Opinion
604218-2004.
Decided on April 22, 2008.
Brian M. Privor, Esq., Mark A. Srere, Esq., Morgan, Lewis Bockius LLP, Washington, D.C. 20004, Attorneys for Plaintiff.
Anthony E. Westreich, Max Capital Management Corp., and Monday, Properties, Inc., Marshall Fishman, Esq., Jeremy Cohen, Esq., Kramer Levin Naftalis Frankel LLP, New York, New York, Attorneys for Defendants.
Before me is a motion for summary judgment by defendants Max Capital Management Corporation, Monday Properties, Inc., and Anthony Westreich.
The parties agreed at oral argument that the only remaining claims in the Complaint against the moving defendants are the sixth, eighth, ninth, and twelfth causes of action. The sixth, eighth, and ninth causes of action concern the allegation that defendants breached a contract with Arthur Lerner ("Lerner") concerning his $1.3 million investment in a brownstone rehabilitation project through Max Harlem, LLC ("Max Harlem"), falsely represented that Max Capital Management Corporation ("Max Capital") would also invest in the project, and diverted Lerner's money to Max Capital. The twelfth cause of action alleges that Adam Hochfelder ("Adam"), Anthony Westreich ("Westreich"), and Max Capital defrauded Brahman Real Estate Investors LLC ("Brahman"), Lerner, and other investors byfalsely representing that a $3.5 million investment in MNY 260 Park Avenue South, LLC ("MNY") would buy them a 35.8% share of Max Capital's one-third interest in a condominium conversion project at Max Capital's original cost, whereas in fact, that 35.8% share had cost less than $1 million, and defendants were enriched by an undisclosed $2.5 million mark-up.
In the rest of this decision, I will refer to the moving defendants as simply "defendants."
On October 17, 2007, an Order of default judgment was issued against Adam.
Max Capital is a limited liability corporation that was owned solely by Westreich and Adam during the times at issue here. The one-third interest in the property at issue was owned by Max 260 Park Avenue South, LLC ("Max 260"), which was created by Westreich, Adam, and other investors. Plaintiffs have submitted evidence that Max 260's interest in the property was held for the benefit of Max Capital, Westreich, and Adam, and that the MNY investment was marketed to plaintiffs by Max Capital employees as a Max Capital investment opportunity. Therefore, the roles of Max Capital and Max 260 in this transaction are sometimes difficult to distinguish, and I may occasionally interchange their names.
In the Max Harlem transaction: the remaining claims against Max Capital and Monday Properties are by Lerner for breach of contract, fraud, and conversion. On these three causes of action, Lerner is the only plaintiff, and Westreich is not a defendant.
In the MNY transaction: the remaining claim against Max Capital, Monday Properties, and Westreich is by Lerner and Brahman for fraud. Monday Properties, Inc. is the current name of Max Capital, but the parties continue to refer to it as "Max Capital" in this lawsuit.
For the reasons that follow, the motion is granted in part and denied in part.
A summary judgment motion shall be granted if, "upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party." CPLR 3212(b). Ordinarily, summary judgment is not warranted when there is a genuine issue of material fact, viewing the evidence in the light most favorable to the non-moving party. Fundamental Portfolio Advisors, Inc. v. Tocqueville Asset Mgmt., L.P. , 7 NY3d 96 , 105-06 (2006).
The question is whether plaintiffs have introduced a dispute as to any material facts about these four claims. Lerner's Breach of Contract Claim re Max Harlem
The sixth cause of action for breach of contract alleges that defendants Max Harlem LLC, Max Capital, and Monday Properties, Inc. breached an "agreement for Lerner to invest $1.3 million alongside Max Capital's $1 million in several non-performing mortgages from Bank of New York." The complaint indicates that Lerner and Adam signed a contract, called the Max Harlem LLC Agreement, "to formalize the collective $2.3 million investment by Lerner and Max Capital and to establish a corporate vehicle to hold the parties' investment." (Compl. ¶ 139.) The Max Harlem LLC Agreement provides that Max Harlem would be capitalized by $1 million from Adam and $1.3 million from Lerner. (Max Harlem Agt. ¶ 8.).
