The following papers numbered 1 through 8 were read on: (1) Defendants’ motion to dismiss and/or for summary judgment; and (2) Plaintiff’s cross-motion for (a) summary judgment and/or to dismiss, (b) “judgment on the pleadings” on Defendants’ fourth counterclaim and on Defendants’ fifth and seventh affirmative defenses, (c) discovery pursuant to CPLR §3212(f) and CPLR §3211(d); and (d) leave to amend the Complaint: Notice of Defendants’ Motion/Affirmation of Albert J. Millus, Jr., Esq./Affidavit of Shaul Kopelowitz/Exhibits A-D 1-3 Memorandum of Law in Support of Motion 4 Notice of Plaintiff’s Cross-Motion and Opposition to Defendants’ Motion/Affirmation of Max Weingarten/Exhibits A-S/Memorandum of Law 5-7 Defendants’ Brief in Opposition to Cross-Motion and in Reply 8 DECISION AND ORDER Upon reading the foregoing papers,1 it is ORDERED that the motions are disposed as follows. BACKGROUND Plaintiff Max Weingarten (“Weingarten”), individually and on behalf of Leo Property Holdings LLC (“LEO”), brought this action against Defendants Shaul Kopelowitz (“Kopelowitz”), Hillcrest Acquisitions LLC (“Hillcrest”), and eight limited liability companies which own property in the State of Tennessee: 404 Homes LLC, Autumn Brook LLC, Country Shores LLC, Stoneview Homes LLC, Liberty Homes LLC, Summer Chase LLC, Summer Chase 2 LLC and Gateway Homes LLC (collectively “LLC Defendants”). Plaintiff alleged claims against all Defendants pursuant to the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 USC §§1961 et seq., breach of contract, breach of fiduciary duty, unjust enrichment, and “concerted-action liability”. Plaintiff seeks monetary damages in an amount not less than 15 million dollars, treble damages, an accounting, imposition of a constructive trust and declaratory relief. Plaintiff sues several “Doe” Defendants and names LEO as a nominal defendant. Kopelowitz formed Hillcrest, a New York limited liability company with its principal place of business in Spring Valley, New York, through which he owns various properties in Rockland County. Kopelowitz later determined to invest in real estate in Tennessee. In furtherance of that goal, Kopelowitz formed the LLC Defendants for the purpose of purchasing multi-unit rental properties in Tennessee. As sole member of each LLC, Kopelowitz applied for and obtained financing for each LLC Defendant to separately purchase different properties in Tennessee (the “Tennessee Properties”). After obtaining the financing to purchase each property, Kopelowitz later syndicated his interests in four of the LLC Defendants2 by selling 70/30 majority interests to investors. In January 2016, Kopelowitz formed LEO as a Delaware limited liability company with the stated purpose “to own, hold, develop, lease, improve, renovate, finance, sell, mortgage, pledge, transfer, exchange, operate and manage that certain parcel of real property and the improvements thereon”, to engage in other investments agreed upon by its Members and to do everything necessary to further such purposes. LEO’s Operating Agreement (the “Agreement”) states that Kopelowitz, Shimon Rosenman3 (non-party) and Plaintiff are members of LEO, each with a 33.33 percent interest. Kopelowitz, Rosenman and Plaintiff agreed that Plaintiff would manage the Tennessee Properties, through LEO. Toward that end, the Agreement stated that Plaintiff would be paid a salary, although it did not specify the amount of the salary. LEO did not acquire any real property in Tennessee and is not registered to do business in that state. LEO is also not registered to do business in New York, however, its principal office is located in Spring Valley, New York. The operating agreements of four of the LLC Defendants, Liberty Homes LLC, Summer Chase LLC, Summer Chase 2 LLC and Gateway Homes LLC, confer an indirect ownership interest in LEO. Although neither LEO nor Weingarten made any financial contribution to these LLC’s (or any of the other LLC Defendants), their operating agreements, which are identical apart from the percentage of LEO’s interest, provided that LEO would receive a certain percentage of “Company Cash”. The agreements defined Company Cash as the cash on hand which remained after the business paid all expenses and