SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS ---------------------------------------------------------------------------X SAMUEL SCHWARTZ, -against- Plaintiff, RIVERSIDE ABSTRACT, LLC, RIVERSIDE 1031, LLC, and SHAUL GREENWALD, ESQ. Index No.: 500663/2017 NOTICE OF MOTION Defendants. ---------------------------------------------------------------------------X PLEASE TAKE NOTICE, that upon the annexed Memorandum of Law, the annexed Affirmation of Serena A. Skala, Esq., dated September 27, 2017 including all exhibits attached thereto, and upon all the pleadings and proceedings had herein, the undersigned will move this Court at the Supreme Court of the State of New York, County of Kings, at an I.A.S. Part at 360 Adams Street, Brooklyn, New York on the 17 th day of November, 2017 at 9:30 a.m. in the forenoon of that day, or as soon thereafter as counsel can be heard, for an Order dismissing the Amended Verified Complaint in its entirety (i) pursuant to CPLR 3211(a)(1) based upon documentary evidence; (ii) pursuant to CPLR 3211(a)(7) for failure to state a claim; and (iii) granting such other and further relief as this Court deems just and proper be entered. PLEASE TAKE FURTHER NOTICE that since more than twelve (12) days notice of motion has been given you, answering affidavits, if any, must be served upon the /// 435085.1 1 1 of 22
undersigned at least seven (7) days before the return date of this motion. Dated: New York, New York September 28, 2017 CLAUSEN MILLER, P.C. By: Carl M. Perri, Esq. Serena A. Skala, Esq. Attorneys for Defendant Riverside Abstract, LLC 28 Liberty Street, 39 th Floor New York, New York 10005 212.805.3900 Our File No.: 25-3001-00-2 TO: WELBY, BRADY & GREENBLATT, LLP Gregory J. Spaun, Esq. Attorneys for Plaintiff 11 Martine Avenue, 15 th Floor White Plains, New York 10606 (914) 428-2100 ROBINSON, BORG, LEINWAND, GREENE, GENOVESE & GLUCK, P.C. Elliot Hahn, Esq. Attorneys for Defendant Riverside 1031, LLC 875 Third Avenue, 9 th Floor New York, New York 10022 (212) 603-6300 RIVKIN RADLER, LLP David S. Wilck, Esq. Attorneys for Defendant Shaul Greenwald, 926 RXR Plaza Uniondale, New York 11556 (516) 357-3000 435085.1 2 2 of 22
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS ---------------------------------------------------------------------------X SAMUEL SCHWARTZ, -against- Plaintiff, RIVERSIDE ABSTRACT, LLC, RIVERSIDE 1031, LLC, SHAUL GREENWALD, ESQ., DAVID GORENBERG, ESQ., YOEL A. ZAGELBAUM, ESQ., CHAIM ZLOTOWITZ, ESQ. and AZI MINDICK, CPA, Index No.: 500663/2017 AFFIRMATION IN SUPPORT Defendants. ---------------------------------------------------------------------------X Serena A. Skala, an attorney duly licensed to practice law before the Courts of the State of New York, hereby affirms the following to be true under the penalties of perjury: 1. I am an associate of the law firm Clausen Miller P.C., attorneys for the Defendant Riverside Abstract, LLC. As such, I am fully familiar with the facts and circumstances of the above-captioned matter having in my possession a file maintained by my office which includes pleadings, discovery, and work product. 2. I respectfully submit this Affirmation, together with the exhibits annexed hereto, in support of Riverside Abstract, LLC s motion seeking an Order dismissing the Amended Verified Complaint in its entirety Complaint in its entirety (i) pursuant to CPLR 3211(a)(1) based upon documentary evidence; (ii) pursuant to CPLR 3211(a)(7) for failure to state a claim; and (iii) granting such other and further relief as this Court deems just and proper be entered. 3. A true and correct copy of plaintiff Samuel Schwartz s Second Amended Summons and Complaint dated August 16, 2017 is annexed hereto as Exhibit A. 435085.1 1 3 of 22
