CHEN WEN CHEN ZIWEI CHENG GUANWEN CHENG JIE CHENG LING DU ERQIN FENG BING GU BEIBEI GUAN ZHIJUN HAN LIDA HE CHUNHUA HOU JIN HU JIANJUN HU XINGNING HU ZHENGFU HU ZHONGYONG HUANG GUI MING HUANG YING JI TONG JIAN ZAIHONG JIANG YUANSHEN KUANG SUPING LEI MINGCHUN LI CHAO YANG LI FEIFEI LI JINLIANG LI NING LI WANSHAN LI WEI LI WEI LI XIAOLIN LI YINGJU LI ZHI HUI LIN SENG LING HAO LING YAHUA LIU QING ZHU LIU WEI WEI LIU XIAO JUN LIU YING LU KUI LU RUI LU YUANQING MA BING MA JIFEI MIAO SHU NI QIAO QI XIAOMEI QU XIAOYAN PAN CHENG PAN YUE XIA REN JINGYAN REN TAO RUAN WEIWEN SHEN CHAOJUN SHENG DONG LIN SHI BING SUN LIANGGUI SUN PING TAN DAMING TANG MINGSHAN TANG WENWEN TAO LANLAN TIAN XIAOYUN WANG GUOLIANG WANG YUN WANG ZHOU JI WEI FANG WEI ZHEN WU LING XIA YUN XIE SHISHI XU YONGLIANG XU ZEYUAN YAN TAO YAN XIAO XIN YANG JIAN HUA YANG YANG JI YANG YUE YOU JUN ZHAN BIHUA ZHANG JUAN ZHANG JUNYI ZHANG PU ZHANG YAN ZHANG YIHONG ZHANG ZHIMIN ZHAO CHUNYING ZHOU BAI ZHOU LIANCHUN ZHOU YAN ZHU JIANAN ZHU WEITE ZHUANG ZHENGWEI ZOU LIANG CAO BING CHEN JIFENG CHEN XIAO CHEN WEIWEI FANG TAIQING GAO YANPING GUO WEI HUANG LEI JIN XI LIANG YUHUI LIU HAO MA QIAN SONG ZHONGMING WAN WEI XU XIAOLONG XU YAN YANG LUZI YE LIANG ZHANG LIHUA ZHOU QUANGEN v. LLC GEORGE OLSEN PAUL LEVINSOHN THE NEW YORK CITY EAST RIVER WATERFRONT DEVELOPMENT FUND LLC (2026)

