The Barrel Saloon, Llc et al v. Southern Wine And Spirits of Upstate New York, Inc. et al

MOTION to Dismiss for Failure to State a Claim

N.D.N.Y.December 21, 2016

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X The Barrel Saloon, LLC; CAD on Pearl, LLC; 28 Thatcher LLC; and DeJohn’s on Lark, Inc., 59-61 North Pearl Street, Albany, New York, Plaintiffs, -against- Southern Wine and Spirits of Upstate New York, Inc. and Southern Glazer’s Wine and Spirits of Upstate New York LLC, 25 Corporate Circle, Suite 102 B, Albany, New York, Defendants. : : : : : : : : : : : : : : : Civil Action No. 1:16-CV-1493 (TJM/TWD) NOTICE OF MOTION TO DISMISS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X PLEASE TAKE NOTICE THAT, upon the Memorandum of Law in Support of Motion to Dismiss and Declaration of Henry M. Greenberg, dated December 21, 2016, the Defendants, Southern Wine & Spirits of Upstate New York, Inc. and Southern Glazer’s Wine and Spirits of Upstate New York, LLC, by their attorneys, Greenberg Traurig, LLP, will move this Court on January 27, 2017, at 10:00 a.m. before the Honorable Thomas J. McAvoy, United States District Judge, at the U.S. Courthouse, 15 Henry Street, Binghamton, NY 13901, for an Order pursuant to Federal Rule of Civil Procedure 12(b)(6) dismissing in its entirety and with prejudice the Verified Complaint of the Plaintiffs, The Barrel Saloon, LLC, CAD on Pearl, LLC, 28 Thatcher LLC, and DeJohn’s on Lark, Inc. Case 1:16-cv-01493-TJM-TWD Document 6 Filed 12/21/16 Page 1 of 2 2 Date: December 21, 2016 Albany, New York Respectfully submitted, GREENBERG TRAURIG, LLP By: /s/ Henry M. Greenberg Henry M. Greenberg (Bar No. 101854) Cynthia Neidl (Bar No. 513737) 54 State Street Albany, New York 12207 Tel: (518) 689-1400 Fax: (518) 689-1499 greenbergh@gtlaw.com neidlc@gtlaw.com Attorneys for Defendants Southern Wine & Spirits of Upstate New York, Inc. and Southern Glazer’s Wine and Spirits of Upstate New York, LLC ATL 21751766v2 Case 1:16-cv-01493-TJM-TWD Document 6 Filed 12/21/16 Page 2 of 2 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X The Barrel Saloon, LLC; CAD on Pearl, LLC; 28 Thatcher LLC; and DeJohn’s on Lark, Inc., 59-61 North Pearl Street, Albany, New York, Plaintiffs, -against- Southern Wine and Spirits of Upstate New York, Inc. and Southern Glazer’s Wine and Spirits of Upstate New York LLC, 25 Corporate Circle, Suite 102 B, Albany, New York, Defendants. : : : : : : : : : : : : : : : Civil Action No. 1:16-CV-1493 (TJM/TWD) DECLARATION OF HENRY M. GREENBERG - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X HENRY M. GREENBERG, pursuant to 28 U.S.C. § 1746(2), declares under penalty of perjury the following: 1. I am a shareholder with the law firm of Greenberg Traurig, LLP, attorneys for the Defendants, Southern Wine & Spirits of Upstate New York, Inc. and Southern Glazer’s Wine and Spirits of Upstate New York, LLC (collectively, “Southern”), in the above- captioned matter. As such, I am fully familiar with the facts and circumstances in this matter. 2. I submit this Declaration and the two (2) exhibits hereto in support of Southern’s motion to dismiss the Verified Complaint (“the Complaint”) of the Plaintiffs, The Barrel Saloon, LLC, CAD on Pearl, LLC, 28 Thatcher LLC, and DeJohn’s on Lark, Inc. (collectively, “Plaintiffs”). Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 1 of 38 2 3. A true and correct copy of Plaintiffs’ Summons and Complaint, filed on or about November 15, 2016, is attached hereto as Exhibit A. 4. A true and correct copy of an article published on or about November 16, 2016 in the Albany Times Union, entitled “Albany bars sue Southern Glazer’s Wine and Spirits of Upstate New York: Proprietors claim they were defrauded by giant liquor distributor,” and accessible on the Internet at http://www.timesunion.com/news/article/Albany-bars-file-sue- Southern-Glazer-s-Wine-and-10616937.php (last visited on December 21, 2016), is attached hereto as Exhibit B. I declare under penalty of perjury that the foregoing is true and correct. Dated: December 21, 2016 Albany, New York By: /s/ Henry M. Greenberg Henry M. Greenberg ATL 21752182v1 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 2 of 38 EXHIBIT A Declaration of Henry M. Greenberg in Support of Defendants Motion to Dismiss Verified Complaint Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 3 of 38 SuvtMol\s STATN OF NE\ry YORK supnnvrE couRT COUNTY OF ALBAI\IY The Banel Saloon, LLC; CAD on Pearl, LLC; 28 ThatcherLLC; and DeJohn's on Lark, Inc., 59-61 North Pearl Street, Albany, New York, Plaintiffs, -against- Southern Wine and Spirits of Upstate New York, Inc. and Southem Glazer's V/ine and Spirits of Upstate New York LLC, 25 Corporate Circle, Suite 102 B, Albany, New York Defendants. Index No.: bbg6Ò4 To The Above Named Defendants: YOU ARE HEREBY SUVIVfONED, and required to serve upon plaintifß' attorneys, an Answer to the Complaint in this action within twenty (20) days after the service of this summons, exclusive of the day of service, or within thirry (30) days after service is complete if this summons is not personally delivered to you within the State of New York. In case of your failure to answer, judgment will be taken against you by default, for the relief demanded in the Complaint. DATED: November 15, 2076 LINN By: D. , Esq for the Plaintffi 6t o Street, Suite 300 Albany, New York 12210-2136 Telephone: (51 8) 449-5400 Trial is desired in the County of Albany The basis ofvenue designated above in the County of Plaintiffs' principal place ofbusiness. Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 4 of 38 STATE OF NEW YORK SUPREME COURT COUNTY OF ALBANY The Barrel Saloon, LLC; CAD on Pearl, LLC; 28 Thatcher LLC; and DeJohn's on Lark, Inc., 59-61North Pearl Street, Albany, New York, Plaintiffs, -against- Southern V/ine and Spirits of Upstate New York, Inc. and Southern Glazer's V/ine and Spirits of Upstate New York LLC, 25 Corporate Circle, Suite 102 B, Albany, New York Defendants. VERIFIED COMPLAINT Index No., ÐL*t" ü* I G :.:-') Plaintiffs, by their attorneys, Linnan & Fallon, LLP, as and for a "ovêrifiál i, I i Complaint against the defendants, allege as follows: ::j f I ';1. That at all times hereinafter mentioned the plaintiff, The Banel $a'loo,g, t-.'- [-rj LLC was and still is a Limited Liability Company duly organized pursuant to the laws of the State of New York, and maintains an office and principal place of business in the County of Albany, State of New York and holds a license from the State of Nçw York to sell alcoholic beverage at retail for on premises consumption. 2. That at all times hereinafter mentioned the plaintiff, CAD on Pearl, LLC was and still is a Limited Liability Company duly organized pursuant to the laws of the State of New York, and maintains an office and principal place of business in the County of Albany, State of New York and holds a license from the State of New York to sell alcoholic beverage at retail for on premises consumption. l: Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 5 of 38 3. That at all times hereinafter mentioned the plaintiff, 28 Thatcher LLC was and still is a Limited Liability Company duly organized pursuant to the laws of the State of New York, and maintains an office and principal place of business in the County of Albany, State of New York and holds a license from the State of New York to sell alcoholic beverage at retail for on premises consumption. 4. That at all times hereinafter mentioned the plaintiff, DeJohn's on Latk, Inc. was and still is a domestic business corporation duly organized pursuant to the laws of the State of New York, and maintains an offtce and principal place of business in the County of Albany, State of New York and holds a license from the State of New York to sell alcoholic beverage at retail for on premises consumption' 5. That at all times hereinafter mentioned defendant, Southem 'Wine and Spirits of Upstate New York, Inc. was a domestic business corporation duly organized pursuant to the laws of the State of New York and maintained an oflice at 25 Corpotate Circle, Suite 102 B, Albany, New York. 6. That at all times hereinafter mentioned defendant, Southern Glazer's Wine and Spirits of Upstate New York LLC was and still is a domestic Limited Liability Company duly organized pursuant to the laws of the State of New York and maintains an office at 25 Corporate Circle, Suite 102P, Albany, New York. 7. That at all times hereinafter mentioned defendant, Southern 'Wine and Spirits of Upstate New York, Inc. was licensed by the State of New York to sell and distribute alcoholic beverages at wholesale under license #2165243. 2 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 6 of 38 8. That at all times hereinafter mentioned defendant, Southem Glazer's Wine and Spirits of Upstate New York LLC was and still is licensed by the State of New York to sell and distribute alcoholic beverages at wholesale from 25 Corporate Circle, Suite 102 B Albany, New York under license #2165243' g. That defendant, Southern Glazer's Wine and Spirits of Upstate New York LLC is licensed by the State of New York to sell and distribute alcoholic beverages at wholesale from 3063 Court Street, Syracuse, New York under license #260636L 10. That, upon information and belief, the defendant, Southern Glazer's Wine and Spirits of Upstate New York LLC (hereinafter "Southem Glazer's") is the successor in interest to the defendant, Southem Wine and Spirits of Upstate New York, Inc. (hereinafter "Southern'Wine"). 1 i. That heretofore and during the period of the business relationship between all the plaintiffs and Southern Wine, and until June 2016, the plaintiffs received billing statements captioned "southern Wine and Spirits" from Southern Wine located in Syracuse, New York directing that payments be made to the Syracuse address. 12. That heretofore and in about June of 2016 the plaintifß herein began receiving invoices captioned "southern Glazer's Wine and Spirits of Upstate New York" from Southem Glazer located in Syracuse, New York directing that payments should be made to the Syracuse address. 13. That heretofore and in about June of 2076 the plaintiffs' wholesale business relationship for alcoholic beverage previously held by Southem Wine was taken over by Southern Glazer's. J Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 7 of 38 14. That heretofore and during all the plaintiffs' business relationship with defendants, Southern Wine and Southern Glazer's there was a system known as "Will Call" wherein customers could order alcoholic beverage for purchase at wholesale to be held at the defendants' warehouse, to be picked up by the customer, at a time when the customer was not scheduled to receive a delivery' 15. Upon information and beliet when a customer received alcoholic beverage using the "Will Call" system, the customer had to sign a receipt or invoice for the alcoholic beverage acknowledging the receipt of same' 16. Upon information and belief, it was a policy of the defendant, Southern Wine that all alcoholic beverages delivered to or received by a customer from the said defendant via "'Will Call" would onty be released to the customer upon receipt of a document signed by the customer, acknowledging receipt of the alcoholic beverage. 17. Upon information and belief, it was and continues to be a policy of the defendant, Southem Glazer's that all alcoholic beverages delivered to or received by a customer from the said defendant via "Will Call" would only be released to the customer upon receipt of a document signed by the customet, acknowledging receipt of the alcoholic beverage. 18. That heretofore, and in 2011 the plaintift The Barrel Saloon, LLC (hereinafter "Barrel") cornmenced a business relationship with the defendant, Southern Wine wherein the plaintiff, Barrel purchased various alcoholic beverages at wholesale from the said defendant, Southem'Wine. lg. That heretofore, the plaintiff, Barrel entered into an agreement with the said defendant, Southern Wine wherein the said defendant would automatically transfer 4 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 8 of 38 funds from plaintiff, Barrel's bank account to pay arly open invoices for product allegedly delivered to plaintiff, Barrel bV th1 defendant, Southem V/ine. 20. That heretofore and in June of 2076 the procedure of automatic payments for the plaintiff, Barrel set f'orth above, was taken over and continued by defendant, Southern Glazer's. 21. That heretofore the plaintiff Barrel rarely, if ever, utilized the "Will Call" system for the receipt of alcoholic beverages from the defendants, Southem Wine and Southern Glazer's. 22. That heretofore, and in20l3 the plaintiff, CAD on Pearl, LLC (hereinafter "CAD") cotnmenced a business relationship with the defendant, Southern Wine and Spirits of Upstate New York, lnc. wherein the plaintiff, CAD purchased various alcoholic beverages at wholesale from the said defendant, Southern Wine. 23. That heretofore, the plaintiff, CAD entered into an agreement with the said defendant, Southern Wine wherein the said defendant would automatically transfer funds from plaintifl, CAD's bank account to pay any open invoices for product allegedly delivered to plaintiff, CAD by the defendant, Southern Wine. 24. That heretofore and in June of 2016 the procedure of automatic payments for plaintiff, CAD set forth above, was taken over and continued by defendant, Southem Glazer's. 25. That heretofore the plaintiff, CAD rarely, if ever, utilized the "'Will Call" system for the receipt of alcoholic beverages from the defendants, Southem Wine and Southern Glazer's. 5 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 9 of 38 26. That heretofore, and in 2014 the plaintiff, 28 Thatcher LLC (hereinafter "Thatcher") commenced a business relationship with the defendant, Southern Wine and Spirits of Upstate New York, Inc. wherein the plaintifT, Thatcher purchased various alcoholic beverages at wholesale from the said defendant, Southem V/ine. 21. That heretofore, the plaintiff Thatcher entered into an agreement with the said defendant, Southern Wine wherein the said defendant would automatically transfer funds from plaintiff, Thatcher's ba¡k account to pay any open invoices for product allegedly delivered to plaintiff, Thatcher by the defendant, Southern Wine. 28. That heretofore and in June of 20t6 the procedure of automatic payments for plaintiff, Thatcher set forth above, was taken over and continued by defendant, Southern Glazer's. 29. That heretofore the plaintiffl, Thatcher rarely, if ever, utilized the "Will Call" system for the receipt of alcoholic beverages from the defendants, Southem Wine and Southern Glazer's. 30. 