Rosa v. TCC Communications, Inc. et al

Filing 53

MEMORANDUM & ORDER terminating 29 Letter Motion for Extension of Time; granting in part and denying in part 35 Motion to Dismiss; granting in part and denying in part 37 Motion to Dismiss. Plaintiff Joseph Rosa sues Defendants TCC C ommunications, Inc. ("TCCC"); TCC Wireless, LLC1 ("TCC Wireless"); and TCC Holdco, Inc. ("Holdco") (collectively, the "Corporate Defendants"), along with individuals Shaher Ismail and Javed Malik for: breach of contract; unjust enrichment; fraud; breach of the covenant of good faith and fair dealing (against the individual defendants); tortious interference (against the individual defendants); violation of New York Labor Law ("NYLL") § ; 190 et seq.; and an accounting. Defendants TCCC and Ismail move to dismiss the fraud, breach of the covenant of good faith and fair dealing, tortious interference, and NYLL claims pursuant to Fed. R. Civ. P. 12(b)(6), and to strike Rosa 9;s punitive damages and attorney's fees requests. Defendants Wireless, Holdco and Malik move to dismiss all claims against them. Holdco also seeks dismissal for lack of personal jurisdiction pursuant to Rule 12(b)(2). Lastly, TCCC and Ismail move pursuant to Rule 36(b) to withdraw an admission made in response to Plaintiff's Request for Admissions. Defendants' motions to dismiss are granted in part and denied in part. TCCC and Ismail's request to withdraw their admiss ion is denied. For the foregoing reasons, Rosa's common-law fraud and tortious interference claims are dismissed against all Defendants with prejudice. Further, Rosa's accounting claim against Defendants Malik, TCC Wireless and Hold co is dismissed with prejudice. His breach of the Subscription Agreement and unjust enrichment claims against TCC Wireless and Holdco are also dismissed with prejudice. TCCC and Ismail's motion to withdraw their admission pursuant t o Fed. R. Civ. P. 36(b) is denied. Plaintiff's request for punitive damages is stricken. Within 21 days of this Memorandum & Order, Plaintiff may file a Third Amended Complaint pleading claims for fraudulent conveyance and successor liability for TCC Wireless and Holdco (with respect to the Partnership Agreement). Plaintiff may not replead a New York Labor Law claim to the extent Plaintiff is seeking discretionary and/or incentive-based pay allegedly owed under the Contracts. Moreover, any amended complaint should make specific allegations regarding this Court's personal jurisdiction over Holdco. Counsel are directed to submit a proposed discovery schedule for this Court's consideration, including a d ate for submission of a joint pretrial order, within 28 days of this Order. Moreover, this Court encourages the parties to consider a settlement conference with the magistrate judge or mediation through the Southern District's Mediation Progr am. Any such request can be made jointly by the parties in a single-sentence letter to this Court. The Clerk of Court is directed to terminate all pending motions. (As further set forth in this Memorandum & Order.) (Signed by Judge William H. Pauley, III on 1/5/2016) (mro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
JOSEPH ROSA,
:
Plaintiff,
:
-against:
TCC COMMUNICATIONS, INC., et al.,
:

1/5/2016

15cv1665
MEMORANDUM & ORDER

Defendants.
:
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WILLIAM H. PAULEY III, District Judge:
At bottom, this is breach of contract action involving the all-too-familiar
scenario in which a plaintiff invokes a blunderbuss of claims against defendants. Rather than
resolving this diversity-jurisdiction dispute, Defendants launched a multi-faceted motion to
dismiss. The parties agreed to stay discovery, and devoted themselves to briefing myriad
questions of law. So now, 10 months after the litigation commenced, this Court winnows the
claims, hits the reset button, and directs that discovery proceed forthwith.
Plaintiff Joseph Rosa sues Defendants TCC Communications, Inc. (“TCCC”);
TCC Wireless, LLC1 (“TCC Wireless”); and TCC Holdco, Inc. (“Holdco”) (collectively, the
“Corporate Defendants”), along with individuals Shaher Ismail and Javed Malik for: breach of
contract; unjust enrichment; fraud; breach of the covenant of good faith and fair dealing
(against the individual defendants); tortious interference (against the individual defendants);
violation of New York Labor Law (“NYLL”) § 190 et seq.; and an accounting. Defendants
TCCC and Ismail move to dismiss the fraud, breach of the covenant of good faith and fair
dealing, tortious interference, and NYLL claims pursuant to Fed. R. Civ. P. 12(b)(6), and to
1

