Riverside Marketing, LLC v. Signaturecard, Inc., 02 CIV.0349(MBM).

• Decision Date: 04 April 2006
• Docket Number: No. 02 CIV.0349(MBM).,02 CIV.0349(MBM).
• Parties: RIVERSIDE MARKETING, LLC, Plaintiff, v. SIGNATURE CARD, INC., Transmedia Network, Inc., Idine Restaurant Group, Inc., and G.E. Financial Assurance, Defendants.
• Court: U.S. District Court — Southern District of New York

425 F.Supp.2d 523

RIVERSIDE MARKETING, LLC, Plaintiff, v. SIGNATURE CARD, INC., Transmedia Network, Inc., Idine Restaurant Group, Inc., and G.E. Financial Assurance, Defendants.

No. 02 CIV.0349(MBM).

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

April 4, 2006.

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Daniel J. Halloran, Palmieri & Castiglione, L.L.P., Mineola, NY, for Plaintiff.

David Leichtman, Maral N. Kazanjian, Morgan, Lewis & Bockius, L.L.P., New York, NY, for Defendant iDine Reward Network, Inc., formerly known as Transmedia Network, Inc.

Gregory T. Casamento, Lord, Bissell & Brook, L.L.P., New York, NY, for Defendant SignatureCard, Inc.

OPINION AND ORDER

MUKASEY, District Judge.

Plaintiff Riverside Marketing, LLC ("Riverside"), sues defendants Signature-Card, Inc. ("Signature") and iDine Rewards Network, Inc., formerly known as Transmedia Network, Inc., ("iDine"), alleging that the defendants breached a contract formed between Riverside and Signature and unjustly enriched themselves. Riverside seeks damages from Signature for breach of contract, fraud in the inducement, dilution of contract, and unjust enrichment. Riverside seeks damages from iDine for breach of contract under the theories of assumption and ratification, conversion, dilution of contract, third party benefit, and unjust enrichment. Signature and iDine have moved separately for summary judgment under Fed.R.Civ.P. 56. As explained more fully below, summary judgment is granted, and the contract against Signature and iDine are dismissed, because the clause purporting to extend the contract in perpetuity subject only to Riverside's unilateral right of termination, paradoxically makes the contract terminable at will. Further, for the reasons set forth below, no claim for unjust enrichment can be maintained against either Signature or iDine.

I.

Riverside is a New York limited liability company with a place of business in New York that was founded in 1995 to provide marketing services to Signature. (Compl. ¶ 3; Signature Rule 56.1 Statement ¶ 7) Signature, an Indiana corporation with a place of business in Illinois and a subsidiary of an Illinois corporation, operated a business called Dining a La Card ("DALC"), which allowed individual and corporate members to obtain discounts by dining at participating restaurants from 1993 until June 30, 1999. (Compl ¶ 4) To participate in DALC, a member would register a credit card and pay an annual fee in exchange for discounts and cash-back preferences at participating restaurants when that credit card was used. (Compl. ¶ 9) Restaurants that wished to participate in DALC signed an agreement with Signature, providing that Signature would buy dining credits, which then would be applied whenever a member used a registered card. (Signature Rule 56.1 Statement ¶¶ 4-5)

In a contract dated September 30, 1995, (the "Member Agreement"), Signature hired Riverside to market and promote DALC to potential members. (Compl.¶¶, 4, 8) Riverside was to receive a fixed portion of the initial membership fee for the enrollment and subsequent renewal for each new member it secured, as well as 2.5 percent of what the DALC members it secured spent at participating restaurants, up to a maximum of $75 per card for three years. (Compl. ¶ 10; Villano Dep. at 33) On September 30, 1996, the Member Agreement was modified to reduce the percentage of member revenues Riverside received from 2.5 percent to 1.5 percent. (Compl. ¶ 11; Villano Dep. at 35)

The Member Agreement states "This Agreement shall be governed in all respects by and construed in accordance with the laws of the State of Illinois." (Leichtman Decl., Ex. D ¶ 8) An addendum to the contract states that the:

initial term of the Agreement shall be for three years and shall end on September 30, 1998. Thereafter, the Agreement shall automatically renewed [sic] for additional three (3) year periods unless thirty (30) days prior to the end of a particular three year term [Riverside] provides written notification to Signature of the termination of this Agreement as of the end of the then current three year term.