'Ihat heretofore, and in2009 the plaintiff, DeJohn's on Lark, Inc. (herein "DeJohn's") commenced a business relationship with the defendant, Southem V/ine and Spirits of Upstate New York, Inc. wherein the plaintiff, DeJohn's purchased various alcoholic beverages at wholesale from the said defendant, Southern Wine. 31. That heretofore, the plaintiff DeJohn's entered into an agreement withthe said defendant, Southern Wine wherein the said defendant would automatically transfer funds from plaintift DeJohn's bank account to pay any open invoices for product allegedly delivered to plaintiff, DeJohn's by the defendant, Southern Wine. 6 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 10 of 38 32. That heretofore and in June of 2016 the procedure of automatic payments for plaintiff, DeJohn's set forth above, was taken over and continued by defendant, Southern Glazer's. 33. That heretofore the plaintiff, DeJohn's rarely, if ever, utilized the "Will Call" system for the receipt of alcoholic beverages from the defendants, Southern Wine and Southem Glazer's. 34. That the plaintifß herein, jointly and severally claim against the defendants, pursuant to CPLR 1002, that the said defendants engaged in a common scheme or plan to engage in a series of transactions to the damage of all of the plaintiffs. 35. That, upon information and belief, heretofore the defendant, Southem Wine commenced'a series of transactions wherein the defendant, Southem'Wine by it agents, servants and/or employees, unlawfully placed orders for alcoholic beverage allegedly to be sold and delivered to licensed retail businesses, including the plaintiffs herein, without the knowledge or consent of the retail business licensees. 36. That the alcoholio beverage ordered per paragïaph 35 was never delivered to or received by the retail business licensees, including the plaintifß. 37. That the defendant, Southem Wine invoiced the retail business licensees, including the plaintiffs herein, for the alcoholic beverage in spite of the fact the licensees/plaintifß did not order or receive the said beverage. 38. That the defendant, Southern Wine utilized the automatlc payrnent procedure established with the licensees/plaintifß to collect money from the licensees/plaintiffs for some of these transactions. 7 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 11 of 38 39. That, upon information and belief, the defendant, Southern Wine by its agents, servants and/or employees, paid for some of the orders and invoices without the knowledge or consent of the licensees/plaintiffs. 40. That the alcoholic beverage ordered on the licensees/plaintifß retail alcoholic beverage license, as set forth in paragraph 35, was diverted, in violation of the Alcoholic Beverage Law of the State of New York and the Rules of the New York State Liquor Authority, to various third persons or companies' 4t. That heretofore and in about June of 2016 the defendant, Southem Glazer's took over the wholesale business of the defendarrt, Southern 'Wine as the successor in interest. 42. That defendant, Southem Glazer' s continued the same coÍtmon scheme or plan to divert sales of alcoholic beverage from licensees/plaintiffs to various third parties. 43. That defendant, Southem Glazer' s continued the same common scheme or plan to invoice and collect funds from licensees/plaintifß, in spite of the fact that the alcoholic beverage so ordered pursuant to the plan was never delivered to or received by the licensees/plaintiffs, whose license was listed on the order. 44. That, upon information and belief, the defendant, Southern Glazer's by their agents, servants and/or employees, paid for some of the diverted alcoholic beverage. 45. That, upon information and belief, the defendants, Southem Wine and Southern Glazer's utilized the "'Will Call" system, as set forth above, to assist the defendants, Southern Wine and Southern Glazer's to carry out the scheme or plan. 46. That, upon information and beliet the defendants, Southem Wine and Southern Glazçr's by their agents, servants and/or employees, unlawfully signed the 8 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 12 of 38 licensees/plaintiffs' signature upon delivery receipts forthe alcoholic beverage so ordered and diverted per the scheme or plan, without the knowledge or consent of the licensees/plaintifß. 47. That the defendants, Southern V/ine and Southern Glazer's did not deliver copies of the signed receipts or invoices, utilized by the defendants, Southern V/ine and Southern Glazer's to obtain alcoholic beverage from the "Will Call" system, to the licensees/plaintiffs upon whose license was used to order the said alcoholic beverage as set forth herein. 48. That the plaintiffs herein have demanded copies of all "'Will Cali" receipts and invoices applicable to their licenses from the defendants herein but the defendants have refused to provide copies all of the "Will Call" receipts and invoices applicable to each ofthe plaintiffs' alcoholic beverage licenses. 49. That without auditing all of the "Will Call" receipts and invoices applicable to each of the plaintiffs' licensees, it is impossible for each of the plaintiffs to determine the amount of alcoholic beverage unlawfully orcleretl on plaintifß' licenses or to determine the amount of money unlawfuily taken from each of the plaintiffs. 50. That, upon information and belief, the warehouse employees of the defendants, Southern 'Wine and Southem Glazer's released the alcoholic beverage ordered pursuant to the scheme or plan with actual and/or constructive knowledge that the signatures on the documents acknowledging receipt of the alcoholic beverage were not genuine or authorized. 9 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 13 of 38 AS AND FOR A F'IRST CAUSE OF ACTION ON BEIL{LF OII PLAINTIFF. THE BAIIIìEL SALOON. LLC 51. The plaintiff, Banel restates and realleges each and every allegation set forth in paragraph marked 1 xhrough 50 herein as if fully set forth. 52. That as a result of the foregoing, the defendants, Southem Wine and Southem Glazer's did unlawfully convert money and property from the plaintiff, Barrel. 53. That from 2011 through July 2016 the plaintifÏ, Banel had "'Wi11 Call" orders that it did not authorize or receive in the sum of $23 ,870.04 54. That from 2011 through July 2016 the plaintiff, Barrel was charged for alcohoiic beverage and had money withdrawn from its account by defendants, Southern V/ine and Southern Glazer's for "Will Call" orders that it did not authorize or receive in the sum that cannot be determined at this time, but in an amount of at least $9,098'00. 55. That plaintiff, Barrel had done business with the defendants, Southem .Wine and Southem Glazer's since 2011 and has been informed and does believe that this scheme or plan has been ongoing, to plaintiff, Barrel's detriment, for an extended period of time. 56. That as a result of the foregoing, the plaintiff, Barel has been damaged in the sum of at least $9,098.00 together with the damage from the loss of use of those funds and the financial exposure for the alcoholic beverage allegedly sold to plaintiff Barrel's licensed establishment but not delivered to or received by the plaintiff, Barrel and interest atgYo from the date ofeach conversion. AS AI\D FOR Ä SECOND CAUSE AEéETIQ¡I ON nn . llC 57. That the plaintiff, Barel repeats and realleges each and every allegation 10 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 14 of 38 set forth in paragraph marked and designated 1 through 56. 58. That the defendants, Southem Wine and Southem Glazer's as the holders of New York State licenses authorizing the sale and delivery of alcoholic beverage at wholesale, were bound by the Laws of the State of New York, the rules and regulations of the New York State Liquor Authority and the terms of their licenses, to deliver alcoholic beverage only to authorized retail licensees and to insure that all alcoholic beverage that it sold and delivered was properly ordered by and delivered to an authorized agent or employee of a retail licensee. 59. That, upon information and belief, the defendants, Southem Wine and Southern Glazer's had in place certain policies and best practices to insure that alcoholic beverage was only ordered by and delivered to authorized agents or employees of a holder ofa license authorized for the retail sale ofalcoholic beverage. 60. That heretofore, the defendants, Southern 'Wine and Southern Glazer's individually and jointly, carelessly and negligently allowed their agents, servants and employees to receive orders for alcoholic beverage from persons wlto were not authorized to make such orders on behalf of licensees/plaintiffs whose retail licenses were utilized to place the orders in violation of their own policies, best practices and the laws of the State of New York and the rules and regulations of the New York State Liquor Authority. 61. That heretofore, the defendants, Southem 'Wine and Southem Glazer's individually and jointly, carelessly and negligently allowed their agents, servants and/or employees to deliver alcoholic beverage to persons who were not authorizedto receive alcoholic beverage on behalf of licensees/plaintiffs whose retail licenses were utilized for 11 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 15 of 38 the delivery and to accept unauthorized or forged signatures upon documents acknowledging receipt of alcoholic beverage, in violation of their own policies, best practices and the laws of the State of New York and the rules and regulations of the New York State Liquor Authority. 62. That as a result of the negligence of the defendants, Southern Wine and Southern Glazer's, and without any negligence on behalf of the plaintiff, Barrel, the said plaintiff has been damaged in the amount of $250,000.00. 63. That, upon information and belief, the actions and inactions of the defendants, Southern Wine and Southern Glazer's, as set forth herein, were known or should have been known to the managers, officers and/or owners of the defendants, Southem Wine and Southern Glazer's, and as a result of the foregoing the negligence of the defendants herein was gross negligence and a wanton disregard for the truth. 64. That as a result of the foregoing, the plaintiff, Barrel is entitled to compensatory damages in the amount of $250,000.00 and punitive damages as may be fixed together with counsel fees. AS AND R A THIRD CAUSE ACTION oN BEHALF OF PLATNTIFF. TrfE BARREL SALOON, LLC 65. That the plaintiff, Barrel repeats and realleges each and every allegation Set forth in paragraph marked and designated I through 64. 66. That the actions and inactions of the defendants, Southern Wine and Southem Glazer's herein were intentional acts committed by the defendarrts, Southern V/ine and Southem Glazer's for monetary gain and in violation of the laws of the State of New York, the rules and regulations of the New York State Liquor Authority and the terms and conditions of the said defendants' licenses issued by the New York State l2 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 16 of 38 Liquor Authority authorizing the defendants, Southern 'Wine and Southern Glazer's to se|l and distribute alcoholic beverage to retail licensees/plaintiffs at wholesale. 67. That as a result of the foregoing, the defendants, Southern 'Wine and Southern Glazer's individually and jointly, have committed fraud upon the plaintiff, Barrel all to plaintiff, Barrel's damage in the amount of $250,000.00, together with punitive damages as may be fixed and counsel fees. AS AND'F'OR A F'OURTH CAUSE OF'ACTION AND FIRST CAUSE OF ACTION ON BEFI,{LF' OF PLAINTIF'F. CAD ON PEARL. LLC 68. The plaintiff, CAD restates and realleges each and every allegation set forth herein in paragraph marked 1 through 50 herein as if fully set forth. 69. That as a result of the foregoing, the defendants, Southern 'Wine and Southern Glazer's did unlawfully convert money and property from the plaintiff, CAD. 70. That from 2013 through July 2016 the plaintiff, CAD had "Will Call" orders that it did not authorize or receive in the sum of $23 ,043.64 TL That from 2013 through July 2016 the plaintiff CAD was charged for alcoholic beverage and had money withdrawn from its account by defendants, Southem Wine and Southern Glazer's for "Will Call" orders that it did not authorize or receive in the sum of at least $10,473.77. 72. That plaintitr, CAD had done business with the defendants, Southem V/ine and Southern Glazer's since 2013 and has been informed and does believe that this scheme or plan has been ongoing, to plaintiff, CAD's detriment, for an extended period of time. 13 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 17 of 38 ì- 73. That as a result of the foregoing, the plaintiff, CAD has been damaged in the sum of at least 510,473J7 together with the damage from the loss of use of those funds and the financial exposure for the alcoholic beverage allegedly sold to plaintiff CAD's licensed establishment but not delivered to or received by the plaintiff, CAD and interest atgo/o from the date ofeach conversion. AS AND A F'IF'TH CÄUSE OF ACTTON ANT) SECOND CAUSE OF' ON ON BEHALF OF PLÄINTIF'F. CAD OI{ PEARL. LLC 74. That the plaintiff, CAD repeats and realleges each and every allegation set forth herein in paragraphs marked and designated 1 through 50 and paragraphs 68 through 73. 75. That the defendants, Southern Wine and Southem Glazer's as the holders of New York State licenses authorizing the sale and delivery of alcoholic beverage at wholesale, were bound by the Laws of the State of New York, the rules and regulations of the New York State Liquor Authority and the terms of their licenses, to deliver alcoholic beverage only to authorized retail licensees and to insure that all alcoholic beverage that it sold and delivered was properly ordered by and delivered to an authorized agent or employee of a retail licensee. 76. That, upon information and belief, the defendants, Southern Wine and Southern Glazer's had in place certain policies and best practices to insure that alcoholic beverage was only ordered by and delivered to authorized agents or employees of a holder of a license authorized for the retail sale of alcoholic beverage. 