KORANGY v. MALONE (2018)

Order, Supreme Court, New York County (Eileen Bransten, J.), entered June 6, 2017, which, to the extent appealed from, as limited by the briefs, granted, for reasons stated on the record on May 22, 2017, defendants' motion to dismiss plaintiff's first cause of action for breach of contract, third cause of action for breach of the covenant of good faith and fair dealing, and fourth cause of action for breach of fiduciary duty, and denied defendants' application for sanctions, unanimously affirmed, with costs.

The motion court correctly dismissed the breach of contract cause of action, as “[u]nder the plain language of the operating agreement” (Nader & Sons, LLC v. Hazak Assoc. LLC, 149 A.D.3d 503, 505, 53 N.Y.S.3d 622 [1st Dept. 2017] ), namely, paragraph 3.3.3, when the members are deadlocked on an issue, they are to submit to mediation, and the “decision of the mediator shall be final and binding.”  Taking the allegations in the complaint as true, plaintiff admitted the parties were deadlocked and the dispute was submitted to mediation.  The cause of action for breach of the covenant of good faith and fair dealing was also correctly dismissed, as the May 17, 2016 letter from defendants' attorney to the broker for plaintiff's prospective buyer did not violate the operating agreement, as it was entitled to withhold consent absent plaintiff's prior notification (Phoenix Capital Invs. LLC v. Ellington Mgt. Group, L.L.C., 51 A.D.3d 549, 550, 859 N.Y.S.2d 46 [1st Dept. 2008] ).  The cause of action for breach of fiduciary duty was foreclosed by the mediation that resolved this issue, and plaintiff was therefore estopped from rearguing this issue (see Matter of Health Tea Corp. v. New York City Loft Bd., 162 A.D.2d 152, 152, 556 N.Y.S.2d 295 [1st Dept. 1990] ).  That branch of the cause of action for breach of fiduciary duty based on defendant's purchase of a commercial building adjacent to the building at the core of this dispute, was correctly dismissed with leave to replead, as plaintiff has not sufficiently pled “ ‘allegations from which damages attributable to [defendants' conduct] might be reasonably inferred’ ” (InKine Pharm. Co. v. Coleman, 305 A.D.2d 151, 152, 759 N.Y.S.2d 62 [1st Dept. 2003] ).

“The court's denial of sanctions and its finding that neither plaintiff nor her lawyer had engaged in frivolous conduct constituted a proper exercise of discretion” (Costantini v. Costantini, 44 A.D.3d 509, 509, 843 N.Y.S.2d 328 [1st Dept. 2007];  see 22 NYCRR 130–1.1[a],[c] ).