FILED: NEW YORK COUNTY CLERK 01/05/ :47 PM INDEX NO /2015

Transcription

1 FILED: NEW YORK COUNTY CLERK 01/05/ :47 PM INDEX NO /2015 e NYSCEF DOC. NO. 25 RECEIVED NYSCEF: 01/05/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X THE BOARD OF MANAGERS OF THE MODERN 23 CONDOMINIUM, Index No /2015 Plaintiff, Hon. Barry R. Ostrager -against- Motion Seq. No WEST 23, LLC, MARTIN HOLLANDER, ARTHUR ISRAEL and EREZ ITZHAKI, Defendants X MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS LORI ANKER NOTT LAURA DAVIDOV Of Counsel ROSENBERG & ESTIS, P.C. Attorneys for Defendants 733 Third Avenue New York, New York (212) RE \600649v6

2 TABLE OF CONTENTS PRELIMINARY STATEMENT...1 Page FACTUAL BACKGROUND...3 ARGUMENT...3 I. Legal Standard on a Motion to Dismiss...3 II. The First Cause of Action For Fraud Must be Dismissed in its Entirety The Martin Act Precludes Plaintiff s First Cause of Action For Fraud Plaintiff's Fraud Claim is Barred as Duplicative Plaintiff s Fraud Cause of Action is not Pled with the Requisite Particularity...10 III. The Second Cause of Action For Breach of Contract Must be Dismissed The Limited Warranty Precludes a Cause of Action for Breach of Contract Plaintiff Fails to State a Cause of Action for Breach of Contract against Principals of Sponsor Plaintiff s Piercing Allegations in the Complaint do Not Revive Plaintiffs Otherwise Inadequate Cause of Action...17 IV. Plaintiffls Third Cause of Action for Breach of Warranty Must be Dismissed Plaintiff is Precluded From Seeking Damages The Alleged Defects Are Precluded By the One Year Limitation Plaintiff Fails to State a Claim Against Principals of Sponsor...26 CONCLUSION...27 RE\803 I 1 \0001 \600649v6 -i-

3 TABLE OF AUTHORITIES Pa e s Cases Andejo Corp. v. South Street Seaport Limited Partnership, 40 A.D. 3d 407, 836 N.Y.S.2d 571 (1st Dept 2007) Ark Bryant Park Corp. v. Bryant Park Restoration Corp., 285 A.D.2d 143, 730 N.Y.S.2d 48 (1st Dept 2001)... 4 ~-3arneli &Cie SA v. Dutch B~~k Fund SPC_ 95 A.D.3d 736, 946 N.Y.S.2d 53 (1st Dept 2012) Berenger v. 261 West LLC, 93 A.D.3d 175, 940 N.Y.S.2d 4 (1st Dept 2012)... 7, 8 Bhandari v. Ismael LeWa Architects, P.C., 84 A.D.3d 607, 923 N.Y.S.2d 484 (1st Dept 2011)... 7 Biondi v. Beekman Hill House Apartment Corp., 257 A.D.2d 76, 692 N.Y.S.2d 304 (1st Dept 1999) aff'd 94 N.Y.2d 659, 709 N.Y.S.2d 861 (2000)... 3, 4 Board of Managers of 184 Thompson Street Condominium v. 184 Thompson Street Owner LLC, 2012 WL (Sup. Ct. NY Co., Apr. 2, 2012, Bransten, J.) aff d, 106 A.D.3d 542, 965 N.Y.S.2d 114 (1st Dept 2013)... 8, 9, 10, 16, 17 Board of Managers of Chelsea 19 Condominium v. Chelsea 19 Associates, et al., 73 A.D.3d 581, 905 N.Y.S.2d 8 (1st Dept 2010)... 9 CPC International Inc. v. McKesson Corporation, 70 N.Y.2d 268, 519 N.Y.S.2d 804 (1987)... 4 Eur_ycleia Partners, LP v. Seward &Kissel, LLP, 12 N.Y.3d 553, 883 N.Y.S.2d 147 (2009) Fumarelli v. Marsam Development, Inc., 238 A.D.2d 470, 657 N.Y.S.2d 61 (2d Dep't 1997), affd, 92 N.Y.2d 298, 680 N.Y.S.2d 440 (1998) Hudson v. Greenwich I Associates, 226 A.D.2d 119, 640 N.Y.S.2d 46 (1st Dept 1996), lv denied, 89 N.Y.2d 860, 653 N.Y.S.2d 282 (1996)... 9 Hwang v. Jackson Ave. Realty LLC, 2011 WL (Sup. Ct. Queens Co., Feb. 22, 2011, Kitzes J.) RE\80311 \0001 \600649v6-11-

4 Kci-usa Co. LLC v. W I OZ/515 Real Estate Lil»ited Partnershi~~, 12 N.Y.3d 236, 879 N.Y.S.2d 17 (2009)... 5, 6, 7, 8, 11 Kliebert v. McKoan, 228 A.D.2d 232, 643 N.Y.S.2d 114 (1st Dept 1996)... 4 Matias v. Mondo Properties LLC, 43 AD 3d 367, 841 N.Y.S.2d 279 (1st Dept. 2007) Mondone v. Lane, 106 A.D.3d 1062, 966 N.Y.S.2d 164 (2d Dep't 2013)... 1 Morone v. Morone, 50 N.Y.2d 481, 429 N.Y.S.2d 592 (1980)... ~' Moustakis v. Christie's Inc., 68 A.D.3d 637, 892 N.Y.S.2d 83 (1st Dept 2009)... 9 Orix Credit Alliance, Inc. v. R.E. Hable Co., 256 A.D.2d 114, 682 N.Y.S.2d 160 (1st Dept 1998) Pasquier v Warren Street Realty LLC,?015 WL (Sup. Ct. NY Co., Apr. 20, Rakower, J.) Pine Street Homeowners Association v. 20 Pine Street, LLC, 109 A.D.3d 733, 971 N.Y.S.2d 289 (1st Dept 2013)... 8, 12, 19, 20, 24 Polsky v. 145 Hudson St1-eet Associates, L.P.,?013 WL (Sup. Ct. NY Co., Nov. 22, 2013, Billings, J.)... 9 Port Chester Elec. Const. Co. v. Atlas, 40 N.Y.2d 652, 357 N.E.2d 983 (1976)... 19, 20 Sheridan Broadcasting Corporation v. Small, 19 A.D.3d 331, 798 N.Y.S.2d 45 (1st Dept 2005)... 18, 19 SOUIIC~ C t1211Cat10I1S II1C. V. Rack &Roll, Inc., 88 A.D.3d 523, 930 N.Y.S.2d 577 (1st Dept 2011)... 1 Sud v. Sud, 211 A.D.2d 423, 62l N.Y.S.2d 37 (lst Dept 1995)... 4 TNS Holdings, Inc. v. MKI Securities Corp., 92 N.Y.2d 335, 680 N.Y.S.2d 891 (1998)... 1 Statutes CPLR ~ 3016(b)... 1, CPLR ~ RE\80311 \0001 \600649v

