Opinion
14 Civ. 10246 (RWL)
03-14-2018
SHANTOU REAL LINGERIE MANUFACTURING CO., LTD., Plaintiff, v. NATIVE GROUP INTERNATIONAL, LTD. d/b/a Native Intimates, and Abe Nissim, Defendants.
Wanda Borges, Christine June Hansen, Borges & Asociates, LLC, Syosset, NY, for Plaintiff. Jeffrey S. Dweck, The Law Firm of Jeffrey S. Dweck, P.C., New York, NY, for Defendants.
Wanda Borges, Christine June Hansen, Borges & Asociates, LLC, Syosset, NY, for Plaintiff.
Jeffrey S. Dweck, The Law Firm of Jeffrey S. Dweck, P.C., New York, NY, for Defendants.
MEMORANDUM AND ORDER
ROBERT W. LEHRBURGER, UNITED STATES MAGISTRATE JUDGE
In this action, Plaintiff Shantou Real Lingerie Manufacturing Co., Ltd. ("Shantou"), seeks to recover damages against Abe Nissim, an officer, director, and shareholder of Native Group International, Ltd. ("Native"), on a veil piercing theory. Shantou currently has an outstanding judgment against Native for the sum of $272,040.40, plus prejudgment interest. See Shantou Real Lingerie Manufacturing Co. v. Native Group International, Ltd. (Shantou I) , No. 14 Civ. 10246, 2016 WL 4532911, at *5 (S.D.N.Y. Aug. 23, 2016).
The parties have consented to my jurisdiction for all purposes pursuant to 28 U.S.C. § 636(c).
On April 7, 2017, Shantou moved for summary judgment against Mr. Nissim pursuant to Rule 56 of the Federal Rules of Civil Procedure. (Notice of Motion, Dkt. 51.) On April 28, 2017, Mr. Nissim responded and filed a motion to dismiss the claim pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, or in the alternative, for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. (Notice of Cross Motion, Dkt. 58.) For the reasons set forth below, Plaintiff's motion is DENIED, and Defendants' motion is DENIED.
Background
A. Factual Background
The following facts are undisputed unless otherwise noted. Shantou is incorporated and has its principal place of business in China. (Defendants' Response to Plaintiff's Rule 56.1 Statement, Dkt. 65 ("Def. 56.1") ¶ 1.) Native is a business corporation organized under the laws of New York and was engaged in the business of selling lingerie to the wholesale and retail market. (Def. 56.1 ¶ 3.) Mr. Nissim is Native's "owner" and sole shareholder. (Def. 56.1 ¶ 4.) Mr. Nissim represents that during Native's most profitable years, the company grossed over $30 million and that it conducted business through a team of officers, accountants, bankers, lawyers, and other employees. (Declaration of Abe Nissim dated April 28, 2017, Dkt. 61 ("Nissim Decl.") ¶ 3.)
Between May and November 2013, Native placed dozens of orders with Shantou for lingerie. Shantou I , 2016 WL 4532911, at *1. Between October 2013 and February 2014, Shantou delivered the goods to Native through five separate shipments, each of which included an invoice, indicating the total balance due, as well as the price, quantity, and type of products shipped. Id. The total amount invoiced for the five shipments was $437,562.20. (Def. 56.1 ¶ 5.) It is uncontested that Native owed Shantou an outstanding balance of $272,040.40 for these goods. (Def. 56.1 ¶ 5.)
In 2014, while this balance was still outstanding, Native became insolvent and its assets were foreclosed upon. Shantou alleges that Native ceased operating on or about July 2, 2014 (Plaintiff's Statement of Material Facts, Dkt. 55-1 ("Pl. 56.1") ¶ 7), and while Mr. Nissim disputes this, he acknowledges that on or about July 2, 2014, Native's assets were foreclosed upon by its lender (Def. 56.1 ¶ 7). Mr. Nissim claims that the insolvency was due in large part to the "failing retail economy." (Nissim Decl. ¶ 2.)
