Tarazi et al v. Quintessential Biosciences, LLC et al

Filing 19

MEMORANDUM AND ORDER: Q Sciences is directed to submit a reply memorandum limited to the question of whether it has a meritorious defense within seven days of the date of this order. The plaintiff may file a sur-reply within seven days of the date Q Sciences' reply is filed. (Signed by Magistrate Judge James C. Francis on 7/1/2015) Copies Mailed By Chambers. (tn)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - -:
NADIA TARAZI, individually and
:
derivatively as a member of
:
PAINTED WINGS MEDIA, LLC,
:
:
Plaintiff,
:
:
- against :
:
QUINTESSENTIAL BIOSCIENCES, LLC,
:
d/b/a Q SCIENCES,
:
:
Defendant,
:
:
and
:
:
PAINTED WINGS MEDIA, LLC,
:
:
Nominal Defendant. :
- - - - - - - - - - - - - - - - - -:
JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE

15 Civ. 1038 (LAK) (JCF)
MEMORANDUM
AND ORDER

This case is one among several related to the falling out of
three business associates, Nadia Tarazi, Autumn Stringam, and Ms.
Stringam’s

husband,

Dana

Stringam,

Micronutrient Solutions, Inc. (“MSI”),

and

their

companies,

Open Mind Consulting, Inc.

(“Open Mind”), and Painted Wings, LLC (“Painted Wings”). The first
of these lawsuits, Tarazi v. Truehope, Inc., 13 Civ. 1024, was
filed in February 2013 by Ms. Tarazi and MSI against Quintessential
Biosciences, LLC (“Q Sciences”), among other defendants.1

Shortly

after filing the second amended complaint in Tarazi v. Truehope,
Ms. Tarazi filed this lawsuit individually and derivatively as a
member of Painted Wings.

Q Sciences was duly served with the

1

The Honorable Lewis A. Kaplan has deemed Tarazi v. Truehope
related to the instant action. (Order dated March 6, 2015).
1

Summons and Complaint on March 6, 2015, but failed to timely
answer, and the Clerk of Court accordingly entered a certificate of
default against it on April 17, 2015.

Thereafter, the plaintiffs

moved for default judgment and the defendant moved to vacate the
entry of default.
Background2
Ms.

Tarazi

developed

a

business

relationship

with

the

Stringams after reading Ms. Stringam’s book, A Promise of Hope,
which details her “successful management of her symptoms [of
bipolar disorder]” through the use of a “Micronutrient Product”
that was “known to treat conditions afflicting certain swine
animals.”

(Complaint (“Compl.”), ¶¶ 8-11).

Ms. Tarazi offered to

help Ms. Stringam “promote her book and life story across multiple
media channels” so that they could “tell, and profit from, [Ms.
Stringam]’s story.”

(Compl., ¶ 9).

In April 2012, they formed

Painted Wings with the primary purpose of using Ms. Stringam’s
personal story to promote micronutrients.
15).

(Compl., ¶¶ 1, 9, 12-

Around the same time, Ms. Tarazi and the Stringams formed a

joint venture with the goal of “not only telling [Ms. Stringam’s]
story . . . , but also selling a private label of the Micronutrient
Product and other related products.”

(Compl., ¶ 16).

Ms. Tarazi

and the Stringams entered into a number of oral and written
agreements related to the joint venture, many of which are at issue
in Tarazi v. Truehope, Inc.

(Compl., ¶ 16).

2

Subsequently, the

For the purposes of this motion, the facts alleged in the
operative complaint are assumed to be true.
2

plaintiffs allege, the Stringams abandoned the joint venture,
breaching several contractual and fiduciary duties, and began
supporting Q Sciences’ efforts to market the Micronutrient Product
instead.

(Compl., ¶¶ 35-62).

In Tarazi v. Truehope, Ms. Tarazi and MSI assert four claims
against Q Sciences.

They allege that Q Sciences aided and abetted

the Stringams’ breach of their fiduciary duty, which arose out of
the joint venture (Second Amended Complaint (“Truehope SAC”), ¶¶
112-117, Tarazi v. Truehope, No. 13 Civ. 1024 (S.D.N.Y.)); that it
tortiously interfered with three contracts -- the joint venture
agreement, a memorandum of understanding related to the joint
venture, and an agreement in which Ms. Stringam promised to endorse
MSI products (Truehope SAC, ¶¶ 123-127); that it unjustly enriched
itself by misappropriating marketing materials created by Ms.
Tarazi and MSI (Truehope SAC, ¶¶ 143-147); and that it engaged in
unfair and deceptive business practices by accepting Ms. Stringam’s
endorsement (Truehope SAC, ¶¶ 153-161).3
Similar claims premised on a different set of alleged duties
are asserted against Q Sciences here.
Q

Sciences

aided

and

abetted

Ms.

