Barshay v. Naithani

Background

Yan Barshay alleged that, in April 2003, he paid $100,000 to settle a debt Mahesh Naithani owed to two lenders. Barshay alleged that Naithani orally agreed to repay the $100,000 plus interest. Naithani later made payments of $90,000 in October 2016 and $50,000 in January 2018. Barshay alleged that the parties agreed Naithani’s total debt was $300,000 and that $250,000 remained unpaid.

Barshay asserted claims for breach of contract, breach of fiduciary duty, and unjust enrichment under New York law. Naithani moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that the claims were released, discharged in bankruptcy, time-barred, and inadequately pleaded.

Materials the Court Considered

On a Rule 12(b)(6) motion, the court generally accepts well-pleaded allegations as true and considers whether they plausibly state a claim. The court declined to consider two release agreements submitted by Naithani because it could not confidently determine from the pleadings whether they applied to Barshay’s claims. The court also declined to consider the parties’ materials and arguments about whether Naithani’s bankruptcy discharged the debt. Accepting Barshay’s allegations as true, the court could not conclude that Barshay had notice of the bankruptcy sufficient to resolve that issue at this stage.

Breach of Contract

The court held that Barshay plausibly alleged that the parties intended to be bound by an oral contract. The allegations that Naithani made partial payments supported the existence of the agreement, and the pleadings did not indicate that a written contract was required.

The contract claim nevertheless failed because Barshay did not plausibly allege a breach. The alleged oral agreement did not specify when Naithani had to perform. Without a deadline, the court could not determine when Naithani’s failure to repay became a breach. Barshay also did not allege anticipatory repudiation, meaning that Naithani had declared before the payment deadline that he would not perform. To the contrary, Barshay alleged that Naithani never said that he owed nothing.

The court did not accept Naithani’s argument that the contract claim was necessarily time-barred. It noted that written acknowledgments showing an intent to pay can extend the limitations period under New York law, and Barshay alleged that Naithani sent emails as recently as November 2019 acknowledging the debt and showing an intent to pay.

Breach of Fiduciary Duty

The court dismissed the fiduciary-duty claim for several reasons. First, Barshay alleged only generalized trust and confidence and did not adequately plead a special relationship creating a fiduciary duty. Second, the claim duplicated the contract claim and did not allege a separate legal duty. Third, the damages sought arose entirely from Naithani’s alleged obligation to repay the money, so the economic-loss rule barred recovery in tort for the claimed benefit of the bargain.

Unjust Enrichment

Barshay pleaded unjust enrichment as an alternative to his other claims. The court dismissed it because unjust enrichment is available only when there is no enforceable agreement governing the dispute, and the court had found that Barshay had pleaded an enforceable agreement concerning the repayment obligation.

Leave to Amend and Disposition

The court found that amendment of the fiduciary-duty and unjust-enrichment claims would be futile. It found that Barshay might be able to state a contract claim by alleging additional facts showing that the time for Naithani’s performance had passed or that Naithani had repudiated his obligations. Any amended pleading also had to address the documents identified during the motion, including the two releases.

The court granted Naithani’s motion to dismiss under Rule 12(b)(6). It ordered the parties to appear for a telephone conference about next steps, including any application by Barshay for leave to amend a second time.