SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ------------------------------------------------------------- x

Index No. 162614/2014 Part 43 (Reed, J.)

Motion Seq. No. 001

THE PEKOE GROUP, INC., Plaintiff,

-against- BARBARA LIGETI, JEFFERY ALTSHULER, JONATHAN CHANG, JANN COBLER, BILLY LOWE, 9606 ENTERTAINMENT, BEVERLY OGILVIE, STAMAN OGILVIE and JOSEPH TRENT SIFF, Defendants.

::::::::::::::

------------------------------------------------------------- x

DEFENDANTS’ MEMORANDUM OF LAW IN SUPPORT OF THEIR MOTION, PURSUANT TO CPLR 3211(A)(1) AND (7), AND, IN THE ALTERNATIVE,

9 U.S.C. §§ 1 ET SEQ., TO DISMISS THE VERIFIED COMPLAINT OF PLAINTIFF THE PEKOE GROUP, INC.

ALLEGAERT BERGER & VOGEL LLP Partha P. Chattoraj Lauren J. Pincus 111 Broadway, 20th Floor New York, New York 10006 (212) 571-0550 Attorneys for Defendants Barbara Ligeti and Jeffrey Altshuler

FILED: NEW YORK COUNTY CLERK 04/23/2015 07:31 PM INDEX NO. 162614/2014

NYSCEF DOC. NO. 12 RECEIVED NYSCEF: 04/23/2015

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Table of Contents

Page PRELIMINARY STATEMENT .................................................................................................... 1 

STATEMENT OF FACTS ............................................................................................................. 2 

ARGUMENT .................................................................................................................................. 4 

I.  THE MARKETING AGREEMENT BARS PLAINTIFF’S FIRST CAUSE OF ACTION BASED UPON QUANTUM MERUIT ........................................... 5 

II.  PLAINTIFF’S SECOND CAUSE OF ACTION BASED UPON ACCOUNT STATED FAILS AS PLAINTIFF HAS NOT ALLEGED AN AGREEMENT BETWEEN THE PARTIES ...................................................................... 8 

III.  THE FRAUD CLAIM AGAINST BARBARA LIGETI MUST BE DISMISSED ....................................................................................................................... 9 

A.  Plaintiff Cannot Bootstrap a Breach of Contract Claim Into a Fraud Claim ..................................................................................................................... 10 

B.  Plaintiff Fails to Allege Fraud with Particularity .................................................. 11 

1.  Plaintiff Has Not Alleged a Material Misrepresentation of Fact ............................................................................................................ 11 

2.  The Complaint Alleges No Facts Supporting an Inference of Knowledge of Falsity and Intent .......................................................... 12 

3.  The Complaint Fails to Allege Detrimental Reliance ............................... 13 

4.  Plaintiff Has Not Shown How Ms. Ligeti’s Alleged Misrepresentations Damaged Plaintiff ...................................................... 13 

C.  Plaintiff’s Demand for Treble Damages and Legal Fees Is Improper ................................................................................................................ 14 

V.  PLAINTIFF’S CLAIMS ARE ALL SUBJECT TO MANDATORY MEDIATION AND ARBITRATION .............................................................................. 14 

CONCLUSION ............................................................................................................................. 17 

ii

Table of Authorities

Page(s)

Cases 

AJ Contracting Co. v. Farmore Realty Inc., 47 A.D.3d 501 (1st Dep’t 2008) ..................................................................................................... 6

Ark Bryant Park Corp. v. Bryant Park Restoration Corp., 285 A.D.2d 143 (1st Dep’t 2001) ................................................................................................... 4

Astra Oil Co., Inc. v. Rover Navigation, Ltd., 344 F.3d 276 (2d Cir. 2003).......................................................................................................... 16

Basis Yield Alpha Fund (Master) v. Goldman Sachs Group, Inc., 115 A.D.3d 128 (1st Dep’t 2014) ................................................................................................... 5

Bellino Schwartz Padob Advertising Inc. v. Solaris Marketing Group Inc., 222 A.D.2d 313 (1st Dep’t 1995) ................................................................................................... 7

Bencivenga & Co. v. Phyfe, 210 A.D.2d 22 (1st Dep’t 1994) ................................................................................................... 11

Brown v. Wolf Group Integrated Commc’ns, Ltd., 23 A.D.3d 239 (1st Dep’t 2005) ............................................................................................. 11, 12

Butterly & Green, Inc. v. Marsalona, 26 Misc.2d 284 (Sup. Ct. Queens Cnty. 1960) ............................................................................... 8

Cameron Eng’g & Assocs. v. JMS Architect & Planner, P.C., 75 A.D.3d 488 (2d Dep’t 2010) ...................................................................................................... 8

Cross v. Zyburo, 185 A.D.2d 967 (2d Dep’t 1992) .................................................................................................. 14

Cutrone v. Kelly, 68 N.Y.S.2d 878 (Sup. Ct. Kings Cnty. 1947).............................................................................. 13

Digital Centre, S.L. v. Apple Indus., Inc., 94 A.D.3d 571 (1st Dep’t 2012) ..................................................................................................... 9

Erdman Anthony & Assocs. v. Barkstrom, 298 A.D.3d 981 (4th Dep’t 2002) ................................................................................................... 9

Eurycleia Partners v. Seward & Kissel, LLP, 12 N.Y.3d 553 (2009) ..................................................................................................................... 9

Page(s)

iii

Ford v. Sivilli, 770 N.Y.S.2d 414 (2d Dep’t 2003) ............................................................................................... 12

