Huang v. ITV Media, Inc. et al
Filing
34
ORDER granting 26 Motion to Dismiss; granting in part and denying in part 27 Motion to Dismiss. IT IS HEREBY ORDERED that, for the reasons explained herein, the motion to dismiss brought by UTS is granted, but plaintiff is granted leave to ame nd the complaint to include allegations showing that UTS is an alter ego of iTV Media. The motion to dismiss by Lin and the iTV Group is granted with respect to the negligent misrepresentation and intentional infliction of emotional distress claims, and the claim for punitive damages, and is otherwise denied. Plaintiff is granted leave to amend the complaint with respect to the intentional infliction of emotional distress count and/or a claim for punitive damages, and shall file the amended complaint no later than thirty days after the date of this order. SO ORDERED. Ordered by Judge Joseph F. Bianco on 4/8/2014. (Lamb, Conor)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
_____________________
No 13-cv-3439 (JFB)(WDW)
_____________________
TIANBO HUANG,
Plaintiff,
VERSUS
ITV MEDIA, INC., ITV MEDIA (HONG KONG), LTD., ITV.CN, INC., UTSTARCOM,
INC., AND SONG LIN,
Defendants.
___________________
MEMORANDUM AND ORDER
April 8, 2014
___________________
JOSEPH F. BIANCO, District Judge:
Plaintiff Tianbo Huang (“plaintiff”)
brings this action arising out of his
employment relationship with iTV Media
and its President and Chief Executive
Officer, Song Lin (“Lin”). Lin also controls
two corporate relatives of iTV Media, called
iTV(Hong Kong) (“iTV (HK)”) and iTV.cn,
both of which plaintiff named as defendants
in this action. Together, all three iTV
entities are known as the “iTV Group.” The
final named defendant is UTSTARCOM
(“UTS”), a separate corporation that plaintiff
alleges is a majority shareholder in iTV
Media.
Plaintiff asserts eight causes of action
against all defendants: (1) breach of
contract, (2) unjust enrichment, (3) fraud,
(4) negligent misrepresentation, (5) breach
of the duty of good faith and fair dealing, (6)
intentional infliction of emotional distress,
(7) record-keeping violations of section 195
of the New York Labor Law (“NYLL”), and
(8) unlawful deduction of wages under
section 193 of the NYLL.
The iTV Group (including Lin) and UTS
each move under Federal Rule of Civil
Procedure 12(b)(6) to dismiss plaintiff’s
complaint. Both motions argue that plaintiff
has not pled facts sufficient to support the
broad assertion that defendants were all
“alter-egos” of each other, thus making each
liable on every count. The motions also
share two more specific arguments: first,
that the unjust enrichment and breach of the
duty of good faith and fair dealing counts
are duplicative; and second, that the fraud,
negligent misrepresentation, and intentional
infliction of emotional distress counts fail to
state claims for relief.
Separately, Lin and the iTV Group move
to dismiss the claims against iTV(HK) and
Lin for lack of personal jurisdiction, and
UTS moves to dismiss the NYLL claims
because it did not employ plaintiff.1
management of a new entity called iTV.cn.
(Id. ¶¶ 21-22.) This meeting occurred in
Plainview, NY. (Id.)
In short, the Court grants the motion to
dismiss the claims against UTS, because
plaintiff has not pled sufficient facts to show
that UTS is an alter ego of iTV Media, but
plaintiff is granted leave to re-plead
additional facts concerning UTS.2 The
motion to dismiss the claims against Lin and
the iTV Group is granted with respect to the
negligent misrepresentation and intentional
infliction of emotional distress claims, and
the claim for punitive damages, and is
otherwise denied. However, the Court also
will allow leave to re-plead the intentional
infliction of emotional distress claim and/or
the claim for punitive damages.
Additional meetings occurred in China
during the following spring. (Id. ¶¶ 25-27.)
In April 2011, plaintiff left his previous job
and accepted an offer to work for the iTV
Group. (Id. ¶ 31.) Plaintiff signed an
employment contract that was also executed
by Lin on behalf of iTV Media. (Id. ¶¶ 33,
36.)
The contract contains several terms
relevant to this motion. It defines plaintiff’s
compensation as $25,000 per month, with
the possibility of performance bonuses, and
it assigns him a certain number of shares of
stock options, to be paid in installments.
(Ex. A to Am. Compl. ¶ 5.) It also grants
him a signing bonus, various benefits, and
matching payments of 5% of his base salary
into a 401(k) Savings and Investment Plan.
(Id.) Plaintiff’s working hours are “40 hours
a week.” (Id. ¶ 6.) The contract also
provides that “[t]he federal or state courts
located in the State of New York shall have
jurisdiction” over any disputes. (Id. ¶ 10.)
I. BACKGROUND
A. Factual Background
The following facts are taken from the
amended complaint, including attached
documents, and they are not findings of fact
by the Court. The Court assumes these facts
to be true for the purpose of deciding this
motion and construes them in the light most
favorable to plaintiff, the non-moving party.
Plaintiff began working for iTV Media
on May 1, 2011, in Melville, New York.
(Am. Compl. ¶ 35.) Within a short time,
plaintiff found the work environment to be
“hostile and intimidating.” (Id. at ¶ 38.) Lin
insulted plaintiff and continued to manage
international operations that plaintiff
believed had been designated his
responsibility under the contract. (Id. ¶¶ 3738.) iTV Media failed to pay plaintiff his
full wages on time, and he was forced to
work without compensation beyond the 40hour workweek defined in his employment
contract. (Id. ¶¶ 38-39.) Plaintiff’s protests
were met with more insults and reminders
that he was building equity through stock
options, but Lin refused to provide a formal
Plaintiff has worked in the Internet
television media industry for more than ten
years. (Am. Compl. ¶ 17.) At some point,
he was approached by Lin and Jingshan Sun
(“Sun”) about working for the iTV Group.
(Id. ¶ 20.) Lin, Sun, and plaintiff met in
December 2010 to discuss plaintiff’s
possible employment, which would include
1
Lin and the iTV Group have not moved to dismiss
the two NYLL counts.
2
At oral argument, counsel for plaintiff represented
that he knew of additional facts concerning UTS
which would support a finding of alter ego liability.
Accordingly, plaintiff is granted leave to re-plead
those facts.
