Faust Harrison Pianos Corp. v. Allegro Pianos, LLC
| Decision Date | 28 March 2013 |
| Docket Number | 09 Civ. 6707 (ER) |
| Parties | FAUST HARRISON PIANOS CORP., GRAND DESIGN PIANO RESTORATION CORP., IRVING FAUST, JOSHUA FAUST, DORIAN FAUST and SARA FAUST, Plaintiffs, v. ALLEGRO PIANOS, LLC, BUKAI PROPERTIES, LLC, ORI BUKAI and REBECCA BUKAI, Defendants - Counterclaimants. v. HARRISON FAUST ACQUISITION CORP. and SARA FAUST, Counterclaim Defendants. |
| Court | U.S. District Court — Southern District of New York |
This action arises out of a family dispute involving several family-owned businesses and related transactions. Before the Court are cross-motions for partial summary judgment pursuant to Fed. R. Civ. P. 56. Docs. 130, 150, 160. For the reasons stated herein, Plaintiffs' motion is GRANTED in part and DENIED in part and Defendants' motion is GRANTED in part and DENIED in part.
Plaintiff Irving Faust is a managing director of Plaintiff Faust Harrison Pianos, Inc. ("FHP"). I. Faust Opp. Decl. ¶ 1.2 FHP is in the business of acquiring, restoring, servicing and selling high-end pianos. Nelson Opp. Aff., Ex. B at 3. Irving Faust is also part owner and President of Plaintiff Grand Design Piano Restoration Corporation ("Grand Design"), an affiliate of FHP that performs high-end restoration of vintage pianos, part owner and Vice-President of Defendant Bukai Properties, LLC ("Bukai Properties"), and part owner and President of Counterclaim Defendant Harrison Faust Acquisition Corporation ("FHC"). I. Faust Opp. Decl. ¶¶ 1, 2. Irving Faust's primary business partner is his wife, Plaintiff Sara Faust. Id. ¶ 2. Joshua Faust, their son, is a co-owner and co-manager of Grand Design. Id.
Defendant Ori Bukai is the son-in-law of Irving and Sara Faust and is married to their daughter, Defendant Rebecca Bukai. Id. ¶¶ 3- 4. Ori Bukai is the owner and manager of Defendant Allegro Pianos, LLC ("Allegro Pianos") and co-owner and Chief Executive Officer ("CEO") of Bukai Properties. Id. ¶ 5; Nelson Aff., Ex. C. Allegro Pianos is in the retail pianobusiness and Bukai Properties is a real estate investment company that owns a property in Stamford, Connecticut. I. Faust Opp. Decl. ¶¶ 5-6. The property in Stamford serves as Allegro Pianos' showroom and is home to a music school owned and managed by Ori Bukai. Id.
Over the years, the parties entered into various transactions, including alleged loans and profit-sharing agreements, some of which are the subject of the instant dispute. Nelson Opp. Aff., Ex. B at 4. The Court outlines the main disputed agreements and transactions below; however, there are additional disputes addressed in this Opinion which are not summarized below.
At some point between 1998 and 2002, FHP and Allegro Pianos first entered into oral Cooperation Agreements3 pursuant to which the two companies agreed to share profits, cross-refer customers, place pianos for sale on consignment in each other's showrooms, and reimburse the consignor for the costs of pianos sold on consignment. Pls.' 56.1 ¶ 18; Defs.' Resp. 56.1 ¶ 18. The parties now accuse each other of breaching the Cooperation Agreements beginning in approximately 2006 or 2007. Pls.' 56.1 ¶ 20; Defs.' Resp. 56.1 ¶ 19.
Defendants allege that as part of the 2007, 2008 and 2009 iterations of the Cooperation Agreements, the parties entered into an oral agreement providing the parties with various rights in the event of termination of the business relationship (the "Cessation Agreement"). See generally O. Bukai Opp. Decl. ¶¶ 84-85. Defendants further allege that the Cessation Agreementwas a necessary and material part of the profit sharing portion of the Cooperation Agreements. Id. ¶¶ 84-86. As part of the Cessation Agreement, Defendants argue that FHP was prohibited from directly contacting the Mason & Hamlin piano company and soliciting them to stop selling pianos to Allegro. Id. ¶ 87. Defendants allege that FHP violated that provision of the Cessation Agreement. Id. ¶ 88. Plaintiffs dispute the existence of the Cessation Agreement. I. Faust Decl. ¶ 29.
