RIAD LLC v. NORTHCO MANAGEMENT INC DRK LLC (2025)

In 2017, plaintiffs, Riad LLC and its sole member, Riad Aafouallah, agreed to work on a construction project (the Hancock project) for defendant Northco Management, Inc. (NYSCEF No. 13.) In 2018, defendants, Northco Management, Inc., Nortco Development, and DRK Chrystie LLC, allegedly made an oral agreement with Riad LLC, under which it would work on and receive additional payments for another construction project, the Chrystie project. (NYSCEF No. 2 at ¶ 4 [complaint].)

In 2021, Northco and Riad LLC agreed that Riad LLC would provide consulting services on the Hancock project in exchange for monthly payments. (NYSCEF No. 12 at 8 [pdf pagination] [Exhibit B].) The 2021 agreement also requires Northco to pay Riad LLC certain bonuses (the phase one, two, and three bonuses) once certain conditions were met. (Id. at 9 [pdf pagination] [Exhibit C].)

Plaintiffs allege that defendants delayed or failed to pay bonuses due for work on the Hancock project and that plaintiffs are entitled to additional compensation for the Chrystie project. Riad LLC asserts claims for breach of contract arising from the Hancock project; breach of contract arising from the Chrystie project; and violation of New York City's Freelance Isn't Free Act (FIFA). Plaintiffs both assert claims for unjust enrichment arising from the Chrystie project; breach of the covenant of good faith and fair dealing; declaratory judgment establishing the rights and obligations of the parties under the agreements; breach of fiduciary duty; and an accounting.

Defendants move to dismiss all of plaintiffs’ claims under CPLR 3211 (a) (1) and (7), except for the portion of Riad LLC's first breach-of-contract claim seeking $7,995.63 in reimbursement of expenses. The motion is granted in part and denied in part.

DISCUSSION

Hancock Project

I. Riad LLC's Breach-of-Contract Claim Against Northco (First Cause of Action)

Riad LLC alleges that Northco breached the 2021 Agreement relating to the Hancock project by (i) failing to pay the phase one bonus timely; (ii) failing to pay the phase two bonus; (iii) failing to pay the phase three bonus; and (iv) failing to reimburse Riad LLC for business-related expenses. (NYSCEF No. 2 at ¶ 78.) Northco moves to dismiss the first three branches of the claim.

A. Untimely Payment of Phase One Bonus

The 2021 agreement provides that Northco must pay the $50,000 phase one bonus “within ninety (90) days of issuance of the Temporary Certificate of Occupancy (’TCO’).” (NYSCEF No. 12 at 9 [pdf pagination].) The documentary evidence suggests that a TCO for the residential parts of the premises was issued in July 2021 (making the bonus payment due in September 2021); but Northco did not pay the bonus until September 2022. (See NYSCEF No. 17 [TCO].)

Northco contends that it did not breach the phase-one-bonus provision of the 2021 agreement. Northco emphasizes that it paid plaintiffs $50,000 in 2022. And it argues that any phase-one-bonus obligation was not triggered in 2021, because that obligation is (assertedly) contingent on issuance of a TCO for the entire building, not merely for the building's residential spaces. (See NYSCEF No. 9 at 15.) Riad LLC, on the other hand, argues that the issuance of a TCO, even if limited to residential space, still triggered Northco's obligation to pay the phase one bonus. (NYSCEF No. 22 at ¶ 23.)

The court concludes that each party's position on the phase-one-bonus language of the 2021 agreement—and what scope of TCO is necessary to trigger the bonus obligation—is reasonable. As a result, this provision of the agreement is ambiguous. The question whether the phase-one-bonus obligation arose in 2021 is therefore “inappropriate for judgment on the pleadings.” (Fine Creative Media, Inc. v Barnes & Noble, Inc., 242 AD3d 452, 454 [1st Dept 2025].)

However, Riad LLC does not dispute that Northco paid $50,000 in September 2022. And even assuming that Northco's payment obligation was triggered a year before payment, plaintiffs cite no contractual provision permitting plaintiff to recover a second $50,000 bonus merely because that bonus was paid late. Instead, the 2021 agreement provides that “[i]n the event Company fails to make any payment when due under this Agreement, late payments shall be subject to interest calculated at five percent (5%) per annum ․ until such payment has been made.” (NYSCEF No. 12 at ¶ 5.) Therefore, the most Riad LLC is entitled to for defendants’ one-year-late payment is $2,500 (five percent of $50,000).

The branch of defendants’ motion to dismiss Riad LLC's breach-of-contract claim based on Northco's alleged untimely payment is denied as to the sum of $2,500 and otherwise granted.

