M Entm't., Inc. v. Leydier

• Decision Date: 16 March 2010
• Parties: M ENTERTAINMENT, INC., et al., Plaintiffs-Appellants, v. Laurence LEYDIER, et al., Defendants-Respondents.
• Court: New York Supreme Court — Appellate Division

897 N.Y.S.2d 402 71 A.D.3d 517 M ENTERTAINMENT, INC., et al., Plaintiffs-Appellants, v. Laurence LEYDIER, et al., Defendants-Respondents. Supreme Court, Appellate Division, First Department, New York. March 16, 2010.

Bienstock & Michael, P.C., New York (Randall S.D. Jacobs of counsel), for appellants.

Satterlee, Stephens, Burke & Burke, LLP, New York (Christopher R. Belmonte of counsel), for Laurence Leydier, respondent.

Gogick, Byrne & O'Neill, LLP, New York (John M. Rondello, Jr. of counsel), for Wardrop Engineering Inc. and J.C. "Cam" Thompson, respondents.

TOM, J.P., ANDRIAS, BUCKLEY, DeGRASSE, RICHTER, JJ.

Judgment, Supreme Court, New York County (Karen S. Smith, J.), entered November 27, 2007, dismissing the complaint, and bringing up for review an amended order, same court and Justice, entered on or about October 17, 2007, which, after a nonjury trial, directed entry of the judgment, unanimously modified, on the law, plaintiffs granted judgment on the issue of liability on that portion of their claim for fraudulent inducement as against defendant Leydier based on the August 19, 2000 Memorandum of Understanding (MOU),the matter remanded for a hearing on the issue of damages with respect to that claim, plaintiffs' motion to amend the pleadings to conform to the evidence granted to the extent of permitting reference to the Haptek/Character Entertainment Addendum, and otherwise affirmed, without costs. Appeal from the amended order, unanimously dismissed, without costs, as subsumed in the appeal from the judgment.

The Court of Appeals has ruled (13 N.Y.3d 827, 891 N.Y.S.2d 6, 919 N.E.2d 177 [2009] ) that this Court has jurisdiction to entertain the appeal notwithstanding mail service of the notice of appeal on defendants' attorneys in contravention of CPLR 2103(f)(1), by depositing said notice in an official depository under the exclusive care and custody of the United States Postal Service outside the state. Leydier does not dispute that plaintiffs filed the notice with the County Clerk or that defense counsel received the notice well within the 30-day statutory time period set forth in CPLR 5513(a). Therefore, defendants have not been prejudiced as a result of the mailing from without the state, and we exercise our discretion to disregard the irregularity (CPLR 2001, 5520[a]; see People ex rel. Di Leo v. Edwards, 247 App.Div. 331, 334, 286 N.Y.S. 840 [1936] ).

The record demonstrates that plaintiffs are entitled to judgmenton the issue of liability on that portion of their claim of fraudulent inducement against Leydier based on the MOU. Clear and convincing evidence ( see e.g. Chopp v. Welbourne & Purdy Agency, 135 A.D.2d 958, 959, 522 N.Y.S.2d 367 [1987] ) shows that Leydier misrepresented or omitted a material fact in connection with the MOU when he represented to plaintiffs that he owned or possessed the exclusive, worldwide rights to the subject software when in fact he did not, that plaintiffs relied on that misrepresentation or omission to their detriment, and that plaintiffs were damaged as a result of paying Leydier $150,000 for the right to exercise an option to acquire rights that he did not own ( see Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 421, 646 N.Y.S.2d 76, 668 N.E.2d 1370 [1996] ).

However, plaintiffs failed to prove by clear and convincing evidence that Leydier fraudulently induced them to enter into the October 22, 2000 License Agreement because, by the time they entered into that agreement, plaintiffs had discovered that Leydier did not possess the full extent of the rights that he represented. Plaintiffs thus had "hints of falsity" in their business dealings with Leydier, imposing upon them a heightened degree of diligence ( see Global Mins. & Metals Corp. v. Holme, 35 A.D.3d 93, 100, 824 N.Y.S.2d 210 [2006], lv. denied 8 N.Y.3d 804, 831 N.Y.S.2d 106, 863 N.E.2d 111 [2007] ). Furthermore, plaintiffs were advised by counsel not to go forward with the transaction without conducting further diligence, yet proceeded with the transaction without contacting Haptek, the third party from whom plaintiffs discovered Leydier had acquired the rights, to determine the nature and extent of those rights under the various agreements between them. Nor did plaintiffs insist on more protective language in the License Agreement to account for the possibility...