The opinion of the court was delivered by: SHIRLEY WOHL KRAM
SHIRLEY WOHL KRAM, U.S.D.J.
Defendants move for an order, pursuant to Rule 56 of the Federal Rules of Civil Procedure, granting partial summary judgment, or in the alternative, granting their motion to dismiss pursuant to Rule 12(b), with respect to Counts 12, 13 and 14 of the Third Amended Complaint. Plaintiff Irwin A. Zucker ("Zucker") cross-moves for an order, also pursuant to Rule 56 of the Federal Rules of Civil Procedure, granting him partial summary judgment on Counts 12, 13 and 14 of the Third Amended Complaint. The primary issue on this motion and cross-motion is whether Zucker, a former employee of the defendant Archer Services, Inc., can enforce a draft settlement agreement governing, among other things, the sale of stock in two of the defendant companies and the payment of an aggregate $ 1.1 million, including securities and other consideration. For the reasons that follow, the Court dismisses Counts 12, 13 and 14 of the Third Amended Complaint on the grounds that (1) there is no genuine issue of material fact that the parties intended to be bound by a signed written agreement, which was never executed; (2) in the alternative, Zucker has failed to satisfy the New York Statute of Frauds; and (3) Zucker has failed to plead fraud with the specificity required by Rule 9 of the Federal Rules of Civil Procedure.
Zucker brought this suit against defendants Archer Services, Inc., eight Archer affiliates (jointly, the "Archer Companies"), Stanley Katz ("Katz") and Judith Katz (collectively, "Archer"). The Archer Companies primarily provide delivery and facility management services, ranging from hand deliveries to the development and staffing of in-house messenger services at national corporations and law firms. Katz is the owner, an officer and a director of the Archer Companies; his wife, Judith Katz, is Secretary of certain of the affiliates. Zucker is an ex-employee and ex-officer of the Archer Companies, whom Katz hired in October 1966.
Zucker worked as an employee of the Archer Companies for more than twenty years, acting as President and Chief Operating Officer of Archer Services, Inc. and an officer of each of the Archer affiliates. By March 1987, however, Zucker was discontented at Archer Services, Inc. and threatened to resign unless Katz satisfied certain demands, including the transfer to Zucker of a ten percent ownership interest in each of the Archer Companies. Following Katz's rejection of Zucker's demands, Zucker resigned. Soon thereafter, Zucker threatened to sue Katz and the Archer Companies unless he was provided with a severance package that included a ten percent interest in Archer stock. The basis of Zucker's demand was his belief that, in or about 1979, Katz had orally promised him a ten percent ownership interest in the stock of the Archer Companies. Although Katz denied making any such promise, he began negotiating a severance agreement with Zucker.
B. The Settlement Negotiations
From early July through early October 1987, the parties engaged in negotiations and drafted a proposed settlement agreement. Zucker retained Clark E. Alpert ("Alpert") and Thomas Ackermann ("Ackermann") of the law firm of Greenberg, Matgolis, Schwartz, Dratch, Fishman, Franzblau & Falkin to negotiate with Ernest Rubenstein ("Rubenstein") of Paul, Weiss, Rifkind, Wharton & Garrison, counsel for the Archer Companies.
On July 10, 1987, the parties and their counsel met to discuss the proposed settlement. The following arrangements were discussed: (1) Zucker would be paid an aggregate of $ 1.1 million consisting of (a) a specified cash amount; (b) a transfer to Zucker of all of the outstanding capital stock of Archer Services of Massachusetts, Inc. ("Archer Boston") and Archer Services of Chicago, Inc. ("Archer Chicago"); and (c) deferred payment of the balance in certain cash installments over an allotted period of time; (2) the deferred payments would be secured by a pledge of ten percent of the outstanding stock of each of the Archer Companies, except Archer Boston and Archer Chicago; (3) Zucker would receive fifty percent of the net proceeds from the sale of Can Carriers, Inc. ("Can Carriers"), a bicycle messenger service; (4) Zucker and Katz would execute and deliver mutual general releases, thereby relinquishing any and all claims each might otherwise assert against the other; and (5) the parties would execute non-compete covenants, defining the nature of the business.
