FILED: NEW YORK COUNTY CLERK 01/31/ :33 AM INDEX NO /2017 NYSCEF DOC. NO. 42 RECEIVED NYSCEF: 01/31/2018

Transcription

1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK JFK HOTEL OWNER, LLC, Index No.: /2017 -XX - against - Plaintiff, HON. GERALD LEBOVITS Part 7 TOURHERO, LLC and JEFFREY L. MOLITOR, Defendants. X PLAINTIFF'S MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANT MOLITOR'S MOTION S E S T I L A W F I R M PC Attorneys for Plaintiff JFK Hotel Owner, LLC 50 Main Street, Ste. 205 White Plains, New York (914) of 11

2 PRELIMINARY STATEMENT Plaintiff, JFK Hotel Owner, LLC, submits this Memorandum of Law in opposition to the motion by defendant, Jeffrey L. Molitor ("Molitor"), for an Order dismissing this action under CPLR 3211(a)(1) and 321 l(a)(7), and for a protective order pursuant to CPLR 3103(a) precluding plaintiff from taking Molitor's deposition. Molitor's motion should be denied in its entirety because plaintiff's complaint sufficiently alleges that Molitor engaged in acts amounting to an abuse or perversion of the limited liability company form to perpetrate a wrong or injustice against plaintiff. Moreover, there is not a forum selection clause that requires that this action be brought in Illinois. And even if there was for the sake of argument only, as further explained infra., Molitor has waived the right to invoke the clause by briefing two motions entirely under New York law. Molitor is not free to pick and choose what parts of the purported forum selection clause he wishes to enforce. In addition, it would be unreasonable and unjust to require that this action be brought in Illinois when all contacts are here in New York. It would amount to nothing more than an exercise in futility. For these reasons, the action as against Molitor should proceed to the discovery stage and he should be required to appear for his deposition. FACTS The facts and circumstances pertinent to plaintiff's opposition to Molitor's motion are set forth in the accompanying Affirmation of Robert A. Sesti, dated January 31, 2018, and the exhibits annexed thereto. The Court is respectfully referred to each of the foregoing in the 2 2 of 11

3 interests of brevity. POINT I PLAINTIFF PLEADS A VALID CAUSE OF ACTION AGAINST MOLITOR TO PIERCE THE CORPORATE VEIL On a motion pursuant to CPLR 321 l(a)(7), a Court must afford the pleading a liberal construction, accept all facts as alleged in the pleading to be true, accord plaintiff the benefit of every possible inference, and determine only whether the facts as alleged fit within any cognizable legal theory. The sole criterion is whether the pleading states a valid cause of action. See Leon v. Martinez, 84 N.Y.2d 83, 614 N.Y.S.2d 972, 974 (1994). To state a cause of action under the doctrine of piercing the corporate veil, the plaintiff must allege facts that, if proved, establish that the party against whom the doctrine is asserted (1) exercised complete domination over the corporation with respect to the transaction at issue, and (2) through such domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against the plaintiff such that a court in equity will intervene. See Olivieri Construction Corp. v. WN Weaver Street, LLC, 144 A.D.3d 765, 41 N.Y.S.3d 59, 61 (2 Dept. 2016); Grammas v. Lockwood Associates, LLC, 95 A.D.3d 1073, 944 N.Y.S.2d 623, 625 (2 Dept. 2012). A cause of action under the doctrine of piercing the corporate veil is not required to meet any heightened level of particularity in its allegations. Olivieri Construction Corp. v. WN Weaver Street, LLC, 41 N.Y.S.3d 59 at 62. Factors to be considered in determining whether an individual has abused the privilege of doing business in the corporate or LLC form include the failure to adhere to LLC formalities, inadequate capitalization, commingling assets, and the personal use of LLC funds. Grammas v. 3 3 of 11

