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Astor Holdings, Inc. v. Roski

United States District Court, S.D. New York
Jan 15, 2002
01 Civ. 1905 (GEL) (S.D.N.Y. Jan. 15, 2002)

Opinion

01 Civ. 1905 (GEL)

January 15, 2002

Fran M. Jacobs, Duane Morris Heckscher, New York, New York (Kurt Hunciker, of counsel) for Plaintiffs Astor Holdings, Inc. and Robot Wars LLC.

Daniel S. Schecter, Latham Watkins, Los Angeles, California (James S. Blank, Belinda S. Lee, Heather L. Mayer and Tehmina Jaffer, of counsel) for Defendants Edward "Trey" Roski. III and BattleBots. Inc.


OPINION AND ORDER


In this latest incarnation of a protracted litigation battle that has continued on both coasts of the United States over the past several years, Plaintiffs Astor Holdings, Inc. ("Astor"), formerly known as Profile Records, Inc. ("Profile"), and Robot Wars LLC ("Robot Wars") (collectively, "Plaintiffs") have brought suit in this district against Edward "Trey" Roski III, and BattleBots, Inc. ("BattleBots") (collectively, "Defendants"). Plaintiffs allege in their complaint that Defendants tortiously interfered with efforts to resolve prior litigation related to the instant action and wrongfully prevented them from entering into various commercial agreements related to their burgeoning business of robotic combat events.

On May 1, 2001, Defendants moved to dismiss this action for improper venue, pursuant to 28 U.S.C. § 1406 and Fed.R.Civ.P. 12(b)(3), or, alternatively, for failure to state a claim, pursuant to Fed.R.Civ.P. 12(b)(6). Following oral argument on June 21, 2001, Defendants also moved to transfer the action to the United States District Court for the Northern District of California, pursuant to 28 U.S.C. § 1404. Finally, Defendants move to strike portions of the complaint pursuant to Fed.R.Civ.P. 12(f). For the reasons that follow, Defendants' motion to dismiss or transfer venue will be denied, the motion to dismiss for failure to state a claim will be granted as to Count III and denied as to Counts I, II and IV, and the motion to strike will be granted as to attorney's fees and denied as to compensatory damages.

BACKGROUND

The parties' dispute involves the industry of robotic combat events, spectacles in which robots fight to the death with various tools of battle like post-modern gladiators. Given the long and convoluted history between the parties, it is necessary to recite at some length — both for contextual and venue purposes — facts concerning the formation of the Robot Wars venture, the parties' prior litigations in this district and the Northern District of California, and the events that led to Plaintiffs' commencing the current action. The facts below are drawn primarily from the Plaintiffs' complaint, which must be taken as true at this stage of the litigation.

The Formation of Robot Wars

In 1994, Profile Records, Inc. ("Profile"), a New York corporation with its principal place of business in this state (Compl. ¶ 1), entered into a joint venture ("the Venture") named "Robot Wars" with Marc Thorpe, a California resident. Profile and Thorpe, which held equal shares of the Venture (Id. ¶ 2), contemplated that Robot Wars would promote itself by staging live combat events that, among other things, could be used as a vehicle for licensing the Robot Wars trademark. (Id. ¶ 10.) Profile advanced approximately $400,000 in start-up capital; Thorpe, who had originated the idea and "took center stage at the live events," contributed no financing. (Id. ¶¶ 14, 16.)

Concomitant to the formation of the Venture, Thorpe and Profile executed a Venture Agreement on July 22, 1994. The agreement specified, among other things, that Thorpe was precluded from "negotiating, seeking to enter into, or entering into any other agreement with respect to matters within the scope of the Venture or becoming involved in any capacity in any other project relating to robots or robotic combat." (Id. ¶ 12.) The Venture Agreement specifies that it is to be governed by New York law, and contains a forum-selection clause specifying that any litigation arising out of its interpretation must be commenced in this state. (Plotnicki Aff. Ex.B at 7.) The parties contemplated that they would later execute more formal corporate documents, such as a shareholders' agreement, in connection with the Venture Agreement. Profile prepared the documents, but Thorpe, for reasons unclear, "declined to sign them." (Id. ¶ 14.)

From 1994 to 1996, Robot Wars expanded its competitions to the point where "it created a recognizable name and market for robotic entertainment." As the company grew, Thorpe became its public face among robot manufacturers, who regarded him as the "father of robotic competition," while Profile provided Robot Wars with financing and managed its daily operations. (Id. ¶ 16.) Despite its increasing success — and the apparent interest of prospective licensees — the company did not turn a profit during that time period. (Id. ¶ 15.)

Thorpe's Purported Breach of the Venture Agreement and Related Litigation

In July 1997, Profile learned that Thorpe had hatched surreptitious plans to conduct an event called "Robot Wars '97," which was supposedly to be funded by Robert Leppo, a California resident who is currently a co-owner of Defendant BattleBots, a California corporation with its principal place of business in California. (Id. ¶ 17.) This putative event violated the terms of the non-compete clause of the Venture Agreement, which prohibited Thorpe from conducting robot competitions independent of his joint venture with Profile. Leppo, aware of Thorpe's contractual restrictions, retained counsel to assist Thorpe with the legal implications of his breach of the Venture Agreement. (Id. ¶¶ 17-18.)

Subsequently, Profile informed Thorpe that his decision to hold Robot Wars '97 violated the Venture Agreement. Thorpe and Leppo ignored Profile's cease-and-desist efforts, and subsequently sent an e-mail to "all Robot Wars supporters," ostensibly in an effort to promote the rival competition. (Id. ¶ 19.)

In response to Thorpe and Leppo's actions, Profile commenced an action against Thorpe in this district on July 25, 1997, which was assigned to Judge Deborah A. Batts. The complaint alleged, among other things, that Thorpe had breached the Venture Agreement and infringed the Robot Wars trademark. Shortly thereafter, at Judge Batts' urging, the parties reached a settlement, memorialized on the record in open court, which specified, in part, that the Venture Agreement was to be "converted into a limited liability company operating agreement," and the new entity would then repay Profile the various cash advances it had made since the inception of the Robot Wars venture. (Id. ¶¶ 21-22.) The agreement also permitted Thorpe to conduct Robot Wars '97.

The Settlement Unravels

Following Robot Wars '97, Thorpe contacted Profile in an effort to split the new limited liability company into two separate divisions — a United States unit, which would be controlled by Thorpe, and an international unit, which would be held by Profile. Unbeknownst to Profile, Thorpe had purportedly entered into side-discussions with Leppo and Defendant Edward "Trey" Roski III, a resident of California. (Id. ¶ 3.) At a time uncertain, Thorpe and Roski then created what Plaintiffs term an "Entity-in-Formation," which was to compete directly with Robot Wars. Id. ¶ 32.)

Profile considered Thorpe's actions to be in derogation of the parties' August 6, 1997, settlement agreement, and it sought permission from Judge Batts to move for an order requiring Thorpe to perform the agreement. By order dated October 3, 1997, Judge Batts directed Profile and Thorpe to engage in mediation in an effort to secure the parties' compliance with the terms of the settlement agreement. (Id. ¶ 26.)

During the subsequent mediation, which was conducted in New York City, the parties reached a tentative agreement, pursuant to which Thorpe agreed to sell his half-share in the limited liability company to Profile, which in turn licensed Thorpe to conduct various robotic competitions with the Robot Wars trademark. However, after Profile's attorneys memorialized the settlement terms and presented them to Thorpe, he refused to execute the documentation and requested that he receive an interim license to conduct "Robot Wars '98" while he was still reviewing the settlement terms that had been presented to him. Profile declined, and Thorpe then moved on March 6, 1998, before Judge Batts for an injunction to compel Profile to grant the license. Judge Batts denied the motion on February 25, 1998, and directed the parties to appear at a subsequent conference in yet another effort to resolve their disputes. (Id. ¶¶ 27-30.)

On March 5, 1998, the day before Thorpe and Profile were scheduled to conduct yet another mediation session in New York City, Thorpe informed his adversary that an attorney from Latham Watkins would be attending. Unbeknownst to Profile, Roski (and, apparently, the Entity-in-Formation) had retained the attorney to monitor the subsequent mediation and, ostensibly, advise him as to how Thorpe could best attempt to dissolve his relationship with Profile. (Id. ¶ 34.)

Immediately following the session, Roski conferred with the attorney. Following those discussions, Roski advised Thorpe that he should not settle with Profile under the terms that Thorpe had previously assented to in October 1997. Thorpe, convinced by Roski's reasoning and knowing that Roski would support him financially in any subsequent litigation with Profile, then informed Profile that he would not settle. (Id. ¶ 35.)

Subsequently, Roski's attorneys informed Thorpe that if he were interested in developing the Entity-in-Formation, he would have to terminate the business arrangement with Profile. Thorpe acceded to the attorneys' advice. (Id. ¶¶ 36-37.) Then, following various telephonic conversations with Roski, Thorpe sent an e-mail on March 20, 1998, to all robot makers and fans on the Venture's mailing list, which referenced his dispute with Profile and noted that Thorpe "had worked too hard and too long and at far too much personal sacrifice to be bullied into submission by a wealthy businessman and his clever attorneys." (Id. ¶¶ 37-38.) At least one of the recipients of the e-mail resided in this district. (June 21, 2001 Tr. at 23.)