The following e-filed documents, listed by NYSCEF document number (Motion 014) 459, 460, 461, 462, 463, 464, 465, 466, 467, 468, 469, 470, 471, 472, 473, 474, 475, 476, 477, 478, 479, 480, 481, 482, 483, 484, 485, 486, 487, 488, 489, 490, 491, 492, 493, 494, 495, 496, 497, 498, 499, 500, 501, 502, 503, 504, 505, 506, 507, 508, 509, 510, 511, 512, 513, 514, 515, 516, 517, 518, 519, 520, 521, 522, 523, 524, 525, 526, 527, 528, 529, 530, 531, 532, 533, 534, 535, 536, 537, 538, 539, 540, 541, 542, 543, 544, 545, 546, 547, 548, 549, 550, 551, 552, 553, 554, 555, 556, 557, 558, 559, 560, 561, 562, 563, 564, 565, 566, 567, 568, 569, 570, 571, 572, 573, 574, 575, 576, 577, 578, 579, 580, 581, 582, 583, 584, 585, 586, 587, 588, 589, 590, 591, 592, 593, 594, 595, 596, 597, 598, 599, 600, 601, 602, 603, 604, 605, 606, 607, 608, 609, 610, 611, 612, 613, 614, 615, 616, 617, 618, 619, 620, 621, 622, 623, 624, 625, 626, 627, 628, 629, 630, 631, 632, 633, 634, 635, 636, 637, 638, 639, 640, 641, 642, 643, 644, 645, 646, 647, 648, 649, 650, 651, 652, 653, 654, 655, 656, 657, 658, 659, 660, 661, 662, 663, 664, 665, 666, 667, 668, 669, 670, 671, 672, 673, 674, 675, 676, 677, 678, 679, 680, 681, 682, 683, 684, 685, 686, 687, 688, 689, 690, 691, 692, 693, 694, 695, 696, 697, 698, 699, 700, 701, 702, 703, 704, 705, 706, 707, 708, 709, 710, 711, 712, 713, 714, 715, 716, 717, 718, 719, 720, 721, 722, 723, 724, 725, 726, 727, 728, 729, 730, 731, 732, 733, 734, 735, 736, 737, 738, 739, 740, 741, 742, 743, 744, 745, 746, 747, 748, 749, 750, 751, 752, 753, 754, 755, 756, 757, 758, 759, 760, 761, 762, 763, 764, 765, 766, 767, 768, 769, 770, 771, 772, 773, 774, 775, 776, 777, 778, 779, 780, 781, 782, 783, 784, 785, 786, 787, 788, 789, 790, 791, 792, 793, 794, 795, 796, 797, 798, 799, 800, 801, 802, 803, 804, 805, 806, 807, 808, 809, 810, 811, 812, 813, 814, 815, 816, 817, 818, 819, 820, 821, 822, 823, 824, 825, 826, 827, 828, 829, 830, 831, 832, 833, 834, 835, 836, 837, 838, 839, 840, 841, 842, 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1236, 1237, 1238, 1239, 1240, 1241, 1242, 1243, 1244, 1245, 1246, 1247, 1248, 1249, 1250, 1251, 1252, 1253, 1254, 1255, 1256, 1257, 1258, 1259, 1260, 1261, 1262, 1263, 1264, 1265, 1266, 1267, 1268, 1269, 1270, 1271, 1272, 1273, 1274, 1275, 1276, 1277, 1278, 1279, 1280, 1281, 1282, 1283, 1284, 1285, 1286, 1287, 1288, 1289, 1290, 1291, 1292, 1293, 1294, 1295, 1296, 1297, 1298, 1299, 1300, 1301, 1302, 1303, 1304, 1305, 1306, 1307, 1308, 1309, 1310, 1311, 1312, 1313, 1314, 1315, 1316, 1317, 1318, 1319, 1320, 1321, 1322, 1323, 1324, 1325, 1326, 1327, 1328, 1329, 1330, 1331, 1332, 1333, 1334, 1335, 1336, 1337, 1338, 1339, 1340, 1341, 1342, 1343, 1344, 1345, 1346, 1347, 1348, 1349, 1350, 1351, 1352, 1353, 1354, 1355, 1356, 1357, 1358, 1359, 1360, 1361, 1362, 1363, 1364, 1365, 1366, 1367, 1368, 1369, 1370, 1371, 1372, 1373, 1374, 1375, 1376, 1377, 1378, 1379, 1380, 1381, 1382, 1383, 1384, 1385, 1386, 1387, 1388, 1389, 1390, 1391, 1392, 1393, 1394, 1395, 1396, 1397, 1398, 1399, 1400, 1401, 1402, 1403, 1404, 1405, 1406, 1407, 1408, 1409, 1410, 1411, 1412, 1413, 1414, 1415, 1416, 1417, 1418, 1419, 1420, 1421, 1422, 1423, 1424, 1425, 1426, 1427, 1428, 1429, 1430, 1431, 1432, 1433, 1434, 1435, 1436, 1437, 1438, 1439, 1440, 1441, 1442, 1443, 1444, 1445, 1446, 1447, 1448, 1449, 1450, 1451, 1452, 1453, 1454, 1455, 1456, 1457, 1458, 1459, 1460, 1461, 1462, 1463, 1464, 1465, 1466, 1467, 1468, 1469, 1470, 1471, 1472, 1473, 1474, 1475, 1476, 1477, 1478, 1479, 1480, 1481, 1482, 1483, 1484, 1485, 1494, 1507, 1508, 1509, 1510, 1511, 1512, 1513, 1514, 1515 were read on this motion to/for JUDGMENT - SUMMARY.

