Ocinomled Ltd. et al v. Five "M" Corp. et al

Filing 125

MEMORANDUM OPINION AND ORDER. For the reasons above, Defendants' motion to realign the parties is GRANTED. This relief requires no action by the Clerk of Court at this time. If, in the future, the issue of complete diversity arises in this actio n, the Court will consider Ocinomled and 50/50 to be plaintiffs for that purpose. Defendants' motion to dismiss the amended complaint is GRANTED IN PART and DENIED IN PART: Plaintiffs' derivative claim for trademark infringement pursuant to 15 U.S.C. § 1114(1) is dismissed in its entirety without prejudice. Plaintiffs' derivative claim for conversion is dismissed with prejudice only to the extent that it is premised on the alleged misappropriation of the goodwill and value of the DELMONICO'S Marks. Plaintiffs' derivative claim for an accounting is dismissed with prejudice as to Defendants Five M, SH Realty, SH Restaurant, Delmonico's Distribution, and Dennis Turcinovic. Plaintiffs' direct claim for co nversion is dismissed in its entirety with prejudice. Plaintiffs' direct claim for unjust enrichment is dismissed with prejudice only to the extent that it seeks relief for conduct beyond the alleged withholding of contributions. The Clerk of Co urt is directed to terminate the motion pending at Dkt. No. 38. So ordered. re: 38 MOTION to Dismiss filed by 268 SH Realty Corp., 268 SH Restaurant Corp., Milan Licul, Dennis Turcinovic, Branko Turcinovic, Delmonico's Distribution LLC, Five "M" Corp. (Signed by Judge Gregory H. Woods on 1/26/2017) (rjm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------------X
FERDO GRGUREV and OMER GRGUREV,
:
individually and derivatively,
:
:
Plaintiffs, :
:
-against:
:
MILAN LICUL, BRANCO TURCINOVIC,
:
DENNIS TURCINOVIC, FIVE “M” CORP., 268 :
SH RESTAURANT CORP., DELMONICO’S
:
DISTRIBUTION LLC, and 268 SH
:
RESTAURANT CORP.,
:
:
Defendants, :
-and:
:
OCINOMLED LTD. and 50/50 RESTAURANT :
CORP.,
:
:
Nominal Defendants. :
------------------------------------------------------------------X

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: 1/26/2017

1:15-cv-9805-GHW
MEMORANDUM OPINION
AND ORDER

GREGORY H. WOODS, United States District Judge:
Plaintiffs Omer and Ferdo Grgurev and Defendants Milan Licul and Branko Turcinovic are
experienced restaurateurs who have owned and operated restaurants together for many years.
Unfortunately, the relationship between them has now gone to pot, devolving into this acrid stew
which, after long simmering, has now come to a boil. The amended complaint asserts a
smorgasbord of fourteen derivative and direct claims ranging from trademark infringement to
tortious interference. Defendants have asserted five counterclaims, including a petition for
dissolution of one of the corporations that they co-own with Plaintiffs. In addition, all parties have
informed the Court of their intention to bring cross-motions for sanctions, and Plaintiffs have
recently moved for a preliminary injunction barring Defendants from making any repairs,
renovations, or improvements to one of their jointly owned restaurants while this action is pending.
Now before the Court, however, is Defendants’ motion to realign the parties and to dismiss twelve

of Plaintiffs’ claims. For the reasons that follow, Defendants’ motion to dismiss is GRANTED IN
PART and DENIED IN PART.
I.

BACKGROUND1
A. The Relationship Between the Parties
Plaintiffs Omer and Ferdo Grgurev and Defendants Milan Licul and Branko Turcinovic

(the “Co-Owner Defendants,” and collectively with Plaintiffs, the “Co-Owner Parties”) are equal coowners of Nominal Defendants Ocinomled Ltd. (“Ocinomled”) and 50/50 Restaurant Corporation
(“50/50”). ECF No. 26, Am. Compl. (“AC”), ¶¶ 16-19. Because they each hold a 25% ownership
stake, the Plaintiffs together and the Co-Owner Defendants together each represent half of the
voting power of each these entities.
The Co-Owner Parties formed Ocinomled “in or around 1998” for the purpose of
purchasing Delmonico’s, a restaurant located at 56 Beaver Street in Manhattan.2 AC ¶ 16.
Ocinomled is a closely held corporation and does not have a governing operating agreement or
shareholders’ agreement. AC ¶ 18, 97.
Prior to forming Ocinomled, the Co-Owner Parties had partnered together for many years
in the operation of other restaurants, including Scaletta. AC ¶ 19. Scaletta is located at 50 West
77th Street in Manhattan and is operated through Nominal Defendant 50/50. Id. The Co-Owner
Defendants have owned other restaurants separate and apart from those that they own with
Plaintiffs, including Murano and Arno, the latter of which they own and operate through Balarini
Restaurant Corporation. AC ¶ 20.
According to the amended complaint, Defendant Milan Licul was, “at all relevant times,”

Unless otherwise noted, the facts are taken from the amended complaint, and are accepted as true for the purposes of
this motion. See, e.g., Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). However, “the tenet that a court
must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009).

1

2

As Plaintiffs point out in the amended complaint, “Ocinomled” is “Delmonico” spelled backwards. AC at 2 n.1.

2

responsible for maintaining the financial books and records of both Delmonico’s (through
Ocinomled) and Scaletta (through 50/50). AC ¶ 21, 122. Licul engaged the same accountant to
maintain the books for both restaurants. AC ¶ 123. Licul was also the president of 50/50. AC
¶ 193.
B. Delmonico’s and the DELMONICO’S Marks
Delmonico’s has been described by the New York Times as “possibly the most famous
name in American restaurant history.” AC ¶ 27, Ex. A. “In operating and promoting its restaurant,
Ocinomled maintains the classic and upscale ambience for which Delmonico’s is famous, and its
menu includes classic Delmonico’s dishes, such as Lobster Newburg, Oysters Rockefeller, Baked
Alaska, Eggs Benedict, Chicken a la Keene and, of course, Delmonico’s Steak.” AC ¶ 23.
According to Plaintiffs, the “high-end reputation of the restaurant is inextricably tied to the
DELMONICO’S name.” Id. Plaintiffs allege that Delmonico’s “has been extremely profitable for
the last fifteen years” and has averaged annual net revenues of at least $5 million for the past several
years. AC ¶¶ 29-30.
In acquiring the Delmonico’s restaurant, Ocinomled also acquired the right to use the
“Delmonico’s” name, as well as “all other rights” to that name held by the seller, CIBE Beaver LLC.
AC ¶ 17. In 2004, Ocinomled filed an application with the U.S. Patent and Trademark Office (the
“USPTO”) for registration of the DELMONICO’S service mark in Class 43 for Restaurant Services
(the “Restaurant Mark”). AC ¶ 24. That application is assigned U.S. Serial Number 76577253. Id.
In 2007, Ocinomled filed an application with the USPTO for registration of the DELMONICO’S
trademark and service marks for various products and services covered by Classes 8, 16, 18, 21, 25,
29, 30, 34, and 41, including cutlery, cookbooks, bags and briefcases, dinnerware, clothing, prepared
foods, salad dressings and sauces, cigars and cigar accessories, and entertainment services (the
“Product Mark,” and collectively with the Restaurant Mark, the “Marks”). AC ¶ 25. That
application is assigned U.S. Serial Number 77301695. Id.
3

Both of Ocinomled’s registration applications are “suspended in accordance with USPTO
procedure pending resolution of a concurrent use registration application made by an unrelated
party in connection with its operation of an unrelated restaurant using the Delmonico’s name in or
around Albany, New York.” AC ¶ 26.
Plaintiffs alleges that the Marks “are famous and are an iconic symbol of a fine dining
steakhouse.” AC ¶ 27. They also allege that the Marks “invoke the goodwill associated with the
historical roots of the Delmonico’s restaurant.” Id.
C. The Operation of Delmonico’s and Scaletta
After the Co-Owner Parties purchased Delmonico’s through Ocinomled, they closed the
restaurant for refurbishment and reopened it in mid-May 1998.3 AC ¶ 22. They “jointly decided
that none of them would be directly involved in the day-to-day operations of the restaurant.” AC
¶ 31. The Co-Owner Defendants devoted their time to managing their other restaurants, Murano
and Arno, while Plaintiffs continued managing the day-to-day operations of Scaletta. Id.
The Co-Owner Defendants appointed Defendant Dennis Turcinovic―Defendant Branko
Turcinovic’s son―as one of two co-managers of Delmonico’s. AC ¶ 32. As co-manager, he had
regular access to the cash received during the course of Delmonico’s daily operations. AC ¶ 103.
Defendant Milan Licul “conducts the bookkeeping” for Delmonico’s and “maintains the
financial books and records of Delmonico’s at the offices of Arno,” the restaurant jointly owned by
the Co-Owner Defendants. AC ¶ 33. Plaintiffs allege that Defendants Milan Licul and Dennis
Turcinovic “were and are responsible for collecting all cash receipts from Delmonico’s restaurant.”
AC ¶ 34.
Defendant Milan Licul also is responsible for maintaining the books and records for the

The Court observes that Plaintiffs have attached to their amended complaint an article from The New York Times
entitled A New Delmonico’s. AC, Ex. A. That article, dated May 13, 1998, refers to the re-opening and describes Robert
Ruggeri and Stefano Frittella as “[t]he new owners . . . who run the Bice restaurant group.” Id.
3

