`FILED: NASSAU COUNTY CLERK 022015
`NYSCEF DOC. NO. 8
`Njrscar DOC. NO.
`8
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`INDEX NO. 604591/2014
`INDEX N0- 604591/2014
`RECEIVED NYSCEF: 02/11/2015
`R~.c~.rv~. my EF: 02/11/2
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`SHORT FORM ORDER
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`€64
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`§Cil/ LOW
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`SUPREME COURT OF THE STATE OF NEW YORK
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`COUNTY OF NASSAU
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`Present: HON. RANDY SUE MARBER
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`JUSTICE
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`TRIAL/IAS PART 12
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` X
`THE BOARD OF DIRECTORS OF THE
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`SEASONS AT MASSAPEQUA
`HOMEOWNERS ASSOCIATION, INC. and
`THE BOARD OF DIRECTORS OF THE
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`Index No.: 604947/ 14
`Motion Sequence...0l
`Motion Date... 12/22/14
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`SEASONS AT MASSAPEQUA CONDOMINIUM,
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`Plaintiffs,
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`-against-
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`ARMA MANAGEMENT, LLC, JORDAN ARMA,
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`MICHELE MARCHESE-RUS SELL, WILLIAM
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`MUEGER and CHAD PATCHINGER,
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`Defendant.
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`X
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`Papers Submitted:
`Notice of Motion ................................. ..x
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`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
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`Reply Brief.......................................... ..x
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`Upon the foregoing papers,
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`the Defendants, Arma Management, LLC
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`(“Arma”), Jordan Arma (“Jordan”), Michele l\/Iarchese—Russe1l, William Mueger and Chad
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`Patchinger’s motion seeking an order, (i) consolidating the instant action with an action
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`currently pending in this Court, pursuant to CPLR § 602 (21); (ii) dismissing the Plaintiffs,
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`1
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`The Board of Directors of the Seasons at Massapequa Homeowners Association, Inc. and the
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`Board of Directors of the Seasons at Massapequa Condominium’s causes of action, except
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`the breach of contract claim against Arma Management, LLC, pursuant to CPLR § 321 1 (a)
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`(7); (iii) dismissing all of the individual Defendants from the action; and,
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`(iv) pursuant to
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`CPLR § 3211 (b) dismissing the affirmative defenses that sound in fraud asserted by the
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`Plaintiffs in the related action, is determined as hereinafter provided.
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`In the instant action, commenced by the Plaintiffs upon electronically filing the
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`Summons and Verified Complaint in the Office of the Nassau County Clerk on September
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`19, 2014, the Plaintiffs seek a declaratory judgment and also seek to recover monetary
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`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
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`and Fair Dealing.
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`The Plaintiffs are also the Defendants
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`in a civil action (Index No.
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`04591/2014) (h reinafter referred to as the “Related Action”) brought against them in this
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`Court by the Defendants in this action, which seeks monetary damages based on claims for
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`breach of contract and defamation. The Related Action was commenced on September 4,
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`2014, prior to the instant action being filed.
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`The Defendants now seek to consolidate this action with the Related Action
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`pending in this Court based on the fact that they involve identical questions of law and fact.
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`Specifically, the Defendants assert that both actions involve questions regarding Anna
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`Management’s performance of its contractual obligations to the Plaintiffs and the Plaintiffs’
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`allegations of fraud, which they also assert as affirmative defenses in the Related Action.
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`The Defendants contend that consolidation is appropriate in the interest ofjudicial economy
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`and to avoid inconsistent judgments. The Plaintiffs’ opposition to the instant motion
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`provides no arguments opposing consolidation.
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`CPLR § 602 (a) provides “when actions involving a common question of law
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`or fact are pending before a court, the court, upon motion, may order a joint trial of .
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`.
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`. all
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`matters in issue, may order the matters consolidated, and may make such other orders
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`concerning the proceedings .
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`.
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`. to avoid unnecessary costs or delay.” An order granting a
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`joint trial provides that the separate characters ofeach action are maintained but provides that
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`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‘
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`Dept. 1987]) There is a preference for joint trials over consolidations in the interests of
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`justice and judicial economy. (Megyesi v. Automobile Rentals, 115 A.D.2d 596 [2d Dept.
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`1985]; Mideal Homes Corp. v. L & C Concrete Work, 90 A.D.2d 789 [2d Dept. 1985]) In
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`the absence of any demonstration that a substantial right would be prejudiced by a joint trial
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`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
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`A.D.2d 977 [3rd Dept. 1998])
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`The Court agrees with counsel for the Defendants that the two actions do
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`involve common questions of law and fact. Additionally, the court finds that the parties will
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`not be prejudiced by the joint trial of the two actions.
