Guzzone v. Zazza

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LISA GUZZONE v. MICHAEL ZAZZA

No. 19-CV-6202 (RER) (JAM)

United States District Court, E.D. New York

March 29, 2024

MEMORANDUM & ORDER

RAMON E. REYES, JR., U.S.D.J.

Plaintiff Lisa Guzzone (“Plaintiff” or “Guzzone”) commenced this action against her nephew defendant Michael Zazza (“Defendant” or “Zazza”) in connection with investments associated with the development of 11 Broadway, Brooklyn, New York (the “Property” or the “Project”). (See ECF No. 1 (“Compl.”)). Before the Court is Plaintiff's Motion for Summary Judgment (ECF No. 50 (“Pl.'s Mot.”)) and Defendant's Cross-Motion for Summary Judgment. (ECF No. 51 (“Def.'s Mot.”)). As discussed more fully below, all of Plaintiff's claims are untimely, and therefore, Defendant's Cross-Motion is granted. Consequently, Plaintiff's Motion is denied.

BACKGROUND

I. Factual Background^[1]

Guzzone a Brooklyn resident at the time of commencing this action and now a full-time resident of Fort Lauderdale, Florida, is Zazza's aunt. (Compl. ¶ 6; ECF No. 51-1 (“Def.'s 56.1”) ¶¶ 52-53; ECF No 52 (“Pl.'s Counter 56.1”) ¶¶ 52-53). She has a college degree and attended law school for one year. (Def.'s 56.1 ¶ 55; Pl.'s Counter 56.1 ¶ 55). For the past twenty to thirty years, Guzzone has worked in the family property management business. (Def.'s 56.1 ¶¶ 56-57; Pl.'s Counter 56.1 ¶¶ 56-57; ECF No. 5115 (“Pl.'s Dep Tr.”) at 9:13-20:08). She briefly held a real estate license in 1996. (Def.'s 56.1 ¶ 64; Pl.'s Counter 56.1 ¶ 64; Pl.'s Dep. Tr. at 19:04-10). As recently as 2022, Plaintiff manages three multi-family buildings located in Brooklyn. (Def.'s 56.1 ¶¶ 59-63; Pl.'s Counter 56.1 ¶¶ 59-63; Pl.'s Dep. Tr. at 12:13-13:02).

Zazza a New Jersey resident, formed Eleven Broadway Managing Member, LLC (“Eleven Broadway”), a Delaware limited liability company (“LLC”), on November 6, 2006. (Compl. ¶ 7; Def.'s 56.1, Ex. C at 1). At the time of formation, the purpose of Eleven Broadway was “to serve as a managing member of ZAGS Broadway, LLC . . ., a single purpose entity that will acquire, own, lease, sublease, operate, manage, improve, finance and sell [the Property].” (Def.'s 56.1, Ex. C at 6). ZAGS Broadway, LLC (“ZAGS”) is a Delaware LLC that was also formed on November 6, 2006. (Def.'s 56.1, Ex. H). ZAGS has two members: GS 11 Broadway Member, LLC (“GS”) and Eleven Broadway. (ECF No. 50-1 (“Pl.'s 56.1”) ¶ 6; Def.'s 56.1 ¶ 6). GS represents Goldman Sachs' interest in the Project. (Def.'s 56.1, Ex. H at 17, 71). Upon formation, ZAGS' purpose was to acquire, own, deal with, operate, and develop the Property. (Id. at 23). On that same date, ZAGS purchased the Property for $28,500,000. (ECF No. 50-3 (“Pl.'s Decl.”), Ex. 10). ZAGS also obtained a $22,000,000 mortgage loan for the Property. (Pl.'s Decl., Ex. 8).

The following year, on November 16, 2007, ZAGS' Operating Agreement was amended (the “Amended ZAGS Agreement”), and GS became the managing member, while Eleven Broadway maintained status as a non-managing member. (Def.'s 56.1, Ex. I (“Amended ZAGS”) at 1, 6). Under the Amended ZAGS Agreement, ZAGS' new corporate purpose became to own a membership interest in 11 Broadway Owner (“Owner”). (Id.). Owner is a Delaware LLC comprised of ZAGS as a minority member and L&M 11 Broadway, LLC (“L&M”) as the managing member. (Pl.'s 56.1 ¶ 7; Def.'s 56.1 ¶ 12; Pl.'s Decl., Ex. 19). Through their relationship in Owner, ZAGS established a joint venture with L&M, a New York LLC, to develop the Property into a mixed-use residential building, with retail space, parking, and market-rate and affordable residential units. (Amended ZAGS at 1, 16). In line with this rearrangement, ZAGS sold the Property to Owner on November 16, 2007. (Pl.'s 56.1 ¶ 7; Def.'s 56.1 ¶ 12; Pl.'s Decl., Ex. 11.).

On June 22, 2010, Owner sold the Property to 11 Broadway HP LIB Housing Development Fund Company, Inc. (“LIB”) for ten dollars and “other good and valuable consideration” for the purpose of refinancing the Property. (Pl.'s 56.1 ¶ 14; Def.'s 56.1 ¶ 14; Pl.'s Decl., Ex. 13 at 2, 10-12). The real property transfer reports attached to the deed indicate that the full sale price was $39,928,508. (Pl.'s Decl., Ex. 13 at 10-12). LIB is a corporation organized under Article XI of the New York Private Housing Finance Law and Section 402 of the Not-for-Profit Corporation Law. (Id. at 2).

