Opinion
150400/2020
05-06-2021
CONCRETE INDUSTRIES ONE CORP., Plaintiff, v. EMPIRE OUTLET BUILDERS, LLC, BFC Partners Development LLC, BFC Partners, L.P., St. George Outlet Development LLC, Donald Capoccia, Jospeh Ferrara, Brandon Baron and John Does 1-10 and ABC Corps 1-10, fictitious names, true names being unknown, who are or were officers, directors, shareholders, or agents of trustees Empire Outlet Builders, LLC, BFC Partners Development LLC and/or BFC Partners, L.P., claimed to apply or consented to the application of trust funds for purposes other than those of the Trusts, or who are or were recipients of funds diverted from the Trusts as described in the Complaint., Respondents.
Plaintiff is represented by Jeffrey Fleischmann Esq. (150 Broadway, Suite 900, New York, NY 10038). Defendants are represented by Andrew Achiron Esq. of Silverman Shin & Byrne PLLC. (88 Pine St., Fl 22, New York, NY 10005).
Plaintiff is represented by Jeffrey Fleischmann Esq. (150 Broadway, Suite 900, New York, NY 10038).
Defendants are represented by Andrew Achiron Esq. of Silverman Shin & Byrne PLLC. (88 Pine St., Fl 22, New York, NY 10005).
Catherine M. DiDomenico, J.
Recitation as required by CPLR 2219(a) of the papers considered in the review of Motion
Sequence Numbers 001 and 002
Numbered
Notice of Motion by Plaintiff, Seq. No. 001 1
Affidavit in Opposition to Seq. No. 001 2
Memorandum of Law in Opposition to 001 3
Notice of Cross Motion by Defendant Seq. No. 002 4
Affidavit in Reply by Plaintiff 5
Affidavit in Opposition to 002 by Plaintiff 6
Memorandum of Law in Opposition to 002 7
Memorandum of Law in Reply to 002 by Defendant 8
Transcript of Oral Argument 9/22/20 9
Upon the foregoing cited papers, the Decision and Order is as follows:
Procedural History / Relevant Facts
Plaintiff Concrete Industries One Corp., ("Concrete") is a New York corporation engaged in the business of "high end" construction work. Defendant Empire Outlet Builders, LLC ("Empire") is a general contractor who hired Plaintiff as a subcontractor. Defendant St. George Outlet Development, LLC ("St. George") is the owner of a large plot of commercial property located in Staten Island, New York. The remaining individual and corporate defendants collectively identified by Plaintiff as the "BFC entities" were responsible for the receipt and management of trust fund monies held for the potential benefit of trust fund beneficiaries pursuant to the New York Lien Law.
This action, and various other related actions which shall be discussed herein, all relate to the construction of a large waterfront shopping mall located in Staten Island, New York. The contract at issue in the present action was entered into between Plaintiff as a subcontractor and Defendant Empire as general contractor. Plaintiff was contracted to perform various facets of construction work at the site. Pursuant to the contract, Plaintiff was to be paid $3,589,728 for its work. However, Plaintiff argues that "all parties understood" that the actual amount owed was adjusted to $4,130,483 after additional work and costs were incurred.
This action was commenced by the filing of a Summons and Verified Complaint on or about February 25, 2020. In its Verified Complaint, Plaintiff asserts seven causes of action: (1) breach of contract; (2) quantum meruit; (3) account stated; (4) unjust enrichment; (5 & 6) diversion of trust fund claims under Article 3-A of the lien law; and (7) a cause of action for common law indemnification. Defendants have filed a Verified Answer in which they raise fourteen affirmative defenses. In addition to the defenses asserted here, Defendants St. George and Empire have also commenced a breach of contract action against Concrete which is currently pending in Kings County Supreme Court under Index Number 524252/2019. Concrete has asserted sixteen affirmative defenses in that case. A considerable amount of litigation has taken place in the Kings County action. The most recent motion filed in that action was to consolidate it with the present action. That motion was denied without prejudice to renewal subject to this Court's ruling on the class action certification issue. (See D & O 3/4/21, Boddie, J.)
In addition to the Kings County action, the parties have identified at least nine other actions pending in Kings County and New York County which are related to the present action. One of those actions, pending in Kings County under index number 511173/2020, is stylized as a class action lawsuit and identifies Concrete as a member of the relevant class of trust beneficiaries.
