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February 21, 1996

EDUARDO CANET, Plaintiff, against GOOCH WARE TRAVELSTEAD, Defendant.

The opinion of the court was delivered by: TRAGER

 TRAGER, District Judge:

 This action presents issues regarding the enforceability, under New York law, of an oral contract of employment that included terms promising bonuses and equity participations in projects undertaken by the employee for his employer, a real estate developer.

 The lawsuit was filed in 1989 by Eduardo Canet, a New York resident, against Gooch Ware Travelstead, a Connecticut resident who was Canet's former employer. Jurisdiction was based on diversity of citizenship under 28 U.S.C. § 1332. The complaint sought damages for breach of contract and requested a declaratory judgment prohibiting the defendant from collecting on his promissory note until he paid the plaintiff's 1988 bonus. The defendant asserted a counterclaim for immediate payment of the promissory note. The liability portion of this lawsuit was tried to the court for five days from September 28, 1995 to October 5, 1995.

 Although plaintiff worked on assignments in Florida, Kuwait, England and Spain for substantial periods, and while arguments could be made that some of these laws, if different, should be applied, both parties have relied upon New York law throughout these proceedings without objection. Moreover, it is conceded that the original oral employment contract between Travelstead and Canet, whatever its terms, was made in New York, as were most of the subsequent promises detailing terms missing from the original agreement.

 I. Findings of Fact

 Plaintiff, Eduardo Canet (Canet), an MBA graduate of Columbia University, first met the Defendant, Gooch Ware Travelstead (Travelstead), sometime about 1978-79 when they worked together on a development project for Grupo Alfa, a Mexican company. The project involved the building of new corporate headquarters for Grupo Alfa in Monterrey, Mexico. Canet was then employed by Grupo Alfa, and Travelstead was a consultant to First Boston. *fn1" Canet at 207-09. Canet had worked for First Boston prior to joining Grupo Alfa. Canet at 212.

 A. Travelstead's Offer of Employment to Canet

 In November 1981, Travelstead invited Canet to leave Grupo Alfa to work for him. At a dinner at the Piccolo Mondo restaurant in Manhattan, attended by their wives, Edythe Travelstead and Sherrill Canet, Travelstead asked Canet to join him in order to "help him in financing, so forth, so he could spend more time looking for new projects." Canet at 211-12. At the time of the dinner, Travelstead was working for First Boston in an unusual role, chairing First Boston's real estate group although he was not a First Boston staff member. The relationship also included an arrangement whereby First Boston became Travelstead's partner in various real estate ventures, with the right of first refusal. E. Travelstead at 59. See also, M. Travelstead at 486. While a number of First Boston staff members worked under Travelstead's supervision, Travelstead's and Canet's discussions contemplated that Canet would work directly for Travelstead. Canet accepted Travelstead's offer; Travelstead then ordered champagne, and the two couples toasted their new relationship. E. Travelstead at 61, Canet at 212.

 Canet worked with Travelstead from 1982 to 1989, serving as "his right-hand man, his assistant, his number one chief executive." E. Travelstead at 64-65. Bruce Colley, who was the son (and business associate) of Eugene Colley, a frequent financial backer of Travelstead, and who also worked for Travelstead for several years, described the relationship: "Ware was the concept genius and Eduardo was the man that got the task done, got the project done." Bruce Colley at 528. Frank Dunlevy, who as a vice president of First Boston knew both Canet and Travelstead, recalled Travelstead saying: "that he considered Eduardo his partner in all of those ventures; they operated like a partnership; shared all of the duties." Dunlevy at 171. Malcolm Travelstead, the defendant's brother, testified that, during the early 1980's, Canet was the only person involved in deal-making who was working directly for Travelstead - as distinguished from First Boston staff. M. Travelstead at 511.