4. A true and correct copy of the Exchange Agreement entered between plaintiff Samuel Schwartz and co-defendant Riverside 1031, LLC is annexed hereto as Exhibit B. 5. A true and correct copy of the Amended Verified Complaint dated February 2, 2017 is annexed hereto as Exhibit C. 6. A true and correct copy of Justice Knipel s decision and order is annexed hereto as Exhibit D. 7. I attended oral argument on July 14, 2017 before the Honorable Lawrence Knipel on behalf of defendant Riverside Abstract, LLC. 8. During oral argument on July 14, 2017, Justice Knipel granted defendant Riverside Abstract, LLC s motion to dismiss on the basis that the Amended Verified Complaint did not contain any allegations pertaining to actions or omissions of Riverside Abstract, LLC. 9. Justice Knipel did not render an opinion with respect to whether or not the Exchange Agreement provided Riverside Abstract with a complete defense to plaintiff s claims. 10. Plaintiff s cause of action for breach of contract must be dismissed as against defendant Riverside Abstract, LLC (Riverside Abstract) pursuant to CPLR 3211(a)(1) because the governing document, the Exchange Agreement, is between plaintiff and Riverside 1031 only. As Riverside Abstract was not a party to the agreement, it cannot be liable for its subsequent breach. See Memorandum of Law in Support, Point I. 11. In addition, plaintiff s cause of action for negligence must be dismissed pursuant to CPLR 3211(a)(7) because the duties cited by plaintiff in support arise solely out of the Exchange Agreement and are thus duplicative of his first cause of action. See Memorandum of Law in Support, Point II. 435085.1 2 4 of 22
13. Plaintiff s third cause of action for prima facie tort must be dismissed pursuant to CPLR 3211(a)(7) because the allegations, if true, establish that he was acting in in his own personal interest at the time he made the problematic statement such that Riverside Abstract cannot be held liable for same. Further, the third cause of action should be dismissed because plaintiff failed to plead that Mr. Greenwald acted with disinterested malevolence when making the statements. See Memorandum of Law in Support, Point III. 14. Finally, plaintiff s fourth cause of action for fraud must be dismissed as procedurally improper based upon the doctrine of collateral estoppel. See Memorandum of Law in Support, Point IV. Dated: New York, New York September 28, 2017 CLAUSEN MILLER P.C. By: Serena A. Skala, Esq. Attorneys for Defendant RIVERSIDE ABSTRACT, LLC 435085.1 3 5 of 22
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS ---------------------------------------------------------------------------X SAMUEL SCHWARTZ, Plaintiff, Index No.: 500663/2017 -against- RIVERSIDE ABSTRACT, LLC, RIVERSIDE 1031, LLC and SHAUL GREENWALD, ESQ. Defendants. ---------------------------------------------------------------------------X DEFENDANT RIVERSIDE ABSTRACT, LLC S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION TO DISMISS PLAINTIFF SAMUEL SCHWARTZ S SECOND AMENDED VERIFIED COMPLAINT Carl M. Perri, Esq. Serena A. Skala, Esq. CLAUSEN MILLER, PC Attorneys for Defendant Riverside Abstract, LLC 28 Liberty Street, 39 th Floor New York, New York 10005 (212) 805-3900 File No.: 27-7571-00-6 435085.1 6 of 22
TABLE OF CONTENTS PRELIMINARY STATEMENT... 1 STATEMENT OF FACTS... 2 PROCEDURAL HISTORY... 3 ARGUMENT... 5 POINT I... 5 PLAINTIFF S FIRST CAUSE OF ACTION FOR BREACH OF CONTRACT SHOULD BE DISMISSED PURSUANT TO CPLR 3211(A)(1)... 5 POINT II... 6 PLAINTIFF S CAUSE OF ACTION FOR NEGLIGENCE IS DUPLICATIVE OF HIS BREACH OF CONTRACT CLAIM... 6 POINT III... 9 THERE IS NO VICARIOUS LIABILTIY FOR PLAINTIFF S CAUSE OF ACTION FOR PRIMA FACIE TORT... 9 CONCLUSION... 12 435085.1 i 7 of 22
TABLE OF AUTHORITIES Cases Adams v. New York City Transit Authority, 88 NY2d 116 (1996)... 9 Bouley v. Bouley, 19 A.D.3d 1049, 797 N.Y. S. 2d 221 (4th Dept. 2005)... 5 Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d 314 (1983)... 10 Cooke v. Drigant, 289 NY 313 (1942)... 10 Curiano v. Suozzi, 63 N.Y.2d 113 (1984)... 11 Dorce v. Gluck, 140 A.D.3d 1111 (2d Dep't 2016)... 10 Fluhr v. Goldscheider, 264 A.D.2d 570, 695 N.Y.S.2d 30 (1st Dep t 1999)... 8 Johnson v. Daily News, 34 NY2d 33 (1974)... 10 Joseph v. City of Buffalo, 83 NY2d 141 (1994)... 10 Mark Hampton, Inc. v. Bergreen, 173 A.D. 2d 220 (1st Dept. 1990)... 5 Rausman v. Baugh, 248 AD 2d 8 (2nd Dept. 1998)... 