Halpern v Greene

[*1] Halpern v Greene 2009 NY Slip Op 51949(U) [24 Misc 3d 1251(A)] Decided on September 15, 2009 Supreme Court, New York County Feinman, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 September 15, 2009
Supreme Court, New York County

Jason Halpern and JACK STANTON, Plaintiffs,

against

Joe Greene, Jr., and JOE GREENE, SR., Defendants.



108302/2008



For Plaintiffs:

Hantman and Associates

By Robert J. Hantman, Esq.

1414 Avenue of the Americas, Suite 406

New York, New York 10019

For Defendants:

Robert M. Simels, P.C.

By Robert M Simels, Esq.

1735 York Avenue, Suite 35 C

New York, New York 10128

Paul G. Feinman, J.

Pursuant to CPLR 3211 (a) (1), defendants move pre-answer to dismiss plaintiffs' complaint based upon documentary evidence. Plaintiffs' complaint seeks commissions allegedly owed by defendant, the boxer Joe Greene, Jr., to them as his managers. Defendants maintain that dismissal of the complaint is mandated because plaintiffs were not properly licensed as boxing managers and, as a result, are precluded from enforcing the management agreements. For the reasons stated below, the motion is granted in part and denied in part.

Factual and Procedural Background

The complaint sets out the following allegations. In early 2005, Halpern and Stanton, who is an attorney, met defendant Greene, Jr. in a gym. At that time, Greene, Jr. was a 19-year-old aspiring amateur boxer. Shortly after their introduction, Stanton and Greene, Jr. entered into a management agreement on February 4, 2005 (Mot. Ex. B).[FN1] In the two subsequent years, [*2]plaintiffs provided Greene, Jr. with substantial financial assistance and logistical support. Plaintiffs directly paid for six of the first eight of Greene, Jr.'s fights, including purses of both boxers, travel expenses, hotels and meals for the entire team, paid all expenses for 13 of Greene, Jr.'s first 14 fights through either purchase of tickets or direct payments to promoters, solicited internet boxing news services for articles and publicity to increase Greene, Jr.'s name recognition, frequently advanced Greene, Jr. personal loans to pay for his day-to-day expenses, paid for posters and other publicity material to enhance his professional standing, leveraged significant contacts with rating organizations to obtain World Rankings, participated in significant negotiations with rating organizations to approve opponents that allowed Greene, Jr. to attain a Top Ten World Ranking, and contacted and attempted to negotiate with all major boxing promoters to obtain television bouts on Greene, Jr.'s behalf. Plaintiffs also sent Greene, Jr. to California in July of 2007 to work with a middleweight champion, and obtained $1,000.00 per week for Greene, Jr. plus expenses for weekly rounds of sparring. As a result of plaintiffs' efforts, Greene, Jr. remained undefeated and rose quickly in the boxing community, which resulted in his ranking as one of the top 10 boxers in the Middleweight Division.

According to the complaint, in April of 2007, both plaintiffs and defendants renewed the 2005 management agreement for an additional three years (Mot. Ex. C).[FN2] Included as part of the agreement were payments totaling $20,800 to be paid to Greene, Sr., for his involvement in his son's career. In an attempt to further promote Greene, Jr. and assure him greater exposure and publicity, plaintiffs secured the services of a boxing promoter, Leon Margules. During the negotiations with Margules, Greene, Jr., at his father's direction, demanded a $40,000 signing bonus from Margules. Because Margules refused to pay any signing bonus, plaintiffs secured the full payment of the requested bonus from a close friend of Halpern who created a new corporate entity, Road Runner, Inc. Shortly after the execution of the 2007 Management and Promotional Agreement, Greene, Sr. undertook to supplant plaintiffs and become his son's manager. To that end, Greene, Sr. increasingly minimized all communication between plaintiffs and his son, while increasing the communication with Margules. On February 23, 2008, the day of Green, Jr.'s fight at Madison Square Garden, Greene, Sr. allegedly screamed at plaintiffs in front of other people in the dressing room. Greene, Sr. later prohibited plaintiffs from visiting Greene, Jr. in either the dressing room or the ring. In preparation for an April 23, 2008 fight, plaintiffs paid for Greene, Jr. to travel to Florida to prepare with a world-class strength trainer and boxing trainer at a cost of approximately $12,000. Over the entire course of plaintiffs' relationship with defendants, plaintiffs transferred or advanced in excess of $225,000 in payments and expenses to further Greene, Jr.'s career.

