Plains Marketing, L.P. v. Kuhn, No. 1:2010cv02520 - Document 16 (E.D.N.Y. 2011)
Court Description: ORDER granting 8 Motion to Dismiss. Ordered by Senior Judge I. Leo Glasser on 10/17/2011.
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Plains Marketing, L.P. v. Kuhn Doc. 16 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ------------------------------------------------------x PLAINS MARKETING, L.P., Plaintiff, Mem orandum and Order 10 -cv-2520 - against GEORGE KUHN Defendant. ------------------------------------------------------x GLASSER, United States District J udge: Plaintiff Plains Marketing, L.P. (“plaintiff” or “Plains Marketing”) brought this diversity action against defendant George Kuhn (“defendant” or “Kuhn”), an officer of SAFE *T* TRANSPORT, Inc. (“Safe T Transport”), claim ing he is personally liable for the corporation’s breach of various sales agreem ents. Plaintiff seeks dam ages in the am ount of $ 435,451.30 . Before the Court is defendant’s m otion to dism iss the com plaint, pursuant to Rules 12(b)(2), (3), and (6) of the Federal Rules of Civil Procedure. Defendant argues that: 1) plaintiff has pleaded insufficient facts to pierce the corporate veil of Safe T Transport and hold him personally liable and therefore the com plaint fails to state a claim upon which relief m ay be granted; 2) venue in this jurisdiction is not proper; and 3) the court lacks personal jurisdiction over the defendant. For the following reasons the Defendant’s m otion is GRANTED. BACKGROU N D The facts alleged in the com plaint are assum ed to be true for the purpose of this m otion. See Nechis v. Oxford Health Plans Inc., 421 F. 3d 96, 10 0 (2d Cir. 20 0 5). In 1 Dockets.Justia.com addition, for the reasons discussed m ore fully below, the Court will consider certain docum ents that are incorporated by reference or integral to the com plaint. See DiFolco v. MSNBC Cable LLC, 622 F. 3d 10 4, 111 (2d Cir. 20 10 ). Supplem entary affidavits subm itted by the parties that are not incorporated into the com plaint will be considered for purposes of deciding the venue issue only. See Fine Foods Int’l, L.P. v. N. Am . Fine Foods Inc., No. 99-CV-10 62(ILG), 1999 WL 1288681, *1 (E.D.N.Y. Nov. 8, 1999) (citation om itted). Plaintiff is a Texas lim ited partnership with its place of business in Houston, Texas. Com plaint, dated May 24, 20 10 (“Com pl.”) ¶1. Between Septem ber 7, 20 0 7 and Septem ber 2, 20 0 8, plaintiff entered into 16 separate written sales agreem ents (the “Sales Agreem ents”) with Safe T Transport, which the plaintiff now alleges is a “fictitious corporate entity.” Com pl. ¶¶ 4-7; Mot. to Dism iss, Ex. A; Affidavit in Opposition of Mike McBride (“McBride Aff.”), Ex. B. By these Sales Agreem ents, Plains Marketing agreed to m ake scheduled deliveries of 60 ,0 0 0 gallons of propane gas per m onth to Safe T Transport at an address in Indianapolis, Indiana. Com pl. ¶¶ 5, 9; Mot. to Dism iss, Ex. A; McBride Aff. Ex. B. Under “SOLD TO” and “SHIP TO,” the Sales Agreem ents listed Safe T Transport. McBride Aff., Ex. B The Sales Agreem ents also state “THIS CONSTITUTES A CONTRACT BETWEEN OUR RESPECTIVE COMPANIES.” Id. The Sales Agreem ents were executed by George Kuhn, on behalf of Safe T Transport, and J ohn DeJ ean, on behalf of Plains Marketing GP Inc., the General Partner of Plains Marketing. Id. Im m ediately beneath the parties’ signatures are references to term s and conditions governing the Sales Agreem ents. One of these agreem ents, dated Septem ber 2 7, 20 0 7, was “Subject to Term s & Conditions attached” (the “General Term s & Conditions”). Mot. to Dism iss, Ex. A. The other fifteen agreem ents, all dated August 14, 20 0 8, stated “This contract shall be governed by Plains Marketing Canada L.P. General Term s and Conditions for Non-Crude Products Sales and Purchases Dated J une 1, 20 0 8” (the “Canada Term s & Conditions”). McBride Aff., Ex. B. Section 16.0 of The Canada Terms & Conditions includes the following: 16.0 GOVERNING LAW AND J URISDICTION 16.1 Canada or the United States: If custody transfer from Seller to Buyer under this Agreem ent takes place in Canada, Section 16.1.1 shall apply. If custody transfer from Seller to Buyer under this Agreem ent takes place in the United States, Section 16.1.2 shall apply. If no custody transfer occurs, Section 16.1.1 shall apply. 