Foster v Eruce Kovner, Robert Wilson, Caxton Health Holdings, LLC

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Foster v Eruce Kovner, Robert Wilson, Caxton Health Holdings, LLC 2012 NY Slip Op 30125(U) January 17, 2012 Sup Ct, NY County Docket Number: 601349/06 Judge: Barbara R. Kapnick Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication. SCANNED ON 111912012 [* 1] I --------- - - Index Number 60134912006 INDEX NO. FOSTER, RICHARD N. MOTION DATE OB+--- MOTION SEQ. NO. KOVNER, BRUCE NO. MOTION CAL. SEQUENCE NUMBER 002 SUMMARY JUDGMENT this motlon tolfor ---------- 6 NUMBERED - I Replying Affidavits 0 Yes Cross-Motion: * o Upon the foregoing papers, it is ordered that this motlon MOTION I DECIDED Z ACCORDANCE WITH S N ACCOMPANYING MEMORANDUM DECISION I JAN 98 2012 1 NLW YOHK i - c rNTv CLERKS OFFICE ~ 3 m Dated: Check one: &iNnL DiSPOSiTiON nN 0 DO NOT POST fl SUBMIT ORDER/ JUDG. Check if appropriate: & W K J.S.C. o a t ~ S i T , o N 0 REFERENCE SETTLE ORDER/ JUDG. [* 2] SUPREME: COURT OF THE STATE OF NEW YORK COUNTY OF N E W YO=: IA PART 39 X _ _ - l _ _ - _ _ _ - _ _ _ l _ _ _ _ _ _ _ I I _ I _ _ _ I _ _ I _ _ _ _ _ L RICHARD N. FOSTER, Plaintiff, - against DECISION/ORDER Index No. 601349/06 Mot. Seq. No. 002 - ERUCE KOVNER, ROBERT WILSON, CAXTON HEALTH HOLDINGS, LLC and CAXTON ASSOClATES, LP, Defendants. X __-__-__________________1______1___1__1 CAXTON HEALTH HOLDINGS, LLC and CAXTON ASSOCIATES, LP, Counterclaim-Plaintiffs, - against - RICHARD N. FOSTER, Counterclaim-Defendant. In this action, plaintiff R i c h a r d N. F o s t e r ( " F o s t e r " ) s e e k s to recover monies allegedly owed to him, including the v a l u e of a 10% equity interest in a healthcare-related investment company, pursuant to oral compensation Defendants Bruce Kovner for joint ("Kovner") , Robert Caxton Health Holdings, LLC ("Caxton") move and summary dismissing Foster's claims. venture agreements. Wilson ("Wilson") , ("CHH") and Caxton Associates, LP judgment pursuant to CPLR 3212 [* 3] FACTS T h e f o l l o w i - n g facts a r e t a k e n f r o m t h e p a r t i e s ' statements o f m a t e r i a l f a c t p u r s u a n t t o Commercial D i v i s i o n R u l e 19-a, t.he pleadings, submitted the in affidavits connection and with other this evidentiary documents are undisputed motion, and u n l e s s o t h e r w i s e indicated. F o s t e r w a s a S e n i o r P a r t n e r and D i r e c t o r a t McKinsey a business consulting f i r m 31 years, until 2004 (Complaint, (Foster Dep. ¶ 2). & Co., H e worked t h e r e f o r Kovner 4:13-18). f o u n d e r a n d Chairrrian o f C a x t o n & the Wilson i s t h e (Complaint, ¶ 9 ) . f o r m e r Vice Chairman of J o h n s o n is I I Johnson, from which h e r e t i r e d i n May 2 0 0 3 ( W i l s o n Dep. 3:17-5:3). I n 2003, F o s t e r was 62 y e a r s o l d and d e c i d i n g whether to l e a v e McKinsey, w h i c h h a d a "strongly s u g g e s t e d r e t i r e m e n t a g e of 60" ( F o s t e r Dep. was interested 35:14-21). i n pursuing s t a r t a healthcare-related , A l t h o u g h h e c o u l d have stayed, h e an idea he h a d been h e d g e fund, p r i v a t e developing to e q u i t y f u n d and v e n t u r e c a p i t a l f u n d ( F o s t e r Dep. 29:7-23). I n December 2 0 0 3 , his healthcare F o s t e r a s k e d Kovner to l u n c h t o d i s c u s s fund idea, which Kovner 2 thought was a good o n e [* 4] (Foster Dep. 52:99 - 53:6). Foster then suggested that Wilson be brought into the discussi-ons, which he did with Kovner s approval After a series of meeLings, they decided (Foster Dep. 55:14-25). t h a t Foster w o u l d j o i n Caxton to implement his healthcare concept (Foster Dep. 55:9-56:9) * To t h i s end, Caxton formed CHH in March 2004 (Bernstej-n Dep. 41:14-16). Caxton executed a Limited Liability Company Agreement for CHH dated as of March (the LLC Agreement ) 15, 2004, in which Caxton was designated the Initial Member of CHH. Agreement also provided substituted p e r s o n s for the admission entities as members, or of The LLC additional and or defined each member s Percentage Interest as the share of the profits and losses of the Company and the Member s right distributions of the Company s assets (LLC Agreement LLC Agreement also contributions of c a s h required the Members to to ¶ make receive 2). The capital (or promissory obligations), p r o p e r t y or services to the Company as s h a l l be determined by a Majority in Thereafter, in a letter to Foster dated March 18, 2004 ( the March 18, 2904 Letter ), Caxton memorialized its understanding of 3 [* 5] the agreement the partics had reached up to that date. letter stated, in pertinent part: We are extremely pleased with the progress we are making in the Caxton Health Holdings project. W h i l e there are numerous, substantive issues remaining to be resolved, we would like to confirm our agreement concerning the following: 1. At commencement on April 19, 2004, you will assume the position of Chief Executive Officer of Caxton Health Hal-dings LLC ("CHH"). 