Friedman v. Anderson, 23 A.D.3d 163 (1st Dep’t 2005) ....................................................................................... 10, 12, 13

Georgia Malone & Co. v. Rieder, 19 N.Y.3d 511 (2012) ................................................................................................................. 6, 7

Gomez-Jimenez v. New York Law School, 103 A.D.3d 13 (1st Dep’t 2012) ..................................................................................................... 5

Gordon v. Dino De Laurentis Corp., 141 A.D.2d 435 (1st Dep’t 1988) ........................................................................................... 11, 13

Gregor v. Rossi, 120 A.D.3d 447 (1st Dep’t 2014) ................................................................................................. 12

Gurney, Becker & Bourne, Inc. v. Benderson Dev. Co., Inc., 47 N.Y.2d 995 (1979) ..................................................................................................................... 8

Handel v. Gruber, 209 A.D.2d 282 (1st Dep’t 1994) ................................................................................................. 12

Herencia v. Centercut Rest. Corp., 938 N.Y.S.2d 286 (1st Dep’t 2012) ................................................................................................ 5

Highland HC, LLC v. Scott, 113 A.D.3d 590 (2d Dep’t 2014) .................................................................................................. 15

Hirschfeld Productions, Inc. v. Mirvish, 88 N.Y.2d 1054 (1996) ................................................................................................................. 15

Interman Indus. Prods., Ltd. v. R.S.M. Electron Power, Inc., 37 N.Y.2d 151 (1975) ..................................................................................................................... 8

Joan Hansen & Co. Inv. v. Everlast World’s Boxing Headquarters Corp., 296 A.D.2d 103 (1st Dep’t 2002) ................................................................................................... 6

Kagan v. K-Tel Entertainment, Inc., 172 A.D.2d 375 (1st Dep’t 1991) ........................................................................................... 5, 6, 7

Krantz v. Chateau Stores of Can. Ltd., 256 A.D.2d 186 (1st Dep’t 1998) ................................................................................................. 14

Leon v. Martinez, 84 N.Y.2d 83 (1994) ....................................................................................................................... 2

Page(s)

iv

Lewis Tree Serv., Inc. v. Lucent Techs., Inc., 239 F. Supp. 2d 332 (S.D.N.Y. 2002) ........................................................................................... 16

Louis Dreyfus Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.3d 218 (2d Cir. 2001).......................................................................................................... 15

Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173 (2011) ..................................................................................................................... 6

Mark Hampton, Inc. v. Bergreen, 173 A.D.2d 220 (1st Dep’t 1991) ................................................................................................... 2

Matias v. Mondo Props. LLC, 43 A.D.3d 367 (1st Dep’t 2007) ................................................................................................... 10

Nat’l Union Fire Ins. Co. v. Robert Christopher Assocs., 257 A.D.2d 1 (1st Dep’t 1999) ..................................................................................................... 10

Nulife Entertainment, Inc. v. Torres, 698 F. Supp. 2d 409 (S.D.N.Y. 2010) ........................................................................................... 15

Parker Realty Group, Inc. v. Petigny, 14 N.Y.3d 864 (2010) ..................................................................................................................... 7

Pearlman v. Friedman Alpren & Green LLP, 300 A.D.2d 203 (1st Dep’t 2002) ................................................................................................. 14

Randall’s Island Aquatic Leisure, LLC v. City of New York, 92 A.D.3d 463 (1st Dep’t 2012) ..................................................................................................... 7

Raytone Plumbing Specialities, Inc. v. Sano Const. Corp., 92 A.D.3d 855 (2d Dep’t 2012) ...................................................................................................... 9

Riverbay Corp. v. Thyssenkrupp N. Elevator Corp., 116 A.D.3d 487 (1st Dep’t 2014) ................................................................................................. 12

Robinson v. Robinson, 303 A.D.2d 234 (1st Dep’t 2003) ................................................................................................... 4

Ryan Graphics, Inc. v. Bailin, 39 A.D.3d 249 (1st Dep’t 2007) ..................................................................................................... 8

Sound Commc’ns, Inc. v. Rack and Roll, Inc., 88 A.D.3d 523 (1st Dep’t 2011) ............................................................................................... 8, 11

Sperry v. Crompton Corp., 8 N.Y.3d 204 (2007) ....................................................................................................................... 7

Page(s)

v

Stuart Lipsky, P.C. v. Price, 215 A.D.2d 102 (1st Dep’t 1995) ................................................................................................. 12

Wall Street Transcript Corp. v. Ziff Commc’ns Co., 225 A.D.2d 322 (1st Dep’t 1996) ................................................................................................. 13

Weitzman v. Listman, 217 A.D.2d 442 (1st Dep’t 1995) ................................................................................................. 14

Worthy v. New York City Hous. Auth., 21 A.D.3d 284 (1st Dep’t 2005) ................................................................................................... 10

Statutes 

9 U.S.C. § 1 ............................................................................................................................... 1, 15

9 U.S.C. § 2 ................................................................................................................................... 15

9 U.S.C. § 3 ................................................................................................................................... 16

9 U.S.C. § 4 ................................................................................................................................... 16

9 U.S.C. § 201 ............................................................................................................................... 15

CPLR 3016(b) ................................................................................................................. 2, 5, 11, 12

CPLR 3211(a)(1) ........................................................................................................................ 1, 4

CPLR 3211(a)(7) ........................................................................................................................ 1, 5

