FILED: NEW YORK COUNTY CLERK 05/08/ :37 PM INDEX NO /2016 NYSCEF DOC. NO. 33 RECEIVED NYSCEF: 05/08/2017

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X BOARD OF MANAGERS OF THE 650 SIXTH AVENUE CONDOMINIUM, Plaintiff, -against- Index No /2016 K-W 650 ASSOCIATES LLC, KUMKANG 650 MANAGER CORP., TAE-WOO KIM, KEUMKANG HOUSING CO., LTD., WESTPORT 650 COMPANY, LLC, KUMKANG HOUSING NY LLC, KLAUS KRETSCHMANN, WESTPORT 650 LLC, KEUN-HWAN BAE, KUMKANG HOUSING CO., LTD., LIVEIN INC., WESTPORT GROUP, INC., GOLDSTEIN ASSOCIATES CONSULTING ENGINEERS, PLLC, GACE CONSULTING ENGINEERS, D.P.C., IBEX CONSTRUCTION COMPANY, LLC, IBEX CONSTRUCTION SERVICES, INC., IBEX CONSTRUCTION U.S., LLC, IBEX CONSTRUCTION, LLC, IBEX CONTRACTING INCL, IBEX DEVELOPMENT & CONSTRUCTION CO., LLC, and IBEX DEVELOPMENT & CONSTRUCTION CORP., Defendants X MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS GOLDSTEIN ASSOCIATES CONSULTING ENGINEERS, PLLC AND GACE CONSULTING ENGINEERS, D.P.C. S MOTION TO DISMISS Milber Makris Plousadis & Seiden, LLP 3 Barker Avenue, 6 th Floor White Plains, NY Of counsel: Christopher A. Albanese Jeffrey J. Fox 1 of 13

2 PRELIMINARY STATEMENT Goldstein Associates Consulting Engineers, PLLC and GACE Consulting Engineers, D.P.C. (collectively, GACE ) respectfully submit this Memorandum of Law in support of their motion for an Order pursuant to CPLR R. 3211(a)(1), (a)(5) and (a)(7) dismissing the Complaint as against GACE based on documentary evidence, statute of limitations and failure to state a cause of action. This action arises out of allegedly defective connections between ceiling sheetrock and structural slabs in a building located at 650 Sixth Avenue in Manhattan (the Property ). GACE was retained by the developer/sponsorship entities including certain Defendants herein and a non-party to provide structural engineering services in connection with the conversion of the Property from an office building to a residential condominium. Although unrelated to the allegations in the Complaint, GACE was also retained by a non-party to provide structural engineering services in connection with the renovation of a roof in one of the penthouse apartments. Since all of GACE s work at the Property was completed more than three (3) years before Plaintiff commenced this action, Plaintiff s causes of action against GACE for breach of contract and professional malpractice are barred by the statute of limitations. Moreover, GACE never entered into a contract with Plaintiff, the Board of Managers of the 650 Sixth Avenue Condominium (the Board ). GACE s proposals to the developer/sponsorship entities made no mention of the Board. Accordingly, Plaintiff lacks standing to pursue its breach of contract claim against GACE. As for Plaintiff s allegations of professional malpractice, it is well-settled that one cannot bring an action for economic loss absent privity or the functional equivalent of privty. For these reasons, Plaintiff s two (2) causes of action against GACE should be dismissed. 2 2 of 13

3 STATEMENT OF FACTS Originally constructed in 1892, the Property is a historic, pre-war, landmarked building located in Chelsea. (Affirmation of Christopher Albanese, 1 Ex. B [Plaintiff s Complaint] at 38). The seven-story building contains 67 residential apartment units, and one commercial unit. Id. GACE was initially retained by non-party ELAD Properties and then Defendants K-W 650 Associates LLC and Kumkang Housing (collectively, Sponsor ) to provide structural engineering services in connection with the conversion of the Property from an office building to a residential condominium. (Affidavit of Alice Chan, 2 3, Ex. 1). According to the Complaint, the Property s ceiling slabs are comprised of terracotta blocks that are covered with an approximately 1¼-inch-thick layer of plaster and finished with a 5/8-inch-thick layer of sheetrock. (Albanese Aff., Ex. B at 45). The Complaint further alleges that while GACE s plans and specifications called for the sheetrock to be anchored through the plaster to the terracotta blocks using a 7 /8-inch metal furring channel, the plans and specifications were not followed. Id. at Specifically, no furring channels were used at all and the sheetrock was secured to the plaster by applying nails in a haphazard manner and using a joint compound as glue. Id. at 48. GACE issued its final invoice for the condominium conversion project on or about February 20, 2008 and performed no additional work thereafter. (Chan Aff., 5, Ex. 3). Sponsor issued its final check for the project on March 28, 2008 but did not pay the balance of the final invoice. Id. at 6, Ex. 4. After unsuccessful collection attempts, GACE wrote off the outstanding balance in March Id. at 6. 1 Hereinafter Albanese Aff. 2 Hereinafter Chan Aff. 3 3 of 13

