Opinion
No. 38418/07.
2011-01-7
Leonid SHAPSIS, Edward Malishkevich and Leonid Shekhets, Plaintiffs, v. Alexander KOGAN, IBM Industries, 2417 Ocean Avenue, LLC, Law Offices of Alexander Sklavos PC, and Alexander Sklavos, Esq., Defendants.
William Schneider, Esq., Brooklyn, attorney for plaintiffs. Alexander Sklavos, Esq., Westbury, attorney for defendants.
William Schneider, Esq., Brooklyn, attorney for plaintiffs. Alexander Sklavos, Esq., Westbury, attorney for defendants.
CAROLYN E. DEMAREST, J.
In this action brought by plaintiffs Leonid Shapsis, Edward Malishkevich and Leonid Shekhets (collectively, plaintiffs) arising out of an alleged breach of a joint venture agreement against defendants Alexander Kogan, IBM Industries, Inc. (IBM), 2417 Ocean Avenue, LLC (2417 Ocean Avenue), Law Offices of Alexander Sklavos PC, and Alexander Sklavos, Esq., defendant Kogan cross-moves for an order dismissing plaintiffs' complaint in is entirety pursuant to CPLR 3211.
BACKGROUND
This action arises out of an alleged joint venture established between plaintiffs and defendant Kogan to develop a parcel of land located on 2417 Ocean Avenue in Brooklyn, New York, by constructing a commercial building on the property to sell for investment purposes.
Plaintiffs' second amended complaint alleges that in 2002, plaintiffs and Kogan entered into an oral agreement that established a joint venture. Plaintiffs claim that in order to more efficiently manage the operations of this alleged joint venture, they and Kogan formed 2417 Ocean Avenue on or about October 24, 2002. Plaintiffs allege that they collectively held a 50% interest in 2417 Ocean Avenue, and Kogan held the other 50% interest in it.
The Operating Agreement for 2417 Ocean Avenue does not list Shapsis or Malishkevich as members, but, rather, it lists Shekhets, Kogan, and three others as members. The Operating Agreement provides that Shekhets and Kogan each contributed $300,000 as their respective capital contributions, and that Shekhets and Kogan each held a 18.75% membership interest in 2417 Ocean Avenue. Shapsis and Malishkevich claim that they are not listed in the Operating Agreement because they agreed to place title of their partnership interest solely in Shekhets' name.
Plaintiffs allege that, in spite of the capital contributions listed in the Operating Agreement, they contributed $371,256 and Kogan initially invested $370,000 in the project. Plaintiffs claim that Kogan, while claiming that he invested an additional $155,000 beyond his initial investment of $370,000, unbeknownst to them, withdrew $195,000 from 2417 Ocean Avenue, which left his actual investment in the project at approximately only $287,000. Plaintiffs also assert that they were the ones who initially located the property at 2417 Ocean Avenue, and that they contributed their time, money, and expertise to the project.
Plaintiffs further allege that in consideration for choosing IBM, in which Kogan was the sole principal, as the general contractor on the project, it was agreed that they and Kogan would each receive 50% of the net fees generated from the construction of the 12 condominiums and medical office (the construction fees). Plaintiffs claim that the construction fees would equal all funds received by IBM and Kogan from construction after subtracting third-party costs associated with the job, with IBM working on a minimum 10% mark-up of all costs.
Plaintiffs additionally allege that after the joint venture was formed, Kogan recommended that 2417 Ocean Avenue retain the Sklavos defendants as legal counsel. The Sklavos defendants drafted 2417 Ocean Avenue's December 2002 Operating Agreement. Plaintiffs claim, however, that the Sklavos defendants did not disclose to them that their law firm also served as Kogan's personal attorney. Plaintiffs assert that the Sklavos defendants improperly simultaneously represented and advised 2417 Ocean Avenue, 2417 Ocean Avenue's individual members, IBM, and Kogan in all of their dealings in connection with the project.
