Opinion
01 Civ. 9468 (RWS)
April 6, 2004
KENNETH G. ROBERTS, JARRETT M. BEHAR Of Counsel, WOLF, BLOCK, SCHORR and SOLIS-COHEN, New York, NY, for Plaintiff
MICHAEL C. MILLER, YORAM J. MILLER Of Counsel, SHAPIRO MITCHELL FORMAN ALLEN MILLER, New York, NY, for Defendants Insead and Insead Online
OPINION
Defendants Insead and Insead Online (collectively, "Insead") have moved for summary judgment against plaintiff Economist's Advocate, LLC ("EA"), pursuant to Fed.R.Civ.P. 56. Additionally, EA has moved for summary judgment against Insead and defendant Cognitive Arts Corp. ("Cognitive Arts") on the First and Second Causes of Action in the complaint or, in the alternative, for summary judgment against Insead on the Third or Fourth Cause of Action. For the reasons set forth below, Insead's summary judgment motion is denied, as is EA's summary judgment motion against Insead. EA's summary judgment motion against Cognitive Arts was previously granted, and a judgment entered. That judgment is hereby vacated.
Prior Proceedings
EA commenced this action on October 29, 2001. The instant motions were marked fully submitted on November 13, 2003. Cognitive Arts submitted no opposition to EA's motion and EA's motion was granted with regards to Cognitive Arts on February 2, 2004. The Facts
The facts are set forth based upon the Local Rule 56.1 statements of EA and Insead and supporting declarations and are undisputed except as noted below.
Insead, a business school based in Fountainebleau, France, owns 100% of Insead Online, an entity which develops and sells educational content via the Internet. Gabriel Hawawini ("Hawawini") has been Dean of Insead since September 2000. Soumitra Dutta ("Dutta") was Dean of Technology at Insead from September 1999 through August 2002 and is currently the Dean of Executive Education at Insead. Jane Sommers-Kelly ("Sommers-Kelly") has been the Director of Insead Online since May 2000 and had previously been Director of Development at Insead.
EA is a limited liability corporation organized under the laws of the State of Delaware with its principal place of business in Ponca City, Oklahoma. EA has been engaged in executive training, including executive training delivered over the Internet, and business consulting, and it has used the enterprise trade name QED Learning.
Matthew Krepps ("Krepps") is the President of EA. He was an assistant professor at Insead from January 1998 to May 2001.
Cognitive Arts is an Illinois corporation with a principal place of business in New York, New York at the time this action was filed. Cognitive Arts is a for-profit commercial eLearning developer which implements corporate training and learning systems that are delivered via computer in either CD or web format. Edward Reiner ("Reiner") joined Cognitive Arts in January 2001 as Executive Vice President of Business Development and remained in that position until December 2001.
According to EA, Insead and EA worked together on the development of online course materials from winter 1999 through April 2001. Insead acknowledges that EA did work in connection with the development of course materials, but claims that efforts were not intended to benefit Insead and that Krepps intended to market courses to other universities. The parties dispute as to whether or not Krepps and Insead entered into an agreement.
An April 14, 2000 letter from Insead to Krepps states:
This letter is to confirm that INSEAD may collaborate with The Economist Advocate, LLC (EA), in the marketing, design, development and delivery of on-line executive education modules to selected companies, provided INSEAD retains full IPRs on the material developed for and used in such modules, and mutually agree upon other terms and conditions.
Terms still to be discussed included respective marketing contributions efforts and costs, development of specific pedagogical modules, and formulae for cost allocations and revenue sharing between EA and INSEAD.
Krepps engaged in business conversations with representatives of Cognitive Arts as early as January 2000. EA claims
Krepps entered into these discussions in fulfillment of EA's agreement in principle to develop and market online courses with Insead. Insead denies the existence of such an agreement and claims that Krepps sought to identify a development partner for his own benefit, and not at the request of Insead.
In September 2000, Krepps entered into a Joint Venture Agreement with Cognitive Arts. This agreement states that EA and Cognitive Arts "will form a joint venture (JV) for the purpose of developing and marketing courses and modules for courses . . . that will be branded by Insead or Insead Executive Education (IU), or other premium providers of management education. The primary markets for these Courses will be students attending IU Executive Education programs, other European Universities and Management Schools, and corporations both in Europe and in the United States."
The Joint Venture Agreement contained an exclusivity clause prohibiting Cognitive Arts from developing courses outside the agreement for any of the institutions introduced to the joint venture, including Insead. This restriction would function for the term of the joint venture plus two years.
