Opinion
601048/07.
Decided September 20, 2007.
Debevoise Plimpton LLP (Joseph P. Moodhe), for Plaintiff.
Greenberg Traurig, LLP (John F. Triggs, David J. Stone, Elizabeth Prickett-Morgan), for Defendants.
Plaintiff moves by order to show cause for an order of attachment, pursuant to CPLR 6201 and 6212, directing that the sheriff of New York City levy on property in which the defendants have an interest, including any debt or obligation that may be owed to them, or any affiliated person or entity under their control, from the Laurus Family of Funds, LLC (Laurus), and for a temporary restraining order temporarily restraining defendants from completing or closing any transaction with or involving Laurus or any affiliate of Laurus, unless $3.2 million is placed in an escrow account, pending an order of this court. Defendants cross-move for an order pursuant to CPLR 3211 (a) (1), (7), and (8), dismissing the complaint.
Plaintiff Iconoclast Advisers LLC (Iconoclast) an investment banking boutique, seeks recovery of fees it claims are due under an engagement agreement with defendant Petro-Suisse Ltd. (Petro Ltd.), and seeks the fees and tort damages from defendant John Wampler, a principal of Petro Ltd. Plaintiff claims that defendant Petro Ltd. and the Laurus Family of Funds LLC (Laurus) are on the verge of closing a transaction that would trigger the fee provisions of the engagement agreement, and that Petro Ltd. will not pay the fee owed to plaintiff. While these motions were pending, on May 14, 2007, the transaction closed between Laurus and Petro-Suisse Energy Services Ltd., High Plains Drilling Company, Inc., and Boom Drilling LLC.
Plaintiff makes this application for an attachment on the grounds that defendant Petro Ltd. has no assets in this jurisdiction, and is a foreign entity not qualified to do business in New York, that defendant John Wampler (Wampler) is a citizen of Switzerland, who permanently resides outside of New York, and that defendants intend to place assets that might be available for execution upon the closing of the transaction out of the jurisdiction of this court to frustrate plaintiff's ability to enforce any judgment rendered in its favor here. It contends that it can show that it is likely to succeed on the merits of its claims for breach of the engagement agreement. Defendants assert that there was no breach of the engagement agreement, because the transaction about which the plaintiff complains is not covered by the engagement agreement, the parties to the engagement agreement were not signatories to any aspect of the Laurus transaction, and the services that were to be provided by plaintiff under the engagement agreement were not and could not be provided by plaintiff. They seek dismissal of the complaint for failure to state a claim and based on documentary evidence, and defendant Wampler seeks dismissal based on lack of personal jurisdiction.
Iconoclast is an investment banking boutique, whose business involves advising clients in connection with the origination and structuring of transactions involving mergers, acquisitions, financing, and private equity and debt investments (Complaint, ¶ 4). It is a Delaware limited liability corporation doing business at 546 Fifth Avenue, New York, New York ( id., ¶ 1).
Petro Ltd. is a corporation organized and existing under the laws of Barbados (Affidavit of Mark Gasarch, dated April 23, 2007, ¶ 1). It allegedly conducts business in New York through an affiliate that maintains an office at 150 East 58th Street, New York, New York (Complaint, ¶ 2). It is in the business of investing in and managing the operation of oil rigs and related oil production equipment and facilities ( id., ¶ 5).
Wampler is a controlling shareholder and Director of Petro Ltd. (Affidavit of John Wampler, dated April 19, 2007, ¶ 1). He is a citizen of the United States, but is a permanent resident of Switzerland ( id., ¶ 2). He does not own property in New York, does not have a mailing address here, does not maintain bank accounts here, and does not pay taxes to the State of New York ( id.).
In the fall of 2006, Howard Chalfin, the Managing Partner of Iconoclast, entered into discussions with Wampler and Mark Gasarch, a director, officer, and shareholder of Petro Ltd., proposing that Iconoclast assist Petro Ltd. in identifying business opportunities, and provide investment banking services with respect to these investments (Complaint, ¶ 6; Gasarch Aff., ¶ 4). After several meetings between Gasarch and Chalfin, Chalfin had identified prospective investors who might participate in Petro Ltd.'s planned "roll up" of various assets it and its affiliates held in the oil production business through mergers, investments, and acquisitions, and potential acquisition targets for the "roll up" (Complaint, ¶ 7). Chalfin stated that Iconoclast would need to be retained by Petro Ltd., and sought a fee of 3% of any debt issued, and 5% of the value of any equity investment ( id., ¶ 8).
