Opinion
EF001342/2017
09-20-2017
TV Tech Managers, Inc., Plaintiff, v. Richard Cohen; Jason Lawrence Ross; Gemma Rowe Johnson; David James Mansfield; James Holland; Marisa Bangash; Remco Van Stipout; LoveLive TV Limited and LoveLive TV US Inc., Defendants.
Law Office of Wallace Neel, P.C. Attorney for Defendants, Richard Cohen, Gemma Rowe Johnson, David James Mansfield, James Holland, Remco Van Stiphout, LoveLive TV Limited and LoveLive TV US Inc. The Ahearne Law Firm, PLLC Attorneys for Plaintiff
Law Office of Wallace Neel, P.C. Attorney for Defendants, Richard Cohen, Gemma Rowe Johnson, David James Mansfield, James Holland, Remco Van Stiphout, LoveLive TV Limited and LoveLive TV US Inc. The Ahearne Law Firm, PLLC Attorneys for Plaintiff Maria S. Vazquez-Doles, J.
The following papers numbered 1 - 37 were read on the pre-answer motion (Seq #1) of all defendants' other than Jason Lawrence Ross and Marisa Bangash, (hereinafter "Defendants") to 1) grant an extension of time to answer or otherwise respond to the Complaint pursuant to CPLR 2004; 2) dismiss certain claims against them with prejudice pursuant to CPLR 3211(a)(7) for failure to state a cause of action and 3) dismiss all claims against LoveLiveTV Ltd. (hereinafter "the UK Corporation"), Richard Cohen, David Mansfield, Remco Van Stiphout and James Holland (collectively the "UK Defendants") for lack of personal jurisdiction pursuant to CPLR 3211(a)(8) and on Defendants' second motion (Seq.#2) to extend their time to answer or otherwise respond to the Complaint pursuant to CPLR 3212(d): Notice of Motion (Seq. #1)/ Neel Affirmation/ Exhibits A-D/ Supporting Affidavits - Cohen, Holland, Mansfield and Van Stiphout/ Memo of Law 1- 11 Notice of Motion (Seq #2)/ Neel Affirmation with Exhibits A-D/ Johnson Affidavit with Exhibits A & B/ Affidavits of Merit/ Memorandum of Law 12-22 Affirmation in Opposition/ Exhibits A-M 23-36 Reply Memorandum of Law 37
Plaintiff has discontinued this action as against defendant, Marisa Bangash.
Extension of Time to Answer:
To extend the time to answer the complaint and to compel the plaintiff to accept an untimely answer as timely, a defendant must provide a reasonable excuse for the delay and demonstrate a potentially meritorious defense to the action. The determination of what constitutes a reasonable excuse for failing to file a timely answer lies within the sound discretion of the court (See, CPLR 3212(d); CPLR 2004; Salzman & Salzman v Gardiner, 100 AD2d 846 [2d Dept 1984]).
In this case, plaintiff has not moved for default judgment. Further, Defendants' counsel had requested an extension of time from plaintiff's counsel who would only consent to the adjournment on the condition that the Defendants waive their jurisdictional objections. In light of the short period of delay, the absence of any prejudice to the plaintiff, the fact that a number of the defendants reside outside the country, the existence of possible meritorious defenses, the lack of willfulness on the part of the defendants and the strong public policy favoring resolution of cases on the merits, defendants' motions to extend their time to answer shall be granted (Robles v Grace Episcopal Church, 192 AD2d 515 [2d Dept. 1993]).
In opposition to both motions, plaintiff's counsel consents to the extension to file an answer to August 9, 2017 (Affirm in Opp. ¶ 13). Accordingly, Defendants' pre-answer motion to dismiss is timely and the time to serve their answer is extended to ten days after service of notice of entry of this order. CPLR 3211(f).
