TheECheck.com, LLC v. NEMC Financial Services Group Inc. et al

Filing 42

MEMORANDUM AND ORDER. ECheck's motions are GRANTED solely as to liability for its Lanham Act and breach of contract claims against NEMC. They are denied in all other respects. The Clerk is directed to terminate the motions. (Docket #29, 37.) The re will be an inquest as to damages on July 17, 2017 at 2:30 p.m. SO ORDERED. Granting in part and denying in part 37 Motion for Default Judgment; Granting in part and denying in part 29 Motion for Default Judgment. (Signed by Judge P. Kevin Castel on 6/16/2017) (rjm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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THEECHECK.COM, LLC,
Plaintiff,
-against-

16-cv-8722 (PKC)
MEMORANDUM
AND ORDER

NEMC FINANCIAL SERVICES GROUP INC.,
CYBERBOX TECHNOLOGY, INC.,
ELLINGTON PICHARDO, PRESLEY
MARTINEZ and OJAY MARTINEZ-GIL,
Defendants.
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CASTEL, U.S.D.J.
Under Rule 55(a), Fed. R. Civ. P, a party defaults when it “has failed to plead or
otherwise defend” against a judgment for affirmative relief. “It is an ancient common law
axiom that a defendant who defaults thereby admits all well-pleaded factual allegations
contained in the complaint. However, it is also true that a district court need not agree that the
alleged facts constitute a valid cause of action.” City of N.Y. v. Mickalis Pawn Shop, LLC, 645
F.3d 114, 137 (2d Cir. 2011) (internal citation and quotation marks omitted). “[P]rior to entering
default judgment, a district court is ‘required to determine whether the [plaintiff’s] allegations
establish [the defendant’s] liability as a matter of law.” Id. (alterations in original) (quoting
Finkel v. Romanowicz, 577 F.3d 79, 84 (2d Cir. 2009)). “Accordingly, a court must consider
whether the complaint alleges enough facts to state a claim to relief that is plausible on its face,
and find it lacking where the complaint tenders naked assertions devoid of further factual
enhancement.” Belizaire v. RAV Investigative & Sec. Servs. Ltd., 61 F. Supp. 3d 336, 344

(S.D.N.Y. 2014) (Oetken, J.) (citing Ashcroft v. Iqbal, 556 U.S. 662 (2009); Bell Atlantic Corp.
v. Twombly, 550 U.S. 544, 570 (2007)).
Plaintiff TheECheck.com, LLC (“ECheck”) has filed two motions for entry of
default judgment. The first motion is made against the corporate defendants, NEMC Financial
Services Group Inc. (“NEMC”) and Cyberbox Technology, Inc. (“Cyberbox”). (Docket # 29.)
The second motion is made against two of the three individual defendants, Ellington Pichardo
and Ojay Martinez-Gil. (Docket # 37.) ECheck has filed affidavits of service as to these
defendants, and the Clerk has issued certificates of default against them. (Docket # 19-20, 2425, 28, 35-36.)
The Complaint includes one claim of false advertising under the Lanham Act and
six claims under New York common law. Subject matter jurisdiction is premised on federal
question jurisdiction over the Lanham Act claim. (See Docket #16 (letter from ECheck
disclaiming allegation of diversity jurisdiction); Compl’t ¶ 12 (asserting federal question
jurisdiction).)
For the reasons that will be explained, ECheck’s motion for entry of default
judgment is granted solely against NEMC as to liability for ECheck’s claim under the Lanham
Act and its breach of contract claim. It is denied in all other respects.
BACKGROUND.
According to the Complaint, “Defendants own, operate and/or control” businesses
that compete with ECheck, including NEMC and Cyberbox. (Compl’t ¶ 2.) ECheck alleges that
in April 2012, Pichardo executed an agreement with ECheck on behalf of NEMC, which
required NEMC to pay $100,000 to ECheck. (Compl’t ¶¶ 46-47.) It alleges that NEMC stopped
making its required payments, and still owes $60,000 to ECheck. (Compl’t ¶¶ 48-49.)

