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GSGSB, INC. v. NEW YORK YANKEES

September 28, 1994

GSGSB, INC., a Pennsylvania corporation, Plaintiff,
v.
NEW YORK YANKEES, an Ohio limited partnership, Defendant.



The opinion of the court was delivered by: SHIRLEY WOHL KRAM

 SHIRLEY WOHL KRAM, U.S.D.J.

 This is an action brought by the architectural firm of Gilboy, Stauffer, Giombetti, Skibinski and Bellante ("GSGSB") *fn1" against the twenty-two time World Series Champions, the New York Yankees Partnership (the "Yankees") for breach of a purported oral agreement. GSGSB now moves for summary judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure, on the grounds that there is no genuine issue of material fact as to Count II (quantum meruit) and Count IV (damages on account stated) of the complaint. The Yankees oppose the motion and cross-move for (1) summary judgment on Count I (breach of contract) and Count IV; (2) partial summary judgment as to Count II; and (3) to dismiss Count III (fraud), pursuant to Rule 9(b) of the Federal Rules of Civil Procedure. For the reasons set forth below, GSGSB's motions are denied. The Yankees' cross-motion for summary judgment is granted in part and denied in part. Specifically, the Yankees' motion with respect to Count I and Count IV is granted, and the Yankees' cross-motion for partial summary judgment with respect to Count II is denied. The Yankees' motion with respect to Count III is granted.

 BACKGROUND *fn2"

 The instant action arises, not from what occurred on the playing field, but rather, from what occurred in -- and in regard to -- Yankee Stadium. On August 7, 1984, Eugene McHale ("McHale"), then president of the Yankees, and John P. Gilboy, Jr. ("Gilboy"), a partner at GSGSB, met to discuss proposed improvements to Yankee Stadium (the "August 7th meeting"). The improvements were to include: (1) construction of thirty-six luxury suites ("superboxes") along the first and third base lines; (2) the creation of a glass-enclosed restaurant containing the Yankee Club; and (3) the expansion of the "Great Moments" banquet room (collectively, the "Project").

 According to GSGSB, although no contract was ever signed, the Yankees directed GSGSB to prepare and deliver drawings and specifications on an expedited basis, as the Yankees hoped to complete the renovations by the 1985 season. Thereafter, purportedly in accordance with the Yankees' instructions but without a contract, GSGSB performed architectural and engineering services related to the Project, including preparation of construction drawings, design studies and document inventory. At the present time, however, no improvements have in fact been made to Yankee Stadium, nor has GSGSB received any remuneration for the work done in connection with the Project.

 The Yankees dispute that GSGSB was ever hired to work on the Project, and instead contend that GSGSB performed its services on a "risk" or "contingent" basis, subject to a final written agreement between the parties. Specifically, the Yankees maintain that they told GSGSB both at the August 7th meeting and thereafter that the City of New York (the "City") owned Yankee Stadium and that, as outlined in the lease agreement between the City and the Yankees, City approval was necessary before any improvements or construction could commence. In addition, the Yankees claim that they told GSGSB that appropriate financing would have to be arranged with the City, and that GSGSB could not be paid for any work until such financing was approved. As the City's permission was necessary to make Stadium improvements, the Yankees maintain that they never intended, nor even had the authority to enter into a contract unless and until financing and approval were obtained from the City. In fact, although the Yankees engaged in protracted negotiations with the City over the course of numerous meetings, they were unable to obtain the necessary consent.

 On March 15, 1991, GSGSB commenced the instant action, alleging causes of action for breach of contract (Count I), quantum meruit (Count II), fraud (Count III) and damages on account stated (Count IV). GSGSB now moves for summary judgment, pursuant to Rule 56 of the Federal Rules of Civil Procedure, as to Counts II and IV of the complaint. Specifically, GSGSB contends that there is no genuine issue of material fact regarding its entitlement to fees incurred in connection with the Project. According to GSGSB, the fee arrangement, while indisputably oral, is reflected in correspondence, draft contracts, representations made by the Yankees to both GSGSB and third parties, invoices documenting plaintiff's fees and expenses and amounts credited against the GSGSB account.

