Grewal v. Cuneo et al
Filing
141
OPINION AND ORDER: Plaintiff's Motion for Reconsideration is denied. Plaintiff's Motion to Strike Defendant's Affirmative Defenses is denied as to the first, second, third, and fifth affirmative defenses, and granted as to the fourth . Plaintiff's Motion to Dismiss Defendant's Counterclaims is granted in its entirety. The Clerk of Court is respectfully directed to terminate the motions pending at docket numbers 114 and 121. Plaintiff shall have until February 1, 2016 to amend her Complaint in accordance with the July 7 Order. Also by February 1, the parties are to notify the Court if they object to this case being referred to Judge Pitman for a settlement conference. (As further set forth in this Order.) Motions terminated: 121 MOTION to Dismiss. filed by Preetpal Grewal, 114 MOTION for Reconsideration re; 98 Memorandum & Opinion, filed by Preetpal Grewal. (Signed by Judge Ronnie Abrams on 1/25/2016) (cf)
USDC-SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC#:
DATE FILED: 1/25/2016
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
PREETP AL GREW AL,
Plaintiff,
v.
No. 13-CV-6836 (RA)
OPINION AND ORDER
JONATHAN W. CUNEO, et al.,
Defendants.
RONNIE ABRAMS, United States District Judge:
Plaintiff Preeptal Grewal, an attorney proceeding prose, initiated this action on September
25, 2013 against her former employer, Cuneo Gilbert & LaDuca LLP ("CGL") and nine individual
Defendants who are partners of or employed by CGL (collectively, the "Individual Defendants"). 1
By Order dated July 7, 2015, the Court granted in part and denied in part Defendants' Motion to
Dismiss, dismissing Plaintiff's Racketeer Influenced and Corrupt Organizations Act ("RICO")
claims and state-law claims for breach of fiduciary duty, unjust enrichment, unfair competition,
fraudulent inducement, and discriminatory termination under New York State and City Human
Rights Law. The Court also determined that none of Plaintiff's claims were properly asserted
against the Individual Defendants, and thereby dismissed them from the action. On July 21, 2015,
Defendant CGL answered Plaintiff's Second Amended Complaint (the "Complaint"), asserting
five affirmative defenses, and filed counterclaims. Now before the Court are Plaintiff's Motion
for Reconsideration of the July 7 Order and Plaintiff's Motion to Dismiss Defendant's
Counterclaims and Strike Defendant's Affirmative Defenses.
For the reasons that follow,
1 The Individual Defendants are Michael Flannery, Robert Cynkar, Sandra Cuneo, Daniel Cohen, Matthew
Miller, Joel Davidow, Jonathan Cuneo, Charles LaDuca, and Pamela Gilbert.
Plaintiffs Motion for Reconsideration is denied, Plaintiffs Motion to Strike Defendant's
Affirmative Defenses is granted in part and denied in part, and Plaintiffs Motion to Dismiss
Defendant's Counterclaims is granted.
DISCUSSION
I.
Motion for Reconsideration
For the purposes of the Motion for Reconsideration, the Court assumes familiarity with the
underlying facts and procedural history as set forth in the July 7 Order.
A. Standard of Review
Reconsideration is an "extraordinary remedy to be employed sparingly in the interests of
finality and conservation of scarce judicial resources." In re Health Mgmt. Sys. Inc. Secs. Litig.,
113 F. Supp. 2d 613, 614 (S.D.N.Y. 2000). Accordingly, "[t]he standard for granting [a motion
for reconsideration] is strict, and reconsideration will generally be denied unless the moving party
can point to controlling decisions or data that the court overlooked-matters, in other words, that
might reasonably be expected to alter the conclusion reached by the court." Shrader v. CSX
Tramp., Inc., 70 F.3d 255, 257 (2d Cir. 1995). To succeed, the moving party must "identif[y] 'an
intervening change of controlling law, the availability of new evidence, or the need to correct a
clear error or prevent manifest injustice.'" Kole! Beth Yechiel Mechil of Tartikov, Inc. v. YLL
Irrevocable Tr., 729 F.3d 99, 104 (2d Cir. 2013) (quoting Virgin At!. Airways, Ltd. v. Nat'!
