The opinion of the court was delivered by: Kimba M. Wood, U.S.D.J.:
On June 22, 2010, Plaintiff Steve Lau commenced this action against Harold Zoref, Leonard Mezei, and Mezei's companies, Northern Funding ("NF") and Northern Healthcare Funding ("NHF") (collectively "Defendants"). The Complaint asserts eight claims, including violations of federal securities statutes, various common law tort claims, and breach of contract. (Dkt. No. 1.)
On February 7, 2011, Lau filed a motion for partial summary judgment on his breach of contract claim against NF and NHF. (Dkt. No. 22.) On September 29, 2011, this Court issued an Opinion and Order granting the motion as to NF but denying the motion as to NHF. See Lau v. Mezei, 2011 WL 4501942 (S.D.N.Y. Sept. 29, 2011) (No. 10-CV-4838) (Wood, J.). On October 10, 2011, pursuant to the Opinion and Order, Lau filed a new Rule 56.1 Statement contending that partial summary judgment was now appropriate against NHF. ("Pl.'s 56.1") (Dkt. No. 59.) Defendant NHF filed its 56.1 Statement on October 17, 2011. ("Defs.' 56.1") (Dkt. No. 66.)
On September 16, 2011, after both parties filed additional Rule 56.1 Statements ("Combined 56.1") (Dkt. No. 47.), Defendants filed a motion for summary judgment on Lau's remaining claims (Dkt. No. 52.).
For the reasons that follow, the Court sua sponte grants Lau summary judgment against NHF as to the breach of contract claim. The Court also grants in part and denies in part Defendants' motion for summary judgment.
Plaintiff Lau is a lawyer with considerable experience in the fields of "civil and criminal law, including asbestos/toxic tort defense, personal injury, trade secrets, fraud, and general practice." (Combined 56.1 ¶¶2-4.) At the time of the events in question, Lau's investment experience consisted of a "low risk," "low yield" Vanguard money market fund (id. ¶¶7-10) and purchasing Microsoft common stock that he later sold at a thirty percent loss (id. ¶22).
In 2006, based on a referral from a friend, Lau and his wife hired Defendant Zoref to serve as their accountant. (Compl. ¶6.) Lau contends that he retained Zoref because Zoref represented that he could provide both accounting and investment services. (Combined 56.1 ¶¶148-152.) Zoref denies ever offering investment advice and contends that Lau made his own investment decisions. (Zoref Decl. ¶¶2-8.)
In 2008, after Lau and his wife divorced, Lau sought Zoref's advice regarding potential investments. Lau informed Zoref that he wanted to invest in a conservative manner that would not risk his principal. (Combined 56.1 ¶¶170-171.) Zoref allegedly advised Lau to allocate his investments among various vehicles, in including NF and NHF (Compl. ¶¶ 13-14.), representing to Lau that NF and NHF would pose "extremely little or no risk" of loss, that NF and NHF had large amounts of collateral and assets, and that this opportunity was reserved for Zoref's "friends and family (id. ¶¶ 18-20). Lau alleges, however, that Zoref knew that NF and NHF had insufficient collateral and that investing in NF and NHF would expose Lau's assets to a high degree of risk. (Id. ¶¶21-22.)
On April 7, 2008, based on Zoref's representations, Lau loaned NF $150,000 in exchange for a promissory note (the "NF Note"). Pursuant to the NF Note, NF agreed to pay Lau the $150,000 principal plus an annual interest rate of 8.5 percent. (Pl.'s 56.1 ¶6; Defs.' 56.1 ¶6.) Although any unpaid principal and accrued interest became payable on April 7, 2009 (Pl.'s 56.1 ¶10; Defs.' 56.1 ¶10), NF failed to pay Lau any of the principal or interest due (Pl.'s 56.1 ¶14; Defs.' 56.1 ¶14). This Court granted Lau's motion for summary judgment on his breach of contract claim against NF on September 29, 2011. See Lau v. Mezei, 2011 WL 4501942.
From April through July of 2008, Lau loaned NHF a total of $330,000. (Pl.'s 56.1 ¶¶16-18; Defs.' 56.1 ¶¶16-18.) On September 1, 2008, NHF issued a term promissory note to Lau in the amount of $336, 973.74 -- the amount of Lau's loans to NHF plus accrued interest (the "NHF Note"). (Pl.'s 56.1 ¶¶19-20; Defs.' 56.1 ¶¶19-20.) Under the terms of the NHF Note, NHF agreed to pay Lau the principal amount of $336,973.74 plus an annual interest rate of 13 percent; pay interest to Lau on the first of every month from September 1, 2008 until the Note expired on September 1, 2011; and pay any unpaid principal on the expiration date. (Pl.'s 56.1 ¶¶22-24; Defs.' 56.1 ¶¶22-24.) Despite Lau's demands, however, NHF has not made any interest payments since June 4, 2010. (Pl.'s 56.1 ¶¶28, 32; Defs.' 56.1 ¶¶28, 32.) This Court previously denied Lau's motion for summary judgment on his breach of contract claim against NHF because Lau filed the motion before the Note's expiration date and the Court could not resolve the "conflicting accounts" of NHF's anticipatory repudiation on summary judgment. See Lau v. Mezei, 2011 WL 4501942, at *3-*4.
