SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS x THE FOXSTONE GROUP, LLC and VODA BAUER REAL ESTATE LLC, Plaintiffs, - against - CALVARY PENTECOSTAL CHURCH, INC., a/k/a CALVARY CATHEDRAL OF PRAISE, MARCUS ROBERTS, and JOHN DOES and JANE DOES 1-100, being persons whose identities are currently unknown to Plaintiffs, Defendants. X CALVARY PENTECOSTAL CHURCH, INC, a/k/a CALVARY CATHEDRAL OF PRAISE, Defendant/Counterclaim-Plaintiff, -against- THE FOXSTONE GROUP, LLC and VODA BAUER REAL ESTATE LLC, Plaintiffs/Counterclaim-Defendants, JASON BAUER and ABRAHAM ZEIGERMAN, Counterclaim-Defendants. Index No. 501142/2016 MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' COMPLAINT Oral Argument Requested X PRYOR CASHMAN LLP Eric D. Sherman Bryan T. Mohler Matthew S. Barkan 7 Times Square New York, New York 10036 T: (212) 421-4100 F: (212) 326-0806 Attorneys for Defendants FILED: KINGS COUNTY CLERK 07/21/2016 07:25 PM INDEX NO. 501142/2016 NYSCEF DOC. NO. 11 RECEIVED NYSCEF: 07/21/2016 1 of 28
Transcript
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF KINGS
x THE FOXSTONE GROUP, LLC and VODA BAUER
REAL ESTATE LLC,
Plaintiffs,
- against -
CALVARY PENTECOSTAL CHURCH, INC., a/k/a CALVARY CATHEDRAL OF PRAISE, MARCUS ROBERTS, and JOHN DOES and JANE DOES 1-100, being persons whose identities are currently unknown to
Plaintiffs,
Defendants. X
CALVARY PENTECOSTAL CHURCH, INC, a/k/a CALVARY CATHEDRAL OF PRAISE,
Defendant/Counterclaim-Plaintiff,
-against-
THE FOXSTONE GROUP, LLC and VODA BAUER
REAL ESTATE LLC,
Plaintiffs/Counterclaim-Defendants,
JASON BAUER and ABRAHAM ZEIGERMAN,
Counterclaim-Defendants.
Index No. 501142/2016
MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS PLAINTIFFS' COMPLAINT
Oral Argument Requested
X
PRYOR CASHMAN LLP Eric D. Sherman Bryan T. Mohler Matthew S. Barkan 7 Times Square New York, New York 10036 T: (212) 421-4100 F: (212) 326-0806
Attorneys for Defendants
FILED: KINGS COUNTY CLERK 07/21/2016 07:25 PM INDEX NO. 501142/2016
NYSCEF DOC. NO. 11 RECEIVED NYSCEF: 07/21/2016
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TABLE OF CONTENTS
TABLE OF AUTHORITIES ii
INTRODUCTION 1
FACTUAL BACKGROUND 4
A. The Parties 4
B. The Non-Binding Development Proposal 5
C. Calvary Chooses Not to Proceed with the Development Proposal 6
D. Procedural History 7
ARGUMENT 7
THE COMPLAINT SHOULD BE DISMISSED IN ITS ENTIRETY WITH PREJUDICE 7
I. BECAUSE THE LOT IS UNENFORCEABLE, THE BREACH OF CONTRACT CLAIM SHOULD BE DISMISSED 7
A. The LOT is Nonbinding on Its Face 7
B. The LOT is an Unenforceable Agreement to Agree 11
II. THE BREACH OF FIDUCIARY DUTY CLAIMS SHOULD BE DISMISSED 13
III. THE REMAINING CONTRACT-BASED CAUSES OF ACTION SHOULD BE DISMISSED 16
A. Tortious Interference with Contract 16
B. Implied Covenant of Good Faith and Fair Dealing 18
IV. THE CLAIM FOR UNJUSTMENT ENRICHMENT SHOULD BE DISMISSED 19
UrbanAmerica, L.P. II v. Carl Williams Grp., L.L.C.,
95 A.D,3d 642 (1st Dep't 2012)
In re Windsor Plumbing Supply Co.,
170 B.R. 503 (Bankr. E.D.N.Y 1994)
STATUTES
8, 14,
16
16
11
1 CPLR § 3211(a)(1)
CPLR §3211(a)(7)
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Defendants respectfully submit this memorandum of law in support of their motion to
dismiss the Complaint in its entirety pursuant to Rules 3211(a)(1) and 3211(a)(7) of the New
York Civil Practice Law and Rules ("CPLR").