4 Separately, GACE provided structural engineering services to the owner of Penthouse A at the Property in connection with a project to raise the roof of that apartment and provide a landscaped terrace with jacuzzi and pool. Id. at 4, Ex. 2. GACE s final invoice to the penthouse owner s architect, Perkins Eastman Architects, P.C. ( Perkins Eastman ) was dated August 11, Id. at 7, Ex. 5. Perkins Eastman issued payment for the Penthouse A work, and for several other unrelated GACE projects, via check dated July 20, Id. at 8, Ex. 6. There are no allegations in the Complaint regarding the Penthouse A work. Plaintiff alleges that on December 24, 2015, a portion of the ceiling sheetrock in one of the condominium units collapsed. (Albanese Aff., Ex. B at 2). There are no allegations of property damage or personal injury resulting from the collapse. Following the alleged incident, the Board surveyed the remainder of the Property and fortified the ceiling connections in 51 units that were identified in the survey as being at risk for collapse. Id. at 3. Plaintiff commenced this action by filing a Summons with Notice on May 5, (Albanese Aff., Ex. A). Following several Orders granting Plaintiff s applications for an extension of time to serve Defendants with the Summons with Notice, on March 17, 2017, Plaintiff filed a Complaint. ARGUMENT I. Standard of Review When reviewing a motion to dismiss based on CPLR R. 3211, the Court must accept the complaint s factual allegations as true, according to plaintiff the benefit of every possible favorable inference, and determining only whether the facts as alleged fit within any cognizable legal theory. Amsterdam Hosp. Group, LLC v. Marshall-Alan Assoc., Inc., 120 A.D.3d 431, 433 (1st Dep t 2014). When a motion is based on CPLR R. 3211(a)(1), [d]ismissal is warranted only if the documentary evidence submitted utterly refutes plaintiff s factual allegations and 4 4 of 13

5 conclusively establishes a defense to the asserted claims as a matter of law. Id. (citations omitted). When a motion is based on CPLR R. 3211(a)(5), a defendant bears the initial burden of establishing, prima facie, that the time in which to sue has expired. Lebedev v. Blavatnik, 144 A.D.3d 24, 28 (1st Dep t 2016). The burden then shifts to the plaintiff to raise an issue of fact as to whether the statute of limitations was tolled or was otherwise inapplicable, or whether it actually commenced the action within the applicable limitations period. Matteawan On Main, Inc. v. City of Beacon, 109 A.D.3d 590, 590 (2d Dep t 2013). A motion based on CPLR R. 3211(a)(7) may be used to dispose of an action in which the plaintiff has not stated a claim cognizable at law or in which the plaintiff identified a cognizable cause of action but failed to assert a material allegation necessary to support the cause of action. Basis Yield Alpha Fund (Master) v. Goldman Sachs Group, Inc., 115 A.D.3d 128, 134 (1st Dep t 2014). As to the latter, the Court of Appeals has made clear that a defendant can submit evidence in support of the motion attacking a well-pleaded cognizable claim. Id. (citing Rovello v. Orofino Realty Co., Inc., 40 N.Y.2d 633 (1976)). II. Plaintiff s Causes of Action are Barred by the Three-Year Statute of Limitations Established by CPLR 214(6) Plaintiff s two (2) causes of action against GACE for breach of contract and professional malpractice must be dismissed because Plaintiff commenced this action more than three (3) years after GACE completed its work at the Property. It is well-settled that a cause of action against a design professional, whether the claim is based upon breach of contract or malpractice, is to be brought within the three-year statute of limitations established by CPLR 214(6). Sendar Dev. Co., LLC v. CMA Design Studio P.C., 68 A.D.3d 500, 503 (1st Dep t 2009). The cause of action accrues upon termination of the professional relationship that is, when [the defendant] 5 5 of 13

