UCF I Tr. 1 v. Berkowitz, Trager & Trager, LLC

UCF I TRUST 1 and UC FUNDING I, L.P., TRUSTEE, Plaintiffs, v. BERKOWITZ, TRAGER & TRAGER, LLC, Defendant.

No. 3:17-cv-1325 (VAB)

UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT

March 29, 2019

RULING AND ORDER ON MOTION TO DISMISS

On August 4, 2017, UCF I Trust 1 ("UCFT") and UC Funding I, L.P., Trustee ("UCF Trust") (together, "Plaintiffs") sued Berkowitz, Trager & Trager, LLC ("Berkowitz, Trager & Trager" or "Defendant"), alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and negligent misrepresentation, based on an opinion letter authored by Berkowitz, Trager & Trager that allegedly induced Plaintiffs to make a mezzanine loan to Park Square West Member Associates, LLC that eventually resulted in a loss of approximately $13,000,000. Complaint, dated Aug. 4, 2017 ("Compl."), ECF No. 1.

On May 1, 2018, the Court granted Berkowitz, Trager & Trager's motion to dismiss this Complaint for failure to state a claim upon which relief can be granted, but granted Plaintiffs leave to file an Amended Complaint, to the extent they were able to address the deficiencies identified by the Court. Ruling on Motion to Dismiss, dated May 1, 2018 ("Ruling"), ECF No. 29.

On May 31, 2018, Plaintiffs filed an Amended Complaint. Amended Complaint, dated May 31, 2018 ("Am. Compl."), ECF No. 33.

On July 18, 2018, Berkowitz, Trager & Trager moved to dismiss the Amended Complaint for failure to allege sufficient facts upon which relief may be granted. Motion to Dismiss Plaintiffs' Am. Compl., dated July 18, 2018 ("Def.'s Mot."), ECF No. 37; Memorandum in Support of Def.'s Mot., dated July 18, 2018 ("Def.'s Mem."), ECF No. 38.

For the reasons explained below, the Court GRANTS Defendant's motion to dismiss and DISMISSES the Amended Complaint with prejudice.

I. FACTUAL AND PROCEDURAL BACKGROUND

UCFT, a Delaware statutory trust with its principal place of business in Boston, Massachusetts, makes secured mezzanine loans.¹ Am. Compl. ¶¶ 3-4. UCF Trust, a limited partnership with a principal place of business in Dover, Delaware, is the trustee of UCFT. Id. ¶ 5. Berkowitz,, Trager & Trager, a law firm organized as a Connecticut limited liability company, has its principal place of business in Westport, Connecticut. Id. ¶ 6.

A. Factual Allegations

The parties' familiarity with the facts of this case, which are set forth in the Court's May 1, 2018 Ruling, is presumed. See Ruling at 2-5. The Court therefore only addresses any new and relevant allegations in Plaintiffs' Amended Complaint in the discussion below.

B. Procedural History

UCFT filed a Complaint in this Court on August 4, 2017, claiming breach of contract, breach of the covenant of good faith and fair dealing, and negligent misrepresentation against Berkowitz, Trager & Trager. See Compl.

On September 25, 2017, Berkowitz, Trager & Trager moved to dismiss, arguing that UCFT had failed to state a claim upon which relief can be granted because (1) UCFT was not Berkowitz, Trager & Trager's client; (2) a third party beneficiary of a written contract cannot recover for a breach of the implied covenant of good faith and fair dealing; and (3) UCFT's claim for negligent misrepresentation is barred by the statute of limitations. First Motion to Dismiss, dated Sept. 25, 2017, ECF No. 14, at 1-2. Berkowitz, Trager & Trager argued that it "did not represent UCF, and in fact was adverse to UCF in its role representing Park Square West Member Associates, LLC as borrower and [Berkowitz's] other clients in connection with this transaction." Id. at 2. Berkowitz, Trager & Trager therefore argued that UCF cannot bring a claim based in contract related to Berkowitz, Trager & Trager's attorney-client relationship with the Park Square West Entities, and any claim based in tort must fail because the applicable three-year statute of limitations had passed. Id. at 2, 6, 8, 15, 17.

On October 16, 2017, Plaintiffs opposed the motion to dismiss. Plaintiffs' Opposition, dated Oct. 16, 2017, ECF No. 16.

