The opinion of the court was delivered by: MUKASEY
MICHAEL B. MUKASEY, U.S.D.J.
Rolls-Royce Motor Cars, Inc., has sued one of its former dealers, Carriage House Moto Cars, Ltd., and several affiliated parties for damages arising from transactions involving 15 luxury automibiles. Defendants have moved to dismiss most of the 23 claims asserted in the complaint for failure to state a claim upon which relief can be granted, Fed. R. Civ. P. 12(b)(6), and have moved for summary judgment on one claim. Fed. R. Civ. P. 56. For the reasons stated below, defendant's motion is granted in part and denied in part.
The allegations in the complaint, which are accepted as true on this motion, are as follows: Plaintiff Rolls-Royce, a Delaware corporation operating principally in Paramus, New Jersey, is the exclusive United States importer and distributor of Rolls-Royce and Bentley automobiles. Carriage House is a New York corporation. At the time of the transactions at issue here, Carriage House maintained its principal place of business on Manhattan's Upper East Side. Carriage House is a wholly owned subsidiary of Autostyle Leasing, Ltd., another New York corporation. Autostyle is owned by Michael Schudroff and Glen Ethe. On March 23, 1983, Carriage House became an authorized dealer of Rolls-Royce and Bentley luxury cars pursuant to a standardized dealer agreement with Rolls-Royce. (Compl. PP 1-3 & Ex. A) Over the following decade, Carriage House operated one of the most successful Rolls-Royce and Bentley dealerships in the United States. (Id. P 17)
Toward the end of the calendar years 1989, 1990, 1991, and 1992, Rolls-Royce agreed to sell automobiles to Carriage House on terms other than the cash-on-delivery ("C.O.D.") terms customary between the parties and in the industry. In December of each of those years, Rolls-Royce delivered cars and their accompanying manufacturer's statements of origin to Carriage House in exchange for checks in the amount of the purchase price of each vehicle. However, Rolls-Royce agreed not to present the checks for payment until after the first of the new year. (Id. P 19)
In late 1993, the parties again agreed to transact business on those terms. Between December 10, 1993 and January 6, 1994, Rolls-Royce delivered two Rolls-Royces and 11 Bentleys to Carriage House's Manhattan storage facility. Carriage House delivered 13 checks to Rolls-Royce in payment for the cars. Rolls-Royce agreed not to deposit the checks until January 14, 1994, in reliance on oral assurances from Schudroff and Ethe that there would be sufficient funds in Carriage House's accounts to cover the checks on that date, and on an unaudited Carriage House financial report dated November 1993 which showed "a substantial positive net worth." (Id. PP 20-21 & Ex. D)
Unbeknownst to Rolls-Royce, Carriage House was insolvent at the time of the above-described transactions and was scrambling to satisfy obligations to other creditors. Some time after receiving the vehicles from Rolls-Royce, Carriage House transferred at least three of them to Autostyle, which pledged them as collateral for a loan from Gotham Bank of New York. Pursuant to an outstanding loan agreement with National Westminster Bank, the remaining cars automatically became collateral for Carriage House's indebtedness to that bank. All of the cars eventually were sold to consumers at various times in 1994. (Compl. PP 14, 23)
On January 14, 1994, Carriage House informed Rolls-Royce that Carriage House's bank accounts did not hold sufficient funds to cover the 13 checks issued the previous month. In February 1994, Rolls-Royce met with Carriage House and the company's accountants, Cole, Roberts & Herbert, to discuss the situation. Representatives of Cole, Roberts informed Rolls-Royce that Carriage House was insolvent and had been "for quite some time." (Id. PP 26-28)
In August 1994, Schudroff and Ethe used the proceeds from the sale of the 13 cars to form BBS Automotive Group, Inc. and Carriage House Motor Cars of Greenwich, Ltd.
The latter was to operate a new luxury car dealership in Connecticut. Sometime that fall, Schudroff advised Rolls-Royce that Carriage House intended to close its Manhattan showrooms. By letter dated March 2, 1995, Rolls-Royce informed Schudroff that Carriage House would be terminated as an authorized dealer effective March 18, 1995. (Id. PP 30-31)
Rolls-Royce alleges that Carriage House of Greenwich has used the Rolls-Royce and Bentley trademarks without authorization, and has falsely advertised itself as an authorized dealer of Rolls-Royce and Bentley automobiles. (Id. PP 32-44 & Exs. F-K)
Rolls-Royce also alleges that Carriage House failed to pay for two other cars. In July 1992, Rolls-Royce delivered a used Bentley convertible to Carriage House for the temporary use of a customer awaiting delivery of a new car. In September 1993, Carriage House received a different used Bentley from a customer who traded the car in for a new vehicle. Carriage House agreed to sell the two used Bentleys and pay a total of $ 415,000 out of the sale proceeds to Rolls-Royce. Rolls-Royce alleges that Carriage House sold both cars in 1994 but never remitted any of the proceeds. (Id. PP 24-25)
Plaintiff filed this action in April 1995. The complaint is more Rube Goldberg than Rolls-Royce, transforming this elegantly simple two-party contract dispute into a dizzily complex multi-party tort litigation. The complaint names as defendants Carriage House, Schudroff, Ethe, Autostyle, BBS, Carriage House of Greenwich, the Cole, Roberts accounting firm, and three Cole, Roberts accountants. The complaint lists 23 claims for relief. The first seven claims are styled (1) common law fraud, (2) negligent misrepresentation, (3) conversion, (4) breach of contract, (5) account stated, (6) "claim by payee against drawer of checks," and (7) fraudulent conveyance. Claims (8) - (15) arise under the federal Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. (1994), and the substantially similar New Jersey RICO statute, N.J. Stat. Ann. § 2C:41-1 et seq. (West 1982). The remaining claims are for (16) unfair competition under § 43(a) of the Lanham Act, 15 U.S.C. § 1125 (1994), (17) trademark infringement under 15 U.S.C. § 1114 (1994), (18) common law trademark infringement, (19) common law unfair competition, (20) trademark dilution under N.Y. Gen. Bus. Law § 368-d (McKinney 1984), (21) a declaration that Rolls-Royce validly terminated its dealer agreement with Carriage House, (22) accountant malpractice,
and (23) "attorneys' fees under dealer agreement."
