The opinion of the court was delivered by: Townes, United States District Judge
Plaintiffs Elliot Spiegel and Jonathan Schatzberg, both of whom were formerly employed at various Tiger Schulmann Karate Centers ("Centers"), bring this action under the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq. ("ADA"), other federal statutes, and various State and local laws, principally alleging that Spiegel was twice wrongfully terminated on account of his obesity and that defendants retaliated against both plaintiffs after Spiegel sought legal remedies for the alleged discrimination. Defendants now move for summary judgment pursuant to Fed. R. Civ. P. 56, and plaintiffs cross-move for leave to further amend their pleadings to add a new defendant. For the reasons stated below, defendants' motion for summary judgment is granted with respect to Counts I, II, III, IV, V, VI and IX of the Second Amended Complaint ("Second Am. Complt."). This Court declines to exercise supplemental jurisdiction with respect to Counts VII and VIII, which are, therefore, dismissed without prejudice. Plaintiffs' cross-motion is denied.
Defendant Daniel "Tiger" Schulmann is the founder and developer of the "Tiger Schulmann Karate" system of martial arts. Defendants' Memorandum of Law in Support of Defendants' Motion for Summary Judgment ("Defendants' Memo") at 2; Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion for Summary Judgment ("Plaintiffs' Memo") at 1.*fn2 This system is taught at approximately forty franchised Tiger Schulmann Karate schools or "Centers," including Centers in Bensonhurst, Brooklyn (the "Bensonhurst Center"); Paramus, New Jersey (the "Paramus Center"); Stamford, Connecticut (the "Stamford Center") and Rego Park, Queens (the "Rego Park Center"). Id.
Plaintiffs were employed at several of these Centers. Defendants' Rule 56.1 Statement ("Def. 56.1") at ¶ 2; Plaintiffs' Response to Defendants' Rule 56.1 Statement ("Pl. 56.1") at p. 2. Both plaintiffs were ultimately fired, giving rise to the instant action. Defendants -- who allege that plaintiffs were employed by franchisees and not by them, Def. 56.1 at ¶ 2 -- do not provide the dates on which plaintiffs were hired or fired. However, the relevant dates can be ascertained by scrutinizing and comparing the exhibits offered by the parties.*fn3
Although defendants have denied knowledge or information sufficient to form a belief as to the truth of plaintiffs' allegation that Spiegel was first hired in April 1999, see Second Am. Complt. at ¶ 9; Answer to Second Am. Complt. at ¶ 2, defendants represent that plaintiff executed an Employee Model Release on July 18, 2000. See Defendants' Memo, Ex. M. That release, in which Spiegel agreed to be photographed and to have his photographs used in promotional materials, expressly states that Spiegel's agreement is "in consideration of [Spiegel's] employment and/or continued employment with an entity and/or entities that operate Tiger Schulmann's Karate Centers." Id. Therefore, while defendants may not agree concerning the exact duration of Spiegel's employment, defendants implicitly agree that Spiegel was employed at one of the Centers as early as July 2000.
Defendants also deny knowledge or information sufficient to form a belief as to the truth of plaintiffs' detailed allegations concerning Spiegel's employment at various Centers between July 2000 and August 2001. See Second Am. Complt. at ¶¶ 14-20; Answer to Second Am. Complt. at ¶ 2. However, according to documents attached to and relied upon in Defendants' (Fn. 2, cont'd) case manager advised defendants' Connecticut-based counsel of Rule 56.1's requirements and directed him to re-file the statement. Although the amended statement contains adequate cites, it still alleges very few uncontested facts. Rather, defendants' 56.1 statement primarily sets forth the defendants' position with respect to contested issues.
Reply Memorandum of Law in Further Support of Defendants' Motion for Summary Judgment ("Defendants' Reply Memo"), Spiegel was working for the Bensonhurst Center (Bensonhurst Karate, Inc.) in mid-August 2001, when he was fired by the Center's manager, Vincent Gravina. See Defendants' Reply Memo, Ex. B., at 17. As will be discussed in greater detail below, the parties disagree as to why Gravina fired Spiegel: defendants claim that Spiegel was fired because he did not get along with his co-workers, while Spiegel maintains that he was fired because he was overweight. However, the parties agree that Spiegel was almost immediately rehired by the Stamford Center (Stamford Karate, Inc.). Spiegel himself testified at his deposition that there was no gap between the time he ceased working at the Bensonhurst Center and the time he started working at the Stamford Center. See Deposition of Elliot Spiegel (Ex. B to the Declaration of Eric J. Grannis in Opposition to Defendants' Motion for Summary Judgment ("Grannis Declaration")) at 17, 21. Spiegel's testimony is corroborated by payroll records which indicate that Spiegel was hired by Stamford Karate, Inc., on September 4, 2001. Defendants' Memo, Ex. D.