4

other restaurants jointly owned by the Co-Owner Parties, including Scaletta. AC ¶ 96.
The Co-Owner parties received regular salaries from Ocinomled, which “were determined
by Defendant Milan [Licul] and paid out through the company’s payroll.” AC ¶ 35. Initially,
Plaintiffs were paid $500 per week, but their salaries were subsequently raised to $1,500 per week.
AC ¶ 36. Defendant Branko Turcinovic was also paid $1,500 per week, while Defendant Milan
Licul paid himself $2,000 per week. Id.
D. Defendants’ Alleged Unauthorized Exploitation of the Marks
Plaintiffs allege that, based on the success of Delmonico’s restaurant, the Co-Owner
Defendants “saw an opportunity to capitalize on the DELMONICO’S marks.” AC ¶ 39. “[R]ather
than expanding the brand for the benefit of Ocinomled,” however, the Co-Owner Defendants
“elected to pursue opportunities for their own benefit, to the detriment of Ocinomled” by using the
Marks in connection with various sauces and other restaurants. AC ¶ 40; id. ¶¶ 40-90.
1. The Sauces and Delmonico’s Distribution LLC
According to the amended complaint, the Co-Owner Defendants “undertook to
manufacture, distribute and sell products under the DELMONICO’S Product Mark, including
Delmonico’s steak sauce . . . as well as other sauces, salad dressings and marinades.” AC ¶ 41. The
Co-Owner Defendants presented Plaintiffs with the idea of developing and marketing a steak sauce
under the DELMONICO’S Product Mark. AC ¶ 42. Based upon a representation that royalties
would be paid to Ocinomled for that use of the Product Mark, Plaintiffs did not object to the idea.
AC ¶¶ 43-44. Thereafter, the Co-Owner Defendants began manufacturing, distributing, and selling
steak sauce under the DELMONICO’S Product Mark, but Ocinomled has not received any royalties
or other compensation. AC ¶ 44-45.
In addition to the use of the Product Mark in connection with the steak sauce, Plaintiffs
allege that the Co-Owner Defendants “unilaterally decided to use the DELMONICO’S Product
Mark for pasta sauces, salad dressings and marinades.” AC ¶ 47. They did not inform Plaintiffs of
5

their plan to do so, nor did they obtain a license or consent from Ocinomled for the use of the
Product Mark in connection with those products. AC ¶ 48-49.
The Co-Owner Defendants formed Defendant Delmonico’s Distribution LLC
(“Delmonico’s Distribution”) for the purpose of manufacturing, distributing, and selling these
sauces, and Plaintiffs allege that Delmonico’s Distribution “is currently selling these products
nationwide online and in stores” at the direction of the Co-Owner Defendants. AC ¶¶ 51-52.
Neither Delmonico’s Distribution nor the Co-Owner Defendants have reported their earnings from
the manufacture, distribution, and sale of these products to Ocinomled or to Plaintiffs. AC ¶ 53.
They also have not paid any license fees or royalties. AC ¶ 54.
2. The Unauthorized Restaurants: Delmonico’s Kitchen and
Delmonico’s of Southampton
According to the amended complaint, the Co-Owner Defendants also used the
DELMONICO’S name on other restaurants, including Delmonico’s Kitchen and Delmonico’s of
Southampton, which are owned by corporations that the Co-Owner Defendants alone own and
control. AC ¶ 59-90. Neither Plaintiffs nor Nominal Defendants Ocinomled and 50/50 have any
ownership stake in or affiliation with either of these restaurants. AC ¶¶ 62, 77.
Through Defendant Five “M” Corporation (“Five M”), an entity which they own and
control, the Co-Owner Defendants converted Murano into Delmonico’s Kitchen, which is located
at 207 West 36th Street in Manhattan. AC ¶¶ 60-61. The website of Delmonico’s Kitchen states
that “Delmonico’s, the country’s first fine dining restaurant, has expanded its premier location at 56
Beaver Street to Midtown Manhattan” and references 1837―the year in which the original
Delmonico’s restaurant is believed to have opened. AC ¶ 69 & Ex. B. Neither the Co-Owner
Defendants nor Five M obtained permission from Plaintiffs to use the DELMONICO’S name in
connection with that restaurant, nor did they obtain a license or other form of consent from
Ocinomled. AC ¶ 64. As with the Product Mark, Plaintiffs allege that neither the Co-Owner
6

Defendants nor Five M have reported the revenues earned from Delmonico’s Kitchen to
Ocinomled, and they have not paid any licensing fees or royalties to Ocinomled for their use of the
Restaurant Mark. AC ¶ 65-66.
Plaintiffs allege that the use of the Restaurant Mark in connection with Delmonico’s Kitchen
has caused customers to confuse that restaurant with Ocinomled’s restaurant, as evidenced by
“several consumer reviews on public websites such as Yelp” that “reflect that consumers believe
that Delmonico’s Kitchen is affiliated with Ocinomled’s famous Delmonico’s restaurant.” AC ¶ 71.
Through 268 SH Restaurant Corporation (“SH”), another entity that they own and control,
the Co-Owner Defendants opened a restaurant by the name of Delmonico’s of Southampton in
2013. AC ¶ 75. As with Delmonico’s Kitchen, the amended complaint alleges that neither the CoOwner Defendants nor SH received permission from Plaintiffs or Ocinomled to use the
DELMONICO’S name in connection with Delmonico’s of Southampton, nor did they obtain a
license or other form of consent for that use of the Restaurant Mark. AC ¶ 79. Neither Plaintiffs
nor Ocinomled have received any report of the revenues earned from Delmonico’s of Southampton,
and no license fees or royalties have been paid to Ocinomled for the use of the Restaurant Mark in
connection with Delmonico’s of Southampton. AC ¶ 80-81.
According to the amended complaint, the Co-Owner Defendants and SH “encouraged
customer confusion by mischaracterizing Delmonico’s of Southampton as an ‘offshoot’ of the
Delmonico’s flagship New York City location, promoting the false assumption of a connection
between Ocinomled’s restaurant and [Delmonico’s of Southampton].”4 AC ¶ 83. Several customers
have “confused Delmonico’s of Southampton as being affiliated with Ocinomled’s restaurant.” AC
¶ 85. For example, “several publicly available reviews reflect that consumers believed that

The amended complaint actually states “between Ocinomled’s restaurant and Delmonico’s Restaurant.” AC ¶ 83. The
Court assumes this to be an error, since Delmonico’s is Ocinomled’s restaurant. See AC ¶ 16, 23.

4

7

Delmonico’s of Southampton was another location of Ocinomled’s famous Delmonico’s
restaurant.” Id.
3. The Cease-and-Desist Letter and the Co-Owner Defendants’ Response
On November 12, 2013, Plaintiffs, through counsel, served a cease-and-desist letter upon
the Co-Owner Defendants. AC ¶ 91 & Ex. C. The letter advised the Co-Owner Defendants that
their use of the DELMONICO’S Restaurant Mark in connection with Delmonico’s Kitchen and
Delmonico’s of Southampton was improper and unauthorized and, because it was a usurpation of
the name for their own benefit, it was a breach of their “fiduciary obligation as shareholders of
Ocinomled Ltd.” AC ¶ 91 & Ex. C, at 1. The letter also demanded that the Co-Owner Defendants
immediately cease their use of the name in connection with the “unaffiliated restaurants.” AC, ¶ 92
& Ex. C, at 2.5
Despite receiving this letter, the Co-Owner Defendants and Defendants Five M and SH
“continued to willfully use the DELMONICO’S name without authorization in connection with
their unaffiliated restaurants.” AC ¶ 93. Plaintiffs allege that Defendants’ continued “misuse of the
Restaurant Mark caused substantial damage to Ocinomled.” AC ¶ 94.
E. Other Alleged Wrongful Conduct
1. Alleged Misappropriation of Funds
Plaintiffs also allege that Defendants “misappropriated funds and resources that rightfully
belonged to Ocinomled and the Plaintiffs.” AC ¶ 95. Specifically, they allege that the Co-Owner
Defendants and Defendant SH have “used funds received at Delmonico’s―which belonged to
Ocinomled―to purchase the building that housed Delmonico’s of Southampton, through another
entity controlled by Defendant Milan [Licul], Defendant [268] SH Realty [Corporation (“SH
Realty”)], and to establish that restaurant.” AC ¶ 99. They also allege that the Co-Owner

The letter does not mention the Co-Owner Defendants’ alleged use of the DELMONICO’S Product Mark in
connection with sauces or any other product.

5

8

Defendants and SH “may have” put up Ocinomled’s Delmonico’s restaurant as collateral, without
authorization, for the loan they took to develop Delmonico’s of Southampton. AC ¶ 100.
Similarly, Plaintiffs allege that the Co-Owner Defendants and Defendant Five M used
Delmonico’s funds to “refurbish and reinvent Murano restaurant into Delmonico’s Kitchen.” AC
¶ 101. This project cost “approximately $600,000, at least a portion of which was paid for with
Ocinomled’s funds.” Id. The Co-Owner Defendants also “repeatedly used Delmonico’s chefs and
waiters at Delmonico’s of Southampton and Delmonico’s Kitchen but, upon information and belief,
paid these employees from Ocinomled’s payroll, despite Ocinomled having no interest in these
other two restaurants.” AC ¶ 108.
Plaintiffs further allege that the Co-Owner Defendants and Defendant Delmonico’s
Distribution used Ocinomled’s funds to finance the creation, marketing, and distribution of the
various sauces, salad dressings, and marinades described above. AC ¶ 102.
According to the amended complaint, Defendant Milan Licul manipulated Ocinomled’s
general ledger to conceal Delmonico’s actual cash receipts “in order to aid the transfer of cash
receipts to Five M, SH Realty, SH Restaurant, Delmonico’s Distribution, and Balarini Restaurant
Corp., all to be applied to infringing products and restaurants.” AC ¶ 105.
Defendant Dennis Turcinovic “provided a portion of that cash to Defendant Milan [Licul]
to be used for these improper purposes,” and Defendant Branko Turcinovic “was aware of this
regular ‘siphoning’ of cash to Defendant Milan [Licul], and assisted in those improper transactions.”
AC ¶ 103-104.
2. 2015 Salary Changes
In April 2015―the same time period during which the Co-Owner Defendants were allegedly
siphoning funds from Ocinomled to benefit their other ventures―they also “unilaterally elected to
cut off Plaintiffs[’] . . . compensation, without explanation.” AC ¶ 37, 106. At the same time,
Plaintiffs allege, Defendant Milan Licul doubled Defendant Branko Turcinovic’s compensation to
9

