Rapay v. Chernov et al

Filing 41

OPINION AND ORDER.....The motion to dismiss for lack of subject matter jurisdiction is denied. The motion to dismiss all claims against the individual defendants, as well as the breach of contract and fraud claims, is granted. The motion to dismiss the quasi-contract claims of unjust enrichment, quantum meruit, and promissory estoppel claims against GKA is denied. The motion to strike the request for punitive damages and attorneys fees is granted. (Signed by Judge Denise L. Cote on 3/6/2017) (gr)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------- X
:
EKATERINA RAPAY,
:
Plaintiff,
:
:
-v:
:
MICHAEL CHERNOV, GELSEY KIRKLAND,
:
GELSEY KIRKLAND ACADEMY OF CLASSICAL
:
BALLET INC., ANDRE TCHELISTCHEFF, NILAY:
SHAH, LEAH CAMPBELL, HARRIET TAMEN,
:
KATHERINE REILAND, and GABRIEL
:
BHARATLALL,
:
:
Defendants.
:
-------------------------------------- X

16cv4910(DLC)
OPINION AND ORDER

APPEARANCES:
For the Plaintiff:
Claudius O. Sokenu
James Lee
Shearman & Sterling LLP
599 Lexington Avenue
New York, New York 10022
For the Defendants:
Jeffrey M. Eilender
Vitali S. Rosenfeld
Schlam Stone & Dolan LLP
26 Broadway
New York, New York 10004
DENISE COTE, District Judge:
Plaintiff Ekaterina Rapay (“Rapay”), a Russian citizen,
brings this action premised on diversity jurisdiction against
the defendants Michael Chernov (“Chernov”), Gelsey Kirkland
(“Kirkland”) and their company, the Gelsey Kirkland Academy of
Classical Ballet Inc. (“GKA”) for breach of contract, fraud,

quantum meruit, unjust enrichment, and promissory estoppel.

The

defendants have moved to dismiss the First Amended Complaint
(“FAC”) pursuant to Fed. R. Civ. P. 12(b)(6) and 12(b)(1).

The

defendants also move to strike the request for punitive damages
and attorneys’ fees from the pleadings pursuant to Fed. R. Civ.
P. 12(f).

For the reasons set forth below, the defendants’

motion to strike is granted, and the motion to dismiss is
granted in part.
BACKGROUND
The following facts are drawn from the FAC and are
construed in favor of the plaintiff.

See Keiler v. Harlequin

Enters. Ltd., 751 F.3d 64, 68 (2d Cir. 2014).
Rapay is a professional ballet costume designer.

Chernov

and his wife Kirkland are the founders of GKA, a New York dance
education center.

In December 2011, Chernov and Kirkland orally

offered to employ Rapay as a costume and set designer for GKA’s
upcoming production of “The Nutcracker” at a “reasonable rate”
and reimburse all her expenses.

There was no written contract.

Rapay began working for GKA in January 2012, but the
parties continued to negotiate the terms and scope of her
employment through April 2012.

According to Rapay, GKA agreed

that she would design costumes and sets for “The Nutcracker” and
other productions in exchange for compensation at “a rate
2

commensurate with her experience.”

Rapay claims such

compensation would range from $50,000 to $75,000 per year.
Throughout 2012 and 2013, Rapay provided at least 51
separate costume design sketches and traveled on three separate
occasions to GKA’s offices in New York to oversee costume design
and construction.

During Rapay’s first trip to New York in

April 2012, Chernov took her to the law offices of Frenkel
Hershkowitz & Safran LLP (“Frenkel”) to help her obtain a work
permit.

A Frenkel representative described the documents

required to obtain an “O-1” work visa, which is a nonimmigrant
visa for certain individuals in the arts and other fields.
Chernov informed Rapay that once she assembled the required
documents, he would provide the employment information necessary
to complete her O-1 visa application.
In March 2013, during her final visit to New York, Rapay
informed Chernov that she had compiled the necessary documents.
Accordingly, on March 13, 2013, Chernov’s assistant sent Rapay
an email containing specific instructions on how to complete the
O-1 visa application (the “March 2013 email”).

