Brown v. Cara

Citation420 F.3d 148
Decision Date28 July 2005
Docket NumberDocket No. 04-5968-CV.
PartiesJeffrey M. BROWN and Jeffrey M. Brown Associates, Inc., Plaintiffs-Appellants, v. Charles CARA and Tracto Equipment, Corp., Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Steven Barshov, Sive, Paget & Riesel (Steven C. Russo and Suzanne Joyce, on the brief), New York, NY, for Plaintiffs-Appellants.

Donald F. Schneider, Schneider Goldstein Bloomfield LLP, New York, NY, for Defendants-Appellees.

Before: STRAUB and SACK, Circuit Judges, KRAVITZ, District Judge.*

STRAUB, Circuit Judge.

Plaintiffs appeal from a partial grant of summary judgment, dismissing all claims against Defendant-Appellee Tracto Equipment, Corp., and all contract claims against Defendant-Appellee Charles Cara. We hold that the grant of summary judgment as to Tracto was premature and therefore vacate that portion of the District Court Order. We further hold that, while the preliminary agreement is not enforceable as to the ultimate contractual goal contemplated in the document, it is enforceable as an obligation between the parties to negotiate in good faith within the framework of the agreement. We therefore affirm, in part, reverse, in part, and vacate, in part, the District Court's grant of summary judgment to defendants as to plaintiffs' contract claims. Because significant issues of fact persist, we remand to the District Court for further proceedings consistent with this opinion.

BACKGROUND

Plaintiff-Appellant Jeffrey M. Brown ("Brown"), a citizen and resident of Pennsylvania, is CEO of Plaintiff-Appellant Jeffrey M. Brown Associates, Inc. (collectively "JMB"), a development and construction contractor with its principal place of business in Pennsylvania. Defendant-Appellee Charles Cara ("Cara"), a citizen and resident of New York, is owner and President of Defendant-Appellee Tracto Equipment, Corp. ("Tracto"), a New York corporation with its principal place of business in New York. During all times relevant to this appeal Tracto owned a parcel of land located at 100 Jay Street, Brooklyn, New York ("Jay Street Property" or the "Property").

In March 2000 the Jay Street Property was in use as a parking lot and was subject to zoning limitations that made it unsuitable for substantial commercial or residential development. At some time prior to March 2000, JMB and Cara together contemplated developing the Jay Street Property for commercial and residential use. The discussions that followed culminated in a two-page Memorandum of Understanding ("MOU"), signed by Brown for "Jeffrey M. Brown Associates, Inc., and his companies, entities, etc.," and by Cara for "Charles Cara and his companies, entities, etc.," on March 27, 2000, by which the parties agreed to "work together to develop, build, market and manage a new real estate venture planned for an existing site at 100 Jay Street in Brooklyn, NY" ("Jay Street Project" or the "Project").

The MOU, referring to prior meetings between the parties, sets forth a general working framework for the Project, including basic design parameters and provisions for the division and distribution of future proceeds. According to the stated terms, Cara is to "provide[ ] the property at no cost to the partnership (or whatever combined entity is formed in the future to develop the project)." Brown is to "provide[ ] his company and individual experience, lender relationships, architect/engineering relationships, legal relationships and governmental relationships to lead the development effort . . . [including] the rezoning process, conceptual design of the project, conceptual budgeting, arranging for possible financing avenues and helping to establish an effective marketing plan." The MOU sets forth Cara's responsibility for compensating a named consultant and Brown's responsibility to compensate another named consultant. It provides that "Brown will build the project with union labor, if needed," and establishes that "Cara will act in the capacity of an Owner's representative on the project." "Brown agrees to front the costs of development up to an amount not exceeding $175,000," and the parties agree to pursue jointly the provision of necessary financing. Finally, the MOU declares that "time is of the essence," and states the parties' intent to "enter into a formal contract shortly."

In a letter dated April 5, 2000, and addressed to Brown, Cara states his desire to negotiate final terms of the partnership design, and project financing. None of the proposed terms were settled, however, allegedly because the parties agreed that the costs associated with the negotiations would be wasted if the Property was not suitably rezoned.

Consistent with the terms outlined in the MOU, JMB commissioned the design of a multi-use, two-tower, building, which came to be known as the "Light Bridges at Jay Street." JMB subsequently sought, through a process of applications, publicity, community meetings, lobbying, and presentations to community boards, rezoning of the Property to allow construction of the Light Bridges Project. Cara was aware of these efforts and attended some of the meetings. In November and December 2001, the Project received the needed approvals.

