SANDRA J. FEUERSTEIN, District Judge.
On or about July 19, 2016, plaintiff PHL Variable Insurance Company ("plaintiff" or "PHL"), commenced this action against defendant Town of Oyster Bay ("defendant" or "the Town") pursuant to this Court's diversity of citizenship jurisdiction under 28 U.S.C. § 1332, asserting claims seeking damages for breach of contract, unjust enrichment, innocent misrepresentation, negligent misrepresentation and fraud. On July 27, 2016, plaintiff filed an amended complaint, inter alia, asserting additional claims against defendant seeking damages for innocent misrepresentation, negligent misrepresentation and fraud. Pending before the Court is defendant's motion to dismiss plaintiff's claims against it in the amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim for relief. For the reasons set forth below, defendant's motion is granted to the extent set forth herein.
Defendant is a town located within the County of Nassau, in the State of New York, that owns and operates, inter alia, a municipal golf course (the "Golf Course"). (Amended Complaint ["Am. Compl."], ¶¶ 5, 8). There are several dining and concession facilities at the Golf Course ("the Facilities"), including: (1) a restaurant, catering and banquet facility commonly known as "The Woodlands at Woodbury;" (2) a snack bar called "The Halfway House," located on the eighth (8
On or about October 30, 2000, defendant entered into a license agreement ("the Concession Agreement") with SRB Catering Corp., d/b/a H.R. Singleton's Classic American Grille ("SRB Catering"), (Am. Compl., ¶ 11), in order "to secure the efficient and beneficial operation of a food and beverage service at the . . . Golf Course, and to provide major capital improvements to the Club House." (Id., Ex. A at 1). Specifically, pursuant to the Concession Agreement, inter alia, SRB Catering agreed "to maintain and operate a food and beverage service at the Club House, the Halfway House, and the Driving Range, on the . . . Golf Course," (id., Ex. A, ¶ 2); and "to make capital improvements to the facility, with a total value of approximately $2,097,000.00," pursuant to plans, specifications and a schedule approved by the Town, within the first three (3) years of the Concession Agreement. (Id., ¶ 39). The Concession Agreement further provides, inter alia, that "[t]itle to all [capital] improvements shall vest in the [Town] upon completion and acceptance of the work." (Id., ¶ 39(g)).
The term of the Concession Agreement was for a period of twenty (20) years, beginning Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 422 (2d Cir. 2011), and do not constitute findings of fact by the Court. January 1, 2001, and ending on December 31, 2020, (Am. Compl., ¶ 37), but it could be renewed for a period of ten (10) years "[a]t the sole option of the [Town]." (Id.) Pursuant to paragraph thirty-seven (37) of the Concession Agreement, SRB Catering was required to pay the Town a license fee of forty-eight thousand dollars ($48,000.00), in equal monthly payments of four thousand dollars ($4,000.00) per month, for the period from January 1, 2001 through December 31, 2001. (Id.) For each subsequent year, the annual license fee was increased by three percent (3%) from the previous year. (Id.) However, the Concession Agreement also gave the Town, at its sole option, "the right to convert th[e] [annual license] payment provision to require [SRB Catering] to pay [it] a percentage of annual gross receipts." (Id.) In the event that the Town exercised that option, SRB Catering was required to pay it a yearly license fee equal to (i) five percent (5%) of annual gross receipts; or (ii) six percent (6%) of annual gross sales if the annual gross sales of SRB Catering exceeded two million dollars ($2,000,000.00). (Id.) Except as provided in Paragraph 37 of the Concession Agreement, all income derived from the operation of the Concession Agreement belonged to SRB Catering. (Id., ¶ 9). The Concession Agreement was executed by Harendra Singh ("Singh"), as "V.P.," presumably vice president, of SRB Catering, and the then-Town Supervisor, John Venditto ("Venditto"), on behalf of the Town, (id. at 24-25), pursuant to Town Resolution No. 638-2000, which was adopted on October 3, 2000. (See Am. Compl., Ex. C at 1, Ex. D at 5 and Ex. F at 1).
On or about April 19, 2005, the Town entered into a license agreement (the "First Amended Concession Agreement" or "FACA") with "SRB Convention and Catering Corp., d/b/a The Woodlands and PassionFish" ("SRB Convention")
Paragraph 32 of the FACA, under the heading, "Termination of Agreement," provides:
(Am. Compl., Ex. B, ¶ 32) (italicized language was subsequently amended as set forth below).
Paragraph 37 of the FACA provides, in pertinent part:
(Am. Compl., Ex. B, ¶ 37). The payment provisions in the FACA remained the same as in the original Concession Agreement.
Paragraph 39 of the FACA provides, in pertinent part:
(Am. Compl., Ex. B, ¶ 39). The FACA was executed by Singh, as President of SRB Convention, and Venditto, on behalf of the Town, (id. at 22-23), pursuant to Town Resolution No. 313-2005, which was adopted on April 19, 2005. (See Id., Ex. C at 1, Ex. D at 5 and Ex. F at 1).
On September 16, 2008, the Town and SRB Convention entered into an agreement ("the Extension Agreement"), indicating, inter alia, that
(Am. Compl., Ex. C at 1-2). Pursuant to the Extension Agreement, SRB Convention agreed "to make an additional $3,250,000,00 in capital improvements to the [Golf Course Facilities]," to be completed by December 31, 2011; and the Town extended the FACA through December 31, 2049, in consideration of the additional capital improvements to be made by SRB Convention. (Id. at 2). The Extension Agreement was executed by Singh, as president of SRB Convention, and Venditto, (id. at 2-3), pursuant to Town Resolution No. 889-2008, which was adopted on September 16, 2008. (See Id., Ex. D at 5 and Ex. F at 1).
