with critical government agencies," because of Grosman's misrepresentations constitute sufficient injuries. The Court disagrees.
The plaintiffs have failed to allege a cognizable injury. There is no actual harm. As stated above, the plaintiffs claim only that there is a threat that they may not obtain the necessary government approvals and that their reputation may be affected. These allegations are too speculative to survive even the most generous application of Fed. R. Civ. P. 12(b)(6). Accordingly, the defendant's motion to dismiss the first two claims for rescission and damages is granted. See Kregos v. Associated Press, 3 F.3d 656, 665 (2d Cir. 1993), cert. denied, 510 U.S. 1112, 114 S. Ct. 1056, 127 L. Ed. 2d 376 (1994) (to sustain a claim for fraud, the misrepresentation must be the direct and proximate cause of an injury).
In reaching this conclusion, the Court finds that the cases cited by the plaintiffs, Rosen v. Spanierman, 894 F.2d 28, 35 (2d Cir. 1990) and Romano v. Key Bank, 90 A.D.2d 679, 680, 455 N.Y.S.2d 879, 881 (4th Dep't 1982), are distinguishable. In Rosen, one of the plaintiffs negotiated the sale price of a painting based on a representation as to its authenticity. The purchase money was supplied by his mother-in-law. The artwork turned out to be a fake. The Second Circuit found that there was sufficient injury to sustain a common law fraud claim because if the plaintiff had known about the misrepresentations regarding the painting's authenticity, he could have purchased another painting. In the Court's view, the injury in Rosen is real and significant. When the fake painting was purchased, the plaintiffs lost the value of the original, a demonstrable injury.
In Romano, the plaintiff sued a Bank and one of its officers arguing that he was defrauded when he signed a personal note in reliance on the promise that it would converted to a corporate obligation of the plaintiff's business. No such conversion was made. Accordingly, when the business failed, the plaintiff was personally liable on the note. The Bank argued that there was no injury because the plaintiff was already a personal guarantor of all outstanding corporate loans. The Fourth Department disagreed, holding that there was sufficient injury because personal liability and guarantor liability were not synonymous. A guarantor is subrogated to rights of the original creditor after his obligations are satisfied. In Romano, the distinction was that of the plaintiff being a secured as opposed to an unsecured creditor, a difference in rights with consequences.
The Court further recognizes that the defendant has also moved to dismiss the first and second causes of action for rescission and damages, for failure to allege that any misrepresentations were material or that the reliance on the alleged misrepresentations was reasonable. However, because the Court has already granted Grosman's motion based on the plaintiffs' failure to allege a sufficient injury, these alternative arguments need not be considered. Nevertheless, Court notes for the sake of clarity and future use, that if the plaintiffs had alleged a cognizable injury, the representations allegedly replied upon, namely Grosman's statements regarding his relationship with Hamlin, White, Dimino, etc., would be material. Further, despite the defendant's arguments to the contrary, the Court finds that any reliance on these statements would also have been reasonable.
C. The standard for leave to file a second amended complaint
Having granted the defendant's motion to dismiss the first and second causes of action contained in the amended complaint the Court now turns to the plaintiffs' motion for leave to file a second amended complaint pursuant to Fed. R. Civ. P. 15 in the form attached to the moving papers. Although Fed. R. Civ. P. 15(a) requires that "leave to amend shall be freely given when justice so requires." Foman v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962), the Supreme Court stated in Foman that denial of a Rule 15(a) motion may be appropriate in instances of "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [and] futility of the amendment. . . ." Foman, 371 U.S. at 182 (emphasis supplied); see Zahra v. Town of Southold, 48 F.3d 674, 685 (2d Cir. 1995); Ruffolo v. Oppenheimer & Co., 987 F.2d 129, 131 (2d Cir. 1993) (recognizing that where amendment of the complaint is unlikely to be productive, it is not an abuse of discretion to deny a Rule 15 motion).
D. The plaintiffs' motion for leave to file a second amended complaint
Applying these standards, the Court grants the plaintiffs' motion for leave to file a second amended complaint. As stated above, the first two causes of action contained in the amended complaint fail to state a cause of action because the plaintiffs have not alleged a cognizable injury. The proposed second amended complaint makes several attempts to correct the defect. The first cause of action, retitled "fraudulent inducement: rescission and declaratory judgment," alleges the following with respect to an injury:
88. Plaintiffs Healthcare and BTNH have been irreparably injured by Grosman's misrepresentations and omissions. BTNH's ability to continue as Receiver of the Nursing Home and lessee of the Premises, and Newco's ability to be granted a permanent license to operate the Nursing Home and succeed to the lease, are severely threatened by Grosman's relationships with White and/or Dimino, so long as Grosman claims to have any interest in BTNH or Newco.