Oral Agreements, Emails and The Motion to Dismiss Based on Documentary EvidencePrint Article
- Posted on: Dec 30 2019
Clients often ask if their oral agreement is enforceable. To support their claim, they point to emails and text messages as evidence of such an agreement. As this Blog has noted in the past, whether an oral agreement is enforceable and whether emails and text messages are sufficient documentary evidence to demonstrate the existence of such an agreement are dependent upon whether the evidence is admissible and irrefutable. See, e.g., here, here, and here.
In today’s post, this Blog examines Ripka v. Stenzler, 2019 N.Y. Slip Op. 33688(U) (Sup. Ct., N.Y. County Dec. 19, 2019) (here), a case in which the Court determined that emails and text messages did not conclusively show the absence of an oral agreement.
Dismissal Due to Documentary Evidence
Under Section 3211(a) of the Civil Practice Law and Rules (“CPLR”), a party can file a motion, before a responsive pleading, to dismiss one or more causes of action alleged against that party. For purposes of a motion under CPLR § 3211(a), a “cause of action” includes counterclaims, crossclaims, and third-party claims.
There are several grounds under CPLR § 3211(a) on which a party may move to dismiss. These include: (1) documentary evidence; (2) lack of subject matter jurisdiction; (3) lack of capacity; (4) another action pending between the same parties for the same cause of action in another court; (5) disposition in a prior proceeding; (6) improper counterclaim; (7) failure to state a cause of action; (8) lack of personal jurisdiction; (9) improper extra-jurisdictional service; (10) failure to join necessary party; and (11) immunity for voluntary non-profit officers.
In most cases, the moving party will invoke more than one of the foregoing bases for his/her motion. However, the movant may choose to base his/her motion solely upon the existence of documentary evidence. CPLR § 3211(a)(1) provides that basis.
Under CPLR § 3211(a), a party may move to dismiss on the “ground that . . . a defense is founded upon documentary evidence.” The CPLR does not, however, define the phrase “documentary evidence.” For this reason, courts described the phrase as “fuzzy” because “what is documentary evidence for one purpose, might not be documentary evidence for another.” Fontanetta v. Doe, 73 A.D.3d 78, 84 (2d Dept. 2010).
To qualify as “documentary,” the content of the document must be “essentially undeniable and …, assuming the verity of [the paper] and the validity of its execution, will itself support the ground on which the motion is based.” Amsterdam Hospitality Grp., LLC v. Marshall-Alan Assocs., Inc., 120 A.D.3d 431, 432 (1st Dept. 2014), quoting David D. Siegel, Practice Commentaries, McKinney’s Cons. Laws of N.Y., Book 7B, C.P.L.R. C3211:10 at 22. See also VXI Lux Holdco S.A.R.L. v. SIC Holdings, LLC, 171 A.D.3d 189 (1st Dept. 2019) (“A paper will qualify as ‘documentary evidence’ only if it satisfies the following criteria: (1) it is ‘unambiguous’; (2) it is of ‘undisputed authenticity’; and (3) its contents are ‘essentially undeniable.’”) (quoting Fontanetta, 73 A.D.3d at 86, 87 (citation omitted). Materials that unquestionably qualify as “documentary evidence” include judicial records, such as judgments and orders, as well as documents reflecting out of-court transactions, such as contracts, deeds, wills, and mortgages. Fontanetta, 73 A.D.3d at 84-85 (citation omitted).
The Standard of Review For a Motion to Dismiss
On a motion to dismiss, the court must accept as true the facts alleged in the complaint and all reasonable inferences that may be gleaned from those facts. Amaro v. Gani Realty Corp., 60 A.D.3d 491 (1st Dept. 2009). The court is not permitted to assess the merits of the complaint or any of its factual allegations, but may only determine if, assuming the truth of the facts alleged and the inferences that can be drawn from them, the complaint states the elements of a legally cognizable cause of action. Skillgames, LLC v. Brody, 1 A.D.3d 247, 250 (1st Dept. 2003), citing Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 275 (1977).
If the defendant seeks dismissal of the complaint based upon documentary evidence, then, as noted, dismissal under CPLR § 3211(a)(1) is warranted only when the documentary evidence “utterly refutes plaintiff’s factual allegations” (Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326 (2002)), and “conclusively establishes a defense to the asserted claims as a matter of law.” Weil, Gotshal & Manges, LLP v. Fashion Boutique of Short Hills, Inc., 10 A.D.3d 267, 270-71 (1st Dept. 2004) (internal quotation marks omitted). In other words, the documents relied upon must “definitely dispose of plaintiff’s claim.” Blonder & Co. v. Citibank, N.A., 28 A.D.3d 180, 182 (1st Dept. 2006).
