Opinion
05 Civ. 6298 (PKC).
July 31, 2006
MEMORANDUM AND ORDER
This is an action by Prescient Acquisition Group, Inc. ("Prescient Group") against the recording artist Michael Jackson and certain entities affiliated with him. Plaintiff alleges that it is owed $48 million in fees by defendants MJ Publishing Trust and MJ-ATV Publishing Trust for financial advisory services. Specifically, plaintiff asserts it successfully secured refinancing of an existing $272,500,000 debt owed to Bank of America, as well as $537,500,000 in additional financing to allow the exercise of a "Put Option" to purchase the remaining 50% interest of Sony/ATV Publishing Trust LLC in the library of songs written by the Beatles. In addition to a breach of contract claim against the two trusts, plaintiff also asserts a claim for unjust enrichment against them, as well as against Mr. Jackson.
On March 24, 2006, I granted Perfect Circle Entertainment, Inc. ("Perfect Circle") leave to intervene in this action as a plaintiff. (Docket No. 52) Perfect Circle alleges that it is the party who brought together plaintiff and the Jackson interests. It asserts claims against all defendants for breach of contract and unjust enrichment.
Defendants now move to dismiss the two complaints under Rule 12(b)(6), Fed.R.Civ.P. For the reasons discussed below, I deny the motion as to the plaintiff's claim for breach of contract against defendant MJ Publishing Trust and grant the motion as to the contract claim against defendant MJ-ATV Publishing Trust. In addition, I grant the motion as to plaintiff's claims of unjust enrichment against all defendants. Finally, I grant the motion to dismiss the intervenor's complaint in its entirety.
The initial complaint was filed on July 11, 2005. It was amended on February 22, 2006. (Docket No. 37) In an order filed April 17, 2006, I granted plaintiff leave to further amend its complaint to add New Horizon Trust as a party defendant on a claim of fraudulent conveyance. (Docket No. 59) At the time of the filing of the Second Amended Complaint ("S.A.C."), defendants' motion to dismiss had been filed. In an order filed on May 3, 2006, I deemed the pending motion to have been interposed against the Second Amended Complaint and permitted the parties to supplement their motion papers, if they so desired. (Docket No. 66). No further substantive submissions were received in relation to the motion to dismiss.
The law firm of Wachtel Masyr, LLP, the second law firm to have appeared for defendants, has moved to withdraw as counsel and to stay this action. As discussed below, the motion is granted insofar as the firm is permitted to withdraw and I will order a brief stay of the action until September 1, 2006.
I. THE PLAINTIFF AND ITS CLAIMS
The plaintiff Prescient Group is a New York corporation with its principal place of business in the State of New Jersey. The complaint alleges that it has done business under the name "Prescient Capital Corporation" ("PCC"). (S.A.C. ¶ 5) It further alleges that "Mr. Darien Dash has at all times controlled Prescient [Group] and was its pre-incorporation promoter." (Id.)
Plaintiff further alleges that on November 17, 2004, Mr. Dash executed an agreement on behalf of "Prescient Capital Corporation," an entity that "he intended to incorporate formally in the near future." (S.A.C. ¶ 13). The S.A.C. alleges that, upon its incorporation in early 2005, Prescient Group "ratified the Agreement by continuing its performance under it (and later, also by demanding defendants' performance)." (S.A.C. ¶ 15).
Defendants in this action are Michael J. Jackson and the two trusts, MJ Publishing Trust and MJ-ATV Publishing Trust. The trusts were formed by Jackson "for the purpose of holding title to certain intellectual property rights, including libraries of songs written by Michael Jackson and by the Beatles." (S.A.C. ¶ 1)
Under the alleged agreement, PCC/Prescient Group agreed to act as a financial advisor to MJ Publishing Trust and secure refinancing of debt owed to Bank of America. (S.A.C. ¶ 1) In exchange for such services, PCC/Prescient Group was to be paid 9% of the principal amount funded or committed and advisory fees for any senior debt funded pursuant to a securitization of the intellectual property. (S.A.C. ¶ 3) PCC/Prescient Group was also to receive this compensation if MJ Publishing Trust entered into a funding agreement with any investors or lenders introduced to MJ Publishing Trust by PCC/Prescient Group within 18 months of termination of the agreement. (Id.)