According to those same payroll records, Spiegel worked in Stamford until June 2002.
Id. In December 2001, while attending a Challenge of Champions tournament, Spiegel discovered that an altered photograph of his torso was being used in an unflattering manner in advertisements for defendants' "Evolve" nutrition program. See Affidavit of Elliot Spiegel, dated Oct. 7, 2005 ("Spiegel Aff.") (Ex. P to the Grannis Declaration) at ¶ 2. Defendants admit that the overweight torso depicted in the advertising is Spiegel's, but note that the photograph did not show Spiegel's head or face or anything else which would permit it to be identified as a picture of Spiegel. See Defendants' Memo at 10. Spiegel, however, states that some of his colleagues, including Schatzberg and Gravina, recognized his torso and "mocked" him. Spiegel Aff. at ¶ 2.
On June 2, 2002, plaintiff was fired from the Stamford Center. Defendants' Memo, Ex. D, Ex. N at ¶ 7. Schulmann admitted at his deposition that he, who owned a controlling interest in Stamford Karate, Inc., ordered Gregory Hunko, who ran the Stamford Center, to fire Spiegel. Deposition of Daniel Schulman dated Jan. 5, 2005 (Ex. C to the Defendants' Memo and Ex. H to the Grannis Declaration) at 28. However, the parties disagree as to why Schulmann fired Spiegel. Spiegel claims that he was fired because of his weight, while Schulmann asserts that he fired Spiegel after employees at the Paramus Center told him that Spiegel said he had "no respect" for Schulmann.
At the time of Spiegel's termination, Spiegel's good friend, Schatzberg, was also working at the Stamford Center. Although defendants have denied knowledge or information sufficient to form a belief as to the truth of the allegation, the Second Amended Complaint alleges that Schatzberg decided to quit working at the Stamford Center sometime after Spiegel was fired. Second Am. Complt. at ¶ 40; Answer to Second Am. Complt. at ¶ 2. The Second Amended Complaint further alleges, and payroll records attached to Defendants' Memo confirm, that in early November 2002 Schatzberg was hired by Vincent Gravina to work at the Rego Park Center (Rego Park Karate, Inc.). See Second Am. Complt. at ¶ 41; Defendants' Memo, Ex. E.
On November 25, 2002, Spiegel filed charges with the Connecticut Commission on Human Rights and Opportunities. See Grannis Declaration, Ex. A. Two or three days later, Gravina fired Schatzberg. See Defendants' Memo, Ex. E; Affidavit of Penelope Kousis dated Oct. 21, 2005 (Ex. E to Defendants' Reply Memo) at ¶ 2. The parties do not agree as to why Schatzberg was fired. Plaintiffs allege that defendants, aware of the close relationship between Spiegel and Schatzberg, fired Schatzberg to retaliate against Spiegel for filing charges with the Connecticut Commission on Human Rights and Opportunities. Defendants assert that Schatzberg was fired for various reasons relating to the quality of his work.
The Plaintiff's Complaints in the Instant Action
On October 8, 2003, plaintiffs commenced the instant action against Schulmann and a New Jersey Corporation -- variously named as UAK Management Company, Inc., and UAK Management, Inc. ("UAK") -- which allegedly was owned solely by Schulmann and operated the Centers. Complaint at ¶¶ 6-7. Although the original complaint alleged that all parties were citizens of New Jersey, plaintiffs nonetheless chose to file the action in this Court. Moreover, for reasons which are not altogether clear, plaintiffs elected to bring this action solely against Schulmann and UAK. They did not name, and have never sought to add, Bensonhurst Karate, Inc., Stamford Karate, Inc., or Rego Park Karate, Inc., as defendants.
