United States District Court, S.D. New York
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 ...