A.V.E.L.A., Inc. v. The Estate of Marilyn Monroe, LLC et al

Filing 131

MEMORANDUM AND ORDER: granting 72 Motion for Leave to File Document. For the reasons stated above, the counter-plaintiff's motion to amend (Docket no. 72) is granted. Within one week of the date of this Order, counsel shall submit a proposed schedule for adjudicating the new claims. (Signed by Magistrate Judge James C. Francis on 7/24/2014); Copies Mailed By Chambers. (djc)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - -:
A.V.E.L.A., INC.,
: 12 Civ. 4828 (KPF) (JCF)
:
Plaintiff,
:
MEMORANDUM
:
AND ORDER
:
- against :
:
THE ESTATE OF MARILYN MONROE,
:
BIOWORLD MERCHANDISING, and DOES
:
1 THROUGH 10,
:
:
Defendants.
:
- - - - - - - - - - - - - - - - - -:
THE ESTATE OF MARILYN MONROE and
:
BIOWORLD MERCHANDISING,
:
:
Counter Claimants, :
:
- against :
:
A.V.E.L.A., INC. and LEO VALENCIA, :
:
Counter Defendants. :
- - - - - - - - - - - - - - - - - -:
JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE
The counter-plaintiff in this dispute over who may rightfully
license the likeness of film actress Marilyn Monroe requests leave
to file an amended counterclaim, adding alter ego allegations and
claims of infringement against three entities it seeks to add as
new counter-defendants.
Background
The plaintiff in this action, A.V.E.L.A., Inc. (“AVELA”), is
a company that creates and licenses artwork featuring pop culture
1

figures in the public domain, for use on clothing, novelty items,
and other consumer products.

(Complaint (“Compl.”), ¶ 1; Answer

and Counterclaims (“Answer”) at 17, ¶ 20).

In June 2011, the

Estate of Marilyn Monroe, LLC (the “Estate”), which holds certain
trademarks associated with Marilyn Monroe, including her name and
signature, and claims to have protectable rights in her image,
persona, and likeness, sent AVELA a cease and desist letter
regarding AVELA-licensed products bearing the image of Marilyn
Monroe.

(Compl., ¶ 9; Answer at 14-16, ¶¶ 9-15).

AVELA then sued

the Estate, seeking declaratory judgment that the products that
AVELA licenses do not infringe on any intellectual property owned
by the Estate and also asserting claims of tortious interference.
The Estate countersued AVELA and its owner, Leo Valencia, bringing
claims

of

unfair

competition,

false

association,

trademark

infringement, dilution, and violation of state law. (Answer at 2028, ¶¶ 39-89).
The Estate now seeks to add three proposed corporate counterdefendants -- IPL, Inc. (“IPL”), X One X Movie Archives Inc. (“X
One X”), and V. International Fine Arts Publishing, Inc. (“V.
International”) -- that it alleges are the alter-egos of the
current counter-defendants, AVELA and Mr. Valencia.

According to

the proposed amended counterclaim, Mr. Valencia “conducts business
under a number of assumed names” and corporations “for the purpose
2

of dissipating the liability of any given entity associated with
the licensing business.”

(First Amended Counterclaim (“First Am.

Counterclaim”) at 7, ¶ 23, attached as Exh. A to Defendant/CounterPlaintiff The Estate of Marilyn Monroe, LLC’s Memorandum of Law in
Support of Motion for Leave to File First Amended Counterclaim and
to Add Counter-Defendants (“Counter-Pl. Memo.”)).

The Estate

alleges that it first learned of these three additional parties
during discovery, and that without the amendment, any potential
injunctive relief or damages will be inadequate.
Memo.

at

5).

The

proposed

amendment

also

(Counter-Pl.

includes

updated

information regarding the trademarks owned and registered by the
Estate,

and

omits

certain

allegations

that

AVELA

improperly

contacted a licensee of the Estate. (Counter-Pl. Memo. at 4). The
latter changes are not contested by the counter-defendants.
Discovery in this action has been disjointed due to numerous
disputes and the replacement of AVELA’s counsel, and the Estate
filed its motion one week before discovery closed.

