Opinion
11 Civ. 1460 (AJN)
02-04-2014
The PrinceRidge Group LLC, Plaintiff, v. Oppidan, Inc., Defendant.
MEMORANDUM & ORDER
:
Plaintiff PrinceRidge Group LLC ("PrinceRidge") brought this action against Defendant Oppidan, Inc. ("Oppidan") alleging breach of contract and breach of the implied covenant of good faith and fair dealing. Jurisdiction is based on diversity of citizenship. See 28 U.S.C. § 1332.
PrinceRidge is a citizen of New York, and Oppidan is a citizen of Minnesota. See Tonorezos Decl., Ex. A ¶¶ 6-7 (Complaint).
Before the Court are the parties' cross-motions for summary judgment. Dkt. Nos. 28, 32. Oppidan has moved for summary judgment on the entirety of PrinceRidge's complaint. PrinceRidge has moved for summary judgment on its breach of contract claim only. For the reasons that follow, Oppidan's motion is granted, and PrinceRidge's motion is denied.
I. LEGAL STANDARD
"Summary judgment is properly granted when, after reviewing the evidence in the light most favorable to the non-moving party, 'there is no genuine issue as to any material fact' and 'the moving party is entitled to a judgment as a matter of law.'" Anyanwu v. City of New York, No. 10-cv-8498, 2013 WL 5193990, at *1 (S.D.N.Y. Sept. 16, 2013) (quoting Fed. R. Civ. P. 56(a); Nabisco, Inc. v. Warner-Lambert Co., 220 F.3d 43, 45 (2d Cir. 2000)). For purposes of summary judgment, there is a genuine issue of material fact if a reasonable factfinder could decide in the non-moving party's favor. See Nabisco, 220 F.3d at 45.
When "both sides move for summary judgment, neither side is barred from asserting that there are issues of fact, sufficient to prevent the entry of judgment, as a matter of law, against it." A & E Television Networks, LLC v. Pivot Point Entertainment, LLC, No. 10 Civ. 09422, 2013 WL 1245453, at *7 (S.D.N.Y. March 27, 2013) (quoting Heublin Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993)). Nor is the Court required to "enter judgment for either party." Morales v. Quintel Entertainment, Inc., 249 F.3d 115, 121 (2d Cir. 2001) (quoting Heublein, 996 F.2d at 1461). "Rather, each party's motion must be examined on its own merits, and in each case all reasonable inferences must be drawn against the party whose motion is under consideration." Id. (citing Scwabenbauer v. Bd. of Educ., 667 F.2d 305, 314 (2d Cir. 1981)).
II. BACKGROUND
The following facts and disputes of fact are based upon the Court's review of the factual record, and particularly the evidence presented in the parties' Rule 56.1 statements and counter-statements. See Monahan v. New York City Dep't of Corr., 214 F.3d 275, 292 (2d Cir. 2000).
A. Parties
Plaintiff PrinceRidge "provides, among other things, financial advisory services to corporations seeking assistance in dealing with the acquisition and disposition of assets." Pl. 56.1 Statement ¶ 1 (citing Kirsch Decl. ¶ 2). On its website, PrinceRidge describes itself as a "full service investment bank with the experience and capital base necessary to provide trusted advice, intelligent solutions and superior executions to middle-market and small-cap clients." Id. ¶ 46. Matthew Kirsch is the Managing Director of PrinceRidge. Id. ¶ 4. At the time of the events giving rise to this litigation, PrinceRidge was not a licensed real estate broker. See Def. 56.1 Statement ¶¶ 28-31; Pl. 56.1 Statement ¶¶ 28-31.
Defendant Oppidan "is a merchant development company that purchases land, constructs retail buildings, leases those buildings to various retailers, and then sells the buildings outright." Pl. 56.1 Statement ¶ 3. Joe Ryan is the President of Oppidan. Id. ¶ 4.
B. Negotiation of Agreement
In early 2010, Oppidan contacted PrinceRidge regarding a portfolio of sixteen properties owned by Oppidan ("Portfolio Properties"), which were primarily leased to retailers Gander Mountain and Camping World, and which were underperforming at the time. See Pl. 56.1 Statement ¶ 2; Def. 56.1 Counterstatement ¶ 2. The parties dispute the nature of the services sought by Oppidan. PrinceRidge characterizes them as "advisory services," Pl 56.1 Statement ¶ 2, while Oppidan characterizes them as "help find[ing] buyers for the Portfolio," Def. 56.1 Statement ¶ 2.
