Goodworldcreations LLC v. Albright

• Decision Date: 17 August 2015
• Docket Number: 14 Civ. 3848 (TPG)
• Parties: GOODWORLDCREATIONS LLC d/b/a/ CROWDNETIC, Plaintiff and Counterclaim Defendant, v. DARA ALBRIGHT, Defendant and Counterclaim Plaintiff, v. ALICE COX a/k/a LUAN COX, Counterclaim Defendant
• Court: U.S. District Court — Southern District of New York

GOODWORLDCREATIONS LLC d/b/a/ CROWDNETIC, Plaintiff and Counterclaim Defendant, v. DARA ALBRIGHT, Defendant and Counterclaim Plaintiff, v. ALICE COX a/k/a LUAN COX, Counterclaim Defendant

14 Civ. 3848 (TPG)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

August 17, 2015

OPINION

This case involves the putative interests of defendant Dara Albright in a company called NowStreet LLC. In January 2014, Albright sold NowStreet to plaintiff GoodWorldCreations, LLC, d/b/a Crowdnetic ("Crowdnetic"), a company founded by counter-defendant Alice Cox ("Cox"). A dispute about the terms of that sale, as well as a purported employment agreement between Crowdnetic and Albright, gives rise to the complaint and counterclaim before the court.

Crowdnetic moves for declaratory judgment, pursuant to 28 U.S.C. § 2201, that Crowdnetic, not Albright, is the rightful owner of NowStreet, and that Albright has no right to rescind Crowdnetic's purchase of NowStreet. Crowdnetic also seeks millions of dollars incompensatory and punitive damages for (1) tortious interference with contract; (2) tortious interference with business relations; (3) conversion; (4) civil trespass to chattel; and (5) a faithless act.

Albright has moved to dismiss Counts II and III of the complaint—the claims for tortious interference with contract and tortious interference with business relations. (Dkt. No. 33.). Albright has also filed a twice-amended counterclaim against Crowdnetic and Cox. (Dkt. No. 31.) As a counterclaimant, Albright brings claims for breach of contract, common law fraud, securities fraud, and tortious interference with business relations. Crowdnetic has moved to dismiss the entirety of Albright's counterclaim.

For the reasons that follow, Albright's motion to dismiss the complaint is denied Crowdnetic's motion to dismiss the counterclaim is granted in part and denied in part.

THE COMPLAINT AND COUNTERCLAIM

The followings facts are drawn from the First Amended Complaint and the Second Amended Counterclaim, and are assumed to be true for purposes of the instant motions.

A. The Complaint

Plaintiff Crowdnetic is a limited liability company with offices in this district. Crowdnetic is "a provider of technology and market data solutions to the global crowdfinance marketplace." (Dkt. No., 23, First Amended Complaint ("FAC") ¶ 13.) Crowdfinance "refers to a relatively new funding approach intended to enable business ventures to raise capital . . . through social media websites and through financial network websites focused on accredited investors ('networks')." (FAC ¶ 12.) Counter-defendant Alice Cox is a resident of New York, and is the founder and CEO of Crowdnetic.

NowStreet is a Georgia limited liability company that provides an informational platform for the crowdfinance industry through various channels. It includes an internet blog started by Albright.

Defendant Albright is a resident of Georgia. Prior to the execution of a Membership Interest Purchase Agreement (the "Purchase Agreement"), Albright was the sole member, and 100% owner, of NowStreet. However, pursuant to the Purchase Agreement, dated as of August 1, 2013 and effective as of January 1, 2014, Albright sold her interest in NowStreet to plaintiff for $5,000. (FAC ¶ 19.) The Purchase Agreement includes a merger clause, which states: "This agreement supersedes all prior discussions and agreements among the parties with respect to the subject matter hereof and thereof and contains the sole and entire agreement between the parties hereto and thereto with respect to the subject matter hereof and thereof." (Purchase Agreement ¶ 4.3.)

At the time the Purchase Agreement was executed, NowStreet's assets included a 1/3 membership interest in a Delaware limited liability company called LendIt Conference, LLC ("LendIt"). LendIt owns the rights to the "LendIt Conference"—a leading conference in the global lending industry which "addresses both consumer and small business lending, and aims to introduce people to the latest online lending platforms[.]" (FAC ¶ 16.)

