Opinion
22-CV-4454 (PAE) (KHP)
12-14-2023
ILLIA KORNEA, et al Plaintiffs, v. JEFFREY A. MILLER, Defendant.
HONORABLE PAUL A. ENGELMAYER, United States District Judge
REPORT AND RECOMMENDATION ON MOTION FOR SUMMARY JUDGMENT
KATHARINE H. PARKER UNITED STATES MAGISTRATE JUDGE
Pro se Plaintiffs Illia Kornea and Octavian Kecenovici bring this action against pro se Defendant Jeffrey A. Miller. Plaintiffs assert claims for breach of contract, violations of New York Commercial Code Law § 3-501 and California Commercial Code § 3501, and violations of New York General Business Law Chapter 20 Article 22A § 349 and California General Business Regulations §§ 16000 et seq. (First Amended Complaint (“FAC”) at 7-9.) Plaintiffs also seek to foreclose on an Agricultural Lien. (Id.) Defendant has asserted counterclaims against Plaintiffs for breach of the covenant of good faith and fair dealing and for tortious interference with business relationships.
Before the Court for a Report and Recommendation (“R&R”) is Defendant's Motion for Summary Judgment seeking dismissal of Plaintiffs' claims. For the reasons stated below, I respectfully recommend that the Motion for Summary Judgment be GRANTED IN PART AND DENIED IN PART, as set forth below.
BACKGROUND 1. Facts Giving Rise to the Litigation
a. In April 2019, the Parties Entered a Joint Venture to Buy and Sell Marijuana.
Plaintiffs are two individuals residing in the state of Pennsylvania. Defendant is an individual residing in the state of California. Defendant is a trained lawyer, but due to events unrelated to this case, he lost his license to practice law in California in approximately December 2018 and lost his license to practice law in New York in October 2019.
On March 12, 2019, Plaintiffs and Defendant entered into a joint venture agreement (“First JVA”). (See ECF No. 107-1 at pages 2-4.) Under the terms of the First JVA, Plaintiffs provided an investment of $4,000 by wire for the procurement and resale of marijuana. (ECF No. 103 (“Opp.”) at 2.)
Between March 19, 2019, and April 12, 2019, Defendant made payments to Plaintiffs totaling $5,000. (ECF No. 95 (“Def's 56.1”) ¶ 3). Plaintiffs assert that these payments were disbursement of profits in connection with the First JVA. (ECF No. 104 (“Plfs' 56.1”) ¶ 3.)
On April 12, 2019, Plaintiffs, Defendant, and non-party Rachel Gendreau (collectively, the “Investors”) signed a second joint venture agreement (“the JVA”), which superseded and replaced the First JVA. (See ECF No. 1 at 26-29, 32). The JVA is dated March 12, 2019, but was signed on April 12, 2019. Email correspondence shows that Defendant drafted the JVA while in communication with Plaintiffs regarding its terms. (See Opp. Ex. C.)
Various copies of the JVA have been filed on the docket, and certain of these copies are missing pages. The unsigned copy of the JVA at ECF No. 1, pages 26-29, is a complete copy of the JVA, and ECF No. 1, page 32 represents the signed last page of the JVA.
According to the JVA, the Investors were to provide “initial funding” of $75,000. (JVA ¶ 2.) This funding was comprised of a portion of the earlier investment in the amount of $4,000, which was “rolled over” from the first joint venture into the instant joint venture, plus additional money paid by check and wire transfers. According to the JVA, the initial funding would also include “profit earned on already invested money.” (Id.) Plaintiffs maintain that in addition to their $4,000 investment that was rolled over from the initial joint venture, they paid $57,125 by check and wire transfers, amounting to a $61,125 total investment by Plaintiffs into the instant joint venture. (Opp. at 2; Plfs' 56.1 ¶ 1.) Of this amount, $25,000 was paid by Plaintiff Kornea on behalf of Gendreau to cover her third of the initial investment, and the JVA contemplated that Gendreau would reimburse Kornea this amount. Defendant provided an additional $7,500 of his own money to fund the joint venture. (JVA ¶ 5.)
The JVA paragraph numbering is not sequential and the JVA repeats paragraph numbers 4-6. Citations to paragraph numbers refer to the first use of that paragraph number, unless followed by an asterisks, in which case they refer to the second use of that paragraph number within the JVA.
Defendant contends that Plaintiffs only invested a total of $56,125. (ECF No. 92 (“Opening Br.”) at 1.) For the purpose of this motion, the Court assumes Plaintiffs' assertion is true. Notably, neither Plaintiffs' nor Defendant's assertions as to the amount invested adds up to $75,000, as contemplated by the JVA, however the JVA permitted the investors to increase or decrease the amount of their principal investment. (JVA ¶ 6.)
The JVA contemplated that Defendant would use the initial investment, along with his own money, to purchase marijuana from licensed bulk wholesalers on behalf of licensed distributers for resale to end user retailers. (Id. at ¶ 4.) The contract specified that the Investors would not be entitled to profits derived from the use of Defendant's money, but it did not specify how Defendant's money would be used in the joint venture. (Id.)
The JVA contemplated at least two bulk purchases-and-resales (i.e. “flips”) of marijuana each month, with each “flip” taking about eight days. (Id. at ¶¶ 4, 6.) The JVA specified that all “cycles” would “terminate” on “the 8th calendar day.” (Id. at ¶ 4.) According to the agreement, Defendant had confidential relationships with distributors and wholesalers that he would use to facilitate the purchase and resale of the marijuana. (Id. at ¶ 4*.)
The JVA specified that each $25,000 investment was expected to generate $8,125 in total profit per flip. (Id. at ¶ 6.) The JVA specified that Defendant would be entitled to $1,825 of the $8,125 profit, (leaving $6,300), and that the remaining profit (of $6,300) would be reinvested into the joint venture until each party's total investment inclusive of reinvestment of profits was $40,000. (Id.) After that time, Defendant would disburse to the Investors “$6,250 EACH of the profit” per flip, assuming Defendant used $75,000 toward the flip. (Id.) The contract did not specify the timing for the payment of profits.
