Opinion
03 Civ. 4275 (HB)
December 22, 2003
OPINION ORDER
Defendants Robert Lewis Rosen Associates, Ltd. ("RLR") and Robert Lewis Rosen ("Rosen") move for summary judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure ("Fed.R.Civ.P.") on all claims asserted in the complaint brought by plaintiff William Webb ("Webb") on the ground that the findings made in the arbitration preceding this lawsuit preclude the claims asserted in Webb's complaint and further that all claims asserted against Rosen individually are improper. In addition, defendants seek sanctions against plaintiffs counsel pursuant to 28 U.S.C. § 1927 (2003). For the following reasons, defendants' motion for summary judgment is granted-in-part and denied-in-part and their motion for sanctions is denied.
Defendants assert that while sanctions are also appropriate under Fed.R.Civ.P. 11, "the time constraints in responding to the Complaint did not permit compliance with the 21 day [Safe Harbor] requirement" of Fed.R.Civ.P. 11(c)(1)(A), and therefore "defendants have not yet served or filed with the Court a Rule 11 Motion." Def. Mem. at 23.
I. BACKGROUND
A. Factual Background
Webb is a director of televised sports programming. Am. Compl. ¶ 2. He retained defendants to negotiate contracts on his behalf beginning in 1986. Id at ¶ 8. The letter agreement between the parties provided that RLR would serve as Webb's "sole and exclusive personal manager, representative and advisor for the purpose of supervising and guiding [his] professional career in the 'Entertainment Field"." Id at ¶ 9. The contract, however, stipulated that RLR's services "are not exclusive to you and we shall have the right to perform the same or similar services for others. . . ." and further stated that "[t]his agreement shall not be construed to create a partnership or joint venture . . ." Brown Aff Exh. N (Letter Agreement) at 2, 5. Pursuant to the 1986 contract, Webb was obligated to provide RLR with 10% of all money earned by him under contracts negotiated during the term of the agreement. Am. Compl. at ¶ 11. The contract expired in 1990. Id at ¶ 15. Several years later, the parties renewed the contract to cover the period between June 8, 1997 and October 12, 2001. In the interim period, when Webb did not have a contract with defendants, Webb alleges that he and defendants had a "loose working relationship," during which he compensated defendants for services they rendered on a contract-by-contract basis. Id at ¶ 15.
In the summer of 1995, Webb spoke to John Filippelli, who later became the coordinating producer of FOX Baseball about working as a director for the FOX Major League lead baseball games, e.g., the "A" baseball games, in the event that FOX were awarded the broadcast rights. Id at U 17. A few days later, Webb contacted Rosen and they agreed that Rosen would handle the contract negotiations should the opportunity to direct FOX's "A" baseball games arise. Id at ¶ 18. After Major League Baseball awarded FOX Sports the television rights in late October 1995, Filippelli contacted Webb about possibly negotiating a contract, and Webb informed him that Rosen would handle the negotiations on his behalf. Id at ¶ 19. The next month, Filippelli called Webb to inform him that Rosen was seeking to promote another person as director, instead of Webb. Id. at ¶ 20. Rosen allegedly went so far as to suggest that Webb would be lucky to direct the "B", "C" or "D" game. Despite Rosen's alleged disloyalty, Filippelli hired Webb to direct FOX's "A" baseball games. Id at ¶ 21. Although aware of Rosen's alleged statements to Filippelli, Webb contends he "had no reason to question Mr. Rosen's loyalty," and therefore allowed Rosen to negotiate Webb's contract with FOX on or around January 1996. Id at ¶¶ 21-22. When Webb's contract with Madison Square Garden ("MSG") network came up for renewal at the end of February 1997, Webb agreed to have defendants negotiate the new contract on the condition that Rosen's son, Gary Rosen, did not participate in the negotiations. Id at ¶ 24. Rosen allegedly agreed to personally handle all of Webb's matters. Id. Webb claims to have learned from Filippelli, in September 1998 and during the summer of 1999, further details about Rosen's attempt to have another client hired over Webb during the FOX negotiations, and also that Gary Rosen had told a coordinating producer of MSG Baseball that another of RLR's clients was a better baseball director than Webb. Id at ¶¶ 25-26.