4 Lockwood Associates, LLC, 4 N.Y.S.2d at 626. Additionally, the corporate veil will be pierced to achieve equity, even absent fraud, when a corporation has been so dominated by an individual and its separate entity so ignored that it primarily transacts the dominator's business instead of its own and can be called the other's alter ego. Olivieri Construction Corp. v. WN Weaver Street, LLC, 41 N.Y.S.3d 59 at 62. The central allegations of plaintiff's complaint are that Molitor knowingly continued to use an inadequately capitalized and essentially defunct entity in defendant, TourHero LLC ("TourHero"), as a guise to enrich himself and his employer Travelliance by obtaining discounted hotel rooms for Travelliance without paying the Hotel for the rooms. In other words, through Molitor's improper use and/or abuse of TourHero as its alter ego, Molitor provided Travelliance and possibly himself with free hotel rooms that they resold to their clients without paying the Hotel for same. Plaintiff's complaint is annexed as Exhibit "A" to the Affirmation of David Pohl, dated December 17, The allegations of plaintiff's complaint are also repeated in the sworn Affidavit of Ally Visram, which is annexed as Exhibit "A" to Robert A. Sesti's accompanying Affirmation. "Hotel" Here, plaintiff, the owner of the Radisson Hotel at JFK Airport (the "Hotel"), alleges that it was approached by Molitor in or around September 2015 with a business proposition. Molitor was known to the Hotel because of his affiliation with a company by the name Travelliance, which regularly did business with the Hotel. The Hotel sold discounted hotel rooms to Travelliance for its resale to an airline for overnight lodging for distressed passengers. [ 4-8 of the Complaint]. 4 4 of 11

5 Molitor represented to the Hotel that he had formed TourHero, an affiliate of Travelliance, to provide lodging to frequent international travelers, and that he wanted to do business with the Hotel. Because the Hotel knew Molitor because of his affiliation with Travelliance, and because Molitor represented that TourHero was affiliated with Travelliance, which later turned out to be false, on or about September 8, 2015 the Hotel agreed to reserve, and TourHero agreed to accept fifteen (15) single/double occupancy hotel rooms per day at the Hotel for certain agreed upon rates, applicable taxes and occupancy fees, to be used exclusively for TourHero's business to business sales. The contract was negotiated exclusively by Molitor on behalf of TourHero and he at all times had complete domination over TourHero's dealings with the Hotel. [ 9-10 of the Complaint]. That because, according to Molitor, TourHero initially had inadequate capitalization and insufficient business to initially fill all of the reserved rooms, Molitor requested and the Hotel agreed that TourHero would initially be permitted to count the first 15 distressed passenger rooms utilized by Travelliance (because of its existing business relationship with the Hotel) on any given night as rooms utilized by TourHero under its contract. [ l 1 of the Complaint]. Note the emphasis on the word "initially" because the inadequate capitalization and use of rooms by Travelliance was not supposed to be continuous throughout as it was, yet not divulged to the Hotel. That between in or about September 2015 through May 2016, TourHero became indebted to the Hotel in the sum of $305,545.63, claiming through Molitor that TourHero still had inadequate capitalization to pay the Hotel. That during the period of time that TourHero incurred this debt, Molitor, knowing that 5 5 of 11

6 TourHero had inadequate capitalization, improperly used his entity TourHero and its contract with the Hotel to benefit and enrich himself personally by, inter alia, furnishing Travelliance with reserved rooms at discounted rates at the Hotel. [ of the Complaint]. That, upon information and belief, Molitor benefitted financially through his use of an essentially defunct TourHero to procure discounted rooms for Travelliance and possibly others, without paying in full for same. [ l3-14 of the Complaint]. That on August 11, 2016, the Hotel and TourHero entered into a payment agreement negotiated and signed by Molitor, under which TourHero agreed to pay the Hotel certain sums Agreement" due under the contract in installments (the "Payment Agreement"). (The Payment Agreement is annexed hereto as Exhibit "G" to the Affidavit of Ally Visram. See Exhibit "A"). That Molitor entered into the Payment Agreement on behalf of TourHero knowing that, but without disclosing to the Hotel, that TourHero still had inadequate capitalization to fulfill the payment terms thereof and would be unable to comply. That TourHero thereafter failed to make any of the required payments. [ of the Complaint]. Here, the Hotel has adequately pleaded allegations that Molitor engaged in acts amounting to an abuse of or perversion of the LLC form to perpetrate a wrong or injustice against the Hotel, including allegations that he signed a subsequent payment installment agreement while knowing full well that TourHero would be unable to comply. As such, Molitor's motion should be denied. 6 6 of 11