 Over time, the Canets and the Travelsteads became very close friends; the line between business and social occasions was often blurred. Referring to the Piccolo Mondo dinner at which Canet accepted Travelstead's offer of employment, Edythe Travelstead testified: "We were all out to dinner, and, which was our custom, because the days were filled with negotiations and so forth, and Ware and I both would spend the evening with clients or potential clients or recruiting people. . ." E. Travelstead at 59. Dunlevy also testified as to the closeness of the relationship (at 173):

 B. The Terms of Canet's Employment Contract with Travelstead

 The content and enforceability of the employment contract formed at the Piccolo Mondo dinner is the crux of the litigation. Canet testified that Travelstead offered him: "[A] salary of $ 100,000. He also promised me a bonus every year, and he also promised me a piece of his interest in the ongoing - on the projects that we were going to be developing. That was the lure, to be able to get a piece of the projects." Canet at 211. Edythe Travelstead's testimony was substantially the same as Canet's, but she added: "[Travelstead] offered [Canet] a bonus that would become a multiple of [the $ 100,000 salary], because the expectations were that enormous sums of money would come into the group. At the same time, he offered him a percentage of the projects that he would work on." E. Travelstead at 60. Sherrill Canet also testified concerning the employment offer accepted by her husband at the Piccolo Mondo dinner in November 1981: "[Travelstead] asked Eduardo if he would like to be his right-hand man and work for him, and he offered him a salary of $ 100,000, and a guaranteed cash bonus at the end of every year, and equity participation in the projects he worked on." S. Canet at 96.

 Travelstead professed only a vague recollection of the dinner and denied offering Canet equity participation as a term of employment. Travelstead at 336, 341-42. Travelstead stated he had told Canet that, although "the bonus is totally up to me, discretionary, but you should certainly anticipate a bonus if you are doing a good job, otherwise you won't have a job in that sense, so." Travelstead at 336-37.

 Canet stated that the equity participation "was the lure, to be able to get a piece of the projects." Id. The importance of the offer of equity participation to Canet was supported by the testimony of Frank Dunlevy, who described conversations with Canet (at 181):

. . . I would say, it was much safer having a job at First Boston because it was a bigger, more established entity and that [Canet] was taking a higher risk. And he would say, you know, higher risk gets higher return and that there were, you know, significant tax advantages, as I think all of us are aware, to real estate and real estate partnerships, certainly prior to the change in the tax law.

 Canet's wife also noted: "Instead of going to work for an investment bank, as he had done before, the equity participation was certainly a big attraction to the terms of the employment." S. Canet at 97. As noted by the defendant, Canet has pursued a successful career in investment banking following the termination of his employment with Travelstead. Def. Post-Trial Resp. Brf. at 16.

 Travelstead stated that "equity participation in real estate projects" could take a number of forms: "[It] can be a payout of a profit interest, or it can be a full partnership as a general partner, or owning a piece of a corporation that is doing a real estate development. It could be a limited partner." Travelstead at 337. Canet's testimony as to the nature of the interests he was granted, although essentially consistent with the categories stated by Travelstead, used a variety of terms to describe them: "a carried interest, and also, you know, I would have been on the hook for some notes, non-recourse notes [in Southshore]," Canet at 215; "a piece of Ware's partnership into the overall partnership, into the overall vehicle [in Silas Creek]," Canet at 223; "Ware gave me a piece - gave me half of 1 percent of his interest in Tower 49," Canet at 229; "7-1/2 percent of his share [in Canary Wharf]," Canet at 234; "we will split this partnership [referring to Barcelona] [60/40]," Canet at 246; "if we buy the company, you're getting 10 percent of my interest or 10 percent of my profits [in McCormick]," Canet at 261; "percentage interest in Mr. Travelstead's interest [in 383 Madison and generally]," Canet at 280, similar at 294-95 [South Shore], 301 [712 Fifth Avenue].

