Li Qun Diao-Tin v Express Trade Capital, Inc.

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Li Qun Diao-Tin v Express Trade Capital, Inc. 2018 NY Slip Op 31215(U) June 15, 2018 Supreme Court, New York County Docket Number: 652808/2017 Judge: O. Peter Sherwood Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 06/15/2018 11:57 AM 1] INDEX NO. 652808/2017 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 06/15/2018 Sl.J t>l{El\lI1: C.:OUR'r ()f, Tl II~ Srf.t\ 1~1~ <>F NI~\\' Y()l{K (~OlJN . r\' OF Nl(\V V<>l~K: C<>M.MERf~l1\L J)IVtlSl<.>N l)~:\l~'l~ 49 - ·- - - - - - - . . . . . . - ·- - - - - -· ........ - - - . . . . . . - .- - - .~ ~· - - ... ·.-· ";" - - - ... - - ~ --- . . X. DE(.]Sl<)N 1\Nl> t)l~lll~l-t Index No.: 652808/2017 f>taintiff, -against1\1otion Sequence N{>.:· 001 l~:Xl'l.tESS rrllAJ)l~ (:APrrAL, INC,., l\'11C:HAF:l.J l{Ol.. NIC~K, K"RISrrl.AN ANl>EllSEN, AND 1\Nl)fi:f{SEN & ST<.lK.KE 1. 1.. (;, l)efcn(Jnnts. - - - - ~ - - - - - - - - - - - - -- - - - - .. - ._ - - - - .. - -- - - . . - - - - - . . . -x I. FA<:~rs 1\s this is a 111otion hJ disn1iss~ the t~1cts arc taken fr()l11 the 1\rncndcd C'on1plainl and docun1entary evidence subn1ittcd by the parties (_(~on1plaint~ NYSC:E.F [)oc. No. 10) (see 1.\4011roe v A4onroe, 50 NY 2d 481, 484 f 1980] ). PlaintitT lj ()un l)iao-··rin C~~Plaintiff,) . dcfcnclant rvlichael l<.otnick (~-1{olnick'")., and defendant Kristian /\ndcrscn C'"/\ndcrscn . ~) . \Vere all n1cn1bers of dcft!ndant 1\ndcrscn <-~Stokke Ll_,(: (A'-'£ S). Plaintiff and her husband ran businesses -vvh1ch 1nanutl1ctured goods f(>r sale . including to ('ostco \V'holcsalc (C:ostcn). In 2013'\ f{()lnick approached Plaintiff and her husband suggesting ' thcv f()rn1 a husincss to n1anulacturc and sell outdoor furniture to (:ostco. They created a brand . . using the na111e i\n.dcrscn '"~ Stokke~ .referring to tvV<} individuals with experience in the business. Plaintiff f()rn1ed 1\&S lAd. I long Kong Plain11ff'"'s t~1111ilv ~ and l~tllnick. \vhlch (··1\<~S llong Kong~ . ). a l long Kong entity, O\Vncd by desi~n~d .. n1anul~1cturc(L ~- and sold outdoor furniture to C'ostco. l\ndcrscn had no equity interest in /$.~S l--long K()llg but received con1missions based on the co1111)any"s sales. l)cfcndant r~xprcss l'radc C.~apital (l~.xpress) is in the business (>f factoring. ln 20 l 4. Rolnick and /\nderscn, and con1panics each (l\Vncd. O\VCd f{olnick inlcJr1ncd Plaint.ifi~s l~xpress significant an1ounts of n1oney. In 2014 . h1111ily that as a result of a change or polic;' by (~oslco . _authorized vendors needed to be incorporated in the l.Jnitcd States. ()n i\ugust 4~ 70 l 4~ the parties executed a L.in1ited l,.1ahility ($111pany C>pcrating i\grccn1cnt for i\ndcrsen & Stokke I .L.C~ (the LLC~ 1-\green1cnt) \.vilh f'laintiff. l~olnick . and Andersen each having a 1/3 interest in the con1pany. Page 1of13 2 of 14 [*FILED: NEW YORK COUNTY CLERK 06/15/2018 11:57 AM 2] INDEX NO. 652808/2017 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 06/15/2018 l{olnick and l\ndersen suggested i\&S obtain factoring services fron1 Express for liquidity purposes . and Plaintiff agreed. A.&S entered into a factoring agree1nent with Express. E.ach rncn1ber agreed to assun1e full responsibility for his/her proportional share of any debt to 1:.xprcss. Sin1ultaneously, unbekno\v11st to .Plaintifl~ Andersen and Rolnick caused A&S to enter into an additional agrccn1ent \.Vith F~xpress" t11e l\ssun1ption and (}uarantcc Agreer11ent (Assun1ption and (iuarantee). ·rhe ;\ssun1ption and Guarantee references debts of old entities O\.\,,ned by Roi nick and Andersen and a settlen1cn.t of those debts \Vith E.xpress, noting forgiveness of $2 million of the debt as to the Rolnick con1panies and $200,000 as to the Andersen entity. lJndcr the Assun1ption and Guarantee~ 1\&S assurncd and guaranteed the payment of that $2.2 million to f:xpress (NYSCE~ l)oc. No. 34 at p. 2). Rolnick and Andersen entered into the Assu1nption and Guarantee Plaintiff~ s cc>nscnt~ \Vithout despite a provision in the LL(~ Agreen1cnt requiring unanimous consent for such agreerncnts:~ Shortly after the signing of the l\ssumption and Guarantee, the parties a1ncntied the A&S I.J~C~ Agreernent~ to give each rncn1ber of ,\&S the ability tc> bind the con1pany to contracts vvith Express" and to n1ake the provision applicab.lc to present and future loans involving Express (the An1ended L.L,C Agree1ncnt). t\ssun1ption and Guarantee~ she -,vould not Had Plaintiff kno\.vn about the have agreed to the An1endcd LLC Agreen1cnt. Pursuant to the Assun1ption and Guarantee, Express kept A:&S 's receivables \Vorth $2.26 n1illion, in apparent