As noted, the contract was signed by PCC and was allegedly ratified by Prescient Group. In acknowledgement of the diverging views of the parties on the efficacy of the claim of ratification, I will sometimes refer to the contracting party as "PCC/Prescient Group". There is no indication in that record that PCC was ever incorporated.
Plaintiff alleges that defendant MJ Publishing Trust entered into the November 17, 2004 agreement. (S.A.C. ¶ 13) Neither MJ-ATV Publishing Trust nor Mr. Jackson are alleged to have been signators to this agreement.
Plaintiff also alleges that it successfully secured financing, as required by the agreement with MJ Publishing Trust, and, as a result of this work, defendants received the benefit to which they were entitled under the agreement. (S.A.C. ¶ 1) Therefore, plaintiff seeks damages for breach of contract. Alternatively, plaintiff seeks to recover against all defendants on a theory of unjust enrichment.
In moving to dismiss, defendants argue that Prescient Group may not assert rights that belong, if at all, to PCC. Further, MJ-ATV Publishing Trust argues that no claim for breach of contract lies against it because only MJ Publishing Trust was party to the alleged agreement. Finally, MJ Publishing Trust, MJ-ATV Publishing Trust and Mr. Jackson argue that, as a matter of law, no claim for unjust enrichment may be asserted against them.
A. Legal Standard
In considering a motion to dismiss pursuant to Rule 12(b)(6), Fed.R.Civ.P., the Court must accept all well-pleaded factual allegations as true and draw all reasonable inferences in favor of plaintiff. "Dismissal is not appropriate `unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Chance v. Armstrong, 143 F.3d 698, 701 (2d Cir. 1998) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, (1957)). On a Rule 12(b)(6) motion, "the issue is not whether a plaintiff is likely to prevail ultimately, but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleading that a recovery is very remote and unlikely but that is not the test." Id. (citations omitted). I am mindful that the allegations of a complaint are to be judged by the notice pleading standard of Rule 8 and no higher burden may be imposed upon the pleader.See Swierkiewcz v. Sorema, 534 U.S. 506, 514 (2002).
The Court may consider documents integral to the complaint without converting the motion to one for summary judgment. See Global Network Comm., Inc. v. City of N.Y., No. 05-3298-cv at 12 (2d Cir. July 21, 2006). See also Int'l Audiotext Network, Inc. v. ATT Co., 62 F.3d 69, 72 (2d Cir. 1995). In this case, the intervenor has annexed the engagement agreement and the agreement between Perfect Circle and PCC/Prescient Group to its complaint, and I consider these documents in deciding the motion to dismiss addressed to the intervenor's complaint. As to the plaintiff, the S.A.C. does not annex its purported agreement with defendants. (The original complaint and first amended complaint had annexed this document.) The S.A.C. does, however, liberally quote from the relevant provisions of the agreement. Moreover, I may take account of the entirety of the agreement because it is integral to the plaintiff's S.A.C., which "relies heavily upon its terms and effect." See Global Network Comm., Inc., at 13.
B. Breach of Contract
Here, the parties agree that New York law applies to the plaintiff's claim for breach of contract as there is a choice of law provision in the signed contract and there are significant contacts between this transaction and the state of New York. Under New York law, to assert a breach of contract claim against a defendant, a plaintiff must "allege (1) the existence of an agreement, (2) adequate performance of the agreement by the plaintiff, (3) a breach of the contract by the defendant, and (4) damages." Eternity Global Mastor Fund, Ltd. v. Morgan Guar. Trust Co. of N.Y., 375 F.3d 168, 177 (2d Cir. 2004) (applying New York law).