N.Y. LIMITED LIABILITY COMPANY LAW § 609(a) ....................................................................... 10

N.Y. LIMITED LIABILITY COMPANY LAW § 610 ............................................................................ 10

Defendants Barbara Ligeti and Jeffrey Altshuler (together, the “Producers”)

respectfully submit this Memorandum of Law in support of their motion, pursuant to CPLR

3211(a)(1) and (7), and, in the alternative, 9 U.S.C. §§ 1 et seq., to dismiss the Verified

Complaint (the “Complaint”) of Plaintiff The Pekoe Group, Inc. (“Plaintiff” or “TPG”).1

PRELIMINARY STATEMENT

Plaintiff contracted in writing to provide certain marketing and advertising

services to a theatrical production company, Little Dinghy Productions LLC (“Little Dinghy”), in

connection with the off-Broadway theater production Riding the Midnight Express with Billy

Hayes. When the production did not perform as well as the parties had hoped, Plaintiff filed the

instant Complaint, indiscriminately bringing suit on theories of “account stated,” “quantum

meruit,” and fraud against various persons whose names appear in the production’s Playbill,

including the Producers – but not Little Dinghy. Indeed, the fully executed Marketing

Agreement between Plaintiff and Little Dinghy, which includes a mandatory mediation and

arbitration provision, is nowhere mentioned in the Complaint. Prior to the commencement of

this lawsuit, however, Plaintiff’s former lawyers sent a demand letter to Little Dinghy,

specifically asserting that this dispute arises out of services that Plaintiff provided pursuant to the

Marketing Agreement, an admission by which Plaintiff is bound. The contract, a fully-executed

copy of which has been submitted herewith, constitutes documentary evidence that is fully

dispositive of all the claims asserted herein.

Plaintiff’s attempt to “plead around” the Marketing Agreement cannot salvage its

deficient Complaint. First, Plaintiff’s quantum meruit cause of action must be dismissed

because a valid contract covers the subject matter of the alleged services, and because the

1 A true and correct copy of the Complaint is attached to the Affirmation of Partha P. Chattoraj in Support of Defendants’ Motion to Dismiss, dated April 23, 2015 (“Chattoraj Aff.”), as Exhibit A.

2

Complaint does not sufficiently allege that the services were provided “at the behest of” the

individual Defendants. Second, Plaintiff’s account stated cause of action must be dismissed

because the Complaint does not allege the most critical component – an agreement between the

parties as to the final amount due – and attaches no invoices. Third, Plaintiff’s fraud claim

against Defendant Barbara Ligeti, the managing member of Little Dinghy, fails because, under

controlling New York law, it is nothing more than an end-run around the breach of contract

claim that Plaintiff has purposely avoided, and in any event the fraud allegations do not satisfy

the exacting specificity requirements of CPLR 3016(b). Fourth, even if the Court does not

dismiss the Complaint on the merits, all of Plaintiff’s claims must be dismissed because Plaintiff

agreed to mediate and arbitrate any and all of its claims arising out of the Marketing Agreement.

Thus, this Complaint constitutes a knowing attempt to avoid the consequences of

the contract that Plaintiff itself drafted, and to extract payment by naming the Producers and

various other individuals, with whom Plaintiff had no direct contact, in a baseless lawsuit. If

Plaintiff wishes to pursue payment of its allegedly outstanding bills, it must proceed against

Little Dinghy, its contractual counterparty, not Defendants, and it must comply with the

mediation and arbitration provisions contained in its contract. Accordingly, the Complaint

should be dismissed in its entirety.

STATEMENT OF FACTS2

Defendants Barbara Ligeti and Jeffrey Altshuler are producers of the Off-

Broadway production, Riding the Midnight Express with Billy Hayes (the “Production”), which

was presented at St. Luke’s Theatre in New York County in or about January – March, 2014.

2 For purposes of this motion only, the Producers accept the allegations set forth in the Complaint as true, see Leon v. Martinez, 84 N.Y.2d 83, 87 (1994) except to the extent they are “either inherently incredible or flatly contradicted by documentary evidence,” see Mark Hampton, Inc. v. Bergreen, 173 A.D.2d 220, 220 (1st Dep’t 1991).

3

(Compl. ¶¶ 3-4.)3 Plaintiff is a company that provides its clients with theatrical advertising and

marketing services. (Compl. ¶ 2.)

Plaintiff prepared a Marketing Agreement (the “Marketing Agreement”4) with

Little Dinghy to provide marketing services for the Production. (Chattoraj Aff. ¶ 4 & Ex. B.)

On or about January 14, 2014, the parties executed the Marketing Agreement. (Chattoraj Aff.

Ex. B.) Little Dinghy was both the “Client” under the Marketing Agreement and the signatory

thereto, with Ms. Ligeti executing the contract solely on the Company’s behalf. (Id.) As the

“Client”, Little Dinghy, and Little Dinghy alone, undertook to pay Plaintiff. (Id. § 2.) The

Marketing Agreement also included a mandatory mediation and arbitration provision:

Any controversy, claim, or dispute arising under, out of, in connection with, or in relation to this agreement, its performance or non-performance, or any breach hereof, shall be submitted first to mediation in New York City by a mediator mutually-agreed by the parties. If the parties do not reach agreement through mediation, or if the parties are unable to agree on a mediator or mediation services, the dispute shall be determined by and finally settled by arbitration in New York City by a single arbitrator, in accordance with the rules of the American Arbitration Association then obtaining. (Id. § 7.) As contemplated by the Marketing Agreement, Plaintiff provided marketing

services in connection with the Production. Plaintiff alleges that it did not receive compensation

for these services. (Compl. ¶ 15.)