Around that time, Roski and his attorneys allegedly devised a scheme to free Thorpe from the constraints that the Venture Agreement imposed on him by either buying out his half-share in the Venture or convincing Thorpe to file for bankruptcy. Profile contends that as a result of these discussions between Thorpe and Roski, Thorpe was precluded from engaging in any further Venture-related business, which made it impossible for the Venture to conduct operations in the early portion of 1998. (Id. ¶¶ 39-40.)

Thorpe's Bankruptcy Filing

As of May 13, 1998, Thorpe had less than $100,000 of debt, which he was capable of paying off as it became due. On that day, Thorpe borrowed $150,000 from Roski, solely to make Thorpe eligible to file a federal bankruptcy petition. Thorpe then used the loan proceeds, which he secured with his half-interest in the Venture, to retain bankruptcy counsel, who had been selected for him by Roski. (Id. ¶¶ 41-42.) On May 27, 1998, Thorpe filed a Chapter 11 petition in the United States Bankruptcy Court for the Northern District of California. Thorpe, acting on the advice of his bankruptcy counsel, then notified Profile that he would be rejecting the Venture Agreement. Subsequently, he also refused to participate in the Venture's business operations, thereby immobilizing Robot Wars.

Additionally, Plaintiffs claim that Thorpe took affirmative steps to hurt Robot Wars' potential business. For example, on July 13, 1998, Thorpe's bankruptcy counsel, through a cease-and-desist letter notified Mentorn Films Group ("Mentorn"), a Robot Wars licensee, that Thorpe owned Robot Wars' trademark rights. Profile contends that as a consequence of Thorpe's actions toward Mentorn — and, apparently, other potential licensees — Robot Wars lost an unspecified amount of prospective business. (Id. ¶¶ 43-47.) Thorpe also allegedly failed to inform Profile in June 1998 that David Letterman was interested in running a "segment on Robot Wars" during his late-night talk show on CBS, which is produced in this district. (Id. ¶ 48.) Moreover, Thorpe failed to prevent two of his acquaintances from using the Robot Wars trademark without authorization, thus diluting the mark's value. (Id. ¶¶ 49-50.)

Profile subsequently moved in the Bankruptcy Court to dismiss Thorpe's petition on the theory that he had filed it in bad faith. It also sought to lift the automatic bankruptcy stay on other litigation so that it could seek a ruling from Judge Batts concerning whether Thorpe was bound by the terms of the August 6, 1997, settlement. On July 30, 1998, the Bankruptcy Court granted Profile relief from the terms of automatic stay, but delayed the order's effect for ninety days to allow Thorpe to develop a reorganization plan. (Id. ¶ 52.) The motion to dismiss the bankruptcy petition for bad faith was deferred pending submission of Thorpe reorganization plan. (Id. ¶ 52.)

The Bankruptcy Settlement Negotiations

Shortly after the stay was lifted, Thorpe's bankruptcy counsel circulated a draft reorganization plan for his client to one of Roski's attorneys at Latham Watkins. The plan apparently contemplated that Roski would acquire Thorpe's interest in the Venture and hire Thorpe as an officer to work for the new entity. To facilitate Roski's prospective purchase, Thorpe's draft specified that Roski would be entitled to match any offer made to Thorpe by a third-party, and would have an opportunity to purchase the Robot Wars trademark — although the mark was allegedly owned by the Venture. Profile renewed its objection to the plan on the grounds that Thorpe's Chapter 11 filing had been made in bad faith. (Compl. ¶¶ 53-56.) This motion was ultimately never heard by the Bankruptcy Court, as the parties continued to negotiate terms for the dissolution of the Venture, terms that apparently conflicted with those embodied in Thorpe's draft reorganization plan. (Id.) For instance, Thorpe insisted that Profile purchase his half-share and grant him a license to conduct Robot Wars competitions in the United States while the plan contemplated that Roski would acquire this interest. (Id. ¶ 56.)

Following an unsuccessful settlement conference before the Bankruptcy Court on December 3, 1998, Roski retained Frederick Fierst to advise Thorpe in connection with licensing issues related to the negotiations. Profile objected to Fierst's disclosing information about the negotiations to Roski, but Fierst nevertheless remained in regular communication with him. Thorpe himself also continued to consult directly with Roski and Leppo. (Id. ¶¶ 57-58.)

Profile informed Fierst, as Thorpe's attorney, that it would be willing to release any claims it had against Thorpe, provided that he "help to promote and rehabilitate the Venture and Profile's reputation." (Id. ¶ 59.) Following further negotiations, Fierst presented Profile with a proposed agreement under which Thorpe would receive $250,000 for his half-share of the Venture, a license to stage a Robot Wars competition in San Francisco, and various other inducements and benefits. Profile signed the agreement, but Thorpe — as had become customary — declined to do so. (Id. ¶¶ 60-63.)

On January 24, 1999, Thorpe, following further consultations with Roski and his attorneys, submitted yet another settlement term sheet to Profile. The sheet provided that in exchange for a mutual release of any claims that Thorpe and Profile may have had against one another, Thorpe would receive, among other things, $250,000 for his half-share of the Venture and a royalty from Robot Wars contingent on its future receipts. (Id. ¶¶ 65-69.) Thorpe would also "disclose potential competitors to Profile," and enter into a five-year non-compete agreement with Robot Wars. (Id. ¶ 69.) On or about February 2, 1999, both parties executed the agreement and submitted it to the Bankruptcy Court for final approval ("the Bankruptcy Settlement"). (ID. ¶¶ 68, 71.) The Bankruptcy Court approved the settlement on March 5, 1999. (Id. ¶ 75.)

Roski's Purported Efforts to Undermine the Bankruptcy Settlement

Shortly after the parties reached the settlement, Roski obtained a copy of the settlement agreement from either Thorpe or his counsel. He then disseminated the information to a robot maker, who posted an item on an unspecified website entitled "Which of You Would Be a Prostitute," opining that Thorpe was "prostitut[ing]" himself to Profile by agreeing to the settlement. (Id. ¶ 72.) Following the settlement, Roski and BattleBots, although aware of the settlement terms, encouraged Thorpe not to publicly support Robot Wars as the settlement required, and Thorpe effectively did not extend his support. (Id. ¶ 78-79.)

A Competitor Emerges

On March 10, 1999, Roski and Leppo unveiled BattleBots, a similar robotic combat event to take place one week before the planned Robot Wars '99. (Id. ¶ 80.) Plaintiffs contend that during the month of February, when BattleBots filed its Articles of Incorporation, Thorpe had approximately three dozen conversations with Roski. (Id. ¶ 81.) They further allege that Thorpe was secretly on Leppo's payroll, with Roski promising to indemnify Leppo for any claims asserted against him in connection with BattleBots (id. ¶¶ 82-84), and that Thorpe made damaging public statements on the internet about Profile and Steven Plotnicki, Profile's principal, in violation of the Bankruptcy Settlement (id. ¶ 85). Finally, on March 15, 1999, Profile notified Thorpe that he had breached the Bankruptcy Settlement and invoked the mediation procedure provided for by the Settlement. (Id. ¶ 87.) During this period, Plaintiffs allege that Roski and BattleBots were pursuing opportunities that Thorpe had told them had been offered to Robot Wars, including holding a meeting with TalentWorks, a television company that had previously "approached Robot Wars"(Id. ¶ 90.)

Defendants assertedly benefitted from Thorpe's refusal to promote Robot Wars. Plaintiffs charge that 38 "key competitors" from past Robot Wars events signed up for BattleBots instead of Robot Wars in 1999 and, likewise, that BattleBots was able to avoid the start-up costs of a robotic combat business. (Id. ¶¶ 99-100.) Robot Wars '99, without enough warriors to hold a profitable event, was canceled, while the first BattleBots event attracted approximately 70 teams of robot makers and has since climbed to profitable new heights, within three months attracting "enough quality robot makers to create a television series." (Id. ¶ 100-101.) Plaintiffs contend that BattleBots' success was unjustly earned through the Defendants' calculated and surreptitious acts that caused the decline in Robot Wars' market position and goodwill. (Id. ¶ 123-126.)

Further Litigation in this Court

Approximately a month later, Robot Wars filed another complaint in this district, Robot Wars v. Roski. III. Roski. Jr. and BattleBots, No. 99 Civ. 2953 (S.D.N.Y. filed April 23, 1999), alleging unfair competition, tortious interference with business and contractual relations, tortious interference with economic advantage, and trade dress infringement against Roski and BattleBots for largely the same activity that forms the material part of the instant complaint. (Defs.' Ex. D at 4 1-46.) On June 30, 1999, Judge Jed S. Rakoff approved Plaintiffs' voluntarily dismissal of the claim without prejudice. (Defs.' Ex. F.)

Further Bankruptcy Litigation

Back in the Northern District of California, the Bankruptcy Court ruled on August 8, 2000, that Thorpe had breached the Bankruptcy Settlement and ordered Thorpe to fulfill the provisions of the settlement agreement that required him to promote Robot Wars. (Defs.' Ex H at 3-4.) Claims of a Roski-Thorpe conspiracy were presented to the Bankruptcy Court by Profile in the determination of Thorpe's liability. Roski's and BattleBots' liability, however, were not considered in this action. Profile appealed the Bankruptcy Court's order to the District Court, which affirmed in part and remanded solely as to the calculation of damages. (Pls.' Ex. A at 19.)

