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United States District Court, S.D. New York
Sep 25, 2001
99 Civ. 2231 (HBP) (S.D.N.Y. Sep. 25, 2001)


99 Civ. 2231 (HBP)

September 25, 2001


I. Introduction

Defendant Carl Orsini ("Orsini") moves for summary judgment pursuant to Fed.R.Civ. p. 56 dismissing the conversion and fraud claims asserted against him. For the reasons set forth below, the motion is denied in all respects.

Plaintiff and Orsini have consented to my exercising plenary jurisdiction over this matter pursuant to 28 U.S.C. § 636 (c). Accordingly, I am not limited to recommending the disposition of Orsini's motion.

II. Facts

This action arises out of a Railpass Sales Agreement ("Contract") between DER Travel, Inc. ("DER") and Dream Tours Adventures, Inc. ("Dream Tours"), executed on or about December 19, 1997. Pursuant to the Contract, DER was to provide Dream Tours with 150 Railpass tickets for resale by Dream Tours. The Contract required Dream Tours to provide DER with a monthly accounting, inventory and statistical data of all sold and unsold tickets (Complaint ("Comp.") ¶ 17). Further, Dream Tours was authorized to issue the tickets only from its office in Lake Success, New York (Comp. ¶ 25). Finally, Dream Tours was required to notify DER immediately of any changes in the organization, address or status of its office (Comp. ¶ 25).

Plaintiff alleges that Dream Tours breached the Contract by failing to provide the accounting, inventory and data required by the Contract (Coup. ¶ 18). In a letter dated June 22, 1998, DER gave Dream Tours one month's notice of the termination of the Contract, as required by the Contract (Coup. ¶ 19). Plaintiff alleges that Dream Tours has never returned, paid for or otherwise accounted for the tickets delivered to it (Comp. ¶ 22).

Plaintiff further alleges that both Dream Tours and the individual defendants converted the ticket stock by transporting it from the location specified in the Contract, i.e., Lake Success, New York, to an undisclosed location in Manhattan, without notifying plaintiff or obtaining its consent (Comp. ¶¶ 26, 35). Moreover, plaintiff alleges that not only were the tickets moved, but they were sold by Tony Kim ("Kim"), without payment to DER (Comp. ¶¶ 26-28).

Finally, plaintiff argues that Orsini and Albert Ghim ("Ghim") fraudulently induced it to enter into the Contract and deliver the tickets to Dream Tours (Plaintiff's Memorandum of Law in Opposition to the Motion of Defendant Carl Orsini for Summary Judgment, dated February 27, 2001, ("Plaintiff's Mem.") at 5). Orsini initiated the negotiations between DER and Dream Tours, representing himself as Dream Tours' chairman (Affidavit of Carl Orsini, dated December 18, 2000, ("Orsini Aff.") at 3, 4). Orsini subsequently negotiated the Contract on Dream Tours' behalf (Orsini Aff. at 4). Furthermore, plaintiff argues that Orsini misrepresented his future plans for Dream Tours, including plans of opening a retail travel agency (Plaintiff's Mem. at 9). Plaintiff also argues that Dream Tours was merely a "sham or dummy enterprise created by Orsini and his co-defendants [to defraud] plaintiff . . ." (Plaintiff's Mem. at 2). Plaintiff's argument regarding the sham nature of Dream Travel is corroborated in part by the fact that Dream Tours never had its own telephone or fax lines and instead used the telephone and fax lines of Petrotech Holdings, Inc., a company that is owned by Orsini and unrelated to Dream Tours (Plaintiff's Mem. at 11).

Plaintiff asserts three claims in this action: (1) breach of contract against Dream Tours; (2) conversion against the three individual defendants, and (3) fraud against the three individual defendants. Dream Tours and Ghim were served but did not appear and default judgments have been entered against them. To date, Kim has not been located and has not, therefore, been served (Affidavit of Stanley K. Shapiro in Opposition to Defendant's Motion for Summary Judgment, dated March 2, 2001, ("Shapiro Aff."), at 2, fn. 1).

III. Analysis

A. Summary Judgment

The standards applicable to a motion for summary judgment are well-settled and require only brief review.

