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FILED: NASSAU COUNTY CLERK 02/06/2015
`FILED: NASSAU COUNTY CLERK 022015
`NYSCEF DOC. NO. 8
`Njrscar DOC. NO.
`8
`
`INDEX NO. 604591/2014
`INDEX N0- 604591/2014
`RECEIVED NYSCEF: 02/11/2015
`R~.c~.rv~. my EF: 02/11/2
`
`SHORT FORM ORDER
`
`€64
`
`§Cil/ LOW
`
`SUPREME COURT OF THE STATE OF NEW YORK
`
`COUNTY OF NASSAU
`
`Present: HON. RANDY SUE MARBER
`
`JUSTICE
`
`TRIAL/IAS PART 12
`
` X
`THE BOARD OF DIRECTORS OF THE
`
`SEASONS AT MASSAPEQUA
`HOMEOWNERS ASSOCIATION, INC. and
`THE BOARD OF DIRECTORS OF THE
`
`Index No.: 604947/ 14
`Motion Sequence...0l
`Motion Date... 12/22/14
`
`SEASONS AT MASSAPEQUA CONDOMINIUM,
`
`Plaintiffs,
`
`-against-
`
`ARMA MANAGEMENT, LLC, JORDAN ARMA,
`
`MICHELE MARCHESE-RUS SELL, WILLIAM
`
`MUEGER and CHAD PATCHINGER,
`
`Defendant.
`
`X
`
`Papers Submitted:
`Notice of Motion ................................. ..x
`
`Affirmation in Support........................ ..x
`Memorandum of Law in Support ........ ..x
`Affirmation in Opposition ................... ..x
`Memorandum of Law in Opposition.....x
`Affirmation in Partial Opposition ....... ..x
`
`Reply Brief.......................................... ..x
`
`Upon the foregoing papers,
`
`the Defendants, Arma Management, LLC
`
`(“Arma”), Jordan Arma (“Jordan”), Michele l\/Iarchese—Russe1l, William Mueger and Chad
`
`Patchinger’s motion seeking an order, (i) consolidating the instant action with an action
`
`currently pending in this Court, pursuant to CPLR § 602 (21); (ii) dismissing the Plaintiffs,
`
`1
`
`

`

`The Board of Directors of the Seasons at Massapequa Homeowners Association, Inc. and the
`
`Board of Directors of the Seasons at Massapequa Condominium’s causes of action, except
`
`the breach of contract claim against Arma Management, LLC, pursuant to CPLR § 321 1 (a)
`
`(7); (iii) dismissing all of the individual Defendants from the action; and,
`
`(iv) pursuant to
`
`CPLR § 3211 (b) dismissing the affirmative defenses that sound in fraud asserted by the
`
`Plaintiffs in the related action, is determined as hereinafter provided.
`
`In the instant action, commenced by the Plaintiffs upon electronically filing the
`
`Summons and Verified Complaint in the Office of the Nassau County Clerk on September
`
`19, 2014, the Plaintiffs seek a declaratory judgment and also seek to recover monetary
`
`damages. The Complaint asserts causes of action for fraud, fraudulent misrepresentation,
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`breach of fiduciary duty, breach of contract and breach of Implied Covenant of Good Faith
`
`and Fair Dealing.
`
`The Plaintiffs are also the Defendants
`
`in a civil action (Index No.
`
`04591/2014) (h reinafter referred to as the “Related Action”) brought against them in this
`
`Court by the Defendants in this action, which seeks monetary damages based on claims for
`
`breach of contract and defamation. The Related Action was commenced on September 4,
`
`2014, prior to the instant action being filed.
`
`The Defendants now seek to consolidate this action with the Related Action
`
`pending in this Court based on the fact that they involve identical questions of law and fact.
`
`Specifically, the Defendants assert that both actions involve questions regarding Anna
`
`