Following the meeting and based on the discussion between the parties, Rubenstein drafted an outline of the preliminary settlement arrangement. The outline included the settlement amount, the approximate payment schedule, the ten percent pledge or stock as security, the need for provisions regarding rights of first refusal and non-compete covenants, and Zucker's willingness to relinquish all of his interests in, and claims against, the Archer Companies. In addition, the outline also indicated that, pursuant to the July 10th discussions, all of the proceeds from the anticipated sale of Can Carriers would go to the Archer Companies, instead of fifty percent to Zucker, as initially proposed. It was further understood that, in the event the parties had not finalized a settlement by the time that a buyer was found for Can Carriers, an escrow agreement would be drafted by Zucker's attorney to govern the proceeds from the Can Carriers' sale.
Thereafter, on or about July 20, 1987, Ackermann told Rubenstein that Zucker wanted $ 250,000 of the settlement amount to be characterized as compensation for alleged personal injuries suffered by him. Such an allocation, it was argued, would render that portion of the settlement amount nontaxable to Zucker under Internal Revenue Code § 104(a)(2). In response, Rubenstein took the position that, if successfully so allocated, the Archer Companies might not be able fully to deduct the settlement amount under Internal Revenue Code § 162 as an ordinary and necessary expense of carrying on its trade or business. Apparently, this issue was never resolved.
2. The Unsigned Draft Settlement Agreement
On August 20, 1987, Rubenstein circulated a copy of a 49-page draft agreement, including Exhibits -- marked "Draft" -- to, among others, Zucker's attorney and Archer's in-house counsel. Although there had been discussions at the July 10th meeting with respect to the settlement amount, this term, as well as the installment payment amounts, were left blank in order to (1) account for the fact that Zucker had aborted a prior, proposed sale of Can Carriers by withholding his signature as a fifty percent record owner; and (2) leave open the possibility that Archer's lost opportunity cost should be reflected in the settlement amount.
Specifically, although a buyer had been found who offered to purchase Can Carriers on terms favorable to Archer, the buyer lost interest when Zucker refused to consent to the sale unless Katz agreed to an outright transfer to him of ten percent of the shares of the Archer Companies. As fifty percent record owner of Can Carriers' stock, Zucker's consent was essential. Thereafter, and simultaneous to the settlement negotiations, Archer continued to try to find a buyer. In or about September 1987, Cycle Services, Inc. ("Cycle Services") expressed interest in purchasing Can Carriers' assets at a price of $ 205,000 -- approximately $ 40,000 less than the purchase price of the first deal.
In addition, at about this same time, Zucker requested that, in lieu of a pledge of ten percent of the stock of each of the Archer Companies, that one hundred percent of the stock of Archer Services of California, Inc. ("Archer California") be used as collateral security for the deferred payments.
On September 18, 1987, the parties met once again to discuss the settlement. At that meeting, Katz raised the issue of whether the settlement payment should be reduced as a result of Zucker's refusal to consent to the sale of Can Carriers. Zucker reacted angrily to this suggestion, and the meeting ended abruptly.
4. The Revival of Negotiations
Although the settlement negotiations were in shambles following Zucker's abrupt departure from the bargaining table on September 18th, counsel for both parties resurrected the settlement by suggesting that (1) Katz agree to withdraw his demand for a price concession as a result of Zucker's role in aborting the earlier Can Carriers' sale and agree to use one hundred percent of the stock of Archer California, rather than ten percent of the stock of all of the Archer Companies, as collateral for the deferred payments; and (2) Zucker agree to use Katz's method for valuing the accounts receivable of Archer Boston and Archer Chicago. On or about October 2, 1987, following a series of telephone conversations, the parties agreed to compromise on these two issues. Rubenstein then undertook to prepare another draft.
