Meadow Ridge Capital, LLC v Levi

[*1] Meadow Ridge Capital, LLC v Levi 2010 NY Slip Op 51969(U) [29 Misc 3d 1224(A)] Decided on November 1, 2010 Supreme Court, Nassau County Driscoll, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 November 1, 2010
Supreme Court, Nassau County

Meadow Ridge Capital, LLC, Plaintiff,

against

Beryl Joy Levi and Tower Isles Frozen Foods Ltd., Defendants.



006594-10



Plaintiff's Counsel: Meyer, Suozzi, English & Klein, P.C.

Defendants' Counsel (Beryl Joy Levi): Nixon Peabody, LLP

Defendants' Counsel (Tower Isles Frozen Foods LTD): Jaspan Schlesinger, LLP

Timothy S. Driscoll, J.

The following papers having been read on these motions:

Notice of Motion, Affirmation in Support and Exhibits............................x

Defendant Levi's Memorandum of Law in Support..................................x

Notice of Motion, Affirmation in Support and Exhibits............................x

Defendant Tower Isles' Memorandum of Law in Support.......................x

Plaintiff's Memorandum of Law in Opposition to Levi Motion...............x

Plaintiff's Memorandum of Law in Opposition to Tower Isles motion....x

Defendant Levi's Reply Memorandum of Law...........................................x

Defendant Tower Isles' Reply Memorandum of Law................................x

This matter is before the Court for decision on 1) the motion filed by Defendant Beryl Joy Levi ("Levi") on June 18, 2010, and 2) the motion filed by Defendant Tower Isles Frozen Foods Ltd. ("Tower Isles") on June 21, 2010, both of which were submitted on August 25, 2010. For the reasons set forth below, the Court 1) grants Levi's motion to dismiss the First Amended [*2]Complaint against her; and 2) grants Tower Isles' motion to dismiss the First Amended Complaint against it.

BACKGROUND

A. Relief Sought

Defendant Levi moves for an Order, pursuant to CPLR §§ 3211(a)(1), (5) and (7), dismissing the Plaintiff's first, second and third causes of action in the First Amended Complaint ("Complaint"), sounding in promissory estoppel, tortious interference and fraudulent misrepresentation, as against Defendant Levi.

Defendant Tower Isles moves for an Order, pursuant to CPLR §§ 3211(a)(1), (5) and (7), dismissing the Complaint as to Tower Isles in its entirety.

Plaintiff Meadow Ridge Capital, LLC ("Meadow Ridge" or "Plaintiff") opposes the motions.

B. The Parties' History

The Complaint (Ex. C to Ortego Aff. in Supp.) contains three (3) causes of action:1) promissory estoppel as to both Defendants, 2) tortious interference with prospective business relations as to Defendant Levi, and 3) fraudulent misrepresentation by Defendant Levi. Plaintiff seeks compensatory damages, punitive damages as to the second and third causes of action, attorney's fees and costs.

Plaintiff seeks compensation for the damages it sustained as a result of Defendants' alleged bad faith conduct and refusal to take necessary and appropriate action to consummate the sale of substantially all of the assets of the corporate Defendant Tower Isles to the Plaintiff. The Complaint alleges as follows.

Meadow Ridge is a limited liability company principally located in Jericho, New York. It "is a private equity firm with an investment focus on smaller middle market food and packaging companies" (Compl. at ¶ 2). The corporate Defendant, Tower Isles, is a food manufacturing company whose primary product is Jamaican beef patties. Tower Isles is a New York corporation principally located in Kings County, New York. Defendant Levi is the President and Chief Executive Officer ("CEO") of Tower Isles as well as a 50% shareholder of Tower Isles. Levi formed Tower Isles in 1969 with her then-husband.

In the early 1990s, Levi commenced a matrimonial action against her husband which resulted in the execution of a Stipulation of Settlement ("Stipulation") dated December 10, 1993. Notwithstanding their agreement in the Stipulation to sell Tower Isles, Levi and her husband continued to operate Tower Isles.

Levi's husband died in 1995. In 1999, Levi agreed to comply with the 1993 Stipulation that required that Tower Isles be sold. Rather than working to sell Tower Isles, however, Levi attempted to negotiate with the other shareholders of Tower Isles to buy the other 50% of the shares, to no avail. As a result of prior litigation between Levi and the other shareholders, Levi ultimately agreed that Tower Isles be marketed for sale.

On March 18, 2009, Levi, other board members of Tower Isles, Plaintiff and legal counsel met in person and through teleconferencing in Jericho, New York, at the law office of Levi's counsel, to discuss a transaction in which Meadow Ridge would purchase the assets of Tower Isles. At this meeting, Levi and Tower Isles, individually and/or by and through their respective counsel, represented to Plaintiff their interest in the sale. In reliance on Defendants' stated interest and intention to sell Tower Isles' assets, Plaintiff allegedly performed certain due diligence between March 2009 and July 14, 2009 regarding the acquisition of Tower Isles' [*3]assets. On or about July 14, 1999, Plaintiff and Tower Isles executed a Letter of Intent ("LOI") (Ex. A to Ortego Aff. in Supp.) regarding the proposed acquisition of substantially all of Tower Isles' assets.

The LOI was addressed to Levi by Dan Grinberg ("Grinberg") and Paul Bevilacqua ("Bevilacqua"), the President and Managing Partner, and Managing Partner respectively, of Meadow Ridge. The LOI states, in pertinent part, as follows:

[Meadow Ridge] is pleased to present to [Tower Isles] this non-binding, (except as otherwise set forth in Section 12) letter of intent regarding the proposed acquisition of substantially all of the assets of [Tower Isles] by Meadow Ridge ("Transaction").

