Smallberg v Raich Ende Malter & Co. LLP

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Smallberg v Raich Ende Malter & Co. LLP 2015 NY Slip Op 32582(U) June 30, 2015 Supreme Court, Suffolk County Docket Number: 14E-64085 Judge: Jerry Garguilo Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [* 1] INDEX No. 14E-64085 SUPREME COURT - STATE OF NEW YORK COMMERCIAL DIVISION IAS PART 48 - SUFFOLK COUNTY PRESENT: Hon. _ __.J.,,E,.,RR......,Y'-'G"""AR~G...,U..,I... L,.O'---- Justice of the Supreme Court MOTION DATE 9-2-14 (001) MOTION DATE 10-8-14 (002) ADJ. DATE 1-14-14 Mot. Seq.# 001 - MG # 002 - XMD; CASEDISP ----------~---------------------------------------------------X LEONARD SMALLBERG and BRADLEY SMALLBERG, Plaintiffs, - against RAICH ENDE MALTER & CO. LLP and DOES 1-10, LAZARUS & LAZARUS, P.C. Attorney for Plaintiffs 240 Madison Avenue, 8th Floor New York, New York 10016 MORITI, HOCK & HAMROFF, ESQ. Attorney for Defendant 400 Garden City Plaza, Suite 202 Garden City, New York 11530 Defendant. ------------------------------------------------------------~-}{ Upon the following papers read on this motion seeking dismissal and/or summary judgment and the cross motion for leave to amend the complaint ; Notice of Motion/ Order to Show Cause and supporting papers dated August 12. 2014; Notice of Cross Motion and supporting papers dated September 26. 2014; Answering Affidavits and supporting papers dated September 26. 2014; Replying Affidavits and supporting papers <lated Noveniber 13. 2014; Other Affirmation of Alexander Widell dated November 13. 2014• (ttud afte1 l1cating cottnsel it• sttppo1t ai1d opposed to tlte n1otio11) it is~ ORDERED that defendant's motion to dismiss pursuant to CPLR 321 l(a) (7) and/or for summary judgment pursuant to CPLR 3212 is granted; and it is further ORDERED that plaintiff's motion to amend the complaint and consolidate this action with pending matters is denied. In this action, plaintiffs seek monetary damages allegedly sustained as a result of the dissolution of an accounting firm, Smallberg, Sorkin and Company (hereinafter SSC). The complaint alleges interference with a contract as a first cause of action and unjust enrichment as a second cause of action. A proposed amended complaint alleges aiding and abetting breach of fiduciary duty as a third cause of action. The complaint was dated, and served, May 22, 2014. Defendant answered June 10, 2014. Discovery has not been completed and two other related law suits exist between the parties Mitchell Sorkin, CPA v Leonard Smallberg,CPA and Bradley Smallberg, Index No. 2110-2014 and Leonard Sma/lberg and Bradley Smallberg v Peter Kutner, Index No. 66618-2014 both in Suffolk County Supreme Court. Defendant, Raich [* 2] Smallberg v REM Index No. I 4E-64085 Page2 Ende Malter & Company LLP (hereinafter REM), now moves for dismissal of the complaint for failure.to state a cause of action and/or summary judgment. Plaintiffs cross move for leave to amend the complamt and to consolidate the related pending actions. Mitchell Sorkin (hereinafter Sorkin) was a partner in SSC. Following unsuccessful merger discussions in December of 2012, Sorkin withdrew from SSC, and joined REM. Plaintiff alleges Sorkin and "presently unknown and unnamed representatives of REM" and "DOES 1-1 O" conspired to, and in fact, contacted SSC clients and caused them to withhold payments lawfully due to SSC. The complaint alleges interference with contract an~ unjust enrichment. As to the motion by defendant