Prior to its insolvency, Native maintained bank accounts with the following institutions: HSBC Bank, N.A., First Republic Bank, and Israel Discount Bank (collectively, the "Native Accounts"). (Def. 56.1 ¶ 21.) Between January 1, 2013 and November 1, 2014, transfers were made from the Native Accounts directly to Mr. Nissim by check or wire transfer in the amount of $64,551.28, and cash withdrawals were made by Mr. Nissim from the Native Accounts totaling $141,555.87. (Def. 56.1 ¶¶ 25, 29-30.) During that same time period, checks were also written to "Cash" on the Native Accounts, in the amount of $41,373. (Def. 56.1 ¶ 31.) Shantou represents that in total, between January 1, 2013 and November 1, 2014, more than $1.725 million was transferred from the Native Accounts to Mr. Nissim. (Pl. 56.1 ¶ 32.) Mr. Nissim refutes this characterization of the transfers and claims that the majority of the $1,725 million in transferred funds represented business expenses, while approximately $250,000 of the transferred funds consisted of "salary, distributions, bonuses, perquisites, expense reimbursements, petty cash and/or business expenses." (Def. 56.1 ¶ 32.)
Shantou asserts that First Republic Bank account no. 4780 was a Native business account, while Mr. Nissim claims it was a personal account in both his and his wife's name. (See Nissim Decl. ¶ 6; First Republic Bank Account Statement—ATM Rebate Checking, attached as part of Ex. 5 to Declaration of Christine Hansen dated April 6, 2017, Dkt. 54 ("Hansen Decl.").) If account no. 4780 was a Native account, that fact would strengthen Shantou's veil-piercing claim. However, it is outside the scope of this Rule 56 motion to determine the ownership of account no. 4780 and therefore any reference to a First Republic Bank account is only to account no. 3560, which all Parties agree is a Native business account.
B. Procedural History
On July 8, 2016, Shantou moved for partial summary judgment against Native, seeking to recover the unpaid balance for its shipments of garments. Native did not submit any opposition papers. On August 23, 2016, the Honorable Frank Maas, United States Magistrate Judge, awarded judgment against Native for the unpaid balance of $272,040.40, plus prejudgment interest on that sum from January 1, 2014, through the date judgment was entered, at the rate set forth in 26 U.S.C. § 6621(a)(2). Shantou I, 2016 WL 4532911, at *5. To date, this judgment remains wholly unsatisfied. On April 7, 2017, Shantou made the instant motion for summary judgment, seeking to pierce Native's corporate veil so that Mr. Nissim would be personally liable for the judgment. On April 28, 2017, Mr. Nissim filed a motion to dismiss the claim pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, or in the alternative, for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.
Shantou argues that Mr. Nissim's motion should be denied as untimely because it was not brought by the deadline for filing dispositive motions. While the Court may strike a cross-motion for summary judgment when the moving party does not meet the deadline for filing dispositive motions, see Fry v. Hartford Insurance Co., No. 09 CV 6669, 2011 WL 1672474, at *3 (W.D.N.Y. May 3, 2011), the Court declines to do so in this instance, see Hahnel v. United States, 782 F.Supp.2d 20, 31 (W.D.N.Y. 2011) (noting that the court routinely permitted litigants to file cross-motions in response to a dispositive motion, even though the deadline had passed). Regardless, this issue is inconsequential as Defendants' cross-motion is being denied in its entirety.
Legal Framework
A. Summary Judgment
Mr. Nissim has moved to dismiss Shantou's veil-piercing claim pursuant to Rule 12(c) of the Federal Rules of Civil Procedure. In connection with that motion, however, Mr. Nissim presented evidence outside the pleadings. Accordingly, the motion will be treated as one for summary judgment under Rule 56. See Fed. R. Civ. P. Rule 12(d).
Under Rule 56 of the Federal Rules of Civil Procedure, a court will "grant summary judgment if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; accord Celotex Corp v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party bears the initial burden of identifying "the absence of a genuine issue of material fact." Celotex , 477 U.S. at 323, 106 S.Ct. 2548. The opposing party must then come forward with specific materials establishing the existence of a genuine dispute. Id. at 324, 106 S.Ct. 2548. Where the nonmoving party fails to make "a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial," summary judgment must be granted. Id. at 322, 106 S.Ct. 2548.
