Grayson v. Ressler & Ressler et al
OPINION AND ORDER re: 48 MOTION for Sanctions, 121 MOTION to Dismiss: Violet Elizabeth Grayson ("Plaintiff" or "Grayson") brings this action against Ressler & Ressler, a law firm, Ellen Werther ("Werther"), and Bruce Ressler ("Ressler") (together, "Defendants"). Before this Court is Defendants' motion to dismiss the Amended Complaint in its entirety pursuant to Federal Rule of Civil Procedure 12(b)(6), and Defendants' motio n for sanctions pursuant to Rule 11. For the reasons set forth above, Defendants' motion to dismiss is GRANTED in part and DENIED in part. Specifically, Grayson's defamation claim is allowed to proceed with respect to three of the four alle gedly defamatory statements. Grayson may also amend the injurious falsehood and prima facie tort claims. If Grayson chooses to file a Second Amended Complaint, she must do so by October 10, 2017. Defendants' motion for sanctions is DENIED without prejudice. The Clerk of Court is respectfully directed to terminate the motions, Docs. 48, 100, 103, 121. (Signed by Judge Edgardo Ramos on 9/18/2017) (jwh)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
VIOLET ELIZABETH GRAYSON,
OPINION AND ORDER
15 Civ. 8740 (ER)
RESSLER & RESSLER, ELLEN
WERTHER, and BRUCE RESSLER,
Violet Elizabeth Grayson (“Plaintiff” or “Grayson”) brings this action against Ressler &
Ressler, a law firm, Ellen Werther (“Werther”), and Bruce Ressler (“Ressler”) (together,
“Defendants”). Before this Court is Defendants’ motion to dismiss the Amended Complaint in
its entirety pursuant to Federal Rule of Civil Procedure 12(b)(6), and Defendants’ motion for
sanctions pursuant to Rule 11.
For the reasons set forth below, Defendants’ motion to dismiss is GRANTED in part and
DENIED in part, and their motion for sanctions is DENIED without prejudice.
A. Factual Background 1
As relevant to the instant motions, Grayson, an attorney, represented TradeWinds Airlines
Inc. (“TW Airlines”) in a veil piercing case in the Southern District of New York (“TW Airlines
Action”). Am. Compl. ¶¶ 2, 13. Werther and Ressler, partners in the law firm Ressler & Ressler,
represented Coreolis Holdings (“Coreolis”) and TradeWinds Holdings (“TW Holdings”) in a
The following facts are drawn from allegations contained in the Amended Complaint (Doc. 97) that the Court
accepts as true for purposes of the instant motion, documents incorporated by reference, and matters subject to
judicial notice. See New York Pet Welfare Ass’n, Inc. v. City of New York, 850 F.3d 79, 86 (2d Cir. 2017) (citation
separate but parallel veil piercing case in the Southern District of New York (“Coreolis Action”).
Id. at ¶¶ 3-5, 27. Coreolis wholly owned TW Holdings, which in turn was the former corporate
parent of TW Airlines. Id. at ¶ 15. Grayson invokes diversity jurisdiction in the instant action as
she is a citizen of California, all Defendants are citizens of New York, and the amount in
controversy exceeds $75,000. Id. at ¶¶ 2-5, 7.
In 2005, prior to Grayson’s representation of TW Airlines, Grayson represented Jet Star
Airlines in a different veil piercing action against George Soros (“Soros”) and Purnendu
Chatterjee (“Chatterjee”) (“Jet Star Action”). Id. at ¶¶ 9-11. Jet Star sought to recover the
amount of a default judgment it had obtained against the defunct C-S Aviation Corporation (“C-S
Aviation”) by piercing C-S Aviation’s corporate veil and reaching its principals, Soros and
Chatterjee. Id. at ¶ 10. The parties settled shortly thereafter, executing a settlement agreement
and a confidentiality agreement. Id. at ¶¶ 11, 16, 50.
Separately, two years later, on June 27, 2008, TW Airlines’ North Carolina counsel,
Tuggle Duggins P.A. (“Tuggle Duggins”), obtained a default judgment of approximately $54
million against C-S Aviation in North Carolina state court. 2 Id. at ¶ 13. On June 30, 2008,
Grayson commenced the TW Airlines Action, seeking to recover the amount of TW Airline’s
default judgment against C-S Aviation from Soros and Chatterjee, the same defendants as in the
Jet Star Action. Id. at ¶¶ 12-13. United States District Judge John F. Keenan presided over the
case. Id. at ¶ 13.
On July 25, 2008, TW Airlines filed a petition for Chapter 11 bankruptcy in the United
States Bankruptcy Court for the Southern District of Florida. Id. at ¶ 14. It was subsequently
converted to a Chapter 7 bankruptcy on October 30, 2008. Id. at ¶ 17. On October 31, 2008,
After TW Airlines obtained that default judgment, Coreolis and TW Holdings sought revision of the judgment,
asserting that some or all of the funds belonged to them. Id. at ¶¶ 15, 19. After discovery and trial on the issue of
damages, Coreolis and TW Holdings obtained a default judgment of approximately $38 million and TW Airlines
obtained a modified judgment of $56 million. Id. ¶¶ 19, 26.
Barry E. Mukamal was appointed as the Chapter 7 trustee (the “Trustee”) and Grayson sought to
be retained as special litigation counsel for TW Airlines. Id. at ¶¶ 17, 21.
Grayson faced several objections to her continuing as counsel for TW Airlines. In late
September 2008, Soros’ counsel told Grayson that she had violated the terms of the Jet Star
confidentiality agreement and/or the settlement agreement by representing TW Airlines in the
TW Airlines Action. Id. at ¶ 16.
On November 26, 2008, the Defendants, acting as counsel for Coreolis and TW Holdings,
opposed the Trustee’s motion to retain Grayson as special litigation counsel for the TW Airlines
Action, which he had filed in the bankruptcy case. Id. ¶ 21; see Objection to Trustee’s
Application, In re TradeWinds Airlines Inc., No. 08-bk-20394 (AJC) (Bankr. S.D. Fla. Nov. 26,
2008), Doc. 231. Coreolis and TW Holdings argued that Grayson should not be retained because
Soros was attempting to disqualify her from representing TW Airlines. Am. Compl. ¶ 21. On
January 7, 2009, the bankruptcy court granted Grayson’s retention over this objection. Id.; see
Order Granting Application to Employ J Nathan Duggins III and Violet Elizabeth Grayson as
Special Litigation Counsel, In re TradeWinds Airlines Inc., No. 08-bk-20394 (AJC) (Bankr. S.D.
Fla. Jan. 7, 2009), Doc. 258. However, Grayson alleges that Defendants’ opposition to her
appointment gave the Trustee “leverage” to lower Grayson’s contingency fee. Am. Compl. at ¶
22. Prior to the opposition, the agreed upon contingency fee was 50% of the first $15 million
recovered, and 33% of any recovery in excess of $15 million. 3 Id. at ¶ 14. After the opposition,
the Trustee modified the contingency fee to 40% of the first $14 million recovered, and 33% of
any recovery in excess of $14 million. Id. at ¶ 22.
On February 2, 2009, Soros moved to disqualify Grayson as counsel in the TW Airlines
Action for violating her confidentiality obligations arising from the Jet Star Action. Id. at ¶ 23;
This fee was to be shared equally by Grayson and Tuggle Duggins. Id. at ¶¶ 12, 14.
Tradewinds Airlines, Inc. v. Soros, No. 08 Civ. 5901 (JFK), 2009 WL 1321695, at *3 (S.D.N.Y.
May 12, 2009). Specifically, Soros argued that Grayson’s participation in the TW Airlines Action
violated and will cause further violations of the Jet Star protective order and settlement
agreement. Tradewinds Airlines, 2009 WL 1321695 at *1, 3, 5-7. On May 12, 2009, Judge
Keenan denied Soros’ motion. See id. at *10; Am. Compl. at ¶ 23. However, he noted that
certain of Grayson’s disclosures in the original and amended complaints and a declaration filed
in the TW Airlines Action “plainly violat[ed] her confidentiality obligations under the [Jet Star]
Settlement Agreement.” Tradewinds Airlines, 2009 WL 1321695 at *6-7. He also noted that her
prospective re-discovery of information originally produced in the Jet Star Action could
constitute an arguable violation of the Jet Star protective order. Id. at *9. Nonetheless, he
concluded that these violations did not necessitate disqualification because they did not
sufficiently “taint” the proceeding, and because the specified contractual remedy for the
violations is disgorgement of the Jet Star settlement funds, not disqualification. Id. at *7-10.
On October 28, 2010, Coreolis and TW Holdings filed the Coreolis Action, seeking to
recover on the default judgment they obtained against C-S Aviation in North Carolina state court
against Soros and Chatterjee. Id. at ¶ 27. Judge Keenan subsequently consolidated this action
with the TW Airlines Action (together, the “Consolidated Actions”). Id.