1. Defendant MJ Publishing Trust
Defendants argue that this breach of contract claim against MJ Publishing Trust should be dismissed because plaintiff does not have standing to assert the claim. Specifically, defendants argue that the parties entered into the alleged agreement on November 17, 2004, and the plaintiff corporation did not exist until early 2005. (Def. Mem. at 7). Defendants argue that plaintiff cannot be a party to the contract because the agreement was allegedly entered into approximately four months before plaintiff existed. (Mot. to Dismiss p. 7).
Under New York law, a corporation may ratify an agreement formed by a promoter prior to the existence of the corporation, thus making the corporation a party to the agreement. See Barnum v. Frickey 115 A.D.2d 977, 977 (4th Dep't. 1985). Ratification need not be explicit; rather, it may be inferred from allegations in the complaint and acts performed in furtherance of the contract. S. B. Rubber Chem. Corp. v. Stein, 7 N.Y.S.2d 553, 555 (N.Y.Sup. 1938), aff'd, 255 A.D. 1012 (2d Dept. 1938).
Here, plaintiff asserts sufficient facts to survive the motion to dismiss. The complaint alleges that Dash was the pre-incorporation promoter of Prescient, that he entered into a written agreement with MJ Publishing Trust on behalf of Prescient, and that the corporation ratified the acts of the pre-incorporation promoter through its performance of the contract and its efforts to enforce the contract. (S.A.C. ¶¶ 13, 15) The complaint alleges performance of the contract through Prescient's arrangement of the required financing through Transitional Investors LLC and Fortress Investment Group LLC. (S.A.C. ¶ 2) Plaintiff also alleges that, despite its demands for payment under the agreement, defendants have "failed and refused to pay Precient" its fees. (S.A.C. ¶ 20). Plaintiff asserts sufficient facts to survive the motion to dismiss the plaintiff's breach of contract claim against defendant MJ Publishing Trust and, therefore, the defendants' motion in this respect is denied.
2. Defendant MJ-ATV Publishing Trust
Defendant MJ-ATV Publishing Trust argues that the breach of contract claim against it should be dismissed because plaintiff failed to plead that MJ-ATV Publishing Trust was a party to the alleged contract and, indeed, could not truthfully allege that it was a party to the contract. It argues that the text of the actual agreement, which does not mention MJ-ATV Publishing Trust, would not support such an allegation.
The plaintiff does not expressly allege any alter ego theory under which MJ-ATV Publishing Trust might be liable for action by MJ Publishing Trust, a separate entity. True, defendants MJ Publishing Trust and MJ-ATV Publishing Trust are referred to interchangeably in the complaint. Plaintiff also asserts that MJ Publishing Trust and MJ-ATV Publishing Trust "exchanged, assigned, and/or assumed the obligations and/or rights of each other pursuant to financing and/or security agreements." (S.A.C. ¶ 7) But, without a specific allegation that plaintiff is seeking to hold MJ-ATV Publishing Trust liable as the alter ego (or equivalent words) of MJ Publishing Trust, the pleading fails to satisfy the minimal notice requirements of Rule 8(a), Fed.R.Civ.P. See, e.g., In re Currency Conversion Fee Antitrust Litig., 265 F. Supp. 2d 385, 426 (S.D.N.Y. 2003) ("Purely conclusory allegations cannot suffice to state a claim based on veil-piercing or alter-ego liability, even under the liberal notice pleading standard.").
