Lewis v Proctor & Gamble, Inc.

[*1] Lewis v Proctor & Gamble, Inc. 2007 NY Slip Op 52488(U) [18 Misc 3d 1110(A)] Decided on December 18, 2007 Supreme Court, New York County Edmead, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 December 18, 2007
Supreme Court, New York County

Raymond P. Lewis d/b/a RPL Consulting, Plaintiff,

against

Proctor & Gamble, Inc. and Dr. Weaver-Coleman, Defendants.



109331/2007

Carol R. Edmead, J.

MEMORANDUM DECISION

Plaintiff Raymond P. Lewis d/b/a RPL Consulting ("plaintiff") commenced this action against defendants Dr. Vanessa Weaver-Coleman ("Dr. Coleman") and Proctor & Gamble, Inc. ("Proctor & Gamble") for conversion, fraud, and breach of guarantee.

Dr. Coleman now moves to dismiss the complaint pursuant to CPLR 3211(a)(1) based on documentary evidence, CPLR 3211(a)(10) for lack of an indispensable party, CPLR 1001 and 1003 for failure to join a necessary party, and New York Limited Liability Law 609 and 610, which protects limited liability members from liability.

The complaint alleges that Dr. Coleman "owned and controlled" VanJo Productions, LLC ("VanJo"), and entered into a contract with plaintiff on behalf of VanJo. According to Dr. Coleman, VanJo operates a theatrical company which has produced a musical play, "If This Hat Could Talk" (the "Musical"). The record indicates that VanJo entered into a consulting employment agreement (the "Agreement") with the plaintiff in connection with the production of the Musical. In March 2007, VanJo terminated plaintiff's Agreement.[FN1] Dr. Coleman asserts that plaintiff knew of the contractual relationships between VanJo and its sponsors due to his Director of Sponsorship position with VanJo. After his discharge, plaintiff made disparaging remarks about Dr. Coleman and VanJo, which caused WalMart to withdraw its financial support from VanJo's play. Plaintiff has attempted to involve VanJo's vendors and cast members in order to disparage VanJo and cause its sponsors to abandon VanJo's efforts to finance and promote the Musical in 2008. VanJo now stands to lose Proctor & Gamble as a sponsor for the Musical as a result of plaintiff's frivolous complaint.

Dr. Coleman argues that the documentary evidence, to wit: the complaint, alleges that [*2]pursuant to "the annexed attorney communication," VanJo owes plaintiff $34,000.[FN2] Further, Dr. Coleman and Proctor & Gamble are not parties to the contract between VanJo and plaintiff.

Dr. Coleman contends that based on the allegations in the complaint, VanJo is a necessary party to this action, and the failure to name said party warrants dismissal pursuant to CPLR 3211(10). Further, VanJo should be joined to plaintiff's action pursuant to CPLR 1001(a) and 1003 in order to afford complete relief to all the parties.

Further, Dr. Coleman argues, the subject contract is between plaintiff and VanJo, a limited liability company, of which she is a member. Thus, pursuant to New York Limited Liability Law 609 and 610, Dr. Coleman is not a proper party a matter of law.

Further, given the complete lack of merit to plaintiff's action as against Dr. Coleman, sanctions should be issued against the plaintiff in the form of costs and attorneys' fees pursuant to NYCRR §130.1.1 incurred by Dr. Coleman to defend this action.

In opposition, plaintiff argues that VanJo is not an indispensable party because there is no claim against or contract with VanJo within the complaint, the contract referred to in the complaint requires the parties to arbitrate their disputes, and the claims in the complaint are against Dr. Coleman individually and as agent of Proctor & Gamble and not as the agent of VanJo.

Further, limited liability law does not shield Dr. Coleman from dishonoring her personal guarantee or from her acts of fraud and conversion of funds which were tendered by Proctor & Gamble and earmarked for the plaintiff. Plaintiff contends that Dr. Coleman fraudulently induced him to enter into a contract with the intent to withhold payment thereunder. Additionally, Dr. Coleman fraudulently induced plaintiff by falsely stating that funds were available and that he would be paid upon her receipt thereof from Proctor & Gamble. Plaintiff attests that Dr. Coleman personally guaranteed all payments to the plaintiff. However, Dr. Coleman submitted expense vouchers to Proctor & Gamble with regard to amounts owed to the plaintiff, and converted the funds she received by retaining the money for her personal benefit. Dr. Coleman held herself out as the agent of Proctor & Gamble in all her dealings with the plaintiff, and to the extent that Dr. Coleman did not have the authority to act on behalf of Proctor & Gamble, her actions would be fraudulent.