5 CPLR 3211(a)(1)... 1 CPLR 3211(a)(7)... 1 General Business Law Article 23-A... 8 Martin Act... 2, 8 N.Y. Comp. Codes R. & Regs. tit. 13, RE\80311 \0001 \600649v6-1V-

6 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X THE BOARD OF MANAGERS OF THE MODERN 23 CONDOMINIUM, Index No /2015 -against- Plaintiff, WEST 23, LLC, MARTIN HOLLANDER, ARTHUR ISRAEL and EREZ ITZHAKI, Defendants X MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS Defendants West 23, LLC ("S~~onsor"), Martin Hollander- ("Hollander"), AI't~lUI' Israel ("Israel'') and Erez Itzhaki ('`Itzhaki")~ (collectively, "Defendants") by and through their attorneys, Rosenberg & Estis, P.C., respectfully submit this memorandum of law in support of their motion, pursuant to CPLR S~ 3211(a)(1), 3211(a)(7) and 3016(b), to dismiss the first, second and third causes of action in the complaint filed on May 1, 2015' (the"complaint'') PRELIMINARY STATEMENT Five years after- completion of construction and title had closed on every unit of the condominium building known as Modern 23 Condoininiuin, the Boa1-d of Managers of the Condominium (`Plaintiff' oi "Board") commenced this action against Sponsor and Principals of Sponsor alleging purported "defects" in the construction. For the reasons set forth below, the Complaint is baseless and fails to state a viable cause of action thereby mandating dismissal of this action. ~ Hollander, Israel and Itzhaki are hereinafter referred to collectively as "Principals of Sponsor". 2 The Complaint and Answer are annexed to the affirmation of Lori Anker Nott, dated January 5, 2016, ('`Nott Aff.") as Exhibits "A" and "B" respectively. RE\8031 l \0001 \600649v6

7 The first cause of action for fraud must be dismissed because: (i) it is precluded by the Martin Act; (ii) it is duplicative of the second cause of action for breach of contract and third cause of action for breach of express warranty; and (iii) Plaintiff failed to plead the alleged fraud with the requisite particularity pursuant to CPLR 3016(b). The second cause of action for breach of contract must be dismissed because Plaintiff s claims for alleged construction defects are subject to the limited warranty set forth in the Offering Plan and the Purchase Agreements. Moreover, the second cause of action must be dismissed against Principals of Sponsor on the additional grounds that Principals of Sponsor were not parties to the Purchase Agreements and therefore have no contractual liability. The fact that Principals of Sponsor signed a Sponsor Certification in connection with the Offering Plan does not change that result. Where, as here, principals of a sponsor execute a sponsor certification which is mandated by the Martin Act, they cannot be held personally liable for the acts of the Sponsor. Plaintiffs attempt to create personal liability under a "piercing" theory falls far short of the pleading requirements to state a claim against Principals of Sponsor. The third cause of action for breach of express warranty must be dismissed because the limited warranty set forth in the Offering Plan and Purchase Agreements expressly precludes a claim for money damages. Moreover, Plaintiff is in any event barred from asserting the claims in the Complaint because they relate to purported defects that were not reported to Sponsor within the one year time period set forth in the limited warranty. Finally, the third cause of action must be dismissed against Principals of Sponsor on the additional grounds that Principals of Sponsor were not parties to the Purchase Agreements and therefore have no contractual liability under the limited warranty. RE\8031 I \0001 \600649v6-2-

8 FACTUAL BACKGROUND On September 14, 2007 a condominium offering plan (the ``Offering Plan") was accepted for filing by the Attorney General's Office in connection with the Modern 23 Condominium (the "Condominium"). (A copy of the Offering Plan is annexed to the Nott Aff. as Exhibit "C".) The Condominium is comprised of 14 units (the "Units") and is located at West 23rd Street, New York, New York. On February 19, 2010 a temporary certificate of occupancy was issued for the Condominium (the "TCO"). (A copy of the TCO is annexed to the Nott Aff. as Exhibit "D".) On February 26, 2010 the Declaration of Condominium was duly recorded (the "Declaration"). (A copy of the Declaration is annexed to the Nott Aff. as Exhibit "E".) All of the Units were sold to the current owners ("Unit Owners") pursuant to written purchase agreements entered into between October 2009 and June 2010 (the "Purchase Agreements"). (Copies of the Purchase Agreements are annexed to the Nott Aff. collectively as Exhibit "F".) Title closed on the Units pursuant to the Purchase Agreements between March 2010 and February (Copies of the deeds are annexed to the Nott Aff. collectively as Exhibit "G".) On July 21, 2010 the Unit Owners held their first meeting and Sponsor relinquished control of the Condoininiutn to the Board. ARGUMENT I. Leal Standard on a Motion to Dismiss A cause of action must be dismissed where, as here, the facts as pleaded do not "fit within any cognizable legal theory" [Morone v. Morone, 50 N.Y.2d 481, 484, 429 N.Y.S.2d 592 (1980)] or where the documentary evidence conclusively establishes a defense to the asserted claims as a matter of law. Biondi v. Beekman Hill House Apartment Corp., 257 A.D.2d 76, 692 N.Y.S.2d 304 (1st Dept 1999), aff d 94 N.Y.2d 659, 709 N.Y.S.2d 861 (2000). RE\80311 \0001 \600649v6-3-