2
acknowledgement that plaintiff’s
options had vested. (Id. ¶¶ 41-46.)
raise a right to relief above the speculative
level.’” Operating Local 649 Annuity Trust
Fund v. Smith Barney Fund Mgmt. LLC, 595
F.3d 86, 91 (2d Cir. 2010) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555
(2007)).
stock
In November 2012, plaintiff received
notice that his employment was being
terminated, effective immediately. (Id. ¶ 51.)
Plaintiff contends that his termination was
solely the result of his demands for timely
and full compensation and his resistance to
efforts by Lin to acquire illegal content for
iTV.cn. (Id. ¶¶ 47-52.)
The Supreme Court clarified the
appropriate pleading standard in Ashcroft v.
Iqbal,
reaffirming
two
important
considerations for courts deciding a motion
to dismiss. 556 U.S. 662 (2009). The Court
instructed district courts to first “identify[ ]
pleadings that, because they are no more
than conclusions, are not entitled to the
assumption of truth.” Id. at 679 (explaining
that though “legal conclusions can provide
the framework of a complaint, they must be
supported by factual allegations”). Second,
if a complaint contains “well-pleaded factual
allegations, a court should assume their
veracity and then determine whether they
plausibly give rise to an entitlement to
relief.” Id. A claim has “facial plausibility
when the plaintiff pleads factual content that
allows the court to draw the reasonable
inference that the defendant is liable for the
misconduct alleged. The 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. at 678 (quoting and citing
Twombly, 550 U.S. at 556-57 (internal
citation omitted)).
Overall, plaintiff claims that nearly half
of his wages were never paid, that he was
never compensated for overtime, that he
never received acknowledgement of his
vested stock options, and that he was denied
the severance package defined in his
employment contract. (Id. ¶¶ 56-62; Ex. A
to Am. Compl. ¶ 7).
B. Procedural History
Plaintiff filed the original Complaint in
this case on June 14, 2013, and an Amended
Complaint on September 12, 2013. On
October 11, 2013, defendants filed their
motions to dismiss. Plaintiff responded in
opposition on October 25, 2013 and
November 1, 2013, and defendants replied
on November 8 and 11, 2013. The Court
heard oral argument on November 14, 2013.
II. STANDARD OF REVIEW
III. DISCUSSION
In reviewing a motion to dismiss
pursuant to Rule 12(b)(6), the Court must
accept the factual allegations set forth in the
complaint as true and draw all reasonable
inferences in favor of the plaintiff. See
Cleveland v. Caplaw Enters., 448 F.3d 518,
521 (2d Cir. 2006); Nechis v. Oxford Health
Plans, Inc., 421 F.3d 96, 100 (2d Cir. 2005).
“In order to survive a motion to dismiss
under Rule 12(b)(6), a complaint must
allege a plausible set of facts sufficient ‘to
The first question is whether personal
jurisdiction exists over Lin and iTV(HK).
Concluding that it does, the Court next turns
to plaintiff’s allegation that defendants are
all alter egos of each other, and finally, to
the arguments concerning the dismissal of
particular causes of action.
3
York to create long-arm, or “specific”
jurisdiction. “New York courts evaluating
specific jurisdiction . . . . must decide (1)
whether the defendant ‘transacts any
business’ in New York and, if so, (2)
whether this cause of action ‘aris[es] from’
such a business transaction.” Best Van
Lines, Inc. v. Walker, 490 F.3d 239, 246 (2d
Cir. 2007); N.Y. C.P.L.R. § 302(a).
A. Personal Jurisdiction
Lin and the iTV Group argue that this
Court lacks personal jurisdiction over Lin
and iTV(HK) because they are not subject to
general jurisdiction in New York, and
because the complaint does not allege
sufficient facts to subject them to specific
jurisdiction. In response, plaintiff argues
that specific jurisdiction exists over both Lin
and iTV(HK), and the Court agrees.
The complaint alleges several examples
of Lin transacting business in New York: he
initially negotiated the employment contract
with plaintiff there; he authorized plaintiff to
begin to work for him in office space there;
and he forced plaintiff to work beyond his
contract there. (Am. Compl. ¶¶ 21, 35, 38).
At the pleading stage, these are legally
sufficient allegations that Lin transacted
business in New York, giving rise to these
causes of action. See SAS Grp., Inc. v.
Worldwide Inventions, Inc., 245 F. Supp. 2d
543, 549 (S.D.N.Y. 2003) (noting that
preliminary contract negotiations are
transactions under New York’s long-arm
statute) (citation omitted); Daou v. Early
Advantage, LLC, 410 F. Supp. 2d 82, 92
(N.D.N.Y. 2006) (determining that personal
jurisdiction existed based on plaintiff’s
employment in New York); Fischbarg v.
Doucet, 832 N.Y.S.2d 164, 167 (N.Y. App.
Div. 2007), aff’d by 9 N.Y.3d 375 (2007)
(holding that defendants’ calls and emails to
plaintiff in New York were transactions
giving rise to the cause of action).
Therefore, the Court concludes that the
complaint and the attached contract
sufficiently establish personal jurisdiction
over Lin at this stage.
It is well settled that “[i]n diversity or
federal question cases the court must look
first to the long-arm statute of the forum
state, in this instance, New York.” Bensusan
Rest. Corp. v. King, 126 F.3d 25, 27 (2d Cir.
1997). “If the exercise of jurisdiction is
appropriate under that statute, the court must
then decide whether such exercise comports
with the requisites of due process.” Id. Thus,
the district court should engage in a two-part
analysis in resolving personal jurisdiction
issues: (1) whether New York law would
confer jurisdiction by New York courts over
the defendant, and (2) whether the exercise
of jurisdiction over the defendant comports
with the Due Process Clause of the
Fourteenth Amendment. See Grand River
Enters. Six Nations, Ltd. v. Pryor, 425 F.3d
158, 165 (2d Cir. 2005). “Prior to discovery,
a plaintiff challenged by a jurisdiction
testing motion may defeat the motion by
pleading in good faith . . . legally sufficient
allegations of jurisdiction.”
Ball v.
Metallurgie Hoboken-Overpelt, S.A., 902
F.2d 194, 197 (2d Cir. 1990).