`

`Management’s performance of its contractual obligations to the Plaintiffs and the Plaintiffs’
`
`allegations of fraud, which they also assert as affirmative defenses in the Related Action.
`
`The Defendants contend that consolidation is appropriate in the interest ofjudicial economy
`
`and to avoid inconsistent judgments. The Plaintiffs’ opposition to the instant motion
`
`provides no arguments opposing consolidation.
`
`CPLR § 602 (a) provides “when actions involving a common question of law
`
`or fact are pending before a court, the court, upon motion, may order a joint trial of .
`
`.
`
`. all
`
`matters in issue, may order the matters consolidated, and may make such other orders
`
`concerning the proceedings .
`
`.
`
`. to avoid unnecessary costs or delay.” An order granting a
`
`joint trial provides that the separate characters ofeach action are maintained but provides that
`
`the actions be tried together, so that the issues that are common between them are heard at
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`the same time. (Mars Assocs. v. New York City Educ. Constr. Fund, 126 A.D.2d 178 [IS‘
`
`Dept. 1987]) There is a preference for joint trials over consolidations in the interests of
`
`justice and judicial economy. (Megyesi v. Automobile Rentals, 115 A.D.2d 596 [2d Dept.
`
`1985]; Mideal Homes Corp. v. L & C Concrete Work, 90 A.D.2d 789 [2d Dept. 1985]) In
`
`the absence of any demonstration that a substantial right would be prejudiced by a joint trial
`
`and given the possibility of inconsistent verdicts if separate trials ensued, the interest of
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`justice and judicial economy will best be served by a joint trial. (Millington v. Williams, 250
`
`A.D.2d 977 [3rd Dept. 1998])
`
`The Court agrees with counsel for the Defendants that the two actions do
`
`

`

`involve common questions of law and fact. Additionally, the court finds that the parties will
`
`not be prejudiced by the joint trial of the two actions.
`
`It appears that discovery in both
`
`actions has not yet commenced.
`
`Although the Defendants seek to consolidate both actions, due to the fact that
`
`the Defendants are the Plaintiffs in the Related Action, consolidation is not possible. One
`
`party may not be a Plaintiffand a Defendant in the same action. Had the Plaintiffs interposed
`
`a counterclaim in the Related Action for the amount they are claiming they are owed in this
`
`action, this motion would not have been necessary and the claims of both parties could have
`
`been litigated in one action.
`
`With regard to the branch ofthe Defendants’ motion, pursuant to CPLR § 321 1
`
`(b), seeking dismissal ofthe Plaintiffs’ affirmative defenses in the Related Action, the Court
`
`finds that because the cases cannot be consolidated, the Defendants’ application to dismiss
`
`the affirmative defenses is not properly asserted in the instant action. The Defendants would
`
`have to move for such relief in the Related Action where the affirmative defenses are
`
`asserted.
`
`The Court now turns to the branch of the Defendants’ motion seeking
`
`dismissal, pursuant to CPLR § 3211 (a) (7), of the causes of action sounding in fraud.
`
`In
`
`support of their motion, the Defendants contend that the Plaintiffs failed to meet the
`
`heightened pleading standard for fraud required by CPLR § 3016 (a). The Defendants
`
`contend that while the complaint alleges that Arma Management misrepresented their
`
`

`

`abilities to induce the Plaintiffs to enter into the agreement, it fails to specify the nature of
`
`the misrepresentations; when and to whom they were made; whether the Board’s reliance
`
`was justified and Arma Management’s scientor. The Defendants argue that the claim against
`
`the Individual Defendants relies on group-pleading allegations that
`
`fail
`
`to allege
`
`particularized allegations. The Defendants also argue that the fraud causes of action should
`
`be dismissed because they are pled upon information and belief and fail to plead the source
`
`of their information.
`
`The Defendants argue that the fraud claims should be dismissed as duplicative
`
`of the breach of contract claim because the Plaintiffs’ fraud claim is based upon the
`
`Defendant, Amia’s alleged breach of the agreement. The Defendants argue that the breach
`
`of fiduciary duty claim should be dismissed because the claim is essentially another claim
`
`of fraud that is not pled sufficiently. Finally, the Defendants argue that the breach ofimplied
`
`covenant of good faith and fair dealing claim should be dismissed because it is not an
`
`independent cause of action. The Defendants contend that although every contract contains
`
`an implied covenant, it does not impose any obligation on a party to a contract beyond the
`
`explicit terms of the contract.
`
`In opposition to the Defendants’ motion to dismiss, the Plaintiffs argue that
`
`they sufficiently pled their claims for fraud and fraudulent misrepresentation to meet the
`
`requirements of CPLR § 3016 (b). Specifically, the Plaintiffs rely on the Complaint to
`
`support their opposition. In the Complaint, the Plaintiffs allege that within five months the
`
`