INTRODUCTION
This dispute stems from an attempt by Plaintiffs The FoxStone Group ("FoxStone") and
Voda Bauer Real Estate ("Voda Bauer") to transform an expressly non-binding Letter of Intent
("LOT") into a binding agreement to force Defendant Calvary Pentecostal Church, Inc. a/k/a
Calvary Cathedral of Praise ("Calvary") into a joint venture to develop a portion of the church's
property adjacent to the church building. The property to be developed borders the Southwest
corner of Prospect Park,
Broadly, the LOT contemplated that Plaintiffs would develop two lots owned by Calvary,
enabling Calvary to pay off the property's mortgage. The LOT on its face contemplated the
future negotiation and execution of operating agreements and other documents that would form
this joint venture, and left material terms to those future negotiations. When the parties were
unable to reach agreement on the terms of a binding joint venture agreement, Plaintiffs instituted
this action claiming for the first time that the LOT was binding on Calvary.
The lynchpin of Plaintiffs' theory is that the LOT was a binding agreement that created a
joint venture. But this theory is utterly refuted by the face of the LOT, which explicitly states that
the:
parties acknowledge that this Letter of Intent is not intended to constitute
a binding contract . . . and shall constitute the basis for an agreement for
the transaction contemplated herein until its expiration or a purchase and
sale agreement with respect to the Project has been fully executed.
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(Sherman Aff. Ex. B at 6 (emphasis added) ("LOT").)'
Plaintiffs ignore this language entirely and point to language earlier in the LOT suggesting
that it was intended to be binding. However, the language stating unequivocally that it is not
binding controls in this instance against any conflicting terms. This is because the original,
preprinted text of this provision stated that the LOI is not intended to binding "until 10 days have
elapsed from the execution hereof." (LOT at 6.). However, the parties struck that clause by hand
markup, wrote "clause deleted" in the margin and signed their initials. This handwritten markup
expresses the latest intent of the parties and therefore controls against the preprinted conflicting
terms in the LOT. See, e.g., Kratzenstein v. Western Assurance Co., 116 N.Y. 54, 57 (1889);
Dazzo v. Kilcullen, 56 A.D.3d 415, 416-17 (2d Dep't 2008). Accordingly, the LOI is nonbinding
as a matter of law.
Plaintiffs' claims for breach of joint venture fiduciary duty fare no better. Because the
nonbinding LOT to enter a joint venture at some future time is unenforceable, a fortiori no joint
venture had yet arisen and Defendants owed no fiduciary duties to Plaintiffs. Indeed, the LOT
contemplated the future drafting of "Definitive Agreements," including an operating agreement,
and left material terms of those agreements for future negotiation. (See LOI at 6 ("The parties
acknowledge that they have not attempted to set forth herein all essential terms of subject
matter of this transaction and until the parties have agreed upon such essential terms, they are
subject to further negotiations."). Terms left for future negotiation include the veto rights that
Calvary would have as the limited partner in the future entity as well as the "developer functions"
that could be exercised by Calvary's developer representative in such entity. (LOI at 2, 6.)
'"Sherman Aff." refers to the Affirmation of Eric D. Sherman, dated July 21, 2016 and submitted herewith.
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Moreover, the Complaint fails to allege all of the elements necessary for the formation of
a joint venture under New York law. For example, it fails to identify (1) an enforceable
agreement between Plaintiffs and Calvary to be associated as joint venturers, (2) any property
that Defendants had actually contributed to the purported joint venture and (3) any provision for
the sharing of losses. These deficiencies also are fatal to Plaintiffs' joint venture theory.
As set forth more fully below, the remaining tag along causes of action are likewise
barebones and devoid of merit. Defendant Roberts and the John and Jane Does — officers and
employees of Calvary — cannot be liable for tortious interference because the LOT was not
binding and, in all events, the Complaint alleges only that they were attempting to get the best
deal possible for Calvary. The cause of action for breach of the implied covenant of good faith
and fair dealing should be dismissed as duplicative of the breach of contract claim because the
two claims are based entirely on the same conduct. Finally, while the Complaint recites a list of
efforts and expenditures purportedly undertaken in anticipation of creating the joint venture, such
costs are not recoverable under a theory of unjust enrichment and, in any case, the Complaint
fails as a matter of law to identify what benefit was conferred on Defendants from such activities
and why it was improper.
The Second Department, and this Court, have long recognized that unsubstantiated
assertions directly contradicting documentary evidence should be accorded no weight. See, e.g.,
Adler v. 20/20 Cos, 82 A.D.3d 915, 917 (2d Delft 2011); RDLF Fin. Servs., LLC v. Esquire
Capital Corp., 34 Misc. 3d 1235(A), 2012 WL 695488 at *8 (Sup. Ct. Kings Co. 2012). It is
indisputable that the LOT was not intended to be binding and that material terms of the joint
venture were to be left for future negotiation and execution of "Definitive Agreements."
Plaintiffs' attempt to plead around this simple truth fails as a matter of law. The Complaint
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should be dismissed in its entirety with prejudice.
FACTUAL BACKGROUND2
A. The Parties
Plaintiff's. Plaintiff FoxStone is a "real estate investment, development and service
company," formed as a New York limited liability company with its principal place of business
in Kings County. (Comp1.115.) 3 Plaintiff Voda Bauer is a New York limited liability company
with its principal place of business in New York County. (Id. !I 6.)
