F&R Goldfish Corp. v. Furleiter

• Decision Date: 02 November 2022
• Docket Number: 2019-11740,Index No. 521162/18
• Parties: F&R GOLDFISH CORP., et al., appellants, v. Vladimir FURLEITER, etc., et al., respondents (and a third-party action).
• Court: New York Supreme Court — Appellate Division

210 A.D.3d 643

178 N.Y.S.3d 87

F&R GOLDFISH CORP., et al., appellants,

v.Vladimir FURLEITER, etc., et al., respondents (and a third-party action).

2019-11740

Index No. 521162/18

Supreme Court, Appellate Division, Second Department, New York.

Argued—September 23, 2022

November 2, 2022

Jacobs Law, P.C., New York, NY (Eleazar Jacobs of counsel), for appellants.

The Law Office of Roman Popik, P.C., New York, NY, for respondents.

BETSY BARROS, J.P., JOSEPH A. ZAYAS, WILLIAM G. FORD, JANICE A. TAYLOR, JJ.

DECISION & ORDER

In an action, inter alia, to recover damages for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and on an account stated, the plaintiffs appeal from an order of the Supreme Court, Kings County (Leon Ruchelsman, J.), dated August 16, 2019. The order, insofar as appealed from, granted those branches of the defendants’ motion which were pursuant to CPLR 3211(a)(7) to dismiss the causes of action alleging breach of the implied covenant of good faith and fair dealing, unjust enrichment, and to recover on an account stated.

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and those branches of the defendants’ motion which were pursuant to CPLR 3211(a)(7) to dismiss the causes of action alleging breach of the implied covenant of good faith and fair dealing, unjust enrichment, and to recover on an account stated are denied.

Beginning in 2011, the plaintiff F & R Goldfish Corp. (hereinafter Goldfish) supplied the defendants Royal Baltic, Ltd. (hereinafter Royal Baltic), and NY Fish, Inc. (hereinafter N.Y. Fish), with raw fish to smoke and manufacture at a facility located on property owned by the defendant Royal Development, Inc. (hereinafter RDI). In 2012, Royal Baltic and N.Y. Fish ceased operations, at which time they owed Goldfish approximately $375,000. In a settlement proposed by the defendants Vladimir Furleiter and Alexander Kaganovsky, who were principals of Royal Baltic and N.Y. Fish and owners of RDI, Goldfish agreed to accept a 40% interest in Royal Baltic and in N.Y. Fish in exchange for waiving the $375,000 debt, paying the outstanding debts of Royal Baltic and N.Y. Fish, making a capital investment contribution, paying 40% of their operating expenses, and paying rent to RDI. In November 2012, operations resumed at the facility, with the plaintiff New York City Fish, Inc. (hereinafter City Fish), managing the business. Three months later in February 2013, the Food and Drug Administration (hereinafter the FDA) documented violations at the facility, and in May 2013, the federal government commenced an action seeking to enjoin operations at the facility (hereinafter the federal action). NY Fish failed to appear in the federal action. In April 2014, the facility was shut down. During the pendency of the federal action, Goldfish discovered that the FDA had previously permanently enjoined some of the defendants from directly or indirectly participating in any fish-smoking operations. In January 2015, Furleiter and Kaganovsky dissolved Royal Baltic, and in June 2016, they dissolved N.Y. Fish. In January 2017, the facility achieved regulatory compliance and operations were permitted to resume. The plaintiffs, pursuant to an additional agreement with Furleiter and Kaganovsky, invested additional capital and provided the inventory needed to resume operations, in exchange for a 19% interest in RDI. In 2018, RDI entered into a contract to sell the property to a third party. Furleiter and Kaganovsky, however, refused to recognize the plaintiffs’ 19% interest in RDI, and commenced an eviction proceeding against City Fish for nonpayment of rent. Thereafter, the plaintiffs commenced the instant action, asserting, inter alia, causes of action alleging breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and to recover on an account stated. In relevant part, the plaintiffs sought to pierce the corporate veil to hold Furleiter and Kaganovsky personally liable for the misconduct of Royal Baltic, N.Y. Fish, and RDI. In their answer, the defendants denied the material allegations of the complaint. The defendants subsequently moved, among other things, pursuant to CPLR 3211(a)(7) to dismiss the causes of action alleging breach of the implied covenant of good faith and fair dealing, unjust enrichment, and to recover on an account stated. In an order dated August 16, 2019, the Supreme Court, inter alia, granted those branches of the motion. The plaintiffs appeal.

"On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction. We accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" ( Leon v. Martinez, 84 N.Y.2d 83, 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511 [citation omitted]; see CPLR 3211[a][7] ; Nomura Home Equity Loan, Inc., Series 2006–FM2 v. Nomura Credit & Capital, Inc., 30 N.Y.3d 572, 582, 69 N.Y.S.3d 520, 92 N.E.3d 743 ). Whether a plaintiff can ultimately prove its allegations is not a consideration in determining a motion to dismiss (see EBC I, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d 11, 19, 799 N.Y.S.2d 170, 832 N.E.2d 26 ). "Furthermore, a fact-laden claim to pierce the corporate veil is unsuited for resolution on a pre-answer, pre-discovery motion to dismiss" ( Cortlandt St. Recovery Corp. v. Bonderman, 31 N.Y.3d 30, 47, 73 N.Y.S.3d 95, 96 N.E.3d 191 ).

Here, the first cause of action, to recover on an account stated, was premised on the acceptance by Royal Baltic and N.Y. Fish of goods and services provided by Goldfish, without objection, and subsequent damages incurred in the amount of $375,000. The Supreme Court granted that branch of the defendants’ motion which was to dismiss this cause of action on the ground that the plaintiffs failed to provide any basis to establish that Furleiter and Kaganovsky "abused the privilege of operating in corporate form by dominating or controlling the corporation."

"Generally, a plaintiff seeking to pierce the corporate veil 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...