Texas 1845, LLC v. Wu Air Corporation et al

Filing 44

MEMORANDUM AND ORDER granting in part and denying in part 12 Motion to Dismiss; granting in part and denying in part 12 Motion to Strike; granting in part and denying in part 13 Motion to Dismiss; granting in part and denying in part 13 M otion to Strike; denying 25 Motion to Appoint Receiver. Based on the foregoing discussion, the Court orders the following: Plaintiff's motion to dismiss the Wu Defendants' counterclaims and strike certain affirmative defenses (Docket E ntry 12) is GRANTED IN PART AND DENIED IN PART. It is denied as to the Wu Defendants' conversion counterclaim and their defamation counterclaim arising out of Plaintiff's allegedly false filing with the FAA. It is granted as to the tortiou s interference with contractual relations and fraud counterclaims and as to the remainder of the defamation counterclaims. The Wu Defendants may amend their counterclaims within twenty-one (21) days from the date of this Order. The Wu Defendants 9; personal jurisdiction and election of remedies affirmative defenses are struck, as is their jury demand. The Court does not strike the concurrent state court proceedings and payment affirmative defenses. Plaintiff's motion to dismiss the Ma ine Defendants' counterclaims and strike an affirmative defense (Docket Entry 13) is DENIED WITHOUT PREJUDICE. The Maine Defendants are directed to file their answer and opposition papers with the Court forthwith and not later than five (5) days from the date of this Order. Upon the Maine Defendants' compliance, Plaintiff may renew its motion with a one-page letter motion to the Court. No additional briefing from either side will be permitted. Plaintiff's motion for a receiver is DENIED at this time. Should Plaintiff move again for the appointment of a receiver, it shall provide the Court with the additional information described above and submit a proposed receivership order. So Ordered by Judge Joanna Seybert on 2/3/12. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
------------------------------------X
TEXAS 1845 LLC,
Plaintiff,
-against-

MEMORANDUM & ORDER
11-CV-1825 (JS)(ETB)

WU AIR CORPORATION, WU AVIATION
CORPORATION, MAINE AVIATION AIRCRAFT
MAINTENANCE LLC, MAIN AVIATION
AIRCRAFT CHARTER LLC and ALLYN
CARUSO,
Defendants.
------------------------------------X
APPEARANCES
For Plaintiff:
Thomas E. Stagg, Esq.
Debra L. Wabnik, Esq.
Stagg, Terenzi, Confusione & Wabnik, LLP
401 Franklin Avenue, Suite 300
Garden City, NY 11530
For Defendants:
Wu Defendants

Maine Aviation
Defendants

Shibu John Jacob, Esg.
Shestack & Young LLP
233 Broadway, Suite 2200
New York, NY 10279
Mark Kenneth Silver, Esq.
Coughlin Duffy LLP
350 Mount Kemble Avenue
Post Office Box 1917
Morristown, NJ 07962

SEYBERT District Judge:
Plaintiff

Texas

1845

LLC

sued

Defendants

Wu

Air

Corporation (“Wu Air”), Wu Aviation Corporation (“Wu Aviation”),
Maine Aviation Aircraft Maintenance LLC (“Maine Maintenance”),
Main Aviation Aircraft Charter LLC (“Maine Charter”), and Allyn
Caruso to recover on promissory notes that were used to finance

two airplanes.

Pending before the Court are three motions.

First,

moves

Plaintiff

(together,
their

the

“Wu

affirmative

to

dismiss

Defendants”)

Wu

Air

and

counterclaims

defenses.

(Docket

Wu

Aviation’s

and

Entry

certain

12.)

of

Second,

Plaintiff moves to dismiss Main Maintenance, Main Charter, and
Allyn

Caruso’s

(collectively,

the

“Maine

Defendants”)

counterclaims and one of their affirmative defenses.
Entry

13.)

receiver

Third,

for

businesses.

Plaintiff

certain

moves

collateral

the

and

Court

for

the

to

(Docket
appoint

Wu

a

Defendants’

(Docket Entry 25.)
BACKGROUND

The
Complaint,

following

the

Wu

discussion

Defendants’

draws

Answer

and

from

Plaintiff’s

Counterclaims,

and

Plaintiff’s motion to appoint a receiver.
I. Plaintiff’s Allegations
The

Wu

Defendants

finance two airplanes.

borrowed

millions

of

dollars

to

In December 2006, Wu Aviation executed a

promissory note (the “Aviation Note”) in the principal amount of
$6,600,000

payable

Equipment”).
(the

to

Key

(Compl. ¶ 11.)

