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BURKE v. STEINMANN

United States District Court, S.D. New York


May 12, 2004.

THOMAS BURKE, Plaintiff,
v.
WALTER S. STEINMANN, JR. and STRAFFORD VENTURES, INC., Defendants

The opinion of the court was delivered by: GERARD E. LYNCH, District Judge

OPINION AND ORDER

Plaintiff Thomas Burke moves for summary judgment against defendants, a Pennsylvania corporation and its sole shareholder, on two breach of contract claims. Plaintiff claims that defendants failed to compensate him in accordance with the terms of a Management Agreement between him and defendants relating to his management of the Typhoon Brewing Company, and also breached their obligations to plaintiff under a Stock Acquisition Agreement. Plaintiff also moves to dismiss defendants' various counterclaims. For the reasons stated below, summary judgment is granted in part and denied in part, and defendants' counterclaims are dismissed.

  BACKGROUND

  Typhoon Brewing Company ("Typhoon") was a Manhattan restaurant owned by Stone House NYC, L.P. ("Stone House"), a New York limited partnership with approximately thirty-five limited partners. (Steinmann Tr. 5-6, annexed to Olk Aff. as Ex. F.*fn1) Defendant Stafford Ventures, Inc. ("Stafford"), a Pennsylvania corporation with its principal place of business in New Jersey, is the general partner of Stone House. Defendant Walter Steinmann, Jr. ("Steinmann") is the sole shareholder of Stafford. Prior to plaintiff's involvement in the restaurant, Steinmann also oversaw Typhoon's financial affairs. (Id. at 24, 33.)

  In 1999, Typhoon's business had decreased and the restaurant was in dire financial straits. (Id. at 25-31.) In an effort to save the business, Steinmann sought to bring in a new partner who would provide an infusion of capital and receive an ownership stake in the restaurant. Through a broker, Steinmann met Burke and the two men began negotiations for the eventual sale of Typhoon to Burke, who had experience in the restaurant business. As a result of these negotiations, the parties entered into three agreements: a Memorandum of Understanding ("MOU") signed on or about June 7, 1999 (Ex. L), a Management Agreement signed on or about June 13, 1999 (Ex. A), and a Stock Acquisition Agreement signed on November 1, 1999 (Ex. E).

  The MOU described the overall agreement between the parties: that Steinmann would transfer 70 percent of his interest in Stafford to Burke, and that Burke would assume managerial and operational control of Stone House and thus Typhoon. As specified in the MOU, in order to effectuate the transfer the limited partners of Stone House would be required to approve certain changes in the partnership structure, including an amendment to "the formula providing for the division of `Distributable Cash' as set forth in the partnership agreement." (Ex. L at 2.) The MOU was eventually superceded by the Stock Acquisition Agreement (Ex. E at ¶ 15), and so the MOU's other specific terms are not relevant to the present action. After the MOU was signed, Steinmann introduced Burke as the new owner of Typhoon, and Burke began managing the restaurant. (Olk. Aff. ¶ 19.) The Management Agreement, signed approximately one month after the MOU, provided the terms of employment during the interim period while Burke was managing the restaurant but had not yet become an owner as anticipated in the MOU and subsequent Stock Acquisition Agreement.

 The Management Agreement

  The Management Agreement states that "Prospective Sellers will cause Stafford to employ Burke as operating manager of the Business for a period of three hundred sixty five (365) days beginning on June 14, 1999, unless terminated earlier pursuant to the terms of this Agreement. . . ." (Ex. A at ¶ 1.) The Management Agreement also includes a provision regarding extensions:

This Agreement . . . may be extended by Burke if determinations on the applications for consent from Landlord, TLC, CPC, SLA and/or BATF have not been received. Prospective Sellers may extend the period set forth in paragraph 1 of this Agreement for a reasonable period of time, but only if there is reasonable certainty that the required consents will be received
(Ex. A at ¶ 10.) The Management Agreement was extended in writing until December 14, 2000. (Ex. Fat 161, Ex. X.)

  The Management Agreement described two scenarios under which it would terminate. First, Burke could be fired for "cause," defined as "(a) criminal charges alleging commission of a felony being brought against Burke by a governmental authority; (b) Burke having committed fraud on the Business or any of the Prospective Sellers; or (c) intentional misconduct of Burke which is materially injurious to the Business." (Ex. A at ¶ 11.) Second, if the necessary consents to the transfer were not obtained from the Stone House limited partners, the Management Agreement would terminate and Burke would be compensated retroactively for his work managing Typhoon at a rate of $2,000 per week from June 14, 1999, until Burke received notice of the termination of the Agreement. (Id. at ¶ 6(A).)

