Spencer Trask Software & Information Services LLC v. RPost International Ltd.
Spencer Trask Software & Information Services LLC v. RPost International Ltd.
Opinion of the Court
OPINION AND ORDER
Defendants RPost International Limited, Zafar Kahn, Terry Tomkow, and Ken Barton (collectively “RPost”) move to dismiss this action brought by Spencer Trask Software and Information Services, LLC and Spencer Trask Ventures, Inc. (collectively “Spencer Trask”), pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, defendants’ motion to dismiss is granted in part and denied in part.
Thereafter, on March 18, 2002, plaintiffs filed an Amended Complaint, adding claims for securities fraud and common law fraud. As a result, defendants withdrew their motion to dismiss in order to address the new issues raised in the plaintiffs’ Amended Complaint. Defendants then brought this motion to dismiss the plaintiffs’ Amended Complaint, and moved this Court for a stay of discovery during the pendency of their motion to dismiss. On April 8, 2002, the Court granted the latter portion of said motion and entered a stay of discovery pending disposition of the motion to dismiss.
BACKGROUND
On a motion to dismiss, the plaintiffs’ well-pleaded allegations in their Amended Complaint are assumed to be true. Rothman v. Gregor, 220 F.3d 81, 91 (2d Cir. 2000). Therefore the relevant facts, as alleged by the plaintiffs in their Amended Complaint, are as follows. Spencer Trask is an experienced venture capital investor that provides financing for emerging companies, particularly in the technology sector, and in return, Spencer Trask generally receives company stock. Plaintiffs’ First Amended Complaint (“Am.Comp.”) ¶ 19. RPost is a start-up internet company which aims to provide an electronic mail service for sending “registered emails” with security similar to registered mail sent through traditional postal services. Id. ¶ 20. In July 2001, RPost circulated an offering memorandum (the “July Memorandum”) among investors, seeking investors to complete its Series B round of financing-a private placement of convertible debt of up to $2 million. The proposed terms for investment called for the Series B notes to convert into shares in RPost at a 50% discount to the closing price in RPost’s later Series C round of financing. The July Memorandum made numerous representations about the company: listing the “Directors and Advisors” of RPost and describing their backgrounds, and including in that group Marvin Runyon, a former Postmaster General of the United States. Id. ¶ 22. The July Memorandum also listed Brigadier General Richard W. Pryor (Ret.), a former President of WorldCom, as the “Interim CEO” of RPost, and included him in the list of people identified under a heading titled “Team—Founders and Leadership Team”. Id. ¶ 23. The July Memorandum made representations concerning RPost’s relationship with the United States Postal Service (USPS), stating that RPost offered registered e-mail “in partnership with the USPS,” and representing that their “partnership was on the cusp of completion.” Id. ¶ 25. Furthermore, the July Memorandum made representations concerning RPost’s capitalization, stating that the authorized capital stock of the company consisted of 120,000,000 “ordinary” shares, of which approximately 21,000,000 were issued and outstanding. Id. ¶ 27.
On August 13, 2001, Kevin Kimberlin, Chairman of Spencer Trask & Co., and Danny Zottoli, Chief Executive Officer of Information Services, met with defendants Kahn and Barton, two of the three founders of RPost. Kahn explained that RPost was raising a “Series B” round of financing, but was in need of further financing to
After Kimberlin and Kahn shook hands on the August Agreement, Kimberlin asked Zottoli to draw up the terms to which they had agreed. David Hochman, a Managing Director at Spencer Trask & Co., drew up four short letter agreements to document the deal; and Hochman and Zottoli then telephoned Kahn and walked him through each sentence reflected in the letter agreements. Kahn told them that the terms in the letters were satisfactory. Hochman then sent the draft letter agreements to Kahn via e-mail on August 23, 2001. These proposed letter agreements summarized the parties’ discussions regarding Spencer Trask’s purchase of the founders’ shares in RPost, provided for payment of $200,000 in cash by Spencer Trask “[o]n execution,” and concluded with the sentence, “We are prepared to move promptly to consummate this transaction following the execution of this letter.” Draft agreements, attached as Ex. B to Affidavit of Kevin B. Kimberlin (“Kimber-lin Aff.”)
Over the next two months, RPost proposed some revisions to the terms of the August Agreement, some of which were material, but Spencer Trask did not accept the material changes. Am. Comp. ¶ 43. The parties never signed or executed any of the four letter agreements written by Hochman. RPost did not provide Spencer Trask with due-diligence materials until the second week of October, a full month after RPost had assured Spencer Trask that those materials would be sent, and those materials did not include several of the documents needed by Spencer Trask
On December 20, 2001, RPost sent Spencer Trask another offering memorandum, which was dated November 2001 (the “November Memorandum”). Like the July Memorandum, the November Memorandum made various representations concerning RPost’s management; its relationship with the USPS; and its capital structure. Am. Comp. ¶ 51.
Despite Spencer Trask’s repeated reminders of the need to receive additional information from RPost in order to complete the due diligence needed in order to close the August Agreement, defendants delayed providing that information and scheduling interviews, such that the due diligence was only finalized on January 9, 2002. Id. ¶ 66. However, on January 15, 2002, when Kimberlin met with Khan and Barton and stated that Spencer Trask was ready to proceed to the final closing of the remaining phases of the August Agreement, Barton told Kimberlin that their circumstances had changed and that they “did not need” that deal anymore. Id. ¶ 67.
In February 2002, Spencer Trask asked RPost a series of questions concerning its capitalization structure and corporate governance. Spencer Trask responded to those questions in a letter dated February 22, 2002, via its counsel Hill & Barlow, with the following information: (1) RPost had 21,645,000 shares of common stock issued and outstanding; (2) RPost had outstanding options exercisable for 686,000 shares of common stock; (3) RPost had reserved 9,564,000 additional shares under its option plan; (4) the three founders of the company-defendants Tomkow, Khan and Barton-were the only members of RPost’s board of directors; (5) RPost did not have an “Executive Committee”; (6) neither Mr. Runyon nor General Pryor were “current statutory officers” of RPost. Id. ¶ 69. In addition, the plaintiffs alleged that they learned information about the qualifications and background of Kahn and Barton that made RPost’s representations regarding these individuals in the July and November appear misleading. Id. ¶ 71. Plaintiffs continue to allege that as of March 12, 2002, RPost had still not finalized any agreement with the USPS. Id. ¶ 73.
