# Yador v. Mowatt

> District Court, E.D. New York · September 11, 2024

URL: https://www.frixlaw.com/law-library/cases/10659388

## Case

- **Court:** District Court, E.D. New York
- **Decided:** September 11, 2024
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10659388

## How later opinions describe it (automated extraction)

- declining to find joint ownership because the plaintiff’s profits were not contingent upon the overall profitability of the enterprise
- holding that Weisman “has been limited by subsequent New York decisions” and the corporate form does not “legally supplant[] the venture . . . when the corporation is a mere adjunct of a joint venture”

## Opinion text

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
------------------------------------x

DELA YADOR,

Plaintiff, MEMORANDUM & ORDER
19-CV-4128 (EK)(RML)

-against-

JASON MOWATT,

Defendant.

------------------------------------x
ERIC KOMITEE, United States District Judge:
Plaintiff Dela Yador and defendant Jason Mowatt worked
together, for a time, on an entertainment business. The
operation sold tickets to parties at which patrons could listen
to music, eat and drink, and also rap or sing along with hit rap
and R&B songs. They called the business Trap Karaoke.
Ultimately, Mowatt and Yador separated. Yador sued,
alleging that he was an equity stakeholder in the venture, and
that Mowatt improperly froze him out. The facts underlying this
dispute are set forth in prior orders, and the court assumes
familiarity with them.1

1 Given the complexities of this case, in September 2021 the Court
requested the appointment of pro bono counsel for Yador. ECF No. 25, at 16
n. 2. Counsel from Davis Polk & Wardell LLP – including Tess Liegeois,
Kathryn Bi, Christina Costello, Alec Fisher, Amelia Starr, Danielle Mullery,
Dara Sheinfeld, Micayla Hardisty, Matthew Garry, and Michael Haney – have
appeared to brief and / or argue this case on behalf of the plaintiff.
Counsel have ably discharged their duties, and the Court thanks them for
their service. See generally Green v. Brennan, 578 U.S. 547, 552 (2016)
(expressing the Court’s thanks to appointed counsel).
Defendant has now moved for summary judgment on all
claims, and also to preclude testimony by the plaintiff’s
valuation expert. For the reasons that follow, those motions

are DENIED except as to the complaint’s fourth cause of action,
which is dismissed as duplicative.
Discussion
A. First Through Third Causes of Action

Defendant Mowatt seeks summary judgment on the
plaintiff’s first three causes of action — breach of the
partnership agreement, breach of the duty of loyalty, and breach
of fiduciary duty. Mowatt makes the same argument in opposing
each of these claims: that a partnership was never formed — or,
alternatively, that it was terminated prior to the events
constituting the alleged breach.2 The record, however, is
replete with “admissible evidence sufficient to raise a genuine
dispute of fact for trial” on the existence and alleged
termination of a partnership, and these issues are therefore not

2 Mowatt also requests summary judgment on the plaintiff’s sixth cause
of action — injunctive relief — on the same basis. Yador abandons that claim
in his opposition papers. Plaintiff’s Opposition Memorandum (“Pl.’s Opp.
Mem.”) at 12 n.4, ECF No. 81-15. The claim is therefore dismissed with
prejudice. See Jackson v. Fed. Exp., 766 F.3d 189, 196 (2d Cir. 2014)
(“[S]ummary judgment is a particularly appropriate time for a non-movant
party to decide whether to pursue or abandon some claims.”).
amenable to decision at this stage. Jaramillo v. Weyerhaeuser
Co., 536 F.3d 140, 145 (2d Cir. 2008).3
1. Genuine Disputes Exist with Respect to Partnership
Formation
Plaintiff claims that he and Mowatt entered into a
partnership, and that Mowatt violated the partnership agreement
by failing to share the profits of the enterprise. The parties
had no written agreement, but in New York, partnership
agreements can be written, oral, or implied-in-fact. The
factors going to the existence of an implied-in-fact partnership

are: “(1) the parties’ intent, whether express or implied; (2)
whether there was joint control and management of the business;
(3) whether the parties shared both profits and losses; and (4)
whether the parties combined their property, skill, or
knowledge.” Hammond v. Smith, 151 A.D.3d 1896, 1897 (4th Dep’t
2017). “No single factor is determinative; a court considers
the parties’ relationship as a whole.” Id.
The record on summary judgment contains more than
sufficient evidence on each factor to establish a genuine
dispute of fact. Among other things, the record reveals
indications that Mowatt regularly referred to Yador — privately