According to plaintiff, "[s]ometime during 2010, SRB determined that it would require financing to, inter alia, properly operate the Facilities and complete the improvements required by the terms of [the Extension Agreement]." (Am. Compl., ¶ 22). SRB Convention subsequently entered into negotiations with NDH Capital Corporation ("NDH"), a loan broker for plaintiff, (Id., ¶¶ 23-24); however, "[o]ne of the issues that made it difficult for SRB to obtain financing was the simple fact that it had no collateral to support any potential loan." (Id., ¶ 25). According to plaintiff, "[i]n the absence of any such collateral, [it] was unwilling to commit to loan money to SRB," (Id., ¶ 26), so "SRB, NDH and [plaintiff] entered into negotiations with [defendant] to structure a transaction that would assure that [plaintiff] would receive significant monies from [defendant] in the event that SRB defaulted in its repayment obligations[,] . . . [which] would . . . be utilized to satisfy the loan made to SRB." (Id., ¶ 27) (emphasis added). Specifically, "counsel for SRB, NDH, [plaintiff] and [defendant] collaboratively created a vehicle whereby, should SRB default on the subject loan, the Concession Agreement would automatically be terminated and, in turn, [defendant] would be required to make a `Termination Payment' to [plaintiff]." (Id., ¶ 28) (italics omitted). Plaintiff alleges that the "`Termination Payment' would, in effect, make [it] whole because it was specifically formulated to equal the amounts then outstanding under the loan made by PHL/NDH to SRB." (Id.) Plaintiff further alleges that, "[a]lternatively, if [defendant] for some reason terminated the Concession Agreement (other than as a consequence of SRB's default on the subject loan), [defendant] would then be obligated to pay [plaintiff] a `Cause Termination Payment' based on the agreed value of the improvements made by SRB." (Id.) (italics omitted).
According to plaintiff, "[a]s a result of the successful conclusion of those negotiations, NDH/PHL agreed to provide financing to SRB in the amount of $7,843,138.08, inclusive of interest (`Loan')." (Am. Compl., ¶ 29) (emphasis omitted). The Loan was evidenced by a "Term Loan, Pledge and Security Agreement" by and between NDH and SRB Convention, dated November 18, 2011 ("the Security Agreement"), (id., Ex. D); and a "Negotiable Promissory Note" by and between NDH and SRB Convention, also dated November 18, 2011 ("the Note") (collectively, the "2011 Loan Documents"). (Id., Ex. E).
On that same date, i.e., November 18, 2011, the Town and SRB Convention ostensibly entered into an "Amendment to Concession Agreement" (the "Second Amended Concession Agreement" or "SACA"), pursuant to which the Town "agreed to amend the [FACA] to provide for payment of certain amounts under the [FACA] to [plaintiff] should [SRB Convention] default in its obligations to [plaintiff]," in order to induce plaintiff to provide the financing SRB Convention was seeking "to facilitate the completion of the capital improvements" at the Golf Course, "and in consideration of the benefits the [Town] has and will continue to receive from the previous and proposed capital improvements[.]" (Am. Compl., Ex. F at 2) (emphasis added).
The SACA amended paragraph thirty-two (32) of the FACA, set forth above, by, inter alia, (1) renaming the heading from "Termination of Agreement" to "Events of Default;" (2) replacing the lead-in paragraph, italicized above, with the statement, "Any of the following events shall constitute an Event of Default under this Agreement[;]" and (3) adding the following subparagraph (h) as an "Event of Default:"
(Am. Compl., Ex. F at 2-3) (emphasis omitted). In addition, the SACA deleted the second to last paragraph of Paragraph 32 of the FACA, italicized above, and replaced it with the following:
(Id. at 3-5) (emphasis omitted; italics added).
In addition, the SACA provides, in pertinent part, as follows:
(Am. Compl., Ex. F, ¶¶ 4, 5 and 9).
Singh, as president of SRB Convention, signed the SACA on behalf of SRB Convention. However, unlike the Concession Agreement, the FACA and the Extension Agreement, which had all been executed by Venditto, as the then-Town Supervisor, pursuant to a resolution adopted by the Town Board, the SACA was executed by Leonard Genova ("Genova"), as the Town Attorney; it was not executed by the Town Supervisor, (Am. Compl. at 7-8; see id., ¶ 31), nor is there any indication in the pleadings, or in any of the documents attached thereto, that it was ever ratified by the Town Board.
Plaintiff alleges that "[i]n connection with documentation of the Loan, NDH and PHL conditioned their respective willingness to make and fund the Loan on the provisioning by [the Town's] counsel of a letter substantiating, inter alia, the validity and enforceability of [the Town's] obligations to make the Termination Payment or the Cause Termination Payment in accordance with the terms and provisions of [the SACA][,]" (Am. Compl., ¶ 35 at p. 13
(Am. Compl., Ex. I).
By letter to NDH that same date ("the Mei Letter"), Mei provided opinions virtually identical to Garry's opinions in the Harris Beach Letter. (Am. Compl., Ex. K).
On or about June 16, 2015, Thomas M. Sabellico, Esq., as special counsel to Genova, the then-Town Attorney, sent NDH a letter ("the Genova Letter") indicating, in pertinent part:
(Am. Compl., Ex. J).
"SRB ultimately defaulted on its obligations to [plaintiff]. . . ." (Am. Compl., ¶ 35). On or about November 19, 2015, plaintiff sent SRB Convention a "Third Notice of Acceleration,"
(Am. Compl., Ex. G) (emphasis omitted).
On or about February 26, 2016, Phoenix, on behalf of plaintiff, sent the Town a "Loan Default Notice," indicating, in pertinent part:
(Am. Compl., Ex. H) (emphasis omitted). Plaintiff alleges that it is an intended third-party beneficiary of the FACA, as amended by the SACA, (id., ¶ 39); that the Town terminated the Concession Agreement, but "failed and/or refused to remit the Termination Payment to PHL, all in violation of the terms of the Concession Agreement (as amended)[,]" (id., ¶ 37 and ¶ 36 at p. 12); and that the amount due and owing under the 2011 Loan Documents, as of June 1, 2016, is six million two hundred fifty-two thousand six hundred twenty-three dollars and eighty-two cents ($6,252,623.82), with additional amounts accruing "with the passage of time." (Id., ¶ 38).
