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United States District Court, Southern District of New York

January 16, 2003


The opinion of the court was delivered by: Harold Baer, Jr., United States District Judge:



Plaintiffs, consisting of models who work or have worked at some point over the past three decades for New York modeling agencies, bring this lawsuit as a class action against the modeling agencies for allegedly violating federal antitrust and New York state laws by, inter alia, (1) conspiring to set the fees charged to models and to fix other terms and conditions of the plaintiffs' contracts; (2) knowingly charging plaintiffs fees in excess of the maximum amount permitted by New York law; and (3) deliberately breaching their fiduciary duties through various unlawful practices, incluing earning undisclosed profits from third parties, billing models for phony expenses, and making profits on services which were agree to be provided at cost. Defendants contend that the complaint should be dismissed for lack of subject matter jurisdiction over the state law claims, pursuant to Fed.R.Civ.P. ("FRCP") 12(b)(1), or failure to state a claim upon which relief can be granted, pursuant to FRCP 12(b)(6). I grant defendants' motion to dismiss plaintiffs' cause of action based on N.Y. General Business Law §§ 170-190 (1988) ("Article 11"). In addition, I dismiss without prejudice plaintiffs' non-Article 11 state law causes of action, and finally, those claims for antitrust damages before June 25, 1998 will be dismissed, with leave to replead within 20 days from the date thereof. I deny defendants' motion with respect to the remaining federal antitrust claims.


When considering a motion to dismiss pursuant to FRCP 12(b)(6), the Court is required to accept as true all of the facts alleged in the complaint and draw all reasonable inferences in the plaintiffs' favor. See Krimstock v. Kelly, 306 F.3d 40, 47-48 (2d Cir. 2002). A motion to dismiss should be granted only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Hamilton Chapter of Alpha Delta Phi, Inc. v. Hamilton College, 128 F.3d 59, 63 (2d. Cir. 1997) (citations and internal quotations omitted). It is improper, however, "`to assume that the [plaintiffs] can prove facts that it has not alleged or that the defendants have violated the antitrust laws in ways that have not been alleged.'" Todd v. Exxon Corp., 275 F.3d 91, 198 (2d Cir. 2001) (citing Associated Gen. Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983)).

Defendants' motions to dismiss under FRCP 12(b)(1) challenges this Court's statutory or constitutional power to adjudicate a case. Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). When considering a Rule 12(b)(1) motion, the Court construes the complaint broadly and liberally in conformity with the principle set out in Rule 8(f), "but argumentative inferences favorable to the pleader will not be drawn." 5A Charles A. Wright et al., Federal Practice and Procedure § 1350, at 218-219 (1990 & Supp.1991). The mover and the pleader may use affidavits and other materials beyond the pleadings themselves in support of, or in opposition to, a challenge to subject matter jurisdiction. See Land v. Dollar, 330 U.S. 731, 735 n. 4 (1947); Exchange Nat'l Bank of Chicago v. Touche Ross & Co., 544 F.2d 1126, 1130 (2d Cir. 1976), cert. denied sub. nom., 469 U.S. 884 (1984). Once challenged, the burden of establishing a federal court's subject matter jurisdiction rests on the party asserting jurisdiction. See Thomson v. Gaskill, 315 U.S. 442, 446 (1942). Unlike a motion to dismiss under Rule 12(b)(6), however, a dismissal under Rule 12(b)(1) is not based on the claim's merits. See Exchange Nat'l Bank, 544 F.2d at 1130-1131. With these standards in mind, I review defendants' motions to dismiss.


Defendants are collectively reported to be the largest modeling agencies in New York and the United States.*fn1 Compl. ¶ 53. Defendants provide models work by speaking to third parties, such as photographers, casting agents, advertising agencies, magazines, and retailers. Compl. ¶¶ 55, 57. In addition, defendants contact the models to inform them of possible employments opportunities, schedule or "book" modeling engagements, and negotiate the models' fees for the modeling engagements. Compl. ¶ 57. The modeling agencies bill and collect money from the models' employers for the jobs performed. Id. For these services, defendants for at least the past 25 years have colluded to charge a standard non-negotiable commission on all fees that plaintiffs received for modeling. Compl. ¶¶ 58, 128-129.

