Bentivoglio v. Event Cardio Group Inc.

Background

Gianfranco “John” Bentivoglio sued Event Cardio Group, Inc. (ECGI) and EFIL Sub of ECG, Inc. (EFIL). The Second Amended Complaint asserted three causes of action: (1) knowingly filing fraudulent information returns under 26 U.S.C. § 7434; (2) breach of contract; and (3) unjust enrichment.

Bentivoglio alleged that ECGI sent him Internal Revenue Service Forms 1099 for tax years 2014 through 2016 that treated more than $700,000 in business expenses as personal income. He also alleged that ECGI stopped making payments required by a Consulting Agreement after May 2017. The agreement provided for monthly payments and included New York choice-of-law and forum-selection provisions. Bentivoglio alleged that EFIL was ECGI’s alter ego, meaning that the two companies should be treated as one for purposes of his claims.

The defendants moved to dismiss the tax-reporting claim for lack of personal jurisdiction, a court’s authority over a defendant. They also sought dismissal of all claims against EFIL because Bentivoglio had not adequately alleged that EFIL was ECGI’s alter ego. Finally, they moved to dismiss the unjust-enrichment claim as duplicative of the breach-of-contract claim. The defendants did not challenge the sufficiency of the breach-of-contract claim against ECGI.

Tax-Reporting Claim and Personal Jurisdiction

The court held that New York’s long-arm statute did not provide personal jurisdiction over ECGI for the tax-reporting claim. ECGI was alleged to be a Nevada corporation with offices in Maryland, and the court found no general jurisdiction in New York.

The court also found no specific jurisdiction under New York Civil Practice Law and Rules section 302(a)(1). Listing a New York law firm as a “care of” mailing address did not show that ECGI was conducting business in New York. Although hiring New York counsel can sometimes constitute conducting business in the state, the court found no substantial relationship between that activity and the filing of the disputed tax forms. The forms were prepared and filed by a California accounting firm, not in New York. The negotiations and signing of the Consulting Agreement in New York also did not establish jurisdiction because the tax-reporting claim did not arise from those events.

The court concluded that it lacked personal jurisdiction over ECGI for the first cause of action and dismissed that cause of action. It stated that the same result would apply to EFIL for that claim even if EFIL were ECGI’s alter ego.

EFIL as a Defendant

The court treated the defendants’ challenge to EFIL as a motion to dismiss for failure to state a claim. Applying Delaware law, the court explained that disregarding a company’s separate legal identity requires allegations showing that the entities operated as a single economic entity and that maintaining their separate identities would cause the kind of fraud or unfairness recognized by the corporate-veil-piercing doctrine.

Bentivoglio alleged overlapping ownership and management and claimed that ECGI’s assets had been transferred to EFIL without consideration to avoid ECGI’s liabilities. The court found those allegations insufficiently detailed to show that ECGI and EFIL operated as a single entity. It also held that the alleged breach of contract did not itself establish the required fraud or unfairness. The court therefore concluded that Bentivoglio had not plausibly alleged that EFIL was ECGI’s alter ego and dismissed EFIL as a defendant.

Unjust-Enrichment Claim

The court dismissed the third cause of action as duplicative. It found that the Consulting Agreement clearly governed the payments at issue and that the agreement’s validity did not appear to be disputed. Because Bentivoglio’s unjust-enrichment claim was based on the same alleged failure to pay under the agreement, it repeated the breach-of-contract claim rather than presenting a separate claim.

Disposition

The court granted the defendants’ motion to dismiss the first and third causes of action and to dismiss EFIL as a defendant. Bentivoglio’s breach-of-contract claim against ECGI remained. The clerk was directed to terminate the motion.