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Direct Investment Partners AG v. Cerberus Global Investments

February 7, 2008

DIRECT INVESTMENT PARTNERS AG, PLAINTIFF,
v.
CERBERUS GLOBAL INVESTMENTS, LLC, CERBERUS CAPITAL MANAGEMENT, L.P., CERBERUS PARTNERS, L.P., AND CERBERUS GLOBAL INVESTMENT ADVISORS, LLC, DEFENDANTS.



OPINION and ORDER

Plaintiff Direct Investment Partners AG ("Direct") brings this action alleging breach of contract, breach of the implied covenant of good faith and fair dealing, and fraud. It also seeks recovery under alternative theories of promissory and equitable estoppel, unjust enrichment, and quantum meruit.

Defendants move to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted.

BACKGROUND

The following allegations are taken from the complaint and are accepted as true on this motion to dismiss. See Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993).

Direct is a Swiss advisory firm that provides consulting services and advice about mergers and acquisitions. It specializes in identifying investment opportunities in Germany, Switzerland, and Austria. Roman Koidl is its Chief Executive Officer.

The Cerberus companies ("Cerberus") are a group of funds specializing in corporate restructuring. Frank Bruno is the President and Managing Director of Cerberus Global Investments, LLC.

In 2002, Cerberus wanted to enter the German market for investments in distressed companies needing restructuring and loans. Cerberus's European advisor arranged a meeting between Koidl and Bruno for December 13, 2002. During that meeting, Bruno told Koidl that Cerberus wanted Direct to identify investment opportunities and they discussed the compensation package Cerberus typically offered consultants and advisors such as Direct. Koidl agreed to work with Cerberus and Bruno told him to report to David Teitelbaum, a Cerberus Managing Director. Koidl and Teitelbaum met, and Teitelbaum agreed to define the terms expressed by Bruno to reflect a fee-based relationship for Direct's services and activities identifying investment opportunities for Cerberus. Less than a week later, Teitelbaum contacted Koidl to confirm the arrangement, and on December 26, 2002, Teitelbaum sent an email (Cmplt., Ex. A) to Koidl, with a copy to Bruno, stating:

Per our conversation, following, please find certain of the key commercial terms of our working relationship:

1) A retainer of US$12,000 month [sic] starting in the month when we close our first deal together, where the cumulative invested amount must exceed 30,000,000 euros. So, if we were to close a first deal in month 4 you would receive a retainer of $12,000 a month, related to months 4 through 18 inclusive.

2) You received [sic] 1% of the Cerberus net invested amount of exclusive deals you source exclusively

3) 20% of all profits above a US$20% unlevered IRR [Internal Rate of Return] of exclusive deals you source exclusively

4) Expense reimbursement for direct out of pocket expenses related to Cerberus targeted investments (such expenses include travel, phone, fax but not office rental type expense) up to a maximum of US$12,000 per month. Cerberus will need complete receipts and it should be expected that it will take literally months for your [sic] to receive reimbursement.

5) If a deal is not an exclusive, all fee amounts are to be discounted by 40%., except for the retainer amount in (1) above. An exclusive is a deal where at the point that we submit any bid price (indication through final) there are no other third parties submitting bid prices. So, if it were a two step process where (Phase 1) we compete on qualitative criteria (commitment to the market, restructuring expertise, etc) and then (Phase 2) we are selected to negotiate oneon-one with the seller on price that would entitle you to the full fee. So, only if there are no others competing on price throughout the process would be [sic] pay you the full fee amount. I am not sure how the lawyers will write this up and this may take a bit of work as we otherwise pay people for true exclusives only.

6) We have some mechanism for something to become a Roman Koidl deal -- like a reply email from either me or Frank Bruno. Let's see what the lawyers come up on this but your request is reasonable.

7) You work with Cerberus exclusively on "targeted investments" which will be defined in the contract.

There is a approx. 10 page contract that will reflect these terms which needs to be modified. Therefore, this brief email only captures certain of the more important commercial terms that we discussed but is not a legal obligation for Cerberus or you.

