OPINION & ORDER Plaintiff Jubilee First Avenue Corporation (“JFAC”) owns and operates a restaurant, Jubilee on First. JFAC, along with plaintiffs Ilda Araujo and Luc Holie — JFAC shareholders, Board members, and officers — bring this action against defendant Eric Macaire, JFAC’s former president. Plaintiffs allege that Macaire is liable for a portion of a settlement with former restaurant employees under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§201 et seq., and the New York Labor Law (“NYLL”), N.Y. Lab. Law §§650 et seq., in Franco v. Jubilee First Avenue Corp., No. 14 Civ. 7729 (SN) (the “Franco Action”); violated his fiduciary duties as president by using JFAC’s funds for his own personal benefit; and converted JFAC’s website and Facebook page after he was terminated from JFAC. Macaire counterclaims, alleging that Araujo and Holie breached a November 7, 2012 contract; tortiously interfered with Macaire’s employment contract; and, through a direct and derivative action, breached their fiduciary duties as officers of JFAC. Macaire also seeks an accounting. Plaintiffs filed a motion for partial summary judgment, seeking summary judgment on (1) their claim for a declaratory judgment assigning the parties’ respective settlement obligations for the Franco Action, (2) their claim for Macaire’s alleged breach of fiduciary duty, and (3) all of Macaire’s counterclaims. Before the Court is the Report and Recommendation of the Honorable Kevin Nathaniel Fox, United States Magistrate Judge, recommending that the Court deny plaintiffs’ motion in full, Dkt. 129 (“Report”), as well as plaintiffs’ Objections to the Report, Dkt. 130 (“Pl. Obj.”), and Macaire’s opposition to those Objections, Dkt. 131 (“Def. Opp. to Objs.”). For the reasons that follow, the Court adopts the Report in part, denying plaintiffs’ motion for summary judgment as to their declaratory judgment and breach of fiduciary duty claims, as well as Macaire’s breach of fiduciary duty and accounting counterclaims. The Court, however, grants plaintiffs’ motion as to Macaire’s breach of contract and tortious interference with contract counterclaims. I. Background A. Factual Background The Court adopts the Report’s account of the facts, to which neither party objects. See Report at 1-4, 13. The following summary captures the undisputed facts necessary to present and assess the issues at hand.1 1. Jubilee on 54th and Jubilee on First In 1994, Macaire opened a restaurant called “Jubilee,” located on 54th Street in New York, New York (“Jubilee on 54th”).2 Pl. 56.1 1. This restaurant was owned by Jubilee Inc., which, in turn, was wholly owned by Macaire from 1994 until approximately 2002. Id. In 2002, Macaire transferred 40 percent of his shares to the chef, Pascal Petiteau; in 2009, Macaire reacquired full ownership of Jubilee Inc. Id. Macaire had ultimate control over Jubilee on 54th: He hired and fired employees, determined their wages, signed their paychecks, and generally oversaw affairs at the restaurant. See id. 2; Vandenabeele Decl., Ex. 2 (partial summary judgment opinion in the Franco Action) (“Franco Op.”) at 11-12. Araujo worked at Jubilee on 54th, but her exact role — including whether she was a general manager or floor manager — is disputed. See Def. 56.1 3; Franco Op. at 13-15. In May 2012, Jubilee on 54th closed. Pl. 56.1 1; Macaire Tr. at 31-32. At that time, Macaire, Araujo, and Holie opened another location on 1st Avenue in New York, New York (“Jubilee on First”).3 Pl. 56.1 8. Jubilee on First is owned by JFAC. Pl. 56.1 8; Def. 56.1 8. JFAC was incorporated as a C corporation, see Driscoll Decl., Ex. A (“Macaire Decl.”) 29; see also id., Ex. M (certificate of incorporation), and was later converted into an S corporation for tax purposes, see Macaire Decl. 48; Driscoll Decl., Ex. FF (emails and tax forms related to S corporation selection). 