By this time, the parties were close to resolving most of the major issues between them. In the interim, counsel for Zucker and Katz attempted to finalize the sale of Can Carriers to Cycle Services. To evidence Archer's commitment to the settlement agreement, an escrow agreement was prepared and signed by Katz in order to govern the proceeds of the Can Carriers' sale pending the parties' execution of a final, written settlement agreement. Thus, Zucker and Katz entered into a written Escrow Agreement agreeing, in essence, that if the parties failed to execute a written settlement agreement by October 30, 1987, they would each receive fifty percent of the escrow funds and both retain the right to dispute each other's fifty percent beneficial interest in the Can Carrier proceeds. If, however, the parties were able to deliver to the escrow agent "a fully executed copy of a Settlement Agreement" by October 30, 1987, then the escrow funds would be disbursed "in accordance with the terms and provisions of such Settlement Agreement . . . ." See Escrow Agreement, annexed to the Affidavit of Ernest Rubenstein, sworn to on Dec. 16, 1991 (the "Rubenstein Aff."), as Exh. "G," at P 3.3. The Escrow Agreement indicated further that the parties had "arrived at a settlement agreement" regarding their disputes. Id. at 1.
As the parties approached the final stages of negotiation, a revised draft agreement, dated October 9, 1991, was prepared at Paul, Weiss to reflect the changes agreed to since August 20th. At about the same time, Zucker executed the consents and stock powers necessary to effectuate the sale of Can Carriers to Cycle Services.
5. The Final Breakdown in Negotiations
On or about October 12, 1987, Alpert told Rubenstein that Zucker demanded that a fully re-drafted and signed written settlement agreement be finalized by October 30th; otherwise, he was "free to walk away from the deal" and file a lawsuit. See Time Records, annexed to the Rubenstein Aff., as Exh. "A." Rubenstein, objecting to Zucker's "bullying," responded that he could not complete the work until November 13th and would not work further in light of Zucker's ultimatum. Rubenstein Aff. at P 36. Thereafter, when no agreement was executed by October 30th, Zucker notified Ackermann that he and Archer had "not as of October 30, 1987 entered into a written Settlement Agreement . . .," and requested the "immediate release of fifty (50%) of the Escrow Funds" plus interest. See Letter from Zucker to Ackermann, of 11/3/87 (the "Zucker Letter"), annexed to the Affidavit of Stanley Katz, sworn to on Dec. 16, 1991 (the "Katz Aff."), as Exh. "A." Accordingly, Ackermann released to Zucker a total of $ 15,097.95 in principal and interest.
C. The Instant Litigation
On October 23, 1987, Zucker filed, but did not serve, an initial complaint asserting some two dozen counts against the Archer Companies, the Katzes, and Archer's accountants, Perelson, Johnson & Rones. Specifically, Zucker alleged that in or about 1979, Katz promised him ten percent of the shares of the stock in each and all of the Archer Companies as additional compensation and consideration for his continued employment. According to Zucker, this promise constituted an enforceable contract which Katz breached.
On October 28, 1987, Zucker served an amended complaint which alleged for the first time that the parties had an enforceable deal, as of October 2, 1987, as a result of the settlement negotiations. Because of a possible diversity problem, however, Zucker filed a Notice of Dismissal Without Prejudice of the amended complaint on January 26, 1988. Thereafter, on March 23, 1988. Zucker served a second amended complaint which was virtually identical to the prior version but for the removal of the non-diverse party. On May 4, 1988, defendants moved to dismiss the second amended complaint.
In its March 1, 1989 Opinion, the Court dismissed Zucker's claims relating to the supposed settlement agreement as barred by the New York State Statute of Frauds, N.Y. Gen. Oblig. L. § 15-501. See Zucker v. Katz, 708 F. Supp. 525 (S.D.N.Y. 1989). Specifically, the Court found the complaint deficient in two ways: "The complaint . . . does not specify fraud surrounding the settlement agreement itself that would support the estoppel argument. There is also no mention in the complaint of the signed writings that may be considered as satisfaction of the statute of frauds." Id. at 539. However, the Court granted Zucker leave to replead, holding that, to overcome the statutory bar, Zucker must allege the "fraudulent conduct" to which he alluded to in his brief in opposition to the motion to dismiss, and establish the existence of any alleged writings which, taken together, might satisfy the Statute of Frauds. Id. at 539.