satisfaction. of the money o\ved r.:xpress by Rotnick, Andersen, and their prior entities. Rolnick-and A.ndersen·siphoned additional money from A&S as C<)nstdting or n1anagen1.cnt tees" including $1.45 n1illion in 2016., \.vhcn prot1ts from the business \Vere dovln significantly. Under the tcrn1s of the l..LC 1\grecn1ent, each partner was to receive- $12,000 per n1onth as base salary. Partners prc}viding services to ~~&S \Vere to be con1pensatcd co1nn1ensurate \Vith the value of those services . as unanirnously agreed upon by the 1nen1bers (see LLC AgrccinenL, Art V~ NYSCF.:F l)oc. No. 32). Plaintiff never agreed to pay any consulting tees to eitl1er Rolnick or l\nderscn and believes they provided no services \vhich \Vould entitle then1 to that mc>ney. Roh1ick also charged over$ l 00,000 in expenses to A&S tor purchases which benefitted h.is other business interests., rather than J\&S. Page 2of13 3 of 14 [*FILED: NEW YORK COUNTY CLERK 06/15/2018 11:57 AM 3] INDEX NO. 652808/2017 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 06/15/2018 Plaintiff asserts six clain1s: l) l,~raud against l{olnick and 1\ndcrscn for .l~1iling to disclose their debts to l:xprcss., l~1iting to disclose the /\ssun1ption and (iuarantee . and t~11scly' teJJin::. Plaintiff /\&S \VOUf(.f only l~ngagc l::0prcss f()r liquidity purposes. 2) ;\iding ant.I /\helling Fraud against i:xpress for dra.tting the ;\ssun11)tion and (iuarantcc, using that agrccn1cnt to satist)t the debts of ({olnick and 1\ndcrse11, tl1iling to disclos~ the 1\ssun1ption and Ciuarantee to PlaintifC and taking /\ ... ~S~s rcccivahles. 3) (~ons]Jirac)r 1.f) 4) l} nj ust (_'0111rnit Fraud against '~JI defendants. J~~nrichincnt as against a II defendants. 5) ('onvcrsion aeainst all defendants '-- 6) llrcach of r:iduciarv [)ut\' al!Jtinst l{olnick .and /\ndcrsen .. ~ ~- A. l)efcndants' i\rgumcnts l)cfcndanls Ilolnick and J\ndcrscn 111<)VC to disn1iss all cla.in1s against thcn1 pursuant to C'IPlJ~ 32l l(a)(3) . (7) _ and (8t and Florida l{evised Li1nited I,iabillty C:ornpany /\cl sections 605.()801 and 605.0802., for ihllure to i)ropcrly plead a derivative action and f()r lack ofjurisdiction over the n1oving defendants. 'l'he parties appear to agree that Florida \a\v ap1)1ics~ but it is not clear \vhy. 'fhc /\n1endc<l LI.,(: /\grccn1cnt provides that it is governed by the la\tvs of the St.ate of Nc\v ) ork 7 (see An1endcd L,l .{: Agrccn1ent. N YS(~l ]~· Lloc. No. l, 36~ ii 12). l)eriv:ttivc (]ain1s arc Jmpror>cr·I)' Plcadctl IVloving defendants arg11e that these clain1s n1ust t~~1il because all or the clairns seek to rct:t,vcr personally lt)r injuries t.o .A.&S. 'rhc con1plaint docs not allege any injury to Plaintiff. directly (.()pp al 3 ). 'rhc inj urlcs all~gcd are to i\t~S. Accordingly~ these <.:lain1s can only be brought derivatively (id. at 5~ citing Florida la\v., Fla Stat /\.nn § 605.0801 l~\t\. n1en1bcr n1aintaining a direct action under this section n1ust plead and prove an actual or threatened injury that is n<Jt solely the result of an injury suffered or threatened to be suffered by the litT1ilcd liahiliLy C(Hnpany·'"f). ltt~rc., the clain1s in1propcrly seek rerncdics fbr Plainti fL not ;\(.'<:S. ,.\ssun1ing these an: considered as derivative clain1s, lhcy too n1ust Ji1il., as Plaintiff has not . ~ . . alleged that she tlladc any dcn1and orlllOVing defendants~ Page 3of13 4 of 14 Of that the dc1nanc.l \VOUld have been [*FILED: NEW YORK COUNTY CLERK 06/15/2018 11:57 AM 4] INDEX NO. 652808/2017 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 06/15/2018 futile (ill.at 3-4~ 6 citing Fla Stat ;\nn § 605.0802}. Nor does she allege irreparable i11jury \>VOu1d result fron1 making a dc1nand (id at 4 ). 2. Lack of Personal ,Jurisdiction rvt.oving defendants also assert that t.hey are not Nc\v Y<>rk domiciliaries nor is Plaintiff. · ·rhe con1plaint alleges llolnick and Andersen live in Florida. Further" neither the events alleged in the co1nplaint n-or the injury are alleged to have happened in Nc\v York. "rhus .. this court is \Vithout perso-nal jurisdiction over either l{olnick or Andersen. A&S is .a Florida Lin1it.ed .Liability ('orporation and Express is a Ne\v Y <>rk con1pany. Owing n1oncy to a New York entity is not a proper basis l{)r jurisdiction over the 1noving defendants (id. at 4). Finally, no tort upon \Vhich to base jurisdicfi()f1 is alleged to have happened in Ne"v York (it.I. at 7-8). Jl. flJaintiff's ()pposition 1. Derivative Actions arc t>ropcrly Stated Plaintiffn1aintains that Florida la\v alloYlS one n1en1ber of an LLC to sue another to enforce rights \vhere the PlaintitT pleads ~~an actual <)r threatened injury that is not solely the result of an injury suftered or threatened to be suffered by the limited liability company" (Fla Stat Ann § 605.0801 ). ·rhc p·faintiff n1ust sho\\t' a direct ii~jury and a special injury, separate from those suffered by the other 111cn1bcrs (see 1.