Opinion
09-CV-3855(GRB)
2022-02-18
The SANDS HARBOR MARINA CORP., Sands Harbor Marina LLC, The Sands Harbor Marina Operating Corp., Sands Marina Operating LLC, Greg W. Eagle, Pine Creek Ranch, LLC, and University 1248, LLC, Plaintiffs, v. USI INSURANCE SERVICE NATIONAL, INC. f/k/a Wells Fargo Insurance Services of Oregon, Inc., EVMC Real Estate Consultants, Inc., Larry Esacove, The Estate of Aida Esacove, David P. Guilot, Anthony B. Chopra, Tisdale & Nicholson, LLP, Jeffrey A. Tisdale, Guy C. Nicholson, and Michael D. Reis, Defendants.
Roy A. Klein, Esq., Law Offices of Roy A. Klein, Attorney for Plaintiffs, 532 Broad Hollow Road Suite 144, Melville, NY 1174. Peter J. Biging, Esq., Goldberg Segalla LLP, Attorney for USI Insurance Service National, Inc., 665 Main Street POB 880, Buffalo, NY 14201. Gregory J. Radomisli, Esq., Martin, Clearwater & Bell, Attorney for Tisdale & Nicholson, LLP and Jeffrey A. Tisdale, 220 East 42nd Street, New York, NY 10028.
Roy A. Klein, Esq., Law Offices of Roy A. Klein, Attorney for Plaintiffs, 532 Broad Hollow Road Suite 144, Melville, NY 1174.
Peter J. Biging, Esq., Goldberg Segalla LLP, Attorney for USI Insurance Service National, Inc., 665 Main Street POB 880, Buffalo, NY 14201.
Gregory J. Radomisli, Esq., Martin, Clearwater & Bell, Attorney for Tisdale & Nicholson, LLP and Jeffrey A. Tisdale, 220 East 42nd Street, New York, NY 10028.
MEMORANDUM OF DECISION & ORDER
GARY R. BROWN, United States District Judge:
"It's so easy to believe someone when they're telling you exactly what you want to hear." -Anonymous
This case arises from plaintiffs’ unsuccessful efforts to obtain hundreds of millions of dollars’ worth of non-traditional commercial real-estate financing from defaulting defendant EVMC Real Estate Consultants, Inc. ("EVMC") in an arrangement best regarded as an advance fee scheme. Presently before the Court are motions for summary judgment by USI Insurance Service National, Inc. ("USI") – EVMC's consultant and insurance broker – and Jeffrey Tisdale and Tisdale & Nicholson's (together "T&N Defendants") – EVMC's attorneys – based on the execution of two release agreements by plaintiff Greg Eagle ("Eagle") in late 2008. Because the undisputed material facts demonstrate that Eagle executed the releases, which cover these defendants, in exchange for yet more promises of financing, defendants’ motions for summary judgment are granted. Factual Background
The following facts, drawn from the parties’ Rule 56.1 Statements and other evidence of record in this action, are construed in the light most favorable to the non-moving party. See Ayazi v. United Fed'n of Teachers Local 2 , 487 F. App'x 680, 681 (2d Cir. 2012) ; Capobianco v. City of New York , 422 F.3d 47, 54-55 (2d Cir. 2005).
USI Insurance Service National, Inc. ("USI") was an Oregon corporation with a principal place of business in Oregon. See Pls. Rule 56.1 Statement of Undisputed Facts ("Eagle SUF"), DE 343-1 at ¶ 3. Michael Reis is an individual domiciled in the State of Oregon. Id. at ¶ 4. Reis was employed by Acordia of Oregon. T&N Defs. Rule 56.1 Statement of Undisputed Facts ("T&N SUF"), DE 344-2 at ¶ 39. Tisdale & Nicholson, LLP was a limited liability partnership organized under the laws of the State of California. Eagle SUF, DE 343-1 at ¶ 5. Defendant Jeffery Tisdale was a partner in Tisdale & Nicholson and was domiciled in California. Id. Tisdale represented defendant EVMC Real Estate Consultants, Inc., a California corporation with its principal place of business in California. T&N SUF, DE 344-2 at ¶¶ 24, 34. Larry Esacove was a senior executive officer at EVMC. Id. at ¶¶ 27, 34. Aida Esacove appeared to be the principal in charge of EVMC. Eagle SUF, DE 343-1 at ¶ 7A; USI SUF, DE 345-1 at ¶ 51. David Guilot was Vice President of Sales of EVMC. T&N SUF, DE 344-2 at ¶ 28.
Acordia of Oregon, Inc. was a subsidiary of Wells Fargo, which was later renamed Wells Fargo Insurance Services of Oregon, Inc., and subsequently became part of USI Insurance Service National, Inc. upon the purchase of Wells Fargo's insurance brokerage business by USI in October 2017. USI Def. Rule 56.1 Statement of Undisputed Fact ("USI SUF"), DE 343-1 at 5 n.3; DE 345-1 at ¶ 92.
