Khan v Arena Serv. Co., LLC

2024 NY Slip Op 32037(U)

June 18, 2024

Supreme Court, New York County

Docket Number: Index No. 150388/2023

Judge: Mary V. Rosado

Cases posted with a "30000" identifier, i.e., 2013 NY Slip

Op 30001(U), are republished from various New York

State and local government sources, including the New

York State Unified Court System's eCourts Service.

This opinion is uncorrected and not selected for official

publication.
NYSCEF DOC. NO. 19 

INDEX NO. 150388/2023 

RECEIVED NYSCEF: 06/18/2024 

SUPREME COURT OF THE STATE OF NEW YORK 

NEW YORK COUNTY 

PRESENT: HON. MARY V. ROSADO PART 33M 

Justice 

--------X INDEX NO. 150388/2023 

ASIF KHAN, MOTION DATE 02/02/2023 

Plaintiff, MOTION SEQ. NO. 001 

- V -

ARENA SERVICE CO., LLC, and QUAESTOR DECISION + ORDER ON ADVISORS, LLC, MOTION 

Defendants. 

X 

The following e-filed documents, listed by NYSCEF document number (Motion 001) 4, 5, 6, 7, 8, 9, 10, 

11, 12, 13, 14, 15, 16, 17, 18 

were read on this motion to/for DISMISS 

Upon the foregoing documents, and after oral argument which took place on November 

21, 2023 with Corey Stark, Esq. appearing for Plaintiff Asif Khan ("Plaintiff') and Patrick 

Lamparello, Esq. appearing for Defendants Arena Service Co., LLC ("ASC") and Quaestor 

Advisors, LLC ("Quaestor") (together "Defendants") 1, Defendants motion for an Order dismissing 

Plaintiff's Complaint is granted in part and denied in part. 

I. Background 

Defendants are asset managers who provide financial services to clients (NYSCEF Doc. 5 

at 7). Plaintiff was hired by Defendants to provide consultant services in May 2021, and was 

subsequently hired full time by Quaestor as Senior Vice President, of Hybrid Investments, with 

the Asset Management Team in September 2021 (NYSCEF Doc. 5 at 7). 

1 Defendants Arena and Quaestor are both wholly-owned subsidiaries of Arena Management Company LLC 

(NYSCEF Doc. 5 at n.2). 

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On January 13, 2023 Plaintiff commenced the underlying action by filing a Summons 

(NYSCEF Doc. 1) and Verified Complaint (NYSCEF Doc. 7) against Defendants alleging causes 

of action for (1) breach of contract, and (2) violation of the New York State Whistleblower 

Protection Law Section 740 of the New York Labor Law (NYSCEF Doc. 7). Specifically, Plaintiff 

alleges that in March 2022 he was terminated by Defendants for complaining about Defendants' 

fraudulent conduct, in violation of Defendants' whistle blower policy (the "Whistle blower Policy") 

(NYSCEF Doc. 17) and Labor Law§ 740. 

On February 2, 2023 Defendants brought the instant motion pursuant to CPLR 321 l(a)(l) 

and CPLR 3 211 ( a )(7) seeking ( 1) dismissal of Plaintiffs breach of contract claim on the ground 

that no contract between Plaintiff and Defendants exists, and (2) dismissal of Plaintiff's Labor Law 

§740 claim on the ground that Plaintiff failed to adequately plead a reasonable belief that 

Defendants were engageg in illegal conduct (NYSCEF Doc. 5 at 6). 

II. Discussion 

Preliminarily, while Defendants' Notice of Motion only references dismissal sought 

pursuant to CPLR 3211 (a)(7), as the Notice of Motion contains a general prayer for relief and both 

the moving and opposition papers proffer arguments with respect to documentary evidence, the 

Court, in its discretion, elects to also consider relief pursuant to CPLR 321 l(a)(l) (see Nehmadi v 

Davis, 95 AD3d 1181, 1184 [2d Dept 2012] quoting Siegel, Practice Commentaries, McKinney's 

Cons Laws of NY, Book 7B, CPLR C2214:5 at 84, holding that "[t]he Court may grant relief, 

pursuant to a general prayer contained in the notice of motion ... other than that specifically asked 

for, to such an extent as is warranted by the facts plainly appearing [in] the papers on both sides. 

It may do so if the relief granted is not too dramatically unlike the relief sought, and if the proof 

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offered supports it and the court is satisfied that no one has been prejudiced by the formal omission 

to demand it specifically"). 

