Pleasure Island, Inc. et al v. City of New York et al

Filing 51

MEMORANDUM AND ORDER, Currently before the Court are state defendants' 41 motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, and city defendants' 36 motion to dismiss pursuant to Rule 12(b)(6). For the reasons set forth below, defendants' 36 and 41 motions are hereby GRANTED. Ordered by Judge I. Leo Glasser on 5/24/2013. (Layne, Monique)

UNITED STATES DISTRICT COURT

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GLASSER, Senior United States District Judge:
Plaintiffs Pleasure Island, Inc. d/b/a Galaxy Restaurant ("Pleasure Island"),
Marat Zagorin C"Zagorin"), and Mark Shteynshlyuger ("Shteynshlyuger," collectively
"plaintiffs") bring this action against the City of New York ("City"), Community Board
#15 ("CB15") and its members (together with the City, "city defendants"), New York
State Liquor Authority ("SLA"), four current and former SLA officials ("SLA officials"),
and two state legislators (together with the SLA officials, "individual state defendants,"
and with the SLA, "state defendants"), alleging that their application for a liquor license
was denied based upon religion and national origin in violation offederal, state, and city
law. Plaintiffs also bring claims for defamation and tortious interference with contracts
under state law.
Currently before the Court are state defendants' motion to dismiss pursuant to
Rules 12(b)(1) and 12(b)(6) ofthe Federal Rules of Civil Procedure, and city defendants'
motion to dismiss pursuant to Rule 12(b)(6). For the reasons set forth below,
defendants' motions are hereby GRANTED.

1

BACKGROUND
I.

Facts

The following facts are taken from plaintiffs' Complaint, documents referenced in
the Complaint, and public records. They are accepted as true for purposes of this
motion, except to the extent they are contradictory.
From about 2005 through 2008, Zagorin was one-third owner ofT E M Bar
Lounge Corp. ("T EM") located at 816 Avenue U in Brooklyn, New York. Complaint
dated September 12, 2013 ("Compl.") 'II 24 (Dkt. No. 1).1 T E M held an on-premises
liquor license and was cited for multiple violations. Compl. '11'1126-28; Affirmation of
Mark D. Frering dated Jan. 3, 2013 ("Frering Aff."), Ex. A at 1-2.2 From 2008 through
2010, a Japanese restaurant unaffiliated with Zagorin operated in this location. Compl.
'1154·
IOn March 20, 2013, Magistrate Judge Gold granted plaintiffs leave to attach a
Proposed Amended Complaint ("PAC") to their supplemental opposition papers.
Despite filing the PAC outside the 21 day window to amend as a matter of course,
plaintiffs did not seek the Court's permission to amend their Complaint. Fed. R. Civ. P.
15(a). While "leave to amend should be granted 'when justice so requires,' motions to
amend should generally be denied in instances of futility, undue delay, bad faith or
dilatory motive, repeated failure to cure deficiencies by amendments previously allowed,
or undue prejudice to the non-moving party." Burch v. Pioneer Credit Recovery. Inc.,
551 F.3d 122,126 (2d Cir. 2008) (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). To
the extent plaintiffs move to amend the Complaint under Rule 15(a), their motion is
denied as futile and causing undue delay. The additional five paragraphs of the PAC do
not cure the deficiencies of the Complaint, and the PAC has delayed proceedings for
weeks by prompting an additional round of briefing.
2 Plaintiffs claim they committed "minor violations," such as failing to properly
display certificates, while SLA found more serious violations, such as noise complaints
and "after hours" sales of alcohol. The Court may take judicial notice of the SLA's
decision because plaintiffs relied upon it in drafting the Complaint. David Lerner
Assocs .. Inc. v. Philadelphia Indem. Ins. Co., --- F. SUpp. 2d ----, 2013 WL 1277882, at
*4 (E.D.N.Y. Mar. 29, 2013).
2

