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USHA Holdings, LLC v. Franchise India Holdings, Ltd.

United States District Court, E.D. New York

March 27, 2014


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For USHA Holdings, LLC, Atul Bhatara, Plaintiffs: Richard L. Yellen, LEAD ATTORNEY, Frank Jonathan Hutton, Richard L. Yellen & Associates, LLP, New York, NY.

For Franchise India Holdings, Limited, Francorp Advisors Private Limited, Guarav Marya, Defendants: Karl F. Milde, Jr., Richard J. Pelliccio, LEAD ATTORNEYS, Eckert Seamans Cherin & Mellbott, LLC, White Plains, NY.

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KIYO A. MATSUMOTO, United States District Judge.

Plaintiffs USHA Holdings, LLC (" USHA" ) and Atul Bhatara (" Bhatara" ) brought suit against defendants Franchise India Holdings, Limited (" Franchise India" ), Francorp Advisors Private Limited (" FAPL" ), and Gaurav Marya (" Marya" ) in the Supreme Court of New York, Queens County, by filing a Summons and Complaint dated June 14, 2012.[1] On July 13, 2012, defendants removed this case to the United States District Court for the Eastern District of New York. (ECF No. 1, Notice of Removal, 7/13/12.) Defendants subsequently moved to dismiss this case, arguing (i) that service was defective, (ii) that the court lacked personal jurisdiction, (iii) that dismissal was warranted under the doctrine of forum non conveniens, (iv) that plaintiffs did not enter into any contract with defendants and could not satisfy the statute of frauds, and (v) that plaintiffs' conversion claim was duplicative of the breach of contract claim and barred by the relevant statute of limitations. Defendants' motion was fully briefed on March 4, 2013. For the reasons provided below, defendants' motion to dismiss plaintiffs' conversion claim is granted, but defendants' motion to dismiss plaintiffs' breach of contract claim is denied, and defendants' motion to dismiss the case for improper service, lack of personal jurisdiction, and under the doctrine of forum non conveniens is denied.


Many of the facts giving rise to this lawsuit are vigorously contested by the parties. In determining the facts relevant to defendants' motion to dismiss for lack of personal jurisdiction, the court has considered the Complaint and the various declarations and other evidence submitted by the parties.[2] Additionally, the court has construed the evidence in the light most favorable to plaintiffs, resolving all doubts in plaintiffs' favor. CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 365 (2d Cir. 1986); see also Realuyo v. Abrille, 93 F.App'x 297, 298 (2d Cir. 2004) (summary order) (" The court must construe the pleadings and affidavits in [plaintiff's] favor." ); DiStefano, 286 F.3d at 84.

I. The License Agreement and the Parties

Francorp International, Inc. (" Francorp" ), which is not a party to this case, is

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a company that provides services and plans for operating and managing franchises. (Declaration of Atul Bhatara (" Bhatara Dec." ) ¶ ¶ 2-3.) Francorp represents many large companies such as Bridgestone Tires, Buffalo Wild Wings, and Popeye's Chicken. ( Id. ¶ 3.) Donald Boroian is the president of Francorp, which is based in Illinois. (Declaration of Donald Boroian (" Boroian Dec." ) ¶ 1.)

Bhatara was born and raised in Queens, New York, graduated from high school in Queens, then graduated from St. John's University in Queens, and resides in Queens. (Bhatara Dec. ¶ ¶ 92-94.) Bhatara has cerebral palsy, needs the assistance of companions to travel within India, and had experimental surgery performed on his legs, which cannot support the weight of his torso. ( Id. ¶ ¶ 97-98, 103.) USHA is a New York LLC based in Queens, New York, and is the business entity used by Bhatara to conduct his investments. ( Id. ¶ 91.)

Marya is domiciled in New Delhi, India. (Declaration of Gaurav Marya (" Marya Dec." ) ¶ 44.) Marya is the principal and managing director of Franchise India and the managing director of FAPL. ( Id. ¶ ¶ 1, 45-46.)

Franchise India is a private, closely-held corporation organized under the laws of the Republic of India with its principal place of business in New Delhi, India. ( Id. ¶ 46.) All of the shareholders of Franchise India are relatives of Marya who reside in India. ( Id. ¶ 45.) Franchise India assists investors who seek franchise opportunities by holding trade exhibitions and helping to broker business transactions. ( Id. ¶ 47.) The company markets itself as the " World's #1 Franchise Site" and boasts partnerships with at least 6,930 global franchising opportunities, including the " Sesame Street Preschool" program and the Kenny Rogers Roasters franchise. (Bhatara Dec. ¶ ¶ 61-63.)

