United States District Court, N.D. New York
April 15, 2004.
SEARS PETROLEUM & TRANSPORT CORP. and SEARS OIL CO., INC., Plaintiffs, -v- ICE BAN AMERICA, INC. a/k/a NATURAL SOLUTIONS CORP., ICE BAN, USA, INC. and THE ESTATE OF GEORGE JANKE, through Lisa Knuth, as representative of the Estate of George A. Janke, Defendants, IMUS, INC. and SEARS ENVIRONMENTAL APPLICATIONS COMPANY, L.L.C., Nominal Defendants
The opinion of the court was delivered by: HOWARD MUNSON, Senior District Judge
MEMORANDUM DECISION AND ORDER
This diversity action was commenced by plaintiffs Sears Petroleum &
Transport Corp. and Sears Oil Co., Inc. ("Sears") against Ice Ban
America, Inc., Ice Ban USA, Inc., and George Janke, the primary
shareholders in the Ice Ban companies, to recover for fraud, breach of
contract, patent infringement, breach of fiduciary duty and violations of
the Lanham Act, 15 U.S.C. § 1121. The case was originally instituted in
New York State Supreme Court (County of Oneida), and removed to federal
court by the defendants. Plaintiffs assert that the late George Janke
fraudulently induced them into creating a Limited Liability Company ("the
L.L.C.") named Sears Environmental Applications Company, ("SEACO") for
the purpose of selling and distributing a revolutionary de-icing product
trade named "Ice Ban" by representing that Ice Ban USA, Inc. ("USA") was
either a licensee or owner of the pertinent patent (collectively
the"Toth/918 patents") for the de-icing agent.
Plaintiffs allege that neither USA nor Janke owned or controlled these
patents, and further maintain that based on this fraudulent
representation, plaintiffs loaned SEACO over $300,000 and expended
$100,000 on "management services." Plaintiffs also maintain that even
though the SEACO creation agreement provided that SEACO would have an
exclusive license to sell "Ice Ban" within the New England states,
defendants violated this agreement by permitting other parties to market
"Ice Ban" within these States.
On September 28, 1999, defendants moved to dismiss the amended
complaint on the grounds that the court lacked jurisdiction over
defendants George Janke and USA and Ice Ban America, Inc., and that
plaintiffs failed to plead fraud as to each of the defendants with the amount of particularity required by Fed.R.Civ.P. 9(b). Additionally,
although not included in their formal motion, but in their Memorandum of
Law defendants, requested the court to stay this action pending the
outcome of a second action between the parties hereto in Florida state
In his decision of May 15, 2000, on that motion, The Honorable
Frederick J. Scullin, Jr. denied defendants' request to stay this action
as well as the motion to dismiss the amended complaint against George
Janke for lack of personal jurisdiction; and the motion to dismiss the
amended complaint for failure to plead fraud with the specificity as to
George Janke and Ice Ban America, Inc.
Defendants' motions to dismiss the amended complaint for lack of
personal jurisdiction as to USA and for failure to plead with the
particularity required by Fed.R.Civ.P. 9(b) were denied without prejudice
and plaintiffs were given 60 days of limited discovery, and then 30 days
from the close of discovery to file a second amended complaint.
Defendants would thereupon have 30 days to make application by letter
brief to dismiss this claim.
By order dated March 27, 2002, Chief Judge F.J. Scullin, Jr.,
reassigned this action to the Honorable Howard G. Munson.
Plaintiffs filed a second amended complaint on August 10, 2000,
however, defendants did not make an application by letter brief to
dismiss the two claims pending against Ice Ban, USA, Inc., within 30 days
after this complaint was filed.
While it is true that an amended complaint ordinarily supersedes a
prior complaint, and renders it of no legal effect, International
Controls Corp. v. Vesco, 556 F.2d 665, 668 (2d Cir. 1977), cert.
denied, 434 U.S. 1014, 98 S.Ct. 730, 54 L.Ed.2d 758 (1978). It is
also true that if the amended complaint also contains new matter, the defendant may bring a
second motion under Rule 12 to object to the new allegations only. FBN
Food Services. Inc. v. Derounian, 6 F.R.D. 11, 13-14 (N.D. Ill. 1946).
