United States District Court, S.D. New York
September 22, 2005.
CHRISTOPHER ZIKAKIS, Plaintiff,
STAUBACH RETAIL SERVICES, INC., PRESIDIO FINANCIAL PARTNERS, LLC, iSTAR FINANCIAL INC., and AUTOSTAR REALTY OPERATING PARTNERSHIP L.P., Defendants.
The opinion of the court was delivered by: NAOMI BUCHWALD, District Judge
MEMORANDUM AND ORDER
Christopher Zikakis ("Zikakis" or "plaintiff") brings this
diversity action against Staubach Retail Services, Inc.
("SRS"),*fn1 Presidio Financial Partners, LLC ("Presidio"),
iStar Financial Inc. ("iStar") and Autostar Realty Operating
Partnership L.P. ("Autostar") (collectively, "defendants")
alleging that defendants improperly used plaintiff's novel idea
of forming a real estate investment trust comprised of
sale-leaseback transactions within the automotive retailing
industry. Defendants have moved to dismiss plaintiff's complaint
for failure to state a claim under Fed.R.Civ.P. 12(b)(6). For
the reasons set forth below, defendants' motion is granted in its
I. Plaintiff's Communications with Staubach, iStar and
Zikakis contacted Staubach, a real estate advisory firm that
specializes in investment and financing transactions involving
commercial properties nationwide, after learning that Staubach
had formed a separate company aimed at providing advisory
services to automotive manufacturers and dealers. Knowing that
Staubach's existing business consisted in part of facilitating
"sale-leaseback transactions," Zikakis contacted Staubach and
related to it an idea to form a real estate investment trust
("REIT") "comprised of sale-leaseback transactions within the
automotive retailing industry." Compl. ¶ 10. According to the
complaint, between December 2002 and March 2003, Zikakis and
various Staubach representatives engaged in several meetings at
which Zikakis "explained in detail his analysis of why the risks
and rewards of sale-leaseback transactions within the automotive
retailing industry were attractive as compared to those found in
other industries." Id. ¶ 11.
On several occasions, Zikakis met with Staubach's president and
C.E.O., Christopher Maguire, to further discuss the REIT idea.
Following one such meeting in New York City on June 6, 2003, Zikakis sent to Maguire a "detailed memorandum describing
the investment rationale for automobile dealership sale-leaseback
transactions." Id. ¶ 14.
On June 28, 2003, Maguire sent Zikakis an e-mail stating that
Zikakis was "the right person to help lead (Staubach] in this
area" and suggesting that Zikakis work with Staubach on a
"contract basis" until Staubach raised sufficient capital to fund
the business venture that Zikakis had proposed to Maguire. Id.
¶ 15. Allegedly as an inducement to encourage Zikakis to share
his ideas further with Staubach, Maguire told Zikakis that it was
Staubach's "customary practice" to form independent companies
with partners who came to own and operate individual businesses
and that Maguire envisioned a similar "partnership" with Zikakis.
Id. ¶¶ 16, 17.
After these conversations, Zikakis engaged in further
communications with Maguire in which Zikakis indicated that,
although he expected eventually to have a stake in the proposed
venture, he was amenable to entering into an "interim
relationship" on a "contract basis" with Staubach until the
business plan "was more fully developed." Id. ¶ 18. After this
conversation, Maguire told Zikakis that Staubach would provide
Zikakis the "next week" with a "term sheet" that would describe
"proposed terms of a business relationship" between Staubach and
Zikakis. Id. ¶ 19. The "term sheet" did not arrive the next week, and when Zikakis
inquired about it, he was told that it would be provided the
following week. According to the complaint, this "pattern of
delays" continued for several weeks thereafter. Id. ¶ 19. In
the meantime, however, on July 17, 2003, Zikakis introduced
Maguire to Barclay Jones, who was affiliated with iStar, a
potential source of capital for the proposed venture.
Subsequent to the meeting with Jones, Maguire allegedly
continued to "promise?" Zikakis that a proposed contract was
forthcoming. Id. ¶ 19. Zikakis, at Maguire's request, then
called an individual named Brodie Cobb, a managing director at
Presidio, a potential future partner. During that conversation,
Cobb questioned Zikakis about Zikakis's "transactional
experience" and then concluded the call. After the call, Zikakis
never heard again from Maguire or Cobb, despite his repeated
attempts to contact them.
II. The Formation of Autostar
Several months later, Zikakis learned that Staubach, iStar and
Presidio had formed Autostar, a REIT "comprised of sale-leaseback
transactions within the automobile retailing industry." Id. ¶
27. The complaint alleges that a July 23, 2004 press release
describing the formation of Autostar "parrot[ed] Zikakis'
business proposal from June 2003." Id. ¶ 28. III. Plaintiff's Complaint
On December 7, 2004, plaintiff filed his complaint in this
action, asserting seven claims. Claim One alleges that defendants
misappropriated plaintiff's idea of forming a REIT comprised of
sale-leaseback transactions within the automotive retailing
industry. Claim Two alleges that Presidio tortiously interfered
with Zikakis's prospective economic gain by "discredit[ing]
Zikakis's experience and reputation, and engag[ing] in acts
designed to exclude Zikakis from any future business relationship
with Staubach." Id. ¶ 25. Claims Three through Five assert that
defendants are liable to Zikakis as a result of the conduct
described above on theories, respectively, of quantum meruit,
promissory estoppel and unjust enrichment. Claims Six and Seven
are demands for equitable relief via accounting and constructive
Defendants have moved to dismiss the complaint in its entirety
on the ground that plaintiff has failed to state a claim upon
which relief can be granted. For the reasons discussed below, we
In considering a motion to dismiss, the Court must accept as
true all material factual allegations in the complaint. Levy ex
rel. Immunogen Inc. v. Southbrook Int'l Invs., Ltd.,
263 F.3d 10, 14 (2d Cir. 2001). However, "[c]onclusory allegations or legal conclusions masquerading as factual conclusions will not
suffice to prevent a motion to dismiss." Smith v. Local 819
I.B.T. Pension Plan, 291 F.3d 236, 240 (2d Cir. 2002) (quoting
Gebhardt v. Allspect, Inc., 96 F. Supp. 2d 331, 333 (S.D.N.Y.
2000)). A motion to dismiss may be granted only where "it appears
beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief." Still
v. DeBuono, 101 F.3d 888, 891 (2d Cir. 1996) (quoting Conley v.
Gibson, 355 U.S. 41, 45-46 (1957)).
The parties agree that in this diversity action we must apply
New York substantive law in examining the sufficiency of
plaintiff's allegations. We examine plaintiff's misappropriation
As the parties acknowledge, to state a claim under New York law
for misappropriation of an idea, plaintiff must satisfy two
elements. First, plaintiff must establish that the idea disclosed
is novel. Second, plaintiff must establish that a legal
relationship existed between the parties. See generally McGhan
v. Ebersol, 608 F. Supp. 277, 284 (S.D.N.Y. 1985); Oasis Music,
Inc. v. 900 U.S.A., Inc., 161 Misc. 2d 627, 631,
614 N.Y.S.2d 878, 881 (Sup. Ct. N.Y. Co. 1994). The complaint does not allege
either of these required elements. A. Novelty
Novelty of an idea is an essential element of the New York tort
of misappropriation. Without it, the idea is not protectable as
property. See, e.g., Downey v. General Foods Corp.,
31 N.Y.2d 56, 61, 334 N.Y.S.2d 874, 877 (1972) ("[W]hen one submits an idea
to another, no promise to pay for its use may be implied, and no
asserted agreement enforced, if the elements of novelty and
originality are absent, since the property right in an idea is
based upon these two elements."). To determine whether an idea is
novel, a court must consider what was already in the public
domain at the time the idea was disclosed to the alleged
misappropriator. A protectable idea must reflect "genuine . . .
invention, and not a merely clever or useful adaptation of
existing knowledge." Educational Sales Programs, Inc. v. Dreyfus
Corp., 65 Misc. 2d 412, 416, 317 N.Y.S.2d 840, 844 (Sup. Ct.
N.Y. Co. 1970) (citation omitted). An idea that is merely "a
variation on a basic theme" available in the public domain is not
novel. Oasis Music, Inc., 161 Misc. 2d at 631-32,
614 N.Y.S.2d at 882; see also Marraccini v. Bertelsmann Music Group Inc.,
221 A.D.2d 95, 98, 644 N.Y.S.2d 875, 877 (3d Dep't 1996) (holding
that idea that is a "creative variation on [an already public]
theme" is not subject to the tort of misappropriation);
Educational Sales Programs, Inc., 65 Misc. 2d at 416,
317 N.Y.S.2d at 844 ("Improvement of standard technique or quality, the judicious use of existing means, or the
mixture of known ingredients in somewhat different proportions
all the variations on a basic theme partake more of the nature
of elaboration and renovation than of innovation.").
The complaint does not allege a novel idea in this
case.*fn3 By the terms of the complaint itself, plaintiff's
idea to "form? a real estate investment trust . . . comprised
of sale-leaseback transactions within the automotive retailing
industry," Compl. ¶ 10 is simply a variation on a theme that
already existed, not only in the public domain, but in Staubach's
business itself. Indeed, the complaint alleges that before
plaintiff disclosed his idea to Staubach, he had learned that:
(i) Staubach had "formed a company to serve the needs of
automotive manufacturers and dealers;" and (ii) Staubach already
"had a division that facilitated sale-leaseback transactions."
