the contacts between the state of New York and the events underlying the instant action, and the similarities between the facts of this case and the Frutico case, this Court finds that New York law controls this court's resolution of the plaintiffs motion for summary judgment and defendants' counterclaims. Defendants' various assertions to the contrary do not require a different result.
For example, defendants' claim that the choice-of-law rules applicable to tort cases govern this Court's resolution of at least some of the issues in the instant dispute is meritless. Throughout their papers, defendants assert not only that an enforceable agreement between the parties existed, (Dfts. Memo at 77-100), but also that plaintiff made misrepresentations to defendants during the course of the parties' negotiations upon which defendants relied to their detriment. Id. at 100-17. Because defendants thus rely on both contract principles and tort law in support of their underlying claims, they maintain that the choice-of-law rules applicable to both contract and tort law are relevant to this Court's resolution of the instant choice-of-law dispute. Id. at 72-76. This Court reiterates, however, that "the effect of misrepresentation, duress, undue influence and mistake upon a contract is determined by application of the rules §§ 187-188." Restatement (Second) Conflict of Laws § 201 (1971). Thus, this Court's choice-of-law analysis regarding both the contact claims raised by each party, and the misrepresentation claims raised by defendants, are properly resolved under only the "interest analysis" test set forth in both Section 188 of the Restatement and relevant New York case law.
Moreover, under the "interests test," New York remains the state with the most significant contacts to defendant's various claims. Plaintiff's allegedly tortious acts of commission and omission regarding the parties' alleged contract are asserted to have taken place in New York. For instance, throughout their counterclaims, defendants allege that "PCC made numerous material representations to Regent. . . ." (Dfts. Memo at 100, 103, 106-07, 111, 113.) It is undisputed both that no meeting regarding the SMPMC project ever occurred in Texas, id. at 72-73; (Pltf. Memo at 6), that several meetings regarding the Project and the Contract took place in New York, (Jorgeson Aff. PP 20, 24, 34-35), and that plaintiff's telecommunications with defendant emanated from New York. As in Frutico, 833 F. Supp. at 296, because any misrepresentations that plaintiff allegedly made were made in New York, this Court finds that New York has the most significant relationship with the occurrences underlying defendant's misrepresentation claim. Accordingly, this Court finds that New York law governs this Court's resolution of these claims.
II. Plaintiff's Motion for Summary Judgment
The instant motion for summary judgment revolves around the question whether an enforceable agreement existed between the parties. This Court briefly will review the law governing motions for summary judgment before addressing the parties' competing claims regarding the instant motion.
A. Rule 56
Pursuant to Rule 56, summary judgement is appropriate where "the pleadings, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). A party seeking summary judgment 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); Scottish Air Int'l, Inc. v. British Caledonian Group, PLC., 867 F. Supp. 262, 265 (S.D.N.Y. 1994), and the party may discharge this burden by demonstrating to the Court that there is an absence of evidence to support the non-moving party's case on an issue which that party 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). As the Second Circuit has noted, "all ambiguities and inferences to be drawn from the underlying facts should be resolved in favor of the party opposing the motion, and all doubts as to the existence of a genuine issue for trial should be resolved against the moving party." Brady v. Town of Colchester, 863 F.2d 205, 210 (2d Cir. 1988); see also Celotex, 477 U.S. at 330 n.2.
To defeat a motion for summary judgement, the non-moving party must do "more than simply show that there is some metaphysical doubt as to material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986); Resolution Trust Corp. v. Hidden Ponds Phase IV Dev. Assocs., 873 F. Supp. 799, 804 (E.D.N.Y. 1995). Instead, the non-moving party must "set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e); Scottish Air, 867 F. Supp. at 266. If the adverse party does not respond to the motion for summary judgement, "summary judgement, if appropriate, shall be entered against the adverse party." Fed. R. Civ. P. 56(e). Such an entry of summary judgment is inappropriate, however, "where the evidentiary matter in support of the motion does not establish the absence of a genuine issue, . . . even if no opposing evidentiary matter is presented." Fed. R. Civ. P. 56(e) advisory committee's notes (1963 amendment).
