United States District Court, S.D. New York
January 23, 2015
PAUL I. WILLENSKY, Plaintiff,
SAMUEL LEDERMAN, LEDCO MANAGEMENT, INC., and JORADA MANAGEMENT, INC., Defendants.
Paul I. Willensky, goldens Bridge, NY, Pro se Plaintiff.
Jonathan James ross, Esq., Caplan & Ross, LLP, New York, NY, Counsel For Defendants.
OPINION AND ORDER
KENNETH M. KARAS, District Judge.
Pro se Plaintiff Paul I. Willensky filed the instant shareholder derivative action against Defendant Samuel Lederman ("Lederman"), and Defendant corporations Ledco Management, Inc. ("Ledco") and Jorada Management, Inc. ("Jorada"), alleging fraud, breach of fiduciary duty, and other misconduct. Before the Court is Defendants' Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), which asserts that Plaintiff's claims are time-barred, and Plaintiff's Motion for Leave To File [an] Amended Complaint ("Motion To Amend"). For the following reasons, the Court grants Defendants' Motion To Dismiss and denies Plaintiff's Motion To Amend.
A. Factual Background
The majority of Plaintiff's allegations concern his relationship with Defendant Lederman.
In each of October 1983 and January 1984, Plaintiff paid $25, 000 to Lederman in exchange for a 50% share and directorship of both Ledco and Jorada, companies engaged "in the business of managing recording and performing artists." ( See Am. Compl. (April 22, 2014) ¶¶ 13, 29-31 (Dkt. No. 17).) Defendant Lederman was president, director, and a 50% shareholder of both companies. ( See id. ) At the time of Plaintiff's investment, Lederman allegedly represented to Plaintiff that he managed artists Ian Hunter, Mick Ronson, Mike Kehr, Don Kehr, and Yul Vaz through his role in a "predecessor entity, " Cleveland Entertainment Company, Inc. ("Cleveland"). (Id. ¶¶ 1-2.) The crux of Plaintiff's claim is that, after Plaintiff's investment, "Lederman... divert[ed] all future revenue streams" from Ledco and Jorada to himself, "engaging in a fraudulent transfer for his sole benefit." (Id. ¶ 62.)
Plaintiff alleges that the "primary inducement" for his investment in Ledco and Jorada was Lederman's promise that "existing revenue streams" from Lederman's management of "Ronson and Hunter" would be "carried over" to Ledco and Jorada. (Id. ¶¶ 2, 18.) Plaintiff later "ascertained that no formal contracts with Ronson or Hunter existed, ... [and that] the ongoing revenues... did not exist or existed in such a way that only... Lederman benefited." (Id. ¶ 5.) Plaintiff alleges that he determined the true nature of his arrangement with Lederman, at least in part, based on a 2006 federal lawsuit that Lederman pursued against, inter alia, Popovich Music Group Ltd. and its president, Stephen Popovich, from which Plaintiff alleges Lederman obtained a favorable judgment that included "residual value" from "carry[-]over clients'" like Ronson and Hunter, revenues which "never accrued to Ledco." (Id. ¶¶ 18-19.)
Additionally, Plaintiff alleges that in late 1984, nearly a year after he made his second investment, Ledco "entered into a management contract... with the band members of Urgent, " but Lederman structured the contract such that it was "for the exclusive management services of Lederman [so that] at any time during the contract[, ] unbeknownst to Plaintiff, ... Lederman could walk away with Urgent, and Plaintiff[']s... Ledco shares would be worthless." (Id. ¶ 4.) Urgent's album was "reissue[d]" in 2011, and included four songs by Hunter and Ronson, but Plaintiff alleges that he never received "a commission or fee." (Id. ¶ 21.)
Plaintiff also alleges that, over the course of his investment, Lederman "failed to perform [the] duties imposed upon him as director and officer of Defendant corporations" because he did not "give care or oversight to the business and affairs of the... corporations in a skillful, careful and diligent manner, but to the contrary neglected, suffered, and permitted monies, properties and effects of said... corporations to be taken, wasted, and squandered" to pay for "personal costs and obligations incurred prior to [P]laintiff[']s investment, " including "management fees earned from royalties, performance fees, and production work[, ] all of which did not flow through Ledco." (Id. ¶¶ 8-9.) Plaintiff alleges that the reason Lederman commingled his assets with those of Ledco and "converted all cash and revenues to his own benefit" was that, "[a]t the time of Plaintiff's... investment, all of... Lederman's economic entities were defunct or in dire need of a cash infusion[, ] [and so] Plaintiff... provided that financial lifeboat through the years of 1983 and 1984." (Id. ¶¶ 10, 23.) Additionally, Plaintiff avers that Lederman "breached his employment agreement as President of... Defendant corporations" because instead of "devot[ing] his full time and energies to the business of said corporations, " he "devoted himself to selling municipal bonds for [another individual]... using the offices, equipment[, ] and staff of the [D]efendant corporations... for his personal profit, " which "alienated concert hall owners/promoters and record company personnel... whose goodwill was critical to the success of Defendant... corporations." (Id. ¶ 11.) Plaintiff also alleges that Lederman, in his capacity as president, "failed to cause the Defendant corporations to [provide] financial reports and tax returns to its shareholder[s], " ( id. ¶ 12), and that he "failed to disclose... accounting issues" faced by Ledco "with due candor, " ( id. ¶ 20).