Nevertheless, the amended complaint does not automatically revive all the
defenses and objections the defendant may have waived in a first motion
to dismiss or to challenge the sufficiency of the amended complaint with
arguments that were previously considered and decided by the court in the
first motion to dismiss. Nor may defendant advance arguments that could
have been made in the first motion to dismiss but neglected to do so.
Id.; Gilmore v. Searson/American Express, 811 F.2d 108, 112 (2d Cir.
After obtaining various documents relating to USA, from counsel in
Florida, plaintiffs' counsel decided that limited discovery would be
unnecessary and so notified defendants' counsel. (5/22/01 Affidavit of
Ted H. Williams, Esq. p., 2, Dock. # 84).
Plaintiffs' second amended complaint merely sought to correct
insufficient allegations in the targeted issues of jurisdiction and fraud
regarding defendant USA. It did not revive defendants' right to challenge
the sufficiency of the prior complaint or defenses already denied.
Defendants answered the second amended complaint on September 5, 2000,
and an amended answer on September 21, 2000.
On May 8, 2001, defendants filed a motion seeking dismissal of the
Second Amended Complaint as against USA., pursuant to Federal Rules of
Civil Procedure 12(2) judgment on the pleadings, and 12(b)(2) lack of
jurisdiction over USA. However, the Rule 12(b)(2) portion of the motion
was untimely and could not be considered because defendants served their
answer to the amended complaint prior to making their motion. Tyco.
Instruments Limited v. Walsh, 2003 WL 553580, at *2 (S.D.N.Y Feb. 27,
2003). Plaintiffs opposed defendants' motion. Federal Rule of Civil Procedure 12(2) provides that, after the
pleadings are closed, any party may move for judgment on the pleadings
provided the trial of the action is not delayed.
Because a judgment on the pleadings focuses on the pleadings
themselves, and not on matters outside of the pleadings such as
affidavits, a motion for judgment on the pleadings is not well-suited for
the determination of whether the court lacks personal jurisdiction over
defendant Ice Ban USA, Inc. in this action. Matters relating to personal
jurisdiction often are not apparent on the face of the pleadings, and a
court considering a challenge to its jurisdiction with respect to a
defendant may well need to receive affidavits and other relevant matters
outside the pleadings in determining the jurisdictional facts of a case.
Rule 12(2) further provides that "[i]f, on motion for judgment on the
pleadings, matters outside of the pleadings are presented to and not
excluded by the court, the motion will be treated as one for summary
judgment and disposed of as provided in Rule 56, and all parties shall be
given reasonable opportunity to present all material made pertinent to
such a motion by Rule 56.
Since the parties hereto had presented matters outside the pleadings
to, and not excluded by the court, it was decided that defendants'
motions would be treated as one for summary judgment and disposed of as
provided in Rule 56. The parties were then provided with appropriate time
periods to submit materials they considered pertinent to deciding the
summary judgment motion.
Having converted defendants' motion for judgment on the pleadings, and
having provided the parties with an opportunity to submit additional
material, the court will now consider the merits of the motion for
summary judgment. DISCUSSION
Summary judgment is proper if, viewing all the facts of record in a
light most favorable to the non-moving party, no genuine issue of
material fact remains for adjudication. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 247-50, 106 S.Ct. 2505, 2509-11, 91 L.Ed.2d 202 (1986).
"[T]he mere existence of some alleged factual dispute between the parties
will not defeat an otherwise properly supported motion for summary
judgment; the requirement is that there must be no genuine issue of
material fact." Samules v. J. Mockry, 77 F.3d 36, 36 (2d Cir. 1996).
The non-movant may defeat summary judgment only by producing sufficient
facts showing that there is a genuine issue of material fact for trial.
Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552,
91 L.Ed.2d 265 (1986). Furthermore, the non-movant "`will have his
allegations taken as true, and receive the benefit of the doubt when his
assertions conflict with the movant.'" Piesco. v. City of New York,
933 F.2d 1149, 1154 (2d Cir.) (quoting 10 Wright, Miller & Kane, Federal
Practice and Procedure, § 2716 (1933)), cert. denied, 502 U.S. 921,
112 S.Ct. 331, 1116 L.Ed.2d 272 (1991).
Nevertheless, courts have cautioned that Federal Rule of Civil
Procedure 5 6(e) expressly provides that a plaintiff opposing summary
judgment may not rely on his complaint to defeat the motion, and that
litigants should be on notice from the very publication of Rule 56(e)
that a party faced with a summary judgment motion "may not rest upon the
mere allegations or denials" of the party's pleadings and that if the
party does not respond properly, summary judgment, if appropriate, shall
be entered. Graham v. Lewinski, 848 F.2d 342, 344 (2d Cir. 1988) (quoting Fed.R.Civ.P. (56(e)).
Personal jurisdiction as to defendant George A. Janke:
Plaintiffs have the burden of establishing this court's jurisdiction
over defendants Janke and USA. In re Magnetic Audiotape Antitrust
Litigation v. BASF AG Aktiegesellschaft, 171 F. Supp.2d 179, 183
(S.D.N.Y. 2001). Should the proponent fail to satisfy this burden, the
court must dismiss the action. Richmond v. Fredericksburg & Potomac
Railroad Co., 945 F.2d 765, 768 (4th Cir. 1991).
The exercise of personal jurisdiction in diversity cases is governed by
the law of the forum state. Arrowsmith v. United Press International,
320 F.2d 219 (2d Cir. 1963) (en banc); Braman v. Mary Hitchcock Memorial
Hospital, 631 F.2d 6 (2d Cir. 1980).
The New York State jurisdictional law, CPLR § 302, or long arm
statute, provides in relevant part:
[A] court may exercise personal jurisdiction over a non-domiciliary
. . . who in person or through an agent:
1. Transacts business within the state or contracts
anywhere to supply goods or services in the state; or
2. Commits a tortious act within the state . . . or
3. Commits a tortious without the state causing
injury to a person or property within the state
. . . if he
(i) regularly does or solicits business or, engages
in any other persistent course of conduct, or
derives substantial revenue from goods used or
consumed or services rendered, in the state, or (ii) expects or should reasonably expect the act to
have consequences in the state and derives
substantial revenue from interstate or international
4. owns, uses or possesses any real property situated
within the state.
This court's exercise of personal jurisdiction over a non-domiciliary
defendant must satisfy constitutional due process as well as the relevant
state statute. Hedlund v. Products from Sweden, Inc., 698 F. Supp. 1087,
1090 (S.D.N.Y. 1988). A court's exercise of jurisdiction over a
non-domiciliary defendant comports with due process if a party has
sufficient minimum contacts with it such that maintenance of the suit
does not offend traditional notions of fair play and justice.
International Shoe Co. v. State of Washington, 326 U.S. 310
66 S.Ct. 154, 158, 90 L.Ed.2d 154, 158, 90 L.Ed. (1945); Burger King
Corporation v. Rudzewicz, 471 U.S. 462
, 105 S.Ct. 2174, 85 L.Ed.2d 528
(1985). New York's long-arm statute, which permits jurisdiction over
non-residents reflects those due process concerns. Kreutter v. McFadden
Oil Corporation, 71 N.Y.2d 460, 527 N.Y.S.2d 195, 198 (1998). Because the
statute does not extend jurisdiction as far as may be constitutionally
possible, Hedlund, 698 F. Supp. at 1090 (S.D.N. Y. 1988), this court's
exercise of personal jurisdiction over defendant George A. Janke and USA
pursuant to CPLR § 302 would accord with due process.