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Allegedly, the undifferentiated “Defendants” then launched “a smear campaign”
to steer business away from ECheck and toward NEMC and non-party World Credit Express.
(Compl’t ¶ 43.) The Complaint alleges, with no supporting allegation, that defendant NEMC is
the alter ego of the three individual defendants. (Compl’t ¶ 11.)
ECheck’s claims principally involve a negative comment left on website called
Ripoff Report, which apparently publishes consumer reviews. ECheck alleges that defendants
“commenced and orchestrated a systematic pattern of online harassment and disparagement”
based on this negative review. (Compl’t ¶¶ 4, 27 & Ex. A.) On May 20, 2013, a reviewer using
the name “Nemc – New York New York” posted negative comments about ECheck to the Ripoff
Report. (Compl’t Ex. A.) The review states in full:
Carlos Santini and Andre Rosa where [sic] always available and
everything was no issue until we started putting business to them.
First issue was that they were having an issue with one of their
accounts and advised us to continue to processing. I want to clear
up that what we did with them was check processing not credit card
processing. Long story short according to them the accounts were
frozen and I would receive my funds as soon as bank released them
which would be a couple of months. Here I am over a year out and
I have not been able to get a concrete answer from any one of these
ripoff artists who once again were always available. Banks do not
hold funds for this long. I honestly don’t know who they are trying
to BS.. Also if you guys think you can intimidate people cause
“zeus” was accused of murder.. I could careless.. [sic] Pay up and
stop the bulls**t
(Compl’t Ex. A.)
Ripoff Report posted a rebuttal from “Jesus aka Zeus Vega / TheECheck.com / 1855-403-3855,” which asserted that the company was “completely compliant with all legal
governances, policies and procedures in the merchant processing arena,” with “unprecedented”
customer service. (Compl’t Ex. A.) An author identified as “Nemc” responded, stating that,
“This response by Jesus is like a taunt.” (Compl’t Ex. A.) The “Nemc” response then described
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three telephone calls to TheECheck.com, and being placed on hold for more than 10 minutes
each time without receiving an answer. (Compl’t Ex. A.) The Complaint alleges, upon
information and belief, that “Defendants” published these comments “to hundreds of third
parties,” including those doing business with ECheck. (Compl’t ¶ 31.)
On the basis of these “Nemc” posts to Ripoff Report, ECheck brings claims of 1.)
false advertising under the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), 2.) trade libel and
commercial disparagement, 3.) common law unfair competition, 4.) tortious interference, and 5.)
breach of non-solicitation agreement. (Compl’t ¶¶ 55-80, 88-90.) It also alleges breach of
contract and unjust enrichment based on NEMC’s failure to pay $60,000 allegedly owed to
ECheck. (Compl’t ¶¶ 81-90.)
DISCUSSION.
I.

ECheck’s Motion Is Denied as to Any Individual Defendant.
As to the individual defendants, the Complaint engages in impermissible group

pleading, and does not allege facts to show that the corporate defendants are the alter egos of the
individual defendants. Moreover, its allegations against the individual defendants are conclusory
and fail to allege specific conduct that supports a claim for relief against them.
First, the Complaint engages in impermissible group pleading. “Although Fed. R.
Civ. P. 8 does not demand that a complaint be a model of clarity or exhaustively present the facts
alleged, it requires, at a minimum, that a complaint give each defendant ‘fair notice of what the
plaintiff’s claim is and the ground upon which it rests.’” Atuahene v. City of Hartford, 10 Fed.
Appx. 33, 34 (2d Cir. 2001) (summary order) (quoting Ferro v. Ry. Express Agency, Inc., 296
F.2d 847, 851 (2d Cir. 1961)). A complaint fails to give fair notice when it “lump[s] all the
defendants together in each claim and provid[es] no factual basis to distinguish their