In assessing the record to determine whether there is a genuine issue of material fact, the court must resolve all ambiguities and draw all factual inferences in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; Smith v. Barnesandnoble.com, LLC, 839 F.3d 163, 166 (2d Cir. 2016). However, the court must inquire whether "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party," and summary judgment may be granted where the nonmovant's evidence is conclusory, speculative, or not significantly probative. Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505. "To show that there is a disputed fact sufficient to deny summary judgment, the non-moving party must produce evidence and ‘may not rely simply on conclusory statements or on contentions that the affidavits supporting the motion are not credible.’ " Montefiore Medical Center v. Local 272 Welfare Fund, No. 14 Civ. 10229, 2016 WL 8677161, at *3 (S.D.N.Y. Dec. 2, 2016) (quoting Ying Jing Gan v. City of New York, 996 F.2d 522, 532 (2d Cir. 1993) ), report and recommendation adopted, 2017 WL 1194704 (S.D.N.Y. March 31, 2017).
B. Conflicts in the Record
It is well established that the statements in an affidavit or affirmation opposing a motion for summary judgment must be accepted as true. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561-62, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). At the same time, it is also well settled that a party cannot "escape summary judgment merely by vaguely asserting the existence of some unspecified disputed material facts," Western World Insurance Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990) (quoting Borthwick v. First Georgetown Securities, Inc., 892 F.2d 178, 181 (2d Cir. 1989) ), or by submitting self-serving affirmations that contradict prior testimony asserted in depositions, interrogatories, or affidavits, see Margo v. Weiss, 213 F.3d 55, 60 (2d Cir. 2000) ("[T]he well-settled rule ‘in this circuit [is] that a party may not, in order to defeat a summary judgment motion, create a material issue of fact by submitting an affidavit disputing his own prior sworn testimony....’ " (quoting Margo v. Weiss, No. 96 Civ. 3842, 1998 WL 2558, at *7 (S.D.N.Y. Jan. 5, 1998) )).
Here, Mr. Nissim has submitted two declarations, which at times directly contradict his and Native's prior sworn discovery responses. Where the factual assertions in Mr. Nissim's declarations are in direct conflict with Defendants' earlier discovery responses, and are not supported by other evidence, the Court has disregarded those assertions. See Intimate Bookshop, Inc. v. Barnes & Noble, Inc., No. 98 Civ. 5564, 2003 WL 22251312, at *9 (S.D.N.Y. Sept. 30, 2003) (affidavits submitted to the court that contradicted prior sworn discovery responses were "wholly insufficient to create a genuine issue of material fact" and were not considered by the court); Mazzuocola v. Thunderbird Products Corp., No. 90 CV 405, 1995 WL 311397, at *9 (E.D.N.Y. May 16, 1995) (same); see also Reisner v. General Motors Corp., 671 F.2d 91, 93 (2d Cir. 2001) (disregarding plaintiff's factual claims after defendant moved for summary judgment, "where those claims contradict[ed] statements made previously by [plaintiff] at his deposition, in his affidavits, and in response to defendants' interrogatories").
Discussion
To pierce the corporate veil under New York law, a plaintiff must establish that the defendant exercised control over the corporation such that the corporation was a mere instrumentality of the owner and used to commit a wrongful or unjust act causing injury to the plaintiff. Atateks Foreign Trade, Ltd. v. Private Label Sourcing, LLC, 402 Fed.Appx. 623, 625 (2d Cir. 2010) ; Freeman v. Complex Computing Co., 119 F.3d 1044, 1052 (2d Cir. 1997). As discussed below, there is no legitimate dispute of material fact as to Mr. Nissim's disregard of the corporate form, but there is still an issue as to whether he exercised that control to commit a wrongful act against Shantou. See Freeman, 119 F.3d at 1053 (remanding case for the district court to determine whether the defendant used his control over the corporation "to commit a fraud or other wrong that resulted in unjust loss or injury to [plaintiff]").
A. Legal Standard for Piercing the Corporate Veil
Shantou argues that Mr. Nissim dominated and controlled Native, and that piercing Native's corporate veil is therefore appropriate. Neither Party disputes that New York law applies to these issues. Under New York law, "the courts will disregard the corporate form, or, to use accepted terminology, pierce the corporate veil, whenever necessary to prevent fraud or to achieve equity." Morris v. New York State Department of Taxation & Finance, 82 N.Y.2d 135, 140, 603 N.Y.S.2d 807, 810, 623 N.E.2d 1157 (1993) (internal quotation marks omitted) (quoting Walkovszky v. Carlton, 18 N.Y.2d 414, 417, 276 N.Y.S.2d 585, 587, 223 N.E.2d 6 (1966) ). To pierce the corporate veil, a plaintiff must establish the following elements: (1) "that the owner exercised complete domination over the corporation, and (2) that such domination was used to commit a fraud or wrong that injured the party seeking to pierce the veil." Thrift Drug, Inc. v. Universal Prescription Administrators, 131 F.3d 95, 97 (2d Cir. 1997) (internal quotation marks omitted) (quoting American Fuel Corp. v. Utah Energy Development Co., 122 F.3d 130, 134 (2d Cir. 1997) ). Veil-piercing is done with "extreme[ ] reluctan[ce]." United States v. Funds Held in the Name or for the Benefit of Wetterer, 210 F.3d 96, 106 (2d Cir. 2000).