DISCUSSION
A. Motion to Dismiss Standard
The Court may grant a motion to dismiss only if “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957);
In deciding a motion under Rule 12(b)(6), the Court may consider only the facts stated on the face of the complaint, documents appended to the complaint or documents incorporated by reference in the complaint. Schnall v. Marine Midland Bank, 225 F.3d 263, 266 (2d Cir. 2000). “[T]he complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference.” Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991); Fed.R.Civ.P. 10(c). When a party introduces matters extraneous to the pleadings, the Court must convert the motion to dismiss into a motion for summary judgment or exclude certain matters from consideration. See Fonte v. Bd. of Managers of Cont’l Towers Condominium, 848 F.2d 24, 25 (2d Cir. 1988); Fed. R.Civ. P. 12(b). However, the Second Circuit has held that “when a plaintiff chooses not to attach to the complaint or incorporate by reference a [document] upon which it solely relies and which is integral to the complaint,” the court may nevertheless take that document into consideration in deciding the defendants’ motion to dismiss, without converting the proceeding to one for summary judgment. Cortec Indus., 949 F.2d at 47-48; see also Int’l Audiotext Network, Inc. v. AT & T Co., 62 F.3d 69, 72 (2d Cir. 1995).
Spencer Trask asserts several claims seeking to enforce the alleged August Agreement with RPost: breach of contract, breach of implied contract, promissory estoppel, unjust enrichment, and breach of the duty of good faith and fair dealing. Defendants argue that all of Spencer Trask’s contract-based claims fail for two reasons: (1) the Amended Complaint and incorporated documents conclusively establish the absence of any claims as matter of law; and (2) the Statute of Frauds bars all of those claims. The Court will first address whether the Amended Complaint and the incorporated documents establish a claim upon which relief can be granted.
Defendants contend that the facts as alleged in the Amended Complaint and the documents incorporated by reference into the complaint show, as a matter of law, that RPost did not manifest an intent to enter into a binding agreement in their conversations with Spencer Trask on August 22, 2001, and therefore, Spencer Trask and RPost did not enter into a binding agreement as result of their oral discussions and handshake on that date. Consequently, defendants contend that plaintiffs cannot state a claim for breach of contract. While plaintiffs assert that the parties did enter into a binding preliminary agreement in their conversation on August 22, 2001, they argue that the issue of whether or not the parties intended to be bound in their August Agreement, and consequently, whether the August Agreement constitutes an enforceable contract, cannot be determined as a matter of law at this early stage of the litigation. See Plaintiffs’ Memorandum of Law in Opposition to Defendants’ Motion to Dismiss the First Amended Complaint (“P1.0pp.”) at 13. While the Court can make the determination of whether the parties intended to be bound in an alleged preliminary agreement on a motion to dismiss, courts are often reluctant to rule on the issue of intent to form a binding agreement in a judgment on the pleadings, and must be cautious in making such determinations. Advanced Marine Techs., 16 F.Supp.2d at 381 n. 27. In Advanced Marine Techs., the Court granted a 12(b)(6) motion to dismiss a breach of contract claim after concluding that the plaintiff could allege no set of facts to show that the defendants intended to be bound in their preliminary agreement. In that case, the Court disagreed with the plaintiffs interpretation of the Second Circuit’s language in Consarc Corp. v. Marine Midland Bank, 996 F.2d 568 (2d Cir. 1993), suggesting that summary judgment and, by a parity of reasoning, a motion to dismiss, may never be granted on the issue of intention to be bound. The Court stated that the proper reading of the language in Consarc would merely indicate that “courts must be cautious in granting summary judgment, perhaps especially so where the issue is intent, but summary judgment nevertheless may be appropriate in such a case if there is no genuine issue of material fact for trial.” Advanced Marine Techs., 16 F.Supp.2d at 381 n. 27. However, in cases where the intent to be bound is not conclusively determinable based on the facts alleged in the complaint and the documents incorporated by reference, “the issue of whether and when the parties intended to be bound is a factual issue that should [be] submitted to the jury.” Int’l Minerals &
Under New York contract law, parties may enter into a contract orally, even though they contemplate later memorializing their agreement in writing. See Ciaramella v. Reader’s Digest Ass’n, 131 F.3d 320, 322 (2d Cir. 1997).
In general, “preliminary manifestations of assent that require further negotiation and further contracts do not create binding obligations.” Shann v. Dunk, 84 F.3d 73, 77 (2d Cir. 1996). However, the Second Circuit has recognized that in some rare instances, if a preliminary agreement clearly manifests the intent of the parties, it can create a binding obligation. See id; Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 72 (2d Cir. 1989). Noting that it is a rare instance in which a preliminary agreement clearly manifests such an intention as to create a binding obligation, Judge Pierre N. Leval, then a District Court judge, helpfully outlined two separate categories of such binding preliminary contracts. See Teachers Ins. & Annuity Ass’n of America v. Tribune Co., 670 F.Supp. 491, 497-99 (S.D.N.Y. 1987). The first type is a fully binding preliminary agreement, which is created when the parties have agreed upon all essential terms, but agree to memorialize their agreement in a more formal document. See Adjustrite Sys., Inc. v. GAB Bus. Services, Inc., 145 F.3d 543, 548 (2d Cir. 1998). “A binding preliminary agreement binds both sides to their ultimate contractual objective in recognition that, ‘despite the anticipation of further formalities’, a contract has been reached.” Id. (citing Tribune, 670 F.Supp. at 498). The second type of preliminary agreement, termed by Judge Leval as a “binding preliminary commitment,” is created when the parties agree on certain major terms but leave other terms open for negotiation, accepting “a mutual commitment to negotiate together in good faith in an effort to reach final agreement.” Tribune, 670 F.Supp. at 498. “In contrast to a fully binding preliminary agreement, a ‘binding preliminary commitment’ does not commit the parties to their ultimate contractual objective but rather to the obligation to negotiate the open issues in good faith in an attempt to reach the ... objective with
The key issue, in finding that the plaintiffs have stated a claim for either type of agreement, is whether the parties intended to be bound by that preliminary agreement. See Adjustrite, 145 F.3d at 548. In ascertaining whether the parties evinced this intention to be bound, the court must look to “the words and deeds [of the parties] which constitute objective signs in a given set of circumstances.” R.G. Group, 751 F.2d at 74. Subjective evidence of intent, however, is generally not considered. See Adjustrite, 145 F.3d at 548; Rule v. Brine, Inc., 85 F.3d 1002, 1010 (2d Cir. 1996). Instead, “[w]hat matters are the parties’ expressed intentions, the words and deeds which constitute objective signs in a given set of circumstances.” R.G. Group, 751 F.2d at 74. The analysis must not put “disproportionate emphasis ... on any single act, phrase or other expression, but, instead, [should consider] the totality of all of these, given the attendant circumstances, the situation of the parties, and the objectives they were striving to attain.” Brown Bros. Elec. Contractors, Inc. v. Beam Constr. Corp., 41 N.Y.2d 397, 393 N.Y.S.2d 350, 352, 361 N.E.2d 999 (1977).