With regard to the other named Defendants, Plaintiff alleges that the Ledco Board of Directors, because of its "position of control and authority" and "advisory, executive, managerial, and directorial" functions, "had knowledge of material non-public information regarding the company, " yet failed to "discharge [its] dut[y]." (Id. ¶¶ 33, 34.) In particular, Plaintiff alleges that the Board failed to "exercise reasonable and prudent supervision over the management, policies, practices[, ] and controls of the Company, " including "taking appropriate action to correct... misconduct and prevent its recurrence." (Id. ¶ 34.) Presumably, this allegation also applies to the Board of Directors of Jorada, though Plaintiff does not explicitly make such an allegation in his Amended Complaint.
B. Procedural History
Over two decades before filing the instant Action, on December 4, 1989, Plaintiff filed a lawsuit in New York Supreme Court against Defendants Lederman, Ledco, and Jorada, as well as one additional defendant, alleging fraud, misconduct, and breach of fiduciary duty. ( See Decl. of Jonathan J. Ross, Esq. in Supp. of Defs.' Mot. To Dismiss ("Ross Decl.") (Mar. 3, 2014) Ex. B (Dkt. No. 13) (New York Supreme Court complaint); see also Letter from Plaintiff to Court (Nov. 27, 2013) ("Pl.'s Nov. 27, 2013 Letter") at unnumbered 1 (Dkt. No. 6) (noting that "[in] 1990... Plaintiff filed a shareholder derivative lawsuit against Samuel Lederman[, ] et al. for fraud").) The lawsuit was based on similar facts to those alleged in the instant case. ( See Mem. of Law in Opp'n to Defs.' Mot. To Dismiss (Mar. 31, 2014) ("Opp'n") 4 (Dkt. No. 14) ("The Plaintiff... does not dispute that a preliminary lawsuit was filed in 1990, and the facts are similar...."). On March 16, 1990, the Supreme Court dismissed Plaintiff's lawsuit. ( See Ross Decl. Ex. C (docket sheet).)
Plaintiff filed the instant Action on October 3, 2013, alleging several causes of action, including "fraudulent transfer, " "fraud and conspiracy to commit fraud, " "conversion, " and "breach of fiduciary duty." ( See Compl. 8-11 (Dkt No. 1).) Plaintiff alleged that, as a result of Defendants' actions, he suffered "serious harm and damage, " because he was "deprive[d]... of profits which [the Defendant corporations] would have generated, " though Plaintiff admits that "the amount of damages and profits can be ascertained only upon an accounting review." (Id. ¶ 14.) Plaintiff therefore sought injunctive relief and damages, including requests that his assets be returned and held in a "constructive trust, " that any transfer of funds from Ledco and Jorada to Lederman "be declared void, " and that he be granted a "full accounting of all monies received from... sales, transfers, as well as other assets taken, and converted by... Lederman." ( See id. ¶¶ 41, 45, 50, 55, 58, 62, 64.)
The Parties stipulated to a two-week extension of time for Defendants to file an answer, ( see Dkt. No. 7), and Defendants thereafter, in a letter dated November 26, 2013, requested a pre-motion conference for their Motion To Dismiss, ( see Dkt. No. 8). Plaintiff responded in a letter dated November 27, 2013. ( See Pl.'s Nov. 27, 2013 Letter.) At the pre-motion conference, held on January 29, 2014 and attended by Plaintiff, the Court adopted a scheduling order whereby Defendants would file their motion by March 3, 2014, Plaintiff would file his opposition by April 4, 2014, and Defendants would file their reply by April 18, 2014. ( See Dkt. (minute entry for Jan. 29, 2014).) Defendants filed their Motion To Dismiss, Memorandum of Law, and Declaration on March 4, 2014. (Dkt. Nos. 11-13.) Plaintiff filed his Opposition on March 31, 2014. ( See Dkt. No. 14). Defendants filed their Reply on April 18, 2014. (Dkt. No. 15). On April 22, 2014, Plaintiff filed his Motion to Amend, attaching his proposed Amended Complaint. (Dkt. No. 17.)
On December 5, 2014, the Court ordered letter briefing on the applicability of New York's "open repudiation doctrine" to Defendants' Motion to Dismiss. ( See Dkt. No. 18.) See also Bd. of Trustees ex rel. Gen. Ret. Sys. of Detroit v. BNY Mellon, N.A., No. 11-CV-6345, 2012 WL 3930112, at *9 (S.D.N.Y. Sept. 10, 2012) (describing this doctrine). Plaintiff filed his letter brief on December 18, 2014, (Dkt. No. 23), and Defendants filed their letter brief on December 19, 2014, (Dkt. No. 21).
