Motion-Secondary: Frank Costanza, Angelo Costanza, Costanza 6 Enterprises, Llc, Francesca Nina, Llc v. Michael J. Cave a/k/a Mike Cave, Jennifer M. Reilly Esq. a/k/a Jennifer M. Cave, Strongarm Holdings, Llc, William Dollard, Brian Dollard, First Equity Abstract Corp. d/b/a “FIRST EQUITY”, Port Jeff Holdings Llc a/k/a PJH, 41 Summit Llc, Strongarm Ventures, Llc, Ridge Property Developers, Llc, Port Ridge Construction Corp., Property Rehab I, Llc, New York Consulting, Llc, Port Jefferson Hills Llc, Unknown Defendants #1-20

On November 06, 2023 a Motion-Secondary was filed involving a dispute between Angelo Costanza, Costanza 6 Enterprises, Llc, Francesca Nina, Llc, Frank Costanza, and 41 Summit Llc, Brian Dollard, First Equity Abstract Corp. D B A First Equity, Jennifer M. Reilly Esq. A K A Jennifer M. Cave, Michael J. Cave A K A Mike Cave, New York Consulting, Llc, Port Jefferson Hills Llc, Port Jeff Holdings Llc A K A Pjh, Port Ridge Construction Corp., Property Rehab I, Llc, Ridge Property Developers, Llc, Strongarm Holdings, Llc, Strongarm Ventures, Llc, Unknown Defendants #1-20, William Dollard, for Commercial Division in the District Court of Suffolk County.

Preview
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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF SUFFOLK
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FRANK COSTANZA, ANGELO COSTANZA,
COSTANZA 6 ENTERPRISES, LLC, and
FRANCESCA NINA, LLC,

Plaintiff, Index No.: 627699/2023
-against-

MICHAEL J. CAVE (a/k/a Mike Cave), JENNIFER M.
REILLY, ESQ. (a/k/a Jennifer M. Cave), STRONGARM
HOLDINGS, LLC, WILLIAM DOLLARD, BRIAN
DOLLARD, FIRST EQUITY ABSTRACT CORP. Justice Assigned
d/b/a “FIRST EQUITY”, PORT JEFF HOLDINGS Hon. Jerry Garguilo
LLC (a/k/a PJH), 41 SUMMIT LLC, STRONGARM
VENTURES, LLC, RIDGE PROPERTY DEVELOPERS,
LLC, PORT RIDGE CONSTRUCTION CORP.,
PROPERTY REHAB I, LLC, NEW YORK
CONSULTING, LLC, PORT JEFFERSON HILLS, LLC,
and UNKNOWN DEFENDANTS #1-20,

Defendants.

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DEFENDANTS’ AMENDED MEMORANDUM
OF LAW IN SUPPORT OF CROSS-MOTION

PINKS & WHITE, ESQS.
140 Fell Court - Suite 303
Hauppauge, New York 11788
(631) 234-4400
E-mail: steven@pinkslegal.com
teresa@pinkslegal.com

Co-Counsel:
MORRIS LEGAL CORP.
28 Laight Street
New York, New York 10013
(917) 621-1110
E-mail: prm@patrickmorrislaw.com
Attorneys for Defendants except
The Reilly Law Group and Jennifer
Reilly, Esq.

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TABLE OF CONTENTS
Page
Table of Authorities…………………………………………………………………… ii-v

Preliminary Statement………………………………………………………………… 6-8

Statement of Facts…………………………………………………………………….. 8

Argument……………………………………………………………………………… 9-25

Point I Plaintiffs’ Claims Must Be Dismissed for Failure
to State a Claim………………………………………………… 9

1. Plaintiffs’ First Cause of Action……………………………………………. 9
a. Failure to Plead with Particularity Pursuant to CPLR 3§016(b)……… 9
b. Failure to Show Justifiable Reliance…………………………………… 9
c. Failure to Show Actual Harm…………………………………………... 11
d. Plaintiffs Lack of Standing……………………………………………… 13

2. Plaintiffs’ Fifth Cause of Action……………………………………………. 14

3. Plaintiffs’ Second and Third Cause of Action………………………………. 14

4. Plaintiffs' Fourth Cause of Action…………………………………………… 16
a. The Fiduciary Duty of the Managing Member………………………….. 17
b. The Theory of “Confidential Relationship”…………………………….. 17

5. Counts Sixth, Eighth and Tenth……………………………………………… 19
a. Plaintiffs’ Sixth Cause of Action…………………………………………. 19
b. Plaintiffs’ Eighth Cause of Action……………………………………….. 20
c. Plaintiffs’ Tenth Cause of Action………………………………………… 21

6. Plaintiffs’ Ninth Cause of Action……………………………………………. 22

7. Plaintiffs’ Eleventh Cause of Action………………………………………… 23
a. Bona Fide Purchasers……………………………………………….. 23
b. Improperly Plead……………………………………………………... 23

