United States District Court, S.D. New York
MANHATTAN REVIEW LLC and JOERN MEISSNER, derivatively on behalf of Manhattan Review LLC, Plaintiffs,
TRACY YUN, MANHATTAN ENTERPRISE GROUP LLC d/b/a MANHATTAN ELITE PREP, and CHRISTOPHER KELLY, Defendants.
HONORABLE LEWIS A. KAPLAN, U.S.D.J.
REPORT AND RECOMMENDATION
C. FRANCIS IV UNITED STATES MAGISTRATE JUDGE
Review LLC ("Manhattan Review") and Dr. Joern
Meissner, suing derivatively on Manhattan Review's
behalf, bring this action alleging a variety of claims
stemming from Tracy Yun's formation and operation of
Manhattan Enterprise Group LLC, which does business as
Manhattan Elite Prep. The defendants have moved to dismiss
the Second Amended Complaint, and the plaintiffs have moved
for leave to file a third amended complaint. For the reasons
discussed below, I recommend that the motion to dismiss be
granted and that leave to amend be denied.
facts underlying the plaintiffs' claims are set forth in
my Report and Recommendation on the defendants' motion to
dismiss the First Amended Complaint. See Manhattan Review
LLC v. Yun, No. 16 Civ. 102, 2016 WL 6330474, at *1-2
(S.D.N.Y. Aug. 15, 2016). In March 2005, Dr. Meissner and Ms.
Yun formed Manhattan Review, a test-preparation business for
the Graduate Management Admission Test (“GMAT”).
(Second Amended Complaint (“SAC”), ¶¶
16, 20). Manhattan Review is a Delaware Corporation with its
principal place of business in New York. (SAC, ¶¶ 1
21). Mr. Kelly, an attorney admitted to practice in New York,
represented Dr. Meissner and Ms. Yun in the creation of
Manhattan Review, drafting an Operating Agreement and filing
the necessary paperwork for Manhattan Review to do business
in New York. (SAC, ¶ 23).
December 2011, following “several heated
exchanges” between Ms. Yun and Dr. Meissner
“rooted, in part, in [Ms.] Yun's misinterpretation
of their personal relationship, ” Ms. Yun took steps to
shut down Manhattan Review and establish a competitor without
Dr. Meissner's consent. (SAC, ¶¶ 38, 44). She
emptied most of the money out of Manhattan Review's bank
account and transferred two of its trademarks to herself.
(SAC, ¶¶ 50-52). On December 30, 2011, she executed
a Certificate of Cancellation of Manhattan Review, which she
filed with the Delaware Secretary of State on January 3,
2012. (SAC, ¶ 53). Mr. Kelly allegedly knew about Ms.
Yun's plans to shut down Manhattan Review and gave her
legal advice on how to misappropriate its assets and transfer
its trademarks to herself. (SAC, ¶¶ 74-84, 90-91).
January 3, 2012, Ms. Yun created Manhattan Enterprise Group
LLC, a Delaware corporation that she wholly owned. (SAC,
¶¶ 4, 55). She immediately commenced operations as
Manhattan Elite Prep, using Manhattan Review's assets,
intellectual property, trademarks, phone numbers, and
employees. (SAC, ¶¶ 56-57, 59). She directed
Manhattan Review's clients to Manhattan Elite Prep,
“blatantly copied” Manhattan Review's logo,
and marketed and sold Manhattan Review's copyrighted
materials. (SAC, ¶¶ 59-61). Since January 2012, Ms.
Yun and Manhattan Elite Prep have continued to sell books,
prep materials, and study guides that use Manhattan
Review's trademarks and copyrighted materials. (SAC,
Review asserts ten causes of action in the Second Amended
Complaint: (1) breach of fiduciary duty (against Ms. Yun);
(2) breach of contract (against Ms. Yun); (3) trademark
infringement, unfair competition, and false designation of
origin in violation of 15 U.S.C. § 1225(a) (against Ms.
Yun and Manhattan Elite Prep); (4) unfair competition
(against Ms. Yun and Manhattan Elite Prep); (5) infringement
in violation of New York statutory and common law (against
Ms. Yun and Manhattan Elite Prep); (6) aiding and abetting
breach of fiduciary duty (against Mr. Kelly); (7 & 8)
copyright infringement or contributory copyright infringement
(against all defendants); and (9 & 10) fraudulent
conveyance (against Ms. Yun and Manhattan Elite Prep). (SAC,
¶¶ 104-165). The Second Amended Complaint contains
an additional cause of action in which Dr. Meissner asserts
each of those claims derivatively on Manhattan Review's
behalf. (SAC, ¶¶ 166-175).
