Opinion
1214 Index No. 655526/18 Case No. 2022–02969
12-14-2023
COLUMBIA CONSULTANTS, LLC, et al., Plaintiffs–Respondents, v. DANUCHT ENTERTAINMENT, LLC, et al., Defendants–Appellants.
Baker & Hostetler LLP, New York (Alyse F. Stach of counsel), for appellants. Michael B. Kramer & Associates, New York (Michael B. Kramer of counsel), for respondents.
Baker & Hostetler LLP, New York (Alyse F. Stach of counsel), for appellants.
Michael B. Kramer & Associates, New York (Michael B. Kramer of counsel), for respondents.
Kapnick, J.P., Friedman, Gonza´lez, O'Neill Levy, JJ.
Order, Supreme Court, New York County (Andrea Masley, J.), entered June 1, 2022, which, to the extent appealed from, denied defendants’ motion to dismiss the fourth cause of action of the third amended complaint (tortious interference with contract), and granted defendants’ motion to reargue their prior motion to dismiss and, upon reargument, adhered to its August 27, 2021 order, which denied their motion to dismiss the third and fifth causes of action of the second amended complaint (fraud and declaratory judgment), unanimously modified, on the law, to dismiss the third cause of action for fraud and otherwise affirmed, without costs.
Plaintiffs released their claim that they had been fraudulently induced to enter into the settlement agreement and release. The release covers all claims (with certain exceptions that are not relevant to this appeal), whether "known or unknown, foreseen or unforeseen, matured or unmatured, suspected or unsuspected, ... arising out of or relating to" the purchase agreements, the businesses covered by the purchase agreements, and the dispute between the parties concerning their obligations thereunder. This is broad enough to cover plaintiffs’ fraud claim (see e.g. Centro Empresarial Cempresa S.A. v. Ame´rica Mo´vil, S.A.B. de C.V., 17 N.Y.3d 269, 277, 929 N.Y.S.2d 3, 952 N.E.2d 995 [2011] ; Sodhi v. IAC/InterActive Corp., 201 A.D.3d 451, 156 N.Y.S.3d 738 [1st Dept. 2022] ; Avnet, Inc. v. Deloitte Consulting LLP, 187 A.D.3d 430, 431, 133 N.Y.S.3d 553 [1st Dept. 2020] ).
The release was "fairly and knowingly made" ( Centro, 17 N.Y.3d at 276, 929 N.Y.S.2d 3, 952 N.E.2d 995 [internal quotation marks omitted]). The settlement
agreement and release was the subject of negotiations between counselled parties. Furthermore, section 1.3(b) provides that the release will remain in effect despite that each releasor "may later discover [c]laims or facts that may be different from ... those that it ... now knows or believes to exist regarding the subject matter of the release" and which "if known at the time of signing of [the][a]greement, may have materially affected [the][a]greement and such [p]arty's decision to enter into it." Plaintiffs also failed to identify "a separate fraud from the subject of the release" ( Centro, 17 N.Y.3d at 276, 929 N.Y.S.2d 3, 952 N.E.2d 995 ; see also Centro at 278, 929 N.Y.S.2d 3, 952 N.E.2d 995 ; Pappas v. Tzolis, 20 N.Y.3d 228, 234, 958 N.Y.S.2d 656, 982 N.E.2d 576 [2012] ; Sodhi, 201 A.D.3d at 451, 156 N.Y.S.3d 738 ).
Even if the fraud claim were not barred by the release, it would fail for lack of justifiable reliance. Plaintiffs allege that they entered into the settlement agreement (dated as of July 6, 2017) because defendant Richard Akiva falsely stated in late January or early February 2017 that the only person interested in buying the membership interests that plaintiffs had sold to defendant Danucht Entertainment, LLC in 2015 was nonparty Ron Burkle, for a price lower than what Danucht had paid. However, section 3 of the settlement agreement states, "Each party ... acknowledges that in entering into [the] agreement, it has not relied upon any representation or warranty made by the other parties ..., except as specifically provided in section 2" (emphasis omitted), and section 2 has nothing to do with indication of interest in buying membership interests. In light of section 3, plaintiffs’ reliance on Akiva's misrepresentation is unreasonable as a matter of law (see Avnet, 187 A.D.3d at 431–432, 133 N.Y.S.3d 553 ; Goldberg v. KZ 72nd, 171 A.D.2d 525, 527, 567 N.Y.S.2d 249 [1st Dept. 1991] ; see also Pappas, 20 N.Y.3d at 233, 958 N.Y.S.2d 656, 982 N.E.2d 576 ; DuBow v. Century Realty, Inc., 172 A.D.3d 622, 98 N.Y.S.3d 844 [1st Dept. 2019] ).
