The opinion of the court was delivered by: Richard J. Holwell, District Judge:
In this case plaintiff DDR Construction Services, Inc. ("DDR") sues several of its former associates in the construction, electrical subcontracting, and consulting industries in New York for violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq. ("RICO"), as well as for fraud, breach of fiduciary duty, and several other state law claims. Currently pending are four motions to dismiss filed by different groups of defendants; DDR's cross-motions to strike, to dismiss counterclaims, and for sanctions; and DDR's cross-motion for leave to seek sanctions. DDR has also submitted a letter application seeking leave to file an amended complaint. For the reasons that follow, defendants' motions are GRANTED; DDR's cross-motion to strike and to dismiss, and for sanctions, is GRANTED IN PART and is DENIED IN PART; DDR's cross-motion for leave to seek sanctions is DENIED; and, DDR's letter application is DENIED.
For the purposes of the present motions, the following facts, drawn from the complaint and the documents incorporated by reference therein, are taken as true. Because the complaint incorporates by reference a litigation involving many of the same parties and factual issues ongoing in the Supreme Court of the State of New York, County of Queens, First Keystone Consultants, Inc. v. DDR Constr. Servs., No. 27095 2005 (N.Y. Sup. Ct.) (hereinafter the "Queens Action"), the pleadings and decisions in that matter are also described and considered. See Blue Tree Hotels Inv. (Canada), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004) ("Our review is generally limited to the facts and allegations that are contained in the complaint and in any documents that are  incorporated into the complaint by reference. . . . But we may also look to public records, including complaints filed in state court, in deciding a motion to dismiss." (internal citations omitted)).
Plaintiff DDR is a New Jersey corporation that provides consulting and other services to entities in the construction industry. (Compl. ¶¶ 8, 33.) Specifically, DDR brings together other construction industry entities in order to facilitate bidding, assists in arranging bids, and manages construction projects. (Id. ¶¶ 21, 25-26, 33-34.) As of 2001, DDR's vice president, Clifford Weiner ("Weiner"), had affiliations with several construction-industry entities operating in the New York area, including defendants Schlesinger Electrical Contractors, Inc. ("Schlesinger"), and First Keystone Consultants, Inc. ("First Keystone"). (Id. ¶ 21.) In 2004, Weiner was also vice president of Schlesinger. (Id. ¶ 32.)
Defendants Siemens Energy & Automation, Inc. ("SEA"), and Siemens Industry, Inc. ("SII"), (collectively "Siemens"), are Delaware corporations that provide electrical, engineering, and automation solutions in the construction industry. (Id. ¶ 9; Siemens' Defs.' Mem. at 4.)*fn1 DDR originally negotiated with Siemens because DDR sought to join forces with an established electrical contractor in submitting bids on "public improvement construction contracts" in New York. (Compl. ¶ 20.) Defendants Jeffrey Deurlein ("Deurlein"), Harry Volande ("Volande"), and Frank Krutemeier ("Krutemeier"), are officers and/or employees of Siemens, and are Georgia residents. (Id. ¶¶ 15, 17, 18.) Defendant Schlesinger-Siemens Electrical ("SSE"), doing business as Schlesinger-Siemens Electrical, LLC, is a company formed by contractual agreement between Siemens and Schlesinger to bid on New York City Department of Environmental Protection ("NYCDEP") "water pollution facility electrical upgrade" projects in New York. (Id. ¶¶ 32-34.) The company was formally established in August 2004, by an "Operating Agreement"; is organized under the law of Delaware; and is authorized to conduct business in New York as a limited liability company. (Id. ¶¶ 14, 35.) Under the Operating Agreement, Siemens and Schlesinger would split SSE profits 50%-50%, but Siemens retained control over SSE with a 51% member interest as compared to Schlesinger's 49% interest. (Id. ¶¶ 36, 48; Siemens Defs.' Mem. at 5 n.6.) SII, SEA, Deurlein, Volande, Krutemeier, and SSE are hereinafter collectively referred to as the "Siemens Defendants." Defendant Robert Rigsby ("Rigsby"), another Georgia resident, was general counsel to Siemens during the relevant period. (Compl. ¶ 16.)
