WILLIAM B. REBOLINI, J.
Upon the following papers numbered 1 to 36 read on this motion and cross motion for summary judgment: Notice of Motion and supporting papers, 1 — 12; Notice of Cross Motion and supporting papers, 13 — 23; Answering Affidavits and supporting papers, 24 — 31; Replying Affidavits and supporting papers, 32 — 34; 35 — 36.
The instant action seeks to recover damages for personal injuries sustained by the infant plaintiff at approximately 6:30 p.m. on March 20, 2004 when she was struck by an unknown motor vehicle while she was attempting to cross Nicholls Road near its intersection with Purick Street, in the Town of Islip, New York. It is undisputed that the infant plaintiff was within a marked cross walk at the time of the accident. It is likewise undisputed that Nicholls Road, also known as County Road 97, is owned by the defendant County of Suffolk. An elementary school belonging to the defendant Bayport-Blue Point Union Free School District is located in the vicinity of the intersection. The complaint alleges that the defendants County of Suffolk, Town of Islip (hereinafter the Town), Town of Brookhaven and Bayport-Blue Point Union Free school District are liable for the infant plaintiff's injuries as a result of their negligent operation, management, maintenance and control of the subject roadway. Specifically, the complaint alleges that the defendants were negligent in, inter alia, failing to maintain the roadway in a reasonably safe and proper condition, failing to provide a safe and proper passage across the roadway, failing to provide proper and adequate traffic control devices, failing to provide traffic lights, failing to provide pedestrian crossing lights, failing to provide crossing guards and failing to have proper street lighting.
A motion by the defendant Bayport-Blue Point Union Free School District, for dismissal of the complaint as asserted against it, was granted by order of this Court, dated August 18, 2008, finding said defendant owed no duty to the plaintiff. By stipulation of discontinuance dated July 29, 2009 the action was discontinued against the Town of Brookhaven.
The County of Suffolk now moves for summary judgment dismissing the complaint as asserted against it on the ground that it is entitled to qualified immunity. The County also argues that it is entitled to summary judgment as it owed no duty to provide overhead artificial lighting and crossing guards. Lastly, it argues that it is entitled to summary judgment as there is no basis to conclude that the complained of roadway defect was a proximate cause of the subject accident. The Town of Islip cross-moves for summary judgment dismissing the complaint and all cross-claims asserted against it on the ground that it did not owe a duty to maintain or design the subject roadway. The Town also contends that it cannot be held liable based on its failure to provide a crossing guard or artificial lighting as it does not owe a duty to provide such benefits.
The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact (see, Alvarez v. Prospect Hosp., 68 NY2d 320; Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851; Zuckerman v. City of New York, 49 NY2d 557). Failure to make such prima facie showing requires a denial of the motion, regardless of the sufficiency of the opposing papers (see, Alvarez v. Prospect Hosp., 68 NY2d 320; Winegrad v New York Univ. Med. Ctr., 64 NY2d 851). Once this showing has been made, however, the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action (see, Alvarez v. Prospect Hosp., 68 NY2d 320; Zuckerman v. City of New York, 49 NY2d 557).
The County failed to demonstrate its prima facie entitlement to summary judgment. In support of the motion, the County submitted, inter alia, a police accident report, a letter from the Commissioner of Public Works to Legislator Brian Foley dated August 20, 2003, a letter from the Commissioner of Public Works to Legislator Brian Foley dated July 21, 2003, the affidavit of Arvind Vora and the infant plaintiff's 50-h hearing testimony.
A municipality owes to the public the absolute duty of keeping its streets in a reasonably safe condition (see, Friedman v. State, 67 NY2d 271). While the design, construction, and maintenance of public highways is entrusted to the sound discretion of municipal authorities, the municipality has a duty to keep its highways reasonably safe for those who obey the rules of the road (see, Levi v. Kratovac, 35 AD3d 548 [2nd Dept., 2006]; Carrillo v. County of Rockland, 11 AD3d 575 [2nd Dept., 2004]). One who is injured in a traffic accident can recover against a municipality if it is shown that its failure to install a traffic control or warning device was negligent under the circumstances, that this omission was a contributing cause of the mishap, and that there was no reasonable basis for the municipality's inaction (see, Alexander v. Eldred, 63 NY2d 460). The evidence submitted in support of the motion fails to establish that the County met its obligation with respect to making the intersection at issue reasonably safe (see, McArthur v. Muhammad, 27 AD3d 532 [2nd Dept., 2006]; Scott v. City of New York, 16 AD3d 485 [2nd Dept., 2005]; Alcalay v. Town of North Hempstead, 262 AD2d 258 [2nd Dept., 1999]). To the contrary, there are triable issues of fact with respect to the reasonableness of the County's failure to install a traffic device at the intersection under all the attendant circumstances. In this regard, the evidence submitted included evidence that Nicholls Road has two lanes in each direction and a posted speed limit of 55 m.p.h. A painted crosswalk was present on Nicholls Road. At the time of the accident, there were no traffic control signals or traffic warning devices present. The infant plaintiff was attempting to cross Nicholls Road within the painted crosswalk at the time that she was struck. The evidence also included the affidavit of Arvind Vora, an employee of the Suffolk County Department of Public Works, which states that the intersection was closed to through traffic following a 1992 traffic study and that a 2003 traffic study indicated that the intersection should remain closed to through traffic. Furthermore, the evidence presented indicated that there was no lighting in the area of the cross walk and that the area was dark at night. Although a municipality is generally not liable for failure to install lighting, in certain situations, where there is a defect or some unusual condition rendering the street unsafe to the traveling public, a municipality may be required to provide lighting (cf., Thompson v. New York, 78 NY2d 682;compare, Rios v. City of New York, 33 AD3d 780 [2nd Dept., 2006];Lee v.Morris, 297 AD2d 626 [2nd Dept., 2002]). In a similar vein, there are triable issues of fact with respect to whether any negligence on the part of the County in failing to make the intersection reasonably safe was a proximate cause of the infant plaintiff's injuries (see, Ernest v. Red Creek Cent. Sch. Dist., 93 NY2d 664; Scott v. City of New York, 16 AD3d 485 [2nd Dept., 2005];compare, McFadden v. Village of Ossining, 48 AD3d 761 [2nd Dept., 2008]).