Thorpe subsequently brought an adversary proceeding against Profile in the Bankruptcy Court, claiming that Profile had violated the Bankruptcy Court's discharge injunction by not discontinuing another suit Profile had filed against Thorpe in this district, Robot Wars v. Marc Thorpe. No. 01 Civ. 3195 (S.D.N.Y. filed Apr. 16, 2001), that has been consolidated with the instant action. (Defs.' Ex. K.) The Bankruptcy Court entered a preliminary injunction on May 24, 2001, enjoining Profile from prosecuting that action against Thorpe pending trial in the adversary proceeding. (Defs.' Ex. N at 1-2.) To the Court's knowledge, that trial is still pending.

The Instant Litigation

On March 5, 2001, Plaintiffs filed the complaint in this action. Plaintiffs present four separate claims, charging that:

(1) Defendants tortiously interfered with Profile's contracts with Thorpe;
(2) Defendants aided and abetted Thorpe's breach of a fiduciary duty he owed to Plaintiffs;
(3) Defendants were unjustly enriched when they acquired a portion of the Robot Wars business for themselves; and
(4) Defendants tortiously interfered with Robot Wars' prospective business relations.

The first and fourth claims were previously before Judge Rakoff in this district, but were voluntarily dismissed without prejudice. (Defs.' Ex. F.)

DISCUSSION

I.Venue Issues

For the purposes of deciding Defendants' motion to dismiss for improper venue or, in the alternative, to transfer the case to another judicial district, the Court must accept all of the uncontroverted allegations in Plaintiffs' complaint as true and construe all reasonable inferences in plaintiffs' favor. Dolson v. New York State Thruway Auth. 2001 WL 363032 at *1 (S.D.N Y 2001) (citation omitted).

A. Improper Venue: Rule 12(b)(3) and § 1406(a)

Defendants maintain that pursuant to 28 U.S.C. § 1406 (a), Plaintiffs' claims should be dismissed because (1) all Defendants do not reside in the state of New York ( 28 U.S.C. § 1391 (a)(1)); (2) no "substantial part of the events of omissions giving rise to the claim" occurred in New York (§ 1391(a)(2)); and (3) this action can be (and should have been) brought in the Northern District of California (§ 1391(a)(3)). (Defs.' Br. at 9.) Plaintiffs maintain that their claims have a substantial connection to New York, and hence, that venue is proper in this district under § 1391(a)(2).

28 U.S.C. § 1391 (a)(2), provides in relevant part: A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in . . . (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred. . . .

The crux of the venue issue, therefore, is whether Plaintiffs can demonstrate that a substantial part of the events or omissions giving rise to the claim occurred in New York. Defendants argue that the events or omissions giving rise to the claim "all occurred in California, not New York." (Defs.' Br. 8-9.)

Although there may have been initial confusion as to the proper interpretation of the 1990 amended version of the venue statute, courts are now settled in their method of application. The Plaintiff bears the burden of establishing that venue is proper once an objection to venue has been raised, D'Anton Jos, S.L. v. Doll Factory. Inc., 937 F. Supp. 320, 321 (S.D.N.Y. 1996), and must demonstrate that venue is proper for each claim asserted in their complaint. See Saferstein v. Paul Mardinly. Durham. James. Flandreu Rodger. P.C., 927 F. Supp. 731, 736 (S.D.N.Y. 1996); Wright, Miller Cooper, Federal Practice and Procedure: Jurisdiction 2d § 3808. To determine whether Plaintiffs have satisfied their burden of proving venue under § 1391(b), courts evaluate Defendants' actions as well as the nature of the dispute. See Friedman v. Revenue Mgmt. of New York, Inc., 38 F.3d 668, 672 (2d Cir. 1994) (affirming transfer of venue to district where a substantial part of Defendant's alleged actions occurred); I.M.D. USA. Inc. v. Shalit, 92 F. Supp. 2 d 315, 318 (S.D.N.Y. 2000) ("[T]he fact that the events and omissions most closely related to the alleged breach . . . unmistakably occurred in South Carolina is material, as the focus under Section 1391(a)(2) is on the activities of the defendant, not the plaintiff")

The venue statute, furthermore, does not require venue in the district with the most substantial contacts to the dispute. Rather, it is sufficient that a substantial part of the events occurred in the challenged venue, even if a greater part of the events occurred elsewhere. See David D. Siegel, Commentary on 1990 Revision of Subdivisions (a), (b), and (e) at 4, 28 U.S.C.A. § 1391 (Supp. 1993); Bates v. CS Adiusters. Inc., 980 F.2d 865 (2d Cir. 1992). The current venue standard, thus, acknowledges the more porous borders of the electronic age, where events can be influenced anywhere in the world by fax, phone and keystroke, and recognizes that a person acting predominantly in one state can easily cause his or her acts to have effects outside the borders of that state. Therefore, to show that venue lies in the Southern District of New York, Astor Holdings and Robot Wars bear the burden of establishing only that a substantial part of Roski's and BattleBots' actions or omissions giving rise to this lawsuit occurred in this district for each of the counts raised.

Plaintiffs contend that the Court can find venue solely because "plaintiffs were injured in New York." (Pl's. Br. at 5.) While it is true that the place where harm of a tort occurs is "relevant for venue purposes, New York Mercantile Exch. v. Central Tours. Inc. 1997 U.S. Dist. LEXIS 9242, at *13 (S.D.N.Y. June 30, 1997), Plaintiffs' contention overstates the breadth of the law of venue. In this case, when Plaintiffs speak of the harm caused by the tort, they mean solely the place where the economic effect of the tort was felt, in other words, the Plaintiffs' place of business. If this were enough to confer venue, then the plaintiff's residence would always be a proper venue in tort cases, or at least in cases of business torts. But this is conspicuously what Congress has provided in § 1391(a). Venue will usually exist where an act outside the district causes physical injury or other tortious effect inside the district. If, for example, a defendant by actions in California interfered with a business opportunity that existed in New York, the harm which the tort contemplates would occur here. But if the economic loss that resulted was inflicted on a corporation in Georgia, for example, that alone would not be sufficient for venue in Georgia, else plaintiffs could always sue in their home forum.

The only case cited that directly supports Plaintiffs' argument that a court may find venue proper under 28 U.S.C. § 1391(a)(2) based solely on the situs of the economic harm is Reynolds Corp v. National Operator Services, Inc., 73 F. Supp.2d 299 (W.D.N.Y. 1999). The other cases cited by Plaintiffs to support an effects-only inquiry are inapposite. Unlike the claims here, the cases cited: (1) concern motions to transfer from a district where venue had already been found proper; (2) contain analyses for personal jurisdiction purposes of defendants' forum related contacts, an inquiry that is distinct from a determination as to whether venue lies; (3) involve fact patterns in which the quantum of defendants' activities in the district in question was relatively greater than that alleged in the present action; or (4) do not even discuss venue or are cited out of context. There is an obvious potential for unbounded venue if the courts were to find venue regardless of where the acts occurred, based solely on the existence of economic harm felt in the district where the plaintiff resides or is headquartered. Therefore, while the locus of the harm suffered is a factor to consider, the case law does not support the theory that venue is proper on an economic-effects inquiry alone, and this Court respectfully declines to follow such limited non-binding authority as appears to take that view.

The Reynolds court cited to Rothstein v. Carriere, 41 F. Supp.2d 381, 387 (E.D.N Y 1999), to support this effects-only test for venue. However, in Rothstein, Judge Gershon noted that "the place where the harm occurred . . . [is] . . . relevant for venue inquiry," but not determinative and, further, that "all of the events regarding plaintiff' transpired in the forum distnct. Id.

CAT Internet Servs. v. Magazinescom. Inc., 2001 U.S.Dist. LEXIS 8, at *22 (E.D. Pa. Jan. 4, 2001).

Levisohn. Lerner. Berger Langsam v. Medical Taping Sys., 10 F. Supp.2d 334, 343 (S.D.N.Y. 1998); National Westminster Bank PLC v. Retirement Care Assocs., Inc., 1999 U.S. Dist. LEXIS 5807, at *8 (S.D.N.Y. Apr. 22, 1999).

Neufeld v. Neufeld, 910 F. Supp. 977, 986 (S.D.N.Y. 1996); New York Mercantile Exch. v. Central Tours Int'l. Inc., 1997 U.S. Dist. LEXIS 9242, at *13 (S.D.N.Y. June 30, 1997).

Lewis v. Rosenfeld, 2001 U.S. Dist. LEXIS 2313, at *14 (S.D.N.Y. Mar. 8, 2001); Bank Brussels Lambert v. Credit Lyonnais (Suisse) SA., 2001 U.S. Dist. LEXIS 5880, at *11 (S.D.N.Y. May 8, 2001); J.C. Whitney Co. v. Renaissance Software Corp., 2000 U.S. Dist. LEXIS 6180, at *64 (ND. III. Apr. 19, 2000). Kirkpatrick v. Rays Group, 71 F. Supp.2d 204, 212 (W.D.N.Y. 1999); Bates v. CS Adiusters. Inc., 980 F.2d 865, 868 (2d Cir. 1992).

But while Plaintiffs are wrong that the situs of economic injury is, without more, a place where "a substantial part of the events or omissions giving rise to the claim occurred," they are nevertheless correct that on the facts of this case, this district is an appropriate venue under the statute.