In diversity cases, district courts apply the choice of law rules of the forum state. Krauss v. Manhattan Life Ins. Co., 643 F.2d 98, 100 (2d Cir. 1981). Under New York law, the general rule is that the law of the state of incorporation determines when the corporate form will be disregarded. See Fletcher v. Atex, Inc., 68 F.3d 1451, 1456 (2d Cir. 1995) ; Soviet Pan Am Travel Effort v. Travel Committee, Inc., 756 F.Supp. 126, 131 (S.D.N.Y. 1991) ("Because a corporation is a creature of state law whose primary purpose is to insulate shareholders from legal liability, the state of incorporation has the greater interest in determining when and if that insulation is to be stripped away."). Here, given that Native is incorporated in New York and that both Parties exclusively cite to and rely upon New York law, the Court will apply New York law to the instant motion. See DER Travel Services, Inc. v. Dream Tours & Adventures, Inc., No. 99 Civ. 2231, 2005 WL 2848939, at *6 (S.D.N.Y. Oct. 28, 2005) (collecting cases and finding that "[b]y citing only to New York authorities, the parties impliedly manifested their acquiescence to New York law controlling this dispute").
The Second Circuit has identified a variety of factors to consider in determining whether an individual exercises complete domination over a corporation, including:
(1) the absence of the formalities and paraphernalia that are part and parcel of the corporate existence, i.e., issuance of stock, election of directors, keeping of corporate records and the like, (2) inadequate capitalization, (3) whether funds are put in and taken out of the corporation for personal rather than corporate purposes, (4) overlap in ownership, officers, directors, and personnel, (5) common office space, address and telephone numbers of corporate entities, (6) the amount of business discretion displayed by the allegedly dominated corporation, (7) whether the related corporations deal with the dominated corporation at arm's length, (8) whether the corporations are treated as independent profit centers, (9) the payment or guarantee of debts of the dominated corporation by other corporations in the group, and (10) whether the corporation in question had property
that was used by other of the corporations as if it were its own.
Wm. Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 131, 139 (2d Cir. 1991). Courts are not required to find that every factor is present, and no one factor is dispositive. New York State Electric & Gas Corp. v. FirstEnergy Corp., 766 F.3d 212, 225 (2d Cir. 2014) ; Sentry Insurance v. Brand Management Inc., 120 F.Supp.3d 277, 288 (E.D.N.Y. 2015), ("[l]t is not required that every single factor weigh in favor of piercing the corporate veil—a district court need only find that, as a matter of law, the balance of Passalacqua factors weighs in favor of either party...." (internal quotation marks omitted) (quoting Feitshans v. Kahn, No. 06 Civ. 2125, 2007 WL 2438411, at *7 (S.D.N.Y. Aug. 24, 2007) )), aff'd sub nom., Sentry Insurance a Mutual Co. v. Weber , 720 Fed.Appx. 639 (2d Cir. 2017).
1. Domination and Control
Because Shantou claims that Native was dominated and controlled by an individual rather than a corporate entity, the Court's analysis will primarily focus on the following Passalacqua factors: the presence of corporate formalities; inadequate capitalization; commingling of personal and corporate funds; the payment or guarantee of debts; overlap of ownership, officers, directors, and personnel; and the amount of business discretion displayed by Native. See, e.g., Push, Inc. v. Production Advisors, Inc., No. 09 Civ. 4722, 2010 WL 1837776, at *3 (S.D.N.Y. April 15, 2010) (emphasizing certain factors where plaintiff was seeking to pierce the veil of a dominant owner, rather than a controlling corporate entity). Applying these factors, it is beyond dispute that Mr. Nissim completely dominated Native and that he disregarded the corporation's separate identity.
