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Finkel v. E.A. Technologies, Inc.

United States District Court, E.D. New York

September 3, 2014

DR. GERALD FINKEL, as Chairman of the Joint Board of the Electrical Industry, Plaintiff,
v.
E.A. TECHNOLOGIES, INC., EDWARD WILLNER, E.A. TECHNOLOGIES/PETROCELLI, J. V., a joint venture, SIEMENS TRANSIT TECHNOLOGIES, a Consortium of Siemens Transportation Systems, Inc. and Transit Technologies, L.L.C., TRANSIT TECHNOLOGIES, L.L.C., SIEMENS INDUSRTY, INC., SUCCESSOR BY MERGER TO SIEMENS TRANSPORTATION SYSTEMS, INC., SIEMENS CORPORATION, SUCCESSOR BY MERGER TO SIEMENS COMMUNICATIONS, INC., ALCACEL-LUCENT USA INC., FEDERAL INSURANCE COMPANY, ST. PAUL FIRE AND MARINE INSURANCE COMPANY, ONEBEACON INSURANCE COMPANY f/k/a GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA, WESTERN SURETY COMPANY, FIDELITY AND DEPOSIT COMPANY OF MARYLAND, and BARON BARON, ESQS., P.C., Defendants.

MEMORANDUM AND ORDER

KIYO A. MATSUMOTO, District Judge.

Plaintiff Dr. Gerald Finkel, as Chairman of the Joint Industry Board of the Electrical Industry (the "Joint Board"), brought this lawsuit to recover from defendants E.A. Technologies, Inc. ("E.A. Technologies"), Edward Willner, principal of E.A. Technologies, and several other entities and insurance carriers past due payments due pursuant to collective bargaining agreements to various employee benefit funds of which plaintiff is the fiduciary. Plaintiff has also sued defendant Baron & Baron, Esqs., P.C. ("Baron & Baron") under a variety of state common law theories for "legal or equitable relief related to the use of proceeds of the sale of real property which Willner had promised to use to pay the amounts sought in this action." Pending before the court is Baron & Baron's motion to dismiss plaintiff's claims against it for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons set forth below, plaintiff's claims against Baron & Baron are dismissed in their entirety with prejudice.

BACKGROUND

The following facts, taken from plaintiff's Third Amended Complaint (ECF No. 134, Third Amended Complaint ("Third Am. Compl."), dated 7/25/14), are assumed to be true for the purpose of deciding the instant motion. Defendant Baron & Baron is a New York law firm that provided legal services for defendant E.A. Technologies, defendant Willner, and Battery Place Realty, LLC ("Battery Place Realty"), a limited liability corporation owned by Willner. (Third Am. Compl. ¶¶ 23, 134-37.) Plaintiff is the Chairman of the Joint Board, which is the administrator and fiduciary of employee benefit plans established and maintained pursuant to collective bargaining agreements between an electrical union and various employers and employer associations in the electrical industry and other related industries. (Third Am. Compl. ¶¶ 4-5.)

E.A. Technologies was required to remit contributions for any employee performing work covered by the relevant collective bargaining agreements, pursuant to those agreements. (Third Am. Compl. ¶¶ 5-6, 28.) Beginning in February 2011, E.A. Technologies failed to make required contributions to several plans administered by the Joint Board. ( Id. ¶¶ 35-40.) In addition to missing payments, E.A. Technologies underpaid its required contributions for the week ending on January 5, 2011 ( Id. ¶¶ 41-43) and the period from April 1, 2009 to March 31, 2010, as revealed by an audit by the Joint Board ( Id. ¶¶ 44-47).[1] E.A. Technologies submitted several checks to the Joint Board to remit required contributions, each of which were returned to the Joint Board by its bank for insufficient funds. ( Id. ¶¶ 48-68.) None of these checks were replaced, nor were the obligations the checks were intended to meet paid in another manner. ( Id. ¶ 68.)

