receiving an interest in the proceeds of that legal claim when that settlement or judgment is paid off at some future time.” (Id. ¶ 23). The Agreement collectively defined Pre-and Post- Settlement Funding as “Funding Opportunities.” (Id. ¶ 24).
In addition to imposing a general obligation on PSS to “identify and refer” Funding Opportunities exclusively to Plaintiff, the Agreement specifically required PSS to “actively solicit Funding Opportunities through [PSS's] network of attorneys,” to “actively seek to add attorneys to PSS's network,” and to “actively conduct marketing efforts to obtain Funding Opportunities [through] the internet, social media, emails, print, attorney visits, and legal conferences.” (Compl. ¶ 26). The Agreement further required PSS to “assist [Plaintiff] in the servicing and administration of” all funding agreements entered as a result of PSS's referrals, and to assist “in the collection of payments” under those funding agreements, “if requested by [Plaintiff].” (Id. ¶ 27).
In exchange for these efforts, the Agreement provided PSS with several forms of consideration. First, the Agreement set forth Plaintiff's agreement to pay PSS monthly commissions that increased based on the volume of presettlement Funding Opportunities that PSS referred to Plaintiff during each month and that Plaintiff accepted, which referrals were defined as “Funded Amounts.” (Compl. ¶¶ 29-30). Second, and pursuant to the Agreement, Plaintiff extended to PSS a $2,250,000 loan, which PSS agreed to repay pursuant to a profit-sharing arrangement based on the volume of Funded Amounts referred by PSS to Plaintiff. (Id. ¶ 31). If and when PSS fully repaid the loan, the Agreement provided that Plaintiff would provide PSS with a monthly profit share based on the Funded Amounts. (Id.).
3. The Breakdown of the Relationship Between the Parties
Plaintiff alleges that the relationship between the parties soured soon after execution of the Agreement, as Plaintiff quickly began to fear that PSS was reneging on its contractual obligations. (Compl. ¶ 33). In particular, PSS's identification and referral of potential Funding Opportunities to Plaintiff declined, resulting in a significant decrease in Funded Amounts over the first year of the Agreement, in comparison to previous figures realized pursuant to a prior arrangement between the parties. (Id.). Plaintiff maintains that this decline was in sharp contrast to the “active[] solicit[ation]” provision of the Agreement, and was due to Defendants' dissatisfaction with the terms of the Agreement and their belief that the Agreement could be improved to PSS's benefit, to which positions Plaintiff alleges that DiNardo openly admitted in November 2021. (Id. ¶ 34).
Chase, who originally held himself out as DiNardo's successor to lead PSS, changed course and disclaimed association with PSS after Plaintiff complained about PSS's breach of contract in November 2021. (Compl. ¶ 35). Notwithstanding business cards and public announcements to the contrary, Chase represented that he was not working for PSS, and that he would not work for PSS so long as it was subject to the terms of the Agreement. (Id.). This public disregard for the Agreement on Chase's part further ensured that PSS's performance under the Agreement would suffer. (Id.).
Events came to a head on March 28, 2022, when PSS formally repudiated the Agreement in an email “proposal” from DiNardo. (Compl. ¶¶ 6, 36). In his email, DiNardo expressed his position that the Agreement was “simply untenable” and demanded a renegotiation of the Agreement. (Id.). In the meantime, DiNardo's email made clear that PSS would no longer honor the Agreement, and that PSS would cease referring Funding Opportunities to Plaintiff, absent Plaintiff acceding to PSS's demands. (Id.). Finally, the email revealed that DiNardo and Chase had been independently developing a “new venture” and “new book” of business extrinsic to the Agreement. (Id. ¶ 37). The email purportedly went as far as to indicate that Chase was “working on over $300MM worth of attorney fundings[,] which most of them will close this calendar year.” (Id.). Plaintiff maintains that these efforts were in blatant violation of the Agreement's exclusivity clause. (Id. ¶ 6).