Ready to move forward, the parties attempted to negotiate the necessary corporate, financing, construction, and operating agreements. Negotiations proceeded through 2002 and into 2003. During the spring of 2003, Cara requested from JMB a proposed construction management agreement. JMB complied, but Cara was not pleased with the terms described in that document. JMB claims that the wrong document was sent to Cara and that JMB so informed Cara at the time. However, Cara's displeasure and offense were so deep that he refused to continue with negotiations and ceased all communication and collaboration with JMB.

In June 2003 JMB brought this diversity action seeking declaratory judgment, a permanent injunction, specific performance of the MOU, and, in the alternative, damages in quantum meruit. Defendants moved for summary judgment on August 11, 2003. Plaintiffs cross-moved for summary judgment on September 12, 2003. The motions were referred to Magistrate Judge Cheryl L. Pollak who, on May 19, 2004, issued a lengthy and detailed report and recommendation concluding that summary judgment should be granted in favor of defendants as to plaintiffs' first and second causes of action seeking enforcement of the MOU. Magistrate Judge Pollak also recommended dismissing all claims against Tracto. The Report further recommended that the parties proceed to discovery on the remaining claims.

The parties filed timely objections to the Report and Recommendation. On September 30, 2004, and November 9, 2004, the District Court, Sterling Johnson, Jr., Judge, issued brief orders, adopting in substance the recommendations of Magistrate Judge Pollak. The District Court dismissed all causes of action against Tracto and all causes of action against Cara, save plaintiffs' claim for relief in quantum meruit against Cara. JMB subsequently filed a motion for entry of final judgment pursuant to Rule 54(b), Fed.R.Civ.P. The unopposed motion was granted; and JMB filed a timely notice of appeal. We assert jurisdiction under 28 U.S.C. § 1291, affirm, in part, reverse, in part, vacate, in part, and remand.

DISCUSSION

Neither party disputes that New York law applies in this diversity case. In reviewing the District Court's grant of summary judgment we apply de novo the standards of decision for Rule 56, Fed.R.Civ.P., motions. We will affirm the District Court's grant of summary judgment to defendants only if, based on facts not in genuine dispute and drawing all inferences in favor of plaintiffs, defendants are entitled to judgment on the merits as a matter of law. Taggart v. Time Inc., 924 F.2d 43, 45-46 (2d Cir.1991). Because this case involves enforcement of an alleged contract, the intentions of the parties are at issue. While this is frequently a source of persistent disputes of fact, "[w]here a question of intention is determinable by written agreements, the question is one of law, appropriately decided on a motion for summary judgment." Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 73 (2d Cir.1989) (internal quotation marks, alteration, and citation omitted). Applying these standards, we affirm, in part, reverse, in part, vacate, in part, and remand.

I. Enforceability of the MOU.

The first question presented on appeal is whether the MOU is an enforceable preliminary agreement. See Adjustrite Sys., Inc. v. GAB Bus. Servs., Inc., 145 F.3d 543, 548 (2d Cir.1998); Arcadian, 884 F.2d at 72-73; Teachers Ins. & Annuity Ass'n. v. Tribune Co., 670 F.Supp. 491, 498 (S.D.N.Y.1987). The District Court found that it is not. We agree that the MOU does not bind the parties to complete the Jay Street Project but disagree insofar as the District Court found that the MOU does not bind the parties to negotiate in good faith open terms that must be settled in order for the development to proceed within the framework described by the MOU.

"Ordinarily, where the parties contemplate further negotiations and the execution of a formal instrument, a preliminary agreement does not create a binding contract." Adjustrite, 145 F.3d at 548. There is no dispute that this is the situation here. At the signing of the MOU, JMB and Cara knew that further negotiations would be required. The MOU itself contemplates a "formal contract" to be entered into in the future. Further, only days after the MOU was signed, Cara solicited JMB to enter negotiations toward the execution of significant and necessary agreements, demonstrating the parties' contemporary understanding that, though they had signed the MOU, further negotiations and formal agreements were necessary.

"In some circumstances, however, preliminary agreements can create binding obligations." Adjustrite, 145 F.3d...

To continue reading

Request your trial
140 cases

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT