Qureshi v. Vital Transp., Inc., 2016–11035

• Decision Date: 19 June 2019
• Docket Number: 2016–11035,Index No. 710821/15
• Citation: 173 A.D.3d 1076,103 N.Y.S.3d 515
• Parties: Tahir I. QURESHI, et al., Respondents, v. VITAL TRANSPORTATION, INC., et al., Appellants.
• Court: New York Supreme Court — Appellate Division

173 A.D.3d 1076

103 N.Y.S.3d 515

Tahir I. QURESHI, et al., Respondents,

v.VITAL TRANSPORTATION, INC., et al., Appellants.

2016–11035

Index No. 710821/15

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

Argued—March 1, 2019

June 19, 2019

Schlam Stone & Dolan, LLP, New York, N.Y. (Jonathan Mazer and Samuel L. Butt of counsel), for appellants.

Raymond J. Aab, New York, N.Y. (Christopher Lynn of counsel), for respondents.

ALAN D. SCHEINKMAN, P.J., MARK C. DILLON, JOSEPH J. MALTESE, HECTOR D. LASALLE, JJ.

DECISION & ORDER

In an action, inter alia, to recover damages for fraudulent misrepresentation and breach of fiduciary duty, the defendants appeal from an order of the Supreme Court, Queens County (Timothy J. Dufficy, J.), dated August 8, 2016. The order, insofar as appealed from, in effect, denied those branches of the defendants' motion which were (1) pursuant to CPLR 3211(a)(1) and (7) to dismiss the first and sixth causes of action, (2) pursuant to CPLR 7503(a) and 2201 to compel arbitration of the plaintiffs' third, fourth, and seventh causes of action and to stay those causes of action pending arbitration, and (3) for attorneys' fees.

ORDERED that the order is affirmed insofar as appealed from, with costs.

In an amended complaint, the plaintiffs alleged, inter alia, that they entered into purchase and proprietary license agreements with Vital Transportation, Inc. (hereinafter Vital), relating to Vital's "black car" taxi radio and dispatch services, and pursuant to such agreements, they were shareholders of Vital. In the first cause of action, the plaintiffs, inter alia, asserted that at the time they entered into the purchase and proprietary license agreements, Vital's principals, and agents, including the defendant Berj Haroutunian, fraudulently misrepresented that the plaintiffs' investment was secured by real estate owned by Vital. In the sixth cause of action, the plaintiffs, inter alia, alleged that the defendants breached their fiduciary duty to the plaintiffs pursuant Business Corporation Law § 717 when they placed that real estate "out of the reach of the plaintiffs."

The defendants moved, inter alia, (1) pursuant to CPLR 3211(a)(1) and (7) to dismiss the first and sixth causes of action, (2) pursuant to CPLR 7503(a) and 2201 to compel arbitration of the third (accounting), fourth (tortious interference with contract and intentional infliction of emotional distress), and seventh (breach of contract/tortious interference) causes of action and to stay those causes of action pending arbitration, and (3) for attorneys' fees. The Supreme Court, inter alia, denied those branches of the defendants' motion. The defendants appeal.

A defendant may move to dismiss one or more causes of action, inter alia, on the ground that a defense is founded upon documentary evidence ( CPLR 3211[a][1] ) or the pleading fails to state a cause of action ( CPLR 3211[a][7] ). On a motion to dismiss pursuant to CPLR 3211(a), the pleading must be afforded a liberal construction and the court must "accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" ( Leon v. Martinez , 84 N.Y.2d 83, 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511 ; see 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 ). A motion to dismiss on the ground that the action is barred by documentary evidence pursuant to CPLR 3211(a)(1) may be granted only where the documentary evidence utterly refutes the plaintiff's factual allegations, conclusively establishing a defense as a matter of law (see Goshen v. Mutual Life Ins. Co. of N.Y. , 98 N.Y.2d at 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190 ; Leon v. Martinez , 84 N.Y.2d at 88, 614 N.Y.S.2d 972, 638 N.E.2d 511 ; Elite Laser Hair, Inc. v. Perfect Body Image, LLC , 167 A.D.3d 718, 718–719 ). "[T]o be considered ‘documentary,’ evidence must be unambiguous and of undisputed authenticity" ( Fontanetta v. John Doe 1 , 73 A.D.3d 78, 86, 898 N.Y.S.2d 569 ; see Hartnagel v. FTW Contr. , 147 A.D.3d 819, 820, 47 N.Y.S.3d 96 ; Anderson v. Armentano , 139 A.D.3d 769, 770–771, 33 N.Y.S.3d 294 ).

