United States District Court, S.D. New York
ELIAS WEXLER, ZERO INTERNATIONAL REALTY CO., INC., ZERO OHIO, LLC, ZERO AMERICA LATINA, LTD., ZERO ASIA PACIFIC LTD., ZERO EAST, LTD., 391 CONCORD AVENUE, INC., and ZERO REALTY NC LLC, Plaintiffs,
ALLEGION (UK) LIMITED, SCHLAGE LOCK COMPANY, LLC, and ALLEGION PLC, Defendants.
OPINION AND ORDER
Edgardo Ramos, U.S.D.J.
Wexler (“Wexler”), Zero International Realty Co.,
Inc. (“Zero Realty”), Zero Ohio, LLC (“Zero
Ohio”), Zero America Latina, Ltd. (“Zero
Latina”), Zero Asia Pacific Ltd. (“Zero
Asia”), and Zero East, Ltd. (“Zero East”)
brought this action against Allegion (UK) Limited
(“Allegion UK”) and Schlage Lock Company, LLC
(“Schlage”), alleging a host of state law claims.
On March 9, 2017, the Court granted in part and denied in
part Defendants' motion to dismiss, permitting Wexler to
proceed on his defamation claim and granting him leave to
replead his age discrimination claims, and granting Zero
Latina, Zero Asia, and Zero East leave to replead their
breach of contract claims. See Opinion and Order on
Defendants' Motion to Dismiss (the “March 2017
Order”) (Doc. 46). Plaintiffs filed an amended
complaint on April 28, 2017, naming Zero Realty NC, LLC
(“Zero NC”) and 391 Concord Avenue, Inc.
(“Concord”) as additional plaintiffs, naming
Allegion plc as an additional defendant, adding multiple new
claims, and dropping Wexler's prior age discrimination
and breach of employment contract claims. See Plaintiffs'
Amended Complaint (“Am. Comp.”) (Doc. 52).
Pending before the Court are: (1) Defendants' motion to
dismiss Counts One, Two, Four through Twelve, and Eighteen of
the Amended Complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6), and (2) Allegion plc's motion to
dismiss for lack of personal jurisdiction pursuant to Federal
Rule of Civil Procedure 12(b)(2). For the reasons discussed
below, Defendants' 12(b)(6) motion is GRANTED in part and
DENIED in part, and Allegion plc's 12(b)(2) motion is
is an entrepreneur and engineer who, for thirty-five years,
served as the President and CEO of Zero International, Inc.
(“Zero International”), a Bronx company
specializing in the manufacture and wholesale of door and
window fixtures, frames, weather-stripping, and acoustic and
fire-proof liners and seals. Am. Compl. ¶¶ 31-32,
35. The company earned the reputation as the “gold
standard” for high-quality door and window seals and
fixtures, having developed its own patented designs, created
its own specialized factory machinery, and devoted
significant resources to obtain high quality materials and
train factory workers. Id. ¶ 32. Under
Wexler's leadership, Zero International expanded its
operations from one small factory in the Bronx to an
international company with four factories in the United
States (including in Ohio and North Carolina), branches all
over the country, and sales in thirty-five countries around
the world. Id. ¶ 35. Throughout that expansion,
Wexler was committed to the Bronx community where the company
was founded, maintaining Zero International's
headquarters and main factory in the Bronx and employing
numerous local workers. Id.
has been published in trade magazines and has served as a
visiting lecturer at the Pratt Institute of Design, President
of the New York Society of Manufacturing Engineers, and
President of the New York Critical Manufacturing Sector
Coordinating Council. Id. ¶¶ 37-38. He was
a member of the Builders Hardware Manufacturers Association,
which advises and writes standards for the American National
Standards Institute. Id. ¶ 37. Wexler is also
the sole shareholder and President of Zero Realty and
Concord, the majority member and President of Zero Ohio and
Zero Realty NC, and the 51% shareholder and President of each
of Zero Latina, Zero Asia, and Zero East. Id.
