Opinion
117138/06.
February 18, 2010.
DECISION AND ORDER
Motion sequences 005 and 006 in the above-captioned action are consolidated for disposition.
In motion sequence 005, defendant Stonehenge Capital Company, LLC ("Stonehenge") moves, pursuant to CPLR 3212, for summary judgment dismissing the complaint as against Stonehenge or, in the alternative, to stay this action with respect to plaintiffs Success, LLC and RD Films, Inc. ("RD") for their failure to register to do business in New York. Plaintiffs cross-move, pursuant to CPLR 3212, for summary judgment on the issue of liability. In motion sequence 006, defendant W. Stephen Keller ("Keller") moves, pursuant to CPLR 3212, for summary judgment dismissing the complaint as to him.
Defendant Alan Brown submits an affidavit wherein he joins in the defendants' motions for summary judgment and purports to oppose plaintiffs' cross-motion.
Plaintiffs bring this action to recover damages based upon defendants' alleged false promises and misrepresentations regarding the financing of a movie called Success, which plaintiffs sought to produce. Plaintiff Ethan Goldman is the author of the screenplay for Success, which is based on a book by Martin Amis. Goldman possesses the exclusive motion picture rights to the book. Goldman and plaintiff Aldo LaPietra formed plaintiff Success, LLC in order to produce the movie (the "Project"). Goldman is a principal of RD. At the time of the events herein, LaPietra was an employee of plaintiff Bad Company Films ("Bad Company"), which was owned and operated by Raub Shapiro. Bad Company agreed to produce the Project through LaPietra.
Stonehenge is a private equity and fund management firm that was interested in the business of film financing. Plaintiffs allege that, in 2004 and 2005 they were involved in "packaging," or developing the Project, which included obtaining commitments from actors and securing financing. In or about June 2005, an independent film packaging agent, Roeg Sutherland, called Goldman and LaPietra to inform them that Stonehenge was interested in financing the Project. Sutherland told them that there would be two people they would be dealing with at Stonehenge: defendants Alan Brown and Stephen Keller. Sutherland further stated that they had both read the script, reviewed the budget and been told of the casting progress.
On June 7, 2005, Sutherland arranged a telephone call in which he introduced Goldman and LaPietra to Brown. Sutherland indicated that Brown "was Stonehenge." During that phone conversation, which included Brown, Goldman, LaPietra, Shapiro and Sutherland, Brown stated that Stonehenge would finance the Project and that the turnaround time to close and receive the funds would be four to five weeks. Plaintiffs allege that, at that time, several sources were interested in financing the Project, but because dealing with Stonehenge would mean dealing directly with the financing entity, they decided to go with Stonehenge. During that conversation, Brown also stated that he had an exclusive relationship with Stonehenge, pursuant to which all potential film financing opportunities had to be brokered by and through him and that, for the purposes of the proposed financing transaction, Brown would be plaintiffs' contact with Stonehenge.
The next day Brown sent Goldman and LaPietra two documents: 1) a contract with Success which would make him the Executive Producer of the film, and 2) a "Summary of Proposed Investment" ("SPI") dated June 8, 2005, which set forth the financial aspects of the deal with Stonehenge in return for their agreement to finance the Project. The SPI indicated that the interest rate would be the prime rate plus 1½ percent. The SPI also indicated that there would be an additional "success fee," which was defined as: "A fee equal to 30% of the Loan amount" which would "become payable upon the earlier of the Maturity or the final repayment of the Loan" (E. Goldman Aff., Ex. 3). The SPI also set forth a number of "Conditions Precedent to Financing." Notable among these was that Success was required to enter into an agreement with Alan Brown as Executive Producer. In addition, the SPI provided that any contract entered into by Success for more than $25,000 had to be approved by Stonehenge, via Alan Brown. Under the heading "Conditions Governing the Investments" the SPI provided that: "[t]he Investor [Stonehenge] shall have the right to approve any contract entered into by the Company with a value greater than $25,000 with such approval granted by the Investor via the Picture's Executive Producer, Alan Brown" (Robert Goldman Aff., Ex. 3).
According to plaintiffs, the two points that the parties initially focused on were the "split" of the proceeds with Stonehenge and the provision that Brown would be the Executive Producer. Although the cost of doing business with Stonehenge was high, Brown assured the plaintiffs that if they agreed to the division of revenues and the payment of the success fee, and Stonehenge had its money before the producers received their share of any profits, that this was a "done deal."