$3,000 per week and increased his own compensation to $3,500 per week. AC ¶ 38.
3. Alleged Misuse of FEMA Funds
Ocinomled’s Delmonico’s restaurant sustained approximately $3 million of flooding damage
from Hurricane Sandy in 2012. AC ¶ 112-113. The Co-Owner parties jointly decided to file a claim
with the Federal Emergency Management Agency (“FEMA”) for those losses. AC ¶ 114.
Approximately two years later, Plaintiffs requested information concerning the status of the FEMA
claim, and Defendant Milan Licul informed them that no money had ever been paid on the claim.
AC ¶ 115. “Upon further inquiry, however, Plaintiffs learned from Ocinomled’s accountant that
this statement by Defendant Milan [Licul] was false, and that FEMA had in fact paid some funds” to
Ocinomled. AC ¶ 116. Accordingly, Plaintiffs allege that Defendant Milan Licul “misappropriated
the FEMA funds that had been paid to Ocinomled and used them for his own benefit and for the
benefit of Defendants SH Restaurant, SH Realty and Five M.” AC ¶ 117.
4. Alleged Interference with the Renewal of Scaletta’s Lease
According to the amended complaint, Defendant Milan Licul’s “misconduct was not just
limited to Delmonico’s.” AC ¶ 119. Since 50/50 opened Scaletta in 1988, it has operated in a leased
space on the Upper West Side of Manhattan. AC ¶ 124. As of the time the amended complaint was
filed on February 22, 2016, the Scaletta lease was set to expire at the end of March 2016. AC ¶ 125.
Plaintiffs allege that Defendant Milan Licul, on behalf of 50/50, “unilaterally took control of
negotiations with the landlord to renew the current lease” and “notified Plaintiffs . . . that he . . . was
the only person with authority to negotiate a new lease for the restaurant.” AC ¶ 126. As of the
date the amended complaint was filed, 50/50 had been unable to reach terms on a renewal of the
lease with the landlord. AC ¶ 127.
Plaintiffs allege that Mr. Licul is “acting solely out of malice” by “intentionally stalling
negotiations and purposely refusing to reach terms on 50/50’s lease renewal” “in order to punish
[Plaintiffs] for disputing [his] misconduct with respect to Ocinomled, and to pressure [Plaintiffs] not
10

to assert claims with regard to his other wrongdoing.” AC ¶¶ 128-130. This conduct, Plaintiffs
allege, is “risking the future of Scaletta restaurant.” AC ¶ 131.
F. Demand Futility Allegations6
Plaintiffs have made no demand on Ocinomled aside from the letter demanding that the CoOwner Defendants cease and desist from using the DELMONICO’S Marks in connection with
their unaffiliated restaurants. AC ¶ 132-134. Instead, Plaintiffs allege that a litigation demand would
be futile for several reasons: First, the Co-Owner Defendants “were and are the primary actors
behind all of the wrongful conduct” alleged in the amended complaint “and face a substantial
likelihood of being held liable for . . . breaching their fiduciary duties . . , and are therefore incapable
of disinterestedly considering a demand to vigorously prosecute this action against themselves.” AC
¶ 134(a). Second, as 50% shareholders in the Nominal Defendants, the Co-Owner Defendants
could “prevent any action taken on behalf of the Nominal Defendants to remedy the actions taken
against it.” AC ¶ 134(b). Third, “[t]he actions taken by Defendants are so egregious on their face
that they could not have been the product of sound business judgment.” AC ¶ 134(d).
G. Procedural History
Plaintiffs initiated this lawsuit on December 16, 2015. In the original complaint, the
Grgurevs joined Ocinomled and 50/50 as plaintiffs. ECF No. 1, Compl., at 1. They brought
federal trademark claims as well as various state law claims. Compl. ¶¶ 132-191. On February 5,
2016, Defendants answered the complaint and asserted counterclaims for breach of the duties of
care and loyalty owed to 50/50, conversion, and unjust enrichment. ECF No. 18. Defendants also
petitioned for dissolution of 50/50. Id.
On February 29, 2016, Plaintiffs amended their complaint to replead certain of their claims
New York law requires that the complaint in a shareholder’s derivative action “set forth with particularity the efforts of
the plaintiff to secure the initiation of such action by the board or the reasons for not making such effort.” N.Y. Bus.
Corp. Law § 626(c). Fed. R. Civ. P. 23.1(b)(3) imposes a similar requirement. Defendants do not seek to dismiss any of
the claims here on the ground that Plaintiffs failed to make a demand, nor do they challenge Plaintiffs’ demand-futility
allegations.
6

11

as derivative and to rename Ocinomled and 50/50 as nominal defendants. ECF No. 26, AC. The
amended complaint asserts ten derivative claims and four direct claims, including claims for federal
trademark infringement and dilution, as well as state law claims for breach of fiduciary duty, breach
of the duty of loyalty, conversion, unjust enrichment, deceptive trade practices, and tortious
interference with business relationship. AC ¶¶ 137-220. Plaintiffs also assert an equitable claim for
an accounting. AC ¶¶ 170-174. As relief, Plaintiffs seek a permanent injunction barring Defendants
from using the Marks in connection with the unauthorized restaurants and products, as well as
compensatory and punitive damages. AC at 33-34.7
On March 29, 2016, Defendants moved to dismiss twelve of the fourteen claims asserted in
the amended complaint. ECF No. 38, Mot. to Dismiss; ECF No. 40, Mem. of Law in Supp. of Mot.
to Dismiss (“Defs.’ Mem.); ECF No. 39, Decl. of Alan C. Trachtman (“Trachtman Decl.”). The
only claims they do not move to dismiss are the federal claims for false designation of origin
pursuant to 15 U.S.C. § 1125(a) and trademark dilution pursuant to 15 U.S.C. § 1125(c). See Defs.’
Mem. In addition, Defendants request in their motion that the Court re-align the parties to recast
the Nominal Defendants as plaintiffs. Defs.’ Mem. at 2-3. Plaintiffs filed an opposition brief on
April 22, 2016. ECF No. 45, Mem. of Law in Opp’n to Mot. to Dismiss (“Pls.’ Mem.”); ECF No.
46, Decl. of Jamie M. Brickell (“Brickell Decl.”). Defendants filed a reply brief on April 28, 2016.
ECF No. 47, Reply Mem. of Law in Supp. of Mot. to Dismiss (“Defs.’ Reply Mem.”); ECF No. 48,
Reply Decl. of Alan C. Trachtman (“Trachtman Reply Decl.”).8, 9

Plaintiffs did not verify their amended complaint, as they were required to do in accordance with Fed. R. Civ. P. 23.1,
when they repleaded certain claims as derivative. The parties stipulated that Plaintiffs could file Rule 23.1 verifications as
separate filings in lieu of amending the complaint for a second time. See ECF No. 34. On March 18, 2016, the Grgurevs
each filed a verification on the docket. ECF Nos. 32-33.
7

8 On July 21, 2016, the parties stipulated to the dismissal of the direct claims as against Defendant Dennis Turcinovic.
ECF No. 58. The only claims that remain against him are claims four, five, six, eight, and nine.

On September 26, 2016, Defendants filed a separate motion to dismiss the case based upon a purported settlement
agreement. ECF No. 71. The Court denied that motion on November 10, 2016, finding that no binding settlement
agreement had been reached between the parties. ECF No. 87.
9

12

II.

DEFENDANTS’ MOTION FOR REALIGNMENT OF THE PARTIES
In their opening brief, Defendants contend that Plaintiffs have “[i]mproperly [r]ealigned the

[p]arties” and ask the Court to “[o]rder Plaintiffs’ Amended Complaint be amended to include
Ocinomled and 50/50 as Plaintiffs in the caption, their proper title, and not as ‘Nominal
Defendants.’” Defs.’ Mem. at 2-3. At the outset, the Court notes that realignment of parties is
relevant only to the issue of whether there is complete diversity of citizenship. Here, however, the
Court has federal-question jurisdiction pursuant to 28 U.S.C. § 1331, grounded on Plaintiffs’ three
federal trademark claims. Since Defendants move to dismiss only one of those three federal claims,
subject matter jurisdiction is not at issue, and it is unclear why Defendants feel compelled to seek
realignment. Nevertheless, the Court has considered Defendants’ request, and it will be granted.
“The general rule is that the corporation in a derivative suit should be aligned as a plaintiff
since it is the real party in interest.” Obstfeld v. Schwartz, 621 F. Supp. 2d 87, 93 (S.D.N.Y. 2008)
(quoting ZB Holdings, Inc. v. White, 144 F.R.D. 42, 45 (S.D.N.Y. 1992)). An exception to this rule
exists, however, for those situations in which aligning the corporation as a plaintiff would not
provide a “real collision of interests.” See id. (citing Smith v. Sperling, 364 U.S. 91, 97 (1957)); see also
Lewis v. Odell, 503 F.2d 445, 447 (2d Cir. 1974) (“As a general rule the federal courts are required to
realign parties according to their real interests so as to produce an actual collision of interests.”).
Aligning a corporation as a defendant is “only proper when [the] corporation is actively antagonistic
to plaintiff’s interests.” Obstfeld, 621 F. Supp. 2d at 93-94 (quoting ZB Holdings, 144 F.R.D. at 45).
“[A]ntagonism has generally not been found where the corporation does not, would not, or
cannot express opposition to the initiation of the lawsuit.” Id. at 94 (quoting Netwolves Corp. v.
Sullivan, No. 00-cv-8943 (AGS), 2001 WL 492463, at *6 (S.D.N.Y. May 9, 2001)); see also Netwolves,
2001 WL 492463, at *7 (“[A] corporation that cannot act, a deadlocked corporation, is not
considered ‘actively antagonistic’ to a lawsuit, within the meaning of Sperling and Swanson, because
the corporation has not refused to sue, and will not clearly refuse to sue if it becomes able to render
13

a decision.”); Cohen v. Heussinger, No. 89-cv-6941, 1994 WL 240378, at *2 (S.D.N.Y. May 26, 1994)
(Sotomayor, J.) (holding that case did not “fall within the boundaries of” the Sperling exception
“because [Plaintiff] and [Defendant] were co-equal owners of [the corporation], and the Proposed
Complaint does not allege that [Defendant] controlled the corporation.”); Sonn, on Behalf of WLS
Assocs. v. Korein, No. 88-cv-1014, 1988 WL 100221, at *1 (S.D.N.Y. Sept. 21, 1988) (“Where an entity
such as [a] corporation or a partnership has ‘retained neutrality’ in respect of a plaintiff’s derivative
claims, there is lacking that degree of antagonism to align the entity as a party defendant.” (citing
Lewis, 503 F.2d at 447)); Kartub v. Optical Fashions, Inc., 158 F. Supp. 757, 758-59 (S.D.N.Y. 1958)
(“While [the corporation] is disabled from acting in its own interest, for the purpose of the
alignment of parties it cannot be considered to be adverse to the plaintiff.”).
Here, it is quite clear that neither Ocinomled nor 50/50 would initiate this litigation. The
reason, however, is not that a majority of its shareholders have voted, or would clearly vote, against
it; rather, it is that exactly half of its shareholders would do so. That is not enough for Ocinomled
and 50/50 to be considered “actively antagonistic” to the litigation because, with 50% of the
ownership on each side, the corporations cannot express their opposition to the initiation of this
action.10 Accordingly, Defendants’ motion to realign the parties is granted. If, in the future, the
issue of complete diversity arises, the Court will consider Ocinomled and 50/50 to be plaintiffs for
that purpose.
III.

