Source: https://law.justia.com/cases/new-york/other-courts/2011/2011-51776.html
Timestamp: 2019-04-23 08:46:54+00:00

Document:
[*1] Mandel Airplane Funding & Leasing Corp. v Laserline Props. II, LLC 2011 NY Slip Op 51776(U) Decided on October 3, 2011 Supreme Court, Suffolk County Pines, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.
Laserline Properties II, LLC, LASERLINE LEASE FINANCE CORP., LASERLINE - VULCAN ENERGY LEASING., LLC., WILLIAM M. EDDINGTON a/k/a W.M. EDDINGTON a/k/a MARK EDDINGTON a/k/a W. MARK EDDINGTON and ROBERT C. ANDREASEN, Defendants.
237 West 35th Street, 14th Fl.
By: Steven R. Popofsky, Esq.
In this action, the plaintiff, Mandel Airplane Funding and Leasing Corporation ("Plaintiff") asserts causes of action for an accounting, breach of fiduciary duty, breach of contract and unjust enrichment against the defendants. Defendants move (motion sequence No. 001), pursuant to CPLR 3211(a)(1) and (a)(7), to dismiss the complaint.
The Verified Complaint alleges, among other things, that defendants Laserline Lease Finance Corp. ("Laserline Lease"), William M. Eddington a/k/a W.M. Eddington a/k/a W. Mark Eddington ("Eddington") and Robert C. Andreasen ("Andreasen") were the initial members of Laserline Properties II, LLC ("Laserline Properties"), a California limited liability company formed in 1999. It is further alleged that Laserline Lease, a Utah corporation wholly owned by Eddington, was the managing member of Laserline Properties and that Eddington and Andreasen were paid management fees by Laserline Properties. The stated purpose of Laserline Lease was to own, as beneficial owner under a trust agreement, a used Boeing 737-200C Aircraft, to lease to another company for a period of 60 months.
On June 27, 2000, Leslie Mandel ("Mandel") purchased a 2.78% interest in Laserline Properties for a capital investment of $50,000. The basic understanding between the parties regarding their relationship in Laserline Properties was set forth in a Confidential Deal Memorandum dated June 20, 2000 ("Memorandum") which provides, among other things, that Mandel was to be paid $862.07 per month for 57 months and a final payment of $50,862.07 provided the lessee of the aircraft made all of its lease payments. Additionally, the Memorandum provides that Mandel would receive 2.78% of the net sale proceeds realized from the sale of the aircraft at the termination of the lease or a continuing 2.78% interest if the aircraft was not sold but re-leased. The Memorandum was executed by Mandel and Eddington, in his capacity as President of Laserline Lease.
In March 2004 Mandel assigned her interest in Laserline Properties to Plaintiff.
In May 2005, the aircraft was sold to a third-party, for a sum not known to Plaintiff.
The Verified Complaint further alleges that Plaintiff received a total of only 56 monthly payments from Laserline Properties, instead of the 58 payments required by the Memorandum. Additionally, Plaintiff alleges that it has not been repaid the $100,000 principal investment in Laserline Properties nor any portion of the net proceeds of the sale of the aircraft. It is further alleged that Eddington told Mandel that the $100,000 principal investment in Laserline Properties had been "rolled over" into a loan to defendant Laserline-Vulcan Energy Leasing, LLC ("Laserline-Vulcan"), which was also managed by Laserline Leasing. Plaintiff claims that while it had loaned other money to Laserline-Vulcan, neither it nor Mandel "consented to, or otherwise authorized the loan of the $100,00 invested in [Laserline Properties] to [Laserline-Vulcan]". Plaintiff claims that as of the end of 2005, Laserline Properties had $345,772.51 in total equity, $47,482.92 in cash, plus a receivable from Laserline Leasing in the amount of $349,542.00, and that Plaintiff has never received any distribution with respect to that remaining equity.
The first cause of action, asserted against Laserline Properties, Laserline Leasing, Eddington and Andreasen, seeks an accounting, based upon said Defendants' purported fiduciary duty to Plaintiff, concerning, among other things, the status and/or disposition of the principal amount of Mandel's investment in Laserline Properties, the payments received on the lease of the aircraft, and the net proceeds of the sale of the aircraft. It is also alleged that said Defendants may have diverted the principal amount of Mandel's investment in Laserline Properties to Laserline-Vulcan without authorization or consent.
The second cause of action, asserted against Laserline Properties, Laserline Leasing, Eddington and Andreasen, alleges that the Defendants breached their fiduciary duties to Plaintiff by among other things, failing to remit Mandel's investment of $100,000 in Laserline Properties upon the termination of the aircraft lease, diverting the $100,000 in principal to Laserline-Vulcan or others without consent or authorization, allowing early termination of the aircraft lease, failing to maximize the gross proceeds of the sale of the aircraft, and failing to remit 5.56% [*3]of the net proceeds of the sale of the aircraft to Plaintiff.
