Doller v. Prescott

• Decision Date: 20 December 2018
• Docket Number: 526578
• Citation: 167 A.D.3d 1298,91 N.Y.S.3d 533
• Parties: Charles W. DOLLER, Appellant, v. David J. PRESCOTT et al., Respondents.
• Court: New York Supreme Court — Appellate Division

167 A.D.3d 1298
91 N.Y.S.3d 533

Charles W. DOLLER, Appellant,
v.
David J. PRESCOTT et al., Respondents.

526578

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

Calendar Date: November 13, 2018
Decided and Entered: December 20, 2018

91 N.Y.S.3d 535

Hawkins Parnell Thackston & Young LLP, New York City (Mark Debrowski of counsel), for appellant.

Dayter Volkheimer LLP, Valatie (F. Charles Dayter of counsel), for respondents.

Before: McCarthy, J.P., Lynch, Clark, Mulvey and Rumsey, JJ.

MEMORANDUM AND ORDER

Lynch, J.

167 A.D.3d 1298

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.

91 N.Y.S.3d 536

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,

167 A.D.3d 1299

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 CPLR 3211, we give "the pleading ... a liberal construction, [assume] the allegations contained within it are ... true and [afford] the plaintiff ... every favorable inference" ( Simkin v. Blank, 19 N.Y.3d 46, 52, 945 N.Y.S.2d 222, 968 N.E.2d 459 [2012] ). Relevant here, a motion pursuant to CPLR 3211(a)(1) must be granted where the documentary evidence "conclusively refutes plaintiff's factual allegations" and establishes a defense as a matter of law ( Kolchins v. Evolution Mkts., Inc., 31 N.Y.3d 100, 106, 73 N.Y.S.3d 519, 96 N.E.3d 784 [2018] ; see Ganje v. Yusuf, 133 A.D.3d 954, 956, 19 N.Y.S.3d 355 [2015] ). The "sole criterion" under a motion to dismiss for failure to state a cause of action pursuant to CPLR 3211(a)(7) is whether, "from [the pleading's] four corners[,] factual allegations are discerned which taken together manifest any cause of action cognizable at law" ( People v. Coventry First LLC, 13 N.Y.3d 108, 115, 886 N.Y.S.2d 671, 915 N.E.2d 616 [2009] [internal quotation marks and citation omitted]; see Gizara v. New York Times Co., 80 A.D.3d 1026, 1027, 915 N.Y.S.2d 379 [2011] ).

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

91 N.Y.S.3d 537

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.

167 A.D.3d 1300

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 A.D.3d 983, 985, 819 N.Y.S.2d 182 [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 A.D.3d 1254, 1255, 937 N.Y.S.2d 682 [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 N.Y.3d at 106, 73 N.Y.S.3d 519, 96 N.E.3d 784 [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 N.Y.2d 105, 109, 436 N.Y.S.2d 247, 417 N.E.2d 541 [1981] ).

In the MOU – which is documentary evidence that may be considered in the context of a motion pursuant to CPLR 3211(a)(1) (see Ganje v. Yusuf, 133 A.D.3d at 957, 19 N.Y.S.3d 355 ) – plaintiff and Prescott expressly confirmed that both would "proceed diligently and in good faith to satisfy the conditions required in order to enter into definitive agreements to close the [offer of equity]." Similarly, the parties confirmed that, during the pendency of the trust litigation, the offer of equity was to be held in abeyance, and that once the litigation ended, the two would "proceed diligently with a view toward" completing, among other transactions, the offer of equity. In our view, the qualifying language in the MOU expressly belies plaintiff's allegations that he was contractually entitled to purchase the Ryan Trust Shares. To the contrary, the parties left open for future negotiation both the type of equity and the "precise manner" in which that equity would be offered. In effect, the MOU was an unenforceable agreement to agree in the future on terms of a "definitive agreement" regarding the offer of equity, and Supreme Court therefore...