OHR Somayach/Joseph Tanenbaum Educ. Ctr. v. Farleigh Int'l Ltd.

483 F.Supp.3d 195

OHR SOMAYACH/JOSEPH TANENBAUM EDUCATIONAL CENTER, Plaintiff/Counterclaim Defendant,

v.FARLEIGH INTERNATIONAL LIMITED, Defendant/Counterclaim Plaintiff.

19-CV-11730 (PMH)

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

Signed September 1, 2020

Jonathan Mark Proman, New York, NY, for Plaintiff/Counterclaim Defendant.

Benjamin Sean Fischer, Devin MIchael Cain, Christopher Blake Harwood, Kevin Grossinger, Morvillo, Abramowitz, Grand, Iason, & Anello P.C., New York, NY, for Defendant/Counterclaim Plaintiff.

MEMORANDUM OPINION AND ORDER

PHILIP M. HALPERN, United States District Judge:

Plaintiff Ohr Somayach/Joseph Tanenbaum Educational Center ("Plaintiff") commenced this action against Defendant Farleigh International Limited ("Defendant") on December 23, 2019. (Doc. 1, "Compl."). Plaintiff, a religious not-for-profit organization, seeks a declaratory judgment from this Court that donations made by Defendant to Plaintiff totaling approximately $6,650,000 are irrevocable and that Defendant has no rights associated with these donations. (Id. ¶¶ 1–4). On January 14, 2020, Defendant filed an Answer and asserted three counterclaims against Plaintiff. (Doc. 8, "Counterclaims"). Defendant asserts Counterclaims for (1) breach of contract, (2) breach of fiduciary duty, and (3) an accounting. (Id. ¶¶ 22–35).

By motion dated May 22, 2020, Plaintiff moved to dismiss Defendant's Counterclaims pursuant to Fed. R. Civ. P. 12(b)(6). (Doc. 29; Doc. 30, "Pl. Br.").¹ On June 5, 2020, Defendant filed its opposition to Plaintiff's motion (Doc. 33, "Def. Br."),² and on June 12, 2020, Plaintiff filed its reply (Doc. 35, "Pl. Reply").

For the reasons set forth below the court GRANTS Plaintiff's motion to dismiss in part.

BACKGROUND

The facts, as recited below, are taken from the Counterclaims. Plaintiff, a not-for-profit organization located in Monsey, New York, was established in 1979 as a branch of the Jerusalem-based Ohr Somayach Institutions network. (Counterclaims ¶ 5). The organization offers an academic program to "develop intellectually sophisticated Talmudic scholars who can make a significant contribution to their communities both as teachers and experts in Jewish law." (Id. ).

Defendant alleges that in 2005 it made a "restricted gift to [Plaintiff] for the purpose of building a Jewish educational center that would be designated for specific educational purposes." (Id. ¶ 6). On July 20, 2005 a deed of gift (the "Deed") was executed providing that Defendant would make a gift of $250,000. (Id. ¶ 7). The Deed states, in relevant part:

1.1 The Donor wishes to provide financial assistance to the Recipient to support the Recipient's non-profit purposes.

1.2 The Recipient is willing to accept the gift and to utilize the gift in accordance with its non-profit purposes.

1.3 The Donor wishes to transfer and assign by way gift^[3] to the Recipient the aggregate total amount of US $250,000 (Two Hundred Fifty Thousand 00/00 US Dollars) (the "Donation")....

2.1 The Donor assigns and transfers to the Recipient by way of gift the Donation absolutely. The Recipient shall apply the Donation in accordance with its non-profit purposes....

4.2 The Recipient shall provide to the Donor, basing on its request, an annually analysis of the manner in which the Donation or any part thereof have been applied.

4.3 In the event the Donation are used not for their designated purpose, the Company shall have the right to suspend the transfer of Donation under this agreement until the relations between the Parties have been settled and/or request the return of any Donation transferred earlier.

(Doc. 31-3, the "Deed").⁴

Defendants allege that in addition to the written terms the Deed, the parties’ agreement also encompassed oral terms including, "(1) that the restricted gift be used to construct an educational facility to be used in accordance with specific and designated non-profit religious educational purposes;^{[5 ]} (2) that the resulting facility would never be mortgaged or otherwise encumbered; and (3) that the resulting facility would be named in honor of Mr. Shvidler's family." (Counterclaims ¶ 9). The Beit Shvidler Conference Center (the "Shvidler Center") was thereafter constructed and named in honor of Eugene Shvidler, an individual associated with Defendant. (Id. ¶ 10). Subsequently, Defendant made additional gifts to Plaintiff totaling "at least" $6,650,000 (the "Gifts"). (Id. ¶ 11). Defendant asserts that "[a]ll the Restricted Gifts were made pursuant to the same [written] terms and with the same [additional oral] understanding as the initial transfer made pursuant to the Deed." (Id. ).