6 completes its performance of significant (i.e., non-ministerial) duties under the parties contract. New York City School Const. Auth. v. Ennead Architects, LLP, 148 A.D.3d 618, 618 (1st Dep t 2017); It is undisputed that GACE is a design professional. (See Albanese Aff., Ex. B at 75, 81). Therefore, the three-year statute of limitations applies. 3 GACE issued its final invoice to Sponsor for the condominium conversion project on February 20, 2008 (Chan Aff. 4, Ex. 3) and received final payment on or about March 28, 2008 (Chan Aff., 5, Ex. 4). GACE issued its final invoice to Perkins Eastman for the Penthouse A project on August 11, 2009 (Chan Aff. 7, Ex. 5) and received final payment on or about July 20, 2010 (Chan Aff. 8, Ex. 6). Plaintiff commenced this action on May 5, 2016, more than eight (8) years after the completion of the condominium conversion project and almost seven (7) years after the completion of the penthouse project. Plaintiff will likely argue that discovery is necessary to determine the exact date on which GACE terminated the professional relationship. However, in ruling on the timeliness of Plaintiff s action, the Court need not concern itself with days or months. Based on the documentary evidence establishing when GACE finished all work at the Property, Plaintiff s action is many years too late. Accordingly, Plaintiff s causes of action for breach of contract and professional malpractice are time-barred and must be dismissed. III. Plaintiff s Breach of Contract Cause of Action Must Be Dismissed Because the Board is Neither a Successor of Sponsor Nor an Intended Third-Party Beneficiary of Sponsor s Contract with GACE Alternatively, were the Court to hold that Plaintiff s action against GACE is not timebarred, the cause of action for breach of contract should be dismissed for lack of standing. It is undisputed that Plaintiff is not a party to the contract between GACE and Sponsor. (Albanese 3 Plaintiff s allegation that the construction defects were latent (see Albanese Aff., Ex. B at 2) is inapposite. As there are no allegations that GACE engaged in engineering work after construction was completed, the continuing representation doctrine, which can toll the statute of limitations, does not apply. Cf. Ennead Architects, 148 A.D.3d of 13

7 Aff., Ex. B at 75). Plaintiff s arguments that it is the successor to Sponsor, or alternatively a third-party beneficiary to GACE s contract with Sponsor, are unavailing. There is no legal basis for the argument that the Board is a successor of the Sponsor. The Complaint alleges that Plaintiff is a successor-in-interest to the Sponsor under the Sponsor- Engineer Contract, and as such, acquired all of the Sponsor s contractual rights under the Sponsor-Engineer Contract. (Albanese Aff., Ex. B at 76). As an initial matter, none of GACE s proposals make any mention whatsoever of future unit owners or a board representing them. (Chan Aff., Exs. 1-2). Further, a successor-in-interest is someone who follows another in ownership or control of property. A successor in interest retains the same rights as the original owner, with no change in substance. Black s Law Dictionary (10th ed. 2014). According to the Complaint, the Condominium is an unincorporated association of Unit Owners and [t]he Board consists of the duly elected members of the Condominium s board of managers, and is charged with administering the affairs of the Condominium. (Albanese Aff., Ex. B at 5-6). Plaintiff alleges no facts to suggest a continuity of ownership or de facto merger. Cf., e.g., In re New York City Asbestos Litig., 15 A.D.3d 254, 256 (1st Dep t 2005). Plaintiff s counsel has lost the successor-in-interest argument in the past. See Bd. of Managers of One Grand Army Plaza v. Seventeen Dev. LLC, 40 Misc 3d 1237(A) (Sup Ct 2013) ( contrary to the plaintiff s suggestion, the allegation that the plaintiff s members are successors of the sponsor is insufficient to establish the requisite contractual privity ) (citing Sutton Apts. Corp. v. Bradhurst 100 Dev. LLC, 36 Misc.3d 1205(A) (Sup Ct. 2012) (dismissing unit owner breach of contract claim against architect despite argument that owner was successor of sponsor)). 7 7 of 13

