Friedman v. Wahrsager
| Decision Date | 30 January 2012 |
| Docket Number | No. 11 CV 815(DRH)(ARL).,11 CV 815(DRH)(ARL). |
| Parties | Ronald J. FRIEDMAN, as Receiver for New York Merchants Protective Co., Inc., New York Merchants Alarm Response, Inc., and N.Y. Merch Prot Co., Inc., Plaintiff, v. Wayne WAHRSAGER, Aaron Wahrsager, Eric R Wahrsager, Nationwide Central Station Monitoring Co., Inc., New York Merchants Protective Co., Inc., NMP Holdings Corp. Nationwide Digital Monitoring Co., Inc., United States Merchants Protective Co., Inc., New York Merchants Alarm Response, Inc., N.Y. Merch Prot Co., Inc., Seniorcare 911, LLC, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
OPINION TEXT STARTS HERE
Silverman Acampora LLP, by: Robert J. Ansell, Jericho, NY, for Plaintiff.
LaMonica Herbst & Maniscalco LLP, by: Joseph S. Maniscalco, Esq., Wantagh, NY, for Defendants Aaron Wahrsager, Eric Wahrsager, Nationwide Central Station Monitoring, and United States Merchants Protective Co. Inc.
This action was commenced by Ronald J. Friedman (“plaintiff” or “Receiver”), who was appointed by this Court in a separate action entitled Bank of America v. New York Merchants Protective Co. Inc., New York Merchants Alarm Response, and N.Y. Merch. Prot. Co. Inc., No. 11–CV–38(DRH)(ARL) (E.D.N.Y.) (the “BOA Action”) to act as the receiver to the defendant businesses in that case. The individual defendants in this suit, Wayne Wahrsager and his two sons Eric and Aaron Wahrsager (collectively, the “Wahrsagers” or the “individual defendants”), are allegedly officers of the receivership businesses 1 named in the BOA Action. In that action, the Bank of America sued to recover over $19 million in defaulted loans and overdraft payments from New York Merchants Protective Company (“NYMP”). 2 Here, the Receiver alleges that in the months prior to NYMP entering receivership, the Wahrsagers took steps to “intentionally sabotage the business and operations of NYMP.” (Amended Complaint (“Am. Compl. ”) ¶ 57.) The Receiver alleges 28 claims for relief, including that the defendants fraudulently conveyed the company's assets. (Am. Compl. generally.) 3
Now before the Court is the motion of defendants Eric and Aaron Wahrsager, Nationwide Central Station Monitoring (“Central Station”), and United States Merchants Protective Co. Inc. (“USMP”) to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6). Defendants Wayne Wahrsager and SeniorCare911, LLC have answered the complaint.4 Although the moving parties and the Receiver have repeatedly represented to the Court since this motion was filed in April 2011 that the parties would be able to settle the matters raised therein, the Receiver informed the Court by letter dated January 11, 2012 that an amicable resolution would not be forthcoming. ( See Letter from Receiver's Counsel dated 1/11/12, docket no. 143.) For the reasons that follow, defendants' motion is granted in part and denied in part.
Although still only in the pleading stage, this case along with its sister case, the BOA Action, has been the subject of multiple proceedings and applications over the past twelve months. The facts and procedural history recounted here will therefore be limited only to what is necessary to decide the instant motion. All well pled factual allegations are assumed true for present purposes.
NYMP was formed in 1989, and since then has provided security alarm, fire alarm, and life-safety alarm monitoring as well as other related services. (Am. Compl. ¶¶ 21–22.) In January 2006, LaSalle Bank, predecessor to Bank of America, entered into an agreement to provide NYMP up to $17.5 million in revolving loans.5 (Am. Compl. ¶ 39.) The amount of the revolving loan was based primarily on the size of NYMP's “recurring monthly revenue,” i.e., revenue from monthly payments to the company in exchange for the provision of monitoring services to its residential and commercial customers. Beginning in February 2010, NYMP, allegedly at the behest of Wayne Wahrsager, engaged in a check-kiting scheme, which accumulated approximately $1.4 million in overdrafts. (BoA Compl. ¶¶ 23–25, 41.) Upon discovering this scheme, the bank directed NYMP, through a September 2010 notice of default, to engage the services of a financial auditor to “re-examine” the actual size of the company's monthly revenue. (BoA Compl. ¶¶ 29, 34.) This audit determined that NYMP had “significantly overstated and misrepresented” the financial basis for the revolving loan. (BoA Compl. ¶ 30.)