The budget which Sutherland originally provided Brown and Keller was for approximately $3.3 million. Brown told plaintiffs to create a new budget for $4 million because that was the level of film that Stonehenge wanted to produce. On June 13, 2005, plaintiffs provided the new $4 million budget to Brown and Stonehenge and Brown told the plaintiffs that it had been approved.
By June 14th, Brown informed Goldman that closing on the deal was set for July 11th. On June 15th, upon Brown's request, plaintiffs submitted the new $4 million budget to Film Finances, Inc., the completion bonding company. On June 20th, LaPietra sent Brown the biographies of the committed actors and Goldman's professional biography as further background material for him to present to Stonehenge.
On June 21st, a first draft principal photography schedule of 28 days and a "day out of days" report was submitted to Brown and Film Finances. At this time a full "cash drawdown" schedule for the entire production, showing week by week expenditures, was submitted to Brown and Keller.
On June 24th, Brown brought Goldman and LaPietra to meet with defendant Keller at Stonehenge's offices at 152 West 57th Street, in Manhattan. The parties met in the Stonehenge conference room. This was the first time Goldman and LaPietra had met Keller, and Brown introduced Keller as the Director of the New York Office, and head of the film financing unit. Keller gave Goldman his card, which set forth his title as Director of Stonehenge Capital Company, LLC.
According to plaintiffs, Keller and Brown both told them how excited they were about the script and project and that there would not be any problem with financing the Project at the $4 million level. They both agreed that they could have the money wired into the bank within four to five weeks, which plaintiffs had said was important if they were to have Sarah Michelle Gellar for one of the lead rolls. Plaintiffs state that they were told to do whatever they had to do to move forward.
Goldman alleges that at this meting he told Keller and Brown that, in order to move forward, and to be able to begin getting the necessary documentation together for the completion bond company, the plaintiffs would need to officially hire their line producer, Margot Lulick, on a full-time basis for the film. Plaintiffs allege that Lulick was considered one of the best line producers in New York and that having her on the team would give the film credibility in the New York film community. Goldman alleges that he told Brown and Keller that Lulick would cost $7,500 per week against a $75,000 fee for the entire pre-production, production and post-production time period.
Plaintiffs allege that they left the meeting with the clear understanding that, with Brown and Keller's approval and encouragement, they were to go out and begin hiring crew, continue casting, set up an office and do all the things they needed to do to make the movie. Plaintiffs began paying Lulick her weekly fee of $7,500 out of their pockets so that she could begin the necessary work of interviewing and hiring crew, creating various schedules needed for the bond company, negotiating with the Teamsters and other unions, etc., all in preparation for making the film.
On June 28th, Brown requested that plaintiffs wire him $1,500 for expenses so that he could perform the necessary background checks for the purpose of Stonehenge's due diligence. Shapiro wired the $1,500 to Brown's account on June 29th.
Thereafter, on July 12th, LaPietra spoke to Brown several times about how long it would take to actually close the financing. Brown responded that it would take from 48 to 96 hours. LaPietra also asked Brown if plaintiffs had satisfied all the conditions and Brown said "Yes, you guys are done!"
As of July 18th, the financing had still not closed and Sarah Michelle Geller was forced to leave the Project because the production dates had now been forced to change due to the Stonehenge financing delays, thereby conflicting with the beginning of her next project. Goldman and LaPietra flew to Los Angeles and convinced actress Selma Blair to commit to the Project. As of July 19th, the contracts for the principal cast of Jeremy Renner, Alessandro Nivola, Selma Blair and Amanda Peet had been negotiated and prepared and had been approved by Brown, Keller and Stonehenge.
On July 21st, both Success and Brown received a short-form letter of intent to bond the film from Film Finances, Inc. Brown did not indicate that there was any problem with this letter.
On July 25th, with Brown's knowledge and approval, Goldman and LaPietra hired a new casting director, Sig DiMiguel, and signed a contract with him. His fee was $15,000 to cast the remaining parts in the film. DiMiguel was paid the first one-third installment of his contract out-of-pocket in order for him to begin work immediately.