2. Robert Wilson will. be offered (and, we understand, will assume) the position of CHH's Chairman. 3. Each of Bruce Kovner (through Caxton Associates LLC or an affiliate), you and [Wilson] will be designated as "Founding Members" of CHI-I. Among the terms to be negotiated will be the l e v e l of ownership to be acquired by each of the Foundirig Members. 4 , We agree that the full details of your compensation (including terms for continuation, expansion and termination of employment) need to be worked out and will depend on multiple ¬actors. We agree that your initial compensation by CHH will include a base salary of $500,000 per annum and a draw of $500,000. The draw will be netted against any other compensation (other than the base salary) you may earn. The base salary and draw will be payable concurrently on a semi-monthly basis, with the initial aggregate gross ( i . e . pretax) payment of $38,461.54 payable on o r about April 30, 2004. 4 The [* 6] Wilson was represented in t h e negotiations by the law firm o f Debevoise & Plimpton 1,LP ( Debevoise ). Debevoise sent Foster and W i l s o n April On April 2, 2004, a memorandum 2004 Memorandum ) purporting (the Debevoise to set forth the current understandings and highlighting issues for additional discussion for the health care funds . Under the heading Compensation , the Memorandum stated that [elach salary of $1,000,000. of the management Founder w i l l receive an annual Each Founder will also receive a portion fees and carried interest from each of the Health Care Funds . CHH started operations sometime in April 2004. Foster assumed the duties of President or Chief Operating Officer and Wilson functioned as Chairman (Kovner Dep. 72:20 - 7 3 : 3 ) . On April 14, 2004, Foster sent a version of the Debevoise April 2004 Memorandum, edited to include his comments, to his attorneys and to Wilson. At the top of the memorandum, Foster wrote: This is a qood list of thinas. What are the or three m ost important things we s h o u l d , be on the lookout f o r ? What are the walk issues? What aye the imarv d a n s e rs? What are the traps? The lists are u3eful but we need more insiaht. two L 5 J ~ [* 7] Thereafter, in his comments, Foster raised various issues, including whet-her carried interesl should be awarded on a sliding scale; the need for- more specifics on how awards of carried interest might be diluted; and the need to determine how the bonus pool would be defined. On September 2, 2004, Caxton s Chief Financial Officer, John Forbes, s e n t an internal memorandum (the Caxton September 2004 Memorandum ) to Caxton s General. Counsel (Scott: Bernstein, E s q . and Controller (Karen Cross), posing a seri.es of ) questions. Forbes asked, i n t e r alia, whether Wilson and Foster would be the only individuals to receive actual shares, and what capital they would be required to p u t up day one ( I d ) . H e also asked [ i l s it. the c a s e that [Wi.lson] and [ F o s t e r ] each initially own 10% and Caxton owns 80% and the first 10% of the phantom shares dilutes Caxton s ownership rata ? and thereafter any dilution is shared p r o I In December 2004, Caxton provided Foster with a proposed draft Amended and Restated Limited Liability Company Agreement of Caxton Holdings Health LLC (the Draft LLC Agreement ). Foster forwarded it to Debevoise on December 16, with a comment that at long last organization papers Caxton for [CHH] 6 of the The Draft LLC Agreement has was produced a draft [* 8] by accompanied Vesting , Discussion a with memorandum an entitled indication Purposes Only t-hat it (the Caxton Memorandum ) . Under the headiriy December Draft Memorandum, 2004 Caxton was I , Holdinq DRAFT December Version the a Health 2004 - For Draft in the Caxton following terms were proposed: A. Each of RW [Robert Wilson] and RF [Richard Foster] has a 10% equity interest in CHH. The 10% interest entitles the h o l d e r immediately to 10% of the net profits and losses of CHH, but will vest over 5 years in equal annual installments of 2% each. B. If the holder dies, retires, is Permanently Disabled, or is terminated other than for Gross Misconduct [these terms were all defined therein]; (1) If the event occurs after September 30, the holder gets full vesting credit f o r the year; if prior to September 30, no vesting credit for the year. (2) The holder will sell 2% of the equity each year to Caxton Associates, LLC until the holder s vested interest has been fully sold back. CHEI C. If termination occurs as a result of Gross Misconduct, 100% of shares will be immediately sold back at [a] price equal to book value of Vested Holdings. D. If after termination for any reason the individual goes into a competitive business, 100% is immediately bought b a c k at book value of Vested Holding. (footnotes omitted) . 