On or about April 21, 2011, E.A. Technologies and Willner (together, "Debtors") entered into a Stipulation and Order of Settlement (the "April 2011 Stipulation") with the Joint Board in which Debtors, jointly and severally, acknowledged and pledged to pay over $300, 000 in past due contributions. ( Id. ¶¶ 76, 138.) Debtors agreed to make an initial $10, 000 payment to the Joint Board and weekly payments thereafter, in addition to the regular weekly contributions to the plans as they became due. ( Id. ¶¶ 78-79, 140-41.) Willner signed the stipulation as principal of E.A. Technologies and in his individual capacity. ( Id. ¶¶ 80, 142.)

Debtors failed to make any payments as agreed upon in the April 2011 Stipulation and failed to cure their default under the stipulation's terms. ( Id. ¶¶ 82-83, 144-45.) After the Joint Board contacted Willner regarding the missed payments, Willner informed the Joint Board that he had found a buyer for an apartment he owned through Battery Place Realty, LLC. ( Id. ¶¶ 85, 146.) Baron & Baron confirmed to the Joint Board in a June 6, 2011 letter that E.A. Technologies would make a payment to the Joint Board at the closing of the sale of the apartment that would include all contributions due up to three weeks prior to the closing date. ( Id. ¶¶ 86, 148.)

The Joint Board sent an email to Willner on June 7, 2011, which it subsequently forwarded to Baron & Baron on June 8, 2011 along with a request for additional information, asking Willner to send in weekly contributions going forward so as not to further increase E.A. Technologies' delinquency in the time period before the closing.[2] ( Id. ¶ 150.) On June 9, 2011, the Joint Board sent a letter to Debtors, copying Baron & Baron, advising Debtors of their default under the April 2011 Stipulation. ( Id. ¶¶ 152-53.) Debtors failed to cure their default within five days of written notice, as required by the April 2011 Stipulation. ( Id. ¶ 154.) The Joint Board sent a follow-up email to Baron & Baron (1) advising them of the default notice and the Joint Board's plan to notify E.A. Technologies employees that their benefits were in jeopardy and (2) requesting a signed agreement regarding payment of the approximately $890, 000 owed by Debtors, as well as a copy of the signed sale contract for the apartment. ( Id. ¶¶ 155-57.) Baron & Baron emailed the Joint Board the same day and responded that that Willner would comply with any agreed-upon terms and that they would supply the apartment sale contract shortly after it was signed. ( Id. ¶ 158.)

The Joint Board emailed Willner and Baron & Baron on June 16, 2013 regarding a deadline for E.A. Technologies employees' continued health benefits and about their failure to provide a signed contract or the closing date for the apartment sale. ( Id. ¶¶ 159-60.) Willner responded the same day, stating that the sale of the apartment would close on July 15, 2011, and no later than August 15, 2011. ( Id. ¶ 162.) On June 17, 2011, the Joint Board emailed Willner, copying Baron & Baron, to reiterate the need for E.A. Technologies to make up overdue contributions and to provide Willner with a draft repayment agreement. ( Id. ¶¶ 162-63.) Baron & Baron did not respond to either Willner or the Joint Board's emails. ( Id. ¶ 164.)

Willner returned a modified version of the draft repayment agreement to the Joint Board, signed by him on behalf of E.A. Technologies and in his individual capacity, on June 21, 2011 (the "June 2011 Agreement").[3] ( Id. ¶¶ 165-66.) Willner had not informed the Joint Board of the modifications he made to the draft agreement prior to signing it. ( Id. ¶ 167.) The June 2011 Agreement provided that Debtors would pay their outstanding obligations to the Joint Board upon the sale of the apartment. ( Id. ¶¶ 85, 168.)

From July to September 2011, the Joint Board sent numerous emails to Baron & Baron to request the apartment sale closing date. ( Id. ¶¶ 170, 174, 180, 182, 185.) Around the same time, the Joint Board also emailed Willner repeatedly, copying Baron & Baron, to request payment of past due contributions, inform him that recent payments had bounced, and warn him that E.A. Technologies employees would be notified if payments were not timely made.[4] ( Id. ¶¶ 172-73, 176, 179.) Baron & Baron did not reply to any of those emails.[5] ( Id. ¶¶ 171, 175, 178, 181, 183, 186.) On September 28, 2011, the Joint Board emailed Willner, copying Baron & Baron, noting that the contract date for the apartment had passed and that if the closing did not take place by October 11, 2011, a new agreement regarding the payment of past due contributions would be required. ( Id. ¶ 187.) The Joint Board emailed Willner and Baron & Baron again on October 12, 2011 to advise that, because the closing of the apartment sale and payment of past due contributions had not occurred, letters would be sent to E.A. Technologies employees. ( Id. ¶ 188.) Baron & Baron did not respond to this email. ( Id. ¶ 189.)

