Dreamco Dev. Corp. v. Empire State Dev. Corp.

• Decision Date: 11 February 2021
• Docket Number: 812,CA 20-00405
• Parties: DREAMCO DEVELOPMENT CORPORATION and Rosanne DiPizio, Plaintiffs-Respondents, v. EMPIRE STATE DEVELOPMENT CORPORATION, Erie Canal Harbor Development Corporation, Phillips Lytle LLP, Defendants-Appellants, Travelers Casualty and Surety Company of America, Defendant, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

191 A.D.3d 1444

142 N.Y.S.3d 688

DREAMCO DEVELOPMENT CORPORATION and Rosanne DiPizio, Plaintiffs-Respondents,

v.EMPIRE STATE DEVELOPMENT CORPORATION, Erie Canal Harbor Development Corporation, Phillips Lytle LLP, Defendants-Appellants,Travelers Casualty and Surety Company of America, Defendant, et al., Defendants.

812

CA 20-00405

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

Entered: February 11, 2021

PHILLIPS LYTLE LLP, BUFFALO (WILLIAM J. BRENNAN OF COUNSEL), FOR DEFENDANTS-APPELLANTS.

LAW OFFICES OF DANIEL W. ISAACS, PLLC, EAST ROCKAWAY (DANIEL W. ISAACS OF COUNSEL), FOR PLAINTIFFS-RESPONDENTS.

PRESENT: CENTRA, J.P., PERADOTTO, NEMOYER, TROUTMAN, AND WINSLOW, JJ.

MEMORANDUM AND ORDER

It is hereby ORDERED that the order insofar as appealed from is unanimously reversed on the law without costs, the motion is granted in its entirety, and the complaint against defendants-appellants is dismissed.

Memorandum: As we set forth in earlier related appeals, nonparty DiPizio Construction Company, Inc. (DiPizio) and defendant Erie Canal Harbor Development Corporation (Erie) entered into a construction agreement pursuant to which DiPizio was to provide construction services for a revitalization project along the waterfront in Buffalo ( DiPizio Constr. Co., Inc. v. Erie Canal Harbor Dev. Corp. , 151 A.D.3d 1750, 56 N.Y.S.3d 751 [4th Dept. 2017], lv denied 30 N.Y.3d 910, 2018 WL 414702[2018] ; DiPizio Constr. Co., Inc. v. Erie Canal Harbor Dev. Corp. , 134 A.D.3d 1418, 23 N.Y.S.3d 762 [4th Dept. 2015] ; DiPizio Constr. Co., Inc. v. Erie Canal Harbor Dev. Corp. , 120 A.D.3d 905, 991 N.Y.S.2d 683 [4th Dept. 2014] ; DiPizio Constr. Co., Inc. v. Erie Canal Harbor Dev. Corp. , 120 A.D.3d 909, 991 N.Y.S.2d 199 [4th Dept. 2014] ; DiPizio Constr. Co., Inc. v. Erie Canal Harbor Dev. Corp. , 120 A.D.3d 911, 990 N.Y.S.2d 426 [4th Dept. 2014] ). Plaintiff Dreamco Development Corporation (Dreamco), owned by Rosanne DiPizio (plaintiff), was retained by DiPizio to provide management and consulting services and construction materials for the project. Erie subsequently terminated DiPizio from the project, and DiPizio no longer needed Dreamco's services. Plaintiffs commenced this action seeking money damages allegedly resulting from the termination, and Empire State Development Corporation, Erie, and Phillips Lytle LLP (collectively, defendants), among others, moved to dismiss the complaint against them. Defendants now appeal from an order insofar as it denied the motion with respect to the first and ninth causes of action.

Defendants contend that Supreme Court erred in denying that part of the motion seeking to dismiss the first cause of action, for fraud, against them. We agree. "The elements of a cause of action for fraud require a material misrepresentation of fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages" ( Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 N.Y.3d 553, 559, 883 N.Y.S.2d 147, 910 N.E.2d 976 [2009] ; see Morrow v. MetLife Invs. Ins. Co. , 177 A.D.3d 1288, 1289, 113 N.Y.S.3d 421 [4th Dept. 2019] ). Furthermore, "a fraud claim requires the plaintiff to have relied upon a misrepresentation by a defendant to his or her detriment" ( Pasternack v. Laboratory Corp. of Am. Holdings , 27 N.Y.3d 817, 829, 37 N.Y.S.3d 750, 59 N.E.3d 485 [2016], rearg denied 28 N.Y.3d 956, 38 N.Y.S.3d 525, 60 N.E.3d 421 [2016] ; see Warren v. Forest Lawn Cemetery & Mausoleum , 222 A.D.2d 1059, 1059, 635 N.Y.S.2d 874 [4th Dept. 1995] ). Here, we conclude that the complaint "failed to adequately allege that the misrepresentations were made for the purpose of being communicated to ... plaintiff[s] in order to induce [their] reliance thereon or that the[ ] misrepresentations were relayed to ... plaintiff[s], who then relied upon them" ( Robles v. Patel , 165 A.D.3d 858, 860, 86 N.Y.S.3d 186 [2d Dept. 2018] ; see New York Tile Wholesale Corp. v. Thomas Fatato Realty Corp. , 153 A.D.3d 1351, 1353-1354, 61 N.Y.S.3d 136 [2d Dept. 2017] ).

