Jordan v. Mirra
REPORT AND RECOMMENDATIONS re 112 MOTION to Dismiss. Please note that when filing Objections pursuant to Federal Rule of Civil Procedure 72(b)(2), briefing consists solely of the Objections (no longer than ten (10) pages) and the Response to the Objections (no longer than ten (10) pages). No further briefing shall be permitted with respect to objections without leave of the Court. Objections to R&R due by 10/2/2017. Signed by Judge Sherry R. Fallon on 9/14/2017. (lih)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
RAYMOND A. MIRRA, JR., RAM
CAPITAL GROUP, LLC D/B/A RAM
CONSULTING GROUP, LLC, RAM
CAPITAL II, LLC, RAM REALTY
HOLDINGS, LLC, JOSEPH A. TROLIO, )
JR., BRUCE KOLLEDA, MARK A.
KOVINSKY, JOSEPH J. TROPIANO, JR., )
DANIELLE STEWART, RENEE M.
SIGLOCH, FREDERICK FORTE,
VIRGINIA L. HALL, BARI KUO, and
Civil Action No. 14-1485-GAM
REPORT AND RECOMMENDATION
.Presently before the court in this diversity action is the motion to dismiss for failure to
state a claim filed by defendants Raymond A. Mirra, Jr. ("Mirra"), RAM Capital Group LLC,
RAM Capital II, LLC, RAM Realty Holdings LLC, Joseph A. Troilo, Jr. ("Troilo"), Bruce
Kolleda ("Kolleda"), Mark A. Kovinsky ("Kovinsky"), Joseph J. Tropiano, Jr. ("Tropiano"),
Danielle Stewart ("Stewart"), Frederick Forte ("Forte"), Renee M. Sigloch ("Sigloch"), Virginia
L. Hall ("Hall"), Bari Kuo ("Kuo"), and Shelly Demora ("Demora") (collectively, "defendants").
(D.I. 112) For the following reasons, I recommend that the court grant the motion to dismiss as
to Counts 1 to 6 and 8 to 10 of the second amended complaint, and deny the motion to dismiss
with respect to Count 7 of the second amended complaint.
In 1991, plaintiff Gigi Jordan ("Jordan") founded Ambulatory Pharmaceutical Services,
Inc. ("APS"), a healthcare company specializing in providing individualized home infusion
services. (D.I. 176 at if 28) Following the success of APS, Jordan entered into a business
relationship with Mirra, 2 in which Jordan ran a subsidiary of Mirra's home infusion company.
(Id) On August 1, 1995, Jordan exercised an option to buy out Mirra's interests in APS, leaving
her as the sole shareholder of APS. (Id at if 31) On August 29, 1997, Jordan sold APS to
Integrated Health Services, Inc. ("IHS"). (Id at if 32)
During this time, Mirra represented to Jordan that defendants Troilo and Kolleda3
managed, controlled, and implemented Jordan and Mirra's respective business and financial
affairs and acted co-equally for Jordan and Mirra as fiduciaries in the execution of their duties.
(Id at ifif 33-34) In 1997, Mirra, Troilo, and Kolleda organized RAM Capital to serve as a
holding company for Jordan and Mirra's joint assets and business ventures. (Id at ifif 35-36) In
2002 and thereafter, Mirra, Troilo, Kolleda, Tropiano, and Kovinsky4 organized various holding
companies and trusts to allegedly disguise the actual ownership interests of Jordan's business
holdings. (Id at ifif 37-38)
Evaluating a motion to dismiss under Rule 12(b)( 6) requires the court to accept as true all
material allegations of the complaint. Spruill v. Gillis, 372 F.3d 218, 223 (3d Cir. 2004).
Consequently, the court's recitation of the facts takes as true the well-pleaded factual allegations
of the second amended complaint in accordance with the Rule 12(b)(6) standard.
Jordan and Mirra were also involved in a personal relationship beginning in1990 or 1991.
(D.I. 84 at if 29)
The second amended complaint also identifies Joseph T. Molieri ("Molieri") as a defendant in
the cited paragraphs. However, Molieri was voluntarily dismissed from this action on January
13, 2016. (D.I. 156)
Bernard Eizen ("Eizen") is identified as a defendant in the cited paragraphs of the second
amended complaint. However, Eizen was voluntarily dismissed from this action on January 13,
2016. (D.I. 156).
In March and December of 2003, Troilo, Mirra, and Kolleda sent Jordan two estate
planning memoranda falsely representing that Jordan and Mirra remained equal owners of their
joint assets and business ventures. (Id at ifif 39-42) In 2005, defendants gave Jordan a business
prospectus falsely reporting the status of Jordan and Mirra's joint business holdings and assets.
(Id at if 43) In 2007, Tropiano, Kolleda, and Mirra sent Jordan a schedule falsely stating that
Jordan and Mirra held equal interests in companies, real estate, and other investments worth
more than $241 million. (Id at if 44) Between 1997 and 2009, Tropiano, Kolleda, Mirra, Troilo,
and Kovinsky sent Jordan various reports and schedules which falsely represented that her
business interests, real estate holdings, and assets were co-equally owned with Mirra. (Id at if
Jordan filed the instant action in the Southern District of New York on March 9, 2012.
(D.I. 1) The parties filed a joint stipulation to transfer venue to the District of Delaware on
December 8, 2014. (D.I. 68) A,related action was pending in the District of Delaware at the
time of the transfer, asserting a RICO claim against Mirra and others ("the RICO action"). (C.A.
On June 3, the court issued its Report and Recommendations in the RICO action,
recommending that the district judge grant the pending motions to dismiss. (C.A. No. 13-2083SLR-SRF, D.I. 457) The district judge adopted the recommendations on August 31, 2016 and
dismissed the RICO action. (C.A. No. 13-2083-SLR-SRF, D.I. 472) The Third Circuit Court of
Appeals affirmed the dismissal of the RICO action on May 12, 2017. (C.A. No. 13-2083-SLRSRF, D.I. 475)
The court issued its Report and Recommendations in the present matter on June 7, 2016,
denying the pending motions to dismiss and granting the motion to amend the complaint. (D.I.
15 8) On August 31, 2016, the district judge accepted in part and rejected in part the
recommendations, recommitting the motions to dismiss to the magistrate judge for consideration
on the merits. (D.I. 175) On September 1, 2016, Jordan filed her second amended complaint in
the present action. (D.I. 176) The second amended complaint asserts the following causes of
action: (1) Count 1: Breach of Contract on Promissory Notes against Mirra; (2) Count 2:
Accounting against Mirra, Troilo, Molieri, and Kolleda; (3) Count 3: Common Law Fraud
against Mirra, Troilo, Molieri, Kolleda, Eizen, Kovinsky, Tropiano, and Walsh; (4) Count 4:
Aiding and Abetting Fraud against Stewart, Sigloch, Forte, Hall, Demora, and Kuo; (5) Count 5:
Fraudulent Inducement against Mirra, Troilo, Tropiano, and Kolleda; (6) Count 6: Breach of
Fiduciary Duty against Mirra, Troilo, Molieri, and Kolleda; (7) Count 7: Breach of Warranties
against Mirra; (8) Count 8: Unjust Enrichment against all defendants; (9) Count 9: Conversion
against all defendants; and (10) Count 10: Declaratory Relief under 28 U.S.C. §§ 2201 and 2202
against Mirra, Troilo, Kolleda, and Eizen. (D.I. 176 at ,-r,-r 298-351)
Conversion and Misappropriation of Jordan's Bank Accounts
Merrill Lynch Transactions
_Jordan opened a Merrill Lynch account based on Mirra' s recommendation in 1992. (Id
at ,-r 49) Patrick J. Walsh ("Walsh") 5 became Jordan's broker and private banker at Merrill
Lynch. (Id at ,-r 50) In 1997, Walsh advised Jordan to open two additional Merrill Lynch
accounts to participate in a covered writing account program intended to eliminate losses below
the principal amounts invested. (Id at ,-r,-r 52-55)
Patrick Walsh was previously named as a defendant to the present action, but was voluntarily
dismissed by Jordan on January 27, 2017. (D.I. 188)
In April 2002, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano conspired with Walsh to
open a new Merrill Lynch account jointly held by Jordan and Mirra. (Id
deposited more than $14 million of Jordan's money into the joint account without Jordan's
knowledge or consent. (Id
60-62) Four months later, in September 2002, Mirra, Troilo,
Kolleda, Kovinsky, and Tropiano allegedly forged Jordan's signature on account opening
documents for the joint account. (Id
In January 2003, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano conspired to convert
Jordan's three individual Merrill Lynch accounts into joint accounts held with Mirra. (Id
65-70) Thereafter, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano opened additional Merrill
Lynch accounts jointly held by Jordan and Mirra by forging Jordan's signature on account
application forms. (Id
71-77) Between 2003 and 2006, Mirra, Troilo, Kolleda, Kovinsky,
and Tropiano forged Jordan's signature on wire transfer authorizations purporting to authorize
Merrill Lynch to transfer Jordan's money to Mirra and various entities owned or controlled by
78-80) Between 2003 and 2008, Mirra, Troilo, Kolleda, Kovinsky, and
Tropiano forged Jordan's signature on loan applications and wife transfer authorizations, causing
Merrill Lynch to loan millions of additional dollars to Mirra, RAM Capital, and other entities
owned and controlled by defendants, using Jordan's assets as collateral for the loans. (Id
On August 29, 1997, Jordan sold APS to Integrated Health Services, Inc. ("IHS") in
exchange for more than $34 million in cash and stock options. (Id at~ 89) Mirra subsequently
urged Jordan to open a Smith Barney brokerage account in March 1998 with the proceeds from
the sale. (Id at ifif 90-91) In June 1998, Mirra encouraged Jordan to execute a Smith Barney
trading agreement, which was faxed to the account broker. (Id.
92) Mirra, Troilo, Kolleda,
and Tropiano then coordinated the liquidation of Jordan's stock in the Smith Barney brokerage
account and fraudulently transferred the funds out of the account without Jordan's knowledge or
In 1998, Mirra conferred with Jordan regarding an "offshore asset protection" plan
involving multiple offshore trusts, LLC' s, and bank accounts. (Id. at ~~ 94-97) Pursuant to
Mirra's proposal, both he and Jordan would transfer $7 million to a bank account in Geneva,
Switzerland (the "BJB account"), and a Nevis-based LLC named West-Highland Company LLC
("West Highland"), solely owned by Jordan, would be established as the account holder of the
offshore account. (Id. at ~~ 98-99) Jordan signed an agreement in accordance with Mirra' s
100) In July 1999, Mirra, Troilo, Kolleda, and Tropiano forged Jordan's
authorization to transfer the funds in Jordan's Smith Barney account to the BJB account,
comprising the total initial funding for West Highland's BJB account. (Id.
