Opinion
No. 500478/12.
2013-02-13
LOPINYUKELIS II, LLC, Plaintiff, v. MERCHANT CAPTIAL FUNDING, LLC, Merchant Capital Funding, LLC d/b/a EZ Business Funding Universal Payment Systems, LLC, Benchmark Merchant Solutioins, LLC, Boris Fidler, and Lawrence Pross, Defendants.
Shapiro Tamir Law Group, PLLC, New York, NY, for Plaintiff. Kramer & Shapiro, Kew Gardens, NY, for Defendant.
Shapiro Tamir Law Group, PLLC, New York, NY, for Plaintiff. Kramer & Shapiro, Kew Gardens, NY, for Defendant.
DAVID SCHMIDT, J.
The following papers numbered 1 to 14 read herein:
+-----------------------------------------------------------------------------+ ¦Papers ¦Numbered ¦ +------------------------------------------------------------------+----------¦ ¦Notice of Motion/Order to Show Cause/Petition/Cross Motion and ¦1–5 ¦ ¦Affidavits (Affirmations) Annexed ¦ ¦ +------------------------------------------------------------------+----------¦ ¦Opposing Affidavits (Affirmations) ¦6–11 ¦ +------------------------------------------------------------------+----------¦ ¦Reply Affidavits (Affirmations) ¦12–14 ¦ +------------------------------------------------------------------+----------¦ ¦Affidavit (Affirmation) ¦ ¦ +------------------------------------------------------------------+----------¦ ¦Other Papers ¦ ¦ +-----------------------------------------------------------------------------+
Upon the foregoing papers, defendants Merchants Capital Funding, LLC, (MCF), Merchant Capital Funding, LLC, d/b/a EZ Business Funding (MCF d/b/a EZBF), Universal Payment Systems, LLC, (Universal), Benchmark Merchant Solutions, LLC, (Benchmark), Boris Fidler and Lawrence Pross move for an order: (1) pursuant to CPLR 3211(a) dismissing the complaint against Fidler, Pross, MCF d/b/a EZBF, and Benchmark on the ground that the complaint fails to state a cause of action against those defendants; or, in the alternative, (2) pursuant to CPLR 3212, granting summary judgment and dismissing the complaint as against Fidler, Pross, MCF d/b/a EZBF, and Benchmark.
The motion is granted to the extent that, pursuant to CPLR 3211(a), the complaint is dismissed as against Benchmark and that the first through ninth causes of action in the complaint are dismissed as against Fidler and Pross. The motion is denied with respect to MCF d/b/a EZBF and denied with respect to the ninth through thirteenth causes of action against Fidler and Pross.
Plaintiff Lopinukelis II, LLC, alleges that MCF failed to pay money owed under the Revenue Sharing Agreement dated June 28, 2010 (Agreement) entered into between plaintiff and MCF and that MCF and the other defendants damaged plaintiff's business by making misrepresentations and by interfering with current and potential clients of plaintiff. It is undisputed that MCF is a domestic limited liability company that provides cash advances against a company's credit card receivables and/or against future bank deposits.
Plaintiff is a sales organization that, under the Agreement, agreed to provide clients for MCF in return for a commission. While MCF denies that it is registered to do business as EZ Business Funding, MCF concedes that it operates website with a URL ezbusinessfunding.com. Benchmark provides credit card processing services, and, under an agreement with MCF, provides such services for business MCF submits to Benchmark. Fidler and Pross are employees and/or members of MCF and are also alleged by plaintiff to be among the owners of Benchmark.
Plaintiff also alleges that MCF has continued its business under the name Universal Payment Systems, LLC. As no motion is made with respect to Universal, there is no need to address this allegation.
