Juliano v Paragon, Inc., Index No. 11747/14 (Rosenbaum, J)

Motion to Dismiss; Contract; Fiduciary Duty; Breach

By Evan Jaffe | Senior Staff Writer

Plaintiff met with non-parties, regarding Plaintiff’s interest in purchasing a shared space dental practice from the non-parties. The non-parties retained Defendants, a dentist and consulting firm, to perform an appraisal of the individual dental practices of the plaintiff and non-parties . Thereafter, Defendants met Plaintiff and presented him with two Fair Market Value and Financial Analysis Reports of each of the practices (“Reports”). Plaintiff did not sign any agreements with Defendants. Ultimately, Defendanst purchased the non-parties’ shared space dental practice instead of Plaintiff.

Plaintiff brought suit against Defendant, alleging the Reports constituted contracts between him and Defendants and Defendants breached those contracts by purchasing the shared space dental practice. Plaintiff alleged these Reports were prepared solely for him by Defendant. Plaintiff argued the documents provided that Defendans maintain “a professional client/consultant relationship” with both the buyer and the seller as “Dual Representation.” Plaintiff also alleged breach of fiduciary duty based upon Defendants’ purchase of the two practices, failing to disclose his intent which deprived Plaintiff the opportunity to fairly compete, and failure to disclose all material facts while representing both parties. Plaintiff also asserted a claim for unjust enrichment.

Defendants moved to dismiss pursuant to CPLR 3211(a)(1) and (a)(7). Defendants submitted two signed contracts between it and the non-parties. Defendants argued Plaintiff did not submit proof of a signed contract as buyer, nor alleged that he signed a contract with Defendants. Rather, Defendants asserted that Plaintiff improperly claimed the Reports created contracts between them. Defendants further argued that due to the non-party sellers’ interests with the future of the business, they did not feel Plaintiff was a good fit, and prompted Defendants to purchase the practices. Non-parties both stated that they never agreed to sell to Plaintiff nor signed any agreement to sell to Plaintiff.

The Court reviewed the Reports and held that although the Reports were addressed to Plaintiff, they were compiled, paid for, and provided at the direction of the non-parties. There was no signed agreement or other writing evidencing an alleged agreement. Defendants had a signed practice sales agreement with the non-parties, and there was no similar agreement with Plaintiff. While the court acknowledged that this situation was analogous to a realtor/broker relationship, the Court also held there was no exclusivity contract with Plaintiff. Moreover, under General Obligations Law §5-701(10) there must be a written memorandum for a contract to pay compensation for the purchase of a business opportunity.

In reviewing the breach of fiduciary duty claim the Court noted the high standard of review and that courts will not establish one when the parties did not. Due to the lack of a written agreement, as well as any proximate cause or actual damages, Defendants owed no duty to Plaintiff; rather, the only duty was to the non-party sellers.. For the same reasons, there was no quasi contract between Defendants and Plaintiff and therefore the unjust enrichment claim failed. The court thus granted Defendants’ motion to dismiss.

Juliano v Paragon, Inc., Index No. 11747/14 (Rosenbaum, J).

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