New York courts apply a presumption of separateness to corporations and are hesitant to disregard the corporate form.See DeJesus v. Sears, Roebuck Co., 87 F.3d 65, 70 (2d Cir.), cert. denied, 519 U.S. 1007 (1996). New York law permits rebuttal of this presumption only when the corporate form has been used to "achieve fraud, or when the corporation has been so dominated by an individual . . . and its separate identity so disregarded, that it primarily transacted the dominator's business rather than its own and can be called the other's alter ego." See, e.g., William Wrigley Jr. Co. v. Waters, 890 F.2d 594, 600 (2d Cir. 1989); see also, Jenkins v. Moyse, 254 N.Y. 319, 324 (1930) (holding that "the corporate entity may be disregarded where it is used as a cloak or cover for fraud or illegality). Factors to consider in this determination include: (1) intermingling of corporate and personal funds, (2) undercapitalization of the corporation, and (3) failure to maintain separate books and records or other formal legal requirements for the corporation.William Wrigley Jr. Co., 890 F.2d at 600-01. The S.A.C. falls woefully short of alleging such circumstances, even in a conclusory manner. Reading the S.A.C. independently from plaintiffs' memoranda in opposition to the motion to dismiss, one could not determine whether plaintiff was alleging a lack of corporate separateness and the basis for a claim.
The motion to dismiss the plaintiff's claim for breach of contract against defendant MJ-ATV Publishing Trust is granted.
C. Unjust Enrichment
Plaintiff also asserts a claim for relief under a theory of unjust enrichment. The parties agree that New York law applies in this case because New York has sufficient contacts with this litigation and the parties, it was the plaintiff's choice of forum, and there was a choice of laws clause in the disputed contract.
An earlier version of the complaint asserted in a single claim for relief the theories of unjust enrichment and quantum meruit. The S.A.C, the operative pleading, alleges unjust enrichment and I will not consider the abandoned quantum meruit claim.
To establish a viable cause of action for unjust enrichment under in New York, a plaintiff must allege that it "(1) conferred a benefit upon the defendant and (2) that the defendant will obtain such benefit without adequately compensating the plaintiff therefor." Nakamura v. Fujuii, 253 A.D.2d 387, 390 (1st Dep't. 1998). Here, plaintiff alleges that it conferred a benefit upon the defendants by introducing them to third parties willing to fund the requested refinancing effort, that the defendants would not have been able to secure such financing without the aid of plaintiff, and that defendants will be left with millions of dollars in benefits if they do not compensate plaintiff for the value of such services. (S.A.C. ¶ 22).
The allegations of the S.A.C. are broad enough to encompass a claim under a theory of unjust enrichment. In moving to dismiss, however, defendants urge that, based upon these facts, recovery is barred by the New York's Statute of Frauds governing finders' fees. The Statute provides, in part, as follows:
"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: 10. Is a contract to pay compensation for services rendered in . . . negotiating the purchase, sale, exchange, renting or leasing of . . . a business opportunity, business, its good will, inventory, fixtures or an interest therein. . . . `Negotiating' includes procuring an introduction to a party to the transaction or assisting in the negotiation or consummation of the transaction. This provision shall apply to a contract implied in fact or in law to pay reasonable compensation."
N.Y. Gen. Oblig. § 5-701(a)(10).
In New York, a plaintiff may not assert an action under a theory of unjust enrichment in order to circumvent the writing requirement of the Statute of Frauds. See Belotz v. Jeffries Co., Inc., 213 F.3d 625 (2d Cir. 2000) (citing Minichiello v. Royal Bus. Funds Corp., 18 N.Y.2d 521, 525, 27 (1966)). See also Tower Int'l v. Caledonian Airways, 133 F.3d 908 (2d Cir. 1998) (holding that notwithstanding a finding that all the elements of unjust enrichment were present, an inability to satisfy the Statute of Frauds causes an unjust enrichment claim to fail as a matter of law). In an analogous situation involving a claim for recovery in quantum meruit, the New York Court of Appeals held that "the [writing] requirement cannot be avoided by an action for compensation in quantum meruit." Minichiello, 18 N.Y.2d at 525, 27. The Statute of Frauds thus precludes any recovery of finder's fees in quantum meruit because "to allow recovery for the reasonable value of those services would substantially defeat the writing requirement." Id. Because, as alleged in the complaint, this is a finder's fee agreement and New York law applies in this action as agreed by the parties, the defendants' motion to dismiss the unjust enrichment claim against Michael Jackson, MJ Publishing Trust, and MJ-ATV Publishing Trust is granted.