Are Emails Documentary Evidence for Purposes of CPLR § 3211(a)(1)?
In the Second Department, affidavits, emails, and letters, are not considered documentary evidence “within the intendment of CPLR 3211(a)(1).” Phoenix Grantor Trust v. Exclusive Hospitality, LLC, 2019 N.Y. Slip Op. 3635 (2d Dept. May 8, 2019), quoting Nero v. Fiore, 165 A.D.3d 823, 826 (2d Dept. 2018). In the First Department, like the Second Department, affidavits are not documentary evidence within the meaning of CPLR § 3211(a)(1). Tsimerman v. Janoff, 40 A.D.3d 242 (1st Dept. 2007). However, unlike in the Second Department, the First Department will consider correspondence and emails “under appropriate circumstances” to qualify as documentary evidence, so long as they meet “the essentially undeniable test.” Amsterdam Hospitality Grp., 120 A.D.3d at 432; Langer v. Dadabhoy, 44 A.D.3d 425, 426 (1st Dept. 2007). Accord Art & Fashion Grp. Corp. v. Cyclops Prod., Inc., 120 A.D.3d 436, 438 (1st Dept. 2014) (“[e]mail correspondence can, in a proper case, suffice as documentary evidence for purposes of CPLR 3211(a)(l)”); Tozzi v. Mack, 169 A.D.3d 547, 548 (1st Dept. 2019) (affirming dismissal of complaint under CPLR § 3211(a)(1) where options agreement and emails utterly refuted plaintiffs’ claim and conclusively established a defense as a matter of law); MCAP Robeson Apartments Ltd. P’ship v. Munimae TE Bond Subsidiary, LLC, 136 A.D.3d 602, 603 (1st Dept. 2016) (affirming dismissal of complaint where email correspondence demonstrated that plaintiff understood, at the time, that such emails constituted notice of termination of the parties’ agreement).
Enforceability of Oral Agreements
To sustain a breach of contract cause of action, a plaintiff must show: (1) an agreement; (2) plaintiff’s performance; (3) defendant’s breach of that agreement; and (4) damages. See, e.g., Furia v. Furia, 116 A.D.2d 694, 695 (2d Dept. 1986). “The fundamental rule of contract interpretation is that agreements are construed in accord with the parties’ intent . . . and ‘[t]he best evidence of what parties to a written agreement intend is what they say in their writing’ …. Thus, a written agreement that is clear and unambiguous on its face must be enforced according to the plain terms, and extrinsic evidence of the parties’ intent may be considered only if the agreement is ambiguous.” Riverside South Planning Corp. v. CRP/Extell Riverside LP, 60 A.D.3d 61, 66 (1st Dept. 2008), aff’d, 13 N.Y.3d 398 (2009). Whether a contract is ambiguous presents a question of law for resolution by the courts. Id. at 67.
When, however, there is no writing between the parties, the plaintiff must show the elements of a binding contract, e.g., an offer, acceptance, consideration, mutual assent, an intent to be bound, and agreement on all essential terms. In other words, an oral agreement will not be enforced unless there is “a manifestation of mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms.” Kelly v. Bensen, 151 A.D.3d 1312, 1313 (3d Dept. 2017). See also Schwartz v. Greenberg, 304 N.Y. 250, 254 (1952); Matter of Express Indus. & Term. Corp. v. New York State Dept. of Transp., 93 N.Y.2d 584, 589 (1999); Towne v. Kingsley, 121 A.D.3d 1381, 1382 (3d Dept. 2014). “In making the determination, the court looks not to the parties’ after-the-fact professed subjective intent, but rather at their objective intent as manifested by their expressed words and conduct at the time of the agreement.” Kelly, 151 A.D.3d at 1313 (internal quotation marks and citation omitted). In the First Department, this is where correspondence, emails and text messages can play a material role.
Ripka v. Stenzler
Ripka involved a breach of contract claim (though other causes of action were alleged) in which the plaintiff, Brian Ripka (“Ripka”), the founder and CEO of a fitness company called Ripped Fitness (“Ripped”), claimed to have an oral agreement for an interest in Rumble Fitness LLC (“Rumble”), a boxing-based fitness company established by the defendant, Andrew Stenzler (“Stenzler”).