BACKGROUND

This action arises out of plaintiffs' participation in the EB-5 Immigrant Investor Program ("EB-5 Program"), which permits foreign investors to seek permanent U.S. residency by investing capital that must be placed "at risk" and deployed to create jobs. Plaintiffs are Chinese nationals that participated in the program by purchasing membership interests in the New York City East River Waterfront Development Fund, LLC (the "Fund"). Defendant New York City Regional Center LLC ("NYCRC"), the Fund's manager, provides financing for real-estate and infrastructure projects in New York City. Defendants George Olsen and Paul Levinsohn managed NYCRC and, in turn, the Fund (George Olsen and Paul Levinsohn, together with NYCRC and the Fund, collectively referred to as defendants).

NYCRC was responsible for raising capital to fund the renovation of the Battery Maritime Building ("BMB") in Manhattan, known as the East River Waterfront Project (the "Project"). Its Offering Memorandum ("OM"), dated March 12, 2011, stated that the Fund's investment objective was to make a "qualified investment" under the EB-5 Program so investors could obtain conditional, and then permanent, U.S. residency (NYSCEF doc. no. 462, pg. 307). The OM disclosed the material terms of a $77 million senior secured loan (the "Loan") to non-party 10 South Street Associates, LLC (the "Borrower"), an affiliate of The Dermot Company, Inc. ("Dermot" or "Developer"), and stated that Borrower was the "sole obligor" on the Loan, warning that repayment would not be guaranteed by Dermot or any other entity (id. at pg. 340). The OM further advised that the investment involved significant risks, including potential loss of capital, and emphasized that the investors' investment must be "at risk" to qualify for the program (id. at pg. 343).

The OM described the Project as having three components: (1) the redevelopment of the BMB, to include, among other things, a luxury hotel, restaurant, and lounge; (2) the construction of a new waterfront esplanade, pavilion buildings, sidewalks and roadways; and (3) the structural rehabilitation of piers and slips, as well as the construction of new passenger walkways, waiting areas, ticket windows, and driveways to allow for improved and expanded ferry service. The OM noted that spending on all three components would count toward EB-5 job creation. However, the OM warned that the City of New York — while expected to invest $214 million of capital into the Project — had no obligation to provide capital funding or to complete any aspect of the Project (id. at pg. 304).

Plaintiffs executed a subscription and operating agreement, representing that they had carefully reviewed the OM, were relying solely on the OM and agreements, possessed knowledge and experience in financial matters, and could bear the risk of complete loss of their capital. Plaintiffs contend, however, that investors were not provided with the OM prior to investing and that many investors saw only signature pages. The operating agreement vested NYCRC with authority to manage the Fund, make decisions concerning investment and EB-5 job creation requirements, and appoint agents. NYCRC engaged Edifice Real Estate Partners LLC ("Edifice") as a construction monitor to visit the job site monthly, review draw requests, verify budgets, and submit monitoring reports. The New York City Economic Development Corporation ("EDC"), the entity which oversaw the BMB's redevelopment, approved Edifice as a monitor for the Project.

The Fund closed the $77 million Loan in July 2012, after which Dermot proceeded with construction. In addressing a timing issue related to anticipated proceeds from the sale of historic tax credits ("HTC") that would be received upon substantial completion of the Project, the New York City Economic Development Corporation ("EDC") and Dermot agreed to defer certain amounts, and NYCRC agreed to contribute up to $5.5 million of its own coffers, if needed, to complete construction. Borrower submitted monthly affidavits representing that, after disbursement, sufficient proceeds would remain to complete construction, and NYCRC approved draw requests based on Dermot's representations and Edifice's recommendations. Plaintiffs' I-829 petitions  ¹ reflected job creation totals sufficient for permanent residency, and every plaintiff who pursued permanent residency achieved it and received green cards for themselves and/or their family members.

