partnership organized and existing under the laws of Delaware.
Defendant Selig Partners, L.P. ("Selig") is a domestic limited
partnership organized and existing under the laws of Delaware.
Selig was both an equity investor in MECO Holdings, as well as a
party which loaned money to MECO Holdings for the acquisition of
Defendant Nippon is a bank and trust company existing under the
laws of New York.
Prior Proceedings and Facts
The facts and prior proceedings are set forth in prior opinions
of this Court, familiarity with which is assumed. See Mina
Investment Holdings Ltd. v. Lefkowitz, 184 F.R.D. 245 (S.D.N Y
1999) (hereinafter "Mina II"); Mina Investment Holdings Ltd. v.
Lefkowitz, 16 F. Supp.2d 355 (S.D.N.Y. 1998) (hereinafter "Mina
I"). Plaintiffs filed their original complaint on February 25,
1997, and their First Amended Complaint on January 12, 1998. The
First Amended Complaint contained three counts, two of which were
directed at Nippon. Count II of the First Amended Complaint
alleged tortious interference with contract against Nippon, and
Count III alleged unjust enrichment.
In considering a motion to dismiss, the facts alleged in the
complaint are presumed to be true and all factual inferences must
be drawn in the plaintiff's favor. See Scheuer v. Rhodes,
416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Mills v.
Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993);
Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989). Accordingly,
the factual allegations considered herein and set forth below are
taken from Plaintiffs' First Amended Complaint and Second Amended
Complaint, and do not constitute findings of fact by the Court.
According to the First Amended Complaint, in April 1994,
Plaintiffs agreed to loan MECO Holdings $1 million to partially
finance the acquisition of MECO. Plaintiffs' loan was made in
exchange for certain rights and obligation by MECO Holdings,
which were set forth in an agreement dated April 4, 1994 (the
"Purchase Agreement"). In part, the Purchase Agreement provided
that Plaintiffs would receive warrants for the purchase of MECO
stock, and that neither MECO nor any MECO subsidiary would assume
additional debt, issue, dispose or sell any class of stock, or
enter into or be a party to any contract aside from those
existing at the closing.
On November 21, 1995, Lefkowitz, MECO Holdings, and MECO
accepted a commitment whereby Nippon would loan $3 million to
MECO, to be used to fund a joint venture called Chicago Cold
Rolling, L.L.C. ("CCR") between Bethlehem Steel Corporation and
MIC — which was created by MECO and MECO Holdings for that very
purpose. The loan was closed on August 2, 1996. In return for the
loan, Nippon received warrants for the purchase of 175,000 shares
of nonvoting stock in MECO, which would be convertible into
voting stock upon transfer by Nippon. The loan commitment
violated the negative covenants contained within the Purchase
Agreement, and was without the consent of Plaintiffs, of which
Nippon was allegedly aware. The First Amended Complaint also
alleged numerous other violations of the Purchase Agreement which
are not germane to the instant motion.
In Mina I, Plaintiffs' claim for tortious interference against
Nippon was dismissed on the ground that Plaintiffs had failed to
adequately allege "but for" causation. Plaintiffs' unjust
enrichment claim against Nippon was also dismissed, on the
grounds that the elements of that cause of action had not
adequately been pleaded and that the existence of the Purchase
Agreement precluded any recovery for unjust enrichment.
In Mina II, this Court granted Plaintiffs' motion for
reconsideration of Mina I, but once again dismissed Plaintiffs'
unjust enrichment claim on the ground that Plaintiffs failed to
adequately allege the elements
of unjust enrichment. In Mina II, however, dismissal was not
predicated upon the rationale that the contractual remedies
available under the Purchase Agreement precluded recovery for
unjust enrichment. Because it was recognized in Mina II that the
Purchase Agreement did not absolutely preclude Plaintiffs' claim,
leave was granted for Plaintiffs to amend their deficient
On February 8, 1999, Plaintiffs filed their Second Amended
Complaint in this action. The Second Amended Complaint largely
incorporates the allegations contained within the First Amended
Complaint, but also contains additional allegations concerning
the impact of the Nippon loan upon Plaintiffs. Most
significantly, the Second Amended Complaint specifies that, as of
August 2, 1996, Nippon's receipt of warrants for the purchase of
175,000 shares of non-voting stock in MECO resulted in an
approximate 15 percent dilution of Plaintiffs' equity interest in
Nippon filed the instant motion on March 8, 1999. Papers were
received by the Court through April 1, 1999, at which time the
motion was deemed fully submitted.
Nippon contends that Plaintiffs' amendment of the complaint is
merely one of form and not substance, and that Plaintiffs have
once again failed to satisfactorily plead the elements of unjust
On a Rule 12(b)(6) motion to dismiss, the factual allegations
of the complaint are presumed to be true and all factual
inferences must be drawn in favor of the plaintiff. See Cosmas,
886 F.2d at 11. A court may not dismiss a complaint unless the
movant demonstrates "beyond doubt 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, 78 S.Ct. 99, 2
L.Ed.2d 80 (1957). However, a complaint consisting merely of
conclusory allegations unsupported by factual assertions cannot
meet even the liberal requirements of Rule 12(b)(6), see De
Jesus v. Sears, Roebuck & Co., Inc., 87 F.3d 65, 70 (2d Cir.