It is presently contemplated that the purchase would be made by a newly formed limited liability company ("Newco"). This letter summarizes our most recent conversations regarding certain of the terms associated with the Transaction and is meant to supersede and replace all previous offers Meadow Ridge has made for the acquisition of the [Tower Isles] assets. We are excited to move expeditiously toward closing in accordance with the terms set forth herein.

***

2. Purchase Price. On the basis of the information received to date, the base purchase price . . . would be $9,000,000 . . . as more fully set forth on Exhibit A to this [LOI]. The Base Purchase Price will be adjusted on the close date as set forth below. At the closing: . . . (iii) thirty five percent (35%) of the Closing Date Purchase Price will be paid by execution of a subordinated promissory note by Newco in favor of [Tower Isles] (the "Note"). If permitted by the senior lenders of Newco the Note will be secured by Newco's assets subject, in all respect, to the priority of the senior lenders. The Escrowed Funds will remain in escrow for 12 months following the closing date, with 50% of the Escrowed Funds being released after 6 months (subject to any pending claims). The interest on the funds in the escrow account will be paid to [Tower Isles]. The Note will be for a term of five (5) years and will bear interest at a rate of eight percent (8%) (4% paid in cash and 4% in PIK).

***

4. Definitive Documentation. Meadow Ridge would work diligently with [Tower Isles] to negotiate and finalize definitive documentation for this transaction. This definitive documentation would include, without limitation, an Asset Purchase Agreement (the "Purchase Agreement")***

5. Additional Due Diligence. The terms of this letter are expressly subject to the completion of our due diligence which we believe we can complete in an efficient manner.

***

7. Conditions. Without limitation of any other conditions set forth herein, the proposed transaction would be expressly subject to each of the following: (I) execution of a mutually satisfactory Purchase Agreement; (ii) the receipt by Meadow Ridge of debt financing on terms acceptable to Meadow Ridge; (iii) the receipt by [Tower Isles] of all governmental and other approvals and consents necessary for the consummation of the proposed transaction; (iv) Meadow Ridge shall have completed and be satisfied in its sole and absolute discretion with the results of its due diligence examination of [Tower Isles]; (v) execution of employment agreements with Mr. Jolly and [Levi]; (vi) execution of the Lease; (vii) the absence of any [*4]material adverse change in [Tower Isles'] business, financial condition, prospects, assets or operations; and (viii) the absence of pending or threatened litigation against [Tower Isles] or its shareholders.

***

10. Exclusivity. In consideration of the significant time and expense that Meadow Ridge has spent and intends to spend as it investigates and pursues the acquisition, [Tower Isles], its shareholders and representatives and affiliates agrees to work exclusively with Meadow Ridge toward the closing of the acquisition. Until the earlier of (i) ninety (90) calendar days following the acceptance of this letter by [Tower Isles], (ii) the termination by Meadow Ridge of negotiations for the transaction contemplated herein, or (iii) the execution by all parties of a definitive Purchase Agreement, [Tower Isles] will not and will cause its officers, representatives, agents and directors to not, (a) directly or indirectly through any other party engage in any negotiations with or provide any information to any other person, firm, entity or corporation with respect to any acquisition or investment transaction involving [Tower Isles], (b) directly or indirectly through any other party solicit any proposal relating to the acquisition of, or other major transaction involving [Tower Isles], (c) dispose of any assets other than in the ordinary course of business, and (d) incur any additional debt other than in the ordinary course of business.

11. Costs. Subject to the second to last sentence in this Section 11, the parties hereto will each be responsible for and bear all of their own costs and expenses (including any broker's or finder's fees) incurred in connection with the transactions contemplated by this letter, including expenses of their representatives, incurred at any time in connection with pursuing or consummating the transaction proposed in this letter; provided that all transfer taxes will be borne by [Tower Isles]. In the event that this Transaction does not close due to [Tower Isles] not acting in good faith to close the Transaction, then in such event [Tower Isles] and its shareholders shall be liable for $300,000 of reimbursement expense which shall represent both the out-of-pocket costs of Meadow Ridge and Meadow Ridge's own time and effort in the diligence, negotiation and financing of this Transaction. Such reimbursement shall be due when it is evident that such transaction will not close.

12. Binding Effect. Except for the obligations of the parties contained in paragraphs 9 [titled "Confidentiality"], 10 [titled "Exclusivity"], 11 [titled "Costs"], and 12 [titled "Binding Effect"], which shall be binding upon and enforceable against each such party, this letter shall not impose any obligation on any of the parties to this letter. This letter may be signed in counterparts and delivered by facsimile, which shall constitute one agreement among all the signatories thereto.

13. Acceptance Deadline. This letter will terminate unless it is accepted by Tower on or before July 14, 2009.

If the terms and conditions of this letter are acceptable, please acknowledge and agree tothe terms hereof by signing one copy of this letter and returning an original to us.

[Emphasis added]

The LOI was "accepted and agreed" to by Levi, as "President/CEO" of Tower Isles, on [*5]July 14, 2009.

By the terms of the LOI, specifically paragraph 12 titled "Binding Effect," only four provisions of the LOI, paragraphs 9, 10, 11 and 12, were binding on the parties.

