raised issues of fact as to their claim that certain
agreements were fraudulently induced, and hence unenforceable).
II. Claim for Breach of Termination-Related Provisions of Management
In his fifth cause of action, plaintiff alleges that Vanteon breached
the terms of the Management Agreement concerning Vanteon's obligations in
the event of plaintiff's termination. Plaintiff alleges that the
agreement provided that upon termination without cause, Vanteon would pay
plaintiff severance pay equal to six months' salary, and that Vanteon
would pay for outplacement services up to $30,000. The complaint also
alleges that plaintiff's life, health, and disability insurance were also
to continue if he were terminated without cause. Plaintiff alleges that
defendant neither paid nor offered to pay any of these benefits.
Defendant contends that these allegations fail to state a claim for
outplacement services, because plaintiff does not allege that he ever
designated an outplacement firm, as required by the Management
Agreement. The agreement provides, inter alia, that "[i]f Employee's
employment is terminated by the Company without Cause . . ., the Company
shall pay . . . to an outplacement firm designated by Employee to provide
outplacement services to Employee, an amount not to exceed in the
aggregate $30,000." MA ¶ 9(d)(ii). Thus, according to defendant,
plaintiff is not entitled to any outplacement benefits unless he first
designates an outplacement firm, and plaintiff does not allege that he
ever did so.
In response, plaintiff does not contend that he has designated an
outplacement service in accordance with the Management Agreement.
Instead, he argues that since Vanteon had taken the position that
plaintiff's termination was for cause, and that plaintiff was therefore
not entitled to any severance benefits under the Management Agreement, it
would have been pointless for plaintiff to designate an outplacement
I believe that defendant's motion to dismiss this claim should be
denied as well. First, the motion does not address plaintiff's claims
regarding any of the severance-related benefits other than outplacement
services, such as continuation of salary or insurance coverage.
Although there is no allegation that plaintiff ever designated an
outplacement firm, I find that this is not a sufficient basis upon which
to dismiss this claim. The Management Agreement does provide that Vanteon
will pay up to $30,000 "to an outplacement firm designated by Employee to
provide outplacement services to Employee . . . ." Thus, the agreement
appears to require plaintiff first to designate an outplacement firm in
order to trigger Vanteon's obligations in that regard.
According to the complaint, however, Vanteon's refusal to pay plaintiff
for outplacement services was not premised upon plaintiff's failure to
designate an outplacement firm, but upon Vanteon's contention that
plaintiff had been terminated for cause. Amended Complaint ¶ 33. As
stated, the Management Agreement provides that Vanteon will pay
outplacement and other severance benefits only if plaintiff's employment
is terminated without cause. If indeed Vanteon made it clear that it
considered plaintiff to have been terminated for cause, thereby rendering
him ineligible for outplacement benefits, he may be excused from
compliance with the designation requirement. "Acts made futile by the
breaching party are not a prerequisite to recovery by the party claiming
to have been wronged." Scholle v. Cuban-Venezuelan
Oil Voting Trust,
285 F.2d 318, 320 (2d Cir. 1960) (citing Strasbourger v. Leerburger,
233 N.Y. 55, 60 (1922)). See also Special Situations Fund III, L.P. v.
Versus Technology, Inc., 227 A.D.2d 321 (1st Dep't) ("A party will be
relieved or discharged from the performance of futile acts or conditions
precedent, including the tender of payment, upon the failure or refusal by
a party to honor its obligations under their contract") (citing
Kooleraire Serv. & Installation Corp. v. Board of Educ., 28 N.Y.2d 101,
106 (1971)), leave to appeal denied, 88 N.Y.2d 815 (1996). Plaintiff's
fifth cause of action thus is adequate to state a claim for relief.
III. Claim under N.Y. Labor Law § 198
Defendant contends that plaintiff's twelfth cause of action, under
N.Y. Labor Law § 198, should be dismissed because it is contingent on
plaintiff's success in prevailing on plaintiff's other causes of action,
which, according to defendant, should also be dismissed.
Defendant's argument concerning this claim is thus itself contingent on
this court's dismissal of plaintiff's other causes of action. Since I am
denying defendant's motion to dismiss those other claims, I deny the
motion insofar as it relates to this claim as well.
IV. Rescission/Reformation of Management Agreement
Plaintiff's tenth cause of action alleges that "[i]t was the intent of
the parties that the Management Agreement would not contradict or change
the commitments and obligations of the Letter Agreement," and that
"[p]laintiff understood that the Management Agreement, from a prospective
basis, did not change any of the commitments previously made by Vanteon
in its Letter Agreement." Amended Complaint ¶¶ 57, 58. Plaintiff
asserts that the Management Agreement should therefore either be reformed
to include the provisions of the Letter Agreement, or rescinded, with
plaintiff being compensated pursuant to the Letter Agreement. Defendant
contends that plaintiff has not alleged any basis for such relief.
"The elements of a claim for rescission [under New York law] based on
fraud are misrepresentation, concealment or nondisclosure of a material
fact; an intent to deceive; and an injury resulting from justifiable
reliance by the aggrieved party." Allen v. WestPoint-Pepperell, Inc.,
945 F.2d 40, 44 (2d Cir. 1991) (citing Channel Master Corp. v. Aluminum
Ltd. Sales, Inc., 4 N.Y.2d 403, 406-07 (1958)). In addition, under New
York law "a contract can be reformed on the basis of mutual mistake if
the writing does not accurately reflect the mutual intention of the
parties." Investors Ins. Co. of America v. Dorinco Reinsurance Co.,
917 F.2d 100, 105 (2d Cir. 1990). There is, however, "a `heavy
presumption' that a written agreement accurately reflects the true
intention of the parties." Id. (quoting Chimart Assocs. v. Paul,
66 N.Y.2d 570, 573 (1986)).
While it remains to be seen whether plaintiff can prove sufficient
facts to prevail on this claim under a theory of either rescission or
reformation, I cannot find at this stage that he has failed at least to
state a claim upon which relief can be granted. The complaint does allege
certain misrepresentations by Vanteon in the formation of the contract,
as well as detrimental reliance by plaintiff, which suggests that there
is at least a colorable basis for a claim for rescission. Plaintiff's
ultimate burden to establish this claim will
be a substantial one, but
given the minimal burden on plaintiff at this stage, I am not prepared to
hold that under no set of facts could plaintiff prevail on this claim.
Furthermore, since plaintiff's other claims are going forward, the
prejudice to defendant by allowing this claim to survive as well will be
V. Other Claims
Although defendant has moved to dismiss the entire complaint,
defendant's papers do not even address the merits of plaintiff's
remaining claims, specifically the sixth through ninth causes of action,
which are generally based on the Management Agreement. In fact, at page
two of its reply brief, Vanteon concedes that "[t]o the extent that the
Plaintiff can assert a cause of action for an alleged breach of the
Management Agreement, although the Defendant contends that there has been
no such breach, Plaintiff can at least plead his cause of action without
being subject to dismissal for failure to state a claim upon which relief
can be granted." Accordingly, defendant's motion to dismiss these causes
of action is denied.
Defendant's motion to dismiss the amended complaint (Docket Item 7) is
IT IS SO ORDERED.