8. Waiver of Claims…………………………………………………………….. 24

Conclusion……………………………………………………………………………….. 25

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TABLE OF AUTHORITIES

Cases Page

AFA Protective Sys. v. American Tel. & Tel. Co.
57 N.Y.2d 912 (1st Dept 1982)…………………………………………………… 13

Alexander & Alexander of New York, Inc. v. Fritzen
147 A.D.2d 241 (1986)………………………………………………………….. 22

Atkins v. Apollo Real Estate Advisors, L.P.
2008 WL 1926684 (ED NY Apr. 30, 2008)…………………………………….. 23

Baron v. Galasso
83 A.D.3d 626, 629 (2d Dept 2011)…………………………………………….. 15

Cayuga Harvester v. Allis–Chalmers Corp.
95 A.D.2d 5 (4th Dept 1983)……………………………………………………. 13

Cedar Swamp Holdings, Inc. v. Zaman
487 F Supp 2d 444 (S.D.N.Y. 2007)…………………………………………… 24

Clarke v. Wallace Oil Co. Inc.
284 A.D.2d 492 at 493 (2d Dept 2001)…………………………………………. 11

Clochessy v. Gagnon
58 A.D.3d 1008 (3d Dept 2009)………………………………………………… 25

Cooper v. Sony Records Intern., a Div. of Sony Music Entertainment, Inc.
2001 WL 1223492 (S.D.N.Y. Oct. 15, 2001)…………………………………… 21

Dingley v. Bon
130 N.Y. 607 (1892)……………………………………………………………. 25

DonDero v. Gardner
267 A.D.2d 830 (3d Dept 1999)…………………………………………………. 13

Elsky v. KM Insurance Brokers
139 A.D.2d 691, 691 (2d Dept 1988)…………………………………………….. 10

Faulkner v. Arista Records, LLC
602 F.Supp.2d 470, 482 (S.D.N.Y. 2009)………………………………………… 20

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Figueroa Ruiz v. Alegria
896 F.2d 645 (1st Cir. 1990)……………………………………………………... 23

5000, Inc. v. Hudson One, Inc.
130 A.D.3d 676 (2d Dept 2015)………………………………………………….. 25

Foster v. Di Paolo
236 N.Y. 132 (1923)............................................................................................... 13

Fox Paine & Company v. Houston Casualty Company
153 A.D.3d 678 (2d Dept 2017)…………………………………………………. 15

Greenfield v. Philles Records
98 N.Y.2d 562, 569 (2002)………………………………………………………. 16

Hanlon v. Macfadden Publ.
302 N.Y. 502 (1951)……………………………………………………………… 13

Hartman v. Morganstern
28 A.D.3d 423, 424 (2d Dept 2006)……………………………………………… 10

Held v. Kaufman
91 N.Y.2d 425 (1998)…………………………………………………………….. 13

In re Albert
137 A.D.3d 1266 (2d Dept. 2016)……………………………………………….. 12

Invacare Supply Group, Inc. v. Star Promotions, Inc.
27 Misc.3d 1202(A) (N.Y. Sup. Ct. Kings County, Mar. 31, 2010)…………….. 23

JFK Family Ltd. Partnership v Millbrae Natural Gas Dev. Fund 2005, L.P.
89 A.D.3d 684 (2d Dept 2015)…………………………………………………… 18

Lama Holding Co. v. Smith Barney
88 N.Y.2d 413 (1996)............................................................................................. 11

Legend Autorama, Ltd. V. Audi of America, Inc.
100 A.D.3d 714, 717 (2d Dept 2012)……………………………………………. 19

Markowits v. Friedman
144 A.D.3d 993 (2d Dept 2016)………………………………………………….. 15

iii

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Matter of Primex Intl. Corp. v. Wal–Mart Stores
89 N.Y.2d 594, 599 (1997)………………………………………………………. 17

Matter of Woodson
136 A.D.3d 691, 693 (2d Dept 2016)……………………………………………. 15

McKinnon Doxsee Agency, Inc. v. Gallina
187 A.D.3d 733, 736 (2d Dept. 2020)…………………………………………… 18

Patterson v. Brown
32 N.Y. 81 (1865)……………………………………………………………….. 25

Prado v. De Latorre
194 A.D.2d 656, 657 (1993)................................................................................... 12

Reno v. Bull
226 N.Y. 546 (1919)……………………………………………………………… 13

Reuben H. Donnelley Corp. v. Mark I Mktg. Corp.
893 F.Supp. 285 (S.D.N.Y. 1995)………………………………………………… 20

Rodgers v. Roulette Records, Inc.
677 F.Supp. 731 (S.D.N.Y. 1988)………………………………………………… 23

