Jpmorgan Chase Funding Inc. v. Hehman

• Decision Date: 31 May 2017
• Docket Number: Index No.: 653040/2016
• Parties: JPMORGAN CHASE FUNDING INC., Plaintiff, v. RICHARD ALLEN HEHMAN, Defendant. RICHARD ALLEN HEHMAN, Third-Party Plaintiff, v. JPMORGAN CHASE & CO., Third-Party Defendant.
• Court: New York Supreme Court

2017 NY Slip Op 31178(U)

JPMORGAN CHASE FUNDING INC., Plaintiff,
v.
RICHARD ALLEN HEHMAN, Defendant.

RICHARD ALLEN HEHMAN, Third-Party Plaintiff,
v.
JPMORGAN CHASE & CO., Third-Party Defendant.

Index No.: 653040/2016

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: PART 35

RECEIVED: June 1, 2017
May 31, 2017

NYSCEF DOC. NO. 60

DECISION/ORDER

Mot. Seqs. 002, 003

HON. CAROL R. EDMEAD, J.S.C.:

MEMORANDUM DECISION

This is an action for, inter alia, breach of contract.

In motion sequence 002, plaintiff, JP Morgan Chase Funding Inc. ("JPMC Funding"), now moves pursuant to CPLR 3211(a)(1), (7), and (b) to dismiss the counterclaims and affirmative defenses contained in pro se defendant, Richard Allen Hehman's ("Hehman") Answer. In motion sequence 003, third-party defendant, JP Morgan Chase & Co. ("JPMC"), moves pursuant to CPLR 3211(a)(1) and (7) to dismiss the defendant/third party defendant, Hehman's third party complaint ("Third-Party Complaint").

Factual Background

In June 2000, Hehmen an employee of JPMC, entered as a partner into a private equity investment program known as the 2000 MD Investment Program ("Investment Program"), which

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offered the "potential for higher returns higher than those available even from a general portfolio or private equity investments, due to a built-in system of recourse and non-recourse financing ("Leverage")" (Compl ¶¶2, 12-13, 18-19, 22-23, 40; JPMC Funding MOL p.2; Opp. mot seq. 003, p.4). The offer to participate in the Investment Program was made pursuant to the terms of an offering memorandum ("Offering Memorandum") (¶17; Opp. mot seq. 003, p.5). Participation in the Investment Program was established by purchasing a limited partner interest in Sixty Wall Street Fund, L.P. ("Partnership") (Compl. ¶¶2, 13-14).

In 2000, JPMC Funding, the designated lender for the Investment program, extended to Hehman, a participant in the Investment Program, a Full Recourse Loan totaling $16,949.76, (Compl. ¶¶1, 22-23, 32-33, 44-45). Based on the performance of the investments in the annual program, Hehman's share of the program's investment proceeds proved insufficient to repay his Full Recourse Loan, and thus, he became obligated to repay the loan (¶¶6-7, 25-27). Hehman's Full Recourse Loan matured on June 9, 2010 and accordingly, the full amount ($16,949.76, plus interest of $9,386.20) became due and payable (¶62).

When Hehman failed to make any payment despite demands made, JPMC Funding commenced this action alleging: (1) breach of contract; (2) breach of implied contract; (3) money lent; (4) unjust enrichment; and (5) account stated.

Hehman filed his answer ("Answer") asserting as affirmative defenses: (1) accord and satisfaction; (2) estoppel; (3) statute of limitations; (4) violation of duty of good faith and fair dealing; (5) latches; (6) "improper demand for payment at an address that [JPMC] knew or should have known was not that of [Hehman]" (Ans. p.2); and (7) fraud.

Additionally, Hehman alleged several counterclaims (collectively "Counterclaims"),

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including: (1) breach of contract; (2) breach of implied contract; (3) unjust enrichment; (4) harassment; (5) fraud; and (6) indemnification.

In turn, Hehman commenced a Third-Party action against JPMC.

Motion Sequence 002

JPMC Funding's Motion to Dismiss the Affirmative Defenses and Counterclaims

In support of its motion to dismiss, JPMC Funding argues that Hehman's counterclaim that JPMC Funding breached the Release and Non-Disparagement Provisions of the Separation Agreement (the "Separation Agreement"), which addressed Hehman's leave of active employment from JP Morgan & Co. fails. The Release Provision only encompasses claims, causes of action and liabilities existing prior to the December 28, 2000 execution date of the Separation Agreement. JPMC Funding's claims and causes of action against Hehman on the Full Recourse Loan, and Hehman's liability with respect to that Loan did not exist prior to the execution of the Separation Agreement. As of the date of the execution of the Separation Agreement, "there was no way to tell whether [Hehman's] share of any future investment proceeds would prove sufficient to cover his Full Recourse Loan," and therefore Hehman's liability to repay the loan, and JPMC Funding's claims or causes of action did not exist as of the date of the Separation Agreement (JPMC Funding, MOL p.11). Instead, pursuant to the terms of the Agreement of Limited Partnership of Sixty Wall Street Fund, L.P. ("Partnership Agreement"), Hehman did not become personally liable on the Full Recourse Loan until the maturity of that Loan, which was June 9, 2010-after the execution of the Separation Agreement (Compl., Ex. 1, Partnership Agreement at § 4.03(a)(i)).

