ML Fashion, LLC v. Nobelle GW, LLC

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ML FASHION, LLC, and ML RETAIL, LLC Plaintiffs, v. NOBELLE GW, LLC, STEPHANIE MENKIN, SARIT MAMAN NAGRANI, and NICOLAS GOUREAU, Defendants.

CIVIL No. 3:21-CV-00499 (JCH)

United States District Court, D. Connecticut

February 2, 2022

RULING ON DEFENDANTS' MOTION FOR COSTS AND FOR A STAY OF PROCEEDINGS (DOC. NO. 31), MOTION TO DISMISS (DOC. NO. 33), AND MOTION TO STAY DISCOVERY (DOC. NO. 57), AND PLAINTIFFS' MOTION TO AMEND THE SCHEDULING ORDER (DOC. NO. 94)

Janet C. Hall, United States District Judge.

I. INTRODUCTION

Plaintiffs ML Fashion, LLC, and ML Retail, LLC, bring this action alleging eleven separate causes of action against defendants Nobelle GW, LLC, (“Nobelle”), Stephanie Menkin (“Menkin”), Sarit Maman Nagrani (“Nagrani”), and Nicolas Goureau (“Goureau”), all related to the opening of Nobelle, a retail fashion store. Pending before the court are four separate motions - three by defendants and one by plaintiffs - all of which this Ruling resolves.

First pursuant to Rule 41(d) of the Federal Rules of Civil Procedure (“Rule 41(d)”), defendants have moved for the court to order plaintiffs to pay certain costs associated with a previously filed action in the pUnited States District Court for the Northern District of Illinois. They also seek a stay of the proceedings in this court until plaintiffs pay those costs. See Defs.' Mot. for Costs and for a Stay of Proceedings Pending Pls.' Payment of Those Costs Pursuant to Fed.R.Civ.P. 41(d) (Doc. No. 31); Defs.' Mem. of Law in Supp. of Defs.' [Mot.] for Costs and for a Stay of Proceedings Pending Pls.' Payment of Those Costs Pursuant to Fed.R.Civ.P. 41(d) (“Defs.' R. 41(d) Mem.”) (Doc. No. 31-1); Defs.' Reply in Further Supp. of Their Mot. for Costs and for a Stay of Proceedings Pending Pls.' Payment of Those Costs Pursuant to Fed.R.Civ.P. 41(d) (“Defs.' R. 41(d) Reply”) (Doc. No. 45). Plaintiffs oppose this Motion. See Pls.' [ ] Mem. of Law in Opp'n to Def.'s Mot. for Costs and for a Stay of Proceedings Pending Pls.' Payment of Those Costs Pursuant to Fed.R.Civ.P. 41(d) (“Pls.' R. 41(d) Mem.”).

Second, defendants have moved to dismiss the Complaint in its entirety. See Defs.' Mot. to Dismiss the Compl. (Doc. No. 33); Defs.' Mem. of Law in Supp. of Their Mot. to Dismiss the Compl. (“Defs.' Mot. to Dismiss Mem.”) (Doc. No. 33-1); Defs.' Reply Mem. of Law in Further Supp. of Their Mot. to Dismiss the Compl. (“Defs.' Mot. to Dismiss Reply”) (Doc. No. 60). Plaintiffs also oppose this Motion. See Pls.' [ ] Mem. of Law in Opp'n to Defs.' Mot. to Dismiss the Compl. (“Pls.' Mem. in Opp'n to Mot. to Dismiss”) (Doc. No. 44).

Third, defendants have also moved to stay discovery “pending the resolution of Defendants' [ ] Motion to Dismiss.” See Defs.' Mot. to Stay Discovery (Doc. No. 57). Plaintiffs oppose this Motion as well, and have cross-moved for this court to impose sanctions on defendants for their alleged failure to confer with plaintiffs before filing their Motion. See Pls.' Mem. of Law in Opp'n to Defs.' Mot. to Stay Discovery and in Supp. of Request for Sanctions (Doc. No. 61).

Finally, plaintiffs have moved for an extension of time and to amend the scheduling order by extending all deadlines by 120 days. See Pls.' Mot. for Extension of Time and to Amend Scheduling Order (“Mot. to Amend Scheduling Order”) (Doc. No. 94). This Motion is unopposed. Id. at 1.

For the reasons set forth below, the court: (1) grants defendants' Motion for plaintiffs to pay certain costs associated with the Illinois Action; (2) denies their Motion to stay proceedings until those costs are paid; (3) grants in part and denies in part defendants' Motion to Dismiss while ordering limited jurisdictional discovery as to defendant Goureau; (4) terminates their Motion to Stay Discovery as moot; (5) denies plaintiffs' cross-Motion for sanctions, and; (6) grants plaintiffs' unopposed Motion to Amend the Scheduling Order.

