Goodman v. BSD 685 N.Y. Propco LLC

2024 NY Slip Op 33717(U)

• Court: New York Supreme Court, New York County
• Decided: October 21, 2024
• Docket: Index No. 151991/2024
• Status: Unpublished

Opinion

Goodman v BSD 685 N.Y. Propco LLC 2024 NY Slip Op 33717(U) October 21, 2024 Supreme Court, New York County Docket Number: Index No. 151991/2024 Judge: Lyle E. Frank Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. INDEX NO. 151991/2024 NYSCEF DOC. NO. 30 RECEIVED NYSCEF: 10/21/2024

SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. LYLE E. FRANK PART 11M Justice ----------------------------------------------------------------- ----------------X INDEX NO. 151991/2024 JOHN FLAM GOODMAN, DIANE JOHNSON GOODMAN, MOTION DATE 05/24/2024 Plaintiff, MOTION SEQ. NO. 001 - V -

BSD 685 NEW YORK PROPCO LLC,MICHAEL SHVO, DECISION + ORDER ON BERLIN ROSEN, LLC MOTION Defendant. ------------------------------------------------------------------- --------------X

The following e-filed documents, listed by NYSCEF document number (Motion 001) 15, 16, 17, 18, 19, 20,21,22,23,24,25,26,27,28 were read on this motion to/for DISMISS

This action arises out of an alleged breach of contract between plaintiffs and defendant

BSD 685 New York Prop co LLC ("BSD"). Plaintiffs also assert claims against defendant

Michael Shvo, based on his membership status with BSD and assert claims for defamation per se

and defamation claims against defendant Berlin Rosen LLC 1.

Defendants now move to dismiss the amended complaint pursuant to CPLR § 321 l(a)(l)

and (7), BSD moves to dismiss the second, third and fourth causes of action in their entirety and

the first cause of action to the extent it seeks damages relating to items omitted from the punch

list; defendant Berlin Rosen moves on the grounds that it was not a party to the contract, and that

the statement made was not defamatory; defendant Michael Shvo moves to dismiss all claims

contending that he was not a party to the contract, and the complaint fails to adequately plead a

basis for individual liability. For the reasons set forth below, the motion to dismiss is granted in

part.

1 The Court would like to thank Hailee Stangeby for her assistance in this matter. 151991/2024 Motion No. 001 Page 1 of 8

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Background

On November 14, 2022, plaintiffs, as buyers, and defendant BSD, as sellers, entered into

a contract for the purchase of 685 Fifth Avenue, Unit 18A, New York, NY. Plaintiffs allege that

defendants materially breached the contract by failing to deliver on the agreed upon

specifications relating to custom millwork, failing to complete all of the punch list items, and

making unauthorized and detrimental modifications to the property.

Defendant Berlin Rosen was not a party to the contract; however, plaintiff alleges that

Berlin Rosen, on behalf of and at the direction of BSD and Michael Shvo, made false and

defamatory statements about plaintiffs in the New York Post. Specifically, the statement was that

plaintiff John Goodman's legal action, "is a shameless attempt to use the courts and the press to

extort money by an individual with a history of frivolous lawsuits." See NYSCEF Doc. 10.

Plaintiffs complaint contains four causes of action: breach of contract, breach of

covenant of good faith and fair dealing, defamation per se, and defamation.

Motion to Dismiss Standard

It is well-settled that on a motion to dismiss for failure to state a cause of action pursuant

to CPLR § 321 l(a)(7), the pleading is to be liberally construed, accepting all the facts as alleged

in the pleading to be true and giving the plaintiff the benefit of every possible inference. See

Avgush v Town of Yorktown, 303 AD2d 340 [2d Dept 2003]; Bernberg v Health Mgmt. Sys., 303

AD2d 348 [2d Dept 2003]. Moreover, the Court must determine whether a cognizable cause of

action can be discerned from the complaint rather than properly stated. Matlin Patterson ATA

Holdings LLC v Fed. Express Corp., 87 AD3d 836, 839 [1st Dept 2011].

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Allegations against defendant Michael Shvo

The concept of "piercing the corporate veil" is a limitation on accepted principles that

corporation exists independently of its owners as a separate legal entity, that owners are normally

not liable for debts of corporation, and that it is perfectly legal to incorporate for the express

purpose oflimiting liability of corporate owners. Morris v New York State Dep't ofTax'n & Fin.,

82 NY2d 135 [1993]. Although there are no definitive rules governing circumstances when

corporate veil may be pierced, there is generally required showing that: (1) owners exercised

complete domination of corporation in respect to transaction attacked; and (2) such domination

was used to commit fraud or wrong against plaintiff which resulted in plaintiffs injury. Id.