liabilities, retained operating funds and reserves and repaid its investors. The operating agreements specified that the LLC members would receive a “Preferred Return” and thereafter LEO would receive a “Post Preferred Return” of 30 percent. Similar provisions were not included in the operating agreements of the other four LLC Defendants, 404 Homes LLC, Autumn Brook LLC, Country Shores LLC, Stoneview Homes LLC. None of those LLC’s provide for any monies to be paid to LEO, contingent or otherwise. Weingarten managed the Tennessee Properties, but was later terminated from his position as property manager with LEO. Kopelowitz asserted that Weingarten’s “performance was highly unsatisfactory”. Kopelowitz Affidavit at 22. Kopelowitz claimed that despite Weingarten’s management responsibilities for the Tennessee Properties, he spent most of his time in New York, only traveling to Tennessee about twice a month. Kopelowitz further charged that Weingarten “also spent money in a highly reckless fashion”. Id. Kopelowitz asserted that, as a result, he and Rosenman relieved him of his responsibility as property manager and replaced him with The K Team, a management company based in Tennessee. After being terminated as property manager of the Tennessee Properties, Weingarten brought this action in his individual capacity and on behalf of LEO.4 Weingarten alleges that “LEO has a.35 percent interest, and other Members in proportion to their relative Interests have a.65 percent ownership interest in each of the Defendants Liberty Homes LLC, Gateway Homes LLC, Summer Chase LLC, Summer Chase 2 LLC and Stoneview Homes LLC.” Complaint at 24. He further alleges that “through his 33.33 percent LEO interest, [he] has a pro rata ownership interest in each of the Defendants Liberty Homes LLC, Gateway Homes LLC, Summer Chase LLC.” Id. at 25. The Complaint alleges that Defendants conducted the affairs of LEO through a pattern of racketeering activity, specifically bank fraud, wire fraud and mail fraud, for the unlawful purpose of causing injury to Weingarten through his “loss of LEO as an ongoing business, loss of rents, profits, loss of investment, loss of personal credit, damage to [his] reputation with Banks and other credit provides [sic], and loss of the Tennessee Real Properties”. Weingarten alleged that Kopelowitz committed bank fraud by maintaining two operating agreements for each of the LLC Defendants, one showing him as a sole member with a 100 percent interest in the LLC, which he used to obtain financing for the particular LLC, and a second operating agreement showing a 70/30 membership split, which he used for investors. Plaintiff alleged that Kopelowitz committed wire fraud by making and receiving wire transfers of funds used to purchase real property, pay legal fees, swap loan deposits, etc. in furtherance of the enterprise’s business. Weingarten alleges that Defendants breached the Agreement and the implied duty of good faith and fair dealing by (a) locking Weingarten out of LEO’s premises and the Tennessee Properties; (b) locking “Weingarten out of the LEO Operating Accounts, refusing to contribute to Operating Expenses in order to ensure that [Weingarten's] LEO and other investments in the [LLC Defendants] would fail”; (c) “causing an ultra vires, unauthorized and illegal Wire Transfer(s), committing Bank, Wire and Mail Fraud in pursuit of the [LLC Defendants'] wrongful enterprise”; (d) “causing an ultra vires, unauthorized and illegal ‘transfer’ of the ‘ownership, management’ of LEO in violation of the Operating Agreement”; (e) “causing an ultra vires, unauthorized and illegal ‘transfer’ of the ‘ownership, management’ of [the Tennessee Properties]; (f) “causing disruption and economic loss to Plaintiff LEO’s operations” through the “Wire, Bank and Mail Fraud”; (g) “[t]hrough the foregoing ultra vires, unauthorized and illegal ‘vote’, ‘wrongful transfer’ and ‘transition’ by prejudicing Plaintiff Weingarten, as an equal member’s ability to conduct LEO’s and the LLC’s business”; and (h) through the “foregoing ultra vires, unauthorized and illegal conduct[, creating] Events of Default under various LEO Lender Agreements, which required that [LEO's] organizational structure be maintained”. Complaint