Opinion
Index No. EF2022141
07-07-2023
Matthew Gabryshak, individually and derivatively on behalf of RIDGEVIEW COMMONS TOWNHOMES, LLC and THE CROSSINGS AT NORTHERN PINES, LLC, Plaintiffs, v. David Massaroni, NICHOLAS MASSARONI, MASSARONI BUILDERS, LLC, and SARATOGA AUTO BROKERS, LLC, Defendants.
For Plaintiff: Christopher A. Priore, Esq. Wilson, Elser, Moskowitz, Edelman & Dicker, LLP For the moving defendants: Christopher Massaroni, Esq. Hodgson Russ, LLP
Unpublished Opinion
For Plaintiff: Christopher A. Priore, Esq. Wilson, Elser, Moskowitz, Edelman & Dicker, LLP
For the moving defendants: Christopher Massaroni, Esq. Hodgson Russ, LLP
THOMAS D. BUCHANAN, J.
Defendants David Massaroni, Nicholas Massaroni and Massaroni Builders, LLC ("Defendants") have moved pursuant to CPLR 3211 to dismiss the Second, Fourth, Fifth, Sixth and Eighth Causes of Action in the Complaint. Plaintiff has opposed the motion. This action arises from a dispute between plaintiff Matthew Gabryshak and defendant David Massaroni as to the operations of the LLC plaintiffs, in which Gabryshak and Massaroni have 50% membership stakes.
Defendants first argue that Plaintiff lacks standing to bring the Second Cause of Action for breach of contract and Fourth Cause of Action for breach of fiduciary duty because the claims asserted are derivative and can only be brought by the LLC's. The distinction between direct and derivative claims lies in whether the harm being asserted was suffered by the entity (derivative) or by the individual (direct). If the individual harm being alleged is "embedded" within a harm to the entity, it must be dismissed (Maldonado v. DiBre, 140 A.D.3d 1501 [3d Dept 2016]). The Second Cause of Action alleges that Defendant breached the Operating Agreements by diverting funds from the LLCs improperly. The Fourth Cause of Action alleges that Defendant breached a fiduciary duty to Plaintiff by misappropriating, and scheming to misappropriate, assets of the LLCs.
Plaintiff argues that he and Defendant are the co-owners of the LLC's and the parties to the Operating Agreements, so that Defendant's breaches of those agreements and of his accompanying fiduciary duty has damaged Plaintiff individually. However, this argument is blunted by one of the terms in the Operating Agreements, which are annexed to the Complaint. Section 3.5 of the Operating Agreement for each entity states, "A Member who or which receives a distribution made by the Company in violation of this Operating Agreement shall be liable to the Company for the amount of such distribution [emphasis added]." By entering into these agreements, Plaintiff and Defendant agreed to be bound by the legal principle asserted here by Defendant. Liability for misappropriation under either theory would be to the LLCs rather than directly to the parties. Plaintiff argues that the value of the misappropriated funds and/or assets would ultimately have been distributed to him, but this argument acknowledges that Plaintiff's individual claims are "embedded" in the derivative claims asserted by the LLCs and, under the reasoning of the Maldonado opinion, must be dismissed.
Defendant argues that the Fifth Cause of Action for breach of the covenant of good faith and fair dealing must be dismissed because it is duplicative of Plaintiff's breach of contract claim, and concomitantly, it is derivative in the same way the contract claim is derivative. A claim for breach of the covenant of good faith and fair dealing alleges that the defendant either sought to prevent the performance of the contract by the plaintiff or to withhold the benefits of the contract from the plaintiff (see e.g. Michaan v. Gazebo Horticultural, Inc., 117 A.D.3d 692 [2d Dept 2014]). Here, Plaintiff makes essentially the same allegations of misappropriation as are asserted in the breach of contract claim. The "withholding of the benefits" of the Operating Agreement is the same as Plaintiff's contractual claim that he was deprived of distributions due to Defendant's misappropriation. This claim is also "embedded" within the derivative claim that Defendant injured the LLC's and, as such, it must be dismissed.
Defendant next asserts that Plaintiff's Sixth Cause of Action for conversion, which is pled against Defendant and against Nicholas Massaroni, should be dismissed as against Defendant because it is duplicative of Plaintiff's breach of contract claim. Defendant correctly points out that a claim for conversion cannot be predicated solely on a breach of contract (Sutton Park Dev. Corp. Trading Co., Inc. v. Guerin & Guerin Agency, Inc., 297 A.D.2d 430 [3d Dept 2002]). On the other hand, Plaintiff cites authority for the proposition that the same conduct which constitutes the breach of a contract can also constitute the breach of a duty arising out of the contractual relationship that is independent of the contract itself (Hamlet at Willow Creek Dev. Co., LLC v. Northeast Land Dev. Corp., 64 A.D.3d 85 [2d Dept 2009]). However, the acts alleged as conversion are the same acts pled in Plaintiff's other causes of action; namely, the misappropriation of assets belonging to the LLC's. Plaintiff does not identify - either in the Complaint or in his motion papers - a duty to the LLC's that is independent of the Operating Agreements and was assumed and then breached by Defendant. This claim also must be dismissed.
Finally, Defendant argues that the Eighth Case of Action for unjust enrichment should be dismissed because the presence of valid and enforceable agreements precludes any claims based in quasi-contract. A claim for unjust enrichment based on the same events alleged in a breach of contract claim must be dismissed as duplicative (Redwing Constr. Co. Inc. v. Sexton, 181 A.D.3d 1027 [3d Dept 2020]). This rule also applies to third parties who did not sign the contract (Randall's Island Aquatic Leisure, LLC v. City of New York, 92 A.D.3d 463 [1st Dept 2012]). As fervently as Plaintiff urges different legal theories, the Operating Agreements cover the subject matter of Plaintiff's claims, precluding a cause of action for unjust enrichment. This claim must also be dismissed.
The parties' remaining contentions have been considered, but they do not affect the outcome of this motion. Therefore, in consideration of the foregoing, it is hereby
ORDERED, that the motion by defendant David Massaroni is granted; and it is further
ORDERED, that the Second, Fourth, Fifth, and Eighth Causes of Action in the Complaint are hereby dismissed; and it is further
ORDERED, that the Sixth Cause of Action, insofar as it asserts claims against defendant David Massaroni, is dismissed, but the claim asserted in the Sixth Cause of Action against defendant Nicholas Massaroni remains viable.
Papers considered:
Notice of Motion; Affirmation of Christopher Massaroni, Esq., with annexed exhibits; Memorandum of Law; Affirmation in Opposition of Christopher A. Priore, Esq.; Memorandum of Law in Opposition; Memorandum of Law in Reply.