The Second Amended Complaint mistakenly identifies this entity as TCC Wireless, Inc. (TCC Wireless
Opp’n at 1 n.1)

strike Rosa’s punitive damages and attorney’s fees requests. Defendants Wireless, Holdco
and Malik move to dismiss all claims against them. Holdco also seeks dismissal for lack of
personal jurisdiction pursuant to Rule 12(b)(2). Lastly, TCCC and Ismail move pursuant to
Rule 36(b) to withdraw an admission made in response to Plaintiff’s Request for Admissions.
For the following reasons, Defendants’ motions to dismiss are granted in part
and denied in part. TCCC and Ismail’s request to withdraw their admission is denied.
BACKGROUND
The following facts are gleaned from the Second Amended Complaint
(“SAC”) (ECF. No. 26) and presumed to be true for purposes of this motion. Rosa was a
sales representative working with Ismail and Malik2 from 2003 until 2014. During that time,
Rosa was also a Regional Sales Director of Union Telecard Alliance (“UTA”), which
provided proprietary phone products distributed by TCCC. In late 2009, TCCC’s relationship
with UTA deteriorated, and Ismail sought to become a T-Mobile Preferred Retailer. TMobile approved TCCC’s proposal only after Rosa—who had significant experience working
with the Latino community in the cellphone business—was identified as the Chief Operating
Officer and Executive Manager of TCCC. TCCC’s “gross profits” increased by about $30–40
million.
Ismail offered, and Rosa accepted, a partnership share in TCCC’s expanding
retail store business. Their understanding was memorialized in a March 2011 “Partnership
Agreement” granting Rosa a 25% interest in all T-Mobile stores expanding into the Northeast.
(SAC Ex. 1.) The agreement was executed by Ismail (on behalf of TCCC and himself) and
Rosa. Ismail brought Defendant Malik in to oversee daily operations, and in late 2012 gave

2

Ismail was the President of both TCCC and TCC Wireless, and a corporate officer of Holdco. (SAC ¶
5.) Malik was a corporate officer of TCCC, TCC Wireless and Holdco. (SAC ¶ 6.)

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him an ownership interest in TCCC. In January 2014, after extensive contract talks, Rosa,
Malik and Ismail drafted a “Subscription Agreement”3 (SAC Ex. 2.), giving Rosa an equity
interest in the SIM card business, which he had helped to grow. Ismail and Rosa executed the
Subscription Agreement, and Ismail informed Rosa that Malik had signed the Subscription
Agreement. Rosa never received a fully executed copy of the Subscription Agreement, but
began receiving a salary, and left his other job to expand the SIM card business.
In late 2012, Ismail began transferring TCCC’s corporate assets to TCC
Wireless, which used the same office, employees, email addresses, financial records, and
comingled banking funds. Leases were switched from TCCC’s name to TCC Wireless’s. And
in December 2014, TCC Wireless merged with Holdco. In 2015, TCC Wireless and/or
Holdco were sold to a third party. Rosa alleges that Ismail orchestrated these transfers to
circumvent Defendants’ financial obligations to him under the Contracts.
Defendants failed to pay Rosa the proceeds owed under the Contracts,
including $400,000 in Sales Performance Incentive Funds (“Spiffs”) and “residuals”
(payments from T-Mobile to a master dealer). Finally, in January 2015, Rosa was paid
$259,846.33. He also received a W2 indicating income of $55,250.00 in 2014. Ismail then
told Rosa that he would receive the balance of the monies due him when the retail store
business was sold. That sale occurred in January, and resulted in proceeds of approximately
$26 million, but Rosa received nothing. When Rosa complained, Defendants cut off his email
account, and accused him of theft.

3

Together, the Partnership Agreement and the Subscription Agreement are referred to herein as the
“Contracts.”

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LEGAL STANDARD
On a motion to dismiss, the factual allegations in a complaint are accepted as
true and all reasonable inferences are drawn in the plaintiff’s favor. Rescuecom Corp. v.
Google Inc., 562 F.3d 123, 127 (2d Cir. 2009). To survive a motion to dismiss, “a complaint
must contain sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 663, 678 (2009) (citation omitted); Ruston
v. Town Bd. for Town of Skaneateles, 610 F.3d 55, 59 (2d Cir. 2010). However, a claim
must rest on “factual allegations sufficient to raise a right to relief above the speculative
level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A pleading offering “labels
and conclusions” or a “formulaic recitation of the elements of a cause of action” fails to state
a claim. Iqbal, 556 U.S. at 678 (citation omitted).
DISCUSSION
I.

Fraud Claim
Defendants argue that Rosa’s fraud claim must be dismissed because, among