Discovery of this alleged fraud prompted Bank of America on January 5, 2011 to commence the BoA action, and therein seek the appointment of a receiver, in order to recover the assets pledged under the loan agreement and the overdrafts resulting from the alleged check-kiting scheme.
Throughout the period of August 2010 to January 5, 2011 (hereinafter the “prelitigation period”), Wayne Wahrsager was allegedly an owner of NYMP, and his two sons, Aaron and Eric Wahrsager were allegedly officers and employees of the company. (Am. Compl. ¶¶ 57–60.) According to the amended complaint, during this time and for a period after the appointment of a receiver, the officers of NYMP “took several steps ... to intentionally sabotage the business and operations of NYMP” (Am. Compl. ¶ 57), including:
1. “[P]urposely causing NYMP” to miss property tax payments, thereby forcing the company, under the terms of its lease, to surrender its lease for no consideration to the landlord, a company in which Wayne Wahrsager holds a 10 percent stake (Am. Compl. ¶¶ 61–63), and then entering into a new lease with Central Station, a corporation wholly owned and run by defendants Aaron and Eric Wahrsager (Am. Compl. ¶¶ 55–56, 64);
2. “[S]hredd[ing] and destroy[ing] all of [NYMP's] customer contracts” (Am. Compl. ¶ 65);
3. Transferring “a significant portion of its assets [including some customer accounts] to Central Station for no consideration” (Am. Compl. ¶¶ 65–67);
4. Signing a contract with Central Station to provide “monitoring services” for NYMP's accounts at a cost of $50,000 per month—allegedly more than double the market rate (Am. Compl. ¶¶ 68–70);
5. Sending a letter to the company's “residential customers” which unilaterally terminated those customers' long-term monitoring contracts, retaining them solely on a month-to-month basis (Am. Compl. ¶ 74);
6. Calling NYMP customers to inform them that the security and fire alarm monitoring on their accounts was being turned off without notice (Am. Compl. ¶ 80);
7. Cancelling customer accounts and moving them to Central Station, or otherwise encouraging customers to switch from NYMP to Central Station or United States Merchants Protective Co. Inc. (“USMP”) (Am. Compl. ¶¶ 83, 85);
8. Forming new corporate entities and renamed existing ones in an attempt to “hide and conceal the acts of sabotage,” including changing NYMP's name to “NYMP Holdings Corp.” and also forming a “new” NYMP owned by Eric Wahrsager (Am. Compl. ¶¶ 76–78);
9. Wiping company servers of critical data allegedly to thwart the Receiver's attempts to run the business; and
10. Refusing the Receiver access to the company's computer system (Am. Compl. ¶ 84).
Plaintiff seeks (1) a permanent injunction enjoining the defendants or their associates from taking any action to harm the operations, business, reputation, and assets of the Receivership Businesses, (2) unfettered access by the Receiver to the operations and premises of Central Station and USMP, (3) an order setting aside any fraudulent conveyance of NYMP assets to Central Station and declaring such assets subject to the perfected security interest held by Bank of America, and (4) damages, costs and fees. (Am. Compl. ¶¶ 2, 188–91.)
Rule 8(a) provides that a pleading shall contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The Supreme Court has clarified the pleading standard applicable in evaluating a motion to dismiss under Rule 12(b)(6).
First, in Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Court disavowed the well-known statement in Conley v. Gibson, 355 U.S. 41, 45–46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) that “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” 550 U.S. at 562, 127 S.Ct. 1955. Instead, to survive a motion to dismiss under Twombly, a plaintiff must allege “only enough facts to state a claim to relief that is plausible on its face.” Id. at 570, 127 S.Ct. 1955.
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).
Id. at 555, 127 S.Ct. 1955 (citations and internal quotation marks omitted).
More recently, in Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), the Supreme Court provided further guidance, setting a two-pronged approach for courts considering a motion to dismiss. First, a court should “begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.” 129 S.Ct. at 1950. “While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Id. Thus, “[t]hreadbare recitals of the...
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