With regard to the first Passalacqua factor, the record contains virtually no corporate records that would evidence the workings of an actual corporation; there are no resolutions, minutes, or the like. The absence of such records "weigh[s] in favor of a finding that a corporation failed to maintain corporate formalities." Cardell Financial Corp. v. Suchodolski Associates, Inc., No. 09 Civ. 6148, 2012 WL 12932049, at *21 (S.D.N.Y. July 17, 2012), report and recommendation adopted sub nom., Cardell Financial Corp. v. Suchodolksi Associates, Inc., 896 F.Supp.2d 320 (S.D.N.Y. 2012) ; see also Goode v. Affirmative Investment Management, Inc., No. 90 Civ. 518, 1992 WL 47544, at *2 (S.D.N.Y. March 5, 1992) (where defendants failed to produce minutes of board and trustee meetings, corporate bank accounts, corporate books or any other documents that would support their claims, the court presumed that such documents did not exist, otherwise they would have been filed in support of defendants' motion for judgment as a matter of law).
Mr. Nissim attempts to justify his business practices and claims that the appropriate corporate formalities were followed but has not identified any support for his claims. In the absence of evidentiary support for those conclusory arguments, Mr. Nissim's "statements are not sufficient to satisfy [his] burden of coming forward with evidence directed to specific facts showing that there is a genuine issue for trial." West-Fair Electric Contractors v. Aetna Casualty & Surety Co., 78 F.3d 61, 63 (2d Cir. 1996) (internal quotation marks omitted) (quoting Jamesbury Corp. v. Litton Industrial Products, Inc., 839 F.2d 1544, 1548 (Fed. Cir. 1988) ); accord Push, Inc., 2010 WL 1837776, at *3 (granting summary judgment where defendant's characterization of corporation as having poor record-keeping practices did not adequately counter the absence of defendant company's inadequate capitalization, absence of corporate formalities, and use of corporate funds for personal use). Accordingly, the first Passalacqua factor weighs in favor of piercing the corporate veil.
Turning to the adequacy of capitalization, a company may be considered undercapitalized "when its liabilities exceed its assets, requiring personal loans to meet operating expenses." Cardell Financial Corp., 2012 WL 12932049, at *22. Insolvency may also be weighed as evidence that a corporation was inadequately capitalized. See, e.g., Atateks Foreign Trade, Ltd., 402 Fed.Appx. at 626 (noting that a factfinder may "consider insolvency in determining whether to pierce the corporate veil"); William Wrigley Jr. Co. v. Waters, 890 F.2d 594 (2d Cir. 1989) ("[I]nsolvency at the time of a transaction ... may evidence a corporation that is a mere shell and therefore susceptible to being bypassed in fashioning an appropriate remedy."); see also United States v. Nagelberg, 772 F.Supp. 120, 124 (E.D.N.Y. 1991) (in light of corporations' involuntary bankruptcies, it was "clear" that they were inadequately capitalized).
Each of the Native Accounts was closed between 2013 and 2014 with a negative or zero balance, demonstrating that Native was underfunded during the relevant time period. (Def. 56.1 ¶ 22.) Native's insolvency and the foreclosure upon its assets provides further confirmation of its inadequate capitalization. (Def. 56.1 ¶ 7.) Mr. Nissim contends that Native was working to "revive itself," but he does not argue that Native was properly capitalized. (Def. 56.1 ¶ 42a.) And, Mr. Nissim admits that he incurred personal debt in order to infuse money into the corporation. (Second Declaration of Abe Nissim dated May 1, 2017, Dkt. 63 ("Nissim Supp. Decl.") ¶ 3; Memorandum of Law in Opposition to Plaintiff's Motion, Dkt. 62 ("Def. Memo.") at 10.) It therefore is beyond dispute that Native was not sufficiently capitalized, another hallmark of disregard for corporate formalities.
The record also indisputably shows that Mr. Nissim and Native commingled personal and corporate funds and payment of debts. Shantou alleges that more than $1,725 million was transferred from Native's bank accounts to Mr. Nissim during the period of 22 months when Native's debts were mounting. (Pl. 56.1 ¶ 32.) Bank records indicate that these transfers included payments for personal expenses, including, but not limited to, mortgage bills, homeowner association bills, American Express bills, oral surgery, camps, charities, utilities, and payments to individuals with the same last name as Mr. Nissim. (Exs. 6 & 7 attached to Hansen Decl.) During that same time, Mr. Nissim received transfers from the Native Accounts by check or wire in the amount of $64,551.28, and withdrew $141,555.87 in cash from the Native Accounts. (Def. 56.1 ¶¶ 29-30.)
