Axginc Corporation v. Plaza Automall, Ltd.REPLY in Support re MOTION for Summary JudgmentE.D.N.Y.January 24, 2017UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK Service Date: January 24, 2017 AXGINC CORPORATION, f/k/a AXIS GROUP, Inc., Plaintiff, -versus- PLAZA AUTOMALL, LTD., Defendant. Case No. 1:14-cv-4648-ARR-VMS REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF PLAINTIFF AXGINC CORPORATION’S MOTION FOR SUMMARY JUDGMENT FISHERBROYLES LLP 445 Park Avenue, Ninth Floor New York, New York 10022 (203) 887-4665 Christina.BostSeaton@fisherbroyles.com Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 1 of 44 PageID #: 1848 TABLE OF CONTENTS PRELIMINARY STATEMENT .....................................................................................................1 ARGUMENT ...................................................................................................................................3 I. PLAZA HAS ADMITTED THAT IT HAS NOT PAYED AXGINC THE AMOUNTS DUE AND OWING UNDER THE AGREEMENT ............................................................3 II. AXGINC’S ERRONEOUS INVOICING OF PLAZA DID NOT RESULT IN A WAIVER OF ITS RIGHTS UNDER THE SUBLEASE OR A MODIFICATION OF THE SUBLEASE .........................................................................................................................4 III. PLAZA HAS NOT RAISED ANY MATERIAL ISSUES OF FACT AS TO WHETHER IT WAS FRAUDULENTLY INDUCED TO ENTER INTO THE SUBLEASE .............10 A. The Sublease’s Specific Disclaimer Bars Plaza’s Fraudulent Inducement Defense .........11 B. Plaza Relies Wholly Upon Conclusory, Immaterial, and Non-Actionable “Promises” In Support of Its Fraudulent Inducement Claim.....................................................................14 IV.THE DOCTRINES OF IMPOSSIBILITY OF PERFORMANCE, COMMERCIAL IMPRACTICABILITY, AND FRUSTRATION OR PURPOSE DO NOT APPLY ...........19 A. The Doctrine of Commercial Impracticability Does Not Apply as a Matter of Law ........20 B. The Doctrines of Impossibility and Frustration of Purpose Do Not Apply as a Matter of Law ..................................................................................................................................23 V. PLAZA’S READING OF THE SUBLEASE’S ATTORNEYS’ FEE PROVISION IS CONTRARY TO THE PLAIN LANGUAGE OF THE SUBLEASE AND UNSUPPORTED BY LAW ..............................................................................................32 CONCLUSION ..............................................................................................................................36 Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 2 of 44 PageID #: 1849 ii TABLE OF AUTHORITIES Cases 407 E. 61st Garage, Inc. v. Savoy Fifth Ave. Corp., 23 N.Y.2d 275 (1968) ................................ 20 American Trading & Prod. Corp. v. Shell Int’l Marine Ltd., 453 F.2d 939 (2d Cir. 1972) ......... 21 Anglo-German Progressive Fund, Ltd. v. Concord Group, Inc., 09-Civ-8708, 2010 U.S. Dist LEXIS 98237, at *34 (S.D.N.Y. Sep. 14, 2010) ......................................................................... 3 Arista Records LLC v. Usenet.com, 07-Civ-8822, 2008 U.S. Dist. LEXIS 95514, at *6 (S.D.N.Y. Nov. 2, 2008) ............................................................................................................................... 1 Aristocrat Leisure Ltd. v. Deutsche Bank Trust Co. Ams., No. 04-civ-10014, 2005 U.S. Dist. LEXIS 16788 (S.D.N.Y. Aug. 12, 2005) .................................................................................. 33 Asphalt Int’l v. Enterprise Shipping Corp., S.A., 667 F.2d 261 (2d Cir. 1981) ............................ 21 Atlantic Richfield Co. v. Interstate Oil Transport Co., 784 F.2d 106 (2d Cir. 1986) ................... 35 Bauman Assoc, Inc. v. H&M Int’l Transport, Inc., 567 N.Y.S.2d 404 (1st Dept. 1991)................ 7 Beardslee v. Inflection Energy, LLC, 904 F. Supp. 2d 213 (N.D.N.Y. 2012) .............................. 24 Brown Bros. Elec. Contractors, Inc. v. Beam Constr. Corp., 41 N.Y.3d 397 (1977) .................... 6 Callisto Pharm., Inc. v. Picker, 74 A.D.3d 545 (1st Dept. 2010) ................................................. 17 Crown IT Services v. Koval-Olsen, 11 A.D.3d 263 (1st Dept. 2004) ..................................... 23, 29 EED Holdings v. Palmer Johnson Acquisition Corp., 387 F. Supp. 2d 265 (S.D.N.Y. 2004)14, 17 Elkar Realty Corp. v. Mitsuye T. Kamada, 6 A.D.2d 155 (1st Dept. 1958) ................................. 25 Empire State Bldg. Co. LLC v. N.Y. Skyline, Inc. (In re N.Y. Skyline, Inc.), 471 B.R 69 (S.D.N.Y. Bankr. 2012) .............................................................................................................................. 33 Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 3 of 44 PageID #: 1850 iii Express Indus. & Terminal Corp. v. N.Y. State Dep’t of Transp., 93 N.Y2d 584 (1999) .............. 7 Four Points Shipping & Trading v. Poloron Isr., LP, 846 F. Supp. 1184 (S.D.N.Y. 1994) ........ 21 Four Seasons Hotels, Ltd. v. Vinnik, 127 A.D.2d 310 (1st Dept. 1987) ......................................... 8 Gander Mt. Co. v. Islip U-Slip LLC, 923 F. Supp. 2d 351 (N.D.N.Y. 2013) ................... 23, 24, 25 Grumman Allied Indus. v. Rohr Indus. Inc., 748 F.2d 729 (2d Cir. 1984) ................................... 19 Harriscom Svenska, A.B. v. Harris Corp., 3 F.3d 576 (2d Cir. 1993) .......................................... 22 Highlands Ins. Co. v. PRG Brokerage, Inc., 01-Civ-2272, 2004 U.S. Dist LEXIS 83 (S.D.N.Y. Jan. 5, 2004) .............................................................................................................................. 18 Home Design Center-Joint Venture v. County Appliance of Naples, Inc., 563 So. 2d 767 (Fla. 2d DCA 1990) .......................................................................................................................... 25, 26 In re Eastern Systems, Inc., 105 B.R. 219 (Bankr. S.D.N.Y. 1989) ........................................... 5, 6 J. Remora Maintenance LLC v. Efromovich, 34 Misc. 3d 1208(A) (Sup. Ct. N.Y. Cnty. 2012) . 34 Jack Kelly Partners LLC v. Zegelstein, 140 A.D.3d 79 (1st Dept. 2016)..................................... 30 Jarecki v. Shung Moo Louie, 95 N.Y.2d 665 (2001) .................................................................... 11 Jeffreys v. City of New York, 426 F.3d 549 (2d Cir. 2005) ............................................................. 9 Jefpaul Garage Corp. v Presbyterian Hospital in City of New York, 61 N.Y. 3d 442 (1984) ... 5, 8 Joseph Martin, Jr. Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105 (1981) ............................... 7 Kel Kim Corp. v. Central Markets, Inc., 70 N.Y.2d 900 (1987) ................................ 19, 20, 21, 22 King v. King, 617 N.Y.S.2d 593 (3d Dept. 1994) ........................................................................... 7 Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 4 of 44 PageID #: 1851 iv Kolchins v. Evolution Markets, Inc., 8 N.Y.S.3d 1 (1st Dept. 2015) .............................................. 6 Lowenschuss v. Kane, 520 F. 2d 255 (2d Cir. 1975) .................................................................... 22 Madison Ave. Leasehold, LLC v. Madison Bentley Assoc. LLC, 8 N.Y.3d 59 (2006) ................... 9 Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173 (2011) .................................................... 18 Marine Midland Bank v. Midstate Lumber Co., Inc., 79 A.D.2d 783, (3d Dept. 1980) ................. 7 Merril Lynch, Pierce, Fenner & Smith, Inc. v. Wise Metals Group, Inc., 19 A.D.3d 273 (1st Dept. 2005) .................................................................................................................... 12, 13, 18 MG Ref & Mktg., Inc. v. Knight Enters., Inc., 25 F Supp. 2d 175 (S.D.N.Y. 1998) .................... 22 Moyer v. City of Little Falls, 134 Misc.2d 299 (Sup. Ct. Herkimer Cnty. 1986) ................... 21, 22 Nesconset ZJ 1 LLC v. Nesconset Acquisition, LLC, Index No. 652719/2015. 2016 N.Y. Slip. Op. 31874 (U) (Sup. Ct. N.Y. Cnty. Oct. 4, 2016) .......................................................................... 13 New York Soc’y for the Relief of the Ruptured & Crippled v. Wright Med. Tech., No. 15-civ- 2871, 2015 U.S. Dist. LEXIS 96779 (S.D.N.Y. Jul. 24, 2015)........................................... 21, 22 Ogdensburg Urban Renewal Agency v. Moroney, 42 A.D.2d 639 (3d Dept. 1973) .................... 23 Oseff v. Scotti, 130 A.D.3d 797 (2d Dept. 2015) .......................................................................... 13 Portnoy v. Omnicare Pharm., Inc., No. 02-civ-2905, 2004 U.S. Dist. LEXIS 12235 (E.D. Pa. Jun. 25, 2004) ............................................................................................................................ 25 PPF Safeguard, LLC v. BCR Safeguard Holding, LLC, 85 A.D. 3d 506 (1st Dept. 2011) .......... 29 Quasha v. America Natural Beverage Corp., 171 A.D.2d 537 (1st Dept. 1991) ......................... 17 Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 5 of 44 PageID #: 1852 v Register.com, Inc. v. Verio, Inc., 356 F.3d 393 (2d Cir. 2004) ....................................................... 6 Remora Maintenance LLC v. Efromovich, 34 Misc. 3d 1208(A) (Sup. Ct. N.Y. Cnty. 2012) ..... 10 Reyes v. Metromedia Software, Inc., 840 F.Supp.2d 752 (S.D.N.Y. 2012).................................. 33 Rombach v. Chang, 335 F. 3d 164, 175 (2d Cir. 2004) ................................................................ 17 Ronan Assoc., Inc. v. Local 94-94A-94B Intern. Union of Operating Engineers, AFL-CIO, 24 F.3d 447 (2d Cir. 1994) ............................................................................................................... 7 Sage Realty Corp. v. Insurance Co. of N. Am., 34 F.3d 124 (2d Cir. 1994) ................................. 10 Sage Realty Corp. v. Jugobanka, D.D., No. 95-civ-0323, 1997 U.S. Dist. LEXIS 9301 (S.D.N.Y, Jul. 2, 1997) ............................................................................................................................... 29 Schiavone Constr. Co. v. County of Nassau, 717 F.2d 747 (2d Cir. 1983) .................................. 35 Schlaifer Nance & Co. v. Estate of Andy Warhol, 119 F.3d 91 (2d Cir. 1997) ............................ 18 Scholastic Inc. v. Harris, 259 F.3d 73 (2d Cir. 2001)................................................................... 33 Sheth v. New York Life Insurance Co., 273 A.D.2d 72 (1st Dept. 2000) ..................................... 18 Shields v. Cititrust Bancorp, Inc., 25 F. 3d 1124(2d Cir. 1994) ................................................... 17 Snide v. Larrow, 93 A.D.2d 959 (3d Dept. 1983) ........................................................................... 7 Travelers Indemnity Co. v. Dammann & Co, Inc., 592 F.Supp. 2d 752 (D.N.J. 2008) ................ 34 Turner., 586 Fed. Appx. 718 (2d Cir. 2014) ................................................................................... 6 Two Catherine Street Mgmt. Co. v. Yam Keung Yeung, 153 A.D.2d 678 (2d Dept. 1989) .......... 29 Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 6 of 44 PageID #: 1853 vi United States v. General Douglas MacArthur Senior Village, Inc., 508 F.2d 377 (2d Cir. 1974) ............................................................................................................................................. 24, 29 Zheng v. City of New York, 19 N.Y.3d 556 (2012) ......................................................................... 