Dongwu v New York City Regional Ctr. LLC

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Dongwu v New York City Regional Ctr. LLC 2018 NY Slip Op 32678(U) October 18, 2018 Supreme Court, New York County Docket Number: 652024/2017 Judge: O. Peter Sherwood Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. ---------------····--··-··· [*FILED: 1] NEW YORK COUNTY CLERK 10/19/2018 09:46 AM INDEX NO. 652024/2017 NYSCEF DOC. NO. 85 RECEIVED NYSCEF: 10/19/2018 SlJI>R.EME (;()UR'r OF !"rHE. s·rATf: OF NEW Y(lRK (:()lJN·rv ()J? Nl~W )l()RK: COMl\1El~(~J.~L 01\'lSl()N P1\ll'f 49 . . . . . . - - - - - . . . . )191 . . . . . . . . . _ . . . . . . . . . . . - -. . . - - . . ~------------ ~:-~ ... ....- - · · - ...- - - - - - - .... ~-~~-~---- ....... -~- ....... _____ x c:t-1E·N l)()Nf;\i\"ll, et 11/., indivicluall~t and dcrivativ:·ely on hehulf t)f 1,11•: NEw· '\l()ltK c~1~rv EAS]~ RlV ER W1\ TEl{~'l{<.>NT l)l~\tELOPI\'IEN~r .FlJND, LL<~, l'laintiffs, DE(~ISION ANll Ol~Dl~:ll lndex No.:<•52024/2017 - against - Nf:\\/ \/ORK CJ'"rY l~l~:Gl<.>N .!\1;; CEN. 'fEI{ L-l~C, c;E<JR(;J~ L . Ol.1SEN, and J>AlJL Ll~VINSOllN, Motion Sequence No.: 001 l)efendants, ·1·1--1E Nl~:\V EAST l~lVEJ{ l)~:v1,:I-'()J•MEN'r FlJND·, [_,[.. C, \'Ol{K i\Tt~:llFl~<>NT 1 \\ C~l]~\r Nominal J.lefend ant. __. . _.._______________ . . _._---_•.__ . , . . ___ . ,__. . . . . . --.,. . . . ,__________ .. 0. Pl~"rf:I~ ~-----:-- . . ---.--.. . . -.. . . . _. . . x ·· ...t SHEl{\\'()()I), .J.: In this action~ defendants Nc\v )'ork (.'ity Regional (~enter lJI"'·c: fN).r(_,J{C~)~ (icorgc L. ()Ison ({)lson), Paul [,evinsohn ([,cvinsoh11) and the Ne\V ·vork <Jit)' East l{ivcr \\Taterft·()tlt [)evclopn1cnt Fund .. f ,L,(, (the Fund), n1ove . pursuant to (~;PLR 3111 (a) ( 1) . {5), and (7) h) disn1iss the con1p1aint. Plaintiffs oppose tl1e n1otion. Bl\{:K<;J~OIJND Plaintiffs arc approxitllalcly l 54 non-E.nglish speaking C.,hincse nationals . each of \Vhorn purchased a n1cn1bcrship interest in the Fund fi)r $500~00<) (see Wolfson affirtnation in opposition f \\lolfson ()pp. 1\tlirn1.J~ exhibit 1 [C~omplaint], 1~ l,167). ln11nigrant Investor Progran1 (EB-5 progratn)~. l~ach participated in the El~-5 a J)rogran1 created b·y C~ongress to stin1ulate cc:ono1nic dcvclt>pn1ent ai1d job creation through f(>reign invcst111cnt ·w·hile affording eligible fiJreign investors the chance lo becon1c lawful pcrn1anenl residents of the lJnitcd States (see c:ornplaint, ii 2). Plaintiffs received approva,l f()r conditional green cards for in1n1cdiatc fan1ily n1cn1bcts throug_h the EI.~-5 th~n1selvcs and progra111 (id.). Of the plaintiffs \Vho chose lo pursue pcrn1ancnt residency . all have received pcrn1anent green cards exce1-1t tor 19 currently U\\.'aiting approval of their petitif)ns. 2 of 11 [*FILED: 2] NEW YORK COUNTY CLERK 10/19/2018 09:46 AM INDEX NO. 652024/2017 NYSCEF DOC. NO. 85 RECEIVED NYSCEF: 10/19/2018 l)e.fendant NYC:R{_~ prcrvidcs financin_g for real.-estate and infrastructure projects in Nc\v '(ork C'ity. in ?(J08~ the lJnited States C~itizenship and ln11nigratio·n Services (lJS(_~IS) a111-1rovcd NYC~R(: to raise capital via the r:H-5 .prt)gratn~ l)efc.ndants ()I sen and I J,cvins<)hn arc ·Ne\v '{ ork real-estate attorneys \\1ho rnanage NY(;J{C: (C:on1plai11t,, 4)~. ·1 4· ") ( ll . "\ l! d .)- ... NYC,:R(~~ in tu111 . n1anag~s the Fund .,~, ~ Plaint.ills purchased n1cn1bership interests in the r:und to fun{t renovation of the Battery l\1aritiJTlC l.3uilding (Biv1fl) . a ferry tern1inaJ next lo the Staten lsland 17erry Tetrninal in f\llanhattan (itl. . ilil 3-4). 1'hc renovation of the BMl3 is a cotnponcnt of the New York c.:ity East River \Vaterfront [)evclopn1cnt Projc~ct (the Project.) (ill.). Non-party 10 SSA l. . andl<-lrd . LJ. ,(~ (Landlord,) leased the R'ivtl.