Coughlan v. Jachney

• Decision Date: 20 July 2020
• Docket Number: 18-CV-2125(SJF)(AKT)
• Citation: 473 F.Supp.3d 166
• Parties: Robert COUGHLAN and Aileen Coughlin, Plaintiffs, v. Kyle JACHNEY, Richard Jachney and Hylas Yachts, Inc., Defendants.
• Court: U.S. District Court — Eastern District of New York

473 F.Supp.3d 166

Robert COUGHLAN and Aileen Coughlin, Plaintiffs,

v.Kyle JACHNEY, Richard Jachney and Hylas Yachts, Inc., Defendants.

18-CV-2125(SJF)(AKT)

United States District Court, E.D. New York.

Signed July 20, 2020

Jarrett M. Behar, Certilman Balin Adler & Hyman, LLP, Hauppauge, NY, for Plaintiffs.

Jeffrey S. Baker, Pro Hac Vice, Baker and Associates, Boston, MA, for Defendants.

ORDER

FEUERSTEIN, District Judge:

I. Introduction

On or about April 10, 2018, plaintiffs Robert Coughlan ("Robert") and Aileen Coughlan ("Aileen") (collectively, "plaintiffs") commenced this action against, inter alia , defendant Kyle Jachney ("defendant")¹ pursuant to this Court's diversity of citizenship jurisdiction under 28 U.S.C. § 1332(a), seeking damages for defendant's alleged breach of contract, unjust enrichment, conversion and fraud. Pending before the Court are plaintiffs’ motion pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment on their conversion and fraud claims; and defendant's cross motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure dismissing plaintiffs’ claims against him in their entirety. For the reasons set forth below, plaintiffs’ motion is denied and defendant's cross motion is granted.

II. Background

A. Factual Allegations²

According to defendant, Hylas builds custom designed yachts. (Affidavit of Kyle Jachney dated May 20, 2019 ["Jachney Aff."], ¶ 35). From 1999 until Hylas ceased to exist, defendant's duties at Hylas, including when he was the vice president of Hylas, included sales, marketing, production and process management, advertising boat shows, deliveries, commissioning³ and design. (Declaration of Robert Coughlan in Support of Motion for Summary Judgment ["Coughlan Decl."], Ex. B at 9:14-25, 10:2-11, 163:19-25, 164:2-10). In addition to defendant and his father, who owned Hylas, Hylas had four (4) employees: Gayle Winters ("Winters"), who "handled the books, [and] just oversaw the kind of general paperwork;" Carol Israel, who worked part-time "answering phones, sending out emails, sending out inquiries, [and] marketing materials;" Christian Pschorr, who "was commissioning manager and service manager," and who "also did deliveries, [and] boat show setups;" and Michael Tamulaites ("Tamulaites"), who did sales and "was replacing [defendant's] father who was slowing down significantly and went into semiretirement that year [2015]." (Id. at 20:25-22:11).

Plaintiffs first met defendant at various boat shows. (56.1, ¶ 3)⁴ .

Aileen entered into a contract with Hylas, dated November 10, 2015 (the "Sales Agreement"), pursuant to which, inter alia , "Seller [Hylas] agree[d] to construct and Buyer [Aileen] agree[d] to purchase one 2017 Hylas 56 (the ‘Yacht’) designed by German Frers and constructed by Queen Long Marine Co., Ltd. of Kaoshiung, Taiwan R.O.C. (‘Queen Long’)". (56.1, ¶¶ 4, 98; Coughlan Decl., Ex. A, ¶ 1). Although the Sales Agreement was initially drafted by Hylas, (56.1, ¶ 8), Robert participated in the negotiation of it and testified that there were many iterations of the Sales Agreement. (Transcript of the deposition testimony of Robert Coughlan on February 5, 2019 ["Coughlan Tr."] at 61:2-10). The Sales Agreement is signed by defendant on behalf of Hylas. (56.1, ¶ 5).

The Sales Agreement contains the following "Payment and Production Schedule":

a) An initial deposit of 10%, $101,800, shall be due with the signed Contract and Agreement.

b) A second deposit of 10%, $101,800, shall be due June 1, 2016 upon confirmation that the Buyers [sic ] Hylas 56 Hull has been laid up and removed from the Mold. QL [Queen Long] shall provide images of the yacht in the mold and moved to the production building prior to the second deposit being forwarded.

c) A third deposit of 5%, $50,900, shall be paid four (4) weeks prior to the projected shipping date from Queen Long Marine.

The Buyer agrees that, if for any reason any outstanding balance is not paid when due, the buyer shall forfeit any deposits already paid to the Seller and the Seller agrees to accept the deposit as liquidated damages in lieu of any other remedy. The Seller shall notify the Buyer a minimum of 10 days in advance of any payments and balance due, and shall have a 30 day cure period from any notice of buyer's default.