Present Motions
Plaintiff Concrete moves by Notice of Motion (Seq. No. 001) for an Order pursuant to Lien Law § 77 and CPLR § 902, § 903 and § 094 determining that the present action may be maintained as a class action lawsuit and for additional relief related to identifying and notifying potential class members. Defendants have filed written opposition to the motion. In addition, Defendants have filed a cross motion (Seq. No. 002) for an Order dismissing various causes of action raised by Plaintiff as duplicative, or otherwise unsupportable, as a matter of law. Among the claims sought to be dismissed are Plaintiff's fifth and sixth Lien Law causes of action which form the basis of the application to certify this action as a class action lawsuit. Defendants argue that if their motion is granted, the certification motion will become moot. Plaintiff has filed written opposition to the Defendants' cross motion.
Decision
Motion for Class Certification (Mot. Seq. No. 001)
The primary purpose of Article 3-A of the Lien Law is to set up a trust to ensure that "those who have directly expended labor and materials to improve real property at the direction of [an] owner or a general contractor receive payment for the work actually performed." Atlas Bldg. Sys. v. Rende , 236 AD2d 494 (2d Dept. 1997) . An action to enforce a trust, or to address "trust diversion claims" must be brought as a representative action, or class action suit for the benefit of all the beneficiaries of the trust. See Callender v. Shirell Air, Inc. , 282 AD2d 564 (2d Dept. 2001). Any relief that may be granted in that action is deemed to be for the benefit of the entire class of trust beneficiaries. See Glazer v. Alison Homes Corp. , 62 Misc 2d 1017(Sup. Ct. Kings Cty. 1970), aff'd, 36 AD2d 720 (2d Dept. 1971) . A failure to properly commence a representative action in the first instance is not fatal and may be cured by a motion to convert the case to a class action lawsuit. See ADCO Elec. Corp. v. McMahon , 38 AD3d 805 (2d Dept. 2007) . When presented with a motion to certify the case as a class action suit, the Court must first determine whether the prerequisites set forth in CPLR § 901 have been satisfied. Assuming § 901 is satisfied, the Court must then consider the factors set forth in § 902. See Bartis v. Harbor Tech, LLC , 147 AD3d 51 (2d Dept. 2016). Class certification must be denied if the requirements of § 901 are not met. See Win-Vent Architectural Windows v. NGU, Inc. , 161 AD3d 702 (1st Dept. 2018) .
Plaintiff concedes that it did not commence the present action as a representative lawsuit in compliance with Lien Law § 77(1). It now moves under CPLR § 901 and § 902 to convert this case into a class action suit for the benefit of all members of the class of beneficiaries seeking to recover funds from the Article 3-A Trust. To do so, Plaintiff must first satisfy the prerequisites set forth in CPLR § 901 by providing "evidentiary facts." See Matros Automated Electrical Const. Corp. v. Libman , 37 AD3d 313 (1st Dept. 2007) ; see also Non-Emergency Transporters of New York, Inc. v. Hammons, 249 AD2d 124 (1st Dept. 1998). Pursuant to CPLR § 901(a), a court may certify a proposed class action suit on a showing that: (1) the class is so numerous that joinder of all members, whether otherwise required or permitted, is impracticable; (2) there are questions of law or fact common to the class which predominate over any questions affecting only individual members; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; (4) the representative parties will fairly and adequately protect the interests of the class; and (5) a class action is superior to other available methods for the fair and efficient adjudication of the controversy. See Moreno v. Future Health Care Servs., Inc. 186 AD3d 594 (2d Dept. 2020) . Lien Law § 77(1)(a) specifically authorizes the Court to waive the first requirement of numerosity.
In the event that the CPLR § 901 prerequisites are satisfied, the Court must then proceed to consider five additional factors set forth in CPLR § 902 which include: (1) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (2) the impracticability or inefficiency of prosecuting or defending separate actions; (3) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (4) the desirability or undesirability of concentrating the litigation of the claim in the particular forum and; (5) the difficulties likely to be encountered in the management of a class action. See Desrosiers v. Perry Ellis Menswear, LLC , 30 NY3d 488 (2017) ; Dugan v. London Terrace Gardens, L.P. , 186 AD3d 12 (1st Dept. 2020) . It is the Plaintiff's burden to provide admissible evidence for the Court's consideration of the § 902 factors. See Krobath v. South Nassau Communities Hosp. , 178 AD3d 805 (2d Dept. 2019).
In opposition to class certification, Defendants argue that Plaintiff has failed to satisfy the § 901 prerequisites, or to properly address the § 902 factors. Defendants argue that Plaintiff has offered only conclusory statements which have no evidentiary value. They also argue that even if the Court considered the applicable factors, they strongly weigh against Plaintiff being certified to represent the class of beneficiaries. Defendants' cross motion also seeks to dismiss Plaintiff's Lien Law 3-A claims which they argue would necessarily moot the application for class certification.
