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Berry v. Deutsche Bank Trust Co. Americas

United States District Court, S.D. New York
Oct 21, 2008
07 Civ. 7634 (WHP) (S.D.N.Y. Oct. 21, 2008)


07 Civ. 7634 (WHP).

October 21, 2008

Timothy J. Hogan, Esq., Honolulu, HI, Counsel for Plaintiff.

Andrew P. DeNatale, Esq., Jonathan E. Moskin, White Case LLP, New York, NY, and F. Wade Ackerman, Esq., Michael Edward Baumann, Esq., Erin N. Brady, Esq., Kirkland Ellis, LLP, Los Angeles, CA, and, Raina P.B. Gushiken, Esq., Lyle S. Hosoda, Esq., Lyle S. Hosoda Associates, LLC, Honalulu, HI, Counsel for Defendants Deutsche Bank Trust Company Americas and JP Morgan Chase Bank.

Robert Penchina, Esq., Levine, Sullivan, Koch Schulz, LLP, New York, NY, Counsel for Defendant General Electric Capital Corporation.

Christopher May Mason, Esq., Nixon Peabody LLP, New York, NY, Counsel for Defendant C S Wholesale Grocers, Inc.

F. Wade Ackerman, Esq., Michael Edward Baumann, Esq., Erin N. Brady, Esq., Richard L. Wynne, Esq., Kirkland Ellis, LLP, Los Angeles, CA, Counsel for Defendants, The Post-Confirmation Trust of the Fleming Cos., Inc. and Robert Kors.


Plaintiff Wayne Berry's ("Berry") hydra-like three-hundred fourteen paragraph Second Amended Complaint alleges a dozen different claims against seven defendants and hundreds of John Doe defendants. It is neither a model of clarity nor a "short and plain statement" of claims. Broadly, Berry's claims sound in copyright infringement, breach of contract, breach of fiduciary duty, and the Racketeer Influenced and Corrupt Organizations ("RICO") Act. Four defendants — Deutsche Bank Trust Co. Americas ("Deutsche Bank"), JP Morgan Chase Bank ("Chase"), General Electric Capital Corporation ("General Electric"), and C S Wholesale Grocers, Inc. ("C S") move to dismiss the Second Amended Complaint. Defendants the Post-Confirmation Trust of the Fleming Companies, Inc. ("Fleming Companies Trust") and Robert Kors ("Kors") move for summary judgment dismissing the claims against them. C S also moves to strike portions of the Second Amended Complaint, and all defendants move to require Berry to post a bond if any of his claims survive. Kors and the Fleming Companies Trust move for sanctions under Rule 11. For the following reasons, this Court grants the motions to dismiss by Deutsche Bank, Chase, General Electric, and C S, and the motions for summary judgment by the Fleming Companies Trust and Kors.

Berry has agreed that the Second Amended Complaint is the final complaint in this action and will not be repled. (Scheduling Order at 1 dated December 7, 2007.)

Plaintiff voluntarily dismissed his claims against a seventh defendant, Core-Mark.


For the purposes of the motions to dismiss, this Court accepts the following allegations as true.

Berry owns a number of copyrights related to software for freight management systems ("Copyrighted Software"). (SAC ¶¶ 1, 17, 23.) In 1999, Berry licensed the Copyrighted Software to the Fleming Companies, Inc. ("Fleming"), a grocery wholesaler and distributor with operations in Hawaii. In April 2003, Fleming filed for bankruptcy. During the bankruptcy proceeding, Fleming rejected Berry's license agreement for the Copyrighted Software and sold its Hawaiian logistics business to C S, a nationwide grocery wholesaler. (Affidavit of Erin N. Brady dated Feb. 26, 2008 ("Brady Aff.") Ex. A: Reorganization Plan dated Aug. 23, 2003 at 34.) The Fleming Companies Trust is the post-bankruptcy estate of Fleming. Kors is allegedly the principal of the Fleming Companies Trust. (SAC ¶ 10.) Deutsche Bank, Chase, and General Electric (collectively, the "Lenders") were part of a syndicate of financial institutions that provided financing to Fleming before the bankruptcy and to the Fleming Companies Trust and C S after the reorganization. (SAC ¶ 4, 107-124.)

