OPINION AND ORDER
Plaintiff Brian S. Cohen (“Cohen”) brings this action against Theodore F. Schroeder (“Schroeder”) alleging that Schroeder is. the alter ego of Skoop Media Associates, Inc, (“Skoop”), a small, nonpublic Delaware corporation that both Cohen and Schroeder have served as directors and officers. (Doc. No. 1 (“Compl.”).) Cohen seeks to hold Schroeder personally liable for indemnification and advancement obligations owed by Skoop to Cohen under a judgment obtained in the Delaware Court’ of Chancery in 2015.
Although this litigation has, to date, borne all the earmarks of a street fight, in which each side has repeatedly accused the other of “impure motives” and “ethical misconduct” (Doc. No. 36), this case is in fact a side show. The main event in the parties’ long-running legal battle is occurring across the street before thé Honorable O. Peter Sherwood in the Commercial Division of the New York State Supreme Court. There, Schroeder, Skoop, and Ren-dezvoo LLC (“Rendezvoo”) have sued Cohen, Pinterest, Inc., and Cohen’s not-for-profit corporation, New York Angels, Inc., alleging, among other things, that they stole intellectual property and misappro
In this ancillary case, Cohen has moved for summary judgment to dismiss Cohen’s claim for veil piercing pursuant to Federal Rule of Civil Procedure 56. (Doc. No. 84.) For the reasons set forth below, Schroeder’s motion is granted.
I. Background
The parties first met in January 2007, when Schroeder and his fellow Columbia Law School classmates Brandon Stroy and William Bocra made a presentation to Cohen—an investor who has provided capital to over twenty start-up companies—regarding Rendezvoo, a social media platform that they were developing. (Def. 56.1 Stmt. ¶ 20; PI. Opp’n'56.1 Stmt. ¶59; see also Doc. No. 86-2 at 163:9-11.) Although Cohen declined to invest in Rendezvoo, he offered to help Schroeder, Bocra, and Stroy “refine their investment pitch,” and ultimately agreed to support development of a different site, Skoopwire.com. (PI. Opp’n 56.1 Stmt. ¶¶ 59-60.) On June 29, 2007, the quartet incorporated Skoop as a Delaware corporation, with Cohen, Schroeder, Bocra, and Stroy serving as Skoop’s sole directors. (Def. 56.1 Stmt. ¶¶2-4.) While Cohen served as Skoop’s Chief Executive Officer "and Chairman of the. Board, Schroeder served as President and Chief Technology Officer and Bocra as Chief Operating Officer. (Id. ¶¶ 5-8.) Skoop also secured corporate counsel in Delaware and adopted by-laws.- (Id. ¶ 9; see also Doc. No. 86-23.) Article 7 of Skoop’s certifícate of incorporation included a guarantee, pursuant to Section 145 of the Delaware General Corporation Law, to advance the expenses, including attorney’s fees, incurred by current or former officers or directors “by reason of’ their service to Skoop and to indemnify their expenses in cases where they prevail, (Doc. No. 94-9 ¶¶2-3.) Although the four men discussed dividing ownership of Skoop, the corporation never issued stock certificates. (Doc. No. 94-1 at 223:11-15.) Furthermore, the directors never reached a formal agreement “delineating what intellectual property, if any, ... Schroeder had brought into [Skoop] ... versus what intellectual property, if any, had accrued to [Skoop] as a result of the group’s development efforts.” (PI. Opp’n 56.1 Stmt. ¶ 61 (citing Doc. No. 94-1 at 85:5-87:8,129:7-23).) ■
By late 2007, Cohen, Schroeder, Bocra, and Stroy ceased developing Skoop-wire.com. (Def. 56.1 Stmt. ¶¶ 10-11;’ Doc. No. 94-1 at 107:10-19.) Although the four men attempted to work out an agreement to liquidate the corporation in March 2008, they never reached consensus and never consummated a separation agreement delineating their respective ownership interests in Skoop. (Def. 56.1 Stmt. ¶¶ 12-19.) Later that year, Cohen disassociated himself from Skoop, but he was never formally removed from Skoop’s board. (Def. 56.1 Stmt. ¶ 21; Doc. No. 94-4 at 38:9-11.)
In the years after his departure from Skoop, Cohen invested in the company that developed the popular social media platform Pinterest. (Def. 56.1 Stmt. ¶¶ 23-24; see also Doe. No. 86-8.)
