Opinion
8792/08.
Decided August 20, 2008.
Olshan Grundman Frome Rosenzweig Wolosky LLP, Attorneys for Plaintiff, By: Thomas J. Fleming, Esq., Lori Marks-Esterman, Esq., New York.
Hughes Hubbard Reed, LLP, Attorneys for Defendant, By: Daniel H. Weiner, Esq., Michael P. Schept, Esq., New York.
Defendant, Greenbriar Equity Group LLC ("Greenbriar" or "Defendant") moves, by Order to Show Cause, to stay the proceeding in this action and compel arbitration, pursuant to CPLR 7503(a), of the claims presented by Plaintiff, Alan H. Howard ("Howard" or "Plaintiff"), who opposes the motion.
PROCEDURAL HISTORY
This action was commenced on April 21, 2008 by filing of the Summons and Complaint. Greenbriar, by Order to Show Cause, moved to for a stay of proceedings and to compel arbitration, and, in the interim, sought a stay of its time to answer the Complaint. By stipulation, Greenbriar's time to answer the complaint has been stayed pending this Court's resolution of the application.
Plaintiff seeks to recover monies he claims are owed based on Greenbriar's breach of promises made in connection with Plaintiff's employment as Greenbriar's managing director. Plaintiff served in that capacity from July 3, 2006 to July 18, 2007, at which time he was terminated.
Plaintiff contends that he devoted his time, expertise, and efforts to making Greenbriar successful and that his efforts contributed to Greenbriar's success (Complaint at ¶ 25). Greenbriar, on the other hand, contends that Plaintiff's performance was "substandard" and that it pointed out the failings to Plaintiff on numerous occasions (Affidavit of Kathleen P.K. Moran, sworn to May 20, 2008 ["Moran Aff."] at ¶ 11). Whether Plaintiff's efforts were successful or not is a factual question, which is not germane to the resolution of the issues presented and not properly determinable on this application.
THE ALLEGATIONS OF THE COMPLAINT
A.The Factual Background
Plaintiff alleges that he left his position as a managing director of the Credit Suisse Group ("Credit Suisse") to join Greenbriar based on Greenbriar's "promise of a long and prosperous relationship" including an annual compensation package of between $3 million and $5.5 million a year (Complaint at ¶¶ 1, 15). Plaintiff asserts that, far from reaching the projected compensation, as of the time of Defendant's wrongful termination, Plaintiff had earned "merely" $700,000 (Complaint at ¶ 56).
The "terms" of Plaintiff's compensation package are set forth in a letter dated June 12, 2006 (the "Employment Letter"). The Employment Letter takes the form of a letter from Kathleen P.K. Moran to Plaintiff. The copy of the Employment Letter submitted to the Court is not signed by Moran and there nothing on the face of the Employment Letter that indicates that it was intended to be signed by Plaintiff. While the Court has been informed that the Employment Letter was signed by Moran and Moran avers that she sent the Employment Letter to Plaintiff (Moran Aff. at ¶ 4), there is nothing to indicate that Plaintiff ever signed it.
In any event, the Employment Letter provided, in pertinent part:
Assuming you are continuously employed by the Management Company [Greenbriar], these terms will remain in effect through a first closing of Greenbriar Equity Fund II, L.P. ("Fund II"), subject to any additional terms of the Greenbriar Equity Capital, L.P. (the "GP") agreement (Moran Aff., Ex. A).
The terms referred to, included:
(1) cash compensation of $750,000 in salary and bonus, plus 10% of the transaction fees earned by Greenbriar;
(2) admission as an additional limited partner to the GP, which entitled Plaintiff to 10% of "amounts available to be allocated among all Managing Directors and Managing Partners . . . which will be applicable to all investments consummated by Fund I after [his] date of hire" and which subjected him to "all obligations of a Limited Partner" insofar as he would "be treated in accordance with the limited partnership agreement of the GP"; and
(3) 10% of the Greenbriar Commitment applicable to investments consummated after his date of hire ("co-investment commitment").