In the autumn of 2010, Grayson and Defendants allegedly reached an oral agreement to
work together, “forming a special confidential relationship of trust.” Id. at ¶¶ 28, 30. The oral
agreement provided that the parties would “work together cooperatively to successfully
prosecute their parallel veil piercing cases, and each benefit from their respective contingency
fee.” Id. at ¶ 101. This agreement was “developed by [the parties’] subsequent conduct and
dealing” and was “to some degree evidenced by, but not fully embodied by, the Joint
Prosecution, Common Interest, and Confidentiality Agreement” executed by the parties and other
lawyers in June 2013. Id. at ¶ 30.
The Consolidated Actions were subject to a partial stay over the course of three years
because Soros and Chatterjee, acting on behalf of C-S Aviation, had appealed the two North
Carolina default judgments. 4 Id. at ¶ 31. During that time, however, Judge Keenan permitted
depositions of five witnesses who were elderly or ill, and production of documents authored by
or sent to the deponents. Id.; see Stipulation and Order Regarding Modification of Stay and
Number of Depositions at 1-2, TradeWinds Airlines, Inc. v. Soros, No. 08 Civ. 5901 (JFK)
(S.D.N.Y. Feb. 27, 2013), Doc. 103. One of the deponents was C-S Aviation’s first President,
Bharat Bhise (“Bhise”). Am. Compl. at ¶ 32. Grayson took the lead in deposing Bhise and
“elicited much useful testimony” from him. Id. However, Grayson complains that Werther, who
also took part in deposing Bhise, sought to prove an unnecessary point at the deposition, that C-S
Aviation had no assets and was insolvent, and spent an inordinate amount of time on this issue.
Id. at ¶ 33. Grayson also complains that Werther also sought to hire her friend, attorney Martin
Bienenstock (“Bienenstock”), to render an expert opinion regarding C-S Aviation’s financial
condition, and demanded that Grayson pay for half of Bienenstock’s bill. Id. at ¶ 34. Grayson
avers that the point Werther sought to make was moot because the last president of C-S Aviation,
James Walsh, had already filed a declaration stating that C-S Aviation never had any assets. Id.
at ¶ 33.
On July 10, 2013, the partial stay of discovery was lifted. Id. at ¶ 35. Grayson
immediately suggested that Werther subpoena all the deposition transcripts Grayson had from the
Jet Star Action. Id. Grayson thereafter delivered the original deposition transcripts to Werther
pursuant to those subpoenas with the express understanding that they would be copied and
returned. Id. However, Werther never returned either the originals or copies. Id.
The stay was imposed on February 23, 2009. See Memorandum Opinion & Order, TradeWinds Airlines, Inc. v.
Soros, No. 08 Civ. 5901 (JFK) (S.D.N.Y. Feb. 23, 2009), Doc. 36.
Grayson further states that Werther was determined to have as co-counsel a law firm that
would be able to finance her “lavish and unnecessary expert witness hiring plan,” and at one
point persuaded “a reluctant Grayson” to ask the Trustee to fund the litigation expenses. Id. at ¶
36. The Trustee declined, and became “needlessly anxious about litigation costs, even though
Grayson assured him that she could fund normal and necessary litigation expenses.” Id.
Thereafter, Grayson alleges that Werther resolved to have Grayson terminated and replaced with
a “deep pocket law firm” that will help pay for Bienenstock’s expert services. Id. at ¶¶ 37-38.
Without providing further details, Grayson states that Werther directly or indirectly contacted
counsel for the bankruptcy estate’s primary creditor and “disparaged” Grayson to that attorney.
Id. at ¶ 38. That attorney then questioned the Trustee’s employment of Grayson, and threatened
to sue the Trustee. Id.
On or about August 10, 2013, Ressler and Werther stopped answering Grayson’s e-mails
and telephone calls. Id. at ¶ 39. At approximately the same time, the Trustee’s counsel, Robert
Mayer (“Mayer”), informed Grayson that he wished to meet with her, Werther and Ressler. Id. at
¶ 40. Mayer subsequently informed Grayson that Werther and Ressler had told him that they
would only meet with him without Grayson, and thus, he arranged two separate meetings for
August 15, 2013. Id. at ¶¶ 40-41. Grayson states that Werther and Ressler’s refusal to conduct a
joint meeting demonstrates that they intended to make statements that they did not want Grayson
to hear, sought to prevent her from refuting their statements, and wished to impede her ability to
repeat their false statements in a court of law. Id. at ¶ 40.
August 15, 2013 Meetings
On the morning of August 15, 2013, Grayson met with Mayer at his law firm, Gordon &
Rees, in downtown Manhattan. Id. at ¶¶ 41-42. During the meeting, they discussed substantive
issues in the Consolidated Actions. Id. at ¶ 42. Although at one point Mayer indicated that he
had obtained her credit or financial information, Grayson claims that the tone of the entire
meeting was “highly cordial.” Id.
After Mayer ended his meeting with Grayson, he immediately went to Ressler &
Ressler’s office to meet with Werther and Ressler. Id. Werther and Ressler made the following
statements to Mayer:
Grayson neglected her responsibilities by failing to do her fair share of the work in the
Consolidated Actions, leaving Defendants to do the “lion’s share” of the work;
Grayson could not take a leading role in depositions because she was representing TW
Airlines subject to a conflict of interest, violating her ethical obligations as an attorney;
Grayson had not reimbursed Defendants for half of certain modest expenses, and that
Grayson could not pay for an expert witness they wished to engage, which they supported
by presenting her credit and/or financial information to Mayer; and
Grayson was unresponsive.
Id. at ¶¶ 43-46. Grayson claims that these statements were false or misleading because:
Grayson did the vast majority of the work by submitting multiple oppositions to Rule
12(b)(6) motions, obtaining leave for necessary interim discovery while the default
judgment appeals were pending, proposing that Werther subpoena the Jet Star transcripts
and ensuring that the subpoenas were not quashed, and taking the lead role in the Bhise
Grayson successfully traced ownership and control of C-S Aviation to Soros and
Chatterjee in the Jet Star Action, laying the foundation for the subsequent Consolidated
Actions, wrote the veil piercing complaint for TW Airlines which Defendants adopted for
their veil piercing complaint, and provided legal authority and briefing on an issue for the
North Carolina damages trial;
Grayson was not conflicted in her representation of TW Airlines;
Defendants had only recently requested payment for half of the litigation expenses from
Grayson promptly responded to all of Ressler and Werther’s communications, questions
Id. at ¶¶ 43, 45, 48-51, 83.
Mayer telephoned Grayson later that same day and told her, “[Werther] wants you gone.”
Id. at ¶ 47. He also related to Grayson what Werther and Ressler told him during their meeting.
Termination of Grayson
On August 19, 2013, the Trustee dismissed Grayson as TW Airline’s special litigation
counsel via email. Id. at ¶ 53. In the email, he stated that Werther was a reason for Grayson’s
dismissal. Id. Grayson subsequently asked the Florida bankruptcy court to overrule the
Trustee’s decision, arguing that her dismissal occurred late in the case, after Grayson had served
as counsel for nearly five years, and would likely produce adverse results for the bankruptcy
estate. Id. at ¶ 54. The bankruptcy court denied her application, deferring to the Trustee’s choice
of counsel. Id.
Grayson then moved to withdraw as counsel in the Consolidated Actions in accordance
with Local Civil Rule 1.4, which was granted. Id. at ¶¶ 54-55, 57. The Trustee moved in the
Florida bankruptcy court to enforce Grayson’s termination, and also sought to impose sanctions
and a gag order against Grayson. Id. at ¶ 58. The bankruptcy court granted the Trustee’s motion
to enforce Grayson’s termination but declined to impose sanctions or a gag order. Id. It also
noted that Grayson might be entitled to some compensation for her representation. Id.
At Werther’s recommendation, the law firm Susman Godfrey LLP (“Susman Godfrey”)
replaced Grayson in the Consolidated Actions on September 18, 2013. Id. at ¶ 59. Grayson
avers that neither the attorneys from Susman Godfrey nor Werther were able to “master the
pertinent facts,” and unnecessarily accumulated litigation expenses for expert witnesses,
including Bienenstock. Id. at ¶ 60. She further criticizes Susman Godfrey and Werther’s
opposition to Soros and Chatterjee’s motion for summary judgment in the Consolidated Actions.
Id. at ¶¶ 61-62. Specifically, she states that their representation was grossly ineffective because
they left out highly probative evidence, certain helpful arguments and pertinent legal citations.