Thus, the Court understands the financials of the deal to be as follows. Under the terms of the JVA, if Defendant used a $75,000 initial investment to purchase marijuana for the first flip, Defendant would re-sell that marijuana for approximately $99,375, generating a total profit of $24,375 (i.e., $8,125 multiplied by 3). Defendant would then reinvest the base-price of $75,000 into the joint venture and take his share of the profit in the amount of $5,475 (i.e., $1,825 multiplied by 3). The remaining profit would thus be $18,900 total or $6,300 per Investor, but under the terms of the JVA, each investor would be considered to have earned $6,250 in profit. The JVA does not state what would be done with the remaining $50 of profit per investor per flip. Under the terms of the JVA, the $6,250 per investor would be reinvested into the joint venture, such that each Investor's investment would rise from $25,000 to $31,250. After a second such flip, each Investor's investment would rise to $37,500. After a third such flip, each Investor's investment would reach the $40,000 limit per Investor through reinvestment of $2,500 of the $6,250 in profits generated from the flip and Defendant would begin to disburse profits. Thus, the first profit disbursement was expected to be $3,750 per investor (i.e., $6,250-$2,500). For subsequent successful flips, instead of reinvesting the remaining profit, Defendant would disburse to each Investor $6,250 in profit.
Pursuant to the JVA, Defendant also provided a “payment guarantee” to the Investors to repay each their initial $25,000 investment should any of the transactions using their investment money result in a loss. (Id. ¶ 5*.) The guarantee would expire on the Investors' receipt of profits exceeding their initial investment amount of $25,000 each. (Id.) The contract does not specify the timing for the repayment of the $25,000. The contract does not provide that money invested above $25,000 must be returned to the Investors in the event the use of that money results in a loss. The JVA is also silent as to what would happen to money invested in the joint venture at the conclusion of the joint venture if the joint venture was successful.
The JVA states that the joint venture would last for one year, subject to renewal in writing, conditioned on Defendant's “ability to continue the Venture and that the marketplace supports the purpose of the Venture.” (Id. ¶ 7.) However, the JVA specifies that “there is NO OBLIGATION” for the parties to continue the joint venture “after the first transaction” unless the parties “desire to do so.” (Id. ¶ 6*.) The Court understands “first transaction” to refer to a flip. The JVA provides that should any party elect not to proceed with the joint venture, “each shall give the other a dated email to that effect.” (Id.)
The JVA contains a choice of law provision stating it will be governed by New York law and that all disputes shall be heard in New York. (Id. ¶ 13.)
b. In April and Early May, 2019, Defendant Facilitated Three Successful Flips and Paid the Contemplated Disbursements.
The joint venture was initially successful. On April 23, 2019, Defendant transferred $2,650 to Plaintiffs, which Plaintiffs contend was a disbursement of profits in connection with the First JVA. (Plfs' 56.1 ¶ 3.) On May 2, 2019, Defendant emailed Plaintiffs stating that he had managed three successful flips on April 15, April 23, and May 1. (Opp., Ex. E.) Defendant stated that he “worked with 75 across all 3 flips,” and the joint venture “made the 6250 on all 3 flips.” (Id.) Defendant stated that “we pulled the 6250 each time (each).” Defendant further stated, “we are now at 40k each (120k total),” and that he would be “disbursing 3250 each,” and reinvesting “30 to 32k each.” (Id.) Plaintiff Kornea responded to this email suggesting that the disbursements should be $3,750 rather than $3,250, and Defendant agreed. (Id.) On May 10, 2019, Defendant made three transfers to Plaintiffs in the amount of $3,750 per transfer, totaling $11,250. (Def's 56.1 ¶ 3)
Notably, however, at this point in time, the investment from the First JVA had been rolled over into the instant joint venture, and the parties had agreed that the JVA would supersede and replace the First JVA.
The above exchange suggests that Defendant engaged in three successful flips, each one generating the expected total profit of $24,375. After each flip, Defendant re-invested the base-price of $75,000 and used that money to purchase the next round of marijuana. Defendant also took his share of $5,475 generated in profit from each flip, and the remaining profit from each flip was approximately $18,900. Each investor was then considered to have earned $6,250 of the remaining profit, which amounts to $18,750 each across all three flips, or $56,250 total for all Investors across the three flips. The exchange suggests that of the $56,250 in total profits earned by the three Investors across the 3 flips, Defendant invested $45,000 of profits back into the joint venture, bringing the total amount of money in the joint venture to $120,000, or $40,000 per Investor. It is undisputed that the remaining profits of $11,250 (including Gendreau's share of the profits) were disbursed to Plaintiffs on May 10.
Again, for each flip, there is $50 per investor that is unaccounted for. Plaintiffs do not appear to argue that they are entitled to an extra $50 per flip.
c. In May 2019, the Joint Venture Began To Experience Trouble.
On Monday, May 13, 2019, Defendant emailed Plaintiffs stating that he had a “[l]ong but fruitful weekend of deals.” (Opp., Ex. E.) On May 27, 2019, Defendant emailed Plaintiffs stating that he was receiving partial payments “essentially every 2 to 3 days,” but he could not provide disbursements that often, and he would set up “multiple streams so that the NET EFFECT will be payment every 8 days.” (Id.) He stated that he would “send out 10k EACH” and would subsequently send “a full disbursement on the 40 each.” (Id.) Defendant stated that the work was “WAY WAY more” than he had envisioned. (Id.) He stated, “We do not need nor want more weed money. I am working on CBD for our next generation but it will be slower[,] so I am reluctant to take money into it yet.” (Id.) Plaintiff Kornea responded that the plan laid out in Defendant's email was “OK” and that he was “happy to hear” that there would be no more delays with disbursements. (Id.)
This exchange suggests that between May 10 and May 27, 2019, Defendant engaged in flips that generated $40,000 in profits, or approximately $13,333 per Investor. However, the exchange suggests that Defendant was struggling to timely pay the profits earned and was contemplating pivoting to a different joint venture involving CBD rather than marijuana.
On May 31, 2019, Defendant transferred $25,000 to Plaintiffs, and on June 3, 2019, he transferred an additional $5,000 to Plaintiffs, thus disbursing $30,000 in profits apparently earned from the May 2019 flips. (Def's 56.1 ¶ 3.) However, a factfinder could determine that he owed the Investors an additional $3,333 each that was not paid out at that time.
d. In June 2019, No Profits were Disbursed and The Parties Discussed “Retooling” the Deal.
There are no communications in the record from the first three weeks of June 2019. On Saturday, June 22, 2019, Defendant emailed Plaintiffs stating that he had been “retooling the entire deal because the weed buys are slowing down.” (Opp., Ex. F.) Defendant stated that retooling the deal involved a “very intense effort” and that he was essentially “doing two jobs now as we enter a new area of sales.” (Id.) Defendant stated that in light of the change in the market, his “overwhelming reaction is to send the money back.” (Id.) He stated that he would provide an “update on a payout after this weekend” and that he could speak by phone on Tuesday evening to discuss “a new way forward.” (Id.)