In light of this apparent breach of the Agreement, on March 30, 2022, Plaintiff requested that PSS provide it with a written report, contemplated by the terms of the Agreement, “describing in reasonable detail [PSS's] solicitation and marketing efforts for Funding Opportunities, and the amounts expended on solicitation and marketing.” (Compl. ¶ 39). The next day, Plaintiff demanded that PSS confirm that, pursuant to a separate section of the Agreement, Plaintiff would be able to access PSS's “personnel and business records relating to the originations and services” obligations under the Agreement. (Id. ¶ 40). Instead, PSS failed to provide the necessary report, and likewise refused Plaintiff's access to the relevant records. (Id. ¶¶ 39-40). Finally, on April 6, 2022, Plaintiff sent PSS a letter stating that PSS was in material breach of the Agreement and had caused Plaintiff substantial damages, and demanding that PSS return the amount due on its $2,225,000 loan. (Id. ¶ 41). PSS refused to pay the amount due on the loan. (Id. ¶ 42).
4. PSS's Access to Plaintiff's Systems and Additional Unfair Competition
In addition to its identification and referral provisions, the Agreement contained confidentiality provisions that provided that “all marketing data and other information” relating to the Funding Opportunities was “Confidential Information of LawCash,” and restricted the parties to using such information “only for their performance under [the] Agreement, and not for any other purpose whatsoever.” (Compl. ¶ 25). Plaintiff alleges that, throughout April 2022, PSS improperly accessed and used Confidential Information from Plaintiff's electronic files to compete with Plaintiff, including by specifically accessing Plaintiff's proprietary database and associated customer relationship management system. (Id. ¶ 43). That database contains detailed and significant information on all of Plaintiff's clients, referral sources, and those attorneys and law firms whose clients utilized Plaintiff's products. (Id.). Moreover, PSS did so in spite of Plaintiff's April 6, 2022 letter setting forth Plaintiff's position that PSS was in material breach of the Agreement. (Id.).
Finally, Plaintiff alleges that PSS, following its improper access of Plaintiff's systems, began a campaign to divert Plaintiff's clients and assets away from Plaintiff for the ultimate benefit of PSS. Specifically, Plaintiff asserts that PSS generated early payoff letters for at least 18 of Plaintiff's clients, and terminated those relationships and fundings in an effort to transfer Plaintiff-owned assets away from Plaintiff, and that it similarly diverted additional Funding Opportunities related to those assets away from Plaintiff, “all for PSS's benefit and in further breach of the Agreement.” (Compl. ¶ 44). In May 2022, PSS also claimed the right to take over from Plaintiff the servicing of all fundings originated pursuant to the Agreement, even going as far as to countermand instructions by an employee of Plaintiff to a client, and direct that client to correspond directly with PSS. (Id. ¶ 45).
B. Procedural History
Following the breakdown of the relationship between the parties, Plaintiff commenced this action with the filing of a seven-count Complaint, the operative pleading in this matter, on May 19, 2022. (Dkt. #1). As to PSS, Plaintiff alleges claims for misappropriation of trade secrets, under federal and New York law (Compl. ¶¶ 46-55, 82-88), as well as breach of contract (id. ¶¶ 56-61), and unfair competition (id. ¶¶ 89-92). As to Chase and DiNardo, Plaintiff alleges separate claims for tortious interference with contract (id. ¶¶ 62-67 (against DiNardo); ¶¶ 68-74 (against Chase)), as well as a joint claim for tortious interference with prospective economic advantage (id. ¶¶ 75-81).
On July 7, 2022, after receiving an extension of the answer deadline, Chase and DiNardo filed separate pre-motion letters seeking leave to file motions to dismiss the pertinent tortious interference claims of the Complaint. (Dkt. #22 (DiNardo Pre-Motion Letter); 25 (Chase Pre-Motion Letter)). PSS, on the other hand, filed an answer and counterclaims against Plaintiff on July 11, 2022. (Dkt. #28). Thereafter, Plaintiff submitted its opposition to DiNardo's and Chase's letters (Dkt. #26), and filed its own pre-motion letter seeking dismissal of PSS's counterclaims (Dkt. #34), which letter PSS duly opposed (Dkt. #35).
