White v Landau

[*1] White v Landau 2011 NY Slip Op 51098(U) Decided on June 10, 2011 Supreme Court, New York County Rakower, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 June 10, 2011
Supreme Court, New York County

Benjamin D. White, Plaintiff,

against

Michael Landau, DAVID ELIEZER POPACK, JONATHAN "CHESKY" MALAMUD, MAP INTERNATIONAL LIMITED, MAP USA LTD., CAPE TRUST and CARRIAGE TRUST, Defendants.



115190/10

 

Day Pitney LLP for Plaintiff

Jaroslawicz & Jaros, LLC for Defendants

Eileen A. Rakower, J.

Benjamin D. White ("Plaintiff") brings this action alleging breach of contract, breach of the covenant of good faith and fair dealing, conversion, breach of fiduciary duty, minority shareholder oppression, denial of access to corporate books and records, and slander per se. According to the complaint, defendant Map International Limited ("Map International") is "a startup in the nascent branchless banking industry," which "provides users with basic financial services despite the lack of bank branches in certain regions of the world." Map International was founded in June 2007 by defendant Landau, who serves at its Chairman, along with defendant Popack, its President, and defendant Malamud. Map International is owned by defendant Cape Trust (which owns 66% of the company) and defendant Carriage Trust (which owns 33% of the company). According to Plaintiff, Map International is "a Gibraltar-based corporation" which maintains an office in New York County.

Plaintiff states that on or around August 4, 2008, he was employed by Map International as Chief Operating Officer, and continues to perform in that capacity. Plaintiff states that, as COO of Map International, he was frequently required to travel [*2]overseas - mostly to Uganda, but also to Kenya, Rwanda, South Africa, and the United Kingdom. Plaintiff annexes to his complaint the July 15, 2008 letter ("the Offer Letter") offering him the position of COO and setting forth the main components of his salary and benefits package. The Offer Letter provides, inter alia, that "You will be reimbursed for all travel and standard business expenses incurred ...." Plaintiff states that he paid over $250,000 in expenses on behalf of Map International. However, in contravention of the Offer Letter, Map International has failed to reimburse Plaintiff $90,000 of those expenses. Plaintiff states that he "relied upon Map International's representations, contained in the [Offer Letter] and in statements made by the Individual Defendants, that [Map International] would ultimately reimburse [Plaintiff] for such expenses."

In addition, Plaintiff claims that Map International has failed to pay him pursuant to the Offer Letter since November 2009, despite the Offer Letter's provision that Plaintiff be compensated "$300,000 per annum, paid twice a month."He claims that, as of the date of the complaint (dated November 17, 2010), he is owed $245,000 in unpaid back wages.

Plaintiff further alleges that "[o]n multiple occasions, Popack gave [him] a verbal personal guarantee that Popack would personally guarantee repayment of salaries and other compensation, and expenses owed," stating, "[i]f the company ... goes down, I'll take care of you."

In addition to the failure to properly compensate Plaintiff and reimburse his travel expenses, Plaintiff alleges that "[t]he Individual Defendants have systematically attempted to freeze out' [Plaintiff] from the operation of [Map International] despite his status as an officer, shareholder, Executive Committee Member and driving force in the company's Africa-based operation."

Plaintiff also claims that the individually named defendants mismanaged Map International, putting the company and its shareholders at risk. Specifically, Plaintiff claims that they have failed to register Map International to do business in New York State, as well as in other jurisdictions in which the company does business. He further claims that the individual defendants have caused International Map to violate various New York State labor laws, and that they "have, on numerous occasions, disseminated false and misleading information about [Map International] to prospective private and government investors." Further still, Plaintiff claims that [*3]Landau and Popack engaged in self-dealing by causing International Map to make a $250,000 loan to the MapFinancial Group, an entity owned by Landau and Popack. Plaintiff states that "Landau and Popack caused $150,000 of the MapFinancial Group Loan to be repaid to Map International but caused $100,000 to be repaid directly to Landau." Plaintiff also claims that the individually named defendants have paid themselves large sums of money while claiming that Map International lacks sufficient funds to pay Plaintiff. Plaintiff alleges that the corporation has failed to keep proper records of these transactions.

