Opinion
602769/07.
Decided June 20, 2011.
This action arises out of a dispute between the purchasers of a luxury condominium unit, the sponsor, and the managing agent, over construction defects in the unit, particularly in the construction of the floor. Defendants 50 Madison Avenue LLC (50 Madison) and Samson Management LLC (Samson) (collectively, Sponsor defendants) move, pursuant to CPLR 3212, for partial summary judgment dismissing the second cause of action (fraud) and fifth cause of action (violations of General Business Law (GBL) §§ 349 and 350) in the amended complaint.
Plaintiffs cross-move, pursuant to CPLR 3126, for an order: (1) striking Sponsor defendants' answer for their willful and contumacious failure to provide complete responses to plaintiffs' supplemental notice for discovery and inspection dated March 31, 2010; or alternatively, (2) precluding Sponsor defendants from offering any testimony or evidence at trial; or alternatively, (3) compelling Sponsor defendants to provide complete responses to plaintiffs' supplemental notice for discovery and inspection dated March 31, 2010 within 10 days or their answer will be stricken. Plaintiffs also seek costs and legal fees incurred in seeking judicial intervention to obtain proper documents and responses.
BACKGROUND
50 Madison was the sponsor of 50 Madison Avenue Condominium, a condominium project located at 50 Madison Avenue in Manhattan. Samson is the property manager of the building. The condominium project was allegedly marketed as a "high-end luxury project," encompassing the highest qualities of workmanship, materials, equipment, appliances, finishes, and services. The units were represented as being habitable in all respects and in move-in condition from the time of the closing of the purchase of the units.
Plaintiffs entered into a Purchase and Sale Agreement dated January 24, 2005 with 50 Madison (executed by Arnold Goldstein as its manager) to purchase the seventh floor condominium. The purchase price was $3,075,000. The Purchase and Sale Agreement incorporates the condominium's offering plan, the condominium's declaration and its by-laws.
Plaintiffs assert that Sponsor defendants led them to believe that the unit would be ready for occupancy at the time of closing the contract. The Lornes attended a pre-closing inspection of the unit, which was supervised and conducted by Samson. Thereafter, the Lornes provided a list of certain construction issues to be corrected and/or completed in accordance with the construction plans and the representations made by Sponsor defendants. The Lornes assert that 50 Madison assured them that the defects were insignificant, easy to correct, and would be corrected within the period provided in the contract and offering plan for the correction of defects. Plaintiffs closed on the unit on September 28, 2005.
Plaintiffs claim that Sponsor defendants knew or should have known the true extent of the construction defects in the unit, and that such defects, in fact, rendered the unit uninhabitable. After the closing, plaintiffs were allegedly unable to move into the unit due to a leak in the installed sprinkler pipes. The leak caused extensive damage to the living room and adjacent areas including the kitchen, hallway, laundry room, and other areas. As a result, substantial portions of the ceiling in the unit had to be removed in order to replace the faulty pipes and fittings. At the end of November 2005, the Lornes moved into the unit. However, after moving into the unit, the Lornes discovered additional significant, latent construction and design defects in the unit, including the flooring, windows, and heating system. The floors were designed as "floating floors," meaning that the hardwood flooring lies flat on the concrete substrate, unattached to the concrete substrate, and is held down by its own weight. The flooring consisted of three levels: the concrete substrate, a plywood subflooring, and the hardwood flooring surface. At some point after they moved in, plaintiffs determined that the concrete substrate was neither flat nor level.
In February and March of 2006, Sponsor defendants advised plaintiffs that the flooring had to be completely replaced and reinstalled. In May 2006, the Lornes put their furniture into storage, and moved out of their unit and into temporary housing. Sponsor defendants reimbursed the Lornes for moving, storage, and temporary housing expenses until early 2007, when they ceased reimbursement. After the Sponsor defendants allegedly failed to properly install the floors, the Lornes decided that they had to directly supervise the work themselves. Plaintiffs assert that Sponsor defendants claim that, pursuant to the offering plan, the concrete substrate is a common element, and that any repairs of the concrete substrate must be specifically requested by the condominium and/or Board of Managers, or performed by and on behalf of the condominium and/or the Board of Managers.
