FKB’s Andrew S. Kowlowitz and Benjamin M. Oxenburg obtain dismissal of an action alleging aiding and abetting fraud in the Appellate Division, First Department

FKB successfully obtained the First Department’s affirmance of a New York County Supreme Court Commercial Division decision granting our pre-answer motion to dismiss.

Plaintiffs’ lawsuit arose out of a dispute amongst LLC members of a venture to construct a luxury boutique hotel near Hudson Square, a neighborhood at the intersection of the SoHo and Tribeca neighborhoods in downtown Manhattan.  Several of the LLC members and investors in the venture include, among others, renowned European soccer players.  FKB’s client acted as counsel to the venture’s project development entity.  After the project ran into various environmental, developmental and financial challenges, including Plaintiffs’ alleged failure to make capital contributions, another attorney took over as counsel for the development entity, and the LLC majority members voted without Plaintiffs to sell the land to a third party in late September 2015.  Plaintiffs then instituted an action against the LLC and its members, the subsequent purchaser of the property, and the attorneys, asserting various causes of action for aiding and abetting, fraud and breaches of fiduciary duty.  Plaintiffs filed a lis pendens against the property, sought to unwind the transaction and asked to be awarded in excess of $20 Million.

Along with the other Defendants, FKB filed a complex pre-answer motion to dismiss, resulting in an attempt by Plaintiffs to amend their complaint to add three (3) new derivative and direct causes of action against FKB’s client for aiding and abetting and breaches of fiduciary duty.  Without hearing any argument, Commercial Division Justice Anil Singh issued a fifty (50) page detailed decision, which granted our motion to dismiss.  Plaintiffs subsequently obtained new counsel and simultaneously moved to reargue and appealed the decision to the First Department.

On February 6, 2018, the First Department affirmed Justice Singh’s decision in its entirety.  The Court seized upon our primary argument on appeal, finding that Plaintiffs were attempting to assert entirely new direct and derivative causes of action against FKB’s client on appeal.  The Court ruled that “Plaintiffs ‘may not add a new theory of liability for the first time on appeal,’” citing to cases provided in FKB’s opposition brief.

If you have any questions about this decision, or the defense of attorneys in general, please contact Andrew S. Kowlowitz or Benjamin M. Oxenburg.