The March 2013

email stated that Rapay would be employed as a full-time
“Costume Designer,” whose job included “designing, sewing and
creating various costumes for [GKA’s] upcoming Nutcracker”
production for “$25,000.”
3

Rapay contacted Chernov and demanded that he pay her
$50,000, not $25,000.

Chernov provided Rapay a “small payment”

and, according to the FAC, assured her “that the rest of her
compensation would be forthcoming and that they would sign a
written contract” on a subsequent visit in the fall of 2013.
On June 17, 2013, Chernov sent Rapay an email terminating
her employment (the “June 2013 email”).

In the email, Chernov

wrote “I need to clarify for you the reality of GKA’s situation
in moving forward,” and explained that GKA would not be using
Rapay’s designs “except for Arabian girls and Russian lead girl
for which [GKA] will credit you of course.”

He added that

Rapay’s designs “for the most part did not fall in with [GKA’s]
vision” and that “[t]his also means [GKA] will not be able to
process your work visa application.”

Chernov noted that he was

“sure that this will impact our friendship.”
GKA’s production of “The Nutcracker” commenced in December
2013.

According to Rapay, videos of the performance reveal that

GKA used not only the costumes for the Arabian girls and the
Russian lead girl, but also various other costumes designed by
Rapay.

Rapay sent Chernov a demand letter on January 31, 2014

seeking payment for her work for GKA.

Chernov never responded.

Rapay filed a complaint on June 24, 2016, seeking to
recover her unpaid compensation under several contract and
4

quasi-contract theories of liability, including breach of
contract, quantum meruit, unjust enrichment, and promissory
estoppel, as well as fraud.
August 2, 2016.

An amended complaint was filed on

The defendants filed the present motion to

dismiss pursuant to Rules 12(b)(6) and 12(b)(1) on August 17.
The motion became fully submitted on November 16.
DISCUSSION
When deciding a motion to dismiss, a court must “accept all
allegations in the complaint as true and draw all inferences in
the non-moving party’s favor.”

LaFaro v. N.Y. Cardiothoracic

Grp., PLLC, 570 F.3d 471, 475 (2d Cir. 2009) (citation omitted).
“To survive a motion to dismiss under Rule 12(b)(6), a complaint
must allege sufficient facts which, taken as true, state a
plausible claim for relief.”

Keiler, 751 F.3d at 68.

A claim

has facial plausibility when “the factual content” of the
complaint “allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.”
Tongue v. Sanofi, 816 F.3d 199, 209 (2d Cir. 2016) (citation
omitted).
I. Individual Liability of Chernov and Kirkland
Chernov and Kirkland contend that the contract and quasicontract claims alleged against them in their personal
capacities must be dismissed because the FAC does not allege any
5

personal wrongdoing by either Chernov or Kirkland.

It is well-

established under New York law that “[p]ersons may not be held
personally liable on contracts of their corporations, provided
they did not purport to bind themselves individually under such
contracts.”

Stern v. H. DiMarzo, Inc., 909 N.Y.S.2d 480, 480-81

(App. Div. 2010) (citation omitted).

Put differently, “[w]hen

an officer or director acts on behalf of his or her corporation,
he or she may not be held liable for inducing the corporation to
violate its contractual obligations unless his or her activity
involves separate tortious conduct or results in personal
profit.”

Id. at 481 (citation omitted).

The FAC does not include facts suggesting that Chernov and
Kirkland engaged in tortious conduct or intended to bind
themselves individually under the contract.1

Accordingly, the

breach of contract and quasi-contract claims against Chernov and
Kirkland are dismissed.
Rapay argues that Chernov and Kirkland benefitted
personally from GKA’s production of “The Nutcracker” through the
advancement of their careers and receipt of salary and benefits
from GKA.

This is insufficient to support a claim against these

The plaintiff does not seek to pierce the corporate veil and
the FAC does not allege facts sufficient to do so. See MAG
Portfolio Consultant, GMBH v. Merlin Biomed Grp. LLC, 268 F.3d
58, 63 (2d Cir. 2001).
6
1

individuals due to the alleged breach by their employer of its
contract with Rapay.
II. Breach of Contract
The defendants argue that the alleged contract is
unenforceable for two reasons.

First, the defendants contend

that it violates New York’s statute of frauds because the oral
contract was never reduced to writing even though Rapay’s
employment extended beyond one year.

