Case 1:17-cv-06697-PAE-KNF Document 130 Filed 12/22/20 Page 1 of 37
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`CCR INTERNATIONAL, INC., CCR
`DEVELOPMENT GROUP, INC., JOSÉ
`FUERTES, and BANCO COOPERATIVO
`DE PUERTO RICO,
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`15 Civ. 6563 (PAE)
`16 Civ. 6280 (PAE)
`17 Civ. 6697 (PAE)
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`OPINION &
`ORDER
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`Plaintiffs and Counterclaim
`Defendants,
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`Defendant and Counterclaim
`Plaintiff.
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`-v-
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`ELIAS GROUP, LLC,
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`PAUL A. ENGELMAYER, District Judge:
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`This case arises from a series of transactions concerning a Puerto Rican soda brand, Coco
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`Rico. Before 2008, Coco Rico was owned by CCR International, Inc. (“CCR”) and José Fuertes
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`(“Fuertes”), whose family had long operated the company. In 2008, CCR sold the Coco Rico
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`assets to CCR Development Group, Inc. (“CCRDG”), which promised to pay for those assets over
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`time. But when CCRDG defaulted on its payments, CCR turned to the owner of Elias Group,
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`LLC (“Elias”), who had long distributed Coco Rico soda, for help. In 2013, CCR assigned the
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`debt owed to it by CCRDG to Elias. In exchange, Elias paid CCR some cash and agreed to make
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`efforts to buy the Coco Rico assets from CCRDG. In 2015, Elias did so.
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`The pending summary judgment motions concern whether Elias has met its contractual
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`obligations to CCR, CCRDG, and Fuertes (the “CCR Parties”). Elias contends that it has. The
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`CCR Parties argue that Elias owes CCR another $8.5 million and Fuertes an annual salary of
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`$180,000. Both sides seek summary judgment on the claims relating to Elias’s obligations to
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`CCR. Only Elias seeks summary judgment as to Fuertes’s claims against it.
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`Case 1:17-cv-06697-PAE-KNF Document 130 Filed 12/22/20 Page 2 of 37
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`For the following reasons, the Court grants Elias’s motion in full and denies the CCR
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`Parties’ motion in full.
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`I.
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`Background
`A.
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`Factual Background1
`1.
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`Parties
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`CCR is a Puerto Rico corporation operated by its two sole shareholders, José Fuertes
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`(“Fuertes”) and his brother Roberto Fuertes (“Roberto Fuertes”). Dkt. 201 (“CAC”) ¶ 1; JSF ¶ 1;
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`Dkt. 242-3 (“Fuertes Tr.”) at 118. Until 2008, CCR owned the Coco Rico soda brand and all its
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`assets (the “Coco Rico assets”). JSF ¶ 2. CCR’s main business was manufacturing and selling
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`the concentrate used to make Coco Rico soda. Fuertes Tr. at 118.
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`CCRDG is also a Puerto Rico corporation. CAC ¶ 2. Its sole shareholder is Francisco
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`Jose Rivera Fernandez (“Rivera”). JSF ¶ 6. In 2008, it bought all right, title, and interest in the
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`Coco Rico assets, including all trademark rights. Id. ¶ 11.
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`Until 2015, Fuertes maintained homes in both New York and Puerto Rico. Id. ¶ 5. As of
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`August 8, 2016, he moved from New York to Florida, while maintaining a separate residence in
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`Puerto Rico. Id. ¶¶ 4–5.
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`Elias is a Delaware limited liability company (“LLC”) with a principal place of business
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`in New York. CAC ¶ 5; Dkt. 189 at 1. Richard Hahn, a citizen of California, is Elias’s sole
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`member. CAC ¶ 5; Dkt. 189 at 1.
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`1 The Court draws its account of the facts from the parties’ respective submissions on their
`motions for summary judgment, including the parties’ joint statement of undisputed facts, Dkt.
`242-1 (“JSF”); the exhibits attached to Elias’s motion for summary judgment, see Dkts. 242-1–28;
`and the exhibits attached to the CCR Parties’ memorandum of law in support of their motion for
`summary judgment and opposition to Elias’s motion, Dkts. 248-2–12. Unless otherwise noted,
`docket references relate to Case No. 15 Civ. 6563.
