Bennett v. Atomic Products Corp.

• Court: New York Supreme Court — Appellate Division
• Writing for the Court: WILLIAM F. MASTRO
• Citation: Bennett v. Atomic Products Corp., 903 N.Y.S.2d 154, 74 A.D.3d 1003 (N.Y. App. Div. 2010)
• Decision Date: 15 June 2010
• Parties: Gerald W. BENNETT, et al., respondents, v. ATOMIC PRODUCTS CORPORATION, et al., appellants.

903 N.Y.S.2d 154

74 A.D.3d 1003

Gerald W. BENNETT, et al., respondents,

v.ATOMIC PRODUCTS CORPORATION, et al., appellants.

Supreme Court, Appellate Division, Second Department, New York.

June 15, 2010.

Miller & Wrubel, P.C., New York, N.Y. (Martin D. Edel and Adam J. Safer of counsel), and Benjamin E. Carter, Riverhead, N.Y., for appellants (one brief filed).

Bracken & Margolin, LLP, Islandia, N.Y. (Jeffrey D. Powell of counsel), for respondents.

WILLIAM F. MASTRO, J.P., FRED T. SANTUCCI, ARIEL E. BELEN, and CHERYL E. CHAMBERS, JJ.

In an action, inter alia, to recover damages for breach of contract, the defendants appeal, as limited by their brief, from so much of an order of the Supreme Court, Suffolk County (Baisley, Jr., J.), dated June 10, 2009, as denied their motion for summary judgment dismissing the complaint, and granted that branch of the plaintiffs' cross motion which was to dismiss the fourth affirmative defense of the statute of frauds.

ORDERED that the order is affirmed insofar as appealed from, with costs.

The plaintiffs developed certain medical equipment for the defendant Atomic Products Corporation (hereinafter Atomic) and its successor in interest, Biodex Medical Systems, Inc. (hereinafter Biodex), pursuant to (1) an oral agreement entered into in 1979 between the plaintiff Alan M. Wunderlich and Atomic, (2) a memorandum signed by Atomic's President, James M. Reiss, on April 19, 1979, acknowledging the receipt of certain prototypes and that those items were given to Atomic for "a % of gross sales as noted," and (3) an oral agreement entered into in 1985 between the plaintiff Gerald W. Bennett and Atomic, relating to a device referred to as a lineator.

On July 22, 1988, the plaintiffs entered into a written agreement with Atomic, whereby the plaintiffs would develop a thyroid scanning system. If Atomic decided to manufacture thethyroid scanning system, it would pay the plaintiffs royalties based upon a percent of the selling price of each unit. The agreement could be terminated in two ways. Pursuant to paragraph 6, within 120 days after receipt of "drawings in sufficient detail such that ATOMIC can arrange for the commercial production of the System," Atomic could notify the plaintiffs of its decision to reject the prototype-whereupon all rights thereto would revert to the plaintiffs. Pursuant to paragraph 16, the agreement to pay royalties would terminate when no unit was sold for 12 consecutive months, "by reason of there being no Sale of the System," whereupon rights to the thyroid scanning system would revert to the plaintiffs.

This action was commenced in 1996, alleging that the defendants breached their contractual obligations by failing to pay any royalties for the thyroid scanning system and by ceasing the payment of royalties on other medical equipment in 1992 and 1993. After issue was joined and depositions conducted, the defendants moved for summary judgment dismissing the complaint, alleging that the written agreement with respect to the thyroid scanningsystem terminated by its terms when no thyroid scanning system was ready for commercial sale within one year of July 22, 1988, and the other agreements were terminable at will. The plaintiffs cross-moved for summary judgment dismissing, inter alia, the affirmative defense of the statute of frauds. In the order appealed from, the Supreme Court denied the defendants' motion and granted that branch of the plaintiffs' cross motion which was to dismiss the affirmative defense of the statute of frauds, on the ground that the parties' oral agreements could have been terminated by the defendants within one year, if the defendants had permanently discontinued selling the products. The defendants appeal. We affirm.

An agreement which "[b]y its terms is not to be performed within one year from the making thereof" falls within the statute of frauds and is not enforceable unless there is a written memorandum thereof signed by the party to be charged (General Obligations Law § 5-701[a][1] ). The oral agreements in this case do not fall within the statute of frauds on the ground that they are terminable at will by the defendants ceasing their sale of the products in issue ( see North Shore Bottling Co. v. Schmidt & Sons, 22 N.Y.2d 171, 174, 292 N.Y.S.2d 86, 239 N.E.2d 189; Davis & Davis v. S & T World Prods., 217 A.D.2d 645, 629 N.Y.S.2d 487).

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