To prevail on a motion for summary judgment, the moving party must show that there are no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c). In deciding such a motion, the district court must view the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in its favor. Giano v. Senkowski, 54 F.3d 1050, 1052 (2d Cir. 1995)
Hemphill v. Schott, 141 F.3d 412, 415 (2d Cir. 1998). See also Sologub v. City of New York, 202 F.3d 175, 178 (2d Cir. 2000); Belfi v. Prendergast, 191 F.3d 129, 135 (2d Cir. 1999); Nora Beverages, Inc. v. Perrier Group of Am., Inc., 164 F.3d 736, 742 (2d Cir. 1998); Grady v.Affiliated Cent, Inc., 130 F.3d 553, 559 (2d Cir. 1997). "The function of the district court in considering the motion for summary judgment is not to resolve disputed issues of fact but only to determine whether there is a genuine issue to be tried." Gorman-Bakos v. Cornell Coop. Extension, 252 F.3d 545, 558 (2d Cir. 2001). See also Fitzgerald v. Henderson, 251 F.3d 345, 360 (2d Cir. 2001); Byrne v. Town of Cromwell, 243 F.3d 93, 101 (2d Cir. 2001)

Once the moving party has met its initial burden of demonstrating the absence of a genuine issue of material fact, the non-moving party, in order to defeat the motion, "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The non-moving party "must set forth specific facts showing that there is a genuine issue for trial" in order to avoid summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).

B. Orsini's Arguments

Orsini has briefed only one argument in support of his motion for summary judgement: that Orsini can be found liable only if Dream Tours' corporate form is disregarded and that there is insufficient evidence in the record to disregard Dream Tours' corporate form (Defendant Carl Orsini's Memorandum of Law in Support of Motion for Summary Judgment, dated December 19, 2000, at 3). This argument, however, ignores the nature of the claims asserted against Orsini and addresses an issue that is not material to those claims.

Disregard of the corporate form, or "piercing the corporate veil," is a doctrine that permits, under certain circumstances, the owners of a corporation to be held liable for the corporation's obligations.

The concept of piercing the corporate veil is a limitation on the accepted principles that a corporation exists independently of its owners, as a separate legal entity, that the owners are normally not liable for the debts of the corporation, and that it is perfectly legal to incorporate for the express purpose of limiting the liability of the corporate owners . . . .
The doctrine of piercing the corporate veil is typically employed by a third party seeking to go behind the corporate existence in order to circumvent the limited liability of the owners and to hold them liable for some underlying corporate obligation . . . . The concept is equitable in nature and assumes that the corporation itself is liable for the obligation sought to be imposed. . . . Thus, an attempt of a third party to pierce the corporate veil does not constitute a cause of action independent of that against the corporation; rather it is an assertion of facts and circumstances which will persuade the court to impose the corporate obligation on its owners . . . .
Morris v. New York State Dep't of Taxation Fin., 82 N.Y.2d 135, 140-41, 623 N.E.2d 1157, 1160, 603 N.Y.S.2d 807, 810 (1993) (citations omitted). See also American Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997) ("Typically, piercing analysis is used to hold individuals liable for the actions of a corporation they control."); Rotella v. Derner, 283 A.D.2d 1026, 1026, 723 N.Y.S.2d 801, 802 (4th Dep't 2001) (an action to pierce the corporate veil seeks "to hold the owners liable for an underlying corporate obligation"). The doctrine has also been used to hold a parent corporation liable for the actions of a subsidiary. See generally Townley v. Emerson Elec. Co., 178 Misc.2d 740, 742, 681 N.Y.S.2d 741, 744-45 (Monroe Co. 1998). The doctrine does not provide any protection to corporate agents or owners with respect to their own liabilities and obligations, incurred as a result of their own acts. To the contrary, where an individual, acting as a disclosed agent for a corporation, commits a tort in the course of his or her agency, the agent is personally liable. Quinn v. Southgate Nelson Corp., 121 F.2d 190, 191 (2d Cir. 1941) ("That a principal is liable for a wrong does not necessarily immunize his agent."); Falbaum v. Pomerantz, 891 F. Supp. 986, 989-90 (S.D.N.Y. 1995) ("[U]nder general principles of agency law, liability of a principal under the doctrine ofrespondeat superior does not extinguish the liability of a culpable agent."); Hotel Constructors, Inc. v. Seagrave Corp., 99 F.R.D. 591, 592 (S.D.N.Y. 1983) ("An agent is responsible for his own tortious acts, notwithstanding the agency relationship and regardless of whether the principal is also liable. . . . "); Union Marine Gen. Ins. Co. v. American Export Lines, Inc., 274 F. Supp. 123, 130 (S.D.N.Y. 1966) ("[I]t is a generally recognized principle that an agent is liable to third persons for his own misfeasance . . . ."); American Ref-Fuel Co. v. Resource Recycling, Inc., 281 A.D.2d 574, 574, 722 N.Y.S.2d 571, 572 (2d Dep't 2001) ("The fact that an agent acts for a disclosed principal does not relieve the agent of liability for its own negligent acts."). Thus," [a]n agent who converts the property of a third party is liable for such conversion, and it is no defense if his acts were committed in pursuance of his employment or for the benefit of his principal." KOUS-TV, Inc. v. Spot Time, Ltd., 599 F. Supp. 90, 92 (S.D.N.Y. 1984).

