United States District Court, S.D. New York
Christopher E. Dervan, Plaintiff,
Gordian Group LLC, Defendant.
OPINION & ORDER
J. NATHAN, District Judge.
Christopher E. Dervan ("Plaintiff or "Dervan")
brings this diversity action against his former employer,
Gordian Group LLC ("Defendant" or
"Gordian"), asserting claims for breach of the
parties' December 2010 severance agreement (the
"Agreement") and unjust enrichment. Before the
Court is Gordian's motion to dismiss Dervan's Second
Amended Complaint, Dkt. No. 17 ("SAC"). For the
reasons set forth below, Gordian's motion is GRANTED in
part and DENIED in part.
otherwise noted, the following facts are taken from the SAC
or from the Agreement, which is attached as Exhibit 1 to the
SAC, see Dkt. No. 17-1.
was employed by Gordian, an investment bank, as an Associate
and then a Vice President from July 24, 2006 to December 17,
2010. SAC ¶ 5. In connection with Dervan's departure
from the firm, the parties entered into the Agreement, which
was memorialized in a December 23, 2010 letter from
Gordian's President, Peter S. Kaufman, to Dervan. SAC
¶ 6. The Agreement sets forth terms by which Gordian
would continue to provide Dervan with certain monetary
compensation and benefits following the termination of his
employment. Agreement at 1. As relevant here, Paragraph 2 of
the Agreement provides:
If you [(Dervan)] choose to continue to work with us
[(Gordian)] as an outside consultant in regards to Thermacell
through the closing of any transaction that generates a fee,
then you will be entitled to 25% of any such fees received by
SAC ¶ 7; Agreement ¶ 2. The terms "work,
" "consultant, " and "transaction"
as used in Paragraph 2 are neither defined nor otherwise
clarified in the Agreement. The word "Thermacell, "
as used in Paragraph 2, is also not defined in the Agreement,
but is alleged by Dervan to refer to "certain technology
and related products and businesses using that technology
then owned by The Schawbel Corporation." SAC ¶ 7.
Agreement does not expressly require Dervan to maintain or
acquire any license or other regulatory authority or
clearance in connection with performing any of the
"work" referenced in Paragraph 2. See
generally Agreement; see also SAC ¶ 15.
The Agreement contains a merger clause, which provides that
the terms of the Agreement are limited to those set forth
within the four corners of the written instrument and that no
extrinsic materials or prior negotiations or agreements
constitute part of the contract between the parties.
Agreement ¶ 14.
the termination of his employment, Dervan did in fact choose
to work as an outside consultant to Gordian with regard to
Thermacell. SAC ¶ 8. Dervan alleges that in that
capacity he provided "valuable services, as appropriate
and as requested by Defendant." SAC ¶¶ 8-9.
The SAC does not describe Dervan's services in any
detail, other than to allege that they did not involve
"interacting] with customers or potential investors
regarding the offer or sale of securities." Id.
the course of his post-termination work for Gordian, Dervan
was not registered as a broker-dealer under Section 15(a) of
the Securities Exchange Act of 1934 (the "Exchange
Act") or otherwise registered in any way with the
Financial Industry Regulatory Authority ("FINRA").
Id. ¶ 16. It is alleged that Gordian was
contemporaneously aware of that fact, and did not suggest
that Dervan was in any way required to be so registered or
that registration was a condition to Dervan receiving
compensation pursuant to the Agreement. Id.
work ultimately helped Gordian to close a transaction in
approximately July 2014 by which an entity affiliated with
the private equity firm Kinderhook Industries acquired The
Schawbel Corporation's "Thermacell Mosquito
business" (the "Thermacell Transaction").
Id. ¶¶ 9-10. Dervan alleges on information
and belief that Gordian was paid a fee of $1.25 million or
more upon closing of the Thermacell Transaction. Id.
¶ 11. Dervan demanded that Gordian pay him twenty-five
percent of that fee pursuant to the Agreement, but Gordian
refused. Id. ¶ 13.
initiated this action on March 5, 2016, asserting claims for
breach of contract and unjust enrichment. Dkt. No. 1. Gordian
now moves pursuant Federal Rule of Procedure 12(b)(6) to
dismiss Dervan's SAC in its entirety. Gordian argues
principally (i) that the SAC inadequately pleads Dervan's
own performance under the Agreement, (ii) that Dervan's
failure to register with FFNRA renders enforcement of the
Agreement's terms illegal, thereby precluding both a
breach of contract claim and an unjust enrichment claim
arising from the same facts, and (iii) that the unjust
enrichment claim is, in any event, impermissibly duplicative.
Standard of Review
order to survive a motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6), a plaintiff must plead
"sufficient factual matter, accepted as true, to
'state a claim to relief that is plausible on its
face.'" Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atlantic Corp. v. Twombly,
550 U.S. 544, 570 (2007)). "A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged."
Id. "The plausibility standard is not akin to a
'probability requirement, ' but it asks for more than
a sheer possibility that a defendant has acted unlawfully.