Under New York law, there are two
bases for personal jurisdiction over out-ofstate defendants: (1) general jurisdiction
pursuant to N.Y. C.P.L.R. § 301, and (2)
long-arm jurisdiction pursuant to N.Y.
C.P.L.R. § 302. Here, plaintiff relies on
Section 302, arguing that Lin and iTV(HK)
have sufficient business contacts with New
Likewise, the complaint sufficiently
alleges that the Court has personal
jurisdiction over iTV(HK). As is discussed
below, the allegations support a plausible
claim that iTV(HK) is an alter ego of iTV
Media, and “‘alter egos are treated as one
4
entity’
for
jurisdictional
purposes.”
Transfield ER Cape Ltd. v. Indus. Carriers,
Inc., 571 F.3d 221, 224 (2d Cir. 2009)
(quoting Wm. Passalacqua Builders, Inc. v.
Resnick Developers South, Inc., 933 F.2d
131, 142-143 (2d Cir. 1991)). Furthermore,
the complaint alleges that Lin uses iTV(HK)
as the funding source for the entire iTV
Group. (Id. ¶ 68.)
Specifically, the
complaint states that iTV(HK) transferred
between $200,000 and $500,000 each
quarter to iTV.cn—the entity employing
plaintiff in New York. (Id. ¶ 70.) These
transfers were allegedly the only source of
funds available for iTV.cn to meet its
financial needs (id.), which included the
payment of plaintiff’s initial salary (id. ¶
36).
Thus, the allegations support an
inference that iTV(HK) paid plaintiff’s
salary for work in New York.
That
conclusion is further supported by the
allegation that, when plaintiff complained of
being underpaid, Lin responded that he
would be paid from funds held by iTV(HK).
(Id. ¶ 43.) Lin is the President of iTV(HK)
and all iTV entities (id. ¶ 69), and his
alleged use of iTV(HK) in this manner gives
the Court personal jurisdiction over both
him and iTV(HK).3
Having concluded that there is an
adequate basis for the exercise of specific
jurisdiction over Lin and iTV(HK), the
Court must next determine whether the
exercise of jurisdiction over them comports
with the Due Process Clause of the
Fourteenth Amendment, which requires
“some act by which the defendant
purposefully avails itself of the privilege of
conducting activities within the forum State,
thus invoking the benefits and protections of
its laws.” Burger King Corp. v. Rudzewicz,
471 U.S. 462, 475 (1985); see also WorldWide Volkswagen Corp. v. Woodson, 444
U.S. 286, 297 (1980) (“[T]he defendant’s
conduct and connection with the forum state
[must be] such that he should reasonably
anticipate being haled into court there.”).
There are two aspects of the due process
analysis: (1) the minimum contacts inquiry,
and (2) the reasonableness inquiry. Chloe v.
Queen Bee of Beverly Hills, LLC, 616 F.3d
158, 171 (2d Cir. 2010).
Although the constitutional due process
issue is a separate question, “[o]rdinarily . . .
if jurisdiction is proper under the CPLR, due
process will be satisfied because CPLR §
302 does not reach as far as the constitution
permits.” Topps Co. v. Gerrit J. Verburg
Co., 961 F. Supp. 88, 90 (S.D.N.Y. 1997).
Here, Lin and iTV(HK) had sufficient
3
The Court notes its responsibility to consider
whether it has personal jurisdiction for each separate
claim. See Interface Biomedical Labs., Corp. v.
Axiom Med., Inc., 600 F. Supp. 731, 734 (S.D.N.Y.
2003). This is because the “transacting business”
prong of Section 302(a)(1) has an “arising under”
component, requiring that the claim asserted arise
from the defendant’s New York business activities.
See, e.g., SAS Grp., 245 F. Supp. 2d at 550. “A
plaintiff’s cause of action ‘arises from’ a defendant’s
New York activities when those activities are
‘substantially proximate to the allegedly unlawful
acts.’” Id. (quoting Xedit Corp. v. Harvel Indus.
Corp., 456 F. Supp. 725, 729 (S.D.N.Y. 1978)).
Such a determination ‘“is necessarily one of degree,
informed by considerations of public policy and
fundamental fairness.”’ Id. (quoting Xedit Corp., 456
F. Supp. at 729). The Court has considered each
claim separately and concludes that there is a high
degree of interrelatedness between the alleged
conduct and each cause of action, such that the
claims for breach of contract, unjust enrichment,
fraud, negligent misrepresentation, breach of the duty
of good faith and fair dealing, and violation of New
York Labor Law all allegedly arose from Lin’s
alleged failure to pay plaintiff what he was promised.
In addition, the claim for intentional infliction of
emotional distress adequately pleads specific
jurisdiction at this stage because Lin’s treatment of
plaintiff occurred during plaintiff’s employment in
New York. (See Am. Compl. ¶¶ 35, 38-39.); see also
United Feature Syndicate, Inc. v. Miller Features
Syndicate, Inc., 216 F. Supp. 2d 198, 206 (S.D.N.Y.
2002) (finding that tort claims arose from transaction
of business in New York in the context of a
contractual relationship).
5
Corp., 721 F. Supp. 2d 228, 246 (S.D.N.Y.
2010) (quoting Metro. Life Ins., 84 F.3d at
575).
minimum contacts with New York that the
exercise of personal jurisdiction over them
satisfies due process for the same reasons
discussed above: Lin negotiated with
plaintiff, put him to work there, and
allegedly failed to compensate him, all in
New York. See Chloe, 616 F.3d at 171
(concluding that “assertion of personal
jurisdiction over [defendant] comports with
due process for the same reasons that it
satisfies New York’s long-arm statute”).
Although there may be some burden on
Lin in defending himself in New York, his
choice to conduct business there suggests
that it is not an unreasonable burden. See
Bank Brussels Lambert v. Fiddler Gonzalez
& Rodriguez, 305 F.3d 120, 129-30 (2d Cir.
2002) (“Even if forcing the defendant to
litigate in a forum relatively distant from its
home base were found to be a burden, the
argument would provide defendant only
weak support, if any, because the
conveniences of modern communication and
transportation ease what would have been a
serious burden only a few decades ago.”
(internal quotation marks and citation
omitted)). The second factor favors keeping
New York as the forum state, since “a state
frequently has a manifest interest in
providing effective means of redress for its
residents,” Chloe, 616 F.3d at 173 (internal
quotation marks and citation omitted), as
does the third factor, since plaintiff is
located there. The fourth and fifth factors
appear to be neutral in this case.