In addition, plaintiffs allege that the Sklavos defendants represented 2417 Ocean Avenue and IBM in two lawsuits, entitled Mikucki v. 2417 Ocean Avenue LLC (Sup Ct, Kings County, index No. 238/05) and Bouri v. 2427 Ocean Avenue LLC (Sup Ct, Kings County, index No. 17102/05), which were brought by individuals seeking to recover for personal injuries which occurred as a result of the construction work at 2417 Ocean Avenue. Plaintiffs assert that the Sklavos defendants improperly advised them that 2417 Ocean Avenue was responsible for these individuals' injuries and recommended that its funds be withheld from distribution to the members as profits, and, instead, be set aside to settle these personal injury lawsuits. Plaintiffs claim that the Sklavos defendants failed to advise 2417 Ocean Avenue that it should seek independent counsel or indemnity from IBM, and that the Sklavos defendants withheld funds owed for the purpose of settling the personal injury lawsuits without accounting for the withholding of these funds. Plaintiffs assert that they were never repaid their share of the withholding from their capital accounts nor were they told what happened to these funds.
The project was completed in or around 2005. According to plaintiffs, after the completion of the project, Kogan repudiated his promise to equally allocate the construction fees and to properly allocate the proceeds as provided in the Operating Agreement, effectively shutting the plaintiffs out of benefitting from the joint venture. Specifically, plaintiffs allege that Kogan caused 2417 Ocean Avenue to distribute proceeds of $525,937 to himself (on an investment of $287,137), while distributing to plaintiffs proceeds of only $503,001 (on an investment of $371,250) for the identical 18.75% membership interest in 2417 Ocean Avenue, in violation of the Operating Agreement as well as the joint venture agreement. Plaintiffs further allege that Kogan withheld substantial funds from all the members of 2417 Ocean Avenue toward the settlement fund for the personal injury lawsuits, and never accounted for these withholdings, nor for the allocation of the legal fees. Plaintiffs additionally allege that Kogan only paid them $90,000 toward their share of the construction fees, and refused to provide an accounting or pay any additional funds toward their share of these fees.
PROCEDURAL HISTORY
The instant action was commenced on October 16, 2007 by plaintiffs Shapsis and Malishkevich against IBM and Kogan. IBM and Kogan, by their attorneys, the Law Offices of Alexander E. Sklavos PC, filed an answer on November 16, 2007. By order dated October 28, 2009, the court granted their motion to dismiss plaintiffs' complaint, pursuant to CPLR 3211(a)(11), for failure to join necessary parties, with leave to file and serve an amended complaint joining these parties. Thereafter, plaintiffs filed a first amended complaint dated January 21, 2010, adding Shekhets, 2417 Ocean Avenue, and 2417 Ocean Avenue Management, LLC, as defendants. IBM and Kogan filed an amended answer dated March 15, 2010.
By notice of motion dated September 1, 2010, plaintiffs moved for an order, pursuant to CPLR 3025(b), granting them leave to file a second amended complaint, joining Alexander Sklavos, P.C. and Alexander Sklavos, Esq. (collectively, the Sklavos defendants) as defendants, changing Shekhets from a defendant to a plaintiff, and eliminating 2417 Ocean Avenue Management, LLC as a defendant. The proposed amended complaint also set forth additional allegations and causes of action. Kogan and his attorney, Sklavos, submitted an affidavit and affirmation, respectively, opposing plaintiffs' motion and in support of a cross motion by Kogan to dismiss plaintiffs' first amended complaint.
At oral argument on September 15, 2010, this court granted plaintiffs' motion to amend their first amended complaint. Consequently, since plaintiffs' second amended complaint supersedes plaintiffs' first amended complaint, Kogan's cross motion to dismiss will be deemed directed to, and addressed by the court with respect to plaintiffs' second amended complaint ( see 49 W. Tenants Corp. v.. Seidenberg, 6 AD3d 243, 243 [2004];Livadiotakis v. Tzitzikalakis, 302 A.D.2d 369, 370 [2003];Sage Realty Corp. v. Proskauer Rose, 251 A.D.2d 35, 38 [1998];Sholom & Zuckerbrot Realty Corp. v. Coldwell Bank Commercial Group, 138 Misc.2d 799, 801 [1988] ).