REM, when a party moves under CPLR 3211 (a)(7) for dismissal based on the failure to state a cause of action, the test is whether the pleading states a cause of action, not whether the plaintiff has a cause of action (Sokol v Leader, 74 AD3d 1180, 904 NYS2d 153 [2d Dept 201 OJ). A court must determine whether, accepting the facts as alleged in the pleading as true and according the plaintiff the benefit of every favorable inference, those facts fit within any cognizable legal theory (Leon v Martinez, 84 NY2d 83, 614 NYS2d 972 [1994]). Affidavits may be used to remedy pleading defects, therejly preserving "inartfully pleaded, but potentially meritorious, claims" (Rove/lo v Orofino Realty. Co., 40 NY2d 633, 635-636, 389 NYS2d 314 [ 1976]). "Whether a plaintiff can ultimately establish [his or her] allegations is not part of the calculus in determining a motion to dismiss" (EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19, 799 NYS2d 170 [2005]). However, "conclusory averments of wrongdoing are insufficient to sustain a complaint unless supported by allegations of ultimate facts" (Muka v Greene County, 101 AD2d 965, 965, 477 NYS2d 444 [4th Dept 1984]; see DiMauro v Metropolitan Suburban Bus Auth., 105 AD2d 236, 483 NYS2d 383 [2d Dept 1984]; Melito v lnterboro--Mutual lndem. lns. Co., 73 AD2d 819,423 NYS2d 742 [4th Dept 1979]; GreschlervGreschler, 71AD2d322,422 NYS2d 718 [2d Dept 1979]). The branch of the motion seeking dismissal of the first and second causes of action for failure to state a cause of action is granted. To succeed on a claim for tortious interference with contractual relations, a plaintiff must show the existence of a valid contract between the plaintiff and a third party, the defendant's knowledge of such contract, the defendant's intentional and improper procurement of the breach of such contract by the third party, and damages (see White Plains Coat & Apron Co., Inc. v Cintas Corp., 8 NY3d 422, 835 NYS2d 530 [2007]; NBT Bancorp v Fleet/Norstar Fin. Group, 87 NY2d 614, 641NYS2d581 [1996]; Lama Holding Co. v Smith Barney, 88 NY2d 413, 646 NYS2d 76 [1996]; Miller v TheodoreTassy, 92 AD3d 650, 938 NYS2d 172 [2d Dept 2012]; Dune Deck Owners Corp. v Liggett, 85 AD3d 1093, 927 NYS2d 125 [2d Dept 2011)). The tort of intentional interference with business relations requires a showing that the defendant intentionally and through wrongful acts prevented a third party from extending a contractual relationship to the plaintiff (see Smith v Meridian Tech., Inc., 86 AD3d 557, 927 NYS2d 14 ! [2d Dept 201l];Ad/erv20/20 Cos., 82 AD3d 915, 918 NYS2d 585 [2d Dept 2011]). The allegations set forth in the complaint are insufficient to state a cause of action for tortious interference with contract, as there is no allegation the defendant procured a breach of contract by any of SSC's clients (see Dune Deck Owners Corp. v Liggett, 85 AD3d 1093, 927 NYS2d 125 [2d Dept 2011]; Ferrandino & Son, Inc. v Wheaton B/drs., Inc., LLC, 82 AD3d 1035, 920 NYS2d 123 [2d Dept 2011 ]). Similarly, the complaint fails to set forth sufficient allegations that the defendant interfered with a prospective business relationship between SSC and a third party (see Adler v 20120 Cos., 82 AD3d 915, 918 NYS2d 585 [2d Dept 2011 ]; [* 3] Smallberg v REM Index No. 14E-64085 Page 3 White v Ivy, 63 AD3d 1236, 880 NYS2d 374 (3d Dept 2009); Pacheco v United Med. Assoc., 305 AD2d 711, 759 NYS2d 556 (3d Dept 2003); Korn vPrincz, 226 AD2d 278, 641NYS2d283 [1st Dept 1996); cf 534 E. 11th