Sager v. Friedman
270 N.Y. 472 (1936)……………………………………………………………… 13

Schron v. Troutman Sanders LLP
20 N.Y.3d 430, 436 (2013)………………………………………………………. 16, 17

Sony Music Entertainment, Inc. v. Robison, et al.
2002 WL 272406, at *3 (S.D.N.Y. Feb. 26, 2002)……………………………….. 20

Talking Capital LLC v. Omanoff
169 A.D.3d 423, 424 (1d Dept 2019)…………………………………………….. 18

U.S. v. Turkette
452 U.S. 576 (1981)……………………………………………………………… 24

White Sands Motel Holding Corp. v. Trustees of Freeholders and
Commonalty of Town of East Hampton
142 A.D.3d 1073, 1074 (2d Dept 2016)…………………………………………. 25

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Winkler v. Battery Trading, Inc.
89 A.D.3d 1016, 1017 (2d Dept 2011)………………………………………….. 15

W.W.W. Assoc. v. Giancontieri
77 N.Y.2d 157, 162, (1990)……………………………………………………… 16

STATUTES

CPLR § 3016(b)………………………………………………………………………….. 7, 8, 10,
17, 20, 23

CPLR § 3211(a)(7)……………………………………………………………………….. 10

Korn–Miller, N.Y.Civ.Prac. ¶ 6501.12, at 65–31—65–32………………………………. 25

NYPL §470.05 – 470.20………………………………………………………………….. 24

RPAPL Section 15………………………………………………………………………… 9, 14, 25

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PRELIMINARY STATEMENT

In part one of this three-part legal odyssey,1 Plaintiffs Frank Costanza (“Frank”) and

Angelo Costanza’s (“Angelo”) (collectively “Plaintiffs”) First Amended Complaint (“Amended

Complaint”) reads like a movie script long on rhetoric but short on actionable facts. Plaintiffs

allege in circuitous fashion that the $3.347 million they invested into a project to develop

approximately 47 acres of land in Ridge, New York (“Project”) was “stolen,” “misappropriated,”

or “converted,” along with a plethora of other overused adjectives.

In an overzealous attempt to seize more than they bargained for, Plaintiffs allege a mish-

mash of causes action seeking ten million dollars in damages, complete control over entities in

which they never invested and are not partners, and 100% of profit proceeds from several other

non-party development projects in which they never invested.

Plaintiffs’ attempt to transform a garden variety business dispute into an unnecessarily

complex web of fraud is unavailing. The Amended Complaint contains 11 causes of action. As

discussed in further detail below, each of these causes of action must be dismissed against the

Cave Defendants for the following reasons:

• Plaintiffs fail to plead fraud (first cause of action) with the requisite particularity

under CPLR §3016 and do not allege fraud because promises to perform in the

future are not actionable; (NYSCEF Doc. No. 83 pp. 3 – 6)

1
Joseph DeLuca, et. al v. Patrick Ryan Morris, et. al, Suffolk County, Index No. 629968/2023; Joseph DeLuca, et. al v. Michael
Cave, et. al, Suffolk County, Index No.601996/2024.

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• Plaintiffs’ Fifth Cause of Action, “Aiding and Abetting a Fraud,” is not actionable

since the Plaintiffs fail to plead fraud (first cause of action). NYSCEF Doc. No.

15, pp. 40 – 41, ¶126 – 129).

• Plaintiffs fail to plead breach of fiduciary duty (fourth cause of action) with the

requisite particularity required under CPLR §3016 and do not adequately allege

the existence of a “confidential relationship.” (NYSCEF Doc. No. 83, pp. 6 – 7)

• Plaintiffs further misstate the nature of the fiduciary relationship of the managing

member, incorrectly alleging that the managing member has a duty to the

members, when the actual duty is to the limited liability company; (NYSCEF Doc.

No. 15, p. 37, ¶118 – 125).

• Plaintiffs fail to plead larceny (second and third causes of action) because there is

no civil common law cause of action and Plaintiffs nonetheless freely and

consensually transferred their funds. (NYSCEF Doc. No. 83, p. 9, at [C])

• Plaintiffs fail to state valid claims for constructive trust and accounting (sixth and

tenth causes of action) because they allege adequate remedies at law and plead

monetary damages as a sufficient remedy; (NYSCEF Doc. No. 83, p. 9 – 11, at

[D])

• Plaintiffs fail to state a valid claim for constructive partnership (eighth cause of

action) with the Defendants because, imposition of a constructive partnership

requires that the Plaintiffs plausibly allege that they had a “tangible expectancy”

of purchasing the subject realty or that such purchase would have been consistent

with its appropriately defined purpose. The clear and unambiguous terms of the

StrongArm Holdings, LLC, “First Amended and Restated Operating Agreement,”

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(NYSCEF Doc. No. 8) wholly defeats this Eighth Cause of Action. (NYSCEF

Doc. No. 15, pp. 43 – 44, ¶141 – 142).