On or about July 19, 2016, plaintiff commenced this action against defendant pursuant to this Court's diversity of citizenship jurisdiction under 28 U.S.C. § 1332, asserting claims seeking damages for breach of contract, unjust enrichment, fraud, innocent misrepresentation and negligent misrepresentation. On July 27, 2016, plaintiff filed an amended complaint asserting the following claims: (1) that the Town breached the Concession Agreement, as amended, by failing and refusing to pay plaintiff the Termination Payment (first cause of action for breach of contract), (see Am. Compl., ¶ 40); (2) that "to the extent the Termination Payment is, for some reason, not properly payable to [the Town], the provisions requiring payment of the Cause Termination Payment to [plaintiff]" were triggered, yet the Town "has failed to remit the Cause Termination Payment to [plaintiff], all in violation of the terms of the Concession Agreement (as amended)" (second cause of action for breach of contract), (id., ¶¶ 36-37 at p. 12, Count II) (emphasis omitted); (3) that the Town "was unjustly, unfairly and inequitably enriched to the extent [plaintiff's] funds were utilized to improve and/or operate the Facilities[,] . . . at the expense and to the detriment of [plaintiff][,]" and "[b]oth equity and good conscience dictate that [it] should reimburse [plaintiff] for any improvements to the Facilities made by SRB with [plaintiff's] funds" (third cause of action for unjust enrichment) (id., ¶¶ 35-37 at p. 12, Count III); (4) that "[t]o the extent [the Town] is correct with respect to the legal assertions contained within the Genova Letter, it necessarily follows that" Garry's representations in the Harris Beach Letter, Mei's representations in the Mei Letter and Genova's representation in the SACA that the Town "has agreed to amend the [FACA] to provide for payment of certain amounts under that Agreement to [plaintiff] should SRB default in its obligations to [plaintiff]," all of which were made for the benefit, or on behalf, of the Town, were untrue, and NDH and plaintiff reasonably relied to their detriment on those representations by funding the Loan, which "is presently uncollectable from SRB" (fourth, fifth and tenth causes of action for innocent misrepresentation), (id., ¶¶ 40-43 at p. 14; ¶¶ 40-43 at p. 16; ¶¶ 36-37 and 39-41 at pp. 22-23, respectively) (italics and brackets omitted); (5) that Harris Beach, Mei and Genova, acting for the benefit, or on behalf, of the Town, knew or should have known that the representations in the Harris Beach Letter, Mei Letter and SACA, respectively, were untrue, and NDH and plaintiff reasonably relied to their detriment on those representations by funding the Loan, which "is presently uncollectable from SRB" (sixth, seventh and eleventh causes of action for negligent misrepresentation), (id., ¶¶ 41-44 at p. 17; ¶¶ 41-44 at p. 18; and ¶¶ 40-42 at p. 24, respectively) (italics omitted); and (6) that Harris Beach, Mei and Genova, acting for the benefit, and on behalf, of the Town, and "in reckless disregard of the truth," "stated facts that were claimed to be known as true" in the Harris Beach Letter, Mei Letter and SACA, respectively, "when, in point of fact, [they] had no reasonable basis for" making those representations, knowing and intending that NDH and/or plaintiff would rely on those assertions, and NDH and plaintiff reasonably relied to their detriment on those representations by funding the Loan, which "is presently uncollectable from SRB" (eighth, ninth and twelfth causes of action for fraud), (id., ¶¶ 41-46 at pp. 19-20; ¶¶ 41-46 at p. 21; and ¶¶ 40-44 at p. 25, respectively) (italics omitted).
Defendant now moves pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure to dismiss plaintiff's claims against it in the amended complaint for failure to state a claim for relief.
The standard of review on a motion made pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is that a plaintiff plead sufficient facts "to state a claim for relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 167 L. Ed. 2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L. Ed. 2d 868 (2009). The plausibility standard requires "more than a sheer possibility that a defendant has acted unlawfully." Id.
"A pleading that offers `labels and conclusions' or `a formulaic recitation of the elements of a cause of action will not do.'" Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). "Nor does a complaint suffice if it tenders `naked assertion[s]' devoid of `further factual enhancement.'" Id. (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955). "Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Twombly, 550 U.S. 544, 127 S. Ct. at 1959.
In deciding a motion pursuant to Rule 12(b)(6), the Court must liberally construe the claims, accept all factual allegations in the complaint as true, and draw all reasonable inferences in favor of the plaintiff. See Aegis Ins. Servs., Inc. v. 7 World Trade Co., L.P., 737 F.3d 166, 176 (2d Cir. 2013) (quotations and citation omitted); Grullon v. City of New Haven, 720 F.3d 133, 139 (2d Cir. 2013). However, this tenet "is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations." Id. at 679, 129 S.Ct. 1937. "In keeping with these principles a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id.; see also Ruston v. Town Bd. of Town of Skaneateles, 610 F.3d 55, 59 (2d Cir. 2010).
Nonetheless, a plaintiff is not required to plead "specific evidence or extra facts beyond what is needed to make the claim plausible." Arista Records, LLC v. Doe 3, 604 F.3d 110, 120-1 (2d Cir. 2010); accord Pension Benefit Guar. Corp. ex rel. St. Vincent Catholic Med. Ctrs. Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 729-30 (2d Cir. 2013). "When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Iqbal, 556 U.S. at 679, 129 S.Ct. 1937.
In deciding a motion pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court must limit itself to the facts alleged in the complaint, which are accepted as true; to any documents attached to the complaint as exhibits or incorporated by reference therein; to matters of which judicial notice may be taken; or to documents upon the terms and effect of which the complaint "relies heavily" and which are, thus, rendered "integral" to the complaint. Chambers v. Time Warner, Inc., 282 F.3d 147, 152-53 (2d Cir. 2002); see also ASARCO LLC v. Goodwin, 756 F.3d 191, 198 (2d Cir. 2014). Accordingly, the Court has not considered any of the extrinsic evidence submitted by the parties in support of, or in opposition to, defendant's motion to dismiss.