By letter agreement dated November 28, 2006, Petro Ltd. agreed to retain Iconoclast (the Engagement Agreement) to provide advice and investment banking services relating to a possible acquisition, merger, consolidation, asset purchase or other business combination, involving some or all of the business, assets, or stock of Laurus for a fee based on the consideration paid in such transaction (Exhibit A to Complaint, Engagement Agreement). The Engagement Agreement specifically provided, in relevant part, that Iconoclast was engaged to render financial advisory and investment banking services:
to Petro Suisse LTD, a Barbados Company, (the "Company") solely in connection with: (a) the possible acquisition, merger, consolidation, asset purchase, reorganization or other business combination with Laurus Family of Funds LLC (the "Target") involving all or a portion of the business, assets or stock of the Target, whether effected in one transaction or a series of related transactions, . . . or (b) the acquisition of effective control over the business affairs of any of the Target's businesses . . . (collectively, the Transaction).
Id. at 1. The Engagement Agreement further provides that if a transaction closes during or within one year of the end of the term, Iconoclast would be paid a cash fee of 4% of the "Aggregate Consideration," or, if no cash consideration is involved, it would receive its fee in an equivalent amount of common stock of the Company or the Target or any vehicle newly formed to effect the Transaction ( id. at 1-2). "Aggregate Consideration" is defined as:
The aggregate amount of cash or cash equivalents and the fair market value (on the date of payment) of securities (whether debt or equity) or assets received by the Target, . . . or by any subsidiary of the Target (including, without limitation, amounts paid by the Company, the Company's subsidiaries in a Transaction such as a leveraged recapitalization, or pursuant to covenants not to compete, employment contracts, employee benefit plans or other similar arrangements). Aggregate Consideration shall also include the amount of any indebtedness (including capital leases) of the Target and/or divisions assumed, defeased, refinanced or otherwise paid in connection with a Transaction.
Id. at 2. The Engagement Agreement provides for a renewable term of 90 days, but that if either party gave written notice of termination within the first 80 days, the agreement would terminate on the 90th day ( id. at 3).
After the Engagement Agreement was executed, Iconoclast identified Laurus as a potential participant in the contemplated transaction (Complaint, ¶ 12). Laurus had previously financed the acquisition of five drilling rigs by Blast Energy Services, Inc. (Blast). Blast was having difficulty repaying its loan with Laurus, and Laurus was looking for a buyer for the Blast rigs ( id., ¶ 10). Chalfin discussed the possibility of a transaction involving the Blast rigs separately with Laurus, encouraging it to entertain a transaction with Petro Ltd. ( id., ¶ 16). Iconoclast introduced Petro Ltd. to Laurus ( see Gasarch Aff., ¶ 11), and created and prepared a PowerPoint presentation (Exhibit A to Chalfin Aff.) designed to persuade Laurus to enter into a transaction with Petro Ltd. relating to the Blast rigs (Complaint, ¶ 17; Chalfin Aff., ¶ 4). The PowerPoint presentation contained an overview of Petro Ltd.'s operations, Wampler's experience in the oil business, and of Petro Ltd.'s proposed roll up (Exhibit A to Chalfin Aff.). Chalfin explains, in his affidavit submitted in support of plaintiff's motion, that the proposed transaction contemplated that Petro Ltd. would acquire the Blast rigs from Laurus through a Petro Ltd. affiliate, referred to in the presentation as Drill Co., and the affiliate would own and operate approximately 27 rigs when the roll up was completed (Chalfin Aff., ¶ 4). Chalfin asserts that, according to Wampler, Petro Ltd. used this presentation in a conference call with Laurus ( id.).