In addition to arguing that the CPLR § 901 prerequisites have not been satisfied, and that the § 902 factors weigh against class certification, Defendants raise a procedural argument based upon the language of the Lien Law itself. Pursuant to Lien Law § 77, there can be only one representative cause of action which shall be "brought for the benefit of all beneficiaries of the trust."See Lien Law § 77(1) . Defendants further rely upon Lien Law § 77(2) which specifically indicates that such an action can only be commenced "provided no other such action is pending at the time of commencement thereof." Here, Defendants identify at least eight cases that predate the commencement of the present action. A review of the pleadings in those actions reveals that seven of them specifically raise Lien Law claims. One case in particular, Casino Mechanical Corp. v. St. George Outlet Development, LLC, et al. , (450103/2020) is stylized as a representative action. Casino was commenced by the filing of a Summons and Complaint on August 27, 2019, six months before the present action was commenced. In addition to the cases that were commenced before the present action, Defendants have also identified a ninth case, pending in Kings County under index number 511173/2020, which is stylized as a representative action and names Concrete as a notice defendant and member of the beneficiary class. The Kings County case was filed while the present motion was sub judice before this Court. The presence of these previously filed cases arguably precludes the present case being certified to represent the class of beneficiaries. See Lien Law § 77 ; see also Premiere Electrical Constr. Corp. v. Security Nat'l Bank , 39 AD2d 967 (2d Dept. 1972) . The existence of previously filed cases is also a factor to be considered under CPLR § 902(3).
New York County Indexes 655571/2019, 45103/2020, 651506/2019, 655572/2019, 451479/2020, 150619/2020, 655727/2018, 451165/2019,
As this case was not commenced as a representative action, Plaintiff bears the burden of satisfying the CPLR § 901 prerequisites by "tendering evidence in admissible form" to support the request for class certification. See Yonkers Contr. Co. v. Romano Enters. of NY, Inc. , 304 AD2d 657 (2d Dept. 2003) ; see also Mid. Is. LP v. Hess Corp. , 184 AD3d 439 (1st Dept. 2020). Plaintiff has failed to meet this burden as his motion is based wholly on conclusory statements made on "information and belief" without supporting facts or evidence. See Matros Automated Electrical Const. Corp. v. Libman , 37 AD3d 313 (1st Dept. 2007) ; Nachbaur v. Am. Transit Ins. Co. , 300 AD2d 74 (1st Dept. 2002). Plaintiff fails to address the nature or procedural posture of the related cases that raise Lien Law claims, which are not referenced by index number. Plaintiff has not provided any documentary evidence from which this Court could determine the nature of the claims asserted, their procedural status, or the position any party takes on this motion in this case. The only document offered by Plaintiff is an affirmation of counsel which contains conclusory allegations that the § 901 prerequisites have been satisfied. In the absence of evidentiary facts, this affirmation is insufficient to support class certification under Lien Law § 901. See Canavan v. Chase Manhattan Bank, N.A. , 234 AD2d 493 (2d Dept. 1996) ; see also Weitzenberg v. Nassau County Dep't of Rec. & Parks , 249 AD2d 538 (2d Dept. 1998). Plaintiff's attempt to cure this lack of proof in its Reply papers is unavailing as this Court cannot consider evidence raised for the first time in reply. See Deutsche Bank Natl. Trust Co. v. March , 138 N.Y.S.3d 356 (2d Dept. 2021) ; see also Picard v. Bigsbee Enters., Inc. , 44 Misc 3d 1214(A) (Sup Ct. Alby. Cty. 2014).
The evidentiary deficiencies addressed above warrant denial of class certification under CPLR § 901. Accordingly, this Court need not consider the factors set forth in § 902. See Egan v. Telomerase Activation Sciences, Inc. , 127 AD3d 653 (1st Dept. 2015) . However, even if this Court were to consider the same, Plaintiff's motion would still fail. As argued by Defendant, at least two factors weigh heavily against Concrete being certified as a class representative.