On August 16, 2007, plaintiffs commenced this action against defendants. Plaintiffs' original complaint contained five causes of action: (1) breach of contract against Sponsor defendants; (2) fraud against Sponsor defendants; (3) breach of express warranty against Sponsor defendants; (4) breach of the common-law implied warranty of habitability (the Housing Merchant Warranty Law) against Sponsor defendants; and (5) breach of fiduciary duty against the Board of Managers of the condominium. As relevant here, Sponsor defendants moved, pursuant to CPLR 3211 (a) (7), to dismiss the complaint for failure to state a cause of action. Plaintiffs cross-moved, inter alia, to amend the complaint to add a claim for declaratory relief and to assert damages claims under GBL §§ 349 and 350. On December 11, 2008, the court denied Sponsor defendants' motion to dismiss the second cause of action for fraud, and permitted plaintiffs to add GBL claims.
The First Department subsequently reversed those portions of the December 11, 2008 decision and order which denied summary judgment on the breach of fiduciary duty claim against the Board and one of its members, David Moffett, and permitted amendment of the complaint to assert a claim for declaratory relief ( see Lorne v 50 Madison Ave. LLC , 65 AD3d 879 , 882 [1st Dept 2009], lv dismissed 15 NY3d 732 [2010]).
The amended complaint contains eight causes of action: (1) breach of contract against Sponsor defendants; (2) fraud against Sponsor defendants; (3) breach of warranty against Sponsor defendants; (4) breach of implied warranty against Sponsor defendants; (5) violation of GBL §§ 349 and 350; (6) negligence against the condominium; (7) breach of fiduciary duty against the Board of Managers; and (8) declaratory judgment. The Lornes seek damages on the first through seventh causes of action in an amount currently estimated to be $1,300,000.
DISCUSSION
Sponsor Defendants' Motion for Summary Judgment
It is well established that the "proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case'" ( Meridian Mgt. Corp. v Cristi Cleaning Serv. Corp. , 70 AD3d 508 , 510 [1st Dept 2010], quoting Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853). Once the proponent of the motion has made a prima facie showing, the burden shifts to the opposing party to "present evidentiary facts in admissible form sufficient to raise a genuine, triable issue of fact" ( Mazurek v Metropolitan Museum of Art , 27 AD3d 227 , 228 [1st Dept 2006], citing Zuckerman v City of New York, 49 NY2d 557, 562). The court's function on a motion for summary judgment is only to determine whether any triable issues of fact exist, not to determine the merits of any such issues ( Sheehan v Gong , 2 AD3d 166 , 168 [1st Dept 2003]).
Fraud (Second Cause of Action)
To establish a claim of fraud, the plaintiff must demonstrate a "representation of a material existing fact, falsity, scienter, deception and injury'" ( New York Univ. v Continental Ins. Co., 87 NY2d 308, 318, quoting Channel Master Corp. v Aluminum Ltd. Sales, 4 NY2d 403, 407 [emphasis in original]). "[T]he false representation relied upon must relate to a past or existing fact, or something equivalent thereto" ( Zanani v Savad, 217 AD2d 696, 697 [2d Dept 1995]).
Sponsor defendants argue that plaintiffs' fraud claim is duplicative of their breach of contract claim. Specifically, Sponsor defendants contend that: (1) the purported fraud alleged is not collateral or extraneous to the Purchase and Sale Agreement; (2) the fraud claim does not allege any damages that would not be recoverable under a contract measure of damages; and (3) the fraud claim does plead a breach of duty separate from the alleged breach of contract. Additionally, Sponsor defendants maintain that plaintiffs have no claim of fraudulent inducement into the Purchase and Sale Agreement, because plaintiffs' allegations merely relate to a breach of contract, and to a cause of action for fraud.
However, the court has previously considered and rejected these arguments. In the court's decision and order dated December 11, 2008, the court stated that "the Lornes allege that the existence of defects in the concrete substrate may have been known to these defendants at the time of the closing. Thus, any assurances by [Sponsor defendants] that the unit was substantially complete or in broom clean condition and ready for occupancy could constitute material misrepresentation of facts, as opposed to mere opinions, which defrauded the Lornes into closing on their unit and paying the balance of the purchase price" ( Lorne v 50 Madison Ave., LLC, 2008 NY Slip Op 33453[U] [Sup Ct, NY County 2008], revd on other grounds 65 AD3d 879 [1st Dept 2009], lv dismissed 15 NY3d 732).