Under New York law, "[p]arties asserting third-party beneficiary rights under a contract must establish (1) the existence of a valid and binding contract between other parties, (2) that the contract was intended for their benefit and (3) that the benefit to them is sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate them if the benefit is lost[.]" Mendel v. Henry Phipps Plaza West, Inc., 6 N.Y.3d 783, 786, 811 N.Y.S.2d 294, 844 N.E.2d 748 (N.Y. 2006) (quotations, alterations and citation omitted); accord Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173, 181-82, 919 N.Y.S.2d 465, 944 N.E.2d 1104 (N.Y. 2011).
"[A] municipality's power to contract is statutorily restricted for the benefit of the public." Genesco Entm't, a Div. of Lymutt Indus., Inc. v. Koch, 593 F.Supp. 743, 748 (S.D.N.Y. 1984); see also Scarborough Props. Corp. v. Village of Briarcliff Manor, 278 N.Y. 370, 375-76, 16 N.E.2d 369 (N.Y. 1938) ("The power of a [municipality] to enter into contracts and to incur financial obligations is subject to statutory conditions and restrictions intended to protect the inhabitants and taxpayers against ill-considered or extravagant action.") "Town Law § 64(6) demands that a formal resolution be passed by the Town Board and executed by the Town Supervisor in the name of the Town before a Town can be bound by any contract." Verifacts Grp., Inc. v. Town of Babylon, 267 A.D.2d 379, 379, 700 N.Y.S.2d 75 (N.Y. App. Div. 1999); see also Glenville Police Benevolent Ass'n v. Mosher, 31 A.D.3d 874, 875, 816 N.Y.S.2d 915 (N.Y. App. Div. 2006) ("Town Law § 64(6) makes abundantly clear that a town cannot be bound contractually unless the contract has been approved by the town board and executed by the supervisor in the town's name.") "Absent strict compliance with the formal requirements of this statute, no valid contract binding a Town may be found to exist." Verifacts, 267 A.D.2d at 379, 700 N.Y.S.2d 75; see also Granada Bldgs., Inc. v. City of Kingston, 58 N.Y.2d 705, 708, 458 N.Y.S.2d 906, 444 N.E.2d 1325 (N.Y. 1982) ("Municipal contracts which violate express statutory provisions are invalid[.]"); Mans Constr. Oversite, Ltd. v. City of Peekskill, 114 A.D.3d 911, 911-12, 980 N.Y.S.2d 822 (N.Y. App. Div. 2014) ("A municipal contract which does not comply with statutory requirements or local law is invalid and unenforceable[.]" (quotations and citation omitted)); Goldberg v. Penny, 163 A.D.2d 352, 353 (N.Y. App. Div. 1990) ("It is fundamental that a municipality can only contract for an authorized purpose and then only in the manner provided by statute.") Indeed, to allow recovery under a contract which contravenes statutory restrictions on a municipality's power to contract "gives vitality to an illegal act and grants the municipality power which it does not possess `to waive or disregard requirements which have been properly determined to be in the interest of the whole.'" Genesco Entm't, 593 F. Supp. at 748 (quoting Lutzken v. City of Rochester, 7 A.D.2d 498, 499, 184 N.Y.S.2d 483 (N.Y. App. Div. 1959)); see also City of New York v. City Merch., Inc., 211 F. App'x 44, 46 (2d Cir. Jan. 8, 2007) (summary order) ("When a statute is . . . designed to protect the public from governmental misconduct or improvidence, . . . its requirements cannot be waived[.]" (quotations and citations omitted)). "A party contracting with a municipality is chargeable with knowledge of the statutes which regulate its contracting powers and is bound by them[.]" Parsa v. State of New York, 64 N.Y.2d 143, 147, 485 N.Y.S.2d 27, 474 N.E.2d 235 (N.Y. 1984); see also Field Day, LLC v. County of Suffolk, 799 F.Supp.2d 186, 195 (E.D.N.Y. 2011) (accord); Town of Oneonta v. City of Oneonta, 191 A.D.2d 891, 892, 594 N.Y.S.2d 838 (N.Y. App. Div. 1993) ("The powers of a municipal corporation are wholly statutory and every person who deals with such a body is bound to know the extent of its authority and the limitations on its power[.]")
Since there is no indication in the amended complaint that the SACA was ever approved by the Town Supervisor or ratified by the Town Board, the amended complaint fails to state a plausible claim that a valid and binding contract existed between SRB Convention and the Town that was intended for plaintiff's benefit. See, e.g. Merrick Gables Ass'n, Inc. v. Town of Hempstead, 691 F.Supp.2d 355, 363 (E.D.N.Y. 2010) (dismissing the plaintiffs' breach of contract claim because there was no indication that the alleged agreement were ever approved by the Hempstead Town Supervisor or ratified by the Hempstead Town Board); Plaza Drive Grp. of CNY, LLC v. Town of Sennett, 115 A.D.3d 1165, 982 N.Y.S.2d 610 (N.Y. App. Div. 2014) (granting judgment in favor of the Town of Sennett declaring that a certain unsigned letter agreement was not a binding contract and was unenforceable against it because the plaintiff had not alleged that the Sennett Town Board considered or approved the letter agreement as required by [N.Y.] Town Law § 64(6) so as to establish a valid contract.) Indeed, it is clear from the documents attached to the amended complaint that, unlike the Concession Agreement, the FACA and the Extension Agreement, which were all executed by Venditto as the then-Town Supervisor, the SACA was executed by Genova, as the then-Town Attorney; not by the Town Supervisor. (See Am. Compl., Ex. F). In addition, although the Harris Beach Letter, the Mei Letter and the SACA refer to the Town Resolutions approving the prior agreements relating to the SACA, (see id., Exs. F, I and K), there is no indication in those documents, the pleadings or any of the other documents attached to the amended complaint that the Town Board ever passed a Town Resolution approving the SACA.
