Rizvi v. Urstadt Biddle Properties Inc.

          RULING AND ORDER ON DEFENDANTS' MOTIONS TO DISMISS AND CROSS MOTIONS FOR SANCTIONS

          VICTOR A. BOLDEN, UNITED STATES DISTRICT JUDGE.

         Nusrat and Eileen Rizvi (“Plaintiffs”) filed this lawsuit on August 21, 2017. Compl., ECF No. 1. Defendants variously moved to dismiss the Complaint. ECF Nos. 10, 14, 19. On October 25, 2017, Plaintiffs amended their complaint. Am. Compl., ECF No. 22. They further amended their complaint on November 15, 2017. Pl. Mot. to Amend/Correct Am. Compl. ECF No. 38.

         Defendants then variously moved to strike portions of Plaintiffs' Amended Complaint. ECF Nos. 25, 27-30. On November 7, 2017, Defendants Urstadt Biddle Properties Inc. and Willing L. Biddle (collectively “UBP Defendants”) filed a motion for sanctions under Federal Rule of Civil Procedure 11. Mot. for Sanctions Pursuant to Rule 11, ECF No. 26.

         On January 17, 2018, the Court convened a hearing on the motions to dismiss and motions to strike. ECF No. 61. Following the hearing, the Court held that Plaintiffs were entitled to amend as of right, denied the motions to strike, and dismissed, without prejudice, the motions to dismiss as moot. Ruling on Def. Mot. to Strike Am. Compl., ECF No. 61.

         On February 1, 2018, Defendants Coles, Baldwin & Kaiser, LLC, John B, Kaiser, and Spa Thea, LLC, dba Andrew Stefanou Salon and Spa (collectively “Stefanou Defendants”) filed a motion to dismiss the Amended Complaint, and to incorporate their earlier motion to dismiss. Stefanou Defendants Mot. to Dismiss Am. Compl., ECF No. 66, incorp. ECF No. 19. That same day, UBP Defendants filed a motion to dismiss the Amended Complaint, and to incorporate their earlier motion to dismiss. UBP Defendants Mot. to Dismiss Am. Compl., ECF No. 67, incorp. ECF No. 10. On February 2, 2018, Defendants Hinckley Allen & Snyder LLP and Noble Allen (collectively “HAS Defendants”) filed a motion to dismiss the Amended Complaint, and to incorporate their earlier motion to dismiss. HAS Defendants Mot. to Dismiss Am. Compl., ECF No. 68, incorp. ECF No. 14. That same day, Tibbetts Keating & Butler LLC filed a motion to dismiss the Amended Complaint. Tibbetts Keating & Butler LLC Mot. to Dismiss Am. Compl., ECF No. 69. On April 27, 2018, Defendant Mario Cometti filed a motion to dismiss the Amended Complaint, and to incorporate the legal arguments in the Tibbetts Keating & Butler LLC motion to dismiss, Cometti Mot. to Dismiss Am. Compl., ECF No. 78, incorp. ECF No. 69.

         For the reasons set forth below, the Court GRANTS Defendants' motions to dismiss WITH PREJUDICE, ECF No. 66, incorp. ECF No. 19, ECF No. 67, incorp. ECF No. 10, ECF No. 68, incorp. ECF No. 14, ECF No. 69, ECF No. 78, incorp. ECF No. 69, DENIES UBP Defendants and Plaintiffs' cross-motions for sanctions, and orders the case closed.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         A. Factual Allegations

         Plaintiffs initially alleged that UBP Defendants and Andrew Stefanou conspired to reduce the sale price of their business, the Lanphier Spa, id. ¶ 15, ^[1] and that a host of individuals and organizations, including a number of attorneys, conspired to deprive Plaintiffs of their livelihood and rights.

