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Leadsinger, Inc. v. Cole

August 10, 2006

LEADSINGER, INC., PLAINTIFF,
v.
EDWARD J. COLE, DEFENDANT.



The opinion of the court was delivered by: Pitman, United States Magistrate Judge

OPINION AND ORDER

I. Introduction

By notice of motion dated September 22, 2005 (Docket Item 22), defendant moves (1) for an Order, pursuant to Rule 56 of the Federal Rules of Civil Procedure, granting summary judgment and dismissing the second amended complaint based on the doctrine of judicial estoppel and (2) for an Order, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, dismissing the seven claims asserted in the second amended complaint on the ground that they all fail to state claims upon which relief can be granted.

The parties have consented to my exercising plenary jurisdiction over this action pursuant to 28 U.S.C. § 636(c) (Docket Item 7).

For the reason set forth below, defendant's motion is granted in part and denied in part.

II. Facts

Plaintiff, ES Electrosales Leadsinger Co. Ltd. ("Leadsinger"), is in the business of selling karaoke products on both a wholesale and retail basis. On or about April 20, 2004, plaintiff entered into a contract with defendant, Edward J. Cole, making Cole Leadsinger's national sales manager for a one-year period (see Second Amended Complaint ("2d Am. Compl."), at ¶¶ 4-5 (Docket Item 21); see also Ex. G annexed to the Affirmation of Kenneth S. Levine, Esq., dated September 21, 2005 ("Levine Aff.")).

Although the contract contained an automatic extension provision, plaintiff alleges that Cole resigned from his position several days before the contract expired (2d Am. Compl. ¶¶ 6-7).

Plaintiff further alleges that Cole was to be compensated for his services by commissions based on a formula set forth in the contract. Plaintiff claims, however, that Cole failed to repay Leadsinger $300,000 in advances on his commissions, which Cole requested and received, but never earned (2d Am. Compl. ¶¶ 8-10).

In addition, plaintiff alleges that Cole, both personally, as well as through his sister, Sharon Cole, acting as his agent, violated the confidentiality provision in the contract by sending e-mails "to Leadsinger's employees and/or representatives disparaging Leadsinger and unjustifiably attempting to create doubt about the quality of Leadsinger's products to thereby interfere with sales" (2d Am. Compl. ¶ 17).

Plaintiff also claims that beginning in or about April 15, 2005, Cole and his sister began sending e-mails to the plaintiff's principles in which they threatened, inter alia, to interfere with Leadsinger's business relationships, as well as threatening to contact the family of Leadsinger's president, Jerry Choe, and disclose Choe's alleged personal indiscretions (2d Am. Compl. ¶¶ 20-22).

Plaintiff commenced this action on April 22, 2005, by filing a verified complaint in the Supreme Court of the State of New York, New York County, seeking a preliminary injunction and damages against defendant based on the following claims: (1) injurious falsehood, (2) interference with contract, and (3) interference with prospective advantage. The complaint further alleged that defendant "received advances exceeding any commissions he may have earned" (Levine Aff. Ex. A).

Also on April 22, 2005, plaintiff filed an application for an order to show cause and an ex parte temporary restraining order against defendant (Levine Aff. Ex. B). On April 26, 2005, the Honorable Karen Smith, Justice, Supreme Court of the State of New York, New York County, declined to sign the order because plaintiff was "seek[ing] monetary relief for the alleged wrong committed by defendant" and, therefore, "a TRO or preliminary and permanent injunctive relief [was] not appropriate" (Levine Aff. Ex. B).

Following Justice Smith's denial, plaintiff filed a supplemental affidavit in support of its application for an order to show cause and an amended verified complaint, stating in both that damages were being asserted in relation to only one customer -- HH Gregg Appliances and Electronics ("HH Gregg") -- while injunctive relief was being sought for Leadsinger's other customers (Levine Aff. Exs. C-D). On April 27, 2005, Justice Smith signed the order to show cause and entered a temporary restraining order against defendant (Levine Aff. Ex. E).

The case was subsequently removed from the Supreme Court of the State of New York, New York County, to this Court by Notice of Removal filed June 15, 2005 (Docket Item 1). Federal jurisdiction is based on diversity of citizenship. See 28 U.S.C. § 1332(a)(1).