“Aviation

Security

Equipment

Finance,

Inc.

(“Key

Pursuant to a security agreement

Agreement”),

the

Aviation

Note

was

secured, in part, by a British Aerospace model BAE 125-1000A
airplane

(the

“Hawker”)

and

its

engines

and

including its logbooks (the “Hawker Logbooks”).
2 

accessories,
(Id. ¶ 19.)

Among

other

things,

the

Aviation

Security

Agreement

provided

that the secured party will have the right to inspect the Hawker
and the Hawker Logbooks.

(Id. ¶ 21.)

The secured party’s

remedies included court action, self-help, or any other lawful
remedy, and the Aviation Security Agreement provided that the
secured party’s remedies were cumulative.

(Id. ¶¶ 21-24.)

In October 2007, Wu Air executed a promissory note in
the principal amount of $8,342,505 payable to Key Equipment.
(Id. ¶ 15.)

In December 2008, Wu Air executed a second note,

this time in the principal amount of $5,000,000, which was also
payable to Key Equipment.

(Id. ¶ 16.)

The Court will refer

collectively to the Wu Air promissory notes as the “Air Notes.”
Pursuant to a security agreement (the “Air Security Agreement”),
the Air Notes were secured in part by a Bombardier model CL-6002B19

aircraft

(the

“CRJ”)

and

its

engines

including its logbooks (the “CRJ Logbooks”).

and

accessories,

(Id. ¶¶ 25-26.)

Among other things, the Air Security Agreements provided the
secured party with the right to inspect the CRJ and the CRJ
Logbooks. (Id. ¶¶ 28-29.)

The secured party’s remedies--which

were cumulative--included court action and self-help.

(Id. ¶¶

30-31.)
In September 2007, Wu Air entered into an aircraft
charter and lease agreement with Maine Charter (the “CRJ Charter
Agreement”) to allow Maine Charter to use the CRJ in its air
3 

charter service.

(Id. ¶ 32.)

The agreement provided, among

other things, that Wu Air was entitled to 85% of the monthly
gross charter flight revenues attributable to the CRJ.
34.)

(Id. ¶

In turn, Maine Charter entered into charter contracts (the

“Charter Contracts”) under which at least three companies agreed
to pay Maine Charter for charter services associated with the
CRJ.

(Id. ¶ 36.)
The

CRJ

Charter

Agreement

Equipment in October 2007.

(Id. ¶ 34.)

that,

default

in

the

event

of

a

was

assigned

to

Key

The assignment provided

under

the

Wu

Air

Security

Agreement, Key Equipment would be entitled to take any action to
collect

rents

Agreement.

or

other

amounts

due

under

the

CRJ

Charter

(Id. ¶ 35.)
The Wu Defendants failed to make the payments required

by the Aviation Note and the Air Notes, respectively, and Key
Equipment accelerated the balance due under the notes. (Id. ¶
37-38.)
In

December

2010,

Key

Equipment

assigned

their

interest in the Aviation Note, Air Notes, Security Agreements,
and CRJ Charter Agreement to Plaintiff.
this

assignment,

Plaintiff

demanded

(Id. ¶ 41.)
that

it

be

Following
allowed

to

inspect the CRJ, the Hawker, and the logbooks for each aircraft.
(Id. ¶ 43.)

Wu Defendants refused this demand and moved the

collateral to an undisclosed location.
4 

(Id. ¶ 45.)

Plaintiff

was eventually able to repossess the CRJ, but it has not been
able to locate the Hawker or the Logbooks for either the CRJ or
the Hawker.

(Id. ¶ 49.)

II. The Wu Defendants’ Counterclaims
The Wu Defendants allege that on February 9, 2011,
“employees or agents” of Plaintiff went to Teterboro Airport in
New Jersey, where the CRJ was being prepared for a chartered
flight.

These employees or agents “made false representations

with respect to the CRJ,” including that Plaintiff “had the
right to repossess the plane” and that “title to the CRJ would
be transferred in 15 minutes.”
¶ 9.)

(Wu Countercls., Docket Entry 10

Through “intimidation,” the employees attempted to coerce

Maine Maintenance’s and Maine Charter’s employees to turn the
CRJ over to Plaintiff.
reclaim
actions

the

CRJ

caused

(Id. ¶ 10.)