(Leichtman Decl., Ex. D at Addendum ¶ 1) Additionally, the addendum states that Riverside is entitled to compensation only "so long as such customers and members are being serviced by Signature," (Leichtman Decl., Ex. D at Addendum ¶ 1), and Signature is required to "use its best efforts to prevent any other person or entity from soliciting such accounts for the purpose of offering Signature products . ." (Leichtman Decl., Ex. D at Addendum ¶ 4) Riverside and Signature struck out language in the Member Agreement addendum which would have allowed for the assignment of Signature's rights and obligations to a party acquiring DALC. (Leichtman Decl., Ex. D; Villano Dep. at 32)

The Member Agreement addendum was drafted by Riverside's attorney Brian R. Gallagher. (Villano Dep. at 22; Gallager Dep. at 10) Ronald Fodrowski, a member of Riverside, and Brian Gallagher, Riverside's attorney, negotiated the terms of the Member Agreement. (Fodrowski Dep. at 24)

Riverside alleges that the Member Agreement could be terminated only by Riverside, because it had a three-year term that automatically renewed for an additional three years unless Riverside notified Signature it was terminating the Member Agreement within 30 days of the end of each three-year term. (Compl. ¶¶ 11-12; Fodrowski Dep. at 31). Riverside believed this automatic renewal was to continue infinitely and that Signature could never terminate the Member Agreement. (Fodrowski Dep. at 31; Villano Dep. at 32)

On July 9, 1997, Signature and Riverside entered into a letter agreement (the "Restaurant Agreement"), which provided that Riverside would acquire and manage restaurants for DALC in return for commission payments. (Cassamento Aff., Ex. G) The Restaurant Agreement contains no provision relating to its duration, termination, or choice of law. (Cassamento Aff., Ex. G) It also does not refer to the Member Agreement. (Cassamento Aff., Ex. G) The Member Agreement states that it cannot "be changed, altered, or affected in any manner except in writing, executed by both parties, which specifically refers to this Agreement and expressly recited the purpose of the modification." (Leichtman Decl., Ex. D, Addendum ¶ 7)

On March 17, 1999, iDine, a Delaware corporation with a principal place of business in Florida, agreed to buy certain assets from Signature, including DALC. (Compl. ¶¶ 5, 12; Leichtman Decl. Ex. H) iDine operates a dining rewards program that purchases dining credits from participating restaurants and offers cashback awards, frequent flier miles, and other benefits to members who register their credit cards and use those cards at participating restaurants. (Robitaille Aff. ¶ 2)

The agreement between Riverside and Signature was disclosed in the asset purchase agreement between iDine and Signature (the "Asset Purchase Agreement"), but it was specifically omitted from the asset purchase as an "excluded contract." (Compl. ¶ 13; Leichtman Decl., Ex. I ¶ 54) The asset purchase was completed on June 30, 1999, when Signature sold DALC to iDine, transferred all of DALC's operations to iDine, and ceased operating DALC. (Fodrowski Dep. at 66; Knoppel Dep. at 44, 51) Prior to the asset purchase, restaurants and members who participated in Signature's DALC could have been solicited by iDine for its program. (Villano Dep. at 53, 121) Clients and restaurants originally solicited by Riverside were solicited by iDine for its new diner's card program when it was time for such clients to renew their annual DALC membership. (Compl. ¶¶ 14, 16)

On June 29, 1999, Signature sent a letter to Riverside terminating their agreement as of 90 days after the date of the letter. (Leichtman Decl., Ex. F, G; Villano Dep. at 88) On July 12, 1999, Riverside sent Signature a letter contesting the termination, stating "our contract will automatically renew every three years unless Riverside Marketing, LLC elects out of the contract in writing 30 days prior to the end of the contract period." (Casamento Aff. Ex. I) During the time between the asset purchase in June 1999 and September 1999, Riverside received payments due under its contract with Signature. (Villano Dep. at 92) Neither iDine nor Signature has made payments to Riverside since September 1999. (Compl. ¶ 15) Riverside did not attempt after September 1999 to recruit more accounts for Signature or iDine. (Fodrowski Dep. at 162) Riverside was paid in full for all commissions due as of September 1999. (Fodrowski Dep. at 162) Riverside never terminated its contracts with Signature nor consented to their alternation, amendment, transfer, or assignment. (Compl.¶ 17)

Riverside alleges that on June 30, 1999, Signature and iDine entered into a services collaboration agreement whereby Signature sold a portion of its contractual rights and obligations under the agreement between Signature and Riverside; Signature agreed to perform marketing and promotional functions for the discount dining program created by iDine after it purchased DALC. (Compl. ¶ 18; Leichtman Decl., Ex. K at 3)

In the Asset Purchase Agreement, Signature agreed to terminate its contract with Riverside prior to the closing date. (Robitaille Aff. ¶ 15; Leichtman Decl., Ex H at 36) Additionally, Signature agreed expressly to indemnify iDine for damages relating to all excluded contracts and liabilities, including the Riverside contract. (Robitaille Aff. ¶ 16; Leichtman Decl., Ex. H at 55) On June 30, 1999, iDine and Signature executed a waiver of asset purchase agreement, wherein Signature agreed to assume responsibility for any claims by independent contractors, including Riverside, for Signature's failure to terminate outstanding contracts. (Robitaille Aff. ¶ 17; Leichtman Decl., Ex. J)

After the asset purchase, Signature and iDine remained separate entities that continued to...