On May 1, 2018, the Court granted Berkowitz, Trager & Trager's motion to dismiss the Complaint for failure to state a claim upon which relief can be granted. See Ruling. The Court found that: (1) Plaintiffs do not have a viable contract claim either because their claim sounded in tort or the Opinion Letter issued by Berkowitz, Trager & Trager was not a contract, id. at 11; (2) Plaintiffs do not have a claim as a third-party beneficiary of any contract between Berkowitz, Trager & Trager and Park Square West Member Associates, LLC, PSWMA I, LLC, PSWMA II, LLC and Seaboard Realty, LLC (the "Park Square West Entities"), in part, because Plaintiffs did not allege that they were intended third-party beneficiaries of that attorney-client relationship, id. at 12; (3) Plaintiffs lack a viable claim based on the covenant of good faith and fair dealing for the same reasons they lack a viable breach of contract claim, id. at 15; and (4) that the Complaint did not sufficiently allege that they reasonably relied on Berkowitz , Trager & Trager's advice, id. at 15-16.

The Court, however, granted Plaintiffs leave to file an Amended Complaint within thirty days of its decision, to the extent Plaintiffs were able to address deficiencies identified by the Court. Id. at 17.

On May 31, 2018, Plaintiffs filed an Amended Complaint. Am. Compl.

On July 18, 2018, Berkowitz, Trager & Trager moved to dismiss the Amended Complaint for failure to allege sufficient facts upon which relief may be granted. Def.'s Mot.; Def.'s Mem.

On August 20, 2018, Plaintiffs opposed the motion. Memorandum of Law in Opposition to Def.'s Mot., dated Aug. 20, 2018 ("Pls.' Mem."), ECF No. 43.

On September 7, 2018, Berkowitz , Trager & Trager filed a reply in further support of its motion to dismiss. Reply, dated Sept. 7, 2018, ECF No. 45.

II. STANDARD OF REVIEW

A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a). Any claim that fails "to state a claim upon which relief can be granted" will be dismissed. FED. R. CIV. P. 12(b)(6). In reviewing a complaint under Rule 12(b)(6), a court applies a "plausibility standard" guided by "two working principles." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

First, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.; see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) ("While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations . . . a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." (internal citations omitted)). Second, "only a complaint that states a plausible claim for relief survives a motion to dismiss." Iqbal, 556 U.S. at 679. Thus, the complaint must contain "factual amplification . . . to render a claim plausible." Arista Records LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010) (quoting Turkmen v. Ashcroft, 589 F.3d 542, 546 (2d Cir. 2009)).

When reviewing a complaint under Federal Rule of Civil Procedure 12(b)(6), the court takes all factual allegations in the complaint as true. Iqbal, 556 U.S. at 678. The court also views the allegations in the light most favorable to the plaintiff and draws all inferences in the plaintiff's favor. Cohen v. S.A.C. Trading Corp., 711 F.3d 353, 359 (2d Cir. 2013); see also York v. Ass'n of the Bar of the City of N.Y., 286 F.3d 122, 125 (2d Cir.) ("On a motion to dismiss for failure to state a claim, we construe the complaint in the light most favorable to the plaintiff, accepting the complaint's allegations as true."), cert. denied, 537 U.S. 1089 (2002).

"Although courts considering motions to dismiss under Rule 12(b)(6) generally must limit [their] analysis to the four corners of the complaint, they may also consider documents that are incorporated in the complaint by reference." Kermanshah v. Kermanshah, 580 F. Supp. 2d 247, 258 (S.D.N.Y. 2008). This is particularly true if a complaint " 'relies heavily upon [the documents'] terms and effect,' which renders the document[s] 'integral' to the complaint." Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002) (quoting Int'l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995) ); see also Blue Tree Hotels Inv. (Canada), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 222 (2d Cir. 2004) (rejecting allegations that were "belied by the letters attached" to the complaint); L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 422 (2d Cir. 2011) (when reviewing a judgment on the pleadings, courts assume facts alleged are true "unless contradicted by more specific allegations or documentary evidence").

III. DISCUSSION

Plaintiffs assert three claims for relief under Connecticut law in their Amended Complaint: breach of contract to a third-party beneficiary, breach of the implied covenant of good faith and fair dealing, and negligent misrepresentation.

Berkowitz, Trager & Trager moves to dismiss all of these claims, arguing that they fail as a matter of law, for largely the same reasons as were articulated in the Court's Ruling dismissing the Complaint.² Def.'s Mem. at 14-26.

The Court agrees.

A. Count One: Breach of Contract

As the Court previously explained, "there is a threshold question of whether Plaintiffs have a viable breach of contract claim at all or, at best, only a tort claim for negligent misrepresentation." Ruling at 10 (citing Meyers v. Livingston, Adler, Pulda, Mieklejohn & Kelly, 311 Conn. 282, 296 (2014) for the proposition that "Connecticut courts have concluded that claims alleging that the defendant attorney had performed the required tasks but in a deficient manner sounded in tort rather than in contract.").

Moreover, even if a breach of contract claim could exist, "the Opinion...