Donner v One Network Enters., Inc.
Annotate this CaseDecided on May 27, 2005
Supreme Court, New York County
William Donner, Plaintiff,
against
One Network Enterprises, Inc. and Fenway Partners, Inc., Defendants.
601015/2004
Karla Moskowitz, J.
Plaintiff moves, pursuant to CPLR 2221, to renew and reargue those portions of this Court's Order, dated January 5, 2005, that (i) dismissed plaintiff's fourth cause of action against defendants One Network Enterprises, Inc. (One Network) and Fenway Partners, Inc. (Fenway); and (ii) dismissed plaintiff's seventh, ninth, tenth, eleventh and twelfth causes of action against Fenway.
Plaintiff William Donner brings this action to recover severance benefits, including one year's base salary of $240,000, plus a bonus of at least $144,000, that Donner claims he is entitled to under the terms of an employment contract. Donner was the Chief Information Officer of Elogex, Inc., now known as One Network. Donner alleges that Fenway, a major shareholder of Elogex, negotiated Donner's employment agreement with Elogex and was responsible for Elogex's obligations under the employment agreement, as well as additional benefits that Fenway separately promised to Donner.
Prior to October 2002, Donner was the managing director of Fenway, a private equity firm. As of October 2002, Fenway had a large investment in Elogex. Donner alleges that, to protect its investment and to better maintain effective control over day-to-day operations of Elogex, Gregg Smart, the managing director Fenway, as well as the Chairman of Elogex, hired Donner as the Chief Information Officer of Elogex.
Donner alleges that he and Smart negotiated the terms of his employment in the fall of 2002. These terms included a base salary of $240,000, a guaranteed bonus, and vested stock options. Donner further alleges that the parties also agreed to a guaranteed severance package consisting of one year's base salary, plus an amount equal to his last year's bonus, if Donner's employment was terminated without cause. Donner also alleges that, as a further inducement to work at Elogex, Smart promised Donner that Fenway would contribute 2% of its own stock ownership in Elogex towards Donner's compensation.
Donner alleges that his initial agreement with Gregg Smart was oral and contained no stated or agreed fixed time period. However, in early 2003, Donner learned from Smart that a [*2]merger was contemplated between Elogex and Transcend Partners, Inc. At that time, Donner asked for written confirmation of the terms of his employment. These terms were recorded in a "term sheet" that Smart gave Donner in February 2003. The term sheet reflects the oral agreement Donner alleges, except that the period of his employment was one year, through December 31, 2003. Donner's bonus was described as: "Target 60% Base Salary, earned and payable as determined by the Board." The term sheet also gave Donner stock options described as "2% Time-vesting Options under Management Option Plan, starting from January 1, 2002. Additional options may be granted from time to time at the discretion of the Board" (Brown Aff., Ex. 2, Donner Aff., Ex. B). The term sheet reflects that it is from Elogex.
Donner alleges that, at that time, Fenway also affirmed its agreement to give Donner another 2% of Elogex, in a second, nearly identical term sheet, which was also given to Donner by Smart. That term sheet, which does not indicate that it is from Fenway, states, under the heading "Options" as follows:
At least 2% Super Incentive Options that will vest upon achieving minimum threshold returns on Fund II's capital investment in its Company. These options might be awarded from the Management Option Plan or may come outside of this plan, depending upon allocation considerations for other employees of the Company . . . .
(id., Donner Aff., Ex. C)
Donner alleges that, on November 11, 2003, the day that One Network was to celebrate the successful launch of its new software product, he along with others, was fired. One Network gave him a letter, dated November 11, 2003 in which One Network stated it would pay Donner $14,423.08, which was the equivalent of two weeks salary and one week of salary for every year of service. In return, One Network demanded a release from Donner from all further obligations, including any claims to unpaid back pay, bonuses and stock options.
Donner commenced the within action in April 2004, asserting fourteen causes of action. Thereafter, Fenway moved to dismiss the fourth, seventh, ninth, tenth, eleventh and twelfth causes of action in the complaint. Defendant One Network moved to dismiss the first, second, fourth, fifth, sixth, eighth, thirteenth and fourteenth causes of action.
By Decision and Order dated January 5, 2005, I found that the term sheet, with the name of Elogex, Inc. typed on the top, was sufficient to withstand the motion to dismiss on the statute of frauds grounds as to Elogex/One Network. For that reason, the motion by One Network to dismiss those claims which were based upon a breach of the employment agreement, was denied.