103) In 2001,
Mirra fraudulently induced Jordan to assign him a fifty percent interest in West Highland by
falsely representing that he had contributed half of the funds deposited into the account. (Id. at
Fraudulent Property Transactions
Defendants also engaged in a scheme to divest Jordan of her equity in several real
106) On June 30, 1995, Jordan purchased a property located at 2932 North
Atlantic Boulevard in Fort Lauderdale, Florida, for $1.65 million. (Id. at~ 107) On July 12,
1996, Mirra and Troilo forged Jordan's signature on a warranty deed purporting to add Mirra as
a co-owner of the property and recorded the deed. (Id. at ~~ 109-1~1) On April 10, 2002, Mirra,
Troilo, Kolleda, and Tropiano forged Jordan's signatures on mortgage loan application
documents and obtained a $375,000 mortgage on the property. (Id. at ifif 112-115) On August
16, 2006, Mirra, Troilo, Kolleda, and Tropiano sold the property for $4.8 million and retained
the proceeds. (Id. at ifif 116-119)
On June 23, 2000, Mirra, Troilo, Kolleda, and Tropiano caused APS, which was jointly
owned by Jordan and Mirra, to purchase a property located at 2937 North Atlantic Boulevard,
Fort Lauderdale, Florida, for $660,000., (Id. at if 121) On December 27, 2001, Mirra, Troilo,
Kolleda, and Tropiano caused the property to be sold for $10.00 to West Highland. (Id. at if 123)
On April 12, 2004, Mirra, Troilo, Kolleda, and Tropiano sold the property for $1.00 to "Gigi
Jordan and her Husband Raymond Mirra." (Id. at if 125) Jordan was not advised of the purchase
or the sales. (Id. at ifif 122, 124, 126) On the same date, Mirra, Troilo, Kolleda, and Tropiano
forged Jordan's signature and authorized Merrill Lynch to wire $345,631.96 to a West Highland
account to pay off the mortgage on the property. (Id. at ifif 127-128) On April 28, 2004, Mirra,
Troilo, Kolleda, Kovinsky, and Tropiano forged Jordan's signature on a warranty deed selling
the property for $850,000 without Jordan's knowledge. (Id. at ifif 129-131)
In 2000, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano incorporated RAM Developers
to engage in real estate investments, and falsely represented to Jordan that she was a fifty percent
owner of RAM Developers. (Id. at ifif 133-135) On April 4, 2001, Jordan provided $4.1 million
to RAM Developers to be used to purchase a property located at 352 West End A venue, New
York, New York. (Id. at if 136) On April 5, 2001, Jordan permitted the property to be titled in
the name of RAM Developers, rather than in Jordan's name individually. (Id. at if 139) On July
8, 2002, Mirra, Troilo, Kolleda, Kovinsky, and Tropiano sold the property for $4.35 million. (Id.
at if 140)
On April 5, 2002, a deed was recorded conveying a property in Concord, Virginia to
Jordan and Mirra for $3.265 million. (Id.
143) On August 27, 2002, Mirra took out a $2
million mortgage from Merrill Lynch on the property without Jordan's knowledge. (Id.
Between February 2003 and June 2004, Mirra, Troilo, Kolleda, and Tropiano bought additional
lots to add to the existing acreage of the property without Jordan's knowledge. (Id.· at ~ 148) On
June 3, 2004, Mirra and Jordan borrowed $3 million from JPMorgan Chase for payment on the
purchase of the property. (Id.
149) On March 31, 2005, the $3 million JPMorgan mortgage
was increased by $1 million and converted to a home equity line of credit. (Id.
June 3, 2005, a loan was obtained on the property from Merrill Lynch in the amount of $2
million. (Id. at 160)
On May 31, 2002, Jordan and Mirra purchased a property in North Garden, Virginia for
$1.8 million. (Id.
163) On December 4, 2003, Mirra, Troilo, Kolleda, and Tropiano forged
Jordan's signature on a deed conveying the property from Jordan and Mirra to RAM Realty. (Id.
164) RAM Realty subsequently subdivided and sold off the Taylors Gap Road Property for
$2.151 million. (Id.
The Separation and Distribution Agreement
On March 12, 2008, Jordan and Mirra executed a Separation and Distribution Agreement
("SDA"). (Id. at ~ 169) In connection with a merger between Biomed America, Inc. ("Biomed")
and Allion Healthcare, Inc. ("Allion"), on March 4, 2008, Mirra, Troilo, Kolleda, and Tropiano
falsely represented that Jordan's half of the Biomed stock was valued at $4.9 million, when it
was actually worth much more than that. (Id.
176-179) Pursuant to the terms of the SDA,
Jordan transferred her fifteen percent ownership interest in Biomed to an LLC owned by Mirra
for $4.9 million. (Id. at, 180) Through this transaction, Mirra received $78 million, $39 million
of which was rightfully Jordan's. (Id. at ,, 181-182)
Mirra subsequently orchestrated two transactions resulting in the sale of Jordan's
ownership interests in APS and Specialty Pharmacy, Inc. to AmerisourceBergen Corporation
("ABC") in 2002 for $30 million. (Id. at,, 185-188) On April 29, 2002, a fraudulent Merrill
Lynch account received nearly $15 million in connection with the first transaction. (Id. at, 189)
In December 2002, Bioservices was acquired by ABC for $159 million, yielding $75 million
more than Mirra had reported. (Id. at , 191) The actual profits of the sale were routed by Mirra
to another unknown account. (Id. at , 195)
On March 4, 2008, Mirra, Troilo, Kolleda, and Tropiano falsely represented to Jordan
that she had a fifty percent interest in four companies, including VasGene, PrideCare, ARC, and
Cancer Innovations, which had no value. (Id. at, 197) Defendants falsely represented that the
companies had no value to induce Jordan to_surrender her rightful interests in the companies and
execute the SDA. (Id. at,, 198-199) In February 2008, Mirra, Troilo, Kolleda, and Tropiano.
falsely represented that RAM Capital had no assets or value, causing Jordan to forfeit her fifty
percent interest in the company. (Id. at,, 202-205)
On February 29, 2008, Mirra, Troilo, Kolleda, and Tropiano sent a purportedly complete
schedule of the private companies in which Jordan and Mirra held joint interests, but did not
disclose the assets of subsidiaries, holding companies, or companies related to RAM Capital.
(Id. at,, 206-211) The schedule also failed to disclose other companies in which Jordan and
Mirra had joint interests that were active and in good standing at the time the SDA was executed.
(Id. at, 213)
The SDA also misrepresented the total value of the real estate properties jointly held by
Jordan and Mirra. (Id at if 216) Specifically, Mirra, Troilo, Kolleda, and Tropiano represented
that a Tahoe property bought in 1999 exclusively by Jordan was jointly held, and they bought
two properties in Santa Barbara, California titled in the name of RAM Realty, using money
stolen from Jordan and Mirra'sjoint bank account in the spring of2004. (Id at ifif 220-221, 224227, 231-235) The SDA also represented that Jordan was responsible for fifty percent of the
fraudulent encumbrances on the Concord, Virginia property, and underestimated the value of the
property by at least $6 million. (Id at ifif 237-242)
Moreover, the SDA contained misrepresentations and concealments regarding the
contributions to West Highland LLC and the liabilities of the Merrill Lynch accounts, indicating
that the assets were jointly held and Mirra had contributed half of the funds, and Jordan and
Mirra were jointly and severally liable for any liabilities, when in fact the contributions were
made solely by Jordan and the liabilities were incurred solely by Mirra. (Id at ifif 245-252)
Mirra succeeded in inducing Jordan to surrender fifty percent of the value of the Merrill Lynch
asset accounts by falsely assuming fifty percent of the joint liabilities, and Jordan paid Mirra·
$3.4 million as consideration for his assumption of the liabilities. (Id at ifif 254-255) Mirra,
Troilo, Kolleda, and Tropiano also falsely represented that all of Mirra' s financial obligations to
Jordan prior to January 31, 2003 had been satisfied. (Id at ifif 257-262)
Contemporaneous with the execution of the SDA, Mirra and Jordan entered into a Mutual
General Release Document ("Release"), which purported to release defendants from liability
arising from their fraudulent conduct. (Id at ifif 264-267) According to Jordan, she reviewed the
terms and conditions of the Release in March 2008 and informed her counsel that she wanted the
following portion from paragraph 3 of the Release 6 stricken:
Jordan, for and on behalf of (x) herself, her heirs and beneficiaries, (y) her
affiliates and each of their limited and general partners, officers, directors,
stockholders, members, managers, employees, attorneys, advisors and agents, and
(z) each such foregoing person's or entity's predecessors, successors and assigns
(collectively, the "Jordan Releasing Parties"), agrees to and hereby does
irrevocably release and forever discharge (a) Raymond A. Mirra, Jr., (b) his heirs
and beneficiaries, his affiliates and the officers, directors, stockholders,
employees, agents, insurers and attorneys of each such affiliate, and (c) each such
foregoing person's or entity's predecessors, successors and assigns (collectively
the "Mirra Released Parties") from any and all manner of actions, causes of
action, claims, offsets, demands, judgments, complaints, executions, regulatory
challenges, losses, damages, expenses, fees, debts, representations, warranties or
liabilities of any kind whatsoever, whether arising out of state, federal or foreign
law, rule, regulation or equity, whether known or unknown, accrued or not
accrued, asserted or not asserted, matured or not matured, suspected or not
suspected, fixed or contingent, foreseeable or unforeseeable, direct or indirect
(each, a "Claim", and collectively, "Claims"), which the Jordan Releasing Parties
ever had, now have or hereafter can, shall or may have or acquire against the
Mirra Released Parties, or any of them, by reason of any and all facts,
circumstances, transactions, events, statements, representations, warranties,
occurrences, acts, or omissions (whether or not knowingly, intentional, reckless or
The identification of paragraph 3 as the disputed portion of the Release was the subject of the
motion for leave to file a second amended complaint. (D.I. 123 at 3-5) Previously, the first
amended complaint identified paragraph 5 as the portion of the Release Jordan sought to change.