Throughout the spring, Kirsch and Ryan participated in several conference calls and met once to discuss Oppidan's business and "determine the scope of services required by Oppidan." Pl. 56.1 Statement ¶ 4. PrinceRidge alleges that Kirsch and Ryan discussed "three potential methods of resolving the financial issues" presented by the Portfolio Properties, including refinancing Oppidan's existing debt, renegotiating Oppidan's loans, and disposing of the Portfolio Properties through sales. Pl. 56.1 Statement ¶ 5. Oppidan, however, alleges that, although Kirsch and Ryan "may have 'talked about other options,'" the focus of the discussions was always upon the sale of the Portfolio Properties. Def. 56.1 Counterstatement ¶ 5 (quoting Tonorezos Decl ¶ 7, Ryan Dep. at 35:12-15). As Oppidan puts it, "[Oppidan] build[s], buy[s], and sell[s]." Id. Whatever the scope of Kirsch and Ryan's preliminary discussions, it was ultimately determined that Oppidan would sell the Portfolio Properties. See Pl. 56.1 Statement ¶ 6 (characterizing sale as having been determined to be "the best course of action"); Def. 56.1 Counterstatement ¶ 6 (characterizing sale as "the only option").
C. April 20, 2010 Agreement
On or around March 19, 2010, Kirsch sent a draft agreement to Oppidan, which PrinceRidge characterizes as an "Exclusive Engagement Agreement," and Oppidan characterizes as a "letter of intent." See Pl. 56.1 Statement ¶ 7; Def. 56.1 Statement ¶ 4; Pl. 56.1 Counterstatement ¶ 4. That draft states "that [Oppidan] has selected [PrinceRidge] to act as its exclusive advisor in connection with the possible. . . Sale of an 18-property portfolio primarily leased to Gander Mountain, Camping World and Cub Foods." Kirsch Decl., Ex. C ¶ 1. PrinceRidge disputes whether they were engaged to "sell" anything and insists on referring to to the agreed-upon services as "Advisory Services," see Pl. 56.1 Statement ¶ 7; see also Kirsch. Decl., Ex. C ¶ 1 (defining the services provided as "Advisory Services"), but does not dispute that the draft contract states that the services to be provided relate to the possible sale of the Portfolio Properties, see Pl. 56.1 Counterstatement ¶ 6. According to Oppidan, the purpose of the agreement was for PrinceRidge "to broker deals [with] entities [. . .] beyond [Oppidan's] reach." Def. 56.1 Counterstatement ¶ 37.
In the section entitled "Retention," the agreement states: "In connection with the proposed Advisory Services, PrinceRidge shall (i) . . . familiarize itself with the properties, business, operations, financial condition, management prospects of the portfolio. . . ; (ii) introduce the Company to potential buyers of the Assets; and (iii) provide such other advisory and investment banking services upon which the parties may mutually agree." Kirsch Decl., Ex C. ¶ 1(b).
In the section entitled "Compensation," the agreement states: "At the closing, [Oppidan] shall pay to PrinceRidge a fee in an amount equal to 2.0% of the sales price (the "Success Fee") in consideration for the Advisory Services Provided by PrinceRidge," which is to be "disbursed from proceeds at closing." Kirsch Decl., Ex. C. ¶ 3(a). Oppidan characterizes this Success Fee as a commission, see Def. 56.1 Statement ¶ 9, which PrinceRidge disputes, see Pl. 56.1 Counterstatement ¶ 9 ("[T]he Contract does not state that 'Compensation was based upon a commission."). The agreement further states that PrinceRidge will be entitled to the Success Fee "if within 18 months from the effective date of termination of this Agreement, [Oppidan] consummates a sales transaction on any property to a buyer whom the company was introduced to by PrinceRidge or who was contacted by PrinceRidge in connection with the Advisory Services." Id. ¶ 3(c).
Oppidan sent its revisions to the agreement to PrinceRidge on or about April 16, 2010. Pl. 56.1 Statement ¶ 9. For purposes of this motion, the only relevant revisions were: (1) the amount of the Success Fee was reduced from 2.0% to 1.85%; and (2) the period of months set forth in paragraph 3(c) was reduced from 18 months to 6 months, and was ultimately settled at 12 months. See Pl. 56.1 Statement ¶ 10. With respect to the provision promising to pay the Success Fee upon the consummation of a "sales transaction on any property to a buyer whom the company was introduced to by PrinceRidge," Oppidan did not "request[] any carve outs of any nature for companies with which Oppidan may have had a pre-existing relationship." Pl. 56.1 Statement ¶ 12; see also Def. 56.1 Statement ¶¶ 9, 11; Tonorezos Decl., Ex. B.