On or about April 11, 2014, Plaintiff’s transactional counsel, Sendroff & Baruch

LLP, sent a letter seeking payment under the Marketing Agreement. The letter, with the subject

heading “‘Riding the Midnight Express with Billy Hayes’ (the ‘Production’)/Marketing

3 The Complaint states that the production took place in or about January – March 2013; this is apparently a typographical error, as the Complaint also alleges that its services in connection with this production began on or about November 29, 2013. (Compl. ¶ 12). 4 A copy of the Marketing Agreement is set forth as Exhibit B to the Chattoraj Affirmation.

4

Agreement,” claimed payment was due “[p]ursuant to Paragraph 2 of the Agreement.” See

Chattoraj Aff. Ex. C.

On or about December 22, 2014, Plaintiff commenced the present action against

the Producers for payment of the marketing fees it had previously contended were due under the

Marketing Agreement. Plaintiff also named seven other defendants who allegedly were “co-

Producers,” but not Little Dinghy. (Compl. ¶¶ 5-11.) Plaintiff now asserts that, notwithstanding

the terms of the Marketing Agreement, Plaintiff provided theatrical advertising and marketing

services to the Producers and other Defendants individually – not to Little Dinghy – and at their

behest (Compl. ¶¶ 12, 14), and brings claims for quantum meruit and account stated. (Compl. ¶¶

12-16, 17-19.) Plaintiff further argues that Ms. Ligeti defrauded Plaintiff by making false

representations “regarding Defendant Ligeti’s assumption of the aforementioned debt and

promised payment of all outstanding sums” (Compl. ¶¶ 20-27.) Plaintiff seeks damages in an

amount not less than $60,000, treble damages, and legal fees (Compl. ¶¶ 14, 26-27), and asserts

an account stated claim in the amount of $51,586.06 (Compl. ¶ 18).

ARGUMENT

Pursuant to CPLR 3211(a)(1), a complaint must be dismissed if “the documentary

evidence conclusively resolves all factual issues and . . . plaintiff’s claims fail as a matter of

law.” Robinson v. Robinson, 303 A.D.2d 234, 235 (1st Dep’t 2003) (“While a complaint is to be

liberally construed in favor of plaintiff on a § 3211 motion to dismiss, the court is not required to

accept factual allegations that are plainly contradicted by the documentary evidence or legal

conclusions that are unsupportable based upon the undisputed facts.”). On such a motion, “the

provisions of the contract delineating the rights of the parties prevail over the allegations set

forth in the complaint.” Ark Bryant Park Corp. v. Bryant Park Restoration Corp., 285 A.D.2d

5

143, 150 (1st Dep’t 2001). Pursuant to CPLR 3211(a)(7), a complaint must be dismissed for

failure to state a cause of action if, drawing all inferences in the plaintiff’s favor, the facts as

alleged do not fit within a cognizable legal theory. Gomez-Jimenez v. New York Law School,

103 A.D.3d 13, 16 (1st Dep’t 2012). Also, even a “well-pleaded cognizable claim” must be

dismissed under CPLR 3211(a)(7) if it is “flatly rejected by the documentary evidence.” Basis

Yield Alpha Fund (Master) v. Goldman Sachs Group, Inc., 115 A.D.3d 128, 135 (1st Dep’t

2014).

Where a cause of action is based upon misrepresentation or fraud, “the

circumstances constituting the wrong shall be stated in detail.” CPLR 3016(b). Under CPLR

3016(b), fraud must be pleaded with “particularity.” Herencia v. Centercut Rest. Corp., 938

N.Y.S.2d 286, 288 (1st Dep’t 2012). Here, the documentary evidence of the Marketing

Agreement, combined with the vague and conclusory allegations in the Complaint, clearly

demonstrate that the Complaint fails to state a cause of action, and all of Plaintiff’s claims must

be dismissed.

I. THE MARKETING AGREEMENT BARS PLAINTIFF’S FIRST CAUSE OF ACTION BASED UPON QUANTUM MERUIT.

Plaintiff’s quantum meruit cause of action must be dismissed because a suit for

recovery in quasi-contract must be directed at the party at whose behest the services were

rendered. As the First Department explained in Kagan v. K-Tel Entertainment, Inc., 172 A.D.2d

375, 376 (1st Dep’t 1991):

[T]o recover under a theory of quasi contract, a plaintiff must demonstrate that services were performed for the defendant resulting in its unjust enrichment. It is not enough that the defendant received a benefit from the activities of the plaintiff; if services were performed at the behest of someone other than the defendant, the plaintiff must look to that person for recovery.

6

(emphasis in original; citations omitted); see also AJ Contracting Co. v. Farmore Realty Inc., 47

A.D.3d 501, 501 (1st Dep’t 2008) (even if defendant “benefitted from plaintiff’s work,” plaintiff

cannot recover in quantum meruit where services were not rendered at defendant’s behest).

Here, the Marketing Agreement conclusively demonstrates that the marketing services at issue

were rendered to, and at the behest of, Little Dinghy, not the Producers. See Kagan, 172 A.D.3d

at 377 (distributor of television series not liable for unjust enrichment theory for unpaid fees of

contract between producer and plaintiff, even though distributor used series and acquiesced in

assignment of producer’s interest in contract with plaintiff, since plaintiff performed services at

request of producer, made contract with producer, expected payment from producer, and lacked

privity of contract with distributor); see also Joan Hansen & Co. Inv. v. Everlast World’s Boxing

Headquarters Corp., 296 A.D.2d 103, 108 (1st Dep’t 2002) (dismissing unjust enrichment claim

for commissions against president of corporation where plaintiff’s commissions arose from

contract with corporation).

