Marin v. AI Holdings (USA) Corp.

• Decision Date: 17 May 2012
• Docket Number: No. 651224/11.,651224/11.
• Court: New York Supreme Court
• Parties: Richard A. MARIN,, Plaintiff, v. AI HOLDINGS (USA) CORP., AI Properties and Development (USA) Corp., Africa Israel Investments Ltd., Izzy Cohen and Nadav Grinshpon, Defendants.

35 Misc.3d 1227

953 N.Y.S.2d 550

2012 N.Y. Slip Op. 50913

Richard A. MARIN,, Plaintiff,

v.AI HOLDINGS (USA) CORP., AI Properties and Development (USA) Corp., Africa Israel Investments Ltd., Izzy Cohen and Nadav Grinshpon, Defendants.

No. 651224/11.

Supreme Court, New York County, New York.

May 17, 2012.

Zukerman Gore Brandeis & Crossman by John K. Crossman, Esq., Frank C. Welzer, Esq., New York, for Plaintiff.

Morrison Cohen LLP by Y. David Scharf, Esq., Kristin T. Roy, Esq., Evan Lupion, Esq., New York, for Defendants.

BERNARD J. FRIED, J.

Plaintiff, Richard A. Marin, alleges that his former employer, AI Holdings (USA) Corp. (AI–USA), breached an agreement to pay him an employment bonus and other executive compensation, and that the individual defendants tortiously interfered with that agreement or with plaintiff's prospective economic advantage with AI–USA. Plaintiff seeks to recover on theories of contract, misrepresentation, promissory estoppel, unjust enrichment and quantum meruit, and to hold defendants AI Properties and Development (USA) Corp. (Properties) and Africa Israel Investments Ltd. (AFI) liable, as alter egos of AI–USA.Defendants seek an order, pursuant to CPLR 3211(a)(1), (7) and (8), dismissing the amended complaint (the complaint) with prejudice, or, in the alternative, an order, pursuant to CPLR 3024(b), striking scandalous and prejudicial allegations therein, and for sanctions pursuant to 22 NYCRR 130–1.1[c].

Unless indicated otherwise, the allegations that follow are taken from the complaint. Plaintiff was the chairman and chief executive officer of defendants AI–USA and Properties USA (together, AI–USA). AI–USA's parent company is AFI, a publicly-traded Israel-based company. Defendant Izzy Cohen (Cohen) is the chief executive officer of AFI and avers that he is a director of AI–USA, but plaintiff states that Cohen, his former supervisor, had no official title at AI–USA. Defendant Nadav Grinshpon is a director of AFI and AI–USA.

Plaintiff was hired by AI–USA in 2008. The parties do not dispute that plaintiff was an at-will employee when he worked for AI–USA and that he was working without a written employment agreement when, in December 2010, he was terminated from his position. Prior to 2010, plaintiff's salary and bonus terms were the subject of a written agreement (2009 Employment Agreement) that expired on December 31, 2009.

It is undisputed that, during 2010, plaintiff was paid a $400,000 salary and that in July 2010, he was paid a $1.25 million bonus. That bonus was paid for plaintiff's 2008–2009 work, pursuant to the 2009 Employment Agreement, which includes a provision for a bonus solely at the discretion of AI–USA. Also, at or around July 2010, a press release was issued by AFI with positive comments about plaintiff's work performance.

Plaintiff claims that, during 2010, he entered into an oral agreement for a $1.25 million dollar bonus, and other compensation, to be paid in addition to his $400,000 annual salary for his 2010 work. Plaintiff contends that he negotiated his compensation terms with Cohen, who was authorized to negotiate the amount of his 2010 bonus, and who had the authority of Lev Leviev, AFI's chairman of the board and principal shareholder, who controlled AFI's board of directors (the Board). Plaintiff alleges that Cohen repeatedly assured Marin that, for 2010, he would again receive an annual bonus of $1.25 million, as well as valuable management incentive payments, retroactive to January 1, 2010. Plaintiff further alleges that after negotiations with Cohen through the earlier part of the year, in May 2010, Cohen agreed that AI–USA would pay Marin a $1.25 million bonus for 2010, as well as other incentives.

Plaintiff also alleges that Cohen indicated that Marin's compensation would be subject to approval by the Board, and assured Marin that his 2010 bonus would be submitted for approval in March 20. 10, but that it was not. Plaintiff contends that he continued to work in reliance on Cohen's repeated promises, in 2010, that approval would be obtained. Plaintiff asserts that with the benefit of hindsight, it is now clear that Cohen never intended to present the bonus for approval, and that, in the alternative, if he had intended to do so, he breached his promise. Marin states that he relied on Cohen's representations, and would have accepted two other job offers, had he known that AI–USA would not pay him as agreed Marin states that in October 2010, he had discussions with Cohen about the AI–USA budget that would be presented to the Board, during which Cohen tried to renegotiate the $1.25 million bonus amount down, but instead included it in the budget. Plaintiff alleges that the AI–USA budget was presented to the Board without objection.