7 [* 9] The Draft LCC Agreement identified Caxton, F o s t e r and Wilson Section 7.1 provided that " [ t l h e as "Founding Members" of CHH. Membership Interest of each Founding Member shall initially be: 80% for Caxton and 10% each for each of Foster and Wilson." Section 3 . l ( a ) provided that "[elch Founding Member has made a capital contribution as reflected on the b o o k s and records o ¬ the Company". Section 1 - 1 defined a "Capital Contribution" as "the amount of capital contributed by such member to the Company". On February 9, 2005, in response to the Draft LLC Agreement and the Caxton December 2004 Draft Memorandum, Debevoise sent to Caxton ' s General Counsel a four-page memorandum February 2005 Issues List") . (the "Debevoise The Memorandum summarized "certain key issues to be considered in determining the structure, profit sharing and governance arrangements for Richard Foster and Robert Wilson . I . in connection with [CHH]". The Memorandum raised, on behalf of Wilson and Foster, various questions and comments on issues such as general structure, deferred compensation, capital contributions, clawback obligations, distributions of proceeds, carried interest/incentive allocation, vesting considerations, withdrawal, governance, non-interference provisions, restrictions on transfers, employment arrangements and legal expenses. The 8 [* 10] parties never reached an agreement on any of those matters (Foster Dep. 97:12 - 1 0 1 : l . l ) . In May 2005, Wilson would be terminated paid $1 million notified (Foster Dep. 322:22 - that hi.s 323:24). employment Foster was per year for the time that he worked at CHH (Plaintiff's Counterstaternent Statement No. 12 Foster I of Material Response to CHH was not. profitable and operated at a loss in each of the years from 2005 to 2009 11016-9; 1 1 8 ~ 1 521; - Facts, 123:2-12; 125:5-9). (Forbes Dep. 97:4-8; Wilson severed his relationship w i t h CHH at the end of 2007 (Wilson Dep. 214:18 215:2) and did not receive a n y additional payments from CHH in addition to his member guaranteed payments (Forbes Dep. 153:23- 154 : 1'7) . Foster commenced this action in April 2006. The Complaint alleges that on March 11, 2004, Foster, Kovner, CHH and Caxton entered into a "compensation agreement", consisting, in part, of Kovner's promise that Foster w o u l d receive $1 million per year plus a 10% equity interest in CHH in consideration for his work as CEO of CHH (Compl. ¶ As is relevant here, the first 76). cause of action seeks in excess of $40 million for breach of the 9 [* 11] compensation agreement and breach of the implied covenant of good faith and fair dealing. The the second cause of action also seeks the value of alleged 10% equity interest, alleginq a breach of an alleged joint venture or partnership agreement entered into on March 11, 2004 by Caxton, Kovner, Wilson and Foster (id., ¶ ¶ 8190). The third cause of action alleges that Foster "is entitled to r e s t i t u t i o n Tor the unjust enrichment of CHH, Caxton and [ ] Kovner in quantum meruit," and alternatively seeks between $10 and $20 million (and other compensation) for Foster's raising $1 billion for Caxtori (id. , ¶¶ 91-98). role in The fourth cause of action, a g a i n s t Caxton and Kovner, seeks the value of his 10% equity interest under a theory of promissory estoppel (id., ¶¶ 99-107), and the fifth cause of action demands relief against Caxton, Kovner and Wilson for breach of fiduciary duty in connection with the alleged joint venture/partnership agreement (Compl. ¶¶ 108-112). ' ' The Complaint originally also asserted causes of action for tortious interference with prospective business advantage and contractual relations. However, those claims were dismissed by Decision and Order of the Hon, Karla Moskowitz dated October 3, 2006 (2006 WL 4804738) and Foster did not appeal the dismissal of those two causes of action. 10 [* 12] D e f e n d a n t s rrtovcd to dismiss the for Complaint s t a t e a c l a i m a n d u n d e r khc S t a t u t e o f F r a u d s . failure to They a l s o s o u g h t d i s m i s s a l upon d o c u m e n t a r y e v i d e n c e , i n c l u d i n g t h e March 1 8 , 2004 Letter. 