The unreported decision and order of the New York State Supreme Court, County of Nassau, Atalaya Asset Income Fund II LP v. HVS Tappan Beach Inc., No. 600517-16 (N.Y. Sup. Ct. Oct. 12, 2016), upon which plaintiff relies, is not binding on this Court and, in any event, is inapposite. In that case, the Town claimed, in relevant part, that the agreement at issue between the parties "although apparently signed by John Vendito [sic], Supervisor," was not enforceable; and submitted on its motion to dismiss, inter alia, an affidavit from Venditto indicating that he did not recall signing the agreement and that it was his understanding that the document was not authorized by a Town Board Resolution. (Plf. Opp., Ex. A at 7). In opposition to the Town's motion to dismiss, the plaintiff claimed, in relevant part, "that the tepid affidavit[] of Venditto . .. [was] insufficient to overcome the presumption of validity of [his] notarized signature[] on the document[.]" (Id.) Thus, in that case, unlike this one, there appeared to be a valid and binding contract on the face of the pleadings and the agreement at issue sufficient to state a cause of action against the Town for breach of contract. However, in this case, it is clear from the face of the pleadings and the documents attached thereto, and without resorting to any extrinsic evidence, that the SACA was never signed or executed by the Town Supervisor, nor ratified by the Town Board.
"Where the Legislature provides that valid contracts may be made only by specified officers or boards and in specified manner, no implied contract to pay for benefits furnished by a person under an agreement which is invalid because it fails to comply with statutory restrictions and inhibitions can create an obligation or liability of the [municipality]. . . . The creation of an obligation against the town, by way of contract, cannot be founded upon omission of action by the town officials, but must be the result of an affirmative determination to create the obligation in the form and manner provided by statute." New York Tel. Co. v. Town of N. Hempstead, 41 N.Y.2d 691, 696, 395 N.Y.S.2d 143, 363 N.E.2d 694 (N.Y. 1977) (quotations and citations omitted). "[E]quitable powers of the courts may not be invoked to sanction disregard of statutory safeguards and restrictions." Seif, 286 N.Y. at 387-88, 36 N.E.2d 630. Accordingly, "[a]s a general rule, a claim against a municipality in quantum meruit will not lie where the original contract is void as contrary to statute or ultra vires[.]" Vrooman v. Village of Middleville, 91 A.D.2d 833, 834, 458 N.Y.S.2d 424 (N.Y. App. Div. 1982), lv. denied, 58 N.Y.2d 610, 462 N.Y.S.2d 1028, 449 N.E.2d 427 (N.Y. 1983).
However, a limited exception to that general rule exists, see Mans Constr., 114 A.D.3d at 912, 980 N.Y.S.2d 822; Mid-Atlantic Perfusion Assocs., Inc. v. Westchester County Health Care Corp., 54 A.D.3d 831, 832-33, 864 N.Y.S.2d 100 (N.Y. App. Div. 2008), insofar as "[a] plaintiff is entitled to recover from a municipality where . . . he has entered into a contract in good faith, the municipality possesses the authority to enter into the contract, the contract is not violative of public policy and the circumstances indicate that if plaintiff is not compensated, the municipality would be unjustly enriched[.]" Vrooman, 91 A.D.2d at 834, 458 N.Y.S.2d 424. "The policy underlying the rule against holding municipalities liable on an implied contract theory is that of safeguarding the taxpayers' interest against extravagance and collusion on the part of public officials by requiring municipalities to abide by statutory restrictions on their contractual authority[.]" Id. (quotations and citation omitted).
The limited exception to the general rule does not apply in this case. Neither plaintiff nor SRB Convention were "providing services at the behest of a higher State authority," as in Vrooman.
Moreover, "[u]nder New York law, a plaintiff may prevail on a claim for unjust enrichment by demonstrating (1) that the defendant benefitted; (2) at the plaintiff's expense; and (3) that equity and good conscience require restitution." Nordwind v. Rowland, 584 F.3d 420, 434 (2d Cir. 2009) (quotations and citation omitted). "The essence of such a claim is that one party has received money or a benefit at the expense of another[,]" Kaye v. Grossman, 202 F.3d 611, 616 (2d Cir. 2000) (quotations and citation omitted), and "[t]he essential inquiry in any action for unjust enrichment . . . is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered[.]" Paramount Film Distrib. Corp. v. State, 30 N.Y.2d 415, 421, 334 N.Y.S.2d 388, 285 N.E.2d 695 (N.Y. 1972); see also Regnante v. Securities & Exch. Officials, 134 F.Supp.3d 749, 772 (S.D.N.Y. 2015) ("[I]n order to state an unjust enrichment claim, a plaintiff must show that the defendant actually received a benefit[,] . . . [and the] benefit must be both `specific' and `direct.'"
The amended complaint is bereft of any factual allegations from which it may reasonably be inferred that defendant actually received any specific and direct benefit at plaintiff's expense, i.e., that the Town, itself, received any benefit from the loan plaintiff made to SRB Convention in November 2011. Indeed, the amended complaint alleges only that the Town was unjustly enriched "to the extent [plaintiff's] funds were utilized to improve and/or operate the Facilities," and that "equity and good conscience dictate that [the Town] should reimburse [plaintiff] for any improvements to the Facilities made by SRB with [plaintiff's] funds."
"To state a claim for fraud under New York law, a plaintiff must allege (1) a material misrepresentation or omission of fact; (2) which the defendant knew to be false; (3) which the defendant made with the intent to defraud; (4) upon which the plaintiff reasonably relied; and (5) which caused injury to the plaintiff." Financial Guar. Ins. Co. v. Putnam Advisory Co., LLC, 783 F.3d 395, 402 (2d Cir. 2015); Mandarin Trading, 16 N.Y.3d at 178, 919 N.Y.S.2d 465 ("Generally, in a claim for fraudulent misrepresentation, a plaintiff must allege a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury[.]" (quotations and citation omitted)); New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 318, 639 N.Y.S.2d 283, 662 N.E.2d 763 (N.Y. 1995) ("The essential elements of a cause of action for fraud are representation of a material existing fact, falsity, scienter, deception and injury[.]" (quotations and citation omitted)).