9 While generally when considering a motion to dismiss pursuant to CPLR 3211 the Court must liberally construe the complaint, accept the facts alleged therein as true, accord the plaintiff favorable inferences and determine whether the facts alleged fit within a cognizable legal theory -- where the factual allegations and legal conclusions drawn therefrom are inherently incredible or flatly contradicted by the documentary evidence, or where the allegations consist of bare legal conclusions, they are not to be presumed true or accorded every favorable inference. See, ems., Biondi v. Beekman Hill House Apartment Corp., supra; Ark Bryant Park Corp. v. Bryant Park Restoration Cori., 285 A.D.2d 143, 730 N.Y.S.2d 48 (1st Dept 2001); Kliebert v. McKoan, 228 A.D.2d 232, 643 N.Y.S.2d 114 (1st Dept 1996); Sud v. Sud, 211 A.D.2d 423, 621 N.Y.S.2d 37 (1st Dept 1995). II. The First Cause of Action For Fraud Must be Dismissed in its Entirety The first cause of action alleges fraud against Defendants. (Complaint ) The fraud claim fails as a matter of law because it is precluded by the Martin Act. Moreover, it must be dismissed because it is duplicative of Plaintiffs second cause of action for breach of contract and third cause of action for breach of express warranty. Finally, Plaintiff has in any event failed to plead its fraud cause of action with the requisite particularity mandated by CPLR 3016(b). 1. The Martin Act Precludes Plaintiff s First Cause of Action For Fraud Plaintiff's fraud cause of action is predicated upon a claim that the Offering Plan, which was incorporated by reference into the Purchase Agreements, contained omissions. (Complaint ) The law is well settled that a fraud claim predicated upon alleged omissions in an offering plan is no more than an indirect attempt to plead a private cause of action under New York's Martin Act which is impermissible as only the Attorney General has the ability to enforce Martin Act claims. CPC International Inc. v. McKesson Corporation, 70 N.Y.2d 268, 519 RE~80311 \0001 \600649v6-4-

10 N.Y.S.2d 804 (1987); Kerusa Co. LLC v. W l OZ/515 Real Estate Limited Partnership, 12 N.Y.3d 236, 879 N.Y.S.2d 17 (2009). It is clear from a most cursory review of the Complaint that Plaintiff's claims are predicated upon omissions from the Offering Plan and an impermissible attempt to bring a private claim under the Martin Act. The Complaint alleges: "In the Certification, Sponsor and its principals certified, under penalty of perjury, that nothing in the Offering Plan was untrue and that there had been no material omissions." (Emphasis supplied.) (Complaint 109.} ``However, Defendants did not independently inform Unit Owners of the findings in the WBMA Reports. This omission was material, as the Unit Owners would not have made their purchases in the manner in which they did had they known the extent of the construction defects at the Building as set forth in the WBMA Reports." (Emphasis supplied.) (Complaint 117.) ``Upon Defendants' misrepresentation of this material fact and omission of material facts, Unit Owners expended large sums of money to purchase Units, to their detriment. Plaintiff has been damaged as a direct result of Defendants' material misrepresentations and omissions..." (Emphasis supplied.) (Complaint 118.) "Moreover, Defendants' material misrepresentations and omissions have caused the March 16, 2015 collapse of the Building's chimney facade..." (Emphasis supplied.) (Complaint 119.) "As a result of Defendants" misrepresentations and omissions, Unit Owners have suffered substantial losses to the value of their residences..." (Emphasis supplied.) (Complaint 120.) The instant case is indistinguishable from Kerusa. Just as herein, Kerusa alleged false and fraudulent representations and material omissions by the sponsor and its principals relating to construction and design defects alleged to have been known but not disclosed. Kerusa also alleged the sponsor and its principals knew the statements and representations were false and omitted material when they were made and the defects were concealed to induce Kerusa to purchase the unit. Kerusa further alleged he believed the statements and representations were true and reasonably relied on them in deciding to purchase the unit. The allegedly undisclosed RE~80311 \0001 \600649v6-5-

11 and concealed defects included holes in the building's concrete structure, an ongoing water condition in the cellar and elevator pits, inadequately insulated pipes that froze and flooding which caused water damage. In concluding the complaint failed to state a cause of action for common-law fraud, as distinct from the Martin Act, the Court of Appeals in Kerusa explained: "Kerusa alleges in its proposed second amended complaint that the sponsor defendants did not disclose various construction and design defects in the offering plan amendments, and represented therein that there were no "material changes of facts or circumstances affecting the property or the offering" (see 13 NYCRR 20.5 [a] [2]) when, in fact, problems arising during construction alerted them to the existence of major defects, which they either ignored or inadequately remedied. But for the Martin Act and the Attorney General's implementing regulations, however, the sponsor defendants did not have to make the disclosures in the amendments. Thus, to accept Kerusa's pleading as valid would invite a backdoor private cause of action to enforce the Martin Act in contradiction to our holding in CPC Intl. that no private right to enforce that statute exists. It would, as amicus Real Estate Board of New York points out, '`expand the already detailed disclosure requirements of the Martin Act by forcing parties to disclose the normal kinds of problems [encountered] in the course of construction that are described in field reports, project meetings and change orders'' in order to avoid transforming every potential latent construction defect case into a claim for common-law fraud on account of alleged omissions in Martin Act disclosures. Similarly, Kerusa's claim of fraudulent concealment rests on the theory that the sponsor defendants actively concealed fraud by repeatedly representing in plan amendments that there were no material changes of facts or circumstances... Again, Kerusa relies on purported omissions from disclosures required by the Martin Act and the Attorney General's implementing regulations-- specifically, 13 NYCRR 20.5 (a) (2) --to make out its case...the proposed second amended complaint at most alleges only that the sponsor defendants tolerated shoddy construction; Kerusa does not contend, for example, that drywall was painted over or taped over to cover up or prevent discovery of water damage; Kerusa does not allege that walls or bricks were put up to hide or prevent it from finding leaking pipes or holes in the foundation. Nothing in the proposed second amended complaint supports active RE\80311 \0001 \600649v6-6-