Defendants Schlesinger and Alison Consulting Group, Inc. ("Alison") are New York corporations involved in the construction industry in New York, mostly in contracting, consulting, or accounting roles. (See id. ¶¶ 1, 10-12, 21, 23, 94-95, 150A.) Defendant First Keystone is a Pennsylvania corporation also involved in the construction industry in New York. (See id.) Defendant Jacob Levita ("Levita") is the president of Schlesinger. (Id. ¶ 11.) Defendant Robert Solomon ("Solomon") is the principal officer of First Keystone. (Id. ¶ 10.) Defendant Joseph Guddemi ("Guddemi") is a principal of Alison. (Id. ¶ 12.) Levita, Solomon, and Guddemi are all New York residents. (Id. ¶¶ 10-12.) Schlesinger and Levita are hereinafter collectively referred to as the "Schlesinger Defendants." First Keystone and Solomon are hereinafter collectively referred to as the "First Keystone Defendants." Alison and Guddemi are hereinafter collectively referred to as the "Alison Defendants."*fn2
Not a party to this action is SFD Associates ("SFD"). SFD was a joint venture of Schlesinger, First Keystone, and DDR, formed in August, 2004, simultaneously with SSE. (Id. ¶ 36.)
B. The Parties' Relationships and the Litigation in Queens
Between 2001 and 2004, Weiner assisted in arranging four construction project bids for Siemens, to be performed in collaboration with various New York construction industry entities including Schlesinger and First Keystone. (Id. ¶ 21.) By the spring of 2004, Weiner apparently desired to create a more formal relationship with Siemens. In August of 2004, therefore, two companies were formed. The first was SSE, a combination of Siemens and Schlesinger authorized to do business in New York as a limited liability company. (Id. ¶ 14). The second was SFD, a joint venture among Schlesinger, First Keystone, and DDR, through which those entities would (1) assist in the bidding and performing of Schlesinger's part of SSE projects, and (2) split any profits Schlesinger earned from those projects in equal thirds. (Id. ¶ 36; Weiner Aff. Ex. A ¶¶ 1, 21).*fn3 Under SSE's Operating Agreement, Schlesinger was permitted to make two appointments to SSE's five-member board of managers; one of those appointments was Weiner. (Compl. ¶¶ 51-52.)
In January of 2004, before either SFD or SSE had been created, Schlesinger, First Keystone, and DDR collaborated in performing electrical work for an NYCDEP project on Coney Island (the "Coney Island Project" or the "Coney Island Partnership"). (Id. ¶¶ 23, 25.) The bid for this project was formally made by a fifty-fifty joint venture between Schlesinger and First Keystone; First Keystone and DDR had a separate agreement by which they would split equally First Keystone's profits on the project. (Id. ¶ 25.) In the spring of 2005, DDR accused Schlesinger and First Keystone of withholding some $300,000 allegedly owed to it. (Id. ¶ 28.) DDR demanded an accounting, but no accounting was performed. (Id. ¶¶ 29-30.)
Thereafter, Schlesinger and First Keystone allegedly began scheming to oust DDR from SFD. (Id. ¶¶ 89-91, 96.)*fn4 First, on September 14, 2005, First Keystone and Schlesinger requested DDR to pay $100,000 to SFD as a "capital call" by the next day; and when DDR neither attended the next day's meeting nor came up with the funds, Schlesinger and First Keystone informed DDR that it would be excluded from SFD profits. (Id. ¶¶ 119, 121-122).*fn5 Second, on September 16, 2005, Weiner was replaced on the SSE board of managers by Levita, either after his resignation or after being forced out by Schlesinger and First Keystone. (Id. ¶¶ 100-101, 136.)*fn6 Siemens, and specifically, Deurlein, allegedly knew of Schlesinger and First Keystone's wrongful conduct but took no action to stop it. (Id. ¶¶ 105, 115-116, 126, 133.)*fn7
The parties entered litigation in December of 2005 when the First Keystone Defendants sued DDR in New York Supreme Court in Queens. First Keystone (1) alleged that DDR had obtained certain profits from the Coney Island Project by fraud; and (2) sought a declaratory judgment that DDR was not entitled to share in profits SFD obtained through Schlesinger's membership interest in SSE. (Id. ¶ 31); see First Keystone Consultants, Inc. v. DDR Constr. Servs., No. 27095 2005, 880 N.Y.S.2d 223 (Table), 2008 WL 5431379 at *1 (N.Y. Sup. Ct. Dec. 15, 2008). DDR counterclaimed against the First Keystone Defendants and asserted third-party claims against the Schlesinger Defendants for inter alia breach of contract, breach of fiduciary duty, and unjust enrichment; and also sought accountings and dissolutions of the Coney Island Project and of SFD. (Kalish Decl. Ex. S ¶¶ 87-132.) DDR also asserted these claims, as well as fraud, conspiracy to commit fraud, constructive trust, tortious interference with contractual relations, and tortious interference with prospective economic advantages, against SSE. (Bhoumik Decl. Ex. B (the "Queens Compl.") ¶¶ 144-195); First Keystone Consultants, Inc. v. DDR Constr. Servs., No. 27095 2005, 901 N.Y.S.2d 906 (Table), 2009 WL 3415282, at *1 (N.Y. Sup. Ct. Oct. 5, 2009).