On July 29th Sutherland informed the plaintiffs that he had just received an e-mail from Keller stating that Stonehenge would now only finance the film at a $3 million budget level. Moreover, Stonehenge would only finance the Project if plaintiffs were able to obtain a domestic distribution deal and signed foreign pre-sale commitments, not just the projections/estimates they were previously relying on and which were referenced in the original SPI.
On August 1st, Sutherland secured a domestic distribution deal and sent the deal memo to Keller and Brown. Also on August 1st, the first official "Success" crew list was generated and distributed, listing the crew members hired as of that date (e.g., line producer, production coordinator, accountant, production designer, director of photography, costume designer, etc.). Brown was included in the distribution.
By August 2nd, the entire crew had been working for almost three weeks in good faith without receiving any payment because no money had been forthcoming from Stonehenge. Plaintiffs continued to pay every expense out of their pockets. They were now 4 ½ weeks away from principal photography and had not received any money from Stonehenge.
LaPietra spoke to Brown four times on August 2nd to impress upon him that plaintiffs were in a serious and critical situation. Brown allegedly continued to say that things were fine and that he was working hard on getting everything done and that it was okay for plaintiffs to continue spending their own money to keep the Project going since the money from Stonehenge was going to come any day now.
Plaintiffs asked Brown if he would give them a signed commitment letter from Stonehenge that would confirm that they were going to fund the film. Plaintiffs believed that, if they had that commitment in writing, they could borrow money from another source which would be necessary to keep the Project going.
On August 8th the money had still not arrived from Stonehenge. On that date, Film Finances, the bond completion company, issued a signed, long-form letter of intent to both Brown and Success.
On August 9th plaintiffs had to pay $3,000 to retain their production office space. Plaintiffs state that they needed to be in that office no later than the end of that week in order to start pre-production on the following Monday. Goldman alleges that he wrote a $3,000 check from the RD Films account and hand-delivered it to the landlord in order to maintain the production office space.
On the morning of August 10th, Brown called LaPietra and told him that he was, at that moment, in a meeting with Keller and Stonehenge, that they were going over everything and that there might be a closing later that day. Several hours later Brown called and said that they would know in an hour or so if Stonehenge had approved all the paperwork.
Later that night plaintiffs learned that Keller was no longer listed on the Stonehenge website. On August 11th plaintiffs learned that Keller had left Stonehenge and had formed a new film finance company called "Parkview Entertainment." Brown assured plaintiffs that this would not affect their financing.
On August 16th, Keller called Goldman and stated that the deal was not done and that Stonehenge was not going to finance the film. He stated that there must have been some "miscommunication." Keller further stated that he had left Stonehenge to form Parkview Entertainment and that Stonehenge would still finance some of his projects. Keller then stated that there were three new conditions for financing and that they had not been met. These included signed foreign commitments.
Later, Goldman forwarded several e-mails to Keller, some of which were e-mails sent from Brown to Success, in which Brown stated that plaintiffs had met all of Stonehenge's conditions. That night Keller called LaPietra and assured him that he and Stonehenge were working on the deal, and that he didn't want to make any promises, but that he thought he would have the money for the Project within 2 days.
The next morning, which was August 17th, Keller informed LaPietra that, because of the e-mails that Goldman had sent the day before, he would have to have the matter reviewed by Stonehenge's legal counsel and that he would contact plaintiffs when that was completed. On August 18th, plaintiffs received a copy of a letter from Stonehenge's associate general counsel to Alan Brown, stating, in part, as follows:
As I am sure you have made clear to the LLC, neither you nor A.R. Brown and Associates represents SCC or acts as its agent nor do you have the authority [to] accept, reject or modify any of the terms of the Summary. It was our anticipation that if discussions with the LLC progressed beyond a preliminary stage, then SCC and the LLC would sign a definitive Purchase Agreement that would form the basis for consummating a transaction . . .
To date, SCC has not seen any indication that the LLC has satisfied or is capable of satisfying the most significant of the conditions precedent outlined in the Summary. In particular, I note that (I) the LLC has yet to secure distribution commitments in an amount no less than 130% of the proposed loan amount, (ii) it is unclear if the LLC will be able to obtain a commitment for a completion bond, and (iii) legal documentation (including operating agreements, loan agreements, and interparty agreements) necessary to complete this investment has (sic) not been completed . . .
(E. Goldman Aff., Ex. 44).
