ADYB ENGINEERED FOR LIFE, INC., Plaintiff, -against- EDAN ADMINISTRATION SERVICES LTD. and POM ADVANCED ARMOR SOLUTIONS LLC, Defendants.
1:19-cv-07800-MKV
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
March 29, 2021
MARY KAY VYSKOCIL, United States District Judge
USDC SDNY DOCUMENT ELECTRONICALLY FILED DOC #: DATE FILED: 3/29/2021
MARY KAY VYSKOCIL, United States District Judge:
Plaintiff ADYB Engineered For Life, Inc. (“ADYB“) brings this action against Defendants Edan Administration Services (Ireland) Ltd. (“EDAN“) and Pom Advanced Armor Solutions LLC (“PAAS“) alleging breach of contract, conversion, and abuse of process. [ECF No. 45.] EDAN and PAAS answered and, together with nonparty Edwin Cohen (“E. Cohen“), EDAN‘s owner, asserted counterclaims against ADYB and its owner and CEO, Hananya Cohen (“H. Cohen“). [ECF No. 49.]
There are four motions before the Court. First, EDAN and PAAS have moved to join E. Cohen (as counterclaim plaintiff) and H. Cohen (as counterclaim defendant) as necessary or, alternatively, permissive parties pursuant to
I.
BACKGROUND
A. Factual Background1
Nearly a decade ago, ADYB entered into a contract (the “Investment Agreement“) with EDAN (formerly known as NEWCO) and E. Cohen, as owner and a representative of EDAN, relating to the development of body-armor technology developed by H. Cohen, the owner and CEO of ADYB. [ECF No. 49 ¶¶ 15, 20, 26.] Under the Investment Agreement, E. Cohen committed to invest $250,000 in ADYB in exchange for a twenty-percent interest in the company. [Id. ¶ 21.]
The Investment Agreement provides for H. Cohen to transfer the rights to his armor-related patents to ADYB upon receipt of the first of two investment payments from E. Cohen. [Id. ¶ 22.] Upon receipt of the second payment, ADYB would license the patents to EDAN. [Id. ¶ 24.] The Investment Agreement gives EDAN the right to “produce and market the current and future technology of ADYB.” [Id. ¶ 24.] The Investment Agreement provides that ADYB and H. Cohen shall “support the marketing and sales efforts” of EDAN. [Id. ¶ 28.] Under the terms of the Investment Agreement, EDAN is subject to benchmarks, or milestones, limiting its rights under
As a result of the promising test results, EDAN, ADYB, and H. Cohen executed two new agreements, or memoranda of understanding. [Id. ¶ 31.] Pursuant to the first (“MOU-1“), H. Cohen assigned the patents to EDAN for “strategic reasons” to assist EDAN in soliciting additional investments. [Id. ¶ 33.] Pursuant to the second (“MOU-2“), ADYB assigned ownership of its physical and intellectual property to EDAN. [Id. ¶ 37.]
Over the next two years, ADYB and EDAN worked together to develop the technology. [Id. ¶¶ 39, 43.] EDAN paid H. Cohen a monthly salary of $2,000 to $3,000 per month, despite the contracts not calling for such payments. [Id. ¶¶ 40, 50.]
During this time, EDAN began exploring a potential business relationship with PPG Industries, Inc. (“PPG“), which was interested in using the patented technology for armored vehicles. [Id. ¶¶ 46–47.] EDAN alleges that H. Cohen knew that an ownership dispute over the patents would ruin the potential business relationship between EDAN and PPG. [Id. ¶ 49.] He demanded that EDAN increase his monthly payments from $3,000 to $8,000. [Id. ¶¶ 49, 50.] Fearing that H. Cohen would destroy the potential deal with PPG, EDAN gave in to his demands. [Id. ¶ 50.]
EDAN, through its wholly owned subsidiary PAAS, entered into a two-year license agreement with PPG (the “PAAS-PPG License Agreement“), under which PAAS would earn royalties from PPG‘s sales of licensed products. [Id. ¶¶ 52–53 & n.5.] PPG was later awarded a contract from the United States Tank Automotive Research, Development and Engineering Center
As the PAAS-PPG relationship formed, E. Cohen and H. Cohen realized that the initial benchmarks in the Investment Agreement, though never triggered because the armor-related technology was not certified by NIJ, risked chilling prospective investors. [Id. ¶ 59.] H. Cohen represented to E. Cohen that he would agree to remove the benchmarks and cooperate with the PPG deal. [Id. ¶¶ 61–62.] Specifically, H. Cohen orally agreed in principle to enter into a new business relationship with no benchmark provision. [Id. ¶ 62.] But when sent a proposed written agreement to memorialize the arrangement, H. Cohen declined to sign it, responding that “[t]rust and good faith should be enough.” [Id. ¶ 66.]
Thereafter, H. Cohen threatened to pull the plug on the parties’ business arrangements if EDAN did not increase his monthly payments to $16,000. [Id. ¶ 67.] Afraid that he would act on his threats and given his representations that he would not interfere with the PAAS-PPG License Agreement, EDAN increased H. Cohen‘s monthly payments. [Id. ¶ 68.] Despite receiving the increased payments, H. Cohen refused to revise the original Investment Agreement. [Id. ¶ 69.]
Amid all of this, in September 2017, H. Cohen filed documents with the United States Patent and Trademark Office (“USPTO“) claiming EDAN breached its agreements with him, he had revoked his assignments to EDAN under MOU-1, and ADYB was now the assignee of his patents. [Id. ¶ 71.] EDAN and PAAS did not learn of these filings with the USPTO until several months later. [Id.] In the interim, they transmitted several monthly payments to H. Cohen under the belief that the PPG deal would continue uninterrupted. [Id. ¶ 72.]
Approximately one year after filing the documents with the USPTO, H. Cohen wrote to PPG claiming that PAAS “no longer holds a marketing license for my patents” and requested confirmation that PPG was no longer marketing his patents. [Id. ¶ 77.] H. Cohen also sent
B. Procedural Background
In May 2019, EDAN, PAAS, and E. Cohen sued ADYB and H. Cohen in the Southern District of New York invoking the Court‘s diversity jurisdiction and seeking a preliminary injunction to stop H. Cohen from further damaging the relationship with PPG. [ECF No. 95-3 ¶ 3.] Compl., Edan Admin. Servs. Ltd. v. Cohen, 1:19-cv-05051 (S.D.N.Y. May 30, 2019) (Caproni, J.), ECF No. 1; Mot. Prelim. Inj., Edan Admin. Servs., 1:19-cv-05051 (S.D.N.Y. May 31, 2019), ECF No. 4. At the preliminary injunction hearing, EDAN, PAAS, and E. Cohen voluntarily dismissed H. Cohen from the case without prejudice upon learning that his citizenship status—a U.S. citizen domiciled abroad and therefore a citizen of no state for diversity purposes—would destroy subject matter jurisdiction. [ECF No. 95-3 ¶ 5.] Order, Edan Admin. Servs., 1:19-cv-05051 (S.D.N.Y. July 10, 2019), ECF No. 32. Shortly after their motion for a preliminary injunction was denied, EDAN, PAAS, and E. Cohen voluntarily dismissed the action without prejudice. [ECF No. 95-3 ¶ 6.] Notice of Voluntary Dismissal, Edan Admin. Servs., 1:19-cv-05051 (S.D.N.Y. July 23, 2019), ECF No. 33.