10 Roberts v. Pollack, 92 A.D.2d 440 (1st Dept. 1983)... 11 Rudovic v. Rudovic, 131 A.D.3d 1225 (2nd Dept. 2015)... 12 Sauter v. New York Tribune, 305 NY 442 (1953)... 9 Sims v. Bergamo, 3 NY2d 531 (1957)... 10 Smith v. Meridian Tech., Inc., 2011 NY Slip Op 5954 (2d Dept, 2011)... 11 Thompson v. Maimonides Medical Center, 86 AD2d 867 (2nd Dept. 1982)... 10 W.W.W. Associates v. Giancontieri, 77 N.Y. 2d 157 (1990)... 6 Wapnick v. Seven Park Avenue Corp., 240 A.D.2d 245. 658 N.Y.S.2d 604 (1st Dep t 1997)... 8 Statutory Authorities 26 U.S.C. 1031... 1, 2 N.Y. Civ. Prac. L. & R. 3211(a)(1)... 1, 5, 12 N.Y. Civ. Prac. L. & R. 3211(a)(7)... passim N.Y. Civ. Prac. L. & R. 3211(a)(7)... 3 435085.1 i 8 of 22
N.Y. Civ. Prac. L. & R. 3211(a)(1)... 2, 5 N.Y. Civ. Prac. L. & R. 3211(a)(7)... 2, 3, 2, 11 Rules and Regulations 26 CFR 1.1031(k)... 3 435085.1 ii 9 of 22
PRELIMINARY STATEMENT This litigation arises out of a series of real estate transactions undertaken pursuant to 26 U.S.C. 1031 (hereinafter the 1031 Exchange ) by the plaintiff Samuel Schwartz. By way of his second amended verified complaint, plaintiff alleges that on or about November 9, 2016, he entered into an Exchange Agreement with defendant Riverside 1031, LLC (Riverside 1031) whereby Riverside 1031 agreed to serve as qualified intermediary exchange in connection with the 1031 Exchange. A copy of plaintiff s Second Amended Verified Complaint is annexed to the Skala Affirmation as Exhibit A. Plaintiff alleges that the Exchange Agreement (and only the Exchange Agreement) governed the parties obligations and responsibilities while engaged in the 1031 Exchange. The Exchange Agreement itself is clear, on its face, that it is an agreement between Riverside 1031 and the plaintiff only. See Exhibit B to the Skala Affirmation. Plaintiff further alleges that he was unable to complete the 1031 Exchange because of a fraud perpetrated upon Plaintiff and Riverside 1031 by an unidentified hacker operating under the corporate name Goldendo, LLC. This unidentified hacker infiltrated non-party George Stavropoulos, Esq. s (who is curiously absent from this action) business email during his representation of Mr. Schwartz in connection with the 1031 Exchange, stealing documents and information. See Exhibit A to the Skala Affirmation at 17-110. Posing as the plaintiff, the unidentified hacker contacted Riverside 1031, perpetrating a fraud upon Riverside 1031 which resulted in the fraudulent transfer of $810,000.000 out of Riverside 1031, LLC s escrow account to the unidentified hacker. Id. at 63. Plaintiff alleges that as a result, he was unable to complete the 1031 Exchange and that he has lost all possibility of obtaining the tax benefits under 1031. See Exhibit A to the Skala Affirmation at 103. Plaintiff has asserted four causes of action against Defendant Riverside Abstract, LLC in his Second Amended Verified Complaint sounding in breach of contract, negligence, prima facie tort and fraud. Id. at 111-172. 1 10 of 22
As is set forth more fully below, plaintiff s cause of action for breach of contract must be dismissed as against defendant Riverside Abstract, LLC (Riverside Abstract) pursuant to CPLR 3211(a)(1) because the Exchange Agreement is between plaintiff and Riverside 1031 only. Since Riverside Abstract was not a party to the agreement, it cannot be liable for its subsequent breach. In addition, plaintiff s cause of action for negligence must be dismissed pursuant to CPLR 3211(a)(7) because the duties cited by plaintiff in support arise solely out of the Exchange Agreement and are thus duplicative of his first cause of action. Plaintiff s third cause of action for prima facie tort must be dismissed pursuant to CPLR 3211(a)(7) because the allegations, if true, establish that Mr. Greenwald was acting in in his own personal interest at the time he made the problematic statements such that Riverside Abstract cannot be held liable for same. Further, the third cause of action should be dismissed because plaintiff failed to plead that Mr. Greenwald acted with disinterested malevolence when making the statements. Finally, plaintiff