2. November 7, 2012 Emails and Later Agreements On November 7, 2012 at 10:28 a.m., Macaire sent an email to Araujo and Holie. Pl. 56.1 14; see also Driscoll Decl., Ex. C (email from Macaire) (“Nov. 7, 2012 Macaire Email”). In that email, Macaire stated: OK we all have 33.3 percent percent [sic] of shares of the company which represents our eligible rights of percentage of the profit shares of 33.3 percent for each of us. Though, as discussed, our corporate shares in the company will have no rights to be combined to form a larger voting strength against one of the share holder[s]. […] This new agreement is made in recognition that you are spending more time at Jubilee and I therefore accept to reduce my share of the company from 50 percent to 33.3 percent to equal yours. Consequentially, I would like to have our contract stipulate (in the employment letter) that I am Public Relation[s] Director in charge of Business Development, Marketing and Legal Matters, but my presence at Jubilee is not a mandatory condition. […] If you are OK with all this…[] I can draft these changes. Show a proof for you to read before sending it to Alex [an attorney]…[] and we can have our contract finished and signed. Nov. 7, 2012 Macaire Email at 2. At 10:56 a.m., Holie responded in French, signing the email, “Ilda Luc.” Driscoll Decl., Ex. D (email chain with Holie’s response) at 2. That afternoon, Macaire sent another email to Araujo and Holie.4 Vandenabeele Decl., Ex. 1 (second email from Macaire). Macaire asked Araujo and Holie to “[p]lease review the letter that I prepare[d] for Alex. Let me know if it is ok with you and I will send it to him.” Id. Macaire further stated that “[t]o simplify the document I suggest that we do not include our understanding that I will receive (if any) 50 percent of the profit for the month[s] of June to November 2012. I trust that we can do this without including it here. Though, if you prefer I have no issues with including it. I just think it is not necessary to complicate the document.” Id. Macaire proposed to send Alex, an attorney, the following: Ilda, Luc and I had a meeting yesterday and have decided to make some change[s] to the structure of Jubilee First Avenue Inc. We have agreed to even out the shares of the company among us. The 200 per value [sic] shares should be divided equally between Ilda, Luc and Eric. In [c]ompensation it should read for all 3 “You will be eligible for a bonus equal to one third (1/3rd) of the net revenues less….” The salaries remain the same equal at $120k per year. Id. The email did not mention any condition bearing on whether plaintiffs could combine their shares–an issue relevant, as discussed infra, to Macaire’s breach of contract and tortious interference counterclaims. See id.; see infra at pp. 20-24. In a resolution dated November 29, 2012, JFAC’s Board — consisting of Macaire, Araujo, and Holie — appointed Macaire as JFAC president, Araujo as treasurer, and Holie as secretary, and granted them each one-third of JFAC’s shares. Pl. 56.1 10; Vandenabeele Decl., Ex. 13 (“Nov. 29, 2012 Resolution”).5 That same resolution also authorized the Board to employ a chef, general manager, and public relations director for Jubilee on First. Pl. 56.1 10. As reflected in employment agreements dated November 27, 2012, Macaire was employed as public relations director, Araujo as general manager, and Holie as chef. See id. 15; Vandenabeele Decl., Ex. 14 (“Nov. 27, 2012 Employment Agreements”). The agreements granted them each a $2,000 per month “personal expense allowance,” which could be deferred so one could spend more than $2,000 in a month without a violation. Pl. 56.1