The existence of a genuine issue of material fact depends on both the genuineness and the materiality of the issues raised by the motion. See Scottish Air, 867 F. Supp. at 266. To evaluate a fact's materiality, "it is the substantive law's identification of which facts are critical and which facts are irrelevant that governs." Anderson v. Liberty Lobby, 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). While "disputes over facts that might affect the outcome of a suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Id. (citations omitted); see Knight v. United States Fire Ins. Co., 804 F.2d 9, 11-12 (2d Cir. 1986), cert. denied, 480 U.S. 932, 94 L. Ed. 2d 762, 107 S. Ct. 1570 (1987). To evaluate the genuineness of a material fact, "all that is required is that sufficient evidence supporting the claimed factual dispute be shown to require a judge or jury to resolve the parties' differing versions of the truth at trial." Anderson, 477 U.S. at 249 (quotation omitted).
B. The Parties' Competing Summary Judgment Claims
In its motion for summary judgment, plaintiff claims that under New York law, the undisputed facts of this case establish that no enforceable contract exists between the parties. (Pltf. Memo at 1-2) (Reply Memo at 10-11.) In support of this claim, plaintiff asserts that (1) execution of a written contract was essential to the agreement between the parties, (Pltf. Memo at 17), and (2) any alleged oral agreement between the parties is unenforceable under the statute of frauds. Id. at 37.
Defendants reject plaintiff's claims and contend that PCC and defendants entered into an enforceable preliminary agreement with respect to the major terms of the SMPMC project. (Dfts. Memo at 77.) Defendants offer two alternative theories in defense of their position: (1) under Texas law, an enforceable contract exists, id. at 77; (2) under New York law, there are triable issues of fact regarding the existence of enforceable preliminary agreement, and PCC's intent to be bound by that agreement. Id. at 85.
In addition, defendants argue that the six counterclaims contained in their answer render inappropriate an award of summary judgment to plaintiff. Id. at 100-23. Five of defendants' counterclaims allege causes of action under both Texas and New York law: (1) intentional misrepresentation, id. at 100-107; (2) negligent misrepresentation, id. at 108-11; (3) promissory estoppel, id. at 118-120; and (4) tortious interference with business relations. Id. at 121-23. Defendants also raise a sixth counterclaim under only Texas law--that plaintiff has violated the Texas Deceptive Trade Practices Act. Id. at 112-18.2
As an initial matter, this Court finds that all claims asserted by defendants pursuant to Texas state law are meritless. As this Court found above, the law of the State of New York--not Texas--controls this Court's resolution of the all of the parties' respective claims in the instant dispute. Accordingly, this Court finds that the following claims raised by defendants should be denied: (1) that under Texas law, an enforceable contract exists between the parties; (2) that plaintiff has violated the Texas Deceptive Trade Practices Act; and (3) that plaintiff is culpable of intentional misrepresentation, negligent misrepresentation, promissory estoppel, and tortious interference with business relations, pursuant to Texas law. Consequently, this Court will address only those claims raised by the parties, pursuant to New York state law. This Court will first resolve the parties' competing claims regarding the subject matter of plaintiff's Complaint--the existence of an enforceable contract between the parties--before moving on to the merits of defendants' various counterclaims.
1. Existence of an Enforceable Agreement.
According to plaintiff, "Second Circuit authority establishes that an after-the fact claim that an enforceable contract was formed at some point during oral negotiations, or in the absence of a formal agreement, . . . may be resolved as a matter of law." (Pltf. Memo at 17.) Plaintiff thus asserts that defendants' "claim that an oral agreement exists between the parties is particularly susceptible to resolution on a motion for summary judgment." Id. at 18. Plaintiff states that both the documentary and testimonial evidence submitted to this Court establishes that the parties did not intend to be bound absent a written agreement. Id.