According to Plaintiff, this provision required each of Defendant's "principals to purchase a co-investment in each equity investment made by the Company" and that as a result, Plaintiff agreed to purchase and invest in the Greenbriar fund in an amount equal to 10% of the total amount committed by Greenbriar management to the fund. He states that he purchased a $270,000 stake in investments made prior to the commencement of his employment (Complaint at ¶¶ 20-21).
The letter also set a higher compensation package, which would take effect upon the cumulative closing of at least $700 million in Fund II, but which was subject to change at the discretion of Managing Partners.
Plaintiff claims that Defendant agreed "that if Fund II closed with more than $700 million, Howard's salary and bonus would increase proportionately to the closing fund size" (Complaint at ¶ 19).
According to both the Complaint, and the papers submitted on this motion by Greenbriar, the terms of Plaintiff's employment were subject to extensive discussions (Complaint at ¶¶ 13-17; Moran Aff. at ¶ 5). Greenbriar asserts that Plaintiff was represented in the negotiations by a major Manhattan law firm (Moran Aff. at ¶ 5).
While both parties rely on the "terms" of the Employment Letter in arguing their respective positions ( see Complaint at ¶¶ 39, 49; see Greenbriar Mem. at 8; Pltf. Mem. at 4), somewhat mysteriously, the Employment Letter states: "Your employment with [Greenbriar] will be on at will basis and no contract of employment is created by this letter" (Moran Aff., Ex. A [emphasis added]).
Plaintiff maintains that it was his experience, connections, reputation and hard work that helped Greenbriar exceed its original expectations and raise $1 billion for Fund II, which closed in June 2007 (Complaint at ¶ 31). Plaintiff claims that, if it were not for his efforts, Greenbriar "would likely have had to retain a placement agent to attract new investors" at a cost of $15 million (Complaint at ¶ 32). The Complaint asserts that Greenbriar now earns an annual management fee of 2% on the $1 billion invested in Fund II — $20 million a year (Complaint at ¶ 33).
Plaintiff contends that Greenbriar terminated when it did in order "[t]o avoid paying [him] the compensation he was owed. . . . [since] around the same time [Defendant] obtained a letter of intent on one deal, and entered into exclusive discussions on another deal, both of which deals closed withing three months of [his] termination" (Complaint at ¶ 4). These deals were Fund II's first two equity transactions involving AmSafe Investments, Inc. ("AmSafe") and Graykon International, Inc. ("Graykon"), and Plaintiff claims to have performed vital services in connection with these transactions for which he has not been compensated (Complaint at ¶¶ 36-38, 48). For these deals, Plaintiff seeks the amounts the parties agreed to as set forth in the Employment Letter i.e., 7.5% of Greenbriar's "carried interest on each of these deals, plus 7.5% of the transaction fees earned by [Greenbriar] on each of these deals . . . and . . . [the right] to purchase a co-investment in each deal" which "when monetized, are projected to yield for [Plaintiff] approximately $2.75 million each, for a total of $5.5 million" (Complaint at ¶ 49, 50).
Plaintiff alleges that Defendant also failed to pay him 10% of all transaction fees associated with Greenbriar's (Fund I) selling off a large portion of its investment in Argo Tech Corporation in March 2007, for which it received a transaction fee in the amount of $2.5 million. Plaintiff contends that, based on the compensation terms of the Employment Letter, he should have been paid $250,000 for this transaction, but he only received $50,000 (Complaint at ¶ 39).
According to Plaintiff, Defendant also failed to honor the terms of the Employment Letter in July 2007 ( i.e., the provision entitling Plaintiff to 10% of all profits to be allocated among all managing directors and managing partners) when it made a capital investment of $4.4 million in Tinnerman Palnut Engineering Products, Inc., ("Tinnerman Palnut"), but refused to permit Plaintiff to make an equity contribution, which would have entitled him to share in the carried interest on the investment (Complaint at ¶¶ 41, 42).