  In addition to the $2,000 per week in retroactive compensation, the Management Agreement provided that if the anticipated transfer of ownership did not occur for any reason other than the four listed exceptions, Steinmann would pay Burke an additional $500,000:

If Steinmann, Jr. fails to sell seventy percent (70%) of the outstanding shares of Strafford to Burke for any reason other than: (a) the inability, despite full cooperation, to obtain consent to the transaction from Stone House, Landlord, Lender, SLA, or BATF; (b) Burke's termination of this Agreement; (c) Burke's decision not to enter into the Stock Acquisition Agreement; or (d) Burke's breach of the terms of the Stock Acquisition Agreement, Steinman Jr. shall pay Burke the sum of $500,000.
(Id. at ¶ 8.)

 Requirement of Consents for the Transfer of Ownership

  As specified in the Management Agreement and the Stock Acquisition Agreement, the transfer of ownership was contingent on receiving the consent to the transfer of stock from a number of parties, including Typhoon's landlord, the New York State Liquor Authority, the Bureau of Alcohol, Tobacco. and Firearms, and the limited partners of Stone House. (Id. at 2-3.) The Stock Acquisition Agreement specified that "all parties will use their best efforts to expeditiously obtain the required consents and will cooperate and comply with all reasonable requests related to obtaining such consents." (Ex. Eat ¶ 4.)

  The Management Agreement placed the responsibility for obtaining all consents on the defendants. As it turned out, plaintiff's attorneys sought and obtained the consents of the liquor authorities and the landlord (Ex. O), and Steinmann took charge of obtaining the consent of the limited partners, an arrangement agreed upon by the parties since many of the limited partners were Steinmann's friends or family. (Olk Aff. ¶¶ 10, 29.) The initial solicitation to the limited partners for consent was dated June 7, 1999, the same date as the MOU. (Ex. H at 20-21.) The solicitation letter requested the partners' consent to restructure both their loans to the partnership and the distribution of income between the limited and general partners. (Id. at 21-23.) It is undisputed that the solicitation sent to the limited partners did not include an opinion of counsel as to the regularity of the transaction, as required by the Stone House limited partnership agreement. Section 13.08(a) of the agreement provides that, in the context of a proposed amendment to the agreement, "[t]he General Partner shall . . . furnish the Partners with an opinion of counsel . . . as to the proposed amendment." (Ex. M.) At his deposition, Steinmann could not recall who drafted this consent letter. (Ex. F at 166-67.) Neither Burke nor his attorneys were involved in the preparation of the letter. (Olk AfF. ¶ 4 4.) On December 17, 1999, Burke's attorneys were notified by Steinmann's personal attorney that more than two-thirds of the limited partners had approved the transaction. (Id. 1145-47).

  In January 2000, on the advice of his attorneys, Burke retained the law firm of LeBoeuf, Lamb, Greene & McRae, L.L.P. ("LeBoeuf) to review the consents which had been solicited by Steinmann. (Id. ¶ 4 7.) In a memo dated June 20, 2000, LeBoeuf concluded that the consents, as obtained, were not sufficient under New York law: "As originally proposed the amendment to the Partnership Agreement would require the approval of 100% of the limited partners of Stone House," because the transaction involved a change to "the manner of computing the distributions of any partner."*fn2 (Ex. W.) In the same letter, LeBoeuf suggested two alternative structures which would permit a two-thirds vote by the limited partners to be sufficient. (Id.) Neither Steinmann nor his attorney disputed the LeBoeuf conclusion, and following their receipt of the memo Steinmann sent a new letter to the limited partners, dated April 12, 2001, to resolicit their consent to the transaction as structured by LeBoeuf. (Ex. F at 103:16-20.) By the time of the second solicitation, however, relations between the parties had soured. Following the new solicitation and a meeting of the partners, only twenty percent of the limited partners gave their consent, far short of the two-thirds needed to effectuate the transfer. The record does not conclusively establish the extent of Steinmann's efforts to obtain the consents. What is clear, however, is that there was considerable confusion as to the need for the second solicitation among Steinmann, his lawyer, and at least one of the limited partners, who stated at his deposition that he thought he was being asked to consent to the same thing he had agreed to in the first solicitation. (Ex. G at 65.)