~ fron1 the (,:ity ofNe\v York (the C~ity). ,_fl1e Fund used the proceeds to n1akc a $77 1111 ll ion s~cured loan (the t.oan) to non-party 10 South Street Associates lJLC: ('the ·Borro\vcr), an afliliate of the lJern1rlt Con1pany (l)ern1ot). thecon1pany nan1ed by the ·Ne\v '{ork C~ity Econo1nic J)evc}()pn·1c11t (\lrporation {N YC."'El)C.~) as developer f()rthe renovation oflhe Btv1l3. l . andlord then cntcre{f two leasehold 111ortgagcs. to secure. the L.t)an. J)ern1ot signed a guaranty for the l.1oan (the f)eliciency ()uaranty) lo C<lver any l1npaid 111oney on the Loan not covered. by· foreclosure of'" the lnortgagcs. PlaintiiTs allege l)errnot. had no ·assets \\:hen it entered into the Deficiency (iuaranty~ and still has no assets . effectively 1nakin.g the Deliciency (iuaranty \V<n1hlcss (ill.~ ii,i 8-9~ l 20-124, 165-168). l.0~111 when only abotit 60°1() N'Y'(~l{C then allovvcd Landlord In July 2() l 5, the I3<lrro\ver stopped n1aking payn1ents on the of construct1(1n of the [11\11B \:vas con1p1eted. }llaintiffs allege that to born.1\.\' $5 .5 tnillion \Vithout an1cnding any of the LtKUl docun1ents or receiving any additional security. ln addition . plaintiff}; clait11 that, in at1 atlet11Jll to ctn1ti11ue.to raise capital fron1 investors int~rcsted L-oan (itl.~ in tl1c l~B-5 iliI 8-9.. progran1, defendants did not rC\leaJ tltat the .B<)rrowcr had defaulted on the 120-124~, 165-168). In ()ctober 2016, dcfc11danls purportedly revealed to plaintiffs that the del~1ulted on the L<Jan a11d renovations to the Btv1lJ had cnd·ccL B()fr0\\1cr In Dccen1ber 2016.. had NYC~I{(~ revealed to plaintiffs that the \\ritkotl' Group had oflered to purchase the Fund's leasehold rnottgages and con1pfctc renovations to the BTvt.l.3, and counseled· plainti1ls that it \VOuld be prelerab)e to foreclose tJn Derrnot in order t<) maxin1izc investor value (id., ~l11 :I 78-J 81). In J)ccen1her 2016 and Jant1ary 2017" plaintiffs requested int<.>r1nation about the status of the Fund and the Loan" and \vhcfhcr l)cr1not had invested $17 tlli 1li<Jn dt).llars 2 3 of 11 trorn defendants. [*FILED: 3] NEW YORK COUNTY CLERK 10/19/2018 09:46 AM INDEX NO. 652024/2017 NYSCEF DOC. NO. 85 RECEIVED NYSCEF: 10/19/2018 PJainti tl1' ullcgc that defendants did not provide the .requested- info.rn1ati<Jn {itlq ii, l 16-119" l 22-- l ;'~-)4- ).. ()n 1\prit 14'! 2017 ~ plaintiffs con11nenced lhis acti<>n against defendants. 1"he con1plaint alltgcs seventeen causes of action, \Vhich arc as t<Jllow·s: l) c<)n1n1cln la\v traud~ 2) derivative clain1 for breach o.f fiduciary duty against NYC:RC~~:. 3) aiding and abetting fraud; 4), derivative clain1 f{lr breach of fiduciary. dutv against NYC:llC:. ~ ~ 5) breach (>f fiduciary duty against NYCR(.~; 6) derivative clain1 l()r aiding and abetting breach of fiduciary duty against ()lscn and L,cvinsohn~ 7) aiding and abetting breach of fiduciary duty against Olsen and L;cvinsohn: 8) breach of contract against ·NYCR(:: -- 9) tortious inducen1cnt of breach of ccu1trac.t against ()lsen <:tnd Levinsohn: I 0) breach of in1plicd covenant of gt)od faith and fair dealing against NYC~IlC; 11) derivative clain1 of gross negligence~ 12) gross negligence; 13) ncgl igent n1isrcprcsentation: l4) unjust enrichrncnt; 15) derivative cfain1 of lU~just cnric.htncnl; I 60) accounting against N)'{:.llC~; and 17) violation of L.i1nitcd l..iability C'ompany (LI.. (;J l.,a\v § 1 102 against N't'C~RC~. l)IS(::USSICJN '"l'he standard <)f rev.ie\V on a 1notion lt} disn1iss pursuant to t~PLf{ 3211 is \V~H estahlishcd . . . fhc court 111ust assu111e the truth or the allegations in the· pleading and "resolve all inferences \vhich reasonably flO\V thcrc.fro111 in t~1vor of the pleadern ( .