B.The Specific Causes of Action
In the First Cause of Action, Plaintiff seeks the additional salary ($59,166) and bonus ($621,250) he claims he is owed based on the closing of Fund II with $1 billion dollars in investments in June 2007 (Complaint at ¶¶ 59-64).
In the Second Cause of Action, Plaintiff seeks to recover the $200,000 Defendant has denied him in connection with the Argo Tech Corporation transaction which occurred in March 2007 (Complaint at ¶¶ 66-71).
In the Third Cause of Action, Plaintiff seeks to recover in an amount not yet known, but believed to be in excess of $100,000, based on Defendant's refusal to allow Plaintiff to make an equity investment in Tinnerman Palnut when Defendant invested $4.4 million in it in July 2007 (Complaint at ¶¶ 74-78).
In the Fourth Cause of Action, Plaintiff seeks "in excess of $3.5 million" for the work he performed for Defendant in raising the necessary capital and in helping to close Fund II since these services (sourcing capital commitments) were beyond the services for which Plaintiff was hired (sourcing equity deals) (Complaint at ¶¶ 80-86). The Fourth Cause of Action is not predicated upon the terms of any express agreement between the parties; rather, it sounds in quasi-contract ( see Complaint at ¶¶ 85-86).
In the Fifth Cause of Action, Plaintiff claims that, under the agreement between the parties, he is entitled to approximately $2.75 million in damages on account of the AmSafe transaction (Complaint at ¶¶ 88-93). The Sixth Cause of Action also is based on the AmSafe transaction but, rather than being predicated on express contract, asserts a quantum meruit theory under which Plaintiff claims entitlement to the same approximately $2.75 million as payment for the reasonable value of his services in relation to the transaction (Complaint at ¶¶ 95-100).
In the Seventh and Eighth Causes of Action involving the Graykon transaction, Plaintiff seeks approximately $2.75 million in damages based on Defendant's failure to (1) pay him $7.5% of the transaction fees, (2) allow him to make an equity investment in Graykon and earn the 7.5% carried interest, and (3) allow him to make a co-investment in Graykon. Again, the Seventh Cause of Action is predicated upon an express agreement (Complaint at ¶¶ 102-107), while the Eighth Cause of Action sounds in quantum meruit (Complaint at ¶¶ 109-114).
Finally, in the Ninth Cause of Action, Plaintiff claims that prior to joining Greenbriar, he earned on average $3.5 million a year as an investment banker. Plaintiff asserts that he walked away from this lucrative career, and rejected other employment opportunities, based on Defendant's promises that he would earn between $3-5.5 million a year (Complaint at ¶¶ 116-117). He asserts that "[i]n reliance on Greenbriar's promises, [he] has lost between $6 and $10 million in income, and has been further damaged by walking away from his 20 year career in investment banking" (Complaint at ¶¶ 118, 119).
DEFENDANT'S MOTION TO COMPEL ARBITRATION
In support of its motion to compel arbitration, Greenbriar, through its counsel, contends that "Plaintiff was employed as a Managing Director of Greenbriar from July 3, 2006 through July 18, 2007" and that" Plaintiff also was and continues to be a limited partner of Greenbriar Equity Capital, L.P. (GEC'), the general partner of Greenbriar Equity Fund, L.P. (Fund I'), a fund that makes privately negotiated equity investments in global transportation and transportation-related industries" (Affirmation of Daniel H. Weiner, Esq. dated May 21, 2008 [ "Weiner Aff."] at ¶ 3). According to counsel, "Plaintiff also was and continues to be a limited partner of Greenbriar Co-Investment L.P. ("Co-Investment Partners"), a partnership that makes investments in the same entities as Fund I and has among its limited partners many of the same employees and officers of Greenbriar" (Weiner Aff. at ¶ 3).
