Hatteras Enters., Inc. v. Forsythe Cosmetic Grp., Ltd.
| Decision Date | 14 January 2019 |
| Docket Number | 2:15-cv-05887 (ADS)(ARL) |
| Parties | HATTERAS ENTERPRISES, INC., a California Corporation; MADMACK LLC, a California Limited Liability Company; and DEBRA MATTES, an individual, Plaintiffs, v. FORSYTHE COSMETIC GROUP, LTD; COLOR CLUB, LLC, a New York Limited Liability Company; HARRIET ROSE 2009 IRREVOCABLE TRUST; HARRIET ROSE, an individual; and MICHAEL ROSE, an individual, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
APPEARANCES:
Yourist Law Corporation APC
Attorneys for the Plaintiffs
Bradly J. Yourist, Esq., Of Counsel.
133 N Altadena Drive Suite 403
Pasadena, CA 91107
By: Franklin Thomas Bigelow, Jr., Esq., Of Counsel.
555 West Fifth Street Suite 3100
Los Angeles, CA 90013
By: Michael A J Nangano, Esq., Of Counsel.
269 South Beverly Drive, Suite 1358 Beverly Hills, CA 90212
295 Madison Avenue 39th Floor
New York, NY 10017
By: Daniel Adam Osborn, Esq., Of Counsel.
10850 Wilshire Boulevard Suite 825
Los Angeles, CA 90024
By: Jay A Woollacott, Esq., Of Counsel.
The plaintiffs Hatteras Enterprises Inc. ("Hatteras"), Debra Mattes ("Mattes"), and MadMack LLC ("MadMack") (collectively, the "Plaintiffs") brought this action against the defendants Forsythe Cosmetic Group, Ltd ("Forsythe"), Harriet Rose, Michael Rose, Color Club, LLC ("Color Club"), Harriet Rose 2009 Irrevocable Trust (the "Trust"), and certain as yet unnamed Does (collectively, the "Defendants"), alleging, inter alia, fraud and breach of contract.
On April 23, 2018, the Court granted in part, and denied in part, a motion by the Defendants to dismiss the complaint pursuant to Federal Rule of Civil Procedure ("FED. R. CIV. P." or "Rule") 12(b)(6). ECF 54 (the "Order"). In relevant part, the Court dismissed the Plaintiffs' statutory and common law claims for fraud, as well as the Plaintiffs' request for rescission based on fraud, but granted the Plaintiffs leave to file a motion to amend their complaint. The Court denied the motion to dismiss with respect to the Plaintiffs' claims for breach of a confidentiality agreement and the Plaintiffs' request for injunctive relief, accounting, and constructive trust. For a full recitation of the facts and the procedural posture of the case, the Court refers the parties to the Order.
Presently before the Court is the Plaintiffs' motion, pursuant to Rule 15, to amend the complaint. Relevant for the purposes of this motion, the Proposed Second Amended Complaint (the "PSAC") asserts several causes of action relating to the formation of Solar Club, LLC ("Solar Club"),a joint venture created as a vehicle to sell the Plaintiffs' nail polish products. The Plaintiffs, through Madmack, and the Defendants, through the Trust, are each 50% owners of Solar Club. ECF 55-1 ¶ 40. Although the parties co-own Solar Club, the Defendants possess operational control of the entity via Forsythe, which is the sole and exclusive manager of Solar Club. Id. ¶ 6. Harriet Rose is the President and controlling owner of Forsythe. Id. ¶ 8. Michael Rose is an officer of Forsythe, and the Chief Operating Officer of Solar Club. Id. ¶ 9.
Based on the Defendants' conduct during and after the formation of Solar Club, the Plaintiffs seek to add the following causes of action to those which survived the Order:
For the following reasons, the Court grants the Plaintiffs' motion with regards to Counts One, Two, Three, Seven, and Nine, but denies the Plaintiffs' motion with regards to Counts Four, Five, Six, and Eight. The Court grants, in part, and denies, in part, the Plaintiffs' motion with regards to Counts Ten and Sixteen.
According to Rule 15(a), a party may amend a pleading "by leave of court or by written consent of the adverse party ... [L]eave shall be freely given when justice so requires [.]" FED. R. CIV. P. 15(a). Courts have liberally interpreted this Rule. See D.C.R. Trucking & Excavation, Inc. v. Aetna Cas. And Sur. Co., No. 96-cv-3995, 2002 WL 32096594, at *8 (E.D.N.Y. Oct. 31, 2002). The power to amend a pleading is within the discretion of the District Court. See Gursky v. Northwestern Mut. Life Ins. Co., 139 F.R.D. 279, 281 (E.D.N.Y. 1991) (citing Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 230, 9 L.Ed.2d 222 (1962)); see also Zahra v. Town of Southold, 48 F.3d 674, 685 (2d Cir. 1995).
Amendments should only be denied for legitimate reasons such as "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendmentspreviously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc." Ruotolo v. City of New York, 514 F.3d 184, 191 (2d Cir. 2008). "The Rule reflects two of the most important principles behind the Federal Rules: pleadings are to serve the limited role of providing the opposing party with notice of the claim or defense to be litigated ... and mere technicalities should not prevent cases from being decided on the merits." D.C.R. Trucking & Excavation, Inc., 2002 WL 32096594, at *8 (quoting Monahan v. N.Y. City Dep't of Corrections, 214 F.3d 275, 283 (2d Cir. 2000).
"[L]eave to amend will be denied as futile only if the proposed new claim cannot withstand a 12(b)(6) motion to dismiss for failure to state a claim, i.e., if it appears beyond doubt that the plaintiff can plead no set of facts that would entitle him to relief." Milanese v. Rust-Oleum Corp., 244 F.3d 104, 110 (2d Cir. 2001) (citing Ricciuti v. N.Y.C. Transit Auth., 941 F.2d 119, 123 (2d Cir. 1991)). It is well-established that a complaint should be dismissed under Fed.R.Civ.P. 12(b)(6) only if it does not contain enough allegations of fact to state a claim for relief that is "plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). Indeed, the issue on a motion to dismiss is "not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir. 2001) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)). "'[D]etermining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'" Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949-50, 173 L.Ed.2d 868 (2009)).
In deciding a motion to dismiss, the Court must accept the material facts alleged in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Ashcroft, 129 S.Ct. 1937 at 1949-50; Zinermon v. Burch, 494 U.S. 113, 118, 110 S.Ct. 975, 979, 108 L.Ed.2d 100 (1990); In re NYSE Specialists Secs. Litig., 503 F.3d 89, 91 (2d Cir.2007). However, "that 'tenet' 'is inapplicable to legal conclusions,' and '[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.'" Harris, 572 F.3d at 72 (quoting Iqbal, 129 S.Ct. at 1949). As such, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and ... determine whether they plausibly give rise to an entitlement of relief." Iqbal, 129 S.Ct. at 1950. Only if this Court is satisfied that "the complaint cannot state any set of facts that would entitle the plaintiff to relief will it grant dismissal pursuant to Rule 12(b)(6)." Hertz Corp. v. City of N.Y., 1 F.3d 121, 125 (2d Cir.1993).
The Court finds that Counts One, Two, Three, Seven, and Nine adequately state a claim, but that Counts Four, Five, Six, and Eight do not. Counts Ten and Sixteen, in part, state a claim and, in part, fail to do so.
Rule 9(b) modifies the liberal pleading standard normally used in motions to dismiss when the complaint raises claims of fraud. While Rule 8(a) requires only a "short and plain statement of the claim showing that the pleader is...
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