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Deitrick v. Cibolo Capital Partners I, LLC

United States District Court, S.D. New York

March 28, 2018



          Edgardo Ramos, U.S.D.J.

         William Deitrick, Jr. brings this diversity action for breach of contract and tortious interference against Cibolo Capital Partners I, LLC (“Cibolo”) and TG LLC (“TG”) (collectively, “Defendants”). Before the Court is Defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted based on principles of collateral estoppel and res judicata, or, alternatively, Federal Rule of Civil Procedure 12(b)(3) for improper venue.[1] See Memorandum in Support of Defendants' Motion to Dismiss Plaintiff's Complaint (“Defs' Mem.”) (Doc. 14) at 1.

         For the reasons stated below, Defendants' motion to dismiss is DENIED.

         I. Procedural Background

         On December 1, 2015, Plaintiff brought an action in New York Supreme Court against these Defendants and the Gypsy Guitar Corporation (“Gypsy”) seeking to recover monetary damages pursuant to an Engagement Letter. See Deitrick v. The Gypsy Guitar Corp., 16 Civ. 616 (ER) (S.D.N.Y. Dec. 28, 2016) (“Deitrick I”). Defendants removed the action to the Southern District of New York on the basis of diversity jurisdiction on January 27, 2016. See Deitrick I, Notice of Removal, 16 Civ. 616 (Doc. 1) at 1. The Deitrick I Complaint alleged breach of contract, tortious interference, and unjust enrichment stemming from the same facts that are at issue here. Deitrick I, Complaint (Doc. 1-A) at 3-15. On March 11, 2016, Defendants Cibolo and TG[2] filed a motion to dismiss the Deitrick I Complaint pursuant to Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. See Deitrick I, Defendants Cibolo and TG's Motion to Dismiss (Doc. 22). Gypsy filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) on August 11, 2016. See Deitrick I, Defendant Gypsy's Motion to Dismiss (Doc. 40). On December 28, 2016, this Court granted Defendants Cibolo and TG's motion to dismiss without prejudice and denied Gypsy's motion to dismiss. See Deitrick I, Opinion and Order on Defendants' Motions to Dismiss (“Opinion and Order”) (Doc. 59). Thereafter, on June 4, 2017, Plaintiff filed the instant Complaint against Defendants Cibolo and TG, which Defendants now move to dismiss. See Plaintiff's Complaint (“Complaint”) (Doc. 1).

         II. Factual Background[3]

         Gypsy, a Tennessee corporation in the business of crafting high-end designer guitars, hired Plaintiff, a New York resident, as its exclusive agent “in connection with a private placement, or other financing of, or asset or stock sale by, Gypsy.” Complaint at ¶ 10. The parties executed a written agreement (the “Engagement Letter”) on July 9, 2013, pursuant to which Plaintiff was entitled to reimbursement for all fees and expenses incurred and to receive a “Placement Fee”-both sums to be paid contemporaneously with the closing of the anticipated transaction. Id. at ¶ 11. As an alternative to the Placement Fee, Gypsy agreed to pay Plaintiff a “Facilitation Fee, ” entitling Plaintiff to a percentage of both cash and the warrants of the total capital raised in any related transaction involving Gypsy and a client introduced by Plaintiff.[4] Id. at ¶ 12. A non-circumvention clause prohibited Gypsy from dealing directly with parties introduced to it by Plaintiff absent Plaintiff's written consent. Id. at ¶ 14. By its terms, the Engagement Letter automatically renewed for additional 12-month periods until Gypsy delivered written notice stating that the term would not be renewed. Id. at ¶ 15. Plaintiff claims that Gypsy has not provided him with written notice of its desire to terminate the agreement, and thus claims that the Engagement Letter is still in effect. Id.

         Acting pursuant to the Engagement Letter, Plaintiff prepared an eighty-one page offering memorandum, financial models, and a due diligence folder. Id. at ¶ 16. Plaintiff also traveled extensively to meet with investors on behalf of Gypsy, including Cibolo, a private equity investor in Texas. Id. After Cibolo expressed interest in Gypsy, Plaintiff and Cibolo entered into a non-disclosure agreement (“NDA”) to allow Cibolo to review Plaintiff's offering materials. Id. at ¶ 17. In pertinent part, the NDA, dated September 10, 2013, provided that Cibolo or any of its affiliates could not deal directly with Gypsy without Plaintiff's written consent. Id.

         The NDA also contained a forum selection clause, which is of particular significance here:

Any claim arising out of this Agreement or any transaction contemplated hereby shall be instituted in any state or federal court in the State of New York located in New York County, each party hereby irrevocably submits to the jurisdiction of such courts, and each party agrees not to assert, by way of motion, any defense or otherwise, in any such claim, that it is not subject personally to the jurisdiction of such court, that the claim is brought in an inconvenient forum, that the venue of the claim is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.

         Declaration of Matthew J. Press (“Press Decl.”) (Doc. 17), Ex. 3(b), Non-Disclosure Agreement (Doc. 17-7) at 4.

