Rand Intl. Leisure Prods., Inc. v Bruno

[*1] Rand Intl. Leisure Prods., Inc. v Bruno 2009 NY Slip Op 50085(U) [22 Misc 3d 1111(A)] Decided on January 14, 2009 Supreme Court, Nassau County Austin, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on January 14, 2009
Supreme Court, Nassau County

Rand International Leisure Products, Inc., Plaintiff,

against

Jeffrey Bruno and SUSAN PERRY, Defendants.



Rand International Leisure Products, LLC Plaintiff, against

against

Dumar International USA Inc. and HYPER BICYCLE INC., Defendants.



13266/06



COUNSEL FOR PLAINTIFF

Nixon Peabody LLP

437 Madison Avenue

New York, New York 10022-7001

Murray Plumb & Murray

75 Pearl Street

P.O. Box 9785

Portland, ME 04104

COUNSEL FOR DEFENDANTS

(for Jeffrey Bruno and Susan Perry)

Richman & Levine, P.C.

666 Old Country Road, Suite 101

Garden City, New York 11530

(for Hyper Bicycle, Inc.)

Duane Morris LLP

1540 Broadway

New York, New York 10036-4086

(for Dumar International USA, Inc.)

Kornstein, Veisz, Wexler & Pollard, LLP

757 Third Avenue

New York, New York 10017

Leonard B. Austin, J.

Plaintiff, Rand International Leisure Products, Inc. ("Rand"), is a domestic corporation engaged in the business of designing, importing and marketing of leisure products, such as bicycles, roller skates and inflatables.

A valuable portion of Rand's business is apparently derived from license agreements Rand obtained from Mattel, Inc. ("Mattel"), a world-wide manufacturer, seller and distributer of toys.

In March 2008, Rand commenced Action No. 2 against two of its competitors, Defendants, Hyper Bicycle, Inc. ("Hyper") and Dumar International, USA, Inc. ("Dumar"). According to Rand, in April 2001, Dumar hired Rand's sales manager Defendant in Action No. 1, Jeffrey Bruno ("Bruno"), with knowledge that Bruno was still employed by Rand at the time. The complaint in Action No. 2 further alleges that one of Dumar's objectives in hiring Bruno who had a written contract with Rand was to exploit his simultaneous Rand employment so that Dumar could acquire the Mattel licenses then held by Rand. [*2]

As to Bruno, Rand contends that he fraudulently and in breach of duty of loyalty schemed to wrest away from Rand, the Mattel product licenses which he was then still servicing as a Rand employee.

More particularly, Rand contends that Bruno: (1) concealed from Rand the fact that he was working for Dumar; (2) made false and denigrating statements to customers about Rand at sales meetings which sabotaged Rand's business relations with those customers, including Mattel; and (3) fraudulently concealed from Rand, that he had made those denigrating, false and damaging statements.

According to Rand, Dumar and Hyper supported Bruno in his disloyal conduct and provided undescribed "financial backing" to him.

Rand further claims that in order to facilitate and fully realize his objectives of securing and/or misappropriating the Rand-Mattel licenses for himself or the corporate Defendants, Bruno needed to ally himself with another established entity such as Dumar purportedly to "demonstrate to Mattel that. . . [he] could provide the requisite production and marketing necessary to successfully manage the Barbie and Hot Wheels' licenses." (Plaintiff's Memorandum of Law, p.10).

Bruno subsequently resigned from his position with Rand in July 2002. Rand commenced a separate action against him (Action No. 1) in August 2006.

Significantly, the complaint in Action No. 1 does not claim that Dumar or Hyper were actually granted Mattel licences as a consequence of Bruno's alleged disloyal conduct. Indeed, the factual narrative presented by Rand ultimately concludes with the revelation that neither Rand nor the corporate Defendants secured the Mattel licenses Rather, in January 2003, an entity "secretly created" by Bruno himself, "Liberty Bicycles," actually acquired the licenses together with another entity, "Magna Bikes," which was never mentioned previously or thereafter in Rand's complaint in Action No. 1.

Rand further contends that, in late 2003, Mattel notified Rand that it would not be renewing its "Barbie" and "Hot Wheels" licenses.

Both Dumar and Hyper now move for an order dismissing the complaint in Action No. 2 pursuant to CPLR 3211(a)(1), (5), (7) and 3016(b).

Dumar asserts, in sum, that Rand's aiding and abetting breach of fiduciary duty claim (first cause of action) is time-barred, and that the purported claim for aiding and abetting Bruno's breach of contract, fails to state a cause of action.

Hyper argues that the complaint in Action No. 2 lacks the requisite specificity in detailing the facts relevant to the aiding and abetting claim as to it (CPLR 3016[b]), and that New York does not recognize a substantive cause of action sounding in "aiding and abetting" a breach of contract.