other things, the fraud claim merely repackages the breach of contract claims. Under New
York law, “[g]eneral allegations that a defendant entered into a contract with the intent not to
perform are insufficient to support a claim to recover damages for fraud.” Gould v.
Decolator, 121 A.D.3d 845, 848 (2d Dep’t 2014); see also Manas v. VMS Associates, LLC,
53 A.D.3d 451, 453 (1st Dep’t 2008) (“A fraud-based cause of action is duplicative of a
breach of contract claim when the only fraud alleged is that the defendant was not sincere
when it promised to perform under the contract.”) (internal quotations and citation omitted).
Accordingly, “parallel fraud and contract claims may be brought if the plaintiff (1)
demonstrates a legal duty separate from the duty to perform under the contract; (2) points to a
fraudulent misrepresentation that is collateral or extraneous to the contract; or (3) seeks
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special damages that are unrecoverable as contract damages.” Merrill Lynch & Co. Inc. v.
Allegheny Energy, Inc., 500 F.3d 171, 183–84 (2d Cir. 2007).
Rosa’s fraud claim does not fall under any of the three exceptions enumerated
in Allegheny Energy. And to the extent Rosa’s allegations are premised on Defendants’
eventual transfer of assets, they are not cognizable as a fraud claim, which covers only
misrepresentations of present fact, rather than promissory statements of future performance.
See Allegheny Energy, 500 F.3d at 184; New York Univ. v. Cont’l Ins. Co., 87 N.Y.2d 308,
318, 662 N.E.2d 763 (1995) (holding that where “the complaint does not state the specific
promises or omissions of material facts allegedly made by [defendants] . . . it alleges nothing
more than a breach of the contract and any covenants implied; it does not allege a cause of
action for fraud.”).4 Accordingly, Rosa fails to state a common-law fraud claim.
The core of Rosa’s fraud-based allegations seems to implicate a claim for
fraudulent conveyance. See, e.g., SAC ¶ 112 (“Defendants intended to defraud plaintiff when
they transferred TCC[C’s] retail store assets to TCC Wireless, which merged with a newlycreated company, TCC Holdco, and was sold to a third party.”) Under New York Debtor and
Creditor Law § 276, “[e]very conveyance made and every obligation incurred with actual
4

Rosa identifies the following statements by Ismail (and arguably the Corporate Defendants, to the
extent Ismail was speaking on their behalf) in the Second Amended Complaint which underlie the fraud claim:






“Ismail offered plaintiff a partnership in TCC[C]’s expanding retail store business.” (SAC ¶ 32)
Ismail “agreed, among other things, to share a 25% interest in all the T-Mobile retail stores that came
into existence in the Northeast.” (SAC ¶ 33.)
“Plaintiff was told by defendant Ismail that because he had an equity interest in the business he should
leave the day-to-day management of the stores to someone else, and focus on building new business in
the Northeast.” (SAC ¶ 37.)
Ismail “asked plaintiff not to discuss his Partnership Agreement with anyone because of ‘office
politics.’” (SAC ¶ 40.)
“In response to numerous requests from plaintiff regarding defendants’ failure to pay him under the
Agreements, defendant Ismail repeatedly told plaintiff that he would be paid once the retail stores were
sold.” (SAC ¶ 51.)

Rosa identifies no statements by Malik underlying a fraud claim.

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intent, as distinguished from intent presumed in law, to hinder, delay, or defraud either
present or future creditors, is fraudulent as to both present and future creditors.” “There are
three elements to a section 276 claim: (1) the thing transferred has value out of which the
creditor could have realized a portion of its claim; (2) that this thing was transferred or
disposed of by debtor; and (3) that the transfer was done with actual intent to defraud.” Fly
Shoes s.r.l. v. Bettye Muller Designs Inc., No. 14-cv-10078 (LLS), 2015 WL 4092392, at *4
(S.D.N.Y. July 6, 2015) (quotation and citation omitted). In order to plead intent, a plaintiff is
permitted to rely on circumstantial “badges of fraud” such as “(1) the inadequacy of
consideration received, (2) the close relationship between the parties to the transfer, (3)
information that the transferor was insolvent by the conveyance, (4) suspicious timing of
transactions or existence of pattern after the debt had been incurred or a legal action against
the debtor had been threatened, or (5) the use of fictitious parties.” Silverman Partners LP v.
Verox Grp., No. 08-cv-3103 (HB), 2010 WL 2899438, at *6 (S.D.N.Y. July 19, 2010).
Here, Plaintiff has pled that TCCC’s income and primary assets were
transferred to TCC Wireless (and eventually Holdco), and has pled facts implicating some of
the “badges of fraud.” However, Defendants may be prejudiced if this Court were to
construe Plaintiff’s fraud claim as one for fraudulent conveyance without permitting
Defendants to evaluate potential arguments for dismissal on the pleadings. Thus, Plaintiff
may replead his fraud claim as one for fraudulent conveyance.
II.

Covenant of Good Faith and Fair Dealing Claim
Defendants argue that Plaintiff’s breach of the covenant of good faith and fair

