Nineteen Eighty-Nine, LLC v. Icahn

96 A.D.3d 603, 947 N.Y.S.2d 450

This text of 96 A.D.3d 603 (Nineteen Eighty-Nine, LLC v. Icahn) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nineteen Eighty-Nine, LLC v. Icahn, 96 A.D.3d 603, 947 N.Y.S.2d 450 (N.Y. Ct. App. 2012).

Opinion

Order, Supreme Court, New York County (Eileen Bransten, J.), entered June 29, 2010 (index 601265/07), which denied the parties’ motions for summary judgment, unanimously modified, on the law, to grant defendants’ motion as to the causes of action for breach of fiduciary duty, fraud, negligent misrepresentation and aiding and abetting breach of fiduciary duty and fraud, and to grant plaintiffs motion for summary judgment on the causes of action for breach of contract, and otherwise affirmed, without costs. Order, same court and Justice, entered March 9, 2011 (index 600424/08), which to the extent appealed, [604]*604denied plaintiff’s motion for summary judgment on the complaint and dismissed the counterclaim, and granted plaintiffs motion to strike evidence, unanimously modified, on the law, to declare, upon the counterclaim, that nominal defendant 1879 Hall, LLC was not dissolved, and to deny plaintiffs motion to strike a portion of defendants’ summary judgment evidence as inadmissible settlement communications, and otherwise affirmed, without costs.

In these two actions arising from a joint venture, the dispute between the parties is governed by a limited liability company (LLC) agreement which specifies that Delaware law applies. Accordingly, the motion court properly applied Delaware law.

In the action for breach of contract, breach of fiduciary duty and related business torts alleging that defendants usurped a joint venture opportunity by trading in securities for their own account (index 601265/07), the tort causes of action should have been dismissed as duplicative of the breach of contract causes of action. Plaintiffs claim that Chelonian made false representations in its books of account by failing to disclose purchases of $108,093,998 face amount of Federal Mogul Corporation (FMO) bonds which it had made without notifying plaintiff, are allegations of breach of the parties’ agreement. Likewise, the fiduciary claims are based on breach of the agreement (see Solow v Aspect Resources, LLC, 2004 WL 2694916, *4, 2004 Del Ch LEXIS 151, *17-19 [Del Ch 2004] [“Because of the primacy of contract law over fiduciary law, if the duty sought to be enforced arises from the parties’ contractual relationship, a contractual claim will preclude a fiduciary claim”]; see also Gale v Bershad, 1998 WL 118022, 1998 Del Ch LEXIS 37 [Del Ch 1998] [if the duty sought to be enforced arises out of the parties’ contractual, as opposed to their fiduciary relationship, that would preclude any fiduciary claim based on the same conduct]). The remaining tort claims for negligent representation and fraud, under the facts alleged here, amount to an unjustified breach of contract, “and should be remedied through contract law and not through tort law” (Tenneco Auto. Inc. v El Paso Corp., 2007 WL 92621, *6, 2007 Del Ch LEXIS 4, *27 [Del Ch 2007]; see also CPM Indus., Inc. v ICI Americas, Inc., 1990 WL 28574, 1990 Del Super LEXIS 88 [1990]).

Plaintiff’s motion for summary judgment on the breach of contract claims should have been granted. The motion court found an issue of fact as to whether the agreement, which required defendants to issue a capital call each time it intended to purchase the bonds, had been modified by the parties. We find that the record demonstrates that the agreement was, to [605]*605some extent, modified by the course of conduct of the parties, and that there is no triable issue of fact regarding defendants’ assertion that the agreement was modified by a course of conduct where business was conducted solely on a verbal basis.

In some instances, rather than using the written capital call as the form of advance notice, the parties exchanged e-mails that set forth an intention to purchase, and the other party’s response as to whether it opted to participate (the LLC Agreement contained a clause requiring plaintiff to provide written notice to defendants when it initiated an FMO trade, so that the party initiating the trade was to notify the other in writing). In other instances, one party would memorialize in an e-mail a discussion that occurred regarding a purchase, and the other’s decision on participation. This conduct took place in 41 trades that are not the subject of this litigation.

There are 18 trades for which plaintiff claims it received no notice from defendants, and for which defendants maintain they provided verbal notice and received a verbal response. Because defendants assert that the agreement requiring notice by written capital call was modified by a course of conduct of mere verbal notice and response, it is their burden to prove this modification by clear and convincing evidence (see Eureka VIII LLC, v Niagara Falls Holding LLC, 899 A2d 95, 109 [Del Ch 2006]).

However, defendants have failed to meet even the lesser burden of a preponderance of the evidence. While defendants’ representative Intrieri avers that he would either call or e-mail plaintiffs representatives, and that they would respond either verbally or by e-mail, defendants have provided no notations or other record that these conversations took place and that plaintiff provided a verbal notification as to whether it chose to participate. In contrast, in numerous instances not at issue here, when one party opted either to participate, or not to participate in a purchase initiated by the other, there are e-mails confirming that decision.

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Cite This Page — Counsel Stack

Bluebook (online)
96 A.D.3d 603, 947 N.Y.S.2d 450, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nineteen-eighty-nine-llc-v-icahn-nyappdiv-2012.