MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF NORMA LOREN'S MOTION TO DISMISS DEFENDANTS' COUNTERCLAIMS

Transcription

1 FILED: NEW YORK COUNTY CLERK 06/15/ :30 PM INDEX NO /2015 NYSCEF DOC. NO. 30 RECEIVED NYSCEF: 06/15/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK NORMA LOREN, -v- Plaintiff, JOSEPH E. SARACHEK and TRIAX CAPITAL ADVISORS, LLC, Index No /2015 Honorable Charles E. Ramos Motion Sequence 2 Defendants. MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF NORMA LOREN'S MOTION TO DISMISS DEFENDANTS' COUNTERCLAIMS MORVILLO ABRAMOWITZ GRAND IASON & ANELLO P.C. Benjamin S. Fischer Britton A. Kovachevich New York, NY (212) Attorneys for Plaintiff Norma Loren 1 of 11

2 TABLE OF CONTENTS PRELIMINARY STATEMENT... 1 STATEMENT OF FACTS... 1 PROCEDURAL HISTORY... 2 ARGUMENT... 3 POINT I: THE COURT SHOULD DISMISS DEFENDANTS' FRAUD COUNTERCLAIM... 3 POINT II: THE COURT SHOULD DISMISS DEFENDANTS' BREACH OF CONTRACT COUNTERCLAIM... 4 A. The Breach of Contract Counterclaim Fails to Properly Allege that Ms. Loren Breached Any Contract... 4 B..The Breach of Contract Counterclaim Does Not Properly Plead the Element of Damages... 5 POINT III: THE COURT SHOULD DISMISS THE UNJUST ENRICHMENT COUNTERCLAIM... 6 CONCLUSION of 11

3 TABLE OF AUTHORITIES Cases Pages Barker v. Time Warner Cable, Inc., 83 A.D.3d 750, 923 N.Y.S.2d 118 (2d Dept. 2011)... 5 Bramex Associates, Inc. v. CBI Agencies, Ltd., 149 A.D.2d 383, 540 N.Y.S.2d 243 (1st Dept. 1989)... 3 Callas v. Eisenberg, 192 A.D.2d 349, 595 N.Y.S.2d 775 (1st Dept. 1993)... 4 Caniglia v. Chicago Tribune-New York News Syndicate, Inc., 204 A.D.2d 233, 612 N.Y.S.2d 146 (1st Dept. 1994) Channel Master Corp. v. Aluminum Ltd. Sales, Inc., 4 N.Y.2d 403, 151 N.E.2d 833 (1958) Chrysler Capital Corp. v. Hilltop Egg Farms, Inc., 129 A.D.2d 927, 514 N.Y.S.2d 1002 (3d Dept. 1987)... 5 Desideri v. D.MF.R. Grp.(USA) Co., 230 A.D.2d 503, 660 N.Y.S.2d 714 (1st Dept. 1997)... 3 Eastman Kodak Co. v. Roopak Enterprises, Ltd., 202 A.D.2d 220, 608 N.Y.S.2d 445 (1st Dept. 1994) Gordon v. Dino De Laurenti is Corp., 141 A.D.2d 435, 529 N.Y.S.2d 777 (1st Dept. 1988)... 3, 5-6 Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 668 N.E.2d 1370 (1996)... 3 Mark Hampton, Inc. v. Bergreen, 173 A.D.2d 220, 570 N.Y.S.2d 799 (1st Dept. 1991)... 6 Miller v. Walters, 46 Misc. 3d 417, 997 N.Y.S.2d 237 (Sup. Ct., N.Y. Cnty. 2014)... 7 Philips Int'! Investments, LLC v. Pektor, 117 A.D.3d 1, 982 N.Y.S.2d 98 (1st Dept. 2014)... 7 Roberts v. Pollack, 92 A.D.2d 440, 461N.Y.S.2d272 (1st Dept. 1983) of 11

4 Woodhill Elec. v. Jeffrey Beamish, Inc., 73 A.D.3d 1421, 904 N.Y.S.2d 232 (3d Dept. 2010)... 5 Statutes Pages NY CPLR , 4 NY CPLR of 11