2014, Allegion UK and Allegion plc (collectively,
“Allegion”) and Schlage approached Wexler and
expressed interest in acquiring Zero International through an
asset purchase transaction. Id. ¶ 40. Until
then, Wexler had not seriously considered selling the
company. Id. Wexler alleges that Anshu Mehrotra
(“Mehrotra”), Allegion's Vice President and
General Manager of Commercial Mechanical Business,
nonetheless enticed him with collateral benefits of the deal
for Wexler personally, beyond the economic benefits such a
transaction would bring him as the principal shareholder of
Zero International. Id. ¶ 41. For example,
Wexler and Mehrotra discussed Wexler's desire to continue
his leading statesman role in the industry so that he could
continue his teaching positions, speaking engagements, and
membership in various industry organizations. Id.
¶ 44. Mehrotra, on behalf of Allegion and Schlage,
assured Wexler that they would support and promote Wexler in
an “emeritus” role so that he could continue his
high-profile involvement in the industry, which would also
benefit Allegion. Id. ¶¶ 43-44. Mehrotra
also represented that Allegion would offer Wexler an honorary
“lifetime” position on an internal board of
directors for Allegion's U.S. commercial mechanical
division so long as Allegion sold Zero products. Id.
their discussions, Wexler also made it clear to Allegion and
Mehrotra that the success of Zero International was his
greatest career achievement and that his main priority was to
ensure that the company continued beyond his lifetime as a
leading company in the industry. Id. ¶ 45.
Mehrotra told Wexler that this was consistent with Allegion
and Schlage's interests and intent in acquiring the Zero
brand and product line, and assured him that Defendants would
maintain the high quality of Zero products. Id.
¶¶ 45, 71. Moreover, he represented that Defendants
intended to keep Zero International's workforce in the
Bronx, Ohio, and North Carolina. Id. ¶ 71.
on Mehrotra's assurances, Wexler agreed to negotiate an
asset purchase agreement (“APA”). Id.
¶ 46. According to the Amended Complaint, Wexler was so
pleased with Mehrotra and Allegion's representations that
he engaged in minimal negotiation over the purchase price.
Id. Following further negotiations on the structure
and terms of the agreement, Wexler and Defendants entered
into the APA, which governed the sale of substantially all of
Zero International's assets to Defendants. Id.
¶ 48. The parties executed the APA on February 19, 2015,
and the transaction closed on April 1, 2015. Id.
Pursuant to the APA, Defendants paid Wexler a fixed cash
purchase price in exchange for acquiring Zero
International's name, brand, product line, inventory,
designs, patents and other intellectual property, and its
factory machinery. Id. ¶ 49. The APA
contemplated that Defendants would continue to manufacture
and sell Zero products through a Schlage subsidiary, known as
Zero Group International (“New Zero”), wholly
owned and controlled by Schlage and indirectly by Allegion.
and Defendants also entered into various related agreements,
including an employment and non-compete agreements.
Id. ¶ 51. Wexler's employment agreement
provided that he would have the title of “President
Emeritus” of Zero Group. Id. ¶ 52. While
the agreement had an eighteen-month minimum term, Mehrotra
assured Wexler that Defendants intended to employ him until
he retired, and further assured him that even after
retirement, he would have the President Emeritus title and
Allegion board position for “life” so long as
Allegion carried Zero products. Id.
also entered into lease agreements with Zero Realty, Zero
Ohio, Zero Realty NC, and Concord allowing Schlage to use
facilities already in use by Zero International. Id.
¶¶ 54- 55. Additionally, Wayne Bewley, an Allegion
product manager, convinced Wexler to retrofit a new building
he had acquired in Burgaw, North Carolina (the “Burgaw
facility”) so that Allegion and Schlage could use it.
Id. ¶ 58. Although Wexler already had a factory
in Wallace, North Carolina used by Zero, Bewley told him that
the head of Allegion's Americas Division maintained a
summer home thirty miles from Burgaw, and assured him that if
he moved the Zero operation to Burgaw, Defendants would enter
into a 40-year lease for the facility. Id. ¶
59. Wexler agreed and undertook the significant expense of
retrofitting the Burgaw facility. Id. ¶ 61.
Defendants never reimbursed Wexler for the costs of
retrofitting. Id. The lease agreements for all of
the facilities leased by Schlage, including the Burgaw
facility, were subject to two-year terms, renewable in
two-year increments. Id. Wexler alleges that even
though the written lease agreements were for two-year terms,
Bewley assured him that this was merely a standard term
required by Allegion's internal policies and that
Defendants intended to lease the facilities long term.
