St. Christopher's, Inc. v. JMF Acquisitions, LLC ( 2021 )

20-3808-cv
St. Christopher’s, Inc. v. JMF Acquisitions, LLC
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION ASUMMARY ORDER@). A PARTY CITING TO A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of
New York, on the 28th day of December, two thousand twenty-one.
PRESENT:
GERARD E. LYNCH,
JOSEPH F. BIANCO,
STEVEN J. MENASHI,
Circuit Judges.
_____________________________________
St. Christopher’s, Inc.,
Plaintiff-Counter-Defendant-Appellee,
v. 20-3808-cv
JMF Acquisitions, LLC,
Defendant-Counter-Claimant-Appellant,
Joseph M. Forgione,
Defendant-Counter-Claimant,
JMF Properties, LLC,
Defendant.
_____________________________________
FOR PLAINTIFF-COUNTER- M. WILLIAM SCHERER, Wilk Auslander
DEFENDANT-APPELLEE: LLP, New York, NY.
FOR DEFENDANT-COUNTER- JAY J. RICE (Bruce H. Nagel, on the brief),
CLAIMANT-APPELLANT: Nagel Rice LLP, Roseland, NJ.
_____________________________________
Appeal from the final judgment of the United States District Court for the Southern District
of New York (Seibel, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is AFFIRMED in part and REVERSED and
REMANDED in part.
Defendant-Counter-Claimant-Appellant JMF Acquisitions, LLC (“JMF”) appeals from the
October 13, 2020 final judgment of the United States District Court for the Southern District of
New York (Seibel, J.), which dismissed with prejudice JMF’s amended counterclaims (the
“counterclaims”) against Plaintiff-Counter-Defendant-Appellee St. Christopher’s, Inc. (“St.
Christopher’s”), pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. We assume
the parties’ familiarity with the underlying facts and procedural history, to which we refer only as
necessary to explain our decision.
BACKGROUND
According to JMF’s counterclaims, St. Christopher’s, which is a residential facility for
people with autism, executed a contract with JMF, a real estate developer, to sell JMF
approximately twenty-two acres of land to develop into “not less than thirty[-]five” residential units.
Joint App’x at 394. After additional negotiations and an amendment to the contract, JMF paid St.
Christopher’s a deposit and moved forward with the project.
Subsequently, the parties began what became a years-long dispute regarding the size of the
development. The counterclaims allege that, in multiple communications to JMF, St.
2
Christopher’s urged JMF to withdraw from the project. When JMF did not do so, St. Christopher’s
threatened to contact the media and local government and to file a lawsuit regarding what it alleged
was improper conduct on the part of JMF. St. Christopher’s allegedly followed through on all of
these threats.
For its part, St. Christopher’s alleged in the instant litigation that, because the contract and
its subsequent amendment were fraudulently induced, St. Christopher’s was entitled to a declaratory
judgment that the contract and its amendment were either never formed or unenforceable. In its
pleadings, St. Christopher’s emphasized that it was “not asking for rescission of the Contract
(although that is the necessary consequence of a determination that there was not meeting of the
minds) or the Amendment (or of any aspect of the transaction)” and expressed a willingness to do
“whatever, if anything, the Court determines it must do” because it “does not want to invite a
counterclaim for anticipatory repudiation.” Joint App’x at 116.
While the instant litigation was pending, St. Christopher’s sent JMF a letter, dated March 9,
2018, to “exercise[] its right to terminate the Contract and does so terminate” due to JMF’s failure
to secure the necessary government approvals by the deadline specified in the contract. Joint
App’x at 360. Subsequently, on April 25, 2018, the parties filed a stipulation in which St.
Christopher’s voluntarily dismissed five of the six claims in its third amended complaint.
Shortly thereafter, on June 22, 2018, JMF filed the counterclaims against St. Christopher’s,
which, as amended, included one counterclaim for anticipatory repudiation and two counterclaims
for breach of contract. JMF sought specific performance, or alternatively, the return of its deposits
for St. Christopher’s alleged anticipatory repudiation and contractual breaches. St. Christopher’s
3
then moved to dismiss JMF’s counterclaims, which the district court granted. This appeal
followed.
DISCUSSION
I. Standard of Review
“We review de novo the grant of a motion to dismiss under Rule 12(b)(6) . . . , accepting
as true the factual allegations in the complaint and drawing all inferences in the [nonmoving party’s]
favor.” Biro v. Condé Nast, 807 F.3d 541, 544 (2d Cir. 2015). To survive a motion to dismiss,
the pleadings “must contain ‘enough facts to state a claim to relief that is plausible on its face.’”
Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). However, we “are not bound
to accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555(internal quotation marks omitted); accord Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements,
do not suffice.”).
II. Anticipatory Repudiation Counterclaim (Claim One)
JMF asserts that the district court erred when it resolved purportedly disputed facts in
dismissing JMF’s anticipatory repudiation counterclaim. We disagree. Although anticipatory
repudiation claims generally raise issues of fact that must be reserved for the jury, see DiFolco v.
MSNBC Cable L.L.C., 622 F.3d 104, 112 (2d Cir. 2010), JMF did not plead sufficient facts to
support a plausible claim for anticipatory repudiation. More specifically, as set forth below,
because JMF failed to plausibly allege that St. Christopher’s conveyed an intent not to perform its
contractual obligations, the district court correctly concluded that JMF’s anticipatory repudiation
counterclaim must be dismissed.
4
Under New York law, “[a]nticipatory repudiation occurs when, before the time for
performance has arisen, a party to a contract declares his intention not to fulfill a contractual duty.”
Lucente v. Int’l Bus. Machines Corp., 310 F.3d 243, 258 (2d Cir. 2002). Anticipatory repudiation
has taken place if there has been “a statement by the obligor to the obligee indicating that the obligor
will commit a breach that would of itself give the obligee a claim for damages for total breach or a
voluntary affirmative act which renders the obligor unable or apparently unable to perform without
such a breach.” Norcon Power Partners, L.P. v. Niagara Mohawk Power Corp., 92 N.Y.2d 458,
463 (1998) (internal quotation marks omitted). To prevail on a claim for anticipatory repudiation,
the obligee must prove that the obligor made “an overt communication of intention not to perform”
to the obligee that is both “positive and unequivocal.” Tenavision, Inc. v. Neuman, 45 N.Y.2d 145,
150 (1978) (internal quotation marks omitted).
In an effort to plausibly plead that St. Christopher’s conveyed a “positive and unequivocal”
intent not to perform, JMF recounts how St. Christopher’s urged JMF to abandon the project on
several occasions, communicated to JMF that it had an alternative deal “in mind,” and followed
through on threats to contact local government officials and the media. Joint App’x at 398–400.
However, none of these alleged communications reflect a positive and unequivocal intent by St.
Christopher’s to abandon its contractual obligations. See, e.g., Palmetto Partners, L.P. v. AJW
Qualified Partners, LLC, 921 N.Y.S.2d 260, 264 (2d Dep’t 2011). In the absence of such an
allegation, JMF’s speculation that St. Christopher’s would eventually abandon the contract cannot
support a plausible claim for anticipatory repudiation.
Similarly, to the extent JMF argues that St. Christopher’s filing a declaratory judgment
action constituted an anticipatory repudiation, we disagree. In Princes Point LLC v. Muss Dev.
5
L.L.C., the New York Court of Appeals rejected this precise argument, explaining that “the mere
act of asking for judicial approval to avoid a performance obligation is not the same as establishing
that one will not perform that obligation absent such approval.” 30 N.Y.3d 127, 134 (2017).
Here, consistent with Princes Point, St. Christopher’s made abundantly clear in its pleadings that it
was only seeking a judicial determination regarding its obligation to perform under the contract and
was not unwilling to ultimately perform under the contract if the lawsuit were unsuccessful. See
Joint App’x at 116 (“At this time, St. Christopher’s is not asking for rescission of the Contract. . . .
St. Christopher’s does not want to invite a counterclaim for anticipatory repudiation. St.
Christopher’s will do whatever, if anything, the Court determines it must do.”).
JMF seeks to distinguish Princes Point by asserting that St. Christopher’s sought to
invalidate the entirety of the contract in this lawsuit, rather than only certain provisions like the
party in Princes Point. The analysis in Princes Point, however, did not rely upon such factual
distinctions regarding the scope of the requested relief relating to the contract. Instead, as here,
where St. Christopher’s “ask[ed] for judicial approval to avoid a performance obligation,” Princes
Point, 30 N.Y.3d at 134, the district court correctly held that mere initiation of the instant lawsuit
did not constitute an anticipatory repudiation of the contract.
