Opinion
650343/08.
Decided March 8, 2011.
Jeffrey T. Golenbock, Esq., Golenbock Eiseman Assor, Bell Peskoe LLP,, New York, NY, Attorneys for Plaintiff.
Steven D. Oppenheim, Esq., Petra von Ziegesar, Esq., Faust Oppenheim LLP, New York, NY, Attorneys for Defendants.
Defendants move to dismiss the Amended Complaint, pursuant to CPLR 3211(a)(5) and 3211(a)(7).
The original complaint in this action was dated September 16, 2008. Defendants previously moved to dismiss that complaint, pursuant to CPLR 3211(a)(5) and 3211(a)(7). That motion was denied and Plaintiff, who had sought to amend his complaint, was granted leave to do so, in the decision and order dated May 12, 2009 ("the 5/12/09 Decision"), familiarity with which is presumed. Thus, the underlying facts are recited herein only briefly and in limited part.
Plaintiff now brings claims, in the Amended Complaint dated June 24, 2009, against Stone and Murrle for breach of contract (the first cause of action) and a declaratory judgment (the second cause of action). Plaintiff also brings claims against all the defendants for unjust enrichment (the third cause of action), quantum meruit (the fourth cause of action), and promissory estoppel (the fifth cause of action). For each of the claims, other than that requesting a declaratory judgment, Plaintiff seeks to be awarded an amount to be determined at trial, but not less than $10 million.
The standard on a motion to dismiss is clear: pleadings are afforded a liberal construction, allegations are accepted as true, the non-moving party is given the benefit of every possible inference and dismissal is only warranted if the moving party has conclusively established a defense as a mater of law. AG Capital Funding Partners v State St. Bank Trust Co. , 5 NY3d 582 , 591 (2005), citing Leon v Martinez, 84 NY2d 83, 87 (1994); Arnav Indus., Inc. v Brown, Raysman, Millstein, Felder Steiner, LLP, 96 NY2d 300, 303 (2001), citing Leon, 84 NY2d at 87-88.
Breach of Contract
Defendants raise several arguments in support of their motion to dismiss Plaintiff's breach of contract claim.
Defendants argue that Plaintiff's allegations, regarding an agreement between the parties, are not sufficiently definite to be binding, as material terms remain open. Defendants contend, inter alia, that the allegations in the Amended Complaint, that describe conversations between Plaintiff and Murrle in which Murrle indicated that he and Stone were reconsidering their agreement to make Venetis a member of the limited liability corporation ("LLC") defendants, demonstrate that there was no meeting of the minds and no contract. Mot Br at 3-4. Plaintiff counters that this is not indicia of an initial lack of agreement but, rather, demonstrates that an agreement had been reached and that Stone and Murrle later sought to change that agreement. Weighing these disparate theories, and assessing of the credibility of those asserting them, is for the trier of fact and not a determination to be made on the instant motion to dismiss, where the movant is given the benefit of every doubt.
Defendants also argue that even if there was an agreement, the statute of frauds requires dismissal of the breach of contract claim. As in their first motion dismiss, Defendants point to two provisions. They argue that Plaintiff's claims are barred by Gen Oblig § 5-701(a)(1), which provides that an agreement is void if not in writing if, by its terms, it is not to be performed within one year. Defendants further argue that the claims are prohibited by Gen Oblig § 5-701(a)(10), which provides that an agreement must be in writing if it is for compensation for services rendered in negotiating the purchase of a business opportunity. However, these arguments are no more persuasive in the instant motion than they were in the motion to dismiss the original complaint. § 5-701(a)(1) is limited to those agreements for which performance within one year would be impossible. Cron v Hargo Fabrics, Inc., 91 NY2d 362, 366 (1998); Festa v Gilston, 183 AD2d 525, 526 (1st Dep't 1992). Defendants have not established that the performance under agreement between the individual parties, if it existed, absolutely required more than one annum. § 5-701(a)(10) is inapplicable at this time because Plaintiff's allegations far exceed assertions regarding the negotiations of business opportunities. As such, Defendants have not established that the statute of frauds warrants dismissal of Plaintiff's breach of contract claim.
New to the instant motion, Defendants argue that, even if there was an agreement, it was an improper assignment under the laws governing LLCs. Mot Br at 7; 11/11/09 Tr t 8-9. They aver that an assignee is precluded from becoming a member of an LLC, without the vote or written consent of the other members. Mot Br at 7. They argue that, as an assignment of a membership interest in either PACP or PACS is unenforceable, without a writing, under the operating agreements and LLC law, Plaintiff's breach of contact claim should be dismissed with prejudice. Plaintiff, however, is clear that he is not seeking an assignment of LLC interests. Opp Br at 13. As such, this basis for Defendants' motion to dismiss is unpersuasive.