• Plaintiffs fail to state a valid claim for civil RICO (ninth cause of action) because

they lack standing and fail to establish any element such as the Cave Defendants

being part of an enterprise or engaged in a pattern of racketeering that impacted

interstate commerce. (NYSCEF Doc. No. 83, pp. 12 – 19).

• Plaintiffs also fail to state a valid claim for civil RICO (ninth cause of action) since

Plaintiffs have not plead separately their alleged violations of 18 USC §§ 1962(a),

(b), (c), or (d), but combine these alleged violations in this single cause of action

under the generic heading of 18 USC § 1962 without reference to the subsection

to which they intend to rely upon. (NYSCEF Doc. No. 15, pp. 44 – 47, ¶143 –

153)

• To the extent that Plaintiff wished to challenge the prior conveyance pursuant to

RPAPL article 15 (eleventh cause of action”), it was incumbent on Plaintiffs to

add the vendee(s) as a defendant(s) to this action or otherwise obtain jurisdiction

over those third parties. (NYSCEF Doc. No. 15, pp. 47 – 28, ¶156 – 157).

Accordingly, the Cave Defendants are entitled to an Order dismissing the Complaint in

its entirety with prejudice and without leave to replead.

STATEMENT OF FACTS

The Cave Defendants refer to the Complaint for a recitation of the factual allegations

relevant to this motion. However, as discussed in further detail below, Plaintiffs’ conclusory and

vague allegations, especially relating to their claims sounding in fraud, are not entitled to the

presumption of truth and must be disregarded.

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ARGUMENT

POINT I

PLAINTIFFS’ CLAIMS MUST BE DISMISSED
FOR FAILURE TO STATE A CLAIM

1. Plaintiffs’ First Cause of Action

a. Failure to Plead with Particularity Pursuant to CPLR §3016(b)

On a motion to dismiss pursuant to CPLR §3211(a)(7), the Court must accept the

plaintiff’s factual allegations as true and afford them the benefit of every possible favorable

inference. Elsky v. KM Insurance Brokers, 139 A.D.2d 691, 691 (2d Dept 1988). However,

conclusory factual allegations or “bare legal conclusions” do not warrant the presumption of

truth and are not afforded every favorable inference on a motion to dismiss. Hartman v.

Morganstern, 28 A.D.3d 423, 424 (2d Dept 2006). Such is the case here.

The Cave Defendants refer this Court to the Memorandum of Law in Support of

Defendant Jennifer M. Reilly, Esq.’s Motion to Dismiss (hereinafter, the “Reilly Memorandum”)

(see, NYSCEF Doc. No. 83) and adopt by reference Defendant Reilly’s argument that the

Plaintiffs’ fraud claim is not plead with particularity as required under CPLR §3016(b).

Specifically, the Cave Defendants adopt by reference the legal arguments contained in Section

A(1), A(2) of the Reilly Memorandum in support of the Cave Defendants Motion to Dismiss the

Plaintiffs’ first cause of action and supplement the argument as followed:

b. Failure to Show Justifiable Reliance

To successfully recover for fraud in the present case, the Plaintiffs must show “justifiable

reliance” on the Cave Defendants “misrepresentation or material omission.” Setting aside the

fact that Defendant Cave strenuously asserts that the Plaintiffs insisted upon the business

structure that was ultimately settled upon and unambiguously memorialized it in a fully

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integrated contract, the Plaintiffs completely fail as a matter of law to establish the necessary

element of “justifiable reliance.”

In an action to recover damages for fraud, the plaintiff must prove a misrepresentation or

a material omission of fact which was false and known to be false by 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” (See, Clarke v. Wallace Oil Co. Inc.

284 A.D.2d 492 at 493 (2d Dept 2001); see also, Lama Holding Co. v. Smith Barney, 88 N.Y.2d

413 [1996]).

Plaintiffs, Frank and Angelo Costanza, assert that they are highly sophisticated

businesspeople with extensive knowledge of the real estate and construction business. Plaintiffs’

counsel has gone as far to say that the Costanzas have “their thumbs” on the Nassau/Suffolk

construction industry. However, the Plaintiffs further acknowledge within their Verified

Complaint that both Frank and Angelo Costanza executed the Amended Operating Agreement of

Strong Arm Holdings (See NYSCEF Doc. No. 17). Plaintiffs also then allege in their pleadings

that all of the acts undertaken by them were undertaken in some sort of state of mental incapacity

caused by a “friendship,” between the Plaintiffs and the Defendants.

As if to acknowledge the ridiculousness of their own allegations and assertions, Plaintiffs

allege that both Frank and Angelo Costanza were so blinded by their relationship with Cave and

Reilly, that they completely lost their mental capacities to make informed business decisions.