The counter-

plaintiff alleges that it first learned of V. International during
the deposition of Liza Acuna in September 2013, when Ms. Acuna
identified V. International as the licensing agent for AVELA.
(Counter-Pl. Memo. at 5).

Following the deposition, the Estate

sought documentation of any agreements or payments between V.
International and AVELA.

(Counter-Pl. Memo. at 5-6).
3

After a

lengthy dispute, unredacted copies of checks showing the payment of
agency fees to V. International were produced on January 14, 2014,
see A.V.E.L.A., Inc. v. Estate of Marilyn Monroe, No. 12 Civ. 4828,
2014 WL 715540, at *3, *10 (S.D.N.Y. Feb. 24, 2014), adhered to on
reconsideration, 2014 WL 1408488 (S.D.N.Y. April 11, 2014); the
Estate maintains that these financial documents were “manufactured”
to “create the appearance of independence” between Mr. Valencia and
V. International (Counter-Pl. Memo. at 4; First Am. Counterclaim at
8, ¶ 32).

During the September 13, 2013 deposition, when asked to

list the licensees of Marilyn Monroe images, Ms. Acuna included the
company Mighty Fine.

(Counter-Pl. Memo. at 6; Deposition of Liza

Acuna dated Sept. 13, 2013, attached as Exh. E to Declaration of
Gina L. Durham dated Dec. 19, 2013 (“Durham 12/19/13 Decl.”), at
102-03). Ms. Acuna subsequently clarified that Mighty Fine was not
an AVELA licensee, prompting the Estate to subpoena the license
agreement from Mighty Fine, which showed that IPL, rather than
AVELA, was the licensor.

(Counter-Pl. Memo. at 6-7).

The Estate

deposed a Mighty Fine representative on November 14, 2013, who
stated that Mighty Fine licensed Marilyn Monroe products from IPL,
provided royalty reports on the products it sold, and considered
IPL to be “one and the same” as AVELA.

(Deposition of Patricia

Timsawat dated Nov. 14, 2014, attached as Exh. Q to Durham 12/19/13
Decl., at 54-55).

The Estate learned of X One X during Mr.
4

Valencia’s September 30, 2013 deposition, when he stated that AVELA
licenses images from X One X in return for a licensing agent fee.
(Counter-Pl Memo. at 7).

Mr. Valencia also stated that he could

not locate a written agreement between AVELA and X One X, nor
distinguish between those images owned by AVELA and those owned by
X One X.

(Counter-Pl. Memo. at 7).

According to the Estate, the

counter-defendants had not produced any documentation of invoices
or payments between AVELA and X One X related to licensing of
Marilyn Monroe images at the time the motion was filed.

(Counter-

Pl. Memo. at 7; Declaration of Gina L. Durham dated Feb. 4, 2014,
¶ 6).
Discussion
Rule 15 of the Federal Rules of Civil Procedure provides that
courts

should

requires.”

“freely

give”

leave

to

amend

“when

justice

so

Fed. R. Civ. P. 15(a)(2); see also Foman v. Davis, 371

U.S. 178, 182 (1962); Aetna Casualty & Surety Co. v. Aniero
Concrete Co., 404 F.3d 566, 603–04 (2d Cir. 2005).

The Second

Circuit has stated that “[t]his permissive standard is consistent
with our strong preference for resolving disputes on the merits.”
Williams v. Citigroup Inc., 659 F.3d 208, 212–13 (2d Cir. 2011)
(internal quotation marks omitted); MHANY Management Inc. v. County
of Nassau, 843 F. Supp. 2d 287, 340 (E.D.N.Y. 2012) (“Amendments
are generally favored because they tend to facilitate a proper
5

decision on the merits.” (internal quotation marks omitted)).
Motions to amend should therefore by denied only for reasons of
undue delay, bad faith or dilatory motive, undue prejudice to the
non-moving

party,

or

futility.

See

Burch

v.

Pioneer

Credit

Recovery, Inc., 551 F.3d 122, 126 (2d Cir. 2008) (citing Foman, 371
U.S. at 182); McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200
(2d Cir. 2007).

The court has broad discretion over such motions.

See McCarthy, 482 F.3d at 200.