The County also failed to demonstrate its prima facie entitlement to summary judgment on the ground of qualified immunity (see, Bresciani v. County of Dutchess, 62 AD3d 639 [2nd Dept., 2009]). While the municipality's duty to keep its roadways in a reasonable safe condition is non-delegable, it is measured by the courts with consideration given to the proper limits on intrusion into the municipality's planning and decision-making functions (see, Friedman v. State, 67 NY2d 271). Thus, in the field of traffic design engineering, the municipality will generally be accorded a qualified immunity from liability arising out of a highway planning decision (Bresciani v County of Dutchess, 62 AD3d 639 [2nd Dept., 2009]). Notwithstanding the foregoing, under this doctrine of qualified immunity, a governmental body may be held liable when its study of a traffic condition is plainly inadequate or there is no reasonable basis for its traffic plan (see, Friedman v. State, 67 NY2d 271; Carrillo v. County of Rockland, 11 AD3d 575 [2nd Dept., 2004]; Forsythe-Kane v. Town of Yorktown, 249 AD2d 505 [2nd Dept., 1998]). In addition, a municipality may be held liable if, after being made aware of a dangerous traffic condition, it does not undertake an adequate study to determine what reasonable measures may be necessary to alleviate the condition or, having determined what reasonable measures were necessary, it unjustifiably delays in taking them (see, Friedman v. State, 67 NY2d 271;Bresciani v. County of Dutchess, 62 AD3d 639 [2nd Dept., 2009]). Moreover, after implementing a traffic plan, a municipality is under a continuing duty to review its plan in the light of its actual operation (see, Friedman v State, 67 NY2d 271). Here, there remain issues of fact regarding the existence and adequacy of any traffic study or plan prepared by the County for the relevant area and of any review or revision thereof in light of the actual operation of the plan and of any significant changes in the circumstances of the location (see, Scott v. City of New York, 16 AD3d 485 [2nd Dept., 2005];Carrillo v. County of Rockland, 11 AD3d 575 [2nd Dept., 2004]; cf.Forsythe-Kane v. Town of Yorktown, 249 AD2d 505 [2nd Dept., 1998; seegenerally, Ernest v. Red Creek Cent. Sch. Dist., 93 NY2d 664). Indeed, the County failed to tender copies of any of the traffic studies on which it allegedly relied in making its traffic planning decisions for the subject intersection (see, McArthur v. Muhammad, 46 AD3d 640 [2nd Dept., 2007]).
The County's failure to satisfy its prima facie burden required denial of its motion without regard to the sufficiency of the plaintiff' s papers in opposition (see, Bresciani v. County of Dutchess, 62 AD3d 639 [2nd Dept., 2009]).
