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P.A. PROPERTIES, INC. v. B.S. MOSS' CRITERION CENTER CORP.

December 22, 2004.

P.A. PROPERTIES, INC., Plaintiff,
v.
B.S. MOSS' CRITERION CENTER CORP., Defendant/Third-Party Plaintiff, v. UNITED ARTISTS THEATRE CIRCUIT, INC., Third-Party Defendant.



The opinion of the court was delivered by: LAURA TAYLOR SWAIN, District Judge

OPINION AND ORDER

In this breach of contract action,*fn1 Plaintiff P.A. Properties, Inc. ("PAP"), seeks to recover from Defendant B.S. Moss's Criterion Center Corporation ("Moss") amounts PAP claims are due and owing under a consulting agreement entered into in 1992 by PAP and United Artists Theatre Circuit, Inc. ("UA"), which was at the time Moss's partner in a joint venture. Moss has commenced a third-party action against UA, seeking, among other things, indemnification in connection with PAP's claim against Moss. The Court has jurisdiction of the main and third-party actions pursuant to 28 U.S.C. § 1332.

  Moss now moves, and PAP cross-moves, for summary judgment with respect to PAP's claims. Moss also seeks an order striking certain affidavits proffered by PAP in support of its cross-motion and in opposition to Moss's motion. UA moves for an order dismissing the Amended Third-Party Complaint. For the reasons that follow, the Court finds that the consulting agreement in question is an obligation of the Moss/UA joint venture with respect to periods in which a certain movie theatre, the lease for which was the subject of the consulting agreement, was operated for the joint venture, but that issues of fact preclude determinations on the current record as to whether PAP is entitled to any payments pursuant to the consulting agreement in respect of such periods. PAP's summary judgment motion is therefore denied, while Moss's summary judgment motion is granted only as to PAP's abandoned claims of quantum meruit, unjust enrichment and breach of contract as to which PAP was allegedly a third-party beneficiary, (see supra note 1), and Moss's motion to strike certain PAP affidavits is granted in part. UA's motion to dismiss the Amended Third-Party Complaint is denied.

  BACKGROUND

  The Court finds pursuant to Rule 56(d) of the Federal Rules of Civil Procedure that the following facts are undisputed except to the extent otherwise specified below. Three agreements are material to the parties' dispute: a 1988 Joint Venture Agreement ("JV Agreement") between UA and certain entities referred to in the agreement as the Moss Venturers, a 1992 Consulting Agreement between UA and PAP ("Consulting Agreement") for lease recovery services, and a 1995 Assignment and Acceptance Agreement ("Assignment Agreement") between Moss and UA, regarding the Joint Venture.

  The Moss/UA Joint Venture

  On or about February 1, 1988, UA entered into a joint venture agreement with the Moss Venturers, a group of entities consisting of the Yonkers Joint Venture, the Movieland 8th Street Joint Venture and B & E Concessions Corporation. (JV Agreement, Nolan Aff. Ex. 3 at 5.) Defendant Moss is the successor in interest to the Moss Venturers under the JV Agreement (Def.'s Rule 56.1 Stat. ¶ 12.) Moss and UA agreed to operate the joint venture (which is hereinafter referred to as the "Joint Venture") under the working name "Moss/United Artists Joint Venture," (JV Agreement, § 2.2) with termination of the venture scheduled for July 31, 2034. (Id. § 2.4.) The JV Agreement was governed by New York partnership law (id. § 10.8) and provided that the members of the Joint Venture were "liable for all debts, liabilities and obligations of the Joint Venture in proportion to their Allocable Shares." (Id. § 3.5(a).) The stated purpose of the Joint Venture was to "manage, operate, lease, deal with and . . . dispose of, the [movie] Theatres" operated by the joint venturers, which included Movieland Yonkers, Movieland 8th Street and the theatre pertinent to the instant controversy, Movieworld Douglaston. (Id. § 2.3.) Under the JV Agreement, UA was designated Managing Venturer and by the express terms of that agreement had the "complete authority and responsibility to manage the Joint Venture, to operate the Theatres and to make all decisions regarding the day-to-day business of the Joint Venture." (Id. § 5.1.) These broad duties included, "without limitation, . . . maintenance of the Theatres, compliance with the terms of the leases for the Theatres, [and] payment of real property taxes." (Id.) Further, UA as Managing Venturer was required to "devote such time and personnel to the management and operation of the Theatres as may be necessary to ensure that the Theatres are operated in a first class manner." (Id. § 5.1(c).)

  The JV Agreement provides for dissolution of the Joint Venture by decision of the parties, expiration of the term of the agreement, or a "sale of all or substantially all of the Joint Venture's assets and the collection and distribution of the proceeds therefrom." (Id. § 8.1(a)-(c).) The agreement requires that, upon dissolution of the Joint Venture, the Managing Venturer ensure that an accounting is done and thereafter pay debts and distribute any remaining capital. (Id. § 8.2(a)-(b).) The agreement further provides that it is only upon compliance with the distribution and liquidation plan contained in Article VIII of the JV Agreement that the joint venture is terminated. (Id. § 8.3.) The JV Agreement also provides, however, that
[e]xcept as otherwise provided [in the JV Agreement], no dissolution or termination of the Joint Venture shall relieve, release or discharge any Joint Venturer . . . from any previous breach or default of, or any obligation theretofore incurred or accrued under, any provision of this Agreement, and any and all such liabilities, claims, demands or causes of action arising from any such breaches, defaults and obligations shall survive such dissolution and termination.
(Id. § 8.2(d).)