It bears noting that Rand has conceded in its opposing memorandum of law that it is unable to allege that Dumar and Hyper possessed knowledge of Bruno's written

employment contract. As a result, it has withdrawn its second cause of action as against both Defendants in Action No. 2.

DISCUSSION [*3]

A.Legal Standard

1.Motion to Dismiss

On a motion pursuant to CPLR 3211(a)(7), the court will accept as true, the facts "alleged in the complaint and submissions in opposition to the motion, and accord plaintiffs the benefit of every possible favorable inference," determining only "whether the facts as alleged fit within any cognizable legal theory." Sokoloff v. Harriman Estates Development Corp., 96 NY2d 409, 414 (2001). See, AG Capital Funding Partners, L.P. v. State Street Bank and Trust Co., 5 NY3d 582, 591 (2005); and Leon v. Martinez, 84 NY2d 83, 87-88 (1994).

On the other hand, "allegations consisting of bare legal conclusions, as well as factual claims inherently incredible or flatly contradicted by documentary evidence are not entitled to such consideration." See, Maas v. Cornell Univ., 94 NY2d 87, 91-92 (1999), quoting Gertler v. Goodgold, 107 AD2d 481, 485 (1st Dept. 1985), aff'd, 66 NY2d 946 (1985). See also, Salvatore v. Kumar, 45 AD3d 560, 563 (2nd Dept. 2007); and Morris v. Morris, 306 AD2d 449 (2nd Dept. 2003).

2.Aiding and Abetting a Breach of Fiduciary Duty

To succeed on a claim for aiding and abetting a breach of fiduciary duty, a plaintiff must make "a prima facie showing of a fiduciary duty owed to plaintiff, . . . a breach of that duty, and defendant's substantial assistance . . . in effecting the breach, together with resulting damages." Ito v. Suzuki,___A.D.3d___, 2008 WL 5057264, at *2 (1st Dept. 2008); Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker, 56 AD3d 1, 7 (1st Dept. 2008); and Kaufman v. Cohen, 307 AD2d 113, 125 (1st Dept. 2003). See also, AHA Sales, Inc. v. Creative Bath Products, Inc., ___A.D.3d___, 867 NYS2d 169 (2nd Dept. 2008); Velazquez v. Decaudin, 49 AD3d 712, 716 (2nd Dept. 2008); Caprer v. Nussbaum,36 AD3d 176, 193 (2nd Dept. 2006); Global Minerals and Metals Corp. v. Holme, 35 AD3d 93, 101 (1st Dept. 2006), lv. app. den., 8 NY3d 804 (2007); and National Westminster Bank USA v. Weksel, 124 AD2d 144, 148-149 (1st Dept. 1987).

"A cause of action for aiding and abetting breach of fiduciary duty must be pleaded with sufficient particularity (CPLR 3016 [b]), to apprise defendants of the conduct on which this claim was predicated.'" Wiener v. Lazard Freres & Co., 241 AD2d 114, 123 (1st Dept. 1998); and McCagg v. Schulte Roth & Zabel LLP, 20 Misc 3d 1139(A), 2008 WL 4065920, at *14 (Sup. Ct. NY Co. 2008). See, Global Minerals and Metals Corp. v. Holme, supra at 101-102. Cf., Black Car and Livery Ins. Inc. v. H & W Brokerage, Inc., 28 AD3d 595, 596 (2nd Dept. 2006); Shearson Lehman Bros. Inc. v.

Bagley, 205 AD2d 467 (1st Dept. 2004); and National Westminster Bank USA v. Weksel, supra .

Indeed, "[w]here liability for fraud is to be extended beyond the principal actors, to those who, although not participants in the fraudulent scheme, are said to have aided in and encouraged its commission, it is especially important that the command of CPLR 3016(b) be strictly adhered to." National Westminster Bank USA v. Weksel, supra at 149. This is because the "alleged aider and abettor, by hypothesis, has not made any fraudulent misrepresentation and should not be called to account for the intentional tort of another unless the circumstances of his connection therewith can be alleged in detail from the outset." Id.;and Jana Master Fund, Ltd. v. JP Morgan Chase & Co., [*4]___Misc.3d___, 2008 WL 746540, at *4 (Sup. Ct., NY Co. 2008).

B.Hyper's Motion to Dismiss

With these considerations in mind, and turning first to Hyper's motion to dismiss, the Court agrees that the factual assertions advanced as to Hyper are deficient, since they rest upon nebulous and unelaborated claims that Hyper allegedly "supported" Bruno's tortious conduct by providing financial backing and support. CPLR 3016(b); and DePinto v. Ashley Scott, Inc., 222 AD2d 288, 289-290 (1st Dept. 1995). Significantly, Hyper neither hired Bruno nor is there any express statement in the complaint alleging that Hyper was aware of Bruno's employment with Rand and/or the "fraudulent" statements Bruno supposedly made to Rand in order to cover up his disloyalty. Egnotovich v. Katten Muchin Zavis & Roseman LLP, 55 AD3d 462 (1st Dept. 2008).