1. Tortious interference with contract

Under § 1391(a)(2), Plaintiffs may litigate the tortious interference of contract claim in this district, because the complaint demonstrates that a substantial part of the events giving rise to this claim occurred here.

Because the claim requires a preexisting contract, the Court first looks to the contracts at issue. There are two contracts to consider: the Venture Agreement and the Bankruptcy Settlement. Plaintiffs claim that Defendants caused Thorpe to breach the Venture Agreement in various ways. (Compl. ¶ 111(a), (b), (c).) It is undisputed that the Venture Agreement was a New York contract to be performed in New York and governed by New York law, as provided by a forum selection clause in the Agreement. (Plotnicki Aff at 7.) Plaintiffs also allege that Defendants induced Thorpe to breach the Bankruptcy Settlement between himself and the Plaintiffs. (Id. ¶ 111(e).) Although the bankruptcy itself took place in the Northern District of California, the Bankruptcy Settlement Agreement specifically states that the contract "may be enforced in the courts of California and New York," and called for Thorpe to provide information to Profile, which is located in New York, as well as to "promote the [Robot Wars] property." (Defs.' Ex. F at 3, 5-6.) While many of the actions giving rise to this claim occurred in California (Defs.' Br. at 11-12), the complaint alleges that these actions were directed at interfering with contracts that had substantial connections to New York.

Thus, substantial events giving rise to the alleged tortious interference of contract occurred in this district and venue is proper here.

2. Aiding and abetting breach of fiduciary duty

Venue in this district is also proper under § 1391(a)(2) for the second claim, aiding and abetting a breach of fiduciary duty. Plaintiffs allege that "knowing that Thorpe owed fiduciary obligations to plaintiffs, defendants deliberately induced Thorpe to breach such obligations and gave substantial assistance and encouragement to him in breaching such obligations." (Compl. ¶ 118.) Specifically, Plaintiffs assert that Roski, "[t]hrough his attorney, covertly participated in the March 6, 1998, mediation session between Thorpe and Profile" in New York to prevent the New York lawsuit from settling: (Id. ¶¶ 34-36). They further contend that on March 29, 1999, Roski's father was in New York on behalf of BattleBots, where he attended a meeting with TalentWorks, "a television company which had approached Robot Wars" via Thorpe, who then relayed this information to Roski and BattleBots instead of Profile. (Id. ¶ 90.) Although Roski himself may have been physically located in California when arranging for the above events, his actions were unmistakably directed towards concrete New York events that comprise a substantial basis of Plaintiffs' cause of action. Wachtel v. Storm, 796 F. Supp. 114, 116 (S.D.N.Y. 1992) (citingOstrowe v. Lee, 256 N.Y. 36 (1931)). Moreover, the fiduciary duty that Thorpe allegedly owed to Profile and Robot Wars is established by the Venture Agreement, which, as discussed above, is without question a New York contract that created a duty to a New York-based venture (Plotnicki Aff. Ex. B at 2), and thus the actions alleged above are directed to a duty established, governed and enforced by New York law. Accordingly, venue in the Southern District of New York is proper for this claim under § 1391(a)(2).

3. Unjust enrichment

Determining the application of§ 1391(a)(2) to the third claim is a more difficult exercise, partly because of the somewhat derivative nature of the claim and partly because of the vague language in Plaintiff's complaint which references, without specifying which are relevant, the prior 121 paragraphs of their complaint. (Compl. ¶¶ 122-127.) The main basis for the claim is that "Defendants engaged in conduct, and encouraged Thorpe to engage in conduct designed to paralyze the Robot Wars business so that defendants could acquire a valuable part of the Robot Wars business for themselves." (Id. ¶ 123.) By reference, however, defendants' "conduct" includes all of the acts alleged for the above actions, including interfering with the New York Venture Agreement, the New York lawsuit and the New York settlement negotiations. Thus, while the enrichment of the Defendants would occur in California, the means that were to accomplish that enrichment involved the undermining of Plaintiffs' venture in New York, which suffices to meet the substantiality test and establish venue for this claim under § 1391(a)(2).

Notwithstanding several references in their brief to a "deal with Comedy Central," by which Plaintiffs contend Defendants were unjustly enriched, this specific instance does not appear in the complaint itself (Pls.' Br. at 10, 12.)

4. Tortious interference with prospective business relations

Venue is also proper in the Southern District of New York for the fourth and final claim. Plaintiffs here allege that Defendants "engaged in fraudulent, dishonest, and unfair competition in order to interfere with the economic opportunities of the Robot Wars business." (Compl. ¶ 129.) Specifically, Plaintiffs contend that Defendants diverted a corporate opportunity for Robot Wars to appear on the David Letterman Show, a New York-based program (Id. ¶¶ 48, 129), as well as other prospective business relationships with "a variety of third parties, including Talent Works" (Id. ¶ 129), also a New York company, albeit one located in the Eastern District of New York. (Defs.' Reply at 5.) Plaintiffs further maintain that Defendants assisted Thorpe in disrupting the settlement proceedings in New York, thus interfering with the potential settlement. (Id. ¶¶ 34-36.) Specifically, it is alleged that Thorpe was in New York to settle a New York lawsuit when Defendants convinced Thorpe not to settle through a variety of tactics, including sending an attorney to the New York mediation proceedings to prevent the settlement. (Id.) Therefore two of the three business relationships allegedly interfered with were based in this district and one was based in the neighboring Eastern District of New York. Thus, substantial events giving rise to this claim transpired in this district, making venue in this Court proper.

Defendants' assertion that this activity was covered by a "mediation privilege" is unavailing, as such a privilege can protect only actual parties to the mediation, which Defendants were not. (Defs.' Br. at 13-14.) Defendants provide no legal support for the proposition that third parties covertly taking part in a mediation are protected by the mediation privilege. This is not surprising, as one of the purposes for the mediation privilege is to encourage settlement, precisely the opposite of what involving interested third-parties in a mediation session would contemplate. See generally Fields-D'Arpino v. Restaurant Assocs., Inc., 39 F. Supp.2d 412, 417 (S.D.N.Y. 1999); Alan Kirtley, The Mediation Privilge'S Transition From Theory to Implementation, J. Disp. Resol. 1, 9 (1995).

B. Change of Venue: § 1404(a)

In letter briefs to the Court filed after oral argument, the parties have addressed whether a transfer of venue was appropriate pursuant to 28 U.S.C. § 1404 (a). That statute provides that "for the convenience of parties and witnesses, in the interest ofjustice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404 (a). There is no dispute that the action in question could have been brought in the Northern District of California. Accordingly, the determination whether to transfer on grounds of convenience is left to "the broad discretion of the district court." Palace Exploration Co. v. Petroleum Dev. Co., 41 F. Supp.2d 427, 437 (S.D.N.Y. 1998) (citation omitted) (quoting In re Cuvahoga Equipment Corp., 980 F.2d 110, 117 (2d Cir. 1992)); Filmline (Cross-Country) Prod., Inc. v. United Artists Corp., 865 F.2d 513, 520 (2d Cir. 1989). The burden of showing the propriety of the transfer lies with the moving party, who must make a "clear-cut showing that a transfer is in the best interests of the litigation." Dwyer v. Gen. Motors Corp., 853 F. Supp. 690, 692 (S.D.N.Y. 1994) (citations omitted) (quotations omitted).

While there is no precise method to determine whether to transfer a case pursuant to § 1404(a), courts are guided by a variety of factors, which include: (1) the convenience of witnesses; (2) the location of relevant documents and the relative ease of access to sources of proof, (3) the convenience of the parties; (4) the locus of the operative facts; (5) the availability of process to compel attendance of unwilling witnesses; (6) the relative means of the parties; (7) a forum's familiarity with the governing law; (8) the weight accorded a plaintiffs choice of forum; and (9) trial efficiency and the interests ofjustice based on the totality of the circumstances. Reliance Insurance Co. v. Six Star. Inc., 155 F. Supp.2d 49, 56-57 (S.D.N.Y. 2001) (citing800-Flowers, Inc. v. Intercontimental Florist. Inc., 860 F. Supp. 128, 133 (S.D.N.Y. 1994); Ivy-Mar Co., Inc. v. Weber-Stephen Products Co., 1993 WL 535166, at *4 (S.D.N.Y. Dec. 22, 1993) While courts are to consider the above factors, there is "no rigid formula for balancing these factors and no single one of them is determinative." Citigroup. Inc. v. City Holding Company and City Nat'l Bank 97 F. Supp.2d 549, 561 (S.D.N.Y. 2000) (citations omitted). In addition, the Court must defer to the plaintiffs choice of forum unless the balance of convenience and justice weigh heavily in favor of defendant's proposed forum Id Toy Biz. Inc. v. Century Corp, 990 F. Supp. at 330 (S.D.N.Y. 1998); Janus Group. Inc. v. Independent Container, Inc., 1998 U.S. Dist. LEXIS 13106 *9 (S.D.N.Y. Aug. 24, 1998).

While Defendants seek to add to this list of factors another "key consideration" of "the pendency of related actions in the transferee district," citing APA Excelsior III L.P. v. Premiere Techs., Inc., 49 F. Supp.2d 664, 667-68 (S.D.N.Y. 1999), this consideration would appear to be not a separate factor, but simply an aspect of the trial efficiency/interests of justice factor. Moreover, APA Excelsior is distinguishable from the instant case as in that case there were twenty-two previously-filed and then-consolidated actions in the Northern District of Georgia that "hinge[d] on the same core of operative facts," versus one case filed in the Southern District of New York pursuant to a forum selection clause in a merger agreement. Id. at 670 Here, there is hardly such an overwhelming preponderance of cases in one district, but rather, related cases have been filed both in New York and in California during the history of the Robot Wars litigation.

