Ddr Constr. Serv. Inc. v. Siemens Indus. Inc.

770 F.Supp.2d 627

DDR CONSTRUCTION SERVICES, INC., Plaintiff,

v.SIEMENS INDUSTRY, INC., Siemens Energy & Automation, Inc., Schlesinger–Siemens Electrical, A Joint Venture d/b/a Schlesinger–Siemens Electrical LLC, Schlesinger Electrical Contractors, Inc., First Keystone Consultants, Inc., Alison Consulting Group, Inc., Jacob Levita, Robert Solomon, Jeffrey Deurlein, Joseph Guddemi, Robert Rigsby, Harry Volande, and Frank Krutemeier, and John Does 1–50, Defendants.

No. 09 CIV. 09605 RJH.

United States District Court, S.D. New York.

March 22, 2011.

Kevin J. O'Connor, Kevin Joseph O'Connor, Sr., Charles Ellias Williams, III, Peckar & Abramson, P.C., New York, NY, Lisa Heller Lesser, Peckar & Abramson, P.C., River Edge, NJ, for Plaintiff.Steven F. Reich, Manatt, Phelps & Phillips, LLP, John Felix Cambria, Gary Dee Adamson, Alston & Bird, LLP, New York, NY, Melvin J. Kalish, Law offices of Melvin J. Kalish, Mineola, NY, Richard H. Agins, Sigman & Rochlin, LLC, Hartford, CT, for Defendant.

MEMORANDUM OPINION AND ORDER

RICHARD J. HOLWELL, District Judge:

In this case plaintiff DDR Construction Services, Inc. (“DDR”) sues several of its former associates in the construction, electrical subcontracting, and consulting industries in New York for violations of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961 et seq. (“RICO”), as well as for fraud, breach of fiduciary duty, and several other state law claims. Currently pending are four motions to dismiss filed by different groups of defendants; DDR's cross-motions to strike, to dismiss counterclaims, and for sanctions; and DDR's cross-motion for leave to seek sanctions. DDR has also submitted a letter application seeking leave to file an amended complaint. For the reasons that follow, defendants' motions are GRANTED; DDR's cross-motion to strike and to dismiss, and for sanctions, is GRANTED IN PART and is DENIED IN PART; DDR's cross-motion for leave to seek sanctions is DENIED; and, DDR's letter application is DENIED.

I. FACTUAL SETTING

For the purposes of the present motions, the following facts, drawn from the complaint and the documents incorporated by reference therein, are taken as true. Because the complaint incorporates by reference a litigation involving many of the same parties and factual issues ongoing in the Supreme Court of the State of New York, County of Queens, First Keystone Consultants, Inc. v. DDR Constr. Servs., No. 27095 2005 (N.Y.Sup.Ct.) (hereinafter the “Queens Action”), the pleadings and decisions in that matter are also described and considered. See Blue Tree Hotels Inv. (Canada), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir.2004) (“Our review is generally limited to the facts and allegations that are contained in the complaint and in any documents that are [ ] incorporated into the complaint by reference.... But we may also look to public records, including complaints filed in state court, in deciding a motion to dismiss.” (internal citations omitted)).

A. The Parties

Plaintiff DDR is a New Jersey corporation that provides consulting and other services to entities in the construction industry. (Compl. ¶¶ 8, 33.) Specifically, DDR brings together other construction industry entities in order to facilitate bidding, assists in arranging bids, and manages construction projects. ( Id. ¶¶ 21, 25–26, 33–34.) As of 2001, DDR's vice president, Clifford Weiner (“Weiner”), had affiliations with several construction-industry entities operating in the New York area, including defendants Schlesinger Electrical Contractors, Inc. (“Schlesinger”), and First Keystone Consultants, Inc. (“First Keystone”). ( Id. ¶ 21.) In 2004, Weiner was also vice president of Schlesinger. ( Id. ¶ 32.)

Defendants Siemens Energy & Automation, Inc. (“SEA”), and Siemens Industry, Inc. (“SII”), (collectively “Siemens”), are Delaware corporations that provide electrical, engineering, and automation solutions in the construction industry. ( Id. ¶ 9; Siemens' Defs.' Mem. at 4.) ¹ DDR originally negotiated with Siemens because DDR sought to join forces with an established electrical contractor in submitting bids on “public improvement construction contracts” in New York. (Compl. ¶ 20.) Defendants Jeffrey Deurlein (“Deurlein”), Harry Volande (“Volande”), and Frank Krutemeier (“Krutemeier”), are officers and/or employees of Siemens, and are Georgia residents. ( Id. ¶¶ 15, 17, 18.) Defendant Schlesinger–Siemens Electrical (“SSE”), doing business as Schlesinger–Siemens Electrical, LLC, is a company formed by contractual agreement between Siemens and Schlesinger to bid on New York City Department of Environmental Protection (“NYCDEP”) “water pollution facility electrical upgrade” projects in New York. ( Id. ¶¶ 32–34.) The company was formally established in August 2004, by an “Operating Agreement”; is organized under the law of Delaware; and is authorized to conduct business in New York as a limited liability company. ( Id. ¶¶ 14, 35.) Under the Operating Agreement, Siemens and Schlesinger would split SSE profits 50%–50%, but Siemens retained control over SSE with a 51% member interest as compared to Schlesinger's 49% interest. ( Id. ¶¶ 36, 48; Siemens Defs.' Mem. at 5 n. 6.) SII, SEA, Deurlein, Volande, Krutemeier, and SSE are hereinafter collectively referred to as the “Siemens Defendants.” Defendant Robert Rigsby (“Rigsby”), another Georgia resident, was general counsel to Siemens during the relevant period. (Compl. ¶ 16.)

