Am. Media, Inc. v. Bainbridge & Knight Laboratories, LLC, Index No. 650230/2013, 9/19/2014 (Bransten, J.).

By Christina Nguyen | Staff Writer

Contract; breach; breach of fiduciary duty; fraud; debtor and creditor law

Plaintiffs commenced an action seeking $1,299,900 for advertising services in magazines owned by plaintiffs allegedly performed for corporate defendant and individual defendant who was corporate defendant’s owner, CEO, president, chairman, secretary, treasurer and director. Plaintiffs asserted four causes of action: breach of contract and unjust enrichment against defendants and common-law fraud and violations of the Debtor and Creditor Law against individual defendant only. Individual defendant sought dismissal of the amended complaint for lack of jurisdiction, failure to state a cause of action, and based upon documentary evidence.

Defendant argued that personal jurisdiction over a corporate officer could not be established by his authorized acts as an agent of the company. Plaintiffs argued that the court had long-arm jurisdiction over defendant under CPLR 302(a)(1). With respect to their fraud clam, plaintiffs alleged individual defendant’s misrepresentations in New York were made to induce or continue a business relationship with corporate defendant. Individual defendant’s alleged misrepresentations were made in New York while he was a New York resident, for the purpose of transacting business in New York by inducing plaintiffs to do business with corporate defendant and to continue the business once corporate defendant’s account with plaintiff became delinquent. Plaintiffs alleged individual defendant’s inducement, business, and commission of a tortious act in New York were sufficient to exercise personal jurisdiction over him. The court determined plaintiffs set forth sufficient facts to establish personal jurisdiction over defendant under CPLR 302(a)(1) and denied the motion to dismiss for lack of personal jurisdiction.

However, the court granted individual defendant’s motion to dismiss for failure to state a cause of action. Plaintiffs claimed that corporate defendant’s corporate veil should be pierced and that defendants should be held jointly and severally liable on plaintiff’s claims for breach of contract and unjust enrichment. Plaintiffs’ conclusory allegations that the corporate structure was a sham were insufficient to warrant piercing the corporate veil. Plaintiffs’ failed to present evidence to support piercing the corporate veil, which was their sole basis for asserting claims against defendant for breach of contract and unjust enrichment. Plaintiffs did not address individual defendant’s arguments or legal authority concerning piercing the corporate veil, other than in a footnote of their opposition brief. The court dismissed plaintiffs’ breach of contract and unjust enrichment claims. Plaintiffs’ fraud claim was based on individual defendant’s alleged misrepresentations made to induce plaintiffs to provide advertising services, which included statements about his and corporate defendant’s financial status and money he was putting into the corporation to pay for expenses. The court determined individual defendant’s alleged statements were not collateral to the advertising services contract between plaintiffs and corporate defendant, but concerned corporate defendant’s performance of the contract itself. Plaintiffs did not make use of the means of verification that were available to verify the representations. Therefore, the court dismissed plaintiffs’ fraud cause of action. Lastly, the court dismissed plaintiffs’ cause of action for violations of sections 272, 273, and 275 of the Debtor and Creditor Law. Plaintiffs claimed that individual defendant withdrew millions of dollars from the corporation for his personal use, or for use by companies owned and controlled by him. The court dismissed this claim because in essence, plaintiffs claim under the Debtor and Creditor Law merely sought to hold individual defendant individually liable in the event that they succeeded in their breach of contract claim against corporate defendant but failed in their attempt to pierce the corporate veil, rendering this claim duplicative of their breach of contract cause of action. The court granted individual defendant’s motion to dismiss in its entirety.

Am. Media, Inc. v. Bainbridge & Knight Laboratories, LLC, Index No. 650230/2013, 9/19/2014 (Bransten, J.).

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