EDAN, PAAS, and E. Cohen prepared to file a lawsuit against H. Cohen in Israel, but, in the interim, ADYB commenced this action against EDAN and PAAS in August 2019. [ECF No. 95-3 ¶¶ 6, 8–9.] ADYB asserted claims against EDAN and PAAS for breach of contract, conversion, and abuse of process. [ECF No. 1.] In November 2019, EDAN and PAAS answered and asserted several counterclaims against ADYB and H. Cohen, jointly and severally [see generally ECF No. 23], noting that they intended to move to add H. Cohen as a party pursuant to
Shortly thereafter, ADYB filed an amended complaint asserting the same three claims against EDAN and PAAS. [ECF No. 45.] EDAN and PAAS filed an amended answer and, together with E. Cohen, asserted counterclaims against ADYB and H. Cohen, jointly and severally, for breach of contract, several torts, and declaratory relief. [ECF No. 49 ¶¶ 86–125, 138–39.] In addition, E. Cohen independently asserted claims against ADYB and H. Cohen, jointly and severally, for breach of contract and unjust enrichment. [Id. ¶¶ 126–37.]
After ADYB answered the counterclaims, Judge Schofield ordered EDAN and PAAS to “file a proof of service of the amended counterclaims on Mr. H. Cohen” and to file a letter setting forth the legal grounds for joining H. Cohen as a counterclaim defendant and E. Cohen as a counterclaim plaintiff. [ECF No. 54 at 3.] H. Cohen was directed to file a response letter within twenty-one days of service of the amended counterclaims. [Id.]
Several attempts by EDAN and PAAS to request a summons for H. Cohen were rejected by the Clerk of Court. [ECF No. 55–58.] The Clerk noted on the docket that the requests were “deficient” because “a summons cannot be requested for parties that are not part of this case.”
The case was then reassigned to me. Shortly thereafter, the Court held a pre-motion conference and set briefing schedules for the parties’ anticipated motions. [ECF No. 92.] Pursuant to Judge Schofield‘s rulings, the parties filed the motion to join parties and the motions to dismiss.2 EDAN and PAAS later filed a letter seeking leave to amend. [ECF No. 130.]
MOTION TO JOIN H. COHEN AND E. COHEN
EDAN and PAAS move for necessary or, alternatively, permissive joinder of H. Cohen and E. Cohen. EDAN, PAAS, and ADYB briefed joinder of H. Cohen and E. Cohen with respect to all counterclaims. [See generally ECF Nos. 95, 102–03.] “Once parties are properly joined under [Rules 13, 19, or 20] as to a particular claim, additional claims, whether they are related or unrelated or they are by or against all or less than all of the parties may be joined under
The Court analyzes joinder of H. Cohen and E. Cohen as necessary parties with respect to the counterclaim for breach of contract since that counterclaim is not contested by any party under
Under the first step of the
(A) in that person‘s absence, the court cannot accord complete relief among existing parties; or
(B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person‘s absence may:
(i) as a practical matter impair or impede the person‘s ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest.
Generally, a party to a contract that is the subject of the litigation is a necessary party. Sunset Homeowners Ass‘n, Inc. v. DiFrancesco, 386 F. Supp. 3d 299, 304–05 (W.D.N.Y. 2019) (collecting cases); Ryan v. Volpone Stamp Co., Inc., 107 F. Supp. 2d 369, 387 (S.D.N.Y. 2000) (collecting cases); see Global Detection & Reporting, Inc., v. Securetec Detektions-Systeme AG, No. 08 Civ. 5411(GEL), 2008 WL 5054728, at *1 (S.D.N.Y. 2008). Conversely, “A nonparty to a commercial contract ordinarily is not a necessary party to an adjudication of rights under the
These propositions are “descriptive not prescriptive.” Gibbs Wire & Steel Co., Inc. v. Johnson, 255 F.R.D. 326, 330–31 (D. Conn. 2009) (citing Jonesfilm v. Lion Gate Int‘l, 299 F.3d 134, 141 (2d Cir. 2002)). “Courts have repeatedly cautioned . . . that the
The party moving for joinder under
A. Step One: Whether H. Cohen and E. Cohen Are Necessary Parties to This Action
1. H. Cohen Is a Necessary Party
EDAN and PAAS argue that H. Cohen is a necessary party because he is a party to the Investment Agreement and MOU-1. [ECF No. 95 at 13.] ADYB argues that H. Cohen is not a party to the Investment Agreement “because he owed no performances thereunder.” [ECF No.
The Investment Agreement is signed by (1) H. Cohen personally, (2) “ADYB represented by [H.] Cohen,” (3) E. Cohen personally, and (4) “[EDAN] represented by [E.] Cohen.” [ECF No. 148 at 22–26.]3 Under New York law, an agent who signs an agreement on behalf of a disclosed principal may be individually bound where “there is clear and explicit evidence of the agent‘s intention to substitute or superadd his personal liability for, or to, that of his principal.” Cement & Concrete Workers Dist. Council Welfare Fund v. Lollo, 35 F.3d 29, 35 (2d Cir. 1994) (quoting Lerner v. Amalgamated Clothing & Textile Workers Union, 938 F.2d 2, 5 (2d Cir. 1991)). Factors courts consider in assessing the signatory‘s intention include, inter alia, the length of the contract, the presence of the signatory‘s name in the contract, and the signatory‘s role in the company. Id. (citing Lerner, 938 F.2d at 5); see also Raymond Weil, S.A. v. Theron, 585 F. Supp. 2d 473, 482 (S.D.N.Y. 2008).4
On the limited record before the Court, EDAN and PAAS have sufficiently shown that H. Cohen is a party to the Investment Agreement such that he may properly be joined as a party defendant on the counterclaim. “The most obvious indicator of intent is the form of the signature.” Israel v. Chabra, 537 F.3d 86, 97 (2d Cir. 2008). As noted, the signature section of the Investment
Other factors support the conclusion that H. Cohen is a necessary party as a party to the Investment Agreement. The contract is only five pages in length, one of which is exclusively signature lines. [ECF No. 95-1.] The short length of a contract generally weighs in favor of personal liability. See, e.g., Paribas Props., Inc. v. Benson, 146 A.D.2d 522, 525–26, 536 N.Y.S.2d 1007 (1st Dep‘t 1989); see also, e.g., Integrated Mktg. & Promotional Sols., Inc. v. JEC Nutrition, LLC, No. 06 Civ. 5640(JFK), 2006 WL 3627753, at *5 (S.D.N.Y. Dec. 12, 2006) (alterations in original) (noting that a seven-page contract “does not present the ‘great danger [of] allowing a single sentence in a long contract to bind individually a person who sign[ed] only as a corporate officer‘” (quoting Salzman Sign Co. v. Beck, 10 N.Y.2d 63, 67 (1961))). However, some courts have noted that the page length of the contract “matters only insofar as the length makes it more or less probable that the individual signatory was aware of the provision imposing personal liability.” Shld, LLC v. Hall, No. 15 Civ. 6225 (LLS), 2017 WL 1428864, at *5 (S.D.N.Y. Apr. 20, 2017) (collecting cases). Because there is no express provision regarding personal liability, the Court assigns little weight to this factor.
Another “factor on which New York courts have relied in finding intent to be personally bound is that the signatory was the president and principal shareholder in the corporation.” JEC Nutrition, 2006 WL 3627753, at *6 (alteration omitted) (quoting Lehman Bros., Inc. v. Tutelar
An additional factor courts have considered in determining whether an agent is a party to a contract is whether the agent is granted rights under the agreement. In Ryan, the court held that an agent of Hall of Fame baseball pitcher Nolan Ryan was a necessary party under
2. E. Cohen Is a Necessary Party
It is undisputed that E. Cohen is a party to the Investment Agreement and MOU-1, which strongly suggests that he is a necessary party to the counterclaim for breach of those agreements. See Sunset Homeowners Ass‘n, 386 F. Supp. 3d at 304–05; Ryan, 107 F. Supp. 2d at 387. Yet ADYB argues that the share disputes between E. Cohen and H. Cohen “has nothing to do with the outcome of any moneys owned by EDAN to ADYB or with ADYB‘s rights to own the patents.” [ECF No. 102 at 7.]
