Fuller Landau Advisory Servs. Inc. v. Gerber Fin. Inc., 17-CV-6027 (JPO)

• Decision Date: 07 August 2018
• Docket Number: 17-CV-6027 (JPO)
• Citation: 333 F.Supp.3d 307
• Parties: FULLER LANDAU ADVISORY SERVICES INC., Plaintiff, v. GERBER FINANCE INC., Defendant.
• Court: U.S. District Court — Southern District of New York

333 F.Supp.3d 307

FULLER LANDAU ADVISORY SERVICES INC., Plaintiff,

v.GERBER FINANCE INC., Defendant.

17-CV-6027 (JPO)

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

Signed August 7, 2018

Filed August 8, 2018

Michael E. Norton, Norton & Associates LLC, New York, NY, for Plaintiff.

Charles Leonard Rosenzweig, Delbello Donnellan Weingarten Wise & Wiederkehr LL, White Plains, NY, Henry G. Swergold, Richard A. Lafont, Stan Lawrence Goldberg, Platzer, Swergold, Karlin, Levine, Goldberg & Jaslow, L.L.P., New York, NY, for Defendant.

OPINION AND ORDER

J. PAUL OETKEN, District Judge:

Plaintiff Fuller Landau Advisory Services Inc. brings this action against Defendant Gerber Finance Inc. for breach of contract, breach of the implied covenant of good faith and fair dealing, and an accounting. Defendant moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), and the Court converted that motion under Federal Rule of Civil Procedure 12(d) into one for summary judgment. For the reasons that follow, Defendant's motion for summary judgment is granted in part.

I. Background¹

Plaintiff Fuller Landau Advisory Services Inc. ("Fuller") provides, among other things, investment banking advisory services relating to corporate transactions. (Dkt. No. 1 ("Compl.") ¶ 7.) Defendant Gerber Finance Inc. ("Gerber") is a financial services firm. (Compl. ¶ 8.) During the relevant time period, Gerber was owned by five shareholders: Investec 1 Limited, Juge Holdings Inc., Catnap Properties Inc., Justin Wessels, and Gerald Joseph, who also served as Gerber's Chief Executive Officer. (Compl. ¶¶ 10–11.)

Gerber's shareholders wanted to sell the company, and around June 2016, Gerber retained Fuller to provide financial advisory services in connection with Gerber's potential sale. (Dkt. No. 21, Ex. 1 ("Fee Agreement") at 1; Compl. ¶ 12.) The parties agreed that if Gerber sold its business, Gerber would compensate Fuller for its services by paying a "Success Fee." (Fee Agreement ¶ 6.) The Success Fee would be equal to 2% of the "minimum value"² of the "Transaction Amount" plus 1% of any Transaction Amount above the minimum value. (Id. ) In relevant part, the Fee Agreement defines the Transaction Amount as follows:

[T]he aggregate value of all voting and non-voting common equity of the Company, calculated on a fully diluted basis and based upon the purchase price at which the Transaction takes place, plus the aggregate amount of: (i) any indebtedness, preferred shares and other securities outstanding at the time of the Transaction assumed by the buyer....

(Fee Agreement ¶ 7.)

Pursuant to the Fee Agreement, Fuller introduced a potential buyer, Trade Finance Solutions (TFS Canada Bond Series, Inc.) ("TFS" or "Buyer"), to Gerber. (Compl. ¶ 28.) In January 2017, Global Fund Holdings Corp., an affiliate of TFS, purchased all of the outstanding shares of Gerber stock form the former shareholders. (Compl. ¶ 30; Dkt. No. 26, Ex. B at 1.)

Prior to the sale, Gerber owed a debt to a syndicate of lenders led by Bank of America/Merrill Lynch ("the Lenders"). (Compl. ¶ 15; Dkt. No. 21, Ex. 2 at 1.) Gerber's credit agreement with the Lenders had a "change of control" clause, under which a sale of 51% or more of Gerber's stock would trigger a default. (Dkt. No. 21 ¶ 13; Dkt. No. 21, Ex. 2 at 4, 60.)

Plaintiff alleges that when TFS purchased Gerber, TFS also convinced the Lenders to allow the change in control to occur without triggering a default of Gerber's loan obligations. (Compl. ¶ 30.) According to Plaintiff, the Lenders agreed to waive enforcement of the change-in-control clause because all of Gerber's outstanding indebtedness to the Lenders "was assumed by and transferred to" TFS and its affiliates. (Compl. ¶ 31.) The parties dispute whether TFS actually "assumed" Gerber's indebtedness to the Lenders.

It is undisputed, however, that TFS's affiliate entered into a limited guaranty with Bank of America (on behalf of all of the Lenders). (Dkt. No. 21, Ex. 4 at 1.) According to Plaintiff, TFS "guaranteed to the Lenders the due and timely payment" of Gerber's indebtedness as of the closing date of Gerber's sale. (Dkt. No. 21 ¶ 20.) As collateral securing its guaranty, TFS granted the Lenders a security interest in all of the Gerber shares it acquired. (Id. ; Dkt. No. 21, Ex. 5.) Plaintiffs also contend that TFS "became a party to various agreements" with the Lenders "pursuant to an amendment to [Gerber's] credit agreement." (Dkt. No. 22 at 3.)

