Opinion
569-, 570-, 570A Index No. 651739/20 Case Nos. 2022-02318, 2022-04271, 2023-00318, 2023-00337
11-16-2023
Heather BARLOW et al., Plaintiffs-Appellants, v. Christopher SKROUPA et al., Defendants-Respondents, Advisory Board Members Does 1-5, Defendants.
Law Office of Carla Kerr Stearns, New York (Carla Kerr Stearns of counsel), for appellants. The Engel Law Group, PLLC, New York (Adam E. Engel of counsel), for respondents.
Law Office of Carla Kerr Stearns, New York (Carla Kerr Stearns of counsel), for appellants.
The Engel Law Group, PLLC, New York (Adam E. Engel of counsel), for respondents.
Kapnick, J.P., Friedman, Gesmer, Gonza´lez, Higgitt, JJ.
Order, Supreme Court, New York County (Lucy Billings, J.), entered on or about November 18, 2021, which to the extent appealed from, denied plaintiffs' motion insofar as it sought to strike defendants' answers and direct entry of judgment against defendants, unanimously modified, on the facts and in the interest of justice, to the extent of directing that plaintiffs are also entitled to an adverse inference charge to be formulated by the trial court, and otherwise affirmed, without costs. Order, same court and Justice, entered on or about March 23, 2022, which, to the extent appealed from, granted the motion of defendants David Katz and Paula Luff to dismiss all claims as against them, unanimously affirmed, without costs. Appeal from orders, same court and Justice, entered on or about January 3, 2023, which, to the extent appealable, denied plaintiffs' separate motions to renew, unanimously dismissed, without costs, as abandoned. Supreme Court providently exercised its discretion in denying plaintiffs' motion as defendants have not engaged in the type of "extreme conduct" warranting the imposition of the "ultimate penalty" of striking their answer or rendering judgment against them ( Pezhman v. Department of Educ. of the City of N.Y., 95 A.D.3d 625, 626, 944 N.Y.S.2d 128 [1st Dept. 2012] ; cf. Elias v. City of New York, 87 A.D.3d 513, 517, 928 N.Y.S.2d 543 [1st Dept. 2011] ). However, in addition to the measures that the court imposed — precluding defendants from presenting documents that they failed to timely produce during discovery and precluding them from offering evidence pertaining to interrogatories that they failed to answer — plaintiffs are also entitled to an adverse inference charge, to be formulated by the trial judge.
As to Katz and Luff's motion to dismiss, Supreme Court correctly granted the motion and dismissed all claims as against them. As to the cause of action as against Katz for violation of the Labor Law and New York State Minimum Wage Orders, plaintiffs alleged in support of that cause of action that Katz made investments in defendant Skytop Strategies, consulted with defendant Christopher Skroupa on hiring decisions, and wired Skroupa money so that Skytop could make payroll. These allegations, however, are insufficient to show that Katz was plaintiffs' employer under the Labor Law (see Bonito v. Avalon Partners, Inc., 106 A.D.3d 625, 626, 967 N.Y.S.2d 19 [1st Dept. 2013] ).
Regarding the cause of action for fraud as against Katz and Luff, Supreme Court properly dismissed that claim, as plaintiffs failed to plead fraud with particularity as required under CPLR 3016(b) (see Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559, 883 N.Y.S.2d 147, 910 N.E.2d 976 [2009] ). The complaint fails to identify any specific and material misrepresentation of fact by either Katz or Luff, and offered only general and conclusory allegations that they made "false representations" regarding Skytop's revenues and its ability to pay wages and benefits (see Principia Partners LLC v. Swap Fin. Group, LLC, 194 A.D.3d 584, 584, 144 N.Y.S.3d 338 [1st Dept. 2021] ). Because the fraud claim was properly dismissed, the cause of action for conspiracy to commit fraud was also properly dismissed (see Empire Outlet Bldrs. LLC v. Construction Resources Corp. of N.Y., 170 A.D.3d 582, 583, 97 N.Y.S.3d 68 [1st Dept. 2019] ).
Plaintiffs also failed to state a cause of action as against Katz and Luff for violation of General Business Law § 350, since the complaint fails to allege any "consumer-oriented" conduct as required by the statute ( Denenberg v. Rosen, 71 A.D.3d 187, 194, 897 N.Y.S.2d 391 [1st Dept. 2010], lv dismissed 14 N.Y.3d 910, 904 N.Y.S.2d 688, 930 N.E.2d 762 [2010] ). Rather, plaintiffs alleged only that on the websites Glassdoor and LinkedIn, Katz and Luff falsely advertised Skytop's financial condition and work culture. Neither of these matters implicate consumers or involve gaining access to customers (see Plavin v. Group Health Inc., 35 N.Y.3d 1, 9, 124 N.Y.S.3d 5, 146 N.E.3d 1164 [2020] ).
Moreover, plaintiffs failed to state a cause of action against Katz and Luff for unjust enrichment because the complaint asserts no nonconclusory facts suggesting that they were enriched at plaintiffs' expense (see Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 183, 919 N.Y.S.2d 465, 944 N.E.2d 1104 [2011] ; IDT Corp. v. Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 142, 879 N.Y.S.2d 355, 907 N.E.2d 268 [2009] ). Rather, the fourth amended complaint makes vague allegations that Katz and Luff "profited" from Skytop's fraudulent scheme and engaged in self-dealing.
Supreme Court correctly dismissed the conversion cause of action as against Katz and Luff, as plaintiffs fail to identify monies that they seek to have returned as "a specific, identifiable fund" ( Cohen Bros. Realty Corp. v. Mapes, 181 A.D.3d 401, 405, 119 N.Y.S.3d 478 [1st Dept. 2020] [internal quotation marks omitted]).
Furthermore, as to the breach of contract cause of action, the fourth amended complaint does not allege that either Katz or Luff were parties to a contract with plaintiffs, and the conclusory alter ego allegations are insufficient to pierce the corporate veil (see Gateway Intl., 360, LLC v. Richmond Capital Group, LLC, 201 A.D.3d 406, 408, 160 N.Y.S.3d 231 [1st Dept. 2022] ). The allegations of Katz's involvement in Skytop — wiring funds to Skytop, giving input on hiring decisions, and speaking at Skytop conferences — fall well short of demonstrating that he had "complete domination of the corporation in respect to the transaction attacked" ( Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135, 141, 603 N.Y.S.2d 807, 623 N.E.2d 1157 [1993] ; see also Sutton 58 Assocs. LLC v. Pilevsky, 189 A.D.3d 726, 730, 137 N.Y.S.3d 359 [1st Dept. 2020] ).
Finally, plaintiffs fail to state a cause of action for promissory estoppel as against Katz and Luff because the complaint fails to allege any "clear and unambiguous promise" by either one of them ( Condor Funding, LLC v. 176 Broadway Owners Corp., 147 A.D.3d 409, 411, 46 N.Y.S.3d 99 [1st Dept. 2017] ).
The Decision and Order of this Court entered herein on June 29, 2023, is hereby recalled and vacated (see M–2023–03203 decided simultaneously herewith).