(D.I. 84 at ,-r,-r 267-68) Paragraph 5 of the Release included the following language:
Each of Mirra, with respect to the Jordan Settled Claims, and Jordan, with respect
to the Mirra Settled Claims, believes after due inquiry that he or she is fully
· familiar with the facts and circumstances which are sufficient to enable him or her
to enter into this Release Agreement, and further acknowledges hereby that he or
she is aware that he or she may hereafter discover facts or circumstances in
addition to or different from those which he or she now knows or believes to be
true with respect to the subject matters of this Release Agreement, but that it is
such Party's intention to, and such Party hereby does~ fully, finally, completely
and forever release, discharge, compromise, settle, satisfy and extinguish any and
all such Claims, without regard to the subsequent discovery or existence of such
different or additional facts or circumstances. Each of the Parties further
expressly acknowledges that the releases set forth herein extend to Claims which
are presently unknown, as well as known Claims.
negligent; whether or not based on, due to or resulting from solely the conduct,
action, activity, omission or fault of one or more of the Jordan Released Parties;
and with or without any conduct, action, activity, omission or fault of the Jordan
Releasing Parties), which occurred, arose or existed at any time on or before the
date of this Release Agreement.
(Id at ~~ 267-68) Mirra, Troilo, Kolleda, and Tropiano allegedly agreed to strike the language
and sent signature pages to Jordan's counsel. (Id
270) Troilo resent the signature page of
the Release for execution without removing the disputed language from the Release, and neither
Jordan nor her counsel reviewed the full version of the Release prior to its execution. (Id
The Conundrum Trust
In December 2002, Mirra and Troilo approached Jordan regarding the establishment of
two grantor retained annuity trusts ("GRATs"), the Hawk Mountain Trust ("HM Trust") and the
Conundrum Trust, for the benefit of Mirra and Jordan's children. (Id
280) Mirra and Troilo
that Jordan would be the settlor of the HM Trust and Mirra would be the settlor of
the Conundrum Trust. (Id
281) The trusts were allegedly intended to receive the proceeds
expected from the ABC acquisition of U.S. Bioservices, and Jordan was led to believe that she
would still control the assets of the Hawk Mountain LLC and that over $3.5 million would be
saved in capital gains tax. (Id
282-283) Mirra and Troilo falsely represented to Jordan that
she could not act as a protector of her own trust, and she acquiesced to the appointment of Mirra
. as protector of the HM Trust. (Id
In April 2010, Eizen contacted Jordan's attorneys in his capacity as attorney for Troilo
and Kolleda, as trustees of the HM Trust, and Mirra, as protector, taking a position directly
adverse to Jordan's interests. (Id
286-287) On May 24, 2010, Eizen sent a letter to
Jordan's attorney, falsely stating that Jordan had resigned as protector of the Conundrum Trust
and attaching a fraudulent document regarding the resignation. (Id
288) On March 9, 2011,
Eizen produced a disclaimer.document dated June 30, 2009, which falsely purported that Jordan
agreed to disclaim any right her son may have had to benefit from the Conundrum Trust as the
adopted child of Mirra. (Id at ~ 289) Another fraudulent disclaimer of Jude Mirra' s interests in
the Conundrum Trust was dated November 19, 2009. (Id
Rule 12(b)(6) permits a party to move to dismiss a complaint for failure to state a claim
upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). When considering a Rule 12(b)(6)
motion to dismiss, the court must accept as true all factual allegations in the complaint and view
them in the light most favorable to the plaintiff. Umlandv. Planco Fin. Servs., 542 F.3d 59, 64
(3d Cir. 2008).
To state a claim upon which relief can be granted pursuant to Rule 12(b)(6), a complaint
must contain a "short and plain statement of the claim showing that the pleader is entitled to
relief;" Fed. R. Civ. P. 8(a)(2). Although detailed factual allegations are not required, the
complaint must set forth sufficient factual matter, accepted as true, to "state a claim to relief that
is plausible on its face." Bell At!. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft
v. Iqbal, 556 U.S. 662, 663 (2009). A claim is facially plausible when the factual allegations
allow the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged. Iqbal, 556 U.S. at 663; Twombly, 550 U.S. at 555-56.
When determining whether dismissal is appropriate, the court must take three steps. 7 See
Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010). First, the court must identify
Although Iqbal describes the analysis as a "two-pronged approach," the Supreme Court
observed that it is often necessary to "begin by taking note of the elements a plaintiff must plead,
the elements of the claim. Iqbal, 556 U.S. at 675. Second, the court must identify and reject
conclusory allegations. Id. at 678. Third, the court should assume the veracity of the wellpleaded factual allegations identified under the first prong of the analysis, and determine whether
they are sufficiently alleged to state a claim for relief. Id.; see also Malleus v. George, 641 F .3d
560, 563 (3d Cir. 2011). The third prong presents a context-specific inquiry that "draw[s] on
[the court's] experience and common sense." Id. at 663-64; see also Fowler v. UPMC
Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). As the Supreme Court instructed in Iqbal, "where
the well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged - but it has not 'show[n]' - 'that the pleader is entitled to
relief."' Iqbal, 556 U.S. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
In support of their motion to dismiss, 8 defendants contend that the Release bars all of
Jordan's claims arising on or before the date of its e:x;ecution, except the breach of warranties
claim asserted against defendant Mirra in Count VII of the second amended complaint. 9 (D.I.
179 at 12-18) According to defendants, Jordan's allegations that her signature was fraudulently
procured are themselves barred by the language of the Release, and also fail independently for
lack of justifiable reliance. (Id. at 14) In response, Jordan alleges that the Release was procured
to state a claim." 556 U.S. at 675, 679. For this reason, the Third Circuit has adopted a threepronged approach. See Santiago v. Warminster Twp., 629 F.3d 121, 130 n.7 (3d Cir. 2010);
Malleus v. George, 641F.3d560, 563 (3d Cir. 2011).
The court may consider the SDA and the Release without converting the motion to dismiss to a
motion for summary judgment because these documents are "integral to or explicitly relied upon
in the complaint." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.
9 The claim for declaratory relief at Count X of the second amended complaint arose after the
execution of the Release and is therefore not barred by its terms.
by fraud and is therefore invalid. (D.I. 122 at 3-8; D.I. 194 at 2) Jordan contends that
determining whether a plaintiff asserting fraud-based claims could justifiably rely on a false
representation raises a question of fact, and her claims that she was not provided with a copy of
the Release before she signed it are fact-sensitive. (D.I. 122 at 7)
As a preliminary matter, the court must determine which state's law applies to the
analysis. Defendants indicate that Delaware law governs construction of the Release pursuant to
the terms of paragraph 7 of the Release, which states that " [t ]his Release Agreement shall be
governed by the substantive laws of the State of Delaware." (D.I. 179 at 14-15; D.I. 114, Ex. D
at, 7) Defendants claim that New York law governs Jordan's fraud-based claims incident to the
execution of the Release, citing Krock v. Lipsay, 97 F.3d 640, 645 (2d Cir. 1996) for the
proposition that the choice of law provision in the Release applies only to breach of contract
claims, and does not extend to tort claims arising fronl: the contract. (D.I. 179 at 14-15) Jordan
does not dispute defendants' assertion that New York law controls with respect to the fraudbased claims. (D.I. 122 at 3-4) Therefore, the court will apply Delaware law to the construction
of the Release, and New York law to the substantive claims in the pleading.
The court next addresses the substantive issue of whether the Release bars all of Jordan's
claims in the present action, with the exception of the causes of action for breach of warranties
against Mirra and for declaratory relief. To determine whether a release covers a claim, "the
intent of the parties as to its scope and effect are controlling, and the court will attempt to
ascertain their intent from the overall language of the document." Corporate Prop. Assocs. 6 v.
Hallwood Grp. Inc., 817 A.2d 777, 779 (Del. 2003). The Release in the present action falls into
the category of a general release which mutually discharges Mirra and Jordan, as well as their
heirs and beneficiaries, their affiliates and the officers, directors, stockholders, employees,.
agents, insurers and attorneys of each such affiliate, and each such foregoing person's or entity's
predecessors, successors and assigns:
from any and all manner of actions, causes of action, claims, offsets, demands,
judgments, complaints, executions, regulatory challenges, losses, damages,
expenses, fees, debts, representations, warranties or liabilities of any kind
whatsoever, whether arising out of state, federal or foreign law, rule, regulation or
equity, whether known or unknown, accrued or not accrued, asserted or not
asserted, matured or not matured, suspected or not suspected, fixed or contingent,
foreseeable or unforeseeable, direct or indirect ... which occurred, arose or ·
existed at any time on or before the date of this Release Agreement.
(D.I. 114, Ex. D at ,-f,-f 2, 3) This language demonstrates the parties' intent to enter into a broad,
mutual release of all claims. Under Delaware law, a general release such as the one at issue in
the present case covers all claims, whether or not they were anticipated. See Hob Tea Room v.
Miller, 89 A.2d 851, 856 (Del. 1952) ("[T]he concept of a general release ... is intended to
cover everything-what the parties presently have in mind, as well as what they do not have in
mind, but what may, nevertheless, arise."); Conley v. Dan-Webforming Int'! AIS (Ltd), 1992 WL
401628, at *9, 12 (D. Del. Dec. 29, 1992) (holding that a fraud-based claim relating to "acts and
deeds ... unknown at the time of settlement" were barred by a general release). Consequently,
the Release bars all of Jordan's claims except for the causes of action for breach of warranties
and declaratory relief.
Jordan's claim against Mirra for breach of warranties is not barred by the terms of the
Release due to the express carve-out in paragraph 3 of the Release: "Notwithstanding anything
herein to the contrary, Jordan is not releasing hereby Mirra from Claims that arise under the
express terms and conditions of, and specified in, the Distribution Agreement, the
Indemnification Agreement and the Purchase Agreement." (D.I. 114, Ex. D at ,-f 3; D.I. 179 at
16-17) Pursuant to the SDA, "Mirra represents and warrants that ... the Recognized Joint
Assets listed on Schedule 2.1.1 represent all of the assets in which the parties have a joint interest
[and] ... the Recognized Joint Liabilities listed on Schedule 2.2.2 represent all of the liabilities
to which the parties are jointly and/or severally liable." (D.I. 114, Ex. Cat ifif 5.3.1, 5.3.2;
11110/15 Tr. at 39: 13-4.1 :3) Thus, Jordan's breach of warranties claim against Mirra arising
under the express terms of Article 5.3 of the SDA is preserved under paragraph 3 of the Release.