In December 2014, Dermot first informed NYCRC and EDC that it lacked sufficient funds to complete construction. NYCRC then took control of Borrower's depository account and disbursed remaining Loan proceeds to pay subcontractors, winterize the building, and satisfy lease obligations in order to preserve the leasehold mortgage securing the Loan. In July 2015, entered into a letter of intent with Stoneleigh Capital LLC, an alternative funding source to mitigate the funding shortfall, but was unable to reach a deal with Dermot and EDC. Plaintiffs allege that defendants treated $5.5 million of the Loan proceeds as additional capital and did not reveal to plaintiffs that Borrower had defaulted on the Loan. Plaintiffs further allege that defendants knew or should have known that Borrower lacked sufficient funds to complete the renovations and continued to permit Loan disbursements without requiring Borrower to make capital contributions to cover the deficiencies.

Plaintiffs contend that defendants paid themselves management fees with the interest income from loan proceeds, contrary to the terms of the Loan agreement and contrary to express EB-5 rules. Plaintiffs further argue that NYCRC entered into a Deferred Funds Agreement ("DFA") that waived loan-balancing rights. Defendants assert that the management fees were disclosed in the OM, the use of Loan proceeds for financing costs did not violate EB-5 requirements, and the DFA addressed the timing issue related to the HTC and allowed the Project to proceed.

PROCEDURAL HISTORY

On October 18, 2018, the court issued a decision and order on motion sequence 001, dismissing 11 of the 17 causes of action asserted by plaintiffs (NYSCEF doc. no. 85). The remaining causes of action addressed by the following decision and order are: (i) COUNT I, for common law fraud; (ii) COUNT II, for a derivative claim of breach of fiduciary duty against NYCRC; (iii) COUNT III, for aiding and abetting fraud; (iv) COUNT IV, for a derivative claim of breach of fiduciary duty for refusal to sell leasehold mortgages, against Olsen and Levinsohn; (v) COUNT VI, for a derivative claim of aiding and abetting breach of fiduciary duty, against George Olsen and Paul Levinsohn; and (vi) COUNT VII, for aiding and abetting breach of fiduciary duty against George Olsen and Paul Levinsohn.

In motion sequence 014, defendants move for summary judgment, pursuant to CPLR 3212, dismissing plaintiffs' remaining claims with prejudice.

LEGAL STANDARD

It is well settled under New York law that "[t]o obtain summary judgment it is necessary that the movant establish his cause of action or defense sufficiently to warrant the court as a matter of law in directing judgment in his favor" (Zuckerman v City of New York, 49 NY2d 557, 562 [1980], citing CPLR 3212(b) [internal quotation marks omitted]). Failure by the movant to make a prima facie showing "requires a denial of the motion, regardless of the sufficiency of the opposing papers" (Vega v Restani Constr. Corp., 18 NY3d 499, 503 [2012] [internal quotation marks and citation omitted, emphasis in original]).

Where the moving party makes a prima facie showing of entitlement to summary judgment, the burden shifts to the non-moving party "to establish the existence of material issues of fact which require a trial of the action" (Matter of Eighth Jud. Dist. Asbestos Litig., 33 NY3d 488, 496 [2019] [internal quotation marks and citation omitted]). "Summary judgment should not be granted where there is any doubt as to the existence of a factual issue or where the existence of a factual issue is arguable" (Forrest v Jewish Guild for the Blind, 3 NY3d 295, 315 [2004] [internal citation omitted]).

DISCUSSION

I. The Fraud and Aiding-and-Abetting Causes of Action

Plaintiffs' first cause of action asserts common law fraud, alleging that defendants misrepresented material facts or omitted material facts in the offering materials to mislead plaintiffs and induce their investment. Specifically, plaintiffs assert that the offering brochure, containing a pie chart of the investment allocations, led plaintiffs to believe that their EB-5 investment only accounted for a lesser portion of the funds required to complete the project, with the rest to be made up from New York State funding and other additional funding obtained by Dermot. Plaintiffs further allege that the defendants failed to disclose that, without the developer's funding, the investors' $77 million was insufficient to fund the total cost of the Project.

