Mid Atlantic Framing, LLC v. Varish Construction, Inc. et al

Filing 95

MEMORANDUM-DECISION AND ORDER granting 82 Motion to Dismiss for Failure to State a Claim: The Court hereby ORDERS that Defendant WSFS's motion to dismiss is GRANTED; and the Court further ORDERS that the Clerk of the Court is directed to te rminate WSFS as a Defendant in this action; and the Court further ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision and Order on the parties in accordance with the Local Rules. Signed by U.S. District Judge Mae A. D'Agostino on 9/14/2016. (ban, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________________
MID ATLANTIC FRAMING, LLC,
on behalf of itself and all other similarly situated
beneficiaries of trust funds received, or to be
received by defendant Varish Construction, Inc.
Under Article 3-A of the New York Lien Law,
Plaintiff,
vs.

3:13-CV-01376
(MAD/DEP)

VARISH CONSTRUCTION, INC.; AVA REALTY
ITHACA, LLC; AVA DEVELOPMENT, LLC;
TOM VARISH, individually: AJESH PATEL, individually;
359 HOSPITALITY ASSOCIATES, LLC; SENECA
SUPPLY, LLC d/b/a THE DUKE COMPANY;
and "JOHN DOE NO. 1" through "JOHN DOE NO. 20",
inclusive, as those persons and entities having an interest in
real property located at 359 Elmira Road, Ithaca, New York,
and being designated as Tax Parcel Nos.: 128.-1-8 and
129.-1-9 on the Land and Tax Map of the City of Ithaca,
Tompkins County, New York, and a portion of Tax Parcel
Nos.: 129-1-10.2, 129.-1-1-1, 129.-1-6.2 and 129.-1-7.2 on the
Land and Tax Map of the City of Ithaca, Tompkins County,
New York, and/or the trust funds received, or to be received by
VARISH CONSTRUCTION, INC. for the improvement of
said property,
Defendants.
____________________________________________
APPEARANCES:

OF COUNSEL:

MARCO & SITARAS, PLLC
33 Whitehall Street, 16th Floor
New York, New York 10004
Attorneys for Plaintiff

GEORGE SITARAS, ESQ.

CORWIN & CORWIN, LLP
600 Unicorn Park
Woburn, Massachusetts 01801
Attorneys for Plaintiff

CHARLES F. AHERN, ESQ.

COOPER ERVING & SAVAGE LLP

BRIAN W. MATULA, ESQ.

39 North Pearl Street
Albany, New York 12207
Attorneys for Defendants AVA Realty
Ithaca, LLC, AVA Development LLC,
and Ajesh Patel

DAVID C. ROWLEY, ESQ.

GREENBERG TRAURIG, LLP
2700 Two Commerce Square
2001 Market Street
Philadelphia, Pennsylvania 19103
Attorneys for Defendant Wilmington
Savings Fund Society, FSB

BRIAN T. FEENEY, ESQ.
GREGORY T. STURGES, ESQ.
STEPHEN M. BUHR, ESQ.

Mae A. D'Agostino, U.S. District Judge:
MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
Plaintiff commenced this action on November 5, 2013, seeking damages in connection
with a construction project in which Plaintiff performed work as a subcontractor of Varish
Construction, Inc. (together with owner/principal, Tom Varish, collectively "Varish") on property
owned at the time by AVA Realty Ithaca, LLC (together with AVA Development LLC and Ajesh
Patel, collectively "AVA"); Varish and AVA are co-defendants in this action. See Dkt. No. 1. In
a July 24, 2015 Memorandum-Decision and Order, the Court granted in part and denied in part
AVA's motion for judgment on pleadings and granted Plaintiff's cross motion for leave to file a
second amended verified complaint. See Dkt. No. 68.
On August 4, 2015, Plaintiff filed its second amended complaint. See Dkt. No. 69. In the
second amended complaint, Plaintiff added Wilmington Savings Fund Society, FSB ("WSFS") as
a Defendant in this action. See id. Currently before the Court is Defendant WSFS's motion to
dismiss the claims asserted against it in the second amended complaint. See Dkt. No. 82.
II. BACKGROUND