5 Plaintiff, Norma Loren, respectfully submits this memorandum of law in support of Plaintiff's Motion to Dismiss Defendants' Counterclaims. PRELIMINARY STATEMENT This case is a straightforward breach of contract case. Ms. Loren personally loaned $500,000 to Defendant Triax Capital Advisors, LLC ("Triax"), which was personally guaranteed by Defendant Joseph Sarachek. Defendants accepted $500,000 from Ms. Loren, and yet Defendants have not repaid her. None of this is in dispute. Recognizing the weakness of their defenses to Ms. Loren's straightforward claim, and in a last-ditch effort to try to avoid liability, Defendants have asserted counterclaims against Ms. Loren for fraud, breach of contract, and unjust enrichment. The Court should dismiss these bare-bones causes of action, however, because they fail to state a cause of action. The claims not only fail to state all the elements of a proper cause of action (including how Defendants could have been damaged by Ms. Loren providing them with $500,000), but also do not even articulate any factual basis for how Ms. Loren could have possibly engaged in any wrongful conduct. The Court should see Defendants' assertion of these unsupportable, indecipherable, and illogical claims as nothing more than a litigation tactic designed to pressure Ms. Loren to no longer pursue her facially valid and straightforward claims. For these reasons and the reasons set forth below, the Court should dismiss the Counterclaims pursuant to NY CPLR 321 l(a)(7). STATEMENT OF FACTS On February 3, 2010, Ms. Loren entered into an agreement (the "Agreement") with Defendant Sarachek and the company he managed, Tri ax. Complaint ("Compl."), dated March 31, 2015, at if~ 3 and 11-12, a copy of which is attached as Exhibit 1 to the Affirmation of Benjamin S. Fischer, dated June 15, 2016 ("Fischer Affirmation" or "Fischer Aff."). As set forth 1 5 of 11

6 in the Agreement, Ms. Loren agreed to loan $500,000 to Triax. Compl. if 13; Fischer Aff., Exh. 2. Sarachek personally guaranteed Triax's "repayment" of the loan, and signed the Agreement twice---0nce on behalf of Triax and once specifically in his capacity as personal guarantor. Compl. if 16; Fischer Aff., Exh. 2 at 2. Ms. Loren made the $500,000 payment and has performed all of her obligations under the Agreement. Defendants have not repaid the loan, notwithstanding the Agreement's provision that interest was due as of March 2010 and the principal loan of $500,000 was due and owing as early as November or December Compl Ms. Loren is seeking full repayment of the interest and principal, which as of April 2015 totaled $774,500. Compl. 1117, 20.. PROCEDURAL HISTORY On May 29, 2015, Defendants moved to dismiss on the following three grounds: (1) that Defendant Sarachek's personal guarantee was not enforceable; (2) that the Agreement was a mere "agreement to agree"; and (3) that Plaintiff had failed to satisfy conditions precedent to the enforcement of the Agreement. The Court denied Defendants' motion to dismiss in its entirety on March 22, See Fischer Aff On April 11, 2016, Defendants filed an Answer and asserted three Counterclaims: breach of contract, fraud, and unjust enrichment. See Fischer Aff., Exh. 3. These bare-bones Counterclaims do not detail how Ms. Loren engaged in any wrongdoing nor do they detail how the Defendants-who actually received $500,000 from Ms. Loren-were harmed (or could possibly have been harmed) by Ms. Loren's payment of this amount. 1 Under the Court's Individual Rule of Practice 5(i), Defendants were obligated to provide a transcript of the proceedings in which the Court denied Defendants' Motion to Dismiss. Despite numerous requests, Defendants have still not provided Ms. Loren with a transcript. Ms. Loren has now ordered a transcript and will request that the Court order Defendants to pay all costs associated with that expense. 2 6 of 11