Motion to Dismiss Pursuant to CPLR§3211(a)(7) and CPLR §3211(a)(8):
In considering a motion to dismiss for failure to state a cause of action, the court must accept the facts as alleged in the complaint as true and accord plaintiff the benefit of every possible favorable inference and determine only whether the facts as alleged fit within any cognizable legal theory (Sokol v Leader 74 AD3d 1180 [2d Dept 2010]). The standard is whether the pleading states a cause of action, not whether the proponent of the pleading has a cause of action (see Guggenheimer v Ginzburg 43 NY2d 268 [1977]).
Plaintiff's complaint alleges five causes of action against all defendants sounding in breach of contract, transfer to defraud creditors, account stated, quantum meruit and unjust enrichment. Plaintiff's opposition makes clear that the only cause of action alleged against the individual defendants is the second cause of action. As they are all either officers, directors or board members of the corporation defendants, they can only be held liable under the doctrine of piercing the corporate veil. Accordingly, plaintiff consents to a dismissal of the First, Third, Fourth and Fifth causes of action as against defendants, Richard Cohen, Gemma Rowe Johnson, David James Mansfield, James Holland and Remco Van Stiphout.
The complaint asserts causes of actions jointly against all defendants referring to them, for the most part as "the defendants." The complaint alleges that in September 2016 the plaintiff entered into an agreement with both corporate defendants whereby the plaintiff would provide the defendants with television production services, as well as, install technical and electronic equipment at the defendants' New York City offices. The complaint alleges that LoveLive TV Limited (the "UK Corporation") is the parent and controlling company of LoveLive TV US, Inc. (the "US Corporation") and that the named individual defendants are collectively the controlling officers and/or directors of the two corporate defendants. The complaint alleges that plaintiff performed all contracted services and that the Defendants have failed and refused to pay the total due on all invoices. The complaint further alleges that in December 2016, the UK Corporation caused the US Corporation to cease trading and that the Defendants transferred the assets of the US Corporation in bad faith to avoid paying the debt owed to plaintiff.
The primary issue is whether the complaint is sufficient to state a cause of action against the UK Corporation and each individual defendant personally for the alleged wrongs of the US Corporation under the doctrine of piercing the corporate veil. The sufficiency of a complaint must be measured against what the law requires of pleadings in the particular case. Although plaintiff's second cause of action does not identify a specific statutory provision under the Debtor Creditor Law ("DCL"), plaintiff argues that same is sufficient as it has plead the necessary elements. As is confirmed in their opposition, the second cause of action is based on Debtor and Creditor Law §§273 and 276.
Debtor and Creditor Law § 273 provides that "[e]very conveyance made and every obligation incurred by a person who is or will be thereby rendered insolvent is fraudulent . . . without regard to his [or her] actual intent if the conveyance is made or the obligation is incurred without a fair consideration." "A finding of constructive fraud pursuant to section 273 may thus be predicated upon proof of insolvency and lack of fair consideration, without a showing of actual motive or intent to defraud" (American Panel Tec v Hyrise, Inc., 31 AD3d 586, 587 [2d Dept. [2006]; see Berner Trucking v Brown, 281 AD2d 924 [2d Dept. 2001]; Gallagher v Kirschner, 220 AD2d 948 [2d Dept. 1995]; Matter of American Inv. Bank v Marine Midland Bank, 191 AD2d 690, 692 [2d Dept 1993]). On the other hand, section 276 requires proof that the transferor actually intended to "hinder, delay, or defraud" any present or future creditors (Debtor and Creditor Law § 276; see Kreisler Borg Florman Gen. Constr. Co., Inc. v Tower 56, LLC, 58 AD3d 694, 696 [2009]; Matter of CIT Group/Commercial Servs., Inc. v 160-09 Jamaica Ave. Ltd. Partnership, 25 AD3d 301, 303 [2006], citing Berner Trucking v Brown, 281 AD2d at 925).
Even accepting the allegations in the complaint as true (see Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]), the complaint has failed to allege a lack of adequate consideration for any alleged transfer with respect to the cause of action pursuant to Debtor and Creditor Law §273. Accordingly, plaintiff's claim pursuant to Debtor and Creditor Law §273 is dismissed as to all defendants.
