Naftali et al v. New York Deferred Exchange Corp. et al

Filing 98

ORDER ADOPTING REPORT AND RECOMMENDATIONS re 84 Motion for Summary Judgment, 88 Report and Recommendations - Based on the foregoing (SEE ATTACHED MEMORANDUM AND ORDER FOR DETAILS), the Court adopts Judge Wickss R&R in its entirety as the opi nion of this Court. Accordingly, the Court finds: (1) NYDEC's motion for summary judgment as to Plaintiffs' breach of contract claim is DENIED; (2) NYDEC's motion for summary judgment as to Plaintiffs' negligence claim is GRANTED, as to the portion of Plaintiffs' negligence claim concerning NYDECs pre-contractual duties, and DENIED, as to the portion of Plaintiffs' negligence claim concerning NYDEC's filing of the Form 8288 and the filing of associated taxes; and (3) Defendant's motion for summary judgment as to Plaintiffs' conversion claim is GRANTED. So Ordered by Judge Joan M. Azrack on 3/14/2022. (Coleman, Laurie)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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ORA NAFTALI and RONI NAFTALI, AS
TRUSTEES OF THE EDTOM TRUST DATED
APRIL 10, 2011,
Plaintiffs,

FILED 

For Online Publication Only CLERK 

U.S. DISTRICT COURT 
EASTERN DISTRICT OF NEW YORK 
LONG ISLAND OFFICE 

2:18 pm, Mar 14, 2022

MEMORANDUM AND ORDER
15-CV-7152 (JMA) (JMW)

-againstNEW YORK DEFERRED EXCHANGE CORP.,
and JEFFREY WECHSLER,
Defendants.
-------------------------------------------------------------X
AZRACK, United States District Judge:

Plaintiffs Ora and Roni Naftali (“Plaintiffs”) commenced this action against defendants
New York Deferred Exchange Corp. (“NYDEC”) and Fritz Trinklein (“Trinklein”) on December
16, 2015 alleging, inter alia, claims for breach of contract, negligence, and conversion resulting
from a failed 1031 Exchange, for which Plaintiffs engaged NYDEC to act as their Qualified
Intermediary. (ECF No. 1.) On July 1, 2021, NYDEC filed the present motion for summary
judgment seeking to dismiss Plaintiffs’ remaining claims of breach of contract, negligence, and
conversion. (ECF No. 84.) On October 22, 2021, the Court referred the motion for summary
judgment to Magistrate Judge James M. Wicks for a Report and Recommendation (“R&R”).
(Electronic Order, 10/22/2021.) Judge Wicks issued an R&R dated December 2, 2021, which
recommends that: (1) NYDEC’s motion for summary judgment as to Plaintiffs’ breach of contract
claim be denied; (2) NYDEC’s motion for summary judgment as to Plaintiffs’ negligence claim
be granted in part and denied in part; and (3) NYDEC’s motion for summary judgment as to
Plaintiffs’ conversion claim be granted. (ECF No. 88.)
NYDEC filed timely objections to the R&R, to which Plaintiffs filed a response in
opposition. (ECF Nos. 92, 96.)