This email suggests that by late June 2019, Defendant was struggling to continue with the joint venture, and was seriously contemplating returning to the Investors their initial investments and creating a new joint venture that involved CBD rather than marijuana. Neither Plaintiffs nor Defendant provided information as to whether they spoke over the phone about a way forward.
On Thursday, June 27, 2019, Defendant sent Plaintiffs an email stating that he should be able to provide an update on Friday “before weed craziness commences” and that he would provide a “payout” on Monday. He stated that Plaintiffs should “[e]xpect 10k each.” (Id.) He further stated, “Retooled and am up and running in [CBD] to offset the weed slowdown. I am fairly confident we can get the 10ks out Monday. Not sure on frequency yet but we are still in the game[,] which is better than not.” (Id.)
The email indicates that Defendant was planning to transfer $10,000 to each Investor, which may have been the remaining profits from flips that occurred in May that Defendant had not yet disbursed in addition to profits from flips that occurred in June. Defendant's references to “doing two jobs,” and to the “weed buys” “slowing down” (rather than stopping), indicate that he may have been continuing to conduct flips pursuant to the JVA in June despite the slowdown in the market. The email could alternatively be interpreted to suggest that the parties to the joint venture had agreed over the phone to terminate the joint venture, and that Defendant would start “pay[ing] out” the Investors' initial investments in increments of $10,000 each in contemplation of “canceling” the joint venture and moving into a new venture involving CBD. In any event, Defendant did not send disbursements of “10k each” at that time.
e. In July 2019, the Joint Venture was Terminated.
On July 15, 2019, Defendant emailed Plaintiffs stating that the “final distribution” would be in “about 2 weeks,” and that “everyone will get their money and between 6 and 8k more each.” (Id.) Defendant stated that he would “prepare a settlement agreement terminating the joint ventures.” (Id.) This email suggests that by this point, the parties to the JVA had agreed to dissolve the JVA because of Defendant's inability to successfully facilitate additional flips. The email suggests that Defendant was relying on other measures such as CBD sales in an effort to comply with his obligation to return to Plaintiffs their initial investment of approximately $25,000 each. The email may be interpreted as suggesting that Defendant would try to pay Plaintiffs an additional $6,000 to $8,000 each in lieu of the $10,000 that Defendant said he would provide in June. Alternatively, the email could be read as suggesting that Defendant had facilitated one last flip generating profits of between $6,000 to $8,000, and that this amount was owed on top of the $10,000 per Investor that Defendant said he would pay in June.
Plaintiff Kornea responded on July 15, 2023 requesting that the final distribution be sent right away and stating that there was no need to prepare a settlement agreement because “[a]s far as we are concerned[,] the JV is terminated.” (Id.) Although the JVA permits termination of the joint venture by email, Plaintiffs assert that “Defendant never executed the dissolution of the JV Agreement.” (Id. at PDF Page 47.) It is undisputed that the parties never modified or extended the JVA in writing. (Def's 56.1 ¶ 8.)
Defendant stated in his sworn interrogatories that the joint venture ultimately incurred a “low five figure loss.” (ECF No. 94 (“Miller Aff.”) Ex. A.)
f. In September 2019, the Parties Corresponded About CBD.
In September 2019, after the dissolution of the joint venture, Defendant emailed Plaintiffs regarding the purchase and sale of CBD. On September 23, 2019, Defendant stated: “We have 83% and 85% CBD (THC COMPLIANT) for $4100 a liter.” (Opp., Ex. D.) The email lists additional pricing for various CBD formulations and states, “Whatever they want, we can get and price accordingly.” (Id.) On September 30, 2019, Defendant emailed Plaintiffs again, stating, “The sale was for $172,000 of several OG weed strains. The CBD would not require us to advance money. The question I pose was do we have any buyers and we can take a fee into a non frozen account.” (Id.)
These emails suggest that Defendant and Plaintiffs were continuing to contemplate and discuss moving into CBD sales. It is not clear from the parties' briefing or the emails themselves whether Defendant's efforts to sell CBD were successful.
g. Between February 2020 and May 2022, Defendant Made Additional Payments to Plaintiffs.
From February 2020 through May 2022, Defendant sent payments to Plaintiffs, via Zelle or wire transfer, totaling $13,650. (Def's 56.1 ¶ 4.) Defendant asserted in his sworn interrogatories that these payments were the result of his independent efforts through sales of “non-cannabis products” to “fulfill the guarantee in the [JVA] of $25,000 returned to each of the Plaintiffs.” (Miller Aff. Ex. A.)
The evidence shows that Defendant has now paid Plaintiffs a total of $62,550 between March 2019 and May 2022. Defendant asserts that he has repaid Plaintiffs more than their initial investments under the JVA, and more than the $25,000 per Investor that the JVA required to be returned should the investment result in a loss.
2. Procedural History
Plaintiffs initially filed claims against Defendant Miller and others in Pennsylvania, but that action was dismissed on May 6, 2022, for lack of personal jurisdiction over the defendants. See Kornea v. Miller, 22-cv-863 (E.D. Pa.). On May 27, 2022, Plaintiffs filed a complaint in this District. The complaint named Defendant as well as his then-wife Patricia Miller, who is now divorced from Defendant, and Ahmed Raed, whom Plaintiffs alleged to be the CEO of RadRelax LLC (“Radrelax”), a CBD company allegedly owned by Defendant. (ECF No. 1.) The complaint attached a copy of a UCC Financing Statement that purported to give notice that Plaintiffs maintain a lien on Defendant's property.
On August 10, 2022, Defendant moved to dismiss the claims against Patricia Miller and Ahmed Raed on the grounds that the Court lacked personal jurisdiction over them and the complaint lacked allegations regarding them. (ECF No. 18.) Defendant also moved to strike the Complaint pursuant to Federal Rule of Civil Procedure 12(f) to the extent it discussed various laws and causes of action outside the context of the facts alleged in the complaint.
On August 25, 2022, I held an initial Case Management Conference with the parties. I set the deadline for all discovery as January 30, 2023, and subsequently extended this deadline several times. (ECF No. 23.) I also encouraged Plaintiffs to consult the New York Legal Assistance Group (“NYLAG”) Clinic for assistance with litigating their case. I reiterated this encouragement at subsequent conferences.
On November 21, 2022, I issued a R&R recommending that the motion to dismiss claims asserted against Patricia Millar and Ahmed Raed be granted. (ECF No. 45.) As for the motion to strike, I explained that this was not the appropriate motion on which to evaluate the legal claims that could be construed from the complaint, and I recommended that this motion be denied. On February 23, 2023, the Honorable Paul A. Engelmayer adopted my Recommendations in their entirety. (ECF No. 62.)