DEFENDANTS’ MOTION TO DISMISS
A. Legal Standard
Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain “a short and plain

Defendants are not correct, however, that Plaintiffs’ naming of Ocinomled and 50/50 as nominal defendants in the
amended complaint was “improper.” See Defs.’ Mem. at 2. That is the default way in which corporations are initially
joined in shareholder derivative actions. See e.g., Liddy v. Urbanek, 707 F.2d 1222, 1224 (11th Cir. 1983) (“[A]s a practical
matter, the corporation is initially named as a defendant. In this way the stockholder insures the presence of the
corporation as an indispensable party. Once joined and present before the court, the corporation is then realigned, if
necessary, according to its real interests.”). Indeed, the very same deadlock that leads the Court to realign the parties
here likely would also have rendered it impossible for Plaintiffs to initially join Ocinomled and 50/50 as plaintiffs.
10

14

statement of the claim showing that the pleader is entitled to relief.” Rule 8 “does not require
detailed factual allegations, but it demands more than an unadorned, the-defendant-unlawfullyharmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
To survive a motion to dismiss pursuant to Rule 12(b)(6), a complaint “must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Iqbal, 556 U.S. at 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim
has facial plausibility 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). “To survive dismissal, the plaintiff must provide the grounds upon which his claim
rests through factual allegations sufficient ‘to raise a right to relief above the speculative level.’”
ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (quoting Twombly, 550 U.S. at
544).
Determining whether a complaint states a plausible claim is a “context-specific task that
requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S.
at 679. The court must accept all facts alleged in the complaint as true and draw all reasonable
inferences in the plaintiff’s favor. Burch v. Pioneer Credit Recovery, Inc., 551 F.3d 122, 124 (2d Cir. 2008)
(per curiam). However, a complaint that offers “labels and conclusions” or “naked assertion[s]”
without “further factual enhancement” will not survive a motion to dismiss. Iqbal, 556 U.S. at 678
(citing Twombly, 550 U.S. at 555, 557).
“In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a
district court may consider the facts alleged in the complaint, documents attached to the complaint
as exhibits, and documents incorporated by reference in the complaint.” DiFolco v. MSNBC Cable
L.L.C., 622 F.3d 104, 111 (2d Cir. 2010) (citations omitted). “Where a document is not
incorporated by reference, the court may never[the]less consider it where the complaint ‘relies
heavily upon its terms and effect,’ thereby rendering the document ‘integral’ to the complaint.” Id.
15

(quoting Mangiafico v. Blumenthal, 471 F.3d 391, 398 (2d Cir. 2006)). Finally, the Court may also
consider “matters of which judicial notice may be taken.” Allen v. WestPoint-Pepperell, Inc., 945 F.3d
40, 44 (2d Cir. 1991).
B. Derivative Claims
1. Trademark Infringement Under 15 U.S.C. § 1114(1)
As noted above, Plaintiffs have brought three federal trademark claims against the CoOwner Defendants and Defendants Five M, SH, and Delmonico’s Distribution. AC ¶¶ 137-156.
Defendants move to dismiss only the claim brought pursuant to 15 U.S.C. § 1114(1). They argue
that Plaintiffs fail to state a § 1114(1) claim―or, alternatively, that the Court lacks subject matter
jurisdiction over this claim―because Plaintiffs do not allege that the Marks are registered. Defs.’
Mem. at 4. What Plaintiffs do allege is that Ocinomled has “filed an application” for each of the
Marks, but that those “applications are currently suspended in accordance with USPTO procedure
pending resolution of a concurrent use registration application made by an unrelated party in
connection with its operation of an unrelated restaurant using the Delmonico’s name in or around
Albany, New York.” AC ¶ 24-26. The Court agrees that this is not enough to sustain a trademark
infringement claim pursuant to 15 U.S.C. § 1114(1).
Section 1114(1), by its terms, provides a cause of action for a “registrant” to recover for
infringement of a “registered mark.” 28 U.S.C. § 1114(1). The Second Circuit has also made clear
that a claim under § 1114(1) lies only where the mark at issued has been registered:
Section 32(1) of the [Lanham] Act, 15 U.S.C. § 1114(1)―at issue here―protects
only registered trademarks. It provides a cause of action against any person who
‘use[s] in commerce any . . . imitation of a registered mark . . . likely to cause
confusion, or to cause mistake, or to deceive.’ Id. This cause of action is
available, however, only to ‘registrant[s]’ of the trademarks at issue, a term the Act
defines as embracing the actual registrant’s ‘legal representatives, predecessors,
successors and assigns.’ 15 U.S.C. § 1127. . . . This provision contrasts with
Section 43 of the Act, which allows suits ‘by any person who believes that he or she
is or is likely to be damaged’ by the defendant’s actions. 15 U.S.C. § 1125(a)(1).
Fed. Treasury Enter. Sojuzplodoimport v. SPI Spirits Ltd., 726 F.3d 62, 72 (2d Cir. 2013) (emphasis and
16

alterations in original); see also Fed. Treasury Enter. Sojuzplodoimport v. Spirits Int’l B.V., 809 F.3d 737,
741 (2d Cir. 2016) (explaining that 15 U.S.C. § 1114(1) “provides a cause of action for owners of
registered trademarks”).
Plaintiffs contend that the suspended status of Ocinomled’s applications for trademark
registration does not deprive them of a § 1114(1) claim because the USPTO suspended the
applications “through no fault of Plaintiffs or Ocinomled,” due to a third party’s concurrent use
registration application. Pls.’ Mem. at 25. They further argue:
The [Trademark Trial and Appeal Board (“TTAB”)] denied the third-party’s
application, finding that Ocinomled had superior rights to the DELMONICO’S
brand and, as such, the third party was not entitled to register its mark. Shortly
thereafter, the third party appealed the TTAB’s ruling and such appeal is pending.
Ocinomled’s registration continues to be stayed until such appeal is resolved. In
that regard, and in light of the TTAB’s determinations in the third-party’s action,
it appears that the matter of pending registration is merely ministerial and should
not preclude Ocinomled’s claim under 15 U.S.C. § 1114(1)(a).
Pls.’ Mem. at 25. Plaintiffs cite absolutely no authority for the proposition that an application that is
suspended pending an appeal from the TTAB should be considered “registered” or that Plaintiffs
should be considered “registrants” under such circumstances. The Court observes that the federal
trademark statutes distinguish between the terms “applicant” and “registrant.” On one hand, for
example, 15 U.S.C. § 1056(a) provides that the USPTO “may require the applicant to disclaim an
unregistrable component of a mark otherwise registrable.” (emphasis added). Similarly, 15 U.S.C.
§ 1071(a)(1) provides that “[a]n applicant for registration of a mark . . . who is dissatisfied with the
decision of the Director or Trademark Trial and Appeal Board, may appeal to the United States
Court of Appeals for the Federal Circuit.” (emphasis added). On the other hand, 15 U.S.C. § 1072
provides that “[r]egistration of a mark on the principal register . . . shall be constructive notice of the
registrant’s claim of ownership thereof.” (emphasis added). And 15 U.S.C. § 1055 distinguishes
between the two terms in the same provision: “Where a registered mark or a mark sought to be
registered is or may be used legitimately by related companies, such use shall inure to the benefit of
17

the registrant or applicant for registration . . . .” (emphasis added). This distinction between the terms
“applicant” and “registrant,” and particularly the use of both terms in a single provision in § 1055,
suggests that Congress would have used both terms in § 1114(1) had it intended that section to
apply to marks whose applications for registration are pending.
Defendants also do not cite any authority to support their contention that the concededly
“pending” nature of the registration applications is “merely ministerial and should not preclude”
their § 1114 claim. Indeed, the concurrent-use determination is relevant to whether a mark is
registrable, see 15 U.S.C. § 1052(d); 37 C.F.R. § 2.67, and therefore registration of the Marks does not
appear to be a fait accompli. But even if eventual registration were assured, that would not change the
fact that the applications are pending rather than registered, and that Ocinomled is an “applicant”
rather than a “registrant.”
Accordingly, because Plaintiffs allege that Ocinomled has filed an application for the Marks,
but that they have not yet been registered, their § 1114(1) claim must be dismissed without
prejudice.11
2. Conversion
Defendants also move to dismiss Plaintiffs’ derivative claim for conversion. Under New
York law, “[a] conversion takes place when someone, intentionally and without authority, assumes

The Court would reach the conclusion that Plaintiffs’ § 1114 claim must be dismissed under both Fed. R. Civ. P.
12(b)(1) and 12(b)(6), but observes that the issue is probably more appropriately resolved under Rule 12(b)(6). For one
thing, the Second Circuit has recently disavowed use of the term “statutory standing” as “misleading” and “a
misnomer.” Am. Psychiatric Ass’n v. Anthem Health Plans, Inc., 821 F.3d 352, 359 (2d Cir. 2016). As the court explained:

11

The Supreme Court has recently clarified . . . that what has been called “statutory standing” in fact is
not a standing issue, but simply a question of whether the particular plaintiff “has a cause of action
under the statute.” Lexmark Int’l, Inc. v. Static Control Components, Inc., [134 S. Ct. 1377, 87 (2014)]. This
inquiry “does not belong” to the family of standing inquiries, id., because “the absence of a valid . . .
cause of action does not implicate subject-matter jurisdiction, i.e., the court’s statutory or
constitutional power to adjudicate the case.” Id. at 1386 n.4.
Am. Psyhiatric Ass’n, 821 F.3d at 359. Additionally, the issue here is not whether Plaintiffs, derivatively on behalf of
Ocinomled, are the right persons to bring a § 1114 claim, but rather whether there is any right of action under § 1114 for
infringement of an unregistered mark.

18

or exercises control over personal property belonging to someone else, interfering with that person’s
right of possession.” Colavito v. N.Y. Organ Donor Network, Inc., 860 N.E.2d 713, 717 (N.Y. 2006).
The two elements of conversion are “(1) plaintiff’s possessory right or interest in the property and
(2) defendant’s dominion over the property or interference with it, in derogation of plaintiff’s
rights.” St. John’s Univ., N.Y. v. Bolton, 757 F. Supp. 2d 144, 178 (E.D.N.Y. 2010) (quoting Colavito,
860 N.E.2d at 717). “Where the property is money, it must be specifically identifiable and be subject
to an obligation to be returned or to be otherwise treated in a particular manner.’” Republic of Haiti v.
Duvalier, 626 N.Y.S.2d 472, 475 (App. Div. 1995). Conversely, “if the allegedly converted money is
incapable of being described or identified in the same manner as a specific chattel, it is not the
proper subject of a conversion action.” Cal Distrib., Inc. v. Cadbury Schweppes Ams. Beverages, Inc., No.
06-cv-0496 (RMB), 2007 WL 54534, at *11 (S.D.N.Y. Jan. 5, 2007) (quoting Interior by Mussa, Ltd. v.
Town of Huntington, 664 N.Y.S.2d 970, 972 (App. Div. 1997)).
With respect to Plaintiffs’ derivative conversion claim, the amended complaint summarizes
the allegations as follows:
Defendants inappropriately misappropriated cash, revenues and the goodwill of
the Marks that belong to Ocinomled by, among other things: (i) using
Ocinomled’s cash receipts and revenue for their own benefit; (ii) misappropriating
the goodwill and value of the DELMONICO’S Marks for their own benefit; and
(iii) misappropriating federal disaster relief funds paid to Ocinomled for their own
use and benefit.
AC ¶ 182. As already discussed, Plaintiffs support this broad allegation with a variety of more
specific allegations. See supra Section I(D)-(E). They bring this claim against all Defendants, AC at
28, and allege that “Defendants’ conversion has damaged Ocinomled in an amount to be
determined at trial, but believed to be no less than $5,000,000.” AC ¶ 184.
Defendants’ primary challenge to the derivative conversion claim is that “Plaintiffs . . . have
entirely failed to allege a specific identifiable sum of money that was converted by Defendants, but
rather vaguely asserted ‘funds,’ ‘cash’ and ‘revenues’ had been misappropriated.” Defs.’ Mem. at 7.
19