~"'1razzullt.1 v River.sh.le Bl1nkin(.~ 0<>., 175 So 3d- 879~ 881 [Fla [)ist (~t App 2015 J). Plaintitl. . claims her injury is special invested in the LLC~ representations (C)pp at bccaus~ she is the only men1ber \Vho under false pretenses and relied on the individual 15~. defendants~ fldse citing Jn re P<1ln·1 ,llve. Partners. LL(l. 576 BR 239, 256 LBan.kr MD Fla 2017)). Plainti1]'notes that in addition to nloney~ her relationship \Vith a manufacturer to \vhich ..t\&S o\vcd $2.26 1nillion in unpaid invoices has bee11 dan1aged (Opp at 15). These are not derivative harn1s'I but instead arc direct injuries to PlaintifC so are properly pleaded as direct causes of action. To the extent the court finds Plainti1T "l.should not have pleaded both direct and derivative clai1ns in thealternativ~ . ~ . Plaintiff asks f()r leave to an1cnd and explicitly separate the clain1s (<)pp at 16 n.6). 2. The Court has J>ersonal .Jurisdiction o'vcr Moving ·Defendants Plaintiff clain1s th~ court has jurisdiction over n1oving defendants pursuant to c·PLR 302(a)( I). ¥rhat section allows jurisdiction over a non-..doJniciliary vvho '.;transacts any business \Vitl1ir1 the .,. ~ Page4of13 5 of 14 ~ [*FILED: NEW YORK COUNTY CLERK 06/15/2018 11:57 AM 5] INDEX NO. 652808/2017 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 06/15/2018 state or contracts any\vhcre lo supply goods or services in the state.'"' t»faintiff n1ust sho\v the dcf(~ndants purposerulJy availed thcn1selvcs of ~"the }Jrivi]cgc; of conducting '-tctivitics ,,vithin the forun1 State'! . and an '"'articulable nexus'"\ bct\vccn the clain1 and the defendants~ transaction of business in the state (()pp at 7~ quoting /) <~ J< <._;/oh_ s·e/ec·1ion.''· S'. L. v l1o£le.<.f.(t ()/e(e,ario ft.1/con l'ineiro _ ,9 N\'3tl 292, 297 1.2017 I). ·rhcn . the court 1i-1usl ~onsidcr \vhethcr jurisdiction con1ports \·\ ith the requircrnents 0 r federal due process (_()pp at 7). Plaintiff argues that n1oving dclendants have purposefully availed thcn1selvcs of the Ne\v York 1()run1. E.xpress is located in Nc\v York . and the parties., relationship \Vith jurisdiction in Ne\-V '\'ork. l.~xprcss is the basis for Tv1oving detendants . purporting to speak for t\&S., entered into . ~lgn:crn~nts \Vilh r:xprcss in N'c\V '{ork. 'T'hc Factoring /\green1ent., the 1\ssurnption and {iuarantec and the 1\n1cnded LI "c~ /\greern~nt all specify N·c\v Y°c.>rk La\v,. and the first t\vo specify the parties' [~y consent to Ncvv' '{ ork jurisdiction (()pp at 8 ). agrcClllCllt.S~ the individual dctendants Sh()\.\i choosing a Nc\v \" ork factor and signing these they intended lo avail thcn1sclvcs of the fin·un1 and establish a purposeful.~ ongoing relationship vvith Express <u1d Nc\v York (()pp at 9). Ocfcndants~ transaction of business in Ne\v York is related to the clain1s at issue here (i<l at I 0 ). lllisn:pn:sentations n1adc in relation 10 the agrCClllCHlS l~XJ1fCSS \Vith 'fhc arc the hasis for the fraud, liduciarv dutv. and conversion c1ain1s (h/. ). r - , Jurisdiction also co1r1ports \\'ith 1cdcral due process lavv as l.ong as the non-don1iciJiary defendants can J(>resec a need to <.h:tcnd a suit in Ne'"' York . due to the various a~rccn1cnts thev ~ . r signed (hi. at 11 ). Such is the case here. ()n<.:.c Plaintiff has n1adc her sho\ving . dctendants have the burden to present case that ... son1e 1Atf\4arca F other consideration \Vould render jurisdiction unreasonable'~ ~··a con1pcl Iing ( hl at l 2, quoting l)L1k-A4or A1./tJ, . (.'o. ~ 95 N Y2<l 21 <J~ 21712{)()()]). !'v1oving dctt~ndants have n1ade no suth sho\ving. In ract. l{olnick has significant contacts in Nc\V '{ ork. ~rhc I J .1C: 1\green1cnt lists his address as being in Nc\v '{ork (NYS(:~r~.F lJoc. No. businesses in Nc\v '{ork State ((}pp at 12). 32~ last page). l·lc also operates rnulti pie These con1panies are explicitly nan1cd in the t\ssun1ption and Ciuarantee (()pp at 12-13). 1\s to Plaintiff "s derivative clain1s~ she \Vas not required lo rnak~ a dc1nand~ because it \\.-ould have been rutilc~ and she \vas not required to specilieally plead· futility . as long n-s she pleaded frtcls to support that conclusir>11 (hi. at 1. 3). Hascd on the pleading'I J>Iaint.itT has alleged the n1ovlng Page S of 13 6 of 14 [*FILED: NEW YORK COUNTY CLERK 06/15/2018 11:57 AM 6] INDEX NO. 652808/2017 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 06/15/2018 defendants exercised control of A&S and acted f(lr their own benefit., against A&S'ts.