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This action arises out of the construction of a Fairfield Inn & Suites hotel in Ithaca, New
York (the "Project"). Defendant AVA was the owner of the Project. AVA hired Varish as its
general contractor which, in turn, hired Mid Atlantic to construct the building frame and shell.
In 2012, Defendant Varish, as general contractor, entered into a contract with Defendants
AVA and AVA Development, as owner, for the construction of the Fairfield Inn & Suites. See
Dkt. No. 69 at ¶ 17. In furtherance of the Project, in September 2012, Varish hired Plaintiff Mid
Atlantic pursuant to a written subcontract, wherein Mid Atlantic agreed to furnish and install
certain framing and/or carpentry work at the Property for the agreed upon subcontract price of
$721,000.00 (the "Subcontract"). See id. at ¶ 18. According to Mid Atlantic, during the course of
the Project, Varish directed Mid Atlantic to perform extra work in the amount of $11,740.00,
thereby adjusting the contract price upward to $732,740.00. See id. at ¶ 19. Mid Atlantic
contends that it "duly performed its agreement with Varish and substantially completed all of the
work required of it under the subcontract, including the extra work, no part of which has been
paid except the sum of $115,000.00, thereby leaving a balance due and owing Mid Atlantic in the
sum of $617,740.00." Id. at ¶ 20.
As relevant to the pending motion to dismiss, Plaintiff has named WSFS in three counts of
the second amended complaint. See Dkt. No. 69 at ¶¶ 165-199. WSFS's role in the alleged events
is as the construction lender, i.e., it loaned the developer and owner of the property (AVA Realty)
money to construct the hotel. In Count Sixteen, Mid Atlantic claims that WSFS is liable under
section 7 of the New York Lien Law and attempts to void certain payments made by WSFS under
the Agreement, alleging that WSFS violated section 7 by accepting false certifications from the
general contractor that Mid Atlantic had been paid in full. See Dkt. No. 69 at ¶¶ 171-175. In
Count Seventeen, Mid Atlantic asserts that WSFS mortgage lien over the property should be
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subordinated to its alleged mechanic's lien because of an alleged material modification to the
Agreement that was not recorded. See id. at ¶¶ 178-190. Finally, in Count Eighteen, Mid
Atlantic claims that it is a third-party beneficiary to the Agreement and, therefore, is entitled to
certain advances made by WSFS pursuant to Article 3-A of the New York Lien Law. See id. at
¶¶ 191-199.
Currently before the Court is Defendant WSFS's motion to dismiss the claims asserted
against it in the second amended complaint. See Dkt. No. 82.
III. DISCUSSION
A.

Standard of Review
A motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal

Rules of Civil Procedure tests the legal sufficiency of the party's claim for relief. See Patane v.
Clark, 508 F.3d 106, 111-12 (2d Cir. 2007) (citation omitted). In considering the legal
sufficiency, a court must accept as true all well-pleaded facts in the pleading and draw all
reasonable inferences in the pleader's favor. See ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493
F.3d 87, 98 (2d Cir. 2007) (citation omitted). This presumption of truth, however, does not
extend to legal conclusions. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted).
Although a court's review of a motion to dismiss is generally limited to the facts presented in the
pleading, the court may consider documents that are "integral" to that pleading, even if they are
neither physically attached to, nor incorporated by reference into, the pleading. See Mangiafico v.
Blumenthal, 471 F.3d 391, 398 (2d Cir. 2006) (quoting Chambers v. Time Warner, Inc., 282 F.3d
147, 152-53 (2d Cir. 2002)).
To survive a motion to dismiss, a party need only plead "a short and plain statement of the
claim," see Fed. R. Civ. P. 8(a)(2), with sufficient factual "heft to 'sho[w] that the pleader is
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entitled to relief[,]'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007) (quotation omitted).
Under this standard, the pleading's "[f]actual allegations must be enough to raise a right of relief
above the speculative level," see id. at 555 (citation omitted), and present claims that are
"plausible on [their] face," id. at 570. "The plausibility standard is not akin to a 'probability
requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully."
Iqbal, 556 U.S. at 678 (citation omitted). "Where a complaint pleads facts that are 'merely
consistent with' a defendant's liability, it 'stops short of the line between possibility and
plausibility of "entitlement to relief."'" Id. (quoting [Twombly, 550 U.S.] at 557, 127 S. Ct. 1955).
Ultimately, "when the allegations in a complaint, however true, could not raise a claim of
entitlement to relief," Twombly, 550 U.S. at 558, or where a plaintiff has "not nudged [its] claims
across the line from conceivable to plausible, the[ ] complaint must be dismissed[,]" id. at 570.
B.

