UBS Sec. LLC v Angioblast Sys., Inc.

[*1] UBS Sec. LLC v Angioblast Sys., Inc. 2012 NY Slip Op 50525(U) Decided on January 30, 2012 Supreme Court, New York County Bransten, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on January 30, 2012
Supreme Court, New York County

UBS Securities LLC, Plaintiff,

against

Angioblast Systems, Inc., Defendant.



650062/2011



Counsel on the matter are Daniel J. Cantor, Bradley J. Butwin and Samantha A. Hill of O'Melveny & Myers, LLP for Plaintiff and Mitchell Epner and Jason Juceam of Wilson Sonsini Goodrich & Rosati for Defendant.

Eileen Bransten, J.

Plaintiff UBS Securities LLC ("UBS") seeks dismissal of Angioblast Systems, Inc. ("Angioblast") counterclaims and affirmative defenses pursuant to CPLR 3016(b), 3211(a)(1), 3211(a)(7), and 3211(b).

BACKGROUND

Plaintiff UBS is a Delaware limited liability company. UBS is a global investment services firm that provides, among other things, investment banking and financial advisory services. Memorandum of Law in Support of Plaintiff's Motion to Dismiss, ("Plaintiff's Memo"), p. 4.

Defendant Angioblast is a Delaware corporation. Angioblast is a privately held biotechnology company specializing in the development and commercialization of novel therapeutic products for the treatment of cardiovascular diseases and vascular disorders. Complaint, ¶ 6.

From 2001-2007, Angioblast conducted pre-clinical and Phase 1 clinical studies of adult stem cell treatments for diseases such as Congestive Heart Failure ("CHF") and Acute Myocardial Infarction ("AMI"). Defendant's Counterclaims, ("Counterclaims"), ¶ 57. In May 2007, the United States Food and Drug Administration ("FDA") gave Angioblast permission to commence Phase 2 clinical trials of its AMI treatment. Id. at ¶ 60. Angioblast had insufficient capital to fund the Phase 2 clinical testing through completion. Id. at ¶ 62. Thus, in the Spring of 2007, Angioblast began contacting leading investment banks with significant experience in the healthcare industry to assist Angioblast by raising capital for its Phase 2 trials. Id. at ¶ 63. [*2]

Angioblast states that at least twelve investment banks, including UBS, were interested in competing for Angioblast's business. Angioblast allegedly informed the banks that its financial objectives were: (1) an immediate Series C equity private placement to raise at least $30 million to finance Angioblast's Phase 2 trials; and (2) an eventual Initial Public Offering ("IPO") following the successful completion of its Phase 2 trials. Counterclaims,at ¶ 65.

UBS first expressed interest in working with Angioblast in June 2007. Counterclaims,¶ 66. UBS allegedly held itself out to Angioblast as the world's leader in healthcare investment banking. Id. In June 2007, Dr. Silviu Itescu, M.D. ("Itescu") (Angioblast's founder and CEO), Michael Schuster ("Schuster") (Angioblast's VP of Operations) and Michael Warman ("Warman") (Angioblast's VP of Corporate Finance and Investor Relations) met several times with Graig Suvvanavejh ("Suvvanavejh") and Steve Yoo ("Yoo"), members of the UBS healthcare investment banking research department that Angioblast believed to be key members. Id. During these meetings, Angioblast shared with Suvvanavejh and Yoo its proprietary information about Angioblast's adult stem cell research, platform technology, stable of intellectual property, results of completed Phase 1 trials, plans for future clinical trials and its strategic business plan. Id.

Angioblast's senior management also met with a UBS healthcare investment banking team led by UBS Managing Director Sage Kelly ("Kelly"). Kelly allegedly represented that if Angioblast hired UBS, he would personally serve as the UBS banking team leader throughout the engagement. Counterclaims, ¶ 67. However, UBS shortly thereafter removed Kelly from the team, stating that Kelly had a conflict of interest. Id. at ¶ 68.