Mediation Bd., 956 F.2d 1245, 1255 (2d Cir. 1992)). In the case of new evidence, the proponent
must demonstrate that the evidence could not have been discovered "with reasonable diligence"
prior to the court's ruling. Fed. R. Civ. P. 60(b)(2). "A motion for reconsideration is 'not a vehicle
for relitigating old issues, presenting the case under new theories, securing a rehearing on the
merits, or otherwise taking a second bite at the apple.'" Persh v. Petersen, No. 15-CV-1414 (LGS),
2015 WL 6736189, at *2 (S.D.N.Y. Oct. 30, 2015) (quoting Analytical Surveys, Inc. v. Tonga
2
Partners, L.P., 684 F.3d 36, 52 (2d Cir. 2012)). In short, "[a] party seeking reconsideration is not
supposed to treat the court's initial decision as the opening of a dialogue in which that party may
then use such a motion to advance new theories or adduce new evidence in response to the court's
rulings." Childers v. N. Y Presbyterian Hosp., 36 F. Supp. 3d 292, 316 (S.D.N.Y. 2014).
Plaintiff has not met her burden here. With respect to her Motion for Reconsideration of
the Court's dismissal of her breach of fiduciary duty, unfair competition, and civil RICO claims,
Plaintiff merely repeats the same arguments the Court previously rejected without pointing to new
evidence or controlling law. Because a motion for reconsideration is not a "vehicle to relitigate"
issues already decided, Plaintiff's motion fails as to these claims. See Persch, 2015 WL 6736189,
at *2. As to the remaining claims, Plaintiff argues that (1) there is newly discovered evidence that
demonstrates that personal jurisdiction is proper over the Flannery Defendants; 2 (2) the Court did
not address her argument that the Individual Defendants are "necessary parties" to this action; and
(3) the Court did not consider material facts that show Defendants never intended to abide by their
promises and thereby fraudulently induced Plaintiff to join CGL. For the following reasons,
Plaintiff has failed to provide the Court a sufficient basis to reconsider its ruling.
B. Personal Jurisdiction over Flannery Defendants
In its July 7 Order, the Court held that it lacked personal jurisdiction over all the Flannery
Defendants other than Joel Davidow. The Court reasoned that, even if Plaintiff could establish
that personal jurisdiction over the CGL partnership established jurisdiction over all partners as a
matter of New York law, Plaintiff had failed to plausibly allege that the Flannery Defendants were
partners by estoppel or otherwise.
July 7 Order 10-11.
Plaintiff now argues that personal
jurisdiction is proper, citing purportedly new evidence establishing that the Flannery Defendants
2
The Flannery Defendants are Michael Flannery, Robert Cynkar, Sandra Cuneo, Daniel Cohen, Matthew
Miller, and Joel Davidow.
3
"knowingly allowed [themselves] to be billed as a partner in numerous fee applications filed under
penalty of perjury." Pl.'s Mot. Recon. 10 (internal citation and quotation marks omitted). But
Plaintiff does not argue that the evidence could not have been discovered with reasonable diligence
prior to the Court's July 7 Order; instead, she states only that she "recently found" an April 2011
email from Joel Davidow and that a February 14, 2014 fee application filed in In re. JP Morgan
Chase Mortgage Modification Litigation "was not available to Plaintiff until recently." Pl.' s Mot.
Recon. 10-11. The fact that Plaintiff "recently learned of this information does not, however,
make it 'new evidence.'" Tatum v. City of New York, No. 06-CV-4290 (BSJ), 2009 WL 976840,
at *2 (S.D.N.Y. April 9, 2009). Plaintiff therefore fails to make the requisite showing that this
evidence could not have been discovered with reasonable diligence prior to the Court's July 7
Order.
In any event, even if the Court were to consider this "new evidence," it does not provide a
basis for reconsideration. Nothing in the fee application in In re. JP Morgan Chase Mortgage
Litigation-in which associate Alexandra Warren is billed at a higher rate than named partner
Pamela Gilbert and the Flannery Defendants are listed as partners-and an email from Joel
Davidow describing himself as a CGL partner, would change the Court's ruling that "[b ]ecause
Plaintiff has not alleged that she relied on representations that they were partners, the Flannery
Defendants are not partners by estoppel under District of Columbia law." July 7 Order 10-11.
Plaintiff also continues to confuse the job title of partner at CGL with the legal status of a partner
under District of Columbia ("D.C.") partnership law. In sum, Plaintiff has provided no basis for
the Court to reconsider its ruling that it cannot exercise personal jurisdiction over the Flannery
Defendants with the exception of Davidow.
4
C. Personal Liability of Individual Defendants
Plaintiff next argues that it was improper to dismiss the Individual Defendants, namely, the
Cuneo Defendants 3 and Flannery Defendants. Specifically, she argues that, under D.C. partnership
law, these parties are individually liable for her state-law and tort claims because they were CGL
partners, and she may thus proceed against them individually. 4
Plaintiffs argument fails as to the Flannery Defendants because, as discussed above,
personal jurisdiction does not lie. As to the Cuneo Defendants, who are by contrast CGL partners,
Plaintiff again fails to establish that they could be personally liable under D.C. partnership law.