B. Procedural History
On or around April 18, 2001, RLR initiated an arbitration against Webb, pursuant to an arbitration clause in the 1986 agreement, which had been extended by further agreement to cover the period June 8, 1997 through October 12, 2001. RLR initiated the arbitration to compel Webb to pay fees allegedly owed to RLR for contracts with FOX and MSG that became effective on March 1, 2001. During the pendency of the arbitration, Webb commenced an action in this Court, which this Court stayed pending the outcome of the arbitration and later dismissed without prejudice because of Webb's failure to timely notify the Court of the status of the arbitration. In the arbitration, Webb sought to assert seven counterclaims, including:
1. Breach of fiduciary duty arising out of defendants' 1995-96 FOX and 1997 MSG contract negotiations;
2. Breach of duty of good faith and fair dealing arising out of defendants' 1995-96 FOX negotiations;
3. Unjust enrichment arising out of defendants' 1995-96 FOX negotiations;
4. Unjust enrichment arising out of defendants' 1997 MSG negotiations;
5. Declaratory judgment that the parties' 1986 written agreement was not revived;
6. Breach of contract arising out of defendants' 1995-96 FOX negotiations; and
7. Fraud in the inducement of the 1997 extension agreement.
The arbitrator in an April 9, 2002 Preliminary Opinion and Award ("4/9/02 Preliminary Award") denied the fifth counterclaim and deemed the seventh counterclaim subject to arbitration pursuant to the extension agreement. Brown Aff. Exh. F (4/9/02 Preliminary Award) at 20. The arbitrator further ruled that the remaining counterclaims were not arbitrable as they did not arise under either the 1986 contract or the extension agreement, and therefore were not covered by the arbitration clause. Id As to the breach of fiduciary duty, he stated that he has "no jurisdiction to decide whether a fiduciary relationship existed between RLR/Rosen and Webb in 1996, or whether the alleged conduct by Rosen during that period breached a duty arising out of that relationship." Id. Further, the arbitrator declined to consider any claim "under the 1996 FOX contract and the 1997 MSG contract, as these were negotiated and entered into prior to June 8, 1997" (id. at 23-24), the date that the 1997 extension agreement went into effect. In a March 11, 2003 Interim Opinion and Award ("4/11/03 Award"), the arbitrator denied Webb's claim for fraudulent inducement, and sustained RLR's claim for breach of the 1997 extension agreement. See Brown Aff. Exh. D (Interim Award) at 21, 25-26. On August 21, 2003, RLR filed an action to confirm the arbitration award and on November 24, 2003, this Court confirmed the award.
In this same Opinion, this Court denied RLR's request for a permanent injunction to bar Webb from filing any further actions arising out of this same factual scenario and also denied Webb's request to stay the confirmation determination pending resolution of a California Labor Commission action.
Following the issuance of the March 11 Award, Webb commenced the instant action. In this proceeding, Webb contends that defendants breached their fiduciary duty by promoting their other clients more vigorously, thus prioritizing the interests of their other clients. Webb further claims that defendants fraudulently induced him to enter into two oral contracts to have defendants represent him in connection with the 1996 FOX and 1997 MSG contracts in exchange for 10% of Webb's gross earnings. According to Webb, he was injured because defendants (1) failed to disclose that they agreed also to represent Robert Fishman in connection with the FOX "A" game director position; (2) falsely told Webb that they were not pushing to have Fishman obtain the contested director position and that they were looking out for Webb's best interest; and (3) falsely represented to Webb that Gary Rosen would play no role in Webb's matters and that Robert Rosen would personally handle all such matters. Am. Compl. ¶ 37. In Webb's third cause of action, he contends that defendants breached the oral agreement (under the covenant of good faith and fair dealing) by failing to disclose their simultaneous representation of him and Fishman for the director's position. Further, Webb asserts that he was injured from Rosen's breach of the oral agreement that he, and not Gary Rosen would handle all of Webb's matters. In Webb's last cause of action, he contends that defendants' were unjustly enriched by receiving 10% of Webb's pay from FOX, despite their effort to convince FOX to hire someone else. Defendants moved to dismiss Webb's claims on July 8, 2003, and on September 2, 2003, this Court converted the motion to dismiss into a motion for summary judgment. The motion for summary judgment was fully-submitted on September 19, 2003.
II. DISCUSSION
A. Relevant Standards
1. Summary Judgment
Pursuant to Fed.R.Civ.P. 56(c), a district court must grant summary judgment if the evidence demonstrates that "there is no genuine issue as to any material fact and [that] the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby Inc., 477 U.S. 242, 250 (1986). "Summary judgment is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to 'secure the just, speedy and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986), quoting Fed.R.Civ.P. 1. In determining whether there is a genuine issue of material fact, a court must resolve all ambiguities and draw all inferences against the moving party. See United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) ( per curiam); Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 57 (2d Cir. 1987). However, the mere existence of disputed factual issues is insufficient to defeat a motion for summary judgment. Knight v. United States Fire Ins. Co., 804 F.2d 9, 11-12 (2d Cir. 1986), cert. denied, 480 U.S. 932 (1987). The disputed issues of fact must be "material to the outcome of the litigation" ( id. at 11), and must be backed by evidence that would allow "a rational trier of fact to find for the non-moving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The non-movant "must do more than simply show that there is some metaphysical doubt as to the material facts." Id.
2. Res Judicata and Collateral Estoppel
The principle of res judicata provides that "once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy." Ecker v. Lerner, 507 N.Y.S.2d 31, 32 (2d Dep't 1986) (citations omitted). "When alternative theories are available to recover what is essentially the same relief for harm arising out of the same or related facts such as would constitute a single 'factual grouping', the circumstance that the theories involve materially different elements of proof will not justify presenting the claim by two different actions." O'Brien v. City of Syracuse, 54 N.Y.2d 353, 357-58 (1981), citing RESTATEMENT (SECOND) OF JUDGMENTS § 61 (Tentative Draft No. 5, 1978). The determination of whether certain factual groupings constitute a transaction or series of transactions depends on how "the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether . . . their treatment as a unit conforms to the parties' expectations or business understanding or usage." In re Reilly, 407 N.Y.S.2d 645, 648 (1978), citing RESTATEMENT (SECOND) OF JUDGMENTS § 61 (Tentative Draft No. 1, 1973). The doctrine of claim preclusion applies to causes of action adjudicated in arbitrations. See In re Claim of Ranni, 58 N.Y.2d 715, 717 (1982).
"The doctrine of collateral estoppel bars relitigation of a specific legal or factual issue in a second proceeding where (1) the issues in both proceedings are identical, (2) the issue in the prior proceeding was actually litigated and actually decided, (3) there was [a] full and fair opportunity to litigate in the prior proceeding, and (4) the issue previously litigated was necessary to support a valid and final judgment on the merits." Grieve v. Tamerin, 269 F.3d 149, 153 (2d Cir. 2001), citing United States v. Hussein, 178 F.3d 125, 129 (2d Cir. 1999) (internal quotations omitted). If an issue's resolution is not necessary to the judgment, its litigation in a subsequent proceeding is not barred by collateral estoppel. Brown v. Felsen, 442 U.S. 127, 139 n. 10 (1979). Under New York law, collateral estoppel may also be applied to issues resolved in arbitration ( see Jacobson v. Fireman's Fund Ins. Co., 111 F.3d 261, 267-68 (2d Cir. 1997)), provided the party asserting preclusion additionally shows "with clarity and certainty" what was determined by the prior judgment, and "that no fair-minded jury could fail to find the arbitrator necessarily denied the claim for the reason the [party] assert[s]" ( Postlewaite v. McGraw-Hill, Inc., 333 F.3d 42, 48-49 (2d Cir. 2003), quoting BBS Norwalk One, Inc. v. Raccolta, Inc., 117 F.3d 674, 677 (2d Cir. 1997)).