On December 23, 2007, Irving Faust sent Ori Bukai an email attaching a document titled "Summary of a Draft Deal," and with the subject line "very latest with highlights." I. Faust Decl., Ex. 16. The document purports to set the rights of the parties upon termination of the business relationship, including with respect to the Mason & Hamline line, and states, "This Summary shall become effective upon execution by all parties." Id. The parties did not sign this document. Defs.' Resp. 56.1 ¶ 26.
On January 24, 2004, Irving Faust and Ori and Rebecca Bukai entered into a written boat loan agreement ("Boat Loan Agreement") for $150,000.000 dollars. Faust signed the agreement as "Lender" and the Bukais signed as "Borrower[s]." I. Faust Decl. ¶ 7, Ex.1. The Boat Loan Agreement provides for interest payments of $1,000.00 dollars per year beginning December 1, 2004 and payment of the principal sum of $150,000.00 dollars on January 29, 2009. The agreement also includes a provision on "Security" which states, "The 59-foot Carver motor yacht to be purchased with these funds shall serve as collateral for this loan." Id.
According to Defendants, although the Boat Loan Agreement was signed by the parties, it was subsequently voided by the parties' actions and agreements. Defs.' Resp. 56.1 ¶ 1. Noboat was purchased under the Boat Loan Agreement. Instead, Ori Bukai asserts that the parties formed an oral agreement ("New Boat Agreement") the following month, in February 2004. O. Bukai Opp. Decl. ¶ 116. According to Bukai, pursuant to the New Boat Agreement the Fausts agreed to purchase the boat as co-owners with the Bukais, and not as collateral interest holders. Id. ¶¶ 117-18. Bukai further alleges that under the New Boat Agreement, each party invested approximately $150,000.00 dollars in the transaction and the parties took out a $700,000 dollar loan with Wachovia Bank. Id. ¶ 120. Plaintiffs dispute that the Boat Loan Agreement was ever terminated. I. Faust Opp. Decl. ¶¶ 11-12.
Defendants proffered a Marine/Note and Security Agreement ("Boat Note") for a vessel named "Blue Jam," dated March 10, 2004 and in the amount of $700,000.00 dollars, and signed by Ori and Rebecca Bukai as "Borrower[s]" and Irving and Sara Faust as "Co-Borrower[s]." O. Bukai Opp. Decl., Ex. 11. According to the Boat Note, Irving and Sara Faust are "equally liable for repayment of [the] loan." Id., Ex. 11.
On October 16, 2005, Rebecca Bukai wrote a check to Irving Faust for $2,000.00 dollars and made a notation on the check that the payment was for "boat loan interest: 2004 & 2005." I. Faust Decl., Ex. 6. According to Rebecca Bukai, Irving Faust specifically asked her to write him a check with the notation for "boat loan interest: 2004 & 2005." R. Bukai Decl. ¶ 34. She did not intend to bind herself, or her husband, to any loan obligation by writing that check. Id. ¶ 36.
A Certificate of Documentation issued by the United States Coast Guard, National Vessel Documentation Center, dated February 25, 2010, lists Blue Jam as being owned by Ori and Rebecca Bukai and Irving and Sara Faust. O. Bukai Opp. Decl., Ex. 10.
Ori and Rebecca Bukai were the initial owners of Bukai Properites. I. Faust Opp. Decl. ¶ 6. In 2007, Irving Faust and Ori Bukai entered into negotiations to finance the construction of Allegro Pianos' showroom on Bukai Properties' land in Stamford, Connecticut. Id. ¶ 8.
On June 15, 2007, pursuant to a Sale and Withdrawal Agreement, Rebecca Bukai sold her shares of Bukai Properties to Irving Faust for the purchase price of "One ($1.00) Dollar and other valuable consideration." Id. ¶ 13; I. Faust Opp. Decl., Ex. 4. The agreement further states:
This Agreement and the Amended and Restated Operating Agreement, including the exhibits and schedules hereto and thereto, contain the entire understanding of the parties hereto with respect to the subject matter hereof and there are no restrictions, representations, warranties, covenants or undertakings of the parties hereto except those expressly set forth herein.
On June 15, 2007, Irving Faust and Ori Bukai executed an Operating Agreement for Bukai Properties, which was later re-executed as the Amended and Restated Operating Agreement (the "Operating Agreement") in August 2008. Pls.' Resp. 56.1 ¶ 1; Nelson Aff., Ex. C. The Operating Agreement is governed by the laws of the State of Connecticut and states:
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