The parties disagree as to the proper scope of discovery for Jordan's cause of action for
breach of warranties against Mirra at Count VII of the second amended complaint. (D .I. 194 at
1-2) ("Jordan therefore is entitled to discovery to prove her allegations" that Mirra omitted or
misrepresented various assets in the schedules to the SDA). Specifically, Jordan alleges that she
may, "on a breach of warranty theory, seek damages for most of the wrongs committed by Mirra
even if all her other claims are dismissed." (Id at 3) Defendants advocate a narrower
construction of the breach of warranties claim, limited to the listing of joint assets and joint
liabilities in certain SDA schedules. (D.I. 195 at 1)
This dispute is not appropriately resolved on a Rule 12(b)(6) motion to dismiss. See US.
ex rel. Spay v. CVS Caremark Corp., 2013 WL 4525226, at *1 (E.D. Pa. Aug. 27, 2013)
(addressing the permissible scope of discovery on a motion to compel after the court previously
deemed the claims sufficient to survive Rule 12(b)(6) scrutiny). Defendants concede that the
cause of action for breach of warranties against Mirra is not barred by the terms of the Release or
the statute oflimitations, and raise no objections to the sufficiency of the pleading with respect to
the breach of warranties claim. (D.I. 179; D.I. 195) Defendants rely on Seven Investments, LLC
v. AD Capital, LLC, 32 A.3d 391, 398-99 (Del. Ch. 2011) in support of their argument that the
carve-out provision does not impact any other claims in this action. (D.I. 179 at 17-18) This
proposition is consistent with the court's recommendation that only the breach of warranties
claim is preserved under the carve-out in the Release. However, Seven Investments is otherwise
inapplicable to the facts presently before the court, as the complaint in that case did not assert
any claims based in contract, and the plaintiff "chose instead to sue for fraud based on wrongs
allegedly committed prior to or in connection with the execution of the Termination Agreement,"
which were barred by the General Release. Seven Investments, 32 A.3d at 398-99.
Jordan alleges that the Release may be voided in the present case because it was procured
by fraud. (D.I. 122 at 3-4) Under New York law, "a release is treated just as any other contract .
. . and may be set aside on the traditional bases of fraudulent inducement, misrepresentation,
mutual mistake or duress." C3 Media & Marketing Group, LLC v. Firstgate Internet, Inc., 419
F. Supp. 2d 419, 429 (S.D.N.Y. 2005) (internal citations omitted). As such, a party may avoid
the application of a signed release by showing that the release was procured by fraud. See
Morefun Co. v. Mario Badescu Skin Care Inc., 588 F. App'x 54, 55-56 (2d Cir. 2014); Pappas v.
Tzolis, 982 N.E.2d 576, 579-80 (N.Y. 2012). However, "if the release is broad enough to
encompass fraud claims, the plaintiff cannot rely on fraudulent inducement unless it can identify
a separate fraud from the subject of the release." See Morefun, 588 F. App'x at 55-56 (internal
quotation marks omitted).
In the present case, the Release contemplates claims "which occurred, arose, or existed at
any time on or before the date ofthis Release Agreement," (D.I. 114, Ex. D at ifif 2, 3), and also
bars claims "arising from or relating to Mirra's or Jordan's negotiation, execution and delivery of
this Release Agreement," (Id at if 6). The fraudulent procurement claim alleged by Jordan
regarding the execution of the Release itself is expressly barred by the terms of the Release, and
therefore cannot be treated as a "separate fraud" apart from the claims contemplated by the
Release. See lnterpharm v. Wells Fargo Bank, Nat'! Ass 'n, 655 F.3d 136, 142 (2d Cir. 2011)
("Under New York law ... a valid release constitutes a complete bar to ari. action on a claim
which is the subject of the release."). The court cannot properly invalidate the Release "by its
own effectiveness." Centro Empresarial Cempresa S.A. v. Am. Movil, S.A.B. de C. V, 76 A.D.3d
310, 317 (N. Y. App. Div. 2010), a.ff'd, 952 N .E.2d 995 (N. Y. 2011 ). Jordan does not claim that
she challenged the inclusion of this language in paragraph 6 of the Release, and paragraph 6
appears plainly on the signature page executed by her. (D.I. 114, Ex. D at if 6) Consequently,
there is no indication that her execution of the Release, and the resultant waiver of claims arising
from the execution and negotiation of the Release, was not "fairly and knowingly made." See
Mangini v. McClurg, 249 N.E.2d 386, 392 (N.Y. 1969) (internal citations and quotation marks
Jordan relies on a number of case authorities in support of the proposition that a general
release may be voided based on fraud in the procurement, and a motion to dismiss is an
inappropriate method for resolving claims when a plaintiff pleads that a release was the product
of fraud or duress. (D.I. 122 at 3-4) However, Jordan's reliance on these cases does not alter the
court's conclusion. In Newin Corp. v. Hartford Accident & Indem. Co., 333 N.E.2d 163. (N.Y.
1975), the New York Court of Appeals determined that the claims fell outside the scope of the
release because the release only covered claims belonging to the bankrupt estate, and stated in
dicta that the release could not bar the claims because its execution was improperly obtained. In
connection with this alternative basis for reaching its conclusion, the court stated that "[s]uch a
claim is well-recognized and, in and of itself would be sufficient to support a denial of this
branch of the motion," without further analysis or application of the principle to the facts of the
case. Id Other cases cited by Jordan rely on Newin in support of their reasoning, despite the
absence of an analysis. See Ladenburg Thalmann & Co. v. Imaging Diagnostic Sys., Inc., 176 F.
Supp. 2d 199, 205 (S.D.N.Y. 2001); Steen v. Bump, 233 A.D.2d 583,
(N.Y. App. Div. 1996).
Jordan's reliance on Johnson v. Lebanese Am. Univ. is also misplaced because it involves a
release's interpretation under New York law, whereas the parties in the present action agree that
Delaware law governs the interpretation of the Release. 84 A.D.3d 427, 429-30 (N.Y. App. Div.
More recent case law confirms that a motion to dismiss may properly be granted based on
the terms of a release that was not induced by a separate fraud. See Morefun Co. v. Mario
Badescu Skin Care Inc., 2014 WL 2560608, at *5 (S.D.N.Y. June 6, 2014), aff'd, 588 F. App'x
54 (2d Cir. 2014) (granting a Rule 12(b)(6) motion because the disputed settlement agreement
contained a valid release of claims); Pappas v. Tzolis, 982 N.E.2d 576, 579-80 (N.Y. 2012)
(dismissing claims for fraud and misrepresentation where no separate action was alleged
regarding the release's fraudulent inducement); Centro Empresarial, 952 N.E.2d 995 (N.Y.
2011) (affirming lower court's decision to bar an action by a release on a motion to dismiss);
Arfa v. Zamir, 952 N.E.2d 1003, 1003-04 (N.Y. 2011) (holding that a general release executed
by the parties barred the fraud claim after concluding that plaintiffs failed to allege the release
was induced by a separate fraud). In the present action, there is no fraud separate from the
subject of the Release because Jordan's allegations regarding fraudulent execution are
contemplated by paragraph 6 of the Release, which states that "[n]either Mirra nor Jordan will
assert any Claims against the other Party arising from or relating to Mirra' s or Jordan's
negotiation, execution and delivery of this Release Agreement." (D.1. 114, Ex. D at if 6)
Even if Jordan did not release her claims, she has failed to establish the requisite
justifiable reliance because she made no efforts to confirm that the requested changes had been
made to the Release before she signed it. To invalidate a release based on fraudulent
inducement, a plaintiff must establish the basic elements of fraud, including "a representation of
material fact, the falsity of that representation, knowledge by the party who made the
representation that it was false when made, justifiable reliance by the plaintiff, and resulting
injury." Centro Empresarial Cempresa S.A. v. Am. Movil, S.A.B. de C. V., 17 N.Y.3d 269, 276
(N.Y. 2011) (internal citations and quotation marks omitted). Although Jordan claims that a
determination on the issue of justifiable reliance requires a factual inquiry that would be
inappropriate at this stage of the proceedings, the facts relevant to the inquiry in the present case
are not in dispute. Specifically, Jordan admits that she did not read the final version of the
Release before signing it. (D.1. 122 at 7; D.I. 84
274) Under New York law, "a party will
not be excused from his failure to read and understand the contents of a release." Sofio v.
Hughes, 162 A.D.2d 518, 519 (N.Y. App. Div. 1990) (internal citations and quotation marks
omitted). This well-established principle extends to the issue of justifiable reliance. See Morby
v. DiSiena Assocs. LPA, 291 A.D.2d 604, 606 (N.Y. App. Div. 2002) ("Having failed to read the
release before signing it, plaintiff simply cannot establish the essential element of justifiable
reliance ... [T]he allegedly fraudulent misrepresentation by Di Siena could have been readily
discovered upon the reading of the document ... "). Jordan's review of a preliminary draft of the
Release does not excuse her failure to request and review the full and final executed version,
despite her allegations of duplicitous conduct by the RAM Defendants. See Sorenson v. Bridge
Capital Corp., 52 A.D.3d 265, 266 (N.Y. App. Div. 2008) (barring plaintiffs fraud claims for
failure to establish justifiable reliance after defendant reinserted disputed language into the
agreement because plaintiff failed to review the agreement in its entirety).
Jordan's claim that "several of [the defendants] themselves had been and would continue
to be Plaintiffs fiduciaries" does not excuse her failure to review the terms of the Release before
executing it because defendants appeared on the opposite side of the transaction, and both Jordan
and defendants were represented by their respective counsel. (D.I. 122 at 8) "That defendants
arguably are fiduciaries of plaintiffs does not invalidate the release, since they negotiated across
the table from plaintiffs, who are sophisticated parties represented by counsel." Kaja
Investments, LLC v. 2170-2178 Broadway LLC, 114 A.D.3d 433, 433-34 (N.Y. App. Div. 2014);
see also M&T Bankv. HR Staffing Solutions, Inc., 106 A.D.3d 1498, 1500 (N.Y. App. Div.