Aida Esacove passed away prior to the suit instituted by Eagle, therefore the Estate of Aida Esacove is now named as a defendant in the complaint.
Eagle was a property developer domiciled in the state of Florida. Eagle SUF, DE 343-1 at ¶ 2. Pine Creek Ranch, LLC and University 1248, LLC (hereinafter, with Eagle, "Eagle Plaintiffs" or "Plaintiffs") were limited liability companies organized under the laws of the state of Florida, with their principal places of business in Florida. Id. Eagle was the sole member of University 1248, LLC and a member of Pine Creek Ranch, LLC. Id. Eagle established these entities to facilitate the purchase of two undeveloped plots of land in Charlotte County, Florida in an attempt to capitalize on growth anticipated from the nearby opening of a satellite campus of Florida Gulf Coast University. USI Def. Rule 56.1 Statement of Undisputed Fact ("USI SUF"), DE 345-1 at ¶¶ 11-13, 25. The first property Eagle sought to purchase was the University 1248 property or R&D Cattle property. USI SUF, DE 345-1 at ¶¶ 11-12. The second property Eagle sought to purchase was the Pine Creek Ranch property or 5200 Ranch property. Id. OJ Buigas was the owner of the 5200 Ranch property. Id. From April 2005 to July 2006, Eagle tried unsuccessfully to obtain financing to purchase the properties. Id. at ¶ 28. As a result of his inability to obtain financing, Eagle forfeited almost nineteen million dollars in non-refundable deposits that he had paid on the 5200 Ranch property. Id. at ¶¶ 21, 36-37. Eagle was ultimately unable to close a deal with Florida Gulf Coast University and forfeited an additional five million dollars in non-refundable contract deposits on the R&D Cattle property. Id. at ¶¶ 40, 46.
Having exhausted traditional funding avenues, Eagle sought alternative financing to revive the project. Id. at ¶¶ 24, 25, 29, 30, 33, 34, 35, 47, 48. This search led Eagle to Jay Jones and Frank Zarrelli, whom Eagle retained as consultants to assist him in obtaining financing. Id. at ¶ 42. Zarrelli then introduced Eagle to David Guilot, a loan financing broker, whom Eagle also retained. Id. at ¶ 43. It was Jones who ultimately introduced Eagle to Stephen Alexander. Id. at ¶ 45. Alexander managed a company, Grove Tactical Training and Survival Center, LLC, that was attempting to develop a plot of land in Florida into an antiterrorism training facility. Id. Guilot, Jones, and Zarrelli also introduced Eagle to EVMC. Id. at ¶ 50. About this time, Guilot was hired by EVMC—and thus acted as Eagle's broker and an employee of EVMC. Id. at ¶ 50.
EVMC and Eagle, as managing member of 1248 University, LLC, entered into a consulting agreement on August 24, 2006. Id. at ¶ 55. Pursuant to that agreement, Eagle agreed to pay EVMC $1.5 million in exchange for assistance in obtaining $150 million in financing for land development projects in Florida. Eagle SUF, DE 343-1 at ¶ 6. Although not formally hired as a Vice President by USI until September 1, 2006, Reis and EVMC had a prior relationship. Id. at ¶¶ 8-9. In June of 2006, Reis and EVMC had signed an independent consulting agreement entitling Reis to commissions on referrals that he made to EVMC. USI SUF, DE 345-1 at ¶ 95. Reis never disclosed this relationship with EVMC to USI despite completing employment forms calling for such information. Id. On October 1, 2006, USI and EVMC entered into a Client Services Agreement ("CSA") pursuant to which USI would help EVMC obtain Residual Value Insurance ("RVI") for real estate financing projects in exchange for fees totaling $250,000 a year. Eagle SUF, DE 343-1 at ¶ 12. To that end, Reis communicated with insurance intermediaries in London, including David Arbuary and Kim Bolton, to set up an insurance facility that could provide RVI for projects that EVMC sought to fund. USI SUF, DE 345-1 at ¶¶ 97-100.
Eagle was initially told that EVMC would be the lender, using funds on deposit with UBS to fund the loan, but EVMC then provided documents purported to be from Deutsche Bank. Id. at ¶¶ 78-79. Though Eagle was assured that a loan would close shortly after he wired the $1.5 million to EVMC, EVMC's title agent only provided a letter stating it had documentation confirming that EVMC had the funds, and draft loan commitment documents did not materialize for several months. Id. at ¶¶ 79, 86-88. Eagle was then informed that Credit Suisse would, in fact, be funding the loan. Id. at ¶ 90. Though without a loan commitment, Eagle paid an additional $3 million to reinstate his right to purchase the R&D Cattle property. Id. at ¶ 91. Eagle ultimately failed to obtain a contract with Florida Gulf Coast University, so he formed a joint venture with Stephen Alexander to develop a tactical training center on the R&D Cattle property. Id. at ¶¶ 106-107.