Plaintiff explains that under New York law, "when parties to a proposed agreement 'do not intend to be bound by an agreement until it is in writing and signed, then there is no contract.'" Id. at 19. In order to determine this intent, the Second Circuit has provided a list of factors for courts to consider to determine whether "the parties' words and deeds, within a given bargaining context show an intent to be bound only by a written agreement." Id. at 23. Plaintiff states that these factors include: (1) whether a writing is contemplated merely as a memorial; (2) whether the contract needs a formal writing for its full expression; (3) any acts of partial performance by one party accepted by the other; (4) the number of terms agreed upon compared to the total number to be included; (5) whether any terms remain to be negotiated; (6) whether the contract has few or many details; (7) whether the amount involved is large or small; (8) whether the standard form is widely used in similar transactions or whether this is an unusual type of contract; (9) the simplicity or complexity of the transaction; (10) the degree of formality attending similar transactions; (11) usage and custom in the industry; (12) subsequent conduct and interpretation by the parties themselves; (13) the speed with which the transaction must be concluded; (14) the availability of information necessary to decide whether to enter into a contract; (15) the time when the contract was entered into; and (16) the relationship of the parties. Id. at 23-24. Plaintiff contends that "most if not all" of these factors weigh heavily in PCC's favor in this case, and should "lead this Court to the inevitable conclusion that no enforceable contract exists." Id. at 29.
In the alternative, plaintiff argues that even if Philips did enter into an oral contract with defendants, that contract would be unenforceable under the Statute of Frauds. Id. at 37. According to plaintiff, New York law requires a signed writing to render enforceable both (1) an agreement to lend money which is secured by a mortgage on real property, and (2) an agreement which by its terms cannot be performed within one year. Id. at 38. Plaintiff claims that the alleged oral agreement in the instant case meets both of these criteria. Id. at 37. Plaintiff explains that both the August and the April Commitment Letters "expressly provide that the loan and the note shall be secured by a lien on all of Sugar Mill's assets including real property," id. at 39, as well as obligate PCC to finance defendants leased equipment for sixty (60) months, or five years. Id. at 41. Thus, even if this Court determines that the parties entered into an oral contract, plaintiff asserts that such contract would be unenforceable under both provisions of the statute of frauds.
Defendants dispute both of plaintiff's arguments. They argue that "Regent has set forth evidence showing that there are material issues of fact as to the existence of an enforceable agreement, and PCC's intent to be bound by that agreement. (Dfts. Memo at 85.) According to defendants, New York law holds that even if parties intend to formalize an agreement, the absence of a final formal document does not prevent the enforceability of the agreement "if the parties have settled on the contract's substantive terms. . . ." Id. at 86. Defendants assert that applying the Second Circuit's test for determining whether a preliminary agreement evinced an intent to be bound to the facts of this case demonstrates that PCC intended to be bound to the agreement proposed on July 17, 1989. Id. at 88-96. Moreover, defendants declare "the major terms [of the parties' alleged agreement] were agreed to in July 1989, were approved by the PCC President and Credit Committee at that time, were repeatedly reaffirmed by PCC personnel and were not re-visited in the correspondence or negotiations between the parties between July, 1989 and March 1990." Id. at 92-93.
Defendants also dispute plaintiff's statute-of-frauds argument. Id. at 97. Defendants claim that the statute of frauds is satisfied in the instant case because
the approval of the transaction by PCC's President and its Credit Committee, the Credit Committee's memorandum to Mr. Blieberg, Mr. Blieberg's memorandum dated July 17, 1989, and Mr. Blieberg's subsequent written reaffirmation of the existence of the transaction and PCC's intent to be bound, taken together, clearly state the essential terms of the contract and are signed by persons authorized to speak for PCC. "It is black-letter law that an agreement satisfying the statute of frauds may be evidenced by piecing together various writings. . . .
Id. at 98 (citation omitted.)
Defendants further claim that plaintiff is equitably estopped from asserting the statute-of-frauds defense. Id. at 98. Defendants explain that PCC misrepresented its intent to be bound, that defendants reasonably relied upon and acted upon these misrepresentation, and that defendants suffered damage as a result of their reliance. Id. at 98-99. Because "the statute of frauds 'should not be used as a means of perpetrating, rather than preventing, deceptive behavior,'" defendants urge that plaintiff be estopped from raising the statute of frauds as a defense. Id. at 99.
