75 F.4th 118
2d Cir.2023Background
- FAT Brands sought a large financing in 2018 and signed a December 2018 agreement with PPMT/PPMT Fund I LP after paying a $100,000 due‑diligence fee; the funds were never delivered.
- Douglas (PPMT) falsely represented he had a commitment from the Qatari royal family and controlled Royal Gulf Capital; in fact those claims were false and Royal Gulf lacked funding.
- Unbeknownst to FAT Brands, PPMT had formed a partnership with SJ Global Investments Worldwide, Ltd. (SJ Global WW) to supply capital; SJ Global principals included Kristina Fields (CFO), Mickey Edison (trustee), Neil Walsh, and Peter Samuel.
- SJ Global WW routed funding through New York entities (including PPMT Fund I LP and SJ Global US) so that FAT Brands would contract with a New York counterparty; FAT Brands was not told SJ Global was the true source.
- After delays, Fields sent FAT Brands a forged receipt claiming SJ Global held $19 billion in Federal Reserve bearer bonds; FAT Brands discovered the forgery and the deal collapsed.
- FAT Brands sued in SDNY alleging fraud and conspiracy against the SJ Global defendants and tort/partnership/supervision claims against others (including Ramjeet); the district court dismissed for lack of personal jurisdiction over Fields and Edison and for failure to state several claims. FAT Brands appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over Fields & Edison (conspiracy/agency theory under CPLR §302) | FAT Brands: co‑conspirator contacts in New York can be imputed; complaint alleges overt acts, awareness, benefit, and direction/control. | Defendants: lack sufficient New York contacts to subject them to jurisdiction. | Court: vacated dismissal; alleged conspiracy and the awareness/benefit/direction elements plausibly alleged, so New York jurisdiction may be imputed to Fields and Edison. |
| Failure to state fraud/conspiracy claim against SJ Global Defendants | FAT Brands: even if some statements were made via PPMT, SJ Global Defendants conspired with PPMT so are liable for the primary fraud. | Defendants: FAT Brands did not rely on statements made directly by SJ Global; PPMT was not SJ Global’s agent, so no fraud liability. | Court: vacated dismissal; complaint plausibly alleges conspiracy and therefore SJ Global Defendants can be liable for the co‑conspirators’ primary fraud. |
| Partnership liability against Ramjeet (Count IX) | FAT Brands: Ramjeet and Douglas formed a partnership/joint venture; loss‑sharing is not required where there was no reasonable expectation of losses. | Ramjeet: complaint fails to allege agreement to share losses, so no partnership. | Court: vacated dismissal; under NY law loss‑sharing is not indispensable if no reasonable expectation of losses, and complaint plausibly alleges that Douglas and Ramjeet did not anticipate losses—remand to assess other partnership factors. |
| Negligent supervision against Ramjeet (Count X) | FAT Brands: supervisory liability can exist outside employer‑employee context under “special circumstances.” | Ramjeet: no employer‑employee or sufficient supervisory control alleged. | Court: affirmed dismissal; complaint fails to plead the requisite supervisory/control relationship to support negligent supervision. |
Key Cases Cited
- Grove Press, Inc. v. Angleton, 649 F.2d 121 (2d Cir. 1981) (New York agency for long‑arm purposes includes co‑conspirators in certain circumstances)
- Kashi v. Gratsos, 790 F.2d 1050 (2d Cir. 1986) (elements of civil conspiracy to commit fraud)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard—plausibility requirement)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard for conspiracy and plausible claims)
- Mario Valente Collezioni, Ltd. v. Confezioni Semeraro Paolo, S.R.L., 264 F.3d 32 (2d Cir. 2001) (standard of review for personal jurisdiction findings)
- Papelino v. Albany Coll. of Pharmacy of Union Univ., 633 F.3d 81 (2d Cir. 2011) (negligent supervision generally requires employer‑employee relationship)
- Scholastic, Inc. v. Harris, 259 F.3d 73 (2d Cir. 2001) (joint ventures governed by same rules as partnerships)
- Original Ballet Russe, Ltd. v. Ballet Theatre, Inc., 133 F.2d 187 (2d Cir. 1943) (co‑conspirator liability—acts of one imputed to others)