Defendant alleges that the Shvidler Center has not been used for the intended educational purposes and instead has been left vacant or rented out for commercial use. (Id. ¶¶ 12–13). Defendant alleges also that Plaintiff took out a mortgage and encumbered the Shvidler Center in 2006, 2009, and 2019. (Id. ¶¶ 15–16). Defendant avers that Plaintiff further encumbered the Shvidler Center when, pursuant to an arbitration award, Plaintiff agreed that all its assets, including the Shvidler Center, would be "encumbered" by a debt to Rabbi Braun after Rabbi Braun gave up ownership and control of Plaintiff. (Id. ¶¶ 17–18). Defendant asserts that these actions are in violation of the Deed and oral terms of the Gifts provided by Defendant to Plaintiff. (Id. ¶¶ 14–16, 18).

On November 12, 2019, Defendant requested that Plaintiff (1) return the Gifts, (2) confirm the Shvidler Center was never mortgaged or otherwise encumbered, and (3) provide Defendant accounting books and records related to the Shvidler Center. (Id. ¶ 20). Thereafter, Plaintiff commenced this action. (Id. ¶ 21).

STANDARD OF REVIEW

A Rule 12(b)(6) motion enables a court to consider dismissing counterclaims for "failure to state a claim upon which relief can be granted." See Fed. R. Civ. P. 12(b)(6). Rule 12(b) "applies equally to claims and counterclaims; therefore, a motion to dismiss a counterclaim is evaluated under the same standard as a motion to dismiss a complaint." Gerdau Ameristeel U.S. Inc. v. Ameron Int'l Corp. , No. 13-CV-07169, 2014 WL 3639176, at *2 (S.D.N.Y. July 22, 2014).

"To survive a motion to dismiss, a [pleading] 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 Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is plausible on its face "when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly , 550 U.S. at 556, 127 S.Ct. 1955 ). "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." Id. The factual allegations pled "must be enough to raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 127 S.Ct. 1955.

"When there are well-pleaded factual allegations [in the counterclaims], a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." See Iqbal , 556 U.S. at 679, 129 S.Ct. 1937. Thus, the court must "take all well-ple[d] factual allegations as true, and all reasonable inferences are drawn and viewed in a light most favorable to the [non-movant]." Leeds v. Meltz , 85 F.3d 51, 53 (2d Cir. 1996). However, the presumption of truth does not extend to "legal conclusions, and threadbare recitals of the elements of the cause of action." Harris v. Mills , 572 F.3d 66, 72 (2d Cir. 2009) (quoting Iqbal , 556 U.S. 662, 129 S.Ct. 1937 ). Therefore, a counterclaim plaintiff must provide "more than labels and conclusions" to show entitlement to relief. Twombly , 550 U.S. at 555, 127 S.Ct. 1955.

ANALYSIS

Before turning to the merits of Defendant's Counterclaims, the Court must address several preliminary issues raised by Plaintiff. These preliminary issues raise yet to be pled affirmative defenses. Fed. R. Civ. P. 12(b) provides that "[e]very defense to a claim for relief in any pleading must be asserted in the responsive pleading if one is required." Fed. R. Civ. P. 12(b). An Answer asserting counterclaims is a pleading to which a responsive pleading is required. Fed. R. Civ. P. 12(a)(1)(B). Certain defenses enumerated in Rule 12(b)(1–7) may be asserted in a pre-answer motion. The unpled affirmative defenses raised by Plaintiff in the case at bar largely fall outside of the Rule 12(b) enumerated defenses. Nonetheless, it is appropriate for the Court to address these affirmative defenses at this juncture. See, e.g., Thea v. Kleinhandler , 807 F.3d 492, 501 (2d Cir. 2015) ("Although the statute of limitations is ordinarily an affirmative defense that must be raised in the answer, a statute of limitations defense may be decided on a Rule 12(b)(6) motion if the defense appears on the face of the complaint."); Lowell v. Lyft, Inc. , 352 F. Supp. 3d 248, 254 (S.D.N.Y. 2018) ("Lack of standing may be grounds for dismissal under Rule 12(b)(1)."); see also § 1360 Preliminary Motions Not Enumerated in Rule 12(b), 5C Fed. Prac. & Proc. Civ. § 1360 (3d ed.) ("Perhaps the most obvious example of expanding the scope of an enumerated Rule 12(b) defense to permit a matter to be raised by pre-answer motion is the willingness of the courts to permit affirmative defenses, such as res judicata and statute of limitations, to be raised by a motion to dismiss for failure to state a claim under Rule 12(b)(6)"); § 1277 Raising Affirmative Defenses by Motion, 5 Fed. Prac. & Proc. Civ. § 1277 (3d ed.) ("Many courts permit affirmative defenses to be asserted by [a pre-answer] motion even when the defenses are not available on the face of the complaint. This is especially true as to those affirmative defenses that seem likely to dispose of the...