Following the execution of this LOI on July 14, 2009, on October 13, 2009 the parties executed an amendment to the LOI which states, in pertinent part, as follows:

Reference is made to the [LOI] from [Meadow Ridge] to [Tower Isles], dated July 10, 2009.***

The purpose of this letter agreement is to amend the exclusivity period as set forth in paragraph 10 of the [LOI] to extend for an additional 60 calendar days (this "Amendment"). In addition the parties agree that Section 11 of the [LOI] will be deleted in its entirety and replaced with the following:

11. Costs. The parties hereto will each be responsible for and bear all of their own costs and expenses (including any broker's or finder's fees) incurred in connection with the transactions contemplated by this letter, including expenses of their representatives, incurred at any time in connection with pursuing or consummating the transaction proposed in this letter, provided that all transfer taxes will be borne by [Tower Isles].

Meadow Ridge and [Tower Isles] agree that except as specifically amended herein, the [LOI] shall continue in full force and effect in accordance with its original terms, and reference to this specific Amendment need to be made in the [LOI] or any other document executed pursuant to or with respect to the [LOI], any reference to the [LOI] in any such document being sufficient to refer to the [LOI] as amended hereby.

If the terms and conditions of this Amendment are acceptable, please acknowledge and agree to the terms hereof by signing one copy of this Amendment and returning an original to us.

This letter was sent to Levi by Dan Grinberg and Paul Bevilacqua. By signing the letter in her capacity as President of Tower Isles, Levi, on behalf of Tower Isles, "accepted and agreed" to the Amendment on October 16, 2009.

Notably, the Amendment deleted that portion of Section 11 contained in the original LOI which addressed the possibility of the transaction falling through as a result of Tower Isles not acting in good faith. In addition, the Amendment makes clear that, in the event that the deal failed to go forward for any reason, each party would be responsible for its own costs.

After the execution of the LOI and its Amendment, Meadow Ridge and Tower Isles began negotiating the terms of the agreements contemplated in and required by the LOI. Plaintiff alleges that, based upon repeated written representations, assurances and affirmative actions by the Defendants, Plaintiff expended tremendous time and resources pursuing the transaction with Tower Isles, including employing countless hours of its own personnel, engaging counselors, consultants and attorneys, conducting meetings, drafting transactional documentation and utilizing resources that could have otherwise been productively employed. Plaintiff claims that after months of extensive work to consummate this transaction, at the eleventh hour, just days before the scheduled closing of the transaction in March 2009, Levi abruptly reneged upon her and Tower Isles' numerous representations and assurances to the [*6]Plaintiff, causing Tower Isles to refuse to consummate the transaction with the Plaintiff. Plaintiff alleges that Levi's actionable conduct has been motivated by wrongful, self-interested and deliberate intentions beyond and outside the scope of her capacity as the President of Tower Isles, including an effort to inflict harm upon and/or to pursue her own interests in conflict with the interests of her co-shareholders in Tower Isles and of Tower Isles itself.

B. The Parties' Positions

In support of its motion to dismiss Plaintiff's sole cause of action against it for promissory estoppel, Tower Isles argues that Plaintiff's claim is barred by operation of the statute of frauds, as no enforceable writing exists upon which the Plaintiff could have reasonably relied to its detriment. Tower Isles also argues that the documentary evidence in this action, including the LOI and its Amendment, conclusively bar Plaintiff's claim for promissory estoppel. Tower Isles thus asserts that the documents establish that the parties merely had an agreement to agree, which is itself unenforceable and cannot provide the requisite clear and unambiguous promise upon which Plaintiff could have reasonably relied upon to its detriment to sustain its promissory estoppel claim. Finally, Tower Isles maintains that the allegations in the Complaint, even when taken as a whole and viewed in a light most favorable to the Plaintiff, fail to state a cognizable claim for promissory estoppel against Tower Isles.

In support of her motion to dismiss each of Plaintiff's causes of action as asserted against her, Defendant Levi maintains that by bringing this action, Plaintiff is not only seeking damages to which it is not entitled, but damages which it specifically waived. Levi maintains that all of the negotiations between Meadow Ridge and Tower Isles, including its directors and officers, occurred under the terms of an explicitly non-binding LOI which clearly provided that each party was responsible for its own costs if the proposed transaction was not consummated for any reason. Levi acknowledges that while the original LOI did provide for damages in the event that the proposed transaction was not consummated due to a party's bad faith, the parties later specifically negotiated and agreed to remove this provision and provide that neither party would be entitled to any damages in the event that a deal was not completed. Levy points to the Amendment to the LOI, which she claims made clear that each party assumed the risk that the deal ultimately would not be completed.

Plaintiff opposes the Defendants' motion, submitting, inter alia, that 1) it would be "unconscionable" (P's Memorandum of Law in Opp. To Tower Isles' motion at p. 6) for the Court to permit Tower Isles "to falsely promise and represent that [Tower Isles] was committed to the deal and that it was a done deal, simply for it to renege on its promises without any recourse against it for its wrongful conduct" (Id.); 2) Meadow Ridge's claim against Tower Isles does not depend on the LOI, but rather concerns Tower Isles' alleged repeated false promises "outside of the LOI" (Id. at p. 7) which caused Meadow Ridge to continue to negotiate and incur costs; and 3) the Statute of Frauds is inapplicable because Plaintiff's lawsuit centers on Tower Isles' alleged breach of its promise to negotiate in good faith and its misrepresentations that it was committed to consummating the transaction.

RULING OF THE COURT

A. Standards for Dismissal

A complaint may be dismissed based upon documentary evidence pursuant toCPLR § 3211(a)(1) only if the factual allegations contained therein are definitively contradicted by the evidence submitted or a defense is conclusively established thereby. Yew Prospect, LLC v. Szulman, 305 AD2d 588 (2d Dept. 2003); Sta-Bright Services, Inc. v. Sutton, 17 AD3d 570 (2d [*7]Dept. 2005).

