Grasshoff v Etra

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Grasshoff v Etra 2013 NY Slip Op 31713(U) July 25, 2013 Sup Ct, New York County Docket Number: 650832/2012 Judge: Eileen Bransten Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 07/29/2013 1] INDEX NO. 650832/2012 NYSCEF DOC. NO. 26 RECEIVED NYSCEF: 07/29/2013 SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY --- .... -...... HON. Elt.EEN BRANSTEN J.S.C. PART --,3-."_ _ Index Number: 650832/2012 GRASSHOFF, SVEN K. vs ETRA, AARON : ,! '.l Sequence Number: DOck D~~,~J~S_ ~~!I,?~ INCONVENI~~T FORUM . " ,~,- ."." ~ , were read on this motion tolfor ~~=-~~------------CJ..S)V11 S.s: Notice of Motion/Order to Show Cause- Affidavits - Exhibits I No(s)._---'-_ _ __ Answering Affidavits - Exhibits _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ I No{s). _ __ _ __ 2 Replying Affidavits _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ I No(s). _3-=--___ The following papers, numbered 1 to Upon the foregoing paper'$, it is ordered that this motion is , ISOEClOEO w u i= en IN ACCORDANCE WITH ACCOMPANYING MEMORANDUM OFC'SfON :;) ."") f2 o w a::: a::: w w u. a::: ¢ ¢ >-~ ..J~ Z ;:, a u. en t; L5 ..J UJ a::: w z 3;(!) a::: ~ a c( a u LI.. W Z :J: a I~ w ..J VI ..J i= a::: o :!: 0 LI.. Dated: ==+-.- 15 . . . '~ 1. CHECK ONE, ................................................................ ,.... 2. CHECK AS APPROPRIATE: ........................... MOTION IS: 3. CHECK IF APPROPRIATE: ................................................ 0'_' \e, ~~~ 0 CASE DISPOS!ILEEN 0 GRANTED ~ENIED D SETTLE ORDER DDONOTPOST BRAr"~T~ON_FINAL 0 DISPOSITION' 0 GRANTED IN PART OTHER o SUBMIT ORDER o FIDUCIARY APPOINTMENT 0 REFERENCE [* 2] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: lAS PART THREE --------------------------------------------------------------------){ SVEN GRASSHOFF, Plaintiff, Index No. 65083212012 Motion Date: 3119/2013 Motion Seq. No.: 001 -againstAARONETRA, Defendant. ---------------------------------------------------------------------)( BRANSTEN, J. This matter comes before the Court on Defendant Aaron Etra's motion to dismiss Plaintiff Sven Grasshoff s Complaint pursuant to CPLR 3211 (a)(7). Plaintiff opposes. For the reasons that follow, Defendant's motion is denied. I. Backeround This litigation stems from Plaintiff Grasshoffs investment in a business venture sponsored by non-party Purified Water and Construction ("Purified"). (CompI. ~ 10.) Grasshofrs investment in Transaction No. 07519936 (the "Transaction") was solicited by non-party Daniel Hunter, as principal of Purified. Id. 1 10. Grasshoff alleges that Hunter engaged Defendant Etra to provide "Paymaster services" for the Transaction. Id. The Complaint notes that Defendant Etra is an attorney. Id. 1 12. 14. On September 22,2011, Defendant Etra entered into a Deposit Agreement with Plaintiff, which provided, in relevant part, that: "Upon receipt of [Grasshoffs] payment [* 3] Index No. 650832/2012 Page 2 of7 Grasshoffv. Etra of One Hundred Fifty Thousand Dollars ($150,000.00) for Transaction No. 07519936, [Etra] shall hold [Grasshoffs] deposit in escrow and shall release said funds only upon closing of Transaction No. 07519936 on or before September 30,2011." Compi. Ex. A, at ~ 1. In the event the Transaction failed to close on or before September 30, 2011, the Deposit Agreement provided that Etra "shall not release or pay said funds to .anyone other than [Grasshoff] and shall immediately wire said funds back to [Grasshoff]. .. " Id. at 12, Gras sho ff alleges that Etra accepted his payment pursuant to the Deposit Agreement and placed the payment into an account, referred to as the "Indeva account" in the Complaint. (CompI. ~ 23.) While Grasshoffs payment was supposed to be held in escrow, Etra purportedly transferred Grasshoffs funds to another account without Grasshoffs consent. Id. ~ 26. In response, Grasshoff filed the instant action, demanding, among other things, damages in the amount of his investment. Grasshoffs Complaint asserts five claims against Etra: (1) breach of contract; (2) promissory estoppel; (3) breach of fiduciary relationship; (4) negligent misrepresentation; and, (5) conversion. II. Defendant Etra's Motion to Dismiss Etra presents one argument in his motion to dismiss: that the facts alleged fail to establish that Etra "had a duty to Plaintiff with respect to the handling of funds sent by [* 4] Grasshoff v. Etra Index No. 650832/2012 Page 3 of7 Plaintiff to Defendant." (Def.'s Br. at 1.) In the absence of such a duty, Etra contends that each of five claims asserted by Plaintiff must be dismissed. However, only two of Plaintiffs claims actually tum on the existence of a duty owed by Etra to Plaintiff - breach of fiduciary duty and negligent misrepresentation. A breach of fiduciary duty claim requires demonstration of "the existence of a fiduciary relationship [between plaintiff and defendant], misconduct by the defendant, and damages that were directly caused by the