Similarly, Defendants argue that “Plaintiffs failed to specify the ‘value’ of the Marks they allege
Defendants converted,” and that “an action for conversion of intangible property, such as goodwill,
‘will not lie.’” Id. These deficiencies, Defendants argue, require that the Court dismiss the derivative
conversion claim as to all Defendants. Id. at 6-7. The Court agrees with Defendants in part.
a. The claim is dismissed to the extent it is premised on the “goodwill
and value of the DELMONICO’S Marks.”
The Court can easily dispose of that portion of the claim that is premised on
misappropriation of the value and goodwill of the DELMONICO’S Marks. Typically, “only
tangible property can be the subject of a conversion action, but intangible rights can form the basis
of conversion damages when the converted property is a document into which intangible rights have
merged.” Ancile Inv. Co. v. Archer Daniels Midland Co., 784 F. Supp. 2d 296, 312 (S.D.N.Y. 2011)
(citations omitted). This exception has been applied, for example, to permit an action for
conversion of a bill of lading, which confers a right to possession of property being transported by
ship. See id. at 312 (collecting cases). Similarly, an action for conversion involving intangible
property may be sustained when, in reality, it involves the misappropriation of tangible property that
manifests intangible intellectual property, such as a master recording embodying a musical
performance, Sporn v. MCA Records, Inc., 448 N.E.2d 1324, 1327 (N.Y. 1983), the USPTO’s record of
patent ownership, Harris v. Coleman, 863 F. Supp. 2d 336, 345 (S.D.N.Y. 2012), and “certificates of
stock, promissory notes, and other papers of value.” Thyroff v. Nationwide Mut. Ins. Co., 864 N.E.2d
1272, 1276 (N.Y. 2007).12
This exception does not apply here. Because “[a] trademark is not tangible personal
property, but rather is intangible intellectual property having no existence apart from the good will

12 This has sometimes been called the “merger doctrine.” Harris, 863 F. Supp. 2d at 345 (describing the doctrine as the
recognition that “intangible property may be subject to conversion when represented by a tangible manifestation, such as
an electronic or paper record”).

20

of the product or service it symbolizes,” it cannot support a claim of conversion. Harris, 863
F. Supp. 2d at 345 (citation omitted); see also Ortega v. Burgos, No. 12-cv-5421 (FB), 2014 WL
2124957, at *1 (E.D.N.Y. May 22, 2014); Fin. Matters, Inc. v. Pepsico, Inc., No. 92-cv-7497 (DO), 1993
WL 378844, at *4 (S.D.N.Y. Sept. 24, 1993). And Plaintiffs do not allege that Defendants converted
any tangible object embodying the Marks. 13
b. The claim otherwise survives.
As noted above, Defendants assert that Plaintiffs’ derivative conversion claim must be
dismissed in its entirety because Plaintiffs “failed to allege a specific identifiable sum of money that
was converted by Defendant, but rather vaguely asserted ‘funds,’ ‘cash’ and ‘revenues’ had been
misappropriated.” Defs.’ Mem. at 7. The Court disagrees. The relevant question at the motion-todismiss stage is not whether Plaintiffs have alleged an exact sum of money in their complaint.
Indeed, the case primarily relied upon by Defendants shows that alleging an exact sum of money is
not itself enough to support a conversion claim. See, e.g., High View Fund, L.P. v. Hall, 27 F. Supp. 2d
420, 429 (S.D.N.Y. 1998) (dismissing conversion claim seeking $1 million because “plaintiffs do not
claim ownership of a specifically identifiable, segregated $1 million” (internal quotation marks,
alteration, and citation omitted)). Rather, the question is whether the money alleged to have been
converted is specifically “identifiable” or, put another way, whether it is capable of “being described or
identified in the same manner as a specific chattel.” See, e.g., 9310 Third Ave. Assocs, Inc. v. Schaffer
Food Serv. Co., 620 N.Y.S.2d 255, 256 (App. Div. 1994) (emphasis added).
The purpose of this limitation is to ensure that the tort of conversion―a property tort―is
applied only where a plaintiff alleges interference with money in which he has a property interest, as
contrasted with a mere right to receive payment. See High View Fund, 27 F. Supp. 2d at 429; Selinger
Enters., Inc. v. Cassuto, 860 N.Y.S.2d 533, 536 (App. Div. 2008) (“The mere right to payment cannot

The Court observes that Plaintiffs failed to address this issue in their opposition brief, despite the fact that Defendants
had raised it in their opening brief. See Defs.’ Mem. at 6, 7.
13

21

be the basis for a cause of action alleging conversion; the essence of such a cause of action is the
‘unauthorized dominion over the thing in question.’” (quoting Fiorenti v. Cent. Emergency Physicians,
762 N.Y.S.2d 402, 403 (App. Div. 2003))); Horn v. Toback, 989 N.Y.S.2d 779, 782 (App. Term 2014)
(holding that defendant was entitled to summary judgment on conversion claim because the claim
“seeks merely to recover an allegedly unpaid debt, and does not seek to recover money from a
discrete, identifiable fund”). That determination often turns on whether the money alleged to have
been converted was contained in a segregated fund of some sort. See, e.g., Mfrs. Hanover Tr. Co. v.
Chem. Bank, 559 N.Y.S.2d 704, 712 (App. Div. 1990) (“Money, specifically identifiable and
segregated, can be the subject of a conversion action.”); see also Thys v. Fortis Sec. LLC, 903 N.Y.S.2d
368, 369 (App. Div. 2010) (“An action for conversion of money may be made out where there is a
specific, identifiable fund and an obligation to return or otherwise treat in a particular manner the
specific fund in question.” (emphasis added) (internal quotation marks and citation omitted));
Sperrazza v. Kail, 699 N.Y.S.2d 609, 610 (App. Div. 1999) (holding that contents of joint bank
accounts, which had been withdrawn in their entirety by one of cotenant without consent of the
other cotenant, were “sufficiently identifiable to be the subject of a claim for conversion”); Bankers
Tr. Co. v. Cerrato, Sweeney, Cohn, Stahl & Vaccaro, 590 N.Y.S.2d 201, 385 (App. Div. 1992) (holding
that proceeds of a litigation settlement were an “identifiable fund” and thus “a proper subject of a
misappropriation and conversion claim”); Brennan’s Bus Serv., Inc. v. Brennan, 484 N.Y.S.2d 297 (App.
Div. 1985) (affirming conversion judgment in favor of plaintiff where defendant withdrew corporate
funds invested in certificates of deposit and spent it for non-corporate purposes).
Here, Plaintiffs have alleged that Defendants siphoned money from Delmonico’s cash
receipts and from claim proceeds paid to Ocinomled by FEMA. The Court infers that the cash
receipts were found either in Delmonico’s cash register or in a bank account established to hold
Ocinomled’s money. Drawing this plausible inference in favor of Plaintiffs, as it must, the Court
finds that this is sufficiently segregated to make the allegedly converted funds “specifically
22

identifiable.” Although Plaintiffs’ conversion claim must ultimately be reduced to a definite and
specific sum of money, that can be accomplished through discovery. The allegations that
Defendants took control over and misused a particular pot of money that rightfully belonged to
Ocinomled are sufficient to survive a motion to dismiss. See Hecht v. Components Int’l, Inc., 867
N.Y.S.2d 889, 897 (Sup. Ct. 2008) (“When funds are provided for a particular purpose, the use of
those funds for an unauthorized purpose constitutes conversion.”).
Defendants make few arguments in support of dismissal of the derivative conversion claim
aside from the specificity argument just discussed. To the extent that they argue that the allegations
are too vague or conclusory in other respects―an argument they make only at the most cursory
level―the Court disagrees. For example, Defendants argue that Plaintiffs fail to state a claim for
conversion against Defendant SH because Plaintiffs have alleged that SH “may have” put
Delmonico’s up as collateral for the loan they took to develop Delmonico’s of Southampton. Defs.’
Mem. at 8. Defendants contend that this allegation is too speculative to support a claim. Id. While
that may be true, Defendants fail to address the fact that Plaintiffs also allege that SH “used funds
received at Delmonico’s―which belonged to Ocinomled―to purchase the building that housed
Delmonico’s of Southampton.” AC ¶ 99. That allegation is not too speculative or vague.
Defendants will have their opportunity to prevail on this claim on summary judgment or at trial, but
the allegations here are sufficient at the pleading stage.
Accordingly, Plaintiffs’ derivative claim for conversion is dismissed only to the extent it is
premised on the alleged misappropriation of the goodwill and value of the DELMONICO’S Marks.
Because such a claim is not cognizable, it is dismissed with prejudice.
3. Breach of the Duty of Loyalty
Defendants also move to dismiss Plaintiffs’ claim for breach of the duty of loyalty, which
they assert on behalf of Ocinomled and against the Co-Owner Defendants and Defendant Dennis
Turcinovic. Defendants argue only that Plaintiffs fail to state a claim for breach of the duty of
23

loyalty because the “allegations are nothing more than a series of poorly-disguised conversion
claims” and that Plaintiffs have “failed [to] set forth specific facts required for proper pleading of a
conversion claim.” Defs.’ Mem. at 10-11; see also Defs.’ Reply Mem. at 7 (“Plaintiffs failed to state a
claim for conversion, and as their entire basis for the breach of duty of loyalty claim is the
conversion claim, the breach of duty of loyalty claim must necessarily fail.”). As explained above,
however, Plaintiffs have stated a claim for conversion. Accordingly, Defendants have not provided
a sufficient basis to grant their motion as to this claim.
4. Breach of Fiduciary Duty
Defendants’ motion to dismiss is also denied as to Plaintiffs’ claim for breach of fiduciary
duty against the Co-Owner Defendants, which Plaintiffs bring derivatively on behalf of both
Ocinomled and 50/50. To state a claim for damages for breach of fiduciary duty under New York
law, a plaintiff must allege: “(1) the existence of a fiduciary relationship, (2) misconduct by the
defendant, and (3) damages directly caused by the defendant’s misconduct.” Blum v. Spaha Capital
Mgmt., LLC, 44 F. Supp. 3d 482, 497 (S.D.N.Y. 2014) (quoting Armentano v. Paraco Gas Corp., 935
N.Y.S.2d 304 (App. Div. 2011)). Defendants do not contend that Plaintiffs have failed to adequately
allege the existence of a fiduciary relationship. Rather, they argue that Plaintiffs have failed to
adequately allege that the Co-Owner Defendants engaged in misconduct.
The amended complaint summarizes the factual allegations underlying Plaintiffs’ fiduciary
duty claim as follows:
In a bad faith attempt to wrest power and control over the DELMONICO’S
brand away from Ocinomled, Defendants Milan and Branko breached their
fiduciary duties to the Nominal Defendants by, among other things: (i) using
Ocinomled’s funds and resources to benefit unrelated restaurants operated by the
corporate defendants; (ii) intentionally misappropriating Ocinomled’s Marks
without obtaining authorization or providing compensation for such use; and (iii)
withholding federal disaster relief funds from Ocinomled and pocketing such
funds for their own use and benefit.
AC ¶ 165. The amended complaint further alleges: “In a bad faith attempt to punish Plaintiffs
24