 The Yankees oppose GSGSB's motion and cross-move for summary judgment, also pursuant to Rule 56, on the grounds that, as the City never approved financing of the Project, there is no issue of fact regarding the lack of an enforceable agreement between the parties. The Yankees claim further that plaintiff's own documents, the testimony of a former GSGSB principal and the correspondence between the parties demonstrate that summary judgment must be granted in its favor.

 I. Correspondence Between the Parties

 While both parties concede that no contract was ever executed, GSGSB contends that the terms of its employment were memorialized in several documents written by McHale, the Yankees' president. Specifically, GSGSB relies upon a memorandum dated September 26, 1984, wherein McHale advised Yankees general partner George Steinbrenner, III ("Steinbrenner") as to the "possible addition" of the superboxes and recommended that, "if we go forward with the project and assuming Gilboy's budget is in line . . . we use Gilboy's firm to do the work." See memorandum from McHale to Steinbrenner of 9/26/84, annexed to the McHale Aff. as Exh. "C." Similarly, in a letter dated February 20, 1985 (the "February 20th letter"), McHale advised Henry J. Stern, the Commissioner of the New York City Department of Parks, that "the architectural firm of GSGSB was hired to do the design work on the addition of luxury suites at Yankee Stadium." See letter from McHale to Stern of 2/20/85, annexed to the Declaration of John Peter Barie, dated April 10, 1993 (the "Barie Dec."), as Exh. "28."

 Although the Yankees admit that McHale authored the two documents, they dispute their relevance as proof that an agreement was reached between the parties. For example, the Yankees argue that the February 20th letter was unrelated to the Project and actually pertained to potential stadium renovations, uncovered during the course of GSGSB's work, that might be necessary to ensure public safety. The Yankees maintain that no safety measures were ultimately necessary or undertaken, and that the initial design calculation by GSGSB suggesting the need for such action was in fact wrong.

 The Yankees argue further that GSGSB's own correspondence indicates that it understood from the outset that the Project was contingent upon approval and financing by the City. Specifically, the Yankees point to an August 8, 1984 letter from GSGSB partner Gilboy to McHale which states in part that "[GSGSB is] very excited about the luxury box project. If arrangements with the City can be completed to permit the Yankees to construct and finance the program, I believe we can use the boxes in the Spring of 1985." See letter from Gilboy to McHale of 8/8/94, annexed to the McHale Aff. as Exh. "A" (emphasis added).

 II. The Unsigned Draft Agreements

 Thereafter, by letter dated September 20, 1985, Ken Lazaruk, also of Shea & Gould, sent a revised draft to McHale and Dominic Provini ("Provini"), head of operations of GSGSB (the "September 20th Draft"). *fn5" On or about November 8, 1985, Lazaruk sent McHale another draft of the revised agreement (the "November 8th Draft"). *fn6" The transmittal letter of this final draft stated, in pertinent part, "enclosed is a revised draft agreement between owner and architect for this project." See letter from Lazaruk to McHale of 11/8/92, annexed to the Barie Dec. as Exh. "22."

 Thus, in total, no less than five draft contracts were discussed by the parties between October 1984 and November 1985. GSGSB alleges, however, that none of these drafts indicated that GSGSB was working at "risk" or on a "contingency" basis. Rather, according to GSGSB, Frankel indicated that he understood the proposed fee arrangement between GSGSB and the Yankees, and that this fee arrangement was reflected in the various contract drafts. No contract was ever executed, however, and in fact, McHale claims that he never indicated that any draft of the contract was acceptable or that a contract could be executed without Steinbrenner's final approval.

