Opinion
No. 2024-50905 Index No. 650839/2017
06-11-2024
Shelley Rubin, Plaintiff, v. Nisha Sabharwal, MOHIT SABHARWAL, VASTRA INC., OM VASTRA LLC, and OM VASTRA MIAMI LLC, Defendants.
Certilman Balin Adler & Hyman, LLP, East Meadow, NY (Nicole Milone, Jaspreet S. Mayall, and Paul B. Sweeney of counsel), for defendants The Law Offices of Neal Brickman, P.C., New York, NY (Ethan Leonard and Neal Brickman of counsel), for plaintiff
Unpublished Opinion
Certilman Balin Adler & Hyman, LLP, East Meadow, NY (Nicole Milone, Jaspreet S. Mayall, and Paul B. Sweeney of counsel), for defendants
The Law Offices of Neal Brickman, P.C., New York, NY (Ethan Leonard and Neal Brickman of counsel), for plaintiff
Gerald Lebovits, J.
This action arises from the sale of supposed museum-quality Himalayan and Indian jewelry to plaintiff, Shelley Rubin. Defendants, Vastra Inc., Nisha Sabharwal, and Mohit Sabharwal, sold plaintiff numerous pieces of jewelry between 2009 and 2014. (See NYSCEF No. 1 at ¶ 18 [complaint].) According to plaintiff, Ms. Sabharwal held herself out as an expert in "Indian art and jewelry" and represented to plaintiff that the jewelry was monetarily and historically valuable. (Id. at ¶¶ 18, 21.) Plaintiff and Ms. Sabharwal also maintained a close friendship.
Plaintiff paid approximately $18 million for the jewelry. Defendants gave plaintiff invoices memorializing the contracts between Vastra Inc. and plaintiff. (NYSCEF No. 1 at ¶ 74.)
This court previously dismissed OM Vastra LLC and OM Vastra Miami LLC from this action. (See Rubin v Sabharwal, 2018 NY Slip Op 30293 [U], *6 [Sup Ct, NY County 2018], affd 171 A.D.3d 580, 580 [1st Dept 2019].)
In 2014, plaintiff sought to appraise some of the jewelry for resale, insurance, and estate-planning purposes. (NYSCEF No. 270 at ¶ 18.) Plaintiff brought some of the jewelry to an appraiser, who never completed the appraisal. (Id.) In 2016, plaintiff brought some of the jewelry to a second appraiser. (Id. at ¶ 19.) The second appraiser concluded that the jewelry was not valuable. (Id. at ¶ 20.)
Plaintiff then obtained counsel. (See NYSCEF No. 270 at 5 [plaintiff's affidavit].) Plaintiff demanded that Ms. Sabharwal "retake possession of the pieces" and issue a refund. (Id.) Plaintiff continued to obtain evaluations for various pieces of the jewelry. (Id.)
Plaintiff brought this action in February 2017. (See NYSCEF No. 1 [summons and complaint].) Plaintiff raises causes of action for fraud and conspiracy to commit fraud, breach of contract and breach of the duty of good faith and fair dealing, unilateral mistake or rescission, unjust enrichment, alter-ego liability, and fraudulent conveyance. (Id.)
In 2018, this court dismissed plaintiff's fraud-in-the-inducement and conspiracy-to-commit fraud claims. (See Rubin, 2018 NY Slip Op 30293 [U] at *3.) This court also dismissed plaintiff's claims for fraudulent conveyance and alter-ego liability. (Id. at *4.) On appeal, the Appellate Division, First Department, affirmed. The First Department held that "[p]laintiff failed to assert sufficient facts to establish reasonable reliance and that she exercised due diligence to determine the value of the property." (Rubin, 171 A.D.3d at 580.) The Court further held that Ms. Sabharwal's alleged misrepresentations "that the items were of museum quality, of highest quality, and generational-ultimately [pertained] to the value of the jewelry, [and was] nonactionable opinion that provides no basis for a fraud claim." (Id. at 581 [internal quotation marks omitted].)
Defendants now move under CPLR 3212 for summary judgment dismissing plaintiff's remaining claims. (NYSCEF No. 208 [notice of motion]; NYSCEF No. 264 [memorandum in support].) The motion is granted.
Defendants also move to dismiss the individual Sabharwal defendants from the action. The court, however, dismisses the action against all the defendants on other grounds and therefore does not reach this request.