FAPL is a closely held, private corporation organized under the laws of the Republic of India on October 7, 2008, with its sole place of business in New Delhi, India. (Marya Dec. ¶ ¶ 19, 49-50.) Marya claims he and his brother own all of the shares of FAPL. ( Id. ¶ 49.) But other evidence in the record, including an agreement signed by Marya on behalf of FAPL and Boroian on behalf of Francorp, shows that Marya owns 50 percent of the shares of FAPL and Bhatara owns 50 percent of the shares of FAPL. (Bhatara Dec., Ex. B.) Marya claims FAPL has 18 employees, all of whom are based in New Delhi. (Marya Dec. ¶ 70.)

II. Negotiations Between Marya and Bhatara

Francorp was offering to sell a license that granted the purchaser the exclusive territorial right to implement Francorp's franchise consulting and development services within the Republic of India (the " License" ). (Bhatara Dec. ¶ 2.) Bhatara claims that he and USHA purchased the License from Francorp on or about September 12, 2008, in exchange for a payment of $400,000. ( Id. ¶ 15 & Ex. A; Boroian Dec. ¶ ¶ 5, 15.) A March 11, 2011 letter from Boroian to Bhatara states that Bhatara initially paid a $50,000 fee as an option for the License and $400,000 to purchase the License. (Bhatara Dec., Ex. A.)

After purchasing the License, Bhatara contacted Marya to discuss the use of the License. ( Id. ¶ 19.) Marya claims, and plaintiffs do not dispute, that he and Bhatara had an initial meeting to discuss the license in New Delhi in " August or September of 2008," that they met the following day at Marya's office in New Delhi to discuss the License, and that Bhatara informed

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Marya that he had retained Amarchand & Mangaldas, a prominent law firm in India, in connection with a possible transaction involving the License. (Marya Dec. ¶ 8.) During these discussions in India, Marya informed Bhatara that he was not interested in purchasing the License from him, but Marya and Bhatara also discussing creating a joint venture based in India that would hold the License and use the License in India. ( Id. ¶ ¶ 10-11.) The parties envisioned that this joint venture would be created under Indian law, maintain its sole office in New Delhi, and enter into any licensing agreement with Francorp for the License. ( Id. ¶ 11.)

A. Draft Memorandum of Understanding

On September 17, 2008, Marya sent an e-mail to Bhatara that included a one-page document entitled " Terms of MOU" (the " MOU" ) as an attachment. ( Id. ¶ 14 & Ex. A.) The MOU, which neither Marya nor Bhatara signed, provided that " Atul Bhatara & Gaurav Marya will structure India JV to represent & Operate Francrop [sic] license in India," that " [b]oth parties will hold 50% is [sic] the India JV," and that " [b]oth Parties will sign MOU which will be binding for JV structure and License Agreement." ( Id., Ex. A.) The MOU sent by Marya also stated that the joint venture would transfer $30,000 to Bhatara immediately upon the signing of the license agreement and $270,000 to Bhatara within one year of the signing. ( Id.) Marya now claims that he " was not willing to invest such a sum in order to purchase the License." ( Id. ¶ 12.)

The draft MOU called for the new Indian joint venture to be incorporated under the name " Usha Management consultants." ( Id., Ex. A.) But Marya stated that he and Bhatara subsequently discussed forming the joint venture under the name " Francorp Advisors Private Limited." ( Id. ¶ 17.) FAPL was formed in India on October 7, 2008. ( Id. ¶ 19.)

B. Meetings between Bhatara and Marya

On November 1, 2008, Marya flew from New Delhi, India to New York, landing on November 2, 2008. ( Id. ¶ 22.) Marya claims he traveled to New York to meet with executives at the Famous Famiglia Pizza Corp. on November 3, 2008, at the request of Bhatara, although he had " no interest in a relationship" with Famous Famiglia. ( Id.)

On November 1, 2008, Eugenie Wilson, an assistant manager at Franchise India e-mailed Bhatara to inform him that Deepika Handa, a legal advisor at Franchise India, would be e-mailing him a draft " Commercial Agreement," which Handa did e-mail to Bhatara later that same day. ( Id. ¶ 23 & Ex. C.) Wilson also wrote in her e-mail to Bhatara that Marya " requests you to please carry a copy of the Agreement when you meet with him on the 2nd Nov [sic] for dinner." ( Id.)[3]

Bhatara and Marya met for dinner on November 2, 2008, at the BLT Steakhouse in White Plains, New York. (Bhatara Dec. ¶ 27.) Bhatara states that he brought a copy of the draft Commercial Agreement to dinner and " discussed its terms in detail" with Marya. ( Id. ¶ 28.) At the end of the dinner, Bhatara stated that he and

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Marya " reached a resolution that while there were still a great deal of outstanding ministerial terms to finalize, the core of our agreement should move forward." ( Id.)

