Basis Yield Alpha Fund (Master) v Goldman Sachs Group, Inc., 2014 NY Slip Op 00587 [1st Dept. 2014]
Since the record does not affirmatively establish a valid obligation to arbitrate the issues raised herein, we must examine Goldman's alternative argument seeking dismissal of the action. With regard to the fraud allegations, Goldman argues that plaintiff failed to state a cause of action because the element of reasonable reliance is precluded as a matter of law by the disclaimer and disclosure in the offering circulars. We do not find that such argument is procedurally precluded by the fact that "Goldman's motion was made under CPLR 3211(a)(7)." The concurring opinion incorrectly maintains that Goldman cannot rely on documentary evidence (the disclaimer and disclosure in the offering circulars) because a CPLR 3211(a)(7) motion is limited to a review of the pleadings.
The motion court examined the purported documentary evidence, albeit over plaintiff's objections, but concluded that it did not bar the fraud claims. Plaintiff, however, has abandoned such procedural argument by failing to raise it on appeal (see Matter of Raqiyb v Fischer, 82 AD3d 1432, 1433, n [3rd Dept 2011], citing Matter of Ifill v Fischer, 72 AD3d 1367, n [3rd Dept 2010]). Instead, in its opening paragraph of the argument section opposing Goldman's motion to dismiss the fraud claims, plaintiff simply comments:
"Goldman's argument on appeal strays far beyond addressing the sufficiency of the allegations. Instead, Goldman seeks to play on a field of disputed issues of fact. But this provides no basis for dismissing this Complaint. That is particularly the case here when this Complaint is based not just on well-pleaded allegations, but on inculpatory Goldman documents disclosed in prior proceedings [emphasis added]."
Thus, on this appeal, plaintiff does not claim that this Court is "procedurally" precluded from examining the documentary evidence at issue because Goldman moved to dismiss under CPLR 3211(a)(7). Rather, plaintiff appears to be arguing that the documentary evidence simply raises "disputed issues of fact," which, as plaintiff correctly asserts, is not enough for a dismissal under CPLR 3211(a)(7).
In any event, the concurrence's contention that this Court is limited to the pleadings, when reviewing a motion to dismiss pursuant to CPLR 3211(a)(7), is not a completely accurate statement of the law. What the Court of Appeals has consistently said is that evidence in an affidavit used by a defendant to attack the sufficiency of a pleading "will seldom if ever warrant the relief [the defendant] seeks unless [such evidence] conclusively establishes that plaintiff has no cause of action" (Rovello v Orofino Realty Co, Inc, 40 NY2d 633, 636  [emphasis added]; see also Guggenheim v Ginzburg, 43 NY2d 268 ).
A CPLR 3211(a)(7) motion may be used by a defendant to test the facial sufficiency of a pleading in two different ways. On the one hand, the motion may be used to dispose of an action in which the plaintiff has not stated a claim cognizable at law. On the other hand, the motion may be used to dispose of an action in which the plaintiff identified a cognizable cause of action but failed to assert a material allegation necessary to support the cause of action. As to the latter, the Court of Appeals has made clear that a defendant can submit evidence in support of the motion attacking a well-pleaded cognizable claim (see Rovello, 40 NY2d 633; Guggenheim, 43 NY2d 268; see also Board of Managers of Fairways at N. Hills Condominiums v Fairways at N. Hills, 150 AD2d 32 [2d Dept 1989]).[FN4]
When documentary evidence is submitted by a defendant "the standard morphs from whether the plaintiff has stated a cause of action to whether it has one" (John R. Higgitt, CPLR 3211[A]: Demurrer or Merits-Testing Device?, 73 Albany Law Review 99, 110 ). As alleged here, if the defendant's evidence establishes that the plaintiff has no cause of action (i.e., that a well-pleaded cognizable claim is flatly rejected by the documentary evidence), dismissal would be appropriate (see e.g. Constructamax, Inc. v Dodge Chamberlin Luzine Weber, Assoc. Architects, LLP, 109 AD3d 574 [2d Dept 2013]; Rabos v R & R Bagels & Bakery, Inc., 100 AD3d 849, 851—852 [2d Dept 2012]; Skillgames, LLC v Brody, 1 AD3d 247, 250 [1st Dept 2003]; Kliebert v McKoan, 228 AD2d 232 [1st Dept 1996], lv denied 89 NY2d 802 ; Board of Managers of Fairways at N. Hills Condominiums, 150 AD2d 32).
Note the concurring opinion.
Bold is mine. Everything else is in original.