A. Standard of Review
To survive a motion to dismiss under Rule 12(b)(6), "a complaint must allege sufficient facts which, taken as true, state a plausible claim for relief." Keiler v. Harlequin Enters. Ltd., 751 F.3d 64, 68 (2d Cir. 2014). The Supreme Court has held that "[w]hile 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 [or her] entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (third alteration in original) (citations omitted). Instead, the "[f]actual allegations must be enough to raise a right to relief above the speculative level, " id., and "once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint, " id. at 563. A plaintiff must allege "only enough facts to state a claim to relief that is plausible on its face." Id. at 570. But if a plaintiff has "not nudged [his or her] claims across the line from conceivable to plausible, the complaint must be dismissed." Id.; see also Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) ("Determining whether a complaint states a plausible claim for relief will... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But 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.'" (alteration in original) (citation omitted) (quoting Fed.R.Civ.P. 8(a)(2))). Where, as here, the complaint was filed pro se, it must be construed liberally with "special solicitude" and interpreted to raise the strongest claims that it suggests. Hill v. Curcione, 657 F.3d 116, 122 (2d Cir. 2011) (internal quotation marks omitted).
In considering Defendants' Motion To Dismiss, the Court "accept[s] all factual allegations as true and draw[s] every reasonable inference from those facts in the plaintiff's favor." In re Adderall XR Antitrust Litig., 754 F.3d 128, 133 (2d Cir. 2014) (internal quotation marks omitted); see also Ruotolo v. City of New York, 514 F.3d 184, 188 (2d Cir. 2008) ("We review de novo a district court's dismissal of a complaint pursuant to Rule 12(b)(6), accepting all factual allegations in the complaint and drawing all reasonable inferences in the plaintiff's favor." (internal quotation marks omitted)). Generally, "[i]n adjudicating a Rule 12(b)(6) motion, a district court must confine its consideration to facts stated on the face of the complaint, in documents appended to the complaint or incorporated in the complaint by reference, and to matters of which judicial notice may be taken." Leonard F. v. Isr. Disc. Bank of N.Y., 199 F.3d 99, 107 (2d Cir. 1999) (internal quotation marks omitted). In deciding a motion to dismiss a pro se complaint, however, it is appropriate to consider "materials outside the complaint to the extent that they are consistent with the allegations in the complaint, " Alsaifullah v. Furco, No. 12-CV-2907, 2013 WL 3972514, at *4 n.3 (S.D.N.Y. Aug. 2, 2013) (internal quotation marks omitted); s ee also Walker v. Schult, 717 F.3d 119, 122 n.1 (2d Cir. 2014) (noting that a court may consider "factual allegations made by a pro se party in his papers opposing the motion"); Rodriguez v. Rodriguez, No. 10-CV-891, 2013 WL 4779639, at *1 (S.D.N.Y. July 8, 2014) ("Although the Court is typically confined to the allegations contained within the four corners of the complaint, when analyzing the sufficiency of a pro se pleading, a court may consider factual allegations contained in a pro se litigant's opposition papers and other court filings.") (citations and internal quotation marks omitted); Agu v. Rhea, No. 09-CV-4732, 2010 WL 5186839, at *4 n.6 (E.D.N.Y. Dec. 15, 2010) (noting that a court may consider "documents that a pro se litigant attaches to his opposition papers").
Additionally, although "[t]he lapse of a limitations period is an affirmative defense that a defendant must plead and prove[, ]" a statute of limitations defense may be "raise[d]... in a preanswer Rule 12(b)(6) motion if the defense appears on the face of the complaint." Staehr v. Hartford Fin. Servs. Grp., Inc., 547 F.3d 406, 425 (2d Cir. 2008); see also Vasconcellos v. City of New York, No. 12-CV-8445, 2014 WL 4961441, at *2 (S.D.N.Y. Oct. 2, 2014) (same). "[B]ecause the defendants bear the burden of establishing the expiration of the statute of limitations as an affirmative defense, a pre-answer motion to dismiss on this ground may be granted only if it is clear on the face of the complaint that the statute of limitations has run." Mosdos Chofetz Chaim, Inc. v. RBS Citizens, N.A., 14 F.Supp. 3d 191, 209 (S.D.N.Y. 2014) (internal quotation marks omitted).
Defendants move to dismiss Plaintiff's claims under Federal Rule of Civil Procedure 12(b)(6), arguing they are "barred by the statute of limitations." (Mem. of Law in Supp. of Defs.' Motion To Dismiss (Mar. 4, 2014) ("Defs.' Mem.") 1-3 (Dkt. No. 12).) In support of their Motion, Defendants assert that the action that Plaintiff filed in New York Supreme Court in 1989 demonstrates that he had "notice of the accrual of his claims" at that time. (Id. at 5.) Defendants also argue that any dismissal "should be with prejudice and without leave to amend" because amendment would be futile. (Id. at 9-10.)
