JF Capital Advisors, LLC v. Merchants Hosp.

2022 NY Slip Op 34339(U)

JF CAPITAL ADVISORS, LLC, Plaintiff, v. MERCHANTS HOSPITALITY LLC, 1101-43 AVE ACQUISITION LLC, ROCHE ENTERPRISES LLC, and HG MANAGEMENT, LLC, Defendants.

Index No. 651394/2020, MOTION SEQ. Nos. 001, 002

Supreme Court, New York County

December 19, 2022

Unpublished Opinion

MOTION DATE 02/25/2021, 02/25/2021

DECISION + ORDER ON MOTION

HON NANCY M. BANNON:

The following e-filed documents, listed by NYSCEF document number (Motion 001) 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 22 24, 25, 26, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51 52, 53, 54, 55, 56, 94, 95, 96, 97, 98, 99, 100, 101, 102 were read on this motion to/for DISMISS.

The following e-filed documents, listed by NYSCEF document number (Motion 002) 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 83, 84, 85, 86, 87, 88, 89, 90, 91, 92, 93 were read on this motion to/for DISMISS.

I. INTRODUCTION

In this action to recover $225,714.91 in damages for, inter alia, breach of contract, unjust enrichment, account stated, and fraud, the defendant Merchants Hospitality, Inc. (MHI), incorrectly sued herein as Merchants Hospitality, LLC, (SEQ 001) and the defendants Roche Enterprises, LLC (Roche), and HG Management, LLC (HG), (SEQ 002) move pursuant to CPLR 3211(a) to dismiss the complaint as against them based on a defense founded on documentary evidence (CPLR 3211[a][1]) and for failure to state a cause of action (CPLR 3211[a][7]). The plaintiff opposes the motions and cross-moves (SEQ 001) pursuant to CPLR 3025 to amend the caption to substitute MHI for Merchants Hospitality, LLC. The motion of MHI is granted in part, the motion of Roche and HG is granted in part, and the plaintiff's cross-motion is granted.

II. BACKGROUND

The following allegations are drawn from the plaintiff's complaint, unless otherwise noted, and are assumed to be true solely for purposes of this motion. See Grassi & Co. v Honka, 180 A.D.3d 564 (1^st Dept. 2020).

The plaintiff, a boutique investment advisory firm specializing in the hotel and hospitality industry, avers that it provided its services to the defendants between March and December 2019, in connection with two hotel properties co-owned by certain of the defendants (the hotels). The first hotel property, known as the Z Hotel, was located at 11-01 43^rd Avenue in Long Island City. The second hotel property, known as the Cachet Hotel, was located at 510 West 42^nd Street in midtown Manhattan.

The plaintiff's CEO, Jonathan Falik (Falik) met with Adam Hochfelder (Hochfelder), MHI's former Managing Director of Real Estate Acquisitions and Development, and Richard Cohn (Cohn), Founding Partner and General Counsel of MHI, at MHI's offices on March 29, 2019, to discuss the plaintiff's retention and scope of work for the hotels. On March 31, 2019, the plaintiff sent MHI a draft engagement letter covering work the plaintiff was to perform, with an initial retainer of $70,000.00, plus success fees and ongoing monthly asset management fees. On April 8, 2019, Falik and other officers of the plaintiff met with Hochfelder and Abraham Merchant (Merchant), MHI's CEO, at the plaintiff's offices to further discuss the plaintiff's retention and scope of work. The same day, the plaintiff updated the draft engagement letter and sent the same to MHI. On May 10, 2019, Hochfelder asked Falik to instead prepare two separate engagement letters, one for work on the Z Hotel, and one for work on the Cachet Hotel. In connection with such request, Hochfelder sought the division of the $70,000.00 retainer fee between work for the Z Hotel, which would require a $20,000.00 retainer, and work for the Cachet Hotel, which would require a $50,000.00 retainer. Hochfelder further requested a reduction in overall fees proposed and that the engagement letter applicable to work for the Z Hotel (the Z Hotel engagement letter) name 1101-43 Ave Acquisition, LLC (1101-43 Ave Acquisition) as the party to be bound, rather than MHI.

On May 10, 2019, the plaintiff sent two revised engagement letters to Hochfelder, on the terms requested. Specifically, the Z Hotel engagement letter provided for a $20,000.00 retainer and the engagement letter applicable to work for the Cachet Hotel (the Cachet Hotel engagement letter) provided for a $50,000.00 retainer. The engagement letters were otherwise substantively identical. Each provided that the plaintiff would perform services for the Z Hotel and the Cachet Hotel, respectively, in three phases, consisting of (1) "deep dive asset performance and analysis on repositioning/manager replacement" (Phase 1), (2) "management/brand repositioning" (Phase 2), and (3) "ongoing management services" (Phase 3). Retainer fees were to be paid as compensation for Phase 1 work. Phase 2 work was to be compensable by a success fee of $75,000.00, upon the execution of new definitive documents with an operator or brand and an actual take-over of operations. Phase 3 work was to be compensable by a monthly fee of 1.0% of the subject hotel's monthly revenue.

