Griggs v. Weiner

• Court: U.S. District Court — Eastern District of New York
• Writing for the Court: Cheryl L. Pollak, Chief United States Magistrate Judge
• Decision Date: 10 August 2021
• Docket Number: 13 CV 3885 (KAM) (CLP)
• Citation: Griggs v. Weiner, 13 CV 3885 (KAM) (CLP) (E.D. N.Y. Aug 10, 2021)
• Parties: MARK GRIGGS, et al ., Plaintiffs, v. STEVEN WEINER, et al ., Defendants.

MARK GRIGGS, et al ., Plaintiffs, v. STEVEN WEINER, et al ., Defendants.

No. 13 CV 3885 (KAM) (CLP)

United States District Court, E.D. New York

August 10, 2021

REPORT AND RECOMMENDATION

Cheryl L. Pollak, Chief United States Magistrate Judge

On July 12, 2013, plaintiffs Mark L. Griggs and John J. Ford commenced this action against Steven Weiner^[1] and Stuart Wertzberger, seeking a declaratory judgment and permanent injunction to stop a pending arbitration. On September 30 2020, plaintiffs filed a motion for summary judgment, which was referred to the undersigned by the Honorable Kiyo A Matsumoto on April 1, 2021. Defendant Wertzberger, proceeding pro se, opposes the motion.

For the reasons set forth below, the Court respectfully recommends that plaintiffs' motion for summary judgment be granted.

FACTUAL AND PROCEDURAL BACKGROUND

A. Summary Introduction

Plaintiff Mark L. Griggs (“Griggs”) is a citizen of the State of Kansas and plaintiff John J. Ford (“Ford”) is a citizen of the State of California. (Pls.' 56.1 Stmnt^[2] ¶¶ 1, 2; Def.'s 56.1 CntrStmt^[3] ¶¶ 1, 2). Defendant Stuart Wertzberger is a citizen of the State of Nevada. (Pls.' 56.1 Stmnt ¶ 3; Def.'s 56.1 CntrStmt ¶ 3). Steven Weiner, formerly a defendant in this case who passed away sometime in 2018, was a citizen of the State of New York. (Pls.' 56.1 Stmnt ¶ 4; Def.'s 56.1 CntrStmt ¶ 4).

The dispute in this case arises from a plan formulated by plaintiffs Griggs and Ford to invest in the development of casinos in Mexico. In connection with that plan, Ford formed three LLCs - the Markham Group LLC (“Markham”) Callide Partners LLC (“Callide”), and Canto Ventures LLC (“Canto”) - that were to participate as shareholders in the Mexican corporate entities that were to actually operate the casinos. Defendant Wertzberger was to provide introductions to possible investors, in exchange for which he was given an opportunity to share in the profits generated by the casinos, subject to certain contingencies. Plaintiffs contend that before the casinos became profitable, the Mexican entities terminated their agreements with Callide and Canto in accordance with a provision in the agreements, and then failed to pay Callide and Canto amounts negotiated as part of a withdrawal and settlement agreement. Thus, plaintiffs contend that there were never any profits to share with Wertzberger and the contingencies that were a prerequisite to his receiving certain amounts under the Agreements never came to pass.

When Wertzberger was not paid the amounts he believed he was owed, he, along with Weiner and Howard Rubinsky, commenced an initial action in 2009 in the Eastern District of New York, seeking an award of finders' fees and claiming breach of contract. That case was dismissed by the court in 2010. Thereafter, a demand for arbitration was filed in California before the American Arbitration Association, based on an arbitration provision in the Callide and Canto Agreements. It is undisputed that neither Griggs nor Ford in his individual capacity are signatories to the Callide and Canto Agreements and hence they are not facially subject to the arbitration provision. Accordingly, Griggs and Ford brought the instant action to stay the California arbitration. Wertzberger contends that both Ford and Griggs are alter egos of Callide and Canto and that if the corporate veil is pierced, they would be subject to the arbitration provisions in the Callide and Canto Agreements. As demonstrated in greater detail below, although Wertzberger disputes many of the facts asserted by plaintiffs, he has failed to provide any evidence to support his theories for piercing the corporate veil. This Court therefore respectfully recommends that the motion for summary judgment, staying the California arbitration, be granted.

B. The Mexican Casino Venture

1) Callide and Canto

In 2006, plaintiffs Griggs and Ford began to investigate the possibility of building casinos in Mexico. (Pls.' 56.1 Stmnt ¶ 21; Def.'s 56.1 CntrStmt ¶ 21). Plaintiffs were introduced to defendant Wertzberger by Howard Rubinsky^[4] because Wertzberger had contacts in the Mexican gaming industry.^[5] (Pls.' 56.1 Stmnt ¶ 21; Def.'s 56.1 CntrStmt ¶ 21).^[6] Through Wertzberger's contacts, Griggs and Ford eventually met in Mexico with two Mexican attorneys - Martin Fuentes Telich (“Fuentes”) and Oscar Paredes Arroyo (“Paredes”) - who proposed obtaining a gaming license.^[7] (Pls.' 56.1 Stmnt ¶¶ 22-23; Def.'s 56.1 CntrStmt ¶¶ 22-23).