"Where jurisdiction rests upon diversity of citizenship, " as it does here, ( see Am. Compl. ¶ 26 (asserting jurisdiction is proper on diversity grounds)), "a federal court sitting in New York must apply New York choice-of-law rules and statutes of limitations." Stuart v. Am. Cyanamid Co., 158 F.3d 622, 626-27 (2d Cir. 1998). In New York, an "action by or on behalf of a corporation against a present or former director... for an accounting, or to procure a judgment on the ground of fraud, or to enforce a liability, penalty[, ] or forfeiture, or to recover damages for waste... or for an accounting in conjunction therewith, " is subject to a six-year statute of limitations. N.Y. C.P.L.R § 213(7); see also Golden P. Bancorp v. F.D.I.C., 273 F.3d 509, 518 & n.5 (2d Cir. 2001) ("The statute of limitations in New York for claims of unjust enrichment, breach of fiduciary duty, corporate waste, and for an accounting is generally six years." (citing N.Y. C.P.L.R §§ 213(1), (7))); Roslyn Union Free Sch. Dist. v. Barkan, 950 N.E.2d 85, 88 (N.Y. 2011) (noting that N.Y. C.P.L.R. § 213(7) "extends the limitations period" for actions for "monetary damages for injury to property" to six years in the circumstances outlined in the statute). For actions based upon fraud, "the time within which the action must be commenced shall be the greater of six years from the date the cause of action accrued or two years from the time the plaintiff... discovered the fraud, or could with reasonable diligence have discovered it." N.Y. C.P.L.R. § 213(8); see also Cohen v. S.A.C. Trading Corp., 711 F.3d 353, 361 & n.3 (2d Cir. 2014) ("Under New York law, claims of common law fraud and breach of fiduciary duty based on fraud are generally subject to six-year statutes of limitations." (citing N.Y. C.P.L.R § 213(8) in the accompanying footnote)); Sargiss v. Magarelli, 909 N.E.2d 573, 576 (N.Y. 2009) ("With respect to the timeliness of [the] plaintiff['s] action, a fraud-based action must be commenced within six years of the fraud or within two years from the time the plaintiff discovered the fraud or could with reasonable diligence have discovered it.'" (citing N.Y. C.P.L.R § 213(8))). For actions where no other limitation is prescribed, the statute of limitations also is six years. N.Y. C.P.L.R § 213(1); see also Caronia v. Philip Morris USA, Inc., 715 F.3d 417, 423 (2d Cir. 2014) (noting that N.Y. C.P.L.R. § 213(1) provides the applicable statute of limitations in "actions seeking equitable relief, including injunctive relief, or [in] actions for which no limitations period is specified") (citation omitted); Melcher v. Greenberg Traurig, LLP, 11 N.E.3d 174, 175 (N.Y. 2014) (noting that N.Y. C.P.L.R. § 213(1) is a "catch-all' or residual provision" which provides a six year statute of limitations for actions which have no other limitations period proscribed by law). Therefore, with the exception of Plaintiff's conversion claim, which is subject to a three-year statute of limitations, N.Y. C.P.L.R § 214(3); SongByrd, Inc. v. Estate of Grossman, 206 F.3d 172, 181 (2d Cir. 2000); State v. Seventh Regiment Fund, Inc., 774 N.E.2d 702, 709 (N.Y. 2002), Plaintiff's claims are governed by a sixyear statute of limitations under New York law.
Plaintiff does not contest that his claims are subject to a six-year statute of limitations. Indeed, Plaintiff appears to recognize that, absent a tolling of the statutes of limitations, his claims are time-barred, as he does "not dispute that [he filed] a preliminary lawsuit... in 1990 [wherein] the facts [were] similar." (Opp'n 4.) Plaintiff instead seeks tolling of the statute of limitations based on "special circumstances which would make the operation of the statute of limitations unfair, " namely that "[Plaintiff] [was] unaware of [his] cause of action." (Id. at 6.) Plaintiff contends that he did not discover the full scope of Defendants' actions until recently, and that therefore the statute of limitations should not have begun to run until he made that discovery. ( See id. at 4, 7.) Construing this argument liberally, it appears that Plaintiff seeks either equitable tolling or an application of the "open repudiation" doctrine under New York State law.
a. Equitable Tolling
Plaintiff's state law claims are governed by New York's equitable tolling doctrine. See Statistical Phone Philly v. NYNEX Corp., 116 F.Supp.2d 468, 482 (S.D.N.Y. 2000) (noting that "the state law of equitable tolling governs [the] plaintiffs' state law claims"). That doctrine "applies where it would be unjust to allow a defendant to assert a statute of limitations defense, " because "the defendant's affirmative wrongdoing... produced the long delay between the accrual of the cause of action and the institution of the legal proceeding." Zumpano v. Quinn, 849 N.E.2d 926, 929 (N.Y. 2006). Therefore, "[i]t is the rule that a defendant may be estopped to plead the Statute of Limitations where plaintiff was induced by fraud, misrepresentations[, ] or deception to refrain from filing a timely action." Simcuski v. Saeli, 377 N.E.2d 713, 716 (N.Y. 1978); Putter v. North Shore Univ, Hosp., 858 N.E.2d 1140, 1142 (N.Y. 2006) ("We have recently reaffirmed that equitable estoppel will preclude a defendant from using the statute of limitations as a defense where it is defendant's affirmative wrongdoing... which produced the long delay between the accrual of the cause of action and the institution of the legal proceeding." (alteration in original) (internal quotation marks omitted)). Additionally, "concealment without actual misrepresentation may form the basis for invocation of the doctrine if there was a fiduciary relationship which gave [the] defendant an obligation to inform [the] plaintiff of facts underlying the claim." Doe v. Holy See (State of Vatican City), 793 N.Y.S.2d 565, 568 (N.Y.App.Div. 2005) (alterations in original) (internal quotation marks omitted). It is the Plaintiff's burden "to establish facts entitling him to equitable tolling." St. John's Univ., N.Y. v. Bolton, 757 F.Supp.2d 144, 187 (E.D.N.Y. 2010) (citing Simcuski, 377 N.E.2d at 716); see also Putter, 858 N.E.2d at 1142 ("A plaintiff seeking to apply the doctrine of equitable estoppel must establish that subsequent and specific actions by defendants somehow kept [him or her] from timely bringing suit." (alteration in original) (internal quotation marks omitted)); Zumpano, 849 N.E.2d at 929 ("It is therefore fundamental to the application of equitable estoppel for [the] plaintiffs to establish that subsequent and specific actions by defendants somehow kept them from timely bringing the suit."); Doe, 793 N.Y.S.2d at 568 ("In opposition to [the] defendants' motions to dismiss upon the affirmative defense, it was incumbent upon [the] plaintiffs to come forward with facts in support of equitable estoppel."). Plaintiff must also establish "[d]ue diligence... in bringing [his] action... within a reasonable time after the facts giving rise to the estoppel have ceased to be operational." Doe, 793 N.Y.S.2d at 569 (internal quotation marks omitted).
