Singer v. Xipto Inc.
852 F. Supp. 2d 416
S.D.N.Y.2012Background
- Plaintiffs invested $100,000 in Defendant pursuant to a Term Sheet and MOUs that allegedly bind two promissory notes.
- Term Sheet states non-binding and to be consummated by a definitive Note Purchase Agreement; no such agreement was drafted or executed.
- MOUs purportedly bind the Plaintiffs to lend $50,000 each; one MOU signed by Jeffrey Singer and the other signed only by Defendant for Andrew Singer.
- Acceleration clause allows conversion of notes to 8% loans after 3 months unless certain network agreements occur; repayments due 30 days after election.
- Defendant contends oral pre-terms existed with 18-month maturity, with different repayment mechanics and potential conversion timelines.
- Plaintiffs sent an August 5, 2010 demand letter to convert investments into loans; Defendant disputes when repayment was due and argues conditions delayed it.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MOUs and Term Sheet create a binding contract | MOUs read with Term Sheet form binding preliminaries. | Only an oral agreement predated and the documents are non-binding. | Plaintiffs plausibly stated a binding preliminary contract under certain factors. |
| Whether plaintiffs pleaded a valid breach of contract claim | Defendant breached by failing to repay after August 2010/December 2011. | Repayment not due until December 2011 under its theory; disputes on terms exist. | Breach claim survives dismissal; issues remain for fact-finding. |
| Whether unjust enrichment is precluded by contract | Alternatives pled independent of the contract; benefit conferred and failure to return funds. | If a binding contract governs, unjust enrichment not applicable. | Unjust enrichment claim survives; may proceed as alternative theory. |
| Whether plaintiffs’ attorney’s fees and punitive damages are recoverable | Fees and possible punitive damages may be recoverable under certain circumstances. | American Rule bars fees; no punitive-damages-entering conduct shown. | Attorneys’ fees dismissed without prejudice; punitive damages dismissed. |
| Whether summary judgment is appropriate given disputed facts about oral agreements | Undisputed terms establish breach by August 2010. | Oral agreements and later documents create material factual disputes. | Summary judgment denied without prejudice. |
Key Cases Cited
- Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69 (2d Cir.1989) (adopts Tribune framework for binding preliminary commitments)
- Vacold LLC v. Cerami, 545 F.3d 114 (2d Cir.2008) (assesses factors for Type I vs Type II agreements)
- Shann v. Dunk, 84 F.3d 73 (2d Cir.1996) (criteria for binding preliminary commitments; importance of terms)
- Winston v. Mediafare Entm’t Corp., 777 F.2d 78 (2d Cir.1985) (highlights open-terms and intent in preliminary agreements)
- Adjustrite Sys., Inc. v. GAB Bus. Servs., Inc., 145 F.3d 543 (2d Cir.1998) (multi-factor approach to determining binding nature of agreements)
- Treble v. Teachers Ins. & Annuity Ass’n, 670 F. Supp. 491 (S.D.N.Y.1987) (Tribune framework for binding commitments (cited for approach))
- Fischer & Mandell, LLP v. Citibank, N.A., 632 F.3d 793 (2d Cir.2011) (elements of breach of contract claim under New York law)
- MacDraw Inc. v. CIT Grp. Equip. Fin., 157 F.3d 956 (2d Cir.1998) (unjust enrichment requires conferred benefit)