After repeatedly changing the funding source and loan closing date, EVMC advised Eagle that the loan would now close on December 15, 2006. Id. at ¶ 115. No loan closed on that date. Id. at ¶ 116. It was then determined that the loan amount would need to be increased to $200 million to cover the costs of the project. Id. at ¶ 118. Due to this increase, EVMC demanded that Eagle pay an additional $500,000 as another non-refundable advance fee, which he did. Id. at ¶¶ 118-23. After sending the additional advance payment, the closing date for the loan was to be January 31, 2007, but that date, like so many others, came and went without a loan being closed. Id. at ¶¶ 124, 141, 144. Other participants grew suspicious. Id. at ¶ 134. On January 2, 2007, Eagle's land use planner, Greg Stuart, sent Eagle and his team a memorandum detailing exactly why Stuart believed that EVMC was defrauding Eagle. Id. at ¶¶ 129-31. Eagle's attorney, Gregg Truxton, Eagle's brother, Tim Eagle, and Stephen Alexander all expressed similar concerns. Id. ¶¶ 133-34. In February of 2007, the Eagle team sent Zarrelli to visit Guilot in Pittsburgh to investigate whether EVMC was a legitimate operation. Id. at ¶ 149. To that same end, in April of 2007 Truxton contacted an attorney involved in prior litigation against EVMC to compare experiences. Id. at ¶ 162. In May of 2007, Eagle was told that the loan was close to being funded, only for EVMC to again scuttle the deal on the eve of closing. Id. at ¶¶ 163-70. As purchase expirations grew near, Eagle, Truxton, Eagle's brother, and Jay Jones flew to Los Angeles to confront Aida Esacove and Tisdale & Nicholson, LLP in person. Id. at ¶¶ 171-73. Though they did not meet with Tisdale & Nicholson, LLP, the group did meet with Aida Esacove, who showed them documents purporting to demonstrate that "billions of dollars" in funding would soon be available to Eagle. Id. at ¶ 175. With the seller's fears about Eagles’ lack of funding temporarily assuaged, a closing date was set for June 8, 2007. Id. at ¶¶ 177-78. Again, no closing occurred. Id. at ¶ 178. Skepticism of EVMC continued to mount. Id. at ¶¶ 179-81.
Regardless, Eagle and EVMC pressed on into July of 2007, when yet another purported closing date passed without action—the funding, which was now allegedly originating from Dubai, was held up yet again. Id. ¶¶ 182-84. In August 2007, EVMC informed Eagle that OPEC was now involved in funding the loan. Id. at ¶ 191. Once again, the loan did not close by a promised closing date of August 31, 2007. Id. at ¶ 193. Eagle was then provided with documents from OPEC that purported to be from an attorney for the OPEC Trust named "Darlington Niks." Id. at ¶ 192, 194, 198. Truxton attempted to contact Niks directly but was informed by the OPEC Fund in Vienna that they could not confirm Niks’ existence. Id. at ¶ 198. Alexander informed Eagle that based on his Department of Defense background and his own investigation, Niks did not exist, and OPEC did not ordinarily fund projects in that manner. Id. at ¶ 199. At the end of August of 2007 Truxton spoke to EVMC's former counsel, Don Wasil, who told Truxton that he was not sure EVMC was "for real." Id. at ¶ 203.
In September of 2007, further problems arose with the transaction. Reis informed EVMC and Eagle that RVI could not be obtained for a purchase of raw land only. Id. at ¶ 210. The Eagle group suggested that the loan amount be doubled to $400 million, a figure that now included acquisition and development costs, as RVI could be issued only for a loan that included subsequent development on said plot. Id. at ¶ 211. Guilot sent Eagle an invoice totaling $27 million for costs incurred in arranging the loan due to the RVI misunderstanding. Id. at ¶ 216. Truxton responded by questioning EVMC's intentions and highlighting that EVMC had made numerous misrepresentations over the preceding year. Id. at ¶¶ 214, 225. On October 2, 2007, EVMC provided Eagle with a new consulting agreement to sign, which required a further $6,375,000 to be paid as an upfront fee. Id. at ¶ 220. Eagle, through Truxton, declined to pay the fee absent a loan commitment and continued, unsuccessfully, to find funding elsewhere. Id. at ¶¶ 223, 225. On October 20, 2007, Jones recommended that a lawsuit be filed against EVMC as soon as possible. Id. at ¶ 227. Failing to obtain financing elsewhere, Eagle proposed proceeding with EVMC even though several members of his team advised him against this course of action. Id. at ¶¶ 228-31. EVMC, through Reis, again assured Eagle that OPEC had committed to funding the project but refused to allow anyone from Eagle's camp to view any documentation supporting the commitment. Id. at ¶¶ 232-34. At this point Jones expressed his opinion that Reis could not be trusted because he would send out any letter EVMC requested. Id. at ¶ 235. After further refusal to provide the underlying documentation, EVMC sent Eagle a revised loan commitment and consulting agreement on November 20, 2007. Id. at ¶ 244. When Eagle requested that Clifford Goldman, purportedly an advisor to EVMC, countersign this agreement, EVMC refused and instead insisted that Darlington Niks would countersign. Id. at ¶ 245. The revised agreement was ultimately executed on November 21, 2007, with Darlington Niks purportedly countersigning on November 23, 2007. Id. at ¶ 249. Eagle again paid an upfront fee, with money borrowed from OJ Buigas, without any assurance that it could be recouped if a loan was not closed. Id. at ¶¶ 249, 252, 260.