2013) (holding that defendant had a duty to "make inquiry and to read and understand" the
agreement, and this duty was not "diminished merely because [he] was provided with only a
signature page before executing the agreement."). Because Jordan has failed to plead justifiable
reliance, which is a required element to invalidate the Release, the court concludes that the
Release is valid and bars Jordan's claims, with the exception of the claim for breach of
warranties against Mirra and the claim for declaratory relief.
Statute of Limitations
The parties do not dispute that New York statutes of limitations apply to the claims at
issue in this case. Jordan initiated the present action against Mirra on March 9, 2012. (D.I. 1)
The amended complaint was filed on March 9, 2015, adding the remaining defendants. (D.I. 84)
Defendants contend that the claims against Mirra for breach of contract on promissory
notes, breach of fiduciary duty, unjust enrichment, and conversion are barred by the applicable
statute of limitations. (D.I. 179 at 12; 25-36) Defendants concede that the claims against Mirra
for an accounting and common law fraud are only partially barred by the statute of limitations,
and the claims against Mirra for fraudulent inducement and breach of warranties are not barred
by the statute of limitations. (D.I. 179 at 12) With respect to the claims against the remaining
defendants, defendants argue that the claims for an accounting, common law fraud, aiding and
abetting fraud, fraudulent inducement, breach of fiduciary duty, unjust enrichment, and
conversion are each barred by the applicable statute of limitations. (Id) In her responsive
submission, Jordan specifically addresses only the claims for common law fraud, breach of
fiduciary duty, unjust enrichment, and breach of contract on promissory notes, and relies on her
equitable tolling arguments as an exception to the statute of limitations with respect to the
remaining claims for an accounting, aiding and abetting fraud, fraudulent inducement, breach of
warranties, and conversion. (D .I. 122 at 8-15)
Count 1: Breach of contract on promissory notes
In support of the motion to dismiss, defendants allege that Jordan's first cause of action
against Mirra for breach of contract on promissory notes is subject to a six-year statute of
limitations, which accrues at the time of execution. (D.I. 179 at 30) Defendants observe that the
notes were executed between October 15, 1997 and October 1, 1998 and, as a result, the statute
of limitations on the latest-accruing claim expired on October 1, 2004. (Id)
In response, Jordan alleges that the promissory notes were unilaterally executed by Mirra,
and Jordan was not aware of the notes' existence until 2011. (D.I. 122 at 13) According to
Jordan, defendants represented that all of Mirra's financial obligations prior to January 31, 2003
had been fully satisfied, thus warranting application of the equitable tolling doctrine. (Id)
Jordan further contends that the language in the notes, which indicates that Mirra waived his
right to be timely sued for nonperformance and nonpayment, precludes application of the statute
oflimitations bar. (Id at 13-14)
The statute oflimitations bars Jordan's claim against Mirra for breach of contract on
promissory notes. The parties agree that the claims accrued in 1997 and 1998, and are subject to
a six year statute of limitations. (D.I. 179 at 30; D.I. 122 at 13-14); see Morrison v. Zaglool, 88
A.D.3d 856, 858 (N.Y. App. Div. 2011). Jordan cannot prevail on her allegation that Mirra
waived the statute of limitations defense in the language of the promissory notes, because an
agreement to waive or extend the statute of limitations before the accrual of the cause of action is
void under New York law. See John J. Kassner & Co. v. City ofNew York, 46 N.Y.2d 544, 551
(N.Y. 1979) ("If the agreement to 'waive' or extend the Statute of Limitations is made at the
inception of liability it is unenforceable because a party cannot 'in advance, make a valid
promise that a statute founded in public policy shall be inoperative."'); Yeshiva Univ. v. Fidelity
& Deposit Co. ofMd., 116 A.D.2d 49, 51-52 (N.Y. App. Div. 1986) ("An agreement to waive or
even extend the Statute of Limitations, adopted at the inception of the contract and not after the
cause of action has accrued, is against public policy and void.").
Therefore, the court recommends dismissal of Count 1 against Mirra for breach of
contract on promissory notes as time barred. The court addresses Jordan's arguments with
respect to the equitable tolling doctrine at§ IV.C, infra. In the event that the district court
reverses this decision and concludes that the equitable tolling doctrine applies as an exception to
the statute of limitations with respect to this claim, the undersigned's recommendation that the
Release bars this cause of action would still result in dismissal.
Count 2: Accounting
Defendants next contend that Jordan's second cause of action for an accounting against
Mirra, Troilo, and Kolleda 10 is barred by the six-year statute oflimitations because the claim,
which accrued each time a wrongful transaction occurred, is based on transactions occurring
through March 11, 2009. (D.I. 179 at 31-32) Defendants allege that the only transactions falling
The second amended complaint also identifies Molieri as a defendant against whom the cause
of action for an accounting is brought. (D.I. 176) However, Molieri was voluntarily dismissed
from this action on January 13, 2016. (D.I. 156)
outside of this range are Mirra' s "Allion/Biomed/Parallex transaction" and certain small loans
made from the Merrill Lynch loan management accounts. (Id) In response, Jordan alleges that
her cause of action for an accounting was timely raised in accordance with the doctrine of
equitable estoppel. (D.I. 122 at 21)
Under New York law, a cause of action for an accounting is governed by a six-year
statute of limitations, which accrues at the time each wrongful transaction occurs. See N.Y.
C.P.L.R. 213(1) (McKinney 2004); Glynwill Invs., NV. v. Prudential Sec., Inc., 1995 WL
362500, at *3 (S.D.N.Y. June 16, 1995). As it pertains to defendants Troilo and Kolleda, the sixyear statute oflimitations bars Jordan's second cause of action for an accounting because the
allegations in the second amended complaint occurred on or before the cutoff date of March 9,
2009, 11 with the latest transaction closing on March 13, 2008. (D.I. 176 at ifif 79, 83, 87, 102-03,
183, 189-91, 304) With respect to defendant Mirra, most of the transactions associated with the
accounting claim closed on or before the cutoff date of March 9, 2006 12 and are therefore barred
by the six-year statute of limitations. Defendants concede that the accounting claim against
Mirra is not barred by the statute of limitations to the extent that it pertains to the
Allion/Biomed/Parallex transaction, which closed on March 13, 2008, and a small number of
loans made out of the Merrill Lynch loan management accounts after March 9, 2006. (D.I. 176
at ifif 87, 183; D.I. 179 at 31-32) However, the portions of Jordan's accounting claim in Count 2
against Mirra which survive the statute of limitations analysis are barred by the terms of the
Release for the reasons stated at § IV .A, supra.
The amended complaint adding defendants Troilo and Kolleda was filed on March 9, 2015.
(D.I. 84) .
Jordan filed the accounting claim against Mirra on March 9, 2012. (D.1. 1)
3. Count 3: Common law fraud
Defendants allege that the statute oflimitations for
third cause of action for
common law fraud is three years under New York law because Jordan has brought daims for
both fraud and conversion. (D.I. 179 at 32) Because none of the common law fraud claims
accrued later than April 10, 2007, defendants contend that the most recent claim expired on April
10, 2010. (Id at 31-32) According to defendants, Jordan's common law fraud Claim based on
alleged misrepresentations made to Jordan in connection with the SDA accrued no later than
March 13, 2008 and are thus timely filed against Mirra, but fail for lack of justifiable reliance.
(Id at 33-34)
In response, Jordan contends that the applicable statute of limitations for common law
fraud is the later of six years or two years after discovery, and the three-year statute of limitations
does not apply in this case because Jordan has alleged third-party reliance on defendants'
misrepresentations. (D.I. 122 at 8-9) Jordan alleges that third-party reliance on defendants'
misrepresentations operates as an exception to the justifiable reliance element of common law
fraud, without explaining how third-party reliance impacts the statute of limitations analysis. 13
(Id at 9-11) According to Jordan, the fact that the fraud claim is alternately pleaded as
conversion is of no dispositive significance.· (Id at 11)
The fraud claims pleaded in paragraph 307(i) to (iv) of Jordan's third cause of action
accrued no later than April 10, 2007. (D.I. 176 at if 87(xxi)) New York's limitations period for
fraud claims is ordinarily "the greater of six years from the date the cause of action accrued or
two years from the time the plaintiff ... discovered the fraud, or could with reasonable diligence
Jordan's contentions regarding third-party reliance are addressed at length in the court's
discussion of justifiable reliance at§ IV.D.l, infra.
have discovered it." N.Y. C.P.L.R. 213(8). However, Jordan has failed to establish that her
fraud claims are not merely incidental to her conversion claims. "[A] fraud-based claim will be
barred by a shorter statute oflimitations if the fraud allegation is 'merely incidental' to a claim
with a shorter limitations period." Marketxt Holdings Corp. v. Engel & Reiman, P.C., 693 F.
Supp. 2d 387, 394 (S.D.N.Y. 2010); see also Midwest Mem. Group, LLC v. Int'! Fund Servs.
Ltd., 2011 WL 4916407, at *5 (S.D.N.Y. Oct. 17, 2011) (concluding that the three-year statute of
limitations for conversion applies to a fraud claim when the "claims center on allegations of theft
rather than deception."). A claim for conversion is subject to a three-year statute of limitations
under New York law. See Marketxt, 693 F. Supp. 2d at 395.
The second amended complaint pleads common law fraud arising out of
misrepresentations and fraudulent concealment involving transfers or encumbrances of Jordan's
assets. (D.I. 176 at if 307) Jordan concedes that her common law fraud claim is alternately
pleaded as a conversion claim, and acknowledges that the gravamen of the cause of action is the
theft itself, and not the deception, by emphasizing that the transfers and encumbrances occurred
"without Plaintiffs knowledge or consent." (D.I. 122 at 11; D.I. 176 at if 307) Consequently,
Jordan has failed to show that: "(l) the fraud occurred separately from and subsequent to the
injury forming the basis of the alternate claim; and (2) the injuries caused by the fraud are
distinct from the injuries caused by the alternate claim." Corcoran v. NY Power Auth., 202
F.3d 530, 545 (2d Cir. 1999). The shorter three-year statute oflimitations period applies to
Jordan's common law fraud claim because Jordan has failed to show that her fraud claims are not
merely incidental to her conversion claims. Marketxt, 693 F. Supp. 2d at 394. The latest of
Jordan's common law fraud claims therefore expired on April 10, 2010. As a result, Jordan's
cause of action for common law fraud is untimely as to all defendants with respect to paragraph
307(i) to (iv) of the second amended complaint.