Plaintiffs claim there are nine potential non-party witnesses who are either New York residents or subject to subpoena in New York, but do not specify their identities. (Pls.' Letter Br. at 6.) Although Defendants do not address this factor in their letter brief, Mark Thorpe, the most significant third-party witness, is a long-time resident of Northern California (Defs.' Br. at l), as is Robert Leppo, another significant witness (Leppo Aff. at 2). "When weighing the convenience of the witnesses, courts must consider the materiality, nature and quality of each witness, not nearly the number of witnesses in each district." TM Claims Service A/S/O Fuji Photo Film v. KLM Royal Dutch Airlines, 143 F. Supp.2d 402, 4016 (S.D.N.Y. 2001) (citation omitted). Thus, as important third party witnesses live in California while other witnesses most likely reside on both coasts, this factor does little to favor one venue over the other.

Assessing this factor is necessarily somewhat difficult at this stage of the case, as discovery has not commenced and neither party has formally identified the witnesses who will be called to testify at trial.

Neither side presents or argues the location of documents, perhaps because it is evident that relevant documents will be found in both New York and California, and thus, this factor does little to help either side. In any event, the location of records is not a compelling consideration when records are easily portable. MChoker v. Bank of America, 984 F. Supp. 757, 7616 (S.D.N Y 1997) ("In today's era of photocopying, fax machines and Federal Express," the location of documents factor is neutral).

As the parties to the suit are located both in California and in New York, the convenience of the parties factor does not weigh in either party's favor. Although Roski is a California resident and BattleBots is a California Corporation, BattleBots does business in New York, as shown by its interactions with Comedy Central, which is located in this district. (Roski Supp. Aff. at 2.) Similarly, although Astor Holding and Robot Wars are New York companies, Robot Wars held events in California. (Plotnicki Aff. at 3.) Indeed, Defendants conceded on the record in open court that this factor is a wash. (6/21/01 Tr. at 37.)

The main factor in Defendants' favor is that the primary locus of operative facts occurred in California (Defs. Br. at 11-15), something plaintiffs do not contest (Pls.' Br. at 10-12). As Roski and Thorpe both live in California, many of the alleged unlawful activities were committed there. However, even if many of the events giving rise to Plaintiffs' claim occurred in California, significant acts that occurred in New York or were directed at New York, as discussed in the § 1406 analysis above. Thus, this factor does not weigh heavily in favor of California.

Neither side has argued that process to compel unwilling witnesses is an issue in this case. Further, there is nothing on the record before the Court to suggest that trial in New York would impede the attendance of any contemplated witness. Similarly, the relative means of the parties has not been persuasively presented to the Court, although Plaintiffs assert, without specific evidentiary support, that they are of limited means while Defendants have "unlimited resources." (Pls.' Letter Br. at 7.) As this conclusory statement is unsupported and as Defendants have not addressed this point, this factor does not favor either side. See, e.g. TM Claims Service, 143 F. Supp.2d 402, 405 n. 4 (citation omitted).

In addition, familiarity with the governing law, whether it be that of California or New York, does little to favor either party, as this factor is generally given little weight in federal courts. See Prudential Sec. Inc. v. Norcom Dev., Inc., 1998 U.S. Dist. LEXIS 10569, at *17 (S.D.N.Y. July 15, 1998) ("this Court has routimely held that the 'governing law' factor is to be accorded little weight on a motion to transfer venue because federal courts are deemed capable of applying the substantive law of other states"). To the extent this factor could be held to have any weight, defendants have not persuasively argued that California law rather than New York law should apply to Plaintiffs' claims, nor that the two states' laws differ in any significant relevant respect.

Defendants choose to focus largely on the trial efficiency and interests of justice factor, in arguing that these claims should be consolidated with the bankruptcy proceedings in the Northern District of California. (Defs.' Letter Br. at 2). This factor "relates primarily to issues of judicial economy." Dostana Enterprises LLC v. Federal Express Corp., 2000 U.S. Dist. LEXIS 11726, *19 (S.D.N.Y. Aug. 9, 2000). Thorpe's bankruptcy proceedings in California, however, are largely complete. Profile appealed the Bankruptcy Court's ruling to the Northen District of California, which affirmed the decision in part and remanded to the Bankruptcy Court on the sole issue of damages. (Pls.' Letter Br. Ex. A at 19.) The other proceeding in Thorpe's bankruptcy case that involves Robot Wars is a narrow adversary proceeding brought by Thorpe against Profile for violating the discharge injunction by failing to discontinue a lawsuit against Thorpe after his reorganization plan was confirmed. (Pascoe Aff. at 2.) Additionally, and more to the point, the bankruptcy proceedings before the California court, including the Bankruptcy Settlement, did not specifically consider Roski's and Battlebots' alleged breaches of the Venture Agreement, but rather considered Marc and Denise Thorpe's breaches. Hence, the claims against Roski and BattleBots have not been litigated in the California action. Finally, it is not at all clear that Plaintiffs' claims against Roski and BattleBots, who are not bankrupt, could be consolidated with bankruptcy court proceedings involving Thorpe. Given these circumstances, the pendency of the California bankruptcy appeal provides no efficiency ground for transfer of an essentially distinct, if somewhat overlapping, litigation. See Wright, Miller Cooper, Federal Practice Procedure: Jurisdiction 2d § 3584 at 454-55 (the related case factor need not be given weight "if there is no realistic possibility of consolidating the present case with the related cases"). Further, as this Court is already familiar with the claims alleged, judicial economy is served by keeping venue in this district.

Since the other factors relevant to venue are fairly evenly balanced, Plaintiffs' choice of forum becomes the important consideration that tips the scales in Plaintiffs' favor to keep venue in New York for each of the claims raised. It is axiomatic that a plaintiff's choice of forum is entitled to great deference when the plaintiff has sued in the plaintiffs home forum. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988) (quoting Van Dusen v. Barrack, 376 U.S. 612, 622 (1964)); Royal Sunalliance v. British Airways, 2001 U.S. Dist. LEXIS 4508 at *2 (S.D.N.Y. Apr. 12, 2001). See also Koster v. (Am.) Lumbermens Mut. Cas. Co., 330 U.S. 518, 524 (1947); Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255-56 n. 23 (1981); Iragorri v. United Techs. Corp., 2001 U.S. App. LEXIS 26033 *7 (2d Cir. Dec. 4, 2001) (forum non conveniens context) (citations omitted); Wright, Miller Cooper, Federal Practice and Procedure: Jurisdiction 2d § 3848. Further, venue should not be transferred under § 1404(a) "where the result is merely to shift the inconvenience to plaintiff" Shube's Manufacturing Corp. v. Blake's Bros. Int'l. Inc., 1990 U.S. Dist. LEXIS 1779, at *12 (S.D.N.Y. Feb. 21, 1990). Here, two New York companies have chosen to litigate in New York claims related to this district.

In short, Defendants have not met their burden under § 1404(a). The balance of factors does not weigh heavily in Defendants' favor, but instead, is largely in equipoise. Given the deference courts are required to give to a plaintiff's choice of forum, this Court declines to transfer this case to the Northern District of California under § 1404(a).

II. Motion to Dismiss Under Rule 12(b)(6)

On a motion to dismiss under Rule 12(b)(6), the court "must accept as true the factual allegations in the complaint, and draw all reasonable inferences in favor of the plaintiff" Harris v. City of New York, 186 F.3d 243, 247 (2d Cir. 1999). The court must limit itself to facts stated in the complaint, including documents attached to or incorporated by the complaint. See Dangler v. New York City Off Track Betting Corp., 193 F.3d 130, 138 (2d Cir. 1999). The court should grant the motion only if, "after viewing plaintiffs allegations in this favorable light, it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief" Id. The court's role on a Rule 12(b)(6) motion is "merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof" Cooper v. Parskv, 140 F.3d 433, 440 (2d Cir. 1998) (internal quotation marks and citation omitted). While the pleading standard is liberal, "bald assertions and conclusions of law are insufficient." Id. at 440 (citing Leeds v. Meltz, 85 F.3d 51, 53 (2d Cir. 1996)).

A. Tortious Interference with Contract

Defendants move to dismiss the tortious interference of contract claim on three grounds: the claim is barred by the statute of limitations, the claim has previously been satisfied, and the claim fails as a matter of law.

1. Statute of limitations

New York has a three-year statute of limitations for tort claims. N.Y. C.P.L.R. § 214(4); Van Dussen-Storto Motor Inn. Inc. v. Rochester Tel. Corp., 407 N.Y.S.2d 287, 292 (4th Dep't 1978). Defendants maintain that Plaintiffs' claims for tortious interference of contract accrued — at the latest — on July 25, 1997, the filing date of the action that Astor commenced against Thorpe alleging, among other things, breach of contract. Plaintiffs claim, however, that Roski's involvement in the ongoing dispute was not known until May 13, 1998, when Roski's loan to Thorpe to fund Thorpe's bankruptcy proceedings was publicly disclosed in the bankruptcy court filings. Plaintiffs maintain that principles of equitable estoppel prevent the statute of limitations from running against plaintiffs who were unaware of their cause of action. (Pls.' Br. at 15.)

