Edge Group Waiccs LLC v. The Sapir Group LLC

• Decision Date: 07 April 2010
• Docket Number: No. 08 Civ. 5158(MHD).,08 Civ. 5158(MHD).
• Citation: 705 F.Supp.2d 304
• Parties: EDGE GROUP WAICCS LLC, Plaintiff,v.The SAPIR GROUP LLC, Defendant.
• Court: U.S. District Court — Southern District of New York

705 F.Supp.2d 304

EDGE GROUP WAICCS LLC, Plaintiff,v.The SAPIR GROUP LLC, Defendant.

No. 08 Civ. 5158(MHD).

United States District Court,

S.D. New York.

April 7, 2010.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Marc E. Kasowitz, Paul Michael O'Connor, III, Seth A. Moskowitz, Kasowitz, Benson, Torres & Friedman, LLP, New York, NY, for Plaintiff.

David C. Segal, Douglas Ian Segal, Sukenik, Segal & Graff, P.C., New York, NY, for Defendant.

MEMORANDUM & ORDER

MICHAEL H. DOLINGER, United States Magistrate Judge:

Plaintiff Edge Group WAICCS, LLC (“Edge Group”) commenced this lawsuit to seek specific performance of a contract for the sale of an interest in a limited liability company. The anticipated transaction would have involved a payment of $20 million by defendant Sapir Group LLC (“Sapir”) in exchange for a 50 percent interest in WAICCS Las Vegas 2 LLC, a limited liability company that was the sole member of another limited liability company, WAICCS Las Vegas 3 LLC.¹ WAICCS 3 in turn holds a 20.4 percent undivided ownership interest in a parcel of undeveloped real estate in Las Vegas, Nevada.

In responding to the complaint (as amended), defendant admitted that it had not proceeded with the purchase, as required under an option that it had exercised. It contended principally, however, that plaintiff was not entitled to specific performance and was limited to the receipt of one million dollars that Sapir had previously placed in an escrow account in compliance with the requirement of the amended Option Agreement into which Sapir had entered with plaintiff.

At the conclusion of discovery, both parties have moved for summary judgment. Sapir seeks, in substance, a determination that plaintiff's relief is limited to payment of the one million dollars now held in escrow, or, possibly, no payment at all because it has not proven or mitigated its damages. Plaintiff seeks entry of judgment ordering specific performance of the contract, that is, payment of $20 million in exchange for tender of its ownership interest in WAICCS 2.²

For the reasons that follow, plaintiff's motion is granted in part and defendant's motion is denied in its entirety.

A. Summary Judgment Standards

Before addressing the parties' summary-judgment motions, we summarize the pertinent standards for assessing such a motion. The court may enter summary judgment only if it concludes that there is no genuine dispute as to the material facts and that, based on the undisputed facts, the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Feingold v. New York, 366 F.3d 138, 148 (2d Cir.2004). “An issue of fact is ‘material’ for these purposes if it ‘might affect the outcome of the suit under the governing law [while] [a]n issue of fact is ‘genuine’ if ‘the evidence is such that a reasonable jury could return a verdict for the nonmoving party.’ ” Shade v. Hous. Auth. of the City of New Haven, 251 F.3d 307, 314 (2d Cir.2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). It is axiomatic that the responsibility of the court in deciding a summary-judgment motion “is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party.” Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986); see, e.g., Ricci v. DeStefano, --- U.S. ----, 129 S.Ct. 2658, 2677, 174 L.Ed.2d 490 (2009); Anderson, 477 U.S. at 255, 106 S.Ct. 2505; Howley v. Town of Stratford, 217 F.3d 141, 150-51 (2d Cir.2000).

The party moving for summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the “pleadings, the discovery and disclosure materials on file, and any affidavits” that demonstrate the absence of a genuine issue of material fact. Fed.R.Civ.P. 56(c); see, e.g., Celotex, 477 U.S. at 323, 106 S.Ct. 2548; Koch v. Town of Brattleboro, 287 F.3d 162, 165 (2d Cir.2002). If the non-moving party has the burden of proof on a specific issue, the movant may satisfy its initial burden by demonstrating the absence of evidence in support of an essential element of the non-moving party's claim. See, e.g., Celotex, 477 U.S. at 322-23, 325, 106 S.Ct. 2548; PepsiCo, Inc. v. Coca-Cola Co., 315 F.3d 101, 105 (2d Cir.2002); Goenaga v. March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir.1995). If the movant fails to meet its initial burden, however, the motion will fail even if the opponent does not submit any evidentiary materials to establish a genuine factual issue for trial. See, e.g., Adickes v. S.H. Kress & Co., 398 U.S. 144, 160, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Giannullo v. City of New York, 322 F.3d 139, 140-41 (2d Cir.2003).