Pursuant to CPLR § 3211(a)(5), a party may move for judgment dismissing one or more causes of action asserted against him on the ground, inter alia, that the cause of action may not be maintained because of the statute of frauds. In addition, it is well settled that a motion interposed pursuant to CPLR §3211 (a)(7), which seeks to dismiss a complaint for failure to state a cause of action, must be denied if the factual allegations contained in the complaint constitute a cause of action cognizable at law. Guggenheimer v. Ginzburg, 43 NY2d 268 (1977); 511 W. 232nd Owners Corp. v. JenniferRealty Co., 98 NY2d 144 (2002). When entertaining such an application, the Court must liberally construe the pleading. In so doing, the Court must accept the facts alleged as true and accord to the plaintiff every favorable inference which may be drawn therefrom. Leon v. Martinez, 84 NY2d 83 (1994). On such a motion, however, the Court will not presume as true bare legal conclusions and factual claims which are flatly contradicted by the evidence. Palazzolo v. Herrick, Feinstein, 298 AD2d 372 (2d Dept. 2002).

B. Piercing the Corporate Veil

Plaintiff's theory as against Defendant Levi is based upon piercing the corporate veil. Generally, a corporation exists independently of its owners, who are not personally liable for the corporation's obligations. Moreover, individuals may incorporate for the express purpose of limiting their liability. East Hampton v. Sandpebble, 66 AD3d 122, 126 (2d Dept. 2009), citing Bartle v. Home Owners Coop., 309 NY 103, 106 (1955) and Seuter v. Lieberman, 229 AD2d 386, 387 (2d Dept. 1996). The concept of piercing the corporate veil is an exception to this general rule, permitting, under certain circumstances, the imposition of personal liability on owners for the obligations of their corporations. East Hampton, 66 AD3d at 126, citing Matter of Morris v. N.Y.S. Dept. Of Taxation, 82 NY2d 135, 140-41 (1993).

A plaintiff seeking to pierce the corporate veil must demonstrate that a court should intervene because the owners of the corporation exercised complete domination over it in the transaction at issue. Plaintiff must further demonstrate that, in exercising this complete domination, the owners of the corporation abused the privilege of doing business in the corporate form, thereby perpetrating a wrong that caused injury to plaintiff. East Hampton, 66 AD3d at 126, citing, inter alia, Love v. Rebecca Dev., Inc. 56 AD3d 733 (2d Dept. 2008). In determining whether the owner has "abused the privilege of doing business in the corporate form," the Court should consider factors including 1) a failure to adhere to corporate formalities, 2) inadequate capitalization, 3) commingling of assets and 4) use of corporate funds for personal use. East Hampton, 66 AD3d at 127, quoting Millennium Constr., LLC v. Loupolover, 44 AD3d 1016, 1016-1017 (2d Dept. 2007).

To state a claim against an individual director or officer, Plaintiff is required to meet an enhanced pleading standard, requiring a particularized pleading of allegations that the acts of the corporate officer were beyond the scope of employment or for personal gain. Petkanas v. Kooyman, 303 AD2d 303, 305 (1st Dept. 2003). In this case, Plaintiff has failed to meet this heightened standard.

The Court concludes that, beyond the bare, conclusory allegations against Levi, Meadow Ridge has failed to allege that any actions taken by Levi were outside the scope of her role as the President and CEO of Tower Isles. To the contrary, Meadow Ridge's allegations describe ordinary and standard negotiations between parties to a potential acquisition, including [*8]communications between counsel, the requesting of face to face meetings to discuss the proposed transaction, and the decision not to go forward with a transaction prior to the execution of any binding agreements. Moreover, nowhere in the Complaint does Meadow Ridge allege that the actions of Levi were made for her personal gain, as distinguished from gain for the corporation. Personal gain is present when the challenged acts were undertaken with malice and were calculated to impair the plaintiff's business for the personal profit of the individual defendant rather than for the corporate interests. Courageous Syndicate v. People-To-People Sports Comm., 141 AD2d 599, 600 (2d Dept. 1988); Robbins v. Panitz, 61 NY2d 967, 969 (1984), reh. den., 62 NY2d 803 (1984). Meadow Ridge merely alleges that, following Levi's termination of the negotiations, she "express[ed] her desire" to the other shareholders to buy out their interest in Tower Isles (Compl. at ¶56). Such an "expression of desire" does not equate to acts undertaken to impair Meadow Ridge's business or for Levi's own personal gain.

Plaintiff's claims that Levi was motivated by wrongful, self-interested and deliberate intentions beyond the scope of her capacity as President and CEO of Tower Isles, including her desire to become the sole shareholder of Tower Isles, do not constitute a viable cause of action. The proposal of an alternative acquisition, in lieu of an unsuitable acquisition that was being pursued under a non-binding LOI, is an action which falls squarely within the scope of Levi's duties as President and CEO, and which could inure to the benefit of Tower Isles and all of its shareholders. Furthermore, there are no allegations in the Complaint that Levi personally profited from the negotiations with Meadow Ridge. Accordingly, based upon the well settled principles and guidelines of CPLR § 3211, the Court concludes that Plaintiff has failed to state a cause of action against Levi personally. C. Promissory Estoppel

With respect to its cause of action for promissory estoppel, Meadow Ridge does not seek to enforce the proposed transaction for the sale of Tower Isles' assets. Rather, Meadow Ridge is seeking damages as a result of Defendants' alleged repeated assurances, promises and representations that they were indeed acting and negotiating in good faith and actually seeking to consummate the transaction. The claim nevertheless fails as a matter of law.

