VALERIE CAPRONI, District Judge.
Plaintiffs Bhutan International Festival, Limited and Bhutan Dragon Events and Festivals, Limited (collectively, "Plaintiffs") have sued Eden Project, a/k/a Eden Project Limited, and Eden Lab, a/k/a EdenLab Ltd., for breach of fiduciary duty, breach of contract, an accounting, and tortious interference.
Plaintiffs were the organizers of a large-scale cultural festival held in Thimphu, Bhutan, in 2015 (the "Festival"). See Am. Compl. ¶ 1. The Festival, known as the Bhutan International Festival, was intended to draw tourists to Bhutan and included numerous musical artists, exhibitions, and other performers. See id. Lab is a "creative production studio and design and sustainability consultancy" organized under the laws of the United Kingdom. See id. ¶¶ 6, 44. Project is a separate entity, also organized under the laws of the United Kingdom, that owns an "ecological theme park" in southern England. See id. ¶¶ 5, 48.
In late 2014, Plaintiffs entered into an Agreement with Lab, pursuant to which Plaintiffs agreed to pay Lab to publicize and recruit artists to participate in the Festival. See id. ¶ 1.
Plaintiffs and Lab were unable to raise the funds they needed, but Lab nevertheless booked numerous artists and vendors for the festival. See id. ¶¶ 21-25. As a result, the Festival ended up significantly over-budget, leaving Plaintiffs with considerable financial liabilities. See id. ¶¶ 2, 18, 25-26.
Plaintiffs allege that Lab breached the provisions in the Agreement that required funding to be in place before Lab was permitted to book artists and vendors for the Festival. See id. ¶¶ 1-2. Plaintiffs sue for breach of fiduciary duty, breach of contract, an accounting, and tortious interference. See id. ¶¶ 53-68.
Plaintiffs filed this action in November 2017. See Compl., Dkt. 1. Project moved to dismiss the Complaint for lack of personal jurisdiction, see Notice of Mot., Dkt. 16, and, in response, Plaintiffs filed an Amended Complaint. See Am. Compl. Project has moved to dismiss the Amended Complaint. See Notice of Mot., Dkt. 26. Lab has not appeared in this action, despite having been served. See Certificate of Service, Dkt. 13; Aff. of Service, Dkt. 36.
Project moves to dismiss the Amended Complaint pursuant to Rule 12(b)(6), on the ground that it was not a party to the Agreement between Plaintiffs and Lab. See Defs.' Mem. of Law, Dkt. 28, at 1-2. Project argues that it played no role in the organization of the Festival, that it and Plaintiffs "are strangers to each other," and, thus, that Plaintiffs have failed to state a claim against Project. Id. at 1.
Plaintiffs concede that Project was not a party to the Agreement but argue that Eden Lab was an "agent" or an "alter ego" of Project and, thus, that Project should be held liable for the acts and omissions of Lab. See Am. Compl. ¶ 51; Pls.' Mem. of Law, Dkt. 30, at 2.
To survive a motion to dismiss under Rule 12(b)(6), "a complaint must allege sufficient facts, taken as true, to state a plausible claim for relief." Johnson v. Priceline.com, Inc., 711 F.3d 271, 275 (2d Cir. 2013) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007)). "Although for the purposes of a motion to dismiss [the Court] must take all of the factual allegations in the complaint as true, [the Court is] `not bound to accept as true a legal conclusion couched as a factual allegation.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). "[T]o survive a motion under Rule 12(b)(6), a complaint does not need to contain detailed or elaborate factual allegations, but only allegations sufficient to raise an entitlement to relief above the speculative level." Keiler v. Harlequin Enters., Ltd., 751 F.3d 64, 70 (2d Cir. 2014).
A corporation may be held liable for the wrongs of another corporation either as an "alter ego" of that corporation, pursuant to a "veil-piercing analysis" or, alternatively, as a principal, pursuant to "traditional principles of agency." Mouawad Nat'l Co. v. Lazare Kaplan Int'l Inc., 476 F.Supp.2d 414, 421 (S.D.N.Y. 2007).