Compl. ¶ 10. The complaint further acknowledges that
sale-leaseback transactions were "found in other industries" at
the time plaintiff's idea was disclosed. Id. ¶ 11. Thus, the complaint concedes that the type of transaction (sale-leasebacks)
and the customer base (automotive manufacturers and dealers) were
already well known to Staubach. The only conceivable new element
in plaintiff's idea was to offer the transactions to a set of
customers automotive retailers to whom Staubach apparently
did not yet offer them. Clearly, this is a "variation on a basic
theme." Oasis Music, Inc., 161 Misc. 2d at 631-32,
614 N.Y.S.2d at 882.*fn4
B. Legal Relationship
Plaintiff also fails to establish that a "legal relationship"
existed between the parties. See McGhan, 608 F. Supp. at 284.
"The legal relationship between the plaintiff and defendant may
be either a fiduciary relationship, or based on an express
contract, an implied-in-fact contract, or a quasi-contract."
Id., at 284 (citation omitted). Plaintiff has not alleged any
basis for concluding that any of these existed here.*fn5
Rather, plaintiff alleges facts which suggest that though a
relationship between the parties may at one time have been
contemplated, none was ever formed. As the complaint alleges, Staubach suggested that plaintiff join it "on a contract basis,"
and promised to provide "within the `next week' a `term sheet'
that would describe the proposed terms of a business
relationship." Compl. ¶¶ 15, 19. However, the "draft contract"
which would define any such relationship never arrived. Compl. ¶
II. Tortious Interference
In order to state a claim under New York law for tortious
interference with prospective economic advantage, "plaintiffs
must prove that: (i) they had a business relationship with a
third party; (ii) defendants knew of that relationship and
intentionally interfered with it; (iii) defendants either acted
solely out of malice or used wrongful means; and (iv) defendants'
interference caused injury to the relationship with the
third-party." Kirch v. Liberty Media Corp., 04 Civ. 667, 2004
WL 2181383, at *8 (S.D.N.Y. Sept. 27, 2004) (citations omitted).
A plaintiff also must allege that he "would have entered into an
economic relationship but for the defendant's wrongful conduct."
Knight-McConnell v. Cummins, 03 Civ. 5035, 2004 WL 1713824, at
*4 (S.D.N.Y. July 29, 2004) (quoting Vigoda v. DCA Prods. Plus
Inc., 293 A.D.2d 265, 266-67, 741 N.Y.S.2d 20, 23 (1st Dep't
2002)). At issue here is whether plaintiff has sufficiently
pleaded that Presidio acted out of malice or used wrongful means
and that plaintiff would have entered into an economic relationship with Staubach but for Presidio's
Plaintiff asserts that the complaint pleads both malice and
wrongful means when it alleges that "Presidio discredited
Zikakis's experience and reputation to Staubach" and also that
Presidio "engaged in acts designed to exclude Zikakis from any
future business relationship with Staubach based upon the idea,
concept and plan for a business venture based on packaging as a
REIT or otherwise sale-leaseback transactions within the
automotive retailing industry." Compl. ¶ 25. We disagree.
The requirement for malice is satisfied "where a defendant
engages in conduct for the sole purpose of inflicting intentional
harm on plaintiffs." Carvel Corp. v. Noonan, 3 N.Y.3d 182, 190,
785 N.Y.S.2d 359, 362 (2004) (quotations and citation omitted);
Catskill Development, LLC v. Park Place Entm't Corp.,
345 F. Supp. 2d 360, 363 (S.D.N.Y. 2004).
According to the complaint, the alleged exclusion by Presidio
occurred after plaintiff had spoken with Cobb, who questioned him
about his "transactional experience." The complaint offers no
facts which suggest that Presidio acted "solely out of malice."
Kirch, 2004 WL 2181383, at *9 (quoting Guard-Life Corp. v. S.
Parker Hardware Manuf. Corp., 50 N.Y.2d 183, 190-91,
428 N.Y.S.2d 628, 632-33 (1980)). If anything, they suggest the opposite. Plaintiff was questioned by a
potential partner about his experience in an area inherently
related to the future business. These facts suggest that Presidio
was acting in its own, "economic self-interest." Carvel Corp.,
3 N.Y.3d at 190, 785 N.Y.S.2d at 363.
B. Wrongful Means
The Court of Appeals of New York has held that "[w]rongful
means include physical violence, fraud or misrepresentation,
civil suits and criminal prosecutions, and some degrees of
economic pressure; they do not, however, include persuasion alone
although it is knowingly directed at interference with the
contract." Carvel Corp., 3 N.Y.3d at 191, 785 N.Y.S.2d at 363
(quotations and citations omitted).*fn6 "[A]s a general
rule, the defendant's conduct must amount to a crime or an
independent tort. Conduct that is not criminal or tortious will
generally be `lawful' and thus insufficiently `culpable' to
create liability for interference with prospective contracts or
other nonbinding economic relations." Id., at 190. For economic
pressure to be wrongful it must be "extreme and unfair." Id.,
at 192-93; see also Treppel v. Biovail Corp., 03 Civ. 3002, 2005 WL 427538,
at *9 (S.D.N.Y. Feb. 22, 2005).