Defendants also contend that PACS, a wholly owned subsidiary of PACP, is a registered broker-dealer of the Securities and Exchange Commission ("SEC") and a member of the Financial Services Regulatory Authority ("FINRA"), and that both corporate entities must be owned and operated in accordance with those agencies regulations. They argue that only registered persons of broker-dealers may transact business and be compensated in an amount determined with reference to a securities transaction. They contend that, inasmuch as Plaintiff has not alleged that he held a securities license or that he was a registered representative of PACP, he may only be compensated by an hourly wage or salary. Mot Br at 5. However, as Plaintiff argues, the allegations in the Amended Complaint are not that he was contacting prospective customers in connection with the sale of securities. Opp Mot at 11. Additionally, Plaintiff avers that Murrle is himself not a registered representative, raising the question of how Defendants can allege that the same activities would be illegal if performed by Plaintiff but not if done by Murrle. More significantly, Defendants have not acknowledged that, assuming for purposes of this motion that there was an agreement and that there was a meeting of the minds on all salient points, there might be any number of different ways the parties may have effectuated that agreement. Thus, Defendants have failed to meet their burden on a motion to dismiss, as they have not conclusively established that Plaintiff's status as an unregistered individual precludes his claims.
Defendants respond that Murrle's role as an unregistered individual cannot be compared to Plaintiff's as he is a direct owner of PACP and an indirect owner of PACS. They argue that direct and indirect owners of broker dealers may share in revenues. Reply Br at 5.
Defendants further contend that the SEC prohibits a registered person from sharing the compensation he receives with another person who is not registered. Mot Br at 6. As such, Defendants argue that, any order to pay any amount to Plaintiff, based on the allegations in the Amended Complaint, would be an order to perform an illegal act. Mot Br at 5. At the same time, they argue that Stone and Murrle are not liable for the debts of the corporate defendants, unless they so specify in writing. They contend that Stone and Murrle do not "own" the profits at issue but, rather, the profits earned by the Transactions at issue were earned by the corporate defendants, and not any individual member. Mot Br 8-9. Defendants are, of course, free to pursue these defenses throughout this action. However they have not yet established, as it is their burden to do so on a motion to dismiss, that if in fact the sole owners of closely held corporations are shown to have agreed to split the profits with another, in exchange for his labor, that the agreement could not be enforced.
Plaintiff argues that the breach of contract claim is against the individual defendants, and that their memberships in the corporate entities do not insulate them from liability from a claim against them personally. Opp Br at 14.
Defendants also claim that Plaintiff is seeking to recover speculative and anticipated future profits, and that such alleged profits are not recoverable under New York law. Reply Br at 2. However, the question of calculating damages is not currently before me, and I decline to speculate at this time as to what damages may ultimately be awarded, if liability is later established in this case. The sole question now before me is whether the claims in the Amended Complaint are sufficient pled that to state legally cognizable causes of action. With regard to his breach of contract claim, Plaintiff has clearly adequately pled his allegations, and Defendants have not established a grounds for dismissal of the claim at this time.
Declaratory Relief
Plaintiff seeks "a declaration that the agreement reached between Venetis, Stone and Murrle is valid and binding, and that it obligates defendants [Stone and Murrle, against whom the claim is asserted] to pay Venetis one-third of all net-profits, including fees and equity interests, generated in the future by the Transactions" at issue. Am Compl at ¶ 45. Defendants argue that this claim should be dismissed, as Plaintiff would have an adequate remedy under his breach of contract cause of action. Mot Br at 16. Where a plaintiff has an adequate remedy under his breach of contract claim, dismissal of a claim for a declaratory judgment is appropriate. Watson v Sony Music Entertainment, Inc., 282 AD2d 222, 222 (1st Dep't 2001). Here, Plaintiff seeks not only a declaration that an agreement was reached, and breached, but a declaration that the defendants are required to pay him the monetized damages from that breach. Thus, Plaintiff has alleged no damages in this claim that cannot be remedied through his breach of contract claim, should he ultimately prevail upon it. Accordingly, the second cause of action is dismissed.
Unjust Enrichment and Quantum Meruit
Defendants put forth a number of arguments for dismissing Plaintiff's quasi-contract claims.