On October 12, 2011, the Joint Board sent letters to the employees of E.A. Technologies advising them that their health insurance and other benefits might be terminated due to their employer's failure to make required plan contributions. ( Id. ¶ 89.) After the letters were sent, Willner contacted the Joint Board regarding payment of outstanding amounts due, and Debtors entered into another stipulation with the Joint Board (the "November 2011 Stipulation"). ( Id. ¶¶ 193-94.) In the November 2011 Stipulation, Debtors acknowledged over $817, 000 owed to the Joint Board, which they would pay back through five weekly payments of $20, 000, a lump sum payment of $450, 000 due in December 2011, and weekly payments of $7, 000 thereafter. ( Id. ¶¶ 93, 196.) The Debtors also agreed to remit future required contributions as they became due. ( Id. ¶¶ 94, 197.) As with the April 2011 Stipulation and the June 2011 Agreement, Willner signed in his individual capacity and as principal of E.A. Technologies. ( Id. ¶¶ 95, 198.) If the Debtors were to default and fail to cure the default within five days of receiving notice of their default, the November 2011 Stipulation provided that the Joint Board would be able to file an action for breach in this court and have judgment entered against Debtors for the full amount currently owed, plus interest and attorney's fees and costs. ( Id. ¶¶ 96, 199.) Debtors contemporaneously executed an Affidavit for Judgment by Confession to be entered against them if they breached the November 2011 Stipulation. ( Id. ¶¶ 97, 200.) Again, Debtors failed to make the required payments; the Joint Board informed Willner of the default on June 12, 2012, and Debtors did not cure the default within five days. ( Id. ¶¶ 98, 202-203.)

Plaintiff alleges that both Willner and Baron & Baron intended the Joint Board to rely upon their representations of the closing date and promises of payment to ensure continuing benefits for E.A. Technologies employees. ( Id. ¶ 204-206.)

On January 6, 2012, Baron & Baron signed a Termination of Contract on behalf of Battery Place Realty that plaintiff alleges terminated a prior contract of sale dated June 13, 2011. ( Id. ¶ 207-208.) The deed filed with the New York City Department of Finance indicates that the sale of the apartment closed on January 20, 2012.[6] ( Id. ¶¶ 100, 215.) The contract did not mention any payments made by the buyer prior to the January 20, 2012 contract date, and the sale amount, $4, 752, 888, was the same as that in the June 13, 2011 contract. ( Id. ¶¶ 213-14, 220.)

Baron & Baron did not notify the Joint Board that the earlier contract of sale had been terminated, or that the sale of the apartment had closed, despite their knowledge of Willner's 2011 agreements to pay the Joint Board with proceeds from the sale. ( Id. ¶¶ 217-18, 221.) At the time of the closing, the amount owed to the Joint Board by Debtors had increased to over $640, 000. ( Id. ¶ 219.) The Joint Board learned of the sale on June 11, 2012 through a third party, at which time it demanded immediate payment of the amount then owed, which had since increased to over $983, 000. ( Id. ¶¶ 103-104, 241-43.)

Although the Joint Board did not receive any payment from the proceeds of the apartment sale, Baron & Baron received payments of at least $175, 000 from the closing for claimed legal fees resulting from work performed for Battery Place Realty LLC and E.A. Technologies.[7] ( Id. ¶¶ 223-34, 226-30, 244.) The Third Amended Complaint also alleges that E.A. Technologies has no ownership interest in the apartment, and that any legal services that Baron & Baron rendered on behalf of E.A. Technologies were separate and distinct from legal services rendered for Willner and Battery Place Realty LLC in connection with the sale of the apartment. ( Id. ¶¶ 231-32.) The Third Amended Complaint alleges that Baron & Baron directed these payments to itself, and that Baron & Baron has not produced a written agreement authorizing direct payment to itself from proceeds of the apartment sale. ( Id. ¶¶ 235-37.)