In January 2011, plaintiffs began construction on 816 Avenue U in order to open
a new establishment: Pleasure Island. Id. 'II 20. Plaintiffs characterize Pleasure Island
as an "upscale full service restaurant geared towards young professionals with recorded
music and, on occasion, light live entertainment." Id. '1137. Shteynshlyuger owned 90%
of Pleasure Island, Zagorin owned 10%, and together they spent about $425,000 in
construction costs and $190,000 in expenses. Id. '11'1122-23. Both Shteynshlyuger and
Zagorin are Russian and Jewish. Id. '11'118-9.
Before starting construction, plaintiffs applied for an on-premises liquor license
for Pleasure Island. Id. '11'1119, 37. Plaintiffs' liquor license application characterizes
Pleasure Island as a "Bar / Lounge," and in the "Extent of Food Service" section selects
the "tavern" option for "alcohol sales primarily," and not the "restaurant" or "tavernrestaurant" option. Declaration of Teresita V. Magsino dated Dec. 28, 2012 ("Magsino
Decl."), Ex. A (Dkt. No. 36-2). Plaintiffs allege that they were assured by unspecified
individuals that their application for a liquor license would be "walked through."
Compl. '1139.
SLA is the state agency responsible for liquor license applications. Id. 'II1l.
Ordinarily, SLA will approve an application for an on-premises liquor license unless
there is good cause for denial. Id. '1138. However, when an applicant for an on-premises
liquor license is located within a 500 foot radius of three or more existing
establishments with on-premises liquor licenses, the burden shifts and SLA will deny
the license unless it finds that granting the license is in the public interest ("500 Foot
Law"). Frering Aff., Ex. A at

2.

As part of that determination, SLA must consult with

the local Community Board and hold a hearing ("500 Foot Hearing"). Id. Plaintiffs
acknowledge that 816 Avenue U is subject to the 500 Foot Law and falls within the
3

jurisdiction of CB15, which prepares nonbinding recommendations of approval or
disapproval of liquor license applications. Id. at 2-6.
On August 30, 2010, plaintiffs mailed a copy of their on-premises liquor license
application to CB15, which considered it at its October 27, 2010 meeting. Magsino
Decl., Exs. A-B. The Complaint and the documents incorporated by reference in the
Complaint present starkly opposing accounts of that meeting. According to the meeting
minutes, board member Robert Gevertzman objected to approving the liquor license
because of prior issues at the same location, which prompted other board members to
voice opposition to Pleasure Island. Magsino Decl., Ex. B. Chairperson Theresa Scavo
took a vote, and CB15 unanimously voted to send a letter recommending rejection to
SLA. Id. In contrast, plaintiffs claim that Scavo opposed their liquor license application
because she did not want to live near a Russian, unkosher establishment. Compl. '11'11 21,
35-36, 44. Prior to the meeting, she allegedly engaged in a public smear campaign
against plaintiffs that induced State Senator Martin Golden and Assemblyman Steven
Cymbrowitz to write letters in opposition to plaintiffs' liquor license application on
official letterhead. Id. '11'1131-34,41,43. At the meeting, Cymbrowitz's letter was read
aloud, and CB15 members claimed that they received 300 phone calls in opposition to
Pleasure Island. Id. '11'11 29, 33, 53. Plaintiffs allege that CB15 made up the 300 phone
calls to further their conspiracy to only approve kosher restaurants. Id. '11'11 29, 53, 60-

3 According to the minutes, CB15 considered twelve other liquor license
applications at the same meeting as Pleasure Island, none of which garnered any
opposition. Although the minutes do not indicate whether these establishments are
kosher or not, several, such as "Perry's Seafood Restaurant," are very likely unkosher.
Magsino Decl., Ex. B.

4

On April 25, 2011, plaintiffs filed their liquor license application with SLA, and an
SLA representative held a 500 Foot Hearing for plaintiffs' liquor license application on
May 17,2011. Frering Aff., Ex. A at 1. Although no one appeared at the hearing to
oppose plaintiffs' application, CB15 and members of the public informed the hearing
officer of their opposition outside the hearing. Id. at 2-3; Compl.

