VINCENT VAGHAR, Plaintiff, -against- BEGREAT SPORTS, LLC and BARRY GARDNER, Defendants.
No. 1:23-cv-03487 (JLR) (HJR)
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
01/22/25
JENNIFER L. ROCHON, United States District Judge
OPINION AND ORDER
Plaintiff Vincent Vaghar (“Vaghar” or “Plaintiff“) brings this diversity action against Defendants BeGreat Sports, LLC (“BeGreat“), and Barry Gardner (“Gardner,” together with BeGreat, “Defendants“), asserting claims for breach of a promissory note, unjust enrichment, conversion, and fraudulent misrepresentation in connection with an alleged loan transaction. See generally Dkt. 14 (“Compl.“). Defendants assert two counterclaims against Plaintiff for abuse of process and tortious interference with business relations. See generally Dkt. 73 (“Second Amended Answer” or “SAA“). Plaintiff now moves to dismiss Defendants’ counterclaims pursuant to
BACKGROUND
For purposes of resolving this motion, the Court accepts the factual allegations in Defendants’ counterclaims as true and draws all reasonable inferences in Defendants’ favor. See, e.g., CDC Newburgh Inc. v. STM Bags, LLC, 692 F. Supp. 3d 205, 217 (S.D.N.Y. 2023); Kingvision Pay-Per-View, Ltd. v. Falu, No. 06-cv-04457 (JGK), 2008 WL 318352, at *1 (S.D.N.Y. Feb. 4, 2008). The Court also considers materials incorporated by reference in the
I. Factual Background
Gardner is the “sole owner and manager” of BeGreat and has made “substantial capital investments” in the company. SAA ¶ 1. Vaghar is a “longtime investor” in BeGreat, id. ¶ 2, and “has made various capital investments in BeGreat over the course of several years,” id. ¶ 3.
In 2019, Vaghar learned that BeGreat was “having discussions with additional potential investors who were planning on infusing a substantial amount of capital into BeGreat.” Id. ¶ 5. At Vaghar‘s insistence, the parties agreed that on receipt of the anticipated infusion of capital, Vaghar‘s investment in BeGreat would be repaid prior to Gardner‘s investment. See id. ¶¶ 6-7. In November 2019, the parties engaged in negotiations to “execute a promissory note in favor of Plaintiff to effectuate [their] agreement” regarding the repayment of their investments. Id. ¶¶ 8-9; see also Dkt. 73-1. “Defendants were not represented by counsel during any of these negotiation communications.” SAA ¶ 10.
On November 12, 2019, Gardner emailed an executed promissory note to Vaghar that “listed [BeGreat] as the only debtor,” id. ¶ 12; see Dkt. 73-1; Dkt. 73-2. Later that day, Vaghar emailed Gardner “a redlined version of the same promissory note that was modified to reflect both BeGreat and [Gardner] (in his personal capacity) as co-debtors under the note,” among other changes. SAA ¶ 13; see Dkt. 73-3. Subsequently, Gardner, on behalf of BeGreat, “execute[d] the modified version of the promissory note ... with the express intention that [he] would not be personally bound by the terms of the note,” SAA ¶ 14, and returned it to Vaghar by email, id. ¶ 15; see Dkt. 73-4. “[T]o ensure that the note was not
Based on Vaghar‘s representations, BeGreat‘s understanding when executing the revised promissory note was that it served only “to ensure that Plaintiff‘s investment in BeGreat was repaid before [Gardner]‘s investment in BeGreat was repaid,” id. ¶ 19, and “that it would only be enforceable if BeGreat finalized the deal to bring on the new investors and received their capital infusion,” id. ¶ 20; see also id. ¶ 21 (“Consistent with this further understanding, the parties chose a maturity date of March 20, 2020 specifically to coincide with BeGreat‘s anticipated receipt of the capital infusion from the new investors.“). However, “[t]he deal with new potential investors was never finalized, and BeGreat never received the expected capital infusion.” Id. ¶ 22.
Several years later, in or around November 2022, “a series of attorneys/debt collectors began contacting Defendants to secure repayment of the promissory note.” Id. ¶ 24. Then, in April 2023, Gardner received a letter from Vaghar‘s counsel informing him that Vaghar would “immediately proceed with filing [his] lawsuit” if he did not receive a “written commitment” to “repay the loan amount and associated fees by a date certain,” or “something substantially similar.” Dkt. 73-5; see SAA ¶ 25. In the letter, Vaghar‘s counsel threatened to “provide a copy” of the lawsuit to the NFL Players Association (the “NFLPA“), SAA ¶ 25 - “the union for [Defendants‘] professional athlete clients,” id. ¶ 45 - and to “issue a press release announcing the filing of the lawsuit and circulate the same to all major media outlets,” Dkt. 73-5.