Id. at ¶¶ 61-65. On March 31, 2015, Judge Keenan granted Soros and Chatterjee’s motion for
summary judgment, which Grayson claims would not have occurred had she remained in the
litigation. Id. at ¶ 65.
Grayson’s Application for Compensation
Grayson subsequently applied to the bankruptcy court, seeking hourly compensation for
the work she performed on the Consolidated Actions. Id. at ¶ 67. On March 16, 2016, the
bankruptcy court held a hearing during which one of Trustee’s attorneys, Lynn Gollin (“Gollin”),
argued that Grayson was not entitled to any compensation because TW Airlines lost the TW
Airlines Action. Id.
On May 10, 2016, a settlement conference was held, which was attended by Mayer,
Gollin, the Trustee and Grayson. Id. at ¶ 69. Although Defendants declined to appear, they
spoke to Mayer telephonically during the conference. Id. The settlement conference resulted in
a partial settlement, subject to court approval. Id. at ¶ 70. The parties agreed that Grayson
would be compensated at $500 per hour for the work she performed with the exception of certain
categories of time entries. Id. The Trustee agreed to this compensation regardless of whether
Grayson was fired for cause or not, and waived all claims for costs the bankruptcy estate had
incurred in responding to Grayson’s applications. Id. Grayson agreed to file a revised fee
application, and in the meantime, she received an interim fee of $90,000. Id. The entire
settlement was subject to the condition that the payment could be adjusted at the end of the
bankruptcy case in the event of administrative insolvency. Id.
On May 26, 2016, the Trustee and Ressler & Ressler, on behalf of Coreolis, commenced
a new veil piercing suit against Soros Fund Management, Soros’ corporation, in North Carolina
state court (the “2016 Action”). Id. at ¶¶ 64, 72, 74. In the Amended Complaint, Grayson
alleges that the Trustee and Ressler & Ressler moved forward with plans for the 2016 Action
“clandestinely,” and filed it after she had settled with the TW Airlines bankruptcy estate in order
to deprive her of any potential compensation for that action. Id. at ¶ 72. Thereafter, Grayson
filed an interim fee application in which she requested a share of any recovery against Soros
Fund Management, should the 2016 Action succeed, in addition to hourly compensation for her
work on the Consolidated Actions since there would be considerable overlap in discovery. Id. at
¶¶ 73-75. Coreolis and TW Holdings opposed Grayson’s revised fee application, urging not only
that she should not share in any recovery from Soros Fund Management, but that she should
disgorge the $90,000 interim fee as well. Id. ¶ 76. Grayson asserts that this opposition is at odds
with the already agreed upon and approved settlement agreement between herself and the
Trustee. Id. at ¶ 77.
B. Procedural History
On August 14, 2015, Plaintiff commenced this action in the Supreme Court of the State
of New York, County of New York against Defendants via summons and notice. Doc. 1 at ¶ 4.
On November 6, 2015, the action was removed to this Court. See id. generally. From November
11, 2015 to February 24, 2016, the instant action was stayed pending the Florida bankruptcy
court’s decision on Defendants’ emergency motion to compel Plaintiff to voluntarily dismiss the
instant action. Docs. 5, 11, 24. When the Court lifted the stay, it also granted Plaintiff leave to
file a complaint that includes a federal cause of action. Doc. 24.
On April 29, 2016, Plaintiff filed the Complaint that included a federal cause of action 5
against Defendants as well as Coreolis, Orchard Capital Corporation, TW Holdings, and Richard
Ressler. Doc. 26.
On December 15, 2016, Defendants filed the instant motion for sanctions pursuant to
Rule 11, asserting that the Complaint was frivolous and without any evidentiary support. Doc.
48. On March 30, 2017, Defendants filed their first motion to dismiss the Complaint. Doc. 84.
The Complaint included a claim under the Fair Credit Reporting Act. Doc. 26 ¶ 62-64. Plaintiff voluntarily
dismissed that claim on April 21, 2017. Doc. 97.
On April 10, 2017, the Court extended Plaintiff’s deadline to respond to the first motion to
dismiss to April 27, 2017. Doc. 96.
On April 21, 2017, in response to the motion to dismiss, Plaintiff filed the Amended
Complaint, asserting the following ten causes of action against Defendants: (1) defamation; (2)
injurious falsehood; (3) tortious interference with contract; (4) tortious interference with
prospective business advantage; (5) breach of contract; (6) quantum meruit; (7) unjust
enrichment; (8) conversion; (9) trespass to chattel; and (10) prima facie tort. Doc. 97.
On April 21, 2017, Defendants argued that the Amended Complaint was untimely, Doc.
100, and on April 24, 2017, Plaintiff requested leave to file another amended complaint should
the Court strike the Amended Complaint as untimely, Doc. 103. On April 25, 2017, the Court
noted that Plaintiff was permitted to file the Amended Complaint as of right and pursuant to the
Court’s order on April 10, 2017, and denied Defendants’ first motion to dismiss the Complaint as
moot. Doc. 104.
On June 1, 2017, Defendants filed the instant motion to dismiss the Amended Complaint
in its entirety pursuant to Rule 12(b)(6). Doc. 121. The instant motion for sanctions also
remains pending as the factual allegations at issue in that motion are largely repeated in the
Rule 12(b)(6) Motion to Dismiss
Under Rule 12(b)(6), a complaint may be dismissed for “failure to state a claim upon
which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When ruling on a motion to dismiss
pursuant to Rule 12(b)(6), the Court must accept all factual allegations in the complaint as true
and draw all reasonable inferences in the plaintiff’s favor. Koch v. Christie’s Int’l PLC, 699 F.3d
141, 145 (2d Cir. 2012). However, the Court is not required to credit “mere conclusory
statements” or “[t]hreadbare recitals of the elements of a cause of action.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “To survive
a motion to dismiss, a complaint must contain sufficient factual matter . . . to ‘state a claim to
relief that is plausible on its face.’” Id. at 678 (quoting Twombly, 550 U.S. at 570). A claim is
facially plausible “when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing
Twombly, 550 U.S. at 556). If the plaintiff has not “nudged [his] claims across the line from
conceivable to plausible, [the] complaint must be dismissed.” Twombly, 550 U.S. at 570.
In determining the motion to dismiss, the Court may “consider documents that are
referenced in the complaint, documents that the plaintiffs relied on in bringing suit and that are
either in the plaintiffs’ possession or that the plaintiffs knew of when bringing suit, or matters of
which judicial notice may be taken.” Silsby v. Icahn, 17 F. Supp. 3d 348, 354 (S.D.N.Y. 2014),
aff’d sub nom. Lucas v. Icahn, 616 Fed. Appx. 448 (2d Cir. 2015) (summary order) (citing
Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002)); see also DiFolco v. MSNBC
Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010). To be incorporated into the complaint by
reference, “the [c]omplaint must make a clear, definite and substantial reference to the
documents.” Mosdos Chofetz Chaim, Inc. v. Vill. of Wesley Hills, 815 F. Supp. 2d 679, 691
(S.D.N.Y. 2011) (internal quotation marks and citation omitted). The Court finds that the Joint
Prosecution and Confidentiality Agreement executed by Plaintiff in connection with the
Consolidated Actions is substantially incorporated into the Amended Complaint by reference,
and thus, the Court will consider this confidentiality agreement in assessing Defendants’ motion
to dismiss. The Court will further take judicial notice of public filings made in court
proceedings, “not for the truth of the matters asserted in the other litigation[s], but rather to
establish the fact of such litigation[s] and related filings.” Kramer v. Time Warner Inc., 937 F.2d
767, 774 (2d Cir. 1991). Defendants further ask the Court to consider the extrinsic evidence they
submitted in support of their motion for sanctions in assessing the motion to dismiss, arguing that
the evidence directly and dispositively rebuts the factual allegations in the Amended Complaint.
But as set forth above, in determining a Rule 12(b)(6) motion, the Court must accept all factual
allegations in the complaint as true and will therefore not consider that extrinsic evidence. 6
To establish a claim of defamation under New York law, a plaintiff must plead “(1) a
defamatory statement of fact; (2) that is false; (3) published to a third party; (4) ‘of and
concerning’ the plaintiff; (5) made with the applicable level of fault on the part of the speaker;
(6) either causing special harm or constituting slander per se; and (7) not protected by privilege.”
FTA Mkt. Inc. v. Vevi, Inc., No. 11 Civ. 4789 (VB), 2012 WL 383945, at *6 (S.D.N.Y. Feb. 1,
2012) (citing Albert v. Loksen, 239 F.3d 256, 265-66 (2d Cir. 2001)). Grayson argues that
Werther and Ressler are liable for defamation per se for making statements to Mayer on August
15, 2013 that tended to disparage her in her profession as an attorney. Doe v. Doe, No. 16 Civ.