"To establish fraud, a plaintiff must show a misrepresentation or a material omission of fact which was false and known to be false by [the] defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury" (Ambac Assurance Corp. v Countrywide Home Loans, Inc., 151 AD3d 83, 85 [1st Dept 2017] [internal quotations and citations omitted]).

Here, the OM directly contradicts statements plaintiffs say they relied upon: it defines Borrower as 10 South Street Associates, LLC (an affiliate of Dermot), identifies Borrower as the sole obligor, and states that repayment would not be guaranteed by Dermot or any other entity. Forward-looking statements in the OM (e.g., that Borrower "expects" to invest $17 million or that the Manager expects the City will provide additional capital in the approximate amount of $145 million to EDC) were framed as projections subject to change, and cannot support fraud absent proof they were known to be false when made. Plaintiffs fail to provide such proof. Moreover, the OM explicitly states that "neither the City nor EDC is obligated to provide such capital and there is no assurance that the City will provide such capital" (NYSCEF doc. no. 462, pg. 340).

Numerous plaintiffs asserted in deposition testimony that they had not received the offering materials before signing, or were only presented with signature pages by officers of NYCRC or by immigration agents who were assisting investors with their applications. Plaintiffs further allege that, after they invested, defendants kept them in the dark about the status of construction, and that, after the borrower defaulted on the Loan, defendants continued to mislead plaintiffs by not disclosing the default, the fact that construction had ceased, or that Dermot was not going to cover the deficiency in capital needed to complete the renovation.

To address these allegations, defendants submit the offering materials and agreements provided to investors. Defendants show that plaintiffs signed statements, as part of the subscription agreements to become investors in the Fund, and, as part of their immigration applications, representing that they relied solely on the facts of and terms of the agreements and that NYCRC had not made any representations of any kind or nature to induce them to invest, except as specifically set forth in the documents. Defendants argue that the offering materials accurately disclosed all material terms of the investment.

In this court's view, plaintiffs fail to adequately establish justifiable reliance on any misrepresentations made to them by immigration agents or officers of NYCRC related to the allocation of investment funds. Plaintiffs, at this stage of the litigation, cannot be heard to complain that they were induced by misrepresentations to invest, given that the facts regarding the nature of the investment were contained within the offering materials. That plaintiffs did not have the offering materials before them prior to signing and agreeing to invest, without having read the material or having asked to see them prior to signing, does not constitute justifiable reliance (see Sharma v Walia, 201 AD3d 609, 610 [1st Dept 2022]). Notably, plaintiffs expressly represented in their subscription agreements and immigration applications that they in fact had received, read, and understood all of the information contained in the offering materials prior to signing. "A signer's duty to read and understand that which it signed is not diminished merely because [the signer] was provided with only a signature page" (Vulcan Power Co. v Munson, 89 AD3d 494, 495 [1st Dept 2011] [internal quotation marks and citations omitted]).

Plaintiffs, moreover, fail to raise a triable issue of fact as to any harm they suffered as a result of defendants' alleged misrepresentations, including statements or omissions regarding Developer's purported funding contribution. The New York Court of Appeals has long observed that, " '[t]o give rise, under any circumstances, to a cause of action, either in law or in equity, reliance on the false representation must result in injury' " (Ambac Assur. Corp. v Countrywide Home Loans, Inc., 31 NY3d 569, 580-581 [2018]; quoting Sager v Friedman, 270 NY 472, 479-481 [1936]). The principle, the Court of Appeals explained, is simply that, "if the fraud causes no loss, then the plaintiff has suffered no damages" (id. [internal quotation marks and citations omitted]). While plaintiffs allege that they did not receive returns of each of their $500,000 investments, plaintiffs do not dispute that each received a green card and obtained permanent residency status for themselves and/or their family members.

