Halpern v. Tharaldson

MOTION for Summary Judgment

D. Neb.September 1, 2016

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP Andrea M. Champion, Esq. Nevada Bar No. 13461 HOLLAND & HART LLP 9555 Hillwood Drive, 2nd Floor Las Vegas, NV 89134 Phone: (702) 669-4629 Fax: (702) 669-4650 amchampion@hollandhart.com Matthew J. Smith, Esq. (Admitted Pro Hac Vice) Claire Wells Hanson, Esq. (Admitted Pro Hac Vice) HOLLAND & HART LLP 555 Seventeenth Street, Suite 3200 Denver, Colorado 80202 Phone: (303) 295-8000 Fax: (303) 295-8261 mjsmith@hollandhart.com cewellshanson@hollandhart.com Attorneys for Defendant Gary Tharaldson THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEVADA JASON HALPERN, Plaintiff, v. GARY THARALDSON, Defendant. CASE NO.: 2:15-cv-02037-JCM-PAL MOTION FOR SUMMARY JUDGMENT ORAL ARGUMENT REQUESTED Defendant Gary Tharaldson (“Tharaldson”), by and through his attorneys of record, Holland & Hart LLP, hereby moves for summary judgment on Plaintiff Jason Halpern’s anticipatory breach claim. /// /// /// /// Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 1 of 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP This Motion is made and based upon the following memorandum of points and authorities, the pleadings and papers on file herein, and Defendants respectfully request that argument be heard on this Motion by the Court. DATED this 1st day of September, 2016 HOLLAND & HART LLP /s Andrea M. Champion Andrea M. Champion, Esq. Nevada Bar No. 13461 HOLLAND & HART LLP 9555 Hillwood Drive, 2nd Floor Las Vegas, NV 89134 Matthew J. Smith, Esq. (Admitted Pro Hac Vice) Claire Wells Hanson, Esq. (Admitted Pro Hac Vice) HOLLAND & HART LLP 555 Seventeenth Street, Suite 3200 Denver, Colorado 80202 Attorneys for Defendant Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 2 of 32 i 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP TABLE OF CONTENTS Page I. INTRODUCTION ................................................................................................................... 1 II. STATEMENT OF UNDISPUTED MATERIAL FACTS ...................................................... 2 III. STANDARD OF REVIEW ................................................................................................... 11 IV. ELEMENTS OF THE CLAIM.............................................................................................. 11 V. ARGUMENT......................................................................................................................... 12 A. There Was No Anticipatory Breach of the Side Letter .................................................. 12 1. Tharaldson Did Not Express A Positive Or Unequivocal Repudiation ................ 13 2. Plaintiff’s Claim Is Based On Terms Not Contained In The Side Letter ............. 16 B. Plaintiff Is Not Entitled to Recover Lost Profits ............................................................ 18 1. Plaintiff’s Damages Are Not Capable of Proof with Reasonable Certainty ......... 18 2. Lost Profits Were Not Within The Contemplation Of The Parties ....................... 23 VI. CONCLUSION ..................................................................................................................... 26 Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 3 of 32 ii 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP TABLE OF AUTHORITIES Page(s) FEDERAL CASES Aevoe Corp. v. AE Tech. Co., 40 F. Supp. 3d 1351 (D. Nev. 2014) ........................................................................................11 Argonaut P’ship, L.P. v. Sidek, S.A. de C.V., No. 96 Civ. 1967(MBM), 1996 WL 617335 (S.D.N.Y. Oct. 25, 1996) ..................................12 Benderson Dev. Co. Inc. v. United States Postal Serv., No. 91-CV-0794E(M), 1998 WL 214741 (W.D.N.Y. Apr. 27, 1998) .............................18, 21 Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ............................................................11 In re Asia Glob. Crossing, Ltd., 326 B.R. 240 (Bankr. S.D.N.Y. 2005) .....................................................................................12 In re Best Payphones, Inc., 432 B.R. 46 (S.D.N.Y. 2010) .......................................................................................13, 14, 15 Kidder, Peabody & Co., Inc. v. IAG Int’l Acceptance Grp. N.V., 28 F. Supp. 2d 126 (S.D.N.Y. 1998) ..................................................................................19, 23 Lau v. Mezei, No. 10 CV 4838, 2011 WL 4501942 (S.D.N.Y. Sept. 29, 2011) ............................................12 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ............................................................11 RIJ Pharm. Corp. v. Ivax Pharms., Inc., 322 F. Supp. 2d 406 (S.D.N.Y. 2004) ......................................................................................11 Saini v. Int’l Game Tech., 434 F.Supp.2d 913 (D. Nev. 2006) ..........................................................................................11 Summit Properties Int’l LLC v. Ladies Prof’l Golf Ass’n, No. 07 Civ. 10407, 2010 WL 2382405 (S.D.N.Y. June 14, 2010) ....................................18, 19 Summit Tax Exempt L.P. II v. Berman, No. 88 Civ. 5839, 1989 WL 152796 (S.D.N.Y. July 19, 1989) ........................................20, 21 Towers Charter & Marine Corp. v. Cadillac Ins. Co., Inc., 708 F.Supp. 612 (S.D.N.Y. 1989)................................................................................13, 14, 17 Vestar Dev. II, LLC v. Gen. Dynamics Corp., 249 F.3d 958 (9th Cir. 2001) .......................................................................................21, 22, 23 Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 4 of 32 iii 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP STATE CASES Ashland Mgmt Inc. v. Janien, 82 N.Y.2d 395 (1993) ..............................................................................................................18 Collard v. Incorporated Village of Flower Hill, 52 N.Y.2d 594 (N.Y. 1981) ...............................................................................................16, 17 Covington Bros. v. Valley Plastering, Inc., 566 P.2d 814 (Nev. 1977) ........................................................................................................11 Goodstein Const. Corp. v. City of New York, 80 N.Y.2d 366 (N.Y. 1992) ...............................................................................................24, 25 IDT Corp. v. Tyco Grp., 13 N.Y.3d 209 (N.Y. 2009) ...............................................................................................14, 15 IDT Corp. v. Tyco Grp., S.A.R.L., 23 N.Y.3d 497 (N.Y. 2014) ...............................................................................................14, 15 Kenford Co., Inc. v. Cty. of Erie, 73 N.Y.2d 312 (N.Y. 1989) .........................................................................................23, 24, 25 Kenford Co., Inc. v. Cty. of Erie, 67 N.Y.2d 257 (N.Y. 1986) ...............................................................................................19, 20 Richardson v. Jones, 1 Nev. 405 (Nev. 1865)............................................................................................................11 Rodriguez v. First President, Inc., 771 N.Y.S.2d 368 (N.Y. App. Div. 2004) ...............................................................................22 RSB Bedford Assocs. LLC v. Ricky’s Williamsburg, Inc., 977 N.Y.S.2d 236 (N.Y. App. Div. 2013) .........................................................................21, 23 OTHER AUTHORITIES Fed. R. Civ. P. 26(a)(1) ..................................................................................................................10 Fed. R. Civ. P. 56(a) ......................................................................................................................11 Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 5 of 32 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT I. INTRODUCTION Plaintiff Jason Halpern (“Plaintiff”) brought this case against Tharaldson seeking lost profits for a failed business deal. The Complaint asserted three claims against Tharaldson for (1) breach of contract, (2) anticipatory breach, and (3) breach of the implied covenant of good faith and fair dealing. On July 18, 2016, the Court granted Tharaldson’s Partial Motion to Dismiss Plaintiff’s claims for breach of contract and breach of the implied covenant of good faith and fair dealing. Order, ECF No. 55. Plaintiff’s only remaining claim is for anticipatory breach. Plaintiff alleges Tharaldson anticipatorily breached the parties’ Side Letter “by