I. The First Hawaii Action

In 2001, Berry sued Fleming for copyright infringement in the Hawaiian federal court. (SAC ¶ 44.) In 2003, prior to any bankruptcy filing, a jury awarded Berry $98,250, for willful infringement. Entry of a judgment was automatically stayed by Fleming's bankruptcy. After the stay was lifted, the Ninth Circuit affirmed the judgment against the Fleming Companies Trust. (SAC ¶¶ 41, 59.)

II. The Second Hawaii Action

A. Overview

Following the jury verdict on his copyright infringement claim, Berry filed another federal action in Hawaii (the "Second Hawaii Action") against twenty-eight companies and individuals including Fleming and C S. (Declaration of Lex R. Smith dated Jan. 25, 2008 ("Smith Decl.") Ex. C: Second Amended Verified Complaint dated Jun. 18, 2004 ("SAC-Hawaii").) In that action, Berry alleged, inter alia, direct and indirect copyright infringement, misappropriation of trade secrets, violations of the Sherman Act, and a RICO claim. (SAC-Hawaii ¶¶ 71-79, 80-95, 96-112, 113-131, 132-149.) He also claimed that C S obtained copies of the Copyrighted Software through a fraud on the bankruptcy court. (SAC-Hawaii ¶¶ 7, 68, 105, 112.)

Berry's RICO claim asserted that the parties were members of an enterprise that started "sometime in 1999," conspired to infringe his copyrights, and were engaged in a pattern of racketeering. He also alleged that his Copyrighted Software was indispensable to the success of the RICO enterprise. (SAC-Hawaii ¶¶ 133-134, 137, 139, 143-148.)

B. Summary Judgment Motions and Trial

In October 2005, the Hawaiian court granted C S's motion for summary judgment and dismissed all claims against that firm, finding that C S had neither used nor copied the Copyrighted Software. (Smith Decl. Ex. D: Order Granting C S's Motion for Summary Judgment dated Jun. 27, 2005.) The court also granted Berry's motion for summary judgment against the Fleming Companies Trust, finding that Fleming had inadvertently infringed the Copyrighted Software for several months. (Smith Decl. Ex. D at 5-28.) Following a jury trial on damages, a judgment was awarded to Berry against the Fleming Companies Trust for $57,534 for inadvertent infringement. (See Smith Decl. Ex. J: Final Judgment in the Second Hawaii Action ("Final Judgment") dated Mar. 16, 2006 at 3.)

C. Permanent Injunction Sought

In early 2006, after the jury trial on damages, Berry tried to revive his claims by moving to enjoin Fleming, the Fleming Companies Trust, and C S from using, reproducing, or transferring the Copyrighted Software and any derivative works, and to direct them to return and destroy all copies of the Copyrighted Software in their possession. (Smith Decl. Ex. I: Order Denying Plaintiff's Motion for Issuance of Permanent Injunction ("Permanent Injunction Order") dated Mar. 3, 2006 at 1-2.) In March 2006, the Hawaiian court denied Berry's motion for injunctive relief, and found that Fleming and the Fleming Companies Trust posed no risk to Berry because they were no longer in business, and that "Berry fail[ed] to show that Fleming transferred any copies or derivatives of the [Copyrighted Software] to C S." (Smith Decl. Ex. I at 6-7; Ex. J.) The Ninth Circuit affirmed the denial of injunctive relief. Berry v. Dillon, No. 06-16199, 2008 WL 257064 (9th Cir. Jun. 27, 2008).