6 Statutes N.Y. U.C.C. § 2-102 ......................................................................................................... 24, 25, 26 N.Y. UCC 2-615 , cmt. 4 .............................................................................................................. 26 Other Authorities Restatement (Second) Contracts § 265, cmt. a ............................................................................. 28 Restatement (Second) of Contracts § 261, cmt. d ......................................................................... 24 Rules Fed. R. Civ. P. 56 ...................................................................................................................... 5, 40 Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 7 of 44 PageID #: 1854 This Reply Memorandum of Law is respectfully submitted on behalf of Plaintiff AXGINC Corporation f/k/a Axis Group, Inc. (“AXGINC” or “Plaintiff”), by its counsel, FisherBroyles LLP, in further support of its motion for an order granting summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure (a) with regard to its claims; and (b) dismissing defendant/counterclaim-plaintiff Plaza Automall Ltd.’s (“Plaza”) counterclaims of fraudulent inducement and impossibility of performance/commercial impracticability. PRELIMINARY STATEMENT Plaza’s Memorandum of Law in Opposition to AXGINC’s Motion for Summary Judgment (the “Opposition Memorandum”) constitutes forty-seven pages of literary smoke and mirrors, replete with conclusory factual assertions for which Plaza either provides no authority whatsoever, or provides reference to documents or testimony that it has misquoted or mischaracterized. Unfortunately for Plaza, none of these attempts to put issues of fact before the Court are sufficient to deny AXGINC’s motion for summary judgment, as none of the purported facts at issue are material. Indeed, Plaza’s Opposition Memorandum is quite stunning in that it utterly fails to address: • the Sublease’s1 “hell or high water” provisions, by which Plaza unconditionally “agree[d] to assume all financial risks associated with the operation of the Premises” and to pay all amounts due under the Sublease “come hell or high water.” SUF ¶ 52 (Moving Memorandum pp 17-18); • the Sublease’s categorical waiver of “any and all…defenses [Plaza] may have in any action brought by [AXGINC] for default, possession, or failure to pay rent or additional rent” SUF ¶ 51 (Moving Memorandum pp. 19-20); • the fact that Plaza’s counterclaims are merely the “mirror image” of their affirmative defenses, and serve “no [independent] purpose and they must be dismissed.” Arista Records LLC v. Usenet.com, 07-Civ-8822, 2008 U.S. Dist. LEXIS 95514, at *6 (S.D.N.Y. Nov. 2, 2008) (Moving Memorandum p. 20 n. 8); 1 Capitalized terms not otherwise defined herein shall have the same meaning as set forth in AXGINC’s Memorandum of Law in Support of its Motion for Summary Judgment (the “Moving Memorandum”). Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 8 of 44 PageID #: 1855 2 • any of the authorities in the Moving Memorandum addressing the summary judgment standard in breach of contract cases (Moving Memorandum pp. 13-14); • any of the authorities in the Moving Memorandum addressing the fact that the mere existence of an immaterial disputed factual issue is insufficient to defeat a motion for summary judgment (Moving Memorandum pp. 13-14); • any of the authorities in the Moving Memorandum addressing the fact that the party opposing summary judgment may not rely upon conclusory allegations or unsubstantiated speculation (Moving Memorandum p. 14); • any of the authorities in the Moving Memorandum demonstrating that Plaza could not have been fraudulently induced to enter into the Sublease because Plaza could not have justifiably relied on the purported misrepresentations (Moving Memorandum pp. 21-26). AXGINC cited to 55 cases in the Moving Memorandum. Plaza, however, only addressed five of these cases in the Opposition Memorandum, and two of those five cases were simply cited for boilerplate recitations of the summary judgment standard. Plaza has, in effect, simply ignored AXGINC’s arguments based upon the law and the plain language of the Sublease, hoping that the Court would get distracted by its lengthy and repetitive side show of immaterial and utterly unsupported “facts.” Plaza’s attempts to defeat AXGINC’s motion for summary judgment must fail. This has always been a simple case of Plaza, a commercial tenant, refusing to pay rent due and owing under the Sublease. Indeed, in its papers in opposition, Plaza admits that it refused to pay AXGINC anything under the Sublease for the period of January 2014 through June 2014, even though it remained in possession of the Premises during that time, not because of any genuinely-held legal position, but because it was “frustrated” that it couldn’t “work something out” for Plaza to remain at the SBMT at a reduced acreage and a reduced rent. Declaration of Tony Urrutia, sworn to on January 13, 2014 [DE 48] (the Urrutia Decl.”), ¶¶ 11-13. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 9 of 44 PageID #: 1856 3 As set forth in greater detail herein, Plaza has failed to raise any material facts sufficient to overcome summary judgment. ARGUMENT I. PLAZA HAS ADMITTED THAT IT HAS NOT PAYED AXGINC THE AMOUNTS DUE AND OWING UNDER THE AGREEMENT There is no dispute in this proceeding with regard to any of the elements2 underlying AXGINC’s breach of contract claim: (1) Plaza admits that it entered into the Sublease [DE 15, ¶ 5]; (2) Plaza does not contend that AXGINC failed to perform any of its obligations under the Sublease [DE 15]; (3) Plaza admits that it did not pay Base Rent in the amount set forth in the Sublease: (a) for the months of April 2012 through September 2013 (rather, Plaza contends that it isn’t required to do so either because: (i) it was fraudulently induced to enter into the Sublease, or (ii) because AXGINC’s erroneous invoicing somehow modified the Sublease, despite its non-waiver and merger provisions). (Urrurtia Decl. ¶¶ 6-11); (b) for the months of January 2014 through June 2014, even though it remained in possession of the Premises during that time frame, because it was “frustrated” that it couldn’t “work something out” for Plaza to remain at the SBMT at a reduced acreage and a reduced rent. (Urrutia Decl. ¶ 11-13). Plaza instead contends that “[a]s a result of Superstorm Sandy…[Plaza] was no longer able to obtain the insurance contemplated by, and required by…the Sublease,” which was “rendered null and void by virtue of impossibility of performance and/or commercial impracticability.” [DE 15 ¶¶ 34 and 37]; and (4) Plaza does not deny that AXGINC was damaged by Plaza’s failure to pay the Base Rent in the amount set forth in the Sublease (DE 15). As set forth in greater detail below, each of Plaza’s defenses fails. 2 As set forth in the Moving Memorandum, “[t]he elements of a breach of contract claim are formation of a contract between the parties, performance by the plaintiff, the defendant’s failure to perform, and resulting damage.” Anglo- German Progressive Fund, Ltd. v. Concord Group, Inc., 09-Civ-8708, 2010 U.S. Dist LEXIS 98237, at *34 (S.D.N.Y. Sep. 14, 2010) (citation omitted) (Moving Memorandum pp. 14-15). Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 10 of 44 PageID #: 1857 4 II. AXGINC’S ERRONEOUS INVOICING OF PLAZA DID NOT RESULT IN A WAIVER OF ITS RIGHTS UNDER THE SUBLEASE OR A MODIFICATION OF THE SUBLEASE Plaza asserted an affirmative defense of waiver and estoppel [DE 15, ¶ 10] due to AXGINC’s failure to properly invoice the amounts due under the Sublease during April 2012 through August 2013, see SUF ¶¶ 67-70. In addition, Plaza asserted an affirmative defense of modification, contending that the Sublease was “modif[ied]…by agreement of the parties in writing.” As set forth herein and in the Moving Memorandum, Plaza’s affirmative defenses of waiver and modification are barred by the plain terms of the Sublease. Initially, as set forth in detail in the Moving Memorandum, the Sublease’s categorical waiver of “any and all…defenses [Plaza] may have in any action brought by [AXGINC] for default, possession, or failure to pay rent or additional rent;” SUF ¶ 51 (Moving Memorandum pp. 19-20), bars Plaza’s affirmative defenses of waiver and modification. Moreover, as set forth in the Moving Memorandum (Moving Memorandum pp. 15-17), Article 13(7)(I) of the Sublease is a non-waiver provision3, which specifically provides that: …[t]he failure of [AXGINC] to insist in any one or more instances upon the strict performance of any covenant of this Lease, or to exercise any option or right herein contained shall not be construed as a waiver of this Lease, or to exercise any option or right therein contained shall not be construed as a waiver or relinquishment for the future of such covenant, right, or option, but the same shall remain in full force and effect unless the contrary is expressed in writing by [AXGINC]. No payment by [Plaza] or acceptance by [AXGINC] of a lesser amount than shall be due from [Plaza] to [AXGINC] hereunder shall be deemed to be anything but payment on account, and the acceptance by [AXGINC] of such a lesser amount whether by check with an endorsement or statement thereon, or by an accompanying letter or otherwise that said lesser amount is paying in full shall 3 There is another non-waiver provision located in Section 27.04 of the Sublease, which states that: [t]he failure of [AXGINC] to insist upon strict performance of any of the covenants or conditions of this Lease, or to exercise any option herein conferred in any one or more instances, shall not be construed to be a waiver or relinquishment of any covenant or condition, but the same shall be and remain in full force and effect. SUF ¶ 57. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 11 of 44 PageID #: 1858 5 not be deemed an accord and satisfaction, and [AXGINC] may accept such payment without prejudice to [AXGINC’s] rights to recover the balance due or pursue any of [AXGINC’s] other remedies hereunder. SUF ¶ 56 (emphasis added). New York law has long held that where a lease contains a non-waiver provision such as those set forth in the Sublease, a landlord, such as AXGINC, may accept rent from its tenant without waiving its rights. See In re Eastern Systems, Inc., 105 B.R. 219, 232 (Bankr. S.D.N.Y. 1989), citing Jefpaul Garage Corp. v Presbyterian Hospital in City of New York, 61 N.Y. 3d 442, 446 (1984). In addition, as set forth in the Moving Memorandum, Section 27.07 of the Sublease is a robust merger provision, which is set forth in its entirety below: Section 27.07 Entire Agreement. IT IS EXPRESSLY AGREED BY LANDLORD AND TENANT, AS A MATERIAL CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS LEASE (TOGETHER WITH THE WRITTEN EXTRINSIC DOCUMENTS TO WHICH SPECIFIC REFERENCE IS MADE IN THIS LEASE) IS THE ENTIRE AGREEMENT OF THE PARTIES; THAT THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS, WARRANTIES, UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS LEASE OR TO THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC DOCUMENTS NOT INCORPORATED IN WRITING IN THIS LEASE. NO MODIFICATION OR AMENDMENT OF THIS LEASE SHALL BE VALID OR EFFECTIVE UNLESS EVIDENCED BY AN AGREEMENT4 IN WRITING. SUF ¶ 66. (Moving Memorandum pp. 21-24). In the Opposition Memorandum, Plaza argues, citing no case law in support, that the non-waiver provision contained in Article 13(7)(I) of the Sublease “is clear that it only allows [AXGINC] to accept a lower amount of rent from Plaza…in the instance where it has invoiced the amount of rent to which [AXGINC] claims it is entitled.” (Opposition Memorandum pp. 43-44). 