Specifically, Bhatara claims that he and Marya confirmed that they would each own 50 percent of the joint venture in India, that Marya's interest would be established by actively operating the joint venture in India, and that Bhatara's interest would be secured by his existing equity in the License, for which he paid the full purchase price of $400,000, in addition to compensation from Marya in consideration for placing the ownership of the License in the joint venture. ( Id.) Bhatara also claims that he and Marya resolved to " proceed by way of an agreement in principle until all remaining terms were resolved" because they were scheduled to fly to Illinois to meet with Francorp on November 4, 2008. ( Id. ¶ ¶ 29, 31.)

C. Terms in the Draft Commercial Agreement

Several terms in the draft Commercial Agreement are relevant to this motion. First, the Agreement stated that Marya and USHA, represented by is managing partner Bhatara, were the parties to the Agreement. (Marya Dec., Ex. C, p. 1.) Second, the agreement states that it " sets out the broad mutual understanding between the parties and reflects only the terms that are presently proposed by the parties concerned in order to set up standards and solutions for setting up and formation" of a joint venture in India. ( Id.) Third, the agreement states that " the terms of this Agreement will arise and be executed only when all material rights, obligations, terms & conditions have been mutually agreed to and set forth in a 'Definitive Agreement' including the Shareholder's Agreement, License Agreement and such other Agreements as the parties may mutually agree to execute from time to time." ( Id. at p. 2.)

Fourth, Article 10 of the draft Commercial Agreement called for arbitration in New Delhi, India, and Article 14 stated that " [t]his Agreement shall be governed by and construed in accordance with the laws of India." ( Id. at pp. 11-13.) Bhatara claims that " the nature and location of conflict resolution was amongst the final minor outstanding points of negotiation." (Bhatara Dec. ¶ 80.)

The Commercial Agreement also deviated in certain respects from a term sheet that Bhatara and Marya previously negotiated in late September 2008. ( Id. ¶ ¶ 78-79 & Exs. K-L.) Specifically, a legal advisor to Bhatara e-mailed him in September 2008 to ask " whether the arbitration in USA will be binding on the parties located in India." ( Id., Ex. L (emphasis added).) On November 4, 2008, Bhatara's legal advisor e-mailed him again to note that the draft Commercial Agreement provided for arbitration to be conducted under the Arbitration and Conciliation Act, 1996, or pursuant to the laws of India, rather than the " Federal Arbitration Act of the USA" provided in the Term Sheet. ( Id., Ex. K.)

D. Meeting with Francorp and License Agreement

On November 4, 2008, Bhatara and Marya met with Boroian at Francorp's offices in Olympia Fields, Illinois. ( Id. ¶ 31.) Bhatara and Marya told Boroian that they had reached an agreement in principle concerning their joint venture and wanted to proceed with their plan to use the License in India. ( Id.) On November 5, 2008, the License was placed in the name of FAPL pursuant to a License Agreement for the License between Francorp and FAPL. ( Id. ¶ 32; Marya Dec., Ex. D.) Although the License Agreement states that the Licensee, FAPL, has paid the Licensor, Francorp, $400,000 as consideration

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for the License, (Marya Dec., Ex. D at p. 11), the License Agreement further provides that this fee " shall be paid by Licensee as follows" and states that Francorp " acknowledges receipt of a nonrefundable payment in the amount of FOUR HUNDRED THOUSAND UNITED STATES DOLLARS ($400,000.00 U.S.D.) from Mr. Atul Bhatara." ( Id.)

Boroian signed the agreement for Francorp, and Marya signed the agreement for FAPL. ( Id.) According to Exhibit 1 of the License Agreement, Marya and Bhatara stated that they each owned 50 percent of the shares FAPL, and Marya and Bhatara both signed a statement acknowledging they consented and submitted to Illinois courts and the federal district court located in or serving Cook County, Illinois for any suits concerning the License Agreement. ( Id.)

Marya and Bhatara then returned to Queens, New York, and had a dinner at the Ramada Plaza near JFK Airport to celebrate and discuss their business relationship. (Bhatara Dec. ¶ 33.) At this dinner, Marya told Bhatara that they would finalize any outstanding items concerning their agreement in the coming weeks. ( Id. ¶ 34.)