0332 (NSR), 2017 WL 3025885, at *11 (S.D.N.Y. July 14, 2017) (a statement is per se
defamatory when it tends to injure another in his or her trade, business, or profession) (citing
Liberman v. Gelstein, 80 N.Y.2d 429, 435 (1992)). The allegedly per se defamatory statements
are that Grayson (1) was violating rules of professional ethics and conduct by representing TW
Airlines subject to her conflict of interest, (2) could not handle documents or take a leading role
at depositions because of this conflict, (3) did not do her fair share of the work on the veil
piercing cases, and (4) was unresponsive to Defendants. 7 Am. Compl. ¶¶ 43-53, 83.
Defendants rely on United States ex rel. Hayes v. Allstate Ins. Co., 686 F. App’x 23 (2d Cir. 2017) for the
proposition that the Court can take extrinsic evidence of bad faith in determining a Rule 12(b)(6) motion. That case
is readily distinguishable in that the attorney in that case admitted that he did not have actual knowledge of the facts
in the complaint, contrary to what he said in the complaint. Id. at 26.
Grayson also makes a passing allegation that Werther sought to foment discord between Grayson and the Trustee
by disparaging Grayson to TW Airline’s primary creditor, Am. Compl. ¶ 38, but fails to plead with sufficient
particularity what Defendants are alleged to have said and to whom they said it. Germain v. M & T Bank Corp., 111
F. Supp. 3d 506, 537 (S.D.N.Y. 2015) (noting that the complaint must at least “identify the allegedly defamatory
Common Interest Privilege
Defendants argue that the allegedly defamatory statements are protected by the common
interest privilege. Otherwise defamatory statements may be protected under this qualified
privilege if they are made to persons who have some common interest in the subject matter, such
as when co-workers discuss an employee’s misconduct, or when parties discuss a topic
concerning their business relationship. See e.g. Ratajack v. Brewster Fire Dep’t, Inc. of the
Brewster-Se. Joint Fire Dist., 178 F. Supp. 3d 118, 166 (S.D.N.Y. 2016); Yong Ki Hong v. KBS
Am., Inc., 951 F. Supp. 2d 402, 437 (E.D.N.Y. 2013); Foster v. Churchill, 87 N.Y.2d 744, 751,
665 N.E.2d 153 (1996) (finding per se defamatory statements to be protected under the common
interest privilege). The common interest privilege protects a defendant from liability unless he
made the statements at issue solely with malice. Thai v. Cayre Group, Ltd., 726 F.Supp.2d 323,
330 (S.D.N.Y. 2010); Chao v. Mount Sinai Hosp., No. 10 Civ. 2869 (HB), 2010 WL 5222118, at
*7 (S.D.N.Y. Dec. 17, 2010), aff’d sub nom. Hengjun Chao v. Mount Sinai Hosp., 476 F. App’x
892 (2d Cir. 2012); Linell v. New York City Dep’t of Educ., No. 15 Civ. 5085 (CBA) (MDG),
2017 WL 880853, at *2 (E.D.N.Y. Mar. 3, 2017). The Court easily concludes that Grayson’s
role and professional conduct in the Consolidated Actions are of common interest to both
Defendants and Mayer, counsel for the Trustee. Thus, the common interest privilege would
apply to the statements Werther and Ressler made on August 15, 2013, unless they spoke solely
“Malice includes spite, ill will, knowledge that the statements are false or reckless
disregard as to whether they are false . . . Spite and ill will refer to the speaker’s motivation for
making the allegedly defamatory comments, not to the defendant’s general feelings about the
plaintiff.” Broyles v. J.P. Morgan Chase & Co., No. 08 Civ. 3391 (WHP), 2010 WL 815123, at
statements, the person who made the statements, the time when the statements were made, and the third parties to
whom the statements were published.”) (citation omitted).
*5 (S.D.N.Y. Mar. 8, 2010) (citation omitted). Plaintiffs cannot plead malice simply by
conclusorily labeling the statements so. Thai, 726 F. Supp. 2d at 335 (conclusory allegations, or
charges based on “surmise, conjecture, and suspicion” are insufficient to defeat common interest
privilege); see also Ramsaran v. Abraham, No. 15 Civ. 10182 (JPO), 2017 WL 1194482, at *6
(S.D.N.Y. Mar. 30, 2017) (“Mere conclusory allegations, or charges based upon surmise,
conjecture, and suspicion are insufficient to defeat the qualified privilege.”) (citation omitted).
Instead, they must plead “facts suggestive enough to warrant discovery.” Yukos Capital S.A.R.L.
v. Feldman, No. 15 Civ. 4964 (LAK), 2016 WL 4940200, at *8 (S.D.N.Y. Sept. 14, 2016).
The gravamen of Grayson’s defamation claim is that Werther and Ressler made the
allegedly defamatory statements to Mayer with the malicious intent to injure Grayson’s
reputation and have her replaced with a law firm that would fund their “expert witness hiring
plan.” The Court finds that Grayson has pled sufficient facts to suggest that Defendants made
the statements knowing them to be false, that is to say, solely with malice. Although Defendants
point to pleaded allegations and raise other facts suggesting that their statements were true and
that they were motivated by reasons other than malice towards Grayson—for example, the fact
that Judge Keenan found Grayson to be representing TW Airlines subject to a conflict of
interest—the Court must draw all inferences in Grayson’s favor on a motion to dismiss.
Furthermore, “[t]he nature and extent of defendants’ mens rea is a question of fact not
appropriate for disposition under Rule 12(b)(6).” Flaherty v. All Hampton Limousine, Inc., No.
02 Civ. 4801 (DRH) (WDW), 2008 WL 2788171, at *8 (E.D.N.Y. July 16, 2008) (citing Penn
Group, LLC v. Slater, No. 07 Civ. 729 (MHD), 2007 WL 2020099, at *6 (S.D.N.Y. June 13,
2007)). Accordingly, the Court cannot find that the Defendants are protected by the common
interest privilege at this juncture.
True Statements or Opinions
Defendants further argue that the alleged statements are substantially true or nonactionable opinions and thus cannot constitute defamation. Statements that are substantially true
are not defamatory because “when the truth is so near to the facts as published that fine and
shaded distinctions must be drawn and words pressed out of their ordinary usage to sustain a
charge of libel, no legal harm has been done.” Tucker v. Wyckoff Heights Med. Ctr., 52 F. Supp.
3d 583, 597 (S.D.N.Y. 2014) (citation and internal modification omitted). Thus, only the gist or
substance of the challenged statements must be true to render them non-defamatory. Printers II,
Inc. v. Professionals Pub., Inc., 784 F.2d 141, 146 (2d Cir. 1986) (citation omitted).
Statements of pure opinion are also not defamatory. Small Bus. Bodyguard Inc. v. House
of Moxie, Inc., 230 F. Supp. 3d 290, 315 (S.D.N.Y. 2017); Gross v. N.Y. Times Co., 82 N.Y.2d
146, 153-54, 603 N.Y.S.2d 813, 623 N.E.2d 1163 (1993) (citation omitted) (“[A] statement of
opinion that is accompanied by a recitation of the facts on which it is based or one that does not
imply the existence of undisclosed underlying facts” is a protected statement of opinion).
Whether a statement is an opinion or fact depends on (1) whether the specific language at issue
has a precise meaning which is readily understood or whether it is indefinite and ambiguous;
(2) whether the statement is capable of being objectively characterized as true or false;
(3) examination of the full context of the communication; and (4) consideration of the broader
social context or setting surrounding the communication. Kirch v. Liberty Media Corp., 449
F.3d 388, 403 n.7 (2d Cir. 2006). “When the criticism takes the form of accusations of criminal
or unethical conduct, or derogation of professional integrity in terms subject to factual
verification, [however,] the borderline between fact and opinion has been crossed.” Restis v. Am.
Coal. Against Nuclear Iran, Inc., 53 F. Supp. 3d 705, 721-22 (S.D.N.Y. 2014) (citing Trump v.
Chi. Tribune Co., 616 F.Supp. 1434, 1435 (S.D.N.Y. 1985)) (internal modifications omitted).
Furthermore, mixed opinion, which is a statement of opinion which implies that it is based on
facts that support the opinion unknown to the person hearing it, is actionable defamation. Chau
v. Lewis, 771 F.3d 118, 129 (2d Cir. 2014).
The Court finds that, taking the Amended Complaint as true, three of the four statements
are actionable. First, the statement that Grayson was violating rules of professional ethics and
conduct by representing TW Airlines subject to a conflict of interest is not pure opinion. It is
true that courts have found general statements that someone acted unprofessionally or unethically
are opinions. See Small Bus. Bodyguard Inc., 230 F. Supp. 3d at 315-16 (citations omitted).
