Chabra et al v. Maplewood Partners, L.P. et al

Filing 50

MEMORANDUM & ORDER re: 39 Motion to Dismiss the First Amended Complaint is DENIED and Plaintiffs' 45 Cross-Motion to Amend the First Amended Complaint is DENIED AS MOOT. Parties Buster C. Glosson, Ron Augustin, and Glen Dell are TERMINATED from this action as the claims in the First Amended Complaint pertain only to Maplewood. Ordered by Judge Joanna Seybert on 2/19/2014. (Nohs, Bonnie)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
---------------------------------------X
SURINDER CHABRA, PARVINDER CHABRA,
and NARINDER CHABRA,
Plaintiffs,

MEMORANDUM & ORDER
12-CV-1113(JS)(ARL)

-against–
MAPLEWOOD PARTNERS, L.P.; GLEN DELL;
LT. GENERAL BUSTER C. GLOSSON; and
RON AUGUSTIN,
Defendants.
---------------------------------------X
APPEARANCES
For Plaintiffs:
Howard W. Burns, Jr., Esq.
Law Offices of Howard W. Burns Jr.
170 Broadway, Suite 609
New York, NY 10038
For Defendants:

Scott Michael Kessler, Esq.
Akerman Senterfitt LLP
335 Madison Avenue, Suite 2600
New York, NY 10017

SEYBERT, District Judge:
Currently pending before the Court are: (1) MapleWood
Partners,

L.P.’s

(“Maplewood”)

motion

to

dismiss

the

First

Amended Complaint, and (2) plaintiffs Surinder Chabra (“Sonny”),
Parvinder

Chabra

(“Parvinder”),

and

Narinder

Chabra’s

(“Narinder” and collectively, “Plaintiffs”) motion to amend the
First Amended Complaint.

For the following reasons, Maplewood’s

motion to dismiss is DENIED and Plaintiff’s motion to amend is
DENIED AS MOOT.

BACKGROUND
The
facts

of

Court

this

presumes

case,

which

familiarity
are

with

extensively

the

underlying

detailed

in

the

Court’s Memorandum and Order of February 28, 2013 (the “First
Dismissal Order,” Docket Entry 32).

In that Order, the Court

denied a motion to change venue filed on behalf of Maplewood,
Glen

Dell,

Lt.

General

Buster

C.

Glosson,

and

Ron

Augustin

(collectively, “Defendants”); granted in part and denied in part
Defendants’

motion

to

dismiss

the

Complaint;

granted Plaintiffs leave to replead.

and

sua

sponte

(See First Dismissal Order

at 22-23.)
Plaintiffs
April

19,

2013,

filed

which

their

alleges

First
the

Amended

same

Complaint

essential

on

factual

background as the original Complaint, but attempts to rectify
deficiencies
particularity.1
lengthy

in

pleading

their

claims

of

fraud

with

Accordingly, the Court will not reiterate the

recitation

of

the

facts

here.2

Briefly,

however,

Plaintiffs allege that Maplewood committed fraud and caused the
demise of AMC Computer Corporation (“AMC”).

Notably, the First Amended Complaint raises claims against
Maplewood only. As such, the Clerk of the Court is directed to
terminate Dell, Glosson, and Augustin as defendants.
1

Capitalized words and phrases refer to terms as defined in the
First Dismissal Order.
2

2

Prior to their involvement with Maplewood, Plaintiffs
owned all of AMC’s outstanding shares.
November

1999,

Robert

V.

Glaser

(Am. Compl. ¶ 16.)

(“Glaser”)

and

approached Plaintiffs regarding investment in AMC.
¶ 22.)

In

Maplewood
(Am. Compl.

There are three primary events which form the foundation

of Plaintiffs’ First Amended Complaint.

Central to the claims

are representations and statements made by Glaser, Maplewood’s
managing partner, and Robert J. Reale, a limited partner of
Maplewood.