3, J u s t i c e Moskowitz, 2006, i n h e r D e c i s i o n and O r d e r of O c t o b e r d i s m i s s e d t h e C o m p l a i n t i n i.Ls e n t i r e t y . With r e s p e c t t o t h e f i r s t c a u s e of a c t i o n , t h e Court found t h a t t h e Complaint sufficiently alleged the existence of an oral agreement for c o m p e n s a t i o n , n o t w i t h s t a n d i n g t h a t some t e r m s were l e f t o p e n f o r negotiation in concluded t h a t t h e March the 18, 2004 c l a i m was However, Letter. barred by t h e Court the S t a t u t e o f Frauds b e c a u s e F o s t e r a l l e g e d i n p a r a g r a p h 35 o f t h e C o m p l a i n t t h a t t h e p a r t i e s e x p e c t e d t h a t CHH would cake a t l e a s t two t o t h r e e y e a r s t o g e t o f f t h e g r o u n d , and t h u s p e r f o r m a n c e u n d e r t h e terms of the alleged joint venture agreement was to exceed a one-year period . The Court sounding i n l i k e w i s e d i s m i s s e d t h e second c a u s e of contract Court found t h a t a s b a r r e d by t h e the unjust enrichment Statute o f action Frauds. The and promissory estoppel c l a i m s c o u l d n o t s u r v i v e b e c a u s e t h e y were b a s e d on t h e f a i l e d c o n t r a c t c l a i m s , a n d c o u l d n o t be i n t e r p o s e d i n c i r c u m v e n t i o n o f the Statute o f Frauds. d i s m i s s e d because the The b r e a c h o f f i d u c i a r y d u t y c l a i m was required confidential 11 r e l a t i o n s h i p would [* 13] have arisen, if at a l l . , out of the allegations underlying the unsuccessful joint venture claim. Finally, in connection with the unjust enrichment claim, the Court addressed the individual liability of Kovner a n d Wilson and held that the Complaint failed to allege that they acted outside the scope of their positions with Caxton or CHH. The Court thus found that piercing the corporate veil could not be justified because F o s t e r did not sufficiently allege either domination of the corporation or the resulting wrongful consequences, and did not allege how they used the corporation for their personal ends. The Appellate Division, First Department, reversed Justice Moskowitz Decision in July 2007 (see F o s t e r v Kovner, 44 A D 3 d 23). The Court noted that the Statute of Frauds is generally inapplicable partnership to an agreement to create a joint venture or of indefinite duration, because such relationships are terminable at will and as such performable with a y e a r . The Appellate Division then reinstated the breach of contract claims, agreeing with Justice Moskowitz that an agreement may exist even where the parties acknowledge that they intend to subsequently I finalize the details of the agreement, citing Richbell Info I I I Servs., Inc. v Jupiter P a r t n e r s , 12 LP, 309 AD2d 288 ( 1 3 t Dep t [* 14] 2003). As a consequence, the unjust enrichment and promissory estoppel c l a i m s , which had been d i . s m , i s s e d as a result of the failure of the contract claims, were also restlored. Likewise, the breach of fiduciary duty cause of action was restored insofar as the joint venture c1.ai.m had been found viable (44 AD3d at 30). The First Department concurred with the finding of the Trial Court that contract the claims March as a 18, 2004 matter Letter of did law. not bar However, Foster s the Court specifically stated that defendants had made a cogent argument that the parties here had failed to reach agreement on many essential terms, even if the letter alone did not conclusively resolve that issue as required on a motion based on documentary evidence under C P L R 3211 (a) (1). Accordingly, the Court went on to state that it could not be said as a matter of law, that the documentary evidence conclusively establishes the parties merely had an agreement to agree, a l t h o u g h d e f e n d a n t s m a y l a t e r s u c c e e d on t h i s a r g u m e n t on s u m m a r y j u d g m e n t or a t trial. (emphasis added) (44 A d 3 d at 28). Discovery ensued, and the record was supplemented with t h e various documents, described above, which r e f l e c t the part-ies negotiations following the issuance of the March 18, 2004 Letter. 