(Id.)

were

Maine

Although Plaintiff’s efforts to

ultimately

Charter

to

unsuccessful,

lose

its

charter

Plaintiff’s
contracts.

The contract cancellations were to the ultimate

detriment of Wu Air.

(Id. ¶ 10.)

According to the Wu Defendants, Plaintiff made false
statements to the Federal Aviation Administration (the “FAA”) on
February 10, 2011.
Plaintiff

filed

a

Specifically, the Wu Defendants claim that
Certificate

of

Repossession

of

Encumbered

Aircraft that falsely claimed that (1) Plaintiff had repossessed
and

foreclosed

on

the

CRJ

on
5 

February

10,

and

(2)

the

Wu

Defendants had been “divested of ownership of the airplane.”
(Id. at 13.)1
The Wu Defendants further allege that on March 22,
2011, the CRJ was being stored at MacArthur Airport in Islip,
New York.
airport,

On that day, Plaintiff’s agents travelled to the
presented

unspecified

“documentation”

to

airport

personnel in order to persuade them that Plaintiff had a right
to repossess the airplane, and falsely stated that Jeffrey Wu-presumably

a

principal

of

the

Wu

Plaintiff to take the airplane.

Defendants--had

(Id. at 14.)

authorized

In fact, Jeffrey

Wu had not authorized Plaintiff to take the CRJ and, pursuant to
an order from New York Supreme Court, Wu Air owned the CRJ and
had the right to use it within the continental United States.
(Id. ¶ 13.)

Nevertheless, Plaintiff’s agents took possession of

the CRJ at MacArthur Airport and flew it to Texas.

(Id. ¶ 14.)

III. Plaintiff’s Motion to Appoint a Receiver
In

addition

to

the

allegations

set

forth

in

its

Complaint, discussed supra, Plaintiff asserts in its motion to
appoint a receiver that the Wu and Maine Defendants “engaged in
a course of conduct to purposefully evade and divert [P]laintiff
from taking the [c]ollateral.”

(Pl. Receiver Br. 2.)

According

1

The counterclaims portion of the Wu Defendants’ Answer contains
mis-numbered paragraphs.
(See generally Docket Entry 10.)
Where appropriate, the Court refers to the ECF page number.
6 

to Plaintiff, the aircraft logbooks--without which the value of
the

planes

decreases

dramatically--have

not

been

properly

secured, thus creating a risk that they will be lost, stolen, or
damaged.

(Id. at 6.)

It also claims that the Wu Defendants

misled Plaintiff about the Hawker’s location (Pl. Receiver Reply
4), that they have not been forthcoming about their current
business address (Pl. Receiver Br. 8), and that they forfeited
their right to do business under Delaware law (id.).
IV. The Maine Defendants
The Maine Defendants have not filed an Answer with the
Court, either on the Court’s Electronic Case Filing (“ECF”) or
in hard copy.
is

no

This appears to be an oversight inasmuch as there

indication

that

the

Maine

defending the case all along.2

Defendants

have

not

been

Obviously, though, the Court

cannot address a motion to dismiss counterclaims that are not
before it.
DISCUSSION
For
dismiss

the

the
Wu

following

Defendants’

reasons,

Plaintiff’s

counterclaims

and

motion

strike

to

certain

affirmative defenses is granted in part and denied in part.

Its

motion to dismiss the Maine Defendants’ counterclaims and an
affirmative defense is denied without prejudice.

Its motion to

2

The Maine Defendants sent courtesy copies of their papers
opposing Plaintiff’s motion to dismiss their counterclaims to
Chambers, but they did not file them with the Court.
7 

appoint a receiver is denied with guidance if Plaintiff again
moves the Court to appoint a receiver.
I. Plaintiff’s Motions to Dismiss the Counterclaims
The
motions
12(b)(6)

to

familiar
dismiss

applies

plausibility

under

to

Federal

motions

to

standard
Rule

dismiss

of

that
Civil

governs
Procedure

counterclaims.

See

Nowicki v. Toll Bros., Inc., No. 10–CV–4877, 2012 WL 14258, at
*1 (E.D.N.Y. Jan. 4, 2012).

To survive a motion to dismiss a

counterclaim, the counterplaintiff must plead sufficient factual
allegations in the complaint to “state a claim [for] relief that
is plausible on its face.”

Bell Atlantic Corp. v. Twombly, 550

U.S. 544, 570, 127 S. Ct. 1955, 1974, 167 L. Ed. 2d 929, 949
(2007).