(See Am. Compl. ¶¶ 17, 31.)
First, in 2001, Maplewood opened a $2 million credit

line for AMC with Eugenia VI Venture Partners (“Eugenia”).
Compl. ¶ 71.)

(Am.

Maplewood allegedly chose Eugenia because it was

affiliated with a company named Casita, L.P. (“Casita”).
Compl. ¶¶ 73-82.)

(Am.

To appease Casita, Maplewood “embarked upon a

fraudulent plan and scheme” pursuant to which AMC would pay
Casita’s

affiliate

Eugenia

excessive

fees

and

interest

and

restructure AMC (the “AMC Restructuring”) to protect Eugenia as
a preferred creditor.
Second,

(See, e.g., Am. Compl. ¶ 82.)

after

the

AMC

Restructuring,

Eugenia

began

providing the accounts receivable financing for all of AMC’s
operations.

(Am. Compl. ¶ 115.)

Plaintiffs allege that Eugenia

loan documents were withheld from them and that Glaser and Reale
made various fraudulent representations and statements regarding
the terms of the financing.

(See Am. Compl. ¶¶ 116-149.)
3

Third,

in

2003,

Reale

approached

Sonny

Chabra

requesting an emergency loan to AMC in the amount of $500,000.
(Am. Compl. ¶ 150.)

Plaintiffs allege that Reale made several

fraudulent representations, including that Sonny Chabra would be
repaid.

(Am. Compl. ¶¶ 151-157.)

According to Plaintiffs,

Sonny received only $150,000 of the $500,000 loan.

(Am. Compl.

¶¶ 158-167.)
Plaintiffs allege various other events, but ultimately
assert claims for: (1) fraud in the inducement relating to the
AMC Restructuring, (2) fraud in the inducement regarding the
Eugenia financing, (3) fraud in the inducement regarding the AMC
loan, and (4) fraud generally.
DISCUSSION
Maplewood

now

moves

to

dismiss

the

First

Amended

Complaint, arguing that Plaintiffs claims are time-barred and
that Plaintiffs have still failed to plead their fraud claims
with particularity.

Plaintiffs cross-move to amend in the

event that the Court finds their First Amended Complaint to be
deficient.

The Court will first address Maplewood’s motion to

dismiss before turning to Plaintiffs’ cross-motion.
I. Legal Standard on a Motion to Dismiss
In
Court

applies

deciding
a

Rule

12(b)(6)

“plausibility

“[t]wo working principles.”

motions

standard,”

to

which

dismiss,
is

guided

the
by

Ashcroft v. Iqbal, 556 U.S. 662,
4

678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009); accord Harris v.
Mills, 572 F.3d 66, 71-72 (2d Cir. 2009).
Court

must

accept

“inapplicable

all

to

allegations

legal

as

First, although the

true,

conclusions;”

this

thus,

“tenet”

is

“[t]hreadbare

recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.”
accord Harris, 572 F.3d at 72.

Iqbal, 556 U.S. at 678;

Second, only complaints that

state a “plausible claim for relief” can survive a Rule 12(b)(6)
motion to dismiss.

Iqbal, 556 U.S. at 679.

Determining whether

a complaint does so is “a context-specific task that requires
the

reviewing

common sense.”

court

to

draw

on

its

judicial

experience

and

Id.; accord Harris, 572 F.3d at 72.

A. Timeliness
Maplewood maintains that Plaintiffs’ claims against it
are based solely upon statements allegedly made by Glaser and
Reale, “whose potential liability for these alleged statements
has

been

extinguished

by

the

statute

of

limitations.”

(Maplewood Br. to Dismiss, Docket Entry 39-3, at 2.)

As such,

they argue that there is no primary liability against Glaser and
Reale and therefore there can be no vicarious liability against
Maplewood.
that

(Maplewood Br. to Dismiss at 2.)

Plaintiffs’

allegations

are

Maplewood’s motion as asserted.

