Blue Wolf Group, LLC v Gaiam, Inc.

[*1] Blue Wolf Group, LLC v Gaiam, Inc. 2007 NY Slip Op 51403(U) [16 Misc 3d 1113(A)] Decided on July 23, 2007 Civil Court Of The City Of New York, New York County Singh, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 July 23, 2007
Civil Court of the City of New York, New York County

Blue Wolf Group, LLC, Plaintiff,

against

Gaiam, Inc., Defendant.



300650TS06

Anil C. Singh, J.

Defendant Gaiam, Inc., moves for summary judgment dismissing this action pursuant to CPLR 3212, contending that it was not one of the contracting parties to an alleged oral agreement for employee placement services and it is therefore under no legal obligation to pay plaintiff a commission or finder's fee. Plaintiff Blue Wolf Group, LLC ("Blue Wolf") opposes and cross-moves for summary judgment pursuant to CPLR 3212 on its third cause of action for unjust enrichment and striking defendant's answer or, in the alternative, for an order pursuant to CPLR 3126 directing defendant to produce Lou Weiss, who is currently the President of a subsidiary of defendant Gaiam, Inc., for an examination before trial.

Plaintiff Blue Wolf is a technical consulting company that provides remote database administration services. Plaintiff contends that its clients also request assistance in locating and securing specialized individuals for hire. According to plaintiff, it provides such assistance in exchange for a commission that is based upon a percentage of the individual's first year salary.

Plaintiff entered into a Remote Services Agreement with GoodTimes, LLC ("GoodTimes") in August 2004, pursuant to which plaintiff provided certain technical services to GoodTimes. Plaintiff subsequently entered into an alleged oral contract with GoodTimes in January or February 2005 to provide employee placement services. Specifically, GoodTimes requested plaintiff's assistance in securing a qualified candidate for a position in GoodTimes' information technology ("IT") department. Plaintiff referred Gene Super as a candidate for the position.

At the time of the alleged contract and referral, Lou Weiss was the Executive Vice [*2]President of GoodTimes. He was one of several people at GoodTimes who interviewed Gene Super. However, GoodTimes instituted a hiring freeze due to financial problems around the time the interviews were conducted, so Super was not hired.

As a result of its financial difficulties, GoodTimes entered into an "Asset Purchase Agreement" with defendant Gaiam, Inc., on July 8, 2005, pursuant to which defendant agreed to acquire substantially all of the assets of GoodTimes for the payment of forty million dollars ($40,000,000). A few days later, GoodTimes filed a Chapter 11 petition in U.S. Bankruptcy Court. The Bankruptcy Court approved the Asset Purchase Agreement on August 31, 2005.

After the closing of the sale of the GoodTimes assets to defendant, defendant in September 2005 hired Lou Weiss to serve as President of Gaiam Direct, a division of defendant Gaiam, Inc. In January 2006, GT Media, Inc., a wholly-owned subsidiary of defendant, hired Gene Super.

Plaintiff commenced the instant action asserting three cause of action against defendant in April 2006. The first cause of action for breach of contract alleges that defendant became the assignee of the employee placement contract between plaintiff and GoodTimes as a result of the consummation of the asset purchase agreement. The second cause of action is based on the principle of quantum meruit. The third cause of action alleges unjust enrichment.

Defendant exhibits the sworn affidavit of Lou Weiss, the current President of Gaiam Direct and former Executive Vice President of GoodTimes, in support of its motion for summary judgment. Mr. Weiss states that, as part of the bankruptcy process, GoodTimes expressly assumed and assigned to defendant a list of certain specified executory contracts and rejected all others not listed. According to Mr. Weiss, the only contract between GoodTimes and plaintiff that was assumed and assigned to defendant was the Remote Services Agreement dated August 1, 2004. He states that the Remote Services Agreement has nothing to do with employee placement services. Furthermore, Mr. Weiss states that defendant is not affiliated in any way with GoodTimes, nor is it the legal successor thereto.

Plaintiff exhibits the sworn affidavit of Michael Kirven, a member of Blue Wolf, in opposition and in support of its cross-motion. Mr. Kirven states that GoodTimes contacted plaintiff in February 2005 to request assistance filling the opening in the IT department. After several months without contact concerning GoodTimes' employment search, he states that he received an email from Lou Weiss on August 4, 2005. According to Mr. Kirven, Mr. Weiss was looking for Gene Super so that he could once again discuss the opportunity for his employment. Mr. Kirven states that the interest in Gene Super by Lou Weiss was strictly related to defendant's business operations, and not those of GoodTimes. Moreover, he states that the discussion between Lou Weiss and Gene Super that occurred after July 11, 2005, related to opportunities that would exist after the consummation of the Asset Purchase Agreement and the acquisition of GoodTimes' business by defendant as part of the bankruptcy proceeding.