 The court accepts the accounts of Travelstead's offer of employment to Canet that were provided by Canet, his wife, Sherrill Canet, and Travelstead's ex-wife, Edythe Travelstead. On this critical issue, the court did not find Travelstead to be a credible witness. On the other hand, Canet struck the court as a credible witness not prone to exaggeration as his account of his negotiations with Travelstead shows. Although Sherrill Canet's testimony might be discounted somewhat for partiality or interest, and that of Edythe Travelstead for bias resulting from her bitter divorce from Travelstead, their accounts, as well as Canet's, were not only substantially consistent but were corroborated in important details by Travelstead's brother, Malcolm Travelstead, and, often, in its credible parts, by Travelstead's own testimony, as well as by Canet's witnesses, David Solomon, Frank Dunlevy, Eugene Colley and Bruce Colley.

 Among the critical factors prompting the court's assessment of the parties' credibility was the testimony of the defendant's brother, Malcolm Travelstead, a defense witness, whose account, while not directly contradicting his brother, described conversations with the plaintiff over a long period of time that make sense only if Canet's account of his employment relationship was substantially accurate. M. Travelstead at 490, 507, 512-13, 515-17. Indeed, if Travelstead's denial had any substance, then Canet's actions, conduct and statements over a period of years would be completely inexplicable. Moreover, were his claims false, it would mean that Canet had been making dishonest statements to family, friends and business associates over an extended period of time. See, S. Canet at 97; Dunlevy at 181; Solomon at 422-23, 426; M. Travelstead at 488-89. This would have been in complete contradiction to his business reputation and the respect in which he appears to have been held by those who dealt with him in business and government. E. Travelstead at 64-66; Dunlevy at 178-79; E. Colley at 190; Travelstead at 338, 344, 359; M. Travelstead at 515-16. In addition, Canet's remaining in Travelstead's employment makes little sense if his account were not true.

 As for the point stressed by defense counsel at trial, Tr. at 22-29, namely, Canet's failure to directly confront Travelstead about the latter's failure to carry out his commitments, the matter is easily explainable. First, Canet was no doubt reluctant to risk destroying a long-standing relationship with much economic potential. Second, and equally significant, as Travelstead's brother candidly testified, his brother was not a person to confront directly. Referring to conversations with Canet in the months before Canet resigned, Malcolm Travelstead testified: "And I even think I said that be prepared to draw a line in the sand that you may have to take alternative actions. . . . Meaning you better have a job because I don't know what my brother's reaction is going to be. He's not a person that likes to be confronted." M. Travelstead at 489.

 Equally significant, Canet's account is consistent with, and thus corroborated by, Travelstead's manner of dealing with other business associates. Travelstead's acknowledged use of "sweat equity" participations in 712 Fifth Avenue and Canary Wharf were in the form of payouts of profit interests. The proposed grant of equity interests in the Barcelona project to Rovet and Malcolm Travelstead were in the form of a limited partnership based on "sweat equity." Rovet at 444-45. Bruce Colley described an oral sweat equity arrangement he obtained while he was employed by Travelstead. B. Colley at 525-27.

 The court finds that Travelstead offered Canet an initial salary of $ 100,000, a substantial annual bonus and "a piece of his interest in the ongoing - on the projects that we were going to be developing." Canet at 211. The court finds that Travelstead's offer of "a piece of his interest in . . . the projects" was an offer of equity participation that could take any of the forms he had outlined, payout of a profit interest, full partnership as a general partner (in a joint venture), owning a piece of a corporation, or limited partnership. It is evident from both men's testimony that whatever arrangement that would ultimately be employed would depend on the nature of the project, tax, financing and other similar considerations so as to arrive at the most mutually advantageous arrangement.