Analysis

Dismissal Based on Documentary Evidence

Under CPLR 3211(a)(1), dismissal of a complaint is warranted where "the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law"

based on documentary evidence [150 Broadway NY Associates, L.P. v Bodner, 14 AD3d 1 [1st Dept 2004]). The term "documentary evidence" referred to in CPLR 3211(a)(1) "typically means judicial records such as judgments and orders or out-of-court documents such as contracts, deeds, wills, and/or mortgages and includes "[a] paper whose content is essentially undeniable and which, assuming the verity of its contents and the validity of its execution, will itself support the ground on which the motion is based" (Webster Estate of Webster v State of New York, 2003 WL 728780 (N.Y.Ct.Cl.), 2003 NY Slip Op. 50590(U) citing Siegel, Practice Commentaries, [*3]McKinney's Cons Laws of NY, Book 7B, CPLR C3211:10, at 20 and 7 Weinstein-Korn-Miller, NY Civil Practice, ¶ 3211.06). Other than the complaint, Dr. Coleman submits no other documentary evidence to flatly dispute allegations in the complaint. Thus, as there is no "documentary evidence" for the Court to consider, dismissal pursuant to such section is unwarranted (see e.g., Fleming v Kamden Properties, LLC, 41 AD3d 781, 839 NYS2d 197 [2d Dept 2007] citing Berger v Temple Beth-El of Great Neck, 41 AD3d 781 [2d Dept 2007] and Siegel, Practice Commentaries, McKinney's Cons. Laws of NY, Book 7B, CPLR 3211:10, at 21) [holding that affidavit and a verified Surrogate's Court petition did not constitute documentary evidence ]).

Necessary Party

CPLR 3211(a)(10) provides: "A party may move for judgment dismissing one or more causes of action asserted against him on the ground that: * * * the court should not proceed in the absence of a person who should be a party."

The court should grant a 3211(a)(10) motion to dismiss only when the unnamed party is not subject to the jurisdiction of the court and will not appear voluntarily, no remedy is available under CPLR 1001(b) and the party which is not named is so essential to the litigation that the action cannot proceed in the absence of the party. Siegel, Practice Commentaries C3211:34; (McKinney's 2005); 1 New York Civil Practice: CPLR ¶ 1003.04 and 1 New York Civil Practice: CPLR ¶ 3211.39.

Thus, the question is whether the litigation cannot fairly proceed in the absence of VanJo, or in other words, whether VanJo an indispensable party under CPLR 1001 or 1003.

Under CPLR 1001 "Persons who ought to be parties if complete relief is to be accorded between the persons who are parties to the action or who might be inequitably affected by a judgment in the action shall be made plaintiffs or defendants." Under CPLR 1003, "Nonjoinder of a party who should be joined under section 1001 is a ground for dismissal of an action without prejudice unless the court allows the action to proceed without that party under the provisions of that section.

CPLR 1001(a) mandates joinder of a party in two situations: (1) where that party is necessary if complete relief is to be accorded between the persons who are parties to the action; or (2) where the unnamed party might be inequitably affected by a judgment in the action (Castaways Motel v CVR Schuyler, 24 NY2d 120 [1969] [non-parties are "indispensable" where the determination of the court will adversely affect their rights]). "As to the latter requirement, [t]he possibility that a judgment rendered without [the omitted party] could have an adverse practical effect [on that party] is enough to indicate joinder." "The primary reason for compulsory joinder is to avoid a multiplicity of actions and to protect the non-parties whose rights should not be jeopardized if they have a material interest in the subject matter" (Joanne S. v Carey, 115 AD2d 4, 7 [1st Dept 1986]).

To determine whether VanJo is an indispensable party, the court must consider whether "... (1) the plaintiff has another effective remedy if the action is dismissed for nonjoinder, (2) prejudice to the defendants or the person not joined, (3) whether and by whom prejudice might have been avoided, (4) feasibility of protective orders, and (5) whether an effective judgment [*4]may be rendered in the absence of the person not joined.

Plaintiff claims entitlement to $34,500 in connection with the production of the Musical.

Essentially, the complaint alleges that (1) Dr. Coleman, on behalf of VanJo, entered into a contract with plaintiff; (2) Dr. Coleman, as Proctor & Gamble's "Agent," accepted $34,500 earmarked for plaintiff, and failed to pay same to plaintiff; and (3) that Dr. Coleman is liable to the plaintiff.

Although plaintiff refers to a "a contract" entered into by Dr. Coleman, neither the terms of such contract are provided or the contract itself. Instead, in opposition to the motion to dismiss, plaintiff submits the Agreement, which appears to form the basis of this action against the defendants. The Agreement, however, is between VanJo and plaintiff. Yet, plaintiff does not seek to recover the $34,500 from VanJo; instead, plaintiff specifically seeks to recover same from Dr. Coleman under theories of fraud, conversion, and breach of guarantee.