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conduct . . . .” Id. ECheck’s allegations generally attribute misconduct to the “Defendants”
collectively, and do not differentiate between the five defendants. (See, e.g., Compl’t ¶ 11
(“Defendants acted in concert or individually in a covert scheme and/or conspiracy to harass and
defame Plaintiff.”); Compl’t ¶ 26 (“Defendants have posted taunting material and defamatory
statements . . . .”); Compl’t ¶ 43 (“Defendants began a smear campaign intended to drive
Plaintiff out of business.”); Compl’t ¶ 53 (alleging that “Defendants” published false and
misleading statements); Compl’t ¶ 86 (“Defendants have materially breached the parties’
agreement . . . .”).) For key factual allegations, the Complaint attributes conduct to defendants
“Pichardo, Presley and/or Ojay,” with the use of the phrase “and/or” impliedly acknowledging
that one or more defendant may have played no role in the alleged activity. (Compl’t ¶¶ 11
(alleging that NEMC was the alter-ego of “Pichardo, Presley and/or Ojay”); 26 (alleging that
“Pichardo, Presley and/or Ojay” authored negative statements about ECheck); 33 (alleging that
“Pichardo, Presley and/or Ojay” acted on behalf of NEMC)). Because the Complaint does not
adequately allege facts about the conduct of any individual defendant, its claims against them are
dismissed.
Second, the Complaint has made only a conclusory assertion that the corporate
defendants are alter egos of the individual defendants. (Compl’t ¶ 11.) To allege liability on an
alter ego theory, the complaint must include “specific factual allegations demonstrating fraud or
other corporate misconduct or that the individuals in question conduct business in their personal
rather than corporate capacity.” Feigen v. Advance Capital Mgmt. Corp., 150 A.D.2d 281, 282
(1st Dep’t 1989); see also Port Chester Elec. Const. Co. v. Atlas, 40 N.Y.2d 652, 657 (1976) (in
ascertaining corporate alter ego, “[t]he determinative factor is whether the corporation is a
‘dummy’” for carrying out personal rather than corporate ends) (quotation marks omitted);

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Semigran Enterprises, Inc. v. Noren, 285 A.D.2d 409, 410 (1st Dep’t 2001) (dismissing claim
premised on alter ego status because the complaint included “no particularized allegations” in
support). The Complaint alleges that because “Pichardo, Presley and/or Ojay . . . dominated,
controlled and supervised” NEMC, the company was their alter ego. (Compl’t ¶ 11.) This is
insufficient to allege alter ego liability and the piercing of NEMC’s corporate veil. See, e.g.,
Cornwall Mgt. Ltd. v. Kambolin, 140 A.D.3d 507, 507 (1st Dep’t 2016) (bare allegations that
defendants “controlled and dominated” corporation “are insufficient to state a cause of action for
alter ego liability.”).
Because the Complaint has failed to allege personal liability on the part of
defendants Pichardo, Presley or Ojay, ECheck’s motion for entry of default judgment against
defendants Pichardo and Ojay is denied. (Docket # 37.)
II.

The Motion for Entry of Default Judgment Is Denied as to Defendant Cyberbox.
The Complaint similarly fails to allege facts in support of any claim against

defendant Cyberbox. Cyberbox is alleged to be a Florida corporation with its principal place of
business in New York. (Compl’t ¶ 7.) The Complaint alleges that the three individual
defendants own Cyberbox, a telemarketing and payment-processing business. (Compl’t ¶ 24.) It
alleges that Cyberbox and ECheck entered into an “Independent Sales Office Agreement” on
April 2, 2012, with Pichardo executing the agreement on Cyberbox’s behalf. (Compl’t ¶ 39.)
The agreement included a non-competition clause. (Compl’t ¶ 41.)
The Complaint makes no additional allegations specific to Cyberbox. It does not
link Cyberbox to the “Nemc” posting on Ripoff Report, or allege conduct specifically
attributable to Cyberbox that breached its agreement with ECheck. To the extent that Cyberbox

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is lumped into the numerous allegations directed to “Defendants” as a whole, those allegations
fail to satisfy Rule 8, for the reasons previously explained.
ECheck’s motion for entry of default judgment is therefore denied as to
Cyberbox.
III.