Plaintiffs filed the FAC on March 3, 2023. Defendant never moved to dismiss the claims asserted in the initial complaint or the FAC pursuant to Rule 12(b)(6) for failure to state a claim. Instead, Defendant answered the FAC and asserted counterclaims on March 14, 2023. (ECF No. 65.) In his answer, Defendant maintains that the joint venture was unsuccessful, in part because of an unfavorable market, and also because he “lost access” to his third-party contact that was licensed under California law to do business in the cannabis industry. Defendant denies that Plaintiffs were promised any return on their investment and denies that Plaintiffs perfected any lien on his property or furnished farm property to him. Defendant asserts a counterclaim for breach of the covenant of good faith and fair dealing on the basis that Plaintiffs initially filed suit in Pennsylvania, in contravention of the choice of venue clause in the JVA. He also asserts a counterclaim for tortious interference with contractual relations, arguing that a paralegal named Lauren has been improperly directing Plaintiffs' actions in this litigation.
At a Case Management Conference on March 27, 2023, I asked Defendant to explain the basis for his counterclaims so that Plaintiffs and the Court could better understand them, and I reminded Plaintiffs of their deadline to answer or otherwise respond to the counterclaims. Plaintiffs filed an answer to the counterclaims on May 3, 2023. (ECF No. 76.) At a June 8, 2023 Case Management Conference, I explained that either side could move for summary judgment, and I set a briefing schedule for any summary judgment motions.
On June 26, 2023, Plaintiffs moved to compel certain additional discovery and requested an extension of the discovery deadline. (ECF Nos. 81-83.) Plaintiffs argued that they had requested banking information from Defendant that Defendant had not provided, and that the banking documents Defendant had provided were overly redacted. After hearing from the parties at a discovery conference and reviewing the unredacted documents in camera, I denied the motion to compel, finding that the information Plaintiffs were seeking was not relevant to their claims or defenses or proportional to the needs of the case. I nonetheless directed Defendant to respond to certain of Plaintiffs' outstanding questions about bank transactions by a date certain and advised the parties that discovery was otherwise closed. (ECF No. 90.)
On July 31, 2023, Defendant moved for summary judgment. Plaintiffs did not file a motion for summary judgment, instead opting simply to oppose Defendants' motion. Additionally, on October 11, 2023, Plaintiffs moved to reopen discovery, again seeking from Defendant additional bank account statements, tax records, financial records, books of accounts, and accounting records. (ECF No. 101.) I denied that motion, finding that Plaintiffs failed to show good cause for reopening discovery. (ECF No. 105.)
LEGAL STANDARD
Under Rule 56 of the Federal Rules of Civil Procedure, a court may grant summary judgment when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The movant bears the burden of demonstrating, on one or more required elements of the plaintiff's claims, that there is no genuine material fact in dispute. “Only disputes over facts that might affect the outcome of the suit under the governing law will preclude a grant of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To receive consideration, the evidence in the record must be admissible at trial. Santos v. Murdock, 243 F.3d 681, 683 (2d Cir. 2001). The Court must “resolve any doubts and ambiguities and draw all reasonable inferences in favor of the nonmoving party.” Johnson v. L'Oreal USA, 2023 WL 2637456, at *3 (2d Cir. Mar. 27, 2023) (citation omitted).
“Where a plaintiff cannot adduce proof sufficient to establish an essential element of her claim, there can be no genuine issue of material fact, because a ‘complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.'” In re Whole Foods Mkt. Grp., Inc. Overcharging Litig., 397 F.Supp.3d 406, 419-20 (S.D.N.Y. 2019) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)), aff'd sub nom. John v. Whole Foods Mkt. Grp., Inc., 823 Fed.Appx. 46 (2d Cir. 2020). A plaintiff “may not rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment.” Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (citation omitted); see also Herlihy v. City of New York, 654 Fed.Appx. 40, 43 (2d Cir. 2016).
The Court must afford pro se litigants “special solicitude” in the construction of pleadings and motions. Sammarco v. Hoolan, 2014 WL 3639161, at *1 (S.D.N.Y. July 23, 2014) (citation omitted). However, a pro se plaintiff is not relieved of his or her duty to meet the necessary requirements to defeat a motion for summary judgment, Jorgensen v. Epic/Sony Recs., 351 F.3d 46, 50 (2d Cir. 2003) (citation omitted), and must still “come forward with evidence demonstrating that there is a genuine dispute regarding material fact,” Bennett v. Bailey, 2010 W L 1459192, at *3 (S.D.N.Y. Apr. 9, 2010).
APPLICATION
1. Jurisdiction, Venue, and Choice of Law
As an initial matter, the Court has subject matter jurisdiction over this action under 28 U.S.C. § 1332, the federal diversity statute, because Plaintiffs are domiciled in Pennsylvania and Defendant is domiciled in California, and the amount of controversy alleged in the complaint is more than $75,000. See Tandon v. Captain's Cove Marina of Bridgeport, Inc., 752 F.3d 239, 243 (2d Cir. 2014) (explaining that for purposes of diversity jurisdiction, the court “must take all uncontroverted facts in the complaint [ ] as true, and draw all reasonable inferences in favor of the party asserting jurisdiction”). Venue is appropriate in this District pursuant to the forum-selection clause in the JVA. See Saray Dokum v. Madeni Aksam Sanayi Turizm A.S., 2023 WL 5164211, at *8 (S.D.N.Y. Aug. 11, 2023). Because of the choice of law provision in the JVA, the Court applies New York law in considering the breach of contract claim. See Texaco A/S (Denmark) v. Com. Ins. Co., 160 F.3d 124, 128 (2d Cir. 1998).
To the extent the FAC alleges that the Court's jurisdiction is under 28 U.S.C. § 1333, which governs admiralty and maritime cases, that is incorrect because this case has nothing to do with admiralty or maritime issues. The contract in question involved the purchase and sale of marijuana within the state of California and did not involve, for example, navigable waters, ships, or seafaring. See Folksamerica Reins. Co. v. Clean Water of N.Y., Inc., 413 F.3d 307, 311-12 (2d Cir. 2005) (explaining that in determining whether jurisdiction lies under 28 U.S.C. § 1333, the court must look at the nature of the contract).
2. First Cause of Action: Breach of Contract
Plaintiffs' first Cause of Action is for breach of contract. Although the claims are not a model of clarity, Plaintiffs appear to believe that Defendant breached the JVA by failing to pay them profits from unspecified marijuana-related transactions that occurred either during the three months the JVA was in effect or after the JVA was terminated. They also appear to take the position that they are owed additional payments under the JVA notwithstanding the fact that they invested less than the initial $25,000 each as contemplated under the JVA and were re-paid more than their initial investments, also as contemplated under the JVA.