While the majority of the misconduct Plaintiff alleges occurred in the mid-1980s, Plaintiff contends that "recently discovered information has changed the nature of the case, and its underlying allegations." (Opp'n 4.) Plaintiff argues that he was previously unaware that "[t]here continues to be ongoing compensation with regard to Hunter, Ronson, and the members of Urgent...., " as well as other revenue streams, "that ha[ve] never been documented by... [Lederman] nor distributed to... Plaintiff." (Opp'n 6; see also Pl.'s Nov. 27, 2013 Letter at unnumbered 1-2 (discussing "ongoing business activity that was unreported to the Plaintiff, " including the fact that "in 1994[, ] Lederman was [an] Executive Producer on Ronson's Heaven & Hell album, [Hunter's] 1989 & 1995.. albums, [and the] 2002 [album] Meatloaf & Friends "); id. at unnumbered 2 (arguing that "[t]he statute of limitations does not apply for the sheer fact that [the] revenues" that Lederman derives from Ledco and Cleveland, to which Plaintiff alleges he is entitled, "continue"); id. (noting that "the business activities" at issue, namely Lederman's continued interest in Cleveland, "were still ongoing into 2008 and possibly beyond, " meaning the statute of limitations should have been "toll[ed] until [Plaintiff] received constructive notice to the true value of his initial investment"); Am. Compl. ¶ 24 (implying that the statute of limitations should run "from the point in time that Plaintiff became knowledgeable that revenues [to which he is entitled] exist").)
Plaintiff argues that he only became "aware of [the] ongoing fraud... [when] he became aware of the death of Stephen Popovich and read about multiple litigations by Defendant Lederman and others" that pertained to compensation that Plaintiff alleges he should have received for the 1984 album, "Hits Out of Hell, '" and its "multiple" reissued versions released "between 2001 and 2009." (Opp'n 7.) The only one of these "litigations" that Plaintiff refers to in his pleadings in any detail is Lederman's lawsuit against Popovich Music Corp. Ltd. and its president, Stephen Popovich ("Popovich") (the "Cleveland Action"). ( See Am. Compl. ¶¶ 18-19.)
The Cleveland Action consists of a lawsuit filed by Lederman and another former Cleveland shareholder on October 27, 2006 against, among others, the only other former Cleveland shareholder, Popovich, seeking the distribution of proceeds from a judgment Popovich received in a separate lawsuit related to Cleveland's recording and management agreements with Michael Aday, p/k/a "Meatloaf." ( See Am. Compl. ¶ 18; Defs.' Mem. 7-8; Ross Decl. Ex. D. ("Lederman Complaint") ¶¶ 19, 28-40, 43, 52, 61, 67 (complaint in Lederman v. Popovich, No. 07-CV-845 (N.D. Oh. Apr. 25, 2007); id. at 17.) Plaintiff alleges that this lawsuit indicated (a) that, contrary to Lederman's representations to Plaintiff, Cleveland continued to exist after Plaintiff's investment, and (b) that after Plaintiff invested in Ledco and Jorada, Lederman derived a benefit from Cleveland clients, namely Ronson and Hunter, meaning Plaintiff was entitled to a portion of the revenues at issue in the Cleveland Action. (Am. Compl. ¶¶ 18-19.)
The Court finds, for the following reasons, that Plaintiff has failed to show how the Cleveland action is relevant, or disclosed information material to, the fraud that Lederman allegedly perpetrated against Plaintiff such that it had an effect on Plaintiff's ability to file his claims. First, by Plaintiff's own admission, any work Lederman performed that was relevant to the Cleveland Action, other than filing the lawsuit itself, pre-dated Plaintiff's investment in Ledco and Jorada. ( See id. ¶ 18 (noting that the suit "related to activities prior to Plaintiff['s]... investment in Ledco").) Therefore, while Lederman seems to have maintained an independent interest in Cleveland as a minority shareholder even after it was dissolved in 1991, (Lederman Complaint ¶¶ 19, 39-40), the Cleveland Action does not suggest that Lederman failed to carry over clients, and their associated revenue streams, to Ledco and Jorada. As Plaintiff admits, he was only entitled to "royalties, compensation[, ] and fees attributable to Lederman" "[f]rom that time" on, i.e., earnings from work Lederman performed from the date of Plaintiff's investment. (Opp'n 7.) Plaintiff therefore has no claim to compensation Lederman earned for work performed prior to Plaintiff's investment. Likewise, the fact that Lederman kept his shares in Cleveland after Plaintiff's investment in Ledco and Jorada does not suggest that Lederman violated any "exclusive employment agreement" he had with Plaintiff and Ledco, ( id. at 6 (emphasis added)), given that Lederman ended his employment with Cleveland as of 1982, the year before Plaintiff's first investment, ( id. at 7).
