Bloomfield Investment Resources Corp v. Daniloff
DECISION AND ORDER: Accordingly, for the reasons stated above, it is hereby ORDERED that the motion so deemed by the Court as filed by plaintiff Bloomfield Investment Resources Corp. to dismiss the counterclaims of defendant Elliott Daniloff pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure (Dkt. No. 53-1) is GRANTED. SO ORDERED. Elliot Daniloff and Elliot Daniloff terminated. (Signed by Judge Victor Marrero on 4/26/2021) (mml)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
BLOOMFIELD INVESTMENT RESOURCES
17 Civ. 4181 (VM)
- against :
DECISION AND ORDER
VICTOR MARRERO, United States District Judge.
(“Bloomfield” or “Plaintiff”) brought the instant action
estoppel, and unjust enrichment. (See First Amended Complaint
(“FAC”), Dkt. No. 51.) Daniloff asserts counterclaims for
breach of contract, promissory estoppel, fraud, and failure
to indemnify. (See Answer to Amended Complaint (“AAC”), Dkt.
No. 52.) Bloomfield and Daniloff’s claims are based on two
Bloomfield alleges that it loaned $25 million to a company
owned by two investment funds managed by ED Capital, LLC and
ED Capital Management, LLC (collectively, “ED Capital”),
entities entirely owned and controlled by Daniloff, and that
it had loaned this money in reliance on Daniloff’s fraudulent
promises to return it. Daniloff alleges that Bloomfield had
represented that it would, and did in fact, invest the $25
million, but Bloomfield failed to treat the money as an
investment and abide by the contractual term providing for
recovery of the investment over time via trading.
Now before the Court is a premotion letter submitted by
Daniloff’s counterclaims. (See the “July 6 Letter,” Dkt. No.
53-1.) The Court also has before it a letter response from
Daniloff (see the “July 27 Letter,” Dkt. No. 53-2), and a
reply letter from Bloomfield (see the “August 3 Reply Letter,”
Dkt. No. 53-3). The Court construes Bloomfield’s letters as
a motion by Bloomfield to dismiss the Complaint pursuant to
Rule 12(b)(6) of the Federal Rules of Civil Procedure (the
“Motion”).1 For the reasons set forth below, the motion is
See Kapitalforeningen Lægernes Invest. v. United Techs. Corp.,
779 F. App’x 69, 70 (2d Cir. 2019) (affirming the district court ruling
deeming an exchange of letters as a motion to dismiss).
The relevant factual background below, except as otherwise noted,
derives from the AAC and the facts pleaded therein, which the Court
accepts as true for the purposes of ruling on a motion to
dismiss. See Spool v. World Child Int’l Adoption Agency, 520 F.3d 178,
180 (2d Cir. 2008) (citing GICC Capital Corp. v. Tech. Fin. Grp., Inc.,
67 F.3d 463, 465 (2d Cir. 1995)); see also Chambers v. Time Warner, Inc.,
282 F.3d 147, 152 (2d Cir. 2002). Except when specifically quoted, no
further citation will be made to the AAC.
ED Capital is the investment advisor and investment
manager for Synergy Hybrid Fund Ltd. and Synergy Hybrid Feeder
Fund Ltd. (collectively, the “Synergy Funds”), investment
funds incorporated in the Cayman Islands that invest in
Russian public and privately held securities. The Synergy
Funds hold 100% of the shares of the United Meat Group
(“UMG”), a Russian corporation. Bloomfield is an entity under
the ultimate control of David and Simon Reuben (“the Rueben
Brothers”), wealthy and sophisticated investors.
In November 2011, Bloomfield transferred to UMG the $25
Daniloff, Bloomfield represented during negotiations that the
$25 million transfer constituted an investment in the Synergy
Funds made pursuant to three agreements: (1) a Memorandum of
Brothers’ representative Patrick O’Driscoll (MOU, Dkt. No.
52-1); (2) the Synergy Hybrid Fund Subscription Agreement
“Subscription Agreement”); and (3) the Confidential Private
Placement Memorandum (the “Memorandum”). Bloomfield, on the
other hand, contends that the $25 million was a loan to UMG
that Daniloff promised would be repaid with interest.