Following acceptance of the revisions, the parties entered into the fully executed agreement on April 20, 2010. Pl. 56.1 Statement ¶ 13.
C. PrinceRidge's Performance under the Agreement
Following execution of the April 20, 2010, agreement, PrinceRidge alleges that it began seeking "to identify firms and/or individuals who had available capital to deploy into the Portfolio of distressed real estate" by (1) "identifying entities interested in providing equity to a joint venture that might acquire the Properties;" (2) "identifying entities interested in providing loans to refinance the existing mortgages"; and (3) "identifying entities interested in purchasing one or all of the Properties outright." Pl. 56.1 Statement ¶ 14. In the terminology used by PrinceRidge, their role was to "find investors and introduce them to the transaction." Pl. 56.1 Counterstatement ¶ 22. Oppidan, however, disputes this characterization of PrinceRidge's conduct and asserts that the PrinceRidge's only role under the Agreement was "to act as the exclusive advisor in connection with the sale of the 16 properties" in the Portfolio," Def. 56.1 Statement ¶ 14, by "identifying people that were interested in buying the properties and making introductions to interested buyers," id. ¶ 25.
Under the agreement, PrinceRidge prepared a document it characterizes as "Discussion Materials" describing the Portfolio Properties. Def. 56.1 Statement ¶ 12. Oppidan, however, asserts that the materials constitute "a 'pitch book' for distribution to 'potential buyers.'" Def. 56.1 Statement ¶ 12 (citing Tonorezos Decl. ¶ 6, M. Kirsch Dep. at 106:18-22); see also Def. 56.1 Counterstatement ¶ 21 (characterizing the materials as "marketing materials"). In addition to describing the Portfolio Properties and related assets, the document states: "Potential buyers may submit bids on the entire portfolio, subsets of the portfolio, or individual assets." Kirsch Decl., Ex. F, at 51; see also Pl. 56.1 Statement ¶ 15. Interested potential buyers are further invited to "[p]lease contact Matthew Kirsch or Nic Anderson to discuss this portfolio acquisition opportunity." Kirsch Decl., Ex. 5, at 51. Both Kirsch and Mr. Anderson are employees of PrinceRidge. Id.
PrinceRidge took other steps to publicize the availability of the Portfolio Properties, for example publishing a document entitled "Portfolio of Net-Leased Retail Properties Offered," which stated that "[PrinceRidge] is offering a portfolio of net-leased properties on behalf of an investor client." Tonorezos Decl., Ex. I. That document described the square footage of the properties, stated their net operating income, predicted that the properties "should sell for roughly $180 million," and indicated that "PrinceRidge [would] entertain offers for the portfolio in its entirety, subsets of the portfolio or individual properties." Id. Oppidan characterizes this document as a "listing," Def. 56.1 Statement ¶ 32, which PrinceRidge disputes, characterizing it instead as "present[ing] an investment opportunity to potential investors through discussion materials," Pl. 56.1 Counterstatement ¶ 32.
On May 18, 2010, PrinceRidge was identified as Oppidan's "broker" in a story about the Portfolio Properties published in Commercial Real Estate Direct. Def. 56.1 Statement ¶ 33 (citing Tonorezos Decl., Ex. J). Like the discussion materials, the media story described the square footage of the properties, their net operating income, and indicated that they "should sell for roughly $180 million." Tonorozeos Decl., Ex. J. PrinceRidge, however, claims that it did not approve of the story prior to its publication. Pl. 56.1 Counterstatement ¶ 33.
Overall, PrinceRidge contacted eighty-four entities "to discuss the Properties, and to attempt to introduce those entities to the Transaction." Pl. 56.1 Statement ¶ 16. These entities were provided with the discussion materials/"pitch book" prepared by PrinceRidge, and were directed to contact Oppidan if they had further questions about the Portfolio Properties. Id. ¶ 17.
PrinceRidge also received bids from entities interested in purchasing the Portfolio Properties. See Pl. 56.1 Statement ¶ 18. PrinceRidge asserts that such bids "were forwarded directly to Oppidan, without any commentary and/or guidance from PrinceRidge." Id. Oppidan, however, disputes this, alleging that "Kirsch advised Oppidan on how to respond to bids," including by providing "specific" numbers with which to "counter" bids. Def. 56.1 Counterstatement ¶ 18.