Unsurprisingly, a new promised closing date of February 15, 2008 yielded no loan. Id. at ¶ 265. By this point, Eagles’ engagement letter with Alexander had expired and Eagle and Alexander had parted ways. Id. at ¶ 262. After yet another closing date passed without a loan, OJ Buigas commenced litigation against Eagle to collect on the loan he had provided to cover the additional advance fee demanded by EVMC. Id. at ¶ 267. On July 7, 2008, Reis resigned from USI. Id. at ¶ 270. In August of 2008, after being informed by OPEC that Darlington Niks was in no way affiliated with the OPEC Fund, the law firm retained by EVMC in Florida to aid with the transaction withdrew as counsel, arousing further suspicion. Id. at ¶¶ 272-73.
Despite two years of broken promises and obvious misrepresentations, Eagle executed a release of EVMC on September 26, 2008 ("Release Agreement") in exchange for a funding capacity letter that he could show to creditors and sellers. Id. at ¶ 275. The Release Agreement explicitly states that "(1) the consulting fee paid pursuant to the CA and CL has been fully earned by EVMC and is not refundable, and (2) the Eagle Parties hereby forever release the EVMC Parties from any claim, demand and cause of action to recover the aforementioned consulting fee." Release Agreement, DE 374-1 at § 2.2. The Release Agreement covered EVMC, "as well as its agents , officers, shareholders, employees, consultants and attorneys ." Id. (emphasis added).
Eagle then formed a new company, Highlands 7700, LLC, and entered into a new agreement with EVMC seeking a $425 million loan to develop another property. USI SUF, DE 345-1 at ¶ 276. On November 20, 2008, the parties signed a Credit Facility Agreement ("CFA") that included a release of EVMC and EVMC's "agents, representatives , members, owners, employees, insurance carriers, partners, joint venturers, predecessors and successors in interest." CFA, DE 374-3 at § 14.A (emphasis added). The release contained within the CFA acknowledged that the $6,375,000 fee paid by Eagle was not refundable and purported to release "each and every claim or potential claim or cause of action" predicated upon any of the parties’ previous dealings. Id. The release contained within the CFA also states that "[t]he enforceability of the foregoing releases is not conditioned upon or subject to the obligations of the parties to one another as set forth in this Credit Facility Letter." Id. at § 14.B. After failing to obtain the necessary zoning approval from the Highlands County Commission in October of 2009, Eagle formed yet another company and again sought to obtain a $425 million loan from EVMC to develop that property. USI SUF, DE 345-1 at ¶¶ 281-82. A loan never materialized, and Aida Esacove passed away on June 15, 2010. Id. at ¶¶ 282, 284. In September of 2010, EVMC informed Eagle that any loan funding could not be used to repay his other investors and, shortly thereafter, EVMC ceased operating and terminated its relationship with Eagle. Id. at ¶ 285. In June of 2011, Eagle, Pine Creek Ranch, LLC, and University 1248, LLC joined this action against EVMC. Id. at ¶ 286.
Procedural History
On September 4, 2009, The Sands Harbor Marina Corp., Sands Harbor Marina LLC, The Sands Harbor Marina Operating Corp. and Sands Harbor Marina LLC (collectively the "Sands Harbor Plaintiffs") commenced this action. On June 20, 2011, an Amended Complaint was filed, adding the Eagle Plaintiffs. See Am. Compl., DE 41. A Second Amended Complaint was filed on September 4, 2011. See Second Am. Compl., DE 53. Following motion practice in February 2013, the Court dismissed the Sands Harbor Plaintiffs’ RICO claims against USI, Reis, and the T&N Defendants. See Mem. & Order, DE 108. Following another round of motions in August 2014, the Court dismissed the fraud claims against Nicholson (individually) and the negligence and breach of fiduciary duty claims against Reis. See Mem. & Order, DE 149.
A third amended complaint was filed on August 10, 2014. See Third Am. Compl., DE 147. The parties agreed to dismiss Plaintiffs’ claims for breach of fiduciary duty as against USI by stipulation on October 20, 2014. See Stipulation & Order, DE 171. Following an additional round of motion practice in 2016, the Court dismissed Plaintiffs’ negligence claim against the USI defendants. See Mem. & Order, DE 235.
On November 19, 2020, the Court conducted a pre-motion conference to address both plaintiffs’ and defendants’ motions for summary judgment. At the conference, the Court deemed the motions made and granted summary judgment in favor of defendants as to the claims for negligent misrepresentation but denied the balance of the motions. See Minute Entry, dated Nov. 19, 2020; DE 361; Hr. Tr., DE 365 at 56:1-10. The Court directed the parties to brief the effect of the two release agreements executed by Eagle on September 26, 2008 and November 20, 2008. Id.