Plaintiffs go so far as to plead, in their sixth cause of action, that a “confidential or fiduciary”

duty exists between the Defendant Cave and the Plaintiffs – an allegation and pleading wholly

unsupported by New York law. See, generally, evidence of a friendship, without more, between

the plaintiff's decedent and the respondent would be insufficient to demonstrate the existence of

a confidential relationship between them. (See, Prado v. De Latorre, 194 A.D.2d 656, 657
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[1993]). Conclusory allegations and speculation of undue influence is simply not enough to

establish a confidential relationship. (See, In re Albert, 137 A.D.3d 1266 (2d Dept. 2016).

On the one hand, the Plaintiff, Frank Costanza, has been in the construction business for

many decades with his “thumb on” the entire construction business in Suffolk and Nassau

County, and his brother, Angelo, is also a sophisticated businessman. Yet, Frank Costanza

asserts that because he briefly dated Reilly, some 20 years ago, that he completely lost his ability

to make an informed business decision and signed an agreement under some magical spell that

not only rendered him essentially helpless at the moment of signing but that this magic spell was

also cast on his brother, Plaintiff Angelo Costanza. And, interestingly, this confidential

relationship extends to Defendant Cave. Both Frank and Angelo Costanza allege that their mere

friendship with Cave is of such a special nature that Cave was also able to render the Plaintiffs

helpless and in a state of substantially reduced mental capacity.

The failure to establish a confidential relationship between Cave and the Plaintiffs

combined with Frank and Angelo Costanza’s extensive business experience results in the

conclusion that the Plaintiff could not have reasonably relied on any of Defendant Cave’s

representations other than those contained in the written agreement. For this reason alone, this

Court must dismiss the Plaintiffs first cause of action, as well as all other causes of action which

rely upon it.

c. Failure to Show Actual Harm

Plaintiffs’ Complaint and subsequent acknowledgements of the Cave Defendants fail to

allege any injury to the Plaintiffs. In fact, the pleadings are so ambiguous and scattershot that the

Plaintiffs fail to properly define what money has actually been lost and by which specific

plaintiff, why each of the Plaintiffs would be entitled to the sweeping relief that they are seeking,

how any such judgment would be allocated between the various Plaintiff parties, and which
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Plaintiff parties, if any, having standing to bring the claims. The fact is that any prospective loss,

at least as it implicates any of the Cave Defendants in this case, cannot be calculated since the

Plaintiffs fail to show any actual harm.

To establish fraud, plaintiffs had to demonstrate that they justifiably relied on a material

misrepresentation knowingly made by defendants and, as a result, suffered some injury (see,

Held v. Kaufman, 91 N.Y.2d 425, 431 [1998]; see also, DonDero v. Gardner, 267 A.D.2d 830,

831 [3d Dept 1999]). “The true measure of damage is indemnity for the actual pecuniary loss

sustained as the direct result of the wrong” or what is known as the “out-of-pocket” rule (Reno v.

Bull, 226 N.Y. 546, 553 1919]; Hanlon v. Macfadden Publ., 302 N.Y. 502 [1951]). Under this

rule, the loss is computed by ascertaining the “difference between the value of the bargain which

a plaintiff was induced by fraud to make and the amount or value of the consideration exacted as

the price of the bargain” (Sager v. Friedman, 270 N.Y. 472, 481 (1936)). 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 (see, Cayuga Harvester v. Allis–Chalmers Corp., 95

A.D.2d 5 [4d Dept 1983]). Under the out-of-pocket rule, there can be no recovery of profits

which would have been realized in the absence of fraud (Foster v. Di Paolo, 236 N.Y. 132

[1923]; AFA Protective Sys. v. American Tel. & Tel. Co., 57 N.Y.2d 912 [1d Dept 1982]).

In the present case the Plaintiffs allege an actual pecuniary loss of $3,347,000.00

(NYSCEF Doc. No. 15 at ¶142). It is further alleged that this loss is based on a capital

contribution to an enterprise in exchange for a 44% profit interest. The enterprise in question is

StrongArm Holdings LLC. The Cave Defendants have acknowledged this capital contribution

but to date the project has not generated a profit.

All business undertakings are risky. It was the clearly stated intention of the Plaintiffs to

invest in the North Fork Gateway project in exchange for a 44% profit interest. The benefit of
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profits can only come at the loss of risk. In the present case, the Plaintiffs seek not only recission

of the written agreement an amount of up to $70,000,000. The Plaintiffs seek certain other relief

in the form of the transfer of real property interests, a “quiet title,” action pursuant to RPAPL

Article 15 on unidentified parcels of real property and to further force the Defendant Michael

Cave to pay all outstanding personally guaranteed loans from his own personal assets as well as

stripping away his capital contribution. But the Plaintiffs have yet to suffer any actual harm

based upon their expectancy of “profits.”