The cross-motion by the defendant Town of Islip for summary judgment dismissing the complaint and all cross claims asserted against it is granted. As a general rule, a municipality will not be held responsible for the negligent design of a highway it does not own or control (see, Ernest v. Red Creek Cent. Sch. Dist., 93 NY2d 664; Horn v. Town of Clarkstown, 46 AD3d 621 [2nd Dept., 2007];Carlo v. Town of E. Fishkill, 19 AD3d 442 [2nd Dept., 2005]; Hynes v. Town of Cornwall, 234 AD2d 423 [2nd Dept., 1996]). Moreover, a municipality cannot be held liable for the failure to maintain in a reasonably safe condition a road it does not own or control unless it affirmatively undertakes such a duty (see, Ernest v. Red Creek Cent. Sch. Dist., 93 NY2d 664; Horn v. Town of Clarkstown, 46 AD3d 621 [2nd Dept., 2007];Carlo v. Town of E. Fishkill, 19 AD3d 442 [2nd Dept., 2005]; Hynes v. Town of Cornwall, 234 AD2d 423 [2nd Dept., 1996]). Furthermore, the Vehicle and Traffic Law extends County authority to all County roads (Vehicle and Traffic Law § 1651; Kovalsky v. Village of Yaphank, 235 AD2d 459 [2nd Dept., 1997]). Although sections of the Vehicle and Traffic Law give towns certain rights with respect to all roads, including County roads, none of these sections establish an affirmative duty of the Town to maintain any County road (Kovalsky v. Village of Yaphank, 235 AD2d 459 [2nd Dept., 1997], at 460; see,Ernest v. Red Creek Cent. Sch. Dist., 93 NY2d 664). Here, the evidence submitted by the Town established that the Town did not own or control the roadway at issue (see,Cuzzo v. Town of Hempstead, 61 AD3d 921 [2nd Dept., 2009]; Molina v. Conklin, 57 AD3d 860 [2nd Dept., 2008]; Horn v. Town of Clarkstown, 46 AD3d 621 [2nd Dept., 2007];Carlo v. Town of E. Fishkill, 19 AD3d 442 [2nd Dept., 2005]; Alcalay v. Town of North Hempstead, 262 AD2d 258 [2nd Dept., 1999]; Hynes v. Town of Cornwall, 234 AD2d 423 [2nd Dept., 1996];Konstantatos v. County of Suffolk, 208 AD2d 889 [2nd Dept., 1994]). In opposition, the plaintiff failed to submit evidence sufficient to raise a triable issue of fact as to whether the Town assumed control of the subject highway or affirmatively undertook any duty to maintain it (see,Molina v. Conklin, 57 AD3d 860 [2nd Dept., 2008]; Horn v. Town of Clarkstown, 46 AD3d 621 [2nd Dept., 2007]; Carlo v. Town of E. Fishkill, 19 AD3d 442 [2nd Dept., 2005]).
Contrary to the plaintiff's contention, the Town cannot be held liable based on its failure to install lighting at the location of the accident. Highway Law § 327, entitled "Lighting roads, highways and bridges", provides, in pertinent part: "The town board of any town * * * may * * * provide for lighting dangerous portions of any road or highway * * * The board may, in its discretion, at any time discontinue the lighting of any road, highway or bridge, or portion thereof." Thus, there is no duty on the part of the town to light the public roadway so as to support a cause of action sounding in negligence based on the lack of lighting (see, Mastro v. Maiorino, 174 AD2d 654 [2nd Dept., 1991]; Bauer v. Hempstead, 143 AD2d 793 [2nd Dept., 1988]). In a similar vein, the Court notes that the Town cannot be held liable based on its failure to provide a crossing guard. Providing crossing guards is one of the governmental functions which is within the discretion of a municipality (see, Molina v. Conklin, 57 AD3d 860 [2nd Dept., 2008]). In order to hold a municipality liable for the negligent performance of a governmental function, a plaintiff must establish that a special relationship with the municipality exists (see, Molina v. Conklin, 57 AD3d 860 [2nd Dept., 2008]). The evidence presented here demonstrates that the Town did not assume a special duty to post a crossing guard at the accident site (see,Vandewinckel v. Northport/East Northport Union Free Sch. Dist., 24 AD3d 432 [2nd Dept., 2005];Carlo v. Town of E. Fishkill, 19 AD3d 442 [2nd Dept., 2005]).
In conclusion, the motion by the County of Suffolk for summary judgment dismissing the complaint and all cross claims asserted against it is denied and the cross motion by the Town of Islip for summary judgment dismissing the complaint and all cross claims asserted against it is granted. The claims dismissed herein against the Town of Islip are severed and the plaintiff's remaining claims shall continue.
Based on the foregoing, it is
ORDERED that the motion by the defendant County of Suffolk for summary judgment dismissing the complaint and all cross claims asserted against it (#003) is denied; and it is further,
ORDERED that the cross motion by the defendant Town of Islip for summary judgment dismissing the complaint and all cross claims asserted against it (#004) is granted.
Ginett v. Computer Task Group, Inc., 962 F.2d 1085, 1091 (2d Cir. 1992).
See Cullen v. Margiotta, 811 F.2d 698, 711 (2d Cir. 1987) (quotation marks and citations omitted), overruled on other grounds, Agency Holding Corp. v. Malley-Duff Assocs., Inc., 483 U.S. 143, 156 (1987).
Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 21 (2d Cir. 1997).
Cullen, 811 F.2d at 711.
Id.
See 28 U.S.C. § 1291 ("The courts of appeals (other than the United States Court of Appeals for the Federal Circuit) shall have jurisdiction of appeals from all final decisions of the district courts of the United States. . . ." (emphasis added)).
See 28 U.S.C. § 1292(b).
See Ginett, 962 F.2d at 1091.
