FILED: NEW YORK COUNTY CLERK 02/06/ :50 PM INDEX NO /2016 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 02/06/2018

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK EAST OF HUDSON RAIL FREIGHT TASK FORCE, Index No /2016 Plaintiff, v. PORT AUTHORITY OF NEW YORK AND NEW JERSEY Defendant. PLAINTIFF'S RESPONSE TO THE DEFENDANT'S OPPOSITION TO AMENDING THE COMPLAINT John F. McHugh, an attorney duly admitter to practice before this Court affirms under penalty of perjury as follows: 1. I am attorney for plaintiff and as such am familiar with facts. 2. The key fact relating to this motion is that it is not a motion for summary judgment, nor is it a motion to amend to avoid or summary judgment or to assert a claim supported only parole evidence which was not provided, as in Baz Gag Baf v. Alcobi, 13 N.Y.S.3d 37 (1st Dept 2015). It is a motion to amend. It is supported an affirmation of counsel, who is fully familiar with support for 1 of 10

2 amendment as it was a document received in discovery. He is also familiar with facts in support of accounting as he took deposition of Ian Francis who disclosed that defendant could re-purpose plaintiff's funds. The e- mail giving rise to fraud claim is fully described in affirmation supporting amendment as is testimony giving rise to accounting claim. The resubmitted here as Exhibit C is also exhibit C to plaintiff's reply to pending motion to dismiss. Thus, an affirmation a person with knowledge does support this motion. 3. In this affirmation I refer to and resubmit Exhibits A, B and C all submitted in response to defendant's motion to dismiss, also pending. FUTILITY 4. The amendment does recite that he plaintiff complied with all statutory requirements to file an action against defendant. The defendant's arguments are fully before this Court on defendant's pending motion to dismiss and need not be re-argued here. On that motion plaintiff referred to date stamps placed on documents when received defendant proving when defendant received documents, thus proving compliance with statute. 5. The or motion before this Court is one to dismiss, filed in mid discovery, precluding depositions of Mr. Ward, Mr. Hoffer, Ms. Shabe or or witnesses who participated in this matter. At this stage all that is before Court 2 of 10

3 is question wher pleadings state any cause of action and that includes amended pleading proposed and that amendment is based upon something and an affirmation from someone with knowledge is generally sufficient. There is no requirement on eir a motion to dismiss or a pure motion to amend to present ultimate evidence in support of claim and it is submitted that in issue is before Court and speaks for itself. It alone is sufficient at this point. It is clear that chairman of plaintiff, at all times relevant hereto and reliance of plaintiff on defendant's commitments was based upon Plaintiff's chairman's discussions with two managing directors of defendant. Plaintiff's chairman reported to or members of Board of Plaintiff, resulting in plaintiff's continued operation in reliance on representations that Managing Directors of defendant would see to it that funding was made available. FRAUD 6. The motion to amend is simple. It is based upon Exhibit C to plaintiff's reply to motion to dismiss. That is an authored Mark Hoffer, executive of defendant charged with determining how to discharge defendant's assumed obligation. According to Exhibit B submitted in response to motion to dismiss Defendant agreed to take responsibility for "(t)he balance of $357,000 is scheduled to reimburse costs for work to be performed Pratt 3 of 10

4 Center and East of Hudson Task Force in support of our Cross Harbor public involvement effort". This is same fund identified in Exhibit A, Comptrollers Contract No. D "Sup.3". In Exhibit C Mr. Hoffer states that he has instructions from 15th floor, ( executive floor) to fund plaintiff. In that he instructs his staff to sabotage plaintiff. This action, on his part, rendered assurances given defendant's executives as to funding of plaintiff, misleading. 7. The material contents of this were recited in both affidavit in support of this motion and in Amended Complaint itself. 8. It was also clear that only material change in complaint was insertion of causes of action for fraud and accounting as well as correction of dates based upon date stamps, fully discussed in reply to motion to dismiss. 9. To justify amendment, only new causes of action need be supported at this time and only to extent of stating that cause of action with particularity. Affidavits of non-party witnesses are not available as all such witnesses must be subpoenaed, which can not happen with a motion to dismiss pending. Indeed, motion to dismiss was filed as soon as Mr. Hoffer and Ms. Shabe had been subpoenaed, preventing ir testimony. A party can not block access to evidence and m move based upon its absence. 4 of 10

