High Tides Llc v. Demichele

• Citation: 931 N.Y.S.2d 377,88 A.D.3d 954,2011 N.Y. Slip Op. 07607
• Parties: HIGH TIDES, LLC, etc., appellant-respondent,v.Don DeMICHELE, respondent,Jeffrey Serkes, et al., respondents-appellants, et al., defendants.
• Decision Date: 25 October 2011
• Court: New York Supreme Court Appellate Division

88 A.D.3d 954
931 N.Y.S.2d 377
2011 N.Y. Slip Op. 07607

HIGH TIDES, LLC, etc., appellant-respondent,
v.
Don DeMICHELE, respondent,Jeffrey Serkes, et al., respondents-appellants, et al., defendants.

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

Oct. 25, 2011.

[931 N.Y.S.2d 378]

Abrams Garfinkel Margolis Bergson, LLP, New York, N.Y. (Robert J. Bergson and Robert F. Salkowski, Roberto Zarco, and Rosanna Navarro, Miami, Florida, pro

[931 N.Y.S.2d 379]

hac vice, of counsel), for appellant-respondent.Troutman Sanders LLP, New York, N.Y. (Aurora Cassirer of counsel), for respondents-appellants Jeffrey Serkes and Kenneth Kellaway.O'Rourke & Degen, PLLC, New York, N.Y. (Ronald D. Degen of counsel), for respondent-appellant Dunkin' Brands, LLC.Meyer, Suozzi, English & Klein, P.C., Garden City, N.Y. (Robert C. Angelillo and Kevin Schlosser of counsel), for respondent.MARK C. DILLON, J.P., ARIEL E. BELEN, SHERI S. ROMAN, and ROBERT J. MILLER, JJ.

[88 A.D.3d 955] In an action, inter alia, to recover damages for fraud and negligence, the plaintiff appeals, as limited by its brief, from so much of an order of the Supreme Court, Nassau County (Bucaria, J.), dated May 11, 2010, as granted those branches of the motion of the defendant Don DeMichele which were pursuant to CPLR 3211(a)(1) and (7) to dismiss the first through sixth causes of action insofar as asserted against him, those branches of the separate motion of the defendants Jeffrey Serkes and Kenneth Kellaway which were pursuant to CPLR 3211(a)(7) to dismiss the first through sixth causes of action insofar as asserted against them, and that branch of the motion of the defendant Dunkin' Brands, LLC, which was pursuant to CPLR 3211(a)(7) to dismiss the sixth cause of action insofar as asserted against that defendant, the defendants Jeffrey Serkes and Kenneth Kellaway cross-appeal, as limited by their brief, from so much of the same order as denied those branches of their motion which were pursuant to CPLR 3211(a)(7) to dismiss the seventh cause of action insofar as asserted against them, and the defendant Dunkin' Brands, LLC, separately cross-appeals, as limited by its brief, from so much of the same order as denied that branch of its motion which was pursuant to CPLR 3211(a)(7) to dismiss the seventh cause of action insofar as asserted against it.

ORDERED that the order is affirmed insofar as appealed from; and it is further,

ORDERED that the order is reversed insofar as cross-appealed from, on the law, and those branches of the respective motions of the defendants Jeffrey Serkes and Kenneth Kellaway, and Dunkin' Brands, LLC, which were pursuant to CPLR 3211(a)(7) to dismiss the seventh cause of action insofar as asserted against each of them are granted; and it is further,

ORDERED that one bill of costs is awarded to the defendant Don DeMichele, the defendants Jeffrey Serkes and Kenneth Kellaway, and the defendant Dunkin' Brands, LLC, appearing separately and filing separate briefs, payable by the plaintiff.

In July 2007, December 2007, and August 2008, the plaintiff, High Tides, LLC (hereinafter HT), invested different sums of money totaling over one million dollars in Kainos Partners Holding Company, LLC (hereinafter Kainos). Kainos was created in 2006 and owned and operated Dunkin' Donuts restaurants in New York, Nevada, and South Carolina. Although Kainos initially grew at an impressive rate, it became insolvent in late 2008 and, ultimately, filed for bankruptcy protection. HT commenced[88 A.D.3d 956] this action against the defendants to recover damages based upon, inter alia, the purported fraudulent acts of the defendants in concealing and misrepresenting the true nature of Kainos's financial status in order to induce the plaintiff to invest in Kainos.

The defendant Don DeMichele, a member of Kainos's board of directors and the

[931 N.Y.S.2d 380]

Chief Executive Officer of Kainos, moved pursuant to CPLR 3211(a)(1) and (7) to dismiss the complaint insofar as asserted against him, arguing, inter alia, that the complaint failed to allege any specific fraudulent misrepresentations he made to HT regarding Kainos. The defendants Jeffrey Serkes and Kenneth Kellaway, members of Kainos's board of directors, separately moved pursuant to CPLR 3211(a)(7) to dismiss the complaint insofar as asserted against them on the ground, inter alia, that it lacked any specific allegations regarding their involvement with the alleged fraud. The defendant Dunkin' Brands, LLC (hereinafter DB), the master servicer for Dunkin' Donuts Franchised Restaurants, LLC, moved pursuant to 3211(a)(7) to dismiss the complaint insofar as asserted against it, arguing, among other things, that there was no basis alleged in the complaint on which it could be found to have been involved in the purported fraud.

With respect to the defendants DeMichele, Serkes, and Kellaway, the Supreme Court concluded that they were entitled to the dismissal of HT's first six causes of action insofar as asserted against them, alleging fraudulent inducement, fraudulent concealment, fraud and misrepresentation, negligent omission, negligent misrepresentation, and conspiracy to defraud. With respect to the defendant DB, the Supreme Court held that it was entitled to the dismissal of HT's sixth cause of action insofar as asserted against it, alleging conspiracy to defraud. However, the Supreme Court denied those branches of the defendants' respective motions which were to dismiss the seventh cause of action alleging aiding and abetting fraud insofar as asserted against these defendants.

On a motion to dismiss a complaint pursuant to CPLR 3211(a)(7), the pleading is to be afforded a liberal construction ( see CPLR 3026; EBC I, Inc. v. Goldman, Sachs & Co., 5 N.Y.3d 11, 19, 799 N.Y.S.2d 170, 832 N.E.2d 26; Leon v. Martinez, 84 N.Y.2d 83, 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511), and the court must accord the plaintiff “the benefit of every possible favorable inference,” accept the facts alleged in the complaint as true, and “determine only whether the facts as alleged fit within any cognizable legal theory” ( Leon v. Martinez, 84 N.Y.2d at 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511). Such a motion should be granted only where, even viewing the allegations as true, the plaintiff still cannot establish[88 A.D.3d 957] a cause of action ( see Kuzmin v. Nevsky, 74 A.D.3d 896, 898, 903 N.Y.S.2d 96; Hartman v. Morganstern, 28 A.D.3d 423, 424, 814 N.Y.S.2d 169).

Here, the first, second, and third causes of action allege, respectively, fraudulent inducement, fraudulent concealment, and fraudulent misrepresentation on the part of, among others, DeMichele, Serkes, and Kellaway. “The elements of a cause of action sounding in fraud are a material misrepresentation of an existing fact, made with knowledge of the falsity, an intent to induce reliance thereon, justifiable reliance upon the misrepresentation, and damages” ( Introna v. Huntington Learning Ctrs., Inc., 78 A.D.3d 896, 898, 911 N.Y.S.2d 442; see Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559, 883 N.Y.S.2d 147, 910 N.E.2d 976)....