B. The Arbitrator's Decision Plaintiffs Current Claims
While the Arbitrator's decision on March 11, 2003, which dismissed Webb's claim of fraudulent inducement and found instead that plaintiff "suffered no loss in income nor benefits, insofar as this record reveals" (Brown Aff. Exh. D (4/11/03 Award) at 17), dealt solely with fraudulent inducement in connection with the 1997 extension agreement, it is critical to understand that the facts and issues raised by Webb to support his arbitration defense are identical to those offered herein. Webb asserted in the arbitration that he was fraudulently induced to enter the extension agreement because of defendants' conduct with regard to the 1996 FOX and 1997 MSG contract negotiations. Thereafter, the arbitrator made the following factual findings, which have preclusive effect in Webb's federal litigation: (1) in view of Webb's notice of Rosen's attempt to promote another person for the position that Webb sought, and decision, nevertheless, to have Rosen negotiate the FOX contract, Rosen's purported misconduct did not fraudulently induce Webb to sign the 1997 extension agreement (id.), (2) Rosen had no meaningful involvement in negotiating the 1997 MSG extension" (id. at 20), (3) Gary Rosen's alleged "badmouthing" of Webb's abilities was immaterial (id. at 20 n. 8), and (4) as Webb "certainly suffered no loss in income nor benefits . . .[,] the essential element of injury has not been proven" (id. at 17).
Webb's assertion that the arbitrator's determination with regard to injury should not be given preclusive effect because he did not have a full and fair opportunity at the arbitration to litigate the issue of injury, is inapposite. While I agree that a full and fair opportunity must have been afforded, in this case it was. Webb fails to establish that the arbitrator "did not permit [him] to offer evidence" in support of his theory that the defendants' disloyalty hindered their ability to negotiate more beneficial contract terms. While the arbitrator did sustain an objection to a line of questioning sought to be explored on the cross-examination of Rosen, the fact is that that Rosen had already explained that he did not "remember the specifics of the negotiations." PI. Opp. at 12. Therefore, any further questioning on this point was both duplicative and futile. Further, Webb presents no evidence to suggest that the arbitrator prohibited him from eliciting similar evidence from other individuals (namely Larry Jones or Ed Goren from FOX) who may have had more acute recollections of their negotiations with Rosen. Webb's counsel actually secured a Declaration from Goren and had the opportunity to question him at the hearing. Def. Supp. at 4. Finally, even if this Court credited Webb's argument that he did not have a full and fair opportunity to raise his damages claim at the arbitration, his new idea, i.e., "a theory of injury based on an amorphous and undefined projection of enhanced compensation that might have been negotiated with FOX had RLR not allegedly promoted Fishman" (Def. Supp. at 1), would be too speculative to allow for recovery. See Travellers Int'l, A.G. v. trans World Airlines, 41 F.3d 1570, 1577 (2d Cir. 1994) (In order to be cognizable, "the alleged loss must be capable of proof with reasonable certainty. In other words, the damages may not be merely speculative, possible or imaginary, but must be reasonably certain and directly traceable to the breach, not remote or the result of other intervening causes . . ."). "Damages are to be calculated to compensate plaintiffs for what they lost because of the fraud, not to compensate them for what they might have gained." Liaros v. Vaillant, 1998 U.S. Dist. LEXIS 390, at *9 (S.D.N.Y. Jan. 15, 1998).
Webb had been on notice, since Rosen's August 1, 2002 deposition, of Rosen's lack of recollection. Def. Supp. at 4. However, not only did he attempt to question Rosen about his recollection once during the hearing, but at a later point in the hearing, Webb's counsel again questioned Rosen about his recollection and Rosen again confirmed that he had no specific memory of the communications. See Def. Supp. at 3 ("I can't be specific as to what the negotiations were, as always, with Larry Jones, he's a somewhat contentious individual, and they were long and arduous. As to the absolute specifics of that [sic] negotiations with Larry Jones or any of the many other negotiations I've had with Larry, I can't sit here today and give you specifics.").