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`It appears that discovery in both
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`actions has not yet commenced.
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`Although the Defendants seek to consolidate both actions, due to the fact that
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`the Defendants are the Plaintiffs in the Related Action, consolidation is not possible. One
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`party may not be a Plaintiffand a Defendant in the same action. Had the Plaintiffs interposed
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`a counterclaim in the Related Action for the amount they are claiming they are owed in this
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`action, this motion would not have been necessary and the claims of both parties could have
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`been litigated in one action.
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`With regard to the branch ofthe Defendants’ motion, pursuant to CPLR § 321 1
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`(b), seeking dismissal ofthe Plaintiffs’ affirmative defenses in the Related Action, the Court
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`finds that because the cases cannot be consolidated, the Defendants’ application to dismiss
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`the affirmative defenses is not properly asserted in the instant action. The Defendants would
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`have to move for such relief in the Related Action where the affirmative defenses are
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`asserted.
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`The Court now turns to the branch of the Defendants’ motion seeking
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`dismissal, pursuant to CPLR § 3211 (a) (7), of the causes of action sounding in fraud.
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`In
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`support of their motion, the Defendants contend that the Plaintiffs failed to meet the
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`heightened pleading standard for fraud required by CPLR § 3016 (a). The Defendants
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`contend that while the complaint alleges that Arma Management misrepresented their
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`abilities to induce the Plaintiffs to enter into the agreement, it fails to specify the nature of
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`the misrepresentations; when and to whom they were made; whether the Board’s reliance
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`was justified and Arma Management’s scientor. The Defendants argue that the claim against
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`the Individual Defendants relies on group-pleading allegations that
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`fail
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`to allege
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`particularized allegations. The Defendants also argue that the fraud causes of action should
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`be dismissed because they are pled upon information and belief and fail to plead the source
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`of their information.
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`The Defendants argue that the fraud claims should be dismissed as duplicative
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`of the breach of contract claim because the Plaintiffs’ fraud claim is based upon the
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`Defendant, Amia’s alleged breach of the agreement. The Defendants argue that the breach
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`of fiduciary duty claim should be dismissed because the claim is essentially another claim
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`of fraud that is not pled sufficiently. Finally, the Defendants argue that the breach ofimplied
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`covenant of good faith and fair dealing claim should be dismissed because it is not an
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`independent cause of action. The Defendants contend that although every contract contains
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`an implied covenant, it does not impose any obligation on a party to a contract beyond the
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`explicit terms of the contract.
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`In opposition to the Defendants’ motion to dismiss, the Plaintiffs argue that
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`they sufficiently pled their claims for fraud and fraudulent misrepresentation to meet the
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`requirements of CPLR § 3016 (b). Specifically, the Plaintiffs rely on the Complaint to
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`support their opposition. In the Complaint, the Plaintiffs allege that within five months the
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`Defendant, Jordan, went from being a unit owner in the Seasons at Massapequa (the
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`“Seasons”) and treasurer of the Board of Directors (the “Board”) to being awarded a five-
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`year, $500,000 management contract, despite not having any prior experience or other
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`qualifications. (See Copy of Complaint annexed to the Affirmation in Opposition of David
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`C. Nevins as Exhibit “A” at W 13, 17, 23, 25 and 28) The Complaint alleges that the
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`Defendants, Jordan and Arma, made misrepresentations regarding its abilities as managing
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`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
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`and that they had interviewed other managing agents.
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`(Id. at M 23, 26) The Plaintiffs
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`contend that when taken with a reasonable inference in favor of the Plaintiffs, the Complaint
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`alleges facts with sufficient specificity to set forth a primafacie claim of fraud.
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`The Plaintiffs further argue that the Complaint sets forth facts with sufficient
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`specificity to support its claims of fraud against the individual board members. The
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`Complaint alleges that the board members took direct actions to further the fraud when they
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`notified the owners, after Arma was awarded the contract, that it interviewed five other
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`managing agents; that the Defendant, Jordan was related to the Defendant, Mueger; that
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`Arma’s agreement was less than the previous managing agent;
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`that
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`the $100,000
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`management fee was consistent with other bids; and that Arma would have more resources
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`dedicated to the Seasons at Massapequa than the prior managing agent.
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`(Id. at 1] 23) The
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`Complaint alleges that the foregoing statements were false and misleading and the Plaintiffs
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`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
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`breach of contract claims. The Plaintiffs argue that the fraud alleged is that the Defendants,
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`Jordan and Arma, used deceptive means to secure a management contract, made false
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`representations regarding his qualifications and abilities and the individual Defendants
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`colluded with Jordan and Arma to perpetuate the fraud and make misrepresentations. (Id.