Defendants. Defendant Calvary is a not-for-profit religious corporation incorporated
under the laws of New York State. Calvary maintains an office and place of business at 45 E.
8th Street, Brooklyn, New York, 11218. (Id. lj 7.) Calvary also owns two contiguous parcels of
real property at 58 and 72 Caton Place in Brooklyn, New York (the "Properties"). (Id. ¶ 10.)
The Properties are subject to a $10.5 million mortgage loan, and a foreclosure action was
instituted in January 2015 alleging a default on Calvary's mortgage obligations. (Id. ¶ 11).
Defendant Marcus Roberts ("Roberts") is President and Chief Executive Officer of
Calvary. (Id. !I 8.) Defendants John and Jane Does 1-100 are "persons or organizations who are
members or agents of Calvary[.]" (Id. lj 9.)
Counterclaim-Defendants. Counterclaim Defendant Jason Bauer ("Bauer") is the Chief
Executive Officer and co-founder of Voda Bauer. Counterclaim Defendant Abraham Zeigerman
("Zeigerman") is the Managing Partner at FoxStone.
2 Although on a Motion to Dismiss well pleaded facts are accepted as true, no weight need be accorded to "factual allegations consisting of bare legal conclusions or that are inherently incredible or flatly contradicted by the
documentary evidence." RDLF Fin. Servs., LLC, 34 Misc. 3d 1235(A), 2012 WL 695488 at *8; accord Caniglia v.
3 The Complaint in this action is attached as Barkan Aff. Ex. A.
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B. The Non-Binding Development Proposal
In June 2015, Plaintiffs drafted and sent to Calvary a "Letter of Intent" with the "Re:"
line of "Joint Venture Proposal Regarding 58 and 72 Caton Place, Brooklyn, NY." (Id. 4g 12;
Sherman Aff. Ex. A at 1 ("LOT") (emphasis added).) 4 The LOT proposed the broad framework
of a future joint venture whereby Plaintiffs would develop the Properties and the venture would
pay off the mortgage on the Properties. (Compl. II 12; LOT at 1, 2-3.) Among other proposed
terms, the LOT envisioned Plaintiffs as 60% owners (and general partner) and Calvary as 40%
owners (and limited partner) of the venture. (Compl. T15(b); LOT at 3.) The LOT also provided
that Plaintiffs would seek the necessary zoning changes to develop the property. (Compl. if 15(c);
LOT at 4-5.) Notably, the LOT contained no provision for the sharing of losses.
The LOT explicitly states that it is not intended to be binding. (See LOT at 6 ("The parties
acknowledge that this Letter of Intent is not intended to constitute a binding contract (except for
the Exclusivity provision above which is binding immediately) and shall constitute the basis for
an agreement for the transaction contemplated herein until its expiration or a purchase and sale
agreement with respect to the Project has been fully executed"). The printed contract originally
contained the clause "until 10 days have elapsed from the execution hereof," however the parties
struck that clause by hand markup, wrote "clause deleted" in the margin and affixed their initials
to the change. (Id.) While the LOT suggests in two prior clauses that it would be binding after
five days have elapsed (see id. at 5; Compl. T 16), the handwritten markup controls over
contrary terms in the preprinted document because it expresses the latest intent of the parties.
See, e.g., Kratzenstein, 116 N.Y. at 57; Dazzo v. Kilcullen, 56 A.D.3d 415, 416-17 (2d Dep't
2008).
4 The Complaint refers to the LOT as a "letter agreement," notwithstanding that the document refers to itself as a
"letter of intent." (See LOI at 1.)
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The LOT also explicitly stated that it did not include all material terms, which would be
left for future negotiation. (See LOT at 6 ("The parties acknowledge that they have not attempted
to set forth herein all essential terms of subject matter of this transaction and until the parties
have agreed upon such essential terms, they are subject to future negotiations").) It is replete
with language indicating that the joint venture would not be formed until such future negotiations
had taken place and "Definitive Documents" had been executed. By way of example only:
• Under the heading "Definitive Agreements" the parties, in the future, are to "negotiate
and execute a definitive partnership agreement . . . in form and substance mutually satisfactory to the parties and containing terms, conditions, covenants and representations
customary to transactions of the type outlined above." (Id. at 5-6 (emphasis added).)
• Included in that future agreement "shall be a list of items requiring [Calvary's] approval
or other involvement" (id. at 6), none of which were identified in the LOI.
• "The parties further agreed that, at the Closing, Calvary and Plaintiffs would execute all remaining Definitive Agreements contemplated under the Letter Agreement, and that
Calvary would tender the deeds to the Properties to the Joint Venture entity formed
thereby." (See Compl. 1 20 (emphasis added).)
• In the term entitled "Joint Venture Documents," the LOI contemplates that the parties will "begin drafting and [sic] definitive documents, including an operating or partnership agreement for the Joint Venture Entity. . . ." (L01 at 5).
