Opinion
Index No. 2023-34483 Motion Seq. No. 001
12-26-2023
KAPITUS SERVICING, INC., Plaintiff, v. ZUMMA MANAGEMENT GROUP, LLC, LASKEY VENTURES, LLC, DARI PIZZA ENTERPRISE II, LLC, SYLVANIAMO, LLC, NAVRREMO, LLC, RENOLDSMO, LLC, PERRYSBURG VENTURES, LLC, MOASIS, LLC, DORRMO, LLC, BOUNCEBACK ENTERPRISES, LLC, MOYAD DARI, SUZAN DARI, and JOHN DOES 1-10, Defendants.
Windels Marx Lane & Mittendorf, LLP, New York, NY (Robert J. Malatak and Dennis A. Amore of counsel), for plaintiff. Law Office of Marc Scolnick, P.C., Kew Gardens, NY (Marc Scolnick of counsel), for defendants Bounce Back Enterprises, LLC, Moyad Dari, and Suzan Dari. No appearance for defendant Dari Pizza Enterprise II, LLC.
Unpublished Opinion
Windels Marx Lane & Mittendorf, LLP, New York, NY (Robert J. Malatak and Dennis A. Amore of counsel), for plaintiff.
Law Office of Marc Scolnick, P.C., Kew Gardens, NY (Marc Scolnick of counsel), for defendants Bounce Back Enterprises, LLC, Moyad Dari, and Suzan Dari. No appearance for defendant Dari Pizza Enterprise II, LLC.
PRESENT: HON. GERALD LEBOVITS, Justice
DECISION + ORDER ON MOTION
HON. GERALD LEBOVITS, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 128, 129, 130, 131, 132, 133, 134, 135, 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151, 152, 153, 154, 155, 157, 158, 159, 160, 161, 166, 168, 169, 170, 171, 172, 173, 176, 178, 179, 180, 181, 182, 183, 184, 185, 186, 187, 188, 202, 203, 204, 205, 206, 207, 208, 209, 210, 211, 212, 213, 214, 215, 216, 217, 218, 219, 220, 221, 222, 223, 224, 225, 226, 227, 228, 229, 230, 231, 232, 233, 234, 235, 236, 237, 238, 239, 240, 241 were read on this motion to EXTEND TIME .
VitalCap Fund Emerald Group Holding, LLC, entered into seven different agreements with defendants Zumma Management Group, LLC, Laskey Ventures, LLC, Daria Pizza Enterprises II, Inc., Sylvaniamo, LLC, Navarremo, LLC, Reynoldsmo, LLC, Perrysburg Ventures, LLC, Moasis, LLC, and Dorrmo, LLC ("Oasis defendants"). (See NYSCEF No. 1 at 9.) Defendant Moyad Dari, president/CEO of all the Oasis defendants, signed the agreements on the Oasis defendants' behalf. (NYSCEF No. 204 at 3, 54-60.) The agreements provide that in exchange for payment of a purchase price, VitalCap would be entitled to a specified amount of the Oasis defendants' future receivables, Mr. Dari would personally guarantee the Oasis defendants' full performance under the agreements, the Oasis defendants would grant VitalCap a security interest in all their personal property, and under a "cross collateral addendum," a subset of the Oasis defendants would agree to "joint liability and cross-collateralization by and between each entity." (NYSCEF No. 1 at ¶ 43; accord NYSCEF No. 9.)
Plaintiff, Kapitus Servicing, Inc., VitalCap's agent, asserts causes of action for breach of contract and multiple fraud-based claims. Plaintiff alleges that the Oasis defendants breached the agreements starting on October 18, 2016, by withholding receivables owed to plaintiff. (NYSCEF No. 1 at ¶ 3.) Plaintiff alleges that all the defendants defrauded plaintiff by making material misrepresentations that the Oasis defendants would make receivable payments and by reselling the same receipts they sold to plaintiff. (NYSCEF No. 1 at ¶¶ 64, 85.) Plaintiff also alleges that defendant Suzan Dari, at Mr. Dari's direction, allegedly transferred money from the Oasis defendants' accounts to Bounce Back Enterprises, LLC, to avoid making the payments owed to plaintiff. (NYSCEF No. 1 at ¶ 75.)