Lastly, Plaintiff alleges that Landau defamed him "the week of August 23, 2010." Plaintiff claims that "[i]n meetings in Uganda with key employees, executives, local businessmen, partners, and government officials, Landau repeatedly referred to [Plaintiff] as a racist, falsely claiming that [he] preferred to employ non-locals instead of local Africans for jobs associated with Map International's branchless banking." Plaintiff continues, "Landau claimed, and stated to third parties, that [Plaintiff] was a racist who did not believe that local Africans were capable of assisting Map International in developing its ... operations." Plaintiff also claims to have obtained a recording of defamatory statements by Landau.

Presently before the court is a motion by defendants to dismiss the complaint's 17 causes of action pursuant to numerous subsections of CPLR §3211. Defendants seek dismissal as to defendants Landau, Popack, Malamud, Map USA Ltd., Cape Trust and Carriage Trust pursuant to CPLR §3211(a)(1) on the grounds that the contract at issue in this suit is between Plaintiff and Map International. They also seek dismissal as to all defendants on §3211(a)(1) grounds because the contract is a contract at will. Defendants seek dismissal as to Landau, Popack, Malamud, Map USA Ltd., Cape Trust and Carriage Trust pursuant to §3211(a)(2) on the grounds that "there is no jurisdiction and no possible claim against them." Defendants also claim that the complaint fails to state a cause of action as to any of the defendants pursuant to §3211(a)(7), and that the court lacks personal jurisdiction over any of the defendants pursuant to §3211(a)(8). As to Popack's alleged personal guarantee, defendants state that the claim fails pursuant to CPLR §3211(a)(5) and General Obligations Law ("GOL") §5-701(a)(7), since there is no guarantee in writing. Lastly, with respect to Plaintiff's defamation claim, defendants claim that Plaintiff's complaint fails to plead defamation with the requisite particularity under CPLR §3016. Plaintiff opposes the motion. [*4]

CPLR §3211 provides, in relevant part:

(a)a party may move for judgment dismissing one or more causes of action asserted against him on the ground that:

(1)a defense is founded upon documentary evidence; or

(2)the court has not jurisdiction of the subject matter of the cause of action; or

(5)the cause of action may not be maintained because of ... statute of frauds; or

(7)the pleading fails to state a cause of action; or

(8)the court has not jurisdiction of the person of the defendant ....

In determining whether dismissal is warranted for failure to state a cause of action, the court must "accept the facts alleged as true ... and determine simply whether the facts alleged fit within any cognizable legal theory." (People ex rel. Spitzer v. Sturm, Ruger & Co., Inc., 309 AD2d 91[1st Dept. 2003]) (internal citations omitted) (see CPLR §3211[a][7]). On a motion to dismiss pursuant to CPLR §3211(a)(1) "the court may grant dismissal when documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law." (Beal Sav. Bank v. Sommer, 8 NY3d 318, 324 [2007]) (internal citations omitted) "When evidentiary material is considered, the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one" (Guggenheimer v. Ginzburg, 43 NY2d 268, 275 [1977]) (emphasis added). A movant is entitled to dismissal under CPLR §3211 when his or her evidentiary submissions flatly contradict the legal conclusions and factual allegations of the complaint (Rivietz v. Wolohojian, 38 AD3d 301 [1st Dept. 2007]) (citation omitted).

As a preliminary matter, the court finds that it lacks personal jurisdiction over Map International because there is no evidence that Plaintiff properly served the company with process. Plaintiff submits affidavits of service attesting to service upon Map International on three occasions:

The affidavit of process server Julius Thompson states that, on December 7, [*5]2010, he served "MAP INTERNATIONAL LIMITED BY MICHAEL LANDAU OFFICER" by "delivering and leaving a true copy or copies of [the summons and complaint] with (JOHN SMITH) DOORMAN WHO REFUSED NAME ACCESS AND ACCEPTED IN ACCORDANCE WITH HIS EVERYDAY DUTIES a person with of suitable age and discretion."