B. Nonpayment of Phase Two Bonus

Riad LLC claims that Northco improperly failed to pay it the phase two bonus. The 2021 agreement provides that “[o]nce the [Northco] has earned a Net Profit of Ten Million US Dollars ($10,000,000), the [Northco] shall pay [Riad LLC] a three percent (3%) Project Completion Bonus based on the $10,000,000 profit within thirty (30) days, less the $50,000 TCO Initial Bonus.” (NYSCEF No. 12 at 9 [pdf pagination].)

Defendants argue that the Hancock project has not achieved a net profit of $10,000,000 and therefore that Northco's obligation to pay the phase two bonus has not been triggered. (NYSCEF No. 9 at 13.) Defendants refer to Northco's president's affidavit and a heavily redacted letter from Northco to plaintiffs’ prior counsel to that effect.¹ (See NYSCEF Nos. 10 at ¶¶ 6-8 [affidavit]; NYSCEF No. 14 [letter].)

Riad LLC argues that the evidence on which defendants rely does not constitute documentary evidence sufficient to definitively refute plaintiffs’ claim. (See CPLR 30211 [a] [1].) The court agrees. The question is therefore whether plaintiffs have stated a cause of action in the first place. (See CPLR 3211 [a] [7].)

In its complaint, Riad LLC alleges on information and belief that the Hancock project “easily surpassed the $10 million threshold requiring payment of a Project Completion Bonus.” (NYSCEF No. 2 at ¶ 41.) To support this belief, the complaint points to reports from real-estate listing companies that 60 of the 71 total residential units have been sold, with two more under contract; and that by September 2021, 30 deeds “were transferred to owners of new units at the Hancock Project totaling ․ over $39 million.” (Id. at ¶¶ 38, 40.) In opposing the motion to dismiss, Riad LLC also cites a real-estate listing for the building that identifies 80 previous unit sales at an average price of $1.28 million. (See NYSCEF No. 24 at 4, 5-8 [pdf pagination].)

The court concludes that these allegations are sufficient to establish, at least for pleading purposes, that Northco met the $10 million net profit threshold for triggering the phase two bonus obligation. The branch of the motion to dismiss the portions of the breach-of-contract claim for nonpayment of the phase two bonus is denied.

C. Nonpayment of Phase Three Bonus

Riad LLC claims that Northco improperly failed to pay it the phase three bonus. Under the 2021 agreement, the phase 3 bonus is due when Northco sells or leases 99% of units in the Hancock building. (NYSCEF No. 12 at 9 [pdf pagination] [Exhibit C].) The agreement also provides that if Northco retains or reserves units 36 months after the issuance of the TCO for all residential units, thereby preventing the selling and leasing of those units, Northco has a buy-out obligation to Riad LLC. (Id.) Under that buy-out obligation, Northco would have to pay Riad LLC 3% of the total profits of the project less the payment of the phase one and two bonuses. (Id.)

Northco argues that Riad LLC effectively admitted in the complaint that the 99% threshold was not met. They point to plaintiffs’ allegation that 60 of the 71 residential units were sold. (See NYSCEF No. 9 at 9.) It also points to the Hancock website, which shows that five of the 71 units are still available for sale. (See NYSCEF No. 16.)

Riad LLC argues, however, that even assuming the website is documentary evidence and accurately reflects the number of available units, it does not defeat plaintiffs’ claim for a bonus in the form of a buyout for retaining units 36 months after the issuance of the TCO. (NYSCEF No. 28 at 13.) Riad LLC adds that the number of units Northco retained is exclusively within Northco's knowledge.

The court agrees with Northco that Riad LLC has not alleged facts to support that 99% of the units were sold. But the court agrees with Riad LLC that discovery is required to learn whether defendants have retained units for 36 months since issuance of the residential TCO in July 2021. (NYSCEF No. 17.)

The branch of the motion to dismiss the portions of the breach-of-contract claim for nonpayment of phase three bonus is granted except to the extent it is predicated on the buyout obligation.

Chrystie Project

II. Riad LLC's Breach-of-Contract Claim Against All Defendants (Second Cause of Action)

Riad LLC also worked on the Chrystie project for defendants. Riad LLC alleges that in 2018 defendants orally promised to pay it a bonus of $100,000 upon issuance of a TCO and a Project Completion Bonus of 3% once the project achieved $2 million in net profits. (NYSCEF No. 2 at ¶ 57.)