They contend, inter alia, that the statute of frauds applies to these claims. Mot Br at 16. However, the issue with this argument is not Defendant's applicability of the statute of frauds to claims sounding in quasi-contract but, rather, that they have failed to establish that it prohibits Plaintiff's claims, as addressed above.
They further argue that Plaintiff does not contend that any services he provided was worth more than the amount he was paid. This contention is clearly contradicted by Plaintiff's requests for damages, alleging that he has been damaged in an amount to be determined at trial, but not less than $10 million. Am Compl at ¶¶ 51, 56.
Defendants argue that, since Plaintiff claims he had an agreement with Stone and Murrle, "it is inconceivable how PACP or PACS could have been unjustly enriched." Mot Br at 16. Again, this argument for dismissal is unpersuasive, as the allegations in the Amended Complaint are sufficient to support the position that, if the facts as alleged are ultimately proved to be true, all the defendants could be viewed as benefitting from the alleged wrongs done to Plaintiff.
Defendants also claim that if I "determine that there was an agreement, but it was not enforceable for any one of the reasons stated above, Plaintiff should be preempted from recovery on a quasi-contract theory which would only be applicable if there were no agreement, not an agreement that is unenforceable." Mot Br at 17. However, there is no reason for me to be determining, at this stage, whether or not an agreement was reached. Moreover, Plaintiff is entitled to bring claims under both contract and quasi-contract theories, pled in the alternative. A plaintiff is simply "not precluded from proceeding on both breach of contract and quasi-contract theories where there is a bona fide dispute as to the existence of the contract." Curtis Properties Corp. v Greif Co., 236 AD2d 237, 239 (1st Dep't 1997). See also IIG Capital LLC v Archipelago LLC , 36 AD3d 401, 404-05 (1st Dep't 2007). Thus, Plaintiff is correct that his contract and quasi contract claims may be argued in the alternative.
Plaintiff's quasi contract claims will ultimately need to be clearly distinguished from one another, to avoid a dismissal on grounds that they are duplicative. For now, however, Plaintiff has adequately alleged each, and sufficiently distinguished his quasi-contract claims from those where the gravamen of the allegations are from breach of contract.
Unjust enrichment "requires a showing that it would be contrary to equity and good conscience to permit defendant to retain what is sought to be recovered." Insur. Co. of State of Penn. v HSBC Bank , 37 AD3d 251 , 255 (1st Dep't 2007). "The elements of a claim in quantum meruit are: the performance of services in good faith, acceptance of the services by the person to whom they are rendered, an expectation of compensation therefor, and the reasonable value of the services." Freedman v. Pearlman, 271 AD2d 301, 304 (1st Dep't 2000).
Promissory Estoppel
Defendants claim that the statute of frauds may be a proper defense to a claim for promissory estoppel, as long as an application of the statute of frauds does not create an unconscionable result. Mot Br at 17. They argue that the loss of a finder's fee is not generally considered to be unconscionable. However, as discussed above, Defendants have not established that the statute of frauds is applicable.
More notably, Defendants also argue that, Plaintiff's promissory estoppel should be dismissed for failure to prove the elements of the claim. The elements of a claim for promissory estoppel are "a clear and unambiguous promise, reasonable and foreseeable reliance by the party to whom the promise is made and an injury sustained in reliance thereon." Braddock v. Braddock , 60 AD3d 84 , 95 (1st Dep't 2009) (internal citations omitted). Defendants aver that Plaintiff has failed "to demonstrate" that a promise was made, that he "was not reasonable in relying on any unconfirmed, unwritten promise'" and that he does not "allege that any services he may have provided were worth more than the amount he was paid." Mot Br at 18. Significantly, Plaintiff does not need to incontrovertibly prove either the existence of the alleged agreement or the reasonableness of his reliance at this stage of the proceedings. Further, and as addressed above, he has clearly alleged that he "has been damaged by virtue of defendants' actions, in contradiction of their promises to him, in an amount to be determined at trial, but in any event not less than $10 million." Am Compl ¶ 60. What, if any, damages Plaintiff may ultimately be able to prove is not apropos at this time. As such, it is Defendants who have failed to prove what would need to be established at this time, that this claim should be dismissed at this stage of the proceeding.
Accordingly, it is:
ORDERED that the motion to dismiss is granted as the claim for a declaratory judgment, and is otherwise denied; and it is further
ORDERED that the remainder of the action shall continue.