UBS then introduced Angioblast to Steven Meehan ("Meehan"). Meehan was a UBS Managing Director with twenty years of healthcare investment banking experience and was the head of UBS's Life Sciences group. Id. at ¶ 69. Angioblast executives met several times in October 2007 with Meehan and UBS Associate Director Nabeel Kaukab ("Kaukab"). Id. at ¶ 70. Angioblast states that during these meetings it explained to Meehan and Kaukab: (1) the amount of capital that Angioblast would require to conduct its Phase 2 clinical trials; (2) the urgent necessity of raising these funds in order to allow Angioblast to commence and complete its Phase 2 clinical trials as soon as possible; and (3) the basis upon which the value of Angioblast would increase by hundreds of millions of dollars once Angioblast successfully completed Phase 2 clinical trials for its AMI product and CHF product. Id.

Meehan allegedly assured senior members of Angioblast management during one of these meetings that, if UBS were engaged to serve as Angioblast's exclusive investment bank, he would personally lead the UBS banking team and use his knowledge, experience, acumen and connections to achieve Angioblast's goals of a Series C private placement and an eventual IPO. Id. at ¶ 71.

By November 2007, Angioblast had narrowed its investment bank candidates to UBS and a smaller investment bank with significant experience in private placement of securities for developing healthcare companies ("Bank B"). Id. at ¶ 72. Bank B represented to Angioblast that it had identified investors interested in investing in Angioblast and that it was [*3]confident that Bank B's investors could provide at least $30 million for a Series C private placement. Id. at ¶ 73.

On November 7, 2007, UBS representatives Meehan and Kaukab personally appeared before Angioblast's Board of Directors and made a formal presentation to convince Angioblast to hire UBS as its exclusive financial advisor. Counterclaims, ¶ 75. Angioblast gave decisive weight to Meehan's claims to have: (1) developed a specialized personal understanding of Angioblast's adult stem cell technology; (2) years of experience in raising funds for clinical development biotechnology companies; and (3) strong relationships with pre-existing UBS clients that would be likely to invest in Angioblast, if such an investment was solicited by Meehan. Id. at ¶ 76. Angioblast was also impressed with Kaukab's vigor and intelligence. Id.

Carter Eckert ("Eckert"), Chairman of the Angioblast Board of Directors, stated to Meehan that Angioblast feared that the UBS "varsity team" would remain on Angioblast's team only until UBS had secured Angioblast's business, at which point UBS would then substitute inexperienced "rookies." Id. at ¶ 77. Eckert clearly stated that Angioblast would retain UBS only if UBS were willing to make an unconditional promise that Meehan and Kaukab would be, and remain, personally engaged as the leaders of the UBS team throughout the engagement and would personally supervise other junior members of the UBS team. Id. Eckert specifically admonished Meehan that unless UBS made this commitment, Angioblast would hire one of UBS's competitors. Id. Angioblast alleges that Meehan falsely promised that if Angioblast chose UBS he would personally run the engagement and that, under his personal supervision, the full team would continue on with Angioblast for the entire term of the engagement. Id. at ¶ 78.

On December 20, 2007, Angioblast and UBS executed the Engagement Letter. The Engagement Letter appointed UBS as Angioblast's exclusive financial advisor in connection with any potential Sale Transaction. Counterclaims, ¶ 80. The Engagement Letter defined "Sale Transaction" as:

whether effected directly or indirectly or in one transaction or a series of transactions, any: (a) merger, consolidation, reorganization or other business combination pursuant to which the Company and any third party and/or 20% or more of their respective businesses, divisions or product lines are combined or (b) sale, transfer or other disposition of 20% or more of the capital stock or assets of the Company by way of negotiated purchase, option, leveraged buyout, minority investment or partnership, recapitalization, joint or collaborative venture or otherwise.

Engagement Letter § 1. Angioblast agreed to pay UBS a fee (the "Agreement Fee") upon entering into an agreement in principle for a Sale Transaction, and a second, larger fee (the "Transaction Fee") at the transaction's closing. Id. at § 2. The Engagement Letter also provided that Angioblast would reimburse UBS for any expenses it incurred in connection with the engagement, "[w]hether or not any Sale Transaction occurs." Id. at § 4. [*4]

The Engagement Letter had a two-year term (the "Term") and a nine-month tail period (the "Tail Period"). The Tail Period extended the time during which UBS could earn a Transaction Fee. Id. at § 1. The Tail Period provision stated that: "UBS shall be entitled to payment in full of the applicable Transaction Fee referred to in this Section 2 if at any time prior to the expiration of nine months after the Term the Company enters into an agreement that subsequently results in the consummation of a Sale Transaction." Id. at § 2. The Engagement Letter's termination provision permitted termination only "upon 30 days prior written notice." Id. at § 7. The Engagement Letter also provided that even if the agreement was terminated, "UBS shall be entitled to the fees payable pursuant to Section 2" if, at any time prior to the end of the Tail Period on September 20, 2010, Angioblast entered into an agreement that ultimately resulted in a Sales Transaction. Id.