The efficacy of the releases has no bearing on the Sands Harbor Plaintiffs’ remaining claims.
DISCUSSION
Summary Judgment Standard
This motion for summary judgment is decided under the oft-repeated and well-understood standard for review for these matters, as discussed in Bartels v. Inc. Vill. of Lloyd Harbor , 97 F. Supp. 3d 198, 211 (E.D.N.Y. 2015), aff'd , 643 F. App'x 54 (2d Cir. 2016), which discussion is incorporated by reference herein. In sum, the question before the Court is whether, based upon the undisputed or improperly disputed facts, the defendants are entitled to judgment. It is with this standard in mind that the Court turns to the motions at bar.
The present dispute centers on the two releases executed by Eagle and EVMC in September and November of 2008 respectively. While defendants argue that both releases entitle them to summary disposition, plaintiffs challenge that assertion principally on two grounds: (1) the releases are void ab initio because they were obtained by fraud, deception, or misrepresentation; and (2) conditions precedent to the releases were not satisfied such that the contracts never took effect.
Applicability of the releases to Defendant USI
There is a threshold inquiry that must be addressed before delving into enforceability. Neither release identifies defendant USI as being a party to the contract or enumerates them as an intended third-party beneficiary. Instead, both releases cover a broad swath of third-party beneficiaries. The September 2008 Release Agreement states, "Eagle, on behalf of himself and any and all of his affiliates, employees, independent contractors, attorneys and trusts (the ‘Eagle Parties’), hereby releases and forever discharges EVMC, as well as its agents , officers, shareholders, employees, consultants and attorneys (the ‘EVMC Parties’)." DE 374-1 at 1 (emphasis added). Similarly, the November 2008 CFA provides:
The Eagle Affiliates and EVMC for themselves on behalf of their respective agents, representatives, members, owners, employees, insurance carriers, partners, joint venturers, predecessors and successors in interest, hereby forever discharge and release one another, inclusive of their respective current and former officers, directors, consultants, agents, representative s, employees, shareholders, attorneys , trustees, and insurance carriers (collectively, the "Releasees").
DE 374-3 at 3 (emphasis added). Plaintiffs now argue that these clauses were not intended to cover defendant USI. There is no dispute that the T&N Defendants are covered as "attorneys."
Under both California and Florida law, a third party need not be named in a contract to enforce it so long as that third party "can show that it is one of a class of persons for whose benefit it was made." General Motors Corp. v. Superior Ct. , 12 Cal. App. 4th 435, 444, 15 Cal. Rptr. 2d 622, 628 (1993) ; see also Hunt Ridge at Tall Pines, Inc. v. Hall , 766 So. 2d 399, 400 (Fla. Dist. Ct. App. 2000) ("A party is an intended beneficiary only if the parties clearly express, or the contract itself expresses, an intent to primarily and directly benefit the third party or a class of persons to which that party claims to belong."). To determine whether the parties intended a third party to be a beneficiary of the contract, the court must "read[ ] the contract as a whole in light of the circumstances under which it was entered." Neverkovec v. Fredericks , 74 Cal. App. 4th 337, 349, 87 Cal. Rptr. 2d 856, 866 (1999). Further, "[w]hen the contract has been reduced to writing, the parties’ intention is to be ascertained from the writing alone, if possible, subject to other rules of interpretation." Rodriguez v. Oto , 212 Cal. App. 4th 1020, 1028, 151 Cal. Rptr. 3d 667, 672 (2013) (internal quotations and citation omitted); see also Beach Towing Servs., Inc. , 278 So. 3d at 860 (Fla. Dist. Ct. App. 2019) ("Expressed intent is that found on the face of the covenant as shown by the language of the entire instrument in which the covenant appears.") (internal quotation marks omitted).
"[I]f the requisite intent appears unambiguous from the face of the contract, the third party makes a prima facie showing of entitlement merely by proving the contract" and "[u]nder ordinary principles of contract law, this satisfie[s] both its substantive burden as a third party beneficiary and its procedural burden as the moving party asserting an affirmative defense on summary judgment." Rodriguez v. Oto , 212 Cal. App. 4th 1020, 1028, 151 Cal. Rptr. 3d 667, 673 (2013) ; see also Palm Beach Pain Mgmt., Inc. v. Carroll , 7 So. 3d 1144, 1145 (Fla. Dist. Ct. App. 2009) ("If a contract's terms are clear and unambiguous, the language itself is the best evidence of the parties’ intent and its plain meaning controls, warranting summary judgment.") (internal citation omitted).