The D.C. Limited Liability Partnership Act generally shields partners from personal
liability for obligations of the partnership, providing:
An obligation of a partnership incurred while the partnership is a limited liability
partnership, whether arising in contract, tort, or otherwise, shall be solely the debt,
obligation, or other liability of the partnership. A partner shall not be personally
liable, directly or indirectly, by way of contribution or otherwise, for such a debt,
obligation, or other liability solely by reason of being or so acting as a partner.
D.C. Code§ 29-603.06(c). 5 Although there is an exception that permits actions by partners against
the partnership or other partners, this exception does not apply here because, as the Court
previously held, Plaintiff has failed to plausibly allege that she was a CGL partner as a matter of
D.C. partnership law. July 7 Order 15-17.
Plaintiff argues that the Cuneo Defendants are nevertheless personally liable based on
additional exceptions to the partnership liability rule. Namely, she contends that they are liable
because ( 1) "partners in a limited liability partnership are not protected as individuals from liability
3
The Cuneo Defendants are Jonathan Cuneo, Charles LaDuca, and Pamela Gilbert.
Although Plaintiff argues that the "Individual Defendants are necessary parties to this action," Pl. 's Mot.
Recon. 11, in substance, Plaintiffs argument appears not to be that they are indispensable under Rule 19, but that
she should be able to bring suit against these parties as individuals.
5
As CGL is a partnership organized under D.C. law, D.C. partnership law applies to the question of
partnership liability.
4
5
incurred by the partnership if the assets of the partnership are insufficient to satisfy the liability"
and/or (2) partners who induce a breach of contract for their own benefit, as distinct from that of
the partnership, are liable for such breaches. Pl.' s Mot. Recon. 11-12. In support of these
assertions, Plaintiff cites only to cases interpreting New York partnership law, arguing that New
York and D.C. partnership law mirror each other in this regard.
Plaintiff does not provide
persuasive support, however, for the contention that, even if these exceptions did apply here, D.C.
partnership law recognizes them. 6 In any event, the New York cases on which Plaintiff relies do
not support the claim that the Cuneo Defendants are individually liable. In United States v. 175
Inwood Associates, LLP, for example, the court held that general partners of a limited liability
partnership-as distinguished from the Cuneo Defendants who are limited liability partners- may
be personally liable to persons other than partners if the entity lacks the financial resources to
satisfy its liability to plaintiff. 330 F. Supp. 2d 213, 224 (E.D.N.Y. 2004). But Plaintiff has not
alleged that CGL is not able to satisfy a judgment against it. Plaintiff's reliance on The Savage Is
Loose Co. v. United Artists Theater Circuit, Inc., 413 F. Supp. 555, 560 (S.D.N.Y. 1976), is
similarly inapt. There, the court found that a general partner could be liable for inducing a breach
of contract "for ulterior purposes wholly divorced from the legitimate interests of the plaintiff
Company." Id. Plaintiff has failed to plausibly allege that, even if this principle did apply to
limited partners governed by D.C. partnership law, that the Cuneo Defendants acted for their own
6
In her opposition to Defendants' Motion to Dismiss, Plaintiff cites Queen v. Schultz, 888 F. Supp. 2d 145
(D.D.C. 2012), ajj"d in part, rev 'din part and remanded, 747 F3d. 879 (D.C. Cir. 2014), and Dupree v. Walker, No.
84-CV-1677, 1988 WL 112157 (D.D.C. Oct. 13, 1988), for the proposition that "[c]ourts in the District of Columbia
look for guidance to the partnership law ofNew York State." Pl.'s Opp. Mot. Dismiss 11 n.5. In Queen, the court
merely found, for the purposes of its choice-of-law analysis, that New York and D.C. law do not conflict regarding
the formation ofa partnership, 888 F. Supp. 2d at 165, and in Dupree, the court looked to New York partnership Jaw
to hold that, where a limited partner seeks to enforce rights against the partnership, there must be complete diversity
among the limited and general partners for diversity jurisdiction to attach, 1988 WL 112157, at *5-4. It does not
follow that that D.C. law recognizes these exceptions to the rule that partners are insulated from liability for claims
arising from the partnership.
6
benefit "wholly divorced" from that of the partnership. Plaintiff thus provides no support for her
claim that the Cuneo Defendants could be personally liable for these claims.
D. Fraudulent Inducement
Plaintiff next argues that the Court "has not taken into account material facts[,] ... which
establish that the Defendants never intended to ... let Plaintiff establish her career at the firm."