18-19. Neither the resolution nor the agreements included a prohibition on the combination of shares. Id. 17;6 see also Nov. 29, 2012 Resolution; Nov. 27, 2012 Employment Agreements. 3. The Franco Action and Settlement In 2014, several former employees of Jubilee on 54th and Jubilee on First brought a suit against JFAC, Araujo, and Macaire under the FLSA and the NYLL. Franco Op. at 1-2. On November 16, 2016, the Honorable Sarah Netburn, United States Magistrate Judge, approved a settlement agreement, see Vandenabeele Decl., Ex. 10 (the “Franco Agreement”), and closed that case.7 Pl. 56.1 4. Under the Franco Agreement, JFAC, Araujo, and Macaire agreed to pay the plaintiffs $175,000 in several installments in full and final satisfaction of all issues in that suit. Id. 5. The Franco Agreement does not address the apportionment of JFAC, Araujo, and Macaire’s obligations to pay the $175,000. Id. 6. JFAC paid 100 percent of the settlement, see Araujo Decl. 30; Macaire has refused to contribute personally to the settlement, Pl. 56.1 7. 4. Macaire’s Removal On December 1, 2016, the JFAC Board of Directors held a meeting. Id. 23. At that meeting, Araujo and Holie voted to remove Macaire as JFAC president and to terminate his employment as public relations director.8 Id.; see also Driscoll, Ex. II (“Dec. 1, 2016 Resolution”). B. This Litigation On December 23, 2016, plaintiffs commenced this action. Dkt. 1 (“Compl.”). On March 9, 2017, the Court referred this case to Judge Fox for general pretrial management. Dkt. 12. On January 1, 2018, Macaire filed an answer that included his counterclaims. Dkt. 51; see also Dkt. 128. On September 7, 2018, plaintiffs filed a pre-motion letter, outlining their arguments in support of their anticipated summary judgment motion. Dkt. 78; see also Dkt. 81. On October 2, 2018, the Court amended its order of reference, referring the anticipated summary judgment motion to Judge Fox for a Report and Recommendation. Dkt. 82. On May 15, 2019, following a delay for motions practice and resolution of discovery issues, plaintiffs filed their motion for summary judgment, Dkt. 112, accompanied by a memorandum of law, Dkt. 114 (“Pl. Mem.”), plaintiffs’ Rule 56.1 statement, Dkt. 115, the Vandenabeele Declaration and attached exhibits, Dkt. 113, and the Araujo Declaration and attached exhibits, Dkt. 116. On June 6, 2019, Macaire filed his memorandum of law in opposition, Dkt. 117 (“Def. Mem.”), his Rule 56.1 response and counterstatement, Dkt. 124, and the Driscoll Declaration and attached exhibits, see Dkts. 118-23. On June 13, 2019, plaintiffs filed their reply memorandum, Dkt. 125 (“Pl. Reply”), and the Araujo Reply Declaration and attached exhibits, Dkt. 126. On October 29, 2019, Judge Fox issued the Report. Dkt. 129. The Report recommended denying summary judgment for plaintiffs on their declaratory judgment and breach of fiduciary duty claims and on Macaire’s counterclaims. Id. at 18. First, as to plaintiffs’ declaratory judgment claim, the Report found that, with regard to the Franco Settlement, plaintiffs had not identified a legal basis for their claim for an “equitable share” of the settlement and thus had not raised a justiciable controversy under the Declaratory Judgment Act, 28 U.S.C. §2001. Id. at 14. Second, as to plaintiffs’ breach of fiduciary duty claims, the Report found that the use of Jubilee’s funds was a disputed factual issue. Id. at 18. It also held that plaintiffs had relied on inadmissible evidence in support of their claim, including, most importantly, a chart compiling Macaire, Araujo, and Holie’s alleged personal spending of corporate funds, id. at 16-17; see also Araujo Decl., Ex. 1 (“Chart”), and thousands of pages of bank records, Report at 17. Last, as to Macaire’s counterclaims, the Report held that there were disputed issues of material fact. See id. at 17-18. For Macaire’s counterclaims, alleging breach of contract and tortious interference with a contract, it found that the parties did not have a formal, written agreement concerning the ownership and operation of Jubilee, and that the meaning of the November 7, 2012 Macaire email was hotly contested. Id. at 18. And for the breach of fiduciary duty counterclaims, it found that the use of Jubilee’s funds was disputed, and that plaintiffs had not submitted admissible evidence to support a grant of summary judgment for them on those