Katsoolis v. Cruz

Background

The court had previously granted in part and denied in part the defendants’ motion to dismiss. That earlier order dismissed the plaintiffs’ claim under the New York City Human Rights Law (NYCHRL) for workplace gender discrimination but allowed the plaintiffs to propose a Second Amended Complaint to correct identified pleading deficiencies. The plaintiffs timely filed a proposed complaint, and the defendants opposed several proposed amendments.

Rulings on the Proposed Amendments

The court granted in part and denied in part the request to file the Second Amended Complaint.

Adding Liquid Media Group (Canada), Ltd. The court granted the request to add Liquid Media Group (Canada), Ltd., referred to as “Old Liquid,” as a defendant. The court directed the plaintiffs to omit the defined term “Combined Company,” except when quoting a source that uses it, because the term was redundant with “New Liquid.” If the proposed complaint referred collectively to Old Liquid and New Liquid, it had to say so explicitly.

NYCHRL gender-discrimination claim. The court granted the request to replead the NYCHRL claim against the entity and individual defendants. The statute allows workplace discrimination claims against an employer, employee, or agent. The claim required allegations that the plaintiff was treated less well than other employees because of gender and that the conduct resulted from discriminatory intent.

The court found that the proposed complaint supplied the required minimum support at the pleading stage. It alleged that defendants disparaged Krysanne Katsoolis’s alleged sexual relationship but did not similarly disparage a male defendant’s sexual relationship; directed regular hostile comments at Katsoolis but not male colleagues; and offered a male colleague an office with a salary while giving Katsoolis a choice between an office and a salary. The court also considered allegations that Katsoolis sought help from Defendant Jackson about comments by another defendant and that Jackson ignored her. The NYCHRL claim could therefore proceed at the pleading stage against all defendants. The court declined to strike the allegation about a male defendant’s sexual relationship, although it noted that defendants could seek redaction of sensitive discussion.

Personal jurisdiction. The court denied the request to plead general personal jurisdiction over the proposed defendants. It held that specific personal jurisdiction already existed over the entity defendants and Defendant Daniel Cruz under the earlier order, and that the same analysis applied to the Second Amended Complaint.

The court also held that specific personal jurisdiction existed over Joshua Jackson and Charles Brezer for the NYCHRL claims. It found that both had conducted business in New York by installing the plaintiffs as the Liquid entities’ New York presence, working remotely with the plaintiffs to obtain financing and projects in the New York area, and traveling to New York on Liquid business. The court found a sufficient connection between those New York activities and the hostile-work-environment allegations because the alleged discrimination occurred in the context of those business interactions.

The court held that general personal jurisdiction did not exist over the entity or individual defendants. It stated that the entities were incorporated and based in Canada and that the individual defendants were domiciled outside New York. The proposed complaint did not allege the unusually continuous and systematic New York contacts needed to treat any defendant as essentially at home in New York. The plaintiffs were therefore directed to exclude a general-jurisdiction statement from the Second Amended Complaint.

Alter-ego theory. The court denied the request to plead that the individual defendants were alter egos of the entity defendants under British Columbia law. An alter-ego theory treats one entity or person as sufficiently connected to another for certain liability purposes. The court stated that British Columbia law required allegations showing complete control of the subsidiary, making it a mere puppet, and an improper or fraudulent purpose or use. The allegations that the individual defendants failed to observe corporate formalities or keep the plaintiffs informed about corporate developments did not show complete control. The court reiterated that the theory that New Liquid was an alter ego of Old Liquid could proceed.

Education allegation. The court denied the request to include an allegation that Defendant Cruz did not receive a college education. Although the defendants’ proposed motion to strike that allegation was premature because the Second Amended Complaint had not yet been filed, the court directed the plaintiffs not to include the irrelevant allegation.

Next steps and disposition

The court ordered the plaintiffs to file the Second Amended Complaint, consistent with its directions, by November 26, 2019. The defendants were required to respond within 21 days after filing. The clerk was directed to reinstate Charles Brezer and Joshua Jackson as defendants when the Second Amended Complaint was filed. The order’s classification is procedural because it governed amendment of the pleadings and personal-jurisdiction and pleading-stage issues rather than finally deciding the underlying discrimination claim.