1. Fraud In The Inducement
In the instant case, plaintiff alleges that (1) defendants fraudulently induced plaintiff to enter into oral agreements in connection with the 1996 FOX and 1997 MSG contracts by (a) failing to disclose that they were also representing another client during the FOX negotiations; (b) expressly conveying the falsified information that they were not pushing another client for the FOX position and instead were representing plaintiffs best interests; and (c) falsely promising plaintiff that Gary Rosen would not participate in the 1997 negotiations with MSG. Under New York law, in order to establish a claim for fraudulent inducement, Webb must prove, by clear and convincing evidence, "(1) that the defendant made a representation, (2) as to a material fact, (3) which was false, (4) and known to be false by the defendant, (5) that the representation was made for the purpose of inducing the other party to rely upon it, (6) that the other party rightfully did so rely, (7) in ignorance of its falsity (8) to his injury." Computerized Radiological Servs. v. Syntex Corp., 786 F.2d 72, 76 (2d Cir. 1986). Because the arbitrator has already determined, as explained supra Section II.S., that Webb suffered no injury, as he secured both of these contracts, plaintiffs fraud in the inducement claims are precluded.
As this identical issue was already decided by the arbitrator, after a full and fair opportunity to litigate, and the issue of injury was necessary to support a determination of Webb's fraudulent inducement counterclaim ( see Computerized, 786 F.2d at 76), the arbitrator's determination of that Webb suffered no injury because he secured the contracts has preclusive effect. See, generally Grieve, 269 F.3d at 153.
2. Breach of Oral Contract Claims
Plaintiff also asserts that defendants breached their oral agreement with Webb in connection with their behavior during the 1996 FOX and 1997 MSG contract negotiations. With regard to the 1996 FOX negotiations, plaintiff alleges that defendants breached their agreement when (a) they failed to notify plaintiff that they would also be representing Fishman and (b) pushed for Fishman's employment over plaintiffs. It is well settled that breaches of contract require a showing of damages. See Fabry's S.R.L v. IFT Intern., Inc., 2003 WL 21203405, at *3 (S.D.N.Y. May 21, 2003). However, the arbitrator found no injury with respect to the fraud in the inducement claim because plaintiff got the FOX job and showed no loss of income or benefits. Implied in such a finding, for the purposes of collateral estoppel, is that plaintiff has also suffered no injury from breach of contract. See Norris v. Grosvenor Marketing, Ltd., 803 F.2d 1281, 1285 (2d Cir. 1986), citing 5 J. Weinstein, H. Korn, A. Miller, New York Civil Practice para. 5011.27, at 50-176 (1985) ("The prior decision of the issue does not have to be explicit 'if by necessary implication it is contained in that which has been explicitly decided.'"). It is undisputed that plaintiff got the "A" job and the arbitrator found no monetary injury arising out of defendants' conduct. Thus, collateral estoppel bars plaintiff from relitigating this claim.
Plaintiff also alleges that Rosen breached the oral contract in connection with the 1997 MSG negotiations when he permitted Gary Rosen to participate in negotiations. However, because the arbitrator already concluded that "Gary Rosen had no meaningful involvement in negotiating the 1997 MSG extension" (Brown Aff. Exh. D at 20), this claim is not cognizable.
If Webb intends to assert that defendants also breached the oral agreement through Gary Rosen's alleged comment to the coordinating producer of MSG Baseball that "another of RLR's clients was a better baseball director than Mr. Webb" (Compl. ¶ 26), this evidence is insufficient as a matter of law. First of all, Webb fails to explain when this statement was made, and rather, asserts only that he learned of the alleged statement in the summer of 1999. Because the MSG contract was negotiated in 1997, it is unclear whether Gary Rosen is even alleged to have "badmouthed" Webb prior to such negotiations. Further, the arbitrator similarly discounted this evidence in the context of deciding that Webb was not fraudulently induced into entering the extension agreement. Brown Aff. Exh. D at 20 n. 8.
The arbitrator explained that "the record reveals that at most, from Webb's perspective, Gary Rosen passed on a message to Webb in or about February 1997 regarding the 1997 MSG extension. I credit Robert Rosen's claim that he was not available at the time and that his son relayed a message concerning the terms that were to be negotiated." In reaching this conclusion, the arbitrator relied on additional evidence of Gary Rosen's minimal involvement, including (a) the fact that "the notes on the proposed extension were in Robert Rosen's handwriting", and (b) "a letter transmitting a draft was addressed to Robert Rosen, not Gary Rosen. Brown Aff. Exh. D. at 19-20.
