JTRE Manhattan Ave. LLC v. Capital One, N.A.

585 F.Supp.3d 474

JTRE MANHATTAN AVENUE LLC and JTRE 807 Manhattan Avenue LLC, Plaintiffs,

v.CAPITAL ONE, N.A., Defendant.

21-CV-5714 (VEC)

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

Signed February 9, 2022

Amy Diana Carlin, Rosen Greenberg Blaha LLP, Lawrence S. Rosen, Stanislav Sharovskiy, LaRocca Hornik Rosen & Greenberg LLP, Michael Anthony Pensabene, Rosenberg & Estis, P.C., New York, NY, for Plaintiffs.

Brooks H. Spears, McGuireWoods LLP, Tysons, VA, Bryan A. Fratkin, McGuireWoods LLP, Richmond, VA, John D. Wilburn, McGuire Woods, LLP, McLean, VA, James Alexander Kellar, McCarter & English, LLP, Newark, NJ, for Defendant.

OPINION & ORDER

VALERIE CAPRONI, United States District Judge:

Plaintiffs JTRE Manhattan Avenue LLC and JTRE 807 Manhattan Avenue LLC ("JTRE") are New York-based limited liability companies that purchased the commercial building located at 807 Manhattan Avenue, Brooklyn, New York, in 2018, during which time Defendant Capital One, N.A. ("Capital One") was the sole tenant. Plaintiffs bring this action for breach of contract and negligent misrepresentation against Capital One for failing to disclose preexisting landlord defaults to JTRE prior to their purchase of the building and for failing to pay rent. Capital One has moved to dismiss the Second Amended Complaint in its entirety. For the reasons that follow, Capital One's motion to dismiss is GRANTED in part and DENIED in part.

BACKGROUND

On October 30, 2015, Capital One entered into a commercial lease with 807 Holdings for a condominium in the building located at 807 Manhattan Avenue, Brooklyn, New York (the "Building"). Second Am. Compl. ("SAC"), Dkt. 26 ¶ 17. The lease was for a term of twenty years; Capital One was the sole tenant and 807 Holdings was the landlord. SAC ¶¶ 17, 19, 48. In 2018, JTRE became interested in purchasing the Building. Id. ¶ 18. To that end, JTRE asked 807 Holdings to obtain an Estoppel Certificate from Capital One to determine whether Capital One knew of any defaults under the lease or had any material complaints about the Building. Id. ¶¶ 20–23. The Certificate affirmed, in pertinent part, that "neither tenant, nor to tenant's knowledge, the landlord, is in default under any of the terms and conditions of the Lease." Sharovskiy Decl., Dkt. 39, Ex. A at 1. The Certificate also affirmed that Capital One understood that JTRE was "relying upon the representation" made. Id. at 2. Capital One issued an Estoppel Certificate to JTRE on May 7, 2018. SAC ¶ 2. Shortly thereafter, JTRE bought the Building and assumed the obligations of landlord under the Lease. Id. ¶ 18.

Five months later, in October 2018, Capital One sent JTRE a notice of default claiming several breaches of the Lease relating to inadequate heating in the Building. Id. ¶ 29. The notice of default claimed that Capital One had incurred over $200,000 in supplemental heating costs during the winter of 2017–2018 due to the Building's inadequate heat and demanded that JTRE reimburse it for those costs. Id. ¶¶ 29–30. The alleged heating failures about which Capital One complained had occurred while 807 Holdings owned the Building. Id. ¶ 30. Plaintiffs allege that Capital One had previously provided 807 Holdings notice of the heating issues and was, therefore, clearly aware of these deficiencies at the time it issued the Estoppel Certificate to JTRE. Id. ¶ 36.

In March of 2020, Capital One vacated the Building. SAC ¶ 58. From July 1, 2020, through December 31, 2020, Capital One paid no rent. Id. ¶¶ 59–74. In December 2020, JTRE delivered a written Notice to Cure to Capital One, demanding payment of the outstanding rent by January 8, 2021. Id. ¶¶ 67–68. When Capital One failed to pay by the Cure Date, JTRE declared a tenant default and terminated the lease. Id. ¶¶ 67–73.

On June 3, 2021, JTRE commenced this action against Capital One in New York state court, Def. Not. of Removal, Dkt. 1, Ex. 1; Capital One removed the case invoking diversity jurisdiction pursuant to 28 U.S.C. § 1332(a).¹ Def. Not. of Removal ¶ 4. On September 2, 2021, Plaintiffs filed a Second Amended Complaint ("SAC"), which is the operative pleading. See generally SAC, Dkt. 26. The SAC alleges two causes of action: (1) breach of contract and (2) negligent misrepresentation. Plaintiffs allege that Capital One breached the lease agreement by failing to pay rent and engaged in negligent misrepresentation when it returned the Estoppel Certificate without notifying JTRE about its complaints of inadequate heat in the building. Id. ¶¶ 1–11. Defendant moved to dismiss the SAC pursuant to Federal Rule of Civil Procedure Rule 12(b)(6). See generally Not. of Mot., Dkt. 29. Specifically, Defendant asserts that Plaintiffs have (1) failed to state a claim for 20 years’ worth of liquidated damages under their breach of contract claim and (2) failed plausibly to allege the special relationship and falsity elements of their negligent misrepresentation claim. Def. Mem., Dkt. 30 at 5–8. Plaintiffs oppose the motion. See generally Pls. Mem., Dkt. 38.