An "alter ego" analysis requires a court to disregard corporate formalities and treat two nominally separate corporations as the same entity. "Disregard of the corporate form is warranted only in extraordinary circumstances, and conclusory allegations of dominance and control will not suffice to defeat a motion to dismiss." Societe d'Assurance de l'Est SPRL v. Citigroup Inc., No. 10-CV-4754, 2011 WL 4056306, at *5 (S.D.N.Y. Sept. 13, 2011) (internal quotation marks omitted); see also Murray v. Miner, 74 F.3d 402, 404 (2d Cir. 1996). New York law requires a party seeking to pierce the corporate veil to make a two-part showing: first, that one corporation exercised "complete domination" over the other with respect to the transaction at issue; and second, that such domination was used "to commit a fraud or wrong that injured the party seeking to pierce the veil." Am. Fuel Corp. v. Utah Energy Dev. Co., 122 F.3d 130, 134 (2d Cir. 1997) (citing Morris v. N.Y. State Dep't of Taxation & Fin., 82 N.Y.2d 135, 141 (1993)).
As for the first prong, courts look to several factors to determine whether a corporation exercises complete domination over the other, including whether "corporate formalities" have been observed, whether the corporation is inadequately capitalized, and the degree of "overlap in ownership, officers, directors, and personnel" between the two entities. N.Y. State Elec. & Gas Corp. v. FirstEnergy Corp., 766 F.3d 212, 224 (2d Cir. 2014) (citing Wm. Passalacqua Builders, Inc. v. Resnick Developers S., Inc., 933 F.2d 131, 139 (2d Cir. 1991)). As for the second prong, the plaintiff must allege that the corporation in question "abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against that party, such that a court in equity will intervene." Morris, 82 N.Y.2d at 142; see also FirstEnergy, 766 F.3d at 229.
Alternatively, one corporation may be held liable for the acts of another under "traditional principles of agency." Mouawad Nat'l Co., 476 F. Supp. 2d at 422. An agency relationship between two entities requires the principal to have the power to control the agent and requires the principal to consent to the agent acting on the principal's behalf. See id. (collecting cases). A party may establish the principal's consent and control by showing that the principal vested the agent with "actual authority" or "apparent authority." Id. Plaintiffs here allege only that Eden Lab acted with apparent authority. See Pls.' Mem. of Law at 2-4.
"Apparent authority exists when a principal, either intentionally or by lack of ordinary care, induces [a third party] to believe that an individual has been authorized to act on its behalf." Aleph Towers, LLC v. Ambit Texas, LLC, No. 12-CV-3488, 2013 WL 4517278, at *6 n.10 (E.D.N.Y. Aug. 23, 2013) (quoting Peltz v. SHB Commodities, Inc., 115 F.3d 1082, 1088 (2d Cir. 1997)). "Apparent authority will only be found where words or conduct of the principal— not the agent—are communicated to a third party, which give rise to a reasonable belief and appearance that the agent possesses authority to enter into the specific transaction at issue." USHA Holdings, LLC v. Franchise India Holdings Ltd., 11 F.Supp.3d 244, 268 (E.D.N.Y. 2014) (quoting Edinburg Volunteer Fire Co. v. Danko Emergency Equip. Co., 55 A.D.3d 1108, 1110 (3d Dep't 2008)). In order to allege apparent authority, then, a complaint must allege both (1) that the principal made representations that led the plaintiff to believe that the agent was acting with the principal's authority and (2) that the plaintiff's belief was reasonable. See id.; see also Itel Containers Int'l Corp. v. Atlanttrafik Express Serv. Ltd., 909 F.2d 698, 703 (2d Cir. 1990).
The Amended Complaint does not allege facts that provide any basis for the Court to infer that Project can be held accountable for Lab's conduct. As an initial matter, Plaintiffs' response to Project's motion does not argue that Project can be held liable pursuant to a veilpiercing or alter-ego theory; the response relies solely on the argument that Project is liable on an agency theory. See Pls.' Mem. of Law at 2-4. To the extent that Plaintiffs intended to raise an alter-ego theory in the Amended Complaint, that theory has been abandoned. See Camarda v. Selover, 673 F. App'x 26, 30 (2d Cir. 2016); Jackson v. Federal Express, 766 F.3d 189, 195 (2d Cir. 2014).
Plaintiffs have failed to state a claim under an agency theory. Plaintiffs assert that Lab held itself out as a "partner" of Project, but Plaintiffs allege no facts from which it could be inferred that Project consented to those representations.
In addition, Plaintiffs have not alleged facts from which the Court could infer that their reliance on Lab's representations was reasonable. Plaintiffs' Agreement with Lab expressly stated that any "brand association" with Project could not "be publicized or used to leverage funding" without the approval of Project's vice chairman, see Am. Compl. ¶ 16; Fitzgerald Decl. Ex. 3; there is no allegation, however, that Plaintiffs sought this approval or even questioned whether Lab might be acting without Project's authorization.