ADYB may be right in this assertion, but it ignores that E. Cohen has rights and obligations as a signatory to the contracts and his rights are properly redressed by a counterclaim to which he is a party. The Second Circuit has held that “[i]f the resolution of a plaintiff‘s claim would require the definition of a non-party‘s rights under a contract, it is likely that the non-party is necessary under
In addition, EDAN and PAAS allege that E. Cohen is a co-inventor of one of the patents, as asserted in their fifth and sixth affirmative defenses. [ECF No. 49 at 6.] Thus, given his alleged ownership interest, failure to join E. Cohen would prevent the Court from according complete declaratory relief with respect to ownership of that patent. See
B. Step Two: Whether Joinder of H. Cohen and E. Cohen Is Feasible: Personal Jurisdiction and Subject Matter Jurisdiction
Having concluded that H. Cohen and E. Cohen are necessary parties, the Court moves to the second step of the
1. Personal Jurisdiction
(a) Personal Jurisdiction Over E. Cohen
As an initial matter, E. Cohen has voluntarily subjected himself to the personal jurisdiction of the Court for purposes of this litigation. See Brown v. Lockheed Martin Corp., 814 F.3d 619, 625 (2d Cir. 2016) (alteration in original) (noting that “the requirement of personal jurisdiction represents first of all an individual right, [and therefore] it can, like other such rights, be waived” (quoting Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 703 (1982))). Accordingly, the Court need only consider whether it has personal jurisdiction over H. Cohen.
(b) Personal Jurisdiction Over H. Cohen
ADYB argues that EDAN and PAAS fail to allege a basis for personal jurisdiction over H. Cohen, individually, since they do not specify whether H. Cohen was acting in a personal capacity or on behalf of ADYB. [ECF No. 102 at 14–16.] This argument is unavailing. The Court has personal jurisdiction over H. Cohen personally or, alternatively, as the principal of ADYB under an agency theory.
Evaluating personal jurisdiction entails a two-stage analysis. See Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 124 (2d Cir. 2002). First, the Court must analyze
An individual may be subject to personal jurisdiction under New York‘s long-arm statute if it “in person or through an agent” transacts business within the state and the asserted claims arise from that transaction.
(i) whether the defendant has an on-going contractual relationship with a New York corporation; (ii) whether the contract was negotiated or executed in New York and whether, after executing a contract with a New York business, the defendant has visited New York for the purpose of meeting with parties to the contract regarding the relationship; (iii) what the choice-of-law clause is in any such contract; and (iv) whether the contract requires [defendants] to send notices and payments into the forum state or subjects them to supervision by the corporation in the forum state.
Sunward Elecs., Inc. v. McDonald, 362 F.3d 17, 22 (2d Cir. 2004) (quoting Agency Rent A Car, 98 F.3d at 29).
A claim “arises from” a transaction when there is a “substantial nexus between the business transacted and the cause of action sued upon.” Agency Rent A Car, 98 F.3d at 31. In a breach of contract action, “the proper inquiry is whether looking at the totality of the defendant‘s activities within the forum, purposeful acts have been performed in New York by the foreign [actor] in
The requirements of the New York long-arm statute can also be satisfied under an agency theory. Acts of a corporation may be attributed to an individual under an agency theory where “(1) the corporation engages in purposeful activity in the forum state that relates to the transaction underlying the lawsuit, (2) the corporation‘s activity was taken for the benefit of and with the knowledge and consent of the defendant, and (3) the defendant exercised some control over the purposeful activity.” Jonas v. Estate of Leven, 116 F. Supp. 3d 314, 328 (S.D.N.Y. 2015) (citing Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 467, 527 N.Y.S.2d 195, 522 N.E.2d 40 (1988); and H.S.W. Enters., Inc. v. Woo Lae Oak, Inc., 171 F. Supp. 2d 135, 145 (S.D.N.Y. 2001)); see also Retail Software Servs. v. Lashlee, 854 F.2d 18, 22 (2d Cir. 1988). Central to this inquiry is “whether the out-of-state corporate officers were primary actors in the transaction in New York that gave rise to the litigation, and not merely some corporate employees who played no part in it.” Karabu Corp. v. Gitner, 16 F. Supp. 2d 319, 323 (S.D.N.Y. 1998) (alterations, ellipsis, and internal quotation marks omitted) (quoting Retail Software, 854 F.2d at 22); see also Leon v. Shmukler, 992 F. Supp. 2d 179, 192–93 (E.D.N.Y. 2014) (requiring “facts establishing that the corporate officer was the driving force behind the New York transactions” (quoting Rainbow Apparel Distrib. Ctr. Corp. v. Gaze U.S.A., Inc., 295 F.R.D. 18, 26 (E.D.N.Y. 2013))).
The exercise of jurisdiction must also comport with due process, which consists of two components: a “minimum contacts” inquiry and a “reasonableness” inquiry. Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50, 60 (2d Cir. 2012) (quoting Chloé v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 164 (2d Cir. 2010)). Where, as here, specific jurisdiction is asserted, there must be “some act by which the defendant purposefully avails itself of the privilege
Weighing the Sunward factors and considering the totality of the circumstances, the Court finds that H. Cohen actions satisfy the transact-business prong of the New York long-arm statute. First, as discussed above, the limited record strongly suggests that H. Cohen personally was a party to the Investment Agreement. See supra Section II.A.1. H. Cohen therefore had an ongoing, eight-year contractual relationship with ADYB, a New York corporation of which he was CEO and owner [ECF No. 49 ¶ 14; ECF No. 45 ¶ 2], and EDAN through its New York-based subsidiary PAAS [ECF No. 49 ¶ 13; ECF No. 45 ¶ 4]. See, e.g., Sea Tow Servs. Int‘l, Inc. v. Pontin, 472 F. Supp. 2d 349, 359 (E.D.N.Y. 2017) (finding that decade-long “continuous, ongoing contractual relationship with [plaintiff], a New York corporation,” weighed in favor of personal jurisdiction); Serendip LLC v. Franchise Pictures LLC, No. 00 Civ. 210 HB, 2000 WL 1277370, at *4 (S.D.N.Y. Sept. 7, 2000) (finding sufficient showing of personal jurisdiction given, inter alia, “ongoing contractual relationship with a New York limited liability company“).
EDAN and PAAS also present evidence showing that H. Cohen made several trips to New York in connection with the business relationship under the Investment Agreement. EDAN and PAAS allege that H. Cohen worked with Craig Schwimmer, a New York-based PAAS employee, on the ballistics test and in pursuit of a deal with PPG. [ECF No. 49 ¶¶ 29, 45.] See Schwimmer
In addition, EDAN and PAAS present hotel and flight reservations for H. Cohen organized and financed by EDAN that reflect at least eight trips to New York ranging from three days to two weeks. [ECF No. 103-1 ¶ 4(e); see ECF No. 103-5.] Such conduct “is quintessential transaction of business and readily meets the requirements of the New York long-arm statute.” Mercury Pub. Affairs LLC v. Airbus Defence & Space, S.A.U., No. 1:19-cv-7518-MKV, 2020 WL 4926334, at *4 (S.D.N.Y. Aug. 21, 2020); see Sunward Elecs., 362 F.3d at 23 (holding that Defendants transacted business in New York where they “maintained a continuous and on-going commercial relationship with Plaintiff, a New York business,” and “traveled to New York on two occasions to attend . . . training programs“); Medicrea USA, Inc. v. K2M Spine, Inc., No. 17 Civ. 8677 (AT), 2018 WL 3407702, at *5 (S.D.N.Y. Feb. 7, 2018) (a “handful of trips to New York” weighed in favor of personal jurisdiction); Thorsen v. Sons of Norway, 996 F. Supp. 2d 143, 156 (E.D.N.Y. 2014) (visits to New York in connection with business activities supported exercise of personal jurisdiction).