13 [* 15] Additionally, the parties testified at their depositions as to their understandings of t.hose negotiations. As is relevant here, Foster was questioned as to the truth of certain allegations of his Complaint: c2: . . . I'm asking you whether [the following] al.legation is true. " T h e agreement provided t h a t profits and losses of CHH would be s h a r e d among the parties", is that true? A: I don't recall. Q: You don't know? A: I don't recall. Q: You don't recall whether that's true? A. Correct. Q: The second sentence of that paragraph says, "Caxton was to receive 80 percent of the equity interest." Is that t r u e ? A: I don't recall.. Q: The t h i r d sentence says, "Mr. F o s t e r and Wilson w o u l d each r e c e i v e a 10 percent equity interest. Is that true? A: I don ' t recall. Q: Okay. A: Yes. "Messrs. Foster, Wilson, and Kovner, the latter acting on his own personal behalf and on behalf of Caxton Associates, LLC, and/or certain of its affiliates, agreed that Foster and Wilson would be co-equal in the new enterprise, sharing responsibility for all major decisions a t CHH . Let's turn back to paragraph 4. Could you please read the first sentence of paragraph 4? " 14 [* 16] Q: Is t h a t t r u e ? A: I b e l i e v e t h a t i t is c o r r e c t . Q: Okay. And could you r e a d t h e s e c o n d s e n t e n c e ? equally . . . /I Q: Is t h a t t r u e ? A: I believe that is correct. Q: L a s t -- c o u l d you r e a d t h e last s e n t e n c e ? A: a: A: I don't recall ( F o s t e r Dep. 33:lO-35:13). n e g o t i a t i o n b y t h e March 2004 L e t t e r : ... Q: [ T l h a t would be a t l e a s t o n e of t h e t e r m s t h a t r e m a i n e d t o b e n e g o t i a t e d a s of t h a t d a t e , t h e l e v e l of o w n e r s h i p t o b e a c q u i r e d by e a c h of t h e t h r e e of you, c o r r e c t ? A: Yes, s i r . Q: So t h a t w a s n ' t r e s o l v e d a s o f t h a t d a t e ? A: Correct. ( F o s t e r Dep. 63:4-11). 15 [* 17] Foster l a t e r testified that the parties reached a verbal agreement that. Caxton would have 80 percent of the equity, and that [Wilson] and I would each have 10 percent of the equity (Foster Dep. 90:8-10). He was then asked why, earlier in the deposition, he had testified that he could not recall whether the parties agreed to those fixed equity interests, and whether the profits and losses would be shared. Foster stated that I thought that you were referring to a specific written agreement, and when I said I didn t recall, remember where in the evolution it was because of that 1 couldn t specific written agreement . . . these things were (Foster Dep. 92:13 - 9 3 : 3 ) . F o s t e r further stated that his more definite testimony about the terms of the oral agreement was the result of discussions with his attorneys, during which he realized that he had misinterpreted the questions (Foster Dep. 93:15-94:6) . With respect to the issue of Foster s equity interest, Kovner testified that he recalled the number 10 percent being raised and used [blut we reached no agreement on that matter . . . [w]e did not agree on the terms on which any equity interest, either in amount or detail, about the way it would vest or be lost (Kovner Dep. 59:21-60:13). Wilson similarly testified that 16 [* 18] he recal.led \ a lot of d i s c u s s i o n a b o u t what was called i n c e n t i v e ... u r equity interest, a n d t h e r a n g e s were 5 p e r c e n t u p to 1.5 T h e r e was a l o t o f discussion a b o u t t h a t , t h a t was a l l percent. never s e t t l e d ( W i l s o n Dep. 95:16-25). H e s t a t e d t h a t h e d i d not r e c a l l a 1 0 p e r c e n t e q u i t y i n t e r e s t i n C H H . What I do r e c a l l i s discussions about incentives, about t e r m equity. And w e longer d i s c u s s e d d i f fererit p e r c e n t a g e s , r a n g e s o f p e r c e n t a g e s t h a t was n e v e r s e t t l e d ( W i l s o n Dep. 96:24 - 97:s). DISCUSSION T h e m o t i o n for summary j u d g m e n t i s g r a n t e d a n d t h e C o m p l a i n t is di-smissed i n its entirety. Fir-st, Foster has failed to s u b s t a n t i a t e t h e core a l l - e g a t i o n , c e n t r a l t o h i s c o n t r a c t c l a i m s , that the parties shows, possibility that he would receive a 1 0 % equi.ty V i e w e d i n a light m o s t f a v o r a b l e t o F o s t e r , t h e i n t e r e s t i n CHH. record agreed at among best, a that variety of the parties options. discussed However, they that never r e a c h e d a final a g r e e m e n t on e i t h e r t h e d e g r e e of t h e i n t e r e s t o r o t h e r rei-ated, m a t e r i a l terms. In determining whether a contract exists, c e n t e r s upon t h e p a r t i e s i n t e r i t to be b o u n d , the inquiry i . e . , whether t h e r e was a m e e t i n g o f the m i n d s r e g a r d i n g t h e m a t e r i a l terms of t h e 17 [* 19] Fed. S a v . transacti.on , C e n t r a l 176 U.S.A., A2d 131, v National (13 Dcpt 132 Westminster 1991); see also Baiik, Amcan H o l d i n g s , Inc. v C a n a d i a n I m p e r i a l Bank of C o m m e r c e , 70 A D 3 d 423 (1 Dept 2010) , lv den 15 N Y 3 d contract requires conditions. mutual assent 704 to (2010). [Aln enforceable its essential terms and If an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract v Poster, 72 AD3d Edelnian v Hill N u r s i n g Home (1989), c e r t Henry 182, 184 (13t Dept 2010); see C o b b l e & Warren C o r p . , 498 US 816, denied doctrine of definiteness, a (1990). 