On October 6, 2014, Schroeder, Bocra, and Stroy entered an “agreement of interest in lawsuit” (“Agreement of Interest”), in which they “acknowledge[d] each party’s interest in any settlement proceeds resulting from” the Pinterest Litigation. (Doc. No. 86-17 at 1.) As part of the agreement, the three men stipulated that Schroeder would be entitled to 75.6% of the interest in the Pinterest Litigation; Bocra would be entitled to 16%; and Stroy would be entitled to 8.4%. (Id.) Accordingly, “[a]ny recovery in the Pinterest Litigation will ultimately inure to the benefit of Schroeder, Bocra, and Stroy.” (Def. 56.1 Stmt. ¶ 37.) The Agreement of Interest also contained a clause whereby the three men “ratified, confirmed and approved” Schroeder’s initiation of the Pinterest Liti
In November 2014, Cohen sued Skoop in the Delaware Court of Chancery seeking (1) indemnification of his expenses incurred in the federal suit dismissed by Judge Castel and (2) advancement of his expenses incurred in the suit pending in New York State Supreme Court pursuant to Article 7 of Skoop’s certificate of incorporation. (Def. 56.1 Stmt. 1189; see also Doc. No. 86-10.) In paragraph 68 of his Delaware complaint, Cohen alleged, “upon information and belief,” that Skoop “has no assets to pay a judgment,” and therefore he “reserve[d] the right to enforce, and fully intend[ed] to enforce expeditiously, any judgment entered against [Skoop] against Mr. Schroeder personally, on the basis that [Skoop] is, in fact, a mere instrumentality and alter ego of Mr. Schroeder.” (Dóc. No! 86-10 at 63-64; see also Doc. No. 94-5 at 82:4-14, 84:11-15 (acknowledging in a subsequent deposition that he “wasn’t sure” Skoop had the assets to pay any judgment at the time he filed suit in Delaware).) On June 4, 2015, the Delaware Court of Chancery granted Cohen’s motion for summary judgment against Skoop. (Doc. No. 94-9.) To date, Skoop has failed to pay this judgment (“Delaware Judgment”) to Cohen. (PI. Opp’n 56.1 Stmt. ¶ 58.)
On August 31, 2015, Cohen filed suit against Schroeder in this Court on a single cause of action for veil piercing. Specifically, Cohen seeks: (1) a declaration that Skoop is Schroeder’s alter ego, and (2) a judgment issued by this Court against Schroeder for the full amount of the Delaware Judgment. (Compl. ¶ 93.) On March 16, 2016, the Court issued an opinion and order denying Schroeder’s motion to dismiss pursuant to Rulé 12(b)(6). Cohen v. Schroeder, No. 15-cv-6881 (RJS),
II. Legal Standard
Pursuant to Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment should be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). There is “no genuine dispute as to any materia] fact” where (1) the parties agree on all facts (that is, there are no disputed facts); (2) the parties disagree on some or all facts, but a reasonable fact-finder, could never accept the rionmoving party’s version of the facts (that is, there are no genuinely disputed facts), see Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,
In determining whether a fact is genuinely disputed, the court “is not to weigh the evidence but is instead required to view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments.” Weyant v. Okst,
III. Discussion
Under Delaware law, “a court may impose personal liability on a corporation’s owner when there is fraud or the corporation ‘is in fact a mere' instrumentality or alter ego of its owner.’ ” Wilson v. Thorn Energy, LLC,
A. Operation ás a “Single Economic Entity”
First, the Court considers whether Skoop and Schroeder “operated as a single economic entity.” NetJets,
whether the corporation was adequately capitalized for the corporate undertaking; whether the corporation was solvent; whether dividends were paid, corporate records kept, officers and directors functioned properly, and other corporate formalities were observed; whether the dominant shareholder siphoned corporate funds; and whether, in. general, the corporation simply functioned as a facade for the dominant shareholder.