\ . tu. zder.\· v 1'f1inshiJ? . 57 N'{2d 3..91~ 3.94 l l \)82]). In assessing a cotnplaint... the court n1ust "detern1ine si111ply \Vhethcr the facts alleged !it \Vithin any cognizable legal theory" ( A·1<>rone v i\1(>rone, 5() NY2d 48 t . 484 [ 19801.) "[T]he al legations of a con1plaint, supplen1ented by a plainti1l's additional submissit)J1S, if an}', n1ust be given their n1ost lirVt)rablc intendn1ent 0 ( ..,4rrinRlon v NeH1 l'··ork. 711nes· ( . 'o.~ 5:5 NY2d 43.3., 442 [ l 982J). 3 4 of 11 tr the !l1cts [*FILED: 4] NEW YORK COUNTY CLERK 10/19/2018 09:46 AM INDEX NO. 652024/2017 NYSCEF DOC. NO. 85 RECEIVED NYSCEF: 10/19/2018 stated are sufficient to support any cognizable lega·I theory, the n1t)tion lo disrniss should be denied ( C"'l1n1JJlti.~n_fi>r 1;,iscal l~.quilJ' v .Sll1le '?/1'/e-it~ York~ 86 N1'2d 307, 318 f 1995 r> . ... Under C'PI . I~ 3211 (a) ( 1)'.' a dis1nissal is warra11tcd only if the docun1entary. evid.encc subn1ittcd conclusively establishes a defense t<) the asserted clain1s as a n.1.atter of la\v~' (l~eon v A!arti11ez, 84 N\'2d 83 . 88 ( 19941). f>ursuant to CI>lJ{ 3211 {a) (5)., .,,.ll1e cause of action nlay not he n1aint.ainL"d int~tncy h~caus~ (}r arbitration and a\van.L. collateral est.oppcl . discharge. in bankruplL"y . or other disability of the 1110\··i·ng party. payn1ent . . relcase.rcsjudicata . stattHC of litT1ita1ions'< ·or statute or tt·auds. ~~ l Jndcr Cl>tJ{ 3211 (a) (7J, '~factual allegations that de' not state a viable cause of aclion . that consist of' bare legal c<.>nclusit)ns . or that are i11herentlv ..... _, .incredible or clearl ,.,v . . . . - contradicted bv dl>cun1cntarv. evidence are not entitled to such considerati<)n . ., t!S~kill~t.nnes. /.,/..(' v '·· ~ ~ Bro,{v . 1 l\l)3d. ?47 . 250 l 1st l)ept 2003]). "'i.Whcthcr the plaintiff \Viii ultinlately be successfl1l in establishing tht1sc allegations is not part of the calct.tlus'' (Lt1nd(1n v Kroll lttb. 5.,;1ecit1/isls. Inc., 22 NY3d 1~ 6 [2013] I. internal quotation marks and citation on1ittedl.). f.,taud and Aiding and i-\hetting Fr·aud (Claims J and 3·} i\ f'i~aud clain1 n1ust allege --·n1isre·presentation t1r ctn1ccaln1ent of a n1aterial ll1ct~ ta:lsity~. scicnter by the \Vrong dt)cr, justilial1lc reliance .on the deception and resulting injury'' (Zltnett Lo1nht1rtlier. llcl i-· i\d(1Slt>lt\ 29 Al)3d 495~ 495 [1 ~a l)cpt 2006]). ~~/\ plaintiff alleging an aiding- antl-abetting fraud clai1n n1ust allege the existence of the underlyin:g fraud, actual knowledge~ and substantial assistance'' (()ster v Kirschner~ 77 AL)3d 51 . 55 Jl st ·oept 201 Of). need only he plcad(.:~J -~f/\ lctuat kno\v·ledgt: generally.,., (it/.). I>Jaintifls allege that defcnda11ts n1ade l 7 01nissions or n1isrcprescntatioi1s before plaint.i fTs entered into the invest111ent including, but not Ii1n1tcd l()'\ 1n.i~rcprcsentations ~tbout parties~ the involv.cn1enl in the llMI~~ whether additional funds "'vould be ~ontributcd by J)crn1ot~ and the risk lt:vcl or the Lenin~ First.~ the (~~ourl vvill consider these clai1ns, as fltr as they are hased on post-- invcst1nent stalen1cnts by the: defendants. Plaintilfs allege ()lsen and Levinsol1n aided and abetted the fraud by \Vriting .. ctliting . and approving various n1islca<li11g documents. l)cfendanls argue that the fraud clai1ns based on tnisrcpresentations before they entetcd into the i11vcstn1ent 1ail because - - the allegations ()r n1isreprcsentati<.)tl and on1issions arc contradicted bv the ()fferine. rv1en1orandun1 ( ()fv1) (sel' ()Jv1., attached as l.~xh.ibit (~ to . . . . . 1.endcr a.ff., .N YS(~l~F· Doc. Nt). 