Burberry Ltd. v RTC Fashion Inc.

Annotate this Case

Download PDF

Burberry Ltd. v RTC Fashion Inc. 2012 NY Slip Op 32223(U) August 17, 2012 Supreme Court, New York County Docket Number: 110615/2011 Judge: Louis B. York Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. - SCANNED ON 812712012 [* 1] . . -. . ... SUPREME COURT OF THE STATE OF NEW YORK NEW YQRK COUNTY \ . PART PRESENT: '--*lo - Index Number : 110615/2011 BURBERRY LIMITED INDEX YO. VI YOTlON DATE RTC FASHION INC. M O W N 8Ea NO. Sequence Number : 002 DISMISS - TIM following papers, nurnbored 1 to Nlotloa of MotlonlOrderto Show Caw, AnmFIrlng Amdrvb Raplylng AcRdavb Y/ +/ f i - Exhlbb ,w m rhmd on thli motlon bolfor m -ACRdavb - Exhlbb - IWN. INdN. 1W4. Upon the forogolng paperm, tt le d a r e d thmt thlr motlon k FILED NEW YQRK COUNTY CLERK'S OFFICE J. ¬LC. 0 CASE DISPOSED o ~ ~ m ~ W B P O S I T I O 0MI NOT POST CI GRANTED IN PART 0OTHER 0SUBMIT ORDER 0FIDUCIARY APPOINTMEW 0REFERENCE ORANTED $DENIED aSElTLEmR [* 2] U SUPlREME COURT OF THE STATE OF NEW COUNTY OF NEW YORK PART EURBERRY LIMITED and BURBERRY USA, Plaintiffs, INDEX NO. 110615/2011 Motion Sequence 002 DECISION & ORDER -against- RTC FASHION N C .d/b/a DESIONERS IMPORTS t/a FASHION58.COM and ASHER HOROWITZ, Defendants. FILED Au6 21 a t 2 moves, pursuant to CPLR 321 1 (a) (7), to dismiss the amended complaint as against him. . FWual Background Burbeny Limited and Burberry USA (together as Burbeny) are sister companies in the United Kingdom and the United States involved in the design, manufacture, distribution and sale of high-endapparel and accessories. Burbeny owns several prominent trademarks, including the Burberry Check and the Equestrian Knight Design. Horowitz is sole owner and officer of Designers Imports,Inc., d/b/a Devigntrs Imports.com USA, Inc. (Designers), which has operated www.designtrsimports.com,dealing in dcsigner-branded clothing and accessories. Horowitz mgistered the domain name for Designers hports with Godaddy.com, Inc. (Godaddy), on August 11,2003. Horowitz Affirm.,*Ex. A. On or about April 12,2005, Horowitz and Burberry entered into a settlement agreement, amended C ? or about May 4,2005, concerning the sale of counterfeit merchandise through In his affirmation in support, attached to the motion, Horowitz identifies himself BS a religious individual, whose beliefs preclude swearing. 1 [* 3] www.designersimports.com infringing on Burberry s trademarks. Designers WM registered with New York s Department of State on November 16,2005. Horowitz Affirm., Ex.B. On May 22,2007, plaintiffs commenced an action against Designers for trademark infringement in the United States District Court,Southorn District of New York, case number 07 Civ 3997 (the Federal Action). This resulted in a bench trial, and a verdict for plaintiffs. The court entered an amended final judgment on July 29,2010 that permanently enjoined Designers f o infringing on my Burberry trademark, and awarded plaintiffs money damages of rm $1,864,875, plus costs and attorneys fees, totaling $2,592,070.89. Defendants RTC Fashion Inc. d/b/a Designers Imports t/a Fashion58.com (RTC) o m md operates www.fashion58.com,a web site which sells designer-branded clothing and accessories. RTC registered w t the Department of State on February 3,2010, and purchased ih the domain name www.rtcfashion.com fiom Godaddy days later. On February 10,2010, www.designersimports.com displayed the message This website is now being leased and w a g e d by RTCF, presumptively RTC Fahion. On May 4,201 0, Horowitz entered into an agreement with RTC for RTC to use www.designersimports.com for an annual fee of $500. On June 22,2010, RTC filed an Assumed Name Certificate with New York s Secretary of State for u e of Designers Imports. Horowitz Affirm., Ex.P. s Plaintiffs commenced the instant action on September 16,2011 , alleging that Horowitz dissipated Designers assets by depleting its funds and conveying www.designersimparts.comto RTC in order to fi-ustrate the enforcement of the judgment in the Federal Action. The