According to Greenbriar's counsel, "the terms of plaintiff's employment by Greenbriar are governed by . . . the Employment Letter'" (Weiner Aff. at ¶ 4). Greenbriar's counsel asserts that the Employment Letter "explicitly states (in its second paragraph) that plaintiff's employment is subject to the additional terms of the limited partnership agreement that established GEC (the GP Agreement')" (Weiner Aff. at ¶ 4). Counsel further states that "the GP Agreement contains an express arbitration clause providing for final and binding determination in New York City by the American Arbitration Association (the "AAA") of
any dispute, controversy or claim arising out of or relating to this Agreement or to the Partnership's affairs or the rights or interests of the Partners or the breach or alleged breach of this Agreement. . . . (Weiner Aff. at ¶ 4).]
The GP Agreement is annexed as Exhibit B to the Moran Affidavit and the quoted provision appears in Section 10.1 at page 32.
Furthermore, Greenbriar contends that the limited partnership agreement governing Co-Investment Partners (the "Co-Investment Agreement") contains a mandatory AAA provision identical to the AAA provision in the GP Agreement (Weiner Aff. at ¶ 5).
The Co-Investment Agreement is annexed as Exhibit C to the Moran Affidavit and the arbitration provision appears in Section 10.1 at page 26.
In an affidavit submitted by Kathleen P.K. Moran, Greenbriar's Managing Director and Chief Financial Officer, Moran states that she sent the Employment Letter to Plaintiff (Moran Aff. at ¶ 4). She emphasizes that the Employment Letter stated that, not only was Plaintiff being hired as a Managing Director, he was also being admitted as a limited partner in GEC and the limited partnership agreement for GEC governs Plaintiff's rights and obligations in that partnership (Moran Aff. at ¶ 6). She also stresses that the Employment Letter states that Plaintiff was admitted as a limited partner in Co-Investment Partners and that the limited partnership agreement for Co-Investment Limited Partners governs Plaintiff's rights and obligations in that partnership (Moran Aff. at ¶ 7).
Moran avers that, although Plaintiff's employment as a Managing Director of Greenbriar was terminated on July 18, 2008, he remains a limited partner in both GEC and Co-Investment Partners (Moran Aff. at ¶ 11).
Greenbriar argues that, "[b]ecause the claims asserted by plaintiff . . . relate to his compensation arrangement with Greenbriar and his interests in affiliated limited partnerships all of which are expressly governed by agreements that contain mandatory arbitration provisions this action should be stayed and plaintiff's claims resolved by arbitration in New York City before the American Arbitration Association ("AAA"), as the parties contracted" (Defendant's Memorandum of Law at 1).
Reviewing the nine causes of action set forth in the complaint, Defendant argues:
(1) Plaintiff's claim for the additional salary and bonus resulting from the closing of Fund II (First Cause of Action) relates to the Employment Letter which "incorporates by express reference the mandatory AAA arbitration provision contained in the GP agreement" ( id. at 8);
(2) Plaintiff's claim for the remaining $200,000 of the $250,000 owed on the Argo Tech transaction (Second Cause of Action) relates to the Employment Letter ( id. at 8);
(3) Plaintiff's claim for a share of profits on the Tinnerman Palnut transaction (Third Cause of Action) relates to the Employment Letter and Plaintiff's membership as a limited partner in GEC under the GP agreement ( id. at 9);
(4) Plaintiff's unjust enrichment claim in excess of $3.5 million (Fourth Cause of Action) is based on the Employment Letter and his position as Managing Director at Greenbriar ( id. at 9-10);
(5) Plaintiff's claim for monies owed on the AmSafe transaction (Fifth [breach of contract] and Sixth [quantum meruit] Causes of Action) relates to the Employment Letter ( id. at 10);
(6) Plaintiff's claim for monies owed on the Grakon transaction (Seventh [breach of contract] and Eighth [quantum meruit] Causes of Action) relates to the Employment Letter ( id. at 11); and
(7) Plaintiff's Ninth Cause of Action seeking $6-10 million in lost income that he could have made had he not turned down other employment is based on his reliance on Defendant's" promises and assurances' of compensation . . . purportedly expressed in the compensation package . . . contained in the Employment Letter, the GP Agreement and the Co-Investment Agreement" ( id. at 11).
