Opinion
01 Civ. 9468 (RWS).
November 22, 2004
WOLF, BLOCK, SCHORR and SOLIS-COHEN, New York, NY, Attorneys for Plaintiff, The Economist's Advocate. By: KENNETH G. ROBERTS, ESQ., JENNIFER F. BELTRAMI, ESQ., Of Counsel.
SHAPIRO MITCHELL FORMAN ALLEN MILLER, New York, NY, Attorneys for Defendants, Insead and Insead Online. By: MICHAEL C. MILLER, ESQ., YORAM J. MILLER, ESQ., Of Counsel.
OPINION
A jury trial was held in the above-entitled action beginning on November 1, 2004. At the conclusion of the trial, the jury rendered a verdict in the amount of $250,000 in favor of plaintiff The Economist's Advocate, LLC ("EA") with regard to its claim in quantum meruit against defendants Insead and Insead Online (collectively, "Insead"). EA has submitted a form of proposed judgment, to which Insead has raised objections. The parties have each provided further submissions outlining their positions.
Prejudgment Interest Shall Run From October 29, 2001
First, Insead has objected to EA's proposal to use June 1, 2000, the purported mid-point in the period during which the quantum meruit services were rendered, as the date from which statutory prejudgment interest, available pursuant to N.Y.C.P.L.R. § 5001, is calculated. In support of its proposed mid-point calculation, EA has relied on the final sentence of N.Y.C.P.L.R. § 5001(b). Subsection (b) provides that,
Interest shall be computed from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred. Where such damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date.
Insead has not objected to the applicability of prejudgment interest in this context. Compare Aniero Concrete Co. v. N.Y. City Constr. Auth., 308 F. Supp. 2d 164, 211 (S.D.N.Y. 2003) ("While . . . the roots of quantum meruit are found in principles of equity, for purposes of prejudgment interest the remedy is likened to one for breach of contract, and an award of prejudgment interest is mandatory.") (emphasis supplied),with Precision Founds. v. Ives, 4 A.D.3d 589, 593, 772 N.Y.S.2d 116, 120 (N.Y.App.Div. 3d Dep't 2004) ("Turning to Supreme Court's award of preverdict interest to plaintiff, we note that such awards are discretionary for a quantum meruit claim.") (internal citation omitted and emphasis supplied).
N.Y.C.P.L.R. § 5001(b). EA has cited no case law supporting the notion that a mid-point calculation is appropriate with regard to a claim in quantum meruit.
New York courts have held that interest on a quantum meruit claim should be calculated from the latter of the date of demand for payment or the date of the completion of the services, or, in the absence of ascertainable dates as to these first two events, the date of commencement of the action itself. See, e.g., Brent v. Keesler, 32 A.D.2d 804, 805, 302 N.Y.S.2d 349, 351-52 (N.Y.App.Div. 2d Dep't 1969); see also Ogletree, Deakins, Nash, Smoak Stewart, P.C. v. Albany Steel Inc., 243 A.D.2d 877, 880, 663 N.Y.S.2d 313, 315-16 (N.Y.App.Div. 3d Dep't 1997). Those courts of this circuit to have considered the question have followed a similar rule. See, e.g., Dweck Law Firm, L.L.P. v. Mann, No. 03 Civ. 8967 (SAS), 2004 WL 1794486, at *4 (S.D.N.Y. Aug. 11, 2004) (calculating interest from the date the plaintiff law firm was terminated and its services concluded), reconsideration denied, No. 03 Civ. 8967 (SAS), 2004 WL 2202587, at *1 (S.D.N.Y. Sept. 30, 2004) (rejecting the argument that prejudgment interest must run from the date of a demand rather than the date of termination of services); Aniero Concrete Co. v. New York City Constr. Auth., 308 F. Supp. 2d 164, 212 (S.D.N.Y. 2003) (concluding that the date the action was filed constituted the appropriate date from which interest could run for quantum meruit claims related to services rendered on various dates, with the exception of one service rendered after the date of filing);Port Chester Elec. Const. Corp. v. HBE Corp., 782 F. Supp. 837, 848 (S.D.N.Y. 1991) (calculating interest on a quantum meruit claim from the last date on which services were performed),rev'd on other grounds, 978 F.2d 820 (2d Cir. 1992).
The record does not demonstrate an ascertainable date on which EA demanded payment for its services (as distinct from payment on the fourth version of the General Release and Termination Agreement ("Version Four") which EA sought to enforce in this action), and there is considerable ambiguity in the trial record regarding the last date on which EA performed the services for which it seeks to recover.
In response to Insead's objection, EA has argued that a mid-point calculation should be used because EA was prevented from completing its services as of May 10, 2001. As no authority is cited in support of this argument, it shall not be adopted.
