| CDR Cr|feances S.A.S. v First Hotels & Resorts Invs., Inc. |
| 2012 NY Slip Op 08638 [101 AD3d 485] |
| December 13, 2012 |
| Appellate Division, First Department |
| CDR CrÉances S.A.S., Appellant, v First Hotels &Resorts Investments, Inc., Also Known as LES Premiers Investissements Hoteliers &Villegiature, Inc., et al., Respondents, et al., Defendants. |
—[*1] Stern Tannenbaum & Bell LLP, New York (David S. Tannenbaum of counsel), for FirstHotels & Resorts Investments, Inc., respondent. Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC (Carl J. Nichols of the bars ofthe State of Virginia and the District of Columbia, admitted pro hac vice, of counsel), for HSBCBank USA, N.A., respondent.
Order, Supreme Court, New York County (O. Peter Sherwood, J.), entered May 8, 2012,which denied plaintiff's motion for leave to amend its complaint, unanimously affirmed, withcosts.
Plaintiff brought this action to force the sale of property owned by defendant First Hotels &Resorts Investments, Inc., the mortgage on which was held by defendant HSBC Bank USA, N.A.First Hotels was one of many entities owned by nonparties Leon Cohen, Maurice Cohen andSonia Cohen. It is undisputed that the Cohens engaged in a web of fraudulent activity thatresulted in the loss to plaintiff of hundreds of millions of dollars and that they used their accountsat HSBC to move money that plaintiff alleges was at least in part fraudulently obtained. Plaintiffsued the Cohens, among others, and obtained judgments against them from courts in New Yorkand Florida. In seeking to collect on the judgments, plaintiff issued subpoenas to HSBC, interalia. HSBC responded to the subpoenas, albeit not always to plaintiff's satisfaction.
After HSBC responded to the subpoenas, two members of the Cohen family were indictedfor various tax violations. In connection with the indictments, the United States Department ofJustice issued a grand jury subpoena to HSBC. HSBC produced many documents (the DOJdocuments), some of which had not been produced to plaintiff in response to its civil subpoena.Plaintiff requested and received copies of the DOJ documents. Plaintiff asserts that [*2]HSBC's failure to produce the documents to it was intentional;HSBC asserts that the documents were not produced because they were not responsive, or forother reasons.
Plaintiff now seeks to amend the complaint in this action, to, inter alia, assert a claim of"aiding and abetting a conspiracy to defraud" against HSBC, add a number of new defendantswho have no connection with the property or its sale, and add new allegations against FirstHotels, including a claim of fraud and conspiracy to defraud. Plaintiff maintains that amendmentis warranted by new information revealed by the DOJ documents.
Nothing in the DOJ documents, however, warrants amendment of the complaint. Plaintiff'sargument amounts to little more than that, because HSBC failed to produce the DOJ documentsin response to its subpoena, it must have been concealing those documents in an effort to furtherthe Cohens' fraud against plaintiff. Even though HSBC should have produced the DOJdocuments in response to plaintiff's subpoena, the proper action for plaintiff in the face of what isessentially discovery misconduct is not to make HSBC a defendant in its action for fraud. As weobserved in a prior appeal in this case, the "ultimate sanction" for discovery misconduct is adefault judgment (see CDRCrÉances S.A.S. v Cohen, 62 AD3d 576, 577 [1st Dept 2009]).
In any event, the proposed amended complaint fails to state a cause of action for aiding andabetting fraud (see Oster vKirschner, 77 AD3d 51 [1st Dept 2010]; see also National Westminster Bank vWeksel, 124 AD2d 144, 149 [1st Dept 1987], lv denied 70 NY2d 604 [1987]). Likethe dismissed complaint in Weksel, it is "devoid of any but the most conclusoryallegations" (124 AD2d at 148). Plaintiff states, citing Oster (77 AD3d at 56), that HSBChad actual knowledge of the fraud as discerned from the surrounding circumstances, but toidentify those circumstances it sets forth its very detailed allegations of the Cohens' fraud againstHSBC. As we observed in Weksel, aiding and abetting "is not made out simply byallegations which would be sufficient to state a claim against the principal participants in thefraud" (124 AD2d at 149).
The proposed allegations of fraud and conspiracy to defraud against First Hotels, which themotion court did not address, are supported by the same allegedly newly discovered evidence asunderlies the proposed HSBC amendment. Its use against First Hotels is more offensive, becausemost of this evidence is not new at all, and plaintiff asserted a claim for conspiracy to defraudagainst First Hotels in the first complaint, and the claim was dismissed. Moreover, while it wouldnot be impossible for plaintiff to say that it only discovered the extent of HSBC's allegedinvolvement in the conspiracy after reviewing the DOJ documents, it could not say that aboutFirst Hotels.
To the extent First Hotels can be deemed liable for amounts owed pursuant to theaforementioned judgments obtained by plaintiff, plaintiff's appropriate course is to seekamendment of those judgments, not to seek relief via this completely unrelated action. Indeed,plaintiff's counsel stated at oral argument that if the court denied amendment, plaintiff wouldbring a special proceeding pursuant to CPLR 5225. Moreover, no allegation in the proposedamended complaint suffices to connect First Hotels, an entity that did not even exist until 2004,[*3]when it was created to purchase the property, with a fraud bythe Cohens that occurred decades ago, regardless of any use the Cohens may ultimately havemade of it. Concur—Gonzalez, P.J., Mazzarelli, Acosta and Román, JJ.