On November 24, 2008, the Supreme Court, Queens County (Hart, J.) granted DDR "summary judgment as to DDR's entitlement to an accounting" of SFD. (O'Connor Decl. Ex. F at 4.) Then on November 26, 2008, that court enjoined First Keystone and Schlesinger from disbursing SFD funds. (Id. at 14.) Almost one year later, on October 5, 2009, the court dismissed all of DDR's claims against SSE on the ground that DDR's pleading failed to state a cause of action pursuant to N.Y. C.P.L.R. 3211(a)(7), and dismissed DDR's breach of fiduciary duty claim against SSE on the additional ground that SSE had a defense founded upon documentary evidence pursuant to N.Y. C.P.L.R. 3211(a)(1). First Keystone, 2009 WL 3415282, at *3-4. As to the fiduciary duty claim, the court held that the SSE Operating Agreement and the SFD Joint Venture Agreement demonstrated that no fiduciary relationship existed between SSE and DDR.*fn8 Id. at *3. After dismissing the remaining causes of action for failing to state claims under N.Y. C.P.L.R. 3211(a)(7), the court denied DDR's cross-motion for an order appointing a referee to conduct an accounting of SFD stating that DDR had already had ample opportunity for discovery. Id. at *5.
On June 22, 2010, the Appellate Division, Second Department, affirmed the Supreme Court's dismissal of all claims against SSE. First Keystone Consultants, Inc. v. DDR Constr. Servs., 74 A.D.3d 1135, 1137-39 (N.Y. App. Div. 2010).*fn9 However, the Second Department reversed the lower court's denial of the appointment of a referee for an accounting, stating: "the referees appointed by the Supreme Court in its prior orders . . . never conducted such an accounting. DDR was a partner in SFD Associates, and is entitled to an accounting of that joint venture." Id. at 1139.*fn10
C. SSE's Alleged Criminal Acts
In 2005, SSE won bids for at least three NYCDEP projects including the "26th Ward Project," the "Wards Island Project," and the "Croton Facility Project." (Compl. ¶¶ 80-83, 85.) However, in preparing its bids and performing the contracts, SSE allegedly engaged in broad-scale fraudulent activity "caus[ing] enormous harm to the profitability of the [projects]." (Id. ¶ 179.) For example, DDR alleges that SSE manipulated New York City's Minority Business Entity ("MBE") program, New York City Administrative Code § 6-129, by creating sham transactions in order to claim MBE credit. According to DDR, Siemens and Schlesinger*fn11 caused an electrical subcontractor, J&R Rey Electrical ("JR"), to accept funds from Schlesinger and use those funds to purchase electrical equipment from Siemens. (Compl. ¶¶ 152-155.) SSE then counted JR's costs in those purchases against its MBE requirements. (Id.) SSE thus charged at least $320,000 of fraudulent expenses incurred by JR in equipment purchases against the 26th Ward Project, along with at least $100,000 in legal fees in preparation for litigation with JR and "enormous" amounts in preparation for investigations by "several" State agencies. (Id. ¶¶ 150(a), 158, 159.) In order to secure JR's cooperation, Siemens, Schlesinger, Deurlein, and Levita allegedly put financial pressure on JR and forced JR to hire SSE's accountant Guddemi, nominally as an electrician, but in reality as a "fox guarding the henhouse." (Id. ¶¶ 188-192.) The over $86,000 paid to Guddemi was also charged against the 26th Ward Project between January 2006 and January 2008. (Id. ¶ 194.) Additionally, through his position Guddemi was able to secure "enormous" profits for his company, Alison, which were all hidden from the Internal Revenue Service. (Id. ¶ 195).
DDR also alleges that SSE, Siemens, Schlesinger, and First Keystone defrauded NYCDEP by forging documents in order to meet NYCDEP's requirement that SSE employ a "Master Electrician" full time. (Id. ¶¶ 160-163.) Allegedly, between July of 2006 and April of 2008, SSE paid one Bronislav Ostrovsky ("Ostrovsky") at least $36,000 to serve as SSE's Master Electrician, but Ostrovsky was actually employed by another contractor, Five Star Electric, Inc., during that period. (Id. ¶¶ 163-170.) Not only were SSE's payments to Ostrovsky charged to the 26th Ward Project so as to diminish the Project's value, but, as with the MBE scheme, SSE has incurred "extraordinary costs and fees" due to State investigations of the Ostrovsky payments. (Id. ¶¶ 150(c), 166.) Finally, DDR makes several more general allegations including that SSE management along with Schlesinger and First Keystone (1) wrongfully diverted SSE funds to themselves; (2) intentionally falsified and confused SSE records; and (3) engaged in widespread nepotism. (See id. ¶¶ 182A-F.)