 C. Projects for Which Canet Claims Interests Were Promised to Him

 1. South Shore-Miami Beach, Florida

 Canet began working for Travelstead in January 1982. The first project he worked on was the South Shore development in Miami Beach, Florida. He "worked with Ware in the zoning matters, with the local authorities, of trying to get the project approved." Canet at 212-13. Travelstead promised him "a 5 percent interest in his interest in that project." The offer was made at a lunch at the Grove Isle Hotel in Coconut Grove, Florida, with both Mrs. Canet and Mrs. Travelstead present. S. Canet at 143; E. Travelstead at 62-63. Canet testified that the promise was made in February 1982. Canet at 294. Travelstead conceded that: "Eduardo was very instrumental in dealing with the Council of the City of Miami Beach . . ." Travelstead at 344. As a result of delays in obtaining approvals, Travelstead ultimately negotiated for "rights in a parcel of land in the redevelopment area" as a means of getting his investment back. Canet at 213-14.

 2. Silas Creek-Winston-Salem, North Carolina

 The next project Canet worked on was Silas Creek, a project to develop a mixed use complex on undeveloped land in Winston-Salem, North Carolina. Canet testified that he played a financial role in the project: "I worked on all the financial information, put the pro formas together. I worked on preparing an information memorandum to attract a partner, financial partner to come in. I met with the financial partner. . . . Worked also on the development aspects of the project." In Travelstead's office in New York, Travelstead offered Canet a two and one-half percent share in the project in 1983. Canet at 218-19, 296; S. Canet at 144; E. Travelstead at 62-63. Travelstead acknowledged Canet's work on the financial side of the project. Travelstead at 348. Edythe Travelstead testified that the Silas Creek development work was not finished prior to its sale. E. Travelstead at 85.

 3. 383 Madison Avenue

 In 1983-84, Canet worked on the acquisition of 383 Madison Avenue, between 46th and 47th Streets in Manhattan. Canet was heavily involved in the acquisition of Grand Central Station air rights from Penn Central and in obtaining financial backing for the project. Canet at 219-23. Canet spent a month in Kuwait meeting with Abdul-Wahab Al-Babtain, who several times invested in Travelstead projects. Pltf. Ex. 39-40. Apparently during this visit Canet and Malcolm Travelstead first worked together. M. Travelstead at 487, 499, Canet at 219-20.

 Travelstead denied that Canet's 1983 trip to Kuwait had anything to do with 383 Madison because, he said, Al-Babtain lived in Saudi Arabia. Travelstead at 457. Plaintiff produced, however, a letter dated October 3, 1983 to Al-Babtain in which Travelstead proposes that the Al-Babtain family invest in 383 Madison. The letter concludes: "We look forward to seeing you and your brothers in Kuwait. . ." Pltf. Ex. 39.

 Travelstead, in December 1983, in response to Canet's request for the papers consummating the transfer of the interests he had been promised in South Shore and Silas Creek, proposed rolling those interests into a two percent interest in 383 Madison. Canet accepted. He described the proposed interest as "a piece of Ware's partnership into the overall partnership, into the overall vehicle." Canet at 219-23; S. Canet at 99-100; E. Travelstead at 63-64; Solomon at 423, 426. Sherrill Canet testified that at a Christmas party in the Travelsteads' Park Avenue apartment in 1983, Travelstead stated that he would give Canet two percent of 383 Madison and Canet would "forfeit the South Shore and Silas Creek" participations. S. Canet at 147. Canet also testified that Travelstead confirmed the interest in 383 Madison at a "Christmas get-together at his house . . . in Greenwich, Connecticut." Canet at 231-232.

 4. 712 Fifth Avenue

 Canet was also heavily involved in Travelstead's assemblage project undertaken at 712 Fifth Avenue, on the site of the Harry Winston Jewelers and the Rizzoli Building. Canet traveled to Italy with: "[real estate developer] David Solomon once a month for almost a year, a year and a half, to see the owners of two of those properties that we were trying to purchase." Travelstead granted Canet a ten percent share at the outset of the project, in Travelstead offices on Third Avenue, in September 1983. Canet at 224-27, 303. Travelstead conceded that he had offered "ten percent of whatever profits I made out of it I was going to give to him," because of Canet's "very outstanding good job of dealing with the City and dealing - I was over with Canary Wharf at the time, he was in New York dealing with the City day and night and managing that, and he was doing a great job." Travelstead at 338.