• "Closing," however, only occurs after receipt of required court approvals and "culminates with the execution of the Definitive Agreements." (Id.; see also Compl. 'Ij 19 (closing would not occur until the New York State Attorney General approved the transaction).)
C. Calvary Chooses Not to Proceed with the Development Proposal
By letter dated November 4, 2015, Calvary informed Plaintiffs that it did not wish to
proceed further with the development proposal outlined in the LOT. (Compl. 1 33.) Plaintiff
alleges that Calvary had determined, among other things, that the proposal outlined in the LOT
was "incompatible with inherent church function" (id. 'IT 32). However, as the November 4, 2015
letter itself indicates, Calvary had become increasingly concerned with Plaintiffs' proposal to
finance the future venture with exceedingly high interest "hard money" loans, which would
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dilute Calvary's financial ownership in the venture from the 40% proposed in the LOT to near
zero and prevent Calvary from shedding its indebtedness, frustrating the entire purpose of the
proposed development. Sherman Aff. Ex. C, at 1-2.
D. Procedural History
Plaintiffs filed their verified Complaint on January 28, 2016. (NYSCEF Doc. No. 1.)
Defendants filed their verified answer, counterclaims and third party claims on February 22,
2016, naming Bauer and Zeigerman as additional counterclaim defendants. (NYSCEF Doc. No.
2.) Plaintiffs filed their verified reply to the counterclaims on April 4, 2016. (NYSCEF Doc. No.
6.) Bauer filed his verified answer to the counterclaims and third party claims on May 9, 2016.
(NYSCEF Doc. No. 7.) 5
ARGUMENT
THE COMPLAINT SHOULD BE DISMISSED IN ITS ENTIRETY WITH PREJUDICE
I.
BECAUSE THE LOI IS UNENFORCEABLE, THE BREACH OF CONTRACT CLAIM SHOULD BE DISMISSED
Count I asserts a cause of action against Calvary for breach of contract for allegedly
breaching "various agreements, including the Letter Agreement." (Comp1.1 37; see also id. 1 39
("Calvary materially and anticipatorily breached these agreements. . .").) 6 However, the LOT is
unenforceable for two independent reasons. First, it is unequivocally non-binding on its face.
Second, even if that were not the case, it is at most an unenforceable "agreement to agree" in
which material terms were explicitly left to future negotiations.
A. The LOI is Nonbinding on Its Face
First, the very face of the LOT belies Plaintiffs' contention that it constituted any
5 Defendants have been unable thus far to serve Zeigerman with a summons and third party complaint.
6 It is unclear to what purported agreements other than the LO1 these allegations refer.
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agreement at all.
"[W]hen the parties have clearly expressed an intention not to be bound until their
preliminary negotiations have culminated in the execution of a formal contract, they cannot be
held until that event has occurred. The necessary finality of assent is lacking." Brause v.
permitted bank to demand immediate payment in full); 447 Clinton Ave. LLC v. Clinton Rising,
LLC, 22 Misc. 3d 1104(A), 2009 WL 38039 at *7 (Sup. Ct. Kings Co. 2009) (handwritten
addition concerning purchaser's right to cancel real estate transaction "takes precedence over
typewritten terms in the event of any conflict"); see also Hudson Towers Hous. Co., Inc. v. VIP
7 (See LOI at 5 (in provision entitled "Due Diligence Period," LOI states that "[title parties hereto shall have 5 calendar days from the date of the signing of this Letter to complete due diligence after which time this Letter becomes binding absent any written notification delivered to the counter party prior to the lapse of the
aforementioned 5 days"); id. (in provision entitled "Definitive Agreements," LOI states that "this letter of intent does not create any binding obligation on the part of the parties with respect to the matters referred to herein until
provision in standard form lease), aff'd, 61 N.Y.2d 976 (1984); Joseph Francese Inc. v. Enlarged
City School Dist., 263 A.D.2d 582, 584 (3d Dep't 1999) (handwritten deletion of arbitration
clause controlling), rev 'd on other grounds, 95 N.Y.2d 59 (2000).
Here, the language indicating unequivocally that the LOT was not intended to be binding
was created by hand markup. Specifically, the language at the very end of the LOT stating that it
is not binding originally contained a preprinted clause indicating that it would not be binding
"until 10 days have elapsed from the execution hereof." (LOI at 6.) However, the parties struck
that preprinted clause by hand markup, wrote "clause deleted" in the margin and initialed the
change. (See id.). Accordingly, the handwritten modification evinces the parties' intention not
to be bound and controls against the preprinted conflicting terms.
