United States District Court, S.D. New York
May 26, 2004.
SPANIERMAN GALLERY, PSP, a Profit Sharing Plan, SPANIERMAN GALLERY, LLC, and ADELSON GALLERIES, INC., Plaintiffs -against- RICHARD LOVE, R.H. LOVE GALLERIES, INC., and R.H. LOVE GALLERIES, Defendants
The opinion of the court was delivered by: VICTOR MARRERO, District Judge
DECISION AND ORDER
In this contract dispute, the plaintiffs allege that they sold four
pieces of art to the defendants, who then resold the art before completing
payment. The defendants move to dismiss the complaint to the extent it
alleges any causes of action against the individual (as opposed to
corporate) defendant, Richard Love ("Love"), and to the extent the
complaint seeks relief for punitive damages. The motion is granted. The
plaintiffs move for summary judgment on their breach of contract claim,
but that motion is denied as premature. Finally, plaintiffs move to amend
their complaint. The proposed amended complaint is appropriate under the
Federal Rules of Civil Procedure's permissive amendment standards and
thus the motion is granted.
In each of four transactions in late 2002 and early 2003, one or more of the Plaintiffs (Spanierman Gallery, PSP, Spanierman
Gallery, LLC, and Adelson Galleries, Inc.) sold a piece of art to one or
more of the Defendants (R.H. Love Galleries, Inc., R.H. Love Galleries,
and Love), who then allegedly resold the art before fully paying. The
original complaint contained improper defendants and extraneous,
meritless causes of action, which, upon Defendants' motion, the Court
dismissed from the case. See Spanierman Gallery, PSP v. Love, No. 03
Civ. 3188, 2003 WL 22480055 (S.D.N.Y. Oct. 31, 2003). Plaintiffs'
pared-down first amended complaint now seek recovery under four causes of
action: (1) breach of contract, (2) violation of the Uniform Commercial
Code, (3) attorney's fees, and (4) punitive damages.
Defendants move to dismiss, in part, the first amended complaint
because they contend that the Court lacks personal jurisdiction over Love
and that punitive damages are improper as against any Defendants. The
Court's previous dismissal order had granted precisely this relief, but
the Court also granted Plaintiffs leave to re-plead those issues.
See id. at *2, *5.
In the same briefing in which Plaintiffs' oppose the motion to dismiss,
Plaintiffs move for summary judgment on their breach of contract claim
and move to amend their first amended complaint to add a fifth cause of
action for fraudulent conveyance.
The Court addresses each of the three motions in turn.
A. MOTION TO DISMISS
Defendants argue that the Court lacks jurisdiction over Love, an
Illinois resident. Plaintiffs bear the burden to show that there is a
basis for personal jurisdiction over Love, but at this pre-discovery
stage in the litigation, Plaintiffs may defeat Defendants' motion merely
by making legally sufficient allegations of personal jurisdiction. See In
re Magnetic Audiotape Antitrust Litig., 334 F.3d 204, 206 (2d Cir.
In diversity cases, such as this one, the Court looks to the forum
state's long-arm statute to determine whether a nonresident defendant may
be subject to the Court's personal jurisdiction. See Savin v. Ranier,
898 F.2d 304, 306 (2d Cir. 1990). In that regard, Plaintiffs rely upon
the provision of New York's long-arm statute that reaches any defendant
who "transacts any business within the state or contracts anywhere to
supply goods or services in the state." N.Y. C.P.L.R. § 302(a)(1).
Specifically, Plaintiffs allege that Love negotiated and executed the
contracts at issue in this lawsuit with the Plaintiffs, who are in New
York. The Court concludes that those allegations are insufficient.
Importantly, Plaintiffs do not allege that Love agreed to supply goods or services in New York; he agreed only to receive the
artwork from New York in Illinois. Love's only possible connection to New
York is that the Plaintiffs, to whom Love allegedly owes a debt, are in
New York. It is well-settled that an agreement to pay money in New York
is insufficient to satisfy § 302(a)(1). See American Recreation Group,
Inc. v. Woznicki, 448 N.Y.S.2d 51, 52 (App. Div.2d Dep't 1982); see also
Concrete Pipe & Prods. Corp. v. Modern Bldg. Materials, Inc.,
624 N.Y.S.2d 496, 497 (App. Div. 4th Dep't 1995) ("It is well established
that a foreign defendant whose only contact with New York is the purchase
of goods by telephone or mail from a New York plaintiff is not subject to
Plaintiffs next argue that, at least with respect to one contract
(pertaining to the so-called "Hassan" artwork), Love actually agreed to
be subject to personal jurisdiction in New York. Critical to this
determination is whether Love is personally bound by the Hassan contract.
The Court concludes that he plainly is not.