The third cause of action, asserted against Laserline Properties and Laserline Lease, alleges that the Defendants breached their contractual obligations under the Memorandum by, among other things, failing to make all monthly interest distributions, failing to refund the principal investment of $100,000, and failing to pay 5.56% of the net sales proceeds of the aircraft.
The fourth cause of action, asserted against Laserline-Vulcan alleges that Laserline-Vulcan has been unjustly enriched by its receipt and unauthorized retention of Plaintiff's $100,000 principal investment in Laserline Properties.
In this pre-answer motion pursuant to CPLR 3211(a)(1) and (7), the Defendants contend, among other things, that Mandel instructed Laserline Properties, in writing, to roll her $100,000 principal investment into Laserline-Vulcan as an investment in Laserline-Vulcan's venture to construct and sell a mobile power system. It is claimed that the Laserline-Vulcan's "lending documents" expressly and unconditionally limited recovery to only the proceeds of that venture. When that venture failed, the investment principal was lost. Defendants point to an action commenced in 2008 in Supreme Court, New York County entitled Gluckman, et al. v. Laserline-Vulcan Energy, LLC, et al, Index No. 601687/08 ("New York County Action"), by Plaintiff and three individuals against Laserline-Vulcan, Laserline Lease, Eddington and others, in which the Plaintiffs sought to recover funds allegedly loaned to Laserline-Vulcan to fund the mobile power generator venture. The New York County Action was principally a breach of contract action, although plaintiffs also asserted tort-based claims sounding in fraud, conversion, intentional interference with contractual relations and breach of fiduciary duty, as well as various other causes of action. By Decision and Order dated December 17, 2009, the Court (Bransten, J.), among other things, granted defendants' motions to dismiss the first amended complaint.
The Defendants in this action now contend that the Plaintiff's first two causes of action alleging breach of fiduciary duty are barred by the determination in the New York County Action that the defendants in that action did not have a fiduciary duty to Plaintiff. Additionally, Defendants argue that Plaintiffs' claims for breach of fiduciary duty are duplicative of the breach of contract claim. Defendants contend that the third cause of action for breach of contract and the [*4]fourth cause of action for unjust enrichment should be dismissed based on an e-mail written by Mandel in 2006 wherein she purportedly admitted that she told Eddington "to put in my return of $100,000 of my investment in aircraft 2 into Vulcan." Defendants also argue that the complaint is devoid of any substantive allegation against Andreasen and, therefore, should be dismissed as asserted against him. Finally, Defendants contend if the complaint is not dismissed in its entirety, this action should be transferred to Civil Court, as the remaining damages would be considerably less than $25,000.
The Plaintiff partially opposes Defendants' motion. Plaintiff consents to the dismissal of the first and second causes of action as asserted against Laserline Properties conceding that Laserline Properties is not Plaintiff's fiduciary. However, Plaintiff continues to assert that Laserline Lease, Eddington, and Andreasen, are its fiduciaries. Additionally, Plaintiff consents to the dismissal of the fourth cause of action asserted against Laserline-Vulcan. In opposition to Defendants' motion, Plaintiff contends that Defendants Laserline Lease, Eddington and Andreasen, as the managers of Laserline Properties and Plaintiff's fiduciaries, consistently failed to provide Plaintiff with information and documents relating to Plaintiff's investment in Laserline Properties. Plaintiff contends that the first and second causes of action, alleging breach of fiduciary duty by Defendants, are not duplicative of the third cause of action for breach of contract because, despite arising from the same underlying facts as the breach of contract claim, Defendants' fiduciary duties are independent of the contractual relationship between the parties and arise as a result of the relationship between the parties in Laserline Properties, a limited liability company, and not from the contract by which that relationship was created. Mandel, Plaintiff's owner and President, submits an affidavit in opposition to the motion in which she avers, among other things, that although she initially agreed to rollover Plaintiff's $100,000 investment in Laserline Properties into Laserline-Vulcan, Plaintiff's "formal" consent for the roll over was never actually given since no Commitment to Provide a Loan was executed not was a promissory note or a Loan and Security Agreement received by Plaintiff, as had been with regard to a separate $100,000 loan to Laserline Vulcan. Further, Mandel admits that the allegation in the Verified Complaint that "neither plaintiff nor Mandel consented to, or otherwise authorized the loan of the $100,000.00 invested in Laserline Properties to Laserline Vulcan" is "a bit overstated" and she apologizes to the Court for the "lack of clarity and any resulting misconceptions." Mandel claims that the e-mail she sent in 2006 stating that she "told Mark [*5][Eddington] to put in my return of $100,000 of my investment in aircraft 2 into Vulcan" was "written in haste, is far from accurate, and should not be considered dispositive of any portion of Mandel Airplane's claim."
In reply, the Defendants contend, among other things, that Mandel's 2006 e-mail precludes Plaintiff from claiming that it is entitled to a return of the $100,00 principal investment in Laserline Properties. Additionally, Defendants concede that dismissal of Plaintiff's accounting claim against Laserline Lease is not warranted. Defendants continue to argue, relying for the first time in reply on California law, that neither Eddington nor Andreasen, as merely co-members in Laserline Properties, owed Plaintiff a fiduciary duty. Defendants also contend, for the first time in reply, and again relying on California law, that Plaintiff lacks standing to assert claims for breach of fiduciary duty by Defendants because belong to Laserline Properties, not its members.