7 POINT II THERE IS NO VALID FORUM SELECTION CLAUSE A forum selection clause defense is a defense founded on documentary evidence pursuant to CPLR 3211(a)(1). See Broadway NY Associates v. Bodner, 14 A.D.3d 1, 784 N.Y.S.2d 63 (1 Dept. 2004) (treating motion asserting defense based on contractual term as 3211(a)(1) motion. On a motion pursuant to CPLR 3211(a)(1), a complaint may be dismissed only where the documentary evidence utterly refutes plaintiff's factual allegations and conclusively establishes a defense as a matter of law. See Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 746 N.Y.S.2d 858, 865 (2002). In order to be considered documentary evidence, the evidence must be unambiguous and of undisputed authenticity, that is, it must be essentially unassailable. Petrone v. Davidoff Hutcher, 150 A.D.3d 776, 54 N.Y.S.3d 25 (2 Dept. 2017); Torah v. Dell Equity, LLC, 90 A.D.3d 746, 935 N.Y.S.2D 33, 34 (2 Dept. 2011). Molitor's counsel points to the following clause in an alleged written contract between TourHero and plaintiff as evidence that plaintiff s action should have been brought in Illinois: Governing Law The terms, provisions and details of this agreement will be governed by the laws of the state of Illinois. Both parties consent to the exclusive jurisdictions of such courts and of the appropriate appellate courts in any such action of legal proceeding and waives any objection to venue or jurisdiction in connection therewith. (See pages 5 and 11 of Molitor's Memorandum of Law). At the outset, Molitor's counsel argues that the Court may take judicial notice of the contract containing the foregoing clause because plaintiff had submitted it on its prior motion for the entry of a default judgment against TourHero and Molitor. (See para. 3 of David Pohl's 7 7 of 11

8 Affirmation). Judicial notice is "knowledge which a Court takes of a matter without evidence having been introduced to establish it." People v. Suarez, 51 Misc.3d 620, 28 N.Y.S.3d 557 (Criminal Court New York County 2016). However, the Court could not take proper judicial notice of this purported contract without considering it in the proper context in which it was initially offered, as was explained in the previously sworn Affidavit of Ally Visram, which referenced the document on plaintiff's prior motion. (See Exhibit "A" to the accompanying Affirmation of Robert A. Sesti). In his Affidavit, Mr. Visram identifies the unsigned contract as a document outlining a verbal agreement made between plaintiff and TourHero, acting through Molitor. Mr. Visram does not identify this unsigned document as the actual contract entered into between plaintiff and TourHero that is the subject of plaintiff's action. Neither does Molitor for that matter. Indeed, in his belated answer to plaintiff's complaint, Molitor alleges that '"in the event the "contract" referenced in paragraph 9 of the Complaint is, in fact, a valid and enforceable contract (as Plaintiff apparently believes), it contains a forum-selection clause requiring this action to be brought in Illinois.'" (See Exhibit "B" to the accompanying Affirmation of Robert A. Sesti). So at the very outset, the purported written contract on which Molitor relies half-heartedly to support his Illinois forum selection clause claim is not considered documentary evidence at all, and as suggested, the Court should take judicial notice of this fact. Indeed, both sides seem to agree that this written contract was not actually entered into between the parties. Secondly, the very language of this purported clause, as shown again below, is ambiguous and when read only begs the question, "Which Courts?": 8 8 of 11

