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Casolaro v. Armstrong

United States District Court, E.D. New York

December 29, 2014

CHARLES JOHN CASOLARO, individually, CASOLARO & ASSOCIATES, P.C., CHARLES JOHN CASOLARO, as the legal guardian of Albert Casolaro, GENE GREGORY VOULO, individually, and SOUTHFORK EQUITY GROUP, LLC, Plaintiffs,
SCOTT ARMSTRONG, individually, and THALIA STREET, LLC, Defendants

For Charles John Casolaro, individually, Casolaro & Associates, P.C., Charles John Casolaro, as the Legal Guardian of Albert Casolaro and the Administrator of the Estate of Albert Casolaro, Gene Gregory Voulo, individually, Southfork Equity Group, LLC, Plaintiffs: Christine Helen Price, Steven G. Leventhal, LEAD ATTORNEYS, Leventhal and Sliney, LLP, Roslyn, NY; Ralph M. Cursio, LEAD ATTORNEY, Leventhal, Cursio, Mullaney & Sliney, LLP, Roslyn, NY; Thomas J. Mullaney, LEAD ATTORNEY, Leventhal, Sliney & Mullaney, LLP, Roslyn, NY.

For Scott Armstrong, individually, Thalia Street, LLC, Defendants: Kenneth F. McCallion, McCallion & Associates LLP, New York, NY.


PAMELA K. CHEN, United States District Judge.

This case involves a poorly-drafted settlement agreement executed by Plaintiffs and Defendants to resolve a dispute over a financial transaction previously entered into by the parties. In 2009, Plaintiffs Charles Casolaro and Gene Voulo, on behalf of themselves, their respective companies and Casolaro's father, purchased a tranche of a collateralized mortgage obligation (" CMO") through Defendants Scott Armstrong and his company, Thalia Street LLC. With Casolaro's consent, Armstrong subsequently invested the tranche abroad. The transaction did not proceed as Plaintiffs expected, and in 2010, Armstrong agreed to buy Plaintiffs out of the transaction. The parties executed a Settlement Agreement whereby Plaintiffs would sell their tranche to Defendants and release any potential claims against Defendants, in exchange for Defendants' payment of $420, 000 by a specific date.

When Defendants failed to pay Plaintiffs by the date set forth in an amendment to the Settlement Agreement, Plaintiffs brought this diversity action, alleging breach of contract and other claims.[1] The dispute before the Court is one of contract interpretation: are Plaintiffs' transfer of the CMO tranche and release of claims against Defendants triggered by the execution of the agreement or by Defendants' payment of the $420, 000 (which has not yet occurred)? Each side argues for a reading of the Settlement Agreement that is not entirely consistent with its text. Based on certain provisions in the contract, Plaintiffs contend that transfer and release took place upon execution of the agreement; thus Plaintiffs have fully performed under the agreement, and Defendants, by not paying the $420, 000, are in breach of the agreement. Based on other provisions of the agreement, Defendants contend that transfer and release only take place upon Defendants' payment of the $420, 000. Thus, according to Defendants, Plaintiffs have not satisfied their obligation to perform, i.e., transfer ownership of the CMO tranche to Defendants and release all claims against Defendants, because Defendants have not paid; therefore Plaintiffs cannot recover for breach of contract.

The Honorable Dennis Hurley, who previously presided over this case, [2] denied Plaintiffs' attempts to resolve the case on summary judgment, finding the record insufficient to support Plaintiffs' interpretation of the agreement. Casolaro v. Armstrong, No. 10-cv-4276, 2012 WL 976063 (E.D.N.Y. Mar. 22, 2012) (" Casolaro I ") (denying Plaintiffs' first motion for summary judgment on Plaintiffs' claim for breach of contract); Casolaro v. Armstrong, No. 10-cv-4276, 2012 WL 6093778 (E.D.N.Y. Dec. 7, 2012) (" Casolaro II ") (denying Plaintiffs' renewed motion for summary judgment on same claim). Accordingly, this Court conducted a one-day bench trial on November 17, 2014 to develop the record on the Settlement Agreement's ambiguous language and the parties' intent in executing the agreement. The trial focused solely on the Plaintiffs' breach of contract claim.

The Court now issues its findings of fact and conclusions of law. The Court finds that the Settlement Agreement is not ambiguous on the issue of Plaintiffs' release of claims; the Settlement Agreement and its subsequent amendment clearly state that release shall take place upon Defendants' payment. Thus, because Defendants' payment has not yet occurred, Plaintiffs have not released their claims.