Thus, Plaintiff cannot look to these individual Defendants for recovery, and the

Complaint’s conclusory allegations that the Producers and the other Defendants were “aware of

and knowingly accepted from Plaintiff” the services that Plaintiff allegedly performed (Compl.

¶ 13) are unavailing. Other than this boilerplate assertion, no specific allegation of

communications between Plaintiff and any Defendant other than Ms. Ligeti appears in the

Complaint. The Court of Appeals has repeatedly held that this pleading deficiency alone

requires dismissal of unjust enrichment claims. See, e.g., Georgia Malone & Co. v. Rieder, 19

N.Y.3d 511, 518 (2012) (allegations that defendant was “aware” of plaintiff and “knew at all

times” of plaintiff’s expectation of payment insufficient to state unjust enrichment claim against

non-privy); Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 182-83 (2011) (“conclusory

7

allegations” that “failed to indicate a relationship between the parties that could have caused

reliance or inducement” insufficient to support unjust enrichment claim); Sperry v. Crompton

Corp., 8 N.Y.3d 204, 215-16 (2007) (same).5

Not only does the Marketing Agreement conclusively establish that Little Dinghy,

not the Producers, would be the proper defendant here, the agreement’s very existence bars

Plaintiff’s quantum meruit cause of action. Under New York law, where a contract covers the

subject matter of the dispute, a quantum meruit cause of action will not lie, regardless of whether

the putative defendant is a signatory to that contract. See Parker Realty Group, Inc. v. Petigny,

14 N.Y.3d 864, 865-66 (2010) (“Recovery under the theory of quantum meruit is not appropriate

where, as here, an express contract governed the subject matter involved.”); Randall’s Island

Aquatic Leisure, LLC v. City of New York, 92 A.D.3d 463, 463 (1st Dep’t 2012) (where contract

was signed by New York City Department of Parks and Recreation, dismissing plaintiff’s action

against New York City Economic Development Corporation because “there can be no quasi-

contract claim against a third-party non-signatory to a contract that covers the subject matter of

the claim”); Bellino Schwartz Padob Advertising Inc. v. Solaris Marketing Group Inc., 222

A.D.2d 313, 313 (1st Dep’t 1995) (existence of express contract “governing subject matter of

plaintiff's claim” barred any “quasi-contractual claims” against “third party nonsignatory to the

valid and enforceable contract”) (citations omitted).

The Marketing Agreement, regarding marketing and advertising for the

Production, covers the subject matter of Plaintiff’s present claim for fees in connection with the

same services, as Plaintiff admitted in the demand letter that preceded this litigation. See

5 Because the pleading standard for quantum meruit claims, which require that the plaintiff plead that its services were rendered “at the behest of” the defendant, is actually more exacting than the standard for general quasi-contract unjust enrichment claims, see Georgia Malone, 19 N.Y.3d at 521 n.2 (citing Kagan, 172 A.D.2d at 376) (Lippman, C.J., dissenting), these precedents are a fortiori here.

8

Chattoraj Aff. Ex. C. Accordingly, Plaintiff’s First Cause of Action for quantum meruit should

be dismissed.

II. PLAINTIFF’S SECOND CAUSE OF ACTION BASED UPON ACCOUNT STATED FAILS AS PLAINTIFF HAS NOT ALLEGED AN AGREEMENT BETWEEN THE PARTIES.

“An account stated is an agreement between parties to an account based upon

prior transactions between them with respect to the correctness of the account items and balance

due.” Ryan Graphics, Inc. v. Bailin, 39 A.D.3d 249, 250 (1st Dep’t 2007). “An account stated

cannot be made the instrument to create liability when none exists.” Gurney, Becker & Bourne,

Inc. v. Benderson Dev. Co., Inc., 47 N.Y.2d 995, 996 (1979). Because the Marketing Agreement

demonstrates that Little Dinghy, not the individual Producers or any other Defendant, has any

obligation to pay Plaintiff, only Little Dinghy could ever be liable in account stated. See Ryan

Graphics, 39 A.D.3d at 250 (lack of “underlying business relationship” with plaintiff precludes

account stated claim); see also Sound Commc’ns, Inc. v. Rack and Roll, Inc., 88 A.D.3d 523, 523

(1st Dep’t 2011) (dismissing account stated claim against individual defendants where

underlying invoices were addressed to their limited liability company); Butterly & Green, Inc. v.

Marsalona, 26 Misc.2d 284, 286 (Sup. Ct. Queens Cnty. 1960) (cause of action for account

stated “insufficient as against the individual defendant who was not a party to the written

agreement from which the original liability stemmed”). The Court should dismiss Plaintiff’s

“account stated” claim for this reason alone.