`

`Defendant, Jordan, went from being a unit owner in the Seasons at Massapequa (the
`
`“Seasons”) and treasurer of the Board of Directors (the “Board”) to being awarded a five-
`
`year, $500,000 management contract, despite not having any prior experience or other
`
`qualifications. (See Copy of Complaint annexed to the Affirmation in Opposition of David
`
`C. Nevins as Exhibit “A” at W 13, 17, 23, 25 and 28) The Complaint alleges that the
`
`Defendants, Jordan and Arma, made misrepresentations regarding its abilities as managing
`
`agent in order to induce the Plaintiffs to award them the management contract. The
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`Complaint asserts that the individual Defendants misrepresented that Arma was the best fit
`
`and that they had interviewed other managing agents.
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`(Id. at M 23, 26) The Plaintiffs
`
`contend that when taken with a reasonable inference in favor of the Plaintiffs, the Complaint
`
`alleges facts with sufficient specificity to set forth a primafacie claim of fraud.
`
`The Plaintiffs further argue that the Complaint sets forth facts with sufficient
`
`specificity to support its claims of fraud against the individual board members. The
`
`Complaint alleges that the board members took direct actions to further the fraud when they
`
`notified the owners, after Arma was awarded the contract, that it interviewed five other
`
`managing agents; that the Defendant, Jordan was related to the Defendant, Mueger; that
`
`Arma’s agreement was less than the previous managing agent;
`
`that
`
`the $100,000
`
`management fee was consistent with other bids; and that Arma would have more resources
`
`dedicated to the Seasons at Massapequa than the prior managing agent.
`
`(Id. at 1] 23) The
`
`Complaint alleges that the foregoing statements were false and misleading and the Plaintiffs
`
`

`

`reasonably relied on such statements. (Id. at 111] 23, 26-28)
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`The Plaintiffs further argue that the fraud claims are not duplicative of the
`
`breach of contract claims. The Plaintiffs argue that the fraud alleged is that the Defendants,
`
`Jordan and Arma, used deceptive means to secure a management contract, made false
`
`representations regarding his qualifications and abilities and the individual Defendants
`
`colluded with Jordan and Arma to perpetuate the fraud and make misrepresentations. (Id.
`
`at 1111 13, 17, 22-28, 42-59)
`
`The Plaintiffs argue that the breach of fiduciary duty cause ofaction should not
`
`be dismissed because, as board members, the individual Defendants had a fiduciary duty to
`
`the residents of the Seasons and they breached their fiduciary duty by acting in their own
`
`self-interest and the interest ofArma instead ofacting in the best interest ofthe condominium
`
`owners.
`
`Finally, the Plaintiffs argue that their cause of action for implied covenant of
`
`good faith and fair dealing should not be dismissed. The Plaintiffs contend that this is a
`
`cause of action independent of a breach of contract cause of action. The Plaintiffs further
`
`contend that they sufficiently pled such cause of action by alleging facts showing that the
`
`Defendants engaged in bad faith and intended to defraud the Plaintiffs by colluding to hide
`
`the qualifications of the Defendants, Jordan and Arma, and their lack of due diligence in
`
`selecting a managing agent.
`
`The attorney for the Plaintiffs in the Related Action, representing them as
`
`