The elements of promissory estoppel are a clear and unambiguous promise, a reasonable and foreseeable reliance by the party to whom the promise is made and an injury sustained by the party asserting the estoppel by reason of his reliance. Ripple's of Clearview, Inc. v. Le Havre Assoc., 88 AD2d 120, 122 (2d Dept. 1982), app. den., 57 NY2d 609 (1982); Rogers v. Town of Islip, 230 AD2d 727 (2d Dept. 1996). A plaintiff may invoke the doctrine of promissory estoppel in two situations: 1) to enforce a promise in the absence of bargained for consideration; and 2) to provide relief to a party where the contract is rendered unenforceable by operation of the Statute of Frauds. Merex A.G. v. Fairchild Weston Sys., 29 F.3d 821, 824 (2d Cir. 1994).

Where an enforceable contract exists, the doctrine of promissory estoppel is inapplicable and a plaintiff cannot recover under this theory. Holmes v. Lorch, 329 F. Supp. 2d 516, 527 (S.D.NY 2004). To invoke the power that equity possesses to trump the Statute of Frauds, a plaintiff must demonstrate unconscionable injury, i.e., injury beyond that which flows naturally from the non-performance of the unenforceable agreement. Merex A.G. v. Fairchild Weston Sys., 29 F.3d at 826.

In support of its cause of action for promissory estoppel, Plaintiff relies upon the LOI and certain alleged representations made by Levi, apparently on behalf of herself and Tower Isles, that Defendants intended to complete and close the proposed transaction with the Plaintiff and [*9]"intended and expressly communicated their intention to act in good faith with each other and diligently for the purpose of consummating and closing the transaction" (Compl. at ¶¶ 72-74). Plaintiff also alleges that it reasonably relied upon these "clear promises and continued representations" that the Defendants, including Tower Isles, "intended to complete the acquisition and were negotiating and would continue to negotiate and act in good faith to complete the transaction" (Id. at ¶ 75). Plaintiff further alleges that the Defendants, including Tower Isles, "wrongfully and in bad faith reneged upon and terminated the acquisition," and that but for the representations and promises allegedly made, Plaintiff "would not have expended time and resources on this proposed transaction or continued to negotiate with the Defendants to acquire the assets" of Tower Isles (Id. at ¶¶ 76-77).

The Court concludes that the documentary evidence bars Plaintiff's claim for promissory estoppel because it conclusively establishes that no agreement was reached between the parties. The documentary evidence also demonstrates that no promises were exchanged upon which Plaintiff can predicate its promissory estoppel claim.

The LOI and its subsequent Amendment, upon which Plaintiff relies to support its claim for promissory estoppel, establish that there was merely an agreement to agree between the parties. The LOI was described as a "non-binding...letter of intent regarding the proposed acquisition of substantially all of the assets" of Tower Isles by Plaintiff. It stated that it "shall not impose any obligations on any of the parties to this letter." An "agreement to agree, in which a material term is left for future negotiations, is unenforceable. Martin Delicatessen v. Schumacher, 52 NY2d 105, 109 (1981). In addition, the inclusion of the conditions in the LOI preclude the element of detrimental reliance required to state a claim for promissory estoppel. Chatterjee Fund Management, L.P. v. Dimensional Media Associates, 260 AD2d 159 (1st Dept. 1999); Prestige Foods, Inc. v. Whale Securities Co., L.P., 243 AD2d 281 (1st Dept. 1997). Inasmuch as Plaintiff alleges that it expended time and money as a result of its detrimental reliance on Defendants' promises, such expenditure of time and money for due diligence is not detrimental reliance under the circumstances Chatterjee Fund Management, L.P. v. Dimensional Media Associates, supra. A claim for promissory estoppel fails where it is contradicted by the agreement in issue which states that neither party had any legal obligations to the other until a written agreement was executed and delivered. Prestige Foods, Inc. v. Whale Securities Co., L.P., supra, at 281-82. Therefore, Plaintiff's claim for promissory estoppel is barred by the very documents upon which Plaintiff relies in the Complaint. Prospect St. Ventures I, LLC v. Eclipsys Solutions Corp., 23 AD3d 213, 213-14 (1st Dept. 2005); Chatterjee Fund Mgmt., L.P. v. Dimensional Media Assocs., supra.

In addition, the Court notes that the LOI not only conditioned the transaction between Meadow Ridge and Tower Isles on the execution of binding agreements between the parties, but also addressed the division of costs in the event that the transaction did not go forward. Under the original terms of the LOI, Meadow Ridge was entitled to a $300,000 reimbursement of costs in the event that Tower Isles was found to not have acted in good faith. The parties, however, subsequently negotiated an amendment to the LOI, which specifically removed its entitlement to such reimbursement. Given that plaintiff negotiated away any entitlement to reimbursement, even in the event that Tower Isles acted in bad faith, the statements made by Levi, either personally or through her counsel, could not constitute a clear and unambiguous agreement to complete the transaction, as each party had clearly planned for the possibility that the deal would not be consummated. This is particularly the case where, as here, the statements, as set forth in [*10]the Complaint, consisted of the type of language evincing an effort to complete a transaction, not a guarantee to go forward with one, and where the LOI explicitly provided that the parties would not be bound until the execution of specified documents. Cohen v. Lehman Brothers Bank, 273 F. Supp. 2d 524, 529 (S.D.NY 2003).

