N.Y.C. Waterfront Dev. Fund II, LLC v. Pier A Battery Park Assocs., LLC

• Decision Date: 28 June 2022
• Docket Number: 16205,Index No. 657055/20,Case No. 2021–03665
• Citation: 206 A.D.3d 565,172 N.Y.S.3d 7
• Parties: NEW YORK CITY WATERFRONT DEVELOPMENT FUND II, LLC, Plaintiff–Appellant, v. PIER A BATTERY PARK ASSOCS., LLC et al., Defendants–Respondents.
• Court: New York Supreme Court — Appellate Division

206 A.D.3d 565

172 N.Y.S.3d 7

NEW YORK CITY WATERFRONT DEVELOPMENT FUND II, LLC, Plaintiff–Appellant,

v.PIER A BATTERY PARK ASSOCS., LLC et al., Defendants–Respondents.

16205

Index No. 657055/20

Case No. 2021–03665

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

ENTERED June 28, 2022

Weil, Gotschal & Manges LLP, New York (Gregory Silbert of counsel), for appellant.

Akerman LLP, New York (Benjamin Joelson of counsel), for respondents.

Gische, J.P., Kern, Mazzarelli, Singh, Rodriguez, JJ.

Order, Supreme Court, New York County (Jennifer G. Schecter, J.), entered on or about August 31, 2021, which, to the extent appealed from as limited by the briefs, granted defendants’ motion to dismiss the fraudulent inducement, fraud, aiding and abetting fraud, negligent misrepresentation, and veil-piercing claims, unanimously affirmed, without costs.

This dispute arises from plaintiff's $16.5 million loan to defendant borrower Pier A LLC (Borrower) for premises known as "Pier A." There are two agreements at issue on this appeal – first is the loan agreement¹ between plaintiff and defendant borrower Pier A LLC (Borrower); second is the lease agreement² between Borrower and non-party Battery Park City Authority (BPCA).

The complaint alleges that defendants fraudulently induced plaintiff to extend the loan to Borrower by furnishing false financial projections. However, Borrower expressly represented in section 3.10 of the loan agreement that those projections were prepared in good faith upon assumptions believed to be reasonable at the time (see Thomas v. McLaughlin, 276 A.D.2d 440, 715 N.Y.S.2d 388 [1st Dept. 2000] ). As the essence of the allegations is that defendants did not comply with that provision, the only claim stated is breach of contract (see MMCT, LLC v. JTR Coll. Point, LLC, 122 A.D.3d 497, 499, 997 N.Y.S.2d 374 [1st Dept. 2014] ). Thus, we need not reach the issue of whether the court properly credited defendants’ written request to prepay the loan as irrefutable proof of absence of intent to defraud.

The complaint states that on November 1, 2018, Borrower and BPCA amended their lease agreement. Plaintiff contends that defendants fraudulently induced it to consent to the lease amendments and forbear from enforcement actions with false assertions that Borrower was committed to honoring its obligations and taking steps to enable it to do so.

The sixth cause of action sounding in fraud with respect to the pre-loan misrepresentations is duplicative of the breach of contract claim (see e.g. MMCT, LLC v. JTR Coll. Point, LLC, 122 A.D.3d 497, 997 N.Y.S.2d 374 [1st Dept. 2014] ; OP Solutions, Inc. v. Crowell & Moring, LLP, 72 A.D.3d 622, 900 N.Y.S.2d 48 [1st Dept. 2010] ). The seventh cause of action, for fraud as to the alleged misrepresentations prior to entering into the lease amendments is, similarly duplicative. Finally, the representations that were allegedly made after entering into the lease amendments are not misrepresentations of defendants’ ability to perform (cf. Shear Enters. LLC v. Cohen, 189 A.D.3d 423, 137 N.Y.S.3d 306 [1st Dept. 2020] ; Man Advisors, Inc. v. Selkoe, 174 A.D.3d 435, 101 N.Y.S.3d 843 [1st Dept. 2019] ). Moreover, plaintiff does not allege that it sustained damages that would not be recoverable under the breach of contract cause of action (Shear Enters., 189 A.D.3d at 309, 137 N.Y.S.3d 306; Man~as v. VMS Assoc. LLC, 53 A.D.3d 451, 454, 863 N.Y.S.2d 4 [1st Dept. 2008] ).

Absent a fraud-based claim, there can be no claim for aiding and abetting fraud (see El Toro Group, LLC v. Bareburger Group, LLC, 190 A.D.3d 536, 542, 141 N.Y.S.3d 3 [1st Dept. 2021] ).

As to the negligent misrepresentation claims, the arm's length transaction between the sophisticated parties did not give rise to a "special relationship" requiring defendants to speak with care about Borrower's financial condition ( Kimmell v. Schaefer, 89 N.Y.2d 257, 264, 652 N.Y.S.2d 715, 675 N.E.2d 450 [1996] ). Plaintiff's reliance on the "special facts" doctrine is unavailing because, even though...