The original complaint asserted five causes of action against these defendants: (1) an ADA claim arising from Spiegel's June 2002 termination from the Stamford Center: (2) a claim pursuant to the New York State Human Rights Law, N.Y. Exec. Law § 290 et seq. ("NYSHRL"), relating to Spiegel's August 2001 termination from the Bensonhurst Center; (3) a claim pursuant to the New York City Human Rights Law, N.Y. City Admin. Code § 8-107 et seq. ("NYCHRL"), also relating to the Spiegel's Bensonhurst termination; (4) a cause of action alleging that defendants' use of Spiegel's photograph violated unspecified New York State defamation and privacy laws; and (5) a cause of action alleging that defendants had intentionally inflicted emotional distress upon Siegel. In addition, the complaint alleged that Schulmann used UAK as his "alter ego," and that Schulmann should, therefore, be liable for the debts of UAK. Complaint at ¶¶ 75-79.
Defendants subsequently moved to dismiss this complaint on various grounds. Judge Allyne R. Ross (who was previously assigned to this case) granted the motion only to the extent of (1) dismissing with prejudice the claim for intentional infliction of emotional distress and (2) dismissing without prejudice all claims against Schulmann on the ground that the complaint failed to allege facts sufficient to make out personal jurisdiction over him. See Spiegel v. Schulmann, No. 03 CV 5088 (ARR), slip op. at 27-28 (E.D.N.Y. June 16, 2004). Judge Ross granted plaintiffs leave to amend the complaint "with regard to the plaintiffs' claims against Schulmann" and with regard to the allegations of alter ego liability. Id. Judge Ross denied defendants' motion to the extent that it sought to dismiss plaintiffs' first four claims as against UAK. Id. at 27.
In July 2004, plaintiffs amended their complaint to add jurisdictional allegations concerning Schulmann. Specifically, plaintiffs added allegations that Schulmann owns "at least 51 percent" of each Center and, "as the sole shareholder, president and director of UAK, derives substantial revenue from services rendered in New York." Amended Complaint ("Am. Complt.") at ¶ 7. Plaintiffs also added an allegation that Gravina "told Spiegel that he was being terminated at the insistence of Schulmann who said to Gravina, 'I own 51 percent of the school and what I say goes.'" Id. at ¶ 24. The Amended Complaint did not specifically allege "alter ego" liability and did not add any new causes of action, but clarified that the ADA claims in Count I and the defamation and privacy law claims in Count IV were being asserted solely against UAK. Am. Complt. at 13.
In August 2004, Stamford Karate, Inc., filed suit against Spiegel in Connecticut Superior Court, alleging that, during the first five months of 2002, Spiegel had "continuously solicited" Hunko -- Stamford Karate's Head Instructor -- to breach his contractual obligations and to start a new karate school with Spiegel. See Defendants' Memo, Ex. N at ¶¶ 9-12. Stamford Karate claimed that Spiegel, an employee, had breached his fiduciary duty of loyalty and that his actions both constituted tortious interference with contract and violated the Connecticut Unfair Practices Act.
In November 2004, plaintiffs filed a Second Amended Complaint, principally adding retaliation claims relating both to the Connecticut state action and to UAK's alleged failure to pay Spiegel's medical claims. In that complaint, Spiegel alleges that following his termination from the Stamford Center, he elected to continue his health coverage with UAK as permitted under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq. ("ERISA"), and the Consolidated Omnibus Budget Reconciliation Act of 1986, 29 U.S.C. §§ 1161 et seq. ("COBRA"). Second Am. Complt. at ¶¶ 86-87. Plaintiffs allege, upon information and belief, that UAK is self-insured with respect to "some claims," and assert that "UAK has refused to pay Spiegel's qualifying medical expenses." Id. at ¶¶ 85, 90. The Second Amended Complaint does not identify the claims UAK allegedly failed to pay or the dates on which such claims were rejected, and does not specify the types of claims for which UAK is "self-insured."