E. Additional Interactions Between Marya and Bhatara

After returning to India, Marya sent an e-mail to Bhatara on November 8, 2008, stating " I am very excited about our new business partnership and am sure this new joint venture will be very fruitful and beneficial to our organizations." ( Id. ¶ 35 & Ex. C.) On November 14, 2008, Marya e-mailed Bhatara and asked him to sign and return a consent letter that would appoint Bhatara a director of FAPL. ( Id. ¶ 37 & Ex. D.) Bhatara signed the letter and returned it to Marya. ( Id. ¶ 37.)

After November 14, 2008, Bhatara felt Marya became " increasingly unresponsive" to questions concerning the License. ( Id. ¶ 38.) Bhatara stated that Marya told him he was reinvesting money derived from the License into FAPL and refused to further memorialize their agreement. ( Id.)

Bhatara and Marya met several times in India after November 14, 2008. (Marya Dec. ¶ 39.) Marya and Bhatara met in Hyderabad, India around February 2009, in Chandigarh, India around May 2009, and in New Delhi, India, around June 2009. ( Id.) Marya claims that there had been no meeting of the minds concerning the draft, that Bhatara did not seek shares in FAPL, and that Bhatara repeatedly sought to sell the License to Marya. ( Id. ¶ ¶ 38-40.)

On July 11, 2011, Bhatara filed a demand for arbitration in Illinois. ( Id. ¶ 40 & Ex. E.) But on February 2, 2012, the arbitration was dismissed for lack of jurisdiction because neither Bhatara nor Marya were parties to the Licensing Agreement between Francorp and FAPL. ( Id. ¶ 43 & Ex. F.) In connection with this proposed arbitration proceeding, counsel for Marya stated that " [a]lthough [Bhatara] was listed as a 50% owner in FAPL [in the exhibits to the License Agreement], [Bhatara] never held equity in FAPL. [Marya] did not object to [Bhatara] characterizing himself as a 50% owner because, at that time, FAPL was less than a month old, and [Marya] believed and expected that [Bhatara] would subsequently fulfill his responsibilities to become a co-owner." (Bhatara Dec., Ex. M, p.4 n.5.)

III. Service on Marya

On June 6, 2012, Boroian received an e-mail from a lawyer for plaintiffs informing him that plaintiffs were filing suit, and Boroian e-mailed Marya that same day, informing him of the lawsuit and asking

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him to " communicate with [plaintiffs] and negotiate a resolution before this goes any further." (Bhatara Dec. ¶ 45 & Ex. E.) On June 9, 2012, Marya responded to Boroian's e-mail and told him he would be in the United States the following week. ( Id. ¶ 46 & Ex. E.)

Franchise India was participating in the International Franchise Expo, which was taking place between June 15 and June 17, 2012, in New York City. (Marya Dec. ¶ ¶ 61-62.) Boroian saw Marya operating a booth at this exposition. (Boroian Dec. ¶ 31.) Marya claims that he had not planned to attend the International Franchise Expo but decided to leave Las Vegas, where he had originally planned to be during his trip, and go to New York to discuss the License with Marya and Boroian. (Marya Dec. ¶ ¶ 64-65.)

Bhatara e-mailed Marya and Boroian on June 11, 2012 to suggest a meeting to resolve the dispute concerning the License. (Marya Dec. ¶ 65.) At approximately 7:00 p.m. on June 16, 2012, Marya arrived at a Hilton Hotel located on the Avenue of the Americas in New York City. ( Id. ¶ 67, Bhatara Dec. ¶ ¶ 50-51.) Marya claims he was immediately served with a Summons and Complaint after arriving, and no settlement meeting took place. (Marya Dec. ¶ 67.) But Bhatara and Bhatara's cousin, Vishal Sharma, claim they had a lengthy meeting with Marya, and that, at the conclusion of the meeting, Marya was served with multiple copies of the Summons and Complaint, both personally and on behalf of Franchise India and FAPL. (Bhatara Dec. ¶ 50; Declaration of Vishal Sharma, ¶ 3.)

IV. Famous Famiglia and Franchise India

Marya claims he agreed to meet with executives at Famous Famiglia Pizza Corp. on November 3, 2008, in White Plains, New York, at the request of Bhatara, even though he " had no interest in a relationship" with Famous Famiglia. (Marya Dec. ¶ 22.) But after Marya met with executives at Famous Famiglia, Franchise India entered into a business relationship with Famous Famiglia. (Bhatara Dec. ¶ 57.) Franchise India designated an employee to serve as Famous Famiglia's project manager, Franchise India represented Famous Famiglia in ...

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