Plaintiffs allege that the conspiracy began between defendants Ford Models Inc. ("Ford") and Wilhelmina Model Agency, Inc. ("Wilhelmina") no later than 1977, and that this conspiracy was exposed by defendant Elite Model Management, Inc. ("Elite"), resulting in a law suit brought by it to challenge the duopoly of Ford and Wilhemina. Compl. ¶ 46. According to court papers filed by Elite, "principals of the major modeling agencies of the City of New York, agreed among themselves to raise commissions charged to the models and to circumvent the licensing requirements required by the statutes of the State of New York." Id. (quoting Levinson Affidavit, ¶ 9, Ford Models, Inc. v. Pillard, Index No. 1148/77). In an affidavit submitted by counsel for Elite, it represented that it was prepared to present sworn testimony that Ford and Wilhemina had agreed to collude to raise prices above the 10% legislative cap on commissions imposed by Article 11, which regulates employment agencies. Compl. ¶ 70. The affidavit further alleges that to circumvent the legislative cap imposed on employment agencies, Ford led a coordinated effort with other modeling agencies to disclaim their status as employment agencies, and to call itself "managers" instead. Compl. ¶ 73. Article 11 requires employment agencies to be licensed and places restrictions on the amount of commissions they may charge. Little other than the defendants' name changed, however. Id. Elite eventually dropped its lawsuit and joined with other defendants to conspire to charge the same non-negotiable commission to models at a rate that exceeded the amount permitted under New York law. Compl. ¶ 74. Pursuant to the conspiracy, defendants raised the commissions charged to models to 15% and then to 20%. Compl. ¶ 79. The defendants further agreed to implement and maintain additional price related restraints by collectively working together to draft increasingly onerous "standard contracts," including requiring the models to reimburse the agencies for any out of pocket costs incurred by the agencies in advertising the models' portfolios, pay the "mother agency" even for jobs the models obtained without the help of the agency, and pay usurious interest rates on salary advances, which defendants treated essentially as a loan. Compl. ¶ 83. In contrast to defendants' contracts, which refer to defendants as "managers," defendants, including Wilhelmina, Ford, Boss, Elite, Click Model Management, Inc. ("Click"), Next Management Co. ("Next"), Zoli Management, Inc. ("Zoli"), Q Model Management ("Q"), MFME Model Management Co. ("MFME"), DNA Model Management, LLC, and IMG Models, Inc. ("IMG"), hold themselves out as modeling agencies (e.g., modeling employment agencies). Compl. ¶¶ 102, 105.

Defendants currently charge most models an industry standard 20% for commission, and 15% if the model makes more than $200,000. Compl. ¶ 82. Defendants apparently maintained its collusive prices through various formal and informal meetings, including periodic meetings of the International Model Management Association ("IMMA"), which was founded by Gerald Ford to help implement the adoption of standardized industry contracts and fix prices. Compl. ¶¶ 85, 87, 88. By 1980, these meetings between members of IMMA which included defendants Ford, Wilhelmina, Elite, Zoli, and Next, occurred once a month. Compl. ¶¶ 85, 86. As a result of defendants' alleged unlawful agreement to fix prices on commission and charges to models, plaintiffs have been damaged and continue to be damaged by having to pay inflated prices in a non-competitive setting. Compl. ¶ 92.


1. Adequacy of Pleaded Antitrust Claims

Defendants assert that plaintiffs' antitrust claims fail to provide sufficient factual allegations to make out violations Section 1 of the Sherman Act. 15 U.S.C. § 1. To make out their claims under Section 1 of the Sherman Act, plaintiffs must plead: (1) a combination or some form of concerted action between at least two legally distinct economic entities; (2) that such combination or conduct constituted an unreasonable restraint of trade either per se or under the "rule of reason"; and (3) injury in their business or property by reason of defendants' antitrust violations. In re NASDAQ Market-Makers Antitrust Litigation, 894 F. Supp. 703, 709 (S.D.N.Y. 1995) ("NASDAQ"). Plaintiffs allege two per se violations of the Sherman Act (for fixing commissions and other charges to models), and one rule of reason claim relating to terms and conditions of employment. Defendants contend that the plaintiffs' "bare-bones" complaint fails to provide any specific allegations of unlawful conduct committed by them. I disagree.

According to plaintiffs, defendants are and have for several years been engaged in an unlawful combination and conspiracy to violate federal antitrust laws. Summarizing the factual allegations provided above, plaintiffs' complaint identifies the conspiracy's scope and purpose, its participants, examples of how defendants devised and implemented the conspiracy, an economically plausible motive for defendants to engage in the conspiracy, the manner in which defendants coordinated their restraint of trade, and the injury suffered as result of the illegal collusion, I find the allegations contained within plaintiffs' complaint more than amply meet the minimum pleading standard required by the Federal Rules to support their antitrust claims. To the extent that there may exist shortcomings in the factual allegations as to specific defendants, "in antitrust cases, where the proof is largely in the hands of the alleged conspirators . . . dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." Hosp. Bldg. Co. v. Trustees of Rex. Hosp., 425 U.S. 738, 746-47 (1976); see also In re NASDAQ, 894 F. Supp. at 712 ("[a]n overt act need not be pleaded against each defendant because a single overt act by just one of the conspirators is enough to sustain a conspiracy claim"). Taking the allegations of uniform pricing, participation in a trade association to facilitate the price fixing, and other uniform features of the contract and behavior with respect to their representation as "managers" vis-a-vis their status as modeling employment agencies, I am persuaded that plaintiffs have met their burden, at least for now, and defendants' motion to dismiss the antitrust claims is denied.

