Opinion
15224 Index No. 655351/18 Case No. 2021–00903
02-03-2022
Marc GOLDMAN, et al., Plaintiffs–Appellants, v. NERDS BROADWAY LIMITED LIABILITY COMPANY, et al., Defendants–Respondents.
Ira Daniel Tokayer, New York, for appellants. Goldberg Weprin Finkel Goldstein LLP, New York (Zachary D. Kuperman of counsel), for respondents.
Ira Daniel Tokayer, New York, for appellants.
Goldberg Weprin Finkel Goldstein LLP, New York (Zachary D. Kuperman of counsel), for respondents.
Manzanet–Daniels, J.P., Webber, Oing, Mendez, Higgitt, JJ.
Order, Supreme Court, New York County (Debra A. James, J.), entered October 19, 2020, which granted defendants’ motions to dismiss the complaint, unanimously affirmed, without costs.
Plaintiff investors’ claims for breach of contract and fiduciary duty are based on defendants’ decision to have the company enter into a contract with the Shubert Organization. Because they allege harm only to the company, and not based on some particular injury or right of the plaintiffs, these claims are derivative (see Abrams v. Donati, 66 N.Y.2d 951, 953, 498 N.Y.S.2d 782, 489 N.E.2d 751 [1985] ). As such, they were properly dismissed for lack of standing, because the transaction complained of occurred before any were members of the company (see Business Corporation Law § 626(b) ; Independent Inv. Protective League v. Time, Inc., 50 N.Y.2d 259, 263, 428 N.Y.S.2d 671, 406 N.E.2d 486 [1980] ).
Contrary to defendants’ contention, plaintiffs sufficiently alleged loss causation by showing a plausible link between the misrepresentation and the loss. They were not required to rebut all other possible causes (see Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 188 [2d Cir.2015] ). The court, however, properly dismissed the fraud claims as barred by the disclaimers in the agreement, which included an express representation that plaintiffs’ professionals had examined the financial records of the company. Given that the fraud alleged was a misrepresentation of how much money had been raised and invested, this disclaimer requires dismissal (see Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 320–322, 184 N.Y.S.2d 599, 157 N.E.2d 597 [1959] ). Because plaintiffs’ claims for fraud, breach of contract, and fiduciary duty were properly dismissed, their "claim" for rescission, which is actually a remedy, was also properly dismissed (see Vitale v. Coyne Realty, Inc., 66 A.D.2d 562, 568, 414 N.Y.S.2d 388 [4th Dept. 1979] ).
Defendants are correct that the claims for breach of contract cannot be asserted against the individual defendants, who are merely members of the entities that signed the operating agreement (see Delagrange v. Payard, 110 A.D.3d 491, 973 N.Y.S.2d 74 [1st Dept. 2013] ) in the absence of any allegation that defendants individually participated in a tort, whether of fraud, breach of fiduciary duty, or otherwise (see Sergeants Benevolent Assn. Annuity Fund v. Renck, 19 A.D.3d 107, 110, 796 N.Y.S.2d 77 [1st Dept. 2005] ). In view of the foregoing, we need not reach the remaining contentions.