Plaintiffs offer deposition testimony, as well as a letter signed by defendants Olsen and Levinsohn addressed to New York's City's then-Deputy Mayor of Housing and Economic Development Alicia Glen, demonstrating that defendants acknowledged their "fiduciary obligations" to "do everything [the Fund] can do to secure a replacement developer who will be in a position to repay the $77 million" (see NYSCEF doc. nos. 1117, pg. 6; 1023 at 329:24-333:2). However, such evidence does little to establish any harm suffered as a direct result of defendants' purported misrepresentations. Plaintiffs are unable to point this court to any representation contained within the offering materials stating that NYCRC guaranteed a return of plaintiffs' investments.

At the time plaintiffs signed their subscription agreements and applied for investor visas, the "applicable regulations on qualifying investments required evidence that the petitioner has placed the required amount of capital at risk for the purpose of generating a return on the capital placed at risk" (Bai v Tegs Management, LLC, US Dist CT, SD NY 20cv4942, Cote, J., 2022 [internal quotation marks and citations omitted] [emphasis added]; see also Wen v New York City Regional Center, LLC, 695 F Supp 3d 517, 528 [SD NY 2023]). The structure of the EB-5 program is designed as an investment vehicle and is not principally an income-producing security. It is a mechanism by which an investor places capital "at risk" in order to obtain immigration benefits. That plaintiffs did not receive a return of their investments does not establish the requisite injury necessary to prove fraud.

Nor can plaintiffs establish damages. Plaintiffs can only recover damages for fraud by proving actual pecuniary loss sustained as a direct result of misrepresentations. "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" (Lama Holding Co. v Smith Barney Inc., 88 NY2d 413, 421 [1996]). Plaintiffs' mention of defendants' own expert, attesting that defendants' had the authority not to proceed with the BMB Project and instead could have invested in an alternative project that yielded both green cards and the return of capital, is unavailing. Such hindsight attempts to hold defendants liable for their judgment and decisions, which would be more appropriately adjudicated under their remaining breach of fiduciary duty claims.

With respect to plaintiff's third cause of action for aiding and abetting fraud, such cause of action must show "(1) the existence of an underlying fraud; (2); the knowledge of this fraud on the part of the aider and abettor; and (3) the substantial assistance by the aider and abettor in the achievement of the fraud" (Stanfield Offshore Leveraged Assets, Ltd. v Metropolitan Life Ins. Co., 64 AD3d 472, 476 [1st Dept 2009] [internal quotations and citations omitted]). Because plaintiffs have failed to establish injury or damages and failed to raise a triable issue of fact, the first and third causes of action for common law fraud and aiding and abetting fraud are dismissed.

II. Derivative Breach of Fiduciary Duty — Disbursement of Loan Proceeds to Pay Interest and Fees to the Manager

Turning now to the breach of fiduciary duty claims, plaintiffs' second and sixth causes of action are asserted derivatively on behalf of the Fund, alleging that defendants breached their fiduciary duties of care and loyalty by disbursing loan proceeds to pay interest and fees to NYCRC, notwithstanding Developer's payment defaults. Thus, plaintiffs contend that defendants elevated their own pecuniary interests in continuing to collect fees over the interests of the Fund and its non-managing members.

Managing members of an LLC owe fiduciary duties to non-managing members (see Pokoik v Pokoik, 115 AD3d 428, 429 [1st Dept 2014]). However, those duties, are qualified by the business judgment rule, which "bars judicial inquiry into actions of corporate directors [or LLC managers] taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes" (S.H. & Helen R. Scheuer Fam. Found., Inc. v 61 Assocs., 179 AD2d 65, 69 [1st Dept 1992] [internal quotation marks and citations omitted]). "So long as the corporation's directors have not breached their fiduciary obligation to the corporation, the exercise of their powers for the common and general interests of the corporation may not be questioned, although the results show that what they did was unwise or inexpedient" (Levandusky v One Fifth Ave. Apartment Corp., 75 NY2d 530, 538 [1990] [internal quotation marks and citations omitted]).