Without an enforceable contract in place, a claim for promissory estoppel is properly reserved for that limited class of cases where the circumstances are such as to render it unconscionable to deny the promise upon which the plaintiff has relied. Sterling Interiors Group, Inc. v. Haworth, Inc., 1996 U.S. Dist. LEXIS 10756 (S.D.NY 1996), reconsid. den., 1996 U.S. Dist. LEXIS 13908 (S.D.NY), quoting Philo Smith & Co. Inc. v. Uslife Corp., 554 F.2d 34, 36 (2d Cir. 1977). An unconscionable injury is one which is beyond what would normally flow from the non-performance of an unenforceable agreement. United Magazine Co. Inc. v. Murdoch Magazines, 146 F. Supp. 2d 385, 405 (S.D.NY 2001). Neither the allegations in the Complaint nor the submissions on the instant motion rise to the level of unconscionability, and the conduct Plaintiff complains of is not sufficiently egregious to warrant recovery. The damages that Meadow Ridge seeks to recover naturally flowed from the non-binding LOI, which contemplated the negotiation of a possible acquisition of substantially all of Tower Isles' assets.

Given the absence of a written enforceable agreement that establishes that Tower Isles made a "clear and ambiguous promise" to the Plaintiff upon which it could have reasonably relied, the first cause of action fails.

D. Statute of Frauds

Plaintiff's promissory estoppel claim is also barred by the Statute of Frauds. The Statute of Frauds is codified in General Obligations Law § 5-701which provides, in pertinent part, as follows:

§ 5-701. Agreements required to be in writing

Every agreement, promise or undertaking is void, unless it . . . be in writing, and subscribed by the party to be charged therewith . . . if such agreement, promise or undertaking . . .

1. By its terms is not to be performed within one year from the making thereof or the performance of which is not to be completed before the end of a lifetime . . .

The Statute of Frauds may be satisfied by a writing which must contain substantially the whole agreement, and all its material terms and conditions, so that one reading it can understand from it what the agreement is. Kobre v. Instrument Systems Corp., 54 AD2d 625, 626 (1st Dept. 1976), aff'd., 43 NY2d 862 (1978), quoting Mentz v. Newwitter, 122 NY 491, 497 (1890), reh. den., 26 N.E. 758 (NY 1891). The statute does not require the writing to be in one document. It may be pieced together out of separate writings, connected with one another either expressly or by the internal evidence of subject matter and occasion. Marks v. Cowdin, 226 NY 138, 145 (1919). The terms of an agreement between the parties may be established by a combination of signed and unsigned documents, letters or other writings provided at least one writing, the one establishing a contractual relationship between the parties, must bear the signature of the party to be charged or his authorized agent, while the unsigned document must on its face refer to the same transaction as that set forth in the one that was signed. Intercontinental Planning v. Daystrom, 24 NY2d 372, 379 (1969), quoting Crabtree v. Elizabeth Arden Sales Corp., 305 NY [*11]48, 56 (1953).

It is clear that the LOI and its Amendment are agreements that are not to be performed within one year from the making of the alleged contract. Preliminarily, the Court notes that the LOI, at paragraph 2, required that the Plaintiff execute a subordinated promissory note whose very terms contemplated payments beyond one year. See A. Aversa Brokerage, Inc. v. Honig Ins. Agency, Inc., 249 AD2d 345, 346 (2d Dept. 1998) (where alleged oral agreement required balance of purchase price to be paid in 30 monthly installments, agreement void because it could not be performed within one year).

In addition, as the LOI also contemplated the sale of goods, specifically, the sale of "all personal property, machinery, equipment, furniture, fixtures, inventory and accounts receivable" of Tower Isles, the proposed Transaction also falls within the ambit of U.C.C. § 2-201 which provides:

(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker.***

[Emphasis added]

By only providing that the parties will enter into a separate and new contract to be negotiated for the purchase of the assets and inventory of Tower Isles by Plaintiff, the LOI also fails to satisfy the requirements of the Statute of Frauds under the UCC. Accordingly, Plaintiff's attempted enforcement of this agreement is barred by the Statute of Frauds. There is no enforceable written agreement in this action that satisfies the Statute of Frauds requirement of the General Obligations Law or the U.C.C and, accordingly, Plaintiff's claim for promissory estoppel against the Defendants is not viable. See Hollinger Digital, Inc. v. LookSmart, Ltd., 267 AD2d 77 (1st Dept. 1999) (causes of action for breach of contract, promissory estoppel and equitable estoppel properly dismissed as "flatly contradicted" by letter agreement between parties).

The Court is also unpersuaded by Plaintiff's argument that the Statute of Frauds is inapplicable to this matter because Plaintiff is not seeking to consummate the asset sale transaction or to enforce a sale of goods under the UCC. Plaintiff contends, instead, that it is seeking to enforce Tower Isles' promise to negotiate in good faith and to hold Tower Isles responsible for its repeated misrepresentations/assurances that it was committed to the deal.

With respect to Plaintiff's claims of an alleged violation of a promise to act in good faith when negotiating and finalizing the terms of the proposed transaction, the Court notes that the Complaint contains only conclusory allegations from which Defendants' bad faith might be inferred. Moreover, the Court must consider what level of commitment, if any, arose from the LOI. Ordinarily, where the parties contemplate further negotiations and the execution of a formal instrument, a preliminary agreement does not create a binding contract. Adjustrite Sys., Inc. v. GAB Business Servs., Inc., 145 F.3d 543, 548 (2d Cir. 1998). This stems from the elemental principle of contract law that no contract can be formed unless the parties intend to be bound. Ogden Martin Sys. v. Tri-Continental Leasing Corp., 734 F. Supp. 1057, 1066 (S.D.NY 1990). Thus, when parties fail to execute a more formal agreement, the issue arises as to whether the preliminary agreement is a binding contract or an unenforceable agreement to agree. [*12]Adjustrite Sys., Inc. v. GAB Business Servs., Inc., supra, at 548.

