United States District Court, S.D. New York
February 27, 2004.
NOLAN BROS. OF TEXAS, INC., Plaintiff, -against- WHITERAVEN, L.L.C., BRYAN E. GORDON, THE HARMONY GROUP, L.L.C., EVEREST/MADISON REALTY PARTNERS, L.L.C. and BOND PARNERSHIP HOLDINGS, L.L.C., Defendants
The opinion of the court was delivered by: THOMAS GRIESA, Senior District Judge
This is the second motion addressed to plaintiff's pleadings. In an
opinion dated March 12, 2001, the court denied defendants' motion to
dismiss, but directed plaintiff to replead. Familiarity with that opinion
is assumed. Plaintiffs filed a Second Amended Complaint. Defendants again
move to dismiss for failure to state a claim.
Defendants' motion is now granted as to counts two and three, but
denied as to counts one and four. The ruling is made for the following
In its Second Amended Complaint, Nolan Bros. ("Nolan") more
clearly alleges the sequence of events that included the signing of
the confidentiality and standstill agreement and the subsequent meeting
with WhiteRaven, L.L.C. ("WhiteRaven"). Nolan makes clear that it
required WhiteRaven to execute the agreement as a prerequisite to meeting
and discussing with WhiteRaven, WhiteRaven's potential involvement in the
acquisition. The agreement explicitly stated that "[a] fully executed
letter will constitute our agreement with respect to the subject matter
of this letter." Bryan Gordon executed the confidentiality and standstill
agreement on behalf of WhiteRaven. But Nolan never signed it. Nolan did,
however, perform its end of the bargain and met with WhiteRaven
concerning a potential business relationship in connection with the
acquisition at issue. Coupled with Nolan's performance, Gordon's
signature is sufficient to meet Nolan's burden of making a prima
facie showing that a contract was entered into. Startech, Inc.
v. VSA Arts, 126 F. Supp.2d 234, *236 (S.D.N.Y. 2000) ("The essential
elements to pleading a breach of contract under New York law are the
making of an agreement, performance by the plaintiff, breach by the
defendant, and damages suffered by the plaintiff") (citing Van Brunt
v. Rauschenberg, 799 F. Supp. 1467 (S.D.N.Y. 1992)).
Contrary to defendants' assertion, the confidentiality agreement does
not state that it is effective only upon Nolan's hiring of WhiteRaven.
breach of contract claim is, therefore, deemed properly pleaded.
COUNTS TWO AND THREE
Nolan pleads breach of fiduciary duty on the part of defendants
WhiteRaven, The Harmony Group and Bryan Gordon, and tortious interference
with fiduciary relations on the part of the defendants Merchant/Everest
Realty Partners, L.L.C. (" Merchant /Everest") and Bond, L.L.C. ("Bond").
Plaintiffs sole basis for alleging the existence of a fiduciary
relationship is the execution of the confidentiality agreement and the
single meeting between Nolan and WhiteRaven, during which confidential
information was allegedly disclosed. This allegation is insufficient to
support the existence of a fiduciary relationship.
The communication of confidential information does not by itself create
a fiduciary relationship. Walton v. Morgan Stanley & Co.,
623 F.2d 796, 798-799 (2d Cir. 1985). Nor does the signing of a
confidentiality agreement necessarily create a fiduciary relationship.
Litton Industries, Inc. v. Lehman Bros. Kuhn Loeb Inc.,
767 F. Supp. 1220, 1231 (S.D.N.Y. 1991) ("the existence of a fiduciary duty is
not coterminous with a contractual obligation. Rather, the proper `focus
is on whether a noncontractual duty was violated; a duty imposed on
individuals as a matter of social policy, as opposed to those imposed
consensually as a matter of contractual agreement.'") (citing
Records, Inc. v. Capitol Records. Inc., 137 A.D.2d 50, 55
(N.Y.A.D. 1988)), rev'd on other grounds, 967 F.2d 742 (2d Cir.
1992). As some courts have stated "it makes great sense not to impose
fiduciary duties concomitantly with confidentiality agreements. The
existence of a detailed confidentiality agreement suggests arm's-length
dealings between co-equals." City Solutions. Inc. v. Clear Channel
Communications, Inc., 201 F. Supp.2d 1048, 1049 (N.D.Cal. 2002).
The purpose of the confidentiality and standstill agreement in the
instant case was to permit the disclosure of specific information that
would allow the parties to explore a possible business opportunity. The
agreement specifically states that "[n]othing herein shall obligate the
Company to retain WhiteRaven, and the terms and conditions of this letter
agreement shall be binding on the parties hereto whether or not the
Company retains WhiteRaven or enters into any agreement with WhiteRaven."
The agreement thus did not contemplate a fiduciary relationship. And none
was created between the parties thereafter.
Because no fiduciary duty existed between the parties, there could also
be no tortious interference with their fiduciary relations. Count three
is therefore dismissed as well.
Under New York law, to prevail on a claim of tortious interference with
prospective business relations, a plaintiff must demonstrate that "the
defendant interfered with business relations existing between a plaintiff
and a third party, either with the purpose of harming the plaintiff or by
means that are dishonest, unfair, or improper." Volvo North America
Corp. v. Men's Intern. Professional Tennis Council 857 F.2d 55, 74
(2d Cir. 1988). While tortious interference does not require that
contractual relations existed between Nolan and McNeil XXVII, PPX
Enters, v. Audiofidelity Enters., 818 F.2d 266, 270 (2d Cir. 1987),
Nolan will be required to show that "a continuing business or other
customary relationship not amounting to a formal contract" existed.
SATCOM Intern. Group PLC v. ORBCOMM Intern. Partners. L.P.,
2000 WL 729110, *21 (S.D.N.Y. 2000). While this claim may be hard to
sustain, it should not be dismissed at the pleading stage.
The motion to dismiss is granted as to counts two and three. Counts one
and four are deemed properly pleaded for the purposes of the
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