Joseph Francese Inc. is particularly instructive. There, the defendant school district had
entered into a contract with plaintiff general contractor for the construction of an elementary
school. 263 A.D.2d at 583. The printed contract contained a section entitled "Arbitration" but
also contained references to arbitration under other headings. Id. at 584. The parties deleted the
"Arbitration" section by written markup but neglected to strike the provisions providing for
arbitration under other headings. See id. In determining that Plaintiff did not have a justifiable
belief that arbitration was the proper forum such that the statute of limitations would be tolled,
the Third Department reasoned, among other things, that:
The parties' written modification to the contract, in the form of deleting the entire arbitration section, reflected their agreement that arbitration would not be available for the resolution of disputes. By virtue of this
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written modification, any undeleted references to arbitration in the
printed clauses of the contract were rendered meaningless.
Id. (emphasis added). This reasoning applies with equal force to the LOI. s
Further, it is notable that the Complaint challenges neither the validity of the handwritten
modification to the LOT nor its clear embodiment of the parties' intent not to be bound. Rather,
it omits mention of this language entirely. See In re Windsor Plumbing Supply Co., 170 13.11.
503, 523 (Bankr. E.D.N.Y 1994) (well established rule that handwritten entries in a document
take precedence over those in typeface "is especially so when neither party to the contract
contests the validity of the handwritten entries"). Accordingly, the parties' handwritten
modification indicating, indisputably, that they would not be bound by the LOT controls over any
conflicting preprinted terms that the parties did not strike and unequivocally renders the LOT
nonbinding as a matter of law.
B. The LOI is an Unenforceable Agreement to Agree
Moreover, the LOT is non-binding for the additional reason that it is an unenforceable
"agreement to agree." The Court of Appeals has held that "it is rightfully well settled in the
common law of contracts in this State that a mere agreement to agree, in which a material term is
left for future negotiations, is unenforceable." Joseph Martin, Jr. Delicatessen, Inc. v.
Schumacher, 52 N.Y.2d 105, 109 (1981) (citation omitted). New York courts have repeatedly
applied this rule to find letters of intent, including those concerning real estate transactions,
unenforceable. See, e.g., Andor Grp., Inc. v. Benninghoff, 219 A.D.2d 573, 573 (2d Dep't 1995)
(where LOT contemplated execution of formal contract and left out material terms such that
The Court of Appeals took no issue with the Third Department's determination that the parties' handwritten markup indicated their intention not to arbitrate despite the undeleted references to arbitration. Rather, it held only that the Third Department applied an incorrect test in determining whether Plaintiff could receive the benefit of
tolling. See Joseph Francese, Inc., 95 N.Y.2d at 62-64. Other courts have since cited the Third Department's opinion in concluding that handwritten modifications to contracts control over conflicting preprinted terms. See, e.g.,
Hudson Towers Hous. Co., Inc., 63 A.D.3d at 413-14 (handwritten modification to settlement agreement controlled).
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intent of the parties could not be ascertained, agreement was unenforceable); Danton Constr.
Corp. v. Bonner, 173 A.D.2d 759, 760 (2d Dep't 1991) (even "reserving a vague right to
'reformat' the terms of the proposed conveyance. . . left significant terms of the transaction open
to future negotiation"); Bernstein v. Felske, 143 A.D.2d 863, 865 (2d Dep't 1988) (letter of intent
to enter construction joint venture not binding where it left for future negotiation, inter al/a,
provisions for limiting the amount of loans); see also Argent Acquisitions, LLC v. First Church
of Religious Se., 118 A.D.3d 441, 444 (1st Dep't 2014) (letter with terms whereby church would
be sold to developer not binding where terms missing or left for future negotiation); Aksman v.
Xiong -wei Ju, 21 A.D.3d 260, 261 (1st Dep't 2005) (letter of intent not binding where it
"expresses the parties' intention to enter into a contract 'at a later date").
The LOT at issue here fits squarely within this case law. It states unequivocally that
"Nhe parties acknowledge that they have not attempted to set forth herein all essential terms
of subject matter of this transaction and until the parties have agreed upon such essential
terms, they are subject to further negotiations." (LOT at 6 (emphasis added).) Accordingly, the
parties could not have been more clear that they had not yet arrived at a meeting of the minds on
all essential terms and thus intended to leave them open to future negotiation. For example, the
LOT leaves for future negotiations: (1) the structure of the joint venture (whether it will be a
limited liability company or a limited partnership) (LOT at 1); (2) the actual drafting of a
partnership agreement or operating agreement, which the LOT itself refers to as "Definitive
Agreements" or a purchase and sale agreement (id. at 5, 6); and (3) enumeration of any decisions
of the purported joint venture over which Calvary (as limited partner) or its representative would
have veto power (id. at 2, 6). Indeed, the "Definitive Agreements" clause states that even the
terms of the LOI were subject to later negotiation, stating that the parties
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shall negotiate and execute a definitive partnership agreement (or the
equivalent depending upon structure) and/or other agreements that are reasonably required and customary to transactions of this nature (collectively, the "Definitive Agreements"), in form and substance mutually satisfactory to the parties and containing terms, conditions, covenants and representations customary to transactions of the type
outlined above.