State Court Action
March 7, 2012, Dr. Meissner commenced an action in New York
State Supreme Court asserting individual claims and
derivative claims on behalf of Manhattan Review against Ms.
Yun and Manhattan Elite Prep. (Defendant Christopher
Kelly's Memorandum of Law in Support of His Motion to
Dismiss the Second Amended Complaint (“Kelly
Memo.”) at 6; Defendant Tracy Yun's Memorandum of
Law in Support of Motions to Dismiss Plaintiffs' Second
Amended Complaint (“Yun Memo.”) at 6;
Plaintiffs' Memorandum of Law in Opposition to
Defendants' Motions to Dismiss (“Pl. Memo.”)
at 8). On July 6, 2015, the court granted partial summary
judgment to Ms. Yun and Manhattan Elite Prep, dismissing all
of Dr. Meissner's derivative claims on the ground that he
lacked the capacity to sue on behalf of Manhattan Review
because he did not “successfully file a petition with
Delaware's Court of Chancery to nullify or rescind the
Certificate of Cancellation.” (Meissner v. Yun,
Index No. 650913/2012, at 6 (N.Y. Sup. Ct. July 6, 2015),
attached as Exh. C to Declaration of Tracy Yun dated Dec. 1,
2016 (“Yun Decl.”); Proposed Third Amended
Complaint (“Proposed TAC”), attached as Exh. A to
Declaration of Thomas P. Higgins dated Jan. 6, 2017,
thereafter, Dr. Meissner sought to revive Manhattan Review as
a Delaware corporation. On July 30, 2015, he paid Manhattan
Review's past due fees and charges and filed a
Certificate of Correction pursuant to the Delaware Limited
Liability Company Act, Del. Code Ann. tit. 6, § 18-211,
attesting that the Certificate of Cancellation filed by Ms.
Yun was not authorized by Manhattan Review. (Proposed TAC,
¶¶ 123-124). On August 3, 2015, the Delaware
Secretary of State issued a Certificate of Good Standing to
Manhattan Review. (Proposed TAC, ¶ 126). On August 12,
2015, Dr. Meissner filed a motion to renew, correct, and
vacate the July 6 Order based on Manhattan Review's newly
restored status as an entity in good standing in Delaware.
(Memorandum of Law in Support of Plaintiff's Motion for
Renewal and Related Relief at 2-3, Meissner, Index
No. 650913/2012 (N.Y. Sup. Ct. Aug. 12, 2015), attached as
Exh. D to Yun Decl.; Proposed TAC, ¶¶ 125-26). On
October 28, 2015, the court rejected Dr. Meissner's
motion on the ground that he “failed to demonstrate
that a Certificate of Good Standing is the equivalent of
nullifying or revoking the Certificate of Cancellation under
Delaware Law.”(Meissner, Index No. 650913/2012
(N.Y. Sup. Ct. Oct. 28, 2015), attached as Exh. E to Yun
Decl.; Proposed TAC, ¶ 127). Dr. Meissner has appealed
the July 6 and October 28 Orders to the Appellate Division,
First Department (Proposed TAC, ¶ 129), which has not
rendered a decision as of this writing.
The Instant Motions
defendants move to dismiss the Second Amended Complaint on
the following grounds: (1) the doctrines of res
judicata and collateral estoppel bar the plaintiffs'
claims; (2) the plaintiffs lack capacity to sue; (3) the
claims against Ms. Yun and Manhattan Elite Prep for trademark
infringement are deficiently pled; and (4) the claims against
Mr. Kelly for aiding and abetting breach of fiduciary duty
and copyright infringement are both time-barred and
deficiently pled. In connection with their motions to
dismiss, the defendants seek an award of attorneys' fees
and costs under the Copyright Act, 17 U.S.C. § 505, and
the Lanham Act, 15 U.S.C. § 1117.
plaintiffs move for leave to file a third amended complaint,
which adds a cause of action against Mr. Kelly for breach of
fiduciary duty but otherwise alleges the same causes of
action as the Second Amended Complaint. (Proposed TAC,
¶¶ 138-220). The Proposed Third Amended Complaint