3 Unless otherwise noted, when quoting judicial decisions this order
accepts all alterations and omits all citations, footnotes, and internal
quotation marks.
and publicly — as his partner (speaking to intent)4; they
regularly conferred on budgeting and hiring (management and
control)5; and both contributed funds and industry knowledge to
the business (combined skills, property and knowledge).6

Mowatt trains most of his analytical fire on the
argument that the two did not agree to share profits and losses,
but the record contains sufficient evidence from which a jury
could reasonably disagree. Among other things, there is the
text chain in which Yador asked Mowatt, regarding profits from
events, “And do we split even?? I know you put out a lot so I’m
def cool with taking less.” Pl.’s Exh. 8 at 16, ECF No. 81-24.
Mowatt responded, “i’m down to split it even.” Id. A jury
might reasonably view this exchange as “a mutual promise or
undertaking of the parties to share in the profits of the
business.” Steinbeck v. Gerosa, 4 N.Y.2d 302, 317 (1958).

Mowatt also sent Yador a series of messages explaining
how “we can cut the costs going forward” — for example, by
cutting out the videographer and limiting expenses for some
other event workers. Pl.’s Exh. 8 at 16, ECF No. 81-24. This

4 E.g., Plaintiff’s Exhibits (“Pl.’s Exhs.”), ECF Nos. 81-16-48, Exh. 4
at 6; Exh. 16 at 3; Exh. 18 at 5.

5 See, e.g., id. at Exh. 8 at 12, 18-19.

6 E.g., Mowatt Deposition Transcript (“Mowatt Dep. Tr.”) at 115:8-116:8,
ECF No. 22 (Exh. 6) (describing Yador’s contributions to the business,
including that he made introductions to venues, acted as a “sounding board,”
and collaborated with Mowatt to create set lists).
conversation may be most naturally understood as a conversation
between equity partners — if Yador was only a contractor, he
would have had less reason to care about cutting costs (and the

costs would not be joint, in any event — there would be no
“we”). See Napoli v. 243 Glen Cove Avenue Grimaldi, Inc., 397
F. Supp. 3d 249, 269-70 (E.D.N.Y. 2019) (divining intent to form
joint venture from the parties having “demonstrated an
understanding that they would share in the losses as well” as
profits).
This exchange occurred after Mowatt had informed Yador
that he could make Yador whole on his $600 cash outlay for the
first event because the event had made $1,228 in online sales.
Id. Again, a jury might also reasonably view the suggestion
that Yador’s right to this distribution was contingent on the
event’s profitability as consistent with joint ownership. Cf.
Steinbeck, 4 N.Y.2d at 317 (declining to find joint ownership

because the plaintiff’s profits were not contingent upon the
overall profitability of the enterprise).7

7 It may have been only natural that the parties would be less explicit
about loss-sharing than profit-sharing, given that the business was
profitable within months of inception. See Pl.’s Exh. 14 at 2, ECF No. 84-4
(showing net income of $2,893.86 for 2015); Pl.’s Exh. 8 at 16 (Mowatt noting
Trap Karaoke’s first two events “should put us in the green”).
2. Genuine Disputes Persist with Respect to Whether, and
When, the Partnership Terminated
Mowatt argues that even if the two men formed a
partnership, it terminated upon the formation of Trap Karaoke,
LLC on December 24, 2015. Defendant’s Memorandum (“Def. Mem.”),
ECF No. 81-2, at 23. He invokes Weisman v. Awnair Corp. of Am.,
3 N.Y.2d 444, 449 (N.Y. 1957) and Nasso v. Seagal, 263 F. Supp.
2d 596, 618 (E.D.N.Y. 2003), for the proposition that the
formation of a corporation to carry out business formerly
carried out by a partnership necessarily terminates the
partnership. See Def. Mem. at 24-25.

But Weisman and Nasso are distinguishable: in both,
the parties mutually agreed to substitute the corporate form for
a preexisting joint venture. See Weisman, 3 N.Y.2d at 449
(“[W]hat is pleaded is an agreement between plaintiff Weisman
and the individual defendants to conduct a business enterprise
as joint venturers through the instrumentality of a
corporation.”) (emphasis added); Nasso, 263 F. Supp. 2d at 618
(holding that “when parties” — plural — “form a corporation to
carry out the business of the partnership, they cease to be
partners”). In that context, the courts said that the parties
cannot have it both ways — that they could not agree to be a

joint venture vis-à-vis one another, but “a corporation as to
the rest of the world.” Weisman, 3 N.Y.2d at 449.
Here, it is Mowatt’s own position that he and Yador
agreed to nothing with respect to the substitution of the LLC
for any preexisting partnership. Moreover, it is of course not
the case that the formation of any new LLC must effectuate the
termination of a preexisting partnership. See Sagamore Corp. v.
Diamond W. Energy Corp., 806 F.2d 373, 378 (2d Cir. 1986)