As to the tortious interference with contract claim asserted against Akiva, defendants’ contention that the release covers the payments due to plaintiff Scott Sartiano under the international license agreement between defendant TKNY Global LLC and nonparties Butter IPH, LLC and Butter Management LLC is unavailing. The first purchase agreement imposes an obligation on Danucht to pay Sartiano "fifty percent ... of the gross revenues generated from the [1 Oak Tokyo] license agreement." It also imposes an obligation on Danucht to "use best efforts to have the operating entity make payments direct to both" Danucht and Sartiano.
Danucht fulfilled the second obligation insofar as Sartiano is concerned – the license agreement provides that all payments due thereunder "shall be made payable directly as follows: ... 50% to ... Sartiano or his related entity." Thus, consistent with section 1.1(a) of the settlement agreement, that obligation was "fulfilled in full," and the transaction contemplated by the first purchase agreement – namely, the license agreement – was "consummated."
If plaintiffs were suing Danucht under the first purchase agreement for 50% of the gross revenue generated from the 1 Oak Tokyo license, that claim would be barred by section 1.1(a) of the settlement agreement. However, plaintiffs are suing Akiva for tortiously interfering with Sartiano's right to receive 50% of the payments under the license agreement. TKNY’s obligation to pay Sartiano under the license agreement is not the obligation of a party under the purchase agreements, which is what section 1.1(a) covers. The tortious interference claim is not barred by the release (see Avnet, 187 A.D.3d at 432, 133 N.Y.S.3d 553 ). The release covers claims "through the Effective Date," i.e., through July 6, 2017. Akiva did not tortiously interfere with the license agreement until approximately August 2019. Defendants’ contention that Akiva cannot be liable because he was an agent acting on behalf of his principal and within the scope of his authority (see Inspirit Dev. & Constr. LLC v. GMF 157 LP, 203 A.D.3d 430, 432, 164 N.Y.S.3d 575 [1st Dept. 2022] ), is also unavailing. Plaintiffs allege that Akiva caused TKNY to breach its obligation to pay Sartiano. Akiva is not TKNY's agent.
Finally, none of the precedents cited by defendants dismissed a claim for tortious interference with contract as duplicative of a breach of contract claim. In any event, plaintiffs do not assert any claims for breach of contract. Instead, they assert the tortious interference claim against Akiva based on a "common-law duty extraneous to the contract not to act wilfully to destroy the property of another" ( Apple Records, Inc. v. Capitol Records, Inc., 137 A.D.2d 50, 56, 529 N.Y.S.2d 279 [1st Dept. 1988] [internal quotation marks omitted]). They allege that he caused TKNY to stop paying Sartiano in retaliation for plaintiffs’ bringing the instant lawsuit.
The court properly declined to dismiss the declaratory judgment claim. This action is distinguishable from Apple Records , where the plaintiffs conceded that the declaratory judgment causes of action "parallel[ed] the breach of contract claims and merely s[ought] a declaration of the same rights and obligations as w[ould] be determined under" the contract claims ( 137 A.D.2d at 54, 529 N.Y.S.2d 279 ). Nor is this a case like NMC Residual Ownership L.L.C. v. U.S. Bank N.A. , 153 A.D.3d 284, 60 N.Y.S.3d 110 (1st Dept. 2017) or Upfront Megatainment, Inc. v. Thiam , 215 A.D.3d 576, 189 N.Y.S.3d 50 (1st Dept. 2023), where the plaintiffs asserted contract claims (see 153 A.D.3d at 286, 60 N.Y.S.3d 110 ; 215 A.D.3d at 577, 189 N.Y.S.3d 50 ). Here, "[t]he mere existence of other adequate remedies ... does not require dismissal" of the declaratory judgment cause of action ( Matter of Morgenthau v. Erlbaum, 59 N.Y.2d 143, 148, 464 N.Y.S.2d 392, 451 N.E.2d 150 [1983], cert denied 464 U.S. 993, 104 S.Ct. 486, 78 L.Ed.2d 682 [1983] ).