Aboutaam v. El Assaad

Background

Hicham Aboutaam sued Ahmad El Assaad and Pride Invests SAL, asserting five claims involving donations to Saving the Next Generation, a Lebanese real-estate development called The Magnolia, and a proposed French real-estate venture. Aboutaam alleged that El Assaad falsely represented that donations to the charity would remain separate from El Assaad’s political activities. He also alleged that El Assaad made misleading statements about The Magnolia’s views, location, and surrounding development rights, inducing Aboutaam to agree to pay $810,000 for an apartment. Finally, Aboutaam alleged that El Assaad falsely claimed to own or be developing French properties and used those statements to induce Aboutaam to form and fund Pride of Cote d’Azur Realty, LLC.

Aboutaam later terminated the Magnolia sale agreement and demanded repayment. The parties exchanged WhatsApp messages about repayment, including proposed payments of approximately $400,000 in December 2018 and April 2019. Aboutaam alleged that these messages created a settlement agreement and that El Assaad breached it by failing to make the payments.

Motions and legal standards

El Assaad and Pride Invests moved to dismiss the amended complaint. They argued that the charity and French-real-estate fraud claims did not satisfy Federal Rule of Civil Procedure 9(b), which requires fraud to be described with particularity; that the Magnolia fraudulent-inducement claim was barred or undermined by the sale agreement and Aboutaam’s ability to investigate; that the court lacked personal jurisdiction over El Assaad for the French-real-estate claim; and that the settlement claims belonged in Lebanon under a forum-selection clause in the original sale agreement.

Aboutaam moved for partial summary judgment—a ruling that no genuine dispute of material fact prevented judgment as a matter of law—on his claim that the WhatsApp messages created a binding settlement and that El Assaad breached it.

Counts One and Three: charity and French-real-estate fraud

The court denied the motion to dismiss Count One, the fraud claim involving Saving the Next Generation. The court held that Aboutaam identified the statements, speaker, general times and locations, and reasons he believed the statements were false. The court also held that Aboutaam sufficiently described the general sources of information supporting his allegation that charity funds were used for political or other purposes. At the pleading stage, the court held, he was not required to identify confidential sources in greater detail.

The court also denied dismissal of Count Three, the fraud claim involving the French real-estate project. The court held that the allegations that El Assaad falsely claimed to own French properties supported a strong inference of recklessness because ownership was important to an investor’s assessment of the project. The court further held that Aboutaam plausibly alleged reasonable reliance and loss, noting allegations that El Assaad staged property tours, showed architectural materials, and presented people who appeared to be legitimate brokers.

The court rejected the personal-jurisdiction argument concerning Count Three. Although the alleged misrepresentations were made outside New York, the court held that the first effect of the alleged fraud occurred in New York when Aboutaam spent money on the real-estate company by signing a New York office lease. The court therefore did not dismiss Count Three for lack of personal jurisdiction.

Count Two: Magnolia fraudulent inducement

The court denied dismissal of Count Two, which alleged that Aboutaam was fraudulently induced to enter the Magnolia sale agreement. The court held that the agreement’s language stating that Aboutaam had reviewed maps, designs, and engineering specifications was not a merger or waiver clause addressing the specific alleged misrepresentations about views, location, or exclusive development rights. The court also held that the reasonableness of Aboutaam’s reliance was a fact-intensive question that should not be resolved on a motion to dismiss, particularly given the alleged use of carefully staged photographs and detailed marketing materials. The court rejected the argument that Aboutaam’s continued performance ratified the agreement, explaining that he sought damages for fraudulent inducement rather than claiming that no contract existed.

Counts Four and Five: settlement claims

Counts Four and Five sought, respectively, a declaration that the alleged June 2018 settlement was enforceable and damages for breach of that settlement. The original Magnolia sale agreement stated that courts in Beirut would decide disputes arising from the agreement’s interpretation, application, execution, or termination. The defendants argued that this provision covered the settlement claims. Aboutaam argued that the WhatsApp settlement was a separate agreement.

The court held that resolving the parties’ motions required deciding whether the forum-selection clause was mandatory and whether it covered the alleged settlement agreement. Those questions had to be decided under Lebanese law because Lebanon was the contract’s center of gravity. The parties had not adequately briefed Lebanese contract law or how Lebanese courts would interpret the clause and the relationship between the original sale agreement and the alleged settlement. The court therefore denied the defendants’ motion to dismiss Counts Four and Five without prejudice and denied Aboutaam’s motion for partial summary judgment on those counts without prejudice, allowing the parties to provide further briefing.

Disposition

The court denied the defendants’ motion to dismiss with prejudice as to Counts One, Two, and Three. It denied the defendants’ motion to dismiss without prejudice as to Counts Four and Five. It denied Aboutaam’s motion for partial summary judgment without prejudice.