The opinion of the court was delivered by: Hurley, District Judge:
This action was commenced by Ronald J. Friedman ("plaintiff" or
"Receiver"), who was appointed by this Court in a separate action
entitled Bank of America v. New York Merchants Protective Co. Inc.,
New York Merchants Alarm Response, and NY Merch. Prot. Co. Inc., No.
11-CV-38(DRH)(ARL)(E.D.N.Y.)(the "BOA Action") to act as the receiver
to the defendant businesses in that case. The individual defendants in
this suit, Wayne Wahrsager and his two sons Eric and Aaron Wahrsager
(collectively, the "Wahrsagers" or the "individual defendants"), are
allegedly officers of the receivership businesses*fn1
named in the BOA Action. In that action, the Bank of America sued to
recover over $19 million in defaulted loans and overdraft payments
from New York Merchants Protective Company ("NYMP").*fn2
Here, the Receiver alleges that in the months prior to NYMP
entering receivership, the Wahrsagers took steps to "intentionally
sabotage the business and operations of NYMP." (Amended Complaint
("Am. Compl.") ¶ 57.) The Receiver alleges 28 claims for relief,
including that the defendants fraudulently conveyed the company's
assets. (Am. Compl. generally.)*fn3
Now before the Court is the motion of defendants Eric and Aaron Wahrsager, Nationwide Central Station Monitoring ("Central Station"), and United States Merchants Protective Co. Inc. ("USMP") to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6). Defendants Wayne Wahrsager and SeniorCare911, LLC have answered the complaint.*fn4 Although the moving parties and the Receiver have repeatedly represented to the Court since this motion was filed in April 2011 that the parties would be able to settle the matters raised therein, the Receiver informed the Court by letter dated January 11, 2012 that an amicable resolution would not be forthcoming. (See Letter from Receiver's Counsel dated 1/11/12, docket no. 143.) For the reasons that follow, defendants' motion is granted in part and denied in part.
Although still only in the pleading stage, this case along with its sister case, the BOA Action, has been the subject of multiple proceedings and applications over the past twelve months. The facts and procedural history recounted here will therefore be limited only to what is necessary to decide the instant motion. All well pled factual allegations are assumed true for present purposes.
I.THE BUSINESS LOAN AND SUBSEQUENT DEFAULT
NYMP was formed in 1989, and since then has provided security alarm, fire alarm, and life-safety alarm monitoring as well as other related services. (Am. Compl. ¶¶ 21-22.) In January 2006, LaSalle Bank, predecessor to Bank of America, entered into an agreement to provide NYMP up to $17.5 million in revolving loans.*fn5 (Am. Compl. ¶ 39.) The amount of the revolving loan was based primarily on the size of NYMP's "recurring monthly revenue," i.e., revenue from monthly payments to the company in exchange for the provision of monitoring services to its residential and commercial customers. (See Complaint filed in BoA Action ("BoA Compl.") ¶¶ 26-30, No. 11-cv-38, docket no. 1.) Beginning in February 2010, NYMP, allegedly at the behest of Wayne Wahrsager, engaged in a check-kiting scheme, which accumulated approximately $1.4 million in overdrafts. (BoA Compl. ¶¶ 23-25, 41.) Upon discovering this scheme, the bank directed NYMP, through a September 2010 notice of default, to engage the services of a financial auditor to "re-examine" the actual size of the company's monthly revenue. (BoA Compl. ¶¶ 29, 34.) This audit determined that NYMP had "significantly overstated and misrepresented" the financial basis for the revolving loan. (BoA Compl. ¶ 30.)
Discovery of this alleged fraud prompted Bank of America on January 5, 2011 to commence the BoA action, and therein seek the appointment of a receiver, in order to recover the assets pledged under the loan agreement and the overdrafts resulting from the alleged check-kiting scheme.