VitalCap signed these agreements. But the filings do not articulate any material distinction between VitalCap and plaintiff. For instance, the complaint alleges that plaintiff is the one that owns the rights to the Oasis defendants' future receivables. (NYSCEF No. 1 at ¶ 48.)
Plaintiff filed its complaint against the Oasis defendants, Mr. and Ms. Dari and Bounce Back Enterprises, LLC, on October 18, 2022. Plaintiff filed an amended complaint on February 14, 2023. Plaintiff amended the complaint to replace defendant "Dari Pizza Enterprises II, LLC" with "Dari Pizza Enterprises II Inc." to reflect Dari Pizza's proper corporate status. (NYSCEF No. 53 at ¶ 8.) Plaintiff also modified the subset of defendants against which plaintiff asserts each cause of action and added another cause of action for aiding and abetting fraud.
Plaintiff now moves for an order (1) extending the time to serve Dari Pizza; (2) deeming plaintiff's amended complaint the operative pleading as to Dari Pizza; and (3) extending the time to serve Mr. and Ms. Dari under Ohio law. Mr. and Ms. Dari and Bounce Back ("Cross-motion defendants") cross-move to dismiss the complaint or, alternatively, the amended complaint. (NYSCEF No. 212 at ¶ 1.)
Because it would be futile for plaintiff to serve Mr. and Ms. Dari with claims that would be dismissed anyway, the court begins with the cross-motion.
DISCUSSION
I. Cross-Motion to Dismiss
Plaintiff filed the amended complaint as of right. CPLR 3025 (a) provides that "[a] party may amend his pleading once without leave of court . . . at any time before the period for responding to it expires. . . ." Plaintiff and the cross-motion defendants stipulated that these defendants had until February 24, 2023, to respond to the original complaint. (NYSCEF No. 25.) Plaintiff was within its rights when it filed the amended complaint on February 14, 2023. The court will consider the motion to dismiss using the amended complaint.
A. Lack of Personal Jurisdiction as to Ms. Dari and Bounce Back Under CPLR 3211 (a) (8)
Ms. Dari is an Ohio resident; Bounce Back is an Ohio LLC. Plaintiff's amended complaint provides two bases for personal jurisdiction over Ms. Dari and Bounce Back: (1) consent to this court's jurisdiction under the agreements' forum-selection clauses and (2) specific jurisdiction under CPLR 302 (a).
Each agreement has a forum-selection clause that provides that any action arising under the contract "shall if [VitalCap] so elects, be instituted in any court sitting in New York" and that the merchant "submits to the jurisdiction" of any court sitting in New York, agrees that a court sitting in New York is convenient, "and waives any and all objections to jurisdiction or venue." (NYSCEF Nos. 54-60, ¶ 4.5.)
Although Ms. Dari and Bounce Back did not sign the agreements, plaintiff argues that they are bound by the forum-selection clauses because they are (1) "closely related" to the Oasis defendants and (2) "alter egos" of the Oasis defendants. (NYSCEF No. 223 at 2.)
Plaintiff also argues that Ms. Dari and Bounce Back are assignees under the agreements and therefore bound by the forum-selection clauses. But plaintiff does not cite evidence in support of this contention. (See NYSCEF No. 223 at 5.)
A non-signatory to an agreement "may . . . be bound by a forum selection clause where the non-signatory and a party to the agreement have such a 'close relationship' that it is foreseeable that the forum selection clause will be enforced against the non-signatory." (Highland Crusader Offshore Partners, L.P. v Targeted Delivery Technologies Holdings, Ltd., 184 A.D.3d 116, 122 [1st Dept 2020]; accord Borden LP v TPG Sixth St. Partners, 173 A.D.3d 442, 443 [1st Dept 2019] [finding that a non-signatory who controlled a signatory and benefitted from a fraudulent conveyance that interfered with the contract between the signatories was closely related to that signatory].)