Here, the plain language of the releases cover agents of EVMC, which includes USI. See Marsh & McLennan of Cal., Inc. v. City of Los Angeles , 62 Cal.App.3d 108, 132 Cal. Rptr. 796, 802 (1976) ("[A]n insurance broker is generally an agent of the insured and not of the insurer."); Amstar Ins. Co. v. Cadet , 862 So. 2d 736, 739 (Fla. Dist. Ct. App. 2003) (an insurance broker is generally an agent of the insured). EVMC and USI had entered into a Client Services Agreement ("CSA") on October 1, 2006, under which USI agreed to act as a consultant and broker for EVMC in setting up RVI for proposed real estate transactions. USI SUF, DE 345-1 at ¶ 96; CSA, DE 378-11. The Release Agreement explicitly covers "agents" and "consultants" of EVMC. Crucially, plaintiffs have not adduced any competent evidence sufficient to raise a triable issue of fact as to the parties’ intent to include USI at the time the releases were negotiated. Instead, plaintiffs rely on the post-litigation conduct of USI in a futile attempt to raise an issue of fact. Further, plaintiffs’ argument that the CSA between EVMC and USI had lapsed by the time the releases were executed is immaterial, as the release contained within the CFA specifically includes current and former agents, consultants, and representatives. The Court therefore finds that defendant USI is covered by the terms of both releases, as are the T&N Defendants.
Fraudulent Inducement
The September 26, 2008 Release Agreement is governed by California law. See Release Agreement, DE 374-1 at § 3.5. The second release, contained within the CFA, was entered into on November 20, 2008, and is governed by Florida law. See CFA, DE 374-3 § 16. Given that both USI and the T&N Defendants have met their burden under Rule 56 by producing the facially valid agreements, it is incumbent upon plaintiffs as the non-movants to come forward with evidence supporting the affirmative defense of fraudulent inducement, as they would bear the burden of proof on that defense at trial. See Celotex Corp. v. Catrett , 477 U.S. 317, 323–24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; see also Simsbury-Avon Pres. Club, Inc. v. Metacon Gun Club, Inc. , 575 F.3d 199, 204 (2d Cir. 2009) ("When the burden of proof at trial would fall on the nonmoving party, it ordinarily is sufficient for the movant to point to a lack of evidence to go to the trier of fact on an essential element of the nonmovant's claim.... In that event, the nonmoving party must come forward with admissible evidence sufficient to raise a genuine issue of fact for trial in order to avoid summary judgment.") (internal citations omitted). Plaintiffs have failed to do so.
Under both California and Florida law, "[a] release obtained through fraud is invalid." Butler Am., LLC v. Aviation Assurance Co., LLC , 55 Cal. App. 5th 136, 144, 269 Cal. Rptr. 3d 284, 291 (2020), rev. denied (Dec. 23, 2020); see also Henson v. James M. Barker Co. , 555 So. 2d 901, 908 (Fla. Dist. Ct. App. 1990) ("A release may be set aside by the court where the evidence is sufficient to establish it has been obtained by fraud."). While Florida law recognizes merger clauses as a valid defense to claims of fraud, the defense is not categorical and may not carry the day where there is evidence that the contract itself was induced by fraud. See Wasser v. Sasoni , 652 So. 2d 411, 413 (Fla. Dist. Ct. App. 1995) ; see also Nobles v. Citizens Mortg. Corp. , 479 So. 2d 822, 822 (Fla. Dist. Ct. App. 1985) ("However, oral agreements or representations may be introduced into evidence to prove that a contract was procured by fraud notwithstanding such a merger clause").
Critically, to successfully establish a defense of fraud in the inducement, the reliance underlying a claim for fraudulent inducement must be reasonable. Guido v. Koopman , 1 Cal. App. 4th 837, 843, 2 Cal. Rptr. 2d 437, 440 (1991) ("Justifiable reliance is an essential element of a claim for fraudulent misrepresentation, and the reasonableness of the reliance is ordinarily a question of fact.... However, whether a party's reliance was justified may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts.") (internal citations omitted). Further, "a party entering into a transaction is not entitled to rely blindly on the opposing party's representations where, as here, the relationship between the parties has been plagued with distrust." Pieter Bakker Mgmt., Inc. v. First Fed. Sav. & Loan Ass'n , 541 So. 2d 1334, 1335 (Fla. Dist. Ct. App. 1989), enforcement denied sub nom. Bakker v. First Fed. Sav. & Loan Ass'n of Hammonton, New Jersey , 575 So. 2d 222 (Fla. Dist. Ct. App. 1991). Here, Eagle chose to, once again, rely on promises by EVMC that it would obtain financing as consideration for entering into the subject releases. Given the woeful history of his interactions with that outfit and its agents, such reliance is not only unreasonable, but nearly unimaginable.
By the time both releases were signed in 2008, the two-year wake of the dealings was littered with the wreckage of repeated empty promises and missed deadlines. See USI SUF, DE 345-1 at ¶ 178. Eagle's counsel, Truxton, sent EVMC a letter on September 11, 2007, questioning EVMC's "bona fide intentions" and stating that EVMC had made numerous misrepresentations over the course of the parties’ dealings throughout the last year. Id. at ¶ 214. On October 4, 2007, Truxton sent an email to Guilot stating, "EVMC has repeatedly demonstrated an inability to perform over the past thirteen (13) months with repeated false promises of closing time frames and a lack of proof of funds confirming an ability to close." Id. at ¶ 221. Additionally, Truxton reached out to an attorney involved in previous litigation with EVMC over funding that never materialized to compare experiences. Id. at ¶ 162. Truxton also contacted EVMC's former counsel, who advised him that he too questioned the veracity of EVMC's claims. Id. at ¶ 203. Various advisors, including Truxton, and other members of Eagle's team tried unsuccessfully to persuade Eagle to pursue other avenues of funding, apparently recognizing the potentially dubious nature of EVMC. Id. at ¶¶ 129-134, 174, 222. The level of distrust had reached such an inflection point by May of 2007 that Eagle and members of his team went to Los Angeles to confront Aida Esacove in person. Id. at ¶ 173. The Eagle team had even discussed filing a lawsuit against EVMC by October of 2007. Id. at ¶ 227.