3. Breaches of Fiduciary Duty
Plaintiff alleges a breach of fiduciary duty with respect to the negotiations for the 1996 FOX and 1997 MSG contracts. It is well settled that proving a breach of fiduciary duty requires a showing of damages. Indep. Order of Foresters v. Donald, Lufkin, Jenrette, Inc., 157 F.3d 933, 943-44 (2d Cir. 1998). Because, as explained supra, the arbitrator found no loss of income or benefits with respect to the 1996 contract, plaintiff is barred in this lawsuit from asserting a strict breach of fiduciary duty claim.
Plaintiff also alleges that defendants breached their fiduciary duty by permitting Gary Rosen to participate in the 1997 negotiations against the wishes of plaintiff. But, as noted above, the arbitrator expressly found Gary Rosen's involvement to be immaterial. And, as stated supra, n. 5, not only did the arbitrator reject Webb's claim that "Gary Rosen 'badmouthed' his abilities," but this allegation lacks the requisite specificity and support to establish a claim of breach of contract.
Webb further alleges that defendants breached their fiduciary obligations by virtue of their violations of Article 11 of the New York General Business Law and Section 1700 of the California Labor Code. Neither of these claims are proper in this Court. To the extent that his breach of fiduciary obligation claim or other state law claims rest on such violation, they are not actionable and must be dismissed because this Court does not have jurisdiction under these statutes. See Masters v. Wilhelmina Model Agency, Inc., 2003 WL 145556, at *6-9 (S.D.N.Y. Jan. 17, 2003) (finding no private right of action under Article 11 as enforcement should be conducted by Commissioner of Labor (and in New York City, Department of Consumer Affairs)); Styne v. Stevens, 26 Cal.4th 42, 54 (2001) ("When the Talent Agencies Act is invoked in the course of a contract dispute, the Commissioner has exclusive jurisdiction to determine his jurisdiction over the matter, including whether the contract involved the services of a talent agency.") (citations omitted). Therefore, any claims brought pursuant to Article 11 or Section 1700 must be asserted in the proper administrative forums, as plaintiff has already done, at least with regard to his Section 1700 claim.
However, while a breach of fiduciary duty claim requires a showing of damages, an alternative agency principle, the faithless servant doctrine, provides an additional mechanism for relief, notwithstanding that Webb suffered no damage. "Under New York law, an agent is obligated 'to be loyal to his employer and is 'prohibited from acting in any manner inconsistent with his agency or trust and is at all times bound to exercise the utmost good faith and loyalty in the performance of his duties.'" Phansalkar v. Andersen Weinroth Co., L.P., et al, 344 F.3d 184, 200 (2d Cir. 2003), quoting Western Elec. Co. v. Brenner, 41 N.Y.2d 291, 295 (1977), quoting Lamdin v. Broadway Surface Adver. Corp., 272 N.Y. 133, 138 (1936). A "principal is entitled to recover from his unfaithful agent any commission paid by the principal." Phansalkar, 344 F.3d at 200, citing Wechsler v. Bowman, 285 N.Y. 284, 292 (1941). It is immaterial that "the services were beneficial to the principal, or that the principal suffered no provable damage as a result of the breach of fidelity by the agent." Feiger v. Iral Jewelry, Ltd., 41 N.Y.2d 928 (1977), citing RESTATEMENT (SECOND) OF AGENCY § 469 (1958). The doctrine ensures that a disloyal agent is not compensated even when the principle suffers no loss.
Defendants' attempt to demonstrate that the faithless servant doctrine is no longer recognized or is inapposite is unavailing. Further, defendants have failed to establish that the arbitrator's determination that Webb was aware of Rosen's disloyalty prior to his decision to allow Rosen to negotiate his FOX contract, or his decision to discredit Webb's assertion that it was not until 1998 that he learned further details about Rosen's disloyalty, on a '"long limo' ride" with Filippelli (Brown Aff. Exh. D at 17, 18), precludes such a claim.
