United States District Court, S.D. New York
Plaintiff is represented by Ronald M. Rosengarten of Greenberg Traurig, Avenue of the Americas, Miami, FL Leslie D. Corwin and Rachel Sims of Blank Rome LLP, New York, NY. and Michael J. Schlesinger of Schlesinger & Associates, P.A., Miami, FL.
Defendants are represented by Gary P. Adelman and Sarah M. Matz of Adelman Matz, P.C., New York, NY.
OPINION AND ORDER
RICHARD J. SULLIVAN, District Judge.
Plaintiff NRW, Inc. ("NRW") brings this diversity action against Defendants Mike Bindra ("Bindra"), Laura De Palma ("De Palma"), Made Event, LLC ("Made Event"), Sala Corporation ("Sala"), EZ Festivals, LLC ("EZ Festivals"), and Mister Ed Productions, Ltd. ("Mister Ed, " and together with Made Event, Sala, and EZ Festivals, the "Entity Defendants"), asserting claims for breach of contract, alter ego liability, and fraudulent transfer. Now before the Court is Defendants' motion to dismiss the Fourth Amended Complaint. For the reasons set forth below, the motion is granted in part and denied in part.
This case arises out of a financing arrangement gone awry between Bindra and NRW's principal, Henri Pferdmenges ("Pferdmenges"). Bindra and Pferdmenges were, in happier times, friends and business partners in a night club. (FAC ¶ 10.) In October 2008, Bindra conceived of a new business venture: an electronic music festival called "Electric Zoo" to be held on Randall's Island in New York City. ( Id. ¶ 12.) He planned to host the first such festival in 2009 ("Zoo 2009") and to eventually expand the festival to other cities. ( Id. ¶¶ 12-14.) Bindra and his wife, De Palma, approached Pferdmenges with the idea and, from October 2008 to February 2009, sought an investment from Pferdmenges. ( Id. ¶¶ 11-15.) On February 25, 2009, Bindra, De Palma, Pferdmenges, and Pferdmenges's attorney met at Pferdmenges's house in Florida to discuss the terms of a possible deal. At that meeting, the parties reached an "understanding" about a possible deal structure, under which Pferdmenges would invest in the festival as a fifty percent partner. ( Id. ¶¶ 20-21.)
Following the meeting and through July 2009, the parties continued to negotiate via email. (FAC ¶¶ 23-27.) Discussions reached an impasse, and on July 2, 2009, Pferdmenges sent Bindra an email threatening to cut off negotiations unless Bindra and De Palma agreed to either the "initial offer (50/50)" discussed at the February 25 meeting or "a straight loan." ( Id. ¶ 27; id. Ex. G.) In response, Bindra sent an email agreeing to "move forward under the 50/50 deal." ( Id. ¶ 27; id. Ex. G.)
On July 9, 2009, Pferdmenges wired $200, 000 to Made Event, an entity owned by Bindra and De Palma, so Bindra and De Palma could use the funds to pay various expenses incurred by Zoo 2009. (FAC ¶¶ 4, 29.) On August 3, 2009, Pferdmenges sent Bindra a proposed written letter agreement entitled "Letter Agreement between NRW Corporation, a Florida corporation (NRW') and Sala, LLC, a Delaware limited liability company (Sala') regarding Electric Zoo Festival 2009 at Randall's Island CZooT (the "Letter Agreement"). (Compl. ¶ 30; id. Ex. I ("Ltr. Agmt.").) The Letter Agreement, which is discussed in greater detail below, set forth the terms of a deal between NRW, an entity controlled by Pferdmenges, and Sala, an entity controlled by Bindra. (Ltr. Agmt. at 1; FAC ¶ 33.) It provided that NRW would invest $500, 000 into an entity called Silly Groove, LLC ("Silly Groove"), which would operate Zoo 2009. (Ltr. Agmt. § 2.) In return, Sala would, after paying back NRW's investment and other liabilities, split the profits from Zoo 2009 with NRW equally. ( Id. § 4.) Sala would retain ownership of "all trademarks, service marks, goodwill and all other property relating to Zoo and any names, images and other rights, " but would enter into a security agreement listing the foregoing as "security for repayment of [NRW's] Investment." ( Id. § 5.)
In response to Pferdmenges's email attaching the Letter Agreement, Bindra sent an email on August 6, 2009 (the "August 6 email") stating, in relevant part:
This looks great though, thank you. Only one small typo we caught in paragraph six. I have copied the sentence here and highlighted the typo:
"That notwithstanding, Sala shall not be required to pay NRW more than one third of its profits from Zoo 2010 for future Zoo[s]."
I think "for" should be "or[.]"
Let me know how Schles [Pferdmenges's attorney, Michael Schlesinger] would like this executed. Should I sign and fax a copy or mail him originals, or both etc?...
