Barlow v. Skroupa

• Decision Date: 23 March 2022
• Docket Number: Index No. 651739/2020
• Citation: Barlow v. Skroupa, 76 Misc.3d 587, 173 N.Y.S.3d 98 (N.Y. Sup. Ct. 2022)
• Parties: Heather BARLOW; Value Extraction Services LLC; Phillip Lofaso; Jake Hendrickson; Makeeda Perkins; Maura Murphy ; Marina Pushkina; Jen Dobies; Roes 1-2; and all others similarly situated and/or interested parties, Plaintiffs v. Christopher SKROUPA; Inspire Summits LLC d/b/a Skytop Strategies ; David Katz; John Stephen Wilson; Paula Luff; and Advisory Board Members Does 1-20, Defendants
• Court: New York Supreme Court

76 Misc.3d 587

173 N.Y.S.3d 98

Heather BARLOW; Value Extraction Services LLC; Phillip Lofaso; Jake Hendrickson; Makeeda Perkins; Maura Murphy ; Marina Pushkina; Jen Dobies; Roes 1-2; and all others similarly situated and/or interested parties, Plaintiffs

v.Christopher SKROUPA; Inspire Summits LLC d/b/a Skytop Strategies ; David Katz; John Stephen Wilson; Paula Luff; and Advisory Board Members Does 1-20, Defendants

Index No. 651739/2020

Supreme Court, New York County, New York.

Decided on March 23, 2022

For Plaintiffs, Carla Kerr Stearns Esq., 29 East 93rd Street, New York, NY 10128

For Defendants, Adam Engel Esq., Engel Law Group PLLC, 280 Madison Avenue, New York, NY 10016

Lucy Billings, J. Plaintiffs originally brought this action alleging breach of a contract with defendants Inspire Summits LLC d/b/a Skytop Strategies and owner Christopher Skroupa, plus related claims. The current operative complaint is the Third Amended Class Action Complaint. NYSCEF Doc. No. 134. Plaintiffs have added parties and causes of action, including fraud, claims under New York General Business Law (GBL) § 350 and unspecified sections of the New York Labor Law, equitable claims, and intentional infliction of emotional distress, based on Skytop Strategies’ alleged failure to pay its employees and contractors, overcharging participants in its conferences, and related conduct.

Defendants David Katz and Paula Luff together move to dismiss all claims pleaded against these defendants in the third amended complaint. C.P.L.R. § 3211(a)(7). Plaintiffs cross-move to amend the complaint again, submitting a Proposed Fourth Amended Class Action Complaint. C.P.L.R. § 3025(b) ; NYSCEF Doc. No. 165. Only defendants Katz and Luff oppose the cross-motion to amend the complaint.

I. CROSS-MOTION TO AMEND THE COMPLAINT

Leave to amend a complaint is freely granted unless the amendment would surprise or otherwise prejudice the opposing parties, Davis v. South Nassau Communities Hosp. , 26 N.Y.3d 563, 580, 26 N.Y.S.3d 231, 46 N.E.3d 614 (2015) ; Kimso Apts., LLC v. Gandhi , 24 N.Y.3d 403, 411, 998 N.Y.S.2d 740, 23 N.E.3d 1008 (2014) ; Machado v. Gulf Oil, L.P. , 195 A.D.3d 26, 30, 146 N.Y.S.3d 66 (1st Dep't 2021) ; Mashinsky v. Drescher , 188 A.D.3d 465, 466, 131 N.Y.S.3d 891 (1st Dep't 2020), or the amendment lacks merit. C.P.L.R. § 3025(b) ; Mashinsky v. Drescher , 188 A.D.3d at 466, 131 N.Y.S.3d 891 ; Avail 1 LLC v. Acquafredda Enters. LLC , 184 A.D.3d 476, 477, 124 N.Y.S.3d 196 (1st Dep't 2020) ; Brook v. Peconic Bay Med. Ctr. , 172 A.D.3d 468, 469, 102 N.Y.S.3d 1 (1st Dep't 2019) ; Jean-Baptiste v. 153 Manhattan Ave. Hous. Dev. Fund Corp. , 124 A.D.3d 476, 477, 2 N.Y.S.3d 441 (1st Dep't 2015). Defendants Katz and Luff oppose the Proposed Fourth Amended Class Action Complaint on the grounds that it fails to state a cause of action against these defendants. As the remaining defendants have not opposed, and as moving defendants’ opposition essentially seeks to dismiss the proposed amended complaint pursuant to C.P.L.R. § 3211(a)(7), the court grants the cross-motion to amend the complaint, treats the fourth amended complaint as the active complaint, and considers defendants’ opposition as seeking dismissal of the fourth amended complaint against Katz and Luff. 49 W. 12 Tenants Corp. v. Seidenberg , 6 A.D.3d 243, 243, 774 N.Y.S.2d 339 (1st Dep't 2004) ; Sage Realty Corp. v. Proskauer Rose LLP , 251 A.D.2d 35, 38, 675 N.Y.S.2d 14 (1st Dep't 1998).