8 Plaintiff s third-party beneficiary argument is belied by the plain language of GACE s proposals, which give no indication of an intention to benefit any third party. (Chan Aff., Exs. 1-2). As the Court of Appeals has stated: Generally it has been held that the ordinary construction contract i.e., one which does not expressly state that the intention of the contracting parties is to benefit a third party does not give third parties who contract with the promisee the right to enforce the latter s contract with another. Such third parties are generally considered mere incidental beneficiaries. Port Chester Elec. Const. Co. v Atlas, 40 N.Y.2d 652, 656 (1976). To maintain a cause of action for breach of contract as a third-party beneficiary, the plaintiff must establish: (1) the existence of a valid and binding contract between other parties, (2) that the contract was intended for its benefit, and (3) that the benefit to it is sufficiently immediate to indicate the assumption by the contracting parties of a duty to compensate it if the benefit is lost. Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 182 (2011) (citing Mendel v. Henry Phipps Plaza W., Inc., 6 NY.3d 783, 786 (2006). Although, GACE s proposals do not include a no third-party beneficiaries clause, there is no indication in the proposals that they are intended to benefit anyone besides GACE and Sponsor. Accordingly, it is appropriate for the Court to hold, as a matter of law, that Plaintiff is not an intended third-party beneficiary. See Alarmex Holdings, LLC v JP Morgan Chase Bank, N.A., 147 A.D.3d 451 (1st Dep t 2017) ( [plaintiff s] allegation that it was an intended beneficiary is conclusory. Its contention that the motion court should have permitted the matter to proceed to discovery for defendant to produce the agreement seeks nothing more than a fishing expedition. ); Perez v. Hunts Point I Assoc., Inc., 129 A.D.3d 498, 499 (1st Dep t 2015) ( Although the contract did not contain an explicit provision on the issue, the contract terms taken as a whole lead to the conclusion, as a matter of law, that plaintiff was not an intended third-party beneficiary of the contract. ); Sutton Apartments Corp. v. Bradhurst 100 Dev. LLC, 107 A.D.3d 646, 649 (1st Dep t 2013) ( Because the agreement 8 8 of 13

9 between the architect and the sponsor does not reflect an intent that proprietary leaseholders be beneficiaries of the agreement, the court properly dismissed the breach of contract claim against the architect. ) Since Plaintiff lacks standing to enforce GACE s contracts with Sponsor, the cause of action for breach of contract must be dismissed. IV. Plaintiff s Professional Malpractice Cause of Action Must be Dismissed Because Plaintiff Lacks Privity or the Functional Equivalent of Privity with GACE Plaintiff cannot recover in tort against GACE because GACE owed no duty to Plaintiff. It is black-letter law that [i]n order to prevail on a negligence claim, a plaintiff must demonstrate (1) a duty owed by the defendant to the plaintiff, (2) a breach thereof, and (3) injury proximately resulting therefrom. In the absence of a duty, as a matter of law, there can be no liability. Pasternack v. Lab. Corp. of Am. Holdings, 27 N.Y.3d 817, 825 (2016), rearg denied, 28 N.Y.3d 956 (2016) (citations omitted). Plaintiff fails to allege the first required element of negligence. The Complaint states that [GACE was] retained to perform engineering services in connection with the Building s construction and that GACE performed said services carelessly and negligently and contrary to accepted practices and standards of the engineering profession. (Albanese Aff., Ex. B at 81, 83). Critically, Plaintiff has failed to allege that GACE violated any legal duty independent of GACE s contractual duty to Sponsor. A viable tort claim against a professional requires that the underlying relationship between the parties be one of contract or the bond between them so close as to be the functional equivalent of contractual privity. Jacobs v. Kay, 50 A.D.3d 526, (1st Dep t 2008) (citing Ossining Union Free School Dist. v. Anderson LaRocca Anderson, 73 N.Y.2d 417, 419 (1989)). Since Plaintiff was not in privity of contract with GACE, it is Plaintiff s burden to 9 9 of 13

10 demonstrate the functional equivalent of privity. See Melnick v. Parlato, 296 A.D.2d 443 (2d Dep t 2002). In order to do so, Plaintiff must meet the following standard: (1) GACE was aware that its drawings and specifications were to be used for a particular purpose; (2) reliance by a known party in furtherance of that purpose; and (3) some conduct by GACE linking it to Plaintiff and evincing its understanding of Plaintiff s reliance. See Ossining, 73 N.Y.2d at 417 (citing Credit Alliance Corp. v. Andersen & Co., 65 N.Y.2d 536 (1985). The Complaint fails both the second and third prongs of the Ossining test, and either failure alone is fatal to Plaintiff s cause of action. The Complaint does not allege that Plaintiff, the condominium board, was known to GACE at the time it provided engineering services. Nor does it allege any conduct by GACE linking GACE to Plaintiff, as opposed to GACE s client, the Sponsor. In reference to the second prong, the Court of Appeals has held that a motion to dismiss should be granted if a plaintiff fails to allege that it was a member of a potential class, as opposed to a known party. Sykes v. RFD Third Ave. 1 Assoc., LLC, 15 N.Y.3d 370, 373 (2010). It is not enough to make general allegations that a board representing future purchasers of condominium units would rely on representations that the conversion of the building to a condominium would be accomplished in a good and workmanlike manner and free of material defects. Id. The Complaint fails the third prong because it is devoid of any allegations of direct contact or any communication between GACE and Plaintiff or any other conduct by GACE related to Plaintiff. See S. Wine & Spirits of Am., Inc. v. Impact Envtl. Eng g, PLLC, 104 A.D.3d 613, 614 (1st Dep t 2013); cf. Point O Woods Ass n v Those Underwriters at Lloyd s, 288 A.D.2d 78, 83 (1st Dep t 2001) (where filling out an application directed at plaintiff satisfied the third Ossining prong). Plaintiff cannot establish any linkage between GACE and the Board. GACE s proposals and invoices for engineering services in connection with the condominium conversion were of 13