20). L)e lenda11ts }Joint to the .fi)l.IQ\\"ing cxan1ples to demonstrate that delendants disclosed con1prchcnsivc qualifiers and risk Jactors in the ()i\1 :· 4 5 of 11 [*FILED: 5] NEW YORK COUNTY CLERK 10/19/2018 09:46 AM INDEX NO. 652024/2017 NYSCEF DOC. NO. 85 RECEIVED NYSCEF: 10/19/2018 Plaintiffs \Vere \Varncd to rely on their 0\\111 ·cxarninati{)O of the con1pany and tcrn1s t)f the offering, and have their o'vn advisorsrcvie\~' it!" especially if English ~-'as not their first language (.ill at.iv-s t . 7,, 8, 25~ 29, 3J_ 35, 39, 42). C:ertain inf()rJnalion in the (JM Constituted fiJfVlard looking stater11ents fron1 \Vhich actual results could differ inaterially . and the 1:un<l \VHS a ''speculative invcstn1cnf~ designed only f(Jr so·phisticated investors able to bear substantial risk of loss (id. at v" 1' 9~ 3 5~ 36 . 37_). ··rhe (JlV1 tt-iscloscd that the Bo1TO\\/er ''.ras not l)crn1ot but a ~".spcc.ial purpose entity ... and L>en110L along \Vi th thc(~ity, vlas disc:lain1cd fror11 having any obligation to pay the I..~oan or provide capital funding {i<l at v-vL. 2, 22, 7). 'l'he ()t\·1 disclosed the Fund has contractual rc.n1edies in the event of a deiault, but . ;.there is no assurance that the IJorrotvcr would be able to inakc the con1pany whole for any losses or dan1agcs sui1ered and the (_~on1pa1ty n1a)r lt)se all the value of its assets: . (it/. at. 3 7). ·rbe ()M stated that the ··invc.stn1cnt o~jeclivc'" \\. as ntll tor plaintiffs to rnake rnoney but rather to ~'"111akc investn1ents ... that satisfy the . qualified invcst1i-1ent" criteria of the l~l~-5 ])rograrn so that investors in the c:on1pany n1ay seek to obtain conditional or pcrn1ancnt resident status ... ,,. and that the invcstn1cnt must be .... at risk~ . and cannot guarantee a return (ic/. at 2). J>laintiffs contend the ()M relied upon by dcfenda11t.s docs not C(>nstitutc docun1cntary evidence because the (.'hi nesc v.crsi\1n of the Oiv1 dated l;e.bruary I., 2011, differed fron1 the English vcrsilln of the orv1 dated rv1arch 20 J I" \Vhich defendants attached to their n1oti<lll., and the 1. 2 . ('hinesc version lacke<.l n1any of the disclosures in the I::nglish version. Plaintiffs alstl argue the C~hincse versions of the Subscription Agreement (SA)~ Operating Agrecn1cnt (()1\)~ certain ne\vslcUers" and other docun1cnts provided to thcn1 \Vere substa11tially different than the English . vers1ons. C'J)I Jl 321 J (a.) ( l) docs not cxplic-itly de tine dtJcun1cntary evidence. "[)t)CUrnentary evidence is a fuzzy tern1~- (Fonl£1nellt.1 v [Joe, 73 ;\l)3d 78, 84'1 f2 11t1 Dept 201 OJ [internal quotation n1arks and citations otniU_edJ ). ""ll ft is clear that judicial r"t:cords,. as \veil as dt)ct1n1e11ts (llll-tlf-court transactt()llS SUth arc rt~rlccling as n1ortuaucs. deeds . contracts. and anv Other. the C(llllCH{S \.,... ess~nti'-dl)' undeniable~ \V{)uld ...,· ......... qualify ~is d<)ctu11cntary ev-id~ncc . \)f \Vhich in the proper case"" (i<I. at 84- 85 Iinternal quotation rna.rks and citali<)n.S on1ittctl I}. I lcre., the doc11n1entary evidence., \vhich inclutics the (lf\1~1~ is disputed. Plaintiffs dispute the authenticity of the ()Mand allegethat different vcrsi<.>ns \Vere provided in (_'hincsc and 1:.:nglish. A]though dclendanls atgue·that }Jlainliffs signed defendants.. vcrsio11s of th~ ()/\ and SA and stJbtnilled these versions to the. l)epartn1cnl of l l<nneland Sel:uritv., - this is art issue of ll1ct. :as defendants did not sub.anit the executed versions of -. - ' ' . the ()M and <JA \V'ith their n1.otic1n. <3i,/ing plaintills the rnost ·~1avorabJc intendn1cnt~ . , plaintitls 5 6 of 11 -YORK - -COUNTY --- -10/19/2018 -----[*FILED: 6]r - NEW CLERK 09:46 AM- ---~~~---------------------··--·-·-··-·-···· NYSCEF DOC. NO. 85 INDEX NO. 652024/2017 RECEIVED NYSCEF: 10/19/2018 