Opinion
654774/2017
06-25-2021
REMORA CAPITAL S.A. and Remora Partners S.A., Plaintiffs, v. Dr. Pierre DUKAN, Marie Dukan, Sacha Dukan, Maya Dukan, Diet Coaching Inc., Duvalec S.A.R.L., and Sedad, S.A.S., Defendants.
Boies Schiller Flexner LLP, New York, NY ( Eric Brenner and Sabina Mariella of counsel), for plaintiffs. Kellner, Herlihy, Getty & Friedman, LLP, New York, NY ( Thomas Vandenabeele and Berenice Le Diascorn of counsel), for defendants.
Boies Schiller Flexner LLP, New York, NY ( Eric Brenner and Sabina Mariella of counsel), for plaintiffs.
Kellner, Herlihy, Getty & Friedman, LLP, New York, NY ( Thomas Vandenabeele and Berenice Le Diascorn of counsel), for defendants.
Gerald Lebovits, J.
The following e-filed documents, listed by NYSCEF document number (Motion 003) 103, 104, 105, 106, 107, 108, 109, 110, 111, 112, 113, 114, 115, 116, 117, 118, 119, 120, 121, 122, 123, 124, 166, 167, 173, 174, 175 were read on this motion for SUMMARY JUDGMENT.
The following e-filed documents, listed by NYSCEF document number (Motion 004) 125, 126, 127, 128, 129, 130, 131, 132, 133, 134, 135, 136, 137, 138, 139, 140, 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 152, 153, 154, 155, 156, 157, 158, 159, 160, 161, 162, 163, 164, 165, 168, 169, 170, 171, 172 were read on this motion for SUMMARY JUDGMENT.
This is a breach-of-contract action brought in 2017 by plaintiffs Remora Capital S.A. and Remora Partners S.A. (Remora) against defendants Diet Coaching Inc. and Duvalec S.A.R.L. This decision addresses two of the claims asserted in the action: one related to defendants’ alleged late repayment of a $300,000 convertible loan, and one relating to defendants’ alleged failure to repay a €60,000 convertible loan. On motion sequence 003, defendants seek summary judgment dismissing both these causes of action. On motion sequence 004, plaintiffs seek summary judgment in their favor on both causes of action.
Motion sequences 003 and 004 are consolidated here for disposition. Defendants’ motion for summary judgment is granted as to the first of the two causes of action and denied as to the second cause of action. Plaintiffs’ motion for summary judgment is denied in its entirety.
BACKGROUND
On August 15, 2013, plaintiffs (under a special-purpose vehicle named DDR) gave a convertible loan of $300,000 to defendants. ( See NYSCEF No. 8.) The loan had to be repaid by September 30, 2013. ( See id. ) It is uncontested that defendants did not repay in cash. Instead, the parties focus on whether defendants paid plaintiffs by converting the loan into equity of the company Diet Coaching and transferring that equity to plaintiffs. The $300,000 was converted into equity of the company Diet Coaching. ( See NYSCEF No. 12.) Plaintiffs argue that defendants neither delivered that equity to them, nor gave them proof that they now held the equity, by the September 30 deadline. Defendants argue that when the loan was converted into equity, it automatically belonged to plaintiffs, and nothing more was needed.
Following financial difficulties for the Diet Coaching company, plaintiffs and defendants signed two agreements on December 31, 2013. First, they signed a Services Agreement. Plaintiff Remora Partners agreed to provide, among other things, strategic advisory services at least once a quarter. ( See NYSCEF No. 143 at ¶ 1.1.) In exchange for these services, defendants would pay a fixed fee of €60,000 the next day. ( See id. at 2.1.) However, given defendants’ financial difficulties—the reason why defendants needed plaintiffs’ services in the first place—defendants could not immediately pay Remora Partners. Instead, they signed a second agreement: the Loan Agreement. Remora Partners agreed to let plaintiff Remora Capital front the fixed payment of €60,000 to Remora Partners. ( See NYSCEF No. 123.) Now, instead of paying Remora Partners the next day for its services, defendants would pay a convertible loan of €60,000 by the end of the next year, December 31st, 2014. ( See id. )
In 2017, plaintiffs brought this action, alleging that defendants never did transfer the $300,000 worth of equity in Diet Coaching to them, or repay the €60,000 convertible loan, and asserting several claims sounding in fraud and contract. In 2018, defendants moved to dismiss under CPLR 3211 (a) (1) and (a) (7). This court denied the motion to dismiss. ( See NYSCEF No. 59.) Defendants then moved to dismiss claims against all defendants except for Diet Coaching, alleging that plaintiffs had not timely served them. This court denied that motion as well. ( See NYSCEF No. 77.) Defendants appealed to the Appellate Division, First Department. In the fall of 2019, the First Department affirmed the denial of the motion to dismiss plaintiffs’ breach-of-contract claims, but held that plaintiffs’ other claims should be dismissed as duplicative of the contract-based causes of action; and it affirmed the denial of the motion to dismiss for lack of proper service. ( See Remora Capital S.A. v Dukan , 175 AD3d 1219 [1st Dept 2019].)