at 65(a)-(h). DISCUSSION Defendants’ Motion Defendants move to dismiss and/or for summary judgment or, in the alternative, for a stay of the action pending arbitration. Lack of Personal Jurisdiction Over LLC Defendants Defendants contend that the Court lacks personal jurisdiction over the LLC Defendants because they are all Delaware companies which own real property in Tennessee and do not conduct business, and are not registered to conduct business, in New York. Defendants’ Memorandum of Law at 17, citing Laufer v. Ostrow, 55 NY2d 305, 309-310 [1982]. Defendants assert that the Complaint contains no factual allegations of any acts taken by the LLC Defendants and no acts which occurred in New York. Weingarten contends that the Court has personal jurisdiction over the LLC Defendants because Kopelowitz’s control of these companies permits the Court to exercise long arm jurisdiction. Weingarten asserts that “[t]he Agreements by and between Kapolowitz [sic], LEO and the Eight Tennessee Properties, which were run through LEO and Hillside [sic] Acquisitions, businesses Kopelowitz controlled and utilized to commit RICO Fraud and the pendent state claims in the Verified Complaint are located in Rockland County New York and provide an ample basis for the ‘conduct of business’ basis for in personam jurisdiction in New York.” Plaintiff’s Memorandum of Law at 93, citing CPLR §302. Weingarten asserts that the LLC Defendants “conducted business through LEO, Hillside [sic] Acquisitions and Kopelowitz and vice versa.” Id. at 95. Weingarten offers nothing to support his own ipse dixit proposition. “Under CPLR 301 ‘the authority of the New York courts [to exercise jurisdiction over a foreign corporation] is based solely upon the fact that the defendant is ‘engaged in such a continuous and systematic course of ‘doing business’ here as to warrant a finding of its ‘presence’ in this jurisdiction’ “. Laufer v. Ostrow, 55 NY2d at 309-10. The Court of Appeals explained that the test for determining whether a foreign company has a “presence” in New York, “is a ‘simple pragmatic one’ (Bryant v. Finnish Nat. Airline, 15 NY2d 426, 432): is the aggregate of the corporation’s activities in the State such that it may be said to be ‘present’ in the State ‘not occasionally or casually, but with a fair measure of permanence and continuity’ (Tauza v. Susquehanna Coal Co., 220 NY 259, 267) and is the quality and nature of the corporation’s contacts with the State sufficient to make it reasonable and just according to ‘traditional notions of fair play and substantial justice’ that it be required to defend the action here (International Shoe Co. v. Washington, 326 US 310, 316, 320; see, also, Rush v. Savchuk, 444 US 320, 327; World-Wide Volkswagen Corp. v. Woodson, 444 US 286, 292; Frummer v. Hilton Hotels Int., 19 NY2d 533, 536).” Laufer v. Ostrow, 55 NY2d at 310. Plaintiff has not shown that there is any basis for the Court to assert long arm jurisdiction over the LLC Defendants. The mere fact that Kopelowitz is a member of the LLC Defendants does not mean that they conduct business outside of Tennessee, where they own and maintain multi-unit rental properties. It would be an unimaginable stretch for the Court to find a basis to exercise long arm jurisdiction over the LLC Defendants. Accordingly, Defendants’ motion to dismiss the Complaint against the LLC Defendants is granted. RICO Cause of Action Defendants contend that the cause of action under RICO should be dismissed because Weingarten does not have standing to bring the claim, having failed to allege a direct injury to himself or to LEO which resulted from Kopelowitz’s acts of alleged bank, wire and mail fraud. Defendants argue that any harm Weingarten might have suffered would have been derivative of any harm allegedly caused to the lending institutions to which Kopelowitz purportedly made misrepresentations. Defendants submit Kopelowitz’s attestation that none of the loans are in default and that Weingarten has not articulated how the lenders were or could have been harmed by Kopelowitz using two different operating agreements and not informing the lenders of other investors, even if that had occurred. Kopelowitz attests that at the time he obtained the