If the moving party carries its initial burden, the opposing party must then shoulder the burden of demonstrating a genuine issue of material fact. See, e.g., Beard v. Banks, 548 U.S. 521, 529, 126 S.Ct. 2572, 165 L.Ed.2d 697 (2006); Celotex, 477 U.S. at 323-24, 106 S.Ct. 2548; Santos v. Murdock, 243 F.3d 681, 683 (2d Cir.2001). In doing so, the opposing party cannot rest “merely on allegations or denials” of the factual assertions of the movant, Fed.R.Civ.P. 56(e); see, e.g., Goldstein v. Hutton, Ingram, Yuzek, Gainen, Carroll & Bertolotti, 374 F.3d 56, 59-60 (2d Cir.2004), nor can it rely on its pleadings or on merely conclusory factual allegations. See, e.g., Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir.2000). It must also “do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); see also Woodman v. WWOR-TV, Inc., 411 F.3d 69, 75 (2d Cir.2005). Rather, it must present specific evidence in support of its contention that there is a genuine dispute as to the material facts. See, e.g., Celotex, 477 U.S. at 324, 106 S.Ct. 2548; Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir.1998); Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 526 (2d Cir.1994).

If both sides move for summary judgment, the court must independently assess each motion. If either movant fails to demonstrate that the material facts are undisputed and dictate judgment for that party, then that party's motion must be denied. See, e.g., Krauss v. Oxford Health Plans, Inc., 517 F.3d 614, 621-22 (2d Cir.2008); White River Amusement Pub, Inc. v. Town of Hartford, 481 F.3d 163, 167 (2d Cir.2007).

B. The Record Facts

Most of the pertinent facts are undisputed, although the inferences to be drawn from those facts are the subject of extensive, and often repetitive, briefing. We first summarize the evidence presented to us, indicating those factual contentions that seem to be disputed.

Plaintiff Edge Group is a limited liability company that engages in real estate investment and development in Las Vegas, Nevada. (Decl. of Reagan Silber in Supp. of Edge Group's Mot. for Summ. J., executed June 26, 2009, ¶ 2). Edge Group and Credit Suisse Management LLC (“Credit Suisse”) are the sole members of WAICCS 2, with each of them owning a fifty-percent share of the company. ( Id. at ¶ 4). Under the operating agreement for WAICCS 2, neither member may transfer its interest to a competitor without prior written consent of the other member. ( Id. at ¶¶ 5-6; Decl. of Paul M. O'Connor III, Esq. in Supp. of Edge Group's Mot. for Summ. J., executed June 26, 2009, Ex. 3 at f 10.02). WAICCS 2 is the sole member of WAICCS 3, a Delaware limited liability company that owns a 20.4 percent undivided interest, as a tenant-in-common, in a parcel of largely undeveloped real estate in Las Vegas. (Silber Decl. at ¶¶ 7-8). The intended development plan for the site involved the construction of a “several thousand room hotel and casino....” ( Id. at ¶ 10). Under the terms of the tenancy-in-common agreement between WAICCS 3 and the co-owners of the property, WAICCS 3 was permitted to transfer a majority of its interest in the property only upon unanimous consent of the other owners, and was permitted to transfer up to 49 percent of its interest only to a non-competitor of the other owners, with a competitor being broadly defined as an entity that “engages in, or manages or directs Persons that engage in, a business which is identical or similar to, or in direct competition with, the business conducted by any of the Owners (or their Affiliates) at the time such Transfer anywhere in the United States.” (O'Connor Decl., Ex. 7 at § 7.1(a), (c); Silber Decl. at ¶¶ 11-12). For transfers that required the consent of the other owners, those owners possessed a right of first offer. ( Id., Ex. 7 at § 7.2).

On November 5, 2007 Edge Group and Credit Suisse entered into a Call Option Agreement under which plaintiff granted Credit Suisse an option to purchase Edge Group's interest in WAICCS 2 for the price of $20 million plus any amounts that Edge Group had contributed to the company in the period from the execution of the Call Option Agreement until the closing of the purchase of the Edge Group's interest pursuant to the option. (Silber Decl. at ¶¶ 18, 20; O'Connor Decl., Ex. 1 at p. 2). The Call Option Agreement defined the option exercise period as extending for sixty days from November 5, 2007, until 5:00 p.m. on January 4, 2008. (O'Connor Decl., Ex. 1 at pp. 1-2).

To exercise the option, Credit Suisse was required to deliver to Edge Group a timely “Call Exercise Notice.” ( Id., Ex. 1 at § 2.04). The Agreement also gave Credit Suisse the right, subject to certain conditions, to assign the option to another party. ( Id., Ex. 1 at p. 2 & § 3.08). The apparent premise for this arrangement was the understanding that Credit Suisse would in fact undertake a search for an interested buyer and would then assign the option to...