The complaint further alleges that as of the date of the filing of the complaint, plaintiffs had not had any communication with Greene, Jr. and have not been paid any commissions since [*3]they entered into the 2007 management agreement. Plaintiffs raise four causes of action. They seek to enjoin defendants "from continuing their behavior whom [sic] have shown an utter disregard for their contractual obligations" (Complaint ¶ 60); claim quantum meruit and unjust enrichment as against both defendants; claim tortious interference with the 2007 management agreement as against defendant Greene, Sr., and breach of contract as against defendant Greene, Jr.

The Motion

Defendants argue in their motion to dismiss that neither plaintiff was licensed as a manager, and therefore under New York law, the management agreement was void and cannot be enforced. They further argue that because plaintiffs induced them to enter into the agreements in violation of state law, plaintiffs should not be allowed to recover under the theory of unjust enrichment, as this would circumvent the intent of the law requiring promoters to be licensed.

Plaintiffs concede they are not licensed in New York State, but argue in opposition to the motion to dismiss that their contract with defendants was not invalid as pertains to fights that took place outside of New York, and that they have sufficiently established sufficient allegations of an agreement to preclude dismissal of the complaint at this early stage in the litigation. They also note that Greene, Sr., is not himself licensed as a boxing manager. They further argue that the complaint contains sufficient allegations to support a claim of tortious interference with contract, as well as unjust enrichment and quantum meruit.

Analysis

In evaluating a dismissal motion based on the pleadings, the "sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law" (Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]). The Court presumes the allegations of the complaint to be true and accords them every favorable inference, except insofar as they consist of bare legal conclusions or are inherently incredible or flatly contradicted by documentary evidence (Beattie v Brown & Wood, 243 AD2d 395 [1st Dept 1997]).

Dismissal pursuant to CPLR 3211 (a) (1) is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law (Ladenburg Thalmann & Co. v Tim's Amusements, Inc., 275 AD2d 243, 246 [1st Dept 2000]). Here, defendants maintain that plaintiffs' claims are barred by the rules of the New York State Athletic Commission ("the Commission"), because neither plaintiff was ever licensed to be a boxing manager in New York, nor was the 2007 agreement submitted and approved by the Commission, and thus it is void. As documentary evidence, defendants offer two uncertified letters issued by the Office of General Counsel of the State of New York Department of State, dated April 30 and May 8, 2008, which respectively state that Jason Halpern and Jack Stanton are not licensed managers, that Road Runner Boxing Inc. is not a licensed promoter, and that the 2007 management agreement is invalid under the rules of the Commission (Mot. Ex. A). The May 8, 2008 letter also states that "[t]o the extent that you seek a legal opinion with regard to the enforceability, under state and federal law, of the contracts . . , it is suggested that you consult with private counsel."

[*4]1. The Validity of the 2005 and 2007 Management Contracts

Although, as a general rule, illegal contracts are not enforceable, the violation of a statute that is merely malum prohibitum, as opposed to malum in se, does not necessarily make a contract void and unenforceable, unless the Legislature intended to make it void (Benjamin v Koeppel, 85 NY2d 549, 553 [1995]). In determining whether to enforce provisions of a contract that is malum prohibitum, the court must consider several factors, central of which are the repugnance of the illegality, the express provisions of the statute violated, and the public policy considerations in refusing enforcement (28 NY Prac., Contract Law § 7:8, citing Kidder, Peabody & Co., Inc. v IAG Intern. Acceptance Group N.V., 28 F Supp 2d 126, 139 [SDNY 1998]). It is well established that licensing requirements that are enacted as revenue-generating measures will not defeat a contract, whereas requirements premised on protecting the life, health and property of New York State citizens will counsel against contract enforcement (see Benjamin v Koeppel, 85 NY2d at 553).