Alternatively, EA claims that interest should run from September 2000 because, at trial, EA limited its quantum meruit claim to a 12-month period out of the total services for which it sought to recover. This position runs contrary to EA's initial argument, offered in support of a mid-point calculation, that the services for which it is recovering in quantum meruit "were rendered continuously during the period from September 1999 to mid-May 2001" (Letter of Jennifer F. Beltrami to the Court, dated Nov. 12, 2004) and is, in any event, unhelpful, as no "ascertainable date" has been identified. N.Y.C.P.L.R. 5001(b).
Finally, EA argues that the latest possible date from which interest should run is May 10, 2001, when, EA argues, Insead terminated EA's services. In support of this argument, EA has cited two cases, both of which stand only for the unremarkable proposition that a party to a contract prevented from completing its performance under the contract may sue either for breach of contract or for the value of its services under a quantum meruit theory. See Reilly v. NatWest Mkts. Group Inc., 181 F.3d 253, 263 (2d Cir. 1999) (noting that "in the employment context, an employee who is wrongfully discharged and prevented from completing the performance of his contract may choose between suing for breach of contract or for the value of the services rendered" under a theory of quantum meruit); Beaumont Birch Co. v. Najjar Indus., Inc., 477 F. Supp. 970, 975 n. 10 (S.D.N.Y. 1979) (explaining that, "[o]n its quantum meruit theory, plaintiff correctly notes that when the defaulting party has prevented full performance or repudiated, abandoned or waived the written contract, the non-defaulting contractor has the right of election to sue for breach of contract or in quantum meruit for the work, labor and services performed and materials furnished") (internal citations omitted). Since no contact was in existence as of May 10, 2001, however, this principle has no bearing here.
As the record does not make clear whether any demand for payment with regard to the services at issue was made on May 10, 2001 or at any time thereafter up to the date that EA commenced this action, and EA has not suggested that contract negotiations during the summer of 2001 or demands for payment under Version Four constituted demands for payment, the earliest ascertainable date at which the cause of action existed is October 29, 2001, the date this action was commenced. Prejudgment interest pursuant to N.Y.C.P.L.R. § 5001 shall run from that date.
Default Judgment Against Cognitive Arts Shall Not Be Entered and the Breach of Contract Claim Against Cognitive Arts Is Dismissed
Insead has also objected to EA's proposed judgment insofar as EA proposes that default judgment be entered against defendant Cognitive Arts Corporation ("Cognitive Arts") in the amount of $500,000. Insead argues that the proposed judgment against Cognitive Arts, premised on a breach of Version Four, is untenably inconsistent with the verdict against Insead, rendered on a quantum meruit theory.
As of the time trial commenced, the only claim remaining against Cognitive Arts was for breach of Version Four, the alleged agreement among EA, Cognitive Arts and Insead. At trial, the jury was instructed that Cognitive Arts had defaulted. Thereafter, EA's breach-of-contract claim against Insead was dismissed insofar as it was premised on the notion that Insead had agreed to Version Four by virtue of the attachment of a signature page from a previous version of the subject agreement to Version Four. EA's alternate theory of contract formation, that Insead had ratified Version Four, was rejected by the jury, which determined that Insead had not ratified Version Four.
In the 130-year old decision of the United States Supreme Court, Frow v. De La Vega, 82 U.S. (15 Wall.) 552 (1872), the Court reversed a default judgment entered against one defendant where the remaining defendants had subsequently proceeded to trial and prevailed against the plaintiff. The Court stated,
If the court in such a case as this can lawfully make a final decree against one defendant separately, on the merits, while the cause was proceeding undetermined against the others, then this absurdity might follow: there might be one decree of the court sustaining the charge of joint fraud committed by the defendants; and another decree disaffirming the said charge, and declaring it to be entirely unfounded, and dismissing the complainant's bill. And such an incongruity, it seems, did actually occur in this case. Such a state of things is unseemly and absurd, as well as unauthorized by law.82 U.S. at 553. The Court proceeded to explain that,
The true mode of proceeding where a bill makes a joint charge against several defendants, and one of them makes default, is simply to enter a default and a formal decree pro confesso against him, and proceed with the cause upon the answers of the other defendants. The defaulting defendant has merely lost his standing in court. He will not be entitled to service of notices in the cause, nor to appear in it in any way. He can adduce no evidence, he cannot be heard at the final hearing. But if the suit should be decided against the complainant on the merits, the bill will be dismissed as to all the defendants alike — the defaulter as well as the others. If it be decided in the complainant's favor, he will then be entitled to a final decree against all. But a final decree on the merits against the defaulting defendant alone, pending the continuance of the cause, would be incongruous and illegal.Id. In other words, "[w]hen a default is entered against one defendant in a multi-defendant case, the preferred practice is for the court to withhold granting default judgment until the [trial] of the action on the merits against the remaining defendants. If plaintiff loses on the merits, the complaint should then be dismissed against both defaulting and non-defaulting defendants." Exquisite Form Indus., Inc. v. Exquisite Fabrics of London, 378 F. Supp. 403, 416 (S.D.N.Y. 1974); see also Lite-Up Corp. v. Sony Music Corp., No. 97 Civ. 1546 (KTD) (MHD), 1999 WL 436563, at *2 (S.D.N.Y. June 24, 1999) (holding that, where default but not default judgment had been entered as to one defendant, "[i]f the remaining defendants prevail, then the defaulting defendant will be exonerated, whereas if the plaintiff prevails on the merits, judgment will be entered against all defendants, including the defaulting party").
