The opinion of the court was delivered by: CEDARBAUM
Crown Sterling Management, Inc. ("Crown"), a Texas corporation with its principal place of business in California which owns, manages, licenses, and franchises hotel chains, entered into an agreement (the "Agreement") with Lazard Freres & Co. ("Lazard"), a partnership with no partners residing in either Texas or California. Pursuant to the Agreement, Lazard was to serve as "exclusive investment banker and financial advisor" to Crown and its affiliates ("the Client") and assist in the restructuring of their debts. The Agreement specifically provided that Lazard would be entitled to its fees if the Client successfully restructured their debts, even if Lazard was not responsible for the debt restructuring. The Client did restructure a portion of their debts, but refused to pay Lazard its fees. This suit followed. Crown has asserted counterclaims of breach of contract, breach of fiduciary duty, breach of the duties of good faith and fair dealing, negligence and gross negligence, fraud, and negligent misrepresentation.
Lazard moves for judgment on the pleadings to recover its fees. At oral argument, pursuant to Fed. R. Civ. P. 12(c), I converted the motion into one for summary judgment, and gave the parties an opportunity to submit any pertinent material outside the pleadings. (Tr. of Proc. Aug. 4, 1995 at 8-9.) Plaintiff also moves pursuant to Fed. R. Civ. P. 54(b) for entry of a final judgment on its claim. Plaintiff is entitled to payment under the Agreement, and because there is no just reason for delay of the entry of a judgment in its favor, the motion is granted.
The terms of the relationship between Lazard and Crown were detailed in an Engagement Letter. (Letter from Lazard to Charles M. Sweeney, dated July 30, 1993, Compl., Exh. A.) The Agreement provided that Lazard was to conduct "due diligence" of the Client, analyze options for financial restructuring, prepare marketing materials, identify prospective investors and financing sources, provide written reports about prospective investors, raise capital, and provide ongoing reports and advice regarding the debt restructuring. (Id. P 1.) The Agreement provided that it applied to "the various entities comprising the Crown Sterling Suites hotel chain" and that "all references to the Company shall be interpreted broadly to refer to any or all such entities, as may be applicable." (Id. at 1.) After setting out Lazard's fee structure, (id. P 3), the Agreement provided that:
while this Agreement is in effect, [Lazard] shall be entitled to receive such fees as are described and contemplated in Paragraph 3, above, in the event that any of the events described or contemplated in Paragraph 3 occurs, regardless of whether [Lazard] is responsible for arranging said events. If, while this Agreement is in effect, Client undertakes one or more transactions leading to the occurrence of such events, which transaction(s) [Lazard] did not arrange, then [Lazard's] fees shall be determined as if [Lazard] had actually arranged said transaction(s),
(id. at P 4) (emphasis added). The Agreement was to remain in effect until thirty days after delivery by either party of a notice of termination, "which notice may not be delivered prior to one year from Client's acceptance." (Id.)
It is not disputed that the Client entered into four refinancing transactions after the parties entered into the Agreement. In February 1994, the Client obtained $ 22 million in new mortgage financing from Heller Financial, Inc., and a new $ 16.5 million mortgage loan from the Bank of Nova Scotia. (Compl. PP 11, 12; Answer PP 11, 12.) The Client also restructured a $ 22,761,272.87 mortgage loan from Mellon Bank, N.A. and a $ 23,893,188.61 mortgage loan from Barnett Bank of Broward County, N.A. (Compl. PP 13, 14; Answer PP 13, 14.) Finally, the Client refinanced an existing $ 86.2 million in mortgage loans from the Bank of Nova Scotia, extending the maturity of those loans by more than three years. (Compl. P 12; Answer P 12.)
On April 22, 1994, Crown sent a "disengagement" letter to Lazard. (See Letter from Robert E. Woolley to Peter Cyrus, Rosenbaum Aff. dated Aug. 9, 1995, Ex. C.) In it, Crown stated that "while some progress toward our mutual goals, as expressed in our discussions and the Letters of Engagement, have [sic] been made, we feel that our overall purposes have been, for whatever reason, unfulfilled." (Id. at 1.) On May 19, 1994, Lazard sent an invoice to Crown, seeking its fees for the four transactions in the amount of $ 1,741,970, plus out-of-pocket disbursements, (Agreement at P 5), attorney's fees, (id. at P 9), and statutory prejudgment interest. N.Y. Civ. Prac. L. & R. § 5004 (McKinney 1992).
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show 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). A party opposing a properly supported summary judgment motion must establish a genuine issue of material fact in order to preclude summary judgment. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-86, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986). In deciding whether a genuine issue exists, the court must "examine the evidence in the light most favorable to the party opposing the motion, and resolve ambiguities and draw reasonable inferences against the moving party." In re Chateaugay Corp., 10 F.3d 944, 957 (2d Cir. 1993).
Two conditions are necessary for Lazard to recover its fees for the February 1994 debt restructuring -- (1) the Agreement must have been in effect in February 1994; and (2) the debt restructuring must have been an "event" within the meaning of the ...