Defendants essentially dispute the existence of the alleged 2018 oral agreement. They further contend that they could not have breached that agreement because, even assuming it exists, it is unenforceable. Defendants cite section 16b of the 2021 agreement, which provides that the contract “supersedes all oral agreements ․ with respect to the subject matter hereof.” (NYSCEF No. 12 at 5 [pdf pagination].) Defendants thus assert that the 2021 agreement superseded any 2018 agreement.

Riad LLC argues that the 2021 agreement's subject matter does not include the Chrystie project and was limited to the Hancock project. Riad LLC therefore argues that the 2018 agreement has not been overridden by the 2021 agreement.

Under New York law, “[a] subsequent contract regarding the same subject matter will supersede a prior contract with regard to that same subject matter.” (Pope Contr., Inc. v NY City Hous. Auth., 214 AD3d 519, 520 [1st Dept 2023].) But “a subsequent contract that does not pertain to ‘precisely the same subject matter’ will not supersede an earlier contract unless the subsequent contract has definitive language indicating it revokes, cancels or supersedes that specific prior contract.” (Tiffany & Co. v Lloyd's of London Syndicates 33, 510, 609, 780, 1084, 1225, 1414, 1686, 1861, 1969, 2001, 2012, 2232, 2488, 2987, 3000, 3623, 4444, 4472, & 4711, 2024 NY Slip Op 50691(U), *7 [Sup Ct, NY County 2024], citing Globe Food Servs. Corp. v Consol. Edison Co. of NY, 184 AD2d 278, 280 [1st Dept 1992].)

Notably, the 2021 agreement does provide that Northco retained Riad LLC for the Hancock project (NYSCEF No. 12 at 9 [pdf pagination] and for “other projects managed by the company” (id. at ¶ 2). But this language alone does not clearly evince an intent to incorporate the Chrystie project, in particular, into the 2021 agreement. Nor does the 2021 agreement otherwise refer specifically to the Chrystie project, in addition to the Hancock project. Moreover, the 2021 agreement became effective in February 2021, years after the Chrystie project began. (NYSCEF No. 12 at 9.)

The branch of defendants’ motion to dismiss the breach-of-contract claim predicated on the Chrystie project is denied.

III. Plaintiffs’ Unjust-Enrichment Claim Against All Defendants (Third Cause of Action)

Plaintiffs alleges that defendants’ refusal to pay plaintiffs for the services rendered on the Chrystie project unjustly enriched defendants. Defendants move to dismiss the unjust-enrichment claim, arguing that the 2021 agreement is a valid contract governing the parties’ relationship with regards to the Chrystie project. (NYSCEF No. 31 at 8-9.) But given the parties’ disputes about (i) whether the 2021 agreement covers the Chrystie project, and (ii) the existence of the 2018 agreement, plaintiffs’ unjust-enrichment claim is not subject to dismissal as duplicative at this stage of the action. (See Art and Fashion Group Corp. v Cyclops Prod., Inc., 120 AD3d 436, 439 [1st Dept 2014] [holding that “[i]n light of defendants’ contention that no ․ agreement existed, plaintiffs are permitted to plead unjust enrichment as an alternative basis for relief”].)

The branch of defendants’ motion to dismiss the claim for unjust enrichment is denied.

Claims Involving Both the Hancock and Chrystie Projects

IV. Plaintiffs’ Breach-of-Covenant-of-Good-Faith-and-Fair-Dealing Claim Against All Defendants (Fourth Cause of Action)

Plaintiffs’ fourth claim is for breach of the implied covenant of good faith and fair dealing. Courts dismiss breach-of-implied-covenant claims when they arise from the same facts and seek the same damages as a breach-of-contract claim. (See Netologic, Inc. v Goldman Sachs Grp., Inc., 110 AD3d 433, 434 [1st Dept 2013].) Here, plaintiffs repeat their allegations and seek the same damages as on their breach-of-contract claims. The branch of the motion to dismiss this claim is granted.

V. Riad LLC's Freelance-Isn't-Free-Act (FIFA) Claim Against Northco (Fifth Cause of Action)

The branch of the motion to dismiss Riad LLC's FIFA claim is denied. FIFA “provide[s] legal protections for freelance workers against nonpayment for work performed.” (Chen v Romona Keveza Collection LLC, 208 AD3d 152, 155 [1st Dept 2022].) Riad LLC claims that Northco violated FIFA because it paid the phase one bonus late. But, as stated above with respect to plaintiff's breach-of-contract claim, whether defendant's payment was untimely is yet to be determined. Accordingly, the branch of the motion to dismiss the FIFA claim is denied.