Plaintiffs have alleged that the parties entered into a fully binding preliminary agreement in their oral agreement on August 22, 2001. Am. Comp. ¶ 2. In the alternative, plaintiffs argue that if the Court finds they have failed to state a claim that the parties entered into a fully binding preliminary agreement, the August Agreement represented a binding preliminary commitment between the parties, and as such that the defendants have breached their duty to negotiate in good faith under such a commitment. See PI. Opp. at 18.
1) August Agreement Is Not a Binding Preliminary Agreement
The Court has identified four factors to be considered in determining whether parties to a preliminary agreement, which calls for the execution of a formal instrument, intended to be bound in the absence of such an executed final instrument. Adjustrite, 145 F.3d at 549. In Winston, the Court looked at the following four factors in determining whether the preliminary agreement between the parties represented a binding preliminary agreement: (1) whether the parties have expressly reserved the right not to be bound without a written contract; (2) whether there has been partial performance of the contract; (3) whether the parties have agreed to all terms of the alleged contract; and (4) whether the alleged agreement is the type that is usually committed to writing. See 111 F.2d at 80. This Court has also found the Winston factors to be instructive in determining whether a preliminary agreement should be considered binding as a preliminary commitment to negotiate in good faith, altering the factors considered only slightly and placing less of a focus on the existence of unresolved terms between the parties. See Tribune, 670 F.Supp. at 499-503. In the analysis of both these types of binding agreements, the Court has found the language of the agreements to be the most important factor in discerning the parties’ manifested intent. See id. at 499. In this case, that is a bit more difficult since the alleged agreement was an oral agreement and the only evidence we have of its language is the language of the draft agreements, which the plaintiffs allege embody the terms of the alleged oral agreement. See Am. Comp. ¶ 41.
a) Express Reservation of Right Not to Be Bound Absent a Writing
While there was not an express reservation of the right not to be bound in the
Furthermore, the defendants did include an explicit reservation of their right not to be bound in the absence of a written agreement in the July Memorandum provided by RPost to Spencer Trask, which lay out the terms for deals involving investment in RPost’s Series B round of financing. See July Memorandum at 4. The plaintiffs reviewed the July Memorandum and, as alleged in the Amended Complaint, relied heavily on the representations therein. See Am. Comp. ¶¶29, 21-28, 91(a)-(e), (g)-(j). In that Memorandum, RPost states, “We may not sell the convertible debt or accept any offer to purchase the convertible debt until we have delivered to you and you have executed the agreement reflecting the definitive terms and conditions of the offering.” Id. at 4. Plaintiffs have alleged that them investment in the Series B financing was part of the August Agreement, therefore the provision of the July Memorandum, which applied to the sale or purchase of convert
The plaintiffs place much weight on the defendants’ admission that there was an “agreement on terms,” and the fact that Kimberlin and Khan shook hands on the oral agreement made in the August 22, 2001 meeting, and plaintiffs argue that such an agreement should establish the parties’ intention to be bound. However, such an agreement can only serve as an indication of the parties’ intention to be bound, and cannot, as plaintiffs contend, conclusively establish that the parties intended to be bound.
b) Partial Performance
The second factor looks to whether one party has partially performed, and that performance has been accepted by the party disclaiming the contract. See R.G. Group, 751 F.2d at 76. Partial performance is a significant factor in determining the existence of a binding oral agreement. See Cleveland Wrecking Co. v. Hercules Constr. Corp., 23 F.Supp.2d 287, 296 (E.D.N.Y. 1998); see also Viacom Int’l Inc. v. Tandem Prod., Inc., 368 F.Supp. 1264, 1270 (S.D.N.Y. 1974), aff'd, 526 F.2d 593 (2d Cir. 1975). Plaintiffs contend that there has been partial performance of the August Agreement: Spencer Trask by investing $500,000 in RPost’s Series B financing round and RPost by providing Spencer Trask with due diligence through January 2001. See PI. Opp. at 16. Partial performance requires some actual performance of the contract, such that the plaintiffs must have conferred something of value upon the defendants
c) Agreement on All Terms
Turning to the third factor, plaintiffs alleged that the parties reached an oral “agreement on terms,” and that RPost thereafter proposed material revisions to those terms. Am. Comp. ¶¶ 37, 43.
d) Agreement Is Type Usually Committed To Writing
The fourth and final factor is whether the August Agreement is the type that is usually committed to writing. The alleged oral agreement was a complex, multi-stage package deal whereby Spencer Trask would invest or raise at least $1.5 million
In sum, three of the four factors strongly point to the conclusion that the parties did not intend to be bound to the terms of the August Agreement in the absence of a written document. Even drawing all reasonable inferences from the partial performance alleged by the plaintiffs, the Court finds that that factor alone is insufficient to state a claim for relief. See Arcadian, 884 F.2d at 72-73 (affirming grant of summary judgment dismissing breach of contract action even though there was “considerable partial performance,” where language of the memorandum showed that the parties did not intend to be bound until final contract was signed); Adjustrite, 145 F.3d at 551 (same). Therefore, based on the facts alleged in the Amended Complaint and the incorporated documents, the Court finds that the plaintiffs have failed to state a claim that the parties intended the August Agreement to be a binding preliminary agreement.
