AMES ASSOCIATES v. ABS PARTNERS REAL ESTATE LLC

Full title: AMES ASSOCIATES, Plaintiff, v. ABS PARTNERS REAL ESTATE LLC, ABS PARTNERS…

Court: United States District Court, S.D. New York

Date published: Mar 3, 2010

06 Civ. 928 (TPG) (S.D.N.Y. Mar. 3, 2010)

Opinion

06 Civ. 928 (TPG).

March 3, 2010

OPINION

THOMAS GRIESA, Senior District JudgePage 2

Plaintiff Ames Associates ("Ames") is suing defendants ABS Partners Real Estate LLC, ABS Partners LLC, Altman/Burack Partners LLC (collectively, "ABS Defendants"), Arnold Schonfeld, Joseph Del Vecchio, Thomas Keegan, Al's Best Electric Co., Inc., and Al Anshelewitz.

The ABS Defendants and defendants Schonfeld, Del Vecchio, and Keegan have filed third-party complaints against Ames's agent, Kerry Gotlib. Third-party defendant Gotlib has moved to dismiss the third-party complaints. The motion is granted.

Ames's action is brought under the Racketeering Influenced and Corrupt Organizations Act of 1970, 18 U.S.C. §§ 1961, et seq. ("RICO") and also asserts common law claims of fraud, breach of fiduciary duty, negligence, and breach of contract. Ames's claims arise from use of the ABS Defendants' position as managing agent of Ames's commercial property to extract substantial sums of money for electrical and construction work that was either not performed or carried out improperly. Ames alleges that defendants conceived a series of fraudulent schemes to bilk Ames by submitting detailed work proposals and invoices to its principal for the approval of various unnecessary electrical and construction projects and recommending contractors who did not charge competitive prices.

Before the court now is the Second Amended Complaint filed on March 5, 2009. Counts I-V are based on RICO and are against one or more of the ABS Defendants and defendants Schonfeld, Del Vecchio, and Keegan.¹ Counts VII-IX allege fraud, Count X is for breach of fiduciary duty, Count XI for negligence, Counts XII and XIV is for breach of contract, and Count XIII for an accounting. The common law counts are against various defendants.

1 Count VI, which asserted a RICO conspiracy claim against the ABS Defendants and defendants Schonfeld, Del Vecchio, and Keegan, was dismissed in its entirety on March 12, 2009.

On April 15, 2009, the ABS Defendants and defendants Schonfeld, Del Vecchio, and Keegan answered, and their answers included third-party complaints against Gotlib under Fed.R.Civ.P. 14(a).

THE THIRD-PARTY COMPLAINTS

The following facts alleged in the third-party complaints are assumed to be true for purposes of this motion to dismiss. Only those facts relevant to third-party defendant Gotlib's motion to dismiss are recited by the court here.

Ames owns a commercial property located at 80 Fifth Avenue, New York, New York ("80 Fifth"). Approximately 60 commercial tenants rent space in 80 Fifth. The ABS Defendants engage in real estate investment, brokerage, management, and consulting for various properties throughout New York and New England. From April 2000 until October 2005, Ames employed the ABS Defendants as managing agent for 80 Fifth. In its role as managing agent, the ABS Defendants' responsibilities included advising and making recommendations to Ames concerning significant capital expenditures, retaining and supervising contractors to perform any capital improvement, repair, and maintenance work, collecting rent from the tenants of 80 Fifth, preparing monthly financial statements, and apprising Ames's principal, Earl C. Ravenal, of all material facts concerning the building.

Defendant Schonfeld provided the day-to-day management services for 80 Fifth, while defendant Del Vecchio assumed overall responsibility for the premises. Defendant Keegan was employed as a Maintenance and Construction Supervisor, assisting Schonfeld and Del Vecchio with the selection, supervision, and inspection of contractors hired to complete construction work at 80 Fifth. Al's Best Electric was hired to perform electrical work on 80 Fifth; defendant Anshelewitz serves as its president.