16.1.1 Laws of Alberta: This Agreem ent shall be governed by and construed in accordance with the laws of the Province of Alberta. . . . Each of the Parties hereto irrevocably and unconditionally consents to subm it to the exclusive jurisdiction of the courts located in Alberta, Canada for any action suits or proceedings arising out of or relating to this Agreem ent. . . . 16.1.2 Laws of New York: this agreem ent shall be governed by and construed in accordance with the laws of the State of New York . . . . Each of the Parties hereto irrevocably and unconditionally consents to subm it to the exclusive jurisdiction of the courts located in the United States Federal District Court for the Southern District of New York and the United States Federal District Court for the Eastern District of New York, or, if such courts decline to exercise or do not have jurisdiction, then New York State District Courts. . . . McBride Aff., Ex. A. Plaintiff claim s that, under these term s and conditions, Kuhn consented to venue in this jurisdiction. Com pl. ¶ 2. 3 Plains Marketing purchased propane to fulfill its obligations under the Sales Agreem ents. Com pl. ¶ 11. Defendant failed to take delivery pursuant to the term s of the Sales Agreem ents. Id. ¶ 12. After giving notice of default via certified m ail, plaintiff sold the propane inventory at a loss. Id. ¶¶ 14-15. On May 24, 20 10 , plaintiff comm enced this action, seeking com pensation for that loss and other dam ages, pursuant to the term s of the Sales Agreem ents. Id. ¶¶ 15-19. D ISCU SSION I. Motion to Dism iss for Failure to State a Claim Upon Which Relief Can be Granted A. Legal Standard for the Sufficiency of a Com plaint On a m otion to dism iss for failure to state a claim , a district court assesses the form al feasibility of the plaintiff’s claim for relief by applying a “plausibility standard.” Bell Atlantic Corp. v. Twom bly, 550 U.S. 544, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (20 0 7). As the Second Circuit has explained, following the Suprem e Court’s decision in Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (20 0 9), the Court is guided by two principles. Harris v. Mills, 572 F. 3d 66, 72 (2d Cir. 20 0 9). First “although ‘a court m ust accept as true all of the allegations contained in a com plaint,’ that ‘tenet’ ‘is inapplicable to legal conclusions and ‘[t]hreadbare recitals of the elem ents of a cause of action, unsupported by m ere conclusory statem ents, do not suffice.’” Id. (quoting Iqbal, 129 S. Ct. at 1949). Second, “‘only a com plaint that states a plausible claim for relief survives a m otion to dism iss,’ and ‘[d]eterm ining whether a com plaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and com m on sense.’” Id. 4 (quoting Iqbal, 129 S. Ct. at 1950 ). To be sufficient, a com plaint not only m ust include a short, plain statem ent of the claim showing the pleader is entitled to relief, Fed. R. Civ. P. 8(a), but also “requires m ore than labels and conclusions, and a form ulaic recitation of the elem ents of a cause of action will not do. Factual allegations m ust be enough to raise a right to relief above the speculative level. . . .” Twom bly, 550 U.S. at 544 (internal citations om itted). a. Consideration of Extrinsic Docum ents on a Rule 12(b)(6) Motion to Dism iss Both parties have subm itted m em oranda, affidavits, and exhibits in relation to this m otion to dism iss. However, when evaluating the sufficiency of the com plaint, a court m ust lim it its analysis “to facts stated in the com plaint or docum ents attached to the com plaint as exhibits or incorporated by reference.” Nechis, 421 F. 3d at 10 0 ; Leonard F. v. Isr. Disc. Bank of N.Y., 199 F. 3d 99, 10 7 (2d Cir. 1999) (district court m ust “confine its consideration to facts stated on the face of the com plaint or incorporated in the com plaint by reference, and to m atters of which judicial notice m ay be taken.”). To be incorporated by reference, “the com plaint m ust m ake a clear, definite and substantial reference to the docum ents.” DeLuca v. AccessIT Grp., Inc., 695 F. Supp. 2d 54, 60 (S.D.N.Y. 20 10 ). Where a docum ent is not incorporated by reference, “the court m ay nevertheless consider it where the com plaint ‘relies heavily upon its term s and effect,’ thereby rendering the docum ent ‘integral’ to the com plaint.” DiFolco, 622 F. 3d at 111 (quoting Mangiafico v. Blum enthal, 471 F. 3d 391, 398 (2d Cir. 20 0 6) (citation om itted)); see also Cham bers v. Tim e Warner, Inc., 282 F. 3d 147, 153 (2d Cir. 20 0 2). 