Court Opinion

ID: 855425
Source: CourtListenerOpinion
Date Created: 2013-03-18 14:35:29.180109+00
Date Added: 2024-06-11T09:02:05.142972
License: Public Domain

12-1143
     Key Items, Inc. v. Global Jewellery Solutions, Ltd.

                          UNITED STATES COURT OF APPEALS
                              FOR THE SECOND CIRCUIT

                                     SUMMARY ORDER
     RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED
     ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE
     PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A
     DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
     ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST
     SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

 1            At a stated term of the United States Court of Appeals
 2       for the Second Circuit, held at the Thurgood Marshall United
 3       States Courthouse, 40 Foley Square, in the City of New York,
 4       on the 18th day of March, two thousand thirteen.
 5
 6       PRESENT: DENNIS JACOBS,
 7                              Chief Judge,
 8                ROSEMARY S. POOLER,
 9                              Circuit Judge.
10                ERIC N. VITALIANO,
11                              District Judge.*
12
13       - - - - - - - - - - - - - - - - - - - -X
14       KEY ITEMS, INC.,
15                Plaintiff-Appellant,
16
17                    -v.-                                                     12-1143
18
19       GLOBAL JEWELLERY SOLUTIONS, LTD.,
20       EDWARD MAIEROVITZ, AND ULTIMA 2008
21       LTD.,
22                Defendants-Appellees.
23
24       - - - - - - - - - - - - - - - - - - - -X

                *
               The Honorable Eric N. Vitaliano, District Judge of
         the United States District Court for the Eastern District of
         New York, sitting by designation.
                                                  1
 1   FOR APPELLANT:              STEVEN CASTALDO, Paduano &
 2                               Weintraub LLP, New York, New
 3                               York (Anthony Paduano, Paduano &
 4                               Weintraub LLP, New York, New
 5                               York, on the brief).
 6
 7   FOR APPELLEES GLOBAL        DOUGLAS R. HIRSCH, Sadis &
 8   JEWELLERY SOLUTIONS, LTD.   Goldberg LLP, New York, New
 9   AND ULTIMA 2008, LTD.:      York.
10
11   FOR APPELLEE EDWARD         Edward Maierovitz, pro se.
12   MAIEROVITZ:
13
14        Appeal from a judgment of the United States District
15   Court for the Southern District of New York (Pitman, M.J.).
16
17        UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED
18   AND DECREED that the judgment of the district court be
19   VACATED and REMANDED.
20
21        Key Items, Inc. (“Key Items”) appeals from the judgment
22   of the United States District Court for the Southern
23   District of New York (Pitman, M.J.), dismissing its
24   complaint and denying its motion to amend on the basis of
25   futility. We assume the parties’ familiarity with the
26   underlying facts, the procedural history, and the issues
27   presented for review.
28
29        Key Items brought this action against Ultima Diamonds,
30   Inc. (“Ultima Diamonds”), a jewelry wholesaler, for refusing
31   to pay for a shipment from Key Items in September 2008. Key
32   Items obtained a default judgment against Ultima Diamonds in
33   the amount of $112,976.96 plus pre-judgment interest.
34   However, the district court dismissed the suit as to Ultima
35   2008, Ltd. (“Ultima 2008”), doing business as “Global
36   Jewellery Solutions, Ltd.” (collectively, “the Global
37   Defendants”) because they were not parties to the contract.
38   Key Items sought leave to amend the complaint to include
39   tortious interference and alter ego claims against the
40   Global Defendants on the basis that Edward Maierovitz
41   controlled both entities and wrongfully transferred assets
42   from Ultima Diamonds to Ultima 2008 in order to render the
43   former judgment-proof. Leave to amend was denied as futile.
44

