CKR LAW LLP v. Eric Craig Mendelson, Defendant–Appellant. (2022)

Order, Supreme Court, New York County (Paul A. Goetz, J.), entered April 7, 2021, which, to the extent appealed from as limited by the briefs, denied defendant's motion to dismiss the cause of action for fraudulent inducement, unanimously reversed, on the law, without costs, and the motion granted, and the complaint dismissed.  The Clerk is directed to enter judgment accordingly.

Supreme Court properly rejected defendant's judicial estoppel argument, which was based on a prior related action (Paul B. Gottbetter v. CKR Law LLP f/k/a Crone Kline Rinde LLP, Sup Ct, N.Y. County, index No. 652715/2015) (the Gottbetter action), as nothing in that prior action forecloses a claim that defendant fraudulently induced plaintiff to enter into agreements with Paul Gottbetter and his law firm, Gottbetter & Partners, LLP (G & P).  Further, defendant notes that when the court dismissed third-party claims in the Gottbetter action, it stated that “misdeeds” by Adam Gottbetter, Paul Gottbetter's son and a principal of G & P, were the actual cause of plaintiff's claimed damages.  The court's statement, however, does not preclude a claim against defendant, since his possible involvement in the alleged fraud was not at issue at the time.

As to the current action, the complaint fails to plead a cause of action for fraudulent inducement because it does not adequately allege that plaintiff suffered any ascertainable out-of-pocket pecuniary damages resulting from the alleged fraud (see Connaughton v. Chipotle Mexican Grill, Inc., 29 N.Y.3d 137, 144, 75 N.E.3d 1159 [2017];  Gottbetter v. Crone Kline Rinde, LLP, 162 A.D.3d 579, 580, 79 N.Y.S.3d 152 [1st Dept. 2018]).  Although plaintiff alleges unspecified reputational damages and lost revenue or profits, these allegations are not sufficient to sustain a cause of action based on fraud (see Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421, 646 N.Y.S.2d 76, 668 N.E.2d 1370 [1996]).  Similarly, plaintiff fails to allege that it paid any particular amount to acquire the G & P law practice or name, alleging only the value of G & P's practice when plaintiff acquired it;  this allegation is insufficient to measure plaintiff's damages (see Continental Cas. Co. v. PricewaterhouseCoopers, LLP, 15 N.Y.3d 264, 271, 907 N.Y.S.2d 139, 933 N.E.2d 738 [2010]).  Furthermore, although plaintiff states that G & P “carried undisclosed liabilities,” it does not elaborate on what those might be.

Plaintiff does not show that further discovery would cure the deficiency in its pleadings (see Connaughton, 29 N.Y.3d at 144, 53 N.Y.S.3d 598, 75 N.E.3d 1159), particularly given that it has obtained discovery in the Gottbetter action.