seeking to materially change the terms of the joint venture to make it highly unfavorable to Plaintiff and refusing to proceed with the venture on the terms set forth in the Contract.” Compl., ECF No. 1 at ¶ 47. Plaintiff alleges that as a result of Tharaldson’s anticipatory breach, Plaintiff has suffered damages, including but not limited to, lost profits, and sought an award of damages in an amount to be determined at trial, but in no event less than $20 million, plus interest. Id. at ¶¶ 49-50. Plaintiff’s claim for anticipatory breach must fail as a matter of law because Plaintiff has not come forth with sufficient evidence to establish essential elements of his claim. First, Plaintiff cannot establish that Tharaldson positively and unequivocally expressed an intention to breach the agreement. Upon examination, Plaintiff’s anticipatory breach claim is actually based on terms that were not included in the parties’ agreement and Tharaldson never expressed an intention to breach the actual terms of the agreement. Second, Plaintiff’s alleged lost profit damages, the only type of damages claimed in the case, are speculative, based on numerous hypothetical assumptions, and were not contemplated by the parties at contracting. For these reasons, Tharaldson is entitled to summary judgment on Plaintiff’s claim for anticipatory breach. /// Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 6 of 32 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP II. STATEMENT OF UNDISPUTED MATERIAL FACTS 1. In May 2007, non-party John Knott and the Plaintiff approached Tharaldson about investing in the purchase of Las Vegas National Golf Course (the “Property”). In August 2007, the parties along with other investors purchased the Property for $42,700,000 with the hope of converting the Property to a master planned residential community. Am. Answer, ECF No. 60 at ¶ 10. 2. To purchase the Property, the parties obtained a $30,000,000 loan secured by the Property (the “Loan”). Id. 3. CV Golf, LLC, a Tharaldson company, invested $5,000,000, and Tharaldson Financial Group (“TFG”) provided a $4,000,000 subordinate loan for the Property purchase (the “TFG Loan”). Id. 4. KH Capital, a partnership between Knott and Plaintiff, together with other limited partner investors, invested $5,000,000 total in the purchase of the Property. Id. Of the $5,000,000 invested by the partnership, Plaintiff personally invested only $250,000. Jason Halpern Deposition Excerpts attached as Ex. A at 30:9-14. 5. Plaintiff, Knott, and Tharaldson also signed personal guaranties for $30,000,000 to the lender to obtain the Loan. ECF No. 60 at ¶ 11. 6. Because of the recession and the nationwide downturn in the real estate market, the value of the Property dropped significantly, and in 2008, the FDIC seized control of the lender for the Loan and of the Loan itself, and sold the Loan to FNBN-CMLCON I LLC, c/o SGH FNB Ventures, LLC, c/o Sorenson Group Management (“FNBN-CMLCON”), at an FDIC auction on or about December 31, 2008. Id. at ¶ 13. 7. After FNBN-CMLCON acquired the Loan, in December 2009, Knott and Tharaldson negotiated a loan modification with FNBN-CMLCON and signed a term sheet to reduce the principal loan balance to $15,000,000. Don Cape Deposition Excerpts attached as Ex. B at 17:7-25:25; Ex. C. Because FNBN-CMLCON was concerned about the potential tax implications of reducing the principal balance, the execution of final documents for the modification was delayed. Ex. B at 17:7-25:25. Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 7 of 32 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP 8. In the meantime, Knott filed for bankruptcy on September 13, 2010 and was granted a discharge from his liability on the $30,000,000 personal guaranty for the Loan. Ex. D at p. 2. Tharaldson’s and Halpern’s $30,000,000 personal guaranties for the Loan remained in effect. 9. In the summer of 2013, while Tharaldson was still working with FNBN- CMLCON to complete and execute the Loan modification, Knott contacted Tharaldson about a group, which included the Plaintiff, that was interested in purchasing the Loan from FNBN- CMLCON. Ex. B at 17:7-25:25. To that end, in or around December, 2013, Plaintiff formed Las Vegas National Golf, LLC (“LVNG”) as a vehicle to attempt to purchase the Loan for $12,250,000, and began negotiating the purchase of the Loan from FNBN-CMLCON (the “Seller”) in an effort to extinguish his guaranty and revive the opportunity to hopefully develop the Property. ECF No. 60 at ¶ 14; Ex. E at p. 1. Tharaldson’s nearly finalized modification of the Loan took a “back seat” while Plaintiff attempted to purchase the Loan. Ex. B at 17:7- 25:25, 29:14-17. 10. Plaintiff engaged David Friedman (“Friedman”), a real estate lawyer and owner of his own real estate advisory firm, in April or May of 2014 to assist with the negotiation and purchase of the Loan. David Friedman Deposition Excerpts attached as Ex. F at 6:20-7:23, 47:3-6. If Friedman was able to help Plaintiff complete the acquisition of the Loan, Friedman expected a share of the profits from the deal as compensation for his assistance. Id. at 43:10- 46:21. 11. In connection with Plaintiff’s attempt to purchase the Loan and in the event that Plaintiff was able to acquire the Loan, Plaintiff, Knott and Tharaldson considered and began negotiating a “friendly foreclosure.” Ex. G. The friendly foreclosure contemplated that if Plaintiff could acquire the Loan, Plaintiff would foreclose on the Property, CV Golf (Tharaldson’s company) would convey its interest to KH Capital (Plaintiff’s Company), the borrowers, including Tharaldson, would “take no action, directly or indirectly, to delay, hinder or postpone the Foreclosure,” and in exchange, Plaintiff would not sue the guarantors (i.e. Tharaldson) with respect to their obligations under their respective personal guaranties. Id. The Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 8 of 32 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP friendly foreclosure was never finalized or executed and was specific to Plaintiff’s attempt to purchase the Loan on his own. 12. After many months of trying to raise sufficient capital, including fourteen subsequent extensions to the Contract, see Ex. H, Plaintiff was unable to do so and could not acquire the Loan from the Seller. Ex. E at p. 1; ECF No. 1 at ¶ 16. Plaintiff’s final offer to purchase was roughly half of their contract at $6,400,000. Ex. B at 35:6-36:24. Plaintiff’s contract with the Seller was thus terminated. Ex. E at p. 1; ECF No. 60 at ¶ 16. As a result, both Plaintiff’s and Tharaldson’s guaranties remained in effect. 13. Shortly after the contract was terminated, Friedman began trying to negotiate the purchase of the Loan by Tharaldson in an attempt to keep the deal alive. ECF No. 60 at ¶ 17. 14. On February 25, 2015, the Seller filed a notice of default and initiated a judicial foreclosure action on the Loan, listing Plaintiff and Tharaldson personally as defendants. Ex. I at p. 1. 15. Even though Plaintiff was unable to complete the Loan purchase, Tharaldson remained interested in acquiring the Loan in part to release his $30,000,000 personal guaranty and avoid foreclosure by the Seller. To effectuate the purchase, LVNG was transferred to Tharaldson. Tharaldson then successfully acquired the Loan from the Seller through LVNG on March 12, 2015 for a purchase price of $10,000,000. Dkt. 60 at ¶ 17; Ex. D. Upon purchase, Plaintiff’s and Tharaldson’s $30,000,000 personal guaranties of the Loan were released. Ex. J; Ex. B at 49:3-50:14. 16. Friedman had spent a significant amount of time working on and negotiating the failed Loan purchase by Plaintiff. Ex. F at 137:1-141:16. As such, Friedman and Plaintiff requested an opportunity to come back into the deal if Tharaldson was able to purchase the Loan, but Plaintiff needed additional time to raise capital. See Ex. E. Thus, prior to acquiring the Loan, Friedman (on Plaintiff’s behalf) drafted a Side Letter Agreement (the “Side Letter”) between Tharaldson and Plaintiff that gave Plaintiff the option to raise capital and purchase half of the interest in LVNG within 75 days of Tharaldson’s purchase of the Loan. Ex. K; Ex. E at p. 2. Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 9 of 32 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP 17. The Side Letter provided that Plaintiff or his affiliate (“JMH affiliate”) “shall have the right to acquire up to a 50% interest in the Loan through the acquisition of a direct or indirect interest in the holder of the Loan Purchaser, provided on or before the 75th day following the Closing Date (the “Election Period”) (i) JMH Affiliate gives written notice to GT of its intention to acquire such interest, (ii) JMH Affiliate pays Loan Purchaser 50% of the purchase price under the Loan Purchase Agreement together with interest thereon at an annual rate of 8% from the Closing Date through and including the date upon which such payment is made, and (iii) JMH Affiliate reimburses GT 50% of the Reimbursement and the Closing Expenses.” Ex. E at p. 2. 