Defendants further contend that the plaintiffs have failed to allege facts to show "market power." Horizontal price fixing is a per se violation, and thus plaintiffs need not allege that defendants have "market power" as to those claims. FTC v. Superior Court Trial Lawyers' Ass'n, 493 U.S. 411, 433 & n.l5 (1990) (part of the per se rule's rationale is to "avoid a burdensome inquiry into actual market conditions . . . where the likelihood of anticompetitive conduct is so great."). Furthermore, plaintiffs' allegation that defendants control well over half of the models under contract to New York-based agencies, and have the power to dictate the terms with the clients they purportedly serve, Compl. ¶¶ 4, 53, 141, is sufficient to show market power.

Plaintiffs' second antitrust cause of action arises from a section 1 violation of the Sherman Act based on violation of Article 11. Defendant Click claims that this cause of action is not actionable. I find none of the cited cases apposite to the instant case. Click, for instance, cites a lengthy section of Telectronics Proprietary Ltd. v. Medtronic, Inc., 687 F. Supp. 832, 837 (S.D.N.Y. 1988) in support of its claim. As noted by the court in Action Ambulance Service, Inc. v. Atlanticare Health Servs., Inc., the Teletronics court "was concerned not with the propriety of pleading a criminal violation as the basis of an antitrust claim, but rather the failure of the manufacturer to assert the necessary element of unreasonable restraint of trade." 815 F. Supp. 33, 38 (D. Mass. 1993). I agree with the Action court's observation and, thus, do not consider Telectronics guiding precedent. Click further cites Sitkin Smelting & Refining Co. v. FMC Corp., 575 F.2d 440 (3d Cir. 1978). Sitkin, as a general matter, correctly states that "[c]onduct not within the scope of the Act [may] not [be] made into an antitrust violation by accompanying conduct which is . . . illegal under some other law." Id. at 447. The conduct alleged under the second cause of action here, however, pertains to a horizontal price-fixing conspiracy among defendants to evade the restrictive limits set by Article 11 on commissions and charges that defendants could lawfully collect as employment agencies. See Complaint at ¶ 135. I find that the alleged conspiracy may be considered anti-competitive, and therefore within the scope of the Sherman Act. None of the other cases cited by Click involve a Sherman Act claim premised in part on violating a state law for which there may be no private right of action. With few exceptions, states do not have the authority to reverse preempt a federal court from hearing a federal claim brought against private parties when a "well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiffs right to relief necessarily depends on resolution of a substantial question of federal law." Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 27-28 (1983); see, e.g., McCarran-Ferguson Act, 15 U.S.C. § 1011-1013 (exempting insurance companies from federal antitrust liability for conduct regulated by state insurance laws); see also United States Dept. of the Treasury v. Fabe, 508 U.S. 491, 507-08 (1993). Simply because the New York legislature may not have given individuals a private right of action for violating Article 11, see infra, does not strip a federal court of jurisdiction to hear the federal claim, which may be premised on conduct that violates a state statute. See Charles A. Wright, Law of Federal Courts 295 (5th ed. 1994) ("If the right is created by federal law, . . . it can be heard in federal court regardless of whether the state has closed its door—or validly could close its doors—to such a suit." (citations omitted)). Having found that this Court has jurisdiction over the federal antitrust claims, I find no reason to dismiss plaintiffs' second cause.

Other defendants contend that they could not have been a party to the conspiracy because they were not in business at its inception, or were not (or no longer are) members of Defendant IMMA. It is well settled, however, that the law does not require every defendant to participate in the conspiracy by identical means throughout the entire class period. Interstate Circuit, Inc. v. United States, 306 U.S. 208, 227 (1939) ("It is elementary that an unlawful conspiracy may be and often is formed without simultaneous action or agreement on the part of the conspirators."); United States v. Rea, 958 F.2d 1206, 1214 (2d Cir. 1992) ("A defendant need not have joined a conspiracy at its inception in order to incur liablity for the unlawful acts of the conspiracy committed both before and after he or she became a member."). Various defendants have invited the Court to consider extrinsic evidence, such as affidavits, declarations, and newspaper articles in consideration of whether there is evidence in support of defendants' motions to dismiss. It well settled however, that on an FRCP 12(b)(6) motion to dismiss, the Court must look for facts only in the complaint and documents attached to the complaint as exhibits or incorporated by reference in the complaint. Kramer v. Time Warner Inc., 937 F.2d 767, 773 (2d Cir. 1991). If I were to take judicial notice of additional material, which I decline to do here, Rule 12(b) would require me to treat the motion as one for summary judgment under Rule 56 and give the party opposing the motion notice and an opportunity to conduct necessary discovery and to submit pertinent material. Id; see Goldman v. Belden, 754 F.2d 1059, 1065-66 (2d Cir. 1985).