The failure to show actual harm is fatal to the Plaintiffs fraud allegation. Therefore, the

Plaintiffs first cause of action must be dismissed along with all other causes of action upon which

rely upon it.

d. Plaintiffs’ Lack of Standing

As to the matter of who has standing to bring any of the claims asserted in the Amended

Complaint, this, too, is a complete mystery due to the ambiguous and scattershot nature of the

allegations. Stated simply, if the StrongArm Holdings LLC, Amended and Restated Operating

Agreement is a valid and enforceable written instrument then Frank and Angelo Costanza have

no standing to bring this action. If Frank and Angelo Costanza are asserting that there is no

written agreement between the parties, they must establish that an actual fraud was perpetrated

and that the written instrument is void ab initio (a very steep cliff to climb in New York). Lastly,

by their own allegations, Angelo Costanza has conveyed the Francesca Nina, LLC interests in

StrongArm Holdings, LLC to an unidentified trust…it is incumbent upon Francesca Nina, LLC

to identify the name of the trust and the identity of the trustee. In the absence of an appearance

by this trust, Francesca Nina LLC has no standing to sustain this complaint.

Without a decisive conclusion regarding which party has standing to bring a claim for

fraud (actual or constructive), it is impossible to determine the nature of the alleged loss or even
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if any actual loss has occurred. Plaintiffs’ failure to establish which parties have standing to bring

the fraud claim means that the claim must be dismissed.

2. Plaintiffs’ Fifth Cause of Action

The Plaintiffs’ fifth cause of action against the Cave Defendants is a claim for “aiding

and abetting” in fraud. This cause of action must be dismissed for the reasons stated above.

There can be no aiding and abetting in fraud where the Plaintiffs fail to properly state a claim for

fraud.

To recover for aiding and abetting fraud, the plaintiff must plead the existence of an

underlying fraud, knowledge of the fraud by the aider and abettor, and substantial assistance by

the aider and abettor in the achievement of the fraud. (Fox Paine & Company v. Houston

Casualty Company, 153 A.D.3d 678 [2d Dept 2017], citing, Markowits v. Friedman, 144 A.D.3d

993 [2d Dept 2016]; Matter of Woodson, 136 A.D.3d 691, 693 [2d Dept 2016]; Winkler v.

Battery Trading, Inc., 89 A.D.3d 1016, 1017 [2d Dept 2011]. “Substantial assistance” requires an

affirmative act on the defendant’s part (Baron v. Galasso, 83 A.D.3d 626, 629 [2d Dept 2011]).

In the present case, the Plaintiffs have failed to properly state a claim for fraud, and even

setting that aside, have failed to show how the varied and numerous Cave Defendants had the

requisite knowledge of, or substantially assisted in a fraud. This Court must, therefore, dismiss

this fifth cause of action.

3. Plaintiffs’ Second and Third Cause of Action

The Cave Defendants refer this Court to the Reilly Memorandum (see, NYSCEF Doc.

No. 83) and adopt by reference Defendant Reilly’s argument that the Plaintiffs fail to state valid

claims for larceny. Specifically, the Cave Defendants adopt by reference the legal arguments

contained in Section C (see NYSCEF Doc. No. 83, p. 9, ¶1 – 2) of the Reilly Memorandum in

support of the Cave Defendants Motion to Dismiss the Plaintiffs’ first cause of action.
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Additionally, of the limited number of exhibits submitted, the Plaintiffs submitted a copy

of the StrongArm Holdings Amended and Restated Operating Agreement (hereinafter, the

“SAOA”) (see NYSCEF Doc. No. 8). This SAOA is clear and unambiguous and contains a

merger clause.

Under New York law, written agreements are construed in accordance with the parties'

intent and “[t]he best evidence of what parties to a written agreement intend is what they say in

their writing” (Greenfield v. Philles Records, 98 N.Y.2d 562, 569 [2002]). As such,

a written agreement that is complete, clear and unambiguous on its face must be enforced

according to the plain meaning of its terms’” (Id.) Schron v. Troutman Sanders LLP, 20 N.Y.3d

430, 436 (2013). As such, “[p]arole evidence—evidence outside the four corners of the

document—is admissible only if a court finds an ambiguity in the contract. As a general rule,

extrinsic evidence is inadmissible to alter or add a provision to a written agreement. This rule

gives ‘stability’ to commercial transactions by safeguarding against fraudulent claims, perjury,

death of witnesses ... infirmity of memory ... [and] the fear that the jury will improperly evaluate

the extrinsic evidence” (W.W.W. Assoc. v. Giancontieri, 77 N.Y.2d 157, 162, (1990).

Furthermore, where a contract contains a merger clause, a court is obliged ‘to require full

application of the parole evidence rule in order to bar the introduction of extrinsic evidence to

vary or contradict the terms of the writing’” (Matter of Primex Intl. Corp. v. Wal–Mart Stores, 89

N.Y.2d 594, 599 [1997]).”