18. The Side Letter further provided that, “In the event JMH Affiliate acquires such 50% interest, GT and JMH (or their respective affiliates) will enter into a joint venture agreement on commercially reasonable terms that will include (i) all decisions and governance with respect to the Loan Purchaser, the Loan, the Property, the budget and the business plan and any all things in connection therewith will require the consent and approval of both GT and JMH (or their respective affiliates), and (ii) a buy/sell provision on commercially reasonable terms in the event GT and JMH are unable to agree on a particular decision, and (iii) pari passu and pro rata capital contributions and returns/distributions to each party.” Id. 19. Plaintiff exercising his option was a condition precedent to the requirement of the parties to negotiate a joint venture agreement on commercially reasonable terms. Id.; Ex. F at 193:11-194:6. 20. The Side Letter further provides, “This letter agreement contains the entire understanding of the parties regarding the subject matter of this letter agreement and supersedes all prior and contemporaneous negotiations and agreements, whether written or oral, between the parties with respect to the subject matter of this letter agreement.” Ex. E at p. 3. 21. The Side Letter is silent regarding details of a business plan, the treatment of the Loan after acquisition, the TFG loan, the Property and the return of original investments made by Plaintiff and Tharaldson to purchase the Property. Id.; Ex. F at 197:18-198:5, 220:25-221:9. There was no agreement as to what LVNG was going to do with the Loan, i.e. LVNG’s only Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 10 of 32 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP asset, after it was acquired and Tharaldson was free to decide what to do with this asset. Ex. F at 197:18-198:5, 204:12-25, 220-223, 292:13-22. Friedman agreed that “foreclosing on the property” was “going to be a decision that would be made by LVNG, id. at 204:20-25, and that “pursuant to this agreement [the Side Letter], if Gary wanted to change his mind [regarding foreclosure], he could.” Id. at 219:22-220:11 and 293:13-22. In the event Plaintiff acquired an interest in LVNG and the parties could not agree on a business plan or other decisions regarding the Loan or Property, Plaintiff or Tharaldson would then “trigger the buy-sell” provision of the Side Letter, which was included in the Side Letter by Friedman. Ex. A at 142:10-143:6, 144:23-145:20; Ex. F at 194:7-195:17, 198:23-201:3. 22. On March 3, 2015, Tharaldson and Plaintiff executed the Side Letter. Ex. E. Because Tharaldson acquired the Loan on March 12, 2015, see Ex. D, Plaintiff had 75 days from that date to exercise his option under the Side Letter. 23. Nearly a month passed after Tharaldson purchased the Loan and Plaintiff’s 75 day option period was triggered with no word from Plaintiff. Then on April 7, 2015, Friedman emailed Don Cape and Joe Blagg (Tharaldson’s employees) for the first time, stating, “Just thought I’d give you an update on the option for the equity. While I can’t give you official notice yet, it looks like we’ll be in for the 50% slug of equity. I hope to be able to give you notice soon. Perhaps, it will make sense for Jason and I to make a trip out to Vegas this month to talk about the project???” Ex. L. Cape responded that same day, “Ok keep us posted.” Id. 24. Two weeks later and with only one month left on the option period, Friedman emailed Cape and Blagg on April 23, 2015, to set up a meeting to “discuss the project.” Ex. M. The meeting did not occur until almost two weeks later on May 4th, which was now only three weeks before Plaintiff’s option period ended. Id. Friedman, a third-party investor named David Saferstein, Cape, and Blagg met at Tharaldson’s office in Las Vegas to “discuss the project.” Id.; Ex. F at 256:10-257:10. Tharaldson and Plaintiff did not attend. Id. 25. At the meeting, Cape raised concerns regarding LVNG’s ability to entitle the Property and shared reference materials citing an Arizona court of appeals opinion that demonstrated the type of opposition they may run into in trying to entitle and develop the Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 11 of 32 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP Property. Ex. B at 105:15-106:20. To follow-up on that discussion, Cape sent Friedman the opinion referenced in the meeting, Ex. N, which had actually been provided originally by Knott, Plaintiff’s partner, in 2007. Ex. O. Both Plaintiff and Friedman admit that without entitlements, the Property could not be developed and the value would remain low. Ex. F at 105:21-107:9; Ex. A at 262:7-24. Entitlements were a “risk,” were not a definite eventuality, and Plaintiff stated he was “speculating…to a degree…because…it is a lengthy challenging entitlement process.” Exs. N, P, and Q; Ex. A at 76:12-77:9; 185:3-19. 26. On May 14, and only twelve days before the option period expired, Friedman emailed Cape and Blagg, stating “We are interested in moving forward with exercising our option and believe that May 26 is the date by which we would have to close. (Of course, there is no obligation unless and until we have documents acceptable to us….).” Ex. R at p. 1. The “documents” Friedman was referring to are an operating agreement/joint venture agreement. Ex. A at 236:13-24. The Side Letter, however, did not require the parties to negotiate the terms of a joint venture until after Plaintiff gave notice, paid 50% of the Loan purchase price, and 50% of the reimbursement and closing expenses. Ex. E at p. 2. 27. Cape responded to Friedman that same day that “it was going to be very challenging to get this papered prior to closing and it would need to start asap so waiting another 10 days to hear back from you is making this even harder to get papered…Gary told me that the 75 days was plenty of time for this to happen so I’m not sure how to have any partnership documents inked ahead of the required funding date. I really wished you wouldn’t have waited until the last minute as it is going to be extremely difficult…” Ex. S at p. 1. 28. Friedman forwarded Cape’s email to Plaintiff, and stated, “We are well within our rights to exercise the option and send a document to them that we’d be willing to sign.” Id. Plaintiff opted not to exercise the option at that time and instead responded to Friedman, “We need to push.” Id. 29. Friedman then responded directly to Cape, continued to push on the deal and offered that the parties could take additional time if needed to get the deal done. Ex. T at p. 1-2. /// Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 12 of 32 H ol la nd & H ar t L LP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 an F 1 th th in in G $ fo P w ea // 30. d Plaintiff] riedman a su 37:9. 31. e Property ( e sale: (1) $ terest; (2) $ terest on th olf’s equity 250,000 for r a 5% pre laintiff and C 32. hat we agre ch party.” / In an effo ” before clo mmary of d As shown including w 10,300,000 2,635,000 e TFG loan; from the or the return o ference; an V Golf. Ex Friedman ed to - par Ex. V. rt to facilita sing and in r eal fundam above, the ater rights) to Plaintiff for the rem (4) $800,00 iginal Prope f Plaintiff’s d (6) 50/50 . U. responded t i passu and 8 te Friedman esponse to F entals. Ex. deal fundam and the follo and Tharald aining princ 0 for entitle rty purchas equity from split of th hat the pro pro rata ca ’s request riedman’s r U; Ex. B at entals assu wing propo son to com ipal of the ments; (5) e, plus $2,5 the origina e remainin posed deal pital contrib for “docume equest, see 118:12-18, med a $33, sed disburs pensate for TFG loan; (a) $5,000,0 00,000 for a l Property p g revenue fundamenta utions and nts accepta Ex. R at p. 1 124:12-126: 910,000 sal ement of pro the Loan pu (3) $1,700, 00 for the re 5% prefere urchase, plu from the sa ls did not “ returns/dist ble to [him , Cape sent 17, 136:21- es price for ceeds from rchase plus 654 for 5% turn of CV nce and (b) s $125,000 le between seem to be ributions to Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 13 of 32 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP 33. Friedman and Plaintiff both understood pari passu and pro rata to mean that each party receives capital returns and profit distributions “at the same time” “in accordance with their percentage of interest…in the entity.” Ex. F at 206:25-207:25; Ex. A at 117:13-118:13. 