dealing claim is redundant in view of the underlying breach of contract claim. “Under New
York law, parties to an express contract are bound by an implied duty of good faith.” Harris
v. Provident Life & Accident Ins. Co., 310 F.3d 73, 80 (2d Cir. 2002) (citation omitted). The
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implied covenant doctrine holds parties to those implied promises “so interwoven into the
contract ‘as to be necessary for effectuation of the purposes of the contract,’” to effectuate the
parties’ intent. Thyroff v. Nationwide Mut. Ins. Co., 460 F.3d 400, 407 (2d Cir. 2006); see
also Don King Prods., Inc. v. Douglas, 742 F. Supp. 741, 767 (S.D.N.Y. 1990) (“The
covenant is violated when a party to a contract acts in a manner that, although not expressly
forbidden by any contractual provision, would deprive the other of the right to receive the
benefits under their agreement.”). However, “a claim for breach of the implied covenant will
be dismissed as redundant where the conduct allegedly violating the implied covenant is also
the predicate for breach of covenant of an express provision of the underlying contract.”
Fleisher v. Phoenix Life Ins. Co., 858 F. Supp. 2d 290, 299 (S.D.N.Y. 2012).
This Court’s decision in Ret. Bd. of Policemen’s Annuity & Ben. Fund of City
of Chicago v. Bank of New York Mellon, No. 11-cv-5459(WHP), 2014 WL 3858469,
(S.D.N.Y. July 30, 2014) (“BONY Mellon”) provides helpful guidance. In BONY Mellon,
plaintiffs alleged that defendant had “impaired [their] ability to collect on a possible, future
judgment” based, in part, on defendants’ involvement with a third party’s merger that led to a
“diminution of . . . available assets.” BONY Mellon, 2014 WL 3858469, at *1, *3. Despite
factual overlap with the underlying breach of contract claim, this Court found that the implied
covenant claim was not redundant because it relied on additional facts and sought additional
damages. See BONY Mellon, 2014 WL 3858469, at *3 (“Through the implied covenant
claim, Plaintiffs seek compensation for the value of the judgment they would have received
[under the contracts] but for the diminution of . . . available assets . . . .”) Similarly, when
read in a favorable light, Rosa’s Second Amended Complaint alleges that Ismail and Malik
planned to divest TCCC of assets to prevent Rosa from receiving the benefits he reasonably
expected to receive under the Contracts. In other words, since Ismail and Malik knew TCCC
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would transfer its assets while negotiating with Rosa, they were not negotiating in good faith.
These allegations implicate the “fundamental purpose of these agreements” (i.e., for Rosa to
share in the profits of the businesses he contributed to) rather than Defendants’ “general right
to act on its own interests in a way that may incidentally lessen the other party's anticipated
fruits from the contract.” BONY Mellon, 2014 WL 3858469, at *5 (emphasis added)
(quotations and citations omitted). Accordingly, Rosa has sufficiently pled a breach of the
covenant of good faith and fair dealing claim against Ismail with respect to the Partnership
Agreement, and against Ismail and Malik with respect to the Subscription Agreement.
III.

Tortious Interference With Business Relations Claim
The tort of interference with existing business relations requires a plaintiff to

establish: (1) it had a business relationship with a third party; (2) defendants knew of that
relationship and intentionally interfered with it; (3) defendants acted solely out of malice, or
used dishonest, unfair, or improper means; (4) defendants’ interference caused injury to the
relationship or breach of the contract; and (5) defendants’ activities were directed at the third
party. See Twelve Inches Around Corp. v. Cisco Sys., Inc., No. 08-cv-6896 (WHP), 2009
WL 928077, at *5 (S.D.N.Y. Mar. 12, 2009) (citing, inter alia, State Street Bank & Trust Co.
v. Inversiones Errazuriz Limitada, 374 F.3d 158, 171 (2d Cir. 2004)). Defendants argue that
the Second Amended Complaint fails to meet every one of those requirements. Their
argument is strongest with respect to the final prong: that Rosa failed to allege that
Defendants’ wrongful conduct was directed at the relevant third party (here, T-Mobile).
“[C]onduct constituting tortious interference with business relations is, by
definition, conduct directed not at the plaintiff itself, but at the party with which the plaintiff
has or seeks to have a relationship.” Carvel Corp. v. Noonan, 3 N.Y.3d 182, 192 (2004); see
also Twelve Inches Around, 2009 WL 928077, at *5 (“the defendant’s activities must be
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directed at the third party and must convince the third party not to enter into a business
relationship.”). Here, Rosa sets forth two allegedly wrongful acts by defendants: (1) that
Defendants removed access to his business email; and (2) that “defendants accused plaintiff of
theft, which accusation has further eroded plaintiff’s reputation in the industry.” (SAC ¶¶ 8688.) The first act is clearly not conduct directed at T-Mobile. The second act speaks vaguely
of Rosa’s industry reputation, without specifying whether Defendants directed those
allegations at T-Mobile. But “cursory allegations and conclusions” regarding Defendants’
allegedly malicious conduct “are insufficient to state a claim.” UPS Store, Inc. v. Hagan, 99
F. Supp. 3d 426, 438 (S.D.N.Y. 2015). There are no allegations that Defendants’ conduct
convinced T-Mobile not to enter a business relationship with Rosa, or otherwise interfered
with a pre-existing relationship independent of Rosa’s work with TCCC. Accordingly,
Rosa’s tortious interference claim is dismissed with prejudice.
IV.