Second, the Cleveland Action makes no mention of Hunter or Ronson, the clients Plaintiff alleges were the "primary inducement" for his investment, (Am. Compl. ¶ 2), nor are Ledco or Jorada implicated. While Plaintiff alleges that the carry-over clients at issue in the instant case only "included" Hunter and Ronson, ( id. ¶ 18), implying there were other clients that Lederman should have brought to Ledco and Jorada, Plaintiff fails to allege who those clients are beyond a passing reference to "Mike Kehr, Don Kehr, [and] Yul Vaz" in the first paragraph of the Complaint, ( id. ¶ 1). Regardless, only one client, Meatloaf, is the subject of the Cleveland Action, and Plaintiff does not allege an interest in Meatloaf, or, for that matter, in Cleveland (as a shareholder or otherwise).
Third, insofar as Plaintiff alleges that the Cleveland Action demonstrated that Cleveland still existed as an entity, contrary to Lederman's representations, ( id. ¶ 18), Plaintiff fails to allege how that fact affects Plaintiff's claims such that the statute of limitations should be tolled. As noted, Plaintiff does not allege an interest in Cleveland itself, and therefore it is unclear how Cleveland's mere existence and maintenance of assets is relevant, particularly given Lederman was no longer an employee-and was only a minority shareholder-at the time of Plaintiff's investment in Ledco and Jorada.
Fourth, even if the Cleveland Action were relevant such that the statute of limitations should have been tolled until the lawsuit was filed, Lederman filed the Cleveland Action in 2006. ( See Am. Compl. ¶ 18.) Plaintiff's claims in this Action, which was filed in October 2013, would therefore still be time-barred under New York's six-year statute of limitations. ( See Compl.)
The Cleveland Action aside, Plaintiff has otherwise "fail[ed] to point to material facts from which a reasonable jury could conclude that [D]efendants' wrongful concealment, " or any of Defendants' actions at all, "prevented [P]laintiff from discovering the nature of [his] claims within the limitations period." Statistical Phone Philly, 116 F.Supp.2d at 483; see also Shared Commc'ns Servs. of ESR, Inc. v. Holdman, Sachs & Co., 832 N.Y.S.2d 32, 34 (N.Y.App.Div. 2007) (rejecting equitable tolling claim and noting that "there is no basis for tolling the statute of limitations" unless the plaintiff "show[s] that [he or she] was prevented from timely filing an action due to reasonable reliance... on deception, fraud[, ] or misrepresentation by [the] defendant." (internal quotation marks omitted)); Doe, 793 N.Y.S.2d at 569 (rejecting equitable tolling claim because the "[p]laintiffs [had] not articulated any acts by [the] [d]efendants that prevented them from timely commencing suit"). Therefore, because Plaintiff had notice of his claims as of the filing of his New York Supreme Court action in 1989, see Harris v. Wilmorite Corp., 697 N.Y.S.2d 439, 440 (N.Y.App.Div. 1999) ("The doctrine of equitable estoppel will not apply if the plaintiff possesses timely knowledge sufficient to place him or her under a duty to make inquiry and ascertain all the relevant facts prior to the expiration of the [s]tatute of [l]imitations" (internal quotation marks omitted)), and the filing of that action makes clear that Plaintiff was not "induced by... [D]efendant[s'] fraud, misrepresentations or deception" to delay the commencement of [his] action, " Keselman v. Webber, 868 N.Y.S.2d 254, 255 (N.Y.App.Div. 2008), equitable tolling does not render Plaintiff's claims timely.
Plaintiff's claim for equitable tolling can, however, be construed another way. While Plaintiff had knowledge of the fraud as of 1989, perhaps he only recently discovered its extent. Indeed, Plaintiff's allegations regarding Lederman's representations about the existence of Cleveland, and the fact that Lederman continued to collect from clients without providing Plaintiff with his share of the proceeds, appear to relate to the severity of the fraud, rather than its existence. Plaintiff characterizes his claims in this way in his Opposition when he "requests that he be allowed to present his recent discoveries of further breach of contract and further fraud." (Opp'n 9 (emphasis added).)