"To plead a claim for fraud in the inducement or fraudulent concealment, plaintiff must allege facts to support the claim that it justifiably relied on the alleged misrepresentations." ACA Fin. Guar. Corp. v. Goldman, Sachs & Co., 25 N.Y.3d 1043, 1044, 10 N.Y.S.3d 486, 32 N.E.3d 921 (N.Y. 2015); see also Paraco Gas Corp. v. Travelers Cas. & Sur. Co. of Am., 51 F.Supp.3d 379, 393 (S.D.N.Y. 2014) ("[T]o prevail on a claim of fraud, a plaintiff must show that it actually relied on the purported fraudulent statements and that its reliance was reasonable or justifiable." (quotations and citation omitted)); Nabatkhorian v. Nabatkhorian, 127 A.D.3d 1043, 1044, 7 N.Y.S.3d 479 (N.Y. App. Div. 2015) ("An essential element of any fraud claim is that there must be reasonable reliance, to a party's detriment, upon the representations made by the defendant against whom the fraud claims has been asserted[.]" (quotations, alterations and citations omitted)). "The plaintiff must show a belief in the truth of the representation and a change of position in reliance on that belief." Nabatkhorian, 127 A.D.3d at 1044. 7 N.Y.S.3d 479.
"[I]f the facts represented are not matters peculiarly within the defendant's knowledge, and the plaintiff has the means available to it of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation, the plaintiff must make use of those means, or it will not be heard to complain that it was induced to enter into the transaction by misrepresentations[.]" ACA Fin., 25 N.Y.3d at 1044, 10 N.Y.S.3d 486 (quotations, alterations and citation omitted). Moreover, "[w]here sophisticated businessmen engaged in major transactions enjoy access to critical information but fail to take advantage of that access, New York courts are particularly disinclined to entertain claims of justifiable reliance." Crigger v. Fahnestock & Co., Inc., 443 F.3d 230, 235 (2d Cir. 2006) (quoting Grumman Allied Indus., Inc. v. Rohr Indus., Inc., 748 F.2d 729, 737 (2d Cir. 1984)).
The fact that the SACA was executed by Genova, in his capacity as the then-Town Attorney, and not by the Town Supervisor, as the Concession Agreement, FACA and Extension Agreement had been, is readily discernible from the face of that document. Moreover, the Harris Beach Letter, the Mei Letter and the SACA itself, all reference the Town Resolutions approving the prior agreements relating to the SACA, yet omit any reference to a Town Resolution approving the SACA. As indicated above, "[a] party contracting with a municipality is chargeable with knowledge of the statutes which regulate its contracting powers and is bound by them[.]" Parsa, 64 N.Y.2d at 147, 485 N.Y.S.2d 27. "Those dealing with officers or agents of municipal corporations must at their peril see to it that such officers or agents are acting within their authority . . . and they have no right to presume that the persons with whom they are dealing are acting within the line of their authority[.]" City of Zanesville, Ohio v. Mohawk Data Scis. Corp., 97 A.D.2d 64, 66, 468 N.Y.S.2d 271 (N.Y. App. Div. 1983); see also Casa Wales Housing Dev. Fund Corp. v. City of New York, 129 A.D.3d 451, 451, 11 N.Y.S.3d 31 (N.Y. App. Div. 2015), lv. denied, 26 N.Y.3d 917, 26 N.Y.S.3d 762, 47 N.E.3d 92 (N.Y. 2016) ("[T]hose dealing with municipal agents must ascertain the extent of the agents' authority, or else proceed at their own risk[.]"); Walentas v. New York City Dep't of Ports, 167 A.D.2d 211, 212, 561 N.Y.S.2d 718 (N.Y. App. Div. 1990), lv. denied, 78 N.Y.2d 857, 574 N.Y.S.2d 938, 580 N.E.2d 410 (N.Y. 1991) ("[I]t is solely at his peril that . . . a party presumes that the persons with whom he is dealing are acting within the scope of their authority and, since the extent of that authority is a matter of public record, there is a conclusive presumption that he is aware of it.") "Even where municipalities have accepted benefits, they will not be held liable under unauthorized agreements[.]" Goldberg, 163 A.D.2d at 353, 558 N.Y.S.2d 564; see also Parsa, 64 N.Y.2d at 147 ("[T]he State's acceptance of benefits furnished under a contract made without authority does not estop it from challenging the validity of the contract or from denying liability pursuant to it[.]"); Seif, 286 N.Y. at 387, 36 N.E.2d 630 ("Mere acceptance of benefits by the city under a contract made without authority does not estop a municipal corporation from challenging the validity of the contract and from denying liability for materials furnished or services rendered under a contract not made or ratified by a board or officer acting under authority conferred by law and in the manner prescribed by law."). "Although application of this rule results in occasional hardship, it has been held that the loss should be ascribed to the negligence of the person who failed to ascertain the authority vested in the public agency with whom he dealt and statutes designed to protect the public should not be annulled for his benefit." City of Zanesville, 97 A.D.2d at 67 (quotations and citation omitted); see also Parsa, 64 N.Y.2d 143, 147, 485 N.Y.S.2d 27 ("Even though a promise to pay may be spelled out from the parties' conduct, a contract between them may not be implied to provide `rough justice' and fasten liability on the State when applicable statutes expressly prohibit it . . . . The result may seem unjust but any other rule would completely frustrate statutes designed to protect the public from governmental misconduct or improvidence.")