In the AAC, Daniloff makes the following allegations.
Daniloff sought investors for UMG in 2010 and approached the
Reuben Brothers. The Reuben Brothers or their representatives
structure of the investment. Daniloff alleges that throughout
those meetings, the Reuben Brothers represented that they
intended to make an investment and never stated they planned
to make a loan. In various communications about the venture,
Daniloff contends that the parties used language such as
“proposed investment,” “investment,” and “invest.” (AAC ¶¶
11-13, 15.) In late 2011, Daniloff and Patrick O’Driscoll
entered into the MOU.
The MOU, attached to the AAC,3 is a single-page document
that provides a “summary of the potential Reuben investment
in Synergy Hybrid Fund Ltd (SHF).” (MOU.) It notes that
“Reuben BVI will invest US $25m in SHF,” which “owns 100% of
equity.” (Id.) It also provides that “Reuben BVI will recover
its $25m over time via trading and the shareholding in SHF
will be diluted to 25% accordingly.” (Id.) The expected
completion date for the investment is listed in the MOU as
Because the MOU was attached to the AAC, the Court may properly consider
it on a motion to dismiss. See Beautiful Home Textiles (USA), Inc. v.
Burlington Coat Factory Warehouse Corp., No. 13 Civ. 1725, 2013 WL
3835191, at *2 (S.D.N.Y. July 25, 2013) (“The parties’ contract, attached
as an exhibit to Defendant's counterclaims, is considered part of the
September 15, 2011. The MOU also contains an “[i]llustrative
structure” of the investment. (Id.)
Daniloff alleges that had he known that the Reuben
Brothers planned to make only a loan, he would have sought
other investors and would not have accepted the $25 million
Bloomfield, or any of their representations.
On August 31, 2011, Bloomfield was created for the
purpose of investing in the Synergy Funds. On November 4,
2011, Bloomfield entered into the Subscription Agreement,
provisions of which Daniloff argues are also consistent with
the investment purpose, and the Memorandum. The Subscription
Agreement also contains an indemnification provision. On
November 11, 2011, Bloomfield transferred $25 million to the
On or about June 2013, Bloomfield became dissatisfied
with its investment and began pressuring Daniloff to repay
the $25 million. It also began asserting that it made an
undocumented loan to UMG rather than an investment. On June
proceeding against UMG in the Netherlands, alleging that
Bloomfield made an undocumented loan to UMG, not to Daniloff.
Subscription Agreement by mischaracterizing its investment as
a loan, misrepresenting its purpose in investing in the
Synergy Funds, and disclosing and publishing the contracts in
alleges that Bloomfield breached the MOU by failing to perform
according to its terms. Daniloff alleges that the various
representations and promises made by Bloomfield discussed in
the AAC, combined with its course of conduct, both induced
Daniloff into taking actions detrimental to his economic
interests and caused him to refrain from taking other actions
in reliance on Bloomfield’s promises. Bloomfield also “made
numerous misrepresentations of material fact” to Daniloff.
(AAC ¶ 59.) Daniloff seeks indemnification based on the
Subscription Agreement, which Daniloff argues applies through
the collateral contract doctrine based on the MOU.
RELEVANT PROCEDURAL HISTORY
On November 18, 2015, ED Capital brought suit against
Bloomfield and various other defendants in this Court. On
Bloomfield then commenced the instant suit against Daniloff,
which the Court determined was related to ED Capital’s suit,
on July 6, 2017. Bloomfield moved to dismiss ED Capital’s
amended complaint, and Daniloff moved to dismiss Bloomfield’s
On April 3, 2018, the Court addressed both motions. ED
Capital, LLC v. Bloomfield Invest. Res. Corp., No. 17 Civ.
4181, 2018 WL 1779379 (S.D.N.Y. Apr. 3, 2018). The Court held
that the allegations in the ED Capital amended complaint,
even when accepted as true, could not adequately support the
claims for relief ED Capital sought and therefore dismissed
ED Capital’s complaint. Id. at *11. By contrast, the Court
held that Bloomfield’s complaint alleged sufficient facts to
survive a motion to dismiss and therefore denied Daniloff’s
motion to dismiss. Id. On November 30, 2018, the Second
amended complaint. ED Capital, LLC v. Bloomfield Invest. Res.
