Amusement Indus. Inc. Dba Westland Indus. v. Stern

693 F.Supp.2d 301

AMUSEMENT INDUSTRY, INC. dba Westland Industries;and Practical Finance CO., Inc., Plaintiffs,

v. Moses STERN, aka Mark Stern; Joshua Safrin;First Republic Group Realty LLC; Ephraim Frenkel; and Land Title Associates Escrow, Defendants.

No. 07 Civ. 11586(LAK).

United States District Court, S.D. New York.

Decided: March 1, 2010.

COPYRIGHT MATERIAL OMITTED

Allen Phillip Sragow, Sragow & Sragow, Long Beach, CA, Eugene R. Scheiman, Mark Alan Bloom, Arent Fox LLP, New York, NY, for Plaintiffs.

Stephen R. Stern, Mark W. Geisler, Philip S. Ross, Hoffinger Stern & Ross LLP, New York, NY, Thomas Moss Wood, Nathan D. Adler, Neuberger, Quinn, Gielen, Rubin & Gibber, P.A., Baltimore, MD, for Defendants.

ORDER

LEWIS A. KAPLAN, District Judge.

The motion of defendant Buchanan Ingersoll & Rooney, PC [DI 133], to dismiss Safrin's amended third party complaint, which by agreement of the parties and order of Magistrate Judge Gorenstein, has been made applicable to Safrin's second amended third party complaint, is granted to the extent that Counts II, III, VII, VIE and X are dismissed and otherwise denied, substantially for the reasons stated in Judge Gorenstein's report and recommendation [DI 353] to which no objection has been filed.

SO ORDERED.

REPORT AND RECOMMENDATION

GABRIEL W. GORENSTEIN, United States Magistrate Judge.

Defendant Joshua Safrin filed a third-party complaint asserting claims against, inter alia, third-party defendants Buchanan, Ingersoll & Rooney, P.C. and Stephen Friedman (collectively, "Buchanan" or "BIR"). See Second Amended Third Party Complaint, filed Feb. 9, 2009 (Docket # 203) ("3d-Party Compl."). Buchanan has now moved to dismiss the third-party complaint as against it.¹ For the reasons stated below, the motion to dismiss should be granted in part and denied in part.

I. BACKGROUND

A. Law Governing Motions to Dismiss

A party may move to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) where the opposing party's complaint "fail[s] to state a claim upon which relief can be granted." While a court must accept as true all of the allegations contained in a complaint, that principle does not apply to legal conclusions. See Ashcroft v. Iqbal, __ U.S. __, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ("[A] plaintiffs obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.") (citation, internal quotation marks, and brackets omitted). In other words, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclu-sory statements, do not suffice," Ashcroft, 129 S.Ct. at 1949, and thus a court's first task is to disregard any conclusory statements in a complaint, id. at 1950.

Next, a court must determine if the complaint contains "sufficient factual matter" which, if accepted as true, states a claim that is "plausible on its face." Id. at 1949 (citation and internal quotation marks omitted); accord Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117, 121 (2d Cir.2007) ("a complaint must allege facts that are not merely consistent with the conclusion that the defendant violated the law, but which actively and plausibly suggest that conclusion"). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully." Ashcroft, 129 S.Ct. at 1949 (citations and internal quotation marks omitted). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct," a complaint is insufficient under Fed.R.Civ.P. 8(a) because it has merely "alleged" but not "show[n]... that the pleader is entitled to relief." Id. at 1950 (quoting Fed.R.Civ.P. 8(a)(2)).

If the allegations of a complaint show that the complained-of conduct was "not only compatible with, but indeed was more likely explained by, lawful" conduct, no claim for relief is stated. Id. at 1950; see also id. at 1951 (allegations in a complaint are rejected where there is an "obvious alternative explanation" for the conduct alleged that is more "likely").

While a court typically examines only the allegations of a pleading on a motion to dismiss, "[d]ocuments that are attached to the complaint or incorporated in it by reference are deemed part of the pleading and may be considered." Roth v. Jennings, 489 F.3d 499, 509 (2d Cir.2007) (citation omitted).

B. Allegations in the Third-Party Complaint

This case began when plaintiffs Amusement Industry, Inc. and Practical Finance Co., Inc. (collectively, "Amusement") sued a number of defendants, including Safrin, asserting that they were responsible for the plaintiffs' $13 million loss in a real estate transaction. Amusement brought claims against Safrin for fraud, negligent misrepresentation, conversion, conspiracy to commit conversion, and unjust enrichment. See First Amended Complaint, filed Mar. 19, 2009 (Docket # 240) ("Compl."), ¶¶ 70-100, 124-32. In his third-party complaint, Safrin alleges the following facts, which we presume to be true on this motion to dismiss. See Swier-kiewicz v. Sorema N.A., 534 U.S. 506, 508 n. 1, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002).

