The weight of authority holds - correctly in the Court's view - that fiduciary duties do not end when relationships become strained. See Ajettix Inc. v. Raub, 804 N.Y.S.2d 580, 587 (Sup. Ct. 2005) ("The law clearly supports Plaintiff's contention. Defendant's fiduciary obligations to [Plaintiff] arose from the status of defendant as a corporate officer and director . . . and were not extinguished by his acrimonious relationship with plaintiff so long as defendant did not withdraw from the corporation . . . .
Logistically, where, as here, the defendant has sold something to the plaintiff for money, "the steps leading to return to the status quo are streamlined: generally the plaintiff must tender the subject of the sale to the defendant and the defendant must tender to the plaintiff the sale price plus interest, minus whatever direct value the plaintiff has received from the transaction." Ajettix Inc. v. Raub, 9 Misc. 3d 908, 920, 804 N.Y.S.2d 580, 593 (Sup. Ct. Monroe Cnty. 2005) (citation omitted). Rescissory damages, which are governed by restitution principles, seek to restore "the reasonable value of any benefit conferred upon the defendant by the plaintiff."
A fraudulent concealment claim is a similar, though different, cause of action than the constructive fraud claim set forth in the amended complaint. See Zackiva Comm'cns Corp. v. Horowitz, 826 F. Supp. 86, 89 (S.D.N.Y. 1993) (noting that "[t]he elements of a claim for fraudulent concealment under New York law are extremely similar to the elements of a claim for constructive fraud); Ajettix Inc. v. Raub, 9 Misc.3d 908, 916, 804 N.Y.S.2d 580 (Sup. Ct. 2005) ("[c]onstructive fraud is similar to fraudulent concealment except that the element of scienter need not be proven" for the former); see also Cornelia Fifth Ave., 2016 WL 5390894, at *8 (setting forth different elements for constructive fraud and fraudulent concealment claims). It is well settled that "Plaintiffs cannot amend their complaint by asserting new facts or theories for the first time in opposition to Defendants' motion to dismiss."
After all, "where a fiduciary relationship exists between" parties to a contract, "there must be clear proof of the integrity and fairness of a transaction between them, ‘or any instrument thus obtained will be set aside or held as invalid,’ " Ajettix Inc. v. Raub , 9 Misc.3d 908, 804 N.Y.S.2d 580, 588 (Sup. Ct. 2005) (quoting Gordon v. Bialystoker Ctr. & Bikur Cholim, Inc. , 45 N.Y.2d 692, 698, 412 N.Y.S.2d 593, 385 N.E.2d 285 (1978) ), even in the face of a release of claims, seeid. at 589. Here, of course, the Settlement Agreement was a contract between a beneficiary (Lifetrade) and a third party (Wells Fargo), and not a contract between a fiduciary (Smith or Marcum) and a beneficiary (Lifetrade).
Dev. Specialists, Inc. v. Akin Gump Strauss Hauer & Feld LLP, 477 B.R. 318, 327 (S.D.N.Y.) opinion amended and superseded, 480 B.R. 145 (S.D.N.Y. 2012) rev'd in part, vacated in part sub nom. In re Coudert Bros. LLP, 574 F. App'x 15 (2d Cir. 2014) (citing Ajettix Inc. v. Raub, 9 Misc. 3d 908, 912, 804 N.Y.S.2d 580 (N.Y. Sup. Ct. 2005) ("[O]n dissolution, partners owe a continuing fiduciary duty to one another with respect to dealings effecting the winding up of the partnership and the preservation of partnership assets."); King v. Leighton, 100 N.Y. 386, 3. N.E. 594 (1885)). See also Matter of Silverberg, 81 A.D.2d at 641 ("The partner charged with winding up the affairs of the partnership still retains a fiduciary duty as an agent of the remaining partners with respect to the liquidation of the firm.")