77. That heretofore, the defendants, Southern Wine and Southern Glazer's individually and jointly, carelessly and negligently allowed their agents, servants and/or t4 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 18 of 38 employees to receive orders for alcoholic beverage from persons who were not authorized to make such orders on behalf of licensees/plaintiffs whose retail licenses were utilized to place the orders in violation of their own policies, best practices and the laws of the State of New York and the rules and regulations of the New York State Liquor Authority. 78. That heretofore, the defendants, Southem 'Wine and Southern Glazer's individually and jointly, carelessly and negligently allowed their agents, servants and/or employees to deliver alcoholic beverage to persons who were not authorized to receive alcoholic beverage on behalf of licensees/plaintiffs whose retail licenses were utilized for the delivery and to accept unauthorized or forged signatures upon documents acknowledging receipt of alcoholic beverage, in violation of their own policies, best practices and the laws of the State of New York and the rules and regulations of the New York State Liquor Authority. 79. That as a result of the negligence of the defendants herein, and without any negligence on behalf of the plaintiff CAD, the said CAD has been damagecl in the amount of $250,000.00. 80. That, upon information and belief, the actions and inactions of the defendants, as set forth herein, \¡y'ere known or should have been known to the rnanagers, officers and/or owners of the defendants, and as a result of the foregoing, the negligence of the defendants herein \¡/as gross negligence and a wanton disregard for the truth.. 81. That as a result of the foregoing, the plaintiff CAD is entitled to compensatory damages in the amount of $250,000.00 and punitive damages as may be fixed together with counsel fees. 15 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 19 of 38 AS AND F'O A SIXTH CAUSE OF ACTION AND THIRD CAUSE OF'ACTION ON BEHALf,'OF CAD ON PEARL. LLC 82. That the plaintiff, CAD repeats and realleges each and every allegation set forth herein in paragraph marked and designated 1 through 50 and 68 through 81. 83. That the actions and inactions of the defendants, Southern 'Wine and Southern Glazer's herein were intentional acts committed by the defendants, Southern Wine and Southern Glazer's for monetary gain and in violation of the laws of the State of New York, the rules and regulations of the New York State Liquor Authority and the terms and conditions of the said defendants' licenses issued by the New York State Liquor Authority authorizing the defendants, Southern 'Wine and Southem Glazer's to sell and distribute alcoholic beverage to retail licensees/plaintiffs at wholesale. 84. That as a result of the foregoing, the defendants, Southern Wine and Southern Glazer's individually and jointly, have committed fraud upon the plaintiff, CAD all to plaintiff, CAD's damage in the amount of $250,000.00, together with punitive damages as may be fixed and counsel f'ees. AS AND FOR A SEVENTH CAUSE OF' CTION AND FIRST CAUSE OF ACTION ON BEIIALF OF' PLAINTIFF, 28 THATCHER LLC 85. The plaintiff, Thatcher restates and realleges each and every allegation set forth in paragraph marked 1 through 50 herein as if fully set forth. 86. That as a result of the foregoing, the defendants, Southem Wine and Southern Glazer's did unlawfully convert money and property from the plaintiff, Thatcher. 76 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 20 of 38 87. That from 2014 through July 2016 the plaintifl Thatcher had "Will Call" orders that it did not authorize or receive in the sum of 514,492-53 88. That from 2014 through July 2016 the plaintiff, Thatcher was charged for alcoholic beverage and had money withdrawn from its account by defendants, Southern Wine and Southem Glazer's for "Will Call" orders that it did not authorize or receive in the sum of at least 56,76I.26 89. That plaintiff, Thatcher had done business with the defendants, Southern Wine and Southern Glazer's since 2014 and has been informed and does believe that this scheme or plan has been ongoing, to plaintiff, Thatcher's detriment, for an extended period of time. 90. That as a result of the foregoing, the plaintiff, Thatcher has been damaged in the sum of 56,761.26 together with the damage from the loss of use of those funds and the financial exposure for the alcoholic beverage allegedly sold to plaintiff, Thatcher's licensed establishment but not delivered to or received by the plaintiff, Thatcher and interest atgo/o from the date ofeach conversion. AS AND FO A EIGHTH CAUSE OF CTION ANI) str'.coNT) CAUSE oF'Ä ON BEH,{LF'OF' PLAINTIF'F. 28 THATCTIER LLC 91. That the ptaintiff, Thatcher repeats and realleges each and every allegation set forth herein in paragraphs marked and designated 1 through 50 and paragraphs 85 through 90. 92. That the defendants, Southem Wine and Southem Glazer's as the holders of New York State licenses authorizing the sale and delivery of alcoholic beverage at wholesale, were bound by the Laws of the State of New York, the rules and regulations t7 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 21 of 38 of the New York State Liquor Authority and the terms of their licenses, to deliver alcoholic beverage only to authorized retail licensees and to insure that all alcoholic beverage that it sold and delivered \Mas properly ordered by and delivered to an authorized agent or employee of a retail licensee. 93. That, upon information and belief, the defendants, Southem Wine and Southern Glazer's had in place certain policies and best practices to insure that alcoholic beverage was only ordered by and delivered to authorized agents or employees of a holder ofa license authorized for the retail sale ofalcoholic beverage. 94. That heretofore, the defendants, Southern Wine and Southern Glazer's individually and jointly, carelessly and negligently allowed their agents, servants and/or employees to receive orders for alcoholic beverage from persons who were not authorized to make such orders on behalf of licensees/plaintifß whose retail licenses were utilized to place the orders in violation of their own policies, best practices and the laws of the State of New York and the rules and regulations of the New York State Liquor Authority. 95. That heretofore, the defendants, Southern 'Wine and Southern Glazer's individually and jointly, carelessly and negligently allowed their agents, servants and/or employees to deliver alcoholic beverage to persons who were not authorized to receive alcoholic beverage on behalf of licensees/plaintiffs whose retail licenses were utilized for the delivery and to accept unauthorized or forged signatures upon documents acknowledging receipt of alcoholic beverage, in violation of their own policies, best practices and the laws of the State of New York and the rules and regulations of the New York State Liquor Authority. 18 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 22 of 38 96. That as a result of the negligence of the defendants herein, and without any negligence on behalf of the plaintiff Thatcher, the said Thatcher has been damaged in the amount of $250,000.00. 97. That, upon information and belief, the actions and inactions of the defendants, as set forth herein, were known or should have been known to the managers, officers and/or o\ilners of the defendants and as a result of the foregoing, the negligence of the defendants herein was gross negligence and a wanton disregard for the truth. 98. That as a result of the foregoing, the plaintiff Thatcher is entitled to compensatory damages in the amount of $250,000.00 and punitive damages as may be fixed together with counsel fees. AS AND A NINTH CAUSE OF' ON ANI) THIRD CAUSE OF'ACTION ON BEHALX'OF' PLAINTIFF. 28 THATCITER LLC 99. That the plaintiff, Thatcher repeats and realleges each and every allegation set forth herein in paragraphs marked and designated 1 through 50 and paragraphs 85 through 98. 100. That the actions and inactions of the defendants, Southern 'Wine and Southern Glazer's herein were intentional acts committed by the defendants, Southern Wine and Southern Glazer's for monetary gain and in violation of the laws of the State of New York, the rules and regulations of the New York State Liquor Authority and the terms and conditions of the said defendants' licenses issued by the New York State Liquor Authority authorizing the defendants, Southem Wine and Southern Glazer's to sell and distribute alcoholic beverage to retail licensees/plaintiffs at wholesale. 79 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 23 of 38 101. That as a result of the foregoing, the defendants, Southern 'Wine and Southern Glazer's individually and jointly, have committed fraud upon the plaintiff, Thatcher all to plaintiff, Thatcher's damage in the amount of $250,000.00, together with punitive damages as may be fixed and counsel fees. AS AND F'OR A TENTH CAUSE OF'ACTION AND FIRST CAUSE OF AC ON ON BEHALF'OF' PLAINTIFF. DEJOHN'S ON LARK.INC.. 102. The plaintiff, DeJohn's restates and realleges each and every allegation set forth in paragraph marked 1 through 50 herein as if fully set forth. 103. That as a result of the foregoing, the defendants, Southern Wine and Southem Glazer's did unlawfully convert money and property from the plaintiff, DeJohn's. 104. That from 2009 through July 2076 the plaintiff, DeJohn's had "'Wi11 Call" orders that it did not authorize or receive in the sum of $69,563.88. t05. That from 2009 through July 2016 the plaintiff, DeJohn's was charged for alcoholic beverage and had money withdrawn from its account by defendants, Southern 'Wine and Southern Glazer's for "Will Cali" orders that it did not authorize or receive in the sum of at ieast 515,701.42 106. That plaintiff, DeJohn's had done business with the defendants, Southern Wine and Southern Glazer's since 2009 and has been informed and docs bclicve that this scheme or plan has been ongoing, to plaintiff, DeJohn's' detriment, for an extended period of time. I07. That as a result of the foregoing, the plaintiff, DeJohn's has been damaged in the sum of 815,701.42 in addition to the additional amount converted by the 20 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 24 of 38 defendants, Southern Wine from 2009 through 2016 together with the damage from the loss of use of those funds and the financial exposure for the alcoholic beverage allegedly sold to ptaintiff, DeJohn's' licensed establishment but not delivered to or received by the plaintiff, DeJohn's and interes t at 9o/o from the date of each conversion. AND CAUSE OF' SE,COND CAUSE OF'A ON ON BEHALF'OF' PLAINTIFF. DEJPIIN'S ON LARK.INC. i08. That the plaintiff, DeJohn's repeats and realleges each and every allegation set forth herein in paragraphs marked and designated i through 50 and paragraphs 102 through 107. 109. That the defendants, Southern Wine and Southern Glazer's as the holders of New York State licenses authorizing the sale and delivery of alcoholic beverage at wholesale, were bound by the Laws of the State of New York, the rules and regulations of the New York State Liquor Authority and the terms of their licenses, to deliver alcoholic beverage only to authorized retail licensees and to insure that all alcoholic beverage that it sold antl clelivered was properly ordered by and delivered to an authorized agent or employee of a retail licensee. 110. That, upon information and belief, the defendants, Southem Wine and Southem Glazer's had in place certain policies and best practices to insure that alcoholic beverage was only ordered by and delivered to authorized agents or employees of a holder ofa license authorized for the retail sale ofalcoholic beverage. 111. That heretofore, the defendants, Southern Wine and Southern Glazer's individually and jointly, carelessly and negligently allowed their agents, servants and/or employees to receive orders for alcoholic beverage from persons who were not 2l Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 25 of 38 authorized to make such orders on behalf of licensees/plaintiffs whose retail licenses were utilized to place the orders in violation of their own policies, best practices and the laws of the State of New York and the rules and regulations of the New York State Liquor Authority. Il2. That heretofore, the defendants, Southern Wine and Southern Glazer's individually and jointly, carelessly and negligently allowed their agents, servants and/or employees to deliver alcoholic beverage to persons who were not authorized to receive alcoholic beverage on behalf of licensees/plaintiffs whose retail licenses were utilized for the delivery and to accept unauthorized or forged signatures upon documents acknowledging receipt of alcoholic beverage, in violation of their own policies, best practices and the laws of the State of New York and the rules and regulations of the New York State Liquor Authority. 113. That as a result of the negligence of the defendants herein, and without any negligence on behalf of the plaintiff DeJohn's, the said DeJohn's has been damaged in the amount of $250,000.00. t14. That, upon information and belief, the actions and inactions of the defendants, as set forth herein, were known or should have been known to the managers, offrcers and/or owners of the defendants and as a result of the foregoing the negligence of the defendants herein was gross negligence and a wanton disregard for the truth. 115. That as a resuit of the foregoing, the plaintiff DeJohn's is entitled to compensatory damages in the amorurt of $250,000.00 and punitive damages as may be fixed together with counsel fees. 22 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 26 of 38 AS AND F'OR A CAUSE OF ACTION AND TIIIRD CAUSE OF'ACTION ON BEHALF'OF' PLAINTIFF. DEJOIIN'S ON LARK.INC. 116. That the plaintiff, DeJohn's repeats and realleges each and every allegation set forth herein in paragraphs marked and designated 1 through 50 and paragraphs 102 through 115. II7. That the actions and inactions of the defendants, Southem 'Wine and Southern Glazer's herein were intentional acts committed by the defendants, Southem 'Wine and Southern Glazer's for monetary gain and in violation of the laws of the State of New York, the rules and regulations of the New York State Liquor Authority and the terms and conditions of the said defendants' licenses issued by the New York State Liquor Authority authorizing the defendants, Southern'Wine and Southern Glazer's to sell and distribute alcoholic beverage to retail licensees/plaintiffs at wholesale. 