7 ARGUMENT POINT I: THE COURT SHOULD DISMISS DEFENDANTS' FRAUD COUNTERCLAIM The Court should dismiss Defendants' fraud counterclaim not only because it fails to plead fraud with particularity as required by CPLR 3106(b ), but also because, as pleaded, the facts asserted by Defendants simply cannot establish a fraud claim. The elements of fraud include a knowing misrepresentation or omission of material fact made with the intent to cause deception or reliance, which causes justifiable reliance and injury. See Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421, 668 N.E.2d 1370 (1996); Channel Master Corp. v. Aluminum Ltd. Sales, Inc., 4 N.Y.2d 403, 407, 151N.E.2d833 (1958); Gordon v. Dino De Laurentiis Corp., 141 A.D.2d 435, 436, 529 N.Y.S.2d 777 (1st Dept. 1988). In order to survive a motion to dismiss, fraud must be pled with particularity. See CPLR 3106(b ); Bramex Associates, Inc. v. CBI Agencies, Ltd., 149 A.D.2d 383, 383, 540 N.Y.S.2d 243 (1st Dept. 1989) (dismissing counterclaims that were "not pleaded with sufficient factual detail" and "bereft of factual allegations which would give plaintiffs a fair opportunity to defend the claims."). A showing of particularity requires that "the circumstances surrounding the fraud be pleaded in detail." Bramex, 149 A.D.2d at 383; see Desideri v. D.MF.R. Grp. (USA) Co., 230 A.D.2d 503, 505, 660 N.Y.S.2d 714 (1st Dept. 1997) (dismissing counterclaims that were not stated in adequate detail when they only alleged that the plaintiff "intentionally misrepresented to [ counterclaimant] and its shareholders the value and business prospects of [a company]" and "convince[ed] [counterclaimant] to purchase [the company], knowing that [counterclaimant] would rely on his advice and consequently pay an unjustifiably high price"); Eastman Kodak Co. v. Roopak Enterprises, Ltd., 202 A.D.2d 220, 222, 608 N.Y.S.2d 445 (1st Dept. 1994) (fraud counterclaim properly dismissed for failure to plead with sufficient particularity where 3 7 of 11

8 counterclaimant "alleged neither the time nor the place of the purported misrepresentations nor [the identity of the person who] purportedly made them"); Callas v. Eisenberg, 192 A.D.2d 349, 350, 595 N.Y.S.2d 775 (1st Dept. 1993) (finding in a medical malpractice case that "conclusory allegations of 'fraudulent billing', 'misstatements concerning patient's condition post surgery' and 'indicating that surgery was necessary' do not satisfy the statutory pleading requirement"). Here, Defendants' fraud counterclaim asserts only general and non-particularized allegations. For example, the fraud claim only alleges that Ms. Loren made "false representations" to induce Defendants into a contract. Fischer Aff., Exh. 3 ifif However, Defendants fail to identify a single false representation made by Ms. Loren nor do they provide any detail regarding how they relied on any misrepresentation to their detriment. Moreover, and not surprisingly, the threadbare fraud claim contains no non-generalized allegations regarding how Defendants could possibly have been damaged. Defendants' allegations of fraud fall entirely short of the standard set forth in CPLR 3106(b), and accordingly, the Court should dismiss Defendants' fraud counterclaim. POINT II: THE COURT SHOULD DISMISS DEFENDANTS' BREACH OF CONTRACT COUNTERCLAIM A. The Breach of Contract Counterclaim Fails to Properly Allege that Ms. Loren Breached Any Contract Defendants' breach of contract counterclaim is facially defective. The breach of contract counterclaim allegations are as follows: "ifthere was a 'Note,' Plaintiff breached the terms of the alleged 'Note.'" Fischer Aff., Exh. 3 if 14. This allegation is plainly insufficient to sustain a breach of contract claim. Indeed, in order for a breach of contract claim to survive a motion to dismiss, the claim must provide notice as to how the alleged breaching party breached the contract. See Caniglia v. Chicago Tribune-New York News Syndicate, Inc., 204 A.D.2d 233, 4 8 of 11

9 234, 612 N.Y.S.2d 146 (1st Dept. 1994) (upholding dismissal of breach of contract claim that was "too indefinite, and therefore, unenforceable, for [claimant's] failure to allege, in nonconclusory language, as required, the essential terms of the parties' [contract]"); see also Barker v. Time Warner Cable, Inc., 83 A.D.3d 750, 751, 923 N.Y.S.2d 118 (2d Dept. 2011) ("In order to state a cause of action to recover damages for a breach of contract, the plaintiffs allegations must identify the provisions of the contract that were breached"); Woodhill Elec. v. Jeffrey Beamish, Inc., 73 A.D.3d 1421, 1422, 904 N.Y.S.2d 232 (3d Dept. 2010) ("the complaint must allege the provisions of the contract that were allegedly breached"); Chrysler Capital Corp. v. Hilltop Egg Farms, Inc., 129 A.D.2d 927, 929, 514 N.Y.S.2d 1002 (3d Dept. 1987) (dismissing breach of contract claim where "essential material facts," including a schedule of payments that were allegedly not made, were not stated). Here, the breach of contract counterclaim fails to provide the requisite notice. - Defendants' allegations do not even describe how Ms. Loren could have breached this contract. By actually paying $500,000 pursuant to the terms of the contract-a fact this Court validated in denying Defendants' motion to dismiss-ms. Loren fulfilled her only obligation under the contract. Indeed, Defendants could never sufficiently plead a breach of contract claim against Ms. Loren in a way that satisfies its pleading burden because Ms. Loren-unlike the Defendants-performed pursuant to the terms of the actual Agreement. B. The Breach of Contract Counterclaim Does Not Properly Plead the Element of Damages Defendants' breach of contract counterclaim also should be dismissed because it lacks any allegation that Ms. Loren's purported breach caused them specifiable damage. "In the absence of any allegations of fact showing damage, mere allegations of breach of contract are not sufficient to sustain a complaint, and the pleadings must set forth facts showing the damage upon 5 9 of 11