As a result of their meetings, Ford, an attorney, caused the formation of Markham, Callide, and Canto, all Delaware LLCs. (Pls.' 56.1 Stmnt ¶¶ 8, 9, 13, 25; Def.'s 56.1 CntrStmt ¶ 25). According to Ford's deposition testimony, Markham was formed to be the managing partner of Callide and Canto; Callide and Canto were formed to participate in the Mexican corporate entities that were to operate the casinos: Camino A La Diversion S. De R.L. De C.V (“Camino”) and Segundo Round S. De R.L. De CV (“Segundo”). (Ford Dep.8 at 36; see discussion infra at 9-13).^[8]

Plaintiffs assert that Ford negotiated and drafted the Callide Limited Liability Agreement (“Callide Agreement”) and the Canto Limited Liability Agreement (“Canto Agreement”), and that he executed both agreements on behalf of Markham, as the sole manager of Callide and Canto. (Pls.' 56.1 Stmnt ¶¶ 27, 28; see Ford Decl.^[9]¶¶ 6, 7 (stating that “[a]s Manager of Markham, I executed the Limited Liability Company Agreement with respect to Callide . . . [and] Canto” and that he did so “solely on behalf of and in my capacity as the Manager of Markham”)). Plaintiffs assert that the other parties to the Callide and Canto Agreements were Wertzberger and CFV, an entity formed and owned by Ivy Ong, Lawrence Kaplan, and Todd Kaplan. (Id.) According to Ford, “Griggs was never a member or manager of Markham, Callide Partners LLC or Canto Ventures LLC.” (Ford Decl. ¶ 19; Griggs Decl., ^[10] Exs. B and C).

In response to these assertions relating to the genesis of the Callide and Canto Agreements, defendant Wertzberger contends that plaintiffs' statements are misleading. (Def.'s 56.1 CntrStmt ¶¶ 27, 28). Although defendant cannot say for certain that Ford negotiated the agreements, defendant believes that Ford drafted the Agreements and he agrees that he and CFV^[11] were parties to the Callide and Canto Agreements. (Id. ¶ 29). Defendant also concedes that both he and Ford signed the Agreements, but defendant asserts that, based on emails and other evidence, ^[12] Ford executed the Agreements on behalf of himself, Markham, and Griggs. (Id. ¶¶ 27, 28). Defendant contends that Griggs and Ford received profits from the casinos, ^[13] along with monies owed to Wertzberger, and that the corporate veil should be pierced to hold both Griggs and Ford bound by the Agreements as well. (Id. ¶ 29; see Wertzberger Decl.^[14] ¶ 5).

In his Declaration submitted in connection with the motion for preliminary injunction, Ford denied Wertzberger's claim that he received monies from Callide and Canto, asserting that “[b]ased upon the facts and circumstances . . .as confirmed by the documentary evidence produced in the prior E.D.N.Y. Action, ^[15] [he has] not received any payments, either directly or indirectly, from [Callide, Camino, Canto, or Segundo] with respect to the casinos contemplated [by those entities] in Mexico.” (Ford Decl. ¶ 26). According to Ford, the LLCs (Callide and Canto) became shareholders in the Mexican entities that were involved in Camino and Segundo and that Markham invested indirectly in the Mexican entities through its membership in the LLCs. (Ford Dep. at 42).

Wertzberger points to the minimal capitalization underlying the formation of Markham and the other LLCs as a basis for piercing the corporate veil. In response to a question regarding Markham's capitalization, Ford explained in his deposition that “[i]t would have been nominal capital” because Markham was to be merely an investment entity, not an operating entity. (Id. at 40; see also id. at 43 (stating that Markham was formed as “an investment entity. It was never designed to be an operating entity”). Ford testified that he was the manager of Markham; that Markham had a bank account at Citibank, and as a member of the Callide and Canto LLCs, Markham indirectly invested in the Mexican entities, Camino and Segundo. (Id. at 39).

According to Ford's testimony, Callide and Canto, both limited liability corporations, were also investment entities; Callide's “sole purpose was to be a shareholder of Camino, and [its] members were to perform various services for Camino, but Callide in and of itself didn't conduct any operations. It was an investment vehicle.” (Id. at 68, 75). As with Markham, Ford testified that because “[i]t was not contemplated that Callide would contribute capital to Camino, [] there was no need for capital to contribute to Camino, so it would have been nominal capital contribution as reflected on Exhibit A.” (Id. at 75 (citing Callide Agreement showing that Markham's initial capital contribution was $130 and CFV's capital contribution was $30)). Similarly, Ford testified that Canto's “sole purpose” was to become a shareholder in Segundo. (Id. at 82). According to the language of the Agreements themselves, the purpose of the corporate entity was to become a shareholder in such foreign companies as the Manager shall determine. (Callide Agr.^[16] ¶ 2.5; Canto Agr.^[17] ¶ 2.5). The Agreements further made it clear that Callide and Canto were not intended to be joint ventures, and that no Member would have any personal liability to the company or other Members. (Id.)

According to the Agreements, the profit-sharing structure for Callide and Canto was divided into 16 units, with two initial Members -- Markham and...