On August 9, 2022, the Court held a joint initial pretrial and pre-motion conference on the parties' various submissions. (See August 9, 2022 Minute Entry). The Court subsequently set a briefing schedule on August 12, 2022, for DiNardo's and Chase's motions to dismiss, after Plaintiff indicated to the Court that referral to the designated Magistrate Judge for a settlement conference would not be productive at that juncture. (Dkt. #38). Pursuant to that schedule, the parties first filed a joint proposed case management plan on September 2, 2022, which plan the Court endorsed the same day. (Dkt. #40). Chase and DiNardo each filed a motion to dismiss on September 30, 2022 (Dkt. #41-42 (DiNardo), 46-47 (Chase)), and Plaintiff filed its consolidated opposition on October 28, 2022 (Dkt. #49). Finally, Chase and DiNardo each filed a reply memorandum in further support of the motions to dismiss on November 18, 2022. (Dkt. #50 (DiNardo), 53 (Chase)).
On March 23, 2023 - following the completion of briefing on the motions to dismiss, and while discovery was ongoing - PSS filed a notice of Chapter 7 bankruptcy. (Dkt. #64). Accordingly, the Court stayed the case as to PSS, and directed a joint letter submission from the parties regarding whether the case should be stayed in its entirety. (Dkt. #65). Pursuant to the Court's order, the parties filed a joint statement on March 29, 2023, indicating that DiNardo was on the verge of filing for Chapter 11 bankruptcy in a parallel proceeding, and setting forth DiNardo's and Chase's positions that the case should be stayed as to them either way, given the interrelationship of their claims with those against PSS. (Dkt. #66). In light of the submission, the Court reserved decision on the automatic stay, and ordered DiNardo to submit proof of his personal bankruptcy filing on or before April 10, 2023. (Dkt #67). DiNardo did so, and on April 11, 2023, the Court stayed this action as to DiNardo. (Dkt. #68-70).
Chase, for his part, also filed a letter dated April 10, 2023, arguing in favor of extension of the automatic bankruptcy stay to him, a non-debtor. (Dkt. #68). Following Plaintiff's response in opposition, the Court issued an order, dated April 18, 2023, entering a discretionary stay as to Chase, “given the factual nexuses between the claims against DiNardo and Chase, as well as
Chase's relationship to [PSS],” and given the possibility “that the bankruptcy court will weigh in and seek to extend the automatic stay or enjoin this case from proceeding.” (Dkt. #73 (citing Pavers & Rd. Builders Dist. Council Welfare Fund v. Core Contracting of N.Y., LLC, 536 B.R. 48, 52 (E.D.N.Y. 2015))). The stay persisted, pending developments in the PSS and DiNardo Bankruptcy Proceedings, until July 12, 2024, when the parties, at the Court's direction, filed a joint status update indicating that there had been no meaningful updates in either bankruptcy matter. In light of that submission, along with Plaintiff's representation that the case could proceed against Chase without implicating discovery from PSS or DiNardo, the Court lifted the stay by order dated July 16, 2024, to allow Plaintiff's claims to proceed against Chase. (Dkt. #82). Accordingly, the Court proceeds to the merits of Chase's pending motion to dismiss.
DISCUSSION
A. Applicable Law
When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court must “draw all reasonable inferences in [p]laintiff's favor, assume all well-pleaded factual allegations to be true, and determine whether they plausibly give rise to an entitlement to relief.” Faber v. Metro. Life Ins. Co., 648 F.3d 98, 104 (2d Cir. 2011) (internal quotation marks omitted); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” (internal quotation marks omitted)). A plaintiff is entitled to relief if he alleges “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007) (“While Twombly does not require heightened fact pleading of specifics, it does require enough facts to nudge plaintiff's claims across the line from conceivable to plausible.” (internal quotations marks omitted) (citing Twombly, 550 U.S. at 570)).