Ellis v. Israel, 12 F.3d 21, 23 (2d Cir. 1993) (citations omitted). Accord Transport Workers Union of America, Local 100, AFL-CIO v. N.Y. City Transit Authority, 505 F.3d 226, 230 (2d Cir. 2007).
Ginett, 962 F.2d at 1092 (quotation marks omitted).
Id. at 1095 (quoting Curtiss-Wright Corp. v. General Elec. Co., 446 U.S. 1, 8 (1980)). Accord Arlinghaus v. Ritenour, 543 F.2d 461, 463 (2d Cir. 1976) ("[T]he determination involves `weighing the overall policy against piecemeal appeals against whatever exigencies the case at hand may present. . . .'" (quoting Panichella v. Penn. R.R. Co., 252 F.2d 452, 455 (3d Cir. 1958)).
See Ginett, 962 F.2d at 1095.
See Curtiss-Wright, 446 U.S. at 8 ("[A] district court must take into account judicial administrative interests as well as the equities involved."); State of N.Y. v. AMRO Realty Corp., 936 F.2d 1420, 1426 (2d Cir. 1991) ("Accordingly, we defer to the district court's judgment, in its role as dispatcher, that the interests of `sound judicial administration' as well as fairness to the parties, mitigate in favor of certification.").
B. Substantive Law
1. Contract Interpretation Under Delaware Law
A federal court sitting in diversity applies the choice of law rules of the state in which it sits. See Schwartz v. Liberty Mut. Ins. Co., 539 F.3d 135, 147 (2d Cir. 2008) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941)). Under New York Law, "[a]bsent fraud or a violation of public policy, a court is to apply the law selected in the contract as long as the state selected has sufficient contacts with the transaction." Fieger v. Pitney Bowes Credit Corp., 251 F.3d 386, 393 (2d Cir. 2001). Neither party disputes the applicability of the Agreement's choice of law provision, which designates Delaware law as controlling. Accordingly, plaintiffs' contract claims are governed by Delaware law. See Agreement at 19.
"[T]he proper interpretation of language in a contract is a question of law." "Summary judgment is an appropriate process for the enforcement of unambiguous contracts because there is no material dispute of fact for the court to resolve." "Delaware adheres to the objective theory of contract interpretation" under which "the court looks to the most objective indicia of [the parties'] intent: the words found in the written instrument." "When the plain, common, and ordinary meaning of the words lends itself to only one reasonable interpretation, that interpretation controls the litigation." If the language in the contract "is clear and unambiguous on its face" courts may not "consider parol evidence to interpret it or search for the parties' intentions."
Allied Capital Corp. v. GC-Sun Holdings, L.P., 910 A.2d 1020, 1030 (Del. Ch. 2006).
Comet Sys., Inc. S'holders' Agent v. MIVA, Inc., 980 A.2d 1024, 1030 (Del. Ch. 2008) (citation omitted).
Sassano v. CIBC World Mkts. Corp., 948 A.2d 453, 461 (Del. Ch. 2008). Accord Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) ("If a contract is unambiguous, extrinsic evidence may not be used to interpret the intent of the parties, to vary the terms of the contract or to create an ambiguity.").
Sassano, 948 A.2d at 461 (citing Eagle, 702 A.2d at 1232). Accord AT T Corp. v. Lillis, 953 A.2d 241, 252 (Del. Super. 2008) ("`Delaware courts will not destroy or twist [contract] language under the guise of construing it. When the language of a . . . contract is clear and unequivocal, a party will be bound by its plain meaning because creating an ambiguity where none exists could, in effect, create a new contract with rights, liabilities and duties to which the parties had not assented. . . .'" (quoting Lorillard Tobacco Co. v. American Legacy Found., 903 A.2d 728, 739 (Del. 2006); Rhone-Poulenc Basic Chem. Co. v. American Motorist Ins. Co., 616 A.2d 1192, 1195-96 (Del. 1992))).
Pellaton v. Bank of N. Y., 592 A.2d 473, 478 (Del. 1991).
Contract terms are not rendered ambiguous simply because the parties disagree as to their construction. "A trial judge must review a contract for ambiguity through the lens of `what a reasonable person in the position of the parties would have thought the contract meant.'" Contract terms are only ambiguous "[w]hen the provisions in controversy are fairly susceptible [to] different interpretations or may have two or more different meanings."
See Rhone-Poulenc, 616 A.2d at 1196.
Kuhn Const., Inc. v. Diamond State Port Corp., 990 A.2d 393, 396 (Del. Super. 2010) (quoting Rhone-Poulenc, 616 A.2d at 1197).
Eagle Indus., 702 A.2d at 1232.
When faced with an ambiguous contract provision, "the interpreting court must look beyond the language of the contract to ascertain the parties' intentions" at the time of drafting. In making such a determination, "the court [] may consider objective [parol] evidence, `including the overt statements and acts of the parties, the business context, the parties' prior dealings, and industry custom.'" "[W]here a contract provision lends itself to two interpretations, a court will not adopt [an] interpretation that leads to unreasonable results, but instead will adopt the construction that is reasonable and that harmonizes the affected contract provisions." "An unreasonable interpretation produces an absurd result or one that no reasonable person would have accepted when entering the contract." 2. New York Statute of Limitations
Id.