Plaintiff does not contend that Lerner entered into a contract with Max Capital directly. ( See Opp'n Br. at 11.) The legal issue briefed by the parties is whether Max Harlem was an alter ego of Max Capital, such that the alleged breach of contract by Max Harlem is attributable to Max Capital.
So Max Capital cannot be liable on any theory, unless there was a breach of contract by Max Harlem. I will set aside the issue of alter ego liability for the moment and first attempt to identify the contract that was allegedly breached and the parties to that contract.
The allegations of the sixth cause of action are ambiguous enough to permit either the inference that the contract allegedly breached was the Max Harlem LLC Agreement or the inference that the Max Harlem LLC Agreement was a larger agreement of which the Max Harlem LLC Agreement was only a part. In his opposition papers, plaintiff favors the former reading i.e., that the contract allegedly breached was the Max Harlem LLC Agreement. (Opp'n Br. at 14-15.) Lerner and Adam were the only signatories to the Max Harlem LLC Agreement, which created Max Harlem as a limited liability corporation, with Lerner and Adam as its sole members. Yet the sixth cause of action alleges that a contract was breached by Max Harlem, not by Adam; it names Max Harlem, not Adam, as a defendant. (Compl. at 23.) If the contract allegedly breached was the Max Harlem LLC Agreement, then Max Harlem, which was formed by it, could not be in breach of it.
Even if Max Harlem could be in breach of the Max Harlem LLC Agreement, the breach of contract claim still falters. While the sixth cause of action alleges breach of an agreement to invest in non-performing mortgages, (Compl. ¶ 139), the Max Harlem LLC Agreement does not even mention non-performing mortgages. The Max Harlem LLC Agreement states that its purpose is "any purpose for which limited liability companies may be formed"; it does not require Max Harlem to do anything in particular with its capital. (Max Harlem Agt. ¶ 2.) In opposing this motion, plaintiff has insisted that the breach of contract claim centers upon Max Harlem's failure to buy brownstones. (Opp'n Br. at 11; Trans. at 63.) If so, the contract allegedly breached cannot be the Max Harlem LLC Agreement, which does not contain a promise to buy mortgages on brownstones.
These inconsistencies lead me to an alternative reading of the sixth cause of action that the Max Harlem LLC Agreement was part of a larger agreement, which was allegedly breached by Max Harlem. The sixth cause of action asserts that Adam "wrote to Lerner and confirmed their agreement. . . [and] further sought Lerner's signature to an Operating Agreement for Max Harlem LLC to. . . establish a corporate vehicle to hold the parties' investment." (Compl. ¶ 139.) According to this reading of the sixth cause of action, the alleged agreement between Adam and Lerner was reached prior to the creation of Max Harlem and resulted in the creation of Max Harlem in the Max Harlem LLC Agreement. But if I adopt this reading, plaintiff has another problem: Lerner cannot sue Max Harlem for breach of an agreement that predated the creation of Max Harlem. Regardless of how one reads the sixth cause of action, the breach of contract claim is fatally flawed. Plaintiff has sued Max Harlem for breach of contract, but he has not alleged that he entered into a contract with Max Harlem; rather, he has alleged that he entered into a contract with Adam to form Max Harlem. The evidence submitted by plaintiff in support of piercing Max Harlem's veil does not help him, because plaintiff has identified no contract between Max Harlem and himself, as its majority member, such that Max Harlem could be liable for breach of contract.
Plaintiff did not sue Adam for breach of contract, but if he had done so, he could not attach liability to Max Capital through Adam on a veil-piercing theory, as Adam is a natural person with no corporate veil to pierce.