ANALYSIS
Defendant Kogan has moved to dismiss the complaint for failure to state a cause of action (CPLR 3211(a)(7)). When evaluating a motion to dismiss pursuant to CPLR 3211(a)(7), the court must construe the pleading liberally, “accepting all the facts alleged in the complaint to be true and according the plaintiff the benefit of every possible favorable inference” (Jacobs v. Macy's East, Inc., 262 A.D.2d 607, 608 [2d Dept 1999]; Leon v. Martinez, 84 N.Y.2d 83 [1994] ). The court will deny the motion “if from the pleadings' four corners, factual allegations are discerned which taken together manifest any cause of action cognizable at law” ( 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 152 [2002] [internal quotation marks omitted] ). “The test on a motion to dismiss for insufficiency of the pleadings is not whether the plaintiff has artfully drafted the complaint but whether, deeming the complaint to allege whatever can be reasonably implied from its statements, a cause of action can be sustained” (Pepler v. Coyne, 33 AD3d 434, 435 [1st Dept 2006] citing Stendig, Inc. v. Thom Rock Realty Co., 163 A.D.2d 46, 48, [1st Dept 1990]; see also Feinberg v. Bache Halsey Stuart, 61 A.D.2d 135, 137–138, [1st Dept 1978] ).
Plaintiffs' second amended complaint sets forth nine causes of action. Plaintiffs' first cause of action seeks a declaratory judgment establishing a joint venture between them and Kogan. “The essential elements of a joint venture are an agreement manifesting the intent of the parties to be associated as joint venturers, a contribution by the coventurers to the joint undertaking (i.e., a combination of property, financial resources, effort, skill or knowledge), some degree of joint proprietorship and control over the enterprise; and a provision for the sharing of profits and losses' “ (Hamlet at Willow Creek Dev. Co., LLC v. Northeast Land Dev. Corp., 64 AD3d 85, 103 [2d Dept 2009], quoting Kaufman v. Torkan, 51 AD3d 977, 979 [2d Dept 2008] [internal quotation marks and citations omitted] ). When evaluating whether a joint venture exists, “[t]he ultimate inquiry is whether the parties have so joined their property, interests, skills and risks that for the purpose of the particular adventure their respective contributions have become as one and the commingled property and interests of the parties have thereby been made subject to each of the associates on the trust and inducement that each would act for their joint benefit' “ ( id. quoting Matter of Steinbeck v. Gerosa, 4 N.Y.2d 302, 317 [1958] [internal quotation marks omitted] ).
Kogan contends that the first cause of action must be dismissed because plaintiffs cannot maintain these claims as they fail to allege that plaintiffs agreed to share in losses as well as in profits. Kogan argues that the absence of this allegation renders this cause of action insufficient on its face.
Plaintiffs, however, adequately allege that the plaintiffs joined with Kogan for the purpose of developing the property located at 2417 Ocean Avenue. Plaintiffs further contend that under the Operating Agreement, the funds invested by them were at a risk of loss on the same pro rata terms as Kogan's funds were at such risk. Plaintiffs assert that they would, therefore, necessarily share in the losses since they would sustain the loss of their investment if efforts under the agreement were unsuccessful. Plaintiffs further argue that since they have alleged that they committed more money while being paid less profits than Kogan, who, they claim, improperly withdrew funds, they have sufficiently alleged that their money was at risk of loss. Thus, plaintiffs have sufficiently alleged the existence of a joint venture agreement to sustain this cause of action.
Plaintiffs' second cause of action seeks damages for breach of the joint venture agreement. In support of his motion to dismiss, Kogan submits an affirmation by Sklavos, who contends that plaintiffs have not alleged any viable claim for a breach of the alleged joint venture agreement. Sklavos asserts that plaintiffs' claim that Kogan failed to allocate funds to them in their capital account as set forth in the Operating Agreement must fail because plaintiffs were not listed as members of 2417 Ocean Avenue in the Operating Agreement. Sklavos further asserts that Shekhets, whose interest in 2417 Ocean Avenue provides the basis for Shapsis and Malishkevich's claim, has been fully compensated for his interest in a previous lawsuit against Kogan for essentially the same relief. In support of this assertion, Sklavos has annexed a stipulation dated March 28, 2008.