`2
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`Case 1:17-cv-06697-PAE-KNF Document 130 Filed 12/22/20 Page 3 of 37
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`Banco Cooperativo de Puerto Rico (“BanCoop”) is a Puerto Rico corporation with its
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`principal place of business in Puerto Rico. CAC ¶ 4; Dkt. 189 at 1.2
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`2.
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`General Background
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`CCR is a family business, which had been owned and operated by Fuertes’s father before
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`he and his brother took over. See Fuertes Tr. at 86, 226. Since at least 1999, the Fuertes family
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`had entertained and negotiated offers to sell the company. Id. at 24–25. One of those
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`negotiations included a nearly completed sale to a company called B. Fernandez, which had
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`offered about $6 million. Id. at 135. Another involved a potential sale to Coca Cola’s Puerto
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`Rican franchisee. Id. at 133–34. Last, Harold Honickman, the father-in-law of Elias’s sole
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`member, Richard Hahn, had at one point offered Fuertes $5 million. Id. at 134–36, 214; see also
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`id. at 51, 144–45 (Honickman and Hahn had “always been interested in the brand”). The Fuertes
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`family, however, did not accept any of these offers and, instead, remained the owners of the CCR
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`brand and assets until 2008. Id. at 135–36.
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`3.
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`Relevant Agreements
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`The parties’ claims revolve around several agreements relating to ownership over,
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`management of, and work related to the Coco Rico assets. The Court reviews the terms of each
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`in turn.
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`a.
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`2008 Asset Purchase Agreement Between CCR and CCRDG
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`On March 31, 2008, CCR sold “100% of the CCR INTERNATIONAL, INC assets,
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`including but not limited to, those assets used to manufacture the Coco Rico Beverage and the
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`Coco Rico Trademark along with the registered Product Base Formula,” to CCRDG. 2008 APA
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`at 2; JSF ¶ 11. To effect that deal, CCR and CCRDG, which had recently been formed for the
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`2 After joining this action, BanCoop settled its claims with the other parties and was terminated
`from the cases. See 17 Civ. 6697, Dkt. 120.
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`3
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`purpose of buying those assets, entered into an asset purchase agreement. See 2008 APA;
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`Dkt. 242-6 (“Rivera Tr.”) at 13. Rivera is CCRDG’s sole owner and operator. See Rivera Tr.
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`at 13. Rivera and Fuertes also run a consulting and investment firm together and have engaged
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`in various business transactions together. See id. at 173–74; Fuertes Tr. at 16–18.
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`Under the 2008 APA, CCRDG agreed to pay “approximately, but not more than” $12.8
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`million, including a $100,000 up-front “cash deposit”; $11.2 million payable in six years’ worth
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`of $50,000 monthly “apportionments,” with the balance due at the end of the sixth year; and $1.5
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`million to be placed in an escrow account at the time of closing. Id. § 2. CCRDG appears to
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`have restructured most of its obligations under the 2008 APA by issuing a $9 million note to
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`CCR, although the terms of that note do not appear to have been produced or explored in this
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`litigation. See Fuertes Tr. at 39 (“Q. So CCRDG, let me say it different and tell me if I am right.
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`CCRDG purchased the Coco Rico assets as they are defined in the agreements from CCR for
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`12.8 million dollars? A. Yes. Q. And as part of that purchase CCR took a note from CCRDG in
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`the amount of $9,000,000? A. Yes.”); Rivera Tr. at 20–21. As discussed more fully below,
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`CCRDG defaulted on most of its payment obligations under the 2008 APA and the $9 million
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`note, leaving the bulk of the latter unpaid after several years. As a result, CCR began looking for
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`other ways to resolve that uncollectable debt.
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`b.
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`2009 Independent Contractor Agreement
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`On August 26, 2009, CCRDG and Fuertes executed an agreement in which CCRDG
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`retained Fuertes to “dedicate his entire working time, attention and energies to the business of”
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`CCRDG. JSF ¶ 17; Dkt. 242-14 (“2009 ICA”) § 1. In exchange, CCRDG agreed to pay Fuertes
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`$18,000 per month and up to 10% of the company’s profits, as well as a percentage of the selling
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`price should CCRDG ever sell the Coco Rico trademarks to a third party. Id. § 3.