The agreement further allocated costs and revenues from the joint venture between Cognitive Arts and EA. It states:
CA [Cognitive Arts] and EA will split evenly all net expense income for each of the Courses developed by the joint venture, with 50% of net income being allocated to each party. Each party, in consideration for its 50% share of net income, shall be required to furnish to the joint venture half of the total costs allocable to the running of the JV operations.
Additionally, the Joint Venture Agreement laid out the terms for dissolution of the joint venture and the mechanism for Cognitive Arts and EA to buy out each other's interests.
The parties dispute as to when Insead became aware of the Joint Venture Agreement. EA claims that Krepps introduced Cognitive Arts to Insead as EA's development partner less than 24 hours after the agreement was executed.
During the fall of 2000, the joint venture developed several elementary business courses for Insead.
Insead points out that prior to the fall of 2000, Cognitive Arts had been in contact with Insead and met with Insead to discuss a possible business relationship.
In November 2000, Insead informed Krepps that its faculty members should not enter into an agreement at odds with the interests of the school, such as the Joint Venture Agreement. On November 21, 2000, Krepps sent an email to Hawawini, Dean of Insead, proposing a solution. He offered to separate from the joint venture in return for a mutually agreeable fee from Cognitive Arts. Hawawini agreed to Krepps' solution and asked Krepps to cancel the contract barring direct contact between Cognitive Arts and Insead as soon as possible.
From December 2000 through April 2001, Krepps attempted to find a third party to purchase his interest in the joint venture without success. Krepps and Cognitive Arts then began discussing the terms of a Termination Agreement, which would provide for EA's divestiture from the joint venture. The parties dispute Insead's involvement in these discussions, and Krepps claims, while Insead denies, that Insead agreed to compensate EA for its investment. The parties agree, however, that Krepps was informed that Insead would not be negotiating with him and that he should negotiate with Cognitive Arts. After early May 2001, Insead did not communicate directly with EA or Krepps.
In May 2001, Krepps resigned from his teaching post at Insead.
On May 11, 2001, Reiner from Cognitive Arts sent Krepps the first draft of a Termination Agreement for his review. Cognitive Arts' cover letter states that the draft Termination Agreement was sent on behalf of the Board of Cognitive Arts and Insead. Drafts of the Termination Agreement were exchanged between Krepps and Cognitive Arts from May to September 2001. Insead was included as a party to drafts of the Termination Agreement.
May and June drafts of the Termination Agreement provided for up-front and royalty payments by Cognitive Arts to Krepps. Then, an August 8, 2001 version of the Termination Agreement ("Version Two") had both Cognitive Arts and Insead listed in the payment section. On August 10, 2001, Krepps signed Version Two, but Cognitive Arts and Insead did not. Reiner first represented to Krepps that the parties were in agreement and then claimed that only a few insubstantial changes needed to be made.
A subsequent version of the Termination Agreement ("Version Three") included Insead in the payment section, but made payment contingent upon Cognitive Arts entering into a development agreement with McGraw-Hill. The parties dispute whether EA was sent this version of the agreement on August 23 or August 26, 2001 and whether EA received an August 23 cover letter, that indicated that Version Three was sent to Insead as the final version of the agreement. Insead reviewed the terms of Version Three and assented to it by signing and faxing the signature page to Cognitive Arts on September 17, 2001. EA claims that Insead placed no restrictions on what Reiner was permitted to do with the page that contained Insead's signature. Neither Krepps nor Cognitive Arts signed Version Three.
From September 1 to September 4, 2003, Krepps and Reiner exchanged new drafts of the agreement. The parties disagree as to whether Insead was aware of these new drafts. Version Four, completed on September 4, 2003, made payment to Krepps unconditionally due on September 17, 2001. Insead claims that it never received a copy of Version Four or knew of its existence. By September 17, 2001, Krepps and Reiner both signed Version Four.
Reiner advised Krepps that he would be sending over Insead's signature page for Version Four. Krepps requested that he send the entire agreement Insead had agreed to, along with Insead's signature page. Reiner sent Krepps a page containing Insead's signature, bearing a footer identifying it as the signature page for Version Three, and attached it to Version Four of the agreement, bearing a footer identifying it as Version Four. Insead claims Cognitive Arts never notified them that Reiner and Krepps executed Version Four, and they believed all parties executed Version Three.
After the September 11, 2001 terrorist attacks, Cognitive Arts' New York offices were closed down, the market for eLearning products slowed, and McGraw-Hill became less interested in funding the venture. No agreement was ever reached with McGraw Hill.