There are two categories of binding preliminary agreements. Teachers Insurance & Annuity Association v. Tribune Co., 670 F. Supp. 491 (S.D.NY 1987); Adjustrite Sys., Inc. v. GAB Business Servs., Inc., supra, at 547-48. The first is a "fully binding preliminary agreement" which is created when the parties agree on all the points that require negotiation but agree to memorialize their agreement in a more formal document. Such an agreement is fully binding. Adjustrite, 145 F.3d at 548. The second type of preliminary agreement, called a "binding preliminary commitment" by Judge Leval in Tribune, supra, is binding only to a certain degree. Id. It is created when the parties agree on certain major terms, but leave other terms open for further negotiation. Id. A binding preliminary commitment does not commit the parties to their ultimate contractual objective, but rather to the obligation to negotiate the open issues in good faith in an attempt to reach the objective within the agreed framework. Id., quoting Tribune, supra, at 498.

The key is the intent of the parties, specifically whether the parties intended to be bound, and if so, to what extent. Adjustrite, 145 F.3d at 548-549. To determine whether the parties to a preliminary agreement calling for the execution of a formal instrument intended to be bound in the absence of such an executed final instrument, a court must consider the following factors: 1) whether there has been an express reservation of the right not to be bound in the absence of a final writing; 2) whether there has been partial performance of the alleged contract; 3) whether all of the terms of the alleged contract have been agreed upon; and 4) whether the agreement at issue is the type of contract that is usually committed to a final writing. Id at 549, quoting Winston v. Mediafare Entertainment Corp., 777 F.2d 78, 80 (2d Cir. 1986). The first factor, the language of the agreement, is the most important. Arcadian Phosphates Inc. v. Arcadian Corp., 884 F.2d 69, 72 (2d Cir. 1989). If the language of the agreement is clear that the parties did not intend to be bound, the Court need look no further. See, e.g., Cohen v. Singer, 4 Fed. Appx. 38, 39 (2d Cir. 2001) (where agreement's language characterized it as an "agreement in principle" and "letter of intent" "subject to and contingent on" formal agreement, District Court correctly concluded that agreement was not binding).

Here, Plaintiff's promissory estoppel claim is that the LOI, by its terms, constituted a binding promise to negotiate in good faith and by failing to do so, Defendants breached their binding obligation. Plaintiff, however, fails to address how this claim can survive Defendants' motion to dismiss in light of the language of the LOI and the Amendment itself. Plaintiff relies on Arcadian Phosphates, Inc. v. Arcadian Corp., cited supra, in which the Second Circuit reversed the grant of summary judgment on plaintiff's promissory estoppel claim, finding that the district court "conflated [defendant's] substantive obligation with its obligation to bargain in good faith." Arcadian Phosphates, Inc., 884 F.2d at 74, n. 4. The Arcadian Court found support for the plaintiff's promissory estoppel claim in the form of "evidence that [defendant] knew and approved of [plaintiff's] expenditures and collateral contracts," but suddenly changed its demand and then broke off negotiations when plaintiff rejected defendant's proposed modification. Id. at 74. Concluding that these circumstances raised genuine issues of material fact as to defendant's obligation to negotiate in good faith, summary judgment was determined to be inappropriate.

Plaintiff's reliance on Arcadian is unpersuasive given the undisputed evidence in the present case. The language of the LOI provides that both Plaintiff and Defendants expressly reserved the right not to consummate the transaction for any reason. It thus forecloses Plaintiff's argument that, by failing to complete the deal, Defendants failed to bargain in good faith. In [*13]addition, as discussed supra, the LOI expressly provided that the Defendants would not be bound until certain events had occurred. The LOI is thus expressly non-binding, discretionary and conditional in nature. Even assuming, arguendo, that Plaintiff did not rely on the LOI, but only on Defendant's promises to act in good faith, the estoppel claim still fails, because there was never a finalized agreement, merely one that was conditional. Prospect St. Ventures, I LLC v. Eclipsys Solutions Corp., 23 A.D. 213 (1st Dept. 2005). Not only was the LOI expressly non-binding, but the parties had not yet agreed upon the material terms of the proposed transaction. Thus, the contingent LOI "flatly contradicts" any claim for promissory estoppel that may otherwise exist.

In addition, in this case, there was no clear and unambiguous promise by the Defendants to pay the Plaintiff for any losses resulting from a failure to consummate the transaction. The mere failure to bring any negotiations or transactions to fruition cannot be imputed to bad faith conduct on behalf of the Defendants, particularly in the absence of any objective criteria by which to measure actions constituting good or bad faith. See Macdonald Ave. Realty, LLC v. Macdonald Ave. Corp., 50 AD3d 1021, 1023 (2d Dept. 2008) (where court was asked to construe clause requiring party to negotiate in good faith, clear set of guidelines against which to measure party's efforts is essential to its enforcement); Cohen v. Lehman Brothers Bank, 273 F. Supp. 2d 524, 529 (S.D.NY 2003). A plaintiff's conclusory allegations that a defendant refused to negotiate a final purchase agreement in good faith, devoid of any specific factual allegations other than the use of the term good faith,' is insufficient to support its argument that defendants unilaterally frustrated performance of the condition and therefore cannot benefit from its nonperformance. Prospect Street Ventures I, LLC v. Eclipsys Solutions Corp., 23 AD3d at 213.