New York Labor Law Claim
Defendants argue that Plaintiff’s NYLL claims fail because the Contracts only

contemplate incentive-based compensation schemes, and such compensation falls outside the
definition of “wages” in the NYLL. “Wages” are defined, in relevant part, as “the earnings of
an employee for labor or services rendered, regardless of whether the amount of earnings is
determined on a time, piece, commission or other basis.” NYLL § 190(1). Under this
definition, New York Courts “exclude[] certain forms of incentive compensation that are
more in the nature of a profit-sharing arrangement and are both contingent and dependent, at
least in part, on the financial success of the business enterprise.” Truelove v. Ne. Capital &
Advisory, Inc., 95 N.Y.2d 220, 223–24 (2000). However, even if a contract provides for pay
that is “contingent” or “discretionary”, contractual wages owed may still fall under the
statutory definition of wages so long as the contracts guarantee a base compensation. See
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Wachter v. Kim, 82 A.D.3d 658, 663 (1st Dep’t 2011) (holding that plaintiff sufficiently pled
a breach of contract and NYLL claim where a contract for “discretionary and/or incentivebased” pay also included a minimum guaranteed amount payable to the plaintiff.)
Here, the Subscription Agreement seems to speak only in terms of a profitsharing arrangement and would therefore be exempt from the NYLL’s definition of “wages”
under the New York State Court of Appeals’ decision in Truelove.5 However, the Partnership
Agreement sets forth a convoluted payment structure, requiring Ismail and TCCC to “pay and
provide [Rosa] with the following:

Thus, the Partnership Agreement requires a minimum payment of $7,000 per month,
regardless of net profits. Based on the First Department’s decision in Wachter, TCCC and

5

Section 4 of the Subscription Agreement refers to Rosa’s “salary,” but the payment schedule therein
relates only to percentages of net profits.

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Rosa’s failure to pay this monthly minimum would appear to state a NYLL claim.6
Conversely, to the extent Rosa’s claim relies on additional wages owed pursuant to the profitsharing aspects of the agreement, he will be unable to recover under the NYLL.7 Given the
Second Amended Complaint’s lack of clarity on this issue, Plaintiff’s NYLL claim is
dismissed without prejudice.
V.

Breach of the Partnership Agreement
Neither TCC Wireless nor Holdco were parties to the Partnership Agreement.

However, Plaintiff seeks to hold them liable based on language in the Partnership Agreement
which holds accountable TCCC’s “successors,” as well as “resulting businesses or
corporations . . . relative to the T-Mobile stores” in the event that “TCC[C] changes form or
ownership, or corporate structure.” Partnership Agreement § 2.a. The Second Amended
Complaint does not allege that TCCC changed its form, ownership or corporate structure.

6

Defendants rely on the New York Court of Appeals’ statement that “nothing in the language of [the
statute as originally enacted] suggests that it was intended to provide any remedy whatsoever for the successful
prosecution of a common-law civil action for contractually due remuneration on behalf of employees who in all
other respects are excluded from wage enforcement protection under the recodified article 6 of the Labor Law.”
Gottlieb v. Kenneth D. Laub & Co., 82 N.Y.2d 457, 462 (1993). But as explained in Pachter v. Bernard Hodes
Grp., Inc., 10 N.Y.3d 609, 616 (2008), that statement in Gottlieb “merely pointed out that employees serving in
an executive, managerial or administrative capacity do not fall under section 191 of the Labor Law and, as a
result, those individuals are not entitled to statutory attorney’s fees under section 198 (1-a) if they assert a
successful common-law claim for unpaid wages.” These cases are inapposite because Defendants do not assert
that Rosa was excluded from wage enforcement protection.
7

As Defendants correctly point out, the Second Amended Complaint is not entirely clear as to whether
Rosa received such minimum payments, as it seems undisputed that Plaintiff received some payments under the
Contracts. And at oral argument, Plaintiff’s counsel indicated that Rosa may have been paid his base salary
under the agreements. See, e.g., Sept 25 Hrng Tr. at 31:8-18 (PLAINTIFF’S COUNSEL: “It is our position that
he was, under the agreements, entitled to both a base salary and was paid that way. They gave him a 1099 and a
W-2 in 2015. They treated him as having two separate components of his compensation package. There was a
1099 for $259,000, which we believe is part of the profit sharing. They also gave him a W-2 of $55,000, so it is
our position that that $55,000 were his wages.” THE COURT: Right. But he received that, didn't he?
[PLAINTIFF’S COUNSEL]: He received that, but that is far from what he believes he was entitled to under the
agreements.”)

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Thus, the relevant issue is whether Rosa has pled that either Holdco or TCC Wireless are
TCCC’s “successors.”8
Generally, “a business entity’s acquisition of assets from another . . . results in
no successor liability, with four exceptions: (1) the successor corporation expressly or
impliedly assumed the liabilities of its predecessor; (2) there was a consolidation or de facto
merger of the two business entities; (3) the successor is a ‘mere continuation’ of the
predecessor; or (4) the transaction is entered into fraudulently to escape such obligations.”
Societe Anonyme Dauphitex v. Schoenfelder Corp., No. 07-cv-489, 2007 WL 3253592, at *2
(S.D.N.Y. Nov. 2, 2007). Based on the Second Amended Complaint, only the fourth
exception is potentially relevant here. (See SAC ¶¶ 10–11 (Defendants “fraudulently
transferred defendant TCC[C]’s assets to defendant TCC Wireless” and “subsequently
transferred the retail store assets of defendant TCC Wireless to defendant TCC Holdco.”);
SAC ¶ 56 (“Defendant Ismail intended to defraud plaintiff in that he diverted TCC[C] assets,
the retail stores, to TCC Wireless, then to TCC Holdco, and then sold TCC Wireless, TCC
Holdco, or both, to a third party.”))
Courts generally find that the fraudulent transfer exception is met where
Plaintiff has sufficiently pled a fraudulent conveyance claim. See Silverman Partners LP,
2010 WL 2899438, at *6 (“When a party has alleged facts to show that a fraudulent
conveyance may have taken place, it can be inferred that the transaction was undertaken to
defraud creditors and the second exception for imposing successor liability applies.”); A.J.
Heel Stone, L.L.C. v. Evisu Int’l, S.R.L., No. 03-cv-1097 (DAB), 2006 WL 1458292, at *4