“Although Rule 21, and not Rule

15(a) normally governs the addition of new parties to an action,
the

same

standard

of

liberality

applies

under

either

rule.”

Zarycki v. Mount Sinai/NYU Health, No. 02 Civ. 6236, 2005 WL
2977568, at *4 (S.D.N.Y. Nov. 4, 2005) (internal quotation marks
omitted); see Addison v. Reitman Blacktop, Inc., 283 F.R.D. 74, 79
(E.D.N.Y. 2011) (noting that same considerations of undue delay,
prejudice, and futility apply under Rule 15(a) and Rule 21).
A. Delay
As the Second Circuit has repeatedly recognized, “[m]ere
delay, . . . absent a showing of bad faith or undue prejudice, does
not provide a basis for a district court to deny the right to
amend.”
843,

856

State Teachers Retirement Board v. Fluor Corp., 654 F.2d
(2d

Cir.

1981);

see

Parker

v.

Columbia

Pictures

Industries, 204 F.3d 326, 339 (2d Cir. 2000); Park B. Smith, Inc.
v. CHF Industries Inc., 811 F. Supp. 2d 766, 779 (S.D.N.Y. 2011);
6

see also Rotter v. Leahy, 93 F. Supp. 2d 487, 497 (S.D.N.Y. 2000)
(“Typically, the moving party’s delay, standing alone, is not
sufficient reason to foreclose amendment.”).

Where a significant

period of time has passed prior to filing a motion to amend,
however, the moving party must provide an explanation for the
delay.

Zubulake v. UBS Warburg LLC, 231 F.R.D. 159, 162 (S.D.N.Y.

2005).
The defendants contend that the Estate unduly delayed in
bringing this motion, as it had knowledge of the underlying facts
as early as September 2013, roughly four months before filing the
motion.

(Memorandum of Points and Authorities in Opposition to

Motion to Amend (“Counter-Def. Memo.”) at 22-24).

While the

counter-plaintiff was on notice that the other entities existed by
the end of October 2013, it was reasonable for it to attempt to
develop these facts through additional discovery before moving to
amend.

See TNS Media Research, LLC v. TRA Global, Inc., No. 11

Civ. 4039, 2012 WL 2052679, at *1 (S.D.N.Y. June 4, 2012) (allowing
party to add counterclaim defendants where earlier suspicions were
subsequently borne out through discovery); Bridgeport Music, Inc.
v. Universal Music Group, Inc., 248 F.R.D. 408, 414 (S.D.N.Y.
2008).

Following the September 2013 depositions of Ms. Acuna, the

Estate sought documentation relating to these other entities from
AVELA and Mr. Valencia and conducted third party depositions.
7

(Counter-Pl. Memo. at 6-7).

The relevant time period is therefore

somewhat less than four months.

Given this context, the delay is

not significant enough to derail this motion.

Courts in this

district have granted motions to amend despite similar temporal
gaps between discovery of the relevant facts and filing of an
amended pleading.

See Securities and Exchange Commission v. DCI

Telecommunications, Inc., 207 F.R.D. 32, 34–35 (S.D.N.Y. 2002)
(allowing amendment where plaintiff obtained discovery supporting
amendment four months before motion); American Medical Assocation
v. United Healthcare Corp., No. 00 Civ. 2800, 2006 WL 3833440, at
*4 (S.D.N.Y. Dec. 29, 2006) (finding no undue delay where party
moved to amend several months after learning relevant facts in
discovery);

see

also

Affiliated

FM

Insurance

Co.

v.

Liberty

Mechanical Contractors, Inc., No. 12 Civ. 5160, 2013 WL 4526246, at
*5 (S.D.N.Y. Aug. 27, 2013) (allowing amendment based on facts and
law available at time of initial pleading and collecting cases).
B. Prejudice
“Prejudice to the opposing party . . . has been described as
the most important reason for denying a motion to amend.”

Frenkel

v. New York City Off–Track Betting Corp., 611 F. Supp. 2d 391, 394
(S.D.N.Y. 2009) (internal quotation marks omitted).
undue prejudice justifies denial of leave to amend.

However, only
See A.V. by

Versace, Inc. v. Gianni Versace S.p.A., 87 F. Supp. 2d 281, 299
8

(S.D.N.Y. 2000).

