-------------------------------------------------------------------)(...... HON. TIMOTHY S. DRISCOLL Justice Supreme Court SUPREME COURT-STATE OF NEW YORK SHORT FORM ORDER Present: 5c- NIM, LLC, Plaintiff -against- VEV ANT, LLC and STACEY ANDREADAKIS, TRIAL/IAS PART: 20 NASSAU COUNTY Inde)( No: 017042- Motion Seq. No. Submission Date: 2/3/11 Defendants. The following papers having been read on this motion: Notice of Motion, Affirmation in Support and E)(hibits... Memorandum of Law in Support... Memorandum of Law in Opposition, Affidavit in Opposition and E)(hibits.. Reply Affi davit an d Exhib i ts......... Rep Iy Memo rand urn of Law...... Correspondence dated January 11, 2011... )( 1 This matter is before the Cour for decision on the motion fied by Defendant Stacey Andreadakis ("Andreadakis ) on November 12 2010 and submitted on Februar 3 2011 following oral argument before the Court. For the reasons set fort below, the Cour denies the motion and grants Plaintiff leave to fie an amended complaint. A. Relief Sought BACKGROUND Defendant Andreadakis moves for an Order, pursuant to CPLR 9 3211(a)(1) and (7), dismissing the Amended Complaint as against her. 1 The Cour notes Plaintiffs objection to Defendant's reply papers but wil, in its discretion, consider those reply papers, as well as Plaintiffs letter dated Januar 11 2011.
PlaintiffNIM, LLC ("NIM") opposes the motion. Alternatively, Plaintiff seeks leave amend its pleading to include facts that the Court deems necessar. B. The Paries' History The Amended Complaint (Ex. 2 to Muchmore Aff. in Supp.), which was fied on September 30, 2010, alleges as follows: NIM is a company that offers services for the development and maintenance of websites. Andreadakis is the owner and Chief Executive Offcer ("CEO") of Defendant Vevant, LLC Vevant"), a business located in Manattan. Plaintiff alleges that V evant as Andreadakis' s alter ego " (Am. CompI. at 5) entered into an agreement on or about March 24 2010 (Ex. A to Am. Compl.) regarding consulting work to be performed by Global Media Services ("GMS"), the parent corporation ofnim, on the Vevant website ("Website ). This agreement lists V evant next to the words "Customer (Full Legal Name)," and Andreadakis next to the words "Customer Contact Name. " This agreement was completed satisfactorily. On or about May 18, 2010, Vevant entered into a second agreement ("Design Contract" with NIM (Ex. B to Am. Compl.). The Design Contract is titled "Vevant Network Website Design and Platform Development Consulting Proposal." The Design Contract lists Vevant the Customer and Andreadakis as the Customer Contact and is signed by Andreadakis at the bottom ofthe first page under the word "VEV ANT " next to the word " " and above the words Authorized Signatue. Plaintiff alleges that the Design Contract provided that NIM would provide development for three separate development phases of the Website, and that 1) 1729 hours would be spent developing the Website at an hourly rate of$75.00 for a total of$129 675.00; and 2) additional revisions requested by Defendants would be biled at an hourly rate of $200.00. NIM biled 1124 hours in excess of the 1729 which were devoted to making revisions requested by Andreadakis, resulting in an additional $224 800.00 being due to NIM which has not been paid. In addition, Defendants owe NIM $31 201.84 representing eight (8) monthly installments that remain unpaid. Finally, Defendants owe NIM the sum of $54 630.00 for an additional project that Plaintiff completed. NIM has performed its obligations under the Design Contract. Plaintiff also alleges that Defendants acted "surreptitiously" (Am. CompI. at 16) because Andreadakis promised to pay the outstanding bils, thereby inducing Plaintiff to perform additional work, but never intended to remit payment. Plaintiff also alleges that Andreadakis