The

counterclaim

does

not

need

“detailed

factual

allegations,” but it demands “more than labels and conclusions,
and a formulaic recitation of the elements of a cause of action
will not do.”

Id. at 555.

In addition, the facts pleaded in

the counterclaim “must be enough to raise a right to relief
above

the

speculative

level.”

Id.

Determining

whether

a

counterplaintiff has met his burden is “a context-specific task
that

requires

the

reviewing

experience and common sense.”
(2d Cir. 2009).
counterplaintiff’s
reasonable

court

draw

on

its

judicial

Harris v. Mills, 572 F.3d 66, 72

On a motion to dismiss, the Court accepts the
factual

inferences

in

allegations

as

its

see,

favor,
8 

to

true

and

e.g.,

draws

all

Litwin

v.

Blackstone Group, L.P.,

634 F.3d 706, 711 n.5 (2d Cir. 2011),

but “[t]hreadbare recitals of the elements of a cause of action,
supported

by

mere

conclusory

statements,

do

not

suffice.”

Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949, 173 L.
Ed. 2d 868 (2009).
A. The Wu Defendants’ Counterclaims
Plaintiff
Defendants’

moves

to

counterclaims:

dismiss

(1)

all

tortious

four

of

the

interference

Wu
with

contractual relations; (2) conversion; (3) defamation; and (4)
fraud.

The Court addresses each in turn.
1. Tortious Interference with Contractual Relations
To

claimant

prevail

must

on

establish:

a

tortious

“(1)

a

interference

valid

contract

theory,
between

a
the

plaintiff and a third party; (2) the defendant’s knowledge of
that contract; (3) the defendant’s intentional inducement of the
third

party

to

breach
(4)

or

otherwise

damages

to

the

render
plaintiff

performance

impossible;

and

resulting

therefrom.”

Pacific Carlton Dev. Corp. v. 752 Pacific, LLC, 62

A.D.3d 677, 679, 878 N.Y.S.2d 421, 423 (N.Y. App. Div. 2d Dep’t
2009); Anesthesia Assocs. of Mount Kisco, LLP v. N. Westchester
Hosp. Ctr., 59 A.D.3d 473, 476, 873 N.Y.S.2d 679, 682 (2d Dep’t
2009).

The

Wu

Defendants

apparently

argue

that

Plaintiff’s

efforts to repossess the CRJ caused various customers, including
a

rock

band,

to

cancel

their
9 

charter

contracts

with

Maine

Charter and that these cancellations were to the detriment of Wu
Air.
that

(Wu Countercl. Opp. 3.)
Plaintiff

had

any

The Wu Defendants do not allege

knowledge

of

Maine

Charter’s

charter

contracts, however, and thus cannot sustain this counterclaim.
Boehner v. Heise, 734 F. Supp. 2d 389, 404 (S.D.N.Y. 2010).
2. Conversion
“To establish a cause of action in conversion, the
plaintiff must show legal ownership or an immediate superior
right of possession to a specific identifiable thing and must
show that the defendant exercised an unauthorized dominion over
the thing in question . . . to the exclusion of the plaintiff's
rights.”

Five Star Bank v. CNH Capital Am., LLC, 55 A.D.3d

1279, 1281, 865 N.Y.S.2d 190, 192 (4th Dep’t 2008) (quoting
Castaldi v. 39 Winfield Assoc., 30 A.D.3d 458, 820 N.Y.S.2d 279)
(internal quotation marks omitted).

Here, the Wu Defendants

allege that they had a superior right of possession to the CRJ
(Wu

Countercl.

¶

13)

and

that

Plaintiff

“exercised

an

unauthorized dominion” over the CRJ by taking it from MacArthur
Airport

under

false

pretenses

(see

id.

¶

14).

This

is

sufficient to state a claim.
Plaintiff argues that the Wu Defendant’s conversion
claim is “baseless” because, in its view, a state court has
already ruled that its repossessing the CRJ was legal.
Br. 7-8.)

In support, it cites a transcript from a proceeding
10 

(Pl. Wu

in what appears to be a related case, Texas 1845 LLC v. Myint J.
Kyaw, No. 3202-2011, in New York Supreme Court, Nassau County
(the “State Court Action”).

(See Debra Wabnik Aff. Ex. A.)