To allege a claim for fraudulent inducement, plaintiff must allege "misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury" (Shea v Hambros PLC, 244 AD2d 39 [1st Dept 1998]). "Plaintiff must show both that defendant's misrepresentation induced plaintiff to engage in the transaction in question (transaction causation) and that the misrepresentations directly caused the loss about which plaintiff complains (loss causation)" (Meyercord v Curry, 38 AD3d 315 [1st Dept 2007]).

To recover for conversion, plaintiff must establish that he owns and has a right to possession of personal property, and that the property is in the unauthorized possession of another who has acted to exclude the rights of the owner (Republic of Haiti v Duvalier, 211 AD2d 379 [1st Dept 1995]). Where the property is money, it must be specifically identifiable and be subject to an obligation to be returned or to be otherwise treated in a particular manner (Manufacturers Hanover Trust Co. v Chemical Bank, 160 AD2d 113, 124-25, 559 NYS2d 704).

To recover against Dr. Coleman for breach of guarantee, plaintiff must establish the existence of the guaranty, the underlying debt and the guarantor's failure to perform under the guaranty (City of New York v Clarose Cinema Corp., 256 AD2d 69, 71 [1st Dept 1998]).

The $34,500 allegedly owed to the plaintiff appears to arise out of the Agreement, and the Agreement was "made between VanJo" and plaintiff. In the event plaintiff prevails and recovers such amount from Dr. Coleman, complete relief would be afforded to the plaintiff. Further, Dr. Coleman's ability to defend the this action is not compromised by the absence of her company, VanJo, in this litigation. The Court notes that in the prosecution of the claim against Dr. Coleman based on her alleged guaranty of payment, plaintiff must establish, and Dr. Coleman is entitled to defend, the existence of the underlying debt. Since the underlying debt arises out of VanJo's obligations under the Agreement, VanJo's rights and liabilities are implicated in this action. However, any judgment against Dr. Coleman, in her individual capacity, would not adversely effect VanJo; under the circumstances herein, and as alleged in the complaint, any money judgment obtained by plaintiff against VanJo could not be enforced against VanJo, who is an unnamed party. Therefore, joinder of VanJo is unwarranted, as is dismissal of this action. [*5]

Dismissal Based on Limited Liability Law

Under New York Limited Liability Law 609 and 610, members and managers of a limited liability company under New York's Limited Liability Company Law, are expressly exempt from personal responsibility for the obligations of the limited liability company. However, members can be held personally liable for the LLCs' breach of contract if the officers took the challenged actions on the LLCs' behalf and the breach involved bad-faith misrepresentations (see Ledy v Wilson, 38 AD3d 214 [1st Dept 2007] citing First Bank of Ams. v Motor Car Funding, 257 AD2d 287, 294, 690 NYS2d 17 [1999]).

Here, the complaint contains claims that Dr. Coleman falsely stated that funds were available and that plaintiff would be paid upon her receipt thereof from Proctor & Gamble.

Sanctions

Dr. Coleman seeks sanctions pursuant to 22 NYCRR 130-1.1 which permits the court to award sanctions for plaintiff's commencement of this purported frivolous action. An action is frivolous if it is completely without merit in law and fact or cannot be supported by a reasonable argument for the extension, modification or reversal of existing law 22 NYCRR 130-1.1(c)(1). In light of the above, it cannot be said that the complaint as against Dr. Coleman lacks merit, as a matter of law. Thus, plaintiff's request for sanctions is denied.

Conclusion

Based on the foregoing, it is hereby

ORDERED that defendants' motion is denied without prejudice; and it is further

ORDERED that the parties enter into a preliminary conference forthwith; and it is further

ORDERED that defendant serve a copy of this order with notice of entry upon all parties within 20 days of entry.

This constitutes the decision and order of the Court.

Dated:December 18, 2007________________________________________

Hon. Carol Robinson Edmead, J.S.C.

In accordance with the accompanying Memorandum Decision, it is hereby

ORDERED that defendants' motion is denied without prejudice to move for dismissal upon other grounds; and it is further [*6]

ORDERED that the parties enter into a preliminary conference forthwith; and it is further

ORDERED that defendant serve a copy of this order with notice of entry upon all parties within 20 days of entry.

This constitutes the decision and order of the Court. Footnotes

Footnote 1: Dr. Coleman contends that although the complaint references the Agreement, the Agreement was not attached to the complaint.

Footnote 2: Dr. Coleman contends that the attorney communication also was not attached to the complaint.