Summary
holding loss causation is not only mandatory element of fraud claim, but also must be pleaded with particularity to survive motion to dismiss
Summary of this case from Basis Pac–Rim Opportunity Fund v. TCW Asset Mgmt. Co.Opinion
2014-05-1
MOSAIC CARIBE, LTD., Plaintiff–Appellant, v. ALLSETTLED GROUP, INC., Defendant–Respondent.
Arent Fox LLP, New York (James M. Westerlind of counsel), for appellant. Cozen O'Connor, New York (Jill L. Mandell of counsel), for respondent.
Arent Fox LLP, New York (James M. Westerlind of counsel), for appellant. Cozen O'Connor, New York (Jill L. Mandell of counsel), for respondent.
TOM, J.P., FRIEDMAN, ANDRIAS, SAXE, DeGRASSE, JJ.
Order, Supreme Court, New York County (Eileen Bransten, J.), entered on or about July 29, 2013, which denied plaintiff Mosaic Caribe, Ltd.'s motion for leave to file an amended complaint, unanimously affirmed, with costs.
Contrary to plaintiff's assertions, the court applied the correct standard in reviewing its motion for leave to amend the complaint. The court correctly noted that if the proposed amendments are totally devoid of merit and legally insufficient, leave to amend should be denied ( Heller v. Louis Provenzano, Inc., 303 A.D.2d 20, 25, 756 N.Y.S.2d 26 [1st Dept.2003];see also MBIA Ins. Corp. v. Greystone & Co., Inc., 74 A.D.3d 499, 500, 901 N.Y.S.2d 522 [1st Dept.2010];Pier 59 Studios, L.P. v. Chelsea Piers, L.P., 40 A.D.3d 363, 366, 836 N.Y.S.2d 68 [1st Dept. 2007] ).
Regarding the fraud claim, the court correctly concluded that plaintiff failed to allege loss causation, namely, that the misrepresentation caused plaintiff to lose the deposit that it had paid to acquire the life insurance policy at issue ( Laub v. Faessel, 297 A.D.2d 28, 31, 745 N.Y.S.2d 534 [1st Dept.2002] ). Plaintiff alleged that it agreed to purchase the policy and pay the deposit based on the misrepresentation of proposed defendant Krasnerman, CEO of defendant AllSettled Group, Inc. (ASG), that one of his companies owned the policy; however, this merely shows that the alleged misrepresentation caused plaintiff to enter into the transaction ( id.). It does not show that the misrepresentation actually caused plaintiff to lose its deposit ( see Friedman v. Anderson, 23 A.D.3d 163, 164, 803 N.Y.S.2d 514 [1st Dept.2005] ). Among other things, plaintiff fails to allege that it ever paid the balance of the $3 million purchase price for the policy after paying the initial $350,000 deposit, or that ASG, as the purchasing agent, was contractually obligated to acquire the life insurance policy absent plaintiff's payment of the full price. Thus, there are no allegations establishing that the alleged misrepresentation, as opposed to plaintiff's failure to pay for the life insurance policy, caused plaintiff's loss.
Furthermore, plaintiff failed to sufficiently allege justifiable reliance on that misrepresentation. Plaintiff, who agreed to purchase the policy at issue at least a year after the alleged misrepresentation, should have sought verification of ownership of the policy before agreeing to purchase it for $3 million. Plaintiff cannot credibly claim that it had no available means of verification, as such information would have been available from defendant or the proposed defendants had plaintiff requested it ( Mountain Cr. Acquisition LLC v. Intrawest U.S. Holdings, Inc., 96 A.D.3d 633, 634, 947 N.Y.S.2d 470 [1st Dept.2012] );UST Private Equity Invs. Fund v. Salomon Smith Barney, 288 A.D.2d 87, 88, 733 N.Y.S.2d 385 [1st Dept.2001];see also HSH Nordbank AG v. UBS AG, 95 A.D.3d 185, 197–198 n. 9, 941 N.Y.S.2d 59 [1st Dept.2012] ).