(holding that Weisman “has been limited by subsequent New York
decisions” and the corporate form does not “legally supplant[]
the venture . . . when the corporation is a mere adjunct of a
joint venture”). There are myriad ways in which entrepreneurs
can operate through multiple entities. The plaintiff’s position
is that the LLC, when it came into existence, was partnership
property, and New York law plainly permits single-member
ownership of an LLC by a partnership. See id.; see generally
Bartenwerfer v. Buckley, 598 U.S. 69, 82 (2023) (“Partnerships

and other businesses can also organize as limited-liability
entities.”). A jury might reasonably find as much on the
existing record.
Finally, New York law requires that the termination of
an at-will partnership occur via an “unequivocal” manifestation
of the election to terminate. Scholastic, Inc. v. Harris, 259
F.3d 73, 87 (2d Cir. 2001) (citing Cracco v. Cracco, 25 A.D.2d
660, 660 (2d Dep’t 1966)). And the record on summary judgment
reveals — among other things — that Mowatt referred to Yador as
his “partner” after the LLC’s formation. Pl.’s Exh. 4, at 6
(Mowatt sent a text in 2016 saying that “Dela [Yador] is my
business partner on trap karaoke”). Mowatt also texted the Trap

Karaoke tour manager as late as 2017 to ask her to “look into
how I can convert an LLC from a partnership into a sole
proprietorship,” suggesting that even then he considered the LLC
to be under his and Yador’s joint control. Id. at 3. Thus
this, too, is a question for a jury to resolve.
Mowatt’s arguments for dismissing the second and third
causes of action — breach of the duty of loyalty and breach of
fiduciary duty — depend on his argument that the parties never
formed, or otherwise terminated, the partnership. See Def. Mem.
at 16 n.2 (“The Second and Third Causes of Action allege breach
of fiduciary duties that arise out of and are owed under a
partnership.”). These arguments therefore fail as well.

B. Fourth Cause of Action: The Implied Covenant of Good Faith
and Fair Dealing
In Yador’s fourth cause of action, he alleges that
even if no provision of the partnership agreement prohibited
Mowatt’s conduct, the implied covenant of good faith and fair
dealing — implicit in every New York contract — did. Mowatt’s
argument that this claim should be dismissed due to the lack of
a partnership contract is unavailing for the reasons set forth
in the preceding section. But Mowatt also argues, in the
alternative, that the implied-covenant claim should be dismissed
because — as framed in the operative complaint — it is
duplicative of Yador’s breach of contract claim. New York law

“does not recognize a separate cause of action for breach of the
implied covenant of good faith and fair dealing when a breach of
contract claim, based upon the same facts, is also pled.”
Harris v. Provident Life and Acc. Ins. Co., 310 F.3d 75, 81 (2d
Cir. 2002).
Yador cites 360 N. Rodeo Drive LP v. Wells Fargo Bank,
N.A. for the proposition that his implied covenant claim “is not
duplicative when the claim depends on other facts in addition to
those that might support a breach of contract claim.” No. 22-
CV-767, 2023 WL 2574180, at *6 (S.D.N.Y. Mar. 20, 2023). In 360
N. Rodeo, which concerned recovery under a loan agreement, the
court found that the two claims were sufficiently distinct to

avoid dismissal. While the breach of contract claim turned on
“Defendants’ unjustified attempt to charge default interest when
there was no contractual justification for the same,” the
implied covenant claim turned instead “on Defendants’ duty to
provide accurate statements as to any charges or fees Defendants
sought to assess.” Id. at *7.
Here, Yador offers only the fact that “Defendant acted
deceptively” in the course of the breach of the partnership
agreement as the “other fact” supporting his implied covenant
claim. Pl.’s Opp. Mem. at 26. Specifically, Yador directs the
Court’s attention to the fact that Mowatt “sat for interviews
during the Parties’ partnership, describing himself as the sole

creator of Trap Karaoke, and then assured Plaintiff it was a
mistake and that he would get a correction, when he had no
intention of doing so.” Id. at 27. But Yador relies on those
same facts to prove his claim for breach of the partnership.
For example, Yador alleges that Mowatt breached the partnership
agreement by “deliberately engag[ing] in a scheme and course of
conduct to confuse the public as to Trap Karaoke’s true origin
and owners.” Second Amended Complaint (“SAC”) ¶ 64, ECF No. 52.
Additionally, as Mowatt points out, “New York’s
Partnership Law creates default provisions that fill gaps in
partnership agreements.” Congel v. Malfitano, 31 N.Y.3d 272,
279 (2018). Those default provisions include a duty — pursuant