34. Friedman and Plaintiff contend that the proposed deal fundamentals breached the pari passu and pro rata capital contributions provision of the Side Letter because Tharaldson proposed to recover the outstanding TFG loan amount, which they allege was a “priority return” to Tharaldson. ECF No. 1 at ¶¶ 34-35. They also allege that recovering the TFG loan amount violated the Side Letter because the parties had agreed to foreclose on the Loan, which they argue would extinguish the subordinate TFG loan and Tharaldson would not be able to recover the outstanding TFG loan amount. Ex. F at 294:20-295:25, 307:21-308:12; Ex. A at 252-257. However, when Friedman drafted the Side Letter, he was aware of the TFG loan, but failed to include anything in the Side Letter with respect to the TFG loan. Ex. F at 220:25-221:9. 35. With the option expiration rapidly approaching, the parties agreed to extend the Side Letter and continued negotiating the terms of a joint venture or a buy-out of Tharaldson’s interest per the Side Letter. See Exs. W, X, and Y. 36. Thereafter, on June 15, 2015 and having gotten no closer to an agreement on an operating agreement/joint venture agreement, Tharaldson offered that Plaintiff could buy him out of the $18M total principle he had invested in the Property ($10.3M loan purchase and accrued interest, $5M equity and $2.7M mezzanine debt and accrued interest) with the following conditions: $15M total purchase, $7M due at Closing Date, $8M Senior Loan with First Deed of Trust, 3 year term, 1st year accrual due at end of 3 year term, 2-3 years interest due and payable monthly, Rate 8%. Ex. Z at p. 2. 37. Plaintiff rejected this offer, id. at p. 1, and has alleged that this “offer” indicated Tharaldson “would not cooperate, would fight having to enter into a joint venture with Halpern, and, if forced, would fight Halpern on every term in a joint venture agreement.” ECF No. 1 at ¶ 37. /// /// Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 14 of 32 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP 38. The parties never agreed on a deal, Plaintiff never paid 50% of the Loan purchase price or 50% of the reimbursement and closing expenses, and Plaintiff never exercised his option to obtain an interest in LVNG. Ex. AA at p. 4; Ex. F at 191:1-194:6. 39. Plaintiff filed his notice of removal and the complaint in this case asserting three claims against Tharaldson, ECF No. 1, two of which were dismissed by this Court. ECF No. 55. Plaintiff’s only remaining claim is for anticipatory breach. Id. 40. Discovery in the case is now closed, and the expert deadlines have passed. ECF Nos. 34 and 48. Plaintiff did not disclose any experts in this case. 41. In his initial disclosures, Plaintiff disclosed that his computation of damages equaled $20 million, plus interest, “attributable to a lost business deal.” Ex. BB at p. 4. Plaintiff did not and has not disclosed any other categories of damages. 42. In his “Second Supplemental Discovery Disclosures Pursuant to Fed. R. Civ. P. 26(a)(1),” Plaintiff revised his damages estimate and asserted that he is entitled to “$12 million plus interest, attributable to a lost business deal.” He explained that “[t]he $12 million is calculated based on fifty (50) percent of the $24 million value of the property provided for in Section 1.2 of the Purchase and Sale Agreement [with DR Horton], which is disclosed concurrently herewith.” Ex. CC at p. 4. 43. A month and a half later, based on the same “DR Horton agreement” attached to his second supplemental disclosures, Plaintiff stated in response to Interrogatory 11 that his “damage claim is based on the $28 million value of the DR Horton agreement together with the $4-6 million approximate value of the water rights less the pay off of the senior note.” Ex. DD at p. 7. However, Plaintiff testified in his deposition that an assumed $34,000,000 sales price, which is now apparently the basis for his damages claim, was “absurd” because “[i]t [the Property] is not worth that much.” Ex. A at 255:9-16. Plaintiff also never supplemented his prior disclosures to reflect this “new” calculation of his damages, nor did Plaintiff ever disclose a revised amount of his damages. 44. The DR Horton agreement referenced in Plaintiff’s disclosures and interrogatory responses is unenforceable, Ex. F at 104:7-25, and there is nothing in the record from DR Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 15 of 32 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP Horton to suggest that this deal was available in May or June 2015, or is presently available. Ex. F at 116:17-117:6. Further, Friedman testified that the DR Horton agreement was only an indication of value “with certain contingencies [being] satisfied…[such as] the entitlements.” Id. at 156:18-157:4. The DR Horton agreement also mandated several conditions (acquire the note, get title to the Property, and entitle the Property), none of which were satisfied. Id. at 105:21-106:7 and 116:17-117:6. III. STANDARD OF REVIEW Summary judgment is appropriate where the pleadings and the evidence show that no genuine issue of any material fact exists and that the moving party is entitled to a judgment as a matter of law. See Fed. R. Civ. P. 56(a). “When the nonmoving party bears the burden of proving the claim or defense, the moving party can meet its burden in two ways: (1) by presenting evidence to negate an essential element of the nonmoving party’s case; or (2) by demonstrating that the nonmoving party failed to make a showing sufficient to establish an element essential to that party’s case on which that party will bear the burden of proof at trial.” Aevoe Corp. v. AE Tech. Co., 40 F. Supp. 3d 1351, 1355 (D. Nev. 2014) (citing Celotex Corp. v. Catrett,477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). “If the moving party satisfies its initial burden, the burden then shifts to the opposing party to establish that a genuine issue of material fact exists.” Id. at 1356 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). IV. ELEMENTS OF THE CLAIM Under New York Law, in order to prevail on a breach of contract claim, a plaintiff must prove (1) the existence of a contract, (2) breach of the contract by the defendant, and (3) damages suffered as a result of that breach. RIJ Pharm. Corp. v. Ivax Pharms., Inc., 322 F. Supp. 2d 406, 412 (S.D.N.Y. 2004).1 1 The elements of a breach of contract claim and anticipatory breach are the same under Nevada law. Saini v. Int’l Game Tech., 434 F.Supp.2d 913, 919-920 (D. Nev. 2006) (citing Richardson v. Jones, 1 Nev. 405, 405 (Nev. 1865)) (breach of contract); Covington Bros. v. Valley Plastering, Inc., 566 P.2d 814, 817 (Nev. 1977) (anticipatory breach). Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 16 of 32 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP “An anticipatory repudiation occurs when a party to the contract (1) states that he cannot or will not perform his obligations, or (2) commits a voluntary affirmative act that renders the obligor unable or apparently unable to perform his obligations.” In re Asia Glob. Crossing, Ltd., 326 B.R. 240, 249 (Bankr. S.D.N.Y. 2005). “For a statement to constitute an anticipatory breach, the announcement of an intention not to perform [must be] positive and unequivocal,” Argonaut P’ship, L.P. v. Sidek, S.A. de C.V., No. 96 Civ. 1967(MBM), 1996 WL 617335, at *5 (S.D.N.Y. Oct. 25, 1996) (internal citation and quotations omitted), and “a plaintiff must identify an overt communication of intention not to perform.” Lau v. Mezei, No. 10 CV 4838, 2011 WL 4501942, at *3 (S.D.N.Y. Sept. 29, 2011) (internal quotations and citations omitted). “A clear manifestation of an intention not to perform, communicated in advance of the time for performance, is critical to establishing that a party has anticipatorily repudiated its performance.” Id (emphasis in original). V. ARGUMENT Tharaldson is entitled to summary judgment on Plaintiff’s anticipatory breach claim because Plaintiff cannot establish two essential elements of his claim. First, Tharaldson never communicated a positive and unequivocal repudiation of the Side Letter. Second, Plaintiff’s alleged damages are speculative as a matter of law. For these reasons, the Court should grant Tharaldson summary judgment on Plaintiff’s anticipatory breach claim. A. There Was No Anticipatory Breach of the Side Letter To succeed on