Opinion
117613/05.
Decided September 11, 2006.
Upon the foregoing papers, it is ordered that: Motion sequence numbers 004 and 005 are consolidated herein for decision. As the court already discussed in detail in a decision and order which it issued in this case on March 28, 2006, the dispute herein involves a claim by a commercial tenant, plaintiff Quik Park Felise LLC, that its right of first refusal ("RFR") has been breached by a fraudulently structured transaction between the defendant landlords and a third party, the Chestnut Group LLC, which purports to be a joint venture in which Chestnut makes a capital contribution of $55 million to the defendants, but is actually nothing more than a sale of the property. The complaint asserted six causes of action, including breach of contract, tortious interference with contract and business relations, breach of the implied covenant of good faith and fair dealing, fraud and negligent misrepresentation. After the commencement of this action and the issuance by this court of a temporary restraining order enjoining the defendants from closing on the transaction with Chestnut, the defendants mailed plaintiff a Notice of Offer, dated January 13, 2006, which stated that they were extending plaintiff a right of first refusal with respect to the two agreements which they had entered into with Chestnut. The letter closed by stating that the offer "in no way shall be deemed an admission by landlord that the agreements are contracts for the sale of the premises" and that it was being made "to avoid unnecessary legal expenses."
In its March 28, 2006 decision and order, the court (1) found that plaintiff was likely to succeed on the merits of its claim and granted its motion for a preliminary injunction restraining the defendants from closing on their transaction with Chestnut and from otherwise transferring the property to a third party in violation of plaintiff's RFR, (2) granted the plaintiff's motion for a Yellowstone-type injunction tolling the 30-day period the had been given, pursuant to the lease, to match, less 10% of the purchase price, the terms of the Chestnut agreements and (3) granted the defendants' motion to dismiss to the extent of dismissing the plaintiff's claims for tortious interference with contract and business relations, breach of the implied covenant of good faith and fair dealing, fraud and negligent misrepresentation.
Thereafter, the plaintiff served and filed an amended complaint, as of right, which, in addition to its breach of contract clam, asserted three new causes for breach of the implied covenant of good faith and fair dealing and two new causes of action, one for breach of contract and the other for a declaratory judgment, claiming that the defendants transaction with Chestnut does not constitute a bona fide offer by a third party to purchase the property and thus does not trigger plaintiff's RFR. In addition, at a conference before this court on May 9, 2006 and by letter dated the next day, plaintiff offered to match the terms contained in the defendants' two agreements with Chestnut and pay 90% of the $55 million which Chestnut had agreed to pay as its purported "capital contribution" to the defendants. The plaintiff's offer was, however, conditioned on defendants' agreement to provide an instrument in which either (1) Chestnut disclaims any interest in the two agreements and in the property or (2) defendants agree to indemnify it plaintiff for any expenses it may incur by reason of Chestnut's assertion of an interest in the two agreements and in the property.
In motion sequence number 004, the defendants have now moved to dismiss the three new causes of action for breach of the implied covenant of good faith and fair dealing and the new cause of action for breach of contract. In motion sequence number 005, the defendants have moved, by order to show cause, for an order vacating the preliminary injunction and the Yellowstone-type injunction which this court previously issued and determining that defendants may consummate their transaction with Chestnut because plaintiff has rejected its opportunity to exercise its RFR.
Discussion
1. Defendants' Motion to Vacate — The defendants' motion to vacate the two injunctions which are presently in effect is based on the fact that the plaintiff, in responding to the defendants' offer of a right of first refusal with respect to the Chestnut agreements, agreed to do so only on the condition that Chestnut disclaim interest in the property or that defendants provide plaintiff with an indemnification provision in the event Chestnut asserts any such interest. In moving to vacate, defendants cite well established case law that the acceptance of an offer conditioned on the offeror's assent to additional or different terms is a counter-offer which constitutes a rejection of the offer, thus terminating the offer. See Homayouni v. Banque Paribas, 241 AD2d 375, 376 (1st Dept 1997); Keryakos Textiles, Inc. v. CRA Development, Inc., 167 AD2d 738, 739 (3rd Dept 1990); Restatement (Second) of Contracts, § 59. Defendants argue that the plaintiff, by conditioning its acceptance of the RFR offer on the imposition of an additional term, effectively rejected and extinguished the offer.