complaint asserted causes of action for fraudulent conveyance, pursuant to Article 10 of the New York Debtor and Creditor Law $9 273,273-a (first); fraudulent conveyance, pursuant to Debtor and Creditor Law 8 274 (second); fraudulent conveyance, pursuant to Debtor and Creditor Law 8 275 2 [* 4] (third); fraudulent conveyance, pursuant to Debtor and Creditor Law 5 276 (l~urth); attorneys fees pursuant to Debtor and Creditor Law 8 276-a ( i t ) and piercing the corporate veil (sixth). ffh; Motion, Ex. A. On or about November 23,201 1, plaintiffs served an amended complaint, which asserted the Same causes of action slightly rearranged. Piercing the corporate veil w s placed a first, then the others succeeded in the same order. Id., Ex.C. Legal Standard On a motion to dismiss for failure to state a cause of action pursuant to CPLR 321 1 (a) (7), pleading is afforded a liberal constructiqn. The court accept[s] the facts as alleged in the the complaint as true, accord[s] plaintiffs the benefit of every possible favorable inference, and detedne[s] only whether the facts m alleged fit within any cognizable legal theory. Leon v Murfinez,84 NY2d 83, 87-88 (1994). However, 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. CanigZia v Chicago Tribune-N.t: News . Syndicate, 204 AD2d 233,233-234 (1st Dept 1994). Discussion [Aln attempt of a third party to pierce the corporate veil does not constitute a cause of ) action independent of that against the corporation; rather it is an assertion of facts and circumstances which will persuade the court to inpose the corporate obligation on its owners. Matter ofMorris v New YorkState Dept. of Taxation &Fin., 82 NY2d 135, 141 (1993). In order for a plaintiff to state a viable claim against a shareholder of a corporation in his or her individual capacity for actions purportedly taken on behalf of the corporation, plaintiff must allege facts that, if proved, indicate that the shareholder exercised complete domination and control over the corporation and abused the privilege of doing business in the corporate form to perpetrate a 3 [* 5] wrong or injustice. East Hampton Union Free School Dist. v Sandpebble Bldrs., Inc,, 16 NY3d 775,776 (201 1) (internal quotation marks and citation omitted). Evidence of dorJlimtion done does not suffice wi*out an additional showing that it led to inequity, fraud or malfeasance. * TNS Holdings v MKISec. Corp., 92 NY2d 335,339 (1998); James v Loran Realty VCorp., 85 AD3d 619,619-620 (1 st Dept 20 11) (L Here,while plaintiffs may have demonstrated that defendant Palazzolo exercised complete domination and control over Loran V, they have failed to show that P a l m l o s actions were for the purpose of leaving the corporation judgment proof o that his actions amounted to a wrong against them ). Factors to be considered by a COW in r determining whether to pierce the corporate veil include failure to adhere to corporate formalities, inadequate capitalization, commingling of assets, and use of corporate funds for pemonal use. Millennium Constr.,LLC v Loupolover, 44 AD3d 1016, 1016-10 17 (2d Dept 2007). No one factor is dispositive. Fantuzia Intl. Corp. v CPL Furs N Y , Inc.,67 AD3d 3 1 1, 512 (1st Dept 2009). This is the threshold issue for the,instm$ motion. It will be denied and Horowitz will remain a defendant if the amended complaint alleges facts that indicate that he exercised complete domination and control over Designers in order to frustrate the exercise of the judgment in the Federal Action. The m r t of plaintiffs overarching claim of a fraudulent eis caweyance by Designers to RTC will likely be determined by a subsequent dispositive motion andor trial. It is undisputed that Horowitz is the sole shareholder, officer and director of Designers, and the sole shareholder, officer and director of RTC. The salient allegations in the amended complaint regarding Horowitz s domination and control of Dosigners are: 4 [* 6] 0 ¬Lpurchased Burbemy s merchmdise wt his personal American Express credit c d far ih sale by Designers. Amended Complaint, 7 16. 