Even if Lerner somehow circumvented these problems and was able to sue Max Harlem for breach of a contract, he would not be able to reach Max Capital on a veil-piercing theory. Plaintiff has not submitted any authority for the proposition that a plaintiff can use veil-piercing doctrine to pierce the veil of a limited liability corporation of which he is a member, in order to attach liability to an alter ego of that corporation. No court of which I am aware has allowed a plaintiff to pierce the veil of his own limited liability corporation.
In short, plaintiff's alter ego argument is inexplicable and a misapplication of veil-piercing doctrine. Accordingly, defendants' summary judgment motion is granted as to the sixth cause of action for the breach of contract, and that cause of action is dismissed.
Lerner's Fraud Claim re Max Harlem
Defendants maintain that the eighth cause of action for fraud should be dismissed as redundant of the breach of contract claim.
"A false statement of intention is sufficient to support an action for fraud, even where that statement relates to an agreement between the parties." Graubard Mollen Dannett Horowitz v. Moskovitz, 86 NY2d 112, 122 (1995); accord Richbell Info. Servs., Inc. v. Jupiter Partners, L.P., 309 AD2d 288, 305 (1st Dep't 2003). A cause of action for fraud will not arise if the alleged fraud restates the facts of the breach of contract claim; a fraud claim must be based on some additional representation, omission, or conduct, other than the contract itself, which was fraudulent when performed. Gotham Boxing Inc. v. Finkel, 18 Misc 3d 1114(A), *10 (Sup.Ct. Jan 08, 2008) (distinguishing caselaw).
The eighth cause of action alleges that Max Capital never invested $1 million into Max Harlem and never purchased non-performing mortgages from the Bank of New York, as allegedly promised. In his opposition papers and at oral argument, however, plaintiff has withdrawn the allegation about the failure to purchase non-performing mortgages from his fraud claim. He has limited the fraud claim solely to Max Capital's alleged promise to invest $1 million alongside Lerner in Max Harlem. (Opp'n Br. at 14; see also Trans. at 63.)
Since the breach of contract claim has been dismissed, I do not need to address defendants' contention that the fraud claim, so limited, is redundant of the breach of contract claim. Plaintiff has submitted evidence in support of the fraud claim, e.g., that Adam told Lerner that Max Capital would invest in the project, that Lerner received materials advertising the investment as sponsored by Max Capital, and that Scot Lerner ("Scot"), a Max Capital employee, helped Adam solicit the investors. Plaintiff has submitted a letter from Adam to Lerner on Max Capital letterhead presenting the Max Harlem investment opportunity and a document faxed from Adam to Lerner referring to the transaction as a "Max Capital Harlem Residential Opportunity."
In any case, the fraud claim would not be redundant of the contract claim, since plaintiff has withdrawn the allegation about Max Capital's promised $1 million investment from his breach of contract claim. At oral argument, plaintiff's counsel insisted that the contract claim is based solely on the breach of the agreement to buy the mortgages. (Trans. at 63.) The Max Harlem LLC Agreement does not contain a promise by Max Capital to invest $1 million in Max Harlem; it states that Adam made that promise individually. (Max Harlem Agt. ¶¶ 5, 8.) Max Capital was not a party to the Max Harlem LLC Agreement.
Therefore, even if the contract claim had survived, the fraud claim would not be redundant insofar as it rests on the allegation that Max Capital, through its agents, promised that Max Capital, rather than Adam individually, would invest $1 million into Max Harlem.
Based on this evidence, plaintiff has raised a disputed issue of fact as to whether Adam or Scot made a fraudulent representation, with the actual or apparent authority of Max Capital, that Max Capital, rather that Adam, would invest $1 million in the Max Harlem project.
Accordingly, defendants' summary judgment motion is denied as to the eighth cause of action for fraud, which is now limited as discussed in this decision.