In addition to the breach of contract claims, Lau also asserts a variety of claims based on Zoref's alleged misrepresentations. He first alleges that Defendants violated various federal securities statutes. (Compl. ¶¶62-69.) Next, Lau asserts a number of common law causes of action, including fraud, fraudulent inducement, and conversion against all Defendants; negligent misrepresentation against Defendants Mezei and Zoref; and breach of fiduciary duty and professional malpractice against Defendant Zoref. (Compl. ¶¶70-120.) Defendants have moved for summary judgment as to all of these claims.
Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "An issue of fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. A fact is material if it might affect the outcome of the suit under the governing law." Fincher v. Depository Trust & Clearing Corp.,604 F.3d 712, 720 (2d Cir. 2010). The moving party must show the absence of a genuine issue of material fact. Zalaski v. City of Bridgeport Police Dep't, 613 F.3d 336, 340 (2d Cir. 2010). To defeat a motion for summary judgment, the non-moving party must raise a genuine issue of material fact by showing more than "some metaphysical doubt as to the material facts," and by presenting more than mere "conclusory allegations or unsubstantiated speculation." Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir. 2011) (internal citations omitted).
In deciding a motion for summary judgment, a court must "construe the facts in the light most favorable to the non-moving party and must resolve all ambiguities and draw all reasonable inferences against the movant." Brod v. Omya, Inc., 653 F.3d 156, 164 (2d Cir. 2011). However, "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge." Kaytor v. Elec. Boat Corp., 609 F.3d 537, 545 (2d Cir. 2010) (quoting Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)) (emphasis omitted). "The role of the court is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried." Brod, 653 F.3d at 164.
Under certain circumstances, district courts may grant summary judgment sua sponte.
First Fin. Ins. Co. v. Allstate Interior Demolition Corp., 193 F.3d 109, 114, 119 (2d Cir. 1999) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 326 (1986)); Kalderon v. Finkelstein, 2010 WL 3359473, at *5 (S.D.N.Y. Aug. 25, 2010) (No. 08-CV-9440) (Sullivan, J.). Where the record indicates that all of the evidentiary materials that a party might submit in response to a motion for summary judgment are before the court, "a sua sponte grant of summary judgment against that party may be appropriate if those materials show that no material dispute of fact exists and that the other party is entitled to judgment as a matter of law." First Fin. Ins., 193 F.3d at 115 (quotation and citation omitted). "The record must, therefore, reflect the losing party's inability to enhance the evidence supporting its position and the winning party's entitlement to judgment." Id.
Although courts are advised to provide notice before granting summary judgment sua sponte, the Second Circuit has nonetheless observed that courts may grant summary judgment against the moving party without notice or opportunity to defend as long as the court has determined that the facts were fully developed such that the moving party would suffer no "procedural prejudice." Bridgeway Corp. v. Citibank, 201 F.3d 134, 139 (2d Cir. 2000). A party suffers procedural prejudice if it is surprised by the court's action such that the party is unable to present evidence in support of its position. Id. If, however, the party cannot claim to have been surprised, or if, "notwithstanding its surprise, the party had no additional evidence to bring, it cannot plausibly argue that it was prejudiced by the lack of notice." Id. at 140.
IV. Plaintiff's Breach of Contract Claim
The NHF Note states that it shall construed in accordance with New York law. (Pl.'s 56.1 ¶10; Def.'s 56.1 ¶10.) Under New York law, a plaintiff establishes a prima facie case of default on a promissory note by providing "proof of the valid note and of defendant's failure, despite proper demand, to make payment." Lehman Bros. Holdings Inc. v. Walji, 2011 WL 1842838, at *3 (S.D.N.Y. May 11, 2011) (No. 09-CV-1995) (Stein, J.); see also Arrowood Indem. Co. v. Gibson & Behman, P.C., 2011 WL 1796045, at *2 (S.D.N.Y. Apr. 29, 2011) (No. 08-CV-6227) (Francis, M.J.).
This Court finds that Lau has met this burden. NHF issued Lau a promissory note with a maturity date of September 1, 2011. (Pl.'s 56.1 ¶5; Def.'s 56.1 ¶5.) Under the terms of the note, NHF agreed to make monthly interest payments through the maturity date and also agreed to repay any unpaid principal on the maturity date. (Pl.'s 56.1 ¶¶7-8; Def.'s 56.1 ¶¶7-8.) The parties agree, however, that NHF has not made any interest payments since June 4, 2010 and has also failed to repay the principal. (Pl.'s 56.1 ¶¶11-12; Def.'s 56.1 ¶¶11-12.)
Summary judgment is appropriate in an action on a promissory note "if there is no material question concerning execution and default of the note." United States v. Galarza, 2011 WL 256536, at *1 (E.D.N.Y. Jan. 26, 2011) (No. 10--CV--894) (Seybert, J.). A plaintiff meets his burden for summary judgment on a promissory note by presenting evidence of execution of the note, and asserting, without dispute from the defendant, that the defendant failed to pay. Valley Nat'l. Bank v. Oxygen Unlimited, LLC, 2010 WL 5422508, at *3 (S.D.N.Y. 2010) (Daniels, J.). When it is ...