The plaintiff alleges that
Stringam

in

breaching

the

fiduciary duties she owed to Painted Wings (Compl., ¶¶ 67-75) and
Ms. Tarazi as a member of Painted Wings (Compl., ¶¶ 85-88).
3

She

Q Sciences moved to dismiss each of these claims.
In a
report and recommendation also issued today, I recommend that the
the tortious interference with contract claim and the deceptive
business practice claim be dismissed, but that Q Science’s motion
be denied with respect to the aiding and abetting a breach of
fiduciary duty claim and the unjust enrichment claim. (Report and
Recommendation dated July 1, 2015, at 43-44).
3

also

asserts

that

Q

Sciences

tortiously

interfered

with

Ms.

Stringam’s obligations under the Transmedia Assignment Agreement,
a contract which assigned the exclusive rights to Ms. Stringam’s
life story to Painted Wings.

(Compl., ¶¶ 19, 76-84).

Discussion
A.

Legal Standard

Under Rule 55 of the Federal Rules of Civil Procedure, “[w]hen
a party against whom a judgment for affirmative relief is sought
has failed to plead or otherwise defend, and that failure is shown
by affidavit or otherwise, the clerk must enter the party’s
default.”

Fed. R. Civ. P. 55(a).

While the entry of default is

not discretionary, after such default is entered, “[t]he court may
set [it] aside . . . for good cause.”

Fed. R. Civ. P. 55(c);

accord Bricklayers and Allied Craftworkers Local 2, Albany Pension
Fund v. Moulton Masonry & Construction, LLC, 779 F.3d 182, 186 (2d
Cir. 2015).

Alternatively, upon application by the non-defaulting

party, the court may enter a default judgment.
55(b).

Fed. R. Civ. P.

Whether to grant a default judgment is a decision left to

the sound discretion of the district court. Shah v. New York State
Department of Civil Service, 168 F.3d 610, 615 (2d Cir. 1999);
Enron Oil Corp. v. Diakuhara, 10 F.3d 90, 95 (2d Cir. 1993).
“It is well established that default judgments are disfavored.
A clear preference exists for cases to be adjudicated on the
merits.” Pecarsky v. Galaxiworld.com Ltd., 249 F.3d 167, 174 (2d
Cir. 2001).

A defaulting party is entitled to have doubts as to

whether default should be granted resolved in its favor.
4

Enron

Oil, 10 F.3d at 96.

Because default is an extreme remedy and

because “Rule 55(c) does not define the term ‘good cause,’ [the
Second Circuit] ha[s] established three criteria that must be
assessed in order to decide whether to relieve a party from
default.”

Bricklayers, 779 F.3d at 186 (alterations in original)

(quoting Enron Oil, 10 F.3d at 96); accord United States v.
DiPaolo, 466 F. Supp. 2d 476, 482 (S.D.N.Y. 2006).

Those criteria

are “(1) whether the defendant’s default was willful; (2) whether
[the] defendant has a meritorious defense to [the] plaintiff’s
claims; and (3) the level of prejudice the non-defaulting party
would suffer as a result of the denial of the motion for default
DiPaolo, 466 F. Supp. 2d at 482 (quoting Trustees of

judgment.”

the CWA Local 14156-Printers, Publishers & Media Workers Benefit
Fund v. Rumar Typesetting and Design, No. 05 Civ. 1455, 2006 WL
1227183, at *2 (S.D.N.Y. May 5, 2006)).
B.

Meritorious Defense

It is not possible to determine whether a default judgment is
appropriate here without further briefing regarding whether Q
Sciences has a meritorious defense to the plaintiff’s claims.
In order to establish a meritorious defense that warrants
vacating

a

default,

conclusively.

a

defendant

need

not

prove

the

defense

See Securities and Exchange Commission v. McNulty,

137 F.3d 732, 740 (2d Cir. 1998); Gonzalez v. City of New York, 104
F. Supp. 2d 193, 197 (S.D.N.Y. 2000).

Rather, the defendant need

only present some evidence of facts that, “if proven at trial,
would constitute a complete defense.”
5

Enron Oil, 10 F.3d at 98.

A defaulting defendant must “present more than conclusory denials
when attempting to show the existence of a meritorious defense.”
Pecarsky,

249

F.3d

at

173;

accord

Sony

Corp.

v.

Elm

Electronics, Inc., 800 F.2d 317, 320-21 (2d Cir. 1986).

State
Such a

defendant must “articulate a defense with a degree of specificity
which directly relates that defense to the allegations set forth in
the plaintiff’s pleadings and raises a serious question as to the
validity of those allegations.”