Carriage House has filed four counterclaims, for (1) breach of contract, (2) tortious interference with contract rights, (3) breach of the implied covenant of good faith and fair dealing, and (4) tortious interference with prospective economic advantage. All defendants except the accountants have moved to dismiss most of the claims
for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). Defendants seek summary judgment under Fed. R. Civ. P. 56 on plaintiff's fraudulent conveyance claim.
This court has subject matter jurisdiction over the federal claims pursuant to 18 U.S.C. § 1964(c) (1994) (RICO), 28 U.S.C. § 1338 (1994) (federal trademark claims), and 28 U.S.C. § 1331 (1994) (general federal question statute). Subject matter jurisdiction for the state law claims is premised on principles of supplemental jurisdiction as codified in 28 U.S.C. §§ 1338, 1367 (1994).
A motion to dismiss under Rule 12(b)(6) tests the facial legal sufficiency of the complaint. On this motion, the court accepts the allegations in the complaint as true and draws all reasonable inferences in favor of the non-movant. Allen v. WestPoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991). The motion should be granted only when it appears beyond doubt from an examination of the complaint that the plaintiff "can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957).
A. Sufficiency of Plaintiff's Alter Ego Allegations
As a threshold matter, defendants contend that Rolls-Royce cannot recover on all claims against all defendants. For example, defendants argue that only Carriage House can be liable to Rolls-Royce for breach of contract, because none of the other defendants were parties to the dealer agreement. (Def. Mem. at 33; similar arguments, as applied to other claims, appear in parts V, VI, X, and XII of defendants' Memorandum of Law.) Rolls-Royce insists that Schudroff, Ethe, Carriage House, Carriage House of Greenwich, BBS, and Autostyle are for most purposes interchangeable as defendants because those entities and individuals are alter egos of one another. Carriage House responds that the complaint's alter ego allegations are conclusory and insufficient.
New York courts will disregard the corporate veil and permit creditors of a corporation to recover from the corporation's owners "either when there is fraud or when the corporation has been used as an alter ego . . . ." Itel Containers Int'l Corp. v. Atlanttrafik Express Serv. Ltd., 909 F.2d 698, 703 (2d Cir. 1990) (emphasis in original). To establish that an entity is the alter ego of its parent owners, a plaintiff must allege and prove "(1) that the parent exercised such complete domination in respect to the transaction attacked that the subsidiary had at that time no separate will of its own, and (2) that this domination was used to commit fraud or wrong against the plaintiff . . . ." Zinaman v. USTS New York, Inc., 798 F. Supp. 128, 132 (S.D.N.Y. 1992) (citations and quotation marks omitted). Under the alter ego theory, it is sufficient to prove that complete domination was used to commit fraud or wrong. Thus, a veil-piercing claimant can prevail without proving fraud if the claimant can identify some non-fraudulent "wrong" attributable to the defendant's complete domination of a subsidiary entity. See Wm. Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 131, 138 (2d Cir. 1991).
New York courts generally are reluctant to pierce the corporate veil under any theory. Itel, 909 F.2d at 703. But because a veil piercing claimant can prevail without proving fraud, plaintiff's alter ego allegations will not be held to the particularity requirement of Fed. R. Civ. P. 9(b). Instead, the allegations properly are judged according to the liberal "notice pleading" standard of Fed. R. Civ. P. 8(a), which requires only a "short and plain statement of the claim showing that the pleader is entitled to relief." See Citicorp Int'l Trading Co. v. Western Oil & Refining Co., 771 F. Supp. 600, 608 (S.D.N.Y. 1991); see also Chicago Dist. Council of Carpenters Pension Fund v. Ceiling Wall Sys. Inc., 915 F. Supp. 939, 942-43 (N.D. Ill. 1996) ("because fraud is not a prerequisite to piercing the corporate veil, Rule 9(b) does not apply to alter ego allegations"); Laborers Combined Funds of Western Pennsylvania v. Ruscitto, 848 F. Supp. 598, 600-01 (W.D. Pa. 1994) (Rule 8(a) applies to alter ego allegations "unless fraud is a necessary element of the claim").
Plaintiff alleges that "Autostyle dominates, controls and operates Carriage House . . . as its agency, instrumentality and alter ego, and is therefore liable for Carriage House['s] corporate obligations." (Compl. P 3) Plaintiff also alleges that Carriage House of Greenwich is an alter ego of Carriage House, Autostyle, Schudroff, and Ethe (id. P 4), and that BBS is the Corporate successor to and/or alter ego of Carriage House, Autostyle, Carriage House of Greenwich, Schudroff, and Ethe. (Id. P 5) The Complaint charges that Schudroff and Ethe used their control over the corporate entities to hide assets from creditors. For example, plaintiff alleges that Schudroff ...