Krepps did not receive any up-front payment, as required under the terms of Version Four. On September 27, 2001, Krepps sent Reiner and Insead an email, pointing out that payment was ten days overdue as of the date of the email and asking for an explanation. He received no response from Insead, and Reiner assured him that there was no problem with payment. Krepps reiterated his demand for payment to Reiner on October 8, 2001 `and October 14, 2001. Insead and Cognitive Arts began to develop and market course materials. Krepps filed the complaint in this action on October 29. 2001 against both Cognitive Arts and Insead, seeking damages for breach of Version Four of the Termination Agreement.
Insead launched the course materials on its website in mid-November 2001, and Insead and Cognitive Arts continued to develop and market courses after January 2002.
The Summary Judgment Standard
Summary judgment is granted only if there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); see generally 6 James Wm. Moore, et al., Moore's Federal Practice ¶ 56.15 (2d ed. 1983). The court will not try issues of fact on a motion for summary judgment, but, rather, will determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law."Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 251-52 (1986).
The moving party has the burden of showing that there are no material facts in dispute, and the court must resolve all ambiguities and draw all reasonable inferences in favor of the party opposing the motion. Bickhardt v. Ratner, 871 F. Supp. 613 (S.D.N.Y. 1994) (citing Celotex Corp. v. Catrett, 477 U.S. 317 (1986)). Thus, "[s]ummary judgment may be granted if, upon reviewing the evidence in the light most favorable to the non-movant, the court determines that there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law." Richardson v. Selsky, 5 F.3d 616, 621 (2d Cir. 1993).
A material fact is one that would "affect the outcome of the suit under the governing law," and a dispute about a genuine issue of material fact occurs if the evidence is such that "a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248;R.B. Ventures, Ltd. v. Shane, 112 F.3d 54, 57 (2d Cir. 1997).
I. Breach of Contract Claim A. Standard
"To succeed in a breach of contract claim, four elements must be satisfied: the making of a contract, performance of the contract by the plaintiff, breach of the contract by the defendant, and damages suffered by the plaintiff." Coastal Aviation. Inc. v. Commander Aircraft Co., 937 F. Supp. 1051, 1060 (S.D.N.Y. 1996).
Here, dispute centers on the first element and on whether a valid contract was entered into between EA and Insead. Instead claims it only agreed to Version Three of the Termination Agreement, which did not contain an unconditional payment provision, and that it never agreed to Version Four. EA, however, argues that Cognitive Arts had actual and apparent authority to bind Insead to Version Four of the Termination Agreement under agency principles.
B. Cognitive Arts Served as Instead's Agent in Negotiations with EA
Actual authority is created by a manifestations of a grant of authority from the principal to the agent. Reiss v. Societe Centrale du Groupe des Assurances Nationales, 235 F.3d 738, 748 (2d Cir. 2000) (citations omitted); Minskoff v. American Express Travel Related Servs. Co. Inc., 98 F.3d 703, 708 (2d Cir. 1996). "The consent for actual authority may be either express or implied from `the parties words and conduct as construed in light of the surrounding circumstances.'"S S Texfiles Int'l v. Steve Weave. Inc. No. 00 Civ. 8391, 2002 U.S. Dist. LEXIS 14742, at *23 (S.D.N.Y. Aug. 12, 2002) (citations omitted). "` [I]mplied actual authority . . . is dependent on verbal or other acts by a principal which reasonably give an appearance at authority' in a manner that is `brought home to the agent.'"Id. (citing Greene v. Hellman, 51 N.Y.2d 197, 204 (1980)).
Here, Insead endowed Cognitive Arts with the authority to negotiate with Krepps on its behalf. Insead did not communicate directly with Krepps or EA during the entire negotiation process in which numerous versions of the agreement were exchanged. In May 2001, Insead directed Krepps to negotiate with Cognitive Arts. Thereafter, Insead communicated its position to Cognitive Arts, who conveyed it to Krepps. When Krepps attempted to speak to Insead directly, Insead would not respond. Sommers-Kelly responded to Krepps through Reiner at times. The cover letter of the first draft of the agreement sent in May 2001 indicated that it was being sent " [o]n behalf of the Board of Cognitive Arts and Insead" and it "will be signed . . . by all parties." Insead reviewed subsequent drafts of the agreement exchanged by Krepps and Cognitive Arts, and Krepps learned of Insead's comments through Cognitive Arts. Reiner's email to Krepps even cut and pasted portions of Sommers-Kelly `s email with her thoughts on the agreement. Thus, through Reiner's communications, terms in the agreement were inserted at Insead's request.