Further, whether the Full Recourse Loan "was known" by the parties to the Separation

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Agreement when they entered into the Agreement is irrelevant, since the Agreement only concerns whether any claims, causes of action or liabilities with respect to the Full Recourse Loan existed as of December 2000.

Moreover, JPMC Funding did not breach the Release Provision, since the unambiguous language of the Release Provision establishes that JPMC, and not JPMC Funding, was the only entity releasing Hehman from existing claims or liabilities.

Further, like the Release Provision, the Non-Disparagement Provision by its plain terms applies to JPMC, not JPMC Funding. Moreover, Henman's counterclaim that JPMC Funding made derogatory and critical statements about him through the Complaint fails, as Hehman fails to identify any disparaging statements within the Complaint. Further, Hehman does not allege any damages resulting from the allegedly defamatory and disparaging statements. The Complaint sets forth neutral factual allegations, and does not impugn the character of Hehman. Finally, to the extent Hehman alleges a defamation claim, JPMC Funding is shielded from liability under the absolute privilege afforded to statements made in litigation.

Next, Hehman's counterclaim that an implied contract existed between him and JPMC Funding fails, since Hehman admits that: "Pursuant to that contract implied in fact, [Hehman] granted the release to [JPMC Funding] and made certain other material businesses promise as reflected in the Separation Agreement to [JPMC Funding]" (JPMC Funding, MOL p.16; Ans. ¶33).

Further, the Answer fails to state a counterclaim for unjust enrichment. Hehman alleges that he conferred a benefit on JPMC Funding "in the form of [Hehman's] general release in favor of, and other material promises" to JPMC Funding in the Separation Agreement (Ans. ¶38), and

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admits that the Separation Agreement covers the subject matter of the unjust enrichment counterclaim.

And, Hehman's harassment claim likewise fails, since he fails to allege any facts alleging improper conduct on behalf of JPMC Funding and New York does not recognize a claim for common law harassment. Moreover, to the extent Hehman pleads a claim for abuse of process, such claim fails; the commencement of this action is insufficient to establish abuse of process.

As to the fraud and/or fraudulent inducement counterclaim, Hehman's allegation that JPMC Funding misrepresented its future intent to perform under the Separation Agreement is insufficient to establish a cause of action for fraud (MBIA Ins. Corp. v. Countrywide Home Loans, Inc., 87 A.D.3d 287, 928 N.Y.S.2d 229 [1^st Dept 2011] ("General allegations that a defendant entered into a contract with the intent not to perform are insufficient to support a fraud claim")). Further, Hehman fails to plead his fraud claim with the requisite particularity pursuant to CPLR 3016(b).

Finally, Hehman does not state a counterclaim for indemnification since he fails to allege any losses or liabilities to any third party for which JPMC Funding could be held responsible. Moreover, to the extent that Hehman's claim for indemnification alternatively requests specific performance, JPMC Funding has established that it did not breach the Release Provision.

Hehman's Opposition

In opposition to JPMC Funding's motion to dismiss, Hehman first argues that the "offer to participate in the Investment Program was made to 'senior executive officers' by the entirety of [JPMC]" to Hehman, and therefore, the Release Provision encompassed the Full Recourse Loan (Opp. mot. seq. 002, p.8).

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Further, JPMC Funding's motion to dismiss is premature, since JPMC (which issued the Separation Agreement) is an integral part of this action and has not answered the Third-Party Complaint.

Moreover, the Full Recourse Loan was released pursuant to the Release Provision since it arose from Hehman's employment and was executed prior to the execution of the Separation Agreement.

Furthermore, Hehman argues that an issue of fact exists as to whether it would be fair to enforce the "[Release Provision] against [Hehman's] claims when [Hehman] was given the-take-it-or-leave-it proposition of signing the [Separation Agreement] or not receiving the payment" (p.9). Additionally, the "Transfer Agreement was obtained unconscionably and in violation of the Separation Agreement" (p.9).

Finally, as to the fraud counterclaim, Hehman alleges that he properly alleged the "fraud in the form of tortuous [sic] interference" (p.9).

JPMC Funding's Reply

In reply, JPMC Funding argues that the Release Provision does support Hehman's breach of contract counterclaim, since the Provision only applies to claims or liabilities arising prior to the execution of the Separation Agreement. Further, Hehman's claim that he believed the Separation Agreement encompassed the entirety of J.P Morgan & Co. Inc., and that the Separation Agreement was ambiguous as to which entities it applies fails since the Release Provision specifically applies only to JPMC and not JPMC Funding.

Moreover, Hehman fails to address JPMC Funding's argument that the breach of the Non-Disparagement Provision counterclaim should be dismissed....