In early December 2006, when Laurus and Petro Ltd. began to engage in serious negotiations, Petro Ltd. began to freeze Iconoclast out of any further participation in the transaction ( id., ¶¶ 18-19). Iconoclast alleges that Chalfin and Roger C. Kahn, a Managing Director of Iconoclast, were supposed to participate in conference calls involving the negotiations with Wampler, Gasarch and Laurus, but that they were never connected ( id., ¶¶ 19-21). On December 12, 2006, Wampler sent an e-mail to Chalfin in which he stated that his call with Laurus was positive, and that Chalfin was "covered as to your agreement, other than that I am only comfortable with my existing team as to sharing information and modeling" (Exhibit B to Complaint). Wampler further stated that he was "extremely busy," and requested that Chalfin refrain from calling him or Gasarch ( id.). After this e-mail, Petro Ltd. stopped communicating with Iconoclast, which was provided with no information about the negotiations (Complaint, ¶ 27).
By letter dated February 9, 2007, Petro Ltd. terminated the Engagement Agreement effective February 26, 2007 (Gasarch Aff., ¶ 9 and Exhibit B annexed thereto). In this termination letter, Petro Ltd. asserts that it was dissatisfied with Iconoclast's performance, that Iconoclast's plan for Petro Ltd. was not a comprehensive, professional strategic plan which Petro Ltd. had expected, and that Iconoclast's advice about what to do with part of Laurus's $40 million debt regarding the Blast rigs was the least appropriate strategy for the situation ( id.).
On March 29, 2007, plaintiff commenced this action, asserting six causes of action. Plaintiff pleads claims against Petro Ltd. for breach of contract, anticipatory breach, and fraudulent inducement of the Engagement Agreement, and against Wampler for fraudulent inducement and tortious interference with contractual relations. It also asserts claims seeking declaratory relief, and for punitive damages.
The Laurus transaction went forward in two stages. First, on April 16, 2007, Laurus loaned $36.5 million to Boom Drilling LLC, a company 80% owned by High Plains Drilling Company, Inc. (High Plains Drilling) and 20% owned by Boom's management (Gasarach Aff., ¶¶ 13, 15). High Plains Drilling Company is 100% owned by Petro-Suisse Energy Services Ltd., and its officers and directors are Wampler and Gasarch (Exhibit D to Gasarch Aff.). Petro-Suisse Energy Services Ltd. is a Barbados corporation with Wampler and Gasarch as its sole shareholders, officers, and directors ( id.). The initial Boom loan was evidenced by notes secured by existing Boom-owned oil rigs (Gasarch Aff., ¶ 13). On or about May 11, 2007, Laurus redeemed the Blast rigs in a bankruptcy sale for the full amount of its $40.6 million loan ( id.). On May 14, 2007, the second and final stage of the Laurus transaction closed. In this stage, Laurus loaned Boom $40.6 million to purchase the Blast rigs from Laurus, which loan was evidenced by notes secured by existing Boom rigs as well as the Blast rigs (Gasarch Aff.,¶ 14). In addition, Laurus received warrants to purchase up to 667 shares (25%) of stock in High Plains Drilling, Boom's corporate parent and owner of 80% of Boom's stock (Gasarch Aff., ¶ 14, and Exhibit C annexed thereto). Wampler personally had also made a $20 million equity investment in Boom, which apparently helped it go forward with this transaction.
At about the same time as this transaction was going forward, Iconoclast made this application seeking an order of attachment. In seeking this extraordinary relief, Iconoclast urges that the defendants, neither of whom are domiciliaries of New York, were preparing to close this substantial transaction with Laurus, at which time Petro Ltd.'s fee obligation to Iconoclast under the Engagement Agreement would ripen. It asserts that Petro Ltd. did not intend to pay Iconoclast the fee it was entitled to receive at the closing, and that it was going to spirit away the assets from the jurisdictional reach of this court. It argues that defendants are non-domiciliaries residing without the state, or, in the case of Petro Ltd., is a foreign corporation not qualified to do business in New York; that Iconoclast has valid claims for breach, and anticipatory breach, of contract; that it will probably succeed on the merits of these claims; and that there are no valid counterclaims that can be asserted against it.