On March 11, 2008, UBS announced that Meehan had been appointed CEO of UBS Russia. Counterclaims, ¶ 84. UBS did not replace Meehan on the Angioblast team with a senior healthcare banker experienced in private placements. Id. at ¶ 85. UBS then terminated Kaukab on or about April 28, 2008. Id. at ¶ 86. UBS did not replace Kaukab with another mid-level healthcare banker having experience in private placements. Id. at ¶| 87. Then, on May 14, 2008, UBS terminated Suvvanavejh. Id. at ¶ 88. Thereafter, Angioblast alleges that the only UBS employee who attempted to maintain contact with Angioblast was Peter Francis, a recent college graduate with no significant healthcare investment banking experience. Id. at ¶ 89.

On June 25, 2008, Angioblast received clearance from the FDA to commence Phase 2 clinical trials of its stem cell treatment of CHF. Angioblast contends that because UBS had failed to raise any new capital for Angioblast, it lacked sufficient capital to commence the Phase 2 clinical trials of its CHF product. Angioblast was forced to put the project on hold until it raised the required capital. Id. at ¶¶ 91-92.

In June 2008, UBS assigned Real Leclerc and Anthony Martino to the Angioblast matter. Leclerc's experience was confined to healthcare mergers and acquisitions, and Martino was not a healthcare specialist. Id. at ¶ 96. In June 2009, Leclerc, Martino and Francis, along with UBS Managing Director Kelly and more than thirty other UBS Healthcare Group investment bankers, departed UBS for Jefferies & Company, Inc. Id. at ¶ 98. After their departure, UBS introduced a new team of UBS Life Sciences investment bankers, led by Managing Director Aradhana Sarin ("Sarin") and Executive Director Christina Bresani ("Bresani"). Id. at ¶ 99.

On July 14, 2009, Itescu wrote to UBS (the "Itescu Letter"), stating:

As you may know, it was our initial confidence in and personal relationship with Steven Meehan and Nabeel Kaukab that first brought our business to UBS and prompted us to consummate the prior engagement letter in December 2007 with Steve, Nabeel and UBS. Regrettably, Steve and Nabeel ceased to provide any services to Angioblast from mid-2008. Therefore, the prior UBS engagement by Angioblast terminated effective from the date of Nabeel's formal departure from UBS. [*5]

Itescu further invited UBS to propose terms for a "new formal relationship" between UBS and Angioblast in a "new engagement letter" and to contact Itescu if UBS had any questions. Id. at ¶ 101.

On July 31, 2009, Bresani, responded to the Itescu Letter on behalf of UBS. In the response, UBS adopted Itescu's suggestion to propose terms for a new formal relationship by proposing terms for a "new engagement" between UBS and Angioblast. Id. at ¶ 103. Over the next six months, Angioblast and UBS pursued the possibility of entering into a new relationship, but the parties never consummated a new agreement. Id. at ¶ 104.

In August 2009, Angioblast succeeded in raising a portion of the money it needed to fund its clinical trials, without assistance from UBS. Id. at ¶ 105. On August 25, 2009, Angioblast publicly announced that it had raised $10 million in equity-based financing, $3 million of which came from its own shareholders. Id. at ¶ 106. Immediately upon receipt of the $10 million, Angioblast initiated the Phase 2 clinical trials on CHF. Id. at ¶ 109.

The Phase 2 clinical trials on CHF consumed virtually all of Angioblast's remaining capital, including the $10 million raised in August 2009. Id. at ¶ 112.

Angioblast had an Australian sister company, Mesoblast Limited ("Mesoblast"), which was also founded by Itescu. Mesoblast owned 32.8% of Angioblast's stock. Id. at ¶ 113. In May 2010, Angioblast negotiated a merger with Mesoblast, without any assistance from UBS. Id. at ¶ 114. On May 12, 2010, Angioblast and Mesoblast publicly announced their merger agreement, under which Mesoblast would become the 100% owner of Angioblast, and Angioblast's shareholders would receive shares in Mesoblast. Id. at ¶ 115.