Finally, certain defendants argue that because their modeling agency contracts are not all the same and that some of the more successful models were able to negotiate a commission below 20%, the plaintiffs' allegations must be viewed as inconsistent with an anticompetitive conspiracy. The complaint alleges that the defendants entered into a conspiracy to evade the 10% cap on commission. The fact that a small number of class members may have been charged less than the benchmark 20% commission, however, does not alone negate the allegation that there was a conspiracy to fix prices above an agreed upon minimum. As the Supreme Court noted in Socony-Vacuum Oil Co., regardless of whether the prices are uniform across-the-board, if the prices are fixed according whatever formula the conspirators settle on, they are fixed and therefore a violation of the Sherman Act. 310 U.S. 150, 222 (1940). Thus, although some models, such as those that made over $200,000, Compl. ¶ 58, may have been able to obtain rates lower than the industry standard 20%, this does not negate the alleged fact that most, if not all, models began negotiation from an artificially high starting point, resulting in prices that are higher than what would have been agreed upon in the absence of a conspiracy. See In re Auction House Antitrust Litig., 193 F.R.D. 162, 166-67 (S.D.N.Y. 2000) ("Auction House"); In re NASDAQ Market-Makers Antitrust Litig., 169 F.R.D. 493, 523 (S.D.N.Y. 1996) ("NASDAQ II"). As to defendants' remaining contentions in regard to the antitrust claims, I find them without merit.

2. State Law Claims

Having found a federal question, and therefore that this Court has subject matter jurisdiction with respect to the alleged violation of federal law, I must next decide whether I can and should exercise supplemental jurisdiction over plaintiffs' New York state law claims. 28 U.S.C. § 1367.

a. New York Article 11 Claim

Plaintiffs asserts as a fourth cause of action that defendants violated Article 11. Defendants argue that Article 11 does not provide either an express or implied private right of action. Section 189 of Article 11, entitled "Enforcement of provisions of this article," provides that this article "shall be enforced by the commissioner of labor, except that in the city of New York this article and such sections shall be enforced by the consumer affairs of such city." N.Y. General Business Law § 189 (McKinney 1988). To begin with, Article 11 does not provide an express private right of action to obtain civil remedies from violators of the article. See id. To imply a private right of action when not expressly provided by statute, plaintiffs must prove (1) they are members of the class for whose benefit the statute was enacted; (2) a private right of action would promote the legislative purpose; and (3) creation of such a right of action would be consistent with the legislative scheme. Sheehy v. Big Flats Community Day, 73 N.Y.2d 629, 633 (1989); see also Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d 314, 329-31 (1983). I have no doubt that the first and second prongs of the Sheehy test are satisfied. The legislature sought through enforcement of Article 11 to protect working people, such as the models, from unscrupulous employment agencies because it considered working people "unable as a class to protect themselves against agencies offering jobs upon payment of unfair and unreasonable fees. . . [T]he business was subject to the abuse of extortionate overcharges. The legislators regarded this as one of the principal reasons for regulation." Society of Models, Inc. v. Moss, 53 N.Y.S.2d 425, 425 (N.Y. Sup. Ct. 1933) (quoting Abbye Employment Agency, Inc. v. Robinson, 2 N.Y.S.2d 947, 952 (1st Dep't 1938)); see also Heyman v. Howell, 133 N.Y.S.2d 19, 21 (N.Y. Ct. Spec. Sessions 1954) ("The primary purpose of the statute in question and the related sections of Article 11 of the General Business Law is to regulate employment agencies for the protection of the applicant for work against many possible abuses."). Furthermore, "it cannot be denied that recognition of a private right of action for civil damages would, as a general matter, advance the legislative purpose" and enable more vigorous enforcement of Article 11. Sheehy, 73 N.Y.2d. at 634. The only outstanding concern then is whether plaintiffs meet the third prong of the Sheehy test.