According to Plaintiff, Stenzler solicited him to participate in Rumble in February 2016. Plaintiff alleged that Stenzler orally agreed to provide him with a 10% stake in Rumble in exchange for Plaintiff’s services in assisting Stenzler with the company’s early development. Plaintiff claimed that Stenzler orally reaffirmed this agreement on multiple occasions.
In consideration for the 10% equity grant, Plaintiff claimed he performed his end of the bargain by providing Stenzler with proprietary information about Ripped’s operations and the names of its vendors and that he performed various services to benefit Rumble, such as analyzing traffic at competing businesses to scout for optimal locations.
Plaintiff alleged that Stenzler reneged on their agreement after bringing in two additional partners, defendants Eugene Remm (“Remm”) and Anthony DiMarco (“DiMarco”), who purportedly told Stenzler that Plaintiff should not be given such a large equity stake. After Ripka insisted that their alleged oral agreement be reduced to writing, Stenzler allegedly refused. Instead, Stenzler offered Plaintiff a 3% stake in Rumble in exchange for a 3% stake in Ripped. According to Plaintiff, he has not been issued a membership interest in Rumble.
Plaintiff filed his original complaint on June 18, 2019, asserting claims for (1) a declaratory judgment that he owned a 10% stake in Rumble; (2) breach of the alleged oral agreement; and (3) unjust enrichment. On July 8, 2019, defendants moved to dismiss, principally arguing that the parties’ emails and text messages only reflected the 3% offer and did not reflect the alleged oral agreement to provide 10% equity. Defendants also sought to strike unrelated allegations of wrongdoing. On September 4, 2019, Plaintiff cross-moved for leave to file a second amended complaint, which included additional causes of action seeking recovery for breach of fiduciary duty, common law tort and fraud.
The Court’s Ruling
The Court granted the motion to dismiss the three claims in the original complaint to the extent of dismissing the breach of contract and unjust enrichment claims asserted against Remm and DiMarco and the breach of contract claim asserted against Rumble.
The Court held that the emails and text messages did not “definitively prove that Stenzler never made the 10% equity promise.” Slip Op. at **3-4. The Court reasoned that since Defendants cherry-picked the communications that purportedly supported their defense, they could not utterly refute plaintiff’s allegations. Id. at *4. The Court explained that Defendants’ failure to cite “a single case where a complaint was dismissed with such a showing”, i.e., that less than all the possible documentary evidence sufficed to dismiss a complaint under CPLR § 3211(a)(1), further supported its ruling. Indeed, noted the Court, “had one of the emails contained an admission by plaintiff that he never reached an agreement for a 10% stake, that would be another matter.…” Id. However, said the Court, “defendants simply ask this court to infer that plaintiff’s claims are not plausible based on their cherry-picked submissions.” Id.
The Court rejected Defendants’ request to shift the burden to Plaintiff to refute their evidentiary showing with other emails in his possession, stating that Plaintiff “has no obligation to do so.” Id. “On the contrary,” said the Court, “defendants bear the entire burden of proving that ‘the documentary evidence utterly refutes plaintiff’s factual allegations, conclusively establishing a defense as a matter of law.’” Id. (quoting Goshen, 98 N.Y.2d at 326). The Court explained that “[t]his is not summary judgment; there is no burden shifting on a motion to dismiss.” Id. (citation omitted).
Finally, the Court rejected Defendants’ attempt to procure dismissal of the alleged oral agreement “by proving that such agreement is not reflected in writing.” Id. at *5. That “there may not be any dispositive documentary evidence” to prove the existence of an agreement is “an inherent[ ] … feature of many alleged oral agreements.” Id. at *4. For this reason, held the Court, “[w]hether documentary evidence ultimately suggests the existence of an oral agreement is a question of fact” not ripe for determination on a motion to dismiss. Id.
As to Remm and DiMarco, the Court said that they were not parties to the alleged oral agreement between Ripka and Stenzler. Id. at * 5. Thus, neither party could be held liable for a breach of that agreement. Id. (citing Leonard v. Gateway IL LLC, 68 A.D.3d 408 (1st Dept. 2009)).
CPLR § 3211(a)(1) can be a powerful tool to secure dismissal of a complaint. While not every document will demonstrate the absence of a cause of action, Ripka demonstrates the need to present the court with documents that utterly refute the cause of action. As in Ripka, cherry-picked emails will not suffice. Thus, in the absence of documents that utterly refute a plaintiff’s claim, dismissal will be inappropriate.