Grand Associates, LLC v. 4D Sight, Inc.

Background

Grand Associates, LLC alleged that it owned and leased a seven-unit building at 66 Allen Street. On September 19, 2022, 4D Sight’s chief executive, Erhan Ciris, entered into a lease with Grand Associates for the penthouse as his personal residence. The lease ran for 30 months, set rent at $20,000 per month, and prohibited nonresidential use except as allowed by law. Grand Associates alleged that Ciris worked for 4D Sight from the apartment, used it for business activities, and prevented building staff and vendors from entering on some occasions.

Ciris stopped paying rent after May 31, 2023. Grand Associates brought nonpayment actions against Ciris in New York state court, and those actions were later settled. Grand Associates then pursued claims against 4D Sight, alleging that 4D Sight was a de facto cotenant that used the apartment as a corporate office. Grand Associates also alleged that 4D Sight, acting through Ciris, misrepresented or failed to disclose the apartment’s intended business use and fraudulently induced Grand Associates to enter the lease.

Motions and jurisdiction

4D Sight moved to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction and Rule 12(b)(6) for failure to state a claim. 4D Sight argued that the settlement with Ciris made Grand Associates’ claims moot. The court rejected that argument because Grand Associates sought damages from 4D Sight in addition to amounts covered by the settlement with Ciris. The court therefore declined to dismiss the case under Rule 12(b)(1).

Quantum-meruit claim

The court dismissed Count 1, Grand Associates’ claim for quantum meruit. Quantum meruit is a remedy that can allow recovery for services or benefits provided without an applicable contract and is intended to prevent unjust enrichment. Under New York law, the claimant must plausibly allege, among other things, that it expected compensation from the defendant.

The court held that Grand Associates did not plausibly allege that it expected compensation from 4D Sight for the company’s alleged use of the apartment. Grand Associates’ own fraud allegations said that it did not know 4D Sight would use the apartment as a corporate office and would not have leased it had it known that fact. The court also found that Grand Associates’ later conduct did not show an expectation of payment from 4D Sight: Grand Associates brought the nonpayment actions against Ciris, did not name 4D Sight, and did not communicate before filing this case that it expected 4D Sight to pay rent.

The court rejected Grand Associates’ reliance on a New York case involving a landlord’s claim against a subtenant. According to the court, that decision did not eliminate the requirement to plead an expectation of compensation, and the facts in that case showed the landlord knew of the subtenant’s occupancy and had received rent from it.

Fraud claims

The court also dismissed Counts 2 and 3, which alleged fraudulent misrepresentations or omissions and fraudulent inducement. Federal Rule of Civil Procedure 9(b) requires fraud to be pleaded with particularity, including the statements alleged to be fraudulent, who made them, when and where they were made, and why they were fraudulent. The complaint must also connect the statements to the defendant.

The court found that the amended complaint did not identify any fraudulent statements made by 4D Sight. Grand Associates attempted to attribute Ciris’s statements to 4D Sight, but the court held that the allegations did not show Ciris was acting within the scope of his employment when he entered the lease. The complaint described the lease as being for Ciris’s personal residence, and the court concluded that the alleged statements were made for a personal, rather than business-related, purpose. The court also noted that the complaint did not identify any other allegedly fraudulent statements attributable to 4D Sight.

Disposition

Judge Margaret M. Garnett granted 4D Sight’s Rule 12(b)(6) motion to dismiss the amended complaint. The court dismissed the quantum-meruit claim and both fraud claims. The order directed the Clerk of Court to terminate the motion and close the case. The opinion did not state that the dismissals were with or without prejudice.