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Nebraskaland, Inc v. Sunoco

December 7, 2010

NEBRASKALAND, INC., PLAINTIFF,
v.
SUNOCO, INC. (R&M); BBZZ EQUITIES, GARRISON CORP.; RICHARD FINKELSTEIN; ARSHAD QAZI; AND DIARAM KALICHARAN, DEFENDANTS.



The opinion of the court was delivered by: David G. Trager United States District Judge

Trager, J:

MEMORANDUM AND ORDER

This case arises out of an alleged scheme by defendants to defraud plaintiff Nebraskaland, Inc. ("Nebraskaland" or "plaintiff") by issuing invoices for fuel to Nebraskaland that did not include agreed-to discounts, and then bribing defendant Diaram Kalicharan ("Kali"), an employee of Nebraskaland, to approve those invoices. Kali moves to dismiss plaintiff's faithless servant claim against him on the grounds that New York's faithless service doctrine violates the Thirteenth and Fourteenth Amendments of the United States Constitution, the Fair Labor Standards Act ("FLSA"), the New York Minimum Wage Act, New York Labor Law ("NYLL") § 193, and local, state and federal tax and retirement laws. Kali also moves for a declaratory judgment declaring New York's faithless servant doctrine null and void. Plaintiff separately moves to dismiss Kali's counter-claim for declaratory judgment. For the reasons stated below, Kali's motion to dismiss is denied and plaintiff's motion to dismiss is granted.*fn1

Background

Nebraskaland operates a fleet of delivery trucks that it uses to distribute meat and other food products to supermarkets and other suppliers throughout New York and the surrounding areas. (Plaintiff's Amended Complaint ("AC") ¶¶ 12-13.) In order to reduce its fuel expenses, Nebraskaland entered into agreements with certain retail fuel suppliers and gas stations to provide discounts. One such agreement, which Nebraskaland and Sunoco entered into prior to March 2006, was a "Fleet Agreement" whereby Sunoco gave Nebraskaland a discount of 3% off Nebraskaland's total monthly Sunoco fuel bill. (Id. ¶¶ 20-21.)

In or around March 2006, Nebraskaland entered into a contract with BBZZ Equities, 880 Garrison and Sunoco that was to provide Nebraskaland with an additional discount on all fuel purchased at the BBZZ/Garrison Station. (Id. ¶ 24.) Under the terms of the contract, Nebraskaland agreed to use the BBZZ/Garrison Station as its preferred fuel supplier in the Bronx in exchange for a discount off the pump price for fuel purchased at the BBZZ/Garrison Station. (Id. ¶ 26.) According to the terms of the contract, Nebraskaland was entitled to receive a credit of approximately one dollar per gallon of fuel purchased at the BBZZ/Garrison Station (the "Contract Credit"),*fn2and the Contract Credit was to be reflected on each monthly fuel bill that Sunoco sent to Nebraskaland. (Id. ¶¶ 22, 27.)

Between approximately September 1994 and September 2009, Kali was employed by Nebraskaland. At all relevant times during this period, he held the position of Vice President of Operations for Nebraskaland. (AC ¶ 9, Kali's First Amended Answer ("FAA") ¶ 3, 35.) The parties dispute whether he was employed in an executive or managerial position, although they agree that Kali was responsible for reviewing the fuel invoices sent by vendors and comparing those invoices with the receipts submitted by drivers in the truck fleet that he supervised. (AC ¶ 14, FAA ¶ 7.) In or around September 2009, Kali's employment with Nebraskaland ended.*fn3 (FAA ¶ 47.)

Plaintiff alleges that, starting in March 2006 and going through at least September 2009, defendants Richard Finkelstein ("Finkelstein"), the President and owner of BBZZ Equities, and Arshad Qazi ("Qazi"), the President and owner of 880 Garrison Corp., engaged in a scheme whereby Sunoco would issue invoices to Nebraskaland that did not reflect the agreed-upon Contract Credit. (AC ¶ 32, 33.) As part of the scheme, plaintiff alleges that Finkelstein and Qazi bribed Kali to approve the invoices for payment by Nebraskaland. (AC ¶¶ 34-38.) Kali denies that he was ever bribed or that he ever received cash payments from either Finkelstein or Qazi. (FAA ¶ 18.)

Plaintiff alleges that, pursuant to the contract, Nebraskaland purchased in excess of half a million gallons of fuel from the BBZZ/Garrison Station from March 2006 through October 2009 -- the period of time in which defendants are alleged to have participated in the scheme to defraud plaintiff. Plaintiff further alleges that it paid Kali in excess of $404,000 in compensation during that period of time.

Procedural History

On February 16, 2010, plaintiff filed this action in New York State Supreme Court. On March 10, 2010, defendant Kali removed the case to federal court pursuant to 28 U.S.C. § 1441(a) on the grounds that plaintiff's complaint involves a federal question which shares a common nucleus of operative facts with plaintiff's state law claims. (D.E. 1.) On April 16, 2010, plaintiff filed an Amended Complaint claiming, inter alia, that it is entitled to recover all compensation paid to Kali during the time he participated in the scheme to defraud plaintiff based on New York's faithless servant doctrine. (AC ¶¶ 120-123, 134.) In response to plaintiff's Amended Complaint, Kali filed his First Amended Answer on April 22, 2010, in which he, inter alia, denied the factual underpinnings of plaintiff's faithless servant claim and asserted numerous affirmative defenses to the claim.

Kali now moves to dismiss plaintiff's faithless servant claim against him on the grounds that New York's faithless servant doctrine violates the Thirteenth and Fourteenth Amendments of the United States Constitution, the FLSA, the New York Minimum Wage Act, NYLL § 193, and local, state and federal tax and retirement laws. Kali also moves for declaratory judgment declaring New York's faithless servant doctrine null and void. Plaintiff separately moves to dismiss Kali's counter-claim for declaratory judgment on the grounds that there is no case or controversy.

Discussion

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