However, here, Grayson also alleges that Defendants claimed she was acting unethically because
she was conflicted in her representation of TW Airlines as a result of her purported violations of
the settlement agreement and protective order in the Jet Star Action. Whether an individual was
subject to a conflict of interest has a precise meaning that can be true or false. Indeed, Grayson
specifically alleges that she was not conflicted. Am. Compl. ¶ 48. Defendants argue that it is
established that Grayson was conflicted because Judge Keenan previously found that Grayson
violated her confidentiality obligations in representing TW Airlines. This argument is unavailing
at this stage of the litigation. Although the Court may take judicial notice of public filings, such
as court opinions, on a motion to dismiss, it can only do so to establish the fact of such litigations
and related filings, not for the truth of the matter asserted.
Second, whether Grayson was unable to handle documents and take a leading role at
depositions due to the conflict of interest is not an opinion but a factual statement. Like the prior
statement, that statement’s truth or falsity can be determined. Grayson alleges that this statement
is false because she was not conflicted and was able to act as the lead attorney for the Bhise
deposition and handle the documents related to that deposition. Id. at ¶¶ 48-49.
Third, the statement that Defendants did the “lion’s share” or a majority of the work is
also arguably objectively verifiable, and thus, not merely an opinion. Indeed, courts are
frequently called upon to assess not only the amount of time, but the value an attorney has
contributed to particular cases. The parties can submit evidence to show their respective
contributions in order to prove the truth or falsity of this statement. 8
However, the Court finds that the last allegedly defamatory statement, that Grayson was
unresponsive, is a non-actionable opinion. If Defendants said that Grayson never responded, or
failed to respond within an hour, or a day, or a week, such statement would be verifiable.
Whether someone is “unresponsive” is not. It also does not further imply that it is based on false
undisclosed facts because the statement merely expresses that whatever Grayson’s response time
or rate was, Defendants were dissatisfied with it. Thus, “unresponsive” has no objectively
A statement must have a reasonably susceptible defamatory meaning for it to be
actionable defamation. A statement is defamatory if it “exposes an individual to public hatred,
shame, obloquy, contumely, odium, contempt, ridicule, aversion, ostracism, degradation, or
disgrace, or . . . induces an evil opinion of one in the minds of right-thinking persons, and ...
deprives one of . . . confidence and friendly intercourse in society.” Croton Watch Co. v. Nat’l
Jeweler Magazine, Inc., No. 06 Civ. 662 (GBD), 2006 WL 2254818, at *4 (S.D.N.Y. Aug. 7,
2006) (citations and internal modifications omitted). Defendants do not argue that the first two
statements are not susceptible of defamatory meaning. Clearly, an allegation that an attorney is
The first three allegedly defamatory statements are distinguishable from the cases Defendants rely on in arguing
that the statements are pure opinion. In Goldberg v. Coldwell Banker, 159 A.D.2d 684, 684-85 (2d Dept. 1990) and
Shernoff v. Soden, 2006 WL 2806448, *2 (N.D.N.Y. 2006), aff’d, 266 F. App’x 12 (2d Cir. 2008), the respective
courts found that the statements were unprovable opinions. Indeed, the statements at issue in Goldberg were that the
attorney was “most uncooperative, abrasive and dilatory,” which merely expresses dissatisfaction and cannot be
objectively proven true or false. 159 A.D.2d at 684-85. In Shernoff, the statements at issue were, inter alia, that
defendants found plaintiff’s legal advice to be “annoying and unhelpful,” that plaintiff was a “thorn in the foot” of
the case, that plaintiff threatened the objectives of the case, defendants would not choose to work for plaintiff, and
intended to have him dismissed from the case. 2006 WL 2806448, *2. Shernoff found that none of these statements
are empirically provable, nor do they imply that they have any undisclosed factual basis. Id. *2, 4-6. In contrast,
whether an attorney was conflicted, and which party contributed more are objectively verifiable. Defendants state
that the statements made in Goldberg and Sternoff are more disparaging than the alleged statements at issue here.
That may be true, but opinions are exempted from liability.
knowingly laboring under a conflict with her client speaks to that attorney’s ethical character.
However, Defendants aver that the statement that they did the “lion’s share” of the work does not
expose Grayson to such negative opinions in others. The Court disagrees. Viewed in context,
and drawing all inferences in Grayson’s favor, the Court finds that the statement that Defendants
were doing most of the work would cause third parties to hold a negative opinion about
Grayson’s diligence as an attorney.
Defendants assert that the defamation claim should nonetheless fail because Grayson
failed to plead special damages. However, Grayson alleges defamation per se for injury to her
profession as an attorney. Defamation per se absolves a plaintiff of the requirement to plead
special damages. Kforce, Inc. v. Alden Pers., Inc., 288 F. Supp. 2d 513, 516 (S.D.N.Y. 2003).
Statements that constitute defamation per se with regards to attorneys “include those statements
which show lack of character or a total disregard of professional ethics, for example, statements
that indicate an attorney has been disloyal to the best interest of his client or statements that
accuse an attorney of unprofessional conduct.” Wilson v. Tarricone, No. 12 Civ. 5337 (LTS),
2013 WL 12084504, at *4 (S.D.N.Y. Sept. 26, 2013), aff’d, 563 F. App’x 864 (2d Cir. 2014)
(citation and internal modifications omitted). Since the alleged defamatory statements concern
Grayson’s unethical conduct as an attorney and lack of diligence, the Court finds that the
statements reasonably affected her professional reputation.
Consequently, Defendants’ motion to dismiss Grayson’s defamation claim is GRANTED
in part and DENIED in part. The claim may proceed with respect to the first three allegedly
defamatory statements, but not with respect to the statement that Grayson was “unresponsive,”
which the Court finds is non-actionable opinion.
The tort of injurious falsehood “consists of the knowing publication of false matter
derogatory to the plaintiff’s business of a kind calculated to prevent others from dealing with the
business or otherwise interfering with its relations with others, to its detriment.” Kasada, Inc. v.
Access Capital, Inc., No. 01 Civ. 8893 (GBD), 2004 WL 2903776, at *15 (S.D.N.Y. Dec. 14,
2004) (quoting Waste Distillation Tech., Inc. v. Blasland & Bouck Engineers, P.C., 136 A.D.2d
633, 523 N.Y.S.2d 875, 877 (N.Y. App. Div. 2d Dep’t 1988)) (internal citation marks omitted).
The elements of an injurious falsehoods claim are: (1) falsity of the alleged statements;
(2) publication to a third person; (3) malice; and (4) special damages. Kasada, 2004 WL
2903776 at *16 (citation omitted). “The cause of action differs from defamation in that a
defamatory statement impugns the basic integrity or creditworthiness of a business while an
injurious falsehood is confined to denigrating the quality of the plaintiff's business’s goods or
services.” Berwick v. New World Network Int’l, Ltd., 06 Civ. 2641 (JGK), 2007 WL 949767, at
*15 (S.D.N.Y. Mar. 28, 2007) (citations and internal quotation marks omitted) (emphasis added);
see also id. (citing Cunningham v. Hagedorn, 72 A.D.2d 702, 422 N.Y.S.2d 70, 74 (N.Y. App.
Div. 1st Dep’t 1979)); Angio-Med. Corp. v. Eli Lilly & Co., 720 F. Supp. 269, 272-74 (S.D.N.Y.
1989) (characterizing as defamatory claims that impute fraud, dishonesty, or unfitness to a
company, and characterizing as injurious falsehood claims that would cause a listener to assume
plaintiff’s cosmetic skin and hair product did not meet safety and efficacy standards).
Here, Grayson states that the same allegedly defamatory statements also give rise to her
injurious falsehood claim. 9 Although it is a close call, the Court finds that the first two
statements concerning Grayson’s conflict of interest would qualify as injurious falsehoods, but
She further avers that Defendants circulated injurious falsehoods to the attorneys at Tuggle Duggins and “other
persons,” and that they are continuing to do so, but does not indicate what these statements were and thus that claim
not the statement concerning her diligence. Clearly, an attorney who is representing a client
while laboring under a conflict that has not been waived is ineffective in her representation, thus
implicating the quality of her services. In any event, Defendants do not argue that the statements
would not qualify as injurious falsehoods.
However, the Court finds that the claim cannot proceed because she does not adequately
allege special damages to survive a motion to dismiss. To establish special damages, a plaintiff
must plead facts demonstrating that actual losses were caused by the alleged tortious act.