to the partnership contract itself — for partners to “render on
demand true and full information of all things affecting the
partnership to any partner.” N.Y. P’ship Law § 42 (McKinney
2024). It also includes a fiduciary duty to the partnership.
Id. § 43. As Yador’s implied covenant claim is premised on
evidence that Mowatt lied to Yador about the nature of the LLC
and his rights over it, the claim is subsumed by Yador’s rights
under the partnership contract itself, and therefore
duplicative. Plaintiff’s fourth cause of action is thus
dismissed.
C. Fifth Cause of Action: Unjust Enrichment

New York law is clear that a plaintiff cannot pursue a
claim for unjust enrichment for conduct covered by a contract
term. Clark-Fitzpatrick, Inc. v. Long Island R. Co., 70 N.Y.2d
382, 388 (1987). But one can plead unjust enrichment in the
alternative, as Yador has done here. Auguston v. Spry, 282
A.D.2d 489, 491 (2d Dep’t 2001); see Grossman v. GEICO Casualty
Co., No. 21-2789, 2022 WL 1656593, at *3 (2d Cir. 2022)
(pleading unjust enrichment in the alternative is appropriate
“where there is a dispute over the existence, scope, or
enforceability of the putative contract”). And the record is,
once again, replete with evidence that Yador worked with Mowatt
to build the company; if he was not a partner or co-LLC member,

then a jury could reasonably conclude — based on this evidence —
that Mowatt was unjustly enriched by Yador’s efforts.8
Mowatt responds that Yador should not be allowed to
pursue this theory because the record reveals “no evidence” from

8 Mowatt argues that this theory — that he unjustly profited from
Yador’s contribution of time and effort — is unpled in the operative
complaint. See Defendant’s Reply Memorandum (“Def. Rep. Mem.”) at 15, ECF
No. 81-50. He reads the complaint to assert enrichment only for his use of
Yador’s idea for the business. See id. That is not, however, a fair
reading. In a section titled “Plaintiff’s Harm,” Yador alleges that he
“spent untold time and personal resources to bring the Partnership’s idea of
‘Trap Karaoke’ to life.” SAC ¶ 33. He goes on to allege that Mowatt was
“unjustly enriched by the[] usurping of the partnerships’ idea and profits.”
which a jury could calculate Yador’s damages (i.e., the value of
his services). Def. Mem. at 33-34. But Yador can overcome the
motion for summary judgment by showing evidence sufficient for a
jury to side with him on each element of his claims. See
Jaramillo, 536 F.3d at 145. And the elements of unjust

enrichment require Yador to show only that he was damaged — not
that he was damaged in a specific amount. See Beth Israel Med.
Ctr. v. Horizon Blue Cross and Blue Shield of N.J., Inc., 448
F.3d 573, 586 (2d Cir. 2006) (“To prevail on a claim for unjust
enrichment in New York, a plaintiff must establish (1) that the
defendant benefitted; (2) at the plaintiff’s expense; and (3)
that equity and good conscience require restitution.”).9
D. Seventh and Eighth Causes of Action: Fraud
Yador brings two claims for common-law fraud. In the
complaint’s seventh cause of action, he alleges that Mowatt
falsely assured him that he (Yador) would be a member of the new

LLC. SAC ¶ 99. His eighth cause of action alleges that Mowatt

Id. at ¶ 62 (emphasis added); see also id. at ¶¶ 48, 55, and 102-03 (all
referring to the uncompensated investment of Yador’s time).

9 At oral argument, Mowatt contended that Yador violated Rule 26 by
omitting to produce a computation of his unjust-enrichment damages in
discovery. This issue is not properly before the court at this stage, given
Mowatt’s omission to brief it beyond a passing reference in his reply brief.
Def. Rep. Mem. at 15 (not citing Rule 26, but arguing that Yador “fails to
put forth any evidence as to the value of his time, effort and uncompensated
labor”); see Clubside, Inc. v. Valentin, 468 F.3d 144, 159 n.5 (2d Cir. 2006)
(“[W]e generally do not consider arguments that are raised for the first time
in a reply brief.”), accord Patterson v. Balsamico, 440 F.3d 104, 113 n.5 (2d
Cir. 2006) (“The Court generally will not consider arguments raised for the
first time in a reply brief.”).
falsely stated that he would be a registered owner of the Trap
Karaoke trademark. Id. at ¶ 106.
Mowatt seeks summary judgment on both claims, on two

alternative bases. First, Mowatt argues that Yador has failed
to produce evidence of an out-of-pocket loss and therefore
cannot satisfy the damages element of a New York fraud claim.
And second, Mowatt argues that Yador cannot show reasonable
reliance on the alleged misrepresentations, because the true
facts concerning the LLC and the trademark registration were
publicly available.10 Neither argument suffices to merit summary
judgment.
1. Injury Due to Fraud