9 The terms, provisions and details of this agreement will be governed by the laws of the state of Illinois. Both parties consent to the exclusive jurisdiction of such courts and of the appropriate appellate courts in any such action of legal proceeding and waives any objection to venue or jurisdiction in connection therewith. The first sentence only states that the laws of the state of Illinois are to apply to the "terms, provisions and details of this agreement." No mention of any Courts are made in the event of suits or proceedings. The second sentence vaguely refers to "such courts and of the appropriate appellate courts in any such action of legal proceeding." To be enforceable, the contractual language must provide unambiguously that any disputes are to be decided in a specified forum. Boss v. American Express Financial Advisors, 6 N.Y.3d 242, 811 N.Y.S.2d 620, 621 (2006)(finding "[y]ou agree to the jurisdiction of [the] State of Minnesota courts for determining any controversy in connection with this Agreement," as meeting the required standard). Standing together as two sentences or alone as one, the purported forum selection language here does not pass muster. It clearly fails to specify plainly and clearly the Courts to which it supposedly applies. Furthermore, the main, conditional theme of this paragraph or clause titled, "Governing Law," as shown by its first sentence, is that Illinois law should apply. However, to date Molitor has not sought to enforce this choice of law provision, but instead has knowingly waived it by briefing two motions strictly under New York law. (See Molitor's accompanying Memorandum of Law in support of this motion, and the Affirmation of David Pohl, dated September 1, 2017, submitted in support of Molitor's prior motion, annexed as Exhibit "C" to the accompanying Affirmation of Robert A. Sesti). It is well-settled that parties can waive a choice of law provision by conduct, such as by 9 9 of 11

10 their attorneys briefing legal issues under New York law. See Leasecomm Corp. v. Long Is. Cellular Ltd., 2002 N.Y. Slip. Op (U) (Civ. Ct. Queens Cty. 2002); Trophy Productions v. Cinema-Vue Corp., 53 A.D.2d 18, 385 N.Y.S.2d 70, 73 (1 Dept. 1976); Martin v. City of Cohoes, 37 N.Y.2d 162, 371 N.Y.S.2d 687, 690 (1975). Here, Molitor is not free to pick and choose what parts of the so-called forum selection clause he wants to try to enforce. And, when the first sentence is eliminated from this supposed forum selection clause, as Molitor has done by ignoring it, there is literally nothing left of any coherent meaning in this paragraph. In sum, Molitor has waived this entire clause. In that it is a defense based entirely on documentary evidence (CPLR 321 l(a)(1)), a forum selection clause is also waived if not raised in a responsive pleading or motion. CPLR 321 l(e). Lischinskaya v. Carnival Corp., 56 A.D.3d 116, 119, 865 N.Y.S.2d 334 (2 Dept. 2008). In this case, the party to this alleged written contract is TourHero. TourHero, however, defaulted in the action and judgment on the issue of liability has been entered against it without any objection by Molitor and with his knowledge and consent. (See Exhibit "D" to the accompanying Affirmation of Robert A. Sesti). Therefore, even if this alleged forum selection clause was applicable, which it is not, it was waived by TourHero when defaulting and this waiver would carry over to its admitted Member, Molitor, as well. Furthermore, even if it did apply, it would not apply to the claims against Molitor personally. It would also not apply to the separate payment agreement that the parties had entered into and which Molitor defaulted on. (See Exhibit "A" to the accompanying Affirmation of Robert A. Sesti) of 11

11 Lastly, a forum selection clause need not be enforced if it is unreasonable, unjust, or cause such difficulty that enforcement would essentially deprive a party of its day in Court. Molino v. Sagamore, 105 A.D.3d 922, 963 N.Y.S.2d 355 (2 Dept. 2013). Here, it would be completely unreasonable and unjust to require plaintiff to bring this action in Illinois. While initially TourHero's principal office was listed as being in Illinois, after TourHero became defunct, it was changed to Molitor's New York City apartment, located at 333 W. 56* Street, 8K, New York, New York. In addition, a search of the Illinois Secretary of State's website lists Jeffrey Molitor as the sole Member of TourHero, LLC. (See Exhibit "E" to the accompanying Affidavit of Robert A. Sesti). Currently, there are literally no contacts whatsoever between this lawsuit and the State of Illinois. Everyone and everything connected to this lawsuit is situated here in the State of New York. It would make absolutely no sense to require plaintiff to bring this suit in Illinois. It would simply be an exercise in futility. CONCLUSION For the foregoing reasons, it is respectfully submitted that the motion by defendant, Jeffrey L. Molitor, be denied in its entirety and that he be required to appear for his deposition. Dated: January 31, 2018 /s/ Robert A. Sesti Robert A. Sesti, Esq. SESTILAW FIRM PC Attorneys for Plaintiff 50 Main Street, Ste. 205 White Plains, New York of 11