Under CPLR 321 l(a)(7), "[a] party may move for judgment dismissing one or more causes 

of action asserted against him on the ground that ... the pleading fails to state a cause of action .... " 

In considering a motion pursuant to CPLR 3211 ( a)(7) to dismiss a complaint for failure to state a 

cause of action, "the court must give the pleading a liberal construction, accept the facts alleged in 

the complaint to be true and afford the plaintiff the benefit of every possible favorable inference" 

(JP. Morgan Sec. Inc. v Vigilant Ins. Co. 21 NY3d 324, 334 [2013]). "[T]he sole criterion is 

whether the pleading states a cause of action, and therefore if from its four corners factual 

allegations are discerned which if taken together can manifest any cause of action, a motion for 

dismissal must fail" (Kusher v King 126 AD2d 446, 467 [1st Dept 1987]). 

Dismissal of a claim pursuant to CPLR 321 l(a)(l) "is warranted only if the documentary 

evidence submitted conclusively establishes a defense to the asserted claims as a matter of law" 

(Leon v Martinez, 84 NY2d 83, 88 [1994]). The First Department has held that "if the defendant's 

evidence establishes that the plaintiff has no cause of action (i.e., that a well-pleaded cognizable 

claim is flatly rejected by the documentary evidence), dismissal would be appropriate" (Basis Yield 

Alpha Fund (Master) v Goldman Sachs Group, Inc., 115 AD3d 128, 135 [1st Dept 2014]). 

Further, while an attorney affirmation is of no probative value, it is well established that 

"an affidavit from an individual, even if the person has no personal knowledge of the facts, may 

properly serve as the vehicle for the submission of acceptable attachments which provide 

evidentiary proof in admissible form, like documentary evidence. In such situations, the affidavit 

itself is not considered evidence; it merely serves as a vehicle to introduce documentary evidence 

to the court" (Basis Yield Alpha Fund (Master) v Goldman Sachs Group, Inc., 115 AD2d 128, n 4 

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[1st Dept 2014]). However, the First Department has held that a paper will qualify as documentary 

evidence only if it satisfies the following: "(1) it is 'unambiguous'; (2) it is of 'undisputed 

authenticity'; and (3) its contents are 'essentially undeniable"' (VXI Lux Holdco S.A.R.L. v SIC 

Holdings, LLC, 171 AD3d 189, 193 [1st Dept 2019] citing (Fontanetta v John Doe I, 73 AD3d 

78, 86, 87 [2d Dept 201 0]). 

1. Defendants Motion to Dismiss Plaintiff's Breach of Contract Claim is Granted 

Here, Plaintiff alleges that by terminating Plaintiff's employment in retaliation for his 

complaints about Defendants' illegal conduct, Defendants breached an implied contract created by 

the Whistleblower Policy (NYSCEF Doc. 7 at,, 47-58). 

Preliminarily, "absent an agreement establishing a fixed duration, an employment 

relationship is presumed to be a hiring at will, terminable at any time by either party" (Sabetay v 

Sterline Drug, 69 NY2d 329, 333 [1987]). While New York Courts "recognize an action for breach 

of contract when plaintiff can show that the employer made its employee aware of an express 

written policy limiting the right of discharge and the employee detrimentally relied on that 

policy ... ," the Court of Appeals has held that "[r]outinely issued employee manuals, handbooks 

and policy statements should not lightly be converted into binding employment 

agreements ... [which] would subject employers who have developed written policies to liability 

for breach of employment contracts upon the mere allegation of reliance on a particular provision" 

Lobosco v NY Tel. Company/NYNEX, 96 NY2d 312, 316-317 [2001]). 

Further, in Matter of Thomas v MasterCard Advisors, LLC, the First Department held that 

a plaintiff does not have a viable claim for wrongful termination in violation of an employee 

handbook where a disclaimer included in the plaintiff's Code of Conduct establishes that "the Code 

of Conduct [ and] Employee Handbook ... are not contracts of employment and are not intended to 

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create any implied promises or guarantees of fixed terms of employment" (Matter of Thomas v 

MasterCard Advisors, LLC, 74 AD3d 464,465 [1st Dept 2010]). 