  Defendants claim that the requisite percentage of limited partners failed to consent to the transaction the second time around because they were dissatisfied that Burke was not always present at the restaurant and that Burke was not making capital contributions to the business. Plaintiff asserts that, under the terms of the Management Agreement, he was not obligated to be a full-time manager nor to make any capital contributions to the business. Plaintiff further alleges that Steinmann was negligent in representing to the limited partners that there were such expectations. (P. Mem. 13-14.)

  On September 30, 2002, Burke received notice of his termination. (Ex. BB.) At that point, he had been working as manager of Typhoon for over three years. (Olk Aff. ¶ 64.) The parties agree that had the transfer closed, Burke would not have been entitled to any compensation under the terms of the Management Agreement. Their central dispute is what, if anything, should be paid to Burke under the terms of the Management Agreement, given the failure to consummate the planned sale.

  DISCUSSION

 I. Summary Judgment Standard

  Summary judgment must be granted where "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is "material" if it "might affect the outcome of the suit under the governing law," and an issue of fact is "genuine" where "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). On a motion for summary judgment, the evidence must be viewed in the light most favorable to the nonmoving party, and the Court must resolve all ambiguities and draw all reasonable inferences in its favor. Id. at 255; Cronin v. Aetna Life Ins. Co., 46 F.3d 196, 202 (2d Cir. 1995).

  To defeat a motion for summary judgment, however, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). "[C]onclusory allegations or unsubstantiated assertions" will not suffice. Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998). Rather, the nonmoving party must "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); Matsushita 475 U.S. at 587 ("Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial.'") (quoting First Nat'l Bank v. Cities Service Co., 391 U.S. 253, 289 (1968)). II. Governing Law

  Plaintiff moves for summary judgment on his claims for weekly compensation and $500,000 in termination damages under the Management Agreement and Stock Acquisition Agreement. Plaintiff also moves to dismiss defendants' counterclaims of breach of both agreements. Where federal jurisdiction is based on diversity of citizenship, breach of contract claims such as those presented here must be resolved under the relevant state law. Gasperini v. Center for Humanities. Inc., 518 U.S. 415, 427 (1996). The parties agree that New York law governs this dispute.

 III. Plaintiff's Claim for Weekly Compensation

  A. Plaintiff's Right to Compensation as Manager

  Plaintiff claims that under the Management Agreement he is entitled to recover $344,000 from defendants: $2,000 per week for the period from June 14, 1999, until September 30, 2002, when he received notice of termination. The plain meaning of the Management Agreement is unambiguous: unless Burke was fired for cause, if the sale of the business was not consummated he is entitled to compensation for his work. There is no allegation that Burke was terminated for cause as that term is defined in the agreement, and plaintiff is entitled to summary judgment on this claim.

  In opposing summary judgment, defendants argue that the Management Agreement was not intended to serve as a long-term management arrangement, and that no party contemplated that Burke would be compensated as a salaried employee. (D. Mem. 11-12.) While the Court is obligated to honor the parties' intent when interpreting a contract, see, e.g., Hunt Ltd. v. Lifshultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir. 1989), defendants' interpretation of the Management Agreement ignores the intent clearly stated in that contract: "Whereas, [Steinmann, Strafford and Stone House, collectively referred to `Prospective Sellers'] are desirous of having Burke manage and operate the Business during the pendency of the applications . . . for consent to the transfer. . . . Prospective Sellers will cause Strafford to employ Burke as operating manager of the Business. . . ." (Ex. A at 3.) The Stock Acquisition Agreement reiterates this intention: "Whereas, on July 13, 1999, [the Prospective Sellers] entered into a Management Agreement with Burke . . . whereby the Prospective Sellers employed Burke as operating manager of the Business during the pendency of the applications for consent. . . ." (Ex. E at 3.)

  The ultimate goal of the transactions and negotiations between the parties may have been "to bring in Plaintiff as an owner/operator with an equity stake in the business" (D. Mem. 11), and thus to have Burke compensated in the form of a percentage of revenues. However, this goal was not achieved, and the anticipated outcome of the parties' interactions is irrelevant to the meaning of the contract terms at issue here. See Omni Quartz, Ltd. v. CVS Corp., 287 F.3d 61, 64 (2d Cir. 2002) ("It is well established that a court may not admit extrinsic evidence in order to determine the meaning of an unambiguous contract.") (citations omitted).*fn3 Provision for the possibility that events may turn out differently than the parties anticipate is a common feature of commercial contracts. The Management Agreement unambiguously provides Burke with compensation while the consents were being sought, in the event that, after he put in time as manager, the deal for transfer of ownership fell through. That is exactly what happened here, and the Management Agreement is plainly intended to cover that contingency, regardless of the outcome the parties hoped for at the outset of their relationship, and even if the issues took longer to resolve than the parties anticipated.