Sponsor defendants made this same argument on the motion to dismiss (Rowland Affirm. in Opposition, Exh. R, at 23-24). Sponsor defendants did not move to reargue or appeal this portion of the court's decision and order. However, the doctrine of the law of the case does not apply where allegations of the complaint are superseded by the amended complaint ( see Thompson v Cooper , 24 AD3d 203 , 205 [1st Dept 2005]).
A fraud claim should be dismissed as redundant where it merely restates a breach of contract claim, i.e., when the only fraud alleged is that the defendant was not sincere when it promised to perform under the contract ( Gordon v Dino De Laurentiis Corp., 141 AD2d 435, 436 [1st Dept 1988]). "[A] cause of action for fraud may be maintained where a plaintiff pleads a breach of duty separate from, or in addition to, a breach of contract. For example, if a plaintiff alleges that it was induced to enter into a transaction because a defendant misrepresented material facts, the plaintiff has stated a claim for fraud even though the same circumstances also give rise to the plaintiff's breach of contract claim" ( First Bank of Ams. v Motor Car Funding, 257 AD2d 287, 291-292 [1st Dept 1999]; see also Non-Linear Trading Co. v Braddis Assoc., Inc., 243 AD2d 107, 118 [1st Dept 1998]). Unlike a misrepresentation of future intent to perform, a misrepresentation of present facts is collateral to the contract, even though it may have induced the plaintiff to enter into the contract, and therefore involves a separate breach of duty ( Deerfield Communications Corp. v Chesebrough-Ponds, Inc., 68 NY2d 954, 956 [measure of damages for being fraudulently induced to enter a contract, i.e., indemnity for the loss suffered through that inducement, is not duplicative of damages for breach of contract]).
In this case, plaintiffs allege that Sponsor defendants made misrepresentations concerning the defects in the construction of the unit and whether the unit was ready for occupancy, then-present facts which were collateral to the contract, which induced them to purchase their unit (Amended Verified Complaint, ¶¶ 11-12, 17, 25, 67-69). Plaintiffs submit, in opposition to the motion, an affidavit from Mrs. Lorne, in which she states that "[p]rior to entering into the Sales Contract . . ., the Developers repeatedly assured us that our Unit was properly constructed in a workmanlike manner" (Rowland Affirm. in Opposition, Exh. V [Ludmila Lorne 2/26/08 Aff., ¶ 24]). Plaintiffs do not merely allege that Sponsor defendants did not intend to perform or fulfill their obligations under the Purchase and Sale Agreement. Rather, plaintiffs allege that misrepresentations were made prior to, and as an inducement for them to enter into the Purchase and Sale Agreement. Plaintiffs also allege that Sponsor defendants knew of the defects in the floor and concrete substrate at the time of the closing, and thus defrauded them into paying the balance of the purchase price. Therefore, plaintiffs' fraud claim is not duplicative of their breach of contract claim ( see GoSmile, Inc. v Levine , 81 AD3d 77 , 81 [1st Dept 2010] [fraud claim found not duplicative where plaintiff alleged that defendant made a misrepresentation of a present fact, i.e., that consultant had not breached underlying non-compete agreement]; Board of Mgrs. of 411 E. 53rd St. Condominium v Dylan Carpet, 182 AD2d 551, 552 [1st Dept 1992] [fraud claim sufficient where complaint alleged that defendants made false statements of fact, as opposed to expressions of future intentions, which were collateral to contract for purchase and installation of carpeting]).
Sponsor defendants argue that the amended complaint is limited to representations made after execution of the Purchase and Sale Agreement. However, plaintiffs only allege that the pre-closing representations were materially false when made (Amended Complaint, ¶¶ 17, 67).
Sponsor defendants next argue that, as a matter of law, plaintiffs could not rely on any pre-closing representations, based upon the following provisions of the Purchase and Sale Agreement:
"32.2 Merger: All prior and contemporaneous "statements" (defined below) made to each party with regard to this transaction, as well as all prior and contemporaneous "statements" made between each party and Escrowee with regard to the escrow provisions of paragraph 25, are merged in this Agreement and have no effect unless they are expressly contained or incorporated by reference in this Agreement. The term " statements" includes representations, promises, understandings, discussions, negotiations, agreements, estimates, valuations, projections and opinions, whether written or oral, as well as a broker's set-up, terms sheet, floor plans, drawings and data of any kind.