(LOT at 5-6.) The LOT cannot possibly be binding if it contemplates the negotiation of definitive
joint venture agreements in the future that will contain terms "of the type" outlined in the LOT.
Accordingly, for the foregoing reasons, Count I of the Complaint for breach of contract
should be dismissed. 9
II. THE BREACH OF FIDUCIARY DUTY CLAIMS SHOULD BE DISMISSED
The Complaint alleges causes of action for breach of fiduciary duty against Calvary
(Count II) as well as aiding and abetting breach of fiduciary duty against Defendant Roberts and
the John and Jane Does (Count III). Both causes of action should be dismissed.
Plaintiffs do not allege any source of such fiduciary duties other than the purported joint
venture. (See Compl. 111 44 (alleging that Calvary owed fiduciary duties to Plaintiffs "[a]s a
member" of the purported joint venture).) Since no joint venture had yet arisen, Calvary owed
Plaintiffs no such duties. As stated above, the LOT unequivocally states that it is nonbinding,
contemplates future negotiation and execution of the "definitive" joint venture documents and
leaves material terms of those agreements for future negotiation. Accordingly, no joint venture
was created by the LOT. See Bernstein, 143 A.D.2d at 865; HDA Parking Devs, v, Mount
Vernon Hosp., Inc., 260 A.D.2d 350, 351 (2d Dep't 1999) (letter of intent to form joint venture
' Plaintiffs puzzlingly pray for monetary damages on their breach of contract claim while at the same time alleging that they have no remedy at law and seek a permanent injunction. (Compare Compl. I 41 and id. p. 15
subparagraph (b) (demanding a permanent injunction) with I 42 and id. p. 14 subparagraph (a) (demanding a money judgment of $100 million on causes of action including Count I).) Moreover, Plaintiffs abjectly fail to make any showing that they are entitled to a permanent injunction as the Complaint fails to plead that Plaintiffs have been irreparably harmed by the purported breach. See, e.g., Parry v. Murphy, 79 A.D.3d 713, 715 (2d Dep't 2010) ("`A permanent injunction is a drastic remedy which may be granted only where the plaintiff demonstrates that it will suffer irreparable harm absent the injunction") (citation omitted).
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to operate parking garage unenforceable where letter stated that it "'was not a final agreement
and does not encompass all the terms and conditions of the agreement to be reached");
UrbanAmerica, 95 A.D.3d at 644.
Moreover, the Complaint fails to allege all of the required elements for a joint venture to
have arisen under New York law. "The essential elements of a joint venture are an agreement
manifesting the intent of the parties to be associated as joint venturers, a contribution by the
coventurers to the joint undertaking (i.e., a combination of property, financial resources, effort,
skill or knowledge) (citation omitted), some degree of joint proprietorship and control over the
enterprise; and a provision for the sharing of profits and losses." Kaufman v. Torkan, 51 A.D.3d
977, 979 (2d Dep't 2008). All of these elements must be present before joint venture liability
can be imposed. ITEL Containers Intl Corp. v. Atlanttrafik Express Serv. Ltd., 909 F.2d 698,
701 (2d Cir. 1990). Accordingly, even if the LOT were an enforceable contract (and it is not),
"it is not enough that two parties have agreed together to act in concert to achieve some stated
economic objective. Such agreement, by itself, creates no more than a contractual obligation,
otherwise every . . . agreement would give rise to a joint venture." Steinbeck v. Gerosa, 4
N.Y.2d 302, 317-318 (1958). The party claiming existence of a joint venture has the burden of
proving such existence. Ramirez v. Goldberg, 82 A.D.2d 850, 852 (2d Dep't 1981).
The Complaint fails to allege many of the requisite elements, First, because the LOT is
not binding as a matter of law and contemplates the future negotiation and execution of
definitive joint venture documents (see LOT at 5-6; Compl. If 15(j)), Plaintiffs have failed as a
matter of law to allege an agreement manifesting the parties' intent to be associated as joint
venturers. Second, the Complaint fails to allege that Calvary made any contribution to the joint
venture. While the framework provided in the nonbinding LOT states that "Calvary will
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contribute lots 44 and 51 . . to the Joint Venture" (LOT at 1 (emphasis added)), the Complaint
concedes that the Joint Venture would not be formed until the execution of the Definitive
Agreements and at that time, Calvary would contribute the church property. (See Compl. If 20
("The parties further agreed that, at the Closing, Calvary and Plaintiffs would execute all
remaining Definitive Agreements contemplated under the Letter Agreement, and that Calvary
would tender the deeds to the Properties to the Joint Venture entityformed thereby") (emphasis
added)). See Barmash v. Perlman, 40 Misc, 3d 1231(A), 2013 WL 4467807, at * 10 (Sup. Ct.