II. THE INTERVENOR'S CLAIMS
As noted, Perfect Circle moved to intervene in the action. The intervenor complaint ("I.C.") alleges that Don Stabler, the authorized agent of MJ Publishing Trust, MJ-ATV Publishing Trust, and Mr. Jackson contacted Perfect Circle in order to secure refinancing on a debt owed to Bank of America. (I.C. ¶ 4) Perfect Circle alleges that, in response to this request and with the defendants' knowledge and consent, it secured PCC/Prescient Group to assist in the search for refinancing. (I.C. ¶ 6) Perfect Circle then agreed that its "sole compensation" would be a portion of the fee to be paid to PCC/Prescient Group by defendants. (I.C. ¶ 6)
Perfect Circle also alleges that it entered into an agreement with PCC/Prescient Group, with the knowledge of defendants, and used its "financial industry contacts and experience with this type of refinancing and structuring" to aid PCC/Prescient Group in securing the refinancing of defendants' debt. (I.C. ¶ 8) Perfect Circle alleges that defendants were aware that it was due compensation for its role in aiding PCC/Prescient Group and in introducing PCC/Prescient Group to the defendants, actions that were instrumental in the eventual refinancing. (I.C. ¶ 9) Perfect Circle argues that its efforts eventually allowed the Bank of America debt to be paid off and additional advances to be made to defendants, thus conferring upon them a valuable benefit. (I.C. ¶ 8)
Perfect Circle alleges that it was to be paid by PCC/Prescient Group after PCC/Prescient Group was paid under the Prescient-MJ Publishing Trust agreement. (I.C. ¶ 6) Perfect Circle argues that the defendants' denial of liability and refusal to pay Prescient Group its fees under the alleged PCC/Prescient Group-MJ Publishing Trust Agreement has denied Perfect Circle its due compensation under its separate agreement with PCC/Prescient Group. Perfect Circle asserts claims for recovery against defendants based on theories of third party beneficiary status and unjust enrichment.
Perfect Circle asserts in the I.C. that PCC/Prescient Group was its agent and partner. (I.C. ¶ 35) It brings no claims against Prescient Group and does not allege that Perfect Circle is a party to the contract with the defendants. Perfect Circle relies upon the agreement between PCC/Prescient Group and Perfect Circle, which states that Perfect Circle is to be compensated through and under PCC/Prescient Group. From the forgoing, Perfect Circle claims that defendants MJ Publishing Trust, MJ-ATV Publishing Trust, and Mr. Jackson were unjustly enriched. It also claims to be a third-party beneficiary of the alleged contract between PCC/Prescient Group and the defendants. I will consider each of these claims in turn.
A. Unjust Enrichment Claim
Perfect Circle asserts a claim against MJ Publishing Trust, MJ-ATV Publishing Trust and Mr. Jackson under a theory of unjust enrichment. It alleges that, "but for Perfect Circle's actions, the refinancing and restructuring of defendants' debt which took place would not have been possible." The I.C. alleges that defendants will be unjustly enriched as a result of Perfect Circle's efforts if Perfect Circle is unable to recover from defendants for the benefit that they received as a result of Perfect Circle's role in securing the transaction. (I.C. ¶ 3)
As previously outlined, a plaintiff seeking to recover under a theory of unjust enrichment under New York law must allege that it "(1) conferred a benefit upon the defendant and (2) that the defendant will obtain such benefit without adequately compensating the plaintiff therefor." Nakamura, 253 A.D.2d at 390 (1st Dep't. 1998). While Perfect Circle alleges that the defendants were benefited and that it would be unjust to allow them to retain the benefits they received as a result of the alleged services, it fails to allege that it directly conferred any benefit upon defendants. Instead, Perfect Circle relies on the benefit it conferred upon PCC/Prescient Group under the PCC/Prescient Group-Perfect Circle agreement, to which no defendant is a party.