8

Notably, the original draft of the Partnership Agreement appears to have included a provision expressly
granting Rosa a 25% interest in “any new or merged entity” arising out of the business, as well as any of
TCCC’s “assigns.” That language was crossed out, and its removal was initialed by both Ismail and Rosa.
(Partnership Agreement at 1.)

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(S.D.N.Y. May 25, 2006) (denying a motion to dismiss a successor-liability claim “[b]ecause
the Court . . . found that Petitioner has adequately pled fraudulent conveyance.”). As
discussed above, Plaintiff’s fraud claim seems to implicate fraudulent conveyance. See, e.g.,
SAC ¶ 112 (“Defendants intended to defraud plaintiff when they transferred TCCC retail
store assets to TCC Wireless, which merged with a newly-created company, TCC Holdco,
and was sold to a third party.”). However, Plaintiff’s Second Amended Complaint does not
clearly allege a claim for fraudulent conveyance or successor liability against TCC Wireless
or Holdco. Accordingly, claims against TCC Wireless and Holdco for breach of the
Partnership Agreement are dismissed with leave to replead.
VI.

Breach of the Subscription Agreement
Holdco and TCC Wireless were not parties to the Subscription Agreement.

And unlike the Partnership Agreement, the Subscription Agreement contains no language
addressing the liability of TCCC’s “successors.” Because Plaintiff concedes that he is not
attempting to pierce the corporate veil to hold Holdco or TCC Wireless liable,9 he has failed
to set forth any theory of contractual liability for those entities. Accordingly, the claims
against Holdco and TCC Wireless for breach of the Subscription Agreement are dismissed
with prejudice.
Malik argues that New York’s statute of frauds, General Obligations Law § 5–
70, renders the Subscription Agreement unenforceable against him because Plaintiff has not
produced a copy signed by Malik. But this Court need not address the statute of frauds here

9

See Opp’n Br. at 20 (“Plaintiff does not disregard the separate corporate forms of the TCC Entities”);
Sept. 25, 2015 Hr’g Tr. at 26:23-27:8 (“THE COURT: [T]here is no reference to successor liability in the
subscription agreement. What is your theory for liability against Holdco and Wireless under Subscription
Agreement? [PLAINTIFF’S COUNSEL]: You’re right. Your Honor, there is no language in the subscription
agreement, specifically in the partnership agreement. Our theory against the other corporate defendants was
based upon the fraud that had been perpetrated by all the parties involved. If the court viewed that as a piercing
corporate veil issue, there is not much that I can say about that because we didn’t address it.”)

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because Rosa plausibly alleges that Malik signed the Subscription Agreement. “The fact that
neither party can now produce a signed copy of the [contract] . . . does not in itself mean that
the contract does not satisfy the statute of frauds. If the [contract] had been signed but was
later lost or destroyed, the Agreement would satisfy the statute of frauds and be binding
against [defendant]. Whether [defendant] signed the [contract] is a disputed question of fact.”
Nat’l City Golf Fin. v. Higher Ground Country Club Mgmt. Co., LLC, 641 F. Supp. 2d 196,
204 (S.D.N.Y. 2009) (citations omitted). Here, in addition to the fact that Malik is listed as a
party to the contract signed by Rosa and Ismail (Subscription Agreement at 2), Rosa alleges
that: (1) Malik engaged in extensive contract negotiations regarding the Subscription
Agreement (SAC ¶ 62); (2) Ismail represented that Malik had signed the contract (SAC ¶¶ 6566); and (3) Defendants at least partially performed their duties under the contract following
its execution. (SAC ¶ 69.) Accordingly, Malik’s motion to dismiss the breach of contract
claim is denied.
VII.