"32.3 Entire Agreement: This Agreement, together [with] the Plan and Amendments to the Plan accepted for filing by the Attorney General prior to closing, constitute the entire understanding and agreement of the parties. Any statements not contained in a written rider attached to this Agreement and signed by the parties is not part of this Agreement and not binding on, or enforceable by or against, the parties.
"32.4 Changes and Waivers: A provision of this Agreement will be considered to have been changed or waived only if the change or waiver is expressly made in writing signed by the party to be charged or (if applicable) by Escrowee, unless such provision is expressly provided to have been waived or deemed waived if not exercised, satisfied or performed within a specified period. The failure to insist on strict performance of any provision will not mean that the provision has been waived or that the right to insist thereafter on strict performance of that or any other provision has been waived"
(Berman Affirm. in Support, Exh. 5).
Although plaintiffs argue that Sponsor defendants made this same argument on the motion to dismiss, the court's review of the papers indicates that they did not move to dismiss for this reason (Rowland Affirm. in Opposition, Exh. R).
"While it is true that a general merger clause is ineffective to exclude parol evidence of fraud in the inducement, a specific disclaimer defeats any allegation that the contract was executed in reliance upon the representations to the contrary'" ( McGowan v Winant Place Assoc., 270 AD2d 466, 467 [2d Dept 2000], quoting Taormina v Hibsher, 215 AD2d 549 [2d Dept 1995]). Here, the merger clause does not disclaim reliance on any specific representations, but rather on "representations, promises, understandings, discussions, negotiations, agreements, estimates, valuations, projections and opinions, whether written or oral, as well as a broker's set-up, terms sheet, floor plans, drawings and data of any kind" (Berman Affirm. in Support, Exh. 5 [emphasis added]). Thus, the court concludes that the merger clause is insufficiently specific to bar evidence of fraud in the inducement ( see Lieberman v Greens at Half Hollow, LLC , 54 AD3d 908 , 909 [2d Dept 2008] [general merger clause in condominium purchase agreement did not prohibit the use of parol evidence to show fraud in the inducement of condominium purchase agreement]; Dyke v Peck, 279 AD2d 841, 842 [3d Dept 2001] [real estate contract lacked specificity to bar use of parol evidence to prove a claim of fraud in the inducement where clauses amounted to nothing more than general merger or "as is" clauses]).
Sponsor defendants also contend that there is no factual basis for plaintiffs' fraud cause of action. They submit excerpts from the deposition testimony of Mr. Lorne, where he testified that he and his wife relied upon representations as to the quality of the residence, the building, and the nature of the amenities (Simon Lorne EBT, at 34-35, 37-38). Mr. Lorne also testified that Samson represented that the unit would be ready for occupancy at the time of the closing, both before and after execution of the Purchase and Sale Agreement ( id. at 48). Sponsor defendants also provide portions of Mrs. Lorne's deposition testimony indicating that the broker informed them, during the inspection and at the closing, that the problems in the unit, including a discolored patch on the ceiling and on the floor, were easy to fix or had already been fixed (Ludmila Lorne EBT, at 342, 343, 347). Mrs. Lorne further testified that after plaintiffs moved in, there were substantial problems with the sprinklers, the heating system, and marble alignment in the unit ( id. at 337-340, 348). Mrs. Lorne testified that prior to the closing, she did not have any conversations with anyone about the concrete floor slab being level ( id. at 640).
In opposing the motion, plaintiffs point to section P-3.5 of the offering plan, which states that "[t]he quality of construction of the Building will be comparable to, or better than, the current prevailing local standards for newly erected buildings in the locale of the Property and containing Building Facilities and amenities comparable to this Building" (Rowland Affirm. in Opposition, Exh. S). Plaintiffs also submit excerpts from Mrs. Lorne's deposition, where she testified that the broker, Louise Forbes of Halstead Property, LLC, informed them that the fifth floor unit was unavailable because she had already purchased it, that Forbes had not, in fact, purchased the fifth floor unit, and that Mrs. Lorne did not want to purchase a "fixer"
(Ludmila Lorne EBT, at 74, 75, 256). Plaintiffs also point to the affidavit from Mrs. Lorne submitted in opposition to the motion to dismiss, in which she avers that "[p]rior to entering into the Sales Contract and at a pre-closing walk through, the Developers repeatedly assured us that our Unit was properly constructed in a workmanlike manner. The Sponsor Defendants repeated this representation at the closing and further assured us that all punch list items were minor and would be completed promptly" (Rowland Affirm. in Opposition, Exh. V [Ludmila Lorne 2/26/08 Aff., ¶ 24]).
