Imperium Blue Acquisition Partners, LLC v

Marathon Asset Mgt., L.P.

2024 NY Slip Op 33042(U)

August 28, 2024

Supreme Court, New York County

Docket Number: Index No. 650497/2024

Judge: Margaret A. Chan

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.
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PRESENT: 

SUPREME COURT OF THE STATE OF NEW YORK 

NEW YORK COUNTY 

HON. MARGARET A. CHAN PART 

Justice 

49M 

-------------------X INDEX NO. 650497/2024 

IMPERIUM BLUE ACQUISITION PARTNERS, LLC, 

IMPERIUM BLUE TAHOE, LLC, IMPERIUM BLUE TAHOE 

HOLDINGS, LLC 

Plaintiffs, 

-vMARATHON ASSET MANAGEMENT, LP., MARATHON 

REAL ESTATE ACQUISITION II, LLC, 

Defendants. 

-------------------X 

MOTION DATE 03/22/2024 

MOTION SEQ. NO. 001 

DECISION + ORDER ON 

MOTION 

The following e-filed documents, listed by NYSCEF document number (Motion 001) 7, 8, 9, 10, 11, 12, 

13, 19,20,21 

were read on this motion to/for DISMISS 

Plaintiffs Imperium Blue Acquisition Partners, LLC, Imperium Blue Tahoe, 

LLC, and Imperium Blue Tahoe Holdings, LLC. (together, Imperium) are a Florida· 

based investment firm with a focus in resort properties. When plaintiffs entered 

into a purchase agreement with a non-party seller on July 28, 2021, to buy a resort 

property in South Lake Tahoe, CA, plaintiffs selected defendants Marathon Asset 

Management, LP and Marathon Real Estate Acquisition II, LLC (Marathon) for a 

$24,750,000 loan to finance this purchase. The purchase agreement had a strict 

closing date of December 6, 2021. Plaintiffs claim that defendants represented to 

them that because plaintiffs had prior loan transactions with them, defendants will 

exercise best efforts to timely close. Defendants failed to do so, requiring plaintiffs 

to quickly seek another lender and at a higher rate and additional costs. Plaintiffs 

therefore brings this action to recover the $75,000 deposit they had paid to 

defendants for the loan as well as damages in more than $3 million that were 

allegedly caused by defendants. Plaintiffs' complaint alleges causes of action1 for 

fraud; breach of good faith obligations; promissory estoppel; and breach of contract. 

Defendants now move to dismiss the complaint. 

For the reasons stated below, defendants' motion is granted in part and 

denied in part. 

1 Plaintiffs withdrew two causes of action: tortious interference with a prospective 

economic advantage, and unjust enrichment (NYSCEF # 19, Plfts' MOL at 5). 

650497/2024 IMPERIUM BLUE ACQUISITION PARTNERS, LLC ET AL vs. MARA THON ASSET 

MANAGEMENT, L.P. ET AL 

Motion No. 001 

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BACKGROUND 

In May 2021, plaintiffs submitted an offer to purchase resort properties from 

non·party sellers for$ 33 million (id. ,r 15). The sellers ultimately opted for another 

buyer. But that deal fell through, so the sellers returned to plaintiffs and sweetened 

the deal on the condition that plaintiffs close the transaction by the end of 2021. 

Plaintiffs entered into a term sheet with the sellers on July 28, 2021 (id ,r 16). 

To finance the transaction, plaintiffs explored a number of lenders but 

ultimately chose defendants because the parties had executed similar transactions 

in the past and, critically, defendants promised to streamline the closing by re-using 

paperwork from the parties' prior deals to forgo ALTA survey requirements, as it 

had done on prior deals (id ,r 18). 

On November 2, 2021, after the parties in this action reached a preliminary 

financing agreement, plaintiffs entered into a purchase agreement with the sellers 

contracting to close the transaction on or before December 6, 2021 (id ,r 25). That 

same day, the parties signed a term sheet wherein defendants agreed to exercise 

best efforts to close the transaction on or before December 6, 2021 (id ,r 29; Plfts' 

MOL at 3). Plaintiffs then gave defendants the required $75,000 good faith deposit 

as specified under the terms of the term sheet (id ,r 29). 