have suf11cicntly pied fraud and aiding and ab~lting fraud ch:iin1s (see f1rrin*gton, 55 NY2d at 442). I)cfendants· '-1rgun1cnt t.hat plaintilfs·-1~1ilcd f<)plcad dan1agcs regarding prc-investn1c1it statctnents is unavailing because., as the BJv1f.3 lease hits already beentctn1i-natcd" plaintiffs \Viii not be able to recover any <)f their investn1ent and face a con1plcte loss. It is possible lcl plead tian1agcs for a risky or speculative investn1ents'\ as n1ost investments. are l-lljJha f'untl (i\4a.vler) v <.iolcllr1lJl1 ·s£u.:hs (iroUJJ., Inc., C:h~ractcrized l 15 i\[)3d as such <:see ll(1sls J·yielti 128~ 138 [ l sl f)cpt 20 l 41 faffin11ing denial of 111ot.ion {)f fi·aud clain1s l1)r ,i \..~speculative and risky~' invest1nent because ''·ti If plaintitl's a]lcgalions arc accepted as true. there is a '·vast gap'· bet\.vcen the speculati vc picture (defendant] })resented to invest()rs and the· events. [deienda11t] also !Jern.\1ein r Kelso c~- ( 'o., 231 .t\D2d 314~ 315 recovt·r profits knC\\: had already occurred ... ]: see ll st .Dept 1997] f~~lhc plaintiff \Vas not trying to received ... but I i]nstcad . he sought to recover the difJercnce l1cL\VCl"ll the price he rct't:ivu.d in the sale of the· con1pany and the price he. \.vould have received had .... Id.:tendants I not d0,.:~i vt:d hin1 ··.1 ). J)laintif1s also clain1 they \Vere datnagcd by post..-investn1ent staten1cnts and 0111issions by delaying thc.ir action against detcndants~ but plaintiffs· have ll{)l stated any cognizable i1~jury fn.11n the alleged delay., so the 11·aud-bascd claims arc disn1issed as ti1r as they are based on postinvcstll1ent statc-n1ct1ts. l"'he ctlurt .has considered the ren1a.ining arguni.cnts regarding the fraud- base.d \:1ain1s and finds thcn1 l.t.navailing. llreac.h of f~iduciary l)ut'r and Aiding and Abettinf! Breach of Fiduciary Dutv (Claims 2, 4-7) ...··ro establish a breach <)f11dt1ciary duty, the n1ova.nt must pr()Ve the existence of a fiduciary relationship, n1isconduct by the other 1-1arty, and dan1ages directly c.auscd by that party*s n1isct1nduct'" (l'okoik v J)okoik~ 115 AD3d 428 . 429 f I st J)cpt 2()] 4 ]). '' i\ fiduciary rclationshi p is necessarily t~tct-spccitic and is also grounded in a higher level of trust than·nor1nally present in the n1arkclplacc bctvvccn tht>se involved in arrn's length business transactions . . .((.J,lilo il.\·set 1l~!!J. v 13Lll"t.'/a;.'s /Jcu1k Jl_r(\ 19 NYJd 584, 593 f2t)l2] [internal quotatil>n n1arks and citations on1ittcd]). ~.;1\ clain1 f(>f aiding and abetting a breach o·f fiduciary duty requires: (I) a breach ·by a fiduciary of obligations to another. (2) that the defendant kno\vingly induccti or participated in the breach~. and (3) that the plainti.ff sullcrcd dan1age as a res.ult <.)flhc breach~" (Kt1i.!/inan v ('ohe,.-1., 307 i\l)2d 113, 125 f lst l)ept 20()3 ·11t~ittttio11s ortlitled). '"•.r\ person kntl\Vingl.Y participates in a brc"tch of fiduciary 6 7 of 11 [*FILED: 7] NEW YORK COUNTY CLERK 10/19/2018 09:46 AM INDEX NO. 652024/2017 NYSCEF DOC. NO. 85 RECEIVED NYSCEF: 10/19/2018 dl1ty tinly when he or she provi<lcs substantial assistance w the prinmry viDlator'" Wi. at 126 1internal quotation n1arks and citations o·n1ittcd]). Plaintiffs allege NYCRC acted in bad faith and breached its fiduciary duty to the Fund when it foiled to properly supervise the BMB tenovation, released funds to the Borrower. accepted the worthless Dcfickricy Guaranty, failed to obtain a completion guaranty. failed to communicate with its investors. and rejected multiple proposals from other developers to buy out the Loan. PlaintitlS also alleuc Olsen and Levinsohn aided and abetted in breachin}!, fiduciary dutv bv ~ . .. . . . . '-". ..