0 He used Designers American Express business credit card to buy household and personal items. Id., T[ 17. He caused Designers to secure a loan With Provident Bank for $200,000, on April 22, 2009, during the prosecution of the Federal Action, with a security agreement that encumbered all of Designers assets. Id., 7 18. Designers web site announced that it w s leased and managed by RTCF in February a 2010. Id., 7 25. In April 2010, the address for Designers American Express business credit card was changed to the same address as RTC s.Id,, 7 26. 0 Horowitz licensed the www.designersimports.comto RTC for the nominal annual fee of $500. Id., 7 27. Horowitz depleted Designers bank accounts at Provident Bank, JP Morgan Chase Bank, N.A., and Columbia Bank. Id., 7 28. 8 Horowitz caused the launcbng of RTC s web site www.fashion5S.com, on May 11, 2010, selling the same merchandise as www.designersimports.com.Id., 7 3 1. RTC filed an assumed name certifiate with the Dapartment of State i the name of n Designers Imports, on June 22, 2010. Id., 7 33. Horowitz argues that the allegations of the amended complaint are general and fail to rise to the level of particularity required to state a prima facie claim for piercing the Gorposate veil. Memorandum of Law at 5. Be contrasw these perceived deficiencies wt courts findings ih where defendants were shuttlivg their personal funds i and out of the corporations without n regard to formality and to suit their immediate convenience [internal quotation marks and citation omitted] ( WalkovszQ v Carlton, 18 NY2d 414,420 [ 1966]), and where defendants used the companies money as a personal checking account for their own use and that of fiends, relatives and associates, and to pay for expenses such as their mothm s plastic surgery, their monthly household bills and parking tickets (Shisgal v Brown, 21 AD3d 845, 849 [lst Dept ZOOS]). 5 [* 7] However, Horowitz himself supplies copies of American Express business credit card statements for a card ending in 4100 1, billed to Horowitz at Designers Collection, paid by a bank account in his name, which also funded Designers payroll, showing purchases of general merchandise at Wal-Mart (on May 1,2009, for instance). Horowitz Affirm., Ex.U. Additionally, records for I another American Express business card, ending in 32004, billed to Horowitz at Designers Collection, paid by a check on the account of RTC Fashion Fashion5 8, show varied transactions with United Talmudical ( Educational Service ), Ed Hwdy Dresses, Godaddy, Wal- M r ,FedEx, gas stations, restaurants and other enterprises. Id., Ex.Q. This evidence, provided at by Horowitz, is sufficient to support an allegation of the use of corporate funds for personal use at both Designers and RTC, in spite of Horowitz s assertion that bank records demonstrate that RTC does not pay defendant Horowitz s personal expenses. Memorandum of Law at 7 . Horowitz acknowledges that Designers, while still listed as an active corporation, is no longer an operating business. Id. He further notes that RTC was formed in February 2010 and took on the assumed name Designer Imports in June 2010, during the later days ofthe Federal Action. Id. He contends that separate business addresses, bank accounts and tax returns for Designers and RTC demonstrate their independence, in spite of common ownership. However, Designers dormancy seems to diminish the importance of its separate physical and f m c i a l position from RTC. Horowitz does not identify when Designers ceased operating, but it may well have wound down conveniently as RTC wose, m k n their purported autonomy more aig illusion than fact. Indeed, the life cycle of these; entities seems to correspond to the progress of the Federal Action. Horowitz contends that he has at all times owned in his individual capacity the web site www.designersimports.com, which he allowed Designers to use. Id. at 9. Then, Designers 6 [* 8] would not have been stripped of its most valuable asset, as characterized by the amended complaint (Amended Complaint 77 27,32), when the web site was licensed to RTC. Plaintiffs offer a different interpretation of the same facts: Designers used the website owned by Borowitz www.desipersimports.com,without adequate consideration and failed to observe any corporate formalities as there was no arms length transaction or agreement between Horowitz and Designers for the use of such website. The tangle of interrelated transactions among Horowitz, Designers and RTC, instituted by Horowitz, de ¬eats the granting of summary judgment in his fivor, dismissing the complaint. He demonstrates little more than separate bank accounts and business addresses for the two companies, while documenting some financial transactions that blur the distinction between business and personal m t e s He offers no evidence that the atr. transfers of www.designersimports.com first to Designers and then to RTC were arm s-length transactions, or conducted with a modicum of formality. Godaddy.com s invoice for registering www,designersimports.com is addressed to Asher Horowitz[,] Designers Imports. The adoption by RTC of the assumed name Designers Imports further serves to blur the distinctions between the companies. Horowitz s conveniently-timed creation of RTC, licensing of www.designersimports.comto RTC, and taking Designers name for RTC together seem intended to maintain continuity in the marketplace while placing obstacles in plaintiffs attempts t9 execute judgment in the Federal Action. Therefore, the first cause of action is sustained. Horowitz also argues that plaintiffs allegatign that the licensing of www.designersirnports.com to RTC was a fraudulent conveyance is deficient because they fail to indicate the value of the transferred property and the inadequacy of the consideration. IDC (Queens) Corp. v Illuminating Experiences,220 AD2d 337,337 (1st Dept 1995) ( The action was properly dismissed for failure to plead the alleged fraudulent conveyance wt the requisite ih 7 [* 9] particularity [CPLR 301 6 (b)]. We note the absence of any specific allegation concerning the value Qfthe transferred property or otherwise showing why the consideration given therefor w s a inadequate ). Plaintiffs counter that violations of Debtor and Creditor Law 85 273, 273-EL, 274 and 275 do not require pleadings of heightened particularity pursuant to CPLR 3016 (b) because they do not require proof of an actual intent to defraud. Gateway I Group v Pprk Ave. Physicians, P.C., 62 AD3d 141, 149 (2d Dept 2009) f plaintiff WEI not required to plead violations of Debtor and Creditor Law $8 273,273-a, 274 and 275 wt such heightened ih parhcularity pursuant to CPLR 3016 [b] ). The court will be guided by Gatewqw, where the Appellate Division specifically cites Debtor and Creditor Law $ # 273,273-a,274 and 275, not IDC (Queens) Corp. v Illuminating Experiences (220 AD2d 337, supra), which has no references to provisions of the Debtor and Creditor Law. Horowitz maintains that Plaintiffs are not creditors of defendant Horowitz and are therefore foreclosed from attacking transactions involving his personal assets. Memorandum of Law at 12. However, that is the e$sence of this action, a charge that Horowitz and his business entities, Designers and RTC, are legally indistinguishable, and their obligations are his, notably plaintiffs judgment against Designers i the Federal Action. In all, plaintiffs allegations are n sufficient to meet the liberal pleading standards of CPLR 321 1 (a) (7), and Horowitz s motion shall be denied. Accordingly, it is ORDERED that defendant Asher Horowitz s motion, pursuant to CPLR 321 1 (a) (7), to dismiss the complaint as against him is denied; nnd it is further ORDERED that defendant Asher Horowitz shall serve an answer to the amended complaint or otherwise respond thereto within 20 days of service of a copy of this order, with 8 [* 10] notice of entry; and it is further ,. ORDERED that directed to appear for a status conference in Room ENTER: J.S.C. LOUIS B. YORK 9 I

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.