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125 Associates v. Cralin Trading Associates

Appellate Division of the Supreme Court of New York, Second Department
Aug 23, 1993
196 A.D.2d 630 (N.Y. App. Div. 1993)

Opinion

August 23, 1993

Appeal from the Supreme Court, Nassau County (Roncallo, J.).


Ordered that the judgment is affirmed, with costs.

The plaintiffs, two investment partnerships and one individual, invested in the defendant limited partnerships in anticipation of tax write-offs amounting to four times their investment. Upon the disallowance by the Internal Revenue Service of the anticipated write-offs, the plaintiffs commenced this action against the limited partnerships and their tax counsel, the law firm of Paul, Weiss, Rifkind, Wharton Garrison (hereinafter Paul, Weiss), alleging, among other things, various theories of fraud. Paul, Weiss moved to dismiss the complaint for failure to particularize the fraud claims and the plaintiffs cross-moved for leave to serve a second amended complaint to add allegations of fraud by Paul, Weiss. The Supreme Court granted the motion of Paul, Weiss and denied the plaintiffs' cross motion. We affirm.

As to Paul, Weiss, the complaint alleged, in essence, that the firm directed the formation of the partnerships and the investment scheme and prepared and issued certain tax opinions with the knowledge that the limited partnerships lacked both the financial ability and intent to complete the transactions necessary to yield the anticipated tax benefits. The complaint offered no further substantial allegations to support the fraud claims but merely relied upon inferences based upon the provision by Paul, Weiss of legal services to the plaintiffs. Furthermore, in opposition to the motion by Paul, Weiss to dismiss, the plaintiffs alleged only that "it is not unreasonable to believe that Paul, Weiss knew at the time it wrote its tax opinion that the [partnership] was not acting in the fashion described in the 1983 P[ublic] O[ffering] M[emorandum]".

We agree with the Supreme Court's conclusion that the plaintiffs' claims against Paul, Weiss, all sounding in fraud, are fatally deficient since they fail to allege facts with sufficient specificity to permit an inference of fraudulent intent (see, CPLR 3016 [b]; National Westminster Bank v Weksel, 124 A.D.2d 144; see also, Credit Alliance Corp. v Andersen Co., 65 N.Y.2d 536, amended 66 N.Y.2d 812). "Where liability for fraud is to be extended beyond the principal actors, to those who, although not participants in the fraudulent scheme, are said to have aided in and encouraged its commission, it is especially important that the command of CPLR 3016 (b) be strictly adhered to" (National Westminster Bank v Weksel, supra, at 149).

Nor did the Supreme Court improvidently exercise its discretion in denying the plaintiffs' cross motion for leave to serve a second amended complaint since the record indicates that the plaintiffs have no viable cause of action against Paul, Weiss (see, CPLR 3211 [e]; Hornstein v Wolf, 67 N.Y.2d 721; Marcucilli v Alicon Corp., 48 A.D.2d 703). Bracken, J.P., Rosenblatt, Miller and Pizzuto, JJ., concur.


Summaries of

125 Associates v. Cralin Trading Associates

Appellate Division of the Supreme Court of New York, Second Department
Aug 23, 1993
196 A.D.2d 630 (N.Y. App. Div. 1993)
Case details for

125 Associates v. Cralin Trading Associates

Case Details

Full title:125 ASSOCIATES et al., Appellants, v. CRALIN TRADING ASSOCIATES, L.P., et…

Court:Appellate Division of the Supreme Court of New York, Second Department

Date published: Aug 23, 1993

Citations

196 A.D.2d 630 (N.Y. App. Div. 1993)
601 N.Y.S.2d 196

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