In opposition, Plaintiff argues that each of the nine causes of action "flows from a breach of promise made by Greenbriar in connection with [Plaintiff's] employment for the Company" (Plaintiff's Memorandum of Law at 2). According to Plaintff, while "Defendant seeks to rely upon arbitration clauses in the limited partnership agreements of the two investment funds through which [Plaintiff] made equity investments and earned carrier interest on the profits from investments in the first fund managed by Greenbriar," because "[n]one of the claims in the instant action arise out of or relate' to either of these limited partnerships, or allege any breach of either such limited partnership agreement," Greenbriar's motion to compel arbitration should be denied ( id.)
THE GOVERNING LEGAL STANDARDS
Although arbitration is a favored by New York public policy as a method of resolving disputes, "equally important is the policy that seeks to avoid the unintentional waiver of the benefits and safeguards which a court of law may provide in resolving disputes. Indeed, unless the parties have subscribed to an arbitration agreement it would be unfair to infer such a significant waiver on the basis of anything less than a clear indication of intent'" ( TNS Holdings, Inc. v MKI Sec. Corp., 92 NY2d 335, 339, quoting Matter of Marlene Indus. Corp. v Carnac Textiles, Inc., 45 NY2d 327, 333-334).
Accordingly, on a motion to compel arbitration, unless the parties have agreed otherwise, the court must determine whether the parties made a valid agreement to arbitrate ( Matter of Smith Barney Shearson Inc. v Sacharow, 91 NY2d 39, 45 ; Brown v Bussey, 245 AD2d 255, 255 [2d Dept 1997]) and if so, whether the issue sought to be submitted to arbitration falls within the scope of that agreement ( Matter of County of Rockland [Primiano Constr. Co., Inc.], 51 NY2d 1, 7).
Pursuant to CPLR 7503(a), "[w]here there is no substantial question whether a valid agreement was made or complied with . . . the court shall direct the parties to arbitrate" (CPLR 7503[a]). While, as noted, arbitration is favored in New York state as a means of resolving disputes ( Stark v Molod Spitz DeSantis Stark, P.C., 9 NY3d 59, 66), "[i]t is settled that a party will not be compelled to arbitrate and, thereby, to surrender the right to resort to the courts, absent evidence which affirmatively establishes that the parties expressly agreed to arbitrate their disputes' . . . The agreement must be clear, explicit and unequivocal . . . and must not depend upon implication or subtlety" ( Matter of Waldron v Goddess, 61 NY2d 181, 183-184, quoting Schubtex, Inc. v Allen Synder, Inc., 49 NY2d 1, 6; see also God's Battalion of Prayer Pentecostal Church, Inc. v Miele Assoc., LLP, 6 NY3d 371, 374; Matter of Estate of Arthur Miller, 40 AD3d 862, 861-862 [2d Dept 2007]). The movant has the burden to show a "clear and unequivocal" agreement to arbitrate the claim ( Gerling Global Reins. Corp. v The Home Ins. Co., 302 AD2d 118, 123 [1st Dept 2002], lv denied 99 NY2d 511; see also Allstate Ins. Co. v Roseboro, 247 AD2d 379 [2d Dept 1998]). And it is a general principle that "'the threshold for clarity of agreement to arbitrate is greater than with respect to other contractual terms'" ( Matter of Waldron, supra, 61 NY2d at 185; quoting Application of Doughboy Indus., 17 AD2d 216, 219 [1st Dept 1963]). Thus, the question is whether the arbitration clause definitely states the issues to be arbitrated and whether the claim sought to be arbitrated falls within the clause.