There is a corollary of the doctrine sometimes referred to as reverse" piercing under which a corporation, in some circumstances, may be liable for the obligations of its owners. See American Fuel Corp. v. Utah Energy Dev. Co., supra, 122 F.3d at 134. The parties make no argument concerning the application of this corollary to the present case, and it does not independently appear to be applicable.

Similarly, a disclosed agent who commits a fraud in the course of his agency is liable for that fraud, notwithstanding the fact that he or she may have no financial interest in the transaction so induced. As the New York Court of Appeals noted almost a century ago: "The fact that in making the false and fraudulent representations the plaintiff may have been acting for others may have rendered his principals liable also, but gave him no immunity from the false and fraudulent representations that he made." Laska v. Harris, 215 N.Y. 554, 556, 109 N.E. 599, 600 (1915).See Sisler v. Security Pac. Bus. Credit, Inc., 201 A.D.2d 216, 222, 614 N.Y.S.2d 985, 988 (1st Dep't 1994) ("If appellant made the representation and warranty of authority with a fraudulent design, as alleged, and damage resulted, he is liable, notwithstanding his lack of personal interest in the transaction and even though the misrepresentations were made on behalf of the [principal]."); Clearview Concrete Prods. Corp. v. Charles Gherardi, Inc., 88 A.D.2d 461, 467 n. 5, 453 N.Y.S.2d 750, 755 n. 5 (2d Dep't 1982) (President of corporation who signed allegedly fraudulent affidavit "would be personally liable for fraud, even though the misrepresentation occurred on behalf of his principal, and even though he did not have a personal interest in the transaction . . . "). See also Katara v. D.E. Jones Commodities, Inc., 835 F.2d 966, 972 (2d Cir. 1987)

The two claims asserted against Orsini do not seek to hold him liable for corporate obligations; rather, they allege that Orsini himself committed torts for which he is personally liable, As the forgoing authorities demonstrate, the fact that Orsini may have been acting as a disclosed agent for a disclosed principal when he allegedly committed the torts has no relevance to his personal liability. If Orsini committed the torts and thereby caused injury, he is personally liable to plaintiff regardless of the fact that he was acting as an agent and regardless of whether Dream Tours' corporate veil should be pierced. In short, the argument made in Orsini's motion, even if correct, has no effect on Orsini's potential liability. Thus, Orsini has no established a legal or factual basis for granting summary judgment.

Inexplicably, DER's Memorandum of Law in opposition to Orsini's motion argues that Dream Tours' corporate form should be disregarded and Orsini held personally liable on DER's breach of contract claim. As noted above, the breach of contract claim is not asserted against Orsini in the complaint. In the absence of a motion to amend the complaint to assert a contract claim against Orsini, DER's argument concerning the disregard of Dream Tours' corporate form is also immaterial.

Although Orsini's Memorandum of Law makes broad, sweeping statements that there is insufficient evidence to sustain either of the tort claims asserted against him, he has not briefed these arguments, cites no authorities setting forth the elements of these claims and does not explain what claim elements are absent. Accordingly, I do not read Orsini's motion to assert that there is insufficient evidence in the record to sustain an essential element of any of the claims asserted against him. Thus, I express no opinion as to whether there is evidence in the record sufficient to support a finding of either conversion or fraud.

IV. Conclusion

Accordingly, for all the foregoing reasons, Orsini's motion for summary judgment is denied in all respects.

Summaries of


United States District Court, S.D. New York
Sep 25, 2001
99 Civ. 2231 (HBP) (S.D.N.Y. Sep. 25, 2001)
Case details for


Case Details


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

Date published: Sep 25, 2001


99 Civ. 2231 (HBP) (S.D.N.Y. Sep. 25, 2001)

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