In

that proceeding, Justice Lawrence K. Marks opined that “it seems
pretty clear” that Plaintiff had a right to take the CRJ and
that Plaintiff “seemed to have a legal right to do what they
did.”

(Id. at 11, 15.)

These quotes do not amount to a clear

finding that Plaintiff had a superior right to the CRJ than the
Wu Defendants.
3. Defamation
The Wu Defendants claim that Plaintiff defamed them
“by asserting that [they] had no rights in the CRJ and Hawker,
respectively, otherwise impugning [their] business reputation.”
(Wu

Countercls.

¶

26.)

As

an

initial

matter,

there

is

no

allegation in the Wu Defendants’ counterclaims that Plaintiff
made

false

statements

concerning

the

Hawker.

The

only

potentially actionable defamatory statements are (1) Plaintiff’s
agents’ statement to the ground crew at Teterboro that Plaintiff
“had the right to repossess the [CRJ]” and that “title to the
CRJ

would

be

transferred

in

15

minutes;”

(2)

Plaintiff’s

statements to the FAA that it had repossessed an aircraft and
that Wu Air and Wu Aviation had been “divested of ownership;”
and (3) Plaintiff’s agents’ statement to the ground crew at

11 

MacArthur Airport that Jeffrey Wu had authorized Plaintiff to
take the CRJ.3
To plead a defamation case, a claimant must allege
“(1) a defamatory statement of fact; (2) that is false; (3)
published

to

a

third

party;

(4)

‘of

and

concerning’

the

plaintiff; (5) made with the applicable level of fault on the
part

of

the

constituting
privilege.”

speaker;
slander

(6)
per

either
se;

causing

and

(7)

special
not

harm

or

protected

by

TC v. Valley Cent. Sch. Dist., 777 F. Supp. 2d 577,

603 (S.D.N.Y. 2011); see also, e.g., Dillon v. City of N.Y., 261
A.D.2d 34, 38, 704 N.Y.S.2d 1, 5 (1st Dep’t 1999).

As is

relevant to this case, a “defamatory” statement may be one that
causes “[r]eputational injury to a person's business, or to a
company, [and] consists of a statement that either imputes some
form of fraud or misconduct or a general unfitness, incapacity,
or inability to perform one’s duties.”

Freedom Calls Found. v.

Bukstel, No. 05-CV-5460, 2006 WL 845509, at *18 (E.D.N.Y. Mar.
3, 2006).

3

To the extent the Wu Defendants attempt to hang a defamation
claim
on
their
allegation
that
Plaintiff’s
agent
used
“documentation” to persuade MacArthur Airport personnel that
Plaintiff had a right to take the CRJ (Wu Countercls. at 14),
this claim is insufficiently pled.
Bobal v. Rensselaer
Polytechnic Inst., 916 F.2d 759, 763 (2d Cir. 1990) (rejecting
slander claim under New York law in part because plaintiff
failed to allege the “actual words spoken”).
12 

In this case, only the second alleged statement is
actionable.
Wu

The first statement is not “of and concerning” the

Defendants

because

the

speaker

did

not

mention

the

Wu

Defendants and there is no allegation that the ground crew at
Teterboro would have understood that the owner of the CRJ, from
whom

the

speaker

was

allegedly

attempting

plane, was either Wu Air or Wu Aviation.

to

repossess

the

See Kirch v. Lib.

Media Corp., 449 F.3d 388, 399 (2d Cir. 2006) (noting that a
statement

may

plaintiff,

[it]

be

defamatory

could

have

where,
been

“though

understood

not
by

naming
a

reasonable

reader as being, in substance, actually about him or her”).
third

statement--that

Jeffrey

Wu

had

the

authorized

The

Plaintiff’s

agents to fly the CRJ--is not defamatory because it does not
“impute[]

some

form

of

fraud

or

misconduct

or

a

unfitness, incapacity, or inability” to do business.

general
Freedom

Calls, 2006 WL 845509, at *18.
The second statement--Plaintiff’s statement to the FAA
that it had repossessed an aircraft and that the Wu Defendants
had been divested of their rights--is another matter.

Plaintiff

argues that such a statement cannot be interpreted as impugning
the Wu Defendants’ fitness for business and thus cannot be libel
per se.