12 concealment unrelated to alleged omissions from Martin Act disclosures." 12 N.Y.3d 236, (Internal citations omitted; emphasis supplied.) Similarly, in Berenger v. 261 West LLC, 93 A.D.3d 175, 940 N.Y.S.2d 4 (1st Dept 2012), a case against a condominium sponsor based upon the alleged failure to disclose the presence and operation of the cooling tower in the offering plan, the Appellate Division dismissed the fraud cause of action stating: "...There is no private right of action where the fraud and misrepresentation relies entirely on alleged omissions in filings required by the Martin Act. Kef~usa Co. LLC v. W10Z/SI S Real Estate Ltd. Pa~ tnerslzip, 12 N.Y.3d 236, 247, 879 N.Y.S.2d 17, 23, 906 N.E.2d 1049, 1055 (2009). The Martin Act is a disclosure statute designed to protect the public from fraud in the sale of real estate securities and the Attorney General enforces its provisions and implementing regulations. CPC Intl. v. McKesson Coj p., 70 N.Y.2d 268, , 519 N.Y.S.2d 804, 807, 514 N.E.2d 116, 119 (1987); Kef~usa Co. LLC, 12 N.Y.3d at 245, 879 N.Y.S.2d at 22, 906 N.E.2d However, a private action may be maintained where the claim alleges a basis for fraud that is distinct from the Martin Act. Assuj~ed Guar. (UK) Ltd. v. J.P. Morgan Inv. Mgt. Inc., 80 A.D.3d 293, 915 N.Y.S.2d 7 (1st Dept.2010). Here, as the defendants correctly assert, the gravamen of the plaintiffs' claims for common-law fraud and misrepresentation is predicated on alleged omissions in the offering plan as to the location and operation of the cooling tower. Because disclosures concerning the cooling tower are specifically required under the Martin Act (see 13 NYCRR 20.7), the plaintiffs' claims for fraud and misrepresentation against 261 West must be dismissed." Id at 184. (Emphasis supplied.) Here, as in Kerusa and Berenger, the gravamen of Plaintiff's claim for fraud is predicated upon purported omissions from the Offering Plan. There is no allegation of active concealment such as "walls or bricks [] put up to hide or prevent it from finding leaking pipes or holes in the foundation" [Kerusa, 12 N.Y.3d at ] or affirmative misrepresentation such as misstating the floor dimensions of units to prospective purchasers. Bhandari v. Ismael Leyva Architects, P.C., 84 A.D.3d 607, 607, 923 N.Y.S.2d 484 (1st Dept 2011). RE\803 I 1 \0001 \600649v6-7-

13 Furthermore, Plaintiff's reliance upon the representations made by Sponsor and Principals of Sponsor in the certification filed in connection with the Offering Plan (the'`sponsor Certification") which provided ``that nothing in the Offering Plan was untrue and that there had been no material omissions" cannot support a fraud claim. (Complaint 109.) The law is well settled that when the statements made in a sponsor certification are mandated by the Martin Act and plaintiff does not posit any basis of liability outside of that statute, the claim must be dismissed. Kerusa Co. LLC., supra; Berenger, supra; Board of Managers of 184 Thompson Street Condominium v. 184 Thompson Street Owner LLC, 2012 WL (Sup. Ct. NY Co., Apr. 2, 2012, Bransten, J.) aff'd, 106 A.D.3d 542, 965 N.Y.S.2d 114 (1st Dept 2013). Here, the language of the Sponsor Certification is identical to the language mandated by the Martin Act, itself in Article 23-A of the General Business Law. See, N.Y. Coinp. Codes R. & Regs. tit. 13, (A copy of the Sponsor Certification is annexed to the Nott Aff. as Exhibit "H"). For all of the foregoing reasons, the first cause of action is precluded by the Martin Act and must be dismissed. 2. Plaintiff s Fraud Claim is Barred as Duplicative Plaintiff s fraud claim must also be dismissed on the grounds that it is duplicative of the breach of contract and breach of express warranty causes of action. A cause of action seeking damages for fraud cannot be sustained when the only fraud charged relates to a breach of contract. A fraud claim must be dismissed unless it arises from representations that are collateral or extraneous to the parties' contract. Pine Street Homeowners Association v. 20 Pine Street, LLC, 109 A.D.3d 733, 971 N.Y.S.2d 289 (1st Dept 2013) (where owners of condominium units brought action alleging failure to construct condominium in accordance with offering plan and specifications resulting in construction defects, the fraud cause of action was properly dismissed RE\80311 \000 I \600649v6-8-

14 because plaintiffs failed to allege tortious conduct separate and distinct from their breach of contract claim); Board of Managers of Chelsea 19 Condominium v. Chelsea 19 Associates, et al., 73 A.D.3d 581, 905 N.Y.S.2d 8 (1st Dept 2010) (fraud claims are precluded as merely duplicative of contract claims where arose from same provisions said to have been breached and sought the same damages); Polsky v. 145 Hudson Street Associates, L.P., 2013 WL at *7(Sup. Ct. NY Co., Nov. 22, 2013, Billings, J.) ("Plaintiffs fraud claims duplicate their breach of contract claim... [because] the alleged misrepresentations directly pertain to... nonperformance provisions in the Purchase Agreement and Offering Plan, rather than to anything collateral to the agreement"). Here, as in the cases cited above, the fraud alleged is Defendants' purported failure to include infot-mation regarding purported construction defects in the Offering Plan, which was incorporated into the Unit Owners' respective Purchase Agreements. (Complaint ) The fraud alleged in the Complaint does not just rely upon, but is entirely dependent upon, the Offering Plan and the Purchase Agreements, i.e., the contract that incorporates its representations. See, also, Board of Managers of 184 Thompson Street Condominium v. 184 Thompson Street Owner LLC, supra; Moustakis v. Christie's Inc., 68 A.D.3d 637, 892 N.Y.S.2d 83 (1st Dept 2009). Further, Plaintiffs claim of fraud based on its allegation that Defendants ``did not intend to build or install... in a workmanlike manner... " is insufficient to support a separate cause of action for fraud. (Complaint 15.) It is well settled law that an allegation that a party never intended to perform its obligations merely states a claim for breach of contract, not fraud. See, e.~., Hudson v. Greenwich I Associates, 226 A.D.2d 119, 640 N.Y.S.2d 46 (1st Dept 1996), lv denied, 89 N.Y.2d 860, 653 N.Y.S.2d 282 (1996); Orix Credit Alliance, Inc. v. R.E. Hable Co., RE\80311 \0001 \600649v6-9-