The complaint does not allege that Presidio used false
statements or misrepresentations to discredit or exclude
plaintiff. Nor does the complaint allege that Presidio employed
any kind of economic pressure. In short, there is no basis from
which to conclude that Presidio employed wrongful means.*fn7
C. But For Test
Because plaintiff has not alleged malice or wrongful means, his
claim of tortious interference with prospective economic
advantage fails. It should also be noted that plaintiff alleges
no facts which would suggest that he would have entered into an
economic relationship with Staubach but for Presidio's conduct.
If anything, the facts alleged in the complaint support exactly
the opposite inference. Even before Presidio's alleged conduct,
Staubach had already engaged in a "pattern of delays" in
providing plaintiff with a term sheet. Compl. ¶ 19. Plaintiff's
claim for tortious interference with prospective economic
advantage therefore fails for this reason as well. III. Quantum Meruit and Unjust Enrichment*fn8
For purposes of this discussion, we treat plaintiff's quantum
meruit and unjust enrichment claims as a single quasi-contract
claim. See Mid-Hudson Catskill Rural Migrant Ministry, Inc. v.
Fine Host Corp., 418 F.3d 168, 175 (2d Cir. 2005); see also
Seiden Assocs., Inc. v. ANC Holdings, Inc., 768 F. Supp. 89, 96
(S.D.N.Y. 1991) ("[U]njust enrichment is a required element for
an implied-in-law, or quasi contract, and quantum meruit, meaning
`as much as he deserves,' is one measure of liability for the
breach of such a contract."), rev'd on other grounds,
959 F.2d 425 (2d Cir. 1992). In order to successfully state his quantum
meruit claim, then, plaintiff must show that Staubach was
unjustly enriched. See Fercus, S.R.L. v. Palazzo, 98 Civ.
7728, 2000 WL 1118925, at *5 (S.D.N.Y. Aug. 8, 2000). The parties
agree that in order "[t]o state a claim for unjust enrichment in
New York, a plaintiff must allege that (1) defendant was
enriched; (2) the enrichment was at plaintiff's expense; and (3) the circumstances were such that equity and good
conscience require defendants to make restitution." Astor
Holdings, Inc. v. Roski, 01 Civ. 1905, 2002 WL 72936, at *17
(S.D.N.Y. Jan. 17, 2002).
In view of the lack of novelty discussed above, the
circumstances are not such that Staubach should be required to
make restitution. See Cunningham v. Merchant-Sterling Corp.,
155 Misc. 2d 226, 228-29, 587 N.Y.S.2d 492, 494, (Sup. Ct. N.Y.
Co. 1991) (noting that "the submission of an idea to someone else
who acts on it does not imply any promise to pay for the use of
an idea giving rise to a right of restitution if the elements of
originality and novelty of the idea are absent") (citing
Downey, 31 N.Y.2d 56, 334 N.Y.S.2d 874). Plaintiff therefore
fails to state a claim for unjust enrichment.
IV. Promissory Estoppel
The parties agree that in order to establish a claim for
promissory estoppel, plaintiff must allege: "1) a clear and
unambiguous promise; 2) reasonable and foreseeable reliance on
that promise; and 3) injury to the relying party as a result of
the reliance." Sharp v. Patterson, 03 Civ. 8772, 2004 WL
2480426, at *11 (S.D.N.Y. Nov. 3, 2004). Here, the complaint does
not allege that Staubach made a clear and unambiguous promise to
plaintiff. Rather, the facts alleged make clear that plaintiff
shared his ideas with Staubach prior to any communication regarding potential future compensation. In
addition, plaintiff waited in vain for a "term sheet" which would
describe the terms of any business relationship between the
parties. The discussions that surrounded this alleged term sheet
were too vague to support a claim for promissory estoppel. See
id. at *4. Therefore, plaintiff's claim for promissory estoppel
V. Accounting and Constructive Trust
Plaintiff acknowledges that Claims Six and Seven, for
accounting and constructive trust, respectively, are claims for
relief that should be imposed only if liability is found under
Claims One through Five. Because plaintiff fails to state his
substantive claims, Claims Six and Seven are also dismissed. CONCLUSION
For the reasons set forth above, defendants' motion to dismiss
is granted in its entirety, and all claims against defendants are
IT IS SO ORDERED.
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