The Court disagrees because, in its view, a charge that

a business had its airplane repossessed is akin to a statement
that a business cannot or will not pay its bills.
13 

And, courts

have

explained

that

creditworthiness

or

falsely

falsely

disparaging

claiming

that

a

plaintiff’s

a

business

is

insolvent is sufficient to state a defamation claim in New York.
De Seversky v. P. & S. Pub., 34 N.Y.S.2d 284, 285 (Sup. Ct. N.Y.
Cty.

1942)

(“A

charge

of

credit is actionable per se

insolvency,

bankruptcy

or

want

of

. . . .”); see Ruder & Finn Inc. v.

Seaboard Sur. Co., 52 N.Y.2d 663, 670, 422 N.E.2d 518, 522, 439
N.Y.S.2d 858, 862 (1981) (“Where a statement impugns the basic
integrity

or

creditworthiness

of

a

business,

an

action

for

defamation lies and injury is conclusively presumed.”); see also
Medina v. United Press Assocs., 185 N.Y.S.2d 366, 368 (Sup. Ct.
N.Y. Cty. 1959) (“Bankruptcy is not a disgrace nor does it imply
incapacity

or

wrongdoing

yet

a

charge

of

bankruptcy

is

universally regarded as libelous.” (citation omitted)); cf., Eli
E.

Albert,

Inc

v.

(S.D.N.Y. 1950).

Dun

&

Brad-Street,

91

F.

Supp.

283,

284

Accordingly, Plaintiff’s motion to dismiss the

Wu Defendants’ defamation counterclaim is denied.
4. Fraud
The elements of fraud under New York law are (1) a
“material

false

representation”;

(2)

made

with

an

intent

to

defraud the plaintiff; (3) the plaintiff’s reasonable reliance
on

the

false

representation;

and

(4)

damages.

Wall

Transp., Inc., 471 F.2d. 410, 415-16 (2d Cir. 2006).

v.

CSX

Under

Federal Rule of Civil Procedure 9(b), claimants must allege the
14 

circumstances surrounding the fraud with particularity.

E.g.,

Wight v. BankAmerica Corp., 219 F.3d 79, 91 (2d Cir. 2000).

The

Wu Defendants do not contest Plaintiff’s argument that they have
failed

to

plead

their

fraud

claim

with

the

particularity

generally required by Rule 9; rather, they argue that their
allegations are sufficient because they provide Plaintiff with
“fair notice” of their theory.

(Wu Countercl. Opp. 6.)

Even if

the Court were to relax the particularity requirement, the Wu
Defendants’ claim would still fail.

The Wu Defendants’ theory

is apparently that Plaintiff defrauded them by falsely telling
the

FAA

that

it

had

repossessed

an

aircraft

and

by

falsely

telling the ground crew at MacArthur Airport that Jeffrey Wu had
authorized Plaintiff to take the CRJ.

(Id. at 7.)

There is no

allegation that the Wu Defendants reasonably relied on these
statements,

however,

and

thus

they

cannot

maintain

a

fraud

claim.
B. The Maine Defendants’ Counterclaims
As discussed already, the Court cannot address a
motion to dismiss counterclaims in an answer that has not been
filed.

The parties are directed to the Conclusion, infra, for

further directions.
II. Plaintiff’s Motions to Strike
Plaintiff
defenses.

also

moves

to

certain

affirmative

In considering motions to strike under Federal Rule
15 

strike

of

Civil

Procedure

12(f),

courts

examine

two

prongs:

first,

whether there are “substantial questions of law or fact that
might

allow

Plaintiff

the

would

defense
be

to

succeed;”

“prejudiced

remained in the pleadings.”

if

and

the

second,

whether

affirmative

defense

Wausau Bus. Ins. Co. v. Horizon

Admin. Servs., LLC, __ F. Supp. 2d __, 2011 WL 2945827, at *2
(E.D.N.Y. July 21, 2011).

The first inquiry is governed by the

same standard that applies to motions to dismiss under Federal
Rule 12(b)(6).

Id.

In evaluating prejudice, courts consider,

among other things, whether the affirmative defense may increase
the time and expense of litigation.

Id.

A. The Wu Defendants’ Affirmative Defenses & Jury Demand
As
strike

the

against

the

following

Wu

Defendants,

defenses:

(1)

Plaintiff
lack

moves

of

to

personal

jurisdiction; (2) pending state court actions; (3) election of
remedies; and (4) payment.

(Pl. Wu Brief 15-16.)

Plaintiff

also moves to strike the Wu Defendants’ demand for a jury trial.
The Court addresses each of these requests below.