With respect to the reasonableness
inquiry, even where an out-of-state
defendant is deemed to have purposefully
availed himself of the forum state, a plaintiff
“must still demonstrate that the exercise of
jurisdiction does not ‘offend traditional
notions of fair play and substantial justice’
and is thus reasonable under the Due
Process Clause.” Id. at 172-73 (quoting
Asahi Metal Indus. Co. v. Superior Court of
Cal., Solano Cnty., 480 U.S. 102, 113
(1987)). As set forth by the Supreme Court,
courts should consider five factors when
determining the reasonableness of a
particular exercise of jurisdiction:
A court must consider [1] the burden
on the defendant, [2] the interests of
the forum State, and [3] the
plaintiff’s interest in obtaining relief.
It also must weigh in its
determination [4] the interstate
judicial system’s interest in obtaining
the most efficient resolution of
controversies; and [5] the shared
interest of the several States in
furthering fundamental substantive
social policies.
Having considered these factors, the
Court concludes that this is not one of the
few and far between cases in which the
exercise of jurisdiction would be
unreasonable despite the fact that plaintiff
has satisfied the state-law and minimum
contacts analyses. In short, the exercise of
personal jurisdiction over Lin and iTV(HK)
“comports with traditional notions of fair
play and substantial justice, such that it
satisfies the reasonableness inquiry of the
Due Process Clause.” Chloe, 616 F.3d at
173 (citation and internal quotation marks
omitted).
Asahi Metal Indus., 480 U.S. at 113 (citation
and internal quotation marks omitted).
“Where the other elements for jurisdiction
have been met, dismissals on reasonableness
grounds should be ‘few and far between.’”
Gucci Am., Inc. v. Frontline Processing
6
is one of English law.4 “[T]he proper
determination of foreign law can be a
complicated task.” Rationis Enters. Inc. of
Panama v. Hyundai Mipo Dockyard Co.,
Ltd., 426 F.3d 580, 586 (2d Cir. 2005). To
determine what English law requires in this
case, “the court may consider any relevant
material or source . . . whether or not
submitted by a party.” Fed. R. Civ. P. 44.1.
The analysis of another American court
applying English law is a particularly
relevant source. See, e.g., In re Alstom SA
Sec. Litig., 253 F.R.D. 266, 291 (S.D.N.Y.
2008); In re Optimal U.S. Litig., No. 10-cv4095, 2011 WL 4908745, at *3 n.31
(S.D.N.Y. Oct. 14, 2011).
B. Alter Ego
Plaintiff’s argument that defendants are
all alter egos of each other fails to specify a
starting point for the Court’s analysis. In
other words, plaintiff does not state which of
the multiple corporate veils he seeks to
pierce in pursuit of alter egos. It appears
that the Complaint focuses on wrongdoing
by iTV Media, and at oral argument, counsel
for plaintiff conceded that iTV Media is the
appropriate starting point, as it was the party
to plaintiff’s employment contract. Thus,
the following discussion will consider
whether the remaining corporate defendants
are iTV Media’s alter egos.
When a plaintiff pursues an alter-ego
theory, it presents a federal court sitting in
diversity with a choice-of-law question.
See, e.g., Fletcher v. Atex, Inc., 68 F.3d
1451, 1456-57 (2d Cir. 1995). “Federal
courts exercising diversity jurisdiction apply
the choice-of-law rules of the forum state,
here New York, to decide which state’s
substantive law governs.” Celle v. Filipino
Reporter Enters. Inc., 209 F.3d 163, 175 (2d
Cir. 2000). When New York courts are
asked to pierce the corporate veil against a
defendant’s alter egos, they look to the law
of the state where the defendant is
incorporated. Kalb, Voorhis & Co. v. Am.
Fin. Corp., 8 F.3d 130, 132 (2d Cir. 1993).
“Because a corporation is a creature of state
law whose primary purpose is to insulate
shareholders from legal liability, the state of
incorporation has the greater interest in
determining when and if that insulation is to
be stripped away.” Soviet Pan Am Travel
Effort v. Travel Comm., Inc., 756 F. Supp.
126, 131 (S.D.N.Y. 1991).
In In re Tyson, 433 B.R. 68, 86
(S.D.N.Y. 2010), Judge Cote surveyed
English law on this same question, and her
“general conclusions about the current state
of English veil-piercing law” have since
guided courts in this and other circuits.5
4
Plaintiff has argued in the alternative that New York
law should apply to the alter ego question, not
because New York has any greater interest than the
British Virgin Islands, but because, in plaintiff’s
view, New York and English law are the same in this
area. See Int’l Bus. Machs. Corp. v. Liberty Mut. Ins.
Co., 363 F.3d 137, 143 (2d Cir. 2004) (“Choice of
law does not matter . . . unless the laws of the
competing jurisdictions are actually in conflict. . . .
In the absence of substantive difference . . . New
York courts are free to apply [New York law].”). As
the Court’s discussion of English law demonstrates,
however, plaintiff is incorrect.
The temporal
requirement most clearly distinguishes New York
from English law. See also Optimal, 2011 WL
4908745, at *3 (applying English law in the absence
of contrary Bahamian authority and noting that
“[a]lthough New York and Bahamian corporate veilpiercing laws are largely similar, they depart in one
determinative aspect—Bahamian law requires that
the defendant incurs a liability to plaintiffs before
creating a fraudulent shell entity”).
iTV Media is incorporated in the British
Virgin Islands, and thus the question
whether any other defendant is its alter ego
5
Though both parties have also cited Sunnyside Dev.
Co., LLC v. Opsys Ltd., No. C 05-0553(MHP), 2005
WL 1876106 (N.D. Cal. Aug. 8, 2005) for its general
statements of English law, the Court finds that the
7
See, e.g., FR 8 Singapore Pte. Ltd. v.
Albacore Maritime Inc., 794 F. Supp. 2d
449, 459 (S.D.N.Y. 2012); Brainware, Inc.
v. Scan-Optics, Ltd., No. 3:11-cv-755, 2012
WL 1999549, at *5 (E.D. Va. May 9, 2012);
Optimal, 2011 WL 4908745, at n.32.