The Seller agrees that production shall take place as follows:

d) Production shall commence no later than June 1^st, 2016. The Seller shall forward images of the Buyer's Yacht removed from the mold as outlined in the Deposits.

e) The Yacht is scheduled for completion and to be prepared for shipping to the U.S by April of 2017. Any change to the schedule due to design changes shall be confirmed in writing between the Buyer and Seller.

f) It is agreed that if Hylas Yachts, Inc. and Queen Long Marine are [sic ] have not shipped the Yacht by October 1^st, 2017 to the U.S, the owner^[5] shall have the option to cancel the order and receive a full refund of all deposits paid to date at the time of cancellation.

g) It is agreed that if Hylas Yachts, Inc. and Queen Long Marine are unable to have the Yacht ready to ship by October 1^st, 2017 to the U.S, the owner shall have the option to cancel the order and receive a full refund of all deposits paid to date at the time of cancellation.^[6]

(Coughlan Decl., Ex. A, ¶ 2). Robert asserts that "[a]t the time that the Sales Agreement was executed, ... [he] understood the word ‘deposit’ to have its common meaning, i.e. , that it was to be security for the performance of the Sales Agreement." (Id. , ¶ 6). Defendant essentially agrees that the term "deposit" in the Sales Agreement should be accorded its plain and ordinary meaning, and he, thus, refers to the dictionary definition for the meaning of that word.⁷ (See Jachney Aff., ¶ 25 [referring to a definition in the First American Dictionary which defines the term "deposit" as meaning: "to give money for partial payment or security"] ).

In addition, the Sales Agreement sets a base price for the Yacht, including all standard equipment as shown therein, "fully commissioned, seaworthy and ready to sail," and provides, in relevant part:

"Seller acknowledges receipt of the sum of $254,500 from the Buyer in three deposits against the base price. With the received deposits listed above, the balance of $763,500 plus options is to be paid at the time of shipping from Queen Long Marine as defined in Paragraph 8. Title is transferred to the Buyer after the final sea trial and the final balance is received by the Seller."

(Coughlan Decl., Ex. A., ¶ 3). Thus, the base price for the Yacht under the Sales Agreement was one million eighteen thousand dollars ($1,018,000.00). (Id. ).

Furthermore, the Sales Agreement provides, inter alia ,

"Upon completion of the Yacht at Queen Long Marine and confirmation of freight contracted for shipment of the Yacht to the U.S port of choice as agreed upon by both the Buyer and Seller, the Buyer shall establish an escrow account in the amount of $563,500 plus options.... It is further agreed that within (10) ten business days of confirmation of the Yacht's shipping from Taiwan the amount of $563,500 plus options shall be released to Queen Long Marine in its entirety."

(Coughlan Decl., Ex. A, ¶ 8).

According to defendant, "[f]rom the time that the Sales Agreement is signed, the process of designing the Yacht for the Purchaser commences," (Jachney Aff., ¶ 36); and "Hylas designs the yacht on an ongoing, continuous basis." (Id. , ¶ 37; see also Coughlan Decl., Ex. B at 138:2-12 [describing the design of the Yacht as "an ongoing process"] ). During his deposition, defendant testified that Hylas did not have any practice or procedures for keeping track of the time spent during the design process, but "there are numerous hours that are spent communicating with the yard," and there were "multiple sets of drawings ... [and] design lists, and then there was a hundred and something pages of communications back and forth and phone calls." (Coughlan Decl., Ex. B at 138:17-139:4). According to defendant, Queen Long created the drawings for the Yacht "based on the information that [he] gave them." (Id. at 139:5-8). Moreover, defendant testified that the Sales Agreement includes a charge for the time Hylas spent in design in "[t]he charge for the yacht and then the options." (Id. at 139:9-13). According to defendant, "Hylas custom built and spent over a year designing the Yacht with its various personnel, ... [and] produced a set of design diagrams for the [plaintiffs]." (Jachney Aff., ¶ 38) (emphasis omitted).

Plaintiffs made the first deposit payment required by the Sales Agreement to Hylas on December 18, 2015. (56.1, ¶ 7). Hylas did not use those funds for the Yacht, and instead used the funds "for general corporate purposes at or around the time the money was received." (Id. , ¶ 11).

Immediately prior to the plaintiffs’ first deposit, the balance of the Hylas operating account was two thousand three hundred two dollars and seventy-six cents ($2,302.76). (56.1, ¶ 74). Immediately after that deposit was received, Hylas wired out sixty-three thousand five hundred dollars ($63,500.00) to "Cross Chartering NV Antwerp/ING Belgium." (Coughlan Decl., Ex. X at NGB0029). By December 22, 2015, the account had a negative balance. (56.1, ¶ 76). However, at the end of that month, the account had a balance of eight hundred eighty-one thousand sixty-five dollars and twenty-two cents ($881,065.22). (Coughlan Decl., Ex. X at NGB0029-30).

In or about March 2016, plaintiffs discussed adding a carbon fiber rig to the Yacht with Hylas. (56.1, ¶ 14). On March 9, 2016, defendant sent Robert an email stating, in part:

"I have the Selden pricing ... and waiting [sic ] on the latest aluminum pricing to get you the proper credits if you want to move forward with carbon. Of course a much pricier option and unlike the aluminum, the carbon requires a 50% deposit to lock in pricing and production time. As discussed

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