74 NY2d Moreover, 475, 482 under the court cannot enforce a contract unless it is able to determine what in fact the parties have agreed to , M a t t e s of 1 6 6 M a m a r o n e c k Ave. Corp. v 151 E . P o s t R d . Corp., 78 N Y 2 d 88, 91 (1991); see Korff v C o r b e t t , 18 AD3d 248 ( I y tDept 2005). Consequently, a mere agreement to agree, in which a material term is left for future negotiations, is unenforceable , Joseph M a r t i n , Jr., D e l i c a t e s s e n , I n c . v S c h u m a c h e r , 52 NY2d 1 0 5 , 109 (1981). While [ a l n agreement may exist even where parties acknowledge that they intend to subsequently finalize the detaj.1~ of the agreement, agreement which Foster merely v Kovner, creates 18 the 44 AD3d framework at for 27-28, an continued [* 20] discussions aimed at the execution insuffi,cient, S c h n e i , d e r v J a r m a i n , of a binding 85 AD3d contract 581, 582 is (lXt Dept 2011). Despite Foster's repeated insistence that he was "promised" the record is devoid of any evidence a 10% equj.ty s h a r e in C H H , that the parties ever had a meeting of the minds on that term. At deposition, Foster could not recall, whether the statements in the Complaint regarding his 10% equity interest, or its allegations that Kovner made "specific and repeated commitments" to that equity share, were true. In contrast, both Kovner and Wilson expressly denied the existence of s u c h a promise. Foster's belated regarding the 10% share, after a claim conference with counsel, does not create a triable issue of fact. His claim that he "misinterpreted" belied by the transcript, particular statements were He was the original questions is specifically asked whether true, not merely whether he could recall whether they appeared in particular draft agreements or in the pleadings. His other responses demonstrate that he understood the distinction, as he testified that a number of the statements regarding the parties' agreement were "correct." 19 [* 21] Furthermore, Foster s later testimony regarding the 10% equity interest failed to specify who made the promise, or when it was made. Despite the allegati.ons of- the Complaint he did not attribute the promise to Kovner, or claim that it was made at the March 11, 2004 meeting. Indeed, he conceded that the level of ownership among the parties had not been resolved when he received the March 18, 2004 Letter, and remained to be negotiated as of that date. T he f u l l record now confirms that the equity issue was never subsequently resolved. The documentary evidence of the parties discusstons flatly contradicts Foster s claim that such a promise was made by any party at any time during his tenure at CHH. The paper trail reveals nothing more than protracted, arm s length business negotiations that ultimately failed. In response to the Debevoise April 2004 Memorandum, Foster asked what proposed terms should cause him to walk from the negotiations; the Caxton September- 2004 Memorandum questioned whether Foster and Wilson would be required to contribute capital on some future day one , whether they would initially receive 10% of CHH s shares, and how those shares might be diluted; Foster recognized in December 2004 that the Draft LLC Agreement, which proposed the 10% equity interest and a capital contribution, was not a final agreement; 20 [* 22] the Draft LLC Agreement was accompanied by the Caxton December 2004 Draft Memorandum, delineated F o r Discussion Purposes O n l y , which proposed one version of a vesting scheme for the equity interests; a n d the Debevoise February 2005 Issues List raised on Foster s behalf a host of key issues still to be considered regarding CHH s operations including its governance, capital structure, compensation arrangements a n d vesting plan. Foster suggests that these documents, and \\recognize that he owned 10% of CHH. review of their language a few others, However, even a cursory demonstrates that the most they recognize is that the parties were contemplating that percentage interest as one possible term of some future agreement. None of them suggests that any interest had been finally or irrevocably agreed upon or awarded. Foster a l s o concedes that Wilson never received the 10%-equity interest which was to coincide with his own receipt of such an