Paragraph 307(v) of the second amended complaint alleges misrepresentations and
fraudulent concealment regarding "the value of Jordan's business interests and assets made in
connection with the SDA," independent from Jordan's conversion claim. (D.I. 176 at if 307(v))
According to the allegations in the second amended complaint, this subpart of Jordan's claim for
common law fraud accrued no later than the execution of the SDA on March 13, 2008, and
expired on March 13, 2014 under the standard six-year statute oflimitations applicable to claims
for common law fraud. (D.I. 176 at ifif 269-77) Therefore, the claim asserted in Count 3 of the
second amended complaint is barred by the statute of limitations to the extent that it pertains to
Troilo, Kolleda, Kovinsky, and Tropiano. Although the claim alleged in paragraph 307(v) is not
barred by the statute of limitations to the extent that it applies to Mirra, the claim fails for lack of
justifiable reliance as discussed at § IV .A, supra, and § IV .D .1, infra.
Count 4: Aiding and abetting fraud
Jordan's fourth cause of action for aiding and abetting fraud is time-barred regardless of
whether the three-year or six-year statute oflimitations applies. The allegations against Stewart,
Sigloch, Forte, Hall, Demora, and Kuo accrued between April 10, 2002 and August 16, 2006.
(D.I. 176 at if~ 112, 117) Consequently, the cause of action was first brought more than eight
years after it accrued. (D.I. 84)
5. Count 5: Fraudulent inducement
The statute of limitations for fraudulent inducement is six years and accrues "when the
document is executed and when the party alleging fraud has given consideration and thus
suffered damage." Triangle Underwriters, Inc. v. Honeywell, Inc., 604 F.2d 737, 748 (2d Cir.
1979) (internal citations and quotation marks omitted). The basis for Jordan's fraudulent
inducement claim, asserted in Count 5 of the second amended complaint, is the execution of the
SDA, .which occurred on March 13, 2008. (D.I. 176 at if 271) The six-year statute of limitations
therefore expired on March 13, 2014, one year before Jordan first raised the claim against
defendants Troilo, Tropiano, and Kolleda. (D.I. 84) Defendants concede that Jordan's claim
against Mirra for fraudulent inducement is not barred by the applicable six-year statute of
limitations. (D.I. 179 at 34) Although the claim is not barred by the statute oflimitations to the
extent that it applies to Mirra, the claim fails for lack of justifiable reliance as discussed at §
IV.A, supra, and§ IV.D.1, infra.
6. Count 6: Breach of fiduciary duty
Defendants contend that Jordan's sixth cause of action for breach of fiduciary duty is
subject to a three-year statute of limitations because Jordan seeks only monetary damages. (D.I.
179 at 34-35) According to defendants, the underlying injury was caused by the same pattern of
forgery and fraud comprised of acts committed between July 12, 1996 and April 10, 2007. (Id)
As a result, defendants contend that Jordan's most recent claim for breach of fiduciary duty
expired on April 10, 2010. (Id) In response, Jordan alleges that a six-year statute oflimitations
should apply to the breach of fiduciary duty claim because the claim is predicated on allegations
of actual fraud. (D.I. 122 at 111-12)
Under New York law, the statute oflimitations for breach of fiduciary duty varies
depending on the substantive remedy sought. See Marketxt, 693 F. Supp. 2d at 398. The statute
of limitations for claims for breach of fiduciary duty sounding in fraud is typically six years,
whereas suits alleging a breach of fiduciary duty seeking only monetary damages are subject to a
three-year statute of limitations. N.Y. C.P.L.R. 213(1); Balta v. Ayco Company, LP, 626 F.
Supp. 2d 347, 356 (W.D.N.Y. 2009). "[A]n exception to this general rule is that claims for
breach of fiduciary duty that sound in fraud are subject to a six-year statute of limitations, even
when the relief sought is money damages." Balta, 626 F. Supp. 2d at 356 (citing Kaufman v.
Cohen, 307 A.D.2d 113, 119 (N.Y. App. Div. 2003)). However, the three-year statute of
limitations for conversion applies to a fraud-based breach of fiduciary duty claim incidental to a
conversion claim. See Marketxt, 693 F. Supp. 2d at 398 ("Because the plaintiffs breach of
fiduciary duty claims are grounded in conversion rather than fraud, they are subject to the shorter
three-year statute oflimitations and are time-barred.").
Although Jordan's claim for breach of fiduciary duty in Count 6 is predicated on
allegations of fraud in the present case, Jordan's fraud allegations are incidental to her
conversion claims for the reasons previously discussed at§ IV.B.3, supra. Under New York
law, when a plaintiffs breach of fiduciary duty claims seek only monetary damages and are
grounded in conversion rather than fraud, they are subject to the shorter three-year statute of
limitations period. Marketxt, 693 F. Supp. 2d at 398 ("Because the plaintiffs breach of fiduciary
duty claims are grounded in conversion rather than fraud, they are subject to the shorter threeyear statute of limitations and are time-barred."). Jordan's cause of action for breach of fiduciary
duty is based on a "pattern of forgery, fraud, conversion, and self-dealing" which also serves as
the basis for Jordan's fraud and conversion claims. (D.I. 176 at ifif 306-08, 328, 342) Therefore,
Jordan's cause of action for breach of fiduciary duty is subject to the three-year statute of
Applying the three-year statute of limitations to Jordan's cause of action for breach of
fiduciary duty, the court concludes that the claim is time-barred with respect to Mirra, Troilo,
and Kolleda. Jordan does not dispute defendants' assertion that the cause of action is based on
allegedly wrongful acts committed between July 12, 1996 and April 10, 2007. (D.I. 176 at ifif
87(xxi), 109) Consequently, the three-year stat~te oflimitations expired on April 10, 2010, two
years before the original complaint was filed against Mirra, and nearly five years before the
amended complaint was filed against Troilo and Kolleda. (D.I. 1; D.I. 84)
7. Count 7: Breach of warranties
There is no dispute that Jordan's seventh cause of action for breach of warranties against
Mirra is not barred by the statute of limitations.
8. Count 8: Unjust enrichment
Defendants allege that the statute of limitations for unjust enrichment in the present case
is three years because Jordan seeks a remedy of monetary damages. (D.I. 179 at 35) Because
the most recent wrongful act giving rise to a duty of restitution was the execution of the SDA in
March 2008, defendants contend that the statute oflimitations pertaining to Jordan's unjust
enrichment claim expired no later than March 13, 2011. (Id) In response, Jordan alleges that
her claim for unjust enrichment seeks appropriate equitable relief in addition to monetary
damages and, as such, a six-year statute oflimitations should apply. (D.I. 122 at 12)
The statute of limitations for a claim of unjust enrichment under N ~w York law depends
on the nature of the remedy sought. Matana v. Merkin, 957 F. Supp. 2d 473, 494 (S.D.N.Y.
2013 ). The limitations period is six years for equitable relief and three years for monetary relief,
and the time begins to run "upon the occurrence of the wrongful act giving rise to a duty of
restitution and not from the time the facts constituting the fraud are discovered." Id (internal
quotation marks and citations omitted); United Teamster Fund v. MagnaCare Admin. Servs.,
LLC, 39 F. Supp. 3d 461, 478 (S.D.N.Y. 2014).
Jordan's second amended complaint specifically identifies the relief sought in connection
with her unjust enrichment claim as follows: "On the Eighth Cause of Action a judgment in
Plaintiffs favor and against all Defendants, for more than $225,000,000.00 in compensatory
damages, together with costs, interest and such other and further relief as this Court deems just
and proper." (D.I. 176 at 83, if H) Contrary to Jordan's contentions, inclusion of the language
"and such other and further relief as this Court deems just and proper" does not constitute a
claim for equitable relief. See Murphy v. Am. Home Prods. Corp., 136 A.D.2d 229, 233-34
(N.Y. App. Div. 1988); Assoun v. Assoun, 2015 WL 110106, at *6 n.3 (S.D.N.Y. Jan. 7, 2015)
("A plaintiffs 'ritualistic use in the prayer for relief of [this language] ... does not change the
legal character of the relief demanded .. ; [and] in no way changes the exclusively monetary
nature of the relief actually sought[.]"). Consequently, the three-year statute oflimitations
expired in March 2011, barring Jordan's claim for unjust enrichment in Count 8 of the second
amended complaint as to all defendants.
9. Count 9: Conversion
As previously discussed in connection with Jordan's third and sixth causes of action for
common law fraud and breach of fiduciary duty, respectively, see§ IV.B.3 & 6, supra, the
applicable statute of limitations for a conversion claim under New York law is three years.
Accrual of the statute of limitations runs from the date the alleged conversion takes place, and
not from the discovery of the injury. Vigilant Ins. Co. ofAm. v. Housing Auth. of City ofEl
Paso, Tex., 660 N.E.2d 1121, 1123 (N.Y. 1995). Jordan's conversion claim is based on
allegations that defendants transferred and encumbered Jordan's assets for their own benefit, and
the last of these acts took place on April 10, 2007. (D.I. 176 at i-fi-f 87(xxi), 342) The statute of
limitations for Jordan's conversion claim at Count 9 of the second amended complaint therefore
expired on April IO, 2010, and the claim is untimely as to all defendants.
Equitable tolling is "a doctrine to be invoked sparingly and only under exceptional
circumstances." Abercrombie v. Andrew Coll., 438 F. Supp. 2d 243, 265 (S.D.N.Y. 2006). To
invoke the doctrine of equitable tolling or equitable estoppel under New York law, 14 a plaintiff
must show that she "was unable, despite due diligence, to discover facts that would allow [her] to
bring [her] claim in a timely manner, or that defendant's actions induced plaintiff to refrain from
commencing a timely action." De Sole v. Knoedler Gallery, LLC, 974 F. Supp. 2d 274, 318
(S.D.N.Y. 2013). "[D]ue diligence on the part of the plaintiff in bringing [her] action is an
essential element for the applicability of the doctrine of equitable estoppel, to be demonstrated
by the plaintiff when [s]he seeks the shelter of the doctrine." Drake v. Lab. Corp. ofAm.
Holdings, 2007 WL 776818, at *7 (E.D.N.Y. Mar. 13, 2007) (quoting Simcuski v. Saeli, 377
N.E.2d 713, 717 (N.Y. 1978)). If the plaintiff possesses "timely knowledge sufficient to place
him or her under a duty to make inquiry and ascertain all the relevant facts prior to the expiration
of the applicable Statute of Limitations," there can be no justifiable reliance, and the doctrine of
equitable estoppel does not apply. Abercrombie, 438 F. Supp. 2d at 266 (quoting Gleason v.