As described supra, on October 5, 2009, Justice Hart dismissed all of DDR's claims pending against SSE in the Queens Action. First Keystone, 2009 WL 3415282, at *3-4. Then on November 17, 2009, DDR filed its complaint in this action. The complaint includes eight counts. First is a RICO claim. Then come several state law claims, confusingly based sometimes on one, sometimes on another, sometimes on both, and sometimes on neither version of its allegations as to the structure of the business entities so far described. The two structures can be summarized as follows:
The "DDR-in-SFD Entity": In this version, described, inter alia, in Count Two, compl. ¶ 235, SSE is a joint venture. The joint venturers in SSE are Siemens and Schlesinger. SFD is another joint venture. The joint venturers in SFD are Schlesinger, First Keystone, and DDR. By virtue of the "Pre-Bidding and Joint Venture Agreement of SFD Associates," DDR, as well as Schlesinger and First Keystone, each own one-third of Schlesinger's one-half property interest in SSE. The "DDR-in-SSE Entity": In this version, described, inter alia, in Count Three, compl. ¶ 237, SSE is again a joint venture. But the joint venturers in SSE are Siemens, Schlesinger, First Keystone, and DDR. The existence of SFD is ignored in this version of DDR's claims.
The following two charts represent these entities graphically:
[Editor's Note: Charts unavailable]
DDR's first count is for civil RICO, 18 U.S.C. § 1964(c), against defendants SEA, Schlesinger, First Keystone, Deurlein, Volande, Krutemeier, Levita, Solomon, Rigsby, and Guddemi. DDR alleges that those defendants ran SSE's affairs though a pattern of racketeering activity in violation of 18 U.S.C. § 1962(c); and additionally that Siemens is separately liable for maintaining its interest in and controlling SSE through a pattern of racketeering activity in violation of 18 U.S.C. § 1962(b). (Compl. ¶¶ 223-224.) As predicate racketeering activity, DDR points to the JR scheme, the payments to Guddemi and Ostrovsky, and the uses and transfers of the funds obtained thereby. (Id. ¶¶ 216-221.) DDR claims as damages the financial harm caused to SSE's NYCDEP Projects by this conduct. (Id. ¶ 227.) These harms include (1) the payments and losses charged against the 26th Ward Project; (2) the legal costs incurred in preparing for and defending State investigations; and (3) the risk that those investigations threaten the very existence of SSE. (Id. ¶¶ 222, 228-230.)
DDR's second count is for a declaratory judgment that "[SSE] is and was a joint venture between [Siemens] and Schlesinger with the constituent venturers in SFD each owning 1/3 of the property interest of Schlesinger in the [SSE] venture." (Id. ¶ 235.)
Third, DDR alleges state law breach of fiduciary duty claims against defendants Siemens, Schlesinger, and First Keystone. (Id. ¶¶ 241-242.) The duty arises from DDR's alleged rights as a joint venturer with Siemens, Schlesinger, and First Keystone in SSE. (Id. ¶ 237 ("As joint venture partners, [Siemens], Schlesinger, and [First Keystone] owed common law and statutory duties of fidelity and loyalty to DDR, . . . to not deprive DDR of the benefits of its partnership rights in SSE.").)
Fourth, DDR asserts fraud against defendants SEA, Schlesinger, First Keystone, Levita, and Solomon and claims not less than $10 million in damages. (Id. ¶¶ 244, 250.) This fraud was that those defendants omitted information relevant to their alleged racketeering activity in documents provided to DDR in both its capacity (1) as joint venturer in SSE; and (2) as counterclaimant in the Queens Action. (Id. ¶¶ 244-247.) The at least $10 million in damages allegedly resulted from DDR and Weiner's time and effort spent working on SSE bids and projects. (Id. ¶ 248.)
Fifth, DDR asserts unjust enrichment against all defendants, claiming that defendants wrongfully distributed to themselves as much as $3 million from SSE, and that those funds should be returned to SSE and redistributed to SSE's joint venturers. (Id. ¶¶ 252-255.) DDR alleges that all defendants are liable because "they participated in and profited from the wrongful expropriation of joint venture funds, and obtained money that in equity and good conscience should not have been obtained." (Id. ¶ 256.)