II. FACTUAL ALLEGATIONS^[1]

In or around 2014, defendants Menkin and Goureau went on a CNBC television series called “The Profit” to solicit an investment from its presenter, Marcus Lemonis (“Lemonis”). Compl. at ¶¶ 13-14. At the time, Menkin and Goureau were operating a failing fashion retail business operating under the brand name “Courage.B.” Id. at ¶ 13. During their appearance on the show, Menkin and Goureau admitted that Courage.B had lost more than $500, 000 in the previous year and that they had just resolved a lawsuit against their stepfather involving the business. Id. at ¶ 15. After discussion, Lemonis agreed to invest $800, 000 in the company to allow it to purchase inventory and pay other fees. Id. at ¶ 16. In exchange, ML Retail - for which Lemonis serves as managing member - received and ownership stake in Menkin and Goureau's business. Id.

The business proceeded to expand, acquiring new brands and opening new stores over the course of the next two years. Id. at ¶¶ 17-18. In or around 2016, Menkin, Goureau, and ML Retail formed ML Fashion, a new LLC, for the purposes of overseeing and operating their still-expanding fashion retail business. Id. Lemonis, as ML Retail's managing member, signed the LLC Agreement on its behalf. Id. at ¶ 16, 22. Pursuant to the LLC Agreement, ML Retail owns a 33.34% stake in ML Fashion, and Lemonis is also its managing member, chairman, and CEO. Id. at ¶¶ 20, 23-24. Menkin and Goureau, for their part, each own a 33.33% membership interest in ML Fashion, and Menkin serves as its president. Id. at ¶ 23-24. However, as managing member, the management of ML Fashion is “vested entirely and exclusively” in Lemonis, and neither Menkin nor Goureau have a right to participate in the management or control of ML Fashion, or to act for it or bind it in any way. Id. at ¶ 27. ML Fashion itself holds title to all of its property, and no member has an individual ownership interest in that property. Id. at ¶ 26. Finally, the LLC Agreement also includes a non-compete clause that applies to each member for twelve months once their membership is terminated. Id. at ¶¶ 30-31.

In or around 2016, Menkin and Goureau opened ML Fashion's first store in Lake Forest, Illinois. Id. at ¶ 33. The business would continue to grow over the next few years, operating more than thirty retail stores across the country at its peak, including a store called “MARCUS” in Greenwich, Connecticut, and another in New York City's Meatpacking District. Id. at ¶¶ 34-36. Defendant Nagrani, an ML Fashion employee at the time, managed both of these stores. Id. at ¶ 1, 36. Plaintiffs allege that these stores were in the same retail market, as “[m]any Greenwich residents do their fashion-related shopping in both Greenwich and New York City”, and that Menkin, Goureau, and Nagrani agreed that the two stores were operating in the same market. Id. at ¶¶ 37-40.

Then the COVID-19 pandemic hit. On or about December 22, 2020, ML Fashion closed the New York City store, although it has still not relinquished the property to the landlord. Id. at ¶ 41. It also stopped selling clothing and other fashion-related retail products from the Greenwich store in or around March 2020, although ML Fashion alleges it still owns the fixtures, furniture, and equipment located on the property. Id. at ¶¶ 42-44. However, when it attempted to retrieve that property from the Greenwich location - which served as collateral for a multi-million dollar loan from ML Retail to ML Fashion - plaintiffs allege that the employee in charge of the removal was threatened by Goureau and prevented from doing so. Id. at ¶ 45, 49. ML Fashion still holds the lease on the Greenwich property, and has never authorized anyone else to operate there. Id. at ¶ 47.

During this time, in or around early 2020, Lemonis began discussions with Menkin and Goureau about their potential exit from ML Fashion. Id. at ¶ 56. These negotiations included proposals for both Menkin and Goureau to exchange all their equity in ML Fashion for mutually agreeable inventory. Id. at ¶¶ 56-57. Plaintiffs allege that, during the conversations surrounding their exits, Menkin and Goureau made numerous misrepresentations. Id. at ¶ 58. For instance, they allegedly said that they would not take ML Fashion inventory or property without its approval, nor would they take actions to compete with or harm the company. Id. at ¶ 59.

According to plaintiffs, however, Menkin and Goureau did just that. They never transferred any equity to Lemonis and ceased all communication with him in early 2020. Id. at ¶ 62. In addition, plaintiffs allege that “as the end of her tenure at ML Fashion became clear, Menkin” - who was ML Fashion's President and oversaw its retail operations and other endeavors - “utilize[d] her position . . . to unduly influence ML Fashion employees and misappropriate ML Fashion inventory.” Id. at ¶¶ 53, 66. More specifically, Menkin formed Nobelle with defendant Nagrani, and then, without authorization, took “at least 3, 922 items of clothing and other merchandise from ML Fashion with a wholesale cost of at least $109, 443.93, and a retail value of at least $207, 473.90.” Id. at ¶ 67. Based on plaintiffs' investigations to date, they believe both Menkin and Nagrani used their positions at ML Fashion to “cover their tracks” as they implemented this scheme, “including by potentially deleting or altering ML Fashion inventory records.” Id. at ¶ 68.

One instance of this alleged conduct occurred in January 2020 when Front Door Fashion (“FDF”) contacted ML Fashion to return 1, 296 items that it had been working to sell online on ML Fashion's behalf. Id. at ¶¶ 69-71. Instead of providing FDF with an ML Fashion address to send the items, Menkin allegedly told them to send the items to a location in New York where her mother, Noemi Goureau, operated a store that plaintiffs...