That said, a court is “not bound to accept conclusory allegations or legal conclusions masquerading as factual conclusions.” Rolon v. Henneman, 517 F.3d 140, 149 (2d Cir. 2008) (citation and internal quotation marks omitted); see also Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009) (“[A]lthough a court must accept as true all of the allegations contained in a complaint, that tenet is inapplicable to legal conclusions, and threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” (internal quotation marks omitted) (quoting Iqbal, 556 U.S. at 678)). Moreover, “[w]here a complaint pleads facts that are ‘merely consistent with' a defendant's liability, it ‘stops short of the line between possibility and plausibility of entitlement to relief.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557).
B. The Court Grants in Part and Denies in Part Chase's Motion to Dismiss
In moving to dismiss, Chase raises two principal arguments. First, Chase argues that the facts as alleged support only a finding that he acted in his capacity as a representative of PSS, and therefore cannot establish that he tortiously interfered with the Agreement as a third party. (Chase Br. 4). Second, Chase asserts that Plaintiff's allegations supporting its tortious interference with prospective economic advantage claim implicate only PSS, and fail to support any plausible finding that Chase independently drove business from Plaintiff. (Id. at 6-7). As set forth below, Chase's arguments meet with mixed success, as the Court finds that Plaintiff has plausibly alleged a tortious interference with contract claim, even though it cannot satisfy the more demanding requirements for tortious interference with prospective economic advantage.
1. Plaintiff Plausibly Alleges That Chase Tortiously Interfered with the Agreement
To state a claim under New York law for tortious interference with a contract, a plaintiff must allege:
[i] the existence of a valid contract between the plaintiff and a third party; [ii] the defendant's knowledge of the contract; [iii] the defendant's intentional procurement of the third party's breach of the contract without justification; [iv] actual breach of the contract; and [v] damages resulting therefrom.Kirch v. Liberty Media Corp., 449 F.3d 388, 401 (2d Cir. 2006) (internal quotation marks omitted) (citing Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 424 (1996)); accord Regeneron Pharms., Inc. v. Novartis Pharma AG, 96 F.4th 327, 343 (2d Cir. 2024). Additionally, “a plaintiff must allege that the defendant's actions were the ‘but for' cause of the alleged breach - in other words, that there would not have been a breach but for the activities of the defendant.” Clean Coal Techs., Inc. v. Leidos, Inc., 377 F.Supp.3d 303, 319 (S.D.N.Y. 2019) (internal quotation marks omitted) (citing RSM Prod. Corp. v. Fridman, 643 F.Supp.2d 382, 405 (S.D.N.Y. 2009), aff'd, 387 Fed.Appx. 72 (2d Cir. 2010) (summary order)).
The parties do not dispute that New York law governs this action and have not suggested that another jurisdiction's law might apply. (Chase Br. 5; Pl. Opp. 2). Accordingly, this Court need not engage in a choice-of-law analysis. See, e.g., Arch Ins. Co. v. Precision Stone, Inc., 584 F.3d 33, 39 (2d Cir. 2009) (“The parties' briefs assume that New York substantive law governs the issues ... presented here, and such implied consent is, of course, sufficient to establish the applicable choice of law.” (internal quotation marks and citation omitted)).
Chase does not contest that the Complaint plausibly alleges the necessary elements of a tortious interference with contract claim: the existence of the Agreement; his knowledge thereof; PSS's actual breach of the Agreement; and Plaintiff's damages resulting therefrom. (See Chase Br. 4-5). Rather, Chase contends that all of his alleged misconduct “concern[ed] actions taken by him in his alleged capacity as a representative of PSS.” (Id. at 4). As such, Chase argues that, because he was merely an agent of PSS, he could not have tortiously interfered with the Agreement, and Plaintiff's allegations should instead pertain only to its breach of contract claims against PSS. (Id.).