Alternatively, a "non-signatory may be bound by a contract under certain limited circumstances, including as . . . an alter ego of a signatory." (Highland Crusader Offshore Partners, A.D.3d at 122.) An alter-ego claim requires allegations of "complete domination of the [company] in respect to the transaction attacked and that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff's injury." (Baby Phat Holding Co., LLC v Kellwood Co., 123 A.D.3d 405, 407 [1st Dept 2014] [internal quotations omitted].)
In the amended complaint, plaintiff alleges that Ms. Dari and Bounce Back are both closely related to the Oasis defendants. Plaintiff alleges that Ms. Dari has a 98% ownership interest in Dari Pizza (see NYSCEF No. 53 at ¶ 91) and a 100% ownership interest in Bounce Back, another non-signatory. (Id. at ¶ 93). Plaintiff alleges that Ms. Dari allegedly "transferred money from the Oasis [defendants'] Designated Accounts to Bounce Back in order to avoid payments to creditors of the Oasis [defendants]." (Id. at ¶ 97.) Therefore, plaintiff has successfully demonstrated that the agreements' forum-selection clauses apply to Ms. Dari and Bounce Back under both the "close relationship" and "alter ego" relationship theories.
Cross-motion defendants contend that plaintiff's allegations are based on Ms. Dari's testimony in an unrelated action with a different creditor, of which there is no record and which they allege was not based on Ms. Dari's personal knowledge. (See NYSCEF No. 237 at ¶¶ 4-5.) Nonetheless, on a motion to dismiss, a court "accept[s] the facts as alleged in the complaint as true, [and] accord[s] plaintiffs the benefit of every possible favorable inference." (Leon v Martinez, 84 N.Y.2d 83, 87 [1994].)
Cross-motion defendants argue that Ms. Dari's testimony suggests she made the transfer "at the behest" of Moyad, and thus that she could not have exercised the requisite domination or control over the Oasis defendants. (See NYSCEF No. 212 at ¶ 34.) Cross-motion defendants contend that plaintiff cites no other "specific facts" of Ms. Dari's domination or control over the Oasis defendants. (Id. at ¶ 33.) But plaintiff need not "plead the elements of alter ego liability with the particularity required by CPLR 3016(b), 'but only to plead in a non-conclusory manner.'" (Kostyatnikov v HFZ Capital Group LLC, 212 A.D.3d 477, 478 [1st Dept 2023], quoting 2406-12 Amsterdam Assoc. LLC v Alianza LLC, 136 A.D.3d 512, 512 [1st Dept 2016].)
Cross-motion defendants also argue that the "closely related" doctrine applies only when evidence shows that the non-signatories were aware of the contract. (See NuMSP, LLC v St. Etienne, 462 F.Supp.3d 330, 350-351 [SD NY 2020].) But plaintiffs effectively do allege that the cross-motion defendants had knowledge of the agreements, given their allegation that the cross-motion defendants perpetrated fraud to undermine those agreements. (See NYSCEF No. 53 at ¶ 61.) The court in NuMSP also noted that a non-signatory may be closely related to a signatory when the non-signatory has an "active role" in the signatory company. (See 462 F.Supp.3d at 351.) As noted above, plaintiff has alleged that Ms. Dari owns 98% of Dari Pizza.
Cross-motion defendants argue that the forum-selection clauses confer jurisdiction on Ms. Dari and Bounce Back for claims involving only "interpretation, performance or breach of the agreement." (NYSCEF No. 237 at ¶ 48.) These defendants argue that the language of the forum-selection clause does "not encompass all claims that have some possible relationship with the contract." (Id. at ¶ 45.) Rather, they argue that the agreement must be the source of the right that [plaintiff] seeks to vindicate." (Id.) This court is unpersuaded.