The Second Amended Complaint raises five new causes of action (Counts V through IX), four of which allege retaliation.*fn4 Counts V and VI both allege that defendants retaliated against Spiegel in violation of Title IV of the ADA, 42 U.S.C. § 12203; Count V alleges that the Connecticut action constituted such retaliation, and Count VI alleges that defendants retaliated against Spiegel by refusing to pay his medical claims. Count VII alleges that defendants have retaliated against plaintiffs in violation of the NYSHRL by (1) filing a frivolous lawsuit against Spiegel, (2) withholding Spiegel's medical benefits and (3) terminating Schatzberg "because of his anticipated testimony and assistance in Spiegel's claim under New York Executive Law § 296 and because of his opposition to practices forbidden by that statute." Id. at ¶¶ 97-98. Count VIII alleges that defendants have retaliated against plaintiffs in violation of the NYCHRL by (1) filing a frivolous lawsuit against Spiegel, (2) withholding Spiegel's medical benefits and (3) terminating Schatzberg "because of his anticipated testimony and assistance in Spiegel's claim under New York City Administrative Code § 8-107 and because of his opposition to practices forbidden by that chapter." Id. at ¶¶ 101-02. Count IX seeks to enforce Spiegel's rights under ERISA and COBRA by "enjoin[ing] UAK to honor the terms of Spiegel's continuing coverage and to pay his eligible medical expenses." Id. at ¶ 107.
Defendants now move for summary judgment with respect to each and every count of the Second Amended Complaint. Defendants preliminarily argue that all causes of action should be dismissed because this Court lacks personal jurisdiction over both defendants and because neither defendant ever employed plaintiffs. Defendants then raise arguments specific to the various causes of action, which are described in detail in the discussion below. Plaintiffs cross-move pursuant to Fed. R. Civ. P. 15(a) and 20 to further amend their pleadings in order to add a new defendant, TSK Franchise Systems, Inc. ("TSK").
The Summary Judgment Standard Summary judgment is appropriate only when "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party bears the burden of showing that there is no genuine issue of fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). If the movant meets this burden, the non-movant "must set forth specific facts showing that there is a genuine issue for trial."Fed. R. Civ. P. 56(e); Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990). The non-movant cannot avoid summary judgment "through mere speculation or conjecture" or "by vaguely asserting the existence of some unspecified disputed material facts." Western World, 922 F.2d at 121 (internal quotations and citations omitted). Moreover, the non-movant cannot rely on hearsay testimony which would not be admissible if testified to at trial. See, e.g., Sarno v. Douglas Elliman-Gibbons & Ives, Inc., 183 F.3d 155, 160 (2d Cir. 1999); Fed. R. Civ. P. 56(e).
Defendants' first argument in their motion for summary judgment asserts, inter alia, that this action must be dismissed because defendants "are not subject to personal jurisdiction within the State of New York." Defendants' Memo at 6. Noting that Judge Ross dismissed without prejudice the claims against defendant Schulmann on the ground that the original complaint did not allege facts which, if true, would establish personal jurisdiction over him, defendants first argue that plaintiffs' Amended Complaint failed to cure this defect. Id. at 6-7. Next, citing to a portion of Schulmann's deposition in which he states that he never travels to New York City "for business" and an affidavit in which the Chief Financial Officer of UAK denies that the corporation has ever transacted business in New York, defendants argue that they do not have "sufficient New York contacts . . . to subject them to jurisdiction in this state." Id. at 6 (citing Ex. C and Ex. Q). Finally, defendants argue that "[p]laintiffs have not . . . alleged a sufficient nexus between the defendants, the causes of action asserted, and the State of New York . . . ." Id. at 7.
"A two-pronged test decides the question of personal jurisdiction: 1) 'whether there is jurisdiction over the defendant under the relevant forum state's laws'; and 2) 'whether an exercise of jurisdiction under these laws is consistent with federal due process requirements.'" Time, Inc. v. Simpson, No. 02 Civ. 4917 (MBM), 2003 WL 23018890, at *1 (S.D.N.Y. Dec. 22, 2003) (quoting Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779, 784 (2d Cir. 1999)). Plaintiffs bear the burden of establishing personal jurisdiction over the defendant. See, e.g., Seetransport Wiking Trader Schiffarhtsgesellschaft MBH & Co. v. Navimpex Centrala Navala, 989 F.2d 572, 580 (2d Cir. 1993). The showing needed to meet that burden varies depending on the stage of the litigation. Prior to trial or an evidentiary hearing on the issue of personal jurisdiction, a plaintiff "need make only a prima facie showing by its pleadings and affidavits that jurisdiction exists." CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986). However, when no evidentiary hearing has been held "but the parties have conducted extensive discovery into the . . . defendants contacts with the forum state, the plaintiff's prima facie showing, necessary to defeat a jurisdiction testing motion, must include an averment of facts that, if credited by [the ultimate trier of fact], would suffice to establish jurisdiction over the defendant." Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999) (internal quotations and citations omitted; bracketed material, but not elipses, in original). These averments must be construed in the light most favorable to plaintiffs and all doubts must be resolved in plaintiffs' favor. See, e.g., Landoil Res. Corp. v. Alexander & Alexander Services, Inc., 918 F.2d 1039, 1043 (2d Cir. 1991).