  Defendants also claim that the Management Agreement was no longer in effect when Burke was terminated, because the agreement was extended in writing only until December 14, 2000. The implication of their position is that, if the Management Agreement had expired on that date, plaintiff would at best be entitled to compensation only from June 14, 1999, through December 14, 2000. This argument is without merit. As plaintiff correctly notes, under New * York law employment contracts can be renewed by mutual action:

it is the rule that when, upon the expiration of a contract for employment for a definite term, the employee continues to render the same services as he rendered during the term of the contract without expressly entering into any new agreement, it will be presumed that he is serving under a new contract having the same terms and conditions as the original one, and provision and restrictions forming the essential parts of the original contract, even though collateral to the to the employment itself, continue in force.
Borne Chemical Co. Inc. v. Dictrow, 445 N.Y.S.2d 406, 431 (2d Dep't 1981) (citations omitted).

  In this case, Burke continued to work for defendants, with their consent, until September 30, 2002. The Management Agreement provided the terms by which Burke would be compensated for that work in the event that the sale transaction failed to close. The plain language of the Management Agreement precludes the existence of any genuine issues for trial on this claim, and plaintiff is entitled to summary judgment. B. Defendants' Counterclaim for Breach of the Management Agreement

  Defendants have asserted a counterclaim that Burke breached the Management Agreement through various acts of mismanagement and thus is not entitled to compensation (D. Mem. 16), and plaintiff has moved to dismiss this claim. Plaintiff's motion will be granted, as defendants fail to allege facts sufficient to sustain a legally cognizable claim. New York law on employee misconduct is grounded in the law of agency. See Phansalkar v. Anderson Weinroth & Co., 344 F.3d 184, 200 (2d Cir. 2003), citing Murray v. Beard, 102 N.Y. 505 (1886). Accordingly, employers may not recover from an employee for mismanagement absent a finding of a breach of the duty of good faith and loyalty. W. Defendants do not allege a breach of this duty, and, in any event, the record does not support a finding of breach, even viewing the facts in the light most favorable to defendants, as the Court must on a motion to dismiss.*fn4

  To the extent that the allegations made by defendants in support of their breach of contract counterclaim (D. Mem. 16) are at all supported by the record, they do not amount to a breach of the duty of good faith and loyalty, as noted above, but are at best allegations that Burke was negligent or incompetent in performing his duties as manager of Typhoon. For example, defendants allege, based essentially on Steinmann's deposition testimony alone, that under Burke's management the business had an "inflated payroll" and incurred "unnecessary fines" for Health Department violations. (Id.) However, under New York law employers may not assert a claim for damages against an employee for the employee's alleged negligent acts, or sue employees for lost profits caused by alleged poor performance. See N.Y. Lab. L. 193 (employers may not make deductions from the wages of an employee, except deductions of the type specifically set forth in the statute); Guepet v. International Tao Sys., Inc., 443 N.Y.S.2d 321, 322-23 (N.Y.Sup.Ct. 1981) ("To allow the defendant [employer] the right to recover [damages] based upon plaintiff's alleged lack of performance would be permitting defendant to do indirectly and retroactively that which the law specifically prohibits it from doing directly.")'.

  Defendants' argument that Burke was not an "employee," and that therefore New York Labor Law section 193 and interpretive caselaw are inapplicable, is without merit. As both the Management Agreement and Stock Acquisition Agreement explicitly state, Burke was employed as the manager of Typhoon during the period between the signing of the Management Agreement and his termination in September 2002. (See discussion in part A, supra.) Under New York law, an employer's sole remedy for an employee's poor performance is termination. Whatever their alleged dissatisfaction with Burke's management, before September 2002 defendants never undertook to terminate their agreements with Burke and pay him the money he was owed under the Management Agreement up to that point. As defendants elected not to do that, and there is neither allegation nor evidence that plaintiff was fired for cause, as that term is defined in the Management Agreement, defendants' counterclaim fails to state a legally cognizable claim and it must be dismissed. IV. Plaintiffs Claim to Liquidated Damages of $500.000

  A. Dispute Over Defendant's "Best Efforts" to Obtain Consent

  Plaintiff also claims that he is entitled to $500,000 in damages as specified in paragraph 8 of the Management Agreement because defendant Steinmann failed to make "best efforts" to obtain the consents from the limited partners of Stone House as provided in the Stock Acquisition Agreement. (P.Mem. 13.) However, a number of genuine disputes over material facts preclude the granting of summary judgment on this claim, and the motion will be denied.

