Pullman v. Alpha Media Publ'g, Inc.

• Decision Date: 11 January 2013
• Docket Number: 12-CV-1924 (PAC)(SN)
• Parties: Jaclinn PULLMAN, Plaintiff, v. ALPHA MEDIA PUBLISHING, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

Jaclinn PULLMAN, Plaintiff, v. ALPHA MEDIA PUBLISHING, INC., et al., Defendants.

12-CV-1924 (PAC)(SN)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

January 11, 2013

REPORT AND RECOMMENDATION

SARAH NETBURN, United States Magistrate Judge.

TO THE HONORABLE PAUL A. CROTTY:

Plaintiff Jaclinn Pullman ("Pullman") brings this action under New Jersey law asserting claims for common law fraud, violation of the New Jersey Consumer Fraud Act ("NJCFA"), N.J. Stat. Ann. § 56:8-1 et seq., piercing the corporate veil, and punitive damages. The theory of her case is that Maxim Magazine ("Maxim") misrepresented to her that it was an owner of the Maxim Bungalows when it was not, that she purchased two Maxim Bungalow timeshares relying on that misrepresentation, and that she was damaged as a result when the project went bankrupt as part of an alleged Ponzi scheme.

Pullman sues three groups of defendants. The first is Alpha Media Group, Inc. ("Alpha Media"), formerly known as Dennis Publishing, Inc. ("Dennis Publishing"), (Compl. ¶¶ 25-26), the publishers of Maxim. Alpha Media is a "wholly owned subsidiary" of Alpha Media Group Holdings ("AMGH"), an entity not named in this action. (Id. ¶ 27.) The second group is the two Quadrangle defendants: (1) Quadrangle Group, LLC, a "private investment management and advisory firm," (id. ¶ 31), which formed AMGH "for the sole purpose of acquiring the assets of Dennis Publishing, including Maxim Magazine and related trademarks" (id. ¶ 27); and (2) Peter Ezersky ("Ezersky") a "managing partner" of Quadrangle Group, LLC (id. ¶¶ 39-40). The third is Stephen Colvin ("Colvin"), the former chief executive officer of Dennis Publishing. (Id. ¶¶ 36-37.)

The three groups of defendants have moved to dismiss Pullman's complaint pursuant to Rules 12(b)(6), 12(b)(7), and 9(b) of the Federal Rules of Civil Procedure. Because I conclude that Pullman's claims against Alpha Media and Quadrangle Group, LLC for common law fraud and violation of the NJCFA are plausible and pled with sufficient particularity, I recommend that their motions to dismiss be DENIED as to those claims. Because I also conclude that Pullman has not pled plausible theories of fraud or violation of the NJCFA against Colvin or Ezersky, I recommend that their motions to dismiss be GRANTED. Because neither piercing the corporate veil nor punitive damages are causes of action under New Jersey law, I recommend that defendants' motions to dismiss be GRANTED as to all parties on those two claims. Finally, I recommend that all defendants' motions to dismiss for failure to join an indispensable party be DENIED.

FACTUAL BACKGROUND

I. The Purchase Giving Rise to the Alleged Fraud

The following facts are assumed to be true for the purposes of this motion.

Pullman began purchasing timeshare interests in 1998. (Compl. ¶ 111.) In 2007, she traded a week she owned in one of her timeshares for a weeklong stay at the Sun Village Resort and Spa ("Sun Village") in the Dominican Republic. (Id.) On June 22, 2007, she began her stay at Sun Village. (Id.)

During this one week period, Pullman was solicited by an unidentified person to invest in a newly announced "Maxim Bungalow[s] projects in Cofresi and Juan Dolio" in the Dominican Republic, scheduled to open in September and October of 2007, respectively. (Id. ¶ 112.) She "was told" by that unidentified person that Maxim was an "owner" and "large" investor in the Maxim Bungalows. (Id. ¶ 113.) While exploring the possibility of investment, Pullman toured one of the bungalow sites and was "impressed with the upscale beautifully designed two bedroom model apartment that she was shown." (Id. ¶ 119.)

After touring this site, Pullman attended a "Maxim Bungalows informational meeting" where she was shown, and later emailed, a promotional video entitled "Right Time, Right Place." (Id. ¶ 120.) The theme of the video was that the "right time" to invest was "now" and the "right place" to invest was in the Maxim Bungalows in the Dominican Republic. (Id. ¶ 121.) Pullman found that this video would lead "a reasonable viewer to believe that Maxim was an owner of the Maxim Bungalows in partnership with the Elliott Company" (the "Elliotts"). (Id. ¶ 122.) At that meeting, she also was given an over 300-page book entitled "Maxim Bungalows Dominican Republic Residential Beneficial Interest Documents - DRAFT" (the "Maxim Draft Book"). (Id. ¶ 123.) The Maxim Draft Book contained various documents associated with the Maxim Bungalows project, including the Homeowners' Association formation documents. (Id. ¶ 124.) It did not disclose that Maxim was not an owner of the Maxim Bungalows, had only licensed its trademark to the actual owners of the project, and could terminate that license upon certain conditions, but it did state that the project could be renamed by the company that was "creating the Condominium Regime." (Id. ¶¶ 125-27.)