However, as to Fenway, Donner acknowledged that he had no written agreement. I found that, because Donner had no written agreement with Fenway and had not alleged sufficient facts for the court to infer that Fenway intended to be bound by Donner's employment contract with Elogex, most of the claims against Fenway were dismissible. I dismissed Donner's fourth, seventh, ninth, tenth, eleventh and twelfth causes of action against Fenway.
On this motion, Donner moves to reinstate the fourth cause of action against both One Network and Fenway, and ninth, tenth and twelfth causes of action against Fenway.
Donner's fourth cause of action, although asserted against both One Network and Fenway alleges that Fenway, as controlling shareholder of Elogex, promised Donner that, following the merger of Elogex and Transcend, Donner would receive the base salary, bonus and severance [*3]benefits set forth in the term sheets. Donner's ninth and tenth causes of action against Fenway seek a constructive trust, and are based upon Fenway's breach of its alleged agreement to give Donner a conditional 2% of its ownership in Elogex. In his twelfth cause of action, Donner alleges that he and Fenway were joint venturers in Elogex, and that, as such, Fenway owed Donner a fiduciary duty to protect and preserve the compensation and benefits promised to Donner upon Fenway's agreement to the merger between Transcend and Elogex.
Donner moves for reargument on the ground that, contrary to my Order, the agreement between Fenway and Donner by which Fenway was to give 2% "super-incentive" options in One Network stock to Donner, is not subject to the statute of frauds. Donner argues that there is extensive case law to the effect that no writing is required with respect to such an agreement. Thus, the absence of a writing is not a basis for dismissing the claim. Finally, Donner argues that, contrary to my order, his employment with Elogex was a joint venture between himself and Fenway.
Donner also moves for renewal with respect to this Court's finding that "Donner has no written agreement with Fenway and has not alleged sufficient facts to infer that Fenway intended to be bound by Donner's employment contract with Elogex" (Brown Aff., Ex. 1 at 8). Donner alleges that, after the motion was submitted, and pursuant to my directive, the parties conducted discovery. Donner alleges that One Network produced numerous documents in discovery that establish that Gregg Smart acted on behalf of Fenway in connection with the promise of the "super incentive" options allegedly promised by Fenway. Donner states that in e-mails sent to and from Fenway, Smart expressly confirmed that Fenway was to be responsible for payment of 2% of Donner's options.
A motion for reargument is addressed to the discretion of the court, and is designed to afford a party an opportunity to establish that the court overlooked or misapprehended relevant facts or misapplied any controlling principle of law; its purpose is not to serve as a vehicle to permit the unsuccessful party to argue, once again the questions previously decided (William P. Pahl Equip. Corp. v Kassis, 182 AD2d 588 [1st Dept], lv to app dismissed in part, den. in part, 80 NY2d 1005 [1992]; Foley v Roche, 68 AD2d 558 [1st Dept 1979]).
An application for leave to renew must be based upon additional material facts that existed at the time the prior motion was made, but were not then known to the party seeking leave to renew, and therefore not made known to the court; renewal should be denied where the movant fails to offer a valid excuse for not submitting additional facts upon the original application Foley v Roche, supra; CPLR 2221; see also, Poag v Atkins, 3 Misc 2d 1109(A) [Sup Ct. New York County 2004] ).
Donner has not demonstrated that this Court overlooked or misapprehended the facts or the law. Donner first argues that his agreement with Fenway does not fall within the Statute of Frauds.
"New York law provides that an agreement will not be recognized or enforceable if it is not in writing and 'subscribed by the party to be charged therewith' when the agreement '[b]y its terms is not to be performed within one year from the making thereof '"
(Cron v Hargro Fabrics, Inc., 91 NY2d 362, 366 [1998] citing General Obligations Law § 5 - 701 [a] [1]).
[*4]
The Statute of Frauds encompasses only those contracts that, by their terms, have absolutely no possibility in fact and law of full performance within one year (id.).
By his own allegations, Donner acknowledges that he negotiated his contract with Gregg Smart in the fall of 2002. Although Donner states that the oral agreement contained no fixed term, the term sheet expressly states that the term is for one year, until December 2003. Thus, Donner's employment contract, that he alleges he negotiated in the fall of 2002, was subject to the statute of frauds, because it could not be completed within one year.