Julian v. Julian, No. 1892-VCP, 2010 WL 1068192, at *5 (Del. Ch. Mar. 22, 2010) (quoting Concord Steel, Inc. v. Wilmington Steel Processing Co., No. 19035, 2009 WL 3161643, at *6 (Del. Ch. Sept. 30, 2009)).
Axis Reinsurance Co. v. HLTH Corp., 993 A.2d 1057, 1063 (Del. Super. 2010) (citing Restatement (Second) of Contracts § 203 (1981); Lorillard, 903 A.2d 728; O'Brien v. Progressive N. Ins. Co., 785 A.2d 281, 288 (Del. 2001); and Holland v. National Auto. Fibres, 194 A. 124, 127 (Del. Ch. 1937)).
Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1160 (Del. Super. 2010) (citations omitted).
"Where jurisdiction rests upon diversity of citizenship, a federal court sitting in New York must apply the New York . . . statutes of limitations." Stuart v. American Cyanamid Co., 158 F.3d 622, 627 (2d Cir. 1998) (citing Guaranty Trust Co. v. York, 326 U.S. 99, 108-09 (1945); Klaxon, 313 U.S. at 496). Accordingly, I apply New York's statute of limitations to defendants' counterclaims.
Defendants have asserted counterclaims for breach of contract, breach of fiduciary duty, unjust enrichment and conversion. In New York, breach of contract claims are governed by a six-year statute of limitations. Conversion claims are governed by a three-year statute of limitations. While New York courts have occasionally applied a three-year statute of limitations to unjust enrichment claim, they more commonly apply a six-year statute of limitations. New York law does not provide a single statute of limitations for breach of fiduciary duty claims. "Rather, the choice of the applicable limitations period depends on the substantive remedy that the plaintiff seeks." If the remedy sought is purely monetary in nature, courts apply a three-year statute of limitations. If the remedy sought is equitable, courts apply a six-year statute of limitations. "Moreover, where an allegation of fraud is essential to a breach of fiduciary duty claim, courts have applied a six-year statute of limitations."
See Civil Practice Law and Rules ("CPLR") § 213(2).
See id. § 214(3).
See, e.g., Ingrami v. Rovner, 847 N.Y.S.2d 132, 134 (2d Dep't 2007).
See Sirico v. F.G.G. Prods., Inc., 896 N.Y.S.2d 61, 66 (1st Dep't 2010); 37 Park Dr. S., Inc. v. Duffy, 881 N.Y.S.2d 481, 482 (2d Dep't 2009); Elliot v. Qwest Commc'ns Corp., 808 N.Y.S.2d 443, 445 (3d Dep't 2006). See also CPLR § 213(1) (directing application of a six-year statute of limitations to "an action for which no limitation is specifically prescribed by law").
IDT Corp. v. Morgan Stanley Dean Witter Co., 12 N.Y.3d 132, 139 (2009).
See id. (citing CPLR § 214(4) (directing application of a six-year statute of limitations to injuries to property)).
See id. (citing CPLR § 213(1)).
Id.
IV. DISCUSSION
A. Summary Judgment as to Damages
Plaintiffs are owed 22.5 percent of any "excess amounts" received by the Company up to a maximum of ten million dollars, at which point their Special Units are fully redeemed and plaintiffs no longer have any equity interest in the Company. I have already held that, as of the date of the first loan on April 26, 2007, the Company's Gross Capital Proceeds Plus Net Cash Flow from Operations exceeded its Acquisition and Development Costs. Accordingly, the only remaining question relating to plaintiffs' summary judgment motion as to damages is whether that excess equaled at least $44,444,444.44 ($44,444,444.44 × .225 = $10,000,000).
1. Gross Capital Proceeds Plus Net Cash Flow from Operations
As of April 26, 2007, the Company entered into two Capital Transactions. First, it received the one hundred and twenty-five million dollar loan on August 26, 2007. Deducting $1,477,540 in expenses and $2,200,000 reserved by Inland for environmental liabilities, the proceeds from the loan amount to $121,322,460. Second, the Company sold Parcel A to the City of Sacramento. Subtracting closing costs, the Company's proceeds from the transaction were $53,967,805. Defendants assert that it is premature to calculate these proceeds because "the actual purchase price of Parcel A has yet to be determined in arbitration." However, there is no legitimate dispute that (i) Parcel A was transferred to the City; and (ii) as of April 26, 2007, the Company had received $53,967,805 in proceeds from that sale. Regardless of whether an arbitration is scheduled to occur in the future (and defendants have not provided any evidence of an agreement compelling arbitration), as of April 26, 2007, the Company had received these proceeds from a Capital Transaction as defined by the Agreement.
See Affidavit of Elliot A. Lesser ("Lesser Aff."), a Certified Public Accountant Retained by Plaintiffs' Counsel, ¶ 8.
