| IDX Capital, LLC v Phoenix Partners Group LLC |
| 2011 NY Slip Op 03274 [83 AD3d 569] |
| April 26, 2011 |
| Appellate Division, First Department |
| IDX Capital, LLC, et al., Respondents, v Phoenix PartnersGroup LLC et al., Defendants, and Wesley Wang, Appellant. IDX Capital, LLC, et al.,Respondents, v Phoenix Partners Group LLC et al., Appellants, et al.,Defendants. |
—[*1] Nixon Peabody LLP, New York (Frank H. Penski of counsel), for Phoenix Partners GroupLLC, Phoenix Partners Group LP, Nicholas Stephan, Marcos Brodsky and Patrick Nihan,appellants. Olshan Grundman Frome Rosenzweig & Wolosky LLP, New York (Jeffrey A. Udell andLori M. Marks-Esterman of counsel), for IDX Capital, LLC, James Cawley, Helen Cawley,James Cawley, Sr., Ron Neal, Bhanu Patel and Starlight Investments, Ltd., respondents. Graubard Miller, New York (Lawrence D. Bernfeld of counsel), for Brady Halper,respondent.
Order, Supreme Court, New York County (Richard B. Lowe, III, J.), entered June 8, 2010,which, insofar as appealed from as limited by the briefs, denied defendant Wesley Wang's motionfor summary judgment dismissing the "earn-out" portion of plaintiffs' alleged damages, anddenied the motion of defendants Phoenix Partners Group LLC, Phoenix Partners Group LP,Nicholas Stephan, Marcos Brodsky, and Patrick Nihan for summary judgment dismissing thesecond verified amended complaint as against them, modified, on the law, to dismiss the claimfor earn-out damages and to dismiss the complaint as against the Phoenix Partners companies,Stephan and Brodsky, and otherwise affirmed, without costs.[*2]
Plaintiffs failed to establish with reasonable certainty thatIDX Capital, LLC, an eight-month-old, money-losing start-up, is entitled to damages based onthe provision in its proposed agreement with a prospective acquirer calling for earn-out paymentsby the acquirer based on IDX hitting certain revenue targets. Absent evidence discussing theprojections or specific strategies that likely would have resulted in IDX meeting the targets, suchas an expert affidavit or an affidavit from a financial officer, plaintiffs' claim for earn-outdamages is speculative and accordingly cannot be maintained (see Kenford Co. v County ofErie, 67 NY2d 257, 261 [1986]; American Preferred Prescription v Health Mgt., 252AD2d 414, 419 [1998]).
Clearly, issue finding, not issue resolution, is a court's proper function on a motion forsummary judgment, resolving, in the process, all inferences in favor of the plaintiff (see Cruzv American Export Lines, 67 NY2d 1, 13 [1986], cert denied sub nom. Bussanich vUnited States Lines, Inc., 476 US 1170 [1986]). However, only the existence of a bona fideissue raised by evidentiary facts, not one based on conclusory or speculative allegations, willsuffice to defeat a motion for summary judgment (see Rotuba Extruders v Ceppos, 46NY2d 223, 231 [1978]). Where competent evidence is presented by a defendant in support of amotion for summary judgment, the burden shifts to plaintiff to produce proof in admissible formsufficient to establish the existence of material issues of fact which require a trial of the action(Miller v City of New York, 253 AD2d 394, 395-396 [1998]).
We find plaintiffs' claim that Stephan and Brodsky participated in Wang's admitted campaignto interfere with the prospective acquisition to be speculative and based on unwarrantedinferential leaps. With respect to Stephan, the text-message chain that plaintiffs rely on, evenwhen read in a light most favorable to their complaint, does not indicate that Stephan knew of, letalone participated in, defendant Wang's campaign to derail the deal between IDX and KnightCapital Group. At the time of the text messages in question, Wang had not commenced hisactivities and gave no indication to Stephan of what he had planned. If anything, the inference tobe drawn from the exchange supports Stephan's claim that he was not involved in the planning orexecution of Wang's plans to break up the deal between IDX and Knight.
We draw a similar conclusion with respect to Brodsky. There is nothing to indicate thatBrodsky provided, at Wang's request, a link to a web site, http://www.pervscan.com, whichshortly thereafter found its way into one of the e-mails Wang sent to Knight, with the intent tofurther Wang's campaign to interfere with the transaction. There is no evidence that Wang toldBrodsky why he wanted the link or what, if anything, he intended to do with it. Indeed, Brodskysent this link to other Phoenix employees. Further, other electronic messages relied on byplaintiff indicate that while Brodsky was aware that Wang wanted to interfere with the deal insome manner, he found Wang's fixation on the deal absurd, even comical. In fact, the electronicmessages read in their entirety support Brodsky's position that he told Wang not to involvePhoenix in any schemes with respect to IDX.