Further, it has been held by the Court of Appeals that, at the pleading stage, a plaintiff

seeking to pierce the corporate veil must adequately allege the existence of a corporate obligation

and that the defendant exercised complete domination and control over the corporation and abused

the privilege of doing business in the corporate form to perpetrate a wrong or injustice. Cortlandt

St. Recovery Corp. v Bonderman, 31 NY3d 30 [2018].

Here, a thorough review of the complaint establishes that the complaint fails to state a

cause of action as against defendant Shvo for breach of contact. As to the allegations that Shvo

is liable under the piercing the corporate veil theory and alter ego liability, the complaint fails to

provide specific allegations that would warrant piercing the corporate veil here. The allegations

set forth, such as the text message and "personal involvement" with decisions regarding the

plaintiffs' unit are insufficient in to show that Shvo misuse of the corporate form for his own

benefit. Accordingly, the complaint is dismissed in its entirety as to defendant Michael Shvo.

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First Cause o(Action-Breach o(Contract

To state a claim for breach of contract, a plaintiff must allege: (1) the parties entered into

a valid agreement, (2) plaintiff performed, (3) defendant failed to perform, and (4) damages.

VisionChina Media Inc. v Shareholder Representative Servs., LLC, 109 AD3d 49, 58 [1st Dept

2013]. Plaintiff alleges defendants breached the contract by failing to perform items listed on the

punch list and failing to deliver "agreed upon specifications" including a lighting cove, armoire,

and custom millwork. See NYSCEF DOC. 6 ,J,Jl2-16.

With respect to the armoire, lighting cove, and custom millwork, these specifications

were not included in the punch list, and despite plaintiffs asserting that this was inadvertent,

defendants are not liable for the modifications as a result of the signed "AS-IS" statement, which

was signed by plaintiffs on December 15, 2023, following a pre-closing walkthrough. See

NYSCEF Docs. 20 and 6 ,J 20.

The "AS-IS" statement explicitly provides that the plaintiffs have "inspected the

Premises and ... hereby accept this Premises in its "AS-IS" condition as of the date [t]hereof

without any reservations or liabilities by [BSD]" and "hereby release [BSD] from any liabilities

with respect to the Premises except as expressly set forth in the Purchase Agreement or the

Offering Plan subject to the Punchlist attached." See NYSCEF Doc. 20. Based on the plain

language of the disclaimer, defendants are not liable for the modifications outside of the punch

list. Accordingly, the motion to dismiss the cause of action against BSD relating to items

omitted from the punch list is granted.

Second Cause o(Action -Breach of Implied Covenant of Good Faith and Fair Dealing

Under New York Law, all contracts imply a covenant of good faith and fair dealing

during performance, meaning neither party shall do anything which will have the effect of

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destroying or injuring the right of the other party to receive the fruits of the contract. 511 W

232nd Owners Corp. v Jennifer Realty Co. 98 NY2d 144 [2002] (internal citations omitted).

For a complaint to state a cause of action alleging breach of an implied covenant of good

faith and fair dealing, the plaintiff must allege facts which tend to show that the defendants sought

to prevent performance of the contract or to withhold its benefits from the plaintiff. See Aventine

Inv. Mgmt., Inc. v. Canadian Imperial Bank of Commerce, 265 A.D.2d 513, 514 [2d Dep't 1999]

citing Dvoskin v Prinz, 205 AD2d 661, 662 [2d Dept 1994].

Here, plaintiffs allege defendants breached the covenant of good faith and fair dealing by

failing to disclose their knowledge of the alleged defects to plaintiffs, and knowingly and

intentionally refusing to make appropriate adjustments. See NYSCEF DOC. 6 ,i,i 55,56.

Defendants assert that this cause of action must be dismissed, as duplicative of the first cause of

action and alleging the same damages. See NYSCEF DOC. 21.

Here, Defendants correctly assert that this second cause of action is duplicative of the

first action. Plaintiffs allege the same conduct and same damages for both the breach of contract

and breach of implied covenant of good faith and fair dealing cause of actions and is "premised

on the same conduct that underlies the breach of contract." See ABN AMRO Cap. USA LLC v.

AMERRA Cap. Mgmt., LLC, 211 AD3d 566, 567 [2022] (quoting MBIA Ins. Corp. v Merrill

Lynch, 81 AD3d 419, 419-420 [1st Dept 2011]). Accordingly, the motion to dismiss the second

cause of action is granted.