his claim for anticipatory breach, Plaintiff must allege and prove that Tharaldson positively and unequivocally announced his intention not to perform his obligations under the Side Letter. Argonaut P’ship, 1996 WL 617335 at *5 (internal citation and quotations omitted). Plaintiff alleges that Tharaldson communicated his intention not to perform by requiring joint venture terms that contradicted the terms agreed to in the Side Letter. Specifically, Plaintiff contends that the deal fundamentals proposed by Tharaldson on May 15, 2015, and the buy-out offered on June 15, 2015, demonstrated that if Plaintiff exercised his option, Tharaldson would not negotiate a joint venture agreement to include “pari passu and pro Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 17 of 32 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP rata capital contributions and returns/distributions to each party” because Tharaldson was seeking to recover the principal and interest from the TFG loan. Statement of Facts, ¶ 34. Interpreting the plain language of the contract and its actual terms, Tharaldson’s communications to Plaintiff were consistent with the Side Letter and did not positively or unequivocally repudiate any future obligation by Tharaldson. Plaintiff’s claim rests solely on terms that either contradict or are not included in the Side Letter. Because Plaintiff’s additional terms should not be implied into the Side Letter, Plaintiff’s claim must fail. 1. Tharaldson Did Not Express A Positive Or Unequivocal Repudiation The terms proposed by Tharaldson were consistent with the Side Letter, and as such, there was no positive or unequivocal repudiation of Tharaldson’s obligations. See Towers Charter & Marine Corp. v. Cadillac Ins. Co., Inc., 708 F.Supp. 612, 614 (S.D.N.Y. 1989) (where a defendant’s actions are consistent with obligations and rights under an agreement, there is no anticipatory breach and summary judgment is appropriate); see also In re Best Payphones, Inc., 432 B.R. 46 (S.D.N.Y. 2010). Plaintiff alleges that Tharaldson’s proposed joint venture terms violated the Side Letter’s requirement that the parties’ future joint venture would provide for “pari passu and pro rata capital contributions and returns/distributions to each party.” Friedman and Plaintiff both understood this to mean the parties would receive the return of capital contributions into LVNG at the same time proportional to their interest in LVNG, and profit distributions from LVNG at the same time proportional to their interest in LVNG. Statement of Facts, ¶ 33. This is precisely what Tharaldson proposed on May 15, 2015 and continued to propose thereafter. In the event of a sale of the Property, Tharaldson proposed the proceeds would first reimburse the parties for the $10,000,000 million they paid to acquire the Loan, plus interest (i.e. the capital contribution into LVNG). Id. at ¶ 31. Tharaldson next proposed to pay necessary liabilities and expenses, i.e. the TFG Loan principle and interest and costs to entitle the Property. Id. Next Tharaldson proposed both parties recover the equity they invested originally to acquire the Property - $5,000,000 equity for Tharaldson and $250,000 for Plaintiff, plus a 5% preference for both. Id. And last, Tharaldson proposed that the remaining proceeds Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 18 of 32 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP would be split by the parties 50/50 (i.e. LVNG’s profit distributions). Id. Tharaldson thus proposed an equal return of the capital invested in LVNG, and an equal distribution of profit at the same time. This is consistent with the Side Letter. As such, Plaintiff cannot support its claim for anticipatory breach. See Towers Charter & Marine Corp., 708 F.Supp. at 614. Assuming arguendo that the proposed terms were inconsistent with the Side Letter, this is not enough to establish a claim for anticipatory breach. While repudiation “can consist of an attempt to advance an unwarranted interpretation of the contract or an indication that the renouncing party will perform only if certain ‘extracontractual’ conditions are satisfied,” “a demand for more than the contract calls for is not in itself a repudiation however.” In re Best Payphones, Inc., 432 B.R. at 54-57. “Courts apply a stringent standard in determining whether the test for repudiation is met, and have generally required repeated insistence on extra- contractual terms; repeated, definite and absolute expressions of an unwillingness to perform; use of language such as ‘termination,’ which conveys finality; or conduct by the allegedly repudiating party that has rendered performance impossible for impracticable.” Id. at 56 (emphasis added). Merely proposing allegedly inconsistent terms, rather than insisting on allegedly inconsistent terms, is not sufficient to support a breach claim. See IDT Corp. v. Tyco Grp., S.A.R.L., 23 N.Y.3d 497, 501 (N.Y. 2014) (“IDT Corp. II”) (citing IDT Corp. v. Tyco Grp., 13 N.Y.3d 209, 214 (N.Y. 2009) (“IDT Corp. I”)). In In re Best Payphones, the court found that the “stringent standard” for repudiation was not met. 432 B.R. at 58. Best Payphones, Inc. (“Best”) argued that Manhattan Telecommunications Corp. (“MetTel”) anticipatorily breached an agreement by sending a final disconnect notice and demanding payment of unrelated judgment. Id. at 53-54. Best pointed to the first paragraph of the notice, which stated in part, “This is a final disconnect notice.” Id. at 55. However, the Bankruptcy Court found, and the reviewing court agreed, that the disconnect notice invited further discussion and left open the prospect of continued service. Id. at 58. The court stated, “An invitation to engage in a dialogue about the disconnect notice does not convey finality,” and “a mere assertion that the party will be unable or will refuse to perform his Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 19 of 32 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP contract is not sufficient [to establish repudiation].” Id. (internal quotations and citations omitted). In IDT Corp. I, the court found there was no breach where the allegedly breaching party did not “insist” on inconsistent terms. The parties entered into a settlement agreement that contemplated the occurrence of numerous conditions, including the negotiation and execution of four additional agreements. IDT Corp. I, 13 N.Y.3d at 214. IDT alleged that Tyco breached the terms of the settlement agreement when it proposed an IRU (one of the four additional agreements contemplated in the settlement agreement), which contained terms that were allegedly inconsistent with the settlement agreement. Id. at 213. The Court held that Tyco did not breach the settlement agreement “by merely proposing an IRU which allegedly contained terms inconsistent with settlement.” Id. at 214. IDT Corp. II confirmed that Tyco did not breach “its obligation merely by proposing (as distinct from insisting upon) terms allegedly inconsistent with the Settlement Agreement.” IDT Corp. II, 23 N.Y.3d at 501. IDT Corp. II also emphasized that while “parties may enter into a binding contract under which the obligations of the parties are conditioned on the negotiation of future agreements…that obligation can come to an end without a breach by either party. There is such a thing as a good faith impasse.” Id. at 502-503. Like In re Best Payphones and IDT Corp. I, the parties’ interactions here demonstrate that there was no insistence on allegedly inconsistent terms, no finality and no “distinct and absolute refusal to perform the promise.” The parties continued to engage in a dialogue about the terms of a potential joint venture (which Tharaldson had no obligation to do, see infra), or alternatively a buy-out of Tharaldson’s interest, for nearly three months until the negotiations finally reached an impasse. Tharaldson did not repeatedly insist on extra-contractual or inconsistent terms nor did he ever express an absolute unwillingness to perform. And Tharaldson never indicated that he would not abide the terms of the Side Letter if Plaintiff exercised the Option. As such, Plaintiff’s claim cannot meet the stringent standard for repudiation and the claim fails as a matter of law. /// Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 20 of 32 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP 2. Plaintiff’s Claim Is Based On Terms Not Contained In The Side Letter Upon closer examination, Plaintiff’s anticipatory breach claim is actually premised on additional terms not contained in the Side Letter. This is improper and cannot sustain his claim. Collard v. Incorporated