Ferdo and Omer for disputing Defendants’ wrongdoing with respect to the DELMONICO’S brand,
Defendant Milan [Licul] abused his position in negotiating the lease renewal for Scaletta, interfering
with 50/50’s ability to reach terms with its landlord.” AC ¶ 167.
With respect to the alleged use of Ocinomled’s funds and resources to benefit unrelated
restaurants owned by the corporate defendants, Defendants argue only that “Plaintiffs failed to set
forth the requisite specificity as to the amount alleged converted, instead conclusorily alleging ‘funds’
and ‘resources.’” Defs.’ Mem. at 11. The Court has already rejected that argument in the context of
Defendants’ challenge to Plaintiffs’ derivative conversion claim, and it need not do so again here.14
With respect to the alleged misappropriation of the Marks, Defendants make a highly limited
argument, and that argument is based on a misreading of the amended complaint. According to
Defendants, “Plaintiffs claim that Defendants Milan and Branko breached their fiduciary duties to
Ocinomled and 50/50 by conversion of Ocinomled’s Mark.” Defs.’ Mem. at 11. They further
contend that “[t]he pleading as to 50/50 fails immediately, as there is no allegation that 50/50 has a
right to the Delmonico’s Mark.” Id. This argument proceeds from a flawed premise. Defendants
are correct that 50/50 is not alleged to hold any ownership interest in the Marks, but the amended
complaint does not allege that the misuse of the Marks constituted a breach of a duty owed to
50/50. Similarly, the amended complaint does not allege that Defendant Milan Licul’s purported
interference with the Scaletta lease breached a duty owed to Ocinomled. Instead, the amended
complaint is perfectly clear with respect to which allegations pertain to which Nominal Defendant.
See AC ¶¶ 165 (alleging misappropriation of Ocinomled’s money and Marks), 166 (alleging damages
to Ocinomled), 167 (alleging interference with Scaletta’s lease), 168-169 (alleging damages to 50/50).

14 In addition, Defendants provide no support for their assumption that the requirements for a conversion claim would
apply equally to a fiduciary duty claim merely because both claims arise out of the alleged misappropriation of money.
As explained above, the tort of conversion is a property tort, and the requirement of a specifically identifiable fund
serves the purpose of ensuring that plaintiffs can recover for conversion only when they claim interference with a property
right, as opposed to a mere failure to pay money owed.

25

To be sure, the amended complaint groups all of these allegations under a single “cause of action,”
see AC ¶¶ 163-169, and it may have been easier to read the amended complaint if Plaintiffs had
chosen to separate it into two causes of action, one on behalf of Ocinomled and the other on behalf
of 50/50. But that is no reason to dismiss the claim or any portion of it.
Finally, with respect to Defendant Milan Licul’s alleged interference with the Scaletta lease,
Defendants argue that, “as a matter of law, Milan cannot interfere with a lease in which he is the
signatory on behalf of 50/50 and as a personal guarantor.” Defs.’ Mem. at 11-12. In making this
argument, Defendants cite to a case concerning tortious interference with business relations and
contracts. Indeed, they even cross-reference their own argument, contained later in their brief,
concerning Plaintiffs’ claim for tortious interference. What Defendants do not do is provide any
authority (or even naked argument) with respect to why the elements of tortious interference apply
equally to a claim for breach of fiduciary duty. Put differently, although a claim for tortious
interference may be valid only if the alleged interference is committed by one who is not a party to
the contract or business relationship, 15 a claim for breach of fiduciary duty merely requires that
conduct in breach of a fiduciary duty caused harm. Blum, 44 F. Supp. 3d at 497. Because
Defendants’ argument is not addressed to the legal requirements for a fiduciary duty claim, it fails.
Defendants’ motion is denied as to Plaintiffs’ derivative claim for breach of fiduciary duty.
5. Accounting
Plaintiffs bring their claim for an accounting on behalf of Ocinomled and against all
defendants. “Under New York law, an accounting is a distinct cause of action rooted in equity.
Such action seeks an adjustment of the accounts of the parties and a rendering of a judgment for the
balance ascertained to be due.” DiTolla v. Doral Dental IPA of N.Y., 469 F.3d 271, 275 (2d Cir. 2006)
(internal quotation marks and citations omitted). “Under New York law, the elements of a claim for

15

The Court will address Plaintiffs’ claim for tortious interference later in this decision.

26

an equitable action for an accounting are: (1) a relationship of a fiduciary or confidential nature; (2)
money or property entrusted to the defendant imposing upon him the burden of accounting; (3) the
absence of an adequate legal remedy; and (4), in some cases, a demand for an accounting and a
refusal.” Matsumura v. Benihana Nat’l Corp., No. 06-cv-7609 (NRB), 2007 WL 1489758, at *4
(S.D.N.Y. May 21, 2007).
Defendants argue that Plaintiffs have failed to adequately plead their claim for an accounting
as to Defendants Five M, SH Realty, SH Restaurant, Delmonico’s Distribution, and Dennis
Turcinovic. Defs.’ Mem. at 12-13. Defendants raise a number of challenges to the sufficiency of
that claim, but the Court need only address one of them. As Defendant correctly state, the amended
complaint fails to allege a fiduciary or confidential relationship between Ocinomled and any of those
defendants. Although New York courts have, in some cases, treated an equitable action for an
accounting as a legal action for monetary damages where the parties have no fiduciary or
confidential relationship, such treatment here would be duplicative and unnecessary. As the Second
Circuit has explained:
In some cases, the New York courts have held that a fiduciary or confidential
relationship is not necessary to obtain judicial relief―but they have done this only
by treating the action for accounting as an action at law for monetary relief, and
not as an equitable action for accounting. E.g., Arrow Communications Labs v. Pico
Prods. Inc., 219 A.D.2d 859, ――, 632 N.Y.S.2d 903, 905 (4th Dep’t 1995) (“Where
a party seeks an accounting, but the primary demand is for monetary damages,
‘[t]he accounting is merely a method to determine the amount of the monetary
damages. The action therefore sounds in law and not in equity.’”) (citation
omitted). Because the plaintiffs have sought money damages in both their breach
of contract and conversion claims, and because discovery as to the measure of
damages would be available to them if they were to prevail on those claims, they
can obtain all the information they seek in the existing claims at law. (Obviously,
the district court has discretion to bifurcate the proceedings into liability and
damages phases, to minimize any unnecessary discovery.) Accordingly, no useful
purpose would be served by treating the plaintiffs’ equitable accounting claim as
an additional, and duplicative, action at law. And the district court was correct in
implicitly declining to do so.
Leveraged Leasing Admin. Corp. v. PacifiCorp Capital, Inc., 87 F.3d 44, 49 (2d Cir. 1996). Here, as in
Leveraged Leasing, Plaintiffs seek money damages in their claims for trademark infringement and
27

conversion, among others, and they will have an opportunity to seek discovery as to the measure of
those damages if they prevail on those claims. As a result, no useful purpose would be served by
treating Plaintiffs’ accounting claim as an “additional, and duplicative, action at law.” See id.; see also
Matsumura, 2007 WL 1489758, at *4 (declining to convert accounting claim to claim for monetary
damages where plaintiffs had no fiduciary relationship with defendant Haru Holding, because the
court found “plaintiff’s separate accounting claim against Haru Holding to be duplicative and
unnecessary, since plaintiffs could fully recover money damages for the claim pled against Benihana
even without Haru Holding as a named defendant.”)
Plaintiffs’ claim for an accounting is dismissed with prejudice as to Defendants Five M, SH
Realty, SH Restaurant, Delmonico’s Distribution, and Dennis Turcinovic.
6. Deceptive Trade Practices Under N.Y. Gen. Bus. Law § 349
Defendants also move to dismiss Plaintiffs’ § 349 claim, which they bring derivatively on
behalf of Ocinomled and against the Co-Owner Defendants as well as Defendants Five M, SH, and
Delmonico’s Distribution. To state a claim under § 349, a plaintiff must allege three elements: “first,
that the challenged act or practice was consumer-oriented; second, that it was misleading in a
material way; and third, that the plaintiff suffered injury as a result of the deceptive act.” New World
Solutions, Inc. v. NameMedia Inc., 150 F. Supp. 3d 287, 329 (S.D.N.Y. 2015) (quoting Stutman v. Chem.
Bank, 731 N.E.2d 608, 611 (N.Y. 2000)). “Whether a representation or an omission, the deceptive
practice must be likely to mislead a reasonable consumer acting reasonably under the
circumstances.” Stutman, 731 N.E.2d at 611-12 (internal quotation marks and citation omitted).
Competitors, as well as consumers, have standing to sue under § 349. See Securitron Magnalock Corp. v.
Schnabolk, 65 F.3d 256, 264 (2d Cir. 1995) (“The critical question, then, is whether the matter affects
the public interest in New York, not whether the suit is brought by a consumer or a competitor.”);
Burberry Ltd. v. Euro Moda, Inc., No. 08-cv-5781 (CM), 2009 WL 1675080, at *16 (S.D.N.Y. June 10,
2009) (“[C]ompetitors also have standing to sue.” (citation omitted)); Tiny Tot Sports, Inc. v. Sporty
28