(FAC ¶ 30; id. Ex. J ("Aug. 6 Email").) On August 13, 2009, NRW wired an additional $300, 000 to Made Event. ( Id. ¶ 32.) Although the Letter Agreement called for NRW to make its investment to Silly Groove, Bindra asked NRW to make the investment to Made Event, and Made Event retained those funds to operate Zoo 2009. ( Id. ¶¶ 32-33.) Neither Sala nor Made Event ever entered into the security agreement contemplated by the Letter Agreement. ( Id. ¶ 34.)
Zoo 2009 was held on Labor Day weekend in 2009 and was attended by over 25, 000 guests. (FAC ¶ 37.) On September 22, 2009, Bindra sent Pferdmenges a financial statement for Zoo 2009. ( Id. ¶ 39; id. Ex. L.) The statement, which excluded information about any ticket fees received by Bindra and De Palma as compensation and any cash proceeds received at the festival, indicated a net loss of $165, 344. (FAC ¶ 39; id. Ex. L.) Thereafter, the parties exchanged more emails about the finances of Zoo 2009; in these emails, Pferdmenges, though his attorney, again demanded to know what amount Bindra and De Palma received in ticket fees, and Bindra, through his accountant, again represented that Zoo 2009 lost $165, 344. ( Id. ¶¶ 42-47.) At around this time, Pferdmenges expressed his willingness to leave the entire $500, 000 investment with Defendants for future Electric Zoo festivals. ( Id. ¶¶ 41, 43.) On January 29, 2010, Bindra wired $200, 000 of NRW's investment back to NRW, but retained the remaining $300, 000. ( Id. ¶ 44.)
In July 2010, Bindra and De Palma created EZ Festivals, a new corporate entity to "hold the investments, working capital and profits of Electric Zoo." (FAC ¶ 48.) Made Event, the entity through which Bindra and De Palma previously operated Electric Zoo, transferred approximately $700, 000 to EZ Festivals, which was owned wholly by De Palma. ( Id. ¶ 49.)
On July 12, 2010, Bindra sent Pferdmenges an email (the "July 12 email") proposing two possible financing deals for the Electric Zoo festival to be held in 2010 ("Zoo 2010"). (FAC ¶ 51; id. Ex. R.) Under the first proposal ("Proposal One"), Pferdmenges would make a $500, 000 investment and receive the first $750, 000 in profits, Made Event would receive the next $750, 000 in profits, and the parties would thereafter split the profits, with ten percent going to Pferdmenges. Under the second proposal ("Proposal Two"), Pferdmenges would make a $500, 000 investment and receive interest on the investment at a rate of ten percent, plus a twenty percent share of the profits from all future Zoos, including ticketing revenues. ( Id. Ex. R.) On July 25, 2010, Pferdmenges told Bindra that he intended to stick to the terms of the "50-50 deal agreed upon approximately a year before, as reflected in the August 2009 letter agreement, as confirmed by both performance and subsequent writings." ( Id. ¶ 54.)
Zoo 2010 was held, once again, over Labor Day weekend, and was attended by over 50, 000 guests. (FAC ¶ 55.) After the festival, Bindra and his accountant, Andrew Britton ("Britton"), emailed Pferdmenges financial statements for Zoo 2010. ( Id. ¶¶ 58-59.) These statements reflected a profit of approximately $1, 473, 000 and categorized NRW's investment as a $500, 000 "loan." ( Id. ; id. Exs. S, T.) According to these statements, EZ Festival would pay NRW $50, 000 in interest (reflecting ten percent interest on the $500, 000 loan) and $294, 600 in profits (reflecting twenty percent of the total profits). ( Id. Exs. S, T.) In one of the emails, Bindra stated that these payments reflected the terms of Proposal Two of the July 12 email. ( Id. Ex. T.) After Pferdmenges again communicated his view that he was entitled to fifty percent of the profits, Bindra sent an email on December 10, 2010, disputing that the parties "agreed upon a 50/50 deal, ever" and reiterating that such a deal was "never agreed upon." ( Id. Ex. U.) On December 29, 2010, EZ Festivals wired NRW the following amounts: (1) $300, 000 in profits, (2) $20, 000 in interest, and (3) $30, 000 in "additional interest." (FAC ¶ 61; id. Ex. V.) NRW accepted these funds without conceding that they constituted the payments to which it was entitled. (FAC ¶ 61.)
The parties' relationship deteriorated quickly thereafter. On April 18, 2011, an attorney for Bindra and De Palma sent Pferdmenges a letter disputing that Pferdmenges ever held any equity in Electric Zoo, and purporting to terminate any business relationship that might exist between Pferdmenges, NRW, and Defendants. (FAC ¶ 64; id. Ex. X.) Bindra thereafter excluded Pferdmenges from participation in Electric Zoo festivals, including the festivals held in 2011, 2012, and 2013 (respectively, "Zoo 2011, " "Zoo 2012, " and "Zoo 2013"). ( Id. ¶¶ 65-69.)