The amended complaint fails to state plausible fraud claims against the Town based upon the alleged misrepresentations of Garry in the Harris Beach Letter, Mei in the Mei Letter and Genova in the SACA, relating to the validity and enforceability of the SACA, because, at most, those representations are mere "misstatement[s] of a matter of law presumed to be so well within the knowledge of plaintiff as to prevent if from being deceived thereby." Steiner Egg Noddle Co. v. City of New York, 63 Misc.2d 163, 165, 311 N.Y.S.2d 406 (N.Y. App. Term 1969). In other words, since, inter alia, the requirements of the New York Town Law § 64(6) are a matter of public record, plaintiff is charged with knowledge of the fact that Genova, as the then-Town Attorney, had no authority to execute the SACA, and that a valid and binding contract required Town Board approval
Moreover, it is undisputed that Genova did not have authority to execute the SACA and "an unauthorized act of a public official precludes an action for deceit[.]" Steiner, 63 Misc. 2d at 166; accord Brill v. Wagner, 5 Misc.2d 768, 770, 161 N.Y.S.2d 490 (N.Y. Sup. Ct. 1957); see also Lindlots Realty Corp. v. Suffolk County, 278 N.Y. 45, 53, 15 N.E.2d 393 (N.Y. 1938) (holding that the fact "that the plaintiff had no right to rely upon an unauthorized act of a public official, since the authority of [that official] was a matter of record and [the] plaintiff is conclusively presumed to have known the extent of th[at] authority[,] . . . may preclude an action for deceit, [although] it does not bar rescission."); Robinowitz v. City of White Plains, 245 A.D. 736, 738, 280 N.Y.S. 105 (N.Y. App. Div. 1935), aff'd, 269 N.Y. 670, 200 N.E. 50 (N.Y. 1936) (granting the defendant's motion to dismiss the plaintiff's fraud claims against the city on the basis, inter alia, that "[t]he alleged misrepresentations upon which the plaintiff [said] she relied [were] predicated upon the doing of acts beyond scope of the authority of the officials who, plaintiff claims, made them.") Plaintiff's conclusory allegations that Harris Beach, Mei and Genova acted "for the benefit of, and on behalf of," the Town, (see Am. Compl., ¶¶ 41 at pp. 14 and 16; ¶¶ 42 at pp. 17, 18, 19 and 21; and ¶ 37 at p. 22), in making the representations regarding the validity and enforceability of the SACA and related documents, are insufficient to state a plausible claim of reasonable reliance, particularly in light of the statutory limitation on the authority of municipal employees to enter into contracts and incur financial obligations. See Genesco Entm't, 593 F. Supp. at 749 (construing the plaintiff's claim that it reasonably relied on the representations of the deputy commissioner, the general counsel and the deputy general counsel of the City to be "a claim that the negotiating parties, although without actual authority, possessed apparent authority to enter into" the contract, but rejecting that claim on the basis that "New York courts do not generally follow the doctrine of apparent authority in cases involving municipal defendants . . . [because] [u]nlike a typical agency relationship, the authority of municipal officers is a matter of record to which the public has ready access."); NRP Holdings LLC v. City of Buffalo, No. 11-cv-472S, 2017 WL 745860, at * 13 (W.D.N.Y Feb. 27, 2017), appeal filed, No. 17-783 (2d Cir. Mar. 20, 2017) (finding that the plaintiff was not entitled to rely on the alleged promises in the . . . [l]etter [by a municipal official] . . . because [that official] did not have the authority to make unconditional promises. It is of little importance why the promise exceeded the agent's power-whether it was an illegal promise, . . . or required legislative approval, . . . the promise need only be outside the authority of the promisor."); cf. Board of Educ. of Plainedge Union Free Sch. Dist. v. Connecticut Gen. Life Ins. Co., 309 F.Supp.2d 416, 421 (E.D.N.Y. 2004) (holding that the principle "that apparent authority cannot bind a municipality[,] is limited to those circumstances where a municipal employee's authority is limited by statutes or regulations.") Accordingly, the branch of defendant's motion seeking dismissal of plaintiff's fraud claims against it pursuant to Rule 12(b)(6) is granted and plaintiff's fraud claims (eighth, ninth and twelfth causes of action) are dismissed in their entirety with prejudice for failure to state a claim for relief.
"[A] claim for negligent misrepresentation requires the plaintiff to demonstrate (1) the existence of a special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff; (2) that the information was incorrect; and (3) reasonable reliance on the information[.]" Mandarin Trading, 16 N.Y.3d at 180, 919 N.Y.S.2d 465 (quotations, alterations and citation omitted); see also Anschutz Corp. v. Merrill Lynch & Co., Inc., 690 F.3d 98, 114 (2d Cir. 2012) ("To state a claim for negligent misrepresentation under New York law, the plaintiff must allege that (1) the defendant had a duty, as a result of a special relationship, to give correct information; (2) the defendant made a false representation that he or she should have known was incorrect; (3) the information supplied in the representation was known by the defendant to be desired by the plaintiff for a serious purpose; (4) the plaintiff intended to rely and act upon it; and (5) the plaintiff reasonably relied on it to his or her detriment." (quotations and citation omitted)).