Under New York law, there are four elements necessary to establish a breach of contract claim: (1) the formation of a contract between the parties; (2) performance by the plaintiff; (3) failure to perform on the part of defendant; and (4) damages. See Johnson v. Nextel Commc'ns, Inc., 660 F.3d 131, 142 (2d Cir. 2011) (citations omitted). It is the plaintiff's burden to establish these elements “by a preponderance of the credible evidence.” G8 Holdings, Inc. v. Deutsche Bank Sec., Inc., 2018 WL 11226748, at *3 (S.D.N.Y. Apr. 19, 2018) (citation omitted). “Because the plaintiff must prove each of these elements, the absence of a genuine issue of material fact due to lack of support for any one of them will require an award of summary judgment in favor of the defendant.” Marks v. N.Y. Univ., 61 F.Supp.2d 81, 88-89 (S.D.N.Y. 1999) (citing Celotex Corp., 477 U.S. at 322-23) (granting summary judgment to defendant on plaintiff's breach of contract claim where the plaintiff pointed to no evidence to support relevant elements of her claim).
Here, the parties agree that the first two elements are met. To start, there is no dispute that the JVA was a contract formed between the parties. Additionally, although it is unclear whether Plaintiffs invested the full $25,000 each of initial funding as contemplated by the JVA, there appears to be no dispute that Plaintiffs performed by providing initial funding for the joint venture in accordance with JVA ¶ 2. The third element (failure to perform) and fourth element (damages) are in dispute, and the Court will discuss each in turn.
a. Failure to Perform
Here, Plaintiffs argue that Defendant failed to perform on the contract because he conducted deals pursuant to the joint venture that were successful and that he kept secret from Plaintiffs, and he did not abide by his obligation under JVA ¶ 6 to forward to Plaintiffs their portion of the profits on those deals. Plaintiffs do not provide detail to support their allegations. For example, Plaintiffs do not provide dates on which profitable deals were allegedly conducted and from which they are owed profits, nor do they provide information as to the number of additional profitable flips they suspect were done or the amounts allegedly earned in profits. Rather, Plaintiffs point generally at the evidence, which consists of email correspondence between Defendant and Plaintiffs as well as Defendant's business and personal bank account statements, and argue that the evidence is sufficient to permit an inference that profits were earned that were not paid out.
The Court has conducted its own thorough review of the evidence in an effort to make sense of the communications and bank statements presented. The evidence suggests that from April 12 to May 10, 2019, Defendant facilitated three flips and disbursed to Plaintiffs the profits from those flips in accordance with the JVA. There is no evidence in the record to suggest that during these first few weeks of the joint venture Defendant failed to disburse Plaintiffs' share of the profits.
However, when construing the evidence in the light most favorable to Plaintiffs, there is some email evidence suggesting that in May and June 2019, Defendant may have conducted deals for which he did not fully abide by his duty under the JVA to disburse profits to Plaintiffs. Specifically, Defendant emailed Plaintiffs on May 27, 2019, stating that he would “send out 10k EACH” and would subsequently send “a full disbursement on the 40 each.” Defendant then transferred $30,000 to Plaintiffs (i.e., $10,000 per Investor). Although the email communications are ambiguous, a factfinder could determine that Defendant owed an additional $10,000 (i.e., $3,333 per investor) from profits generated in May. Then, on June 27, 2019, Defendant emailed Plaintiffs stating that Plaintiffs should expect a payment of “10k each,” but Defendant did not pay $10,000 to each Plaintiff at that time. Indeed, Defendant did not make any disbursements to Plaintiffs in the month of June 2019, despite the fact that his emails could reasonably be interpreted to suggest that he was attempting to conduct flips in June. On July 15, 2019, Defendant emailed Plaintiffs stating that the “final distribution” would be in “about 2 weeks,” and that “everyone will get their money and between 6 and 8k more each.” There is no evidence that these payments were made. It was not until 2020-2023 that Defendant sent make-up payments to Plaintiffs totaling $13,650. (Def's 56.1 ¶ 4.)
Although this evidence is hardly a smoking gun in favor of Plaintiffs, it is sufficient to permit a factfinder to determine that the joint venture earned profits in May and June 2019 that Defendant failed to fully disburse to Plaintiffs. That is, the evidence suggests that the $13,650 actually paid to Plaintiffs over the course of the following four years may have been less than the dollar amount owed, and that Defendant may in fact owe Plaintiffs additional amounts from May and June 2019 transactions.
As for the time period following June 2019, Plaintiffs point to various documents to support their claim that Defendant continued to breach the joint venture even after it was terminated on July 15, 2019. However, none of the documents are sufficient to permit a non-speculative finding that Defendant continued to broker marijuana deals pursuant to the JVA from which profits were generated that are payable to Plaintiffs.
Defendant's brief states that the specific question of whether he “did more deals after June 2019 . . . smacks of he said/they said,” and thus he “has opted to leave” that issue “for trial.” (Opening Br. 1-2). He then states that in light of the lack of any evidence that he closed deals after June 2019, “summary judgment on Plaintiffs' entire case,” including this issue, “would not be unreasonable, should the Court elect to consider it.” (Id.) Accordingly, while it is somewhat unclear, Defendant's brief can reasonably be construed to seek summary judgment on Plaintiff's “entire case,” including the issue of whether Defendant conducted deals after June 2019. The fact that no evidence supports this theory of the breach is sufficient to grant summary judgment on this issue. Even if Defendant's brief cannot reasonably be construed to seek summary judgment on this issue, a court may grant summary judgment sua sponte where the non-moving party is given notice and opportunity to be heard, and where, as here, “it appears clearly upon the record that all of the evidentiary materials that a party might submit in response to a motion for summary judgment are before the court.” Bridgeway Corp. v. Citibank, 201 F.3d 134, 139-41 (2d Cir. 2000) (citation omitted). This R&R constitutes notice to Plaintiffs that the Court is considering dismissing the breach of contract claim, and Plaintiffs have the opportunity to object to this R&R.
To start, Plaintiffs cite the bank records from Defendant's law firm account, which is the account that managed the joint venture's money. Plaintiffs argue that these records show that despite having money in the spring of 2019, the account was drawn down in June 2019 and experienced no activity for months until the account was closed. Plaintiffs argue that the lack of activity after June 2019 indicates that Defendant must have moved the joint venture's money to some other account, and that the joint venture must have continued to make money after that period. However, such an assertion is entirely speculative, and Plaintiffs present no evidence suggesting that Defendant moved money to another account.