5 In this instance, the Court finds that although the Sales Agreem ents, the General Term s & Conditions, and the Canada Terms and Conditions are not attached to the com plaint, they are incorporated by reference and integral to the com plaint and m ay be considered by the Court in deciding this m otion. See Nechis, 421 F. 3d at 10 0 ; Int’l Audiotext Network v. Am . Tel. & Tel. Co., 62 F. 3d 69, 72 (2d Cir. 1995) (contract between parties “integral” to com plaint alleging breach and m ay be considered on a m otion to dism iss). The Court, of course, is not constrained to accept the com plaint’s allegations regarding the legal construction of these docum ents. Int’l Audio Network, 62 F. 3d at 72. There is no basis for considering extrinsic affidavits or other m aterials that are not referenced in or integral to the com plaint. “[A] district court errs when it considers affidavits and exhibits subm itted by defendants or relies on factual allegations contained in legal briefs or m em oranda in ruling on a 12(b)(6) m otion to dism iss.” Friedl v. City of New York, 210 F. 3d 79, 83-84 (2d Cir. 20 0 0 ) (citations om itted); see also J ohnson v. Levy, No. 10 -Civ-3217 (ADS), 20 11 WL 4375671, at *5 (E.D.N.Y. Sept. 19, 20 11) (declining to consider affidavits subm itted “for the purpose of refuting the facts alleged in the com plaint”); Elm owitz v. Exec. Towers at Lido, LLC, 571 F. Supp. 2d 370 , 375 n.4 (E.D.N.Y. 20 0 8) (declining to consider exhibits subm itted in conjunction with a m otion to dism iss). b. Piercing the Corporate Veil In m aking this m otion to dism iss, Kuhn argues that the proper defendant in this action is Safe T Transport and that plaintiff has failed to plead sufficient facts to hold 6 Kuhn personally liable for the Sales Agreem ents. Mot. to Dism iss 2. For the reasons set forth below, the Court finds Kuhn’s argum ents dispositive. It is clear that the defendant executed the agreem ents as an officer or agent of Safe T Transport and that plaintiff’s expectation was that it was form ing a contract with a corporate entity, Safe T Transport, not with Kuhn personally. Under both “SOLD TO” and “SHIP TO,” the Sales Agreem ents list Safe T Transport. Plaintiff’s own custom er num ber for the transactions was “SAFETTR.” And the Sales Agreem ents state “THIS CONSTITUTES A CONTRACT BETWEEN OUR RESPECTIVE COMPANIES.” Although George Kuhn signed the agreem ent, he did so on behalf of Safe T Transport, in the sam e m anner that Plains Marketing agreed to the contract by the signature of J ohn DeJ ean. A corporation is an inanim ate, artificial entity and can only act through its officers, em ployees, and other agents. See Com m odity Futures Trading Com m . v. Weintraub, 471 U.S. 343, 349– 48, 10 5 S.Ct. 1986, 85 L.Ed.2d 372 (1985). As a result, the liability for contracts signed on behalf of a corporation is im puted to the corporation, not the agent. To hold an agent or officer personally responsible for the contracts of a corporation requires the court to set aside the corporate form or “pierce the corporate veil.” See In re Adelphia Com m s. Corp., 322 B.R. 50 9, 522-23 (Bankr.. S.D.N.Y. 20 0 5) (discussing the requirem ents for piercing the corporate veil and holding an officer of a corporation personally liable). Under New York’s choice of law rules, the law of the state of the defendants’ incorporation generally is applied to claim s piercing the corporate veil. Apex Mar. Co. v. OHM Enters., No. 10 -Civ-8119 (SAS), 20 11 WL 1226377, at *2, n.23 (S.D.N.Y. Mar. 30 , 20 11) (citing Soviet Pan Am Travel Effort v. Travel Com m ., Inc., 756 F. Supp. 126, 131 7 (S.D.N.Y. 1991)). However, in the absence of countervailing public policy, the parties m ay choose which state’s law to apply. William Passalacqua Builders, Inc. v. Resnick Devs. S., Inc., 933 F. 2d 131, 137 (2d Cir. 1991); Walter E. Heller & Co. v. Video Innovations, Inc., 730 F. 2d 50 , 52 (2d Cir. 1984). In this case, defendant claim s that Safe T Transport is duly incorporated in Nevada, while plaintiff claim s the dispute should be construed in accordance with the parties’ choice of New York law, as specified Section 16.1.2 of the Canada Term s & Conditions. The deficiencies in the com plaint