The buyer's signature line on that contract reads:
Agreed: /s/ Richard Love _____________________________
________________ (R.H. Love Galleries, Richard H.
(First Am. Compl. Ex. A) Plaintiffs argue that Love's signature is on
behalf of an unincorporated, nonexistent entity, "R.H. Love Galleries,"
as distinguished from defendant R.H. Love Galleries, Inc. Plaintiffs assert that, without the crucial
letters "Inc." on the signature line, Love is personally liable for any
signature purportedly on behalf of the fictitious entity. Plaintiffs'
argument is imaginative, but unpersuasive.
Under New York law, a contract entered into by a corporation under a
"colloquial title" is enforceable by either party, and "the misnomer is
held unimportant." Mail & Express Co. v. Parker Axles, Inc.,
198 N.Y.S. 20, 21 (App. Div. 1st Dep't 1923); cf. In re Excel Stores,
Inc., 341 F.2d 961 (2d Cir. 1965) (enforcing, under Connecticut law, a
contract which used the name "Excel Department Stores" instead of the
true name, "Excel Stores, Inc."); Curtis G. Testerman Co. v. Buck,
667 A.2d 649, 652 (Md. 1995) (holding that, even though a contract was
executed in the name of "Curtis G. Testerman, Inc." instead of the true
name of "Curtis G. Testerman Company," the signatory would not be held
Here, it is beyond dispute that "R.H. Love Galleries" was intended to
designate defendant R.H. Love Galleries, Inc. Importantly, Plaintiffs
have not alleged that, at the time of the contract, they were under any
actual misapprehension that there was some other, unincorporated group
with virtually the same name as R.H. Love Galleries, Inc.*fn1 Absent such an allegation,
the Court will not permit the Plaintiffs to capitalize on that technical
naming error in contravention of the parties' evident intentions. See
William Meade Fletcher, Fletcher Cyclopedia of the Law of Private
Corporations § 3014, at 133 (1997) ("A mistake in setting out the name of
a corporation in an instrument is not fatal where the identity of the
corporation is apparent.").*fn2 Because Love is not personally bound by
the Hassan contract, he is not bound by any clause therein which would
subject him to jurisdiction in New York.
In the second part of Defendants' motion to dismiss, they argue that
the Plaintiffs' complaint should be dismissed to the extent that it seeks
punitive damages. They press the same points as the Court found
meritorious in the first motion to dismiss and argue that Plaintiffs have
not remedied the defects which the Court identified. See Spanierman
Gallery, 2003 WL 22480055, at *5. Plaintiffs do not anywhere oppose
Defendants' arguments on this point and thus, the motion is granted. B. SUMMARY JUDGMENT
Plaintiffs move for summary judgment on their breach of contract claim
essentially because they contend that Defendants' answer concedes
liability. Defendants correctly respond that such a motion is premature.
First, Plaintiffs have failed to comply with this Court's individual
practices which require them to send a letter to the Court requesting a
pre-motion conference before filing such a motion. See Individual
Practices of United States District Judge Victor Marrero, R. II.A.
Second, there has been no discovery in this action, and it is this
Court's general practice to decline to entertain a summary judgment
motion until after discovery. See, e.g., Berger v. United States,
87 F.3d 60, 65 (2d Cir. 1996) (holding that summary judgment is generally
appropriate only after discovery); Metrokane, Inc. v. The Wine
Enthusiast, 160 F. Supp.2d 633, 638 (S.D.N.Y. 2001) (holding that it
would be "premature" to decide summary judgment before discovery); cf.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 n.5 (1986) (noting
that, under the federal rules, summary judgment should be "refused where
the nonmoving party has not had the opportunity to discover information
that is essential to his opposition"). This point relates back to the
first because, had the Plaintiffs requested a pre-motion conference (as
is required), the Court could have determined then whether and to what extent discovery would be
necessary before entertaining a summary judgment motion. Finally,
Plaintiffs' motion is not necessarily as straightforward as they would
make it appear because they have failed to address the affirmative
defenses in Defendants' answer.
At the next conference with the parties, which is scheduled below, the
Court will endeavor to have the parties agree on the scope of discovery
and the ripeness of any future summary judgment motion.
C. MOTION FOR LEAVE TO AMEND
Plaintiffs seek to amend their complaint to add a claim of fraudulent
conveyance. Under Federal Rule of Civil Procedure 15, leave to amend
"shall be freely given." Fed.R.Civ.P. 15. The Supreme Court has
identified several factors which might permit a Court to deny such a
motion, in spite of the permissive standard: "undue delay, bad faith or
dilatory motive on the part of the movant, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to the
opposing party by virtue of allowance of the amendment, [and] futility of
amendment." Foman v. Davis, 371 U.S. 178, 182 (1962).
Defendants resist the amendment on the ground that it alleges facts
which were not in the original complaint. Presumably, Defendants intend to suggest that adding new allegations at
this stage of the litigation amounts to undue delay, or that such
allegations would unduly prejudice the Defendants. The Court disagrees.