5

The Court finds

sufficient

to

overcome

As in the original Complaint, Plaintiffs allege in the
First Amended Complaint that their claims are not time-barred
because Maplewood signed a stipulation agreeing to discontinue a
prior litigation and not to assert a statute of limitations
defense in a subsequent litigation (the “Dismissal Agreement”).
(Am. Compl. ¶ 3.)

In their motion to dismiss the original

Complaint, the collective Defendants argued that the Dismissal
Agreement violated New York General Obligations Law § 17-103.
(First

Dismissal

indefinite

Order

tolling

at

periods

17.)
for

contract express or implied.”
103(1).

That

“an

statute

action

arising

proscribes
out

of

a

N.Y. Gen. Obligations Law § 17-

The Court ultimately rejected Defendants’ argument that

this is a contract-based action and found that the Dismissal
Agreement

itself

this stage.

was

ambiguous,

thus

precluding

dismissal

at

(First Dismissal Order at 18-19.)

Maplewood now asserts that “Plaintiffs have concocted
an agency theory of liability to attempt to bring the alleged
conduct of Glaser and Reale--whom they no longer seek to hold
individually

liable--within

Agreement.”

(Maplewood

maintain

that,

because

Br.

the
to

confines
Dismiss

Plaintiffs’

of

at

claims

the

7.)

against

Dismissal
Thus,
Glaser

they
and

Reale are time-barred, there is no primary liability upon which
to

base

a

vicarious

liability

(Maplewood Br. to Dismiss at 7-9.)
6

claim

against

Maplewood.

Plaintiffs counter that

Maplewood
statute

is
of

attempting
limitations

to

revive

argument

its

and

previously-rejected

that,

in

any

event,

Plaintiffs’ claims against Maplewood rest on common law agency
principles rather than vicarious liability.
The Court agrees with Plaintiffs that the Dismissal
Agreement may foreclose Maplewood’s current argument.
Maplewood

has

framed

its

liability,

its

assertions

argument

in

necessarily

terms

include

Although

of
the

vicarious
statute

of

limitations and the fact that Plaintiffs’ claims against Glaser
and Reale are now time-barred.

As the Court held in its First

Dismissal Order, the Dismissal Agreement is ambiguous.

All that

the Court has before it at this stage is the statement in the
Dismissal

Agreement

that

“Defendants

agree

not

to

raise

a

defense of statute of limitations on any claim asserted in a
subsequent action unless it could have been raised at the time
of this action.”
H.)

(Heywood Declaration, Docket Entry 4-1, Ex.

Maplewood signed the Dismissal Agreement in 2006, less than

six years after the events at issue, and therefore could not
have

asserted

their

current

defense.

Accordingly,

whether

Maplewood intended to waive a statute of limitations defense in
this

context

is

unclear

and

the

Court

determination on a motion to dismiss.

cannot

make

this

(See First Dismissal

Order at 19 (citing Eternity Global Master Fund Ltd. v. Morgan
Guar. Trust Co. of N.Y., 375 F.3d 168, 178 (2d Cir. 2004) for
7

the proposition that the Court cannot resolve such ambiguities
on a motion to dismiss).)
Moreover,

as

the

Court

previously

held,

New

York

General Obligations Law § 17-103 applies primarily to contract
actions.

Its only applicability, if at all, is subdivision 4(b)

which “reserves a court’s equitable power to estop a defendant
from asserting the defense of statute of limitations when such
estoppel is necessary to prevent unfairness.”
AL.,

NEW YORK PRACTICE SERIES: NEW YORK LAW

OF

LEE S. KREINDLER

ET

TORTS § 19:5 (2013).

Although the parties have not squarely addressed this issue,
this suggests that the Court’s equitable powers are at play.
one side of the equation is the Dismissal Agreement.
other

is

the

sheer

passage

of

time

and

Maplewood’s

On

On the
current

assertion that Plaintiffs cannot viably rest their claims on
vicarious liability.
In the interest of completeness, Maplewood bases its
argument solely on the issue of vicarious liability.