The affidavit of process server Kevin J. Lopez states that, on December 7, 2010, he served "MAP INTERNATIONAL LIMITED BY DAVID ELIEZER POPACK OFFICER" by "affixing [the summons and complaint] to the door of DEFENDANT said residence since admittance could not be obtained upon reasonable application or a person of suitable age and discretion found who would receive same ..." The affidavit attests to three "prior diligent efforts to effect personal service."

Another affidavit from Mr. Lopez states that, on December 4, 2010, he served the summons and complaint upon "MAP INTERNATIONAL LIMITED BY JONATHAN (CHESKY) MALAMUD OFFICER" by "delivering and leaving a true copy or copies of the aforementioned documents with ELIZABETH ORELLAMA PERSON IN CHARGE a person of suitable age and discretion.

CPLR §311(a)(1) provides that service upon a corporation "shall be made by delivering the summons ... to an officer, director, managing or general agent, or cashier or assistant cashier or to any other agent authorized by appointment or by law to receive service." Here, Plaintiff attempted to serve Map International by utilizing avenues of service available for personal service upon a natural person pursuant to CPLR §308(2) & (4). This is insufficient to effect service upon a corporation (see Bezoza v. Bezoza, 2011 NY Slip Op 3281, *1 [1st Dept. 2011]) ("Although the doorman of the individual defendants' apartment building could properly accept service on behalf of the individual defendants, plaintiff failed to show that the doorman was an officer, director, managing or general agent, or cashier or assistant cashier or to any other agent authorized by appointment or by law to receive service' on behalf of the corporation); see also Lakeside Concrete Corp. v. Pine Hollow Bldg. Corp., 104 AD2d 551, 551-52 [2nd Dept. 1984]).[FN1] [*6]

Moreover, defendants' motion to dismiss with respect to Map USA Ltd., Cape Trust, and Carriage Trust are granted because nowhere in the complaint does Plaintiff state cognizable causes of action against any of these entities. The Offer Letter (which Plaintiff annexed to his complaint) clearly demonstrates that Map International was the entity that contracted with Plaintiff. The complaint makes no actionable allegations against these other entities, and merely states that Map USA is a subsidiary of Map International, and that Cape Trust and Carriage Trust are part owners of Map International.

With respect to the individually named defendants, the court finds that causes of action (alleging breach of contract and breach of the covenant of good faith and fair dealing with respect to Plaintiff's salary, bonus, ESOP, and travel expenses) numbered 1-8 must be dismissed as the individual defendants were not parties to the contract.

Plaintiff's 9th and 10th causes alleged breach of contract and breach of the covenant of good faith and fair dealing, respectively, concern Popack's alleged verbal personal guarantee to pay the compensation and expenses owed Plaintiff by Map International. Plaintiff's cause of action for breach of contract must be dismissed pursuant to the statute of frauds. GOL §5-701(a)(2) provides that [*7]

Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking ... Is a special promise to answer for the debt, default or miscarriage of another person;

Plaintiff's related claim for breach of the covenant of good faith and fair dealing must be dismissed as it is based upon the same facts underlying the breach of contract claim (see 2470 Cadillac Resources, Inc. v. DHL Express (USA), Inc., 2011 NY Slip Op 4528, *2 [1st Dept. 2011]).

Plaintiff's 11th cause of action seeks to recover all debts, wages or salaries due and owing Plaintiff from his employment with Map International pursuant to BCL §630. That section provides, in pertinent part, that

The ten largest shareholders, as determined by the fair value of their beneficial interest as of the beginning of the period during which the unpaid services referred to in this section are performed, of every corporation (other than an investment company registered as such under an act of congress entitled Investment Company Act of 1940'), no shares of which are listed on a national securities exchange or regularly quoted in an over-the-counter market by one or more members of a national or an affiliated securities association, shall jointly and severally be personally liable for all debts, wages or salaries due and owing to any of its laborers, servants or employees other than contractors, for services performed by them for such corporation.