Applying these precepts, as the Court in Schron stated, the terms of the agreement are

clear and unambiguous as to the obligations, rights, remedies available to the parties.

In New York, “…where a contract contains a merger clause, a court is obliged ‘to require

full application of the parole evidence rule in order to bar the introduction of extrinsic evidence

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to vary or contradict the terms of the writing’” (See, Matter of Primex Intl. Corp., 89 N.Y.2d at

599).

Section 13.06, “Entire Agreement,” the integration clause of the contract, states:

This Agreement, together with the Articles of Organization and
all related Exhibits and Schedules, constitutes the sole and entire
agreement of the parties to this Agreement with respect to the
subject matter contained herein and therein, and supersedes all
prior and contemporaneous understandings, agreements, records,
representations, and warranties, both written and oral, whether
express or implied, with respect to such subject matter. (See
NYSCEF Doc No. 17, at 39).

The Plaintiffs are unable to overcome this bar to the admission of parole evidence, which

means that the Plaintiffs’ second and third causes of action - Fraud, Larceny by Trick and

Larceny by False Promise – must fail. As stated in herein and the Reilly Memorandum, the

Plaintiffs have failed to state a claim and even if a claim were properly stated, the Plaintiffs

consensually transferred funds and got what they bargained for in the operating agreement.

(NYSCEF Doc. No. 83 at 9; see also NYSCEF Doc. No. 8).

4. Plaintiffs’ Fourth Cause of Action

The Cave Defendants refer this Court to the Reilly Memorandum (see, NYSCEF Doc.

No. 83) and adopt by reference Defendant Reilly’s argument that the Plaintiffs’ breach of

fiduciary duty claim is not pled with particularity as required under CPLR §3016(b).

Specifically, the Cave Defendants adopt by reference the legal arguments contained in Section

B(1) of the Reilly Memorandum in support of the Cave Defendants Motion to Dismiss the

Plaintiffs’ fourth cause of action.

In addition, Plaintiffs’ Fourth Cause of Action, Breach of Fiduciary Obligation is based

in part on a misstatement or misunderstanding of New York case law. The fiduciary duty of a

managing member is to the LLC, not the members individually. Perhaps aware of this

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insurmountable hurdle, the Plaintiffs allege that Cave owes, generically, the Defendants fiduciary

obligations based on a “confidential relationship”. For the reasons stated herein and in Section

B(1) of the Reilly Memorandum, the Plaintiffs have wholly failed to establish that Cave or any

of the Cave Defendants have any fiduciary obligations to any of the Plaintiff parties.

a. The Fiduciary Duty of the Managing Member

The managing member of a New York limited liability company has no fiduciary duty

the individual members, only a duty to the LLC itself. The court must, therefore, dismiss any

claim that sounds in a fiduciary duty to any individual member of the LLC.

A breach of fiduciary duty has been defined as taking “an action for [one's] own improper

personal benefit” that is not in the best interests of the party to whom a duty is owed (JFK

Family Ltd. Partnership v Millbrae Natural Gas Dev. Fund 2005, L.P., 89 A.D.3d 684, 685 [2d

Dept 2015]). A managing member of an LLC owes a fiduciary duty to the LLC (see,

McKinnon Doxsee Agency, Inc. v. Gallina, 187 A.D.3d 733, 736 [2d Dept. 2020). In addition, a

non-member manager of an LLC owes a fiduciary duty to the LLC (see Limited Liability

Company Law § 409[a]; see also Talking Capital LLC v. Omanoff, 169 A.D.3d 423, 424 [1d

Dept 2019]) (emphasis added).

The Plaintiffs’ allege that Cave has a fiduciary obligation to the Plaintiffs but this is not

correct. Cave’s fiduciary obligations as the Managing Member are to the limited liability

company itself, not its individual members and certainly not to Frank and Angelo Costanza

personally.

b. The Theory of “Confidential Relationship”

Contrary to Plaintiffs hyperbolic allegations, the pleading wholly fails to establish that

“confidential relationship,” existed or could even be inferred.

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Although a fiduciary relationship does not arise out of a contractual relationship, a

fiduciary duty can arise out of a confidential relationship between the parties under “special

circumstances.” A conventional business relationship, without more, is insufficient to create a

fiduciary relationship. Rather, a plaintiff must show special circumstances that transformed the

parties' business relationship to a fiduciary one. (See, Legend Autorama, Ltd. V. Audi of

America, Inc., 100 A.D.3d 714, 717 [2d Dept 2012]).

The existence of a confidential relationship is ordinarily a factual determination based

upon “evidence of other facts or circumstances showing inequality or controlling influence.”