In sum, JMF’s allegations in the anticipatory repudiation counterclaim—including St.
Christopher’s filing of the instant lawsuit, as well as the related statements and conduct by St.
Christopher’s surrounding the lawsuit—do not plausibly allege a “positive and unequivocal” intent
by St. Christopher’s not to perform its contractual obligations if the lawsuit were ultimately
unsuccessful. Tenavision, 45 N.Y.2d at 150. Accordingly, the district court correctly dismissed
JMF’s counterclaim for anticipatory repudiation.
6
III. Breach of Contract Counterclaims
JMF also brings two breach of contract counterclaims, which we address in turn.
i. Counterclaim Two
JMF has brought a breach of contract counterclaim based upon its assertion that the filing
of this lawsuit was a breach because, in the event of a default by JMF, St. Christopher’s “sole
remedy” under Section 8.2 of the contract was to retain JMF’s deposit and interest as liquidated
damages. Joint App’x at 407. In other words, JMF argues that, in bringing this lawsuit and failing
to pursue the proper contractual remedy for JMF’s alleged breach, St. Christopher’s itself
committed breach of contract.
This counterclaim, however, suffers from a fatal flaw—St. Christopher’s declaratory
judgment action did not accuse JMF of defaulting on the contract, or otherwise refusing to perform
under the contract. Instead, St. Christopher’s consistently alleged that its contract with JMF was
either nonexistent or unenforceable. Therefore, because St. Christopher’s pleadings do not allege
that JMF defaulted on the contract, JMF has not plausibly alleged that St. Christopher’s breached
the contract in selecting an improper remedy under the contract’s default provision. Accordingly,
the district court properly dismissed JMF’s breach of contract counterclaim under this theory.
ii. Counterclaim Three
JMF’s final breach of contract counterclaim asserts that St. Christopher’s breached its
implied contractual duty to act in good faith and conduct fair dealings. Specifically, JMF alleges
that the combination of St. Christopher’s threats to JMF, communications to the media and local
government, and filing of the instant declaratory judgment action impeded JMF’s ability to perform
its own contractual obligations to obtain the requisite government approvals for the project.
7
The district court dismissed this counterclaim because St. Christopher’s terminated the
contract under Section 9.1(b)—which provides St. Christopher’s with the option to terminate the
contract if JMF failed to obtain the necessary government approvals by March 4, 2018—and JMF
failed to allege that the termination was precluded by the prevention doctrine. We disagree. The
prevention doctrine excuses the non-occurrence of a condition precedent if the party seeking to
invoke that condition “was instrumental in preventing or frustrating its occurrence.” Merzon v.
Lefkowitz, 735 N.Y.S.2d 106, 107 (1st Dep’t 2001). Here, application of the doctrine would
prevent St. Christopher’s from relying on JMF’s failure to obtain the requisite government
approvals to terminate the contract. See, e.g., Ixe Banco, S.A. v. MBNA Am. Bank, N.A., No. 07
CV. 0432, 2009 WL 3124219, at *4 (S.D.N.Y. Sept. 29, 2009). To invoke this doctrine at this
stage of the proceeding, JMF need only allege that St. Christopher’s materially hindered JMF’s
ability to obtain the requisite government approvals in a timely manner. See Farrell Heating,
Plumbing, Air Conditioning Contractors, Inc. v. Facilities Dev. and Improvement Corp., 414
N.Y.S.2d 767, 770 (3d Dep’t 1979) (a party who “greatly disrupts and frustrates” the other’s
performance breaches the underlying agreement); 13 RICHARD A. LORD, WILLISTON ON
CONTRACTS § 39.3 (4th ed. 2000 & 2009 Supp.) (“[I]f one party to a contract hinders, prevents, or
makes impossible performance by the other party, the latter’s failure to perform will be excused.”).
JMF has done so here: the allegations support an inference that St. Christopher’s materially
“frustrated” JMF’s ability to obtain the government approvals in a timely manner. As a result, if
these allegations are proven, St. Christopher’s was precluded from terminating the contract on the
basis that JMF failed to obtain the requisite government approvals.