A "strong public policy favor[s] enforcement of forum selection clauses"; and these clauses may be construed "to encompass tort claims brought in relation to the contract and/or which arise out of the business relationship." (Montoya v Cousins Chanos Casino, LLC, 2012 WL 118475, at *5 [Sup Ct, NY County 2012].) Plaintiff's causes of action against Ms. Dari and Bounce Back for aiding and abetting fraud, constructive fraudulent conveyance, and fraudulent conveyance turn on the transactions embodied in the agreements, namely, to pay plaintiff the receivables. (See Overseas Ventures, LLC v ROW Mgmt., Ltd., Inc., 2012 WL 5363782, at *7 [SD NY Oct. 26, 2012] [holding that a forum-selection applies to a claim for aiding and abetting conversion that stemmed from the "transaction embodied" in the agreement].)
Cross-motion defendants also contend that the forum-selection clause applies only to actions concerning "the interpretation, performance or breach hereof"-not also to fraud or other tort claims. (NYSCEF No. 237 at ¶¶ 47-48.) But this construction is unduly narrow, given the preceding language of the clause, which states that "[a]ny suit, action or proceeding arising hereunder" must be brought in New York if VitalCap chooses. Moreover, the word "breach" is preceded by the word "or." This suggests that breach of contract is one kind of claim to which the forum-selection clause applies. This construction comports with the strong public policy favoring forum-selection clauses. The forum-selection clause applies to all of plaintiff's causes of action.
Given the court's conclusion that Ms. Dari and Bounce Back have consented to this court's exercise over them of personal jurisdiction, the court need not consider the parties' other jurisdictional arguments. (See Highland Crusader, 184 A.D.3d at 123 ["[C]ourts have recognized that a consent to jurisdiction by virtue of the 'close relationship' between the non-signatory and contracting party [obviates] the need for a separate analysis of constitutional propriety."].)
B. Inconvenient Forum as to Ms. Dari and Bounce Back
Cross-motion defendants argue that New York is an inconvenient forum for Ms. Dari and Bounce Back. But under the forum-selection clause, Ms. Dari and Bounce Back waived all objections to jurisdiction and submitted to the jurisdiction of courts sitting in New York. Ms. Dari and Bounce Back are thus "precluded from attacking the court's jurisdiction on forum non conveniens grounds." (Sterling Nat. Bank as Assignee of NorVergence, Inc. v Eastern Shipping Worldwide, Inc., 35 A.D.3d 222, 223 [1st Dept 2006].)
C. Improper Venue as to Ms. Dari and Bounce Back
Cross-motion defendants argue that New York County is an improper venue for a suit against Ms. Dari and Bounce Back. Ms. Dari and Bounce Back are domiciled in Ohio and plaintiff is incorporated in Virginia. Defendants contend that "Plaintiff has provided no facts showing any of the alleged causes of action took place in New York." (NYSCEF No. 212 at ¶¶ 61-62.) But the forum-selection clauses found in the agreements between plaintiff and the Oasis defendants are binding. The clauses provide that the merchant "submits to the jurisdiction" of any court sitting in New York and "waives any and all objections to jurisdiction or venue." (NYSCEF Nos. 54-60 [emphasis added].) Ms. Dari and Bounce Back have clearly waived all objections to venue. (See Merchant Cash & Capital, LLC v Beachside Home Care, LLC, 2017 NY Slip Op 31817[U], at *2 [Sup Ct, Suffolk County 2017] [holding that a contract provision through which the parties clearly agreed to a forum and waived objections to venue is valid absent a showing that the provision is unreasonable].)
D. Bankruptcy Discharge as to Mr. Dari under CPLR 3211 (a) (5)
Mr. Dari filed for Chapter 7 bankruptcy in November 2017. (NYSCEF No. 204 at ¶ 16.) The bankruptcy court granted a discharge. (NYSCEF No. 210.) As part of the bankruptcy proceeding, Mr. Dari listed VitalCap as an unsecured creditor (see e.g. NYSCEF No. 208) and sent notice to VitalCap (see NYSCEF No. 206).