Third, the MOU-1, which incorporates the Investment Agreement, contains a New York choice-of-law provision. [ECF 95-2 at 2.] This is a “significant factor” weighing in favor of personal jurisdiction “because the parties, by so choosing, invoke the benefits and protections of New York law.” Sunward Elecs., 362 F.3d at 23 (citing CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 367 (2d Cir. 1986)); see also JN Realty LLC v. Estate of Marvin, 268 F. Supp. 2d 231, 237 (E.D.N.Y. 2003)
Furthermore, the counterclaim for breach of contract on which EDAN and PAAS seek to join H. Cohen as a defendant undoubtedly “arises from” H. Cohen‘s New York-based business transactions. H. Cohen‘s business trips to New York were financed by EDAN. H. Cohen also met and worked closely with Craig Schwimmer, a New York-based PAAS employee, in connection with the Investment Agreement and MOU-1.
Accordingly, based on the totality of H. Cohen‘s contacts with New York in connection with the contracts at issue in this case, EDAN and PAAS have made a prima facie showing that H. Cohen is subject to personal jurisdiction under New York‘s long-arm statute on the breach of contract counterclaim. See, e.g., Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 60 (2d Cir. 1985) (finding that “the totality of the circumstances surrounding defendants’ activities in New York in connection with the matter giving rise to the lawsuit” reflected a “substantial nexus,” including “frequent later visits to New York, and the alleged breach of the [contract]” (collecting cases)); Assil Gem Corp. v. Greyhound Leisure Servs., Inc., No. 00 Civ. 0072, 2000 WL 375244, at *3 (S.D.N.Y. Apr. 11, 2000) (exercising personal jurisdiction given “the quality and nature of defendant‘s activities, in the aggregate,” even though defendant did not maintain a physical presence, negotiate or execute contract, or meet plaintiff in connection with contract in New York).
Alternatively, the Court has personal jurisdiction over H. Cohen pursuant to the New York long-arm statute under an agency theory. First, ADYB, a New York corporation, engaged in purposeful activity in New York through its business dealings with PAAS, EDAN‘s New York-based subsidiary, in connection with the contracts at issue in this case. [ECF No. 45 ¶¶ 2, 4.]
Second, as the owner and CEO, H. Cohen personally benefitted from ADYB‘s business partnerships. See, e.g., Retail Software, 854 F.2d at 23 (“As officers, directors, and shareholders,
Third, given his personal involvement, his position in the company, and the company‘s small size (three employees) [ECF No. 102 at 16 n.5], H. Cohen exercised sufficient control over the New York activities. See In re Sumitomo Copper Litig., 120 F. Supp. 2d 328, 337 (S.D.N.Y. 2000); see also Anna Sui Corp. v. Forever 21, Inc., No. 07 Civ. 3235(TPG), 2008 WL 4386747, at *3 (S.D.N.Y. Sept. 25, 2008). There clearly is an “articulable nexus between the business transacted and the cause of action sued upon.” Sole Resort, S.A. de C.V. v. Allure Resorts Mgmt., LLC, 450 F.3d 100, 103 (2d Cir. 2006) (quoting McGowan v. Smith, 52 N.Y.2d 268, 272, 437 N.Y.S.2d 643, 419 N.E.2d 321 (1981)). Accordingly, EDAN and PAAS have sufficiently shown, in the alternative, that the requirements of the New York long-arm statute are satisfied under an agency theory.
Finally, because the requirements of New York‘s long-arm statute have been met, the constitutional due process requirements have also been met. See D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 105 (2d Cir. 2006) (finding that “the constitutional requirements of personal jurisdiction are satisfied because application of
2. Subject Matter Jurisdiction
ADYB brought this action under
EDAN and PAAS previously conceded this point,5 but now they argue that the Court has supplemental jurisdiction over the counterclaims against ADYB and H. Cohen under
The Court, however, must evaluate subject matter jurisdiction on a claim-by-claim basis. Rocky Aspen Mgmt. 204 LLC v. Hanford Holdings LLC, 358 F. Supp. 3d 279, 282 (S.D.N.Y. 2019) (citing United Republic Ins. Co., in Receivership v. Chase Manhattan Bank, 315 F.3d 168, 170–171 (2d Cir. 2003)); Coakley v. Kingsbrook Jewish Med. Ctr., No. 16 Civ. 7009 (BMC), 2017 WL 398379, at *1 (E.D.N.Y. Jan. 30, 2017) (noting that “analysis of subject matter jurisdiction is a particularized inquiry for each claim” (citing Hoops v. KeySpan Energy, 794 F. Supp. 2d 371, 380 (E.D.N.Y. 2011))).
Under
Compulsory counterclaims under
Like the counterclaim for breach of contract,6 the counterclaims asserted by EDAN, PAAS, and E. Cohen against ADYB and H. Cohen satisfy the common-nucleus test under
ADYB argues that, notwithstanding that they satisfy the common-nucleus requirement, the counterclaims fall within an exception to supplemental jurisdiction in diversity cases contained in
In any civil action of which the district courts have original jurisdiction founded solely on section 1332 of this title, the district courts shall not have supplemental jurisdiction under subsection (a) over claims by plaintiffs against persons made parties under Rule 14, 19, 20 or 24 of the Federal Rules of Civil Procedure, or over claims by persons proposed to be joined as plaintiffs under Rule 19 of such rules, or seeking to intervene as plaintiffs under Rule 24 of such rules, when exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332.