On November 3, 2021, defendants made their first diligence requests from 

the plaintiffs, and, on November 4, defendants began requesting the ALTA surveys 

that it had allegedly promised not to require of plaintiffs (id). From that point on, 

according to plaintiffs, defendants continued "piling on surprise requests" that 

deviated considerably from both defendants' representations to plaintiffs and the 

way that they had handled prior deals (id ,r,r 31-32). Because plaintiffs found such 

requests to be unreasonable and a departure from defendants' recent promises, 

plaintiffs sought to terminate the transaction (id ,r 34). Defendants insisted that 

they would "do everything in their power to make [the deal] work for [plaintiffs'] 

team" (id ,r 36). Plaintiffs agreed to continue the transaction as long as defendants 

honored their word (id ,r 38). 

After the parties agreed to continue the transaction, plaintiffs obtained the 

ALTA surveys allegedly at significant effort and expense (id ,r 48). Defendants then 

told plaintiffs that the December 6 closing date would be impossible and proposed a 

January 22, 2022 closing date (id ,r 53). Plaintiffs reminded defendants that a 2022 

closing would be impossible because of their purchase agreement with the sellers to 

close by December 6, 2021 (id). Although defendants told plaintiffs that it would be 

impossible to close, they inexplicably told plaintiffs that the draft loan documents 

"should be out tomorrow" (id ,r 54). 

650497/2024 IMPERIUM BLUE ACQUISITION PARTNERS, LLC ET AL vs. MARATHON ASSET 

MANAGEMENT, LP. ET AL 

Motion No. 001 

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On November 23, 2021, rather than sending the loan agreement draft to 

plaintiffs, defendants simply told them that it would be impossible to close by the 

end of the year (id ,r 56). Plaintiffs, in response, requested to terminate the 

transaction for the second time (id ,r 57). Defendants insisted that plaintiffs contact 

the sellers to buy more time on the deal so that they could close (id ,r 58). Plaintiffs 

contacted the sellers, who agreed to a one·week extension to December 13, but 

defendants indicated that they still could not commit to that date (id ,r 59). 

Plaintiffs then demanded a refund of their $75,000 good faith deposit from 

defendants, who counter-offered returning $65,850 on the condition that plaintiffs 

release defendants from any and all future claims (id ,r 56). Plaintiffs refused (id). 

After the expiration of the exclusivity period between the parties, plaintiffs 

sought alternative financing, eventually obtaining a costly bridge loan (id ,r,r 67-

69). Plaintiffs then negotiated with the sellers to push the close date out to 

December 30, 2021, which the sellers agreed to on the condition that plaintiffs make 

costly concessions (id). On March 30, 2022, plaintiffs obtained financing from 

another non-party lender to pay off the costly bridge loan (id ,r 70). 

According to plaintiffs, defendants' delays were intentional and in bad faith 

(id ,r 74). Plaintiffs claim that defendants were only delaying the transaction 

because defendants had reached their maximum collateralized loan obligation limit 

for 2021 and therefore needed to push the closing out to 2022 (id). Plaintiffs posit 

that defendants had known all along that they would be unable to close the 

transaction by 2021 but made false promises to plaintiffs just to secure the 

transaction in the hopes of persuading plaintiffs to push the closing date out to 2022 

when defendants' loan limit would renew (id) 

Plaintiffs bring this action against defendants alleging (1) fraud, (2) breach of 

good faith obligation, (3) promissory estoppel, and (4) breach of contract (Complaint 

,r,r 23-28). In its opposition, plaintiffs withdrew the causes of action for tortious 

interference with a prospective economic advantage and unjust enrichment (Plfts' 

MOL at 5). Each cause of action will be addressed in turn below. 

Legal Standard 

On a CPLR 3211(a)(7) motion to dismiss, the court must afford the pleadings 

a liberal construction, accept the allegations of the complaint as true and provide 

the plaintiffs with "the benefit of every possible favorable inference" (Leon v 

Martinez, 84 NY2d 83, 87 [1994]). A motion to dismiss pursuant to CPLR 3211(a)(l) 

may be appropriately granted "only if the documentary evidence submitted 

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

(Morgenthow & Latham v Bank of N. Y. Co., Inc., 305 AD2d 7 4, 78 [1st Dept 2003] 

[internal citations and quotations omitted]). Under these circumstances, "legal 

conclusions and factual allegations [in the complaint] are flatly contradicted by 

650497/2024 IMPERIUM BLUE ACQUISITION PARTNERS, LLC ET AL vs. MARATHON ASSET 

MANAGEMENT, LP. ET AL 

Motion No. 001 

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documentary evidence [such that] they are not presumed to be true or accorded 

every favorable inference" [international citations and quotation omitted] (id at 78). 