"To recover damages for fraudulent misrepresentation, a plaintiff must prove (1) a misrepresentation or an omission of material fact which was false and known to be false by the defendant, (2) the misrepresentation was made for the purpose of inducing the plaintiff to rely upon it, (3) justifiable reliance of the plaintiff on the misrepresentation or material omission, and (4) injury" ( Bernardi v. Spyratos , 79 A.D.3d 684, 687, 912 N.Y.S.2d 627 ; see Lewis v. Wells Fargo Bank, N.A. , 134 A.D.3d 777, 778, 22 N.Y.S.3d 461 ; Blanco v. Polanco , 116 A.D.3d 892, 895, 986 N.Y.S.2d 151 ; see also Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 N.Y.3d 553, 559, 883 N.Y.S.2d 147, 910 N.E.2d 976 ). Where a cause of action is based upon fraud, the circumstances constituting the alleged wrong must be stated in detail (see CPLR 3016[b] ; Eurycleia Partners, LP v. Seward & Kissel, LLP , 12 N.Y.3d at 559, 883 N.Y.S.2d 147, 910 N.E.2d 976 ; Matter of Pesola Trust, etc. , 166 A.D.3d 885, 887, 88 N.Y.S.3d 552 ). However, the pleading requirements of CPLR 3016(b) may be met when the facts are sufficient to permit a reasonable inference of the alleged conduct (see Pludeman v. Northern Leasing Sys., Inc. , 10 N.Y.3d 486, 492, 860 N.Y.S.2d 422, 890 N.E.2d 184 ; Minico Ins. Agency, LLC v. AJP Contr. Corp. , 166 A.D.3d 605, 608, 88 N.Y.S.3d 64 ).

Here, assuming the facts alleged to be true and according the plaintiffs the benefit of every favorable inference (see Goshen v. Mutual Life Ins. Co. of N.Y. , 98 N.Y.2d at 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190 ; Leon v. Martinez , 84 N.Y.2d at 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511 ), the plaintiffs set forth a cognizable cause of action to recover damages for fraudulent misrepresentation, and stated in sufficient detail the facts constituting the alleged wrong (see Hiu Ian Cheng v. Salguero , 164 A.D.3d 768, 770, 83 N.Y.S.3d 645 ; Minico Ins. Agency, LLC v. AJP Contr. Corp. , 166 A.D.3d at 608, 88 N.Y.S.3d 64 ). While the defendants also moved to dismiss the first cause of action on the ground that it was barred by documentary evidence, the attorney affirmation they submitted was insufficient to establish an evidentiary basis for consideration of at least some of the submitted materials (see Onewest Bank, FSB v. Michel , 143 A.D.3d 869, 871, 39 N.Y.S.3d 485 ; U.S. Nat. Bank Assn. v. Melton , 90 A.D.3d 742, 743, 934 N.Y.S.2d 352 ). While additional materials were submitted together with a client affidavit on reply, that evidence was improperly submitted for the first time with the defendants' reply papers (see Levy v. Smith , 132 A.D.3d 961, 963, 18 N.Y.S.3d 438 ; Kevin Kerveng Tung, P.C. v. JP Morgan Chase & Co. , 105 A.D.3d 709, 710, 963 N.Y.S.2d 145 ). In any event, the documentary evidence did not utterly refute the plaintiffs' factual allegations and conclusively establish a defense to the plaintiffs' first cause of action as a matter of law (see Goshen v. Mutual Life Ins. Co. of N.Y. , 98 N.Y.2d at 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190 ). Accordingly, we agree with the Supreme Court's denial of that branch of the defendants' motion which was to dismiss the first cause of action.

"[C]orporate officers and directors have a fiduciary relationship with the shareholders of their corporation" ( Lindner Fund, Inc. v. Waldbaum, Inc. , 82 N.Y.2d 219, 223, 604 N.Y.S.2d 32, 624 N.E.2d 160 ; see Giblin v. Murphy , 73 N.Y.2d 769, 771, 536 N.Y.S.2d 54, 532 N.E.2d 1282 ). "The elements of a cause of action to recover damages for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant's misconduct" ( Rut v. Young Adult Inst., Inc. , 74 A.D.3d 776, 777, 901 N.Y.S.2d 715 ; see Parekh v. Cain , 96 A.D.3d 812, 816, 948 N.Y.S.2d 72 ; Kurtzman v. Bergstol , 40 A.D.3d 588, 590, 835 N.Y.S.2d 644 ). A cause of action to recover damages for breach of fiduciary duty must be pleaded with the particularity required under CPLR 3016(b) (see Parekh v. Cain , 96 A.D.3d at 816, 948 N.Y.S.2d 72 ; Palmetto Partners, L.P. v. AJW Qualified Partners, LLC , 83 A.D.3d 804, 808, 921 N.Y.S.2d 260 ; Winston Chiu v. Man Choi Chiu , 71 A.D.3d 621, 623, 896 N.Y.S.2d 132 )...