15 256 A.D.2d 114, 682 N.Y.S.2d 160 (1st Dept 1998) (Appellate Court dismissed the fraud claim as duplicative of the breach of contract claim, explaining that "a viable claim for fraud concerning a contract must allege misrepresentations of present facts (rather than merely of future intent) that were collateral to the contract and which induced the allegedly defrauded party to enter into the contract... Allegations that a party entered into a contract without intent to perform do not state a cause of action for fraud") Accordingly, the fraud cause of action must be dismissed because it is duplicative of the second and third causes of action. 3. Plaintiff s Fraud Cause of Action is not Pled with the Requisite Particularity Plaintiffs fraud cause of action must also be dismissed because it is not pled with the requisite particularity. CPLR ~ 3016(b) provides in relevant part: "[w]here a cause of action or defense is based upon... fraud... the circumstances constituting the wrong shall be stated in detail." In practice, this means that "the complaint must allege the basic facts to establish the elements of the cause of action," and that the facts as alleged must permit a "reasonable inference of the alleged misconduct." Eurvcleia Partners, LP v. Seward &Kissel, LLP, 12 N.Y.3d 553, 559, 883 N.Y.S.2d 147 (2009); Board of Managers of 184 Thompson Street Condominium v. 184 Thompson Street Owner LLC, supra, (Other than conclusory allegations, the complaint fails to allege an intent to deceive and therefore does not satisfy the particularity requirement of CPLR 3016(b).) As discussed above, each paragraph of the first cause of action for fraud references, either directly or indirectly, the Purchase Agreements and/or the Offering Plan and Defendants' alleged failure to disclose information therein and therefore cannot state a cause of action for fraud. These allegations are also utterly devoid of any detail as to purported fraudulent conduct or intent to deceive as mandated by CPLR 3016(b). (Complaint ) RE\80311 \0001 \600649v6-10-

16 Likewise, Plaintiff s allegations regarding the marketing materials for the Condominium are completely devoid of specificity3 and cannot support a fraud claim. (Complaint ) In Kerusa Co. LLC v. W l OZ/515 Real Estate, L.P., 10 Misc.3d 929, 935, 810 N.Y.S.2d 861 (Sup. Ct., N.Y. Co. Dec. 6, 2005), the lower court disposed of the same issue before the case reached the Court of Appeals when it refused to allow a fraud claim to be asserted based upon allegedly false statements in brochures and advertisements where the element of falsity was not pleaded with sufficient particularity stating: ``With respect to allegedly false statements in brochures and advertisements, Kerusa fails to plead the element of falsity with particularity... Soiree of these statements are sales puffery... and Kerusa does not set forth in what manner the remaining statements are false." As to Principals of Sponsor, in addition to the foregoing, the Complaint fails to allege any independent fraudulent acts committed by any of these defendants in their individual capacity no less details of such conduct. Moreover, the reference to their signatures on the Sponsor Certification cannot serve as grounds to state a claim because, as discussed above, the signatures were mandated by the Martin Act and cannot serve as an independent basis for liability. As such the fraud cause of action cannot lie against theirs. For all of the reasons stated above, the first cause of action for fraud should be dismissed. III. The Second Cause of Action For Breach of Contract Must be Dismissed The second cause of action must be dismissed because Plaintiff's claims for alleged construction defects are subject to the limited warranty set forth in the Offering Plan and in the Purchase Agreements (the "Limited Warranty"). Moreover, the second cause of action must be dismissed against Principals of Sponsor on the additional grounds that Principals of Sponsor were not parties to the Purchase Agreements and therefore have no contractual liability. The 3 In fact, paragraph 12 of the Complaint is pled upon "information and belief." RE\80311 \0001 \600649v6-11-

17 mere fact that they signed the Sponsor Certification in connection with the Offering Plan does not create personal liability because they were required to do so by the Martin Act. Finally, Plaintiff's attempt to create personal liability against Principals of Sponsor under a ``piercing" theory falls far short of the pleading requirements to state a claim. 1. The Limited Warranty Precludes a Cause of Action for Breach of Contract Where, as here, the Offering Plan and Purchase Agreement have a Limited Warranty, Plaintiff is precluded from maintaining a cause of action for breach of contract for construction defects. Fuinarelli v. Marsam Development, Inc., 238 A.D.2d 470, 657 N.Y.S.2d 61 (2d Dep't 1997), affd, 92 N.Y.2d 298, 680 N.Y.S.2d 440 (1998); 20 Pine Street Homeowners Association v. 20 Pine Street LLC, supra. provides: The Limited Warranty is set forth, i~~tei~ alia, at pages of the Offering Plan and Section 777-a of The New York General Business Law (Housing Merchant Implied Warranty Law) does not apply to this offering. Sponsor does, however, offer a Limited Warranty in lieu of and in place of all other warranties on the construction of the Unit and its components, both express and implied, including any warranties of merchantability or fitness for a particular purpose. The Limited Warranty provided for herein is extended only to the first purchaser of each Unit and shall survive closing of title but is not extended to any subsequent owner of the Unit. The Limited Warranty Begins on the date title to the Unit passes to the Unit Owner and extends the following matters for one (1) Year thereafter: (a) for such one (1) year period the home will be free from defects due to a failure to have been constructed in a skillful manner, (b) for such one (1) year period the plumbing, electrical, heating, cooling and ventilation systems of the home will RE\80311 \0001 \600649v6-12-

