Obeid ex rel. Gemini Real Estate Advisors LLC v. La Mack
| Decision Date | 17 March 2016 |
| Docket Number | No. 14CV6498-LTS-HBP,14CV6498-LTS-HBP |
| Parties | WILLIAM T. OBEID, directly and derivatively on behalf of GEMINI REAL ESTATE ADVISORS LLC, et al., Plaintiff, v. CHRISTOPHER LA MACK, et al., Defendants, and GEMINI REAL ESTATE ADVISORS LLC, et al., Nominal Defendants. |
| Court | U.S. District Court — Southern District of New York |
In this action, Plaintiff William T. Obeid ("Obeid" or "Plaintiff') asserts claims for conversion, unjust enrichment and violation of the Computer Fraud and Abuse Act ("CFAA") against Defendant Elevation Real Estate Group, LLC ("Elevation") and others. Elevation has moved to dismiss the claims against it for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) and for failure to state a claim pursuant to Rule 12(b)(6) (docket entry no. 242).1
The Court has subject matter jurisdiction of this action pursuant to 28 U.S.C. §§ 1331 and 1367.
The Court has carefully reviewed the parties' submissions and, for the following reasons, Elevation's motion is granted in part and denied in part.
The relevant allegations of the SAC, which are taken as true for the purposes of this motion practice, are summarized below. Because a court evaluating a motion to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) may also consider materials outside of the pleadings, see Dorchester Fin. Sec. Inc. v. Banco BRJ, S.A., 722 F.3d 81, 84 (2d Cir. 2013), this background summary also reflects Plaintiff's proffers relevant to the issue of personal jurisdiction.
Christopher La Mack and Dante A. Massaro (the "Individual Defendants") and Obeid are equal one-third Member Managers of Gemini Real Estate Advisors, LLC ("GREA"), which, along with its subsidiaries and affiliates, operates as a single family of closely-held entities under the brand "Gemini." (SAC ¶ 2.) Gemini owns, manages, and develops commercial real estate, with over $1 billion of real estate assets under management, consisting largely of hotel and retail properties. (Id. ¶¶ 3, 24.) Gemini has two principal places of business: a New York corporate headquarters and a North Carolina office that hosts its retail property division. (Id. ¶ 172.)
On or about April 2, 2015, the Individual Defendants formed Elevation, with Massaro as Elevation's President and CEO, and LaMack as its Managing Director. (SAC ¶ 221; Meister Decl. Ex. 19 at MELNYF0004732.) Elevation is a limited liability company organizedunder the laws of the State of Delaware with its principal place of business in North Carolina. (Id. ¶ 37.) It has an office located at 220 Fifth Avenue, 13th Floor, New York, NY 10001. (See Meister Decl. Ex. 10.)2 Elevation has described itself as being a competitor "in and around the New York City metropolitan area" and has described its principals as "having been involved with the acquisition, syndication, and disposition of . . . 10 hospitality projects in New York and Boston." (See id. Ex. 19.) Obeid alleges that Elevation is one of at least eight new entities formed by the Individual Defendants between November 2014 and April 2015, to which the Individual Defendants have diverted Gemini's resources and corporate opportunities. (See SAC ¶¶ 214-22.)
Obeid alleges that his claims arise in whole or in part out of Elevation's contacts with and conducting of business in New York, whereby the Defendants purposefully availed themselves of the benefits of New York Law. (Id. ¶ 166.) Obeid also alleges that Elevation committed torts, in whole or in part, in New York, which were directed towards Gemini, whose principal place of business is New York, and Obeid, who is a New York resident. (Id.)
More specifically, Obeid alleges that, immediately following Massaro's appointment as GREA's Operating Manager, the Individual Defendants began usurping existing Gemini corporate opportunities for the benefit of the Individual Defendants' "newly formed entities." (SAC ¶ 8.) Obeid alleges that Elevation and the Individual Defendants intentionally stole and converted Gemini funds to form and launch their new entity, Elevation. (SAC ¶ 383.)Obeid alleges that by, November 2014, the Individual Defendants were directing Gemini employees to assist them with launching and forming their new competing entities. (SAC ¶ 219.) In September 2014, Massaro allegedly instructed Gemini's New York hospitality and corporate employees to cease communications with Obeid and withhold from Obeid all information concerning Gemini activities. (Id. ¶ 198.) Between November 2014 and April 2015, Gemini employee Chris Melling allegedly worked on sourcing real estate investment opportunities for the Individual Defendants' new entities, including Elevation. (See ¶ 219.)