To recover for fraud in New York, a plaintiff must
prove “[1] a misrepresentation or a material omission of fact
which was false and known to be false by defendant, [2] made for
the purpose of inducing the other party to rely upon it, [3]
justifiable reliance of the other party on the misrepresentation
or material omission, and [4] injury.” Lama Holding Co. v.
Smith Barney Inc., 88 N.Y.2d 413, 421 (1996). Mowatt argues

10 Specifically, Mowatt argues that Yador could have obtained the LLC’s
articles of incorporation — which showed that Yador was not a member — from
the New York Department of State. Def. Mem. at 39-40; Def. Rep. Mem. at
18-19. And he argues that Yador could have obtained the trademark
registration — which showed that Yador was not a registered holder — with the
Patent and Trademark Office. Def. Mem. at 40; Def. Rep. Mem. at 18-19.
that Yador has adduced insufficient evidence of the last
element.
New York courts calculate damages for fraud based on

“the actual pecuniary loss sustained as the direct result of the
wrong,” rather than allowing “recovery of profits which would
have been realized in the absence of fraud.” Id. This is known
as the “out-of-pocket rule.” Id.
Mowatt argues that Yador has not produced any evidence
of recoverable damages under the out-of-pocket rule. But he
also acknowledges that Yador has produced evidence of
“unreimbursed travel expenses totaling $88.66,” which
constitutes an out-of-pocket loss. Def. Mem. at 38.11 Under New
York law, “fraud from which flows even nominal damage has been
held actionable.” Cooke v. Colman, 269 N.Y.S. 21, 23 (1st Dep’t
1934).12

As with his arguments on unjust enrichment, Mowatt’s
argument goes not to whether Yador has raised a genuine dispute

11 The parties also dispute whether the value of Yador’s in-kind
contributions — mainly his time and effort — can qualify as out-of-pocket
losses here. Given the evidence that Yador expended money out-of-pocket, we
need not resolve this issue at this stage.

12 Mowatt frames Yador’s reliance on the $88.66 as an attempt to “amend
his pleadings in a summary judgment opposition.” See Def. Rep. Mem. at 17.
This is not a fair reading of the record; Yador invoked his out-of-pocket
financial expenditures in the pleadings. See, e.g., SAC ¶ 103 (“Plaintiff
further invested money, time, and resources into Trap Karaoke that he would
not have invested but for Defendant’s fraud.”) (emphasis added); id. ¶ 102
(“Plaintiff would not have continued to . . . incur expenses for . . . Trap
Karaoke . . . had he known Defendant intended to exclude him from the LLC.”).
as to the element at issue — here, injury — but only to the
amount of damages available. As the Second Circuit has
explained, however, the purpose of the out-of-pocket rule is not

to require up-front calculations of damages. Instead, it is to
“regulate which types of injuries must be shown to constitute a
tort.” AHW Inv. P’ship, MFS, Inc. v. Citigroup Inc., 661 F.
App’x 2, 4-5 (2d Cir. 2016) (citing Starr Found. v. AIG, Inc.,
76 A.D.3d 25, 28 (1st Dep’t 2010)). Here, Yador has adduced
sufficient evidence of out-of-pocket injury at this stage.
2. Publicly Available Information
To recover for fraud based on a misrepresentation or
material omission, New York law requires that the plaintiff
“suffered injury as a result of justifiable reliance” upon the
misrepresentation or omission. Dallas Aerospace, Inc. v. CIS
Air Corp., 352 F.3d 775, 784 (2d Cir. 2003). That requirement —
also termed the “reasonable reliance element” — “is focused on

whether it was foolish or not for the plaintiff to believe the
defendant’s fraudulent statement.” Lugones v. Pete and Gerry’s
Organic, LLC, 440 F. Supp. 3d 226, 243 (S.D.N.Y. 2020) (citing
Banque Franco-Hellenique de Commerce Int’l et Mar., S.A. v.
Christophides, 106 F.3d 22, 26 (2d Cir. 1997)).
In a classic application of this rule, the Appellate
Division affirmed a grant of summary judgment in Alpha GmbH &
Co. Schiffsbesitz KG v. BIP Indus. Co., 25 A.D.3d 344, 345 (1st
Dep’t 2006). There, the parties were business entities on
opposite sides of an arm’s length transaction. Neither party
claimed a confidential or fiduciary relationship. And both