While New York courts have suggested that this species of equitable tolling may be meritless, see, e.g., Zumpano, 849 N.E.2d at 930 (rejecting equitable tolling claim because there was no "new separate and subsequent acts of wrongdoing" beyond those "alleged" to have occurred decades before the instant action), federal courts, applying the federal equitable tolling doctrine, have more explicitly held that "[t]he law does not permit equitable tolling when a party simply did not realize the extent' of his claim." Ruso v. Morrison, 695 F.Supp.2d 33, 46 (S.D.N.Y. 2010); cf. Paige v. Police Dep't of City of Schenectady, 264 F.3d 197, 200 (2d Cir. 2001) ("Although some of the facts putatively concealed by the defendants might have strengthened [the plaintiff's] case by corroborating her story, ... the absence of those facts did not sufficiently justify [the plaintiff's failure to] pursu[e] her cause of action as to merit equitable tolling."); Kronisch v. United States, 150 F.3d 112, 121 (2d Cir. 1998) ("[A] plaintiff need not know each and every relevant fact of his injury.... Rather, a claim will accrue when the plaintiff knows, or should know, enough of the critical facts of injury and causation to protect Weiner, 717 F.Supp. 77, 80 (S.D.N.Y. 1989) (refusing to apply continuing wrong doctrine where damages continued to accrue from an initial fraud due to subsequent rent payments). himself by seeking legal advice."); Statistical Phone Philly 116 F.Supp.2d at 482 (rejecting the plaintiff's plea for equitable tolling, noting that the plaintiffs "failed to show that [the defendants'] concealment prevented their discovery of the nature of their claim, " and that "[t]he fact that [the] plaintiffs may not have had all the facts pertinent to their claims is of no consequence" because "[t]he question is whether plaintiff knew enough to sue" (emphasis added)). Because Plaintiff, by his own admission, already had knowledge that he allegedly had been defrauded as of, at latest, 1989, there is no basis for equitably tolling the statute of limitations. See Ruso, 695 F.Supp.2d at 46-48 (rejecting application of equitable tolling because plaintiff was "on notice" that he may have been defrauded when, for example, he "threatened to sue" the defendant over two years before he alleged to have learned the extent of the fraud (internal quotation marks omitted)).
b. Open Repudiation
Under New York law, the open repudiation doctrine provides that "the limitations period for claims arising out of a fiduciary relationship does not commence until the fiduciary has openly repudiated his or her obligation or the relationship has been otherwise terminated." Golden P. Bancorp, 273 F.3d at 518 (internal quotation marks omitted); see also Westchester Religious Inst. v. Kamerman, 691 N.Y.S.2d 502, 503 (N.Y.App.Div. 1999) (noting that in "an action for breach of a fiduciary relationship, " the statute of limitations "does not begin to run until the fiduciary has openly repudiated his or her obligation or the relationship has otherwise been terminated, " and finding the plaintiff's claim timely on those grounds); cf. Matter of Behr, 594 N.Y.S.2d 314, 315 (N.Y.App.Div. 1993) ("For a trustee to invoke a Statute of Limitations defense, a mere lapse of time is insufficient without proof of an open repudiation." (citing Matter of Barabash, 286 N.E.2d 268) (second citation omitted)). An open repudiation must be "clear and made known to the plaintiff, " Evangelista v. Mattone, 844 N.Y.S.2d 74, 75 (N.Y.App.Div. 2007); see also In re Meyer, 757 N.Y.S.2d 98, 99 (N.Y.App.Div. 2003) (same); In re Velsor's Estate, 243 N.Y.S.2d 477, 478 (N.Y. Sur. Ct. 1963) (noting that "[a]cts which have been held to be sufficient to support a repudiation" must be "unequivocal, " and that "proof of repudiation [must be] clear and satisfactory"), though such repudiation need not be accomplished by virtue of an explicit statement of repudiation from the fiduciary, see, e.g., Trafalgar Power, Inc. v. U.S. Bank Nat. Ass'n, No. 05-CV-15333, 2012 WL 555044, at *10 (N.D.N.Y. Feb. 21, 2012) (finding that there was an open repudiation when the defendant bank "stopped making disbursements" pursuant to formal requests from the operator of the plaintiff corporation's power plants, and when the president of the plaintiff corporation indicated in a deposition that "he no longer placed trust in the [b]ank, and he felt the [b]ank had breached its fiduciary duty" and sent the bank a letter threatening to sue for breach of that duty). It is the burden of the party "seeking the benefit of the Statute of Limitations defense" to prove that an open repudiation has occurred. In re Rodken, 705 N.Y.S.2d 429, 430 (N.Y.App.Div. 2000).
As Defendants contend in their supplemental letter brief, ( see Letter from Brian D. Caplan, Esq., to Court (Dec. 19, 2014) ("Defs.' Dec. 19, 2014 Letter") at unnumbered 1-2 (Dkt. No. 21)), the open repudiation doctrine exists to "protect beneficiaries in the event of breaches of duty by fiduciaries such as estate administrators, trustees, corporate officers, and receivers, that is, in circumstances in which the beneficiaries would otherwise have no reason to know that the fiduciary was no longer acting in that capacity." Access Point Med., LLC v. Mandell, 963 N.Y.S.2d 44, 47 (N.Y.App.Div. 2013). Put another way, "a person should be able to rely on the fiduciary's skill without the necessity of interrupting a continuous relationship of trust and confidence by instituting suit." White v. Fee, 953 N.Y.S.2d 554, 2012 N.Y. Slip Op. 51133(U), at *23 (N.Y. Sup.Ct. June 7, 2012) (citing People v. Ben, 866 N.Y.S.2d 464, 465-66 (N.Y.App.Div. 2008) and Kamerman, 691 N.Y.S.2d at 503)); see also Golden P. Bancorp, 273 F.3d at 519 (same).