(Id. at 16-

17.)
1. Personal Jurisdiction
The personal jurisdiction defense must be struck.
Wu

Defendants

Security

consented

Agreements

to

(Compl.

jurisdiction
Exs.

D,

E

in
§

New

8.1

York

in

(consenting

The
the
to

jurisdiction and consenting to service by mail)), a point the Wu
16 

Defendants do not contest.

(See Wu Countercl. Opp. 7.)

Rather,

they claim that Plaintiff has not filed an affidavit evidencing
proof

of

service

of

process.

The

Court

notes

that

the

Wu

Defendants do not claim that they were not actually served and,
in

any

event,

their

claim

that

Plaintiff

affidavits of service is demonstrably wrong.
6.)

did

not

submit

(Docket Entries 5,

Further, allowing this affirmative defense to remain in the

pleading

would

prejudice

Plaintiff

by

creating

the

potential

that the Wu Defendants will attempt to litigate the jurisdiction
issue further.
2. Pending State Court Litigation
Plaintiff

argues

that

the

Wu

Defendants

should

be

foreclosed from arguing that the related state cases, which are
apparently pending in Maine and New York, bar this Court from
hearing

this

case.

(Pl.

Wu

Br.

12-13.)

Where

there

are

parallel federal and state proceedings, a district court may
abstain

from

hearing

circumstances,

when

administration,

giving

resources
counsels.”

and

the
the

federal
concept

regard

comprehensive

to

suit
of

“in
‘(w)ise

conservation

disposition

exceptional

of

of

judicial
judicial

litigation’

so

Lasker v. UBS Sec. LLC, 614 F. Supp. 2d 345, 354

(E.D.N.Y. 2008) (quoting Colo. River Water Conservation Dist. v.
United States, 424 U.S. 800, 817-18, 96 S. Ct. 1236, 47 L. Ed.
2d 483 (1976)).

In evaluating whether Colorado River abstention
17 

is

appropriate,

concurrent

the

Court

proceedings

must

are

first

parallel,

determine
meaning

substantially the same parties and issues.”

whether
they

Id.

“the

involve

If so, the

Court weighs six factors, including “desirability of avoiding
piecemeal litigation.”

Colorado River, 424 U.S. at 818.

factor

and

is

dispositive,

against abstention.

the

balance

is

weighed

No

heavily

Lasker, 614 F. Supp. 2d at 354.

Although the Court is generally aware that Plaintiff
has also sought some type of relief in state courts in Maine and
New York, to date no party has adequately explained to the Court
the issues, parties, or posture of the concurrent state court
proceedings.

Thus

the

Court

cannot

determine

whether

these

actions are parallel to this suit and, if so, whether staying
this case would avoid piecemeal litigation.

Accordingly, the

Court declines to strike this affirmative defense.
3. Election of Remedies
The Wu Defendants’ election of remedies affirmative
defense must be struck.

A secured party’s remedies against a

defaulting debtor are generally cumulative, see N.Y. U.C.C. § 9601; Chem. Bank v. Alco Gems Corp., 543 N.Y.S.2d 426, 428 (1st
Dep’t 1989), and the Notes contained a provision to that effect.
(Compl.

Exs.

D,

E

§

5.3.)

The

Wu

Defendants

protest

that

Plaintiff is not entitled to a double recovery (Wu Countercl.

18 

Opp. 9); of course, nothing in this Order should be read as
permitting Plaintiff to recover a windfall.
4. Payment
The

Court

declines

to

affirmative defense of payment.

strike

the

Wu

Defendants’

The Wu Defendants claim that

they made “substantial payments” on the Notes (Kyaw Aff. ¶ 5);
the existence and amount of those payments are questions of fact
that precludes Plaintiff’s motion to strike.
5. Jury Demand
The jury demand must be struck.

The Wu Defendants

waived any right to a jury trial in the Security Agreements,
which each contain a clear jury waiver clause.
E § 8.12.)

(Compl. Exs. D,

Notwithstanding the Wu Defendants’ argument, the

waiver clause was not “placed discreetly in the contract” (Wu
Counterclaim Opp. 13); on the contrary, it--unlike the majority
of the contract--is typed in all capital letters.
jury

waiver

is

intentionally,

and

enforceable

if

voluntarily,”

“it

is

Merrill

A contractual

made
Lynch

knowingly,
&

Co.

v.