As Plaintiff correctly notes (Pl. Opp. 9), New York law provides that liability may attach to corporate officers if “the acts of the defendant corporate officer which resulted in the tortious interference with contract either were beyond the scope of their employment or, if not, were motivated by his personal gain, as distinguished from gain for the corporation.” Clean Coal Techs., 377 F.Supp.3d at 320 (alteration adopted and internal quotation marks and citation omitted); see also IMG Fragrance Brands, LLC v. Houbigant, Inc., 679 F.Supp.2d 395, 407-08 (S.D.N.Y. 2009) (“[A] narrow exception exists for officers acting wholly outside the scope of their authority for purely personal gain[.]”); accord In re KG Winddown, LLC, 632 B.R. 448, 492 (Bankr. S.D.N.Y. 2021). Such is the case here, where Chase's alleged misconduct supports the pleading-stage finding that he acted outside the scope of his employment in causing PSS's breach of the Agreement.
To begin, the Complaint plausibly alleges that Chase's contributions to PSS's efforts to renege on the Agreement began even prior to Chase's commencement of his employment at PSS as DiNardo's successor, suggesting that at least some of Chase's conduct was undertaken in an individual capacity. (Compl. ¶¶ 5, 6). Likewise, Plaintiff's well-pleaded allegations that Chase publicly disclaimed his association with PSS while the terms of the Agreement were in force belie Chase's current assertions that he acted only in his capacity as the President and CEO during his tenure at the company. (Id. ¶¶ 5, 35). Finally, Plaintiff's allegations that Chase exerted substantial efforts to build a competing venture, separate from PSS, in an attempt to undermine the Agreement between Plaintiff and PSS further indicate that Chase was acting outside of any official capacity as a corporate employee of PSS. (Id. ¶¶ 6, 38).
Chase's efforts to rebut these allegations focus primarily on his involvement in the competing venture, and posit that Plaintiff has not demonstrated that (i) his competing venture “generated revenue to [Plaintiff's] detriment,” and (ii) Chase “actually benefit[ed] from this alleged diversion of business.” (Chase Reply (citing DiNardo Reply 2)). To the contrary, the Court finds that the Complaint plausibly alleges that Chase used his competing venture to exert pressure on Plaintiff to bolster PSS's efforts to repudiate the Agreement, and to generate profit for Chase personally through his competing venture. (See Compl. ¶ 38 (alleging that “Chase and DiNardo engaged in this improper solicitation,” in support of Chase's competing venture, “in an effort to coerce [Plaintiff] to amend the contract and ultimately to induce PSS to break its contract with [Plaintiff]”); see also id. ¶¶ 6, 35-37 (detailing such efforts)). Ultimately, Chase's “alternative explanations for this [alleged misconduct]” cannot, at the pleading stage and drawing all inferences in Plaintiff's favor, “rule out the possibility that [he] acted for his own personal gain in failing to perform [his role at PSS] until [Plaintiff] acceded to his demands.” Clean Coal Techs., 377 F.Supp.3d at 321 (citing Island Two LLC v. Island One, Inc., No. 13 Civ. 2121 (LGS), 2013 WL 5380216, at *3 (S.D.N.Y. Sept. 26, 2013) (finding at the motion to dismiss stage that similar “allegations [were] sufficient to support a claim” that a corporate officer acted “outside the scope of [his] employment” and sought to “personally profit”)).
For substantially similar reasons, the Court rejects Chase's argument that the Complaint does not plausibly allege that his alleged misconduct caused PSS to breach the Agreement with Plaintiff. (See Chase Br. 5). A determination of “but-for causation” in the context of a tortious interference with contract claim requires a court to consider “[i]f the breach would have occurred ‘prior to any involvement by' the [defendants] or apart from their actions.” Rich v. Fox News Network, 939 F.3d 112, 127 (2d Cir. 2019) (quoting KAM Constr. Corp. v. Bergey, 56 N.Y.S.3d 740, 742 (4th Dep't 2017)). Here, as discussed, Plaintiff has adequately alleged that Chase was personally involved in precipitating PSS's breach of the Agreement, including by diverting resources away from PSS prior to his official start at the company as DiNardo's successor (Compl. ¶ 6), and by stating that “he would not work for PSS so long as it was subject to the terms of the Agreement, thus ensuring that PSS's performance under the Agreement would dramatically suffer” (id. ¶ 35).