Pl' s Mot. Recon. 16. Plaintiff points to Jonathan Cuneo' s decision to limit her international
antitrust work early in her employment, the manner in which Defendants ousted her from the firm,
and the threats Defendants made against her, as well as Defendant's purported misappropriation
of her work and clients as evidence that Defendants never intended to abide by the promises that
induced her to join the firm. Pl.'s Mot. Recon. 15-16.
As an initial matter, in the July 7 Order, the Court did indeed review the various ways
Plaintiff alleged that Defendants expropriated her work, but nonetheless concluded that they were
insufficient to establish that Defendants never intended to deliver on their promises. July 7 Order
24-25. As to the remaining allegations, Plaintiff points to no fact that "might reasonably be
expected to alter" the Court's conclusion. Shrader, 70 F.3d at 257. As the Court explained at
length in its July 7 Order, the standard to plead fraudulent inducement claims is a strict one, see
Fed. R. Civ. P. 9(b ), requiring the Plaintiff to plead facts that "give rise to a strong inference that
the defendant[ ] had an intent to defraud, knowledge of the falsity, or a reckless disregard for the
truth." Cohen v. S.A.C Trading Corp., 711 F.3d 353, 359 (2d Cir. 2013) (alteration in original).
None of the events that allegedly took place after Plaintiff was hired give rise to the inference that
any promises were false when made. 7
7
Plaintiff also requests that the Court clarify whether the parties will be able to address the appropriate
measure of damages at a later point. Any ruling on the damages available here would be premature at this time.
7
II.
Plaintifrs Motion to Strike CGL's Affirmative Defenses
Plaintiff moves to strike all five of Defendant CG L's affirmative defenses. Federal Rule
of Civil Procedure 12(f) provides that, "[t]he court may strike from a pleading an insufficient
defense or any redundant, immaterial, impertinent, or scandalous matter." "Motions to strike
affirmative defenses are 'generally disfavored.'" Walsh v. City of New York, 585 F. Supp. 2d 555,
557 (S.D.N.Y. 2008) (citing Simon v. Mfrs. Hanover Tr. Co., 849 F. Supp. 880, 882 (S.D.N.Y.
1994)). Accordingly, "[t]he standard to prevail on a motion to strike is demanding," requiring that
the moving party demonstrate that (1) there may be no question of fact which might allow the
defense to succeed; (2) there may be no substantial question of law, a resolution of which could
allow the defense to succeed; and (3) the party would be prejudiced by the inclusion of the defense.
Tardif v. City of New York, 302 F.R.D. 31, 32 (S.D.N.Y. 2014) (internal citations and quotation
marks omitted).
The motion is denied insofar as it seeks dismissal of the first, second, third, and fifth
affirmative defenses. Plaintiff has failed to show that these defenses would cause her prejudice,
and the Court is persuaded that there is sufficient overlap between CGL's defenses and Plaintiff's
affirmative claims that there will be no need for additional discovery. See Harborview Value
Master.fund, L.P. v. Freeline Sports, Inc., No. 11-CV-1638 (CM), 2012 WL 612358, at *15-16
(S.D.N.Y. Feb. 23, 2012). As to the fourth affirmative defense, alleging Plaintiff fails to state a
claim for hostile work environment, this claim is dismissed in light of the Court's July 7 Order,
which held that Plaintiff had stated a claim. See FD.I. C. v. Pelletreau & Pelletreau, 965 F. Supp.
381, 390 (E.D.N.Y. 1997) ("An affirmative defense which previously has been rejected on a
defendant's motion to dismiss is thereupon insufficient as a matter oflaw and must be stricken.").
8
III.
Plaintifrs Motion to Dismiss CGL's Counterclaims
Plaintiff also moves to dismiss CGL's counterclaims for breach of contract, breach of
fiduciary duty, and declaratory judgment. Her motion is granted.
A. Relevant Facts
Defendant COL asserts the following facts in support of its counterclaims for breach of
contract, breach of the duty of loyalty and fiduciary duty, and declaratory judgment. Plaintiff
worked as an attorney at COL from June 2008 through May 9, 2012, and, as a part of her
employment contract, she was obligated to comply with the firm's policies and procedures
regarding attendance, performance of work in a timely and professional manner, acceptance and
representation of clients, and cooperation with the firm's other attorneys. Countercl. ,, 6-8.
According to COL, Plaintiff failed to comply with these regulations, disappearing from work for
long periods of time without notice or permission, submitting work assignments late, and failing
to cooperate with the firm's attorneys. Id. , 10. COL also alleges that Plaintiff made disparaging
remarks to a potential client and other COL attorneys about the firm and its founder, Jonathan
Cuneo, including that Cuneo was incompetent and always lost his cases. Id. ,, 23-24.
