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HOLDINGS v. PALMER JOHNSON ACQUISITION CORP.

May 19, 2005.

EED HOLDINGS, Plaintiff,
v.
PALMER JOHNSON ACQUISITION CORP. and ANDREW J. McKELVEY, Defendants.



The opinion of the court was delivered by: ROBERT SWEET, Senior District Judge

OPINION

Defendant Andrew J. McKelvey ("McKelvey") has moved under Rule 12(b)(6) and Rule 9(b), Fed.R.Civ.P., to dismiss certain of the claims against him in the amended complaint of plaintiff EED Holdings alleging that the corporate veil shielding defendant Palmer Johnson Acquisition Corp. ("PJAC") should be pierced and that McKelvey committed fraud. For the reasons set forth below, the motion is granted, and the allegations stricken.

Prior Proceedings

  The initial filing of the complaint by EED and the previous motion by McKelvey to dismiss it are set forth in the October 20, 2004 opinion of the Court, familiarity with which is assumed. See EED Holdings v. Palmer Johnson Acquisition Corp., No. 04 Civ. 0505 (RWS), 2004 WL 2348093 (S.D.N.Y. Oct. 20, 2004) (the "October 20 Opinion"). The October 20 Opinion granted McKelvey's motion in part and denied it in part.

  In the October 20 Opinion, this Court held that with respect to McKelvey, EED had failed to state a negligent misrepresentation claim or a basis for piercing the corporate veil, but that EED had stated a fraud claim against him. It held that two of the specific representations referred to in the complaint were not actionable and denied PJAC's motion to dismiss or transfer. EED filed its amended complaint on November 8, 2004. The amended complaint repleaded the piercing the corporate veil claim against McKelvey, amended the fraud claim, and removed reference to the two representations which the Court held to be non-actionable. The amended complaint also retains the breach of contract claim against PJAC, which is not at issue on the present motion.

  The October 20 Opinion upheld the fraud claim against McKelvey based on his alleged statement that PJAC "had the capability and wherewithal to properly construct the yacht . . . in a timely manner." (Compl. ¶ 14.)

  The instant motion was heard and marked fully submitted on February 9, 2005.

  The Additional Allegations

  The amended complaint added the following allegations:
15. In Spring 2001 Goldman met with McKelvey at the New York Yacht Club in Manhattan, and discussed the type of yacht he wished to have constructed. McKelvey spoke at length about the attributes of PJI in order to convince Goldman to contract with PJI for the yacht. Among other things, McKelvey stated to Goldman that PJI had the capability and wherewithal to properly construct the yacht sought by Goldman in a timely manner. McKelvey also assured Goldman — who was aware of McKelvey's enormous personal wealth — in words or in substance that he would personally take all necessary steps to insure that PJI maintained its wherewithal. * * *
17. In order to further induce EED to enter into an agreement with PJI, McKelvey agreed to have PJAC guaranty PJI's obligations. Upon information and belief, McKelvey knew at that time that, because PJAC was itself undercapitalized, it would not have sufficient assets to meet its obligations under such guaranty if called upon to do so.
(Am. Compl. ¶¶ 15, 17.)

  The Facts As Alleged

  The following facts are drawn from the amended complaint. All well-pleaded allegations are accepted as true for the purpose of this motion. See Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). The following statements do not constitute findings of the Court.

  EED is a company incorporated in the Cayman Islands, and is a citizen or subject of the United Kingdom. Its chief asset is a Cayman Islands flag vessel which has no fixed location. (See Am. Compl. ¶ 4.)

  PJAC is a Delaware corporation with its principal place of business in Wisconsin, formed by McKelvey to serve as a holding company for several corporations involved with the construction, repair, and servicing of yachts. (See id.) McKelvey is a citizen of the State of New York, the owner of the entirety of PJAC, and according to EED "one of the wealthiest individuals in the United States." (Id. ¶ 6.)

  In 2000, McKelvey formed PJAC, and on September 29, 2000 PJAC acquired 100 percent of the stock of Palmer Johnson, Inc. ("PJI") and two other Palmer Johnson companies, as well as certain related assets owned by the selling parties (the "PJAC Acquisition"). According to EED, for some time prior to the PJAC Acquisition, the Palmer Johnson ...


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