On March 9, 2020, while discovery was ongoing in the action, defendants issued Diet Coaching share certificate No. 11 to plaintiffs. ( See NYSCEF No. 145.) That share certificate is for 38.57 shares in Diet Coaching—the number of shares in that $300,000 was worth as of September 30, 2013. ( See NYSCEF No. 118 at ¶¶ 10-12.)
The parties now separately move for summary judgment on plaintiffs’ two remaining contract-based causes of action. On the first cause of action, defendants’ motion for summary judgment dismissing that claim (motion sequence 003) is granted, and plaintiffs’ motion for summary judgment in their favor on the claim (motion sequence 004) is denied. On the second cause of action, both motions for summary judgment are denied.
DISCUSSION
I. Defendants’ Procedural Challenges to Plaintiffs’ Motion for Summary Judgment
As an initial matter, defendants claim that plaintiffs’ motion for summary judgment should be denied because it suffers from serious procedural defects. This court disagrees.
Many of these asserted defects are technical and do not affect the parties’ substantial rights. Some of the defects (failure to attach pleadings, failure to annex a separate, short, and concise statement of material facts, lack of translation certification) have been cured. Others (improper electronic-signature filing, memorandum-of-law not preceding exhibits on NYSCEF, improper word-limit certification filing, omitting the note of issue filing date) shall be disregarded by this court under CPLR 2001.
The one procedural issue that warrants discussion relates to defendants’ argument that plaintiffs improperly rely on an attorney affirmation that is not based on personal knowledge. The court finds this argument unpersuasive. CPLR 3212 (b) requires an affidavit by a person "having knowledge of the facts." However, CPLR 2106 allows the statement of an attorney "who is not a party to an action" to be served "in lieu of and with the same force and effect as an affidavit." For the movant, an attorney affirmation lacking personal knowledge is allowed—the affirmation can simply present proof from discovery. ( See Olan v Farrell Lines, Inc. , 64 NY2d 1092, 1093 [1985].) Defendants misplace their reliance on Clarke v Am. Truck & Trailer, Inc. (171 AD3d 405 [1st Dept 2019] ). There, the First Department said only that if the attorney lacks personal knowledge, then unauthenticated, and thus inadmissible, evidence cannot be introduced via attorney affidavit. ( See id. at 406.) Defendants do not challenge the authentication of plaintiffs’ evidence. They merely challenge the attorney affirmation generally.
II. The Parties’ Summary-Judgment Motions on Plaintiffs’ First Cause of Action (the $300,000 DDR Loan Agreement)
Plaintiffs’ first cause of action asserts that defendants breached the parties’ agreement relating to the $300,000 loan to DDR by failing to repay that loan. As noted above, it is undisputed that defendants did not pay plaintiffs back in cash. Instead the question is whether defendants satisfied their obligations under the agreement by transferring to plaintiffs an equity share in Diet Coaching equal to the amount of the loan.
Defendants rely on an internal accounting statement that assertedly indicates that the amount of the loan was converted into equity in Diet Coaching in 2013—contending that once the loan was converted into equity, it automatically belonged to plaintiffs. This court disagrees. There must be at least some evidence not simply that equity in a company exists but that it has, in fact, been transferred to a particular party. Thus, on the prior appeal in this action, the First Department held that defendant Duvalec having listed the equity as "paid in capital" in their books was not enough, as it "does not show that any shares were allocated to plaintiffs , much less the number of shares allocated, or their valuation." ( Remora Capital , 175 AD3d at 1219-1220 [emphasis added].) And defendants on this motion still provide proof only that they converted $300,000 into shares of Diet Coaching, without establishing who owned those shares.