Plaintiffs also point to Defendant's personal bank statements produced during discovery, which show money transfers into and out of Defendant's account from June 8, 2020 to May 11, 2021. Plaintiffs highlight several transfers, specifically:
• A transfer of $400 on June 8, 2020; description states: “Zelle Transfer Conf# 0FJ&0Q3MS; Jeffrey Miller”
• A transfer of $1,000 on July 2, 2020; description states: “WIRE TYPE:WIRE IN Dated: 200702”
• A transfer of $1,000 on July 20, 2020; description states: “WIRE TYPE:WIRE IN Dated: 200720”
• A transfer of $1,000 on August 3, 2020; description states: “Zelle Transfer Conf#411567059; FiberH LLC”
• A transfer of $1,900 on August 6, 2020; description states “Zelle Transfer Conf#411567059; FiberH LLC”
• A transfer of $1,100 on August 25, 2020; description states “Zelle Transfer Conf#42321706; FiberH LLC”
• A transfer of $1,000 on December 12, 2020; description states: “Zelle Transfer Conf# 485196990; Jeffrey Miller”
• A transfer of $750 on May 3, 2021; description states: “Zelle Transfer Conf# 590268297; Rad Relax LLC.”
Plaintiffs argue that these eight transfers into Defendant's personal bank account prove that the joint venture must have been successful. However, all of these transfers occurred after the termination of the JVA, whether the factfinder assumes the JVA was terminated by email on July 15, 2019, or by the terms of the JVA on April 11, 2020 (one year after it began). Plaintiffs cite no evidence linking these transfers to the joint venture and provide no explanation as to the significance of these transfers or how a factfinder could infer from them that the terminated joint venture was making a profit. Plaintiffs also provide no legal basis to find that Defendant owed Plaintiffs any money that he earned outside of the joint venture.
As further evidence that Defendant continued to breach the JVA following June 2019, Plaintiffs cite a general lack of evidence produced by Defendant during discovery. They argue that Defendant “[r]efused to submit [d]iscovery of his personal checking account, Accounting Records, books of accounting, Tax records, [or] Personal Banking.” (Opp. 3.) However, it is not the case that Defendant refused to comply with his discovery obligations. To the contrary, Defendant produced several months of bank account statements from the account that handled the joint venture's money and from his personal account. Although Plaintiffs moved to compel production of additional records, Defendant responded that he had produced all relevant documents and that he did not maintain a Profit and Loss Statement for the joint venture or other documentation tracking the joint venture's income. The Court denied the motion to compel, finding that, given the representations and productions made by Defendant, the request for additional discovery was not warranted. Plaintiffs point to no evidence that Defendant withheld responsive documents, and any such finding would be speculative. Accordingly, Defendant's purported failure to produce additional financial records is not evidence of a breach of contract.
Notably, other than repeatedly requesting additional financial records from Defendant, Plaintiffs made minimal effort to pursue discovery, and chose not to depose Defendant or any potential witnesses. Plaintiffs also did not proffer any expert witness to contest Defendant's assertion that the market for marijuana was unfavorable at the relevant time. Nor can Plaintiffs rely on their own testimony to contradict Defendant's assertions that the joint venture was unsuccessful or that he did not conduct additional deals, because unlike Defendant, Plaintiffs have no personal knowledge as to the success of the joint venture or any specific transactions.
Finally, Plaintiffs point to two emails sent by Defendant to Plaintiffs on September 23 and September 30, 2019 regarding sales of CBD and “several OG weed strains.” (Opp. Ex. D.) Despite the fact that Plaintiffs are the recipients of these emails, the emails are presented to the Court with virtually no context. Plaintiffs argue that the emails prove that Defendant was involved with cannabis-related projects after July 15, 2019, when the joint venture purportedly stopped making money and was terminated. However, the emails in question do not indicate that Defendant engaged in successful cannabis-related deals, nor that he used funds from the joint venture to engage in such deals. Moreover, the email evidence shows that Defendant told Plaintiffs he was “reluctant to take money into” a CBD venture. It would be speculative for a factfinder to infer from these emails generally discussing cannabis-related projects that the joint venture was earning profits payable to Plaintiffs. Moreover, as discussed above, Plaintiffs cite no legal basis to find that Defendant owed Plaintiffs money that he earned independently outside of the joint venture.
Therefore, Plaintiffs have failed to present evidence supporting, either directly or circumstantially, a finding that the joint venture continued to operate after its termination on July 15, 2019 or that Defendant failed to perform on the JVA as a result of any activity that occurred after June, 2019. Plaintiffs do not point to any deposition testimony of Defendant or others involved in the purchase and sale of marijuana under the joint venture, nor any deposition testimony, affidavits, or communications from individuals who may have knowledge about other dealings or transactions Defendant was involved in during the relevant period.
In sum, when looking at the record as a whole, there is some evidence to support Plaintiff's theory that, in May and June 2019, the JVA may have earned some profits that were not fully disbursed to Plaintiffs. While the JVA, by its terms, does not guarantee any amount of profits or return on investment, Defendant was obligated under the JVA to disburse profits that were actually earned. The email evidence from May and June 2019 in which Defendant states he will be sending money to the Investors is sufficient to raise a material dispute as to whether Defendant failed to perform on the contract by not fully disbursing profits the joint venture earned in May and June 2019. However, there is no evidence to support the allegation that Defendant continued to breach the JVA in July 2019 and beyond.
b. Damages
Plaintiffs assert that they incurred damages by failing to earn the full extent of profits they were owed under the JVA. Assuming Plaintiffs can show that Defendant failed to perform on the contract, there is sparse evidence on the record showing that Plaintiffs incurred any damages. Plaintiffs do not present any calculation of damages owed and have not presented a damages expert or any other method for calculating damages. It is also undisputed that Defendant complied with his duty under the JVA to return Plaintiffs' initial investments of approximately $25,000 each, and that Plaintiffs did not incur a loss on their investment.
However, as discussed above, there is evidence supporting a claim that Defendant may have failed to pay Plaintiffs their full share of profits earned in May and June 2019, which according to the emails may have been approximately $10,000 to $20,000 per Investor. It is undisputed that Defendants instead paid Plaintiffs approximately $6,350 each after May 10, 2019. Thus, construing the evidence in the light most favorable to Plaintiffs, a factfinder could reasonably find that contractual damages of approximately $13,650 per Plaintiff are due. Additionally, should Plaintiffs prevail at trial on the breach of contract issue, they could obtain nominal damages, which are “always available for breach of contract.” T & N PLC v. Fred S. James & Co. of N.Y., Inc., 29 F.3d 57, 60 (2d Cir. 1994).
