Nadselson v. Zakharchenko

• Decision Date: 23 September 2014
• Docket Number: Index No. 501571/2012
• Parties: ALIA NADSELSON and IRENE NADELSON, Plaintiff, v. IGOR ZAKHARCHENKO, and ROSTISLAV NOVAKOVSKY a/k/a RUSSELL NOVAKOVSKY, Defendants.
• Court: New York Supreme Court

2014 NY Slip Op 32552(U)

ALIA NADSELSON and IRENE NADELSON, Plaintiff, v. IGOR ZAKHARCHENKO, and ROSTISLAV NOVAKOVSKY a/k/a RUSSELL NOVAKOVSKY, Defendants.

Index No. 501571/2012

New York Supreme Court

RECEIVED NYSCEF: October 2, 2014

September 23, 2014

NYSCEF DOC. NO. 62

At an IAS Term, Part 47of the Supreme Court of the State of New York, held in and for the County of Kings, at the Courthouse, at Civic Center, Brooklyn, New Vork, on the 23^rd day of September, 2014.

PRESENT: HON. DAVID I. SCHMIDT, Justice.

DECISION AND ORDER

Mot. Seq. No(s). 3

Upon the foregoing papers, defendants, Igor Zakharchenko and Rostislav Novakovsky a/k/a Russell Novakovsky, (collectively "defendants"), move for an order, pursuant to CPLR 3211 (a)(1) and (7), dismissing the verified complaint (complaint).

Background

The instant action concerns, a transaction between the parties, wherein plaintiffs, ALISA NADELSON and IRENE NADELSON (collectively "plaintiffs") purchased a share of the defendants' restaurant business located in Miami, Florida. By a sales agreement dated June 24, 2011, for the sum of $ 10.00, defendants agreed to sell and plaintiffs agreed to buy, a 50.2% share in defendants' restaurant company named A.I.R Restaurant Group, LLC DBA Greenspoon Health Bar & Grill ("Greenspoon"). On the same date, all of the parties executed a new operating agreement for Greenspoon reflecting the new^;ownership interests created by the sales agreement and outlining to duties and obligations of the members.

Plaintiffs' complaint¹ alleges that, under the operating agreement, the parties agreed that 1) plaintiffs would infuse Greenspoon with $260,000 of fresh capital to be mostly applied towards the completion of the construction of the restaurant, 2) defendants would manage the day-to-day operations of Greenspoon and 3) Greenspoon would operational by September 1, 2011. Plaintiffs also allege that after the consummation of the deal, plaintiff repeatedly requested that the defendants provide accounting information relating to Greenspoon's operations so that plaintiffs could monitor how defendants were utilizing the plaintiffs' investment. Plaintiffs allege that on or about August of 2011, not having received a response from defendants regarding Greenspoon's accounting information, they contacted the construction company building the restaurant and were informed that Greenspoon was indebted to the construction company for approximately $40,000.00. Plaintiffs also allege that the restaurant did not open on September 1, 2011 as originally planned and that the costs and expenses related to the construction continued to exceed the anticipated budget. Plaintiffs' further allege that the defendants, in violation of the operating agreement, renegotiated the restaurant's lease after a near eviction and that, on or about May of 2012, shortly after the restaurant's March 2012 opening date, negotiated a sale of the restaurant without plaintiffs knowledge and consent: Plaintiffs allege that their ongoing requests to defendants for records and information relating to the construction, lease and sale of the business were ignored by the defendants. Plaintiffs claim that in an effort to mitigate losses they consentedto the sale of the restaurant so the proceeds could be utilized to minimize the restaurant's liabilities, including for unpaid rent. Plaintiffs' complaint enumerates additional allegations concerning purported mismanagement of the company by the defendants and interposes eight causes of actions based on the above transactions and occurrences.

Plaintiffs' first cause of action alleges that plaintiffs were fraudulently induced into signing the June 24, 2011 sales agreement and the June 24, 2011 operating agreement. Plaintiffs' second cause of action sounds in fraud and alleges that the defendants misrepresented their intention to honor the provisions of the sale and operating agreements. Plaintiffs' third cause of action alleges that defendants conspired to commit the fraudulent acts alleged in causes of action one and two. The fourth cause of action alleges that defendants breached the sale and operating agreements. The fifth cause of action seeks damages based on a claim of unjust enrichment. The sixth cause of action alleges a claim for rescission. The seventh cause of action alleges a breach of fiduciary duty and the eighth cause of action seeks an accounting and disclosure of all of the LLC financial records.