'11'11

39, 45. The hearing

officer accepted two letters in opposition on May 19, 2011, which plaintiffs allege was
improper. Id.
SLA held a full board meeting to consider plaintiffs' application on October 19,
2011. Compl. '1147. At the meeting, plaintiffs claimed that the opposition to their
application stemmed from false rumors that Pleasure Island was going to be an adult
venue. Id. They testified that they were opening a restaurant that would operate as a
lounge late at night, not an adult venue, and two additional witnesses spoke in support
of plaintiffs. Id.

'11'11

48-50. A representative for Assemblyman Cymbrowitz appeared in

opposition to plaintiffs' application and emphasized that community opposition,
including the 300 phone calls, stemmed from prior problems at the location. Id.

'11'11

33-

34; Frering Aff., Ex. A at 4. SLA members noted that Pleasure Island's website used the
word "nightclub" and were skeptical that Pleasure Island would be a restaurant;
however, they decided to defer ruling on plaintiffs' application because of the rumor
allegations. Frering Aff., Ex. A at 4-5.
SLA considered plaintiffs' application again at its November 16, 2011 full board
meeting. At the meeting, a representative for plaintiffs presented a petition of support
from members of the community and offered a number of changes to assuage CB15's
concerns, such as changing the name of the establishment to "Galaxy Restaurant,"
closing by 2:00 A.M. instead of 4:00 A.M., adding noise-absorbing curtains, offering
5

valet parking, and using an age verification system. Compl. '\l'\l51-52. Plaintiffs
informed CE15 of these proposed changes prior to this meeting, but CE15 continued to
oppose plaintiffs' liquor license application. Id. '\l 51; Frering Aff., Ex. A at 5. SLA
concluded that CE15 unanimously voted against granting the liquor license despite
being informed of these proposed changes due to the history of problems at the location,
which stopped when the Japanese restaurant operated there. Frering Aff., Ex. A at 5. In
light of CE15's and Cymbrowitz's opposition, and the lack of complaints about an
establishment not affiliated with Zargorin in the same location, SLA voted that granting
plaintiffs' application was not in the public interest. Id. at 6-7. Plaintiffs allege that SLA
conspired with CE15 to deny its application because CE15 sent an SLA employee an
email thanking her for disapproving plaintiffs' application. Compl. '\l 42.

II.

Procedural History

Plaintiffs filed this action on September 20, 2012, alleging federal, state, and city
discrimination claims and additional state law claims. Dkt. No.!. On December 28,
2012, city defendants moved to dismiss the Complaint, arguing that CE15 and its
members merely acted in an advisory capacity and, therefore, cannot be held liable.
Dkt. No. 36-4. Plaintiffs filed their opposition on February 7, 2013, and city defendants
filed their reply on March 1, 2013. Dkt. Nos. 44-45.
On January 11, 2013, state defendants moved to dismiss the Complaint, arguing,
among other things, that plaintiffs' claims are barred by the Eleventh Amendment. Dkt.
No. 41-1. Plaintiffs filed their opposition on March 8, 2013, to which they attached the
PAC, and state defendants filed their reply on April 19, 2013. Dkt. Nos. 46 & 50. On
March 19, 2013, plaintiffs filed a supplemental opposition to city defendants' motion

6

based on the PAC with Magistrate Judge Gold's permission. Dkt. No. 4 8 -1. City
defendants filed their response on April 5, Z013. Dkt. No. 49·

DISCUSSION
I. Legal Standards

A. Rule 12(b)(1)
"A case is properly dismissed for lack of subject matter jurisdiction under Rule
1z(b )(1) of the Federal Rules of Civil Procedure when the district court lacks the

statutory or constitutional power to adjudicate it." Makarova v. United States, Z01 F·3d
110,113 (zd Cir. zooo). To defeat a Rule 1z(b)(1) motion to dismiss, plaintiffs "bear[]
the burden of proving subject matter jurisdiction by a preponderance of the evidence."
Aurecchione v. School man Transp. Sys .. Inc., 4z6 F.3d 635, 638 (zd Cir. Z005). In
resolving such a motion, "the court must take all facts alleged in the complaint as true
and draw all reasonable inferences in favor of plaintiff[s]." Natural Res. Def. Council v.
Johnson, 461 F.3d 164,171 (zd Cir. zo06) (quotation omitted). However, the Court
"may consider affidavits and other materials beyond the pleadings to resolve the
jurisdictional issue." J.S. ex reI. N.S. v. Attica Cent. Sch., 386 F.3d 107, 110 (zd Cir.
Z004).

