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Natasha Shpak, Rouben Vartanov, and Lili Ougoulava v. Malcolm Curtis

September 26, 2011


The opinion of the court was delivered by: Roslynn R. Mauskopf, United States District Judge.


Plaintiffs bring this action for monetary and equitable relief against defendants Malcolm and Judith Curtis ("Malcolm" and "Judith" respectively), Belzona Systems of California, Inc. ("Belzona"), and Simnat Global Inc. ("Simnat"), alleging fraud, conspiracy, violation of New York Civil Rights Law § 80-b, breach of contract, breach of fiduciary duty, conversion, and unjust enrichment. All defendants are California domiciliaries, and all plaintiffs are New York domiciliaries. (Compl. (Doc. No. 1) ¶¶ 1--4.) Plaintiffs' claims arise out of an alleged scheme where Malcolm and Judith's son Simon Curtis ("Simon," and, collectively, the "Curtises"),*fn1 promised to marry plaintiff Natasha Shpak, and Malcolm and Judith promised to open a restaurant in California to support them, all in order to induce plaintiffs to give them certain restaurant equipment, with which defendants absconded. (Compl. ¶¶ 12, 19.)

Presently before the Court are defendants' motions to dismiss for lack of subject matter jurisdiction, lack of personal jurisdiction, improper venue and failure to state a claim, under Rules 12(b)(1), 12(b)(2), and 12(b)(6) of the Federal Rules of Civil Procedure, and 28 U.S.C. § 1406(a). (Defs.' Notice of Mot. to Dismiss (Doc. No. 34) ¶¶ 1--4.) In the alternative, defendants move to transfer this action to the Northern District of California under 28 U.S.C. § 1404(a). (Id. ¶ 3.) For the reasons set forth below, defendants' motions are DENIED in their entirety.


The following facts are drawn from plaintiffs' complaint, the factual allegations of which are taken as true for purposes of defendants' motion to dismiss. Harris v. Mills, 572 F.3d 66, 71 (2d Cir. 2009). Simon met Shpak abroad at the St. Matthews School of Medicine in November 2001. (Compl. ¶ 7.) Simon and his then-wife Natalia became friends with Shpak. In July 2004, Simon and Natalia attended Shpak's birthday party at a Brighton Beach, New York restaurant called the Imperator, owned by Shpak's parents, plaintiffs Rouben Vartanov and Lili Ougoulava. (Id. ¶ 10.) Over the course of their ownership, Vartanov and Ougoulava had furnished the Imperator with certain bespoke equipment, including, inter alia, custom lighting and sound systems, furniture, and kitchen equipment (collectively, the "Equipment"). (Id. ¶¶ 49--50.) Simon told Vartanov and Ougoulava that he was impressed with the Equipment, and that he "wished he could own a restaurant like Imperator." (Id. ¶ 11.)

I.Simon and Shpak's relationship

In January 2007, Natalia died, and a romantic relationship developed between Shpak and Simon. At his wife's funeral in California, which Shpak attended, Simon told Shpak he had romantic feelings for her and gave her various gifts. (Id. ¶ 15.) In March 2007, Natasha attended Simon's birthday party in California, where Simon informally proposed marriage and told Natasha of his family's plans to open a restaurant for the couple, to support them in their marriage. (Id. ¶ 16.) In April 2007, Simon visited New York, met Shpak's parents, referred to Shpak as his fiancee, and told them of his family's plans to open a restaurant to support Simon and Shpak. (Id. ¶ 19.) Simon expressed his desire to use the Equipment in the new restaurant. (Id.) Vartanov and Ougoulava hesitated to part with the Equipment until Simon and Natasha became "officially engaged." (Id. ¶ 19.)