DISCUSSION 

Plaintiffs and defendants have a fundamental disagreement about what is in 

dispute. Defendants argue that "[t]his case begins and ends with a Term Sheet" 

(Dfts' MOL at 7), but plaintiffs contend that "[tlhis is not a case that rises and falls 

with a Term Sheet" (Plfts' MOL at 5). Defendants paint this case as one in which 

they were not contractually bound to fulfill the terms of a term sheet, whereas 

plaintiffs are painting it as one in which defendants fraudulently induced them into 

an exclusive relationship with defendants, thereby barring them from actively 

pursuing other lending opportunities. And in the end, defendants allegedly cost 

plaintiffs $ 3 million in damages. 

Fraud 

Defendants argue that plaintiffs' fraud claim should be dismissed because the 

parties had signed the term sheet which clearly states that it is not a binding 

agreement. Defendants cite the following provision from the term sheet: 

"Under no circumstances should the terms and conditions contained herein 

constitute or be deemed to constitute a legally binding commitment on the part 

of [Marathon] or any of its affiliates, nor shall they be construed as an offer or 

undertaking by [Marathon] to issue, arrange or negotiate a commitment for 

the Proposed Financing or any other financing, or any commitment, offer, 

undertaking or agreement of any kind." 

(id). Defendants argue that plaintiffs cannot reasonably rely on an agreement that 

is non-binding (NYSCEF # 8- Dfts' MOL at 1). 

Plaintiffs, on the other hand, argue that defendants are mis-reading the 

Complaint because plaintiffs are not premising their causes of action on defendants' 

failure to complete the financing pursuant to the term sheet (Plfts' MOL at 7). 

Instead, plaintiffs argue, defendants' repeated misrepresentations and omissions 

that they would "expedite the underwriting process, would re·use former 

documentation and omit certain conditions to do so, and would use best efforts to 

meet deadlines it did not have any intention of meeting" form the basis of their 

Complaint (id). In other words, plaintiffs are not bringing this lawsuit because of 

defendants' failure to fulfill the financing pursuant to the term sheet but instead 

because defendants had induced plaintiffs to enter into an exclusive business 

relationship with defendants by using a series of misrepresentations and omissions. 

Plaintiffs point to the following omission: the true reason that defendants 

were "piling on surprise requests" and requesting diligence items that defendants 

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MANAGEMENT, L.P. ET AL 

Motion No. 001 

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promised it would not need is that defendants had maximized their collateralized 

loan obligation for 2021, and therefore needed to push the closing date out to 2022 

(id ,r 74). Defendants' repeated misrepresentations and omissions allegedly 

resulted in a $3-million injury to the plaintiffs since plaintiffs had to re-negotiate 

extensions with the seller, acquire a costly bridge loan, and then enter into a new 

financing agreement with a new lender, who eventually closed the transaction (id 

,r,r 70-72). 

Under CPLR 3016(b), "the circumstances constituting the wrong shall be 

stated in detail." [1st Dept 2020]). "To state a cause of action for fraud, a plaintiff 

must allege 'a material misrepresentation of a fact, knowledge of its falsity, an 

intent to induce reliance, justifiable reliance by the plaintiff and damages' [citations 

omitted]" (Cohen Brothers Realty Corp. v Mapes, 181 AD3d 401, 404 [1st Dept 

2020]). Additionally, "material omissions of fact" can also constitute an element of 

fraud just as material misrepresentations can (Mandarin Trading Ltd v 

Wildenstein, 16 NY3d 173, 178 [2011]). 

Here, plaintiffs sufficiently allege a claim for fraud: defendants' omissions 

and misrepresentations induced plaintiffs to initially secure and then help expedite 

a loan, when defendants' had motives to push the closing past December 2021, 

which caused plaintiffs injury (see Held v Kaufman, 91 NY2d 425, 431 [1998] ["[t]o 

state a cause of action for fraud, a plaintiff must show an intentional 

misrepresentation of a material fact resulting in some injury"]). While plaintiffs 

plead reasonable reliance on defendants' misrepresentations in a general manner, it 

is sufficient to withstand a motion to dismiss at this pre-discovery stage (Cohen 

Brothers Realty Corp., 181 AD3d at 404 ["Actual knowledge . . . need only be 

pleaded generally, [given], particularly at the pre-discovery stage, that a plaintiff 

lacks access to the very discovery materials which would illuminate a defendant's 

state of mind" [internal citations omitted]). Moreover, as alleged, defendants' motive 

for pushing out the closing date was that defendants had maximized their loan 

obligation for the year. Defendants' underlying motives are within defendants' 

knowledge, and plaintiffs are ill-equipped to show those facts at this pre-discovery 

stage (Jared Contracting Corp. v New York City Transit Authority, 22 NY2d 187, 

194 [1968] ["[i]t is almost impossible to state in detail the circumstances 

constituting a fraud where those circumstances are peculiarly within the knowledge 

of the party against whom the defense is being asserted."]). 