Count Sixteen
In Count Sixteen, Mid Atlantic claims that WSFS violated section 7 of the New York Lien

Law by disbursing loan proceeds to AVA Realty after receiving allegedly false certifications from
AVA Realty and the general contractor. See Dkt. No. 69 at ¶¶ 166-77. Defendant WSFS
contends that Count Sixteen should be dismissed because section 7 of the Lien Law applies only
to payments made by owners, contractors, or subcontractors, not to the disbursement of loan
proceeds by lenders. See Dkt. No. 82-7 at 13-15. As such, WSFS contends that, because the
second amended complaint "admits that WSFS was the lender and not an owner, contractor, or
subcontractor, Mid Atlantic's § 7 claim must be dismissed." Id. at 14.
In response, Mid Atlantic argues that WSFS's motion to dismiss should be denied as to
Count Sixteen because section 7 of the Lien Law is applicable "to the collusive conveyances,
liens and encumbrances alleged by Plaintiff." Dkt. No. 91 at 23. Specifically, Mid Atlantic
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contends that it "alleges in its complaint that WSFS advanced building loan proceeds to AVA
based upon false certifications and documentation provided by the AVA Defendants and Varish,
which purported to show that there was no money due and owing Mid Atlantic." Id. at 24 (citing
Dkt. No. 69 at ¶ 172). Further, Mid Atlantic asserts that the second amended complaint "alleges
that WSFS knew that the certifications were false, but turned a blind eye to the falsity in order to
justify making further advances to the AVA Defendants." Id. (citing Dkt. No. 69 at ¶ 175). As
such, Mid Atlantic argues that, "[b]y making those advances, WSFS effectively increased the
amount of its mortgage lien or encumbrance on the property, to the detriment of lienors such as
Mid Atlantic, whose interest in the property would be diminished as a result." Id.
Section 7 of New York's Lien Law states as follows:
Any payment by the owner, contractor or subcontractor upon a
contract for the improvement of real property, made prior to the
time when, by the terms of the contract, such payment becomes
due, for the purpose of avoiding the provisions of this article, shall
be of no effect as against the lien of a subcontractor, laborer, or
materialman under such contract, created before such payment
actually becomes due. A conveyance, mortgage, lien or
incumbrance made by an owner of real property, for the purpose of
avoiding the provisions of this article, with the knowledge or privity
of the person to whom the conveyance is made or in whose favor
the mortgage, lien or incumbrance is created, shall be void and of
no effect as against a claim on account of the improvement of such
real property, existing at the time of the making of the conveyance
or the creation of such mortgage, lien or incumbrance.
N.Y. Lien Law § 7.
As Defendant WSFS correctly argues, by its very terms, section 7 of the Lien Law applies
only to owners, contractors and subcontractors. Nothing in this section indicates that it was
intended to be applied to building loan contracts or lenders. In fact, the Lien Law defines the
term "lender" as a party to a building loan contract that "in consideration of the express promise
of an owner to make an improvement upon real property, agrees to make advances to or for the
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account of such owner to be secured by a mortgage on such real property[.]" N.Y. Lien Law §
2(13). Further, the Lien Law definitions for "owner," "contractor," and "subcontractor" make
clear section 7 is inapplicable to WSFS. See N.Y. Lien Law § 2(3), (9)-(10).
The Court also finds unpersuasive Mid Atlantic's argument that the second sentence of
section 7 is applicable to the present situation. Again, the second sentence of section 7 does not
mention lenders and does not, by its terms, authorize a claim by a subcontractor against a lender.
Moreover, beyond the question of whether section 7 creates a cause of action against
lenders, the second sentence does not apply to the facts alleged in the second amended complaint.
As set forth above, section 7 states that a "conveyance, mortgage, lien, or incumbrance" made "by
an owner of real property" is void, if made for the purpose of avoiding a "claim on account of the
improvement of such real property, existing at the time of the making of the conveyance or the
creation of such mortgage, lien or incumbrance." N.Y. Lien Law § 7 (emphasis added). In the
second amended complaint, Mid Atlantic alleges that WSFS entered into the Agreement with
AVA Realty on March 1, 2012, see Dkt. No. 69 at ¶ 187, and that the mortgage associated with
the Agreement was recorded on March 7, 2012. See id. at ¶ 96. The general contractor on the
project did not hire Mid Atlantic until September 2012, approximately six months after WSFS's
mortgage was recorded. See id. at ¶ 18. Section 7 of the Lien Law makes clear that, to void a
mortgage, it must have been created to avoid Mid Atlantic's "claim on account of the
improvement of real property." N.Y. Lien Law § 7. Since the mortgage was created six months
before Mid Atlantic was even hired to work on the Project, it was clearly not created "for the
purpose of avoiding" Mid Atlantic's lien, because the lien could not have existed at that time. See
W.L. Development Corp. v. Trifort Realty, Inc., 406 N.Y.2d 489, 498-99 (1978); Makhoul v. 115
96th Street Holding Corp., 263 A.D.2d 470 (2d Dept. 1999); In re Elmwood Farms, Inc., 30 B.R.
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282, 289 (Bankr. S.D.N.Y. 1983) ("[C]onstruction had not commenced until nine months after the
recording of the mortgage, ruling out any possibility that a collusive mortgage had been
granted").
Based on the foregoing, the Court grants WSFS's motion to dismiss as to Count Sixteen of
the second amended complaint.
C.