Throughout this entire period, Made Event and EZ Festivals made a number of payments - to Bindra, De Palma, Made Event, and a separate corporate entity called Mister Ed - that NRW alleges were intended to fraudulently divert funds from the accounts of Made Event and EZ Festivals. (FAC ¶¶ 70-74; id. Exs. AA, BB.)
In July 2013, Made Event and EZ Festivals announced that they were being sold to SFX Entertainment ("SFX") for $45, 000, 000. Pferdmenges and NRW received no proceeds from this sale. ( Id. ¶¶ 76-77.)
B. Procedural History
In June 2012, Pferdmenges and NRW brought suit against Defendants in Florida state court. On July 20, 2012, Defendants removed the case to the United States District Court for the Southern District of Florida on the basis of diversity jurisdiction. (Doc. No. 1.) Pferdmenges and NRW did not move to remand. Instead, the parties litigated Defendants' motion pursuant to 28 U.S.C. § 1404(a) to transfer the action to the Southern District of New York. (Doc. Nos. 31, 37, 41.) On November 20, 2012, the Honorable K. Michael Moore, District Judge, granted Defendants' motion, and transferred the case to this District, where it was assigned to my docket. (Doc. No. 43.) Following a status conference before the Court, Pferdmenges and NRW filed a Second Amended Complaint on January 23, 2013, asserting claims for breach of a contract, breach of fiduciary duty, declaratory relief, unjust enrichment, promissory estoppel, implied contract in fact, and fraud in the inducement. (Doc. No. 54.)
On February 5, 2013, Defendants filed a motion to dismiss the Second Amended Complaint, which was fully submitted on February 20, 2013. (Doc. Nos. 57, 63, 64.) At a conference on July 11, 2013, the Court granted Defendants' motion, finding that the contract alleged by Pferdmenges and NRW was contradicted by documents attached to the Second Amended Complaint. (Doc. No. 86 at 3:11-5:9.) The Court dismissed the remaining claims as either duplicative of the contract claim or defective as a matter of law, but permitted Pferdmenges and NRW to amend their complaint to assert a breach of contract claim consistent with the documents attached to the Second Amended Complaint, as well as claims for alter ego liability and fraudulent transfer. ( Id. at 5:10-7:4; Doc. Nos. 84, 91.)
On September 27, 2013, NRW filed the Third Amended Complaint, asserting claims for breach of contract, alter ego liability, and fraudulent transfer. (Doc. No. 92 ("TAC").) The Third Amended Complaint dropped Pferdmenges as a Plaintiff and named Mister Ed as an additional Defendant. (TAC at 1.) The Court held a pre-motion conference on November 22, 2013, to discuss Defendants' then-contemplated motion to dismiss the Third Amended Complaint. (Doc. No. 108 ("Nov. 22 PMC Tr.").) At the conference, the Court observed that, based on the Letter Agreement and the August 6 email, NRW had possibly pleaded the existence of a contract between the parties regarding Zoo 2009 and, potentially, Zoo 2010. (Nov. 22 PMC Tr. at 25:22-26:1.) The Court permitted Defendants to file the motion, and ordered discovery to proceed as to Zoo 2009 and Zoo 2010. (Doc. No. 107.) The motion was filed on January 8, 2014 and fully submitted on March 10, 2014. (Doc. Nos. 111, 123.)
On August 18, 2014, the Court issued an Order observing that the Third Amended Complaint does not adequately plead the existence of diversity jurisdiction, but permitting NRW to file an amended complaint correcting the defect pursuant to 28 U.S.C. § 1653. (Doc. No. 142.) On August 27, 2014, NRW filed its Fourth Amended Complaint, which is identical to the Third Amended Complaint, except as to the allegations concerning diversity jurisdiction. ( Compare FAC ¶¶ 1-9, with TAC ¶¶ 1-9.) The Court deemed the parties' briefings and the documents attached to the Third Amended Complaint to be refiled as to the Fourth Amended Complaint. (Doc. Nos. 142, 144.)
On September 4, 2014, NRW submitted a pre-motion letter seeking leave to file a Fifth Amended Complaint asserting additional claims for declaratory judgment, fraudulent inducement, and unjust enrichment based on statements Bindra and De Palma made at depositions. Defendants responded with a letter of their own on September 9, 2014.
II. LEGAL STANDARD
To survive a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, a complaint must "provide the grounds upon which [the] claim rests." ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007). The plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "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." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In reviewing a Rule 12(b)(6) motion to dismiss, a court must accept as true all factual allegations in the complaint and draw all reasonable inferences in favor of the plaintiff. ATSI Commc'ns, 493 F.3d at 98. However, that tenet does not extend to "factual assertions [in the complaint] that are contradicted by the complaint itself, by documents upon which the pleadings rely, or by facts of which the court may take judicial notice." Perry v. NYSARC, Inc., 424 F.Appx. 23, 25 (2d Cir. 2011). Similarly, the presumption of truth "is inapplicable to legal conclusions." Iqbal, 556 U.S. at 678. Thus, a ...