The problem with defendants' argument is that they have not cited any cases, and the court has found none, where the offer and counter-offer are made while the parties are in litigation over their respective contractual rights and are offered for the purpose of resolving the dispute which gave rise to this litigation. As already noted, it was not until after this action was brought and the court had issued a TRO enjoining the defendants from closing on the Chestnut transaction that they offered plaintiff the opportunity to exercise its RFR. Moreover, in doing so, defendants expressly stated that the offer was made for the purpose of avoiding unnecessary legal expenses and that they otherwise reserved their rights to assert that their transaction with Chestnut did not, in fact, trigger the RFR. Clearly, this offer was an offer to resolve the issues raised in this litigation and settle the lawsuit. Given this court's issuance of a TRO, the plaintiff was under no legal obligation to respond to the plaintiff's offer. Moreover, as the court indicated in its March 28, 2006 decision and order, it is arguable whether the defendants' transaction with Chestnut should even be considered a bona fide offer by Chestnut to purchase the premises, thus triggering plaintiff's RFR.
Nevertheless, the plaintiff decided to respond to the plaintiff's offer with what was clearly a counter-offer. Notably, this offer was first conveyed to the defendants at a conference before the court, at which time plaintiff's counsel expressly reserved all of his client's rights. The following day, counsel sent defendants' counsel a signed, written offer containing the same terms and expressly reserving the plaintiff's rights and implying no waivers.
Although the parties never used the word "settlement" in either of their respective offers, it is clear that the offers were made for the purpose of resolving this litigation. A waiver is the intentional, voluntary relinquishment of a known right. See White v. Church of Our Lady of Sorrows, 255 AD2d 109 (1st Dept 1998). In view of the fact that the plaintiff's response to the defendants' RFR offer was initially conveyed to the defendants at a conference before the court in the context of an attempt by the parties to settle this litigation and contained an express reservation of rights, there is no merit to the defendants' argument that plaintiff somehow intentionally relinquished any of its rights, including the rights it obtained pursuant to the two injunctions issued herein. The public policy in this State has long been to encourage and facilitate settlements. See Crow Crimmins Wolf Munier v. Westchester Co., 126 AD2d 696, 697 (2nd Dept 1987). The defendants' attempt to use the plaintiff's counter offer as the basis for extinguishing its RFR rights cannot be countenanced since it would undermine this public policy. The motion must therefore be denied in its entirety.
2. Defendants' Motion to Dismiss — The defendants' motion to dismiss the three new causes of action asserted in the amended complaint (third, sixth and seventh causes of action) for must be granted for the same reason by which the court earlier dismissed the cause of action asserted in the original complaint for breach of the same covenant. The plaintiff has failed to persuade the court that these three causes of action are not "intrinsically tied to the damages allegedly resulting from the breach of the contract." Canstar v. Jones Constr. Co., 212 AD2d 452, 453 (1st Dept 2004). See also The Hawthorne Group v. RRE Ventures, 7 AD3d 320, 321 (1st Dept 2004).
As to the new cause of action for breach of contract (fourth cause of action), the amended complaint asserts that defendants' Notice of Offer breached the underlying lease. The court agrees that this claim fails to state a cause of action. Nowhere in the complaint does plaintiff explain how the lease was breached, much less cite to any specific provision which was breached. Nor has the plaintiff, in its opposition papers, provided any amplification on this claim. See Leon v. Martinez, 84 NY2d 83, 88 (1994). It is well settled that on a motion to dismiss for failure to state a cause of action, "the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one." Guggenheimer v. Ginzburg, 43 NY2d 268, 275 (1977). In the absence of any explanation by the plaintiff as to how its lease was breached by the defendants' service of a Notice of Offer, the court is unable to find any actionable claim for breach of contract. This cause of action must therefore be dismissed.
Accordingly, in motion sequence number 004, the defendants' motion to dismiss is granted and the third, fourth, sixth and seventh causes of action in the amended complaint are hereby dismissed. In motion sequence number 005, the defendants' motion to vacate is hereby denied in its entirety.
The parties shall appear before the court in Room 412, 60 Centre Street, New York, New York on October 3, 2006 at 10:30 a.m. for a compliance conference.