Spota, 194 A.D.2d 764, 764 (N.Y. App. Div. 1993)).
New York courts do not typically distinguish between the doctrines of equitable estoppel and
equitable tolling, and the same analysis is applied to both doctrines. Corporate Trade, Inc. v.
Channel, 563 F. App'x 841, 841 (2d Cir. 2014). The parties agree that New York courts do not
distinguish between the doctrines of equitable estoppel and equitable tolling (D.I. 122 at 16; DJ.
130 at 16 n.10), although the Second Circuit has noted that "the reported decisions of the federal
and state courts do not always mean the same thing by their use of these phrases, and phrases to
which some judges ascribe different meanings are used interchangeably by other judges," Pearl
v. City ofLong Beach, 296 F.3d 76, 81 (2d Cir. 2002).
To invoke the equitable tolling doctrine, a plaintiff must also establish that the defendants
took subsequent and specific actions, separate from those that provide the factual basis for the
underlying causes of action, to prevent the plaintiff from timely bringing suit. Corsello v.
Verizon New York, Inc., 18 N.Y.3d 777, 789; 967 N.E.2d 1177 (N.Y. 2012) (citing Zumpano v.
Quinn, 6 N.Y.3d 666, 674; 849 N.E.2d 926 (N.Y. 2006)). "[W]here the alleged concealment
consisted of nothing but defendants' failure to disclose the wrongs they had committed, [New
York courts] have held that the defendants were not estopped from pleading a statute of
limitations defense." Corsello, 18 N.Y.3d at 789; see also Abercrombie, 438 F. Supp. 2d at 265
("[E]quitable estoppel does not apply where the misrepresentation or act of concealment
underlying the estoppel claim is the same act which forms the basis of plaintiffs underlying
cause of action."). However, concealment without an actual misrepresentation may suffice to
toll the running of the statute oflimitations if the plaintiff has a fiduciary relationship with the
defendants. See St. John's Univ. v. Bolton, 757 F. Supp. 2d 144, 186-87 (E.D.N.Y. 2010); see
also Porwick v. Fortis Benefits Ins. Co., 2004 WL 2793186, at *6 (S.D.N.Y. Dec. 6, 2004)
("Equitable estoppel requires a showing that defendant made an actual misrepresentation unless
the parties have a fiduciary relationship, in which case, concealment without actual
misrepresentation will suffice."). This does not mean that the doctrine of equitable estoppel is
"applied with more vigor against one who owes a fiduciary duty to the plaintiff." Abercrombie,
438 F. Supp. 2d at 265 n.23.
Jordan alleges that the doctrine of equitable estoppel should toll the running of the statute
of limitations because defendants were in a fiduciary relationship with Jordan, and the amended
complaint contains numerous allegations regarding defendants' affirmative acts of
misrepresentation and concealment. (D .I. 122 at 18) Jordan contends that she did not begin to
discover defendants' fraud until early 2010, and the commencement of this action in 2012 and
the amendment of the complaint once the stay was lifted in 2015
that Jordan acted
with the requisite due diligence in light of her incarceration in 2010. (Id at 19-20)
In response, defendants contend that Jordan's equitable estoppel argument fails because it
is premised on the very same allegations of misrepresentation and concealment on which
Jordan's second through eighth causes of actiOn depend. (D.I. 130 at 16-17) Moreover,
defendants argue that Jordan's own allegations compel the conclusion that she knew or should
have known of her alleged injury no later than March 13, 2008, when she executed the SDA,
because the alleged fraud was obvious from a cursory review of the SDA and the accompanying
schedules. (Id at 17) According to defendants, it is irrelevant whether defendants were Jordan's
fiduciaries or whether Jordan was incarcerated in 2010, because Jordan failed to plead that she
undertook a diligent inquiry in March 2008. (Id at 18)
Even if the court were to credit Jordan's assertion that defendants were her fiduciaries, 15
the doctrine of equitable tolling does not apply to the second through eighth causes of action in
the present case because Jordan relies on the same allegations of misrepresentation and
concealment on which her causes of action depend, with the exception of the claim for breach of
contract on promissory notes. See St. John's Univ., 757 F. Supp. 2d at 187 (concluding that,
even though plaintiff sufficiently alleged the existence of a fiduciary relationship, equitable
tolling did not apply to toll the limitations period because the claims were based on the same acts
of fraudulent concealment that formed the basis for plaintiffs invocation of the equitable tolling
At§ IV.A, supra, the court considered Jordan's argument that defendants acted as Jordan's
fiduciaries, and concluded that Jordan and defendants appeared on opposite sides of the
transaction and were represented by separate counsel. The court recommended that defendants'
alleged role as fiduciaries did not excuse Jordan's failure to review the terms of the Release
before executing it under the circumstances of this case.
doctrine). Specifically, Jordan supports her equitable tolling argument by pointing to allegations
in the second amended complaint that defendants:
(i) forged Jordan's signature on dozens of documents iri. order to siphon off
Plaintiffs assets for their own benefit, without Jordan's knowledge (Amended
Complaint, ifif 49-169, and passim); (ii) caused Jordan's assets to be invested in
various entities that they falsely claimed were jointly owned by Jordan and Mirra,
when in fact they were not (id., ifif 33-48, and passim); (iii) falsely represented
that RAM Capital and various other entities in which Jordan supposedly had a 50
percent interest had no value, or less value than they actually had (id, ifif 169-256,
and passim); (iv) falsely represented that Mirra's financial obligations to Jordan
for the period prior to January 31, 2003 had been satisfied (id, ifif 257-263); and
(v) falsely represented that the General Release language had been stricken from
the SDA, when in fact it had not been stricken (id, ifif 264-279).
(D.I. 122 at 18) A review of the cited paragraphs of the second amended complaint reveals that
these allegations also form the basis for Jordan's causes of action for an accounting, common
law fraud, aiding and abetting fraud, fraudulent inducement, breach of fiduciary duty, breach of
warranties, and unjust enrichment. (D.I. 176)
Moreover, the doctrine of equitable tolling does not apply in the instant case because
Jordan failed to establish that she justifiably relied on the alleged misrepresentations or
concealment. Jordan's review and execution of the SDA should have put her on inquiry notice
of her alleged injuries no later than March 13, 2008, when the SDA was executed. "[T]he
allegations of the complaint, itself, actually establish that plaintiffl] could have uncovered
defendants' alleged misrepresentations and omissions if [she] had exercised due diligence."
Phoenix Light SF Ltd v. Goldman Sachs Group, Inc., 43 Misc. 3d 1233(A), at *6 (N.Y. Sup. Ct.
2014). Bank accounts that Jordan alleges she owned solely, and which were later secretly
converted by defendants into joint accounts with Mirra, are listed in the SDA as joint accounts.
(D.I. 176 at ifif 54-55, 70; D.I. 114, Ex. C at Schedule 2.1.1) Four bank accounts that Jordan
alleges she never opened and had no knowledge of are listed in the SDA as joint accounts. (D.I.
176 at~~ 62, 75; D.I. 114, Ex.Cat Schedule 2.1.1) Real properties that Jordan alleges she
owned are absent from the SDA schedules, including the Taylors Gap Road property. (D.I. 176
163-67) Jordan also alleges that the SDA schedules fail to include more than twelve
companies "active and in good standing at the time of the execution of the SDA, in which Jordan
and Mirra had joint interests." (D.I. 176 at~ 213) Where, as here, a plaintiff has failed to
conduct any inquiry at all, it is appropriate to consider equitable estoppel at the motion to dismiss
stage. See Arthur Andersen, 747 F. Supp. at 944; Abercrombie, 438 F. Supp. 2d at 267; Whitney
Holdings, Ltd. v. Givotovsky, 988 F. Supp. 732, 747-48 (S.D.N.Y. 1997).
To the extent that Jordan should have been aware of her claims as of March 13, 2008,
Jordan's subsequent incarceration in 2010 has no bearing on the analysis. See Tellier v.
Krimmer, 1996 WL 518108, at *2 (E.D.N.Y. Sept. 4, 1996) ("Under New York law, a plaintiffs
imprisonment does not act to toll the statute oflimitations."); Daniels v. Doe, 1999 WL 1211824,
at *2 (S.D.N.Y. Dec. 17, 1999) ("It has repeatedly been held that neither plaintiffs prose nor
incarcerated status is a basis for tolling the statute of limitations."). For the foregoing reasons,
the doctrine of equitable estoppel does not toll the statute oflimitations for Jordan's second
through eighth causes of action.
Sufficiency of Claims
In support of the motion to dismiss, defendants allege that Jordan's fraud-based claims
for common law fraud, aiding and abetting fraud, and fraudulent inducement at Counts 3 through
5 of the second amended complaint fail as a matter of law for lack of justifiable reliance. (D.I.
179 at 21-22) Specifically, defendants contend that the claims for common law fraud and aiding
and abetting fraud are predicated on the alleged forgeries of Jordan's signature, but only third
parties, and not Jordan, are alleged to have relied on the purported forgeries. (Id. at 22-23)
Moreover, defendants allege that Jordan fails to plead that she justifiably relied on any alleged
misrepresentation or omission in executing the SDA and the Release to establish a viable cause
of action for fraudulent inducement. (Id. at 23) In response, Jordan contends that fraud claims
may be predicated on third-party reliance if such reliance results in injury to the plaintiff. (D.I.