Moreover, the few substantive paragraphs in the complaint which actually mention Hyper, fail to identify, with adequate specificity, the wrongful conduct supposedly perpetrated by Hyper. That is, beyond vague generalities, Rand has not particularized what Hyper did, and how, in particular, it substantially assisted Bruno's fraud and breach of loyalty. See, Esteva v. Nash, 55 AD3d 474 (1st Dept. 2008). In fact, the complaint in Action No. 2 does not include any substantive allegations which refer separately to Hyper or which attribute wrongdoing specifically to it. Instead, Rand has simply lumped Hyper together with Dumar in a few, generically crafted paragraphs. See, Aetna Cas. & Sur. Co. v. Merchants Mut. Ins. Co., 84 AD2d 736 (1st Dept. 1981); Cf. Henry v. City of New York, 2007 WL 1062519, at *5 (E.D.NY 2007).

Although the complaint in Action No. 2 further alleges that: (1) unnamed, "senior" Hyper and Dumar officials "accompanied" Bruno to an unstated place in his continued efforts to obtain the Mattel licenses; and (2) that Bruno also utilized "financial backing" provided in some unspecified fashion by both Dumar and Hyper, these contentions are bereft of factual detail as to Hyper and, in one instance, refer to conduct occurring after Bruno resigned his position with Rand.

Nor does the complaint in Action No. 2 otherwise provide factual background or informational context illuminating the larger role supposedly played by Hyper in the operative and underlying, "Rand-Bruno-Dumar" transaction. To the contrary, the descriptive allegations included in the complaint relate exclusively either to Bruno's disloyal conduct or the manner in which Dumar, the entity which actually hired Bruno, allegedly exploited Bruno's divided loyalties to acquire the Mattel licenses.

Although to be sure, CPLR 3016 is "not to be interpreted" so as to require "unassailable proof of fraud" (Pludeman v. Northern Leasing Systems, Inc., 10 NY3d 486, 492 [2008]; and Lanzi v. Brooks, 43 NY2d 778, 780 [1977]), the allegations set forth here fall short of establishing reasonable compliance with the specificity requirements of the statute. Black Car and Livery Ins., Inc. v. H & W Brokerage, Inc., supra at 596; and Dumas v. Fiorito, 13 AD3d 332 (2nd Dept. 2004). Accordingly, the complaint in Action No. 2 must be dismissed insofar as interposed against Hyper.

C.Dumar's Motion to Dismiss

With respect to Dumar's motion to dismiss on limitations grounds, it has been held that "New York law does not provide any single limitations period for breach of fiduciary duty claims." Kaufman v. Cohen, supra at118.

Rather, "[a] cause of action for breach of fiduciary duty is governed by a six-year [*5]statute of limitations where the relief sought is equitable in nature (see, CPLR 213[1]), or by a three-year statute of limitations where the only relief sought is money damages." Wiesenthal v. Wiesenthal, 40 AD3d 1078, 1079 (2nd Dept. 2007).See also, Lonegard v. Santa Fe Indus., Inc., 70 NY2d 262, 266 (1987); Weiss v. TD Waterhouse, 45 AD3d 763, 764 (2nd Dept. 2007); Carlingford Center Point Associates v. MR Realty Associates, L.P., 4 AD3d 179, 180 (1st Dept. 2004); Kaufman v. Cohen, supra at 118; Yatter v. William Morris Agency, Inc., 256 AD2d 260, 261 (1st Dept. 1998); and CPLR 214 (4).

However, where the underlying breach is predicated on fraud, the statute of limitations is six years, notwithstanding the fact that plaintiff seeks solely monetary relief. See, Klein v. Gutman, 12 AD3d 417, 419 (2nd Dept. 2004); Kaufman v. Cohen, , supra ; Williams v. Sidley Austin Brown & Wood, L.L.P., 15 Misc 3d 1125(A), 2007 WL 1203594 at *5 (Sup. Ct. NY Co. 2007). See, Unibell Anesthesia, P.C. v. Guardian Life Ins. Co. of America, 239 AD2d 248 (1st Dept. 1997).