         After the parties signed the NDA, Cibolo entered into due diligence discussions with Plaintiff and Gypsy regarding the investment. Id. at ¶ 18. Plaintiff alleges that sometime thereafter, Win Purifoy, a manager at Cibolo, instructed Gypsy to exclude Plaintiff from the negotiations. Id. at ¶ 19. Plaintiff claims that he was not informed of this instruction and that he did not consent to the communication between Gypsy and Cibolo, but that despite his repeated requests, Cibolo and Gypsy continued their discussions without involving him, thereby breaching Article 7 of the Engagement Letter and Section 5 of the NDA.[5] Id. at ¶ 20-21.

         On October 10, 2013, Cibolo formed Cibolo Guitar Partners, which in turn, formed Teye Guitars, LLC, which later changed its name to TG. Id. at ¶ 22. Plaintiff alleges that Cibolo Guitar Partners is the sole member of TG, and Cibolo Guitar Partners and TG were formed with the intent to purchase Gypsy and evade their contractual obligations to Plaintiff. Id. at ¶ 22-23. On October 18, 2013, without Plaintiff's consent, Gypsy and TG executed an Asset Purchase Agreement (the “APA”), by which TG agreed to purchase the properties, rights, and assets used or useful in connection with Gypsy's design and construction of guitars. Id. at ¶ 24. Gypsy and TG also agreed to pay Plaintiff, at closing, a brokerage fee of $120, 000 plus 2.2222% fully-diluted ownership in TG. Id. at ¶ 25.

         That same day, on October 18, 2013, Gypsy and TG executed a promissory note & security agreement (“Promissory Note”), whereby TG lent $125, 000 to Gypsy, its creative director, Teije Wijnterp, and CEO, Evert Wilbrink, to pay the obligations owed to Plaintiff and specific working capital needs. Id. at ¶ 26. Wilbrink also entered into a separate employment agreement (also on October 18) to become the chief operating officer and director of business development at TG. Id. at ¶ 27. On October 30, 2013, Cibolo investors, Sanjay Chandra and TAFLUMA Partners, L.P., executed a commercial loan agreement & promissory note (“Commercial Agreement”) with TG in which they agreed to loan TG $800, 000 to pay its obligations, including those TG assumed when it acquired the assets of Gypsy. Id. at ¶ 28. Plaintiff alleges that, under the Commercial Agreement, Gypsy's first obligation was to satisfy the amount owed to Plaintiff; however, Plaintiff has yet to receive such payments. Id. On April 1, 2014, Wijnterp signed an employment agreement to become the chief executive officer and chief creative director of TG. Id. at ¶ 29.

         Approximately eight months later, on December 3, 2014, Plaintiff, through his attorneys, submitted a demand letter to Gypsy and TG seeking the money owed to him pursuant to the Engagement Letter. Id. at ¶ 33. On December 31, 2014, in response to the demand, Gypsy and TG entered into a settlement agreement, [6] providing, in pertinent part, that the parties never consummated the purchase transaction contemplated in the APA. Id. at ¶ 34. Moreover, Plaintiff alleges that the settlement agreement indicates that TG held legal title of Gypsy's property for approximately 14 months. Id. Plaintiff seeks compensatory damages for the amount owed to him under the Engagement Letter, including the Placement Fee, Facilitation Fee, business expenses, and interest. Id. at ¶ 35.

         III. Legal Standards

         A. Rule 12(b)(6) Motion to Dismiss

         Under Rule 12(b)(6), a complaint may be dismissed for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). When ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept all factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Koch v. Christie's Int'l PLC, 699 F.3d 141, 145 (2d Cir. 2012). However, the Court is not required to credit “mere conclusory statements” or “threadbare recitals of the elements of a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)); see also Id. at 681 (citing Twombly, 550 U.S. at 551). “To survive a motion to dismiss, a complaint must contain sufficient factual matter . . . to ‘state a claim to relief that is plausible on its face.'” Id. at 678 (quoting Twombly, 550 U.S. at 570). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). If the plaintiff has not “nudged [his] claims across the line from conceivable to plausible, [the] complaint must be dismissed.” Twombly, 550 U.S. at 570.

         Here, Defendants allege that the Complaint should be dismissed because it raises the same jurisdictional issues that were actually raised and decided in Deitrick I. See Defs' Mem. at 5. A 12(b)(6) motion “is appropriate when a defendant raises claim preclusion . . . and it is clear from the face of the complaint, and matters of which the court may take judicial notice, that the plaintiff's claims are barred as a matter of law.” Conompco, Inc. v. Roll Int'l, 231 F.3d 82, 87 (2d Cir. 2000); see also Swiatkowski v. Citibank, 745 F.Supp.2d 150 (E.D.N.Y. 2010) (granting a 12(b)(6) motion to dismiss on grounds of collateral estoppel and res judicata). Moreover, dismissal under 12(b)(6) is proper when the court has previously made a final jurisdictional determination. Insurance Corp. of Ir., Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694 (1982); see also Romulus v. United States, 983 F.Supp. 336, 343 (E.D.N.Y. 1997) (“[A] dismissal for lack of jurisdiction is preclusive as to the issue of jurisdiction.”). A motion to dismiss premised on personal jurisdiction requires the court to construe all evidence in the light most favorable to the plaintiff. DiStefano v. Carozzi N. America, Inc., 286 F.3d 81, 84 (2d Cir. 2001).

         B. Rule 12(b)(3) ...

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