B. Rule 12(b)(6)
Rule 8(a)(z) of the Federal Rules of Civil Procedure requires a complaint to
include "a short and plain statement ofthe claim showing that the pleader is entitled to
relief." To survive a motion to dismiss pursuant to Rule 1z(b)(6), the plaintiffs pleading
must contain "sufficient factual matter, accepted as true, to 'state a claim to relief that is
plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 66z, 678 (Z009) (quoting Bell Atl.
Corp. v. Twombly. 550 U.S. 544, 570 (Z007)). A claim has facial plausibility "when the
7

plaintiff pleads factual content that allows the Court to draw the reasonable inference
that the defendant is liable for the misconduct alleged." Igbal, 556 U.S. at 678 .
Although detailed factual allegations are not necessary, the pleading must include
more than an "unadorned, the-defendant-unlawfully-harmed-me accusation;" mere
legal conclusions, "a formulaic recitation of the elements of a cause of action," or "naked
assertions" by the plaintiff will not suffice. Id. (internal quotations and citations
omitted). This plausibility standard "is not akin to a 'probability requirement,' but it
asks for more than a sheer possibility that a defendant has acted unlawfully." Id.
(quoting Twombly, 550 U.S. at 556). Determining whether a complaint states a
plausible claim for relief is "a context-specific task that requires the reviewing court to
draw on its judicial experience and common sense. But where the well-pleaded facts do
not permit the court to infer more than the mere possibility of misconduct, the
complaint has alleged-but it has not 'show[n]' -'that the pleader is entitled to relief.'"
Igbal, 556 U.S. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
In adjudicating a Rule 12(b)( 6) motion, a district court may consider "the

complaint and any documents attached thereto or incorporated by reference and
documents upon which the complaint relies heavily." Bldg. Indus. Elec. Contractors
Ass'n v. City of New York, 678 F.3d 184, 187 (2d Cir. 2012) (quotations omitted).
II. Federal Claims
Plaintiffs allege that various government agencies and officials conspired to
discriminate against them based upon religion and national origin in violation of the
First and Fourteenth Amendments, and cite a laundry list of provisions of the Civil
Rights Act: 42 U.S.C. §§ 1983, 1985, and 1986. Compl. 'Il'll 64-83.

8

"Section 1983 governs civil rights actions against a person acting under color of
state law who 'subjects, or causes to be subjected, any citizen of the United States or
other person within the jurisdiction thereof to the deprivation of any rights, privileges,
or immunities secured by the Constitution and laws of the United States.'" Reyes v. City
of New York, No. 1O-CV-1838, 2012 WL 37544, at *3 (E.D.N.Y. Jan. 9, 2012) (quoting 42
U.S.C. § 1983). "The statue itself is not a source of substantive rights but merely
provides a method for vindicating federal rights elsewhere conferred," here, the First
and Fourteenth Amendments. Id. (quoting Fowlkes v. Rodriguez, 584 F. Supp. 2d 561,
572 (E.D.N.Y. 2008)). "Section 1985 prohibits conspiracy to interfere with civil rights,"
and "§ 1986 creates a cause of action for neglecting to prevent an actionable conspiracy
under § 1985." Sylla v. City of New York, No. 04-cv-5692, 2005 WL 3336460, at *7
(E.D.N.Y. Dec. 8, 2005). Plaintiffs seek $10 million in compensatory damages and an
additional $10 million in punitive damages, as well as attorneys' fees and costs, for their
federal claims. Compl.

'11'11

70, 80, 83.

A. State Defendants
Plaintiffs bring claims against SLA, the SLA officials in their individual and
official capacities, and two state legislators in their individual and official capacities. Id.
'11'1111-17. Official-capacity suits are fundamentally directed at the government entity of
which the officer is an agent, while "[p]ersonal-capacity suits seek to impose personal
liability upon a government official for actions he takes under color of state law."
Kentucky v. Graham, 473 U.S. 159, 165-66 (1985) (citations omitted). Whereas "[t]he
only immunities that can be claimed in an official-capacity action are forms of sovereign
immunity," "an official in a personal-capacity action may ... be able to assert personal
immunity defenses." Id. at 166-67.