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`4
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`c.
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`2013 Assignment Agreement Between CCR and Elias
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`After CCRDG and CCR executed the 2008 APA, CCRDG defaulted on its payments
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`thereunder. See JSF ¶ 19; Fuertes Tr. at 205 (CCRDG paid about $3.6 million total); Rivera Tr.
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`at 67 (CCRDG only paid between $3 and $4 million under the 2008 APA); Dkt. 242-9 (“First
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`Hahn Tr.”) at 138–39.3 In response, CCR “explored many alternatives,” including suing
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`CCRDG directly. Fuertes Tr. at 51, 86. Ultimately, because of CCR’s own lack of cash, CCR
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`instead “went for help” to Richard Hahn. Id. at 86; see id. at 51 (“We didn’t have any cash.”).
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`Hahn is the owner and president of Good-O Beverages (“Good-O”), a longtime and major
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`distributor of Coco Rico soda for CCR (and then CCRDG). First Hahn Tr. at 14, 30; Rivera Tr.
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`at 88. He is also the son-in-law of Harold Honickman, who had once offered to buy CCR for
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`roughly $5 million. Fuertes Tr. at 134–36, 214.
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`On January 30, 2013, CCR assigned to Elias—of which Hahn is the sole member—all of
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`CCR’s rights to receive payment from CCRDG under the 2008 APA. See JSF ¶¶ 23–24;
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`Dkt. 242-15 (“Assignment Agreement”). CCR’s obligations to Elias under the Assignment
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`Agreement are straightforward. CCR agreed to assign to Elias “[a]ll rights of [CCR] to receive
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`payments under the [2008 APA], including, without limitation, the Escrow Amount,” as well as
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`all of CCR’s rights “to receive stock in CCRDG” and “any . . . other rights arising by reason of,
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`or in connection with,” the 2008 APA. Assignment Agreement § 1.01(a)–(d). In other words,
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`Elias obtained from CCR the right to receive any payments then owed by CCRDG to CCR under
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`the 2008 APA, which the Assignment Agreement represented to be “at least $9,000,000.” See
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`id. at 1.
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`3 CCRDG had also pledged the Coco Rico assets as collateral for a separate bank loan, on which
`it had defaulted. See First Hahn Tr. at 138–39. “So the bank was in the position where it could
`foreclose on those assets.” Id.
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`5
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`Elias’s payment for those rights had more complicated terms. Those complications, and
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`the extent of Elias’s performance, form much of the basis of the present controversy.
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`First, Elias had to make an “initial payment” of $300,000, to be paid in three unequal
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`installments upon the occurrence of three separate events. See id. § 1.03(a)(i) (requiring
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`payment of $80,000 upon CCR’s delivery to Elias of its certificate of incorporation and other
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`corporate materials); id. § 1.03(a)(ii) (requiring another $70,000 payment if, after paying the
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`above $80,000, CCR delivered additional documents to Elias, including a certificate of good
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`standing); id. § 1.03(a)(iii) (requiring final $150,000 payment at the end of Elias’s due
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`diligence). Elias appears only to have paid the first $70,000 and $80,000 payments, for a total
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`of $150,000. See JSF ¶ 46; Fuertes Tr. at 53–54.
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`Second, Elias agreed to pay CCR monthly amounts it received from CCRDG pursuant to
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`its assigned rights under the 2008 APA. See Assignment Agreement § 1.03(b). Elias’s
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`obligation to pay those amounts, however, was “conditional upon [Elias] having received such
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`sums from CCRDG,” and CCRDG appears seldom to have paid Elias those apportionments. Id.;
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`see Fuertes Tr. at 55–56 (estimating such payments over the course of the Assignment
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`Agreement, to be less than $500,000, most of which CCRDG paid directly to CCR).