After receiving the e-mail, Koidl and Teitelbaum had a telephone conference during which Teitelbaum stated, "Don't worry Roman, we always pay our consultants." Cmplt. ¶ 29. Teitelbaum sent Koidl another e-mail on December 30, 2002 stating "my prior email did reflect how we intend to work with you and that email was also consistent with our conversation." Id. at ¶ 31.

On January 1, 2003 Direct began to investigate and present investment opportunities to Cerberus.

On January 25, 2003, Cerberus sent Direct a Consulting Agreement (Cmplt., Ex. B), which it referred to as a "standard" agreement (the "January Consulting Agreement"). On February 10, 2003, Koidl returned to Cerberus a copy with his proposed revisions (the "February Consulting Agreement") (Cmplt., Ex. C). Direct asserts that this document accepted the "key commercial terms" of the relationship, as to which there was no disagreement, that the proposed revisions were minor, and that "Mr. Teitelbaum represented that the terms of the February 10, 2003 Consulting Agreement were accepted, and also promised he would secure the signature of Cerberus to the February 10, 2003 Consulting Agreement." Cmplt. ¶¶ 42-46.

"On or about March 6, 2003, Cerberus wrote to Direct to advise that Mr. Koidl should deal directly with Mr. Teitelbaum. In the correspondence, Cerberus acknowledged that it had 'contracted' with Direct." Cmplt. ¶ 53. On March 12, 2003, Bruno wrote to Direct confirming Cerberus's interest in working with Direct on five specific exclusive transactions.

In early 2003, Dresdner Bank established an Institutional Restructuring Unit ("IRU") to sell distressed, non-performing, sub-performing, and other non-strategic investments. IRU's assets included debis AirFinance, B.V. ("dAF") and a portfolio of German non-and sub-performing loans known as Project Phoenix.

At the request of Cerberus, Koidl initiated telephone calls to facilitate meetings between Cerberus and IRU. He also helped Cerberus prepare a letter of introduction, dated April 15, 2003, to IRU, which served "as written confirmation and acknowledgement of the contract between the parties and that IRU and its portfolio of investments was introduced to Cerberus by Direct." Cmplt. ¶ 76. With Koidl's participation, Cerberus made bids to acquire Project Phoenix from IRU and competed through the final round of bidding, but it was awarded to another investor in March 2004.

Cerberus then turned its focus to acquiring dAF, which it had learned about at a meeting set up by Direct. Cerberus did not include Direct in important negotiations with IRU, and "Direct was not even made aware of all the dAF discussions, despite previous statements by Mr. Teitelbaum that Mr. Koidl was an integral player in assisting Cerberus with IRU." Cmplt. ¶ 106. Koidl informed David Knower (head of Cerberus's German operations) of his concern that Direct was being ignored by Cerberus, and Knower responded that because of the Project Phoenix dealings, Cerberus was already known to IRU and Direct's further involvement was no longer necessary.

On January 30, 2004, Koidl met with Bruno in Frankfurt and reminded him of the key commercial terms. "Mr. Bruno acknowledged the parties' agreement and Direct and Mr. Koidl's involvement in: (i) arranging the introduction to IRU; (ii) the investment opportunities presented as a result of this introduction; and (iii) the efforts of Direct in making the exclusive IRU introduction and facilitating meetings and negotiations, among other services furnished by Direct to Cerberus." Cmplt. ¶ 110. Bruno stated: "Roman, we do not have amnesia. We know about your involvement, and you will get paid if we get something closed at IRU." Id. After that meeting, Cerberus no longer involved Direct in its negotiations with IRU, and completed a $1.37 billion acquisition of dAF.

Direct has demanded payment for its consulting and advisory services, which Cerberus has not paid.

DISCUSSION

Under Fed. R. Civ. P. 12(b)(6), on a motion to dismiss a complaint for failure to state a claim upon which relief may be granted, a court must accept the factual allegations of the complaint as true, and draw all inferences in favor of the plaintiff. Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993). The court may consider exhibits annexed to the complaint or incorporated in it by reference. Brass v. American Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir. 1993). "In order to withstand a motion to dismiss, a complaint must plead enough facts to state a claim for relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007).

Defendants argue that the Court should dismiss the complaint because Cerberus did not demonstrate an intent to be bound, and therefore the parties never formed an enforceable contract. Further, it argues that any such ...


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