· interests (ill at 14). ·ro ask Plaintiffs effectively to sue themselves is laughable (id.). C. Movin·g l)efendants'.Reply I. The l.ndividual Claims f ..ail In reply, n1oving defendants argue that T'laintiff s alleged dan1ages are neither direct nor special. '"rhus, she has fl1iled to alleg.e individual darnages (R·eply at I). She relics (ln a case \1'thich is inapplicable., since it dealt \¥ith a clain1 tor Jraudulcnt inducement and Plaintiff has not alleged she ,~·as fraudulently induced to invest in i\&S, but instead into agreeing to let A&S enter into the Factoring Agrcc1nent (id. at 2). I~.xpress Fut1her~ the damages she seeks is the an1ount of money she clain1s heJd back fron1 A&S (it!., c.iting ("omplaint ~.ii 65-70). ·rhe injury here is to the con1pany~ not to Plaintiff. ,\dditionally, as fitr as Plaintiff alleges dan1agc tc) he.r relationships with the f:hinese n1anuf~tcturer and (;en. Ins. ('o. c:oslct1, those are rcputationa1 injuries and non-actionable. (see (;£/(-.'0 v llo.v . 136 So 3d 64 7~ 651 IFla. Dist c:t A pp 2013 'I I;."(ienerally speaking, to satisfy the element of an injury, the claiinant niust establish that he or she has sustained pecuniary damage or injury by \Vhich he or she has been placed in a \Vorse position than he or she would have been absent the fraud''']). 2. Derivative Claims f ..ail [)cfen<lants contend Plaintitl""is:- in fact~ required to cxplic.itly plead demand futility and, as she has failed to do S<>!! all clain1s should be disn1issed (Repl.y at. 5}~ 3. Lack of .Jur·isdiction Defendants Rolnick and Andersen did not engage in sustained and substa11tial transaction of business in Ne\.v York in relation to this action (id. at 6). Nor does jurisdiction comport \vith tederal due process., as individual defendants C{)U]d not have foreseen having to defend an action related to the Florida LJ..(: in Nevv· York (id.). Further, Plainti11~ does nclt counter defendants' argument that there is no jurisdiction under (~:·p[_Jl 302(a)(2.) {jurisdiction based on commission of a tort). As far as f>Iaintiff relies on the individual defendants having signed the Factoring 1\greement~ .~ssun1ption and <Juarantee . and An1cnded LLC Agreen1.enl, the last is 111ere.ly an an1endn1cnt to the I..J LC A.greem.cnt of a Florida LL(~, and Express \Vas not a party to that agreen1ent (Reply at 6- 7). Plaintiff has not made any allegations ab<>ut where any of those agreements were negotiated <)r execut.ed. ·rhis is sin1ilar to a situation vvl1ere an entity· borrows tnoncy \Vhich is Page6of13 7 of 14 [*FILED: NEW YORK COUNTY CLERK 06/15/2018 11:57 AM 7] INDEX NO. 652808/2017 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 06/15/2018 payable in Ne\\-' 'lork. 'fhat obligation docs not confer jurisdiction First at. Bank an(/ ]/·. 1\1 (~o. <.)11 the hotTO\Vcr (icl at 7_ citing I-.. an out-of-state note v l·f/ilson, I 7 l Al)'?d 616 . 6 l 8 ( l st f)cpt 19911 n1adc pa)'ahlc in Nc\V York does noL in and of itsclt: cotrJer .personal jurisdiction over the nondon1icil1ary~· I). i\dditionally . the clain1s do not arise out or the Factoring 1\green1ents, but n-0111 Plaintiff's n1en1bc:.rship in ,1\&S. so the rclti.vant agrccrnents are the i\&S ()perating. ;\grecn1cnt and tht: 1\n1ended (lleply at 7). 1.l~(· /\.g.rccn1cnl.. neither of \Vhich has n clause consepting. to Ne\.\/ '"y'orkjurisdiction ·rhe allegations do not add up to a conclus.inn or inlercncc that any negotiations or signing took place in Nc\:v York (it/' at 8). ·1·<l the contrary . the agrcen1cnts appear to he l~xprcss .,s standard hoilcrplat.c agrccn1cnts, v...rith little negotiations having be.en done at all ( itl ). ·r'l1c forun1 clauses in the r-:actoring 1\grcen1ents are irrelevant to this action., as Plainti IT is not suing for a breach of 1ht)Se agrecn1ents but instead based {lll her n1cn1bcrship in /\&S (it.l at _;\ccordingly . thl! relevant agreen1cnls 9.). art~ the Ll . ( . i\green1cnt and th~~ 1\n1ended LL(.' l\grccrncnt. neither of vvhich has a C(>nncct1on lo NC\\/ York. Dc·fcndants also c_listinguish the t:ascs cited by Plaintiff: atguing that deJendants' contacls \Vith Ne\V York \Vere n1inin1aL and did not reach the level of th(lSC in the cases cited by Plaintiff (hl at l0-14). 