         Plaintiffs, in their Amended Complaint, ECF No. 22, allege: (1) tortious interference with contract, Am. Compl. ¶ 66-75; (2) breach of contract, id. at ¶ 76-80; (3) misappropriation, id. at ¶ 81-96; (4) conspiracy to engage in a pattern of racketeering activity, id. at ¶ 97-127; (5) violations of unfair business practices and Connecticut Business & Professional Code, id. at ¶ 128-146; (6) breach of the covenant of good faith, id. at ¶ 147-167; (7) intentional infliction of emotional distress, id. at ¶ 168-186; (8) fraud, id. at ¶ 187-199; (9) violation of the False Claims Act, 13 U.S.C. § 3729(A)(1)(B) and (A)(2), and using a false record or statement to get a false claim paid material to a false claim, id. at ¶ 200-203; (10) violation of Connecticut Unfair Trade Practices Act (“CUTPA”), Conn. Gen. Stat. § 42-110a, et seq., id. at ¶ 204-209; (11) civil conspiracy, id. at ¶ 210-215; (12) forgery, Conn. Gen. Stat. § 53a-139, id. at ¶ 216-224; and (13) mail fraud, id. at ¶ 225-235. Plaintiffs allege additional facts in a motion to amend/correct the amended complaint. Pl. Mot. to Amend/Correct Am. Compl., ECF No. 38.

         The case principally concerns the Plaintiffs' loss of their business, “The Spa.” Plaintiffs operated The Spa for twenty years, from 1992 until 2012. Compl. at ¶ 15. Plaintiffs entered into a five-year lease of the underlying property in 1997. Id. at ¶ 16. Urstadt Biddle Properties Inc. acquired the underlying property in 1998, id. at ¶ 19, and granted Plaintiffs a five-year lease extension lasting until November 30, 2011. Id. at ¶ 20. Plaintiffs allege that the new lease agreement contained a non-compete clause. Am Compl. at ¶ 41. In 2009, Plaintiffs “invested $3 million dollars into business premises improvements.” Id. at ¶ 43. Shortly thereafter, they began discussing the sale of The Spa to the spa's manager, Defendant Stefanou. Compl. ¶ 24. In January 2011, Plaintiffs notified UBP that they intended to renew the 2006 lease extension. Id. at ¶ 25. After an exchange of documents, UBP informed Plaintiffs that Mr. Stefanou's signature would be required. Id. at ¶ 33.

         In the weeks that followed, Plaintiffs allege that UBP kept adding restrictions to the lease renewal, and Mr. Stefanou kept lowering his offering price in an “underhanded manipulation of the negotiations.” Id. ¶ 34-38. Plaintiffs allege that they confronted Mr. Stefanou and terminated his employment as a result, but UBP refused to negotiate further and rented the facility to Mr. Stefanou instead. Id. ¶¶ 37, 39-41. According to Plaintiffs, that rental and subsequent proceedings in court demonstrate that “[t]he Defendants embarked on the ‘concerted' efforts to steal the Plaintiff[s'] business and earned ‘good will.'” Am. Compl. at ¶ 47.

         Plaintiffs allege that Defendants have acted “collectively [to] create[] an elaborate artifice using multiple corporate entities and existing businesses and established professionals to unlawfully induce Plaintiff[s] to assign their business and earned good will over to the control of the Defendants.” Id. at ¶ 48. Plaintiffs focus on a January 10, 2012 settlement as the key “proof of the ‘conspiracy' and evidence of the ‘illegal' acts of the Defendants.” Id. at ¶ 64. On that day, Plaintiffs and UBP reached a settlement agreement that “enabled Plaintiff[s] to remain in possession [of their business rental property] for a period of six months.” Id. at ¶ 64b. Plaintiffs allege that Defendants “forged Plaintiff[s] name[s] on a full release of all claims” that day. Id. at ¶ 64j. Plaintiffs have alleged highly similar claims in several state court proceedings.

