MacKay v. Paesano, Index No. 68232-14, 2/6/2017 (Emerson, J.)

Motion to Dismiss; Joint Venture; Statute of Frauds; Leave to Replead

By: Kei Haneda | Staff Writer

From 2007 to 2010, Paesano and Cadan (collectively “Defendants”), allegedly failed to adhere to a series of agreements they entered into with MacKay (“Plaintiff”). Under the alleged agreements Plaintiff would refer potential investors to Defendant Paesano, who would pay Plaintiff an annual referral fee based on any initial investments made by such individuals. Plaintiff did not receive any referral fees even after Defendants agreed to pay Plaintiff $1 million per year with annual reassessments. Plaintiff continued to refer investors to Defendant Paesano but was never compensated despite repeated demands.

Plaintiff’s recovery action was based on seven causes of action: (1) breach of a joint-venture agreement; (2) breach of fiduciary duty; (3) breach of contract; (4) fraudulent misrepresentation; (5) unjust enrichment; (6) quantum meruit; and (7) promissory estoppel. Defendants moved to dismiss Plaintiff’s complaint. The Court dismissed all the claims. In particular, the Court focused on the first three.

The Court first dismissed the Plaintiff’s joint-venture claim because Plaintiff failed to establish that there was a mutual undertaking by the parties to submit to the burden of “making good the losses of others.”  Instead, the parties agreed that loss resulting from one aspect of a transaction would fall on the person responsible for that aspect. The Court held that, absent a written provision for the sharing of losses, no joint venture had been created; risk of individual expenses did not constitute an agreement to share the losses. The Court also concluded that without a joint venture there was no fiduciary relationship between parties, thereby invalidating Plaintiff’s fiduciary-duty cause of action.

Further, the Court found that the statute of frauds barred the Plaintiff’s claim that Defendants breached an enforceable agreement. The Court held that General Obligations Law § 5-701(a)(10), which bars the enforcement of an oral agreement to pay compensation for negotiating a business opportunity, covered the compensation agreement for procuring customers. The Court dismissed all the other causes of action either as duplicative of the breach-of-contract claim or as barred by the statute of frauds.

The Court therefore dismissed all the seven causes of action of the complaint. The Court, however, granted the Plaintiff leave to replead the breach-of-contract claim, and held that Plaintiff should be given the opportunity to establish a written agreement for the purpose of the statute of frauds through “innumerable emails, phone calls, trips, meetings and other transactions with Defendants.” The Court, however, denied Plaintiff’s request to replead as to the remaining claims because they could not be cured by better pleading.

MacKay v. Paesano, Index No. 68232-14, 2/6/2017 (Emerson, J.)

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