sides were represented by their own counsel. Summary judgment
was appropriate, in those circumstances, because the information
that was allegedly concealed related to matters of public record
that could have been discovered by the exercise of ordinary
diligence. Id.
But the rule is not absolute; as the Second Circuit
has observed, New York does not require that information “be
available only to the defendant and absolutely unknowable by the
plaintiff before reliance can be deemed justified.” Lazard
Freres & Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1542
n.9 (2d Cir. 1997); see also Todd v. Pearl Woods, 20 A.D.2d 911,
911, (2d Dep’t 1964) (holding that where “the facts were

peculiarly within the knowledge of the defendants and were
willfully misrepresented, the failure of the plaintiffs to
ascertain the truth by inspecting the public records is not
fatal to their action”), aff’d, 15 N.Y.2d 817 (1965).
So, in assessing reasonable reliance, “New York takes
a contextual view, focusing on the level of sophistication of
the parties, the relationship between them, and the information
available at the time of the operative decision.” J.P. Morgan
Chase Bank v. Winnick, 350 F. Supp. 2d 393, 406 (S.D.N.Y. 2004).
In this assessment, “beneficiaries of [a] fiduciary
relationship” are “entitled to rely on [the fiduciary’s]
representations and his complete, undivided loyalty”; thus they

are not, generally speaking, “required to perform independent
inquiries.” Frame v. Maynard, 922 N.Y.S.2d 48, 51 (1st Dep’t
2011).
Mowatt maintains that his alleged misrepresentations
could have been discovered through ordinary diligence. Def.
Mem. at 40. For example, Mowatt argues that Yador could have
sought out the application he filed with the United States
Patent and Trademark Office, which lists Mowatt (and not Yador)
as an owner of the Trap Karaoke mark. Id.; see TRAP KARAOKE,
Registration No. 5,121,354, United States Patent and Trademark
Office.13 But given the New York standard, this is a question
for a jury on the instant record. Unlike the factors in play in
Alpha GmbH, for example, Yador is an individual rather than a

business entity; he was unrepresented in his dealings with
Mowatt; and he alleges a fiduciary relationship between the two.
He has also adduced sufficient evidence for a jury to conclude
that Mowatt made “willful” misrepresentations, per the Second
Department’s decision in Todd, supra.

13 “[T]he Court may take judicial notice of official records of the
United States Patent and Trademark Office.” Kaplan, Inc. v. Yun, 16 F. Supp.
3d 341, 345 (S.D.N.Y. 2014).
Lastly, the facts alleged to have been misrepresented
were within Mowatt’s purview and not Yador’s, as Mowatt filed
the paperwork to create the LLC and the application to trademark

the name Trap Karaoke. Pl.’s Exh. 3, ECF No. 81-19, at 22.
Thus, a genuine dispute persists as to whether Yador reasonably
relied on Mowatt’s statements. These remaining “[q]uestions of
the reasonableness of reliance raise issues of fact that must be
resolved at trial.” MTV Networks v. Curry, 867 F. Supp. 202,
207 (S.D.N.Y. 1994).
E. Defendant’s Daubert Motion
In addition to his motion for summary judgment, Mowatt
moves to preclude (in part) the testimony of Yador’s valuation
expert, Jeffrey Hart. Hart’s report estimates Yador’s potential
damages. Hart’s Expert Report (“Hart Report”) ¶ 22, ECF No. 84-
5. Hart used a discounted cash flow (DCF) model to forecast the

value of Yador’s share of the partnership as it would have been
assessed in 2017 and 2019. Hart Report, ¶¶ 27-28.14
A DCF analysis incorporates two key inputs: (1) a
“forecast[] of expected revenues” over a discrete period of time
(here, five years), and (2) the “value of the company beyond the
discrete period” — i.e., the “terminal value” — which is based

14 Yador sees 2017 and 2019 as the relevant valuation dates because those
are the years in which Yador alleges that the Trap Karaoke partnership was
breached (by Mowatt) and that he filed this suit. Pl.’s Opp. Mem. at 32.
on a longer-term cash-flow estimate. Id. ¶ 70. Mowatt’s
objections generally refer to the first input.
To forecast Trap Karaoke’s then-expected revenues over

five-year periods beginning in 2017 and 2019, Hart relied on (1)
Trap Karaoke’s historical financials leading up to those
periods, (2) Trap Karaoke’s management’s expectations for its
growth potential at the time, and (3) the growth and performance
of two more mature, but otherwise assertedly comparable,
companies: D’ussé Palooza and Grits & Biscuits. Id. ¶ 73. Hart
explains that he needed to use comparable company data, rather
than Trap Karaoke’s own revenue projections, because Trap
Karaoke made no projections of forward revenue. Id. ¶ 72.
Mowatt criticizes the process by which Hart selected the
“comparable” companies, as well as certain inferences Hart drew
from material provided by those companies’ founders.