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`Elias’s third and last payment obligation centered on its efforts to buy the Coco Rico
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`assets from CCRDG. If Elias “acquire[d] all right, title and interest in and to all of the Coco
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`Rico Assets,” then the above monthly obligations would terminate “and be replaced with
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`[Elias’s] obligation to make either (in [Elias’s] discretion) of the following payments to [CCR]”:
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`(1) a “Yearly Payment” of $450,000 per year until Elias pays a “Buyout Amount”; or (2) the
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`“Buyout Payment,” less the amount of the initial payment. Assignment Agreement
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`§ 1.03(c)(ii)(1), (2). The agreement then defined “Buyout Amount” as follows:
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`The term “Buyout Amount” means $5,000,000 reduced by the following amounts:
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`(1) The amounts, if any, previously paid to [CCR] pursuant to Section
`1.03(c)(i); and
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`(2) If the aggregate consideration given by [Elias] for its acquisition of the
`Coco Rico Assets includes the payment of any amount or other valuable
`consideration in addition to the release of CCRDG’s payment obligations
`under the [2008 APA], then by the amount of such additional payment or
`the value of such additional consideration (such value, as reasonably
`determined by [Elias]); and
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`(3) If the Coco Acquisition occurs other than pursuant to an amicable
`transaction between [Elias] and CCRDG, including, without limitation, any
`litigation, foreclosure, bankruptcy purchase, other proceeding or otherwise,
`then by the aggregate amount of any and all costs of [Elias] incurred in
`connection with such acquisition . . . .
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`Id. § 1.03(c)(iii). The first and third terms are not relevant here. But the second is key: Elias’s
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`“buyout” obligation to CCR was $5 million, less the initial payment and any amount it paid to
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`acquire the Coco Rico assets from CCRDG above and beyond “the release of CCRDG’s
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`payment obligations under the” 2008 APA. Id.
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`The Assignment Agreement also required Elias, if it ultimately bought the Coco Rico
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`assets, to negotiate (but not necessarily enter into) a consulting or employment agreement with
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`Fuertes, under which Fuertes would provide services “related to the Coco Rico Assets.” Id.
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`§ 1.03(c)(ii).
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`d.
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`2013 Option Agreement Between Elias and CCRDG
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`Soon after CCR and Elias executed the Assignment Agreement, on June 4, 2013, Elias
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`and CCRDG entered into an option agreement that granted Elias certain rights to purchase the
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`Coco Rico assets from CCRDG. See JSF ¶ 33; Dkt. 242-16 (“Option Agreement”). Pursuant to
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`that agreement, Elias paid $250,000 in exchange for the “right and option” to purchase the “Coco
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`Rico Assets” and certain real estate then owned by CCRDG. Option Agreement § 1.
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`To exercise that option, “[t]he consideration for the Coco Rico Assets [would] consist
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`of”: (1) a cash payment of $5.75 million, to be distributed to various creditors of CCRDG; and
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`(2) “the irrevocable and complete release and extinguishment of the purchase price obligations of
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`[CCRDG] under the [2008 APA] . . . , which APA was subsequently assigned by [CCR] to
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`[Elias],” which the parties stipulated to be $8.5 million. Id. § 1(a)(i)(A), (B). The Option
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`Agreement stated that “[t]his Agreement and the documents to be delivered hereunder constitute
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`the sole and entire agreement of the parties to this Agreement with respect to the subject matter
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`contained herein, and supersede all prior and contemporaneous understandings and agreements,
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`both written and oral, with respect to such subject matter.” Id. § 7(f).4
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`e.
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`2013 Ratification Agreement Between Elias, Fuertes, Roberto
`Fuertes, CCR, and “New CCR”
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`On August 23, 2013, for reasons that are not relevant here, Elias entered into another
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`agreement with CCR, along with Fuertes, Roberto Fuertes, and another entity also called “CCR
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`International, Inc.,” which the agreement designated “New CCR.” See JSF ¶ 33; Ratification &
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`Acknowledgment Agreement at 1. That agreement, inter alia, clarified that the total amount
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`owing under the 2008 APA was $8.5 million. See Ratification & Acknowledgment Agreement
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`§ 1.01(j). The parties also “ratifie[d] and confirm[ed] the Assignment Agreement” and “every
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`one of its provisions,” and New CCR and the Fuertes brothers each agreed to jointly and
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`severally undertake all of CCR’s obligations and covenants under the Assignment Agreement.
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`Id. § 2.02. Further, they each agreed never to “directly or indirectly challenge, question or
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`attack” that Agreement. Id. § 2.03(a).