4 In the Opposition Memorandum, Plaza selectively (and mis-representatively) quotes from Section 27.07, omitting all of the disclaimers of reliance. (Opposition Memorandum p. 38). This appears to be part of Plaza’s efforts to simply ignore all the aspects of AXGINC’s Moving Memorandum as to which Plaza does not have a good response. Plaza also contends that AXGINC “curiously” misquoted Section 27.07 by substituting the word “Disclaimer” for the word “Agreement” in the third-to-last word in the Section. Counsel for AXGINC represents that this misquoting was far from “curious,” but rather a simple exhaustion-induced typo that occurred when typing the Section into the Moving Memorandum, and then copying-and-pasting it into the SUF. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 12 of 44 PageID #: 1859 6 As the Court may determine itself, the plain language of Article 13(7)(I) is not, as Plaza contends, “expressly condition[ed]” on AXGINC correctly invoicing Plaza. Moreover, case law demonstrates that landlords who mistakenly invoice their tenants may collect rent due and owing under a lease where, as here, the lease contained a non-waiver provision. See In re Eastern Systems, Inc., 105 B.R. at 232 (Bankr. S.D.N.Y. 1989). Plaza also contends that the erroneous invoices issued by AXGINC to Plaza, and Plaza’s subsequent payment on these erroneous invoices, constituted “agreements in writing,” which were each valid modifications of the Sublease. (Opposition Memorandum p. 38). Plaza argues that “[i]t is important to note” that Section 27.07 “does not require that an agreement modifying the rent in the Sublease be signed by the parties… .” (Opposition Memorandum p. 40). To support its argument, Plaza relies exclusively on inapposite cases where the contracts at issue—if there even were written contracts at issue—did not contain non-waiver provisions. See Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 427 (2d Cir. 2004) (cited only for boilerplate law on contract formation; no discussion of non-waiver provisions); Turner v. Temptu, Inc., 586 Fed. Appx. 718 (2d Cir. 2014) (plaintiff sued for breach of oral joint venture agreement; case dismissed; no discussion of non-waiver provisions); Brown Bros. Elec. Contractors, Inc. v. Beam Constr. Corp., 41 N.Y.3d 397, 399 (1977) (course of conduct between shopping complex owner and developer and subcontractor suggested that owner agreed to pay for work that subcontractor performed for general contractor, who had since abandoned the project; no discussion of non-waiver provisions); Zheng v. City of New York, 19 N.Y.3d 556, 577 (2012) (tenants unsuccessfully sued the City, arguing that the precedent of Brown Bros. Elec. Contractors, Inc. required that the City continue to provide subsidies under a discontinued program; no discussion of non-waiver provisions); Kolchins v. Evolution Markets, Inc., 8 N.Y.S.3d 1, 9 (1st Dept. 2015) (email correspondence Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 13 of 44 PageID #: 1860 7 concerning draft employment agreement extension, when viewed together, could be considered a contract; no discussion of non-waiver provisions); Express Indus. & Terminal Corp. v. N.Y. State Dep’t of Transp., 93 N.Y2d 584, 589 (1999) (case considered whether the execution and return of a blank permit could be deemed acceptance; court found the permit had too many blanks to be a definite offer that could be accepted; no discussion of non-waiver provisions); Joseph Martin, Jr. Delicatessen, Inc. v. Schumacher, 52 N.Y.2d 105 (1981) (renewal was too vague and had too many undecided terms for there to have been an offer and acceptance; no discussion of non-waiver provisions); King v. King, 617 N.Y.S.2d 593 (3d Dept. 1994) (during married couple’s separation, letter from attorney was not sufficiently clear, unambiguous, and unequivocal to be an offer that could be accepted; no discussion of non-waiver provisions). Plaza also argues that “there are issues of fact as to whether or not the parties agreed to modify the rent,” and with regard to whether the parties intended to waive the amounts due under the Sublease. (Opposition Memorandum pp. 40 and 44). Plaza relies wholly upon inapposite case law in making this argument. Bauman Assoc, Inc. v. H&M Int’l Transport, Inc., 567 N.Y.S.2d 404, 408 (1st Dept. 1991), for example, dealt with an oral agreement; there was no non-waiver provision or merger provision at issue. Marine Midland Bank v. Midstate Lumber Co., Inc., 79 A.D.2d 783, (3d Dept. 1980) did not contain a non-waiver provision evidencing the parties’ intention, so the court there had to look to evidence external to the contract. This is not the case here. Similarly, the court in Ronan Assoc., Inc. v. Local 94-94A-94B Intern. Union of Operating Engineers, AFL-CIO, 24 F.3d 447, 449 (2d Cir. 1994) dealt with an ambiguous letter documenting employment, and it looked to parol evidence to determine the parties’ intention. There is no ambiguity here. Similarly, the agreement in Ronan Assoc. Inc. did not contain a non-waiver provision or a merger provision. In Snide v. Larrow, 93 A.D.2d 959 (3d Dept. 1983) a woman and Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 14 of 44 PageID #: 1861 8 her husband agreed to purchase of land from her parents pursuant to an installment contract, and during the course of the contract, the couple got divorced. The parents looked for a way to get out of allowing the now-divorced son-in-law from purchasing the property, but the court found that there had been a waiver under the contract because they had not enforced their rights throughout. The contract did not contain a non-waiver provision. Four Seasons Hotels, Ltd. v. Vinnik, 127 A.D.2d 310, 317 (1st Dept. 1987), cited by Plaza, supports AXGINC’s argument in this proceeding, as the court therein held that whether there is an intent to be bound “is to be decided by the court if determinable from the language employed by the written instrument…Construction of a written instrument is a question of law for the court to determine.” Similarly, Plaza cites Jefpaul Garage Corp. v. Presbyterian Hosp. in N.Y., 61 N.Y.2d 442 (1984) for the boilerplate notion that “intent to waive…is an issue of fact,” (Opposition Memorandum p. 44), but in Jefpaul Garage Corp., the Court of Appeals looked to the non-waiver provision in the lease, found that it was clear and unambiguous, and that a waiver was precluded. 61 N.Y.2d at 445 (emphasis added). Here, however, the parties’ intention not to modify the rent, and for AXGINC to have the benefit of non-waiver provision, is clearly expressed in Article 13(7)(I): …No payment by [Plaza] or acceptance by [AXGINC] of a lesser amount than shall be due from [Plaza] to [AXGINC] hereunder shall be deemed to be anything but payment on account, and the acceptance by [AXGINC] of such a lesser amount whether by check with an endorsement or statement thereon, or by an accompanying letter or otherwise that said lesser amount is paying in full shall not be deemed an accord and satisfaction, and [AXGINC] may accept such payment without prejudice to [AXGINC’s] rights to recover the balance due or pursue any of [AXGINC’s] other remedies hereunder. SUF ¶ 56. The New York Court of Appeals has held that “[w]hen [as here, the court is] interpreting language in a commercial lease, [the court] appl[ies] [its] well-established precedent…that when the parties set down their agreement in a clear, complete document, their writing should…be Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 15 of 44 PageID #: 1862 9 enforced according to its terms.” Madison Ave. Leasehold, LLC v. Madison Bentley Assoc. LLC, 8 N.Y.3d 59, 66 (2006) (internal citations omitted). This principle is particularly important here, in the context of a real property transaction, where commercial certainty is a paramount concern, and where the Sublease was negotiated between sophisticated, counseled business people negotiating at arms’ length. Id. Next, Plaza conclusorily argues, without any citation to any evidence whatsoever, that “[t[his is not the case of a simple “mistake,” as Plaintiff claims, (Opposition Memorandum p. 41), apparently suggesting that AXGINC has some nefarious plan in place to rebut the Sublease’s purported modification. Plaza, however, “may not rely on conclusory allegations or unsubstantiated speculation” in order to successfully oppose summary judgment. Jeffreys v. City of New York, 426 F.3d 549, 553-554 (2d Cir. 2005). Contrary to Plaza’s unfounded contention, AXGINC has submitted ample contemporaneous evidence demonstrating that the invoices were erroneously issued. SUF ¶¶ 67-70. In any event, however, because the Sublease contained a non- waiver provision, Plaza is obligated to pay the amounts due and owing under the Sublease. (Moving Memorandum pp. 15-17). Plaza also erroneously asserts that “Plaintiff’s draft of a[n] August 7, 2013 invoice for alleged back-rent for $741,153,17, was just that—a draft.” (Opposition Memorandum p. 41). While this argument is utterly immaterial, it is also untrue. AXGINC discovered the mistake on August 6, 2013, and less than two weeks later, the invoice was delivered to Plaza at an in person meeting on August 19, 2013, at which Plaza “cried and whined” and asked for the “bal[ance] due rent to go away.” See Blount Decl. Exh H (AX000355) and Exh I, Bost Seaton Decl. Exh. 1 (Tr. 132:11-137:7); Exh. 2 (Tr. 140:15-142:5); Exh. 7 (Tr. 127:1-129:20), and Exh 21. Notably, after receiving the invoice, Plaza did not write AXGINC claiming that the amount set forth therein was Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 16 of 44 PageID #: 1863 10 in error (as it would have done if it had genuinely believed that the Sublease had been modified). In fact, in October, November, and December 2013, Plaza paid the full amounts due and owing under the Sublease, although it now claims that it did so only because it was going to “work something out” with AXGINC. Urrutia Decl. ¶¶ 7-10. Contrary to Plaza’s contentions that the Sublease was never operative (Moving Memorandum p.1), Plaza’s conduct indicates that it too believed that the Sublease was operative—otherwise it never would have asked for an abatement of rent. SUF ¶ 74. For all the reasons set forth in the Moving Memorandum, AXGINC is entitled to summary judgment on its claim for breach of contract. III. PLAZA HAS NOT RAISED ANY MATERIAL ISSUES OF FACT AS TO WHETHER IT WAS FRAUDULENTLY INDUCED TO ENTER INTO THE SUBLEASE In the Opposition Memorandum, in an apparent attempt to employ the litigation strategy of an ostrich with its head in the sand, Plaza ignores those aspects of the Sublease that are inconvenient to its claims. Plaza utterly fails to address AXGINC’s arguments with regard to (a) the Sublease’s “hell or high water” provisions, by which Plaza unconditionally “agree[d] to assume all financial risks associated with the operation of the Premises,” and to pay all amounts due under the Sublease “come hell or high water;” SUF ¶ 52 (Moving Memorandum pp 17-18); and (b) the Sublease’s categorical waiver of “any and all…defenses [Plaza] may have in any action brought by [AXGINC] for default, possession, or failure to pay rent or additional rent5;” SUF ¶ 51 (Moving Memorandum pp. 19-20). Pursuant to these provisions, as set forth in greater detail in the Moving 5 Plaza argues that the waiver of defenses contained in the Sublease cannot be enforced because of the compulsory counterclaim rule. (Opposition Memorandum pp. 46-47, citing Sage Realty Corp. v. Insurance Co. of N. Am., 34 F.3d 124 (2d Cir. 1994)). The Sage Realty Corp. case does not stand for the proposition that a contractual waiver of defenses—as opposed to counterclaims—may not be enforced because of the compulsory counterclaim rule. In fact, the Sage Realty Corp. case does not address contractual waivers of defenses at all. New York law has long held that contractual waivers of defenses are enforceable. See Moving Memorandum pp. 19-20 and Remora Maintenance LLC v. Efromovich, 34 Misc. 3d 1208(A) (Sup. Ct. N.Y. Cnty. 2012). Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 17 of 44 PageID #: 1864 11 Memorandum, Plaza specifically assumed all financial risk associated with the Sublease, and it is precluded from raising any defenses to enforcement by the clear terms of the Sublease. Accordingly, Plaza may not assert a claim for fraudulent inducement, and it has no basis upon which not to pay the amounts due and owing. Moreover, Plaza also utterly ignored, and did not even attempt to distinguish, the numerous cases cited by AXGINC that demonstrate that Plaza cannot make out three key elements of its fraudulent inducement claim: (1) justifiable reliance; (2) scienter; and (3) materiality and actionablity. (Moving Memorandum pp. 21-29). The Court may rely upon the Moving Memorandum for AXGINC’s arguments on these points. Set forth below, however, AXGINC rebuts the arguments in the Opposition Memorandum. A. The Sublease’s Specific Disclaimer Bars Plaza’s Fraudulent Inducement Defense Plaza contends that the merger provision contained in Section 27.07 of the Sublease does not bar Plaza’s fraudulent inducement claim because (1) Plaza is purportedly offering extrinsic evidence “to prove [AXGINC’s] fraudulent representations and inducement of promise of a partnership with Plaza [that] neither alters, varies, nor contradicts any term contained in the Sublease;” and (2) because the Sublease purportedly does not disclaim reliance on AXGINC’s “particular representations.” (Opposition Memorandum pp. 18-19). These arguments are utterly unsupported by the authorities cited by Plaza, and are plainly contrary to well-established New York law. In support of its contention that it may offer extrinsic evidence, Plaza selectively quotes from Jarecki v. Shung Moo Louie, 95 N.Y.2d 665 (2001) because, according to Plaza, the parol evidence that it seeks to rely upon isn’t designed “to alter, vary, or contradict the terms of the writing.” (Opposition Memorandum pp. 18-19) Jarecki, however, goes on to say that “[t]he merger clause accomplishes this purpose [i.e., “requir[ing] the full application of the parol Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 18 of 44 PageID #: 1865 12 evidence rule in order to bar the introduction of extrinsic evidence to alter, vary, or contradict the terms of the writing”] by evincing the parties’ intent that the agreement “is to be considered a completely integrated writing.” 95 N.Y.2d at 669 (internal citation omitted). Jarecki does not support Plaza’s argument. In Jarecki, the New York State Court of Appeals found that the merger clause in the parties’ agreement barred the claim of the plaintiff therein, who argued that an option agreement still survived after the parties reduced their agreement to writing. In any event, Plaza seems to miscomprehend its own argument; Plaza’s very purpose in introducing its evidence of a purported “promise,” (Opposition Memorandum pp. 12-18) is to contradict the terms of the Sublease, which (because of the hell and high water clause, waiver of defenses provision, and merger provision, among others) would otherwise conclusively bar all of Plaza’s defenses, see Moving Memorandum pp. 17-19, 21-24. In its attempt to argue that the Sublease’s disclaimer of reliance does not bar its fraudulent inducement defense, Plaza notably does not make any attempt to distinguish the cases relied upon by AXGINC in the Moving Memorandum. See Moving Memorandum pp. 21-24). Plaza instead largely relies upon Merril Lynch, Pierce, Fenner & Smith, Inc. v. Wise Metals Group, Inc., 19 A.D.3d 273 (1st Dept. 2005), which simply stands for the non-controversial proposition that “only where the parties expressly disclaim reliance on the particular misrepresentations is extrinsic evidence barred.” While neither the Appellate Division nor lower court decisions quote from the merger clause at issue in that proceeding, the parties’ agreement in Merrill Lynch, Pierce, Fenner & Smith, Inc. is publicly available as Exhibit A to the Third Amended Answer and Counterclaims that was electronically filed as Docket Entry 13 therein. The agreement is a form engagement letter, unlike the highly negotiated Sublease at issue herein, and, unlike Section 27.07, it does not contain any disclaimer of representations. Accordingly, it is unsurprising that the court therein Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 19 of 44 PageID #: 1866 13 held that the merger provision in the engagement letter did not bar extrinsic evidence related to Wise Metal Group’s fraudulent inducement counterclaim. Merrill Lynch, Pierce, Fenner & Smith, Inc. does not support Plaza’s argument, particularly where, as here, AXGINC has cited numerous cases where the courts dismissed fraudulent inducement claims as barred by merger provisions very similar to the provision at issue in this proceeding. See, e.g., Nesconset ZJ 1 LLC v. Nesconset Acquisition, LLC, Index No. 652719/2015. 2016 N.Y. Slip. Op. 31874 (U) at **37-38 (Sup. Ct. N.Y. Cnty. Oct. 4, 2016) (dismissing fraudulent inducement claim for failure to allege justifiable reliance because the agreement contained a merger clause and a specific disclaimer that “neither party rel[ied] upon any representation, express or implied warranties, guarantees, promises, statement, ‘setups,’ representations or information not embodied in this agreement”) and Oseff v. Scotti, 130 A.D.3d 797, 799 (2d Dept. 2015) (granting summary judgment dismissing a claim for fraudulent inducement because the agreement provided that the defendants made no representations regarding “any matter or thing affecting or relating to this agreement, except as specifically set forth in this agreement”), compare with Section 27.07 (“…THIS LEASE (TOGETHER WITH THE WRITTEN EXTRINSIC DOCUMENTS TO WHICH SPECIFIC REFERENCE IS MADE IN THIS LEASE) IS THE ENTIRE AGREEMENT OF THE PARTIES; THAT THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS, WARRANTIES, UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS LEASE OR TO THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC DOCUMENTS NOT INCORPORATED IN WRITING IN THIS LEASE…”), SUF ¶ 66. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 20 of 44 PageID #: 1867 14 B. Plaza Relies Wholly Upon Conclusory, Immaterial, and Non-Actionable “Promises” In Support of Its Fraudulent Inducement Claim In the Opposition Memorandum, Plaza made no attempt to distinguish any of the cases relied upon by AXGINC in its Moving Memorandum (Moving Memorandum pp. 21-25), all of which demonstrate that Plaza cannot demonstrate several key elements of its fraudulent inducement claim, including justifiable reliance, scienter, and actionability and materiality. (Opposition Memorandum pp. 12-18). Instead, Plaza relies upon a few, inapposite cases, which it cites for non-controversial boilerplate principles of law. Plaza cites EED Holdings v. Palmer Johnson Acquisition Corp., 387 F. Supp. 2d 265 (S.D.N.Y. 2004) (Opposition Memorandum p. 12) apparently to argue that AXGINC misrepresented present facts in order to induce Plaza to enter the Sublease. In the EED Holdings case, the only actionable misrepresentations related to “the present condition of defendant PJI’s finances and operations.” 387 F. Supp. 2d at 276. There are no such present misrepresentations of material fact at issue in this proceeding. Along with the many deficiencies with Plaza’s fraudulent inducement claim that were set forth in the Moving Memorandum (Moving Memorandum pp. 21-29) , each of the purported “promises” allegedly relied upon by Plaza (1) related to the parties’ hopes that there would be future business; and (2) were plainly immaterial to Plaza’s decision to enter into the Sublease, since Plaza did not, for example, require AXGINC to make the increase in Base Rent contingent upon any new vehicle processing business, nor did it request that AXGINC make any representations in the Sublease about the purported new business. In the Opposition Memorandum, Plaza argues that its fraudulent inducement claim is supported by a number of wholly immaterial “promises,” such as (a) statements in notes of meetings where Plaza stated that it was “willing to partner with [AXGINC] (Herman Decl. Exh. K); (b) testimony by Plaza representatives who stated that “[AXGINC] never gave us a timeline. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 21 of 44 PageID #: 1868 15 They just said what they do and that they would be getting cars shipped over” (Herman Decl. Exh. G); (c) “Stewart’s proposal is in direct competition for our joint business plan so we need to take immediate steps to make sure we secure this business for Axis/Plaza” (Herman Decl Exh. M); (d) “we were going to be…in business together so we could make more money” (Herman Decl. Exh. G); and (e) “[AXGINC] promised them processing work and have not given them any” (Herman Decl. Exh. A). None of these purported “promises,” when taken at face value, represent anything more than a desire by the parties to work together to get more business. There are absolutely no facts that tie this desire for the parties to get more business to Plaza’s decision to enter into the Sublease. Further, Plaza intentionally overstates its “evidence” in the Opposition Memorandum to make it sound as though AXGINC representatives admitted that they told Plaza that it would be the “exclusive” provider of vehicle processing services—even though the RFQ explicitly provided otherwise. For example, the Opposition Memorandum states that: Pete Waddington [an AXGINC representative] admitted that, despite promising to Plaza that Plaza would be the exclusive company who would do the vehicle processing work through a partnership with [AXGINC] (see Mele Tr. P. 65 in Herman Decl. Exh. G: “Exclusive to us”), there were actually other entities that Plaintiff was considering giving the vehicle processing work, and who were submitting quotes to [AXGINC] for such vehicle processing work (see Waddington Tr. Pp. 42-43 in Herman Decl. Exh. D) (Opposition Memorandum p. 16). A review of the Waddington deposition transcript, however, makes clear that he never stated that AXGINC promised to Plaza that it would be the exclusive company to perform vehicle processing work. Similarly, Plaza also claims that “Plaza was led to believe that the “RFQ” submission was just to confirm pricing information for [AXGINC],” and it relies upon the testimony of Plaza’s witness Anthony Aquilino on this point: “It was my understanding that [AXGINC] needed to know what the labor would cost so they knew how to price it to whoever they were going to sell this to…” Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 22 of 44 PageID #: 1869 16 (Aquilino Tr. Pp. 80-81 in Herman Decl. Exh. N) (Opposition Memorandum pp. 16-17). Mr. Aquilino’s answer was taken entirely out of context, and did not relate to Plaza’s alleged belief that it had been told