While an agreement to arbitrate must be in writing (CPLR 7501), that a written agreement, containing an arbitration clause, is not signed by the party to be charged is not fatal to requiring the parties to proceed to arbitration, where the evidence shows that the party to be charged intended to be bound by it ( God's Battalion of Prayer Pentecostal Church, Inc., supra, 6 NY3d at 374). That is because a party to an agreement cannot pick and choose among the provisions of the agreement, selecting only those provisions that suit its purposes and rejecting those that do not ( id). Thus, the fact that Plaintiff did not sign the Employment Letter does not preclude enforcement of an arbitration provision contained within it, assuming that, in fact, the Employment Letter contains an arbitration provision.
On the other hand, the Court must give effect to all of the provisions of a contract ( God's Battalion of Prayer Pentecostal Church, Inc., supra, 6 NY3d at 374). The Court has reflected on the provision which states: "Your employment will be on at will basis and no contract of employment is created by this letter" (Moran Aff., Ex. A). The Court also notes that the foregoing phrase is followed by the statement that Moran "would be pleased to discuss in more detail the terms of [Plaintiff's] employment or any other topic" ( id). This language could be read to suggest that the parties did not intend the Employment Letter to be a binding contract, intending only either: (a) that the Employment Letter was a preliminary offer of employment; or (b) that the agreement of employment was intended to be oral, except that the Employment Letter was intended to serve as a written confirmation of the orally-agreed to terms.
On reflection, the Court concludes that the Employment Letter is a binding agreement. First, it begins by stating that, commencing as of July 3, 2006, the date of hire, the "following terms will take effect." Second, neither party has asserted that the Employment Letter is an unenforceable agreement to agree or otherwise not binding. To the contrary, Plaintiff relies upon the Employment Letter in his complaint, contending that he is entitled to certain damages based upon Greenbriar's breach of its terms. Greenbriar, likewise, urges that Plaintiff is bound by the arbitration agreements it claims are incorporated by reference in the Employment Letter. Third, and perhaps most important, the record before the Court indicates that both parties moved forward with Plaintiff's employment, thus indicating their mutual assent to be bound ( see, e.g., God's Battalion of Prayer Pentecostal Church, Inc., supra, 6 NY3d at 374; Bed, Bath Beyond, Inc. v Ibex Constr., LLC, 52 AD3d 413 [1st Dept 2008]). There is no language in the Employment Letter that indicates that the parties anticipated that a further writing would be required or that states that the parties would not be bound until a further writing was made ( Bed, Bath Beyond, Inc., supra, 52AD3d at 413).
The Court reads the phrase "no contract of employment is created by this letter" as amplifying the preceding language that the employment "will be on at will basis" by eliminating any intent that the employment be for a definite term or that termination would be authorized only for cause.
Greenbriar asserts that, since the Employment Letter provides that the terms are "subject to any additional terms" of the GP Agreement, and since the GP Agreement contains an arbitration clause, Plaintiff agreed to arbitrate the claims set forth in this action.
There is plausibility to construing the provision of the Employment Letter which makes its terms "subject to" any additional terms of the GP Agreement to have incorporated the GP Agreement, and its arbitration clause, by reference ( see Institute for Eastwest Studies, Inc. v National Audubon Socy., Inc., 17 Misc 3d 1108[A], 2007 NY Slip Op 518882[U] [Sup Ct NY County 2007]). New York law will enforce an arbitration clause contained in an agreement which is incorporated into another agreement by reference ( see, e.g., Level Export Corp. v Wolz, Alken Co., 305 NY 82). However, because an agreement to arbitrate must be clear and unambiguous, and not dependent upon subtleties in the agreement, any reference in an agreement to an arbitration clause contained in another agreement must clearly show an intent to arbitrate, such as by explicit mention of the arbitration clause or, at the least, implied mention through the explicit incorporation of the other agreement by reference ( Matter of Aerotech World Trade Ltd. v Excalibur Sys., Inc., 236 AD2d 609 [2d Dept 1997], lv denied 90 NY2d 812; accord, General Railway Signal Corp. v L.K. Comstock Co., 254 AD2d 759 [4th Dept 1998], lv dismissed 93 NY2d 881).