Mr. Nissim claims—without evidentiary support for his conclusory say-so—that the majority of the $1,725 million transferred to him consisted of payments for business expenses and contends that approximately $250,000 of the funds represented "salary, distributions, bonuses, perquisites, expense reimbursements, petty cash, and/or business expenses." (Def. 56.1 ¶ 32.) He also states that to the extent any "solely personal expenses" were paid or advanced by Native, they were "normally declared distributions or deducted from [his] salary." (Def. 56.1 ¶ 32; Nissim Decl. ¶ 19.) Mr. Nissim admits, however, that he may have "inadvertently overlooked" certain deductions or reimbursements made for personal expenses. (Nissim Decl. ¶ 19.)
And while Mr. Nissim does specifically refute the personal nature of a handful of the payments listed above, he does not address most of them, including certain payments which facially appear to be purely personal, such as: a vehicle leased or financed through Honda, repairs and home expenses, and payments to Citimortgage and WF Home Mortgage. (Def. 56.1 ¶ 28.) Courts routinely find that these types of payments are evidence of commingling of personal and business funds. See, e.g., Shanghai Join Buy Co. v. PSTEX Group, Inc., No. 05 Civ. 3766, 2006 WL 2322648, at *5 (S.D.N.Y. Aug. 10, 2006) (transfer of corporate funds to payments for defendant's wife, car, and lease, among other personal expenses, were sufficient evidence of commingling of personal and corporate funds).
Even in connection with the payments that he denies being for personal expenses, Mr. Nissim does not offer any evidence supporting his characterization of those payments.
Moreover, regardless of whether Mr. Nissim was reimbursing the company for any personal transfers, his use of a corporate credit card to pay personal expenses is still evidence of commingling and disregard of the corporate form. See, e.g., National Integrated Group Pension Plan v. Dunhill Food Equipment Corp., 938 F.Supp.2d 361, 377 (E.D.N.Y. 2013) ("Even if the Court accepts [defendant]'s claim that he reimbursed the companies for the majority of his personal expenses, his use of corporate credit cards to pay over $300,000 in personal expenses is evidence of domination.").
To further combat these allegations, Mr. Nissim provides some evidence that he "infused personal funds to the corporation to help it succeed and to help pay its debts" and states that he personally borrowed significant amounts of money to do so. (Nissim Supp. Decl. ¶ 3; Def. Memo, at 12.) This admission, however, actually strengthens the evidence of domination and the absence of arm's length dealing. See Lakah v. UBS AG, 996 F.Supp.2d 250, 263 (S.D.N.Y. 2014) (defendant's transfer of personal funds to the defendant corporation was evidence of domination and control); Vos v. Lee, No. 07 CV 804, 2009 WL 10640615, at *6 (E.D.N.Y. Dec. 23, 2009) (where defendants made loans to the corporations, but the loans and their terms were not memorialized in writing, this was evidence that the defendants did not interact at arm's length with the defendant corporation). In sum, the evidence put forth by both Parties demonstrates beyond dispute that Mr. Nissim commingled personal and corporate funds, used corporate funds for his own benefit, and personally provided for the payment of corporate debts.