The parties' competing contract claims focus on three issues: (1) whether the parties reached a preliminary agreement; (2) whether the parties intended to be bound absent a signed, written agreement; and (3) whether, even if the parties entered into an enforceable oral agreement, that agreement is valid under the statute of frauds. Because the same principles govern the first two issues, this Court will review them together before moving on to the statute of frauds.
a. Rules governing the existence of binding contractual agreements.
Under New York law, "if parties do not intend to be bound by an agreement until it is in a writing and signed, then there is no contract until that event occurs." R.G. Group v. Horn & Hardart Co., 751 F.2d 69, 74 (2d Cir. 1984); see Scheck v. Francis, 26 N.Y.2d 466, 311 N.Y.S.2d 841, 842, 260 N.E.2d 493 (1970). "This rule holds true even if the parties have orally agreed upon all terms of the proposed contract." R.G. Group., 751 F.2d at 74; see Schwartz v. Greenberg, 304 N.Y. 250, 107 N.E.2d 65 (1952).
On the other hand, "where there is no understanding that an agreement should not be binding until reduced to writing and formally executed, and 'where all the substantial terms of the contract have been agreed on, and there is nothing left for future settlement,' then an informal agreement can be binding even though the parties contemplate memorializing their contract in a formal document." R.G. Group., 751 F.2d at 74 (citations omitted). The point of these rules is to give parties the power to contract as they please, so that they may, if they like, bind themselves orally or by informal letters, or that they may maintain 'complete immunity from all obligation' until a written agreement is executed." Id. ; 1 Corbin on Contracts § 30, at 98 (1963). What matters to a court's determination of the existence of a contract "are the parties' expressed intentions, the words and deeds which constitute objective signs in a given set of circumstances." R.G. Group., 751 F.2d at 74.
The Second Circuit has noted that
many modern business transactions could not be carried out unless the parties were able to rely on oral promises or informal writings, such as letters, memos, and faxes. A stock market transaction or insurance coverage by verbal binder are examples. In other, more complex transactions, negotiations would be chilled were a person later to be held bound by every chance promise made. In such situations, the legal obligation must await the execution of a formal written agreement--so the party may be assured that all proper precautions were taken before it was legally committed.
Consarc Corp. v. Marine Midland Bank, N.A., 996 F.2d 568, 570 (2d Cir. 1993).
The Second Circuit long has recognized the reasons for applying these principles in "substantial and complex" business dealings. According to the court,
freedom to avoid oral agreements is especially important when business entrepreneurs and corporations engage in substantial and complex dealings. In these circumstances there are often forceful reasons for refusing to make a binding contract unless it is put in writing. The actual drafting of a written instrument will frequently reveal points of disagreement, ambiguity, or omissions which must be worked out prior to execution. Details that are unnoticed or passed by in oral discussion will be pinned down when the understanding is reduced to writing. These considerations are not minor indeed, above a certain level of investment and complexity, requiring written contracts may be the norm in the business world, rather than the exception.
Id. at 75.
The Second Circuit's concerns regarding oral contracts are expressed in a list of the factors that courts most commonly look to in deciding whether parties' words and deeds within a given bargaining context, show an intent to be bound only by written agreement. Id. These factors are: "(1) the number of terms agreed upon compared to the total number to be included, (2) the relationship of the parties, (3) degree of formality attending similar contracts, (4) acts of partial performances by one party accepted by the other, (5) usage and custom of the industry, (6) subsequent conduct and interpretation by the parties themselves, (7) whether writing is contemplated merely as a 'memorial,' (8) whether contract needs a formal writing for its full expression, (9) whether any terms remain to be negotiated, (10) whether contract has few or many details, (11) whether amount involved is large or small, (12) whether a standard form is widely used in similar transactions or whether this is an unusual type of contract, . . . (13) the speed with which the transaction must be concluded, (14) the simplicity or complexity of the transaction, (15) the availability of information necessary to decide whether to enter into a contract, and (16) the time when the contract was entered into. Consarc, 996 F.2d at 575-76. Although no single factor is decisive, each provides significant guidance. Id. ; R.G. Group, 751 F.2d at 75.