On June 29, 2007, third-party defendants Steven Alevy and Friedman—who "was acting, at all times mentioned herein, in his capacity as an attorney and shareholder of [Buchanan]," 3d-Party Compl. ¶ 5—"presented an investment opportunity to Amusement, purportedly on behalf of Safrin and others," although Safrin had not authorized either party to do so, id. ¶¶ 26-27. Indeed, while Friedman held himself out as Safrin's representative, "Safrin never retained or otherwise authorized Friedman to speak or act on his behalf in connection with the transactions described in the [underlying] Complaint." Id. ¶ 29.

On that same date, Steven Alevy drafted a "letter of intent," which was "signed by [defendant Moses] Stern on behalf of First Republic Corp.," and which "identifies as its parties First Republic Corp. and West-land Industries, the name under which Amusement does business." Id. ¶ 30. Safrin was not a party to the letter of intent. Id. ¶ 31. That day, Amusement wired $13 million into an escrow account. Id. ¶ 33.

Amusement and First Republic agreed to "work in good faith 'to finalize [their agreements]' " during the seven-day period following June 29, 2007. Id. 11 37. During this period, Amusement "drafted and for- warded three partnership agreements to Friedman for Safrin, among others, to sign in order 'to complete a transaction.' " Id, (emphasis omitted). Nonetheless, "[n]one of these draft agreements called for Safrin's signature." Id. ¶ 38.

On July 2, 2007, Alevy e-mailed the letter of intent to Friedman and Stern. Id. ¶ 32. On July 6, 2007,

Plaintiffs, through Friedman: (a) suggested a new Property Portfolio ownership structure; (b) inquired as to whether its $13,000, 000.00 contribution to the purchase should be a loan to Stern or to the entity that would be the owner of the Property Portfolio; (c) notified Safrin, among others, that the seven-day period had expired; and (d) noted that there should be about $4,000, 000.00 in reserve after the closing. Plaintiffs also instructed Friedman not to authorize the release of the $13,000, 000.00 held in escrow.

Id. ¶ 40. "Safrin was unaware of these negotiations and communications." Id. ¶ 41.

In July 2007, two loan agreements were executed by or on behalf of First Republic Realty LLC with Citigroup, purporting to name Safrin as guarantor. Id. ¶ 22. Safrin's signatures on those loan agreements are forgeries. Id. ¶23. On July 9, 2007, Amusement asked Friedman for a copy of the loan agreements. Id, ¶ 44. Friedman did not provide the documents but stated that First Republic Realty LLC "was now the purchasing entity." Id.

On July 11, 2007, Friedman provided documents to Amusement, including a promissory note for $13 million signed by Stern, as well as "an Escrow Agreement, and Agreements, purportedly signed by Stern and Safrin, assigning their respective LLC membership interests in First Republic LLC and the underlying LLC ownership structure, and eleven grant deeds constituting the Property Portfolio, all of which were signed on behalf of First Republic LLC." Id. ¶ 50 (citations omitted). "Safrin's signature on the 'Agreement' that purportedly assigns his LLC interests... is a forgery.... Moreover, Safrin's forged signature, as it appears in the document, is not witnessed, as required by the form itself." Id. ¶ 51.

Safrin's claims against Buchanan consist of: (1) indemnification and contribution (Count I); (2) implied contractual indemnification (Count III); (3) "Breach of Duty as Agent/Attorney" (Count V); (4) violation of Safrin's right of privacy under New York Civil Rights Law §§ 50-51 (Count VII); (5) conspiracy to violate New York Civil Rights Law §§ 50-51 (Count IX); (6) violation of the California common law right of privacy/commercial misappropriation (Count VIII); and (7) conspiracy to violate Safrin's right to privacy under California common law (Count X). In addition, Safrin seeks a declaratory judgment (Count II) that:

(a) no attorney-client or other principal-agency relationship existed between Safrin and Friedman [and/or] BIR... in connection with the transactions alleged in the Complaint; (b) Friedman [and] BIR... had no authority, whether actual or apparent, to act on Safrin's behalf in connection with the transactions alleged in the Complaint; and (c) Safrin did not ratify any of the representations or conduct allegedly made or undertaken on his behalf by Friedman [and/or] BIR... in connection with the transactions alleged in the Complaint.

Id. ¶ 83.

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