Markowits v. Friedman

• Decision Date: 23 November 2016
• Citation: Markowits v. Friedman, 2016 NY Slip Op 7932, 144 A.D.3d 993, 42 N.Y.S.3d 218 (N.Y. App. Div. 2016)
• Parties: Sara MARKOWITS, et al., appellants, v. Barry FRIEDMAN, et al., respondents, et al., defendants.
• Court: New York Supreme Court — Appellate Division

144 A.D.3d 993

42 N.Y.S.3d 218

2016 N.Y. Slip Op. 07932

Sara MARKOWITS, et al., appellants,

v.Barry FRIEDMAN, et al., respondents, et al., defendants.

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

Nov. 23, 2016.

Lynn, Gartner, Dunne & Covello, LLP, Mineola, NY (Joseph Covello and Kenneth L. Gartner of counsel), for appellants.

Frank Seddio, Brooklyn, NY, for respondents Faigy Wertzberger and Frank Conway, and Morrison Cohen LLP, New York, NY (Y. David Scharf and Kristin T. Roy of counsel), for respondents Barry Friedman and Rachel Friedman (one brief filed).

RUTH C. BALKIN, J.P., L. PRISCILLA HALL, BETSY BARROS and VALERIE BRATHWAITE NELSON, JJ.

In an action, inter alia, to recover damages for breach of contract, the plaintiffs appeal from an order of the Supreme Court, Kings County (Solomon, J.), dated June 16, 2014, which granted those branches of the motion of the defendants Barry Friedman, Rachel Friedman, Faigy Wertzberger, Frank Conway, and Susan D. Osterer which were for summary judgment dismissing the complaint insofar as asserted against the defendants Faigy Wertzberger and Frank Conway, and pursuant to CPLR 7503 to stay all remaining proceedings in the action and compel arbitration, and denied that branch of their motion which was for leave to amend the complaint.

ORDERED that the order is affirmed, with costs.

The defendants Barry Friedman and Rachel Friedman were the owners of Parkshore Home Health Care, LLC, doing business as Renaissance Home Health Care, and Renaissance HHA, LLC (hereinafter together the companies), which provide home care and nursing services. In March 2010, the Friedmans entered into two agreements with the plaintiff Alexander Markowits whereby they agreed to sell an interest in the companies and an option to purchase the remainder interests. In June 2011, the parties modified the agreements to provide supplemental payment terms. In connection with the modification, they executed related documents, including a promissory note from Markowits for a portion of the purchase price, together with a confession of judgment in the same sum, and an agreement to submit to arbitration “any disputes [which should] arise between them concerning the sale ... relating directly or indirectly to the aforementioned transaction,” excepting only the filing and entering by Barry Friedman in the appropriate court of the confession of judgment. The parties executed another modification of the agreements in February 2012. Operational control of the companies was purportedly transferred to Markowits in April 2012. In June 2012, Markowits allegedly failed to make a payment due pursuant to the agreements. The Friedmans held him in default of the promissory note, accelerated the debt, and filed the confession of judgment.

Markowits, his wife, the plaintiff Sara Markowits, and the companies (hereinafter collectively the plaintiffs) thereafter commenced this action alleging, among other things, that the Friedmans breached warranties in the contracts of sale by concealing civil actions and government investigations pending against the companies, and that the Friedmans' failure to disclose these actions and investigations fraudulently induced Markowits to enter into the modification agreements. The complaint further alleged that the Friedmans violated a noncompete clause in the contracts by engaging in competing businesses and hiring employees of the companies, including the defendants Faigy Wertzberger and Frank Conway, for other health care businesses in which they had an interest. The complaint asserted causes of action against Wertzberger and Conway to recover damages for breach of their employment agreements with the companies and to enjoin them from engaging in competition with the companies.

All of the defendants except Asher Fensterheim (hereinafter collectively the defendants) moved for summary judgment dismissing the complaint insofar as asserted against Wertzberger, Conway, and Susan D. Osterer, and pursuant to CPLR 7503 to stay all remaining proceedings in the action and compel arbitration. The plaintiffs moved, inter alia, for leave to amend the complaint to add causes of action against Rabbi Moshe Milstein, who allegedly acted as an impartial mediator during the negotiation of the 2011 modification agreement, and against certain employees of the companies, related to their failure to disclose the actions and investigations to Markowits. In an order dated May 14, 2014, the Supreme Court granted that branch of the defendants' motion which was for summary judgment dismissing the complaint insofar as asserted against Osterer. In an order dated June 16, 2014, the Supreme Court granted the remaining branches of the defendants' motion and denied that branch of the plaintiffs' motion which was for leave to amend the complaint. The plaintiffs appeal from the June 16, 2014, order.