Therefore, even under the most liberal construction of the Complaint in the light most favorable to the Plaintiff, the Court finds that Plaintiff has failed to allege a cause of action for promissory estoppel against the Defendants Tower Isles and/or Levi. As Plaintiff's sole claim against Tower Isles is for promissory estoppel, the Court grants Tower Isles' motion to dismiss the Complaint in its entirety.

E.Remaining Causes of Action

While the Court need not address the merits of Levi's motion to dismiss the remaining causes of action as against her, given Plaintiff's failure to establish a basis upon which to pierce the corporate veil, the Court will nevertheless address Plaintiff's causes of action for tortious interference with prospective business relations and fraudulent misrepresentation against Levi.

1. Tortious Interference with Prospective Business Relations

Meadow Ridge's second cause of action, for tortious interference with prospective business relations also fails. The claim for tortious interference with prospective business relations failed to include the necessary allegation that Levi's conduct was motivated solely by malice or to inflict injury by unlawful means, beyond mere self-interest or other economic considerations. See Shared Communications Servs. of ESR, Inc. v Goldman Sachs & Co., 23 AD3d 162, 163 (1st Dept. 2005). Wrongful means' includes physical violence, fraud, misrepresentation, civil suits, criminal prosecutions, and some degree of economic pressure, but more than simple persuasion is required. Snyder v. Sony Music Entertainment, 252 AD2d 294, 300 [1st Dept. 1999). The Complaint alleges that Levi's actions were motivated by economic considerations and self-interest. The Complaint further alleges that Levi's actions were motivated by a desire to negotiate a purchase price with Tower Isles' shareholders (Compl. at ¶ [*14]57). Even if true, this is clearly not conduct "motivated solely by malice" and Plaintiff's mere use of the term "malice" does not render the Complaint sufficient in this regard.

Moreover, the claim for tortious interference with prospective business relations based on the anticipated benefits from the proposed acquisition is not viable because the LOI set forth several conditions precedent which Plaintiff failed to allege would have been satisfied "but for" Defendants' allegedly wrongful conduct. See Vigoda v. DCA Prods. Plus Inc., 293 AD2d 265, 266 (1st Dept. 2002). Accordingly, the Court dismisses Plaintiff's second cause of action against Levi.

2. Fraudulent Misrepresentation

Plaintiff's third cause of action is also dismissed. A cause of action for fraud requires a showing of a representation of a material existing fact, falsity, scienter, deception and injury. New York University v. Continental Insurance Company, 87 NY2d 308, 318 (1995). Each of these elements must be pled with particularity. CPLR §3016(b); Papp v. Debbane, 16 AD3d 128 (1st Dept. 2005).

Plaintiff's action for fraudulent misrepresentation is based on its contention that "[d]uring the negotiations with Plaintiff. . . Defendant Levi. . . continually and on numerous occasions knowingly misrepresented to Plaintiff that she would act in good faith to pursue the transaction with Plaintiff and that she fully intended to finalize and close the sale of Defendant Tower to Plaintiff" (Compl. at ¶ 96). Plaintiff maintains that "Defendant Levi knew at all relevant times that she actually did not intend for Defendant [Tower Isles] to sell its assets to Plaintiff and that she was not acting in good faith in dealing with Plaintiff in connection with the transaction" (Id. at ¶ 97).

To defeat a motion a motion to dismiss, plaintiff must allege that it reasonably and justifiably relied upon the alleged fraudulent misrepresentations. 802 F Realty Corp. v. American International Specialty Lines Ins. Co., 295 AD2d 398 (2d Dept. 2002); see also Lama Holding Co. v. Smith Barney Inc., 88 NY2d 413 (1996). Where, as in this case, the parties had a letter agreement expressly stating that neither party had any obligations to the other until the execution of further agreements, the elements of reasonable reliance is not present. See Prestige Foods, Inc. v. Whale Securities Co., L.P., 243 AD2d at 281 (plaintiff's causes of action properly dismissed where "flatly contradicted" by letter ).

Plaintiff's reliance upon the decision in Gotham Boxing Inc. v. Finkel, 18 Misc 3d 1114A (2008) is misplaced. Gotham Boxing Inc. involved a dispute arising out of defendants' alleged failure to participate in a boxing match regarding which there was an alleged oral agreement. In Gotham Boxing, supra, the Court found that the plaintiffs had alleged reasonable reliance, notwithstanding the absence of an enforceable agreement, on the grounds that it was customary for promoters to act in reliance on an oral agreement containing the material terms setting up a fight, and contracts are typically approved by the New York State Athletic Commission at the time of a weigh-in immediately precedent a fight. In the matter at bar, Meadow Ridge fails to allege any similar industry custom which would render its alleged reliance reasonable. Moreover, even if there were a similar custom, any alleged reliance would be unreasonable in light of the conditional LOI and its Amendment in this case. See Pink v. Am. Surety Co., 283 NY 290, 296 (1940) (general custom or usage may not be interposed to alter vary, or contradict unambiguous contractual provisions or modify or change legal obligations assumed by the parties under their contracts). Therefore, Plaintiff's claim for fraudulent misrepresentation also fails and the Court grants Levi's motion for an Order dismissing the First Amended Complaint of [*15]the Plaintiff as asserted against her.

In light of the foregoing, the Court dismisses the Complaint in its entirety.

All matters not decided herein are hereby denied.

This constitutes the decision and order of the Court.

ENTER

DATED: Mineola, NY

November 1, 2010__________________________

HON. TIMOTHY S. DRISCOLL

J.S.C.