Lerner's Conversion Claim re Max Harlem
Defendants contend that plaintiff's ninth cause of action for conversion should be dismissed as redundant of the breach of contract claim. Since the contract claim has been dismissed, the conversion claim cannot be redundant of it.
"Any use of property beyond the authority which an owner confers upon a user or in violation of instructions given is a conversion." Meese v. Miller, 79 AD2d 237, 243 (4th Dep't 1981). In his conversion claim, Lerner contends that Max Capital misappropriated his $1.3 million investment in Max Harlem for purposes not authorized by the parties' agreement and has refused to return it, and has submitted evidence in support of this contention. Accordingly, the summary judgment motion is denied as to the ninth cause of action for conversion.
Brahman and Lerner's Fraud Claim re MNY
In the twelfth cause of action, plaintiffs Brahman and Lerner allege that misrepresentations in a marketing brochure and by Westreich, Adam Hochfelder ("Adam"), and Jimmy Hochfelder ("Jimmy") fraudulently induced them to invest in MNY.
As Lerner and Brahman are the only two plaintiffs on this cause of action, the term "plaintiffs" in the rest of this decision will refer to only Lerner and Brahman.
A short history of the MNY transaction: Max 260 Park Avenue South, LLC ("Max 260") and two other investors bought a property at 260 Park Avenue to redevelop it into condominiums. Max 260 invested $2.7 million for a one-third share in the property. Plaintiffs have submitted evidence that Max 260's investment was made on behalf of Westreich, Adam, and other investors, and it was overseen by Max Capital employees. According to plaintiffs, defendants created MNY to hold 35.8% of Max 260's one-third interest in the property; MNY's 35.8% share had cost about $1 million. Furthermore, according to plaintiffs, defendants prepared a brochure to market MNY to outside investors as a Max Capital investment. The thrust of the fraud claim is the allegation that defendants represented to the MNY investors that Max Capital had invested or intended to invest $10 million in MNY, and that they could invest at Max Capital's original cost. The MNY investors eventually invested about $3.5 million; $450,000 of this amount was invested by plaintiffs to this action. Lerner invested $200,000, and Brahman invested $250,000.
There is some dispute as to whether the amount actually invested was $3.5 million or $3.397 million, but this dispute does not make a difference in this decision.
Although they invested only $450,000 in MNY, Lerner and Brahman purport to assert this fraud claim on behalf of all the MNY investors, who collectively invested $3.5 million. Plaintiffs' counsel suggested at oral argument that I could order relief for all the MNY investors by creating some sort of fund, from which MNY investors could draw, in proportion to their investments in MNY, regardless of whether they are parties to this action.
Plaintiffs have articulated no legal theory and cited no authority for the proposition that I have the authority to award them damages on behalf of other MNY investors, or to award damages to persons who have not joined this lawsuit, and, of course, there is none. A court has authority to decide only justiciable disputes in controversy between parties who bring these matters before them. Plaintiffs have no standing to assert the claims of non-parties. See generally Muskrat v. United States, 219 U.S. 346 (1911) (actual controversy requirement); Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (standing requirement). To the extent that Brahman and Lerner are asserting claims on behalf of non-parties, those claims are dismissed.
With respect to the fraud claim based on Lerner and Brahman's $450,000 investment: defendants argue that this claim should be dismissed as a matter of law and undisputed fact for four reasons. First, defendants contend that the alleged misrepresentations in the brochure were not a representation of existing fact, but projections of a future expectation. Second, defendants contend that it was unreasonable for plaintiffs to rely on the alleged misrepresentations made orally or in the brochure, because they were contradicted by other documents available to plaintiffs before they invested. Third, defendants maintain that the fraud claims are barred by a disclaimer signed by plaintiffs in the MNY Subscription Agreement. Fourth, defendants insist that plaintiffs have not incurred out-of-pocket damages, because their investment has been profitable.
First, I address defendants' contention that the alleged misrepresentation in the brochure was not a representation of existing fact, but a projection of a future expectation, and therefore not actionable as fraud.
