E-Lionheart Associates, LLC v. Alkane, Inc.
Filing
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MEMORANDUM DECISION re: 26 MOTION to Dismiss. filed by Matthew Zuckerman.For the foregoing reasons, the Court DENIES defendant Zuckerman's motion to dismiss (Doc. #26). The Clerk is instructed to terminate this motion. (Signed by Judge Vincent L. Briccetti on 11/7/2011) (rj)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YO
E-LIONHEART ASSOCIATES, LLC,
Plaintiff,
USDCSDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #:-:-:--~-:::or---UYTT.Tft. " I): ) :._1_~-/ I
MEMORANDUM DECISION
v.
10 CV 2781 (VB)
ALKANE, INC., MONSTER DIESEL, INC.,
ALTERNAFUELS, INC., and MATTHEW
ZUCKERMAN,]
Defendants.
-.--------------..--------------------------------------------x
Briccetti, 1.:
Defendant Mathew Zuckerman has filed a motion to dismiss the claims against him
(Doc. #26). The Court has already entered a default judgment against defendant Alkane, Inc.,
Monster Diesel, Inc., and Alternafuels, Inc. (Doc. #23), leaving only those claims against
Zuckerman. For the following reasons, Zuckerman's motion is DENIED.
The Court possesses subject matter jurisdiction over this matter pursuant to 28 U.S.c.
§ 1332.
BACKGROUND
For purposes of ruling on defendant's motion, the Court accepts all well-pleaded
allegations of the amended complaint as true.
PlaintiffE-Lionheart Associates, LLC ("E-Lionheart") acquired a promissory note made
payable by defendant Alkane. The promissory note featured the right by the holder to convert
the debt into equity, a feature of great import to plaintiff. Zuckerman, as Alkane's Chief
Executive Officer, assured plaintiff that Alkane, on plaintiffs request, would procure a board
Defendant Zuckerman's first name is spelled "Mathew."
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resolution permitting the conversion following the acquisition of the promissory note by
plaintiff.
On January 18, 2011, plaintiff acquired the promissory note in exchange for $125,000.00,
with Alkane's concurrent execution of a convertible promissory note in E-Lionheart's favor for
the same amount, bearing interest at six percent per year and restating the conversion
entitlements. In reliance upon the ability to convert the debt to equity, in January and February
2011, E-Lionheart commenced short sales of stock three times, expecting the equity it would
acquire to be available to complete each transaction. Zuckerman continually reaffirmed E
Lionheart's ability to undertake the conversion, in reliance on which, plaintiff sold more shares
of Alkane stock.
On March 15,2011, Zuckennan indicated for the first time that Alkane would not permit
the conversion. Plaintiff was then required to purchase shares of Alkane on the open market.
Doing so resulted in losses to plaintiff of $22,924.06. Despite written demand, Alkane refused
to permit the conversion.
In May 2011, Alternafuels, Inc. began the process of acquiring Alkane's assets.
DISCUSSION
The function of a motion to dismiss pursuant to Rule 12(b)(6) is "merely to assess the
legal feasibility of the complaint, not to assay the weight of the evidence which might be offered
in support thereof." Ryder Energy Distrib. v. Merrill Lynch Commodities, Inc., 748 F.2d 774,
779 (2d Cir. 1984). When deciding a motion to dismiss, the court must accept all well-pleaded
allegations as true and draw all reasonable inferences in favor of the pleader. Hishon v. King,
467 U.S. 69, 73 (1984). The complaint must contain the grounds upon which the claim rests
through factual allegations sufficient "to raise a right to relief above the speCUlative level." Bell
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Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A plaintiff is obliged to amplify a claim with
some factual allegations to allow the court to draw the reasonable inference that the defendant is
liable for the alleged conduct. Ashcroft v. Iqbal, 556 U.S.
129 S. Ct. 1937 (2009).
Defendant Zuckerman moves for dismissal on two grounds. First, he argues that plaintiff
has secured judgments against the three corporate defendants which alleviates the need for it to
secure a judgment against Zuckerman. Second, defendant argues that plaintiff has failed to
allege that Zuckerman acted as an individual in this matter. The motion is denied because both
of these reasons fail. In addition, the motion is denied as improper because Zuckerman has
already filed an answer (Doc. #20). Once he filed his answer, Zuckerman was no longer entitled
to file a motion to dismiss under Rule 12(b)(6). See Fed. R. Civ. P. 12(b) ("A motion asserting
any of these defenses must be made before pleading if a responsive pleading is allowed.").
As for Zuckerman's contention about a default judgment having been secured against the
corporate defendants, even when a plaintiff secures a judgment against one tortfeasor which
would satisfy his whole claim, he may still proceed against another joint tortfeasor. See, U,
3947 Austin Blvd. Assocs. v. M.K.D. Capital Corp., 2006 U.S. Dist. LEXIS 13618 (S.D.N.Y.
Mar. 24, 2006) (entering default judgment against several defendants, but not all); Montcalm
Pub. Corp. v. Ryan, 807 F. Supp. 975, 978 (S.D.N. Y. 1992). It should be noted that plaintiff will
not be able to recover more than his just amount. See Gerber v. MTC Electronic Technologies
Co., Ltd., 329 F.3d 297, 302-03 (2d Cir. 2003). Therefore, the default judgment has no impact
on whether Zuckerman may be held liable in this action.
In addition, Zuckerman's theory that his acting as an officer of the corporate defendant
absolves him of liability is legally wrong. Corporate officers and directors are not generally
liable for corporate debts or the corporation's breaches of contract. See We're Associates Co. v.
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Cohen. Stracher & Bloom, P.C., 65 N.Y.2d 148,151 (1985). Nonetheless, "officers and
directors of a corporation may be held liable for fraud if they participate in it or have actual
knowledge of it." Cohen v. Koenig, 25 FJd 1168, 1173 (2d Cir. 1994) (quoting People v. Apple
Health & Sports Clubs, Ltd., 80 N.Y.2d 803,807 (1992). Plaintiff asserts claims against
Zuckerman for common law indemnification, fraud, and fraudulent conveyance under New York
Debtor Creditor Law §§ 273 and 276. The allegations of the amended complaint do not base
liability on Zuckerman's role as an officer of the corporations, but as an active participant in the
alleged fraud. Therefore, there is no bar to plaintiffs asserting these claims.
CONCLUSION
For the foregoing reasons, the Court DENIES defendant Zuckerman's motion to dismiss
(Doc. #26).
The Clerk is instructed to terminate this motion.
Dated: November 7, 2011
White Plains, New York
Vincent L. Briccetti
United States District Judge
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