Specifically, ADYB argues that the Court cannot exercise supplemental jurisdiction over the counterclaims again H. Cohen because his presence would defeat diversity. [ECF No. 102 at 9–11.] ADYB‘s argument ignores that
The Court may exercise supplemental jurisdiction over the counterclaims against H. Cohen because EDAN, PAAS, and E. Cohen are not “plaintiffs” under
ADYB argues that jurisdiction is improper under Exxon Mobil Corp. v. Allapattah Services, Inc., 545 U.S. 546 (2005), and Merrill Lynch & Co. Inc. v. Allegheny Energy, Inc., 500 F.3d 171 (2d Cir. 2007). In Exxon Mobil, a case involving whether courts may exercise supplemental jurisdiction over additional plaintiffs whose claims do not satisfy the amount-in-controversy, the Court noted that “[a] failure of complete diversity . . . contaminates every claim in the action.” 545 U.S. at 564. In Merrill Lynch, the Second Circuit held that the district court could not exercise supplemental jurisdiction over counterclaims asserted against the plaintiff by a non-diverse party joined under
These two cases do not undermine the Court‘s finding that it may exercise supplemental jurisdiction over the counterclaims against H. Cohen. As courts have recognized, Merrill Lynch “did not interpret Exxon Mobil Corp. to hold that the addition of a nondiverse party is always prohibited.” Cole Mech. Corp. v. Nat‘l Grange Mut. Ins. Co., No. 06 Civ. 2875 (LAK)(HBP), 2008 WL 11395565, at *7 (S.D.N.Y. Aug. 13, 2008) (citing Merrill Lynch, 500 F.3d at 179); see Morris & Judith Family P‘ship, LLC v. Fid. Brokerage Servs. LLC, No. 18-cv-8851 (JSR), 2019 WL 1447137, at *1 (S.D.N.Y. Feb. 28, 2019); Regent Ins. Co. v. Integrated Pain Mgmt., S.C., Nos. No. 4:14-CV-1759 RLW, 4:15CV236 RLW, 2016 WL 5092564, at *2 (E.D. Mo. Sept. 19, 2016); see also Metro Found. Contractors v. Arch Ins. Co., 498 F. App‘x 98, 102 (2d Cir. 2012) (summary
Merrill Lynch involved the joinder under Rule 19 of a necessary party that asserted its own claims. 500 F.3d at 177. Here, unlike in Merrill Lynch, original defendants, together with a newly joined necessary party, seek to assert compulsory counterclaims against a non-diverse would-be counterclaim defendant, with both the new counterclaim plaintiff and the new counterclaim defendant joined pursuant to
[P]ersons brought into an action under Rule 13(h) as parties to . . . a compulsory counterclaim under Rule 13(a) . . . will come under the ancillary (now supplemental) subject-matter jurisdiction of the court. . . . Thus, a party can be added for purposes of adjudicating those claims without regard to the party‘s citizenship or to whether the party is joined pursuant to Rule 19 or Rule 20, since the party‘s presence will not be deemed to destroy the court‘s existing jurisdiction.
13B Wright & Miller § 1436; see Associated Dry Goods Corp. v. Towers Fin. Corp., 920 F.2d 1121, 1126 (2d Cir. 1990) (noting that “ancillary jurisdiction should be more readily available to one haled into court against his or her will than to a plaintiff who has chosen the forum for litigation,” such as a defendant that “seek[s] to join a third party as a Rule 13(h) counterclaim defendant” (citing Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 376 (1978))). Simply put,
In sum, the Court holds that H. Cohen and E. Cohen are necessary parties and that their joinder is feasible. The Court therefore grants the motion to join H. Cohen and E. Cohen as parties to the EDAN/PAAS counterclaims.
C. The Court May Exercise Jurisdiction Over E. Cohen‘s Individual Claims
ADYB also argues that the Court lacks subject matter jurisdiction over E. Cohen‘s independent claims for breach of contract and unjust enrichment (Counts VII–VIII). [ECF No. 102 at 8.] ADYB argues that these claims are not compulsory counterclaims, let alone counterclaims, because no claims are brought against E. Cohen personally and that they “are premised on different facts that are not logically related” to ADYB‘s claims. [Id. at 5–6, 8.]
E. Cohen‘s claims at minimum satisfy the common-nucleus requirement of
ADYB argues that with respect to his independent claims, E. Cohen should be classified as a plaintiff and barred from asserting them because no claims are asserted against him and he has voluntarily inserted himself into this lawsuit to seek affirmative relief. [ECF No. 102 at 8.]
It is the Court‘s duty “to look beyond the pleadings and arrange the parties according to their sides in the dispute.” Md. Cas. Co. v. W.R. Grace & Co., 23 F.3d 617, 622 (2d Cir. 1993) (quoting Indianapolis v. Chase Nat‘l Bank, 314 U.S. 63, 69–70 (1941)). When determining the proper alignment of parties, courts must “examine ‘the realities of the record’ to discover the ‘real interests’ of the parties.” Id. at 623 (quoting Chase Nat‘l Bank, 314 U.S. at 69); see Lewis v. Odell, 503 F.2d 445, 447 (2d Cir. 1974) (noting that courts must “[]align parties according to their real interests so as to produce an actual collision of interests” (citing Chase Nat‘l Bank, 314 U.S. at 69)). This is a “fact-specific inquiry” that requires a “practical examination of the entire record.” Md. Cas., 23 F.3d at 623.
E. Cohen is best properly aligned with Defendants EDAN and PAAS in this action and therefore should not be classified as a plaintiff under
E. Cohen‘s joinder under
The fact that E. Cohen asserts affirmative claims for relief while there are no claims asserted against him does not mandate that he be classified as a plaintiff and prevented from
After EDAN and PAAS‘s case against ADYB and H. Cohen was dismissed for jurisdictional reasons, it was ADYB that elected to invoke the jurisdiction of the Court as a plaintiff suing on the same contracts, thereby opening the door for EDAN and PAAS to join E. Cohen as a necessary party to their counterclaims pursuant to
H. Cohen moves, pursuant to
This motion appears to be the result of a misinterpretation or misunderstanding of an Order by Judge Schofield. Upon receipt of the parties’ pre-motion letters, Judge Schofield, to whom this case was previously assigned, directed EDAN and PAAS to “file a proof of service of the amended counterclaims on Mr. H. Cohen.” [ECF No. 54 at 3.] EDAN and PAAS understood this order as a directive to effectuate service within the meaning of
H. Cohen‘s motion to dismiss the counterclaims against him [ECF No. 91] is denied without prejudice as premature. Since the Court has now granted the motion to join H. Cohen as a party, he must be served. Accordingly, the Court shall direct the Clerk of Court to issue a summons. If service is not effectuated, timely and properly, H. Cohen may renew this motion.
ADYB has moved to dismiss the following counterclaims pursuant to
In the interests of judicial economy and given the advice by the parties that discovery is closed regardless of the Court‘s rulings on these motions [see ECF No. 156], the Court addresses the
A. Legal Standard
Courts evaluate a motion to dismiss a counterclaim under the same standard as a motion to dismiss a claim in a complaint. E.g., Dentsply Int‘l Inc. v. Dental Brands for Less LLC, No. 15 Civ. 8775, 2016 WL 6310777, at *2 (S.D.N.Y. Oct. 27, 2016) (citing Keep on Kicking Music, Ltd.
In ruling on a motion to dismiss, the Court must “accept as true all factual allegations,” Hernandez v. United States, 939 F.3d 191, 198 (2d Cir. 2019) (quoting Nielsen v. Rabin, 746 F.3d 58, 62 (2d Cir. 2014)), and “construe all reasonable inferences that can be drawn from the complaint in the light most favorable to the plaintiff,” Arar v. Ashcroft, 585 F.3d 559, 567 (2d Cir. 2009) (citing Roth v. Jennings, 489 F.3d 499, 501 (2d Cir. 2007); and Conyers v. Rossides, 558 F.3d 137, 143 (2d Cir. 2009)). However, the Court is “not required to credit conclusory allegations or legal conclusions couched as factual allegations.” Dale v. UnitedHealthcare Ins. Co., 974 F.3d 183, 188–89 (2d Cir. 2020) (quoting Nielsen, 746 F.3d at 62); see also Edwards v. Sequoia Fund, Inc., 938 F.3d 8, 12 (2d Cir. 2019); Rothstein v. UBS AG, 708 F.3d 82, 94 (2d Cir. 2013).
1. Tortious Interference with Contract (Count II)
In support of their claim for tortious interference with the PAAS-PPG License Agreement, EDAN and PAAS allege the following: (1) the PAAS-PPG License Agreement is a valid, enforceable contract; (2) ADYB and H. Cohen knew of the contract; (3) ADYB and H. Cohen intentionally interfered with the contract by attempting to revoke the assignments of the patents to EDAN by filing the documents with the USPTO; (4) the filings caused PAAS to breach the contract with PPG because PAAS claimed to have an exclusive license to the rights covered by the patents and had granted PPG an exclusive license to use the patents; and (5) the breach damaged the relationship of EDAN and PAAS with PPG. [ECF No. 49 ¶¶ 92–97.] These allegations are insufficient to state a claim for tortious interference with contract.
