Ehrenkranz v 58 MHR, LLC, 2015 NY Slip Op 50859(U), 5/27/2015 (Pines, J.)

Motion to dismiss; conversion; unjust enrichment; fraudulent conveyances

By: Toshia Smith | Staff Writer

Plaintiffs are property owners. Defendants contracted with plaintiffs for the construction of their residence. Third-party plaintiffs are plaintiffs’ former law firm. Plaintiffs sued defendants for allegedly dissipating the assets of a company it owned after plaintiffs asserted claims against said company in another action. Plaintiffs commenced a breach of contract action against defendants, and were awarded a jury verdict of $2.2 million. The judgment was affirmed on appeal. Defendants made counterclaims against plaintiffs, asserting plaintiffs’ alleged lies were the basis of the court issuing judgment against defendants. Defendants also made third-party claims against plaintiffs’ former law firm who represented plaintiffs in the underlying matter. The Court here considered pre-discovery motions to dismiss.

Plaintiffs moved to dismiss defendants’ claims for (1) tortious interference with business relationships, (2) breach of the construction contract, (3) unjust enrichment, (4) recession, (5) inducement of the breach of fiduciary duty, and (6) computer fraud. Third-party plaintiffs moved to dismiss the defendants’ claims of (1) defamation, (2) tortious interference with prospective business relations, (3) business disparagement, (4) inducing the breach of fiduciary duties, (5) a violation of federal computer fraud, (6) tortious interference with contract, (7) conversion, (8) violation of Judiciary Law §487, and (9) abuse of process. Defendants moved to dismiss plaintiffs’ counter-claims of (1) conversion, (2) filing of a lis pendens, (3) punitive damages, (4) unjust enrichment, (5) fraudulent conveyance.

Third party plaintiffs asserted that defendants’ claims fail to constitute any proper “claim over” as required by CPLR 1007, lack specificity, were raised and rejected on appeal, and are all-around frivolous. Plaintiffs asserted that defendants’ counter-claims fail because they are barred by collateral estoppel, contradict trial verdicts, there is no evidence of computer access or fraud, and the property was transferred with consideration.

The appellate court held the defendants’ claim for tortious interference against the plaintiffs failed because no interference was alleged, let alone supported by evidence. Further, the counterclaim for breach of contract was barred by collateral estoppel because the issues concerning the purchase and construction of the residence were properly litigated. Moreover, the other counter-claims were precluded under doctrine of estoppel due to prior litigation of the matters or lack of being raised in earlier motions. With regards to defendants’ defamation claim against the third-party plaintiff, the court found the third-party plaintiff is entitled to absolute privilege because third-party plaintiffs’ statements were made in the process of litigation. Additionally, the court held the defendants’ claim against third-party plaintiffs for interference with the contract fails because the issue was raised and ignored by the court, and defendants’ conversion claim fails because real property cannot be converted. Because there is no separate cause of action for punitive damages, plaintiffs’ motion to seek special damages is invalid. The court reasoned the remaining plaintiffs’ counter-claims against defendants were determined in previous motions; therefore defendants’ motions to dismiss were rejected.

Ehrenkranz v 58 MHR, LLC, 2015 NY Slip Op 50859(U), 5/27/2015 (Pines, J.).