D. Attorneys' Fees Motions and Judgment Debtor Deposition

Following denial of the permanent injunction, C S sought attorneys' fees and costs. (Smith Decl. Ex. L: Order dated Mar. 2, 2007.) The Hawaiian court awarded $84,758 in attorneys' fees to C S as the prevailing party on the copyright claim. (Smith Decl. Ex. L at 2.) Enforcement proceedings ensued. C S moved to compel Berry's deposition as a judgment debtor. Lex Smith ("Smith"), C S's attorney, contacted Wesley Ichida ("Ichida"), Berry's counsel, to schedule a hearing on the motion to compel. (Affidavit of Lex R. Smith dated Feb. 25, 2008 ("Smith Aff.") ¶ 4.) During that telephone conversation, Smith asked Ichida if his attorney lien on Berry's judgments against the Fleming Companies Trust was for sale. (Smith Aff. ¶ 4; Affidavit of Wesley Ichida dated Feb. 25, 2008 ¶ 3.) Ichida informed Berry later that day about Smith's inquiry. (Affidavit of Wayne Berry dated Mar. 19, 2007 ("Berry Aff.") ¶ 16, Ex. 5: Email string between Berry and Ichida, dated July 17, 2007 ("Ichida Email").) Berry now alleges on information and belief that Smith paid Ichida to breach his fiduciary duty to Berry, and that Ichida concealed the alleged payment. (SAC ¶¶ 193-227.)

The Hawaiian court ordered Berry to appear for a deposition as a judgment debtor. He traveled from Florida to Hawaii where Smith deposed him. (Brady Aff. Ex. G: Order Affirming Magistrate Judge Order Compelling Wayne Berry to Comply with an Order for Judgment Debtor Deposition dated Aug. 10, 2007; Smith Decl. ¶ 21; Berry Aff. ¶ 17.) When the deposition concluded, Berry flew back to Florida where he was served with a divorce complaint. He claims that the Hawaiian deposition and the service of a summons and divorce in Florida are related in some way. (Berry Aff. ¶ 17.)


I. Legal Standard

A. Motion to Dismiss

On a motion to dismiss, the Court must accept the material facts alleged in the complaint as true and construe all reasonable inferences in the plaintiff's favor. Grandon v. Merrill Lynch Co., 147 F.3d 184, 188 (2d Cir. 1998). Nonetheless, "factual allegations must be enough to raise a right of relief above the speculative level, on the assumption that all of the allegations in the complaint are true." Bell Atl. Corp. v. Twombly, ___ U.S. ___, 127 S. Ct. 1955, 1965 (2007) (requiring plaintiff to plead "enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of [his claim]");see also ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) ("We have declined to read Twombly's flexible `plausibility standard' as relating only to antitrust cases.").

A court may also consider "documents appended to the complaint or incorporated in the complaint by reference, and to matters of which judicial notice may be taken." Allen v. WestPoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991). The Court may also "look to public records . . . in deciding a motion to dismiss." Blue Tree Hotels Inv. (Canada), Ltd. v. Starwood Hotels Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004).

B. Summary Judgment

Summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). The burden of demonstrating the absence of any genuine dispute as to a material fact rests with the moving party. Adickes v. S.H. Kress Co., 398 U.S. 144, 157 (1970). In determining whether there is a genuine issue as to any material fact, "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in [its] favor."Liberty Lobby, 477 U.S. at 255

II. Copyright Infringement Claims

A. C S

The doctrine of res judicata, or claim preclusion, precludes the parties or their privies from relitigating claims that were or could have been raised in a previous action. Marvel Characters, Inc. v. Simon, 310 F.3d 280, 286-87 (2d Cir. 2002). To establish res judicata, the movant must show that: "(1) the previous action involved an adjudication on the merits; (2) the previous action involved the plaintiffs or those in privity with them; [and] (3) the claims asserted in the subsequent action were, or could have been, raised in the prior action." Monahan v. N.Y. City Dep't of Corr., 214 F.3d 275, 285 (2d Cir. 2000). "A first judgment will generally have preclusive effect only where the transaction or connected series of transactions at issue in both suits is the same, that is when the same evidence is needed to support both claims, and when the facts essential to the second were present in the first." S.E.C. v. First Jersey Secs., Inc., 101 F.3d 1450, 1463-64 (2d Cir. 1996) (citations and quotations omitted).