Under New York law, a claim for tortious interference with a contract requires “[1] the existence of a valid contract between the plaintiff and a third party, [2] defendant‘s knowledge of that contract, [3] defendant‘s intentional procurement of the third-party‘s breach of the contract without justification, [4] actual breach of the contract, and [5] damages resulting therefrom.” Rich v. Fox News Network, LLC, 939 F.3d 112, 126–27 (2d Cir. 2019) (quoting Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 424, 646 N.Y.S.2d 76, 668 N.E.2d 1370 (1996)). EDAN and PAAS fail to allege adequately facts to plead the third and fourth elements of a tortious interference with contract claim. EDAN and PAAS argue that they have stated a claim because the “PAAS-PPG License Agreement quickly fell apart and became impossible to perform.” [ECF No. 107 at 5.] The New York Court of Appeals and the Second Circuit, however, have consistently emphasized the necessity of an actual breach by the third party. See NBT Bancorp Inc. et al. v. Fleet/Norstar Fin. Grp., Inc., 87 N.Y.2d 614, 620–21, 641 N.Y.S.2d 581, 664 N.E.2d 492 (1996) (emphasizing necessity of breach to state claim for tortious interference with contract (collecting
Moreover, EDAN and PAAS fail to state a claim since they allege that PAAS breached the PAAS-PPG License Agreement as a result of ADYB and H. Cohen‘s actions; they do not allege as the law requires that PPG, the third party, breached the contract. The tortious interference claim therefore fails as a matter of law. See Cicel (Beijing) Sci. & Tech. Co. v. Misonix, Inc., No. 2:17–cv-1642 (ADS)(SIL), 2017 WL 4535933, at *7 (E.D.N.Y. Oct. 7, 2017) (dismissing tortious interference with contract claim because “rather than alleging that one of the third parties breached its contract with Cicel, the Plaintiff alleges that it breached its contracts with third parties“); Symquest Grp., Inc. v. Canon U.S.A., Inc., 186 F. Supp. 3d 257, 267 (E.D.N.Y. 2016) (dismissing tortious interference with contract claim because plaintiff “does not allege that any of its end-users breached their contracts, but rather that [plaintiff] will breach or has breached its contracts with
2. Tortious Interference with Business Relations (Count III)
Under New York law, a claim for tortious interference with business relations requires a showing that “(1) the plaintiff had business relations with a third party; (2) the defendant interfered with those business relations; (3) the defendant acted for a wrongful purpose or used dishonest, unfair, or improper means; and (4) the defendant‘s acts injured the relationship.” 16 Casa Duse, LLC v. Merkin, 791 F.3d 247, 261 (2d Cir. 2015) (quoting Catskill Dev., L.L.C. v. Park Place Entm‘t Corp., 547 F.3d 115, 132 (2d Cir. 2008)). “Conduct constituting tortious interference with business relations is, by definition, conduct directed not at the plaintiff itself, but at the party with which the plaintiff has or seeks to have a relationship.” Symquest Grp., 186 F. Supp. 3d at 268 (alteration omitted) (quoting Carvel Corp. v. Noonan, 3 N.Y.3d 182, 192, 785 N.Y.S.2d 359, 818 N.E.2d 1100 (2004)).
EDAN and PAAS have failed to plead the wrongful purpose or improper means element. EDAN and PAAS base their tortious interference with business relations claim on the same factual allegations as their tortious interference with contract claim. [Compare ECF No. 49 ¶¶ 91–97, with id. ¶¶ 98–102.] EDAN and PAAS allege that interferences by ADYB and H. Cohen were intentional and “aimed to harm EDAN and PAAS.” [Id. ¶ 101.] But EDAN and PAAS also allege, to their detriment, that ADYB and H. Cohen sought to usurp from EDAN and PAAS “the business opportunity and relationship with PPG and realize and reap for themselves the substantial monetary profits, all to the exclusion of EDAN and PAAS.” [Id. ¶¶ 5, 82.] Because ADYB and H. Cohen allegedly acted in part out of economic self-interest—a permissible purpose—the third element is not satisfied. See RFP LLC v. SCVNGR, Inc., 788 F. Supp. 2d 191, 196 (S.D.N.Y. 2011) (dismissing claim for tortious interference with business relations because “the only
3. Fraudulent Inducement (Count IV)
To state a claim for fraudulent inducement under New York law, a plaintiff must allege: “(i) a material misrepresentation of a presently existing or past fact; (ii) an intent to deceive; (iii) reasonable reliance on the misrepresentation by [the plaintiff]; and (iv) resulting damages.” Johnson v. Nextel Commc‘ns, Inc., 660 F.3d 131, 143 (2d Cir. 2011) (citing Ross v. Louise Wise Servs., Inc., 8 N.Y.3d 478, 488, 836 N.Y.S.2d 509, 868 N.E.2d 189 (2007)).
Generally, “a fraud claim may not be used as a means of restating what is, in substance, a claim for breach of contract.” Wall v. CSX Transp., Inc., 471 F.3d 410, 416 (2d Cir. 2006). To maintain a claim for fraudulent inducement that is distinct from a breach of contract claim, a plaintiff must (1) “demonstrate a legal duty separate from the duty to perform under the contract“; (2) “demonstrate a fraudulent misrepresentation collateral or extraneous to the contract“; or (3) “seek special damages that are caused by the misrepresentation and unrecoverable as contract damages.” Bridgestone/Firestone Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13, 20 (2d Cir. 1996) (collecting cases).
EDAN and PAAS base their fraudulent inducement claim on the following allegations: H. Cohen refused to sign the proposed written agreement to modify the Investment Agreement after orally promising to enter into a new contract without any benchmarks [ECF No. 49 ¶¶ 61–62, 104]; H. Cohen knowingly made false statements that he would continue to support the PAAS-PPG License Agreement [id. ¶ 105]; and EDAN transmitted to H. Cohen additional monthly payments totaling $71,600 based on H. Cohen‘s representations that he would remove the benchmarks or, at a minimum, not disrupt the PAAS-PPG License Agreement [id. ¶¶ 106–107]. But EDAN and PAAS also allege: H. Cohen was obligated under the Investment Agreement “to support the marketing and sales efforts” of EDAN [id. ¶ 28]; they advised H. Cohen that the benchmarks “needed to be removed” because they would deter prospective investors from entering into a deal
EDAN and PAAS‘s claim for fraudulent inducement fails because it is duplicative of their breach of contract claim. The Investment Agreement broadly obligates ADYB and H. Cohen “to support the marketing and sales efforts” of EDAN. [ECF No. 45 ¶ 28.] EDAN and PAAS allege, inter alia, that removal of the benchmarks was necessary to lure prospective investors into a business relationship with EDAN and PAAS. [See ECF No. 49 ¶¶ 6, 59–60.] The attempt by EDAN and PAAS to recharacterize H. Cohen‘s alleged statements as falling beyond the scope of H. Cohen‘s contractual obligation to support EDAN‘s sales and marketing efforts is unpersuasive. [ECF No. 107 at 15.] Because H. Cohen had a pre-existing contractual obligation to support EDAN‘s sales and marketing efforts, EDAN and PAAS cannot maintain an independent claim for fraudulent inducement based on H. Cohen‘s allegedly false statements that he would continue to support the PAAS-PPG License Agreement. See Ithaca Capital Invs. I S.A. v. Trump Panama Hotel Mgmt. LLC, 450 F. Supp. 3d 358, 370 (S.D.N.Y. 2020) (dismissing fraudulent inducement counterclaim as duplicative of breach of contract counterclaim where “Defendants only allege[d] that Plaintiffs promised that they would take no actions adverse to the interests of Defendants . . . [, which] is exactly Plaintiffs’ duty as set forth in [the contract]“); Wild Bunch, SA v. Vendian Entm‘t, LLC, 256 F. Supp. 3d 497, 506–07 (S.D.N.Y. 2017) (finding that defendant‘s false assurances of its intent to perform pre-existing contractual obligations could not support fraudulent inducement claim).