                                  2
 1        We review the denial of a motion to amend on the basis
 2   of futility de novo. See Hutchison v. Deutsche Bank Sec.
 3   Inc., 647 F.3d 479, 490 (2d Cir. 2011).
 4
 5        The district court rejected Key Items’s tortious
 6   interference claim, in part, on the ground that because
 7   Ultima Diamonds became defunct prior to payment coming due,
 8   its dissolution was the but-for cause of the breach, rather
 9   than any act by the Global Defendants. However, Key Items
10   alleges that Maierovitz shut down one company (Ultima
11   Diamonds), established a new one (Ultima 2008), and shifted
12   assets from the old to the new--thereby causing Ultima
13   Diamonds to breach its contractual obligations–-and these
14   allegations sufficiently plead causation. The district
15   court acknowledged as much, explaining that if the
16   fraudulent transfer allegation were included in plaintiff’s
17   tortious interference claim, “it probably would salvage the
18   claim.” A 239 n.4. The allegation was discounted because
19   it appeared under the “alter ego” section of the complaint,
20   and Key Items failed to incorporate it by reference into the
21   recital as to tortious interference. Surely, Key Items will
22   correct this technical defect when it files its amended
23   complaint. It follows, then, that leave to amend would not
24   be futile. Cf. Travelers Ins. Co. v. 633 Third Assocs., 973
25   F.2d 82, 87-88 (2d Cir. 1992).
26
27        The court also erred in denying Key Items’s the
28   opportunity to add an alter ego claim. Key Items must
29   demonstrate (1) that the Global Defendants dominated Ultima
30   Diamonds, and (2) that “such domination was used to commit a
31   fraud or wrong that injured the party seeking to pierce the
32   veil.” Am. Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d
33   130, 134 (2d Cir. 1997).
34
35        According to the amended complaint, just one week
36   before Ultima Diamonds purchased more than 3,000 pieces of
37   jewelry from Key Items, Maierovitz established Ultima 2008,
38   another jewelry wholesaler operating in the same market, out
39   of the same office, using the same business address and
40   resources. After receiving the jewelry, Maierovitz then
41   allegedly refused to pay for part of the shipment (1,700
42   rings), transferred the assets to Ultima 2008, dissolved
43   Ultima Diamonds, and began using Ultima 2008 to conduct his
44   jewelry business (under the name “Global Jewellery
45   Solutions”). Maierovitz is a director and officer of both
46   companies, and served as the companies’ primary contact
47   person at all relevant times. No one--not even counsel for

                                  3
 1   the Global Defendants--could identify any individual or
 2   entity involved in the governance of these companies other
 3   than Maierovitz.1
 4
 5        Key Items further alleges [i] that part of the jewelry
 6   that had been delivered to Ultima Diamonds was returned by
 7   the Global Defendants, and [ii] that Maierovitz represented
 8   to the Jewelers Board of Trade that Ultima Diamonds now
 9   conducts business as Ultima 2008. These allegations create
10   a sufficient inference that the Global Defendants gained
11   control of Ultima Diamonds’s assets, including the jewelry
12   that Key Items had shipped in October and November of 2008.
13
14        Accepting the above allegations as true, as we must, we
15   conclude that Key Items has pled almost all of the
16   discretionary factors that “tend to identify a dominated
17   corporation.”2 Am. Fuel Corp., 122 F.3d at 134. It has
18   also adequately pled that “such domination was used to
19   commit a fraud or wrong” against it. Id.
20
21        For the foregoing reasons, we hereby VACATE the
22   judgment of the district court and REMAND with instructions
23   to grant Key Items’s motion to amend its complaint.
24
25
26                              FOR THE COURT:
27                              CATHERINE O’HAGAN WOLFE, CLERK
28
29
30
31

         1
           At oral argument, the Global Defendants’ attorney
     stated that he did not know his own client’s principal.
     When pressed, he speculated that perhaps his client is owned
     by a group of individuals in India.
         2
           These factors include inadequate capitalization; the
     use of corporate resources for personal gain; overlap in
     ownership, officers, and directors; sharing the same
     business address and office space; the lack of business
     discretion displayed by the dominated corporation; whether
     the entities interact at arms length; whether others pay or
     guarantee debts of the dominated corporation; and whether
     the controlling entity used the property of the dominated
     corporation. See id.
                                  4