In April 2007, Shpak moved to California to live with Simon. (Id. ¶ 20.) The Curtises discussed with Shpak extensively the planned restaurant. (Id.) Malcolm and Judith told Simon to propose formally to Shpak, and gave him a fake diamond ring for the occasion. (Id. ¶ 21.) In July 2007, Simon proposed to Shpak at an upscale restaurant in San Diego, California, and gave her the fake diamond as an engagement ring. (Id. ¶ 22.) Shpak did not know the diamond was fake. (Id.) At the dinner, Simon called Vartanov and Ougoulava and told them that he and Shpak had become "officially engaged." (Id. ¶ 23.) Between July 2007 and December 2007, Simon continued to suggest that Vartanov and Ougoulava give the Equipment to Simon and Shpak as an engagement gift. (Id. ¶ 25.) On December 31, 2007, Vartanov and Ougoulava threw an engagement party for Shpak and Simon at the Imperator. (Id.¶¶ 26, 28.) At the party, Simon gave Shpak a pair of fake diamond earrings, again at Malcolm and Judith's instruction. Again, Shpak did not know the diamonds were fake. (Id. ¶ 27.) Simon discussed the potential engagement gift of the Equipment with Vartanov and Ougoulava. (Id. ¶ 28.) Simon agreed with Vartanov and Ougoulava that any gift of the Equipment would be contingent on eventual marriage between Simon and Shpak. (Id. ¶ 28.)

In February 2008, after numerous discussions with Vartanov, Simon paid in excess of $25,000 to ship the Equipment to California, placed some of the Equipment in storage, and placed the more valuable items in Malcolm and Judith's home. (Id. ¶¶ 29--30.) Subsequently, Malcolm and Judith formed defendant Simnat. Simnat is an amalgam of the first names of Simon and Shpak. (Id. ¶ 31.) Malcolm, Judith and Simon indicated to Shpak that Simnat would belong to Simon and Shpak, and would be the holding company for the new restaurant, which was to be called the "Edge." (Id. ¶ 38, 41.) Malcolm and Judith, however, owned 80% of Simnat. (Id. ¶ 31.) In October 2008, Vartanov and Ougoulava came to California to visit and stay with the Curtises, who told their visitors that the wedding would take place when financing and other plans for the Edge were more firmly in place. (Id. ¶¶ 32--34.) The Curtises approached Vartanov and Ougoulava for a loan and were rebuffed. (Id. ¶ 34.) Around April 2009, the Curtises arranged alternate financing. (Id. ¶ 35.)

II.Separation and state litigation

In April 2009, the Curtises had Shpak forcibly evicted from their property, where she had been staying with Simon since April 2007. (Id. ¶ 36.) Shpak's ejection was without warning or provocation. (Id.) The morning of Shpak's ejectment, Simon left the house, saying he would return after visiting Malcolm and Judith. The Curtises had summoned the police, however, who arrived shortly after Simon left, and removed Shpak from the premises. Shpak had only a brief moment to gather her belongings, and was forced to leave many items behind. (Id.) Thus ended any engagement between Shpak and Simon. (Id.)

Beginning in April 2009, the Curtises used some of the Equipment to establish the Edge. Other pieces of the Equipment they sold. (Id. ¶¶ 38--39.) Some proceeds of the sales were credited to the the Edge's account with Morningstar Productions LLC, an event production company. (Id. ¶¶ 41, 48.) The Edge opened in June 2009, managed by the Curtises through Simnat and Belzona. (Id. ¶ 41.) Plaintiffs requested that the Curtises return the Equipment, to no avail. (Id. ¶¶ 40, 42.)

In October 2009, plaintiffs sued Simon in Kings County Supreme Court seeking damages for conversion of the Equipment. See Shpak v. Curtis, No. 024960/2009 (Sup. Ct. Kings Cnty.). Plaintiffs sought and received temporary injunctive relief barring further sale of the Equipment and permitting plaintiffs to inspect the Equipment. (Compl. ¶¶ 46--47.) In the course of the state-court litigation, plaintiffs learned of the Curtis' sale of some of the Equipment, and the sequence of events involving Malcolm and Judith surrounding Simon's proposal. (See Compl. ¶¶ 49--51.) The state court awarded plaintiffs preliminary injunctive relief in the form of control over the remaining Equipment in storage, at plaintiffs' expense. (Id. ¶¶ 52; Def. Malcolm Curtis' Aff. in Supp. of Mot. to Dismiss ("Malcolm Aff.") Ex. 8 (Doc. No. 34-4), at 72.) The state court action remains pending.

In April 2010, plaintiffs filed the instant complaint alleging fraud, conspiracy, violation of New York Civil Rights Law § 80-b, breach of contract, breach of fiduciary duty, conversion, and unjust enrichment. Defendants contend that the Court lacks subject matter jurisdiction under 28 U.S.C. § 1332 and personal jurisdiction under New York's long-arm statute, N.Y. C.P.L.R. § 302, that venue is improper, and that plaintiffs have failed to state a claim upon which relief may be granted.


A motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) requires the court to examine the legal, rather than factual, sufficiency of a complaint. Harris, 572 F.3d at 71. As required by Rule 8(a)(2), a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." To withstand a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

A court considering a 12(b)(6) motion must "take[ ] factual allegations [in the complaint] to be true and draw[ ] all reasonable inferences in the plaintiff's favor." Harris, 572 F.3d at 71 (citation omitted). A complaint need not contain " 'detailed factual allegations,' " but it must contain "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 555). In other words, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555). Rather, the plaintiff's complaint must include "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 570). The determination of whether "a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950 (citing Iqbal v. Hasty, 490 F.3d 143, 157--58 (2d Cir. 2007)).


I.Subject matter jurisdiction

The diversity statute confers original jurisdiction with respect to "all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different States." 28 U.S.C. § 1332(a). Plaintiffs allege that the Court has diversity jurisdiction. Defendants do not contest diversity of citizenship,*fn2 but contend that the amount in controversy is less than the $75,000 required to establish jurisdiction. "A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it." Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000) (citing Fed. R. Civ. P. 12(b)(1)). In considering a motion to dismiss for lack of subject matter jurisdiction, a district court "must accept as true all material factual allegations in the complaint, but [is] not to draw inferences from the complaint favorable to plaintiffs." J.S. ex rel. N.S. v. Attica Cent. Sch., 386 F.3d 107, 110 (2d Cir. 2004) (citation omitted). The Court, however, "may consider affidavits and other materials beyond the pleadings to resolve the jurisdictional issue, but [it] may not rely on conclusory or hearsay statements contained in the affidavits." Id. (citations omitted).

"A party invoking the jurisdiction of the federal court has the burden of proving that it appears to a 'reasonable probability' that the claim is in excess of the statutory jurisdictional amount." Tongkook Am., Inc. v. Shipton Sportswear Co., 14 F.3d 781, 784 (2d Cir. 1994) (quoting Moore v. Betit, 511 F.2d 1004, 1006 (2d Cir. 1975)). The burden is "hardly onerous," Scherer v. Equitable Life Assurance Soc'y of U.S., 347 F.3d 394, 397 (2d Cir. 2003), however, because of the "rebuttable presumption that the face of the complaint is a good faith representation of the actual amount in controversy." Wolde-Meskel v. Vocational Instruction Project Cmty. Servs., Inc., 166 F.3d 59, 63 (2d Cir. 1999).

A defendant may rebut the presumption by showing "to a legal certainty" that the amount recoverable does not meet the jurisdictional threshold. Id. (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288--89 (1938)). "[T]he legal impossibility of recovery must be so certain as virtually to negative the plaintiff's good faith in asserting the claim." Chase Manhattan Bank, N.A. v. Am. Nat'l Bank & Trust Co. of Chi., 93 F.3d 1064, 1070--71 (2d Cir. 1996) (quoting Tongkook, 14 F.3d at 785). Indeed, "grave doubt about the likelihood of a recovery of the requisite amount" is insufficient; the "legal certainty" standard is a "high bar." Scherer, 347 F.3d at 397; Zacharia v. Harbor Island Spa, Inc., 684 F.2d 199, 202 (2d Cir. 1982); see also Tongkook, 14 F.3d at 785 ("Where the damages sought are uncertain, the doubt should be resolved in favor of the plaintiff's pleadings.").

Here, plaintiffs seek damages or return of the Equipment, allegedly valued at over $500,000, an amount in excess of the required threshold. (See Compl. ΒΆΒΆ 6, 11, 45, 50, 66, 80.) The plaintiff is entitled to a presumption that this amount is a good faith representation of the amount in controversy. Plaintiffs also have submitted a "Master Equipment List," setting forth in scrupulous detail a description of each "item group" (for example, "70. Ornate Antique Loveseat, quantity 1"; "25. Mirrorball 20" with motor, quantity 2"), the condition of the item, and its cost, for 165 distinct item groups, and a total cost of $572,363. (Decl. of Natasha Shpak in Opp'n to Defs.' Mot. to Dismiss ("Shpak Decl.") Ex. 5 (Doc. 34-8), at 66--75.) Plaintiffs also submit receipts for sound equipment, lighting, video, and other equipment, the cost of which exceeds $75,000. (Id. at 76--84.) Defendants contend that an auction of the Equipment ...

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