The final group of factors further demonstrate Mr. Nissim's domination and control of Native. As Native's sole owner, officer, and shareholder, Mr. Nissim had unfettered discretion with respect to the corporation and its business decisions. See, e.g., Ridge Clearing & Outsourcing Solutions, Inc. v. Khashoggi, No. 07 Civ. 6611, 2011 WL 3586455, at *9 (S.D.N.Y. Aug. 12, 2011) (factors met where defendants "exercised nearly unbridled discretion" over corporation's business activities), aff'd sub nom., Broadridge Securities Processing Solutions, LLC v. Khashoggi, 507 Fed.Appx. 57 (2d Cir. 2013). Mr. Nissim attempts to manufacture a material issue of disputed fact by representing that Native had at least one other corporate officer, a Chief Operating Officer ("COO"), and that the COO and an office manager had access to the company's credit card and were permitted to withdraw funds from the Native Accounts. (Nissim Decl. ¶ 13.) These unsupported assertions contradict Native's prior discovery responses and post-judgment interrogatory responses, as well as Native's 2013 and 2014 tax forms, which did not list any corporate officers other than Mr. Nissim. (Interrogatories ¶¶ 1-4; Post-Judgment Interrogatories ¶¶ 1-4; 2014 U.S. Income Tax Return, attached as Ex. 9 to Hansen Decl.; 2013 U.S. Income Tax Return, attached as Ex. to Declaration of Christine Hansen dated May 5, 2017.) Mr. Nissim's newly asserted, contradictory representations are insufficient to create a genuine issue of material fact and will not be considered by this Court. See, e.g., Vos, 2009 WL 10640615, at *7 (conclusory, unsworn affidavits representing that funds were not taken out of the defendant corporation for personal purposes, when contradicted by prior testimony and documentary evidence, were not sufficient to create a genuine issue of material fact); The Intimate Bookshop, Inc., 2003 WL 22251312, at *9 (declining to consider affidavits submitted in connection with summary judgment motion where the affidavits conflicted with representations made in earlier discovery responses).
Mr. Nissim does not identify either the COO or the office manager by name or any other means. The only other employee identified in Defendants' discovery responses was a bookkeeper named Jess Fishman, who reported to Mr. Nissim and had no "authority to act, as a signatory or otherwise, on behalf of [Native]." (Defendant Native Group's Response to Plaintiff's First Set of Interrogatories ("Interrogatories"), attached as Ex. 3 to Hansen Decl., ¶¶ 2-3.) Furthermore, Native and Mr. Nissim represented that no individuals other than Mr. Nissim "were permitted to withdraw funds, issue checks drawn upon, and/or make from transfers from [the Native Accounts]." (Post-Judgment Interrogatories and Document Requests ("Post-Judgment Interrogatories"), attached as Ex. 8 to Hansen Decl., ¶¶ 2-3.) And, given the strength of the other evidence, even if Native had a COO at some point in time, that fact alone would not materially alter the determination of Mr. Nissim's domination and control.
Native's interrogatory responses were "provided solely by" Mr. Nissim, and the corporation's Post-Judgment Interrogatory Responses were signed by Mr. Nissim.
Mr. Nissim also argues that because Native conducted legitimate business, the corporation could not possibly have been under Mr. Nissim's domination and control. This argument misconstrues the requirements for piercing the corporate veil. Shantou is not required to show that Native conducted no legitimate business in order for the Court to find that Mr. Nissim was Native's alter ego. See Passalacqua, 933 F.2d at 139.
Taken together, the facts demonstrate unequivocally that Mr. Nissim exercised complete dominion over Native: Native did not observe corporate formalities; Mr. Nissim commingled personal and corporate funds; he diverted money from Native's Accounts for his personal use; and he exercised sole decision-making authority for the corporation. See NYKCool A.B. v. Pacific International Services, Inc., No. 12 Civ. 5754, 2013 WL 1274561, at *9-10 (S.D.N.Y. March 29, 2013) (piercing corporate veil where no corporate formalities were maintained, there was overlap of ownership and managers, the company had no discretion over major business decisions, and there was an absence of arm's length dealing), aff'd sub nom., NYKCool A.B. v. Ecuadorian Line, Inc., 562 Fed.Appx. 45, 46 (2d Cir. 2014) ; Capital Distribution Services, Ltd. v. Ducor Express Airlines, Inc., No. 04 CV 5303, 2007 WL 1288046, at *3 (E.D.N.Y. May 1, 2007) (granting summary judgment and piercing the corporate veil where the corporation had no functioning board of directors or officers other than the individual defendants, there were no recorded minutes of corporate meetings, the entity was undercapitalized, and the individual defendant sometimes paid his personal expenses from the corporate account); Shanghai Join Buy Co. v. PSTEX Group, Inc., No. 05 Civ. 3766, 2006 WL 2322648, at *3-5 (S.D.N.Y. Aug. 10, 2006) (piercing the veil and granting summary judgment where corporation was run "without any concern for business formalities," the individual defendant's constant movement of funds from the corporation's account led to inadequate capitalization, and funds were taken out of the corporation for personal purposes, among other factors).