111. l>ISC.;lISSl(.)N 1.. a,~k of l"'egal I. 1 ~~c apacity (~a1>acit}· conct:rns a ·pfainti ft'"s po\,vcr tt) appear bcf(H·c. and bring an action in t:ourC" ( C' PL.I{ 3 7 J 1 C'on1n1entary (.,32 l l: 17 . at 29 Jrnain vol.]). ·rhis is separate .fi~f>n1. the question of standing that conies into pla)r in relation to a plain.tiffs disability or \vhether a given legislatively-created go,,..ernn1ental entity has the capacity to co111n1enc.c an action (Notes to (~I>J J{ 321 I). ·rhe question of capacity asks \Vhclhcr the plaintiff has the po\vcr to bring a suit. l"'hc qucslitn1 or standing asks vvhcthcr the plaintirrhas a sufficient stake in t.hc outcon1c of the litigation (id.). -·r..,cgal capacity lo sue. or lack thcrcol~ <>iten depends purely on the litiganCs status, such as that of an inh1nL an adjudicated in\:.on1petcnt'I a trustee~ certain govcrnn1cntal entities or~ as in this case, a business <:orporation'~ (~\'ec. I le.re the l 1t1c. 1Var l?ank v n1ovi11g dclendanls Evc1ns. 31 1\l)Jd 278, 279 I l sl l)ept 2006]). arc not arguing that Plaintiff lacks capacity. 'fhcy argue she lacks standing to bring this suit as an individual.. as the injuries a11cgcd arc to 5-()). J\ccordingly. the portion 1\<.~S (see ~1lcn10 at or the n1otion based on (~'Pl.J{ .12 l 1(a)(3) (lack of legal capacity) 1~1i ls. Page 7of13 8 of 14 [*FILED: NEW YORK COUNTY CLERK 06/15/2018 11:57 AM 8] INDEX NO. 652808/2017 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 06/15/2018 2.. Failure to State a C]airn ()11 a n1otion to dis1niss pursuant ln (,PLTl ~ 321 l (n) (7) for fllilurc to stat~ a <.:ans~ of aclion., the \:ourl is nol t.:alk.•d up()n to delcnnine the truth of the, allegations (see.!: 't.11n1u1ignji)r f lscul J:..'t/llit_r v 5'tate. 86 N'.-'2d 307. ~ l7f1995J~ ]/') llroalhray (yor/J. v . 4/exaiu/er',i.;, Inc., 46 NY2d 506, 509 fl979.J). Rather. the court is required to ""affbrd the pleadi11gs a liberal construction~ titkc t.he allegations of the co1nplaiut as true and provide Plaintiff the benefit of every possible inference'., !citation ontitted]. ·\\1hethcr a PtnintiJT can ulti1natcly e.stahlish its allegations is not part of the <.:alculus in (inh/11u111. ,\f.1chs (~ ('o., pleading slat\JS a 1;,;.aus~ 5 N'{3d 11 . 19 f2005J). a 111otion lo dis1niss . , (Jtfl(~ 1 \' courrs role is lin1itcd to dctennining \Vhethcr the of action, nol \Vhether there is cvidcntiary suppo11 to ofai.:.tion (see (i11g}!.enhein1er v LJ~pt l~hc dc:h.~rn1ining (J·i11-;:hu1)!.. ~~stablish a 1ut~ritorious cause 43 N'r'2d 2(,8 . 275ll977]:1\'okul v Lc<.u/er. 74 ;\l)Jd 1180 f2d 2010f). First n1oving defendants c.lai1n Plaintiff lacks standing lo bring clai1ns in her individual capacity~ as the injuries assc11·ed arc to A&S . not Plaintiff Dian-·ri1L In the con1plainL Plaintiff docs nol distinguish bct\V\:Cll clairns brought in an individual opposition to lhe arg.ucs i~ ntotion~ she ~larifies capa~ity and those brought. derivatively on bt:hal f of 1\£.~S. Jn her 1.hat she asserts all of the clain1s in an individual ctipacity, \vhich she alhJ\·\'Cd by Florida St:.1tutc 605.080 I. \vhich provide~ that a direct action against another n1en1bl:r~ a n1anag(!r~ or the lin1itcd liability con1pany l(J enforce the n1cmber's rights and otherw·ise protect t.hc ···a n1c1nb~r n1ay n1aintain n1en1bcr's interests~ including rights and interests under the operating agrcen1ent <)r this chapt.cr or arising independently of the n1cn1bership relationship [if the n1en1bcr can] plead and prove an actual or threatened injury that is not solely the result of an injury suffered or threatened to be sullcrcd by the lin·1ited liaoility con1pany."" Interpreting this slatulc~ Florida courts have ht·1d . that. ··an at:tion n1ay be brought directly onJy if (I) there is a dirc<.:l harn1 to the shareholder or n1en1bcr such that the alleged injury' docs not 1lo'v subsequently fron1 an initial harn1 to ·the con1pany and (2) there is a spe<:ial injury to the shareholder ~Jr n1c1nber that is or rncn1bcrs . ~ ( f)inuro s~;:parate and distinct fi·on1 those sustained by the other shareholders lnvest111ents~ l,f~(.' v ("l1nuJcho., 14 l So 3d 73 I 739-40 I rla l.)ist C.:t 1\.pp 'I 2014]). Plaintiff argues that she has suf1crcd special injuries because the <)lhcr tvvo rncrnbcrs (flolnick and ;\ndcrscn) engaged in the n1iseonducl and so did not suffer the san1c dan1agc (()pp al 15-16 ). Plaint i rr ignon. .>s the first prong of the test., that the it~jury to the con1pany. /\11 of the Jan1agc alleged by the Plaintiff is not llo\V fron1 an initial hartll lo i\&S~ either ti·on1 in(lividual defendants causing 1\&S to assun1c their indebtedness to Express~ clr taking unearned n1anagcrncnl Page 8of13 9 of 14 [*FILED: NEW YORK COUNTY CLERK 06/15/2018 11:57 AM 9] INDEX NO. 652808/2017 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 06/15/2018 fees and rcin1burscnlcnts for unrelated expenses. Accordingly~ none of the clai1ns asse11ed satisfy the t\vo-prong test. PJainti tl' has failed to state an individual clai1n under .Florida la\v. Plaintiffs individual clain1s also fail under Nc\V York la\v, where hthe pe11inent inquiry. _ . is whether the thrust of the Plaintift.,s action is to vindicate his personal rights as an individual and not asa stockholder on behalf of the corporation" ((,'1y1ven v Rigc1s, 85 AD3d 1524, 1527 [3d J.)cpt 2(}11 j). '"s the injuricscon1plaincd of arc to A&S, the complaint. is aboutA&S's rights, not those. belonging directly to Plaintiff. 