The March 28, 2008 stipulation, however, is not dispositive of plaintiffs' claims in this action. That stipulation involved the settlement of a federal court action by Shapsis and Malishkevich against Shekhets, Kogan, and John Litman (another member of 2417 Ocean Avenue) ( Shapsis v. Shekhets, 05 Civ 5555 [ED NY] ). In that federal court action, Shapsis and Malishkevich alleged that Shekhets, without their knowledge and consent, improperly sold the partnership's interest in 2417 Ocean Avenue Management, LLC, a separate limited liability company that controlled the medical office space at the property, to Kogan and John Litman.
Moreover, although the March 28, 2008 stipulation of dismissal provided that the claims and counterclaim therein would be dismissed with prejudice and that action would be discontinued, it specifically provided that the dismissal and discontinuance would not have any res judicata or collateral estoppel effect on any claim or counterclaims not specifically set forth in the pleadings. There were no claims against Kogan in that federal court action regarding the distribution of the construction fees or proceeds of 2417 Ocean Avenue, which are the subject of the present action (which was already pending at the time that stipulation was executed).
Sklavos also asserts that as to the withholding of funds for the personal injury actions, this was done by agreement. Sklavos has annexed a July 7, 2006 agreement, which settled a New Jersey action (the New Jersey action) by Shekhets against Shapsis and Malishkevich, and Melver Corp., Design Flooring Systems, Inc., and Imperial Design and Construction, LLC (which were entities in which these parties had interests). A perusal of this agreement, however, reveals that it does not specifically relate to the personal injury lawsuits.
Sklavos and Kogan assert that plaintiffs, through Shekhets, were admittedly paid over $520,000. Sklavos, in his affirmation, also asserts that plaintiffs resolved their differences in the July 7, 2006 agreement, which documents investment amounts of $60,000 from Shapsis and $65,000 from Malishkevich, and a total investment of all three plaintiffs of approximately $350,000. The July 7, 2006 agreement, though, involved the distribution of proceeds of 2417 Ocean Avenue among Shekhets, Shapsis, and Malishkevich, and not any claim against Kogan, who was not a party to that action. Significantly, however, the July 7, 2006 agreement provided that after distributing certain proceeds and repaying the investment amounts of Shekhets, Shapsis, and Malishkevich in 2417 Ocean Avenue, all remaining distributions from 2417 Ocean Avenue were to be made by Kogan to them in the respective percentages of 40%, 40%, and 20%.
Thus, mindful of this court's obligation to view the complaint's allegations in the light most favorable to the plaintiffs, they have adequately alleged a cause of action for breach of contract, and Kogan has failed to demonstrate any basis for dismissal of the second causes of action.
Plaintiffs' third cause of action alleges a breach of fiduciary duty by the Sklavos defendants, seeking damages against them. In order to state a prima face case for a breach of fiduciary duty, “a plaintiff must prove the existence of a fiduciary relationship, misconduct by the defendant, and damages that were directly caused by the defendant's misconduct” ' (Guarino v. North Country Mortg. Banking Corp., 2010 WL 5095476 [2nd Dept 2010] quoting Kurtzman v. Bergstol, 40 AD3d 588, 590 [2d Dept 2007] ). “[W]here ... the plaintiff's claims of breach of fiduciary duty are essentially claims of legal malpractice, they are governed by the same standard [for legal malpractice]” (Boone v. Bender, 74 AD3d 1111, 1113 (internal citations omitted)). Thus, the plaintiffs must set forth a claim for legal malpractice by demonstrating that the attorney “failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the attorney's breach of this duty proximately caused plaintiff to sustain actual and ascertainable damages” and “but for” the defendants' conduct, plaintiffs would have prevailed in the underlying matter or would not have sustained any ascertainable damages ( id. (internal quotations and citations omitted)).