Plaintiffs

have asserted that their claims are, instead, grounded on common
law

principles

of

agency.

In

support,

Plaintiffs

cite

to

Karaduman v. Newsday, Inc., 51 N.Y.2d 531, 435 N.Y.S.2d 556, 416
N.E.2d 557 (1980).

(Pl.’s Opp. Br., Docket Entry 44, at 7-11.)

There, the New York Court of Appeals held that, because the
plaintiff’s

libel

claims

against

individual

reporters

and

an

editor were barred by the applicable statute of limitations,
8

Newsday--the newspaper for which the employees worked--could not
be

held

however,

vicariously
the

liable.

Court

of

In

Appeals

making

this

specifically

determination,

noted

that

its

analysis may well have been very different if it were to apply
“conventional
Newsday

principles

could

be

of

held

agency”

directly

because,
liable

in

as

that

a

case,

principal.

Karaduman, 51 N.Y.2d at 547, 435 N.Y.S.2d at 564, 416 N.E.2d at
564.3
not

Thus, Plaintiffs maintain that, although Maplewood could
be

held

vicariously

liable

if

there

were

no

primary

liability against Glaser and Reale, it can be held liable under
common law agency concepts even if claims against Glaser and
Reale are time-barred.

(Pl.’s Opp. Br. at 7.)

Maplewood does not dispute Plaintiffs’ legal premise,
but maintains that Karaduman is inapplicable because Plaintiffs
seek

to

hold

Maplewood

vicariously

liable,

and

it

is

well-

settled that vicarious liability depends on primary liability.
(Maplewood Reply Br., Docket Entry 47, at 5.)

A principal is

vicariously liable when, inter alia, the agent/employee commits
a tort while acting within the scope of his employment.
RESTATEMENT (THIRD)

OF

See

AGENCY § 7.03(2) (2006); see also Meyer v.

Holley, 537 U.S. 280, 285, 123 S. Ct. 824, 154 L. Ed. 2d 753
(2003)

(“It

is

well

established

that

traditional

vicarious

Both parties have set forth their respective readings of this
case. The Court has provided a general summary.
3

9

liability

rules

ordinarily

make

principals

or

employers

vicariously liable for acts of their agents or employees in the
scope

of

subject

their

to

authority

direct

or

employment.”).

liability,

however,

when,

A

principal

inter

alia,

is
the

agent acts with actual authority or the principal ratifies the
agent’s conduct.

RESTATEMENT (THIRD)

OF

AGENCY § 7.03(1)(2006).

Here, contrary to Maplewood’s assertion, Plaintiff has
at least plausibly alleged that Glaser and Reale acted with
actual

authority

liability.

sufficient

452,

maintain

direct

corporate

“Actual authority arises from a manifestation from

principal to agent.”
2d

to

486

Cromer Fin. Ltd. v. Berger, 137 F. Supp.

(S.D.N.Y.

2001)

(internal

quotation

marks

and

citation omitted); see Anwar v. Fairfield Greenwich Ltd., 728 F.
Supp.
agency

2d

372,

theory

435
of

(S.D.N.Y.

liability,

2010)

(“To

Plaintiffs

establish
must

an

allege

actual

‘(1)

the

principal’s manifestation of intent to grant authority to the
agent, and (2) agreement by the agent.’” (quoting Commercial
Union Ins. Co. v. Alitalia Airlines, S.p.A., 347 F.3d 448, 462
(2d

Cir.

2003)).

“The

consent

for

actual

authority

may

be

either express or implied from the parties’ words and conduct as
construed in light of the surrounding circumstances.”

Cromer

Fin. Ltd., 137 F. Supp. 2d at 486 (internal quotation marks and
citation omitted).

The Amended Complaint alleges that Maplewood

knew, approved, accepted, and adopted Glaser and Reale’s actions
10

and that Glaser and Reale were acting “for and on behalf” of
Maplewood.