1 3. Derivative Clai1ns iv1oving defendants argue the derivative clain1s faiJ for lack of allegations that Plaintifl n1ade a demand of At.~S that such a dcn1and \vould have been futile (see BelcJ1er v S'chilling, 309 So 2d 32, 35 [l~'la Dist c~t App I 975])M Plaintiff contends that her allegations that the individual defendants control i\&S is sufficient~ as asking them to take actior1 against their O\Vn t?·aud and bad acts \vould he futile (<)pp at 14 ). Florida la\v docs not require a shareholder bringing a derivative clain1 to 1nakc the dcn1and ~~if the directors ... \Vhether bv reason of hostile interest. or ... guilty participation in the \¥rongs con1plaincd of~ cannot be expected to institute suit or, if' they do, it is apparent they will not be the proper parties to conduct the litigation"' (Belcher .. 309 So 2d at 35). While Plaintiff has not used the \\'<}rd "•futility,'" Plaintiff has pleaded facts \Vhich indicate. ' 1\lthough not alleged in the co1nplaint\ Plaintiff 1nay \Vcll be able to assert a direct cfairn against Rolnick and Andersen. The Assun1ption and Ciuarantee signed by Rolnic.k and Andersen allegedly without the kno"'lcdgc and consent of Plaint in: revive~ reduced and settled debts of the Rolnit:k Co1npanies and SJM (o\vned by 1\ndcrscn) hthat was not required to be repaid by such con1panies ... as if such [debts] \\1crc still outstanding" (NYSCEF Doc. No. 34). ·rhe Assun1ption and Guarantee also shields Rolnick and· Andersen fron1 individual liability (see id). It also provides that the rights and Assurncd Indebtedness of Express and A&S '"i.sha1J be governed and construed in accordance with the fa\vs ... of the St:1te of Nev,·· ·vork·" and l\&S ~ . hereby consents to the jurisdiction of the Suprerne Court of the State ofNcvv York''' (id) as to rnaucrs relating to that i·nstrunient. The /\mended LLC ,\grec1ncnt obligates each n1e1nber or .A&~S to notifv Express or .. the occurrence of anv event ~ J specified in the LL(~~s Articles of ()rganization tandj the LL(~"s <)peraf'ing Agreen1cnt (NYSCEF Doc. No. 36). It then requi-res the express prior \Vrittcn consent of Express before the ·me1nbers rnay exercise their rights of O\Vnership or governance in A&S (id if 7). Should any 1nc111ber default in his/her obligation to Express" t.he An1cndcd LL(: ·"'g.reetnent authorizes Express to take enfi)ftcn1cnt action ain the natne l~f Gil)' A4en1ber of' LLC'T, without lhc rcquire1nent that [Express] first obtainling an] or<lcr frorn a court of con1pctcnl jurisdiction"" (emphasis added) (itf ii v - I 0). Accordingly . the i\incndcd LL(: Agreernenl not only renders 1\&Srcsponsible for the revived debts but also appears to grant Express the right to step into the shoes of Plaintiff and exercise her rights as a mernber of A&S in connection \Vith the allegedly unauthorized actions of Rolnick and Andersen.. By its tcnn~, the rights ceded to Express irnpairs the personal rights nicn1bers of /\&Sand in that light. the fraud alleged 1nay not be solely derivative. or Page 9of13 10 of 14 [*FILED: NEW YORK COUNTY CLERK 06/15/2018 11:57 AM 10] INDEX NO. 652808/2017 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 06/15/2018 such a den1and 'A'Ottld have been a \vaste of titne ..Defendants cilc no casela\v suggesting an explicit statcn1ent of futility is required. 1.Jndcr Nc\V '{ork kl\V., "'"( 1) dc111and is excused because or futility \Vhen a con1plain1 allcg~s \Vith particularity that a n1ajority of the board of directors is interested in the challenged transaction. [)irector interest n1ay either be self-interest in the transaction at issue~ or a loss or independence because a director \vith no direct interest in a transaction is l'.Ontrollcd bv a self-interested director . ... (2) LJen1and is excused hccause ,Jf futility \Vhcn a con1plaint alleges \vi th particularity that the . board or directors <lid not fully infornl then1selvcs about the cha1lengcd transaction to the extent reasonably appropriate under lh~ circurnstances. ·rhc long-standing rule is that a director does not cxcnipt hi1nscl r fn.