Unjust Enrichment Claim
Defendants TCC Wireless, Holdco and Malik move to dismiss Rosa’s unjust

enrichment claim. As an initial matter, the unjust enrichment claims against TCC Wireless
and Holdco must be dismissed because “[t]here can be no quasi-contract claim against a thirdparty non-signatory to a contract that covers the subject matter of the claim.” Randall’s Island
Aquatic Leisure, LLC v. City of New York, 92 A.D.3d 463, 464 (1st Dep’t 2012).
Malik argues that because Ismail and TCCC do not dispute the Subscription
Agreement’s validity against themselves, the Subscription Agreement is an enforceable
contract governing Rosa’s breach of contract claims, therefore precluding any quasi-contract
claims against Malik. Under New York law, “[t]he existence of a valid and enforceable
written contract governing a particular subject matter ordinarily precludes recovery in quasi
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contract for events arising out of the same subject matter.” In re First Cent. Fin. Corp., 377
F.3d 209, 213 (2d Cir. 2004). However, where there is a dispute regarding a defendant’s
obligations under the contract, an unjust enrichment claim may survive a motion to dismiss as
an alternative to the breach of contract claim. See, e.g., Bridgeway Corp. v. Citibank, N.A.,
132 F. Supp. 2d 297, 305 (S.D.N.Y. 2001). Here, Malik unequivocally disputes his
obligations under the Subscription Agreement, calling it “unenforceable on its face.” (Malik
Br. (ECF No. 39) at 5.) Accordingly, Malik’s motion to dismiss the unjust enrichment claim
is denied.
VIII.

Accounting Claim
To state a claim for an accounting under New York law, a plaintiff must

establish: (1) relations of a mutual and confidential nature; (2) money or property entrusted to
the defendant imposing upon him a burden of accounting; (3) that there is no adequate legal
remedy; and (4) in some cases, a demand for an accounting and a refusal. IMG Fragrance
Brands, LLC v. Houbigant, Inc., 679 F. Supp. 2d 395, 411 (S.D.N.Y. 2009). Defendants
Holdco, TCC Wireless, and Malik argue that Plaintiff’s complaint fails to satisfy the first two
elements of an accounting claim. With respect to Holdco and TCC Wireless, Plaintiff does
not allege any relationship at all, much less one of a mutual and confidential nature.
Moreover, with respect to Malik, the only alleged relationship is that they negotiated the
Subscription Agreement and worked together. (SAC ¶¶ 39, 62.) Such “arm’s length business
dealings” have been found insufficient to state an accounting claim under New York law. See
KJ Roberts & Co. Inc. v. MDC Partners Inc., No. 12-cv-5779 (LGS), 2014 WL 1013828, at
*12 (S.D.N.Y. Mar. 14, 2014) (“Under New York law, a ‘confidential relationship’ in this
context refers to a relationship which induced plaintiff to entrust defendant with property or
money. Plaintiff has not produced any evidence suggesting that it entrusted Defendant with
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property or money or that its relationship with Defendant consisted of anything other than
arm’s length business dealings.”) (quotations and citations omitted), aff’d, 605 F. App’x 6 (2d
Cir. 2015). Lastly, to the extent Rosa seeks an accounting to calculate his damages, he “can
make use of familiar discovery devices to obtain any information [he] needs to establish [his]
allegations as to damages.” Addax BV Geneva Branch v. E. of New Jersey, Inc., No. 05-cv9139 (JSR), 2007 WL 1321027, at *2 (S.D.N.Y. May 4, 2007) (quotation, citation and
alterations omitted) Accordingly, the accounting claim is dismissed with prejudice as to
Defendants Holdco, TCC Wireless, and Malik.
IX.

Motion to Strike Punitive Damages & Attorney’s Fees
Defendants seek to strike Plaintiff’s demands for punitive damages and

attorney’s fees pursuant to Rule 12(f), which states that “the court may strike from a pleading
an insufficient defense or any redundant immaterial, impertinent, or scandalous matter.”
“Under New York law, the elements of a punitive damages claim based on a breach of
contract action are: (1) defendant's conduct must be actionable as an independent tort; (2) the
tortious conduct must be . . . egregious [in] nature . . . ; (3) the egregious conduct must be
directed to plaintiff; and (4) the conduct must be part of a pattern directed at the public
generally.” M’Baye v. World Boxing Ass'n, No. 05-cv-9581 (DC), 2007 WL 844552, at *5
(S.D.N.Y. Mar. 21, 2007). Plaintiff will clearly not be able to satisfy the fourth element, as
there are no allegations of conduct directed at the public generally. Accordingly, Defendants’
motion to strike Plaintiff’s punitive damages request is granted. See M’Baye, 2007 WL
844552, at *5; Nash v. Coram Healthcare Corp., No. 96-cv-0298 (LMM), 1996 WL 363166,
at *4 (S.D.N.Y. June 28, 1996). This Court declines to strike Plaintiff’s request for attorney’s
fees at this time.

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X.