Nor do we agree with the dissent that the message sent from Brodsky's account to KnightCEO Thomas Joyce that "bad things happen when good people do nothing," raises a genuineissue of fact. Brodsky claims no knowledge of this e-mail, and given the fact that otherdefendants have been accused of "hacking" into IDX computer systems, this submission isequivocal at best. When read in the context of all the evidence submitted by defendants, it simplydoes not rise to the level of a genuine, triable issue of fact sufficient to defeat defendants' motion.
Although plaintiff Cawley alleges that Stephan and Brodsky had animosity toward him, andthat both wanted to see the deal fail, this allegation is clearly insufficient to draw an inferencethat [*3]Stephan, Brodsky, Wang, Niham and others took"common action for a common purpose by common agreement or understanding. . . from which common responsibility derives" (Goldstein v Siegel, 19AD2d 489, 493 [1963]; see AnesthesiaAssoc. of Mount Kisco, LLP v Northern Westchester Hosp. Ctr., 59 AD3d 473, 479[2009]). Accordingly, we dismiss the tortious interference and aiding and abetting causes ofaction as against Stephan and Brodsky (see Home Town Muffler v Cole Muffler, 202AD2d 764 [1994]). However, we sustain such claims against Nihan based on evidence tending toshow that while still employed by IDX, he gave Wang information about the proposedacquisition and revealed other confidential information about IDX. This evidence is sufficient toraise an issue of fact as to whether Nihan conspired with Wang to derail the acquisition.
Concerning the claims against the Phoenix Partners companies, the record, viewed in a lightmost favorable to plaintiffs, demonstrates that Wang was a rogue employee whose tortious actsto derail the acquisition were outside the scope of his employment with Phoenix and notcommitted in furtherance of Phoenix's business. Accordingly, the Phoenix Partners companiescannot be held vicariously liable for such acts (see Bowman v State of New York, 10 AD3d 315, 316 [2004];Nicollette T. v Hospital for Joint Diseases/Orthopaedic Inst., 198 AD2d 54, 55 [1993]).
The cause of action for injunctive relief against Stephan is dismissed. Given the lack ofevidence that Stephan participated in the campaign against IDX or otherwise engaged in orthreatened to engage in any disparagement of plaintiff Cawley in violation of a prior settlementagreement, there is no support for plaintiffs' claim that Stephan is likely to continue to disparageIDX and Cawley absent injunctive relief.
We have considered the parties' other contentions and find them unavailing.Concur—Mazzarelli, J.P., Sweeny and RomÁn, JJ.
Acosta and Abdus-Salaam, JJ., dissent in part in a memorandum by Abdus-Salaam, J., asfollows: I would affirm the motion court's denial of summary judgment to the Phoenix Partnerscompanies, Stephan, and Brodsky. I disagree with the majority's assessment that plaintiffs' claimagainst these defendants is based on "unwarranted inferential leaps." Rather, "[m]indful that issuefinding and not issue resolution is a court's proper function on a motion for summary judgment,and drawing all inferences in plaintiff[s'] favor as we are bound to do" (Cruz v AmericanExport Lines, 67 NY2d 1, 13 [1986]), there is enough circumstantialevidence—including defendants' recruitment of Nihan, the timing of their variouselectronic conversations regarding the transaction and the beginning of Wang's pseudonymouse-mail campaign, their animus towards plaintiff Cawley, their knowledge of Wang's hostilitydirected at Cawley, Brodsky's e-mailing of the "pervscan" link to Wang, which Wang then sent toKnight—as well as direct evidence in the form of the mysterious e-mail (with Wang'smantra about "bad things happen when good people do nothing") that went out under Brodsky'sname to Knight, but of which Brodsky says he knows nothing—that leads me to concludethat if defendants' summary judgment motion dismissing the second amended complaint isdecided on the version of the facts most favorable to plaintiffs (see Mullin v 100 Church LLC, 12AD3d 263, 264 [2004]), summary judgment was properly denied.
Defendants' avowed protestations of innocence do not render all of this circumstantial anddirect evidence speculative. While the affidavits of Brodsky, Stephan and Wang purport to [*4]explain away the evidence, it is not this Court's function to makecredibility determinations. And, although much of plaintiffs' evidence is circumstantial,"[c]ircumstantial evidence is not inherently weaker than direct evidence and frequentlycircumstantial evidence may be stronger than direct evidence" (1A NY PJI3d 1:70, at 105[2011]). In granting summary judgment, the majority has disregarded the concept that "[a]determination based on circumstantial evidence is essentially one to be made by the fact-finder,guided by the legal principles appropriate to such a determination" (Abramo v Pepsi-ColaBuffalo Bottling Co., 224 AD2d 980, 981 [1996]).