Where a complaint pleads facts that are 'merely
consistent with' a defendant's liability, it
'stops short of the line between possibility and
plausibility of entitlement to relief" Id.
(quoting Twombly, 550 U.S. at 557) (additional
internal quotation marks omitted).
deciding a motion to dismiss, a court is required to
"accept the complaint's factual allegations as
true and draw all reasonable inferences in the plaintiffs
favor." Steginsky v. Xcelera, Inc. 741 F.3d
365, 368 (2d Cir. 2014). It should not, however, give
"effect to legal conclusions couched as factual
allegations." Port Dock & Stone Corp. v.
Oldcastle Northeast, Inc., 507 F.3d 117, 121 (2d Cir.
2007). At the pleading stage, the court generally "must
limit its analysis to the four corners of the
complaint." Vassilatos v. Ceram Tech Int'l
Ltd., 92-cv-4574, 1993 WL 177780, at *5 (S.D.N.Y. May
19, 1993) (citing Kopec v. Coughlin, 922 F.2d 152,
154-55 (2d Cir. 1991)). However, it may "consider
'documents attached to the complaint as an exhibit or
incorporated in it by reference, matters of which judicial
notice may be taken, or documents either in plaintiffs'
possession or of which plaintiffs had knowledge and relied on
in bringing suit.'" Chambers v. Time Warner,
Inc., 282 F.3d 147, 153 (2d Cir. 2002) (internal
alterations omitted) (quoting Brass v. Am. Film Techs.,
Inc., 987 F.2d 142, 150 (2d Cir. 1993)). Here,
accordingly, the Court may consider the Agreement, which as
noted is attached as Exhibit 1 to the SAC.
Dervan Fails to Plausibly Allege His Own Performance Under
argues that the SAC fails to adequately plead Dervan's
own performance under the Agreement. Specifically, Gordian
maintains that the SAC is devoid of "well-pleaded facts
providing even the most basic description of the services
[Dervan] supposedly performed" for Gordian and,
furthermore, that it does not specifically allege that Dervan
provided any such services "through the closing" of
the Thermacell Transaction, as purportedly required to merit
compensation under the express terms of the Agreement.
See Defendant Gordian's Memorandum of Law in
Support of its Motion to Dismiss Plaintiffs Second Amended
Complaint, Dkt. No. 20 ("Br."), at 3-4.
responds primarily that his own performance under the
Agreement is a "condition precedent" to suit and
therefore may be "allege[d] generally" under
Federal Rule of Civil Procedure 9(c). Plaintiffs Memorandum
of Law in Opposition to Defendant's Motion to Dismiss the
Second Amended Complaint, Dkt. No. 24 ("Opp."), at
6-7. As such, Dervan maintains, allegations that he
"serv[ed] as an outside consultant with Defendant in
regard to Thermacell" and "provided valuable
services, as appropriate and as requested by Defendant,
" SAC ¶ 9, along with the general averment that
"[a]ll conditions precedent to Defendant's
contractual obligation to pay Plaintiff his twenty-five
percent share of the fees received from the [Thermacell
Transaction] have occurred, " id. ¶ 20,
are sufficient to survive a motion to dismiss. Opp. at 5-7.
The unmistakable, if implicit, premise of Dervan's
argument is that, by virtue of Rule 9(c), conditions
precedent are subject to a lesser pleading requirement than
the plausibility standard embodied in Rule 8(a). The Court
preliminary matters are not disputed. In order to
successfully state a claim for breach of contract under New
York law,  a complaint must allege: "(1) the
existence of an agreement, (2) adequate performance of the
contract by the plaintiff, (3) breach of the contract by the
defendant, and (4) damages." Eternity Global Master
Fund Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d
168, 177 (2d Cir. 2004) (internal quotation marks omitted).
"Although the substantive merits of any contract claim
are governed by New York law, any pleading requirements are
governed by federal law, which controls procedural matters in
diversity cases." Mendez v. Bank of Am. Home Loans
Servicing, LP, 840 F.Supp.2d 639, 647 (E.D.N.Y.2012);
see also Biro v. Conde Nast, 807 F.3d 541, 544 (2d
Cir. 2015) ("federal pleading rules and standards . ..