For the past 89 years, boxing in New York State has been heavily regulated by the State Athletic Commission, which is vested with "the sole direction, management, control and jurisdiction over all such boxing and sparring matches or exhibitions to be conducted, held or given within the state of New York" (Unconsolidated Laws § 8906). Pursuant to the Commission's administrative regulations, licensing by the Commission is required of, among others, every promoter, manager, and matchmaker who engages, either directly or indirectly, in boxing or wrestling contests or exhibitions New York (19 NYCRR §§ 206.7, 207.1, and 207.10). Even if all proper licenses are secured, the regulations do not recognize any management contract between a boxer and a manager as valid, unless both parties appear at the same time before the Commission and receive its approval (19 NYCRR § 208.5; see also 19 NYCRR §§ 206.14, 208.1 [applies filing and approval requirements to all contracts for activities under the Commission's jurisdiction]). Further, in 2003, the Legislature amended the statute to specifically include, among other provisions, a requirement that "any contract between a boxer and the promoter or manager shall be in writing and filed with the commission at the time any agreement is made for a match to take place in the state." (Unconsolidated Laws § 3934 [7]).

The state regulation of boxing parallels the federal legislation encapsulated in the Professional Boxing Safety Act (15 USC 6301 et seq.), also known as the Muhammad Ali Boxing Reform Act. The federal regulation of boxing is predicated on the need to protect "the rights and welfare of professional boxers on an interstate basis by preventing certain exploitive, oppressive, and unethical business practices." The Muhammad Ali Boxing Reform Act emphasizes the importance of state regulation of boxing to safeguard "the welfare of professional boxers and serve the public interest." Both the state and federal regulation of boxing was adopted not as revenue generating measures, but solely for the purpose of uprooting entrenched repeated occurrences of disreputable, coercive and abusive business practices in the boxing industry. Accordingly, violation of any licensing or approval requirements set out in Title 19, Chapter 7 of the New York Code, Rules, and Regulations renders unenforceable contracts by any non-complying party (see Baksi v Wallman, 271 AD 422, 425-26 [1st Dept 1946], aff'd 297 NY 456 [1947] [finding a boxing management contract unenforceable partly due to lack of proper license]; see also Gotham Boxing, Inc. v Klitschko, 2008 NY Slip Op 50020U [Sup Ct, New York County, 2008]). [*5]

In this case, it is undisputed that plaintiffs were not properly licensed as managers in New York as of the date of execution of both the 2005 and 2007 management agreements, and plaintiffs have not proffered any evidence to establish that either of them was licensed in any other state.[FN3] It is also undisputed that neither agreement was ever submitted to the Commission.[FN4] Therefore, both the 2005 and 2007 contracts are invalid under the New York law. The allegations of partial performance in the plaintiffs' complaint are inconsequential to the issue of enforceability, because the taint of illegality remained throughout the performance of the 2005 and 2007 agreements (see Baksi, 271 AD at 426 [reversing the trial court's decision to enforce the illegal contract to the extent performed]).

Plaintiffs' argument that the licensing requirement under the New York law does not apply to managerial fees for those fights that took place outside of New York is unpersuasive. Their reliance on Quartey v AB Stars Productions, S.A., 260 AD2d 39 (1st Dept 1999), is misplaced. In Quartey, the First Department ruled that an out-of-state boxing promoter, unlicensed in New York, could recover promoting fees for bouts taking place in New York, if it contracted with a properly licensed New York promoter in good faith as an out-of-state agent for a foreign boxer, and not in an attempt to circumvent the New York State licensing requirements (Quartey, 260 AD2d at 43). As to the fights outside of New York, the Court of Appeals ruled that New York Athletic Commission's licensing regulation does not extend to foreign contracts between out-of-state parties merely because the contracts contain a New York "choice of law" clause (260 AD2d at 43-44).