Village of Flower Hill, 52 N.Y.2d 594, 603-04 (N.Y. 1981) (“Where language has been chosen containing no inherent ambiguity or uncertainty, courts are properly hesitant, under the guise of judicial construction, to imply additional requirements to relieve a party from asserted disadvantage flowing from the terms actually used.”); IDT Corp. I,13 N.Y.3d at 214 (“[A] contract is to be construed in accordance with the parties’ intent, which is generally discerned from the four corners of the document itself. Consequently, a written agreement that is complete, clear and unambiguous on its face must be enforced according to plain meaning of its terms.”) (internal quotations and citations omitted). Plaintiff attempts to add a condition precedent to his obligation to exercise the Option - an obligation for the parties to negotiate a joint venture agreeable to Plaintiff. The Side Letter, however, explicitly provides that the parties were obligated to negotiate a joint venture agreement only after Plaintiff exercised his option. Statement of Facts, ¶ 19. Friedman acknowledged this much when he said to Halpern “we are well within our rights to exercise the option…” Id. at ¶ 28. Rather than exercise the Option when he had a right to do so, Plaintiff attempted to add a new requirement to exercising the Option stating, “Of course, there is no obligation [to exercise the Option] unless and until we have document acceptable to us.” Id. at ¶ 26. Exercising the option was a condition precedent to this obligation and the Option was not conditioned on “documents acceptable” to Plaintiff. Plaintiff’s insistence on this new term is improper and the court should decline to imply this additional requirement into the Side Letter. Collard, 52 N.Y.2d at 603-604. Plaintiff is also trying to include additional terms in the Side Letter regarding the TFG Loan through the pari passu/pro rata clause. In the proposed deal fundamentals, Tharaldson proposed repaying the principal and interest of the TFG Loan. Plaintiff claims that this was “not the deal” because Tharaldson had agreed to foreclose on the Property and wipe out the TFG Loan through a friendly foreclosure. Statement of Facts, ¶ 34 (Ex. A at 252-257). But the Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 21 of 32 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP Side Letter is silent regarding the treatment of the TFG Loan or a foreclosure, which Plaintiff admits. Id. at ¶ 21. Friedman drafted the Side Letter on Plaintiff’s behalf, id. at ¶ 16, and could have included terms in the Side Letter specifying these details, but he failed to do so. The Court should not imply these terms, Collard, 52 N.Y.2d at 603-604, and without them, Plaintiff’s claim must fail because Tharaldson’s proposed joint venture terms did not violate any term of the Side Letter. See Towers Charter, 708 F.Supp. at 614. Indeed, the Side Letter provides that only after Plaintiff exercised his option and acquired an interest in LVNG, the parties would then negotiate a joint venture agreement and “all decisions and governance with respect to the Loan Purchaser, the Loan, the Property, the budget and the business plan and any all things in connection therewith will require the consent and approval of both GT and JMH (or their respective affiliates).” Statement of Facts, ¶ 18. In the event the parties were not able to agree on decisions and governance relating to any of these items, the parties could take advantage of the buy-sell provision. Statement of Facts, ¶¶ 18, 21. Nowhere does the Side Letter state that the parties have already agreed to foreclose on the Property and wipe out the TFG Loan. Id. at ¶ 21. Plaintiff and Friedman both admitted that if after acquiring the interest in LVNG, Tharaldson changed his mind and refused to foreclose on the Property as he had a right to do, they would have exercised the buy/sell provision of the Side Letter. Id. It is undisputed that decisions relating to the business plan and the Property, including whether to foreclose and wipe out the TFG loan or any other plan, were to be agreed to by LVNG, and that there was a contractual mechanism available to Plaintiff if the parties could not agree on how to proceed - the buy/sell. Id. If anyone was insisting on inconsistent or extracontractual terms, it was Plaintiff, not Tharaldson. Moreover, the Side Letter states explicitly, “This letter agreement contains the entire understanding of the parties regarding the subject matter of this letter agreement and supersedes all prior and contemporaneous negotiations and agreements, whether written or oral, between the parties with respect to the subject matter of this letter agreement.” Id. at ¶ 20. The Side Letter thus superseded any alleged prior agreements and contained the entire understanding of Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 22 of 32 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP the parties. The court should decline to imply additional terms not included in the Side Letter. Without these additional terms, Plaintiff’s claim must fail. As the undisputed facts demonstrate, Plaintiff is improperly asking the court to imply and add several terms to the Side Letter to support his anticipatory breach claim. Plaintiff’s exercise of the option was not conditioned on receiving documents acceptable to him, and Tharaldson was under no obligation to provide Plaintiff with proposed joint venture terms prior to Plaintiff exercising his option. Further, in the Side Letter, the parties did not agree to foreclose on the Property, Tharaldson did not agree to walk away from the deficiency on the TFG Loan, and all prior agreements regarding foreclosure or otherwise were disclaimed and superseded. Thus, the deal fundamentals proposed by Tharaldson were consistent with the Side Letter, and Tharaldson never expressed a positive, unequivocal intent to repudiate any obligations under the Side Letter. And it is Plaintiff, not Tharaldson, who was trying to add terms not contained in the Side Letter. The Court should therefore grant Tharaldson summary judgment on Plaintiff’s anticipatory breach claim. B. Plaintiff Is Not Entitled to Recover Lost Profits Plaintiff has asserted only lost profit damages in this case. Under New York Law, in order to recover lost profits damages, Plaintiff must show that “the lost profits (1) were caused by the breach, (2) are capable of proof with reasonable certainty and (3) were within the contemplation of the parties at the time that the contract was made.” Benderson Dev. Co. Inc. v. United States Postal Serv., No. 91-CV-0794E(M), 1998 WL 214741, at *6 (W.D.N.Y. Apr. 27, 1998) (citing Ashland Mgmt Inc. v. Janien, 82 N.Y.2d 395, 403-404 (1993)). Plaintiff cannot satisfy the second or third factor required to prove lost profit damages. Because damages are an essential element of Plaintiff’s claim and Plaintiff cannot prove this element, Tharaldson is entitled to summary judgment. 1. Plaintiff’s Damages Are Not Capable of Proof with Reasonable Certainty To recover lost profits, a “plaintiff must establish [both] the existence and the amount of lost profits with reasonable certainty…” Summit Properties Int’l LLC v. Ladies Prof’l Golf Ass’n, No. 07 Civ. 10407, 2010 WL 2382405, at *2 (S.D.N.Y. June 14, 2010) (emphasis Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 23 of 32 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP added). Lost profits damages cannot be based on speculative assumptions. Id. “[W]here the existence of lost profits rests on a multitude of assumptions, the plaintiff has failed to establish the existence of lost profits to a reasonable certainty.” Id. at *3; see also Kidder, Peabody & Co., Inc. v. IAG Int’l Acceptance Grp. N.V., 28 F. Supp. 2d 126, 134 (S.D.N.Y. 1998) (“[A] claimant cannot establish lost profits with the law’s requisite certainty where its calculation is dependent upon a host of assumptions concerning uncertain contingencies, and applies numerous variables about which an expert can only surmise.”) Plaintiff cannot meet the reasonable certainty requirement for two reasons. First, Plaintiff himself cannot decide how to measure his lost profits damages. He first alleged that his damages totaled $20 million plus interest, without any support. Statement of Facts, ¶ 41. He then stated his damages totaled $12 million plus interest based on 50% of the $24 million value of the Property provided for in the non-binding, unenforceable agreement with DR Horton. Id. at ¶¶ 42, 44. He finally asserted his damage claim is based on the $28 million value of the DR Horton agreement (the same agreement he previously stated was valued at $24 