Under CPLR § 902(1), Plaintiff bears the burden of showing that out of the many available class beneficiaries, it is in the best position to fairly and adequately protect the interests of the class. As indicated above, Defendants have commenced a companion action in Kings County wherein Concrete is the named defendant. Defendants here argue that since the causes of action raised in the Kings action, if successful, would negate Concrete's right to collect under the Lien Law Trust, it cannot be the best representative for the class. Concrete has failed to explain how it would ensure that its own potential liability would not predominate its attention over the issues unique and germane to the beneficiary class. See Globe Surgical Supply v. Geico Ins. Co. 59 AD3d 129 (2d Dept. 2008) ; see also CPLR § 901(4) ; CPLR § 902(1). Accordingly, as Plaintiff has failed to establish that it is the best position to fairly and adequately protect the interests of the class, CPLR § 902(1) weighs against certification. See Cooper v. Sleepy's, LLC , 120 AD3d 742 (2d Dept. 2014) . Plaintiff's initial moving papers also fail to set forth its counsel's qualifications, which is a requirement of the "adequacy of representation" factor. See Globe Surgical Supply v. GEICO Ins. Co. , 59 AD3d 129 (2d Dept. 2008).
Pursuant to CPLR § 902(4), Plaintiff also bears the burden of showing that Richmond County is an appropriate forum for the class action suit. Here, Concrete fails to explain how Richmond County can be an appropriate venue for the representative suit when at least two of the related cases have contractual forum selection clauses which require them to be litigated in New York County. Even in the context of a potential class action suit, forum selection clauses remain valid and enforceable. See Globe , Supra , see also Rocco v. Pension Plan of NY State Teamsters Conference Pension & Retirement Fund , 799 N.Y.S.2d 163 (Sup. Ct. Kings Cty. 2004) . As Plaintiff fails to address how it would be possible for the New York County forum cases to be litigated in Richmond County, CPLR § 902(4) also weighs against certification.
For the reasons set forth above, this Court finds that Concrete has failed to meet its burden of satisfying the prerequisites of CPLR § 901. Concrete has also failed to meet its burden of offering persuasive evidence in support of the CPLR § 902 factors. Accordingly, Plaintiff's motion for class certification is hereby denied.
Motion to Dismiss (Mot. Seq. No. 002)
In addition to opposing class certification, Defendants cross move to dismiss the fifth and sixth Lien Law diversion causes of action asserted by Plaintiff pursuant to CPLR § 3211(a)(4). CPLR § 3211(a)(4) gives the court discretion to dismiss a case when "there is another action pending between the same parties for the same cause of action in a court of any state." Malay v. City of Syracuse , 25 NY3d 323 (2015) . Defendants argue that Concrete cannot be certified as a class representative because there are at least seven related cases that predate the filing of the present action. The presence of previously filed cases that contain claims relating to the same trust, including one that is stylized as a representative suit, preclude the present lien law causes of action from being asserted here. See Premiere Electrical Constr. Corp. v. Security Nat'l Bank , 39 AD2d 967 (2d Dept. 1972) .
In opposition, Plaintiff argues that Defendants' ability to rely upon CPLR § 3211(a)(4) has been waived because the present motion was not filed in compliance with CPLR § 3211(e). CPLR § 3211(e) requires any motion filed under § 3211(a)(4) to be filed prior to the service of an Answer or preserved in that Answer as an affirmative defense. See Green Point Sav. Bank v. Clarke , 220 AD2d 384 (2d Dept. 1995) . A failure to properly raise or preserve this defense results in waiver. See Rennert Diana & Co. v. Kin Chevrolet, Inc. , 137 AD2d 589 (2d Dept. 1988). Here, it is undisputed that Defendants' motion was not timely filed pursuant to CPLR § 3211(e), and that the issue was not raised as an affirmative defense in Defendants' Answer. Accordingly, Plaintiff's § 3211(a)(4) motion to dismiss must be denied as waived. However, as the underlying Lien Law § 77 statutory prohibition against multiple cases cannot be waived, the motion is denied without prejudice to the filing of a motion for summary judgment, a motion to sever and transfer the lien law claim, or for other relief supportable by law.
Defendants also move to dismiss the second, third, fourth and seventh causes of action pursuant to CPLR § 3211(a)(7) on the basis that those claims are precluded by the existence of a binding contract. See e.g. Clark-Fitzpatrick, Inc. v. Long Island R. Co. , 70 NY2d 382 (1987) . The existence of a subcontract that controls the legal obligations between the parties is not in dispute as both parties rely upon the agreement in support of their respective arguments. However, despite the existence of a contract, Concrete asserts various causes of action sounding in the quasi contractual theories of quantum meruit, unjust enrichment, and for an account stated, together with a cause of action for common law indemnification.
