Opinion
150319/2018
06-07-2019
VICE INC., Plaintiff, v. Scott STAPP, Defendant. Scott Stapp, Counterclaim Plaintiff, v. Vice, Inc., Counterclaim Defendant, and Jonathan Votta, Vincent Votta, Ronald Jay Blumenthal, John Moyer, Union Entertainment Group, Inc. and John Gomez, Additional Counterclaim Defendants.
The following papers numbered 1 to 6 were fully submitted on the 14th day of May, 2018.
Papers Numbered
Notice of Motion (Seq. No. 002 ) by Counterclaim Defendants
Vice, Inc., Jonathan Votta, Vincent Votta, Ronald Jay Blumenthal, and John Moyer, to Dismiss the Counterclaim of Defendant/Counterclaim Plaintiff Scott Stapp pursuant to CPLR 3211(a)(1), CPLR 3211(a)(5), CPLR(a)(6) and CPLR(a)(7), with Supporting Papers (dated March 8, 2019) 1
Memorandum of Law in Support of Motion to Dismiss Counterclaim (dated February 18. 2019) 2
Notice of Cross Motion (Seq. No. 003 ) by Counterclaim Defendant John Gomez, with Supporting Papers (dated March 8, 2019) 3
Scott Stapp's Memorandum of Law and Affidavit in Opposition to the Counterclaim Defendants' Motions to Dismiss (dated April 30, 2019) 4
Affirmation of Gary M. Schuster, Esq. in Support of Motion to Dismiss Counterclaim (dated May 10, 2019) 5
Reply Memorandum of Law in Further Support of Motion to Dismiss Counterclaim (dated May 12, 2019) 6
Upon the foregoing papers, the motion (Seq. No. 002 ) of counterclaim defendant Vice, Inc., and additional counterclaim defendants Jonathan Votta, Vincent Votta, Ronald Jay Blumenthal and John Moyer to dismiss the single counterclaim of counterclaim plaintiff Scott Stapp is granted in accordance with the following, as is the cross motion (Seq. No. 003 ) of counterclaim defendant John Gomez for like relief.
BACKGROUND
Defendant Scott Stapp is a highly successful rock music singer, songwriter and well-known vocalist. He achieved fame as the lead vocalist for the musical group, "Creed", and as a solo act. To the extent that his notoriety is relevant to this action, the albums his band released sold in excess of 50 million copies worldwide and have been certified as "Platinum" and "Gold" by the Recording Industry Association of America; his singles have reached "Number One" on the Billboard Mainstream Rock Chart. Plaintiff Vice, Inc. (hereinafter, "Vice") owns and operates a music recording and performing group named Art of Anarchy (hereinafter, "AOA"). On September 29, 2015, the parties executed a written agreement entitled "Art of Anarchy Band Agreement" whereby Vice engaged Stapp as a member of AOA, to provide his "unique, innovative and personal services" to the band. The Band Agreement was executed by Vice, Stapp and the other members of the musical group, i.e. , Jonathan Votta, Vincent Votta, Ronald Jay Blumenthal and John Moyer.
This action arises out of Stapp's alleged breach of the agreement by, inter alia , failing to participate in live performances, still photography, video productions and publicity programs, including radio interviews. More particularly, Vice claims that Stapp (1) refused to participate in social media promotional efforts such as the filming and recording of a live performance video and a music video in support of AOA's second LP; and (2) he "secretly" negotiated (i.e. , without the participation of the other AOA band members) a headlining role as a solo act on a musical tour called "Make America Rock Again" (the "2017 MARA Tour"). Allegedly, Stapp's actions and omissions resulted in the termination of AOA's record contract with a unit of Sony Music, thereby hindering the band's success and causing Vice to suffer severe financial consequences. According to plaintiff, Stapp's bad faith conduct gave rise to the causes of action asserted in the Complaint, i.e. , for theft of corporate business opportunities (the "First"), breach of fiduciary duty (the "Second"), breach of contract (the "Third"), conversion (the "Fourth"), unjust enrichment (the "Fifth"), to impose a constructive trust (the "Sixth"), and for the repayment of an alleged $ 200,000.00 loan (the "Seventh").