The brochure states that Max Capital was projected to invest almost $10 million in the property. Plaintiffs were also told that the MNY investors would be investing $3.5 million in the project on a "pari passu" basis with Max Capital. Plaintiffs allege that the parties understood this expression to mean that they were investing at the same cost originally paid by Max 260 for its one-third interest in the property.
Plaintiffs allege that, in fact, a 35.8% interest in Max 260 was worth only about $1 million, since Max 260 had invested only $2.7 million in the project. Plaintiffs have introduced evidence that Westreich, Jimmy, and Adam represented to them that the MNY investors' $3.5 million investment represented 35.8% of Max Capital's total $10 million investment in MNY, and that the MNY investors were buying into MNY at Max 260's original cost, without any mark-up, when defendants knew all along that they were "marking up" Max Capital's actual investment, in order to generate a $2.5 million profit for Max Capital.
Defendants insist that I must disregard plaintiffs' evidence because the brochure indicates that the $10 million figure was a projection. I disagree; a "statement of present intention" made with no present intention of carrying it out can support a fraud action. Channel Master Corp. v. Aluminum Ltd. Sales, Inc., 4 NY2d 403, 407 (1958). As plaintiffs have raised a dispute as to whether a future projection was made with no present intention of carrying it out, I cannot dismiss the fraud claim on that basis.
Second, defendants contend that it was unreasonable for plaintiffs to rely on the alleged oral misrepresentations or misrepresentations in the brochure, because those representations were contradicted by a statement in the Max 260 Operating Agreement, which, defendants say, plaintiffs could have asked to see as part of their due diligence. To be clear: Plaintiffs did not invest directly in Max 260; they invested in MNY. Nevertheless, defendants maintain that, since Lerner and Brahman each executed the MNY Operating Agreement and the MNY Subscription Agreement, and both of these documents indicated that plaintiffs were buying a direct interest in Max 260 by investing in MNY, plaintiffs were responsible for finding out about, obtaining, and reviewing the Max 260 Operating Agreement.
"A party cannot claim reliance on a misrepresentation when he or she could have discovered the truth with due diligence." KNK Enterprises, Inc. v. Harriman Enterprises, Inc. , 33 AD3d 872 , 872 (2nd Dept. 2006). See also Stuart Lipsky, P.C. v. Price, 215 AD2d 102, 103 (1st Dep't 1995) (dismissing plaintiff's claim that defendant fraudulently misrepresented size and viability of his law practice under CPLR 3211(a)(7), where "plaintiffs, which had the means available to ascertain the truth, nevertheless chose to rely solely upon the alleged oral representations without any effort to verify that information via financial statements") (emphasis added); East 15360 Corp. v. Provident Loan Soc. of New York, 177 AD2d 280, 281 (1st Dept. 1991) (citations omitted) (holding that plaintiff could not claim fraud, because it "could have, with due diligence, discovered a defect. . . prior to execution of the contract"); Rodas v. Manitaras, 159 AD2d 341, 342 (1st Dep't 1990) ("[A] party seeking to avoid a specific disclaimer clause must demonstrate that the facts alleged to have been fraudulently concealed could not be discovered through the exercise of reasonable diligence.").
The MNY Subscription Agreement states that "all documents, records and books pertaining to this investment have been made available for inspection by the Subscriber." (MNY Subscription Agt. § 5.3(a).) This provision was not in the Max 260 Operating Agreement; the MNY Subscription Agreement does not refer to the Max 260 Operating Agreement, and it does not say the Max 260 Operating Agreement was among the documents made available to plaintiffs.