St. HollS. Dev. Fund Corp. vHendrick, 90 AD3d 541, 935·NYS2d 23 (I st Dept 2011)). Here, the complaint does not allege the name of any client whose contract with SCC was interfered with, the alleged time or date of the interference, or the specific amount of damage. Thus, the cause of action must be dismissed. Turning to the second cause of action, unjust enrichment occurs where a defendant enjoys a benefit bestowed by the plaintiff without adequately compensating the plaintiff (see Sergeants Benevolent Ass'n Annuity FundvRenck, 19 AD3d 107,796 NYS2d 77 (!st Dept 2005)). A plaintiff must show "that (I) the other party was enriched, (2) at that party's expense, and (3) that 'it is against equity and good conscience to permit [the other party] to retain what is sought to be recovered' "(Citibank, N.A. v Walker, 12 AD3d 480, 481, 787 NYS2d 48 [2d Dept 2004]; Baron v Pfizer, Inc., 42 AD3d 627, 629-630, 840 NYS2d 445 (3d Dept 2007)). Receipt ofa benefit alone is insufficient to establish a cause of action for unjust em'ichment (see Wiener v Lazard Freres & Co., 241 A.D.2d 114,672 NYS2d 8 [1st Dept 1998)). Rather, liability requires that under the circumstances and as between the parties to the transaction the enrichment be unjust (see McGrath v Hilding, 41 N.Y.2d 625, 394 NYS2d 603 (1977)). Here, plaintiff has not pied what, if any accounts receivable, were taken by REM or by "DOES 1-10" and thus has not stated a cause of action. The motion by defendants, in the alternative, for summary judgment is denied as moot given the courts determination herein. As to the plaintiffs' motion for leave to amend the complaint, applications for leave to amend pleadings under CPLR 3025 (b) should be freely granted unless the proposed amendment (I) would unfairly prejudice or surprise the opposing party, or (2) is palpably insufficient or patently devoid of merit (see Maldonado v Newport Gardens, Inc., 91 AD3d 731, 93 7 NYS2d 260 [2d Dept 2012]; Lucido v Manc11So, 49 AD3d 220, 851 NYS2d 238 [2d Dept 2008]). A determination whether to grant such leave is within the Supreme Court's broad discretion, and the exercise ofthat discretion will not be lightly disturbed (see Gillin v Chirinkin, 60 AD3d 90 I, 875 NYS2d 585 [2d Dept 2009]; Ingrami v Rovner, 45 AD3d 806, 847 NYS2d 132 [2d Dept 2007)). Here, the proposed amendment can be characterized as palpably insufficient or patently devoid of merit on its face. The cause of action against REM for aiding and abetting a breach of fiduciary duty asserted in the proposed amended verified complaint is deficient. To establish a claim for aiding and abetting a breach of fiduciary duty, a plaintiff must establish a breach of a fiduciary obligation owed to another, that the defendant knowingly induced or participated in the breach, and that the plaintiff suffered damages as a result of the breach (see Baron v Galasso, 83 AD3d 626, 921 NYS2d I 00 [2d Dept 201 l];Kaufman vCohen,307 AD2d 113, 760NYS2d 157 [lstDept2003]; Global Mins. & Metals Corp. vHolme, 35 AD3d 93, 824 NYS2d 210 [1st Dept 2006], Jvdenled8 NY3d 804, 831NYS2d106 [2007]). "One who aids and abets a breach of a fiduciary duty is liable for that breach, even if he or she had no independent fiduciary obligation to the alleged injured party, if the alleged aider and abettor rendered substantial assistance to the fiduciary in the course ofeffecting the alleged breach ofduty" (Sanford/Kissena Owners Corp. vDara/Props.,LLC, 84AD3d 1210, 1212, 923 NYS2d692 [2d Dept2011];seeMonaghan v