New York Court Holds For Defendant; Plaintiffs’ Complaint Related To Fraud, Conspiracy, Breach of Fiduciary Dismissed
March 4, 2022, Southern District of New York – The case arose from the financing and development of two parcels of land outside Dallas, Texas, known as Wade Park. Plaintiffs Wade Park Land, LLC, (“WP Land”),Wade Park Land Holdings, LLC (“WPL Holdings”), and Thomas Family Trust brought seventeen claims against defendants in their amended complaint, alleging that a temporary bridge loan from one of the defendants devolved into a fraudulent scheme to take control of Wade Park. Defendants Jonathan Kalikow, WP Development Partners, LLC, Gamma Lending Omega, LLC, Gamma Real Estate Capital, LLC, and GRE WP, LLC moved to dismiss Trustee’s complaint.
Defendants contended that the complaint must be dismissed under releases signed by the Plaintiffs. First, the Defendants argued that WP Land and WPL Holdings signed eight forbearance agreements containing releases, and under New York law, a valid release constitutes a complete bar to an action on a claim which is the subject of the release. Plaintiffs argued that the releases did not bar their claims because the agreements within which releases were contained are the product of inceptive fraud under Georgia law. Second, the Plaintiffs argued that the claims did not accrue until after the effective date of the releases. Third, they contended that the agreements could not bar Plaintiffs’ claims because Plaintiffs have stated a claim for declaratory relief that the contracts are void. Fourth, Plaintiffs claimed that the integration clause in the deed-in-lieu agreement (executed later) revived claims previously released by the forbearance agreements.
The Court determined that “the mere failure to comply with a promise to perform an act in the future is not fraud in a legal sense…. Actionable fraud . . . does not result from a mere failure to perform promises made. Otherwise, any breach of a contract would amount to fraud”. The Court found that Plaintiffs did not make any well-plead allegations of fact plausibly supporting the notion that Defendants intended not to perform the agreements. On Plaintiffs’ second argument, the Court found that the accrual of Plaintiffs’ claims does not await Defendants’ enjoyment of a right that Defendants obtained from Plaintiffs. The Court stated that if Plaintiffs were defrauded into granting Defendants an interest in Wade Park, they had the right to sue Defendants as soon as that right was conveyed. Accordingly, any rights that the Plaintiffs had to sue the Defendants for fraud were effectively released in the agreements. The Court found the Plaintiffs’ third and fourth argument as unavailing. The Court held that the Plaintiffs failed to state a claim for declaratory relief.
Further, the Court ruled that the integration clause in the subsequent agreement cannot be read to revive the released claims because the forbearance agreements contained broad releases, not covenants not to sue. The Court stated that had the forbearance agreements included covenants not to sue, the subsequent agreement could have rescinded that contract and thereby revived the claims. However, since the forbearance agreements contained immediately effective releases, the Court held that the integration clause of the subsequent agreement could not be read to revive the released claims.
Finally, the Court dismissed the claims covered by the releases. The Court further held that even if those claims were not released, Plaintiffs’ claims would have also failed for the additional other reasons because they were voidable under common law principles and Plaintiffs failed to plead the fraud elements with particularity. Accordingly, the Court dismissed the complaint and granted the Defendants’ motion to dismiss.
Wade Park Land Holdings, LLC v. Kalikow, 2022 U.S. Dist. LEXIS 38828
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