After receiving these materials, Pullman had several discussions about her potential investment with Roger Walser ("Walser"), "her Maxim Bungalows sales representative." (Id. ¶128.) Walser assured her that the Maxim Bungalows were a "'safe' investment." (Id. ¶ 133.) He made various representations about her purchase that reinforced the idea that Maxim was an owner, discussing "Maxim's desire, as an owner to capitalize on the world renowned Maxim name to 'fill the resort with the Maxim readership.'" (Id. ¶ 129; see id. ¶¶ 130-33.) Walser also reassured Pullman that any renaming of the Maxim Bungalows would still include the word "Maxim," (id. ¶ 130), and indeed that the only way Maxim would remove the Maxim name was if it sold "[its] interest in the Maxim Bungalows[,] which would require the approval of the Homeowners' Association" (id. ¶ 131).

In her complaint, Pullman does not allege that Walser was an employee or agent of the defendants. In her opposition papers, however, she states that Walser "represented himself to [her] as an employee of the [Sun Village] resort, owned by the Elliotts, which had just obtained a major sales agreement with Maxim Magazine making them the exclusive sales agents of the Maxim Bungalows." (Plaintiff's Alpha Media Opposition Brief ("Pl. Alpha Media Opp. Br.") at 8; see Plaintiff's Colvin Opposition Brief ("Pl. Colvin Opp. Br.") at 8.) (emphases in original). This representation led Pullman to believe that Walser "had authority to sell Maxim Bungalows on behalf of Maxim." (Pl. Alpha Media Opp. Br. at 8-9.) Elsewhere in her complaint, Pullman explains that the Elliotts were resort developers and were charged with "the construction and management of the Maxim Bungalows project." (Compl. ¶ 53.) She states that the Elliotts entered into a license agreement with Alpha Media to use the Maxim trademark in connection with the Maxim Bungalows. (Id. ¶¶ 57, 59.) The Elliotts are not named as defendants in Pullman's complaint.

After her discussions with Walser, but still during her June 2007 stay, an unnamed person offered Pullman the "Founder's Phase price" to invest in the Maxim Bungalows. (Id. ¶¶ 5, 135,137.) This price reflected a 33 percent discount, but only "if she signed her purchase documents immediately and put a deposit on her credit card." (Id. ¶ 135.) Pullman agreed to the terms and signed the purchase documents with an agent of Ocean Palms Real Estate (SVG) ("Ocean Palms"). (Id. ¶¶ 136-39.) That agent represented to Pullman that Ocean Palms, as a "joint Maxim-Elliott Company," was an owner of the Maxim Bungalows. (Id. ¶ 137.) Pullman agreed to a purchase price of $124,620. (Id. ¶ 138.) Pullman made this purchase because "she felt secure investing alongside 'Maxim,' a large media company which would take every step possible to ensure that [its] 'valuable' name was protected including, at minimum, a thorough investigation of the Elliotts." (Id. ¶ 136.) Before leaving Sun Village, Pullman paid a refundable $5,000 deposit. (Id. ¶ 139.) She was told she was legally entitled to a fifteen day "cooling off" period before sending a check for her final payment to the Maxim Bungalows sales office. (Id. ¶ 140.)

When Pullman returned home to New Jersey, she further investigated Maxim's connection to the Maxim Bungalows and visited webpages linked from the maxim.com website that contained information about the project. (Id. ¶ 141.) She states that the maxim.com website and the pages linked to the Maxim Bungalows did not provide the material terms of the Licensing Agreement, or disclose that Maxim was solely a "passive trademark licensor" in the Bungalows and not an owner. (Id. ¶¶ 142-43.) Pullman found that the pages were misleading to an "average consumer" and to her, and that an average consumer viewing them would have assumed Maxim was the owner of the Bungalows. (Id. ¶¶ 142-44.) During this fifteen day period, Pullman also examined Maxim Bungalows brochures that she had been provided, which also did not disclose that Maxim's role in the project was solely that of a "'passive trademark licensor' who could terminate the Maxim Bungalows license agreement at any time after June 30, 2007." (Id. ¶ 158; see id. ¶¶ 144, 271-72.)

Because Pullman "did not find information which was contrary to the representations that Walser or the Maxim Bungalows marketing materials had made," (id. ¶ 144), she decided to finalize her purchase, and in June 2007 she sent a check for $119,620 to the Maxim Bungalow's sales office at Sun Village in the Dominican Republic (id. ¶¶ 5, 145). Pullman later discovered, "when examining a copy of her canceled check," that it had been sent from the Maxim Bungalows sales department to be deposited in a bank account in the United States. (Id. ¶ 145.) In November 2007, Walser called Pullman at her home and solicited her to purchase the "last remaining penthouse unit" at the Maxim Bungalows. (Id. ¶ 146.) Pullman declined. (Id.)

Plaintiff states that she lost her money when the Maxim Bungalows were revealed to be a Ponzi scheme and were foreclosed upon in the Fall...