The Appellate Division has recently and unequivocally concluded that "Business Corporation Law § 630 does not apply to foreign corporations" (Stuto v. Kerber, 2010 NY Slip Op 7646, *3 [3rd Dept. 2010]). Accordingly, inasmuch as Plaintiff's complaint states that Map International is "a Gibraltar-based corporation," BCL §630 is inapplicable and this cause of action must be dismissed.

Plaintiff's 12th cause of action alleges that Plaintiff "has an interest in his personal funds that he expended in order to pay for Map International's corporate and business expenses," and that defendants "have taken [his] property and converted it for their own personal use." "A conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person's right of possession" (Colavito v. New York Organ Donor Network, Inc., 8 NY3d 43, 49-50 [2006]). Here, Plaintiff fails to state a cause of action for conversion. Plaintiff does not allege that defendants took [*8]dominion over his property; rather, he alleges that he advanced travel expenses which Map International was contractually obligated to reimburse him for. While such allegations clearly form the basis for a breach of contract claim against Map International, they are insufficient to state a cause of action for conversion.

Plaintiff's 13th and 14th causes of action, which allege breach of fiduciary duty and director/officer misconduct pursuant to BCL §720, are also dismissed. Plaintiff alleges that the individually named defendants have wrongfully enriched themselves and depleted the company of capital through self-dealing. Assuming the truth of these allegations, as the court must for purposes of this motion, such claims belong to the corporation, and may only be asserted by way of a derivative action.

For a wrong against a corporation a shareholder has no individual cause of action, though he loses the value of his investment or incurs personal liability in an effort to maintain the solvency of the corporation .... Exceptions to that rule have been recognized when the wrongdoer has breached a duty owed to the shareholder independent of any duty owing to the corporation wronged .... But allegations of mismanagement or diversion of assets by officers or directors to their own enrichment, without more, plead a wrong to the corporation only, for which a shareholder may sue derivatively but not individually (Abrams v. Donati, 66 NY2d 951, 953 [1985]).

While Plaintiff's allegation that Map International has failed to compensate and reimburse him pursuant to its contractual obligations is a claim which inures to Plaintiff, alleged wrongs which harm the corporation as a whole cannot be brought by Plaintiff directly.

Plaintiff's 15th cause of action alleges minority shareholder oppression. The First Department has observed that oppressive conduct "is distinct from illegality and refers to conduct that substantially defeats the reasonable expectations' held by minority shareholders in committing their capital to the closed corporation" (In re Rambusch, 143 AD2d 605, 606 [1st Dept. 1988]) (citing In re Kemp & Beatley, Inc., 64 NY2d 63 [1984]). Defendants claim that Plaintiff cannot assert a claim of minority oppression because Plaintiff "was not a shareholder." However, defendants fail to submit any documentary evidence which conclusively establishes their assertion, and taking the allegations of the complaint as true, Plaintiff adequately pleads that he is a minority shareholder and that the individually named defendants "have acted in [*9]such a manner as to defeat those expectations ... which formed the basis of [Plaintiff's] participation in the venture" (Kemp & Beatley at 68). Accordingly, Plaintiff is not barred, at least at the pleading stage, from asserting a cause of action for corporate dissolution based upon minority shareholder oppression.

Plaintiff's 16th cause of action seeks access to corporate books and records. "It is well settled that a shareholder has both statutory and common-law rights to inspect the books and records of a corporation if inspection is sought in good faith and for a valid purpose" (Dwyer v. Di Nardo & Metschl, P.C., 41 AD3d 1177, 1178 [4th Dept. 2007]) (citing Peterborough Corp. v. Karl Ehmer, Inc., 215 AD2d 663, 664 [2nd Dept. 2005]; BCL §624; Crane Co. v. Anaconda Co., 39 NY2d 14, 18-20 [1976]; Tatko v. Tatko Bros. Slate Co., 173 AD2d 917 [3rd Dept. 1991]). Again, to the extent that Plaintiff alleges that he is a shareholder of Map International, he states a cause of action for inspection of corporate books and records.

