44 F. Supp. 3d 482
S.D.N.Y.2014Background
- Plaintiff Blum, a Nevada resident, sues two New York defendants (VanClief and Spaha) in a diversity action for breach of contract, breach of fiduciary duty, and unjust enrichment.
- Blum invested in Woodward Skate Parks through VanClief, who represented himself as Blum’s broker; later Woodward’s shares and warrants (246,000 shares plus 123,000 warrants) and 8% interest were at issue.
- Several drafts of proposed buyout/stock repurchase agreements preceded a November 2011 “Contract” on Spaha letterhead, signed by Blum and VanClief, promising $300,000 in cash by Nov 11, 2011 for Blum’s Woodward interests; the agreement contemplated transfer of all Blum’s Woodward-related interests.
- Blum did not receive the $300,000 by the deadline, and subsequent attempts to finalize or document the purchase failed; Blum later sought relief in Nevada state court (default judgment) which was not recognized by New York courts.
- Blum filed this action on June 4, 2013, asserting (i) breach of contract against Spaha, (ii) breach of fiduciary duty against VanClief, and (iii) unjust enrichment; both sides moved for summary judgment; the court applied New York law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is there a valid contract between Blum and Spaha? | Contract formed to repurchase Blum’s Woodward shares for $300,000. | Contract lacks consideration; is illusory; mutual mistake as to shares. | Yes; contract valid and enforceable; consideration shown by extrinsic evidence; not illusory or mutual mistake. |
| Can the contract be enforced given potential mutual mistake or indefiniteness? | Extrinsic evidence shows parties intended $300,000 for Blum’s shares. | Mutual mistake voids contract; ambiguity. | Ambiguity resolved in Blum’s favor; extrinsic evidence supports intent to transfer all shares for $300,000; contract enforceable. |
| Is Blum entitled to damages and specific performance from Spaha? | Blum seeks $300,000 plus interest and specific performance to transfer shares. | No recovery or no specific performance due to issues with contract formation. | Judgment for $300,000 plus prejudgment interest; specific performance possible but not ruled final in absence of transfer documents. |
| Is VanClief personally liable; piercing corporate veil? | VanClief breached fiduciary duty and contract personally. | LLC liability shield; no piercing of the corporate veil. | VanClief not personally liable; summary judgment granted on veil-piercing grounds. |
| Should Blum’s unjust enrichment and fiduciary duty claims survive? | Unjust enrichment and fiduciary duty based on failure to deliver shares. | Contract governs subject matter; unjust enrichment duplicative; fiduciary duty not shown to breach. | Unjust enrichment claim dismissed; fiduciary duty claim dismissed. |
Key Cases Cited
- Topps Co., Inc. v. Cadbury Stani S.A.I.C., 526 F.3d 63 (2d Cir. 2008) (Ambiguities may be resolved by extrinsic evidence; or no extrinsic support supports interpretation)
- Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458 (N.Y. 1982) (Consideration can be implied; parol evidence to illuminate consideration)
- Register.com, Inc. v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004) (Parol evidence; mutual assent and interpretation of contract terms)
- Grammas v. Lockwood Assoc., LLC, 95 A.D.3d 1073 (2d Dep’t 2012) (Veil-piercing standards require domination and misuse to commit a wrong)
- Alden Auto Parts Warehouse, Inc. v. Dolphin Equip. Leasing Corp., 682 F.2d 330 (2d Cir. 1982) (Mutual mistake defense evaluated against clear and convincing standard)