Count Seventeen
In Count Seventeen, Mid Atlantic claims that WSFS's mortgage should be subordinated to

Plaintiff's mechanic lien because material modifications were allegedly made to the Agreement,
but those modifications were not recorded. See Dkt. No. 69 at ¶¶ 184-87. WSFS contends that
Count Seventeen must be dismissed for several reasons. First, WSFS argues that Mid Atlantic
does not have a mechanic's lien because it was discharged by the filing of a bond; and, therefore,
Mid Atlantic no longer has a lien to which WSFS's mortgage could be subordinated. See Dkt. No.
82-7 at 15-16. Second, WSFS contends that, "[e]ven if Mid Atlantic explained away its failure to
plead the bond and the discharge of its lien, Count 17 still fails the Twombly standard." Id. at 17.
Specifically, WSFS argues that Mid Atlantic alleges "upon information and belief" that the
Agreement was "amended or modified" after it was filed. See id. (citing Dkt. No. 69 at ¶ 184).
WSFS contends, however, that Mid Atlantic has not alleged facts "explaining the terms of the
alleged modification or when the alleged modification was made." Id. Further, WSFS argues
that, even though Mid Atlantic does not plead facts describing the nature of the alleged
amendment or modification, "it nonetheless claims (with no apparent basis) that the change was
material (a legal requirement for subordination under the Lien Law)." Id. (citing Dkt. No. 69 at ¶
184). "In short, Mid Atlantic asserts that the unidentified change made to the Agreement on an
unidentified date was not filed within a certain timeframe. These vague allegations are the sort of
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'threadbare recitals' of the elements of a cause of action that do not set forth a plausible claim for
relief under Iqbal and Twombly." Id. Finally, WSFS argues that, even assuming that this claim
otherwise satisfied Twombly and Iqbal, it is still legally insufficient under the Lien Law because
the fact that WSFS may have waived unspecified requirements regarding "submissions" does not
constitute a "modification" for purposes of section 22 of the Lien Law. See id. at 19-21.
In response, Mid Atlantic first contends that "WSFS' argument that Mid Atlantic's lien
was discharged by bond must be rejected because the bond instrument that WSFS relies upon is
not effective since it fails to comply with Section 19 of the Lien Law." Dkt. No. 91 at 10.
Specifically, Mid Atlantic contends that the "lien discharge bond attached to WSFS' papers is not
effective because it was never served upon Mid Atlantic, and a certificate of qualification issued
under Section 1111 of the Insurance Law was not filed with the bond." Id. at 11 (citing Sturges
Decl., Exhibit "A"). Further, Mid Atlantic argues that, "in an email on October 23, 2015, counsel
for AVA in this action, Brian Matula, Esq., asserted that the bond was funded with money that
WSFS had set aside from the construction loan, but that 'the bond expired after a year and the
bond was released with the funds being returned to Mr. Patel.'" Id. (quoting Sitaras Decl., Exhibit
"11"). As such, Mid Atlantic contends that, according to AVA's counsel, there is no longer a
bond and, "[w]hile AVA has failed to provide any documents to support the claims made in the
October 23, 2015 email, the email is enough to raise doubts as to whether the bond is valid and
enforceable." Id.
Next, Mid Atlantic argues that WSFS's motion as to Count Seventeen must be denied
because "WSFS' records show that the expenses and net sum available that were disclosed in the
Section 22 affidavit were changed during the project and no modification was filed." Dkt. No. 91
at 12. Further, Mid Atlantic contends that it "is well-established that any modification in the
