Riddell Sports Inc. v. Brooks

• Decision Date: 05 January 1995
• Docket Number: No. 92 Civ. 7851 (PKL).,92 Civ. 7851 (PKL).
• Citation: 872 F. Supp. 73
• Parties: RIDDELL SPORTS INC., Plaintiff, v. Frederic H. BROOKS, Defendant. Frederic H. BROOKS and Connecticut Economics Corporation, Counterplaintiffs, v. RIDDELL SPORTS INC., Riddell, Inc., Equilink Licensing Corporation, RHC Licensing Corporation, M.L.C. Partners Limited Partnership, Robert Nederlander and Leonard Toboroff, Counterdefendants. Frederic H. BROOKS, Defendant and Third-Party Plaintiff, v. PURSUIT ATHLETIC FOOTWEAR, INC., Riddell Athletic Footwear, Inc., Woodco Sports, Inc., Ernest Wood, Jr., Harry Wood and Arthur Tse, Third-Party Defendants.
• Court: U.S. District Court — Southern District of New York

872 F. Supp. 73

RIDDELL SPORTS INC., Plaintiff, v. Frederic H. BROOKS, Defendant.

Frederic H. BROOKS and Connecticut Economics Corporation, Counterplaintiffs, v. RIDDELL SPORTS INC., Riddell, Inc., Equilink Licensing Corporation, RHC Licensing Corporation, M.L.C. Partners Limited Partnership, Robert Nederlander and Leonard Toboroff, Counterdefendants.

Frederic H. BROOKS, Defendant and Third-Party Plaintiff, v. PURSUIT ATHLETIC FOOTWEAR, INC., Riddell Athletic Footwear, Inc., Woodco Sports, Inc., Ernest Wood, Jr., Harry Wood and Arthur Tse, Third-Party Defendants.

No. 92 Civ. 7851 (PKL).

United States District Court, S.D. New York.

January 5, 1995.

Skadden, Arps, Slate, Meagher & Flom, New York City, for plaintiff and counterclaim defendants (Thomas J. Schwarz, Jeremy A. Berman, and Mark A. Berman, of counsel).

Molton & Meekins, New York City, for defendant and counterclaim plaintiffs (David J. Molton and Susan L. Meekins, of counsel).

OPINION AND ORDER

LEISURE, District Judge:

The plaintiff and counterclaim defendant Riddell Sports Inc., ("Riddell") along with the other counterclaim defendants (collectively, "counterdefendants") moves the Court to dismiss counts VII through XI of defendant and counterclaim plaintiff Frederic H. Brooks' ("Brooks"), and counterclaim plaintiff Connecticut Economics Corporation's ("CEC") (collectively, "counterplaintiffs") counterclaims, pursuant to Fed.R.Civ.P. 12(b)(6) and 8(a)(2). For the reasons stated below, counterdefendants' motion is granted in part, and denied in part.

BACKGROUND

Brooks is the former president and chief operating officer of Riddell. Riddell commenced the instant action against Brooks on October 9, 1992. Subsequent to the commencement of this action, Riddell amended its complaint three times. The Third Amended Complaint was filed on or about March 7, 1994, and Brooks served his answer, counterclaims, and third-party claims on or about March 30, 1994.

Riddell, inter alia, asserts that a fraudulent conveyance claim brought against it by the Creditor's Committee of MacGregor Sporting Goods, Inc. was instigated by Brooks. Memorandum of Law in Opposition to Counterclaim Defendants' Motion to Dismiss Count VII through XI of the Counterclaims Pursuant to Fed.R.Civ.P. Rule 12(b)(6) ("Counterplaintiff Mem.") at 3. Counterplaintiffs contend that since October 1992, Riddell has withheld approximately $350,000 in compensation owed to CEC, induced its subsidiaries to dishonor the terms of employment agreements between them and Brooks, induced the commencement of a securities fraud action against Brooks, implied Brooks as a third-party defendant in a class action against Riddell, and endeavored to impair Brooks' ability to obtain employment in the sporting goods industry. Counterplaintiff Mem. at 3. As a consequence, counterplaintiffs brought a number of counterclaims against plaintiff and the other counterdefendants.

Counterdefendants now move to dismiss counterplaintiffs' claims for: (1) tortious interference with contractual relations (Count VII); (2) tortious interference with prospective business advantage (Count VIII); (3) abuse of process (Count IX); (4) injurious falsehood (Count X); and (5) prima facie tort (Count XI) (the "counterclaims").

DISCUSSION

A. Statute of Limitations

Counterdefendants preliminarily contend that the counterclaims are barred by the statute of limitations. They argue that the gravamen of the allegations in the counterclaims is purported injury to Brooks' reputation. Counterdefendants observe that an action to recover for injuries to reputation must be commenced within one year. Counterdefendants further note that counterplaintiffs "cannot circumvent New York's one year statute of limitations for defamation by labeling a claim one for intentional interference with economic relations, prima facie tort, or injurious falsehood, `if, in fact, the claim seeks redress for injury to reputation.'" Aequitron Medical, Inc. v. CBS, Inc., 1994 WL 30414, at *8 1994 U.S.Dist. LEXIS 942, at *23 (S.D.N.Y. Jan. 27, 1994) (quoting Entertainment Partners Group, Inc. v. Davis, 198 A.D.2d 63, 603 N.Y.S.2d 439, 440 (1st Dept. 1993)).