However, David Kershner, the president of Samson, testified that Forbes did not purchase the fifth floor unit (Kershner EBT, at 154).
Here, there is evidence that Sponsor defendants represented in the offering plan that the unit would be properly constructed, and also made oral representations at the closing and inspection that the unit was properly constructed and ready for occupancy, and that the punch list items were minor. However, it has not been established when the floor or concrete substrate in the unit was completed, and whether Sponsor defendants knew of the defects in the unit. Thus, the court concludes that there are issues of fact as to whether Sponsor defendants or their agents misrepresented material, existing facts, including the condition of the flooring and concrete substrate, and whether plaintiffs relied upon those representations in purchasing their unit ( see Michaelson v Albora ,12 AD3d 648, 650 [2d Dept 2004] [issue of fact as to whether board of condominium made a material misrepresentation to unit owners concerning negotiations with developer]; Residential Bd. of Mgrs. of Zeckendorf Towers v Union Sq.-14th St. Assoc., 190 AD2d 636, 637 [1st Dept 1993] [upholding claim of fraud in sale of condominium units brought against sponsor who allegedly knowingly and intentionally advanced a misrepresentation in the offering plan]; Horn v 440 E. 57th Co., 151 AD2d 112, 116 [1st Dept 1989] [fact questions precluded summary judgment on fraud claim based on allegedly fraudulent statements in offering plan and amendment thereto]).
Accordingly, Sponsor defendants' motion for summary judgment dismissing the second cause of action is denied.
General Business Law §§ 349 and 350 (Fifth Cause of Action)
Sponsor defendants move for summary judgment dismissing plaintiffs' fifth cause of action, contending that plaintiffs do not allege and have no proof that the alleged misrepresentations had an impact on consumers or the public at large.
Plaintiffs oppose this portion of the motion, contending that defendants' motion for summary judgment is premature. Plaintiffs point out that, in the court's decision and order dated September 7, 2010, the court found that documents from Louise Forbes were material and necessary to plaintiffs' GBL claims, and directed Forbes to provide the discovery by October 11, 2010. Plaintiffs further argue that Sponsor defendants have refused to provide all of the documents sought in their supplemental demand for discovery and inspection dated March 31, 2010.
GBL § 349 (a) prohibits "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state." GBL § 350 declares unlawful "[f]alse advertising in the conduct of any business, trade or commerce or in the furnishing of any service in this state." The elements of a cause of action pursuant to GBL § 349 are: "(1) a deceptive consumer-oriented act or practice which is misleading in a material respect, and (2) injury resulting from such act. In determining whether a representation or omission is a deceptive act, the test is whether such act is likely to mislead a reasonable consumer acting reasonably under the circumstances" ( Andre Strishak Assoc. v Hewlett Packard Co., 300 AD2d 608, 609 [2d Dept 2002] [internal quotation marks and citation omitted]; see also Solomon v Bell Atl. Corp. , 9 AD3d 49 , 52 [1st Dept 2004]). The elements of a cause of action under GBL § 350 are that "the advertisement: (1) had an impact on consumers at large, (2) was deceptive or misleading in a material way, and (3) resulted in injury" ( Andre Strishak Assoc., 300 AD2d at 609). "Similarly, the test is whether the advertisement is likely to mislead a reasonable consumer acting reasonably under the circumstances" ( id. [internal quotation marks and citation omitted]).In Thompson v Parkchester Apts. Co. ( 271 AD2d 311 [1st Dept 2000]), the plaintiffs alleged that they were defrauded into purchasing their unit at an apartment complex. The plaintiffs asserted, inter alia, violations of the Martin Act and GBL § 349. The First Department held that the plaintiffs failed to "set forth a viable claim under [GBL] § 349 since they have not met the threshold requirement for such a claim by showing that the alleged deceptive acts, if permitted to continue, would have a broad impact on consumers at large" ( id.). The Court explained that "[t]he presently litigated dispute, involving faulty plumbing and what the individual plaintiffs were told about the condition of the plumbing when they purchased their individual units, is unique to the parties at this particular complex, and thus, does not fall within the ambit of the statute" ( id. at 311-312; see also Devlin v 645 First Ave. Manhattan Co., 229 AD2d 343, 344 [1st Dept 1996] [in action seeking recovery against sponsor and manager of condominium for alleged defects in the building and in individual units, plaintiffs had no right to attorney's fees pursuant to GBL § 349 (h) because "the requisite broad impact on consumers at large is not evident"]).
