Defendants claim that all of Carriage House's assets were used to satisfy valid antecedent debts, and argue that this vitiates any fraudulent conveyance claims as a matter of law. Defendants have submitted evidence demonstrating that Carriage House became indebted to National Westminster Bank in 1989, long before the disputed transactions involving the 13 cars, and that Carriage House's assets were used to satisfy that indebtedness. (Nicyper Aff. Exs. A-N)
Defendants may be correct insofar as the fraudulent conveyance claim is based on N.Y. Debt. & Cred. Law § 273 (McKinney 1990), which provides that "every conveyance made . . . by a person who is or will be thereby rendered insolvent is fraudulent as to creditors without regard to actual intent if the conveyance is made . . . without a fair consideration." Defendants' submissions tend to establish that the satisfaction of Carriage House's antecedent debt to National Westminster Bank constitutes valid consideration for Carriage House's asset transfers. However, under N.Y. Debt. & Cred. Law § 276 (McKinney 1990), "every conveyance made . . . with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors." A conveyance may be fraudulent under § 276 even if it is not fraudulent under § 273.
Whether a conveyance is fraudulent under § 276 depends on the intent of the party conveying the assets. The Second Circuit has cautioned that Rule 56 "would be rendered sterile . . . if the mere incantation of intent or state of mind would operate as a talisman to defeat an otherwise valid motion." Meiri v. Dacon, 759 F.2d 989, 998 (2d Cir.) (affirming summary judgment in an employment discrimination case), cert. denied, 474 U.S. 829, 88 L. Ed. 2d 74, 106 S. Ct. 91 (1985). However, defendants here moved for summary judgment long before the completion of discovery. Defendants rely on the theory that a claim under § 273 will be barred as a matter of law if Carriage House's outstanding debt to National Westminster Bank is valid. As to a claim under § 276, defendants' motion is premature because defendants' limited submissions do not squarely address the issue of intent, and because plaintiff should have the benefit of at least some discovery before this issue is resolved on the merits. See Fed. R. Civ. P. 56(f) ("Should it appear from the affidavits of a party opposing the motion that the party cannot for reasons stated present by affidavit facts essential to justify the party's opposition, the court may refuse the application for judgment").
Defendants argue that all facts in its statement under Local Rule 3(g) must be deemed admitted because plaintiff failed to submit a responsive Rule 3(g) statement. However, defendants' Rule 3(g) statement makes no claims as to defendants' intent to defraud creditors. Thus, even if the court were to find procedural default and deem defendants' assertions of fact admitted, that would not bar a fraudulent conveyance claim under § 276.
Only two federal claims remain in this action, and they arise from defendants' alleged false advertising and unauthorized use of Rolls-Royce and Bentley trademarks. There is some doubt as to whether jurisdiction for the state law claims properly could be premised on diversity of citizenship. Plaintiff is a corporation that maintains its principal place of business in New Jersey. Defendant partnership Cole, Roberts has an office in Fort Lee, New Jersey. See Nicyper Aff. Ex. H. Unincorporated associations are citizens for diversity purposes of every state in which any partner resides. Carden v. Arkoma Assoc., 494 U.S. 185, 195-96, 108 L. Ed. 2d 157, 110 S. Ct. 1015 (1990). If any Cole, Roberts partner resides in New Jersey, there is no complete diversity here as is required under 28 U.S.C. § 1332.
If there is no diversity, subject matter jurisdiction for the state law claims would have to be premised on principles of supplemental jurisdiction as codified in 28 U.S.C. § 1367 (1994). Supplemental jurisdiction is appropriate when the state claims arise out of the same "nucleus of operative facts" as the jurisdictionally sufficient federal claims. People by Abrams v. Terry, 45 F.3d 17, 23 n.7 (2d Cir. 1995). It is not clear whether that is true of the two sets of claims here. The federal claims involve false advertising and unauthorized use of trademarks by Carriage House of Greenwich; the state claims (other than the state unfair competition and trademark claims) arise from Carriage House's alleged failure to pay for cars under a sales contract.
The parties will be asked to address both of these issues at a forthcoming conference.
* * *
For the reasons set forth above, defendants' motion to dismiss is granted as to the first, second, third, eighth, ninth, tenth, eleventh, twelfth, thirteenth, fourteenth, and fifteenth claims for relief in plaintiff's complaint. The motion otherwise is denied.
Dated: New York, New York
May 23, 1996
Michael B. Mukasey,
U.S. District Judge