SHANAHAN v. COUNTY OF ROCKLAND (2026)

DECISION & ORDER

In an action, inter alia, to recover damages for fraud and tortious interference with prospective business relationship, the plaintiff appeals from an order of the Supreme Court, Rockland County (Sherri L. Eisenpress, J.), dated June 7, 2024.  The order, insofar as appealed from, granted those branches of the defendants' motion which were pursuant to CPLR 3211(a) to dismiss the causes of action alleging fraud and tortious interference with prospective business relationship and denied the plaintiff's cross-motion to change venue of the action or for recusal of the Justice presiding.

ORDERED that the order is affirmed insofar as appealed from, with costs.

In March 2020, the plaintiff applied for a position as a criminal investigator with the Rockland County District Attorney's Office.  In June 2020, the Rockland County Department of Personnel (hereinafter the Department of Personnel) informed the plaintiff that it proposed disqualifying him from an eligible list for the criminal investigator position based on the results of a background investigation of him.  The plaintiff was given the opportunity to rebut the disqualification.  In August 2020, the Department of Personnel rejected the plaintiff's appeal and finalized its determination that he was disqualified from the eligible list for the criminal investigator position.

Thereafter, the plaintiff commenced a proceeding pursuant to CPLR article 78 against the Department of Personnel and the Rockland County District Attorney's Office, contending that his disqualification from the eligible list violated lawful procedure under the Civil Service Law and was arbitrary and capricious.  In a judgment dated September 23, 2021, the Supreme Court denied the petition and dismissed the proceeding.

In December 2023, the plaintiff commenced this action against Rockland County, the Rockland County District Attorney's Office, and the Rockland County District Attorney, both in his official capacity and his individual capacity.  The complaint purported to assert, inter alia, causes of action alleging fraud and tortious interference with a prospective business relationship, predicated on allegations that the defendants targeted him for disqualification for eligibility for the criminal investigator position.  Among other things, the plaintiff alleged that the Rockland County District Attorney's Office failed to disclose to the Department of Personnel a certain email received from the plaintiff's former employer, the United States Drug Enforcement Agency (hereinafter the DEA), which purportedly corroborated the plaintiff's account of his separation from employment with the DEA.

The defendants moved pursuant to CPLR 3211(a)(5) and (7) to dismiss the complaint as barred by the doctrine of res judicata and for failure to state a cause of action.  The plaintiff opposed the defendants' motion and cross-moved to change venue of the action or for recusal of the Justice presiding over the matter.

By order dated June 7, 2024, the Supreme Court, inter alia, denied the plaintiff's cross-motion and granted those branches of the defendants' motion which were pursuant to CPLR 3211(a) to dismiss the causes of action alleging fraud and tortious interference with prospective business relationship.  The court determined, among other things, that the purported causes of action alleging fraud and tortious interference with prospective business relationship were barred by the doctrine of res judicata and, moreover, that the plaintiff had failed to state a cause of action alleging fraud or tortious interference with prospective business relationship.  The plaintiff appeals.

Pursuant to CPLR 3211(a)(5), a party may seek dismissal of a cause of action based upon the doctrine of res judicata (see Abakporo v. Abakporo, 244 AD3d 665, 666;  Sunny v. Hossain, 236 AD3d 699, 699–700).  “ ‘Under the doctrine of res judicata, or claim preclusion, a disposition on the merits bars litigation between the same parties, or those in privity with them, of a cause of action arising out of the same transaction or series of transactions as a cause of action that either was raised or could have been raised in the prior proceeding’ ” (Harrison DGR44, LLC v. Luiso 44 Harrison, LLC, 219 AD3d 1413, 1414, quoting HSBC Bank USA, N.A. v. Pantel, 179 AD3d 650, 650–651;  see Matter of Josey v. Goord, 9 NY3d 386, 389).

Here, contrary to the determination of the Supreme Court, the issues raised in this action were not decided and could not have been raised in the plaintiff's prior CPLR article 78 proceeding.  Accepting the facts as alleged in the complaint as true (see Leon v. Martinez, 84 N.Y.2d 83, 87), the evidence on which the plaintiff relies was discovered subsequent to entry of the judgment in the prior proceeding (see Altman v. Orseck, 235 AD3d 818, 819;  Specialized Indus.  Servs.  Corp. v Carter, 68 AD3d 750, 752).  Accordingly, the doctrine of res judicata does not bar litigation of the purported causes of action alleging fraud and tortious interference with prospective business relationship (see Babad v. Oratz, 242 AD3d 807, 809).

