Abbottv.Herzfeld Rubin

Appellate Division of the Supreme Court of New York, First DepartmentMar 29, 1994
202 A.D.2d 351 (N.Y. App. Div. 1994)
202 A.D.2d 351609 N.Y.S.2d 230

March 29, 1994

Appeal from the Supreme Court, New York County (Peter Tom, J.).


Plaintiffs' cause of action for a RICO conspiracy (see, 18 U.S.C. § 1962 [d]) is deficient in that it lacks specific allegations of a conscious agreement among the professional defendants and the promoter defendants to commit mail fraud (see, Adler v. Berg Harmon Assocs., 790 F. Supp. 1222, 1234). Furthermore, the complaint does not attribute specific misrepresentations or omissions in the offering memorandum to the attorney defendants (see, Friedman v. Arizona World Nurseries Ltd. Partnership, 730 F. Supp. 521, 531, affd 927 F.2d 594), and, as against both the attorney and accountant defendants, does not set forth a factual basis that would give rise to an inference of fraudulent intent (see, Wexner v. First Manhattan Co., 902 F.2d 169, 172).

The cause of action for common law fraud lacks "additional detail concerning the facts constituting the alleged fraud" (Credit Alliance Corp. v. Andersen Co., 65 N.Y.2d 536, 554, mot to amend remittitur granted 66 N.Y.2d 812); the cause of action for breach of fiduciary duty is ambiguous in alleging that the professional defendants knew that they were participating in a breach of the promoter defendants' fiduciary duty to plaintiffs (see, H20 Swimwear v. Lomas, 164 A.D.2d 804, 807); and the cause of action for negligent misrepresentation, insofar as it pertains to services provided by the professional defendants before plaintiffs' investment was closed, states no facts that would give rise to an inference that the professional defendants were even aware of these particular investors as opposed to a more amorphous class of potential investors (see, Westpac Banking Corp. v. Deschamps, 66 N.Y.2d 16).

However, to the extent that the cause of action for negligent misrepresentation is based on omissions by the defendant accounting firm after the investment was closed, the complaint sufficiently alleges that the firm knew or should have known that reliance by the limited partners was the very purpose of the work it was performing for the joint venture (see, Prudential Ins. Co. v. Dewey, Ballantine, Bushby, Palmer Wood, 80 N.Y.2d 377, 384-385), and the existence of circumstances that rendered or should have made the falsity of facts provided by the promoters "obvious" or at least shown the truth of those facts to be grossly doubtful (see, State St. Trust Co. v. Ernst, 278 N.Y. 104, 112; Joel v. Weber, 166 A.D.2d 130, 136-137).

Leave to replead was properly denied, plaintiffs not having provided proposed new pleadings supported by evidence as on a motion for summary judgment (CPLR 3211 [e]; see, Hickey v National League of Professional Baseball Clubs, 169 A.D.2d 685).

We have considered plaintiffs' remaining arguments and find them to be without merit.

Concur — Ellerin, J.P., Kupferman, Ross, Nardelli and Williams, JJ.