D. Sale of Portfolio Properties to NRP
National Retail Properties ("NRP"), an organization "that invests in income producing real estate across the country," was one of the corporate entities contacted by PrinceRidge regarding the Portfolio Properties. Pl. 56.1 Statement ¶¶ 19-20. Kirsch sent NRP the discussion materials/"pitch book" in May or June 2010, and had "multiple discussions with NRP's acquisitions department. . . regarding the Properties." Id. ¶ 22; Def. 56.1 Counterstatement¶ 22 (disputing only the characterization of the discussion materials/"pitch book"). Oppidan had previously dealt with NRP, and Ryan had had a "business and personal relationship with NRP's senior executive vice president going back six or seven years." Def. 56.1 Counterstatement ¶ 38.
On June 24, 2010, Kirsch emailed a member of the NRP acquisitions department to indicate that first round bids on the Portfolio Properties were due on June 25, 2010. Pl. 56.1 Statement ¶ 23. The NRP employee responded by informing Kirsch "that NRP would not 'be participating in [PrinceRidge's] process.'" Id. ¶ 24 (quoting Kirsch Decl., Ex. I) (alteration in original). Kirsch contacted Ryan at Oppidan to find out whether Ryan "knew why NRP chose not to participate in [PrinceRidge's) [sic] process." Id. ¶ 25. Ryan responded that the NRP employee was mistaken, and that he had directed NRP to participate in the PrinceRidge process. Id. Despite Ryan's assurances, however, NRP did not submit any bids on the Portfolio Properties by the June 25, 2010, deadline. Pl. 56.1 Statement ¶ 26. These events caused "Kirsch and others at PrinceRidge [to grow] concerned that Oppidan was seeking to deny PrinceRidge's right to a Success Fee." Id. ¶ 27.
On July 26, 2010, NRP sent a Letter of Intent to Oppidan, indicating that it intended to purchase five of the Portfolio Properties for $50,470,996. Pl. 56.1 Statement ¶ 28. NRP ultimately purchased the properties for $50,370,996. Id. ¶ 31. On June 6, 2011, NRP sent a second Letter of Intent to Oppidan, indicating that it intended to purchase five additional Portfolio Properties for $50,385,638. Id. ¶ 32. NRP ultimately purchased these properties for $50,395,638. Id. ¶ 36.
Following the purchase of the Portfolio Properties by NRP, Oppidan declined to pay PrinceRidge a Success Fee, pursuant to the April 20, 2010, agreement, notwithstanding that Oppidan had consummated sales transactions with NRP, which had been contacted by PrinceRidge. Pl. 56.1 Statement ¶ 37.
E. Other Sales
Oppidan has sold at least one other Portfolio Property to an entity that was contacted by PrinceRidge. See Pl. 56.1 Statement ¶ 42 (Inland Real Estate Group of Companies, Inc., purchased the College Station property). Ryan also indicated that Oppidan "has conducted business in some form or another with Cole Capital, Dougherty Funding, and Kimco," which were also contacted by PrinceRidge. Id.
F. Oppidan Brokerage Agreements
Prior to retaining PrinceRidge, Oppidan had "unsuccessfully sought to sell the [Portfolio Properties] through its network of real estate brokers." Pl. 56.1 Statement ¶ 43. The prior failure of traditional real estate brokers was one the factors that motivated Oppidan to seek out PrinceRidge. Def. 56.1 Counterstatement ¶ 43. Another factor was the hope that PrinceRidge would provide "access to markets not otherwise available to Oppidan." Id.
In contrast with Oppidan's agreement with PrinceRidge, which defines PrinceRidge as an "advisor" and styles compensation as a "Success Fee," Oppidan's agreements with traditional real estate brokers explicitly use the terms "broker" and "commission." See Pl. 56.1 Statement ¶¶ 44-49; Kirsch Decl., Ex. R. Oppidan's traditional brokerage agreements, for example, state that Oppidan "employs Broker as its exclusive agent to procure purchasers for [a property]. Broker is authorized to sell the property." Id. ¶ 48. This language does not appear in Oppidan's agreement with PrinceRidge.
G. Current Action
PrinceRidge filed this action on March 3, 2011, alleging breach of contract and breach of the implied covenant of good faith and fair dealing. Def. 56.1 Statement ¶¶ 1-2. Both PrinceRidge and Oppidan filed motions for summary judgment on March 18, 2013. See Dkt. Nos. 28, 32.
III. BREACH OF CONTRACT
Both parties have filed motions for summary judgment on the breach of contract claim. See Oppidan Br., at 6-14; PrincerRidge Br., at 13-19. The Court addresses Oppidan's motion first.