First, the new facts alleged involve the same basic premise as the
original complaint the improper resale of certain pieces of art
which Defendants did not own. Second, Defendants can hardly be heard to
complain of undue delay or prejudice because the case has not even
proceeded to discovery.
Defendants next argue that the amendment would be futile because it
fails to comply with Federal Rule of Civil Procedure 9(b). Again, the
Court disagrees. Rule 9(b) states: "In all averments of fraud or mistake,
the circumstances constituting fraud or mistake shall be stated with
particularity." Fed.R.Civ.P. 9(b). Conclusory allegations of fraud
will be dismissed under Rule 9(b). See Shemtob v. Shearson, Hammill
& Co., 448 F.2d 442, 444 (2d Cr. 1971).
The Second Circuit has "construed Rule 9(b) strictly in order to
minimize strike suits, to protect defendants . . . from harm to their
reputation resulting from ungrounded actions, and to give defendants
notice of the precise conduct in issue." Billard v. Rockwell Int'l
Corp., 683 F.2d 51, 57 (2d Cir. 1982). However, the Second Circuit
has also recognized "an obvious tension between the requirements of Rule 9(b) and the practicality of alleging in elaborate detail facts
constituting fraud prior to discovery," id., as well as a tension with
Rule 8, which only requires a short and concise statement of the claims.
See Felton v. Walston & Co., 508 F.2d 577, 581 (2d Cir. 1974).
There are two types of fraudulent conveyance claims under New York
law, distinguished as conveyances which are actually fraudulent, see
N.Y. Deb. & Cred. Law § 276, and those which are constructively
fraudulent, see id. § 273. See United States v. Coppola, 85 F.3d 1015,
1021 n.5 (2d Cir. 1996). The latter type of claim "need not be pled with
particularity because, despite the statutory label of `fraudulent
conveyance,' it does not require an intent to deceive or any of the
traditional elements of fraud." Intuition Consol. Group, Inc. v. Dick
Davis Publ'g Co., No. 03 Civ. 5063, 2004 WL 594651 (S.D.N.Y. Mar. 25,
2004) (citing Bank of Montreal v. Bresner, No. 92 Civ. 875, 1992 WL
296438, at *3 (S.D.N.Y. Oct. 8, 1992)). Because Plaintiffs' proposed
amended complaint alleges both types of fraudulent conveyance,
Defendants' reliance on Rule 9(b) to resist the proposed amendment is
misplaced, at least with respect to Plaintiffs' claim of constructive
As to the claim of actual fraudulent conveyance, Plaintiffs'
allegations are plainly sufficient. Plaintiffs' complaint sets forth the details surrounding the resales of the art,
including the identity of the buyers, the dates of the transactions, and
the alleged consideration received. Those allegations are at least as
particular as the model complaint for fraudulent conveyance in Official
Form 13, which states in relevant part:
Defendant C. D. on or about ____ conveyed all his
property, real and personal . . . to defendant E. F.
for the purpose of defrauding plaintiff and hindering
and delaying the collection of the indebtedness
evidenced by the note above referred to.
Fed.R.Civ.P. Form 13. Rule 84 specifically states that such forms "are
sufficient under the rules." Fed.R.Civ.P. 84; see also United States v.
Gelb, 783 F. Supp. 748
, 757 (E.D.N.Y. 1991) (holding that a complaint
which closely tracked Form 13 satisfied Rule 9(b)); 5 Charles Alan Wright
& Arthur R. Miller, Federal Practice & Procedure § 1298, at 623-24 (2d
ed. 1990) ("The proper balance between the simplicity sought in Rule 8
and the particularity required by Rule 9 is demonstrated by the
illustrative fraud claim set out in Official Form 13, which is expressly
declared to be a sufficient pleading by Rule 84."). Finally, the Court
notes that, by specifying the dates and nature of the transactions,
Plaintiffs' complaint "give[s] defendants notice of the precise conduct
in issue." Billard, 683 F.2d at 57. III. ORDER
For the reasons stated, it is hereby
ORDERED that the motion of defendants R.H. Love Galleries, Inc., R.H.
Love Galleries, and Richard Love ("Defendants") to dismiss, in part, the
complaint of plaintiffs Spanierman Gallery, PSP, Spanierman Gallery,
LLC, and Adelson Galleries, Inc. ("Plaintiffs") is granted. The first
amended complaint is dismissed to the extent it asserts any claim against
defendant Richard Love and to the extent it asserts any claim for
punitive damages; it is further
ORDERED that Plaintiffs' motion for summary judgment is denied as
premature; it is further
ORDERED that Plaintiffs' motion for leave to amend their first amended
complaint is granted; it is finally
ORDERED that the parties appear before this Court for a status
conference on June 10, 2004 at 4:00 p.m. in Courtroom 905 of the United
States Courthouse, 40 Centre Street, New York, New York.