Second, the defendants

allege that the contract is unenforceable for lack of
definiteness.
A. Statute of Frauds
New York’s statute of frauds renders void an agreement that
has not been reduced to writing if “[b]y its terms [it] is not
to be performed within one year from the making thereof.”
Gen. Obl. Law § 5-701(a)(1).

N.Y.

“New York courts generally

construe the statute of frauds narrowly, voiding only those oral
contracts which by their very terms have absolutely no
possibility in fact and law of full performance within one
year.”

Kroshnyi v. U.S. Pack Courier Servs., Inc., 771 F.3d 93,

110 (2d Cir. 2014) (citing D&N Boening, Inc. v. Kirsch
Beverages, Inc., 63 N.Y.2d 449, 454 (1984)).

“[W]herever an

agreement has been found to be susceptible of fulfillment within
that time, in whatever manner and however impractical, the New
7

York Court of Appeals has held the one-year provision of the
Statute to be inapplicable, a writing unnecessary, and the
agreement not barred.”

Id. (citation omitted).

New York law presumes that an employment agreement that
lacks a fixed duration is a “hiring at will, terminable at any
time by either party.”

Id. (citation omitted).

Such agreements

are “not covered by the statute of frauds, because they could
theoretically be terminated by either party within one year of
their making.”

Id.

The alleged oral agreement between Rapay and GKA is not
void under the statute of frauds.

Nothing in the alleged

contract required that Rapay’s employment extend beyond a year.
She was not required, for example, to continue working for GKA
up to and until the production of “The Nutcracker.”

She was

required to design costumes and sets -- a service which could
theoretically have been completed within the course of a year
and in advance of the ballet performances.
GKA contends that the parties contemplated that the work
would occur over the course of the 23 months preceding “The
Nutcracker” performance.

Even if this were the parties’

expectation, that is insufficient to void a contract.

It

remained possible that Rapay’s work could be fully performed
within a year or that her employment would be terminated.
8

B. Sufficiency of the Alleged Oral Contract
The defendants argue that Rapay’s breach of contract claim
should be dismissed because the alleged oral contract is too
indefinite to be enforceable.

Specifically, the defendants

contend that there was no meeting of the minds with respect to
the commencement date, the duration, and the salary.
“Under New York law, a binding contract can be formed
without the execution of a written agreement.”

Delaney v. Bank

of Am. Corp., 766 F.3d 163, 171 (2d Cir. 2014).

Nonetheless,

“the plaintiff must demonstrate that the terms of any agreement
are definite.”

Id.; see also Joseph Martin, Jr., Delicatessen,

Inc. v. Schumacher, 52 N.Y.2d 105, 109 (1981) (“[B]efore 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.”).
New York courts “ha[ve] not applied the definiteness
doctrine rigidly.”

166 Mamaroneck Ave. Corp. v. 151 E. Post Rd.

Corp., 78 N.Y.2d 88, 91 (1991).

Instead, they apply a standard

that is “necessarily flexible, varying for example with the
subject of the agreement, its complexity, the purpose for which
the contract was made, the circumstances under which it was
made, and the relation of the parties.”

Cobble Hill Nursing

Home, Inc. v. Henry & Warren Corp., 74 N.Y.2d 475, 482-83
9

(1989).

Accordingly, “[b]efore rejecting an agreement as

indefinite, a court must be satisfied that the agreement cannot
be rendered reasonably certain by reference to an extrinsic
standard that makes its meaning clear.”

Id. at 483.

1. Commencement Date and Duration
With respect to a start date, while some New York courts
have held that the commencement date constitutes an “essential
element[] of an effective employment contract,” Elite Tech. NY
Inc. v. Thomas, 894 N.Y.S.2d 420, 421 (App. Div. 2010) (citation
omitted), failure to specify a start date does not automatically
render a contract unenforceable.

So long as this term “can be

rendered certain and complete, by reference to something
certain, the court will fill in the gaps.”

Metro-Goldwyn-Mayer

v. Scheider, 40 N.Y.2d 1069, 1071 (1976) (citation omitted).
Similarly, although duration is considered an “essential term[]
of an employment contract,” Zaitsev v. Salomon Bros., Inc., 60
F.3d 1001, 1004 (2d Cir. 1995), “[t]he fact that [an] alleged
oral agreement may not have contained a specified time for
performance does not constitute a form of indefiniteness that
would, at th[e] pleadings stage, warrant dismissal on that
basis.”