On January 10, 2011, approximately two weeks after the Angioblast-Mesoblast transaction closed, the interim results from the ongoing Phase 2 clinical trials of Revascor for patients with CHF were publicly announced. Id. at ¶ 118. The price of Mesoblast stock on the Australian Stock Exchange increased more than 25% within one week. Id. at ¶ 119. During the week following the public announcement of the Revascor interim results, the aggregate market capitalization of Mesoblast increased by more than $300 million U.S. dollars. Id.

UBS commenced this action on January 10, 2011. UBS asserts two causes of action against Angioblast: breach of contract and indemnification. Angioblast asserts two counterclaims against UBS: fraudulent inducement and breach of contract. Angioblast also alleges nine affirmative defenses: (1) failure to state a cause of action; (2) fraudulent inducement; (3) abrogation and abandonment; (4) termination; (5) estoppel, waiver and consent; (6) unjust enrichment; (7) unclean hands; (8) plaintiff's breach; and (9) "additional defenses."

UBS moves to dismiss Angioblast's counterclaims and affirmative defenses in their entirety.

ANALYSIS UBS Moves Pursuant to CPLR 3211(a)[*6]

to Dismiss Angioblast's Counterclaims

UBS moves to dismiss Angioblast's counterclaims in their entirety pursuant to CPLR 3211(a)(1) and 3211(a)(7).

Standard of Law

On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction. We accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory. Under CPLR 3211(a)(1), a dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law. In assessing a motion under CPLR 3211(a)(7), however, a court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint and the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one.

Leon v. Martinez, 84 NY2d 83, 87-88 (1994) (internal quotations and citations omitted); see also Goshen v. Mutual Life Ins. Co. of New York, 98 NY2d 314, 326 (2002). "It is well settled that bare legal conclusions and factual claims, which are either inherently incredible or flatly contradicted by documentary evidence are not presumed to be true on a motion to dismiss for legal insufficiency. O'Donnell, Fox & Gartner v. R-2000 Corp., 198 AD2d 154, 154 (1st Dep't 1993). The court is not required to accept factual allegations that are contradicted by documentary evidence or legal conclusions that are unsupported in the face of undisputed facts. Zanett Lombardier, Ltd. v. Maslow, 29 AD3d 495, 496 (1st Dep't 2006) citing Robinson v. Robinson, 303 AD2d 235, 235 (1st Dep't 2003).

Angioblast's Counterclaim for Fraudulent Inducement

Angioblast alleges that UBS made a material misrepresentation of fact, namely that Managing Director Meehan would personally lead, and Kaukab would continue to be involved in, the Angioblast engagement for the entire term of UBS's engagement to serve as Angioblast's exclusive financial advisor. Counterclaims, ¶ 122. Angioblast alleges that this statement was false and was intended to induce Angioblast to enter into the Engagement Letter with UBS. Id. at ¶ 123.

UBS moves to dismiss Angioblast's counterclaim on three grounds. First, UBS alleges that Angioblast could not have reasonably relied on the alleged pre-contractual oral misrepresentation because that representation is not mentioned in the Engagement Letter. Plaintiff's Memo, p. 2. UBS alleges that if Meehan's and Kaukab's involvement was the only reason that Angioblast was willing to hire UBS, Angioblast was required to insist on including a provision to that effect in the Engagement Letter. UBS alleges that Angioblast's failure to do so establishes that its reliance on the alleged oral misrepresentation was unreasonable as a matter of law. Id. at p. 13. [*7]

Second, UBS alleges that the Engagement Letter contained a merger clause that explicitly stated that the Engagement Letter "embodie[d] the entire agreement and understanding between the parties hereto and supersede[d] all prior agreements and understandings relating to the subject matter hereof" and that it "may not be amended or otherwise modified or waived except by an instrument in writing signed by both UBS and the Company." Id.

Third, UBS alleges that Angioblast has not pleaded that the alleged fraud caused it any out-of-pocket losses. Id. at p. 2.