N.Y. County 2013) ("The LOI also frequently references things that 'will' and 'shall' be
determined 'at the time of Entity formation,' reflecting an intent not to be bound until the
consummation of some future agreement") (citation omitted). Indeed, that the parties
contemplated future creation of a joint venture is evinced by the LOT itself. Plaintiffs described
the LOT in the "Re:" line as a "Joint Venture Proposal." (LOT at 1.) See Prospect St. Ventures I,
LLC v. Eclipsys Solutions Corp,, 23 A.D.3d 213, 213 (1st Dep't 2005) ("The intent not to be
bound is also manifested in the references in the letter to a "proposed commitment" and a
"proposed transaction").
Third, the LOT does not contain any provision for the sharing of losses among the
purported joint venturers; it only contemplates returns and distributions. (LOT at 5.) This
deficiency is fatal to Plaintiffs' claim that a joint venture existed such that fiduciary duties were
owed to them. Steinbeck v. Gerosa, 4 N.Y.2d 302, 317 (1958) (agreement to pay royalties did
not give rise to a joint venture where there was no sharing of losses); see Kaufman, 51 A.D.3d at
979 ("Here, Kaufman's claim of a breach of fiduciary duty under a joint venture agreement must
fail as a matter of law, since there is no provision for the sharing of losses") (citation omitted);
Tilden of N.J. v. Regency Leasing Sys„ Inc., 230 A.D.2d 784, 786 (2d Dep't 1996) (loan
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agreement did not create a joint venture where lender's "protection of its position as creditor"
indicated it did not intend to share losses). Thus, even if the LOI could somehow be construed to
be an enforceable agreement (and it cannot), as a matter of law no joint venture had arisen.
Accordingly, no joint venture arose pursuant to the LOT, and the causes of action for
breach of fiduciary duty against Calvary (Count II) and aiding and abetting breach of fiduciary
duty against the Individual Defendants (Count III) should be dismissed. See UrbanAmerica, 95
A.D.3d at 645 ("Since defendants' counterclaim for breach of a joint venture was properly
dismissed, their breach of fiduciary duty counterclaims were also properly dismissed"); Langer v.
Dadabhoy, 44 A.D.3d 425, 426 (1st Dep't 2007) (affirming dismissal of breach of fiduciary duty
claim where Plaintiff failed to allege elements of a joint venture); see also Bitter v. Renzo, 101
A.D.3d 465, 465 (1st Dep't 2012) ("In light of the insufficient allegations of any fiduciary duty
owed . . . the trial court also correctly dismissed the claim of aiding and abetting a breach of
fiduciary duty") (citation omitted).
III. THE REMAINING CONTRACT-BASED CAUSES OF ACTION SHOULD BE
DISMISSED
A. Tortious Interference with Contract
Count V of the Complaint alleges a cause of action for tortious interference with contract
against Defendant Roberts and the John and Jane Does for purportedly procuring Calvary's
breach of the LOT. (Compl. 1164.) "Tortious interference with contract requires the existence of
a valid contract between the plaintiff and a third party, defendant's knowledge of that contract,
defendant's intentional procurement of the third-party's breach of the contract without
justification, actual breach of the contract, and damages resulting therefrom." Lama Holding Co.
v. Smith Barney Inc., 88 N.Y.2d 413, 424 (1996) (citation omitted). Where, as here, a letter of
intent is nonbinding on its face, it cannot serve as the predicate for a cause of action for tortious
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interference. See, e.g., Buechner v. Avery, 38 A.D.3d 443, 443-44 (1st Dep't 2007) ("The claim
for tortious interference with contract was not viable absent an enforceable contract. . . since the
letter of intent expressly provided that it was not binding except with respect to certain clauses
not at issue.").
Moreover, even if the LOT could be considered to be binding (and it cannot), the cause of
action for tortious interference with contract still fails. "Officers, directors or employees of a
corporation do not become liable to one who has contracted with the corporation for inducing the
corporation to breach its contract merely because they have made decisions and taken actions
that resulted in the corporation's breaching its contract." Citicorp Retail Servs., Inc. v.
Wellington Mercantile Servs., Inc., 90 A.D.2d 532, 532 (2d Dep't 1982). An agent is thus
"immune from liability if it appears that he is acting in good faith as an officer. . . [and did not
commit] independent torts or predatory acts directed at another." Murtha v. Yonkers Child Care
Ass 'n, 45 N.Y.2d 913, 915 (1978) (alteration in original) (citation omitted).