Cross-motion defendants contend that recovery against Mr. Dari is foreclosed by the bankruptcy discharge he obtained before plaintiff commenced this action. (NYSCEF No. 212 at 14.) Plaintiff did not file a challenge or adversary proceeding within the allotted time and did not appeal the discharge order. (NYSCEF No. 212 at 15-16.) Cross-motion defendants argue that plaintiff should not get a chance now to challenge the bankruptcy discharge in this court. (Id. at 16.) They also contend that this court has no jurisdiction to hear a claim on the discharge-that federal bankruptcy courts have exclusive jurisdiction to hear those challenges. (NYSCEF No. 212 at 16.)
With respect to jurisdiction, cross-motion defendants' argument is without merit: "[S]tate and federal courts have concurrent jurisdiction over the issue of the dischargeability of a particular debt following the discharge of the debtor in bankruptcy." (Matter of Ross v Sperow, 57 A.D.3d 1255, 1256 [3d Dept 2008].)
On the merits of the discharge argument, this court agrees with plaintiff that the discharge does not bar its claims against Mr. Dari because that discharge extinguished only his personal liability. (See Johnson v Home State Bank, 501 U.S. 78, 83 [1991], citing 11 USC § 524 [a] [1].) Plaintiff can still seek enforcement in rem of its perfected security interests granted in the underlying receivables-purchase agreements. (See e.g. Carman v European American Bank & Trust Co., 78 N.Y.2d 1066, 1067 [1991] ["It is elementary, however, that liens and other similar secured interests ordinarily survive bankruptcy."].) Moreover, plaintiff did not bring monetary claims against Mr. Dari personally-only claims for replevin, declaratory judgment, and injunctive relief.
Plaintiff has submitted a copy of the results of plaintiff's UCC search as evidence of these filings. (See NYSCEF No. 10.)
Cross-motion defendants question whether plaintiff ever alleged or provided support in its papers showing it perfected its security interests." (NYSCEF No. 237 at ¶ 55.) Plaintiff's amended complaint alleges that plaintiff filed UCC-1s; and plaintiff has also submitted a copy of the results of plaintiff's UCC search to show that it perfected its security interests. (See NYSCEF No. 10, 53 at ¶ 44.)
E. Failure to State a Cause of Action
In deciding a motion to dismiss under CPLR 3211 (a) (7), the court will "accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory." (Leon, 84 N.Y.2d at 87-88.)
i. Fraud
Plaintiff asserts a cause of action for fraud against the Oasis defendants, not the Cross-motion defendants. These defendants may not move to dismiss this cause of action. The motion to dismiss the cause of action for fraud is denied.
ii. Aiding and Abetting Fraud
In a cause of action for aiding and abetting fraud, a plaintiff must allege "the existence of the underlying fraud, actual knowledge, and substantial assistance." (Oster v Kirschner, 77 A.D.3d 51, 55 [1st Dept 2010].) To establish fraud, the plaintiff must allege "a representation of material fact, the falsity of that representation, knowledge by the party who made the representation that it was false when made, justifiable reliance by the plaintiff, and resulting injury." (Centro Empresarial Cempresa S.A. v Am. Movil, 17 N.Y.3d 269, 276 [2011].)
CPLR 3016 (b) requires that a cause of action sounding in fraud be stated with particularity and that a plaintiff plead "facts [that] are sufficient to permit a reasonable inference of the alleged conduct." (Feldman v Byrne, 210 A.D.3d 646, 649 [2d Dept 2022].) Cross-motion defendants argue that under this requirement, plaintiff here must explain how each defendant contributed to the alleged fraud. (NYSCEF No. 212 at 17.)
This court disagrees. Even if a plaintiff does not allege the "specific details of each individual defendant's conduct," CPLR 3016 (b) "may be met when the facts are sufficient to permit a reasonable inference of the alleged conduct." (Pludeman v Northern Leasing Sys., Inc., 10 N.Y.3d 486, 492-493 [2008].) For instance, plaintiff can satisfy CPLR 3016 (b) by alleging that fraud was perpetrated by an "interlocking relationship of defendants." (Tomkins PLC v Bangor Punta Consol. Corp., 194 A.D.2d 493, 493 [1st Dept 1993].)