While Defendants list numerous allegations in the complaint itself to show that Roski's involvement was known to Plaintiffs prior to the bankruptcy filings, the allegations in the complaint represent information known to the Plaintiffs at the time of filing the complaint and do not necessarily demonstrate what was previously known by Plaintiffs. Further, although the complaint shows that Plaintiffs were suspicious of Leppo's involvement in July 1997, Thorpe falsely denied Leppo's involvement, supporting Plaintiffs' claim that they lacked actual knowledge of Roski's and Leppo's involvement at the relevant time.

For New York tort claims, the Court considers New York's doctrine of equitable estoppel, which is similar, but not identical, to the federal doctrine of equitable tolling. Johnson v. Nyack Hosp., 86 F.3d 8, 11 (2d Cir. 1996); Cary Oil Co., Inc. v. MG Refining and Mktg, Inc., 90 F. Supp.2d 401, 419 (S.D.N.Y. 2000). Equitable estoppel prevents a defendant from pleading the statute of limitations if plaintiff refrained from filing a timely action because of defendants' affirmative acts of misrepresentation or concealment. Plaintiffs must also demonstrate that they exercised due diligence in bringing the cause of action and reasonable care in ascertaining facts which might have led to discovery of their claim. Id. at 420; see also Menke v. Glass, 898 F. Supp. 227, 232-233 (S.D.N.Y. 1995) ("the critical question is whether the circumstances of th[e] case put plaintiffs on notice., and if, through the exercise of reasonable diligence, they would have discovered the wrongdoing"). The complaint here alleges both that Thorpe affirmatively misrepresented Roski's involvement and that Plaintiffs were reasonably dingent in attempting to determine Defendants' role in the alleged actions by asking Thorpe and his attorney of Leppo's connection to the alleged violations. (Compl. ¶ 21.) Perhaps these allegations will not in the end be established. At this stage of the proceeding, however, the facts alleged must be taken as true. Accordingly, the statute of limitations defense presents issues of fact that must be resolved at trial, or at least at summary judgment after development of a full factual record. It cannot be found on the face of the complaint that the tortious interference with contract claim is time-barred as a matter of law.

2. Claim preclusion

Defendants also argue that "in the Thorpe-Astor Adversary Proceeding, Astor was compensated for any alleged damages it suffered as a result of Thorpe's breach of contract" (Defs.' Br. at 17.) The tortious interference with contract claim, however, is a separate tort for which there is a separate cause of action brought against different persons than those sued in the bankruptcy court. While a breach of contract claim against Thorpe would be precluded, having already been litigated in the former proceeding, the claim at issue here involves Roski's and BattleBots' involvement in that breach, which has not yet been litigated, and for which a claim is not extinguished. While Plaintiffs would not be entitled to duplicative compensatory damages for any injuries for which they have already been compensated by Thorpe, Plaintiffs are entitled to demonstrate that Defendants here are joint tortfeasors with Thorpe, as well as to seek additional remedies, including punitive damages, against the Defendants.

3. Failure to state a claim

To state a claim for tortious interference with contract under New York law, a plaintiff must allege (1) the existence of a valid contract between itself and a third party; (2) defendant's knowledge of that contract; (3) defendant's intentional procuring of a breach; and (4) damages. There is also a causation burden on the plaintiff, who must assert that defendant's actions were the "but for" cause of the alleged breach of contract — in other words, that there would not have been a breach but for the defendant's activities. Lastly, the pleadings must have some factual specificity to state a claim for tortious interference; conclusory assertions are not sufficient. Alevizopoulos Assocs. v. Comcast Int'l Holdings, 100 F. Supp.2d 178, 186 (S.D.N.Y. 2000).

Plaintiffs identify two contracts with which Defendants interfered: the July 22, 1994, Venture Agreement between Profile Records, Inc. and Marc Thorpe that created Robot Wars, Inc., and the February 2, 1999, Bankruptcy Settlement Agreement among Profile Holdings, Inc., Robot Wars LLC, Steven Plotnicki and Marc Thorpe. (Compl. ¶¶ 111-113; Pls.' Ex. B; Defs.' Ex. F.) Plaintiffs claim that, notwithstanding their knowledge of these agreements, Defendants deliberately interfered with the contracts (Id. ¶¶ 112, 115) by inducing Thorpe to breach both of them (Id. ¶¶ 112-113), resulting in an estimated $5 million in damages to Plaintiffs (id. ¶ 114).

While the claims meet the required factual specificity as to the elements of the cause of action, the required causation is not as clearly alleged. However, Plaintiffs have alleged certain facts, particularly that Defendants formed an "Entity-in-Formation," and planned to hold Robot Wars '97 with Thorpe before the breach of the Venture Agreement, which suggest that Plaintiffs could show that without the assurance of a future business partner, Thorpe would not have breached the contract with Plaintiffs.(Id. ¶ 111.)

The terms of the Venture Agreement state that the joint venture "shall terminate at the election of either party, exercised by giving written notice to the other party . . . upon a material breach by either party, other than the party giving notice of termination." (Plotnicki Aff Ex. B at 5.) Although Profile previously brought an action against Thorpe in this district on July 25, 1997, for violating the Venture Agreement, it does not appear that Profile sought to terminate the Venture because of the breach. Rather, the Venture was converted following settlement negotiations into a limited liability company operating agreement, with Thorpe and Profile each having a 50% interest in Robot Wars LLC. As the agreement was restructured in this manner, it is possible for there to be more than one period of relevant interference with contract.

Likewise, Plaintiffs have pled specific facts that, if proven, could show that but for Roski's involvement, Thorpe would not have breached the Bankruptcy Settlement, including that Roski (a) hired attorney Fierst to advise Thorpe on the Bankruptcy Settlement (¶ 57); (b) sat alongside Thorpe at the Bankruptcy Court's approval of the Settlement (¶ 74); (c) "encouraged" Thorpe's various e-mail messages that allegedly failed to promote Robot Wars as required by the Settlement Agreement (¶¶ 74-79); and (d) secretly arranged for Thorpe to be placed on his business partner's payroll at around the time of the settlement, and indemnified his partner for the relationship (¶¶ 82-83). Thus, the facts alleged in the complaint, if they are substantiated, would permit a reasonable jury to conclude that but for Roski's actions, Thorpe would not have breached the Bankruptcy Settlement.

Thus, Plaintiffs have adequately alleged facts constituting a claim of tortious interference with contract. Accordingly, Defendants' motion to dismiss that claim is denied.

B. Aiding and Abetting Breach of a Fiduciary Duty

Defendants claim that the statute of limitations for a claim of breach of a fiduciary duty is three years, thus barring Plaintiffs from bringing this claim. Plaintiffs maintain that the appropriate time period is six years where the relief sought is equitable in nature or the breach grounded in fraud, or alternatively, that Roski's breach fell within the three-year statute of limitations period.

Even assuming arguendo that the applicable limitations period is three years, there is no statute of limitations bar here. Principles of equitable estoppel require that "a statute of limitations does not run against a plaintiff who is unaware of his cause of action." Dillman v. Combustion Engineering. Inc., 784 F.2d 57 (2d Cir. 1986) (citations omitted). In this case, the fact of which Plaintiffs needed to be aware is not the claimed breach of duty by Thorpe, but the alleged involvement by Defendants in inducing that breach. As stated above, Plaintiffs allege that they did not know, and could not have known, of the existence of contractual interference by Roski until Roski's May 13, 1998, loan to fund Thorpe's bankruptcy petition was publically disclosed. For the purposes of this motion, the Court must accept these allegations as true. Thus, since the instant action was filed on March 5, 2001, the claim falls within the three-year statute.

Defendants also argue that Plaintiffs have failed to state a claim for which relief can be granted. To state a claim for aiding and abetting a breach of fiduciary duty under New York law, Plaintiffs must allege (1) a breach by a fiduciary of obligations to another, and (2) that the defendant knowingly induced or participated in the breach. Wight v. Bankamerica Corp., 219 F.3d 79, 91 (2d Cir. 2000). Plaintiffs assert in the complaint that Defendants, knowing of the Venture Agreement between Thorpe and Profile and the later non-compete agreement in the Bankruptcy Settlement, encouraged Thorpe to attack Profile publicly (Compl. ¶¶ 19, 38); advised him to deadlock the Robot Wars business (Id. ¶¶ 36, 40, 45); sent their attorney to a private mediation with Profile (Id. ¶ 35); caused Thorpe to create a cloud on Robot Wars' ownership of the Robot Wars trademark (Id. ¶ 47); arranged for Thorpe to file for bankruptcy to obtain control of the Robot Wars business (Id. ¶ 43); and placed Thorpe on his payroll (Id. ¶¶ 82-83). Taking these allegations as true, this claim is adequately pled.

Accordingly, Defendants' motion to dismiss the claim of aiding and abetting breach of a fiduciary duty is denied.

C. Unjust Enrichment

Plaintiffs allege that Defendants engaged in conduct to obstruct the Robot Wars business, causing the erosion and goodwill of Robot Wars' market position, in order to acquire part of the Robot Wars business for themselves. (Compl. ¶¶ 123-125.) Defendants maintain that the claim of unjust enrichment, similar to quantum meruit, requires that "plaintiffs conferred a benefit on defendants," which Plaintiffs fail to demonstrate in their complaint. (Defs.' Br. at 23.)