(Matter of Nealon, 104 A.D.3d 1088 [3d Dept 2013]). Further, even where there is evidence of

one party's complete dependence on the other as a result of physical limitations, the relationship

may not be unequal as a matter of law if, at the time of the challenged transactions, the

physically weaker party remained able to exercise free will. (See Id. at 1089) (emphasis

added).

The Plaintiffs’ allegations and exhibits fail to show how or when Angelo and Frank

Costanza were unable to exercise their free will. (See Id.). Without this essential element, no

fiduciary obligation can have been created through the parties on the basis of “inequality or

controlling influence”. (See Id.). The relationship between the Plaintiffs and the Defendant is

memorialized in a written agreement. There is nothing to indicate that the parties had anything

more than an ordinary business relationship.

While “it is not entirely clear when fiduciary duties arise out of a contractual

relationship,” it is well-settled law that, “a conventional business relationship does not create a

fiduciary relationship in the absence of additional factors.” (Reuben H. Donnelley Corp. v. Mark

I Mktg. Corp, 893 F.Supp. 285 [S.D.N.Y. 1995]). “Generally, an arm's length business

transaction, even those where one party has superior bargaining power, is not enough to give rise
18

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to a fiduciary relationship.” (See, Faulkner v. Arista Records, LLC, 602 F.Supp.2d 470, 482

[S.D.N.Y. 2009], citing Sony Music Entertainment, Inc. v. Robison, et al., 2002 WL 272406, at

*3 [S.D.N.Y. Feb. 26, 2002]).

For the reasons state herein and Section B(1) of the Reilly Memorandum, the Plaintiffs

fail to show the elements necessary and therefore fail to properly plead a breach of fiduciary

obligations owed by Defendant Michael Cave as the managing member of the LLC.

Furthermore, there is no factual basis nor is there support in the law to conclude that any Cave

Defendant had anything more than an ordinary business relationship with the Plaintiffs.

5. Counts Sixth, Eighth and Tenth

The Cave Defendants refer this Court to the Reilly Memorandum (see, NYSCEF Doc.

No. 83) and adopt by reference Defendant Reilly’s argument that the Plaintiffs’ breach of

fiduciary duty claim is not pled with particularity as required under CPLR §3016(b).

Specifically, the Cave Defendants adopt by reference the legal arguments contained in Section D

of the Reilly Memorandum in support of the Cave Defendants Motion to Dismiss the Plaintiffs’

sixth and tenth cause of action. As stated herein, since Plaintiffs fail to establish that a fiduciary

obligation existed between the Plaintiffs and any of the Cave Defendants Michael Cave, Counts

Sixth, Eighth and Tenth must be dismissed.

a. Plaintiffs’ Sixth Cause of Action

The Cave Defendants refer this Court to the Reilly Memorandum (see, NYSCEF Doc.

No. 83) and adopt by reference Defendant Reilly’s argument that the Plaintiffs’ claim is not pled

with particularity as required under CPLR §3016(b). S

Case Info

Judge

J-COMM Garguilo Track Judge’s New Case

Case No.

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Document Filed Date

April 11, 2024

Case Filing Date

November 06, 2023

County

Parties

41 SUMMIT LLC Defendant
Angelo Costanza Plaintiff
Brian Dollard Defendant
COSTANZA 6 ENTERPRISES, LLC Plaintiff
DELCOL, ROBERT JAMES Attorney for the Plaintiff
DOOLEY, CHRISTOPHER PAUL Attorney for the Plaintiff
FIRST EQUITY ABSTRACT CORP. d/b/a FIRST EQUITY Defendant
FRANCESCA NINA, LLC Plaintiff
Frank Costanza Plaintiff
Ira B. Warshawsky Special Master Non Party
Jennifer M. Reilly ESQ. a/k/a Jennifer M. Cave Defendant
Larry R Davis ESQ Non Party
MCCORMICK, PATRICK Attorney for the Defendant
Michael J. Cave a/k/a Mike Cave Defendant
MORRIS, PATRICK RYAN Attorney for the Defendant
NEW YORK CONSULTING, LLC Defendant
PINKS, STEVEN GERALD Attorney for the Defendant
PORT JEFFERSON HILLS LLC Defendant
PORT JEFF HOLDINGS LLC a/k/a PJH Defendant
PORT RIDGE CONSTRUCTION CORP. Defendant
PROPERTY REHAB I, LLC Defendant
RIDGE PROPERTY DEVELOPERS, LLC Defendant
ROSE, JAMES A. Attorney for the Plaintiff
STERN, FREDRICK PAUL Attorney
STRONGARM HOLDINGS, LLC Defendant
STRONGARM VENTURES, LLC Defendant
SWEENEY, PAUL B Attorney for the Plaintiff
UNKNOWN DEFENDANTS #1-20 Defendant
WARSHAWSKY, IRA BENJAMIN Attorney
WHITE, TERESA A. Attorney for the Defendant
William Dollard Defendant
MICHAEL CRANE Attorney

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