II.THE ALLEGED "SABOTAGE" OF NYMP
Throughout the period of August 2010 to January 5, 2011 (hereinafter the "prelitigation period"), Wayne Wahrsager was allegedly an owner of NYMP, and his two sons, Aaron and Eric Wahrsager were allegedly officers and employees of the company. (Am. Compl. ¶¶ 57-60.) According to the amended complaint, during this time and for a period after the appointment of a receiver, the officers of NYMP "took several steps . . . to intentionally sabotage the business and operations of NYMP" (Am. Compl. ¶ 57), including:
1. "[P]urposely causing NYMP" to miss property tax payments, thereby forcing the company, under the terms of its lease, to surrender its lease for no consideration to the landlord, a company in which Wayne Wahrsager holds a 10 percent stake (Am. Compl. ¶¶ 61-63), and then entering into a new lease with Central Station, a corporation wholly owned and run by defendants Aaron and Eric Wahrsager (Am. Compl. ¶¶ 55-56, 64);
2. "[S]hredd[ing] and destroy[ing] all of [NYMP's] customer contracts" (Am. Compl. ¶ 65);
3. Transferring "a significant portion of its assets [including some customer accounts] to Central Station for no consideration" (Am. Compl. ¶¶ 65-67);
4. Signing a contract with Central Station to provide "monitoring services" for NYMP's accounts at a cost of $50,000 per month -- allegedly more than double the market rate (Am. Compl. ¶¶ 68-70);
5. Sending a letter to the company's "residential customers" which unilaterally terminated those customers' long-term monitoring contracts, retaining them solely on a month-tomonth basis (Am. Compl. ¶ 74);
6. Calling NYMP customers to inform them that the security and fire alarm monitoring on their accounts was being turned off without notice (Am. Compl. ¶ 80);
7. Canceling customer accounts and moving them to Central Station, or otherwise encouraging customers to switch from NYMP to Central Station or United States Merchants Protective Co. Inc. ("USMP") (Am. Compl. ¶¶ 83, 85);
8. Forming new corporate entities and renamed existing ones in an attempt to "hide and conceal the acts of sabotage," including changing NYMP's name to "NYMP Holdings Corp." and also forming a "new" NYMP owned by Eric Wahrsager (Am. Compl. ¶¶ 76-78);
9. Wiping company servers of critical data allegedly to thwart the Receiver's attempts to run the business; and
10. Refusing the Receiver access to the company's computer system (Am. Compl. ¶ 84).
Plaintiff seeks (1) a permanent injunction enjoining the defendants or their associates from taking any action to harm the operations, business, reputation, and assets of the Receivership Businesses, (2) unfettered access by the Receiver to the operations and premises of Central Station and USMP, (3) an order setting aside any fraudulent conveyance of NYMP assets to Central Station and declaring such assets subject to the perfected security interest held by Bank of America, and (4) damages, costs and fees. (Am. Compl. ¶¶ 2, 188-91.)
a.Motion To Dismiss Pursuant to Rule 12(b)(6)
Rule 8(a) provides that a pleading shall contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Supreme Court has clarified the pleading standard applicable in evaluating a motion to dismiss under Rule 12(b)(6).
First, in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), the Court disavowed the well-known statement in Conley v. Gibson, 355 U.S. 41, 45-46 (1957) that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." 550 U.S. at 562. Instead, to survive a motion to dismiss under Twombly, a plaintiff must allege "only enough facts to state a claim to relief that is plausible on its face." Id. at 570.
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).
Id. at 555 (citations and internal quotation marks omitted).
More recently, in Ashcroft v. Iqbal, -- U.S. --, 129 S. Ct. 1937 (2009), the Supreme Court provided further guidance, setting a two-pronged approach for courts considering a motion to dismiss. First, a court should "begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." 129 S. Ct. at 1950. "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Id. Thus, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 1949 (citing Twombly, 550 U.S. at 555).
Second, "[w]hen there are well-pleaded factual allegations a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. "Determining whether a complaint states a plausible claim for relief [is] . . . a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950. The Court defined plausibility as follows:
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. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of 'entitlement to relief.'"