interest. It is well settled that, if the parties to an agreement do not intend i.t to be binding upon them until it is reduced to writing and signed by both of them, they are not bound and may not be held liable until it has been written o u t and signed , Scheck v Francis, 26 NY2d 466, 469-470 21 (1970); J o r d a n Panel [* 23] Systems, 2007). Corp. v T u r r l e r C o n s t . Co., 45 AD3d 165, 166 (13t Dept The parties' intent to await an executed contract may be determined by reference to their course of conduct in negotiating and the documents exchanged during t h a t Dadabhoy, 4 4 AD3d process, see L a n g e r v 425 (1" Dept 2 0 0 7 ) , Iv d e n 10 NY3d 71.2 ( 2 0 0 8 ) , the Court may l o o k to the surrounding circumstances where arid such intent is not expressly stated, v Dratfield Gibson G r e e t i n g s , 269 AD2d 294 (1". Dept. 2000). Here, the record convincingly establishes that the parties at all governed times by a anticipated that formal writing. their Foster relationship acknowledged would be that the intent was "to convert. this very broad, complicated set of verbal agreements in actual written documents" (Foster Dep. 56:16-201, and agreed that "the goal at the end of the day would be to have a final, agreed-upon, signed document that [the] lawyers [had] extensively protect conscientiously reviewed to [Foster's] interests, and t - h a t Caxton' s lawyers [had] extensively reviewed to protect their interests" (Foster Dep. 266:14-19). Consequently, the negotiations were conducted largely through the exchange of drafts prepared by attorneys. Moreover, the 2004 LCC Agreement, which Foster insists was the only effective contract governing CHH's operations, expressly states in Paragraph 19 that 22 [* 24] it "may be amended o n l y upon the written consent of a Majority in That Agreement was never amended to Interest of the Members." grant Foster Member, and a 10% equity Foster never interest agreed or to otherwise the later make a him amended L,LC Agreement, which would have awarded him a share subject to a capital contribution and other requirements. Even assuming, contrary to the evidence, promised a 10% equity share in CHH, is isolation, too indefinite to that Foster was that term, considered be enforced. The in parties considered a variety of vesting, buy-back, forfeiture and other options relating to the equity interests, a n d Foster concedes that none of them were accepted or implemented. The absence of agreement on the material terms necessary to define the scope and nature of Hecht v Foster's equity Helmsley-Spear, interest renders Inc., 65 AD3d it 951, illusory, 951 see, (13t Dept 2009) ("The oral assurances lacking any actual terms as to the amount, form, and timing of payment of any compensation, and including no methodology or custom providing for the determination of the same, failed to manifest a clear intention on the part of the parties to form a binding, definite severance agreement"); G l a r i z e r v Keilin & Bloom, 281 AD2d 371, 372 (1"' Dept 2001) ("the terms used to describe plaintiffs' rights under 23 [* 25] the alleged 'equity contract interest' enforcement") To --- 'substantial income', [are] indefinite too 'market rate', to permit , the extent Foster's claim of a joint venture or partnership i m p l i c a t e s his entitlement to a 10% equity interest, Furthermore, a joint it fails for the reasons discussed above. venture or partnership agreement requires that the parties agree to share not just the profits, but the losses also. Magnum Real Estate S e r v s . , Inc. v 133-134-13s ASSOC., LLC, 59 A D 3 d 362 (1" Dept 2009); Prince v O'Brien, 256 AD2d 208 (' 1' Dept 1998). At deposition, Foster either maintained that he never discussed the sharing of losses, or expressly disclaimed them (Foster Dep. 253:17-23; 109:Z-12). responsibility for His claim that he risked the loss of the value of his services in exchange for a share of the profits constitute is insufficient, as such an arrangement does not sharing in the losses of a partnership or joint venture, Steinbeck v Gerosa, 4 N Y 2 d 302, 317 (1958); Impastato v De G i r o l a m o , 117 Misc2d 786 (Sup Ct, Kings Co 1983), a f f d 95 A D 2 d 845 (2d Dept 1983); Abeles, Inc. v Creekstone F a r m s P r e m i u m B e e f , LLC, 2010 WL 446042 (EDNY 2 0 1 0 ) ; A r t c o , I n c . v K i d d e , Inc., 1993 WL 962596 at *10 (SDNY 1993) ("The New York Court of Appeals' 24 [* 26] decision in Steinbeck v Gerosa stands squarely for the proposition that: putting one's efforts and time at risk are not enough to show an agreement to bear losses . . . This, of course, makes sense, because if [plaintiff] were correct that simply expending efforts to set up a venture were sufficient to satisfy the essential. element of sharing of losses, the requirement could Foster cannot rely on the loss- nearly always be satisfied"). sharing terms of the LLC Agreement and the Draft LLC Agreement, as he was not a p a r t y to the former and t h e latter never went into effect. 