s fourth cause of action for fraud must be dismissed as procedurally improper based upon the doctrine of collateral estoppel. STATEMENT OF FACTS By way of background, a 1031 exchange is a real estate transaction created by 26 U.S.C. 1031 that allows a taxpayer to defer recognition of capital gains tax from the sale of investment property by engaging in a like-kind exchange : a transaction in which the taxpayer uses the proceeds from the sale of an investment property ( relinquished property ) to subsequently purchase another property ( replacement property ) that is similar in nature in order to defer capital gains tax assessed against the sale of relinquished property. See 26 U.S.C. 1031, et seq. In order to engage in a Section 1031 exchange, the taxpayer retains a qualified intermediary (QI) (a title, created by statute, for a company that is engaged in the full-time business of facilitating 1031 tax exchanges). The qualified intermediary acquires the relinquished property from the 2 11 of 22
taxpayer, transfers the relinquished property to the buyer, holds the proceeds of the sale in escrow, acquires the replacement property from the seller and transfers the replacement property to the taxpayer. Id.; see also 26 CFR 1.1031(k)-1(g)(4)(iii)(b). These duties as well as the taxpayers duties and responsibilities are memorialized in an Exchange Agreement, the contents of which is prepared pursuant to the rules provided in the United States Internal Revenue Code. Id.; see also 26 CFR 1.1031(k)-1(g)(4)(i)-(vii). As is stated above, the allegations in this matter arise out of plaintiff s attempt to complete a 1031 Exchange in or about November, 2016. As required by statute, plaintiff retained Riverside 1031 to serve as QI for the plaintiff. Plaintiff and Riverside 1031 entered into an Exchange Agreement on or about November 9, 2016 to memorialize this relationship. See Exhibit A to the Skala Affirmation at 44. Defendant Riverside Abstract is not a QI but is instead a real estate title and abstract company that provides closing services to purchasers and sellers of real estate. PROCEDURAL HISTORY Plaintiff initially commenced this action with the filing of a summons and complaint on January 11, 2017 naming Riverside Abstract, LLC, Riverside 1031, LLC, Shaul Greenwald, Esq., David Gorenberg, Esq., Yoel A. Zagelbaum, Esq., Chaim Zlotowitz, Esq., and Azi Mindick, CPA as defendants; this complaint was never served upon the defendants. Thereafter on February 2, 2017, plaintiff filed an amended summons and complaint naming the same seven defendants and asserting nine causes of action sounding in breach of contract, breach of fiduciary duty, negligence, professional malpractice, legal malpractice, prima facie tort, fraud, false advertising and deceptive business practices. All defendants moved to dismiss the complaint on various grounds. Riverside Abstract moved to dismiss pursuant to CPLR 3211(a)(7) and 3 12 of 22
(a)(1) arguing that (a) the amended verified complaint did not contain a single allegation pertaining to Riverside Abstract, LLC; (b) that the Exchange Agreement executed by Riverside 1031 and plaintiff provided Riverside Abstract a complete defense to plaintiff s claims since it was not a party to the agreement and (c) that plaintiff s other allegations were improperly pled. The motions were fully briefed and the Court heard oral argument on July 14, 2017. At the conclusion of the arguments, Justice Knipel, inter alia, granted defendant Riverside Abstract s motion in its entirety, on the basis that the amended verified complaint did not contain any allegations pertaining to Riverside Abstract with leave to replead plaintiff s causes of action for breach of contract, negligence and prima facie tort to include such allegations. Justice Knipel did not opine on whether or not the Exchange Agreement acts as a complete defense for Riverside Abstract. In accordance with such ruling, on August 16, 2017 plaintiff filed a second amended complaint against Riverside Abstract, LLC, Riverside 1031, LLC and Shaul Greenwald, Esq., only, asserting four causes of action sounding in breach of contract, negligence, prima facie tort and fraud. See Exhibit A to the Skala Affirmation. This second amended verified complaint relies upon a completely different sent of allegations to support the causes of action for negligence and prima facie tort than the amended verified complaint. A copy of the amended verified complaint is annexed to the Skala Affirmation as Exhibit C to enable to Court to compare. 4 13 of 22