The facts of the present case are unlike the ones presented in Quartey. Here, all parties were at all relevant times the residents of New York. Both the 2005 and 2007 management contracts were drafted and executed in New York. Most of the managerial activity, training, and many of the bouts took place in New York. With respect to the boxing engagements outside of New York, plaintiffs' contractual obligations were performed pursuant to, and the claimed rights arose from, the New York contracts. The retention by plaintiffs of Margules as a New York-licensed promoter does not overcome the failure by plaintiffs to comply with New York's licensing requirements, and does not cure the illegality of the 2005 and 2007 contracts (see Quartey, 260 AD2d at 43; see also Gutfreund v DeMian, 227 AD2d 234, 235 [1st Dept 1996] [denying commission to an unlicensed insurance broker who used the services of a licensed broker to sell insurance]).

Defendant Greene, Jr. cannot be held liable for breach of an illegal management contract he signed with plaintiffs. Such a contract is void. Therefore, because the 2005 and 2007 [*6]management agreements are illegal, plaintiffs' claims of breach of contract and for injunctive relief must be dismissed. Plaintiffs' third cause of action for tortious interference with the 2007 agreement brought against defendant Greene, Sr. must also be dismissed for failure to establish the existence of a valid contract (see 28 NY Prac Contract Law § 21:39).

2. Cause of Action Sounding in Quantum Meruit

Defendants maintain that the Court must also dismiss plaintiffs' second cause of action sounding in quantum meruit. They argue that plaintiffs' request for reasonable compensation for their services is a disguised attempt to circumvent the unenforceability of the management agreements, and as such must be rejected. They further rely on Fallon v McKeon, 230 AD2d 629 (1st Dept 1996) in arguing that the failure of the complaint to identify the reasonable value of their services is fatal to plaintiffs' quantum meruit claim. Defendants' reliance on Fallon is misplaced, given that the issue in Fallon was not that the plaintiff failed to identify the reasonable value of services rendered, but rather claimed damages in a sum identical to the amount claimed in the other four causes of action, a sum which equaled the gross revenues of the program at issue (230 AD2d at 630). Accordingly, here the Court addresses only defendants' former objection.

A cause of action under quantum meruit, also known as quasi contract, only applies in the absence of an express agreement, and is not really a contract at all, but rather a legal obligation imposed in order to prevent a party's unjust enrichment (Bauman Associates., Inc. v H & M International Transport, Inc., 171 AD2d 479, 484 [1st Dept 1991] [citation omitted]; see also First New York Realty Co. v RMC Enterprises, LLC, 250 AD2d 539 [1st Dept 1998];Black's Law Dictionary, 5th Ed. [defining quantum meruit to mean "as much as he deserves"]). Recovery is available not only where there has been an actual benefit to the other party, but in the instance of a wrongdoing defendant, to restore the plaintiff's former status, including compensation for expenditures made in reliance upon the defendant's representations (Bauman Associates, 171 AD2d at 484).

To make out 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 (Id.). However, as an equitable remedy, quantum meruit is designed to ensure fairness, and not to act as a backdoor to enforcing an otherwise invalid contract (Bauman Associates, 171 AD2d at 484). As noted by the Court of Appeals, two important tenets that have emerged from the case law are, that fee forfeitures are disfavored and that such forfeitures are perhaps particularly inappropriate when other regulatory sanctions exist for noncompliance (Benjamin v Koeppel, 85 NY2d 549, 553 [1995], citing Lloyd Capital Corp. v Pat Henchar, Inc., 80 NY2d 124, 128 [1992]; Charlebois v Weller Assocs., Inc., 72 NY2d 587, 595 [1988]; John E. Rosasco Creameries, Inc. v Cohen, 276 NY 274, 279-280 [1937]).

As noted, the Athletic Commission's regulations invalidate non-complying agreements. They contain no express prohibitions, however, against maintaining suit to recover under alternative theories (19 NYCRR §§ 205 et seq.; see also Gotham Boxing Inc. v Finkel, supra, [*7]2008 NY Slip Op 50020U).[FN5] Thus, in Gotham Boxing, the court allowed a claim of fraud to be asserted by a plaintiff despite the dismissal of the plaintiff's breach of contract claim for failure to comply with the Athletic Commission's regulations (2008 NY Slip Op 50020U, at *10-*12). Gotham Boxing also reasoned that a plaintiff could recover under a theory of promissory estoppel if unconscionability were established, although in that litigation, plaintiff was unable to allege facts upon which a finding of unconscionability could be made (2008 NY Slip Op 50020*, at *14). Based on this analysis, it is apparent that the Athletic Commission's regulations do not entirely preclude the present suit.