Having reviewed Tyson, the English
decisions on which it is based, and the
American decisions which have followed it,
this Court agrees that Judge Cote has
accurately and succinctly summarized
English veil-piercing law.6
pled sufficient facts with respect to UTS,
and therefore the claims against UTS must
be dismissed.
1. Misuse of the Corporation
Viewed in a light most favorable to
plaintiff, the complaint alleges that the
various corporate forms among the
defendants are a façade, but that allegation is
simply a starting point under English law. It
is also necessary to allege that defendants
misused the corporate façade “to avoid or
conceal liability.” Tyson, 433 B.R. at 87
(quoting Hashem, [2008] EWHC 2380 [¶
162]).
Tyson is particularly instructive because,
“[u]nlike American law, English case law
does not provide an enumerated set of
factors that a court can evaluate in deciding
whether to lift the corporate veil.” United
Trade Assocs., Ltd. v. Dickens & Matson
(USA) Ltd., Inc., 848 F. Supp. 751, 760
(E.D. Mich. 1994).
Nonetheless, three
principles emerge from the thorough
analysis in Tyson: (1) plaintiffs seeking to
pierce the corporate veil under English law
must allege and prove that defendants
misused a corporate façade; (2) the misuse
must have occurred after the liability arose
(“the temporal requirement”); and (3) there
is a preference under English law for fraud
claims
directly
against
individual
defendants. Examining the complaint in
light of these principles, plaintiff has
sufficiently pled that iTV(HK) and iTV.cn
are alter egos of iTV Media, but he has not
With respect to UTS, the complaint
contains no allegation that Lin or iTV Media
used UTS at all, much less misused it. At
most, plaintiff alleges that UTS owned a
controlling interest in iTV Media, but the
superior position of one entity over another
does not, by itself, justify piercing the
corporate veil under English law. See Great
Lakes Overseas, Inc. v. Wah Kwong
Shipping Grp., Ltd., 990 F.2d 990, 997 (7th
Cir. 1993) (considering Atlas Maritime Co.
v. Avalon Maritime Ltd., 4 All E.R. 769
(C.A. 1991) to represent the state of English
law, and noting that Atlas Maritime “found
no justification for piercing the corporate
veil to hold a parent company responsible
for the debts of its wholly owned subsidiary,
even where the subsidiary was created to
conduct the business at issue and was
funded entirely by loans advanced by the
parent.”). The complaint does not allege the
use of UTS by any defendant, and thus the
complaint fails to meet the first principle of
English veil-piercing law.
discussion in Tyson is far more thorough. In any
event, Sunnyside is not inconsistent with Tyson.
6
The Court reviewed the following cases cited in
Tyson or by defendants: Faiza Ben Hashem v.
Abdulhadi Ali Shayif, [2008] EWHC (Fam.) 2380;
Kensington Int’l Ltd. v. Congo, [2005] EWHC 2684
(Comm.); Ord v. Belhaven Pubs Ltd., [1998] 2 BCLC
447, [1998] BCC 607; Re Polly Peck Int’l, [1996] 2
All ER 433, [1996] 1 BCLC 428, [1996] BCC 486.
Additionally, the Court reviewed the more recent
case of VTB Capital plc v. Nutritek Int’l Corp.,
[2013] UKSC 5, which was decided since Tyson and
cited by defendants. Plaintiff has cited no additional
English authority.
In contrast, the allegations concerning
iTV(HK) and iTV.cn suggest that those
entities were part of a façade constructed by
Lin to avoid his liability for plaintiff’s
8
acquire’—conduct which, good or bad, was
thought ‘inherent in our corporate law.’” Id.
(quoting Adams v. Cape Indus. Plc, [1990]
Ch. at 544); see also Optimal, 2011 WL
4908745 at *7 (“[T]o pierce the corporate
veil a defendant must have already incurred
a liability and then set up a fraudulent shell
entity to avoid that liability.”).
wages and other compensation.
The
complaint alleges that there is a fluid
relationship among all iTV entities, with Lin
in control of each. (Am. Compl. ¶¶ 64-69.)
According to the complaint, Lin’s contract
with plaintiff was on behalf of iTV Media,
yet at Lin’s behest, “iTV HK acts as the
funding conduit for the iTV Group.” (Id. ¶
68.) When plaintiff complained about being
underpaid, Lin suggested that there were
funds available from iTV(HK), from which
plaintiff would be paid eventually. (Id. ¶
43.) Plaintiff’s initial salary, however, was
paid through iTV.cn, which the complaint
alleges was a newly-established entity
created for the purpose of attracting plaintiff
to work for Lin and iTV Media, and which
Lin subsequently misused by preventing
plaintiff’s efficient management of it. (Id.
¶¶ 21-23, 36, 47-50.) Thus, the complaint
sufficiently alleges that Lin and iTV Media
misused both entities by relying on them to
attract and retain plaintiff, and to under-pay
him while attempting to shield iTV Media
from liability. (Id. ¶ 67.)
There is no allegation against UTS
which satisfies the temporal requirement: it
is clear that UTS was formed well before the
alleged wrongdoing (Compl. ¶ 14), and it
does not appear that UTS played any role
afterward. On this ground alone, the claims
against UTS must be dismissed.
Again, the Court reaches the opposite
conclusion with respect to iTV(HK) and
iTV.cn. Although iTV(HK) appears to have
existed before plaintiff joined iTV Media,
viewing the complaint in a light most
favorable to plaintiff, it alleges that, after
incurring
liability
to
plaintiff
for
compensation, Lin deprived iTV.cn of the
money to pay plaintiff by keeping the
money in iTV(HK). (Compl. ¶¶ 43, 68.) In
addition, Lin’s alleged statement that the
money to pay plaintiff was available through
iTV(HK) supports an inference that Lin used
iTV(HK) to persuade plaintiff to keep
working, even after Lin incurred liability to
him for unpaid compensation. (Id.)
Accordingly, plaintiff has satisfied the
first principle of English veil-piercing law
for iTV(HK) and iTV.cn, but not for UTS.
2. Temporal Requirement
A second and closely-related principle of
English law imposes a temporal requirement
concerning when the misuse must occur: the
wrongdoer must have placed the corporation
between himself and his victim after
incurring liability. Tyson, 433 B.R. at 88.