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`4 As discussed more fully below, each of the relevant agreements here contained a very similar
`merger or integration clause. See Assignment Agreement § 7.07; Dkt. 242-17 (“Ratification &
`Acknowledgment Agreement”) § 6.08; Dkt. 242-18 (“2015 APA”) § 9.06; Dkt. 242-21 (“2015
`ICA”) § 17.
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`8
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`f.
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`2015 Asset Purchase Agreement Between Elias and CCRDG
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`On April 15, 2015, CCRDG sold all the Coco Rico assets to Elias. See JSF ¶ 39;
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`2015 APA.5 The agreement effecting that sale defined the purchase price that Elias would pay to
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`include the following. First, Elias “shall, concurrently with Closing, release and extinguish all of
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`the purchase price obligations of Seller to Buyer pursuant to the [2008 APA] . . . , which was
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`subsequently assigned by [CCR] to [Elias].” 2015 APA § 2.04(a). Second, Elias had to pay a
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`“cash purchase price of $4,750,000,” to be distributed to several of CCRDG’s creditors,
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`including BanCoop. Id. § 2.04(b). Last, Elias agreed to issue CCRDG a promissory note in the
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`amount of $1 million, payable two years after the closing date, which CCRDG in turn agreed to
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`assign to BanCoop. Id. § 2.04(c). CCRDG has confirmed that, aside from the BanCoop note,
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`Elias paid the full cash purchase price and released CCRDG’s $8.5 million payment obligations
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`to Elias. See Rivera Tr. at 36–37, 67–68.
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`The 2015 APA also identified several “deliverables” that Elias and CCRDG agreed to
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`exchange at closing, two of which the parties identify as relevant. See 2015 APA § 3.02. First,
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`CCRDG agreed to deliver to Elias “all originals and all copies of the Formulas in any and all
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`forms (written or electronic) and in the possession of whomever they may currently be (including
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`Carlos Fuertes).” Id. § 3.02(a)(vii); see JSF ¶ 44. Second, CCRDG agreed to deliver to Elias
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`“full, final and unconditional releases duly executed by Mr. Jose M. Fuertes . . . in full and final
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`payment of any and all claims of Jose Fuertes against [CCRDG], including on account of a claim
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`for profit sharing rights purportedly granted by [CCRDG] to Jose Fuertes” in the 2008 APA.
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`2015 APA § 3.02(a)(x); see JSF ¶ 44.
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`5 Those assets were defined in the 2015 APA to include all inventory, contracts, “Intellectual
`Property Assets,” tangible personal property, books and records, and all goodwill and the going-
`concern value of the Coco Rico business. 2015 APA § 2.01.
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`g.
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`2015 Independent Contractor Agreement Between Elias and
`Fuertes
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`Last, on April 21, 2015, Elias and Fuertes entered into an independent contractor
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`agreement. See JSF ¶¶ 49–50; 2015 ICA. In it, the parties agreed that Fuertes “shall devote no
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`less than 120 business hours per calendar month to the Services” unless the parties agreed
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`otherwise in writing. Id. § 2. Fuertes also “agree[d] to maintain, at his sole cost and expense, a
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`residence in New York State and suitable accommodations in Puerto Rico,” and “agree[d] that
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`this Agreement shall automatically terminate for Cause (as defined below) if [Fuertes] becomes a
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`resident (whether fulltime or part time) in Puerto Rico or any other place outside of the State of
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`New York.” Id. § 6(b). The first paragraph in the 2015 ICA identified Fuertes’s address as “14
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`America Way, Saratoga Springs, NY 12866.” Id. at 1. Fuertes further “covenant[ed] and
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`guarantee[d] that” he had caused all persons, including his family and CCRDG’s owners, to
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`deliver the copies of the Coco Rico concentrate formula to Elias, and that such persons would
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`not retain copies of that formula. Id. § 8(a).
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`Fuertes’s payment under the agreement was set by a schedule thereto, titled “Consulting
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`Fee.” Id. § 3; JSF ¶ 57. Under that schedule, Elias was to pay Fuertes $300,000 the day after the
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`2015 ICA was signed and another $250,000 after 30 days. See 2015 ICA, Schedule B § 1.
