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Canon U.S.A., Inc. v. Divinium Technologies Inc.

United States District Court, S.D. New York

February 21, 2017

CANON U.S.A, INC., et al, Plaintiffs,
v.
DIVINRIUM TECHNOLOGIES, INC., et al., Defendants.

          OPINION & ORDER

          HONORABLE PAUL A. CROTTY, United States District Judge.

         Plaintiffs Canon U.S.A., Inc. ("Canon USA") and Canon Financial Services, Inc. allege that Jay J. Freireich, and his law firm, Brach Eichler LLC ("Brach Eichler, " and together with Freireich, the "Attorney Defendants"), aided and abetted a fraud perpetrated by their former clients. Plaintiffs now move for leave to amend their complaint to add a claim against the Attorney Defendants for violation of New York Judiciary Law § 487. The Court grants the motion.

         BACKGROUND

         The Court summarizes here the relevant factual allegations from Plaintiffs' Proposed Amended Complaint, which the Court accepts as true for purposes of this motion for leave to amend. See Henneberry v. Sumitomo Corp. of America, 415 F.Supp.2d 423, 432-33 (S.D.N.Y. 2006). Defendants Divinium Technologies (formerly known as EZ Docs, Inc. ("EZ Docs")), Anthony Grimaldi, Steven Hernandez, Catherine Mattiucci, and Leonard Harac (together, the "EZ Docs Defendants") defrauded Canon USA to obtain an authorized Canon business equipment dealership. Proposed Am. Compl. (Dkt. 89-1) ¶¶ 1-2. The scheme arose in 2008, after Canon USA refused authorization for Empire Technology ("Empire") to acquire an authorized Canon retail dealership. Id. ¶¶ 45-47. Grimaldi and Hernandez were Empire's principals, and Canon USA rejected Empire's attempted acquisition due, in part, to Grimaldi and Hernandez's prior arrests in connection with a fraud scheme involving business equipment leases. Id. ¶ 46.

         Grimaldi, Hernandez, and Harac realized that to obtain a dealership, they had to conceal Grimaldi and Hernandez's involvement. Id. ¶ 48. They agreed with Grimaldi's sister, Mattiucci, to create a new corporation, EZ Docs, to pursue acquisition of the dealership. See Id. ¶ 49. EZ Docs was set up to have Mattiucci as President and nominal shareholder. Id. But in reality, Grimaldi and Hernandez were to split ownership and primarily perform the actual management of EZ Docs, with Harac's and Mattiucci's assistance and participation. See Id. Grimaldi, Hernandez, and Mattiucci then retained Freireich to help provide legal services with respect to EZ Docs. Id. ¶ 53. At the time, Freireich worked for non-party Poe & Freireich, but moved to Brach Eichler in March 2010. Id. ¶¶ 53, 63. Canon USA approved EZ Docs' acquisition of the dealership in November 2008, as well as another dealership in February 2010. Id. ¶¶ 52, 63.

         After acquiring the dealerships, the EZ Docs Defendants engaged in a series of improper and illegal activity. See generally Id. § IV.F. Because of her status as owner and principal of EZ Docs, Mattiucci grew concerned about her potential personal liability in connection with this activity. See Id. ¶ 161. Consequently, Mattiucci, Grimaldi, and Hernandez asked Freireich to draft a "Nominee Declaration." Id. Freireich addressed this request in a June 2011 letter to Mattiucci, Grimaldi, and Hernandez, wherein Freireich described Grimaldi and Hernandez as the "de facto shareholders, officers and directors" of EZ Docs. Id. Thereafter, Freireich prepared the Nominee Declaration, dated October 5, 2011 and executed by Mattiucci, Grimaldi, and Hernandez. Id. The Nominee Declaration provided, among other things, that at the time EZ Docs was formed, it was intended that Grimaldi and Hernandez would hold 100% of EZ Docs' stock, and that Mattiucci was holding the shares of EZ Docs "for the benefit of and as nominee for" Grimaldi and Hernandez. Id. It also provided that Mattiucci, Grimaldi, and Hernandez understood "that Canon was and is unwilling to permit [Grimaldi and Hernandez] to have an ownership interest in a Canon licensed dealership." Id.

         By the fall of 2011, Canon USA began considering terminating EZ Docs' dealership due, among other things, to learning of Grimaldi and Hernandez's involvement with EZ Docs. See Id. ¶ 160. On October 25, 2011, Canon USA notified EZ Docs that EZ Docs' authorized Canon retail dealer agreement was terminated, effective immediately. Id. ¶ 162.

         On November 1, 2011, EZ Docs, represented by Freireich and Brach Eichler, sued Canon USA in New York State Supreme Court to seek reinstatement of the dealership (the "Termination Lawsuit"). Id. ¶ 163. Freireich and Brach Eichler also filed an application for a temporary restraining order ("TRO"), together with an affidavit from Mattiucci that contained such statements as "[n]o other person has ever held any equity interest in [EZ Docs]." Id. ¶¶ 164-165. On November 4, 2011, Justice Melvin L. Schweitzer of the Supreme Court of the State New York denied the TRO application. Id. ¶ 166.

         In the original complaint, Plaintiffs sued the Attorney Defendants for aiding and abetting the EZ Docs Defendants' fraud. Compl. (Dkt. 1) Counts VII, IX. They now seek to add a claim against the Attorney Defendants for violation of New York Judiciary Law § 487 in connection with allegedly false statements made in submissions to the New York Supreme Court in the Termination Lawsuit. Proposed Am. Compl. Count XVI.

         DISCUSSION

         I. Legal Standards

         A party may amend its pleadings at any time with the court's leave, which the court should freely give when justice so requires. See Fed. R. Civ. P. 15(a)(2). Generally, "[a] district court has discretion to deny leave for good reason, including futility, bad faith, undue delay, or undue prejudice to the opposing party." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007). "An amendment to a pleading is futile if the proposed claim could not withstand a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6)." Lucente v. Int'l Bus. Machs. Corp., 310 F.3d 243, 258 (2d Cir. 2002).

         II. Application

         The Attorney Defendants contend that Plaintiffs' proposed amendment would be futile. However, they concede-and the Court agrees-that there is no bad faith or undue delay on the part of Plaintiffs, or undue ...


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