118. That as a result of the foregoing, the defendants, Southern'Wine and Southern Glazer's individually and jointly, have committed fraud upon the plaintiff, DeJohn's all to plaintiff, DeJohn's' damage in the amount of $250,000.00, together with punitive damages as may be fixed and counsel fees. \ilHEREFORE, plaintiffs demand judgment as follows: 1. The Barrel Saloon, LLC demands judgment on the First Cause of Action in the sum of $9,098.00 and additional sums as may be determined through discovery together with the damage from the loss of use of those funds and the financial sxposure for the alcoholic beverage allegedly sold to plaintiff, Barrel's licensed establishment but 23 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 27 of 38 not delivered to or received by the plaintiff, Barrel and interest at 9o/o from the date of each conversion. 2. The Barrel Saloon, LLC demands judgment on the Second Cause of Action for compensatory damages in the amount of $250,000.00 and punitive damages as may be fixed together with counsel fees. 3. The Barrel Saloon, LLC demands judgment on the Third Cause of Action in the amount of $250,000.00, together with punitive damages as may be fixed and counsel fees. 4. CAD on Pearl, LLC demands judgment on the Fourth Cause of Action in the sum of $10,473 .77 and additional sums as may be determined through discovery together with the damage from the loss of use of those funds and the financial exposure for the alcoholic beverage allegedly sold to plaintiff, CAD's licensed establishment but not delivered to or received by the plaintiff, CAD and interest at9% from the date of each conveÍs10n 5. CAD on Pearl, LLC demands judgment on the Fifth Cause of Action for compensatory damages in the amount of $250,000.00 and punitive damages as may be fixed together with counsel fees. 6. CAD on Pearl, LLC demands judgment on the Sixth Cause of Action in the amount of $250,000.00, together with punitive damages as may be fixed and counsel fees. 7. 28 Thatcher LLC demands judgment on the Seventh Cause of Action in the sum of $6,761.26 and additional sums as may be determined through discovery 24 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 28 of 38 together with the damage from the loss of use of those funds and the financial exposure for the alcoholic beverage allegedly sold to plaintiff, Thatcher's licensed establishment but not delivered to or received by the plaintiff, Thatcher and interest at9o/o from the date of each conversion. 8. 28 Thatcher LLC demands judgment on the Eighth Cause of Action for compensatory damages in the amount of $250,000.00 and punitive damages as may be fixed together with counsel fees. 9. 28 Thatcher LLC demands judgment on the Ninth Cause of Action in the amount of $250,000.00, together with punitive damages as may be fixed and counsel fees. 10. DeJohn's on Lark, Inc. demands judgment on the Tenth Cause of Action in the sum of 515,707.42 and additional sums as may be determined through discovery together with the damage from the loss of use of those funds and the financial exposure for the alcoholic beverage allegedly sold to plaintiff, DeJohn's' licensed establishment but not delivered to or received by the plaintiff, DeJohn's ancl interesL aL 9Yo frorn the date of each conversion. 11. DeJohn's on Lark, Inc. demands judgment on the Eleventh Cause of Action for compensatory damages in the amount of $250,000.00 and punitive damages as may be fixed together with counsel fees. 12. DeJohn's on Lark, Inc. demands judgment on the Twelfth Cause of Action in the amount of $250,000.00, together with punitive damages as may be fixed and counsel fees. 25 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 29 of 38 13. Together with such other relief as the court may deem just and proper and the costs and disbursements of this action. Dated: November 14, 2016 Albany, New York LINNAN & FALLON, LLP By: A 6 for the Plaintffi bia Street, Suite 300 Albany, New York 12210-2136 Telephone: (5 1 8) 449-5400 26 Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 30 of 38 STATE OF NEW YORK SUPREME COURT COUNTY OF ALBANY The Ba:rel Saloon, LLC; CAD on Peari, LLC1' 28 Thatcher LLC; and DeJohn's on Lark, Inc., 59-61 North Pearl Street, Albany, New York, Plaintiffs, -against- Southern V/ine and Spirits of Upstate New York, Inc. and Southern Glazer's Wine and Spirits of Upstate New York LLC, 25 Corporate Circle, Suite 102 B, Albany, New York Defendants. VERIF'ICATION Index No.: STATE OF NEW YORK COLI-NTY OF ALBANY I, Christopher M. Pratt, being duly sworn, depose and say that I am a MemberAvlanager of The Barrel Saloon, LLC; that I have read the foregoing COMPLAINT and know the contents thereof; that the same is true to my knowledge, except as to matters therein stated to be alleged on information and belief, and that as to those matters, I believe same to be true. CHRISTOPHER M. PRATT Sworn to before me this I É-day of November, 2016 PUBLIC ) ) SS. :i -----l JAMES D. LININAN Notary Public, State of New York Qualified in Albany Oounty No. 02112371'350 Commiss'ron Expires March 30, ZO_U Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 31 of 38 STATE OF NEW YORK SUPREME COURT COUNTY OF ALBANY The Barrel Saloon, LLC; CAD on Pearl, LLC; 28 ThatcherLLC; and DeJohn's on Latk, lnc', 59-6l North Pearl Street, Albany, New York, Plaintiffs, -against- Southern Wine and Spirits of Upstate New York, Inc. and Southern Glazer's Wine and Spirits of Upstate New York LLC, 25 Corporate Circle, Suite 102 B, Albany, New York Defendants. VERIFICATION Index No.: STATE OF NEW YORK COUNTY OF ALBANY I, Christopher M. Pratt, being duly swom, depose and say that I am a Member/Manager of CAD on Pearl, LLC; that I have read the foregoing COMPLAINT and know the contents thereof; that the same is true to my knowledge, except as to matters therein stated to be alleged on information and belief, and that as to those matters, I believe same to be true' *Õ: CHzuSTOPHER M. PRATT Sworn to before me this lÞ-day of November, 201 6 ) ) SS Y PUBLIC Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 32 of 38 STATE OF NEV/ YORK SUPREME COURT COUNTY OF ALBANY The Barrel Saloon, LLC; CAD on Pearl, LLC; 28 Thatcher LLC; and DeJohn's on Latk, Inc., 59-6l North Pearl Street, Albany, New York, Plaintifß, -against- Southern Wine and Spirits of Upstate New York, Inc. and Southem Glazer's V/ine and Spirits of Upstate New York LLC, 25 Corporate Circle, Suite 102 B, Albany, New York Defendants. VERIF'ICATION Index No.: STATE OF NEW YORK COUNTY OF ALBANY I, Christopher M. Pratt, being duly swom, depose and say that I am a Member/lvlanager of 28 Thatcher LLC; that I have read the foregoing COMPLAINT and know the contents thereof; that the same is true to my knowledge, except as to matters therein stated to be alleged on information and belief; and that as to those mattets, I believe same to be true. CHRISTOPIIER M. PRATT Swom to before me this /-¿uv of Novemb er,2016 ) ) ss. PUBLI JAI4ES D. LINNAN Noïary Èr-rD !c, Stete r¡f New York QL:et,iitli in 'r.li:a¡y County | ::.'. r_l2i.12 _r Z i ;'r50 Cc;nnii:'.:r: i:;(p;jris tlarch 30, zOJf t; t ì I I Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 33 of 38 STATE OF NEV/ YORK SUPREME COURT COLINTY OF ALBANY The Barrel Saloon, LLC; CAD on Pearl, LLC; 28 Thatcher LLC; and DeJohn's on Latk, Inc., 59-6I North Pearl Street, Albany, New York, Plaintiffs, -against- Southern Wine and Spirits of Upstate New York, Inc. and Southern Glazer's 'Wine and Spirits of Upstate New York LLC, 25 Corporate Circle, Suite 102 B, Albany, New York Defendants. \rERIFICATION Index No.: STATE OF NEW YORK COI.INTY OF ALBANY I, Christopher M. Pratt, being duly sworn, depose and say that I am the President of DeJohn's on Lark, Inc.; that I have read the foregoing COMPLAINT and know the contents thereof; that the same is true to my knowledge, except as to matters therein stated to be alleged on information and belief, and that as to those matters, I believe same to be true. CHzuSTOPHER M. PRATT Sworn to before me this Kdry of Novemb e¡2016 ) ) SS. f PUBLIC JAIVES D. I.INNAN NotarvÞubic, ilt¿'te oi iiew York Quãìiíri'ti in A!frrrrrY OountY lr,:. f iÌL i2"7 " -1i\0 ì:' Commissiorl É..<¡-',r",s lvr.ìl'Ü:i i0, 20 / / Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 34 of 38 EXHIBIT B Declaration of Henry M. Greenberg in Support of Defendants Motion to Dismiss Verified Complaint Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 35 of 38 http://www.timesunion.com/news/article/Albany-bars-file-sue-Southern-Glazer-s-Wine-and-10616937.php Albany bars sue Southern Glazer's Wine and Spirits of Upstate New York Proprietors claim they were defrauded by giant liquor distributor By Steve Barnes Updated 5:43 am, Wednesday, November 16, 2016 Albany A giant liquor distributor defrauded four city bars over a period of years by charging for alcohol that the businesses never ordered or received, according to a lawsuit seeking more than $1.25 million in damages. The suit, filed Tuesday, alleges a salesman for Southern Wine and Spirits, with knowledge of management, repeatedly put through unrequested last-minute orders, known as "will calls," that the representative signed for under his own name or with forged signatures, sometimes misspelled, of representatives of The Barrel Saloon, The Capital Bistro, Public House 42 and Pearl Street Pub. The businesses, co-owned by Chris Pratt and Alessio Depoli, are all in Albany and opened between 2009 and 2014. Filed on behalf of Pratt and Depoli by attorney James D. Linnan, the suit seeks $500,000 for Pearl Street Pub, the oldest of the four bars, $250,000 apiece for the other three, punitive damages to be determined, court costs and attorney fees. After a review of financial records and inventory, Pratt said the bars paid Southern more than $42,000 for wine and spirits they neither ordered nor received, most taken as part of automatic monthly withdrawals. He also found more than $100,000 charged through his accounts with Southern that wasn't paid by the bars, suggesting the Southern rep was padding sales figures by ordering on the bars' accounts, returning some products and likely selling the remainder elsewhere on the side, according to Linnan. The practice came to light over the summer, when Pratt, alerted to a discrepancy, asked to review his will-call orders. While his records showed only 10 will-calls, he eventually turned up from Southern a stack of orders several inches thick dating back years, he said. Some were for products that his bars don't sell, such as high-end Scotch for the Page 1 of 3Albany bars sue Southern Glazer's Wine and Spirits of Upstate New York - Times Union 11/16/2016http://www.timesunion.com/tuplus-business/article/Albany-bars-file-sue-Southern-Glazer... Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 36 of 38 barbecue-focused Barrel Saloon, and others for quantities that would take many months to sell. Pratt, in an interview Tuesday at Linnan's Albany office, acknowledged he should have caught on sooner. "We weren't paying attention," he said. "But they're a (multibillion)-dollar company. You don't think they're going to be scamming you." The suit names Southern Wine and Spirits of Upstate New York and Southern Glazer's Wine and Spirits of Upstate New York, its name as of earlier this year following a merger. The New York company is a subsidiary of Southern Glazer's Wine and Spirits, a $16 billion-a-year conglomerate that is the country's largest distributor of wine and spirits, selling more than 150 million cases in 44 states plus, the District of Columbia, the Caribbean and Canada, according to reports in industry journals. Linnan said negotiations with Southern broke down when the company offered an unsatisfactory financial settlement and refused to acknowledge a systemic practice of padded bills and charges for products never ordered. Linnan, who previously owned a restaurant and has represented bars and restaurants in legal matters for decades, said conversations he and Pratt have had with other bar owners suggest the abuse is rampant. "It's not just me; it's every bar owner in the state," Pratt said. Referring to Southern, he added, "They know it happens, and they haven't changed their policies, as far as we know." He said he switched his business to other distributors except for key brands including Tito's Vodka, Jameson Irish Whiskey and Fireball Cinnamon Whisky, which are demanded by customers by name and carried exclusively by Southern. Linnan said when he and Pratt brought their allegations to the State Liquor Authority, they were told the agency has been alerted in the past to similar behavior by Southern. "To my knowledge, the SLA is investigating this matter," he said. An agency spokesman didn't immediately reply to an inquiry seeking comment. Page 2 of 3Albany bars sue Southern Glazer's Wine and Spirits of Upstate New York - Times Union 11/16/2016http://www.timesunion.com/tuplus-business/article/Albany-bars-file-sue-Southern-Glazer... Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 37 of 38 Hank Greenberg, an Albany attorney representing Southern, said he had not seen the suit and declined comment. sbarnes@timesunion.com • 518-454-5489 • @Tablehopping • http://facebook.com/SteveBarnesFoodCritic © 2016 Hearst Communications, Inc. Page 3 of 3Albany bars sue Southern Glazer's Wine and Spirits of Upstate New York - Times Union 11/16/2016http://www.timesunion.com/tuplus-business/article/Albany-bars-file-sue-Southern-Glazer... Case 1:16-cv-01493-TJM-TWD Document 6-1 Filed 12/21/16 Page 38 of 38 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF NEW YORK - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X The Barrel Saloon, LLC; CAD on Pearl, LLC; 28 Thatcher LLC; and DeJohn’s on Lark, Inc., 59-61 North Pearl Street, Albany, New York, Plaintiffs, -against- Southern Wine and Spirits of Upstate New York, Inc. and Southern Glazer’s Wine and Spirits of Upstate New York LLC, 25 Corporate Circle, Suite 102 B, Albany, New York, Defendants. : : : : : : : : : : : : : : : Civil Action No. 1:16-CV-1493 (TJM/TWD) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS GREENBERG TRAURIG, LLP 54 State Street, 6th Floor Albany, New York 12207 Telephone: (518) 689-1400 Facsimile: (518) 677-1828 Email: greenbergh@gtlaw.com Email: neidlc@gtlaw.com Attorneys for Defendants Southern Wine & Spirits of Upstate New York, Inc. and Southern Glazer’s Wine and Spirits of Upstate New York, LLC Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 1 of 32 i TABLE OF CONTENTS TABLE OF AUTHORITIES ................................................................................................... iii PRELIMINARY STATEMENT ............................................................................................... 