Defendants argue in opposition to the attachment motion that, while the elements regarding their domiciles, and the lack of counterclaims in excess of plaintiff's claims are not in dispute, plaintiff cannot succeed on the merits of its claim for breach of contract. They contend that the subject matter of the Engagement Agreement, which had been drafted by plaintiff, is limited by its explicit terms to a prospective transaction between Petro Ltd. and Laurus in which there was a sale of all or a part of Laurus. They maintain that the transaction that ultimately came to fruition with Laurus was outside the scope of what plaintiff was retained to do. In addition, they urge that the Engagement Agreement does not contain any language expanding its scope to cover a transaction involving parents, subsidiaries, affiliates, agents, or other companies associated with Petro Ltd. While defendants admit that plaintiff did introduce them to Laurus (Gasarch Aff., ¶ 11), companies other than Petro Ltd. represented by Mark Gasarch, a director, officer and shareholder of Petro Ltd.with whom plaintiff had negotiated, and companies in which Gasarch and defendant Wampler have an ownership interest, actually consummated the transaction with Laurus, not Petro Ltd., and that transaction was not any "acquisition, merger, consolidation, asset purchase, reorganization or other business combination" with Laurus as required under the Engagement Agreement.
In moving to dismiss, defendants urge several grounds for relief. First, they assert that the complaint must be dismissed as against defendant Wampler because this court lacks personal jurisdiction over him. Mr. Wampler submits an affidavit in which he attests that he is a permanent resident of Switzerland, and does not have minimum contacts with New York (Wampler Aff., ¶ 2). He further states that he had a chance encounter with plaintiff's president, Howard Chalfin, at a restaurant in New York, but that he was not here for any negotiations with plaintiff, and that he did not commit any torts here (id., ¶¶ 3-6).
Second, defendants argue that the complaint must be dismissed as to both defendants on substantive grounds. They contend that the claims for breach of contract and anticipatory breach must be dismissed because plaintiff has not alleged that any breach has occurred. They urge that plaintiff cannot and has not alleged that any "transaction," as that is defined in the Engagement Agreement, has or will occur. They maintain that the fraudulent inducement claim fails because it simply alleges that defendants entered into the agreement without the intention to perform. They contend that the tortious interference claim must be dismissed because Mr. Wampler, as an officer and director, cannot be independently liable for Petro Ltd.'s breach. Finally, they argue that the claims for declaratory and punitive relief fall with the rest of the claims.
The motion for an attachment is denied. The cross motion to dismiss is granted only to the extent that the second, third, and sixth causes of action are dismissed. I will first address the attachment motion, and then the cross motion to dismiss.
In moving for the attachment, Iconoclast argues that the Engagement Agreement should be read broadly. It asserts that it was retained to render investment advisory services to Petro Ltd. in connection with a transaction involving Laurus, and, until it was frozen out, that is what Iconoclast did. It maintains that it introduced Laurus to Petro Ltd., and that that introduction led to the transaction with Laurus. It contends that the Engagement Agreement broadly defines "transaction" to include an asset purchase involving the assets of Laurus, and that the Laurus transaction is in substance a business combination involving assets of Laurus. It further contends that entities controlled by defendant Wampler, the controlling shareholder of Petro Ltd., are the parties benefitting from the Laurus transaction. Thus, it asserts that it has demonstrated a likelihood of success on the merits of its breach of contract claim.
The grounds for an attachment are set forth in CPLR 6201, which provides, in pertinent part:
An order of attachment may be granted in any action . . . where the plaintiff has demanded and would be entitled, in whole or in part, or in the alternative, to a money judgment against one or more defendants, when: 1. the defendant is a nondomiliciary residing without the state, or is a foreign corporation not qualified to do business in the state. . . .
Attachment is a statutory provisional remedy, and because of its harsh nature, the statute is strictly construed in favor of the defendant against whom it may be employed ( Elton Leather Corp. v First General Resources Co., 138 AD2d 132, 135 [1st Dept 1988]). CPLR 6212 (a) sets forth the required showing for an attachment order. It provides that the plaintiff bears the burden to demonstrate: (1) the existence of one or more grounds of attachment under CPLR 6201; (2) a cause of action; (3) that it is probable that the plaintiff will succeed on the merits of its claim; and (4) the amount demanded from the defendant exceeds all counterclaims known to the plaintiff (CPLR 6212 [a]; see Ford Motor Credit Co. v Hickey Ford Sales, Inc., 62 NY2d 291; Considar, Inc. v Redi Corp. Establishment, 238 AD2d 111 [1st Dept 1997]). To show probability on the merits, the plaintiff must show more than a prima facie case that could satisfy the claim as a pleading ( see Zenith Bathing Pavilion, Inc. v Fair Oaks S.S. Corp., 240 NY 307, 312; Siegel, New York Prac § 317 at 504-05 [4th ed. 2005]). Even if the plaintiff satisfies the requirements of CPLR Article 62, the provisional remedy of attachment is a discretionary one ( see Asdourian v Konstantin, 50 F Supp 2d 152, 158 [ED NY 1999]).