18 be free from defects due to a failure by the builder to have installed such systems in a skillful manner; and (c) for such one (1) year period the home will be free from material defects. Sponsor reserves the right to substitute materials, fixtures, appliances and equipment and make modifications of layout or design or Units, provided, however, that Sponsor may not: (1) substitute materials, fixtures, appliances or equipment of lesser quality or design; or (2) change the size, location of: buildings or Units other improvements or Common Elements if such changes affect the percentage of common interest or adversely affect the value of any Unit to which title has closed or for which a purchase agreement has been executed and is in effect, unless all affected Unit Owners and contract vendees consent in writing to such change. The issuance of a temporary or permanent Certificate of Occupancy shall be deemed presumptive evidence that the construction has been substantially completed in accordance with this Plan and the Plans and Specifications. However, notwithstanding the foregoing, Sponsor or its representatives will correct, repair or replace all defects in the construction, the installation or operation of any appliances, fixtures or equipment in the same, or will cause the same to be corrected, repaired or replaced, but only if such defects are due to improper workmanship or material substantially at variance with the Plans and Specifications, and Sponsor is notified by the Board of Managers and Unit Owner of such defect: (i) as to the Common Elements, within one year from the earlier of the issuance of a temporary Certificate of Occupancy, subject to such defect or the date of substantial completion of the portions) of the Common Elements which is claimed be defective; or (ii) as to a Unit, on or prior to the date of closing for such Unit, except that if any such defect in a Unit can be detected only by occupancy of the Unit, Sponsor will correct such defect if notified in writing by the Unit Owner within one year from the date of the closing of title to such Unit. ~ ~ ~ ~ Except as expressly set forth herein, Sponsor has no obligation to make any repairs of any kind. In no event shall Sponsor be liable RE\80311 \0001 \600649v6-13-

19 for special or consequential damages (whether based on ne~li~ence, breach of contract, warranty, or otherwise), it being intended that Sponsor's sole obligations under the Plan shall be to repair or, at Sponsor's option, replace (or cause to be replaced or repaired) an_y defective item of construction whether arising as a result of defects in material or improper workmanship or material substantially at variance with the Plans and Specifications), in accordance with the terms and conditions set forth in this section, provided, however, that nothing contained herein is intended to relieve Sponsor of liability for actual damages resulting from property damage or personal injury arising as a result of negligence of Sponsor or its authorized agents or employees in connection with the transactions contemplated by this Plan. * ~ * ~ The method of correcting any defect in construction will be selected by Sponsor in its sole discretion. The quality of construction as to any such correction will be comparable to local standards customary in the particular trade or trades involved and will be in accordance with the Plans and Specifications. Sponsor will be conclusively considered to have discharged any obligation that it may have with respect to any defects, whether patent or latent, if: (1) Sponsor is not notified of the existence of such defect, in the manner and within the appropriate time period specified above... (2) The Board of Managers and/or the Managing Agent and/or the Unit Owner fails to allow prompt access to the Unit in question by Sponsor or Sponsor's contractors; or (3) Sponsor has corrected, or caused the correction of, the defect in accordance with the practice of the industry, as determined by Sponsor's general contractor, architect, or engineer, in their sole judgment. * * ~ ~ NOTHING CONTAINED IN THIS SECTION WILL BE CONSTRUCTED SO AS TO RENDER SPONSOR LIABLE FOR CONSEQUENTIAL DMAGES (WHETHER BASED ON NEGLIGENCE, BREACH OF CONTRACT, BREACH OF WARRANTY, OR OTHERISE), IT BEING INTENDED THAT SPONSOR'S SOLE OBLIGATION UNDER THIS RE\80311 \0001 \600649v6-14-

20 SECTION WILL BE TO REPAIR OR REPLACE ANY DEFECTIVE ITME OR CONSTRUCTION UPON, AND SUBJECT TO, THE TERMS AND CONDTIONS SET FORTH ABOVE, SPONSOR WILL HAVE NO OBLIGATION TO CORRECT OR REPAIR ANY DEFECTIVE OR OTHER CONDITIONS IN THE BUILDIING (INCLUDING IN THE UNSOLD UNITS AND COMMON ELEMENTS) OR IN, OR WITH RESPECT TO, ITS APPURTENANCES. The Purchaser of a Unit shall inspect such Unit prior to the closing date and shall execute at such time an inspection statement acknowledging the Purchaser's acceptance of the Unit in good condition and in accordance with the terms of the Plan... Except for those warranties or guaranties provided to Sponsor by contractors, manufacturers or suppliers, which Sponsor will assign to the Board of Managers and/or Unit Owners, as necessary, Sponsor does not make any warranty of any kind, express or implied, and Sponsor hereby disclaims any and all warranties, including but not limited to, implied warranties or merchantability and fitness for a particular purpose, with respect to the construction of the Unsold Units and Common Elements, and with respect to the personal property located within the Unsold Units and the Common Elements, the Unit Owners assume all risk and liability from the use of this property." See, Exhibit "C" annexed to the Nott Aff. at pp ) (Emphasis supplied.) The Purchase Agreements likewise set forth the Limited Warranty. (See, Exhibit "F" annexed to the Nott Aff. at pp. 6-7.) The allegations of the Complaint fall squarely within the Limited Warranty. Each and every allegation relates to purported construction "defects". (Complaint ) Moreover, the Complaint sets forth the contractual provisions upon which it rests and specifically recites the Limited Warranty provisions from both the Offering Plan and the Purchase Agreement. (Complaint ) For all of the foregoing reasons, the second cause of action for breach of contract must be dismissed in its entirety. RE\803 I 1 \0001 \600649v6-15-

