Don Lia v. Saporito

• Citation: 909 F.Supp.2d 149
• Decision Date: 06 November 2012
• Docket Number: No. 11–CV–3621(SJF)(ETB).,11–CV–3621(SJF)(ETB).
• Court: U.S. District Court — Eastern District of New York
• Parties: Don LIA, Mobile Management, LLC, and N.R. Automotive, Inc., Plaintiffs, v. Michael SAPORITO and Jesse Armstead, Defendants. W & D Imports, Inc., doing business as Willis Honda, and David Davis, Consolidated Plaintiffs, v. Don Lia, Mobile Management, LLC, N.R. Automotive, Inc., Michael Saporito, Jesse Armstead, Allstar Motors of L.I. Inc., All Star Motors, LLC, doing business as Hamilton Honda, American Honda Motor Co., Inc. and Does 1 Through 7, Consolidated Defendants.

909 F.Supp.2d 149

Don LIA, Mobile Management, LLC, and N.R. Automotive, Inc., Plaintiffs,

v.Michael SAPORITO and Jesse Armstead, Defendants.

W & D Imports, Inc., doing business as Willis Honda, and David Davis, Consolidated Plaintiffs,

v.Don Lia, Mobile Management, LLC, N.R. Automotive, Inc., Michael Saporito, Jesse Armstead, Allstar Motors of L.I. Inc., All Star Motors, LLC, doing business as Hamilton Honda, American Honda Motor Co., Inc. and Does 1 Through 7, Consolidated Defendants.

No. 11–CV–3621(SJF)(ETB).

United States District Court, E.D. New York.

Nov. 6, 2012.

Steven Cohn, Steven Cohn, PC, Carle Place, NY, Jeffrey H. Weinberger, New York, NY, for Plaintiffs.

Matthew Brian Weinick, Jeffrey Kevin Brown, Matthew Ian Marks, Rick Ostrove, Leeds Brown Law, P.C., Carle Place, NY, Charles Michael Rowan, Jr., Francis X. Riley, III, Saul Ewing LLP, Princeton, NJ, Michael S. Gugig, Saul Ewing LLP, Newark, NJ, Andrew P. Cooper, Davidoff Hutcher & Citron LLP, Garden City, NY, for Defendants.

Eric L. Chase, Ronald James Campione, Bressler Amery & Ross, P.C., Florham Park, NJ, for Consolidated Plaintiffs.

Daniel Esrick, Elizabeth Mooney, Robert D. Cultice, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA, for Consolidated Defendants.

ORDER

FEUERSTEIN, District Judge.

On June 30, 2011, plaintiffs Don Lia (“Lia”), Mobile Management, LLC (“Mobile Management”) and N.R. Automotive, Inc. (“N.R.Automotive”) (collectively, “the Lia parties”) filed a complaint (“the Lia complaint” or “the Lia action”) in the Supreme Court of the State of New York, County of Nassau, against defendants Michael Saporito (“Saporito”) and Jesse Armstead (“Armstead”) (collectively, “defendants”), alleging claims seeking specific performance of two (2) agreements; judgment declaring Lia's ownership interest in certain property; the imposition of a constructive trust on certain property and assets; an accounting; and monetary damages for breach of fiduciary duty, unjust enrichment and breach of contract. On July 27, 2011, Saporito removed the action to this Court pursuant to this Court's diversity jurisdiction under 28 U.S.C. § 1332.¹ Pending before the Court are: (1) Saporito's motion to dismiss the Lia complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure; and (2) Armstead's motion to dismiss the Lia complaint pursuant to Rules 12(b)(1) and (6) of the Federal Rules of Civil Procedure. For the reasons set forth herein, defendants' motions are granted in part.

I. BackgroundA. Factual Background ²

The Lia parties allege that in or around March 2003, Lia and Saporito, with the participation of Armstead, decided to pursue an “open point,” i.e., the formation of a new automobile dealership in a specific geographic region, in central New Jersey that had been announced by American Honda. (Lia Compl., ¶ 15). On April 22, 2003, Lia and defendants executed a purported agreement (“the 2003 Agreement”), pursuant to which, inter alia: (1) defendants agreed to apply for the open point in their names, with Armstead initially owning fifty-one percent (51%) of the prospective dealership as the “Dealer” and Saporito owning forty-nine percent (49%) of the prospective dealership as the “Dealer Manager,” (Lia Compl., ¶¶ 18–19); (2) Lia agreed (a) to contribute one hundred percent (100%) of the new dealership's “total required capital investment,” to be repaid under a three (3)-year, self-liquidating prime rate note, (b) to purchase the real property on which the dealership would operate, (c) to build an automobile sales/service facility in conformance with American Honda's specifications and (d) to make all of the management decisions for the prospective dealership, (Lia Compl., ¶ 20); (3) Lia would be entitled to require, on demand, that defendants transfer to him seventy-five percent (75%) of their combined ownership interests in the prospective dealership, (Lia Compl., ¶ 21); and (4) defendants were required to “execute additional formal agreements that incorporate the [foregoing] terms and conditions” upon American Honda's issuance of a letter of intent awarding them the open point, (Lia Compl., ¶ 22).