9

The Eleventh Amendment provides sovereign immunity from suits for money
damages to state agencies and state officials acting in their official capacities, including
state legislators. Id. at 169; Pennhurst State Sch. & Hosp. v. Halderman, 465 U.S. 89,
99-100 (1984); Rini v. Zwirn, 886 F. Supp. 270, 295 (E.D.N.Y. 1995). Therefore, state
defendants' motion to dismiss under Rule 12(b)(I) is granted with respect to SLA and
the individual state defendants in their official capacities. Tessler v. Paterson, 768 F.
Supp. 2d 661, 672 (S.D.N.Y. 2011).4
Senator Golden and Assemblyman Cymbrowitz are absolutely immune from
personal liability. State legislators are entitled to absolute immunity from personalcapacity suits "for a wide array of legislative acts within 'the sphere of legitimate
legislative activity.'" Favors v. Cuomo, 285 F.R.D. 187, 208 (E.D.N.Y. 2012) (quoting
Bogan v. Scott-Harris, 523 U.S. 44, 46 (1998)). Taking an opposing position during a
public meeting is "integral to the legislative process," and, therefore, is entitled to
legislative immunity. Avila v. Estate of Kroogman, No. 3-02CV851, 2006 WL 214032, at
*3 (D. Conn. Jan. 27, 2006) (citing Bogan, 523 U.S. at 55). Accordingly, state
defendants' motion to dismiss under Rule 12(b)(6) is granted with respect to both state
legislators.

4 Although the Eleventh Amendment provides sovereign immunity against suits
for money damages, it permits suits against state officers in their official capacity that
allege ongoing violations of federal law and seek prospective relief. In re Deposit Ins.
Agency, 482 F.3d 612,618 (2d Cir. 2007) (citing Ex parte Young, 209 U.S. 123 (1908)).
While the Complaint makes a lone, passing reference to unspecified injunctive relief, it
"fails to sufficiently allege any ongoing violation of federal law, much less any ongoing
violation perpetrated by [individual state defendants]." Foster v. Diop, No. 11-CV-4731,
2013 WL 1339408, at *9 (E.D.N.Y. Mar. 31, 2013); Compl. at 24. Therefore, despite the
volume of ink expended by the parties on this issue, the Ex parte Young doctrine is
inapposite.
10

State defendants' motion to dismiss under Rule 12(b)(6) is also granted with
respect to the SLA officials because plaintiffs fail to allege a single instance of
discriminatory conduct by the SLA officials. In sum, the Court dismisses all federal
claims against state defendants with prejudice.

B. City Defendants
Plaintiffs bring claims against CB15, all members of CB15 in their individual and
official capacities, and the City. Compl. '\1'\110, 18.

i. Claims against CB15 and its Members
"To state a claim under § 1983, a plaintiff must establish that the defendant
deprived him of a federal or constitutional right while acting under the color of state
law." Sazon Inc. v. City of New York, No. 11 Civ. 3666, 2011 WL 5910171, at *3 (S.D.N.Y.
Nov. 28, 2011) (citing Cox v. Warwick Valley Cent. Sch. Dist., 654 F.3d 267, 272 (2d Cir.
2011)). A person acts under color oflaw when he (1) acts in his official capacity "clothed
with the authority of state law," or (2) acts "under 'pretense' of law" by purporting to act
with official power. Id. at *3-4 (quoting West v. Atkins, 487 U.S. 42, 49 (1988); Screws
v. United States, 325 U.S. 91, 111 (1945)).
CB15 and its members cannot be held liable under § 1983 because they did not
act under color oflaw. It is well-established that for all regulatory activities, a
"Community Board's role in the review process is merely advisory." Greenberg v. City of
New York, 832 N.Y.S.2d 16, 21 (1st Dep't 2007) (citing Cmty. Bd. 7 of Borough of
Manhattan v. Schaffer, 639 N.E.2d 1, 5 (N.Y. 1994)); Sazon, 2011 WL 5910171, at *4
(citing cases). Here, CB15 sent a non-binding recommendation to SLA, which had sole
authority over plaintiffs' liquor license application. Since CB15 and its members lacked
the power to approve or disapprove plaintiffs' application, and plaintiffs do not allege
11