Berry does not dispute the first two elements, but asserts that his claims here are different from those advanced in the Second Hawaii Action. However, the Hawaii action specifically addressed Berry's claims that C S acquired the Copyrighted Software from Fleming in the bankruptcy proceeding and that C S's use of Copyrighted Software infringed Berry's copyrights. Berry's copyright infringement, trespass to material objects and conversion claims in this action rest on the same facts that were determined by the Hawaiian court. Therefore, these claims are barred by res judicata. See Cisco Sys. Inc. v. Alcatel USA, Inc., 301 F. Supp. 2d 599 (E.D. Tex. 2004) (holding trespass claim barred by earlier law suit for trade secrets).

B. The Lenders

1. Contributory Infringement

"To state a claim for contributory copyright infringement, a plaintiff must aver that the defendant, "`with knowledge of the infringing activity, induce[d], cause[d], or materially contribute[d] to the infringing conduct of another.'" Warner Bros. Entm't Inc. v. Ideal World Direct, 516 F. Supp. 2d 261, 267-68 (S.D.N.Y. 2007) (quoting Gershwin Publ'g Corp. v. Columbia Artists Mgmt., Inc., 443 F.2d 1159, 1162 (2d Cir. 1971) (modifications in the original)).

To show material contribution, the participation or contribution must be substantial. Faulkner v. Nat'l Geographic Soc'y, 211 F. Supp. 2d 450, 473 (S.D.N.Y. 2002) (quotations omitted). "The authorization or assistance must bear a direct relationship to the infringing acts, and the contributory infringer must have acted in concert with the direct infringer."Livnat v. Lavi, No. 96 Civ. 4967 (RWS), 1998 WL 43221, at *3 (S.D.N.Y. Feb. 2, 1998).

Because Berry fails to allege any facts that show that the Lenders acted in concert with any direct infringer or directed the infringement, the Lenders' motion to dismiss the contributory infringement claim is granted.

2. Vicarious Infringement

To establish vicarious liability, plaintiff must show that the defendant had the "[1] right and ability to supervise [that] coalesced with [2] an obvious and direct financial interest in [3] the exploitation of copyrighted materials." Softel, Inc. v. Dragon Med. Scientific Commc'ns, Inc., 118 F.3d 955, 971 (2d Cir. 1997) (citing Shapiro, Bernstein Co. v. H.L. Green Co., 316 F.2d 304, 307 (2d Cir. 1963)). "Courts relying on this theory . . . have emphasized that some degree of control or supervision . . . is of crucial importance." Demetriades v. Kaufmann, 690 F. Supp. 289, 292 (S.D.N.Y. 1988). "The mere fact that the [defendants] could have policed [the infringer] . . . is insufficient to impose vicarious liability." Artist Music Inc. v. Reed Publ'g USA, Inc., No. 93 Civ. 3428 (JFK), 1994 WL 191643, at *5 (S.D.N.Y. May 17, 1994). "[T]he parties' paths must cross on a daily basis, and the character of this intersection must be such that the party against whom liability is sought is in a position to control the personnel and activities responsible for the direct infringement." Banff Ltd. v. Limited, Inc., 869 F. Supp. 1103, 1109 (S.D.N.Y. 1994).

Berry fails to allege any facts showing the degree of control necessary to state a claim of vicarious copyright infringement. The relationship between a lender and borrower alone is not sufficient to establish the right and ability to supervise the borrower. See Banff, 869 F. Supp. at 1109-10 (parent-subsidiary relationship was insufficient to show the level of control necessary for vicarious copyright infringement); see also Perfect 10, Inc. v. Visa Int'l Serv. Ass'n, 494 F.3d 788, 803 (9th Cir. 2007) ("[T]he mere ability to withdraw a financial `carrot' does not create the `stick' of `right and ability to control' that vicarious infringement requires.").

Moreover, the interest in repayment of a loan does not establish an "obvious and direct financial interest" in the infringement. See Deutsch v. Arnold, 98 F.2d 686, 687-88 (2d Cir. 1938) (holding that collecting a fixed rent from an infringer was insufficient to impose vicarious copyright infringement liability); Ellison v. Robertson, 357 F.3d 1072, 1078 (9th Cir. 2004) (requiring proof that defendant's revenues were dependant on infringement). Accordingly, the Lenders' motions to dismiss the vicarious infringement claim are granted.

