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Hugh Wyatt v. Inner City Broadcasting Corporation

September 28, 2011

HUGH WYATT, PLAINTIFF,
v.
INNER CITY BROADCASTING CORPORATION, INNER CITY MEDIA CORPORATION, AND ICBC BROADCAST HOLDINGS, INC., DEFENDANTS.



The opinion of the court was delivered by: P. Kevin Castel, District Judge:

MEMORANDUM AND ORDER

Plaintiff Hugh Wyatt, proceeding pro se, brings this action against Inner City Broadcasting Corporation ("Inner City"), Inner City Media Corporation ("Inner City Media"), and ICBC Broadcast Holdings Inc. ("Broadcast Holdings"), alleging that defendants violated multiple state and federal laws, including section 17 of the Securities Act of 1933, 15 U.S.C. § 77q; section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78j(b); Securities and Exchange Commission Rule 10b-5, 17 C.F.R. § 240.10b-5; and the civil enforcement provision of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(c).*fn1 Plaintiff seeks monetary damages and injunctive relief, including the appointment of a receiver. Defendants jointly move to dismiss the Amended Complaint pursuant to Rule 12(b)(1), Fed. R. Civ. P., and Rule 12(b)(6), Fed. R. Civ. P. (Docket # 16.) For the reasons set forth below, the claims against Inner City are dismissed.

PROCEDURAL HISTORY AND THE AUTOMATIC STAY

Plaintiff filed the Complaint and then a motion, which the Court deemed to be a motion for a preliminary injunction. (Docket # 1, 2.) On August 2, 2011, the Court held a hearing on the motion for a preliminary injunction. At the hearing, plaintiff filed an Amended Complaint in open court. (Docket # 13.) After hearing the parties, the Court denied plaintiff's application for injunctive relief and permitted defendants to file a motion to dismiss the Amended Complaint. (8/2/11 Tr.) Defendants filed the motion on August 10, 2011. (Docket # 16.)

By letter dated August 23, 2011, defendants notified the Court that involuntary Chapter 11 bankruptcy petitions were filed against Inner City Media and Broadcast Holdings in the United States Bankruptcy Court for the Southern District of New York. (Letter dated Aug. 23, 2011 at 1.) Inner City is the parent corporation of Inner City Media and Broadcast Holdings. (Letter dated Aug. 23, 2011 at 1.) The petitions were filed on August 19, 2011, before the motion to dismiss was fully briefed. (Letter dated Aug. 23, 2011 at 1.) No bankruptcy petition was filed against or by the parent corporation, Inner City. (Letter dated Aug. 23, 2011 at 1.) On August 25, 2011, defendants filed a reply brief. (Docket # 24.)

The filing of an involuntary bankruptcy petition triggers an automatic stay. 11 U.S.C. § 362(a). The stay is "applicable to all entities" of "the commencement or continuation . . . of a judicial . . . action or proceeding against the debtor." 11 U.S.C. § 362(a); see also Olick v. Parker & Parsley Petroleum Co., 145 F.3d 513, 516 (2d Cir. 1998) (noting that the automatic stay provision applies to actions against debtors). Here, Inner City is not a debtor. Therefore, the action is stayed as to defendants Inner City Media and Broadcast Holdings but not Inner City. Accordingly, this Memorandum and Order is directed solely to Inner City. See Thule AB v. Advanced Accessory Holdings Corp., 2010 WL 1838894, at *1 (S.D.N.Y. May 4, 2010) (deciding a jointly filed motion to dismiss solely as to the claims against the defendant who was not subject to the automatic stay).

FACTUAL BACKGROUND

The following facts are taken from the Amended Complaint. For the purposes of Inner City's 12(b)(6) motion, all non-conclusory factual allegations of the non-movant are accepted as true, Iqbal v. Ashcroft, 129 S. Ct. 1937, 1949-50 (2009), and all reasonable inferences are drawn in favor of the non-movant. In re Elevator Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007).

