ADYB Engineered For Life, Inc. v. Edan Administration Services (Ireland) LTD.
1:19-cv-07800
S.D.N.Y.Mar 29, 2021Background
- ADYB (New York company) entered an Investment Agreement with EDAN (Ireland) and Edwin Cohen (E. Cohen) under which E. Cohen would invest and H. Cohen (ADYB’s owner/CEO) would assign patent rights and support EDAN’s marketing; benchmarks limited EDAN’s license if NIJ certification occurred.
- After promising test results, parties executed two MOUs transferring patents/asset control to EDAN; EDAN (through PAAS) later licensed the technology to PPG and anticipated substantial TARDEC-related revenue.
- ADYB/H. Cohen repeatedly negotiated over payments and allegedly threatened to disrupt the PPG deal; EDAN/PAAS increased payments to H. Cohen. H. Cohen later filed documents with the USPTO claiming he revoked assignments and sent disparaging communications to PPG.
- Procedurally: ADYB sued EDAN/PAAS for breach, conversion, and abuse of process; EDAN/PAAS (with E. Cohen) counterclaimed against ADYB and sought to join H. Cohen and E. Cohen as counterparty/counterclaim-plaintiff(s).
- The Court considered four motions: joinder of H. and E. Cohen; H. Cohen’s motion to dismiss for insufficient service; ADYB’s 12(b)(6) motion to dismiss various counterclaims; EDAN/PAAS’s motion for leave to amend to add a fraudulent-conveyance claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Joinder of H. Cohen and E. Cohen under Rule 13(h)/Rule 19 and supplemental jurisdiction | ADYB argued non-parties should not be joined where diversity would be destroyed and some claims may be unrelated | EDAN/PAAS argued both are necessary parties to the breach-of-contract counterclaim (signatories/contractual interests) and §1367 permits supplemental jurisdiction over compulsory counterclaims added via Rule 13(h) | Court granted joinder: H. Cohen and E. Cohen are necessary parties; supplemental jurisdiction under §1367(a) covers the compulsory counterclaims; §1367(b) did not bar joinder of non-diverse counter-defendant joined under Rule 13(h) |
| Personal jurisdiction over H. Cohen; sufficiency of service | H. Cohen argued insufficient process/service and lack of personal jurisdiction | EDAN/PAAS showed H. Cohen signed the Investment Agreement, traveled to NY for business, had ongoing contractual relations and acted as ADYB’s principal (agency theory) | Court found a prima facie basis for specific jurisdiction and denied the service dismissal as premature; ordered summons to issue so H. Cohen can be served |
| Motion to dismiss counterclaims (12(b)(6)) — tortious interference with contract (PAAS–PPG) | ADYB: plaintiffs failed to plead essential elements | EDAN/PAAS: H. Cohen and ADYB disrupted PAAS–PPG relationship | Dismissed: plaintiffs failed to allege an actual breach by the third party (PPG); allegations show PAAS purportedly breached, not PPG |
| Motion to dismiss counterclaims — tortious interference with business relations | ADYB: challenged sufficiency and wrongful-purpose element | EDAN/PAAS: alleged intentional interference and harm to PPG relationship | Dismissed: plaintiffs pleaded permissible economic motive (seeking profit), not the wrongful means/sole-purpose malice required |
| Motion to dismiss counterclaims — fraudulent inducement | ADYB: alleged statements were contractual promises and duplicative | EDAN/PAAS: alleged H. Cohen orally agreed to excise benchmarks and induced payments | Dismissed: alleged misrepresentations concern future performance and are duplicative of breach-of-contract; damages sought overlap contract damages |
| Motion to dismiss counterclaims — unjust enrichment | ADYB: unjust enrichment barred by existence of contract; insufficient allegations | EDAN/PAAS: seek recovery for extra monthly payments and alleged benefits | Partially granted: unjust enrichment dismissed as duplicative to extent it duplicates contract damages; survived only as to H. Cohen for the extra monthly payments (not against ADYB) |
| Motion to dismiss counterclaims — libel | ADYB: statute of limitations and lack of specificity | EDAN/PAAS: alleged defamatory emails to PPG | Dismissed: many statements time-barred; remaining allegations fail to identify specific statements, speakers, recipients, and dates with requisite particularity |
| Motion to dismiss counterclaims — declaratory judgment | ADYB: duplicative relief already covered by breach claim | EDAN/PAAS: sought declarations regarding patent assignment, unenforceability of milestone, and E. Cohen’s equity | Dismissed: count duplicates issues that will be resolved in breach litigation (no distinct relief) |
| Motion for leave to amend to add fraudulent-conveyance claim | EDAN/PAAS: newly discovered conveyance of H. Cohen’s shares to spouse during litigation warrants amendment | ADYB: amendment would be futile and raise jurisdictional issues | Denied as futile: proposed claim lacks an independent basis for subject-matter jurisdiction (would destroy diversity and is unrelated in time/substance to original federal claims) |
Key Cases Cited
- Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567 (U.S. 2004) (Rule 13(h) joinder principles and citizenship treatment)
- Viacom Int’l, Inc. v. Kearney, 212 F.3d 721 (2d Cir. 2000) (two-step Rule 19 analysis and feasibility inquiry)
- Merrill Lynch & Co. Inc. v. Allegheny Energy, Inc., 500 F.3d 171 (2d Cir. 2007) (limits on supplemental jurisdiction when non-diverse parties are joined)
- Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546 (U.S. 2005) (supplemental jurisdiction principles under §1367)
- Sunward Elecs., Inc. v. McDonald, 362 F.3d 17 (2d Cir. 2004) (factors for New York CPLR §302 long-arm transact-business analysis)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (U.S. 1985) (minimum contacts, purposeful availment standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility pleading standard); Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (Twombly plausibility pleading standard)
- Omni Capital Int’l, Ltd. v. Rudolf Wolff & Co., Ltd., 484 U.S. 97 (U.S. 1987) (service of process prerequisite to personal jurisdiction)
- Associated Dry Goods Corp. v. Towers Fin. Corp., 920 F.2d 1121 (2d Cir. 1990) (ancillary/supplemental jurisdiction over Rule 13(h) counterclaims)