In a Decision and Order dated November 7, 2018, the Court denied Stapp's pre-answer motion to dismiss the Complaint pursuant to CPLR § 3211(a)(1), and granted the branch of the motion pursuant to § 3211(a)(7) to dismiss the causes of action for breach of fiduciary duty, conversion, unjust enrichment and to impose a constructive trust.
Subsequently, Stapp interposed a Verified Answer and Counterclaim, wherein he asserts that Vice, Jonathan Votta, Vincent Votta, Blumenthal, Moyer, and Union Entertainment Group, Inc. conspired to commit fraud, aided and abetted in participating in a fraudulent scheme, and knowingly made numerous fraudulent misrepresentations to induce him to "join" the band, Art of Anarchy.
More particularly, the fraudulent statements at issue concern, inter alia , that (1) AOA had negotiated a "three-album deal" with Century Media Records; (2) management had secured an agreement with the band, Nickelback, for AOA to be the opening act for an upcoming tour; (3) financing had been obtained for the band's tours, music videos, marketing and recordings; (4) an established infrastructure was in place; and (4) the band had secured offers to perform at certain venues.
MOTION TO DISMISS STAPP'S COUNTERCLAIM PURSUANT TO CPLR § 3211(a)(7)
Presently before the Court is a motion and cross motion by the counterclaim defendants to dismiss Stapp's counterclaim pursuant to CPLR §§ 3211(a)(1), (a)(5), (a)(6) and (a)(7).
On a motion to dismiss for failure to state a cause of action under CPLR 3211(a)(7), the Court "accept[s] the facts as alleged in the complaint as true, accord[s] plaintiff the benefit of every possible favorable inference, and determine[s] only whether the facts as alleged fit within any cognizable legal theory" ( Connaughton v. Chipotle Mexican Grill, Inc. , 29 NY3d 137, 141 [2017], quoting Leon v. Martinez , 84 NY2d 83, 87-88 [1994] ; see CPLR § 3026 ). "At the same time, however, allegations consisting of bare legal conclusions are not entitled to any such consideration" ( Simkin v. Blank , 19 NY3d 46, 52 [2012] ).
Pertinent to the matter at bar, "[d]ismissal of the complaint is warranted if the plaintiff fails to assert facts in support of an element of the claim, or if the factual allegations and inferences to be drawn from them do not allow for an enforceable right of recovery" ( Connaughton v. Chipotle Mexican Grill, Inc. , 29 NY3d at 142 ; see also John R. Higgitt, Practice Commentaries, McKinney's Cons Laws of NY, CPLR C3211:22). The court may freely consider affidavits submitted by plaintiff to remedy any defects in the complaint (see Gawrych v. Astoria Fed. Sav. & Loan , 148 AD3d 681, 682 [2d Dept 2017] ]; see Rovello v. Orofino Realty Co. , 40 NY2d 633, 635 [1976] ).
In the matter at bar, to properly allege a counterclaim of fraud, plaintiff must assert (1) a misrepresentation or a material omission of fact which was false and known to be false by the counterclaim defendants, (2) made for the purpose of inducing him to rely upon it, (3) justifiable reliance on the misrepresentation or material omission, and (4) injury resulting from the fraud (see Connaughton v. Chipotle Mexican Grill, Inc. 29 NY3d at 142 ; Lama Holding Co. v. Smith Barney , 88 NY2d 413, 421 [1996] ).
In support of the motion and cross motion to dismiss, counterclaim defendants maintain that assuming, arguendo, Stapp pleaded the elements of fraud with sufficient particularity as required by CPLR § 3016, he has nevertheless failed to state a cause of action regarding the essential element of injury. More particularly, movants maintain that the sole measure of damages in such a cause of action is the actual pecuniary loss sustained as the direct result of the fraud, rather than having to forego other business opportunities, as Stapp alleges. They contend that the counterclaim fails to allege any recoverable damages. Moreover, movants point out that the Band Agreement specifically contemplates that Stapp could pursue his on-going musical career, as stated in paragraph 3: "[t]he services of each band member under this Agreement being non-exclusive and part-time, each band member shall have the right to perform similar services to other musical groups and to engage in other business ." Based on the foregoing, it is alleged that Stapp's assertion that he incurred a loss of other business opportunities is contradicted by the clear and unambiguous terms of the Band Agreement.
