| Mateo v Senterfitt |
| 2011 NY Slip Op 01877 [82 AD3d 515] |
| March 15, 2011 |
| Appellate Division, First Department |
| Fernando Mateo et al., Respondents, v Akerman Senterfitt,Appellant, et al., Defendants. (And a Third-Party Action.) |
—[*1] Garvy Schubert Barer, New York (Andrew J. Goodman of counsel for respondents.
Order, Supreme Court, New York County (Paul G. Feinman, J.), entered July 29, 2010,which denied defendant Akerman Senterfitt's motion to dismiss the causes of action for fraud andnegligent misrepresentation, unanimously reversed, on the law, without costs, and the motiongranted. The Clerk is directed to enter judgment dismissing the complaint as against defendantAkerman Senterfitt.
The cause of action for negligent misrepresentation is insufficiently stated because plaintiffs,who assert their claims on their own behalf and as assignees of third-party defendant PeterSkyllas, do not allege that either they or Skyllas were in contractual privity with defendant (see J.A.O. Acquisition Corp. vStavitsky, 8 NY3d 144, 148 [2007]). Nor do their allegations that defendantcommunicated directly with Skyllas in e-mails, representing that it was undertaking due diligenceto verify that defendant/third-party plaintiff Henry Vargas owned a majority interest in 2141 MDJr., LLC and that such interest was free of liens and encumbrances, describe a relationship ofnear-privity between Skyllas and defendant (see Prudential Ins. Co. of Am. v Dewey,Ballantine, Bushby, Palmer & Wood, 80 NY2d 377, 384 [1992]; Ossining Union FreeSchool Dist. v Anderson LaRocca Anderson, 73 NY2d 417, 419 [1989] ["a bond. . . so close as to be the functional equivalent of contractual privity"]; UnitedSafety of Am. v Consolidated Edison Co. of N.Y., 213 AD2d 283, 286 [1995] ["a specialrelationship of trust or confidence which create(d) a duty for (defendant) to impart correctinformation to (Skyllas)"]). Rather, these allegations reveal the negotiation of a simple,arm's-length business transaction in which defendant served as Skyllas's adversary's counsel(see Par Plumbing Co. v Engelhard Corp., 256 AD2d 124 [1998]; Andres v LeRoyAdventures, 201 AD2d 262 [1994]).
The fraud cause of action, which alleges that defendant aided its client, Vargas, in sellingSkyllas an interest in a real estate company that Vargas did not possess, fails to state with [*2]particularity any knowing or reckless misrepresentation of amaterial fact by defendant (see EurycleiaPartners, LP v Seward & Kissel, LLP, 12 NY3d 553, 559 [2009]). Plaintiffs allege thatdefendant relied on a fraudulent operating agreement supplied to it by Vargas, took no furthersteps to verify the actual ownership of the company in drafting the relevant transactionaldocuments, and represented to Skyllas's counsel in e-mails that Vargas had stated that he had aninterest in the company and that it (defendant) would account for the origins of that interest andconfirm that the interest was free of liens and encumbrances. However, these are eithermisrepresentations attributable to Vargas or statements of future intention, not statements ofpresent material facts known to be false at the time they were made (see ESBE Holdings, Inc. v VanquishAcquisition Partners, LLC, 50 AD3d 397, 398 [2008]; Sheth v New York Life Ins.Co., 273 AD2d 72, 73-74 [2000]).
To the extent plaintiffs contend that defendant made actionable misrepresentations in thetransactional documents it drafted by incorporating Vargas's misrepresentations into thedocuments, they are alleging substantial assistance by defendant to aid and abet Vargas's fraud(see Oster v Kirschner, 77 AD3d51, 54-57 [2010]; National Westminster Bank v Weksel, 124 AD2d 144, 147-150[1987], lv denied 70 NY2d 604 [1987]). However, the complaint fails to state a cause ofaction for aiding and abetting because it does not allege that defendant had actual knowledge ofany fraud perpetrated by Vargas (see Oster, 77 AD3d at 55; Weksel, 124 AD2d at148-150).
Nor does the complaint adequately allege that defendant reasonably could and should haveforeseen that a class of persons like plaintiffs would act in reliance on the allegedmisrepresentations (see e.g. Houbigant, Inc. v Deloitte & Touche, 303 AD2d 92, 100[2003]; Wey v New York Stock Exch., Inc., 15 Misc 3d 1127[A], 2007 NY Slip Op50880[U] [2007]). It fails to explain with sufficient particularity how defendant should haveknown or had reason to believe that anyone other than Skyllas would rely on its allegedmisstatements in the relevant documents or in e-mails sent to Skyllas's counsel duringnegotiations.
Plaintiffs' allegations of scienter are also inadequate, since they do not support an inferencethat defendant's statements were "based on grounds so flimsy as to lead to the conclusion thatthere was no genuine belief in [their] truth" (see DaPuzzo v Reznick Fedder & Silverman, 14 AD3d 302, 303[2005]; Houbigant, 303 AD2d at 97). The complaint alleges that defendant was recklessand grossly negligent in failing to conduct any reasonable investigation before lending its nameand reputation to Vargas's scheme and that the documents contained numerous obviousirregularities that should have led to an investigation to confirm the ownership interests.However, nowhere does it allege that defendant knew or should have known, or was grosslynegligent or reckless in failing to conduct any inquiry and discover, that Vargas's representationswere in fact false. Even if such an allegation can be inferred from the complaint and supportingaffidavits, it is not sufficiently particularized (see Houbigant, 303 AD2d at 97).
Plaintiffs fail sufficiently to allege that defendant's misrepresentations were the direct andproximate cause of their claimed loss of the $3.8 million they loaned to Skyllas (see Friedman v Anderson, 23 AD3d163, 167 [2005]; Laub v Faessel, 297 AD2d 28, 30-31 [2002]). While the complaintalleges a sufficient causal link between defendant's alleged misrepresentations and Skyllas's lossof his $1 million advance payment to Vargas to acquire the initial option, it acknowledges that atleast three events occurred between the alleged misrepresentations and plaintiffs' loan to Skyllas:Skyllas declined to exercise the option (the only transaction in which defendant was involved),Skyllas and Vargas subsequently negotiated and consummated on their [*3]own and without defendant's assistance, the transfer of 49% ofVargas's purported interest in the company to Skyllas, and the holder of the mortgage on anotherof Skyllas's buildings demanded immediate payment of a substantial portion of the principal.These events constitute superseding causes that broke the chain of causation (see generallyDerdiarian v Felix Contr. Corp., 51 NY2d 308, 315 [1980]; see e.g. Aronoff v Ernst &Young, 1999 WL 458779, *3-5, 1999 NY Misc LEXIS 665, *8-13 [1999]).Concur—Tom, J.P., Mazzarelli, Freedman and Manzanet-Daniels, JJ.