`

`Defendants in that action, submitted an Affirmation in Partial Opposition. The Affirmation
`
`joined in the arguments set forth by David Nevins, the Plaintiffs’ attorney in the instant
`
`action, regarding the dismissal of the Plaintiffs’ fraud claims. The Affirmation fiirther
`
`argued that the branch of the motion seeking dismissal of the affirmative defenses was
`
`premature and improper as the two actions have not yet been consolidated.
`
`In their Reply in Further Support oftheir motion, the Defendants argue that the
`
`Plaintiffs’ opposition fails to overcome its pleading deficiencies.
`
`Specifically,
`
`the
`
`Defendants argue that the Plaintiffs fail to plead the Defendants’ scientor, and instead pled
`
`a “reasonable inference of fraud,” which is not applicable here. The Defendants further
`
`argue that the Plaintiffs fail to rebut their allegation that the fraud claims should be dismissed
`
`because all ofthe facts are pled “upon information and belief.” The Defendants further argue
`
`that the Plaintiffs’ claims are based on group-pleading allegations and fail to set forth
`
`specific misrepresentations.
`
`The Defendants argue that the fraud claims should be dismissed as duplicative
`
`ofthe breach of contract claim because the fraud causes of action are premised upon Arma’s
`
`alleged breach of the agreement and the unspecified misrepresentations regarding Anna’s
`
`background and abilities to perform the services set forth in the agreement.
`
`The Defendants further argue that the breach of fiduciary duty claim fails as
`
`a matter of law because the claim is merely another insufficient fraud claim. Finally, the
`
`Defendants contend that the implied covenant claim should be dismissed as duplicative of
`
`

`

`the breach of contract claim because there is no independent cause of action for implied
`
`covenant.
`
`The Defendants also argue, in a footnote, that for the same reasons the Court
`
`should dismiss the first cause of action for declaratory judgment and the seventh cause of
`
`action that the agreement is unconscionable as duplicative of the breach of contract claim.
`
`“In the context of a CPLR 3211 motion to dismiss, the pleadings are ‘to be
`
`afforded a liberal construction. [The Court must] accept the facts as alleged in the complaint
`
`as true, [and] accord plaintiffs the benefit ofevery possible favorable inference.” (Mandarin
`
`Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 178 [2011], citing Leon v. Martinez, 84 N.Y.2d
`
`83, 87 [1994] [citation omitted]; Morone v. Morone, 50 N.Y.2d 481, 484 [1980])
`
`If there
`
`is a discernible claim, that is where the inquiry must end. (Hurrell—Harring v. State ofNew
`
`York, 15 N.Y.3d 8, 20 [2010])
`
`To state a cause of action for fraud the following must be established: (1) false
`
`representation of material existing fact; (2) scienter; (3) deception; and (4) damages. (see
`
`CPLR § 3016 [b]; Barclay Arms Inc. v. Barclay Arms Assoc., 74 N.Y.2d 644) CPLR § 3016
`
`(b) provides that when a cause of action is based on fraud, the circumstances constituting the
`
`wrong shall be stated in detail.
`
`Initially, the Court must address the Defendants’ argument that the claims of
`
`fraud should be dismissed because they are alleged “upon information and belief.” “Where
`
`allegations of fraud are based on information and belief, the source of such information must
`
`

`

`be revealed...[h]owever, at this early stage ofthe litigation, plaintiffs are entitled to the most
`
`favorable inferences, including inferences arising from the positions and responsibilities of
`
`defendants, and plaintiffs need only set forth sufficient information to apprise defendants of
`
`the alleged wrong.” (DDJ Management, LLC v. Rhone Group, LLC, 78 A.D.3d 442 [l“
`
`Dept. 2010] [citations omitted])
`
`With respect to the claims based on fraud, the Complaint sets forth sufficient
`
`allegations to meet the heightened requirements and to apprize the Defendants ofthe alleged
`
`wrong. The Plaintiffs allege that in or about June of 2008, the Defendants, Russell and
`
`Jordan, were appointed to the Board. The Plaintiffs allege that in February 2012, the
`
`Defendant, Jordan, sold his unit to his mother-in-law and her husband, the Defendant,
`
`Mueger. Thereafter, the Defendant, Mueger, was appointed to the Board, replacing the
`
`Defendant, Jordan, as Treasurer. The Plaintiffs allege that in May 2012, the Defendant,
`
`Patchinger, was appointed to the Board and became the Vice President. On June 24, 2012,
`
`the Defendant, Jordan, formed Anna and in July 2012, Anna entered into the Agreement
`
`with the Board to become the new managing agent.
`
`The Plaintiffs allege that the Defendants, Jordan and Anna, misrepresented
`
`their abilities, background, and prior relationship to the Plaintiffs, in order to induce them to
`
`enter into the Agreement. The Plaintiffs allege that on November 21, 2012, the Board
`
`represented to the residents of the Seasons that: (1) the Board interviewed five different
`
`managing agents and Anna was the best fit; (2) Jordan Anna was related to the Defendant,
`
`10
`
`