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information disclosed in a Lien Law Section 22 affidavit are material and must be filed in the
County Clerk's office." Id. "Here, WSFS' internal records produced in response to Mid Atlantic's
subpoena reveal that the parties modified the expenses and net sum available, and therefore,
WSFS' mortgage must be subordinated to Mid Atlantic's mechanic's lien." Id. at 13.
Mid Atlantic next argues that it has sufficiently pled a claim under section 22 "because it
alleges that WSFS and AVA Defendants made material modifications to, or waived the material
terms of the building loan contract without filing a modification with [the] County Clerk's office."
Id. at 16. "Specifically, Mid Atlantic alleges that 'WSFS disbursed loan proceeds to AVA without
requiring, or waiving the requirements that AVA provide certain certifications and submissions
that AVA was required to submit to WSFS as a condition precedent to the disbursement of loan
proceeds,' and that '[s]aid modifications and amendments have impaired and prejudiced the rights
of contractors and lienors such as Mid Atlantic that furnished improvements to the Property.'" Id.
(quoting Sturges Decl., Exhibit "A" at ¶¶ 187-188).
Section 22 of the Lien Law provides, in relevant part, as follows:
A building loan contract either with or without the sale of land, and
any modification thereof, must be in writing and duly
acknowledged, and must contain a true statement under oath,
verified by the borrower, showing the consideration paid, or to be
paid, for the loan described therein, and showing all other expenses,
if any, incurred, or to be incurred in connection therewith, and the
net sum available to the borrower for the improvement, and, on or
before the date of recording the building loan mortgage made
pursuant thereto, to be filed in the office of the clerk of the county
in which any part of the land is situated, except that any subsequent
modification of any such building loan contract so filed must be
filed within ten days after the execution of any such modification. .
. If not so filed the interest of each party to such contract in the real
property affected thereby, is subject to the lien and claim of a
person who shall thereafter file a notice of lien under this chapter.

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N.Y. Lien Law § 22. "Although section 22 states that 'any subsequent modification' . . . to a
building loan contract must be filed, this language . . . has always been interpreted to mean any
'material' subsequent modification." Altshuler Shahm Provident Funds, Ltd. v. GML Tower, LLC,
21 N.Y.3d 352, 365 n.9 (2013) (quotation and emphasis omitted). A "'modification of a building
loan contract is "material" if it (1) alters the rights and liabilities otherwise existing between the
parties to the agreement or (2) enlarges, restricts or impairs the rights of any third-party
beneficiary.'" Id. (quotation and other citation omitted); see also Howard Sav. Bank v. Lefcon
Partnership, 209 A.D.2d 473, 475 (2d Dept. 1994).
"Amendments to the agreement 'must be filed within ten days after the execution of any
such modification.'" Howard Sav. Bank, 209 A.D.2d at 475. "Noncompliance with the disclosure
mandate of Lien Law § 22 results in the subordination of the Bank's mortgage to the liens
subsequently filed by those who provided services and materials in connection with the project."
Id. (citation omitted). The underlying purpose of Lien Law § 22 is to permit contractors and
subcontractors to ascertain how much money will be made available to the owner in connection
with the project and thus, the ability of the owner to pay for any services and materials provided.
See id. (citation omitted).
In the present matter, the relevant portions of Count Seventeen of the second amended
complaint provide as follows:
184.