III. Unjust Enrichment Against the Lenders

Section 301 of the Copyright Act preempts state law actions that seek to vindicate rights equivalent to those protected under the Copyright Act. See 17 U.S.C. § 301(a). The Copyright Act preempts state law claims when: (1) "the particular work to which the claim is being applied falls within the type of works protected by the Copyright Act" and (2) "the claim seeks to vindicate legal or equitable rights that are equivalent to one of the bundle of exclusive rights already protected by copyright law." Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 305 (2d Cir. 2004).

A claim seeks to vindicate legal or equitable rights that are equivalent to one of the bundle of exclusive rights already protected by copyright law if the claim involves "acts of reproduction, adaptation, performance, distribution or display" and does not include "any extra element[] that make[s] it qualitatively different from a copyright infringement claim." Briarpatch, 373 F.3d at 305. The Court of Appeals has taken a "restrictive view of what extra elements transform an otherwise equivalent claim." Briarpatch, 373 F.3d at 306. "To determine whether a claim is qualitatively different, [courts] look at what [the] plaintiff seeks to protect, the theories in which the matter is thought to be protected and the rights sought to be enforced." Briarpatch, 373 F.3d at 305 (internal quotation marks and citations omitted).

Because there is no conflict between New York and Hawaii law on a claim for unjust enrichment, this Court will discuss the law of New York. MCI Worldcom, Inc. v. Tele Tower, Inc., No. 01 Civ. 0255 (LAK), 2002 WL 378424, at *2 (S.D.N.Y. Mar. 11, 2002). "The basic elements of an unjust enrichment claim in New York require proof that (1) defendant was enriched, (2) at plaintiff's expense, and (3) equity and good conscience militate against permitting defendant to retain what plaintiff is seeking to recover." Briarpatch, 373 F.3d at 306. While the element of enrichment is not required for a copyright infringement action, it does not go "far enough to make the unjust enrichment claim qualitatively different from a copyright infringement claim."Briarpatch, 373 F.3d at 306.

Berry's claim that the Lenders were enriched by Fleming's infringement by at least the value of the infringed material, (SAC ¶ 183), is qualitatively the same as a copyright infringement claim. See Briarpatch, 373 F.3d at 306 (unjust enrichment claim alleging that defendant was enriched by an act that formed the basis of a copyright infringement claim was preempted); Orange County Choppers, Inc. v. Olaes Enters., Inc., 497 F. Supp. 2d 541, 566 (S.D.N.Y. 2007) (claim that defendant was unjustly enriched by reproduction and distribution of licensed design was preempted). Accordingly, the Lenders' motions to dismiss the unjust enrichment claims are granted.

IV. RICO Claims

To establish a civil RICO claim, "a plaintiff must show that he was injured by [the] (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Azrielli v. Cohen Law Offices, 21 F.3d 512, 550 (2d Cir. 1994). An "enterprise" is defined to "`include any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity.'"Bankers Trust Co. v. Rhoades, 741 F.2d 511, 515 (2d Cir. 1984) (quoting 18 U.S.C. § 1961(4)). In determining whether a RICO enterprise exists, a court must look to the "`hierarchy, organization, and activities' of an association-in-fact to determine whether its members functioned as a unit." First Nationwide Bank v. Gelt Funding Corp., 820 F. Supp. 89, 90 (S.D.N.Y. 1993). In order to be liable under RICO, a defendant must play some part in "directing the enterprise's affairs."Reves v. Ernst Young, 507 U.S. 170, 179 (1993). Lending money to an enterprise does not establish a role in "directing the enterprises affairs." See, e.g., Indus. Bank of Latvia v. Baltic Fin. Corp., No. 93 Civ. 9032 (LLS), 1994 WL 286162, at *3 (S.D.N.Y. Jun. 24, 1994) (dismissing RICO claim against bank because "provid[ing] banking services — even with knowledge of the fraud — is not enough" to state a RICO claim).