inter alia 1) went to Plaintiff's office, thereby activating its security system; 2) sent employees or contractors to speak with Plaintiff "in an effort to harass and intimidate Plaintiff's employees (Am. Compl. at ~ 19); and 3) attempted to change the launch dates for the Website and pressure Plaintiff to complete the project without remuneration. Plaintiff's efforts to pierce the corporate veil, and hold Andreadakis personally liable for Vevant's debts, are based on allegations that: Andreadakis engaged in behavior which was outrageous and abused the privilege of doing business in the corporate form. She used her corporation to perpetrate wrong and injustice against Plaintiff as she now intends to hide behind her corporate veil and not pay Plaintiff for the services rendered. Am. Compl. at 1 25. The Amended Complaint contains two (2) causes of actions, each of which is asserted against both Defendants. The first is for breach of contract and the second is for failure to pay on an account. Andreadakisprovides a November 10 2010 printout from the website ofthe New York State, Deparment of State ("DOS"), Division of Corporations which reflects that Vevant is a domestic limited liability company. Its initial fiing date with the DOS was Januar 2010. In his Affdavit in Opposition, Adam Cohen ("Cohen ), the founder and CEO ofnim affirms as follows: Cohen was personally involved in all transactions between NIM and Andreadakis. Andreadakis represented to Cohen that she was the "key decision maker" for Vevant (Cohen Aff. at ~ 3), including decisions about the technologies used for her company s platform. Andreadakis "appeared to regularly purchase personal items for herself using her Vevant funds boasting on occasion that she received significant tax benefits because she used Vevant to charge all of her expenses, thereby exempting her from taxes (Id. at 1 4). Cohen also alleges that Andreadakis received personal benefits, including free rent on her aparment which she used as Vevant' s offices. In addition, many of the payments that NIM received came directly from Andreadakis' personal accounts which, Cohen submits, demonstrates that there was commingling between personal and business accounts. Cohen provides no documentar proof of these payments. In her Reply Affidavit, Andreadakis affrms that she was not a party to either of the Vevant contracts with NIM and never guaranteed Vevant' s payments under those contracts. She
), avers, fuher, that Vevant is an independent company "engaged in the business of providing an e-commerce platform for emerging fashion designers with editorial and networking components" (Andreadaks Reply Aff. at ~ 4). Vevant, which Andreadaks describes as the collaborative effort" of a number of individuals (id. is not the alter ego of Andreadakis. Andreadakis denies commingling Vevant' s assets with her personal assets, and describes Cohen s Affidavit as "consist(ing) entirely of speculation (id. at 6). With respect to Cohen claim that Andreadakis received free rent, Andreadakis affrms that she resides in a condominium owned by her family which does not charge her rent. Thus, there is no basis for Cohen s suggestion that she has used Vevant fuds to pay that rent. Andreadakis also avers that Vevant maintained independent corporate offices during its transactions with NIM. Andreadakis provides a copy of Vevant' s most recent corporate lease and rent payment (Ex. A to Andreadakis Reply Aff.) dated May 25, 2010 and October 6 2010 respectively. Andreadakis affirms, further, that NIM was fully compensated for the services it provided to Vevant, and provides copies of checks ("Checks ) to NIM from Vevant and her mother, Helen Andreadakis ("Helen ) totaling in excess of $90 000 (Ex. B to Andreadakis Reply Aff.). The check from Vevant is dated August 9 2010 and is in the amount of$11 200.29, and the check from Helen is dated May 20 2010 and is in the amount of $60 000. Andreadakis submits that this documents refutes Cohen s allegations that she paid NIM from her personal fuds and that NIM was not compensated for its services. Andreadakis affirms, further, that NIM breached its agreements with Vevant by 1) failing to provide promised functionality to the Website; 2) failing to meet delivery deadlines; and 3) locking Vevant employees out of their email accounts. C. The Parties' Positions Andreadakis submits that the claims in the Complaint against her must be dismissed