>. .,! w' providing substantinl assistance to NYCRC as the managers of NYC RC. Defondants contend that the allegations about N YCRC' s conduct arc covered by its comractual duties as Fund manager. so ·N Y(~ll(_· had the authoritv.,,. to engage in that conduct~ and~ furthcrn1orc . these alleg_ations a.re ....... ...... -· contradicted bv the docun1cnta.rv evidence. ~ . ~ (Jiving plaintir!S the benefit of every reasonable inforcnce, plaintiffs have adequately pied a Ih:g.atio ns to support the breach of fiduciary duty and aiding and abetting breach of fiduciary clut y claims (second. third, fourth, sixth and seventh causes of action). Plaintiffs sufficiently alleged that NYCRC put its own interests in 1naking the Loan appear to be a good investment and the BMB renovation appear to be going smoothly so that NYCRC could solicit more investors for other projects ahead or plaintiffs and the Fund, and that Olsen and Levinsohn substantially asSisted NYCRC. As previously mentioned, the documentary evidcm:e is disputed and presents an issue of fact. However, plaintiffs have failed to plead the filth cause of action for breach or fiduciary duty against NYCRC because they have not suilicicntly alleged damages. The damages plaintiffs allege f(Jr that claim are direct! y to the Fund. not to plaintlffa. Therefore, defendants' motion to dismiss the breach of fiduciary duty and aiding and abetting breach of fiduciary duty claims (second and fourth through seventh causes of action) is granted only with respect to the breach of iiduciary cluty clain1 against. NYC~R(~ (litlh cause of action). Breach of Contract and TortiOus fodUecment of Breach of Contract Clainis 8-9 ~~-rhc elen1\:nts of·a bre-ach of cnntrt1ct clain1 -arc f()rn1alifnltlfit C<)nlroct bet \Veen the p.arties . pcrfonnnncc by lhc plaimifL the dcfondant's failun: to perform. and resulting damage·· (/'Jo11u . nbt111111 v 1V'<'H' }·ork Lb1ir., 71 Al)3d 80 .. 91 ..I l I_ lst f)cpl 200()1 H.t.lil 14 N'{3d 901 l2010J) . lhc illtcrprctation of an Urlmnbiguous <;Ontract is a (!U(;'Sliol1 {)(' lmv for thl' C(lUrl, and the provisicJns of tht..' t:ontract dclincaring the rights Df the purtics }Jrevail over the dtlegations set forth in the co1nplai11C·, (,-Irk lir:t~,1nl t>ark f ,.or/J. v J51:varu f>atk l?esl<.nttliorr- <.-~tn71. ., 2.85 /\l)J.d 14:1 . l 50 7 8 of 11 [*FILED: 8] NEW YORK COUNTY CLERK 10/19/2018 09:46 AM - - - - - - - - - - - - - - - - - - - - - - - ----------------INDEX NO. 652024/2017 NYSCEF DOC. NO. 85 RECEIVED NYSCEF: 10/19/2018 11 st J)~pl 20011 ). ~.;·rortious inlertcrencc \Vilh contract req_uires the ex istencc of a val id contract the plaintiff anti. a t.hird pa11y, dcfen(lant's kn<)vvlcdgc ·of tl1at cc>ntra<:t, dc1endant's bct\.vecn intentional procurctnent of· thl: third-party's brcacl1 of the contract without justification . actual breach ofthe contract . and dan1agcs resulting thercfro111~' (l~.t1111c1 llol£.iin. ~. (To. v ~~lnilh Barne.v Inc . ., 88 N '{2d 4 I 3~ 424 [ 1996]). Plaintiffs allege dcfcn(lants breached the OA by using invest<)rs' corttributitltis to pay its expenses. Section 5.2 l)fthe ()l\ states that fhe i.'(.~0111pany shall ... pay all expenses ... but [theyl shall {)nJy be payable fron1 "Distributable Cash realized· ll"t1n1 Interest lnc<n11c' . (Oflcring Men1. § 5.2). l)cfendants Ct)ntcnd that secti()n 5.4 of the ()1\ all<)\\!S thcn1 1(1 use the Fund"s n1oncy in this \.vay because thal section pr<)vid.cs ~ . (,f)tllpany 1:x_penscs fcanj be collected ag~1inst all revenue dcri ved hy the (~on1pany'" {it.I. § 5 .4 ). (iiven that n1oney paid b:y investors is not have alleged deleradants~ revenue~ plain ti fls fi1ilure to perlorn1 unticr the ()A. llO\\/evcr, plaintiffs have not alleged da111agcs re!;ulting fronl this breach. ·•·Jn cJain1s fbr brCttch of C{)rltracl., a pa.rlyts J'(.!:Ctrvery is ordinarily· lirnited ro gcn\;ral dnn1ugcs \'._'hich are the natural and prob~H..,le consequence nf the breath ....... (lJruf;f.r ll·uck !?e111c.tl \. ('0111111)~ .f<VitJe Ins. ('o. ._ 277 /\[l2d 125~ 125-----26 I lst JJcpt ?0001 Iinternal quotat it>n n1arks and citati<n1s t)lllittcd.J )... Plaintiffs have dan1a2es. ........ 