However, quantum meruit is an equitable doctrine that lies fully within the discretion of the Court. A party claiming entitlement to it must come before the Court with clean hands. The evaluation of the equities in any given relationship entails a case-by-case factual inquiry into all relevant circumstances, including the respective parties' experience, prior dealings, motives, and the nature, character, and quality of the business and personal relationships between the parties. And while the Court must not allow any party to avoid its legal responsibility of licensing, the availability or denial of relief must not be out of proportion to the requirements of public policy (see Benjamin v Koeppel, 85 NY2d at 553 [allowing attorney to recover legal fees despite failure to register]; Lloyd Capital Corp. v Pat Henchar Inc, 80 NY2d 124,129 [1992] [rejecting a claim of forfeiture of a promissory note based on the bank's failure to comply with federal regulations as being unjustifiably harsh], extensively quoting Rosasco Creameries v Cohen, 276 NY at 278).

Here, defendants argue that one of the plaintiffs, Stanton, is an attorney authorized to practice law in the State of New York, and as such could hardly claim ignorance of the law nor should he be permitted to profit from any claimed ignorance. They argue that to permit plaintiffs to recover could arguably undermine the Athletic Commission's ability to enforce the regulations designed to protect boxers. This case, however, presents facts that are materially distinct from the precedents precluding any recovery by individuals evading the state's licensing scheme. Plaintiffs' complaint and Stanton's affidavit proffered as part of the opposition to the motion, set forth detailed allegations of plaintiffs' comprehensive involvement with and contribution to every aspect of defendant Greene, Jr.'s personal and professional life, from paying certain sums of money for his coaching, marketing, and professional development to paying for his basic living expenses, with substantial payments also going to Greene, Sr. Plaintiffs contend their relationship with Greene, Jr. transcended the boundaries of business interests and morphed into one of mutual friendship and one better characterized as a mentor-mentee relationship. At no point prior to becoming a high-ranking professional boxer is Greene, Jr. alleged to have [*8]complained about his relationship with plaintiffs or rejected their substantial financial assistance. According to the complaint, plaintiffs did not engage in any improper or unscrupulous conduct of the type that the Athletic Commission's regulations were designed to prevent. Stanton's affidavit avers that plaintiffs took no managers' fees on "at least 6 fights," "always took a reduced fee on the rest," and took no fees on the last two fights (Memo of Law in Reply, Ex. A, Stanton Aff. ¶¶ 32, 33). The affidavit describes many of the expenses plaintiffs made, and while most of them could be understood to be of the type that they contracted to provide and for which they were to be reimbursed, there are other more personal expenses, such as paying "extra money" to Greene, Jr. to help him out, paying his cell phone bills when his phone was cut off, paying for the oil heat for the homes of Greene, Jr. and his mother, buying extra tickets to Greene, Jr.'s fights so that his family could attend, and flying Greene, Jr.'s mother to the fights in Florida (Stanton Aff. ¶¶ 13, 14, 21, 27, 28). Further, the agreement to make payments to Greene, Sr., could be found to differ from expenses made on behalf of Greene, Jr.

While the court must not allow plaintiffs to reap financial benefit from their failure to comply with the statutory and administrative regulations, the court shall not dismiss the claim of unjust enrichment and allow defendants to retain plaintiffs' direct financial contributions which are separate and apart from any earnings Greene, Jr. may have made. The aim of the Athletic Commission regulations is to act as a shield, not a sword for the boxer's personal gain (c.f., Benjamin, 85 NY2d at 553 [citations omitted]; Charlebois v J.M. Weller Assoc., 72 NY2d at 595 [rejecting an attempt to use the Education Law requirement of licensure of engineers to avoid payment for received services]; Rice v Butler, 160 NY 578 [1899] [finding that the minor could not use the privilege of infancy as a sword rather than a shield in order to rescind a contract and recover back the amount paid without returning the benefit of the same]; Pinkava v Yurkiw, 2009 NY Slip Op 5953, *2 [2nd Dept 2009] [rejecting an attempt to use the Statute of Frauds as a sword to avoid a partially performed oral agreement]). Therefore, for the purposes of this pre-answer motion to dismiss, plaintiffs have made sufficient allegations to state a claim for quantum meruit and the motion to dismiss the second cause of action is denied.