11 directed to Sponsor. The Complaint alleges no contact between GACE and Plaintiff. It does not allege that Plaintiff was a known party to GACE at the time GACE performed its engineering services or any conduct by GACE evincing an understanding of Plaintiff s reliance. Accordingly, the cause of action for professional negligence must be dismissed. V. Plaintiff s Negligence Claim Against GACE Seeking Economic Loss Fails to State a Cause of Action In New York, recovery for economic loss arising from negligence is barred where, as here, there is no contractual relationship, or its functional equivalent, between the parties. See Ossining, 73 N.Y.2d at 424 ( [t]he long-standing rule is that recovery may be had for pecuniary loss arising from negligent representations where there is actual privity of contract between the parties or a relationship so close as to approach that of privity ); see also Residential Bd. of Managers of Zeckendorf Towers v. Union Sq.-14th St. Assoc., 190 A.D.2d 636 (1st Dep t 1993) ( plaintiff cannot recover solely for economic loss arising out of negligent construction in the absence of a contractual relationship ). The rule is also well-settled as it relates to architects and engineers. Key Intern. Mfg., Inc. v. Morse/Diesel, Inc., 142 A.D.2d 448, 453 (2d Dep t 1988). Plaintiff s alleged losses are economic. Plaintiff seeks to recover costs to replace ceiling sheetrock in one apartment and to fortify connections between sheetrock and ceiling slabs that were allegedly installed improperly in others. In particular, the Complaint states that the ceilings in the majority of the Building s units were insufficiently anchored to the structural ceiling slab and a portion of the sheetrock in one Unit collapsed, completely without warning. (Albanese Aff., Ex. 2, 2). Plaintiff further alleges that the Board took immediate action by surveying the remainder of the Building and fortifying the ceiling connection in 51 Units that were identified in the survey as being at risk for collapse. (Id. at 3) of 13

12 Since Plaintiff is seeking the benefit of a bargain for properly anchored sheetrock not property damage or personal injury the nature of the alleged losses are economic. See Trump Vil. Section 3, Inc. v. New York State Hous. Fin. Agency, 307 A.D.2d 891, 897 (1st Dep t 2003) ( it is clear that plaintiff is seeking the benefit of its contractual bargain, namely, the cost of completing the defective repairs to the building s terraces ) (citing Rothberg v. Reichelt, 270 A.D.2d at 762, 705 N.Y.S.2d 115 [plaintiff seeking recovery for a purely economic loss the cost of repairs and the difference in value between what defendants were contractually obligated to provide and what plaintiff actually received]); see also 17 Vista Fee Assoc. v. Teachers Ins. and Annuity Ass n of Am., 259 A.D.2d 75, 83 (1st Dep t 1999) ( a contracting party seeking only a benefit of the bargain recovery, viz., economic loss under the contract, may not sue in tort notwithstanding the use of familiar tort language in its pleadings ); Amin Realty, LLC v. K & R Construction Corp., 306 A.D.2d 230, 231 (2d Dep t 2003) (describing the removal, reinstallation, and repair of the first floor of a building as economic loss, and stating that the economic loss rule is applicable to economic losses to the product itself, as well as consequential damages resulting from the defect). Due to the lack of privity or the functional equivalent of privity between Plaintiff and GACE, Plaintiff is barred from recovering alleged economic losses through the malpractice claim against GACE. For these reasons, Plaintiff s fourth cause of action should be dismissed of 13

13 its entirety. CONCLUSION For the foregoing reasons, Plaintiff s Complaint should be dismissed as against GACE in Dated: White Plains, New York May 8, 2017 MILBER MAKRIS PLOUSADIS & SEIDEN, LLP By: Christopher A. Albanese Attorneys for Defendants Goldstein Associates Consulting Engineers, PLLC and GACE Consulting Engineers, D.P.C. 3 Barker Avenue, 6 th Floor White Plains, New York (914) of 13