Blumenfeld Development Group, Ltd v. Forest City Ratner Companies, LLC, Forest City Enterprises INC., Bruce Ratner, Nassau Events Center, LLC, Index No. 50188/2016, 02/22/16 (DeStefano, J.)

CPLR 3211(a)(1); CPLR 3211(a)(7); Breach of Contract; Breach of Fiduciary Duties; Tortious Interference

By: Diana Ricaurte | Staff Writer

Defendants, along with their owner Bruce Ratner (“Ratner”) submitted a bid to redevelop Nassau County’s Nassau County’s Veterans Memorial Coliseum (the “Coliseum”). Plaintiff and its Principal Edward Blumenfeld (“Blumenfeld”) similarly submitted a bid for the project. After review by Nassau County, Defendants became one of the finalists. As a result, Ratner asked Blumenfeld and Plaintiff to join his final bid. The parties then memorialized an oral joint venture agreement. For the final bid, the parties were required to negotiate and execute a Lease Agreement (“LA”). In the LA, Ratner signed the proposed lease, Defendants were the tenants, and Plaintiff was the proposed member and Defendants’ owner. Upon review, the Nassau County selected Defendants as the winning bidder.

Ratner and Blumenfeld proceeded to draft a Memorandum of Understanding (“MOU”), which memorialized the party’s intent to later draft a formal written joint venture agreement (“JV”). The JV granted a fifty (50%) percent equity interest to Plaintiff in retail space surrounding the Coliseum. The MOU required the parties to execute a mutually satisfactory JV agreement in good faith with a stipulated deadline for the JV completion. However, both parties failed to meet the stipulated deadline. Nonetheless, Plaintiff and Defendant continued performing under the MOU.

Unexpectedly, Ratner ordered Plaintiff to cease its participation and control in the project. After failed attempts by Plaintiff to amend their suddenly deteriorating relationship, Plaintiff commenced this action. First, Plaintiff sued Defendants for breach of contract claiming that their oral joint venture agreement was enforceable. Second, Plaintiff alleged that Defendant breached its fiduciary duty because the parties were partners in a joint venture. Particularly, Plaintiff argued that Ratner (1) breached his fiduciary duty to Defendants by excluding Plaintiff from the project, and (2) made decisions that favored his personal interest. Third, Plaintiff claimed tortious interference with the contract when Defendant wrongfully excluded Plaintiff from the decision-making process.

Defendants moved to dismiss Plaintiff’s verified complaint on the grounds that the MOU disproved the party’s oral JV. In opposition, Plaintiff argued that the oral JV was enforceable.

The Court granted Defendants’ motion in part and denied the motion in part. First, the Court held that Defendants breached their contract because the parties had the essential elements to form a binding JV. The Court held that Defendants demonstrated the essential elements for a binding JV: (1) its intent to be associated with JV, (2) mutual contribution, (3) financial resources, (4) effort, (5) skill or knowledge, (6) joint proprietorship and control over the enterprise, and (7) provision for sharing profits and losses. The Court noted several facts that bolstered this finding such as the JV’s objective and a completion date and the identity of the parties as sophisticated business people that had extensive join activities and corporate efforts throughout the project. Indeed, after investing time and resources in a yearlong project, the parties would not sever their relationship solely because the JV went unexecuted. Thus, the Court held that both Defendants and Plaintiff intended to remain partners until the completion of their project. Based upon such facts, the Court found that Plaintiff satisfied all of the elements.

Second, the Court dismissed both of the fiduciary claims. The Court found that Plaintiff’s fiduciary claim alleging Defendants’ duty to act in Plaintiff’s best interest was duplicative of the breach of contract claim. Duplicative claims rely on the same facts and seek similar damages as previous claims. Here, the Court reasoned that Plaintiff had relied on the same underlying facts and sought similar damages. Notably, the Court also dismissed Plaintiff’s fiduciary claim because Ratner’s decisions to exclude Plaintiff from the project did not favor his personal interests because the LA executed by the parties did not establish a conclusive list of its members. Thus, the Court granted Defendants’ motion as to this point.

Third, the Court held that Ratner tortuously interfered when he wrongfully excluded Defendants from the project. To prove a claim of tortious interference, a plaintiff must prove that there was a valid contract and tortious interference thereof. Although parties can create subsequent contracts of the same subject matter, those subsequent agreements do not supersede the previous contracts. Here, the MOU’s language did not terminate the rights of the parties, before its execution. If Defendants wanted to expunge Plaintiff from the project upon failure to write the JV, Defendant’s would have included that in the MOU. Thus, the Court held that NEC tortiously interfered with BDG’s participation in the project.

Blumenfeld Development Group, Ltd v. Forest City Ratner Companies, LLC, Forest City Enterprises INC., Bruce Ratner, Nassau Events Center, LLC, Index No. 50188/2016, 02/22/16 (DeStefano, J.).




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