Held v. Kaufman, 91 N.Y.2d 425, 432 (1998).

The alleged agreement between Rapay and GKA is not too
indefinite in terms of its commencement date or duration to be
10

unenforceable.

The agreement provided that Rapay was to perform

her costume and set design work “in connection with a number of
ballet productions, including ‘The Nutcracker.’”

This is

sufficiently definite to withstand a motion to dismiss.
2. Price
“As price is an essential ingredient of every contract for
the rendering of services, an agreement must be definite as to
compensation.”

Cooper Square Realty, Inc. v. A.R.S. Mgmt.,

Ltd., 581 N.Y.S.2d 50, 51 (App. Div. 1992).

That said, the

failure to fix a sum certain is not necessarily fatal to a
contract.

Under New York law, a price term is

not necessarily indefinite because the agreement fails
to specify a dollar figure, or leaves fixing the
amount for the future, or contains no computational
formula. Where at the time of agreement the parties
have manifested their intent to be bound, a price term
may be sufficiently definite if the amount can be
determined objectively without the need for new
expressions by the parties; a method for reducing
uncertainty to certainty might, for example, be found
within the agreement or ascertained by reference to an
extrinsic event, commercial practice or trade usage.
Cobble Hill, 74 N.Y.2d at 483.
“A custom or usage, if it is to be read into a contract to
ascertain the intention of the parties, must fix a definite
standard by proof establishing that it was general, uniform and
unvarying.”

Belasco Theatre Corp. v. Jelin Prods., Inc., 59

N.Y.S.2d 42, 45 (App. Div. 1945).
11

In other words, “custom and

usage evidence must establish that the omitted term is ‘fixed
and invariable’ in the industry in question.” Hutner v. Greene,
734 F.2d 896, 900 (2d Cir. 1984) (citation omitted).

The custom

must be “general and not personal, and known to the parties.”
Belasco, 59 N.Y.S.2d at 46.

In Belasco, for example, the court

found a price term for theater bookings insufficiently definite
where it merely established “a range with minimum and maximum
figures within which the parties could negotiate.”

Id. at 45.

Here, the FAC alleges that the defendants agreed to
compensate Rapay “at a rate commensurate with her experience.”
The FAC further alleges that “Chernov, by virtue of his
experience in the ballet industry and his extensive
conversations with Rapay regarding her work, was aware of the
value of Rapay’s services and the market rate for such
services.”

Finally, the FAC states that GKA agreed to

compensate Rapay “in the range of $50,000 to $75,000, a rate
commensurate with her experience,” and that “a designer of
Rapay’s experience and skills would typically receive a salary
in excess of $50,000 per year.”
These allegations are insufficient to allege a meeting of
the minds with respect to price.

Like the indefinite price term

in Belasco, Rapay’s alleged price term merely establishes a
range -- between $50,000 and $75,000 -- within which the parties
12

could negotiate.

Moreover, Rapay’s alleged price term is not

“fixed and invariable” within the ballet industry, as it
necessarily turns on the experience and skills of the individual
designer.

Thus, Rapay’s contract claim must be dismissed due to

the indefinite price term.
III. Quantum Meruit and Unjust Enrichment
The defendants seek to dismiss Rapay’s quasi-contract
claims as inadequately plead.

A plaintiff may recover for

unjust enrichment in New York after establishing “that the
defendant was enriched at the plaintiff’s expense and that
equity and good conscience require the plaintiff to recover the
enrichment from the defendant.”

Bigio v. Coca-Cola Co., 675

F.3d 163, 176-77 (2d Cir. 2012) (citation omitted).

“The

essential inquiry in any action for unjust enrichment is whether
it is against equity and good conscience to permit the defendant
to retain what is sought to be recovered.”

Mandarin Trading

Ltd. v. Wildenstein, 16 N.Y.3d 173, 182 (2011) (citation
omitted).
Similarly, to recover in quantum meruit in New York, a
plaintiff 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.”
13

Leibowitz v. Cornell Univ., 584 F.3d 487, 509 (2d Cir. 2009)
(citation omitted).

Under New York law, quantum meruit and

unjust enrichment may be jointly analyzed as a single quasicontract claim.

