| RNK Capital LLC v Natsource LLC |
| 2010 NY Slip Op 06541 [76 AD3d 840] |
| September 7, 2010 |
| Appellate Division, First Department |
| RNK Capital LLC et al.,Appellants-Respondents, v Natsource LLC et al., Respondents-Appellants, et al.,Defendant. |
—[*1] Carter Ledyard & Milburn LLP, New York (Lawrence F. Carnevale of counsel), forrespondents-appellants.
Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered July 10,2009, which, insofar as appealed from, denied defendants-appellants' motion for summaryjudgment dismissing plaintiffs' causes of action for breach of contract, breach of fiduciary dutyand aiding and abetting breach of fiduciary duty, unanimously reversed, on the law, with costs,and the motion granted. Order, same court and Justice, entered October 28, 2009, which, uponreargument, adhered to the July 10, 2009 determination that plaintiffs cannot recover damagesfor lost profits, unanimously affirmed, with costs. Appeal from order, same court and Justice,entered February 17, 2010, which, upon defendants-appellants' motion in limine to precludeplaintiffs from offering certain evidence at trial, modified, sua sponte, the order of July 10, 2009solely to the extent of dismissing the breach of contract cause of action, unanimously dismissed,without costs, as moot in light of our disposition of the appeal from the July 10, 2009 order.
As the motion court ultimately recognized in its order rendered on the motion in limine, thebreach of contract claim is barred by the statute of frauds (General Obligations Law §5-701 [a] [10]), as the e-mails relied on by plaintiffs demonstrate that the parties did not reachagreement to enter into a broker/principal relationship or on the essential term of the putativebroker's compensation, and intended that any agreement reached be reduced to a formal writing(see Oui Cater, Inc. v Lantern Group,Inc., 71 AD3d 555 [2010];Langer v Dadabhoy, 44 AD3d 425 [2007], lv denied 10 NY3d 712 [2008]).
Plaintiffs failed to raise a triable issue of fact with respect to the causes of action for breachof fiduciary duty and aiding and abetting same. The evidence does not support the complaint'sallegation that a relationship of trust and confidence giving rise to fiduciary duties preexisted thealleged brokerage agreement, which agreement, as noted above, failed to satisfy the statute offrauds. On this record, the most plaintiffs have shown is that the parties had engaged in a seriesof transactions in which, as a principal of plaintiffs admitted, defendants [*2]represented plaintiffs on a nondiscretionary basis, with no authorityto bind plaintiffs to any deal without the latter's "specific authorization." This kind of nonagencyrelationship is not fiduciary in nature (see Celle v Barclays Bank P.L.C., 48 AD3d 301, 302 [2008]["brokers for nondiscretionary accounts do not owe clients a fiduciary duty"]; Fesseha v TDWaterhouse Inv. Servs., 305 AD2d 268, 268-269 [2003]). The averments by a formerexecutive for one of the defendant entities that he believed plaintiffs and their principal hadplaced full trust and confidence in him and relied on his superior knowledge and expertise notonly is conclusory (see Batas v Prudential Ins. Co. of Am., 281 AD2d 260, 264-265[2001]; Gaidon v Guardian Life Ins. Co. of Am., 255 AD2d 101, 101-102 [1998],mod on other grounds 94 NY2d 330 [1999]) but also purports to state a belief in relianceby another who did not make averments to that effect. Nor do plaintiffs' own "subjective claimsof reliance on defendants' expertise" suffice to establish a fiduciary relationship (SocieteNationale D'Exploitation Industrielle Des Tabacs Et Allumettes v Salomon Bros. Intl., 251AD2d 137 [1998], lv denied 95 NY2d 762 [2000]). Moreover, that defendants may havehad superior knowledge of the particular type of investment products involved does not, withoutmore, create a fiduciary relationship (see Batas, 281 AD2d at 264-265; Gaidon,255 AD2d at 101-102), especially given that plaintiffs themselves are highly sophisticatedbusiness entities. The claim of a fiduciary relationship is further negated by the testimony ofplaintiffs' principal that "it's not [his] contention that [defendants] weren't allowed to" competeagainst plaintiffs for a business opportunity, although this competition is precisely the crux of thecomplaint.
In sum, on this record it could not reasonably be concluded that "[plaintiffs] repose[d] a highlevel of confidence and reliance in [defendants], who thereby exercise[d] control and dominanceover [plaintiffs]" (People v CoventryFirst LLC, 13 NY3d 108, 115 [2009]). Nor would the evidence support a finding thatthere existed between these highly sophisticated parties "a higher level of trust than normallypresent in the marketplace between those involved in arm's length business transactions" (EBC I, Inc. v Goldman, Sachs & Co., 5NY3d 11, 19 [2005], citing Northeast Gen. Corp. v Wellington Adv., 82 NY2d 158,162 [1993]). Rather, plaintiffs' allegations of breach of fiduciary duty merely duplicate the breachof contract claim barred by the statute of frauds.
Since the fiduciary breach causes of action were not viable, the claim for resulting lost profitswas properly dismissed. In addition, the record established that plaintiffs' ability to realize profitsfrom the allegedly usurped investment opportunity was contingent on certain conduct by thirdparties and authorization from a government-sanctioned oversight entity, both of which werehighly uncertain and well beyond the scope of defendants' influence or control (see Laub vFaessel, 297 AD2d 28, 30 [2002] [plaintiff asserting cause of action for breach of fiduciaryduty "must establish that the alleged . . . misconduct w(as) the direct and proximatecause of the losses claimed"]). Concur—Saxe, J.P., Friedman, Nardelli, Moskowitz andRichter, JJ.