Despite "the importance of recognizing the freedom of negotiating parties from binding obligations," there are instances where a manifestation of preliminary assent amounts to a legally binding agreement. Teachers Ins. & Annuity Ass'n v. Tribune Co., 670 F. Supp. 491, 497 (S.D.N.Y. 1987). In Teachers Annuity, Judge Leval noted that "preliminary contracts with binding force can be of at least two distinct types." Id. at 498. "One occurs when the parties have reached complete agreement (including the agreement to be bound) on all issues perceived to require negotiation." Id. The second sort of preliminary agreement--"the binding preliminary commitment"--"is one that expresses mutual commitment to a contract on agreed major terms, while recognizing the existence of open terms that remain to be negotiated." Id. at 498.
Judge Leval explained the difference between these two types:
The first type binds both sides to their ultimate contractual objective in recognition that that contract has been reached, despite the anticipation of further formalities. The second type--the binding preliminary commitment--does not commit the parties to their ultimate contractual objective but rather to the obligation to negotiate the open issues in good faith in an attempt to reach the alternate objective within the agreed framework. In the first type, a party may lawfully demand performance of the transaction even if no further steps have been taken following the making of the "preliminary" agreement. In the second type, he may not. What he may demand, however, is that his counterparty negotiate the open terms in good faith toward a final contract incorporating the agreed terms. This obligation does not guarantee that the final contract will be concluded if both parties comport with their obligation, as good faith differences in the negotiation of open issues may prevent a reaching of final contract. It is also possible that the parties will lose interest as circumstances change and will mutually abandon the negotiation. The obligation does, however, bar a party from renouncing the deal, abandoning the negotiations, or insisting on conditions that do not conform to the preliminary agreement.
Judge Leval noted that it often will "be difficult for a court to determine whether a preliminary manifestation of assent should be found to be a binding commitment." Id. He stated, however, that the factors provided by the Second Circuit "as relevant to a determination whether final contracts had been reached in preliminary form are also relevant to determination whether preliminary commitments are to be considered binding." Id. at 498-99. Although several of these factors, such as the existence of open terms, are applied differently in one analysis than the other, a court's task remains the same regardless of which inquiry it undertakes, namely "to determine the intentions of the parties at the time of their entry into the understanding, as well as their manifestations to one another by which the understanding was reached." Id. at 499. Judge Leval cautioned, however, that "there is a strong presumption against finding a binding obligation in agreements which include open terms, call for future approvals and expressly anticipate future preparation and execution of contract documents." Id.
i. Whether a binding preliminary agreement existed between the parties
Defendants maintain that a binding preliminary agreement existed between themselves and PCC. They claim that "Regent and PCC reached such preliminary agreement on July 14, 1989, the terms of which were set forth in PCC's memorandum of July 17, 1989." (Dfts. Memo at 87.) Reviewing this memorandum and other relevant documentation in the light most favorable to defendants, this Court finds that defendants' position is unsupported by relevant case law.
To reiterate, on July 7, 1989, defendants and PCC met in New York "to negotiate the terms and conditions regarding the Sugar Mill transaction in Houma, Louisiana between Regent Health Care and PCC." (Memorandum to J. Walter Corcoran from W.G. Blieberg (June 29, 1989); (Jorgeson Aff. P 20); (Dfts. Memo at 20.)
According to defendants,
by the end of the meeting, PCC and Regent had reached agreement on the major terms of the transaction. Mr McKinney stated that the terms agreed to during that meeting would be presented to the PCC Credit Committee for approval, and that he and Mr. Corcoran had decided to recommend to the Credit Committee that PCC finance the entire project. Mr. McKinney stated that if the Credit Committee approved the transaction, that would constitute a "formal commitment" by PCC to do the transaction on those terms.