Plaintiff is a shareholder in Inner City, a broadcasting company that "owns or has been involved in the ownership of" various radio stations and the Apollo Theater. (Am. Compl. ¶¶ 1, 5, 7.) According to plaintiff, Inner City and its subsidiaries have $230 million in outstanding debt. (Am. Compl. ¶ 10.) The Amended Complaint indicates that the outstanding debt arose, at least in part, from bank loans issued by Goldman Sachs and GE Capital. (Am. Compl. ¶¶ 9, 11.) Earvin "Magic" Johnson Enterprises ("Magic Johnson Enterprises") and Ron Burkle's Yucaipa Companies ("Yucaipa Companies") plan to purchase the outstanding debt pursuant to a proposed agreement (the "Debt Purchase Agreement"). (Am. Compl. ¶¶ 7, 10.) Inner City is a party to the Debt Purchase Agreement. (Am. Compl. ¶ 10.) If the Debt Purchase Agreement is consummated, the ownership of the debt will then be transferred to Fortress Investments ("Fortress"), Yucaipa Companies and Magic Johnson Enterprises. (Am. Compl. ¶ 11.) "The terms of the debt buyout will . . . amount to associated debt being bought for 25 cents on the dollar."*fn2 (Am. Compl. ¶ 10.)

The Amended Complaint makes a variety of factual allegations that primarily relate to his rights as a shareholder in Inner City. For example, plaintiff alleges that "Inner City has refused to provide [him] with any information regarding the" Debt Purchase Agreement. (Am. Compl. ¶ 14.) He also alleges that Inner City has refused to inform him whether Inner City will seek the approval of its disinterested directors and shareholder before consummating the Debt Purchase Agreement. (Am. Compl. ¶ 14.) Inner City has also failed to hold stockholder meetings or issue "financial documents for the past five years." (Am. Compl. ¶ 12.) It has also refused to comply with a court order, issue by the New York State Supreme Court, requiring Inner City to release certain documents. (Am. Compl. ¶ 13.)

Plaintiff also asserts a RICO claim and alleges that "[d]efendants operated their [business] enterprise . . . for the purpose of enriching the family of Percy E. Sutton through transactions . . . [that] violated state and federal criminal laws . . . ." (Am. Compl. ¶ 8.) This includes violating federal laws prohibiting mail fraud, bank fraud and the interstate transportation of stolen property. (Am. Compl. ¶ 8.) He also alleges that "[t]he fraudulent conduct involved in the proposed transfer of debt and equity to Fortress is in violation of section 17 of the Securities Act of 1933 and rule 10(b)5 of the SEC under the Securities Exchange Act of 1934." (Am. Compl. ¶ 11.)

Other allegations in the Amended Complaint relate to a Federal Communications Commission ("FCC") license issued to Inner City. (Am. Compl. ¶ 6.) The Amended Complaint alleges that by allowing Goldman Sachs and "General Electric" to "own[ ] the entire equity interest of [Inner City]," it has violated "the licensing requirements of the FCC." (Am. Compl. ¶ 11.)

LEGAL STANDARD

Rule 8(a)(2), Fed. R. Civ. P., requires "a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)) (ellipsis in original). To survive a motion to dismiss under Rule 12(b)(6), a plaintiff must provide the grounds upon which the claims rest, through factual allegations sufficient to raise a right to relief above the speculative level. ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Twombly, 127 S. Ct. at 1965). "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." Achcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). "The plausibility standard . . . asks for more than a sheer possibility that a defendant has acted unlawfully." Id. Legal conclusions and "[t]hreadbare recitals of the elements of a cause of action" do not suffice to state a claim, as "Rule 8 . . . does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Id. at 1949-50. The Supreme Court has described the motion to dismiss standard as encompassing a "two-pronged approach" that requires a court first to construe a complaint's allegations as true, while not bound to accept the veracity of a legal conclusion couched as a factual allegation. Id. Second, a court must then consider whether the complaint "states a ...


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