Iconoclast has failed to sustain its burden of proof. While it is undisputed that there is a ground for attachment (Petro Ltd. is a nondomiciliary and is not qualified to do business in New York), and that the amount demanded by Iconoclast exceeds all counterclaims known to it, Iconoclast fails to demonstrate a probability of success on the merits of its claim. The Engagement Agreement provides that Iconoclast was engaged to "render financial advisory and investment banking services to Petro Suisse LTD, . . . solely in connection with" the "transaction," defined as "the possible acquisition, merger, consolidation, asset purchase, reorganization or other business combination" with Laurus involving all or a portion of the business, assets or stock of Laurus (Exhibit A to Complaint). This agreement was drafted by Iconoclast with three changes made by Petro Ltd., one of which was to insert the word "solely." This change clearly limited the agreement to the transactions defined in the next clause. Nevertheless, even assuming for purposes of this attachment that there was an"asset purchase" by Boom's acquisition of the Blast rigs from Laurus, as argued by Iconoclast, the Engagement Agreement, on its face, is between Petro Ltd. and Iconoclast. The Laurus transaction which closed in May 2007 is between Laurus, Boom, and High Plains Drilling Company. Petro Ltd. is not a party to it. While Iconoclast presents evidence that Petro-Suisse Energy Services Ltd., like Petro Ltd., is controlled by Wampler, and they are both affiliated with High Plains Drilling, it is not clear that the Engagement Agreement binds all entities that could be related to Petro Ltd. It also is not clear from the agreement whether the fee would be earned if the advice was rendered to Petro Ltd. but a different related Petro-Suisse entity entered into contractual privity with Laurus, as Iconoclast urges. Therefore, Iconoclast fails to demonstrate a likelihood of success on the merits of its claim that the Engagement Agreement would be applicable to the Laurus transaction that finally came to fruition. At this early stage in this litigation, without clear proof that there was a breach of the Engagement Agreement, the draconian remedy of attachment is not warranted. Accordingly, the motion for an attachment is denied.
The first issue to be addressed on the cross motion to dismiss is whether there is personal jurisdiction over defendant Wampler. A non-domiciliary of New York, Wampler is only subject to jurisdiction under the terms of the long-arm statute, CPLR 302, which is more limited than under the United States Constitution ( see Banco Ambrosiano, S.P.A. v Artoc Bank Trust Ltd., 62 NY2d 65, 71). In deciding personal jurisdiction, a two-part analysis is required. First, it must be determined whether the defendant is amenable to jurisdiction under the long-arm provisions, and then whether jurisdiction comports with federal due process ( see LaMarca v Pak-Mor Mfg. Co., 95 NY2d 210, 214; Panacea Solutions, Inc. v Roll, 2006 WL 3096022 [SD NY 2006]). A plaintiff opposing the motion to dismiss bears the burden of proving personal jurisdiction over a defendant ( DiStefano v Carozzi North Amer., Inc., 286 F3d 81, 84 [2d Cir 2001]). Where the motion is made prior to discovery, however, the plaintiff may defeat the motion by alleging facts constituting prima facie evidence of jurisdiction ( PDK Labs, Inc. v Friedlander, 103 F3d 1105, 1108 [2d Cir 1997]; Panacea Solutions, Inc. v Roll; supra at *2). The complaint, affidavits, or other supporting evidence is construed in the light most favorable to plaintiff ( DiStefano v Carozzi North Amer., Inc., supra.).
CPLR 302 (a) provides, in relevant part:
As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary . . . who in person or through an agent:
1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or
* * *
3. commits a tortious act without the state causing injury to person or property within the state, . . . if he
(I) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or
(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce. . . .
The cause of action must arise out of the relevant contacts.