(Am. Compl. ¶¶ 42-43.)

allegations are sufficient.

At this juncture, these

See Old Republic Ins. Co. v. Hansa

World Cargo Serv., Inc., 51 F. Supp. 2d 457, 471 (S.D.N.Y. 1999)
(“New

York

courts

have

recognized

that

the

question

of

the

existence and scope of an agency relationship is a factual issue
that

a

court

cannot

properly

adjudicate

on

a

motion

to

dismiss.”).
Accordingly, Maplewood’s motion to dismiss the Amended
Complaint because Plaintiffs’ claims are time-barred is DENIED.
B. Particularity of Fraud Claims
Maplewood further asserts that, even if Plaintiffs’
claims

are

not

time-barred,

Plaintiffs

have

still

failed

to

plead their claims of fraud with particularity as required by
Federal Rule of Civil Procedure 9(b).

The Court disagrees.

As more fully explained in the Court’s First Dismissal
Order, Rule 9(b) requires that a party alleging fraud “must
state with particularity the circumstances constituting fraud or
mistake.”

FED. R. CIV. P. 9(b).

requirement,
fraudulent
where,

when

a

“[p]laintiff

statements;
and

to

(2)

whom

To comply with the particularity
must:

identify
the

(1)
the

statements

specify

the

speaker;
were

explain why the statements were fraudulent.”

(3)

made;

state

and

(4)

Waldman v. New

Chapter, Inc., 714 F. Supp. 2d 398, 402 (E.D.N.Y. 2010).
11

alleged

Maplewood contends that Plaintiffs have not pled fraud
with

particularity

because

the

First

Amended

Complaint

references vague windows of time for some statements and because
Plaintiffs do not explain why other statements were fraudulent
when made.

The Court begins first with Maplewood’s argument

regarding vague references to time.

In particular, Maplewood

cites to eleven paragraphs in the First Amended Complaint, which
contain language such as “a few weeks after the August 25, 2000
Acquisition Closing” (Am. Compl. ¶ 40), “on [one] occasion” (Am.
Compl. ¶¶ 48-49, see also id. ¶ 53), and similar statements (Am.
Compl. ¶¶ 65, 93, 138) or which do not contain a time period at
all

(Am.

Compl.

¶¶

57,

67,

70).

However,

as

Plaintiffs

correctly assert, these paragraphs refer to background facts,
not

alleged

Plaintiffs’
reference

fraudulent

statements

allegations

specific

dates

at

regarding
or

time

issue.

In

fraudulent

periods.

(See,

contrast,
statements
e.g.,

Am.

Compl. ¶¶ 84, 86 (regarding statements made during a September
23, 2002 meeting); id. ¶¶ 90 (regarding statements made during
October 2002).)

Moreover, allegations regarding specific time

frames are sufficient.

See Fennick v. NYCM, No. 13-CV-0085,

2013 WL 5323630, at *5 (N.D.N.Y. Sept. 20, 2013) (“‘To meet its
burden

of

pleading

a

claim

of

fraud,

the

complaint

must

adequately specify the misleading or fraudulent statements the
claimant alleges it relied upon as well as the location, time
12

frame,

and

identity

statements.”’

of

(quoting

those

responsible

Stanely

v.

Bray

for

making

the

Inc.,

197

Terminals,

F.R.D. 224, 228 (N.D.N.Y. 2000)); Isanaka v. Spectrum Tech. USA
Inc.,

131

F.

Supp.

2d

353,

360

(N.D.N.Y.

Feb.

18,

2001)

(“Plaintiff must adequately specify the misleading or fraudulent
statements he alleges he relied upon as well as the location,
time frame, and identity of those responsible for making the
statements in his complaint.”).
As

to

Maplewood’s

contention

that

Plaintiffs

have

failed to allege that the purportedly fraudulent statements were
false when made, the Court also disagrees.