ECheck’s Motion Is Granted Solely As to ECheck’s Lanham Act and Breach of
Contract Claims against NEMC.
1. False Advertising under the Lanham Act.
In order to state a claim for relief that is plausible on its face, a plaintiff must

allege “only enough facts” to “nudge[]” its claims “across the line from conceivable to
plausible . . . .” Twombly, 550 U.S. at 570. “Factual allegations must be enough to raise a right
to relief above the speculative level, on the assumption that all the allegations in the complaint
are true (even if doubtful in fact).” Id. at 555 (internal citations omitted).
Section 43(a) of the Lanham Act states in relevant part:
Any person who . . . in connection with any goods or services . . .
uses in commerce any . . . false or misleading description of fact, or
false or misleading representation of fact, which . . . in commercial
advertising or promotion, misrepresents the nature, characteristics,
qualities, or geographic origin of . . . another person’s goods,
services, or commercial activities . . . shall be liable in a civil action
by any person who believes that he or she is or is likely to be
damaged by such act.
15 U.S.C. § 1125(a)(1)(B). “[A] typical false-advertising case will implicate only the Act’s goal
of ‘protect[ing] persons engaged in [commerce within the control of Congress] against unfair
competition.’” Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1389
(2014) (alterations in original; quoting 15 U.S.C. § 1127). A communication is “commercial
advertising or promotion” when it is 1.) commercial speech, 2.) made for the purpose of
influencing consumers to buy goods or services, and 3.) disseminated to the relevant purchasing

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public. Boule v. Hutton, 328 F.3d 84, 90-91 (2d Cir. 2003). Communications need not be as
formal as “those made as part of a classic advertising campaign . . . .” Id. at 90. False and
derogatory statements published on a public internet forum may constitute false advertising. See
Enigma Software Group USA, LLC v. Bleeping Computer LLC, 194 F. Supp. 3d 263, 295, 29798 (S.D.N.Y. 2016) (Engelmayer, J.). 1
Accepting the Complaint’s allegations as true, “Nemc” posted false and
derogatory comments about ECheck for the purpose of influencing consumers not to do business
with ECheck. (Compl’t ¶¶ 27, 30 & Ex A.) Because a defaulting defendant admits all wellpleaded factual allegations against it, defendant NEMC has admitted that it is the “Nemc” that
posted the allegedly false comments about ECheck on Ripoff Report. See generally City of New
York, 645 F.3d at 137. The Complaint includes facts sufficient to plausibly allege that NEMC
violated the Lanham Act’s prohibition against false advertising.
Plaintiff’s motion for entry of default judgment against NEMC is therefore
granted as to liability for the Lanham Act claim.
2. Breach of Contract.
Count Five alleges that NEMC and ECheck entered into a Merchant Services
Agreement on or about April 20, 2012. (Compl’t ¶ 46 and Ex. C.) Under the agreement,
“NEMC became indebted to Plaintiff for over $100,000 at various times for Plaintiff’s services
and or fees set forth therein.” (Compl’t ¶ 47.) The Complaint alleges that “Defendants thereafter
defaulted in the payment obligations due on and after July 30, 2012.” (Compl’t ¶ 48.) ECheck
alleges that it is owed $60,000 in payment under the agreement. (Compl’t ¶ 49.)

False advertising claims under the Lanham Act are governed by a six-year limitations period. See Conopco, Inc. v.
Campbell Soup Co., 95 F.3d 187, 191 (2d Cir. 1996). ECheck’s false advertising claim directed to the May 20,
2013 Ripoff Report post is therefore timely.
1