1996), and a complaint "must contain allegations concerning each
of the material elements necessary to sustain recovery under a
viable legal theory." Huntington Dental & Med. Co. v. Minnesota
Mining & Mfg. Co., No. 95 CIV. 10959(JFK), 1998 WL 60954, at *3
(S.D.N.Y. Feb.13, 1998) (citation omitted).
As the Second Circuit has explained, to recover on a theory of
[A] plaintiff must prove that the defendant was
enriched, that such enrichment was at plaintiff's
expense, and that the circumstances were such that in
equity and good conscience the defendant should
return the money or property to the plaintiff.
Dolmetta v. Uintah Nat'l Corp., 712 F.2d 15, 20 (2d Cir. 1983);
see Universal City Studios, Inc. v. Nintendo Co., 797 F.2d 70,
79 (2d Cir. 1996); ABF Capital Management v. Askin Capital
Management, L.P., 957 F. Supp. 1308, 1333 (S.D.N.Y. 1997);
Martes v. USLIFE Corp., 927 F. Supp. 146, 149 (S.D.N.Y. 1996). A
claim for unjust enrichment requires a plaintiff to allege that
the defendant has already been enriched, see Axel Johnson, Inc.
v. Arthur Andersen & Co., 830 F. Supp. 204, 211 (S.D.N.Y. 1993),
and that the enrichment came at plaintiff's expense. See
Huntington Dental & Med., 1998 WL 60954, at *6.
In both Mina I and II, it was found that Plaintiffs failed to
allege, in anything other than conclusory terms, the dilution of
their equity interest in MECO, the enrichment sustained by
Nippon, and the manner in which that enrichment was at
Plaintiffs' expense. In Mina II, Plaintiffs were granted leave to
amend their complaint and re-plead the elements of unjust
enrichment, and to elaborate upon the "direct effect of Nippon's
receipt of 175,000 new warrants convertible into stock and
explain the dilution of their equity interest in MECO." 184
F.R.D. at 257. While the Second Amended Complaint provides
superficial elaboration on the mechanism by which Plaintiffs'
warrants were diluted, it
provides little beyond that which was already before the Court in
To be sure, the First Amended Complaint did not specify the
specific dilution percentage, set a date upon which dilution
should be reckoned, or make clear the specific number of
Plaintiffs' warrants to be compared with Nippon's 175,000 shares.
However, the Second Amended Complaint adds virtually nothing of
substance to its predecessor. The First Amended Complaint sets
forth facts from which generic warrant dilution could be (and
was) inferred, given that Nippon was granted warrants for 175,000
shares in contravention of an agreement permitting no additional
issuance of shares, and the Purchase Agreement allotted
Plaintiffs a specified number of warrants. The First Amended
Complaint also indicates that Nippon knowingly disregarded MECO's
violation of the Purchase Agreement and Plaintiffs' failure to
consent to the Nippon loan. While the Second Amended Complaint
makes these claims more explicit, the raw material for
Plaintiffs' current unjust enrichment claim against Nippon was
already present in the First Amended Complaint.
The Second Amended Complaint fails to provide any explanation
of the nature of Nippon's enrichment, how that enrichment was or
is at the real expense of Plaintiffs, and why good conscience
requires that Nippon make restitution in this case. To do this,
given the nature of Nippon's loan to MECO, it is not enough to
merely state that Plaintiffs' warrants have been diluted by 15
percent, especially given that the warrants have yet to be
exercised, do not manifest a current or past equity interest in
MECO, and were obtained in exchange for monies that were loaned
to and used by MECO — the self-same company whose warrants are
held by Plaintiffs. Plaintiffs are correct in observing that the
dilution itself has already occurred by virtue of the Nippon loan
arrangement, but nowhere do they indicate how this has resulted
in any real enrichment at their expense.
In Mina II, Plaintiffs were invited to explain how the dilution
in this case requires restitution, how Nippon was actually
enriched by its receipt of the warrants in exchange for loaning
MECO $3 million, and how this loan arrangement ultimately came at
Plaintiffs' expense. Plaintiffs have failed to respond to this
Nippon has hypothesized that the Nippon loan, while it
technically resulted in the dilution of Plaintiffs' warrants, may
ultimately have enhanced the value of Plaintiffs' potential stake
in MECO, and that a portion of that loan was likely used to pay
Plaintiffs in full for the original $1 million loan to MECO
Holdings. While the Court does not rely on this particular
rationale in deciding the instant motion, the Second Amended
Complaint does little to explain how the abstract dilution of
Plaintiffs' warrants has created a situation in which equity
should intervene to command restitution.*fn1 Further,
Plaintiffs' allegation that Nippon "may" become unjustly enriched
in the future cannot remedy this deficiency.
For the reasons set forth above, Nippon's motion to dismiss
Plaintiffs' claim for unjust enrichment is granted.
It is so ordered.