Plaintiff alleges that when it entered into the agreements with the Oasis defendants, plaintiff relied on the Oasis defendants' representations that they would remit their future receivables to plaintiff. (See NYSCEF No. 53 at ¶ 155.) Plaintiff also alleges that Ms. Dari and Bounce Back aided the Oasis defendants in transferring or selling the receivables to avoid paying the receivables to plaintiff. (Id. at ¶¶ 154, 158.)
Cross-motion defendants contend that plaintiff did not justifiably rely on the Oasis defendants' misrepresentations. They argue that plaintiff should have conducted its own investigations to determine the accuracy of the misrepresentations. The existence of this kind of "fact-sensitive" issue, however, does not warrant dismissal of the cause of action, but instead consideration by a "finder of fact." (Feldman, 210 A.D.3d at 649.)
Plaintiff alleges actual knowledge and substantial assistance with the requisite particularity. Plaintiff alleges that Ms. Dari and Bounce Back "knew of Oasis defendants' fraud to transfer the [future receivables] with the intention of not paying Plaintiff" and "substantially assisted in the fraud by engaging in conduct in connection with the fraudulent transfer." (NYSCEF No. 223 at 17.)
The cross-motion to dismiss plaintiff's cause of action for aiding-and-abetting-fraud is denied.
iii. Constructive Fraudulent Conveyance and Actual Fraudulent Conveyance Under the Debtor and Creditor Law
a. Constructive Fraudulent Conveyance
Plaintiff brings a cause of action for constructive fraudulent conveyance under DCL §§ 274, 275, and 278. DCL § 274 pertains to conveyances made "without fair consideration," leaving the entity from which the conveyance was made with "unreasonably small capital." DCL § 275 applies when a plaintiff not only meets the elements of DCL § 274, but also can show "an element of intent or belief that insolvency will result." (Wall St. Assoc. v Brodsky, 257 A.D.2d 526, 528 [1st Dept 1999].) No heightened particularity requirements apply to claims brought under DCL §§ 274 and 275. (Gateway I Group, Inc. v Park Ave. Physicians, P.C., 62 A.D.3d 141, 149 [2d Dept 2009].) DCL § 278 is a remedy provision that allows "a creditor whose claim has matured" to "have a fraudulent conveyance set aside 'against any person' other than a good faith purchaser for value.'" (Commodity Futures Trading Com'n v Walsh, 17 N.Y.3d 162, 174-175 [2011].)
Plaintiff's fraudulent-conveyance claims are governed by the former version of DCL article 10, because they are based on conveyances made prior to the April 2020 effective date of the amendments to that article. (See NYSCEF No. 53 at 28).
In pleading its claim under DCL §§ 274 and 275, plaintiff alleges that the "Oasis defendants, Bounce Back, and Ms. Dari "conveyed the Receipts, Collateral, and Related Proceeds due to Plaintiff to their fraudulent transferees" and did not receive "a reasonable equivalent value in exchange for the transfer or obligation." (NYSCEF No. 53 at ¶¶ 161, 164.) Plaintiff also alleges that the Oasis defendants, Ms. Dari, and Bounce Back "knew that Oasis [d]efendants were insolvent when" they made the fraudulent conveyance. (Id. at ¶ 163.)
Cross-motion defendants contend that plaintiff converted its constructive-fraudulent-conveyance claim into an actual-fraudulent-conveyance claim by alleging scienter. (NYSCEF No. 212 at 18.) But a constructive-fraud claim under DCL § 275 requires that plaintiff show an "element of intent or belief that insolvency will result." (Wall St. Assoc., 25 A.D.2d at 528.)