To maintain a cause of action for fraudulent inducement of a contract, a party must show "a material representation, known to be false, made with the intention of inducing reliance, upon which it actually relied, consequentially sustaining a detriment." Frank Crystal & Co., Inc. v. Dillman, 84 AD3d 704, 704 (1st Dep't 2011). A fraud-based cause of action is duplicative of a breach of contract claim when the only fraud alleged is that the defendant was not sincere when it promised to perform under the contract. First Bank of the Americas v. Motor Car Funding, 257 AD2d 287, 291 (1st Dep't 1999). A fraud-based cause of action may lie, however, where the plaintiff pleads a breach of a duty separate from a breach of the contract. Id.

The true measure of damages for fraud is indemnity for the actual pecuniary loss sustained as the direct result of the wrong. This is known as the "out-of-pocket" rule. Lama Holding Co. v. Smith Barney, 88 NY2d 413, 421 (1996). Under the out-of-pocket rule, loss is computed by ascertaining the "difference between the value of the bargain which a plaintiff was induced by fraud to make and the amount or value of the consideration exacted as the price of the bargain." Lama, 88 NY2d at 421,citing Sager v. Friedman, 270 NY 472, 481 (1936). Damages are to be calculated to compensate plaintiffs for what they lost because of the fraud, not to compensate them for what they might have gained. Lama, 88 NY2d at 421. Under the out-of-pocket rule, there can be no recovery of profits which would have been realized in the absence of fraud. Id. The loss of an alternative contractual bargain cannot serve as a basis for fraud or misrepresentation damages because the loss of the bargain was "undeterminable and speculative." Lama, 88 NY2d at 422citing Dress Shirt Sales v. Hotel Martinique Assocs., 12 NY2d 339, 344 (1963).

Angioblast has alleged that, on November 7, 2007, UBS made a material misrepresentation of fact, namely, that Managing Director Meehan would personally lead, and Kaukab would be involved in, the Angioblast engagement for the entire term of UBS's engagement as Angioblast's exclusive financial advisor. Counterclaims, ¶ 122. Angioblast alleges that at the time Meehan made these false promises he knew, or had reason to know, that he had been slated to become the CEO of UBS Russia, that he would have no involvement in UBS's healthcare group and that he would not be in a position to provide assistance to Angioblast. Id. at ¶ 78.

Angioblast alleges that this misrepresentation was intended to induce Angioblast to enter into the Engagement Letter. Id. at ¶| 124. Angioblast alleges that it reasonably relied upon UBS's misrepresentation in executing the Engagement Letter. Id. at ¶ 125. [*8]

Angioblast next alleges that it suffered damages as a result of its reliance on UBS's misrepresentation. Id. at ¶ 126. Angioblast contends that, had UBS not falsely represented that Meehan and Kaukab would personally lead the UBS banking team for its entire engagement by Angioblast, Angioblast would not have engaged UBS. Angioblast argues that, instead of hiring UBS Angioblast would have engaged an alternative investment bank that would have successfully made a private placement of Angioblast securities of at least $30 million. Id.

Angioblast has not pled a legally cognizable injury. Angioblast alleges damages based on monies that would have been realized in the absence of the fraud. However, Angioblast cannot be compensated for what it might have gained. Lama, 88 NY2d at 421. Angioblast alleges the loss of an alternative contractual bargain which is too speculative for relief to be granted. Id. UBS's motion to dismiss Angioblast's counterclaim for fraudulent inducement is granted.

UBS also moves to dismiss Angioblast's counterclaim for fraudulent inducement pursuant to CPLR 3016(b). This issue need not be addressed in light of the foregoing dismissal.

Angioblast's Counterclaim for Breach of Contract

Angioblast's counterclaim for breach of contract alleges that UBS breached its duty to use its best efforts to facilitate appropriate financing by, inter alia: (1) reassigning Meehan to UBS Russia without replacing him with a senior investment banker having broad experience in raising capital for developmental biotechnology companies; (2) terminating Kaukab without replacing him with an investment banker sufficiently experienced in healthcare to serve as team leader on the Angioblast engagement; (3) terminating Suvvanavejh without replacing him with a senior investment banking research analyst; (4) assigning Francis, a recent college graduate with virtually no banking experience, to serve effectively as the Angioblast team leader; and (5) essentially dismantling the UBS Angioblast team such that the team was not only leaderless, but, as a practical matter, was non-existent. Id. at ¶ 90.