It is apparent that the crux of this litigation is whether defendant
Janke and/or Ice Ban USA, had ownership of the Toth /918 patents which
would give them the right to create or manufacture the trade named Ice
Ban deicing agent that was to be distributed and sold under the terms of
the L.L.C. agreement. Plaintiffs allege that Janke's supposed ownership
of these patents was the critical inducement to enter the L.L.C.
agreement and caused them to sustain considerable monetary damages as a
result. Janke's non-ownership of these patents is the source of controversy with the defendants.
On a summary judgment motion, the non-movant will have his allegations
taken as true, and receive the benefit of the doubt when his assertions
conflict with the movant. United States v. Diebold, 369 U.S. 654, 655,
82 S.Ct. 993, 994, 8 L. ED.2d 176 (1962).
The record in the instant case discloses that the trade named Ice Ban
deicing agent was developed in Budapest, Hungary in the mid-1980s' by
Jeno Toth, Joseph Szeles, Sr. and Otto Engenhoffer. The developers
patented the deicing agent in Hungary and other European countries. It
was also patented in the United States as an "anti-freeze composition
substitute for making surfaces free of snow and ice, comprising . . . a
waste concentrate of [the] alcohol industry." (collectively the "Toth
Patents"). The United States patent was issued to the three Hungarian
inventors on June 30, 1987 as U.S. Patent No. 4,676,918 ("the 918
Patent") entitled "Anti-Freeze Composition Suitable For Making Surface
Free of Snow and Ice."
In a document signed by the various parties thereto on May 31, 1994
and/or June 10, 1994, Jeno Toth, Otto Egenoffer and the successors in
interest to Joseph Szeles, Sr., Joseph Szeles, Jr. and Gabriella Szeles
sold the Toth/918 patents to Karl and Barbara Ronaszeki. The agreement
called for the purchasers to pay the sellers $750,000 on or before the
one year from the execution of the sale agreement. The purchasers had the
right to extend the payment due date for an additional 90 day period if
A document entitled "Assignment Agreement" was entered between
defendant George Janke and Karl and Barbara Ronaszeki on May 28, 1994.
This agreement assigned the Toth/918 patents rights to Janke. This
Assignment Agreement may have been only an agreement to agree as its last
paragraph recites that "[t]his draft will be finalized in a final
assignment formally setting forth the terms and conditions outlined above."
This Assignment Agreement is the basis for George A. Janke's claim that
he purchased the rights to the Toth/918 patents from Karl and Barbara
Ronaszeki, and subsequently assigned these rights to Ice Ban USA, Inc.
However, in an unrefuted written statement dated November 13, 1998, Peter
Toth, Otto Bgenhoffer and Josef Szeles confirmed unequivocally that they
have not individually, collectively, nor their predecessors in ownership
received any money or other compensation whatsoever as a result of the
agreement to sell the Toth/918 patents entered with Karl and Barbara
Ronaszeki. (Sears Affidavit Exhibit M).
Non-payment of the agreed upon sale price for the Toth/918 patents by
Karl and Barbara Ronaszeki constituted a failure of consideration which
voided their purchase agreement with the original holders of the Toth/918
patents, leaving them without the right to sell this patent to George A.
Janke or any other party.
In spite of these facts, George A. Janke constantly assured the
plaintiffs that he owned the rights to the Toth/918 patents, and assigned
them to USA. The assurances were made during meetings in Florida as well
as letters and telephone calls from there, and during a joint sales and
promotion conference in Rome, New York on or about August 27, 1998. At a
breakfast meeting during this conference, Janke repeatedly orally
affirmed to Howard P. Sears, President of plaintiff Sears, that he had
purchased the Toth/918 patents that was now owned by his corporation USA.
He also tried to dissuade Howard P. Sears from making an upcoming trip to
Hungary to meet the inventors of the patent. (Sears Affidavit ¶ 18).
Additionally, in October, 1998 Howard P. Sears discovered that in a
letter dated September 8, 1998, another Ice Ban attorney, James M.