Third and Fourth Causes ofAction - Defamation Per Se and Defamation

To be successful on a defamation claim, plaintiffs must prove that defendant made "a

false statement, published without privilege or authorization to a third party, constituting fault as

judged by, at a minimum, a negligence standard, and it must either cause special harm or

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constitute defamation per se." Epifani v Johnson, 65 AD3d 224,233 [2009] [internal quotations

and citations omitted]). The complaint must set forth the particular words allegedly constituting

defamation, the time, place and manner in which the false statement was made and specify to

whom it was made. See id.; CPLR 3016[a]; Dillon v City of New York, 261 AD2d 34, 38

[1999]).

A defamatory statement is libelous per se "if the statement tends to expose the plaintiffs

to public contempt, ridicule, aversion or disgrace, or induce an evil opinion of him in the minds

of right-thinking persons, and to deprive him of their friendly intercourse in society." Matovcik v

Times Beacon Record Newspapers, 46 AD3d 636, 637 [2007] [internal quotations and citations

omitted]. "In evaluating whether a cause of action for defamation is successfully pleaded, the

words must be construed in the context of the entire statement or publication as a whole, tested

against the understanding of the average reader, and if not reasonably susceptible of a

defamatory meaning, they are not actionable and cannot be made so by a strained or artificial

construction. Dillon, 261 AD2d at 38 [citations omitted]. Certain statements are not actionable,

like expressions of opinions, loose, figurative or hyperbolic statements, even if deprecating the

plaintiffs, or an employer's assessment of an employee's job performance. See id.; Rinaldi v

Holt, Rinehart & Winston, Inc., 42 NY2d 369, 380 [1977] [internal quotations and citations

omitted]. Truth is a complete defense to defamation. See Rinaldi, 42 NY2d at 380. Whether a

particular statement constitutes fact or opinion is a question oflaw. Id. at 381.

Plaintiffs set forth that defendant Berlin Rosen described the plaintiffs' legal action as "a

shameless attempt to use the courts and the press to extort money by an individual with a history

of frivolous lawsuits." See NYSCEF DOC. 10. Plaintiff has provided the "particular words" and

has alleged the "time, place and manner in which the false statement was made," and "specified to

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whom it was made" within the complaint. See NYSCEF DOC. 6 ,i,i 36, 37, 73-82; see also Epifani

v Johnson, 65 AD3d 224, 233 [2009]; see also CPLR 3016[a]; see also Dillon, 261 AD2d at 38.

Therefore, at this stage in litigation, plaintiffs have sufficiently pled this cause of action and

defendant's motion to dismiss is denied.

For the defamation per se cause of action, Defendants have alleged the statement made in

the New York Post article "accuses Plaintiffs of committing the serious crime of extortion and of

engaging in a pattern of filing false, frivolous, and fraudulent lawsuits, which are acts of moral

turpitude." See NYSCEF DOC. 6. ,i 76. Upon viewing the statement as well as the entirety of the

publication, and testing "against the understanding of the average reader" the statement made by

Berlin Rosen regarding plaintiffs' legal action can be considered "reasonably susceptible of a

defamatory meaning." See Dillon, 261 AD2d at 38. Therefore, plaintiffs cause of action alleging

defamation per se will survive this motion to dismiss.

Oral Argument-Citation

During oral argument, counsel for the defendants brought to this Court's attention a

potentially non-existent quotation and citation included in plaintiffs' opposition papers. Plaintiffs'

counsel was directed to look into the matter and respond to the Court regarding the origin of the

quotation and the appropriate citation. To date, plaintiffs' counsel has not contacted the Court as

directed. In order for the plaintiffs' counsel to have an opportunity to be heard as to whether

sanctions for this apparent non-existent citation, the Court is holding in abeyance a determination

on sanctions as indicated below. Accordingly, it is hereby

ORDERED that counsel for plaintiffs is directed to submit an affirmation answering why

sanctions should not be awarded not more than 7 days following the date of service of this Decision

and Order with notice of entry; and it is further

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ORDERED that the complaint is dismissed in its entirety as against defendant Michael

Shvo; and it is further

ORDERED that the defendants' motion to dismiss plaintiffs' first cause of action with

respect to items omitted from the punch list is granted; and it is further

ORDERED that defendants' motion to dismiss plaintiffs' second cause of action is granted;

and it is further

ADJUDGED that the remainder of the instant motion is denied.

10/21/2024 DATE LYLE E. FRANK, J.S.C.

~ CHECK ONE: CASE DISPOSED NON-FINAL DISPOSITION

GRANTED □ DENIED GRANTED IN PART □ OTHER APPLICATION: SETTLE ORDER SUBMIT ORDER

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT □ REFERENCE

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