Prejudice results when the proposed amendment

would “(i) require the opponent to expend significant additional
resources

to

conduct

discovery

and

prepare

for

trial;

(ii)

significantly delay the resolution of the dispute; or (iii) prevent
the

plaintiff

from

bringing

a

timely

action

in

another

jurisdiction.” Monahan v. New York City Department of Corrections,
214 F.3d 275, 284 (2d Cir. 2000) (quoting Block v. First Blood
Associates, 988 F.2d 344, 350 (2d Cir. 1993)); see Adams v. City of
New York, __ F. Supp. 2d __, __, 2014 WL 309640, at *11 (E.D.N.Y.
Jan. 29, 2014).

Whether a party had prior notice of a claim and

whether the new claim arises from the same transaction as the
claims in the original pleading are central to this determination.
See Monahan, 214 F.3d at 284.

The procedural posture of a case,

including the stage of discovery and whether dispositive motions
have been filed, may also be weighed.

See, e.g., Grochowski v.

Phoenix Construction, 318 F.3d 80, 86 (2d Cir. 2003) (upholding
denial of leave to amend where amendment was sought after discovery
had closed and while summary judgment motion was pending); see also
Ruotolo v. City of New York, 514 F.3d 184, 192 (2d Cir. 2008)
(“Undue prejudice arises when an ‘amendment [comes] on the eve of
trial and would result in new problems of proof.’” (alteration in
original) (quoting State Teachers Retirement Board, 654 F.2d at
856)).

The non-moving party bears the burden “of demonstrating
9

that substantial prejudice would result were the proposed amendment
to be granted.”

Alexander Interactive, Inc. v. Adorama, Inc., No.

12 Civ. 6608, 2014 WL 113728, at *3 (S.D.N.Y. Jan. 13, 2014)
(internal quotation marks omitted); see also ResQNet.com v. Lansa,
Inc., 382 F. Supp. 2d 424, 449 (S.D.N.Y. 2005), rev’d on other
grounds, 594 F.3d 860 (Fed. Cir. 2010).
The counter-defendants assert that the proposed amendment will
“have a dramatic effect on discovery and substantially delay
resolution of this action.”

(Counter-Def. Memo. at 1).

As they

correctly note, the proposed amendment would not merely hold IPL,
X One X, and V. International liable for the actions of AVELA and
Mr. Valencia; rather, it alleges that these entities themselves
have engaged in infringing conduct.

(First Am. Counterclaim at 9,

¶¶ 34-36; at 10-12, ¶¶ 40, 44-51).

As such, it will implicate

discovery beyond the corporate structure of these entities and into
areas that the current counter-defendants view as outside the scope
of this litigation.
The counter-defendants’ assertion that the addition of the
three proposed counter-defendants will delay resolution for “at
least a year” (Counter-Def. Memo. at 1), however, is unsupported.
Although new discovery will certainly be warranted, it will be
limited in scope.
defendants

are

As the Estate claims that the new counter-

alter-egos

of

Mr.
10

Valencia,

any

additional

documentation

sought

will

likely

be

in

the

current

counter-

defendants’ possession and therefore can be expeditiously produced.
See Sullivan v. West New York Residential, Inc., No. 01 CV 7847,
2003

WL

21056888,

at

*2

(E.D.N.Y.

March

5,

2003)

(finding

additional discovery not unduly prejudicial where newly asserted
alter ego claims “will likely involve only some of the same
witnesses already deposed, and any documents sought will likely be
in the defendants’ possession”).

Likewise, while depositions may

need to be reopened, this should not impose an undue burden on the
current counter-defendants.

See id.; Bridgeport Music, Inc., 248

F.R.D. at 414 (“[T]he burden on the current defendants of attending
reopened depositions would be less because they have previously
prepared for them.”).
Generally, “[a]llegations that an amendment will require the
expenditure

of

additional

time,

effort,

[themselves] constitute undue prejudice.”

or

money

do

not

A.V. by Versace, Inc.,

87 F. Supp. 2d at 299 (internal quotation marks omitted); see
Soroof Trading Development Co. v. GE Microgen, Inc., 283 F.R.D.
142,

153

(S.D.N.Y.