DISCUSSION
I. Breach of Contract (Third Cause of Action)
For her third cause of action, plaintiff claims that defendants breached the contracts by providing nonconforming jewelry. Under UCC 2-608 (1), a buyer may revoke acceptance of goods whose "nonconformity substantially impairs its value." The revocation "must occur within a reasonable time after the buyer discovers or should have discovered the ground for it," and "[i]t is not effective until the buyer notifies the seller of it." (UCC 2-608 [2].) Whether the buyer provided notice within a reasonable time "depends on the circumstances of the transaction." (Arkwin Indus. Inc. v Hadco Aluminum & Metal Corp., 123 A.D.2d 806, 807 [2d Dept 1986], citing UCC 1-204 [2].) But "when only one inference may be drawn as to the reasonableness of the time in which defendant rejected the goods, it becomes a question of law." (Tabor v Logan, 114 A.D.2d 894, 894 [2d Dept 1985].)
The parties do not dispute that plaintiff accepted the jewelry. Defendants argue that plaintiff failed timely to revoke her acceptance of the jewelry and therefore that plaintiff's breach-of-contract claim must be dismissed. (NYSCEF No. 264 at 6-7.) Defendants maintain that plaintiff's failure to notify defendants of any purported nonconformities until 2016 was unreasonable as a matter of law. (Id. at 8-9.) Defendants argue that plaintiff's failure to discover latent defects by an earlier date does not excuse her delay in notifying defendants of the defects. (See Rosen v Spanierman, 711 F.Supp. 749, 754-755 [SD NY 1989] ["[I]n the absence of an explicit promise of future performance-a cause of action is lost after four years regardless of the aggrieved party's lack of knowledge of the breach."] [internal quotation marks omitted], vacated in part 894 F.2d 28 [2d Cir 1990].) Defendants contend that plaintiff could have appraised the jewelry at an earlier time. (NYSCEF No. 264 at 8-9.)
Plaintiff argues that her revocation was timely. (NYSCEF No. 287 at 14.) Plaintiff claims she acted within a reasonable time by demanding "rescission approximately one month after [she] first learned that a limited number of the items that she... purchased from [Ms. Sabharwal] were non-conforming." (Id.) Regardless, plaintiff says, the timeliness of that demand is an issue of fact that a jury should decide. (Id.; see Wilson Trading Corp. v David Ferguson, Ltd., 23 N.Y.2d 398, 406 [1968] [denying summary judgment on the question whether plaintiff timely and properly revoked acceptance].)
The problem with this argument is that it is ultimately grounded in the asserted special relationship between plaintiff and Ms. Sabharwal. That is, plaintiff is arguing that she acted reasonably in waiting as long as she did to have the jewelry appraised and to revoke her acceptance, because her close friendship with Ms. Sabharwal led her to trust Ms. Sabharwal's self-portrayal as an expert in Indian jewelry and representations that the jewelry was authentic. (See NYSCEF No. 270 at ¶¶ 7, 12, 13.) This argument is ultimately no different from plaintiff's contention in unsuccessfully opposing dismissal of her fraud claims that she had reasonably relied on Ms. Sabharwal's representations.
Plaintiff does not provide any other explanation for her delay in seeking to verify the condition and authenticity of the jewelry. Nor does she claim that discovering the true nature of the jewelry would have been difficult to accomplish had she sought to do so earlier than she did. (Cf. Tomasino v Estee Lauder Cos. Inc., 44 F.Supp.3d 251, 261 [ED NY 2014] [finding on a motion to dismiss that 2-3 years was an unreasonable delay when plaintiff did not allege she used the product and did "not posit any reason why the products' alleged shortcomings would not have been readily discoverable so that she could have provided notice of the alleged breach of warranty without delay"].)
Defendant's motion for summary judgment dismissing plaintiff's breach-of-contract claim is granted.
The court does not reach the parties' arguments about the statute of limitations, plaintiff's production of jewelry for inspection, parol evidence, or whether the jewelry was nonconforming.
II. Breach of the Covenant of Good Faith and Fair Dealing (Third Cause of Action)
In connection with her breach-of-contract claim, plaintiff raises a claim for breach of the covenant of good faith and fair dealing. The covenant "embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract." (111 W. 57th Inv. LLC v 111 W57 Mezz Inv. LLC, 220 A.D.3d 435, 435 [1st Dept 2023].) A "claim for breach of the implied covenant of good faith and fair dealing [may be] dismissed as duplicative, [when] it arises from the same facts and seeks the same damages as the contract claim." (Polaris Venture Partners VI L.P. v AD-Venture Capital Partners L.P., 179 A.D.3d 548, 548 [1st Dept 2023].)
Defendants contend that "[t]here are no facts showing that Defendants took any action to prevent performance of the contract or to withhold its benefits" and "that Plaintiff willfully failed on her own accord to have the jewelry appraised timely." (NYSCEF No. 264 at 16 [internal quotation marks omitted].) Defendants further argue that this claim duplicates plaintiff's breach-of-contract claim. Defendants also argue that plaintiff is not entitled to remedies under the UCC, because she did not timely notify defendants of the defects. (See UCC 2-607 .) In contrast, plaintiff argues that Ms. Sabharwal and Vastra Inc. breached the covenant of good faith and fair dealing by knowingly selling plaintiff inauthentic jewelry "that would clearly frustrate the purpose of the agreement." (NYSCEF No. 287 at 17.)
