Rka Film Fin., LLC v. Kavanaugh

• Decision Date: 30 April 2019
• Docket Number: Index 652592/15,9154-9155-9155A-9155B-9155C-9155D-9155E-9155F
• Citation: 99 N.Y.S.3d 267,171 A.D.3d 678
• Parties: RKA FILM FINANCING, LLC, Plaintiff–Appellant, v. Ryan KAVANAUGH, et al., Defendants–Respondents.
• Court: New York Supreme Court — Appellate Division

171 A.D.3d 678

99 N.Y.S.3d 267

RKA FILM FINANCING, LLC, Plaintiff–Appellant,

v.Ryan KAVANAUGH, et al., Defendants–Respondents.

9154-9155-9155A-9155B-9155C-9155D-9155E-9155F

Index 652592/15

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

ENTERED: APRIL 30, 2019

Latham & Watkins LLP, New York (Benjamin Naftalis of counsel, New York), for appellant.

Skadden, Arps, Slate, Meagher & Flom LLP, New York (Jonathan L. Frank of counsel), for Ryan Kavanaugh, respondent.

Schulte Roth & Zabel LLP, New York (Robert M. Abrahams of counsel), for Colbeck Capital Management, LLC, Colbeck Capital LLC, Colbeck Partners IV, Jason Colodne, Jason Beckman and David Aho, respondents.

Greenberg Traurig, LLP, Chicago, IL (Gregory E. Ostfeld of the bar of the state of Illinois, admitted pro hac vice, of counsel), for Ramon Wilson, Andrew Matthews, Greg Shamo and Tucker Tooley respondents.

Renwick, J.P., Richter, Gesmer, Kern, Singh, JJ.

The court correctly dismissed the SAC because it did not adequately plead an actionable claim for fraud, fraudulent inducement, or negligent misrepresentation against any of defendants. The SAC did not attribute specific misrepresentations or wrongdoing to most defendants (see Marine Midland Bank v. Russo Produce Co. , 50 N.Y.2d 31, 44–45, 427 N.Y.S.2d 961, 405 N.E.2d 205 [1980] ; Fletcher v. Dakota Inc. , 99 A.D.3d 43, 49, 948 N.Y.S.2d 263 [1st Dept. 2012] ), but rather, impermissibly lumped those defendants together with the others against whom specific acts had been pleaded ( Jonas v. National Life Ins. Co. , 147 A.D.3d 610, 612, 48 N.Y.S.3d 77 [1st Dept. 2017] ; MP Cool Invs. Ltd. v. Forkosh, 142 A.D.3d 286, 291, 40 N.Y.S.3d 1 [1st Dept. 2016], lv denied 28 N.Y.3d 911, 47 N.Y.S.3d 227, 69 N.E.3d 1023 [2016] ).

Initially, the facts alleged in the SAC do not support a claim of fraud against Colbeck Capital Management, LLC (Colbeck) or David Aho ( Pludeman v. Northern Leasing Sys., Inc. , 10 N.Y.3d 486, 492, 860 N.Y.S.2d 422, 890 N.E.2d 184 [2008] ). Aho's alleged statement that plaintiff's investment was "low risk," was a non-actionable expression of hope (see Zaref v. Berk & Michaels, 192 A.D.2d 346, 349, 595 N.Y.S.2d 772 [1st Dept. 1993] ), and his presentation of slides prepared by Relativity is insufficient to impute representations within the slides to him personally (see Gregor v. Rossi, 120 A.D.3d 447, 447–448, 992 N.Y.S.2d 17 [1st Dept. 2014] ). Plaintiff also waived any claims based upon representations by Aho by signing specific disclaimers in non-disclosure agreements which renounced any representations regarding the accuracy of any statements made in the introductory investment materials (see Loreley Fin. (Jersey) No. 3 Ltd. v. Citigroup Global Mkts. , 119 A.D.3d 136, 143, 987 N.Y.S.2d 299 [1st Dept. 2014] ). The non-disclosure agreements also released Aho and Colbeck Capital Management from liability relating to or resulting from the use of those materials (see Centro Empresarial Cempresa S.A. v. America Movil, S.A.B. de C.V. , 17 N.Y.3d 269, 277–278, 929 N.Y.S.2d 3, 952 N.E.2d 995 [2011] ).

The alleged misrepresentations attributed to defendants Ramon Wilson, Andrew Matthews, and Greg Shamo, officers of Relativity, are similarly insufficient to give rise to a fraud claim. The alleged misrepresentations attributed to these defendants were made after plaintiff had already invested in Relativity, precluding a conclusion that they induced plaintiff to engage in the transaction ( Laub v. Faessel, 297 A.D.2d 28, 31, 745 N.Y.S.2d 534 [1st Dept. 2002] ). To the extent plaintiff claims that these defendants' misrepresentations caused it to abstain from taking legal action, plaintiff has not demonstrated that it sustained damages as a result of such forbearance, an essential element of its claim ( Laub, 297 A.D.2d at 30–31, 745 N.Y.S.2d 534 ).

To the extent the SAC has attributed specific misrepresentations to defendant Ryan Kavanaugh, the founder and chief executive officer of Relativity, they do not support a claim of fraud. Plaintiff could not have justifiably relied on the misrepresentations regarding Relativity's financial health in agreeing to engage in the investment, as plaintiff, a sophisticated investor, did not demonstrate that it fulfilled its affirmative obligation to verify the nature and quality of its investment (see MP Cool Invs. Ltd. , 142 A.D.3d at 287, 40 N.Y.S.3d 1 ; Global Mins. & Metals Corp. v. Holme, 35 A.D.3d 93, 100, 824 N.Y.S.2d 210 [1st Dept. 2006] ).

Insofar as plaintiff relies on the alleged insincere promise that its funds would be used for only print and advertising expenses, we dismiss the fraud claims as disguised claims for breach of contract (see Cronos Group Ltd. v. XComIP, LLC, 156 A.D.3d 54, 67–68, 64 N.Y.S.3d 180 [1st Dept. 2017] ). Further, any misrepresentations made after plaintiff had already invested the funds are insufficient to give rise to fraud as there was no nexus between the alleged statements and plaintiff's losses (see Laub, 297 A.D.2d at 31, 745 N.Y.S.2d 534 ).

The court...