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`Fuertes has testified that Elias paid him this initial $550,000 in 2015. See Fuertes Tr. at 94–95.
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`Then, Fuertes was to receive no payments for the next two years. 2015 ICA, Schedule B § 2. In
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`the third through seventh years of the agreement, Fuertes’s annual compensation would depend
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`on the amount of Coco Rico concentrate that Elias sold. Id. § 3. If that amount were less
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`than 60,000 gallons in a given year, Fuertes would receive nothing that year; if it were
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`between 60,000 and 75,000, he would receive $100,000; if it were between 75,000 and 85,000,
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`he would receive $140,000; and if it were more than 85,000, he would receive $180,000. Id.
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`The 2015 ICA authorized Elias to terminate the agreement “at any time for ‘Cause’ if
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`any” of several events occurred. As relevant here, those events included: (1) “[a]ny
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`representation or warranty of [Fuertes] is untrue or incorrect in any respect”; (2) Fuertes “fails to
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`fully comply with any obligation, agreement, covenant or guarantee contained in this
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`Agreement”; (3) Fuertes “becomes a resident (whether fulltime or part time) in Puerto Rico or
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`any other place outside of the State of New York”; and (4) Fuertes “commences or participates in
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`any legal suit, action or proceeding against the company (except with respect to any breach by
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`the Company of the Company’s obligations under this Agreement).” Id. § 9(b)(i), (ii), (vii), (viii). If
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`the agreement terminated, Fuertes “shall no longer have any rights” and “shall no longer be
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`entitled to any fees or other payments” under it. Id. § 9(d).
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`4.
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`Post-Agreement Events
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`On June 9, 2015, Elias wrote a letter to CCR, Fuertes, and Roberto Fuertes regarding the
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`“Assignment Agreement and Ratification Agreement.” See Dkt. 242-19 (“Buyout Letter”) at 1.
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`In that letter, Elias notified them that Elias had “consummated a transaction with CCRDG
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`constituting a ‘Coco Acquisition’” under the Assignment Agreement. Id. at 2. It recited that
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`upon such acquisition, Elias’s obligations to CCR pursuant to that Agreement became one of the
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`following: yearly payments of $450,000 or a one-time payment of the “Buyout Amount,” as set
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`forth in the Agreement. Id. And, Elias wrote, it elected to pay CCR the Buyout Amount. After
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`stating the definition of that term from the Assignment Agreement, Elias concluded that “[t]he
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`calculation of the Buyout Amount results in a required payment of $0.00; to wit: $5,000,000,
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`less, the Initial Payment of $150,000, reduced by: $6,041,000 of consideration given by Assignee
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`for its acquisition of the Coco Rico Assets in addition to the release of CCRDG’s payment
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`obligations under the Asset Purchase Agreement.” Id. Accordingly, Elias stated that it “has no
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`further obligations under the Assignment Agreements.” Id. at 3.
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`Case 1:17-cv-06697-PAE-KNF Document 130 Filed 12/22/20 Page 12 of 37
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`Thus, all told, as of Elias’s Buyout Letter, the following transactions had occurred: CCR
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`had sold the Coco Rico assets to CCRDG in 2008 for $12.8 million. CCRDG paid CCR only
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`about $4 million of that purchase price, and owed about $9 million more. In 2013, CCR
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`assigned its right to receive that $9 million in exchange for the payments set forth in the
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`Assignment Agreement, including the $300,000 initial payment (of which Elias paid $150,000)
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`and the “buyout amount” should Elias ever acquire the Coco Rico assets. Also in 2013, Elias
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`paid $250,000 to CCRDG for the option to buy those assets from CCRDG. Then, in 2015, Elias
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`bought those assets, paying CCRDG $4.75 million in cash, $1 million through a note, and also
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`releasing CCRDG’s $8.5 million obligation to Elias. CCR had thus received between $4 and
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`$4.5 million for the company, most of which came from CCRDG and some of which Elias paid;
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`CCRDG had received $5.75 million (all of which went to pay its creditors) plus the release of its
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`debt, all from Elias; and Elias had paid a little more than $6 million, in cash and promises of
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`payment, and also released CCRDG from paying Elias the $8.5 million to which Elias was
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`entitled under the Assignment Agreement. And Elias now owned the Coco Rico assets.
