NY Statute of Frauds Bars Claims in Warner Acquisition

Snyder v. Bronfman, __ N.Y.3d __, 2009 NY Slip Op 08667 (N.Y. Nov. 23, 2009), holding that quantum meruit and unjust enrichment claims brought to recover the value of plaintiff's services in helping to achieve a corporate acquisition are barred by the statute of frauds contained in General Obligations Law § 5-701 (a) (10).

The deal? Defendant and a group of other investors agreed to acquire Warner Music from Time Warner for approximately $2.6 billion in cash. According to the complaint, Plaintiff was a major contributor to this success: he identified the opportunity, persuaded defendant of its merits, helped to get debt financing and obtained financial information from the target company.

New York's highest court, the Court of Appeals, found: "The essence of plaintiff's claim is that he devoted years of work to finding a business to acquire and causing an acquisition to take place — efforts that ultimately led to defendant's acquisition of his interest in Warner Music. In seeking reasonable compensation for his services, plaintiff obviously seeks to be compensated for finding and negotiating the Warner Music transaction. His claim is of precisely the kind the statute of frauds describes."

Quantum Meruit AND Contract Claims Survive in Action Against Label

Gromley v. Atlantic Recording Corp., No. 101041/08, 1/30/09 N.Y.L.J. Decision of Interest (Sup.Ct., N.Y. Co. Jan. 2, 2009)

Defendant record company ("Atlantic") moved to dismiss plaintiff's claims for quantum meruit. Plaintiff alleged defendant owed her the reasonable value of her services regarding the introduction of artists to defendant and overseeing production of records. Atlantic argued for dismissal arguing plaintiff's employment contract, which expired, covered the subject of royalties and contained a merger clause, and precluded the payment of royalties after expiration of the contract.

The court stated it was reasonable to infer the parties did not intend for plaintiff to continue working without expectation of payment even after expiration of the contract. Thus, the claims for unjust enrichment and quantum meruit stated a claim under quasi contract for payment for the period of time after expiration of the employment contract. However, plaintiff's claim seeking compensation under an implied contract for royalties for international sales for the period the contract existed was not actionable.

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Rapper 50-Cent's Girlfriend Granted Interim Stay of Eviction From Home

Tompkins v. Jackson, No. 102255-2006, 6/11/08 N.Y.L.J. "Decision of Interest" (Sup.Ct., N.Y. Co. decided May 14, 2008):

This court adopts the view that unmarried cohabitants may lawfully contract concerning their financial and other matters relevant to their relationship, subject to the rules of contract law, except where sexual services constitute the only consideration for the agreement [cit. om.]. Therefore, the complaint alleges sufficient services rendered by the plaintiff, which are non-sexual in nature and separable from the parties' relationship, such that a breach of contract claim in this regard supports plaintiff's request for an interim stay.

The court also found that the imposition of a constructive trust concerning the parties house in Dix Hills (NY), a partition of same, an accounting, quantum meruit for services performed, and damages for unjust enrichment were sufficiently plead in Plaintiff's complaint to warrant preliminary injunctive relief.

'Warner' Oral Joint Venture Claims Dismissed

In Snyder v. Bronfman, No. 105454/07, 5/06/08 N.Y.L.J. "Decision of Interest" (Sup.Ct., N.Y. Co. April 24, 2008), the New York Supreme Court, New York County, dismissed former Simon & Schuster CEO, Richard E. Snyder's claims against Edgar M. Bronfman -- Chairman and CEO of Warner Music -- relating to an alleged oral joint venture between the two.

Plaintiff sued for over $100 mil. based on six counts: breach of joint venture agreement, breach of fiduciary duty, joint venture accounting, unjust enrichment, promissory estoppel, and quantum meruit. Defendant moved to dismiss pursuant to CPLR 3211(a)(5) ("...the cause of action may not be maintained because of ... statute of frauds ..."), contending that New York's General Obligations Law prohibits a plaintiff from recovering a finder's fee or other compensation based on services rendered in connection with a corporate acquisition in the absence of a written agreement. (G.O.L. sec. 5-701(a)(10).)

The court disagreed, finding that the statute of frauds provision (id.) does not apply to an oral joint venture agreement "which involves two or more individuals pooling their respective efforts to create and/or operate a business venture as opposed to one person assisting or facilitating another to do so." (See Freedman v. Chemical Const. Corp., 43 N.Y.2d 260 (1977) and other cases cited herein.) Here, plaintiff was not a mere finder or intermediary -- "plaintiff functioned as more than just a broker assisting defendant in a limited and transitory manner".

Nonetheless, plaintiff's claims relating to the joint venture were dismissed because the alleged oral joint venture was too vague to support a joint venture agreement. Though plaintiff alleged that the parties had agreed he would receive a "fair and equitable" share of an amount of money from the alleged oral joint venture, the court found it too uncertain. (Citing Varney v. Ditmars, 217 N.Y. 223 (1916), and Freedman v. Pearlman, 271 A.D.2d 301 (1st Dep't 2000).) "The alleged contract in question is affected by too many facts that are in themselves indefinite and uncertain such that the intention of the parties is pure conjecture." Thus, after finding that the action was "ripe for dismissal" at the pleadings stage, the joint venture claims (and the promissory estoppel claim) were dismissed for vagueness. **

However, the unjust enrichment and quantum meruit claims survived. Based on a legal presumption of a promise to pay a "reasonable value", the court found that whether plaintiff can establish some value for any services actually rendered "must await discovery." Therefore, plaintiff had 20 days to file an answer to the unjust enrichment and quantum meruit claims.

** The court did not clarify under which provision of the CPLR it was granting dismissal of the joint venture and promissory estoppel claims. Although the portions of the decision relating to the statute of frauds clearly relate to defendant's motion under CPLR 3211(a)(5), it appears that dismissal of these counts was based on plaintiff's failure to state a cause of action. Can the court convert a 3211(a)(5) motion into a 3211(a)(7) motion sua sponte, assuming defendant's motion papers were brought only under 3211(a)(5)?