COL further alleges that from July 2011 to May 2, 2012, "unbeknownst to COL" Plaintiff
provided legal advice to Elizabeth Thomas, a pro se litigant in a case before Judge Gleeson in the
United States Court for the Eastern District of New York. Id.,, 11-14. COL avers that the firm
had not authorized her to represent Thomas, but instead had "expressly instructed [Plaintiff] to
refrain from providing any such assistance." Id. ,, 14-15. On May 4, 2012, Thomas told COL
that Plaintiff had been providing legal advice to her and "ghostwriting" her pleadings. Id., 13. In
response, COL retained Michael Ross, a member of the New York Bar with expertise in the New
York Code of Professional Responsibility, to conduct an investigation of Plaintiff's involvement
9
with Thomas. Id. 116. The firm expended $63,000 to conduct the investigation, which culminated
in a report submitted to Judge Gleeson on June 22, 2012. Id. 1117-18. On April 2, 2013 Thomas
threatened to file suit against COL and Plaintiff, and did so on December 16, 2013 for claims
based, in part, on Plaintiffs actions while providing Thomas legal assistance. Id. 1129-30. COL
was forced to expend time and resources as a result of Plaintiffs purported unauthorized
involvement with Thomas. Id. 1131-32.
After Plaintiff resigned from the firm on May 9, 2012, COL alleges she refused to comply
with its requests that she return client files and lied about possessing such files. Id. 122. Plaintiff
also purportedly refused to provide notice to the New York Office of Court Administration that
she was no longer affiliated with COL. Id. 120. COL also alleges that, in about September 2011,
while still an attorney at COL, Plaintiff agreed to provide legal service to a couple, Martin J. Bowes
and Marie V. Bowes ("the Bowes"), without the firm's knowledge or authorization. Id. 125. COL
learned of this only when the Bowes called the firm in April 2013 to express their dissatisfaction
with Plaintiffs legal services and to demand the return of their documents. Id. 1125-29.
B. Standard of Review
A motion to dismiss counterclaims pursuant to Rule l 2(b )( 6) is decided under the same
standard as that of a motion to dismiss the claims of a complaint. See MTV Networks v. Curry,
867 F. Supp. 202, 203 (S.D.N.Y. 1994); Schatt v. Curtis Management Group, Inc., 764 F. Supp.
902, 915 (S.D.N.Y. 1991). A counterclaim need only contain "a short and plain statement of the
claim showing the pleader is entitled to relief' so as to give the opposing party fair notice of the
claim and the grounds on which it rests. Fed. R. Civ. P. 8(a)(2). To survive a motion to dismiss,
a counterclaim must do more than offer "naked assertions devoid of further factual enhancement."
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation and internal quotation marks omitted). A
10
court must "accept all allegations in the complaint as true and draw all inferences in the nonmoving party's favor." LaFaro v. New York Cardiothoracic Group, PLLC, 570 F.3d 471, 475 (2d
Cir. 2009). "Consideration is limited to the factual allegations in the Answer, the Counterclaims,
and those documents attached as exhibits or incorporated by reference." Gortat v. Capata Bros.,
Inc., 585 F. Supp. 2d 372, 375 (E.D.N.Y. 2008) (citing Faconti v. Potter, 242 F. App'x. 775, 777
(2d Cir. 2007)), afj'd sub nom., Gortat v. Capata Bros., Inc., 568 F. App'x 78 (2d Cir. 2014).
C. Judicial Estoppel
Plaintiff first argues that CG L's counterclaims should be dismissed under the doctrine of
judicial estoppel, which is aimed at preventing litigants from pursuing contradictory positions in
different legal proceedings. Specifically, Plaintiff contends that because Defendants declared
under penalty of perjury that Plaintiff was a CGL partner in the context of declarations for
attorneys' fees, Defendants are now estopped from contradicting this position by arguing that
Plaintiff was never a partner.
"In order for judicial estoppel to be invoked, (1) the party against whom it is asserted must
have advanced an inconsistent position in a prior proceeding, and (2) the inconsistent position must
have been adopted by the court in some matter." Peralta v. Vasquez, 467 F .3d 98, 105 (2d Cir.
2006).
The first element requires "a true inconsistency between the statements in the two
proceedings." Simon v. Sa/elite Glass Corp., 128 F.3d 68, 72-73 (2d Cir. 1997). The Second
Circuit has thus "limit[ed] the doctrine of judicial estoppel to situations where the risk of
inconsistent results with its impact on judicial integrity is certain." Uzdavines v. Weeks Marine,
Inc., 418 F.3d 138, 148 (2d Cir. 2005).
