United States District Court, S.D. New York
MEMORANDUM OPINION AND ORDER
GREGORY H. WOODS, United States District Judge.
Plaintiff Livewire Ergogenics Inc. executed a note (the
“Note”) with Third-Party Defendant American E
Group LLC (“AEG”) on the advice of its counsel,
Third-Party Defendant JS Barkats PLLC (“JSB”),
and Third-Party Defendant Sunny Joseph Barkats (together with
JSB, the “Barkats Defendants”). Livewire alleges
that the terms of the Note were unfair and that the Barkats
Defendants recommended that it accept the terms of the Note
only because it had undisclosed conflicts of interest with
AEG. Livewire pleads that these conflicts led the Barkats
Defendants to breach their fiduciary duties as attorneys to
Livewire. Livewire alleges that Third-Party Defendant Elana
Hirsch-Barkats' wife and AEG's principal
member-assisted the Barkats Defendants by concealing these
conflicts. Hirsch now moves to dismiss the third-party claims
against her. Because Livewire has plausibly alleged that the
Barkats Defendants breached their fiduciary duties to
Livewire and that Hirsch helped them do so by concealing the
conflicts between the Barkats Defendants and AEG,
Hirsch's motion to dismiss is DENIED.
November 3, 2015, Livewire entered into an agreement with JSB
for JSB to represent Livewire as legal counsel. TPC ¶
17. Barkats is “the managing partner of JSB.”
Id. ¶ 10. The agreement between JSB and
Livewire was “memorialized” in an engagement
letter (the “Engagement Letter”). Id.
¶ 17. In the Engagement Letter, the Barkats Defendants
“agreed to assist Livewire with financing.”
Id. “The Engagement Letter also contained the
following provision with respect to ‘Financing:'
[t]he firm will assist you with identifying sources of
financing to pay service providers and make sure the Company
is current with certain determined invoices, and will charge
a $4, 500 flat fee for securing such financing on your behalf
and review the terms of the not [sic], any conflicts shall be
properly be waived by You in the event the funds are procured
though another entity the firm may represent or partially
own. The Firm will negotiate terms with vendors and such
terms will not bound [sic] your Company but the financing
which will be made to you in the aggregate of approximatively
$50, 000 in value.
Id. ¶ 19. Soon after JSB and Livewire executed
the Engagement Letter, Livewire executed the Note with AEG.
Id. ¶ 24. Livewire alleges that the terms of
the Note were unfavorable to Livewire. Id. ¶
alleges that the Barkats Defendants committed various torts
against Livewire when they negotiated the terms of the Note.
Livewire alleges that these torts resulted from conflicts of
interest that the Barkats Defendants were subject to in
negotiating the terms of the Note. Livewire alleges that the
Barkats Defendants “represented Livewire in securing
the Note, while simultaneously owning and/or representing
AEG.” Id. ¶ 33. The TPC also alleges that
Livewire was never informed that the “funds procured
via the Note were from an entity (AEG) that JSB
represented[.]” Id. ¶ 20. Livewire
alleges that these conflicts led the Barkats Defendants to
recommend that it accept the terms of the Note,
notwithstanding the fact that these terms were unfavorable to
Livewire. Id. ¶ 45. Livewire alleges that as a
result of these conflicts, the Barkats Defendants breached
their fiduciary duties as attorneys to Livewire, id.
¶¶ 73-79, and committed legal malpractice,
id. ¶¶ 108-115.
alleges that Hirsch assisted the Barkats Defendants in
committing these torts by concealing their conflicts of
interest. The TPC alleges that Defendant Hirsch is married to
and shares a residence with Barkats. Id. ¶ 47.
Livewire also alleges that Hirsch is AEG's
“principal member.” Id. Livewire further
alleges that it was never informed that Barkats and Hirsch
“were AEG's only members.” Id.
¶ 20. The TPC alleges that Hirsch actively concealed
these conflicts by causing “the Note to identify
AEG's offices located at 300 East 93rd Street, New York,
New York 10128, when, in fact, AEG and JSB shared offices at
18 E. 41st Street, 19th Floor, New York, New York
10017.” Id. ¶ 87. Livewire alleges that
Hirsch did this to “deceiv[e] Livewire” by
concealing “the fact that AEG (and its principal) had
deep business and personal relationships with JSB and Mr.
Barkats.” Id. ¶ 86.
initiated this lawsuit to enforce the terms of the Note on
May 3, 2018, Dkt No. 1, and filed an amended complaint on May
10, 2018, Dkt No. 7. Livewire filed the TPC on April 10,
2019. Dkt No. 107. As against Hirsch, the TPC asserts claims
for aiding and abetting a breach of the fiduciary duty owed
to Livewire by the Barkats Defendants, TPC ¶¶
80-93, and for civil conspiracy, id. ¶¶
116-27. Hirsch filed the instant motion to dismiss on April
9, 2019. Dkt Nos. 104-05.
filed its opposition on April 24, 2019. Dkt Nos. 114-15.
Hirsch filed her reply on May 1, 2019. Dkt No. 116.
complaint must contain “a short and plain statement of
the claim showing that the pleader is entitled to
relief.” Fed.R.Civ.P. 8(a)(2). However, a defendant may
move to dismiss a plaintiff's claim for “failure to
state a claim upon which relief can be granted.”
Fed.R.Civ.P. 12(b)(6). In deciding a motion to dismiss under
Rule 12(b)(6), the court accepts as true all well-pleaded
factual allegations and draws all inferences in the
plaintiff's favor. See Palin v. N.Y. Times Co.,
933 F.3d 160, 165 (2d Cir. 2019) (quoting Elias v.
Rolling Stone LLC, 872 F.3d 97, 104 (2d Cir. 2017);
Chase Grp. Alliance LLC v. City of N.Y. Dep't of
Fin., 620 F.3d 146, 150 (2d Cir. 2010)). To survive a
motion to dismiss pursuant to Rule 12(b)(6), a complaint
“must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on
its face.'” Iqbal, 556 U.S. at 678
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)). A claim is facially plausible when a 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).
survive dismissal, the plaintiff must provide the grounds
upon which his claim rests through factual allegations
sufficient ‘to raise a right to relief above the
speculative level.'” ATSI Commc'ns, Inc. v.
Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007)
(quoting Twombly, 550 U.S. at 544). Although Rule 8
“does not require ‘detailed factual
allegations,' . . . it demands more than an unadorned,
Iqbal, 556 U.S. at 678. “A pleading that
offers ‘labels and conclusions' or ‘a
formulaic recitation of the elements of a cause of action
will not do.'” Id. (quoting
Twombly, 550 U.S. at 555). Determining whether a
complaint states a plausible claim is a
“context-specific task that requires the reviewing
court to draw on its judicial experience and common
sense.” Id. at 679.