loans, he was the sole member of each LLC Defendant, and did not obtain investors until he had secured the loans. Kopelowitz Affidavit at 16. Defendants contend that Weingarten has not shown a causal link between his claimed injury and Kopelowitz’s alleged fraud upon the lenders from whom the LLC Defendants obtained financing to purchase the various Tennessee Properties. Defendants cite Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 191 F 3d 229 (2nd Cir 1999), cert denied 528 US 1080 [2000], to support their argument that Weingarten cannot proceed with his claim under RICO because he has not shown that Kopelowitz’s allegedly fraudulent acts against the lenders caused either he or LEO to suffer direct injury. The Second Circuit Court of Appeals held in Laborers Local 17 that in order to establish standing to sue under RICO, a plaintiff must “[show] that the defendant’s violation not only was a ‘but for’ cause of his injury, but was the proximate cause as well.” 191 F 3d at 234 (quoting Holmes v. Securities Investor Protection Corp., 503 US 258, 268 [1992]). The court reiterated the United States Supreme Court’s holding in Holmes v. Securities Investor Protection Corp., supra, that traditional common law notions of proximate cause were incorporated by Congress into the RICO statute. Further elaborating on proximate cause, the court stated that “one notion traditionally included in the concept of proximate causation is the requirement that there be ‘some direct relation between the injury asserted and the injurious conduct alleged’.” Id. at 235 (quoting Holmes, 503 US at 268). Consequently, ‘a plaintiff who complain[s] of harm flowing merely from the misfortunes visited upon a third person by the defendant’s acts [is] generally said to stand at too remote a distance to recover’.” Id. (quoting Holmes, 503 US at 268-69, 112 S Ct 1311 (citing 1 J.G. Sutherland, A Treatise on the Law of Damages 55-56 (1883)); omitting other citations). The direct injury test is “a key element for establishing proximate causation, independent of and in addition to [substantial cause and reasonable foreseeability, which are] other traditional elements of proximate cause” that cannot substitute for direct injury. Id. at 236. In a later case, which did not involve claims under RICO, the Second Circuit Court of Appeals noted that it has “held RICO plaintiffs to a more stringent showing of proximate cause than would be required at common law”. Desiano v. Warner-Lambert Co., 326 F 3d 339, 348 [2d Cir. 2003] (citing Moore v. PaineWebber, Inc., 189 F 3d 165, 178, 179 [2d Cir.1999] (Calabresi, J., concurring) (explaining that “a RICO plaintiff’s burden to show that his case meets the common-law requirement of proximate causation derives from the legislature’s intent to impose that causation requirement, and not directly from the common law itself”)). Weingarten does not even begin to approach the required showing. He explains his “direct injury” in terms of the monetary damage he suffered as a result of being “locked out of LEO, the Eight Tennessee Properties, and [wrongfully terminated] as partner and member” when he confronted Kopelowitz about his commission of “RICO Bank, Bank Source and Wire Fraud”. Plaintiff’s Memorandum of Law at 91. Applying either the standard for a motion to dismiss or the standard for summary judgment leads to the same result. The standard applicable to a motion to dismiss pursuant to CPLR §3211 requires the Court to “afford the pleadings a liberal construction, take the allegations of the complaint as true and provide plaintiff the benefit of every possible inference”, EBC I, Inc. v. Goldman, Sachs & Co., 5 NY3d 11, 19 [2005] (citing Goshen v. Mutual Life Ins. Co. of N.Y., 98 NY2d 314, 326 [2002]). The standard applicable to a motion for summary judgment pursuant to CPLR §3212 requires the Court to view the evidence “in the light most favorable to the nonmoving party, and all reasonable inferences must be resolved in favor of the nonmoving party.” Santiago v. Joyce, 127 AD3d 954 [2nd Dept 2015] (citing Green v. Quincy Amusements, Inc., 108 AD3d 591, 592; Pearson v. Dix McBride, LLC, 63 AD3d 895). Plaintiff’s RICO claim fails under both standards. It is readily apparent from Weingarten’s