"An exception to this rule is that courts will not apply the fraud statute of limitations if the fraud allegation is only incidental to the claim asserted; otherwise, fraud would be used as a means to litigate stale claims'." Klein v. Gutman, supra , quoting, Kaufman v. Cohen, supra at 119; and Powers Mercantile Corp. v. Feinberg, 109 AD2d 117, 120 (1st Dept. 1985), affd, 67 NY2d 981 (1986). See, Buller v. Giorno, ___AD3d___, 2008 WL 5058521 (1st Dept. 2008). Thus, "where an allegation of fraud is not essential to the cause of action pleaded except as an answer to an anticipated defense of Statute of Limitations, courts look for the reality, and the essence of the action and not its mere name'." Kaufman v. Cohen, supra at 120, quoting, Brick v. Cohn-Hall-Marx Co., 276 NY 259, 264 (1937). See, Buller v. Giorno, supra .

Applying these principles to the subject claim, the Court finds that Rand's fraud allegations are incidental, rather than integral, to the underlying breach of fiduciary duty claim. Thus, a three year limitations period is applicable.

Irrespective of how embellished or nominally labeled in essence, the wrongdoing depicted here ultimately distills to no more than a claim that Bruno was an unfaithful employee who breached his written contract and duty of loyalty to Rand. He did so, the complaint advises, by secretly accepting employment with a competitor; denigrating Rand; attempting to steal Rand's clients and product licenses; and by faithlessly providing assistance to Dumar all while still serving in Rand's employ and, obviously, without informing Rand that he was doing so.

The Court agrees that any fiduciary duties which were allegedly violated here are primarily founded upon the breach of Bruno's written employment agreement and/or the duty of loyalty he otherwise owed to Rand as its employee. See gen'lly, Western Elec. Co. v. Brenner, 41 NY2d 291, 295 (1977); Lamdin v. Broadway Surface Adv. Corp., 272 NY 133, 138 (1936); Wallack Freight Lines, Inc. v. Next Day Express, Inc., 273 AD2d 462 (2nd Dept. 2000); and Laro Maintenance Corp. v. Culkin, 267 AD2d 431, 433 (2nd Dept. 1999).

The repeated inclusion of artfully crafted allegations to the effect that Bruno "fraudulently concealed" all of his conduct from Rand or, put differently, simply did not [*6]inform Rand of his activities, which is essentially the theory advanced here, does not alter this conclusion.

More specifically, the use of fraud-type catch phrases alleging that Bruno not surprisingly "concealed" his conduct from Rand; that his undisclosed actions "induced" Rand to continue his employment; and that, in general, Bruno thereby "fraudulently worked" for Dumar fall short of establishing that fraud is an integral component of the underlying fiduciary duty theory advanced.

Where fraud is not integral to the claims at issue, a three year limitations will apply to a cause of action sounding in aiding and abetting the breach of a fiduciary duty. Weiss v. TD Waterhouse, supra ; and Kaufman v. Cohen, supra .

Here, Rand itself contends that its claims accrued in late 2002 and into 2003, when it claims that it actually lost the Mattel licenses. Inasmuch as the instant action was commenced in March 2008, well over three years after the 2003 accrual date, the aiding and abetting claim is time-barred. See, e.g., Donenfeld v. Brilliant Technologies Corp., ___Misc 3d___, 2008 WL 4065889, at *2-3 (Sup. Ct. NY Co. 2008). Thus, Rand's claims against Dumar in Action No. 2 must be dismissed.

D.Consolidation

In light of the Court's determination dismissing all of the claims in Action No. 2, Rand's related motion for an order consolidating this matter with the prior action commenced against Bruno must be denied as academic.

E.Leave to Replead

Upon the papers submitted, and in light of the grounds on which the Court's dismissal has been granted, the Court declines to exercise its discretion in favor of granting Rand's alternate request, in effect, for leave to replead and/or amend its claims. See gen'lly, Carl v. Cohen, 55 AD3d 478 (1st Dept. 2008). Cf., Janssen v. Incorporated Village of Rockville Centre,___AD3d___, 2008 WL 5263770 (2nd Dept. 2008); and CPLR 3025(b). In the absence of showing any factual basis to support any legal theory of recovery by Rand against Dumar or Hyper, leave to replead must be denied.

Accordingly, it is,

ORDERED, that the motion to dismiss the complaint by Defendant Hyper Bicycle, Inc. is granted; and it is further,

ORDERED, that the motion to dismiss the complaint by Defendant Dumar International, USA, Inc. is granted; and it is further,

ORDERED, that the complaint in Action No. 2 is hereby dismissed; and it is further,

ORDERED that the motion to consolidate Actions No. 1 and No. 2 pursuant to CPLR 602 is denied as academic; and it is further,

ORDERED, that counsel for the respective parties in Action No. 1 shall appear for a preliminary conference on February 11, 2009 at 9:30 a.m.

This constitutes the decision and Order of the Court.

Dated: Mineola, NY______________________________

January 14, 2009Hon. LEONARD B. AUSTIN, J.S.C.