On April 26, 2023, Vaghar proceeded to file the instant suit, see Dkt. 1, and the next day, a “self-described sports reporter” posted about the filing, which was “reposted by others,” SAA ¶ 26; see Dkt. 73-6; Dkt. 73-7. Subsequently, “BeGreat lost several of its
Defendants allege that “the version of the promissory note attached to the Complaint which includes [Gardner]‘s signature in his personal capacity is a forged, falsified and/or altered document,” id. ¶ 18, because Gardner “never affixed his electronic signature - or authorized his electronic signature to be affixed - to any version of any promissory note in favor of Plaintiff,” id. ¶ 17. Accordingly, Defendants argue that Vaghar initiated the Complaint based on a fraudulent promissory note, see Dkt. 14-1, with the “intent to harm” Gardner and his business, SAA ¶ 40, and “to pressure [them] into making payments,” id. ¶ 42.
II. Procedural History
On April 26, 2023, Plaintiff filed his Complaint, seeking damages in connection with Defendants’ alleged refusal to fulfill the terms of the promissory note attached to the Complaint. See Dkt. 1. On January 11, 2024, Defendants filed their answer, see Dkt. 48, which they amended on April 30, 2024, to assert two counterclaims against Plaintiff for abuse of process and tortious interference with business relations, see Dkt. 71. Plaintiff moved to dismiss the counterclaims on May 21, 2024, see Dkt. 72, after which Defendants filed their Second Amended Answer on June 6, 2024, see SAA, mooting Plaintiff‘s motion, see Dkt. 74. The Second Amended Answer asserted the same two counterclaims, but with the addition of several supporting exhibits. See generally SAA.
On June 21, 2024, Plaintiff filed the instant motion to dismiss Defendants’ amended counterclaims pursuant to
III. Legal Standard
Under
DISCUSSION
I. Choice of Law
While the parties do not brief choice of law, they both appear to agree that New York law applies. See Br. at 6; Opp. at 2. “In diversity actions, federal courts follow the choice-of-law rules of the forum state to determine the controlling substantive law.” Feldman Law Grp. P.C. v. Liberty Mut. Ins. Co., 819 F. Supp. 2d 247, 255 (S.D.N.Y. 2011) (footnote omitted), aff‘d, 476 F. App‘x 913 (2d. Cir. 2012) (summary order). “However, where the parties have
Because the parties’ briefs rely on and indicate their assent to the application of New York law, and the Court has not identified a strong countervailing public policy, the Court will apply New York law to the abuse-of-process and tortious-interference claims at issue here. See PetEdge, 234 F. Supp. 3d at 486 (applying New York law where party implicitly consented by citing exclusively to New York law); accord Heath v. EcoHealth All., No. 23-cv-08930 (JLR), 2024 WL 5168072, at *3 (S.D.N.Y. Dec. 19, 2024) (citing PetEdge, 234 F. Supp. 3d at 486).
II. The Motion to Dismiss
Plaintiff seeks dismissal, pursuant to
A. Abuse of Process
Plaintiff argues that Defendants’ abuse-of-process counterclaim should be dismissed because the process relied upon is Plaintiff‘s filing of the summons and complaint in this action, which is insufficient to state a claim for relief under New York Law. Br. at 6. The Court agrees with Plaintiff.