Maplewood maintains

that Plaintiffs did not set forth specific facts to show why the
following were false when made: (1) the statement that GE was no
longer willing to provide financing to AMC (Am. Compl. ¶¶ 6570), (2) alleged representations regarding the assertion that
Eugenia demanded restructuring of AMC (Am. Compl. ¶¶ 90-97), (3)
alleged representations that Maplewood intended to sell AMC (Am.
Compl.

¶¶

$500,000

136-37),
loan

to

and
Sonny

(4)

alleged

Chabra

representations

would

be

repaid

that

(Am.

the

Compl.

¶¶ 150-167).
First,
regarding

GE’s

Plaintiffs
willingness

have

alleged

to

continue

that

statements

financing

were

misrepresentations because GE was willing to continue financing-though on terms that allegedly did not serve Maplewood (see Am.
13

Compl. ¶ 69)--and were made to effectuate a fraudulent plan or
scheme (see Pl.’s Opp. Br. at 19-20).
sufficiently

supported

their

Second, Plaintiffs have

allegations

regarding

that Eugenia demanded the AMC Restructuring.

statements

Plaintiffs have

alleged that Eugenia was not the only lending option and that
the AMC Restructuring was conceived by Maplewood.
¶¶

96-97.)

In

support,

they

have

alleged

(Am. Compl.

that

Glaser

and

Reale’s statements regarding the terms of the AMC Restructuring
were false and that the AMC Restructuring was contrived in order
to

appease

Casita.

Third,

as

to

Plaintiffs’

allegations

regarding representations that Maplewood intended to sell AMC,
the First Amended Complaint alleges that such statements were
made

to

Eugenia

induce

Sonny

financing

Chabra

into

arrangements

the

when,

AMC

in

Restructuring

fact,

Maplewood

seemingly intended to sell only a division of AMC.
¶¶ 136-38.)

and
had

(Am. Compl.

Finally, as to the $500,000 loan, Plaintiffs have

alleged that statements regarding repayment were false because
Maplewood knew that the loan could not be paid under the terms
of the Eugenia loan.
Court

finds

that

(Am. Compl. ¶ 166.)

Plaintiffs

have

Maplewood’s motion on this point.

alleged

Accordingly, the
enough

to

overcome

See U.S. v. Wells Fargo Bank,

N.A., --- F. Supp. 2d ----, 2013 WL 5312564, at *16 (S.D.N.Y.
Sept. 24, 2013) (“Whether a complaint complies with [Rule 9(b)]
depends

upon

the

nature

of

the
14

case,

the

complexity

or

simplicity of the transaction or occurrence, the relationship of
the parties and the determination of how much circumstantial
detail is necessary to give notice to the adversary party and
enable

him

to

prepare

a

responsive

pleading.”

(internal

quotation marks and citation omitted)).
Maplewood’s
Complaint

for

motion

failure

to

to

plead

dismiss
fraud

the

with

First

Amended

particularity

is

therefore DENIED.
II. Plaintiffs’ Cross-Motion to Amend
Plaintiffs

also

cross-move

to

amend

their

First

Amended Complaint in the event that the Court grants Maplewood’s
motion to dismiss.

However, as the Court has denied Maplewood’s

motion, amendment is not necessary, and Plaintiffs’ motion is
therefore DENIED AS MOOT.

[BOTTOM OF PAGE INTENTIONALLY LEFT BLANK]

15

CONCLUSION
For

the

foregoing

reasons,

Maplewood’s

motion

to

dismiss the First Amended Complaint is DENIED and Plaintiffs’
cross-motion to amend the First Amended Complaint is therefore
DENIED AS MOOT.
Additionally, the Clerk of the Court is directed to
terminate

Dell,

Glosson,

and

Augustin

as

defendants

in

this

matter as the claims in the First Amended Complaint pertain only
to Maplewood.
SO ORDERED.

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

February
19 , 2014
Central Islip, NY

16