that CB15 misrepresented its ability to do so, plaintiffs have not adequately pleaded that
CB15 or its members acted under color of law. See Sazon, 2011 WL 5910171, at *4.
Similarly, Scavo is but a single member of CB15, so her alleged actions and
misrepresentations are, l! fortiori, not under color of state law. Therefore, plaintiffs' §
1983 claim against CB15 and its members is dismissed.
Plaintiffs also fail to adequately plead conspiracy claims under §§ 1985 and 1986.
"In order to maintain an action under Section 1985, a plaintiff must provide some
factual basis supporting a meeting of the minds, such that defendants entered into an
agreement, express or tacit, to achieve the unlawful end." Sylla, 2005 WL 3336460, at
*7 (quoting Webb v. Goord, 340 F.3d 105,110-11 (2d Cir. 2003)). A single "thank you"
email does not establish an agreement between CB15 and SLA. Similarly, the fact that
several named defendants sit on the same community board is insufficient to support
the existence of an agreement among them. Sazon, 2011 WL 5910171, at *6. "Where
plaintiff[s] fail[] to state a viable § 1985 claim, [they] cannot state a claim under § 1986."
Sylla, 2005 WL 3336460, at *7. Accordingly, plaintiffs' §§ 1985 and 1986 claims against
CB15 and its members are dismissed.

ii. Claims against the City of New York
"In order to establish municipal liability for unconstitutional acts by municipal
employees, a plaintiff must show that the violation of his constitutional rights resulted
from a municipal policy, custom, or practice." Trigg v. New York City Transit Auth., No.
99-CV-4730, 2001 WL 868336, at *11 (E.D.N.Y. July 26,2001) (citing Monell v. Dep't of
Social Servs., 436 U.S. 658, 694 (1978)). A plaintiff can establish this by alleging a
formal act of a municipality's governing body, a single act by a municipal employee with
policymaking authority, or an informal custom that "is so widespread as to have the
12

force of law." Sazon, 2011 WL 5910171, at *5 (citing Pembaur v. City of Cincinnati, 475
U.S. 469, 480-81 (1986); Bd. of Cnty. Comm'rs of Bryan Cnty., Okla. v. Brown, 520 U.S.
398,404 (1997))·
Plaintiffs have not alleged any formal or informal City policies, customs, or
practices; CB15 has no policymaking authority, as discussed above; and Scavo's alleged
biases and "actions alone cannot support an inference of the existence of a permanent
and well-settled widespread practice." Andrews v. City of New York, CV-01-7333, 2004
U.S. Dist. LEXIS 30290, at *33 (E.D.N.Y. Nov. 23, 2004); Sazon, 2011 WL 5910171, at
*5. Accordingly, plaintiffs' federal claims against the City are dismissed.
In sum, the Court dismisses all federal claims against city defendants with

prejudice.
III.

State and City Law Claims
The Court may decline to exercise supplemental jurisdiction over state and

municipal law claims if the Court has "dismissed all claims over which it has original
jurisdiction." 28 U.S.C. § 1367(c)(3). "It is well settled that where, as here, the federal
claims are eliminated in the early stages of litigation, courts should generally decline to
exercise pendent jurisdiction over remaining state law claims." Klein & Co. Futures, Inc.
v. Bd. of Trade, 464 F.3d 255, 262 (2d Cir. 2006). Therefore, plaintiffs' state and city
law claims are dismissed without prejudice. See Cave v. East Meadow Union Free Sch.
Dist., 514 F.3d 240, 250 (2d Cir. 2008).
CONCLUSION
For all of the foregoing reasons, defendants' motions are hereby GRANTED.
SO ORDERED.

13

Dated:

Brooklyn, New York
May 24, 2013

s/ILG

-I.Lm~

v

Seni;ru~i;Ei States District Judge

14