In a sur-reply, Plaintiff argues, among other things, that Defendants are Plaintiff's fiduciaries under California law and that Plaintiff has standing to bring a breach of fiduciary duty claims against Defendants.
Initially, the first and second causes of action as asserted against Laserline Properties are hereby dismissed in light of Plaintiff's concession that Laserline Properties did not owe it any fiduciary duty. Additionally, upon Plaintiff's consent, the fourth cause of action for unjust enrichment against Laserline Vulcan is hereby dismissed. In their reply papers, Defendants concede that dismissal of Plaintiff's first cause of action for an accounting as asserted against Laserline Lease is not warranted. Accordingly, that branch of Defendants' motion seeking dismissal of the first cause of action as asserted against Laserline Lease is denied.
[t]he complaint must be liberally construed and the plaintiff given the benefit of every favorable inference (citations omitted). The court must also accept as true all of the facts alleged in the complaint and any factual submissions made in opposition to the motion (citations [*6]omitted). If the court can determine that the plaintiff is entitled to relief on any view of the facts stated, its inquiry is complete and the complaint must be declared legally sufficient (citations omitted). While factual allegations contained in the complaint are deemed true, bare legal conclusions and facts flatly contradicted on the record are not entitled to a presumption of truth (citations omitted).
(Symbol Tech., Inc. v. Deloitte & Touche, LLP, 69 AD3d 191, 193-195 [2d Dept 2009]).
A claim for breach of fiduciary duty cannot be based on the same facts and theories as a breach of contract claim (Brooks v. Key Trust Co. Natl. Assoc., 26 AD3d 628, 630 [3d Dept 2006]). In order to be actionable, the claim for breach of fiduciary duty must be separate, distinct, and independent of the contract itself (Sally Lou Fashions Corp. v. Camhe-Marcille, 300 AD2d 224 [1st Dept 2002]).
Here, the Plaintiff alleges that the Defendants, by virtue of their status as co-members in Laserline Properties owed plaintiff a fiduciary duty. Contrary to the Defendants' contention, the prior order in the New York County Action is not dispositive of Plaintiff's current claims for breach of fiduciary duty. The New York County Action involved a single loan transaction between entities which the Court found did not give rise to a fiduciary relationship. By contrast, at issue in this case are the rights and obligations of co-members of a limited liability company.
Although the Defendants, citing to the 2002 agreement between Eddington and Mandel pursuant to which Mandel purchased an additional 2.78% interest in Laserline Properties from Eddington, contend that Laserline Properties is subject to governance pursuant to California law and that pursuant to California law Defendants did not have a fiduciary duty to Plaintiff, Defendants failed to provide the Court with a copy of the operating agreement of Laserline Properties. The 2002 agreement between Eddington and Mandel states that it is to be governed and construed by the laws of the State of California. It does not in any way indicate that the rights and obligations of the members of Laserline Properties are governed by California law. Even if California law applies, by failing to submit the operating agreement, the Defendants have failed to establish that the operating agreement did not constitute an independent source of fiduciary duties for Defendants thus rendering the fiduciary duty claims duplicative of the breach of contract claim under the Confidential Deal Memorandum (cf. Coventry Real [*7]Estate Advisors, L.L.C. v. Developers Diversified Realty Corp., 84 AD3d 583, 585 [1st Dept 2011]). The Defendants argument that Plaintiff lacks standing to seek an accounting based on Defendants' alleged breach of fiduciary duty is without merit (see East Quogue Jet, LLC v. East Quogue Members, LLC, 50 AD3d 1089 [2d Dept 2008][member of limited liability company has standing to demand an accounting]). Accordingly, except as set forth above, the Defendants' motion to dismiss the first and second causes of action is denied.
That branch of Defendant's motion pursuant to CPLR 3211(a)(1) to dismiss the third cause of action for breach of contract is also denied."A motion to dismiss a complaint pursuant to CPLR 3211(a)(1) may be granted only where the documentary evidence submitted by the movant utterly refutes the plaintiff's allegations against it and conclusively establishes a defense as a matter of law" (Cog-Net Bldg. Corp. v. Travelers Indem. Co., 86 AD3d 585 [2d Dept 2011]). Here, the 2006 e-mail sent by Mandel does not utterly refute the Plaintiff's allegation that Defendants breached the terms of the Confidential Deal Memorandum, nor does it conclusively establish a defense as a matter of law. At most, the e-mail is evidence that contradicts Plaintiff's allegation that it did not consent or otherwise authorize the "rollover" of its investment in Laserline Properties into Laserline Vulcan, which ultimately may limit the damages, if any, recovered by Plaintiff if it demonstrates that Defendants breached the Confidential Deal Memorandum.
ORDERED that the Defendants' motion is otherwise denied.

References: § 431
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