| Gregor v Rossi |
| 2014 NY Slip Op 06012 [120 AD3d 447] |
| August 28, 2014 |
| Appellate Division, First Department |
[*1]
| Deborah A. Gregor et al.,Respondents, v Joseph J. Rossi et al., Defendants, and Barbara Alesi et al.,Appellants. |
L'Abbate, Balkan, Colavita & Contini, LLP, Garden City (Marian C. Rice ofcounsel), for appellants.
Taylor Colicchio LLP, New York (Ellen Nunno Corbo of counsel), forrespondents.
Order, Supreme Court, New York County (Eileen A. Rakower, J.), entered January6, 2014, which denied defendants Alesi, Groman and Glascock's motion to dismiss thecomplaint as against them, unanimously reversed, on the law, and the motion granted.The Clerk is directed to enter judgment accordingly.
Plaintiffs, investor-shareholders in a corporation that was allegedly part of defendantRossi's fraudulent scheme, allege that defendants Alesi, Groman and Glascock, who wereretained as the attorneys for the corporation, were complicit in the scheme by draftingdocuments and a shareholder agreement designed to give plaintiffs the impression thatthe corporation was legitimate and by dealing directly with plaintiffs in reviewing thedocuments and giving them "accompanying legal advice and counsel."
Fraud and fraudulent inducement are not pleaded with the requisite particularityunder CPLR 3016 (b), because the words used by defendants and the date of the allegedfalse representations are not set forth (see Brown v Wolf Group Integrated Communications, Ltd., 23AD3d 239 [1st Dept 2005]; Riverbay Corp. v Thyssenkrupp N. El. Corp., 116 AD3d487 [1st Dept 2014]). While the complaint alleges that defendants' actionsconstituted representations (see Brown, 23 AD3d at 239), thoseactions—allegedly drafting corporate documents and explaining them toplaintiffs—do not reasonably support the inference that defendants were placingan imprimatur on the legitimacy of the investment enterprise.
Moreover, plaintiffs allege that they invested the funds they seek to recover betweenSeptember 2010 and April 2012, encompassing an eight-month period before defendants,who were first retained in May 2011, ever got involved in these matters. There is nospecific allegation that plaintiffs made any of their investments after interacting withdefendants. The lack of greater specificity about information peculiarly within plaintiffs'knowledge renders conclusory any claim of reliance on anything defendants said or did.The lack of specificity similarly renders any claim of the required loss causationconclusory (see Laub v Faessel, 297 [*2]AD2d28, 31 [1st Dept 2002]).
The constructive fraud and negligent misrepresentation causes of action are deficientfor failure to allege the requisite fiduciary or special relationship between plaintiffs anddefendants (see J.A.O.Acquisition Corp. v Stavitsky, 8 NY3d 144, 148 [2007]; Matter of Aoki v Aoki, 117AD3d 499 [1st Dept 2014]). The attorneys for a corporation represent the corporateentity, not the shareholders (seeEurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 562[2009]). The parties did not expressly agree otherwise (see Talvy v American RedCross in Greater N.Y., 205 AD2d 143, 149 [1st Dept 1994], affd 87 NY2d826 [1995]). Plaintiffs' subjective belief did not create an attorney-client relationship or aclose relationship approaching privity that imposed upon defendants a duty to them toimpart correct information (seePellegrino v Oppenheimer & Co., Inc., 49 AD3d 94, 99 [1st Dept 2008]).We note, in addition, that the requisite relationship between the parties must have existedbefore the transaction from which the alleged wrong emanated, and not as a result of it(Elghanian v Harvey, 249 AD2d 206 [1st Dept 1998]; see also Waterscape Resort LLC vMcGovern, 107 AD3d 571 [1st Dept 2013]).
Plaintiffs do not expressly allege a cause of action against defendants for aiding andabetting the fraud alleged to have been committed by Rossi. Even if the causes of actionas pleaded could be fairly interpreted as including liability for aiding and abetting fraud,they are still deficient because they fail to allege that defendants had actual knowledge ofthe fraud and provided substantial assistance in its commission (see Oster v Kirschner, 77AD3d 51, 55-56 [1st Dept 2010]). The allegation that the attorneys "knew or shouldhave known" of the fraud is conclusory and alleges mere constructive knowledge (see Global Mins. & MetalsCorp. v Holme, 35 AD3d 93, 101-102 [1st Dept 2006], lv denied 8NY3d 804 [2007]; Weinberg vMendelow, 113 AD3d 485, 488 [1st Dept 2014] [allegation that defendant"knew, or . . . should have known" was sufficient because it was coupledwith specific allegations of actual knowledge of fraud]). The allegations that theattorneys prepared merger documents and a shareholder agreement are allegations ofordinary professional activity, not substantial assistance (see Roni LLC v Arfa, 72 AD3d413 [1st Dept 2010], affd 15 NY3d 826 [2010]).
The claims under the North Carolina RICO statute fail to set forth the requiredpredicate act as part of a pattern of racketeering activity, since the common-law tortsalleged are not viable and, in any event, are otherwise insufficient for the purpose(see Cofacredit, S.A. v Windsor Plumbing Supply Co., Inc., 187 F3d 229, 242[2d Cir 1999]).
The conspiracy cause of action is deficient for failure to allege facts supporting aconclusion that there was an agreement among defendants regarding an underlying tort(see 1766-68 Assoc., LP v Cityof New York, 91 AD3d 519 [1st Dept 2012]). The claims for punitive damagescannot stand in the absence of a substantive underlying cause of action (Rocanova vEquitable Life Assur. Socy. of U.S., 83 NY2d 603, 616-617 [1994]).
Plaintiffs failed to respond to the arguments before the motion court in support of[*3]dismissing the claim that defendants are responsiblefor producing the corporate books and records, and they do not mention the issue onappeal. Accordingly, the claim should be dismissed. Concur—Tom, J.P.,Moskowitz, Manzanet-Daniels, Feinman and Gische, JJ. [Prior Case History: 2013NY Slip Op 32800(U).]