UBS moves to dismiss Angioblast's counterclaim for breach of contract on three grounds. First, UBS alleges that Angioblast improperly attempts to impose an implied best efforts obligation that is inconsistent with the written agreement. Second, UBS alleges that any implied best efforts obligation would be unenforceable because the Engagement Letter contains no objective criteria by which to measure UBS's performance of that alleged implied obligation. Third, UBS alleges that Angioblast has not suffered any damages as a result of the breach.

In order to plead a breach of contract claim, the party must allege: (1) the making of an agreement; (2) performance of the agreement by one party; (3) breach by the other party; and (4) damages. J & L American Enterprises, Ltd. v. DSA Direct, LLC, 10 Misc 3d 1076(a), *5 (Sup. Ct., NY County 2006) (citations omitted). In addition, the pleading must also "set forth the terms of the agreement upon which [the breach] is predicated, either by express [*9]reference or by attaching a copy of the contract." Id. citing Chrysler Capital Corp. v. Hilltop Egg Farms, Inc., 129 AD2d 927, 928 (3rd Dep't 1987).

Angioblast has alleged that UBS failed to use its best efforts to discharge its obligation to facilitate any financing for Angioblast. Memorandum of Law in Opposition to Plaintiff's Motion to Dismiss, ("Defendant's Memo"), p. 20. Angioblast alleges that it engaged UBS to serve as "exclusive placement agent in connection with a Placement." Engagement Letter § 1. Angioblast contends that by operation of New York law, in accepting this exclusive agency UBS provided an implied promise to use its good faith, best efforts to bring about a Placement. Defendant's Memo, p. 20. Angioblast alleges that UBS's failure to comply with its implied promise was a breach of contract. Id. at p. 21.

Angioblast alleges that it suffered damages as a result of UBS's breach. Angioblast alleges that: (1) had UBS complied with its obligation to use its best efforts to assist Angioblast in raising capital, it would have raised at least $30 million in a Series C private placement by June 2008; and (2) the absence of that capital delayed Angioblast from commencing Phase 2 clinical testing for 14 months and ultimately forced it to sell itself to Mesoblast before it could publicly announce the success of those clinical trials. Id. at p. 22.

Implicit in all contracts is a covenant of good faith and fair dealing in the course of contract performance. Dalton v. Educational Testing Serv., 87 NY2d 384, 389 (1995). Encompassed within the implied obligation of each promisor to exercise good faith are " any promises which a reasonable person in the position of the promisee would be justified in understanding were included.'" Rowe v. Great Atl. & Pac. Tea Co., 46 NY2d 62, 69 (1978) quoting 5 Williston, Contracts § 1293, , at 3682 [rev. ed. 1937]. This embraces a pledge that "neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract." Dalton, 87 NY2d at 389 quoting Murphy v. American Home Prods. Corp., 58 NY2d 293, 304 (1983).

Angioblast has not pleaded that UBS took any action that would have the effect of destroying or injuring the right of Angioblast to receive the fruits of the contract. Dalton, 87 NY2d at 389. UBS may not have acted as Angioblast preferred, but Angioblast has not sufficiently alleged that UBS breached its implied obligation to exercise good faith in its performance. UBS's motion to dismiss Angioblast's counterclaim for breach of contract must therefore be granted.

II.UBS Moves Pursuant to CPLR 3211(b)

to Dismiss Angioblast's Affirmative Defenses

UBS next moves to dismiss Angioblast's affirmative defenses in their entirety pursuant to CPLR 3211(b).

A.Standard of Law

CPLR 3211(b) provides that a party may move to dismiss one or more defenses on the ground that a defense is not stated or has no merit. Siegel, NY Practice § 269, at p. 449 (4th ed. 2005). Upon a motion to dismiss a defense, a defendant is entitled to the benefit of every reasonable [*10]intendment of the pleading, which is to be liberally construed. If there is any doubt as to the availability of a defense, it should not be dismissed. Abney v. Lunsford, 254 AD2d 318, 318 (2nd Dep't 1998). When moving to dismiss an affirmative defense, the movant bears the burden of demonstrating that the affirmative defense is without merit as a matter of law because it either does not apply under the factual circumstances of the case or it fails to state a defense. Bank of America., N.A. v. 414 Midland Ave. Assoc., LLC, 78 AD3d 746, 748 (2nd Dep't 2010). When pleading a defense, brevity is not only permissible, but encouraged. Siegel, NY Practice § 223, at p. 370 (4th ed. 2005). For example, the New York Court of Appeals has held that pleading the phrase "statute of limitations" is sufficient to preserve that defense. Immediate v. St. John's Queens Hospital, 48 NY2d 671, 673 (1979).