Corp., 757 F. App’x 26 (2d Cir. 2018).
After the Court rendered its decision, Daniloff filed
his Answer on May 24, 2018. (Dkt. No. 21.) In the Answer,
Daniloff asserted the same counterclaims as he does in the
AAC. By letter dated June 14, 2018, Bloomfield notified
counterclaims, and Daniloff responded by letter dated June
22, 2018. (Dkt. Nos. 24, 27.) Bloomfield then sent the July
6 Letter. On July 13, 2018, the Court held a conference and
instructed Daniloff to respond to the July 6 Letter and
Bloomfield to file a reply letter. (See Minute Entry dated
July 13, 2018.) The July 23 Letter and August 3 Reply Letter
followed. Before the Court ruled on Bloomfield’s proposed
motion to dismiss, the matter was stayed while the parties
discussed settlement. (See Dkt. Nos. 35, 36, 37, 38, 39, 41,
42.) After the Court ordered a status update on the matter on
November 12, 2020, the parties informed the Court on December
3, 2020 that no resolution had been reached. (Dkt. No. 44.)
On February 11, 2021, Bloomfield filed the FAC. Daniloff
filed the AAC on March 29, 2021. On April 15, 2021, the
parties filed a joint letter to the Court asking that the
Court accept the July 6 Letter, July 23 Letter, and August 3
Reply Letter, which the parties had previously submitted with
respect to dismissal of Daniloff’s original counterclaims, in
support of and opposition to a motion to dismiss the AAC’s
counterclaims. (Dkt. No. 53.) The Court does so in the instant
Decision and Order.
THE PARTIES’ ARGUMENTS
Bloomfield argues that Daniloff’s counterclaims must be
contends that the breach of contract claim fails because the
MOU is not a binding contract. Even if it were, Daniloff
cannot enforce the MOU because of his own failure to perform
under that agreement and because Daniloff has failed to allege
Bloomfield breached the MOU. Second, Bloomfield argues that
Daniloff’s promissory estoppel claim fails because all of the
alleged promises stemmed from the MOU, making the claim
duplicative. Third, Bloomfield asserts that the fraud claim
is untimely and that no actionable misrepresentation has been
adequately alleged. Finally, Bloomfield argues that Daniloff
cannot seek indemnification under the Subscription Agreement
because he cannot enforce that contract.
Daniloff argues that the AAC’s counterclaims have been
Bloomfield breached by seeking to recover its $25 million as
a loan repayment rather than recovering the investment over
time via trading as outlined in the MOU. Second, Daniloff
mischaracterizing the investment as a loan, misrepresenting
the purpose in investing in the Synergy Funds, and violating
the confidentiality provisions of the Subscription Agreement.
simultaneously if the existence of the contract is disputed.
Third, Daniloff argues that his fraud claim is timely under
the discovery rule because he did not learn that Bloomfield
was claiming that it made a loan rather than investment until
June 7, 2017. Fourth, Daniloff argues that the collateral-
contract doctrine, recognized by Cayman Islands law, allows
him to enforce promises made to him and for his benefit under
the Subscription Agreement based on Bloomfield’s entering the
“To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim
to relief that is plausible on its face.’” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). This standard is met “when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
plausible. See id. However, a court should not dismiss a
allegations sufficiently “raise a right to relief about the
speculative level.” Twombly, 550 U.S. at 555.
In resolving a Rule 12(b)(6) motion, the Court’s task is
“to assess the legal feasibility of the complaint, not to
assay the weight of the evidence which might be offered in
support thereof.” In re Initial Pub. Offering Sec. Litig.,
383 F. Supp. 2d 566, 574 (S.D.N.Y. 2005) (internal quotation
marks omitted), aff’d sub nom. Tenney v. Credit Suisse First
Bos. Corp., No. 05 Civ. 3430, 2006 WL 1423785 (2d Cir. May
19, 2006). In this context, the Court must draw reasonable
inference in favor of the nonmoving party. See Chambers v.