Defendants Schlesinger and Alison Consulting Group, Inc. (“Alison”) are New York corporations involved in the construction industry in New York, mostly in contracting, consulting, or accounting roles. ( See id. ¶¶ 1, 10–12, 21, 23, 94–95, 150A.) Defendant First Keystone is a Pennsylvania corporation also involved in the construction industry in New York. ( See id.) Defendant Jacob Levita (“Levita”) is the president of Schlesinger. ( Id. ¶ 11.) Defendant Robert Solomon (“Solomon”) is the principal officer of First Keystone. ( Id. ¶ 10.) Defendant Joseph Guddemi (“Guddemi”) is a principal of Alison. ( Id. ¶ 12.) Levita, Solomon, and Guddemi are all New York residents. ( Id. ¶¶ 10–12.) Schlesinger and Levita are hereinafter collectively referred to as the “Schlesinger Defendants.” First Keystone and Solomon are hereinafter collectively referred to as the “First Keystone Defendants.” Alison and Guddemi are hereinafter collectively referred to as the “Alison Defendants.” ²

Not a party to this action is SFD Associates (“SFD”). SFD was a joint venture of Schlesinger, First Keystone, and DDR, formed in August, 2004, simultaneously with SSE. ( Id. ¶ 36.)

B. The Parties' Relationships and the Litigation in Queens

Between 2001 and 2004, Weiner assisted in arranging four construction project bids for Siemens, to be performed in collaboration with various New York construction industry entities including Schlesinger and First Keystone. ( Id. ¶ 21.) By the spring of 2004, Weiner apparently desired to create a more formal relationship with Siemens. In August of 2004, therefore, two companies were formed. The first was SSE, a combination of Siemens and Schlesinger authorized to do business in New York as a limited liability company. ( Id. ¶ 14). The second was SFD, a joint venture among Schlesinger, First Keystone, and DDR, through which those entities would (1) assist in the bidding and performing of Schlesinger's part of SSE projects, and (2) split any profits Schlesinger earned from those projects in equal thirds. ( Id. ¶ 36; Weiner Aff. Ex. A ¶¶ 1, 21).³ Under SSE's Operating Agreement, Schlesinger was permitted to make two appointments to SSE's five-member board of managers; one of those appointments was Weiner. (Compl. ¶¶ 51–52.)

In January of 2004, before either SFD or SSE had been created, Schlesinger, First Keystone, and DDR collaborated in performing electrical work for an NYCDEP project on Coney Island (the “Coney Island Project” or the “Coney Island Partnership”). ( Id. ¶¶ 23, 25.) The bid for this project was formally made by a fifty-fifty joint venture between Schlesinger and First Keystone; First Keystone and DDR had a separate agreement by which they would split equally First Keystone's profits on the project. ( Id. ¶ 25.) In the spring of 2005, DDR accused Schlesinger and First Keystone of withholding some $300,000 allegedly owed to it. ( Id. ¶ 28.) DDR demanded an accounting, but no accounting was performed. ( Id. ¶¶ 29–30.)

Thereafter, Schlesinger and First Keystone allegedly began scheming to oust DDR from SFD. ( Id. ¶¶ 89–91, 96.) ⁴ First, on September 14, 2005, First Keystone and Schlesinger requested DDR to pay $100,000 to SFD as a “capital call” by the next day; and when DDR neither attended the next day's meeting nor came up with the funds, Schlesinger and First Keystone informed DDR that it would be excluded from SFD profits. ( Id. ¶¶ 119, 121–122).⁵ Second, on September 16, 2005, Weiner was replaced on the SSE board of managers by Levita, either after his resignation or after being forced out by Schlesinger and First Keystone. ( Id. ¶¶ 100–101, 136.) ⁶ Siemens, and specifically, Deurlein, allegedly knew of Schlesinger and First Keystone's wrongful conduct but took no action to stop it. ( Id. ¶¶ 105, 115–116, 126, 133.) ⁷

The parties entered litigation in December of 2005 when the First Keystone Defendants sued DDR in New York Supreme Court in Queens. First Keystone (1) alleged that DDR had obtained certain profits from the Coney Island Project by fraud; and (2) sought a declaratory judgment that DDR was not entitled to share in profits SFD obtained through Schlesinger's membership interest in SSE. ( Id. ¶ 31); see First Keystone Consultants, Inc. v. DDR Constr. Servs., No. 27095 2005, 22 Misc.3d 1102(A), 880 N.Y.S.2d 223 (Table), 2008 WL 5431379 at *1 (N.Y.Sup.Ct. Dec. 15, 2008). DDR counterclaimed against the First Keystone Defendants and asserted third-party claims against the...