As an initial matter, Plaintiff fails to explain exactly how judicial estoppel would bar CG L's
counterclaims. In any event, judicial estoppel does not attach here. "[A] court must carefully
11
consider the contexts in which apparently contradictory statements are made to determine if there
is, in fact, direct and irreconcilable contradiction." Rodal v. Anesthesia Gp. of Onondaga, P. C.,
369 F.3d 113, 119 (2d Cir. 2004). Defendant's representation that Plaintiff held the title of partner
at CGL for the purposes of fee applications does not contradict its current position that she was
not an equity partner and, therefore, as a legal matter, not a partner under D.C. partnership law.
Defendant is therefore not estopped from arguing that Plaintiff was not a CGL equity partner.
D. First Counterclaim: Breach of Contract
Plaintiff argues that CGL's breach of contract claim fails to state a claim for relief. The
Court agrees. "Under New York law, the elements of a breach of contract claim are the formation
of an agreement, performance by one party, breach of the agreement by the other party, and
damages." Berman v. Suga LLC, 580 F. Supp. 2d 191, 202 (S.D.N.Y. 2008) (citing First Investors
Corp. v. Liberty Mut. Ins. Co., 152 F.3d 162, 168 (2d Cir. 1998)). 8 A party need not plead each
element individually, but the pleadings must allege sufficient facts to show that a contract existed.
See Ostrolenk Faber LLP v. Unigene Labs., Inc., No. 12-CIV-3991 (HB), 2012 WL 3114742, at
*2 (S.D.N.Y. Aug. 1, 2012).
Plaintiff argues that New York Labor Law Section 193 ("Section 193") bars CG L's breach
of contract counterclaim. Section 193 prohibits employers from making wage deductions based
on an employee's substandard job performance. New York courts have construed this provision
to preclude employers from pursuing damages based on an employee's negligence or poor job
performance, reasoning that, although such claims are "not an obvious example of attempted wage
deductions[,] ... if such claims are not treated as such, the goal of§ 193, which is to afford strong
8
As in the July 7 Order, the Court will apply New York law to Plaintiff's state-law contract and tort claims
based on the parties' reliance on New York law. See Krumme v. WestPoint Stevens Inc., 238 F.3d 133, 138 (2d Cir.
2000).
12
protection of the wages of employees, could easily be circumvented." Cohen v. Stephen Wise Free
Synagogue, No. 95-CV-1659 (PKL), 1996 WL 159096, at *4 (S.D.N.Y. Apr. 4, 1996); accord
Farricker v. Penson Dev., Inc., No. 07-CV-11191(DAB),2010 WL 845983, at *2 (S.D.N.Y. Mar.
4, 2010) ("an employer cannot recover based on a lack of performance"); Burke v. Steinmann, No.
03-CV-1390 (GEL), 2004 WL 1117891, at *6 (S.D.N.Y. May 18, 2004) ("under New York law
employers may not assert a claim for damages against an employee for the employee's alleged
negligent acts, or sue employees for lost profits caused by alleged poor performance"); Guepet v.
Int'! Tao Sys., Inc., 443 N.Y.S.2d 321, 322-23 (N.Y. Sup. Ct. 1981) ("To allow the defendant
[employer] the right to recover [damages] based upon plaintiffs alleged lack of performance would
be permitting defendant to do indirectly and retroactively that which the law specifically prohibits
it from doing directly.").
COL alleges that Plaintiff did not: "(a) meet the firm's attendance expectations; (b) perform
work in a timely and professional manner; (c) comply with the firm's procedures regarding the
acceptance and representation of clients; (d) cooperate with the firm's attorneys; and (e) [comply
with] CGL's requests to provide all documents which contained information regarding Thomas
and CGL's clients and potential clients." Countercl. , 34. Ultimately, these allegations amount
to little more than claims that Plaintiff performed her job responsibilities below the expected
standard, and are therefore foreclosed by Section 193. See Burke, 2004 WL 1117891, at *6
("employers may not recover from an employee for mismanagement absent a finding of a breach
of the duty of good faith and loyalty"). Defendant points to no case where a court upheld a breach
of contract claim based on analogous allegations. Defendant's breach of contract counterclaim is
thus dismissed. 9
9
Nor can CGL circumvent Section 193 by alleging that this conduct violates the implied covenant of good
faith and fair dealing.