claims. See id. at 17-18. On November 12, 2019, plaintiffs timely filed their Objections. Dkt. 130. On November 26, 2019, Macaire filed his opposition to the Objections. Dkt. 131. On December 3, 2019, plaintiffs filed a reply. Dkt. 132. II. Applicable Legal Principles A. Report and Recommendation In reviewing a report and recommendation, a district court “may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. §636(b)(1)(C). When specific objections are made, “[t]he district judge must determine de novo any part of the magistrate judge’s disposition that has been properly objected to.” Fed. R. Civ. P. 72(b)(3); United States v. Male Juvenile, 121 F.3d 34, 38 (2d Cir. 1997). To accept those portions of the report to which no timely objection has been made, “a district court need only satisfy itself that there is no clear error on the face of the record.” King v. Greiner, No. 02 Civ. 5810 (DLC), 2009 WL 2001439, at *4 (S.D.N.Y. July 8, 2009) (citing Wilds v. UPS, 262 F. Supp. 2d 163, 169 (S.D.N.Y. 2003)); see also Edwards v. Fischer, 414 F. Supp. 2d 342, 346-47 (S.D.N.Y. 2006). To the extent that the objecting party makes only conclusory or general objections, or simply reiterates the original arguments, the court will review the report and recommendation strictly for clear error. See Dickerson v. Conway, No. 08 Civ. 8024 (PAE), 2013 WL 3199094, at *1 (S.D.N.Y. June 25, 2013); Kozlowski v. Hulihan, Nos. 09 Civ. 7583, 10 Civ. 0812 (RJH), 2012 WL 383667, at *3 (S.D.N.Y. Feb. 7, 2012); Kirk v. Burge, 646 F. Supp. 2d 534, 538 (S.D.N.Y. 2009) (collecting cases). Further, “[c]ourts generally do not consider new evidence raised in objections to a magistrate judge’s report and recommendation.” Tavares v. City of New York, No. 08 Civ. 3782 (PAE), 2011 WL 5877548, at *2 (S.D.N.Y. Nov. 23, 2011). B. Motions for Summary Judgment To prevail on a motion for summary judgment, the movant must “show[] that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The movant bears the burden of demonstrating the absence of a question of material fact. In making this determination, the Court must view all facts “in the light most favorable” to the non-moving party. Holcomb v. Iona Coll., 521 F.3d 130, 132 (2d Cir. 2008). If the movant meets its burden, “the nonmoving party must come forward with admissible evidence sufficient to raise a genuine issue of fact for trial in order to avoid summary judgment.” Jaramillo v. Weyerhaeuser Co., 536 F.3d 140, 145 (2d Cir. 2008). “[A] party may not rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment.” Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (alteration in original) (citation omitted). Rather, to survive a summary judgment motion, the opposing party must establish a genuine issue of fact by “citing to particular parts of materials in the record.” Fed. R. Civ. P. 56(c)(1)(A); see also Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009). “Only disputes over facts that might affect the outcome of the suit under the governing law” will preclude a grant of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In determining whether there are genuine issues of material fact, a court is “required to resolve all ambiguities and draw all permissible factual inferences in favor of the party against whom summary judgment is sought.” Johnson v. Killian, 680 F.3d 234, 236 (2d Cir. 2012) (quoting Terry v. Ashcroft, 336 F.3d 128, 137 (2d Cir. 2003)). III. Discussion Plaintiffs object to the Report on several grounds. First, they argue that the Report erred in finding that their declaratory judgment claim was non-justiciable. See Pl. Obj. at 24-25. Second, plaintiffs object to the Report’s finding, in connection with their breach of fiduciary duty claim, that how JFAC’s funds were used was a disputed fact, and the Report’s finding that a chart and bank records were inadmissible. See id. at 6-20. Third, they contend that the Report erred, when addressing the breach of contract and tortious