Here, Plaintiff alleges that he was made aware of and relied on the Whistle blower Policy 

(NYSCEF Doc. 7 at i1i130-31 ). Further, the "Non-Retaliation" provision of the Whistle blower 

Policy explicitly limits Defendants' right of discharge (NYSCEF Doc. 17 at 4). However, in 

support of their motion to dismiss, Defendants attach, as documentary evidence, an offer letter sent 

by Quaestor to Plaintiff and signed by Plaintiff on August 10, 2021 (the "Offer Letter") which 

states, inter alia: 

[w]hile this letter agreement is intended to summarize our offer, it 

shall not be used to interpret or in any way govern the terms of your 

employment relationship with Arena except to exclude terms 

inconsistent with it. You understand that you will be an at-will 

employee and that either you or Arena may terminate the 

relationship at will, with or without cause, at any time (NYSCEF 

Doc. 8 at 2). 

Defendants also attach Defendants' Employee Handbook dated January 2020, which states: 

[n]either this handbook nor any other verbal or written 

communication by a management representative is, nor should it be 

considered to be, an agreement, contract of employment, express or 

implied, or a promise of treatment in any particular manner in any 

given situation, nor does it confer any contractual rights whatsoever. 

Arena Management Company, LLC adheres to the policy of 

employment at will, which permits the Company or the employee to 

end the employment relationship at any time, for any reason, with 

or without cause or notice (NYSCEF Doc. 9 at 2). 

Together, the 2020 Employee Handbook and Plaintiff's August 2021 Offer Letter 

explicitly state that Plaintiff is an employee at will who may be terminated at any time, with or 

without cause, and that no written or verbal communications shall be considered either express or 

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implied contracts of employment (NYSCEF Docs. 8-9). 2 These disclaimers prevent the creation 

of a contractual relationship and negate any protection from termination that Plaintiff may have 

inferred from the Whistleblower Policy. 

In light of the foregoing, the Court finds that Defendants have proffered sufficient 

documentary evidence to establish that there was no employment agreement between Plaintiff and 

Defendants. Accordingly, Defendants' motion to dismiss Plaintiff breach of contract claim is 

granted. 

11. Defendants' Motion to Dismiss Plaintiffs Claim for Violation of Labor Law §740 is 

Denied 

Here, Defendants argue that Plaintiffs claim for violation of Labor Law §740 must be 

dismissed because Plaintiff failed to allege that he disclosed a policy, activity or practice of 

Defendants that Plaintiff reasonable believed to be in violation of law, rule or regulation, and 

because Plaintiff failed to specify any factual basis for his belief that a law, rule or regulation was 

violated (NYSCEF Doc. 5 at 15). 

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2 As the accuracy of Defendants' documentary evidence is attested to in the affirmation of Defendants' counsel and 

there is no opposition or dispute in the record regarding the authenticity of these documents, the Court finds that a 

proper foundation has been laid for admission of these documents as evidence. 

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Labor Law § 740 "prohibits 'retaliatory personnel action' against an employee who 

undertakes to disclose conduct in violation of any law or regulation, who furnishes information to 

an investigatory body in regard to such activity or who refuses to participate in such activity" 

(Seung Won lee v Woori Bank, NY Agency, 131 AD3d 273,277 [1st Dept 2015]). Specifically, 

Labor Law§ 740(2)(a) states that: 

[ a ]n employer shall not take any retaliatory action against an 

employee, whether or not within the scope of the employee's job 

duties, because such employee does any of the following: (a) 

discloses, or threatens to disclose to a supervisor or to a public body 

an activity, policy or practice of the employer that the employee 

reasonably believes is in violation of law, rule or regulation or that 

the employee reasonably believes poses a substantial and specific 

danger to the public health or safety. 

Further, the First Department has held that "[t]h provisions of Labor Law § 740 regarding 

retaliatory discharge are to be strictly construed" ( Cotrone v Consolidate Edison Co. of NY, Inc., 

50 AD3d 354 [1st Dept 2008]). 

Effective January 26, 2022 "Labor Law§ 740 was amended to, among other things, protect 

employees who disclose or threaten to disclose a practice than an employee 'reasonably believes 

is in violation oflaw, rule or regulation or that the employee reasonably believes poses a substantial 

and specific danger to the public health or safety" (Clendenin v VOA of AM - Greater NY Inc., 

214 AD3d 496,497 [1st Dept 2023]). However, as Plaintiffs alleged whistleblowing disclosures 

were made in 2021, prior to the enactment of the 2022 amendment, the pre-amendment standard 

applies (Id.). 

