Coppelson v. Serhant

Background

Aaron Coppelson, Dariush Fakheri, and Nightengale NY1, LLC sued Ryan Serhant and Nest Seekers International LLC over the purchase of a Manhattan investment property called the Tribeca Property. Plaintiffs alleged that Serhant acted as their real estate broker and described the property as a “gold mine,” a property plaintiffs could not pass up, and one that would soon be worth more than $5 million. They alleged that they therefore chose the Tribeca Property instead of another property they were considering.

Plaintiffs further alleged that, after the purchase, they learned that Serhant represented both sides of the transaction, received undisclosed referral fees or a commission, and disclosed information about plaintiffs’ need to complete a tax-advantaged real estate exchange. Plaintiffs alleged that they bought the Tribeca Property for $4,375,000 and sold it in January 2020 for $3,675,000.

The court had previously dismissed plaintiffs’ First Amended Complaint without prejudice. Plaintiffs then filed a Third Amended Complaint asserting four claims: fraudulent inducement and concealment, promissory estoppel, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. Defendants moved to dismiss under Federal Rules of Civil Procedure 12(b)(6), for failure to state a claim, and 9(b), which requires fraud to be pleaded with particular detail.

Court’s Analysis

Fraudulent inducement and concealment

The court held that plaintiffs had not fixed the problems identified in its earlier decision. Under New York law, statements about real-estate value generally are opinions and are not actionable fraud. The court treated statements that the Tribeca Property was the “best one on the list,” was priced below market, or would appreciate substantially as opinions, puffery, or sales talk. The court also relied on the rule that buyers in real-estate transactions generally must satisfy themselves about the value and quality of the purchase.

The court also rejected plaintiffs’ theory that Serhant’s alleged undisclosed dual agency supported a fraud claim. It adhered to its earlier conclusion that New York Real Property Law § 443 limits claims against licensed brokers acting as dual agents to regulatory actions.

Promissory estoppel

Promissory estoppel requires a clear and definite promise, reasonable and foreseeable reliance, and injury caused by that reliance. The court found that plaintiffs did not allege that Serhant clearly promised to represent only them. It also held that the alleged statement that the property would be worth more than $5 million within a short period was an opinion and too vague to support a promissory-estoppel claim.

Implied covenant of good faith and fair dealing

The court stated that the implied covenant applies only when there is a valid contract. Plaintiffs alleged, on information and belief, that the dual agency was not disclosed in writing and resulted from an oral contract, but the court found that allegation conclusory and unsupported by the rest of the complaint. It therefore found the claim insufficient.

Unjust enrichment

Plaintiffs added an allegation that Serhant received a $175,000 commission from the transaction. The court nevertheless held that the unjust-enrichment claim duplicated the dismissed fraud claims because it rested on the same allegations concerning the property’s value, the alleged concealment of Serhant’s work for the seller, and the commission. Under New York law, unjust enrichment is unavailable when it merely duplicates a conventional contract or tort claim.

Disposition

Judge Lewis J. Liman granted defendants’ motions to dismiss. The order directed the Clerk of Court to close the case. Although defendants’ motion sought dismissal with prejudice, the court’s conclusion stated only that the motions to dismiss were granted; it did not specify that the dismissal was with or without prejudice.