English law contains “a clear distinction
between a defendant using a corporate
structure to ‘evade . . . such rights of relief
against him as third parties already
possess’—conduct for which veil-piercing
may apply—and a defendant using a
corporate structure to evade ‘such rights of
relief as third parties may in the future
The allegations concerning iTV.cn also
satisfy the temporal requirement, by
showing that Lin created iTV.cn to lure
plaintiff into the iTV Group based on false
promises, and then defraud him. (Id. ¶¶ 2123, 26, 28, 30.)
The complaint does not
state precisely when iTV.cn was created, but
its creation was nonetheless integral to the
alleged fraud, and it remained the entity in
which plaintiff was employed even after Lin
and iTV allegedly defrauded and underpaid
him. Therefore, in a light most favorable to
9
plaintiff, the allegations against iTV.cn meet
the temporal requirement.
3. Preference
Claims
for
Individual
sufficient for the Court to reach the same
conclusion with respect to UTS.8 Therefore,
the claims against UTS are dismissed.
Fraud
C. Duplicative Causes of Action
Defendants argue that the unjust
enrichment and good faith and fair dealing
counts are duplicative of plaintiff’s breach
of contract claim, but that argument is
premature at this stage. “[A] plaintiff may
plead two or more statements of a claim,
even within the same count, regardless of
A third principle of English law holds
that, “when an individual defendant makes a
fraudulent misrepresentation on behalf of a
company, that individual defendant need not
be held liable through a circuitous veilpiercing theory but rather, may be made to
answer for his own tort.” Id. at 90 (citing
Std. Chartered Bank v. Pak. Nat’l Shipping
Corp., [2002] UKHL 43 [¶¶ 20–22], [2003]
1 A.C. 959, 968–69 (H.L.)).
plaintiff’s employment contract. Accord D. Klein &
Son, Inc. v. Good Decision, Inc., 147 F. App’x 195,
198-99 (2d Cir. 2005) (piercing corporate veil in a
breach of contract case under New York law where
one owner controlled multiple corporations and used
them interchangeably, and noting that “in such
circumstances, courts may appropriately pierce
corporate veils to ensure that a plaintiff can seek
relief against the whole entity with whom it
reasonably thought it had contracted”). Likewise, at
this stage, the Court need not reach plaintiff’s
alternative arguments for enforcing the contract
against iTV.cn.
8
A related question, not briefed by plaintiff but
presented by UTS, is whether UTS could be held
liable as an alter ego of iTV.cn, which is incorporated
in Delaware. “Persuading a Delaware court to
disregard the corporate entity is a difficult task.”
Wallace ex rel. Cencom Cable Income Partners II,
Inc. L.P. v. Wood, 752 A.2d 1175, 1183 (Del. Ch.
1999). In order to state a claim, plaintiff must allege
facts demonstrating such “exclusive dominion and
control” by one entity over the other that the
controlled entity “no longer ha[s] legal or
independent significance of [its] own.” Id. at 118384 (quotation and citation omitted). The allegations
must also suggest that the controlled entity is a
“sham” existing “for no other purpose than as a
vehicle for fraud.” Id. at 1184. Plaintiff has simply
not alleged that iTV.cn was controlled by UTS or that
it was a sham created for the benefit of UTS. At
most, plaintiff’s allegations about the “sham” nature
of iTV.cn link it to Lin and iTV Media, and it would
be another step entirely to reach UTS. See In re The
Heritage Org., LLC, 413 B.R. 438, 514 (N.D. Tex.
2009) (requiring piercing at each level of ownership
under Delaware law).
The cases cited in Tyson differ to the
extent that they involve only one corporate
entity and one individual defendant,
typically in an agency relationship, which
may present a weaker case for veil-piercing
because the corporation is merely associated
with the alleged wrongdoing, rather than a
means of its accomplishment. Here, in
contrast, the allegations involve an
individual actively managing multiple
entities in order to gain the benefit of
plaintiff’s labor while shielding himself of
the liability for his compensation, and under
these circumstances, piercing the veil of the
entities directly involved is not “circuitous.”
This is true with respect to iTV(HK) and
iTV.cn, for the reasons discussed above, but
not for UTS, because plaintiff has not
alleged facts sufficient to bring UTS within
the alleged fraud.
In sum, all three principles of English
law support the conclusion at this stage,
based upon the allegations in the complaint,
that iTV(HK) and iTV.cn are alter egos of
iTV Media.7 Plaintiff has not alleged facts
7
This conclusion moots the argument by Lin and the
iTV Group that iTV.cn cannot be held liable for
breach of contract because it was not a party to
10
established either (a) by alleging facts to
show that defendants had both motive and
opportunity to commit fraud, or (b) by
alleging facts that constitute strong
circumstantial evidence of conscious
misbehavior or recklessness.” Shields v.
Citytrust Bancorp., Inc., 25 F.3d 1124, 1128
(2d Cir. 1994).
consistency.” Henry v. Daytop Vill., Inc., 42
F.3d 89, 95 (2d Cir. 1994).
In this case, whether there is any overlap
between these counts will likely depend on
whether the written contract covers all
aspects of the parties’ agreement, which is a
disputed question of fact. See Seiden Assoc.,
Inc. v. ANC Holdings, Inc., 754 F. Supp. 37,
39-40 (S.D.N.Y. 1991) (denying motion to
dismiss where parties disputed nature and
extent of contract). In particular, the unjust
enrichment count is based on the theory that
plaintiff was forced to provide “ExtraContractual Services” (Am. Compl. ¶ 95),
and the good faith and fair dealing count
seeks an alternative ground for recovery
even if plaintiff’s termination did not violate
the employment contract (id. ¶ 118).
Therefore, the counts are not duplicative at
this stage.
In a light most favorable to him,
plaintiff’s complaint sufficiently alleges that
Lin and iTV Media had the motive to hire
plaintiff through fraud because they valued
his experience, and that they had the
opportunity to commit fraud while making
promises about the IPO during negotiations
over plaintiff’s compensation. (Am. Compl.
¶¶ 25-28.)
Additionally, plaintiff’s
allegation
that
defendants
severely
underpaid him from the beginning, and
never acknowledged the promised stock
options, supports an inference that
defendants’ intention all along was to
defraud plaintiff.
D. Fraud, Negligent Misrepresentation
Defendants argue that the fraud and
negligent misrepresentation counts fail to
state claims because they are based on
statements of future intent.
