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RELLA v. NORTH ATLANTIC MARINE

June 21, 2004.

FRANK RELLA, Plaintiff,
v.
NORTH ATLANTIC MARINE, LTD d/b/a FREEDOM MARINE, KENNETH TESSLER, and GLOBAL YACHTS INTERNATIONAL, LTD., Defendants.



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

OPINION AND ORDER

This dispute revolves around a joint venture agreement for the purchase and marketing of yachts. By letter dated January 23, 2004, defendant North Atlantic Marine d/b/a Freedom Marine ("Freedom") advised the Court that the parties had settled. The Court therefore issued an order, docketed by the Clerk's Office on January 30, 2004, discontinuing this case with leave to reopen within thirty days should the parties fail to consummate the settlement. On March 4, 2004, Frank Rella, the plaintiff, wrote the Court requesting its assistance because Global Yachts International, Ltd. ("Global") refused to comply with the terms of the alleged settlement. Global responded by disavowing any settlement. The Court thereafter exercised its discretion to reopen the action, and held a status conference on March 15, 2004, at which the parties indicated their intention to renew certain summary judgment motions that had been filed before the putative settlement. Rella and Freedom also requested leave to file a new motion seeking to enforce that settlement, which the Court granted.

  Before the Court are several motions. Rella moves for summary judgment against both defendants on count five of the complaint, which seeks recovery of $33,475 allegedly converted by defendants. Global cross-moves for summary judgment on counts four and five, which allege claims for unjust enrichment and conversion, respectively, against Global. Freedom also filed a motion, which, while not a model of clarity, apparently seeks four forms of relief: that the Court (1) enforce the settlement; (2) compel Global to deposit $33,475 with the Court for disbursement to Rella; (3) permit Freedom and Kenneth Tesler, a principal of Freedom, to cross-claim against Global; and (4) grant summary judgment to Tesler. Finally, Rella moves to enforce the putative settlement. For the reasons that follow, Rella's motion for summary judgment will be granted as against Freedom only; Global's cross-motion will be granted in part: Freedom's motion will be granted insofar as it seeks to exonerate Tesler from personal liability; and all other motions will be denied.

  BACKGROUND

  Rella and Freedom executed a joint venture agreement dated August 31, 2001 ("JVA"). (Berton Aff., Ex. A.) By the JVA, Rella agreed to purchase a 2002 Sealine 42/5 yacht ("Sealine 42/5"), which would be marketed and resold at a higher price, and to permit Freedom to use the yacht for promotional purposes. Freedom, in exchange, gave Rella a $114,045 discount on the yacht's list price and certain guarantees regarding maintenance, insurance, and registration of the yacht. (Id.) Freedom also promised "to use its best efforts to market and sell the Sealine." (Id. ¶ 6.) If Freedom succeeded, the JVA entitled Rella to receive from the proceeds of the sale the "Purchase Price" of $461,724 that he originally paid for the Sealine, as well as 50% of whatever profits remained after the payment of sales commissions, which were not to exceed 25% of those profits. (Id.) The JVA also gave Rella the option to buy additional Sealines.

  Pursuant to the JVA, Rella bought a 42/5 Sealine from Freedom (Tessler Cert. ¶ 9; Berton Aff. ¶ 5), which in turn acquired it from Global. Global purchases Sealines from their manufacturer and sells them to yacht vendors and at times directly to retail customers in Florida. (Berton Aff. ¶¶ 2-4.) Rather than delivering the Sealine 42/5 to Freedom's headquarters in New Jersey, however, Global delivered it to Florida. (Tessler Cert. ¶ 6.) There, Global enjoyed the right to display the yacht as an aid to its marketing efforts, and to use it at certain times subject to certain conditions; in exchange, Global allowed Freedom and Rella to dock the yacht at its marina. (Tessler Cert. ¶ 7; Berton Aff. ¶¶ 8-9, Ex. C.) Rella effectively concedes that Global had some right to use the Sealine 42/5, but disputes the extent of that right, alleging that Global damaged the boat through unauthorized use.*fn1 (P. Rule 56.1 Stmt. ¶ 6; Compl. ¶ 20; P. Br. 3-4; Wertheimer Reply Aff.2; Berton Aff., Ex. D.)

  On November 6, 2002, Rella paid Freedom a $33,475 deposit for a second Sealine 42/5. (P. Rule 56.1 Stmt. ¶ 1.) Freedom again intended to acquire the yacht from Global and therefore passed on to Global a check for the same amount of money as a down payment on the Sealine 42/5. (Wertheimer Aff., Ex. 6.) At some point, however, Rella decided that rather than purchase a second Sealine 42/5 from Freedom, he wanted a different model, the Sealine 47. (Berton Aff. ¶ 6; P. Rule 56.1 Stmt. ¶ 3; Wertheimer Decl., Ex. 2.) Freedom contracted with Global to buy this new model (Berton Aff. ¶ 7) and had Rella's deposit reallocated for that purpose. (Wertheimer Decl., Ex. 3.) But Rella never consummated the purchase, apparently because he concluded that Freedom had breached the JVA. (Freedom Rule 56.1 Stmt. ¶ 4.) He later demanded that defendants return his deposit. (Wertheimer Decl., Exs. 4, 5.) To date, neither has complied.*fn2

  On October 24, 2002, Rella sued Freedom, Tesler, and Global, alleging that (1) Freedom breached the JVA; (2) Freedom and Tesler converted Rella's Sealine 42/5 by recklessly misusing it; (3) Tesler fraudulently represented Freedom to be a "responsible dealer" to induce Rella to enter into the JVA; (4) Global and Freedom, by wrongfully converting the Sealine 42/5 and using it without authorization "as a demonstration boat," became unjustly enriched; and (5) Global and Freedom converted Rella's $32,475 deposit on the Sealine 47.

  On July 11, 2003, Rella moved for partial summary judgment on the fifth count, seeking recovery of his deposit. Pursuant to a scheduling order entered on August 8, defendants were to file opposition papers to that motion and any cross-motions by August 15; Rella was to respond to such cross-motions by September 15; and defendants were to reply by September 22. By two orders entered in late August, however, the parties withdrew all pending motions and agreed to a new case management plan, which extended the discovery deadline to September 23 and set a post-discovery conference for October 17. The Court heard nothing further from the parties until early October, when they asked to be referred to mediation. Mediation evidently failed, for in December and January, the parties began to refile their summary judgment motions. The Court then set a new briefing schedule. But before the motions were fully briefed, Freedom wrote the Court a letter, copied to Rella and Global, stating that the parties settled. Accordingly, the Court issued an order of discontinuance with leave to reopen within thirty days, and the Clerk of the Court closed this case on January 30, 2001.

  While Freedom's letter represented that the parties had settled, negotiations and exchange of draft settlement agreements continued for the next month. Ultimately, the putative settlement failed, apparently because Freedom had previously, on December 12, 2003, brought a related action against Global in New Jersey state court, and Global insisted that any settlement of this action be conditioned on Freedom's agreement to settle the New Jersey action. By order entered on March 17, 2004, the Court restored this action to the calendar and set a new briefing schedule, which encompassed both Global's and Rella's summary judgment motions and new motions by which Freedom and Rella seek to enforce the putative settlement agreement.

  DISCUSSION

  I. Enforcement of the Putative Settlement

  Because Rella's motion to enforce the settlement, in which Freedom joins, would dispose of all issues were it to prevail, the Court will address it first.

  Under New York law, a settlement agreement is a contract subject to the ordinary rules of contract interpretation and enforcement. Bank of New York v. Amoco Oil Co., 35 F.3d 643, 661 (2d Cir. 1994) (collecting cases). That means, among other things, that no valid and enforceable settlement exists unless there has been a meeting of the minds between the parties on all essential terms. Schurr v. Austin Galleries of Illinois, Inc., 719 F.2d 571, 576 (2d Cir. 1983). This is a question of fact that must be resolved by analyzing "the totality of ...


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