Opinion
16922 Index No. 651148/19 Case No. 2022-03300
12-20-2022
ABN AMRO CAPITAL USA LLC et al., Plaintiffs–Appellants–Respondents, v. AMERRA CAPITAL MANAGEMENT, LLC, et al., Defendants–Respondents–Appellants.
Reid Collins & Tsai LLP, New York (Rachel S. Fleishman of counsel), for appellants-respondents. Selendy Gay Elsberg PLLC, New York (Faith E. Gay of counsel), for respondents-appellants.
Reid Collins & Tsai LLP, New York (Rachel S. Fleishman of counsel), for appellants-respondents.
Selendy Gay Elsberg PLLC, New York (Faith E. Gay of counsel), for respondents-appellants.
Kern, J.P., Friedman, Gesmer, Gonza´lez, Mendez, JJ.
Order, Supreme Court, New York County (Andrea Masley, J.), entered on or about July 5, 2022, which, insofar as appealed from as limited by the briefs, granted defendants’ motion to dismiss as to the conspiracy to commit fraud and breach of the implied covenant of good faith and fair dealing claims and the request for consequential damages on the breach of contract claims, and denied the motion as to the fraudulent inducement, aiding and abetting fraud, and unjust enrichment claims, unanimously modified, on the law, to clarify that recovery of unpaid loan amounts on the breach of contract claim is barred as consequential damages, and otherwise affirmed, without costs.
The claim for conspiracy to commit fraud was properly dismissed as duplicative of the aiding and abetting fraud claim, as it "does not connect any defendants not already alleged to have committed the primary underlying fraud" ( Community Assn. of the E. Harlem Triangle, Inc. v. Butts, 200 A.D.3d 599, 601, 161 N.Y.S.3d 41 [1st Dept. 2021] ; see also American Baptist Churches of Metro. N.Y. v. Galloway, 271 A.D.2d 92, 101, 710 N.Y.S.2d 12 [1st Dept. 2000] ).
The motion court appears to have held that plaintiffs were contractually barred from seeking consequential damages, without deciding whether the specific damages sought were consequential in nature. We find that recovery from defendants of the outstanding balance of plaintiffs’ loans to Transmar Commodity Group Ltd. would constitute consequential damages. The final sentence of § 18 of the relevant subordination agreements does not create an exemption to the consequential damages bar for unpaid loan amounts, at least not when sought to be recovered from parties other than the ones contractually obligated to pay the loans (i.e., Transmar). The subordination agreements also "do not suggest or provide for such a heavy responsibility on the part of defendants, and the evidence fails to show that such damages were foreseeable and contemplated by the parties before or at the time of the agreement[s’] formation" ( ERC 16W L.P. v. Xanadu Mezz Holdings LLC, 133 A.D.3d 444, 444, 18 N.Y.S.3d 853 [1st Dept. 2015] [internal quotation marks omitted]).
The breach of the implied covenant of good faith and fair dealing claim was properly dismissed "because it is premised on the same conduct that underlies the breach of contract" claim and seeks (a subset of) the same damages ( MBIA Ins. Corp. v. Merrill Lynch, 81 A.D.3d 419, 419–420, 916 N.Y.S.2d 54 [1st Dept. 2011] ).
The fraudulent inducement claim was properly sustained (see generally Connaughton v. Chipotle Mexican Grill, Inc., 135 A.D.3d 535, 537, 23 N.Y.S.3d 216 [1st Dept. 2016], affd 29 N.Y.3d 137, 53 N.Y.S.3d 598, 75 N.E.3d 1159 [2017] ). Plaintiffs sufficiently alleged that § 4 of the 2016 subordination agreement was false because Transmar owed defendants more than $10 million as a result of the 2014 transaction loans. Although defendants are correct that § 4 makes representations only as to the debt of Transmar, plaintiffs sufficiently alleged that Transmar was the de facto obligor on the 2014 transaction loans. Plaintiffs also sufficiently alleged reasonable reliance. The documents relied on by defendants do not conclusively establish that plaintiffs knew or should have known the relevant facts prior to execution of the 2016 subordination agreement. The fraudulent inducement claim is also not duplicative of the breach of contract claim, as the damages sought are no longer the same in view of our dismissal of the request for unpaid loan amounts above (see generally Man~as v. VMS Assoc., LLC, 53 A.D.3d 451, 453–454, 863 N.Y.S.2d 4 [1st Dept. 2008] ).
The aiding and abetting fraud claim was properly sustained (see generally Stanfield Offshore Leveraged Assets, Ltd. v. Metropolitan Life Ins. Co., 64 A.D.3d 472, 476, 883 N.Y.S.2d 486 [1st Dept. 2009], lv denied 13 N.Y.3d 709, 2009 WL 3379028 [2009] ). Plaintiffs sufficiently alleged that defendants affirmatively assisted and helped conceal Transmar's fraud by helping to devise and execute transactions for the purpose of secretly inflating Transmar's financials (see Silvercreek Mgt. v. Citigroup, Inc., 346 F. Supp. 3d 473, 491–492 [S.D.N.Y.2018] ; JP Morgan Chase Bank v. Winnick, 406 F. Supp. 2d 247, 257 [S.D.N.Y.2005] ). It is not clear as a matter of law that defendants’ conduct was too attenuated from the harm to plaintiffs to be a proximate cause thereof.
The unjust enrichment claim was properly sustained (see generally Schroeder v. Pinterest Inc., 133 A.D.3d 12, 26, 17 N.Y.S.3d 678 [1st Dept. 2015] ). Plaintiffs sufficiently alleged that they had a preexisting right to the money paid to defendants on the 2014 transaction loans. The unjust enrichment claim is also not duplicative of the breach of contract claim, because it was asserted only against the two defendant entities that were not parties to either subordination agreement and sought to recover only the monies paid thereto (see generally Pappas v. Tzolis, 20 N.Y.3d 228, 234, 958 N.Y.S.2d 656, 982 N.E.2d 576 [2012] ).