Donner asserts that, nonetheless, Fenway's promise to give him a 2% super-incentive bonus is not subject to the statute of frauds, because that obligation accrued within the one year time frame. Donner cites Cron v Hargro Fabric, Inc. (91 NY2d 362 [1998]), for the proposition that "where, as here, an employment relationship is terminable at will, claims for additional compensation following termination will not be barred by the statute of frauds. . . " (Brown Aff., at 10). As an initial matter, this employment agreement was not terminable at will but rather had a one year period ending December 31, 2003. Because it was orally negotiated in the fall of 2002, it is subject to the statute of frauds and is unenforceable without a writing, "subscribed to by the party to be charged" (General Obligations Law § 5-701). Inasmuch as Donner does not have any writing showing Fenway subscribed, Fenway cannot be held liable for the obligations thereunder.
Donner also asserts that Fenway's oral promise to pay the 2% super incentive option, vesting "upon achieving minimum threshold returns" on Fenway's investment, was capable of performance within one year of its making and is therefore similar to the bonus promised under Cron. I agree that, if there was a possibility that "achieving minimum threshold returns" was capable of happening within one year, then Fenway's alleged oral promise to give Donner the 2% super incentive options would fall outside the statute of frauds (Cron v Hargro Fabrics, supra.). Unfortunately, neither of the parties ever defined the term "minimum threshold returns," so it is impossible to determine whether the 2% super incentive options could have accrued within one year. Significantly, Donner does not allege that the minimum threshold returns were met. Moreover, the term "minimum threshold returns" is too vague to constitute an enforceable promise (see e.g., Danton Const. Corp. v Bonner, 173 AD2d 759 [2d Dept 1992]).
Donner also argues that, the mere absence of an agreement to share loses does not preclude the Court from finding the existence of a joint venture. The indicia of the existence of a joint venture are: acts manifesting the intent of the parties to be associated as joint venturers, mutual contribution to the joint undertaking through a combination of property, financial resources, effort, skill or knowledge, a measure of joint proprietorship and control over the enterprise and a provision for the sharing of profits and losses (Richbell Information Services, Inc. v Jupiter Partenrs, L.P., 309 AD2d 288 [1st Dept 2003]). Here, giving Donner every possible favorable inference, as is accorded a plaintiff on a motion to dismiss, nonetheless, Donner has alleged only that he was an employee of Elogex, who Fenway promised a "super-incentive" bonus, upon achieving some unspecified financial goals for Elogex. This is no different from any other executive who is promised a performance-based bonus. There is no indication that Donner and Fenway had any degree of shared control over the enterprise. Nor that they had mutual investments in Elogex. Nor that they would share profits and/or losses.
The New Evidence [*5]
Donner also argues that new evidence, consisting of intra-office e-mails in Fenway, provides proof that Fenway is obligated to give to Donner the 2% super incentives that he alleges were promised to him. In fact, the e-mails indicate that the agreement was never finalized as to how, or when, these super incentives would be paid. Thus, in an e-mail dated November 22, 2002 Gregg Smart writes to another Fenway employee as follows:
We have not defined time vs perf mix yet. Prior eq plan was 100 pct time vesting over 3 years. I support 75 pct time over 4 years and 25 pc perf. Also I would sprinkle another 4 pts to maybe [Bill Donner] and tp betw the 2 or them or include jerry in that after we cross 3x or 4x or 5x of our money. A carrot out there at a bigger win. . .
(Brown Aff., Ex. 7).
Also, in an e-mail dated March 20, 2003, Smart writes as follows:
Bd's [Bill Donner's] term sheet cannot be shown as is to TP [Travis Parsons] or JWO [Jerry Overcash]. It contains two items we would not give them, proection [six] against the 8 pct dividend and specific rewfeence [sic] to 2 pct supers which may come from fenway's hide outside the gmt plan . . .
Brown Aff., Ex. 9, emphasis added).
Neither of these e-mails indicate that an enforceable agreement existed between Donner and Fenway. Finally, Donner points to a letter, dated May 1, 2003, both Fenway and One Network signed, in which Fenway agreed to indemnify Elogex for a period of 180 days, against all liabilities, claims and expenses arising from any claims by reason of Elogex's termination of employment of William Donner" (Brown Aff., Ex. 5). This is not evidence of an agreement between Fenway and Donner.
Accordingly, for the foregoing reasons, it is
ORDERED that plaintiff's motion to reargue this Court's decision, dated January 5, 2005, is denied, and it is further
ORDERED that the motion to renew is denied.
The foregoing is the decision and order of this court.
Dated: May 27, 2005
ENTER:
______________________________
J.S.C.
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