11()1 sufTic1enl ly p1ed any such 'l'l1crcfor~M delcnda11ls.~ branches or the. n1otion to disn1iss. th\.~. breach . .· ' . - or contract and . tort1l)HS induccn1cnt o·f' breach ()('co.ntract c.lain1s are granted. Implied (~ovenant of (;••od ..~aith and F1tir ·ocaling((:Iaim 10) . ~In Nc\v \" ork, all C(l11tract_s itnply a C<lvenant of gd<ld faith (iJ1d fair dealing in the course of perlt)rn1ance~· (5 I 1 ff?_ 232ncl ()n11,1er.v (:or11. v ..Jenn~/er Reltlt_v (,'<J. ~ 98 N Y2(i I 44~ 153 l 2002f) . . ~·rhis covenant en1braces a .pledge that neither party shall do anything '~1 hich \Nill have the ef1ect of dcstrclying or irtjuring the right of the other -party to receive the fruits of the contract''! (ic/_ I internal qut)fation n1arks and citatic)ns ()t11iltcdl) . .l\ breach of the c<rvenant t)f g.oocl faith and 1~1ir dealing is a brerich <lf contract (lJosco1«1le <J1Jeratb1<t: v 1Vctutica ~1JJJ>arel, 298 At>2d 33(). 3J I [Is' l)epl 2002]). i.1.Ft)r a con1plainl to ·state a ·cause (Jf aclic}n al lcfgiI1g breach of an itnplied covenant of good faitl1 and lair dealing . the plain1ifrn1ust allege t~icts which tend (() sJ1ov." that the defendant sought to prevent pcrf{)rn1ancc of the contract or to will1hold its benefits lron1 the plaintiff' (.11 ventine Inv. A1~stt. v <. ctnallit1n l1111Jerial /Jank <?f-(.'01111nerce . . 265 A l)2d 513, 514 l2d Dept l 999f). 1 f)cfcndants' branch. of the n1l-.tion seeking to disrniss this clairti is granted because it is duplicative ol" the breach of contract clai111. Plaintiffs' only alle.gcd 111isrcprescntations supporting 9 of 11 [*FILED: 9] NEW YORK COUNTY CLERK 10/19/2018 09:46 AM INDEX NO. 652024/2017 NYSCEF DOC. NO. 85 RECEIVED NYSCEF: 10/19/2018 this clain1 arc the san1c as those supporl.ing the breach of cont:ra·ct clain1. '•'fhc: clain1 that defendants brc~1chcd the in11Jlicd cove11ant of good fi1ith and fitir dealing )rnay be I properly disn1issed as duplicative of the brcttth of contract claim t\vhenf bo:th clain1s arise fi~on1 the san1c facts"' (f,o(~l1n l1_dvisor.s. I.LC.~ v Patriltrc/1 />artner.,·. LL(.'. 63 i\[)3d 440~ 443 [ l st l)cpt 2009]). (;ross ~egligt. nce ((}lai.ms l l-12) ... l(ilr{)SS ncg.ligencc differs in kind, not only degree., fron1 clah11s <)fordinary negligence. It is conduct that evinces a reckless disregard fiJr. the rights of others or s1i-u1cks of intentio-nal \vrongdoing~~: ((,'olna(r;hi, lJ.•~.,.r.1. v .Jeivelers· J>rolection ~S'erv~\'., 81 N.Y2:d 821, 823,··-824 (1993] [internal quotation 1narks and citations on1ittedJ ). 'Ilic ·n1otion to disn1iss the gross negligence c.lailns is granted be.cause the cla.in1sarc also duplicative of t.hc breach of contract clain1. Plaintitls~ only alleged 1nisreprescntations supporting the gross: negligence: clain1s arc Lh:e san1e as those vvhich underlie the breac:h of <.:ontracl cla.in1 (.~onunerce.., (s<~e ()F/571~·u11d II. f.,L(,' v (.·c1nt1t.lian lnl/JeriallJank l~/· 82 AD3d 537~ 539 I l ~• J)cpt 2011 "I [holding that gross 11cgligencc clain1 \Vas properly disrnisscd as it \Vas duplicative of the breach of contract claimJ}~ Negligent I\'Iisrcpresentation (Claim 13) ·~1-\ ch1in1 fi1r negligent 1nisrepresentation rc,1uircs the plaintitr to den1onstrate ( 1) the existence ofa special or privily·--likc. relatitH1shi1Jin1posing a duty on the defendant to in1part correct inf(Jrn1ation to the plaintiff~ thG inforn1at.ion (.J...4. (J. .4cquisition '!'I (2) that the infiJrmation was incorrect.; and (3) rcason<:tble reliance on (~'orr>. v 1.51avit,YkJl"! 