Having already interposed an answer, defendants now move pursuant to CPLR 3211 based on two grounds. Defendants' argue as their first basis for dismissal that, pursuant to CPLR 3211(a)(1), that the plaintiffs' entire complaint should be dismissed because this court lacks subject matter jurisdiction since the operating agreement contains a forum selection clause requiring all claims concerning the operating agreement to be litigated in Florida. In the alternative, defendants move, pursuant to CPLR 3211(a)(7), to dismiss plaintiffs' first, second,third, fourth and sixth causes of action based on the purported failure of the pleadings to adequately state those respective claims.²

In opposition, plaintiffs contend that the clause relied upon by the defendants is not a forum selection clause but a choice of law clause. Additionally, plaintiffs' allege that on or about June 2012, by a meeting of the majority of the members, the clause was amended to substitute New York law instead for Florida law, as the preferred substantive choice of law. Finally, plaintiffs argue that the complaint is sufficient on its face.

In reply, defendants reiterate that this court lacks subject matter jurisdiction over this matter urging dismissal not only based on the forum selection provisions but also based on the lack of contacts between the subject matter and the court.³

Discussion

CPLR 3211(a)(1)

When a party seeks an order dismissing a complaint pursuant to CPLR 3211(a)(1) based on documentary evidence, the application may be granted if the documentary evidence utterly refutes material allegations in the complaint and establishes a defense as a matter of law. Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190 (2002); Xia-Ping Wang v. Diamond Hill Realty, LLC, 116 A.D.3d 767, 984 N.Y.S.2d 76 (2^nd Dept. 2014).

Here, the clause, found in section 22 of the Operating Agreement, states in pertinent part that the, "...Agreement and the rights and liabilities of the parties hereunder shall be governed by and determined with the laws of the State of Florida." The clause is a choice of law provision and not a forum selection provision and the two clauses should not be read as one and the same. Tegra S.A. v. Bombardier, Inc., 80 A.D.3d 443, 915 N.Y.S.2d 61 (1^st Dept. 2011). Therefore, defendants the motion made pursuant to CPLR 3211(a)(1) is denied.

CPLR 3211 (a)(7)

As an alternative to the complete dismissal of the complaint, defendants seek dismissal of the first, second, third, fourth and sixth causes of action based on CPLR 3211(a)(7).⁴

It is axiomatic that when determining a motion pursuant to CPLR 3211 (a)(7), a court must "liberally construe the complaint ... and accept as true the facts alleged in the complaint and any submissions in opposition to the dismissal motion." 511 W. 232nd Owners Corp., 98 N.Y.2d at 152, 746 N.Y.S.2d 131, 773 N.E.2d 496 (2002). The court must also "accord [a] plaintiff the benefit of every possible favorable inference." (id. at 152). "The motion must be denied if from the pleadings' four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law'" id. at 152, quoting Polonetsky v. Better Homes Depot, Inc., 97 N.Y.2d at 54, 735 N.Y.S.2d 479, 760 N.E.2d 1274 (2001). "Although on a motion to dismiss plaintiffs' allegations are presumed to be true and accorded every favorable inference, conclusory allegations [and] claims consisting of bare legal conclusions with no factual specificity are insufficient to survive a motion to dismiss." Godfrey v. Spano, 13 NY3d 358, 373 (2009);

a. First Cause of Action - Fraud in the Inducement

The first cause of action for fraud in the inducement is asserted against defendants for their alleged misrepresentations relating to material facts existing at the time the parties executed the sales and operating agreements

A cause of action for fraud in the inducement, must aver that there was a "representation of a material existing fact, falsity, scienter, deception and injury." Channel Master Corp. v. Aluminium Ltd. Sales, 4 N.Y.2d 403, 407, 176 N.Y.S.2d 259, 151 N.E.2d 833). Dalessio v. Kressler, 6 A.D.3d 57, 773 N.Y.S.2d 434 (2^nd Dept. 2004).

In support of its application to dismiss the first cause of action, defendants argue that plaintiffs' complaint fails to make allegations concerning the misrepresentations of fact existing at the time of the execution of the documents. Defendants also contend that plaintiffs' decision to forego any due diligence belies plaintiffs' allegation that it justifiably relied on defendants' alleged representations concerning the state of Greenspoon's affairs. Specifically, defendants contend that any statements they made regarding the anticipated opening date was merely an expression of future expectation and not a representation of an existing fact. Also, defendants argue that any representations made at the time of the execution of the agreements regarding the current state of the construction of the restaurant and its assets (i.e. equipment, furniture and fixtures) was readily apparent to plaintiffs based on their personal inspection of the premises. In opposition, defendants, citing to paragraphs 72 and 73 of the complaint, argue that complaint, on its face, adequately avers the elements of a claim for fraudulent inducement.

Plaintiffs' complaint fails articulate with any specificity the misrepresentations allegedly made by the defendants concerning facts existing at the time of the execution...