In June 2010, MCF entered the Agreement with plaintiff in which plaintiff agreed to obtain business clients for MCF and MCF agreed to pay plaintiff 75 percent of all gross revenue generated by the clients obtained by plaintiff, to disclose gross revenue on these transactions to plaintiff within certain time periods, pay plaintiff within certain time periods, and supply copies of its revenue sharing agreements with its revenue sharing partners (Agreement § 1). The Agreement further provided that this commission would increase to 80 percent of all such gross revenue if the gross revenue from plaintiff's clients reached $15,000 per month (Agreement § 1). As is relevant here, the Agreement also provided that: (1) plaintiff could not send cash advance deals to entities other than MCF unless agreed to in writing by both parties (Agreement § 1); (2) that the Agreement would continue unless it was canceled by either party upon 60 days written notice (Agreement § 3); (3) that plaintiff is an independent contractor and that no fiduciary relationship exists between plaintiff and MCF with respect to the subject matter of the agreement (Agreement § 5); and (4) that the Agreement constitutes the entire agreement between plaintiff and MCF and that “no modification, amendment, waiver, termination or discharge of this Agreement, or any provision hereof, shall be binding upon wither party unless confirmed by a written instrument signed by the party to be charged” (Agreement § 6).
In an affidavit, Gleb Yukelis, plaintiff's managing member, states that MCF gave plaintiff merchant application forms so that plaintiff could sign up customers directly with Benchmark with respect to the credit card accounts. According to Yukelis, Benchmark would accept and process these applications submitted by plaintiff.
Yukelis asserts that, in August 2011, plaintiff contemplated cancelling the Agreement based on MCF's failure to timely disclose revenue amounts, failure to timely pay plaintiff in full, failure to timely supply copies of revenue sharing agreements, and failure to pay penalties for its late payments and late delivery of documents. At a meeting held in August 2011, Yukelis asserts that Pross and Fidler, who Yokelis understood to be owners/employees of MCF, stated that they did not want plaintiff to end its relationship with MCF, and asserted that MCF would catch up on late payments and would begin making payments earlier. Yukelis, however, told Pross and Fidler that he wanted Benchmark to pay plaintiff directly and that he wanted a new written agreement to be signed by Pross and Fidler and by Benchmark. Pross and Fidler represented to Yukelis that they owned a 25 percent share of Benchmark, that they could speak for Boruch Greenberg, the managing member of Benchmark, and that they agreed to such an arrangement.
Until a written agreement was finalized, Pross and Fidler told Yukelis that plaintiff would be paid 85 percent of the gross residuals (credit card advance accounts) directly from Benchmark.
Yukolis states that thereafter he overheard on conversation between plaintiff's referral partner and Greenberg, and participated in another conversation, in which Greenberg did not confirm or deny that Fidler and Pross were part owners of Benchmark or that they had authority to negotiate on Benchmarks behalf.
Plaintiff refers to this 85 percent commission arrangement as the “interim agreement.”
It is these assertions that apparently form the basis for plaintiff's allegation in the complaint that “Benchmark was aware of these representations [about a new agreement] and acquiesced and participated in the intentional misrepresentations made to [plaintiff] in an attempt to fraudulently induce [plaintiff] to continue doing business with Defendants” (Complaint ¶ 39).
Yukolis asserts that in October and November 2011, “plaintiff was paid at the rate of 85% on the Residual accounts it boarded with Defendant Benchmark.” Notably, however, Yukolis does not state whether these payments were made by MCF or by Benchmark. In the affidavit, Yukolis mentions having a meeting in September 2011 with Fidler about arranging for direct payments, and in a subsequent paragraph of the affidavit states that “at a later point in negotiations, when I was seeking a higher Residual payment rate from Defendant Benchmark.” Yukolis, however, makes no assertion that any final agreement was ever reached with Fidler or Pross. Thereafter, in November 2011, MCF stopped making payments due to plaintiff. In the complaint, plaintiff asserts that it relied on these promises to enter into a new agreement, and did not terminate its relationship with MCF and suffered damages by foregoing opportunities to enter into business relationships with other entities.