Accordingly, although there is limited evidence of damages, there is sufficient evidence of damages to amount to a disputed material fact ripe for trial. See NAF Holdings, LLC v. Li & Fung (Trading) Ltd., 2016 WL 3098842, at *17-18 (S.D.N.Y. June 1, 2016) (rejecting defendants' argument that plaintiffs' failure to show damages is alone sufficient for summary judgment because of the availability of nominal damages). However, any damages awarded at trial would be limited as set forth above.
In sum, Plaintiffs have presented sufficient evidence to support all four elements of a breach of contract claim on the theory that, in May and June 2019, the JVA may have earned profits that were not fully disbursed to Plaintiffs. As such, I respectfully recommend that the motion for summary judgment be denied to the extent it seeks to dismiss the breach of contract claim in its entirety. However, because there is no evidence to support the allegation that Defendant continued to breach the JVA after June 2019, I respectfully recommend that summary judgment be granted as to Plaintiffs' allegations that Defendant breached the contract by continuing to earn profits after June 2019. See G8 Holdings, Inc., 2018 WL 11226748, at *4 (granting summary judgment to defendant on plaintiff's breach of contract claim where the plaintiff failed to point to evidence supporting its theory of breach, and explaining that “no reasonable jury could find by a preponderance of evidence that” the defendant breached the contract by using the plaintiff's proprietary information).
3. Second Cause of Action: New York and California Commercial Codes
Plaintiffs' Second Cause of Action asserts claims under the New York Uniform Commercial Code (“N.Y. U.C.C.”) § 3-501 and the California Commercial Code (“Cal. Com. Code”) § 3501. These provisions are not identical, but they both concern the requirement of “presentment” as it relates to “negotiable instruments.” Both the N.Y. U.C.C. and the Cal. Com. Code define “negotiable instrument” as an unconditional promise or order to pay a sum certain in money that, among other things, is payable on demand or at a definite time. See N.Y. U.C.C. § 3-104; Cal. Com. Code § 3104. Common examples of negotiable instruments include personal checks, cashier's checks, money orders, and travelers checks. “Presentment” in this context means a demand for payment made by a person entitled to enforce the instrument - that is, an effort to deposit or cash the check.
The Cal. Com. Code § 3501 defines “presentment” and explains how presentment may be made. N.Y. U.C.C. § 3-501 discusses when presentment is necessary. Subsequent sections of each code provide that a negotiable instrument is “dishonored” when the holder makes presentment and payment is refused on the day of presentment. Presentment and dishonor occur, for instance, when the holder of a check attempts to cash it, but payment is refused because of insufficient funds on deposit.
Plaintiffs argue that the JVA itself constitutes a “negotiable instrument,” and that Defendant “dishonored” the JVA in violation of the N.Y. U.C.C. and Cal. Com. Code. (Opp. 6.) This argument fails as a matter of law because the JVA is not a negotiable instrument. Significantly, the JVA was not an “unconditional promise” to pay a sum certain but rather was an agreement between four parties to engage in a joint venture, with each party meeting certain conditions. The JVA also was not payable “on demand.” See Stroll v. Epstein, 818 F.Supp. 640, 643 n. 4 (S.D.N.Y.1993) (“[T]he present contract is not a negotiable instrument because it is not payable to order or to bearer.” (citing N.Y. U.C.C. Law § 3-104)); Kamdem-Ouaffo v. Pepsico, Inc., 2015 WL 1011816, at *17 (S.D.N.Y. Mar. 9, 2015) (explaining that an employment contract is not a negotiable instrument and dismissing claims brought pursuant to the N.Y. U.C.C.).
To the extent the FAC can be construed to assert a claim that Defendant dishonored a negotiable instrument such as a check, this claim fails as well. It is undisputed that “Defendant never presented a check or other negotiable instrument to Plaintiffs.” (Def's 56.1 ¶ 12.) To the contrary, the evidence shows that Defendant made successful payments to Plaintiffs using wires or Zelle transfers.
As such, any claims asserted under the Uniform Commercial Codes necessarily fail, and I respectfully recommend that these claims be dismissed.
4. Third Cause of Action: Unethical Business Practices under New York and California Law
Plaintiffs' Third Cause of Action asserts that Defendant violated New York General Business Law (“N.Y. Gen. Bus. Law”) Chapter 20 Article 22A § 349 and California Business and Professions Code, Division 7 §§ 1600-1800.
N.Y. Gen. Bus. Law § 349 declares unlawful any “[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state.” N.Y. Gen. Bus. Law § 349. To state a claim for a § 349 violation, a plaintiff must allege that a defendant has engaged in (1) consumer-oriented conduct (2) in the State of New York that is (3) materially misleading and that (4) the plaintiff suffered an injury as a result of the allegedly deceptive act or practice. Nick's Garage, Inc. v. Progressive Cas. Ins. Co., 875 F.3d 107, 124 (2d Cir. 2017) (citation omitted); Fed. Deposit Ins. Corp. for First NBC Bank v. Murex LLC, 2018 WL 5831312, at *1 (S.D.N.Y. Nov. 7, 2018) (citations omitted). “Typically, private contract disputes cannot form the basis of a § 349 claim,” as a plaintiff “must demonstrate that the acts or practices have a broader impact on consumers at large.” Euchner-USA, Inc. v. Hartford Cas. Ins. Co., 754 F.3d 136, 143 (2d Cir. 2014) (citation omitted).
Here, there are no allegations that Defendant engaged in consumer-oriented conduct that harmed Plaintiffs, nor do Plaintiffs cite evidence suggesting that Defendant engaged in consumer-oriented conduct that harmed them. Rather, this is a quintessentially private contract dispute that does not form the basis of a claim under § 349. This is a sufficient basis to dismiss the § 349 claim. See Id. (affirming dismissal of § 349 claim arising from private contract dispute).
Plaintiffs' citation to Himmelstein, McConnel, Gribben, Donoghue & Joseph, LLP v. Matthew Bender & Co., Inc., 37 N.Y.3d 169, 171 N.E.3d 1192 (2021), does not warrant a different result. In that case, the New York court held that GBL § 349 covers not only deceptive practices targeting household consumers, but deceptive practices “directed to the consuming public and the marketplace” generally. Id. at 178. (See ECF No. 103-2 at 8.) “In other words,” the court explained, “GBL § 349 is focused on the seller's deception and its subsequent impact on consumer decision-making, not on the consumer's ultimate use of a product.” Id. Here, the issue is not whether Plaintiffs are household consumers or business consumers. Rather, the issue is that the alleged misleading conduct in question was not oriented at consumers at all, but at private parties to a contract.
