Opinion
12886 Index No. 652185/19 Case No. 2020-02490
01-19-2021
UNITED NATURAL FOODS, INC., Plaintiff–Appellant, v. GOLDMAN SACHS GROUP, INC., et al., Defendants–Respondents.
Quinn Emanuel Urquhart & Sullivan, LLP, New York (David M. Cooper of counsel), for appellant. Cravath, Swaine & Moore LLP, New York (Michael A. Paskin of counsel), for respondents.
Quinn Emanuel Urquhart & Sullivan, LLP, New York (David M. Cooper of counsel), for appellant.
Cravath, Swaine & Moore LLP, New York (Michael A. Paskin of counsel), for respondents.
Webber, J.P., Mazzarelli, Gonza´lez,Scarpulla, Shulman, JJ.
Order, Supreme Court, New York County (Andrea Masley, J.), entered on or about May 6, 2020, which, insofar as appealed from as limited by the briefs, granted defendants' motion to dismiss as to the breach of contract claim related to marketing period fees, the breach of the implied covenant of good faith and fair dealing claim insofar as related to the flex provisions, and the fraud claim, unanimously affirmed, without costs.
The breach of contract claim was properly dismissed because both contractual conditions to charging marketing period fees were satisfied.
First, the acquisition closed prior to completion of the marketing period, which began when nonparty Supervalu Inc. filed its second-quarter financial statement on October 15, 2018. The commitment letter is clear that the marketing period was to commence upon delivery of certain specified financial statements, including Supervalu's statements for each fiscal quarter "ended at least 40 days before the Closing Date." As such, once the closing date was set for October 22, 2018, it was clear that the marketing period could not begin until Supervalu delivered its financial statement for the last quarter ending before September 12, 2018 (40 days prior) – i.e., the second quarter, which ended September 8th.
Second, it is undisputed that syndication was not complete by the date of closing. Plaintiff argues that this was due to defendants' failure to act in good faith to complete syndication, as required by the agreements. However, defendants were under no obligation to syndicate at all, let alone to employ any particular level of effort in doing so. Rather, their obligation was to fund the loan, and they merely "reserve[d] the right" to syndicate all or part of that commitment in order to decrease their own credit risk. Plaintiff cannot use the implied covenant of good faith and fair dealing to create an obligation to syndicate (see Fesseha v. TD Waterhouse Inv. Servs., 305 A.D.2d 268, 268, 761 N.Y.S.2d 22 [1st Dept. 2003] ).
The breach of the implied covenant of good faith and fair dealing claim was sufficiently distinct from the breach of contract claim to survive dismissal, at least as limited on appeal. However, this claim was nonetheless properly dismissed as conclusory and insufficiently alleged. To the extent it was based on defendants' failure to make sufficient efforts to syndicate the loan, it was also inconsistent with the agreements for the reasons stated above.
The fraud claim was properly dismissed because plaintiff did not sufficiently plead justifiable reliance (see generally ACA Fin. Guar. Corp. v. Goldman, Sachs & Co., 25 N.Y.3d 1043, 10 N.Y.S.3d 486, 32 N.E.3d 921 [2015] ; Global Mins. & Metals Corp. v. Holme, 35 A.D.3d 93, 99–100, 824 N.Y.S.2d 210 [1st Dept. 2006], lv denied 8 N.Y.3d 804, 831 N.Y.S.2d 106, 863 N.E.2d 111 [2007] ). Plaintiff could have asked follow-up questions regarding what kind of an effect making Supervalu a coborrower would have and on which "select accounts," but did not do so. Plaintiff also failed to insist on a final list of investors prior to closing, even though it is undisputed that plaintiff had the contractual right to do so to facilitate exercise of its right to veto investors. Defendants' failure to provide such a list was a red flag that triggered a need to make additional inquiries, including with respect to whether any proposed investors had adverse interests to plaintiff.
Plaintiff's damages allegations were also unduly speculative (see generally Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421–422, 646 N.Y.S.2d 76, 668 N.E.2d 1370 [1996] ).