in light of the facts that 1) Andreadakis executed the contracts on behalf of Vevant and is not a par to the contracts; 2) Andreadakis did not personally guarantee Vevant' s performance under either contract. Andreadakis fuher avers that the Amended Complaint lacks any specific factual allegations that could serve as the basis for piercing the corporate veil. Plaintiff opposes Andreadakis' motion, submitting that Plaintiff has sufficiently alleged facts waranting a piercing of the corporate veil in light of the allegations in the Amended Complaint that Andreadakis used Vevant as her alter ego by using Vevant to commit a wilful
breach of contract with Plaintiff and Cohen s affirmations regarding Andreadakis' control of Vevant and payment ofvevant obligations with personal funds. Should the Cour find the Amended Complaint insufficient, Plaintiff seeks leave to amend the Complaint to provide supplementar facts in support of its cause of action against Andreadakis. In fuher support, Andreadakis submits inter alia that 1) Plaintiff has made no allegations that would support a finding that Vevant was a mere instruentality with no independent existence, and submits that the nature of the services provided by NIM related directly to Vevant's corporate function; 2) the mere act of non- payment does not support the cause of action for fraud; and 3) Cohen s allegations do not provide sufficient support for piercing the veil, in par because a) there is no description of the personal items that Andreadakis purchased with Vevant fuds; and b) Andreadakis has provided an explanation for receipt of rent-free living accommodations. RULING OF THE COURT A. Standards for Dismissal A motion interposed pursuant to CPLR 93211 (a)(7), which seeks to dismiss a complaint for failure to state a cause of action, must be denied if the factual allegations contained in the complaint constitute a cause of action cognzable at law. Guggenheimer v. Ginzburg, 43 N.Y.2d 268 (1977); 511 W 232 Owners Corp. v. Jennifer Realty Co. 98 N.Y.2d 144 (2002). When entertaining such an application, the Cour must liberally constre the pleading. In so doing, the Cour must accept the facts alleged as true and accord to the plaintiff every favorable inference which may be drawn therefrom. Leon v. Martinez 84 N.Y.2d 83 (1994). On such a motion however, the Court wil not presume as true bare legal conclusions and factual claims which are flatly contradicted by the evidence. Palazzolo v. Herrick, Feinstein 298 A. 2d 372 (2d Dept. 2002). A complaint may be dismissed based upon documentar evidence pursuant to CPLR 9 3211(a)(I) only if the factual allegations contained therein are definitively contradicted by the evidence submitted or a defense is conclusively established thereby. Yew Prospect, LLC v. Szulman 305 AD.2d 588 (2d Dept. 2003); Sta-Bright Services, Inc. v. Sutton 17 AD.3d 570 (2d Dept. 2005). B. Relevant Causes of Action To establish a cause of action for breach of contract, one must demonstrate: 1) the existence of a contract between the plaintiff and defendant, 2) consideration, 3) performance by
the plaintiff, 4) breach by the defendant, and 5) damages resulting from the breach. Furia Furia 116 AD.2d 694 695 (2d Dept. 1986). See also JP Morgan Chase v. J.H Electric, 69 AD.3d 802 (2d Dept. 2010) (complaint suffcient where it adequately alleged existence of contract, plaintiff s performance under contract, defendant's breach of contract and resulting damages), citing, par inter alia, Furia, supra. establishes a prima facie case for an account stated by proving that the defendants received and retained bils for services rendered to the defendants without objection. Nebraskaland, Inc. v. Best Selections, Inc. 303 AD. 2d 662 (2d Dept. 2003); Herrick Feinstein LLP v. Stamm 297 AD.2d 477 (1st Dept. 2002). There can be no account stated where no account was presented or where any dispute about the account is shown to have existed. Abbott Duncan Wiener v. Ragusa 214 AD. 2d 412 (1st Dept. 1995), citing Waldman v. Englishtown Sportswear 92 A. 2d 833 836 (1 st Dept. 1983). C. Personal Liabiltv for Corporate Obligations Generally, a