2) August Agreement May Represent a Binding Preliminary Commitment
In considering whether the August Agreement resulted in the second
Looking to the second factor enunciated in Tribune -the context of the negotiations-the one factor not considered in the analysis for the first type of binding agreement, the Court looks to where the parties alleged oral agreement fell within the course of the negotiations. The plaintiffs allege that the parties had at least two meetings and several conversations regarding the deal prior to their oral agreement on August 22, 2001. See Am. Comp. ¶¶ 30, 31, 35. Therefore, the Court cannot say that the negotiations were at such a preliminary stage that the parties conclusively could have evinced no intent to be
In most cases where the courts have found a binding preliminary commitment, the parties have purposely left open terms to be negotiated in good faith. See, e.g., Tribune, 670 F.Supp. at 499; P.A. Bergner & Co., 823 F.Supp. at 158. In this case, the plaintiffs have not alleged that the parties purposely left terms open to be negotiated in good faith, however, it is clear from the facts alleged both that the parties did not reach an agreement on all terms in the August Agreement and that the parties did engage in some negotiations about those open terms after they reached their alleged oral agreement. Am. Comp. ¶¶ 43, 44. While courts have found the existence of open terms to indicate the parties’ intention not to be bound to the terms of a preliminary agreement, courts have found that factor to play a less significant role in the determination of whether the parties evinced an intent to be bound to a negotiate those open terms in good faith. See Tribune, 670 F.Supp. at 499 (“To consider the existence of open terms to be as fatal would be to rule, in effect, that binding preliminary commitments cannot be enforced. That is not the law.”)
For the reasons stated in the analysis above, the partial performance factor weighs slightly in favor of the plaintiffs, and the final factor-whether the agreement is one that would have normally been committed to writing-weighs in favor of the defendants.
C. Claim II: Breach of Implied Contract
The law recognizes two types of implied contracts, those which are implied by the facts and those which are implied by the law. A contract implied from the facts is found where the consent of the parties to the agreement may be inferred from the acts of the parties and all of the surrounding circumstances. Tjoa v. Julia Butterfield Mem’l Hosp., 205 A.D.2d 526, 612 N.Y.S.2d 676 (2d Dep’t 1994). Furthermore, “a contract cannot be implied-in-fact where the facts are inconsistent with its existence ... or against the intention or understanding of the parties.” Tjoa, 612 N.Y.S.2d at 677. An implied-in-fact contract arises in the absence of an express agreement, and is based on the conduct of the parties from which a fact-finder may infer the existence and terms of a contract. See AEB & Assocs.
D. Claim III: Promissory Estoppel
Under New York law, promissory estoppel has three elements: “ ‘a clear and unambiguous promise; a reasonable and foreseeable reliance by the party to whom the promise is made; and injury sustained by the party asserting the estop-pel by reason of his reliance.’ ” Esquire Radio & Elecs., Inc. v. Montgomery Ward & Co., 804 F.2d 787, 793 (2d Cir. 1986) (quoting Restatement (Second) of Contracts § 90 (1981)). The plaintiffs have alleged that: 1) the defendants made a clear and unambiguous promise to allow Spencer Trask to participate in the overall deal structure, in which Spencer Trask would invest in the Series B financings and purchase a portion of the founders’ shares; 2) the plaintiffs reasonably and foreseeably relied on those promises by investing $500,000 in the company’s Series B financing; and 3) as a result of that reliance, Spencer Trask has been injured in three ways.
E. Claim VIII: Unjust Enrichment
Under New York law, “a plaintiff seeking an equitable recovery based on unjust enrichment must first show that a benefit was conferred upon the defendant, and then show that as between the two parties, enrichment of the defendant was unjust.” Reprosystem, 727 F.2d at 263 (2d Cir. 1984) (citing Indyk v. Habib Bank Ltd., 694 F.2d 54, 57 (2d Cir. 1982)); Dolmetta v. Uintah Nat’l Corp., 712 F.2d 15, 20 (2d Cir. 1983) (“To recover on a theory
F. Claim IX: Breach of Duty of Good Faith and Fair Dealing
The covenant of good faith and fair dealing, implied in every contract under New York law, “includes ‘an implied undertaking on the part of each party that he will not intentionally and purposely do anything to prevent the other party from carrying out the agreement on his part.’ ” Carvel Corp. v. Diversified Mgmt. Group, Inc., 930 F.2d 228, 230 (2d Cir. 1991) (quoting Grad v. Roberts, 14 N.Y.2d 70, 75, 248 N.Y.S.2d 633, 198 N.E.2d 26 (1964)). Since this Court is not willing to dismiss the plaintiffs’ claim for breach of contract at this juncture, the Court also denies the defendants’ motion to dismiss the plaintiffs’ claim for breach of duty of good faith and fair dealing.
G. Statute of Frauds Considerations
The defendants argue that enforcement of the August Agreement is barred under the Statute of Frauds, § 5-701(a)(l) of New York’s General Obligations Law. “Under New York law, parties are free to enter into a binding contract without memorializing their agreement in a fully executed document.” Winston, 777 F.2d at 80. However, New York law requires certain agreements to be in writing. See N.Y. Gen. Oblig. § 5-701.
Section 5-701(a)(l) has been read narrowly so as to bar oral agreements when there is no “possibility in fact and law of full performance within one year.” Ohanian v. Avis Rent A Car Sys., Inc., 779 F.2d 101, 106 (2d Cir. 1985) (“The one-year provision has been held not to preclude an oral contract unless there is ‘not ... the slightest possibility that it can be fully performed within one year.’ ”) (citing 2 Corbin on Contracts § 444, at 535; War
However, just because Spencer Trask could have chosen not to exert their right to purchase shares in the third round, its choice would not have extinguished RPost’s obligation to sell those shares. “The touchstone of an inquiry under Section 5-701(a)(l) is ... whether the contract by its terms is incapable of performance within one year, because it places indefinite liability on the defendant.” Day v. Meyer, 2000 WL 1357499, *5 (S.D.N.Y. Sept. 19, 2000) (Court held that the alleged contract was capable of performance within one year because defendants’ liability could have concluded within one year if performance was achieved within one year.). In the case at hand, RPost’s liability under the August Agreement would not have ended upon Spencer Trask’s election to forego a third round. Under the August Agreement, RPost still would have been under a duty to sell the founders’ shares in the third round if Spencer Trask had wanted to purchase them, and therefore the alleged contract was not capable of being performed within a year. See Zupan v. Blumberg, 2 N.Y.2d 547, 161 N.Y.S.2d 428, 429, 141 N.E.2d 819 (1957); Martocci v. Greater New York Brewery, 301 N.Y. 57, 63, 92 N.E.2d 887 (1950) (holding that the contract fell within the Statute of Frauds since, under the terms of the contract, the contractual relationship between the parties would continue beyond a year, “even though the continuing liability to which defendant is subject is merely a contingent one. The endurance of defendant’s liability is the deciding factor.”). Since the August Agreement, as alleged by the plaintiffs, was not capable of being performed within a year, it would be subject to the Statute of Frauds.