During the relevant time, Kerry Gotlib was an agent of Ames who maintained an office at 80 Fifth and oversaw and supervised all construction projects and electrical work undertaken at 80 Fifth. Third-party plaintiffs allege that Gotlib:

• provided recommendations to Ravenal regarding the need for work, the costs associated therewith, how any work would be performed, and the bidding process by which contractors would be hired;

• was responsible for and made decisions concerning the scope of the electrical and construction work performed at 80 Fifth;

• communicated frequently with Schonfeld, Del Vecchio, Keegan, and the contractors concerning the electrical and construction work at 80 Fifth;

• spoke regularly with Ravenal regarding the progress and status of the electrical and construction work, including the attendant costs;

• convened several meetings with the contractors who performed the work at 80 Fifth; and

• participated in decisions concerning payments to contractors for the electrical and construction work.

Third-party plaintiffs contend that if plaintiff sustained any damages, Gotlib's conduct caused or contributed to those damages by failing, over the course of years, to object to or otherwise take steps to prevent or bring to an end the allegedly improper acts in which defendants were engaged.

The third-party complaints do not contain specific counts. They claim the right of contribution with respect to any count in the Second Amended Complaint as to which defendants/third-party plaintiffs are found liable. Thus, it is necessary to refer to the counts in the Second Amended Complaint in order to determine whether there can be third-party liability based on those counts.

DISCUSSION

Applicable Legal Standards

When considering a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), the court must accept the factual allegations contained in the third-party complaint as true and draw all reasonable inferences in the third-party plaintiff's favor. See Phelps v. Kapnolas, 308 F.3d 180, 185 (2d Cir. 2002). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. While a complaint need not supply "detailed factual allegations," it must consist of more than "labels and conclusions" or a "formulaic recitation of the elements of a cause of action." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Unless a plaintiff's well-pleaded allegations have "nudged [its] claims across the line from conceivable to plausible," the complaint must be dismissed. Id. at 570.

Rule 14(a) permits a defendant to sue a third party who may be liable to the defendant for all or part of a plaintiff's claim against that defendant. See Fed.R.Civ.P. 14(a). In order to bring a third-party action, the third-party defendant's liability must be derivative of or secondary to that of the defendant in the main action. See Stratagem Dev. Corp. v. Heron Int'l, 153 F.R.D. 535, 544 (S.D.N.Y. 1994).

"The right to contribution . . . among alleged multiple wrongdoers arises when they each owe a duty to plaintiff or to each other and by breaching their respective duties they contribute to plaintiff's ultimate injuries." Trustees of Columbia Univ. in City of N. Y. v. Mitchell/Giurgola Assocs., 109 A.D.2d 449, 454, 492 N.Y.S.2d 371, 375-376 (1st Dep't 1985). Under New York's contribution statute, two or more persons who are subject to liability for damages for the same personal injury, injury to property, or wrongful death, may claim contribution among them whether or not an action has been brought or a judgment has been rendered against the person from whom contribution is sought. See C.P.L.R. § 1401.

RICO Claims

Counts I-V of the Second Amended Complaint assert claims under RICO. The defendants/third-party plaintiffs claim that they are entitled to contribution against Gotlib if they are liable under any of the RICO counts.

It is well-settled in this district that there is no right to obtain contribution for RICO liability because contribution is not included on the extensive list of civil remedies proscribed by the RICO statute. See, e.g., THC Holdings Corp. v. Tishman, Nos. 93 Civ. 5343 (KMW), 95 Civ. 4422, 1998 WL 305639, at *2 n. 1 (S.D.N.Y. June 9, 1998) (dismissing contribution and indemnification claims because there is no such right under RICO); O K Trojan, Inc. v. Mun. Contractors Equip. Corp., 751 F. Supp. 431, 434 (S.D.N.Y. 1990) (noting that "the right to seek contribution would serve to dilute the impact of assessing treble damages against the RICO violator."). In fact, third-party plaintiffs concede in their opposition brief that they are prevented from seeking contribution from Gotlib for their RICO claims. Accordingly, Gotlib's motion to dismiss is granted as to Counts I-V of the Second Amended Complaint.

