Algorithmic Capital Markets Inc v. Universal Capital Holdings Group Inc

Background

Algorithmic Capital Markets Inc. filed a New York state-court action against Universal Capital Holdings Group Inc., asserting breach-of-contract claims. Universal removed the action to federal court and moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to state a legally sufficient claim.

Universal’s motion raised two issues concerning Algorithmic’s ability to sue. First, Universal argued that Algorithmic lacked legal capacity because the Treasurer of New Jersey had revoked its corporate charter about ten years earlier. Second, Universal argued that New York Business Corporation Law § 1312 barred Algorithmic from suing in New York because Algorithmic lacked a certificate of authority to do business there as a foreign corporation.

Parties’ Arguments

Algorithmic argued that it had cured the New Jersey issue by reinstating its incorporation on March 2, 2020, and that New Jersey law made the reinstatement relate back to the date of revocation. Algorithmic also stated that it obtained a New York certificate of authority on March 11, 2020, and argued that New York law allowed it to cure the earlier lack of certification before judgment in the action.

Algorithmic requested attorney fees and actual expenses based on what it characterized as the frivolous nature of Universal’s motion. In its reply, Universal did not dispute Algorithmic’s arguments about capacity and authority. Instead, Universal opposed Algorithmic’s fee request and asked for its own fees and expenses for bringing the motion, without providing argument or legal authority.

Ruling

Judge Mary Kay Vyskocil denied the motion to dismiss. The court stated that Universal effectively conceded that Algorithmic had the capacity and authority to assert its claims. In reaching that ruling, the court cited Universal’s reply, New Jersey’s reinstatement statute, Algorithmic’s certificate of reinstatement, and authority stating that the New York certification problem could be cured before judgment.

The court also denied both parties’ requests for attorney fees and costs for engaging in ordinary motion practice. The order directed Universal to file its answer by October 14, 2020. The opinion does not decide whether either party ultimately prevailed on the breach-of-contract claims.