1. Injury to Reputation

Counterplaintiffs urge the Court to apply a three-year statute of limitations, and assert that counterdefendants distort the allegations contained in the counterclaims. Counterplaintiffs state that the one-year statute of limitations applicable to libel and slander should not be applied to the counterclaims for tortious interference with contract, tortious interference with prospective economic advantage, and prima facie tort. Under New York law, when recompense for economic loss is sought rather than damages for reputational injury, all of these claims are governed by the three year limitations period set forth in section 214 of the Civil Practice Laws and Rules ("CPLR").¹ Counterplaintiffs contend that Brooks is not primarily seeking recompense for reputational injury, but rather damages for pecuniary losses attributable to (1) Brooks' loss of consulting fee income due to Riddell's breach of its agreement; (2) the failure of Riddell and its subsidiaries to honor their contractual obligations to indemnify Brooks for certain expenses; (3) the loss of consulting fees and other income resulting from counterdefendants' tortious interference with Brooks' ability to obtain employment in the sporting goods industry; and (4) Brooks' loss of other business opportunities in the sporting goods industry.

This Court remains unconvinced by counterplaintiffs' unsupported assertions. The Court notes that counterplaintiffs' breach of contract claims, contained in counts I through VI of the counterclaims, are not subject to the instant motion to dismiss, and counterplaintiffs enumerate no other specific fees or opportunities that were lost. Aside from agreements allegedly breached by Riddell and its subsidiaries, counterplaintiffs merely assert that, due to disparaging statements, general business opportunities and potential income were lost. The Court finds that the gravamen of counterplaintiffs' allegations, in the counterclaims at issue in the instant motion, aside from the claim for tortious interference with contractual relations, is purported injury to reputation. The injury complained of by counterplaintiffs, aside from the claim for tortious interference with contractual relations, flows from the professed effect that counterdefendants' actions had on counterplaintiffs' reputation. The one-year statute of limitations contained within CPLR § 215(3) therefore applies to the counterclaims, except for the claim for tortious interference with contractual relations. This Court finds the one year limitations period applicable despite the labels which counterplaintiffs apply to their claims. See Aequitron Medical at *8 at *23; Entertainment Partners, 603 N.Y.S.2d at 440; Santagada v. Lifedata Medical Services, Inc., 1993 WL 378309, at *4-5, 1993 U.S.Dist. LEXIS 13093, at *9-14 (S.D.N.Y. September 21, 1993) (PNL) (in applying a statute of limitations, the Court looks for the reality and the essence of the action and not its mere name ... if an action is one solely or primarily claiming injury to reputation, it is in the nature of a defamation action for purposes of the applicable statute of limitations, regardless of the conduct that allegedly caused the injury); Noel v. Interboro Mut. Indem. Ins. Co., 31 A.D.2d 54, 55, 295 N.Y.S.2d 399, 400 (1st Dept.1968), aff'd, 29 N.Y.2d 743, 326 N.Y.S.2d 396, 276 N.E.2d 232 (1971).

2. CPLR 203(d)

Counterplaintiffs assert that, pursuant to CPLR 203(d), the timeliness of the counterclaims is determined as of the date the complaint was filed, October 1992. CPLR 203(d) provides, in relevant part:

(d) Defense or counterclaim. A defense or counterclaim is interposed when a pleading containing it is served. A defense or counterclaim is not barred if it was not barred at the time the claims asserted in the complaint were interposed, except that if the defense or counterclaim arose from the transactions, occurrences, or series of transactions or occurrences, upon which a claim asserted in the complaint depends, it is not barred to the extent of the demand in the complaint notwithstanding that it was barred at the time the claims asserted in the complaint were interposed.

CPLR § 203(d). Counterdefendants assert, and counterplaintiffs do not dispute, that Brooks' counterclaims for tortious interference with contract, tortious interference with prospective economic advantage, injurious falsehood and prima facie tort accrued in January 1993. Counterplaintiffs conclude that the counterclaims could not possibly be time-barred because they would not have been time-barred at the time the complaint was filed, October 9, 1992.

The Court finds that claims for injury to reputation and abuse of process, to the extent that they accrued between October 9, 1992 and March 31, 1993 (one year before the filing of the counterclaims on or about March 31, 1994) are time-barred. Causes of action that accrue to a defendant after the filing of a complaint are not tolled by CPLR 203(d). The practice commentary to CPLR 203(d) (formerly 203(c)) states, "this rule is intended to apply to all mature counterclaims existing on the date the summons is served; conversely the rule does not apply to a counterclaim that comes into existence after the commencement of the action." McLaughlin, Practice Commentaries, McKinney's Cons. Law of New York Book 7B, CPLR C203:9 at 159. See also, In Re Value Line Special Situations Fund Litigation, 420 F.Supp. 125, 127 (S.D.N.Y.1976).

3. Same Transaction and Occurrence

Counterplaintiffs' last contention is that, even if otherwise time-barred, all of the counterclaims relate to the same series of transactions and occurrences and therefore are not barred to the extent of plaintiff's $40 million demand. Counterplaintiffs offer no support for this conclusory allegation,...