Cross-motion defendants argue that a DCL § 274 claim based on a defendant's alleged misrepresentations requires alleging a fiduciary or confidential relationship between the parties. (NYSCEF No. 237 at 12, citing Sutton Apts. Corp. v Bradhurst 100 Dev. LLC, 107 A.D.3d 646, 648 [1st Dept 2013].) But no such requirement exists. (See Board of Managers of Be@William Condominium v 90 William St. Development Group LLC, 187 A.D.3d 680, 681-682 [1st Dept 2020] [rejecting defendants' argument that the DCL §§ 273 and 274 claims against them should be dismissed, absent allegations of a fiduciary relationship between the parties].) Cross-motion defendants' motion to dismiss the constructive-fraud claim is denied.
b. Actual Fraudulent Conveyance
Plaintiff also brings a claim for actual fraudulent conveyance under DCL § 276 and seeks relief under DCL § 278. DCL § 276 provides that "[e]very conveyance made and every obligation incurred with actual intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors." A claim under DCL § 276 must be pleaded with heightened particularity. (See CPLR 3016 [b]; Cash on Spot ATM Servs., LLC v Camia, 144 A.D.3d 961, 962 [2d Dept 2016].) And Cross-motion defendants argue again that each defendant's role in the alleged fraud must be pleaded with particularity. (NYSCEF No. 212 at 17.)
Plaintiff alleges that the "Oasis Defendants, Bounce Back, and [Ms. Dari], by way of their collective acts, made the [f]raudulent [c]onveyance [despite] knowing Oasis Defendants had obligations to Plaintiff under the Agreements" and "knowing it would leave Oasis Defendants with insufficient capital (or any capital for that matter) to satisfy their obligations to Plaintiff." (NYSCEF No. 53 at ¶¶ 176-177.).
Cross-motion defendants' motion to dismiss the cause of action for actual fraudulent conveyance is denied.
iv. Alter-ego Liability/Piercing the Corporate Veil
Cross-motion defendants and plaintiff agree that alter-ego liability/piercing the corporate veil is not a separate cause of action. Plaintiff contends, however, that maintaining this cause of action would allow it to seek liability if it is successful on its other claims. (NYSCEF No. 223 at 19.) That is not sufficient to preserve what is otherwise a non-viable claim. Plaintiff's cause of action for alter-ego liability/piercing the corporate veil is dismissed. The allegations supporting that cause of action, though, will "remain part of the complaint." (Wheeler Ave. Laundry LLC v Modern Yonkers Realty LLC, 2017 WL 4969968, at *7 [Sup Ct, Westchester County 2017].)
v. Unjust Enrichment
Cross-motion defendants argue that plaintiff's unjust-enrichment claim should be dismissed as duplicative of plaintiff's fraud and fraudulent conveyance claims. (NYSCEF No. 212 at 19.) Plaintiff contends that this claim is not duplicative "because there has been no determination that this claim is based upon the same facts as other claims" in the complaint. (NYSCEF No. 223 at 21.)
An unjust-enrichment claim is "not available where it simply duplicates, or replaces, a conventional contract or tort claim." (Corsello v Verizon New York, Inc., 18 N.Y.3d 777, 790 [2012].) Here, plaintiff's claim, "while dressed as an unjust enrichment cause of action, is, in fact, a restatement of Plaintiff's fraud claim." (Starlite Media LLC v Pope, 2014 NY Slip Op 30984(U), *7 [Sup Ct, NY County 2014], affd 128 A.D.3d 498 [2015].) Indeed, plaintiff expressly relies on the defendants' alleged actions that plaintiff contends constitute fraud and fraudulent conveyance in order to support plaintiff's cause of action for unjust enrichment. (See NYSCEF No. 53 at 32.) Cross-motion defendants' motion to dismiss the cause of action for unjust enrichment is granted.
F. Dismissal of Replevin and Conversion Causes of Action as Time-Barred
Under CPLR 214 (3), the statute of limitations for replevin and conversion is three years. Plaintiff filed its original complaint on October 18, 2022, six years from the day the defendants allegedly retained receivables owed to plaintiff, not three. Plaintiff contends, however, that when a "complaint asserts causes of action for fraud and conversion, the longer statute of limitations for fraud applies." (D. Penguin Bros. Ltd. v City Natl. Bank, 158 A.D.3d 432, 433 [1st Dept 2018].) The statute of limitations for fraud is "the greater of six years from the date the cause of action accrued or two years from the time the plaintiff . . . discovered the fraud, or could with reasonable diligence have discovered it." (CPLR 213 [8].)