Defendants’ abuse-of-process counterclaim fails at the first step because “the institution of a civil action by summons and complaint is not legally considered process capable of being abused.” HC2, Inc. v. Delaney, 510 F. Supp. 3d 86, 106 (S.D.N.Y. 2020) (quoting Curiano v. Suozzi, 469 N.E.2d 1324, 1326 (N.Y. 1984)). “The action [for abuse of process] is not for the wrongful bringing of an action or prosecution, but for the improper use, or rather abuse, of process in connection therewith.” Zappin v. Cooper, No. 23-165, 2024 WL 3084015, at *2 (2d Cir. June 21, 2024) (summary order) (quoting Hauser v. Bartow, 7 N.E.2d 268, 373 (N.Y. 1937)). “[L]egal process means that a court issued the process, and the plaintiff will be penalized if he violates it.” Cook, 41 F.3d at 80 (citing Mormon v. Baran, 35 N.Y.S.2d 906, 909 (Sup. Ct. 1942)). “It follows that there must be an unlawful interference with one‘s person or property under color of process in order that action for abuse of process may lie,” HC2, Inc., 510 F. Supp. 3d at 106, and “no such interference flows from the issuance of a civil summons,” Manhattan Enter. Grp. LLC v. Higgins, 816 F. App‘x 512, 514 (2d Cir. 2020) (summary order). Examples of legal process that “can be so abused include writs of attachment, execution, garnishment, or sequestration proceedings, or arrest of the person, or criminal prosecution, or even such infrequent cases as the use of a subpoena for the collection of a debt.” Blanco, 722 F. Supp. 3d at 223-24 (quoting HC2, Inc., 510 F. Supp. 3d
Defendants argue that they have satisfied this first prong because their counterclaims “contain allegations of Plaintiff‘s actions which go well beyond him simply filing a lawsuit.” Opp. at 5; see, e.g., SAA ¶ 38 (“Plaintiff forged, falsified and/or altered the promissory note attached to the Complaint to include [Gardner‘s] signature despite having no authorization to do so and despite knowing that [Gardner] never agreed to be bound personally by the promissory note.“). However, none of these allegations demonstrate that the purportedly fraudulent note was used to “obtain[] any court-issued process” that interfered with Defendants’ person or property, Blanco, 722 F. Supp. 3d at 224 (emphasis omitted), such as attachment or garnishment. Cf. Riddell Sports Inc. v. Brooks, 872 F. Supp. 73, 79 (S.D.N.Y. 1995) (dismissing abuse-of-process claim notwithstanding claimants’ argument that their counterclaim was “not based on the mere filing of a summons and complaint, but rather. . .on counterdefendants’ improper and unlawful use of judicial process to harass [them]“).
B. Tortious Interference with Business Relations
Plaintiff next argues that Defendants’ counterclaim for tortious interference with business relations should be dismissed for failure to state a claim because Defendants have not pleaded facts to show that Plaintiff‘s suit is frivolous or that it was brought with a solely malicious motive. See Br. at 7-8; Reply at 4-5.1 Defendants argue that Plaintiff filed an action based on an altered document and acted maliciously by identifying Defendants’ biggest client in the Complaint to enhance the newsworthiness of the lawsuit, and that Defendants thereafter lost that client. Opp. at 6. The Court finds that Defendants have not stated a claim for relief.
“To state a claim for this tort under New York law, four conditions must be met: (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.” Catskill Dev., L.L.C. v. Park Place Ent. Corp., 547 F.3d 115, 133 (2d Cir. 2008) (Sotomayor, J.) (citing Lombard v. Booz-Allen & Hamilton, Inc., 280 F.3d 209, 214 (2d Cir. 2002); Goldhirsh Grp., Inc. v. Alpert, 107 F.3d 105, 108-09 (2d Cir. 1997)); accord Pride Techs., LLC v.
Focusing on the third element, to maintain a tortious-interference-with-business-relations claim, Defendants must adequately allege that Plaintiff “acted for a wrongful purpose or used dishonest, unfair, or improper means” to interfere with Defendants’ business relationships. 16 Casa Duse, LLC v. Merkin, 791 F.3d 247, 262 (2d Cir. 2015) (quoting Catskill Dev., L.L.C., 547 F.3d at 132). The “wrongful means’ element sets a high bar,” and generally requires a showing that the interfering conduct “amount[ed] to a crime or an independent tort,” or served “the sole purpose of inflicting intentional harm” on the claimant. Id. (quoting Carvel Corp. v. Noonan, 818 N.E.2d 1100, 1103 (N.Y. 2004)). Even though Plaintiff‘s Complaint alleges less than favorable things about the Defendants’ financial practices and includes the name of one of Defendants’ clients, Plaintiff‘s filing of a public lawsuit against the Defendants and alleged circulation of the lawsuit do not constitute wrongful means here. Defendants do not argue that they have pleaded facts sounding in a crime or independent tort. Defendants also do not plausibly allege that Plaintiff‘s claims are “frivolous, objectively unreasonable, or patently meritless” such that Plaintiff‘s sole intention
In this case, the “alleged fraud ‘ha[s] at most a tenuous relation to the harm alleged,‘” which “fails to show causation.” Id. (alteration in original) (quoting Catskill Dev., L.L.C., 547 F.3d at 133). Defendants do not allege or plead facts to support the inference that their former clients relied on the allegedly forged note in deciding to terminate their business relationships with Defendants. Cf. Catskill Dev., L.L.C., 547 F.3d at 134 (rejecting claim for
For these reasons, Defendants have not pleaded sufficient factual matter to state a claim for tortious interference with business relations under New York law.
CONCLUSION
Plaintiff‘s motion to dismiss Defendants’ counterclaims for abuse of process and tortious interference with business relations is GRANTED. The Clerk of Court is respectfully directed to terminate the motions pending at Dkts. 76 and 78.
Dated: January 22, 2025
New York, New York
SO ORDERED.
JENNIFER L. ROCHON
United States District Judge