defendant's misconduct." Kurtzman v. Bergstol, 40 A.D.3d 588, 590 (2d Dep't 2007). The elements ofa claim for negligent misrepresentation are: "(1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information.;' MatlinPatterson ATA Holdings LLC v. Fed. Express Corp., 87 A.DJd 836, 840 (1st Dep't 2011). Plaintiff s breach of contract, promissory estoppel, and conversion claims do not require such a pleading of duty. See Harris v. Seward Park Hous. Corp., 79 A.D.3d 425, 426 (1st Dep't 2010) (stating that the elements ofa breach of contract claim are "the existence of a contract, the plaintiffs performance thereunder, the defendant's breach thereof, and resulting damages."); MatlinPatterson ATA Holdings LLC v. Fed. Exp. Corp., 87 A.D .3d 836, 841-42 (1 st Dep't 2011) ("The elements of a claim for promissory [* 5] Grasshoffv. Etra Index No. 65083212012 Page 4 of7 estoppel are: (1) a promise that is sufficiently clear and unambiguous; (2) reasonable reliance on the promise by a party; and (3) injury caused by the reliance."); Colavito v. NY Organ Donor Network, Inc., 8 N.Y.3d 43,50 (2006) ("Two key elements of conversion are (1) plaintiffs possessory right or interest in the property and (2) defendant's dominion over the property or interference with it, in derogation ofplaintiffs rights.") Accordingly, since Etra's argument is only potentially applicable to the fiduciary duty and negligent misrepresentation counts, the Court will turn its analysis to those claims below. A. Breach ofFiduciary Duty Defendant Etra grounds his motion to dismiss the breach of fiduciary duty claim in a single argument, contending that he owed Plaintiff no duty with respect the handling of Plaintiffs funds under Shapiro v. McNeil, 92 N.Y.2d 91 (1998). As Plaintiff correctly notes, however, the facts as pleaded in this case render the holding of Shapiro distinguishable and thus inapplicable. Shapiro was a highly fact-intensive ruling. The Shapiro Court held that an attorney owed no duty of care to a nonclient simply by accepting and disbursing funds sent by the nonclient to the attorney's lOLA account, where "there were neither circumstances suggesting bad faith nor the total absence of any apparent authority on the [* 6] Grasshoffv. Etra Index No. 65083212012 Page 5 of7 face of the checks which would put [attorney] on notice of an irregularity possibly triggering a duty to inquire' before making the disbursement. Shapiro, 92 N.Y.2d at 98. In particular, Shapiro noted the absence of any contractual relationship between the nonclient and the attorney, which further established the attorney's lack of notice about any irregularity regarding the transfer of funds out of the lOLA account. Id. Conversely, here a contractual relationship has been alleged between Defendant Etra and Plaintiff Gras shoff. Under the Deposit Agreement, Etra was the "Paymaster,"1 and was required to hold Grasshoffs funds in escrow until the Transaction'S closing, or in the event the Transaction did not close, return the funds to Grasshoff. Thus, unlike Shapiro, Plaintiff has pleaded facts that should have put Etra on notice that his disbursement of funds from the escrow account was unauthorized. Accordingly, Shapiro does not provide a basis for dismissal of Plaintiffs breach of fiduciary duty claim. Since Etra makes no other argument in favor of dismissal, his motion is denied. 1 The Court notes that the Complaint repeatedly refers to Etra as an attorney; however, the Complaint does not plead that he was acting as an attorney with regard to the Transaction. Instead, the Complaint asserts that Etra was acting as "Paymaster," a position described by Plaintiff as akin to an escrow agent. See PI.' s Opp. Br. at 2, 4. [* 7] Grasshoffv. Etra B. Index No. 65083212012 Page 6 of7 Negligent Misrepresentation Plaintiffs negligent misrepresentation claim stems from Etra's alleged misrepresentation of "his role as a neutral intermediary providing a safe vehicle to facilitate the transfer of capital, in that he did not hold or intend to hold any of the transferred funds in escrow, and he did not intend to provide any security whatsoever to the investors in the Transaction." (CompI. ~ 60.) Defendant contends that this claim must be dismissed under Shapiro, again because Defendant owed no duty to Plaintiff. However, for the reasons discussed above, Shapiro does not govern this claim. Defendant asserts no other bases for the dismissal of this claim. Accordingly, Defendant's motion is denied on this basis. (Order follows on next page.) [* 8] Index No. 650832/2012 Grasshoff v. Etra Page 7 of7 III. Conclusion For the foregoing reasons, it is ORDERED that Defendant Etra's motion to dismiss is denied; and it is further ORDERED that counsel are directed to appear for a compliance conference in Room 442, 60 Centre Street, on September 17, 2013, at 10 AM. Dated: New York, New York July L"\, 2013 ENTER: ~( ~ ~ 4« c<n ~"J\c:::._ - Hon. Eileen Bransten, I.S.C.

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