Plaintiff’s account stated cause of action is further barred by Plaintiff’s utter

failure to plead an essential element thereof – an agreement as to the balance due. See Interman

Indus. Prods., Ltd. v. R.S.M. Electron Power, Inc., 37 N.Y.2d 151, 153-54 (1975) (collecting

cases); Cameron Eng’g & Assocs. v. JMS Architect & Planner, P.C., 75 A.D.3d 488, 489 (2d

9

Dep’t 2010) (affirming dismissal of account stated claim where trial court found that there was

“no agreement with respect to the balance due”). Here, Plaintiff alleges merely that it has billed

Defendants, and has “stated an account to Defendants in the amount of $51,685.06.” (Compl. ¶

18.) Plaintiff makes no allegation that an agreement, whether express or implied, was reached

with respect to the balance due, nor has Plaintiff attached any invoices to the Complaint. This is

insufficient as a matter of law. See Digital Centre, S.L. v. Apple Indus., Inc., 94 A.D.3d 571,

572-73 (1st Dep’t 2012) (dismissing account stated cause of action because of failure to plead

“essential element” of “an agreement with respect to the balance due” and failure “to support

that amount with invoices sent to and retained by defendant”).

Moreover, Plaintiff’s concession that Defendants allegedly “have and continue to

refuse to pay Plaintiff any part thereof” (Compl. ¶ 15) is fatal to its “account stated” claim. See,

e.g., Digital Centre, 94 A.D.3d at 573 (complaint must plead “defendant’s retention of the

billings for an unreasonable period of time without objecting to them”) (citing Raytone Plumbing

Specialities, Inc. v. Sano Const. Corp., 92 A.D.3d 855 (2d Dep’t 2012)); Erdman Anthony &

Assocs. v. Barkstrom, 298 A.D.3d 981, 982 (4th Dep’t 2002) (affirming summary judgment

dismissing account stated claim based on evidence of oral objections to stated amount).

Certainly, no allegations of Defendants’ non-objection to Plaintiff’s alleged account stated

appear in the Complaint. Accordingly, Plaintiff’s second cause of action for account stated

should be dismissed.

III. THE FRAUD CLAIM AGAINST BARBARA LIGETI MUST BE DISMISSED.

Under New York law, a cause of action for fraud requires (1) a material

misrepresentation of fact, (2) knowledge of its falsity, (3) an intent to induce reliance,

(4) justifiable reliance by the plaintiff, and (5) damages. See Eurycleia Partners v. Seward &

10

Kissel, LLP, 12 N.Y.3d 553, 569 (2009). A “mere recitation of the elements of fraud is

insufficient to state a cause of action”; rather, “specific and detailed factual allegations” are

required. Friedman v. Anderson, 23 A.D.3d 163, 166 (1st Dep’t 2005) (quoting Nat’l Union

Fire Ins. Co. v. Robert Christopher Assocs., 257 A.D.2d 1, 9 (1st Dep’t 1999)). Plaintiff's

woefully deficient Complaint falls far short of pleading these basic elements.

A. Plaintiff Cannot Bootstrap a Breach of Contract Claim Into a Fraud Claim.

Plaintiff’s fraud claim against Defendant Barbara Ligeti is a transparent attempt to

hold Ms. Ligeti personally liable for the debts of Little Dinghy, the limited liability company she

owns and manages. As their name implies, however, limited liability companies exist for the

express purpose of limiting liability; as such, members, managers and agents of a limited liability

company are not liable for the company’s debts simply for being the company’s member,

manager or agent, or for participating in or managing the conduct of the company’s business.

See N.Y. LIMITED LIABILITY COMPANY LAW §§ 609(a), 610; see also, e.g. Matias v. Mondo

Props. LLC, 43 A.D.3d 367, 367-68 (1st Dep’t 2007) (“to impose individual liability ‘based

entirely on the principal’s control over the management of company business would obviate the

legal distinction between a company and its officers, share owners and employees’”) (quoting

Worthy v. New York City Hous. Auth., 21 A.D.3d 284, 287 (1st Dep’t 2005) (Tom, J.P.,

concurring)). Even if (contrary to fact) Ms. Ligeti were somehow personally liable under the

Marketing Agreement between TPG and Little Dinghy, however, Plaintiff’s fraud claim would

still fail.

Plaintiff contends that Ms. Ligeti “promised payment of all outstanding sums

owed to Plaintiff herein” – sums arising from the Marketing Agreement – and that at the time of

such statements, she “knew them to be false.” (Compl. ¶ 22.) These allegations amount to no

11

more than an effort to manufacture a fraud claim out of a garden-variety breach of contract claim

merely by tacking on allegations of lack of intent to perform. This is insufficient as a matter of

law. See Sound Commc’ns, 88 A.D.3d at 523 (fraud claim dismissed where plaintiff “essentially

alleges that defendants never intended to honor a promise to pay plaintiff's fees”); Gordon v.

Dino De Laurentis Corp., 141 A.D.2d 435, 436 (1st Dep’t 1988) (“It is well settled that a cause

of action for fraud will not arise when the only fraud charged relates to a breach of contract.”)

(citations omitted). Simply put, Plaintiff’s fraudulent misrepresentation cause of action against

Ms. Ligeti must be dismissed because the only misrepresentation Plaintiff appears to allege is an

undisclosed intention not to perform under the Marketing Agreement. Even accepting this

allegation as true for purposes of this motion to dismiss, Plaintiff “has alleged no more than that

defendants did not intend to honor their contract, which is insufficient to state a claim for fraud.”

Brown v. Wolf Group Integrated Commc’ns, Ltd., 23 A.D.3d 239, 240 (1st Dep’t 2005) (citing

Bencivenga & Co. v. Phyfe, 210 A.D.2d 22, 22 (1st Dep’t 1994)).

B. Plaintiff Fails to Allege Fraud with Particularity.

Plaintiff's skeletal Complaint fails to satisfy even basic notice pleading

requirements – far less the heightened pleading standards of CPLR 3016(b) – and accordingly

must be dismissed on this ground as well.