The Employment Letter does not mention the arbitration clauses in the GP Agreement and the Co-Investment Agreement nor does the Employment Letter explicitly incorporate either the GP Agreement or Co-Investment Agreement by reference. Indeed, the Employment Letter does not even mention the existence of the Co-Investment Agreement. The phrase "subject to" any additional terms of the GP Agreement is neither an explicit mention of the arbitration clause in that Agreement nor an explicit incorporation by reference. Accordingly, no matter the effectiveness of this language in generally incorporating provisions of the GP Agreement, the language is not effective to incorporate the arbitration clause. At most, a reading of the Employment Letter as a whole makes clear that the "subject to the additional terms of . . . (the GP') agreement" clause was meant to condition Plaintiff's admission as a limited partner on his being subject to the provisions of the GP Agreement which govern the relationship of the limited partners inter se. Indeed, the specific text following this general clause clarifies it by providing that Plaintiff's "interest as a Limited Partner of the GP will otherwise be treated in accordance with the limited partnership agreement of the GP and [that he] shall be subject to all obligations of a Limited Partner thereunder" (Moran Aff., Ex. A).
The GP Agreement, which is dated November 1, 1999, long pre-dates the Employment Letter.There is no indication that the GP Agreement and the Co-Investment Agreement were attached to the Employment Letter; nothing in the Employment Letter so states. Nor has any evidence been submitted that they were even shown to Plaintiff prior to his joining Defendant as managing director. Furthermore, Defendant has not provided the Court with any addenda to the GP Agreement and the Co-Investment Agreement evidencing Plaintiff's execution of themor any other writing indicating his agreement to the terms thereof. While it may be that, by accepting membership in the limited partnership agreement, Plaintiff implicitly agreed to be bound by the same provisions as govern the relationship between all the limited partners, his acceptance of employment does not carry with it the implication that he agreed to have the arbitration provisions govern his employment relationship. Indeed, even if it did, arbitration must be agreed to, it can not be imposed by retrospective implication.
Likewise, the Co-Investment Agreement is dated as of January 1, 2003, some three and one-half years prior to the Employment Letter.
Indeed, the copy of the GP Agreement submitted on this motion is not signed by any one at all, while the copy of the Co-Investment Agreement is signed only by Greenbriar Holdings, LLC and not by any of the limited partners.
It is obvious that the purpose of the Employment Letter was to set forth the terms governing Plaintiff's status as an employee of Greenbriar. It is equally obvious that, upon gaining admission as a limited partner in GEC, the GP Agreement was to govern Plaintiff's rights and status as a limited partner, the same as the limited partners, but not to govern his employment with Greenbriar.
Moreover, the terms of the arbitration provisions found in the GP Agreement (section 10.1) and the Co-Investment Agreement (section 10.1) can no way be interpreted to cover the claims in this action as they provide:
any dispute, controversy or claim arising out of or relating to this Agreement or to the Partnership's affairs or the rights or interests of the Partners or the breach or alleged breach of this Agreement, whether arising during the Partnership term or at or after its termination or during or after the liquidation of the Partnership, shall be settled by arbitration in New York City . . . in accordance with the rules then obtaining of the American Arbitration Association (Moran Aff., Exs. B, C [emphasis added]).
An agreement to arbitrate some issues between the parties will not be construed as an agreement to arbitrate all issues between the parties ( Matter of Aerotech World Trade Ltd., supra, 236 AD2d at 609).
The arbitration clause, by its terms, does not cover all of the disputes that the parties may have. Nor does it cover any dispute arising out of Plaintiff's employment with Defendant; indeed, it seems doubtful that it could have since both the GP Agreement and the Co-Investment Agreement pre-date Plaintiff's employment.
Rather, the arbitration clause in the GP Agreement covers disputes arising or relating to the GP Agreement. It also covers disputes between the rights and interests of the partners, as partners. The same is true of the Co Investment Agreement. Nothing in those agreements purports to provide for, much less mandate, disputes between GEC or the Co-Investment Partners and any of their employees.