1 RELEVANT BACKGROUND ................................................................................................. 3 I. The Parties .............................................................................................................. 3 II. Plaintiffs’ Claims ...................................................................................................... 4 STANDARD OF REVIEW ....................................................................................................... 6 ARGUMENT ............................................................................................................................. 6 I. THE COMPLAINT FAILS TO STATE A CONVERSION CLAIM BECAUSE PLAINTIFFS DID NOT AND CANNOT ALLEGE THAT SOUTHERN TOOK POSSESSION OF A SPECIFIC IDENTIFIABLE THING ................................................................. 7 II. THE COMPLAINT FAILS TO STATE A NEGLIGENCE CLAIM UNDER NEW YORK LAW ................................................................ 9 A. Plaintiffs’ Negligence Claims Are Barred by the Economic Loss Rule ............................................................................. 10 B. Plaintiffs Have Not Alleged a Duty of Care Owed to Them by Southern ................................................................................. 11 C. Plaintiffs Fail to Adequately Allege Damages ...................................... 14 III. THE COMPLAINT FAILS TO STATE A FRAUD CLAIM UNDER NEW YORK LAW AND WITH THE PARTICULARITY REQUIRED BY FED. R. CIV. P. 9(b) ............................ 15 A. Plaintiffs Do Not and Cannot Identify Any Material Misrepresentation or Omission. ............................................................ 16 B. Plaintiffs’ Conclusory Allegations Fail to Give Rise to an Inference of Fraudulent Intent. ......................................................... 18 C. Plaintiffs Do Not and Cannot Allege Reasonable Reliance. ................................................................................................ 19 D. Plaintiffs Fail to Adequately Allege Damages ...................................... 20 Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 2 of 32 ii IV. ALL OF PLAINTIFFS’ CLAIMS ARE SUBJECT TO A THREE-YEAR STATUTE OF LIMITATIONS AND BARRED TO THE EXTENT THEY SEEK RELIEF FOR CONDUCT THAT OCCURRED THREE YEARS PRIOR TO THE DAY THE LAWSUIT WAS COMMENCED .................................. 21 CONCLUSION ........................................................................................................................ 23 Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 3 of 32 iii TABLE OF AUTHORITIES CASES Page(s) 532 Madison Ave. Gourmet Foods, Inc. v. Finlandia Center, Inc., 96 N.Y.2d 280, 727 N.Y.S.2d 49, 750 N.E.2d 1097 (N.Y. 2001) ..................................... 10 9310 Third Ave. Associates, Inc. v. Schaffer Food Service Co., 210 A.D.2d 207, 620 N.Y.S.2d 255 (N.Y. App. Div. 1994) ............................................... 7 Acito v. IMCERA Group, Inc., 47 F.3d 47 (2d Cir. 1995) ................................................................................................... 18 Alfaro v. Wal-Mart Stores, Inc., 210 F.3d 111 (2d Cir. 2000) ............................................................................................... 12 Almeciga v. Ctr. for Investigative Reporting, Inc., 121 F. Supp. 3d 379 (S.D.N.Y. 2015) ................................................................................ 12 Amusement Indus., Inc. v. Buchanan Ingersoll & Rooney, P.C., No. 11 Civ. 4416, 2013 U.S. Dist. LEXIS 33324 (S.D.N.Y. Feb. 15, 2013) ............................................................................................. 20 n.5 Anchundia v. Ne. Utilities Serv. Co., No. CV 07-4446 (AKT), 2010 U.S. Dist. LEXIS 57890 (E.D.N.Y. June 11, 2010) ............................................................................................ 14 n.3 Arfa v. Zamir, 76 A.D.3d 56, 905 N.Y.S.2d 77 (N.Y. App. Div. 2010), aff’d, 17 N.Y.3d 737, 952 N.E.2d 1003, 929 N.Y.S.2d 11 (N.Y. 2011) ................................................. 19 n.5 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ....................................................................................................... 6, 14 Auguston v Spry, 282 A.D.2d 489, 723 N.Y.S.2d 103 (N.Y. App. Div. 2001) ............................................... 8 Aurora Loan Services v. Grant, 17 Misc. 3d 1102[A], 851 N.Y.S.2d 56, 2007 N.Y. Misc. LEXIS 6475 (Sup. Ct. Kings Co. 2007) ............................................................................................ 13 n.3 Banque Franco-Hellenique de Commerce Int’l et Mar., S.A. v. Christophides, 106 F.3d 22 (2d Cir. 1997) ........................................................................................... 20 n.5 Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 4 of 32 iv Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ....................................................................................................... 6, 14 Bishop v. Best Buy, Co. Inc., No. 08 Civ. 8427, 2011 U.S. Dist. LEXIS 102179 (S.D.N.Y. Sept. 8, 2011) ............. 13 n.3 Brown v. Samalin & Bock, 168 A.D.2d 531 N.Y.S.2d 426 (N.Y. App. Div. 1990) ..................................................... 15 Byrd v Wal-Mart, Inc., 128 A.D.3d 629, 8 N.Y.S.3d 428 (N.Y. App. Div. 2015) ................................................. 12 Castaldi v. 39 Winfield Assocs., 30 A.D.3d 458, 820 N.Y.S.2d 279 (N.Y. App. Div. 2006) ................................................. 7 Cumis Ins. Socy., Inc. v. Citibank, N.A., 921 F. Supp. 1100 (S.D.N.Y. 1996) ..................................................................................... 8 D’Amour v Ohrenstein & Brown, LLP, 2007 NY Slip Op 52207(U), 17 Misc 3d 1130[A], 851 N.Y.S.2d 68 (N.Y. Sup. Ct., N.Y. County 2007) .......................................................... 8 Dance v. Town of Southampton, 95 A.D.2d 442, 467 N.Y.S.2d 203 (N.Y. App. Div. 1983) ............................................... 13 Darby v. Compagnie Nat’l Air France, 96 N.Y.2d 343, 728 N.Y.S.2d 731, 753 N.E.2d 160, 162 (N.Y. 2001) ....................................................... 11 Drake v. Lab. Corp. of Am. Holdings, No. 02CV1924 (FB)(RML), 2007 U.S. Dist. LEXIS 17430 (E.D.N.Y. Mar. 13, 2007) .................................................................................................. 11 Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168 (2d Cir. 2004) ............................................................................................... 16 Evarts v. Pyro Eng’g, Inc., 117 A.D.3d 1148, 985 N.Y.S.2d 179 (N.Y. App. Div. 2014) ............................................. 9 Fin. Guar. Ins. Co. v. Putnam Advisory Co., LLC, 783 F.3d 395 (2d Cir. 2015) ............................................................................................... 15 Fundacion Museo De Arte Contemporaneo de Caracas v. CBI-TDB Union Bancaire Privee, 160 F.3d 146 (2d Cir. 1998) ................................................................................................. 9 Garber v. Ravitch, 186 A.D.2d 361 N.Y.S.2d 163 (N.Y. App. Div. 1992) ..................................................... 22 Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 5 of 32 v Gerschel v. Christensen, 143 A.D.3d 555, 40 N.Y.S.3d 41 (N.Y. App. Div. 2016) ................................................. 21 Giordano v. UBS, AG, 134 F. Supp. 3d 697 (S.D.N.Y. 2015) ................................................................................ 19 Global View Ltd. Venture Capital v. Great Central Basin Exploration, L.L.C., 288 F. Supp. 2d 473 (S.D.N.Y. 2003) .............................................................................. 7, 8 Gold Sun Shipping v. Ionian Transp., 245 A.D.2d 420, 666 N.Y.S.2d 677 (N.Y. App. Div. 1997) ............................................. 22 Golub Corp. v. Sandell Transport, Inc., 1:15-CV-0848 (LEK/CFH), 2016 U.S. Dist. LEXIS 121105 (N.D.N.Y. Sept. 8, 2016) ..................................................................................................................... 18 Greenspan v. Allstate Ins. Co., 937 F. Supp. 288 (S.D.N.Y. 1996) ..................................................................................... 17 Griffith v. City of New York, 248 A.D.2d 439, 668 N.Y.S.2d 940 (N.Y. App. Div. 1998) ............................................. 22 Hamilton v. Accu-Tek, 935 F. Supp. 1307 (E.D.N.Y. 1996) .................................................................................. 13 Harris v. Mills, 572 F.3d 66 (2d Cir. 2009) ................................................................................................... 5 Hines v. New New York City Tr. Auth., 264 A.D.2d 506, 694 N.Y.S.2d 473 (N.Y. App. Div. 1999) ............................................. 12 Harsco Corp v. Segui, 91 F.3d 337 (2d Cir. 1996) ................................................................................................. 17 Hollin v. Scholastic Corp., 252 F.3d 63 (2d Cir. 2001) ................................................................................................. 16 Kimmell v. Schaefer, 89 N.Y.2d 257, 652 N.Y.S.2d 715, 675 N.E.2d 450 (N.Y. 1996) ..................................... 12 King County, Wash. v. IKB Deutsche Industriebank, AG, 863 F. Supp. 2d 288 (S.D.N.Y. 2012) ................................................................................ 10 Kopperl v. Bain, No. 09 Civ. 1754 (CSH), 2010 U.S. Dist. LEXIS 89195 (D. Conn. Aug. 30, 2010) .................................................................................................. 14 Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 6 of 32 vi Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 595 N.YS.2d 931, 612 N.E.2d 289 (N.Y. 1993) ....................................... 22 Landesbank Baden-Wurttemberg v. Goldman Sachs & Co., 478 F. App’x 679 (2d Cir. 2012) ....................................................................................... 18 Lerner v. Fleet Bank, N.A., 459 F.3d 273 (2d Cir. 2006) ............................................................................................... 18 Mazzola v. Roomster Corp., 849 F. Supp. 2d 395 (S.D.N.Y. 2012) .................................................................................. 8 Merryman v. J.P. Morgan Chase Bank, N.A., 15-cv-9188 (VEC), 2016 WL 547776 (S.D.N.Y. Sep. 29, 2016) ........................................ 8 Midwest Mem. Grp., LLC v. Int’l Fund Servs. (Ireland) Ltd., No. 10 Civ. 8660, 2011 U.S. Dist. LEXIS 119428 (S.D.N.Y. Oct. 17, 2011) .................................................................................................................................. 21 Mills v. Polar Molecular Corp., 12 F.3d 1170 (2d Cir. 1993) ............................................................................................... 17 Montes v. New York City Tr. Auth., 46 A.D.3d 121, 843 N.Y.S.2d 622 (N.Y. App. Div. 2007) ............................................... 12 Moore v. PaineWebber, Inc., 306 F.3d 1247 (2d Cir. 2002) ............................................................................................. 19 N.Y. City Educ. Constr. Fund v. Verizon N.Y. Inc., 114 A.D.3d 529, 981 N.Y.S.2d 11 (N.Y. App. Div. 2014) ............................................... 19 Negrete v. Citibank, N.A., 15 Civ. 7250, 2016 U.S. Dist. LEXIS 66342 (S.D.N.Y. May 19, 2016) ................................................................................................... 10 O’Brien v. Nat’l Prop. Analysts Partners, 936 F.2d 674 (2d Cir. 1991) ............................................................................................... 18 PPC Broadband, Inc. v. Transformix Eng’g, Inc., 14-cv-00315, 2015 U.S. Dist. LEXIS 8343 (N.D.N.Y. Jan. 26, 2015) ............................. 11 PPI Enters. (U.S.) v. Del Monte Foods Co., No. 99 Civ. 3794 (BSJ), 2003 U.S. Dist. LEXIS 16006 .................................................... 11 Pasternak v. Laboratory Corp. of Am. Holdings, 27 N.Y.3d 817, 37 N.Y.S.3d 750, 59 N.E.3d 485 (N.Y. 2016) ......................................... 11 Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 7 of 32 vii Pomahac v. TrizecHahn 1065 Ave. of Ams., LLC, 65 A.D.3d 462, 884 N.Y.S.2d 402 (N.Y. App. Div. 2009) ............................................... 12 Rey-Willis v. Citibank, N.A., No. 03 Civ. 2006, 2003 U.S. Dist. LEXIS 12760 (S.D.N.Y. July 23, 2003) .................... 17 Selinger Enterprises, Inc. v. Cassuto, 50 A.D.3d 766, 860 N.Y.S.2d 533 (N.Y. App. Div. 2008) ................................................. 9 Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124 (2d Cir. 1994) ............................................................................................... 18 In re September 11 Property Damage, 468 F. Supp. 2d 508 (S.D.N.Y. 2006) .......................................................................... 13 n.3 Small v. Lorillard Tobacco Co., 94 N.Y.2d 43, 720 N.E.2d 892, 698 N.Y.S.2d 615 (N.Y. 1999) ....................................... 15 Spool v. World Child Int’l Adoption Agency, 520 F.3d 178 (2d Cir. 2008) ............................................................................................... 16 Torrance Construction, Inc. v. Jaques, 127 A.D.3d 1261, 8 N.Y.S.2d 441 (N.Y. App. Div. 2015) ............................................... 21 Vigilant Ins. Co. of Am. v. Housing Authority of City of El Paso, Tex., 87 N.Y.2d 36, 637 N.Y.S.2d 342, 660 N.E.2d 1121 (N.Y. 1995) ..................................... 21 Zap v. Mortgage Electronic Registration Systems, Inc., 6:15-cv-00624 (MAD/TWD), 2016 U.S. Dist. LEXIS 150988 (N.D.N.Y. Nov. 1, 2016) .................................................................................................................... 17 FEDERAL AND STATE STATUTES 28 U.S.C. § 1332 ........................................................................................................................ 5 28 U.S.C. § 1441 ........................................................................................................................ 5 28 U.S.C. § 1446 ........................................................................................................................ 5 Fed. R. Civ. P. 9(b) .......................................................................................................... passim Fed. R. Civ. P. 11 ..................................................................................................................... 19 Fed. R. Civ. P. 12(b)(6) ................................................................................................... 