Here, plaintiffs's third cause of action must be dismissed outright as plaintiffs have only alleged that the Slavos defendants were retained by 2417 Ocean Avenue, and thus owe the plaintiffs a fiduciary duty, failing to adequately allege the existence of a fiduciary duty between the Sklavos defendants and the plaintiffs themselves as individuals. It is clear that the Sklavos defendants had no duty to disclose any conflict, if one in fact existed, to the plaintiffs as none of them were represented by the Sklavos defendants or listed as individual parties in either the Mikucki action or the Bouri action. Instead of alleging that a fiduciary duty existed between the Sklavos defendants and themselves, plaintiffs assert an improper derivative claim on behalf 2417 Ocean Avenue, alleging that Sklavos failed to advise 2417 Ocean Avenue that it had no liability for the personal injury lawsuits instituted against it and failed to disclose the conflict of interest created by the Sklavos defendants' simultaneous representation of 2417 Ocean Avenue and IBM. Although members of an LLC are permitted to bring derivative claims on behalf of the LLC ( see Tzolis v. Wolff, 10 NY3d 100 [2008] ), here, two of the plaintiffs are not even members of the LLC and lack standing to bring a derivative action. Moreover, all three of the plaintiffs seek relief for themselves as individuals instead of relief for the LLC.
Plaintiffs also fail to adequately plead the remaining elements of the cause of action. They do not allege that the Sklavos defendants failed to successfully represent 2417 Ocean Avenue and prevail in the actions or that the LLC incurred damages. Plaintiffs only allege that 2417 Ocean Avenue paid a disproportionate share of the legal fees and settlement costs incurred by both it and IBM, but do not dispute that the Mikucki action was resolved in 2417 Ocean Avenue's favor, and that no judgment was issued against 2417 Ocean Avenue in the Bouri action. Thus, the third cause of action is dismissed in its entirety.
Plaintiffs' fourth cause of action for breach of contract states:
Sklavos' agreement to represent the Plaintiffs constituted a binding agreement to perform legal services. Among the express and implied conditions of Sklavos' agreement to perform legal services was the obligation to comply with its responsibilities as fiduciary under common law and its obligations to comply with the requirements of the New York Code of professional responsibility. Sklavos, by his own actions, breached his obligation to the Plaintiffs. As a result, Sklavos breached his fiduciary duty and the Plaintiffs have been damaged as a result in an amount to be determined at trial.Plaintiffs' conclusory allegation, that Sklavos agreed to represent them is inadequate as they have failed to allege the existence of an attorney-client relationship between the Sklavos defendants and plaintiffs individually and have failed to submit a retainer agreement or describe the terms of an existing oral agreement. Plaintiffs have only alleged that Shapsis and Malishkevich sat in on some meetings with Sklavos, among others, related to the organization of 2417 Ocean Avenue and that Shekhets is member of 2417 Ocean Avenue, which was represented by Sklavos. These allegations fail to adequately plead the existence of an express agreement between the Sklavos defendants and the plaintiffs to perform legal services. The fourth cause of action is dismissed with leave to replead within 20 days.
Plaintiffs' fifth cause of action for fraud seeks damages as against Kogan. Plaintiffs allege that Kogan knowingly made false representations as to the amount of his own investment and a promise of an equal profit and construction fees in order to induce them to contribute money to 2417 Ocean Avenue, without the intent to return any profits or the construction fees to them. Plaintiffs assert that they relied upon Kogan's representations to their detriment by entering into the joint venture. Plaintiffs state that they were damaged due to Kogan's return of only $90,000 of the construction fees and withholding of the rest of the construction fees, Kogan's failure to distribute the proceeds of their investment on a pro-rata basis, and Kogan's fraudulent withholding of funds (with the aid of the Sklavos defendants) for legal fees and settlement of the personal injury lawsuits.
