Chadha v. Wahedna

• Decision Date: 23 June 2022
• Docket Number: 16175,Index No. 652818/20,Case No. 2021–02705
• Citation: 206 A.D.3d 523,171 N.Y.S.3d 87
• Parties: Nilish CHADHA, individually and derivatively on behalf of Wahed Inc., etc., Plaintiff–Appellant, v. Junaid WAHEDNA et al., Defendants–Respondents.
• Court: New York Supreme Court — Appellate Division

206 A.D.3d 523

171 N.Y.S.3d 87

Nilish CHADHA, individually and derivatively on behalf of Wahed Inc., etc., Plaintiff–Appellant,

v.Junaid WAHEDNA et al., Defendants–Respondents.

16175

Index No. 652818/20

Case No. 2021–02705

Supreme Court, Appellate Division, First Department, New York.

ENTERED June 23, 2022

Goldberg Segalla LLP, New York (Adam S. Katz of counsel), for appellant.

Lowenstein Sandler LLP, New York (Gavin J. Rooney and Craig Dashiell of counsel), for respondents.

Renwick, J.P., Kern, Kennedy, Mendez, Higgitt, JJ.

Order, Supreme Court, New York County (Barry R. Ostrager, J.), entered on or about May 28, 2021, which granted defendants’ motion to dismiss the amended complaint, unanimously modified, on the law, to deny the motion as to plaintiff's claims that (i) he was owed approximately $30,000 in accrued salary for the period through November 2016, (ii) defendants failed to pay him $50,000 of the $650,000 owed under the stock repurchase agreements between himself and defendant Wahed Inc., (iii) defendant Junaid Wahedna improperly charged him approximately $125,000 in brokerage fees for the sale/repurchase of his shares, and (iv) the bonus that Wahedna received in July 2017 should have been shared with him, and otherwise affirmed, without costs.

Plaintiff alleges that defendants engaged in a fraudulent scheme to buy his shares in Wahed Inc. at deeply discounted values by fraudulently inducing him to enter into a series of stock repurchase agreements, misrepresenting the value of his shares, and, in breach of fiduciary duties owed to him, failing to disclose higher share prices that were being negotiated with third-party investors at the time. Plaintiff also alleges that he and Wahed eventually entered into a settlement agreement and release (the release), but that he is excused from performance of the release because defendants were in material breach when they failed to pay $50,000 due to him under the agreement's terms. Plaintiff also alleges that the release was the result of overreaching or unfair circumstances. We find that Supreme Court improperly granted that branch of the defendants’ motion, pursuant to CPLR 3211(a)(1),(5) and (7), to dismiss the complaint as barred by the release.

Supreme Court correctly dismissed plaintiff's claim that he was fraudulently induced into signing the stock repurchase agreements, as the element of justifiable reliance is not present. On the contrary, plaintiff cannot have justifiably relied on Wahedna's alleged misrepresentations because, in each stock repurchase agreement, plaintiff represented and warranted that he had all the information he needed to decide whether to sell his shares (see Cestone v. Johnson, 179 A.D.3d 557, 558, 117 N.Y.S.3d 221 [1st Dept. 2020] ; New York City Educ. Constr. Fund v. Verizon N.Y. Inc., 114 A.D.3d 529, 530, 981 N.Y.S.2d 11 [1st Dept. 2014] ). Further, plaintiff was the Chief Operating Officer and a director of Wahed, so the value of Wahed, and whether plaintiff owed it a debt, were not facts peculiarly within Wahedna's knowledge (see Cestone, 179 A.D.3d at 558, 117 N.Y.S.3d 221 ). Therefore, because we decline to unwind the stock repurchases, plaintiff's claims that are based upon his status as a shareholder were properly dismissed.

Plaintiff's argument that defendants...