While Plaintiff does not argue that the open repudiation doctrine applies to this case in his Opposition, the Court ordered supplemental briefing to determine if the doctrine rendered any of Plaintiff's claims timely. ( See Dkt. No. 18.) Having reviewed the Parties' letter briefs, the Court agrees with Defendants that "Plaintiff cannot reasonably claim that he was unaware of the facts purportedly showing... Lederman's repudiation of his purported fiduciary obligations, " and that therefore Plaintiff's claims are not saved by the open repudiation doctrine. (Defs.' Dec. 19, 2014 Letter at unnumbered 2). Plaintiff had ample reason to believe that Defendants had repudiated their fiduciary duties when he learned that he was not receiving payments to which Plaintiff alleges he was entitled, and he manifested such a belief when he filed suit against Defendants in 1989. See Lake Erie Distribs., Inc. v. Martlet Importing Co., 634 N.Y.S.2d 599, 601 (N.Y.App.Div. 1995) ("The commencement by [the] plaintiff of its lawsuit was an objective expression of [the] plaintiff's intent to treat [the defendant's] repudiation as a final breach of the franchise agreement."); cf. Trafalgar Power, 2012 WL 555044, at *10 (finding that there was an open repudiation when [the] [d]efendant bank "stopped making disbursements" pursuant to formal requests from the operator of the plaintiff corporation's power plants, and when the president of the plaintiff corporation indicated in a deposition that "he no longer placed trust in the [b]ank, and he felt the [b]ank had breached its fiduciary duty" and sent the bank a letter threatening to sue for breach of that duty). Moreover, because Plaintiff filed that lawsuit, it is clear that he was in no way "prevented from timely filing an action due to reasonable reliance" on the fiduciary relationship. White, 2012 N.Y. Slip. Op. 51133(U), at *23 (finding "no basis for tolling the statute of limitations" because the defendants "repudiated their fiduciary relationship at the time they performed [their] allegedly bad acts, " and because the plaintiffs were not "actively misled by [the] [d]efendants from filing suit or that [the] [p]laintiffs were in some extraordinary way prevented from complying with the limitations period" (citations and internal quotation marks omitted)). Therefore, the Court finds that the open repudiation doctrine is inoperable in this case because as of, at the latest, the filing of Plaintiff's New York Supreme Court lawsuit in 1989, Plaintiff had no reason to rely on the actions of the Defendants as fiduciaries. Plaintiff's claims thus remain untimely.
Having determined that Plaintiff's claims are time-barred, the Court must determine whether it should grant Plaintiff leave to amend the Complaint. "Generally, leave to amend should be freely given, and a pro se litigant in particular should be afforded every reasonable opportunity to demonstrate that he has a valid claim." Nielsen v. Rabin, 746 F.3d 58, 62 (2d Cir. -) (internal quotation marks omitted). "A pro se complaint should not be dismissed without the Court granting leave to amend at least once when a liberal reading of the complaint gives any indication that a valid claim might be stated." Id. (internal quotation marks omitted). The decision of whether to grant or deny leave to amend is, however, governed by the "sound discretion of the district court, " such that the district court may deny leave "for good reason, including futility." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007); see also Tocker v. Philip Morris Cos., Inc., 470 F.3d 481, 491 (2d Cir. 2006) (noting that "leave to amend a complaint may be denied when amendment would be futile").
Plaintiff, in his Motion To Amend, represents that his proposed amendment establishes that "the revenue stream of royalties" at issue "was still continuing up past the date of the initial filing of this... action." (Pl.'s Mot. for Leave To File [an] Amended Complaint (Apr. 22, 2014) ("Mot. To Amend") at unnumbered 2 (Dkt. No. 17).) As the preceding section of this Opinion makes clear, however, while Plaintiff's proposed amendment may concern "newly discovered information that was not available at the time of [Plaintiff's] initial filing, " ( id. ), it does not cure the underlying issue with Plaintiff's claims-that they are time-barred-because it only refers the extent of damages from the alleged fraud at issue. See Foster v. N.Y.C. Prob. Dep't, No. 11-CV-4732, 2013 WL 1342259, at *3 (E.D.N.Y Mar. 7, 2013), adopted by 2013 WL 1305775 (E.D.N.Y Mar. 30, 2014) (holding that "amendment... would be futile because [the] plaintiff's... claim... would be barred by the statute of limitations."); Brandon v. Musoff, No. 10-CV-9017, 2012 WL 135592, at *4, *6 (S.D.N.Y. Jan. 17, 2012) (dismissing complaint with prejudice where amendment would be futile because plaintiff's claim was "time-barred"). Other than by reference to facts discovered from the Cleveland Action that Plaintiff has not yet included in his pleadings, the Court cannot conceive of any amendment that would justify equitable tolling of the statute of limitations in this case, and Plaintiff already had an opportunity to amend when filing his proposed Amended Complaint. The Court therefore denies Plaintiff's Motion To Amend as futile, except insofar as Plaintiff wishes to amend his Amended Complaint to address the relevance of the Cleveland Action to his equitable tolling argument.
In light of the foregoing, the Court dismisses Plaintiff's Amended Complaint and denies Plaintiff's Motion To Amend. The dismissal is without prejudice only insofar as Plaintiff is given 30 days to submit a Second Amended Complaint, amending only to address the issue of the relevance of the Cleveland Action. No extensions will be granted. Plaintiff is reminded to plead the fraud "with particularity" in accordance with Federal Rule of Civil Procedure 9(b). The Clerk of Court is respectfully requested to terminate the pending Motions. (See Dkt. Nos. 11, 16, 17.)