21 2. Plaintiff Fails to State a Cause of Action for Breach of Contract against Principals of Sponsor While the Court need not even get this far, the second cause of action for breach of contract must in any event be dismissed against Principals of Sponsor. The Complaint does not allege that anyone other than ``Sponsor'" was a party to the Purchase Agreements, had an obligation under the Purchase Agreements or purportedly breached the Purchase Agreements. (Complaint 122, 126 and 128.) Moreover, the documentary evidence confines that Principals of Sponsor were not parties to the Purchase Agreements. The Purchase Agreements were signed by Sponsor only and not by any Principals of Sponsor in their individual capacity. (See, Purchase Agreements annexed to the Nott Aff. as Ex. "F".) As such, the Complaint fails to state a cause of action for breach of contract against Principals of Sponsor. Board of Managers of 184 Thompson Street Condominium v. 184 Thompson Street Owner LLC, supra. Moreover, New York's Limited Liability Code provides in Section 609 that members and managers of a limited liability company are not liable for any liabilities of the limited liability company, whether arising in tort, contract or otherwise, solely by reason of being members or managers thereof. Matias v. Mondo Properties LLC, 43 AD 3d 367, 841 N.Y.S.2d 279 (lst Dept. 2007). Finally, the allegation in the Complaint that Principals of Sponsor signed the Sponsor Certification which was incorporated by reference into the Purchase Agreements does not save Plaintiffs second cause of action for breach of contract against Principals of Sponsor. (Complaint ) As discussed above in connection with the cause of action for fraud, Principals of Sponsor cannot be held personally liable for the contractual obligations of Sponsor based upon their execution of the Sponsor Certification because Principals of Sponsor were RE\80311 \0001 \600649v6-16-

22 required to sign the Sponsor Certification pursuant to the Martin Act. Board of Managers of 184 Thompson Street Condominium v. 184 Thompson Street Owner LLC, supra. In affirming the dismissal of claims against the principals of a sponsor in Board of Managers of 184 Thompson Street Condo., supra, the Appellate Division, First Department stated: "The motion court correctly determined that the Non-Sponsors may not be held individually liable for any of plaintiffs claims premised solely on alleged violations of the offering plan and certification (see Bej engej v. 261 W. LLC, 93 AD3d 175, 184 [ 1st Dept 2012]). The statements made by defendants in the certification and the plan were mandated by the Martin Act (see Kerusa Co. LLC v. W10Z/S1 S Real Estate Ltd. Partnership, 12 NY2d 236, 246 [2009])..." Id at 544. See also, Pasquier v Warren Street Realty LLC, 2015 WL (Sup. Ct. NY Co., Apr. 20, Rakower, J.) (Individual members of Sponsor that signed certification are not liable for breach of contract claims). For the foregoing reasons, the second cause of action for breach of contract fails as a matter of law against Principals of Sponsor. 3. Plaintiff s Piercing Allegations in the Complaint do Not Revive Plaintiff s Otherwise Inadequate Cause of Action Again, while the Court need not reach this issue as Plaintiff is precluded from maintaining a claim for breach of contract, Plaintiffs attempt to create personal liability for Principals of Sponsor under the Purchase Agreements by asserting a "piercing" theory of liability falls far short of the pleading requirements to support a claim. (Complaint ) To state a claim for "piercing" a party must allege that (i) the owners [Principals of Sponsor] exercised complete domination of the corporation [Sponsor] in respect to the transaction attacked; and (ii) that such domination was the instrument of fraud or otherwise resulting in wrongful or inequitable consequences. Evidence of domination alone does not RE\80311 \000 I \600649v6-17-

23 suffice without an additional showing that it led to inequity, fraud or malfeasance. TNS Holdings, Inc. v. MKI Securities Corp., 92 N.Y.2d 335, 339, 680 N.Y.S.2d 891 (1998). The law is well settled that bare and conclusory allegations that owners acted as the alter ego of an entity cannot support a claim for breach of contract against the individuals. Sound Communications Inc. v. Rack &Roll, Inc., 88 A.D.3d 523, 524, 930 N.Y.S.2d 577 (1st Dept 2011) (Appellate Division reversed lower court and dismissed the ``piercing" claim against the individuals holding "[t]he complaint merely alleges that [the entity] functioned as the moving defendants' alter ego. It is not sufficiently alleged that [the entity's] status as a limited liability company was used to commit a fraud against plaintiff'.) See also, Andejo Corp. v. South Street Seaport Limited Partnership, 40 A.D. 3d 407, 836 N.Y.S.2d 571 (1st Dept 2007) (The lower court properly declined to allow piercing claims to continue where complaint failed to allege particularized facts); Mondone v. Lane, 106 A.D.3d 1062, 1064, 966 N.Y.S.2d 164 (2d Dep't 2013) ("[T]he complaint is devoid of any allegations sufficient to pierce the corporate veil... to reach [the principal] in his individual capacity"); Hwang v. Jackson Ave. Realty, LLC, 2011 WL (Sup. Ct. Queens Co., Feb. 22, 2011, Kitzes J.) (Allegations in the complaint are insufficient to maintain a claim against the individuals based on their alleged role as "alter ego" of the sponsor.) The Complaint is replete with conclusory assertions that Principals of Sponsor acted as the "alter ego" of Sponsor. (Complaint ) There are no allegations that Principals of Sponsor exercised complete domination of Sponsor or that they did so as an instrument of fraud resulting in wrongful or inequitable consequences. Furthermore, there are no allegations that Principals of Sponsor used the Sponsor" s corporate form for the transaction of their personal business as distinct from the Sponsor's corporate business. (Complaint ) Sheridan R E\80311 \0001 \600649v6-18-

24 Broadcasting Corporation v. Small, 19 A.D.3d 331, 798 N.Y.S.2d 45 (1st Dept 2005); Port Chester Elec. Const. Co. v. Atlas, 40 N.Y.2d 652, 657, 357 N.E.2d 983 (1976). Moreover, a plaintiff must plead detailed allegations of fraud or corporate misconduct. Sheridan Broadcastin~rporation v. Small, su ra; Pine Street Homeowners Assn v. 20 Pine Street, LLC, supra. There are no detailed allegations set forth in the Complaint of any fraud or misconduct by Principals of Sponsor in connection with any purported domination of Sponsor. As discussed above, the Complaint is entirely devoid of the requisite specificity to state a cause of action for fraud. Plaintiff therefore fails to state a claim against Principals of Sponsor based upon a "piercing" argument. See, also, Barneli &Cie SA v. Dutch Book Fund SPC, 95 A.D.3d 736, 946 N.Y.S.2d 53 (1st Dept 2012) (Causes of action in complaint seeking to hold principals personally liable on an alter ego theory dismissed where the plaintiff failed to adequately plead a fraud claim. In addition, the conclusory allegations in the complaint were insufficient to state a piercing claim.) In affirming the dismissal of a complaint for failure to adequately plead a "piercing" claim, the Court of Appeals in Sheridan Broadcasting Corporation v. Small, supra held: "In the instant situation, the motion court aptly determined that plaintiffs have not alleged, with the requisite "particularized statements detailing fraud or other corporate misconduct," facts that would warrant piercing the corporate veil (Slzeinberg v. 177 E. 77, 248 A.D.2d 176, 177, 670 N.Y.S.2d 19 [1998], Iv. dismissed in part &denied in paj t 92 N.Y.2d 844, 677 N.Y.S.2d 69, 699 N.E.2d 429 [ 1998] ), especially since "[a]n inference of abuse does not arise... where a corporation was formed for legal purposes or is engaged in legitimate business" (TNS Holdings, 92 N.Y.2d at , 680 N.Y.S.2d 891, 703 N.E.2d 749). Indeed, plaintiffs have not asserted facts that would establish that the individual defendant, *333 through his domination, ``abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against [plaintiffs] such that a court in equity will intervene" (Matter of Moj-ris, 82 N.Y.2d at 142, 603 N.Y.S.2d 807, 623 N.E.2d 1157). Thus, the motion court properly determined that RE\8031 I \0001 \600649v6-19-