Plaintiff's allegations as to the specific nature of Chase's involvement in bringing about PSS's alleged breach of the Agreement likewise distinguish this case from those relied upon by Chase, in which ‘but for' causation was not plausibly established due to the presence of irreconcilable allegations indicating the third party's independent decision to breach the relevant agreement. See, e.g., Clean Coal Techs., 377 F.Supp.3d at 319-21 (dismissing claims of tortious interference where the “Complaint ma[de] clear that [the third party] made an independent decision to [breach the agreement]”); RSM Prod. Corp., 643 F.Supp.2d at 410 (finding causation not established where complaint otherwise “allege[d] that [the third party] exhibited a predisposition toward breaching the Agreement independent of the alleged involvement of any of the Defendants”). While Chase may make the argument, later in this litigation, that DiNardo and PSS would have breached the Agreement notwithstanding Chase's own personal involvement, any consideration of “the degree to which the contract would have been breached anyway is a question properly left for discovery and, perhaps, jury determinations.” Rich, 939 F.3d at 127. Accordingly, the Court finds that Plaintiff has adequately alleged a claim for tortious interference with contract against Chase.
2. Plaintiff Has Not Plausibly Alleged That Chase Tortiously Interference with Its Prospective Economic Advantage
Chase also raises challenges to Plaintiff's claim that he tortiously interfered with Plaintiff's prospective economic advantage. While tortious interference with contract and tortious interference with prospective economic advantage claims share certain key elements, they are not the same. Indeed, a prospective economic advantage claim “is a difficult one to sustain, with requirements more demanding than those for interference with [the] performance of an existing contract.” PKG Grp., LLC v. Gamma Croma, S.p.A., 446 F.Supp.3d 249, 251 (S.D.N.Y. 2006). Here, as set forth below, the Court finds that Plaintiff's allegations, while sufficient to establish a tortious interference with contract claim, fail to establish a claim for tortious interference with prospective economic advantage.
Beginning with the legal standard, a claim for tortious interference with prospective economic advantage under New York law requires a plaintiff to establish that:
[i] it had a business relationship with a third party;
[ii] the defendant knew of that relationship and intentionally interfered with it; [iii] the defendant acted solely out of malice, or used dishonest, unfair, or improper means; and [iv] the defendant's interference caused injury to the relationship.Kirch, 449 F.3d at 400 (quoting Carvel Corp. v. Noonan, 350 F.3d 6, 17 (2d Cir. 2003)). As with a tortious interference with contract claim, “[a] plaintiff must also establish causation by demonstrating ‘that she would have entered into an economic relationship but for the defendant's wrongful conduct.'” Nat'l Air Cargo Grp., Inc. v. Maersk Line Ltd., No. 17 Civ. 8659 (KPF), 2019 WL 4735426, at *9 (S.D.N.Y. Sept. 27, 2019) (quoting Tucker v. Wyckoff Heights Med. Ctr., 52 F.Supp.3d 583, 598 (S.D.N.Y. 2014)).
Additionally, “the plaintiff must show more culpable conduct on the part of the defendant” to sustain a tortious interference with prospective economic advantage claim. Gym Door Repairs, Inc. v. Young Equip Sales, Inc., 206 F.Supp.3d 869, 908 (S.D.N.Y. 2016) (internal quotation marks omitted (citing Carvel Corp. v. Noonan, 3 N.Y.3d 182, 190 (2004)); see also Sidney Frank Importing Co. v. Beam Inc., 998 F.Supp.2d 193, 211-12 (S.D.N.Y. 2014) (finding that mental state for prospective economic advantage claim “is more exacting” than that for a contract interference claim). This showing requires plausible allegations that the defendant's conduct either “amounts to a crime or an independent tort, or that the defendant has ‘engaged in conduct for the sole purpose of inflicting intentional harm on' the plaintiff.” Nat'l Air Cargo, 2019 WL 4735426, at *9 (quoting Carvel, 3 N.Y.3d at 190); accord Jacob v. Lorenz, No. 21 Civ. 6807 (ER), 2023 WL 4106298, at *13 (S.D.N.Y. June 21, 2023), reconsideration denied, 2023 WL 6603292 (S.D.N.Y. Oct. 10, 2023).