are so serious as to render the distinctions between Nevada and New York law im m aterial and the outcom e the sam e under either state’s laws. To pierce Safe T Transport’s corporate veil, plaintiff would need to set forth facts showing, first, that Kuhn abused the corporate form by exerting such dom ination over the corporation or utilizing it for such personal gain that the corporation was a m ere alter-ego. See Truck Ins. Exch. v. Swanson, 124 Nev. 629, 189 P. 3d 656 (20 0 8); Morris v. N.Y. State Dep’t of Taxation & Fin., 82 N.Y. 2d 135, 141, 623 N.E. 2d 1157, 60 3 N.Y.S.2d 80 7 (1993). Supporting factual allegations could include, for exam ple, com ingling of funds, undercapitalization, unauthorized diversion of funds, treatm ent of corporate assets as the individual's own, and failure to observe corporate formalities. See MAG Portfolio Consultant, GMBH v. Merlin Biom ed Grp. LLC, 268 F. 3d 58, 63 (2d Cir. 20 0 1) (sum m arizing New York state law); Polaris Indus. Corp. v. Kaplan, 10 3 Nev. 598, 747 P. 2d 884, 887 (1987). Second, plaintiff would need to set forth facts showing that m aintaining the corporate form would sanction a fraud, illegality, or injustice against the plaintiff. Truck Ins. Exch, 124 Nev. at 635; Morris, 82 N.Y. 2d at 141. 8 Here, the com plaint does not even attem pt to address the elem ents necessary to pierce the corporate veil. In its m em orandum opposing this m otion, the plaintiff m akes several argum ents why Kuhn should be personally liable but, for the reasons previously set forth, the Court cannot consider factual allegations contained in legal m em oranda. The com plaint itself m erely states, repeatedly, that Safe T Transport is a “fictitious” entity. This is precisely the type of “conclusory allegations or legal conclusions m asquerading as factual conclusions” that cannot defeat a m otion to dism iss. Kirch v. Liberty Media Corp., 449 F. 3d 388, 398 (2d Cir. 20 0 6) (quoting Sm ith v. Local 819 I.B.T. Pension Plan, 291 F. 3d 236, 240 (2d Cir. 20 0 2)). The only factual allegation in the com plaint is that Safe T Transport is not authorized to do business in Ohio or Indiana. This single factual allegation falls far short of those necessary to pierce the corporate veil. Accordingly, the com plaint m ust be dism issed for failure to state a claim against Kuhn. II. Motion to Dism iss for Im proper Venue Because plaintiff has failed to dem onstrate that Kuhn is personally liable for the Sales Agreem ents, he is not bound by the Sales Agreem ents’ forum selection clause. Absent a choice of forum by the parties, there is no basis for venue in this jurisdiction. In this diversity action, venue is governed by 28 U.S.C. § 1391(a), which provides, in relevant part: A civil action wherein jurisdiction is founded only on diversity of citizenship m ay, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the sam e State, (2) a judicial district in which a substantial part of the events or om issions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is 9 situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the tim e the action is com m enced, if there is no district in which the action m ay otherwise be brought. Neither party alleges any connection to New York. The defendant resides in Ohio. He does no business in New York, caused no injury in New York, and was not served in New York. No events or om issions giving rise to the suit occurred in New York. There is no basis for personal jurisdiction in New York over the defendant. Furtherm ore, it is apparent that this action could have been brought in Ohio, where the defendant resides and where defendant concedes a substantial part of the events occurred. Reply Mem . in Opp. 6-7. Thus, venue is not proper in this jurisdiction and the defendant’s m otion to dism iss is granted for that reason as well. III. Personal J urisdiction Having found that this action should be dism issed for failure to state a claim and im proper venue, the Court finds it unnecessary to address the issue of personal jurisdiction. 10 CON CLU SION For the foregoing reasons, defendant’s m otion to dism iss is granted and the com plaint dism issed without prejudice. SO ORD ERED . Dated: Brooklyn, New York October 17, 20 11 _ _ / s/ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ I. Leo Glasser, U.S.D.J . 11
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