Murphy-Higgs v. Yum Yum Tree, Inc., 112 F. App’x 796, 797 (2d Cir. 2004); In Touch Concepts,
Inc. v. Cellco P’ship, 949 F.Supp.2d 447, 484 n.30 (S.D.N.Y. 2013). She must also plead the
amount of special damages with specificity. See Fashion Boutique v. Fendi USA, Inc., 314 F.3d
48, 59 (2d Cir. 2002); Daniels v. St. Luke’s-Roosevelt Hosp. Ctr., 02 Civ. 9567 (KNF), 2003 WL
22410623, at *8 (S.D.N.Y. Oct. 21, 2003) (plaintiff’s special damages claim based on loss of
employment and the corresponding salary, were not sufficiently stated as required by New York
law); Rall v. Hellman, 284 A.D.2d 113, 114, 726 N.Y.S.2d 629, 632 (N.Y. App. Div. 1st Dep’t
2001) (“While costs, such as counsel fees, incurred in avoiding damage to plaintiff's reputation
and business may be actionable under an injurious falsehood theory . . . , plaintiff's complaint
was nevertheless deficient as he failed to identify his special damages with sufficient
Grayson claims that Defendants caused her to suffer special damages in the sum of
$9,730,000—an amount reached by applying the percentages contained in her contingent fee
agreement to the default judgment entered against C-S Aviation—plus statutory interest accruing
from July 2010 forward. Am. Compl. ¶ 89. Even taking the Amended Complaint as true, this
amount is based wholly on speculation as to what her fee might have been if she was not
terminated, if Soros and Chatterjee had not prevailed on their summary judgment motion, if TW
Airlines obtained the full amount of default judgment as opposed to, for example, settling for a
lesser amount, and if her contingent fee agreement was not further modified. Accordingly, the
Court finds that the alleged special damages are too speculative to allow her injurious falsehood
claim to proceed. However, the Court permits Grayson to replead her injurious falsehood claim.
Tortious Interference With Contract and Tortious Interference With
Prospective Business Advantage
“Under New York law, the elements of tortious interference with contract are (1) the
existence of a valid contract between the plaintiff and a third party; (2) the defendant’s
knowledge of the contract; (3) the defendant’s intentional procurement of the third-party’s
breach of the contract without justification; (4) actual breach of the contract; and (5) damages
resulting therefrom.” See Kirch, 449 F.3d at 401 (internal quotation marks and citation omitted).
The elements of a claim for tortious interference with prospective economic advantage are (1) a
business relationship with a third party; (2) the defendant’s knowledge and intentional
interference with that relationship; (3) that the defendant acted solely out of malice, or used
dishonest, unfair, or improper means; and (4) injury to the business relationship. See Kirch, 449
F.3d at 400 (quoting Carvel Corp. v. Noonan, 350 F.3d 6, 17 (2d Cir. 2003)).
Defendants assert that the tortious interference claims should be dismissed because they
are merely duplicative of the defamation claim. In Chao v. Mount Sinai Hospital, the Second
Circuit observed that “‘New York law considers claims sounding in tort to be defamation claims .
. . where those causes of action seek damages only for injury to reputation, [or] where the entire
injury complained of by plaintiff flows from the effect on his reputation.’” 476 F. App’x 892, 895
(2d Cir. 2012) (emphasis added) (quoting Jain v. Sec. Indus. & Fin. Mkts. Ass’n, No. 08 Civ.
6463 (DAB), 2009 WL 3166684, at *9 (S.D.N.Y. Sept. 28, 2009)). 10 There, the court affirmed
Cf. Cohen v. Cowles Media Co., 501 U.S. 663, 671 (1991) (noting that the plaintiff was not attempting to use a
promissory estoppel cause of action under Minnesota state law “to avoid the strict requirements for establishing a
libel or defamation claim” where the plaintiff could not sue for defamation because the information disclosed was
dismissal of a tortious interference with contract claim and a tortious interference with
prospective business advantage claim on a Rule 12(b)(6) motion because the factual allegations
underlying the claim were “virtually identical” to the facts underlying a defamation claim. Id.
Specifically, both causes of actions were premised on allegations that defamatory statements
were made in the course of the defendant hospital’s internal investigation into the plaintiff
professor’s research misconduct. Id. at 895. The court further concluded that the harms the
professor claimed to have suffered as a result of the non-defamation tort causes of action—
including the termination of his employment—all flowed from the effect on his reputation caused
by the alleged defamatory statements. Id.
Here, Grayson bases her tortious interference claim on the allegations that Defendants
made defamatory statements and “foment[ed] discord” between Grayson and her client. Am.
Compl. ¶¶ 91-99. Grayson argues that her tortious interference claims are not duplicative of the
defamation claim because Defendants induced the Trustee to breach his engagement agreement
with Grayson not only by defaming Grayson but also by refusing to work with her. The
Amended Complaint insufficiently establishes that Defendants refused to work with her. The
alleged facts from which she draws this conclusion merely indicate that there was discord
between the two parties and that Defendants did not want to work Grayson, which they largely
expressed by making the alleged defamatory statements. Accordingly, as in Chao, the entire
injury pleaded in relation to the tortious interference claims flows from the effect on Plaintiffs’
reputation resulting from Defendants’ statements.
Breach of Contract
Grayson further claims that Defendants breached the oral contract that existed between
the parties when they (1) unlawfully sought to oust Grayson as TW Airline’s special litigation
counsel, (2) caused her to be replaced by attorneys who were unfit to familiarize themselves with
the Consolidated Actions within the requisite time; (3) unsuccessfully opposed Soros and
Chatterjee’s summary judgment motion in the Consolidated Actions; (4) interfered with and
opposed Grayson’s efforts to obtain compensation from the TW Airlines bankruptcy estate; (5)
attempted to unwind her partial settlement with the Trustee; and (6) filed the 2016 Action which
relies heavily on Grayson’s work while maintaining that she is not entitled to any compensation
from its prospective proceeds. Am. Compl. ¶ 103. Defendants argue that Grayson fails to
sufficiently allege the existence of the oral contract between the parties.
In order to survive motion to dismiss on a breach of contract claim, a plaintiff must allege
the existence of a contract, performance of that contract by one party, breach by the other party,
and resulting damages. See Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525 (2d Cir.
1994). Importantly, a plaintiff must set forth the material terms of the agreement, including the
particular terms that were allegedly breached by the defendants. See, e.g., Childers v. New York
and Presbyterian Hosp., 36 F.Supp.3d 292, 312-13 (S.D.N.Y.2014) (dismissing breach of
contract claim because plaintiff did not allege in non-conclusory language the essential terms of
the purported contract, including those terms upon which liability was predicated); Shtofmakher
v. David, No. 14 Civ. 6934 (AT), 2015 WL 5148832, at *8 (S.D.N.Y. Aug. 17, 2015) (same).
“Under New York law, ‘before the power of law can be invoked to enforce a promise, it must be
sufficiently certain and specific so that what was promised can be ascertained.’” Sang Lan v.
Time Warner, Inc., No. 11 Civ. 2870 (AT), 2014 WL 764250, at *2 (S.D.N.Y. Feb. 25, 2014)
(quoting Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105, 109 (1981)).
Grayson plainly fails to set forth the material terms of the agreement with the requisite
specificity, preventing the Court from ascertaining what was promised and whether Defendants’
alleged actions breached such promises. She only provides that the parties entered into an
agreement to “work together” to “cooperatively [and] successfully prosecute their parallel veil
piercing cases, and each benefit from their respective contingency fee.” Am. Compl. ¶¶ 28, 30
101. She does not indicate what such cooperation entailed—what tasks each party agreed to
perform—what the parties understood to be “successful prosecution,” and whether the parties
had particular obligations to ensure that they received compensation from their respective clients
beyond seeking successful resolution of the cases. See e.g. In re Adelphia Commc’ns Corp. Sec.
& Derivative Litig., No. 03 MDL 1529 (JMF), 2013 WL 6838899, at *9 (S.D.N.Y. Dec. 27,
2013) (dismissing a breach of contract claim where it was alleged that a party was obligated to
make appropriate accounting and disclosures without specifying the meaning of “appropriate” or
the manner of disclosure required). Thus, the Amended Complaint’s allegations are too vague to
Grayson suggests that she can further amend her pleadings to allege the following terms
of the oral contract: (1) the parties would contribute effort based on their respective areas of
knowledge, expertise, and skill, (2) the parties would do their fair share of the work to produce
the best possible product and to avoid duplication, and (3) the parties would split joint expenses.
Opp. Mot. to Dismiss at 13. However, it is unclear how Defendants’ alleged actions would
constitute breach of these terms. Grayson does not claim that Defendants failed to fairly
contribute effort or pay for their half of the joint expenses. Instead, she bases her breach of
contract claim on Defendants’ alleged machinations in causing her termination and replacement,
dismissal of the Consolidated Actions on summary judgment, and interference with Grayson’s
efforts to obtain compensation from the TW Airlines bankruptcy estate. None of these additional
terms prevent Defendants from taking any of those actions.