ARGUMENT POINT I PLAINTIFF S FIRST CAUSE OF ACTION FOR BREACH OF CONTRACT SHOULD BE DISMISSED PURSUANT TO CPLR 3211(A)(1) Plaintiff s first cause of action sounds in breach of contract and alleges that defendants, pursuant to the aforementioned Exchange Agreement, had specific duties and obligations vis a vis the plaintiff which they breached. See Exhibit A at 111-130. In support of this claim, plaintiff cites to various provisions of the November 9, 2016 Exchange Agreement pertaining to the release of Exchange Proceeds and Riverside 1031 s due diligence requirements. Id. It is undisputed that this is the only document upon which plaintiff bases his breach of contract claim. Id. A review of the agreement shows that it was between plaintiff and Riverside 1031, only and that Riverside Abstract was not a party to it. See Exhibit B to the Skala Affirmation at p. 1, para. 1. A motion to dismiss pursuant to CPLR 3211(a)(1) will be granted if the documentary evidence resolves all factual issues as a matter of law, and conclusively disposes of the plaintiff s claims. Importantly, in deciding a motion brought pursuant to CPLR 3211(a)(1), factual claims that are either inherently or flatly contradicted by documentary evidence are not entitled to be accepted as truthful or afforded any favorable inference. Mark Hampton, Inc. v. Bergreen, 173 A.D. 2d 220 (1 st Dept. 1990). Contracts between the parties to a litigation have long been held to qualify as documentary evidence for purposes of CPLR 3211(a)(1). It is axiomatic that one who is not a party to a contract cannot be sued for its breach. See Bouley v. Bouley, 19 A.D.3d 1049, 1050, 797 N.Y. S. 2d 221, 233 (4 th Dept. 2005). Along this vein, New York Courts have long adhered to the rule that in interpreting a contract for its meaning, evidence outside the four corners of the document to vary the meaning of the writing is 5 14 of 22
inadmissible. Further, absent a patent ambiguity, when parties set down their agreement in a clear, complete document, their writing should, as a rule, be enforced according to its terms. W.W.W. Assocs. v. Giancontieri, 77 N.Y. 2d 157, 162 (1990). Therefore, extrinsic and parole evidence is not admissible solely to create an ambiguity in a written agreement which is complete, clear and unambiguous on its face. (emphasis added). Id. at 163. Here, the Exchange Agreement is complete, clear and unambiguous on its face that it is made and by and between Samuel Schwartz, the exchanger, and Riverside 1031, as Qualified Intermediary only. Plaintiff s attempts to muddy the water by alleging that Riverside Abstract and Riverside 1031 are alter-egos is of no merit. The Exchange Agreement does not contain an ambiguity with respect to which entities/persons are bound by it and thus, the outside evidence cannot be used by the plaintiff to provide a different interpretation. The parties are bound by the four corners of the document. Therefore, plaintiff s breach of contract claim must be dismissed as against Riverside Abstract, LLC; it was not a party to the Exchange Agreement and cannot be liable for its breach. POINT II PLAINTIFF S CAUSE OF ACTION FOR NEGLIGENCE IS DUPLICATIVE OF HIS BREACH OF CONTRACT CLAIM By way of its original motion to dismiss, Riverside 1031 argued that the negligence cause of action asserted in the Amended Verified Complaint must be dismissed pursuant to CPLR 3211(a)(7) as duplicative of the breach of contract claim 1. In issuing a decision on July 14, 2017, Justice Knipel denied this portion Riverside 1031 s motion giving the allegations in the Amended Verified Complaint a very lax interpretation for imposing duties independent of the 1 Defendant Riverside Abstract, LLC made a similar argument that was not addressed by the Court since the Court granted Riverside Abstract, LLC s motion pursuant to Point I that plaintiff failed to assert a single allegation against Riverside Abstract, LLC. 6 15 of 22