McCann, Jr., of the Florida law firm Ackerman, Senterfitt & Eidson, wrote to Jozef Szeles Jr. attempting to
purchase the Toth/918 patents.
Although George A. Janke is now deceased, the New York State Dead Man's
Statute (CPLR 4519) does not preclude the court's consideration of
statements allegedly made by him which have been offered in opposition to
defendant's motion for summary judgment. Phillips v. Kantor & Co.,
31 N.Y.2d 307, 315, 338 N.Y.S.2d 882 (1972); Mover v. Briggs, 47 A.D.2d 66,
366 N.Y.S.2d 352 (1st Dept. 1975).
In making these alleged misrepresentations at the Rome, New York
meeting with Sears, Janke committed a tort within New York state. De
Clerg v. Perue, 78 A.D.2d 706, 432 N.Y.S.2d 285 (3rd Dept. 1980). A tort
is deemed committed in New York when a non-resident makes a false
representation in the state and causes a resident to rely thereon,
causing injury. Id., Bialek v. Racal-Milgo, 545 F. Supp. 25, 35
(S.D.N.Y. 1982). Janke's intentional and allegedly tortious actions were
aimed at New York and he knew that injury would be felt there by
plaintiffs in the state in which they conduct business. Under the
circumstances, Janke could have "reasonably anticipated being haled into
court there" to answer for the authenticity of the statements he made to
Howard P. Sears concerning his and/or USA's ownership of the Toth/918
patents. World-Wide Volkswagen Corporation v. Woodson, 444 U.S. 286, 297,
100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1982). An individual injured in New
York need not go to Florida to seek redress from a person who, though
residing in Florida, knowingly causes an injury in New York. Defendant
Janke was a primary participant in the alleged wrongdoing intentionally
directed at a New York business, and jurisdiction over him is valid on
that basis. Janke's allegedly tortious act within New York State
conferred personal jurisdiction over him pursuant to New York CPLR §
302(a)2. Bernstein v. Kelso & Company, Inc., 231 A.D.2d 314, 324, 659 N.Y.S.2d 276,
283 (1st Dept. 1997).
Personal jurisdiction as to defendant Ice Ban USA. Inc.:
§ 302(a)1 New York CPLR provides that a defendant who has "transacted
business" in New York may be sued on any cause of action arising out of
that transaction. See Hoffritz For Cutlery, Inc. v. Amajac, Ltd.,
753 F.2d 55, 58-59 (2d Cir. 1985). Proof of one transaction in New York
is sufficient to invoke jurisdiction under New York's long-arm statute,
even though the defendant never entered New York, so long as defendant's
activities in New York were purposeful and there is a substantial
relationship between the transaction and the claim asserted. Clarendon
National Insurance Company v. Lan, 2001, 152 F. Supp.2d 506 (S.D.N.Y.
2001); Kreuttedr v. McFadden Oil Corporation, 71 N.Y.2d 460,
527 N.Y.S.2d 195 (1988).
In assessing whether one meeting satisfies the test of CPLR § 302(a)1,
New York requires some "purposeful activities" within the state and the
existence of an articularly nexus between the business transaction and
the cause of action sued upon. Hvide Marine International v. Employees
Insurance of Wausau, 724 F. Supp. 180, 183 (S.D.N.Y. 1989). The
determining factor is the nature and quality of defendant's contacts;
that is, the more meaningful the contacts to the relationship of the
parties, the more likely it is that the court will find a 302(a)1
transaction sufficient to establish personal jurisdiction. Central
Locating Service, Ltd, v. Southern Bell Telephone & Telegraph Co., 1990
WL 178995 at *2 (N.D.N.Y. Nov. 16, 1990).
