in Touch Concepts, Inc. v. P'ship

• Decision Date: 04 June 2013
• Docket Number: No. 13 Civ. 1419(PKC).,13 Civ. 1419(PKC).
• Parties: IN TOUCH CONCEPTS, INC., Plaintiff, v. CELLCO PARTNERSHIP d/b/a Verizon Wireless, Tom Verghese, Ryan Broomes, Jorge Velez, Anthony Fiocco, Bruno Pavlicek, Ajay Bhumitra, Shelly Bhumitra, Poonam Sawnhey, and John/Jane Doe Cellco Partnership d/b/a Verizon Wireless Personnel 1–10, so named as their identities have yet to be established, Defendants.
• Court: U.S. District Court — Southern District of New York

949 F.Supp.2d 447

IN TOUCH CONCEPTS, INC., Plaintiff,

v.CELLCO PARTNERSHIP d/b/a Verizon Wireless, Tom Verghese, Ryan Broomes, Jorge Velez, Anthony Fiocco, Bruno Pavlicek, Ajay Bhumitra, Shelly Bhumitra, Poonam Sawnhey, and John/Jane Doe Cellco Partnership d/b/a Verizon Wireless Personnel 1–10, so named as their identities have yet to be established, Defendants.

No. 13 Civ. 1419(PKC).

United States District Court,

S.D. New York.

June 4, 2013.

Michael W. Kennedy, Normandy Beach, NJ, Ravi Batra, The Law Firm of Ravi Batra, P.C, New York, NY, for Plaintiff.

David Jay, Greenberg Traurig, LLP, New York, NY, Philip R. Sellinger, Todd Lawrence Schleifstein, Greenberg Traurig LLP, Florham Park, NJ, for Defendants.

MEMORANDUM AND ORDER

P. KEVIN CASTEL, District Judge.

In a 175–page, 862–paragraph complaint, plaintiff In Touch Concepts, Inc. (“Zcom”) brings this action against defendants. The complaint is neither “short” nor “plain” as required by Rule 8(a)(2), Fed.R.Civ.P. Counsel for plaintiff is cautioned to be mindful of the mandates of Rule 8(a) in any pleading filed in a federal forum. But for the procedural history of this case, the Court would exercise its authority to dismiss this prolix pleading. See Simmons v. Abruzzo, 49 F.3d 83, 86 (2d Cir.1995); Doe v. Washington Post Co., 12 Civ. 5054, 2012 WL 3641294, at *2 (S.D.N.Y. Aug. 24, 2012); In re Merrill Lynch & Co., Inc. Research Reports Sec. Litig., 218 F.R.D. 76, 78 (S.D.N.Y.2003).

The defendants are Cellco Partnership (“Verizon Wireless” or “Verizon”), Jorge Velez, Tom Varghese,¹ Ryan Broomes, Anthony Fiocco, Bruno Pavlicek, Shelly Bhumitra, Poonam Sawnhey, Ajay Bhumitra, and John/Jane Doe Cellco Partnership Personnel 1–10. Zcom, a former Verizon agent, and its subagents sold Verizon services and merchandise pursuant to an Agency Agreement. The complaint alleges a scheme purportedly created by Verizon and certain of its employees in order to increase account activations, which is an important marker of success in the wireless industry. Verizon, it is alleged, encouraged Zcom and its subagents to activate prepaid cellular devices in exchange for commissions it never intended to pay. According to Zcom, Verizon also coerced Zcom's subagents to increase the prepaid activations through fraudulent business practices. Zcom asserts that it took measures to report and eradicate such fraud. In an effort to cover up its own wrongdoing and punish Zcom, Verizon allegedly blamed Zcom for its own fraudulent scheme, terminated the Agency Agreement, and thwarted Zcom's attempts to sell its business operations. The Amended Complaint contains eleven causes of action based on such conduct, including claims for breach of contract asserted solely against Verizon as well as claims alleging various tortious conduct. Defendants now move to dismiss the Amended Complaint for failure to state a claim, pursuant to Rule 12(b)(6), Fed.R.Civ.P.

As a threshold matter, the Court first addresses its subject matter jurisdiction over the action and the claims asserted herein. This action, which asserted claims on behalf of a class, was removed from New York State Supreme Court pursuant to the Class Action Fairness Act (“CAFA”), 28 U.S.C. §§ 1332(d), 1453. After removal, Zcom amended the complaint and removed all class allegations. As discussed herein, the Court concludes that, under the time-of-filing rule, it has subject matter jurisdiction over the action, but declines to exercise supplemental jurisdiction over claims against certain defendants. The Court then proceeds to discuss (1) Zcom's breach of contract claims against Verizon and (2) Zcom's tort and quasi-contract claims against all remaining defendants. Finally, the Court addresses Varghese's motion to strike allegations in the Amended Complaint.

BACKGROUND

For purposes of the motions to dismiss under Rule 12(b)(6), the Court accepts all nonconclusory allegations in the Amended Complaint as true, and draws all reasonable inferences in favor of plaintiff, as non-movant.

1. The Parties

Zcom, a New York corporation, was a Verizon “Master Agent” authorized to sell Verizon's wireless services and merchandise. (Am. Compl. ¶¶ 33–35.) Until 2010, Zcom was jointly owned by its current president and CEO Vikas Dhall (a/k/a Victor Singh) and Alexandra Bershtein. In 2010, Dhall purchased Bershtein's interest in the company. ( Id. ¶¶ 9, 225.)