Defendant Wampler attests that he owns no property in New York, he has no mailing address here, he pays no taxes here, and he has no bank accounts in New York (Wampler Aff., ¶ 2). He further states that he does not transact any business in New York, and that his limited involvement in the negotiation of the Engagement Agreement was not done in New York ( id., ¶ 4).
In response, Iconoclast contends that Wampler is subject to long-arm jurisdiction under CPLR 302 (a) (3), based on his commission of the torts of fraudulent inducement and tortious interference with contract outside of New York, causing injury to Iconoclast in New York. It contends that the element of injury to property in New York is met because Iconoclast does business in New York, and, as a result of Wampler's tortious acts, Iconoclast was deprived of its $3 million fee. It urges that Wampler clearly is involved in interstate or international commerce. It points to the facts that Wampler owns oil rigs and related equipment in Trinidad, Oman, Hungary, Austria, and Germany, as well as in certain states in this country. Iconoclast further asserts that Wampler's companies have an office in New York, managed by Wampler's agent Gasarch in New York, through which Wampler does a substantial amount of business (Complaint, ¶ 2). It points to the fact that Wampler is personally investing in this Laurus transaction, a transaction which is governed by New York law, and the parties to it expressly consented to jurisdiction here. Finally, it argues that it has made a"sufficient start" to demonstrate that its position that jurisdiction over Wampler is not frivolous, such that it should be entitled to jurisdictional discovery under CPLR 3211 (d).
It is evident that plaintiff has made a sufficient prima facie showing under CPLR 302 (a) (3). Jurisdiction under CPLR 302 (a) (3) rests on five elements: (1) defendant committed a tortious act outside New York; (2) the cause of action arises from the act; (3) the act caused injury to a person or property in New York; (4) defendant expected or should reasonably have expected the act to have consequences here; and (5) the defendant derived substantial revenue from interstate or international commerce ( LaMarca v Pak-Mor Mfg. Co., 95 NY2d 210, supra). The first element has been met. Plaintiff has alleged that defendant Wampler has tortiously interfered with the Engagement Agreement ( see discussion below). It alleges that the Engagement Agreement was a valid contract, that Wampler was aware of it, and that he intentionally procured Petro Ltd.'s breach of that contract without justification, and that he personally benefitted from that breach as the controlling shareholder of the various Petro-Suisse companies involved in the Laurus transaction ( see Hoag v Chancellor, Inc., 246 AD2d 224 [1st Dept 1998] [corporate officer liability on tortious interference claim]). Iconoclast alleges that this tortious act occurred outside New York. This is sufficient on a jurisdiction motion.
The second element is also met. It is undisputed that the claim arises from the act. The third element, that the tortious interference caused injury to a person or property in New York, is satisfied on the facts here. In determining this element, courts apply a situs of injury test, in which the court must locate the original event which caused the injury ( DiStefano v Carozzi North Amer., Inc., 286 F3d at 84). This original event is where the first effects of the tort that produced the economic injury is located ( id.). In a tortious interference with contract claim, the first effects are felt where the contract was to be performed by plaintiff, who was prevented from performing and reaping the benefits thereof. In the instant case, that location was New York. Iconoclast was an investment banking boutique engaged to provide advice, and bringing the parties to a transaction together from its New York office. It was engaged to and did introduce Wampler and Petro Ltd. to Laurus, a New York hedge fund, to effect a transaction that would generate fees to be paid to Iconoclast here in New York. The first effects of the injury were felt here when Iconoclast allegedly was frozen out of the negotiations, and when defendants refused to pay its fees. Accordingly, Iconoclast has alleged sufficient facts to show that the injury caused by Wampler's alleged tortious interference occurred in New York
Iconoclast has also made a prima facie showing that Wampler should have reasonably expected his acts of allegedly freezing Iconoclast, a New York investment banking adviser, out of the Laurus transaction negotiations, and preventing Iconoclast from performing its role in the Engagement Agreement to have consequences in New York.
Finally, Iconoclast has made a sufficient showing that Wampler derives substantial revenue from interstate and international commerce. It shows that Wampler, and the companies he controls, own oil rigs and related equipment in various states, as well as in several countries ( see Chalfin Aff., Exhibit A). One of the Petro-Suisse companies he owns or controls has an office in New York, these companies are managed by Mark Gasarch, who also operates in New York, and Wampler does a substantial amount of business through these Petro-Suisse companies. This satisfies the requirement in CPLR 302 (a) (3) (ii).