prevail in all civil actions, including diversity
litigation") (internal quotation marks and citations
omitted). Federal Rule of Civil Procedure 9(c) provides that
"[i]n pleading conditions precedent, it suffices to
allege generally that all conditions precedent have occurred
or been performed. But when denying that a condition
precedent has occurred or been performed, a party must do
with particularity." Fed.R.Civ.P. 9(c). When a contract
expressly makes payment by the defendant contingent on the
plaintiffs performance of specified services - as does the
Agreement at issue here - the plaintiffs performance
qualifies as a condition precedent. See, e.g.,
Oppenheimer & Co., Inc. v. Oppenheim, Appel, Dixon &
Co., 86 N.Y.2d 685, 690, 660 N.E.2d 415, 418, 636
N.Y.S.2d 734, 737 (1995) ("[a] condition precedent is an
act or event, other than a lapse of time, which, unless the
condition is excused, must occur before a duty to perform a
promise in the agreement arises") (internal quotation
marks omitted); cf. Allis-Chalmers Mfg. Co. v. Malan
Const. Corp., 30 N.Y.2d 225, 231 n.4, 282 N.E.2d 600,
602, 331 N.Y.S.2d 636, 639 (1972) (rejecting argument that
the term "conditions precedent, " as used in the
pleading rules set forth in CPLR 3015, "has reference to
conditions precedent to the existence of a contract" but
"not as to one party's performance under the
contract"); 22 NY. Jur. 2d Contracts § 262 (2d ed.
2017) ("If one covenant precedes performance of the
other, or is concurrent therewith, and is necessary or proper
to enable the other to be performed, or relates to such
performance, it or its performance is a condition
precedent."). Therefore, by the plain terms of Rule
9(c), Dervan's own performance may indeed, as he
suggests, be "alleged generally."
critical question, however, is precisely what that means.
the Supreme Court established the plausibility pleading
standard under Federal Rule of Civil Procedure 8(a) in
Twombly and Iqbal, courts in this Circuit
have largely, although not uniformly, taken the view urged by
Dervan - that is, notwithstanding the seemingly broadly
applicable requirements of Rule 8(a), only "at most, a
general averment to the satisfaction of any conditions
precedent" is required to withstand a motion to dismiss
under Rule 12(b)(6). Superior Site Work, Inc. v. Nasdi,
LLC, 14-cv-1061, 2016 WL 526238, at *6 (E.D.N.Y. Feb. 9,
2016) (internal quotation marks omitted); see also In re
Residential Capital, LLC, 524 B.R. 563, 584 (Bankr.
S.D.N.Y. 2015) ("Courts in the Second Circuit are
largely in agreement that a general allegation that all
conditions precedent have been met is sufficient to satisfy
Rule 9(c).") (internal quotation marks and alteration
omitted); Beautiful Home Textiles (USA), Inc. v.
Burlington Coat Factory Warehouse Corp., 13-CV-1725,
2013 WL 3835191, at *3 (S.D.N.Y. Jul. 25, 2013) ("In
this Circuit, a general allegation that all conditions
precedent have been met... is sufficient to satisfy Rule
9(c)"); Mendez v. Bank of Am. Home Loans Servicing,
LP, 840 F.Supp.2d 639, 647 (E.D.N.Y. 2012) (collecting
cases and noting that "it is clear that even where
courts require allegations in the complaint with regard to
the satisfaction of conditions precedent, courts have
consistently accepted only general averments of their
fulfillment"). The Court of Appeals has not interpreted
Rule 9(c) in the wake of Twombly and Iqbal;
indeed, "there is scant binding case law in this Circuit
regarding [Rule 9(c)]" more generally. Superior Site
Work, 2016 WL 526238, at *6; see also Mendez,
840 F.Supp.2d at 648 ("There is little case law in this
Circuit regarding this particular provision of the Federal
Rules."); Ackerley Media Gr., Inc. v. Sharp Elecs.
Corp., 170 F.Supp.2d 445, 453 (S.D.N.Y. 2001)
("Perhaps because [the] language [of Rule 9(c)] is so
straightforward, there is relatively little case law
interpreting this rule. The court knows of no Second Circuit
case passing on the matter...."). At least two other
courts of appeals, however, have adopted what can only be
characterized as the prevailing view among the District
Courts of this Circuit. See Hildebrand v. Allegheny
Cty., 757 F.3d 99, 112 (3d Cir. 2014) (under Rule 9(c),
"the pleading of conditions precedent falls outside the
stricture of Iqbal and Twombly"); Myers v.
Central Fla. Invs., Inc., 592 F.3d 1201, 1224 (11th Cir.
2010) (post-Twombly/Iqbal decision concluding that
plaintiffs "general statement" that she had
"fulfilled all conditions precedent to institution of
this action" was "sufficient to discharge her duty
under Rule 9 of the Federal Rules of Civil Procedure").
analytic rationale for this conclusion, to the extent it is
expressly articulated in the case law, would appear to be
neatly summarized in the Third Circuit's
Iqbal and Twombly interpreted Federal Rule
of Civil Procedure 8(a), which governs the standard for
pleading a claim for relief. The pleading of conditions
precedent is governed by Rule 9(c), not Rule 8(a). Neither
Iqbal nor Twombly purport to alter Rule 9.
We see no indication that those ...