2006 Decision, As noted in Justice Moskowitz in her October 3, the failure of the joint venture claim also requires the dismissal of the claim for breach of fiduciary duty. Foster's promissory estoppel cause of action must also be dismissed. The elements of such a claim are "(1) a promise that is sufficiently clear and unambiguous; (2) reasonable reliance on the promise by a party; and (3) injury caused by the reliance", MatlinPatterson ATA H o l d i n g s LLC v F e d e r a l Express C o r p . , 8 1 AD3d Dept 2011). 836, 841-842 (l'3t. Once again, Foster relies upon the promise of a 10%- equity interest in support of this claim. noted above, such a promise unambiguous, but non-existent. 25 is not only not clear As and [* 27] The claim quantum for meruit enrichment .i-s dismiissed as w e l . 1 . under theory a of unjust The elements of a claim in quantum meruit are: the performance of services in good faith, acceptance rendered, of an services by the expectation the person compensation of to whom therefor, they are and the reasonable value of the services , F r e e d m a n v P e a r l m a n , 271 A D 2 d 301, 304 (13 Dept Ilowever, 2000). recovery such is not available unless the services performed were so distinct from the duties of his employment and of such nature that it would be unreasonable for the employer to assume that they were rendered without expectation of further pay , id. , quoting Robinson v Munn, 238 NY 40, 43 ( 1 9 2 4 ) . Foster cannot recover f o r his fundraising efforts on behalf of CHH because they were admittedly within the scope of his duties as CEO (Foster Dep. 150:lO - 152:19) for which he was paid a salary of $1 mllion per year. had an agreement percentage of the 01- He also testified that he never understanding funds raised that he would (Foster Dep. be paid a 201:21-202:ll). Beyond this, the additional compensation sought would be barred by the Statute of Frauds, General Obligations Law 5-701 [a] [lo], 26 [* 28] which precludes oral agreements for compensation or finder's fees in connection with "services rendered in . purchase . [or] sale [including] . procuring . . negotiating the . of a business opportunity an introduction to party a . . to . the transaction or assisting in the negotiation or consummation of the trarisaction." A D 3 d 547 claim L.P. v Conoloq C o r p . , 61 See Meyers A S S O C . , (13t Dept 2009) (Statute of Frauds barred quantum merit for compensation in connection with procurement of investors for private securities offering). The record also fails to establish that defendants were unjustly enriched, because it is undisputed t h a t CHH never made a p r o f i t but instead sustained substantial l o s s e s , see Delaney v Weston, 66 AD3d 519 ( l g t Dept 2009), Iv d i s m 14 N Y 3 d 763 (2010). Foster's reliance on his expert's speculative calculation of CHH's alleged enterprise v a l u e in its first year is misplaced, because CHH was a new business venture and there was,therefore,no "reasonable basis profits with the Digital Broadcast of experience requisite Corp. upon degree v Ladenburg, which of to estimate reasonable Thalmann & lost certainty", Co., Inc., 6 3 A D 3 d 647, 647-48 (1'" Dept 2009), lv den 14 N Y 3 d 7 3 7 (2010). Finally, the claims against Kovner and Wilson individually are dismissed, insofar as F o s t e r has n o t established any tort or 27 [* 29] contractual liability under the causes of action pled. Additionally, Foster has not alleged that they acted outside of their corporate capacities with CHH in their dealings with him, a n d , as set forth by Justice Moskowitz in her Decision, no ground f o r piercing t h e corporate veil has been established. Foster's vague claims that they fraudu1,ently induced him to trust them, dragged o u t the negotiation process, neglected their duties at CHH or ignored some of his requests to speak to them about problems at CHH do not implicate personal liability of any kind. Accordingly, based on all the papers submitt.ed and the oral argument held on the record on September 9, 2011, defendants' motion for summary judgment is granted. The Complaint i.s dismissed with prejudice against all the defendants, and without costs or disbursements. The Clerk is directed to enter judgment accordingly Dated: January /7 , 2012 ' BARBARA 28 JAN .an 2012

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