A federal court has dismissed civil racketeering charges against Triple Five Worldwide and members of the Ghermezian family and threw out charges that the defendants violated rules of corporate governance that could have led to personal liability in a trademark infringement lawsuit.
The court also dismissed all counts against Triple Five chairman Nader Ghermezian and his nephew Syd Ghermezian, who is listed as a principal of the Triple Five subsidiary that owns 75% of Calverton Aviation & Technology, the company presently in court with the Town of Riverhead over a 2018 contract that the Town Board declared null and void in October.
The federal action was brought in February 2021 by the manufacturer and distributor of personal care products, who accused the numerous defendants in the lawsuit of wrongfully using a trademarked name and logo on a knock-off hand sanitizer produced in Mexico during the pandemic in 2020.
The court allowed the original complaint to be amended in May 2023 to add Nader Ghermezian and Don Ghermezian, CEO of Triple Five, and Syd Ghermezian, chairman and CEO of Community Federal Savings Bank, a bank owned by the Ghermezian family. The order also allowed Community Federal Savings Bank to be added as a defendant.
The amended complaint sought to hold the Ghermezians personally liable for losses suffered by the plaintiffs resulting from an alleged counterfeit sanitizer “scheme” undertaken in the name of Triple Five Worldwide. The FDA put the counterfeit sanitizer on its “do not use” list for potential methanol contamination, according to the complaint, which caused irreparable damage to plaintiffs’ brand and business, the complaint states.
The defendants denied all allegations and brought a motion to dismiss the action.
U.S. District Court Judge John Cronan (SDNY) in a 96-page decision signed March 22, dismissed the counts of the complaint raising civil racketeering claims against all defendants. The plaintiffs failed to state facts in the complaint sufficient to show that each defendant violated the federal RICO (“Racketeer Influenced and Corrupt Organizations Act”) statute, the judge held.
The judge also dismissed the plaintiffs’ charges seeking to hold the defendants personally liable for claimed damages suffered as a result of the alleged trademark infringement. The court ruled that the plaintiffs did not allege sufficient facts to justify “piercing the corporate veil” to hold the individuals personally liable.
The standard a plaintiff must meet to pierce the corporate veil is “very demanding,” the judge wrote. It is “warranted only in extraordinary circumstances, and conclusory allegations of dominance and control will not suffice to defeat a motion to dismiss,’” the judge wrote.
The plaintiffs’ complaint primarily contains “only conclusory assertions” in support of their veil-piercing theories, the judge ruled. Plaintiffs’ factual allegations about the defendants’ use of “their personal messaging accounts, personal telephone numbers, and email accounts not affiliated with the corporation—are insufficient to meet the ‘very demanding’ standard for invoking the extraordinary standard for piercing the corporate veil,” the court held.
The plaintiffs’ trademark infringement and related claims against Triple Five CEO Don Ghermezian, Triple Five Worldwide, David Ghermezian, Yonah Ghermezian and two other individuals affiliated with Triple Five, survived the motion to dismiss.
The fate of the contract between the Town of Riverhead and Triple Five affiliate Calverton Aviation & Technology lies with a state court judge in Suffolk County, where CAT brought a lawsuit seeking performance of the contract.
Riverhead in 2018 signed a contract with Calverton Aviation & Technology to sell 1,644 acres of industrial land in Calverton for $40 million.
The day after the Riverhead Industrial Development Agency denied CAT’s application for financial assistance to develop the Calverton Enterprise Park site, the Town Board in a unanimous vote on Oct. 24 declared the contract null and void.
Calverton Aviation & Technology filed a lawsuit in January seeking to enforce the contract.
The lawsuit remains pending. The town’s time to answer or otherwise move against the complaint, such as by filing a motion to dismiss, has been extended by stipulation to April 12.
The survival of local journalism depends on your support.
We are a small family-owned operation. You rely on us to stay informed, and we depend on you to make our work possible. Just a few dollars can help us continue to bring this important service to our community.
Support RiverheadLOCAL today.