Partners have a continuing duty to each other as they wind up the business, including preservation of the partnership assets. See Ajettix Inc. v. Raub, 9 Misc.3d 908, 912, 804 N.Y.S.2d 580, 587 (Sup. Ct. 2005). If a former partner makes use of a partnership asset, that partner has a fiduciary duty to account to former partners for any benefit that is derived from its use.
Meinhard v. Salmon, 249 N.Y. 458, 463–64, 164 N.E. 545 (1928). See, e.g., Birnbaum v. Birnbaum, 73 N.Y.2d 461, 541 N.Y.S.2d 746, 539 N.E.2d 574 (1989) (partner); Meinhard v. Salmon, 249 N.Y. 458, 164 N.E. 545 (1928) (manager in joint business venture); In re Estate of Rothko, 43 N.Y.2d 305, 401 N.Y.S.2d 449, 372 N.E.2d 291 (1977) (executor); Tucker Anthony Realty Corp. v. Schlesinger, 888 F.2d 969 (2d Cir.1989) (partner); Ajettix Inc. v. Raub, 9 Misc.3d 908, 804 N.Y.S.2d 580 (Sup.Ct.2005) (corporate officer and director); Hanson Trust PLC v. ML SCM Acquisition, Inc., 781 F.2d 264 (2d Cir.1986) (corporate director); Albright v. Jefferson Cnty. Nat'l Bank, 292 N.Y. 31, 53 N.E.2d 753 (1944) (trustee); Commander Terminals Holdings, LLC v. Poznanski, 84 A.D.3d 1005, 923 N.Y.S.2d 190 (2d Dep't 2011) (corporate officer); In re Heller, 6 N.Y.3d 649, 816 N.Y.S.2d 403, 849 N.E.2d 262 (2006) (trustee); Greene v. Greene, 56 N.Y.2d 86, 451 N.Y.S.2d 46, 436 N.E.2d 496 (1982) (attorney-client). As a matter of logic, however, these cases cannot possibly set the governing standard here because the relationship between Dr. Engel and TIAA was of an entirely different character.
But there is an important exception: they have a continuing duty to each other as they wind up the partnership's affairs, including winding up the partnership's unfinished business. See, e.g., Ajettix Inc. v. Raub, 9 Misc.3d 908, 912, 804 N.Y.S.2d 580 (Sup.Ct. Monroe County 2005) (“[O]n dissolution, partners owe a continuing fiduciary duty to one another with respect to dealings effecting the winding up of the partnership and the preservation of the partnership assets.” ) (emphasis added); see also King v. Leighton, 100 N.Y. 386, 3 N.E. 594 (1885).
But there is an important exception: they have a continuing duty to each other as they wind up the partnership's affairs, including winding up the partnership's unfinished business. See, e.g., Ajettix Inc. v. Raub, 9 Misc.3d 908, 912, 804 N.Y.S.2d 580 (Sup.Ct.2005) (“[O]n dissolution, partners owe a continuing fiduciary duty to one another with respect to dealings effecting the winding up of the partnership and the preservation of the partnership assets.”) (emphasis added); see also King v. Leighton, 100 N.Y. 386, 3 N.E. 594 (1885). This duty devolves on all partners at the moment of dissolution, whether they remain behind to wind up the firm's business (as Coudert's Executive Board did), or leave their former firm and wind up the business elsewhere.
Indeed, none of the cases cited by Sotheby's is to the contrary. See Morse/Diesel, Inc. v. Fidelity and Deposit Co. of Md., supra, 768 F. Supp. at 117 (granting leave to replead rescission claim based on fraudulent inducement despite previous dismissal of fraud claim for failure to plead damages); Ajettix Inc. v. Raub, 9 Misc. 3d 908, 919-20, 804 N.Y.S.2d 580, 592-93 (Sup. Ct. 2005) (determining that plaintiff had elected remedy of rescission by moving for summary judgment on rescission claim). Therefore, any inconsistency among Minor's claims does not render his deceptive practices claim futile at this stage.