5 ISSSES OF FACT CAN ONLY BE DETERMINED AFTER FULL DISCOVERY 10. Plaintiff is entitled to discovery with regard to all aspects of this claim and had been perusing that discovery diligently until motion to dismiss was filed. As shown a quote at pages 7-8 of plaintiffs memorandum in opposition to motion to dismiss, Richard Friedman senior advisor to defendant's Managing Director, stated that he had been directed to use EIS funds to fund plaintiff. The only EIS funds allocated to that purpose are funds identified in Sub. 3. The defendant's motion to dismiss was filed after that revelation was made in Mr. Friedman's deposition but before noticed depositions of Mr. Hoffer and Ms. Shabe could be taken. 11. The balance of defendant' opposition relates to existing motion to dismiss and is not relevant here. The amended complaint does not change breach of fiduciary duty claim. 12. Defendant argues that re is no breach of fiduciary duty where, as here, it did not receive funds in issue but merely authority to oversee plaintiff's activity, pay its bills and be reimbursed from funds authorized Congress. The Comptrollers contract, Supra, makes it clear that funds in issue were allocated to Task Force and to pay specific obligations of Task Force. To obtain that funding, however, Task Force needed a local sponsor which 5 of 10

6 could pay Task Forces bills and n obtain reimbursement from Federal Government, in this case, from FHA. Exhibit B to that reply is an from Ms. Laura Shabe to John Formosa, official at FHA overseeing Cross- Harbor project, seeking approval of Executive Director, Chris Ward's, agreement to undertake that function. The fact that defendant, once in control of se funds, could divert m to any or part of cross-harbor effort, was confirmed Ian Francis, of Department of Transportation at Exhibit A to Mr. Acosta's affidavit, pages However, all of issues raised Mr. Acosta on both motion to dismiss and on this motion relate to issues of fact resolutions of which are not relevant to eir motion. 15. For instance, objection raised Mr. Formosa of FHA to any funding of plaintiff, relied upon defendant here, was based on fact that as of date he actually made that comment, plaintiff had no sponsor due to City's suspension of its EIS for Cross-Harbor Tunnel, thus terminating sponsorship City's Economic Development Corp. Thus, at that time, plaintiff could not fulfill prerequisites for funding. However, Ex. B, evidencing Mr. Ward's agreement to sponsor plaintiff, solved that problem. Once Mr. Ward, as Executive Director of defendant agreed to take that 6 of 10

7 responsibility, a fiduciary relationship was formed. Such a relationship is defined under " new fiduciary principle":, a fiduciary relationship exists when re is (1) dependence or vulnerability one party on or, that (2) results in power being conferred on or itself effectively, (3) "cover" such that entrusting party is not able to protect or orwise, and (4) this entrustment has been solicited or accepted party on which fiduciary obligation is imposed. Promises Broken vs. Promises Betrayed: Metaphor, Analogy, and New Fiduciary Principle u. Ill. L. Rev. 897 cited with approval in Langford, v. Roman Catholic Diocese of Brooklyn, 177 Misc.2d N.Y.S.2d 436 (Sup. Kings 1998). 16. More recently Second Department has held that "... While courts generally look to parties' contractual agreement to discover nature of ir relationship, existence of a fiduciary relationship is not dependent solely upon an agreement or contractual relation (see EBC I, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d at 20, 799 N.Y.S.2d 170, 832 N.E.2d 26). Rar, actual relationship between parties determines existence of a fiduciary duty (see id.). Here, Supreme Court erred in concluding that amended complaint failed to state a cause of action alleging breach of fiduciary duty against Equity Risk. The amended complaint alleged existence of a special relationship which gave rise to a fiduciary duty on behalf of Equity breach of that duty. Accepting truth of Risk to plaintiffs and a plaintiffs' allegations, y advance a viable claim for breach of fiduciary duty against Equity Risk (see Birnbaum v. Birnbaum, 73 N.Y.2d 461, , 541 N.Y.S.2d 746, 539 JD5' N.E.2d 574; JT Queens Carwash, Inc. v. JDW & Assoc., Inc., 144 A.D.3d 750, , 45 N.Y.S.3d 100; *677 Freundlich v. Pacific Indemn. Co., â 137 A.D.3d 967, , 27 N.Y.S.3d 629; **298 Tzolis v. Wolff, 39 7 of 10