>111 liability by tailing to do rnorc than passi vcly rubbcr-stan1p the dc<.:isions l)f the active tnanagers. (3) l)cn1and is excused because or futility \vhcn a con1plnint alleges \Vith particularity that the challenged transaction \Vas so egregious on its face that it could not have hccn the product <)f sound business judgn1cnt J 1996 J th~ l internal or the directors'" {A'1t.:1rx v ilkers., 88 NY2d 189" 200-0 I quotations and citations 0111ittcd I). t>Iaintiff s allegatit)DS satisfy the first part of tcsc n1aking her dcri·vat.ivc c.lain1s sufficient to survive. 4. .I uris<liction over I\rlo\:ing l)cfendants 181 provides that ·~1aJ party rnay n1ovc l(.>r_iudgn1cnl Jis1nissing one orlnorc (.'Pl.I{ 3211 Jal t:auscs of action asserted ·against hi111 on the ground that ... thl! court has nol jurisdi\:tiun of the person of the defendant"" \\lhcn presented \Vith a n1otion under C:P.L,R 321 l fa] seeking to assert personal issue'· (i\4ari.\'I (·oil ,, jurisdiction~ l~rc:u~v . the Plaintiftl~] f.81 . "'the party hears the uJtin1ate burden of proof on this 84 1\IJ3d I 32'1 . ·1322-1323 12d l)cpt 2011 J). 'fhe pa1iy opposing a Ir evidence or the f~1cts cstabJishingjurisdlction art~ in the exclusive control of th~ n1oving party~ ('Pl J{ 3211 Id.I only n1otion to disrniss need not slate all the a requires ~f '"·sulTi<.:icnt start.~ . I .. I>. v J'roik(I /)iL1loJ: l./aS:·t ln<lustries. Inc_~ J~lClS necessary lo establish jurisdit.:tinn. den1onstrating that such facts ··n1ay exist'" (see llllK A4as/er 1~ . unll Inc_~ 85 Al)3d 665 11 st Oept 201 l J'I citing J>eterson v .S/.1l1rtan 13 N\{2d 463:- 467f1974]). fV'loving defendants arc alleged lo live in Florida (C'on1plaint ,,,, 3-4 ). Plaintiff argues this Cl>urt has jurisdiction because the 111oving defendants ··transaL:t( J _.. husiness \-vi thin the stale or contractl 1any\vhcre to supply goods or services in the state~~ (C~Pl./R Page 10 o'f 13 11 of 14 302falf I .J). [*FILED: NEW YORK COUNTY CLERK 06/15/2018 11:57 AM 11] INDEX NO. 652808/2017 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 06/15/2018 Cl)LR 302(a)( 1) is a single transacti<ln statute, n1caning "one transaction'' in Ne"v York is suf'ficicnl to invoke jurisdiction., even- though the defendant 11c.ver enters New York, so long as the defendanfs activities here '"were purpc)sefur' and there . is a substa11tial relatitn1ship between the transaction and the c.lai.n1 asserted (LJeutsche Bt1nk ~s·ec . . .Inc. v Montcrna Bd 71 ~ 818 NYS2d 164 [2006 J; Bunkt?fl. v ~SllJfe Auto. l\t1ut. Ins. Jello,. 27? 1\D2d l 03~ 7()7 NYS2d A.D3d 238 . 8()6 460., 467~ Nl'~S2d 426f1~• [)cpt <~,( lr1vs., 7 NY3d 65" c·o.. 296 AD2d. 699 [2002]~ f.,ebel v 2000]; ()pticl1re Acquisilil)n C~orp. v Cyt1stillo~ 84 1.2d Dept 20051: see also Kreulter v J\4cFadden ()ii c~·orp... 25 71 NY2d 577 N'~{S2d 195 11988] [one transaction in Ne\v Y<lrk is suflicicnt to it1voke jurisdictit)n, even th<>ugh the defendant never enters Ne\v York~ pr<lvidcd the defendant's activities here \>Vere purposeful. and there is a substantial relationship bctwee11 the transaction and the claim asserted J). \Vith respect to the first part of the test, coutis look to '"'the totality of the defendant's activities \Vithin the B£.1nk & Trust forum~' (·~o. l-~/. l\l. (Deutsche Blink. 7 NY3d 65~ 818 N"Y'S2d 164 [2006]; ,5/erling Nt1t'l Y'. v f"illelity·· A·for(gl1ge Investors., 510 F2d 870, 873 [2d (_'irl 975]), t.o dctern1inc \vhether a defendant has transacted business in such a way that it constitutes ~'"purposeful activity.~' defined as ;.;.son1e act by which the defendant purposefully avails [himseH] of the privilege of conducting activities \vithin the forun1 State, thus invoking the benefits and prote.ctions of its la\VS., .. (A4cKee E~lectric (·"o. J11c. v Rt111lc1nL1-Bor/i!. C.'orp, 20 NY2d 377, 382 (.1967], quoting Ilanson v [)enck/t1-i 357 l.JS 235. 253 [19581: tu:cortl f'ischbLtrg v Doucet., 9 NY3d 375, 380 f2007J). As f()r the SCC()nd part of the test~ . ~[aJ suit \Viti be deen1cd t{) have arisen out of a party's activities in New 'l ork if there is an articulable nexus., or a substantial relationship . between the clain1 asserted and the actions that occurred in Nc\v York'' (./)eutsche Bank; Henderson v INS', 157 F3d l 06 . 