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Blum v. Spaha Capital Mgmt., LLC

United States District Court, S.D. New York

September 15, 2014

RANDOLPH BLUM, Plaintiff,
v.
SPAHA CAPITAL MANAGEMENT, LLC et al., Defendants

Decided September 12, 2014

Page 483

For Randolph Blum, Plaintiff: Jason Mitchell Baxter, Jason M. Baxter, Esq., New York, NY.

For Spaha Capital Management, LLC, John Van Clief, Defendants: Tristan C. Loanzon, LEAD ATTORNEY, Loanzon LLP, New York, NY.

Page 484

OPINION AND ORDER

GABRIEL W. GORENSTEIN, United States Magistrate Judge.

Plaintiff Randolph Blum brought this diversity action against defendants John

Page 485

VanClief and Spaha Capital Management, LLC (" Spaha" ) raising claims for breach of contract, breach of fiduciary duty, and unjust enrichment. Both sides have moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the following reasons, Blum's motion is granted in part and denied in part, and defendants' motion is granted in part and denied in part.

I. BACKGROUND

A. Facts

In this case, each side submitted a statement of material facts pursuant to Local Civil Rule 56.1 in which they supported some or all of their statements of material fact with citations to admissible evidence as required by Local Civil Rule 56.1(d). However, while each side submitted a counterstatement purporting to controvert the material facts listed by the other side, neither side (with limited exceptions not relevant to this ruling) followed any of the paragraphs of the counterstatement with " citation[s] to evidence which would be admissible, set forth as required by Fed.R.Civ.P. 56(c)." See Local Civil Rule 56.1(d). Accordingly, the statements of material fact in each side's Rule 56.1 statements are deemed admitted. See Lorterdan Props. at Ramapo I, LLC v. Watchtower Bible & Tract Soc'y of N.Y., Inc., 2012 WL 2873648, at *1 n.1 (S.D.N.Y. July 10, 2012) (plaintiff's statements " deemed admitted" because " [d]efendant failed to adhere to Federal Rule of Civil Procedure 56(c) and Local Rule 56.1(d) in that it did not cite to admissible evidence in support of its statements denying [p]laintiff's statements of material fact" ); Guarino v. St. John Fisher Coll., 553 F.Supp.2d 252, 253-54 (W.D.N.Y. 2008) (" deem[ing] Defendant's factual assertion admitted" where plaintiff failed to cite to admissible evidence ), aff'd, 321 F.App'x 55 (2d Cir. 2009).

Blum is a resident of Nevada, VanClief is a resident of New York, and Spaha is a New York limited liability company. See Complaint, filed June 4, 2013 (Docket # 1) (" Compl." ), ¶ ¶ 2-4. In 2004, Blum's friend Richard Andriola suggested that Blum contact VanClief about an investment opportunity in a company called Virtual Scopics. See Declaration of Randolph Blum, filed Mar. 27, 2014 (Docket # 24) (" Blum Decl." ), ¶ 1.[1] Andriola informed Blum that VanClief was a Senior Vice President in Institutional Sales at Matrix Investment Research/ Matrix USA LLC. Id. ¶ 2. Blum followed his friend's advice and invested in Virtual Scopics through VanClief, id. ¶ 4, and later invested in an entity called " DAIS" through VanClief, id. ¶ 5.

In 2006, VanClief informed Blum that another company called Woodward Skate Parks (" Woodward" ) was " offering investment