Unjust enrichment is best understood as a general principle, straddling the division between contract and tort, that underlies various legal doctrines and remedies, rather than as a single well-defined cause of action. 22A N.Y. Jur. Contracts § 512. In essence, it is an action for restitution or on quasi contract, and "[the] existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter." Feigen v. Advance Capital Management Corp., 541 N.Y.S.2d 797, 799 (1st Dep't. 1989) (citing Clark-Fitzpatrick. Inc. v. Long Is. R.R. Co., 521 N.Y.S.2d 653, 656 (N.Y. 1987)). Unjust enrichment is not an appropriate remedy for fruitless negotiation, frustration or disappointed expectations. Cunningham v. Merchant-Sterling Corp., 587 N.Y.S.2d 492, 494 (1991); Songbird Jet Ltd., Inc. v. Amax. Inc., 581 F. Supp. 912, 926 (S.D.N.Y. 1984); 22A N.Y. Jur. Contracts § 512.

To state a claim for unjust enrichment in New York, a plaintiff must allege that (1) defendant was enriched; (2) the enrichment was at plaintiffs expense; and (3) the circumstances were such that equity and good conscience require defendants to make restitution. Louos v. Cyr, 2001 U.S. Dist. LEXIS 4663 *35 (S.D.N.Y. Apr. 17, 2001) (citingHuntington Dental Medical Co., Inc. v. Minnesota Mining and Mfg. Co., 1998 U.S. Dist. LEXIS 1526, *17 (S.D.N.Y. Feb. 11, 1998).

Although the conferral of a benefit upon Defendants is not clearly stated in the complaint, the crux of Plaintiffs' allegation appears to be that Roski and BattleBots were enriched in two basic ways. First, Plaintiffs contend Roski and BattleBots harmed RobotWars' business by "paralyzing the Robot Wars business., and causing the erosion of its goodwill and market position," so that Defendants could "acquire a valuable part of the Robot Wars business." (Compl. ¶ 123.) This was allegedly done by "either divesting Profile of its interest in the Robot Wars business or by forcing the Venture to grant Roski and BattleBots a license." (ID.) Second, Plaintiffs contend that BattleBots procured "key competitors" from prior Robot Wars events for BattleBots. (Compl. ¶¶ 99-100, 125.) Thus, Defendants' enrichment has been alleged. Whether the claimed enrichment is alleged to have been at Plaintiffs' expense is more dubious, as that claim appears to be based largely on the generalized notion of the erosion of Robot Wars "goodwill and market position." Though these allegations are less than specific, and do not suggest that Plaintiffs conferred a benefit on Defendants, it cannot be said at this point that Plaintiffs could not demonstrate facts to show that Defendants' enrichment came at their expense.

With such a vague claim, the equity standard is of critical importance. In this case, virtually all of the facts that could conceivably suggest that "equity and good conscience require Defendants to make restitution" are facts that are alleged to constitute specific torts charged elsewhere in the complaint. For example, in the tortious interference with contract claim, Plaintiffs allege Defendants caused Thorpe to file for bankruptcy in an effort to divest Profile of its interest in the Robot Wars business (Compl. ¶ 111), and in the aiding a breach of fiduciary duty claim, Plaintiffs maintain Defendants' alleged role in Thorpe's breaching of the Venture Agreement resulted in unjust enrichment (Compl. ¶¶ 119-120). Whether any benefit obtained by Defendants at Plaintiffs' expense by those alleged actions was "unjust" is better assessed according to the well-established rules defining the applicable torts, rather than by free-floating notions of "equity and good conscience."

The sole specific allegation that is not found elsewhere in the complaint is the question of the grant of a license from Robot Wars to Defendants. It is unclear precisely which license Plaintiffs refer to in this claim. Although the complaint mentions several licenses-in-negotiation, there appears to only have been one license that was ultimately granted to Thorpe: the license permitting Thorpe to conduct Robot Wars '97, that resulted from the settlement of August 6, 1997. (Compl. ¶ 22.) Plaintiffs rely on Rostropovich v. Koch, 1995 U.S. Dist. LEXIS 2785 (S.D.N.Y. March 7, 1995) for the proposition that "[e]ven though defendants paid for the right defendants did not pay [plaintiff] Rostropovich and a jury might find that the defendants benefitted monetarily at plaintiff's expense." (Pls.' Br. at 22).Rostropovich is not analogous to the instant situation, however, as it is nowhere alleged that Plaintiffs did not receive consideration for the license. In fact, Thorpe gave valuable consideration for that license, in the form of the settlement agreement. If Thorpe did not completely fulfill the promises exchanged for the license, because he failed to comply with the terms of the settlement agreement after staging Robot Wars '97, Plaintiffs deserve compensation to the extent they can show that Defendants achieved this result by tortious behavior, as alleged in the first two claims. If, however, they cannot establish the elements of the alleged torts, they have alleged no independent theory on which their success could be labeled unjust, such that equity should fill the gap and provide restitution where no tortious behavior can be shown. Accordingly, Defendants' motion to dismiss the unjust enrichment claim is granted.

D. Tortious Interference with Prospective Contractual Relations

The tort of interference with potential contractual relations consists of an intentional and improper interference with another's prospective contract. "To sustain its claim for tortious interference with prospective economic advantage, Plaintiffs must satisfy "an extremely high pleading standard" with allegations that include elements "more demanding than those for interference with [the] performance of an existing contract." Six West Retail Acquisition. Inc. v. Sony Theatre Mgmt Corp., 2000 U.S. Dist. LEXIS 2604 *101 (S.D.N.Y. March 8, 2000) (citing Fine v. Doernberg Co., Inc., 610 N.Y.S.2d 566, 567 (2d Dept 1994).

To state a prima facie case under New York law, Plaintiffs must establish (1) business relations with a third party; (2) the defendant's interference with those business relations; (3) that the defendant acted with the sole purpose of harming the plaintiff or used dishonest, unfair, or improper means; and (4) injury to the business relationship.See Nadel v. Play-By-Play Toys Novelties. Inc., 208 F.3d 368, 382 (2d Cir, 2000) (citing Purgess v. Sharrock, 33 F.3d 134, 141 (2d Cir. 1994)); Restatement (Second) of Torts § 766B.

Plaintiffs claim that Defendants interfered with two distinct business opportunities of Robot Wars, specifically, potential contracts with David Letterman and TalentWorks (Compl. ¶ 129), causing damages they estimate at $5 million (Compl. ¶ 130). Defendants allege, however, that they did no more than engage in competitive activity, which is not actionable under a theory of intentional interference with prospective economic advantage, Six West Retail, 2000 U.S. Dist. LEXIS 2604 at *101

1. Existing business relations

In the very nature of this tort, an existing contract is not required to state a claim for tortious interference with prospective business relations. Hannex Corp. v. GMI. Inc., 140 F.3d 194, 205 (2d Cir. 1998);Volvo N. Am. Corp. v. Men's Intern. Prof'l Tennis Council, 857 F.2d 55, 74 (2d Cir. 1988). However, there is a threshold requirement that a plaintiff "must specify some particular, existing business relationship through which plaintiff would have done business but for the allegedly tortious behavior." Six West Retail, 2000 U.S. Dist. LEXIS 2604 at * 101 (citing Minnesota Mining and Mfg. Co. v. Graham-Field. Inc., 1997 WL 166497 at *7 (S.D.N.Y. Apr. 9, 1997) (internal citations omitted); see also Envirosource. Inc. v. Horsehead Resource Dev. Co., 1996 WL 363091 at *14 (S.D.N.Y. 1996).

It is questionable whether Plaintiffs can establish such a business relationship with the David Letterman Show. In fact, the complaint supports the view there was no existing relationship of which Plaintiffs were aware, but rather the mere possibility of a limited future relationship between Robot Wars and the David Letterman Show which was only known to Thorpe. (Compl. ¶ 48.) Further, while Thorpe knew of this potential relationship, the relationship in question appears to be a one-off appearance on the Letterman show that will be hard to argue, even with more evidence, meets the requirement of an "existing business relationship." Plaintiffs rely on Hannex for the proposition that it need not plead that it would have entered into a contract to state a claim for interference with prospective business relations. However, in Hannex, although plaintiff Hannex did not have a contract to prove the existence of a business relationship with SS Japan, Hannex had an ongoing distributorship relationship that was shown to be "continuing" or "customary." This type of relationship is different from that alleged here, which appears to be nothing more than a preliminary contact that had not yet ripened even to negotiations. Whether the Letterman allegations meet the standard for this tort is thus a close question.

The alleged relationship with TalentWorks, however, was a longer term, potentially continuing" relationship. Although the nature of the potential TalentWorks relationship is not specified in the complaint, a supporting affidavit shows that TalentWorks sought in September of 1997 to "open discussions" with Robot Wars about developing "a mutual agreement for pay-perview television rights as well as other television related exposures." (Stucker Aff. Ex. A.) However, Defendants also provide a declaration of TalentWorks' CEO, Leonard Stucker, who states under oath that he formally withdrew his proposal to Thorpe and Robot Wars a year before he heard of and made contact with Roski and BattleBots. (Stucker Aff ¶¶ 6, 8.) If Stucker is to be believed, Plaintiffs will be unable to establish that any action of Defendants disrupted Plaintiffs' relationship with TalentWorks. At this stage of the litigation, however, Plaintiffs' allegations must be taken as true, and Plaintiffs have alleged that the failure of this relationship resulted from Defendants' interference. (Compl. ¶ 129.) Plaintiffs are entitled to test Stucker's assertions through discovery.