Defendants again cite their 2013 books and submit tax returns, each listing a conversion of the $300,000 into capital shares. ( See NYSCEF No. 12; NYSCEF Nos. 34-41.) This is still only proof that $300,000 were converted into shares. It says nothing about who owned them. A document that would make out this showing, such as a share certificate, would not be issued until 2020. Plaintiffs have established prima facie that defendants breached the contract in 2013, and defendants have not introduced contrary evidence that raises a dispute of fact.
To recover for breach of contract, though, a plaintiff must establish not only that the defendant breached the contract, but also that plaintiff suffered damages as a result. ( See Harris v Seward Park Housing Corp. , 79 AD3d 425, 426 [1st Dept 2010].) Plaintiffs here have not done so.
Ordinarily, the proper measure of damages for breach of contract is expectation damages, to "put[ ] plaintiff in the same economic position [it] would have occupied had the breaching party performed the contract." ( Emposimato v CICF Acquisition Corp. , 89 AD3d 418, 421 [1st Dept 2011].) In the case of a breach of a contract to sell securities, "expectation damages are calculated as ‘the difference between the agreed price of the shares and the fair market value at the time of the breach.’ " ( Id. , quoting Aroneck v Atkin , 90 AD2d 966, 966 [4th Dept 1982] ; see also LG Capital Funding, LLC v Coroware, Inc. , 2017 WL 3973921, at *4-*5 [ED NY Sept. 8, 2017] [same, applying New York law to determine expectation damages for breach of a convertible loan agreement]; Union Capital LLC v. Vape Holdings Inc. , 2017 WL 1406278, at *6-*7 [SD NY Mar. 31, 2017] [same].)
Here, Remora loaned defendants the $300,000 in mid-August 2013. And the time of the breach was September 30, 2013—the date on which defendants were required to—but did not—convert the loaned funds into shares of Diet Coaching to be held by Remora. Plaintiffs have not, however, provided any evidence that the share price set in the August 2013 loan agreement differed from the shares’ fair-market value as of the end of September 2013. To the contrary, record evidence suggests that no difference existed. Defendants’ papers on motion sequence 003 include both the loan agreement itself and an affidavit from defendant Sacha Dukan explaining some of the agreement's terms. ( See NYSCEF Nos. 111, 118.) The Sacha Dukan affidavit, which in relevant part plaintiffs have not controverted, represents that the value of the Diet Coaching shares for purposes of the agreement would was based on a valuation of the company set in the agreement, divided by the number of outstanding shares. ( See NYSCEF No. 118 at ¶¶ 10-12.) And plaintiffs themselves have stated that no new shares were issued during 2013. ( See NYSCEF No. 171 at ¶ 27.) These facts, taken together, suggest that there was no difference between the agreed-upon share price and the share price at the time of the breach—and thus no expectation damages. Nor do plaintiffs introduce other countervailing evidence that might support a claim for expectation damages.
Instead, plaintiffs focus on the lag between the point when defendants were supposed to deliver shares of Diet Coaching (September 2013) and the point when defendants actually did deliver the shares (March 2020). Plaintiffs claim that because defendants’ breach was not cured until March 2020, plaintiffs should be entitled to damages for the difference in share value that occurred over the six-and-a-half years in which defendants were in breach. But plaintiffs cite no New York decision holding this measure of damages to be appropriate in place of expectation damages.
Moreover, plaintiffs do not provide any evidence by which this form of damages could be measured—such as the change in value of the Diet Coaching shares between 2013 and 2020. At most, plaintiffs say that by March 2020 "the market value of the shares had likely significantly declined" relative to September 2013, given apparent difficulties faced by Diet Coaching's business. (NYSCEF No. 150 at 16.) This unsupported conjecture is insufficient to create an issue of fact at summary judgment, much less entitle plaintiffs to judgment as a matter of law. Plaintiffs emphasize a statement of the U.S. Court of Appeals for the Second Circuit, applying New York law, that "New York courts have significant flexibility in estimating general damages." ( Id. , quoting Tractebel Energy Mktg., Inc. v AEP Power Mktg. , 487 F3d 89, 112 [2d Cir 2007].) But "significant flexibility" is not free rein to pick a likely seeming number absent evidentiary support in the record.
Plaintiffs imply that the absence of evidence should be not be held against them because defendants failed to respond to a discovery request seeking "balance sheets and profit and loss statements for Diet Coaching" for 2020, which would have "allow[ed] Plaintiffs to fully evaluate the current value of Diet Coaching equity." (NYSCEF No. 150 at 16 n 2.) But plaintiffs did not take any steps to obtain that information, beyond "inform[ing] defense counsel that [plaintiffs] had not received" documents containing the information. (NYSCEF No. 126 at ¶ 3.) Plaintiffs did not raise this issue with the court in the three succeeding discovery conferences. ( See NYSCEF Nos. 98-100). Nor, for that matter, did plaintiffs move to compel. And plaintiffs chose to file their note of issue without having these documents in hand. ( See NYSCEF No. 101.)