Following removal, plaintiff filed a second amended complaint on September 13, 2005 (Docket Item 21), asserting the following seven claims: (1) breach of contract (2d Am. Compl. ¶¶ 1-10), (2) unjust enrichment (2d Am. Compl. ¶¶ 11-14), (3) tortious interference with contract and an additional breach of contract claim (2d Am. Compl. ¶¶ 15-26), (4) tortious interference with prospective economic advantage (2d Am. Compl. ¶¶ 27-32), (5) injurious falsehood (2d Am. Compl. ¶¶ 33-36), (6) prima facie tort (2d Am. Compl. ¶¶ 37-39), and (7) a request for permanent injunctive relief (2d Am. Compl. ¶¶ 40-44).

As noted above, by notice of motion dated September 22, 2005 (Docket Item 22), defendant now moves for summary judgment and/or to dismiss the second amended complaint.

III. Analysis

A. Standards Applicable to a Motion for Summary Judgment and a Motion to Dismiss the Complaint

The standards applicable to a motion for summary judgment are well-settled and require only brief review.

Summary judgment shall be granted when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). This form of relief is appropriate when, after discovery, the party -- here plaintiff -- against whom summary judgment is sought, has not shown that evidence of an essential element of her case -- one on which [he] has the burden of proof -- exists. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). This form of remedy is inappropriate when the issue to be resolved is both genuine and related to a disputed material fact. An alleged factual dispute regarding immaterial or minor facts between the parties will not defeat an otherwise properly supported motion for summary judgment. See Howard v. Gleason Corp., 901 F.2d 1154, 1159 (2d Cir. 1990). Moreover, the existence of a mere scintilla of evidence in support of non-movant's position is insufficient to defeat the motion; there must be evidence on which a jury could reasonably find for the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

If the movant demonstrates an absence of a genuine issue of material fact, a limited burden of production shifts to the non-movant, who must "demonstrate more than some metaphysical doubt as to the material facts," and come forward with "specific facts showing that there is a genuine issue for trial." Aslanidis v. United States Lines, Inc., 7 F.3d 1067, 1072 (2d Cir. 1993). If the non-movant fails to meet this burden, summary judgment will be granted against it.

Powell v. Nat'l Bd. of Med. Exam'rs, 364 F.3d 79, 84 (2d Cir. 2004); accord Jeffreys v. City of New York, 426 F.3d 549, 553-54 (2d Cir. 2005); Gallo v. Prudential Residential Servs., Ltd., 22 F.3d 1219, 1223-24 (2d Cir. 1994). "The party seeking summary judgment has the burden to demonstrate that no genuine issue of material fact exists. . . . In determining whether a genuine issue of material fact exists, a court must examine the evidence in the light most favorable to, and draw all inferences in favor of, the non-movant . . . . Stated more succinctly, '[t]he evidence of the non-movant is to be believed.'" Lucente v. Int'l Bus. Machs. Corp., 310 F.3d 243, 253-54 (2d Cir. 2002) (citations omitted). See also Jeffreys v. City of New York, supra, 426 F.3d at 553 ("Assessments of credibility and choices between conflicting versions of the events are matters for the jury, not for the court on summary judgment."); accord Make the Road by Walking, Inc. v. Turner, 378 F.3d 133, 142 (2d Cir. 2004); Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 780 (2d Cir. 2003).

The Court of Appeals for the Second Circuit has explained that "in determining whether the moving party has met [its] burden of showing the absence of a genuine issue for trial, the district court may not rely solely on the statement of undisputed material facts contained in the moving party's Rule 56.1 statement. It must be satisfied that the citation to evidence in the record supports the assertion." Vt. Teddy Bear Co. v. 1-800 Beargram Co., 373 F.3d 241, 244 (2d Cir. 2004); see also Giannullo v. City of New York, 322 F.3d 139, 140 (2d Cir. 2003).

The standards applicable to a motion to dismiss pursuant to Rule 12(b)(6) are also well-settled and require only brief review.