  1995 Assignment Agreement between Moss and UA

  On or about January 26, 1995, Moss and UA executed an Assignment Agreement which Moss claims terminated the Joint Venture. Under the Assignment Agreement, "Assignor" Moss assigned 98% of its 48% interest in the Joint Venture and the Joint Venture's assets (including theatre leases) to "Assignee" UA, in consideration for $10,099,014.00, plus certain additional consideration. (Assignment Agreement, Nolan Aff. Ex. 5 at 1.) This left Moss with a remaining 1% interest in the Joint Venture. (Id.) The Assignment Agreement provided that Moss would relinquish its outstanding 1% interest either when (1) UA and Moss "obtained the written consent of the landlord for the Movieland 8th Street lease held by the [Joint Venture], for the Assignment and/or the consent of such landlord to the assignment of such lease to [UA]," or (2) "upon the written request of Assignee," and that the Joint Venture Agreement would remain in effect pending such events, with certain modifications, including elimination of the limitations imposed by Section 5.2 of that Agreement on UA's powers to act for the Joint Venture. (Id.)

  The Assignment Agreement included provisions requiring Moss and UA to indemnify each other for certain lease-related obligations of the Joint Venture. Specifically, it required UA to indemnify Moss for 49% of any post-assignment Joint Venture liabilities, and further provided that "[Moss] shall receive or be liable for 49% of any net adjustment . . . arising out of the dispute between Moss/UA and the landlord for the Douglaston Theatre operated by Moss/UA." (Id. at 3-4.) There is no evidence in the record as to whether the conditions precedent to transfer of Moss's remaining 1% interest were ever satisfied and, although Moss has proffered the conclusory assertion that "[a]s of June 30, 1995, the Douglaston Plaza movie theatre and the lease thereto with landlord Yale University were the property of UA and not of either Moss or the Moss/United Artists Joint Venture," (Moss Aff., Nolan Aff. Ex. 8 ¶ 12), there is no evidence of any transfer of ownership of the Douglaston theatre lease from the Joint Venture to UA.

 
With regard to liability, the Assignment Agreement provided that
Assignee hereby agrees with and represents and warrants to Assignor that Assignee shall perform all of Assignor's obligations and liabilities, including payments of money obligations or liabilities under, pursuant or arising out of or created by [the Joint Venture] which arise after the date hereof except that Assignor shall remain liable for 1% of such obligations until such time as its remaining 1% interest . . . is transferred.
(Assignment Agreement at 3.) The Assignment Agreement further provided: "Assignor hereby warrants and represents that the interests conveyed herein are subject to no . . . claims or debt arising out of Assignor, and . . . Assignor expressly agrees that it shall indemnify and defend Assignee from any such . . . claims or debt." (Id.) Lastly, by the terms of the Assignment Agreement, Moss agreed to "receive or be liable for 49% of any net adjustment (including legal fees) arising out of the dispute between Moss/UA and the landlord for the Douglaston Theatre operated by [the Joint Venture]." (Id. at 4.)

  There is a dispute among PAP, Moss and UA as to whether the Assignment Agreement effectively terminated the Joint Venture. Although Moss alleges that the Joint Venture "ended by June 30, 1995," it also claims that specific events necessary under Section 8.2 of the JV Agreement to effect dissolution did not occur due to an alleged breach by UA. (Am. Third-Party Compl. ¶¶ 5, 7.) The 1992 Agreement between UA and PAP

  On or about September 15, 1992, UA and PAP entered into a written agreement whereby PAP would provide consulting and lease recovery services to discover possible overcharges on the Movieworld Douglaston lease. (See Grewe Decl. ¶ 4.) Yale University ("Yale") was the landlord of the Douglaston premises. The only entities named as parties to the Consulting Agreement were PAP and UA; the Joint Venture was not mentioned in the Agreement. (Consulting Agreement, Nolan Aff. Ex. 1.) At the time the Consulting Agreement was executed, UA was the Managing Venturer of the Joint Venture. (Pl.'s Rule 56.1 Stat. ¶ 20; Def.'s Rule 56.1 Stat. ¶ 14.)

  The Consulting Agreement provided that PAP's duties thereunder were principally to consist of the "Identification of Overpayments" by "analyz[ing] relevant records and source documents in order to identify opportunities for claiming Lease Charge Recoveries." (Consulting Agreement, cl. 1(A).) "Lease Charge Recoveries" are defined in the Consulting Agreement as including "audit deficiency offsets, credits, refunds, [and] interest on cash flow savings" arising from PAP's proper identification of lease charges (i.e., "rent, common area maintenance, real estate tax, insurance, utilities and promotional fees") overcharged by Movieworld Douglaston theatre landlord Yale. (Id. at cl. 9.) Under the Consulting Agreement, PAP's compensation was to consist of a contingency fee derived from two separate sources: (1) a percentage of the "Lease Charge Recoveries realized by [UA];" and (2) a percentage of "any Bona Fide Recovery Opportunity identified by PAP in an Interim or Final Report which [UA] declines to pursue." (Id. at cl. 2.) A "Bona Fide Recovery Opportunity" is defined in the Consulting Agreement as "[a] Lease Charge Recovery identified in an Interim or Final Report which is yet to be realized by the Client." (Id. at cl. 9.) "In October 1992, . . . PAP identified to UA Lease Recovery Opportunities pursuant to the [Consulting Agreement]" in an Interim Report. (Paquet Aff., Nolan Aff. Ex. 9 ¶ 14; see also Pickhardt Aff. Ex. L; Pl.'s 56.1 Stat. ¶ 9; Def.'s 56.1 Stat. ¶ 25.) Final reports were provided to ...


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