While defendants are correct that two of the cases that apply the doctrine, Carr v. Natl Bank Loan Co., 167 N.Y. 375, 360 (1901) and New York Cent. Ins. Co. v. Nat'l Protection Ins. Co., 14 N.Y.85 (1856), involve transactions where the agent was situated on both sides of the deals, defendants cite no case to demonstrate that the faithless servant doctrine only applies in such instances. And, as the basis for the right to relief in these cases was that the defendant "undertook to act as the agent of both parties in a matter where their interests were, for obvious reasons, to be regarded as conflicting" ( id. at 379), which is similar to the basis claimed by Webb, defendants' attempt at distinguishing Carr and New York Central is ineffective.
While plaintiffs faithless servant doctrine is actionable, it is only cognizable against RLR, as a corporation. The faithless servant doctrine provides a mechanism for relief against an agent by an employer. See Phansalkar, 344 F.3d at 200. The fact that plaintiff at all times knew that his agreements were with RLR, the corporation, rather than with Rosen, the company's principal, is evident from the contracts and discourse communicated between the parties since the inception of their relationship, which include but are not limited to (1) the 1986 letter agreement signed by "RLR Associates, Ltd. By: Robert Rosen" (Brown Aff. Exh. N at 5), (2) a May 21, 1997 letter from Robert Rosen to Webb, on RLR's letterhead, signed by Rosen with "RLR" beneath his name, which states that "I've noticed that your contract with RLR has expired and have taken the liberty of enclosing an extension agreement . . ." (id. Exh. O) (emphasis added), and (3) the May 21, 1997 extension agreement on RLR's letterhead, signed by Rosen with "RLR" beneath his name, which states: "This shall serve to amend the contract between you and us dated October 7, 1986" (id.) (emphasis added). This evidence proves unequivocally that plaintiff was, and indeed knew or should have known that he was dealing with RLR, not Rosen individually, during the terms of the 1986 agreement and the 1997 extension agreement. Further, allegations made by plaintiff in his amended complaint exhibit that plaintiff knew that he was also contracting with RLR as an entity, not Rosen individually, during the interim period between the two agreements. Notably, Webb asserts that "[a]fter the 1986 Contract expired by its own terms on October 7, 1990, the relationship between Mr. Webb and Robert Rosen/RLR could best be described as a loose working relationship under which Robert Rosen/RLR was compensated for services rendered on a contract-by contract basis." Am. Compl. ¶ 15 (emphasis added). Plaintiff also alleges that RLR, not Rosen, was the intended recipient of the 10% commissions for all contracts negotiated by Rosen during this period. Id. ¶¶ 11, 16, 23. In fact, Webb provides no evidence to support a claim that his interim contracts were with Rosen, in his individual capacity. Summary judgment is granted to Robert Rosen on plaintiffs faithless servant claim.
Practically speaking, commissions on the 1996 FOX and 1997 MSG contracts were paid directly to RLR. No evidence has been represented by Webb to the contrary. Further, Webb has not even suggested that RLR remitted the entire payment to Rosen as compensation. In the event that Webb succeeds on this claim, whether RLR chooses to seek partial indemnification from Rosen has no bearing on Webb's recovery from RLR.
4. Unjust Enrichment Claims
Plaintiff also claims that by attempting to convince FOX to hire another client instead of plaintiff, defendants were unjustly enriched by receiving 10% of plaintiff's pay from FOX.
While the arbitrator found that there was "no injury to Webb with respect to the manager's fees for these activities" at law, he did not find that defendants were not "unjustly enriched" in accepting them. Unjust enrichment is an equitable claim which has three elements: (1) a benefit conferred upon defendant by plaintiff; (2) an appreciation or knowledge by defendant of the benefit; and (3) the acceptance or retention by defendant of the benefit under such circumstances as to make it inequitable for defendant to retain the benefit without payment of its value. Van Gemert v. Boeing Co., 590 F.2d 433, 444 (2d Cir. 1978), citing 12 Williston on Contracts, § 1479 at 276 (3d ed. 1970). While a claim for unjust enrichment is usually precluded where there was "a valid and enforceable written contract governing the particular subject matter" ( Nat'l Westminster Bank plc v. Grant Prideco, Inc., 261 F. Supp.2d 265, 275 (S.D.N.Y. 2003)), because defendants have failed to establish either that there was a valid written contract which governed the particular subject matter or that the arbitrator's decision precludes litigation on this claim, plaintiffs unjust enrichment claim against RLR stands.