Upon information and belief, AVA and WSFS subsequently
amended or modified the material terms of the Building
Loan Contract after it was filed.

185.

Upon information and belief, AVA and WSFS failed to file
one or more modifications or amendments to the Building
Loan Contract in the office of the Tompkins County Clerk
within ten (10) days of such modification or amendment.

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186.

In addition, upon information and belief, WSFS and AVA
agreed to material modifications and amendments to the
terms and conditions of the Building Loan Contract which
were never filed in County Clerk's office.

187.

Upon information and belief, WSFS disbursed loan
proceeds to AVA without requiring, or waiving the
requirement that AVA provide certain certifications and
submissions that AVA was required to submit to WSFS as a
condition precedent to the disbursement of loan proceeds.

188.

Said modifications and amendments have impaired and
prejudiced the rights of contractors and lienors such as Mid
Atlantic that furnished improvements to the Property.

189.

By reason of AVA's and WSFS' failure to properly file
modifications or amendments of the Building Loan Contract
pursuant to Sections 13 and 22 of the N.Y. Lien Law, the
Building Loan Mortgage is subordinate to the Lien and all
subsequently filed mechanic's liens.

Dkt. No. 69 at ¶¶ 184-89.
In the second amended complaint, Mid Atlantic fails to allege any facts explaining the
terms of the alleged modification or when it was made. Although Mid Atlantic fails to plead facts
describing the nature of the alleged amendment or modification, it nonetheless claims that the
change was material. See Dkt. No. 69 at ¶ 184. Mid Atlantic continues by contending that this
unspecified material change to the Agreement, was not filed with Tompkins County within ten
(10) days of the change. See id. at ¶ 185. These allegations in the amended complaint are merely
a formulaic recitation of the elements of a claim brought pursuant to section 22 of the New York
Lien Law. These allegations are devoid of factual enhancements that are necessary to render the
claim plausible.1 See Iqbal, 556 U.S. at 678.
As WSFS notes, Mid Atlantic provided a number of additional facts in its response to the
motion to dismiss that do not appear in the second amended complaint. See Dkt. No. 91. These
allegations are not properly considered by the Court in deciding WSFS's motion to dismiss.
Further, the Court takes no position whether these additional facts, if properly before the Court,
1

(continued...)
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As WSFS correctly contends, Mid Atlantic has failed to articulate how the alleged
unspecified modification(s) impaired the rights of subcontractors such as Mid Atlantic. Mid
Atlantic fails to reference any specific section of the Building Loan Contract, and it fails to
explain how WSFS and AVA Realty, in practice, allegedly deviated from the Agreement's
specific provisions.
Based on the foregoing, the Court grants WSFS's motion to dismiss as to Count
Seventeen.2
D.

Count Eighteen
In Count Eighteen of the second amended complaint, Mid Atlantic contends that it is a

third-party beneficiary to the Agreement and, therefore, is entitled to enforce the terms of the
Agreement against WSFS. See Dkt. No. 69 at ¶¶ 191-99. WSFS argues that this claim must be
dismissed because Mid Atlantic is not a third-party beneficiary to the Agreement. See Dkt. No.
82-7 at 23-24.
The Agreement contains the following provision regarding third-party beneficiary claims:
1

(...continued)

would plausibly allege a claim under section 22 of the Lien Law.
In response to WSFS's motion, Mid Atlantic claims that WSFS improperly argues that it
had the information necessary to plead this cause of action with specificity because WSFS had
produced nearly 6,000 pages of documents in response to Mid Atlantic's subpoena. See Dkt. No.
91 at 20. Mid Atlantic claims that the documents were not produced until after it had already
filed its proposed second amended complaint. See id. As such, without citation to any relevant
authority, Mid Atlantic contends that WSFS "misapplies the law since there is no requirement
that Mid Atlantic plea[d] a Section 22 violation with specificity." Id.
2