contractual duties and granted plaintiff leave to re-plead this specific cause of action as it pertained to Riverside Abstract. However, in what appears to be an effort to plead that the duties assumed by the respective defendants were separate and apart from the duties assumed by the Exchange Agreement, plaintiff actually provided clarification that such duties are identical. Plaintiff supports his latest cause of action for negligence with allegations that the defendants breached three (and only three) distinct duties to plaintiff: their duty to review and execute an estimated settlement statement, as well as a final closing statement, their duty to review the contract for the purpose of the property and their duty to review a notice of assignment. See Exhibit C to the Skala Affirmation at 132, 136 and 143. At the outset, Riverside Abstract does not agree with plaintiff s insinuations with respect to these duties. Riverside Abstract is not commenting on whether or not the defendants breached the duties as alleged by the plaintiff, nor whether or not such breaches, to the extent they occurred, were the proximate cause of plaintiff s damages. Riverside Abstract is not making any arguments with respect to the legal implications of the contractual provisions or the legal affect that the possible failure to adhere to the provisions may have had on the ultimate outcome of the 1031 Exchange. Notwithstanding the foregoing, each of the three duties alleged by plaintiff arise directly from the Exchange Agreement, are duplicative of plaintiff s breach of contract claim and must be dismissed as a matter of law. With respect to the alleged duty to review and execute an estimated settlement statement, as well as a final closing statement, Section 9.1 of the Exchange Agreement states Each party to this Agreement agree(s) to execute all additional documents and instruments necessary or proper in order to carry out the terms and purposes of this Agreement. See Exhibit B to the Skala Affirmation, Section 9.1. Assuming solely for argument purposes that Riverside 1031 had a duty 7 16 of 22
to review these documents, that they failed to do so and that such failure was the proximate cause of plaintiff s damages, such duty would arise out of this provision of the Exchange Agreement; it is clearly not an independently assumed duty. Likewise, the second duty alleged by the plaintiff to have been breached by the defendants was the duty to review the contract for the purchase of the property. See Exhibit A to the Skala Affirmation at 136. Again, this duty arises directly from the Exchange Agreement, specifically Section 5.1 which states Exchanger shall provide Riverside 1031, LLC with a copy of the acquisition agreement (the Purchase Agreement) signed by both the Exchanger and the Seller. See Exhibit B to the Skala Affirmation at Section 5.1. Finally, the duty to review the Notice of Assignment also arises directly from the Exchange Agreement. See Exhibit B to the Skala Affirmation at Sections 2.1 and 5.1. Indeed, none of these duties is independent of the contractual duties between the parties. Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382, 389 (A simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated.); City of New York v. 611 West 152 nd Street, Inc., 273 A.D.2d 125, 710 N.Y.S.2d 36 (1 st Dep t 2000); see also, Fluhr v. Goldscheider, 264 A.D.2d 570, 695 N.Y.S.2d 30 (1 st Dep t 1999) ( no cause of action exists for negligence performance of a contract ); Wapnick v. Seven Park Avenue Corp., 240 A.D.2d 245. 658 N.Y.S.2d 604 (1 st Dep t 1997). Here as explained above, plaintiff alleges no duty owed to it by defendants except those explicitly present in the Exchange Agreement. Thus, the claim for negligence is duplicative and fails as a matter of law. Additionally, the negligence claim must also be dismissed as against Riverside Abstract because all of the duties alleged by the plaintiff are subsumed by an agreement to which it is not a party. /// 8 17 of 22