In September 2010, Guzzone learned of the opportunity to invest in Eleven Broadway. (Pl.'s 56.1 ¶¶ 16-17). She characterizes Zazza's actions as a solicitation. (Id.). Plaintiff asserts that Defendant stated that she would receive a twenty-two percent return on her investment within three years, that Eleven Broadway owned the Property, that demolition and excavation work on the Property was complete, and that Eleven Broadway's purpose was to develop a fifteen-story building on the Property-all of which Defendant knew to be false. (Id. ¶¶ 16-19, 21-25, 31, 35; Pl.'s Counter 56.1 ¶ 75). Guzzone also asserts that Zazza failed to disclose the full corporate structure of the Project, including the role of Goldman Sachs and L&M, and the loans on the Property. (Pl.'s 56.1 ¶¶ 27-28, 40, 45). Meanwhile, Zazza maintains that no solicitation occurred, nor that he made any false statements. (Def.'s 56.1 ¶¶ 16, 18, 22-23, 29, 32, 49).

On September 30, 2010, Plaintiff and Defendant entered into a “Contract for Sale of Membership Interest,” and in exchange for an initial investment of $250,000, Plaintiff received 2.5 percent of the membership interest in Eleven Broadway. (Pl.'s Decl., Ex. 3). By way of the same contract, Guzzone's acquaintance George Spanakos (“Spanakos”) also invested $250,000 on behalf of his daughters Alexandria and Andrea Spanakos in exchange for 2.5 percent of Eleven Broadway. (Id.). Spanakos is a lawyer who represented Plaintiff's father once and her brother on several separate occasions, but he did not act in his legal capacity throughout this investment. (Def.'s 56.1, Ex. M at 8:1210:21; 12:04-10). Plaintiff reasoned that this was a sound investment because she trusted Defendant as her nephew, knew of Defendant's past success in real estate, relied on Spanakos' experience, and believed the agreement to be “simple.” (Def.'s 56.1 ¶¶ 7173; 75-76; Pl.'s Counter 56.1 ¶¶ 71-73; 75-76).

After Guzzone and Spanakos invested, Eleven Broadway's operating agreement was amended (“Restated Agreement”) to reflect the new ownership. (Pl.'s Decl., Ex. 7 (“Restated Agreement”) at 1). The Restated Agreement states that Eleven Broadway's purpose is “to serve as a managing member of [ZAGS,] . . . a single purpose entity that will acquire, own, lease, sublease, operate, manage, improve, finance and sell [the Property].” (Id.). While Guzzone asserts that this was a fraudulent misstatement that Zazza knew to be false (Pl.'s 56.1 ¶ 25), Zazza contends that this was a typographical error in the Restated Agreement, which was prepared by Goldman Sachs, and that he never affirmatively stated that Eleven Broadway was a managing member of ZAGS. (Def.'s 56.1 ¶ 19).

A little over a year later, on November 8, 2011, in response to what Plaintiff again characterizes as a solicitation, she entered into another “Contract for Sale of Membership Interest” with Defendant. (Pl.'s 56.1 ¶ 32; Pl.'s Decl., Ex. 4). Guzzone made a second investment of $250,000 in exchange for 2.4 percent member interest in Eleven Broadway for herself and for 0.6 percent membership interest on behalf of her daughter. (Pl.'s 56.1 ¶ 32; Def.'s 56.1 ¶ 32; Pl.'s Decl., Ex. 4).

Over the years, Guzzone followed up with Zazza about when she would receive a return on her investment. (Pl.'s Decl., Ex. 15 at 1-4). For example, on February 7, 2015, she wrote, “Please lets [sic] meet to discuss about Goldman Sacs [sic]. I really need to see statements from them.” (Id. at 3). Again, on October 12, 2016, Guzzone wrote:

please send me [an] email with all paper work and any contact from you and Goldman sacs [sic] [.] I haven't received anything in regard to my 500,000 held with them and you . . . I really would feel better if I could have my full money back . . . I don't want to have to call [Spanakos] to ask him he gets offended that you're not telling me he says he shouldn't be the person in the middle of us. He feels that you should be much more attentive to me as your aunt and your family and it worries him that I keep telling him you're not telling me anything so please [Zazza] can you correct that?

(Id. at 4). Zazza responded to these emails with general updates or that he was waiting on more information from Goldman Sachs. (Id. at 15-18). Defendant sent multiple emails to Goldman Sachs attempting to get updates and answers about the Property. (Id. at 514). Eventually, on July 26, 2018, Defendant provided Plaintiff with a copy of a letter from Goldman Sachs (the “2018 Goldman Sachs Letter”), which stated that as a result of the various entities involved in the Project, Eleven Broadway's interest in the Property was subordinate to approximately twenty-five million dollars of other debt that is due to mature in 2051. (Pl.'s 56.1 ¶¶ 39-40; Def.'s 56.1 ¶¶ 39-40; Pl.'s Decl., Ex. 16 (“2018 GS Letter”)). Guzzone claims that upon receipt of the 2018 Goldman Sachs Letter, she realized something was awry and that she was never going to receive any return on her investment. (Pl.'s 56.1 ¶ 44-45).

Subsequently, on December 16, 2019, LIB obtained another mortgage on the property for $6,500,000. (Pl.'s Decl., Ex. 14).

Since her investment, Plaintiff never received IRS K-1 forms showing Eleven Broadway's profits and losses, which Defendant claims Goldman Sachs never provided to him. (Pl.'s 56.1 ¶ 37; Def.'s 56.1 ¶ 37). Further, Guzzone argues that Zazza, knowing that there would not be any profit based on ownership...