Doller v. PrescottDoller v. Prescott
Lynch, J.
Appeal from an order of the Supreme Court (Platkin, J.), entered June 26, 2017 in Albany County, which, among other things, granted defendants’ motion to partially dismiss the complaint.
Defendant David J. Prescott was the majority shareholder in defendant Integra Optics, Inc. In 2012, Prescott and plaintiff — who had previously provided financial and investment advice to Prescott — entered into a memorandum of understanding (hereinafter MOU) that memorialized, among other things, plaintiff‘s future right of first refusal to acquire “equity” in Integra. In 2013, plaintiff executed an employment agreement with Integra to serve as its executive vice-president and chief financial officer. In September 2014, plaintiff notified Prescott that he wished to exercise a right of first refusal to purchase certain Integra shares (hereinafter the Ryan Trust Shares). Prescott refused, advised that he would be purchasing the shares for himself and fired plaintiff. In this ensuing action, plaintiff asserted eight causes of action, including breach of the MOU and employment agreement, fraud and unjust enrichment. Prescott, Integra and defendant Goshawk Funding Limited — an entity purported to be Prescott‘s alter ego and “shell corporation” organized under the laws of Hong Kong — moved to dismiss the causes of action related to the MOU pursuant to CPLR 3211 (a) (1), (7) and (8) and to compel arbitration and stay the third and fourth causes of action related to the employment agreement. Supreme Court granted the motion, dismissed six causes of action, stayed two causes of action and dismissed all causes of action asserted against Goshawk. Plaintiff now appeals.
On a motion to dismiss pursuant to
Plaintiff‘s first, second, fifth and seventh causes of action for breach of contract, fraud, unjust enrichment and breach of the duty of good faith and fair dealing, respectively, as well as the sixth cause of action for a declaratory judgment, all stem from the MOU and plaintiff‘s attempt to purchase the Ryan Trust Shares. The MOU defines the Ryan Trust Shares as those that were in the control of a trust that was a party to litigation involving both Prescott and Integra pending at the time the MOU was executed. In relevant part, the MOU included an “[o]ffer of [e]quity,” specifically, that plaintiff was to “be given a right of first refusal for [e]quity.” The MOU defined equity as “ownership or the rights of ownership in Integra.” The “[o]ffer of [e]quity” provided that plaintiff‘s first refusal right “shall include, but not be limited to, the right of first refusal to acquire the Ryan Trust Shares should they become available and/or equity grants or an equity earn in. However, the precise manner in which this [e]quity is offered shall be determined subsequent to the [e]nd of [l]itigation or circumstances deemed mutually sufficient by both Prescott and [plaintiff].” Further, the MOU confirmed the parties’ understanding that “the offer of [e]quity [was] a material inducement to [plaintiff] entering into [the] [a]greement.” Plaintiff alleged that Prescott misrepresented his intention to allow plaintiff to purchase the Ryan Trust Shares, made similar offers of equity to other Integra employees and intentionally refused to issue the Ryan Trust Shares to plaintiff.
We agree with Supreme Court‘s determination that the MOU was unenforceable. “[A] contract must be definite in its material terms to be enforceable” (Clifford R. Gray, Inc. v LeChase Constr. Servs., LLC, 31 AD3d 983, 985 [2006] [internal quotation marks and citation omitted]), and the terms must “manifest[ ] . . . mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms” (Female Academy of the Sacred Heart v Doane Stuart School, 91 AD3d 1254, 1255 [2012] [internal quotation marks and citation omitted]). “This requirement of definiteness assures that courts will not impose contractual obligations when the parties did not intend to conclude a binding agreement” (Kolchins v Evolution Mkts., Inc., 31 NY3d at 106 [internal quotation marks and citation omitted]). An “agreement to agree, in which a material term is left for future negotiations, is unenforceable” (Joseph Martin, Jr., Delicatessen v Schumacher, 52 NY2d 105, 109 [1981]).
In the MOU — which is documentary evidence that may be considered in the context of a motion pursuant to
To establish a cause of action for fraud, plaintiff was obligated to “allege misrepresentation or concealment of a material fact, falsity, scienter by the wrongdoer, justifiable reliance on the deception and resulting injury” (Lusins v Cohen, 49 AD3d 1015, 1017 [2008] [internal quotation marks and citation omitted]). Defendants correctly argue that a cause of action is not stated where, as here, the claim is that a party was fraudulently induced to enter into an unenforceable agreement (see Clifford R. Gray, Inc. v LeChase Constr. Servs., LLC, 31 AD3d at 986). Moreover, a fraud claim may not be established “when the only fraud charged relates to a breach of contract“; rather, a party must “allege a breach of duty which is collateral or extraneous to the contract between the parties” (Krantz v Chateau Stores of Canada, 256 AD2d 186, 187 [1998]). Plaintiff alleges that Prescott never intended to permit plaintiff to purchase the Ryan Trust Shares and that the offer of equity was made to exploit and induce plaintiff to execute the MOU. Accepting this allegation to be true, the alleged misrepresentation is not collateral to the MOU, but a misrepresentation as to Prescott‘s intent to perform in the future, which is not actionable (see New York Univ. v Continental Ins. Co., 87 NY2d 308, 318 [1995]; Wyle Inc. v ITT Corp., 130 AD3d 438, 438-439 [2015]). Accordingly, we agree with Supreme Court‘s determination to dismiss plaintiff‘s second cause of action for fraud. Correspondingly, plaintiff‘s cause of action seeking punitive damages fails (see Rocanova v Equitable Life Assur. Socy. of U.S., 83 NY2d 603, 616-617 [1994]; Park v YMCA of Greater N.Y. Flushing, 17 AD3d 333, 333-334 [2005]).
Supreme Court also properly dismissed plaintiff‘s fifth cause of action for unjust enrichment. Initially, and contrary to plaintiff‘s argument, we find that defendants argued — and Supreme Court properly considered — whether plaintiffs stated a cause of action pursuant to
Next, we consider defendants’ motion to dismiss the claims against Goshawk pursuant to
Turning to defendants’ alternative jurisdictional argument, plaintiff was not obligated to plead a basis for personal jurisdiction (see Fischbarg v Doucet, 9 NY3d 375, 381 n 5 [2007]). Further, although defendants correctly argued that “the ultimate burden of proof rests with the party asserting jurisdiction,” to successfully oppose defendants’ motion, “[plaintiff] needed only [to] make a prima facie showing that [Goshawk] was subject to the personal jurisdiction of . . . Supreme Court” (Constantine v Stella Maris Ins. Co., Ltd., 97 AD3d 1129, 1130 [2012]; see Nick v Schneider, 150 AD3d 1250, 1251 [2017]). In our view, accepting plaintiff‘s allegations to be true and construing them in a light favorable to him, plaintiff‘s submissions were sufficient to establish that jurisdiction was proper pursuant to
Goshawk also moved to dismiss the causes of action against it pursuant to
Finally, we find that Supreme Court properly granted defendants’ motion to stay the third and fourth causes of action stemming from the employment agreement and to compel arbitration, notwithstanding plaintiff‘s claim that the agreement was induced by fraud (see Markowits v Friedman, 144 AD3d 993, 996-997 [2016]).
McCarthy, J.P., Clark, Mulvey and Rumsey, JJ., concur.
ORDERED that the order is affirmed, with costs.