  Under the contracts governing the sale of the business, both parties were obligated to use their "best efforts" to secure the consent of the limited partners for the transfer of stock to Burke. (Ex. E at ¶ 4.) Contractual "best efforts" clauses require that the bound party work toward the object of the contract "to the extent of his total capabilities." Bloor v. Falstaff Brewing Corp., 454 F. Supp. 258, 267 (S.D.N.Y. 1978); see also Kroboth v. Brent, 625 N.Y.S.2d 748, 749-50 (3d Dep't 1995) ("best efforts" requires that a party pursue "all reasonable means for obtaining" the promised goal and will almost always involve a factual inquiry into the particular circumstances of the case).

  Steinmann was not required to pay the liquidated damages amount if he was unable, despite "fiill cooperation," to obtain consent from the limited partners. (Ex. A at ¶ 8.) Plaintiff claims, however, that the consents were not forthcoming because Steinmann failed to use his best efforts to obtain them in either the first or the second solicitation. Defendants counter that Steinmann made best efforts in both solicitations, but that the consents were not obtained because Burke's consultation of LeBoeuf undermined Steinmann's first, successful effort to obtain consent, and that the second solicitation failed because the limited partners were dissatisfied with Burke's performance as manager. Although plaintiff presents evidence that Steinmann fell short of his contractual obligations, a reasonable jury considering all the circumstances could find that Steinmann did employ his best efforts to secure the necessary consents, or that, even if he did not, his breach of this obligation was unrelated to the failure to obtain the consents and thus plaintiff is not entitled to the $500,000 in liquidated damages. Genuine disputes over material facts remain, and thus summary judgment on this claim must be denied.

  1. First Solicitation

  Neither party disputes that Steinmann solicited the Stone House limited partners' consent to the proposed transaction in June 1999, and that the solicitation produced the consent of more than two-thirds of the limited partners. However, plaintiff argues that this solicitation was legally insufficient because it was not accompanied by an opinion of counsel, as required by the partnership agreement, and that this failure demonstrates that Steinmann did not use "best efforts" to obtain valid consents. Defendants' brief does not address the failure to seek a legal opinion. The terms of the Stone House partnership agreement plainly require that an opinion of counsel accompany consent solicitations of the type needed to transfer ownership to Burke. Steinmann offers no reason why he failed to obtain the opinion or advice of counsel or why he should be excused from this obligation, and a reasonable jury could find that this dereliction fell short of "best efforts" to obtain consent.

  However, viewing the evidence in the light most favorable to defendants, material issues of fact exist as to whether this oversight is in any way related to the failure of the transaction to close or the ultimate inability to obtain the consent of the limited partners to the transfer, as contemplated in paragraph 8 of the Management Agreement. For example, the first solicitation did not produce the unanimous consent of the limited partners, although Burke's own lawyers later took the position that unanimity was required for the form of transaction described by Steinmann in the first solicitation. It is impossible to determine on the present record whether a solicitation that was drafted according to the later recommendations of Burke's lawyers would have received the same two-thirds consent that was garnered by the solicitation actually sent, or whether the failure to achieve unanimity for the first solicitation stemmed from concerns independent of the lack of an opinion letter. Thus, a reasonable jury, hearing all the evidence, could find either for or against plaintiff on the question of whether Steinmann's conduct of the first solicitation would entitle Burke to the $500,000 in liquidated damages under paragraph 8 of the Management Agreement.

  2. Second Solicitation

  With regard to the second solicitation attempt, plaintiff claims that Steinmann breached his obligation to use "best efforts" by misrepresenting plaintiff's obligations under the various agreements and by failing to take sufficient measures to ensure that the limited partners would provide their consent to the transaction. To support this claim, plaintiff asserts that Steinmann did not properly explain the need for the new consent to the limited partners, resulting in confusion among the partners as to what they were being asked to sign, and that Steinmann generally was not aggressive enough in convincing the limited partners to give their consent. (P. Mem. 16.) Plaintiff also asserts that Steinmann allowed some of the limited partners to believe that Burke was obligated to serve as the day-in-day-out" manager of Typhoon, and that he was obligated to make capital contributions to the partnership, neither of which is consistent with the terms of the Management Agreement or Stock Acquisition Agreement. (Id. 15-17.) Defendants dispute plaintiff's version of events and assert that, despite employing every available means to "duplicate his earlier success" in securing two-thirds consent (D. Mem. 8), Steinmann was unable to obtain the required consents because, during the delays created by the "unreasonable demands" of Burke and his counsel, the limited partners lost confidence in Burke due to his allegedly poor performance and lack of accountability. (Id. 7.) Ultimately, only approximately twenty percent of the limited partners consented in response to the second solicitation. On this record, plaintiff cannot meet his burden of establishing that there is no genuinely disputed issue of material fact, and summary judgment must be denied.