In Outrigger Const. Co., Inc. v. Bank Leumi Trust Co. of N.Y., 240 A.D.2d 382 (2d Dep't 1997), the plaintiff had entered into a contract with the owner of a parcel which was allegedly breached. Thereafter, the plaintiff sued the bank providing a construction loan and the subsequent owner of the property on, among other things, an unjust enrichment theory, because the plaintiff made improvements to the property that benefited these defendants. The Appellate Division, Second Department, rejected the plaintiff's theory because the benefit to the defendants was indirect: "To recover under a theory of quasi contract, the plaintiff must be able to prove that performance was rendered for the defendants resulting in their unjust enrichment. It is not enough to show that the defendants consented to the improvements or received a benefit from the plaintiff's activities." 240 A.D.2d at 384.
The PCC/Prescient Group-Perfect Circle agreement provided that "Prescient has been exclusively engaged by the Company (referring to defendants)" and that "Prescient [] agrees to compensate PCE [Perfect Circle] for its introduction and delivery of the exclusive engagement of it by Company [defendants]." This language supports the conclusion that PCC/Prescient Group, not the defendants, received a benefit from Perfect Circle's efforts,i.e. the introduction to and agreement with MJ Publishing Trust, and that PCC/Prescient Group was to compensate Perfect Circle for such benefit. Perfect Circle has asserted no claim against PCC/Prescient Group in this action.
Accepting all allegations of the S.A.C. as true, defendants have not been unjustly enriched at the expense of Perfect Circle because Perfect Circle has not conferred a benefit upon defendants but rather upon PCC/Prescient which indirectly may have benefited defendants. Cf. Mariacher Contracting Co., Inc. v. Kirst Const. Inc., 187 A.D.2d 986, 988 (4th Dep't. 1992) (holding that defendant was not unjustly enriched by improvements it received when plaintiff performed work for the benefit of the general contractor who was responsible for completion of the improvements). At most, Perfect Circle has conferred a benefit upon PCC/Prescient Group, with which it has a seemingly enforceable contract. Perfect Circle accepted the risk that it would be paid when, as, and if PCC/Prescient Group is paid. The absence of an alleged conferral of direct benefit would support the grant of defendants' motion to dismiss the intervenor's claim for unjust enrichment. But, in addition, defendants assert that the claim is an unavailing effort to circumvent New York Statute of Frauds, which, as noted, requires that finders' fee agreements be in writing. (N.Y.G.O.L. § 5-701(a)(10)). Perfect Circle claims that this Court should apply California law, which does not require that finders' fees be in writing.
Federal courts sitting in diversity must apply the substantive law that the state's highest court would apply, including choice of law principles. Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-497 (1941). The New York Court of Appeals consistently holds that New York has the paramount interest in application of its Statute of Frauds laws for finders' fees because it is a "national and international center for the purchase and sale of businesses and interests therein" and by enacting the Statute of Frauds, the Legislature intended to protect residents of New York as well as "those who come into New York to take advantage of [its] position as an international clearing house and market place." Id. at 383-384. Here, not only does the substantial interest of New York in the enforcement of its Statute of Frauds apply, but also a "significant part" of the events that gave rise to Prescient's claims took place in the State of New York. (I.C. at 4-5) Also, the underlying contract between PCC/Prescient Group and MJ Publishing Trust, "governed by and construed in accordance with the laws of the State of New York, without regard to principles of conflicts of laws." (I.C. Ex. 1) The underlying agreement upon which intervenor seeks to rely serves as an additional factor in the "center of gravity" analysis.
Intervenor acknowledges that, under New York choice of law rules, this Court should apply the law of the jurisdiction with the greatest interest in the litigation as long as it has sufficient contacts so as to not render the application of its law to be unfair. (Intervenor Opp'n to Mot. to Dismiss at 5).See Fort Howard Paper Co. v. William D. Wittter, Inc., 787 F.2d 784, 790 (2d Cir. 1986) (discussing the New York Court of Appeals decision in Intercontinental). In Intercontinental, the Court of Appeals held that New York has a substantial interest because its Statute of Frauds provision is aimed at preventing perjury upon its courts. In its opinion, the court stated that the New Jersey Statute of Frauds (similar to the California Statute of Frauds at issue in the present case) does not apply to brokerage or finder's fee agreements and therefore New York's interest should prevail over that of New Jersey because New Jersey has no interest in protecting New York courts from perjury. Intercontinental, 24 N.Y.2d at 385.