Here, the
alleged statements are Lin’s promises that
iTV Media would hold an IPO within one
year, making stock options more attractive
to plaintiff.
Although the complaint sufficiently
alleges fraud, it fails to state a claim for
negligent misrepresentation. That count is
supported by the same promise of an IPO,
but “representations about future events . . .
cannot support a claim for negligent
misrepresentation.” Hydro Investors, Inc. v.
Trafalgar Power, Inc., 227 F.3d 8, 21 (2d
Cir. 2000).
Instead, “the alleged
misrepresentation must be factual in nature
and not promissory or relating to future
events that might never come to fruition.”
Id.; see also Murray v. Xerox Corp., 811
F.2d 118, 123 (2d Cir. 1987) (“Murray’s
efforts to frame broken promises into
misrepresentations of present facts are
fruitless.”); Margrove Inc. v. Lincoln First
Bank of Rochester, 388 N.Y.S.2d 958, 960
(N.Y. App. Div. 1976) (“The mere failure of
defendant to abide by its commitment
cannot be made the basis of an action in tort
“Where a cause of action for fraud is
based on a defendant’s statement of future
intention . . . plaintiff must show that the
defendant, at the time the promissory
representation was made, never intended to
honor or act on his statement.” AbernathyThomas Eng’g Co. v. Pall Corp., 103 F.
Supp. 2d 582, 596 (E.D.N.Y. 2000). To
show intent, “plaintiff[] must allege facts
that give rise to a strong inference of
fraudulent intent.” Acito v. IMCERA Grp.,
Inc., 47 F.3d 47, 52 (2d Cir. 1995). “The
requisite ‘strong inference’ of fraud may be
11
The complaint does not set forth
allegations that give rise to a plausible claim
of “extreme and outrageous conduct,” as
that term is defined under New York law for
purposes of this claim. It alleges that Lin
accused employees of “fictitious offenses,”
insulted those who complained about unpaid
salaries, and threatened to retaliate against
plaintiff by terminating his employment.
(Am. Compl. ¶ 38.) Lin also allegedly told
plaintiff that he was “worse than a peddler
on the street,” which the complaint states is
offensive within Chinese culture, though to
what degree and effect is not stated. (Id. ¶
46.) Thus, even viewed in a light most
favorable to plaintiff, these allegations
describe behavior that is offensive and
unprofessional, but not beyond all bounds of
decency or intolerable in a civilized society.
Cf. Kirwin v. N.Y. State Office of Mental
Health, 665 F. Supp. 1034, 1040 (E.D.N.Y.
1987) (dismissing claims based on “insults,
indignities,
annoyances,
and
petty
oppressions”
including
a
“veritable
campaign of harassment”); Russo-Lubrano,
2007 WL 121431 at *6-7 (collecting cases).
for misrepresentation.”).
Therefore, the
negligent misrepresentation claim is
dismissed.
E. Intentional Infliction of Emotional
Distress
The complaint also alleges that Lin’s
outbursts and threats of retaliation in the
workplace were an intentional infliction of
emotional distress suffered by plaintiff. In
order to assert a valid claim for intentional
infliction of emotional distress under New
York law, a plaintiff must demonstrate “(1)
extreme and outrageous conduct, (2) intent
to cause severe emotional distress, (3) a
causal connection between the conduct and
the injury, and (4) severe emotional
distress.” Bender v. City of New York, 78
F.3d 787, 790 (2d Cir. 1996) (citing Howell
v. N.Y. Post Co., 81 N.Y.2d 115, 121
(1993)).
New York “sets a high threshold for
conduct that is ‘extreme and outrageous.’”
Id. The conduct alleged must be “‘so
outrageous in character, and so extreme in
degree, as to go beyond all possible bounds
of decency, and to be regarded as atrocious,
and utterly intolerable in a civilized
society.’” Martin v. Citibank, N.A., 762 F.2d
212, 220 (2d Cir. 1985) (quoting Fischer v.
Maloney, 373 N.E.2d 1215, 1217 (N.Y.
1978)). “[S]atisfying the ‘outrageousness’
element is difficult, even at the pleadings
stage.” Russo-Lubrano v. Brooklyn Fed.
Sav. Bank, No. 06-CV-0672, 2007 WL
121431, at *6 (E.D.N.Y. Jan. 12, 2007); see
also Stuto v. Fleishman, 164 F.3d 820, 827
(2d Cir. 1999) (“Whether the conduct
alleged may reasonably be regarded as so
extreme and outrageous to permit recovery
is a matter for the court to determine in the
first instance.”).
Although plaintiff relies for support on
this Court’s decision in Hamlett v.
Santander Consumer USA Inc., the
allegations in that case were far more
severe: the complaint described 9,500 calls
from a debt collector over an 11-month
span, and threats of physical arrest that led
the plaintiff to require medication. 931 F.
Supp. 2d 451, 454 (E.D.N.Y. 2013). Here,
the allegations are both less specific and less
extreme.
Furthermore, this case is
distinguished from Hamlett by the fact that
plaintiff’s allegations arose in the
employment context, where “New York
courts are exceedingly wary of claims for
intentional infliction of emotional distress
. . . because of their reluctance to allow
plaintiffs to avoid the consequences of the
employment-at-will doctrine by bringing a
12
contained
within
cases
involving
commercial disputes between private
parties. In particular, the New York Court
of Appeals has held that plaintiffs may
recover punitive damages in the commercial
context only upon a showing, inter alia, that
the wrongdoing was “aimed at the public
generally, is gross and involves high moral
culpability.” Walker v. Sheldon, 10 N.Y.2d
401, 405 (1961). Thus, it is well settled that
“[w]here, as here, a fraud claim is related to
a breach of contract claim, punitive damages
are available only if: ‘(1) defendant’s
conduct is actionable as an independent tort;
(2) the tortious conduct must be of the
egregious nature set forth in [Walker, 10
N.Y.2d at 404-05]; (3) the egregious
conduct must be directed to plaintiff; and (4)
it must be part of a pattern directed at the
public generally.’” Carling v. Peters, 10
civ. 4573 (PAE) (HBP), 2013 WL 865822,
at *8 (S.D.N.Y. Feb. 6, 2013) (quoting N.Y.