Against this backdrop, any reliance on the part of the Eagle Plaintiffs was indisputably unreasonable. See Pieter Bakker Mgmt., Inc. v. First Fed. Sav. & Loan Ass'n , 541 So. 2d 1334, 1335 (Fla. Dist. Ct. App. 1989), enforcement denied sub nom. Bakker v. First Fed. Sav. & Loan Ass'n of Hammonton, New Jersey , 575 So. 2d 222 (Fla. Dist. Ct. App. 1991) ; see also Guido v. Koopman , 1 Cal. App. 4th 837, 843–44, 2 Cal. Rptr. 2d 437, 440–41 (1991) (affirming entry of summary judgment based on a finding that reliance was unreasonable as a matter of law). Eagle was aware of the woeful history of this matter prior to the execution of the releases and chose to proceed anyway. Because Plaintiffs have failed to support an essential element of this affirmative defense, justifiable reliance, they have failed to raise a genuine issue of material fact as to fraud in the inducement. See Pettinelli v. Danzig , 722 F.2d 706, 710 (11th Cir. 1984) (applying Florida law and holding "[w]hen negotiating or attempting to compromise an existing controversy over fraud and dishonesty it is unreasonable to rely on representations made by the allegedly dishonest parties.... Thus, the appellants have failed to make a prima facie case of fraud because they had no legal right to rely on any representations under these circumstances.") (internal citation omitted). Therefore, the Court will not disturb the releases on this ground.
Failure to Satisfy Conditions Precedent
Plaintiffs further resist the imposition of summary judgment by unpersuasively arguing that conditions precedent to both the September Release Agreement and the November Credit Facility Agreement were not satisfied. Specifically, as to the Release Agreement, plaintiffs allege that EVMC did not provide evidence of funding until four and a half hours after the 9:00 AM September 26, 2008 deadline set forth in the contract. See Pls. Mem., DE 380 at 13. Eagle also argues that the evidence provided "failed on its face to meet the requirements of the Release Agreement; its vague and imprecise language nowhere stated that a specifically named funding source had set aside $425 million in an identified account." Id. Though the email conveying the proof of funding evidence was indisputably sent after the deadline, see Ex. M to USI Reply Mem., DE 379-2, other undisputed facts must be considered. The emails exchanged between the parties earlier that morning demonstrate that EVMC was prepared to send the evidence of funding well in advance of the deadline, but delays on the part of Eagle and his attorney, Truxton, caused the otherwise de minimis four-hour delay. See Ex. G to USI Mem., DE 378-8. Additionally, Truxton replied to EVMC confirming receipt of the funding evidence without objection to its apparent tardiness or lack of specificity. See Ex. M to USI Reply Mem., DE 379-2. Further undermining Plaintiffs’ argument, emails from September 29, 2008 demonstrate that Eagle had informed others of his receipt of the proof of funding and reaffirmed to them his belief that the transaction would be completed soon. Based on the foregoing, the Court finds that Plaintiffs have not raised a genuine issue of material fact on this ground as the evidence indicates that the breach was not viewed as material and was waived by the aggrieved party. See Whitney Inv. Co. v. Westview Dev. Co. , 273 Cal. App. 2d 594, 603, 78 Cal. Rptr. 302 (1969) ("When the injured party with knowledge of the breach continues to accept performance from the guilty party, such conduct may constitute a waiver of the breach.").
The courts of California have repeatedly recognized that "although every instance of noncompliance with a contract's terms constitutes a breach, not every breach justifies treating the contract as terminated.... Following the lead of the Restatements of Contracts, California courts allow termination only if the breach can be classified as material, substantial, or total." Bos. LLC v. Juarez , 245 Cal. App. 4th 75, 82, 199 Cal. Rptr. 3d 452, 457 (2016) (internal quotations and citations omitted).
Jay Jones emailed Aida Esacove and David Guilot thanking them for sending the proof of funding and stating that "Greg Eagle has informed his core team in regards to the Eagle Center and of our accomplishments and time period ahead." Ex. M to USI Reply Mem., DE 379-2.