  B. Defendants' Counterclaims of Frustration and Impossibility

  Defendants raise frustration and impossibility as counterclaims to plaintiff's claim for $500,000 in liquidated damages, asserting that Burke prevented them from completing their part of the bargain (D. Mem. 8), and plaintiff moves to dismiss.*fn5 The asserted counterclaims fail as a matter of law and will be dismissed.

  "Impossibility" and "frustration of purpose" refer to two distinct doctrines in contract law. The Second Circuit has explained the distinction as follows:

[I]mpossibility may be equated with an inability to perform as promised due to intervening events, such as an act of state or destruction of the subject matter of the contract. . . . Frustration of purpose, on the other hand, focuses on events which materially affect the consideration received by one party for his performance. Both parties can perform, but, as a result of unforeseeable events, performance by party X would no longer give party Y what induced him to make the bargain in the first place. Thus frustrated, Y may rescind the contract.
United States v. General Douglas MacArthur Senior Village. Inc., 508 F.2d 377, 381 (2d Cir. 1974). First, defendants' impossibility claim is wholly without merit. In an effort to sustain this claim, defendants point to "external factors which affected Steinmann's pursuit of the second round consents," including the death of Steinmann's mother and the terrorist attacks of September 11, 2001. (D. Mem. 10.) This claim is legally insufficient. Even viewing the evidence in the light most favorable to the defendants and drawing all reasonable inferences in their favor, the claims of defendants here fall far short of the extreme circumstances in which New York courts have allowed the defense of impossibility. See, e.g., Kel-Kim Corp. v. Central Markets, Inc., 70 N.Y.2d 900, 902 (1987) ("Impossibility excuses a party's performance only when the destruction of the subject matter of the contract or the means of performance makes performance objectively impossible."); 407 E. 61st Garage, Inc. v. Savoy Fifth Avenue Corp., 23 N.Y.2d 275, 281 (1968) ("impossibility of performance is limited to destruction of the means of performance by act of God, vis major, or by law. . . . financial difficulty or economic hardship, even to the extent of insolvency or bankruptcy" does not excuse performance).

  The Typhoon Brewery was not located in or near the World Trade Center and was not destroyed on September 11, even though those terrible events caused financial hardship for many businesses in New York. Likewise, Steinmann's mother had no connection to his performance under the contract and her death is irrelevant to this dispute, however deeply it may have affected Steinmann and his focus on business concerns. Indeed, defendants do not even attempt to link either of these events to the process of obtaining the consents. The claim cannot withstand even the slightest scrutiny and must be dismissed.

  Defendants' "frustration of purpose" claim fares little better. Under the doctrine of frustration of purpose, a party to a contract may rescind the contract if "an unforeseen event has occurred, which, in the context of the entire transaction, destroys the underlying reasons for performing the contract." Sage Realty Corp. v. Omnicom Group, Inc., 705 N.Y.S.2d 500, 504 (N.Y.Sup.Ct. 2000). Defendants claim that they were frustrated in their attempts to obtain the consents through the second solicitation for two reasons. First, they argue that `'the Plaintiff's rejection of the previously obtained consents frustrated the purpose of the Stock Acquisition Agreement" because it created additional steps that had to be taken to consummate the transaction. (D. Mem. 8.) Second, they claim that Burke's poor performance as a manager frustrated the purpose of the transaction. Id. 9.) While these events, accepting defendants' version of them, may raise issues of fact as to whether defendants used best efforts to obtain the necessary consents, or whether any failure to do so can give rise to damages, they fall far short of a legal claim of frustration of purpose. The counterclaim of frustration of purpose is dismissed.

  CONCLUSION

  For the reasons discussed above, the plaintiffs motion for summary judgment is granted as to the claim for weekly compensation in the amount of $344,000, and denied as to the claim for $500,000 in liquidated damages. Defendants' counterclaims are dismissed for failure to state a claim upon which relief can be granted. SO ORDERED.


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