123 [2d C:ir 1998] [internal quotation rnarks on1itted]). Pia inti fl~ argues that 1noving defendants did business in New York \Vith Express a11d then brought Express t<J do business with A&S (()pp at 7-8). The Factoring Agreement and the i\ssun1ption and Guarantee contain jt1risdictional clauses selecting N>ew York as the fortu11 ft)r resc>lving disputes (itl at 8). J>laintiff argues that those agrcen1ents state that '"any I>erson signing this Agreen1cnt agrees t<) be h()Un.d hereby,'' expressly binding the indi\1idual defendants \.Vho signed (ill). The relationship \Vith t:xpress \Vas to be t)ngoing, establishing a repeated, and continuing relationship \Vith r:xpress Trradc, and thercft1re with New 9). Page 11of13 12 of 14 ~"purposeful, ~rork'' (id. at [*FILED: NEW YORK COUNTY CLERK 06/15/2018 11:57 AM 12] INDEX NO. 652808/2017 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 06/15/2018 I· lo\vcvcr, the individual delendants arc not parties to either the Factoring Agree1ncn1 ()r the i-\ssun1ption and C~i uarantee. While the 1-\ssurnption and (ruarantec recites that each Person signing is bound.. including lo the j urisd ictinnal clause, ··"'Person~· is a dt: tined ·rhe tcn1L ,1\ssu111ption and Cluarantee refers to the detinilion in the Factoring 1\grccn1cnL \vhich defines ~·Per.son ... as "~any ind i viduaL sol~ proprietorship. joint vcn tu re~ trust . . _ or any other enl it y"~ (r·'act()ring 1\grccn1cnt at 13). C~nnsidcring that definitiun~ the sentence in the .t\ssu1nption and (iuaranlcc is better read as '""any f'individual or entity I signing this 1\grccrncnt agrees to be bound hereby~~ (/\ssu1l1ption and (iuarantee al 4). The individual defendants did flf)t sign in their personal capacities. They signed on behalf or ./\&S . and arc not p~rsonally bound by those agrcen1ents. ·rhc busi11css relationship upon \vhich the Plaintiff relics is hel\veen Express and 1\&S. rv'loving defendants arc not parties. lo that relationship:. 'I.hey arc alleged lo have previously done sonic business \Vith r:xpress . through diftcrcnt entities~ resulting in the debts o\.vcd to L:xprcss_ ·rhc instant dispute docs not arise fi;on1 those underlying transactions (even assurning the transactions can confer ..jurisdiction on the individual defendants)~ hut Ii·on1 the LL.(~ /\grccn1cnt.. \Vhich lacks a -· jurisdictional clause [see N'{SC~EJ 7 l)oc. No. 36 . by the n1oving dcti:nd.anls O\Vl"d "- . il l 21 and the lia.ct that unrelated entities o\vned n1oncy to I·~xprcss. 2 1\ssu111ing that defendants transacted business \vithin the tneaning of ('PL.I{ *30? (a)( 1 )'.\ the court n·iust further ascertain \Vhcther the exercise of jurisdiction con1ports \vith due process (lnlernational /;iJ1t-1nce 13.J. ·. v . \lt11io1u.1/ J?e.\·erv<:. IJ£1nk, 98 Nl:'2d 238~ 746 NYS2d 611 120021~ r(n\larca v f>ak-A4or A1a111!fi..tcl111·inJ!, (,'ontJ}tU1J·~ 95 NY2d 210, 713 NYS2d 304 f2000)). [)uc process is not offended ...[so I l<)ng as the party avails itself or the b~nefi.ts or the forur11., has sufficient n1inin1un1 contacts \vith it ~tnd., should. reasonably expect to deJend its action there 1- . , I even if not present in the state (A.-fc(1'ee v Jnternt.1tioru1! L(fe /l1s. ("'o.~ 355 lJS ?20 . 222-2 1 3 fl 957.1). ·ro satis(y t.hc rninirnurn contacts rcquircn1cnt., it is essential tbat there be ··st)n1c act by \vhich the d~Jcndant purposcfitlly· avails itself of the privilege of conducting activities \tvithin the forutn State~ thus invoking the bcncJits and protections of its laws'\' (lfl1n.\·on v J)eck./a., 357 l_JS 235~ ?53 I 19581). P1aintiff has not alleged such an act~ as none of the acts taking place in Nc\v York arc al IL\.gcd to he attributable to the individual defendants in their personal capacities. l{athcr they are attributable to entitics·\vith vvhich the individual dclcndanls \-Vere 'tlliliatcd. l\ccordingly'\ Pl.aintiff 2 Rolnir.k subscrib~~d \o l\H,~ LL(~ Ai!JCCtncnt .... and listed a Ne\v York address thereon (see NYS('EF i)oc., No. 32) Page 12of13 13 of 14 [*FILED: NEW YORK COUNTY CLERK 06/15/2018 11:57 AM 13] INDEX NO. 652808/2017 NYSCEF DOC. NO. 47 RECEIVED NYSCEF: 06/15/2018 has failed lo n1ect her burden of showin:g jurisdiction over the individual defendants at this ti1nc and the con1plaint tnust be disn1issed as to thcn1. Because the record no\:v before the court does not reveal \vhether the parties had contacts vvith Ne\V York in connection \Vith creati()ll of A&S and their operation of the business., the court ' . . \Viii all<J\.V discovery lin1ited to the issue t)fjurisdiction over Rolnick·J and Andersen_ Further, leave is granted for Plaintiff to rnovc tor fea\·e to ·amend her complaint so she n1ay separately plead her derivative and individual clain1s. Acct)rdingly . it is hereby ORDElt"l~I) that the 1notion of Michael Rolnick and Kristian Andersen to dismiss the con1plaint as against the1n is granted without prejudice to plaintiff seeking leave to file an amended complaint. 'fhis C(u1stitutcs the decisi<}n an,d order of the court • l.lATED: 1 .June 15, 2018 ENTER~ The Operating l\green\cnt recites a Ne\\' York address tor Rolnick but his signature does not appear thereon. Page 13 of13 14 of 14

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