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opportunities at '50 cents per share, 50% warrant coverage,' along with '8%'." Id. ¶ 6 (citing Plaintiff's F.R.C.P. 26 Disclosure, dated Aug. 21, 2013 (annexed as Ex. 1 to Defendants' Rule 56.1 Statement, filed Mar. 7, 2014 (Docket # 19) (" Def. 56.1 Statement" )) (" Pl. Disclosure" ), at 8. " [Blum] agreed to invest the money that [VanClief] had on account for [Blum] from the sale of the prior shares and additional cash that [Blum] sent to [VanClief], with the understanding that [Blum] would receive 246,000 shares, warrants for 123,000 shares, and 8% on [his] investment in exchange for $123,000.00." Id. ¶ 7 (citing Pl. Disclosure at 17); see also Defendants' Rule 56.1 Statement in Response to Plaintiff's Cross-Motion Rule 56.1 Statement, filed Apr. 7, 2014 (Docket # 29) (" Def. 56.1 Reply" ), ¶ 21. Blum alleges that he considered VanClief to be his broker in this deal and thus relied on VanClief " to execute the deal as he agreed." Blum Decl. ¶ 8; see also Def. 56.1 Reply ¶ 22. VanClief " informed [Blum] that [he] would receive shares at 50 cents a share, 50% in warrants, and interest of 8%." Blum Decl. ¶ 9; Plaintiff's Counter 56.1 Statement, filed Mar. 28, 2014 (Docket # 27) (" Pl. 56.1 Statement" ), ¶ 23. While defendants have not properly controverted Blum's Rule 56.1 statement on this issue, defendants have introduced as exhibits two subscription agreements that they allege evidence Blum's acquisition of the 246,000 shares in Woodward but not the warrants for 123,000 shares. See Declaration of John VanClief in Support of Defendants' Spaha Capital and John VanClief's Motion for Summary Judgment, filed Mar. 7, 2014 (Docket # 20) (" VanClief Decl." ), ¶ ¶ 5-6. Both agreements are signed bye Blum, but not by a representative of Woodward. See Subscription Agreement and Accredited Investor Questionnaire, dated May 23, 2006 (annexed as Ex. 3 to Def. 56.1 Statement); Subscription Agreement and Accredited Investor Questionnaire, dated May 23, 2006 (annexed as Ex. 4 to Def. 56.1 Statement).

After receiving 246,000 shares in Woodward, Blum emailed VanClief to inquire about the warrants for the other 123,000 shares. See Blum Decl. ¶ 11 (citing Pl. Disclosure at 24). In response, VanClief " confirmed that [Blum] was still owed 123,000 shares for 50% warrants." Id. ¶ 12. Blum's papers cite to an instant messenger conversation between Blum and VanClief from May 27, 2007, in which Blum asked, " what about my 123 extra shares," and VanClief replied, " ur extra shares I think will be a dividend in retail." Pl. Disclosure at 28. Blum then asked, " that was the 50% on top on the 246," and VanClief responded, " I guess that is it--correct 123." Id. Blum ended the conversation by writing, " Get me my extra ww share" and to which VanClief replied, " will do!" Id. at 29. In a separate conversation dated July 25, 2007, VanClief told Blum that he was " working on the 123K," presumably referring to the warrant shares. Id. at 32. Similarly, in an email dated July 30, 2007, VanClief wrote, " [r]egarding the WW shares, I am checking into it . . . so give me a bit of time and I will get it done." Id. at 36.[2] Blum also asked VanClief " about the 8% that was supposed to be paid on the investment." Blum Decl. ¶ 13 (citing Pl. Disclosure at 30).

Blum continued to ask VanClief about the warrant shares and the 8% return for

Page 487

" about three years," but " [e]very time [he] asked [VanClief] about these issues, [VanClief] would promise to do something about it, but never did." Id. ¶ 14.[3] According to VanClief, on December 13, 2007, Woodward filed for Chapter 11 bankruptcy, and " Blum's interest in Woodward . . . was part of the bankruptcy filing." VanClief Decl. ¶ 9. At this point, Spaha purchased Woodward through the bankruptcy process, id. ¶ 10, and " agreed to carry Blum's investment in Woodward," id. ¶ 11. When Blum's investment was originally made in 2006, however, neither VanClief nor Spaha had any interest in Woodward. See id. ¶ 8.