In any event, the damages EDAN and PAAS allege make abundantly clear that the fraudulent inducement claim is duplicative of the breach of contract claim. EDAN and PAAS seek
In short, EDAN and PAAS‘s claim for fraudulent inducement is duplicative of their claim for breach of contract. Alleging that H. Cohen falsely represented that he intended to fulfill his obligations under the Investment Agreement by removing the benchmarks and cooperating with EDAN and PAAS does not create a separate cause of action for fraudulent inducement. See
4. Unjust Enrichment (Count V)
EDAN and PAAS have plausibly stated a claim for unjust enrichment against H. Cohen based on the increased payments transmitted to him; however, they have failed to plausibly state a claim for unjust enrichment against ADYB.
To state a claim for unjust enrichment under New York law, a plaintiff must show that “(1) defendant was enriched, (2) at plaintiff‘s expense, and (3) equity and good conscience militate against permitting defendant to retain what plaintiff is seeking to recover.” Briarpatch Ltd. v. Phx. Pictures, Inc., 373 F.3d 296, 306 (2d Cir. 2004) (citing Clark v. Daby, 300 A.D.2d 732, 732, 751 N.Y.S.2d 622 (3d Dep‘t 2002)). The existence of a valid, enforceable contract governing a particular subject matter generally precludes recovery based on unjust enrichment for events arising out of that subject matter. IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 142, 879 N.Y.S.2d 355, 907 N.E.2d 268 (2009) (citing Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382, 388, 521 N.Y.S.2d 653, 516 N.E.2d 190 (1987)). Conversely, an unjust enrichment claim may proceed “when the written agreement, or lack thereof, does not cover the full scope of the dispute between the parties.” Gemma Power Sys., LLC v. Exelon W. Medway II, LLC, No. 19 Civ. 00705 (CM), 2019 WL 3162088, at *5 (S.D.N.Y. July 1, 2019) (citing Joseph Sternberg, Inc. v. Walberg 36th St. Assocs., 187 A.D.2d 225, 227–28, 594 N.Y.S.2d 144 (1st Dep‘t 1993)).
EDAN and PAAS‘s unjust enrichment claim falls into two categories. First, EDAN and PAAS seek $3.8 million in damages on the ground that ADYB and H. Cohen “unjustly received benefits to the developments, improvements, modifications and additions to the patents.” [ECF No. 49 at 34 ¶¶ 115, 117.] Second, EDAN and PAAS seek $520,000 in damages from the monthly
EDAN and PAAS cannot maintain an unjust enrichment claim based on the first category because it is duplicative of their breach of contract claim. This part of the unjust enrichment claim relies on identical facts and seeks identical damages as their breach of contract claim, which is “plainly insufficient.” Hesse v. Godiva Chocolatier, Inc., 463 F. Supp. 3d 453, 474 (S.D.N.Y. 2020) (citing Koenig v. Boulder Brands, Inc., 995 F. Supp. 2d 274, 290 (S.D.N.Y. 2014)); see Prof‘l Merch. Advance Capital, LLC v. C Care Servs., LLC, No. 13–cv–6562 (RJS), 2015 WL 4392081, at *6 (S.D.N.Y. July 15, 2015) (dismissing unjust enrichment claim as duplicative of breach of contract claim “since there is an enforceable agreement and the same damages are sought” (collecting cases)). Indeed, EDAN and PAAS fail to respond to ADYB‘s argument that this portion of the unjust enrichment claim is duplicative of the breach of contract claim or otherwise explain why it is not. See Nelson v. MillerCoors, LLC, 246 F. Supp. 3d 666, 679 (E.D.N.Y. 2017) (noting that “claims for unjust enrichment will not survive a motion to dismiss where plaintiffs fail to explain how their unjust enrichment claim is not merely duplicative of their other causes of action” (citing Ebin v. Kangadis Food Inc., 13–CV–2311, 2013 WL 6504547, at *7 (S.D.N.Y. Dec. 11, 2013))).
With respect to the second category, to the extent the claim is predicated on the additional payments made to H. Cohen, EDAN and PAAS have plausibly stated a claim for unjust enrichment against H. Cohen, but not against ADYB. EDAN and PAAS allege that nothing in the original agreements entitled H. Cohen to monthly payments but EDAN acquiesced in his demands given the potential of the PPG deal and concerns that he could ruin the deal. [ECF No. 49 ¶¶ 50, 67–70.] While EDAN and PAAS characterize the direct payments of $520,000 as part of their
The claim for unjust enrichment cannot go forward against ADYB. The allegations with respect to the increased monthly payments concern only H. Cohen and fail even to mention ADYB. [See ECF No. 49 ¶¶ 49–50, 59–67.] Nor is there a basis to hold H. Cohen and ADYB jointly and severally liable on that claim. Under New York law, tortfeasors may be held jointly and severally liable when they “act concurrently or in concert to produce a single injury.” In re Methyl Tertiary Butyl Ether (“MTBE“) Prods. Liab. Litig., 447 F. Supp. 2d 289, 297 (S.D.N.Y. 2006) (collecting cases); see also Bank of China v. Sub-Zero, Inc., No. 02Civ.4457(RMB)(AJP), 2005 WL 1149780, at *1 (S.D.N.Y. May 16, 2005) (collecting cases). Here, there are no allegations that ADYB acted concurrently or in concert with H. Cohen with respect to the increased monthly payments. While the first amended counterclaim is sloppily pleaded and generally refers to H. Cohen and ADYB interchangeably, the allegations regarding the increased monthly payments specifically refer only
5. Libel (Count VI)
In the statement of facts section of the first amended counterclaim, EDAN and PAAS allege that the libelous communications began in October 2018. [ECF No. 49 ¶¶ 77–78, 80.] In one instance, however, they allege that H. Cohen began sending libelous e-mails in October 2017. [Id. ¶ 119.] The statute of limitations for a libel claim is one year.
Insofar as EDAN and PAAS assert a claim for libel based on statements made after August 20, 2018, the claim nonetheless fails as a matter of law. To state a claim for libel under New York law, the claimant must plead “(1) a false statement that is (2) published to a third party (3) without privilege or authorization, and that (4) causes harm.” Elias v. Rolling Stone LLC, 872 F.3d 97, 104 (2d Cir. 2017) (quoting Stepanov v. Dow Jones & Co., 120 A.D.3d 28, 34, 987 N.Y.S.2d 37 (1st Dep‘t 2014)).