With respect to Debtor and Creditor Law § 276, the complaint fails to allege with the requisite specificity a cause of action upon which relief could be granted sounding in actual fraud against the individual defendants (see CPLR 3016 [b]; 3211 [a] [7]; Barclay Arms v Barclay Arms Assoc., 74 NY2d 644, 646-647 [1989]). The issue is whether, under the doctrine of piercing the corporate veil, the complaint contains allegations sufficient to state a cause of action holding each individual defendant personally liable for the actions he took as an officer, director or board member.
The general rule, of course, is that a corporation exists independently of its owners, who are not personally liable for its obligations, and that individuals may incorporate for the express purpose of limiting their liability (see Bartle v Home Owners Coop., 309 NY 103[1955]; Seuter v Lieberman, 229 AD2d 386 [2d Dept. 1996]). The concept of piercing the corporate veil is an exception to the general rule, permitting, in certain circumstances, the imposition of personal liability on owners for the obligations of their corporation (see Matter of Morris v Mew York State Dept. Of Taxation & Fin, 82 NY2d 135, 140-141[1993]). A plaintiff seeking to pierce the corporate veil must demonstrate that a court in equity should intervene because the owners of the corporation exercised complete dominion over it in the transaction at issue and in doing so, abused the privilege of doing business in the corporate form, thereby perpetrating a wrong that resulted in injury to the plaintiff (Id.; see Love v Rebecca Dev. Inc., 56 AD3d 733 [2d Dept. 2008]; Milennium Constr., LLC v Loupolover, 44 AD3d 1016 [2d Dept. 2007]). A plaintiff seeking to pierce the corporate veil must also establish that the owners through their domination abused the privilege of doing business in the corporation form. (Morris v New York State Dept. Of Taxation & Fin, 82 NY2d at 142), or that they intentionally "hinder[ed], delay[ed] or defraud[ed] present or future creditors" (Debtor and Creditor Law §276; see Galgano v Ortiz, 287 AD2d 688, 689 [2d Dept. 2001]).
Affording the complaint a liberal construction, accepting as true all facts alleged therein, and according the plaintiff the benefit of every possible inference (see Leon v Martinez, 84 NY2d 83, 87 [1994]; Breytman v Olinville Realty, LLC, 54 AD3d 703 [2008]; Asgahar v Tringali Realty, Inc., 18 AD3d 408 [2005]), the plaintiff has not sufficiently pleaded a cause of action pursuant to the doctrine of piercing the corporate veil to recover against the individual defendants for the alleged wrongs committed by the corporate defendants. Conduct constituting an abuse of the privilege of doing business in the corporate form is a material element of any cause of action seeking to hold an owner personally liable for the actions of his or her corporation. Here, nothing in the complaint asserts or suggests that any of the individual defendants acted other than in his or her capacity as director, officer or board member of the corporations or that they failed to respect the separate legal existence of the corporation, or that any of them treated the corporate assets as their own, or that they in another way abused the privilege of doing business in the corporate form.
The affidavits of Tracey Pietrzak and Tony Pietrzak, owners of plaintiff corporation, submitted in opposition to this motion, do nothing more than restate the allegations in the complaint. It is simply stated that Tony Pietrzak spoke with defendants, Richard Cohen and James Holland and admitted that defendant, Gemma Johnson acted in her capacity as agent of the corporate defendants. They state that they named all defendants associated with the two corporations as they are unaware of any specific wrongdoing but ask that they be allowed discovery to determine who the specific individuals are that may be personally responsible to plaintiff. The policy inherent in allowing individuals to conduct business in the corporate form so as to shield themselves from personal liability would be seriously threatened if an insufficient cause of action is allowed to survive at least to the summary judgment stage, merely on the plaintiff's hope that something will turn up. In an appropriate case, a plaintiff may seek pre-action discovery in order to obtain information relevant to determining who should be named as a defendant (see CPLR 3102[c]; East Hampton Union Free School District v Sandpebble Builders, Inc., 66 AD3d 122 [2d Dept. 2009]).