Eagle next contends that the November 2008 CFA fails to meet the requirement set forth in the September Release Agreement that "EVMC agrees to negotiate in good faith with Eagle a loan commitment between the parties within ten (10) days." Pls. Memo, DE 380 at 5, 14. This argument is similarly unavailing, as emails between the parties demonstrate that negotiations occurred as early as October 3, 2008—unequivocally within the ten-day negotiation period set forth in the Release Agreement. See Ex. O to USI Reply Mem., DE 379-4. Given that the parties merely agreed to negotiate , and not to complete an agreement, this condition appears to have been met as well. Even construing this provision as requiring an agreement be signed within ten days, the result does not change. While it is undisputed that the Credit Facility Agreement was not signed until November of 2008, Eagle's failure to raise this issue in a timely fashion, his continuation of negotiations, and his ultimate agreement to the terms of the CFA would constitute a waiver. See Whitney Inv. Co. v. Westview Dev. Co. , 273 Cal. App. 2d 594, 603, 78 Cal. Rptr. 302 (1969) ("When the injured party with knowledge of the breach continues to accept performance from the guilty party, such conduct may constitute a waiver of the breach."); see also Raymond James Fin. Servs., Inc. v. Saldukas , 896 So. 2d 707, 711 (Fla. 2005) ("We have defined ‘waiver’ as the voluntary and intentional relinquishment of a known right or conduct which implies the voluntary and intentional relinquishment of a known right.").
Black's Law Dictionary defines "negotiate" as "[t]o communicate with another party for the purpose of reaching an understanding." Black's Law Dictionary (11th ed. 2019).
Eagle next argues that the November 2008 CFA is unenforceable because it did not contain a closing date for the loan and because a condition precedent to the CFA—EVMC's attainment of RVI—had not been met. Section 14.B. of the CFA, however, provides that "[t]he enforceability of the foregoing releases is not conditioned upon or subject to the obligations of the parties to one another as set forth in this Credit Facility Letter." CFA, DE 374-3. Given this unequivocal (if inconceivable) agreement that the release is not conditioned on the other obligations of the parties within the CFA, the purported failure to satisfy these conditions is immaterial. "It is never the role of a trial court to rewrite a contract to make it more reasonable for one of the parties or to relieve a party from what turns out to be a bad bargain." Barakat v. Broward Cty. Hous. Auth. , 771 So. 2d 1193, 1195 (Fla. Dist. Ct. App. 2000).
Were Section 14.B to be unenforceable, the result would not change. While Eagle seeks to characterize the CFA as a "binding loan agreement," the other terms of the CFA vitiate that argument. When engaging in contract interpretation, the terms of a contract are not to be read in vacuum, but rather must be read in the context of the agreement as a whole. See Famiglio v. Famiglio , 279 So. 3d 736, 740 (Fla. Dist. Ct. App. 2019). While Eagle points to the lack of a date certain for closing to support his argument that an essential term was missing, a review of the balance of the CFA forecloses this argument. There are several conditions precedent that Eagle had to satisfy before funding would be provided. For example, Section 9.J requires that Eagle obtain a zoning variance from the Board of County Commissioners of Highland County. See CFA, DE 374-3. Given that this approval is completely outside of either party's control, it stands to reason that no firm date would be included for the provision of funding. See Blackhawk Heating & Plumbing Co. v. Data Lease Fin. Corp. , 302 So. 2d 404, 408 (Fla. 1974) ("Even though all the details are not definitely fixed, an agreement may be binding if the parties agree on the essential terms and seriously understand and intend the agreement to be binding on them."). This context—the various preconditions imposed upon Eagle and the overall purpose of the agreement—demonstrates that the lack of a date certain for closing is not a fatal error, but rather a common-sense omission that does not support a finding of lack of mutual assent, the essential inquiry when determining if a valid contract has been formed.
Finally, Eagle contends that the CFA is not operative because EVMC did not yet have Residual Value Insurance "in place" for the loan commitment. Section 9.O of the CFA provides: "Lender's obligation to close and fund the Loan is subject to the availability of Residual Value Insurance and Credit Default Insurance for the Loan. Lender will be responsible for obtaining this insurance coverage and represents that this insurance is available and in place ." CFA, DE 374-3 (emphasis added). Section 14.B would, again, seem to foreclose this argument. Even absent Section 14.B, the functional mechanics of RVI militate against Eagle's argument. RVI, by its nature, is purchased at the time of closing, as it is insurance for the lender against unforeseen market forces that could negatively impact the value of the property. Given that no loan had yet been closed, as Eagle had not yet satisfied the numerous conditions precedent, it stands to reason that no RVI would have been fully "in place" yet either. The evidence indicates that at the time of closing, RVI would have been available. USI Counter SUF, DE 356 at ¶¶ 55, 72; USI SUF, DE 345-1 at ¶¶ 97-100, 102. Given the foregoing, the Court again finds that Plaintiffs have failed to raise a genuine issue of material fact on these grounds.
CONCLUSION
Based on the foregoing, defendant USI's motion for summary judgment as to the Eagle Plaintiffs’ claims for fraud and unjust enrichment is GRANTED. Defendant Tisdale & Nicholson and defendant Jeffrey A. Tisdale's motion for summary judgment as to the Eagle Plaintiffs’ claims for fraud and unjust enrichment is GRANTED.