If the claims brought in this action involved a dispute arising out of or related to Plaintiff's rights and obligations under the terms of either the GP Agreement or the Co-Investment Agreement, this Court would readily stay this proceeding and compel the parties to arbitration. However, the GP Agreement and the Co-Investment Agreement controlled Plaintiff's rights and obligations as a limited partner in Fund I.
The only claim of Plaintiff that arguably relates to the Plaintiff's rights and obligations as a limited partner in Fund I and, therefore, as to which the GP Agreement and/or the Co-Investment Agreement may possibly be implicated, is Plaintiff's claim that Defendant refused to allow him to make an equity contribution when Defendant infused an additional $4.4 million in Tinnerman Palnut. (Third Cause of Action, Complaint at ¶¶ 73-78). However, the basis for Plaintiff's claim in this regard is his claim that Greenbriar promised that it would, as part of his compensation package, pay him 10% of the carried interest ( i.e., profits made from investments) allocated to all managing directors and managing partners of GEC (Complaint at ¶ 73). Thus, Plaintiff's claim arises out of the Employment Letter, not anything in the GP Agreement or Co-Investment Agreement. Indeed, contrary to Greenbriar's argument (Def. Mem. at 9), it does not appear to the Court that Plaintiff is predicating his entitlement to buy into the Tinnerman Palnut transaction on his status as a limited partner. Rather, his claim is independent of that status. Indeed, the "Co-investment commitment" contained in the Employment Letter is found as a separately labeled and contained paragraph, distinct from the provisions relating to cash compensation and share of incentive fee distributions. There is nothing in the Employment Letter and nothing in the paragraph dealing with the Co-investment commitment that even mentions the existence of the Co-Investment Agreement, much less incorporates it and the arbitration clause found therein by reference.
Plaintiff's remaining claims are breach of contract, unjust enrichment, quantum meruit claims and/or promissory estoppel claims arising from Defendant's alleged breach of the agreed upon items of compensation set forth in the Employment [*12]Letter. They all relate to Plaintiff's services as Managing Director not his rights and obligations as a limited partner in Fund I. "While an agreement to arbitrate can be incorporated [into a second agreement] by reference, any such reference must clearly show such an intent to arbitrate" ( Matter of Aerotech World Trade Ltd., supra, 236 AD2d at 609). Because "[a] party cannot be compelled to submit to arbitration absent an agreement expressly encompassing the subject matter of the dispute" ( Allstate Ins. Co., supra, 247 AD2d at 380), the Court cannot find that Plaintiff agreed to arbitrate the claims he presents in this action.
CONCLUSION
The Court has considered the following papers in connection with this application:
1)Order to Show Cause dated May 27, 2008; Affirmation of Daniel H. Weiner, Esq. dated May 21, 2008; Affidavit of Kathleen P.K. Moran, sworn to May 20, 2008, together with the exhibits annexed thereto;
2)Defendant's Memorandum of Law In Support of Motion to Compel Arbitration, dated May 21, 2008;
3)Plaintiff's Memorandum of Law in Opposition to Defendants' Motion to Compel Arbitration dated June 10, 2008, submitted with proof of due service;
Upon the foregoing papers, and for the reasons set forth above, it is hereby
ORDERED that the motion of Defendant Greenbriar Equity Group., LLC to compel arbitration and stay proceedings in this action is denied; and it is further
ORDERED that Defendant shall serve its Answer to the Complaint herein by August 29, 2008, which date may not be adjourned or extended without written order of the Court; and it is further
ORDERED that counsel for the respective parties shall appear before this Court on September 12, 2008 at 9:30 a.m. for a Preliminary Conference; and it is further
ORDERED that the Preliminary Conference hereinabove scheduled may not be adjourned except upon written order of the Court.
This constitutes the Decision and Order of the Court.