Id. ¶¶ 56, 61.
also agreed to assume contractual relationships that Zero
International had with its overseas distributors, Zero Asia,
Zero Latina, and Zero East (collectively, the
“Distributor Plaintiffs”). Id. ¶
62. Prior to the APA, Zero International had exclusive
contracts with each of the Distributor Plaintiffs, which it
provided to Defendants. Id. ¶ 63. After the APA
closed, Mehrotra and Bewley, as Defendants' agents, told
Wexler, as the distributors' representative, that
Defendants agreed to use the Distributor Plaintiffs as the
exclusive distributors for New Zero on the same terms as had
been previously set forth in their written contracts with
Zero International concerning exclusivity, territory, pricing
and commissions, and payment terms. Id. ¶ 64.
According to Wexler, the parties further agreed that the
contract period for each Distributor Plaintiff would last for
so long as Defendants sold Zero products in the
distributor's respective region. Id.
alleges that shortly after the close of the APA, Defendants
“began to reveal their true intention.”
Id. ¶ 82. He alleges that in the early summer
of 2015, Defendants began to ignore his advice about managing
the affairs of New Zero, and almost entirely stopped
communicating with him by mid-summer. Id. ¶ 84.
Around that same time, Defendants also began planning to lay
off Zero's workforce in the Bronx and other factories in
the U.S. and began preparing to close its U.S. factories
altogether. Id. ¶ 85. On the morning of
September 17, 2015, Mehrotra traveled to Wexler's office
in the Bronx, accompanied by Schlage's head of human
resources and two security guards. Id. ¶ 87.
Mehrotra told Wexler that he was fired, and after giving him
a few minutes to gather whatever belongings he could carry,
the security guards escorted him from the building, as his
friends and colleagues watched. Id. After Wexler had
been removed from the premises, Defendants assembled New
Zero's employees and told them that Wexler had been
terminated because of something he allegedly did in the
office. Id. ¶ 88. They instructed the employees
that they were not permitted to talk to Wexler or his family.
alleges that Defendants defamed him by falsely informing
prominent members of the acoustical, fireproofing, and
door-hardware industries that Wexler's work for
Defendants had been unsatisfactory. Id. ¶ 94.
Wexler also alleges that Defendants informed these industry
leaders that he was escorted out of the building after his
firing, suggesting that he was dishonest and unworthy of
continued employment. Id. Wexler contends that
Defendants never expressed dissatisfaction with his work and
later sent him a letter stating that he had been terminated
without cause as part of a general “reduction in
force.” Id. ¶ 95.
alleges that Defendants further defamed him when they sent a
marketing bulletin entitled “Zero International Product
Availability Update” to Zero customers and industry
members in December 2016 (the “December 2016
Bulletin”). Id. ¶ 97. Wexler asserts that
the bulletin falsely claimed that Zero products developed
under Wexler had “quality issues” and that the
“old Zero management” had acted unethically by
circumventing proper safety and quality review of products he
rushed to market. Id. ¶ 98. According to
Wexler, Defendants derisively called these products
“Engineered Specials, ” advising customers that
they were so defective that Allegion was pulling them from
the market pending review and redesign. Id. Wexler
claims that the false statements in the bulletin impugned his
ethics, honesty, and integrity. Id. ¶ 102.
Moreover, Wexler asserts, Defendants' overall conduct
damaged his reputation and interfered with his future
business prospects. Id. ¶¶ 121-126. Since
his employment with New Zero was terminated, Wexler has been
stripped of his membership in various industry organizations,
and has lost his ability to continue speaking and teaching
engagements and to serve as a credentialed expert in the
industry. Id. ¶¶ 123-124.
2016, Defendants had fired nearly all of the Zero employees
in the Bronx and elsewhere in the U.S., and moved Zero's
headquarters to Indiana, where Schlage is located.
Id. ¶ 89. Wexler asserts that, in addition to
gutting Zero's work force, Defendants physically
destroyed Zero's factory machinery, which had been
developed, designed, and calibrated by Zero International to
make its unique high quality door/window seals and
weather-stripping. Id. ¶ 90. Allegion personnel
physically smashed the machines, rendering them inoperable
and irreparable. Id. ¶ 91. In March 2017,
Schlage notified that it would not renew its lease of the
various facilities it had leased from Zero Realty, Zero Ohio,
and Zero NC, including the Burgaw facility. Id.
¶¶ 104, 107. Defendants also failed to use the
Distributor Plaintiffs as their exclusive distributors for
Zero products in the distributors' regions. Id.
February 29, 2016, Wexler, the Distributor Plaintiffs, Zero
Realty, and Zero Ohio brought this action against Allegion UK
and Schlage in New York State Supreme Court, Bronx County,
alleging age discrimination, defamation, breach of various
contracts, including Wexler's employment contract and the
oral distributor contracts with Zero Latina, Zero Asia, and
Zero East, unjust enrichment, and conversion. Doc. 2. On
March 28, 2016, Defendants removed the case to this Court on
the basis of diversity jurisdiction. Id. On November
9, 2016, the Court denied Plaintiffs' motion to remand
the case back to state court. Doc. 36.
March 9, 2017, the Court granted in part and denied in part
Defendants' motion to dismiss, permitting Wexler to
proceed on his defamation claim and granting him leave to
replead his age discrimination claims, and granting the
Distributor Plaintiffs leave to replead their breach of
contract claims. See March 2017 Order. Plaintiffs filed an
amended complaint on April 28, 2017, naming Zero NC and
Concord as additional plaintiffs and naming Allegion plc as
an additional defendant. See Am. Comp. The Amended Complaint
dropped Wexler's age discrimination claim and breach of
contract claim arising from his employment contract, and
added various new state law claims. Id.
before the Court is Defendants' partial motion to dismiss
Plaintiffs' claims for fraudulent inducement (Count One);
tortious interference (Count Two); defamation based on the
December 2016 bulletin (Count Four); breach of contract based
on Wexler's honorary board position (Count Five); breach
of the contracts with the Distributor Plaintiffs (Counts Six,
Seven, and Eight); promissory estoppel based on
Defendants' promise to continue using the Distributor
Plaintiffs as exclusive distributors (Counts Nine, Ten, and
Eleven); promissory estoppel based on Defendants' promise
to lease the Burgaw facility for decades (Count Twelve); and
unjust enrichment (Count Eighteen). Doc. 67. Also pending
before the Court is Allegion plc's motion to dismiss for
lack of personal jurisdiction. Id.
Rule 12(b)(2) Motion to Dismiss: Lack of Personal
plaintiff opposing a motion to dismiss under Rule 12(b)(2)
for lack of personal jurisdiction has the burden of
establishing that the court has jurisdiction over the
defendant.” BHC Interim Funding, LP v. Bracewell
& Patterson, LLP, No. 02 Civ. 4695 (LTS) (HBP), 2003
WL 21467544, at *1 (S.D.N.Y. June 25, 2003) (citing Bank
Brussels Lambert v. Fiddler Gonzalez & Rodriguez,
171 F.3d 779, 784 (2d Cir. 1999)). To meet this burden, the
plaintiff must plead facts sufficient for a prima facie
showing of jurisdiction. Whitaker v. Am. Telecasting,
Inc., 261 F.3d 196, 208 (2d Cir. 2001). The court
construes all of the plaintiff's allegations as true and
resolves all doubts in its favor. Casville Invs., Ltd. v.
Kates, No. 12 Civ. 6968 (RA), 2013 WL 3465816, at *3
(S.D.N.Y. July 8, 2013) (citing Porina v. Marward
Shipping Co., 521 F.3d 122, 126 (2d Cir. 2008);
Martinez v. Bloomberg LP, 883 F.Supp.2d 511, 513
(S.D.N.Y. 2012)). “However, a plaintiff may not rely on
conclusory statements without any supporting facts, as such
allegations would lack the factual specificity necessary to
confer jurisdiction.” Art Assure Ltd., LLC v.
Artmentum GmbH, No. 14 Civ. 3756 (LGS), 2014 WL 5757545,
at *2 (S.D.N.Y. Nov. 4, 2014) (internal quotation marks and
Rule 12(b)(6) Motion to Dismiss: General Legal
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, 699 F.3d at 145. However, the Court is not required to
credit “mere conclusory statements” or
“[t]hreadbare 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)). “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. (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.
Wexler's Fraudulent ...