10 which the action is based." Gordon, 141 A.D.2d at 436. Thus, as the Defendants were the ones who received the proceeds provided for under the Agreement (and never paid that amount back), it is not surprising that Defendants' breach of contract counterclaim lacks any allegations detailing how they were injured because, simply put, Defendants suffered no damage. **** Having failed to allege how Ms. Loren has breached any agreement, or which agreement she might have breached, or even how a hypothetical breach could have damaged them, Defendants have failed to state a claim for breach of contract. See Roberts v. Pollack, 92 A.D.2d 440, 444, 461N.Y.S.2d272 (1st Dept. 1983) (despite favorable inferences afforded in assessing the sufficiency of a claim, "allegations consist_ing of bare legal conclusions, as well as factual claims either inherently incredible or flatly contradicted by documentary evidence are not entitled to such consideration."); accord Mark Hampton, Inc. v. Bergreen, 173 A.D.2d 220, 220, 570 N.Y.S.2d 799 (1st Dept. 1991). Accordingly, the Court should dismiss the breach of contract counterclaim. POINT III: THE COURT SHOULD DISMISS THE UNJUST ENRICHMENT COUNTERCLAIM Remarkably, Defendants assert an unjust enrichment claim even though (a) the counterclaim lacks a single cogent allegation about how Ms. Loren was enriched; and (b) Ms. Loren could not have been enriched since it was she-not the Defendants-who parted with money in connection with the transaction between her and the Defendants memorialized in the Agreement. Importantly, Defendants do not claim that the basis for Ms. Loren's purported unjust enrichment was a transaction other than the Agreement entered into between them. Under the terms of the Agreement, it is clear that Ms. Loren was not enriched and could not have been 6 10 of 11

11 enriched. Indeed, Defendants' unjust enrichment allegations just do not make sense, particularly in light of the terms of the Agreement. Defendants' unjust enrichment claim alleges that Ms. Loren was unjustly enriched because "Defendants had their payments diverted to the Plaintiff thereby enriching her." Fischer Aff., Exh. 3,-r 18. But Defendants altogether fail to identify any payments directed toward Ms. Loren that could have enriched her, or their basis for asserting that equity requires that those unidentified payments be returned to them. See Philips Int'! Investments, LLC v. Pektor, 117 A.D.3d 1, 4, 982 N.Y.S.2d 98 (1st Dept. 2014) (explaining that unjust enrichment claim requires claimant to plead "some relationship with the defendant sufficient to give rise to a finding that retention of the benefits are unjust." (citing Georgia Malone & Co. v. Rieder, 19 N.Y.3d 511, 519, 973 N.E.2d 743 (2012))); Miller v. Walters, 46 Misc. 3d 417, 426, 997 N.Y.S.2d 237 (Sup. Ct., N.Y. Cnty. 2014) (dismissing unjust enrichment claim where claimant had "not alleged that they undertook any actions for Defendants' benefit"). Accordingly, the unjust enrichment counterclaim is insufficient as a matter of law and should be dismissed. CONCLUSION For the reasons stated above, the Court should dismiss Defendants' Counterclaims in their entirety. Dated: June 15, 2016 B~cher Britton A. Kovachevich MORVILLO ABRAMOWITZ GRAND IASON & ANELLO P.C. 565 Fifth A venue New York, New York (212) (telephone) (212) (facsimile) Attorneys for Plaintiff Norma Loren 7 11 of 11