Court Allows Repled Contract Claim And New Fraudulent Conveyance Claims To Proceed After Dismissal Of Most Of Prior Complaint

On April 1, 2024, Justice Melissa A. Crane granted in part a motion to file a second amended complaint and denied a motion for sanctions. Plaintiff in G&Y Maintenance Corp. v. 540 West 48th St. Corp., GLSC, Index No. 652108/2020, is a subcontractor that had sued its general contractor and others for account stated, unjust enrichment and quantum meruit, and asserted veil-piercing claims against Chiang, principal of Core, one of the corporate Defendants. Two years earlier, the Court had dismissed all of those claims, leaving only a breach of contract claim against Core.

On the plaintiff’s appeal of that dismissal order, the Appellate Division modified the dismissal to allow plaintiff to replead its alter ego claim against Chiang, and otherwise affirmed. Although the breach of contract claim was by then trial ready, in the fall of 2023 Plaintiff moved to file a second amended complaint (SAC) asserting nine causes of action. In the April 1, 2024 order, Justice Crane allowed only four of them to proceed.

The Court again dismissed the fraud claim against Chiang, as duplicative of Plaintiff’s contract claim and for failure to plead with specificity, as it did in the first dismissal order, a ruling the First Department affirmed. The Court also rejected the claim for breach of fiduciary duty as “fail[ing] to allege anything more than an arms-length business transaction,” ruling that the parties’ “extensive business history” did not “elevate this relationship to that of fiduciaries.” Slip Op. at 4. To the extent the second cause of action further sought a constructive trust it was time barred.

The SAC’s claims under §§ 273, 274 and 275 of the Debtor-Creditor Law, for fraudulent conveyance, survived dismissal because they concerned the same transactions as the original pleading, and therefore related back for purposes of the statute of limitations. By contrast, the Court rejected plaintiff’s claims under DCL § 273-a and § 720 of the Business Corporation law, both additional claims for fraudulent conveyance, because Plaintiff could not plead the requisite unsatisfied judgment or its resulting status as a judgment creditor, respectively.

The Court allowed the SAC’s breach of contract cause of action to proceed to the extent it concerned the same allegations as the contract claim in the original complaint, but its additional allegations, which were “nearly unintelligible” and many of which “appear to be a vain attempt to recast the failed fraud and breach of fiduciary duty claims,” would not be allowed to go forward. Slip Op. at 8. The SAC’s claims seeking to impose liability on the wife of one of the Defendants would not be allowed, as the basis for them was “impossible to discern”. Id.

Finally, the Court denied Defendants’ motion for sanctions premised on claimed prejudice from Plaintiff’s delay in seeking to amend, because “Defendants could always be sued later for fraudulent conveyance once there is a judgment under Debtor and Creditor law § 273-a or comparable statute,” so “the prejudice from delay is to plaintiff who has lost its in place in line for trial” by moving to amend. Id. at 9.