GateGuard Inc. v. Goldmont Realty Corp.
| Decision Date | 04 May 2023 |
| Docket Number | 20-CV-1609 (VEC) |
| Parties | GATEGUARD INC., Plaintiff, v. GOLDMONT REALTY CORP., LEON GOLDENBERG, ABI GOLDENBERG, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Plaintiff a company that provides intercom devices, is suing real estate developers for allegedly inducing Plaintiff to spend resources on new staff, contracts, and advertising in reliance on a false representation that Defendants would invest at least $1 million in the company. See generally Am. Compl., Dkt. 1.[1] Defendants have moved for summary judgment. See Defs. Not. of Mot., Dkt. 146. For the following reasons, their motion is GRANTED.
BACKGROUND[2]
GateGuard Inc. (“GateGuard”) is a company that provides intercom devices. Rule 56.1 Counterstmt., Dkt. 160-4 ¶¶ 3, 5.[3] Ari Teman (“Teman”) is GateGuard's CEO. Rule 56.1 Stmt., Dkt. 148, ¶ 4. Leon Goldenberg (“L. Goldenberg”) is the CEO and President of the real estate development company Goldmont Realty Corp. (“Goldmont”). Rule 56.1 Counterstmt. ¶ 30. Abi Goldenberg (“A. Goldenberg”) is L. Goldenberg's son. Id.[4]
At some point in 2018, A. Goldenberg and Teman began discussing the potential for GateGuard to provide intercom devices and related services to properties owned or managed by Goldmont. Rule 56.1 Stmt. ¶ 5; Rule 56.1 Counterstmt. ¶¶ 5, 31. Shortly afterwards, A. Goldenberg learned that Teman was seeking to raise $5 million in new capital for GateGuard. Rule 56.1 Counterstmt. ¶ 32; Rule 56.1 Reply, Dkt. 166, ¶ 32.
On December 26, 2018, Teman, L. Goldenberg, and A. Goldenberg met in person. Rule 56.1 Counterstmt. ¶ 33; Rule 56.1 Reply ¶ 33. The parties dispute what happened at the meeting. According to Plaintiff, L. Goldenberg promised to invest $1 million into GateGuard; the parties “sealed this commitment” with a handshake. Rule 56.1 Counterstmt. ¶ 36. Defendants maintain that the parties did not agree to anything during the meeting; Defendants acknowledge that the possibility of an investment was discussed. Rule 56.1 Reply ¶¶ 33, 36.
After that meeting, A. Goldenberg looked for other potential investors. Rule 56.1 Counterstmt. ¶ 63; Rule 56.1 Reply ¶ 63. On March 7, 2019, Teman met with L. Goldenberg, A. Goldenberg, and a group of potential investors the Goldenbergs had brought together to discuss an investment in GateGuard. Rule 56.1 Counterstmt. ¶¶ 44-46; Rule 56.1 Reply ¶¶ 44-46.
On March 13, 2019, L. Goldenberg informed Teman that the potential investors would not be investing in GateGuard. See Rule 56.1 Counterstmt. ¶ 49; Rule 56.1 Reply ¶ 49; Email, Dkt. 154-29, at 000169. L. Goldenberg also informed Teman that he himself would “not be investing substantial money.” Email, Dkt. 154-29, at 000169.
The parties dispute the extent to which GateGuard acted in reliance on Teman's understanding that Defendants would make an investment. According to Plaintiff, GateGuard, among other things, marketed free intercom systems to hundreds of new buildings with Defendants' “knowledge and tacit consent”; began an advertising campaign “on the back of” Defendants' “contemplated investment”; and had its parent company hire new employees to expand its business at L. Goldenberg's “insistence.” Rule 56.1 Counterstmt. ¶ 54. According to Defendants, none of the evidence Plaintiff cites supports its version of events. Rule 56 Reply ¶ 54.[5]
Defendants never invested in GateGuard. Rule 56.1 Stmt. ¶ 8; Rule 56.1 Counterstmt. ¶¶ 8, 50.
Plaintiff sued Defendants for breach of contract and fraudulent inducement on December 4, 2019. See Compl., Dkt. 1.[6]
Plaintiff's fraud claim fails at summary judgment because there is no evidence that Defendants did not intend to invest in GateGuard when they purportedly promised they would do so; to the contrary, the circumstantial evidence Plaintiff proffers suggests that Defendants seriously considered investing in Plaintiff and encouraged acquaintances to do the same. The failure to make good on a promise is not, without more fraud.