See Agreement § 1 (defining "Capital Transaction" to include "[a] sale or other transfer . . . of all or a portion of the Real Property or the Project . . ."). Defendants assert that "the sale of Parcel A to the City of Sacramento should not be included as part of the analysis" of the Company's Gross Capital Proceeds. Memorandum of Law in Opposition to Plaintiffs' (Third) Motion for Partial Summary Judgment, Pursuant to Rule 56 of the Federal Rules of Civil Procedure, and in Opposition to Plaintiffs' Motion to Dismiss, Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("Def. Opp.") at 2. However, the Agreement expressly states that the sale of "a portion of the Real Property" is a Capital Transaction. Agreement § 1. This express language is controlling.
See Lesser Aff. ¶ 8.
Def. Opp. at 2 (citing Affidavit of Suheil Totah ("Totah Aff."), Vice President at the Company in Charge of Development of the Project, ¶¶ 7-8).
See Dec. 21, 2006 Grant Deed, Ex. A. to Affidavit of Bradley M. Rank, Counsel for Plaintiffs.
See The Company's Trial Balance and Ledger as of Dec. 31, 2006, Ex. F to Padian Aff., at ST8054.
Adding these two Capital Transactions together, the Company's Gross Capital Proceeds totaled $175,290,265 as of April 26, 2007. In addition, as indicated by its tax returns, the Company had a negative net Cash Flow from Operations of $8,285,398 at that time. Accordingly, the aggregate Net Cash Flow from Operations and Gross Capital Proceeds received by the Company on April 26, 2007 was $167,004,867.
See Excerpts of the Company's 2007 Federal Tax Return ("Company's 2007 Tax Return"), Ex. H to Padian Aff., at ST8574.
2. Acquisition and Development Costs
According to evidence submitted by plaintiffs, the Company expended $119,744,283 in Acquisition and Development Expenses. Defendants argue that in addition to these costs, the Acquisition and Development Expenses should include "reasonable future reserves" for the development of the Project.
See Plaintiffs' Memorandum of Law in Support of Plaintiffs' Motion for (i) Summary Judgment as to Damages on Their First and Second Causes of Action and (ii) to Dismiss the Defendants' Counterclaims ("Pl. Mem.") at 9 (citing Lesser Aff. ¶¶ 16-18; Company's 2007 Tax Return at ST8574, ST8582-83).
Def. Opp. at 3 (emphasis added).
This argument is similar to another argument defendants raised when plaintiffs moved for summary judgment on the issue of liability. At that time, Defendants asserted that "distributions under Section 10.2 [were] premature because the Agreement never contemplated that Plaintiffs would be entitled to any kind of a payout until and unless the Project had been developed to a viable, income-generating entity." I rejected that argument — finding that the Agreement did not contain any qualification that "the enterprise must be income-generating" before section 10.2 is implicated and that the clear language of the Agreement indicates that plaintiffs were entitled "to equity distributions as soon as the Company had taken in more capital than it had expended in connection with the Project."
Ross, 2010 WL 2816873, at *5 (citation and quotation marks omitted).
Id.
Similarly, there is no indication in the Agreement that speculative future costs should be included in the Acquisition and Development Expenses referenced by the Agreement. Section 10.2, by its express terms, only includes Acquisition and Development Expenses "incurred by the Company . . . through the Date of Determination" — in this instance, April 26, 2007. Defendants have not identified any future expenses recorded in the Company's financial statements — which could arguably be included in Acquisition and Development Expenses incurred as of the Date of Determination — that plaintiffs have not included in their calculation of the Company's Acquisition and Development Expenses. Instead, defendants have cited an external report commissioned by the City of Sacramento and completed in December of 2007 (several months after the Date of Determination) suggesting that the Company will have to expend additional resources to develop the Project. This document does not create a genuine issue of material fact as to whether the Company had already incurred these expenses by April 26, 2007. Accordingly, these speculative future costs are not included in the Acquisition and Development Expenses referenced by the Agreement.
See Def. Opp. at 3 (citing Totah Aff. ¶ 8 and Table C to an External Report Commissioned by the City of Sacramento, Ex. B to Totah Aff.).
3. Conclusion
Subtracting the Company's Acquisition and Development Expenses ($119,744,283) from its aggregate Net Cash Flow From Operations and Gross Capital Proceeds ($167,004,867), the Company had an excess amount of $47,260,584. Because 22.5 percent of this amount is greater than ten million dollars, plaintiffs were therefore entitled to the maximum ten million dollar excess payment as of April 26, 2007.
B. Motion to Dismiss
Plaintiffs make three arguments in favor of dismissal of defendants' counterclaims. First, plaintiffs argue that defendants' non-contract counterclaims are barred by the applicable statute of limitations. Because plaintiffs' alleged misconduct ended in June 2005 and defendants first filed their counterclaims on January 2010, defendants' breach of fiduciary duty and conversion counterclaims are barred by the applicable three-year statute of limitations. However, a six-year statute of limitations applies to defendants' unjust enrichment and breach of contract counterclaims. Accordingly, these counterclaims are timely.