that it would be the “exclusive” provider of vehicle processing services. The actual exchange is set forth below: Q: It says here all work must be done by union workers; do you know what that’s about? A: I had [a] conversation with [AXGINC] regarding pricing and sales and since it was work being performed in New York waterfront you use union workers, and it was my understanding they needed to know so I guess—I’m sorry, I don’t mean to say guess, it’s a phrase. Q: I understand. A: It was my understanding that they needed to know what the labor would cost so they [would] know how to price to whoever they were going to sell this to or bid it to, and so, again, rather than start work with non-union workers and for them to price it according and then to later on find out you need union workers would have really upset their whole business plan. (Aquilino Tr. 80:14-81:10, Herman Decl. Exh. N). When Mr. Aquilino, who was the first deponent to be asked about the RFQ, was asked about its non-exclusivity provision, he did not state that he had had believed that the arrangement would be exclusive. Rather, he stated that he “didn’t read this here in its entirety.” (Aquilino Tr. 99:7-102:18, Bost Seaton Decl. Exh. B). In fact, Mr. Aquilino never once stated in his deposition that he believed that the bid provided for exclusivity.6 (Bost Seaton Decl. Exh. B). Moreover, a number of the purported misrepresentations relied upon by Plaza in the Opposition Memorandum are entirely conclusory; Plaza does not rely upon any evidence in their support: 6 Moreover, as set forth in detail in the Moving Memorandum, Plaza returned the RFQ—which plainly stated that the award would be non-exclusive—to AXGINC two months prior to signing the Sublease. (Moving Memorandum p. 25). Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 23 of 44 PageID #: 1870 17 • “[AXGINC] fraudulently induced Plaza to enter into the Sublease by representing and promising that [AXGINC] and Plaza would be business partners together on the new business to come to the SBMT.7” (Opposition Memorandum p. 12) (emphasis added). • “[AXGINC] used the opportunity [of the Initial Lease’s expiration] to induce Plaza into accepting a 53% rent increase in the Sublease by promising to enter into a partnership/joint venture with Plaza in the vehicle processing business that [AXGINC] procured.” (Opposition Memorandum p. 13). • “[AXGINC’s] representation was not that it hoped to obtain future business; rather, its representation was that Plaza would be Plaintiff’s exclusive partner on the substantial new business to come to the SBMT.” (Opposition Memorandum p. 13 (emphasis added)). Plaza cannot base its claims on these wholly conclusory purported misrepresentations. See Callisto Pharm., Inc. v. Picker, 74 A.D.3d 545 (1st Dept. 2010) (“speculative” or “conclusory” allegations of reliance will not prevent summary judgment under the clear and convincing evidence standard). In fact, the EED Holdings case cited by Plaza actually supports AXGINC’s position. The other two purported misrepresentations at issue in the EED Holdings case, i.e. that the defendant “would be building the greatest boats” and that a particular individual was “personally committed” to the defendant,” were both found to be “not actionable, because they are mere expressions of advertising, a well recognized form of puffery.” Id., citing Quasha v. America Natural Beverage Corp., 171 A.D.2d 537 (1st Dept. 1991) (dismissing fraud claim where documents withheld from plaintiff “contain nothing more than speculation, advertising puffery, and the defendants’ hopes for the future for the company”) and Rombach v. Chang, 335 F. 3d 164, 175 (2d Cir. 2004) (holding that a financial analyst’s earnings projections were non-actionable under federal securities law); Shields v. Cititrust Bancorp, Inc.8, 25 F. 3d 1124, 1129 (2d Cir. 1994) (“stating that under federal 7 Ironically, even Plaza, in its own self-serving statements, unintentionally concedes that the purported “promises” related to future work that the parties hoped would come to the SBMT. 8 This case was cited by AXGINC in its Moving Memorandum at p. 27. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 24 of 44 PageID #: 1871 18 securities law, forward-looking statements are not actionable merely because they turn out to be misguided); Highlands Ins. Co. v. PRG Brokerage, Inc., 01-Civ-2272, 2004 U.S. Dist LEXIS 83, at *12 (S.D.N.Y. Jan. 5, 2004) (holding that defendants’ promises concerning future profitability are not actionable as fraud under New York law); Sheth v. New York Life Insurance Co., 273 A.D.2d 72, 74 (1st Dept. 2000) (holding that claims based on “conclusory” statements and opinions of “future expectations” are not actionable as fraud”). The purported “promises” at issue in this proceeding are similarly non-actionable. The other three cases cited by Plaza also do not support Plaza’s argument. Plaza cites Merril Lynch, Pierce, Fenner & Smith, Inc. for the elements of a claim for fraudulent inducement (Opposition Memorandum p. 17), without taking any steps to apply its holding to this case. A review of the decision, however, indicates that, unlike the present case, the purported misrepresentation in that proceeding related to a present fact, namely that “Merrill Lynch represented that a market existed for the proposed debt instruments, knowing that financing could not be obtained under the proposed terms.” 19 A.D.3d at 275. Plaza also cites Mandarin Trading Ltd. v. Wildenstein, 16 N.Y.3d 173 (2011) for the same point (Opposition Memorandum p. 17), but the decision in Mandarin Trading Ltd. actually supports AXGINC, as the New York State Court of Appeals held therein that “the letter regarding the painting’s value constituted nonactionable opinion that provided no basis for a fraud claim,” and dismissed the claim. 16 N.Y.3d at 179. Similarly, Plaza cites Schlaifer Nance & Co. v. Estate of Andy Warhol, 119 F.3d 91, 98 (2d Cir. 1997) for the dicta that “what constitutes reasonable reliance is ‘always nettlesome because it is so fact intensive’” (Opposition Memorandum p. 17). That case, however, supports AXGINC as well, as the Second Circuit upheld the lower court’s determination that “no rational juror could Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 25 of 44 PageID #: 1872 19 have concluded that [the plaintiff] reasonably relied on the Estate’s misrepresentation” because the plaintiff was sophisticated and did not investigate the misrepresentations after numerous red flags. 119 F.3d 98-102. Here, Plaza was a sophisticated business, represented by counsel, and it was aware when it entered into the Sublease that the SBMT had not yet been chosen by any manufacturers for the delivery of automobiles, that it had submitted a bid for vehicle processing work that, if awarded, would have been non-exclusive, and that neither the Sublease nor any other agreement contained any provisions documenting the purported vehicle processing agreement. (Moving Memorandum pp. 24-26). Plaza’s reliance upon the purported misrepresentations was unreasonable as a matter of law. 119 F.3d at 101, citing Grumman Allied Indus. v. Rohr Indus. Inc., 748 F.2d 729, 737 (2d Cir. 1984). IV. THE DOCTRINES OF IMPOSSIBILITY OF PERFORMANCE, COMMERCIAL IMPRACTICABILITY, AND FRUSTRATION OR PURPOSE DO NOT APPLY In its affirmative defenses and counterclaims, Plaza vaguely alleges that either the doctrines of (a) impossibility of performance; or (b) commercial impracticability offer a defense to AXGINC’s attempt to enforce its rights under the Sublease. [DE 15 ¶¶ 34 and 37]. Now, for the first time, by the Opposition Memorandum, Plaza appears to also be contending that it is relying upon the doctrine of frustration of purpose. (Opposition Memorandum p. 19). As set forth in the Moving Memorandum, Plaza unconditionally agreed to pay the amounts due and owing under the Sublease, and it waived the right to assert defenses and counterclaims, so Plaza is barred from interposing these defenses. (Moving Memorandum pp. 17-20). In any event, however, whichever doctrine Plaza intend to rely upon, however, it will not find relief from its obligations under the Sublease. As the New York Court of Appeals held in Kel Kim. Corp. v. Central Markets, Inc., 70 N.Y.2d 900 (1987) ., generally, defenses to the enforcement of contracts (such as the doctrines of commercial impracticability, impossibility, and Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 26 of 44 PageID #: 1873 20 frustration of purpose) are to be “applied narrowly, due in part to the judicial recognition that the purpose of contract law is to allocate the risks that might affect performance and that performance should be excused only in extreme circumstances.” 23 N.Y.2d at 901. There are no such extreme circumstances in the instant case. A. The Doctrine of Commercial Impracticability Does Not Apply as a Matter of Law Commercial impracticability, one of the doctrines that permits a party to excuse its obligations under a contract, is a doctrine rooted in Article 2 of the Uniform Commercial Code, which is entitled “Sales,” and which only applies to “transactions in goods.” N.Y. U.C.C. § 2-102. There is no dispute that the Sublease is not a transaction in goods. The U.C.C. (and the doctrine of commercial impracticability set forth therein) does not apply in this proceeding. While the Restatement (Second) of Contracts also uses the term “impracticability” rather than impossibility, see Restatement (Second) of Contracts § 261, cmt. d, courts in New York have not adopted the Restatement, and instead have followed New York’s long-standing common-law jurisprudence on impossibility, as outlined by the New York State Court of Appeals in 407 E. 61st Garage, Inc. v. Savoy Fifth Ave. Corp., 23 N.Y.2d 275 (1968) and in Kel Kim Corp., 70 N.Y.2d at 900, and discussed in detail in the Moving Memorandum. (Moving Memorandum pp. 29-34). Despite the fact that the doctrine of commercial impracticability does not, on its face, apply to the present case, Plaza contends that the doctrine of “[c]ommercial impracticability is well- recognized in the Second Circuit,” (Opposition Memorandum p. 20), without citing any authority for this assertion, let alone authority that is applicable to the instant case. Indeed, the vast majority of cases that Plaza cites applying the doctrine of commercial impracticability are totally inapposite, as they are (a) admiralty cases, which are decided under federal common law—not New York Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 27 of 44 PageID #: 1874 21 law—and are accordingly not applicable9, see American Trading & Prod. Corp. v. Shell Int’l Marine Ltd., 453 F.2d 939, 942 (2d Cir. 1972), Asphalt Int’l v. Enterprise Shipping Corp., S.A., 667 F.2d 261, 265-66 (2d Cir. 1981); and Four Points Shipping & Trading v. Poloron Isr., LP, 846 F. Supp. 1184 (S.D.N.Y. 1994); or (b) commercial sales contracts governed by Article 2 of the U.C.C., see Moyer v. City of Little Falls, 134 Misc.2d 299 (Sup. Ct. Herkimer Cnty. 1986). In one of the cases cited by Plaza, New York Soc’y for the Relief of the Ruptured & Crippled v. Wright Med. Tech., No. 15-civ-2871, 2015 U.S. Dist. LEXIS 96779 (S.D.N.Y. Jul. 24, 2015), as in the instant case, the defendant therein incorrectly interposed its counterclaim as a claim of commercial impracticability (which ought not apply in the context of a medical licensing agreement, which is not governed by Article 2 of the U.C.C.), as opposed to (correctly) interposing it as a claim of impossibility. New York Soc’y