Plaintiffs argue that § 190 of Article 11, which provides private individuals the right to have instituted a criminal proceeding, suggests a legislative intent to give individuals a private right to enforce civil remedies. Although the general rule in New York asserts that "statutes which on their face provide penal sanctions also imply a private right of action" particularly where "disregard of the command of a statute is a wrongful act, and where it results in damage to one of the class for whose benefit the statute was enacted, Diehl & Sons, Inc. v. Int'l Harvester Co., 445 F. Supp. 282, 289 (E.D.N.Y. 1978) (quoting Jones v. Beame, 382 N.Y.S.2d 1004, 1007 (S.Ct. N.Y. County Spec. Term 1976) (citations omitted), "if a provision or body of law has a potent official enforcement mechanism, the Legislature contemplated administrative enforcement and [thus] there is no private right of action." Carube v. New York City Transit Authority, 738 N.Y.S.2d 67, 67 (2d Dept. 2002); see Uhr v. East Greenbush Central Sch. Dist., 94 N.Y.2d 32, 40 (1999)(finding private right of action inconsistent with statutory scheme when legislature has provided a potent enforcement mechanism through the Commissioner of Education with the duty and power to enforce the education law). In Carube, the court noted that the statutes at issue were silent on whether a private right of action existed, and that under the applicable statutory provisions, the commissioner of labor, as in Article 11, is charged with enforcement. Id. In view of the legislative scheme which named the commissioner as the only authority with power to enforce the statute, the Appellate Division in Carube held that the lower court properly dismissed the proceeding instituted by a private individual pursuant to CPLR article 78. Id. As evidence that the Department of Consumer Affairs ("DCA"), which is charged with enforcement in New York City, is not a "potent" official enforcement mechanism, plaintiffs refer to a 1973 New York Supreme Court Opinion, which stated in dicta that the DCA had failed to meet its burden of showing it had the authority to subpoena petitioner Ford Models, Inc. so as to investigate whether it was operating as an employment agency without a license. Ford Models, Inc. v. Dep't of Consumer Affairs of the City of New York, No. 4235/73, slip op. at 2 (N.Y. Sup.Ct. Spec. Term August 30, 1973). Plaintiffs suggest, at least before the 1975 amendment to Article 11, that the DCA may not have had the authority to subpoena an entity operating without a license. Plaintiffs' Dec. 9, 2002 Letter. The court in Ford quashed DCA's subpoena in large part because the DCA had made no showing that Ford was operating as an employment agency, despite the fact that Ford had "voluntarily permitted respondent to examine its records to ascertain whether [it was] violating the law respecting employment agencies." Id. In any event, the DCA now has authority to "subpoena records and witnesses or otherwise conduct investigations of any employer or other person where [it] has reasonable grounds for believing that such employer or person is violating or has conspired or is conspiring with an employment agency to violate this article or such sections." N.Y. General Business Law § 189(2). Plaintiffs supply no contemporaneous evidence (at least from the past 25 years) to demonstrate that underenforcement is a current problem or that the DCA or commissioner of labor should be considered an "impotent" enforcement agency.

In further support of its position that individuals have a private right to sue under Article 11, plaintiffs cite to a handful of court opinions that countenanced the assertion of Article 11 by private individuals. In each case cited, however, none of the opponents to the assertion raised the lack of a private right of action as a defense. Moreover, none of the courts gave careful consideration to whether a private right of action actually existed. See Mandel v. Liebman, 303 N.Y. 88, 97-98 (1951)(rejecting affirmative defense that contract was void because it violates § 172 of Article 11); Friedkin v. Harry Walker, Inc., 395 N.Y.S.2d 611, (N.Y. Civ. Ct. 1977) (finding defendant violated § 172 of Article 11); Dorrell Assocs. v. Urb Prods. Corp., 325 N.Y.S.2d 507, 509 (N.Y. Civ. Ct. 1971) (holding claim to compensation by plaintiff employment agency barred because of failure to comply with Article 11); Heyman, 133 N.Y.S.2d at 21 (finding defendants were not an employment agency and thus Article 11 was inapplicable); Bose v. United Employment Agencies, Inc., 102 N.Y.S.2d 1012, 1015 (1951) (finding on the facts that plaintiff was not entitled to relief under Article 11). With the exception of Friedkin, none of the courts gave relief to the plaintiff under Article 11. When the question of the court's subject matter jurisdiction to hear an Article 11 claim brought by a private individual was raised on appeal, the Appellate Division affirmed the lower court's holding that Article 11 "is to be enforced in this locality by the Commissioner of Consumer Affairs of New York City (General Business Law, Section 189), and the only remedy available to plaintiff with respect to the statute is the administrative procedure detailed herein." Morin v. Curtis Assocs. Personnel, Inc., 393 N.Y.S.2d 16, 17 (1st Dep't 1977).

Plaintiffs lastly proffer a 1997 letter from the DCA, which cites Friedkin and impliedly acknowledges that a private party may bring a claim under Article 11. As noted in Metropolitan Ass'n of Employment Agents of New York v. Gourdine, however, the DCA "may not make regulations that are legislative in character." 465 N.Y.S.2d 816, 817 (N.Y. Sup. Ct. 1983), aff'd 485 N.Y.S.2d 266 (1st Dep't 1985). If the adopted policies or regulations "add to or change the requirements of article 11 of the General Business Law, it does not matter how harmonious the regulations are with respect to general legislative policy. . . . They must be nullified because they are legislative, not administrative in character." Id. (citing Broidrick v. Lindsay, 39 N.Y.2d 641, 646 (1976)). DCA's opinion attempts to broaden the scope of enforcement authority provided by Article 11, and accordingly is legislative in character.