See Pl. Mem. at 24-25. See Ghartey v. St. John's Queens Hosp., 869 F.2d 160, 162 (2d Cir. 1989) ("Where the dates in a complaint show that an action is barred by a statute of limitations, a defendant may raise the affirmative defense in a pre-answer motion to dismiss. Such a motion is properly treated as a Rule 12(b)(6) motion. . . ."); Morris v. People's Rep. of China, 478 F. Supp. 2d 561, 566 (S.D.N.Y. 2007) (when evaluating a statute of limitations defense in the context of a motion to dismiss, a "[c]ourt may not look outside the complaint and `any documents that are either incorporated into the complaint by reference or attached to the complaint as exhibits.'" (quoting Blue Tree Hotels Inv. (Can.), Ltd. v. Starwood Hotels Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004))).
Defendants argue that a six-year statute of limitations should apply to their breach of fiduciary duty claims because "fraud has been alleged." Pl. Opp. at 7. However, defendants do not specifically allege a fraud claim. See Ball Interior Demolition Corp. v. Palmadessa, 874 F. Supp. 576, 588 (S.D.N.Y. 1995) ("There are five elements necessary to sustain a claim in fraud under New York law: (1) misrepresentation of a material fact; (2) the falsity of that misrepresentation; (3) scienter, or intent to defraud; (4) reasonable reliance on that representation; and (5) damage caused by such reliance." (collecting cases)). Recognizing that the complaint insufficiently alleges fraud, defendants have requested that they be granted leave to "incorporate the fraud allegations delineated in the affidavit of Stanley E. Thomas, dated September 10, 2010." Def. Opp. at 7. However, this affidavit contains little factual content not already alleged by defendants, and, even if this extra factual content were incorporated, defendants' allegations would not meet the pleading requirements for a claim of fraud under Federal Rule of Civil Procedure 9(b) ("In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake."). In particular, neither the Counterclaims nor the affidavit sufficiently plead a misrepresentation by plaintiffs or reasonable reliance by defendants. Accordingly, I deny defendants' request to replead. See Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d Cir. 2000) (holding that it is proper to deny a request to amend when repleading would be "futile").
Plaintiffs argue that a three-year bar applies to the unjust enrichment claims because defendants seek legal damages, as opposed to equitable relief. See Reply Memorandum of Law in Further Support of Plaintiffs' Motion for Summary Judgment as to Damages on Their First and Second Causes of Action and to Dismiss the Defendants' Counterclaims at 9. However, as discussed, this is the rule for breach of fiduciary duty claims, not unjust enrichment claims. See supra Part III.B.2. The vast majority of courts have applied a six-year statute of limitations to unjust enrichment claims regardless of whether plaintiffs are seeking legal or monetary relief. See, e.g., 37 Park Dr. S., 881 N.Y.S.2d at 482.
Second, plaintiffs argue that defendants' have failed to plead factual content allowing this Court to draw the reasonable inference the plaintiffs are liable for the alleged misconduct. With respect to defendants' allegations against Levine, this is incorrect. Defendants have alleged, inter alia, (1) that Levine entered into an agreement requiring him to disburse funds intended for third parties; (2) that defendants transferred a specific amount to Levine to disburse to third parties; (3) that Levine commingled these funds with his own funds in a personal bank account; and (4) that a significant amount of the money transferred to Levine was not distributed to the intended third parties. These allegations provide sufficient factual content to make defendants' breach of contract and unjust enrichment counter claims plausible.
See Pl. Mem. at 21-23.
See Am. Countercl. ¶ 1
See id. ¶ 10.
See id. ¶ 8.
See id. ¶¶ 11-13.
See Terwilliger v. Terwilliger, 206 F.3d 240, 245-46 (2d Cir. 2000) ("To prevail on a breach of contract claim under New York law, a plaintiff must prove (1) a contract; (2) performance of the contract by one party; (3) breach by the other party; and (4) damages." (quotation marks and citations omitted)).
See Beth Israel Med. Ctr. v. Horizon Blue Cross and Blue Shield, 448 F.3d 573, 586 (2d Cir. 2006) ("Cases dealing with unjust enrichment in New York are uniform in their recognition of three elements of the claim: To prevail on a claim for unjust enrichment in New York, a plaintiff must establish (1) that the defendant benefitted; (2) at the plaintiff's expense; and (3) that equity and good conscience require restitution." (quotation marks and citation omitted)).
However, defendants have not pled sufficient factual allegations against the other plaintiffs. Defendants do not allege that the other plaintiffs were parties to the agreement at issue, and thus, they cannot be held liable for breach of contract. In addition, although defendants allege that the Project funds transferred to Levine were used for the "personal purposes of the other plaintiffs," the allegations pled by defendants do not give rise to a plausible inference that these plaintiffs were in fact unjustly enriched. Specifically, defendants do not make any attempt to allege what personal purposes the funds were used for, how much money was transferred for use by these plaintiffs, when the funds were used for this purpose, or any other specifics. Accordingly, I find that the single bare allegation that funds were also used to benefit the other plaintiffs is insufficient to render defendants' unjust enrichment counterclaims plausible.