In May 2014, the second annual LendIt Conference was held in San Francisco, with increased attendance (and corresponding profits) as compared to the 2013 LendIt Conference. Crowdnetic claims that both before and after the conference, Albright actively worked against its interest by telling investors involved in the LendIt Conference or general crowdfinance space that Albright—not Crowdnetic—controlled the rights to own or manage NowStreet and its interest in the LendIt Conference. Albright allegedly did so by, among other things, changingpasswords to remove Crowdnetic's access to LendIt's online files and social media accounts. (FAC ¶¶ 36-45.) Albright then further moved "to sabotage Crowdnetic's business and business relations" on May 13, 2014—one week after the LendIt conference—when Albright "demanded that the parties 'unwind' the Purchase Agreement pursuant to which Crowdnetic had purchased Albright's interests in NowStreet, so that ownership of NowStreet (and its 1/3 interest in LendIt) would be restored to her." (FAC ¶ 53.) Albright also informed third parties, including a news source called "Lend Academy," that she was unwinding the transaction with Crowdnetic and therefore maintained full ownership and control over NowStreet. Crowdnetic claims Albright's actions were driven in part by the success of the 2014 LendIt Conference, which led her to experience seller's remorse after realizing she had sold her 1/3 interest in the LendIt Conference profits to plaintiff for far less than the profits actually earned by LendIt.

According to Crowdnetic, in the last half of 2013, "the parties also discussed the possibility of Albright's becoming an employee of Crowdnetic and being granted an option to purchase units in plaintiff." (FAC ¶ 23.) Crowdnetic adds that in January 2014, "Albright executed a Unit Option granting her options to purchase a specified number of units in Crowdnetic, vesting of which options was contingent upon her being employed by Crowdnetic." (FAC ¶ 24.) However, Crowdnetic claims that "in March 2014, [Albright] indicated to Crowdnetic that she did not want to become an employee and instead wished to be a consultant," and that Albright ultimately did not sign a proposed Consulting Agreement or revised Unit Option Agreement. (FAC ¶¶ 25-27.)

B. The Counterclaim

Albright tells a different story. In her Second Amended Counterclaim, filed against Crowdnetic and its CEO, Alice (Luan) Cox, Albright claims to be the victim "of deception andbetrayal by Cox and Crowdnetic." (Second Amended Counterclaim ("SACC"), Dkt. No. 31 at 3.)

Albright admits that effective January 2014, pursuant to the Purchase Agreement, she "sold her interests in NowStreet to Crowdnetic, resulting in Crowdnetic owning 100% of the Member Interests of NowStreet." (SACC at 2.) But Albright claims that she agreed to sign the Purchase Agreement, and a related Unit Option Agreement ("Option Agreement"),¹ only after relying on representations from Cox in mid to late 2013 regarding Albright's continued employment with Crowdnetic. (SACC ¶ 30.)

Albright first received drafts of the Purchase Agreement and Option Agreement on December 30, 2013. She claims that while the Purchase Agreement itself made no reference to any other agreement to continue to employ Albright, Cox "repeatedly represented to Albright that Crowdnetic was not buying NowStreet, but rather she was buying Albright, and Cox falsely represented to Albright that the deal needed to be structured in this manner for tax reasons." (SACC 127.) As of January 8, 2014, Albright claims that she had an agreement (what she refers to as the "January 2014 Employment Agreement") with Crowdnetic to work as a key executive through August 1, 2016—unless she was terminated for cause—at a salary of $120,000 annually.² Albright alleges that under her agreement with Crowdnetic, her "executive position at Crowdnetic would be safe for at least three years so long as she continued to perform satisfactorily," and that Albright was to receive "founders' shares" and "a long term employment contract as a key executive of Crowdnetic." (SACC at 4.) On this point, Albright quotes anemail from Cox which stated in part: "there is a minimum target that if hit would ensure that your contract / you wouldn't be let go, etc. So, there is a performance metric to protect against your fear." (SACC ¶ 30.) Albright believed such employment terms "would be memorialized by a formal written agreement entered into between Crowdnetic and Albright, but were binding as of when the NowStreet ownership was transferred by Albright to Crowdnetic." (SACC ¶ 30.)

Albright executed the Option Agreement on January 8, 2014, and executed the Purchase Agreement the next day. However, she did not receive or execute any written agreement regarding the terms of her continued employment, as Cox insisted that Crowdnetic could not afford the legal fees to create such a document until after the company's financing round was completed. And, Cox later informed Albright that her title would change from Chief Communications Officer at Crowdnetic to Editor-in-Chief at NowStreet. Cox also requested that Albright sign a 2-year non-compete agreement that referred to Albright as a "consultant." Albright refused.

Crowdnetic's financing round was completed on February 15, 2014. Soon thereafter, Cox told Albright that she would send her a proposed employment agreement, but would need to "refigure" her compensation due to investor concern that Albright's compensation was too high. Cox proposed a reduction in Albright's salary from $120,000 to $100,000 annually, which Albright rejected. Cox also sent Albright a draft employment agreement, entitled "Consulting Agreement," which provided for a one-year term of employment and allowed Crowdnetic to terminate Albright's employment at any time, with or without cause. (SACC ¶ 37.) Albright refused to sign this document, advising...