On January 26, 2015, Obeid alleges, the Individual Defendants transferred all of Gemini's hospitality and corporate employees located in Gemini's New York headquarters to a competitor's New York office, and completed a massive data transfer from Gemini to the competitor. (Id. ¶ 291.) Obeid alleges that Elevation and the Individual Defendants "unlawfully copied and duplicated Gemini's entire network and created a parallel network that hosts Gemini's stolen confidential information, which is now used by Elevation and [the Individual Defendants] to the exclusion of Gemini's rights." (Id. ¶ 383.) Obeid also alleges that the Individual Defendants have sublet Gemini's office space in Huntsville, North Carolina to Elevation for free, and that Gemini has subsidized Elevation's soft launch by paying for various conferences, such as $20,000 of expenditures in connection with the International Conference of Shopping Centers in Las Vegas. (Id. ¶ 222.)
Elevation also allegedly usurped a Gemini retail shopping center development project in Apple Valley, Minnesota and is also closing on projects in South Carolina and North Carolina that were "sourced and stickhandled" by Gemini. (Id. ¶¶ 212-13; see also Meister Decl. Exs. 10, 13-27, 19, 23, 36.) In the Apple Valley transaction, Elevation utilized New York-based attorneys and a New York-based escrow agent. (See id.) The purchase agreement betweenElevation and Apple Valley Holdings LLC, a Delaware limited liability company with an office at 152-15 Rockaway Boulevard, Jamaica, New York 11735, contained a New York choice of law provision. (See id.) Elevation is also soliciting equity investments in Apple Valley Acquisition LLC, using contracts that include a New York arbitration clause, executed copies of which are returnable to Elevation's New York office to the attention of Chris Melling. (See id. Ex. 10.)
On a motion to dismiss a complaint for lack of personal jurisdiction pursuant to Rule 12(b)(2), "[a] plaintiff bears the burden of demonstrating personal jurisdiction over a person or entity against whom it seeks to bring suit." Troma Entm't, Inc. v. Centennial Pictures Inc., 729 F.3d 215, 217 (2d Cir. 2013) (internal quotation marks and citation omitted). If a defendant challenges personal jurisdiction by filing a Rule 12(b)(2) motion, "the plaintiff need persuade the court only that its factual allegations constitute a prima facie showing of jurisdiction." Dorchester, 722 F.3d at 85 (internal quotation marks and citation omitted). The court must "construe the pleadings and any supporting materials in the light most favorable to plaintiffs." Licci, 732 F.3d at 167 (citation omitted).
In deciding a motion to dismiss for lack of personal jurisdiction, courts engage in a two-part analysis: first, the court must determine whether there is, applying the forum state's rules, a statutory basis for personal jurisdiction; and second, whether its exercise of jurisdiction comports with due process under the federal Constitution. See Chloe v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 163 (2d Cir. 2010). Under New York's long arm statute, a court mayexercise personal jurisdiction over any non-domiciliary, who in person or through an agent: (1) transacts any business in New York or contracts to supply goods or services in New York; or (2) commits a tortious act in New York; or (3) commits a tortious act outside of New York causing injury to person or property in New York, so long as it: (i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in New York, or (ii) expects or reasonably should expect the act to have consequences in New York and derives substantial revenue from interstate or international commerce. See N.Y. C.P.L.R. § 302(a)(1)-(4) (LexisNexis 2015). New York's long-arm statute does not extend to the limit of federal due process. Beatie & Osborn LLP v. Patriot Sci. Corp., 431 F. Supp. 2d 367, 387 (S.D.N.Y. 2006).
Obeid asserts that C.P.L.R. § 302(a)(1) provides a proper basis for the exercise of personal jurisdiction over Elevation. Under C.P.L.R. § 302(a)(1), a court in New York may exercise long-arm personal jurisdiction over a non-domiciliary party if he (1) transacts any business within the state and (2) the cause of action arises from the business contacts. Energy Brands Inc. v. Spiritual Brands, Inc., 571 F. Supp. 2d 458, 465 (S.D.N.Y. 2008). A single transaction in New York may suffice to support personal jurisdiction "even though the defendant never enter[ed] New York, so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted." PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1109 (2d Cir. 1997) (internal quotation marks and citation omitted) (alteration in original).
Here, Obeid has sufficiently alleged facts indicating that Elevation "transacts business" within New York within the meaning of C.P.L.R. § 302(a)(1) and that his course ofaction arise from such transactions of business.3 The Apple Valley transaction was conducted with a counter-party located in New York, utilized...
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