Plaintiffs' briefing also references Defendant's loss of his license to practice law, which they purport was based on Defendant's “unethical business practices.” (ECF No. 103-2 at 8.) However, Defendant's disbarment has nothing to do with this case. Plaintiffs do not allege to have used Defendant's legal services, nor have they submitted any evidence suggesting that they used Defendant's legal services.
Additionally, there are no allegations that Defendant conducted any deceptive acts or practices in the state of New York, and the evidence shows that all relevant activity occurred in California, notwithstanding the choice of law provision in the JVA. This is also a sufficient basis to dismiss the § 349 claim. See Alzheimer's Found. of Am., Inc. v. Alzheimer's Disease & Related Disorders Ass'n, Inc., 2018 WL 2084168 (S.D.N.Y. May 1, 2018) (dismissing § 349 claim in part because “the deception did not occur in the state of New York”).
As for California Business and Professions Code, Division 7 §§ 1600-1800, these sections include a range of provisions that govern issues not relevant to this litigation such as licensing by cities and counties, employment activities, health care services, advertising, and cyber piracy. The Court construes this claim to assert that Defendant's alleged breach of the JVA generally constitutes unfair business activity. This claim is an attempt by Plaintiffs to repackage the breach of contract claim. There is no cogent argument in the briefing, nor any citation to evidence, that would warrant a trial as to any claim brought pursuant to the California Business and Professions Code.
Accordingly, I respectfully recommend that the claims asserted pursuant to the N.Y. Gen. Bus. Law and California Business and Professions Code be dismissed.
5. Fourth Cause of Action: Agricultural Lien
In their Fourth Cause of Action, Plaintiffs request a judgment foreclosing upon an agricultural lien that they allege to have perfected on “materials and labor furnished by Plaintiffs to Defendant as farm property” under Article 9, Sections 9601 et seq. of the Cal. Com. Code. (FAC 4.) In their briefing, Plaintiffs clarify that the alleged lien is on the property “3014 E. Dexter Ave Covina Ca.,” which they allege is Defendant's property.
The relevant provision of the Cal. Comm. Code provides that “[a]fter default ... [a] secured party may ... [r]educe a claim to judgment, foreclose, or otherwise enforce the claim, security interest, or agricultural lien by any available judicial procedure.” Cal. Comm. Code § 9601(a)(1). Under California law, a security interest is enforceable against a debtor if: (1) value has been given; (2) the debtor has rights in the collateral or the power to transfer rights in the collateral to a secured party; and (3) the debtor has authenticated a security agreement that provides a description of the collateral. Cal. Com. Code § 9203(b); see also Marshall Wealth Mgmt. Grp., Inc. v. Santillo, 2019 WL 79036, at *7 (N.D. Cal. Jan. 2, 2019) (on a motion for default judgment, finding that the plaintiff was entitled to foreclose on mortgages on vessels where the evidence demonstrated that plaintiff was a secured party, that he executed a preferred mortgage on the vessels and perfected liens on the vessels, that defendant defaulted on the mortgage, and that plaintiff incurred the claimed damages.)
Defendant contends that it is inappropriate for the Court to consider California law because of the choice of law provision in the JVA. The relevant provision states that “[t]his agreement shall be governed by and construed in accordance with the laws of New York and all disputes heard in New York City, New York.” This language only covers disputes as to the JVA itself, and is not so broad “as to encompass the entire relationship between the contracting parties.” Krock v. Lipsay, 97 F.3d 640, 645 (2d Cir.1996); see also Plymack v. Copley Pharm., Inc., 1995 WL 606272, at *5 (S.D.N.Y.1995) (under New York law, “[a] contractual choice-of-law provision ... does not bind the parties with respect to non-contractual causes of action”). Therefore, Plaintiffs may assert claims under California law in this lawsuit notwithstanding the choice of law provision.
Here, Plaintiffs have cited no evidence that they made any loan to Defendant or that Defendant defaulted on a loan. Significantly, although Plaintiffs alleged in the FAC that they loaned Defendant farm property, Defendant declared in a sworn affidavit that Plaintiffs never loaned him farm property, and Plaintiffs have not disputed this assertion in their briefing, submitted a countervailing affidavit, or pointed to any evidence that they loaned Defendant farm property. (Miller Aff. ¶ 11.) Rather, Plaintiffs assert in their Rule 56.1 statement that they perfected an agricultural lien because, “[s]imply put[,] Defendant reneged on the deal and refused to pay on the contract.” This is plainly insufficient on a motion for summary judgment to establish any security interest in Defendant's property.
Additionally, although Plaintiffs attached a copy of a UCC Financing Statement to the initial complaint, this form is merely designed to allow a creditor to give notice that it has or may have an interest in the property of a debtor and is not itself evidence that a creditor in fact has an interest in that property. See United States v. Prusa, 2006 WL 2521641, at *2-3 (E.D. Cal. Aug. 30, 2006), R&R adopted, 2006 WL 2792830 (E.D. Cal. Sept. 28, 2006) (finding that where the party opposing summary judgment did not provide evidence to establish the validity of the UCC Financing Statements they had filed, the financing statements were “null and void,” and the purported “lien” had “no basis in law or fact”).
Because Plaintiffs have provided no evidence supporting the validity of any lien on Defendant's property, I respectfully recommend that summary judgment as to the Fourth Cause of Action be granted, and that Plaintiffs' foreclosure claim be dismissed.
CONCLUSION
For the reasons set forth above, I respectfully recommend that Defendant's Motion for Summary Judgment be GRANTED, except as to Plaintiffs' claim that Defendant breached the JVA by failing to disburse the full amount of profits earned in May and/or June 2019 that should have been disbursed in accordance with the terms of the JVA. If this R&R is adopted, this discrete claim and Defendant's counterclaims will be the only remaining claims in this action.
NOTICE
The parties shall have seventeen days from this date to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Fed.R.Civ.P. 72(b) to this Report and Recommendation. See also Fed.R.Civ.P. 6(a),(d). If Plaintiffs file written objections to this Report and Recommendation, Defendant may respond to the objections within seventeen days after being served with a copy. Fed. R. Civ. P.72(b)(2). If Defendant files written objections to this Report and Recommendation, Plaintiffs may respond to the objections within seventeen days after being served with a copy. Fed. R. Civ. P.72(b)(2).
Objections and responses to objections shall be filed with the Clerk of the Court, with courtesy copies delivered to the Hon. Paul A. Engelmayer at 40 Foley Square New York, NY 10007-1312 and to any opposing parties. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b). Requests for an extension of time to file objections must be directed to Judge Engelmayer. Failure to file timely objections will result in a waiver of those objections for purposes of appeal. See 28 U.S.C.§ 636(b)(1); Fed.R.Civ.P. 6(a), 6(d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).