TimeWarner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). However,
the requirement that a court accept the factual allegations
in the complaint as true does not extend to legal conclusions.
counterclaim is evaluated under the same standard as a motion
to dismiss a complaint.” Holborn Corp. v. Sawgrass Mut. Ins.
Co., 304 F. Supp. 3d 392, 397 (S.D.N.Y. 2018) (citation
The Court grants the Motion in part and denies the Motion
in part. Specifically, the Court is persuaded that the MOU by
its terms is not a binding preliminary agreement. Nor does
provision. In addition, Daniloff’s promissory-estoppel claim
alleged detrimental reliance. Daniloff’s fraud claim also
fails because it is time barred.
BREACH OF CONTRACT AND INDEMNIFICATION
The Court is not persuaded that the MOU is a binding
stated a contract claim against Bloomfield. Under New York
law, a binding contract requires “a manifestation of mutual
assent sufficiently definite to assure that the parties are
truly in agreement with respect to all material terms.”
Tractebel Energy Mktg. v. AEP Power Mktg., Inc., 487 F.3d 89,
95 (2d Cir. 2007). “Ordinarily, where the parties contemplate
instrument, a preliminary agreement does not create a binding
contract.” Brown v. Cara, 420 F.3d 148, 153 (2d Cir. 2005)
(citation omitted). In some instances, however, preliminary
agreements may constitute binding contracts. Id.
In order for Daniloff’s breach-of-contract claim, which
is premised on Bloomfield’s alleged failure to adhere to the
repayment terms of the MOU, to be viable, the Court must find
that the MOU is what is commonly referred to as a “Type I”
preliminary agreement.4 A Type I agreement is one in which
This is because even if the Court found that the MOU constituted what
is commonly referred to as a “Type II” preliminary agreement, such an
agreement “does not commit the parties to their ultimate contractual
objective but rather to the obligation to negotiate the open issues in
good faith in an attempt to reach the alternate objective within the
agreed framework.” Teachers Ins. & Annuity Ass’n v. Tribune Co., 670 F.
Supp. 491, 498 (S.D.N.Y. 1987). Daniloff is not arguing that Bloomfield
failed to negotiate in good faith, however. His claim is that Bloomfield
failed to abide by the MOU’s terms governing return of Bloomfield’s
investment. As such, even if the MOU were a Type II agreement, Bloomfield
would not be liable for the complained-of breach. The Court’s analysis is
accordingly limited to whether the MOU is a Type I agreement.
[t]he parties have reached complete agreement
(including the agreement to be bound) on all the
issues perceived to require negotiation. Such an
agreement is preliminary only in form -- only in
the sense that the parties desire a more elaborate
formalization of the agreement. The second stage is
not necessary; it is merely considered desirable.
Teachers Ins. & Annuity Ass’n v. Tribune Co., 670 F. Supp.
491, 498 (S.D.N.Y. 1987). This type of agreement “binds both
sides to their ultimate contractual objective in recognition
that that contract has been reached, despite the anticipation
of further formalities.” Id. Thus, for the terms of the MOU
to be enforceable, the MOU must be a Type I agreement. When
deciding whether an agreement is a Type I agreement, Courts
consider the following factors: (1) whether there is an
express reservation of the right not to be bound in the
absence of a writing; (2) whether there has been partial
performance of the contract; (3) whether all of the terms of
the alleged contract have been agreed upon; and (4) whether
the agreement at issue is the type of contract that is usually
committed to writing. Brown, 420 F.3d at 154.
Applying these factors to the language of the MOU, any
claim that the MOU is a Type I binding preliminary agreement
is implausible. The first factor requires looking at the
“explicit language of commitment or reservation.” Brown, 420
F.3d at 154. While there “is no explicit reservation in the
MOU, . . . the language is decidedly non-committal.” Id. at
154. The MOU contains numerous equivocal terms and provides
only a “summary of the potential Reuben investment.” (MOU
(emphasis added).) “Because the language is so non-committal,
significance.” Brown, 420 F.3d at 155; see also Adjustrite
Sys., Inc. v. Gab Bus. Servs., Inc., 145 F.3d 543, 549-50 (2d
supports” finding a document entitled a “proposal” to be
The second factor of partial performance also undercuts
any finding that the MOU is plausibly a Type I binding
agreement. According to the terms of the MOU, the investment
would be completed by September 15, 2011. But the AAC alleges
that Bloomfield transferred the $25 million to the Synergy
Funds well after the September 15 deadline. The AAC states
that the transfer was made on November 11, 2011, after the
Bloomfield’s performance undermines any argument that the
parties intended to be bound by the MOU. Rather, the only
plausible conclusion based on these allegations is that it
was the Subscription Agreement, not the MOU, that imposed
binding obligations upon Bloomfield.
The third factor of whether there are open terms further
indicates that the MOU is not a binding agreement. Here, it
is clear from the face of the one-page MOU, which by its own
terms is only a “summary” of a “potential” investment, that
reached by the Bloomfield and the Synergy Funds reinforces
“that much is missing from the MOU.” See Brown, 420 F.3d at
155. There is a “strong presumption” against finding that
agreements with open terms are binding, Tribune, 670 F. Supp.
at 499, and Daniloff has offered no allegations that could
plausibly overcome this strong presumption.
The Court declines to conduct any analysis with respect
to the fourth factor at this stage. Courts in this district
have recognized that “it is nearly impossible to determine at
the motion to dismiss stage whether a more formal contract
conditions.” See, e.g., Sawabeh Info. Servs. Co. v. Brody,
832 F. Supp. 2d 280, 307-08 (S.D.N.Y. 2011). Regardless,
because three of the four factors in the Type I analysis weigh
in favor of Bloomfield, there is no need to address the fourth
agreement as necessary to give rise to his breach-of-contract
claim based on the MOU.
Nor can Daniloff bring any breach-of-contract claims,
including for indemnification, arising from the Subscription
Agreement or Memorandum. Daniloff lacks standing to bring
such claims because he is not a party to those agreements.
Daniloff recognizes this and instead seeks to rely on the
(usu[ally] oral) agreement will not be excluded under the
parol-evidence rule if the oral agreement is independent of
and not inconsistent with the written contract, and if the
information in the oral agreement would not ordinarily be
expected to be included in the written contract.” ED Capital,
LLC v. Bloomfield Invest. Res. Corp., 757 F. App’x 26, 29 (2d
collateral-contract doctrine applies in this case such that
the Subscription Agreement may be considered by the Court due
to the existence of a separate agreement -- the MOU.
agreement. Even if the MOU were a valid separate agreement,
it would not constitute a collateral contract. In affirming
the Court’s prior decision dismissing ED Capital’s amended
breadth of the Subscription Agreement, “[i]f Bloomfield (or,
indeed, the Synergy funds) intended to give some other party
-- like ED Capital -- the right to enforce the provisions of
the Subscription Agreement, one would ordinarily expect such
agreement,” and therefore “the alleged separate agreement
does not qualify as a collateral contract.” Id. Under this
reasoning, Daniloff, who, like ED Capital, is not a party to
the Subscription Agreement, cannot enforce the Subscription
Agreement regardless of the MOU. Thus, pursuant to the Second
Circuit’s decision in ED Capital, Daniloff lacks standing to
bring claims under the Subscription Agreement.
Dismissal of Daniloff’s promissory-estoppel claim is
requires demonstrating: “1) a clear and unambiguous promise;
2) reasonable and foreseeable reliance on that promise; and
3) injury to the relying party as a result of the reliance.”
Kaye v. Grossman, 202 F.3d 611, 615 (2d Cir. 2000).
alleged the first two requirements, the Court concludes that
Daniloff has not sufficiently alleged injury. Daniloff claims
that he was injured because he failed to seek other investors
as a result of his reliance on Bloomfield’s representations
that it was making an investment and not a loan. But this
assumptions.” Hedspeth v. Citicorp Individual Bank Ret. Plan,
No. 91 Civ. 1471, 1993 WL 204808, at *19 (S.D.N.Y. June 7,
1993). While Daniloff has alleged that “he would have sought
other investors,” there are no allegations that he actually
did forego any alternative offers. (AAC ¶ 24.)