Furthermore, even if the Court were to find that Grayson adequately pled the essential
terms of the oral contract, it is unenforceable under the Statute of Frauds. Under New York’s
Statute of Frauds, if a contract by its terms cannot be performed within one year of its
consummation, it must be made in writing. N.Y. Gen. Oblig. Law § 5-701(a)(1). Contracts that
have indefinite durations are considered incapable of performance within a year and fall within
the ambit of the Statute of Frauds. See In re Bayou Hedge Fund Litig., 534 F. Supp. 2d 405, 419
(S.D.N.Y. 2007), aff’d sub nom. S. Cherry St., LLC v. Hennessee Grp. LLC, 573 F.3d 98 (2d Cir.
2009) (citing Computech Intern., Inc. v. Compaq Computer Corp., No. 02-CV-2628, 2002 WL
31398933, at *3 (S.D.N.Y. Oct. 24, 2002)).
Grayson argues that the Statute of Frauds is inapplicable because the Consolidated
Actions could have concluded within a year of the contract’s formation, at which point the
parties would be relieved of their contractual obligations. The Court disagrees. Although the
exact terms of the oral contract are unclear, Grayson appears to suggest that Defendants have an
on-going contractual obligation to forever refrain from interfering with her compensation from
the TW Airlines bankruptcy estate for the Consolidated Actions and any subsequent action that
uses her work product, such as the 2016 Action. This suggests that at least some of the
contractual performance obligations have indefinite durations that extend past the conclusion of
the Consolidated Actions, which theoretically (though highly improbably) might have been
concluded within one year. Hence, the purported contract must have been made in writing. 11
Grayson also asserts that her partial performance removes the contract from the purview
of the Statute of Frauds. This argument fails. While partial performance is an exception to
Statute of Frauds under New York General Obligations Law Section 5-703 for contracts
concerning real property, it does not apply to Section 5-701 which governs the alleged contract
here. Duckett v. Hadley Engelhard, Esq., No. 15 Civ. 8645 (RJS), 2017 WL 512455, at *3
(S.D.N.Y. Feb. 6, 2017) (noting that the New York Court of appeals has “firmly stated” that
there is no part performance exception to Section 5-701(a)(1) of New York’s statute of frauds);
Castellotti v. Free, 138 A.D.3d 198, 203 (1st Dep’t 2016) (“the partial performance exception
applies only to the statute of frauds provision in [N.Y. Gen, Oblig. L.] § 5-703, and has not been
Although Grayson claims that the parties’ oral agreement was partly evidenced by the written Joint Prosecution,
Common Interest, and Confidentiality Agreement, Grayson does not argue that Defendants breached their
confidentiality obligations arising from that written agreement. See Ressler Decl. Ex. 2.
extended to § 5-701”); c.f. SSP Capital Partners, LLC v. Mandala, LLC, 715 F. Supp. 2d 443,
448 (S.D.N.Y. 2009), aff’d sub nom. SSP Capital Partners, LLP v. Mandala, LLC, 402 F. App’x
572 (2d Cir. 2010) (finding that part performance is a rejoinder to a Statute of Fraud defense
under Section 5-703). Accordingly, the Court dismisses Grayson’s breach of contract claim with
In order to recover in quantum meruit under New York law, “a claimant must establish
‘(1) the performance of services in good faith, (2) the acceptance of the services by the person to
whom they are rendered, (3) an expectation of compensation therefor, and (4) the reasonable
value of the services.’” Mid-Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp.,
418 F.3d 168, 175 (2d Cir. 2005) (quoting Revson v. Cinque & Cinque, P.C., 221 F.3d 59, 69 (2d
Cir. 2000)). To succeed on a quantum meruit claim, Grayson must allege that she expected
compensation from the Defendants, not from a third party. Kaplan v. Vincent, 937 F. Supp. 307,
318 (S.D.N.Y. 1996). However, the Amended Complaint is devoid of allegations that Grayson
expected any compensation from Defendants for her work on the Consolidated Actions as
opposed to from the TW Airlines bankruptcy estate. Nothing in her allegations suggest that her
purported oral argument with Defendants transformed their relationship vis-à-vis their respective
clients. To the extent Grayson believes she is entitled to compensation for her work either in the
Consolidated Actions or in the 2016 Action, she must look to her client, not Defendants. The
Court thus dismisses Grayson’s quantum meruit claim with prejudice. 12
The claim is defective for the additional reason that Grayson has not alleged the reasonable value for her services.
Grayson argues that her services on the coordinated veil piercing cases benefited Defendants by (1) freeing up their
time to work on their other matters, and (2) allowing them to foreseeably recover in the 2016 Action, which
allegedly utilizes the work she did in the Consolidated Actions. However, this argument is unaccompanied by
allegations concerning the reasonable value of such current or prospective benefit. This deficiency alone is enough
to defeat her claim at this stage. See Hajny v. Best Roofing of New Jersey, Inc., No. 11 Civ. 00173 (LLS), 2011 WL
2493737, at *7 (S.D.N.Y. June 22, 2011) (dismissing quantum meruit claim where “[p]laintiffs d[id] not allege the
reasonable value of the services they rendered to defendants”); Broughel v. Battery Conservancy, No. 07 Civ. 7755
(GBD), 2009 WL 928280, at *8 (S.D.N.Y. Mar. 30, 2009) (noting that “a quantum meruit claim will be dismissed
To state a claim for unjust enrichment under New York law, a plaintiff must plead facts
showing that “(1) defendant was enriched, (2) at plaintiff’s expense, and (3) equity and good
conscience militate against permitting defendant to retain what plaintiff is seeking to recover.”
Diesel Props S.r.l. v. Greystone Bus. Credit II LLC, 631 F.3d 42, 55 (2d Cir. 2011) (citations and
internal quotation marks omitted). It is unclear from the Amended Complaint how Defendants
have been unjustly enriched at Grayson’s expense. As Grayson alleges, there was no recovery
under the Consolidated Cases. The 2016 Action is still pending. Grayson states that recovery
under the 2016 Action is “foreseeable,” but there is nothing in the Amended Complaint that
supports this assertion beyond mere conjecture, and she does not allege how much of this
foreseeable recovery would be a result of her contribution. Moreover, while Defendants may
have benefited from having shared the workload with Grayson in the Consolidated Actions
because it allowed them to spend more time on other matters, Grayson conceivably received this
benefit as well since she admits that Defendants took a leading role in electronic discovery. Am.
Compl. ¶ 43. If they both received the same benefit from their arrangement, it cannot be said
that one party benefited at the expense of another. In addition, and for the same reasons
discussed above, Grayson must look to her client’s bankruptcy estate for any compensation she
believes she is entitled to. Accordingly, the Court also dismisses Grayson’s unjust enrichment
claim with prejudice.
To withstand a motion to dismiss on a conversion claim, Grayson must allege “(1) the
property subject to conversion is a specific identifiable thing; (2) plaintiff had ownership,
possession or control over the property before its conversion; and (3) defendant exercised an
where the complaint contains nothing more than undefined and conclusory statements regarding the actual benefit
plaintiff conferred on the defendant”).
unauthorized dominion over the thing in question, to the alteration of its condition or to the
exclusion of the plaintiff's rights.” DeAngelis v. Corzine, 17 F. Supp. 3d 270, 282 (S.D.N.Y.
2014) (citation omitted). Where a defendant’s “original possession [of the property] is lawful, a
conversion does not occur until the defendant refuses to return the property after demand or until
he sooner disposes of the property.” Schwartz v. Capital Liquidators, Inc., 984 F.2d 53, 54 (2d
Cir. 1993) (quoting Johnson v. Gumer, 94 A.D.2d 955, 464 N.Y.S.2d 318, 319 (4th Dep’t
1983)); see also Camp Summit of Summitville, Inc. v. Visinski, No. 06 Civ. 4994 (CM) (GAY),
2007 WL 1152894, at *10 n.2 (S.D.N.Y. Apr. 16, 2007) (noting that demand for return of the
property subject to conversion is required to state a claim for conversion where the plaintiff
initially authorized defendant to use the property).
Grayson alleges Werther committed conversion by taking and failing to return her
original Jet Star transcripts. However, Grayson concedes that Werther’s original possession of
the Jet Star transcripts was both authorized by her and permitted through a court order. In fact,
Grayson states that it was her idea for Werther to procure the transcripts from her through
subpoenas, and that she further aided Werther in defeating Soros’ attempt to quash the
subpoenas. Am. Comp. ¶ 35. Thus, in order to survive a motion to dismiss, Grayson must allege
that she made a valid demand for the return of the transcripts and that Werther refused this
demand. She fails to do so. Instead, she vaguely asserts that the transcripts were released upon
an “express understanding” that they would be promptly copied and returned, but that Werther
failed to return them. Am. Comp. ¶¶ 35, 115. This allegation is insufficient to make out a claim
for conversion because it fails to establish whether and when a demand for the property was
made and refused. See Marvel Worldwide, Inc. v. Kirby, 756 F. Supp. 2d 461, 469 (S.D.N.Y.