Breach of Contract Claim

Count XII of the Second Amended Complaint asserts a claim for breach of contract. The defendants/third-party plaintiffs claim that they are entitled to contribution against Gotlib if they are liable for breach of contract. Count XIV is not involved in the issues in this motion because it is against defendant Al's Best Electric, who is not making any third-party claims.

New York does not authorize contribution as a result of a third-party's breach of contract.

To permit [contribution], pursuant to C.P.L.R. § 1401, arising solely from breach of contract, would not only be at odds with the statute's legislative history, but also would do violence to settled principles of contract law which limit a contracting party's liability to those damages that are reasonably foreseeable at the time the contract is formed.

Bd. of Educ. v. Sargent, Webster, Crenshaw Folley, 71 N.Y.2d 21, 28, 523 N.Y.S.2d 475, 517 N.E.2d 1360 (1987). New York law "is clear that contribution claims are unavailable when the underlying claim is for purely economic loss resulting from the breach of contractual obligations." Sotheby's Fin. Servs., Inc. v. Baran, No. 00 Civ. 7897 BSJ, 2003 WL 21756126, at *11 (S.D.N.Y. July 29, 2003). Third-party plaintiffs' claims for contribution based on an alleged breach of contract thus fail as a matter of law.

Remaining Common Law Claims

Counts VII, VIII, X, XI, and XIII of the Second Amended Complaint assert claims for fraud, breach of fiduciary duty, negligence, and an accounting. The defendants/third-party plaintiffs claim that they are entitled to contribution against Gotlib if they are liable under any of these counts. Count IX is not involved in the issues in this motion because it is against two defendants — Al's Best Electric and defendant Anshelewitz — who are not making third-party claims.

Dismissal of a third-party complaint for contribution is warranted where the third-party defendant served as an agent to the plaintiff throughout the transaction in question, because any culpable conduct of the third-party defendant would be attributable to the plaintiff through agency principles. See N.Y. Islanders Hockey Club, LLP v. Comerica Bank-Texas, 115 F. Supp. 2d 348, 351 (E.D.N.Y. 2000); Connell v. Weiss, No. 84 Civ. 2660-CSH, 1985 WL 428, at *4 (S.D.N.Y. Mar. 19, 1985). Where the actions and state of mind of an agent are imputed to the principal, there is no need to bring a third-party action seeking contribution by plaintiff's agent for its `share' of damages. See Ivor Wolfson Corp. SA v. Locke Liddell Sapp LLP, No. 99 CIV 11471 AKH, 2001 WL 246384, at *4 (S.D.N.Y. Mar. 13, 2001) (denying leave to file third-party complaint for contribution where complaint alleged, among other things, claims of fraud, negligent misrepresentation, and breach of fiduciary duty); see also Gabriel Capital, L.P. v. Natwest Fin., Inc., 137 F. Supp. 2d 251, 266 (S.D.N.Y. 2000). (dismissing claim for contribution against agent based on recklessness, negligence, breach of fiduciary duty, and breach of contract because his culpable conduct is imputed to the principal).

Because Gotlib served as Ames's agent and advisor throughout the course of defendants' alleged misdeeds, any culpable conduct by Gotlib is ascribed to Ames through agency principles. As such, Ames is bound by the acts and omissions of Gotlib and suffers the consequences of any of his missteps. If defendants can show fault on the part of Ames or on the part of Ames's agent Gotlib, this will operate in an appropriate way with respect to Ames's right of recovery, and this is the proper way to have the conduct of Gotlib considered in this action.

CONCLUSION

Gotlib's motion to dismiss the third-party complaints is granted, and the third-party complaints are dismissed in their entirety.

SO ORDERED.