According to Plaintiffs, they based their assumption about Project's involvement on: the fact that both Lab and Project are based in the United Kingdom; that Lab "was headed by a longstanding executive from Eden Project"; that the names of both entities used the word "Eden"; and that Lab "was copiously throwing about the `sustainability' eco-message of Eden Project." Pls.' Mem. of Law at 5. These facts fall far short of giving rise to any inference that Plaintiffs had a reasonable belief that Lab was acting as Project's agent. Moreover, Plaintiffs were aware that the executive in question had terminated his employment with Project several months prior, and Plaintiffs were aware that Lab was a separate entity from Project. See Am. Compl. ¶ 44; Fitzgerald Decl. Ex. 1 (executive's LinkedIn page, showing the dates that he stopped working for Project and began working for Lab); id. Ex. 8 (executive's email signature, stating that Lab is incorporated as a separate entity).
At best, the facts alleged suggest that Plaintiffs were on notice to investigate the relationship between Lab and Project further, whether by conducting a review of public records, contacting Project executives, or otherwise. See F.D.I.C. v. Providence Coll., 115 F.3d 136, 141 (2d Cir. 1997) ("[A] third party `who deals with an agent does so at his peril, and must make the necessary effort to discover the actual scope of authority.'" (quoting Itel Containers, 909 F.2d at 703)); Ford, 32 N.Y.2d at 472; Arol Dev. Corp. v. Whitman & Ransom, 626 N.Y.S.2d 118, 120 (1st Dep't 1995) ("When facts and circumstances serve to put the third party on notice that the agent may not be authorized to represent the principal, the third party has a duty to inquire as to the scope of the purported authority."). Having failed to do so, Plaintiffs have failed to allege that Lab acted with the apparent authority of Project.
For all these reasons, Plaintiffs have failed to state a claim against Project, and all claims against Project are dismissed with prejudice.
"The plaintiff bears the burden of establishing personal jurisdiction over the defendant." MacDermid, Inc. v. Deiter, 702 F.3d 725, 727 (2d Cir. 2012) (quoting Seetransport Wiking Trader Schiffarhtsgesellschaft MBH & Co., Kommanditgesellschaft v. Navimpex Centrala Navala, 989 F.2d 572, 580 (2d Cir. 1993)). The plaintiff, however, "need make only a prima facie showing" that jurisdiction exists. Id.
"[A] district court sitting in a diversity action . . . may exercise personal jurisdiction to the same extent as the courts of general jurisdiction of the state in which it sits." Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 124 (2d Cir. 2002) (citing Fed. R. Civ. P. 4(k)(1)(A)). Plaintiffs rely on § 302(a)(1) of New York's long-arm statute to establish personal jurisdiction. See Pls.' Mem. of Law at 5. That provision states that a court may exercise personal jurisdiction over a defendant who "in person or through an agent . . . transacts any business within the state." N.Y. C.P.L.R. § 302(a)(1). To determine whether a defendant transacts business in New York, courts consider the so-called Agency Rent A Car factors:
Sunward Elecs., Inc. v. McDonald, 362 F.3d 17, 22-23 (2d Cir. 2004) (quoting Agency Rent A Car Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 29 (2d Cir. 1996)).
Additionally, to the extent that Plaintiffs would move for leave to amend their complaint, that motion would be denied. Plaintiffs have already amended their complaint once, and they have not moved in their response papers for leave to amend a second time. Nothing in Plaintiff's response suggests that there are additional facts that they could allege that would adequately state a claim against Project. Accordingly, leave is not granted to move to file a second amended complaint, as such a motion would be futile.
As an initial matter, the Court notes that Lab has not moved to dismiss and has not appeared in this action. Plaintiffs have taken minimal steps to obtain a default judgment against Lab.
Turning to the first Agency Rent a Car factor, New York's long-arm statute requires that an out-of-state defendant have "an ongoing contractual relationship" with an in-state corporation. Sunward Elecs., 362 F.3d at 22 (emphasis added). Plaintiffs, however, do not allege that Lab conducted any business in New York other than the single Agreement that Lab entered into with Plaintiffs. "[D]istrict courts within this Circuit have held that a single short-term contract is not enough to constitute an `ongoing contractual relationship' for the purposes of personal jurisdiction." Gordian Grp., LLC v. Syringa Expl., Inc., 168 F.Supp.3d 575, 584-85 (S.D.N.Y. 2016) (collecting cases); see also, e.g., Sandoval v. Abaco Club on Winding Bay, 507 F.Supp.2d 312, 317 (S.D.N.Y. 2007); cf. Sea Tows Servs. Int'l, Inc. v. Pontin, 472 F.Supp.2d 349, 359 (E.D.N.Y. 2007) (finding an "ongoing contractual relationship" where parties did business for more than 14 years).
