Shamis v. Ambassador Factors Corp.
| Decision Date | 27 January 1999 |
| Docket Number | No. 95 Civ. 9818(RWS).,95 Civ. 9818(RWS). |
| Citation | 34 F.Supp.2d 879 |
| Court | U.S. District Court — Southern District of New York |
| Parties | Robert SHAMIS, as Assignee of Wishbone Trading Company, Limited, a Hong Kong corporation, and Robert Shamis, Individually, Plaintiff, v. AMBASSADOR FACTORS CORPORATION, d/b/a Ambassador Factors, A Division of Fleet Factors Corp., A Rhode Island corporation, S. Roberts, Inc., a New York corporation, Christy Lynn, a New York corporation, ABC Companies (fictitious names of corporate affiliates of defendants S. Roberts, Inc. and Jay Vee, Inc. whose identities are presently unknown), Nathan Korman, a/k/a Lawrence Korman, Steven Pesner, as Executor of the Estate of Leonard Kaye, and Mahoney Cohen & Company, P.C., a New York professional corporation, Defendants. |
Storch Amini & Munves, P.C., New York City (Steven G. Storch, of counsel), for plaintiff.
Ruskin, Moscou, Evans & Faltischek, P.C., Mineola, NY ( , for defendant Ambassador Factors Corp.
Schaeffer & Zapson LLP, New York City (Elliott L. Schaeffer, Lance N. Olitt, of counsel), for defendants S. Roberts, Inc., Jay Vee, Inc., Christy Lynn and Nathan Korman.
Strassberg & Strassberg, P.C., New York City (Louis Strassberg, of counsel), for defendant Mahoney Cohen, Rashba & Pokart.
Defendant Ambassador Factors Corporation ("Ambassador"), defendants S. Roberts, Inc. ("Roberts"), Christy Lynn, Inc. ("Christy"), Angela Christy, Inc. ("Angela"), Jay Vee, Inc. ("Jay Vee") and Nathan L. Korman ("Korman" and collectively "The Roberts Defendants") and defendant Mahoney Cohen Rashba Pokart and Company ("Mahoney Cohen") (collectively, the "Defendants") have moved to dismiss this action, pursuant to Fed.R.Civ.P. 37, based on plaintiff Robert Shamis' ("Shamis") alleged discovery abuses, or, in the alternative, for sanctions.
The Roberts Defendants, pursuant to Fed. R.Civ.P. 56, move for summary judgment dismissing Shamis' Sixth Claim1 for relief against Korman, and dismissing Shamis' Seventh and Eighth Claims for Relief against Angela and Christy.2
For the reasons set forth below, Defendants' motion to dismiss is denied. The Roberts Defendants motion for summary judgment is granted in part and denied in part.
Plaintiff Shamis is a citizen of Israel and a British national, and at all times relevant to this action, was a shareholder, officer and director of Wishbone. Shamis is Wishbone's assignee.
Wishbone was a Hong Kong-based apparel exporter that shipped goods primarily to the United States. In December 1993, Wishbone was placed in receivership and ultimately liquidated in accordance with Hong Kong law.
Defendant Roberts is a New York-based wholesale distributor of women's dresses.
Defendants Jay Vee, Inc., Angela, Christy Lynn and ABC Companies are successor corporate entities of Roberts.
Defendant Korman was an officer and a 60% stockholder of Roberts.
Defendant Ambassador is a Rhode Island corporation that provides account receivable factoring services between importers and distributors in the garment industry.
Defendant Mahoney Cohen is a New York-based accounting company that performs private and public accounting, as well as related consulting and auditing services.
On November 20, 1995, Shamis filed his initial complaint (the "Complaint") which alleged eleven causes of action against the above named defendants. On February 28, 1996, Shamis filed an amended complaint (the "Amended Complaint"), pursuant to Fed.R.Civ .P. 15(a), substituting Steven Pesner ("Pesner") as a defendant for Leonard Kaye ("Kaye").3
On March 21, 1996, Ambassador moved pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss the Complaint for failure to state a claim upon which relief can be granted and failure to plead fraud with particularity, pursuant to Fed.R.Civ.P. 9(b). By opinion and order dated August 12, 1996, Ambassador's motion was denied. See Shamis v. Ambassador Factors Corp., No. 95 Civ. 9818, 1996 WL 457320 (S.D.N.Y. August 14, 1996).
On May 13, 1997, Shamis filed a motion for leave to file a second amended complaint and thereby sought, among other things, to add a fraud claim against Mahoney Cohen and two RICO claims against Roberts, Ambassador, Korman, Jay Vee, and Mahoney Cohen. The Roberts Defendants cross-moved to dismiss the entire action. By opinion and order dated August 15, 1997, the Court granted the motion to dismiss, denied Shamis' motion to amend the complaint, and granted Shamis leave to replead the state law claims upon a showing that the receivers were citizens of a foreign state recognized by the United States Department of State. See Shamis v. Ambassador Factors Corp., No. 95 Civ. 9818, 1997 WL 473577 (S.D.N.Y. August 18, 1997).