As the sole incorporator, chief executive officer and principal
shareholder of USA, the alleged owner of the Toth/918 patent, George
Janke and USA had a significant financial interest in inducing the
plaintiffs to enter the L.L.C. agreement which called for the purchase
and distribution of USA's deicing product. As president of USA, he
continuously misrepresented his or his corporation's ownership of the
Toth/918 patents to plaintiffs in both correspondence on corporate
letterhead and by telephone, and courts have found that telephone and
mail contacts with New York alone are sufficient to confer jurisdiction
when the "center of gravity" of the business transacted was in New York.
See Wilhelmshaven Acquisition Corporation v. Asher, 810 F. Supp. 108, 112
(S.D.N.Y. 1993); Parker-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13,
308 N.Y.S.2d 327 (1970); Otterbourg, Steindler, Houston & Rosen, P.C.
v. Shreve City Apartments, Ltd., 140 A.D.2d 327, 543 N.Y.S.2d 978 (1st
Dept. 1989). Additionally, he made these representations on his own and
his corporation's behalf, to Howard P. Sears personally at their Rome,
New York meeting in August 1997.
It is clear that the center of gravity of this case was New York.
Plaintiffs were located in New York, negotiations leading to the
formation of a Limited Liability Company with Ice Ban America, Inc. and
Imus took place in New York, the L.L.C. was formed in accordance with the
laws of New York (ARTICLE II 2.4), and the choice of law governing the
terms and provisions of the agreement was New York law (Applicable Law,
11.6). As USA chief executive officer, George Janke directed mail and
telephone calls to New York that misrepresented ownership of the Toth/918
patent, and, while in New York, personally repeated them to the
It is also clear that defendant corporation USA, through the actions of
its president George Janke, transacted business in New York, and is
subject to jurisdiction in New York State under the terms of § 302(a)1 of
its long-arm statute.
Plaintiffs' allegations of fraud: Rule 9(b) of the Federal Rules of Civil Procedure requires that in all
allegations of fraud the circumstances constituting the fraud must be
stated with particularity. Shields v. Cititrust Bancorp, Inc.,
23 F.3d 1124, 1127-28 (2d Cir. 1994). In ruling on a motion to dismiss
under Rule 9(b), "the court must read the complaint generously, and draw
all inferences in favor of the pleader." Cosmas v. Hassett, 886 F.2d 8,
11 (2d Cir. 1989). The court must deny a motion to dismiss under Rule
9(b) as long as some of the allegations of fraud are adequate. Norstar
Bank v. Pepitone, 742 F. Supp. 1209, 1213 (E.D.N.Y. 1990). Rule 9(b) is
satisfied if the complaint gives enough information to enable defendants
to frame a responsive pleading and assure that a sufficient basis exists
for the allegations made. Epstein v. Hass Securities Corp.,
731 F. Supp. 1166, 1180 (E.D.N.Y. 1990); Morrow v. Black,
742 F. Supp. 1199, 1205 n. 16 (S.D.N.Y.1990)("Conclusory allegations that
the defendant's conduct was fraudulent or deceptive is not enough.")
There are three goals satisfied by Rule 9(b): "(1) providing a
defendant fair notice of plaintiff's claim, to enable preparation of a
defense; (2) protecting a defendant from harm to his reputation or
goodwill; and (3) reducing the number of strike suits." DiVittorio v.
Equidyne Extractive Industries, Inc., 822 F.2d 1242, 1247 (2d Cir.
1987). Thus, Rule 9(b) "inhibits the filing of a complaint as a pretext
for discovery of unknown wrongs." Gross v. Diversified Mortgage
Investors, 431 F. Supp. 1080, 1087 (S.D.N.Y. 1977). In Decker v.
Massey-Ferguson, Ltd., 681 F.2d 111, 114 (2d Cir. 1982), the Second
Circuit applied a straightforward test to determine the sufficiency of a
claim based upon fraud; the complaint need only allege the existence of
facts and circumstances sufficient to warrant the pleaded conclusion that
fraud had occurred. In so doing, the plaintiff's attorneys would be
stating "the circumstances constituting fraud . . . with particularity" as required by Rule 9(b). Id. at 119.