interference counterclaims, in finding that there was no formal written agreement as to JFAC’s operations and in failing to find that Araujo and Holie had a statutory right, as Board members, to remove Macaire. See id. at 20-22. Last, plaintiffs object that the Report failed to consider admissible evidence, namely the chart and bank records, when deciding the breach of fiduciary duty counterclaims. See id. at 22-24. The Court addresses each in turn. A. Declaratory Judgment Claim (Count One) Plaintiffs seek summary judgment on their declaratory judgment claim, which asks the Court, under the Declaratory Judgment Act, 28 U.S.C. §2201, to determine the “equitable shares” of each of Araujo, Macaire, and JFAC of the $175,000 Franco Settlement. See Pl. Mem. at 8-9. Specifically, they ask the Court to find that Macaire’s equitable share is no less than 75 percent and Araujo’s is no more than 25 percent , based on their respective roles at Jubilee on 54th and Jubilee on First. See id. at 11-12. The Report held that plaintiffs had failed to raise a justiciable controversy, because they had failed to identify any legal basis — including a lack of any apportionment clause in the Franco Settlement, the FLSA, or the NYLL — to support their claim of indemnification and contribution for an “equitable share.” See Report at 14. Plaintiffs object that the Report erred in finding that they had failed to raise a justiciable controversy under the Declaratory Judgment Act, arguing that New York indemnification and contribution law provides a legal basis for their claim. Pl. Obj. at 24. Plaintiffs had already raised the basis for their Objection in their reply brief submitted to Judge Fox. See Pl. Reply at 2-3. Because plaintiffs simply reiterate their previous arguments, clear error review is appropriate. See Dickerson, 2013 WL 3199094, at *1. The Court finds — under both clear error and de novo standards of review — that plaintiffs have failed to raise a justiciable controversy and adopts the Report’s recommendation to deny summary judgment on the declaratory judgment claim. The Declaratory Judgment Act enables a district court, for “a case of actual controversy within its jurisdiction,” to “declare the rights and other legal relations of any interested party seeking such declaration.” 28 U.S.C. §2201(a). Under the Act, courts have “unique and substantial discretion in deciding whether to declare the rights of litigants.” Carr v. DeVos, 369 F. Supp. 3d 554, 563 (S.D.N.Y. 2019) (quoting Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995)). “But that discretion does not extend to the declaration of rights that do not exist under law.” Chevron Corp. v. Naranjo, 667 F.3d 232, 244 (2d Cir. 2012). The Declaratory Judgment Act supplies the remedy of a declaratory judgment, but not the underlying cause of action. See id. at 244-45 (“The DJA is procedural only…and does not create an independent cause of action.” (internal quotation marks and citations omitted)); Richards v. Select Ins. Co., 40 F. Supp. 2d 163, 169 (S.D.N.Y. 1999). To maintain an action for a declaratory judgment, a plaintiff instead must allege a cause of action, or “a substantive claim of right,” based on either federal or state law. See In re Joint E. & S. Dist. Asbestos Litig., 14 F.3d 726, 730-31 (2d Cir. 1993); see also Garcia v. Nat’l Contractors Ins. Co., No. 15 Civ. 1332 (CBA), 2015 WL 7016968, at *1-2 (E.D.N.Y. Nov. 12, 2015) (dismissing complaint because neither federal nor state law provided cause of action). Otherwise, “[a] prayer for relief, standing alone, simply does not satisfy the requirement that a case or controversy exist.” Springfield Hosp. v. Hofmann, 488 F. App’x 534, 535 (2d Cir. 2012). Plaintiffs’ first claim is for a “declaratory judgment” related to the “equitable share of liability of the parties” under the Franco Settlement, see Compl. 49, but their Complaint fails to allege any underlying cause of action under which that claim can proceed, see id.