A. Oppidan Motion
Oppidan argues that it is entitled to summary judgment on PrinceRidge's breach of contract claim because the undisputed facts show that "PrinceRidge did not have the requisite license and is prohibited under New York Law from engaging in the brokerage of real property." Oppidan Br. 3.
1. Section 442-d
New York law precludes any person or entity from "bring[ing] or maintain[ing] an action. . . for the recovery of compensation for services rendered. . . in the buying, selling, exchanging, leasing, renting or negotiating a loan upon any real estate," unless that person or entity "alleg[es] and prov[es] that [it] was a duly licensed real estate broker or real estate salesman on the date when the alleged cause of action arose." N.Y. Real Property Law § 442-d. This provision is "strictly construed," and "compliance is mandatory." Am. Prop. Consultants, Ltd. v. Walden Lisle Assocs., No. 95 Civ. 329 (KMW), 1997 WL 394617, at *7 (S.D.N.Y. July 14, 1997) (citing Matter of Wertlieb, 165 A.D.2d 644, 569 N.Y.S.2d 61, 63 (N.Y. App. Div. 1st Dep't 1991); Meltzer v. Crescent Leaseholds, Ltd., 315 F. Supp. 142, 150 (S.D.N.Y. 1970), aff'd, 442 F.2d 293 (2d Cir. 1971)). Section 442-d applies "[w]here the dominant feature of the transaction is the transfer of real property." Panarello v. Segalla, 6 A.D.3d 515, 516, 775 N.Y.S.2d 360, 361 (N.Y. App. Div. 2d Dep't 2004).
For purposes of § 442-d, a "real estate broker" is, among other things, any person or entity "who, for another and for a fee, commission or other valuable consideration, lists for sale, sells, at auction or otherwise, exchanges, buys or rents, or offers or attempts to negotiate a sale, at auction or otherwise, exchange, purchase or rental of an estate or interest in real estate." N.Y. Real Property Law § 440(1). Finding a potential buyer for a property is a type of service "that ha[s] traditionally defined as brokerage services and constitute[s] the services of a 'real estate broker'" under § 442-d. Am. Prop. Consultants, 1997 WL 394617, at *7 (citing NFS Servs., Inc. v. West 73rd St. Assocs., 102 A.D.2d 388, 477 N.Y.S.2d 135 (N.Y. App. Div. 1st Dep't 1984), aff'd, 488 N.Y.S.2d 648 (1985)); see also Feldbau v. Klarnet, 109 Misc.2d 32, 36, 439 N.Y.S.2d 596 (N.Y. Civ. Ct. 1981) ("[A] finder is included within. . . section 442-d of the Real Property Law."); Futersak v. Perl, 84 A.D.3d 1309, 1311, 923 N.Y.S.2d 728 (N.Y. App. Div. 2d Dep't 2011) (holding that § 442-d "applies even if the services rendered are characterized as those of a 'finder'").
2. Dominant Feature of Transaction
Section 442-d applies to any transaction in which "the dominant feature. . . is the transfer of real property." Panarello, 775 N.Y.S.2d at 361. It is undisputed that PrinceRidge is seeking recovery of a "Success Fee" that, under the parties' agreement, was to be "based upon the sales price" and "disbursed from proceeds at the closing" of any Portfolio Property sold to a buyer previously contacted by PrinceRidge. Def. 56.1 Statement ¶ 11; Pl. 56.1 Counterstatement ¶ 11 ("Not disputed."); see also Oppidan Br. 10-11. Notably, PrinceRidge has presented no evidence supporting the conclusion that "the underlying transaction was anything more than the purchase and sale of real property," Futersak, 84 A.D.3d at 1311—as their complaint makes clear, PrinceRidge is specifically seeking to recover compensation for services rendered in relation to the sale of a number of Portfolio Properties to NRP, see Tonorezos Decl., Ex. A ¶¶ 15-16 (Complaint). Accordingly, the restrictions contained in § 442-d apply to the transaction at issue in this case.