However, contrary to the plaintiff's contention, the Supreme Court properly determined that the complaint failed to state causes of action alleging fraud and tortious interference with business relationship.  “On a motion to dismiss pursuant to CPLR 3211(a)(7), the complaint is to be afforded a liberal construction, the facts alleged are presumed to be true, the plaintiff is afforded the benefit of every favorable inference, and the court is to determine only whether the facts as alleged fit within any cognizable legal theory” (Granizo v Krystal Fruits & Vegetables, Inc., 238 AD3d 719, 720 [internal quotation marks omitted];  see Congregation Erech Shai Bais Yosef, Inc. v Werzberger, 242 AD3d 945, 947).  “Dismissal of the complaint is warranted if the plaintiff fails to assert facts in support of an element of the claim, or if the factual allegations and inferences to be drawn from them do not allow for an enforceable right of recovery” (Franklin D. Nastasi Trust v. Bloomberg, L.P., 224 AD3d 804, 808;  see Connaughton v Chipotle Mexican Grill, Inc., 29 NY3d 137, 142).  “[T]he court may consider affidavits submitted by the pleading party to remedy any defects in the pleading, and upon considering such an affidavit, the facts alleged therein must also be assumed to be true” (Nationwide HVAC Supply Corp. v. Mosby, 244 AD3d 737, 738 [internal quotation marks omitted];  see Island Ordnance Sys., LLC v Amerimex, Inc., 224 AD3d 821, 822).  “Nevertheless, conclusory allegations—claims consisting of bare legal conclusions with no factual specificity—are insufficient to survive a motion to dismiss” (Jennings v. Metropolitan Transp.  Auth., 226 AD3d 662, 663 [internal quotation marks omitted];  see Epstein v. Cantor, 244 AD3d 937, 939).

“The elements of a cause of action for fraud require a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages.  A claim rooted in fraud must be pleaded with the requisite particularity under CPLR 3016(b)” (Congregation Erech Shai Bais Yosef, Inc. v Werzberger, 242 AD3d at 947 [internal quotation marks omitted];  see Thomson v Watchtower Bible & Tract Socy. of N.Y., Inc., 198 AD3d 996, 997).  “[A]ctual harm is an element of fraudulent inducement” (Connaughton v Chipotle Mexican Grill, Inc., 29 NY3d at 144;  see Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 NY3d 553, 559).  “With regard to damages, there must be an allegation of actual pecuniary loss sustained as the direct result of the wrong, or what is known as the out-of-pocket rule” (Vice, Inc. v. Stapp, 209 AD3d 794, 796 [internal quotation marks omitted];  see Connaughton v Chipotle Mexican Grill, Inc., 29 NY3d at 142).  “Damages are to be calculated to compensate plaintiffs for what they lost because of the fraud, not to compensate them for what they might have gained” (Vice, Inc. v. Stapp, 209 AD3d at 796 [internal quotation marks omitted];  see Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 421).  Here, the plaintiff failed to allege that he suffered actual pecuniary loss as a direct result of the defendants' alleged wrongs and also failed to allege his justifiable reliance upon the defendants' purported misrepresentations.

“A plaintiff seeking damages for tortious interference with prospective business relations must allege (1) that it had a [prospective] business relationship with a third party;  (2) that the defendant knew of that [prospective] relationship and intentionally interfered with it;  (3) that the defendant acted solely out of malice or used improper or illegal means that amounted to a crime or independent tort;  and (4) that the defendant's interference caused injury to the [prospective] relationship with the third party” (Looks Great Servs., Inc. v. Roosevelt, 239 AD3d 627, 629 [internal quotation marks omitted];  see Hersh v. Cohen, 229 AD3d 524, 526).  Here, the plaintiff did not allege that the defendants acted solely out of malice and failed to adequately allege that the defendants used improper or illegal means that amounted to a crime, independent tort, or other egregious wrongdoing (see Lynch Dev. Assoc., Inc. v. Johnson, 219 AD3d 1328, 1330;  Law Offs. of Ira H. Leibowitz v Landmark Ventures, Inc., 131 AD3d 583, 586).  The complaint also failed to adequately plead that the plaintiff would have been hired as a criminal investigator but for the defendants' allegedly wrongful actions (see Sternberg v. Wiederman, 225 AD3d 820, 822;  Murphy v. City of New York, 59 AD3d 301).

The foregoing determinations render academic the plaintiff's contentions that the Supreme Court erred in denying his cross-motion to change venue of the action or for recusal of the Justice presiding over the matter (see Matter of Town of Waterford v New York State Dept. of Envtl.  Conservation, 187 AD3d 1437, 1440–1441;  cf.  Hall v. Nassau County, 248 AD3d 35).

CHAMBERS, J.P., FORD, WAN and MCCORMACK, JJ., concur.