See Am. Counterclaim ¶ 1.
Id. ¶ 3.
Third, plaintiffs assert that defendants' counterclaims are barred by a release contained in section 17.8 of the Agreement. But the Agreement was executed on July 13, 2004, while Levine's misconduct allegedly continued until June 2005. Accordingly, this release, which is backward not forward looking, cannot possibly bar all of defendants' breach of contract and unjust enrichment claims against Levine.
See Pl. Mem. at 23-24 (citing Agreement § 17.8).
See Agreement § 17.8 ("[E]ach of the parties hereto releases any claims, known or unknown, that it had, has or hereafter may have against any of the other parties hereto, for damages, demands, losses, liabilities and for any action, reason, matter or thing occurring, arising, accruing, or existing before the date hereof, relating to the Property or the Project or both. . . ." (emphasis added)).
Plaintiffs' motion to dismiss defendants unjust enrichment and breach of contract counterclaims against Levine is denied. However, defendants' remaining counterclaims against Levine, and all their counterclaims against the other plaintiffs, are dismissed with prejudice.
C. Entry of Partial Final Judgment
Because I find that there is no just reason for delay, I grant plaintiffs' motion for entry of final judgment on their First and Second Causes of Action. First, there is no doubt that a final decision has been rendered on these claims, as I have granted plaintiffs' motions for summary judgment as to liability and damages on their First and Second Causes of Action.
Second, the remaining claims are separable. Plaintiffs have indicated a willingness to voluntarily dismiss their remaining causes of action if judgement is entered. While the remaining counterclaims relate to the same Project as plaintiffs' claims, they arise from a different agreement and relate to distinct monetary transactions. Moreover, because defendants' counterclaims have been dismissed against all plaintiffs other than Levine, preventing the other plaintiffs from seeking finalize their recovery on the First and Second Causes of Action would unfairly prejudice them.
See Pl. Mem. at 17.
See Gottesman v. General Motors Corp., 401 F.2d 510, 512 (2d Cir. 1968) (holding that Rule 54(b) certification was appropriate where the claims required "different exhibits, proof and witnesses" and "different sets of operative facts will determine the result").
Third, there is a real and immediate danger of prejudice if final judgment on these claims is not entered. Inland has commenced foreclosure proceedings against the Company's sole asset — the Real Property purchased to develop the Project. If a judgment can be registered prior to any foreclosure sale, plaintiffs may be able to recover against the Company. Otherwise, plaintiffs will have to recover solely from Thomas — an individual who may lack the monetary resources and/or liquidity necessary to satisfy this large judgment.
See 6/16/10 Letter to the Court from Padian, Ex. A to Padian Aff.
See Curtiss-Wright Corp., 446 U.S. at 12 ("[I]f its financial position were such that a delay in entry of judgment on Curtiss-Wright's claims would impair Curtiss-Wright's ability to collect on the judgment, that would weigh in favor of certification.").
Accordingly, provided that plaintiffs dismiss their remaining claims, final judgment will be entered on plaintiffs' First and Second Causes of Action.
D. Pre-Judgment Interest
Because this Court is sitting in diversity, New York's choice of law rules determine which state's laws should be applied to calculate pre-judgment interest on plaintiffs' First and Second Causes of Action. "[U]nder New York choice of law principles, the allowance of prejudgement interest is controlled by the law of the state whose law determined liability on the main claim." Delaware law therefore applies to the award and calculation of pre-judgment interest.
See Schwartz v. Liberty Mut. Ins. Co., 539 F.3d 135, 147 (2d Cir. 2008).
Id.
Under Delaware law, pre-judgment interest is calculated from the date payment was due — in this case, April 26, 2007. When the contract does not specify an interest rate, as in this case, "the legal rate of interest shall be 5% over the Federal Reserve Discount rate including any surcharge as of the time from which interest is due." The Federal Reserve discount rate for April 26, 2007 was 5.24 percent, which combined with the statutory five percent increase, results in an interest rate of 10.24 percent per annum. Accordingly, plaintiffs are entitled to $3,534,904.03 in interest on their ten million dollar award.
See United States ex rel. Endicott Enters. v. Star Bright Constr. Co., 848 F. Supp. 1161, 1169 (D. Del. 1994).
6 Del. C. § 2301(a).
V. CONCLUSION
For the reasons stated, plaintiffs' motion for summary judgment as to damages is granted, and its motion to dismiss defendants' counterclaims is granted in part and denied in part. The Clerk of Court is directed to enter final judgment on plaintiffs' First and Second Causes of Action and to close this motion (Docket No. 73). A conference is scheduled for November 9, 2010 at 4:30 pm.
SO ORDERED: