Kairam, M.D. v. West Side GI, LLC

Filing 400

ORDER: Adopting REPORT AND RECOMMENDATION: for 372 Report and Recommendation. Plaintiff's objections are otherwise conclusory and general or restate the parties' original arguments. Wallace, 2014 WL 2854631, at *1; Bailey, 2014 WL 2855 041, at *1. Thus, the Court has reviewed the remainder of the thorough and well-reasoned R&R for clear error and finds none. For the foregoing reasons, the Court OVERRULES Plaintiff's objections to the R&R and ADOPTS the R&R in its entirety. The Clerk of Court is respectfully directed to terminate the motions at ECF Nos. 329 and 383. SO ORDERED. (Signed by Judge Analisa Torres on 1/12/2024) (ama) Transmission to Orders and Judgments Clerk for processing.

DISCUSSION2
I.

Standard of Review

A district 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). When a party makes
specific objections, the court reviews de novo those portions of the R&R to which objection is made.
Id.; Fed. R. Civ. P. 72(b)(3). However, “when a party makes only conclusory or general objections,
or simply reiterates [her] original arguments,” the court reviews the R&R strictly for clear error.
Wallace v. Superintendent of Clinton Corr. Facility, No. 13 Civ. 3989, 2014 WL 2854631, at *1
(S.D.N.Y. June 20, 2014) (citation omitted); see also Bailey v. U.S. Citizenship & Immig. Servs., No.
13 Civ. 1064, 2014 WL 2855041, at *1 (S.D.N.Y. June 20, 2014) (“[O]bjections that are not clearly
aimed at particular findings . . . do not trigger de novo review.”). Moreover, “a district judge will not
consider new arguments raised in objections to a magistrate judge’s report and recommendation that
could have been raised before the magistrate but were not.” United States v. Gladden, 394 F. Supp.
3d 465, 480 (S.D.N.Y. 2019) (citation omitted).
The Court may adopt those portions of the R&R to which no objection is made “as long as no
clear error is apparent from the face of the record.” Oquendo v. Colvin, No. 12 Civ. 4527, 2014 WL
4160222, at *2 (S.D.N.Y. Aug. 19, 2014) (citation omitted). An R&R is clearly erroneous if the
reviewing court is “left with the definite and firm conviction that a mistake has been committed.”
Easley v. Cromartie, 532 U.S. 234, 242 (2001) (citation omitted); see also Travel Sentry, Inc. v.
Tropp, 669 F. Supp. 2d 279, 283 (E.D.N.Y. 2009).

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The Court presumes familiarity with the facts and procedural history of this action as detailed in the prior orders of the
Court and Judge Aaron. See ECF Nos. 215, 241, 315.

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II.

Analysis

The R&R recommends that the three theories of Plaintiff’s fraud claim and her negligentmisrepresentation claim be dismissed and that leave to amend be denied. Plaintiff objects to each
recommendation. See generally Pl. Objs.
A. Fraud
1. Fraudulent Misrepresentations During Negotiations
Plaintiff objects to the R&R’s conclusion that her reliance on statements during negotiations
to buy WSGI shares was not justifiable, a necessary element of fraud. See Pl. Objs. at 7–19. In
assessing reliance, courts “consider the entire context of the transaction, including factors such as its
complexity and magnitude, the sophistication of the parties, and the content of any agreements
between them.” Universe Antiques, Inc. v. Varelka, 510 F. App’x 74, 75–76 (2d Cir. 2013) (citation
omitted).3 Plaintiff contends that the R&R “fails to perform a complete analysis” of the factors. Pl.
Objs. at 10, 12. Plaintiff’s conclusory objection is belied by the R&R, which carefully examines the
transaction as a whole and finds that the specific disclaimers in the Membership Subscription
Agreement (“MSA”) that Plaintiff signed preclude justifiable reliance, regardless of Plaintiff’s
sophistication. R&R at 8, 12; see ECF No. 241 at 3 (overruling Plaintiff’s prior objection to “giving
effect to a disclaimer in the [MSA]”).
Plaintiff next attempts to circumvent the disclaimers in two ways, and objects to the R&R’s
rejection of both. First, Plaintiff argues that the disclaimers are ineffective because WSGI had
purportedly failed to deliver a signed copy of the MSA to Plaintiff. Pl. Objs. at 18–20. The R&R

Plaintiff argues that the R&R applied the standard for “reasonable reliance” and contends that this is a more stringent
standard than “justifiable reliance.” Pl. Objs. at 7–9. The R&R notes that the Second Circuit and New York courts use
the terms interchangeably. R&R at 6 (collecting cases). Moreover, the R&R applies the test that the Second Circuit has
set forth—and that, indeed, Plaintiffs request this Court to use—to determine “justifiable reliance.” Compare R&R at 6
with Pl. Objs. at 9.
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finds this argument to “lack[] credulity,” as Plaintiff has worked at WSGI for nine years pursuant to
the MSA, alleges that WSGI signed the MSA, and does not allege that she lacks a signed copy. R&R
at 8–9. Plaintiff argues only that the Court should not assess credulity on a Rule 12(b)(6) motion. Pl.
Objs. at 18. But, the Court need not credit allegations that are not well-pleaded, Ashcroft v. Iqbal,
556 U.S. 662, 679, 683 (2009), and, therefore, agrees with Judge Aaron’s analysis.
Second, Plaintiff contends that certain alleged misrepresentations referred to facts within
Defendants’ peculiar knowledge and were, therefore, not covered by the disclaimers. The R&R finds
that Plaintiff was able to access each piece of information that she claims was peculiar. R&R at 11–
12. Plaintiff does not contest this finding, claiming instead that the R&R did not account for her level
of sophistication in determining whether knowledge was peculiar to Defendants. See Pl. Objs. at 14–
16. But, the R&R correctly found that “even the most unsophisticated investor cannot fail to do any
diligence” when she has “access to all necessary information.” R&R at 12–13; see Merrill Lynch &
Co. v. Allegheny Energy, Inc., No. 02 Civ. 7689, 2005 WL 832050, at *7 (S.D.N.Y. Apr. 12, 2005)
(noting that the exception applies when the party had no access to or notice of the information alleged
to be “critical [and] material”); DIMON Inc. v. Folium, Inc., 48 F. Supp. 2d 359, 368 (S.D.N.Y. 1999)
(finding peculiar knowledge when the information was accessible “only with extraordinary effort or
great difficulty”). Accordingly, the Court OVERRULES Plaintiff’s objections to Judge Aaron’s
recommendation as to this fraud theory.
2. Fraudulent Misrepresentations in MSA
Plaintiff contends that the MSA implied WSGI’s compliance with an ambulatory surgery
center exception to the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b)(3)(L)(ii)(II) (the “ASC Safe

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Harbor”).4 Pl. Objs. 16–17. But, Plaintiff’s general objection offers no response to two holdings in
the R&R that preclude this fraud theory: (1) Plaintiff could not justifiably rely on any representation
of future compliance in light of an MSA disclaimer, R&R at 20; and (2) Plaintiff did not adequately
allege that, at the time of the MSA’s execution, Defendants knew that they were currently noncompliant with the ASC Safe Harbor, id. at 16. Accordingly, Plaintiff’s objection is OVERRULED.
3. Fraudulent Inducement
The R&R concludes that Plaintiff’s fraudulent inducement claim remains duplicative of her
breach-of-contract claims. R&R at 17–18; see also ECF No. 215 at 20. Plaintiff argues that, because
the Court already dismissed her breach-of-contract claims, the fraud claims must be permitted to
proceed. Pl. Objs. at 26–28; see ECF No. 215 at 26–30 (recommending dismissal of Plaintiff’s
breach-of-contract claims), R. & R. adopted in relevant part, ECF No. 241 at 7; see also id. (denying
leave to amend contract claims). Plaintiff is incorrect.
If the allegations underlying a fraud claim arise from the parties’ duties under a contract, “a
cause of action sounding in fraud does not lie,” unless the plaintiff can demonstrate (1) a legal duty
separate from the contractual duty, (2) a fraudulent misrepresentation collateral or extraneous to the
contract, or (3) the availability of special damages that are unrecoverable as contract damages.
Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13, 20 (2d Cir. 1996). The R&R
finds that the fraudulent-inducement claim is based on a lack of “sincer[ity] in [Defendants’] promise
to perform” under the MSA—in other words, the parties’ duties under the contract.5 R&R at 19.

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The ASC Safe Harbor affects the valuation of the company: in other words, compliance with the ASC Safe Harbor
would permit WSGI to compute a different valuation than if WSGI were not in compliance.
Plaintiff also claims that—outside of the MSA—Defendants “promise[d] to compensate her for cases,” but the R&R
correctly found that, under New York law, this “promissory statement of what will be done in the future gives rise only to
a breach of contract cause of action.” R&R at 19 (quoting Matsumura v. Benihana Nat’l Corp., 542 F. Supp. 2d 245, 253
(S.D.N.Y. 2008))
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And, Plaintiff does not demonstrate any of the three exceptions set forth in Bridgestone/Firestone.6
Therefore, Defendants’ purported intent not to perform their duties under the MSA is cognizable only
as a breach-of-contract claim, and Plaintiff cannot resurrect her dismissed contract claim as a fraud
cause of action. Accordingly, Plaintiff’s objection is OVERRULED.
B. Negligent Misrepresentation
The R&R concludes that Plaintiff’s allegations regarding a “long history of trust and
professional respect” fail to give rise to the “privity-like” relationship necessary for a negligentmisrepresentation claim. R&R at 23; see ECF No. 215 at 21–27. In objecting, Plaintiff merely
reiterates that she has “long, pre-existing relationships”7 with the three persons who purportedly made
misrepresentations to her, “as well as an intense relationship of trust with WSGI.” Pl. Objs. at 23–25.
As such, Plaintiff does not trigger de novo review, and the Court finds that the R&R did not commit
clear error. See ECF No. 241 at 5–6.
Moreover, even if Plaintiff could demonstrate a privity-like relationship, the R&R rejects
Plaintiff’s negligent-misrepresentation claims on multiple grounds that the Court has already
discussed: Plaintiff cannot claim reasonable reliance on the misrepresentations, and the claim itself is
cognizable only as a breach-of-contract claim. R&R at 23–24; see supra Section I.A. Accordingly,
Plaintiff’s objection is OVERRULED.

Plaintiff cites caselaw stating that dismissal is required only when the contract claim is “viable.” Pl. Objs. at 27–28.
Plaintiff interprets this caselaw to foreclose a duplicativeness finding when the breach-of-contract claims are dismissed.
But, her cited cases stand for a different proposition: a fraud claim may proceed despite a parallel breach-of-contract
claim if the party against whom the fraud claim is asserted was not a party to the contract. See Sun Prods. Corp. v. Burch,
507 F. App’x 46, 48 (2d Cir. 2013); Richbell Info. Servs. v. Jupiter Partners, 309 A.D.3d 288, 305 (N.Y. App. Div. 2003);
see also Exch. Listing, LLC v. Inspira Techs., Ltd., 661 F. Supp. 3d 134, 157 (S.D.N.Y. 2023) (“[A] plaintiff may
separately state a claim for fraud against a non-party to a contract that would otherwise be barred as duplicative of a
breach of contract claim against a party to the contract”). Because Defendants were parties to the MSA and made the
alleged oral promise to compensate her for cases, the exception does not apply.
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Plaintiff states that these persons gave her business advice and “used her office to perform procedures.” Pl. Objs. at 23–
24. These allegations are insufficient to explain why “[P]laintiff’s reliance on [their] representation[s] was justifiable.”
EED Holdings v. Palmer Johnson Acquisition Corp., 387 F. Supp. 2d 265, 281 (S.D.N.Y. 2004).
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C. Leave to Amend
“[I]t is within the sound discretion of the district court whether to grant or deny leave to
amend.” Schvimmer v. Off. of Ct. Admin., 857 F. App’x 668, 671 (2d Cir. 2021) (citation omitted).
Plaintiff argues that the R&R’s recommendation to deny her leave to amend ignores the Second
Circuit’s precedent in Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., 797 F.3d 160, 190 (2d Cir.
2015). Plaintiff is incorrect. Loreley requires only that the Court provide Plaintiff with guidance as
to the “precise defects” before denying leave to amend. 797 F.3d at 191. The Court has done so with
regard to the fraud claims twice and the negligent-misrepresentation claims once.8 See ECF No. 241
at 6–7. Plaintiff does not contest the R&R’s finding that the deficiencies in Plaintiff’s second
amended complaint persist and “remain remarkably the same as in the prior pleading.” R&R at 24.
Plaintiff, moreover, has not identified “how [she] propose[s] to amend the complaint to cure its
defects.” F5 Cap v. Pappas, 856 F.3d 61, 90 (2d Cir. 2017). Accordingly, Plaintiff’s objection is
OVERRULED, and the Court denies leave to amend.
CONCLUSION
Plaintiff’s objections are otherwise conclusory and general or restate the parties’ original
arguments. Wallace, 2014 WL 2854631, at *1; Bailey, 2014 WL 2855041, at *1. Thus, the Court
has reviewed the remainder of the thorough and well-reasoned R&R for clear error and finds none.

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Indeed, the Court previously permitted Plaintiff the opportunity to replead her negligent-misrepresentation claim,
overruling Judge Aaron’s recommendation, see ECF No. 241 at 7, 9; and granted Plaintiff leave to amend the fraud claim
specifically related to the issue of reliance, see ECF No. 315 at 3.

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For the foregoing reasons, the Court OVERRULES Plaintiff’s objections to the R&R and
ADOPTS the R&R in its entirety. The Clerk of Court is respectfully directed to terminate the
motions at ECF Nos. 329 and 383.
SO ORDERED.
Dated: January 12, 2024
New York, New York

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