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`at 1111 13, 17, 22-28, 42-59)
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`The Plaintiffs argue that the breach of fiduciary duty cause ofaction should not
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`be dismissed because, as board members, the individual Defendants had a fiduciary duty to
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`the residents of the Seasons and they breached their fiduciary duty by acting in their own
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`self-interest and the interest ofArma instead ofacting in the best interest ofthe condominium
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`owners.
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`Finally, the Plaintiffs argue that their cause of action for implied covenant of
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`good faith and fair dealing should not be dismissed. The Plaintiffs contend that this is a
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`cause of action independent of a breach of contract cause of action. The Plaintiffs further
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`contend that they sufficiently pled such cause of action by alleging facts showing that the
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`Defendants engaged in bad faith and intended to defraud the Plaintiffs by colluding to hide
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`the qualifications of the Defendants, Jordan and Arma, and their lack of due diligence in
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`selecting a managing agent.
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`The attorney for the Plaintiffs in the Related Action, representing them as
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`Defendants in that action, submitted an Affirmation in Partial Opposition. The Affirmation
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`joined in the arguments set forth by David Nevins, the Plaintiffs’ attorney in the instant
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`action, regarding the dismissal of the Plaintiffs’ fraud claims. The Affirmation fiirther
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`argued that the branch of the motion seeking dismissal of the affirmative defenses was
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`premature and improper as the two actions have not yet been consolidated.
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`In their Reply in Further Support oftheir motion, the Defendants argue that the
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`Plaintiffs’ opposition fails to overcome its pleading deficiencies.
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`Specifically,
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`the
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`Defendants argue that the Plaintiffs fail to plead the Defendants’ scientor, and instead pled
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`a “reasonable inference of fraud,” which is not applicable here. The Defendants further
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`argue that the Plaintiffs fail to rebut their allegation that the fraud claims should be dismissed
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`because all ofthe facts are pled “upon information and belief.” The Defendants further argue
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`that the Plaintiffs’ claims are based on group-pleading allegations and fail to set forth
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`specific misrepresentations.
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`The Defendants argue that the fraud claims should be dismissed as duplicative
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`ofthe breach of contract claim because the fraud causes of action are premised upon Arma’s
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`alleged breach of the agreement and the unspecified misrepresentations regarding Anna’s
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`background and abilities to perform the services set forth in the agreement.
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`The Defendants further argue that the breach of fiduciary duty claim fails as
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`a matter of law because the claim is merely another insufficient fraud claim. Finally, the
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`Defendants contend that the implied covenant claim should be dismissed as duplicative of
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`the breach of contract claim because there is no independent cause of action for implied
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`covenant.
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`The Defendants also argue, in a footnote, that for the same reasons the Court
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`should dismiss the first cause of action for declaratory judgment and the seventh cause of
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`action that the agreement is unconscionable as duplicative of the breach of contract claim.
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`“In the context of a CPLR 3211 motion to dismiss, the pleadings are ‘to be
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`afforded a liberal construction. [The Court must] accept the facts as alleged in the complaint
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`as true, [and] accord plaintiffs the benefit ofevery possible favorable inference.” (Mandarin
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`Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 178 [2011], citing Leon v. Martinez, 84 N.Y.2d
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`83, 87 [1994] [citation omitted]; Morone v. Morone, 50 N.Y.2d 481, 484 [1980])
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`If there
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`is a discernible claim, that is where the inquiry must end. (Hurrell—Harring v. State ofNew
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`York, 15 N.Y.3d 8, 20 [2010])
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`To state a cause of action for fraud the following must be established: (1) false
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`representation of material existing fact; (2) scienter; (3) deception; and (4) damages. (see
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`CPLR § 3016 [b]; Barclay Arms Inc. v. Barclay Arms Assoc., 74 N.Y.2d 644) CPLR § 3016
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`(b) provides that when a cause of action is based on fraud, the circumstances constituting the
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`wrong shall be stated in detail.