million) together with the $4-6 million approximate value of the water rights less the pay-off of the senior note, without specifying an actual dollar amount of damages. Id. at ¶ 43. Plaintiff has never explained how his damages claim changed in reliance on the same DR Horton agreement, and Plaintiff has offered no expert testimony or opinion to support his damages claim. Further, Plaintiff himself testified that a $34 million sales price, on which he is apparently now basing his damages claim, is “absurd” and the Property is “not worth that much.” Id. This evinces the speculative and unsupported nature of Plaintiff’s damages. Second, irrespective of which calculation Plaintiff ultimately pursues, any calculation must fail because it is based on several hypothetical, speculative assumptions. The calculations assume that: (1) Plaintiff would exercise his option and acquire the interest in the Loan; (2) the parties would negotiate and agree to a foreclosure, whereby Tharaldson would walk away from the outstanding balance on the TFG Loan and his prior equity investment, and LVNG would thereby obtain title to the Property; Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 24 of 32 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP (3) LVNG would complete entitlements to convert the Property into residential homes; and (4) the parties would find an interested buyer and sell the Property and water rights at a profit. A review of several cases demonstrates that assumptions (2), (3) and (4) are speculative as a matter of law. For example, in Kenford Co., Inc. v. Cty. of Erie, 67 N.Y.2d 257 (N.Y. 1986) (“Kenford I”), the County of Erie breached an agreement to construct a domed athletic stadium that gave Kenford the right to manage the stadium for a 20-year period. The stadium was never constructed, and Kenford sought to recover lost profits largely from income it would have received from managing the stadium during the 20-year period had the stadium been built. Id. at 262. The court reversed the award of lost profits, in part, because the assumptions upon which the damages relied were uncertain. For example, Kenford’s damages “assumed that the facility was completed, available for use and successfully operated for 20 years, providing professional sporting events and other forms of entertainment…” Id. The court held that “the multitude of assumptions required to establish projections of profitability over the life of this contract require speculation and conjecture, making it beyond capability of even the most sophisticated procedures to satisfy the legal requirements of proof with reasonable certainty.” Id. Similarly, in Summit Tax Exempt L.P. II v. Berman, No. 88 Civ. 5839, 1989 WL 152796 (S.D.N.Y. July 19, 1989), the plaintiff alleged that the defendants breached an agreement that required the defendants to make improvements on a residential rental development. One of the defendants counterclaimed against the plaintiff alleging that the plaintiff breached by failing to provide financing and demanded to recover profits it would have earned from renting apartments which were never built because of the failure to provide financing. Id. at *1. The court found the damages were “utterly fanciful” and rested on “a large number of uncertain events and projections,” including but not limited to “(1) that he was unable to obtain an alternative source of the $15,000,000 financing… (3) that [defendant] would have been able to complete on schedule the initial 500 units in accordance with the terms of the Agreement and Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 25 of 32 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP the subsequent 1,700 units; ... (5) that all units could be constructed at [defendant’s] current cost projections; (6) that the [project] would be capable of sustaining a 95% occupancy rate over a 30 year period; ... and (8) that operating expenses would remain constant over a 30 year period.” Id. at *7. The court dismissed the counterclaim because it asserted only speculative lost profits. Id. In Benderson, the plaintiff acquired a piece of property and offered to sell a portion of the property to the Postal Service, subject to certain restrictions which would preserve its ability to lease other property space to retail tenants following the sale of the property. 1998 WL 214741 at *1. The Postal Service deviated from those restrictions and the plaintiff sought the profits it lost from being unable to rent space to other retail clients. Id. at *3, *6. The court held that the plaintiff’s damages were speculative as a matter of law because plaintiff could not prove his lost profits with reasonable certainty. Id. at *6. The court noted that the calculations were based on the assumption that the property would have been fully leased within 18 months of the Postal Service’s breach if the Post Office had not been constructed in violation of the Restrictions. Id. The court found this assumption was too speculative to form the basis for an award of lost profits because it was based exclusively on the opinion of the plaintiff’s president, and plaintiff did not come forth with any specific evidence, expert or otherwise, to support this assumption. Id. Finally, in RSB Bedford Assocs. LLC v. Ricky’s Williamsburg, Inc., 977 N.Y.S.2d 236 (N.Y. App. Div. 2013), a prospective landlord attempted to close on a contract to purchase a building, but was unable to do so because of the defendants’ repudiation of the agreement to lease space therein. The prospective landlord sought lost profits to compensate for his inability to sell the building at a later time in the future. Id. at 237. The court held, “Lost profits from the sale of the building, which plaintiff never owned, at some point in the indefinite future to an unknown purchaser are patently speculative.” Id. at 237-38; see also Vestar Dev. II, LLC v. Gen. Dynamics Corp., 249 F.3d 958, 962 (9th Cir. 2001) (where plaintiff sought “future profits that it hoped to earn from the shopping center it had planned to build on a parcel it was Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 26 of 32 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP attempting to buy,” the court held, “There is no way to evaluate other than through speculation, the profits that it might have made.”) Like the cases cited above, Plaintiff’s lost profits rest on multiple assumptions that require speculation and conjecture. The first key to Plaintiff’s lost profits calculation is Assumption (2) - that the parties would agree to foreclose on the property. However, as the undisputed facts show, the parties did not agree to a foreclosure, Tharaldson did not agree to walk away from the TFG Loan or his prior investment in the Property, and Tharaldson could change his mind regarding a foreclosure. Statement of Facts, ¶ 21. Indeed, if Tharaldson did not agree to a foreclosure, Plaintiff, by his own admission, could have and would have exercised the buy/sell provision of the Side Letter. Id. Assumption (2) is thus speculative and not supported by any credible evidence. There is also no credible evidence or expert testimony to support that LVNG or any other entity could complete entitlements, which was critical to developing the Property and realizing a profit. Both Plaintiff and Friedman admitted this much and testified that without entitlements, the Property could not be developed and the value would remain low. Id. at ¶ 25. The record further supports that entitlements were a hurdle and not a definite eventuality. For example, Don Cape noted these difficulties in numerous emails. Id. And Friedman acknowledged that the DR Horton agreement was only an indication of value “with certain contingencies [being] satisfied…[such as] the entitlements.” Id. Plaintiff’s only support for Assumption (3) is an alleged conversation Friedman had with the commissioner, whose name he could not remember and on a date he could not remember,2 during which the commissioner allegedly indicated that she would not be against the entitlements. This hearsay evidence cannot bar summary judgment. Rodriguez v. First President, Inc., 771 N.Y.S.2d 368, 369 (N.Y. App. Div. 2004) (“Although hearsay evidence may be considered in opposition to a motion for summary judgment, it is insufficient to bar summary judgment if it is the only evidence submitted”). Assumption (3) is thus hypothetical and speculative. 2 Tharaldson gave Plaintiff a chance to supplement the record with the name of the commissioner and the date of this alleged meeting. No such information has been provided and discovery has now closed. Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 27 of 32 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP And last, the damages calculation rests entirely on a non-binding, unenforceable agreement with DR Horton for the sale of a piece of property which Plaintiff did not own. Friedman admitted in his deposition that the agreement was unenforceable, and there is nothing in the record from DR Horton to suggest that this deal was available in May or June 2015, or is presently available. Statement of Facts, ¶ 44. Indeed, Friedman admitted in his deposition that the three conditions of the agreement with DR Horton (acquire the note, get title to the Property, and entitle the Property) were not satisfied. Id. As the courts found in RSB Bedford and Vestar Development, a hypothetical opportunity to sell a property in the future, which the Plaintiff does not even own, is patently speculative. See RSB Bedford, 977 N.Y.S.2d at 237-38; Vestar Dev., 249 F.3d at 962. Moreover, Plaintiff has not provided any expert testimony to support the projected value of the Property and the water rights after entitlements (which Plaintiff has himself admitted is an “absurd” number). Assumption 4 is therefore also speculative as a matter of law. See Kidder, Peabody & Co., Inc. 28 F. Supp. 2d at 134 (damages are speculative where expert testimony is necessary to explain variables and no such testimony is provided). Plaintiff therefore cannot prove his lost profit damages with requisite certainty. 2. Lost Profits Were Not Within The Contemplation Of The Parties Plaintiff cannot show that his alleged lost profits were “within the contemplation of the parties as a probable result of a breach at the time of or prior to contracting.” Kenford Co., Inc. v. Cty. of Erie, 73 N.Y.2d 312, 319 (N.Y. 1989) (“Kenford II”) (internal citations and quotations omitted). “In determining the reasonable contemplation of the parties, the nature, purpose and particular circumstances of the contract known by the parties should be considered…as well as what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it assumed, when the contract was made.” Id. (internal citations and quotations omitted). In Kenford II, the court concluded that the plaintiff could not show that the parties had contemplated plaintiff’s alleged lost profits at the time of contracting. Plaintiff sought to recover lost profits based on the anticipated increase in the value of land surrounding a domed athletic stadium that was supposed to be built but which was cancelled by the County. The Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 28 of 32 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP court first noted that the parties’ contract did not specifically provide for this remedy, nor did it suggest “such a heavy responsibility on the part of the County.” Id. at 320. In the absence of such a provision, the court considered “what the parties would have concluded had they considered the subject.” Id. (emphasis in original). The court found that although “the County was aware that [plaintiff] had acquired and intended to further acquire peripheral lands, this knowledge, in and of itself, is insufficient as a matter of law to impose liability on the County...” Id. The court further found that the plaintiff undoubtedly “purchased the peripheral lands in question with the hope of benefitting from the expected appreciation in the value of those lands…[but] [i]n doing so, [plaintiff] voluntarily and knowingly assumed the risk that, if the stadium were not built, its expectations of financial gain would be unrealized.” Id. Likewise, in Goodstein Const. Corp. v. City of New York, 80 N.Y.2d 366 (N.Y. 1992), the court again found that plaintiff’s alleged lost profits were not within the contemplation of the parties. In Goodstein, the parties entered into two letter agreements for the development and construction of two real estate sites. Id. at 368-370. Per the agreements, the plaintiff was designated to exclusively negotiate the terms and conditions of the land disposition agreement (“LDA”) with another entity. Id. Any binding obligation on the defendant “was to be contingent upon the fulfillment of various legal requirements…” Id. at 369. The defendant later notified plaintiff that it had been dedesignated as the exclusive negotiator for the sites and the parties never concluded an LDA. Id. at 369-370. The plaintiff filed suit and sought nearly $800 million in lost profits damages. The defendant argued that the “loss of profits based on fulfillment of the terms of the contract being negotiated could not have been reasonably contemplated as damages for a breach of the agreement to negotiate those very contractual terms.” Id. at 374. The court agreed, and found that to “allow plaintiff loss of anticipated profits of some $800 million, based on the hypothesized successful completion of the proposed improvements…would have the anomalous effect of holding the [defendant] responsible as guarantor, under a proposed LDA to which neither party agreed, for the profits from the projected improvements which plaintiff would never have to construct.” Id. The court further Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 29 of 32 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP declared it was “simply not conceivable” that the defendant could have contemplated that it was subjecting itself to such “an unfair, one-sided allocation of the risks.” Id. at 375. Like in Kenford II and Goodstein, there is no evidence in the record to support that Tharaldson assumed the liability for Plaintiff’s loss of anticipated profits if Plaintiff did not acquire an interest in the Loan and the parties could not agree on a proposed joint venture. First, the Side Letter does not specifically provide for the recovery of lost profits. Second, the profits Plaintiff is requesting rest on numerous assumptions that, as noted above, either had not been agreed to by the parties or were uncertain. For example, Plaintiff’s lost profits requires the court to assume that if Plaintiff acquired the interest, the parties would have agreed to foreclose on the Property as part of a joint venture agreement. But the parties had not agreed to a foreclosure and Plaintiff has admitted that Tharaldson could change his mind about whether to foreclose. Third, the parties did allocate the risk if the parties could not agree on a joint venture - Plaintiff could exercise the buy/sell and acquire Tharaldson’s interest. Thus, like Goodstein, Plaintiff should be precluded from seeking lost profits based on a hypothetical sale of a Property under a proposed joint venture agreement to which the parties never agreed. Tharaldson did not become the guarantor of Plaintiff’s risk if the parties could not agree to a joint venture, and this would be an unfair allocation of risk to Tharaldson not contemplated in the Side Letter. As such, Plaintiff cannot prove he is entitled to recover lost profits. /// /// Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 30 of 32 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP VI. CONCLUSION There are no genuine issues of material fact and Plaintiff has failed to make a showing sufficient to establish two essential elements of his anticipatory breach claim on which he will bear the burden of proof at trial - that an anticipatory breach occurred and Plaintiff was damaged as a result. The Court should thus grant summary judgment in Tharaldson’s favor on Plaintiff’s remaining claim for anticipatory breach. DATED this 1st day of September, 2016 HOLLAND & HART LLP /s Andrea M. Champion Andrea M. Champion, Esq. Nevada Bar No. 13461 HOLLAND & HART LLP 9555 Hillwood Drive, 2nd Floor Las Vegas, NV 89134 Matthew J. Smith, Esq. (Admitted Pro Hac Vice) Claire Wells Hanson, Esq. (Admitted Pro Hac Vice) HOLLAND & HART LLP 555 Seventeenth Street, Suite 3200 Denver, Colorado 80202 Attorneys for Defendant Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 31 of 32 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 H ol la nd & H ar t L LP CERTIFICATE OF SERVICE Pursuant to Fed. R. Civ. P. 5(b), I hereby certify that on the 1st day of September, 2016, I served a true and correct copy of the foregoing MOTION FOR SUMMARY JUDGMENT by electronic transmission to the parties on electronic file as follows: David A. Carroll, Esq. (NSB #7643) Anthony J. DiRaimondo, Esq. (NSB #10875) 3800 Howard Hughes Parkway, Suite 1200 Las Vegas, Nevada 89169 William R. Fried, Esq. (Pro Hac Vice) Herrick Feinstein LLP 2 Park Avenue New York, New York 10016 Attorneys for Plaintiff Jason Halpern /s Alexis Stajkowski Alexis Stajkowski 9006767_6 Case 2:15-cv-02037-JCM-PAL Document 61 Filed 09/01/16 Page 32 of 32