 III. The Fee Arrangement and Invoices

 A. The September 3, 1985 Letter

 GSGSB first points to a September 3, 1985 letter (the "September 3rd letter") from Provini to McHale, memorializing an August 29, 1985 meeting in which Provini indicated that the parties had "settled on a fee of $ 610,000 for engineering on the Third and First Base sides." See letter from Provini to McHale of 9/3/85, annexed to the McHale Aff. as Exh. "E." The letter indicated further that additional reimbursables, such as for "reproduction" and "Federal Express," were to be billed as the Project proceeded into construction. Id. In that same letter, Provini notified McHale that he shortly would be receiving an invoice for $ 550,796.00. Id. According to GSGSB, the September 3rd letter is evidence that the parties had agreed on a fee for GSGSB's work.

 McHale contends that the September 3rd letter does not accurately reflect the understanding between the Yankees and GSGSB as it appears to assume that (1) the parties had agreed on the fee; and (2) the Yankees had agreed to accept the $ 550,796.00 invoice. McHale contends further that he informed Provini that he did not agree either to the terms of the September 3rd letter, or to the invoices referenced therein, and that all discussions regarding fees were tentative pending authorization by Steinbrenner.

 McHale also contends that Provini, the author of the September 3rd letter, conceded that the letter contained certain errors. In fact, Provini testified at his deposition that, if McHale had agreed to the fee of $ 610,000, Provini would have "stuck a contract in front of him and had him sign it." See deposition of Dominic Provini, taken on 3/27/92 ("Provini Dep."), annexed to the Bergen Aff. as Exh. "D," at 67.

 B. Additional Correspondence and Invoices

 GSGSB alleges further that an oral agreement was memorialized in various invoices sent to the Yankees. Specifically, by letter dated September 11, 1985, Provini sent McHale GSGSB's Invoice No. 9505 in the amount of $ 550,796.00 and Invoice No. 9522 in the amount of $ 6,918.13 for reimbursables. See letter from Provini to McHale of 9/11/85, annexed to the Affidavit of Robert J. Hantman, sworn to on April 12, 1993 (the "Hantman Aff.") as Exh. "A," at 13. Subsequently, in a letter dated December 24, 1985, GSGSB forwarded Invoice No. 9833 to the Yankees for reimbursable expenses. See letter from Provini to McHale of 12/24/85, annexed to the Hantman Aff. as Exh. "B," at 3-44. The Yankees did not respond to any of these GSGSB invoices.

 Provini also sent a letter, dated September 13, 1985, to Ken Lazaruk at Shea & Gould indicating that the Yankees had agreed to pay GSGSB a total of $ 610,000.00 and that "this should conclude the final items of the contract." See letter from Provini to McHale of 9/13/85, annexed to the Barie Dec. as Exh. "20." Enclosed with the letter to Lazaruk was a copy of the September 3rd letter explaining how the parties had arrived at the fee. Both Provini and McHale now indicate, however, that the letter did not mean that the Yankees had "agreed" to anything, and that GSGSB understood that services rendered were performed subject to Steinbrenner's and the City's approval.

 On or about April 25, 1986, John Symuleski ("Symuleski"), comptroller for GSGSB, sent McHale an additional confirmation letter indicating that the amount due GSGSB as of March 31, 1986 totaled $ 563,125.01. *fn7" See letter from Symuleski to McHale of 4/25/86, annexed to the Barie Dec. as Exh. "25." The letter requested that, assuming the amount was in agreement with the Yankees' records, the Yankees should sign in the space provided below the text of the letter and return it to GSGSB's auditors. The Yankees did not respond.

 Thereafter, at a May 12, 1986 meeting between GSGSB's Provini, William Dowling, in-house counsel for the Yankees, David Weidler, comptroller for the Yankees, and McHale, Provini apparently indicated that:

 
[GSGSB's] compensation will require adjustment based on the escalated cost of construction. GSGSB questioned the Yankees' acknowledgement of the A/E letter dated February 19, 1986. The letter as written notes the increase in fee because of interest and states a September 1986 date for reconciliation. Gene McHale said he would review the 2 points with George and have a response this week. Anyone taking exception to the statements in these minutes or having any knowledge of omission shall notify the architect in writing within three (3) days after receipt of the minutes, listing in detail the exceptions, otherwise, the minutes shall stand as written.