2010) (noting that a court must analyze the actions and the words of a party who received a
demand for return to determine whether and when the demand was refused).
Moreover, conduct that would otherwise be conversion is generally permitted when it is
done pursuant to a valid court order, unless the party procured the order through intentional
misrepresentation. 13 Polanco v. NCO Portfolio Mgmt., Inc., 23 F. Supp. 3d 363, 371 (S.D.N.Y.
2014) (citing Calamia v. City of New York, 879 F.2d 1025, 1031 (2d Cir. 1989)). There is no
allegation that the subpoenas themselves contained any limitations on Werther’s retention of the
transcripts. In addition, the Amended Complaint alleges that Defendants’ continued retention of
the transcripts was permitted by court order as well. Am. Compl. ¶¶ 74-75. Accordingly, to the
extent Grayson believes she is entitled to the prompt return of the documents, the appropriate
avenue for relief is an application to Judge Keenan, pursuant to whose order Werther is holding
them. This claim is dismissed with prejudice.
Trespass to Chattel
Grayson’s claim of trespass to chattel is also based on Werther’s alleged retention of the
Jet Star transcripts. A trespass to chattel occurs when a party intentionally, and without
justification or consent, physically interferes with the use and enjoyment of personal property in
another’s possession, and causes harm such as depriving the use of the chattel from its rightful
possessor for a substantial time. Bose v. Interclick, Inc., No. 10 Civ. 9183 (DAB), 2011 WL
4343517, at *9 (S.D.N.Y. Aug. 17, 2011). Thus, trespass to chattel requires an allegation that a
party acted with intent to invade another’s chattel. FTA Mkt. Inc., 2012 WL 383945, at *6
(S.D.N.Y. Feb. 1, 2012) (citing Phillips v. Sun Oil Co., 307 N.Y. 328, 331, 121 N.E.2d 249
(1954)). As discussed above, Werther was authorized to procure the Jet Star transcripts pursuant
to subpoenas, which provides her conduct with sufficient justification. See Dockery v. Tucker,
No. 97 Civ. 3584 (ARR) (RLM), 2008 WL 2673307, at *11 (E.D.N.Y. June 26, 2008) (finding
that damage to plaintiff’s chattel was authorized because the defendants conducted a lawful
Grayson does not argue that the subpoenas were obtained improperly, nor can she. Indeed, Grayson alleges that
she was instrumental in advocating for the subpoenas in opposition to a motion to quash.
search under the Fourth Amendment). Grayson does not allege that the express understanding
between Werther and Grayson either modifies or limits the subpoena. Thus, as with the
conversion claim, if Grayson has a claim for the return of the transcripts, it is a claim
appropriately addressed to Judge Keenan. This claim is dismissed with prejudice.
10. Prima Facie Tort
To state a claim for prima facie tort under New York law, a plaintiff must plead the
following elements: “(1) intentional infliction of harm; (2) resulting in special damages; (3)
without excuse or justification; (4) by an act that would otherwise be lawful.” Twin Labs., Inc. v.
Weider Health & Fitness, 900 F.2d 566, 571 (2d Cir. 1990). Defendants argue that this claim
must be dismissed for failure to plead special damages. The Court agrees.
Grayson argues in her opposition to the instant motion that the prima facie tort claim is
based on Defendants’ efforts to unwind her $90,000 interim fee settlement with the Trustee and
requests leave to allege her damages with greater particularity. Defendants argue that her claim
would still fail as she is unable to allege the necessary intent. “To prevail on a prima facie tort
claim, a plaintiff must plead that the only motivation for the act was ‘disinterested
malevolence.’” Margrabe v. Sexter & Warmflash, P.C., 353 F. App’x 547, 549 (2d Cir. 2009).
Other motives such as profit, self-interest or business advantage will defeat a prima facie tort
claim. Id. (citation omitted). The Court permits Grayson to amend her prima facie tort claim to
the extent that she is able to sufficiently plead all the elements, including that Defendants’ only
motivation was disinterested malevolence.
Rule 11 Sanctions
By a separate motion, Defendants ask the Court to sanction Grayson under Rule 11 for
making false and inadequately investigated allegations in her Complaint, which she largely
repeats in the Amended Complaint and declaration opposing the sanctions motion. Rule 11
states that the court may impose sanctions “[i]f, after notice and a reasonable opportunity to
respond, the court determines that Rule 11(b) has been violated . . . .” Fed. R. Civ. P. 11(c)(1);
see also Ipcon Collections LLC v. Costco Wholesale Corp., 698 F.3d 58, 63 (2d Cir. 2012)
(stating that “sanctions under Rule 11 are discretionary, not mandatory”). The Second Circuit
has made clear that Rule 11 sanctions should be granted with caution, applied only when “a
particular allegation is utterly lacking in support.” In re Highgate Equities, Ltd., 279 F.3d 148,
154 (2d Cir. 2002) (quoting O’Brien v. Alexander, 101 F.3d 1479, 1489 (S.D.N.Y. 1996)); Kiobel
v. Milson, 592 F.3d 78, 81 (2d Cir. 2010); (see also Storey v. Cello Holdings, L.L.C., 347 F.3d
370, 387 (2d Cir. 2003) (“When reviewing Rule 11 sanctions, however, we nevertheless need to
ensure that any [sanctions] decision is made with restraint.”) (internal quotation marks and
“A pleading, motion or other paper violates Rule 11 either when it has been interposed
for any improper purpose, or where, after reasonable inquiry, a competent attorney could not
form a reasonable belief that the pleading is well grounded in fact and is warranted by existing
law or good faith argument for the extension, modification or reversal of existing law.” Robledo
v. Bond No. 9, 965 F. Supp. 2d 470, 477-78 (S.D.N.Y. 2013) (quoting Kropelnicki v. Siegel, 290
F.3d 118, 131 (2d Cir. 2002) (internal citations and quotations omitted)). When deciding whether
to grant Rule 11 sanctions, the Court applies an objective standard of reasonableness, W.K.
Webster & Co. v. Am. President Lines, Ltd., 32 F.3d 665, 670 (2d Cir. 1994), and looks to, among
other factors, whether the party acted in bad faith; whether they relied on a direct falsehood; and
whether the claim was “utterly lacking in support.” New V & J Produce Corp. v. NYCCaterers
Inc., No. 13 Civ. 4861 (ER), 2014 WL 5026157, at *7 (S.D.N.Y. Sept. 29, 2014). All doubts
must be resolved in favor of the signer of the pleading. Rodick v. City of Schenectady, 1 F.3d
1341, 1350 (2d Cir. 1993).
Grayson argues that Rule 11 sanctions are not proper at this stage of the litigation. She is
correct that resolution of a sanctions motion concerning pleadings is generally proper after
discovery since it would otherwise end-run the principle that courts must take the plaintiff’s
pleading as true on a motion to dismiss. Luv N’ Care, Ltd. v. Shiboleth LLP, No. 16-CV-3179
(AJN), 2017 WL 3671039, at *13 (S.D.N.Y. Aug. 8, 2017). However, courts may consider
motions for sanctions after the case is dismissed pursuant to a motion to dismiss. See e.g.
Shetiwy v. Midland Credit Mgmt., No. 12 Civ. 7068 (SAS), 2014 WL 3739512, at *2-3 (S.D.N.Y.
July 29, 2014) (imposing Rule 11 sanctions for plaintiffs’ failure to ensure factual bases for their
allegations after having granted the defendants’ motion to dismiss); Freeman v. Bianco, No. 02
Civ. 7525 (GEL), 2003 WL 179777, at *1 (S.D.N.Y. Jan. 24, 2003) (ordering plaintiff to show
cause why sanctions should not be granted pursuant to Rule 11 for bringing a frivolous action
after granting defendant’s motion to dismiss); Safe-Strap Co. v. Koala Corp., 270 F. Supp. 2d
407, 413 n.3 (S.D.N.Y. 2003) (noting that a party may promptly file a Rule 11 sanctions motions
for submitting a false complaint, but that courts normally will determine the issue at the end of
the litigation). Since the Court found that Grayson adequately pleaded defamation as to three of
the four allegedly defamatory statements, it finds that consideration of the Rule 11 sanctions
motion is premature at this juncture.
For the reasons set forth above, Defendants’ motion to dismiss is GRANTED in part and
DENIED in part. Specifically, Grayson’s defamation claim is allowed to proceed with respect to
three of the four allegedly defamatory statements. Grayson may also amend the injurious
falsehood and prima facie tort claims. If Grayson chooses to file a Second Amended Complaint,
she must do so by October 10, 2017.
Defendants’ motion for sanctions is DENIED without prejudice.
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