When deciding a motion to dismiss under Rule 12(b)(6), [the court] must accept as true all well-pleaded factual allegations of the complaint and draw all inferences in favor of the pleader. See City of Los Angeles v. Preferred Communications, Inc., 476 U.S. 488, 493, 106 S.Ct. 2034, 90 L.Ed.2d 480 (1986); Miree v. DeKalb County, 433 U.S. 25, 27 n.2, 97 S.Ct. 2490, 53 L.Ed.2d 557 (1977) (referring to "well-pleaded allegations"); Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993). "'[T]he complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference.'" Int'l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995) (quoting Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991)). The Court also may consider "matters of which judicial notice may be taken." Leonard T. v. Israel Discount Bank of New York, 199 F.3d 99, 107 (2d Cir. 1999) (citing Allen v. WestPoint-Pepperill, Inc., 945 F.2d 40, 44 (2d Cir. 1991)). In order to avoid dismissal, a plaintiff must do more than plead mere "[c]onclusory allegations or legal conclusions masquerading as factual conclusions." Gebhardt v. Allspect, Inc., 96 F. Supp.2d 331, 333 (S.D.N.Y. 2000) (quoting 2 James Wm. Moore, Moore's Federal Practice ¶ 12.34[a] [b] (3d ed. 1997)). Dismissal is proper only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); accord Cohen v. Koenig, 25 F.3d 1168, 1172 (2d Cir. 1994).

Hoffenberg v. Bodell, 01 Civ. 9729 (LAP), 2002 WL 31163871 at *3 (S.D.N.Y. Sept. 30, 2002). See also McKenna v. Wright, 386 F.3d 432, 436 (2d Cir. 2004); Phillip v. Univ. of Rochester, 316 F.3d 291, 293-94 (2d Cir. 2003); Bruce v. United States Dep't of Justice, 314 F.3d 71, 73-74 (2d Cir. 2002); Cole v. Moraflor, 02 Civ. 9981 (RWS), 2006 WL 457817 at *2 (S.D.N.Y. Feb. 23, 2006); George v. New York City Health & Hosp. Corp., 02 Civ. 1818 (AGS), 2003 WL 289617 at *2 (S.D.N.Y. Feb. 11, 2003).

Defendant seeks dismissal of the second amended complaint based on two principle theories: (1) summary judgment should be granted, dismissing any claims seeking damages for customers other than HH Gregg, based on the doctrine of judicial estoppel (Memorandum of Law in Support of Defendant's Motion to Dismiss and Motion for Summary Judgment, dated September 20, 2005 ("Def.'s Mem."), at 3-5) and (2) each of the seven claims asserted fails to state a claim upon which relief can be granted (Def.'s Mem. at 5-12).*fn1

B. Judicial Estoppel

Defendant first argues that summary judgment should be granted and plaintiff judicially estopped from asserting any claims in the second amended complaint for damages concerning any customers other than HH Gregg (see Def.'s Mem. at 3-5). Specifically, defendant claims that plaintiff made prior representations to the state court limiting its damage claims to HH Gregg only, in connection with its application for an order to show cause and a temporary restraining order. Defendant argues that these representations were relied upon by the state court in granting a temporary restraining order. Defendant contends that plaintiff's prior representations are clearly inconsistent with its claims in the second amended complaint for damages concerning customers other than HH Gregg and, therefore, plaintiff should now be judicially estopped from seeking damages with respect to those customers (see Def.'s Mem. at 4-5; see also Reply Memorandum of Law in Support of Defendant's Motion to Dismiss and Motion for Summary Judgment, dated October 28, 2005 ("Def.'s Reply Mem."), at 1-3).

The doctrine of judicial estoppel was recently discussed by the Supreme Court in Zedner v. United States, 126 S.Ct. 1976, 1987 (2006):

As this Court has explained:

"'[W]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him.' Davis v. Wakelee, 156 U.S. 680, 689, 15 S.Ct. 555, 39 L.Ed. 578 (1895). This rule, known as judicial estoppel, 'generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase.' Pegram v. Herdrich, 530 U.S. 211, 227, n. 8, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000)." New Hampshire v. Maine, 532 U.S. 742, 749, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001).

Although this estoppel doctrine is equitable and thus cannot be reduced to a precise formula or test, "several factors typically inform the decision whether to apply the doctrine in a particular case: First, a party's later position must be clearly inconsistent with its earlier position. Second, courts regularly inquire whether the party has succeeded in persuading a court to accept that party's earlier position . . . . A third consideration is whether the party seeking to assert an inconsistent position would derive an unfair advantage or impose ...


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