8 NY3d 144'! 148., 12007] Icitations (Hllittedl). J)cfendants ~ branch 0 f the t110tion lO diSn1tSS this taUSe ot· action ts granted~ as the c(ai1n is duplicative or the breach or c.ontract. clain1. ~'"l Plaintiffs] cause[] of .acti(lO for ... negligent n1isrcpresentation [is] not separate and apart tron1 its c.lai.111 fi1r breach <>f C<)ntract. ]'he clain1[] I.is) predicated upon prec.iscly the san1e purported wrongful conduct as is tl1e c.lain1 fhr breach of contract ~ :· .~ .. (_<)P S'olutio11.\·.J inc. v ("roivell & i\4oring~ LLl\ 72 Af)3d 6:22., (-)22 Tl st l}epl 201 O]). lTnjust •:nrichment ((~laims 14-15) ~~·rhe essential inquiry in any action for unjust enrichment ... is whether it is against equity and good conscience to pennit the defend.ant to retain w·hat is sought to be recovered. A plaintiff n1ust sho\~l that ( I ) the other party was enriched.; (2) atthal party;s expense .. and (3) th'lt it is against equity and good conscience to pcrn1ft [the c.1th~r party] to r·etain \Vhat ·1s sought tt) be recovered~~ (i\4lln£larin Tr£u1in.~ Ll<f v H1ilcien.\·tein., 16N'i'jd173, f82, [2:011.1 lintcrnal quotation n1arks anti citations on1ittedj). Plaintills~ unjust c1~richn1cnt clai1ns are ttlso duplicative of their breach of 9 10 of 11 [*FILED: 10] NEW YORK COUNTY CLERK 10/19/2018 09:46 AM INDEX NO. 652024/2017 NYSCEF DOC. NO. 85 RECEIVED NYSCEF: 10/19/2018 contract clain1s; therefore . these branches qf the rnotidn !Jlltnk 1?0111e, L.LJ>~ ~tre also granted (1\4i1rk JJruee Intl Inc. v 6f) i\L)3d 550~ 551 [lst ·Dept 20()9] fholding that the unjust cnrichtncnt c.lain1 vvas:properly dis1nissed as it \Vas duplicative of the. bi-each of ctl11lract clain1JJ. 1\ccounting and .\'i4_tlatit••• of Ll .. C Lalv §.1 l02 l. t.<-~ t~a\v § 1 l 02 stales that any member ((~laims n1ay_~ ~"suhject 16-17) to rcas<.1na:b·1c sta11dards as 111ay be· set forth in., or pursuant t(.1~ the operating agre-emcnt, inspect and copy '1t his or 11cr O\\tn expense'' (I .J~C~ l.,a\v § 1 l 02)_ docun1cnts . Plaintiffs allege that bctilrc comn1encing this action, they requested infbrn1ation~ and an accnunling regart.iing the Fund. I)cfendants argue lhat plaintiffs did not sutlicicnt.ly plead allegations l{)r an accou11ting or vit)lation of LL.,(~ Lavv *1102 because, under the()/\ . defendants \verc only obligated to ensure· that \•records shall be available upo.n ten ( 10) business days prior vvritten notice t<> th.e Manager for insi->ection'~ (Lender .AJlirn1ation . exhibit l) § 12. l ). Plaintills do not allege they fo.llo\ved the prescribed procedure for gaining ac<:css tn the documents~ but <lnly lhat defendants ha\/e n<lt provided the dt)Ct1n1cnts (Con1plaint. ,!.i1 314315). 'fhcse branches of the tnotion arc granted because plaintiffs have t11ilcd lo plead that the rcquircn1ents of the C)A for requesting the doctn11ents have been n1el. ·rhe court need n<>l reach any rcn1ainin:g e<lntcntit1ns. f:ON(:.LlJSlON Accordinglv, it is hcrehv . ~ ~ Ol{l)ERl(O that dcte.ndants" motion to distniss ·is ninth . tenth, eleventh~ tvvelfth; thirteenth, f(lurteenth, grant.~d in part'! and the fifteenth~- sixteenth . fifth~ eighth'! and seventeenth causes of action of the C{>n1plaint arc disrnisscd; and it is further OJ~Dl~REl>that defendants are directed to sctvean ans\>ver-t() the.con1p.Jaint \Vithin tvventy (20) days alter service of a C()l)Y :of this order with notice of entf)'. "fhis constitutes tl1c tiecision a11d order of the. coqrt., IO 11 of 11

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