Sometimes a story sounds bad on first reading, and changes thereafter. This story sounds worse on second reading. It reeks of non-actionable wrongs suffered by a not-so-astute plaintiff.
Mizrahi v Adler 2014 NY Slip Op 31701(U) June 30, 2014 Sup Ct, NY County Docket Number: 650802/2010 Judge: O. Peter Sherwood is a retelling of a very old “hot” real estate deal gone sour.
“It is uncontested that, in 2006, plaintiff Eitan Mizrahi (plaintiff) entered into a written retainer agreement with Adler and his law firm, non-party, Stern, Adler & Associates, LLP, for the firm to act as plaintiffs attorneys, to provide advice and services specifically with regard to estate planning issues (Retainer Letter, attached to Adler Aff. as Exhibit C). At a meeting in February 2007, plaintiff and Adler discussed a possible real estate opportunity, found by Adler, to purchase residential units then under construction in Las Vegas, Nevada, called the Trump International Hotel and Tower (Trump Towers). Trump Towers was to be comprised of two towers, Tower I and Tower II. Apparently, Adler had marketing materials on hand at the meeting which described the [* 1] investment, and plaintiff allegedly expressed interest in investing in the project.
Adler claims that he explained to plaintiff that Saw was in a “unique position” to offer prospective investors the opportunity to purchase units in the Towers before they were offered to the general public (Adler Aff., ¶14), and that plaintiff could take advantage of Saw’s contacts to purchase units by entering a finder’s agreement with Saw, and paying Saw a fee. Plaintiff claims that he was told that Saw was owned by an individual named Jack Wishna (Wishna), and that Adler would be working Wishna. Adler contends that plaintiff knew Saw was Adler’s company. Adler adds that he told plaintiff that his “contacts” with Wishna would aid in the process of purchasing property in Trump Towers, as Wishna was alleged to have a relationship with the developer (id.). Plaintiff maintains that Adler told him an investment in Trump Towers would be entirely risk-free, and that by investing through the intervention of Saw (and hence, Wishna), plaintiff would obtain certain benefits, “including, but not limited to, the ability to sell or swap units prior to closing, and postpone the contracted closing date” (Complaint, attached to Adler Aff. as Exhibit A, ¶ 15). Plaintiff calls these alleged rights the “Wishna Umbrella.” Early in May, 2007, upon Adler’s advice, plaintiff executed Reservation Deposit Forms for two units in Tower II, and made deposits of $I 0,000 per unit. Plaintiff claims that the Reservation Deposit Form named “Jack Wishna of Liberty Realty Inc.” as a sales agent involved with the sale (id.¶ 18).
The complaint alleges that defendant lost his down payment due to wrongdoing by Adler in representing to plaintiff that the investment was risk-free and that the plaintiff would have rights in the purchase of units in Trump Towers that he did not actually have under the Purchase Agreement. Plaintiff argues that he labored under the reasonable misconception that Adler was acting as his attorney at all times during the transactions at issue. Plaintiff claims to have only a fragmentary education and a slim grasp of the English language, and that he relied totally on Adler, as his attorney
in making the investment. Plaintiff never read any document he was asked to sign, under the assumption, that Adler, as plaintiffs attorney, was looking out for plaintiffs interests.
Plaintiffs action fails on the question of proximate cause. While the issue of proximate cause can often be ~jury question (see Bradley v Soundview Healthcenter, 4 AD3d 194 [1st Dept 2004 ]), the court may always determine whether there are questions of fact (see Laub v Faessel, 297 AD2d 28 [1st Dept 2002]). In Laub v Faessel, dealing with claims for fraud, negligent misrepresentation and breach of fiduciary duty, the court, discussing proximate cause, di~tinguished between a misrepresentation which induces a plaintiff to engage in a transaction (“transaction causation”), and misrepresentations which directly cause the loss to plaintiff (“loss causation”) (id. at 31 ). “Loss causation is the fundamental core of the common-law concept of proximate cause: ‘An essential element of the plaintiffs cause of action for negligence, or for … any … tort, is that there be some reasonable connection between the act or omission of the defendant and the damage which the plaintiff has suffered [citation omitted]'” (id.). “Transaction causation is often synonymous with ‘but for’ causation” (Amusement Industry, Inc. v Stern, 786 F Supp 2d 758, 776 [SDNY 2011 ]). In the present context of a legal malpractice claim, plaintiff alleges “transaction causation,” because he says that he would not have entered into the agreements had he known that they bore any risk. That is, “but for” Adler’s representations, there would have been no transaction. However, even assuming that th_e representations are a basis for finding “transaction causation,” plaintiff cannot establish “loss causation,” because many factors led to the failure to close on Unit 6401, or any other unit in the Trump Towers. Plaintiffs losses were caused by the precipitious drop in real estate prices, and the value of the Trump Towers units in 2008; the Joss of his job; and plaintiffs failure to obtain financing. 4 The “Wishna Umbrella” could not have protected plaintiff from his losses. As a result, plaintiff has failed to plead proximate cause.
The failure to establish proximate cause dooms plaintiffs cause, of action for legal malpractice. Likewise, it dooms his claims for fraud and negligent misrepresentation (see Friedman v Anderson, 23 AD3d 163 [I st Dept 2005]), and for breach of fiduciary duty (see Northbay Constr.Co. v Bauco Constr. Corp., 38 AD3d 737 (2nd Dept 2007]).
Further, plaintiff cannot establish reasonable reliance on any representation that the deal was risk free. Reasonable reliance is an element of a fraud cause of action (see MBIA Ins. Co. v Countrywide Home Loans, Inc., 87 AD3d 287 [I st Dept 2011 ]), and of a claim for negligent misrepresentation (see JA. 0. Acquisition Corp. v Stravitsky, 8 NY3d 144 (2007]). In the Finder Agreement, plaintiff represented to Saw that he was a “sophisticated investor,” and that he “acknowledg[ ed] that buying real estate is a risky investment and that there is no guarantee the value of the unit will increase.over time.” He cannot later claim that he did not know that his investment was risky. ”