Defendants present an argument in the alternative that plaintiffs' fraud 

claim is premised on a breach of contract claim and that "[cllaims arising out of 

breaches of contracts are not cognizable as fraud" (Dfts' MOL at 9). Again, plaintiffs 

are not premising their claims on the term sheet but on the material omissions and 

misrepresentations that defendants are alleged to have made not only in the lead· 

up to the signing of the term sheet but also each time that plaintiffs attempted to 

terminate the transaction. Moreover, if the term sheet is a non-binding contract, as 

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MANAGEMENT, L.P. ET AL 

Motion No. 001 

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defendants assert, then it is not possible for the fraud claim to arise out of any 

contractual duty since there would be no contractual duty. The branch of 

defendants' motion to dismiss plaintiffs' fraud claim is denied. 

Breach of Good Faith Obligation & Contract 

In New York, "causes of action based upon breach of the covenant of good 

faith and fair dealing cannot be sustained absent a contractual obligation between 

the parties" (Parkmerced Invs., LLC v We Work Cos. LLC, 217 AD3d 531, 532 [1st 

Dept 2023], citing Duration Mun. Fund L.P. vJ.P. Morgan Sec. Inc., 77 AD3d 474, 

474-475 [1st Dept 2010]). "Absent the existence of a contract, a claim alleging 

breach of the implied covenant of good faith and fair dealing is legally unavailing 

[citations omitted]" (Keefe v New York Law School, 71 AD3d 569 [1st 2010]; see also 

King Penguin Opportunity Fund III, LLC v Spectrum Group Management LLC, 187 

AD3d 688, 690 [1st Dept 2020]). 

Here, defendants argue that because the term sheet explicitly states that 

"[u]nder no circumstances should the terms and conditions contained herein 

constitute or be deemed to constitute a legally binding commitment ... " (NYSCEF # 

11, Exh B to Dfts' MOL), the term sheet itself is not an unenforceable contract and, 

therefore, cannot be breached. Likewise, because there is no contract, there is no 

implied covenant of good faith, which does not exist in the absence of a contract 

(Dfts' MOL at 12-13). Defendants note that "no claims based on conditions 

explicitly addressed in the Term Sheet can succeed" (Dfts' MOL at 20). 

Plaintiffs, on the other hand, argue that even if the term sheet itself is 

unenforceable, there existed an oral agreement between the parties that arose once 

plaintiffs attempted to terminate the agreement and defendants orally induced 

them to forgo the termination with redoubled promises to use best effort to close the 

transaction (Pltfs' MOL at 13-16). Thus, plaintiffs argue that, even if the term 

sheet in not binding as far as completing the financing, defendants were 

nonetheless bound underwriting the financing in good faith (Pltfs' MOL at 14). 

Plaintiffs also claim that defendants formed an oral contract by reassuring 

plaintiffs that they would be able to fulfill the terms of the contract. 

However, because there is clear and unambiguous language in the term sheet 

outlining that the term sheet is non-binding and unenforceable, plaintiffs' argument 

that there is at minimum an implied good faith obligation in the term sheet is 

circuitous and unavailing. Further, plaintiff's argument that defendants' re· 

assurance to fulfill a contract that is already non-binding does not create a separate 

binding oral contract. 

The branch of defendants' motion to dismiss the breach of contract and good 

faith obligation claims are granted. 

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MANAGEMENT, LP. ET AL 

Motion No. 001 

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Promissory Estoppel 

To establish a claim for promissory estoppel, a plaintiff must show (i) a 

sufficiently clear and unambiguous promise; (ii) reasonable reliance on the promise; 

and (iii) injury caused by the reliance [citations omitted]" (Caselloti v Free, 138 

AD3d 198, 204 [1st Dept 2016]). While plaintiff must show in detail each of these 

elements, at this pre-discovery stage, however, "no such showing is required to 

survive a motion to dismiss pursuant to CPLR § 3211(a)(7)" ( Villacorta v Saks Inc., 

2011 NY Slip Op 51160(U) at 12 [Sup Ct, NY County 2011]). 

Defendants', in arguing dismissal for plaintiffs' promissory estoppel cause of 

action, rely on Star Vest Partners II, L.P. v Em portal, Inc.: 

"Where a term sheet or other preliminary agreement explicitly requires the 

execution of a further written agreement before any party is contractually 

bound, it is unreasonable as a matter of law for a party to rely upon the other 

party's promises to proceed with the transaction in the absence of that further 

written agreement." 