Whether the complaint's characterization of this relationship and the accuracy of its depiction will stand up to the rigors of the discovery stage of the litigation is unknown to the Court at the present time. If the Court is to make an informed decision on the issue of availability of the equitable relief to plaintiffs, the Court must have the benefit of a fully developed record. Accordingly, defendants' pre-answer motion to dismiss plaintiffs' second cause of action is denied.

It is therefore,

ORDERED that defendants' motion pursuant to CPLR 3211 to dismiss the complaint is granted to the extent that plaintiffs' first cause of action seeking injunctive relief against both defendants, third cause of action for tortious interference with the 2007 management agreement asserted against defendant Joe Greene, Sr., and fourth cause of action for breach of the 2007 management agreement asserted against defendant Joe Greene, Jr. are dismissed, and the motion is otherwise denied with leave to renew at the close of all discovery; and it is further

ORDERED that plaintiffs shall serve a copy of this decision and order upon defendants no later than ten (10) days of the date of this decision and order, and defendants shall serve an answer no later than (20) days from the date of such service; and it is further [*9]

ORDERED that counsel for plaintiffs shall serve a copy of this decision and order upon the Clerk of Court (60 Centre St., Basement) who shall enter judgment in accordance with the foregoing, and sever and continue the claims which are not dismissed under this index number.

This constitutes the decision and order of the court.

Dated:September 15, 2009________________________________

New York, New YorkJ.S.C. Footnotes

Footnote 1:The 2005 agreement included terms that the managers were to provide personal management services regarding all matters pertaining to Greene, Jr.'s career (2005 Agreement ¶ 1[a]); that they would provide Greene, Jr. with a $30,000 signing bonus; a $2,000 monthly check, a leased motor vehicle, and a $10,000 bonus if Greene, Jr.'s record reached 15-0 (2005 Agreement ¶ 3), and that they were entitled to receive 33 and one third percent of Greene, Jr.'s income (2005 Agreement ¶ 4 [a]). The agreement provides that the managers are to be reimbursed for "all expenses reasonably necessary" in conducting their activities, including travel, and for training and expenses related to training and conditioning (2005 Agreement ¶ 6).

Footnote 2:Under the 2007 Agreement, the managers' scope of duties was essentially the same, their share of the income was to be the same, and they were to be reimbursed for the same items (Mot. Ex. C, 2007 Agreement ¶¶ 1, 4, 5). In addition, they agreed to pay Greene, Sr. a total of $28,000 per year, and to permit him to participate in the agreement (2007 Agreement ¶ 2).

Footnote 3:Defendants provide an uncertified copy of a letter from the office of the general counsel of the Florida Business and Professional Regulation indicating that neither plaintiff was licensed in Florida as managers as the time the 2007 agreement was executed (Memo of Law in Reply, Ex. A, Letter Tunnicliff to Dubin, July 10, 2008).

Footnote 4:According to the letter from the general counsel's office of the Florida Business and Professional Regulation, the management agreement was untimely filed in Florida and is thus deemed invalid as concerns bouts taking place in Florida (Memo of Law in Reply, Ex. A, Letter Tunnicliff to Dubin, July 10, 2008).

Footnote 5:Compare this with CPLR 3015 (e), which requires that a cause of action against a consumer which arises from the plaintiff's conduct of a business that is required by state or local law to be licensed, must allege that the plaintiff is duly licensed and shall contain the name of number of the license and issuing governmental agency. See, e.g, , B & F Building Corp v Liebig, 76 NY2d 689, 691-94 (1990) (where plaintiff is home improvement contractor, it is required under the statute, as a prerequisite to maintaining a claim against a consumer irrespective of the actual theory of relief, to plead that plaintiff had a license at the time of the home improvements, and if license has lapsed, the contractor is allowed to amend the complaint to assert the existence of the renewed license).