Blum v. Spaha Capital Management, LLC
1:13-cv-03795
S.D.N.Y.Sep 15, 2014Background
- Plaintiff Randolph Blum (Nevada) invested in Woodward Skate Parks via broker John VanClief and later claimed he was owed 246,000 shares plus 123,000 warrant shares and 8% interest for a $123,000 investment in 2006.
- Blum alleges repeated promises from VanClief (including instant messages and emails) that the 123,000 warrant shares were owed; Woodward later filed bankruptcy and Spaha (a New York LLC) purchased Woodward and agreed to carry Blum’s investment.
- After years of unmet promises, Blum and VanClief negotiated a buyout in 2011; multiple drafts contemplated Spaha purchasing 369,000 shares for roughly $267,500–$300,000, and a November 2011 letter on Spaha letterhead signed by VanClief and Blum (the “Contract”) promised $300,000 in two payments by Nov. 11, 2011.
- Blum never received payment; he sued Spaha and VanClief for breach of contract, breach of fiduciary duty, and unjust enrichment and both sides moved for summary judgment. Many of defendants’ Rule 56.1 denials lacked supporting evidence and thus many facts were deemed admitted.
- The court interpreted the Contract ambiguously worded clause that it would “conclude all business” as, based on drafts and communications, reflecting an agreement: Spaha would buy Blum’s Woodward shares/interest for $300,000.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity/enforceability of the Nov. 2011 Contract against Spaha | Contract memorialized $300,000 buyout for Blum’s shares/interest; enforceable | Contract lacks consideration; is illusory/indefinite; mutual mistake about number of shares | Court: Contract valid and enforceable against Spaha; consideration established by extrinsic evidence and drafts; not illusory; mutual mistake defense fails |
| Remedy for breach of contract by Spaha | Money judgment ($300,000) and possibly specific performance to effect transfer of shares | — | Court: Grant judgment for $300,000 plus pre-judgment interest; reserved decision on specific performance and invited briefing |
| Personal liability of VanClief on the Contract | VanClief signed the Contract; liable personally | VanClief protected by LLC statute; no basis to pierce LLC veil | Court: VanClief not personally liable; summary judgment for VanClief because Blum failed to show domination/fraud to pierce veil |
| Unjust enrichment and breach of fiduciary duty claims | Unjust enrichment and fiduciary breach based on failure to deliver warrants/8% | Unjust enrichment precluded by valid contract; insufficient evidence of fiduciary breach or causation | Court: Unjust enrichment dismissed (duplicative of contract). Fiduciary duty claim against VanClief dismissed for lack of evidence showing breach or causation |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard and burden shifting)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (genuine issue for trial standard)
- Krumme v. WestPoint Stevens Inc., 238 F.3d 133 (parties’ choice of law by implied consent)
- Diesel Props S.R.L. v. Greystone Bus. Credit II LLC, 631 F.3d 42 (elements of breach of contract under New York law)
- Topps Co., Inc. v. Cadbury Stani S.A.I.C., 526 F.3d 63 (parol evidence and contract ambiguity)
- Chock Full O’Nuts Corp. v. Tetley, Inc., 152 F.3d 202 (summary judgment despite contractual ambiguities when extrinsic evidence one-sided)
- Vacold LLC v. Cerami, 545 F.3d 114 (specific performance for privately held stock conveyances)
- Chimart Assoc. v. Paul, 66 N.Y.2d 570 (reformation/mutual mistake—heavy burden to show true agreement)
- Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458 (definition of consideration under New York law)