VI. Plaintiffs’ Declaratory-Judgement Claim Against All Defendants (Sixth Cause of Action)

The branch of the motion to dismiss plaintiffs’ declaratory-judgment claim is granted. Plaintiffs seek “a declaratory judgment establishing the rights and obligations of the parties concerning the [2021] Agreement and the Chrystie Agreement.” (NYSCEF No. 2 at ¶ 107 [complaint].)

Defendants argue that the declaratory-judgment claim is duplicative of the breach-of-contract claims (first and second causes of action). This court agrees. In adjudicating the breach-of-contract claims, this court will inevitably have to identify the rights and obligations the parties had under the agreements. The branch of defendants’ motion to dismiss the declaratory-judgement claim is granted.

VII. Plaintiffs’ Breach-of-Fiduciary-Duty Claim Against All Defendants (Seventh Cause of Action)

The branch of the motion to dismiss plaintiffs’ breach-of-fiduciary-duty claim is granted. Fiduciary duties may arise when special circumstances elevate a conventional business relationship into a fiduciary one (AHA Sales, Inc. v Creative Bath Prods., Inc., 58 AD3d 6, 21 [2d Dept 2008].) But plaintiffs must show that the relationship exceeds that found in an arm's length-transaction (Bd. of Managers of Highpoint Condo. v E./W. Venture, 278 AD2d 55, 56 [1st Dept 2000].)

Although plaintiffs contend that their relationship with defendants involved trust and confidence, they do not show that it was closer than arm's-length. Although plaintiffs resigned from their former employer to work for defendants, they still operated under the written 2021 agreement and (possibly) the 2018 agreement. The absence of a fiduciary relationship is also supported by language in the 2021 agreement providing that Riad LLC's relationship with Northco is “that of an independent contractor and not that of an employee or agent.” (NYSCEF No. 12 at ¶ 9.)

Alternatively, the fiduciary-duty claim is dismissed as duplicative of plaintiffs’ breach-of-contract claims. (See William Kaufman Org., Ltd. v Graham & James LLP, 269 AD2d 171, 173 [1st Dept 2000] [holding that a breach-of-fiduciary duty claim was duplicative of a breach-of-contract claim when it arose from conduct not “independent of the contract itself”] [internal quotations marks omitted].)

VIII. Plaintiffs’ Accounting Claim Against All Defendants (Eighth Cause of Action)

The branch of defendants’ motion to dismiss plaintiffs’ accounting claim is granted. Plaintiffs and defendants are not fiduciaries, and the right to accounting exists only if fiduciary duties run between the parties. (See Front, Inc. v Khalil, 103 AD3d 481, 483 [1st Dept 2013].)

Accordingly, it is

ORDERED that the branch of defendants’ motion to dismiss Riad LLC's breach-of-contract claim based on Northco's alleged untimely payment (first cause of action) is denied as to the sum of $2,500 and otherwise granted; and it is further

ORDERED that the branch of defendants’ motion to dismiss Riad LLC's breach-of-contract claim against Northco (first cause of action) for failure to pay the phase two bonus is denied; and it is further

ORDERED that the branch of defendants’ motion to dismiss Riad LLC's breach-of-contract claim against Northco (first cause of action) for failure to pay the phase three bonus is granted except to the extent it is predicated on the buyout obligation; and it is further

ORDERED that the branch of the motion to dismiss Riad LLC's breach-of contract-claim (second cause of action) arising from the Chrystie project is denied; and it is further

ORDERED that the branch of the motion to dismiss plaintiffs’ unjust-enrichment claim regarding the Chrystie project (third cause of action) is denied; and it is further

ORDERED that the branch of defendants’ motion to dismiss Riad LLC's FIFA claim is denied; and it is further

ORDERED that the branches of the motion to dismiss the breach-of-covenant-of-good-faith-and-fair-dealing claim (fourth cause of action), declaratory-judgment claim (sixth cause of action), breach-of-fiduciary-duty claim (seventh cause of action), and accounting claim (eighth cause of action) are granted; and it is further

ORDERED that the balance of the claims in this action are severed and shall continue; and it is further

ORDERED that the parties appear for a telephonic preliminary conference on January 12, 2026.

FOOTNOTES

1.   Riad LLC argues that plaintiffs demanded an accounting from defendants about information concerning sales and costs to complete the Hancock project. (NYSCEF No. 28 at 11.) It argues that defendants provided only a statement summarizing unit sales, said conclusorily that Northco had not met the $10,000,000 threshold, and refused plaintiffs’ request for further information. (Id.) Defendants argue that they offered plaintiffs an opportunity to review records about profits, on the condition that they sign a non-disclosure agreement. (See NYSCEF No. 15 at 3.)

Gerald Lebovits, J.