Sixth, DDR asserts "civil conspiracy" against SEA, Schlesinger, First Keystone, Deurlein, Volande, Krutemeier, Schlesinger, Levita, First Keystone, Solomon, Rigsby, and Guddemi. (Id. ¶ 259.) Without identifying any specifics, the complaint essentially states that those defendants had a common and malicious intent to harm SSE and DDR, and that those defendants carried out the acts supporting the first five counts.
Seventh, DDR asserts conversion against all defendants, claiming that defendants wrongfully distributed to themselves an undetermined amount of funds from SSE, and that those funds should be placed in constructive trust for the benefit of DDR. (Id. ¶¶ 264-270.)
Eighth and finally, DDR asserts negligence and negligent entrustment against SEA. DDR alleges that Siemens managed SSE's finances-funds to which DDR was entitled to a one-sixth portion pursuant to the SFD and SSE agreements-and that Siemens failed to "prevent and detect" the conduct already described. (Id. ¶¶ 272-279.) DDR claims this negligence "created an unreasonable risk of harm to DDR's property interests" in the NYCDEP Projects, and that that allowed upwards of $1.4 million to be embezzled from SSE.
On December 24, 2009, the First Keystone Defendants filed their answer to the complaint and counterclaimed against DDR for (1) breach of contract entitling the First Keystone Defendants to $50,000 they were required to provide SSE when DDR failed to meet the September 2005 capital call; (2) fraud and breach of fiduciary duty entitling them to $75,000, which represents one-sixth of an amount SSE would allegedly have saved in equipment purchases had Weiner not delayed certain purchases; and (3) for the costs the First Keystone Defendants have expended in defending this suit. (First Keystone Defs.' Answer ¶¶ 201-203.) The Siemens Defendants, the Schlesinger Defendants, the Alison Defendants, and Rigsby have each filed their own motion to dismiss. In response, DDR opposed the motions to dismiss and additionally cross-moved
(1) to strike the First Keystone Defendants' answer and dismiss their counterclaims; (2) for sanctions against the First Keystone Defendants; and (3) for leave to seek sanctions against the Schlesinger Defendants. DDR has also submitted a letter seeking leave to amend its complaint in light of documents allegedly newly revealed resulting from certain Freedom of Information Act requests and rulings in the pending state court accounting proceeding.
A. Defendants' Motions to Dismiss
On a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) the Court accepts as true all factual allegations in the complaint and draws all reasonable inferences in the plaintiff's favor. In re DDAVP Direct Purchaser Antitrust Litigation, 585 F.3d 677, 692 (2d Cir. 2009). The complaint's allegations, however, "must be enough to raise a right of relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Only a "plausible claim for relief survives a motion to dismiss." LaFaro v. New York Cardiothoracic Group, PLLC, 570 F.3d 471, 476 (2d Cir. 2009). Thus courts are "not bound to accept as true a legal conclusion couched as a factual allegation," and "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009) (internal quotation marks omitted).
Four motions to dismiss are currently pending, covering all defendants except First Keystone and Solomon. The Court addresses each of the several asserted grounds for dismissal in turn.
a. Colorado River Abstention
All moving defendants argue that the "Colorado River abstention doctrine" requires this Court to dismiss the present action because DDR is litigating its entitlement to the anticipated profits from SSE's NYCDEP contracts in the Queens Action. Defendants argue, "[a] ruling in the Queens Action that DDR is not entitled to any profits from the SFD partnership would moot the instant lawsuit since DDR would be unable to sustain a claim for damages." (Siemens Defs.' Mem. at 12.)
"The doctrine of abstention, under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it." Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 813 (1976). Unlike other abstention doctrines related to "considerations of proper constitutional adjudication and regard for federal-state relations," Colorado River abstention "rest[s] on considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation." Id. at 817. However, "[a]lthough duplicative litigation as between federal courts is ordinarily to be avoided, . . . the pendency of an action in  state court is no bar to proceedings concerning the same matter in  Federal court . . . [due to] the virtually unflagging obligation of the federal courts to exercise the jurisdiction given them." Woodford v. Cmty. Action Agency of Greene Cnty., Inc., 239 F.3d 517, 522 (2d Cir. 2001) (citing Colorado River, 424 U.S. at 817). Thus Colorado River abstention permits dismissal only in the rare case when (1) the relevant state and federal actions are "concurrent" or "parallel" and (2) evaluation of a six-factor test weighs in favor of abstention. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 16 (1983). The circumstances permitting dismissal are extremely limited, and "the balance [must be] heavily weighted in favor of the exercise of jurisdiction." Id.; Jamaica Hosp. Med. Ctr. v. United ...