122 at 9-11)
Federal and state courts in New York are divided as to whether a fraud-based claim may
be predicated on third-party reliance. See Chevron Corp. v. Donziger, 871 'F. Supp. 2d 229, 256
(S.D.N.Y. 2012); Pasternackv. Lab. Corp. ofAm., 59 N.E.3d 485, 491-93 (S.D.N.Y. 2014). The
Second Circuit has twice held that "a plaintiff does not establish the reliance element of fraud for
purposes of ... New York law by showing only that a third party relied on a defendant's false
statements." Cement & Concrete Workers Dist. Council Welfare Fund, Pension Fund, Legal
Servs. Fund & Annuity Fund v. Lo/lo, 148 F .3d 194, 196 (2d Cir. 1998); see also City ofNew
Yorkv. Smokes-Spirits.com, Inc., 541F.3d425, 454 (2d Cir. 2008), rev'd on other grounds and
remanded sub nom. Hemi Group, LLC v. City ofNew York, NY, 559 U.S. 1 (2012)
("[A]llegations of third-party reliance ... are insufficient to make out a common law fraud claim
under New York law."). However, federal district and state courts within New York have also
reached the opposite conclusion, holding that "the doctrine of third-party reliance permits the
plaintiff to show that a third-party relied upon a misrepresentation by the defendant, which
resulted in injury to the plaintiff." Prestige Builder & Mgmt. LLC v. Safeco Ins. Co. ofAm., 896
F. Supp. 2d 198, 203 (E.D.N.Y. 2012).
More recently, the Southern District of New York conducted a comprehensive analysis of
the source of the split inPasternackv. Lab. Corp. See Pasternack, 2014 WL 4832299, at *1538
18; see also Ahluwalia v. St. George's Univ., LLC, 63 F. Supp. 3d 251, 270 (E.D.N.Y. 2014)
("The Court finds persuasive the thorough reasoning of Pasternack."). Ultimately holding that
the Second Circuit decisions should control, the court observed that the cases upholding thirdparty reliance as a basis for fraud claims could be traced back to three decisions from the 1800' s.
Id. at * 17. Upon close examination, the Pasternack court concluded that none of the three cases
actually addressed the issue of third-party reliance, 16 and noted that the requirements for stating a
fraud claim under New York law have changed substantially over the past century. Id. at* 1718. Having analyzed an extensive body of cases on the issue of third-party reliance, the
Pasternack court concluded:
Given that the New York Court of Appeals has not directly addressed this issue,
that the Appellate Division courts are divided, and that many of the Appellate
Division cases that have endorsed third-party reliance have mistakenly relied on
Eaton, Bruff, and Rice, this Court will adopt the interpretation of New York law
that is set forth in Lallo and Smokes-Spirits. com. That interpretation holds that "a
plaintiff does not establish the reliance element of fraud for purposes of ... New
York law by showing only that a third party relied on a defendant's false
statements." Lollo, 148 F.3d at 196. Because the SAC alleges that only the FAA
and not Pasternack relied on LabCorp's alleged misrepresentations, Pastemack's
fraud claim will be dismissed.
Id. at *18. The parties in the present action do not dispute that the basis for Jordan's fraud
claims· are the forgeries that were relied upon by third parties. Because the second amended
complaint in the instant case alleges that only third parties, and not Jordan herself, relied on the
forgeries, I recommend that Jordan's fraud-based claims be dismissed without prejudice.
Specifically, the Pasternack court observed that in Eaton, Cole & Burnham Co. v. Avery, 83
N.Y. 31 (1880), and Bruff v. Mali, 36 N.Y. 200 (1867), the plaintiff relied on the
misrepresentations, and the court therefore did not reach a determination on third-party reliance
because the third parties acted as mere conduits. In Rice v. Manley, 66 N.Y. 82 (1876), the issue
before the court was whether the plaintiff suffered a legally cognizable injury, not whether a
fraud claim could be premised on misrepresentations made to a third party.
In addition, Jordan's.fraud allegations fail as a matter oflaw because Jordan cannot
establish that she justifiably relied on the alleged misrepresentations. The alleged
misrepresentations were obvious from the face of the SDA and the Release, and could have been
uncovered in the exercise of reasonable diligence. See Phoenix Light SF Ltd v. Goldman Sachs
Group, Inc., 43 Misc. 3d 1233(A), at *6 (N.Y. 2014) (granting motion to dismiss where
allegations of complaint itself established that plaintiff could have uncovered defendants' alleged
misrepresentations in the exercise of due diligence). Specifically, bank accounts that were
opened solely in Jordan's name appeared in the SDA as accounts jointly held with Mirra. (D.I.
176 at~~ 54-55, 70; D.I. 114, Ex. C at Schedule 2.1.1) The pleading identifies at least four
accounts of which Jordan was unaware and did not open. (D.I. 176 at~~ 62, 75; D.I. 114, Ex. C
at Schedule 2.1.1) A number of real properties owned by Jordan were absent from the SDA
schedules. (Id at~~ 163-167) Jordan's own records and a review of the SDA would have
revealed the alleged fraud, and Jordan's failure to inquire about these issues demonstrates a lack
of justifiable reliance. See DynCorp v. GTE Corp., 215 F. Supp. 2d 308, 322-23 (S.D.N.Y.
2002) ("This is not a case where ... [defendant's] alleged fraud was hidden in its accounting
records, requiring extraordinary effort and sophisticated consultants to unmask."); see also Arfa,
76 A.D.3d at 59-60. Consequently, I recommend that Jordan's fraud-based claims be dismissed
for failure to adequately state a claim for relief under Rule 12(b)(6).
Defendants allege that Jordan's claim for declaratory relief at Count 10 of the second
amended complaint fails because it does not state and independent cause of action. (D .I. 179 at
36) In addition, defendants contend that Jordan lacks standing to bring a claim for declaratory
relief because Jordan was not a beneficiary of the Conundrum Trust at the time of her son's
death. (Id at 37) In response, Jordan alleges that she does not rest her claim of subject matter
jurisdiction on the Declaratory Judgment Act. (D.I. 122 at 22) ·Moreover, Jordan contends that
she has standing to assert the declaratory judgment claim because she seeks a declaration stating
that she was improperly removed as the protector of the Conundrum Trust. (Id)
I recommend that the court dismiss Jordan's tenth cause of action for declaratory relief in
light of the foregoing recommendations that the court dismiss Jordan's fraud-based claims and
her second cause of action for an accounting. (D.I. 176 at ifif 296-97; 344-51) The Declaratory
Judgment Act 17 provides an equitable remedy, and is not an independent cause of action. See
Doe v. Wilmington Housing Authority, 880 F. Supp. 2d 513, 540 n.24 (D. Del. 2012), rev 'din
part on other grounds, 568 F. App'x 128 (3d Cir. 2014). "Like a preliminary injunction, a
declaratory judgment relies on a valid legal predicate. The DJA is procedural only, and does not.
create an independent cause of action." Chevron Corp. v. Naranjo, 667 F.3d 232, 244-45 (2d
Cir. 2012) (internal citations and quotation marks omitted).
Jordan's tenth cause of action seeking a declaratory judgment is based on her allegations
that she was wrongfully removed as the protector of the Conlindrum Trust through forged and
fraudulent documents. (D.I. 176 at ifif 344-51) In contrast, Jordan's only surviving claim for
breach of warranties against Mirra is based on Mirra' s representations and warranties that the
scheduled assets and liabilities identified in the SDA were accurate. (Id at ifif 331-35) The
second amended complaint does not seek declaratory relief for the continuing dispute regarding
the breach of warranties claim. See Norton v. Town ofIslip, 678 F. App'x 17, 22-23 (2d Cir.
Although Jordan alleges that she "does not rest her claim of subject matter jurisdiction on the
Declaratory Judgment Act," (D.I. 122 at 22), the second amended complaint expressly states that
"Plaintiff is entitled to a judgment pursuant to the Declaratory Judgment Act," (D.1. 176 at if
201 7) (dismissing claims brought under the Declaratory Judgment Act because no other federal
claims survived the pleading stage); see also Long v. Wells Fargo Bank, NA., 670 F. App'x 670,
671 (10th Cir. 2016) (concluding that request for declaratory relief was not viable because it was
based on an invalid cause of action). Consequently, Jordan's cause of action for breach of
warranties cannot serve as a legal predicate for her declaratory judgment claim.
The cases cited by Jordan support the court's conclusion that a cause of action for
declaratory judgment cannot proceed absent other related causes of action. See Moore v.
Democratic Cty. Exec. Comm. ofPhila., 2014 WL 5780879, at* (E.D. Pa. Nov. 6, 2014) ("[T]he
federal Declaratory Judgment Act is procedural and is not an independent basis for federal
jurisdiction, so this action cannot proceed as a declaratory judgment action alone."); Mazzoccoli
v. Merit Mountainside LLC, 2012 WL 6697439, at *9 (D.N;J. Dec. 20, 2012) (holding that a
claim brought pursuant to the Declaratory Judgment Act does not provide an independent ground
for federal subject matter jurisdiction). In view of the foregoing analysis, I recommend that the
court dismiss Jordan's cause of action for declaratory relief.
Defendants alternatively allege that Jordan has failed to establish standing to bring any
cause of action based on her allegations regarding the Conundrum Trust. (D .I. 179 at 37)
However, defendants' motion to dismiss was brought only under Rule 12(b)(6). (D.1. 112)
"Generally speaking, motions to dismiss on the grounds of a failure to allege an 'injury in fact'
implicate constitutional standing principles and thus are predicated on Rule 12(b)(l) rather than
Rule 12(b)(6)." Maio v. Aetna, Inc., 221F.3d472, 481 n.7 (3d Cir. 2000). Defendants'
contentions regarding Jordan's standing are based on Jordan's alleged failure to plead a
"concrete" injury in fact suffered by Jordan herself in accordance with the requirements of
Article III. (D.I. 179 at 37) Consequently, issues pertaining to the adequacy of Jordan's
standing to bring her claim for declaratory relief are not properly before the court at this time.
However, for the reasons stated in the preceding paragraph, it is recommended that Jordan's
tenth cause of action for a declaratory judgment be dismissed.
For the reasons ~iscussed above, I recommend that the court grant-in-part defendants'
motion to dismiss. (D.I. 112) Specifically, I recommend that the court deny the motion to
dismiss with respect to Jordan's claim for breach of warranties against Mirra at Count 7 of the
second amended complaint, and grant the motion to dismiss Counts 1 through 6 and Counts 8
through 10 against all remaining defendants.
This Report and Recommendation is filed pursuant to 28 U.S.C. § 636(b)(l)(B), Fed. R.
Civ. P. 72(b)( 1), and D. Del. LR 72.1. The parties may serve and file specific written objections
within fourteen (14) days after being served with a copy of this Report and Recommendation.
Fed. R. Civ. P. 72(b). The failure of a party to object to legal conclusions may result in the loss
of the right to de novo review in the district court. See Henderson v. Carlson, 812 F.2d 874,
878-79 (3d Cir. 1987); Sincavage v. Barnhart, 171 F. App'x 924, 925 n.l (3d Cir. 2006). The
parties are directed to the court's Standing Order for Objections Filed Under Fed. R. Civ. P. 72,
dated October 9, 2013, a copy of which is available on the court's website,
Dated: September _cl, 2017
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