Prior to the 2022 amendment, to succeed on a cause of action for violation of Labor Law 

§ 740 the "plaintiff has the burden of proving that an actual violation occurred, as opposed to 

merely establishing that the plaintiff possessed a reasonable belief that a violation occurred. And, 

the violation must be of the kind that creates a substantial and specific danger to the public health 

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or safety" (Webb-Weber v Community Action for Human Servs., Inc., 23 NY3d 448, 452-453 

[2014]). For pleading purposes, the Court of Appeals has held that "the complaint need not specify 

the actual law, rule or regulation violated, although it must identify the particular activities, policies 

or practices in which the employer allegedly engaged, so that the complaint provided the employer 

with notice of the alleged complained-of-conduct" (Id. at 453). 

Plaintiff alleges in his Complaint that "Defendants were engaging in illegal and fraudulent 

conduct through a pump-and-dump scheme concerning two shell companies ... in which 

Defendants were heavily invested" (NYSCEF Doc. 7 at ,r 36). Plaintiff Complaint goes on to define 

a "pump-and-dump scheme" as an instance "when a fraudster deliberately buys shares of a very 

low-priced, thinly traded stock, then spreads false or misleading information to pump up the 

stock's price, then dumps its shares, causing the price to fall, leaving other investors with worthless 

or nearly worthless shares of stock" (Id.). Further, Plaintiff alleges that Defendants engaged in a 

"scheme of misrepresenting unrealized gains for shares that were very illiquid and not marketable 

to investors in order to inflate artificially and fraudulently Defendants' performance record" 

(NYSCEF Doc. 7 at ,r 40). Moreover, Plaintiff alleges that in October and November of 2021 he 

disclosed Defendants' illegal acts to Arena's Executive Director Daniel Zwirn; Managing Director 

and President of Quaestor John Felleter and his temporary supervisor, Vincent De Vito (NYSCEF 

Doc. 7 at ,r 34-41 ). 

The facts at bar are similar to those in Demir v Sandoz Inc., 155 AD3d 464 [2017] where 

the Court held that "plaintiff adequately pleaded a Labor Law § 740 violation against defendants 

in alleging that its manufacturer and procurement of chemical ingredients for defendants' highest 

grossing product was not compliant with FDA regulatory requirements governing the drug's safety 

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and efficacy, and she need not plead an actual violation of laws or regulations" (Demir v Sandoz 

Inc., 155 AD3d 464 [2017]). 

In light of the foregoing, according Plaintiff the benefit of every possible favorable 

inference, the Court finds that Plaintiffs pleading sufficiently identifies the specific activities, 

policies or practices Defendant engaged in which constitute violations, and sufficiently alleges that 

Plaintiff disclosed these violations to Defendants. As such, Defendants' motion to dismiss 

Plaintiffs cause of action for violation of Labor Law§ 740 is denied. 

Accordingly, it is hereby, 

ORDERED that Defendants Arena Service Co., LLC and Quaestor Advisors, LLC's 

motion to dismiss Plaintiff Asif Khan's Labor Law § 7 40 claim is denied; and it is further 

ORDERED that Defendants Arena Service Co., LLC and Quaestor Advisors, LLC's 

motion to dismiss Plaintiff Asif Khan's breach of contract claim is granted; and it is further 

ORDERED that on or before July 23, 2024, the parties are directed to submit a proposed 

Preliminary Conference Order to the Court via e-mail to SFC-Part33-Clerk@nycourts.gov. If the 

parties are unable to agree to a proposed Preliminary Conference Order, the parties are directed to 

appear for an in-person preliminary conference with the Court in Room 442, 60 Centre Street, on 

July 24, 2024 at 9:30 a.m.; and it is further 

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ORDERED that within 10 days of entry, counsel for Plaintiff Asif Khan shall serve a copy 

of this Decision and Order, with notice of entry, on all parties to this case; and it is further 

ORDERED that the Clerk of the Court is directed to enter judgment accordingly. 

This constitutes the Decision and Order of the Court. 

6/18/2024 

DATE 

CHECK ONE: CASE DISPOSED 

GRANTED □ DENIED 

APPLICATION: SETTLE ORDER 

CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN 

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Motion No. 001 

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RY V. ROSADO, J.S.C. 

X NON-FINAL DISPOSITION 

X GRANTED IN PART □ OTHER 

SUBMIT ORDER 

FIDUCIARY APPOINTMENT □ REFERENCE 

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