 Minutes of meeting, dated 5/12/86, annexed to the Barie Dec. as Exh. "26." Although McHale, Dowling and Weidler were sent copies of the minutes, the Yankees never took exception to them. The Yankees now contend, however, that the minutes (1) are completely self-serving as they were prepared by GSGSB; and (2) confirm further that Steinbrenner's approval was necessary, as McHale "said he would review the two points with George [Steinbrenner] and have a response this week." Id.

 Subsequently, in a letter dated June 23, 1986, Robert T. Kelly and Company, accountants for GSGSB, sent David Weidler, chief financial officer of the Yankees, who was the comptroller and treasurer of the Yankees during the Project, a copy of GSGSB's request for confirmation of the balance due. Weidler did not respond to the June 23, 1986 letter. GSGSB contends that Steinbrenner, however, acknowledged discussing GSGSB's invoices with Weidler. See deposition of George Steinbrenner, taken on 3/11/92, annexed to the Hantman Aff. as Exh. "K," at 12.

 Thereafter, by letter dated July 10, 1986, George Campbell, chief financial officer of GSGSB, wrote Weidler, stating:

 
This letter is in regard to two issues pertaining to reference project. If you haven't received Robert T. Kelly & Company's accounts receivable confirmation letter initially sent to Mr. Eugene McHale on April 25th, I am sure that you have received the follow up addressed to you dated June 23rd. Your timely response to Robert T. Kelly would be appreciated. Enclosed is a copy of a letter sent to Gene McHale on 2/19/86. Since September is less than two months away, I wanted you to particularly be aware of your agreement for payment of our fee as set forth in paragraph four of subject letter.

 See letter from Campbell to Weidler of 7/10/86, annexed to the Hantman Aff. as Exh. "A," at 65. Weidler did not respond to the letter.

 C. The Yankees' Response

 By letter dated August 15, 1986, William F. Dowling, the Yankees' then general counsel, wrote to GSGSB, stating in part:

 
[GSGSB] agreed to and did perform architectural and engineering services on a risk basis to the New York Yankees on the expectation that it would be retained to perform architectural services if the New York Yankees determined to construct certain luxury boxes. No such decision has yet been made.

 See letter from Dowling to GSGSB of 8/15/86, annexed to the Hantman Aff. as Exh. "A," at 69. The August 15, 1986 letter advised GSGSB that (1) the Yankees were unable to verify or confirm the amount due, if any, to GSGSB; (2) the Yankees "had been told on several occasions that the statements of account [were sent] to us for GSGSB internal purposes and were not a record of a sum due and owing on account;" and (3) GSGSB "agreed to and did perform architectural and engineering services on a risk basis to the New York Yankees on the expectation that it would be retained to perform architectural services if the New York Yankees determined to construct certain luxury boxes." Id.

 In a memo to his file, dated July 20, 1986, Steinbrenner, upon learning of the invoices forwarded by GSGSB, indicated:

 
To say the least I was shocked . . . . I immediately reached for Gilboy who then called me back . . . . When I questioned what the hell the arrival of a sudden invoice for $ 550,000 meant with an alleged agreement for 10% interest, [Gilboy] told me that Gene McHale had made the agreement with him. I told him that was bullshit. Gene McHale could not make such an agreement with him and that no one at the Yankees had ever made such an agreement with him . . . . I said I want to make it clear to you Jack, I have absolutely no agreement with you on fee, interest, or anything else. I had never made any agreement with you and that I did not believe that Gene McHale had because he would have had to have my consent.

 See letter to file from Steinbrenner of 7/20/86, annexed to the Barie Dec. as Exh. "27." ...


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