8 A.D.3d 138, 829 N.Y.S.2d 488, affd. 10 N.Y.3d 100, 855 N.Y.S.2d 6, 884 N.E.2d 1005; Salm v. Feldstein, 20 A.D.3d 469, 799 N.Y.S.2d 104) At bar plaintiff could not operate without sponsorship defendant as it could not access federal funding provided to it. RELIANCE 18. Defendant asserts that plaintiff asserts no damages caused reliance on defendant's misrepresentations. The amended complaint, states: 20. In reliance on broad legal and verbal commitment made Defendant, Task Force continued to operate and incurred liabilities in course of its operations which did not exceed sum of committed funding including Federal and Local shares. That constitutes needed allegation of damages. 19. It is also clear that Mr. Galligan's testimony, relied upon defendant again, establishes only that defendant was attempting to resolve this matter hiring him. Negotiations between Mr. Galligan and Mr. Hoffer or his staff are tainted Mr. Hoffer' stated intent to sabotage Task Force, and thus are of no moment. See Exhibit C. The Comptrollers contract, Exhibit A to plaintiff's opposition to motion to dismiss, sets forth conditions placed on 8 of 10

9 se funds Comptroller. They provide that sponsor uses se funds to pay for three years of Task Force activity on presentation of evidence that Task Force was engaged in specified activity. That is commitment being relied upon, not conditions Mr. Hoffer he sought to impose on Mr. Galligan in order to disable plaintiff 29. The allegation is that Authority, (15th FlOOr) had an agreement with plaintiffs Chairman which Mr. Hoffer sabotaged, rendering 15th floor's statements misleading. Neir Mr. Ward nor Mr. Foy have been deposed Mr. Formosa of FHA has not been deposed nor has Ms. Shabe, recipient of Ex. C nor Mr. Hoffer its author. For present purposes, Exhibit B, from Ms. Shabe to Mr. Formosa, containing a proposed agreement to be signed Mr. Ward, combined with Mr. Hoffers acknowledgement of receiving instructions to fund task force from 15th floor, Exhibit C, are sufficient evidence that such an agreement was made. Mr. Richard Friedman, Senior Advisor to Executive Director, i.e. Mr. Ward and n Mr. Foy, testified that he was engaged in finding ways to fund Task Force from EIS funds i.e. funds which include those here in issue. CONCLUSION 30. The proposed amended complaint relies upon Exhibit C which speaks for itself and which is in record as Exhibit C to plaintiff's response to 9 of 10

10 defendant's pending motion to dismiss. It establishes defendant's executives instructed Mr. Hoffer to fund Task Force while he directs his staff not to accomplish that goal despite wishes of executives of defendant. Ian Francis provides a motive to deceive as if plaintiff does not receive funds in issue, defendant could apply m to any or aspect of study it was n conducting. By reason of above plaintiff's motion to amend should be granted. Dated, New York, N.Y. /s/john F. McHugh February 5, Broadway, Suite 2320 New York, N.Y of 10