A claim for "innocent misrepresentation" is, in essence, a claim for "rescission based on fraud[,]" in which, "unlike a cause of action in damages on the same ground, proof of scienter and pecuniary loss is not needed." D'Angelo v. Bob Hastings Oldsmobile, Inc., 89 A.D.2d 785, 785, 453 N.Y.S.2d 503 (N.Y. App. Div. 1982), aff'd, 59 N.Y.2d 773, 464 N.Y.S.2d 724, 451 N.E.2d 471 (N.Y. 1983); see also Seneca Wire & Mfg. Co. v. A. Leach & Co., 247 N.Y. 1, 7-8, 159 N.E. 700 (1928) ("It is not necessary, in order that a contract may be rescinded for fraud or misrepresentation, that the party making the misrepresentation should have known that it was false. Innocent misrepresentation is sufficient, and this rule applies to actions at law based upon rescission as well as to actions for rescission in equity. . . . A distinction in the nature of the proof. . . does not exist between the action at law and the action in equity, but does exist between the action in rescission and the action for damages based upon fraud and deceit. Here there must be proof of willful and fraudulent misrepresentation, knowingly made, resulting in damage."); Jack Kelly Partners LLC v. Zegelstein, 140 A.D.3d 79, 85, 33 N.Y.S.3d 7 (N.Y. App. Div. 2016), lv. dismissed, 28 N.Y.3d 1103, 45 N.Y.S.2d 364, 68 N.E.3d 92 (N.Y. 2016) ("[F]raud sufficient to support the rescission requires only a misrepresentation that induces a party to enter into a contract resulting in some detriment; proof of scienter is not necessary and even an innocent misrepresentation is sufficient for rescission[.]"); Steen v. Bump, 233 A.D.2d 583, 584, 649 N.Y.S.2d 731 (N.Y. App. Div. 1996), lv. denied, 89 N.Y.2d 808, 655 N.Y.S.2d 887, 678 N.E.2d 500 (N.Y. 1997) ("When a party seeks rescission and not damages on the basis of fraud, proof of scienter is not necessary; even an innocent misrepresentation is sufficient for rescission[.]"); Dygert v. Leonard, 138 A.D.2d 793, 794, 525 N.Y.S.2d 436 (N.Y. App. Div. 1988) ("If the element of scienter is subtracted from a cause of action for fraud, the remainder constitutes innocent misrepresentation. . . . [I]nnocent misrepresentations may be sufficient to void a contract[.]") Thus, in order to state a claim for innocent misrepresentation, that plaintiff must allege "that (a) the defendant misrepresented material facts; (b) that th[o]se representations were made to induce the plaintiff to enter into the . . . agreement; and (c) that the plaintiff entered into the agreement . . . in justifiable reliance on the said misrepresentations[.]" Emerson Elec. Mfg. Co. v. Printed Motors, Inc., 252 N.Y.S.2d 600, 607-08 (N.Y. Sup. Ct. 1964); see also West Side Fed. Sav. & Loan Ass'n of New York City v. Hirschfeld, 101 A.D.2d 380, 385, 476 N.Y.S.2d 292 (N.Y. App. Div. 1984), lv. denied, 65 N.Y.2d 605, 493 N.Y.S.2d 1028, 482 N.E.2d 1230 (N.Y. 1985) (holding that in order to show innocent misrepresentation, the plaintiff must demonstrate "the misrepresentation by the defendants of a material fact made to induce the plaintiff to enter into the . . . agreement and upon which the plaintiff justifiably relied[.]"); Albany Motor Inn & Rest., Inc. v. Watkins, 85 A.D.2d 797, 798, 445 N.Y.S.2d 616 (N.Y. App. Div. 1981), lv. denied, 56 N.Y.2d 508, 453 N.Y.S.2d 1027, 439 N.E.2d 401 (N.Y. 1982) ("All that is required to state a cause of action for rescission of a contract based on fraud is to set forth the circumstances in detail showing that a false material misrepresentation was made and that plaintiff relied on the representation to his detriment.")
The amended complaint fails to state plausible claims for negligent and innocent misrepresentation, inter alia, for the same reason plaintiff's fraud claims fail, to wit, the amended complaint is devoid of any factual allegations from which it may reasonably be inferred that plaintiff justifiably relied upon the purported misrepresentations in the Harris Beach Letter, the Mei Letter and the SACA relating to the validity and enforceability of the SACA.
Furthermore, in the commercial context, liability for negligent misrepresentations, "is imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified." Crawford v. Franklin Credit Mgmt. Corp., 758 F.3d 473, 490 (2d Cir. 2014) (quotations, alterations and citation omitted). Since "an arm's length borrower-lender relationship [] does not support a cause of action for negligent misrepresentation[,] . . . even . . . if the parties are familiar or friendly[,]" Greenberg, Trager & Herbst, LLP v. HSBC Bank USA, 17 N.Y.3d 565, 578, 934 N.Y.S.2d 43, 958 N.E.2d 77 (N.Y. 2011), neither does the relationship between the lender and, in effect, the borrower's guarantor. See Fidelity Nat'l Title Ins. Co. v. N.Y. Land Title Agency LLC, 121 A.D.3d 401, 403, 994 N.Y.S.2d 76 (N.Y. App. Div. 2014) ("[A] special relationship of trust and confidence does not arise merely from an arm's-length business transaction . . . ." (quotations and citation omitted)); Bank Leumi Trust Co. of N.Y. v. Block 3102 Corp., 180 A.D.2d 588, 589, 580 N.Y.S.2d 299 (N.Y. App. Div. 1992), lv. denied, 80 N.Y.2d 754, 587 N.Y.S.2d 906, 600 N.E.2d 633 (N.Y. 1992) ("The legal relationship between a borrower and a bank is a contractual one of debtor and creditor and does not create a fiduciary relationship between the bank and its borrower or its guarantors.") Since plaintiff's negligent misrepresentation claims involve sophisticated parties, represented at all times by counsel during the transactions at issue, that entered into an arm's length business transaction, a finding of a special relationship is precluded.
Contrary to plaintiff's contention, the case RBS Citizens, N.A. v. Thorsen, 71 A.D.3d 1108, 898 N.Y.S.2d 219 (N.Y. App. Div. 2012), does not hold that "[t]he furnishing by counsel of an opinion establishes the existence of the `special relationship' required in order to plead a claim of negligent misrepresentation." (Plf. Opp. at 22). Rather, that case held: (1) that "[t]he plaintiff alleged the existence of certain facts which, if true, would establish that the defendant had a duty to use reasonable care to impact correct information to the plaintiff due to a special relationship existing between the parties[,]" id. at 1109 (quotations and citation omitted), without indicating what those "certain facts" were; and (2) that "[t]he plaintiff also alleged the existence of certain facts which, if true, would establish" the other elements of a negligent misrepresentation claim, i.e., that "certain `information' the defendant imparted to the plaintiff in an opinion letter was false, and that the plaintiff reasonably relied on that information[.]" Id. (quotations and citation omitted). Since the amended complaint does not allege any factual allegations from which a special relationship between plaintiff and defendant, or the element of justifiable reliance, may reasonably be inferred, the branch of defendant's motion seeking dismissal of plaintiff's negligent misrepresentation claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is granted and plaintiff's negligent misrepresentation claims are dismissed in their entirety with prejudice for failure to state a claim for relief.
For the reasons set forth above, defendant's motion to dismiss plaintiff's claims against it pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is granted to the extent set forth herein and plaintiff's claims against defendant in the amended complaint are dismissed in their entirety with prejudice for failure to state a claim for relief. The Clerk of the Court shall enter judgment in favor of defendant and close this case.
SO ORDERED.