Thereafter counsel for Stonehenge stated that if plaintiffs wanted to hold any discussions with Stonehenge regarding financing, any such conversations had to be preceded by a full release of any claims against Stonehenge, Keller and Brown. Plaintiffs refused and the Project collapsed. Plaintiffs allege that as a result of defendants' misrepresentations and failure to proceed with the financing, they not only lost the money that they had invested, but their careers in the film industry were ruined.
Afterwards, plaintiffs learned, through discovery, that in February 2005, Keller and Stonehenge had signed a "Separation Agreement and Release" (the "Separation Agreement") providing that Keller's employment with Stonehenge was to terminate as of August 31, 2005. Keller and Brown had decided to form Parkview Entertainment, a film financing company in which they would be partners. Plaintiffs further discovered that, although Brown had done some work with Stonehenge on another film project, Brown was not an employee of Stonehenge, nor did he have an exclusive relationship with it. Plaintiffs allege Keller and Brown created that fiction to prevent the plaintiffs from contacting anyone at Stonehenge other than themselves. Plaintiffs further allege that Keller wanted to deliver the Project to Stonehenge through Parkview Entertainment, and wanted Brown as the Executive Producer of the Project so that he and Brown could collect additional compensation from the plaintiffs.
Stonehenge contends that it did not hear of the Project until July 31, 2005 (Adamek Aff., ¶ 20). Keller formally presented a Parkview Entertainment "Film Financing Package" for the Project to Stonehenge no earlier than August 5, 2005 (Robert Goldman Aff., Ex. 5). Thus, according to plaintiffs, throughout June and July, while Brown and Keller were assuring plaintiffs that they had a deal, and that financing was forthcoming, Brown and Keller had not even presented the Project to Stonehenge.
In November 2006, plaintiffs commenced this action against Stonehenge, Keller, Brown and their respective companies alleging causes of action for fraud and misrepresentation (first cause of action), conspiracy and acting in concert to defraud (second cause of action), fraud by concealment (third and fourth causes of action), breach of fiduciary duty (fifth cause of action), breach of contract (sixth and seventh causes of action), breach of the duty of good faith and fair dealing (eighth cause of action), deceptive trade practices (ninth cause of action), intentional destruction of rights (tenth cause of action) and intentional infliction of emotional distress (eleventh cause of action).
This cause of action appears to be alleged only against Brown and Keller.
Stonehenge moves for summary judgment dismissing the complaint as against it on the grounds that: (1) as to those causes of action based upon fraud, concealment and misrepresentation, neither Brown nor Keller had authority to speak on Stonehenge's behalf and Stonehenge, therefore, cannot be held liable for their misrepresentations; and (2) as to the breach of contract claims, the parties never entered into a contract. Stonehenge also moves to stay the action as to plaintiffs Success and RD, in that they are foreign entities not licensed to do business in New York.
In support of his motion for summary judgment in his favor, Keller also asserts that the SPI explicitly set forth that financing would only be provided based upon an executed Purchase Agreement. Keller further asserts that plaintiffs did not meet the other pre-conditions to financing as set forth in the SPI, including the bonding requirement and foreign and domestic distribution guarantees. Keller asserts that plaintiffs therefore knew, or should have known, that there was never any commitment on Stonehenge's part and that any alleged expenses the plaintiffs incurred would have to be borne by them. Keller also asserts that there is no credible evidence that he ever made any misrepresentations to the plaintiffs, and that plaintiffs have failed to set forth the alleged misrepresentations with particularity as required by CPLR 3016. Finally, Keller asserts that plaintiffs have failed to allege the breach of any legal duty independent of the alleged breach of contract and therefore, the complaint must be dismissed.