13
E. Second Counterclaim: Breach of Duty of Loyalty and Fiduciary Duty
Plaintiff next seeks to dismiss CGL' s second counterclaim for breach of fiduciary duty and
duty of loyalty on the grounds that the alleged misconduct does not state a claim for breach of
these duties. 10 "To succeed on a claim for breach of fiduciary duty under New York law, a plaintiff
must demonstrate the existence of a fiduciary relationship between the parties and a breach of that
duty by the defendant." Fagan v. First Sec. Invs., Inc., No. 04-CV-1021 (LTS), 2006 WL 2671044,
at *4 (S.D.N.Y. Sept. 15, 2006). Under New York law's faithless servant doctrine, an employee
owes a duty of good faith and loyalty to an employer which obligates him "to be loyal to his
employer" and prohibits him "from acting in any manner inconsistent with his agency or trust."
Phansalkar v. Andersen Weinroth & Co., L.P., 344 F.3d 184, 200 (2d Cir. 2003) (quoting Western
Elec. Co. v. Brenner, 360 N.E.2d 1091 (N.Y. 1977)) (internal quotation marks omitted). "The
duty of loyalty 'has been limited to cases where the employee, acting as the agent of the employer,
unfairly competes with his employer, diverts business opportunities to himself or others to the
financial detriment of the employer, or accepts improper kickbacks."' Farricker v. Penson Dev.,
Inc., 2010 WL 845983, at *2 (S.D.N.Y. Mar. 4, 2010) (quoting Veritas Capital Management
L.L. C. v. Campbell, 08-CV650058, 2008 WL 5491146, at * 10-11 (N.Y. Sup. Ct. 2008); accord
Westwood Chem. Co. v. Kulick, 570 F. Supp. 1032, 1040 (S.D.N.Y. 1983).
CG L's claim that that Plaintiff violated her duties by (1) surreptitiously representing
Thomas without CGL's authorization; (2) representing the Bowes without CGL's authorization
and doing so ineffectively; (3) disparaging Cuneo and CGL to Thomas and other members of the
firm; (4) ignoring CG L's requests for documents in Plaintiffs possession related to Thomas and
10 In the context of a motion to dismiss, the Court will not consider Plaintiffs arguments regarding the truth
of the allegations as it is obligated to "accept all factual allegations as true." Jaghory v. New York State Dept. of
Educ., 131 F.3d 326, 329 (2d Cir. 1997) (internal citations omitted).
14
the firm's clients and potential clients; (5) lying to the firm about her possession of the same; and
(6) preparing to take CGL's clients with her when she left the firm. None of these allegations
states a claim for breach of fiduciary duty or duty of loyalty. The alleged violations will be
considered in turn.
CGL claims that Plaintiff represented Thomas and the Bowes without the firm's
authorization-unaccompanied by any facts that she benefitted from these representations to the
detriment of the firm-is insufficient as a matter of law to state a claim for breach of fiduciary
duty or the duty ofloyalty. In Farricker v. Penson Development, Inc., the court was faced with a
similar set of facts. 2010 WL 845983, at *2. Presented with an employer who alleged that its
employee had promised two real estate brokers, without authorization, that the employer would
pay for their services, Judge Batts held that such ultra vires acts, without evidence of self-dealing,
did not state a claim for a breach of good faith and loyalty. Id. The same deficiency exists here.
CGL alleges no facts establishing that Plaintiff misappropriated the firm's time or resources, that
she diverted profits to herself, that she worked for a competing law firm, or that she solicited clients
to start a competing business. Cf Phansalker, 344 F.3d at 200 (finding employee a faithless
servant where he failed to disclose and retained for himself interests belonging to his employer);
Carco Group, Inc. v. Maconachy, 383 F. App'x. 73, 76 (2d Cir. 2010) (finding defendant a faithless
servant "because of his self-dealing"); Penton Learning Sys., LLC v. Def Strategies Inst. Grp.,
2012-CV-651791, 2014 N.Y. Misc. LEXIS 3622, at *54-56 (N.Y. Sup. Ct. July 28, 2014) (finding
breach of the duty ofloyalty where Defendants "were performing duties for a competing company"
while still in Plaintiffs employ). Lacking allegations of any act of similar disloyalty, these claims
must fail.
15
CGL also fails to state a claim with respect to its allegations that Plaintiff disparaged Cuneo
and CGL to Thomas and other members of the firm, ignored CG L's requests for documents related
to Thomas and the firm's clients and potential clients, and lied to the firm about her possession of
such documents. While it does allege insubordination and dishonesty, CGL fails to allege any
element of self-dealing on Plaintiffs part. Such claims are thus not actionable under the faithless
servant doctrine. See Schwartz v. Leonard, 526 N.Y.S.2d 506, 508 (N.Y. App. Div. 1988) (finding
allegation that defendant took client files and made secret plans to move to new office space
"insufficient ... to show that defendant neglected the files during his period of employment or that
he was furthering his own interest at the expense of the plaintiff').