Plaintiff's 17th and final cause of action is for slander per se regarding the alleged false statements made by Landau to the effect that Plaintiff was a racist who avoided hiring local Africans. "The elements [of a defamation claim] are a false statement, published without privilege or authorization to a third party, constituting fault as judged by, at a minimum, a negligence standard, and it must either cause special harm or constitute defamation per se." CPLR 3016(a) requires that a plaintiff alleging defamation plead with sufficient particularity the actual allegedly defamatory words used by the defendant(s); in addition, the plaintiff must set forth the time, place, and manner of the communication (Dillon v. City of New York, 261 AD2d 34 [1st Dept. 1999]). Here, Plaintiff fails to set forth the specific statements allegedly uttered by the Landau, and it is well settled that dismissal is required where a plaintiff merely paraphrases the defamatory statements complained of (Murganti v. Weber, 248 AD2d 208 [1st Dept. 1998]; MaNas v. VMS Assoc., LLC, 2008 NY Slip Op 6350 [1st Dept. 2008]). Accordingly, Plaintiff's 17th cause of action is dismissed.

Wherefore it is hereby

ORDERED that the motion of defendants Map International, Map USA, Cape Trust, and Carriage Trust to dismiss the complaint herein is granted and the complaint is dismissed in its entirety as against said defendants, with costs and disbursements to said defendants as taxed by the Clerk of the Court, and the Clerk is directed to enter judgment accordingly in favor of said defendants; and it is further [*10]

ORDERED that the individually named defendants' motion to dismiss is granted as to Plaintiff's 1st through 14th, and 17th causes of action; and it is further

ORDERED that the individually named defendants' motion to dismiss is denied as to Plaintiff's 15th and 16th causes of action; and it is further

ORDERED that the action is severed and continued against the remaining defendants; and it is further

ORDERED that the caption be amended to reflect the dismissal and that all future papers filed with the court bear the amended caption; and it is further

ORDERED that counsel for the moving party shall serve a copy of this order with notice of entry upon the County Clerk (Room 141B) and the Clerk of the Trial Support Office (Room 158), who are directed to mark the court's records to reflect the change in the caption herein; and it is further

ORDERED that remaining defendants shall serve their answer or answers within ten days of receipt of a copy of this order with notice of entry thereof.

This constitutes the decision and order of the court. All other relief requested is denied.

DATED: June 10, 2011___________________________________

EILEEN A. RAKOWER, J.S.C.

Footnotes

Footnote 1:The court notes that, as an alternative to CPLR §311, a party seeking to serve an unauthorized foreign corporation may avail itself of Business Corporation Law ("BCL") §307, which provides, in pertinent part, as follows:

(a) In any case in which a non-domiciliary would be subject to the personal or other jurisdiction of the courts of this state under article three of the civil practice law and rules, a foreign corporation not authorized to do business in this state is subject to a like jurisdiction. In any such case, process against such foreign corporation may be served upon the secretary of state as its agent. Such process may issue in any court in this state having jurisdiction of the subject matter.

(b) Service of such process upon the secretary of state shall be made by personally delivering to and leaving with him or his deputy, or with any person authorized by the secretary of state to receive such service, at the office of the department of state in the city of Albany, a copy of such process together with the statutory fee, which fee shall be a taxable disbursement. Such service shall be sufficient if notice thereof and a copy of the process are:

(1) Delivered personally without this state to such foreign corporation by a person and in the manner authorized to serve process by law of the jurisdiction in which service is made, or

(2) Sent by or on behalf of the plaintiff to such foreign corporation by registered mail with return receipt requested, at the post office address specified for the purpose of mailing process, on file in the department of state, or with any official or body performing the equivalent function, in the jurisdiction of its incorporation, or if no such address is there specified, to its registered or other office there specified, or if no such office is there specified, to the last address of such foreign corporation known to the plaintiff.