The Tort Claims
As to Stonehenge's assertion that it cannot be held liable for any alleged misrepresentations made by either Brown or Keller, the rule is that principals are liable for the acts of their agents performed within the scope of their apparent authority ( News Am. Mktg., Inc. v Lepage Bakeries, Inc., 16 AD3d 146, 148 [1st Dept 2005]). The Restatement of Agency 2d, section 261 provides that "[a] principal who puts a servant or other agent in a position which enables the agent, while apparently acting within his authority, to commit a fraud upon third persons is subject to liability to such third persons for the fraud." "The reasoning behind this provision [is that], as between two innocent parties[,] the one who has allowed the fraud to be perpetrated should bear the loss" ( see Hatton v Quad Realty Corp., 100 AD2d 609, 610 [2d Dept], Iv denied 63 NY2d 608). Thus, principals are liable for the fraudulent acts of their agents, including those acts which are performed within the scope of apparent authority, even if the agent was acting solely to benefit himself ( Parlato v Equitable Life Assur. Soc'y of U.S., 299 AD2d 108, 113 [1st Dept 2002], Iv denied 99 NY2d 508). The rule applies even where the agent's fraud was detrimental to the principal ( Hatton v Quad Realty Corp., 100AD2d at 610; Citibank, N.A. v Nyland (CF8) Ltd., 878 F2d 620, 624 [2d Cir 1989]; Rocks Jeans, Inc. v Lakeview Auto Sales Serv., Inc., 184 AD2d 502, 503 [2d Dept 1992]; Restatement [Second] of Agency §§ 261-62, 265 [1]; 2A NY Jur 2d Agency and Independent Contractors §§ 290-91, 295 [1998]). However, a plaintiff suing a principal on the basis of an agent's apparent authority is required "to prove that the principal created an appearance of authority on which the plaintiff reasonably relied, thereby enabling the agent to successfully perpetrate the tort" ( Parlato v Equitable Life Assur. Soc'y of U.S., 299 AD2d at114.
Here, it is undisputed that Keller's title was that of "Director" of Stonehenge and that he operated out of its New York office. It is also undisputed that Keller met with the plaintiffs in Stonehenge's conference room on June 24, 2005. He was listed on their website and his e-mail address waswskeller@stonehenge.com. Although Stonehenge insists that Keller was not a "managing director" and, therefore, had no authority to enter into any financing deals, there is no question that Keller's job with Stonehenge was to solicit those deals, and that he held himself out as having authority to negotiate them. In the Parkview Entertainment film financing package that Keller submitted to Stonehenge, Keller describes himself as having "founded" the New York office and as the person "overseeing $100 million in assets":
[Keller was] part of the team that formed Stonehenge Capital as a spin-off of the bank's private equity business. In 2000 he founded Stonehenge's New York office where until his departure he oversaw its $100 million in assets under management. During the course of his tenure he expanded the office to include five investment professionals originating a range of investments including early-stage equity financings in technology companies and later stage debt investments in numerous industries. He has served on the board of directors of a number of Stonehenge's portfolio companies
(Robert Goldman Aff., Ex. 5) (emphasis added).
In addition, Stonehenge expressly authorized Keller to act as its agent. In the Separation Agreement executed by Keller and Stonehenge in February 2005, Stonehenge acknowledged that: (1) Keller was a Director of Stonehenge Capital Company, LLC; (2) he was a Vice President and member of the board of managers of Stonehenge Capital Fund New York LLC; and (3) he would continue to present film financing opportunities to Stonehenge between August 31, 2005, when his employment was to terminate, and prior to December 31, 2005. The Separation Agreement and Release provides in pertinent part:
4. Film Finance. The Company agrees and acknowledges that Employee may present one or more Qualified Productions (as defined below) to the Company for financing on or prior to December 31, 2005 . . . If Employee presents a Qualified Production on or prior to December 31, 2005, and the Company does not finance or provide credit support to at least one Qualified Production, then the Company shall pay $75,000 to Employee (the "Penalty") . . . Solely for the purpose of soliciting Qualified Productions for financing consideration by the Company, the Company agrees that Employee will be an agent of the Company until December 31, 2005
(Robert Goldman Aff., Ex.2) (emphasis added).
As to the issue of Brown's apparent authority to act on Stonehenge's behalf, the SPI explicitly sets forth that Brown is Stonehenge's agent in stating that "[t]he Investor [Stonehenge] shall have the right to approve any contract entered into by the Company with a value greater than $25,000 with such approval granted by the Investor via the Picture's Executive Producer, Alan Brown" (Robert Goldman Aff., Ex.3). Plaintiffs were therefore logically led to believe that Brown was acting as an agent for Stonehenge. The issue to be determined is whether Stonehenge in anyway authorized the creation of Brown's apparent authority.
Keller's deposition testimony was that Brown was installed as Executive Producer on the Project in order to protect Stonehenge's interests and that Stonehenge wanted that oversight. In his testimony, Keller acknowledges that he authored the SPI (Keller Dep. at 63, Hindy Aff., Ex. J). Under questioning by plaintiffs' attorney, Keller stated as follows:
Q. I didn't ask that question. My question was did you ever have a conversation with him [Alan Brown] about him becoming executive producer in a film project that Stonehenge was considering? . . .
