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Rosa v. TCC Communications Inc.

United States District Court, S.D. New York

March 13, 2017

JOSEPH ROSA, Plaintiff,
v.
TCC COMMUNICATIONS, INC., et al., Defendants.

          OPINION AND ORDER

          WILLIAM H. PAULEY III, District Judge.

         Defendants TCC Wireless, LLC (“TCC Wireless”), TCC Holdco, Inc. (“Holdco”), and Javed Malik move to dismiss certain counts of the Third Amended Complaint. For the reasons that follow, their motions are denied in part and granted in part.

         BACKGROUND

         I. Procedural History

         The Third Amended Complaint in this action is the fourth iteration of a complaint seeking damages arising principally from Defendants' alleged breach of two agreements and the fraudulent conveyance of assets from which Plaintiff Joseph Rosa claims he should have been paid.

         On January 5, 2016, this Court granted in part and denied in part Defendants' motion to dismiss the Second Amended Complaint. See Rosa v. TCC Communications, Inc., 2016 WL 67729 (S.D.N.Y. Jan. 5, 2016). In that Order, this Court, among other things, granted Rosa leave to re-plead his fraud claims as fraudulent conveyance claims, and to re-assert allegations supporting successor liability against TCC Wireless and Holdco under the breach of contract claims. Separate from these motions to dismiss, Defendants TCCC, Shaher Ismail, and Malik filed answers responding to certain claims upon which their previous motions to dismiss were denied. (ECF Nos. 65 and 70.)

         Defendants TCC Wireless, Holdco, and Malik now move to dismiss the First, Fourth, and Sixth causes of action of the Third Amended Complaint-breach of contract, fraudulent conveyance, and New York Labor Law, respectively-on grounds that they fail to state a claim for relief. Holdco also seeks dismissal for lack of personal jurisdiction.

         II. Operative Facts

         The following facts are taken from the Third Amended Complaint and presumed to be true for purposes of resolving these motions. In 2003, Rosa began working with Ismail as a sales representative in charge of supporting Defendants' sales and marketing strategy in the long distance calling cards business. (TAC ¶¶ 21-22.) Beginning in 2009 and 2010, Rosa helped Ismail develop and implement a business plan to become a T-Mobile master dealer, a position that would provide them with exclusive access to T-Mobile's lucrative Preferred Retailer program. (TAC ¶¶ 26-28, 31-32.) Their efforts paid off. TCCC's operations as an exclusive T-Mobile Preferred Retailer increased its profits by approximately $30-40 million. (TAC ¶¶ 33, 35.)

         Ismail set his ambitions on expanding TCCC's operations, and tasked Rosa with overseeing the opening of new retail store locations in the Northeast United States. (TAC ¶ 36.) In March 2011, Ismail and Rosa entered into a partnership agreement regarding the expansion of the retail store business, providing Rosa a 25% interest in all new Northeast region T-Mobile retail stores, including New York (the “Partnership Agreement”). (TAC ¶¶ 37-38, Ex. 1.) Thereafter, Malik was brought in to oversee day-to-day operations of the retail stores so that Rosa could focus on opening additional stores in the Northeast. (TAC ¶ 43.) Around the end of 2012 and beginning of 2013, Ismail gave Malik an ownership interest in TCCC for his work in running the daily operations of the retail stores. (TAC ¶ 46.)

         Around 2013, Ismail began divesting TCCC of its corporate assets and transferred them to a new entity, TCC Wireless. (TAC ¶ 47.) The primary assets transferred to TCC Wireless were the T-Mobile retail stores in which Rosa maintained a 25% equity interest. (TAC ¶ 53.) TCC Wireless and TCCC used the same office as their principal place of business, employed the same employees, and utilized the same email addresses. (TAC ¶ 49.) They continued using TCCC's financial records to secure leases for T-Mobile retail stores, but amended the leases to reflect TCC Wireless as lessee. (TAC ¶¶ 49, 51.) Further, TCCC and TCC Wireless banking funds were commingled, but Ismail also diverted TCCC's income from T-Mobile into a separate account for TCC Wireless. (TAC ¶¶ 49-50.)

         In December 2014, TCC Wireless merged with a newly created entity, Holdco, and transferred its primary assets-including the Northeast region T-Mobile stores-to that entity. (TAC ¶¶ 52-53.) In January 2015, Holdco was sold to a third party for approximately $26 million. (TAC ¶¶ 52, 86.) Rosa alleges that the successive transfer of assets to TCC Wireless and Holdco-both of which operated as the “same continuing enterprise” as TCCC (TAC ¶ 55)-was done without his knowledge or consent (TAC ¶¶ 15-16) and designed to “circumvent defendants' financial obligations to” him. (TAC ¶ 54.)

         Rosa claims that he was never fully paid under the Partnership Agreement despite multiple requests for payment. (TAC ¶ 56.) He also claims that he was never fully paid under the Subscription Agreement dated September 2013, which was consummated to compensate him for his work in the sim-card business. (TAC ¶ 63.) Despite a payment of approximately $260, 000 in January 2015 and $55, 000 in 2014, Rosa alleges that he is still owed in excess of $400, 000 under the Subscription Agreement and his pro rata share of the monthly profits generated by the T-Mobile preferred retailer stores, which he estimates to be $700, 000-800, 000 per month. (TAC ¶¶ 79-85.)

         DISCUSSION

         I. Standard

         All factual allegations in the Third Amended Complaint are accepted as true, and all reasonable inferences are drawn in the Rosa's favor. Rescuecom Corp. v. Google Inc., 562 F.3d 123, 127 (2d Cir. 2009). The 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. 663, 678 (2009) (citation omitted). However, the claim must rest on “factual allegations sufficient to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). It must avoid “labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” Iqbal, 556 U.S. at 678.

         Further, any allegations sounding in fraud-like those in support of Rosa's fraudulent conveyance claim-must comport with the heightened pleading standard of Federal Rule of Civil Procedure 9(b), which provides that “[i]n all averments of fraud . . . the circumstances constituting the fraud . . . shall be stated with particularity.” Thus, in general “allegations of fraud based on information and belief do not satisfy the requirements of Rule 9(b), ” with the exception that “matters peculiarly within the knowledge of the opposing party” may be “made on information and belief” and a statement of facts on which such belief is founded. Cargo Partner AG v. Albatrans Inc., 207 F.Supp.2d 86, 116 (S.D.N.Y. 2002). While a “plaintiff need not demonstrate in his complaint that what he believes to be true is in fact true, he must present facts that show that his belief is not without foundation, that it is belief rather than irresponsible speculation.” Cargo Partner, 207 F.Supp. at 116.

         II. DCL § 276

         This Court previously observed that the core of Rosa's fraud allegations in the Second Amended Complaint implicated a claim for fraudulent conveyance and granted him leave to re-plead. Rosa, 2016 WL 67729, at *3. Under New York Debtor and Creditor Law § 276, “[e]very conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.” The DCL broadly defines a creditor as “a person having any claim, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent.” N.Y. Debt. and Cred. Law § 270. Creditor status arises “as soon as the cause of action accrued.” Bulkmatic Transport Co., Inc. v. Pappas, 2001 WL 882039, *11 ...


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