There are no facts establishing that the Lenders had any control. They loaned money in an arms length commercial transaction. Moreover, the facts do not establish any hierarchy or organization among the Lenders, Kors, the Fleming Companies Trust, and C S. Berry's "conclusory naming of a string of entities does not adequately allege an enterprise." First Capital Asset Mgmt., Inc. v. Satinwood, Inc., 385 F.3d 159, 175 (2d Cir. 2004) (citations and quotations omitted). Accordingly, the Defendants' motions to dismiss and for summary judgment regarding the RICO claim are granted and the RICO claim is dismissed.

V. Breach of Contract Claims

To establish a claim for breach of contract, the plaintiff must prove: "(1) a contract; (2) performance of the contract by one party; (3) breach by the other party; and (4) damages."Terwilliger v. Terwilliger, 203 F.3d 240, 246 (2d Cir. 2000) (citations omitted).

Section 365 of the Bankruptcy Code provides that a trustee or chapter 11 debtor-in-possession may, with court approval, reject any executory contract or unexpired lease of the debtor. 11 U.S.C. § 365(a). Rejection is in effect a decision to breach the contract or lease. See 11 U.S.C. § 365(g). In the event of rejection, the non-debtor party is generally relegated to pursuing an unsecured pre-petition claim against the estate. In re Child World, Inc., 147 B.R. 847, 852 (Bankr. S.D.N.Y. 1992). "Rejection does not change the substantive rights of the parties to the contract, but merely means the bankruptcy estate itself will not become a party to it." In re Alongi, 272 B.R. 148, 153 (Bankr. D. Md. 2001).

Because Fleming rejected Berry's license agreement for the Copyrighted Software, the Fleming Companies Trust was never a party to the license agreement. Cruikshank Ltd. v. Sorros, 765 F.2d 20, 26 (2d Cir. 1985). In addition, because the Fleming Companies Trust has no obligations under the license agreement there can be no derivative liability for Kors. Accordingly, the Fleming Companies Trust's and Kors's motion for summary judgment on the breach of contract claim is granted and the contract claim is dismissed.

VI. State Law Claims For Tortious Conduct

A. Abuse of Process Claim

An abuse of process claim has three essential elements: "(1) regularly issued process, either civil or criminal, (2) an intent to do harm without excuse or justification, and (3) use of the process in a perverted manner to obtain a collateral objective."Curiano v. Souzzi, 469 N.E.2d 1324, 1326 (N.Y. 1984). The "gist" of an action for abuse of process is improper use of the process after it is issued. Curiano, 469 N.E.2d at 1326. The mere service of a complaint is not an abuse of process. See Curiano, 469 N.E.2d at 1326. Also, "an attempt to collect a money judgment is a justification for the use of process negating a required element of the tort of abuse of process — a purpose to do harm without economic or social justification." Chem. Bank v. Haseotes, No. 93 Civ. 2846 (LMM), 1994 WL 88257, at *2 (S.D.N.Y. Mar. 16, 1994) (citing Roberts v. Pollack, 461 N.Y.S.2d 272 (N.Y.App.Div. 1st Dep't 1983)).

There is no conflict between New York and Hawaii law, so this Court will apply the law of New York. See Wong v. Panis, 772 P.2d 695, 699-700 (Haw.Ct.App. 1989), abrogated on other grounds,Hac v. Univ. of Hawaii, 73 P.3d 46 (Haw. 2003) (Hawaii law same)

Berry claims two acts by C S, Kors and the Fleming Companies Trust constitute abuse of process: (1) service of a divorce complaint in Florida and (2) a court-ordered judgment debtor deposition in Hawaii. (SAC ¶¶ 228-236.)

The service of a complaint is not an abuse of process. Curiano, 469 N.E.2d at 1326. As for the deposition, Berry does not dispute that it was ordered by the Hawaiian court as part of C S's effort to recover its attorneys' fees. Thus, Berry concedes it had a legitimate purpose. Chem. Bank, 1994 WL 88257, at *2. Accordingly, C S's motion to dismiss the abuse of process claim is granted, and Kors and the Fleming Companies Trust are granted summary judgment dismissing the claim.