A. Our conversations were not about making him the executive producer on the projects. Our conversations were about Stonehenge having an interest in investing in films, and Stonehenge also feeling that it would be appropriate if it did so to have someone involved in those productions who could oversee those productions, who could be involved, and someone that we would have previously known and his ability to fulfill that sort of role.
(Keller Dep. at 27-28, Hindy Aff., Ex. J). Thus, although Stonehenge now denies that it ever authorized Keller or Brown to act on its behalf, if, in fact, Stonehenge did indicate to Keller that it wanted "someone involved in those productions who could oversee those productions," then it may be held liable for Brown's fraudulent misrepresentations ( Hatton v Quad Realty Corp., 100 AD2d 609, supra).
Plaintiffs have presented evidence indicating that Keller and Brown acted in concert in order to benefit their partnership. If plaintiffs prove this at trial, Brown and Keller may each be held liable for the fraud and misrepresentations of the other ( see People v Caban, 5 NY3d 143, 148; Alexander Alexander of N.Y., Inc. v Fritzen, 68 NY2d 968; Keller v Levy, 265 App Div 723, 724 [1st Dept 1943]).
As to Keller's arguments that plaintiffs' complaint fails to set forth any misrepresentations with the degree of particularity required by CPLR 3016, plaintiffs allege the following misrepresentations: (1) that Stonehenge was prepared to provide financing for the Project in the event that conditions set forth in the SPI were met; (2) that Brown was an exclusive broker for Stonehenge, and in order to obtain financing through Stonehenge, plaintiffs had to hire Brown as their agent; (3) that as of July 12, 2005, the due diligence for the Project had been completed, the $4 million budget had been approved and Stonehenge would close the financing within 24 to 48 hours; (4) that as of July 23, 2005, Stonehenge was preparing the documents to close the financing; (5) that Stonehenge would not require foreign or domestic distribution commitments as conditions to close the financing; (6) that by August 1, 2005, Brown had obtained executed written foreign distribution contracts that were sufficient to satisfy this condition; and (7) that as of August 12, 2005, all the belated Stonehenge conditions had been met and Stonehenge would provide $3 million in financing. These alleged misrepresentations meet the requirements of CPLR 3016.
As to plaintiffs' fifth cause of action for breach of fiduciary duty, the plaintiffs have not shown that Keller owed them a fiduciary duty. This cause of action is, therefore, dismissed as to Keller. However, the court cannot conclude on this record that this cause of action should be dismissed as to Brown.
Plaintiffs do not oppose those branches of defendants' motions for summary judgment dismissing the ninth cause of action for deceptive trade practices and the tenth cause of action for "Intentional, Knowing and Malicious Destruction of Rights, Property and Future Opportunity". Regardless, the ninth cause of action is not viable because no consumer oriented claim is alleged. See GBL § 349; Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, N.A., 85 NY2d 20, 24-25 (1995) plaintiffs claiming the benefit of GBL § 349 "must charge conduct of the defendant that is consumer-oriented"). Nor is the tenth cause of action viable as no such cause of action exists in New York. Accordingly, the ninth and tenth causes of action are dismissed as against all defendants.
Finally, the eleventh cause of action alleging intentional infliction of emotional distress on behalf of plaintiffs Goldman and LaPietra must also be dismissed against all defendants. Imposition of liability for the intentional infliction of emotional distress requires a demonstration that a defendant's conduct was (1) extreme and outrageous, (2) intended to cause severe emotional distress, (3) formed the nexus between the conduct and the injury, and (4) resulted in severe emotional distress ( Howell v. New York Post Co., 81 NY2d 115, 121). The conduct complained of must be "so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community" ( Fischer v. Maloney, 43 NY2d 553, 557). Here, defendants' alleged conduct does not rise to the level of outrageousness needed to sustain a cause of action for intentional infliction of emotional distress. Accordingly, the eleventh cause of action is dismissed.
The Contract Causes of Action
In support of its motion to dismiss plaintiffs' contract causes of action, Stonehenge points out that the SPI stated at the top of the first page, as follows:
These summary terms are for discussion purposes only and do not represent an offer or commitment to invest on the part of Stonehenge. Any commitment by Stonehenge to invest will be evidenced by an executed Purchase Agreement.
