ADYB Engineered for Life, Inc. v. Edan Admin. Servs.

Decision Date28 March 2022
Docket Number1:19-cv-7800-MKV
PartiesADYB ENGINEERED FOR LIFE, INC., Plaintiff, v. EDAN ADMINISTRATION SERVICES LTD. and POM ADVANCED ARMOR SOLUTIONS LLC, Defendants.
CourtU.S. District Court — Southern District of New York

ADYB ENGINEERED FOR LIFE, INC., Plaintiff,
v.

EDAN ADMINISTRATION SERVICES LTD. and POM ADVANCED ARMOR SOLUTIONS LLC, Defendants.

No. 1:19-cv-7800-MKV

United States District Court, S.D. New York

March 28, 2022


OPINION AND ORDER

MARY KAY VYSKOCIL, United States District Judge:

The dispute among the parties has a long history.[1] The present case was filed by ADYB Engineered For Life, Inc. (“ADYB”) against Defendants Edan Administration Services (Ireland) Ltd. (“EDAN”) and Pom Advanced Armor Solutions LLC (“PAAS”) alleging breach of contract, conversion, and abuse of process. [ECF No. 45]. EDAN and PAAS have answered and, together with Edwin Cohen (“E. Cohen”), EDAN's owner, asserted counterclaims against ADYB for breach of contract, fraud, and unjust enrichment (among others). (Defendants' Answer to First Amended Complaint and Defendants' First Amended Counterclaims (“Def. First Am. Counterclaims”) [ECF No. 49] ¶¶ 86-125). The counterclaims added ADYB and, its owner and CEO, Hananya Cohen (“H. Cohen”) as counterclaim defendants. (See Def. First Am. Counterclaims). E. Cohen has also asserted independent claims for breach of contract and unjust enrichment against ADYB and H. Cohen. (Def. First Am. Counterclaims ¶¶ 126-137).

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BACKGROUND

I. Factual Background

In September 2011, ADYB entered into a contract (the “Investment Agreement”) with EDAN (formerly known as NEWCO) and E. Cohen, as owner and a representative of EDAN, relating to the development of body-armor technology developed by H. Cohen, the owner and CEO of ADYB. (Def. First Am. Counterclaims ¶¶ 15, 20, 26).[2] Under the Investment Agreement, E. Cohen committed to invest $250, 000 in ADYB in exchange for a twenty-percent interest in the company. (Def. First Am. Counterclaims ¶ 21).

The Investment Agreement provides for H. Cohen, upon receipt of two investment payments from E. Cohen, to transfer the rights to his armor-related patents to ADYB and then for ADYB to license the patents to EDAN. (Def. First Am. Counterclaims ¶¶ 22, 24). Under the terms of the Investment Agreement, EDAN is subject to benchmarks, or milestones, limiting its rights under its license if the technology was certified at certain performance levels by the National Institute for Justice (“NIJ”), an agency of the U.S. Department of Justice. (Def. First Am. Counterclaims ¶ 25). Initial testing of the armor-related technology was promising, but did not satisfy the performance levels necessary to be certified by NIJ. (Def. First Am. Counterclaims ¶ 30).

As a result of the promising test results, EDAN, ADYB, and H. Cohen executed two new agreements, or memoranda of understanding. (Def. First Am. Counterclaims ¶ 31). Pursuant to those memoranda of understanding, H. Cohen assigned the patents to EDAN to assist EDAN in

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soliciting additional investments and ADYB assigned ownership of its physical and intellectual property to EDAN. (Def. First Am. Counterclaims ¶¶ 33, 37).

Over the next two years, ADYB and EDAN worked together to develop the technology. (Def. First Am. Counterclaims ¶¶ 39, 43). EDAN paid H. Cohen a monthly salary of $2, 000 to $3, 000 per month, despite the contracts not calling for such payments. (Def. First Am. Counterclaims ¶¶ 40, 50).

During this time, EDAN began exploring a potential business relationship with PPG Industries, Inc. (“PPG”), which was interested in using the patented technology for armored vehicles. (Def. First Am. Counterclaims ¶¶ 46-47). EDAN alleges that H. Cohen knew that an ownership dispute over the patents would ruin the potential business relationship between EDAN and PPG and so demanded that EDAN increase his monthly payments from $3, 000 to $8, 000. (Def. First Am. Counterclaims ¶¶ 49-50). EDAN gave in to these demands because, it alleges, it feared that H. Cohen would destroy the potential deal with PPG. (Def. First Am. Counterclaims ¶ 50).

EDAN, through its wholly owned subsidiary PAAS, entered into a two-year license agreement with PPG (the “PAAS-PPG License Agreement”), under which PAAS would earn royalties from PPG's sales of licensed products. (Def. First Am. Counterclaims ¶¶ 52-53 & n.5). PPG was later awarded a contract from the United States Tank Automotive Research, Development and Engineering Center (“TARDEC”) to study and develop the licensed products. (Def. First Am. Counterclaims ¶ 55).

As the PAAS-PPG relationship formed, E. Cohen and H. Cohen realized that the initial benchmarks in the Investment Agreement, though never triggered because the armor-related technology was not certified by NIJ, risked chilling prospective investors. (Def. First Am. Counterclaims ¶ 59). Nonetheless, E. Cohen and H. Cohen could not reach an agreement to

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revise the original Investment Agreement. (Def. First Am. Counterclaims ¶ 69). At the same time, EDAN alleges that H. Cohen threatened to terminate the parties' business arrangements if EDAN did not increase his monthly payments to $16, 000. (Def. First Am. Counterclaims ¶ 67). Fearful that H. Cohen would act on his threats, EDAN acquiesced. (Def. First Am. Counterclaims ¶ 67).