Defendant's remaining claim that Plaintiff was a faithless servant by "preparing to take
CGL's clients with her when she left the firm" also fails. Countercl., 37. The only support for
this allegation is that Thomas purportedly told CGL that Plaintiff had such plans. Id. , 23. New
York courts, however, have found that the taking of "preliminary steps to enter into a competitive
business involved no breach of fidelity so long as ... Plaintiff never lessened his work on behalf
of defendant and never misappropriated to his own use business secrets." Feiger v. Ira! Jewlery,
Ltd., 363 N.E.2d 350, 351 (N.Y. 1977); accord Bon Temps Agency v. Greenfield, 622 N.Y.S.2d
709 (N.Y. App. Div 1995) ("mere taking of preliminary steps to enter into a competitive business
would not be a breach of fidelity unless or until [defendant] lessened her work on behalf of plaintiff
or misused plaintiffs business secrets); Mal Dunn Assoc. v. Kranjac, 535 N.Y.S.2d 430, 431 (N.Y.
App. Div. 1988) ("preliminary inquiries" to employer's clients did not breach duty). Without
alleging any facts evidencing that Plaintiff took a material step to steal the firm's clients, this claim
cannot survive.
F. Third Counterclaim: Declaratory Judgment
16
Lastly, Plaintiff moves to dismiss CGL's third counterclaim for declaratory judgment in
which Defendant seeks a judgment that it "is not obligated to pay [Plaintiff] any additional
incentive or other compensation." Countercl.
~
44.
In order to decide whether to entertain an action for declaratory judgment, courts consider:
"(l) whether the judgment will serve a useful purpose in clarifying or settling the legal issues
involved; and (2) whether a judgment would finalize the controversy and offer relief from
uncertainty." Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 411 F.3d 384, 389 (2d Cir.
2005) (citing Broadview Chem. Corp. v. Loctite Corp., 417 F.2d 998, 1001 (2d Cir.1969)).
"[W]here a declaratory judgment claim is redundant of a primary claim raised by a party to a
lawsuit, it is properly dismissed as duplicative." Garfinkel v. RalfVayntrub, lnvar Consulting Ltd.,
No. 13-CV-3093 (PKC), 2014 WL 4175914, at *6 (E.D.N.Y. Aug. 20, 2014). "A district court
has broad discretion to decide whether to render a declaratory judgment." In re Orion Pictures
Corp.,4F.3d 1095, 1100(2dCir.1993).
CGL has provided no basis for why a declaratory judgment would serve a useful purpose
in clarifying a legal issue or would offer the parties relief from uncertainty. Its only argument is
that "the damages sought by [Plaintiff] include a share of attorneys' fee awards which may not be
made and collected before this litigation concludes." Defs.' Opp. Mot. Dismiss Countercl. 13.
But Defendant's equivocal justification for declaratory judgment does not explain why the Court's
judgment on Plaintiff's claims will not resolve Plaintiff's entitlement to such fees on a prospective
basis. See, e.g., Amusement Indus., Inc. v. Stern, 693 F. Supp. 2d 301, 311(S.D.N.Y.2010) ("The
fact that a lawsuit has been filed that will necessarily settle the issues for which the declaratory
judgment is sought suggests that the declaratory judgment will serve 'no useful purpose."');
Intellectual Capital Partner v. Inst. Credit Partners LLC, No. 08-CV-10580 (DC), 2009 WL
17
1974392, at *6 (S.D.N.Y. July 8, 2009) ("declaratory relief would serve no useful purpose as the
legal issues will be resolved by litigation of the breach of contract claim"). Plaintiffs declaratory
judgment counterclaim is thus dismissed.
CONCLUSION
Plaintiffs Motion for Reconsideration is denied. Plaintiffs Motion to Strike Defendant's
Affirmative Defenses is denied as to the first, second, third, and fifth affirmative defenses, and
granted as to the fourth. Plaintiffs Motion to Dismiss Defendant's Counterclaims is granted in its
entirety. The Clerk of Court is respectfully directed to terminate the motions pending at docket
numbers 114 and 121.
Plaintiff shall have until February 1, 2016 to amend her Complaint in accordance with the
July 7 Order. Also by February 1, the parties are to notify the Court if they object to this case
being referred to Judge Pitman for a settlement conference.
SO ORDERED.
Dated:
January 25, 2016
New York, New York
Ro me Abrams
Umted States District Judge
18
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