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Perhaps the most important aspect of any case is determining what your damages are.  After all, isn’t that generally the point of all our efforts – to try to recover the most amount of money?  The defendant may undeniably be the villain you make them out to be, and undoubtedly they have caused you all the harm and damage you allege.  But, a recent decision by the Honorable Saliann Scarpulla highlights the difficulty in proving your damages, particularly a claim for lost profits.

In Sullivan v. Christie’s Fine Art Storage Services, Inc., Sullivan and his business partner concocted a plan to reproduce, market, and sell prints of artwork created by Alberto Vargas (“Mara Corday or Pin-Up Girl,” “Beauty and the Beast,” formerly known as “Ziegfeld Girl with Mask,” and “Miss America”).  In October 2012, Sullivan stored the artwork in Christie’s Fine Art Storage Services’ (“CFASS”) warehouse, and not even a month later the property was destroyed or damaged by Superstorm Sandy.

Sullivan sued CFASS seeking to recover compensatory damages over $11 million, including lost profits.  On summary judgment, the Court dismissed Sullivan’s claim for lost profits because it was not within contemplation of the parties at the time of the contract, and even more so because the lost profits were too speculative.

First, the Court noted that the agreements between the parties did not directly discuss lost profits, and there was no dispute that “CFASS knew or had any basis upon which to reasonably contemplate that the works of art were intended for reproduction, marketing, and sale with an alleged net profit of more than $10 million.”

Second, the court stated “Sullivan’s potential consequential damages are not capable of measurement with reasonable certainty.”  Which was the polite way of saying they were far too speculative.  The court found that Sullivan had no experience in this area, and that this new business venture created by him and his partner in 2012, had “no track record of previous profits.”  Therefore, Sullivan could not “estimate lost profits with the requisite degree of reasonable certainty.”

The major takeaway here, as in any case, is that “it’s not what you know it’s what you can prove.”  And proving lost profits is one of the more difficult things to do in court.  Nonetheless, if you want to recover lost profits, at the very minimum, at the time of contract, make sure the other party is aware of what your damages may be, so they are within contemplation of the parties.  Also, in order to prove your lost future profits, make sure to keep records of your past profits.  Only then will you be able to win an award for your lost profits.

CPLR 3211(a)(1) allows a defendant to seek dismissal of a complaint when the defense is “founded upon documentary evidence.” “Documentary evidence”, however, is not defined by the CPLR – leaving many practitioners in the dark as to what qualifies as a sufficient “document” under this paragraph.  Indeed, in a recent blog, we highlighted a case involving whether a termination letter sent by the lawyer was sufficient.

By its plain meaning, “documentary evidence” seems to suggest that any type of evidence that has been reduced to writing could qualify. In reality, however, “documentary evidence” only encompasses certain types of documents, making CPLR 3211(a)(1) a narrow, and sometimes risky, ground upon which to seek dismissal.

That begs the question – what qualifies as documentary evidence under CPLR 3211(a)(1)? New York courts have held that judicial records and documents such as notes, mortgages, and deeds rise to the level of “documentary.” But what about contracts? In Hoeg Corp. v Peebles Corp., the Second Department recently affirmed that contracts can indeed attain the rank of “documentary evidence” under certain circumstances.

In Hoeg, plaintiff and defendant entered into a joint venture and memorialized the terms of their relationship in a written retainer agreement. Specifically, the retainer agreement provided, among other things, that plaintiff would act as a consultant in order to facilitate defendant’s acquisition and development of real property in New York City. The retainer agreement also set forth varying commission structures for work performed by plaintiff in facilitating the defendant’s acquisition of such properties. Notwithstanding the written retainer agreement, plaintiff alleged that it had entered into a prior oral agreement with defendant whereby the parties agreed that plaintiff would retain 25% of the equity in the joint venture.

The plaintiff ultimately commenced an action against the defendant for breach of the oral agreement, alleging that the defendant had failed to honor the terms of the oral agreement after the defendant had sold development rights to a parcel of property in a multimillion dollar deal. The Kings County Supreme Court denied the defendant’s motion to dismiss, but the Second Department reversed, finding that the written retainer agreement qualified as documentary evidence under CPLR 3211(a)(1).

In reaching its conclusion, the Court examined the parties’ written retainer agreement and found that the agreement was “comprehensive in its scope and coverage” that constituted a complete written instrument. Accordingly, the Court held that the parol evidence rule bars any evidence concerning the alleged prior oral agreement. For this reason, the Court ruled that the parties’ contract “conclusively disposed of the plaintiff’s claim alleging breach of the purported oral joint venture agreement.”

This does not necessarily mean that every contract will qualify as documentary evidence under CPLR 3211(a)(1). A document will be considered “documentary evidence” within the meaning of CPLR 3211(a)(1) if it “utterly refutes the plaintiff’s allegations, conclusively establishing a defense as a matter of law” (see, e.g., Eisner v Cusumano Corp.) .  In addition, the documentary evidence must be “unambiguous, authentic, and essentially undeniable” (id.).

The careful practitioner should be aware of the limited utility of CPLR 3211(a)(1) and be armed with the right evidence before relying solely on the “documentary evidence” ground. Otherwise, it might be wise for a practitioner to invoke CPLR 3211(a)(7) as a ground for dismissal as well.

 

In an action for breach of contract, Pulp Fiction and Reservoir Dogs star Harvey Keitel sued E*Trade based upon a Term Sheet entered into between Keitel and advertising agency Ogilvey & Mather NY (“Ogilvey”) for the actor to do three commercials.   The case, Keitel v E*Trade Fin. Corp. (Sup Ct, NY County, Apr. 17, 2017) (Ramos, J.),  was filed in 2015 after E*Trade decided not to move forward with Keitel in its advertising campaign.

After the initial motion to dismiss was granted by the Court in March 2016, Keitel was granted leave to amend based upon additional facts learned through discovery. In his amended complaint, Keitel alleged that the totality of circumstances – including exchanges of emails and internal communications between E*Trade and Ogilvey — demonstrated an intent to be bound.

In ruling on E*Trade’s motion to dismiss the amended complaint, Justice Ramos disagreed with Keitel. In granting the motion, the Court noted that the Term Sheet states clearly that, “neither party shall be bound until the parties execute a more formal written agreement”, which was never done.  Since the Court found the Term Sheet unambiguous, resort to extrinsic evidence was unnecessary.  Even looking at the proffered extrinsic evidence, however, the Court observed that there was simply no “meeting of the minds”.  Justice Ramos also noted that this was not like PMJ Capital Corp. v PAF Capital, LLC, where there were negotiations and a finalized term sheet “ready for execution.” Finally, E*Trade’s “kill fees” of $150,000 was considered inadmissible evidence of liability under CPLR 4547.

Query whether, as pleaded in the amended complaint, were the subsequent communications between the parties enough to effectuate a waiver of the “neither party shall be bound” clause?   For a good discussion on when these “neither party shall be bound” clauses should be ignored, see Justice McGuire’s dissenting 0pinion in Jordan Panel Sys. Corp. Turner Constr. Co.

Following the decision, Keitel filed a Notice of Appeal on May 2, so stay tuned for the Appellate ruling.