25 plaintiffs' second through sixth causes of action were insufficiently pleaded..." Id. at 332. Similarly, in Pine Street Homeowners Assn v. 20 Pine Street, LLC, su ra, the Appellate Division, First Department, affirmed the dismissal of a complaint against the principals of a sponsor holding: ``The claims against Sponsor's principals were properly dismissed. Other than conclusory statement that Sponsor's principals dominated and controlled Sponsor and each other, plaintiffs failed to allege particularized facts to warrant piercing the corporate veil so as to allow the claims against the principals to continue... In addition, as noted above, the fraud claims were not adequately pled so as to provide a basis to hold the principals liable." Id. at 735. The Complaint utterly fails to set forth the requisite detailed allegations mandating dismissal of the claims against Principals of Sponsor. The few factual allegations set forth in the Complaint do not change that result. A review of Complaint reveals that the vast majority of Plaintiffs allegations relate to the purported commonality between one of the Principals of Sponsor -- Hollander -- and various entities other than Sponsor. (Complaint ) Even assuming the allegations to be true for purposes of this motion, these allegations are irrelevant to a piercing claim in connection with Sponsor. Moreover, as a matter of law allegations of commonality will not sustain a piercing claim. Mere affiliation is not sufficient to state a claim to pierce the corporate veil. See, Port Chester Elec. Const. Co. v. Atlas, supra. Not only are Plaintiffs allegations of commonality between Hollander and other entities insufficient to state a claim, but the documentary evidence conclusively establishes that the alleged commonality between Sponsor, Hollander and Marin was disclosed in the Offering As such, Plaintiff cannot rely upon these allegations to state a cause of action. For example, Plaintiff alleges the following: Marin is an entity affiliated with Sponsor, was hired by Sponsor RE~80311 \0001 \600649v6-20-

26 to manage the affairs of the Condominium and fielded many complaints by the Unit Owners. Further, Marin and Sponsor maintained the same business address. (Complaint ) The Offering Plan discloses every one of these facts. The cover page of the Offering Plan lists Sponsor's address as " West 23, LLC c/o Marin Management Corp. 114 East 39th Street, New York, New York " (Emphasis supplied.) (See, Exhibit "C" annexed to the Nott Aff.) The Offering Plan further provides as follows: "MANAGEMENT Manai~ng Agent for the Condominium The Management Agreement, dated September 28, 2006, appoints Marro Management Corp., 114 East 39th Street, New York, New York as Managing Agent to perform general services for the Condominium, including but not limited to the following: a) at the request of the Condominium, to cause to be hired, paid and supervised all personnel to operate and maintain the Building; b) to cause the Building to be repaired and maintained; c) to comply with all orders or requirements of federal, state, municipal and other authorities as applicable; d) to contract for necessary services for the Building; and e) generally to do things reasonably deemed necessary or desirable by the Condominium for the proper management of the Building..." IDENTITY OF PARTIES Sponsor Sponsor, West 23, LLC, is a New York limited liability company formed on July 23, Its principals are Martin Hollander, whose office is c/o Marin Management Coro East 39th Street, New York, New York RE\803 I 1 \0001 \600649v6-21-

27 Martin Hollander is President of Marin Management Corp., a real estate management company founded in Managing Agent Marro Management Corp., having offices at 114 East 39th Street, New York, New York, will manage the Condominium. Properties currently or formerly managed by the managing agent, which has been in business since 1978, including West 82nd Street, 321 East 66th Street, 258 West 22nd Street, 357 East 68th Street, 412 East 73rd Street, 421 East 80th Street, and 419, 421, and 423 East 88th Street, all in Manhattan... Martin Hollander, Mana~in~ Member of Sponsor, is also an officer, director and shareholder of the mana~in~ agent." (Emphasis supplied.) (See, Exhibit "C" annexed to the Davidov Aff. at pp ) Plaintiff also alleges that employees of Marin ``assisted" in the business dealings of Sponsor. (Complaint ) Here too, not only are these allegations insufficient to support a "piercing" claim, but the documentary evidence precludes Plaintiff s reliance upon them because the Offering Plan expressly provides that Marin was hired b~ponsor for this very purpose, to wit, to manage the Condominium. (See, Exhibit "C" annexed to the Nott Aff. at pp ) Similarly, Plaintiffs allegations that Marin hired or used other persons or entities (besides its employees) to "assist" it in running the business of the Condominium cannot support a ``piercing'' claim since Marin was expressly vested with the authority to do so in the Offering Plan. (See, Exhibit "C" annexed to the Nott Aff. at pp ) Finally, while there are multiple references to Sienna Construction Ltd. and 114 East 39th St. Associates in the Complaint, nowhere is it alleged that either entity had any involvement with Sponsor, the Offering Plan or development of the Condominium. (Complaint ) These allegations are irrelevant and insufficient to support a claim to ``pierce" the Sponsor entity. Plaintiff fails to set forth allegations to state a claim that Principals of Sponsor should be held personally liable for the corporate obligations of Sponsor. RE~803 I 1 \0001 \600649v6-22-