III. The Parties’ Summary-Judgment Motions on Plaintiffs’ Second Cause of Action (the €60,000 Advisory Services and Loan Agreements)
A. Whether the Second Cause of Action is Barred by a Contractual Forum-Selection-Clause
Defendants argue that plaintiffs’ second cause of action should be dismissed because a forum-selection clause in the Services Agreement mandates litigation in Switzerland. ( See NYSCEF No. 113 at ¶¶ 4.1-4.3.) This argument is without merit.
Both parties agree that relying on a forum-selection-clause is a defense based on documentary evidence within the meaning of CPLR 3211 (a) (1). This defense is waived if not raised in the answer or a pre-answer motion to dismiss. ( See CPLR 3211 [e].) But defendants did not expressly raise a forum-selection-clause defense in their answer or in a pre-answer motion to dismiss. Nor do defendants seek to amend their answer. Instead, defendants argue that they raised the defense in their answer merely by asserting a "documentary evidence" defense in the answer based on CPLR 3211 (a) (1). ( See NYSCEF No. 105 at 17.) But asserting in general terms in the answer that plaintiffs’ claims are defeated by documentary evidence is not sufficient to put plaintiffs on notice of defendants’ specific forum-selection-clause defense. In any event, defendants themselves concede that they were only reminded of the forum-selection clause in the Services Agreement when plaintiffs produced the Agreement in discovery. ( See id. at 15.) The documentary-evidence defense in the answer thus necessarily could not have encompassed a forum-selection-based argument for dismissal. That argument has been waived.
B. Whether the Second Cause of Action is Subject to Dismissal for Failure to Plead the Substance of Foreign Law
Defendants next contend that plaintiffs’ second cause of action must be dismissed because plaintiffs base this cause of action on Swiss law without providing the substance of the Swiss legal provision on which they rely. CPLR 3016 (e) provides that "where a cause of action or defense is based on the law of a foreign country ... the substance of the foreign law relied upon must be stated." And failure to cite that foreign law with particularity is sufficient to warrant dismissal of a motion. ( See MBI Intl. Holdings Inc. v Barclays Bank PLC , 151 AD3d 108, 116 [1st Dept 1993].) But, as with the forum-selection clause discussed above, this attack on the sufficiency of the pleadings was waived because it was not raised in an answer or in a pre-answer motion to dismiss. ( See Fossella v Dinkins , 66 NY2d 162, 167 [1985].)
C. Whether to Grant the Parties’ Opposing Motions for Summary Judgment on the Second Cause of Action
Plaintiffs’ second cause of action, also sounding in breach of contract, is based on two related letter agreements, executed the same day. One agreement (the Advisory Services Agreement) calls for plaintiff Remora Partners to provide defendants with financial and strategic advisory services in exchange for a flat fee of €60,000, plus additional specified contingent bonuses. ( See NYSCEF No. 124.) The other agreement (the Advisory Loan Agreement) "is intended to serve as our agreement on the terms and conditions of the payment of the SA services" that Remora Partners would be providing. (NYSCEF No. 25 at 1.) The Loan Agreement called for Remora Capital to front the €60,000 payment to Remora Partners; Remora Capital's payment would be treated in substance as a €60,000 loan to Diet Coaching, which was to be convertible into shares of defendant Duvalec. ( See id. ) It is undisputed that defendants neither repaid the €60,000 to plaintiffs in cash, nor converted the €60,000 into shares of Duvalec that were then transferred to plaintiffs.
Plaintiffs therefore have asserted a claim for breach of contract for defendants’ failure to repay the loan in cash or shares. The parties each now move for summary judgment on that claim.
The interpretation of unambiguous provisions regarding a contract's structure and terms are questions of law for the court. ( See Burlington Ins. Co. v NYC Tr. Auth. , 29 NY3d 313, 321 [2017].) The presence of ambiguous provisions creates an issue of fact for the jury. ( See Hartford Accident & Indem. Co. v Wesolowski , 33 NY2d 169, 172 [1973].) Ambiguity exists when the contract as a whole does not reveal its purpose and the intent of the parties, or there are multiple reasonable interpretations. ( See Universal Am. Corp. v National Union Fire Ins. Co. of Pittsburg, PA. , 25 NY3d 675, 680 [2015].)