Exercising jurisdiction over Wampler comports with due process. As discussed above, Wampler has sufficient contacts with New York such that notions of fair play and substantial justice are not offended ( see International Shoe Co. v State of Washington, 326 US 310, 316). He has minimum contacts with New York in this case, such that he should reasonably anticipate being haled into court here ( see LaMarca v Pak-Mor Mfg. Co., 95 NY2d at 216). He has made a personal equity investment in Boom in connection with the Laurus transaction, a transaction that is governed by New York law and which expressly consents to jurisdiction in New York courts. In addition, Wampler conducted a significant portion of the negotiations with Laurus and Iconoclast through Gasarch, an agent located in New York. This satisfies the constitutional due process requirements. Accordingly, there is personal jurisdiction over Wampler, and that portion of the cross motion to dismiss is denied.
The cross motion to dismiss is granted as to the second, third, and sixth causes of action. The second cause of action for anticipatory breach is dismissed as moot. The Laurus transaction closed, and Iconoclast's fee was not paid. The substance of this claim is subsumed in the breach of contract claim.
The third cause of action for fraudulent inducement is dismissed. In that claim, Iconoclast alleges that Petro Ltd. and Wampler made representations to induce Iconoclast to enter into the Engagement Agreement. It claims that these defendants made "representations concerning their false intention to use Iconoclast as an investment adviser and to pay the fee contemplated under the terms of the Engagement Agreement," and that they intended to have Petro Ltd. prevent Iconoclast from performing, not to pay the fee, and to have Petro Ltd. breach the agreement (Complaint, ¶¶ 55-56). These allegations essentially assert that defendants entered into the Engagement Agreement without intending to perform.
A fraud claim is redundant of a breach of contract claim where the only fraud alleged merely relates to a party's alleged intent not to perform and to breach the contract ( see Town House Stock LLC v Coby Housing Corp., 36 AD3d 509 [1st Dept 2007]; Jericho Group, Ltd. v Midtown Dev., L.P., 32 AD3d 294 [1st Dept 2006]; 767 Third Ave. LLC v Greble Finger, LLP, 8 AD3d 75 [1st Dept 2004]; Goldstein v CIBC World Markets Corp., 6 AD3d 295 [1st Dept 2004]; Comtomark, Inc. v Satellite Communications Network, Inc., 116 AD2d 499 [1st Dept 1986]). A plaintiff must allege the breach of a duty which is collateral or extraneous to the contract to allege a viable fraud claim arising out of a contractual relationship ( see Krantz v Chateau Stores of Canada Ltd., 256 AD2d 186 [1st Dept 1998]).
Iconoclast's fraud claim here fails because it does not allege the breach of any duty collateral or extraneous to the contract. Moreover, except for the unelaborated request for punitive damages in the sixth cause of action, Iconoclast has not claimed any special damages proximately caused by the false representation that are not recoverable under the contract damages sought in the first cause of action. This is further evidence that these claims are duplicative ( see Town House Stock LLC v Coby Housing Corp., 36 AD3d 509, supra; Krantz v Chateau Stores of Canada Ltd., 256 AD2d at 187).
Iconoclast's relies on Grubard Mollen Dannett Horowitz v Moskovitz ( 86 NY2d 112). In that case, however, the fraud claim was based on allegations that the defendant, a retiring partner, falsely represented to the plaintiff firm that he would act to ensure the future of the firm by integrating and institutionalizing the clients. The Court found that plaintiff sufficiently alleged a separate claim for fraudulent inducement. Unlike the instant action, the fraud in the Graubard Mollen case was collateral or extraneous to the contract — it was based on additional oral assurances not embodied in the contract, and was evidenced by defendant's conduct shortly after entering into the agreement ( see Coppola v Applied Elec. Corp., 288 AD2d 41, 42 [1st Dept 2001]). Here, there were no collateral or extraneous oral assurances. Accordingly, the third claim for fraudulent inducement is dismissed.