The engagement letters provided that the plaintiff's work on all three phases would commence "upon execution" of the subject engagement letter. Notwithstanding, on May 10, 2019, Hochfelder advised Falik that the plaintiff should commence work immediately and that both engagement letters would be signed in due course. The plaintiff thus began performing substantial services for both hotels under all three phases of the engagement letters.

On May 19, 2019, Merchant signed the Z Hotel engagement letter on behalf of 1101-43 Ave Acquisition. The plaintiff performed all Phase 1 and Phase 2 services for the Z Hotel and identified a new management company for the Z Hotel. On June 29, 2019, the defendants retained the new management company to take over operations of the Z Hotel. The plaintiff also performed all Phase 3 services for the Z Hotel.

In June 2019, the defendants paid the plaintiff the $20,000.00 retainer fee. On September 2, 2019, the plaintiff invoiced MHI for $75,000.00 owed as a success fee for Phase 2 work, and $15,132.56 owed for Phase 3 work through August 2019. On November 4, 2019, the plaintiff invoiced MHI for an additional $10,582.35 owed for Phase 3 work from September through October 2019. However, the defendants have not paid the plaintiff any amount owed for Phase 2 and Phase 3 work performed in connection with the Z Hotel. Nor have the defendants objected to the amounts provided in the invoices.

The Cachet Hotel engagement letter, which listed the plaintiff and MHI as parties, was never executed. Nonetheless, the plaintiff performed all Phase 1 and Phase 2 services in the Cachet Hotel engagement letter and identified a new management company for the Cachet Hotel. On September 12, 2019, the defendants retained the new management company to take over operations of the Cachet Hotel.

In the course of its work in connection with the Cachet Hotel, the plaintiff learned that the Cachet Hotel was jointly owned by MHI and Roche, and operated through Roche's subsidiary, HG. Accordingly, the plaintiff "communicated and coordinated" all of its work "by and through" MHI, Roche, and HG. On June 20, 2019, Jacob Bracken (Bracken), a representative of Roche and HG, told Falik that the Cachet Hotel engagement letter would not be signed and that neither the retainer nor a success fee would be paid to the plaintiff.

On March 2, 2020, this action ensued. The plaintiff states claims arising out of the engagement letters for monies due (first cause of action), breach of contract (second and third causes of action), quantum meruit (fourth cause of action), unjust enrichment (fifth cause of action), promissory estoppel (sixth cause of action), account stated (seventh cause of action), and fraudulent misrepresentation (eighth cause of action). The plaintiff also seeks contractual attorney's fees under indemnification provisions included in the engagement letters (ninth cause of action). 1101-43 Ave Acquisition filed an answer on August 31, 2020. The remaining defendants filed the instant motions.

III. DISCUSSION

A. Motions to Dismiss

When assessing the adequacy of a pleading in the context of a motion to dismiss under CPLR 3211(a)(7), the court's role is "to determine whether [the] pleadings state a cause of action." 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 N.Y.2d 144, 151-152 (2002). To determine whether a claim adequately states a cause of action, the court must "liberally construe" it, accept the facts alleged in it as true, accord it "the benefit of every possible favorable inference" (id. at 152: see Romanello v Intesa Sanpaolo, S.p.A., 22 N.Y.3d 881 [2013]; Simkin v Blank, 19 N.Y.3d 46 [2012]), and determine only whether the facts, as alleged, fit within any cognizable legal theory. See Hurrell-Harring v State of New York, 15 N.Y.3d 8 (2010); Leon v Martinez, 84 N.Y.2d 83 (1994).

On a motion to dismiss based on documentary evidence, dismissal is appropriate where "the documentary evidence utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law." Goshen v Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326 (2002) (internal citation omitted). A particular paper will qualify as "documentary evidence" only if it satisfies the following criteria: (1) it is "unambiguous"; (2) it is of "undisputed authenticity"; and (3) its contents are "essentially undeniable." See VXI Lux Holdco S.A.R.L. v SIC Holdings, LLC, 171 A.D.3d 189 (1^st Dept. 2019).

MHI contends that the Z Hotel engagement letter, which it submits in support of its motion, shows MHI is not a proper party to this action. Specifically, MHI observes that...