In any case, the fraud claim was duplicative of the breach of contract claim. Among other things, apart from an unelaborated request for punitive damages in connection with the fraud claim, the proposed amended complaint seeks the same damages as the breach of contract claim, specifically, return of the deposit plaintiff paid pursuant to the contract ( see e.g. Manas v. VMS Assoc., LLC, 53 A.D.3d 451, 453–454, 863 N.Y.S.2d 4 [1st Dept. 2008];Krantz v. Chateau Stores of Canada, 256 A.D.2d 186, 187, 683 N.Y.S.2d 24 [1st Dept.1998] ).
The concerted action claim was also totally devoid of merit. As discussed above, Mosaic failed to allege that Krasnerman or ASG fraudulently induced Mosaic to transfer its deposit, and thus, that they acted tortiously or that either defendant committed a tortious act in pursuance of the agreement ( Rastelli v. Goodyear Tire & Rubber Co., 79 N.Y.2d 289, 295, 582 N.Y.S.2d 373, 591 N.E.2d 222 [1992] ). Furthermore, that AFG benefitted by receiving the deposit does not suffice to show that it had any understanding that any of the defendants would defraud Mosaic, or that it acted tortiously ( see National Westminster Bank v. Weksel, 124 A.D.2d 144, 147, 511 N.Y.S.2d 626 [1st Dept.1987],appeal denied70 N.Y.2d 604, 519 N.Y.S.2d 1027, 513 N.E.2d 1307 [1987] ).
The court properly concluded that there was no viable civil conspiracy, having concluded that there was no viable fraud claim that formed the overt act for the conspiracy.
The cause of action for breach of fiduciary duty was properly deemed duplicative of the breach of contract claim as it alleges the very same facts as the breach of contract claim ( Leather v. United States Trust Co. of N.Y., 279 A.D.2d 311, 312, 720 N.Y.S.2d 448 [1st Dept.2001];Perl v. Smith Barney, 230 A.D.2d 664, 666, 646 N.Y.S.2d 678 [1st Dept.1996],lv. denied89 N.Y.2d 803, 653 N.Y.S.2d 281, 675 N.E.2d 1234 [1996] ). Mosaic failed to allege that ASG had any duty to Mosaic apart from that set forth in the contract, and thus, that it had any independent fiduciary duty to acquire the life insurance policy at issue, or return Mosaic's deposit.
The claim for money had and received, a quasi contract claim, seeks return of Mosaic's deposit. The deposit was paid pursuant to the underlying contract. Absent a valid fraud claim calling into question the validity of the underlying contract, this claim may not be maintained ( see Clark–Fitzpatrick, Inc. v. Long Is. R.R. Co., 70 N.Y.2d 382, 389, 521 N.Y.S.2d 653, 516 N.E.2d 190 [1987];Goldstein v. CIBC World Mkts. Corp., 6 A.D.3d 295, 296, 776 N.Y.S.2d 12 [1st Dept.2004] ).
As the intentional tort claims are all devoid of merit, the court properly concluded that Mosaic failed to allege any conduct that was sufficiently egregious to warrant punitive damages arising from a breach of contract ( New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 316, 639 N.Y.S.2d 283, 662 N.E.2d 763 [1995];AXA Mediterranean Holding, S.P. v. ING Ins. Intl., B.V., 106 A.D.3d 457, 457–458, 965 N.Y.S.2d 89 [1st Dept.2013] ).
Finally, based on the above, the court correctly concluded that it lacked jurisdiction over proposed defendants Krasnerman and AFG, who are undisputedly non-domiciliaries. Jurisdiction does not lie over Krasnerman pursuant to New York's long arm statute because the complaint fails to sufficiently allege that he committed any tortious act, including making any fraudulent misrepresentation, in New York (CPLR 302[a][2] ). Absent a valid conspiracy claim, no personal jurisdiction exists over AFG or Krasnerman based on such a conspiracy ( see Lawati v. Montague Morgan Slade Ltd., 102 A.D.3d 427, 428, 961 N.Y.S.2d 5 [1st Dept.2013] ).