The parties agree that the UCC governs this action. The UCC equivalent of the covenant of good faith and fair dealing is the statutory obligation of good faith. (See UCC 1-304 ; Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP v Matthew Bender & Co. Inc., 2018 NY Slip Op 30294 [U], *12 [Sup Ct, NY County 2018] [equating the UCC's express obligation of good faith and the common-law implied covenant of good faith and fair dealing]) affd 172 A.D.3d 405 [1st Dept 2019], affd 37 N.Y.3d 169 [2021].) Notably, the UCC's obligation of good faith cannot constitute an independent cause of action. A "[p]laintiff may allege bad faith as part of its breach of contract claim, but bad faith does not provide an independent basis for recovery given that it is a 'disqualifying factor as distinguished from a liability-imposing factor.'" (Quail Ridge Assoc. v Chem. Bank, 162 A.D.2d 917, 918-919 [3d Dept 1990], quoting Super Glue Corp. v Avis Rent A Car Sys., 132 A.D.2d 604 [2d Dept 1987] [internal citation omitted].) The UCC "does not permit recovery of money damages for not acting in good faith where no other basis of recovery is present." (Super Glue, 132 A.D.2d at 606.) Given this court's conclusion that plaintiff is not entitled to recover for breach of contract, plaintiff may not recover separately for breach of the obligation of good faith.
Defendant's motion for summary judgment dismissing plaintiff's breach-of-covenant claim is granted.
III. Rescission (Fourth Cause of Action)
In her fourth cause of action, plaintiff seeks to rescind the contracts. Defendants argue that plaintiff "failed to revoke her acceptance of the jewelry in a reasonable time, [and therefore] is barred from any remedy, including rescission" under the UCC. (NYSCEF No. 264 at 16 [internal quotation marks omitted].) Defendants further argue that plaintiff's rescission claim hinges on the allegations that plaintiff pleaded in her previously dismissed fraud-based claims. (Id. at 17.) Plaintiff counters that defendants provided plaintiff with fake jewelry and deprived plaintiff of the benefit of the contract. (NYSCEF No. 287 at 18.) Plaintiff argues that, under the UCC, she is entitled to rescind the contracts. (Id. at 18-19.)
Plaintiff is not entitled to a rescission remedy. The UCC does not differentiate between a revocation-of-acceptance and rescission claim. (See UCC 2-608 , Comment 1.) Plaintiff's rescission claim therefore is subject to dismissal as duplicative of her breach-of-contract claim. Moreover, this court agrees with defendants that plaintiff's proffered basis for rescission relies on the same allegations that this court (and the First Department) already held to be insufficient in the context of plaintiff's fraud claims. The motion for summary judgment to dismiss plaintiff's claim for rescission is granted. The court does not reach the parties' arguments concerning plaintiff's exercise of ordinary care or the impact of missing jewelry on this claim.
IV. Unjust Enrichment (Fifth Cause of Action)
In her fifth cause of action, plaintiff claims that defendants were unjustly enriched at plaintiff's expense. Defendants argue that plaintiff's unjust enrichment claim is duplicative of her breach-of-contract claim. (NYSCEF No. 264 at 19.) Defendants contend that the contracts governing the transactions between the parties precludes plaintiff from recovering through an unjust-enrichment claim. (Id.) Plaintiff counters that "it should be left for the jury to determine whether the evidentiary facts justify" this claim (NYSCEF No. 287 at 20.) Plaintiff also argues that an unjust enrichment may be pleaded in the alternative. (Id.) Defendants are correct.
The transactions between the parties were memorialized with invoices. Given that "[a] party may not recover in... unjust enrichment where the parties have entered into a contract that governs the subject matter" (Pappas v Tzolis, 20 N.Y.3d 228, 234 [2012] [internal quotation marks omitted]), defendant's motion for summary judgment dismissing plaintiff's unjust-enrichment claim is granted.
The court does not reach the parties' remaining arguments about plaintiff's reliance on Ms. Sabharwal's alleged misrepresentations or the statute of limitations.
Accordingly, it is
ORDERED that defendants' motion for summary judgment to dismiss the remainder of plaintiff's complaint is granted, and plaintiff's complaint is dismissed, with costs and disbursements as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further
ORDERED that defendants shall serve a copy of this order with notice of its entry on plaintiff; and shall serve notice of entry in accordance with this court's e-filing protocol (which may be accessed on the e-filing page of the court's website, www.nycourts.gov/supctmanh) on the office of the General Clerk and on the Office of the County Clerk, which shall enter judgment accordingly.