The Court's conclusion that § 442-d applies to the underlying transaction is not disturbed by PrinceRidge's various allegations regarding the proper characterization of the underlying transaction. See, e.g., Pl. 56.1.1 Counterstatement ¶¶ 7 (disputing Oppidan's characterization of the contract as setting forth a list of properties "to be sold" by PrinceRidge, on the basis that "PrinceRidge was not engaged to 'sell' any properties"), 9 (disputing Oppidan's characterization of the compensation sought as a "commission"), 22 ("PrinceRidge did not have a 'process of finding buyers,' rather, PrinceRidge sought to find investors and bring them to the transaction.") (emphasis added). In determining the applicability of § 422-d, courts look to the nature of the underlying transaction, and not the terms used by the parties to describe it—so long as "real estate is going to be the principal element involved in the transaction, a broker has to have a license and cannot evade its necessity by referring to the services as originating or introducing or any other fantastic term." Baird v. Krancer, 138 Misc. 360, 362, 246 N.Y.S. 85, 88 (N.Y. Sup. Ct. 1930); see also Feldbau v. Klarnet, 109 Misc.2d at 35 ("The statute broadly covers 'compensation for services rendered' regardless of what the parties may call it."). There is simply no genuine dispute that the dominant feature of the underlying transaction in this case was the transfer of real property from Oppidan to NRP, whether that transaction is framed as a "sale of real property" or, as PrinceRidge prefers, an "investment in a transaction involving a portfolio of distressed real estate." PrinceRidge Opp. 3.
Similarly irrelevant are the differences between the underlying contract and Oppidan's "agreements with actual real estate brokers." PrinceRidge Opp. 5. New York law forecloses PrinceRidge's arguments that § 442-d does not apply because the underlying contract did not expressly refer to PrinceRidge as a "broker," did not contain the phrase "Broker is authorized to sell," and did not refer to PrinceRidge's compensation as a "commission." See PrinceRidge Opp. at 5-6. It is well established that the restrictions of § 442-d cannot be avoided by such maneuvers, for "[t]he statute broadly covers 'compensation for services rendered' regardless of what the parties may call it." Feldbau v. Klarnet, 109 Misc.2d at 35; see also Baird v. Krancer, 138 Misc. at 362; Futersak v. Perl, 84 A.D.3d at 1311 ("[Section 442-d] applies even if the services rendered are characterized as those of a 'finder.'); Panarello v. Segalla, 6 A.D.3d at 516-17 (applying § 442-d to recovery of "consultant's fee"); Levinson v. Genesse Assocs., 172 A.D.2d 400, 401, 568 N.Y.S.2d 780 (N.Y. App. Div. 1st Dep't 1991) ("The fact that plaintiff chose to label her activities in connection with [the sale of real estate] as 'consulting is not determinative."). As this line of cases demonstrates, § 442-d applies to any action seeking compensation in relation to the sale of the Portfolio Properties to NRP, notwithstanding the absence of such terms as "broker" and "commission" from the underlying contract.
3. Services Provided
It is well established that § 442-d applies to compensation for "finder" services rendered in relation to a real estate transaction. See Futersak v. Perl, 84 A.D.3d at 1311 (holding that § 442-d "applies even if the services rendered are characterized as those of a 'finder'"); Feldbau v. Klarnet, 109 Misc.2d at 36 ("[A] finder is included within. . . section 442-d of the Real Property Law."); Sorice v. Dubois, 25 A.D.2d 521, 521, 267 N.Y.S.2d 227 (N.Y. App. Div. 1966) (holding that § 442-d precludes recovery of "either brokerage commissions or finder's fees"). In Panarello v. Segalla, for example, the New York Appellate Division held that § 442-d precluded a non-licensed real estate broker from recovering compensation for his "efforts to find a buyer for" a parcel of real estate. 6 A.D.3d at 515-16. While there may be distinctions between "finders" and "brokers" for purposes of some areas of New York law, see PrinceRidge Opp. 3-4, 9-11 (discussing case law distinguishing finders from brokers under other areas of law), there is no distinction between finders and brokers under § 442-d. To the contrary, New York courts have repeatedly refused to recognize such a distinction for purposes of the prohibition on recovery for unlicensed real estate services. See Futersak v. Perl, 84 A.D.3d at 1311 ("Contrary to the Supreme Court's conclusion, [§ 422-d] applies even if the services rendered are characterizes as those of a 'finder.'); see also Feldbau v. Klarnet, 109 Misc.2d at 35-36; Sorice v. Dubois, 25 A.D.2d at 521.
For example, PrinceRidge relies on Northeast General Corporation v. Wellington Advertising, Inc., 82 N.Y.2d 158 (1993), for the proposition that a "finder is not a broker" and is therefore subject to different legal duties. See PrinceRidge Opp. at 9-10 (citing Northeast Gen. Corp. v. Wellington Adver., Inc., 82 N.Y.2d at 162)). Northeast General Corporation, however, is simply not relevant to the treatment of "finders" under § 442-d, as it does not involve a real estate transaction. See 82 N.Y.2d at 160.