Although allowing a private right of action might advance the legislative goal of protecting employees, "the most critical inquiry in determining whether to recognize a private cause of action where one is not expressly provided is whether such action would be consistent with the over-all legislative scheme." Hoxie's Painting Co. v. Cato-Meridian Cent. School Dist., 76 N.Y.2d 207, 212 (1990). The history surrounding the last two amendments to Article 11 suggest that there was no intent by the legislature to provide a private right of action. Article 11 was recodified and amended in 1958 to "specifically locate enforcement and licensing responsibility with a specific official in each community in the State" and "expand the authority of these law enforcers . . . to issue interpretive regulations" and "increase the arsenal of penalties." D'Avanzo Exh. A. According to the 1958 Budget Report on Bills, "primary responsibility for enforcement continues to lie with local units of government" and because "no basic change in the method of enforcing these regulations" is contemplated, the effect on the state budget was expected to be insignificant. D'Avanzo Exhibit C. According to a memorandum prepared by the Commerce and Industry Association of New York, Inc. ("CIANY"), which was among the parties consulted on the recodification of Article 11, it was "contemplated that licensing and enforcement would remain in the hands of local authorities in New York City and probably in certain of the larger cities up-state." D'Avanzo Exh. B. Despite concerns expressed by the CIANY about underenforcement of Article 11 in areas outside large cities, id, the legislature did not amend Article 11 to provide a private right of enforcement. Instead, in the opinion of the counsel to the Governor, the legislature delegated enforcement authority "entirely to local authorities, that is, to city license commissioners or town and village clerks." D'Avanzo Exh. F. The counsel to the Governor also expressed misgivings that Article 11 would be underenforced, particularly in town and villages where "clerks simply cannot provide for careful investigation of applicants for agency licenses." Id. Although the legislature recognized that under the law before 1958 there was "no enforcement in many communities, and the power of the commissioner of license [was] not commensurate with his responsibility for enforcing the law," it refused to implement alternative enforcement means, e.g., a private right of action, and instead "expand[ed] the authority of these law enforcers respecting the power to inspect books and records and issue interpretive regulations." D'Avanzo Exh. A. In 1975, the legislature again amended Article 11, but rather than provide a private right of action to more effectively enforce Article 11, it chose to give additional powers to the commissioner. D'Avanzo Exh. H, J. The legislature clearly contemplated administrative enforcement of Article 11. Sadly perhaps and despite pressure from consumer groups that were contrary minded, the legislature concluded not to broaden the language, which only underscores the lack of legislative intent to create a private right of action. See Uhr, 94 N.Y.2d at 41; cf. Goshen v. Mutual Life Ins. Co. of New York, 98 N.Y.2d 314, 324 (2002) (observing the existence of a private right of action only after legislature expressly sought to "broaden the effectiveness of the statute").

Currently, section 189 of Article 11 provides that the commissioner of labor (or the Department of Consumer Affairs in the city of New York) "may make reasonable administrative rules within the standards set in this article," N.Y. General Business Law § 189, "inspect the premises, registers, contract forms, receipt books, application forms, referral forms, reference forms, reference reports and financial records of fees, charged and refunds made of each employment agency [no] less frequently than once every eighteen months," id, "subpoena records and witnesses or otherwise conduct investigations of any employer or other person where he has reasonable grounds to believe such employer or person is violating . . . this article," id., "hold a hearing" on complaints lodged by employment agencies, trade associations, or others, and levy fines and revoke or suspend the license of those found guilty after a hearing. Id. In addition, section 190 of Article 11 provides private individuals or the commissioner of labor the right to press for criminal proceedings to be instituted against "officers of a corporation and stockholders holding ten percent or more of the stock of a corporation which is not publicly traded, who knowingly permit the corporation to violate" various sections of Article 11. Id. § 190. Together, sections 189 and 190 set forth a comprehensive scheme by which Article 11 is to be enforced, and I decline to depart from that legislative scheme and engraft another enforcement mechanism. Mark G. v. Sabol, 93 N.Y.2d 710, 734 (1999). Accordingly, I grant defendants' motion to dismiss plaintiffs' fourth cause of action.