1. Plaintiffs’ Motion for Summary Judgment (Motion Sequence 004)
Plaintiffs assert that because it is undisputed that defendants did not repay the loan, plaintiffs are entitled to summary judgment on this cause of action. In opposing plaintiffs’ motion, defendants argue that plaintiffs failed to perform their own contractual obligations to provide advisory services to Diet Coaching, and therefore cannot recover in breach of contract. Plaintiffs’ response is that the Services and Loan Agreements are separate and distinct—and thus that defendants still owed (and failed to pay) the €60,000 in cash or shares, regardless of any disagreement over plaintiffs’ provision of services. This court does not agree that the two agreements can be separated as plaintiffs contend.
The two agreements are dated the same day, were made in the same place, and were executed by the same signatories on each side. And in substance, the agreements are two halves of one larger whole: The Services Agreement states what plaintiffs would be doing for defendants, the Loan Agreement states how defendants would be paying for plaintiffs’ services. Plaintiff contends that one could read the Loan Agreement separately, as simply a straight loan from Remora Capital to defendants that went unrepaid. ( See NYSCEF No. 150 at 17.) But it would make little sense to read the Loan Agreement in isolation from the Services Agreement—not least because the Loan Agreement itself states expressly that it sets forth how plaintiffs would be paid for the services provided under the Services Agreement. ( See NYSCEF No. 25 at 1.)
This court thus concludes that the only reasonable reading of these two agreements is that they are interconnected pieces of a broader agreement consisting of fees owed for services rendered. That the parties agreed to treat defendants’ obligation to pay for those services as a convertible loan, rather than as a straight fee, does not alter this analysis. As a result, this court cannot determine whether plaintiffs can recover in breach of contract for defendants’ failure to satisfy their loan obligations without first considering defendants’ argument that plaintiffs failed to provide the promised services. Plaintiffs’ motion for summary judgment on the second cause of action (motion sequence 004) is denied.
2. Defendants’ Motion for Summary Judgment (Motion Sequence 003)
On defendants’ motion for summary judgment, defendants argue that plaintiffs have no breach-of-contract claim because the services provided by Remora Partners failed as a matter of law to satisfy Remora's obligations under the Services Agreement. ( See NYSCEF No. 105 at 18-20.) This court disagrees.
Defendants also assert that plaintiffs did not suffer damages, and thus cannot recover in breach of contract, because it "is undisputed that the €60,000 remained with Remora at all times and that Defendants never received a penny on that basis." (NYSCEF No. 105 at 21.) But the Services and Loan Agreements, read together, clearly contemplate that plaintiffs were to provide defendants with €60,000 worth of advisory services. The particular manner in which the parties booked this transaction does not oust defendants’ obligation to provide plaintiffs with €60,000 in exchange for the services, any more than it ousts plaintiffs’ obligation to provide the services in the first place.
The Services Agreement says little about what the advisory "services" to be provided by Remora Partners would entail. It mentions that Remora will "advise the group ... during the meetings of the Strategic Committee or of any other governing body of the same nature, at least once per quarter." (NYSCEF Doc No. 143 at ¶ 1.1.) And defendants’ evidence does establish that a body called the "strategic committee" was never established. At the same time, though, a board member of Remora Partners had several regular meetings with defendants, plaintiffs helped find a new managing director for Diet Coaching, plaintiffs produced a 99-page memo on market position for the Dukan Diet, and also helped raise capital for Diet Coaching. ( See NYSCEF No. 24 at ¶ 15-17.) This court concludes that these services provided to defendants are sufficient to raise a factual dispute about whether plaintiffs satisfied their obligations under the Services and Loan Agreements.
Accordingly, for the foregoing reasons, it is hereby
ORDERED that the branch of plaintiffs’ motion under CPLR 3212 seeking summary judgment in their favor on their first cause of action (mot seq 004) is denied; and it is further
ORDERED that the branch of defendants’ motion under CPLR 3212 seeking summary judgment dismissing plaintiff's first cause of action (mot seq 003) is granted; and it is further
ORDERED that the branch of plaintiffs’ motion under CPLR 3212 seeking summary judgment in their favor on their second cause of action (mot seq 004) is denied; and it is further
ORDERED that the branch of defendants’ motion under CPLR 3212 seeking summary judgment dismissing plaintiff's second cause of action (mot seq 003) is denied.