FedEx TechConnect, Inc. v. OTI,

Inc., No. 12 Civ. 1674, 2013 WL 5405699, at *8 (S.D.N.Y. Sept. 23,
2013) (quoting Salomon v. 1498 Third Realty Corp., 148 F.R.D. 127,
130 (S.D.N.Y. 1993)).
Q Sciences does not identify any merit-based defenses related
to the allegations set forth in the complaint.

Rather, it argues

that the case should be stayed or dismissed pursuant to the firstfiled doctrine, because it is duplicative of the Tarazi v. Truehope
action.

(Memorandum

of

Law

of

Defendant

Quintessential

Biosciences, LLC dba Q Sciences in Support of its Motion to Vacate
Default

Entered

by

Clerk

of

the

Court

and

in

Opposition

to

Plaintiff’s Motion for Entry of Default Judgment at 15).
“As part of its general power to administer its docket, a
district court may stay or dismiss a suit that is duplicative of
another federal court suit.”
133, 138 (2d Cir. 2000).

Curtis v. Citibank, N.A., 226 F.3d

There is no “rigid test” for such action;

courts are instead required to “consider the equities of the
situation” and exercise discretion.

Id.

“Because of the obvious

difficulties of anticipating the claim or issue-preclusion effects
6

of a case that is still pending, a court faced with a duplicative
suit will commonly stay the second suit, dismiss it without
prejudice,

enjoin

the

parties

consolidate the two actions.”

from
Id.

proceeding

with

it,

or

“[S]imple dismissal of the

second suit is another common disposition because plaintiffs have
no right to maintain two actions on the same subject in the same
court, against the same defendant at the same time.”
138–39.

Id. at

However, “[a] duplicative suit does not [] necessarily

require dismissal of the later-filed action; such situations ‘do
not lend themselves to a rigid test, but require instead that the
district

court

consider

the

equities

of

the

situation

when

exercising its discretion.’” Fido’s Fences, Inc. v. Radio Systems
Corp., 999 F. Supp. 2d 442 (E.D.N.Y. 2014) (quoting Curtis v.
Citibank, N.A., 226 F.3d 133, 138 (2d Cir. 2000)).

For example,

where the claims asserted in the second claim merely “overlap
with,” but do not duplicate, the claims in the first-filed case,
courts may choose simply to stay or consolidate the later-filed
case.

See, e.g., Coon v. Shea, 2:14 CV 85, 2014 WL 5847720, at *6

(D. Vt. Sept. 5, 2014), report and recommendation adopted in
relevant part, 2014 WL 5849053 (D. Vt. Nov. 12, 2014).
A defaulting defendant may establish a meritorious defense by
showing that the first-filed doctrine will require dismissal of the
later-filed case. See LaBarbera v. MMK Trucking, Inc., 06 CV 6643,
2008 WL 508630, at *2 (E.D.N.Y. Feb. 25, 2008) (finding meritorious
defense where plaintiff asserted claim under same ERISA provision
regarding overlapping time period in both cases).
7

However, an

argument

that

a

later-filed

case

will

merely

be

stayed

or

consolidated under the first-filed doctrine cannot establish a
“complete defense.”

See GuideOne Mutual Insurance Co. v. Iglesia

Bautista Resurreccion, 11-20497-CIV, 2011 WL 3584212, at *4 (S.D.
Fla. Aug. 12, 2011) (finding no meritorious defense where firstfiled doctrine would result only in stay).
Q Sciences argues that the first-filed doctrine applies, but
does

not

explain

why

dismissal,

rather

consolidation, is the appropriate outcome.

than

a

stay

or

Because the claims in

this suit are premised on different duties than the claims against
Q Sciences in Tarazi v. Truehope, dismissal is not an obvious
choice.

See

Coon, 2014 WL 5847720, at *6.

In order to establish

a meritorious defense, Q Sciences must either explain why dismissal
would be more appropriate than the other possible outcomes under
the first-filed doctrine or present facts that, if proven at trial,
would constitute a complete merit-based defense to the three claims
against it.
Conclusion
Q Sciences is directed to submit a reply memorandum limited to
the question of whether it has a meritorious defense within seven
days of the date of this order.

The plaintiff may file a sur-reply

within seven days of the date Q Sciences’ reply is filed.

8

SO ORDERED.

'
JAMES C. FRANCIS IV
UNITED STATES MAGISTRATE JUDGE

Dated:

New York, New York
July 1, 2015

Copies mailed this date:
James D. Bailey, Esq.
Bailey Duquette P.C.
100 Broadway, 10th Floor
New York, NY 10005
Alon Markowitz, Esq.
Markowitz Law Group, P.C.
10 E. 40th St., 33rd Floor
New York, NY 10016

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