         B. Procedural Background

         Before this filing, this litigation had a substantial history in the Connecticut state courts. See, e.g., Lanipher Day Spa, Inc., et al. v. Urstadt Biddle Properties, Inc., FST-CV16-6029248-S (Conn. Super. Ct. 2017), Tibbetts Keating & Butler, LLC v. Lanipher Day Spa, Inc., et al. v. Lanipher Day Spa, Inc., et al., FST-CV12-5013946-S (Conn. Super. Ct. 2017). Superior Court Judge Kenneth Povodator summarized the litigation history in his June 2, 2017 Memorandum of Decision:

This is second generation litigation arising from incidents that primarily occurred in the 2011-12 time frame. The earlier round of litigation was resolved or withdrawn in 2012-13 (with a vestige dismissed in 2015). Virtually the entire current dispute arises from the prior litigation and circumstances surrounding the termination of the prior litigation, including claims relating to execution (or non-execution) of a formal release of claims in the courthouse on January 10, 2012.

Lanipher Day Spa, Inc., et al., FST-CV16-6029248-S at *1. Judge Povodator then held that Defendant UBP was entitled to summary judgment on the issues of tortious interference, conversion, fraud and misrepresentation, and CUTPA, Id. at *18, that Defendant HAS was entitled to summary judgment on the issues of tortious interference, conversion, fraud and misrepresentation, CUTPA, and all other counts directed at the Defendant, Id. at *20, and that Defendant Stefanou was entitled to summary judgment on the issues of tortious interference, conversion, fraud and misrepresentation, CUTPA, and all other counts directed at the Defendant. Id. at *22.

         II. STANDARD OF REVIEW

         In every case, a court must determine whether it has subject matter jurisdiction. In evaluating a motion under Rule 12(b)(1) for lack of subject matter jurisdiction, the Court “must accept as true all material factual allegations in the complaint but need not draw inferences favorable to the party asserting jurisdiction.” Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998). The plaintiff bears the burden of showing that subject matter jurisdiction is proper based on facts existing at the time he or she filed the complaint. Scelsa v. City Univ. of New York, 76 F.3d 37, 40 (2d Cir. 1996) (citations omitted).

         In cases involving prior litigation between or among the parties, a court must determine if it is precluded from adjudicating some or all of the claims on account of prior rulings on the merits of those claims. The doctrine of res judicata, or claim preclusion, generally dictates that “a judgment on the merits in a prior suit bars a second suit involving the same parties or their privies based on the same cause of action.” Parklane Hosiery Co. v. Shore, 439 U.S. 322, 327, 99 S.Ct. 645, 649, 58 L.Ed.2d 552 (1979). “In considering the preclusive effect of a state court judgment on a subsequent federal action, under the Full Faith and Credit Act, 28 U.S.C. § 1738, [Second Circuit courts] usually consult the preclusion laws of the state in which the judgment was issued.” Nestor v. Pratt & Whitney, 466 F.3d 65, 71 (2d Cir. 2006) (holding that the typical approach is not appropriate for administrative appeals under Title VII).

         “Under Connecticut law, the doctrine of res judicata is based on the policy that a party should not be allowed to relitigate a claim which it already had an opportunity to litigate. Accordingly, a former adjudication of a claim on its merits is an absolute bar to a subsequent action on the same claim or on any claim based on the same operative facts that might have been made in the prior action.” Sekor v. Capwell, 1 F.Supp.2d 140, 145 (D. Conn. 1998) (internal citation omitted). The party asserting the defense of res judicata bears the burden of proving that the prior action resulted in a ruling of the claim on its merits, and that res judicata applies to the current case. Ventres v. Goodspeed Airport, LLC, 301 Conn. 194, 205, 21 A.3d 709, 716 (2011).

         Once matters of subject matter jurisdiction and claim preclusion are addressed, a court will evaluate any claims that the complaint fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(6). In reviewing a complaint under Rule 12(b)(6), the court applies “a ‘plausibility standard, '” ...