Moreover, those same allegations state a plausible claim that St. Christopher’s breached its
8
implied covenant of good faith and fair dealing by taking “numerous actions evidencing its bad
faith and failure to cooperate” with the applications for government approvals for the project that
JMF was required to obtain under the contract. Joint App’x at 408. For example, JMF alleges
that St. Christopher’s, among other things: (1) “[s]ent a letter to the town Supervisor stating that
litigation was likely between St. Christopher’s and JMF and that the town would be in the middle
and intending to interfere with the Project, create obstacles for JMF to obtain approvals, and cause
the town to not approve development”; (2) communicated with the press; and (3) “wrongfully
instituted this action to impede, hinder and/or prevent JMF from fulfilling its contractual obligations
and/or developing the Project.” Joint App’x at 409–10.
The district court held that the counterclaim could not survive a motion to dismiss because
JMF failed to plead sufficient facts to establish causation—an essential element to recover damages
in a breach of contract action—because “JMF has not alleged a single fact regarding the steps it
took to obtain government approvals or how [St. Christopher’s] actions frustrated those efforts.”
Special App’x at 19. However, JMF’s counterclaim need only raise an inference of causation
attributable to St. Christopher’s breach at the pleading stage. See CAE Indus. Ltd. v. KPMG Peat
Marwick, 597 N.Y.S.2d 402, 404 (1st Dep’t 1993) (“[T]o defeat the defendant’s motion to dismiss
. . . [i]t was sufficient that the complaint contained allegations from which damages attributable to
the defendant’s breach might be reasonably inferred.”). As described above, JMF has described
actions by St. Christopher’s sufficiently significant to permit a plausible inference that such acts
would make it difficult for JMF to obtain approval, and, contrary to St. Christopher’s contention,
has pled that it was “[a]t all times . . . engaged in” efforts “to fulfill its contractual obligations,”
Joint App’x at 404—an allegation that is supported by evidence in the record that it had submitted
9
proposals to the town, id. at 86. In other words, drawing all reasonable inferences in JMF’s favor,
the counterclaim plausibly alleges that bad faith interference by St. Christopher’s in the government
approval process was sufficiently extensive to support an inference that JMF’s damages were
attributable to St. Christopher’s breach. Accordingly, we conclude that the district court erred in
its dismissal of JMF’s third counterclaim for breach of the contract’s implied covenant of good faith
and fair dealing.
IV. Dismissal with Prejudice
Finally, JMF contests the district court’s dismissal of its amended counterclaims with
prejudice and denial of leave to file second amended counterclaims. “We review the denial of
leave to amend a complaint for abuse of discretion, unless the denial was based on an interpretation
of law, in which case the legal conclusion is reviewed de novo.” Starr v. Sony BMG Music Ent.,
592 F.3d 314, 321 (2d Cir. 2010). Here, the district court found not only that JMF failed to adduce
any additional facts in its proposed second amended counterclaims that would cure its pleading
deficiencies, but also that the pleading deficiencies were so substantive they would have been
impossible for JMF to cure “by better pleading.” Special App’x at 22–23.
On appeal, JMF argues in a conclusory fashion that “no additional factual allegations are
needed,” but “if leave had been granted[,] it could have added those allegations to an amended
pleading.” Appellant’s Br. at 59–60. JMF never explains, however, what “those [additional]
allegations” would be. Therefore, it is entirely unclear how JMF could cure the pleading defects
identified in the anticipatory repudiation counterclaim, as well as the breach of contract
counterclaim alleging that the filing of the lawsuit was an improper remedy under the contract.
Though leave to amend is to be freely given “when justice so requires,” Fed. R. Civ. P. 15(a)(2), it
10
was not an abuse of discretion for the district court to deny leave to JMF when JMF “did not advise
the district court how the complaint’s defects would be cured.” Porat v. Lincoln Towers Cmty.
Ass’n, 464 F.3d 274, 276 (2d Cir. 2006).
* * *
We have reviewed JMF’s remaining arguments and find them to be without merit.
Accordingly, we REVERSE and REMAND on JMF’s counterclaim for breach of contract based
on the implied covenant of good faith and fair dealing, and AFFIRM the district court’s judgment
on all other counterclaims.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
11