Id. at .177 (citation omitted), “While “no single factor c[an] justify a decision to disregard the corporate entity, ,.. some combination of them [i]s required.” Harper v. Del. Valley Broads., Inc.,
1. Siphoning
The Court starts with Cohen’s contention that Schroeder has “siphoned” Skoop’s assets. NetJets,
But upon review of the record, it is clear that Cohen’s argument is specious. In pursuing the Pinterest Litigation on Skoop’s behalf, Schroeder has sought to preserve the corporation’s only potential asset—the intellectual property allegedly stolen by Cohen. (See Doc. Nos. 86-12, 86-21.) There is simply nothing wrong or even unusual about the fact that a corporation’s president has taken the steps necessary to assert claims against an allegedly faithless director and officer, or the fact that Schroeder has argued, in the alternative, that the relevant property in the Pinterest Litigation belongs to him. Indeed, the “baseline rule” is that “a plaintiff is generally permitted to plead and prove his or her case on alternative and sometimes inconsistent theories of liability.” Thieriot v. Jaspan Schlesinger Hoffman, LLP, No. 07-cv-5315 (DRH) (AKT),
Accordingly, Cohen’s inflammatory accusation that Sehroeder has “pilfer[ed]” Skoop’s intellectual property (Opp’n 22) is simply hollow bombast. The Court has little trouble concluding, as a matter of law, that Sehroeder has never siphoned any assets belonging to Skoop.
2. Adequate Capitalization and Solvency
The Court next addresses the related questions of whether Skoop “was adequately capitalized for the corporate undertaking” and whether it “was solvent.” NetJets,
There is no dispute that Skoop, a start-up that was an active corporation for under a year, “does not have any significant funds, nor has it ever.” (Pl. Opp’n 56.1 ¶ 55; see also Doc. No. 94-11 at 2; Opp’n 15-16.) But there is also no evidence that Skoop was “set up for financial failure.” In re BH S &B Holdings LLC,
3. Adherence to Corporate Formalities
The Court next turns to “whether dividends were paid, corporate records kept, officers and directors functioned properly, and other corporate formalities were observed.” NetJets,
But the Second Circuit has repeatedly recognized that “with respect to small, privately-held corporations, ‘the trappings of sophisticated corporate life are rarely present,’ and we must avoid an over-rigid ‘preoccupation with questions of structure, financial and accounting sophistication or dividend policy or history.’ ” Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc.,
Instead, a corporation’s adherence to formalities is merely one of several factors that are used to “determin[ej whether ... the corporation is a ‘dummy’ for its individual stockholders who are in reality carrying on business in their personal capacities for purely personal rather than corporate ends.” Primex Plastics Corp. v. Lawrence Prods., Inc., No. 89-cv-2944 (JSM),
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For the reasons set forth above, the Court finds that no reasonable jury would conclude that Skoop “simply functioned as a facade” for Schroeder. NetJets,
B. “Overall Element of Injustice or Unfairness”
Even assuming a genuine dispute of fact existed with respect to the first prong of the alter-ego analysis, the Court also concludes that no reasonable jury would find the second element required for veil piercing—an “overall element, of injustice or unfairness.” NetJets,
Cohen’s veil-piercing claim is particularly problematic under this prong in light of his status as a corporate insider. It is true, as the Court has previously noted, that “a corporate insider or shareholder of a company is not automatically barred as a matter of law from bringing an alter-ego claim against that entity.” Cohen,
Cohen' is a consummate “insider” of Skoop, having served as director, chief executive officer, and chairman of the board during the company’s short history in 2007 and 2008. (Def. 56.1 Stmt. ¶¶4-5.) Although Cohen was not involved in the company for several years, the evidence is clear that Cohen knew, or at the very least had reason to know, that Skoop had no assets at the time he filed suit in Delaware Chancery Court in November 2014. In paragraph 63 of Cohen’s complaint in the Delaware action, he alleged,. “upon information and belief,” that Skoop “has, no assets to pay a judgment,” and therefore he ,“reserve[d] the right to enforce, and
In fact, the only “injustice” claimed by Cohen is that Schroeder revived Skoop, an otherwise defunct entity, so that he could prosecute the Pinterest Litigation against Cohen while “avoiding] ... the substance of [Cohen’s] standing challenge” before Judge Castel. (Opp’n 23; see id. at 25 (accusing “Schroeder of employing a defunct, undercapitalized corporation as his litigation prop while refusing to take responsibility for its liabilities”).) For the reasons set forth in Section III.A.1, the Court finds nothing unjust or wrongful in Schroeder’s decision to allege both that he owns the intellectual property at issue in the Pinterest Litigation and, in the alternative, that the relevant intellectual property belongs to the corporate entity. (See Doc. Nos. 86-12, 86-21.) With respect to the latter claim, the undisputed evidence in the record reveals that Schroeder is not pursuing the Pinterest Litigation exclusively “for his own personal benefit,” since a favorable verdict on that cause of action will redound to the benefit of the corporation and, indirectly, its shareholders. The Agreement of Interest—by which Schroeder, Bocra, and Stroy delineated their interest in the litigation and ratified Schroeder’s prior acts in initiating suit on the corporation’s behalf—confirms this fact. (Def. 56.1 Stmt. ¶37; Doc. No. 86-17.) Simply put, no reasonable jury would find that Schroeder is using Skoop to perpetrate an “injustice” by initiating the Pin-terest Litigation, in which he is working to protect the only potential asset Skoop has—its ownership interest in the disputed intellectual property.
