Manhattan Chrystie St. Dev. Fund, LLC v 215 Chrystie Invs. LLC, 2024 NY Slip Op 02989 [227 AD3d 621]

May 30, 2024

Appellate Division, First Department

[*1]

Manhattan Chrystie Street Development Fund, LLC, Appellant,

v

215 Chrystie Investors LLC et al., Respondents.

Weil, Gotshal & Manges LLP, New York (Gregory Silbert of counsel), for appellant.

Meister Seelig & Fein PLLC, New York (Stephen B. Meister of counsel), for 215 Chrystie Investors LLC and others, respondents.

Morrison Cohen LLP, New York (David E. Ross of counsel), for Ziel Feldman, respondent.

Order, Supreme Court, New York County (Robert R. Reed, J.), entered July 18, 2023, which, to the extent appealed from as limited by the briefs, granted defendants’ CPLR 3211 motions to dismiss the tortious interference with contract claims against defendants Steven Witkoff and Ian Schrager and unjust enrichment claims against defendants IS Company LLC doing business as Ian Schrager Company, The Witkoff Group LLC, Ian Schrager, Scott Alper, James Stomber, Bernard Schrager, Howard Lorber, and Ziel Feldman, unanimously reversed, on the law, without costs, the motions denied, and the claims reinstated.

Supreme Court should not have dismissed plaintiff’s tortious interference with contract claim against Witkoff and Schrager, whether considered under New York or Delaware law. Plaintiff sufficiently alleged its prima facie claim premised on: (i) the joint venture limited liability company agreement (the JV Agreement); (ii) Witkoff and Schrager’s knowledge about the JV Agreement by virtue of their involvement in the management, and indirect ownership, of the project at issue; (iii) their intentionally causing 215 Chrystie Venture LLC (the Managing Member) to breach Sections 4.04 (b) and 3.04 (c) of the JV Agreement and 215 Chrystie Investors LLC (the Joint Venture) to breach Section 4.04 (a); and (iv) plaintiff having been damaged by the Joint Venture’s resulting inability to pay plaintiff ( see e.g. Shear Enters., LLC v Cohen , 189 AD3d 423 , 424 [1st Dept 2020]; AM Gen. Holdings LLC v Renco Group, Inc. , 2013 WL 5863010, *12, 2013 Del Ch LEXIS 266, *42-45 [Oct. 31, 2013, C.A. No. 7639-VCN]).

Defendants have failed to demonstrate that Witkoff and Schrager cannot be liable as corporate officers because, according plaintiff the benefit of every possible favorable inference, the complaint adequately alleges that they took acts outside the scope of their employment for personal profit ( see e.g. Shear , 189 AD3d at 424) and acted in bad faith ( see e.g. AM Gen. Holdings , 2013 WL 5863010, *12, 2013 Del Ch LEXIS 266, *42-45). This is based on their allegedly causing the Joint Venture to incur commercially unreasonable loans so they could siphon money for their enrichment, while leaving the Joint Venture unable to pay amounts owed to plaintiff ( see also WP Devon Assoc., L.P. v Hartstrings, LLC , 2012 WL 3060513, *4, 2012 Del Super LEXIS 353, *12-20 [July 26, 2012, C.A. No. N11C—02—216 JRJ]).

Supreme Court also should not have dismissed plaintiff’s unjust enrichment claim against all defendants excepting the Joint Venture and the Managing Member (collectively the Non-JV Agreement Defendants). Plaintiff sufficiently alleged its prima facie claim based on allegations that money flowed from the Joint Venture to the Managing Member, thereby enriching the Non-JV Agreement Defendants, that the Joint Venture’s resulting inability to pay plaintiff was at plaintiff’s expense, and that the result is against equity and good conscience. In these circumstances, we find that defendants have failed to demonstrate that plaintiff’s claim is precluded by the existence of the JV Agreement ( see [*2] e.g. Bradkin v Leverton , 26 NY2d 192 [1970]; Georgia Malone & Co., Inc. v Rieder , 86 AD3d 406 [1st Dept 2011], affd 19 NY3d 511 [2012]). This Court’s decisions in Vitale v Steinberg (307 AD2d 107 [1st Dept 2003]) and Bellino Schwartz Padob Adv. v Solaris Mktg. Group (222 AD2d 313 [1st Dept 1995]) do not reflect a categorical rule to the contrary.

It is unnecessary to resolve the choice-of-law issue because under either Delaware law or New York law plaintiff has pled sufficient facts to state a claim for tortious inference with contract and unjust enrichment.

We have considered the parties’ remaining contentions and find them unavailing. Concur—Manzanet-Daniels, J.P., Kapnick, Mendez, Rosado, JJ. [Prior Case History: 79 Misc 3d 1226(A), 2023 NY Slip Op 50730(U).].