In addition to these claims relating to the promises to enter into a new agreement, plaintiff alleges that defendants interfered with current and potential business relations by falsely representing that plaintiff exclusively worked for defendants. In addition, plaintiff asserts that on January 16, 2012, an employee of MCF named Karima told a employee of one of plaintiff's customers that plaintiff is “responsible for over billing.” On January 18, 2012, this same MCF employee told an employee of another of plaintiff's customers that plaintiff “are scam artists who rip them off and we [presumably plaintiff] are responsible for over billing” and, that same day told an employee of the another customer that plaintiff is “responsible for over billing.” Plaintiff alleges that each of the defendants was “aware of, acquiesced and approved of the defamation of” plaintiff.
Based on these factual allegations, plaintiff has pled causes of action for breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, tortious interference with contract, tortious interference with current business relationships, tortious interference with prospective business relationships, promissary estoppel, conversion, unjust enrichment, libel, slander, defamation per se, and trade libel.
It is in this context that the movants have moved to dismiss for failure to state a cause of action (CPLR 3211[a][7] ). In considering a motion to dismiss for failing to state a cause of action, the pleading is to be afforded a liberal construction (CPLR 3026), and the court should accept as true the facts alleged in the complaint, accord plaintiff the benefit of every possible inference, and only determine whether the facts, as alleged, fit within any cognizable legal theory ( see Hurrell–Harring v. State of New York, 15 NY3d 8, 20 [2010];Leon v. Martinez, 84 N.Y.2d 83, 87–88 [1995] ). In addition, “a court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint and the criterion is [then] whether the proponent of the pleading has a cause of action, not whether he [or she] has stated one” (Leon, 84 N.Y.2d at 88 [internal citations and quotation marks omitted]; see also Young v. Campbell, 87 AD3d 692, 693 [2d Dept 2011], lv denied18 NY3d 801 [2011] ).
MCF d/b/a EZBF
Initially, with respect to MCF d/b/a EZBF, counsel for defendants argues that there is no legal entity named EZ Business Funding and that, as such, there is no basis to include EZ Funding as a defendant in the action. MCF, however, concedes that it runs the EZ Business Funding website and MCF has not moved to dismiss the action as against it. Under these circumstances, the appellation MCF d/b/a EZBF only serves as an additional identification of MCF, and accords no basis for dismissal or for alteration of the caption ( see In re Golden Distributers, LTD, v. Garced, 134 BR 766, 769 [Bankr SDNY 2010]; see also Victor Auto Parts, Inc. v. Cuva, 148 Misc.2d 349, 350–351 [Sup Ct Monroe County 1990] ).
BENCHMARK
On the other hand, plaintiff's complaint and the affidavits submitted by plaintiff fail to show any basis for holding Benchmark liable on any of the legal theories in the complaint. The only agreement alleged to have been entered into with Benchmark was what plaintiff refers to as the “interim agreement,” in which Fidler and Pross, who plaintiff claims asserted that they were authorized to speak on the behalf of Benchmark, agreed that Benchmark would pay plaintiff directly at the 85 percent commission rate. Assuming that Fidler and Pross had authority to enter into the agreement,
plaintiff only alleges that they reached the oral “interim agreement” and essentially concedes that the parties contemplated reaching a formalized written agreement. No such formal agreement was ever reached after further negotiations. Under such circumstances, the parties only entered into an agreement to agree, which is unenforceable ( see Miranco Contr. Inc. v. Perel, 29 AD3d 873, 874 [2d Dept 2006]; Frankel v. Ford Leasing Dev. Co., 7 AD3d 757, 758 [2d Dept 2004]; Maffea v. Ippolito, 247 A.D.2d 366, 367 [2d Dept 1998]; see also Brown v. Cara, 420 F3d 148, 153 [2d Cir2005]; but see Emigrant Bank v. UBS Real Estate Sec., Inc., 49 AD3d 382, 383–384 [2008] ).
The court notes that Benchmark also moves for summary judgment and has submitted affidavits from Fidler, Pross and Greenberg in which they deny that Fidler and Pross were owners of Benchmark, had authority to negotiate on Benchmark's behalf or entered into any agreement on the behalf of Benchmark. To the extent that Yukelis' allegations relating to Greenberg's non-committal responses regarding to Fidler and Pross' authority to speak for Benchmark may be enough to demonstrate a factual issue with respect to whether Fidler and Pross had apparent authority from Benchmark to enter into an agreement with plaintiff ( see Hallock v. State of New York, 64 N.Y.2d 224, 231 [1984];Merrell–Benco Agency, LLC v. HSBC Bank USA, 20 AD3d 605, 607–609 [3d Dept 2005], lv denied6 NY3d 742 [2005];cf. 1230 Park Assoc., LLC v. Northern Source, LLC, 48 AD3d 355, 355–356 [1st Dept 2008] ), plaintiff's allegations, as discussed herein, nevertheless still fail to demonstrate the existence of a cause of action against Benchmark.
In addition, absent allegations that it was Benchmark, rather than MCF, that made the payments at the 85 percent rate in October and November, there is nothing to suggest that Benchmark deemed the interim agreement in effect ( cf. Frankel, 7 AD3d at 757). Plaintiff also has not alleged that the parties reached an agreement with respect to the duration of the “interim agreement,” and, at most, plaintiff has alleged that Benchmark agreed to pay the 85 percent rate during the course of negotiations that would lead to a written agreement. Since these negotiations broke down by November, plaintiff has failed to identify any grounds that would have required Benchmark to continue making payments to plaintiff.
Plaintiff has also failed to identify any agreement that would have required Benchmark to continue negotiating with plaintiff or that imposed any duties with respect to such negotiations ( cf. Brown, 420 F3d at 157–158). As such, plaintiff cannot state a claim for breach of any covenant of good faith and fair dealing (Prospect St. Ventures I, LLC v. Eclipsys Solutions Corp., 23 AD3d 213, 213 [1st Dept 2005]; Kindler v. Newsweek, Inc., 277 A.D.2d 159, 160 [1st Dept 2000] ). Similarly, without any agreement, plaintiff cannot have detrimentally relied upon any alleged promises by Benchmark, precluding plaintiff's promissary estoppel claim (Prospect St. Ventures I, LLC, 23 AD3d at 214). In any event, the alleged refusal by Benchmark to reach an agreement to pay plaintiff directly constitutes an uncertain prospective benefit that is not sufficiently unconscionable to warrant the application of the doctrine of promissory estoppel ( see AHA Sales, Inc. v. Creative Bath Prods., Inc., 58 AD3d 6, 8 [2d Dept 2008]; Country–Wide Leasing Corp. v. Subaru of Am., 133 A.D.2d 735, 736 [2d Dept 1987], lv denied70 N.Y.2d 615 [1988] ).
Given that plaintiff's allegations show nothing more than an arms-length business relationship between plaintiff and Benchmark, plaintiff has no breach of fiduciary duty claim against Benchmark ( see Surge Licensing v. Copyright Promotions, 258 A.D.2d 257, 258 [1st Dept 1999]; Sanshoe Trading Corp. v. Mitsubishi International Corp., 122 Misc.2d 585, 587 [Sup Ct, New York County 1984], affd104 A.D.2d 337 [1st Dept 1984]; Rodgers v. Roulette Records, Inc., 677 F.Supp 731, 738–739 [SDNY 1988]; cf. AHA Sales, Inc., 58 AD3d at 9). Plaintiff has no unjust enrichment claim against Benchmark because, despite any benefit Benchmark may have obtained as a result of plaintiff's services, plaintiff performed its services at the behest of MCF, not Benchmark ( see Kagan v. K–Tel Entertainment Inc., 172 A.D.2d 375, 376–377 [1st Dept 1991]; see also Branch Services, Inc. v. Cooper, 102 AD3d 645, 2013 N.Y. Slip Op 00058 * 3 [2d Dept 2013]; Ehrlich v. Froehlich, 72 AD3d 1010, 1011 [2d Dept 2011] ). Plaintiff does not have a conversion claim, because it has failed to allege grounds showing that Benchmark was required to pay plaintiff. In any event, plaintiff's conversion claim is also without merit because it has merely alleged the right to payment from Benchmark, and does not allege that plaintiff ever had ownership, possession or control of the money at issue ( see Peters Griffin Woodward, Inc. v. WCSC, Inc ., 88 A.D.2d 883, 884 [1st Dept 1982]; see also Zendler Constr. Co ., Inc. v. First Adj. Group, Inc., 59 AD3d 439, 440–441 [2d Dept 2009] ).
The remaining causes of action against Benchmark alleged in the complaint likewise do not allow for recovery from Benchmark. The factual basis for the tortious interference with contract and tortious interference with current and potential business relations (fourth through sixth causes of action) is plaintiff's allegation that defendants interfered with these relation by falsely representing that plaintiff exclusively works for defendants. The libel, slander and defamation (tenth through thirteenth causes of action) are based on plaintiff's allegations that an MCF employee informed plaintiff's customers that plaintiff over bills. Plaintiff, however, has failed to identify any connection between these acts and Benchmark.
Plaintiff attempts to overcome the deficiencies in its allegations against Benchmark by arguing that plaintiff acted as an implied or apparent agent of Benchmark by signing up credit card customers directly with Benchmark on Benchmark's application forms. While such acts might have rendered plaintiff an implied or apparent agent of Benchmark with respect to the customers, such an agency does not allow plaintiff to recover from Benchmark in the absence of a contractual relationship with Benchmark or any allegation that plaintiff performed its services at the behest of Benchmark rather than MCF ( see Kagan, 172 A.D.2d at 376–377;see also Branch Services, Inc., 2013 N.Y. Slip Op 00058 * 3;Ehrlich, 72 AD3d at 1011;cf. Reese v. Texas Co., 266 App.Div. 550, 556 [1st Dept 1943], affd292 N.Y. 583 [1944] ).
Alternatively, plaintiff alleges that Benchmark is an alter-ego of MCF. Plaintiff's conclusory allegations that Benchmark is an alter ego of MCF fail to justify piercing the corporate veil ( see AHA Sales, Inc., 58 AD3d at 10;Goldman v. Chapman, 44 AD3d 938, 939, 939–940 [2d Dept 2007], lv denied10 NY3d 702 [2008] ), particularly in the absence of allegations that Benchmark abused the privilege of operating in the corporate form in order to commit a wrong against plaintiff ( see 210 86th Street Corp. v. Grasso, 305 A.D.2d 156 [1st Dept 2003]; Matter of Island Seafood Co. v. Golub Corp., 303 A.D.2d 892, 895 [3d Dept 2003]; Seuter v. Lieberman, 229 A.D.2d 386 [2d Dept 1996] ).
In sum, plaintiff has failed to demonstrate that it has a viable cause of action against Benchmark. As such, Benchmark is entitled to dismissal of the complaint as against it pursuant to CPLR 3211(a)(7) .
As Benchmark is entitled to dismissal of the complaint under CPLR 3211(a)(7), the court has not addressed Benchmark's alternative request for summary judgment.
FIDLER AND PROSS
Fidler and Pross assert that they may not be held liable because all their interactions with plaintiff were conducted in their role as corporate officers or employees of MCF. The complaint does not allege that Fidler or Pross entered into any agreement with plaintiff in their individual capacities, and Fidler and Pross have submitted their own affidavits in which they state their interactions with plaintiff were conducted in their corporate capacities. Fidler and Pross' actions on the behalf of the MCF do not render them individually liable for breach of contract, breach of the covenant of good faith and fair dealing and unjust enrichment ( see Sound Communications, Inc. v. Rack & Roll, Inc., 88 AD3d 523, 523–524 [1st Dept 2011]; Stern v. H. Dimarzo, Inc., 77 AD3d 730, 731 [2d Dept 2010] ). For the reasons noted above with respect to Benchmark, plaintiff simply does not have an action against Fidler and Pross for breach of fiduciary duty, promissary estoppel and conversion. Finally, plaintiff's conclusory allegations fail to justify piercing the corporate veil to reach Fidler and Pross ( see AHA Sales, Inc., 58 AD3d at 10;Goldman, 44 AD3d at 939–940;Vitale v. Steinberg, 307 A.D.2d 107, 110–111 [1st Dept 2003] ), particularly in the absence of allegations that Fidler and Pross abused the privilege of operating in the corporate form in order to commit a wrong against plaintiff ( see Refreshment Mgt. Servs., Corp. v. Complete Off. Supply Warehouse Corp., 89 AD3d 913, 915 [2d Dept 2011]; Sound Communications, Inc., 88 AD3d at 524;210 86th Street Corp., 305 A.D.2d at 156).