2012).

An

“‘adverse

party’s

burden

of

undertaking discovery, standing alone, does not suffice to warrant
denial of a motion to amend a pleading.’”

JPMorgan Chase Bank,

N.A. v. IDW Group, LLC, No. 08 Civ. 9116, 2009 WL 1357946, at *4
(S.D.N.Y. May 12, 2009) (quoting United States v. Continental
11

Illinois National Bank & Trust Co., 889 F.2d 1248, 1255 (2d Cir.
1989)); see also Margel v. E.G.L. GemLab Ltd., No. 04 Civ. 1514,
2010 WL 445192, at *12 (noting that any “prejudice that would flow
from any additional required discovery can generally be mitigated
by adjustments to the discovery schedule,” and collecting cases);
Lawrence v. Starbucks Corp., No. 08 Civ. 3734, 2009 WL 4794247, at
*4 (S.D.N.Y. Dec. 10, 2009).

At the time the motion was filed,

discovery was not yet closed, nor had any dispositive motions been
filed.

Although discovery has since closed, “where the proposed

amendment arises from the same set of operative facts as the
original claims . . .

the mere fact that discovery has concluded

does not provide a reason for denying leave to amend.” Michalek v.
Amplify Sports & Entertainment LLC, No. 11 Civ. 508, 2012 WL
2357414, at *5 (S.D.N.Y. June 20, 2012) (internal quotation marks
omitted).

The counter-defendants have not established that re-

opening discovery will cause them undue prejudice in this matter.
Furthermore, while the Estate may not have filed its motion
until February 2014, given the nature of the allegations at issue
-- unlawful use of the Estate’s intellectual property related to
Marilyn Monroe -- the counter-defendants were on notice that claims
might be alleged against other entities licensing Marilyn Monroe
products.

Indeed, the three entities at issue are either owned by

Mr. Valencia, a current counter-defendant, or intimately involved
12

in the licensing of AVELA’s products.

The Estate also clearly

indicated its intention to file alter ego claims and identified the
relevant

entities

sanctions.

in

its

December

2013

motion

for

discovery

See A.V.E.L.A., Inc., 2014 WL 715540, at *10.

Given

such notice that these claims might be asserted, the counterdefendants cannot reasonably claim undue prejudice.

“[F]ederal

courts have consistently granted motions to amend where, as here,
it appears that new facts and allegations were developed during
discovery, are closely related to the original claim, and are
foreshadowed in earlier pleadings.”

Bridgeport Music, Inc., 248

F.R.D. at 415 (internal quotation marks omitted).
Finally, judicial efficiency weighs in favor of allowing the
amendment.

See Duling v. Gristede’s Operating Corp., 265 F.R.D.

91, 102 n.5 (S.D.N.Y. 2010) (“Where, as here, the original and
proposed

claims

are

interrelated,

it

also

serves

judicial

efficiency to permit them to be brought in the same action.”).
Under the proposed amendment, the exact same claims, arising from
the same course of conduct, are now asserted against allegedly
interrelated entities.

It is appropriate that these claims be

adjudicated together, especially in light of the closely-knit web
of licensing relationships alleged by the Estate.

See Danaher

Corp. v. Travelers Indemnity Co., No. 10 Civ. 121, 2013 WL 150027,
at *4 (S.D.N.Y. Jan. 10, 2013) (considering judicial efficiency “an
13

appropriate factor to consider when deciding a motion to add
parties”); Bridgeport Music, Inc., 248 F.R.D. at 415 (finding
judicial economy favored adding new defendant where the “claims
against [new defendant] are identical to those already in the
case”).
C. Futility
Leave to amend may be denied as futile when the pleading would
not survive a motion to dismiss.

See AEP Energy Services Gas

Holding Co. v. Bank of America, N.A., 626 F.3d 699, 726 (2d Cir.
2010); Slay v. Target Corp., No. 11 Civ. 2704, 2011 WL 3278918, at
*2 (S.D.N.Y. July 20, 2011) (“Futility generally turns on whether
the proposed amended pleading states a viable claim.”); Penn Group,
LLC v. Slater, No. 07 Civ. 729, 2007 WL 2020099, at *4 (S.D.N.Y.
June 13, 2007).