1, 5, 14 N.Y. C.P.L.R. § 214(3) ............................................................................................................ 21 Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 8 of 32 viii N.Y. C.P.L.R. § 214(4) ............................................................................................................ 21 OTHER AUTHORITIES Fred Warren Bennett, 2-12 New York Practice Guide: Negligence § 12.01 (2016) ................................................................................................................................. 12 Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 9 of 32 1 The Defendants, Southern Wine & Spirits of Upstate New York, Inc. and Southern Glazer’s Wine and Spirits of Upstate New York, LLC (collectively, “Southern”), by and through their attorneys, Greenberg Traurig, LLP, respectfully submit this Memorandum of Law in Support of their Motion to Dismiss the Verified Complaint of the Plaintiffs, The Barrel Saloon, LLC, CAD on Pearl, LLC, 28 Thatcher LLC and DeJohn’s on Lark, Inc. (collectively, “Plaintiffs”), pursuant to Fed. R. Civ. P. 12(b)(6). PRELIMINARY STATEMENT This case involves nothing more than an overpayment claim between two sophisticated commercial parties who have done and currently are doing business with one another. New York law governing commercial contracts and transactions was designed to resolve disputes of this nature. However, unwilling to accept the limitations on actual damages imposed by applicable law, Plaintiffs try to transform this action into a tort case, by alleging common law theories sounding in conversion, negligence and fraud, and seeking over $2 million in compensatory and punitive damages, and attorney’s fees. Defendant Southern is a national wholesaler of alcoholic beverages, and Plaintiffs are four local taverns. Plaintiffs allege that, on an unspecified number of occasions, going back as far as 2009, Southern placed orders on Plaintiffs behalf, without their knowledge, to purchase wine and liquor they never received. Plaintiffs assert that, at times, their bank accounts were debited by Southern for the cost of these beverages, or Southern paid. As a result, Plaintiffs claim they are out-of-pocket collectively $42,034.45. They allege no facts demonstrating any additional harm. Even assuming the truth of the allegations pled in Plaintiffs’ Complaint, all of the causes of action in it fail to state claims under New York law. For example, Plaintiffs’ Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 10 of 32 2 conversion claim — which seeks money damages for purported overcharges — does not and cannot identify with specificity the funds allegedly taken from them. As such, Plaintiffs have failed to allege an essential element of a conversion claim where, as here, money is the subject of conversion. Likewise deficient as a matter of law is Plaintiffs’ negligence claim. It is precluded by New York’s economic loss rule, which bars recovery in negligence for economic damage absent personal injury or property damage. Additionally, Plaintiffs allege no cognizable duty of care that was breached by Southern or actual harm or damage. Finally, Plaintiffs’ fraud claim is based on the barest of conclusory allegations, and, therefore, fails to state a claim for fraud with the particularity required by Fed. R. Civ. P. 9(b). Indeed, the Complaint fails to allege multiple elements necessary to sustain a fraud claim, including fraudulent misrepresentations reasonably relied on by Plaintiffs to their detriment, intent to defraud, and facts showing how the alleged fraud caused damages. In short, Plaintiffs’ attempt to transform this simple commercial dispute into a tort case misses the mark. Notably, on the day Plaintiffs commenced this lawsuit, they held a press conference for the manifest purpose of intimidating Southern and bullying it into a settlement. Southern values its customers and its reputation as an industry leader delivering the highest standards of customer service. Southern also takes seriously Plaintiffs’ allegations. By this lawsuit, however, Plaintiffs seek a windfall recovery based on claims that are unsupported and unsupportable. Accordingly, Southern’s motion to dismiss should be granted and Plaintiffs’ Complaint dismissed in its entirety and with prejudice. Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 11 of 32 3 RELEVANT BACKGROUND The following discussion of the factual background of this case is based on the allegations in the Complaint, which, for purposes of this motion only, must be assumed to be true. That said, Southern denies Plaintiffs’ claims, all of which are meritless as a matter of law. I. The Parties Each of the four Plaintiffs in this action is either a limited liability company or for- profit corporation licensed in New York State to sell alcoholic beverage for retail consumption on premises it operates in Albany County. (Complaint (“Compl.”) attached as Exhibit A to Declaration of Henry M. Greenberg, dated December 21, 2016, ¶¶ 1-4 (“Greenberg Decl.”).) Defendants Southern Wine & Spirits of Upstate New York, Inc. (“Southern Wine and Spirits”) was and Southern Glazer’s Wine and Spirits of Upstate New York, LLC (“Southern Glazer’s”) is a wine and liquor wholesaler licensed to do business in New York State. (Id. ¶¶ 5, 6, 7-8.)1 Each of the Plaintiffs, commencing at different times, maintained an ongoing business relationship with Southern. (Id. ¶¶ 18-19, 22-23, 26-27, 30- 31.) DeJohn’s on Lark, Inc. began purchasing alcoholic beverages from Southern in 2009 (Id. ¶¶ 30, 106); The Barrel Saloon, LLC in 2011 (Id. ¶¶ 18, 55); CAD On Pearl, LLC began in 2013 (Id. ¶¶ 22, 72); and 28 Thatcher LLC began in 2014 (Id. ¶¶ 26, 89). As a result of a merger in 2016, Southern Glazer’s assumed control over Southern Wine and Spirits, and became its successor in interest. (Id. ¶¶ 10, 13, 41-43.) The two 1 Although named in the Complaint as a Plaintiff, “59-61 North Pearl Street, Albany, New York,” is an address, not a business entity. Similarly, the Complaint names as a Defendant, “25 Corporate Circle, Suite 102 Albany B, Albany, New York,” which is an address, not a business entity. Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 12 of 32 4 Defendants are alleged by Plaintiffs to have engaged in exactly the same conduct, albeit at different times (Southern Wine and Spirits from 2009 through 2016, and Southern Glazer’s in 2016). Thus, for ease of reference, Southern Wine and Spirits and Southern Glazer’s are referred to hereinafter, collectively, as “Southern.” II. Plaintiffs’ Claims The gravamen of Plaintiffs’ lawsuit are the allegations that, contrary to company policies and “best practices” and in violation of unspecified State laws, rules and regulations, Southern utilized its “Will Call” system2 to collect funds from Plaintiffs for orders that they never placed and alcoholic beverages they never received. (Id. ¶¶ 34-35, 40, 43.) The Complaint alleges that Southern ordered the purchase of alcoholic beverages for Plaintiffs, without their knowledge or consent, and then failed to deliver to them the beverages so ordered. (Id. ¶¶ 35-36.) Instead, goes the allegations, the ordered beverages were diverted by Southern to third persons or companies. (Id. ¶ 40.) In furtherance of this “scheme or plan,” Southern allegedly invoiced Plaintiffs for the alcoholic beverages they did not order and forged the signatures of Plaintiffs’ representatives on delivery receipts or invoices. (Id. ¶¶ 37, 46-47, 50.) For some of these transactions, Southern allegedly transferred funds from Plaintiffs’ bank accounts (Id. ¶¶ 38, 54), and, for other transactions, Southern paid for the alcoholic beverages (Id. ¶¶ 39, 44). 2 As alleged in the Complaint, the “Will Call” system enabled retailers, such as Plaintiffs, to order and obtain alcoholic beverages at times when they were not otherwise scheduled to receive deliveries from a wholesaler. (Id. ¶ 14.) A retailer that placed an order for alcoholic beverages through the Will Call system could pick them up at Southern’s warehouse, after signing a receipt or invoice. (Id. ¶¶ 14-17.) Pursuant to an agreement with the retailer, Southern could automatically transfer funds from the retailer’s bank account as payment for the beverages. (Id. ¶¶ 19, 23, 27, 31.) Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 13 of 32 5 Plaintiffs do not provide the name of a single person who works for or on behalf of Southern that engaged in the conduct alleged in the Complaint. Moreover, although the Complaint is 26-pages long, Southern’s alleged conduct is described in conclusory fashion in a handful of paragraphs. (See id. ¶¶ 34-40, 46-48.) Most of the Complaint consists of redundant allegations asserted separately for each Plaintiff. In the Complaint, the following three causes of action are reiterated virtually verbatim for each Plaintiff: (1) conversion, (2) negligence and (3) fraud. (Id. ¶¶ 51-118.) Thus, rather than alleging just three causes of action, the Complaint alleges 12 duplicative causes of action (three for each Plaintiff). With respect to Plaintiffs’ conversion theory, the only difference in the causes of action asserted for each of the Plaintiffs is the amount of compensatory damages sought thereby, varying from as little as $6,761.26 (in the case of Plaintiff 28 Thatcher, LLC) to as much as $15,701.42 (in the case of Plaintiff DeJohn’s on Lark, Inc.). (Id. ¶¶ 88, 105; see also id. ¶¶ 54 (Plaintiff The Barrel Saloon, LLC alleging loss of $9,098), 71 (Cad on Pearl, LLC alleging loss of $10,473.77.) Each Plaintiff also seeks $250,000 in compensatory damages, punitive damages and attorneys’ fees for their negligence and fraud causes of action. (Id. ¶¶ 62, 64, 67, 79, 81, 84, 96, 98, 101, 113, 115, 118.) On November 15, 2016, Plaintiffs commenced this action by filing their Complaint in New York State Supreme Court, Albany County. (Greenberg Decl., Exhibit A.) Southern, in turn, removed the action to this Court on December 15, 2016, pursuant to 28 U.S.C. §§ 1332, 1441 and 1446. Southern now moves to dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(6). Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 14 of 32 6 STANDARD OF REVIEW A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the complaint’s allegations. Harris v. Mills, 572 F.3d 66, 71 (2d Cir. 2009). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint does not suffice “if it tenders naked assertions devoid of further factual enhancement.” Id. (internal quotations and citation omitted). Although “a court must accept as true all of the allegations contained in a complaint,” that tenet “is inapplicable to legal conclusions,” and “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citation omitted). Moreover, “only a complaint that states a plausible claim for relief survives a motion to dismiss,” and determining whether a “plausible” claim is stated is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679 (citation omitted). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 678 (citation omitted). “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it stops short of the line between possibility and plausibility of ‘entitlement to relief.’” Id. (quoting Twombly, 505 U.S at 557). ARGUMENT In the Complaint, rather than couch their claims for relief in the law of commercial transactions or contract, Plaintiffs assert causes of action for the torts of conversion, negligence and fraud in an effort to seek a windfall recovery. These claims all arise from Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 15 of 32 7 allegations that Southern placed orders on Plaintiffs behalf for alcoholic beverages that they never received, and in some (but not all) cases debited their bank accounts as payment for such orders. However, the Complaint fails to state claims under New York tort law. I. THE COMPLAINT FAILS TO STATE A CONVERSION CLAIM BECAUSE PLAINTIFFS DID NOT AND CANNOT ALLEGE THAT SOUTHERN TOOK POSSESSION OF A SPECIFIC IDENTIFIABLE THING The Complaint’s first cause of action, asserted separately on behalf of each Plaintiff, is for conversion. (Compl. ¶¶ 51-56, 68-73, 85-90, 102-107.) Specifically, the Complaint alleges that, on an unspecified number of occasions, Southern “did unlawfully convert money and property” from each of the Plaintiffs. (Id. ¶¶ 52, 69, 86, 103.) As explained below, Plaintiffs have not — and cannot — allege an essential element of a conversion claim. Under New York law, “[t]o establish a cause of action in conversion the plaintiff must show legal ownership or an immediate right of possession to a specifically identifiable thing and must show that the defendant exercised an unauthorized dominion over the thing in question . . . to the exclusion of the plaintiff’s rights.” Castaldi v. 39 Winfield Assocs., 30 A.D.3d 458, 458, 820 N.Y.S.2d 279, 279-80 (N.Y. App. Div. 2006) (internal quotations and citation omitted). Money can be the subject of conversion only where “there is a specific, identifiable fund and an obligation to return or otherwise treat in a particular manner the specific fund in question.” Global View Ltd. Venture Capital v. Great Central Basin Exploration, L.L.C., 288 F. Supp. 2d 473, 479 (S.D.N.Y. 2003) (quotation marks and citation omitted). “To state a cause of action for conversion of money, the money must be ‘described or identified in the same manner as a specific chattel.’” Id. at 480 (citing 9310 Third Ave. Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 16 of 32 8 Associates, Inc. v. Schaffer Food Service Co., 210 A.D.2d 207, 208, 620 N.Y.S.2d 255, 256 (N.Y. App. Div. 1994)). Moreover, money that sits in a business entity’s general account, and is commingled with the business entity’s other funds, is not considered to be specifically identifiable for purposes of a conversion claim. See, e.g., Cumis Ins. Socy., Inc. v. Citibank, N.A., 921 F. Supp. 1100, 1110 (S.D.N.Y. 1996) (“funds commingled in an account are ordinarily not specifically identifiable for the purposes of a conversion claim”); D’Amour v. Ohrenstein & Brown, LLP, 2007 NY Slip Op 52207(U), ¶ 13, 17 Misc. 3d 1130[A], 1130[A], 851 N.Y.S.2d 68, 68 (N.Y. Sup. Ct., N.Y. County 2007) (“money that has been paid into a business entity’s general account, and commingled with the business entity’s other funds, is generally not considered to be specifically identifiable for purposes of a conversion claim”) (internal citations omitted); see also Auguston v. Spry, 282 A.D.2d 489, 491, 723 N.Y.S.2d 103, 106 (N.Y. App. Div. 2001) (“The plaintiff’s cause of action alleging conversion must fail because he alleges that his money was to be commingled into the corporation’s capital. As commingled money, his money was incapable of being converted.”) (internal citations omitted). Instructive, in this connection, is Mazzola v. Roomster Corp., 849 F. Supp. 2d 395, 409 (S.D.N.Y. 2012). There, the Court held that allegations that an online roommate matching service intentionally charged the plaintiff’s debit card three times in the amount of $29.95, without permission, did not state a claim for conversion of money, because plaintiff could not point to a specifically identifiable fund to which she had legal title or a superior right to possession. Id. at 409 (citation omitted). See also, e.g., Global View Ltd. Venture Capital, 288 F. Supp. 2d at 473 (holding allegations of conversion were insufficient where complaint referred to “unspecified ‘monies and assets’” without any indication of an Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 17 of 32 9 identifiable fund or a “description of the transfer or transfers from which the Court could infer a specifically identified fund of money”); Merryman v. J.P. Morgan Chase Bank, N.A., 15-cv-9188 (VEC), 2016 WL 547776, at *12 (S.D.N.Y. Sep. 29, 2016) (complaint failed to state conversion claim based on alleged overcharges for foreign exchange transactions); Selinger Enterprises, Inc. v. Cassuto, 50 A.D.3d 766, 768, 860 N.Y.S.2d 533, 536 (N.Y. App. Div. 2008) (“The mere right to payment cannot be the basis for a cause of action alleging conversion[.]”). Here, although the Complaint alleges a minimum sum of money for each Plaintiff allegedly converted by Southern, it does not describe any specific transactions or identify any specifically identifiable segregated funds in Southern’s control that belongs to Plaintiffs. (Compl. ¶¶ 54, 56, 71, 73, 88, 90, 105, 107.) Additionally, the monies at issue were in a general business account. (Compl. ¶¶ 19, 23, 27, 31, 54, 71, 88, 105.) See Fundacion Museo De Arte Contemporaneo de Caracas v. CBI-TDB Union Bancaire Privee, 160 F.3d 146, 148 (2d Cir. 1998) (funds deposited in bank account are not sufficiently specific to state conversion claim) (citation omitted). Accordingly, the allegations in the Complaint fail to meet the “specifically identifiable” standard of actions for conversion of money, and the First, Fourth, Seventh, and Tenth Causes of Action for conversion should be dismissed. II. THE COMPLAINT FAILS TO STATE A NEGLIGENCE CLAIM UNDER NEW YORK LAW The Complaint’s second cause of action, asserted separately on behalf of each Plaintiff, is styled as a claim based on negligence. (Compl. ¶¶ 57-64, 74-81, 91-98, 108- 115.) “To establish a prima facie case of negligence, the plaintiff is required to demonstrate Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 18 of 32 10 that [1] the defendant owed a duty to him or her, that [2] the defendant breached that duty and that [3] such breach was a proximate cause of the injuries sustained.” Evarts v. Pyro Eng’g, Inc., 117 A.D.3d 1148, 1150, 985 N.Y.S.2d 179, 181 (N.Y. App. Div. 2014) (brackets inserted & citations omitted)). Plaintiffs allege that Southern “negligently allowed” employees to place orders on behalf of Plaintiffs, in violation of Southern’s own policies, “best practices” and New York laws, rules and regulations. These allegations fail to state a claim for multiple reasons. (Compl. ¶¶ 59-61, 76-78, 93-95, 110-112.) A. Plaintiffs’ Negligence Claims Are Barred by the Economic Loss Rule First, as a threshold matter, Plaintiffs’ negligence claim is barred by the economic loss rule, which “bars recovery in negligence for economic damage absent personal injury or property damage.” 532 Madison Ave. Gourmet Foods, Inc. v. Finlandia Center, Inc., 96 N.Y.2d 280, 288, 727 N.Y.S.2d 49, 52, 750 N.E.2d 1097, 1101 (N.Y. 2001); King County, Wash. v. IKB Deutsche Industriebank, AG, 863 F. Supp. 2d 288, 302 (S.D.N.Y. 2012) (“Under New York’s ‘economic loss’ rule, a plaintiff cannot recover in tort for purely economic losses caused by a defendant’s negligence.”). The purpose of this rule is to prevent dissatisfied customers in matters arising from business relationships to use tort law to recover losses that were or should have been protected against through contract law. See Negrete v. Citibank, N.A., 15 Civ. 7250, 2016 U.S. Dist. LEXIS 66342, at *37 (S.D.N.Y. May 19, 2016) (“The purpose of this economic loss rule is to ‘keep contract law from drowning in a sea of tort and with this goal in mind New York courts restrict plaintiffs who have suffered economic loss, but not personal or property injury, to an action for the benefits of their bargains.”) (citation and internal quotation marks omitted). Simply put, the rule bars Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 19 of 32 11 tort recovery for economic loss suffered by commercial entities, and requires sophisticated commercial parties to pursue only their contractual remedies when asserting an economic loss claim, in order to preserve the distinction between contract and tort law. See id. Here, to the extent the Complaint’s cryptic allegations can be discerned, Plaintiffs’ claimed injuries are all forms of pure economic loss. “New York courts have recognized exceptions to the economic loss rule in cases of professional malpractice, for certain contracts for the provision of services, and where the defendant had a duty independent of its contractual obligations to the plaintiff.” PPC Broadband, Inc. v. Transformix Eng’g, Inc., 14-cv-00315 (MAD/TWD), 2015 U.S. Dist. LEXIS 8343, at *40 (N.D.N.Y. Jan. 26, 2015). But none of these exceptions are applicable in the instant case. See PPI Enters. (U.S.) v. Del Monte Foods Co., No. 99 Civ. 3794 (BSJ), 2003 U.S. Dist. LEXIS 16006, at *27 (S.D.N.Y. Sept. 11, 2003 (dismissing negligence claim for failure to claim personal injury or property damage). Accordingly, the economic loss rule bars Plaintiffs’ negligence claims. B. Plaintiffs Have Not Alleged a Duty of Care Owed to Them by Southern With respect to the first element necessary to establish a prima facie case of negligence, “[i]n the absence of a duty, as a matter of law, there can be no liability.” Pasternak v. Laboratory Corp. of Am. Holdings, 27 N.Y.3d 817, 825, 37 N.Y.S.3d 750, 755, 59 N.E.3d 485 (N.Y. 2016) (citations omitted). “‘Although juries determine whether and to what extent a particular duty was breached, it is for the courts first to determine whether any duty exists.’” Drake v. Lab. Corp. of Am. Holdings, No. 02CV1924 (FB)(RML), 2007 U.S. Dist. LEXIS 17430, at *5 (E.D.N.Y. Mar. 13, 2007) (quoting Darby v. Compagnie Nat’l Air France, 96 N.Y.2d 343, 347, 728 N.Y.S.2d 731, 733, 753 N.E.2d 160, 162 (N.Y. 2001)). Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 20 of 32 12 New York “courts . . . fix the duty point by balancing factors, including the reasonable expectations of parties and society generally, the proliferation of claims, the likelihood of unlimited or insurer-like liability, disproportionate risk and reparation allocation, and public policies affecting the expansion or limitation of new channels of liability.” Almeciga v. Ctr. for Investigative Reporting, Inc., 121 F. Supp. 3d 379, 382-83 (S.D.N.Y. 2015) (internal citations and quotations omitted); see also Alfaro v. Wal-Mart Stores, Inc., 210 F.3d 111, 114 (2d Cir. 2000) (“Identifying the scope of an alleged tortfeasor’s duty is ‘not something derived or discerned from an algebraic formula. Rather, it coalesces from vectored forces including logic, science, weighty competing socioeconomic policies and sometimes contractual assumptions of responsibility.”) (citation and internal quotation marks omitted). In their Complaint, Plaintiffs do not allege the existence of a specific duty that ran between themselves and Southern. In fact, the word “duty” is not used even once in the Complaint. See Kimmell v Schaefer, 89 N.Y.2d 257, 263, 652 N.Y.S.2d 715, 719, 675 N.E.2d 450, 453 (N.Y. 1996) (liability for negligence may result only from the breach of a duty running from the tortfeasor to the injured party). Instead, Plaintiffs conclusorily assert that Southern’s conduct violated certain internal company policies and “best practices.” However, New York “courts have consistently refused to predicate liability on the violation of a company rule or policy.” Fred Warren Bennett, 2-12 New York Practice Guide: Negligence § 12.01 (2016) (citing Hines v. New York City Transit Authority, 264 A.D.2d 506, 507, 694 N.Y.S.2d 473, 474 (N.Y. App. Div. 1999); Montes v. New York City Tr. Auth., 46 A.D.3d 121, 122-23, 843 N.Y.S.2d 622, 623-624 (N.Y. App. Div. 2007)); see also Byrd v Wal-Mart, Inc., 128 A.D.3d 629, 630, 8 N.Y.S.3d 428, 429-30 (N.Y. App. Div. 2015) (rejecting argument that violation by the defendant’s employees of an alleged internal rule Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 21 of 32 13 or guideline could serve as a basis for imposing liability for negligence); Pomahac v. TrizecHahn 1065 Ave. of Ams., LLC, 65 A.D.3d 462, 465, 884 N.Y.S.2d 402, 405-06 (N.Y. App. Div. 2009) (holding that a defendants failure to adhere to its own internal guideline or policy “cannot be considered evidence of negligence” “where the internal guideline or policy requires a standard that transcends the standard required by the duty of reasonable care . . . .”) (emphasis in original and citation omitted). Likewise unavailing is Plaintiffs’ attempt to predicate their negligence claim on alleged violations of unidentified State laws, rules, and regulations. “Terms of a statute or a regulation are not automatically adopted by New York courts as a standard of due care in negligence litigation.” Hamilton v. Accu-Tek, 935 F. Supp. 1307, 1320 (E.D.N.Y. 1996) (citing Dance v. Town of Southampton, 95 A.D.2d 442, 446, 467 N.Y.S.2d 203, 206 (N.Y. App. Div. 1983). Adoption of a statutory requirement as a standard of care is a matter of judicial construction based on a careful review of the specific statute at issue and its legislative intent. See Dance, 95 A.D.2d at 446, 467 N.Y.S.2d at 206 (“[T]he terms of a regulatory statute should not receive automatic construction as a standard of care in negligence litigation, for judgment should be exercised as to the appropriateness of the statute for that purpose.”). A plaintiff, therefore, is not entitled to pursue a negligence claim based on an alleged violation of an unspecified law.3 And such is the case here — the 3 Case law so holding is legion. See, e.g., Bishop v. Best Buy, Co. Inc., No. 08 Civ. 8427, 2011 U.S. Dist. LEXIS 102179, at *30 (S.D.N.Y. Sept. 8, 2011) (dismissing negligence per se claim on the ground that Complaint failed to “cite any statute imposing a specific duty to protect Plaintiff that Defendants breached”); In re September 11 Property Damage, 468 F. Supp. 2d 508, 522 (S.D.N.Y. 2006) (dismissing claim for negligence per se because “plaintiffs have not alleged any violation of a state statute,” and allegation that New York City and State safety codes were violated was conclusory); Aurora Loan Services v. Grant, 17 Misc. 3d 1102[A], 851 N.Y.S.2d 56, 2007 N.Y. Misc. LEXIS 6475, at *10 (Sup. Ct. Kings Co. 2007) (counterclaim failed to state Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 22 of 32 14 Complaint fails to identify a specific statute, rule or regulation, let alone one that provides a standard of conduct that Southern allegedly violated. Thus, Plaintiffs have failed to allege a cognizable duty owed to them by Southern, which is an essential element of a negligence claim. Nor have Plaintiffs alleged the essential element of breach of a duty of care. C. Plaintiffs Fail to Adequately Allege Damages At the pleading stage, governed by Fed. R. Civ. P. 12(b)(6), Plaintiffs’ “demand for money damages must satisfy the Twombly and Iqbal requirement of factual, non-conclusory allegations stating a plausible claim that defendant’s conduct caused specific economic harm in a quantifiable amount.” Kopperl v. Bain, No. 09 Civ. 1754 (CSH), 2010 U.S. Dist. LEXIS 89195, at *10-11 (D. Conn. Aug. 30, 2010) (citing Fink v. Time Warner Cable, No. 08 Civ. 9628 (LTS), 2009 U.S. Dist. LEXIS 63708, at *4 (S.D.N.Y. July 23, 2009)). However, the damage demands alleged in Plaintiffs’ negligence causes of action fail to satisfy this requirement. While the Complaint alleges damages in the amount of $250,000 per Plaintiff, Plaintiffs do not allege any facts showing how Southern’s alleged “negligence” (i.e., a breach of a duty of care) caused any actual harm or damage. Compl. ¶¶ 68, 81, 101, 116. Plaintiffs merely allege that persons who were not authorized to receive alcoholic beverages did so through the use of Plaintiffs’ retail licenses and such beverages were delivered to unauthorized third parties. (Compl. ¶¶ 60-61, 77-78, 94-95, 111-112.) But even if true, a cause of action because pleadings failed to allege “with any specificity” that the party against whom such claims was brought violated a state statute) (citation omitted); see also Anchundia v. Ne. Utilities Serv. Co., No. CV 07-4446 (AKT), 2010 U.S. Dist. LEXIS 57890, at *15 (E.D.N.Y. June 11, 2010) (“Plaintiffs are not entitled to pursue a claim of negligence per se where a specific statute has not been identified”). Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 23 of 32 15 Plaintiffs have not shown that this conduct resulted in any cost, harm or damage to them. Manifestly, Plaintiffs plucked from thin air their $250,000 figure, and it is incapable of being proven with reasonable certainty.4 See Brown v. Samalin & Bock, 168 A.D.2d 531, 532, 563 N.Y.S.2d 426, 426 (N.Y. App. Div. 1990) (damages claimed by plaintiffs are “too speculative and incapable of being proven with any reasonable certainty”). Thus, the Complaint fails to allege the essential element of damages for a negligence claim. For all of these reasons, Plaintiffs’ Second, Fourth, Sixth and Eleventh Causes of Action for negligence should be dismissed. III. THE COMPLAINT FAILS TO STATE A FRAUD CLAIM UNDER NEW YORK LAW AND WITH THE PARTICULARITY REQUIRED BY FED. R. CIV. P. 9(b) The Complaint’s third cause of action, asserted separately on behalf of each Plaintiff, alleges common law fraud. (Compl. ¶¶ 65-67, 82-84, 99-101, 116-118.) To maintain a claim for fraud under New York law, a plaintiff must allege that (1) the defendant made a material false representation, (2) the defendant intended to defraud the plaintiff thereby, (3) the plaintiff reasonably relied upon the misrepresentation, and (4) the plaintiff suffered damages as a result of such reliance. See Small v. Lorillard Tobacco Co., 94 N.Y.2d 43, 57, 720 N.E.2d 892, 898, 698 N.Y.S.2d 615, 621 (N.Y. 1999) (“To make a prima facie case of fraud, the complaint must contain allegations of a representation of material fact, falsity, scienter, reliance and injury.”). Additionally, Fed. R. Civ. P. 9(b) requires that a party alleging fraud must state with “particularity” the circumstances constituting fraud. See Fed. R. Civ. P. 9(b) (“In allegations of fraud or mistake, a party must state with particularity the 4 By contrast, the Complaints’ conversion causes of action allege that Plaintiffs were actually charged for purchases that they never received, and pray for damages in amounts, ranging between $9,098 and $15,701 for each of the Plaintiffs. (Compl. ¶¶ 54, 71, 88, 105.) Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 24 of 32 16 circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.”). To satisfy this requirement, a plaintiff must “‘(1) detail the statements (or omissions) that the plaintiff contends are fraudulent, (2) identify the speaker, (3) state where and when the statements (or omissions) were made, and (4) explain why the statements (or omissions) are fraudulent.’” Fin. Guar. Ins. Co. v. Putnam Advisory Co., LLC, 783 F.3d 395, 403 (2d Cir. 2015) (quoting Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 187 (2d Cir. 2004)). This pleading standard is a “heightened” one where generalized allegations will not suffice. Spool v. World Child Int’l Adoption Agency, 520 F.3d 178, 184 (2d Cir. 2008). As will be demonstrated, Plaintiffs have failed to allege essential elements of fraud with the particularity demanded under Fed. R. Civ. P. 9(b). A. Plaintiffs Do Not and Cannot Identify Any Material Misrepresentation or Omission Plaintiffs fail to allege any fraudulent misrepresentation (or omission) made by any Defendant, which is an essential element of a claim sounding in fraud. The Complaint is devoid of a single, specific allegation that Southern made any statement to Plaintiffs, let alone one that was false, much less fraudulent. See Hollin v. Scholastic Corp., 252 F.3d 63, 70 (2d Cir. 2001) (“complaint must identify the statements plaintiff asserts were fraudulent and why, in plaintiff’s view, they were fraudulent, specifying who made them, and where and when they were made”). Nor does the Complaint state where and when a fraudulent omission was made. Furthermore, the Complaint fails to name any person who engaged in fraudulent speech or made material omissions, but rather, attributes all relevant conduct to unnamed Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 25 of 32 17 “agents, servants and/or employees” of Southern. (Compl. ¶¶ 35, 39, 44, 46, 60, 61, 77, 78, 94, 95, 111, 112.) It is settled law that allegations of fraud cannot rely on generalized allegations that corporations or their agents engaged in fraudulent conduct. See, e.g., Harsco Corp v. Segui, 91 F.3d 337, 347 (2d Cir. 1996) (“when a complaint charges fraud, it must . . . identify the speaker”); Mills v. Polar Molecular Corp., 12 F.3d 1170, 1175 (2d Cir. 1993) (dismissing complaint that failed to assign fraudulent statements to particular individuals connected to corporate defendant because “Rule 9(b) is not satisfied where the complaint vaguely attributes the alleged fraudulent statements to defendants.”) (internal citation omitted); Zap v. Mortgage Electronic Registration Systems, Inc., 6:15-cv-00624 (MAD/TWD), 2016 U.S. Dist. LEXIS 150988, *17-18 (N.D.N.Y. Nov. 1, 2016) (dismissing fraud claim because plaintiff failed to specifically identify any fraudulent misrepresentation made by any defendant, which is an essential element of the claim); Rey-Willis v. Citibank, N.A., No. 03 Civ. 2006, 2003 U.S. Dist. LEXIS 12760, at *8 (S.D.N.Y. July 23, 2003) (“Although the Complaint indicated the approximate date, place, and content of [defendant’s] fraudulent omissions, it failed to identify the persons who made the alleged misrepresentation . . . . Because [plaintiff] does not specifically identify, by name or otherwise, the identity of the persons who engaged in fraudulent activity, [plaintiff] fails to meet the heightened pleading standard of Rule 9(b).”); Greenspan v. Allstate Ins. Co., 937 F. Supp. 288, 291 (S.D.N.Y. 1996) (an allegation of fraud “must link the allegedly fraudulent statement to an individual speaker; attribution to a corporate entity or its representative is insufficient”). Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 26 of 32 18 B. Plaintiffs’ Conclusory Allegations Fail to Give Rise to an Inference of Fraudulent Intent Plaintiffs also fail to allege that Southern intended to defraud them. The Complaint merely contains a one-word assertion that Southern’s actions were “intentional.” (Compl. ¶¶ 66, 83, 100, 117.) This is insufficient to state a claim for fraud. See Golub Corp. v. Sandell Transport, Inc., 1:15-CV-0848 (LEK/CFH), 2016 U.S. Dist. LEXIS 121105, * 18 (N.D.N.Y. Sept. 8, 2016) (dismissing fraud claim based on conclusory allegations of fraud). “Under Rule 9(b), ‘[m]alice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.’ Fed. R. Civ. P. 9(b). However, because a Court “must not mistake the relaxation of Rule 9(b)’s specificity requirement regarding condition of mind for a license to base claims of fraud on speculation and conclusory allegations, . . . plaintiffs must allege facts that give rise to a strong inference of fraudulent intent.” Acito v. IMCERA Group, Inc., 47 F.3d 47, 52 (2d Cir. 1995) (internal citation and quotation marks omitted). Thus, the Second Circuit has “repeatedly required plaintiffs to plead the factual basis which gives rise to a strong inference of fraudulent intent.” O’Brien v. Nat’l Prop. Analysts Partners, 936 F.2d 674, 676 (2d Cir. 1991) (internal quotation marks omitted). The requisite strong inference of fraudulent intent “may be established either (a) by alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness.” Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290-91 (2d Cir. 2006) (quoting Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994)). Here, Plaintiffs do not ascribe to Southern any motive for committing fraud. Nor does the Complaint include any allegations, factual or otherwise, suggesting why Southern Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 27 of 32 19 would intentionally seek to defraud Plaintiffs. It is well settled that a plaintiff cannot base a fraud claim on the “general profit motive common to all corporations, which does not suffice.” Landesbank Baden-Wurttemberg v. Goldman Sachs & Co., 478 F. App’x 679, 681 (2d Cir. 2012) (summary order) (internal citation omitted). Accordingly, the Complaint fails to allege the requisite element of fraudulent intent. C. Plaintiffs Do Not and Cannot Allege Reasonable Reliance Likewise, the Complaint fails to allege that Plaintiffs reasonably relied upon any misrepresentation (or omission) and that they suffered damages as a result thereof. The word reliance is nowhere to be found in the Complaint, nor is there an allegation that Plaintiffs were damaged because of any such reliance. See Moore v. PaineWebber, Inc., 306 F.3d 1247, 1253 (2d Cir. 2002) (“[L]iability for fraudulent misrepresentations cannot be established simply by proof of a central, coordinated scheme. Rather . . . each plaintiff must prove that he or she personally received a material misrepresentation, and that his or her reliance on this misrepresentation was the proximate cause of his or her loss.”). Indeed, Plaintiffs cannot allege reasonable reliance without violating Fed. R. Civ. P. 11. It is well established that reasonable reliance cannot be said to exist where, as here, the plaintiff “fails to use ordinary intelligence to ascertain the truth” of the alleged fraudulent conduct. N.Y. City Educ. Constr. Fund v. Verizon N.Y. Inc., 114 A.D.3d 529, 530, 981 N.Y.S.2d 11 (N.Y. App. Div. 2014); see also Giordano v. UBS, AG, 134 F. Supp. 3d 697, 710 (S.D.N.Y. 2015) (dismissing fraud claim because plaintiff could not establish reasonable reliance). If, as alleged in the Complaint, Southern transferred money from Plaintiffs’ bank accounts over the course of several years to pay for orders of alcoholic beverages which Plaintiffs did not order or receive, Plaintiffs could have discovered such transfers during that Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 28 of 32 20 period simply by examining their bank account statements.5 In fact, Plaintiffs’ owner conceded that “[w]e weren’t paying attention” and “he should have caught on sooner” to what Southern was doing, in an interview he gave to a reporter the same day the Complaint was filed. (Steven Barnes, Albany bars sue Southern Glazer’s Wine and Spirits of Upstate New York: Proprietors claim they were defrauded by giant liquor distributor, Albany Times Union, Nov. 16, 2016, attached as Exhibit B to Greenberg Decl.) D. Plaintiffs Fail to Adequately Allege Damages Finally, Plaintiffs’ fraud claims do not allege any facts plausibly showing how Southern’s alleged fraudulent caused any actual harm or damage to Plaintiffs. Rather, as with the negligence claims, the Complaint merely alleges that each Plaintiff was damaged in the amount of $250,000, without any supporting facts. (Compl. ¶¶ 67, 84, 101, 118.) Thus, the Complaint fails to allege the essential element of damages for a fraud claim, with the particularity required by Fed. R. Civ. P. 9(b). See Warren v. John Wiley & Sons, Inc., 952 F. Supp. 2d 610, 623 (S.D.N.Y. 2013) (dismissing fraud claim “[b]ecause Plaintiffs have not identified a distinct harm stemming from the alleged fraudulent conduct . . . .”). For all of these reasons, Plaintiffs’ Third, Sixth, Ninth and Twelfth Causes of Action for fraud should be dismissed. 5 See, e.g., Arfa v. Zamir, 76 A.D.3d 56, 59, 905 N.Y.S.2d 77, 79 (N.Y. App. Div. 2010) (affirming grant of motion to dismiss a fraud claim for failing to show reasonable reliance), aff’d, 17 N.Y.3d 737, 952 N.E.2d 1003, 929 N.Y.S.2d 11 (N.Y. 2011); accord Amusement Indus., Inc. v. Buchanan Ingersoll & Rooney, P.C., No. 11 Civ. 4416, 2013 U.S. Dist. LEXIS 33324, at *12 (S.D.N.Y. Feb. 15, 2013) (a plaintiff “must show ‘minimal diligence’ or care that ‘negat[es] its own recklessness’”) (quoting Banque Franco-Hellenique de Commerce Int’l et Mar., S.A. v. Christophides, 106 F.3d 22, 27 (2d Cir. 1997)) (alteration in original). Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 29 of 32 21 IV. ALL OF PLAINTIFFS’ CLAIMS ARE SUBJECT TO A THREE-YEAR STATUTE OF LIMITATIONS AND BARRED TO THE EXTENT THEY SEEK RELIEF FOR CONDUCT THAT OCCURRED THREE YEARS PRIOR TO THE DAY THE LAWSUIT WAS COMMENCED By operation of the applicable statutes of limitation, all of Plaintiffs’ causes of action are barred to the extent they seek relief for conduct that occurred more than three years prior to November 15, 2016 — the date the Complaint was filed in this action. Specifically, the conversion claim is governed by a three-year statute of limitations. See N.Y. C.P.L.R. §§ 214(3), 214(4); Vigilant Ins. Co. of Am. v. Housing Authority of City of El Paso, Tex., 87 N.Y.2d 36, 44-45, 637 N.Y.S.2d 342, 347, 346-47, 660 N.E.2d 1121, 1125- 26 (N.Y. 1995) (“action for conversion . . . [is] subject to a three-year limitation period”) (citing N.Y. C.P.L.R. § 214(3)). The statute runs from the date that the conversion took place, not from discovery of the conversion. Vigilant Ins. Co. of Am., 87 N.Y.2d at 44, 627 N.Y.S.2d at 347, 660 N.E.2d at 1126. In addition, “[t]he statute of limitations runs separately from each separate act of conversion; a series of conversions against the same person or entity is not considered a single transaction for such purpose[.]” Torrance Construction, Inc. v. Jaques, 127 A.D.3d 1261, 1265, 8 N.Y.S.2d 441, 446 (N.Y. App. Div. 2015) (citation omitted). Similarly, the negligence claim is subject to a three-year statute of limitations. N.Y. C.P.L.R. § 214(4); Gerschel v. Christensen, 143 A.D.3d 555, 40 N.Y.S.3d 41, 44 (N.Y. App. Div. 2016) (conversion and negligence claims subject to three-year statutes of limitation). A negligence claim accrues upon injury. Midwest Mem. Grp., LLC v. Int’l Fund Servs. (Ireland) Ltd., No. 10 Civ. 8660, 2011 U.S. Dist. LEXIS 119428, at *3 (S.D.N.Y. Oct. 17, Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 30 of 32 22 2011) (citing Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 595 N.Y.S.2d 931, 612 N.E.2d 289 (N.Y. 1993)). So, too, the fraud claim is subject to a three-year limitations period, because it is “merely incidental” to the conversion claim. Gold Sun Shipping v. Ionian Transp., 245 A.D.2d 420, 420, 666 N.Y.S.2d 677, 678 (N.Y. App. Div. 1997) (holding three-year statute of limitations applied to fraud claim that was “merely incidental to the conversion cause of action”); Garber v. Ravitch, 186 A.D.2d 361, 362, 588 N.Y.S.2d 163, 164 (N.Y. App. Div. 1992) (where alleged fraud is “merely the means of accomplishing the conversion of plaintiff’s property,” fraud claim is subject to three-year statute of limitations); see also Griffith v. City of New York, 248 A.D.2d 439, 439, 668 N.Y.S.2d 940, 940 (N.Y. App. Div. 1998) (holding that “it is the essence of the action and not the label given to it that is important for determining time limitations”). The Complaint does not set forth the dates on which their accounts were allegedly overcharged by Southern. However, each Plaintiff identifies the year in which the alleged overcharging began: The Barrel Saloon, LLC — 2011 (Compl. ¶ 18); CAD on Pearl, LLC — 2013 (id. ¶ 22); 28 Thatcher LLC — 2014 (id. ¶ 26); and DeJohn’s on Lark, Inc. — 2009 (id. ¶ 30). Plaintiffs filed their Complaint on November 15, 2016. Accordingly, all of their claims are time barred to the extent they are premised on events occurring on or before that date. Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 31 of 32 23 CONCLUSION For all of the foregoing reasons, Southern respectfully requests that this Court grant Southern’s motion to dismiss, dismiss Plaintiffs’ Complaint in its entirety and with prejudice, and grant Southern such other and further relief as the Court deems appropriate. Date: December 21, 2016 Albany, New York Respectfully submitted, GREENBERG TRAURIG, LLP By: /s/ Henry M. Greenberg Henry M. Greenberg (Bar No. 101854) Cynthia Neidl (Bar No. 513737) 54 State Street Albany, New York 12207 Tel: (518) 689-1400 Fax: (518) 689-1499 greenbergh@gtlaw.com neidlc@gtlaw.com Attorneys for Defendants Southern Wine & Spirits of Upstate New York, Inc. and Southern Glazer’s Wine and Spirits of Upstate New York, LLC ATL 21749556v3 Case 1:16-cv-01493-TJM-TWD Document 6-2 Filed 12/21/16 Page 32 of 32