DISCUSSION

I. Standard of Review

To survive a motion to dismiss for failure to state a claim upon which relief can be granted, "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). In general, "a complaint does not need to contain detailed or elaborate factual allegations, but only allegations sufficient to raise an entitlement to relief above the speculative level." Keiler v. Harlequin Enters. Ltd. , 751 F.3d 64, 70 (2d Cir. 2014) (citation omitted). When considering a Rule 12(b)(6) motion to dismiss, the Court draws all reasonable inferences in the light most favorable to the plaintiff. See Gibbons v. Malone , 703 F.3d 595, 599 (2d Cir. 2013) (citation omitted). The Court is not required, however, to "accept as true a legal conclusion couched as a factual allegation." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ).

Although the parties agree that Plaintiffs’ breach of contract claim is subject to the Rule 8(a) pleading standard, Defendant contends that Plaintiffs’ negligent misrepresentation claim is subject to the heightened pleading standard of Rule 9(b). Def. Mem. at 5. There is debate within this Circuit over whether Rule 8(a) or Rule 9(b) governs claims of negligent misrepresentation. Although some courts have concluded that Rule 9(b) applies to "negligent misrepresentation claims that are premised on fraudulent conduct," the Second Circuit has not reached that question. Ellington Credit Fund, Ltd. v. Select Portfolio Servicing, Inc. , 837 F.Supp.2d. 162, 200 (S.D.N.Y. 2011) (collecting cases); Eternity Glob. Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y. , 375 F.3d 168, 188 (2d Cir. 2004) (noting that Rule 9(b) "may or may not" apply to negligent misrepresentation claims). This Court need not resolve the question of which pleading standard governs, however, because Plaintiffs have failed to plead sufficient facts to state a claim for negligent misrepresentation under either standard.

II. Negligent Misrepresentation

To state a claim for negligent misrepresentation under New York law,² "a plaintiff must assert ‘(1) the defendant had a duty, as a result of a special relationship, to give correct information; (2) the defendant made a false representation that he or she should have known was incorrect; (3) the information supplied in the representation was known by the defendant to be desired by the plaintiff for a serious purpose; (4) the plaintiff intended to rely and act upon it; and (5) the plaintiff reasonably relied on it to his or her detriment.’ " Eidelman v. Sun Prods. Corp. , No. 16-CV-3914, 2017 WL 4277187, at *4 (S.D.N.Y. 2017) (quoting Anschutz Corp. v. Merrill Lynch & Co. , 690 F.3d 98, 114 (2d Cir. 2012) ).

The "duty" or "special relationship" element of negligent misrepresentation limits such claims to "situations involving ‘actual privity of contract between the parties or a relationship so close as to approach that of privity.’ " Anschutz Corp. , 690 F.3d at 114 (quoting In re Time Warner Inc. Sec. Litig. , 9 F.3d 259, 271 (2d Cir. 1993) ). "[L]iability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified." Kimmell v. Schaefer , 89 N.Y.2d 257, 263, 652 N.Y.S.2d 715, 675 N.E.2d 450 (1996).

In the commercial context, whether a special relationship exists turns on three factors: whether the defendants "held or appeared to hold unique or special expertise"; whether there is a special relationship of "trust or confidence"; and whether the "speaker was aware of the use to which the information would be put and supplied it for that purpose." Izquierdo v. Mondelez Int'l, Inc. , No. 16-CV-04697, 2016 WL 6459832, at *8 (S.D.N.Y. 2016) (citing Kimmell , 89 N.Y.2d at 263, 652 N.Y.S.2d 715, 675 N.E.2d 450 ).³ "New York courts do not recognize a cause of action for negligent misrepresentation in the absence of some special relationship of trust or confidence between the parties." Amusement Indus., Inc. v. Stern , 786 F. Supp. 2d 758, 778 (S.D.N.Y. 2011) (quoting Accusystems, Inc. v. Honeywell Info. Sys., Inc. , 580 F. Supp. 474, 480 (S.D.N.Y. 1984) ).

Plaintiffs’ SAC fails to allege facts from which the Court can plausibly infer that a "special relationship," as defined by relevant precedent, existed between JTRE and Capital One. First, the SAC fails to allege sufficiently that Capital One had unique or special expertise as to 807 Holdings’ potential defaults. Accepting the facts in the SAC as true, at the time the Estoppel Certificate was issued, Capital...