`

`Mueger; (3) the five year at $ 100,000.00 per year agreement was less than the prior managing
`
`agent; (4) that the $100,000.00 management fee was consistent with all other bids; and (5)
`
`that Anna will have more resources dedicated to the Seasons than the previous managing
`
`agent.
`
`The Plaintiffs allege that the aforementioned representations were false,
`
`misleading and intended to hide the fact that the Defendants, Russell, Mueger and
`
`Patchinger, failed to do their due diligence in hiring a managing agent. The Plaintiffs allege
`
`that as a result of the Defendants, Jordan and Ar1na’s misrepresentations, they entered the
`
`Agreement and since then they have been damaged by the Defendant, Arma’s failure to
`
`perform its obligations under the Agreement. The Plaintiffs further allege that the
`
`Defendants, Jordan and Anna, colluded with the Defendants, Russell, Mueger and Patchinger
`
`to induce the Plaintiffs to hire Arma as the managing agent. The Court finds that the
`
`circumstances constituting the alleged fraud are stated in sufficient detail, that when viewed
`
`in the light most favorable to the Plaintiffs, make up a cognizable cause of action.
`
`As to the Plaintiffs’ breach of fiduciary duty cause of action, despite the
`
`Defendants’ assertion that it should be dismissed because it is duplicative of the breach of
`
`contract claim, the Court disagrees. The Plaintiffs allege that, as Board members, the
`
`Defendants, Russell, Mueger and Patchinger breached their fiduciary duties by acting in their
`
`own self-interest and not the best interests of the Plaintiffs. This is a separate and distinct
`
`claim from the breach of contract claim asserted against the Defendant, Anna.
`
`11
`
`

`

`With regard to the Plaintiffs’ claim against all of the Defendants for breach of
`
`implied covenant of good faith and fair dealing, “within every contract is an implied
`
`covenant of good faith and fair dealing.” (Aventine Inv. Management, Inc. v. Canadian
`
`Imperial, 265 A.D.2d 5 13 [2““ Dept]) “The plaintiffmust allege facts which tend to show that
`
`the defendant sought to prevent performance of the contract or to withhold its benefits from
`
`the plaintif .” (Id.) Here, even when giving the most favorable inference to the facts alleged
`
`in the Complaint, the Plaintiffs failed to sufficiently state a cause of action for breach of
`
`implied covenant of good faith and fair dealing.
`
`Accordingly, it is hereby
`
`ORDERED, that the branch of the Defendants’ motion seeking an order
`
`pursuant to CPLR § 602 is GRANTED to the extent that the two (2) actions shall be joined
`
`for discovery and trial; and it is fiirther
`
`ORDERED, that the file maintained by the Hon. Randy Sue Marber in this
`
`action shall be transferred to the Hon. Thomas Feinman; and it is fiirther
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`ORDERED, that a Preliminary Conference in this action shall be held on
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`March 4, 2015 at 9:30 a.m. in the Preliminary Conference Part of this courthouse; and it is
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`further
`
`ORDERED, that the branch of the Defendants’ motion seeking an order
`
`pursuant to CPLR § 3211 (a) (7), dismissing with prejudice, all of the Plaintiffs’ causes of
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`action except for the breach of contract claim against the Defendant, Arma Management,
`
`12
`
`

`

`LLC, is DENIED, with the exception of the sixth cause of action for bad faith/breach of
`
`implied covenant of good faith and fair dealing, which is DISMISSED; and it is further
`
`ORDERED, that the branch of the Defendants’ motion seeking an order,
`
`dismissing all of the individual defendants from the action, is DENIED; and it is further
`
`ORDERED, that the branch of the Defendants’ motion seeking an order,
`
`pursuant to CPLR § 3211 (b), dismissing the Affirmative Defenses that sound in fraud
`
`asserted by the Plaintiffs in the related action, is DENIED.
`
`This decision constitutes the order of the Court.
`
`DATED:
`
`Mineola, New York
`
`February 4, 2015
`
`Hon. Ranky Sue Marber, J.S.C.
`
`

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