F & M Precise Metals, Inc. v Goodman
Annotate this CaseDecided on August 25, 2004
Supreme Court, Nassau County
F & M PRECISE METALS, INC., Plaintiff,
against
NELSON GOODMAN, PREMIER INNOVATIONS, LLC; and PREMIER STORE FIXTURES, INC., Defendants.
6546-04
COUNSEL FOR PLAINTIFF
Grimes & Battersby, LLP
405 Lexington Avenue - 26th Floor
New York, New York 10174
COUNSEL FOR DEFENDANT
Law Offices of Jack Segal, LLP
1428 36th Street - Suite 209
Brooklyn, New York 11218
Leonard B. Austin, J.
Defendants Nelson Goodman and Premier Store Fixtures, Inc. move for an order, pursuant to CPLR 3211(a)(7), dismissing the complaint as against them and dismissing the complaint, generally.
BACKGROUND
This action arises out of the failure of Defendant Premier Innovations, LLC ("Premier") to pay sums due to Plaintiff F&M Precise Metals, Inc. "(F & M") under a written licensing agreement dated April 8, 2002 (the "Agreement"). Defendant Nelson Goodman ("Goodman"), vice president of Premier, negotiated and signed the Agreement, which requires Premier to pay 50 cents per licensed product sold and requires royalties to be calculated and paid on a monthly basis. It also requires a written royalty statement for each royalty period.
The complaint alleges that Premier sold licensed products pursuant to the Agreement and failed to pay a single royalty or provide a single royalty statement.
With respect to the remaining Defendants, Plaintiff alleges that Goodman negotiated the licensing agreement. Plaintiff "believed" it was entering into an agreement with Goodman personally. However, F & M also alleges that before signing the Agreement, Goodman requested it to enter the Agreement with Premier, a newly formed limited liability company, as the licensee. Thereafter, Goodman signed the Agreement only in his capacity as vice president of Premier.
With respect to Defendant Premier Store Fixtures, Inc. ("Fixtures"), the complaint alleges, "that upon information and belief", Fixtures is "the parent company of or is otherwise owned by or affiliated with" Defendant Premier and that both are located at 200 Sherwood Avenue, Farmingdale, New York, which is also Goodman's business address.
The complaint alleges five causes of action against all Defendants. The first is for breach of contract. The second cause of action is for breach of the duty of good faith and fair dealing. The third cause of action is for unjust enrichment. In the fourth cause of action, Plaintiff seeks an accounting. The fifth cause of action is for fraud in the inducement.
Goodman and Fixtures now move to dismiss on the grounds that they were not parties to the Agreement and that there was no fraud as a matter of law. Plaintiff argues that the court should pierce the corporate veil.
DISCUSSION
A.Fraud/Fraud in the Inducement
Plaintiff alleges that "Goodman falsely represented to F&M that he was entering into a contractual relationship with F&M" and that F&M "relied upon the misrepresentation". Accordingly, Plaintiff urges that the complaint states "a valid claim against Defendants for fraud in the inducement." The Court disagrees.
The required elements of a cause of action for fraud are representation, falsity, scienter, deception, and injury. Cerabono v. Price, 7 A.D.3d 479 (2nd Dept. 2004); Shao v. 39 College Point Corp., 309 A.D.2d 850 (2nd Dept. 2003); Channel Master Corp. v. Aluminum Limited Sales, Inc., 4 N.Y.2d 403 (1958); and Sabo v. Delman, 3 N.Y.2d 155, 159 (1957), quoting, Ochs v. Woods, 221 N.Y. 335, 338 (1917). In order to establish deception, any reliance upon the false representation must be "justifiable under all the circumstances" Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 322 (1959). See also, Madison Home Equities, Inc. v. Echeverria, 226 A.D.2d 435 (2nd Dept. 1999); Cohen v. Cerier, 243 A.D.2d 670 (2nd Dept. 1997); and Brown v. Lockwood, 76 A.D.2d 721 (2nd Dept. 1989). [*2]
F& M's cause of action for fraudulent inducement must be dismissed because the required element of deception or justifiable reliance is negated by the complaint itself. Plaintiff states that Goodman requested F&M to enter the Agreement with the newly formed limited liability company instead of Goodman personally. (Complaint ¶ 11) Goodman signed the Agreement solely as an officer of the LLC. Such signature irrefutably establishes that he did not act in his personal capacity. Maranga v. McDonald & T. Corp., 8 A.D.3d 351 (2nd Dept. 2004). In addition, it is clear from the papers submitted that Plaintiff was represented by counsel, and that he drafted the Agreement which recites that Premier, not Goodman, is the licensee. It is not for this Court to rewrite or modify an agreement negotiated at arm's length by competent counsel. Backer Mgt. Corp v. Acme Quilting Co., 46 N.Y.2d 211 (1978).