 Travelstead sold his interest to David Solomon in the 712 Fifth Avenue project prior to construction for $ 16 million. Canet at 225-26. (Solomon stated "in excess of ten million," at 425.) Canet asserted that Travelstead's profits were $ 5 million. Travelstead paid Canet $ 310,000 in 1986, not the $ 500,000 to which Canet claims he was entitled. Canet stated that when he raised the question of the remaining $ 190,000, Travelstead told him: "'There is a Cuomo tax issue. As soon as David Solomon's letter of credit clears, I will pay.'" Canet at 227-28. Interestingly, the way that Travelstead describes the receipts appears to confirm Canet's assertion that $ 10 million was a net figure: "We got all our expenses back, and in essence made $ 10 million on top of all of the monies, cash outlay, and First Boston and I split that. *fn2" " Travelstead at 354-55. The "Cuomo tax," a ten percent tax on the profit realized by real estate transfers of $ 1 million or more, appears, from Travelstead's testimony, to be the only deduction remaining once Travelstead received the $ 5 million. See N.Y. Tax L. §§ 1440 et seq. (McKinney 1987 & Supp. 1993). This is an issue that will have to be resolved during the damages phase.

 5. Tower 49

 At Christmastime 1984, Travelstead gave Canet a one-half percent interest in Tower 49. Canet acknowledged that he had done little on Tower 49 but that Travelstead explicitly stated that the interest was "in recognition of the work [Canet] had done as well in these other projects." Canet at 229-30. David Solomon, Travelstead's partner in Tower 49, confirmed that Travelstead had stated that Canet owned a one-half percent interest in Tower 49. Solomon at 422.

 6. Canary Wharf

 In 1985, Canet began working on the Canary Wharf project in London, a major development project undertaken with First Boston/Credit Suisse. He ultimately moved to London for "a year and a half, two years." Canet at 231. Canet dealt with the London Docklands Development Council "negotiating what's called the Master Building Agreement," dealing with zoning, landmark, and project commitments to provide jobs, schools, etcetera. Canet at 232. Travelstead also spent substantial time on the project, commuting to London from New York. Travelstead at 359-60. Travelstead admitted that Canet "did a great job, and certainly something I couldn't have done as well as he did. . . . Mr. Canet was certainly the main negotiator on the Docklands Development contract, the development plan. He was certainly the main one on that, and he was the main negotiator with Tower Hamlets, but I was the main negotiator with the government in England . . ." Travelstead at 359.

 Subsequently, when the project was purchased by Olympia and York in July 1987, as part of the sale, Travelstead set aside seventeen percent of his share of a continuing "net profit interest" or "carried interest" for four people. (Following the Thanksgiving, 1986 offer, Travelstead had decided that one of the intended recipients, Scott Lowry, no longer deserved a share.) Canet's share was set at four percent. *fn3" At the time, the "carried interest" was believed to be of value. Travelstead at 362. Canet describes the value of the carried interest as "minuscule," while $ 5 million was paid to Travelstead and First Boston on top of costs and expenses at the time of the sale. He got no part of Travelstead's sale of his interest in the project, other than the four percent "carried interest." Canet at 242.

 In 1988 or 1989, Travelstead and First Boston restructured their arrangement, effectively ending their partnership. As part of the transfer of Travelstead's "carried interest" to First Boston, Travelstead obtained "a recognition agreement," in which First Boston assumed the responsibility for payment of the seventeen percent of Travelstead's five percent "carried interest" to the four designated Canary Wharf principals. Travelstead at 363-64. Travelstead also testified that he negotiated at the end of the project for a payment to himself "just shy of 46 million," of which he set aside $ 1 million for payments "to some key people, including Mr. Canet and five or six other people." His statement that: "we roughly set aside between 17 and 20 percent of what I was being paid, and that was paid out in bonuses" is difficult to reconcile with his other testimony regarding his profit at the conclusion of the Canary Wharf project that suggests that less than twelve percent of his profit was paid in bonuses. *fn4" Travelstead at 367-68.