directly result from the reliance, and thus is typically
applied where vested or clearly identified rights have been
lost.” Id.; see also Philo Smith & Co., Inc. v. USLIFE Corp.,
relinquishment of their opportunity to seek other purchasers
. . . hardly seems the sort of irremediable change in position
estoppel”); Optionality Consulting Pte. Ltd. v. Nekos, No. 18
Civ. 5393, 2019 WL 4523469, at *8 (S.D.N.Y. Sept. 18, 2019)
(explaining that “the mere failure to obtain an uncertain
prospective benefit does not rise to a sufficient level of
unconscionability to warrant the application of the doctrine
citation omitted); Hoffmann v. Boone, 708 F. Supp. 78, 82
(S.D.N.Y. 1989) (noting that under New York law, “[f]oregoing
other business opportunities . . . is not enough” to establish
promissory-estoppel claim is accordingly dismissed.5
Dismissal of Daniloff’s fraud claim is warranted because
limitations applicable to a fraud claim is the later of either
(i) six years from the date that the claim accrued or (ii)
two years from the time the fraud was discovered or could
Liveintent, Inc. v. Naples, 293 F. Supp. 3d 433, 444 (S.D.N.Y.
2018) (quoting N.Y. C.P.L.R. § 213(8)). Daniloff contends
that his claim is timely under the second provision.
The Court does not agree. Daniloff argues that he did
not discover the alleged fraud -- “that Bloomfield would
The Court further observes that the AAC does not properly suggest that
Daniloff suffered any other sufficient injury. Whether as a loan or
investment, Daniloff received the $25 million needed. To the extent
Daniloff claims he suffered monetary or reputational harm as a result of
the legal proceedings Bloomfield has brought to recover its money, “in
the absence of egregious circumstances, courts have consistently rejected
promissory estoppel claims when the alleged injuries consisted of lost
profits, lost fees, forgone business opportunities or damage to business
reputation.” Darby Trading Inc. v. Shell Int’l Trading & Shipping Co.,
568 F. Supp. 2d 329, 341 (S.D.N.Y. 2008) (internal quotation marks and
‘invest’ instead of ‘lend’” (July 27 Letter at 3) -- until
Bloomfield brought the instant suit on June 7, 2017, making
his counterclaim, originally filed on May 24, 2018, timely.
But Daniloff’s argument is belied by the AAC’s allegations
purported fraud, or could have discovered it with reasonable
diligence, well before Bloomfield brought this suit. The AAC
explicitly alleges that around June 2013, Bloomfield became
dissatisfied with its investment and began asserting that it
made an undocumented loan to UMG rather than an investment.
Moreover, the AAC alleges that on June 16, 2014, Bloomfield
alleged that it made an undocumented loan to UMG in an action
filed in the Netherlands. Thus, by June 2014 at the latest,
Daniloff would have been aware that Bloomfield considered the
$25 million payment to be a loan. See Sejin Precision Indus.
Co., Ltd. v. Citibank, N.A., 726 F. App’x 27, 31 (2d Cir.
2018) (noting that lawsuits may put a claimant on notice of
potential fraud for purposes of the discovery rule).
Daniloff argues that “Bloomfield never affirmatively
took the position that its investment was actually a loan
until it filed this action on June 7, 2017.” (Dkt. No. 27, at
3.) The Court is not persuaded. Daniloff’s own allegations
unequivocally state that around June 2013, Bloomfield “began
asserting that it made an undocumented ‘loan’ to UMG rather
than an investment in the Synergy Funds.” (AAC ¶ 39.) Nothing
in this allegation suggests that Bloomfield had not yet taken
an affirmative stance on whether the payment was a loan.
payment would have been made abundantly clear from the fact
Netherlands and alleged therein that it had made a loan to
Daniloff’s claim that he did not discover the purported fraud
until the filing of the instant suit is simply implausible.
The fraud claim is therefore dismissed as untimely.
Accordingly, for the reasons stated above, it is hereby
ORDERED that the motion so deemed by the Court as filed
by plaintiff Bloomfield Investment Resources Corp. to dismiss
the counterclaims of defendant Elliott Daniloff pursuant to
Rule 12(b)(6) of the Federal Rules of Civil Procedure (Dkt.
No. 53-1) is GRANTED.
New York, New York
26 April 2021
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