However, the Court agrees with Judge Hurley's prior ruling of ambiguity with respect to the transfer of the CMO tranche. After reviewing extrinsic evidence to determine the parties' intent, the Court determines that the parties' goal in executing the Settlement Agreement was to allow Plaintiffs to exit the transaction through a buy-out by Defendants. To best achieve this intent, the Court resolves the Settlement Agreement's ambiguity in Plaintiffs' favor, finding that they relinquished right, title and interest to their CMO tranche when the parties executed the Settlement Agreement on June 11, 2010. This conclusion is further bolstered by Defendants' post-contract conduct and the parties' prior course of dealing, which show that Armstrong has been acting as the owner of Plaintiffs' CMO tranche following the execution of the Settlement Agreement and its amendment.

Finally, the Court determines that Plaintiffs' recovery is not barred despite the fact that their performance is technically incomplete. The only reason that Plaintiffs have not been able to release their claims is because Defendants have not paid. New York law is clear that a party's failure to perform will not be fatal to its recovery " where a defendant's conduct was an impediment to performance and where Plaintiff was otherwise ready, willing, and able to perform." Exportaciones Del Futuro S.A. de C.V. v. Iconix Brand Grp. Inc., 636 F.Supp.2d 223, 229-30 (S.D.N.Y. 2009). Therefore, for the reasons set forth below, the Court hereby awards judgment to Plaintiffs on their breach of contract claim.


A. The Parties

Plaintiff Charles John Casolaro (" Casolaro") is an attorney who created the law firm Casolaro & Associates, P.C., also a plaintiff in this action. (Tr. 19.[3]) In 2009, Casolaro was the legal guardian of his father, Albert Casolaro, and became administrator of the estate of Albert Casolaro in September 2010 after his father's passing. (Tr. 19.)

Plaintiff Gene Gregory Voulo (" Voulo") is Casolaro's brother-in-law. (Tr. 20, 50.) Voulo is a medical doctor and also the managing member of Plaintiff Southfork Equity Group, a real estate company in Long Island. (" Southfork Equity"). (Tr. 50.) Voulo did not testify before the Court.

Defendant Scott Armstrong (" Armstrong") is a medical sales professional who conducted trades and made investments through Defendant Thalia Street LLC (" Thalia Street"). (Tr. 46-47.) Thalia Street LLC is now defunct. (Tr. 8.)

B. The CMO Transaction

In 2009, Armstrong purchased a tranche of a CMO to be traded abroad (" the Armstrong tranche"). (Tr. 130-31.) It came from a CMO numbered 44628FAK7 (" the FAK7 CMO"), and purportedly had a face value of $324 million. (Tr. 130, 137; Pl. Ex. 3, Letter from Brendan Cook to Nicoklas Kangerlaris (Nov. 6, 2009).)

As Armstrong prepared to invest his tranche, Voulo, whom he knew from an existing business relationship, introduced him to Casolaro. (Tr. 129.) Casolaro and Voulo sought to participate in a similar transaction. (Tr. 21, 130-32.)

After some discussion among the three men, Armstrong facilitated Plaintiffs' purchase of a tranche from the FAK7 CMO (" the Casolaro tranche"). (Tr. 21-2, 130-32; Def. Ex. B Master Fee Protection Agreement (Apr. 8, 2009) (" Master Fee Agreement").) Plaintiffs purchased the other half of the FAK7 CMO for $400, 000, with money from Casolaro & Associates, Southfork Equity, Albert Casolaro's guardianship funds, and Casolaro's personal funds. (Tr. 44, 112-13.) The Casolaro tranche purportedly had a face value of $305 million. (Tr. 137.) It was purchased by Thalia Street, which was the entity listed as its record owner. (Tr. 73, 168, 207; Court Ex. 1, Deposition of Michael DeNio at 52 (Jul. 17, 2013) (" DeNio Dep.").)

Before trading the Casolaro tranche abroad, Armstrong secured Casolaro's consent to do so. (Tr. 99-100.) Casolaro consented to the transfer of the Casolaro tranche from Thalia Street's account at Transcend Capital in Dallas to a sub-account held by Atlas Treasury, located at Geniki Bank in Greece. (Tr. 99; Def. Ex. A, Consent by Charles J. Casolaro (May 29, 2009) (" Casolaro Consent").) Armstrong sought Casolaro's consent because he viewed Casolaro as the owner of the tranche and thus needed Casolaro's approval. (Tr. 134 (" After all, this is his instrument. I need his approval"); 174 (" I can't send his CMO somewhere just because I want to send mine.").)

After receiving Casolaro's approval, Armstrong arranged for the Casolaro tranche and the Armstrong tranche to be sent electronically to Atlas Treasury to be monetized. (Tr. 99-100, 135-36.) The parties expected to ...

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