Under that standard, the proper inquiry “is not

whether a [moving party] will ultimately prevail but whether [that
party] is entitled to offer evidence to support the claims.’” Todd
v. Exxon Corp., 275 F.3d 191, 198 (2d Cir. 2001) (quoting Scheuer
v. Rhodes, 416 U.S. 232, 236 (1974)).

A court must accept as true

all well-pleaded facts and draw all reasonable inferences in the
moving party’s favor.

DiFolco v. MSNBC Cable LLC, 622 F.3d 104,

110-11 (2d Cir. 2010).
Although the counter-defendants allege that the evidence that
the Estate proffers in its motion is insufficient to support the
14

alter ego allegations (Counter-Def. Memo. at 23), whether or not
the proposed amended counterclaims are sufficient is determined by
the facts alleged in the proposed amended counterclaim itself. See
DiFolco, 622 F.3d at 111 (“In considering a motion to dismiss for
failure to state a claim pursuant to Rule 12(b)(6), a district
court may consider the facts alleged in the complaint, documents
attached to the complaint as exhibits, and documents incorporated
by reference in the complaint.”).

A complaint need not contain

detailed factual allegations, but it must contain more than mere
“‘labels

and

conclusions’

or

‘a

elements of a cause of action.’”

formulaic

recitation

of

the

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

678 (2009) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 555
(2007)).
“‘Under New York choice of law principles, the law of the
state of incorporation determines when the corporate form will be
disregarded and liability will be imposed on shareholders.’”
National Gear & Piston, Inc. v. Cummins Power Systems, LLC, 975 F.
Supp. 2d 392, 401 (S.D.N.Y. 2013) (quoting Fletcher v. Atex, Inc.,
68 F.3d 1451, 1456 (2d Cir. 1995).

IPL is an unincorporated entity

based in California, X One X is a Nevada corporation, and V.
International is a California corporation. (First Am. Counterclaim
at 3, ¶¶ 4-6).

However, as the counter-defendants cite to a

Southern District of New York case in contesting the sufficiency of
15

the counter-plaintiff’s allegations (Counter-Def. Memo. at 23-24),
to which the counter-plaintiff does not object in its Reply, I will
consider New York law to be applicable here.

See American Fuel

Corp. v. Utah Energy Development Co., 122 F.3d 130, 134 (2d Cir.
1997) (applying New York law despite Utah incorporation where
parties’ briefs “rel[ied] primarily on New York law”).
Under New York law, to justify disregarding the corporate
form, the Estate must demonstrate that (1) Mr. Valencia dominated
the entities with respect to the claimed infringement, and (2) that
this domination was used “to commit a fraud or wrong” that injured
the Estate.

Key Items, Inc. v. Global Jewellery Solutions, Ltd.,

514 F. App’x 40, 41-42 (2d Cir. 2013) (citing American Fuel Corp.,
122 F.3d at 134).

“New York law allows the corporate veil to be

pierced either when there is fraud or when the corporation has been
used as an alter ego.”

Itel Containers International Corp. v.

Atlanttrafik Express Services Ltd., 909 F.2d 698, 703 (2d Cir.
1990) (emphasis omitted).

The factors to be considered when

determining whether the corporate veil should be pierced include
(1)

the

absence

of

corporate

formalities;

(2)

inadequate

capitalization; (3) overlap in ownership, officers, directors, and
employees; (4) common office space, address, and telephone numbers;
(5) the amount of business discretion displayed by the allegedly
dominated

corporation;

and

(6)
16

arms

length

business

dealings

between the related corporations.

Network Enterprises, Inc. v.

APBA Offshore Productions, Inc., No. 01 Civ. 11765, 2002 WL
31050846, at *3 (S.D.N.Y. Sept. 12, 2002); see also Camofi Master
LDC

v.

College

Partnership,

Inc.,

452

F.

(S.D.N.Y. 2006) (noting additional factors).

Supp.

2d

462,

472

“In making an alter

ego determination, a court is concerned with reality and not form,
and

with

how

the

corporation

operated.”