Hart used estimates of historical data from the
comparable companies to project Trap Karaoke’s revenue growth at
comparable stages (e.g., the year-over-year increase in D’Ussé’s
third-year revenues would correlate with Trap Karaoke’s third
year). Id. ¶ 75. Combining those projections with actual data
for Trap Karaoke’s expenses and other liabilities, Hart arrived
at “an estimate of [Trap Karaoke’s] unlevered free cash flow,”
to which he applied a discount rate. Id. ¶ 71. These
calculations yielded two net present values — estimates of what
a buyer would have paid for the business at the two valuation
dates. Id. ¶ 106.
Mowatt does not question the reliability of the DCF

methodology. Instead, he objects to three aspects of Hart’s
process, all relating to his use of D’ussé Palooza and Grits &
Biscuit’s audience growth to estimate Trap Karaoke’s revenue
growth. First, he argues that Hart “cherrypicked” those
companies as comparators rather than employing a more objective
selection process. Second, he argues that Hart lacked a
sufficient basis for his assumption that estimates of the
companies’ ticket sales could be used to estimate their revenue
growth. And third, he argues that Hart had insufficient data
from which to estimate Grits & Biscuits’ actual audience growth.
Selection of Comparable Companies. In selecting
D’ussé Palooza and Grits & Biscuits as comparators, Hart relied

on his own research into those companies’ business models as
well as testimony from Mowatt himself. The two comparable
company founders provided data including their events’ average
ticket prices, the size of their shows, the relationship between
revenue and ticket sales, and how their margins changed over
time. See Hart Report ¶¶ 53-54; see also Benner Hall
Declaration, ECF No. 81-12; Erika Lewis Declaration, ECF No.
81-13.
Mowatt objects that Hart “cherrypicked” these
companies as comps rather than employing a “survey or some other
independent [selection] process.” Def. Mem. at 42; see
generally In re Rezulin Prods. Liab. Litig., 309 F. Supp. 2d
531, 563 (S.D.N.Y. 2004) (“[A]n expert may not pick and choose

from the scientific landscape and present the Court with what he
believes the final picture looks like.”). Cherry-picking
constitutes “a form of [r]esult-driven analysis, which
undermines principles of the scientific method.” Daniels-Feasel
v. Forest Pharms., Inc., 2021 WL 4037820, at *5 (S.D.N.Y. Sept.
3, 2021) (citing In re Lipitor (Atorvastatin Calcium) Mktg.,
Sales Practices & Prod. Liab. Litig. (No. II) MDL 2502, 892 F.3d
624, 634 (4th Cir. 2018) (affirming district court’s exclusion,
under Daubert, of testimony of epidemiologist who included
favorable test results in his report and excluded unfavorable

results)).
Hart testified about his selection process. He
explained that in the course of his market research, he asked
plaintiff’s counsel about the discovery in this case:
specifically, “whether anything existed in the record” —
including witness testimony — “that would point us to comparable
companies.” Hart Deposition (“Hart Dep.”), ECF No. 81-10, at
228:23-229:9. In this way, he learned of Mowatt’s own
assessment that these two companies were in the same space.15
Mowatt’s objection falls short because “any selection

of comparable companies is inherently the product of expert
judgment,” and the record does not indicate that Hart’s judgment
was biased or otherwise flawed. See Manbro Energy Corp. v.
Chatterjee Advisors, LLC, No. 20-CV-3773, 2022 WL 4225543, *9
(S.D.N.Y. Sept. 13, 2022). And there is nothing inherently
improper about Hart’s reliance on the parties and the record.
See, e.g., Lickteig v. Cerberus Capital Mgmt., L.P., 589 F.
Supp. 3d 302, 334 (S.D.N.Y. 2022). In the end, Mowatt does not
explain how the survey or other “independent process” he
envisions would have worked. His objection to Hart’s selection
of these particular companies — and any potential disanalogies
between them and Trap Karaoke — ultimately goes to the weight of

his testimony, not its admissibility.
Using Ticket Sales to Approximate Revenue Growth.
Mowatt also challenges Hart’s assumption that the comparator
companies’ ticket sales would correlate with revenue growth.