To the extent the rule announced by Frow affects entry of default judgment as to one defendant prior to a determination on the merits as to the remaining defendants, it has been limited by many courts to those instances where the liability of the defendants is joint. See, e.g., Int'l Controls Corp. v. Vesco, 535 F.2d 742, 746-47 n. 4 (2d Cir. 1976); Martin v. Coughlin, 895 F. Supp. 39, 43 (N.D.N.Y. 1995); Exquisite Form, 378 F. Supp. at 416 n. 19; but cf. Diarama Trading Co. v. J. Walter Thompson U.S.A., Inc., No. 01 Civ. 2950 (DAB), 2002 WL 31545845, at *4 (S.D.N.Y. Nov. 13, 2002) (observing that "decisions in this Circuit subsequent to Vesco support extension of Frow to cases in which defendants are merely similarly situated") (internal quotation marks and citation omitted); Lite-Up, 1999 WL 436563, at *3 n. 2 (noting that "[e]ven if the nature of the defaulting defendant's liability were not technically joint with the non-defaulting defendant, some of the post-Frow cases suggest that the analysis of the joint liability cases is appropriately applied to bar premature entry of judgment") (citing, inter alia, Gulf Coast Fans v. Midwest Elec. Importers, 740 F.2d 1499, 1512 (11th Cir. 1984) (collecting cases)). As the merits have already been reached here, it need not be determined whether the limitations placed on the pretrial application of Frow apply.
EA argues that undisputed evidence demonstrates that Cognitive Arts signed Version Four and that, by virtue of this signature, Cognitive Arts is bound to those provisions of Version Four which apply to Cognitive Arts. EA contends that Cognitive Arts therefore bears a contractual obligation under Version Four in the amount of $500,000 because Version Four includes a clause allowing for the severance of unenforceable provisions including, according to EA, those that pertain to Insead, and because a single obligor may be held liable for the entire amount owed on Version Four.
EA has offered no authority to support the proposition that an agreement which, by its very terms, contemplates assent by more than two parties and to which only two parties assent will be binding as among those two parties. Indeed, "[i]t is elementary that there can be no agreement unless all of the parties involved intended to enter into one." Ahern v. S. Buffalo Ry. Co., 303 N.Y. 545, 560, 104 N.E.2d 898, 907 (N.Y. 1952), aff'd on other grounds, 344 U.S. 367 (1953); see also H. Jolsen's Taendstikfabrikker v. Thurber, 118 N.Y. 684, 684, 23 N.E. 808, 810 (N.Y. 1890) ("A contract imports mutuality, and there must be the concurrence of the minds of all parties in reference to the thing to be done, and there can be no contract, unless all parties assent."). Put simply, since Insead neither signed nor ratified Version Four, and Version Four by its express terms was to be an agreement by and among Insead, Cognitive Arts and EA, no agreement was formed as a matter of law and Version Four is unenforceable. As no agreement was formed, the severability and amendment clauses contained in Version Four and invoked by EA have no force or effect and EA may not recover from Cognitive Arts upon a claim that Cognitive Arts breached Version Four. Accordingly, EA's sole remaining claim against Cognitive Arts for breach of contract is dismissed, and no default judgment shall be entered.
EA has argued that Cognitive Arts is bound under "black-letter principles of common law" (Letter of Kenneth G. Roberts to the Court, dated Nov. 18, 2004, at 1) and has cited toPimpinello v. Swift Co., 253 N.Y. 159, 170 N.E. 530 (N.Y. 1930) for the proposition that "the signer of a deed or other instrument, expressive of a jural act, is conclusively bound thereby. . . ." Pimpinello, 253 N.Y. at 162, 170 N.E. at 531. The complete statement by the Pimpinello court, of which EA has offered only an excerpt, announces the doctrine that "the signer of a deed or other instrument, expressive of a jural act, is conclusively bound thereby and that his mind never gave assent to the terms expressed is not material." Id. (emphasis supplied). EA's reliance on Pimpinello is, accordingly, misplaced, as Pimpinello sets forth a rule as to whether an individual may be bound by his or her negligently provided signature, not whether a party to a purportedly tripartite agreement may be bound where some but not all parties have signed the subject document.
Conclusion
EA's remaining claim against Cognitive Arts for breach of contract is hereby dismissed. In accordance with the foregoing discussion and with the verdict rendered at the jury trial on this matter, the Clerk of Court is directed to enter judgment in favor of the plaintiff, The Economist's Advocate, LLC, as against defendants Insead and Insead Online in the amount of $250,000, plus statutory prejudgment interest from October 29, 2001 to the date of entry of judgment.
It is so ordered.