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NOLAN BROS. OF TEXAS, INC. v. WHITERAVEN

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

OPINION

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 reasons.

  COUNT ONE

  In its Second Amended Complaint, Nolan Bros. ("Nolan") more Page 2 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. The Page 3 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 Apple Page 4 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. Page 5

  COUNT 4

  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.

  CONCLUSION

  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 Page 6 complaint.

  SO ORDERED.

20040227

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