Id. at 509 n.9.

Rapay’s quasi-contract claims of unjust enrichment and
quantum meruit against GKA are adequately pled.

The FAC alleges

that Rapay agreed to design costumes and sets for GKA in
exchange for compensation; that GKA utilized several of Rapay’s
costumes in its production of “The Nutcracker”; that Rapay was
not paid adequately for her set and costume design services; and
that Rapay expressed an expectation of compensation, as
evidenced by her repeated inquiries to Chernov regarding the
status of her payment.

Thus, Rapay’s allegations are sufficient

to support her quasi-contract claim under both a theory of
unjust enrichment and quantum meruit.
IV. Promissory Estoppel
The defendants move to dismiss the claim for promissory
estoppel.

“To demonstrate promissory estoppel under New York

law, a party must show reasonable and detrimental reliance upon
a clear and unambiguous promise.”

Sec. Plans, Inc. v. CUNA Mut.

Ins. Soc., 769 F.3d 807, 816 (2d Cir. 2014).
Rapay’s promissory estoppel claim against GKA is adequately
pled.

The FAC alleges that Chernov, acting as a representative
14

of GKA, assured Rapay that she would be paid for her costume
design work.

The FAC further alleges that Rapay reasonably

relied upon Chernov’s assurances when she expended substantial
resources in designing sets and costumes for GKA, and was
damaged when GKA did not pay her as promised.

Accordingly, the

defendants’ motion to dismiss the promissory estoppel claim
against GKA is denied.
To the extent, however, that the plaintiff seeks to bring
this claim against the individual defendants, it is dismissed.
The FAC describes an agreement by GKA to pay her for work to be
performed for GKA.

There is no basis for a promissory estoppel

claim against any other defendant.
The defendants argue that the promissory estoppel claim
should be dismissed as duplicative.

They cite Celle v. Barclays

Bank P.L.C., 851 N.Y.S.2d 500, 501 (App. Div. 2008), for the
proposition that “[i]n the absence of a duty independent of an
agreement, a promissory estoppel claim is duplicative of a
breach of contract claim,” even if the contract claim is found
to be defective.

Celle is inapposite.

The court in Celle found

that there was a valid contract between the parties that
preempted the plaintiff’s promissory estoppel claim.

Id.

Here,

by contrast, there was no formal contract between Rapay and GKA;
accordingly, the promissory estoppel claim is not duplicative.
15

V. Fraud
The defendants argue that Rapay’s fraud claim should be
dismissed as duplicative of her breach of contract claim and
because it fails to satisfy the heightened pleading requirements
set forth in Fed. R Civ. P. 9(b).
“Under New York law, fraud requires proof of (1) a material
misrepresentation or omission of a fact, (2) knowledge of that
fact’s falsity, (3) an intent to induce reliance, (4)
justifiable reliance by the plaintiff, and (5) damages.”
Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Secs., LLC, 797
F.3d 160, 170 (2d Cir. 2015).

To withstand a Rule 12(b)(6)

challenge in federal court, the plaintiff must “assert facts
that plausibly support the inference of fraud.”

Id. (citation

omitted).
In conjunction with the facial plausibility standard for
Rule 12(b)(6), a plaintiff must also satisfy the heightened
pleading requirements set forth in Rule 9(b).2

To satisfy these

requirements, the complaint must: (1) detail the events giving
rise to the fraud, such as the statement or omission that is
alleged to be fraudulent, the identity of the speaker, the

Rule 9(b), Fed. R. Civ. P., provides: “In alleging fraud or
mistake, a party must state with particularity the circumstances
constituting fraud or mistake. Malice, intent, knowledge, and
other conditions of a person’s mind may be alleged generally.”
16
2

location of the fraud, and the reason the statement is
fraudulent; and (2) allege facts “that give rise to a strong
inference of fraudulent intent.”

Loreley Fin. (Jersey) No. 3

Ltd., 797 F.3d at 171 (citation omitted).

An inference of

fraudulent intent is “strong” if it is “cogent and at least as
compelling as any opposing inference one could draw from the
facts alleged.”

Id. at 177 (citation omitted).

In determining

whether this “strength-of-inference requirement” is met, courts
must “consider the complaint in its entirety and take into
account plausible opposing inferences.”