In addition, "[a] claim rooted in fraud must be pleaded with the requisite particularity under CPLR 3016 (b)" ( Eurycleia Partners, LP , 12 N.Y.3d at 559, 883 N.Y.S.2d 147, 910 N.E.2d 976 ). Inasmuch as the complaint contained only generic allegations that defendants made misrepresentations, omissions, and concealments in their pleadings and communications, we further conclude that the complaint failed to adequately set forth with particularity the alleged misrepresentations of material fact made by defendants (see Scialdone v. Stepping Stones Assoc., L.P. , 148 A.D.3d 953, 955, 50 N.Y.S.3d 413 [2d Dept. 2017], appeal dismissed 29 N.Y.3d 1113, 61 N.Y.S.3d 201, 83 N.E.3d 210 [2017] ; cf. Pike Co., Inc. v. Jersen Constr. Group, LLC , 147 A.D.3d 1553, 1556, 47 N.Y.S.3d 579 [4th Dept. 2017] ). Furthermore, to the extent that it is based on alleged omissions by defendants, the first cause of action fails to state a claim because "an omission does not constitute fraud unless there is a fiduciary or ‘special’ relationship between the parties" ( Golub v. Tanenbaum-Harber Co., Inc. , 88 A.D.3d 622, 622, 931 N.Y.S.2d 308 [1st Dept. 2011], lv denied 19 N.Y.3d 806, 2012 WL 2378694 [2012] ; see Eurycleia Partners, LP v. Seward & Kissel, LLP , 46 A.D.3d 400, 402, 849 N.Y.S.2d 510 [1st Dept. 2007], affd 12 N.Y.3d 553, 883 N.Y.S.2d 147, 910 N.E.2d 976 [2009] ) and the complaint failed to allege the requisite fiduciary or special relationship between plaintiffs and defendants.

We also agree with defendants that the first cause of action is time-barred. Although fraud claims are generally governed by a six-year statute of limitations (see CPLR 213 [8] ), "courts will not apply the fraud [s]tatute of [l]imitations if the fraud allegation is only incidental to the claim asserted; otherwise, fraud would be used as a means to litigate stale claims" ( Powers Mercantile Corp. v. Feinberg , 109 A.D.2d 117, 120, 490 N.Y.S.2d 190 [1st Dept. 1985], affd 67 N.Y.2d 981, 502 N.Y.S.2d 1001, 494 N.E.2d 106 [1986] ; see Kaufman v. Cohen , 307 A.D.2d 113, 119, 760 N.Y.S.2d 157 [1st Dept. 2003] ). "In classifying a cause of action for statute of limitations purposes, the controlling consideration is not the form in which the cause of action is stated, but its substance" ( Rutzinger v. Lewis , 302 A.D.2d 653, 654, 754 N.Y.S.2d 735 [3d Dept. 2003] ; see Matter of Foley v. Masiello , 38 A.D.3d 1201, 1201-1202, 833 N.Y.S.2d 342 [4th Dept. 2007] ). Inasmuch as the gravamen of plaintiffs’ fraud claim is that plaintiffs suffered reputational damages and a loss of goodwill as a result of defendants’ conduct and that Dreamco lost its contract with DiPizio as a result of defendants’ fraudulent scheme, we conclude that the fraud allegation is incidental to the injurious falsehood and tortious interference claims, which were dismissed by the court as time-barred.

We likewise agree with defendants that the court erred in denying that part of the motion seeking to dismiss the ninth cause of action, for violations of Judiciary Law § 487, against Phillips Lytle LLP. Under section 487 (1), an attorney who "[i]s guilty of any deceit or collusion ... with intent to deceive the court or any party," is guilty of a misdemeanor and is potentially liable for treble damages to be recovered in a civil action. A violation of the statute may be established by evidence of the defendant's alleged deceit (see Scarborough v. Napoli, Kaiser & Bern, LLP , 63 A.D.3d 1531, 1533, 880 N.Y.S.2d 800 [4th Dept. 2009] [internal quotation marks omitted]; Izko Sportswear Co., Inc. v. Flaum , 25 A.D.3d 534, 537, 809 N.Y.S.2d 119 [2d Dept. 2006] ), but "alleged deceit that is not directed at a court must occur in the course of ‘a pending judicial proceeding’ " ( Hansen v. Caffry , 280 A.D.2d 704, 705, 720 N.Y.S.2d 258 [3d Dept. 2001], lv denied 97 N.Y.2d 603, 735 N.Y.S.2d 492, 760 N.E.2d 1288 [2001] ; see Sun Graphics Corp. v. Levy, Davis & Maher, LLP , 94 A.D.3d 669, 669, 943...