1. Plaintiff Has Not Alleged a Material Misrepresentation of Fact.

Plaintiff’s vague allegations regarding Ms. Ligeti’s supposed misrepresentations

lack any of the specificity required by CPLR 3016(b). The Complaint does not identify a single

specific instance of a misrepresentation, but rather simply alleges that Ms. Ligeti made

“numerous representations” over the course of an “approximately” eleven-month time period to

an unspecified person (or persons) at TPG. (Compl. ¶ 12.) These allegations, which do not

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include the alleged “words used by defendants and the date of the alleged misrepresentations,”

are insufficiently specific to support a fraud claim under CPLR 3016(b). Gregor v. Rossi, 120

A.D.3d 447, 447 (1st Dep’t 2014) (citing Brown, 23 A.D.3d at 239-40; Riverbay Corp. v.

Thyssenkrupp N. Elevator Corp., 116 A.D.3d 487, 488 (1st Dep’t 2014)). Among other

problems, without allegations of the dates and specific substance of the alleged representations, it

is impossible to discern how Plaintiff could have relied on and been damaged by the alleged

representations. See, e.g., Gregor, 120 A.D.3d at 447. These pleading failures alone doom

Plaintiff’s fraud claim.

2. The Complaint Alleges No Facts Supporting an Inference of Knowledge of Falsity and Intent.

The Complaint also contains no specific factual allegations whatsoever in support

of its conclusory assertions that “[a]t the time Defendant Ligeti made such representations, she

knew them to be false” and “[a]t the time Defendant Ligeti made said false representations, she

intended for Plaintiff to believe and rely upon said false representations.” (Compl. ¶¶ 22-23.)

These general allegations do not suffice to plead that the alleged representations were “made

with the intent to deceive.” See, e.g., Handel v. Gruber, 209 A.D.2d 282, 283 (1st Dep’t 1994)

(affirming dismissal of fraud claims). Plaintiff’s failure to provide any particularized factual

assertions “support[ing] the inference of scienter” is fatal to its claim. See Ford v. Sivilli, 770

N.Y.S.2d 414, 416 (2d Dep’t 2003); see also Friedman v. Anderson, 23 A.D.3d 163, 166 (1st

Dep’t 2005) (allegations insufficient where plaintiff “merely asserts that [defendant] knew his

representations were false and were made without any knowledge or factual support.”); Stuart

Lipsky, P.C. v. Price, 215 A.D.2d 102, 103 (1st Dep’t 1995) (fraud claim properly dismissed

where “[t]he complaint, in seeking to plead a fraud claim based upon a representation of future

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conduct, fails to plead any facts giving rise to an inference that the defendant, at the time the

promissory representations were made, never intended to honor or act upon his statements.”).

3. The Complaint Fails to Allege Detrimental Reliance.

Plaintiff contends that it relied on Ms. Ligeti’s alleged misrepresentations by not

filing a Complaint (Compl. ¶ 24); these allegations are insufficient, because they do not actually

show detrimental reliance. See Wall Street Transcript Corp. v. Ziff Commc’ns Co., 225 A.D.2d

322, 322 (1st Dep’t 1996) (fraud claim dismissed where plaintiff failed to show “how it relied to

its detriment”) (emphasis added.) It is evident from the mere existence of the present Complaint

that Plaintiff never lost the ability to so proceed; for example, no statute of limitations has

passed. See Cutrone v. Kelly, 68 N.Y.S.2d 878 (Sup. Ct. Kings Cnty. 1947) (“the fact that

plaintiff was ‘discouraged’ from ‘pursuing his legal remedies immediately’ affords no basis for

any recognized cause of action.”).

4. Plaintiff Has Not Shown How Ms. Ligeti’s Alleged Misrepresentations Damaged Plaintiff.

Finally, Plaintiff again makes only conclusory assertions of damages, claiming it

was damaged in an amount equal to “no less than $60,000.” (Compl. ¶ 25.) However, a bald

allegation of damages does not suffice; rather, a plaintiff must “allege[] or produce[] . . .

evidence that those misrepresentations directly and proximately caused” the loss. Friedman, 23

A.D.3d at 167. Because Plaintiff’s naked allegations of damage “do not contain any factual

detail showing specific damage resulting from the purported misrepresentation,” they “therefore

are insufficient to establish a fraud claim,” Gordon, 141 A.D.2d at 437, and Plaintiff’s cause of

action for fraud must be dismissed.

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C. Plaintiff’s Demand for Treble Damages and Legal Fees Is Improper.

As Plaintiff has no cause of action for fraud, Plaintiff’s claim for treble damages

and legal fees (Compl. ¶ 27) should also be dismissed. This demand should also be dismissed

for the independent reason that an “unelaborated request for punitive damages” is insufficient to

establish that any special damages are recoverable. Krantz v. Chateau Stores of Can. Ltd., 256

A.D.2d 186, 187 (1st Dep’t 1998). “Treble damages” are not available for fraud claims. See

Weitzman v. Listman, 217 A.D.2d 442, 443 (1st Dep’t 1995) (striking “treble damages” claim

and holding that “the measure of damages for fraud is the actual pecuniary loss sustained”).

Moreover, Plaintiff’s allegations do not even come close to the “aggravating or outrageous

circumstances” required to sustain a punitive damages claim at the pleading stage, Pearlman v.