Furthermore, the Court dismisses Spencer Trask’s argument that the August Agreement would be exempt from the Statute of Frauds under the doctrine of partial performance. Section 5-701(a) does not expressly provide a part performance exception, and the New York Court of Appeals has firmly stated that there is no such exception. See Messner Vetere Berger McNamee Schmetterer Euro RSCG Inc. v. Aegis Group PLC, 93 N.Y.2d 229, 689 N.Y.S.2d 674, 677 n. 1, 711 N.E.2d 953 (1999) (stating that Court had “not ... adopted [the] proposition” that there is a “judicially-created part performance exception to [General Obligations Law] § 5-701”); Valentino v. Davis, 270 A.D.2d 635, 703 N.Y.S.2d 609, 611 (3d Dep’t 2000) (holding that “the doctrine of part performance cannot save contracts governed by General Obligations Law § 5-701”); see also Belotz v. Jefferies & Co., Inc., 213 F.3d 625, 2000 WL 665564 (2d Cir. 2000) (unpublished) (holding that the doctrine of part performance is “of no aid to the ap
However, Spencer Trask argues that even if the August Agreement falls within the Statute of Frauds, it would be exempted from the Statute under Section 8-113 of the UCC, adopted by New York in 1997. Section 8-113 provides, in pertinent part:
[A] contract or modification of a contract for the sale or purchase of a security is enforceable whether or not there is a writing signed or record authenticated by a party against whom enforcement is sought, even if the contract or modification is not capable of performance within one year of its making.
N.Y.U.C.C. § 8-113(a). This provision replaces former UCC § 8-319, which did subject a contract for the sale of securities to the Statute of Frauds. Spencer Trask argues that the August Agreement between Spencer Trask and RPost plainly called for the purchase of securities by Spencer Trask since Spencer Trask would have the right under that Agreement to purchase the founders’ shares in three tranches. See PI. Opp. at 25; Am. Comp. ¶ 33. RPost contends that the alleged agreement to sell a certain percentage of the founders’ shares to Spencer Trask should not be deemed a “sale of security” within the meaning of § 8-113, since § 8-113 was not intended to encompass the type of complex agreement alleged in this case. See Def. Memo at 23. RPost argues that the Official Comment to N.Y.U.C.C. § 8-113 indicates that § 8-113 was intended only to cover “simple stock purchases and sales and allow for electronic transactions such as ‘day trading.’ ” Def. Mem. at 23. However, in light of the dearth of New York case law defining the parameters of § 8-113, the Court finds that it would be better equipped to address the issue of whether the August Agreement should be deemed “a sale or purchase of a security” under UCC § 8-113, and therefore exempted from the writing requirement of the Statute of Frauds, with the additional information available at the summary judgment stage. Moreover, since the plaintiffs are entitled to offer evidence that their breach of contract claim is not barred by the Statute of Frauds, they are also entitled to offer evidence that their equitable claims for im
H. Fraud Claims
The plaintiff asserts four claims based on alleged fraud: (1) violations of Section 10(b) and Section 20 of the Securities Exchange Act of 1934 (the “Exchange Act”) (15 U.S.C. § 78(b) and 78t(a)) and S.E.C. Rule 10b-5 promulgated thereunder; (2) common law fraud; (3) equitable estoppel based on alleged fraud; and (4) and breach of warranty. While each of these fraud claims have their own legal elements, each claim requires, that the plaintiffs allege and ultimately prove that the defendants made false representations, that the plaintiffs reasonably relied on those false representations, and that that reliance caused injury to the plaintiffs. In Re Time Warner Inc. Secs. Litig., 9 F.3d 259, 264 (2d Cir. 1993) (§ 10(b) and Rule 10b-5); Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421, 646 N.Y.S.2d 76, 668 N.E.2d 1370 (1996) (common law fraud); Chadirjian v. Kanian, 123 A.D.2d 596, 506 N.Y.S.2d 880, 882 (2d Dep’t 1986) (equitable estoppel); CBS Inc. v. Ziff-Davis Pub. Co., 75 N.Y.2d 496, 554 N.Y.S.2d 449, 453, 553 N.E.2d 997 (1990) (breach of warranty).
The plaintiffs have based their fraud-related claims on four categories of alleged misstatements and omissions made by the defendants: 1) statements about the RPost’s relationship and the status of negotiations with the USPS; 2) statements about RPost’s management; 3) statements about the number of options in reserve; and 4) statements about the defendants’ intent to fulfill the terms of the August Agreement.
I. Claims VII and V: Federal Securities and Common Law Fraud Claims
Turning the Court’s attention to the remaining three categories of alleged misrepresentations and omissions, the Court finds that the plaintiffs have failed to make an adequate allegation of the injury and loss causation or proximate cause element required under both the federal securities and the common law fraud claims. To state a claim for fraud under § 10(b), Rule 10b-5 or New York common law, a plaintiff must allege a misrepresentation or a material omission of fact which was false and known to be false by defendant, that the plaintiff reasonably relied upon, and that as a proximate cause of that
1) Inadequate Allegation of Injury
“It is fundamental that in order to secure relief, either legal or equitable, for fraud, the person seeking redress must have been damaged, injured, or harmed as a result of the asserted fraud, that is, must have thereby been misled to his or her injury.” 60A N.Y. Jur.2d Fraud and Deceit § 170. Moreover, in order to sustain an action for fraud, there must be some actual loss incurred as a direct result of the wrong by the party bringing the action, and in an action for damages, the plaintiff must make a showing of some concrete pecuniary loss. See Dornberger v. Metropolitan Life Insurance Co., 961 F.Supp. 506, 543 (S.D.N.Y. 1997); 60A N.Y. Jur.2d Fraud and Deceit § 170. Defendants argue that the plaintiffs have failed to allege this element because plaintiffs have not alleged “that the value of [Spencer Trask’s] actual $500,000 investment in RPost has been harmed in any way due to the alleged fraud, or that it has suffered any other out-of-pocket injury.” Def. Mem. at 28. Plaintiffs argue that they have adequately alleged injury on two levels: 1) the value of their $500,000 investment has been diminished as a result of the defendants’ alleged misrepresentations, and 2) they are less able to influence the defendants’ business strategy with the 2% ownership interest received from their $500,000 investment, rather than the 20% ownership interest they would have had if the parties had fulfilled the August Agreement. See PI. Opp. at 28. This latter injury is not a cognizable one for the fraud claim since this injury did not result from the defendants’ alleged misrepresentations but rather from the defendants’ failure to comply with the terms of the August Agreement. As such, the harm sustained by having only a 2% ownership investment would be recoverable under the breach of contract claim, not the fraud claim. See N.Y.Jur.2d Fraud and Deceit § 7 (“A cause of action for fraud, as opposed to breach of contract, will not lie where the only damages proximately caused by the alleged fraud are those recoverable under a claim for breach of contract.”)