In an attempt to remedy the alleged pleading deficiencies, Stapp submits an affidavit to "supplement" his counterclaim to include details regarding the financial harm he allegedly sustained as a result of the fraud. According to Stapp, he invested substantial intellectual property (e.g. , in the form of his existing song, "Somber", other songwriting, his name, likeness and good will), for the benefit of AOA, instead of investing the same in his existing solo career. Similarly, he professes to have expended countless hours of songwriting for an AOA album, and maintains that the time and efforts he devoted to this task would have generated an album and related tour in 2017/2018 for his solo career. He allegedly declined a firm offer of $ 550,000 to perform and participate in the 2017 International Battle of the Bands that conflicted with AOA's 2017 summer tour. Essentially, Stapp contends that his "investment" of the foregoing items in furtherance of the Band Agreement had a value of at least $ 2 million, which constitutes the damages he suffered as a result of the fraud.
DISCUSSION
In New York, "the true measure of damage is indemnity for the actual pecuniary loss sustained as the direct result of the wrong or what is known as the ‘out-of-pocket’ rule" ( Lama Holding v. Smith Barney , 88 NY2d at 421 [internal citation omitted]; see Connaughton v. Chipotle Mexican Grill, Inc. 29 NY3d at 142 ). Under this rule, "[d]amages are to be calculated to compensate plaintiffs for what they lost because of the fraud, not to compensate them for what they might have gained [T]here can be no recovery of profits which would have been realized in the absence of fraud" ( id. at 421 ). "Moreover, this Court has consistently refused to allow damages for fraud based on the loss of a contractual bargain, the extent, and indeed, the very existence of which is completely undeterminable and speculative" ( id. at 142-143 [citation omitted] ).
Consonant with the foregoing, the Court finds that the counterclaim is fatally deficient. Stapp failed to allege any compensable damages directly resulting from the alleged fraud, and he did not otherwise plead a recoverable harm. More particularly, the purported loss of his investment of "substantial intellectual property" is not a recoverable "out-of-packet" loss (see Connaughton v. Chipotle Mexican Grill, Inc. 29 NY3d at 142 ). Moreover, Stapp's assertions that his reputation and songwriting (1) could have been devoted to his solo career rather than to benefit the Art of Anarchy Band, and (2) would have generated his own album and a related tour in 2017 and 2018, are inadequate to satisfy his pleading burden. These are not claims for actual out-of-pocket loss. Rather, they are "completely undeterminable and speculative" allegations of (1) potential damages to Stapp's solo career in the form of, inter alia , lost income, (2) loss of a contractual bargain, and/or (3) loss of profits from his purported $ 2 million investment in AOA ( Connaughton v. Chipotle Mexican Grill, Inc. 29 NY3d at 142-143 ; see Dress Shirt Sales v. Hotel Martinique Assoc. , 12 NY2d 339, 344 [1963] ). There can be no recovery of profits which would have been realized in the absence of fraud (see Connaughton v. Chipotle Mexican Grill, Inc. 29 NY3d at 142 ).
Dismissal of the counterclaim is warranted in light of Stapp's failure to assert facts necessary to support a material element of a cause of action for fraud (see Connaughton v. Chipotle Mexican Grill, Inc. 29 NY3d at 142-143 ; Lama Holding Co. v. Smith Barney , 88 NY2d at 421 ). The Court will not "read into his allegations a claim for cognizable damages under the guise of liberally construing the [counterclaim]" (see Connaughton v. Chipotle Mexican Grill, Inc. 29 NY3d at 144 )
Based on the Court's conclusion that the counterclaim should be dismissed pursuant to CPLR § 3211(a)(7) for failure to state a cause of action, there is no reason to address the balance of the motion and cross motion ( id. at 144 ).
Accordingly, it is
ORDERED, that the motion and cross motion to dismiss the counterclaim of Scott Stapp pursuant to CPLR § 3211(a)(7) is granted, the balance of the motion and cross motion is rendered academic; and it is further
ORDERED, that said counterclaim is hereby severed from the Verified Answer and dismissed; and it is further
ORDERED, that the Clerk mark his records accordingly; and it is further
ORDERED, that the parties appear for a preliminary conference on _________________, at 9:30 a.m., in DCM Part 21, Room 430 at 26 Central Avenue, Staten Island, New York.