(Robert Goldman Aff., Ex. 3). Thus, under the explicit terms of the SPI, Stonehenge made it clear that any intent to be contractually bound would be contained in an executed Purchase Agreement. Under well-established New York law, "if the parties to an agreement do not intend it to be binding upon them until it is reduced to a writing and signed by both of them, they are not bound and may not be held liable until it has been written out and signed" ( Jordan Panel Sys., Corp. v Turner Constr. Co., 45 AD3d 165, 166 [1st Dept 2007] quoting Scheck v Francis, 26 NY2d 466, 469-470).
Moreover, a plain and unequivocal written statement that the defendant will not be contractually bound cannot be overridden without an express waiver of that condition ( id.). Here, plaintiffs' allegation that Keller and Brown repeatedly misrepresented that a "closing" would soon occur, is insufficient to override the express condition of a writing, since the word "closing" indicates a further finalization of the transaction. Therefore, plaintiffs' sixth and seventh causes of action for breach of contract are dismissed.
Given that the contract causes of action cannot stand, plaintiffs' eighth cause of action for breach of the implied covenant of good faith and fair dealing must be dismissed because the covenant only relates to the terms of a contract ( Phoenix Capital Invs. LLC v Ellington Mgmt. Group, L.L.C., 51 AD3d 549, 550 [1st Dept 2008]).
Finally, defendants assert that neither Success nor RD may maintain this action in that neither is authorized to do business in New York, as required by Limited Liability Company Law § 808 and Business Corporation Law § 1312 (a), respectively. Each of these sections provides that a foreign entity doing business in this state without authority shall not maintain an action in the courts of this state unless and until the entity has been authorized to do business. However, a defendant relying upon this statutory barrier bears the burden of proving that the plaintiff's "business activities in New York were 'not just causal or occasional,' but 'so systematic and regular as to manifest continuity of activity in the jurisdiction'" ( ST Bank v Spectrum Cabinet Sales, Inc., 247 AD2d 373 [2d Dept 1998] quoting Peter Matthews, Ltd. v Robert Mabey, Inc., 117 AD2d 943, 944 [3d Dept 1986].
As to Success, plaintiffs acknowledge that Success is a California limited liability company, but contend that it was formed on July 26, 2005 for the purpose of completing the transaction with Stonehenge. To that end, the company tried, but was unable to conduct business in this state. Rather, it incurred liabilities in anticipation of receiving the promised financing. Stonehenge replies that New York is where all the preparatory work for the financing took place, such as scouting out locations, renting an office, etc. Nonetheless, even if these activities were done in the name of Success, which is not at all clear, given the late date of the creation of the company, there is still no indication that Success was doing business in this state with any degree of permanence or continuity. Similarly, Stonehenge has not shown that RD conducted business in New York on a systematic and regular basis.
The Cross Motion
Plaintiffs cross-move for summary judgment on the issue of liability. Stonehenge fails to raise a genuine issue of fact with respect to its liability for the acts of its agent, defendant Keller. As to Brown's misrepresentations, an issue of fact exists as to whether Stonehenge authorized Keller to install an agent in a film deal or in any other way acted to create Brown's apparent authority.
The court has considered the parties' remaining arguments and finds them lacking in merit.
Accordingly, based upon the foregoing, it is
ORDERED that, as to motion sequence number 005, that part of defendant Stonehenge Capital Company, LLC's motion for summary judgment dismissing the complaint against it is granted as to plaintiffs' sixth through eleventh causes of action, and the motion is otherwise denied; and it is further
ORDERED that, as to motion sequence number 006, the defendant Stephen Keller's motion for summary judgment dismissing the complaint against him is granted as to plaintiffs' fifth through eleventh causes of action, and is otherwise denied; and it is further
ORDERED that, plaintiffs' cross-motion for summary judgment is granted only to the extent that defendant Stonehenge Capital Company, LLC is liable for the misrepresentations of its agent, defendant Stephen Keller, and the motion is otherwise denied; and it is further
ORDERED that the first through fourth causes of action are severed and continued as to all defendants and the fifth cause of action is severed and continued as to defendant Brown.
The foregoing constitutes this court's decision and order. Dated: February 18, 2010