Vanacore v. Vanco Sales LLC
| Decision Date | 27 June 2017 |
| Docket Number | No. 16-CV-1969 (CS),16-CV-1969 (CS) |
| Parties | RAYMOND VANACORE and DEANNA VANACORE, Plaintiffs, v. VANCO SALES LLC and MICHAEL VANACORE, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Appearances:
Robert E. DiNardo
Newburgh, New York
Gardiner S. Barone
Goshen, New York
Plaintiffs Raymond and Deanna Vanacore assert claims arising out of an oral agreement with Defendants Michael Vanacore and Vanco Sales LLC. Before the Court are Defendants' Motion to Dismiss, (Doc. 21), and Motion for Sanctions, (Doc. 25). For the reasons stated below, Defendants' Motion to Dismiss is GRANTED and their Motion for Sanctions is DENIED.
I accept as true the facts, but not the conclusions, set forth in Plaintiffs' Amended Complaint ("AC"). (Doc. 13.)
At some unspecified time in 2003, nonparty Anthony Cannella presented Plaintiff Raymond Vanacore ("Raymond") with a business opportunity to deliver pharmaceutical drugs on an emergency basis. (Id. ¶ 2.) Because the opportunity required a significant capital investment, Raymond approached his cousin, Defendant Michael Vanacore ("Michael"), and offered to include Michael in the opportunity in exchange for Michael providing the capital investment. (Id.) Michael agreed with Raymond and Cannella to use an existing entity, Defendant Vanco Sales LLC ("Vanco"),1 to deliver the pharmaceuticals. (Id. ¶ 3.) Michael was Vanco's managing member and was solely responsible for its administration, including collecting its revenues, distributing any payments, and filing any required tax forms. (Id. ¶¶ 11, 17.)
Raymond, Cannella, and Michael agreed that they would share revenue from the operation as follows: 15% to Raymond, "for organizing the business and finding the capital investment;" 30% to Cannella, "for assisting in the delivery and providing the business opportunity to the others;" and 55% to Michael, "for providing the capital, using . . . Van[]co . . . , and administering the business." (Id. ¶ 4.) That agreement was oral. (See id. ¶¶ 20, 26 (describing agreement as "verbal").)
Vanco entered into a contract with Fresenius Medical Care ("Fresenius") to deliver pharmaceutical drugs on an emergency basis, which contract was for an indefinite duration andwas terminable at will. (Id. ¶¶ 5-7.) Pursuant to this contract, Vanco performed and was compensated for services it provided Fresenius from 2003 through June 2016. (Id. ¶ 8.) The amount of services Vanco provided, and thus the amount of compensation paid to Vanco, varied over time. (Id. ¶¶ 9-10.) Vanco's sole source of revenue during this time was compensation under the Fresenius contract. (Id. ¶ 13.) Plaintiffs allege that as Vanco's managing member, Michael was solely responsible for administering services under the Fresenius contract, (id. ¶ 12), but elsewhere they allege that Cannella participated in the delivery of the pharmaceutical drugs, (id. ¶ 4). Michael was solely responsible for distributing payments to Raymond under the oral agreement. (Id. ¶ 16.)
From 2003 to April 2015, Michael paid Cannella and Raymond2 commissions under the oral agreement, (see id. ¶ 14), which for Raymond amounted to approximately $300,000, (id. ¶ 33). From 2003 through June 2016, Vanco distributed approximately $1 million to Michael or his designees. (Id. ¶ 34.) In April 2015, Plaintiffs stopped receiving payments from Michael or Vanco. Plaintiffs have unsuccessfully demanded payment. (Id. ¶ 38.)
Plaintiffs filed the instant suit on March 17, 2016. (Doc. 1.) Following pre-motion correspondence and a pre-motion conference regarding Defendants' proposed motion to dismiss the complaint, (Docs. 11, 12), on June 30, 2016 Plaintiffs filed the AC, (Doc. 13), in which they seek an accounting and assert claims for specific performance, breach of contract, and unjust enrichment. Defendants then filed the instant motion to dismiss. (Doc. 21.)