Plaintiff has also failed to demonstrate that it has a tortious interference claim against Fidler and Pross. The conclosury allegations that defendants interfered with contracts and business relations without specifying which contracts or relations were affected by defendants' conduct are simply insufficient to state a cause of action for interference with contracts or business relations ( see Ferrandino & Son, Inc. v. Wheaton Bldrs., Inc., LLC, 82 AD3d 1035, 1036 [2d Dept 2011] ). Moreover, defendants alleged wrongful act of informing the customers that plaintiff worked exclusively for MCF would appear to be a truthful statement in light of the Agreement's restriction on plaintiff sending residual or cash advance deals to other entities, especially in the absence of any allegation that plaintiff engaged in business other than that covered by the Agreement ( see NBT Bancorp v. Fleet/Norstar Fin. Group, 87 N.Y.2d 614, 624–625 [1996];Lo Presti v. Massachusetts Mut. Life Ins. Co., 30 AD3d 474, 476 [2d Dept 2006] ).
On the other hand, this court finds that Fidler and Pross are not entitled to dismissal of the slander, libel and defamation claims at this early stage of the proceedings. As noted above, the slander, defamation and libel claims are based on plaintiff's allegations that an employee of MCF told plaintiff's customers that plaintiff over billed. Such an allegation may be sufficient to state a claim for slander ( see 43A N.Y. Jur 2d, Defamation & Privacy § 55; see also John Langenbacher Co. v. Tolksdorf, 199 A.D.2d 64, 64–65 [1st Dept 1993] ). Fidler and Pross do not argue that such statements do not constitute libel or slander, but rather, assert that plaintiff has failed to make allegations specifically connecting the statements to Fidler and Pross. Defendant may be correct that the statement in the complaint that “each of the Defendants were aware of, acquiesced in, and approved of the defamation of” plaintiff, may not be sufficient, in and of itself, to tie the statements to Fidler or Pross. However, plaintiff, particularly in the affidavits submitted in opposition to the motion, has made factual allegations to the effect that Fidler and Pross, regardless of their actual titles, were primarily responsible for MCF's operations, at least with respect to MCF's relations with plaintiff. Given Fidler and Pross' positions with MCF, a reasonable inference may be drawn, particularly in the context of this prediscovery motion, that they approved and/or procured the making of the allegedly defamatory statements ( see Pludeman v. Northern Leasing Sys., Inc., 40 AD3d 366, 367–368 [1st Dept 2007], affd10 NY3d 486, 493–494 [2008];see also DDJ Mgt., LLC v. Rhone Group, LLC, 78 AD3d 442, 444 [1st Dept 2010]; Pisani v. Staten Island Univ. Hosp., 440 F.Supp 2d 168, 179 [EDNY 2006] ).
While Fidler and Pross alternatively move for summary judgment, their affidavits do not specifically address plaintiff's allegations relating to the defamation claims. Fidler and Pross' general conclusory denials of the complaint's allegations are insufficient to demonstrate their prima facie entitlement to summary judgment with respect to their liability for the defamation claims ( see Forsell v. Lerner, 101 AD3d 807, 808–809 [2d Dept 2012] ). This portion of the motion for summary judgment must thus be denied regardless of the sufficiency of plaintff's opposition papers ( see Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 [1985] ).
This constitutes the decision and order of the court.