Id. (citation omitted).

At the pleading stage, a fraud plaintiff may establish a “strong
inference” of scienter “by alleging facts that constitute strong
circumstantial evidence of conscious misbehavior or
recklessness.”

Id. (citation omitted).

[W]here a fraud claim arises out of the same facts as
plaintiff’s breach of contract claim, with the
addition only of an allegation that defendant never
intended to perform the precise promises spelled out
in the contract between the parties, the fraud claim
is redundant and plaintiff’s sole remedy is for breach
of contract.
Telecom Int’l Am., Ltd. v. AT&T Corp., 280 F.3d 175, 196 (2d
Cir. 2001) (citation omitted).

In other words, “simply dressing

up a breach of contract claim by further alleging that the
promisor had no intention, at the time of the contract’s making,
to perform its obligations thereunder, is insufficient to state
17

an independent tort claim.”

Id. (citation omitted).

Thus, in

order to state a claim for fraud under New York law that is
separate from a breach of contract claim, a plaintiff must
either:
(i) demonstrate a legal duty separate from the duty to
perform under the contract; or (ii) demonstrate a
fraudulent misrepresentation collateral or extraneous
to the contract; or (iii) seek special damages that
are caused by the misrepresentation and unrecoverable
as contract damages.
Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98
F.3d 13, 20 (2d Cir. 1996) (citation omitted).
The FAC fails to plead fraud with sufficient particularity
to survive Rule 9(b)’s pleading requirements.

The FAC alleges

that “[d]uring Rapay’s employment, without intending to make
good on his promise, Chernov repeatedly assured Rapay that she
would be paid her wages for the work that she did for GKA.”
First, Rapay does not identify any fraudulent representations
attributable to Kirkland; accordingly, the fraud claim against
her must be dismissed.

As for Chernov, the facts asserted in

the FAC fail to raise a strong inference of scienter.

The FAC

fails to plead that the parties ever reached an agreement on how
much GKA would pay Rapay.

Moreover, Rapay does not identify

with sufficient specificity any alleged misrepresentation or
specify where and when these allegedly fraudulent statements
were made; just that they were made “repeatedly.”
18

Accordingly,

Rapay’s fraud claim is dismissed for failing to satisfy the
heightened pleading requirements of Rule 9(b).
Rapay argues that under New York law, an employer’s
knowingly false promise to an employee, made during the duration
of the employment and intended to induce that employee to
abandon other employment opportunities, is actionable as fraud.
This argument does not cure the failure to meet the Rule 9(b)
pleading standard.
inapposite.

Moreover, the cases Rapay cites are

Rogers v. Blacksmith Brands, Inc., 11cv1940, 2011

WL 6293764 (S.D.N.Y. Dec. 13, 2011), and Hyman v. International
Business Machines Corp., 98cv1371, 2000 WL 1538161 (S.D.N.Y.
Oct. 17, 2000) concern misrepresentations made prior to the
commencement of an employment contract in order to induce the
plaintiff to enter into a contract.

See N.Y. Univ. v. Cont’l

Ins. Co., 87 N.Y.2d 308, 316 (1995) (recognizing that a party
may be liable in tort “[w]here a party has fraudulently induced
the plaintiff to enter into a contract”).

The fraudulent

misrepresentations in Rogers and Hyman were therefore collateral
to the employment contract, and did not concern either party’s
obligations under a contract.
Here, by contrast, the fraudulent misrepresentations were
allegedly about the very terms of the employment relationship.
GKA’s promise to pay Rapay amounts to nothing more than a party
19

indicating its intent to pay for work performed.

Such

allegations are insufficient to support a claim of fraud under
New York law.

Finally, the allegation that GKA owes Rapay more

for her work than it has already paid her is addressed through
the plaintiff’s quasi-contract and promissory estoppel claims.
VI. Statute of Limitations
The defendants assert that the entire complaint must be
dismissed as time-barred.

New York law provides that “[w]hen a

nonresident sues on a cause of action accruing outside New York,
CPLR 2023 requires the cause of action to be timely under the
limitations periods of both New York and the jurisdiction where
the cause of action accrued.”
93 N.Y.2d 525, 528 (1999).