A satisfactory allegation includes "(1) specific facts; (2) sources
that support the specific facts; and (3) a basis from which an inference
of fraud may be fairly drawn." Crystal v. Foy, 562 F. Supp. 422, 425
(S.D.N.Y. 1983). Realistically, a plaintiff "cannot be expected to plead
a defendant's actual state of mind." Devanev v. Chester, 813 F.2d 566,
568 (2d Cir. 1987). Therefore, Rule 9(b) was designed to allow a certain
degree of generality in alleging scienter. Id. at 568. However,
plaintiffs are still required to "plead the factual basis which gives rise
to a `strong inference' of fraudulent intent." O'Brien v. National
Property Analysts Partners, 936 F.2d 674, 676 (2d Cir. 1991); Ouaknine
v. MacFarland, 897 F.2d 75, 80 (2d Cir. 1990); Wexner v. First Manhattan
Co., 936 F.2d 169, 172 (2d Cir. 1990). A "strong inference of fraudulent
intent" may be established either "(a) by alleging facts to show that
defendants had both motive and opportunity to commit fraud, or (b) by
alleging facts that constitute strong circumstantial evidence of
conscious misbehavior or recklessness." Shields v. Citytrust Bancorp,
25 F.3d 1124, 1128 (2d Cir. 1994)
While the plaintiff is obliged to plead those events and facts that
evince a strong inference that the defendant intended to defraud, it is
not appropriate to focus solely on the particularity requirement in fraud
cases under 9(b), and a balance must be sought with the simplicity
required by Fed.R.Civ.P. 8 that the pleadings should contain a "short and
plain" statement of the claim or defense and with each averment should be
"simple, concise and direct." United States v. Gleb, 783 F. Supp. 748,
757 (E.D.N.Y. 1991). Rule 9(b) does not require nor make legitimate the
pleading of detailed evidentiary matter. The Second Circuit expresses this
same view that "F.R.Civ.P. 9(b) must be reconciled with F.R.Civ.P. 8(a)(2)
. . ." Denny v. Barber, 576 F.2d 465, 469 (2d Cir. 1978). See Michael v. Clark Equipment
Company, 380 F.2d 351, 352 (2d Cir. 1967)(plaintiff pled fraud with
sufficient particularity even though plaintiff alleged numerous and
inconsistent theories of fraud); Jurban v. Musikahn, 673 F. Supp. 108,
111-12 (E.D.N. Y. 1987)(plaintiff pled fraud with sufficient
particularity under Security and Exchange Act even though amended
complaint did not specify the fraudulent words of corporation president
or date they were uttered); Anderson v. Lowery, 667 F. Supp. 105, 108
(S.D.N.Y. 1987)(allegations of scienter need not be made with great
specificity). "[A]verments of fraud do not have to contain a precise
statement of all the elements of the fraud but need only set forth the
facts with sufficient particularity to apprise defendant fairly of the
charge. Union Mutual Live Insurance Company v. Simon, 22 F.R.D. 186, 187
Defendants assert that plaintiffs' complaint states that they relied
upon certain misrepresentations regarding defendants' ownership of the
Toth/918 patent when they entered into the Operating Agreement, but the
complaint does not allege with any specificity or particularity any
alleged fraudulent misrepresentation by George Janke, U.S.A, or Ice Ban
America, Inc. The complaint also makes only vague statements of opinion
and ownership and is confusing and contradictory.
Defendants further maintain that plaintiffs have not alleged specific
dates on which representations were made, and the person who made them
and to whom. Nor have they alleged any and all specific factual
representations and the reasons and basis for believing these factual
representations were false.