The sixth cause of action for punitive damages is dismissed. There is no separately stated claim for punitive damages.
The remainder of the cross motion to dismiss is denied.
The first cause of action for breach of contract sufficiently states a claim, and is not barred by any documentary evidence submitted by defendants. Although the pleadings, affidavits, and documents are insufficient for Iconoclast to seek an attachment, they are sufficient to satisfy a pre-answer, pre-discovery motion to dismiss. The evidence shows that there is a contract between Iconoclast and Petro Ltd., which required Petro Ltd. to pay Iconoclast a fee if a particular type of transaction closed with Laurus, a transaction closed with Laurus, and Iconoclast was not paid a fee. This meets the pleading requirements for a breach of contract claim under CPLR 3211 (a) (1) and (7). The contract, as well as the documentary evidence submitted, fail to establish as a matter of law that the Engagement Agreement only binds Petro Ltd., and not entities that could be related to Petro Ltd., including Petro-Suisse Energy Services Ltd. In addition, contrary to defendants' argument, it is not clear that the transaction which actually occurred did not fall within the parameters set forth in the Engagement Agreement, as an asset purchase of some of Laurus's assets. Therefore, dismissal at this point in the litigation is premature and unwarranted.
The fourth cause of action for tortious interference with contract against defendant Wampler also sufficiently pleads a claim. To plead a tortious interference claim, a plaintiff must allege (1) a valid contract between the plaintiff and a third party; (2) defendant's knowledge of the contract; (3) defendant's intentional procurement of a breach without justification; (4) actual breach; and (5) damages ( NBT Bancorp Inc. v Fleet/Norstar Fin. Group, Inc., 87 NY2d 614, 620-21). Ordinarily, a corporate officer or director is not personally liable to a party who has contracted with the corporation on the theory of inducing a breach of a contract merely due to the fact that the officer made decisions or acted in such a way that the corporation's promises were broken ( Joan Hansen Co. v Everlast World's Boxing Headquarters Corp., 296 AD2d 103, 109 [1st Dept 2002]). An officer or director, however, may be personally liable where the officer acts for his personal rather than the corporate interests ( Hoag v Chancellor, Inc., 246 AD2d at 230).
To establish corporate officer liability for tortious interference, the complaint must allege that the officer's acts were taken outside the scope of his or her employment, or that the officer personally profited from the acts ( id. at 228-29). This claim is subject to an enhanced pleading standard ( Joan Hansen Co. v Everlast World's Boxing Headquarters Corp., 296 AD2d at 109; see Petkanas v Kooyman, 303 AD2d 303, 305 [1st Dept 2003]). Thus, the plaintiff must make a particularized pleading, in nonconclusory language, of facts establishing that the officer's acts were beyond the employment scope, or were performed with malice and motivated by a desire for personal gain ( Chambers Assocs. LLC v 105 Acquisition LLC, 37 AD3d 365 [1st Dept 2007]; Petkanas v Kooyman, 303 AD2d at 305; Joan Hansen Co. v Everlast World's Boxing Headquarters Corp., 296 AD2d at 109-110).
In the instant case, Iconoclast's assertions that Wampler, as the controlling shareholder and one of only two or three officers of both Petro Ltd. and Petro-Suisse Energy Services Ltd., the entity which actually closed the transaction, personally benefitted from Petro Ltd.'s breach of the Engagement Agreement, and that this was his motivating intent in freezing Iconoclast out of the Laurus transaction and procuring Petro Ltd.'s breach of its obligation to pay Iconoclast its fee, satisfy its pleading burden on this claim. Iconoclast further supports its claim with assertions that Wampler had personally made a $20 million equity investment in Boom Drilling as evidence of the personal benefits to Wampler upon completion of the Laurus transaction without the obligation of Iconoclast's $3 million fee. This is sufficient at this stage of the action. Accordingly, the fourth cause of action states a claim against Wampler.
I have considered the defendants' remaining arguments, and find them to be without merit.
Accordingly, it is
ORDERED that the motion for an attachment is denied; and it is further
ORDERED that the cross motion to dismiss is granted to the extent that the second, third, and sixth causes of action are dismissed; and it is further
ORDERED that the defendants are directed to serve an answer to the complaint within 10 days after service of a copy of this order with notice of entry.