Glob. Fin. Corp. v. Triarc Corp.,

“When an alleged injury is purely

economic, the place of injury usually is where the plaintiff
resides and sustains the economic impact of the loss.”
529.

Id. at

Rapay is a noncitizen whose cause of action accrued while

she was residing in St. Petersburg, Russia.

Accordingly, the

Section 202 states:
An action based upon a cause of action accruing
without the state cannot be commenced after the
expiration of the time limited by the laws of either
the state or the place without the state where the
cause of action accrued, except that where the cause
of action accrued in favor of a resident of the state
the time limited by the laws of the state shall apply.
N.Y. C.P.L.R. § 202.
3

20

shorter of New York or Russia’s statute of limitations governs
her claims.
The New York statute of limitations for Rapay’s claims
against GKA for quantum meruit and promissory estoppel is six
years.

See N.Y. C.P.L.R. § 213.4

The Russian statute of

limitations varies based on what type of relationship Rapay had
with GKA.

According to the defendants’ expert, the Labor Code

of the Russian Federation (the “Labor Code”) applies when “there
is no formal written employment agreement, but the relationship
between the parties is deemed to be an employment relationship.”
The Labor Code provides for a three-month limitations period and
is said to govern “[c]laims by an employee against an employer,
including those for compensation such as unpaid salary,” as well
as “individual labor dispute[s].”

By contrast, the Civil Code

of the Russian Federation (the “Civil Code”) governs nonemployment relationships that arise from “a contract for
rendering services or performing works.”

The limitations period

for service contracts is three years, commencing on the date
when a person discovers that his or her rights have been

Section 213 provides that “an action upon a contractual
obligation or liability, express or implied,” must be commenced
within six years. N.Y. C.P.L.R. § 213(2). See also IMS Eng’rsArchitects, P.C. v. State, 858 N.Y.S.2d 486, 489 n.2 (App. Div.
2008) (noting that six-year statute of limitations applies to
causes of action in quasi-contract).
21
4

violated.
Rapay does not dispute the defense expert’s credentials or
the substance of his affidavit.

Rather, Rapay argues that her

relationship with GKA constituted a service contract -- not an
employment relationship -- as those terms are understood within
the Russian Labor and Civil Codes.
While the FAC occasionally refers to Rapay’s relationship
with GKA as one of employment, the nature of the relationship
between Rapay and GKA is more properly construed as a service
contract between the entity and a consultant.

Accordingly, if

the Russian statute of limitations applies, it imposes a threeyear statute of limitations.
Next, the parties dispute the date upon which Rapay’s cause
of action accrued.

This lawsuit was filed on June 24, 2016.

The limitations period under the Russian Civil Code commences on
the date upon which a person discovers that her rights have been
violated.
Rapay’s claim is timely.

Until “The Nutcracker” was

staged, Rapay could not have discovered the extent to which GKA
would use her work and therefore the amount she believed she was
owed.
The defendants contend that the limitations period began on
June 17, 2013, when Chernov sent Rapay an email terminating her
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employment.

But, Chernov’s June 2013 email did not describe the

extent to which GKA would rely on Rapay’s work.

Rather, the

email informed Rapay that GKA would be using at least some of
Rapay’s designs, “for which [GKA] w[ould] credit [Rapay] of
course.”

While the email also stated that GKA would “not be

able to process [Rapay’s] work visa application,” it was not
unreasonable for Rapay to believe that she would still receive
appropriate compensation to the extent GKA chose to use her
designs.
VII. Punitive Damages and Attorneys’ Fees
The plaintiff seeks to recover punitive damages as well as
attorneys’ fees and costs as an element of damages under her
contract and quasi-contract claims.

The defendants’ motion to

strike these claims for relief is granted.
The standard for imposing punitive damages under New York
law is “strict.”
511 (2013).

Marinaccio v. Town of Clarence, 20 N.Y.3d 506,

“[P]unitive damages will be awarded only in

exceptional cases,” where the defendant’s conduct manifests
“spite or malice, or a fraudulent or evil motive . . . or such a
conscious and deliberate disregard of the interests of others
that the conduct may be called wilful or wanton.”