The second Agency Rent a Car factor asks whether the contract at issue was negotiated or executed within New York, or whether the defendant visited New York for the purpose of furthering the parties' contractual obligations. Sunward Elecs., 362 F.3d at 22. There is no indication that the Lab employees—who were located in the United Kingdom—visited New York or otherwise conducted any activity within the state. While Plaintiffs allege that at least one of Plaintiffs' employees was present in New York when the Agreement was negotiated, see Fitzgerald Decl. Ex. 6, and that this employee wired money to Lab from a New York bank, see Am. Compl. ¶ 39, "[t]he unilateral activity of [a] plaintiff executing a contract in New York is an insufficient basis upon which to acquire jurisdiction over a non-domiciliary defendant." Falow v. Cucci, No. 00-CV-4754, 2003 WL 22999458, at *5 (S.D.N.Y. Dec. 19, 2003) (citing Galgay v. Bulletin Co., 504 F.2d 1062, 1065 (2d Cir. 1974)). Indeed, were such activity sufficient, a plaintiff could manufacture personal jurisdiction over a defendant through the plaintiff's own actions.
Plaintiffs also argue that the emails that Lab employees sent into the state are sufficient to establish personal jurisdiction. But telecommunications establish personal jurisdiction only if they were "related to some transaction that had its `center of gravity' inside New York, into which a defendant `projected himself.'" Maranga v. Vira, 386 F.Supp.2d 299, 306 (S.D.N.Y. 2005) (collecting cases). In this case, the Agreement related to a festival in Bhutan, and Lab and its employees were located in the United Kingdom; the parties' transaction clearly did not have its center of gravity in New York. Indeed, nothing about the transaction at issue relates to New York, other than that one of Plaintiffs' employees appears to reside within the state.
As to the third and fourth Agency Rent a Car factors, the Agreement contained no choiceof-law clause, and there is no indication that Lab was required to send notices or payments into New York or that Lab was otherwise subject to "supervision" within the state. See Fitzgerald Decl. Ex. 3. The fact that Plaintiffs wired funds to and exchanged emails with Lab from New York is insufficient to satisfy this factor. See Sunward Elecs., 362 F.3d at 23; see also, e.g., Sandoval, 507 F. Supp. 2d at 317 ("Defendant signed a contract in the Bahamas for work that was to be performed on its property in the Bahamas; the fact that [Plaintiff] decided to carry out some of the logistics and internal management of the contract project by using employees based in New York does not speak to the issue of Defendant's contacts with the forum." (emphasis in original)).
For all these reasons, the Court does not have personal jurisdiction over Lab, and all claims against Lab are dismissed without prejudice.
For all the foregoing reasons, Project's motion to dismiss (Dkt. 26) is GRANTED. All claims against Eden Project and Eden Project Limited are DISMISSED WITH PREJUDICE for failure to state a claim. All claims against Eden Lab and Eden Lab Ltd. are DISMISSED WITHOUT PREJUDICE for lack of personal jurisdiction.
The Clerk is respectfully directed to terminate the open motion at Dkt. 26 and to CLOSE the case.
Additionally, the Court is mindful that is has discussed only one provision of New York's long-arm statute, N.Y. C.P.L.R. § 302(a)(1), as a possible basis for jurisdiction. No other provision in the statute would be appropriate here. Under N.Y. C.P.L.R. § 302(a)(2), Lab has not committed a "tortious act within the state." See Fantis Foods, Inc. v. Standard Importing Co., 49 N.Y.2d 317, 326 (1980) ("[T]he residence or domicile of the injured party within a State is not a sufficient predicate for jurisdiction, which must be based upon a more direct injury within the State and a closer expectation of consequences within the State than the indirect financial loss resulting from the fact that the injured person resides or is domiciled there." (collecting cases)). N.Y. C.P.L.R. § 302(a)(3) does not apply because, as the Court has discussed, there is no indication that Lab has done any business within New York other than the Agreement at issue. See N.Y. C.P.L.R. § 302(a)(3) (requiring that the defendant "regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state" (emphasis added)). And, finally, N.Y. C.P.L.R. § 302(a)(4) is plainly not appropriate, as Plaintiffs have not alleged that Lab "owns, uses or possesses any real property situated within the state." N.Y. C.P.L.R. § 302(a)(4).
