FT Travel-New York, LLC v. Your Travel Center, Inc.
112 F. Supp. 3d 1063
C.D. Cal.2015Background
- Frosch (a travel management co.) alleges that in Nov. 2014 it entered a written agreement with YTC (a retail travel agency) under which YTC would report airline sales through Frosch’s ARC branch and ultimately be sold to Frosch; the contract mistakenly names “YTC Travel, LLC” (LLC), a nonexistent entity.
- Negotiations occurred over several years between Frosch’s CEO Bryan Leibman and YTC’s CEO Colin Weatherhead; parties allegedly intended YTC (not LLC) to be the counterparty and planned a succession/sale mechanism in the agreement.
- The agreement includes a Succession provision (termination tied to Leibman’s departure or change in Frosch ownership), a Guaranty & Indemnity clause, and restrictive covenants; Frosch alleges YTC began steps to perform but then Weatherhead terminated the deal after pressure from a third party (Tzell).
- Frosch sued for breach of contract (specific performance and damages), reformation (mutual mistake or fraud), and alternative theories against LLC and Weatherhead personally; defendants moved to dismiss under Rule 12(b)(6).
- Court analyzed whether the agreement was too indefinite (duration, agreements-to-agree), whether there was consideration, whether the correct parties are bound (misnomer/reformation), Weatherhead’s personal liability, and whether damages were sufficiently alleged.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Contract indefiniteness/duration | Agreement contains termination provision tied to Leibman’s status; thus duration is determinable | Lacks an express duration -> unenforceable / terminable at will | Denied dismissal: termination clause renders duration determinable for pleading purposes |
| Succession clauses = "agreement to agree" | Succession terms (including formula) are sufficiently definite; ¶9(A) and ¶9(D) are not fatal | Succession leaves material terms for future negotiation -> unenforceable | Denied dismissal at pleading stage; court finds clauses not obviously mere agreements to agree |
| Consideration | Parties exchanged reciprocal benefits (ARC reporting, commissions, services) | Lack of consideration (no signed guaranty, no new ARC branch established) | Denied dismissal: consideration need not be pled; lack of consideration is affirmative defense |
| Identity/misnomer and reformation | The contract unmistakably refers to YTC (address, officers); misnomer rule or reformation (fraud/mutual mistake) can bind YTC | Naming LLC (nonexistent) defeats contract or requires rescission | Denied dismissal: misnomer rule and reformation pleadings are plausible; reformation based on fraud/mutual mistake survives |
| Weatherhead personal liability (guaranty) | Guaranty/indemnity clause in agreement and signing supports personal liability | Weatherhead didn’t sign separate personal guaranty; signature format and clause ambiguity show intent was corporate only | Dismissed Weatherhead personal-liability claim based on guaranty (3rd claim) with leave to amend; but alternative theory (signed for nonexistent LLC) survives |
| Weatherhead liability for signing for nonexistent principal | Asserting he signed on behalf of LLC which did not exist; thus personal liability under agency law | Argues mutual mistake and that Weatherhead didn’t claim agency for nonexistent principal | Survives: pleading that Weatherhead knew LLC didn’t exist is sufficient at this stage |
| Damages | Alleged lost commissions/overrides, lost acquisition, lost revenue and reputational harm | Termination occurred immediately so damages implausible | Denied dismissal: pleaded damages are plausible for Rule 12(b)(6) purposes |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must plead plausible entitlement to relief)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: plausible factual content required)
- Cobble Hill Nursing Home v. Henry & Warren Corp., 74 N.Y.2d 475 (1989) (contract must be reasonably certain in material terms)
- Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105 (1981) (agreements to agree are unenforceable)
- Payroll Exp. Corp. v. Aetna Cas. & Sur. Co., 659 F.2d 285 (2d Cir. 1981) (absence of fixed term is not fatal where contract provides for termination)
- Chimart Associates v. Paul, 66 N.Y.2d 570 (1986) (reformation available for mutual mistake or fraud; writing must reflect actual agreement)
- Cement & Concrete Workers Dist. Council v. Lollo, 35 F.3d 29 (2d Cir. 1994) (factors for imposing personal liability on corporate signatory)