Allegheny Energy, Inc., 500 F.3d 171, 188 (2d Cir. 2007), and
the Wu Defendants’ argument that the Court should ignore the
language of the Security Agreements is wholly unpersuasive.
B. The Maine Defendants’ Third Affirmative Defense
As

discussed

already,

the

Court

will

not

address

Plaintiff’s motion against the Maine Defendants until the Maine
19 

Defendants file their Answer with the Court.

The parties are

directed to the Conclusion, infra, for further directions.
III. Plaintiff’s Motion to Appoint a Receiver
Plaintiff moves separately for an order appointing a
temporary receiver over (1) the Hawker and the Logbooks, and (2)
the

Wu

appoint

Defendants.
a

receiver

In
is

diversity
governed

by

cases,

whether

federal

or

common

not

law,

to
and

district courts generally consider the following factors:
[F]raudulent
conduct
on
the
part
of
defendant;
the
imminent
danger
of
the
property being lost, concealed, injured,
diminished in value, or squandered; the
inadequacy of the available legal remedies;
the probability that harm to plaintiff by
denial of the appointment would be greater
than the injury to the parties opposing
appointment; and, in more general terms,
plaintiff's probable success in the action
and the possibility of irreparable injury to
his interests in the property.
Varsames v. Palazzolo, 96 F. Supp. 2d 361, 365 (S.D.N.Y. 2000)
(quoting
“[T]he

Wright

&

appointment

Miller
of

a

§

2983)

receiver

(alteration
is

in

considered

Varsames).
to

be

an

extraordinary remedy, and . . . should be employed cautiously
and granted only when clearly necessary to protect plaintiff's
interests in the property.”

Rosen v. Siegel, 106 F.3d 28, 34

(2d Cir. 1997) (quoting Citibank, N.A. v. Nyland (CF8) Ltd., 839
F.2d 93, 97 (2d Cir. 1988)).

20 

As

it

stands,

the

Court

does

not

have

enough

information to order the drastic relief Plaintiff seeks.

For

one thing, the parties have provided very little information on
the state court proceedings, including whether any state court
injunction remains in effect.

At this point, the Court is also

without other information it considers relevant to its analysis,
including whether the Hawker is still making commercial flights
or otherwise generating revenue for any of the Defendants or the
parameters of the receivership Plaintiff envisions.

The motion

is denied and, if Plaintiff renews its motion, it should provide
the

Court

with

receivership

more

order,

hearing is warranted.

information,

and

the

Court

including
will

a

consider

proposed
whether

a

See generally United States v. Bonanno

Organized Crime Family of La Cosa Nostra, 683 F. Supp. 1411,
1452 (E.D.N.Y. 1988) (granting hearing on government’s motion
that, among other things, defined the scope of the proposed
receivership).
CONCLUSION
Based on the foregoing discussion, the Court orders
the following:
Plaintiff’s

motion

to

dismiss

the

Wu

Defendants’

counterclaims and strike certain affirmative defenses (Docket
Entry 12) is GRANTED IN PART AND DENIED IN PART.
as

to

the

Wu

Defendants’

conversion
21 

It is denied

counterclaim

and

their

defamation

counterclaim

arising

false filing with the FAA.

out

of

Plaintiff’s

allegedly

It is granted as to the tortious

interference with contractual relations and fraud counterclaims
and as to the remainder of the defamation counterclaims.

The Wu

Defendants may amend their counterclaims within twenty-one (21)
days from the date of this Order.
The Wu Defendants’ personal jurisdiction and election
of remedies affirmative defenses are struck, as is their jury
demand.

The Court does not strike the concurrent state court

proceedings and payment affirmative defenses.
Plaintiff’s motion to dismiss the Maine Defendants’
counterclaims and strike an affirmative defense (Docket Entry
13)

is

DENIED

WITHOUT

PREJUDICE.

The

Maine

Defendants

are

directed to file their answer and opposition papers with the
Court forthwith and not later than five (5) days from the date
of this Order.

Upon the Maine Defendants’ compliance, Plaintiff

may renew its motion with a one-page letter motion to the Court.
No additional briefing from either side will be permitted.
Plaintiff’s motion for a receiver is DENIED at this
time.

Should Plaintiff move again for the appointment of a

receiver,

it

shall

provide

the

Court

with

the

additional

information described above and submit a proposed receivership
order.

22 

SO ORDERED.
/s/ JOANNA SEYBERT______
Joanna Seybert, U.S.D.J.
Dated:

February
3 , 2012
Central Islip, New York

23