Univ. v. Cont’l Ins. Co., 87 N.Y.2d 308, 316
(1995)). If the complaint fails to allege
sufficient facts to support a plausible claim
for punitive damages, it can be dismissed as
a matter of law under Rule 12(b)(6). See,
e.g., N.Y. Marine & Gen. Ins. Co. v.
Tradeline (L.L.C.), 266 F.3d 112, 130 (2d
Cir. 2001) (affirming dismissal of punitive
damages claim under Rule 12(b)(6) for
failure to allege any facts, in a breach of
contract action, regarding conduct aimed at
the public generally).
wrongful discharge claim under a different
name.” Mariani v. Consol. Edison Co. of
N.Y., Inc., 982 F. Supp. 267, 275 (S.D.N.Y.
1997) (collecting cases); see also Stuto, 164
F.3d at 827 (“[S]everal New York courts
have dismissed cases involving acts of
coercion and misrepresentation related to
employment or disability decisions on the
ground that such conduct was not extreme or
outrageous”); Galanis v. Harmonie Club of
The City of New York, No. 13 Civ. 4344
(LTS)(AJP), 2014 WL 101670, at *9
(S.D.N.Y. Jan. 10, 2014) (“[A]bsent a claim
of sex discrimination, battery, or sexual
harassment, New York courts generally will
not find intentional infliction of emotional
distress in the employment discrimination
context.”); Wahlstrom v. Metro-North
Commuter R. Co., 89 F. Supp. 2d 506, 52930 (S.D.N.Y. 2000) (collecting cases).
Therefore, the Court concludes that Hamlett
is inapposite, and that the complaint does
not state a claim for intentional infliction of
emotional distress under New York law,
although plaintiff is granted leave to replead this count in the amended complaint.
F. Punitive Damages
Lin and the iTV Group also argue that
any claim for punitive damages must be
dismissed because the complaint does not
contain allegations that would allow for
punitive damages in a case involving claims
of fraud and breach of contract in the
context of a private commercial contract.
As set forth below, the Court agrees.
Even viewing the complaint in a light
most favorable to plaintiff, it fails to allege
any facts to support an inference that the
alleged conduct by Lin and iTV Media was
aimed at the public generally. Thus, based
upon the current allegations, no claim for
punitive damages can exist as a matter of
law with respect to any of the remaining
claims in this case.
However, in an
abundance of caution, the Court will grant
leave to re-plead to give plaintiff an
As a general rule, punitive damages are
unavailable in ordinary contract actions;
rather, they are recoverable in such cases
only if aimed at the public generally and,
thus, necessary to vindicate a public right.
See TVT Records v. Island Def Jam Music
Grp., 412 F.3d 82, 93-94 (2d Cir. 2005).
This rule also applies to fraud claims
13
same legal standard.” K.R. ex rel. Perez v.
Silverman, No. 08-CV-2192 (RJD)(SMG),
2009 WL 2959580, at *3 (E.D.N.Y. Aug.
13, 2009).
opportunity to correct, if possible, this
pleading deficiency.
G. Leave to Amend
The negligent misrepresentation count is
deficient not because of a shortage of factual
allegations, but due to its basic substance:
broken promises and representations of
future events are simply not actionable
under a negligent misrepresentation theory.
Additional pleading will not cure the
negligent misrepresentation count, and leave
to amend it is therefore denied. Accord
Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d
Cir. 2000) (“The problem with Cuoco’s
causes of action is substantive; better
pleading will not cure it. Repleading would
thus be futile.”).
As discussed supra at note 2, plaintiff’s
counsel requested during oral argument to
amend the complaint to include additional
allegations in support of the argument that
UTS is an alter ego of iTV Media. That
request is granted.
In his opposition to this motion, plaintiff
also requested leave to amend any dismissed
counts against Lin and the iTV Group. “It is
the usual practice upon granting a motion to
dismiss to allow leave to replead.” Cortec
Indus., Inc. v. Sum Holding L.P., 949 F.2d
42, 48 (2d Cir. 1991). The Court has
dismissed the negligent misrepresentation
and intentional infliction of emotional
distress counts, as well as the claim for
punitive damages, and grants leave to amend
except as to the negligent misrepresentation
claim. If plaintiff is aware of facts sufficient
to state a claim for intentional infliction of
emotional distress and/or a claim for
punitive damages, he may include them in
the amended complaint.
Amending
the
negligent
misrepresentation count would be futile.
See McCarthy v. Dun & Bradstreet Corp.,
482 F.3d 184, 200 (2d Cir. 2007) (“A
district court has discretion to deny leave for
An
good reason, including futility.”).
amendment is considered futile if it could
not defeat a motion to dismiss for failure to
state a claim or for lack of subject matter
jurisdiction. See Riccuiti v. N.Y.C. Transit
Auth., 941 F.2d 119, 123 (2d Cir. 1991);
Chan v. Reno, 916 F. Supp. 1289, 1302
(S.D.N.Y. 1996). Thus, “whether considered
in the context of a motion to dismiss or
opposition to a motion for leave to amend,
the viability of a claim is evaluated by the
14
IV. CONCLUSION
For the foregoing reasons, the motion to
dismiss brought by UTS is granted, but
plaintiff is granted leave to amend the
complaint to include allegations showing
that UTS is an alter ego of iTV Media. The
motion to dismiss by Lin and the iTV Group
is granted with respect to the negligent
misrepresentation and intentional infliction
of emotional distress claims, and the claim
for punitive damages, and is otherwise
denied. Plaintiff is granted leave to amend
the complaint with respect to the intentional
infliction of emotional distress count and/or
a claim for punitive damages, and shall file
the amended complaint no later than thirty
days after the date of this order.
SO ORDERED.
______________________
JOSEPH F. BIANCO
United States District Judge
Dated: April 8, 2014
Central Islip, NY
***
Plaintiff is represented by Eugene Meyers,
Dacheng Law Offices, 2 Wall Street, 21st
Floor, New York, NY 10005. Defendants
Lin and the iTV Group are represented by
Donald F. Schneider, Silverman Sclar Shin
& Byrne PLLC, 381 Park Avenue South,
New York, NY 10016. Defendant UTS is
represented by Charles A. Michael, Brune &
Richard LLP, One Battery Park Plaza, 34th
Floor, New York, NY 10004.
15
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