Kogan, in seeking dismissal of this cause of action, contends that plaintiffs have failed to assert a viable claim of fraud. Kogan argues that plaintiffs have failed to plead their claim of fraud with sufficient particularity as required by CPLR 3016(b).
It is well established that “[a] cause of action alleging fraud will not lie where the only claim of fraud relates to a breach of contract” (Mendelovitz v. Cohen, 37 AD3d 670, 671 [2007];see also WIT Holding Corp. v. Klein, 282 A.D.2d 527, 528 [2001];Weitz v. Smith, 231 A.D.2d 518, 518 [1996];Tesoro Petroleum Corp. v. Holborn Oil Co., 108 A.D.2d 607, 607 [1985] ). “[A] mere misrepresentation of an intention to perform under the contract is insufficient to allege fraud” (Mendelovitz, 37 AD3d at 671;see also New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 318 [1995];Ross v. DeLorenzo, 28 AD3d 631, 636 [2006] ).
However, a misrepresentation of a material fact which is collateral to the contract and serves as an inducement for the contract is sufficient to allege fraud ( see Ross, 28 AD3d at 636). Here, Shapsis has alleged that plaintiffs were induced to enter the alleged joint venture or partnership due to Kogan's misrepresentation of the amount of his investment, which plaintiffs viewed as collateral for such joint venture or partnership agreement. Thus, plaintiffs have adequately stated, with particularity, a cause of action for fraud sufficient to comply with the heightened pleading standards of CPLR 3016.
Plaintiffs' sixth cause of action for breach of fiduciary duty against Kogan seeks damages as against Kogan. Plaintiffs allege that due to Kogan's status as a member of the joint venture, and as their partner, he owed them a fiduciary duty to promote the common interests of the joint venture. Plaintiffs further allege that Kogan breached this fiduciary duty by failing to allocate funds as set forth in the Operating Agreement toward the capital account in 2417 Ocean Avenue, failing to account for and transfer 50% of the construction fees to them, failing to compensate them for the time contributed by them in working on the project and overseeing the general contracting work, and inappropriately withholding the funds from their capital account toward the settlement of the personal injury lawsuits.
As with plaintiff's third cause of action for breach of fiduciary duty, plaintiff must adequately allege the existence of a fiduciary relationship, misconduct by the defendant, and damages directly caused by such misconduct ( see Guarino v. North Country Mortg. Banking Corp., 2010 WL 5095476 [2nd Dept 2010]; Kurtzman v. Bergstol, 40 AD3d 588, 590 [2d Dept 2007] ). A fiduciary relationship exists between joint venturers, and imposes upon joint venturers a duty of loyalty, good faith, and fair dealing toward each other ( see Birnbaum v. Birnbaum, 73 N.Y.2d 461, 466 [1989];Blue Chip Emerald v. Allied Partners, 299 A.D.2d 278, 279 [2002];Madison Hudson Assoc., LLC v. Neumann, 8 Misc.3d 1025[A], 2005 N.Y. Slip Op 51289[U],*12 [2005]; Schlesinger v. Regenstreif, 26 Misc.2d 604, 608 [1954] ). Members of a partnership also owe a fiduciary duty to each other ( see Graubard Mollen Dannett & Horowitz v. Moskovitz, 86 N.Y.2d 112, 118 [1995];Birnbaum, 73 N.Y.2d at 465–66;Gibbs v. Breed, Abbott & Morgan, 271 A.D.2d 180, 184 [2000] ).
Thus, inasmuch as plaintiffs have alleged the existence of an oral partnership or joint venture with Kogan and an alleged breach by Kogan of a fiduciary duty owed to the plaintiffs, they have pleaded a cognizable claim of breach of fiduciary duty. Dismissal of plaintiffs' sixth cause of action must, therefore, be denied.