It is undisputed that NYCRC's entitlement to receive compensation, by way of management fees, was disclosed in the offering materials (NYSCEF doc. no. 462, pg. 311). The operating agreement separately vested NYCRC with discretion to manage, monitor, and make decisions for the Fund to further its investment objective under the EB-5 program, including decisions regarding the application of Loan proceeds. The record demonstrates that NYCRC's challenged decisions — closing the Loan, payment of management fees from Loan proceeds, ongoing disbursement of the Loan — were made in good faith to advance that objective. Courts do not second-guess such judgment calls with hindsight. Plaintiffs' central theory, that fee and interest payments from Fund assets rendered NYCRC "self-interested" and stripped its decisions of protection, does not create a triable issue on this record.

A conflict of interest that is specifically disclosed in the governing offering or operating documents, and to which the investor assents by subscribing, does not support a breach of fiduciary duty claim (see Wen v New York City Regional Center, LLC, 695 F Supp 3d 517, 549 [SD NY 2023] [finding that regional center defendants' collection of management fees "did not create an impermissible conflict of interest because the offering memoranda fully disclosed them"]). " 'A breach of fiduciary duty claim may not be based on a conflict of interest or even self-dealing where the conflict was specifically disclosed in the partnership agreement or prospectus' " (id., quoting Schneider v Wien & Malkin LLP, 2004 WL 2495843, at *14 [Sup Ct, NY County 2004], and citing Seaford Funding Ltd. P'shp v M&M Assocs. II, L.P., 672 A2d 66, 72 [Del Ch 1995] ["A conflict of interest disclosed in a prospectus or partnership agreement and a plaintiff's acceptance of the terms of the prospectus or Partnership Agreement precludes the plaintiff from bringing a derivative claim based on the facts disclosed in those documents"]).

Plaintiffs' argument that defendants' disbursement decisions were tainted because NYCRC benefited financially from continuing to collect fees on outstanding loan balances is the precise theory rejected in Wen.² The mere fact that a fiduciary could, or does, financially benefit from a particular business decision does not, standing alone, create a disqualifying conflict of interest sufficient to strip that decision of business judgment protection. To hold otherwise would mean that virtually every disbursement, fee collection, or portfolio management decision made by any compensated manager of a pooled investment vehicle would be presumptively disloyal, since compensated managers by definition benefit, in some general sense, from the continuation of the fee-generating relationship.

Plaintiffs have identified no evidentiary proof in admissible form that NYCRC's disbursement decisions were the product of self-dealing — distinguishable from its ordinary, disclosed fee arrangement. Plaintiffs separately fail to cite authority or support for its contention that the EB-5 Program prohibits payment of management fees from loan proceeds or other EB-5 monies. Defendants assert that NYCRC only used funds not used for job creation purposes to support the ongoing construction and to compensate its managers. Absent proof of self-dealing beyond the fee structures plainly disclosed in the OM, the decisions regarding how and when to apply Loan proceeds fall squarely within the protection of the business judgment rule, and this court declines to engage in the kind of after-the-fact second-guessing of managerial decisions that the rule exists to prevent. Neither do plaintiffs' critiques of NYCRC's monitoring and administration of the Loan overcome the protections here. NYCRC was authorized to retain experts, engaged a qualified monitor, and relied on monthly site-visit reports, draw reviews, and budget verifications in administering disbursements. On this record, the choice to rely on the retained monitor and contemporaneous information does not evince bad faith, gross negligence, or willful misconduct.

Finally, the contention that NYCRC's post-default disbursements of remaining loan proceeds were disloyal is unsupported. The record reflects that those disbursements were directed to preserving collateral and ensuring that EB-5 Program requirements were met, both of which were well within the manager's discretion and aligned with the investment objective. Plaintiffs offer no admissible evidence that these decisions were outside NYCRC's authority or tainted by an undisclosed conflict. Given that the derivative breach of fiduciary duty cause of action premised upon the disbursement of Loan proceeds fails, the derivative aiding-and-abetting cause of action based on the same conduct fails as well. Accordingly, the second and sixth causes of action are dismissed.