And while it is true that Skoop has defaulted on its obligation to advance Cohen’s legal fees, as required under Skoop’s articles of incorporation, the fact remains that to prevail on prong two of the alter-ego analysis, a party must show that defendant’s abuse of “the corporate form in and of itself operates to serve some fraud or injustice, distinct from the alleged wrongs of the underlying corporation.” Trevino v. Merscorp, Inc.,
Furthermore, while Schroeder and Skoop’s other officers might be faulted for failing to keep the corporation sufficiently capitalized to meet Skoop’s indemnification and advancement obligations, there is no evidence that they have deliberately kept
In sum, the Court concludes that even assuming a genuine dispute existed as to whether Schroeder “abuse[d]” Skoop’s “corporate form,” Cohen fails as a matter of law to show that such abuse caused an “injustice” meriting veil piercing. See Standex,
IV. Conclusion
As noted at the outset, the ultimate dispute between Cohen and Schroeder—over whether Cohen misappropriated intellectual property and trade secrets belonging to Schroeder and/or Skoop—will be resolved across the street in the Commercial Division. The litigation before this Court, which appears to have been commenced for the principal purpose of gaining leverage and imposing pain in that action, is at best the undercard to the main event. Having now found for Schroeder in this lightweight exhibition, the Court will allow the parties to retire to their corners to prepare for their next bout before Justice Sherwood. Thus, for the reasons set forth above, Defendant’s motion for summary judgment pursuant to Rule 56 is GRANTED.
The Clerk is respectfully directed to terminate the motion pending at docket number 84 and to close this case.
SO ORDERED.
Notes
. The facts are drawn from Schroeder’s Local CiviLRule 56.1 Statement (Doc. No. 87 ("Def. 56.1 Stmt.”)), Cohen’s Counterstatement (Doc. No. 93 ("Pi. Opp’n 56.1 Stmt.”)), the declarations submitted in support of and in opposition to the motion, and the exhibits attached thereto (Doc. Nos. 86, 94). unless otherwise noted, where only one party’s 56.1 Statement or Counterstatement is cited, the other party does not dispute the fact asserted, has offered no admissible evidence to refute that fact, or merely objects to inferences drawn from that fact. In resolving the motion, the Court has also considered Schroeder’s memorandum of law in support of his motion (Doc. No. 85 ("Mem.”)), Cohen's opposition brief (Doc. No.'92 ("Opp’n”)), and Schroeder’s reply (Doc. No. 96 ("Reply”)).
. As of 2016, Pinterest drew approximately 150 million monthly users, and as of 2015, the company was valued at $11 billion. See Kathleen Chaykowski, Pinterest Reaches 150 Million Monthly Users, Boosts Engagement Among Men, Forbes (Oct. 13, 2016), https:// www.forbes.com/sites/kathleenchaykowski/ 2016/10/13/pinterest-reaches-150-million-monthlyusers/#3156e2d5732e; Michael J. de la Merced, Pinterest Valuation at $11 Billion After New Round of Fund-Raising, N.Y. Times (Mar. 16, 2016), https://www.nytimes.com/ 2015/03/17/business/dealbook/pinterest-valuation-at-11 -billion-after-newround-of-fund-raising.html.
. There is no dispute that subject matter jurisdiction over this case is' appropriate, since Cohen is a citizen of New York, Schroeder is a citizen of New Jersey, and the amount in controversy exceeds $75,000. (Doc. No. 59 ¶¶6-7); see also 28 U.S.C. § 1332(a).
. The Court applies Delaware’s veil-piercing law, since Skoop is a Delaware corporation, and "under New York choice of law principles, the law of the state of incorporation determines when the corporate form will be disregarded and liability will be imposed on shareholders.” Fletcher v. Atex, Inc.,