Cross-motion defendants argue that the statute of limitations for fraud should not apply. They contend that the alleged fraud adds nothing to the causes of action for replevin and conversion. (NYSCEF No. 237 at 14.) But the alleged fraud was how defendants allegedly retained the receipts, collateral, and related proceeds in the first place. (See NYSCEF Nos. 21-23.)
Thus, the six-year statute of limitations applies to the replevin and conversion causes of action. Plaintiff brought these claims timely. Cross-motion defendants' motion to dismiss the causes of action for replevin and conversion under CPLR 3211 (a) (5) is denied.
II. Plaintiff's Motion
Plaintiff seeks extensions of time to serve Mr. and Ms. Dari and Dari Pizza, and also asks this court to deem the amended complaint the operative complaint with respect to Dari Pizza.
CPLR 306-b provides that service of a complaint upon a defendant must be made "within 120 days after the commencement of the action." A court may authorize an extension of time for a plaintiff to effect service under CPLR 306-b "upon good cause shown or in the interest of justice." In the somewhat unusual circumstances of this case, the court concludes that the service plaintiff has already made on these defendants is sufficient, such that no extension of time is required. Plaintiff's requests for extensions of time to serve are denied as academic.
With respect to Mr. and Ms. Dari, plaintiff seeks more time to serve them individually under Ohio law. But plaintiff has concededly served these defendants under New York law. (NYSCEF No. 152 at 7.) And plaintiff does not provide authority indicating that plaintiff must also serve the Daris under Ohio law.
With respect to Dari Pizza, plaintiff's initial attempt at serving the complaint on Dari Pizza, made in November 2022, was unsuccessful: Plaintiff attempted to serve Dari Pizza as a limited liability company rather than as a corporation. (See NYSECF No. 19 at 3.) Plaintiff amended its complaint as of right in February 2023. (NYSCEF No. 53.) Plaintiff served the amended complaint on Dari Pizza in the correct manner on March 2, 2023-within 120 days after filing the amended complaint, but more than 120 days after filing the original complaint. (See NYSCEF No. 175.) Dari Pizza did not, however, reject the amended complaint as untimely served. Nor do defendants argue on this motion that the complaint should be dismissed as against Dari Pizza for untimely service. (See NYSCEF No. 212 at 4-11 [mem. of law].) The court concludes, therefore, that plaintiff has properly served Dari Pizza with the amended complaint and that no extension of time to serve Dari Pizza is required.
As for plaintiffs request to deem the amended complaint the operative pleading as to Dari Pizza, defendants contend that this request should be denied because plaintiff did not seek leave to amend with respect to Dari Pizza under CPLR 3025 (b). Defendants do not, however, give reasons why leave to amend would have been required to begin with. Nor does this court perceive any reasons why, either.
CPLR 3025 (a) permits amendment as of right "within twenty days after its service," or "any time before the period for responding to it expires," or "within twenty days after service" of a responsive pleading. Here, the parties stipulated to extend defendants' deadline to answer. (See NYSCEF No. 25.) Plaintiff amended its complaint before defendants answered, and before the expiration of their time to answer. (Compare NYSCEF No. 25 [stipulation], with NYSCEF No. 53 [amended complaint].) Plaintiffs amendment was proper under CPLR 3025 (a)-and occurred within the 120-day service period running from the filing of the original complaint.
The amendment was thus operative against all defendants, including Dari Pizza. And, as noted above, plaintiff properly served defendants with the amended complaint. Plaintiffs request to have the amended complaint deemed the operative pleading as against Dari Pizza is granted.
Accordingly, it is:
ORDERED that the cross-motion defendants' request to dismiss the complaint is granted only with respect to plaintiffs claims for (i) alter-ego liability/piercing the corporate veil and (ii) unjust enrichment, and the request is otherwise denied; and it is further
ORDERED that the branches of plaintiff s motion seeking extensions of time to serve Mr. and Ms. Dari under Ohio law, and to serve Dari Pizza, are denied as academic; and it is further
ORDERED that the branch of plaintiff s motion to deem the amended complaint the operative pleading as against Dari Pizza is granted.