Id. (citation

omitted); see also Ross v. Louise Wise Servs., Inc., 8 N.Y.3d
478, 489 (2007) (“Punitive damages are permitted when the
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defendant’s wrongdoing is not simply intentional but evince[s] a
high degree of moral turpitude and demonstrate[s] such a wanton
dishonesty as to imply a criminal indifference to civil
obligations.” (citation omitted)).
It is well-established under New York law that “[p]unitive
damages are not recoverable for an ordinary breach of contract
as their purpose is not to remedy private wrongs but to
vindicate public rights.”

Rocanova v. Equitable Life Assurance

Soc’y of the U.S., 83 N.Y.2d 603, 613 (1994).

Punitive damages

are recoverable only “when the breach also involved a
particularly egregious fraud that ‘was aimed at the public
generally.’”

TVT Records v. Island Def Jam Music Grp., 412 F.3d

82, 94 (2d Cir. 2005) (citation omitted).

Punitive damages are

similarly unavailable for unjust enrichment and other quasicontract claims.

See Rosenberg, Minc & Armstrong v. Mallilo &

Grossman, 833 N.Y.S.2d 485, 486 (App. Div. 2007) (finding it
proper to “decline[] to instruct the jury that punitive damages
may be awarded for unjust enrichment” because “such a cause of
action effects disgorgement without regard to moral
culpability”).
Under the American Rule, “attorneys’ fees are not
ordinarily recoverable in the absence of a statute or
enforceable contract providing therefor.”
24

U.S. Fid. & Guar. Co.

v. Braspetro Oil Servs. Co., 369 F.3d 34, 74 (2d Cir. 2004)
(citation omitted).

New York follows the American Rule.

See

Mount Vernon City Sch. Dist. v. Nova Cas. Co., 19 N.Y.3d 28, 39
(2012).
VIII. Subject Matter Jurisdiction
The defendants also seek to dismiss the complaint for lack
of subject matter jurisdiction pursuant to Rule 12(b)(1) for the
plaintiff’s failure to plead a claim for damages in excess of
$75,000.
Determining the existence of subject matter
jurisdiction is a threshold inquiry and a claim is
properly dismissed for lack of subject matter
jurisdiction under Rule 12(b)(1) when the district
court lacks the statutory or constitutional power to
adjudicate it.
Morrison v. Nat'l Austl. Bank Ltd., 547 F.3d 167, 170 (2d Cir.
2008) (citation omitted).
The party invoking the federal court’s jurisdiction bears
the burden of showing a “reasonable probability” that the
threshold amount in controversy for diversity jurisdiction is
satisfied.

Colavito v. N.Y. Organ Donor Network, Inc., 438 F.3d

214, 221 (2d Cir. 2006) (citation omitted).

“This burden is

hardly onerous, however, for [courts] recognize a rebuttable
presumption that the face of the complaint is a good faith
representation of the actual amount in controversy.”

Scherer v.

Equitable Life Assurance Soc’y of the U.S., 347 F.3d 394, 397
25

(2d Cir. 2003) (citation omitted).

“To overcome the face-of-

the-complaint presumption, the party opposing jurisdiction must
show to a legal certainty that the amount recoverable does not
meet the jurisdictional threshold.”

Id. (citation omitted).

If

the right of recovery is uncertain, the doubt should be resolved
in favor of the subjective good faith of the plaintiff.

Id.

(citation omitted).
These is no dispute that jurisdiction based on diversity of
citizenship exists in this case.

Defendant GKA is a New York

company, while individual defendants Chernov and Kirkland are
both United States citizens residing in New York.

The plaintiff

is a Russian citizen residing in St. Petersburg.
With respect to the amount in controversy, Rapay alleges
that a rate commensurate with her costume design experience
would have been approximately $50,000 per year.

Because Rapay

worked for GKA for a year and a half, she claims to be entitled
to at least $75,000.

The defendants have not shown to a legal

certainty that Rapay is not entitled to recover that amount or
more.
CONCLUSION
The motion to dismiss for lack of subject matter
jurisdiction is denied.

The motion to dismiss all claims

against the individual defendants, as well as the breach of
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contract and fraud claims, is granted.

The motion to dismiss

the quasi-contract claims of unjust enrichment, quantum meruit,
and promissory estoppel claims against GKA is denied.

The

motion to strike the request for punitive damages and attorneys’
fees is granted.
Dated:

New York, New York
March 6, 2017
____________________________
DENISE COTE
United States District Judge

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