After the TFS purchase, Gerber paid Fuller a Success Fee based on the purchase price of the shares. (Compl. ¶ 35.) Fuller contends, however, that it is also entitled to a Success Fee based on the value of the debt that Gerber owed to the Lenders at the time of the TFS purchase. (Compl. ¶¶ 33, 35, 37.) Gerber has refused to pay a Success Fee based on that debt. (Compl. ¶ 36.) Gerber has also allegedly refused to provide Fuller with relevant information and documents relating to TFS's guaranty agreement with the Lenders. (Compl. ¶ 38.)

In August 2017, Fuller brought this suit against Gerber for breach of contract, breach of the implied covenant of good faith and fair dealing, and an accounting. (Compl. ¶¶ 40–60.) Defendant moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. (Dkt. No. 15.) In its opposition brief, Plaintiff argued that because Defendant's motion relied on matters outside the pleadings, the motion should be converted into a motion for summary judgment pursuant to Rule 12(d). (Dkt. No. 22 at 12–14.) On May 15, 2018, the Court gave the parties notice that the motion would be treated as one for summary judgment under Rule 56 and permitted the parties an opportunity to file any relevant supplementary materials. (Dkt. No. 28.)

II. Legal Standard

Summary judgment is appropriate when "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A fact is material if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is genuine if, considering the record as a whole, a rational jury could find in favor of the non-moving party. Ricci v. DeStefano , 557 U.S. 557, 586, 129 S.Ct. 2658, 174 L.Ed.2d 490 (2009).

On summary judgment, the party bearing the burden of proof at trial must provide evidence on each element of its claim or defense. Celotex Corp. v. Catrett , 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "If the party with the burden of proof makes the requisite initial showing, the burden shifts to the opposing party to identify specific facts demonstrating a genuine issue for trial, i.e. , that reasonable jurors could differ about the evidence." Clopay Plastic Prods. Co. v. Excelsior Packaging Grp., Inc. , No. 12 Civ. 5262, 2014 WL 4652548, at *3 (S.D.N.Y. Sept. 18, 2014) (citing Fed. R. Civ. P. 56(c) ; Anderson , 477 U.S. at 250–51, 106 S.Ct. 2505 ). The court views all "evidence in the light most favorable to the non-moving party," and summary judgment may be granted only if "no reasonable trier of fact could find in favor of the nonmoving party." Allen v. Coughlin , 64 F.3d 77, 79 (2d Cir. 1995) (second quoting Lund's, Inc. v. Chem. Bank , 870 F.2d 840, 844 (2d Cir. 1989) ).

III. Discussion

Plaintiff alleges three causes of action: (1) breach of contract; (2) breach of the duty of good faith and fair dealing; and (3) equitable accounting. The Court addresses each in turn.

A. Breach of Contract

Under New York law,³ the elements of a breach of contract claim are "(1) the existence of an agreement, (2) adequate performance of the contract by the plaintiff, (3) breach of contract by the defendant, and (4) damages." Eternity Glob. Master Fund Ltd. v. Morgan Guar. Tr. Co. of N.Y. , 375 F.3d 168, 177 (2d Cir. 2004) (quoting Harsco Corp. v. Segui , 91 F.3d 337, 348 (2d Cir. 1996) ).

The parties' dispute centers on the third element: whether Defendant breached the Fee Agreement by failing to include the value of its outstanding bank debt to the Lenders in the Success Fee it paid to Fuller. Under the Fee Agreement, Gerber was obligated to include the debt only if it was part of the "Transaction Amount," which is defined to include "any indebtedness, preferred shares and other securities outstanding at the time of the Transaction assumed by the buyer." (Fee Agreement ¶ 7.) Therefore, the core issue can be framed even more specifically: Did TFS assume any indebtedness when it bought Gerber?

As a threshold matter, the Court must determine whether the phrase "any indebtedness ... assumed by the buyer" is ambiguous. See, e.g., Eternity Glob. Master Fund Ltd. , 375 F.3d at 177–78 ; see also JA Apparel Corp. v. Abboud , 568 F.3d 390, 396 (2d Cir. 2009) ("[T]he question of whether a written contract is ambiguous is a question of law for the court."). A contract term is unambiguous "if it has ‘a definite and precise meaning, unattended by danger of misconception in the purport of the [contract] itself, and concerning which there is no reasonable basis for a difference of opinion.’ " JA Apparel Corp. , 568 F.3d at 396 (alteration in original) (quoting Breed v. Ins. Co. of N. Am. , 46 N.Y.2d 351, 355, 413 N.Y.S.2d 352, 385 N.E.2d 1280 (1978) ). In contrast, an ambiguous contract term is "capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business." Id. at 396–97 (quoting Revson v. Cinque & Cinque, P.C. , 221 F.3d 59, 66 (2d Cir. 2000) ).

To determine whether a contract term is ambiguous, courts "look[ ] within the four corners of the document [and] not to outside sources." Id. at 396 (quoting Kass v. Kass , 91 N.Y.2d 554, 566, 673 N.Y.S.2d 350,...