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`Soon after receiving the Buyout Letter, Fuertes flew to the Dominican Republic, where
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`he met with Hahn to discuss it. Fuertes Tr. at 90. When they met, Fuertes demanded $5 million
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`“to comply with the agreement.” Id. at 292. But the two did not resolve their dispute. Id.
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`at 106; see First Hahn Tr. at 175 (“[Fuertes] came with me to the Dominican Republic and spent
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`most of the time discussing this and saying he was going to sue and telling people who I was
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`there with he was going to be suing, he was going to shut us down.”). And for the most part,
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`after that meeting Fuertes did not provide further services to Elias under the 2015 ICA. See
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`Fuertes Tr. at 30–31; 106–07; see also id. at 90–93 (Fuertes only worked for, at most, the first
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`three months after executing the 2015 ICA).
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`In August 2016, Fuertes moved from New York to Boca Raton, Florida. See JSF ¶ 5;
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`Fuertes Tr. at 110 (“Q. After you signed [the 2015 ICA] at some point you stopped dwelling in
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`New York and began dwelling in Florida? A. Yes.”).
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`To date, Elias has not paid Fuertes anything beyond the initial $550,000 in 2015.
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`B.
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`Procedural History
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`The history of these cases is baroque. For the most part, that history is not relevant to the
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`pending motions. The following summary solely concerns events bearing on those motions.
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`On August 25, 2015, CCR filed the original complaint against Elias and Coco Rico, LLC,
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`alleging, inter alia, breach of contract, trademark infringement, unfair competition, fraudulent
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`inducement, and unjust enrichment. Dkt. 4. The case was assigned to the Hon. Robert W.
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`Sweet. On January 15, 2016, the Court granted Elias’s partial motion to dismiss, dismissing the
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`bulk of CCR’s claims but leaving intact its breach-of-contract claim. Dkt. 29. On April 4, 2016,
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`CCR filed an amended complaint, this time bringing claims only for breach of contract, unjust
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`enrichment, and quantum meruit. Dkt. 47.
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`On July 6, 2016, Elias filed a complaint against CCRDG and Fuertes in New York State
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`Supreme Court, alleging that each had breached their contracts with, and had conspired to harm
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`and defraud, Elias. No. 16 Civ. 6280, Dkt. 1-1. On August 8, 2016, CCRDG and Fuertes
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`removed the case to this Court. See id., Dkt. 1. On September 6, 2016, CCRDG and Fuertes
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`answered that complaint and filed counterclaims. Id., Dkts. 7, 10. On January 12, 2017, Judge
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`Sweet consolidated the removed action with CCR’s original federal action, Dkt. 81, and the two
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`cases jointly proceeded to discovery, Dkt. 87.
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`On September 1, 2017, BanCoop filed a complaint against Elias in this Court, alleging
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`breach of contract and conversion arising from Elias’s failure to pay the note associated with the
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`2015 APA. No. 17 Civ. 6697, Dkt. 1. On December 5, 2017, Elias answered that complaint and
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`Case 1:17-cv-06697-PAE-KNF Document 130 Filed 12/22/20 Page 14 of 37
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`filed a third-party complaint against the CCR Parties, seeking common law contribution and
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`indemnification. Id., Dkt. 18. On March 14, 2018, the CCR Parties answered the third-party
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`complaint in the BanCoop action and brought counterclaims against Elias, reprising their claims
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`of trademark infringement, unfair competition, and breach of contract. Id., Dkt. 38. “In the
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`alternative” to their claim for damages for breach of contract, they also asked “the Court to
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`rescind all contracts” between Elias and the CCR Parties. Id. at 11. On April 12, 2018, Judge
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`Sweet accepted BanCoop’s lawsuit as related to the first two. Dkt. 103. On June 26, 2018, he
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`ordered all three cases consolidated. Dkt. 106.