POINT III THERE IS NO VICARIOUS LIABILTIY FOR PLAINTIFF S CAUSE OF ACTION FOR PRIMA FACIE TORT To support his the prima facie tort claim contained in the second amended verified complaint, plaintiff alleges that defendant Greenwald told him he would make plaintiff whole for the theft, but only on the condition that he made Greenwald a 50-50 partner in any replacement property that he ultimately purchased. See Exhibit A to the Skala Affirmation at 88. The key here is that plaintiff alleges that Greenwald, personally, would be made a 50-50 partner. Taking the allegations as true, it is clear that if Greenwald did make this assertion, he made it solely for his own benefit and not for the benefit of Riverside Abstract. Plaintiff do not assert that he was acting in his capacity as CEO or that he was acting in furtherance of the interests of Riverside Abstract. Therefore, the third cause of action must be dismissed as against Riverside Abstract. Under the doctrine of respondeat superior, an employer is answerable for the torts of an employee who acts within the scope of his or her employment. The purpose of the rule is to render the employer responsible, in proper cases, for the employee s tortious acts, which although errant, were done in furtherance of the employer s business. Sauter v. New York Tribune, 305 NY 442 (1953)(holding that the doctrine of respondeat superior is inapplicable when the employee is acting outside the scope of his employment). The theory is that the employer should, as a required cost of doing business, compensate a party harmed by an employee who was acting, not on his or her own behalf, but in the employer s service. See Adams v. New York City Transit Authority, 88 NY2d 116, 119 (1996) (holding that torts which are not part of the conduct of the employer s enterprise should not be made the responsibility of the employer). However, in the event that the complained of acts are made in furtherance of 9 18 of 22
some other interest separate and apart from the interests of the corporation, liability cannot attach. See Thompson v. Maimonides Medical Center, 86 AD2d 867 (2 nd Dept. 1982). In assessing whether or not an employer is liable for the acts of its employee in a given case, the question is whether the complained of acts were within the scope of the person s employment. Rausman v. Baugh, 248 AD 2d 8, 10 (2 nd Dept. 1998) Courts will typically look at whether the employee s act fell within the direction or control of the employer. Johnson v. Daily News, 34 NY2d 33 (1974); whether the employee acted under the express or implied authority of the employer; Rausman, 248 A.D. 2d at 10 citing Cooke v. Drigant, 289 NY 313, 317 (1942); whether the employee s acts were in furtherance of the employer s interests. Rausman, 248 A.D. 2d at 10 citing Sims v. Bergamo, 3 NY2d 531, 535 (1957); whether the employee s acts were in the discharge of duty to the employer. Rausman, 248 A.D. 2d at 10 citing Joseph v. City of Buffalo, 83 NY2d 141, 145 (1994); and whether the acts were so closely connected with what the employee was hired to do and so fairly and reasonably incidental to it, that they may be regarded as methods, even though quite improper ones, of carrying out the objectives of employment. Rausman, 248 A.D. 2d at 10. Here, given the allegations as pled, there can be no vicarious liability to Riverside Abstract. If in fact Greenwald made the offer as alleged by plaintiff, then he clearly was acting with his own financial interests in mind and was not acting for the good of Riverside Abstract. Therefore, the cause of action must be dismissed as a matter of law. Notwithstanding the foregoing, the prima facie tort causes of action fail to plead disinterested malevolence, that is that malevolence was the sole motive for defendants conduct, an essential element of a prima facie tort claim. Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d 314, 333 (1983); Dorce v. Gluck, 140 A.D.3d 1111 (2d Dep't 10 19 of 22