CPLR 3212 (f) provides that "[s]hould it appear from affidavits submitted in opposition to the motion that facts essential to justify opposition may exist but cannot then be stated, the court may deny the motion or may order a continuance to permit affidavits to be obtained or disclosure to be had and may make such other order as may be just." This is especially so when the opposing party had not had a reasonable opportunity for disclosure prior to making the motion ( Global Mins. Metals Corp. v Holme , 35 AD3d 93 , 103 [1st Dept 2006], lv denied 8 NY3d 804). "A grant of summary judgment cannot be avoided by a claimed need for discovery unless some evidentiary basis is offered to suggest that discovery may lead to relevant evidence" ( Bailey v New York City Tr. Auth., 270 AD2d 156, 157 [1st Dept 2000]; see also Ruttura Sons Constr. Co. v Petrocelli Constr., 257 AD2d 614, 615 [2d Dept], lv dismissed and denied in part 93 NY2d 956). However, "[t]he mere hope that further disclosure might uncover evidence likely to help [plaintiffs'] case" provides no basis for postponing summary judgment ( Maysek Moran v Warburg Co., 284 AD2d 203, 204 [1st Dept 2001]).
Here, plaintiffs have shown that "facts essential to justify opposition may exist" but cannot now be stated (CPLR 3212 [f]). The court ruled on defendants' motion for a protective order that "to satisfy a claim under GBL § 349, plaintiffs must illustrate that the alleged deceptive acts, if permitted to continue, would have a broad impact on consumers at large, making it necessary that the Lornes prove that other purchasers in the building fell victim to deceptive statements about the condition of their units. Thus, documents from Forbes concerning her work selling and marketing units in the building may produce material relevant and necessary to the GBL claims" ( Lorne v 50 Madison Ave. LLC, 2010 NY Slip Op 32471[U] [Sup Ct, NY County 2010] [citation and quotation marks omitted]). In light of the court's decision on Sponsor defendants' motion for a protective order, and the fact that Sponsor defendants have not responded to items 9 and 11 of plaintiffs' supplemental notice for discovery and inspection dated March 31, 2010, summary judgment is premature as to the fifth cause of action ( see Cassevah v Mack , 51 AD3d 1132 , 1132-1133 [3d Dept 2008] [in action brought by purchaser of residential property against vendor for fraud, breach of contract, and violation of GBL § 349, plaintiffs showed that summary judgment was premature; trial court previously ordered open commissions to depose husbands, finding that such depositions "could lead to relevant evidence"]).
The court's decision was issued after Sponsor defendants made the instant motion for summary judgment.
Item 9 seeks "[c]opies of all correspondence, including e-mails, between or including Halstead Property and Samson Management, including but not limited to communications between Louise Forbes, Michael Santoro, David Kershner, Arnold Goldstein and Michael Goldstein, concerning the Condominium" (Rowland Affirm. in Opposition, Exh. H). Item 11 requests "[c]opies of all correspondence, including e-mails, between or including Halstead Property and Samson Management, including but not limited to communications between Louise Forbes, Michael Santoro, David Kershner, Arnold Goldstein and Michael Goldstein, concerning the sale and/or purchase of Unit 5 at the Condominium" ( id.).
Therefore, Sponsor defendants' motion for summary judgment dismissing the fifth cause of action is denied, without prejudice to renewal after Plaintiff files the Note of Issue, but within 45 days of such filing.
Plaintiffs' Request for Costs and/or Sanctions
Plaintiffs request sanctions against Sponsor defendants for making a frivolous motion for summary judgment. However, sanctions are only appropriate when a party or attorney has abused the judicial process, or wasted judicial resources by engaging in wholly frivolous litigation ( see e.g. Creative Bath Prods. v Connecticut Gen. Life Ins. Co., 173 AD2d 400, 401 [1st Dept], lv denied 79 NY2d 751). Frivolous conduct has been defined as being (1) "completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law"; (2) "undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another"; or (3) "asserts material factual statements that are false" ( 22 NYCRR 130-1.1 [c]). Plaintiffs have not shown that defendants' motion was wholly frivolous as defined therein.