On a motion for summary judgment, the movant has the initial burden of establishing prima facie, with evidence in admissible form, that it is entitled to judgment as a matter of law, and if the movant does so, the burden shifts to the non-moving party to demonstrate existence of a triable issue of fact (Goldberger v. Brick & Ballerstien, Inc., 217 AD2d 682, 683 [2d Dep't 1995].

The court finds that defendant in the instant matter has set forth a prima facie case for summary judgment with respect to the cause of action alleging breach of contract. It is [*3]undisputed that the alleged oral agreement for employee placement services entered into in January or February 2005 was between plaintiff and GoodTimes, not between plaintiff and defendant. Nevertheless, plaintiff contends that the agreement inured to defendant as a result of the consummation of the Asset Purchase Agreement between defendant and GoodTimes.

We disagree. The Bankruptcy Court's Sale Order is attached to the affirmation of Lou Weiss as Exhibit 1. The order states in pertinent part, "The Purchase Agreement was negotiated at arm's length and proposed and entered into by and among Sellers and Purchaser without collusion and in good faith" (Weiss Aff., Exhibit 1, p. 4). The Order goes on to state, "The Sellers are authorized to assume and assign the Assigned Contracts identified as Exhibit A annexed hereto to the Purchaser pursuant to section 365 of the Bankruptcy Code" (Weiss Aff., Exhibit 1, p. 6). The agreement for employee placement services is conspicuously absent from the list of contracts assigned to and/or assumed by the defendant.

In addition, a copy of the Remote Services Agreement is attached to the Weiss affirmation as Exhibit 2. A review of the Remote Services Agreement reveals that it has nothing to do with employee placement services. Under such circumstances, it is clear that plaintiff's alleged oral contract with GoodTimes is unenforceable against defendant. Moreover, plaintiff has shown no triable issue of fact with respect to the breach of contract claims. Accordingly, plaintiff's cause of action alleging breach of contract must be dismissed.

We turn next to defendant's motion for summary judgment with respect to the second cause of action (quantum meruit) and the third cause of action (unjust enrichment). Defendant contends that plaintiff's allegation of unjust enrichment is an effort to evade the bar of General Obligations Law section 5-701, the codification of the Statute of Frauds. Specifically, defendant contends that plaintiff's cause of action sounding in unjust enrichment must be dismissed by reason of the absence of a written contract between the parties.

General Obligations Law 5-701(a)(10) provides in pertinent part as follows:

a. Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith or by his lawful agent, if such agreement, promise or undertaking:

...

10. Is a contract to pay compensation for services rendered in negotiating a loan, or in negotiating the purchase, sale, exchange, renting or leasing of any real estate or interest therein, or of a business opportunity, business, its good will, inventory, fixtures or an interest therein, including a majority of the voting stock interest in a corporation and including the creating of a partnership interest. "Negotiating" includes procuring an introduction to a party to the transaction or assisting in the negotiation or consummation of the transaction. This provision shall apply to a contract implied in fact or in law to pay reasonable compensation but shall not apply to a contract to pay compensation to an auctioneer, an attorney at law, or a duly licensed real estate broker or real estate salesman.

(General Obligations Law section 5-701(a)(10)).

Defendant cites Roberts v. Champion Intl., 52 AD2d 773 (1st Dep't 1976), Rogoff v. San Juan Racing Assn., 77 AD2d 831 (1st Dep't 1980), and Davis & Mamber v. Adrienne Vittadini, Inc., 212 AD2d 424 (1st Dep't 1995) in support of its argument that plaintiff's claims are barred [*4]by the Statute of Frauds. However, the cited cases are clearly distinguishable from the instant matter in that they are actions to recover a finder's fee for bringing to defendants certain business opportunities. In stark contrast, plaintiff's claim in the instant matter is based upon an agreement for employee placement services. Defendant's invocation of section 5-701(a)(10) of the General Obligations Law in support of its motion is inapposite, for the statutory provision on its face applies only to contracts to pay compensation for services rendered in: 1) negotiating a loan; 2) negotiating a real estate transaction; or 3) brokering the sale of a business. The contract in question here fits within none of those categories