B. Aiding and Abetting and Tortious Inducement of Breach of Fiduciary Duty

To establish a cause of action for aiding and abetting a breach of fiduciary duty a plaintiff must allege: "(1) the existence of a violation by the primary (as opposed to the aiding and abetting) party; (2) knowledge of this violation on the part of the aider and abettor; and (3) substantial assistance by the aider and abettor in the achievement of the primary violation."Design Strategy, Inc. v. Davis, 469 F.3d 264, 303 (2d Cir. 2006) (citations and quotations omitted). Similarly, the tort of tortious inducement of breach of fiduciary duty requires: (1) a breach by a fiduciary of obligations to another, (2) that the defendant knowingly induced or participated in the breach, and (3) that the plaintiff suffered damages as a result of the breach. S K Sales Co. v. Nike, Inc., 816 F.2d 843, 847-48 (2d Cir. 1987); see also Television Events Mktg, Inc. v. Amcon Distrib. Co., 488 F. Supp. 2d 1071, 1076 (D. Haw. 2006) (Hawaii law same).

Berry has simply failed to allege any facts that show that Ichida breached his fiduciary duty in any way. Berry lists, in conclusory fashion, all the various duties owed by an attorney to his client and claims that Ichida breached them all. However, in the seventy-two pages of his complaint, he provides no facts that would show or tend to show that either there was an agreement between Smith and Ichida or that Ichida betrayed Berry in any way. Therefore, C S's motion to dismiss the claims of aiding and abetting breach of fiduciary duty and tortious interference of breach of fiduciary duty is granted. See Parrott v. Coopers Lybrand, LLP, 702 N.Y.S.2d 40, 53 (N.Y.App.Div. 1st Dep't 2000) (conclusory allegations cannot support aiding and abetting breach of fiduciary duty claim). Moreover, even assuming that the evidence Berry presented in opposition to the summary judgment motion of Kors and the Fleming Companies Trust was true, there is nothing to support the allegation that a secret agreement was formed between Smith and Ichida or that Ichida breached his fiduciary duties in any way. In fact, the evidence that Berry points to — emails between him and Ichida where Ichida told him of the conversation with Smith — show that an agreement was not formed between Ichida and Smith. Therefore, the motion for summary judgment of Kors and the Fleming Companies Trust is granted and the claims for tortious inducement and aiding and abetting breach of fiduciary duty are dismissed.

C. Tortious Interference with Contractual Relations

To state a claim for tortious interference with contract the plaintiff must allege: (1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of the contract; (3) the defendant's intentional procurement of the third-party's breach of the contract without justification; (4) actual breach of the contract; and (5) damages resulting therefrom. Kirch v. Liberty Media Corp., 449 F.3d 388, 401-02 (2d Cir. 2006) (New York law); see also Lee v. Aiu, 936 P.2d 655, 668 (Haw. 1997) (identical requirements under Hawaii law).

Berry fails to allege any facts that would establish that Ichida breached his attorney retainer agreement with Berry. Therefore, C S's motion to dismiss the claim for tortious interference with contractual relations is granted. See Fluhr v. Goldscheider, 695 N.Y.S.2d 30, 31 (N.Y.App.Div. 1st Dep't 1999) (failure to allege breach of contract fatal to tortious interference claim). Also, Berry has failed to create any issue of material fact that Ichida breached his retainer agreement in any way. Berry points to no part of the agreement or any material fact that shows that Ichida breached any contract with Berry. Therefore, Kors's and the Fleming Companies Trust's motion for summary judgment is granted and the claim for tortious interference with contractual relations is dismissed.

D. Aiding and Abetting Conversion

To allege a claim for aiding and abetting a conversion, a plaintiff must sufficiently allege that a conversion has occurred. Calcutti v. SBU, Inc., 273 F. Supp. 2d 488, 493 (S.D.N.Y. 2003). A "conversion is the unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner's rights." In re Musicland Holdings, Inc., 386 B.R. 428, 440 (S.D.N.Y. 2008) (quotingVigilant Ins. Co. v. Housing Auth., 660 N.E.2d 1121, 1126 (N.Y. 1995)). "[T]he money must be part of a separate, identifiable, segregated fund in order to bring an action for conversion." In re Musicland, 386 B.R. at 440. "More particularly, if the allegedly converted money is incapable of being described or identified in the same manner as a specific chattel, it is not the proper subject of a conversion action." High View Fund L.P. v. Hall, 27 F. Supp. 2d 420, 429 (S.D.N.Y. 1998).