Contrary to Mid Atlantic's contentions, it was required to plead this claim with sufficiently
factual specificity to satisfy Iqbal and Twombly. Further, even assuming that WSFS did not turn
over the documents responsive to the subpoena until after it filed its proposed second amended
complaint, nothing prevented Mid Atlantic from cross-moving for leave to amend in response to
the pending motion to dismiss. Rather, Mid Atlantic provided facts from the subpoenaed
documents in its memorandum of law in response to the motion to dismiss, which the Court is not
permitted to consider at this stage.
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Rights of Third Parties. The parties do not intend the benefits of
this Agreement, the Note or the Mortgage to be for the benefit of
any third party … [T]his Agreement shall not be construed as
creating any rights, claims or causes of action against Lender by
Borrower [] in favor of any contractor, subcontractor, supplier of
labor or materials, or any of its respective creditors or any other
person or entity other than Borrower. Without limiting the
generality of the foregoing, advances made directly to any other
contractor, subcontractor or supplier of labor or materials, shall not
be deemed a recognition by Lender of a third-party beneficiary
status of any such person or entity.
Dkt. No. 82-4 at 27-28.3
In the present matter, the Court first notes that Mid Atlantic failed to respond to WSFS's
motion to dismiss as to this claim. As such, the Court finds that Mid Atlantic has abandoned this
claim. See Silverman v. Household Fin. Realty Corp. of New York, 979 F. Supp. 2d 313, 317
(E.D.N.Y. 2013) (dismissing eleven out of fifteen causes of action due to the plaintiff's failure to
oppose the defendants' arguments); Reid v. Ingerman Smith LLP, 876 F. Supp. 2d 176, 186
(E.D.N.Y. 2012) ("This Court may, and generally will, deem a claim abandoned when a plaintiff
fails to respond to a defendant's arguments that the claim should be dismissed") (quoting Arma v.
Buyseasons, Inc., 591 F. Supp. 2d 637, 643 (S.D.N.Y. 2008)); Jackson v. Federal Exp., 766 F.3d
189, 196 (2d Cir. 2014) (holding that the district court may properly consider a claim abandoned
whether the counseled party responded to some claims in response to the pending motion).
Even if the Court were to find that Mid Atlantic did not abandon Count Eighteen, the
Court would nevertheless find that the claim should be dismissed. As the above language makes
clear, the contracting parties did not intend to create any rights for third-party beneficiaries, which
is necessary under Delaware law. See Ins. Co. of North America v. Waterhouse, 424 A.2d 675,

Delaware law governs the "interpretation, construction, enforcement, and all other
aspects of the rights, obligations and duties created under [the] Agreement." Dkt. No. 82-4 at 28.
3

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679 (Del. Super. Ct. 1980); Am. Fin. Corp. v. Computer Sciences Corp., 558 F. Supp. 1182, 1185
(D. Del. 1983) (holding "that under Delaware law both parties must in some manner express an
intent to benefit the third-party before third-party beneficiary status is found") (citations omitted).
Even if Court applied New York law, the result would be the same. See Hylte Bruks Aktiebolag
v. Babcock & Wilcox Co., 399 F.2d 289, 292 (2d Cir. 1968) (applying New York law).
Based on the foregoing, the Court grants WSFS's motion to dismiss as to Count Eighteen
of the second amended complaint.
IV. CONCLUSION
After carefully reviewing the entire record in this matter, the parties' submissions and the
applicable law, and for the foregoing reasons, the Court hereby
ORDERS that Defendant WSFS's motion to dismiss is GRANTED; and the Court further
ORDERS that the Clerk of the Court is directed to terminate WSFS as a Defendant in this
action; and the Court further
ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision
and Order on the parties in accordance with the Local Rules.

IT IS SO ORDERED.
Dated: September 14, 2016
Albany, New York

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