Verizon is a general partnership with business presence throughout the United States and principal offices located in New Jersey. ( Id. ¶ 36.) At all times relevant to this action, Verizon employed several of the individually named defendants. Ryan Broomes and Jorge Velez served as account managers. ( Id. ¶¶ 69, 77.) Anthony Fiocco and Bruno Pavlicek were “ostensibly” internal investigators. ( Id. ¶¶ 85, 94.) Verizon and these individually-named defendants are jointly represented and together submit a motion to dismiss the Amended Complaint. (Docket No. 42.)

Tom Varghese served as Verizon's Director of Indirect Distribution for the New York Metro Market until he was terminated from this position on July 11, 2011. (Am. Compl. ¶¶ 6, 56.) Varghese's responsibilities included approving new store locations in the New York metro area. Varghese submits a separate motion to dismiss as well as a motion to strike portions of the Amended Complaint, pursuant to Rule 12(f), Fed.R.Civ.P. (Docket No. 46.) Varghese joins in the arguments advanced by his co-defendants. ( E.g., Varghese Mem. at 10, 12, 14–15.)

This opinion frequently refers to Verizon, Broomes, Velez, Fiocco, Pavlicek, and Varghese collectively as “the Verizon defendants.”

Zcom also brings suit against several individuals not employed by Verizon (collectively the “non-Verizon defendants”). Ajay Bhumitra (“Ajay”) owns a portfolio of Sprint Nextel and AT & T-branded agency locations, which are competitors of Zcom and Verizon. (Am. Compl. ¶ 104.) Ajay submits his own motion to dismiss the Amended Complaint. (Docket No. 48.)

Shelly Bhumitra (“Shelly”), Ajay's brother, is a principal of Zoom's former subagent Reachout Wireless, Inc. (“Reachout”). (Am. Compl. ¶ 110.) Poonam Sawnhey is a principal of Zcom's former subagent American Candy, Inc. ( Id. ¶ 120.) Shelly Bhumitra and Poonam Sawnhey are jointly represented and together submit a motion to dismiss the Amended Complaint. (Docket No. 47.) According to Zcom, Shelly Bhumitra and Poonam Sawnhey intended to destroy Zcom from within, in order to allow Ajay to take over Zcom's business or otherwise benefit. (Am. Compl. ¶¶ 8, 123.)

2. The 2008 Agency Agreement

For many years Zcom was a successful seller of Verizon products and services. ( Id. ¶¶ 34, 228.) Its business comprised approximately twenty-five percent of Verizon's New York metro-area market share. ( Id. ¶ 34.) Zcom acted as a “Master Agent” of Verizon and not as a franchisee. ( Id. ¶ 236.) Verizon also authorized Zcom to engage subagents to sell Verizon services, subject to Verizon's approval of the subagents and store locations. ( Id. ¶¶ 35, 228–29; see also id. Ex. 4 ¶¶ 2.4.2, 2.7.) Zcom eventually went from operating three to approximately 150 store locations, including about 30 “corporate owned” stores and 120 authorized subagents. ( Id. ¶¶ 228, 230.)

Zcom and Verizon renewed their Agency Agreement in 2008 for a five-year term. ( Id. ¶ 237.) The terms of the Agreement covered a range of matters including Verizon's approval of new stores and subagents, Zcom's ability to transfer or assign the Agreement, as well as grounds for the Agreement's termination. ( Id. Ex. 4 ¶¶ 2.4.2, 2.7, 10.8, 8.) The Agreement also contains an express waiver of the implied covenant of good faith and fair dealing. ( Id. Ex. 4 ¶ 10.2 (“It is understood and agreed that this Agreement is not subject to any implied duties of good faith or fair dealing.”).)

3. The Prepaid Activation Scheme

New phone number activations are an important measure of success in the cellular carrier industry. ( Id. ¶ 9(a).) Generally, Verizon paid Zcom a commission for each postpaid subscription Zcom activated, so long as the phone number remained active for a minimum period of time. ( Id. ¶ 239.) If a customer did not keep his account active long enough, Verizon automatically charged back the associated commission from Zcom by deducting “such monies from future payments due.” ( Id. ¶ 244.) In the event a commission was charged back, Zcom charged back an equal amount from the responsible subagent. ( Id. ¶ 245.)

Plaintiff alleges that beginning in 2009, the Verizon defendants devised a scheme to increase new phone activations by using prepaid cellular devices. ( Id. ¶¶ 20–24, 251–56.) Verizon instructed Zcom to sell “Customer Provided Equipment” (“CPE”)—discarded cellular telephones provided to customers after an “upgrade”—as “emergency” use phones. ( Id. ¶¶ 261–265.) Under the plan, Zcom would “credit” the customer's activation fee, activate the phone as a “pre-pay” account, and provide the customer with $45.00 worth of prepaid minutes.² ( Id. ¶ 265.) While Zcom or a subagent was to bear the cost of the prepaid minutes, Verizon informed Zcom and its subagents that they would receive a $40.00 commission for each prepaid activation as well as an incentive (or “spiff”) of $20.00. ( Id. ¶¶ 268–70.) Thus, it appeared that Zcom and the subagents would recognize a profit for each prepaid activation after the commission and “spiff” were paid out.

In order for an agent to retain the commission payment, the prepaid phone had to remain active for at least 180 days. ( Id. ¶ 273.) Otherwise, Verizon would “charge back” the commission from Zcom. ( Id. ¶¶ 244, 273.) Verizon told Zcom that following the above instructions “was all that was required in order to ensure that the prepaid phone remained active for at least 180 days, thus avoiding ‘chargebacks' of commissions.” ( Id. ¶ 273.)

But such representations are now alleged to have been false, and the Verizon defendants knew as much. ( Id. ¶¶ 274, 276.)...