Friedman Alpren & Green LLP, 300 A.D.2d 203 (1st Dep’t 2002), or the “high degree of moral

turpitude on the part of the defendants as to imply criminal indifference to civil obligations”

required to support such a claim. Cross v. Zyburo, 185 A.D.2d 967, 968 (2d Dep’t 1992)

(striking demand for “punitive or treble damages” and holding that such damages are unavailable

in the “ordinary fraud case”).

V. PLAINTIFF’S CLAIMS ARE ALL SUBJECT TO MANDATORY MEDIATION AND ARBITRATION

Finally, all of Plaintiff’s claims against Ms. Ligeti and Mr. Altshuler are subject to

mandatory mediation followed by arbitration if necessary, and must therefore be dismissed on

that separate and independent ground. In the Marketing Agreement, Plaintiff agreed to first

mediate and then arbitrate “[a]ny controversy, claim, or dispute arising under, out of, in

connection with, or in relation to this agreement, its performance or non-performance, or any

breach” thereof. (Chattoraj Aff. Ex. B § 7.) Pursuant to the Federal Arbitration Act, this

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arbitration agreement is valid and enforceable. See 9 U.S.C. § 2.6 The arbitration provision

contained in the Marketing Agreement is broad, see, e.g., Nulife Entertainment, Inc. v. Torres,

698 F. Supp. 2d 409, 413 (S.D.N.Y. 2010), and therefore presumptively covers “all issues that

touch matters within the main agreement to be arbitrated.” Louis Dreyfus Negoce S.A. v. Blystad

Shipping & Trading Inc., 252 F.3d 218, 225 (2d Cir. 2001). As set forth above, and as Plaintiff

has admitted (see Chattoraj Aff. Ex. C), TPG’s claims arise out of the Marketing Agreement.

Therefore, these claims must be arbitrated and the Complaint should be dismissed.

The fact that the Producers are not individually parties to the Marketing

Agreement does not change this result. Because this dispute arises out of the Producers’ actions

as agents of Little Dinghy, the signatory, the Producers may enforce the arbitration clause. As

the New York Court of Appeals has explained:

[C]ourts have consistently afforded agents the benefit of arbitration agreements entered into by their principals to the extent that the alleged misconduct relates to their behavior as officers or directors or in their capacities as agents of the corporation. The rule is necessary not only to prevent circumvention of arbitration agreements but also to effectuate the intent of the signatory parties to protect individuals acting on behalf of the principal in furtherance of the agreement.

Hirschfeld Productions, Inc. v. Mirvish, 88 N.Y.2d 1054, 1055-56 (1996) (applying 9 U.S.C. §

201) (affirming order compelling arbitration of claims against individual theatrical producers

based on their production company’s arbitration agreement with plaintiff).

Further, the Complaint contends that Defendant Barbara Ligeti made

representations regarding her alleged “assumption of the aforementioned debt” (Compl. ¶ 21),

and therefore seeks to hold her personally liable for Little Dinghy’s obligations under the

6 Because the Complaint evidences transactions involving interstate and international commerce (see Compl. ¶¶ 7, 11 (alleging Defendant Billy Lowe is a resident of Edinburgh, Scotland, and Defendant Joseph Trent Siff is a resident of Houston, Texas)), as does the contract in question, see Chattoraj Aff. Ex. B § 2 (TPG to provide inter alia Internet “Social Media Marketing” and “Web Site”), the Federal Arbitration Act governs this issue. See 9 U.S.C. §§ 1-2; see also Highland HC, LLC v. Scott, 113 A.D.3d 590, 592-93 (2d Dep’t 2014).

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Marketing Agreement. Because Plaintiff seeks to substitute Ms. Ligeti as a party to the

Marketing Agreement in lieu of Little Dinghy, Plaintiff is estopped from denying her the right to

enforce that agreement’s arbitration provision. See Astra Oil Co., Inc. v. Rover Navigation, Ltd.,

344 F.3d 276, 280 (2d Cir. 2003) (signatory estopped from denying non-signatory right to

arbitrate where (1) there was a close corporate relationship between non-signatory and party to

agreement, (2) claims were brought under agreement, and (3) estopped party treated non-

signatory as if it were a party to the agreement.)

Although the Federal Arbitration Act refers only to stays of actions governed by

arbitration agreements, see 9 U.S.C. §§ 3-4, this Court should still dismiss the Complaint against

the Producers in its entirety, because all of Plaintiff’s claims are subject to arbitration and there

will never be any substantive proceeding before this Court on Plaintiff’s claims. See, e.g., Lewis

Tree Serv., Inc. v. Lucent Techs., Inc., 239 F. Supp. 2d 332, 340 (S.D.N.Y. 2002) (“Because all

of [plaintiff’s] claims are subject to arbitration, no useful purpose will be served by granting a

stay of [plaintiff’s] claims and thus its action against the defendants is dismissed.”). All of

Plaintiff’s claims against the Producers are subject to mandatory mediation and arbitration, and

they should be dismissed on these grounds alone.

CONCLUSION

For the foregoing reasons, Defendants Barbara Ligeti and Jeffrey Altshuler

respectfully request that the Court grant their motion to dismiss Plaintiffs Complaint, and grant

such other and further relief as the Court deems just and proper.

Dated: New York, New York April23, 2015

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ALLEGAERT BERGER & VOGEL LLP

Partha P. Chattoraj Lauren J. Pincus

111 Broadway, 20th Floor New York, New York 10006 (212) 571-0550

Attorneys for Defendants Barbara Ligeti and Jeffrey Altshuler