On December 8, 2010, by letter from AI–USA, plaintiff's employment was terminated and plaintiff was informed that he would not be receiving any bonus for 2010 and was obligated to immediately repay a $500,000 loan. Plaintiff claims this happened because, in Fall 2010, he raised, reported and attempted to investigate transactions involving the alleged diversion of AI–USA's corporate business opportunities by Grinshpon and Cohen.¹

AFI moves to dismiss the complaint for lack of personal jurisdiction on the basis that it does not conduct business in New York or maintain contacts sufficient to justify personal jurisdiction under CPLR 301. CPLR 3211(a)(8) permits a party to dismiss claims against a defendant on the ground that “the court has not jurisdiction of the person of the defendant.” Where a defendant moves to dismiss the complaint for lack of personal jurisdiction, the plaintiff bears the burden of proof of demonstrating jurisdiction (Copp v. Ramirez, 62 A.D.3d 23, 28, 874 N.Y.S.2d 52 [1st Dept 2009] ). Evidence presented must be viewed in the light most favorable to the non-moving party and doubts resolved in his favor (Brandt v. Toraby, 273 A.D.2d 429, 430, 710 N.Y.S.2d 115 [2d Dept 2000] ).

Grinshpon argues that AFI is an investment and holding company, formed and existing under the laws of Israel, is based there, and does not conduct business operations in the United States or have contacts with New York. Grinshpon asserts that AFI has indirect ownership of interests in limited liability companies or corporations, which may operate in New York, but itself has no New York offices, warehouses, employees, telephone listing or presence. Grinshpon states that the complaint does not allege that AFI entered into an agreement in its own capacity. With these allegations, AFI has met its burden to demonstrate that it is not subject to jurisdiction pursuant to CPLR 301.

In opposition, plaintiff argues that the pleadings warrant personal jurisdiction pursuant to New York's long-arm jurisdiction statute, CPLR 302(a)(1) or (3), but does not discuss the allegations that he claims demonstrate that such jurisdiction has been conferred. Instead, he discusses the issue of jurisdiction over a parent corporation under agency and the “mere department theory” ( see Pl. Memo. of Law, at 30–31 [ citing Frummer v. Hilton Hotels Intl., 19 N.Y.2d 533, 537, 281 N.Y.S.2d 41, 227 N.E.2d 851,cert denied389 U.S. 923 [1967] ). Therefore, plaintiff has not met his burden to demonstrate jurisdiction under CPLR 302(a)(1) and (3).

Plaintiff, however, argues that AFI is doing business in New York, and that if his showing is not sufficient to prove this, than he should be permitted discovery on the issue (CPLR 3211[d] ). CPLR 301 concerns jurisdiction over those “engaged in such a continuous and systematic course of doing business' in New York as to warrant a finding of its presence' in this jurisdiction” (Delagi v. Volkswagenwerk AG of Wolfsburg, Germany, 29 N.Y.2d 426, 430–431 [1972] ). The test for such presence requires that “[t]he court ... be able to say from the facts that the corporation is present' in the State not occasionally or casually, but with a fair measure of permanence and continuity' “ (Landoil Resources Corp. v. Alexander & Alexander Servs., 77 N.Y.2d 28, 33–34 [1990], quoting Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 267 [1917] ). Whether a corporation itself may be deemed to be present in the State with permanence and continuity is evaluated using a number of factors (Landoil, 77 N.Y.2d at 33, 563 N.Y.S.2d 739, 565 N.E.2d 488), including the conducting of business affairs in New York, and/or an office, bank accounts, property or employees in the State (Frummer, 19 N.Y.2d at 537, 281 N.Y.S.2d 41, 227 N.E.2d 851).

Plaintiff argues that AFI is doing business in New York through its subsidiaries. A foreign corporation may be present through the conduct of its New York-based subsidiaries where the subsidiary is “so dominated” by a parent that is deemed a mere instrumentality or department of the parent (Delagi, 29 N.Y.2d at 432, 328 N.Y.S.2d 653, 278 N.E.2d 895). Regarding this issue, the factual question to be answered is whether or not the subsidiary was only nominally independent, so as to essentially not function as a separate entity (Taca Intl. Airlines, S.A. v. Rolls–Royce of England, 15 N.Y.2d 97 [1965] ). Factors that may be considered in making such a determination include the subsidiary's financial dependency on the parent, its observance of corporate formalities and the parent's interference in, and control of, the subsidiary's marketing and operational policies and selection and assignment of executive personnel (Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120–22 [2d Cir1984] ).

Plaintiff provides some of AFI's internet postings, and concludes that they demonstrate subsidiary AI–USA's domination by AFI, but fails to adequately address what in these materials challenges Grinshpon's averment of AFI's indirect ownership of interests in entities that may operate in New York, or how they suggest a non-frivolous basis for jurisdiction. Plaintiff also provides little more than that to...