Baby, LLC, No. 04-cv-4487 (DLC), 2005 WL 2044944, at *5 (S.D.N.Y. Aug. 24, 2005) (“So long as
there is harm to the ‘public at large,’ a competitor may recover under the statute.’” (citation
omitted)).
According to Defendants, “Plaintiffs have entirely failed to allege factual content that
Defendants’ acts were directed at consumers, or that the acts are misleading in a material way, or
that Plaintiffs have been injured as a result.” Defs.’ Mem. at 14. Defendants are not correct.
Plaintiffs have pleaded facts sufficient to give rise to a plausible inference that Defendants engaged
in materially misleading conduct, that the conduct was intended to―and, in fact, did―mislead
consumers, and that Ocinomled was injured as a result.
With respect to misleading conduct, Plaintiffs point to Defendants allegedly unauthorized
use of the DELMONICO’s name in connection with Delmonico’s Kitchen, Delmonico’s of
Southampton, and the various sauces, none of which are owned by Ocinomled. AC ¶¶ 39-90, 176.
With respect to the consumer-oriented nature of that conduct, they adequately allege that it was
“likely to cause confusion, cause mistake or deceive as to an affiliation, connection or association of
Defendants with Ocinomled and/or as to the origin, sponsorship or approval of Defendants’
products or services by Ocinomled.” AC ¶¶ 177; see also, e.g., AC ¶ 83 (alleging that Defendants
“encouraged consumer confusion by mischaracterizing Delmonico’s of Southampton as an
‘offshoot’ of Delmonico’s flagship New York City location”). Further, they allege in nonconclusory fashion that Defendants’ alleged misuses of the DELMONICO’S name actually did
cause consumer confusion. See, e.g., AC ¶ 71 (“For example, several consumer reviews on public
websites such as Yelp reflect that consumers believe that Delmonico’s Kitchen is affiliated with
Ocinomled’s famous Delmonico’s restaurant.”).
Defendants rely for their argument on Securitron, in which the Second Circuit held that under
§ 349, “[i]t is clear that the gravamen of the complaint must be consumer injury or harm to the
public interest.” 65 F.3d at 264 (internal quotation marks and citation omitted). They also rely on
29

Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, 647 N.E.2d 741 (N.Y. 1995), which
held that a plaintiff “must demonstrate that the acts or practices have a broader impact on
consumers at large.” Defs.’ Mem. at 14 (quoting Oswego Laborers, 647 N.E.2d at 744). As explained
above, however, Plaintiffs have adequately alleged that Defendants’ unauthorized use of the
DELMONICO’S name in connection with non-Ocinomled restaurants and products caused
consumer harm or injury to the public, and that they had a broad impact on consumers at large
inasmuch as such use was likely to cause consumer confusion. See, e.g., CommScope, Inc. of N.C. v.
Commscope (U.S.A.) Int’l Grp. Co., 809 F. Supp. 2d 33, 38 (N.D.N.Y. 2011) (holding that plaintiff
stated a § 349 claim where plaintiff “alleged facts plausibly suggesting that Defendant intentionally
registered its corporate name to be confusingly similar to Plaintiff’s CommScope trademark”); New
York City Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F. Supp. 2d 305 (S.D.N.Y. 2010) (holding
that plaintiff was likely to succeed on merits of § 349 claim premised on likelihood of confusion
between marks); Houbigant, Inc. v. ACB Mercantile, Inc., 914 F. Supp. 964, 984 (S.D.N.Y. 1995)
(holding that plaintiffs stated a § 349 claim where they alleged that defendants imported counterfeit
good “with the intent to cause confusion and mistake, to deceive customers as to the source and
origin of the products”).
Defendants’ motion is denied as to Plaintiffs’ derivative § 349 claim.
7. Unjust Enrichment
Plaintiffs bring their derivative claim for unjust enrichment on behalf of Ocinomled and
against all Defendants. “The theory of unjust enrichment lies as a quasi-contract claim. It is an
obligation imposed by equity to prevent injustice, in the absence of an actual agreement between the
parties concerned.” IDT Corp. v. Morgan Stanley Dean Witter & Co., 907 N.E.2d 268, 274 (N.Y. 2009)
(citation omitted). To state a claim for unjust enrichment under New York law, a plaintiff must
allege that “(1) the other party was enriched, (2) at that party’s expense, and (3) that it is against
equity and good conscience to permit the other party to retain what is sought to be recovered.”
30

Georgia Malone & Co. v. Rieder, 973 N.E.2d 743, 746 (N.Y. 2012) (citation omitted).
Defendants’ argument for dismissal of Plaintiffs’ derivative unjust enrichment claims is halfbaked at best. Aside from an unexplained quotation from a case stating that “[t]o offset on a theory
of unjust enrichment, there must first be enrichment,” Indyk v. Habib Bank Ltd., 694 F.2d 54, 57 (2d.
Cir. 1982), Defendants neither cite nor address any of the elements of an unjust enrichment claim.
Instead, they once again hang their hats solely on their contention that Plaintiffs have inadequately
pleaded their conversion claim:
As described in detail (supra § A), Plaintiffs have failed to state a claim for
conversion, as their claim both lacks the requisite specificity and is for intangible
property, neither of which suffices to state a conversion claim. Thus, as Plaintiffs
have failed to state a claim for conversion, and as their unjust enrichment claim is
grounded in the conversion claim, it necessarily follows that Plaintiffs have failed
to state with factual content a claim for unjust enrichment.
Defs.’ Mem. at 12 (citations omitted). The Court has held that Plaintiffs stated a claim for
conversion; thus, Defendants’ argument fails at the gate. But even if Plaintiffs had failed to state
such a claim, it would not “necessarily follow[]” that they would also have failed to state a claim for
unjust enrichment, since conversion and unjust enrichment are different claims with different
elements, stemming from law and equity, respectively. Defendants’ argument appears to be founded
on an assumption that “enrichment” for purposes of an unjust enrichment claim is synonymous
with “conversion”―an assumption for which they offer no support.
Defendants’ motion is denied as to Plaintiffs’ derivative claim for unjust enrichment.
8. Tortious Interference with Business Relationship
Plaintiffs bring their derivative claim for tortious interference with business relationship on
behalf of 50/50 and against Defendant Milan Licul for allegedly interfering with the negotiation of
50/50’s lease renewal. AC ¶¶ 191-198. To state a claim under New York law for tortious
interference with a business relationship―also known as tortious interference with prospective
economic advantage―a plaintiff must allege that “(1) it had a business relationship with a third party;
31

(2) the defendant knew of that relationship and intentionally interfered with it; (3) the defendant
acted solely out of malice, or used dishonest, unfair, or improper means; and (4) the defendant’s
interference caused injury to the relationship.” Kirch v. Liberty Media Corp., 449 F.3d 388, 400 (2d Cir.
2006). As a general rule, the third element is satisfied only where the defendant’s conduct
“amount[s] to a crime or an independent tort.” Carvel Corp. v. Noonan, 818 N.E.2d 1100, 1103 (N.Y.
2004). An exception to that general rule “has been recognized where a defendant engages in
conduct ‘for the sole purpose of inflicting intentional harm on plaintiffs.’” Id. (quoting NBT Bancorp,
Inc. v. Fleet/Norstar Fin. Grp. Inc., 628 N.Y.S.2d 408, 410 (App. Div. 1995)).
Defendants’ arguments in support of dismissal of this claim are less than crystal clear. First,
they appear to argue that the amended complaint does not allege any conduct directed at a third
party, but the Court does not agree. “[U]nder New York law, in order for a party to make out a
claim for tortious interference with prospective economic advantage, the defendant must interfere
with the business relationship directly; that is, the defendant must direct some activities towards the
third party and convince the third party not to enter into a business relationship with the plaintiff.”
Fonar Corp. v. Magnetic Resonance Plus, Inc., 957 F. Supp. 477, 482 (S.D.N.Y. 1997) (citing G.K.A.
Beverage Corp. v. Honickman, 55 F.3d 762 (2d Cir. 1995)); see also Carvel Corp., 818 N.E.2d at 1104
(“[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.”).
The crux of the conduct alleged in the amended complaint is that Licul “took control of the
negotiation of the renewal of 50/50’s lease with its landlord” and “is intentionally stalling
negotiations and purposely refusing to reach terms on 50/50’s lease renewal.” AC ¶¶ 126-128, 193194. These allegations give rise to a plausible inference of conduct directed at the landlord, as
opposed to conduct directly merely at the Co-Owner Plaintiffs or at 50/50. Indeed, it is difficult to
imagine how Licul could “refus[e] to reach terms” without communication with the counterparty to
32

the negotiations (the landlord).
Defendants also rely on case law concerning the requirements for a claim of tortious
interference with contract. For example, they cite to Notaro v. Performance Team, 26 N.Y.S.3d 201, 203
(App. Div. 2016) for the proposition that a defendant cannot tortiously interfere with a contract to
which he is a party. Defendants then attempt to apply that proposition to Plaintiffs’ claim by stating
that Licul “is the sole signatory and personal guarantor on 50/50’s lease.” Defs.’ Mem. at 15-16.
This argument fails for at least two reasons. First, the proposition that a defendant cannot tortiously
interfere with his own contract exists in the context of a claim for tortious interference with an
existing contract, but the elements of that tort are not the same as the elements of a claim for
tortious interference with prospective economic advantage. See Carvel Corp., 818 N.E.2d at 1103
(“We have recognized that inducing breach of a binding agreement and interfering with a
nonbinding ‘economic relation’ can both be torts, but that the elements of the two torts are not the
same.”).
Second, this argument relies upon facts that are not alleged in the complaint; namely, that
Licul is the sole signatory and personal guarantor on the lease. As a result, the Court may consider
them in resolving this 12(b)(6) motion only if they are contained in a document attached to the
complaint, incorporated by reference into the complaint, integral to the complaint, or are properly
subject to judicial notice. See DiFolco, 622 F.3d at 111; Allen, 945 F.3d at 44. The lease to which
Defendants refer was not attached to the complaint, and Defendants have not provided any
alternative basis for the Court to consider it.
In their reply brief, Defendants contend that Plaintiffs’ tortious interference claim is moot
because it was eventually renewed. Defs.’ Reply Mem. at 3-4. Defendants cite both to a “Lease
Extension” document annexed as an exhibit to their own declaration as well as to a purported
concession contained in Plaintiffs’ opposition brief. Defs.’ Reply Mem. at 3. As already explained,
the Court cannot consider the document annexed to Defendants’ declaration without an adequate
33

basis to do so, and Defendants have provided none. Moreover, to the extent that Defendants rely
on Plaintiffs’ purported concession, the Court is not convinced that it moots the claim. In their
opposition brief, Plaintiffs state: “Indeed, it was only due to Plaintiffs’ efforts to hire counsel and
take over negotiations with the landlord that Scaletta’s lease was eventually renewed―though Milan’s
conduct had already resulted in considerable damage.” Pls.’ Mem. at 9. Although Plaintiffs do
appear to have conceded that the lease was eventually renewed, they nevertheless clarify that Licul’s
alleged conduct had already caused injury. Furthermore, Plaintiffs go on to state that “Milan’s
interference has not ceased, but rather, has continued through unreasonable refusals to sign lease
documentation to finalize the lease renewal.” Pls.’ Mem. at 9. Accordingly, the Court does not view
the claim as moot.
Defendants’ motion is denied as to Plaintiffs’ derivative claim for tortious interference with
business relationship.
C. Direct Claims
In addition to their derivative claims, Plaintiffs bring direct claims for breach of the duty of
loyalty, breach of fiduciary duty, conversion, and unjust enrichment. AC ¶¶ 199-220. As a threshold
matter, Defendants contend that each of those direct claims must be dismissed because they
“conflict with Plaintiffs’ derivative claims.” Defs.’ Mem. at 17. Courts in this district “have applied
a strict standard in scrutinizing simultaneous direct and derivative claims for signs of conflict.”
Cordts-Auth v. Crunk, LLC, 815 F. Supp. 2d 778, 793 (S.D.N.Y. 2011)(citation omitted). This
scrutiny arises from the imposition by Fed. R. Civ. P. 23.1 of a requirement that the plaintiff “fairly
and adequately represent the interests of shareholders or members who are similarly situated in
enforcing the right of the corporation or association.” See, e.g., Wall St. Sys., Inc. v. Lemence, No. 04cv-5299 (JSR), 2005 WL 292744, at *3 (S.D.N.Y. Feb. 8, 2005).
While there is always a theoretical conflict of interest in situations where a
plaintiff in a single lawsuit seeks redress on behalf of [the corporation] and from
[the corporation], it is indisputable that the existence of an actual conflict
34