Thereafter, on March 31, 1989, Zucker filed his third amended complaint, omitting the claims dismissed with prejudice and refashioning others. Defendants have answered this pleading by asserting general denials and affirmative defenses, including, lack of standing, unclean hands, and failure to state a claim upon which relief can be granted.
Pursuant to Counts 12 and 13 of the Third Amended Complaint, Zucker alleges that, as of October 2, 1987, the parties intended to be bound to a settlement arrangement calling for the transfer to Zucker of Archer Boston and Archer Chicago and the payment of $ 750,000. Zucker alleges further that the "formality of executing a written document embodying the Agreement's terms was not a prerequisite for there to be a binding Agreement." See Complaint at P 103. Zucker also alleges that on October 6, 1987, he partially performed by entering into the "Can Asset Transaction Agreement" and the "Can Escrow Agreement." Id. at P 104. Accordingly, Zucker demands (1) specific performance of the Agreement; (2) compensatory and punitive damages; and (3) costs.
Archer now moves for summary judgment with respect to Counts 12, 13 and 14 of the Third Amended Complaint on the grounds that (1) as the parties intended to be bound by a signed written agreement, and no signed agreement was ever executed, the proposed agreement is not enforceable; (2) the draft agreements are insufficient to constitute a writing, and thus, do not satisfy the New York Statute of Frauds; and (3) Zucker has failed to plead fraud with the specificity required by Rule 9 of the Federal Rules of Civil Procedure.
Although Zucker concedes that "this is admittedly not a case in which there is a nice neat single document captioned "Settlement Agreement" embodying all of the terms and signed by all parties," see Memorandum of Law in Opposition to Defendants' Motion for Partial Summary Judgment and in Support of Plaintiff's Cross-Motion ("Pl. Mem."), at 2, he maintains that the settlement agreement should be enforced because: (1) a series of documents embody all of the material terms of the parties' agreement; (2) he partially performed his obligations under the agreed upon settlement to his detriment and Archer's benefit; and (3) there is a writing, signed by the party against whom enforcement is sought, confirming the fact that the parties had arrived at, and agreed to, a settlement. Zucker has not responded, however, to the alleged deficiency of the fraud claim (Count 14).
Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, establish that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). In determining whether the movant has met this burden, the Court must resolve all ambiguities in favor of the party opposing the motion. Lopez v. S.B. Thomas, Inc., 831 F.2d 1184, 1187 (2d Cir. 1987) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 8 L. Ed. 2d 176, 82 S. Ct. 993 (1962)); Eastway Constr. Corp. v. New York, 762 F.2d 243, 249 (2d Cir. 1985). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact, Adickes v. S. H. Kress & Co., 398 U.S. 144, 157, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970), and may discharge this burden by demonstrating an absence of evidence supporting the opponent's defenses on which the opponent would have the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323
, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). The burden then shifts to the opponent who must come forward with "specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e).
The opponent must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). Speculation, conclusory allegations and mere denials are not enough to raise genuine issues of fact. Anderson v. Liberty Lobby, 477 U.S. 242, 249-50, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Knight v. United States Fire Ins. Co., 804 F.2d 9, 15 (2d Cir. 1986), cert. denied, 480 U.S. 932, 94 L. Ed. 2d 762, 107 S. Ct. 1570 (1987); Argus Inc. v. Eastman Kodak Co., 801 F.2d 38, 45 (2d Cir. 1986), cert. denied, 479 U.S. 1088, 94 L. Ed. 2d 151, 107 S. Ct. 1295 (1987). To avoid summary judgment, enough evidence ...