Although not precisely on point, the cases cited by plaintiff in opposition to the motion are more closely analogous to the matter at hand. For example, in Arrow Employment Agency Inc. v. Tom Rice Buick-Pontiac-GMC Truck Inc., 185 Misc 2d 811 (App. Term, 2d Dep't 2000), the Second Department held that an agreement between an employment agency and an employer is enforceable and not subject to the Statute of Frauds (Id., 185 Misc 2d at 813-14). The court also held that where there is no express agreement as to the amount of the fees, an employment agency is entitled to recover on a quantum meruit basis (Id., 185 Misc 2d at 813). Likewise, in Howard-Sloan Legal Search, Inc. v. Todtman, Young, Tunick, Nachamie, Hendler & Spizz, P.C., 193 AD2d 404 (1st Dep't 1993), the First Department held that General Obligations Law section 5-701(a)(10) does not apply to the services of employment agencies.

In light of the above case law, defendant has not made out a prima facie case for the dismissal of plaintiff's claims for unjust enrichment and quantum meruit. On the contrary, plaintiff has set forth a prima facie case for unjust enrichment and quantum meruit.

"In order to establish a claim in quantum meruit, a claimant must establish (1) the performance of the services in good faith, (2) the acceptance of the services by the person to whom they are rendered, (3) an expectation of compensation therefor, and (4) the reasonable value of the services" (22A NY Jur. 2d Contracts section 595). "The doctrine of quantum meruit is used as a device for the prevention of unjust enrichment of one party at the expense of another in the absence of a valid contract" (22A N.Y.Jur. 2d Contracts section 594).

In his affirmation, Michael Kirven states that plaintiff referred Gene Super to GoodTimes and that Lou Weiss interviewed Gene Super for employment in February 2005. A few months later, Lou Weiss e-mailed Michael Kirven on August 4, 2005, expressing a renewed interest in the possibility of employing Gene Super. Thereafter, defendant hired Lou Weiss as the President of its Gaiam Direct division in September 2005, and GT Media, Inc., a subsidiary of defendant, hired Gene Super in January 2006. In short, it appears that defendant would not have hired Gene Super but for the employee placement services rendered in good faith by plaintiff. Under such circumstances, plaintiff has clearly stated facts sufficient to support its claim in quantum meruit.

Plaintiff cross-moves for summary judgment on its third cause of action for unjust enrichment. The doctrine of unjust enrichment has been described as follows:

The term "unjust enrichment" does not signify a single well-defined cause of action. It is a general principle, underlying various legal doctrines and remedies. The phrase "unjust enrichment" is used in law to characterize the result or effect of a failure to make restitution of or for property or benefits received under such circumstances as to give rise to a legal or equitable obligation to account therefor.

An action to recover on a theory of unjust enrichment is based on the equitable principle that a [*5]person must not be allowed to enrich himself unjustly at the expense of another. Unjust enrichment does not require a wrongful act by the one enriched an only requires that equity and good conscience demand that the one enriched not retain the property held. In order to recover, defendants must in fact be enriched. However, where a valid and enforceable contract exists governing a particular subject matter, it precludes recovery in quasi-contract for events arising out of the same subject matter. It has been said, however, that where there is a bona fide dispute as to the existence of a contract or where the contract does not cover the dispute in issue, a party may proceed on an action on quasi-contract.

(22A NY Jur. 2d Contracts section 512)(citations omitted).

"To prevail on a claim of unjust enrichment, a party must show that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered" (Citibank, N.A. v. Walker, 12 AD3d 480, 481 [2d Dep't 2004] (internal quotation marks and citations omitted)). The facts presented make out a prima facie claim that defendant was unjustly enriched at plaintiff's expense. However, plaintiff is not entitled to an award of summary judgment on its cause of action for unjust enrichment because there are unresolved questions of fact as to the circumstances regarding the hiring of Gene Super that only Lou Weiss is in a position to answer.

Finally, the branch of plaintiff's cross-motion to strike defendant's verified answer pursuant to CPLR 3126 is granted to the extent of directing defendant to produce Lou Weiss for examination before trial. The EBT of Lou Weiss shall be held within 45 days of the date of this order.

For the above reasons, only that branch of defendant's motion for summary judgment on the first cause of action for breach of contract is granted. In all other respects, defendant's motion for summary judgment is denied. Plaintiff's cross-motion for summary judgment on the third cause of action for unjust enrichment is denied.

The foregoing constitutes the decision and order of the court.

Date: July 23, 2007______________________________

New York, New YorkAnil C. Singh