On October 10, 1997, Shamis filed a motion to vacate the judgment dismissing his Complaint, and for leave to file a second amended complaint, adding two state law claims: (1) common law fraud against Mahoney Cohen; and (2) breach of contract against Ambassador. By opinion and order dated February 20, 1998, the Court granted the motion to vacate and granted leave to file the proposed second amended complaint. See Shamis v. Ambassador Factors Corp., No. 95 Civ. 9818, 1998 WL 75828 (S.D.N.Y. February 20, 1998). Shamis filed his Second Amended Complaint on March 4, 1998, alleging claims against the various defendants based upon fraud, breach of contract, breach of implied covenant of good faith, goods sold and delivered, fraudulent conveyance, successor liability and third party beneficiary.
On September 4, 1998, Ambassador moved to dismiss this action pursuant to Fed. R.Civ.P. 37. On September 15, 1998 Mahoney Cohen filed its motion to dismiss. The Roberts Defendants filed their motion to dismiss on September 23, 1998. Oral argument was heard on November 4, 1998, at which time leave was granted to all parties to file additional submissions. Additional papers were received through December 22, 1998, at which time the motions were deemed fully submitted.
In 1986, Korman controlled and operated a garment wholesaler known as El Jay. Shamis alleges that Korman, on behalf of El Jay, received financing from Manufacturers Hanover Bank (the "Bank"), which was secured by El Jay's receivables and inventory. According to Shamis, although the financing arrangement allowed El Jay to borrow against receivables only after product was shipped to a customer, El Jay nevertheless submitted invoices to the Bank for goods that had not been ordered and/or shipped to customers. Shamis claims that the Bank learned of this fraudulent practice, and began recouping the advances it had paid to El Jay. The Bank's recoupments contributed to El Jay filing a Chapter 11 bankruptcy petition in early 1987.
According to Shamis, Ambassador was first introduced to Korman when, pursuant to a court order, the company was appointed to be the factor for El Jay as debtor-in-possession. Furthermore, Shamis alleges that when Ambassador undertook this assignment, Ambassador learned about Korman and El Jay's fraudulent "pre-invoicing" practice.
On August 26, 1988, Roberts and Ambassador entered into a written agreement (the "Factoring Agreement") in which Roberts appointed Ambassador as its exclusive factor of all accounts receivable that resulted from Roberts' sales of finished goods to various retailers. In exchange, Ambassador received, among other things, a percentage commission, and security interests in both Roberts' accounts receivable and some of Roberts' inventory.
In 1988, Korman was introduced to Shamis and the two began discussions about a business arrangement pursuant to which Wishbone would manufacture clothing for Roberts. On October 27, 1989, Roberts and Wishbone entered into a three-year agreement (the "Master Agreement"), in which Roberts appointed Wishbone as its exclusive purchasing agent for all of its finished goods manufactured in the Far East, Turkey, India and elsewhere. The Master Agreement established that Wishbone would finance Roberts' inventory purchases by extending letters of credit to merchandise suppliers. Wishbone also agreed to provide certain support services with those suppliers on Roberts' behalf. In return, Roberts granted Wishbone (1) security interests in Roberts' inventory, accounts receivable and other assets; (2) a six percent commission on the value of goods imported through Wishbone and a three percent commission on all sums which it financed on Roberts' behalf; and (3) an assignment of 50% of the payments made by Ambassador to Roberts under the Factoring Agreement.
To establish a payment mechanism for Roberts' obligations to Wishbone under the Master Agreement, Ambassador and Roberts then entered into a written agreement, dated November 20, 1989 (the "Assignment of Factoring Proceeds Agreement"), which provided that Ambassador would pay directly to Wishbone one-half of the 80% of the accounts receivable payments which otherwise would have been paid to Roberts under the Factoring Agreement. This Agreement further provided that Ambassador would subordinate its security interest under the Factoring Agreement to Wishbone's security interest under the Master Agreement with respect to inventory and receivables that would arise from the sale of the inventory that Wishbone had supplied and/or financed.
Shamis claims that the Factoring Agreement specifically provided that any receivable sold to Ambassador would be accompanied by proof of delivery of the underlying goods to the customer in order to eliminate the possibility that Korman and Roberts would repeat the fraudulent invoicing scheme allegedly perpetrated by El Jay.
According to Shamis, Wishbone supplied Roberts with finished goods until approximately June 1991, at which time Roberts's debt to Wishbone had...
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