for the Relief of the Ruptured & Crippled is also inapposite, however, and does not support Plaza’s argument, because it was decided at the motion 9 Moreover, a number of these cases are inapposite for another reason—the courts therein find that the high standard for commercial impracticability does not excuse performance. For example, Plaza cites American Trading & Prod. Corp. v. Shell Int’l Marine Ltd., 453 F.2d 939, 942 (2d Cir. 1972) for this assertion: Even though the owner is not excused because of strict impossibility, it is urged that American law recognizes that performance is rendered impossible if it can only be accomplished with extreme and unreasonable difficulty, expense, injury or loss. This is dicta by the court therein; in fact, the language cited by Plaza in the Opposition Memorandum is a recitation of a party’s argument. In fact, the court in the American Trading & Prod. Corp. case does not excuse performance under the charter party contract at issue therein. Rather, the court holds that “increase in expense is not sufficient to constitute commercial impracticability under either American or English authority.” Id. The case does not support Plaza’s argument. Similarly, Plaza cites case Four Points Shipping & Trading v. Poloron Isr , LP, 846 F. Supp. 1184 (S.D.N.Y. 1994) arguing that, because the judge in that case cited both Kel Kim Corp. and Asphalt International, it must have “indicat[ed] that [the judge] did not view Kel Kim [Corp.] as precluding application of the law of commercial impracticability.” (Opposition Memorandum p. 23). This argument also fails. First, Four Points Shipping & Trading is a charter party case before the court under admiralty jurisdiction, applying the federal common law of commercial impracticability, and it is inapposite. Second, the court in Four Points Shipping & Trading cites Kel Kim Corp. and Asphalt Int’l for the proposition that “unforeseeability of the full extent of the risk…would be a precondition for excusing nonperformance under any of the doctrines of (a) commercial impracticability; (b) impossibility; or (c) force majeure. 846 F. Supp. at 1188. This decision does not support Plaza’s argument, because, as set forth in greater detail herein, flooding at the SBMT, and the difficulty to obtain insurance as a result of that flooding, was utterly foreseeable. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 28 of 44 PageID #: 1875 22 to dismiss phase—not on summary judgment. The court held that (a) determining the validity of the counterclaim would depend upon an evaluation of evidence for issues such as foreseeability, and (b) noted that the cases relied upon the movant in support of its motion to dismiss had all been determined on summary judgment, not at the motion to dismiss phase, so the case should proceed to discovery. No. 15-civ-2871, 2015 U.S. Dist. LEXIS 96779, at **5-7. Notably, the majority of the cases cited by the court dealt with the doctrine of impossibility—not commercial impracticability—because that would have been the appropriate defense to have been interposed, see Kel Kim Corp., 70 N.Y.2d 900; MG Ref & Mktg., Inc. v. Knight Enters., Inc., 25 F Supp. 2d 175 (S.D.N.Y. 1998); Lowenschuss v. Kane, 520 F. 2d 255 (2d Cir. 1975). The lone exception was Harriscom Svenska, A.B. v. Harris Corp., 3 F.3d 576 (2d Cir. 1993), which applied the doctrine of commercial impracticability because that case dealt with the sale of goods and, accordingly, the U.C.C. applied. New York Soc’y for the Relief of the Ruptured & Crippled is best understood as a case holding that, under the facts of that case, a defense of impossibility could not be disposed of on a motion to dismiss. That is not the procedural posture of this case. As will be discussed in greater detail below, however, even if the court were to hold that the defense of commercial impracticability applied in the present case, Plaza would still not be able to avail itself of that defense. As the court in Moyer held, “[i]ncreased cost alone does not excuse performance unless the rise in cost is due to some unforeseen contingency which alters the essential nature of the performance.” Moyer, 134 Misc.2d at 300 (emphasis in original), citing N.Y. UCC 2-615 , cmt. 4. Here, as will be discussed in greater detail below, flooding at the SBMT, and the difficulty to obtain insurance as a result of that flooding, was utterly foreseeable. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 29 of 44 PageID #: 1876 23 B. The Doctrines of Impossibility and Frustration of Purpose Do Not Apply as a Matter of Law The doctrine of impossibility was briefed extensively in the Moving Memorandum. (Moving Memorandum pp. 29-34). In short, the doctrine of impossibility “excuses a party’s performance only when the destruction of the subject matter of the contract or the means of the performance makes performance objectively impossible.” Id. (emphasis added). “Moreover, the impossibility must be produced by an unanticipated event that could not have been foreseen or guarded against in the contract. Id., citing 407 E. 61st Garage, Inc., 23 N.Y.2d at 281 and Ogdensburg Urban Renewal Agency v. Moroney, 42 A.D.2d 639, 640 (3d Dept. 1973). Now, for the first time, however, Plaza has asserted that it is also relying upon the doctrine of frustration of purpose. (Opposition Memorandum p. 19). This doctrine also does not provide Plaza with a defense against the amounts owed under the Sublease. As with defenses seeking to excuse a party’s performance under a contract, and as acknowledged by the court in one of the cases cited by Plaza, Crown IT Services v. Koval-Olsen, 11 A.D.3d 263 (1st Dept. 2004), the doctrine of frustration of purpose is “a narrow one that does not apply unless the frustration is substantial…the frustrated purpose must be so completely the basis of the contract that, as both the parties understood, without it, the transaction would have made little sense.” 11 A.D.3d at 265 (emphasis added). It “excuses performance when a ‘virtually cataclysmic, wholly unforeseeable event renders the contract valueless to one party. It is not enough that the transaction has become less profitable for the affected party or even that he will sustain a loss.” Gander Mt. Co. v. Islip U-Slip LLC, 923 F. Supp. 2d 351, 359 (N.D.N.Y. 2013) (internal citations omitted). As with the doctrines of commercial impracticability and impossibility, the frustration must have been unforeseeable: Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 30 of 44 PageID #: 1877 24 The frustration must be so severe that it is not fairly to be regarded as within the risks that [were] assumed under the contract…the non-occurrence of the frustrating event must have been a basis assumption on which the contract was made. Id., citing Restatement (Second) Contracts § 265, cmt. a. The difference between the doctrines of impossibility and frustration of purpose is helpfully summarized by the Second Circuit in United States v. General Douglas MacArthur Senior Village, Inc., 508 F.2d 377 (2d Cir. 1974): In general, impossibility may be equated with an inability to perform as promised due to intervening events, such as an act of state or destruction of the subject matter of the contract. The doctrine comes into play where (1) the contract does not expressly allocate the risk of the event’s occurrence to either party, and (2) to discharge the contractual duties (and, hence, obligation to pay damages for breach) of the party rendered incapable would comport with the customary risk allocation. Essentially, then, discharge by reason of impossibility—as well as the concomitant remedy (to the discharge) of rescission—enforce what can be reasonable inferred to be the intent of the parties at the time of contract. Frustration of purpose, on the other hand, focuses on events which materially affect the consideration received by one party for his performance. Both parties can perform, but as a result of unforeseeable events, performance by party X would no longer give party Y what induced him to make the bargain in the first place. Thus frustrated, Y may rescind the contract. Discharge under this doctrine has been limited to instances where a virtually cataclysmic, wholly unforeseeable event renders the contract valueless to one party. 508 F.2d at 381. “[T]he underlying principle of both doctrines is foreseeability. ‘Impossibility and frustration of purpose both refer to two distinct doctrines in contract law, but both require unforeseeability.’” Gander Mt. Co., 923 F. Supp. 2d at 362 (emphasis added), quoting Beardslee v. Inflection Energy, LLC, 904 F. Supp. 2d 213 (N.D.N.Y. 2012). This case is very similar to Gander Mt. Co.. In that case, Gander Mountain, a retail store, leased a commercial space in a shopping plaza that had flooded previously. 923 F. Supp. 2d at 355. The lease required that Gander Mountain have an insurance policy that insured a minimum of 80% of their inventory, and the full replacement value of the buildings and improvements. Id. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 31 of 44 PageID #: 1878 25 at 356. After another flood in the premises, wherein Gander Mountain lost all of its inventory, Gander Mountain was no longer to obtain flood insurance, and it later discontinued operations at the premises. Id. Gander Mountain then filed a complaint seeking a declaratory judgment that, due to the flood and its inability to procure insurance, the lease was thereby terminated.10 Id. at 359. The Gander Mt. Co. court granted the landlord’s motion to dismiss the claim seeking a declaratory judgment that Gander Mountain was relieved from its obligations under the lease under the doctrine of frustration of purpose. Id. at 362. In so doing, the court looked to two cases with similar facts and analogous lease provisions: (a) Portnoy v. Omnicare Pharm., Inc., No. 02-civ- 2905, 2004 U.S. Dist. LEXIS 12235 (E.D. Pa. Jun. 25, 2004); and (b) Home Design Center-Joint Venture v. County Appliance of Naples, Inc., 563 So. 2d 767 (Fla. 2d DCA 1990). These cases are discussed briefly below. In Portnoy, the leased property was no longer usable for its intended purpose—making FDA approved pharmaceuticals—after Tropical Storm Allison. No. 02-civ-2905, 2004 U.S. Dist. LEXIS 12235 at *7-8. On summary judgment, the court held that the doctrines of frustration of purpose and impossibility did not apply because “the parties contemplated such a contingency and allocated the risk between the parties.” Id. at 9. The court noted that “[t]here is a detailed contact between these two sophisticated parties in which allocation for risk casualty is distributed between the parties: 10 This represents a difference between Gander Mt. Co. and the present case. AXGNC rejected the Sublease in its bankruptcy, effective June 30, 2014. [DE 1, ¶ 11, n. 2] and Urrutia Decl. ¶ 13. AXGINC only seeks amounts due and owing the Sublease through and including June 30, 2014. [DE 1, ¶¶ 15, 22]. There is no dispute that Plaza remained in possession of the Premises through and including June 30, 2014. SUF ¶ 81 and Urrutia Decl. ¶¶ 13 and 15. In fact, one of the cases cited by Plaza, Elkar Realty Corp. v. Mitsuye T. Kamada, 6 A.D.2d 155 (1st Dept. 1958) explicitly makes clear that even if Plaza’s impossibility or frustration of purpose defense were found to be well-founded (which they aren’t), Plaza still is required to pay rent due and owing under the Sublease through and including June 30, 2014, because it remained in possession of the Premises during this period. 6 A.D.2d at 159. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 32 of 44 PageID #: 1879 26 Section 10.02 Damage or Casualty In case the Premises or any portion thereof shall be totally or partially damaged or destroyed by fire or by any other casualty whatsoever, then Landlord and Tenant shall proceed with reasonable promptness, and in accordance with paragraph (c) below, to repair and restore the Premises to at least as good a condition as that which existed immediately prior to such fire or other casualty and during such repair period there shall be an abatement of rent… . Id. at *9. The court noted that “there is no evidence that the non-occurrence of a flood was a basic assumption upon which the contract was made. In fact the language of the lease indicates otherwise,” by providing for an abatement during the repair period. Id. at *10. The court further noted that “[t]he contemplation of flood was always there as evidenced by the fact that Defendants purchased flood insurance [and collected upon it].” Id. The court also held that the doctrine of impossibility did not apply because “[a]n ability to attract clientele is a risk every business takes. A lease that was nullified by a reluctance of a third party to deal with the lessee of a building would result in shifting the loss to the lessor,” which the court found to be inappropriate given the parties’ express agreement as to damage and casualty. Id. at *14. The court denied the tenant summary judgment on its defenses. In Home Design Center-Joint Venture, the tenant specifically agreed to maintain liability insurance. 563 So. 2d at 768. Like Plaza, the tenant also had floor plan insurance on the appliances that it displayed at the premises because, as is common with appliance businesses, it did not own the merchandise that it displayed; instead, it was owned by a finance company under a floor plan agreement. Id. The tenant’s insurance was cancelled after an insurance inspector noticed a large propane tank that was installed at the premises before the tenant entered into the lease. Id. The tenant contended that it was unable to obtain insurance after this cancellation. Id. at 769. The court noted at the outset that—like the instant case—the lease “d[id] not mention the tenant’s Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 33 of 44 PageID #: 1880 27 agreement with a third party to maintain sufficient property insurance…[t]he lease does not even mention the tenant’s intention to use a floor plan agreement.” Id. The court noted that: [t]he future availability of contractually required insurance at a reasonable price is clearly a business risk. The parties could have shifted the risk of expensive or unavailable insurance for either the liability coverage or the property coverage from the tenant to the landlord. They chose not to shift this risk by the terms of the contract. Id. The court held that neither the doctrine of impossibility nor the doctrine of frustration of purpose excused the tenant’s performance. With regard to impossibility, the court held that it was not impossible for the tenant to operate an appliance store on the premises, it was just expensive, and “economic difficult did not render [the sublease’s] purpose “impossible.”” Id. at 770. With regard to frustration, the court held that the tenant’s purpose “was not frustrated by a failure of consideration or an impossibility of performance by [landlord],” and, in any event, “the defense is not available concerning difficulties which could reasonably have been foreseen.” Id. The court upheld the lower court’s decision at trial, holding that “[a]lthough [tenant] may not have anticipated future problems with its insurance company or with its floor plan financier, it did not present substantial competent evidence to establish that such basic business risks were matters which is not have foreseen at the time it negotiated the terms of the lease.” Id. In Gander Mt. Corp., the court noted that the tenant was “a sophisticated business entity with knowledge of the real estate industry and clearly experienced in entering into written agreements of this nature.” 923 F. Supp. 2d 361. The court found that the parties had, the lease, “allocated their risks with respect to the damage of the property” by the following provision: 15.1 Repair and Restoration If the premises (including, without limitation, the Building) shall be damaged or destroyed in whole or in part by fire or other casualty during the Lease term, Tenant shall promptly repair and restore the Premises to a condition equal to its condition immediately prior to such damage or destruction… Id.at 361-362. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 34 of 44 PageID #: 1881 28 The court held that “[b]ecause plaintiff was aware of the possibility of flood, plaintiff could not have assumed that all-risk insurance would be available.” Id. at 362. Moreover, the court found that the tenant had “failed to allege that it was unable to negotiate terms that would protect [it] from any flood occurrence. While it may be financially difficult or unprofitable…to continue to operate…that does not excuse [tenant’s] obligation to perform under the terms of the lease.”11 Id. at 362-363. The court granted the landlord’s motion to dismiss tenant’s declaratory judgment claim, which called for tenant’s obligations under the lease to be discharged, and the lease to be rescinded, based upon the doctrine of frustration of purpose. Id at 363. Here, Plaza cannot obtain relief under either the doctrine of impossibility or the doctrine of frustration for a number of reasons. First, as Plaza admits, the premises were not destroyed to render it physically impossible to store cars there. (Opposition Memorandum p. 36). Second, Plaza signed the Sublease two weeks after its entire inventory was destroyed by Hurricane Sandy. SUF ¶¶ 34-36. Like Gander Mt. Corp., it was unquestionably foreseeable that the SBMT might flood—because it had two weeks earlier!—and that it might be difficult for Plaza to obtain insurance after such a flood. See also Moving Memorandum p. 33. Third, as in Gander Mt. Corp., the Sublease plainly contemplated that Plaza would bear the risk in the event of a flood or other casualty. For example, by Article 15 of the Sublease, only AXGINC had the right to terminate the Sublease because of casualty. SUF ¶ 58. By Article 16, Plaza further agreed that its obligation to pay rent was not “affected, impaired, or excused” based upon AXGINC’s inability to provide services based upon any act beyond its control, such as a flood. SUF ¶ 59. And, by the “hell or high water” provisions, see Moving Memorandum pp. 17-18, and by the waiver of defenses and counterclaim provision, 11 The court also cites that lower court’s decision in Kel Kim Corp. approvingly. Id. at 362-363. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 35 of 44 PageID #: 1882 29 see Moving Memorandum pp. 19-20, Plaza unconditionally agreed to pay the sums due under the Sublease, regardless of whether there was a flood or any other casualty-type event. As in Gander Mt. Corp., Plaza’s impossibility and frustration of performance defenses fail as a matter of law and must be dismissed. The cases that Plaza cites do not, in fact, support its argument. For example, in Crown IT Services, 11 A.D.3d 263, the court held that there was nothing in the contract that suggested that it was contingent upon Crown’s status as an IT provider, so the contract’s purpose was not frustrated by Crown’s failure to maintain that status. PPF Safeguard, LLC v. BCR Safeguard Holding, LLC, 85 A.D. 3d 506 (1st Dept. 2011) also holds that the frustration of purpose doctrine was “unavailing.” And it appears that Two Catherine Street Mgmt. Co. v. Yam Keung Yeung, 153 A.D.2d 678 (2d Dept. 1989) deals with an unforeseeable change in rules and regulations, which is not the case in the instant case. In two other cases cited by Plaza, tenants failed in their attempts to get relief on summary judgment on their impossibility and frustration of purpose defenses. First, in Sage Realty Corp. v. Jugobanka, D.D., No. 95-civ-0323, 1997 U.S. Dist. LEXIS 9301 (S.D.N.Y, Jul. 2, 1997), in refusing to grant summary judgment in tenant’s favor, the court cited the Second Circuit’s decision in General Douglas MacArthur Senior Village, Inc., , noting that the doctrine of frustration is “limited to instances where a virtually cataclysmic, wholly unforeseeable event renders the contract valueless to one party…[i]f a contingency is reasonably foreseeable and the agreement nonetheless fails to provide protection in the event of its occurrence, the defense of commercial frustration is not available.” No. 95-civ-0323, 1997 U.S. Dist. LEXIS 9301, at *6, citing General Douglas MacArthur Senior Village, Inc., 508 F.2d at 381. In Jugobanka D.D., unlike the present case, the lease was silent as to the allocation of risk on the issue. The court denied Jugobanka’s Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 36 of 44 PageID #: 1883 30 motion for summary judgment on its defense of frustration because it was unclear on the record whether the Executive Order imposing sanctions on Yugoslavia had been unforeseeable. Id. at *7. Similarly, in Jack Kelly Partners LLC v. Zegelstein, 140 A.D.3d 79 (1st Dept. 2016), the court affirmed the lower court’s denial of the tenant’s summary judgment motion for judgment on its claims for rescission and for a declaratory judgment that the lease was invalid and unenforceable due to impossibility or frustration. Similarly, Plaza’s attempt to distinguish Kel Kim Corp. (Opposition Memorandum p. 22) fails. The court did not view as significant the fact that “the landlord in Kel Kim was not in a similar business as its roller rink tenant, and did not have similar interests;” in fact, the Kel Kim Corp. decision says nothing at all on this point. Id. Nor did the court in Kel Kim Corp. base its decision on the fact that the lease therein “did not limit the use of the leased premises, as is the case at bar.” Id. Rather, as discussed in the Moving Memorandum, the Kel Kim Corp. court based its decision on the fact that the unavailability of insurance was not unforeseeable, and could have been addressed by the parties in the lease. (Moving Memorandum pp. 29-31). Lastly, a number of the factual contentions relied upon in the Opposition Memorandum are incorrect or misleading. For example, Plaza contends that the premises at the SBMT were not in a flood zone prior to Hurricane Sandy, citing to testimony from Plaza’s insurance broker, Joseph Gundermann. (Opposition Memorandum p. 24). In fact, a portion of the SBMT was always deemed a high risk flood zone, as conceded by Plaza’s witness, Mr. Aquilino. SUF ¶ 77. Moreover, even Mr. Gundermann admitted that portions of the FEMA flood map zoned the SBMT as a high risk flood zone prior to Hurricane Sandy. Gundermann Tr. 181:4-184:15, Bost Seaton Decl Exh. 4. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 37 of 44 PageID #: 1884 31 Plaza also misleadingly contends that the Ground Lease required “insurance,” and it couldn’t get flood insurance after Hurricane Sandy, so the purpose of the Ground Lease was frustrated. (Opposition Memorandum pp. 25-27). The Ground Lease, however, only required Garage Keeper’s Liability Insurance—not flood insurance. Blount Decl. Exh. B, Section 11. In addition, Plaza selectively quotes the following exchange from AXGINC’s in-house counsel: Q: If the only purpose for the sublease was to store vehicles on the premises, and if you were unable to obtain flood insurance for the inventory on the premises, wouldn’t you say that the sublease wouldn’t be able to be performed? A: Yes. I mean, I’m going to agree. (Opposition Memorandum p. 28) This utterly misrepresents Mr. Davis’ testimony. In fact, Mr. Davis went on to say the following: A: Yes. I mean, I’m going to agree. One, in terms of ability to perform, I mean, that sort of, to me, is a legal question. I think, and I don’t know New York law. But I think we would have to look at the lease. I don’t recall there being an out specifically, you know, that the lease was tied specifically to the sublease, and there’s a term. And then, as we’ve said before, I know I would—we were able to get indications of insurance beyond, I think, just Plaza’s inventory, so it’s not like it was impossible to get the insurance. Q: What was the end? A: It’s not like it was impossible for them to get insurance. Q: Flood insurance? A: Yeah, to cover this. It may have been more expensive than they wanted, but I don’t know. Again, I never saw—as we’ve also discussed, I don’t know what they were paying before. Davis Tr: 112:2-24, Bost Seaton Decl Exh. 3. A review of the complete deposition interchange accordingly shows that, in fact, Mr. Davis said exactly the opposite of what Plaza conveyed in the Opposition Memorandum—to his understanding, Plaza could get flood insurance, it just may have been more expensive than it wished. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 38 of 44 PageID #: 1885 32 V. PLAZA’S READING OF THE SUBLEASE’S ATTORNEYS’ FEE PROVISION IS CONTRARY TO THE PLAIN LANGUAGE OF THE SUBLEASE AND UNSUPPORTED BY LAW Plaza argues that, because the Sublease’s attorneys’ fee provision is located in Article 7 of the Sublease, entitled “Indemnity,” the provision “only deals with claims made by third parties.” (Opposition Memorandum pp. 44-46). This is contrary to the plain language of the Sublease, and is unsupported by law. Plaza’s argument is misplaced for a number of reasons. First, the plain language of Article 7 makes clear that Plaza’s obligation to indemnify AXGINC was not limited to instances of indemnification of claims from third parties: Article 7 INDEMNITY Tenant agrees that Landlord shall not be liable for injury to any person, or for the loss of, or for the damage to, any property (including property of Tenant) occurring in or about the Premises from any cause whatsoever, except for Landlord's gross negligence. Tenant hereby indemnifies and holds Landlord, each of the Ground Lessor Parties, and their respective affiliates, officers, directors, employees, representatives and agents (individually and collectively, the "Indemnified Party") harmless from and against same and agrees to defend the Indemnified Party against any and all claims, charges, liabilities, obligations, penalties damages, costs and expenses (including attorney's fees) arising, claimed, charged, or incurred against or by the Indemnified Party from any matter or thing arising from Tenant's use of the Premises or activities at the Terminal, the conduct of its business or from any activity, work or things done, permitted, or suffered by the Tenant in or about the Premises. Tenant shall further indemnify and hold harmless the Indemnified Party from and against any and all claims arising from any breach or default in the performance of any obligation on Tenant's part, or arising from any act or negligence of Tenant, or any officer, agent, employee, guest, or invitee of Tenant, and from all costs, attorney's fees, and liabilities incurred in or about the defense of any such claim or any action or proceeding brought thereon. In case any action or proceeding be brought against the Indemnified Party by reason of such claim Tenant shall defend the same at Tenant's sole expense by counsel satisfactory to Landlord. The indemnification provided in this section shall survive any termination or expiration of this Lease. Without limiting the generality of the above, Landlord, its affiliates and its agents shall not be liable for any loss or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Premises, or from pipes, appliances or plumbing works therein or from the roots, street or subsurface or from any other place resulting from dampness or any other. Blount Decl. Exh. F (emphasis added). Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 39 of 44 PageID #: 1886 33 The relevant language, which is emphasized with bold font above, refers to liabilities that arise from or are related to “any breach or default in the performance of any obligation on Tenant's part.” This language would be rendered meaningless under the reading advanced by Plaza, because, pursuant to the Sublease, Plaza does not have any “obligations” to “third parties” such that it could “breach or default in the performance of” those “obligations.” Indeed, Article 13, captioned “Defaults,” relates exclusively to ways in which Plaza could default in its obligations to AXGINC—not to any third parties. Id. Because Plaza’s interpretation violates the “cardinal rule that a contract should not be read to render any provision superfluous,” it must be disregarded by the Court. Reyes v. Metromedia Software, Inc., 840 F.Supp.2d 752, 756 (S.D.N.Y. 2012), citing Scholastic Inc. v. Harris, 259 F.3d 73, 83 (2d Cir. 2001). Second, the Sublease also makes clear, for the avoidance of doubt, that the captions preceding the Sublease’s various articles and sections shall not be construed in a way to limit the terms of the Sublease: Section 27.05 Captions. The captions in this Lease are for convenience only and do not in any manner limit or amplify the provisions of this Lease. On this basis, the Court must disregard the Sublease’s captions, and not construe them as part of the Sublease in order to “limit or amplify” the Sublease’s provisions. See Empire State Bldg. Co. LLC v. N.Y. Skyline, Inc. (In re N.Y. Skyline, Inc.), 471 B.R 69, *83-84 (S.D.N.Y. Bankr. 2012) (construing attorneys’ fees provision in favor of landlord and disregarding the caption of the provision, because the lease contained a provision providing that “captions are included for convenience only, and are not to be construed as part of the lease as a limitation on the scope of any of its provisions”), see also Aristocrat Leisure Ltd. v. Deutsche Bank Trust Co. Ams., No. 04- civ-10014, 2005 U.S. Dist. LEXIS 16788 at *18 n.6 (S.D.N.Y. Aug. 12, 2005) (“the parties Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 40 of 44 PageID #: 1887 34 contractually agreed that the Indenture’s paragraph headings “are for convenience only and shall not affect the construction”…[a]ccordingly, they do not factor into this [c]ourt’s analysis”); J. Remora Maintenance LLC v. Efromovich, 34 Misc. 3d 1208(A) (Sup. Ct. N.Y. Cnty. 2012) (on summary judgment, finding that defendant’s claim for fraudulent inducement was waived; holding that because the guaranty “explicitly state ‘captions in this Guaranty have been inserted for convenience only and shall be given no substantive meaning or significance whatsoever in construing the terms of this Guaranty’…the fact that the waiver [of all defenses] appears in a section entitled ‘Governing Law’ does not compel a different conclusion” as to its applicability). As the court noted in Travelers Indemnity Co. v. Dammann & Co, Inc., 592 F.Supp. 2d 752, 766-67 (D.N.J. 2008): [s]imply referring to a claim as one for indemnification does not make it so. First, although the paragraphs above both have the word “indemnification” in their headers, portions of those paragraphs are explicitly not provisions for indemnification. For example, the paragraph entitled “REWORK AND PRODUCT LIABILITY INDEMNIFICATION” contains, as one would guess from the header, a “rework” provision that has nothing to do with indemnification. The first sentence of that paragraph is related only to the Seller’s agreement to rework defective production. An agreement [] does not become an indemnification simply because the header of that paragraph contains the word indemnification. 592 F.Supp. 2d at 766. Accordingly, the Sublease’s provision providing that AXGINC is entitled to attorneys’ fees “arising from any breach or default in the performance of any obligation on [Plaza’s] part” does not “become an indemnification provision simply because the header of that paragraph contains the word indemnification.” Id. None of the authorities relied upon by Plaza are on point; at best, they stand for the proposition that Plaza’s obligation to pay AXGINC’s attorneys’ fees arising from Plaza’s breach of the Sublease should not be understood as an indemnification obligation, because indemnification refers to liability incurred to a third party. See Travelers Indemnity Co.., 592 F. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 41 of 44 PageID #: 1888 35 Supp. 2d at 766-67 (discussing black letter law of indemnification); Atlantic Richfield Co. v. Interstate Oil Transport Co., 784 F.2d 106 (2d Cir. 1986) (holding that indemnification language unlike the language in this case, i.e., “exonerate, indemnify and save harmless Lessor from and against any liability for damage of the property of the Lease, Lessor or others,” only provided for indemnification of third party claims); Schiavone Constr. Co. v. County of Nassau, 717 F.2d 747 (2d Cir. 1983) (finding indemnification unlike the language in this case, i.e., “[t]he Engineers agree that they will be responsible and save the County harmless from all claims, damages, costs and expenses arising from the use of any patented articles in connection with the work and also arising from the performance of the work of the Engineers including damages to person or property and the defense, settlement, or satisfaction of such claims,” ambiguous with regard to whether it was intended to cover the contracting parties and remanded for a review of parol evidence). AXGINC does not seek for the attorneys’ fee provision to be construed as an indemnity provision—Plaza does—and Plaza authorities do not stand for the proposition that AXGINC is not entitled to attorneys’ fees in this proceeding. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 42 of 44 PageID #: 1889 36 CONCLUSION WHEREFORE, it is respectfully requested that the Court grant Plaintiff AXGINC’s motion for summary judgment pursuant to Fed. R. Civ. P. 56 in its entirety. Date: January 24, 2017 New York, New York FISHERBROYLES LLP /s/ Christina H. Bost Seaton By: Christina H. Bost Seaton, Esq. 445 Park Avenue, Ninth Floor New York, New York 10022 (203) 887-4665 (phone) Christina.BostSeaton@fisherbroyles.com Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 43 of 44 PageID #: 1890 37 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK AXGINC CORPORATION, f/k/a AXIS GROUP, Inc., Plaintiff, -versus- PLAZA AUTOMALL, LTD., Defendant. Case No. 1:14-c-4648-ARR-VMS CERTIFICATE OF SERVICE CHRISTINA H. BOST SEATON ESQ. declares, under penalty of perjury, as follows: 1. I am a member of the law firm of FisherBroyles LLP, attorneys for Plaintiff AXGINC Corporation f/k/a Axis Group Inc. (“AXGINC”). 2. On January 24, 2017, I served the foregoing Reply Memorandum of Law in Further Support of AXGINC’s motion for summary judgment upon counsel for Defendant Plaza Automall, Ltd. by the Court’s electronic case filing system. 3. An additional copy was sent by Federal Express to: Schlacter & Associates 450 Seventh Avenue New York, New York 10123 Date: January 24, 2017 New York, New York /s/ Christina H. Bost Seaton Christina H. Bost Seaton, Esq. Case 1:14-cv-04648-ARR-VMS Document 52 Filed 01/24/17 Page 44 of 44 PageID #: 1891