As for the plaintiffs’ fust alleged injury, the diminished value of their $500,000 investment in RPost, the plaintiffs have failed to allege any facts that could lead a trier of fact to find that they had suffered an injury as a result of the aforementioned three categories of alleged misrepresentations. See Packer v. Yampol, 630 F.Supp. 1237, 1241 (S.D.N.Y. 1986) (holding that plaintiffs failed to satisfy their burden of pleading facts in support of each element of their 10b-5 claim, because
2) Failure to Allege Loss or Proximate Causation
Moreover, even if the plaintiff had alleged sufficient facts to establish that they had been injured by a decrease in the value of their investment, they have not adequately alleged any causal connection between the alleged misrepresentations and the resulting injury. As such the plaintiffs have failed to establish the loss or proximate causation element, required under both the common law and the federal securities law fraud claims identified in the Amended Complaint. See Emergent Capital Inv. Mgmt., LLC v. Stonepath Group, Inc., 165 F.Supp.2d. 615, 625 (S.D.N.Y. 2001). Under both the common law and the § 10b claim, the plaintiffs must allege both “transaction causation, i.e. that but for the fraudulent statement or omission, the plaintiff would not have entered into the transaction; and loss causation, i.e. that the subject of the fraudulent statement or omission was the cause of the actual loss suffered.” Suez Equity Investors, L.P. v. Toronto-Dominion Bank, 250 F.3d 87, 95 (2d Cir. 2001) (citing Mfrs. Hanover Trust Co. v. Drysdale Secs. Corp., 801 F.2d 13, 20 (2d Cir. 1986) (“The standard for liability in a civil action under
Defendants argue that the plaintiffs’ fraud-based claims must be dismissed since the plaintiffs have failed to allege both the transaction and loss causation elements necessary to adequately allege the common law and § 10(b) fraud claim. The Court finds that the Amended Complaint does adequately plead the transaction causation element, by alleging that, but for the alleged misrepresentations, the plaintiffs would not have made the $500,000 investment in RPost. See Am. Comp. ¶¶ 33, 34, 94. Nevertheless, the Court agrees with the defendants that the Amended Complaint fails to establish the loss causation pleading requirement, and as such the plaintiffs have failed to state a claim for fraud under both § 10b of the Exchange Act and the common law.
3) Injury Must Be Limited to Out-of-Pocket Damages
The plaintiffs’ only allegation of injury in the Amended Complaint is the statement that they have suffered dam
Lastly, plaintiffs assert that their allegation of injury in the Amended Complaint is sufficient to state a claim for fraud, and that under Rule 9(b) of the Federal Rules of Civil Procedure, no detailed pleading of fraud damages is required. See PI. Opp. at 38. Plaintiffs rely on the Second Circuit opinion in Novak v. Kasaks, 216 F.3d 300, 306 (2d Cir. 2000), for this premise. However in that case, the Second Circuit’s language regarding the pleading requirement for a fraud claim pertained solely to the scienter requirement and the facts that must be alleged in order to state the element of fraudulent intent, but did not at any point address the pleading requirement for the injury element. Id. at 305-315. Contrary to the plaintiffs’ argument, Courts in this District and this Circuit do require more than merely conclusory allegations of injury to state a claim for fraud. These Courts have required that the plaintiffs allege both transaction and loss causa
4) Materiality and Reasonable Reliance
Having found that the plaintiffs failed to make an adequate allegation of injury, it is unnecessary for the Court to address the question of whether the plaintiffs have adequately alleged the elements of reasonable reliance and materiality. However, since the Court is dismissing the plaintiffs’ federal securities and common law fraud claims with leave to replead, it is prudent for the Court to address these issues. Both the issues of materiality and reasonable rebanee raise issues of fact that often make them unsuitable for determination on a motion to dismiss. See Press v. Chem. Inv. Servs. Corp., 166 F.3d 529, 538 (2d Cir. 1999) (Oakes, J.) (holding that the determination of materiality is “a mixed question of law and fact that generally should be presented to a jury” (citing TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438, 439, 96 S.Ct. 2126, 48 L.Ed.2d 757 (1976))); ABF Capital Mgmt. v. Askin Capital Mgmt., L.P., 957 F.Supp. 1308, 1324 (S.D.N.Y. 1997) (“Courts applying New York law generally have found that the question of a plaintiffs’ reasonable reliance raises issues of fact that should not be resolved on a motion to dismiss.”). While the Court may doubt the materiality of several of the misstatements and omissions alleged in the Amended Complaint, giving all reasonable inferences to the plaintiffs, the Court cannot determine at this point that the defendants’ alleged misstatements and omissions are “so obviously unimportant to the reasonable investor that reasonable minds could not differ on the question of their importance.” Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir. 1985) (Kearse, J.). Therefore, the Amended Complaint would not be dismissed on the ground that the alleged misstatements and omissions are not material.
Turning our attention to the issue of reasonable reliance, the Court finds that the Amended Complaint adequately alleges that the plaintiffs reasonably relied on the alleged misrepresentations about RPost’s management, and the alleged misrepresentations made about the number of options in reserve. However, with respect to the statements about RPost’s relationship with and the ongoing negotiations with the USPS in the July Memorandum, the Court is persuaded by the defendants’ argument that reasonable reliance on any such statements is precluded as a matter of law by the inclusion of a disclaimer in the July Memorandum that “bespeaks caution.”