This Court has Personal Jurisdiction over Schulmann
When Judge Ross addressed defendants' motion to dismiss -- approximately eight months after the action had been filed and prior to the initial conference before Magistrate Judge Mann -- there was nothing to suggest that substantial discovery had taken place. Accordingly, Judge Ross applied the least exacting standard, reviewing the allegations in the complaint to determine if they made out a prima facie showing of jurisdiction. See Spiegel, slip op. at 13. Judge Ross held that the allegations in the original complaint were insufficient to make such a showing with respect to Schulmann. Id. at 20. However, noting that plaintiffs' memorandum of law in opposition to the motion to dismiss suggested that plaintiffs were "in a position to make a much stronger case for jurisdiction over Schulmann," id., Judge Ross dismissed the claims against Schulmann without prejudice, and granted plaintiffs leave to amend their complaint in an effort to make a sufficient showing of personal jurisdiction. Id. at 28.
Contrary to defendants' assertions, plaintiffs have cured the deficiencies in their original pleading. In their Amended Complaint, filed in July 2004, plaintiffs allege that Schulmann owns "at least 51 percent" of each Center. Am. Complt. at ¶ 7. In addition, plaintiffs allege that, in firing Spiegel from the Bensonhurst Center, Gravina "told Spiegel that he was being terminated at the insistence of Schulmann who said to Gravina, 'I own 51 percent of the school and what I say goes.'" Id. at ¶ 24.
These allegations are sufficient to establish personal jurisdiction over Schulmann. Although plaintiffs do not expressly allege that Schulmann himself does business in New York, there is no question that the entities which fired plaintiffs -- Bensonhurst Karate, Inc. and Rego Park Karate, Inc. -- are domestic corporations.*fn5 Moreover, the allegations in the Amended Complaint at least imply that Schulmann ordered the terminations in his capacity as a principal of those corporations.
"Under New York law 'individual corporate officers may be subject to jurisdiction in New York if it is established that the corporation is acting as their agent here.'" Mende v. Milestone Tech., Inc., 269 F. Supp. 2d 246, 253 (S.D.N.Y. 2003) (quoting Kinetic Instruments, Inc. v. Lares, 802 F. Supp. 976, 984 (S.D.N.Y. 1992)). While plaintiffs cannot establish jurisdiction simply by establishing that Schulmann is an officer in a New York corporation, they may do so by establishing "that the corporation acted 'with the knowledge and consent of the officer and the officer . . . exercised control over the corporation in the transaction.'" Id. The Amended Complaint explicitly alleges that Schulmann, as owner of 51 percent of the corporation, used his control over the corporation to effect the firing of Spiegel. Accordingly, the allegations in the Amended Complaint are sufficient to establish personal jurisdiction over Schulmann under N.Y.C.P.L.R. § 301.
The allegations are also sufficient to establish personal jurisdiction over Schulmann under N.Y.C.P.L.R. § 302(a)(1). Section 302(a)(1) provides that a court may exercise personal jurisdiction "over any non-domiciliary . . . who in person or through an agent . . . transacts any business within the state," but only with respect to any cause of action arising from that transaction of business. This provision "extends the jurisdiction of New York state courts to any nonresident who has 'purposely availed [himself] of the privilege of conducting activities within New York.'" Bank Brussels Lambert, 171 F.3d at 787 (quoting Parke-Bernet Galleries, Inc. v. Franklyn, 26 N.Y.2d 13, 18, 308 N.Y.S. 337, 341 (1970)) (bracketed ...