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`Initially, the Court must address the Defendants’ argument that the claims of
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`fraud should be dismissed because they are alleged “upon information and belief.” “Where
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`allegations of fraud are based on information and belief, the source of such information must
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`be revealed...[h]owever, at this early stage ofthe litigation, plaintiffs are entitled to the most
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`favorable inferences, including inferences arising from the positions and responsibilities of
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`defendants, and plaintiffs need only set forth sufficient information to apprise defendants of
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`the alleged wrong.” (DDJ Management, LLC v. Rhone Group, LLC, 78 A.D.3d 442 [l“
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`Dept. 2010] [citations omitted])
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`With respect to the claims based on fraud, the Complaint sets forth sufficient
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`allegations to meet the heightened requirements and to apprize the Defendants ofthe alleged
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`wrong. The Plaintiffs allege that in or about June of 2008, the Defendants, Russell and
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`Jordan, were appointed to the Board. The Plaintiffs allege that in February 2012, the
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`Defendant, Jordan, sold his unit to his mother-in-law and her husband, the Defendant,
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`Mueger. Thereafter, the Defendant, Mueger, was appointed to the Board, replacing the
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`Defendant, Jordan, as Treasurer. The Plaintiffs allege that in May 2012, the Defendant,
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`Patchinger, was appointed to the Board and became the Vice President. On June 24, 2012,
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`the Defendant, Jordan, formed Anna and in July 2012, Anna entered into the Agreement
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`with the Board to become the new managing agent.
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`The Plaintiffs allege that the Defendants, Jordan and Anna, misrepresented
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`their abilities, background, and prior relationship to the Plaintiffs, in order to induce them to
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`enter into the Agreement. The Plaintiffs allege that on November 21, 2012, the Board
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`represented to the residents of the Seasons that: (1) the Board interviewed five different
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`managing agents and Anna was the best fit; (2) Jordan Anna was related to the Defendant,
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`10
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`Mueger; (3) the five year at $ 100,000.00 per year agreement was less than the prior managing
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`agent; (4) that the $100,000.00 management fee was consistent with all other bids; and (5)
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`that Anna will have more resources dedicated to the Seasons than the previous managing
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`agent.
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`The Plaintiffs allege that the aforementioned representations were false,
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`misleading and intended to hide the fact that the Defendants, Russell, Mueger and
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`Patchinger, failed to do their due diligence in hiring a managing agent. The Plaintiffs allege
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`that as a result of the Defendants, Jordan and Ar1na’s misrepresentations, they entered the
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`Agreement and since then they have been damaged by the Defendant, Arma’s failure to
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`perform its obligations under the Agreement. The Plaintiffs further allege that the
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`Defendants, Jordan and Anna, colluded with the Defendants, Russell, Mueger and Patchinger
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`to induce the Plaintiffs to hire Arma as the managing agent. The Court finds that the
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`circumstances constituting the alleged fraud are stated in sufficient detail, that when viewed
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`in the light most favorable to the Plaintiffs, make up a cognizable cause of action.
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`As to the Plaintiffs’ breach of fiduciary duty cause of action, despite the
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`Defendants’ assertion that it should be dismissed because it is duplicative of the breach of
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`contract claim, the Court disagrees. The Plaintiffs allege that, as Board members, the
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`Defendants, Russell, Mueger and Patchinger breached their fiduciary duties by acting in their
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`own self-interest and not the best interests of the Plaintiffs. This is a separate and distinct
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`claim from the breach of contract claim asserted against the Defendant, Anna.
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`11
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`With regard to the Plaintiffs’ claim against all of the Defendants for breach of
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`implied covenant of good faith and fair dealing, “within every contract is an implied
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`covenant of good faith and fair dealing.” (Aventine Inv. Management, Inc. v. Canadian
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`Imperial, 265 A.D.2d 5 13 [2““ Dept]) “The plaintiffmust allege facts which tend to show that
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`the defendant sought to prevent performance of the contract or to withhold its benefits from
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`the plaintif .” (Id.) Here, even when giving the most favorable inference to the facts alleged
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`in the Complaint, the Plaintiffs failed to sufficiently state a cause of action for breach of
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`implied covenant of good faith and fair dealing.
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`Accordingly, it is hereby
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`ORDERED, that the branch of the Defendants’ motion seeking an order
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`pursuant to CPLR § 602 is GRANTED to the extent that the two (2) actions shall be joined
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`for discovery and trial; and it is fiirther
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`ORDERED, that the file maintained by the Hon. Randy Sue Marber in this
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`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
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`ORDERED, that the branch of the Defendants’ motion seeking an order
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`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,
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`12
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`LLC, is DENIED, with the exception of the sixth cause of action for bad faith/breach of
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`implied covenant of good faith and fair dealing, which is DISMISSED; and it is further
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`ORDERED, that the branch of the Defendants’ motion seeking an order,
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`dismissing all of the individual defendants from the action, is DENIED; and it is further
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`ORDERED, that the branch of the Defendants’ motion seeking an order,
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`pursuant to CPLR § 3211 (b), dismissing the Affirmative Defenses that sound in fraud
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`asserted by the Plaintiffs in the related action, is DENIED.
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`This decision constitutes the order of the Court.
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`DATED:
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`Mineola, New York
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`February 4, 2015
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`Hon. Ranky Sue Marber, J.S.C.
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