disqualifies a plaintiff from acting as representative in these dual capacities.
Cordts-Auth, 815 F. Supp. 2d at 794 (internal quotations marks and citations omitted). An actual
conflict may exist where “substantial recovery on the [direct] claim may reduce the potential
recovery on behalf of the corporation on the derivative claim.” Brickman v. Tyco Toys, Inc., 731
F. Supp. 101, 108-09 (S.D.N.Y. 1990).
Defendants argue that an actual conflict exists between Plaintiffs’ derivative and direct
claims here because the direct claims are premised on the Co-Owner Defendants’ alleged
withholding of the Plaintiffs’ salaries. Defs.’ Mem. at 17-18.16 Defendants’ argument enjoys some
facial validity, since Plaintiffs seek redress through these claims for money owed, but not paid, to
them personally. The Court is not convinced, however, that this fact actually renders Plaintiffs in
this particular case unable to “fairly and adequately represent the interests of shareholders or
members who are similarly situated in enforcing the right of the corporation or association.” Fed. R.
Civ. P. 23.1. Defendants have not addressed how the “actual conflict” analysis applies in the
context of a closely held corporation, but the Court notes that this case does not involve a typical
corporation with widely dispersed shareholders who exist in considerable separation from “the
corporation.” Instead, Ocinomled and 50/50 are closely held corporations, and the Co-Owner
Parties are their only shareholders. As a result, the two plaintiffs are the only shareholders “who are
similarly situated in enforcing the right[s]” of those corporations to redress for the Co-Owner
Defendants’ alleged misconduct. It is difficult to discern how Plaintiffs could not fairly represent
themselves.
Accordingly, the Court will not dismiss these, or any other, claims on the basis of a conflict.
Instead, the Court will address each of the direct claims on the merits.
16 The amended complaint refers to the wrongful withholding of “distributions.” AC ¶¶ 204, 209, 212, 216. In their
opening brief, Defendants’ argument proceeds on the assumption that Plaintiffs were alleging a failure to issue
dividends. Defs.’ Mem. at 18-19. In their opposition brief, Plaintiffs clarify that their direct claims do not allege a failure
to issue dividends, but rather a failure to pay salaries. Pls.’ Mem. at 23 n.8. The Court agrees with Plaintiffs that this is
clear from a reading of the amended complaint as a whole. See id.

35

1. Breach of the Duty of Loyalty
Defendants’ only argument with respect to this claim is that Plaintiffs were not entitled to
receive a salary. Defs.’ Reply Mem. at 1-3. More specifically, they contend that Plaintiffs have failed
to allege an entitlement to a salary because they have failed to plead any of the factors that qualify a
person as an “executive employee” under the Fair Labor Standards Act (FLSA). This argument
borders on the nonsensical, not least because the purpose of the “executive employee” designation
under the FLSA is not to determine eligibility for a salary. Instead, a person who qualifies as an
“executive employee” is exempt from the minimum wage and maximum hour requirements of the
FLSA. 29 U.S.C. § 213(a)(1). Indeed, Defendants’ argument is circular, because one of the elements
of the executive employee “test” that Defendants themselves cite is that “[t]he employee must be
compensated on a salary basis.” Defs.’ Reply Mem. at 2. A test that requires that the employee “be
compensated on a salary basis” cannot logically be used to determine whether that employee is
entitled to a salary.
In the amended complaint, Plaintiffs allege that each of the Co-Owner parties “received
regular salaries from Ocinomled,” AC ¶ 35, that Plaintiffs were initially paid $500 per week before
receiving a raise to $1500 per week, AC ¶ 36, and that the Co-Owner Defendants “unilaterally
elected to cut off Plaintiffs’ . . . compensation, without explanation.” AC ¶ 37. Defendants will
have an opportunity to establish on summary judgment or at trial that Plaintiffs had no entitlement
to a salary, but what Plaintiffs have alleged is sufficient at the pleading stage.
Defendants’ motion is denied as to Plaintiffs’ direct claim for breach of the duty of loyalty.
2. Breach of Fiduciary Duty
Defendants raise no arguments with respect to Plaintiffs’ direct claim for breach of fiduciary
duty other than the argument discussed immediately above. Therefore, Defendants’ motion is
denied as to that claim, as well.

36

3. Conversion
As explained earlier in this decision, “if the allegedly converted money is incapable of being
described or identified in the same manner as a specific chattel, it is not the proper subject of a
conversion action.” Cal Distrib., Inc., 2007 WL 54534, at *11 (quoting Interior by Mussa, 664 N.Y.S.2d
at 972). And “[t]he mere right to payment cannot be the basis for a cause of action alleging
conversion,” because “the essence of such a cause of action is the ‘unauthorized dominion over the
thing in question.’” Selinger, 860 N.Y.S.2d at 536 (App. Div. 2008) (quoting Fiorenti, 762 N.Y.S.2d at
403).
With respect to their direct conversion claim, Plaintiffs allege that “Defendants
inappropriately misappropriated cash and revenues by, among other things, intentionally
withholding Ocinomled distributions from Plaintiffs.” AC ¶ 212. To the extent that this claim
seeks relief for unpaid contributions, it asserts a mere right to payment rather than dominion over a
specific and identifiable fund. As a result, while Plaintiffs may seek relief for this allegedly wrongful
withholding of their salaries pursuant to their other claims, they may not do so in the form of a
conversion claim.
And to the extent that the claim seeks relief for misappropriation of Ocinomled’s funds
beyond the withholding of salaries, it is more appropriately viewed as a derivative, rather than a
direct claim. “New York does not have a clearly articulated test” for whether a claim is direct or
derivative, “but approaches the issue on a case by case basis depending on the nature of the
allegations.” Yudell v. Gilbert, 949 N.Y.S.2d 380, 383 (App. Div. 2012). In conducting this case-bycase analysis, New York courts have adopted the framework developed under Delaware law:
[A] court should look to the nature of the wrong and to whom the relief should
go. The stockholder’s claimed direct injury must be independent of any alleged
injury to the corporation. The stockholder must demonstrate that the duty
breached was owed to the stockholder and that he or she can prevail without
showing an injury to the corporation.
Id. at 384 (quoting Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1039 (Del. 2004)); see also
37

id. at 381 (“The Tooley test is consistent with New York law and has the added advantage of
providing clear and simple framework to determine whether a claim is direct or derivative.”); SFR
Holdings Ltd. v. Rice, 17 N.Y.S.3d 398, 398-99 (App. Div. 2015) (also applying the Tooley test)).
“Thus, under Tooley, a court should consider ‘(1) who suffered the alleged harm (the corporation or
the stockholders); and (2) who would receive the benefit of any recovery or other remedy (the
corporation or the stockholders individually).’” Yudell, 949 N.Y.S.2d at 384 (quoting Tooley, 845
A.2d at 1035).
Applying the Tooley test, it is clear that Plaintiffs’ alleged direct injury is not independent of
any injury to the corporation, since the harm done by the misappropriation of Ocinomled’s funds
was suffered by Ocinomled. Furthermore, any disgorgement of the allegedly misappropriated funds
would inure to the benefit of Ocinomled, and Plaintiffs would benefit only indirectly in their
capacities as shareholders.
Accordingly, Defendants’ motion is granted as to Plaintiffs’ direct claim for conversion.
Because this claim fails as a matter of law, rather than as a result of inadequate pleading, it will be
dismissed with prejudice.
4. Unjust Enrichment
As the Court explained in its analysis of Plaintiffs’ derivative claim for unjust enrichment,
such a claim differs from a conversion claim in that it does not require a specific and identifiable
fund. Instead, it requires a plaintiff to allege that “(1) the other party was enriched, (2) at that party’s
expense, and (3) that it is against equity and good conscience to permit the other party to retain what
is sought to be recovered.” Georgia Malone & Co., 973 N.E.2d at 746. As with their direct claim for
conversion, Plaintiffs allege that “Defendants misappropriated cash and revenues belonging to
Plaintiffs by, among other things, intentionally withholding Ocinomled’s distributions from
Plaintiffs.” AC ¶ 216. To the extent that Plaintiffs seek to recover for withheld distributions, they
may proceed on a claim of unjust enrichment. To the extent they seek to recover for other forms of
38

misappropriation, however, their claim is properly viewed as derivative for the reasons described
immediately above.
Therefore, Defendants’ motion is granted to the extent that Plaintiffs’ direct claim for unjust
enrichment seeks relief for conduct beyond the alleged withholding of contributions.
IV.

CONCLUSION
For the reasons above, Defendants’ motion to realign the parties is GRANTED. This relief

requires no action by the Clerk of Court at this time. If, in the future, the issue of complete diversity
arises in this action, the Court will consider Ocinomled and 50/50 to be plaintiffs for that purpose.
Defendants’ motion to dismiss the amended complaint is GRANTED IN PART and
DENIED IN PART:
Plaintiffs’ derivative claim for trademark infringement pursuant to 15 U.S.C. § 1114(1) is
dismissed in its entirety without prejudice.
Plaintiffs’ derivative claim for conversion is dismissed with prejudice only to the extent that
it is premised on the alleged misappropriation of the goodwill and value of the DELMONICO’S
Marks.
Plaintiffs’ derivative claim for an accounting is dismissed with prejudice as to Defendants
Five M, SH Realty, SH Restaurant, Delmonico’s Distribution, and Dennis Turcinovic.
Plaintiffs’ direct claim for conversion is dismissed in its entirety with prejudice.
Plaintiffs’ direct claim for unjust enrichment is dismissed with prejudice only to the extent
that it seeks relief for conduct beyond the alleged withholding of contributions.
The Clerk of Court is directed to terminate the motion pending at Dkt. No. 38.

SO ORDERED.
Dated: January 26, 2017
New York, New York

_____________________________________
_____________________
_ __ ___________
__
GREGORY H. WOODS
GREGORY H
G R
United States District Judge
39