It is well settled that " 'if . . . the other party has the means available to him of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation, he must make use of those means, or he will not be heard to complain that he was induced to enter into the transaction by misrepresentations . . . '." Danann Realty Corp. v. Harris, supra at 322 (1959), quoting, Schumaker v. Mather, 133 N.Y. 590, 596 (1892). Thus, Plaintiff knew before entering into the Agreement that Innovations was to be the licensee; not Goodman. Plaintiff is charged with knowledge of the significance of Goodman's signature in a representative capacity. The complaint cannot be found to state a cause of action in fraud because the claimed reliance on the alleged misrepresentation by Goodman is not justifiable or reasonable under the circumstances presented. Danann Realty Corp. v. Harris, supra at 322. One whose lack of due care creates their own difficulties cannot claim fraud against the other party. Rodas v. Manitaras, 159 A.D.2d 341, 343 (1st Dept. 1990). See also, McManus v. Moise, 262 A.D.2d 370 (2nd Dept. 1999); and Rudnick v. Glendale Systems, Inc., 222 A.D.2d 572 (2nd Dept. 1995). Put succinctly, a party's failure to learn that which is easily ascertainable negates any claim of reasonable reliance. Breco Environmental Contractors v. Town of Smithtown, 307 A.D.2d 330 (2nd Dept. 2003); Stuart Silver Assocs. v. Baco Dev. Corp., 245 A.D.2d 96 (1st Dept. 1997); Philips Credit Corp. v. Regent Health Grp., Inc., 953 F. Supp. 482 (SDNY 1997); and Pappas v. Harrow Stores, Inc., 140 A.D.2d 501 (2nd Dept. 1988).
B.Piercing the Corporate Veil Goodman
With respect to the remaining causes of action, Plaintiff avers that the court should pierce the corporate veil. The complaint does not include a cause of action for such relief and Plaintiff does not request leave to replead. Thus, the issue is whether a cause of action to pierce the corporate veil can be made out from within the four corners of the pleading, together with the Plaintiff's evidence in opposition to the motion. CPLR 3211(c). See also, Rovello v. Orofino Realty Co., 40 N.Y.2d 633 (1976).
To successfully pierce the corporate veil, Plaintiff must show that: " '(1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the Plaintiff which resulted in Plaintiff's injury'." Old Republic Nat. Title Ins. Co. v. Moskowitz, 297 A.D.2d 724, 725 (2nd Dept. 2002), quoting, Matter of Morris v New York State of Dept. of Taxation & Fin., 82 N.Y.2d 135, 141 (1993). The corporate veil can also be pierced when "there has been, inter alia, a failure to adhere to corporate formalities, inadequate capitalization, use of corporate funds for personal purpose, overlap in ownership and directorship, or common use of office space and [*3]equipment". Forum Ins. Co. v. Texarkoma Transp. Co., 229 A.D.2d 341 (1st Dept. 1996).
The allegations in the complaint are that Innovations and Fixtures have the same address and that Goodman is an officer of one and a principal of the other. The opposition alleges that Goodman exercised complete domination with respect to the transaction sued upon. Giving Plaintiff the benefit of every favorable inference (Leon v. Martinez, 84 N.Y.2d 83 [1994]; and Dye v. Catholic Medical Center of Brookly & Queens, Inc., 273 A.D.2d 193 [2nd Dept. 2000]), these allegations are insufficient to support a claim to pierce the corporate veil, as there are no factual allegations to support the second requirement of wrongdoing other than a mere failure of the new business venture. In order to properly allege a cause of action against a shareholder or a corporate officer, a plaintiff must do more than conclusorily state the shareholder or officer exercises dominion and control over the corporation. Triemer v. Bobsan Corp., 70 F. Supp. 2d 375, 377 (S.D.N.Y. 1999). See also, Matter of Sharon Towers, Inc. v. Bank Leumi Trust Co. of NY, 50 A.D.2d 509 (1st Dept. 1998).
Plaintiff suggests that there is wrongdoing in Goodman's formation of the LLC for the new business venture. A limited liability company is validly and legally formed to protect against personal liability; as its name suggests. Limited Liability Company Law § 609(a) provides that a member or manager of a limited liability company is not "liable for any debts, obligations or liabilities of the limited liability company ... whether arising in tort, contract or otherwise, solely by reason of ... participating in the business of the limited liability company". Other than suggesting that Goodman wrongfully shielded himself from liability, the complaint "does not include a single specific allegation of how [Defendants] misused the corporate form". Triemer v. Bobsan Corp., supra. For example, F&M alleges that the LLC was used for Goodman's personal business without identifying what personal, as compared to corporate business, Goodman pursued. Neither the complaint nor the opposition alleges facts by which F&M's conclusory allegations concerning wrongdoing can be supported. Accordingly, the complaint should be dismissed as against Goodman. See, Lichtman v. Estrin, 282 A.D.2d 326 (1st Dept. 2001).
C.Piercing the Corporate Veil Fixtures
With respect to Fixtures, the only allegation in the complaint is that Fixtures and Innovations have the same address and that, "upon information and belief", Fixtures is the parent or the subsidiary corporation or has some other unidentified relationship with Innovations. In order for a complainant to meet the legal threshold for imposing liability upon a corporate parent for the acts of a subsidiary, it must plead the same elements necessary to pierce a corporate veil; to wit: facts which demonstrate that the parent exercised complete domination and that such domination was used to commit a fraud or wrong against the Plaintiff. "Recasting the aforementioned criteria for piercing the corporate veil and framing them as allegations in the complaint , does not, without more, sustain a cause of action against the parents" Triemer v. Bobsan Corp., supra at 377. F&M has made no factual allegations against Fixtures. Accordingly, the complaint must also be dismissed as against Fixtures.
Accordingly, it is,
ORDERED, that Defendants' motion to dismiss is granted to the extent that the complaint as against Defendants Nelson Goodman and Premier Store Fixtures, Inc. is hereby dismissed; and the fifth cause of action is dismissed with prejudice; and it is further,
ORDERED, that counsel shall appear for a Preliminary Conference on September 21, 2004 at 9:30 a.m. [*4]
This constitutes the decision and Order of the Court.
Dated: Mineola, NY _____________________________
August 25, 2004 Hon. LEONARD B. AUSTIN, J.S.C.
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