In their reply, which opposes the cross-motion, Katz and Luff alternatively seek their costs, including attorneys’ fees, if the court allows the amendment. C.P.L.R. § 3025(b). The court denies this request for attorneys’ fees and other costs as a condition of granting amendment, since defendants show neither surprise nor other prejudice from the amendment, and it is not completely without merit. Id. ("Leave [to amend] shall be freely given upon such terms as may be just"); Peach Parking Corp. v. 346 W. 40th St., LLC , 52 A.D.3d 260, 261, 859 N.Y.S.2d 424 (1st Dep't 2008) ; 92 E. LLC v. Lee , 65 Misc. 3d 137(A), 2019 WL 5493373 (App. Term 1st Dep't 2019).

II. DISMISSAL OF THE FOURTH AMENDED COMPLAINT'S CLAIMS AGAINST KATZ AND LUFF

A. STANDARD

Upon a motion to dismiss a complaint pursuant to C.P.L.R. § 3211(a)(7), the court considers the facts alleged in the complaint and presumes them to be true. Himmelstein, McConnell, Gribben, Donoghue & Joseph, LLP v. Matthew Bender & Co., Inc. , 37 N.Y.3d 169, 175, 150 N.Y.S.3d 79, 171 N.E.3d 1192 (2021) ; Connaughton v. Chipotle Mexican Grill, Inc. , 29 N.Y.3d 137, 141, 53 N.Y.S.3d 598, 75 N.E.3d 1159 (2017) ; Seaman v. Schulte Roth & Zabel LLP , 176 A.D.3d 538, 538, 111 N.Y.S.3d 266 (1st Dep't 2019). Moving defendants bear the burden to establish that plaintiffs’ fourth amended complaint "fails to state a viable cause of action."

Connolly v. Long Island Power Auth. , 30 N.Y.3d 719, 728, 70 N.Y.S.3d 909, 94 N.E.3d 471 (2018). In evaluating the motion, the court must accept plaintiffs’ allegations as true, liberally construe the fourth amended complaint, and draw all reasonable inferences in plaintiffs’ favor. Doe v. Bloomberg L.P. , 36 N.Y.3d 450, 454, 143 N.Y.S.3d 286, 167 N.E.3d 454 (2021) ; Connolly v. Long Island Power Auth. , 30 N.Y.3d at 728, 70 N.Y.S.3d 909, 94 N.E.3d 471 ; JF Capital Advisors, LLC v. Lightstone Group, LLC , 25 N.Y.3d 759, 764, 16 N.Y.S.3d 222, 37 N.E.3d 725 (2015) ; M & E 73-75 LLC v. 57 Fusion LLC , 189 A.D.3d 1, 5, 128 N.Y.S.3d 200 (1st Dep't 2020).

The court will not give such consideration, however, to allegations that consist of only bare legal conclusions. Myers v. Schneiderman , 30 N.Y.3d 1, 14, 62 N.Y.S.3d 838, 85 N.E.3d 57 (2017) ; Simkin v. Blank , 19 N.Y.3d 46, 52, 945 N.Y.S.2d 222, 968 N.E.2d 459 (2012) ; M & E 73-75 LLC v. 57 Fusion LLC , 189 A.D.3d at 5, 128 N.Y.S.3d 200. Instead, the court accepts as true only plaintiffs’ factual allegations that set forth the elements of a legally cognizable claim and from them draws all reasonable inferences in their favor. Dismissal is warranted if the fourth amended complaint fails to allege facts that fit within any cognizable legal theory against Katz or Luff. Sassi v. Mobile Life Support Servs., Inc. , 37 N.Y.3d 236, 239, 154 N.Y.S.3d 290, 175 N.E.3d 1246 (2021) ; Faison v. Lewis , 25 N.Y.3d 220, 224, 10 N.Y.S.3d 185, 32 N.E.3d 400 (2015).