The undisputed facts show that the services for which PrinceRidge seeks compensation were finder services. In PrinceRidge's own words, its services under the April 20, 2010, contract consisted of, "finding prospective investors who may be willing to invest in a transaction involving a portfolio of distressed real estate." PrinceRidge Opp. 3 (emphasis in original). Indeed, PrinceRidge's principal argument against summary judgment is that its services did constitute "finder" services under New York law. See, e.g., id. at 2 ("PrinceRidge acted as a 'finder,' not a 'broker.'"). Although PrinceRidge suggests that it performed other services for Oppidan in addition to finding potential buyers for the Portfolio Properties, see, e.g., PrinceRidge Opp. 3 (PrinceRidge's work. . . consisted of, among other things, finding. . .") (emphasis added), it presents no evidence that it seeks compensation for anything other than its work "search[ing] for and locat[ing] potential buyers of the Properties, and introduc[ing] them to Oppidan." Oppidan Br. 10 (quoting Tonorezos Decl., Ex. A ¶ 12 (Complaint)). Accordingly, no reasonable finder of fact could conclude that the services for which PrinceRidge seeks compensation were anything but "finder" services, which are covered by § 442-d.
This conclusion is not disturbed by PrinceRidge's allegation that it lacked "the authority to negotiate anything with any of the prospective investors" or "the authority to bind Oppidan to a contract." PrinceRidge Opp. 6; see also id. at 8 (distinguishing Feldbau v. Klarnet on the ground that "PrinceRidge did none of the negotiating for the Transactions"). Most significantly, the plain language of § 442-d—which states that it applies to services rendered "in the buying, selling, exchanging, leasing, renting or negotiating a loan upon any real estate"—precludes the conclusion that the statute applies only when the party seeking compensation possesses the authority to negotiate a transaction. See also N.Y. Real Property Law § 420(1) (defining real estate broker as one "who, for another. . . lists for sale, sells. . . exchanges, buys or rents, or offers or attempts to negotiate a sale. . . exchange, purchase or rental of an estate or interest in real estate"). As the use of the disjunctive "or" indicates, negotiating a real estate transaction is sufficient but not necessary to trigger the restrictions of § 442-d. Feldbau v. Klarnet, moreover, holds that finders as well as brokers are covered by § 442-d, even in light of the fact that "[i]t is possible for a finder to accomplish his service by making only two phone calls," i.e., without actually negotiating the transaction. 109 Misc.2d at 36; see also Panarello v. Segalla, 6 A.D.3d at 515-16 (applying § 442-d to a finder without determining whether he had the authority to negotiate); Sorice v. Dubois, 25 A.D.2d at 521 (same). That PrinceRidge lacked the authority to negotiate on behalf of Oppidan therefore cannot raise a genuine issue of fact regarding whether the services rendered were covered by § 442-d.
4. Real Estate License
It is undisputed that PrinceRidge was not a duly licensed real estate broker at the time of the transaction. See Def. 56.1 Statement ¶¶ 28-31; Pl. 56.1 Statement ¶¶ 28-31.
5. Conclusion
Taken in the light most favorable to the PrinceRidge, the record can only reasonably be read to show: (1) the underlying transaction was a real estate transaction covered by § 442-d; (2) the services rendered were "finder" services covered by § 442-d; and (3) PrinceRidge was not a licensed real estate broker at the time it rendered the services for which it seeks compensation. PrinceRidge is therefore barred from recovery for breach of contract under § 442-d, which prohibits non-licensed real estate brokers from recovering for services rendered in real estate transactions, and Oppidan's motion for summary judgment on this claim is granted.
B. PrinceRidge Motion
The Court having granted Oppidan's motion for summary judgment on the breach of contract claim, PrinceRidge's motion for summary judgment on that claim is denied.
IV. BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING
Oppidan further argues that it is entitled to summary judgment on PrinceRidge's claim for breach of the implied covenant of good faith and fair dealing because (1) it is duplicative of PrinceRidge's breach of contract claim, and (2) the underlying agreement is unenforceable. Oppidan Br. 14.
A. Whether the Cause of Action is Duplicative
"Under New York law, parties to an express contract are bound by an implied duty of good faith, but breach of that duty is merely a breach of the underlying contract." Harris v. Provident Life & Accident Ins. Co., 310 F.3d 73, 80 (2d Cir. 2002) (quoting Fasolino Foods Co. v. Banca Nazionale del Lavoro, 961 F.2d 1052, 1056 (2d Cir. 1992)). A claim for breach of the implied covenant will therefore be "dismissed as redundant where the conduct allegedly violating the implied covenant is also the predicate for the breach of an express provision of the underlying contract." ICD Holdings S.A. v. Frankel, 976 F. Supp. 234, 243-44 (S.D.N.Y. 1997) (internal citations omitted).