Personal Jurisdiction Over Holdco
While all of the claims against Holdco have been dismissed, some with

prejudice and some without, this Court nevertheless addresses the issue of personal
jurisdiction in the event Plaintiff elects to replead.
Holdco, a Delaware Corporation with a principal place of business in Illinois,
argues that this Court lacks personal jurisdiction over it. Regarding general jurisdiction,
Holdco points to the Supreme Court’s recent decision in Daimler AG v. Bauman, 134 S. Ct.
746, 761–62 (2014), which held that a foreign corporation may be subject to general
jurisdiction in a state only where its contacts are so “continuous and systematic,” judged
against the corporation’s national and global activities, that it is “essentially at home” in that
state. See also Gucci Am., Inc. v. Weixing Li, 768 F.3d 122, 135 (2d Cir. 2014) (“We
conclude that applying . . . Daimler, the district court may not properly exercise general
personal jurisdiction over the Bank. Just like the defendant in Daimler, the nonparty Bank
here has branch offices in the forum, but is incorporated and headquartered elsewhere.
Further, this is clearly not ‘an exceptional case’ where the Bank’s contacts are ‘so continuous
and systematic as to render [it] essentially at home in the forum.’”). Under this standard, the
Second Amended Complaint lacks sufficient allegations to establish general jurisdiction.
Holdco also argues that this Court lacks long-arm jurisdiction. However, it is
worth noting that CPLR § 302(a)(3)(ii) provides for personal jurisdiction over a nondomiciliary who “commits a tortious act without the state causing injury to person or property
within the state,” if the defendant regularly does or solicits business within the state, derives
substantial revenue from goods used or consumed or services rendered in the state, or
reasonably expects the act to have consequences in the state and derives substantial benefit
from interstate or international commerce. In analyzing long-arm jurisdiction under that
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statute, courts have held that a transferee’s potential liability under fraudulent conveyance is
sufficient to establish a “tortious act without the state.” Sunrise Indus. Joint Venture v. Ditric
Optics, Inc., 873 F. Supp. 765, 770 (E.D.N.Y. 1995). As discussed above, however, a
fraudulent conveyance claim is not pled in the Second Amended Complaint. Moreover, there
are no allegations that Holdco regularly does or solicits business within the state, derives
substantial revenue from goods used or consumed or services rendered in the state, or derives
substantial benefit from interstate or international commerce.
XI.

Motion to Withdraw Admission
In their response to Rosa’s First Set of Requests for Admission, Ismail and

TCCC admitted “that Mr. Malik signed a copy of the Subscription Agreement.” (ECF No. 401 at 7.) They seek to withdraw that admission.
Under Fed. R. Civ. P. 36(b), matters admitted are considered “conclusively
established unless the court, on motion, merits the admission to be withdrawn or amended.”
“[T]he decision to excuse the defendant from its admissions is in the court’s discretion,”
Donovan v. Carls Drug Co., 703 F.2d 650, 651–52 (2d Cir. 1983), but a court may permit a
party to withdraw an admission “if it would promote the presentation of the merits of the
action and if the court is not persuaded that it would prejudice the requesting party in
maintaining or defending the action on the merits.” Fed. R. Civ. P. 36(b) (emphasis added).
Here, Ismail and TCCC assert that their admission was inadvertent, and that
withdrawal would subserve the presentation of this case because the admission relates to a
core issue (i.e. whether Malik signed the Subscription Agreement). While this Court is
sympathetic to the argument that permitting an inadvertent admission by one defendant to
adversely affect another defendant seems unfair, Rule 36(b) only permits withdrawal if it
would promote the merits of the action. But Ismail’s admission does not preclude Malik from
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denying that he signed the Subscription Agreement. All that has been “conclusively
established” is that Ismail and TCCC have admitted that Malik signed the contract.
Moreover, this Court is persuaded that withdrawal would prejudice Rosa. Accordingly,
Ismail and TCCC’s motion to withdraw their admission is denied.
CONCLUSION
For the foregoing reasons, Rosa’s common-law fraud and tortious interference
claims are dismissed against all Defendants with prejudice. Further, Rosa’s accounting claim
against Defendants Malik, TCC Wireless and Holdco is dismissed with prejudice. His breach
of the Subscription Agreement and unjust enrichment claims against TCC Wireless and
Holdco are also dismissed with prejudice. TCCC and Ismail’s motion to withdraw their
admission pursuant to Fed. R. Civ. P. 36(b) is denied. Plaintiff’s request for punitive damages
is stricken.
Within 21 days of this Memorandum & Order, Plaintiff may file a Third
Amended Complaint pleading claims for fraudulent conveyance and successor liability for
TCC Wireless and Holdco (with respect to the Partnership Agreement). Plaintiff may not
replead a New York Labor Law claim to the extent Plaintiff is seeking discretionary and/or
incentive-based pay allegedly owed under the Contracts. Moreover, any amended complaint
should make specific allegations regarding this Court’s personal jurisdiction over Holdco.
Counsel are directed to submit a proposed discovery schedule for this Court’s
consideration, including a date for submission of a joint pretrial order, within 28 days of this
Order. Moreover, this Court encourages the parties to consider a settlement conference with
the magistrate judge or mediation through the Southern District’s Mediation Program. Any
such request can be made jointly by the parties in a single-sentence letter to this Court.

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The Clerk of Court is directed to terminate all pending motions.
Dated: January 5, 2016
New York, New York
SO ORDERED:

_____________________________
WILLIAM H. PAULEY III
U.S.D.J.
All Counsel of Record via ECF.

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