Furthermore, the plaintiffs argue that their allegations that the defendants “made statements and omissions that were materially false and misleading,” Am. Comp. ¶¶ 91, 99, are sufficient to invoke the second limitation of the “bespeaks caution” doctrine, preventing the application of that doctrine when the defendants are alleged to have information which makes the substance of the cautionary statements fraudulent. PI. Opp. at 34; In re Marion Merrell Dow, 1993 WL 393810, at *8. However, this case can be distinguished from the two cases cited by the plaintiffs where the Court declined to apply the “bespeaks caution” doctrine as a result of the plaintiffs’ allegations of the knowing falsity of the defendants’ cautionary statements. In each of the cases cited by Spencer Trask, the plaintiffs made factual allegations re
Furthermore, the Court finds that the plaintiffs have failed to make an adequate allegation of reasonable reliance with respect to the oral or written representations made by defendants outside of the representations made in the July Memorandum, the Debt Agreement, or other documents provided by the defendants in response to the plaintiffs’ request for information, as a result of the plaintiffs’ acknowledgement in the Debt Agreement, signed when they made the $500,000 investment in RPost, that they did not rely on “any representations or other information (whether oral or written) other than as set forth” in the aforementioned documents. Debt Agreement at ¶ 8(b). The plaintiffs argue that the broad language of the disclaimer in the Debt Agreement lacks the requisite specificity to rule out the plaintiffs’ reasonable reliance as a matter of law, however the Court finds that the language in the disclaimer is sufficiently specific to preclude reliance on any oral or written statements outside of those identified in the disclaimer. See PL Opp. at 35. Courts have found general merger clauses or disclaimers stating that the document being signed is the “entire agreement among the parties” and that it “su-percedes all previous understandings among [the parties]” not to be sufficiently specific to disclaim reliance on certain pri-
J. Claim VI: Equitable Estoppel
In order to establish a claim for equitable estoppel, the plaintiff must allege reasonable reliance upon the words or actions of the defendants and, that as a result of such reliance, the plaintiffs preju-dicially changed their position. See Chadirjian, 506 NY.S.2d at 882; Nassau Trust Co. v. Montrose Concrete Prods. Corp., 56 NY.2d 175, 451 N.Y.S.2d 663, 436 N.E.2d 1265 (1982). The plaintiffs have alleged that they reasonably relied on the statements of the defendants’ indicating their intent to complete the terms of the August Agreement, and that their reliance on the defendants’ representations caused a prejudicial change in their position-namely, “instead of standing to benefit as an investor with approximately 20% interest in RPost, Spencer Trask’s interests stand to be diluted to less than 2% of RPost’s shares upon completion of the Series C financing.” Am. Comp. ¶ 109. Essentially, the plaintiffs allege that as a result of the defendants’ failure to fulfill the terms of the August Agreement, the plaintiffs’ were damaged in an amount not less than $500 million since they only received the 2% ownership interest from their $500,000 investment, rather than the 20% ownership interest that they would have had if the parties had completed the terms of the August Agreement. See Am. Comp. ¶¶ 109, 110. The plaintiffs’ “prejudicial change” in their position was brought about by the defendants’ failure to fulfill the terms of the alleged contract. As discussed supra, where the sole basis for the plaintiffs’ fraud-based claim is the defendants’ intent not to perform the contract, the proper relief is under a claim for breach of contract, not equitable estoppel. See Briefstein v. P.J. Rotondo Constr. Co., 8 A.D.2d 349, 187 N.Y.S.2d 866, 868 (1959) (“[T]o say that a contracting party intends when he enters an agreement not to be bound by it is not to state fraud in an actionable area, but to state a willingness to risk paying damages for breach of contract.”). Therefore the defendants’ motion to dismiss the plaintiffs’ claim for equitable estoppel is granted.
K. Claim VII: Breach of Warranty
The plaintiffs claim that the defendants breached the warranty made in the Debt Agreement, which the plaintiffs signed when they made the $500,000 investment in RPost. In order to state a claim for breach of warranty, the plaintiffs must adequately allege that the defendants made such a warranty, that the plaintiffs relied on that warranty, and that the plain
CONCLUSION
For the foregoing reasons, defendants’ motion to dismiss all claims made in plaintiffs’ Amended Complaint under Rule 12(b)(6) is granted as to claims IV (§ 10(b)
SO ORDERED.
. The defendants attached to their motion papers several documents extrinsic to the Amended Complaint. The Court declines to convert the motion to one for summary judgment and excludes from consideration all of the extrinsic documents and affidavits attached to the Defendants' Motion for Summary Judgment save three, which the Court finds have been "incorporated by reference” into the Amended Complaint. See Cortec, 949 F.2d at 47-48; Fed.R.Civ.P. 10(c). Therefore the Court will consider: (1) the July Memorandum, attached as Ex. A to the Affidavit of Zafar Kahn in Support of Motion to Dismiss First Amended Complaint ("Kahn Aff.”), which the plaintiffs have relied heavily on in making their claims, see Am.Comp. ¶¶ 21-28, 91(a)-(e), (g)-(j); (2) the four draft letter agreements ("draft agreements”), attached as Ex. B to Kimberlin Aff., whose terms allegedly embody the August Agreement and were allegedly agreed to in telephone conversations between the parties, see Am. Comp. ¶¶ 41-42; and (3) the Debt Agreement, executed November 1, 2001, attached as Ex. L to Kimberlin Aff., which is the only investment agreement that Spencer Trask signed with RPost and from which plaintiffs quote significant portions in the Amended Complaint, see Am. Comp. ¶¶ 50, 91(q), 92; see also Advanced Marine Techs., Inc. v. Burnham Sec., Inc., 16 F.Supp.2d 375, 378 (S.D.N.Y. 1998) (Court held that the plaintiff had incorporated a letter by reference into the Complaint since a paragraph of the complaint referred to that letter and quoted a significant portion of the letter). Furthermore, despite the fact that these documents were not attached to the Amended Complaint, the Court will consider them because the plaintiffs have actual notice of tírese agreements and rely upon them in the Amended Complaint. See Cortec, 949 F.2d at 48 (Court considered documents not
. For the purposes of the present motion, the parties do not dispute that New York law governs the claims at issue in this case.
. The plaintiffs do not allege in the Amended Complaint that the defendants intended to be bound or that the defendants communicated an intent to be bound by the August Agreement, despite plaintiffs’ contention to the contrary in their Opposition to Defendants' Motion to Dismiss and their citation to an in-apposite paragraph of the Amended Complaint. PL Opp. at 15. However, plaintiffs’ allegation that the parties reached an agreement on terms must be seen by the Court, in the context of a motion to dismiss, as evidence in support of defendants' intention to be bound.
. Plaintiffs claim that they alleged that the parties agreed to all material terms of the August Agreement, but they cite to an inappo-site paragraph in the Amended Complaint to support this claim. See PI. Opp. at 17. In fact plaintiffs' Opposition does not stand up to scrutiny, as it is replete with citations not supported by the Amended Complaint’s actual allegations. E.g., Pl. Opp. at 2, 6, 13, 15-17.
. While it is most likely that an agreement to the terms stated in the alleged oral agreement would normally be in writing, a preliminary commitment to negotiate in good faith may be less likely to be expected to be in writing. However, the Amended Complaint did not allege that the August Agreement was an agreement to negotiate in good faith, but rather simply an agreement to the terms stated.