In support of its motion for summary judgment, Oppidan points to PrinceRidge's complaint, which "bases both alleged causes of action on the same set of facts." Oppidan Br. 15 (citing Tonorezos Decl., Ex. A ¶¶ 10-21 (Complaint)). PrinceRidge's claim for breach of the implied covenant of good faith and fair dealing is indeed based upon the exact same set of allegations made in support of its claim for breach of contract, and is "[s]pecifically. . . among other things," based upon Oppidan's "refus[al] to compensate PrinceRidge for its services pursuant to an express agreement between the parties." Tonorezos Decl., Ex. A ¶¶ 28-29 (Complaint). PrinceRidge, moreover, does not contest that its claim for breach of the implied covenant, like its claim for breach of contract, seeks recovery for Oppidan's efforts to "avoid paying PrinceRidge its contractual fee." PrinceRidge Opp. 13.
PrinceRidge, however, counters that its claim for breach of the implied covenant is not duplicative because it is "premised on the manipulative tactics used by Oppidan to avoid paying PrinceRidge for the services it rendered," including the "subversive actions" engaged in by NRP and Oppidan "to consummate the transaction without PrinceRidge's knowledge to avoid paying PrinceRidge its contractual fee." PrinceRidge Opp. 13. PrinceRidge, for example, alleges that Oppidan "work[ed]. . . behind the scenes and unbeknownst to PrinceRidge, in a deceitful attempt to sell the Properties to NRP and avoid paying PrinceRidge the Success Fee it contractually earned." Id. at 14.
Oppidan's efforts to avoid compensating PrinceRidge for the services it rendered in the sale of the Portfolio Properties to NRP, however, are "also the predicate for [PrinceRidge's] claim for breach of. . . contract," In re Houbigant Inc., 914 F. Supp. 964, 989 (S.D.N.Y. 1995), and both claims clearly "relate to the same events," Ely v. Perthuis, 12 Civ. 1078 (DAB), 2013 WL 411348, at *5 (S.D.N.Y. Jan. 29, 2013) (dismissing breach of good faith and fair dealing claim as duplicative with breach of contract claim, notwithstanding plaintiff's argument that the first claim was based on defendant's refusal to acknowledge the agreement, while the second was based on defendant's refusal to pay plaintiff under the agreement). Accordingly, Oppidan's motion for summary judgment is granted with respect to PrinceRidge's claim for breach of the duty of good faith and fair dealing for its redundancy with the claim for breach of contract.
B. Enforceability of Underlying Agreement
Even if PrinceRidge could show that its claim for breach of the implied covenant were not duplicative, Oppidan would be entitled to summary judgment on the claim because "[t]here can be no breach of the duty of good faith and fair dealing when there is no valid and binding contract from which such a duty would arise." Stillman v. InService America, Inc., No. 05 Civ. 6612 (WHP), 2008 WL 2156724, at *3 (S.D.N.Y. May 20, 2008) (quoting Banco Espirito Santo de Investimento, S.A. v. Citibank N.A., No. 03 Civ. 1537 (MBM), 2003 WL 23018888, at *5 (S.D.N.Y. Dec. 22, 2003)). Because the underlying agreement is unenforceable, see supra § III, Oppidan's motion for summary judgment is granted with respect to PrinceRidge's claim for breach of the implied covenant of good faith and fair dealing. See id.
This conclusion is not affected by PrinceRidge's allegations that it is "a boutique investment bank," that, "[b]efore even doing the work set forth in the Exclusive Engagement Agreement, [it] advis[ed] Oppidan in an advisory capacity," or that the underlying contract contains a conflicts of interests clause. PrinceRidge Opp. 14 (emphasis in original). None of these allegations has any bearing on whether the dominant feature of the underlying contract was the transfer of real estate, whether PrinceRidge is seeking compensation for services rendered in relation to the transfer of real estate, and whether PrinceRidge has a real estate license. See supra § III. They are correspondingly irrelevant to the enforceability of the underlying contract and therefore insufficient to defeat summary judgment.
V. CONCLUSION
For the foregoing reasons, Defendant Oppidan's motion for summary judgment is granted in its entirety, and Plaintiff PrinceRidge's motion for summary judgment is denied.
This resolves Docket Nos. 28 and 32. The Clerk of Court is requested to terminate this case.
SO ORDERED. Dated: February 4, 2014
New York, New York
/s/_________
ALISON J. NATHAN
United States District Judge