Ford Motor Co., 71AD3d848, 897NYS2d 482 [2d Dept 2010]; Velazquez vDecaudln, 49 AD3d 712, 854 NYS2d 163 [2d Dept 2008]; see also Baron v Galasso, 83 AD3d 626, 921 NYS2d I 00 [2d Dept 2011 )). The elements of substantial assistance can be established with proof showing the defendant affirmatively [* 4] Smallberg v REM Index No. 14E-64085 Page4 assisted, helped conceal, or, by virtue of failing to act when required to do so, allowed the breach to happen (see Kaufman v Cohen, 307 AD2d I I 3, 760 NYS2d 157 [1st Dept 2003]). Mere inaction on the part of the defendant, however, will constitute substantial assistance only if the defendant owes a fiduciary duty directly to the plaintiff (Sanford/Kissena Owners Corp. v Dara/ Props., LLC, 84 AD3d 1210, 1212, 923 NYS2d 692 (2d Dept 2011); Kaufman v Cohen, 307AD2dI13, 126, 760 NYS2d 157 (1st Dept 2003)). Further, the plaintiff must show that the defendant had actual knowledge of the breach of fiduciary duty; constructive notice of the breach is insufficient to impose liability for aiding and abetting (Global Mins. & Metals Corp. vHolme, 35 AD3d 93, IOI, 824 NYS2d 210 [1st Dept2006];Kaufman vCohen, 3.07 AD2d 113, 125, 760 NYS2d 157 [1st Dept 2003]; see Baron v Galasso, 83 AD3d 626, 921NYS2d100 [2d Dept 2011]). Here, the proposed amended complaint does not allege that Les Chiffoniers was an actual client of SSC, and REM, therefore was free to negotiate or engage them as it saw fit. Moreover, the proposed complaint does not allege that Sorkin was surreptitiously soliciting Les Chiffonaire or that Sorkin had not already advised plaintiffs of his intent to leave SSC. Accordingly, plaintifrs application to amend the complaint is denied as the allegations in the proposed complaint do not state a cause of action for aiding and abetting a breach of fiduciary duty. As to the request for consolidation, a motion to consolidate or join for trial two or more actions rests within the sound discretion of the trial court (see CPLR 602; Matter ofLong Is. Indus. Group v Board of · Assessors, 72 AD3d 1090, 1091, 900 NYS2d 128 [2d Dept 2010]; North Side Sav. Bank v Nyack Waterfront Assoc., 203 AD2d 439, 610 NYS2d 862 [2d Dept 1994]). While CPLR 602 provides that actions "involving a common question of law or fact" may be consolidated by court order, consolidation or joinder is inappropriate where the cases involve different factual issues and legal claims (Gibbons v Groat, 22 AD2d 996, 997, 254 NYS2d 843 [3d Dept 1964); see Pau v Bellavia, 145 AD2d 609, 536 NYS2d 472 [2d Dept I 988]), and would result in jury confusion and prejudice to defendants (see Simoni v Costigan, 100 AD3d 531, 953 NYS2d 858 [lstDept2012];Suckishviliv VuitingNurseServ. ofN.Y., 74 AD3d433, 900 NYS2d 874 [1st Dept 2010]). As no counterclaim survives the dismissal herein, the application to consolidate or join for trial Mitchell Sorkin, CPA v Leonard Smal/berg, CPA and Bradley Smallberg, CPA, Index No. 2110-2014 is denied as moot (see Progressive Northeastern Ins. Co. v North State Autobahn, Inc., 71 AD3d 657, 8% NYS2d 137 [2d Dept 2010); Beerman v Morhaim, 17 AD3d 302, 791NYS2d854 [2d Dept 2005]; Heydt Contracting Corp. v Tishman Constr. Corp., 163 AD2d 196, 558 NYS2d 47 [1st Dept 1990]). The application to consolidate or join this matter for trial with Leonard Smallberg and Bradley Smallberg v Peter Kutner Index No. 6618-2014 is, likewise, denied as moot. 3o I.zol X s FINAL DISPOSITION _ _ NON-FINAL DISPOSITION

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