allegations that he did not suffer a direct injury from Kopelowitz’s purported misrepresentations or any of the RICO predicate acts of bank, wire or mail fraud allegedly committed by Kopelowitz in furtherance of his alleged enterprise. Neither Weingarten’s affirmation5 nor the discovery he requests can save the RICO claim.6 Further detail about Kopelowitz’s allegedly fraudulent acts to obtain financing to purchase the Tennessee Properties cannot supply the causal link between such acts and the alleged injury to Weingarten or LEO, if indeed there was one.7 The injury allegedly suffered by Weingarten did not arise from the fraudulent acts perpetrated upon the lending institution(s). Instead, the injury to Weingarten resulted from Kopelowitz’s alleged retaliatory conduct against him personally after he told Kopelowitz that he had learned of Kopelowitz’s fraudulent activity. The harm to Weingarten came thereafter when he was “locked out” of LEO and allegedly lost the profits, investments and business opportunities that flowed from his relationship with LEO, including his loss of the Tennessee Properties.8 Kopelowitz demonstrated that Weingarten’s allegations of injury are far too remote from the alleged fraud to state a claim under RICO.9 The causal link between the predicate acts and the injury to him are tenuous at best. Only the lending institutions to which Kopelowitz purportedly misrepresented his ownership interests in the LLC Defendants suffered the injury, if at all, which Weingarten alleged. Weingarten simply failed to make the requisite causal link to himself or LEO. “[M]ere conclusory or unsubstantiated allegations or assertions are insufficient to oppose the motion.” Matter of Estate of Kraus, 208 AD2d 729, 730 [2nd Dept 1994] (citing Zuckerman v. City of New York, 49 NY2d 557, 562 [1980]); see also Roosevelt Sav. Bank v. Jaffee, 227 AD2d 608, 608 [2nd Dept 1996]. Accordingly, Defendants’ motion for summary judgment dismissing Plaintiff’s RICO cause of action is granted. Breach of Contract Defendants Hillcrest and the LLC Defendants move to dismiss and/or for summary judgment as to Weingarten’s cause of action for breach of contract against them, because none of them were signatories to the Agreement which Plaintiff alleged was breached. Defendants’ Memorandum of Law at 12 (citing Siegel Consultants, Ltd. v. Nokia, Inc., No. 590221/09, 2010 WL 9067678 [Sup Ct, New York County 2010], aff’d in part, 85 AD3d 654 [1st Dept 2011], leave den 18 NY3d 809 [2012]). Defendants move to dismiss the cause of action as against Kopelowitz, the only other party to the Agreement who is sued in the action,10 on the ground that Weingarten has not alleged which provision of the Agreement was breached. In his opposition papers, Weingarten references other agreements which he claims were breached: “Plaintiff Weingarten, through his member interest in LEO, and through his 70/30 Group Partnership and “sweat equity” Agreement (Exhibit B January 10, 2016 Business Plan Agreement) essentially had a.10 percent interest in all Eight Tennessee Properties.” MOL at 114. “Kopelowitz wrongfully terminated Weingarten’s partnership, and pro rata member agreement in all Eight Tennessee Property LLCs…”. Id. at 116. However, neither the Business Plan Agreement nor the “pro rata member agreement” were included in this cause of action as agreements which were breached. Plaintiff only alleged a breach of the (LEO Operating) Agreement. The Agreement does not incorporate by reference or otherwise refer to either the Business Plan Agreement or the “pro rata member agreement”. The Agreement contains a standard merger clause that precluded incorporating any external agreements or understandings: 10.5 Entire Agreement; Amendments. This Agreement and the agreements referred to herein constitute the entire agreement of the parties relating to the subject matter hereof, and together they supersede and replace any prior agreement or understanding between some or all of the parties pertaining thereto. Except as otherwise expressly provided for, the Agreement may not be changed or modified, except by unanimous action all of the Members. Weingarten claimed in his papers that Kopelowitz breached the “LEO member agreement at