 Canet continued to serve the Canary Wharf Development Co. Ltd. during a transition period in 1987 between Travelstead-First Boston to Olympia & York project ownership. Def. Ex. 43. Canet's role in the transition was, in fact, a condition upon the sale to Olympia & York. He testified that he believed he was the only person asked to stay on the project after Travelstead sold his interest. Canet at 304.

 D. Canet's 1986 Letter Listing Unfulfilled Commitments

 By the summer of 1986, Canet was completely frustrated that, after working for Travelstead for four and one half years, none of Travelstead's commitments to him had been carried out. Canet finally got up the courage to write a letter to Travelstead listing the latter's commitments with respect to promised equity participations. Pltf. Ex. 7. Canet listed his concerns that the full amount of the 56th Street transaction (712 Fifth Avenue) had not been paid and that he had not gotten "the papers" formalizing the transfer of equity in 383 Madison Avenue, Silas Creek, *fn5" 712 Fifth Avenue, 222 Broadway, Tower 49, or Canary Wharf. Canet also requested payment of his 1985 bonus. Canet asked Travelstead to fulfill the commitments that he had made. In the letter Canet also stated: "If you [Travelstead] truly believe that what I am asking is in any way different from you have promised [sic], I want to sit down with you to discuss and finally resolve these issues." He also expressed great interest in taking on overall responsibility for Canary Wharf, in response to a suggestion Travelstead had made that he was considering such an assignment.

 Canet testified that he gave Travelstead his letter at 47 Park Street, "a hotel in London where we [presumably the Canets and Travelstead, while in London] not only lived, but also had our offices." Travelstead read the letter and the two men went over it. Canet also gave the letter (presumably a copy) to Travelstead's attorney, Mike Masin. Canet at 236-37. Several weeks later, Travelstead gave Canet a check for $ 150,000 for his 1985 bonus (net of estimated taxes). *fn6" Id. Sherrill Canet confirmed her husband's account, noting that "he was a little uncomfortable giving [the letter] to Ware. He didn't know how Ware would react." After Canet had given Travelstead the letter, Mrs. Canet had a private conversation with Travelstead about it, no doubt of a desire to minimize any adverse reaction it might have provoked. She told Travelstead "that Eduardo was uncomfortable giving him this letter." Travelstead responded that "he [Canet] was right about what was in the letter." S. Canet at 103, 105.

 Both Canets testified to their conversation in London in 1986 with Mike Masin, Travelstead's personal attorney, at the restaurant, La Gavroche, in which they raised their concerns that Travelstead had not documented the equity interests he had promised Canet. Canet at 311; S. Canet at 103. Canet testified that he thought the dinner took place after he gave his letter to Travelstead. Canet at 311.

 Canet testified that after he had discussed his letter with Travelstead and Masin, Masin, in a letter dated September 29, 1986, sent Canet a document that granted him a small interest in 222 Broadway plus $ 600,000 in losses for tax purposes. Canet ultimately declined this interest, which he felt was offered as an accommodation to the concerns expressed in his letter. He believed it was "not what we had agreed to." Canet at 308-09.

 Travelstead denied ever receiving Canet's letter. Travelstead at 404. Travelstead's denial that he did not receive Canet's 1986 letter and acknowledge the commitments it contained is simply not credible. Tr. at 555. The 1986 letter lends support to Canet's claim because it itemized his expectations at that time, was provided to and discussed with Travelstead, who, the court finds, not only did not regard Canet's expectations as a figment of his imagination, but set in motion the drafting of an agreement with regard ...

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