California does not require a writing for finder's fee agreements. But California's interest in enforcing contracts is primarily to uphold the reasonable expectations of the parties.Denny v. Am. Tobacco Co., 308 F.Supp. 219, 223 (N.D. Cal. 1970). California courts acknowledge that California's interest in protecting the reasonable expectations of its citizens is "much less apparent" than New York's clear interest in protecting against fraudulent claims. See id.
Therefore, because New York has a greater interest in the application of its Statute of Frauds to this litigation and because there are sufficient contacts with New York "so as not to render application of its law fundamentally unfair," Fort Howard, 787 F.2d at 790, I conclude that New York's Statute of Frauds applies to the intervenor's claim for a finders' fee. This holding is supported by the strong policy to "reduc[e] unfounded . . . claims and preserv[e] New York's role as a national and international center for the purchase and sale of businesses.Holding Capital Group, Inc. v. AP Co., 673 F.Supp. 1274, 1277 (S.D.N.Y. 1987).
Perfect Circle does not allege any written agreement between it and defendants which satisfies the writing requirement for finders' fees under the New York Statute of Frauds. N.Y. Gen. Oblig. § 5-701(a)(10). As a result, the unjust enrichment claim fails under New York law, which forbids the use of claims of unjust enrichment to attempt to circumvent the writing requirement for finders' fee agreements. See Minichiello v. Royal Bus. Funds Corp., 18 N.Y.2d 521, 525 (1966). See also Tower Int'l, 133 F.3d at 908. The defendants' motion to dismiss the intervenor's claim for unjust enrichment is granted.
B. Third Party Beneficiary
As an alternate theory of recovery, Perfect Circle claims to be a third-party beneficiary of the alleged agreement between PCC/Prescient Group and defendants. New York law applies to this third-party claim because a third-party beneficiary's rights are no greater than the rights of the promisee. Barnum v. Millbrook Care Ltd. P'ship, 850 F. Supp. 1227, 1234 (S.D.N.Y. 1994). Because the contract upon which Perfect Circle claims to have rights as a third-party beneficiary contains a choice of law provision providing that New York law will apply irrespective of the principles of conflict of laws, this claim is governed by New York law. See Goodson v. Red Carpet Inns, 1979 U.S. Dist. LEXIS 7731, at *15-16 (S.D.N.Y. Dec. 28, 1979).
For a third-party beneficiary to succeed on a breach of contract claim under New York law, the party must "establish (1) the existence of a valid and binding contract between other parties, (2) that the contract was intended for that party's benefit, and (3) that the benefit was immediate, and not incidental, so as to `indicate duty to compensate the plaintiff if the benefit is lost.'" BDG Oceanside, LLC v. RAD Terminal Corp., 787 N.Y.S.2d 388, 390 (2005). While the third-party beneficiary does not have to establish that it was explicitly mentioned in the contract, New York law requires that the parties' intent to benefit a third-party be shown on the fact of the contract. See Strauss v. Belle Realty Co., 98 A.D.2d 424, 426-427 (2d. Dept. 1983). Here, there is no expression of an intention to benefit Perfect Circle as a third-party to the agreement between PCC/Prescient Group and MJ Publishing Trust, nor does the I.C. allege that the agreement contains such an expression.
In New York, a third-party can enforce a right "if (1) the promised performance will be of pecuniary benefit to him and (2) the contract is so expressed as to give the promisor reason to know that such benefit is contemplated by the promisee as one of the motivating causes of his making the contract." Roby v. Corp. of Lloyd's, 996 F.2d 1353, 1359 (2d Cir. 1993) (citing 4 Arthur L. Corbin, Corbin on Contracts § 776, at 18 (3d 3d. 1967). Again, there is no indication in the agreement that MJ Publishing Trust had reason to know that the benefit was contemplated by PCC upon entering into the agreement, nor does the IC allege any such indication within the agreement.