15 See Mowatt Dep. Tr. at 90:19-91:1. When asked “[w]hat businesses
were similar to Trap Karaoke in 2015,” Mowatt pointed to Grits & Biscuits and
Henry Palooza (D’ussé Palooza’s former name). Id. at 90:19-91:1. He
acknowledged that both companies were similar in that they tour “multiple
cities” and “probably have a similar audience,” but maintained that Grits &
Biscuits events take a different “format” (without explaining how) and that
D’ussé Palooza events were daytime events, unlike Trap Karaoke’s. Id. at
91:10-24.
But D’ussé Palooza’s founder supported this assumption
explicitly, attesting that his company’s “revenue increased in
proportion to ticket sales.” Hart Report ¶ 53. Certainly,

Hart’s assumption was not “so unrealistic and contradictory as
to suggest bad faith.” Restivo v. Hessemann, 846 F.3d 547, 577
(2d Cir. 2017). It is only logical to expect that a business’s
revenue would correlate with demand for its core product. Thus,
Mowatt’s “contentions that the assumptions are unfounded go the
weight, not the admissibility, of the testimony.” Id.; see also
Prob. Ct. of City of Warwick ex rel. Lawton v. Bank of Am.
Corp., No. 7-CV-239, 2010 WL 1508922, *5 (D.R.I. Apr. 4, 2010)
(explaining that “accepted valuation techniques obligate an
expert to make a variety of simplifications, assumptions, and
estimates based on reasoned judgment and professional
training”).
Grits & Biscuits’ Data. Finally, Mowatt argues that

Hart lacked sufficient audience data for Grits & Biscuits from
which to estimate revenue growth. Def. Mem. at 44-45 (arguing
that “Hart relies solely” on a declaration that the company
“hosted a few shows a year”).
“Most challenges to the facts or data relied upon by
an expert do not go to the admissibility of his testimony, but
only to the weight” thereof. Allen v. Dairy Farmers of Am.,
Inc., No. 09-cv-230, 2014 WL 266290, at *9 (D. Vt. Jan. 23,
2014) (quoting Aventis Envtl. Sci. USA LP v. Scotts Co., 383 F.
Supp. 2d 488, 514 (S.D.N.Y. 2005)). Here, Hart relied on
adequate data (for gatekeeping purposes). He had a sworn

declaration from Grits’ founder, Erika Lewis, who described
audience growth over the relevant time period. Lewis Decl.
¶¶ 5-9. Lewis averred that from “2010-2012, Grits & Biscuits
hosted a few shows a year at venues that held approximately 500
people.” Id. ¶ 5. The company “grew steadily,” and from
“2013-2016, Grits & Biscuits hosted approximately 8-15 shows per
year at venues with approximate capacities ranging from
900-1,500 people.” Id. ¶ 8. Then, from “2016-2019, Grits &
Biscuits hosted approximately 15-28 shows per year at venues
with approximate capacities ranging from 1,200-4,500 people.”
Id. ¶ 9.
Hart used these figures to estimate Grits & Biscuits’
annual growth. See Hart Report at 36 (Exh. 3b). This does not

warrant exclusion; “experts commonly extrapolate from existing
data.” General Elec. Co. v. Joiner, 522 U.S. 136, 146 (1997).
To be sure, another expert might reach a different estimate.
But “under Daubert, the possibility that a different conclusion
could be drawn from [] data does not undercut the reliability of
the conclusion that was drawn, as long as the expert has good
grounds for the chosen interpretation.” United States v.
Morgan, 53 F. Supp. 3d 732, 741 (S.D.N.Y. 2014).
Hart explained the basis for his conclusion in some
detail. And Mowatt does not argue that the analysis is actually
inconsistent with the data — only that the information from

Grits & Biscuits was too “vague” to support Hart’s gap-filling
extrapolation. Def. Mem. at 44. But experts facing imperfect
data sets regularly make “estimates based on reasoned judgment
and professional training.” Prob. Ct. of City of Warwick ex
rel. Lawton, 2010 WL 1508922, *5. Mowatt may attack those
estimates at trial, but they are not a basis on which to exclude
Hart’s testimony.
Conclusion
For these reasons, the defendant’s motions are denied,
except that count four of the complaint is hereby dismissed.
Before October 21, 2024, the parties are directed to file a
joint proposed pretrial order in accordance with the Court’s
Individual Civil Rules. A pretrial conference will be held on
November 21, 2024, at 10:00 A.M., in person in Courtroom 6G
North.

SO ORDERED.

/s/ Eric Komitee
ERIC KOMITEE
United State s District Judge

D ated: September 11, 2024
Brooklyn, New York

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10659388. Public record. Not legal advice.