Plaintiffs' seventh cause of action for conversion seeks damages as against Kogan, 2417 Ocean Avenue, IBM, and Sklavos. Plaintiffs allege that Kogan, together with IBM and Sklavos, converted their money from their capital account in 2417 Ocean Avenue, by failing to distribute 50% of the construction fees to them. Plaintiffs assert that Kogan caused 2417 Ocean Avenue to distribute funds from plaintiffs' capital account to himself, rather than to plaintiffs, and caused IBM to withhold from plaintiffs 50% of the construction fees for Kogan's personal benefit. Plaintiffs also assert that Kogan, together with the Sklavos defendants, converted their funds by illegally withholding the funds from their capital accounts allegedly to settle the personal injury lawsuits.
“A conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person's right of possession” (Colavito v. New York Organ Donor Network, Inc., 8 NY3d 43, 49–50 [2006] ). “[T]o establish a cause of action in conversion, the plaintiff must show legal ownership or an immediate superior right of possession to a specific identifiable thing and must show that the defendant exercised an unauthorized domain over the thing in question ... to the exclusion of the plaintiff's rights' “ (Estate of Giustino v. Estate of DelPizzo, 21 AD3d 523, 523 [2005], quoting Independence Discount Corp. v. Bressner, 47 A.D.2d 756, 757 [1975];see also Hamlet at Willow Cr. Dev. Co., LLC v. Northeast Land Dev. Corp., 64 AD3d 85, 113 [2009];Zendler Constr. Co., Inc. v. First Adj. Group, Inc., 59 AD3d 439, 440 [2009] ).
Tangible personal property or a specific sum of money must be involved ( see Independence Discount Corp., 47 A.D.2d at 757). A “mere right to payment cannot be the basis for a cause of action alleging conversion” (Selinger Enters., Inc. v. Cassuto, 50 AD3d 766, 768 [2008];see also Interstate Adjusters v. First Fid. Bank, N.J., 251 A.D.2d 232, 234 [1998] ).
Here, plaintiffs do not allege that a “specific identifiable thing” was entrusted to Kogan or 2417 Ocean Avenue. Rather, plaintiffs allege that they invested funds in 2417 Ocean Avenue, and that Kogan did not give them their fair share of their interests and the construction fees. Thus, plaintiffs' claim that they are entitled to payment stems from a purported contractual relationship based upon a joint venture or partnership.
A claim of conversion cannot be predicated “on a mere breach of contract” (Kopel v. Bandwidth Tech. Corp., 56 AD3d 320, 320 [2008] ). Where there are no independent facts alleged that constitute a separate taking which could give rise to tort liability, apart from an alleged breach of contract, a cause of action for conversion must be dismissed ( see Tornheim v. Blue & White Food Prods. Corp., 56 AD3d 761, 761 [2008];Hochman v. LaRea, 14 AD3d 653, 655 [2005];Fesseha v. TD Waterhouse Inv. Servs., 305 A.D.2d 268, 269 [2003];Wolf v. National Council of Young Israel, 264 A.D.2d 416, 417 [1999];Priolo Communications v. MCI Telecom. Corp., 248 A.D.2d 453, 454 [1998];MBL Life Assur. Corp. v. 555 Realty Co., 240 A.D.2d 375, 376 [1997] ). Here, plaintiffs' conversion claim is solely predicated on an alleged breach of contract. Thus, plaintiffs' seventh cause of action is dismissed for failure to state a cause of action ( seeCPLR 3211[a][7] ).
Plaintiffs' eighth cause of action alleges a claim of unjust enrichment as against Kogan, 2417 Ocean Avenue, and IBM. “[T]o prevail on a claim of unjust enrichment, a party must show that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit [the other party] to retain what is sought to be recovered” (Cruz v. McAneney, 31 AD3d 54, 59 [2006] [internal quotation marks and citation omitted]; see also Spallina v. Giannoccaro, 98 A.D.2d 103, 105 [1983] ). Plaintiffs allege that they provided their time, money, and skill to the joint venture, and that Kogan, 2417 Ocean Avenue, and IBM misappropriated this for their own benefit without fairly compensating them. Thus, plaintiffs have adequately pleaded an unjust enrichment claim, and dismissal of their eighth cause of action must be denied.