Wajilam

Exports

(Singapore) Pte Ltd. v. ATL Shipping Ltd., 475 F. Supp. 2d 275, 282
(S.D.N.Y. 2006) (internal quotation marks omitted); see also United
States v. Funds Held in the Name or for the Benefit of Wetterer,
210

F.3d

96,

106

(2d

Cir.

2000)

(noting

that

alter

determination must be made based on totality of facts).

ego

“[P]urely

conclusory allegations” are insufficient to state a claim for
alter-ego liability.

In re Currency Conversion Fee Antitrust

Litigation, 265 F. Supp. 2d 385, 426 (S.D.N.Y. 2003).
Here, the Estate alleges facts with sufficient specificity to
survive a motion to dismiss.

The Estate asserts that AVELA, IPL,

and X One X are undercapitalized and that Mr. Valencia is the sole
shareholder,

officer,

director,

Counterclaim at 7, ¶ 25).
does

not

follow

corporate

and

employee.

(First

Am.

It further asserts that Mr. Valencia
formalities,

including

maintaining

separate books and records, and freely co-mingles funds between
IPL, X One X, AVELA, and his own personal finances.
17

(First Am.

Counterclaim at 7-8, ¶¶ 26-27). The Estate also alleges that these
entities and Mr. Valencia “exploit the same intellectual property”
and do not maintain any written agreements as to its use.
Am. Counterclaim at 8, ¶ 27).

(First

While the Estate does not claim that

V. International is either undercapitalized or that Mr. Valencia is
its

sole

shareholder,

officer,

director,

and

employee,

it

nonetheless alleges that V. International should be considered an
alter-ego because the corporation operates solely to “provide
administrative
entities.

support”

to

Mr.

Valencia

and

the

other

named

(First Am. Counterclaim at 8, ¶¶ 29-30). The Estate

alleges that V. International’s sole clients are Mr. Valencia and
the other named entities, several V. International employees have
e-mail addresses with the extension @avela.net, and that the
counter-defendants’ prior counsel identified herself as “in-house
counsel” for AVELA but was actually employed by V. International.
(First

Am.

Counterclaim

at

8,

¶¶

30-31).

Accepting

these

allegations as true, they establish a plausible inference that
these entities are sufficiently interrelated to be considered alter
egos.

See Ferrara v. Smithtown Trucking Co., No. 13 CV 3006, 2014

WL 3378350, at *7 (E.D.N.Y. July 10, 2014) (finding “extensive
allegations” of common management, supervision, and ownership,
inadequate capitalization, and shared operations, equipment, and
customers

sufficient

to

support
18

alter

ego

claims);

Network

Enterprises, Inc., 2002 WL 31050846, at *4 (finding allegations of
same address and telephone number, “complete domination” by same
chairman,

and

financial

inconsistencies

sufficient

to

allow

proposed amendment adding alter ego claims, and collecting cases).
The Estate alleges that this disregard of corporate form was used
to evade liability for infringement, for example, by licensing
images through IPL as opposed to AVELA (The Estate of Marilyn
Monroe, LLC’s Reply Memorandum of Law in Support of its Motion for
Leave to File First Amended Counterclaim and to Add CounterDefendants at 3, 5; First Am. Counterclaim at 7, ¶ 23), sufficient
to support the second prong of the veil piercing inquiry.
Items,

Inc.,

514

F.

App’x

at

41

(finding

alter

ego

See Key
claims

sufficient based on allegations that businesses operated in same
market, had same officer and director, used same business address
and resources, and transferred assets to avoid liability).
Conclusion
For the reasons stated above, the counter-plaintiff’s motion
to amend (Docket no. 72) is granted.

Within one week of the date

of this Order, counsel shall submit a proposed schedule for
adjudicating the new claims.

19

SO ORDERED.

f ·"?;~~

v

C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE

Dated: New York, New York
July 24, 2014

Copies mailed this date:
Michael R. Adele, Esq.
Technology Litigation Center
828 S. Marjan St
Anaheim, CA 92806
Tamar Duvdevani, Esq.
DLA Piper LLP
1251 Avenue of the Americas
New York, NY 10020-1104
Gina L. Durham, Esq.
DLA Piper, LLP
555 Mission St., Suite 505
San Francisco, CA 94105

20