In support of their theory that § 5.3(a) bars the fraud claim, defendants have cited a variety of cases, all of which are distinguishable. Cf. Nurnberg v. Hobo Corp. , 30 AD3d 359 , 360 (1st Dep't 2006) (granting summary judgment dismissing fraud claim based on misrepresentations contradicted by documentation provided to plaintiff, which plaintiff "d[id] not deny having received," and "disclosing all pertinent facts"); NM IQ LLC v. OmniSky Corp. , 31 AD3d 315 , 316 (1st Dep't 2006) (dismissing fraud claim on summary judgment, where plaintiffs could not have reasonably relied on false statements that OmniSky had sufficient capital to continue its operations, where "plaintiffs had been provided with independent analyst reports warning that OmniSky would need capital" and it was "undisputed that plaintiffs learned about. . . and. . . had all the material facts before deciding to close on the transaction"); In re Dean Witter Managed Futures Ltd. Partnership Litigation, 282 AD2d 271, 271 (1st Dep't 2001) (holding that individual investors' reliance on brokers' oral misrepresentations about limited partnership investments was unreasonable as a matter of law, where plaintiffs signed agreement representing they had received limited partnership prospectuses, which prominently disclosed "that the investments in question were speculative,' involved a high degree of risk,' and should be made only with funds the investor could afford to lose entirely").
In Nurnberg, OmniSky, and Dean Witter, the plaintiffs received the documentation at issue, whereas here it is undisputed that plaintiffs were not given, were not referred to, and did not review the Max 260 Operating Agreement. In Dean Witter, the plaintiffs' fraud claim was based on an oral representation that was contradicted by the written documentation; in contrast, in the instant case, the alleged fraudulent misrepresentations were contained in the written materials plaintiffs were given. ( E.g., Fishman Aff. Ex. I at PPII 01657.)
This instant case is also distinguishable from Rodas, because the disclaimer in the MNY Subscription Agreement does not specifically state that plaintiffs did not rely on outside representations about how much money Max Capital intended to invest in the property and that the MNY investors would invest on a pari passu basis. Cf. Rodas, 159 AD2d at 341-42 (affirming summary judgment dismissing fraud claim based on false representations that the business's income was $20,000 a week, where, in the contract of sale, plaintiffspecificallydisclaimed reliance on "any representations made by the seller" as to "the past, present or prospective income or profits of the said business").
Even if it were reasonable for plaintiffs to have asked for and reviewed the Max 260 Operating Agreement as part of their due diligence, the Max 260 Operating Agreement does not clearly state the percentage interest in Max 260 that was held by MNY Holdings, LLC at the time plaintiffs invested in MNY or the price paid by MNY Holdings, LLC for that interest. According to the § 5.1 of the MNY Subscription Agreement, the money invested by the MNY investors would be used by MNY to buy MNY Holdings, LLC's 35.8% membership interest in Max 260. The Max 260 Operating Agreement states on page 32 that Max 260 Park Avenue South Holdings, LLC c/o Max Capital contributed $1,733,873 for a 64.2% interest in the property, and Insignia Realty Investors III, LLC contributed $966,667 for a 35.8% interest in the property. (Westreich Aff. Ex. A, Schedule I.) Section 11.1 provides that Max Capital, as obligor for Max 260 Park Avenue South Holdings, LLC, was obligated to buy out Insignia's interest by the end of 2002. Nothing in the Max 260 Operating Agreement says that Max Capital did so.
Therefore, while this question is close, I cannot conclude, as a matter of law, that plaintiffs did not make a reasonable effort to verify the information they were given as part of their due diligence. I cannot dismiss the fraud claim on this basis.
Third, defendants contend that plaintiffs's fraud claim is barred by a disclaimer in § 5.3(d) of the MNY Subscription Agreement.
The MNY Subscription Agreement, signed by Lerner and Brahman, states that Lerner and Brahman were "not subscribing for the Interest as a result of or subsequent to. . . any solicitation of a subscription by a person other than a representative of [MNY]." (MNY Subscription Agt. § 5.3(d).)
