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Beekman Investment Partners, L.P. v. Alene Candles

February 14, 2006


The opinion of the court was delivered by: Denise Cote, District Judge


Defendants move to dismiss plaintiff's complaint in this diversity action for failure to state a claim. For reasons described below, the motion to dismiss is converted to a motion for summary judgment and is granted.


This dispute arises out of negotiations for the purchase by plaintiff Beekman Investment Partners, L.P. ("Beekman") of all of the stock of defendant Alene Candles, Inc. ("Alene"), from its sole shareholder defendant Paul Amato. The following facts are undisputed.

As part of the negotiations, the parties signed a letter of intent dated April 19, 2005 ("LOI"), outlining the terms that would govern the transaction between Amato and Beekman. The letter begins with an expression of Beekman's interest in pursuing the purchase, and a description of its qualifications and strengths that would enable it to complete the transaction in a satisfactory manner. The introduction closes by stating that Beekman "intend[s] to commit the resources to completing a transaction by your requested timetable of mid-June. To that end, below please find a detailed summary of terms with which we would proceed to close the Transaction."

On the following pages, these terms are grouped in a two-column table; the left column contains a brief title and the right column contains the substance of a particular term, in either a complete sentence or a list of bullet points. One row in the table is entitled "Expense Reimbursement." The substantive text reads "Seller [Amato] will reimburse the Buyer [Beekman] and [a holding company] reasonable expenses related to the Transaction not to exceed $100,000 if the Transaction is not completed." Another row, entitled "Exclusivity," reads "Seller will enter into an Exclusivity Agreement ("EA") attached as Exhibit A . . . ." There are eleven rows in all.

Immediately following this table, the text resumes "The above terms do not constitute a definitive offer, acceptance, contract, or agreement, all of which require the completion of our due diligence and will be incorporated in a definitive purchase agreement duly executed by the Seller and Beekman." The final paragraph of the letter begins "We are prepared to commit the resources to finalize our due diligence, negotiate a definitive purchase agreement and close a transaction by June 30th." The letter includes a signature block for John Troiano, Chief Executive Officer of Beekman, and is "Agreed and Accepted" by Amato on a separate signature block.*fn1

Attached to the letter as Exhibit A is a second letter from Troiano to Amato. The introductory paragraph of this second letter reads "[Beekman] has been engaged in discussions with you regarding [Alene], of which you are the principal shareholder, concerning Beekman's proposal of April 19, 2005 to purchase the Company (the "Acquisition"). This letter sets forth our understanding of certain agreements reached between Beekman and you in connection with such negotiations." Four numbered paragraphs follow.

The first paragraph states that "[i]n consideration of the time and expense to be incurred by Beekman in negotiating a Purchase Agreement and conducting its due diligence review for the proposed Acquisition," Amato will negotiate exclusively with Beekman until the earlier of "the date upon which a Purchase Agreement among Beekman, the Company, and you is signed" or July 19, 2005. The second requires Amato to provide Beekman with access to all of Alene's property and records. The third states that "[t]his letter and the agreements contained herein are [] intended to constitute a binding agreement between the parties with respect to the subject matter hereof." And the fourth provides that the letter may not be amended or modified except in a writing signed by both parties. The letter has a signature block for Troiano and is "Acknowledge and Agreed to" by Amato. Nowhere in this exhibit is there any mention of expense reimbursement.

The parties never executed a purchase agreement, nor did the planned transaction occur. Beekman claims in its Complaint that it elected not to complete the transaction because the financial projections upon which the transaction was planned were adjusted significantly downward by Alene two months after the LOI was signed. Nevertheless, Beekman did incur at least $100,000 of what it believes were reasonable expenses related to the intended purchase. It seeks recovery of those expenses in this action under four claims: breach of contract, breach of the implied covenant of good faith and fair dealing, promissory estoppel, and unjust enrichment.

Defendants moved to dismiss the Complaint for failure to state a claim under Fed. R. Civ. P. 12(b)(6). In support of its opposition to defendants' motion, Beekman submits two communications from Amato to Troiano. The first is an email, dated April 18, 2005, wherein Amato expresses his willingness "to sign a revised LOI and your 'Exhibit A' (Exclusivity Agreement)" and indicates a number of changes he would like to see made to the letter of intent. One change is to the expense reimbursement term: Amato states "We would have to pay your costs only if the deal did not close." The second communication is a letter dated September 20, 2005. In this letter, Amato expresses "shock[] by the assertion that these expenses [incurred during due diligence] are my responsibility." Amato explains his understanding that when the parties discussed the letter of intent, Troiano "stated that this clause was to protect you in case the owner got 'cold feet' and did not close on the transaction after you had incurred costs relating to the accounting and legal due diligence." He reiterates this understanding at the close of the letter.


1. Conversion of the Motion to Dismiss to a Motion for Summary Judgment

Fed. R. Civ. P. 12(b) provides that if, on a motion to dismiss for failure to state a claim, "matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment." For the purposes of a Rule 12(b)(6) motion, "the complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference." Int'l Audiotext Network, Inc. v. Am. Tel. and Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995). Although the LOI was not attached to or incorporated in the Complaint by plaintiff, it is not matter outside the pleadings because "the complaint relies heavily upon its terms and effect, which renders the [LOI] integral to the complaint." Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. ...

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