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CPLR 213(2) establishes a six-year limitations period for a breach of contract
claim, and ECheck’s breach of contract claim is therefore timely. The Complaint plausibly
alleges that NEMC and ECheck entered into a contract, and that NEMC breached the contract by
failing to make payments required of it.
ECheck’s motion for entry of default judgment is there granted against NEMC as
to liability only.
3. ECheck’s Unjust Enrichment Claim Is Duplicative.
Because the Court concludes that ECheck has demonstrated its entitlement to
default judgment against NEMC on its breach of contract claim, its motion for entry of default
judgment on its unjust enrichment claim is denied as duplicative. See, e.g., Cont’l Cas. Co. v.
Contest Promotions NY, LLC,, 2016 WL 1255726, at *4 (E.D.N.Y. Mar. 28, 2016) (“[T]he
Court denies Plaintiff’s motion for a default judgment as to Plaintiff’s unjust enrichment claim,
as it is duplicative of the breach of contract claim.”) (collecting cases).
4. ECheck’s Motion Is Denied as to Breach of Non-Solicitation
Agreement.
Count Seven alleges that “Defendants” breached a non-solicitation agreement
with ECheck. (Compl’t ¶¶ 91-94.) This claim appears to be premised on the allegation that
Cyberbox’s agreement with ECheck included a provision barring plaintiff from contacting
ECheck’s customers or merchants. (Compl’t ¶ 41.)
But the Complaint does not allege any conduct by Cyberbox that breached such a
provision. As noted, its allegations broadly lump together the conduct of undifferentiated
“Defendants.” To the extent that the claim is premised on the Ripoff Report posting of “Nemc,”
the Complaint has not plausibly alleged that the posting involved Cyberbox.

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5. ECheck’s Remaining Claims Are Untimely.
A. Trade Libel and Commercial Disparagement.
New York has a one-year limitations period for trade libel claims, running from
date of publication, including online publications. See Enigma Software, 194 F. Supp. 3d at 276;
Martin v. Daily News L.P., 121 A.D.3d 90, 103 (1st Dep’t 2014); Firth v. State, 98 N.Y.2d 365,
370 (2002); CPLR 215(3).
The Ripoff Report comment was left on May 20, 2013. This action was
commenced more than three years later, on November 9, 2016. (Docket # 1.) Because it was
filed beyond the one-year limitations period, ECheck’s trade libel claim is dismissed.
B. Common Law Unfair Competition.
Under New York law, the limitations period for unfair competition is “treated
disparately,” depending on the nature of the alleged misconduct. Omni Food Sales v. Boan,
2007 WL 2435163, at *6 (S.D.N.Y. Aug. 24, 2007) (Crotty, J.). For unfair competition claims
that sound in fraud or breach of fiduciary duty, the limitations period is generally six years,
whereas for claims alleging injury to property, the limitations period is generally three years.
See id. (collecting cases). Here, ECheck’s unfair competition claim is premised on “false and
defamatory complaints” and “defamatory statements.” (Compl’t ¶¶ 69, 71.) Because CPLR
215(3) sets a one-year limitation period for “slander” and “false words causing special damages,”
applying a one-year limitations period is appropriate, and the unfair competition claim is
dismissed as untimely.
Even if the three-year limitations period used for injury to property applies, the
unfair competition claim is still untimely. See CPLR 214(4). Separately, the six-year limitations
period is inapplicable, as the Complaint does not allege that NEMC had a fiduciary obligation to

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ECheck, and its stray invocations of “fraud” and “fraudulent” conduct are conclusory. (See, e.g.,
Compl’t ¶¶ 3, 38.)
ECheck’s common law unfair competition claim is therefore dismissed as
untimely.
C. Tortious Interference.
Count Four alleges tortious interference with contractual relations and prospective
contractual relations. This claim is governed by the three-year limitation period of CPLR 214(4).
See, e.g., Turecamo v. Turecamo, 55 A.D.3d 455 (1st Dep’t 2008).
This action commenced more than three years after the Ripoff Report posting.
ECheck’s tortious interference claim is therefore dismissed as untimely.
CONCLUSION.
ECheck’s motions are GRANTED solely as to liability for its Lanham Act and
breach of contract claims against NEMC. They are denied in all other respects. The Clerk is
directed to terminate the motions. (Docket # 29, 37.)
There will be an inquest as to damages on July 17, 2017 at 2:30 p.m.
SO ORDERED.

Dated: New York, New York
June 16, 2017

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