Defendants' motion to dismiss the intervenor's third-party beneficiary claim is granted.
III. MOTION TO WITHDRAW
The law firm of Wachtel Masyr, LLP has moved, pursuant to Local Rule 1.4, for leave to withdraw as counsel for MJ Publishing Trust, MJ-ATV Publishing Trust, New Horizon Trust and Mr. Jackson and seeks a stay of this action pending selection of replacement counsel. (Docket #77)
Moving counsel is not the first firm to represent the defendants in this action. Previously, the law firm of Latham Watkins, LLP represented the defendants and later moved to withdraw, citing difficulties in communicating with their clients as a result of a change in the designated intermediary between Mr. Jackson and the trusts, on one hand, and the law firm on the other. The law firm also cited non-payment of its fees. I granted the law firm's application. (Order of November 17, 2005, Docket # 22)
In the present motion to withdraw, Wachtel Masyr, LLP recites the history of further changes in the lines of client reporting, ensuing difficulties in communications and non-payment of fees. It claims that since Mr. Jackson's deposition in this case, which took place in Paris on June 12-13, 2006, it has been unable to communicate with him. Mr. Jackson has written directly to this court seeking additional time in this case to find new counsel and confirming that he has "irreconcilable differences" with the existing law firm.
Plaintiffs counsel does not oppose the motion to withdraw but vehemently opposes any stay of the action.
I will grant the motion to withdraw as counsel for all defendants effective immediately. Fact discovery originally had been set to close on April 26, 2006 and has been extended to July 24, 2006. The issue of withdrawal of counsel was first raised by letter on July 7, 2006. (Docket #75) I have already extended the discovery period in this action to September 18, 2006 because of the substitution of counsel issue. I will extend the date for completion of all discovery to October 23, 2006 but do not anticipate granting any further extensions. This extension contemplates the need of new counsel to get up to speed in this action.
I will stay all proceedings in this action from the date hereof until September 1, 2006. I will hold an in-person conference in this action on September 5, 2006 at 2:15 p.m. in Courtroom 12C, Daniel P. Moynihan, United States Courthouse, 500 Pearl Street, New York, NY 10007.
A TRUST MAY ONLY APPEAR IN COURT THROUGH AN ATTORNEY ADMITTED TO PRACTICE IN THIS COURT. DEFENDANTS MJ PUBLISHING TRUST, MJ-ATV PUBLISHING TRUST AND NEW HORIZON TRUST SHALL APPEAR ON SEPTEMEBR 5, 2006 BY COUNSEL WHO HAS FIRST FILED A NOTICE OF APPEARANCE IN THIS ACTION.
MR. JACKSON SHALL APPEAR ON SEPTEMBER 5, 2006 EITHER (1) IN PERSON, IF THE INTENDS TO REPRESENT HIMSELF; OR (2) BY COUNSEL WHO HAS FIRST FILED A NOTICE OF APPEARANCE IN THIS ACTION.
FAILURE OF ANY DEFENDANT TO APPEAR ON SEPTEMBER 5, 2006 AT 2:15 P.M. IN COMPLIANCE WITH THIS ORDER MAY RESULT IN THE STRIKING OF THAT DEFENDANT'S ANSWER AND ENTRY OF A DEFAULT JUDGMENT AGAINST HIM OR IT.
IV. CONCLUSION
Defendants' motion to dismiss (Docket No. 39) (a) to dismiss plaintiff's breach of contract claim against defendant MJ-ATV Publishing Trust is GRANTED; (b) plaintiff's breach of contract claim against defendant MJ Publishing Trust is DENIED; and (c) plaintiff's claims for unjust enrichment against all defendants is GRANTED. Defendants' motion to dismiss (Docket No. 67) the intervenor's complaint in its entirety is GRANTED.
SO ORDERED.