Chase again challenges both the causation and scienter elements of Plaintiff's claims, arguing that the Complaint fails to plausibly allege that he acted outside of his corporate capacity in allegedly directing PSS's actions in diverting Plaintiff's clients to PSS. (Chase Br. 6-8). In this context, however, Chase's arguments are more successful. Turning to the Complaint itself, the Court observes that Plaintiff's substantive allegations regarding Defendants' alleged interference with its business are devoid of any mention of Chase. In particular, Plaintiff broadly alleges that PSS abused its access to Plaintiff's systems and clients to improperly compete with Plaintiff. (Compl. ¶¶ 43-45). This misconduct includes Plaintiff's allegations that: (i) “PSS improperly accessed and used [Plaintiff's] Confidential Information” (id. ¶ 43); (ii) “PSS [] generated early [payoff] letters for at least 18 [of Plaintiff's] clients” (id. ¶ 44); and (iii) “PSS improperly claimed the right to take over servicing of all fundings originated pursuant to the Agreement” (id. ¶ 45). Importantly, Plaintiff alleges that this misconduct was undertaken “all for PSS's benefit and in further breach [of] the Agreement,” and contains no mention of Chase. (Id. ¶ 44). By contrast, Plaintiff's allegations directed at Chase are limited to claims that Chase “directed others at PSS” (id. ¶ 79), or otherwise “caused PSS” (id. ¶ 80) to engage in the misappropriation of confidential information and diversion of business, and the conclusory allegation that such misconduct was “for the benefit of PSS, DiNardo, and Chase” (id.).
Under New York law, tortious interference with prospective economic advantage claims “require[] proof that the defendant intentionally engaged in acts wrongful by some means other than the fact of the interference itself.” Carson Optical, Inc. v. Prym Consumer USA, Inc., 11 F.Supp.3d 317, 337 (E.D.N.Y. 2014). Plaintiff's limited and nonspecific allegations against Chase, however, are merely “consistent with [his] liability” and thus “stop[] short of the line between possibility and plausibility for entitlement to relief.” Iqbal, 556 U.S. at 678. In comparison to those detailed allegations regarding the extent of Chase's activities in personally bringing about PSS's breach of the Agreement, Plaintiff's allegations supporting its prospective economic advantage claims simply reflect an impermissibly formulaic effort to tack an individual claim against Chase onto Plaintiff's substantive claims against PSS for breach of contract, misappropriation of trade secrets, and unfair competition. See Twombly, 550 U.S. at 555 (“[A] formulaic recitation of the elements of a cause of action will not do.”); see also Evliyaoglu Tekstil A.S. v. Turko Textile LLC, No. 19 Civ. 10769 (LJL), 2020 WL 7774377, at *2 (S.D.N.Y. Dec. 30, 2020) (dismissing prospective economic advantage claims “contain[ing] little more than ‘unadorned, the defendant-unlawfully-harmed-me accusations,' inadequate to state a claim” (alteration adopted) (quoting DiFolco v. MSNBC Cable LLC, 622 F.3d 104, 110-11, 115 (2d Cir. 2010))). Accordingly, the Court finds that Plaintiff has not met the “more demanding” requirements to set forth a claim for tortious interference with prospective economic advantage, and grants Chase's motion to dismiss. PKG Grp., 446 F.Supp.3d at 251.
CONCLUSION
For the foregoing reasons, Chase's motion to dismiss Count IV of the Complaint is hereby DENIED, and Chase's motion to dismiss Count V of the Complaint is hereby GRANTED. Plaintiff and Chase are directed to meet and confer, and to provide the Court with a proposed amended case management plan on or before August 14, 2024.
The Clerk of Court is directed to terminate the pending motion at docket entry 46.
SO ORDERED.