Given that the TalentWorks allegations can meet this requirement, it is unnecessary to decide whether the Letterman allegations are independently sufficient to meet the test. Since the claim will not be dismissed in any event, it is preferable to allow discovery on the Letterman episode as well, and defer until development of a fuller record the question whether the Letterman claim will remain part of the case.

2. Wrongful purpose/wrongful means

Even if the requirement of existing business relations is met, in order to state a claim for tortious interference with prospective business relations, Plaintiffs must allege either (1) that Defendants' sole purpose was to harm the Plaintiffs, or (2) that Defendants employed wrongful means in their interference.

The first test cannot be met as Plaintiffs and Defendants are economic competitors and, thus, disruption of Plaintiffs' business cannot be shown to be the sole purpose of Defendants' alleged interference. It is well settled that a defendant's "status as a competitor . . . may excuse him from the consequences of interference with prospective contractual relationships, where the interference is intended at least in part to advance the competing interest of the interferer, no unlawful restraint of trade is effected, and the means employed are not wrongful." Six West Retail, 2000 U.S. Dist. LEXIS 2604 *106 (citing Guard-Life Corp. v. S. Parker Hardware Mflg. Corp., 50 N.Y.2d 183, 191 (1980)); Rest.2d Torts § 768(1)(d). Hence, one who intentionally causes a third party not to enter into a prospective contract with his competitor does not interfere improperly with the other's relation if his purpose is at least in part to advance the interest of competing with the other. Here, Defendants are direct competitors of Plaintiffs, involved in precisely the same highly specialized business. In such a situation, it cannot be plausibly maintained that competitive impulses were not, in part, behind Defendants' actions.

Thus, the actions alleged for this claim can only be tortious if Defendants used "dishonest, unfair, or improper means" (collectively called "wrongful means"), to interfere with Plaintiffs' potential contractual relations. Wrongful means include "physical violence, fraud, misrepresentation, civil suits, criminal prosecutions and some degree of economic pressure, but more than simple persuasion is required." Snyder v. Sony Music Entertainment, Inc. 684 N.Y.S.2d 235, 300 (1st Dept. 1999) (citation omitted). Plaintiffs allege that "Defendants engaged in fraudulent, dishonest and unfair conduct in order to interfere" with Plaintiffs' prospective contractual relations. (Compl. ¶ 129.) Fraud is only alleged, if at all, to the extent that Thorpe was violating his fiduciary duty to Plaintiffs. In Hannex, considering conduct similar to that here, the Second Circuit held that "if a jury were to find the Defendants tortiously interfered with Salvo's fiduciary duties to [plaintiff] Hannex, they could also find that such interference constituted wrongful means sufficient to support a tortious interference with contractual and prospective business relations claim." Hannex, 140 F.3d at 206. Thus, although fraud may only be alleged as to Thorpe, ajury could find that Roski's alleged tortious interference with Thorpe's breach of fiduciary duty to Profile and Robot Wars constitutes wrongful means to support this claim. Accordingly, Defendants' motion to dismiss this claim is denied.

IV. Motion to Strike

Defendants claim Plaintiffs are not entitled to compensatory damages for the alleged interference with contract as they have already received such damages in the prior Thorpe-Astor Adversary Proceeding (Defs.' Br. at 23; Marc and Denise Thorpe v. Profile Holdings. Inc., Bankr. N.D. Cal. (Aug. 14, 2000)) and that Plaintiffs have no basis on which to request attorneys' fees. They therefore move to strike both demands. Plaintiffs offer no law or precedent to support their requests for either compensatory damages or attorneys' fees.

A. Compensatory Damages

It is telling that Defendants' motion to strike compensatory damages is not based on a claim of res judicata, although the substance of Defendants' argument is similar to an assertion that the claim for damages should be precluded as the issue was already litigated. Res judicata could not bar compensatory damages here because the Defendants in this action, Roski and BattleBots, are separate and distinct from those in the prior proceeding. When deciding whether the doctrine of res judicata bars a subsequent action, the court must consider whether (1) the prior decision was a final judgment on the merits, (2) the litigants were the same parties, (3) the prior court was of competent jurisdiction, and (4) the causes of action were the same. Corbett v. MacDonald Moving Servs., 124 F.3d 82, 88 (2d Cir. 1997).

This case involves plaintiffs, one of whom was a party as the prior proceeding, seeking to bring claims against two new defendants. The prior Adversary Proceeding was between Profile and the Thorpes, not Roski or BattleBots. Profile was not required to bring its claims against Roski in the bankruptcy proceedings because Profile has separate and distinct causes of action against each defendant. Northern Assur. Co. of Am. v. Square D Co., 201 F.3d 84, 89 (2d Cir. 2000) (where plaintiff chooses to sue one joint tortfeasor, but not the other, the unadjudicated claim survives the first judgment and can be brought against other potentially liable parties); Restatement (Second) of Judgments § 49 cmt. a (1982) (claim against others liable for the same harm is considered separate for preclusion purposes). Thus, although Plaintiffs' claim for compensatory damages for breach of contract may have been finally adjudicated as against the Thorpes, Plaintiffs are entitled to litigate their claims against Roski and BattleBots.

However, while multiple parties may be liable to Plaintiffs for the same injury, satisfaction of only one judgment for that injury may be collected. Northern Assur. Co. of Am., 201 F.3d at 89; Gentile v. County of Suffolk, 926 F.2d 142, 153 (2d Cir. 1991) (when plaintiff seeks compensation for same damages under different legal theories of wrongdoing, plaintiff generally should receive compensation for an item of damages only once); Conway v. Icahn Co., Inc., 16 F.3d 504, 511 (2d Cir. 1994) ("where plaintiff[s'] theories of recovery are based on a single set of facts, and the economic loss sustained was predicated on those unitary facts," only a single recovery should be allowed); see also Broome v. Biondi, 17 F. Supp.2d 211, 227 (S.D.N Y 1997). Thus, while both Thorpe and the Defendant here can both be found liable for Plaintiffs' breach of contract injury, only one recovery may be collected for compensatory damages for the breach of the Venture Agreement with Thorpe.

In the Thorpe-Astor Adversary Proceeding, Thorpe's breach of the Venture Agreement was litigated to a judgment, and the Plaintiffs' award ($225,666.67) was offset against Profile's larger debt to Thorpe ($250,000), resulting in a judgment that Profile pay Thorpe $24,333.33. The decision, however, was appealed by Profile to the District Court, which remanded the calculation of damages to the Bankruptcy Court, directing that contract rather than tort theory be applied in the calculation. (Pls.' Ex. A at 19.) So far as the record before this Court reveals, the damage award from that action has not been satisfied, nor even finally determined, and, thus, the motion to strike compensatory damages is premature at this stage. If, however, a final damages award is entered against Thorpe and the judgment is paid, Plaintiffs will not be entitled to a double recovery, and Defendants' motion can be renewed. Alternatively, if Plaintiffs cannot, for whatever reason, execute their judgment against Thorpe, there is no reason why they would not be entitled to obtain and execute a judgment against Roski and/or BattleBots as joint tortfeasors for the alleged claim. Northern Assur. Co. of Am., 201 F.3d at 88. Accordingly, the motion to strike the demand for compensatory damages for tortious interference with contract is denied, without prejudice to renewal at a later stage in the litigation if a prior judgment for this claim is obtained and satisfied.

B. Attorneys' Fees

Plaintiffs make a perfunctory request for attorneys' fees at the end of their complaint. Under New York law, attorneys' fees are not recoverable by prevailing parties absent express statutory or contractual authority or court rule. See Severion v. Classic Cohision. Inc., 719 N.Y.S.2d 902, 903 (2d Dep't 2001); Klein v. Sharp, 343 N.Y.S.2d 1014, 1015 (1st Dep't 1973). Plaintiffs' claims do not derive from a statute or contract authorizing recovery of attorneys' fees, but rather are articulated as common law tort claims for which attorneys' fees are ordinarily not available. In light of the litigious history of the Robot Wars dispute, this would be the last case in which any court would consider expanding the law of attorneys' fees eligibility in such a way as to provide further incentives to either party to prolong the dispute. Accordingly, Defendants' motion to strike Plaintiffs' demand for attorneys' fees is granted.

CONCLUSION

Defendants' motions to dismiss for lack of venue or to transfer venue are denied. Defendants' motion to dismiss for failure to state a claim is granted as to Count III and denied as to Counts I, II, and IV. Defendants' motion to strike Plaintiffs' request for compensatory damages is denied, and the motion to strike Plaintiffs' request for attorneys' fees is granted.

SO ORDERED:


Summaries of

Astor Holdings, Inc. v. Roski

United States District Court, S.D. New York
Jan 15, 2002
01 Civ. 1905 (GEL) (S.D.N.Y. Jan. 15, 2002)
Case details for

Astor Holdings, Inc. v. Roski

Case Details

Full title:ASTOR HOLDINGS, INC. f/k/a PROFILE RECORDS, INC. and ROBOT WARS LLC as…

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

Date published: Jan 15, 2002

Citations

01 Civ. 1905 (GEL) (S.D.N.Y. Jan. 15, 2002)

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