“A long line of cases in this District holds that a defamation claim is only sufficient if it adequately identifies the purported communication, and an indication of who made the communication, when it was made, and to whom it was communicated.” Evliyaoglu Tekstil A.S. v. Turko Textile LLC, No. 19-cv-10769 (LJL), 2020 WL 7774377, at *3 (S.D.N.Y. Dec. 30, 2020) (internal quotation marks omitted) (collecting cases); see also Chidume v. Greenburgh-N. Castle Union Free Sch. Dist., 2020 WL 2131771, at *14 (S.D.N.Y. May 4, 2020) (noting that a plaintiff must “identify the allegedly defamatory statements, the person who made the statements, the time when the statements were made, and the third parties to whom the statements were published” (quoting Alvarado v. Mt. Pleasant Cottage Sch. Dist., 404 F. Supp. 3d 763, 790 (S.D.N.Y. 2019))). “Vagueness as to the complained-of conduct is particularly inappropriate when pleading a defamation claim” because “the complaint [must] afford defendant sufficient notice of the communications complained of to enable him to defend himself.” Tannerite Sports, LLC v. NBCUniversal News Grp., 864 F.3d 236, 251 (2d Cir. 2017) (alteration in original) (quoting Kelly v. Schmidberger, 806 F.2d 44, 46 (2d Cir. 1986)).
The allegations in Count VI lack the specificity required to state a claim for libel. EDAN and PAAS allege that H. Cohen sent e-mails “falsely assert[ing] that EDAN has breached the Investment Agreement with ADYB” and that “[u]pon information and belief, [H. Cohen] dispatched additional e-mails to representatives of PPG falsely accusing EDAN of fraudulent behavior, lying, and dishonesty.” [ECF No. 49 ¶ 119.] EDAN and PAAS‘s general allegations that H. Cohen made accusations of fraudulent behavior, lying, and dishonesty are not sufficiently particularized to sustain a claim for libel. EDAN and PAAS allege no specific details regarding such accusations to put ADYB on notice of the complained-of communications. See Soojung Jang v. Trs. of St. Johnsbury Acad., 331 F. Supp. 3d 312, 345 (D. Vt. 2018) (dismissing defamation claim because plaintiff failed to identify specific statements); Young v. Suffolk County, 705 F. Supp. 2d 183, 212 n.12 (E.D.N.Y. 2010) (dismissing libel and slander claims where plaintiff “failed to allege any specifics regarding the statements“); Sawyer v. Musumeci, Nos. 96 Civ. 6497(LLS), 96 Civ. 6689(LLS), 1997 WL 381798, at *2 (S.D.N.Y. July 9, 1997) (dismissing defamation claims where the claims were “too conclusory” and did not identify the allegedly defamatory statements), aff‘d, 165 F.3d 14 (2d Cir. 1998).
Moreover, while H. Cohen‘s alleged statements that EDAN breached the Investment Agreement may be more specific, EDAN and PAAS fail to allege specifically when and to whom the statements were made, alleging only vaguely that H. Cohen sent e-mails to representatives of PPG. That is insufficient to state a claim. See Biomed Pharms., 775 F. Supp. 2d at 739 (dismissing defamation claim where plaintiff alleged “only vaguely that [the statements] were made to unidentified patients of [plaintiff], unidentified physicians, and unidentified individuals at the [state agency]“).
To the extent the libel claim is not time-barred, EDAN and PAAS have failed to state a claim upon which relief can be granted. Accordingly, the libel claim (Count VI) must be dismissed.
6. Declaratory Judgment (Count IX)
EDAN and PAAS have failed to state a claim for declaratory judgment. Where a claim for declaratory judgment “seeks a declaration of the same rights as will be determined under [a claimant‘s] action for breach of contract,” it is duplicative and must be dismissed. Lorterdan Props. at Ramapo I, LLC v. Watchtower Bible & Tract Soc‘y of N.Y., Inc., No. 11-CV-3656 (CS), 2012 WL 2873648, at *9 (S.D.N.Y. July 10, 2012) (quoting Aeolus Down, Inc. v. Credit Suisse Int‘l, No. 10-CV-8293, 2011 WL 5570062 (LLS), at *5 (S.D.N.Y. Nov. 16, 2011)). Conversely,
The claim for declaratory judgment here is duplicative of the breach of contract counterclaims and therefore must be dismissed. EDAN and PAAS largely concede this, arguing only that the claim should survive with respect to subsections (h), (i), and (j).8 [ECF No. 107 at 19–20.] These subsections seek a declaratory judgment that “(h) EDAN is the rightful assignee of Patents ‘876, ‘621, and ‘363, now and in the future“; “(i) The milestone provision of the Investment Agreement is unenforceable by ADYB and [H. Cohen] due to, inter alia, estoppel, bad faith, unclean hands and intentionally wrongful conduct“; and “(j) [E. Cohen] holds a non-dilutive twenty-percent interest in ADYB.” [ECF No. 49 ¶ 139.]
Subsections (h) and (i) will necessarily be resolved in the course of the litigation since the breach of contract claim centers around whether the benchmarks were triggered, thereby entitling H. Cohen to revoke the assignment of the patents. [ECF No. 49 ¶ 11.] Subsection (j) can only be construed as asserted by E. Cohen, and that claim is clearly duplicative of his independent claim for breach of contract. See Sofi Classic S.A. de C.V. v. Hurowitz, 444 F. Supp. 2d 231, 249–50 (S.D.N.Y. 2006) (“Plaintiffs’ declaratory judgment claim seeks resolution of legal issues that will, of necessity, be resolved in the course of the litigation of the other causes of action. Therefore, the claim is duplicative in that it seeks no relief that is not implicitly sought in the other causes of action.” (citing Del Greco v. CVS Corp., 337 F. Supp. 2d 475, 488 (S.D.N.Y. 2004)))).
V. MOTION FOR LEAVE TO FILE A SECOND AMENDED COUNTERCLAIM
EDAN and PAAS request leave to file a second amended answer and counterclaim. [ECF No. 130 at 1.] They propose to add a cause of action against H. Cohen for a fraudulent conveyance on the ground that he allegedly conveyed his shares in ADYB to his wife during the pendency of this lawsuit. [Id.]
Whether to grant leave to amend rests in the sound discretion of the Court. McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007) (citing Zahra v. Town of Southold, 48 F.3d 674, 686 (2d Cir. 1995); and Ansam Assocs., Inc. v. Cola Petroleum, Ltd., 760 F.2d 442, 446 (2d Cir. 1985)). While the Court “should freely give leave when justice so requires,”
Here, leave to amend would be futile because the Court would lack subject matter jurisdiction over the proposed claim. Because the proposed claim does not present a federal question and H. Cohen cannot be sued in diversity, the only basis for subject matter jurisdiction would be supplemental jurisdiction. Supplemental jurisdiction would be improper because the claim for fraudulent conveyance rests on facts completely unrelated in time and in substance to those underlying ADYB‘s claims—i.e., the claims within the Court‘s original jurisdiction. See Schwartz v. Sensei, LLC, 17-CV-04124 (SN), 2020 WL 5817010, at *4 (S.D.N.Y. Sept. 30, 2020)
VI. CONCLUSION
For the reasons discussed above: (1) the motion to join H. Cohen and E. Cohen as necessary parties is GRANTED; (2) H. Cohen‘s motion to dismiss is DENIED without prejudice; (3) ADYB‘s motion to dismiss is GRANTED IN PART and DENIED IN PART; and (4) EDAN and PAAS‘s request for leave to further amend is DENIED. The Court dismisses Counts II, III, IV, V (in part), VI, and IX of the counterclaims. [ECF No. 49.]
The Clerk of Court is respectfully requested to terminate docket entries 65, 91, 93, and 130 and to issue a summons to Edan Administration Services (Ireland) Ltd., Pom Advanced Armor Solutions LLC, and Edwin Cohen for service on Counterclaim Defendant Hananya Cohen.
SO ORDERED.
Date: March 29, 2021
New York, NY
MARY KAY VYSKOCIL
United States District Judge