Plaintiff filed the instant action against E.A. Technologies on November 18, 2011. (ECF No. 1, Complaint.) On December 20, 2011, the clerk of court entered a default against E.A. Technologies, and plaintiff moved for default judgment against the company on January 20, 2012. (ECF No. 4, Clerk's Entry of Default; ECF No. 6, Mot. for Default Judgment.) This court referred plaintiff's motion to Magistrate Judge James Orenstein for a report and recommendation, which Magistrate Judge Orenstein issued on July 23, 2012. (ECF No. 22, Report and Recommendations re: Motion for Default Judgment ("Report and Recommendation").) The Report and Recommendation was ultimately mooted by a consent judgment against defendant E.A. Technologies, signed by plaintiff and Willner, at which time the parties also agreed that plaintiff could amend the Complaint.[8] (ECF Order dated 8/21/12.) Plaintiff filed an amended complaint on August 17, 2012, which named as additional defendants several other companies alleged to be jointly and severally liable for the past due contributions, and Baron & Baron. (ECF No. 30, Amended Complaint.) The Amended Complaint only included a single claim for relief against Baron & Baron, seeking an accounting. ( Id. ) With the consent of the parties, except Willner, plaintiff filed a second amended complaint on June 4, 2013 (ECF No. 94) to add additional parties; the claim against Baron & Baron, however, was not amended. On June 10, 2013, Baron & Baron requested a pre-motion conference with respect to its proposed motion to dismiss plaintiff's Second Amended Complaint as to Baron & Baron for failure to state a claim upon which relief can be granted. (ECF No. 107, Letter Requesting Pre-Motion Conference.) On July 11, 2013, a pre-motion conference was held and the court ordered plaintiff to file a third amended complaint amending its allegations as to Baron & Baron only. (Minute Entry dated Jul. 11, 2013.) Plaintiff filed the third amended complaint on July 25, 2013, adding eight state law claims against Baron & Baron. (ECF No. 134, Third Amended Complaint.) Baron & Baron renewed its request to move to dismiss the Third Amended Complaint (ECF No. 137) and filed the fully-briefed motion on October 7, 2013 (ECF Nos. 147-51.)

LEGAL STANDARD

Baron & Baron moves to dismiss the Third Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), which provides for dismissal of a complaint when the allegations contained therein fail "to state a claim upon which relief can be granted." To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), "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, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In order to meet this standard, "the plaintiff [must] plead[] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The plausibility standard does not require the plaintiff to demonstrate a "probability" of misconduct, "but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. "[T]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.'" Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir. 2001) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). A plaintiff that alleges fraud, as plaintiff does in his fraudulent conveyance claim, must meet the heightened pleading standard set forth in Federal Rule of Civil Procedure 9(b), which requires the party alleging fraud to "state with particularity the circumstances constituting fraud or mistake." See Fed.R.Civ.P. 9(b).

In deciding a motion to dismiss pursuant to Rule 12(b)(6), a court must "accept as true all allegations in the complaint and draw all reasonable inferences in favor of the non-moving party.'" Vietnam Ass'n for Victims of Agent Orange v. Dow Chem. Co., 517 F.3d 104, 115 (2d Cir. 2008); see also Starr v. Sony BMG Music Entm't, 592 F.3d 314, 321 (2d Cir. 2010). However, "conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to defeat a motion to dismiss." Achtman v. Kirby, McInerney & Squire, LLP, 464 F.3d 328, 337 (2d Cir. 2006) (internal quotation marks and brackets omitted).

DISCUSSION

The Third Amended Complaint asserts eight claims against Baron & Baron under New York law:[9] (1) unjust enrichment, (2) money had and received, (3) negligence, (4) breach of fiduciary duty/demand for documentary and financial accounting, (5) tortious interference with contract, (6) fraudulent conveyance, (7) constructive trust/promissory ...


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