An examination of plaintiff's second amended complaint discloses that
it has met the requirements or Rule 9(b) in detailing the defendants'
alleged fraud. For instance paragraph 36 recites that on October 21, 1997 that Janke, through his secretary,
Ann M. Owen, sent to Ronald Francis, Treasurer of Sears Oil, what Janke
represented to be a copy of the assignment of the ['918] Patent from Karl
and Barbara Ronaszeki to Janke dated May 28, 1994. The purported
assignment was recorded in the PTO on March 17, 1997 at Reel 8401, Frame
0354. Paragraph 43 states that, subsequently, by letter dated August 13,
1998, Janke represented to Howard P. Sears that "I purchased the rights
to the  Patent and the original Hungarian and European patents in
June, 1994, from Karl & Barbara Ronaszeki who in turn purchased those
patents from the registered owners of the Toth, et al. [sic]."
The complaint further sets forth that plaintiff's reliance on such
representations, they, Imus and Ice Ban America, Inc. entered into an
agreement leading to the formation under New York State law, of the Sears
Environmental Applications Company, L.L.C. on July 8, 1998, for
undertaking the sale and distribution of the de-icing agent in the New
England states under the name Ice Ban. The terms of the agreement also
provided that Sears Oil progressively loaned the new corporation $300,000
in cash and spent well over $100,000 in management time on its business.
When considering the entire complaint, these allegations by the plaintiff
met the Rule(b) requirement to plead fraud with particularity as to
defendant George Janke.
As to defendant USA, the complaint alleges in paragraph 14, that its
President, George Janke, in continuing to misrepresent its ownership of
the Toth/918 patent, on or about August 31, 1996, USA entered into an
agreement that purported to license defendant Ice Ban, America, Inc. to
sell USA's product in parts of the State of New York.
Paragraph 15 asserts that in September 1997, USA, through George Janke
entered negotiations with the plaintiff, on its own behalf, asserting
USA's Right to Substitute Itself for Defendant Ice Ban America, Inc. in a proposed L.L.C. Agreement for
the sale of Ice Ban products in New York.
Paragraph 16 maintains that on or about May 6, 1998, USA, through
George Janke, USA gave written assurance to Howard Sears that USA would
stand behind the proposes LLC Agreement with Ice Ban America, Inc. and
would provide "or have provided" Ice Ban to the LLC.
Paragraph 18 states that in October 1997, as part of Sears'
negotiations with Ice Ban America, Inc., USA required Sears to enter into
a Confidentiality Agreement in response to Sears' due diligence request
for information relating to the ownership of the Toth/918 patent. USA's
conduct caused loans and management expenses to be made by Sears Oil
based on defendants' misrepresentations that they owned or controlled the
['918'] Patent, resulting in damages to the plaintiffs.
The plaintiff is at liberty to refuse to be pinned down to a single
theory of fraud; and inconsistency is not a tenable objection to a
pleading. See > Fed.R.Civ.P. 8(e)(2). There is no justification in the
Federal Rules for an order to plaintiff to set forth a cause of action
clearly. In the first place there is no requirement under the Rules that
a complaint state a cause of action. The only relevant requirement is
that of stating a claim upon which relief may be granted. See > Rules
8(e). Michael v. Clark Equipment Company, 380 F.2d 351, 352 (2d Cir.
An examination of plaintiffs' second amended complaint shows that it
has met the essential requirements for detailing defendants' alleged
fraud complaint are sufficient to meet the requirements of Rule 9(b). It
specifically alleges the contents, representations, the facts
misrepresented, the identity of the persons who made the
misrepresentations and plaintiffs' reliance upon the representations and consequent damages resulting
therefrom. Although plaintiffs may not have pinpointed the exact time and
place of every representation, they have given sufficient notice of the
time period during which these representations were made. This appears
sufficiently specific in the present case to give defendants adequate
notice of the claims against them for fraud and fraudulent intent, and to
prepare an effective defense. Therefore, the court finds that the second
amended complaint complies with the specific pleading requirements of
Accordingly, defendants' motion for summary judgment to dismiss the
second amended complaint due to the court's lack of jurisdiction over
defendants George Jake and Ice Ban USA, Inc., and the incomplete fraud
allegations in plaintiffs' second amended complaint is DENIED.
IT IS SO ORDERED.
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