Plaintiffs' Cross Motion to Strike Sponsor Defendants' Answer
Plaintiffs move to strike Sponsor defendants' answer, contending that these defendants have failed to comply with two status conference orders dated May 20, 2010 and July 8, 2010, which ordered Sponsor defendants to provide the documents addressed in Sponsor defendants' May 3, 2010 response to plaintiffs' supplemental notice for discovery and inspection dated March 31, 2010 and Sponsor defendants' May 14, 2010 letter. Plaintiffs also maintain that Sponsor defendants have failed to withdraw their improper objections to the remaining items. Alternatively, plaintiffs seek an order compelling Sponsor defendants to provide complete responses to their supplemental demand within 20 days or Sponsor defendants will be precluded from offering any evidence or testimony at trial.
In opposition, Sponsor defendants contend that the cross motion has been rendered moot by the status conference order dated September 16, 2010, which extended their deadline to produce documents, or advise plaintiffs that they have no further responsive documents, until September 24, 2010. Sponsor defendants represent that they have produced documents responsive to items 3, 9, 10, 30, 35, 38, and 39 as referenced in their response dated May 14, 2010, and will provide, within 30 days, documents responsive to the requests to the extent they concern repairs, construction defects, or the marketing of any unit in the building.
In reply, plaintiffs note that, on September 24, 2010, counsel for Sponsor defendants advised that "I've been back to the client and gone over the e-mail list. To the extent not already not produced there are no e-mails responsive to your third request" (Rowland Reply Affirm., Exh. D). Counsel for plaintiffs represents that Sponsor defendants have not provided the documents or an affidavit from an officer employed by Samson ( id., ¶ 7).
"Although actions should be resolved on the merits whenever possible, a court may strike a pleading as a sanction against a party who refuses to obey an order for disclosure" ( Reidel v Ryder TRS, Inc. , 13 AD3d 170, 171 [1st Dept 2004] [citations omitted]; see also CPLR 3126). A court may strike an answer or preclude a party from offering evidence only when the moving party "establishes a clear showing that the failure to comply is willful, contumacious or in bad faith" ( Rodriguez v United Bronx Parents, Inc. , 70 AD3d 492 [1st Dept 2010] [internal quotation marks omitted]; see also Holliday v Jones , 36 AD3d 557 , 558 [1st Dept 2007]; Palmenta v Columbia Univ., 266 AD2d 90, 91 [1st Dept 1999]). Generally, "willfulness" may be inferred from a party's repeated failure to respond to demands and/or comply with disclosure orders, coupled with inadequate excuses ( Siegman v Rosen, 270 AD2d 14, 15 [1st Dept 2000]). The burden then shifts to the opposing party to demonstrate a reasonable excuse ( Reidel, 13 AD3d at 171; Furniture Fantasy v Cerrone, 154 AD2d 506, 507 [2d Dept 1989]).
Here, plaintiffs have failed to make a clear showing that Sponsor defendants' failure to comply was willful, contumacious, or in bad faith. On September 16, 2010, the court extended Sponsor defendants' deadline to produce remaining document discovery prior to the submission of the cross motion (Berman Aff. in Opposition, Exh. A). Sponsor defendants also produced documents responsive to seven items in plaintiffs' supplemental demand. Counsel for Sponsor defendants represents that his clients will produce documents concerning other units in the building within 30 days. It also appears that plaintiffs have not been prejudiced by the late disclosure, since remaining depositions have not gone forward. Therefore, a sanction is not warranted at this time.
Finally, plaintiffs' request for costs and legal fees incurred in connection with the cross motion is denied. Plaintiffs have not provided any basis for costs and legal fees.
CONCLUSION AND ORDER
Accordingly, it is
ORDERED that the motion (sequence number 018) of defendants 50 Madison Avenue LLC and Samson Management LLC for partial summary judgment is denied as to the fraud cause of action (second cause of action), and is denied as to the General Business Law §§ 349 and 350 cause of action (fifth cause of action) without prejudice to renewal after Plaintiff files the Note of Issue, but within 45 days of such filing; and it is further
ORDERED that plaintiffs' cross motion is denied; and it is further
ORDERED that plaintiffs' request for sanctions is denied.