2. Use of the Corporation for Perpetration of a Wrongful Act
"The party seeking to pierce the corporate veil must establish that the owners, through their domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party such that a court in equity will intervene." Morris, 82 N.Y.2d at 142, 603 N.Y.S.2d at 811, 623 N.E.2d 1157. Without a causal link between the control exerted over the corporation and the fraud or other wrong, "limited liability will prevail." Freeman, 119 F.3d at 1053 ; see Key Items, Inc. v. Ultima Diamonds, Inc., No. 09 Civ. 3729, 2010 WL 3291582, at *9 (S.D.N.Y. Aug. 17, 2010) (dismissing alter ego claim due to absence of allegations that defendants "used the corporate form to breach the contract or to frustrate contractual obligations"). Here, summary judgment is not appropriate in favor of either Party because there are disputed issues of fact as to whether there is a causal link between Mr. Nissim's domination of the corporation and Native's failure to pay the outstanding balance owed to Shantou.
Mr. Nissim also argues that piercing the corporate veil is not appropriate because Shantou assumed the risk of doing business with Native. The case law relied upon by Mr. Nissim is inapt. In the Second Circuit, courts are reluctant to find sufficient evidence of wrongdoing where the party seeking to pierce the veil was aware of the financial condition of the relevant corporation ahead of time. See, e.g., Favour Mind Ltd. v. Pacific Shores, Inc., No. 98 Civ. 7038, 2004 WL 97649, at *7 (S.D.N.Y. Jan. 20, 2004). This is not such a case. Mr. Nissim has not presented any evidence that Shantou had knowledge of Native's deteriorating financial condition or of its corporate structure. In light of this, it cannot be said that Shantou assumed the risk that Native would perpetrate a fraud or wrong against it.
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The causation prong can be satisfied when the dominating party has used its control to transfer assets beyond the reach of creditors. See Atateks Foreign Trade, Ltd., 402 Fed.Appx. at 626 (the fraudulent transfer of commission payments "was a wrong resulting in plaintiffs' injury because the commissions exacerbated defendants' insolvency and rendered them less able to pay damages"); JSC Foreign Economic Association Technostroyexport v. International Development & Trade Services, Inc., 386 F.Supp.2d 461, 476 (S.D.N.Y. 2005) (holding that "diverting payments from [the corporation] into personal accounts," which resulted in the defendant being "unable to comply with its contractual obligations" constituted a wrong for veil-piercing purposes)
Shantou alleges precisely that: Mr. Nissim abused Native's corporate form and "raided" its corporate assets so that Native could not satisfy its contractual obligations to Shantou. (Memorandum of Law in Support of Plaintiff's Motion for Summary Judgment, Dkt. 55, at 10-11.) But this is a material issue of disputed fact, which itself turns on multiple disputed issues of fact. For example, bank records do indicate that between January 1, 2013 and November 1, 2014, large sums of money were transferred out of the Native Accounts during the time that Native was incurring debts to Shantou. (Exs. 6 & 7.) Mr. Nissim contends, however, that Native's insolvency and subsequent inability to pay its creditors, including Shantou, resulted not from those transfers, but primarily from a failing retail market. (Nissim Decl. ¶ 2); see Lakah, 996 F.Supp.2d at 266-68 (declining to determine on summary judgment defendant's motive for transferring funds or the causes of the collapse of the corporation).
Additionally, Mr. Nissim represents that between September and December 2013, he transferred $323,400 in personal funds to Native and that he borrowed significant sums of money to do so. (Nissim Supp. Decl. ¶ 3; Attachment to Nissim Supp. Decl.) While Mr. Nissim's personal contributions to Native's Accounts strengthens the undisputed fact of his domination and control as set forth above, they "weaken the inference of fraud or wrong." Lakah, 996 F.Supp.2d at 263 (declining to grant summary judgment where issues of fact remained as to whether Defendants' acts constituted fraud or wrongdoing). If these transfers were truly personal contributions or loans from Mr. Nissim, this would suggest that he was not attempting to frustrate Native's contractual obligations to Shantou.
In sum, although Shantou has established as a matter of law that Mr. Nissim exercised dominion and control over Native, there is a disputed material issue of fact as to whether Mr. Nissim employed that domination and control to perpetrate a wrongful act against Shantou. Summary judgment therefore is not warranted.
Conclusion
For the reasons stated above, Plaintiff's motion for summary judgment is denied and Defendant's cross-motion is denied.