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`On November 9, 2018, the Court dismissed the CCR Parties’ claims for trademark
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`infringement and unfair competition. Dkt. 113. Also on November 9, 2018, “[g]iven the
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`plethora of pleadings and filings,” the Court directed the CCR Parties and BanCoop to file a
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`consolidated second amended complaint. Dkt. 114 at 1–2. Although they initially failed to file
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`any amended pleading, Dkt. 119, on February 14, 2019, they sought leave to do so and filed a
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`proposed consolidated amended complaint, Dkt. 120-1. Substantial confusion then ensued. See
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`Dkt. 182 (explaining in greater detail the sparring over the propriety of the CCR Parties’
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`proposed consolidated complaint).
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`On April 8, 2019, following Judge Sweet’s passing, the consolidated cases were
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`reassigned to this Court. On July 15, 2019, the Court sought to resolve the then-pending disputes
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`over the operative pleadings. Id. It held that the February 14, 2019 amended complaint was not
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`operative and directed the plaintiffs to file a motion for leave to file such amended complaint if
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`they still intended to do so. Id. at 2. On August 16, 2019, following further apparent confusion
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`among the parties, the Court directed the CCR Parties and BanCoop to file, within 20 days, “a
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`single consolidated complaint setting forth their existing claims against the Elias Group that have
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`Case 1:17-cv-06697-PAE-KNF Document 130 Filed 12/22/20 Page 15 of 37
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`not already been dismissed by the Court.” Dkt. 187 at 3. The Court stated that it did “not grant
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`leave for the addition of new parties, new claims, or new factual allegations.” Id.
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`On September 5, 2019, the plaintiffs filed a consolidated amended complaint. Dkt. 188.
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`On September 16, 2019, the Court approved and entered a Civil Case Management Plan and
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`Scheduling Order setting the close of fact discovery on December 16, 2019, and scheduling a
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`case management conference for January 29, 2020. Dkt. 193.
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`On September 17, 2019, Elias filed a letter stating that the consolidated amended
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`complaint “contains facts not previously alleged and a new remedy, rescission,” in violation of
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`the Court’s directive. Dkt. 194. On September 18, 2019, the Court ordered the CCR Parties and
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`BanCoop to each submit a sworn declaration explaining the new allegations in the complaint,
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`and directed them to file another consolidated complaint that complied with the Court’s order.
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`Dkt. 195. The same day, plaintiffs’ counsel filed a letter explaining the new allegations and
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`seeking leave to file the amended complaint with minor revisions, but maintaining the claim for
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`rescission. Dkt. 196. Elias opposed the inclusion of the latter. Dkt. 197. The Court granted
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`plaintiffs leave to refile a slightly amended complaint, and instructed Elias that it was at liberty
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`to move to dismiss any portion of it. Dkt. 198.
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`On September 23, 2019, BanCoop and the CCR Parties filed the consolidated amended
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`complaint, which is now the operative pleading in this case. See CAC. It brought the following
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`claims, solely against Elias: (1) BanCoop sought a declaratory judgment establishing its right to
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`payment in full by Elias under the note associated with the 2015 APA, id. ¶¶ 90–92; (2) BanCoop
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`alleged that Elias had breached the terms of that note by failing to pay it, id. ¶¶ 93–102;6 (3) the
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`CCR Parties alleged that Elias had breached the 2013 Assignment Agreement, the 2013 Option
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`Agreement, and 2015 APA by failing to pay $8.5 million to CCRDG “for the benefit of” CCR,
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`id. ¶¶ 104, 106–111, and sought either damages for that breach or rescission of those agreements,
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`id. ¶ 115; (4) the CCR Parties alleged that Elias breached the 2015 ICA by failing to pay Fuertes
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`$180,000 annually, id. ¶ 105; and (5) the CCR Parties alleged that Elias breached the implied
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`covenant of good faith and fair dealing, id. ¶¶ 112–115.
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`On October 15, 2019, Elias moved to dismiss the complaint in part. Dkt. 202. It argued
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`that the claim for rescission was futile and tardy, and that the CAC’s request for attorneys’ fees
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`was also futile. Dkt. 203. Plaintiffs opposed the motion to dismiss insofar as it related to the
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`remedy of rescission, Dkt. 204, but conceded that attorneys’ fees were not available under New
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`York law, id. at 11. On November 7, 2019, the Court granted Elias’s motion in part. Dkt. 205.
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`It granted the motion to dismiss plaintiffs’ claim for attorneys’ fees