Plaintiffs' ninth cause of action seeks damages against Kogan for a breach of an implied duty of good faith and fair dealing. It is well established that “[i]mplicit in all contracts is a covenant of good faith and fair dealing in the course of contract performance” (Atlas Elevator Corp. v. United Elevator Group, Inc., 77 AD3d 859 [2010] [internal quotation marks and citations omitted] ). “This embraces a pledge that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract,” ‘ and “[w]here the contract contemplates the exercise of discretion, this pledge includes a promise not to act arbitrarily or irrationally in exercising that discretion’ “ (Lonner v. Simon Prop. Group, Inc., 57 AD3d 100, 108 [2008], quoting Dalton v. Educational Testing Serv., 87 N.Y.2d 384, 389 [1995] ). The implied covenant of good faith and fair dealing “is breached when a party to a contract acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party of the right to receive the benefits under their agreement' “ (P.T. & L. Contr. Corp. v. Trataros Constr., Inc., 29 AD3d 763, 764 [2006], quoting Aventine Inv. Mgt. v. Canadian Imperial Bank of Commerce, 265 A.D.2d 513, 514 [1999] ).
Here, plaintiffs' ninth cause of action for breach of the implied covenant of good faith and fair dealing does not allege any additional factual allegations or add anything to plaintiffs' claim of a breach of the joint venture agreement, and is based on the same facts as pleaded in plaintiffs' second cause of action for breach of contract. Thus, since these causes of action are duplicative, plaintiffs' ninth cause of action for breach of the implied covenant of good faith and fair dealing must be dismissed ( see Levi v. Utica First Ins. Co., 12 AD3d 256, 257–258 [2004];Canstar v. Jones Constr. Co., 212 A.D.2d 452, 453 [1995] ).
Plaintiffs' tenth cause of action seeks an accounting to determine the amounts that they are owed from the alleged joint venture. Plaintiffs allege that they are entitled to the pro-rata share of the proceeds received by Kogan from 2417 Ocean Avenue and to 50% of the construction fees received by IBM and Kogan.
“The right to an accounting is premised upon the existence of a confidential or fiduciary relationship and a breach of the duty imposed by that relationship respecting property in which the party seeking the accounting has an interest” (AHA Sales, Inc. v. Creative Bath Prods., Inc., 58 AD3d 6, 23 [2008] [internal quotation marks and citation omitted]; see also Adam v. Cutner & Rathkopf, 238 A.D.2d 234, 242 [1997];Palazzo v. Palazzo, 121 A.D.2d 261, 265 [1986] ).
Kogan contends that while plaintiffs may have filed the articles of organization of 2417 Ocean Avenue as organizers, they were never made members of 2417 Ocean Avenue. Kogan argues that since plaintiffs are not members of 2417 Ocean Avenue, no fiduciary relationship existed between him, 2417 Ocean Avenue, and plaintiffs so as to entitle plaintiffs to an accounting. Kogan additionally notes that plaintiffs are not shareholders of IBM, and asserts that plaintiffs, therefore, are not entitled to an accounting with respect to it.
Plaintiffs, however, claim that although two of them were not formally listed as members in the Operating Agreement, a joint venture existed, which entitles them to an accounting, and that they are seeking an accounting of the amounts that they are owed pursuant to the joint venture. Moreover, Shekhas, who is a member listed in the Operating Agreement, has also adequately alleged that he is entitled to an accounting of 2417 Ocean Avenue. Thus, plaintiffs have sufficiently alleged a viable claim for an accounting, and dismissal of plaintiffs' tenth cause of action must be denied ( see Silver v. Silver, 63 AD3d 903, 903 [2009] ).
Accordingly, Kogan's cross motion to dismiss plaintiffs' second amended complaint is granted with respect to plaintiffs' third, seventh, and ninth causes of action, and is granted, with leave to replead within 20 days of the date of this order, with respect to plaintiff's fourth cause of action, and is denied with respect to plaintiffs' first, second, fifth, sixth, eighth, and tenth causes of action. Defendants shall file and serve their answer within twenty days of the date of entry of this order. A preliminary conference has been scheduled for February ––––, 2011.
This constitutes the decision and order of the court.