Defendants argue that plaintiffs' execution of this agreement bars any claim that they relied on a representation by another other than an MNY representative, citing First Nationwide Bank v. 965 Amsterdam, Inc., 212 AD2d 469 (1st Dep't 1995). In First Nationwide, the court dismissed the defendant's affirmative defense of fraud, which was its sole defense to defaulting on a bank loan, based on affidavits defendant previously signed, in which he agreed that the plaintiff bank was extending the loan in reliance on the defendant's own representations about the property's condition. First Nationwide, 212 AD2d at 470-71.
Plaintiffs have introduced evidence that all of the allegedly fraudulent representations, including those in the brochure, were given to them by Westreich, Adam, and Jimmy. Westreich and Adam fall into the category of MNY representatives under § 5.3(d), since they were managers of MNY. ( See Fishman Aff. Ex. K, § 5.1(b).) Plaintiffs have submitted evidence that Jimmy was their agent, so he may also fall into that category, for purposes of this motion. Consequently, § 5.3(d) does not bar plaintiffs' fraud claim.
Fourth, defendants argue that plaintiffs cannot prove that they incurred out-of-pocket damages, because the undisputed facts show that their investment has been profitable.
It is the basic law of fraud that a prevailing plaintiff is entitled to its out-of-pocket damages. Lama Holding Co. v. Smith Barney Inc., 88 NY2d 413, 422 (1996) (plaintiffs' damages for fraud are "limited to recovering their losses"); Hotaling v. A.B. Leach Co., 247 NY 84, 88 (1928) ("actual pecuniary loss sustained as a direct result of the wrong is the measure to be applied in fixing damages" for fraud).
Defendants maintain that plaintiffs have not been damaged by investing in MNY, because Lerner's $200,000 investment has generated a $390,000 return, and Brahman's $250,000 investment has generated a $485,000 return. Peter Hochfelder ("Peter"), who is Brahman's principal, avers that, as of December 3, 2007, Lerner had received distributions of only $177,874 less than his $200,000 investment, and Brahman had received distributions of $222,341 less than its original $250,000 investment. (Peter Aff. ¶ 21.) Plaintiffs assert that a large additional sum has not been distributed, as plaintiffs' entitlement to those funds has not yet been resolved, and they are being held in reserve pending resolution of the related action, Lerner v. Westreich, Index No. 603184-2005. So even if defendants were correct that the measure of plaintiffs' damages was the difference between their investment and its profits, there is a factual dispute as to whether plaintiffs' investment has been profitable.
In any case, plaintiffs dispute defendants' measure of damages. They insist that defendants are erroneously basing their damages estimate on whether the investment was profitable, rather than on the difference between (plaintiffs' share of) the $3.5 million investment in MNY and the actual value of that investment that they received in exchange, which is $2.5 million. I do not need to resolve this dispute here, because it is evident that, even using defendants' measure, there is an unresolved factual dispute as to whether plaintiffs' investment has in fact been profitable.
Accordingly, for all the above reasons, defendants' summary judgment motion is denied as to the twelfth cause of action for fraud, except inasmuch as plaintiffs assert claims on behalf of non-parties to this action.
Accordingly, it is
ORDERED that the motion for summary judgment is granted as to the sixth cause of action, and that cause of action is dismissed as to defendants Max Capital Management Corp., and Monday Properties, Inc.; and it is further
ORDERED that the motion for summary judgment as to the eighth cause of action is denied, but that cause of action is limited as discussed in this decision; and it is further
ORDERED that the motion for summary judgment as to the ninth cause of action for conversion is denied; and it is further
ORDERED that the motion for summary judgment is denied as to the twelfth cause of action, except that any claims asserted by plaintiffs on behalf of non-parties are dismissed; and it is further
ORDERED that this action shall continue as to the remaining allegations in the eighth, ninth, and twelfth causes of action; and it is further
ORDERED that the parties shall appear for a final status conference on May 27, 2008 at 11:00 a.m.