The Supreme Court properly granted that branch of the defendants' motion which was for summary judgment dismissing the complaint insofar as asserted against Wertzberger and Conway. Those defendants established their prima facie entitlement to judgment as a matter of law by submitting affidavits denying that they had written employment agreements with the companies. In opposition to the motion, the plaintiffs failed to raise a triable issue of fact (see generally Zuckerman v. City of New York, 49 N.Y.2d 557, 562, 427 N.Y.S.2d 595, 404 N.E.2d 718 ). While the plaintiffs submitted confidentiality agreements signed by Wertzberger, those agreements did not contain any prohibition against competition following termination of her employment with the companies (cf. Roemer & Featherstonhaugh v. Featherstonhaugh, 274 A.D.2d 630, 632, 710 N.Y.S.2d 190 ). Moreover, the plaintiffs allege that the employees were hired by the Friedmans, who were already in possession of the client lists of the companies, and thus, there is no triable issue of fact as to whether the employees breached the confidentiality agreements by disclosing confidential patient lists.

In the absence of prejudice or surprise to the opposing party, leave to amend a pleading should be freely granted unless the proposed amendment is palpably insufficient or patently devoid of merit (see CPLR 3025[b] ; Galanova v. Safir, 127 A.D.3d 686, 4 N.Y.S.3d 538 ; Marcum, LLP v. Silva, 117 A.D.3d 917, 986 N.Y.S.2d 508 ). The determination to permit or deny amendment is committed to the sound discretion of the trial court (see CPLR 3025[b] ; Edenwald Contr. Co. v. City of New York, 60 N.Y.2d 957, 959, 471 N.Y.S.2d 55, 459 N.E.2d 164 ). Here, the Supreme Court providently exercised its discretion in denying the plaintiffs leave to amend the complaint because the proposed causes of action were patently devoid of merit. To plead a cause of action to recover damages for fraudulent concealment, the plaintiff must allege, in addition to the elements of fraud, that the defendant had a duty to disclose the material information (see Bannister v. Agard, 125 A.D.3d 797, 5 N.Y.S.3d 114 ; E.B. v. Liberation Publs., 7 A.D.3d 566, 777 N.Y.S.2d 133 ; P.T. Bank Cent. Asia, N.Y. Branch v. ABN AMRO Bank N.V., 301 A.D.2d 373, 376, 754 N.Y.S.2d 245 ). As a purported impartial mediator between the parties to the 2011 modification agreement, Rabbi Milstein did not have a fiduciary relationship with Markowits, and was under no duty to disclose the information to him (see Marmelstein v. Kehillat New Hempstead: The Rav Aron Jofen Community Synagogue,

11 N.Y.3d 15, 22, 862 N.Y.S.2d 311, 892 N.E.2d 375 ; Northeast Gen. Corp. v. Wellington Adv., 82 N.Y.2d 158, 604 N.Y.S.2d 1, 624 N.E.2d 129 ). While the employees had duties of good faith and loyalty to their employer (see Lamdin v. Broadway Surface Adv. Corp., 272 N.Y. 133, 5 N.E.2d 66 ; Qosina Corp. v. C & N Packaging, Inc., 96 A.D.3d 1032, 948 N.Y.S.2d 308 ), they had no fiduciary duty of disclosure to Markowits, who had not yet assumed operational control of the companies.

The proposed cause of action alleging that the employees and Rabbi Milstein aided and abetted the Friedmans in concealing the actions and investigations against the companies is patently devoid of merit. There is no cause of action for aiding and abetting a breach of contract (see Pomerance v. McGrath, 124 A.D.3d 481, 484, 2 N.Y.S.3d 436 ; Purvi Enters., LLC v. City of New York, 62 A.D.3d 508, 509, 879 N.Y.S.2d 410 ). To recover for aiding and abetting fraud, the plaintiff must plead “the existence of an underlying fraud, knowledge of the fraud by the aider and abettor, and substantial assistance by the aider and abettor in the achievement of the fraud” (Winkler v. Battery Trading, Inc., 89 A.D.3d 1016, 1017, 934 N.Y.S.2d 199 ; see Matter of Woodson, 136 A.D.3d 691, 693, 24 N.Y.S.3d 706 ). “Substantial assistance” requires an affirmative act on the defendant's part (see Baron v. Galasso, 83 A.D.3d 626, 629, 921 N.Y.S.2d 100 ). “[T]he mere inaction of an alleged aider or abettor constitutes substantial assistance only if the defendant owes a fiduciary duty directly to the plaintiff” (Monaghan v. Ford Motor Co., 71 A.D.3d 848, 850, 897 N.Y.S.2d 482, quoting Kaufman v. Cohen, 307 A.D.2d 113, 126, 760 N.Y.S.2d 157 ; see Smallberg v. Raich Ende Malter & Co., LLP, 140 A.D.3d 942, 35 N.Y.S.3d 134 ; Sanford/Kissena Owners Corp. v. Daral Props., LLC, 84 A.D.3d 1210, 923 N.Y.S.2d...