III. Derivative Breach of Fiduciary Duty — Refusal to Sell the Leasehold Mortgage

Lastly, plaintiffs' fourth cause of action concerns defendants' alleged refusal to sell the leasehold mortgages — granted to it by Dermot as collateral securing the Fund's Loan — following the developer's default on the Loan. According to plaintiffs, multiple developers were interested in purchasing the Fund's leasehold mortgages and completing renovations to the BMB, and that several of those developers had made written offers to NYCRC (Sec. Am. Comp., ¶222). Defendants assert that the cause of action should be dismissed as moot because it seeks injunctive relief that requires defendants to sell the Fund's leasehold mortgages for the best terms reasonably available. Defendants submit that NYCRC has since sold the Loan's collateral for $13 million. Plaintiffs contend that defendants could have established a higher asking price, above the $13 million that defendants ultimately accepted, if they had obtained their own appraisal.

Here, plaintiffs seek equitable relief that is no longer available, and on the record presented on the motion, neither plaintiffs nor the Fund suffered damages by defendants' failure to sell the Loan and collateral for a greater value. Plaintiffs also fail to demonstrate any refusal by defendants to sell the collateral or actual, non-speculative or conjectural evidence that there were other bona fide offers on the table from other developers. Instead, plaintiffs merely assert that, before closing the sale of the leasehold mortgage, defendants demanded that plaintiffs execute general releases to NYCRC and the Fund before continuing to negotiate and move forward with the sale.

The threat that plaintiffs refer to is contained in a letter of settlement that was used for negotiating purposes between defendants and The Witkoff Group (NYSCEF doc. no. 1121), who entered into a letter of intent in April 2016 in connection with Witkoff's offer to purchase the Loan for $7 million. The parties were unable to reach a deal. In August 2018, defendants ultimately moved forward with the sale of the Loan for $13 million to Centaur Properties LLC, a replacement developer, without obtaining releases from plaintiffs. Given plaintiffs' failure to raise a triable issue of fact as to whether the business judgment rule applies to defendants' alleged refusal to sell the leasehold mortgage and collateral, defendants' motion for summary judgment is granted as to the fourth cause of action for derivative breach of fiduciary duty, and it is therefore dismissed.

IV. Aiding and Abetting Breach of Fiduciary Duty — Olsen and Levinsohn

The court notes that plaintiffs' fifth cause of action for a direct claim of breach of fiduciary duty against NYCRC was previously dismissed in an order and decision dated October 18, 2018. If there is no underlying claim for breach of fiduciary, the claim for aiding and abetting must also be dismissed. Therefore, this court grants summary judgment dismissing plaintiffs' seventh cause of action for aiding and abetting breach of fiduciary duty against George Olsen and Paul Levinsohn.

Accordingly, it is hereby

ORDERED that defendants' motion for summary judgment pursuant to CPLR 3212 is granted in its entirety.

DATE October 9, 2026

FOOTNOTES

1.   Form I-829 is an official form filed with U.S. Citizenship and Immigration Services (USCIS) by immigrant investors in the EB-5 Immigration Investor Program. The form is for immigrant investors to petition to remove the conditions on their, and certain dependents', permanent resident status which they obtained based on investment in a new commercial enterprise. If USCIS accepts the petition before the applicant's conditional permanent residency status is terminated, the applicant's status will automatically be extended for the period indicated in the filing receipt (Instructions for Petition by Investor to Remove Conditions on Permanent Resident Status, https://www.uscis.gov/sites/default/files/document/forms/i-829instr.pdf, [Department of Homeland Security U.S. Citizenship and Immigration Services, Form I-829, Expires 3/31/27, last accessed October 9, 2026]).

2.   (695 F Supp 3d 517, 528 [SD NY 2023]).

Robert R. Reed, J.