B.Failure to State a Cause of Action

Angioblast's first affirmative defense alleges that the Complaint, and each purported claim and cause of action therein, fails to state a claim upon which relief can be granted. Counterclaims, ¶ 41. The defense of failure to state a cause of action may be inserted in an answer as an affirmative defense. The pleading of that defense is, however, surplusage, as it may be asserted at any time even if not pleaded. Riland v. Frederick S. Todman & Co., 56 AD2d 350, 352 (1st Dep't 1977). The assertion of that defense in an answer should not be subject to a motion to strike. Id. at p. 353.

UBS's motion to dismiss Angioblast's affirmative defense for failure to state a cause of action is denied.

C.Fraudulent Inducement

Angioblast alleges that the Complaint, and each purported claim and cause of action therein, is barred in whole or in part by the doctrine of fraudulent inducement. Counterclaims, ¶ 42. CPLR 3016(b) requires that where a cause of action is based upon fraud, the circumstances constituting the wrong shall be stated in detail.

As discussed above, Angioblast has not pled a legally cognizable injury sufficient to support a claim for fraudulent inducement. For the same reasons this court must dismiss Angioblast's counterclaim for fraudulent inducement, it must also dismiss this affirmative defense. UBS's motion to dismiss Angioblast's affirmative defense of fraudulent inducement is therefore granted.

D.Abrogation and Abandonment

Angioblast alleges that the Complaint, and each purported claim and cause of action therein, is barred in whole or in part by the doctrines of abrogation and/or abandonment. Counterclaims, ¶ 43. UBS has not met its burden of demonstrating that the affirmative defense is without merit as a matter of law. UBS has not shown that this defense either does not apply under the factual circumstances of the case or fails to state a defense. UBS's motion to dismiss Angioblast's affirmative defense of abrogation and abandonment is thus denied.

E.Termination

Angioblast alleges that the Complaint, and each purported claim and cause of action contained therein, is barred in whole or in part because the contract was terminated. Counterclaims, ¶ 44.

It is a well-established principle of law that when a contract affords a party the unqualified right to limit the contract's life by notice of termination, that right to terminate is absolute and will be upheld in accordance with its clear and unambiguous terms. Red Apple Child Development Center v. Community School Districts Two, 303 AD2d 156, 157 (1st Dep't 2003).

On July 14, 2009, Angioblast wrote a letter to UBS stating that the engagement was terminated effective from the date of Nabeel's formal departure from UBS.Counterclaims, ¶ 100. [*11]UBS alleges that Angioblast's termination defense fails because the termination was not proper under the Engagement Letter. Plaintiff's Memo, p. 22. UBS also alleges that even if the termination had been proper under the Engagement Letter, the clear and unambiguous Tail Period provision entitles UBS to collect the fees at issue for a post-termination Sale Transaction agreed to during the Tail Period. Id.

The Engagement Letter's termination provision permitted termination only "upon 30 days prior written notice." Engagement Letter, § 7. The Engagement Letter also provided that even if the agreement was terminated, "UBS shall be entitled to the fees payable pursuant to Section 2" if, at any time prior to the end of the Tail Period on September 20, 2010, Angioblast entered into an agreement that ultimately resulted in a Sales Transaction. Id. A "Sale Transaction" includes a merger in which Angioblast and any third party and/or 20% or more of their respective businesses, divisions or product lines are combined. Id. at § 1.

UBS alleges that in May 2010, Angioblast negotiated a merger with Mesoblast. Complaint, ¶ 3. UBS alleges that the merger constituted a Sale Transaction that was entered into prior to the end of the Tail Period on September 20, 2010. Id. at ¶ 3. UBS alleges that Angioblast owes it and Agreement Fee and a Transaction Fee. Id. at ¶¶ 3-4.