On August 1, 2016, Defendants served on Plaintiffs a proposed motion for sanctions under Federal Rule of Civil Procedure 11(c)(2). (Doc. 27 Ex. H.) Plaintiffs did not withdraw orattempt to further amend the AC, and Defendants filed the instant motion for sanctions on November 1, 2016. (Doc. 25.)
Defendants move to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), arguing that the oral agreement is unenforceable because it does not comply with the New York statute of frauds.
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (alteration, citations, and internal quotation marks omitted). While Federal Rule of Civil Procedure 8 "marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, . . . it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Iqbal, 556 U.S. at 678-79.
In considering whether a complaint states a claim upon which relief can be granted, the court "begin[s] by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth," and then determines whether the remaining well-pleaded factual allegations, accepted as true, "plausibly give rise to an entitlement to relief." Id. at 679.Deciding whether a complaint states a plausible claim for relief is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not 'shown' - 'that the pleader is entitled to relief.'" Id. (alteration omitted) (quoting Fed. R. Civ. P. 8(a)(2)).
The New York statute of frauds provides that certain agreements are "void, unless [they] or some note or memorandum thereof be in writing" and signed by the party to be charged. N.Y. Gen. Oblig. Law § 5-701(a). Included are Id. § 5-701(a)(10). Section 5-701(a)(10) "bar[s] the enforcement of unwritten agreements for services where the plaintiff has requested compensation in exchange for having identified a business opportunity, secured potential business partners, and contributed to the formation of a business team." Prince v. Gov't of People's Republic of China, Inst. of Architecture Design & Research, No. 13-CV-2106, 2014 WL 1303417, at *4 (S.D.N.Y. Mar. 31, 2014). Section 5-701(a)(10) applies whether "the transaction results in the acquisition of an existing enterprise or the formation of a new one." Gutkowski v. Steinbrenner, 680 F. Supp. 2d 602, 613 (S.D.N.Y. 2010) (internal quotation marks omitted). Defendants argue that the oral agreement falls squarely within § 5-701(a)(10), and is therefore void because there is no written "note or memorandum thereof." I agree.
Plaintiffs allege the existence of an oral agreement under which Raymond would be compensated "for organizing the business and finding the capital investment." (AC ¶ 4.) The conduct for which Plaintiffs seek compensation clearly falls within the statute's definition of negotiating - Raymond brought the Cannella opportunity to Michael, (id. ¶ 2), secured Michael's participation in terms of both capital and management, (id. ¶¶ 2-4), and thereby enabled the consummation of the Fresenius contract. See N.Y. Gen. Oblig. Law § 5-701(a)(10). And what Raymond created by putting Michael together with Cannella was clearly a "business opportunity." The statute is intended to cover agreements, like the oral agreement here, for "providing 'know-how' or 'know-who'[] in bringing about between principals an enterprise of some complexity or an acquisition of a significant interest in an enterprise." Freedman v. Chem. Constr. Corp., 372 N.E.2d 12, 16 (N.Y. 1977). Because Plaintiffs do not allege that the agreement was memorialized in writing, and instead allege that it was "verbal," (AC ¶¶ 20, 26), the statute of frauds renders it unenforceable.
Plaintiffs argue that the oral agreement was not intended to compensate Raymond for his role in negotiating the business opportunity, but instead to pay him "a commission for procuring an agreement between the defendants and the third-party Fresenius." (Doc. 27 Ex. I ("P's Mem."), at 4.)3 The main problem with this argument is that the AC says no such thing; it says that the 15% was for "organizing the business and finding the capital investment," (AC ¶ 4), not for finding a customer for the business.4 Further, section 5-701(a)(10) would apply whether the agreement was characterized as compensating Raymond for his role in the negotiations leading to the formation of the enterprise or for enabling the enterprise to secure the Freseniusopportunity. See Freedman, 372 N.E.2d at 16 (...
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