Amid all of this, in September 2017, H. Cohen filed documents with the United States Patent and Trademark Office (“USPTO”) claiming EDAN breached its agreements with him, he had revoked his assignments to EDAN of the patents, and ADYB was now the assignee of his patents. (Def. First Am. Counterclaims ¶ 71). Approximately one year after filing the documents with the USPTO, H. Cohen wrote to PPG claiming that PAAS “no longer holds a marketing license for my patents” and requested confirmation that PPG was no longer marketing his patents. (Def. First Am. Counterclaims ¶ 77). EDAN alleges that H. Cohen also sent numerous disparaging e-mails to PPG representatives, calling EDAN and PAAS liars, fraudsters, and like terms. (Def. First Am. Counterclaims ¶ 80). H. Cohen continued to assert to PPG that EDAN breached the Investment Agreement and approached PPG to inquire whether it would be interested in a deal with ADYB to the exclusion of EDAN and PAAS. (Def. First Am. Counterclaims ¶¶ 78, 82).

II. Procedural History

In May 2019, EDAN, PAAS, and E. Cohen sued ADYB and H. Cohen in the Southern District of New York invoking the Court's diversity jurisdiction and seeking a preliminary injunction to stop H. Cohen from further damaging the relationship with PPG. (Declaration of Danny Turetsky (“Turetsky Decl.”) [ECF No. 95-3] ¶ 3); Complaint, Dkt. No. 1, Edan Admin. Servs. Ltd. v. Cohen, 1:19-cv-05051 (S.D.N.Y. May 30, 2019) (Caproni, J.); Mot. Prelim. Inj., Dkt. No. 4, Edan Admin. Servs., 1:19-cv-05051 (S.D.N.Y. May 31, 2019). At the preliminary

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injunction hearing, EDAN, PAAS, and E. Cohen voluntarily dismissed H. Cohen from the case without prejudice upon learning that his citizenship status - a U.S. citizen domiciled abroad and therefore a citizen of no state for diversity purposes - would destroy subject matter jurisdiction. (Turetsky Decl. ¶ 5); Order, Dkt. No. 32, Edan Admin. Servs., 1:19-cv-05051 (S.D.N.Y. July 10, 2019). Shortly after their motion for a preliminary injunction was denied, EDAN, PAAS, and E. Cohen voluntarily dismissed the action without prejudice. (Turetsky Decl. ¶ 6); Notice of Voluntary Dismissal, Dkt. No. 33, Edan Admin. Servs., 1:19-cv-05051 (S.D.N.Y. July 23, 2019).

EDAN, PAAS, and E. Cohen prepared to file a lawsuit against H. Cohen in Israel, but, in the interim, ADYB commenced this action against EDAN and PAAS in August 2019. (Turetsky Decl. ¶¶ 6, 8-9). ADYB asserted claims against EDAN and PAAS for breach of contract, conversion, and abuse of process. [ECF No. 1]. In November 2019, EDAN and PAAS answered and asserted several counterclaims against ADYB and H. Cohen, jointly and severally, noting that they intended to move to add H. Cohen as a party pursuant to Federal Rule of Civil Procedure 13(h). [ECF No. 23 at 8 n.1]. In December 2019, the Court (Schofield, J.) entered a Case Management Plan and the parties began discovery. [ECF No. 36].

Shortly thereafter, ADYB filed an amended complaint asserting the same three claims against EDAN and PAAS. [ECF No. 45]. EDAN and PAAS filed an amended answer and, together with E. Cohen, asserted counterclaims against ADYB and H. Cohen, jointly and severally, for breach of contract, several torts, and declaratory relief. [ECF No. 49 ¶¶ 86-125, 138-39]. In addition, E. Cohen independently asserted claims against ADYB and H. Cohen, jointly and severally, for breach of contract and unjust enrichment. [ECF No. 49 ¶¶ 126-37].

At this same time, the case was reassigned to me. Subsequent to that reassignment, the parties filed several motions. ADYB moved to dismiss EDAN and PAAS's tort and declaratory relief counterclaims pursuant to Rule 12(b)(6). [ECF No. 65]. H. Cohen moved to dismiss all of

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the counterclaims that EDAN and PAAS brought against him, pursuant to Rules 12(b)(4) and 12(b)(5), for insufficient process and service of process. [ECF No. 91]. EDAN and PAAS moved to join E. Cohen (as counterclaim plaintiff) and H. Cohen (as counterclaim defendant) as necessary or, alternatively, permissive parties pursuant to Federal Rules of Civil Procedure 13(h), 19, and 20. [ECF No. 93]. And EDAN and PAAS moved for leave to file a second amended answer and counterclaim, pursuant to Rule 15(a)(2), to add a counterclaim for fraudulent conveyance against H. Cohen. [ECF No. 130].

While these motions were pending, the Court held a Post-Discovery Conference on March 2, 2021. At the conference, the parties represented that except for two hours of H. Cohen's deposition (which the parties later resolved by stipulation [ECF No. 160]), all discovery was complete and no additional discovery was required [ECF No. 156]. Shortly after the PostDiscovery Conference, the parties filed a joint letter requesting that the Court schedule a bench trial for this matter in October 2021. [ECF Nos. 159, 161].

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