Because the complaint fails to adequately state a cause of action as against Richard Cohen, Gemma Rowe Johnson, David James Mansfield, James Holland and Remco Van Stiphout under the doctrine of piercing the corporate veil and because the plaintiff has not offered any evidence to establish or suggest that it actually has such a cause of action against them, the complaint is dismissed as asserted against said individual defendants.
On the other hand, as plaintiff has sufficiently alleged facts indicating that the UK Corporation exercised dominion and control over the US Corporation there is a basis upon which to predicate liability against the UK Corporation and discovery is warranted (see Lipton v Unumprovident Corp. 10 AD3d 703 [2d Dept 2004]).
Defendants claim that this Court lacks personal jurisdiction over the UK Corporation and the individual defendants. In light of the above, the court need not reach a determination as to the individual defendants with respect to personal jurisdiction. It is undisputed that the UK Corporation owns one hundred percent (100%) of the US Corporation. Individual defendants, Richard Cohen, James Holland, David Mansfield and Remco Van Stiphout submitted affidavits stating that they have no ties to New York. While that may be true in a personal nature, plaintiff's opposition tends to establish the UK Corporation transacts business within this state based upon its parent-subsidiary relationship with the US Corporation.
New York's long-arm statute, CPLR 302, enables our courts to acquire personal jurisdiction over foreign corporations not "doing business" here in the traditional sense. It is enough if the cause of action asserted against the defendant corporation arose from its transaction of business in New York, and the UK Corporation's direct involvement with the operations of the US Corporation provides sufficient basis for this Court to exercise jurisdiction over it pursuant to CPLR 302(a)(1). (CPLR 302 provides that a non-domiciliary is subject to jurisdiction for claims arising from a defendant's transaction of business in this State.) A non resident parent corporation may be sued in New York when the relationship between the parent and the local subsidiary validly suggests the existence of an agency relationship or the parent controls the subsidiary so completely that the subsidiary may be said to be simply a department of the parent in which case the court can conclude that the parent was doing extensive business in this State through its local department separately incorporated as a subsidiary (Delagi v Volkswagenwerk A.G. of Wofsburg, Germany, 29 NY2d 426 [1972]).
Beyond a traditional agency relationship, the court may consider factors of common ownership, the financial dependency of the subsidiary on the parent corporation, the degree to which the parent corporation interferes in the selection and assignment of the subsidiary's executive personnel and fails to observe corporate formalities, and the degree of control over marketing and operational policies of the subsidiary which is exercised by the parent (Volkwagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117 [2d Cir.1984] ).
The evidence that plaintiff submits belies the contention that the UK Corporation is merely a holding company, and in fact suggests that the UK Corporation oversees the operations of the US Corporation and that they are basically one company with various locations world wide. For these reasons, the Court finds that the exercise of personal jurisdiction over the UK Corporation is proper.
Accordingly, upon review of the foregoing papers, it is hereby
ORDERED that Defendants' motion (Seq #1 and #2) is granted to the extent that defendants' time to answer or otherwise respond to the Complaint is extended to ten days after service of notice of entry of this order; and it is further
ORDERED that Defendants' motion (Seq#1) is granted to the extent that the complaint is dismissed as against defendants, Richard Cohen, Gemma Rowe Johnson, David James Mansfield, James Holland and Remco Van Stiphout pursuant to CPLR 3211(a)(7); and it is further
ORDERED that plaintiff's claim pursuant to Debtor and Creditor Law §273 is dismissed as against all Defendants; and it is further
ORDERED that Defendants' motion (Seq#1) pursuant to CPLR 3211(a)(8) as to defendant, LoveLive TV Ltd. is denied. The Court need not reach a determination as to personal jurisdiction over each individual defendant; and it is further
ORDERED that all remaining parties shall appear for a status conference, as previously scheduled, on October 19, 2017 at 9:30am at the 1841 Courthouse, 101 Main Street, Goshen, New York.
The foregoing shall constitute the Decision and Order of this Court.
All matters not specifically addressed herein are denied. Dated: September 20, 2017 Goshen, New York HON. MARIA S. VAZQUEZ-DOLES, J.S.C.