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European School of Economics Foundation and Ese Nyc, Inc. v. Teknoloji Holdings A.S. and Mehmet Emin Hitay

May 4, 2011

EUROPEAN SCHOOL OF ECONOMICS FOUNDATION AND ESE NYC, INC. D/B/A EUROPEAN SCHOOL OF ECONOMICS,
PLAINTIFFS,
v.
TEKNOLOJI HOLDINGS A.S. AND MEHMET EMIN HITAY, DEFENDANTS.



The opinion of the court was delivered by: Thomas P. Griesa U.S .d.j.

OPINION

Plaintiffs European School of Economics Foundation ("ESEF") and ESE NYC, Inc. d/b/a European School of Economics ("ESE NYC"), together "ESE," bring this action against defendants Teknoloji Holdings A.S. and Mehmet Emin Hitay for a declaratory judgment that the parties entered into a binding contract, and that pursuant to that contract, plaintiffs are entitled to retain a €500,000 payment which defendants made to plaintiffs. Defendants have filed a counterclaim seeking the return of the €500,000, based on the theory of unjust enrichment.

The action has been tried by the court without a jury. This opinion constitutes the court's findings of fact and conclusions of law.

The court finds that plaintiffs are entitled to a declaratory judgment that they may retain the €500,000. The counterclaim is dismissed.

Facts

Plaintiff ESEF is a New York State not-for-profit foundation. Plaintiff ESE NYC is a New York State educational corporation. Together they are engaged in developing innovative schools of economics abroad.

Defendant Teknoloji Holding is a foreign holding company existing under the laws of the Republic of Turkey, with a principal place of business in Istanbul, Turkey. Defendant Hitay is the principal of Teknoloji Holding and a citizen and resident of the Republic of Turkey.

On November 17, 2007, at a conference in Istanbul, Turkey, Hitay met an officer of plaintiffs named Stefano D'Anna. On November 20 Hitay and D'Anna met again at a dinner hosted by Hitay.

D'Anna was executive vice-president of ESEF. He was director of ESE. D'Anna was the author of a book entitled "School for Gods," which was apparently a best-seller in Turkey and which Hitay had read and admired.

On November 21, D'Anna and Hitay met at Hitay's office. The two discussed the possibility of opening a branch of the European School of Economics in Turkey. Hitay's assistant made minutes of what occurred at the meeting. Both sides in the present lawsuit agree that D'Anna and Hitay reached an oral agreement at this meeting for the establishment of the institution in Turkey. Part of this agreement was that Hitay's company, Teknoloji, would have the right to use the name of the European School of Economics and its logo. It was agreed that Teknoloji would pay ESE a total of one million euros-50% "upfront," and the other 50% over five years.

ESE promptly sent Hitay a proposed written agreement dated November 21, signed by D'Anna, and another person connected with ESE, Allesandro Nomellini. This document was a faithful representation of the oral agreement. It specified, among other things, that Teknoloji would pay, upon receipt of the agreement, a fee in the amount of "euro 500,000" in consideration for the use of the ESEF and ESE names and logos in the Turkish territory. The agreement gave precise instructions as to how to make a wire transfer of the €500,000. The agreement went on to state that Teknoloji was to pay "an annual fee" in the amount of €100,000 again in consideration for the use of the ESEF and ESE names and logos in the Turkish territory.

There was a provision that the agreement would be for a five-year term and would remain in force except in the event of payment default. It was provided that the agreement should be governed by the laws of the State of New York, United States of America.

D'Anna also sent Hitay a "Business Plan." Hitay testified that he approved the Business Plan. The Business Plan included, among other things, a projected four-year profit and loss statement for 2008-2011. The statement showed revenues ranging from $2.5 million to $11.2 million over those years; expenses ranging from $1.6 million to $3.6 million; and gross profits ranging from $580,000 to $4.7 million. The projection assumed an exchange rate of €1 to $1.50.

At the trial, Hitay tried to indicate that he did not take these financial projections seriously. However, there is nothing to indicate that these were not good-faith estimates, based on ESE's experience. In any event, as already stated, Hitay testified that he approved the Business Plan.

Hitay testified at the trial that upon receiving the November 21 document, he had three objections, which he communicated to D'Anna. Hitay wished to have the arrangement last for an indefinite time. He wished to have the rights with regard to all publications which might emanate from the school in Turkey. Finally, he desired to have the agreement cover Northern Cyprus as well as Turkey proper. Hitay testified that he called D'Anna and raised these issues.

D'Anna did not testify at the trial. He resides in Italy. His deposition had been taken, largely through questioning by defense counsel. Excerpts from the deposition were read at the trial.

Both D'Anna and Hitay testified that there was a telephone conversation between them after Hitay received the November 21 document. There is some conflict as to what was said in the conversation. The court finds that the three points, described above, were raised by Hitay either in this conversation or soon thereafter for the purpose of having the proposed written agreement of November 21 redrafted, but the existence of the basic agreement was not denied. Hitay agreed to make the €500,000 payment, which he did by a wire transfer on November 26. The transfer was made ...


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