The existence of a valid contract generally precludes recovery under quasi contractual theories for events arising out of the same subject matter. See EBC I, Inc. v. Goldman Sachs & Co. , 5 NY3d 11 (2005) ; see also VisionChina Media Inc. v. Shareholder Representative Servs., LLC , 109 AD3d 49 (1st Dept. 2013) . However, there are some circumstances where quasi contractual theories may be plead and advanced "in the alternative." See e.g. Winick Realty Group LLC v. Austin & Assoc. , 51 AD3d 408 (1st Dept. 2008) . When considering a motion to dismiss, the Court must construe all of the facts asserted by the non-moving party as true and afford them every favorable inference. See Dee v. Rakower , 112 AD3d 204 (2d Dept. 2013) .
Here, Defendants argue that the contract sufficiently covers the subject matter of the suit such that the quasi contractual claims should be dismissed as a matter of law. In opposition, Plaintiff argues that they should be able to plead quasi-contract theories in the alternative, as the scope of the contract is in dispute. Specifically, Plaintiff argues that the contractual payment amount agreed to by the parties was increased from $3,589,728 to $4,130,483 . (Pl Complaint Para. 14). Plaintiff further asserts that the Defendants have denied that the scope of work authorized under the contract included "pre-cast stairs installation, pavers work on walkways and asphalt installation."
After review of the moving papers filed by both parties, together with the contract at issue, Defendants' motion to dismiss Plaintiff's claims sounding in unjust enrichment and quantum meruit is hereby granted. Plaintiff's first argument regarding an alleged increase in the contract price is unpersuasive because if the parties "agreed" to the increase, then that agreement would arguably serve as an authorization for additional work under the original contract. As for their second argument, the scope of work to be completed is clearly outlined in the contract. Moreover, the contract indicates that "any extra work performed without notification and approval shall not be reimbursed." (Contract Pg. 2). While there may be a question of fact as to whether additional work or payment was authorized, that issue still falls within the scope of the parties' agreement. Therefore, Plaintiff's second and fourth causes of action are hereby dismissed as the parties' valid contract covers the entire scope of work to be completed by the Plaintiff. See Suverant LLC v. Brainchild, Inc. , 2021 NY Slip Op 00918 (1st Dept. 2021) ; see also Gargano v. Morey , 165 AD3d 889 (2d Dept. 2018) . This same theory applies to Defendant St. George as a third party nonsignatory to the valid and enforceable contract. See 22 Gramercy Park, LLC v. Michael Haverland Architect, P.C. , 170 AD3d 535 (1st Dept. 2019) ; see also Bellino v. Schwartz Padob Advertising v. Solaris Mktg. Group , 222 AD2d 313 (1st Dept. 1995).
However, as Plaintiff has alleged facts in his Summons and Complaint sufficient to establish a cause of action for an account stated, the motion to dismiss that cause of action is hereby denied. A cause of action for an account stated may be plead in the alternative to a breach of contract claim, although the same damages cannot be recovered twice. See First Class Concrete Corp. v. Rosenblum , 167 AD3d 989 (2d Dept. 2018) ; see also Episcopal Health Servs., Inc. v. POM Recoveries, Inc. , 138 AD3d 917 (2d Dept. 2016) ; Nouveau El. Indus., Inc. v. Glendale Condominium Town & Tower Corp. , 107 AD3d 965 (2d Dept. 2013).
Finally, Defendants move to dismiss Plaintiff's cause of action for "commonlaw indemnification." Plaintiff seeks indemnification against Defendant Empire and the BFC Defendants on the ground that Concrete was unable to pay its suppliers and subcontractors because it wasn't paid in compliance with the contract. However, the concept of commonlaw indemnification is not available for simple breach of contract damages based upon pure economic loss. See Chatham Towers, Inc. v. Castle Restoration & Construction., Inc. , 151 AD3d 419 (1st Dept. 2017) ; see also Galvin Bros., Inc. v. Town of Babylon, NY , 91 AD3d 715 (2d Dept. 2012). Accordingly, the Plaintiff's seventh cause of action is hereby dismissed.
Conclusion
This constitutes the Court's Decision on motion sequence numbers 001 and 002. Any issues raised in either of those motions, but not specifically addressed herein, are hereby denied without prejudice. As certain causes of action asserted by Plaintiff remain, the parties are hereby directed to serve initial discovery demands and appear for a preliminary conference on May 26, 2021 at 12:30 PM . Counsel are further directed to inform this Court if the motion to consolidate in Kings County is being re-filed in light of the present Decision, at which point the Preliminary Conference may be adjourned.