Summary judgment is appropriate when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986). “A genuine dispute exists when the evidence is such that, if the party against whom summary judgment is sought is given the benefit of all permissible inferences and all credibility assessments, a rational factfinder could resolve all material factual issues in favor of that party.” SEC v. Sourlis, 851 F.3d 139, 144 (2d Cir. 2016) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). “Summary judgment is appropriate when there can be but one reasonable conclusion as to the verdict, . . . i.e., it is quite clear what the truth is, . . . and no rational factfinder could find in favor of the nonmovant.” Id. (citations and internal quotation marks omitted).
The nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts,” and “may not rely on conclusory allegations or unsubstantiated speculation.” Jeffreys v. City of New York, 426 F.3d 549, 554 (2d Cir. 2005) (citations and internal quotation marks omitted). Rather, the nonmoving party must come forward with “specific facts showing that there is a genuine issue for trial.” Sista v. CDC Ixis N. Am., Inc., 445 F.3d 161, 169 (2d Cir. 2006) (citation omitted).
Under New York law, fraud requires proof of “(1) a material misrepresentation or omission of a fact, (2) knowledge of that fact's falsity, (3) an intent to induce reliance, (4) justifiable reliance by the plaintiff, and (5) damages.” Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Secs., LLC, 797 F.3d 160, 170 (2d Cir. 2015) (citing Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559 (2009)).
If the purported misrepresentation is a promise of future action, the plaintiff must prove that the promise was made “with a preconceived and undisclosed intention of not performing it.” Century Pac., Inc. v. Hilton Hotels Corp., 528 F.Supp.2d 206, 222 (S.D.N.Y. 2007) (internal quotation marks and citation omitted), aff'd, 354 Fed.Appx. 496 (2d Cir. 2009). Fraudulent intent “is rarely susceptible of direct proof and must ordinarily be established by circumstantial evidence and the legitimate inference arising therefrom.” Martell Strategic Funding LLC v. Am. Hosp. Acad., No. 12-CV-627 (VSB), 2019 WL 632364, at *11 (S.D.N.Y. Feb. 14, 2019) (quoting Goshen Litho, Inc. v. Kohls, 582 F.Supp. 1561, 1564 (S.D.N.Y. 1983)). It is well established that, at summary judgment, proof of “non-performance of a promise” is not enough to establish a triable issue of fact with respect to fraudulent intent. Murray v. Xerox Corp., 811 F.2d 118, 122 (2d Cir. 1987).
The parties do not dispute that Plaintiff's fraud claim is based on Defendants' purported promise to invest in GateGuard in the future.[7] Although a promise of future conduct can be actionable as fraud, to survive a motion for summary judgment, Plaintiff must have admissible evidence that tends to prove that the promise was made with intent to defraud. That is where Plaintiff's claim falters.
Plaintiff maintains that it has met its burden at summary judgment because it alleged that “Defendants had no intention of honoring” their promises and because fraudulent intent is an issue of fact for trial. Pl. Mem., Dkt. 150, at 17 ). In response to a motion for summary judgment, invoking a conclusory allegation contained in the Amended Complaint is inadequate to raise a triable question of fact. See Murray, 811 F.2d at 122 (affirming summary judgment because the plaintiff “failed to offer evidence of [the defendant's] fraudulent intent” at the time it made an allegedly fraudulent promise); CCM Rochester, Inc. v. Federated Inv'rs, Inc., 234 F.Supp.3d 501, 506 n.11 (S.D.N.Y. 2017) (); Bogart v. Shearson Lehman Bros., Inc., No. 91-CV-1036 (LBS) (NG), 1995 WL 46399, at *1 (S.D.N.Y. Feb. 6, 1995) ().
Apart from that bare-bones argument, Plaintiff rattles off purported facts to substantiate its claim that Defendants knew that their promise to invest in GateGuard was false. See Rule 56.1 Counterstmt. ¶¶ 39-50. The facts Plaintiff invokes do not tend prove that there was never an intent to perform and actually tend to prove the opposite. According to Plaintiff, L. Goldenberg sought to form a group of investors so they would have more leverage in their negotiations with Plaintiff; Defendants even organized a meeting to encourage their friends and business contacts to invest. See id. ¶¶ 41, 44-46. L. Goldenberg testified that he was willing to invest with Teman, id. ¶ 43, and A. Goldenberg spent time promoting GateGuard to potential investors, id. ¶ 63. The time and energy Defendants spent recruiting other investors and promoting GateGuard suggest that they were motivated to help GateGuard thrive so they could profit from its success, not that they were fraudulently manipulating GateGuard into making business expenditures for their amusement.[8] Cf. Elliot v. Nelson, 301 F.Supp.2d 284, 287 (S.D.N.Y. 2004) (...
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