As an exception to this general rule, officers and directors may be held liable for inducing
the corporation's breach if their acts are "taken outside the scope of their employment or that
they personally profited from their acts." Citicorp Retail Servs., 90 A.D.2d at 532. However,
nebulous and conclusory allegations that officers or employees received such benefits are
insufficient to state a cause of action. Kats v. East 13th Street Tifereth Place, LLC, 73 A.D.3d
706, 708 (2d Dep't 2010) ("[C]onclusory allegations in the complaint establish, at most that
[defendant] might derive a financial benefit as a stockholder of the Seller, which is insufficient to
establish that his predominant motive was to obtain an individual pecuniary benefit, rather than
to advance the interests of the corporation.") (citation omitted); Citicorp Retail Servs., 90 A.D.2d
at 532-533 (allegations of mere "ordinary corporate infighting" insufficient because "[t]o hold
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officers or employees liable for causing their corporation to breach its contract, it is not sufficient
merely to allege, in conclusory form, that they acted for personal profit or committed
independently tortious acts") (citation omitted); see also 57th St. Arts, LLC v. Calvary Baptist
Church, 52 A.D.3d 425, 426 (1st Dep't 2008) (church executive and general counsel not liable
for inducing church to breach lease because "[c]onclusory assertions of wrongful, intentional,
malicious or improper actions, for personal profit or constituting independent torts, are
inadequate" and the complaint failed to allege any act undertaken by defendant to induce the
breach); Raymond Corp. v. Coopers & Lybrand, 105 A.a2d 926, 927 (3d Dep't 1984)
(dismissing toitious interference claim against corporation's senior vice president and treasurer
where complaint "failed to set forth specific factual allegations that Wolf acted outside the scope
of employment or for personal profit") (citation omitted).
Here, the Complaint comes up woefully short. Its solitary allegation with respect to
Defendant Roberts and the John and Jane Does is that they "substantially assisted and caused
Calvary to breach its obligations to the Joint Venture in order to personally profit from said
breaches." (Compl. iii 52.) Such a recitation is the very definition of conclusory and is entirely
insufficient to create liability on the part of Defendant Roberts or the John and Jane Does.
B. Implied Covenant of Good Faith and Fair Dealing
Count IV of the Complaint purports to allege a cause of action against Calvary for breach
of the implied covenant of good faith and fair dealing. (Compl. IN 55-60.) New York courts
have repeatedly dismissed such claims where they are merely duplicative of a breach of contract
claim. New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 319-320 (1995); see Barker v.
Time Warner Cable, Inc., 83 A.D.3d 750, 752 (2d Dep't 2011) (affirming dismissal of implied
covenant claim because "{a]s pleaded in the complaint, the cause of action . . . is duplicative of
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the cause of action alleging breach of contract") (citation omitted); Canstar v. J.A. Jones Constr..
counterclaim where it was "redundant" because it was "intrinsically tied to the damages
allegedly resulting from a breach of the contract") (citation omitted); see also Star Vest Partners
II, L.P. v. Emportal, Inc., 101 A.D.3d 610, 613 (1st Dep't 2012) ("[A] claim for breach of the
implied covenant of good faith and fair dealing may not be used as a substitute for a nonviable
breach of contract") (quotation & citations omitted).
Here, the Complaint utterly fails to distinguish between the conduct that would support
the breach of contract claim and the conduct that would support the implied covenant claim.
(See, e.g., Compl. ¶ 58 ("Defendant Calvary breached the implied covenant of good faith and fair
dealing by virtue of its conduct as detailed more fully above") (emphasis added); id. ig 59
(defendants purportedly breached the implied covenant "[b]y its failure to dutifully perform its
obligations to Plaintiffs as set forth more fully above . . .") (emphasis added). Accordingly,
Count IV must be dismissed. 10
IV. THE CLAIM FOR UNJUSTMENT ENRICHMENT SHOULD BE DISMISSED
Count VI purports to allege a claim against all Defendants for unjust enrichment. To
prevail on a claim for unjust enrichment, a plaintiff must show that (1) the other party was
enriched, (2) at the plaintiff's expense and (3) that it is against equity and good conscience to
permit the other party to retain what is sought to be recovered. Goel v. Ramachandran, 111
A.D.3d 783, 791 (2d Dep't 2013). Mere conclusory allegations that the defendant received some
10 Additionally, to the extent that the Complaint could be construed to allege a violation of the implied covenant of good faith and fair dealing because Defendants purportedly did not negotiate the Definitive Documents in good faith,
that claim must also fail. See HP Hotel Sponsor, LLC v. Strategic Capital Solutions, No. 603707/08, 2010 WL
3815242, at *4 (Sup. Ct. N.Y. County Aug. 26, 2010) (a duty to negotiate in good faith is "inconsistent with the terms of the Letter, 'which makes manifest that [SCSI did not intend to be bound until the deal was finalized' (citing
Pullman Grp., LLC. v. Prudential Ins. Co. of Am., 288 A.D.2d 2, 4 (1st Dep't 2001))); see also Brause, 10 A.D.2d at
332 (where wording of letters reveals "no present intent to form a binding contract. . . either party may withdraw
with impunity" prior to a meeting of the minds), aff'd, 9 N.Y.2d 620 (citation omitted).
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benefit, standing alone, are insufficient to establish a cause of action for unjust enrichment. Id. at
792 ("[T]he bare legal conclusion that it is against equity and good conscience to permit
[defendant] to retain this unidentified benefit is insufficient to adequately allege that the asserted
enrichment was unjust") (citation omitted); see also Old Republic Nat'l Title Ins. Co. v. Cardinal