2016); see also Curiano v. Suozzi, 63 N.Y.2d 113, 117 (1984); Smith v. Meridian Tech., Inc., 2011 NY Slip Op 5954 (2d Dept, 2011); Roberts v. Pollack, 92 A.D.2d 440, 447 (1st Dept. 1983). Additionally, plaintiff failed to allege that he sustained special damages or failed to allege that he suffered specific and measurable loss as a direct result of the tort. Plaintiff claims that the damages he suffered as a result of the alleged prima facie tort are the exact same damages that he suffered as a result of the breach of contract: i.e. that his funds were stolen by an unidentified hacker and that he was unable to complete the 1031 Exchange in a timely manner. Therefore, not only does he fail to plead special damages, but he has also failed to show that the damages he suffered as a result of the prima facie tort are causally related to the alleged tort. Indeed, plaintiff alleges that his damages were proximately caused by the unidentified hacker. Ginsberg. V. Ginsberg, 84 A.D.2d 573, 574 (2 nd Dept. 1981). Plaintiff does not allege that he suffered any additional harm as a result of his conversation with Greenwald. Thus, the claim must be dismissed pursuant to CPLR 3211(a)(7). POINT IV PLAINTIFF S CAUSE OF ACTION FOR FRAUD WAS ALREADY DISMISSED BY THE COURT AND THUS IS NOT APPROPRIATE Plaintiff s fourth cause of action sounds in fraud and alleges that the cause of action is included in this second amended verified complaint in the event that the Appellate Division grants the relief requested by the plaintiff on his cross-appeal from Justice Knipel s order dated July 14, 2017 and reinstates his cause of action. See Exhibit A to the Skala Affirmation at 163. The inclusion of this cause of action is wholly inappropriate. In the event plaintiff s cause of action for fraud is reinstated pursuant to his appeal, the proper procedure is for plaintiff to file a third amended verified complaint including a cause of action for fraud. Under the 11 20 of 22
doctrine of collateral estoppel, relitigation of an issue which has necessarily been decided in a prior action and is determinative of the issues disputed in the present action is precluded provided that there was a full and fair opportunity to contest the decision now alleged to be controlling. Rudovic v. Rudovic, 131 A.D.3d 1225 (2 nd Dept. 2015). Here, Justice Knipel already decided that plaintiff s cause of action for fraud was inadequate as a matter of law. A copy of Justice Knipel s decision and order is annexed to the Skala Affirmation as Exhibit D. Thus, allowing the plaintiffs to plead a cause of action for fraud when that issue was fully briefed and argued would constitute an impermissible second bite at the apple. Therefore, plaintiff should be precluded from asserting this cause of action here and Riverside Abstract should not have to respond to it. CONCLUSION For the foregoing reasons, and those set forth in the accompanying affirmation, it is respectfully requested that an Order dismissing the Second Amended Verified Complaint in its entirety (i) pursuant to CPLR 3211(a)(1) based upon documentary evidence; (ii) pursuant to CPLR 3211(a)(7) for failure to state a claim; and (iii) granting such other and further relief as this Court deems just and proper be entered. Dated: New York, New York September 28, 2017 CLAUSEN MILLER, P.C. By: Carl M. Skala, Esq. Serena A. Skala, Esq. Attorneys for Defendant Riverside Abstract, LLC 28 Liberty Street, 39 th Floor New York, New York 10005 212.805.3900 Our File No.: 25-3001-00-2 12 21 of 22
TO: WELBY, BRADY & GREENBLATT, LLP Gregory J. Spaun, Esq. Attorneys for Plaintiff 11 Martine Avenue, 15 th Floor White Plains, New York 10606 (914) 428-2100 ROBINSON, BORG, LEINWAND, GREENE, GENOVESE & GLUCK, P.C. Sheldon Eisenberger, Esq. Attorneys for Defendant Riverside 1031, LLC 875 Third Avenue, 9 th Floor New York, New York 10022 (212) 603-6300 RIVKIN RADLER, LLP David S. Wilck, Esq. Attorneys for Defendants Shaul Greenwald 926 RXR Plaza Uniondale, New York 11556 (516) 357-3000 13 22 of 22