. The three ways in which the plaintiffs allege they have been injured are: 1) plaintiffs have invested $500,000 in a company which is attempting to dilute their ownership to an insignificant percentage; 2) plaintiffs are being deprived of the opportunity to protect their investment in the company by warding off the dilution that will occur in the Series C and D financing rounds; and 3) defendants have been able to promote additional financ-ings by announcing to potential investors that Spencer Trask is investing in the defendants' company, while defendants are preventing Spencer Trask from completing the terms of the alleged August Agreement. Am. Comp. ¶ 86.
. N.Y. GOL § 5-701 provides in relevant part: "Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking ... [b]y its terms is not to be performed within one year from the making thereof or the performance of which is not to be completed before the end of a lifetime.”
. Furthermore, the Court agrees with the defendants that the defendants' admission to an "agreement on terms” with Spencer Trask in August 2001 does not take the August Agreement outside of the Statute of Frauds, since the defendants did not admit to have reached a binding agreement, and unlike the situation in the case cited by the plaintiffs, In re Dissolution of C & M Plastics Inc., 194 A.D.2d 1020, 599 N.Y.S.2d 880, 882 (3d Dep’t 1993), the defendants did not make any admission regarding the precise terms of the alleged agreement in any of their submissions to this Court.
. Plaintiffs assert that breach of warranty claims of not require a showing of reliance, see PL Opp. at 29. However, such claims do require a showing of reliance, it is merely a different type of showing. Courts evaluate the existence of reliance in a breach of warranty claim by looking at the terms of the contract. See CBS, 75 N.Y.2d at 506 n. 5, 553 N.E.2d 997 ("We do not hold that no reliance is required, but that the required reliance- is established if, as here, the express warranties are bargained-for terms of the seller."); Ainger v. Michigan Gen. Corp., 476 F.Supp. 1209, 1225 (S.D.N.Y. 1979) ("The question of whether the promisee ‘relied’ on the warranty, then, is whether he believed he was purchasing the promise" as a part of the contract.)
. While the Amended Complaint does include allegations of misstatements made by the defendants after November 1, 2001, when the plaintiffs signed the Debt Agreement investing $500,000 in RPost, the plaintiffs concede that these statements could not be the subject of a fraud claim since the plaintiffs could not have relied upon them in making the investment in RPost. See PL Opp. at 30, n. 18.
. The Court finds plaintiffs' argument that they can maintain their fraud claim based on the defendants' alleged intention not to perform under the contract unpersuasive, and the authority cited for this premise inapposite. See PL Op. at 37. In Philips Credit Corp. v. Regent Health Group Inc., 953 F.Supp. 482, 520 (S.D.N.Y. 1997), the Court did not address the issue of the redundancy of a fraud and a breach of contract claim based on the same set of facts, and furthermore, the Court held that " ' [(fraudulent intent not to perform a promise cannot be inferred merely from the fact of nonperformance,' ” and that additional proof is required for such a showing. Id. at 520 (citing Brown v. Lockwood, 76 A.D.2d 721, 432 N.Y.S.2d 186, 195 (2d Dep’t 1980)). The Amended Complaint in this case makes no such showing.
. The plaintiffs also bring the claim under Section 20 of the Exchange Act, which imposes liability on controlling persons for violations of any section of the Act, including § 10(b)5. 15 U.S.C. § 78 j(b).
. The Amended Complaint contains no allegations that the value of the plaintiffs’ actual $500,000 investment has been harmed as a result of the alleged fraudulent misrepresentations; rather, the plaintiffs seek to be able to perform the terms of the August Agreement and invest even more money in RPost on the same terms agreed upon before the plaintiffs learned of the alleged fraudulent misrepresentations.
. To the extent that plaintiffs have failed to state a viable § 10(b) violation, the § 20 claim shall be dismissed as well.
. Under a section in the July Memorandum entitled “Risk Assessment”, RPost includes a disclaimer which states in bold print, “We may be unable to finalize an agreement with
. See supra n. 16. Furthermore, notwithstanding the Court's predisposition to make all reasonable inferences in favor of the plaintiffs at this stage, the Court finds the plaintiffs' argument that the disclaimer did not warn about the possibility of RPost not entering into an agreement with the USPS on the time frames represented, or at all, but merely conveyed the possibility that a contract may not be favorable to RPost, to be disingenuous at best. See PI. Opp. at 34. Spencer Trask is, by its own admission, a experienced venture capital investor, see Am. Comp. ¶ 19, and is presumed to comprehend the implications of a disclaimer that warns of the possibility and the effect of the "failure to reach such an agreement.” See July Memorandum at 33.
. While the Court agrees with the plaintiffs that the "bespeaks caution” doctrine does not bar a showing of the plaintiffs’ reliance on statements of present fact regarding RPost's relationship with the USPS, including statements that RPost had a "partnership" with USPS, that negotiations were in their "final stages,” and that the USPS was "moving forward aggressively with RPost,” see Am. Comp. ¶ 25, the plaintiffs are still hampered in stating a claim that they reasonably relied on those statements of present fact, in light of the express warning in the disclaimer that RPost may be "unable to finalize an agreement with the USPS.” July Memorandum at 32-33; see Def. Reply at 9.
. However, the Court notes that the damages for a breach of warranty claim are measured by the "benefit of the bargain” standard. See Clearview Concrete Products Corp. v. S. Charles Gherardi, Inc., 88 A.D.2d 461, 453 N.Y.S.2d 750, 756 (1982) (holding that under New York law, breach of warranty damages are usually measured by the "benefit of the bargain” rule, i.e. the difference between the actual value of the investment and the value which it would have had absent the breach). "The 'benefit of the bargain’ standard is intended to place the injured party in as good a position as would have been achieved had there been full performance of the contract, but the damages must be measurable with a reasonable degree of certainty and must be adequately proven.” Id. at 756.
. In response to the defendants’ request that the Court limit discovery to the claims that have survived the motion to dismiss, see Def. Reply at 10, n. 12, discovery is, obviously, so limited.
Reference
- Full Case Name
- SPENCER TRASK SOFTWARE AND INFORMATION SERVICES LLC, formerly known as Spencer Trask Internet Group, LLC and Spencer Trask Ventures, Inc. v. RPOST INTERNATIONAL LIMITED Zafar Kahn Terry Tomkow and Ken Barton
- Cited By
- 27 cases
- Status
- Published