b. Non-Article 11 State Claims

Plaintiffs also assert a fifth, sixth and seventh cause of action for breach of fiduciary duty, unjust enrichment, and an accounting. Plaintiffs' non-Article 11 causes of action are premised in large part on violation of Article 11. See, e.g., Compl. ¶¶ 155-156, 161-163, 167. For instance, plaintiffs assert that defendants failed to disclose that they were operating without a license as an employment agency "in contravention of New York State Law," e.g., § 172 of Article 11, and that "[b]y failing to disclose that they were in fact acting as employment agencies, and by charging excessive fees," e.g., in excess allowed under § 185 of Article 11, "Defendants breached their fiduciary duties." Compl. ¶¶ 155, 156. In plaintiffs' unjust enrichment claim, plaintiffs contend that defendants are "employment agencies as defined by § 171 [of Article 11]" and that defendants "entered into oral and written contracts with Plaintiffs that require Plaintiffs to pay at least 20% commissions in violation of New York state law." Id. at ¶ 162. Namely, "these oral and written contracts violate GBL §§ 172 and 185 [of Article 11]." Id. at ¶ 163. Thus, according to plaintiffs, defendants have been unjustly enriched by these unlawful contracts. Id. at ¶ 164. The damages sought appear to represent an effort to enlarge the remedies that the New York Court of Appeals prohibited when the legislature has already set forth remedies in the statute. See Sheehy, 73 N.Y.2d. at 636. The Court of Appeals stated in Sheehy that where the "Legislature has not been completely silent but has instead made express provision for civil remedy, albeit a narrower remedy than the plaintiff might wish, the courts should not ordinarily attempt to fashion a different remedy with broader coverage." Id. at 636 (emphasis added). In Sheehy, the plaintiff attempted to recover damages under common-law tort principles for harm caused by defendant's sale of alcohol to underage people. Id. at 632-33. The plaintiff tried to avail herself of this civil remedy by piggy-backing on to the penal statute and relying on the proposition that New York "statutes which on their face provide penal sanctions also imply a private right of action." The Court of Appeals rejected the plaintiffs argument, noting that the legislature already provided a civil remedy for such conduct, and where there are two statutes that address the same wrong (one civil and one penal), courts should not attempt to alter the remedy provided by the legislative scheme. Id. at 636; cf. General Teleradio, Inc. v. Manuti, 131 N.Y.S.2d 365, 369 (1st Dep't 1954) (finding right of action for plaintiff to enforce civil remedy premised on violation of the penal statute when legislature did not provide a civil remedy in the statutes). Indeed, "where a new right is created, or a new duty imposed by statute, [such as that imposed by Article 11 on employment agencies], if a remedy be given by the same statute for its violation or nonperformance, the remedy given is exclusive," and thus the "remedy can be only that which the statute prescribes." Drinkhouse v. Parka Corp., 3 N.Y.2d 82, 88 (1957). Here, Article 11 provides that anyone found guilty of violating any provision of the Article may have its license suspended or revoked and/or a fine for each violation not to exceed $500, and in addition, "[a]ny employment agency which collects . . . fees contrary to provisions of the Article shall return the fee or the excess portion within seven days after receiving a demand therefor." N.Y. General Business Law §§ 185, 189.

Aspects of plaintiffs' state law claims, however, may engender duties that do not arise from an Article 11 violation, which would be permissible and over which I could exercise supplemental jurisidiction. While exercise of supplemental jurisdiction over plaintiffs' claims may be "a favored and normal course of action," Marisol A. v. Giuliani, 929 F. Supp. 662, 686 (S.D.N.Y. 1996), the Court has discretion to decline to exercise jurisdiction over pendent claims if they "raise[] a novel or complex issue of State law . . . or in exceptional circumstances, there are other compelling reasons for declining jurisdiction," 28 U.S.C. § 1367, such as the likelihood of "jury confusion in treating divergent claims for relief, that would justify separating state and federal claims for trial." United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 727 (1966) (internal citation omitted); see Purgess v. Sharrock, 33 F.3d 134, 138 (2d Cir. 1994). Here, I find that the non-Article 11 claims, on the basis of plaintiffs' complaint, appear heavily intertwined with the duties created by Article 11. In view of the interrelationship between the Article 11 and non-Article 11 claims, and the likely difficulty and confusion that may arise from trying to separate facts in support of the impermissible non-Article 11 state claims from the permissible non-Article 11 claims and the federal antitrust claims, I decline to exercise jurisdiction over any of plaintiffs' state law claims. Because plaintiffs' state law claims may have a basis on grounds other than Article 11 violations, upon which a remedy could be had, I am granting, without prejudice, defendants' motion to dismiss plaintiffs' fifth, sixth, and seventh causes of action.

3. Impact of Statute of Limitations on Plaintiffs' Claims

Defendants further contend that all of plaintiffs' claims are time barred by the applicable statute of limitations. Plaintiffs allege that defendants' conspiracy has continued through the filing date of their complaint. See Compl. ¶¶ 52, 82-83, 128, 132. When there are continuing antitrust violations, such as a price-fixing conspiracy, each overt act that is part of the violation and that injures the plaintiffs starts the statutory period running again, "regardless of the plaintiffs knowledge of the alleged illegality at much earlier times." Klehr v. A.O. Smith Corp., 521 U.S. 179, 189 (1997). Thus, plaintiffs' alleged continuing antitrust violations are sufficient to permit plaintiffs to recover damages incurred at least for the four years prior to the filing date of the complaint. Id. 189-90 (noting that "plaintiff cannot use an independent, new predicate act as a bootstrap to recover for injuries caused by other earlier predicate acts that took place outside the limitations period").