corporation exists independently of its owners, who are not personally liable for the corporation s obligations. Moreover, individuals may incorporate for the express purose oflimiting their liability. East Hampton v. Sand pebble 66 A. 3d 122, 126 (2d Dept. 2009), citing Bartle v. Home Owners Coop. 309 N. Y. 103, 106 (1955) and Seuter v. Lieberman, 229 AD.2d 386, 387 (2d Dept. 1996). The concept of piercing the corporate veil is an exception to this general rule, permitting, under certain circumstances, the imposition of personal liability on owners for the obligations of their corporations. East Hampton 66 AD.3d at 126, citing Matter of Morris v. NYS. Dept. Of Taxation 82 N.Y.2d 135 140-41 (1993). A plaintiff seeking to pierce the corporate veil must demonstrate that a cour should intervene because the owners of the corporation exercised complete domination over it in the transaction at issue. Plaintiff must fuher demonstrate that, in exercising this complete domination, the owners of the corporation abused the privilege of doing business in the corporate form, thereby perpetrating a wrong that caused injur to plaintiff. East Hampton 66 A. 3d at 126, citing, inter alia, Love v. Rebecca Dev., Inc. 56 AD.3d 733 (2d Dept. 2008). In determining whether the owner has "abused the privilege of doing business in the corporate form " the Cour should consider factors including 1) a failure to adhere to corporate formalities 2) inadequate capitalization, 3) commingling of assets and 4) use of corporate funds for personal
use. East Hampton 66 AD.3d at 127, quoting Milennium Constr., LLC v. Loupolover, 44 AD.3d 1016, 1016-1017 (2d Dept. 2007). E. Amendment of Complaint Leave to amend is to be freely given, absent prejudice or surrise directly resulting from the delay in seeking leave, unless the proposed amendment is palpably insufficient or patently devoid of merit. Aurora Loan Services, LLC v. Thomas 70 AD.3d 986, 987 (2d Dept. 2010), citing CLR ~ 3025(b); Lucido v. Mancuso 49 AD.3d 220, 222 (2d Dept. 2008). F. Application of these Principles to the Instant Action The Cour concludes that the Amended Complaint contains insufficient factual allegations in support of Plaintiffs claim that Andreadakis abused the privilege of doing business in the corporate form. In light of evidence before the Cour suggesting that there is support for this theory, however, the Cour grants Plaintiff leave to fie an amended complaint containing more specific allegations in support of its claim that the Cour should pierce the corporate veil and hold Andreadakis personally liable for the debts ofvevant. The Cour has reached this conclusion based both on the liberal amendment policy set forth in case law, and in consideration of certin evidence before the Cour including 1) the fact that Andreadakis' mother Helen, who has no apparent offcial connection to Vevant, provided the majority of payment to NIM as reflected by the Checks provided, 2) the absence of an affdavit from someone associated with Vevant, or other documentation, to support Andreadakis' claim that Vevant is a collaborative effort" of a number of individuals, and 3) Andreadakis' concession that she does not pay rent for her living quarers which corroborates, to some extent, Cohen s affirmation that Andreadaks discussed this issue with him, notwithstading Andreadakis' explanation that she does not pay rent because she lives in a family-owned condominium. The Cour directs Plaintiff to fie and serve its amended complaint on or before April 22, 2011 and directs Defendants to serve their Answer to the amended complaint on or before May 20, 2011. The Cour fuher directs counsel for the paries to appear before the Cour for a Preliminar Conference on May 25 2011 at 9:30 a.
All matters not decided herein are hereby denied. This constitutes the decision and order of the Cour. The Court reminds counsel for the paries of their required appearance before the Court on May 25 2011 at 9:30 a.m. for a Preliminar Conference as directed herein. DATED: Mineola, NY March 16, 2011 \ c 'i 0 HON. TIMOTHY S. J.S. /Ji RISiOLL ENTERED MAR 1 g 2011 NASSAU COUNTY, COUM" CLERK' S OFF.cE