B. THE CLAIMS AGAINST KATZ AND LUFF

The fourth amended complaint's claims are based largely on Skytop Strategies’ alleged failure to pay plaintiffs, who were its employees and consultants, what Skytop Strategies owed them.

1. First Claim - Fraud

The first claim is for fraud, based on alleged misrepresentations about Skytop Strategies’ revenue, funding, and prospects and defendants’ nondisclosure of its financial irregularities.

Katz and Luff maintain that the fourth amended complaint fails to allege that they owed any duties to plaintiffs or made any misrepresentations on which plaintiffs reasonably relied and that the allegations otherwise lack the required particularity for a fraud claim. C.P.L.R. § 3016(b).

The fourth amended complaint does not credit Katz or Luff with any fraudulent statements. Plaintiffs rest on their allegations that "defendants" made material misrepresentations and fraudulent omissions to plaintiffs. "Defendants" misrepresented that they profited only from Skytop Strategies’ conferences and not from inducing employees, consultants, and vendors to provide services without payment and that Skytop Strategies possessed the financial ability to pay employees so as to produce high performance, was growing fast, and offered employees rapid growth. Aff. of Carla Kerr Stearns in Supp. of Cross-Mot. to Am. Ex. C (4th Am. Compl.) ¶¶ 30-31.

The failure to distinguish among the various defendants regarding which misrepresentations and omissions each defendant made to each plaintiff, when, and where is "improper group pleading." Principia Partners LLC v. Swap Fin. Group, LLC , 194 A.D.3d 584, 584, 144 N.Y.S.3d 338 (1st Dep't 2021). By pleading the fraud claim against all defendants collectively, without any specification of the conduct charged to particular defendants, plaintiffs deprive defendants of the notice regarding "the material elements of each cause of action" to which defendants are entitled under C.P.L.R. § 3013. By referring to all defendants together, plaintiffs also fail to plead their fraud claim with the particularly required by C.P.L.R. § 3016(b) ; El Toro Group, LLC v. Bareburger Group, LLC , 190 A.D.3d 536, 541, 141 N.Y.S.3d 3 (1st Dep't 2021) ; Total Asset Recovery Servs. LLC v. Metlife, Inc. , 189 A.D.3d 519, 523, 139 N.Y.S.3d 3 (1st Dep't 2020).

Plaintiffs do allege that Katz speaks at Skytop Strategies’ conferences and consults with Skroupa regarding its business, 4th Am. Compl. ¶¶ 4, 24, and that both Katz and Luff "knowingly and recklessly participate[ ] in the Skytop fraud," id. , ¶¶ 4, 6, but these allegations are similarly vague and conclusory and fail to support a fraud claim against either Katz or Luff. Therefore the court dismisses the fraud claim against both of them.

2. Second Claim - Violation of GBL § 350

General Business Law § 350 prohibits "[f]alse advertising in the conduct of any business, trade or commerce or in the furnishing of any service." Plavin v. Group Health Inc. , 35 N.Y.3d 1, 9, 124 N.Y.S.3d 5, 146 N.E.3d 1164 (2020). As plaintiffs do not allege any false advertising by Katz or Luff, personally, plaintiffs rely on respondeat superior to hold Skytop Strategies liable for the conduct of the individual who conveyed the false advertising, combined with piercing the corporate veil to hold Katz and Luff liable for Skytop Strategies’ conduct.

Plaintiffs contend that Katz and Luff are liable by piercing the corporate veil because they are Skytop Strategies’ alter egos. To pierce the corporate veil and hold Katz and Luff liable for Skytop Strategies’ actions, plaintiffs must show that Katz and Luff...