Defendants suggest that the Court should dismiss plaintiffs' antitrust claims, to the extent that they are based on transactions that took place more than four years ago, because plaintiffs knew or should have known by exercise of due diligence of their claims before 1998. Plaintiffs allege in their complaint that they were unaware of the antitrust violation because defendants fraudulently concealed their improper conduct, which would toll the statute of limitations on the federal antitrust claims. State of New York v. Hendrickson Bros., 840 F.2d 1065, 1083 (2d Cir. 1988). To prove fraudulent concealment, the plaintiffs must show that the (1) defendants concealed the existence of an antitrust violation, (2) which prevented plaintiffs' discovery of the violation until some time within the four year statute of limitations, and (3) plaintiffs' ignorance of the defendants' antitrust infraction was not due to lack of diligence. Id. at 1083.

To show that defendants took affirmative steps to conceal their conspiracy, plaintiffs aver in their complaint, inter alia, that the defendants were experienced business people, Compl. ¶¶ 93-98, defendants knew of the laws that they intentionally violated, Compl. ¶¶ 69-73, 77-78, 108-109, defendants exchanged extensive information amongst themselves to coordinate their actions, which they did not share with plaintiffs, Compl. ¶¶ 84-92, and defendants did not disclose that their standard rate was set pursuant to a price-fixing agreement with other modeling agencies, Compl. ¶¶ 58-59, 79, 119. In light of the plaintiffs' contention that the vast bulk of the models are unrepresented by a manager or counsel, Compl. ¶ 58, and are young, with an average career length of six years, many of whom were not even born when the lawsuit instituted by Elite came to be publicized, Dec. 5, 2002 Hearing at 37, I find it hardly reasonable to expect plaintiffs to comb through newspaper articles about a two-decade old lawsuit or appreciate that the alleged conduct would be actionable under the antitrust laws. See Thompson v. Metropolitan Life Ins. Co., 149 F. Supp.2d 38, 48-53 (S.D.N.Y. 2001) (noting that despite newspaper coverage and broadcast news coverage, there were genuine issues of material fact in regard to plaintiffs' notice of defendants' alleged unlawful conduct); Antonios A. Alevizopoulos & Assoc. Inc. v. Comcast Int'l Holdings, Inc., 100 F. Supp.2d 178 (S.D.N.Y. 2000). I am satisfied that plaintiffs have alleged enough to show that defendants' acts of concealment prevented plaintiffs from discovering their claims within the limitations period. See Cerbone v. Int'l Ladies Garment Workers' Union, 768 F.2d 45, 48-49 (2d Cir. 1985); Hendrickson Bros. Inc., 840 F.2d at 1083.

I find that plaintiffs, however, have not met their burden of pleading with particularity the third element of fraudulent concealment. See Klehr, 521 U.S. at 194-95. "[G]eneral assertions of ignorance and due diligence without more specific explanation for the delay in bringing a suit will not satisfy [the] pleading requirements." Philip Morris Inc. v. Heinrich, 1996 WL 363156, at * 12 (S.D.N.Y. June 28, 1996). Even upon a generous reading of plaintiffs' complaint, I find plaintiffs do not indicate when it acquired knowledge of its causes of action against defendants, nor have they adequately pleaded diligence in attempting to discover the alleged fraud. Accordingly, I will grant defendants' motion to bar antitrust damages for claims arising before June 25, 1998, with leave to replead within 20 days from the date hereof.

4. Forum Selection Clauses

Finally, some of the defendants assert that the forum selection clause in defendants' contracts requires the law suit to be brought in California. Defendants are incorrect. The agreement mandates nothing more than consent to a specific jurisdiction, and does not make that jurisdiction "exclusive," which would render jurisdiction in California mandatory. Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 76 (9th Cir. 1987) (holding that the language — "The courts of California, County of Orange, shall have jurisdiction over the parties in any action at law relating to the subject matter or the interpretation of this contract." — is permissive (emphasis added)); see also AGR Fin. L.L. C. v. Ready Staffing, Inc., 99 F. Supp.2d 399, 403 (S.D.N.Y. 2000) (in accord); Berg v. MTC Electronics Technologies, 71 Cal.Rptr.2d 523 (Ct. App.2d Dist. 1998).


For the foregoing reasons, defendants' motion to dismiss plaintiffs' Article 11 cause of action is granted, and I decline to exercise supplemental jurisdiction on the remaining state claims. Defendants' motion to dismiss the antitrust claims arising before June 25, 1998 is granted with leave to replead within 20 days from the date hereof. Plaintiffs have satisfactorily pleaded antitrust claims for damage suffered by them after June 25, 1998, and thus those claims survive defendants' motion to dismiss. The motion for class certification will be fully briefed and courtesy copies provided to chambers by February 17, 2003. Finally, simply to put all parties on notice, should reliable information (which has yet to come to my attention) be provided to the Court, and it suggests in any way, shape, or form harassment of plaintiffs to discourage their participation in this lawsuit, I will schedule a hearing, issue subpoenas, and should I find any wrongdoing, take appropriate action.


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