There is no specific allegation of what funds were converted or why Berry might be entitled to them. Therefore, C S's motion to dismiss the claim for aiding and abetting conversion of client funds is granted. Also, Berry has failed to create any issue of material fact that any funds were converted. Therefore, Kors's and the Fleming Companies Trust's motion for summary judgment is granted and the claim for aiding and abetting conversion is dismissed.

VII. Rule 56(f) Continuation

Berry seeks discovery related to the abuse of process and the breach of fiduciary duty claims. The Second Circuit has established a four-part test for the sufficiency of an affidavit submitted pursuant to Rule 56(f) seeking a continuance of the summary judgment motion in order to perform additional discovery: (1) the affidavit must include the nature of the uncompleted discovery; (2) how the facts sought are reasonably expected to create a genuine issue of material fact; (3) what efforts the affiant has made to obtain those facts; and (4) why those efforts were unsuccessful. Hudson River Sloop Clearwater, Inc. v. Dep't of Navy, 891 F.2d 414, 422 (2d Cir. 1989).

Because the abuse of process claim fails as a matter of law, continued discovery would be futile. As for the breach of fiduciary duty claim, Plaintiff seeks bank records from the Lynch Ichida firm to show payments from the Fleming Companies Trust, Kors, or C S to Lynch Ichida. While evidence of payments might create an issue of material fact, Berry has offered nothing that suggests a corrupt agreement was ever formed. See Contemporary Mission, Inc. v. U.S. Postal Serv., 648 F.2d 97, 107 (2d Cir. 1981) (finding that "opposing party's mere hope that further evidence may develop prior to trial is an insufficient basis upon which to justify the denial of [a summary judgment] motion."). Accordingly, Berry's request for additional discovery under Rule 56(f) is denied.

VIII. Rule 11 Sanctions

It is well established that Rule 11 sanctions must be imposed carefully, lest they chill the creativity essential to the evolution of the law. See, e.g., Kniipe v. Skinner, 19 F.3d 72, 78 (2d Cir. 1994); In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. 124, 130 (S.D.N.Y. 1999). The purpose of Rule 11 is to deter abusive litigation tactics by imposing an affirmative duty to conduct a reasonable inquiry into the factual and legal viability of claims. See, e.g., Eastway Constr. Corp. v. City of N.Y., 762 F.2d 243, 253 (2d Cir. 1985). Rule 11 sanctions may be imposed in two situations: "[1] when it appears that the pleading has been interposed for any improper purpose, or [2] where, after a reasonable inquiry, a competent attorney could not form a reasonable belief that the pleading is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law. Eastway, 762 F.2d at 254.

While Berry's Second Amended Complaint fails to state a claim, this Court cannot conclude that Rule 11 was violated for any of the reasons raised by the Fleming Companies Trust and Kors.


For the foregoing reasons, the motions by Deutsche Bank Trust Co. Americas, J.P. Morgan Chase, General Electric Capital Corporation, and C S Wholesale Grocers, Inc. to dismiss all claims against them are granted. The motion for summary judgment of the Post-Confirmation Trust of the Fleming Companies, Inc. and Robert Kors to dismiss all claims against them is granted. Defendants' motion for. security is denied as moot. The Second Amended Complaint is dismissed. The Clerk of the Court shall terminate all motions pending as of September 30, 2008, and mark this case as closed.


Summaries of

Berry v. Deutsche Bank Trust Co. Americas

United States District Court, S.D. New York
Oct 21, 2008
07 Civ. 7634 (WHP) (S.D.N.Y. Oct. 21, 2008)
Case details for

Berry v. Deutsche Bank Trust Co. Americas

Case Details


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

Date published: Oct 21, 2008


07 Civ. 7634 (WHP) (S.D.N.Y. Oct. 21, 2008)

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