Plaintiffs filed a “Response Brief [to the R&R] to clarify
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Plaintiffs’ position” to which NYDEC responded. (ECF Nos. 91, 97.) After conducting a review
of the full record (including the motion papers, R&R, and objections,) and applicable law, the
Court adopts Judge Wicks’s R&R in its entirety as the opinion of the Court.
In reviewing a magistrate judge’s report and recommendation, a court must “make
a de novo determination of those portions of the report or . . . recommendations to which
objection[s] [are] made.” 28 U.S.C. § 636(b)(1)(C); - - --- - - - - - - - - - - - No. 5-CV-5579,
see also Brown v. Ebert,
2006 WL 3851152, at *2 (S.D.N.Y. Dec. 29, 2006). The Court “may accept, reject, or modify, in
whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. §
636(b)(1)(C). Those portions of a report and recommendation to which there is no specific
reasoned objection are reviewed for clear error. See Pall Corp. v. Entegris, Inc., 249 F.R.D. 48,
51 (E.D.N.Y. 2008).
The Court finds no clear error in the portions of Judge Wicks’s R&R to which there are no
specific objections. In particular, Judge Wicks recommended granting NYDEC’s motion for
summary judgment as to the portion of Plaintiffs’ negligence claim concerning NYDEC’s precontractual duties, and granting NYDEC’s motion for summary judgment as to the conversion
claim. Applying clear error review, the Court adopts Judge Wicks’s recommendations regarding
this portion of the negligence claim and the conversion claim.
I next address the portions of the R&R to which the parties have objected. For the
objections, I have undertaken a de novo review of the record, the R&R, the objections, and the
opposition. For the reasons stated below, the Court denies those objections and adopts the R&R.
NYDEC argues that summary judgment should be granted (1) as to the breach of contract
claim because Plaintiffs failed to perform their obligations under the Exchange Agreement, and
(2) as to the portion of the negligence claim concerning NYDEC’s filing of the Form 8288 and the

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filing of associated taxes because NYDEC owed Plaintiffs no duty concerning the Form 8288.
(Def. Obj. at 11-18.) These objections reiterate NYDEC’s previous arguments and were already
addressed by the R&R. Having considered the full record, the Court denies those objections for
the reasons articulated in Judge Wicks’s R&R.
Plaintiffs submitted a “response” to the R&R, which states that they “do not object to any
of the Magistrate Judge’s recommendations.” (ECF No. 91 at 1.) However, Plaintiffs submitted
this response to clarify their position with regard to the conversion claim, which Judge Wicks
recommended dismissing as duplicative of the breach of contract claim. (Id.) The conversion
claim is limited to the $200,000 that the parties agreed be held in escrow “until there is an
adjudication determining the disbursement of the balance of the escrow in the action or a further
agreement of both the Plaintiff[s] and Defendants.” (ECF No. 84-11 at 2-3.) Plaintiffs argue that
because the conversion claim has been dismissed, if Plaintiffs lose on their breach of contract claim
at trial and NYDEC loses on its claims for offsetting damages, then the $200,000 would remain
“in limbo” in escrow. (ECF No. 91 at 3.) Plaintiffs argue that if this occurred, they would be
entitled to move at trial to conform the pleadings to the proof pursuant to Rule 15 of the Federal
Rules of Civil Procedure. (Id.) Plaintiffs state that:
[I]f the Court directs, [Plaintiffs will] seek leave to amend the complaint at this
juncture to add equitable claims for the return of the $200,000 escrow money.
However, we think it preferable to avoid further motion practice . . . . [and that
Plaintiffs] make this submission to provide further notice of their position and their
intent to seek relief commensurate with the proof at trial.
(Id. at 6.) Thus, Plaintiff seeks only to inform that Court of an action they may take at trial and
are not objecting to the R&R or requesting any relief currently. The Court agrees with Judge
Wick’s analysis of this claim and adopts the Judge Wicks’s recommendation to dismiss the
conversion claim.

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Based on the foregoing, the Court adopts Judge Wicks’s R&R in its entirety as the opinion
of this Court. Accordingly, the Court finds: (1) NYDEC’s motion for summary judgment as to
Plaintiffs’ breach of contract claim is DENIED; (2) NYDEC’s motion for summary judgment as
to Plaintiffs’ negligence claim is GRANTED, as to the portion of Plaintiffs’ negligence claim
concerning NYDEC’s pre-contractual duties, and DENIED, as to the portion of Plaintiffs’
negligence claim concerning NYDEC’s filing of the Form 8288 and the filing of associated taxes;
and (3) Defendant’s motion for summary judgment as to Plaintiffs’ conversion claim is
GRANTED.
SO ORDERED.
Dated: March 14, 2022
Central Islip, New York
/s/ (JMA)
JOAN M. AZRACK
UNITED STATES DISTRICT JUDGE

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