At some unspecified point after the three-year period in which Blum sought relief from VanClief, Blum asked VanClief if he " would agree to take the shares back and pay [Blum] the money that [he] was owed for the shares and the 8%." Blum Decl. ¶ 15. According to Blum, " in April 2010, [VanClief] agreed to send [Blum] the 123,000 shares that [he] was owed." Id. ¶ 16; see also id. ¶ 17; Pl. Disclosure at 59-60. But when VanClief purported to send Blum a package containing the shares in June 2010, Blum in fact received " a certificate that purported to be worth 54,000 shares of [Woodward], but which . . . was simply a fake document printed by [VanClief] himself." Blum Decl. ¶ ¶ 19-20.[4]

Blum asserts, " [o]n September 1, 2011, I had a phone conversation with [VanClief] and a financial advisor named Mike Hood, in which [VanClief] acknowledged that he had breached his financial duty to me as my broker to obtain the correct number of shares and [VanClief] agreed to buy out all of the shares that I had bargained for totalling [sic] 369,000 in return for $269,000.00." Blum Decl. ¶ 26. In support of this, Blum cites to an email he sent to VanClief on September 6, 2011, stating, " We are waiting for your emailing documenting our telephone conversation that occurred on 1Sept11. During this conversation you offered me a pre-IPO buyout of all my shares of WW(369,000) for $269,000 within 30 days." Pl. Disclosure at 90. According to Blum, VanClief then prepared and sent to Blum on September 15, 2011, a preliminary agreement regarding the alleged buyout. See Blum Decl. ¶ 27; Def. 56. Reply ¶ 41 (admitting this contention).

Two documents in the record appear to be preliminary drafts of the alleged buyout agreement -- neither of which bears a signature of any party. The first document -- titled " Stock Purchase Agreement" -- refers to Blum as the " seller" and states, " Purchaser shall purchase from Seller 369,000 shares of Common stock, issued by [Spaha] dba [Woodward], in consideration of a promissory note in the amount of $267,500.00 . . . secured by a pledge of the stock." Pl. Disclosure at 93. The second document -- titled " Stock Purchase and Indemnification Agreement" -- states, " whereas . . . [i]t is the sole intent to repurchase from Randolph Blum his interests and 369,000 shares of [Spaha] dba [Woodward] . . . Blum will ask for $267,500 for his entire interest and/or negotiate the best offer for the buyer and seller between all parties involved . . . and said parties will attempt to have the said stock purchase agreement reached and completed by October 31, 2011." Id. at 95.

Page 488

Frustrated that this first draft of the agreement would only give him a promissory note in exchange for his shares, Blum wrote an email to VanClief on September 15, 2011, stating, " Do not try to BS me or Mike. Make the contract very very simple -- On this date Randolph Blum will receive $269,750.00 in CASH for 369,000 shares of WW." Id. at 102. On September 23, 2011, VanClief appears to have emailed to Blum a second draft of the agreement. See id. at 116. This revised draft states, " Purchaser shall purchase from [Blum] 369,000 shares of Common stock, issued by [Spaha] dba [Woodward], in consideration for cash in the amount of $269,750.00 . . . secured by a pledge of the stock." Id. at 118. Blum signed this document and the accompanying " Stock Purchase Contract," which declares that " Blum will receive . . . $269,750 for his entire interest" and that " Blum and Purchaser will agree to terms and thus execute the stock purchase agreement." Id. at 119. However, neither of these documents were signed by anyone on behalf of Spaha. See id. at 118-19. Blum again spoke with VanClief on the phone on September 30, 2011, during which VanClief " proposed to pay [Blum] the amount of $300,000.00 for the shares and for the 8% interest that [Blum] was owed for [his] initial investment of $123,000.00." Blum Decl. ¶ 28.[5]

On November 2, 2011, VanClief sent Blum what appears to be the final draft of the agreement, which is the document that Blum relies on for his breach of contract claim. See Pl. Disclosure at 140. This document -- which we refer to as the " Contract" even though its validity is disputed -- is not formatted in a manner similar to the agreements just described. Instead, it is in the form of a letter on the letterhead of " Spaha Capital Management LLC." See id. at 148. The substantive portion of the Contract states as follows:

This contract stipulates that payment of $150,000 is due from Spaha Capital Management, LLC to Mr. Blum on November 7th, 2011. Subsequent payment of an additional $150,000 to Mr. Blum is due on November 11th, 2011. Said payments can be broken up into traunches [sic] as they fund into Spaha Capital Management, LLC to Mr. Blum as long as they total $300,000 by November 11, 2011. ...

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