The unjust enrichment claim is similar to the faithless servant claim — both allege that due to disloyalty, the benefit conferred was undeserved. Because these claims address the inequity of the benefit derived by the allegedly disloyal actor, rather than remedy the injury or damage suffered by the plaintiff, these claims are not barred by the arbitrator's finding that Webb suffered no injury7.
Because, as explained supra, plaintiff at all times contracted with RLR as an entity, not Robert Rosen in his individual capacity, plaintiffs unjust enrichment claim against Robert Rosen must be dismissed. Further, since as per plaintiffs own allegations, the commissions paid on contracts negotiated by Rosen were paid to RLR (Am. Compl. ¶¶ 11, 16, 23), not Rosen, plaintiff has failed to establish that a benefit was conferred upon Rosen. See Represystem, B. V. v. SCM Corp., 727 F.2d 257, 263 (2d Cir. 1984). Webb has failed to present any evidence to prove that the commissions received by RLR from Webb's contracts were remitted in full, or even in part, to Rosen. Therefore, it was RLR, if anyone, who was unjustly enriched through defendants' disloyal acts.
5. Sanctions
Defendants seek sanctions against plaintiffs counsel pursuant to 28 U.S.C. § 1927 for counsel's engagement in "a pattern of unnecessarily and unreasonably multiplying the proceedings." Def. Mem. at 23. Section 1927 provides that "[a]ny attorney or other person admitted to conduct cases in any court of the United States or any Territory thereof who so multiplies the proceedings in any case unreasonably and vexatiously may be required to satisfy personally the excessive costs, expenses, and attorneys' fees reasonable incurred because of such conduct." Plaintiffs request is misplaced. Even in cases where all claims are found to be barred by res judicata, and counsel's behavior is determined to be "perplex[ing]," courts in this district have denied sanctions pursuant to Rule 11 and Section 1927. See Brown v. Sara Lee Corp., 98 Civ. 1593, 1998 U.S. Dist. LEXIS 18325, at *13-14 (S.D.N.Y. Nov. 19, 1998) (denying sanctions despite the fact that "[t]he cavalier manner in which plaintiffs' counsel posits an unlawful conspiracy on no apparent basis beyond a re-casting of the very acts by defendants that previously have been found insufficient to support any kind of federal claim reasonably raises the suspicion that plaintiffs' counsel has lost sight of the line between assiduous advocacy and unprofessional excess."). In this case, not only are some of plaintiff's claims proper, even as to those that this Court finds barred, defendants are disingenuous to argue that such determination is obvious, as defendants asserted the contrary at the arbitration in an attempt to dismiss the majority of Webb's counterclaims. See Pl. Supp. at 2, citing Defendant's Reply Brief on Jurisdictional Issues, 8/22/01, at 12 ("the alleged facts forming the basis of Webb's First through Fourth and Sixth Counterclaims [the claims Mr. Webb now seeks to litigate before this Court] do not address the same facts as Webb's Seventh Counterclaim (for fraudulent inducement."). While in my view, some of the plaintiffs behavior could be characterized as overzealous, I am not prepared on this record to conclude that plaintiffs counsel acted unreasonably and vexatiously in multiplying the proceedings, and therefore sanctions are inappropriate.
III. CONCLUSION
For the foregoing reasons, defendants' motion for summary judgment is granted-in-part and denied-in-part. Summary judgment is granted for defendants on all of plaintiff's claims against Rosen in his individual capacity. Summary judgment is granted for defendants on plaintiffs claims against RLR for (1) fraud in the inducement, (2) breach of oral contract, (3) breach of fiduciary duty (other than under faithless servant doctrine), and (4) violations of Article 11 of the New York General Business Law and Section 1700 of the California Labor Code. Summary judgment for defendants is denied with respect to plaintiffs claims against RLR (1) under the faithless servant doctrine, and (2) for unjust enrichment. Discovery is to commence with the issuance of this Opinion and Order, but is limited to these two remaining claims. Defendants' motion for sanctions is denied. The remainder of this litigation will continue in accordance with the Pre-Trial Scheduling Order.SO ORDERED