Id. at 1949 (quoting and citing Twombly, 550 U.S. at 556-57) (internal citations omitted). In other words, "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - - but it has not 'show[n]' - - that the pleader is entitled to relief." Id. at 1950.
b.Documents Properly Considered On A Motion to Dismiss
In deciding a motion to dismiss pursuant to Rule 12(b)(6), the court generally may only consider facts stated in the complaint or "[d]ocuments that are attached to the complaint or incorporated in it by reference." Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007); Gillingham v. GEICO Direct, No. 06-CV-2915, 2008 U.S. Dist. LEXIS 4169, *6 (E.D.N.Y. Jan. 18, 2008) (same). A document not appended to the complaint may be considered if the document is "incorporated [in the complaint] by reference" or is a document "upon which [the complaint] solely relies and . . . is integral to the complaint." Roth, 489 F.3d at 509 (quoting Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991)) (emphasis in the original). "Where a document is not incorporated by reference, the court may nevertheless consider it where the complaint 'relies heavily upon its terms and effect,' thereby rendering the document 'integral' to the complaint." DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010) (quoting Mangiafico v. Blumenthal, 471 F.3d 391, 398 (2d Cir. 2006)); see also Cortec Indus., 949 F.2d at 47 ("when a plaintiff chooses not to attach to the complaint or incorporate by reference a [document] . . . which is integral to the complaint, the defendant may produce [it] when attacking the complaint for its failure to state a claim, because plaintiff should not be allowed to escape the consequences of its own failure"). "However, 'even if the document is "integral" to the complaint, it must be clear on the record that no dispute exists regarding the authenticity or accuracy of the document.'" DiFolco, 622 F.3d at 111 (quoting Faulkner v. Beer, 463 F.3d 130, 134 (2d Cir. 2006)).
Defendants first argue that plaintiff's claims for breach of the duty of loyalty and fiduciary duty against Aaron and Eric Wahrsager (claims numbered three through six) must be dismissed for failure to state a claim because plaintiff has failed to "prove" that either of these individuals were officers or directors of the NYMP. (Ds' Memo at 7-11; Ds' Reply at 3-4.) This argument, however, reflects a fundamental misapprehension by defendants of plaintiff's burden at the pleading stage. Plaintiff need not "prove" any element of a claim in the amended complaint. Rather, he must allege "only enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570.
Under New York law, a claim for breach of fiduciary duty requires "the existence of a fiduciary relationship, misconduct by the defendant, and damages that were directly caused by the defendant's misconduct." Guarino v. No. Country Mortg. Banking Corp., 79 A.D.3d 805, 807, 915 N.Y.S.2d 84 (2d Dep't 2010). "Directors and officers typically owe fiduciary duties to the corporation and its shareholders, which include a 'duty of care' and a 'duty of loyalty.'" RSL Communs. PLC v. Bildirici, No. 04-CV-5217, 2006 U.S. Dist. LEXIS 67548 (S.D.N.Y. Sept. 14, 2006)(citing Gully v. NCUA Bd., 341 F.3d 155, 165 (2d Cir. 2003) and Norlin Corp. v. Rooney, Pace Inc., 744 F.2d 255, 264 (2d Cir. 1984)).
Here, plaintiff's claims of a fiduciary relationship are based on the allegations that Aaron and Eric were officers of NYMP during the period in question. (Am. Compl. ¶¶ 59-60.) Whether Aaron and Eric actually were officers of the company, and whether they owed such fiduciary duties, is necessarily a factual inquiry not before the Court at this stage of litigation. Plaintiff has alleged sufficient facts to state a claim for breach of fiduciary duty and duty of loyalty, and the Court accepts all well-pled allegations as true for the purpose of deciding this motion. Therefore, defendants' argument that such claims should be dismissed at this stage because "the Receiver has failed to present any evidence, beyond his untrue assertion that Aaron [and ...