(101 AD3d 610, 613 [1st Dept 2012]; Dfts' MOL at 17). Defendants insist that the 

term sheet expressly conditions any completion of the financing on "due diligence 

review, the result of which must be satisfactory to [defendants] in [their] sole 

discretion' and makes plain that [defendants are] under no binding legal obligation 

to complete the Proposed Financing" (Dfts' MOL at 17). Plaintiffs reiterate that 

defendants are misreading their complaint and misrepresenting their position 

(Plfts' MOL at 16-17). 

Plaintiffs again point out that their position is not based on the term sheet; 

rather, they would not have selected defendants as their lender but for defendants' 

representations that they would expedite the transaction through the re-use of prior 

diligence materials and the waiver of ALTA land surveys. Plaintiffs also point out 

that when they attempted to terminate the deal not once but twice, defendants 

made continuing assurances that they would exercise best efforts to close and "meet 

the December 6, 2021 deadline" (Complaint ,r,r 46-47). But more than just the mere 

blanket assurance, plaintiffs allege that defendants assured plaintiffs that they 

would take certain steps to expedite the transaction and exercise best efforts, 

especially upon each of the two times plaintiffs tried to terminate the loan deal. 

However, defendants allegedly took none of the promised steps and, moreover, could 

not exercise best efforts since it was allegedly impeding the closing on purpose to 

buy themselves time to close in 2022. 

Here, plaintiff has adequately shown that there is a clear and unambiguous 

promise that defendants would expedite the loan transaction for a closing in 

December 2021. It is undisputed that the parties had conducted prior deals together 

and defendants had foregone the ALTA surveys and other diligence materials for 

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plaintiffs in the past. Such prior conduct would have further induced plaintiffs to 

rely on defendants' promise that they would do the same for the similar transaction 

intended to close on December 6, 2021. 

As for the alleged$ 3 million injury, plaintiffs make clear that once the 

transaction with defendants broke down, they needed to obtain costly bridge 

financing and extensions from the sellers, ultimately closing the financing 

transaction on December 30, 2021 (id ,r 69). Plaintiffs then had to pursue another 

lender in 2022 to pay off the bridge financing by March 30, 2022 and incurred more 

costs (id ,r,r 70-71). Considering that the closing with the new lenders occurred in 

2021, plaintiffs have adequately alleged a causality here between defendants' 

actions and the injury suffered by plaintiffs. 

At this pre-discovery and pre-answer stage in the proceedings, plaintiffs' 

cause of action for promissory estoppel survives defendants' motion to dismiss. 

CONCLUSION 

Accordingly, it is here by 

ORDERED that defendants' motion to dismiss is granted only to the extent 

that count two (good faith obligation), count three (tortious interference with 

prospective economic advantage), count five (unjust enrichment [quantum meruitD, 

and count six (breach of contract) are granted; and it is further 

ORDERED that the branches of defendants' motion to dismiss is denied as to 

count one (fraud) and count four (promissory estoppel); and it is further 

ORDERED that defendants have 30 days from the date of this Decision and 

Order to file their Answer to plaintiffs' complaint; and it is further 

ORDERED that counsel for plaintiff shall serve a copy of this decision, along 

with notice of entry, on the defendants within 10 days of this filing. 

08/28/2024 

DATE 

CHECK ONE: 

MARGARET A. CHAN, J.S.C. 

APPLICATION: 

CHECK IF APPROPRIATE: 

CASE DISPOSED 

GRANTED □ DENIED 

SETTLE ORDER 

INCLUDES TRANSFER/REASSIGN 

NON-FINAL DISPOSITION 

GRANTED IN PART 

SUBMIT ORDER 

FIDUCIARY APPOINTMENT 

65049712024 IMPERIUM BLUE ACQUISITION PARTNERS, LLC ET AL vs. MARATHON ASSET 

MANAGEMENT, LP. ET AL 

Motion No. 001 

□ OTHER 

□ REFERENCE 

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