UBS has demonstrated that the termination defense is without merit. UBS's motion to dismiss Angioblast's affirmative defense of termination is granted.

F.Estoppel, Waiver and Consent

Angioblast alleges that the Complaint, and each purported claim and cause of action contained therein, is barred in whole or in part by the doctrines of waiver, estoppel and/or consent. Counterclaims, ¶ 45. These defenses are equitable in nature. BP3 Capital LLC v. Yosupov, 29 Misc 3d 1239(A), 2 (NY Sup. Ct., Queens County December 21, 2010). In an action at law seeking monetary damages, defendants' equitable defenses are not applicable. Obstfeld v. Thermo Niton Analyzers LLC, 32 Misc 3d 1221(A), 5 (NY Sup. Ct., Kings County July 25, 2011) (holding that "in an action at law seeking monetary damages, defendants' equitable defenses are not applicable"). Defendants are not entitled to interpose equitable defenses, which are brought in defense of plaintiffs' claims for monetary damages. Id.

UBS has commenced this action against Angioblast for breach of contract and indemnification. UBS solely seeks damages. Angioblast's equitable defenses are thus unavailable in this action. UBS's motion to dismiss Angioblast's affirmative defense of estoppel, waiver and consent is granted.

G.Unjust Enrichment

Angioblast alleges that the Complaint, and each purported claim and cause of action contained therein, is barred by the doctrine of unjust enrichment. Counterclaims, ¶ 46. As stated supra, equitable defenses are unavailable in an action exclusively for damages. UBS's motion to dismiss Angioblast's affirmative defense of unjust enrichment is granted.

H.Unclean Hands

Angioblast alleges that the Complaint, and each purported claim and cause of action contained therein, is barred by the doctrine of unclean hands. Counterclaims, ¶ 47. The doctrine of unclean hands is an equitable defense that is unavailable in an action exclusively for damages. Manshion Joho Ctr., Ltd. v. Manshion Joho Ctr., Inc., 24 AD3d 189, 190 (1st Dep't 2005). UBS's motion to dismiss Angioblast's affirmative defense of unclean hands is granted.

I.Plaintiff's Breach of Contract

[*12]Angioblast alleges that the Complaint, and each purported claim and cause of action contained therein, is barred to the extent UBS materially breached and repudiated the terms and conditions of the contract, both express and implied. Angioblast contends that it was therefore excused from its purported obligation to perform thereunder. Counterclaims, ¶ 48.

As discussed above, Angioblast has not pleaded that UBS breached its implied obligation to exercise good faith. See § I(C), supra. UBS's motion to dismiss Angioblast's affirmative defense of plaintiff's breach is granted.

ORDER

Accordingly, it is:

ORDERED that Plaintiff's motion to dismiss is granted as to Defendant's first counterclaim for fraudulent inducement, and that counterclaim is dismissed; and it is further

ORDERED that Plaintiff's motion to dismiss is granted as to Defendant's second counterclaim for breach of contract, and that counterclaim is dismissed; and it is further

ORDERED that Plaintiff's motion to dismiss is granted as to Defendant's second affirmative defense of fraudulent inducement, and that affirmative defense is dismissed; and it is further

ORDERED that Plaintiff's motion to dismiss is granted as to Defendant's fourth affirmative defense of termination, and that affirmative defense is dismissed; and it is further

ORDERED that Plaintiff's motion to dismiss is granted as to Defendant's fifth affirmative defense of estoppel, waiver and consent, and that affirmative defense is dismissed; and it is further

ORDERED that Plaintiff's motion to dismiss is granted as to Defendant's sixth affirmative defense of unjust enrichment, and that affirmative defense is dismissed; and it is further

ORDERED that Plaintiff's motion to dismiss is granted as to Defendant's seventh affirmative defense of unclean hands, and that affirmative defense is dismissed; and it is further

ORDERED that Plaintiff's motion to dismiss is granted as to Defendant's eighth affirmative defense of plaintiff's breach, and that affirmative defense is dismissed; and it is further

ORDERED that Plaintiff's motion to dismiss is otherwise denied. It is further

ORDERED that the parties are to appear in Room 442, 60 Centre Street, on February 21, 2012 for a preliminary conference.

Dated: New York, New York

January ___, 2012

ENTER:

______________________________________

Hon. Eileen Bransten, J.S.C.