Defendants applied for the open point in their names only and represented to American Honda that they, personally, were providing all of the necessary funds. (Lia Compl., ¶ 17). However, according to the Lia parties, “it was Lia alone who contributed 100% of the funding for the dealership that ultimately became Hamilton Honda * * *.” ( Id.)

In 2003, in compliance with American Honda's property requirements for the open point, Lia, in the name of “Allstar Route 130 EW, LLC,” purchased approximately eight (8) acres of real property located in East Windsor, New Jersey. (Lia Compl., ¶ 25). However, American Honda ultimately deemed that property unsuitable for the open point, so Lia invested more funds for its redevelopment for an alternative use. (Lia Compl., ¶ 26).

In September 2004, “[i]n continuing pursuit of the Open Point,” Lia, in the name of “Allstar Route 130 HS, LLC,” purchased approximately eleven (11) acres of real property in Hamilton Township, New Jersey (“the Hamilton Property”). (Lia Compl., ¶ 27). In addition, Lia, in the names of five (5) additional limited liability companies, purchased contiguous real property, including property referred to as the “Frank's Nursery Property.” (Lia Compl., ¶ 28).

In September 2004, American Honda awarded the open point to defendants (“the Hamilton Honda Dealership project”). (Lia Compl., ¶¶ 23, 30). According to the Lia parties, defendants failed and refused to execute the additional formal agreements required under the 2003 Agreement. (Lia Compl., ¶¶ 24, 31). In addition, the Lia parties allege that unbeknownst to them, defendants pursued potentially competing dealerships while their application for the open point was pending and applied to American Honda Finance Corporation (“AHFC”) for approximately forty million dollars ($40,000,000.00), executing loan documents in favor of AHFC for a mortgage of approximately twenty million dollars ($20,000,000.00) on the Hamilton Property. (Lia Compl., ¶¶ 33–34). The Lia parties further allege that Saporito improperly transferred a one million nine hundred thousand dollar ($1,900,000.00) mortgage from the Hamilton Property to the adjacent property owned by Lia personally. (Lia Compl., ¶ 35).

The Lia parties contend that in early November 2006, upon learning of defendants' pursuit of potentially competing dealerships, Lia had a 2006 Agreement drafted, confirming that he had “exclusively funded the acquisition, operating and carrying costs” of the Hamilton Honda Dealership project and demanding that the operating agreements for the Hamilton Honda Dealership project be amended to acknowledge that Lia is “the sole member” thereof. (Lia Compl., ¶ 36). Although Saporito signed the 2006 Agreement on November 13, 2006, he failed and refused to execute the necessary amendments to the operating agreements as required thereunder. (Lia Compl., ¶ 38).

On May 19, 2009, defendants opened a sixty-five (65) thousand square-foot Honda automobile dealership (“the Hamilton Honda Dealership”) on a twelve (12)-acre campus in Hamilton, New Jersey. (Lia Compl., ¶¶ 11, 40). According to the Lia parties, defendants have frozen Lia out of the Hamilton Honda Dealership, “depriving [him] of “participation in its ‘sky-rocketing’ growth and withholding his rightful distribution, with millions of dollars invested currently unpaid and with no managerial control.” (Lia Compl., ¶¶ 14, 41–42). The Lia parties contend that Lia invested in excess of ten million dollars ($10,000,000.00) to purchase the Hamilton Honda Dealership's underlying real estate and other assets and to fund its development costs and operating expenses. (Lia Compl., ¶¶ 13, 41).

B. Procedural History

On June 30, 2011, the Lia parties filed a complaint in the Supreme Court of the State of New York, County of Nassau, which Saporito removed to this Court pursuant to this Court's diversity jurisdiction under 28 U.S.C. § 1332. In their complaint, the Lia parties seek: (1) specific performance of the 2003 and 2006 Agreements (first cause of action); (2) judgment declaring that Lia is (a) the sole owner of the property he acquired, in the name of certain limited liability companies, in relation to the Hamilton Honda Dealership, (b) a seventy-five percent (75%) owner of the Hamilton Honda Dealership and (c) entitled to seventy-five percent (75%), and full managerial control, of the Hamilton Honda Dealership (second cause of action); (3) monetary damages for breach of fiduciary duty (third and fourth causes of action against Saporito only), unjust enrichment (sixth cause of action) and breach of contract (eighth cause of action against Saporito only); (4) imposition of a constructive trust upon the Hamilton property and related assets, and the revenues of the Hamilton Honda Dealership (fifth cause of action); and (5) an accounting of the Hamilton Honda Dealership's revenues and expenses since its formation in 2009 (seventh cause of action).

Defendants now move pursuant to, inter alia,Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss the Lia complaint.

II. DiscussionA. Rule 12(b)(6) Standard of Review ³

The standard of review on a motion made pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is that a plaintiff plead sufficient facts “to state a claim for relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). The pleading of specific facts is not required; rather a complaint need only give the defendant “fair notice of what the * * * claim is and the grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007). “A pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.’ ” Ashcroft v. Iqbal, 556...