In a May 7, 2001 email, Sommers-Kelly notified Krepps that she would be unable to speak to him directly and that in the future he should be forwarding his comments "to the team, which includes Cognitive Arts." She also testified that " [b]ecause Cognitive Arts was handling or responsible for the buyout . . . our discussions on the Release Agreement were limited to conversations with Ed Riener, yes." In a May 10 email, Hawawini indicated to Krepps that Insead would not be negotiating with him.
If Cognitive Arts did not have actual authority, it at least had apparent authority to negotiate with Krepps on behalf of
Insead. Apparent authority arises from "words or conduct of the principal, communicated to a third party, that give rise to `the appearance and belief that the agent possesses authority to enter into a transaction. The agent cannot by his own acts imbue himself with apparent authority." Fennel v. TLB Kent Co. 865 F.2d 498, 503 (2d Cir. 1989) (quoting Hallock v. State, 485 N.Y.S.2d 510, 513 (1984)). "[A] principal may be estopped from denying apparent authority if (1) the principal's intentional or negligent acts, including acts of omission, created an appearance of authority in the agent, (2) on which a third party reasonably and in good faith relied, and (3) such reliance resulted in a detrimental change in position on the part of the third party." Minskoff, 98 F.3d at 708.
Here, Insead refused to communicate with Krepps directly and Insead's conduct created the appearance that Cognitive Arts had the authority to negotiate on its behalf. Krepps' reliance on this conduct was reasonable. The cover letter of the first draft of the agreement specifically indicated that it was being sent on behalf of Cognitive Arts and Insead, every draft of the agreement subsequently exchanged contemplated signature by Insead, and Insead subsequently conveyed its comments through Cognitive Arts. Krepps could not investigate Cognitive Arts' authority further because Insead would not reply to his inquiries. Krepps relied on Cognitive Arts' representations regarding Insead's positions in the course of negotiations and in structuring the agreement.
Insead claims that its refusal to talk to Krepps was not necessarily due to agency, but rather its relations with Krepps had soured, Krepps had resigned from Insead's faculty, and Insead feared suit by Krepps. Sommers-Kelly testified that while Insead was willing to enter into a Termination Agreement containing a release from Krepps, it did not do so directly because it found Krepps to be "litigious and irrational" (Sommers-Kelly Dep. at 133.) Furthermore, as it was Cognitive Arts who entered into the Joint Venture Agreement with Krepps, and not Insead, it made sense that Cognitive Arts take on the responsibility of negotiating a release. This does not negate Cognitive Arts' agency for Insead in negotiations with Krepps, but rather strengthens it and provides an explanation for why Insead chose this course of action.
Insead so wanted to avoid communication with Krepps that a version of the Termination Agreement prohibited Krepps from communicating with Insead or its faculty without its prior consent.
C. EA Does Not Establish that Cognitive Arts Had the Authority to Bind Insead to the Termination Agreement
Even if Cognitive Arts represented Insead in negotiations, it does not follow that it had the authority to bind them to an agreement. Parties routinely allow brokers, attorneys, or other third parties to negotiate deals without granting the negotiators the authority to bind them. E.g.,1058 Corp. v. Ergas, 571 N.Y.S.2d 706, 708 (1st Dep't 1991) (broker authorized negotiate deal on behalf of building held not to have authority to close deals without client's approval); Encyclopedia Brown Prods., Ltd. v. Home Box Office. Inc. 25 F. Supp.2d 395, 403-04 (S.D.N.Y. 1998) (attorney authorized to negotiate on behalf of production company held not to have authority to bind client).
Here, any agency by Cognitive Arts did not extend to the authority to bind Insead to the Termination Agreement. All of the drafts of the Termination Agreement circulated by Cognitive Arts and EA included a signature line for Insead and/or Insead Online and specifically indicated that the signature would be provided by "Soumitra Dutta, Dean of Technology." Thus, even if Cognitive Arts served as Insead's agent, Cognitive Arts did not have the authority to sign an agreement on Insead's behalf.
Krepps himself has recognized this. He testified that Insead's signature was required to enforce the agreement against Insead and that Insead had to approve all material changes to the agreement. Thus, in an email discussing Version Four of the Termination Agreement, Krepps asked Reiner to have Sommers-Kelly or Dutta confirm that Insead signed off on the new version of the agreement. Krepps also asked Reiner to fax the complete agreement Insead had agreed to.
The fact that Insead relied on Cognitive Arts to conduct due diligence into Krepps' expenses on behalf of the joint venture in June 2001 does not indicate Cognitive Arts' authority to bind
Insead. Drafts of the Termination Agreement, circulated before the due diligence took place, provided that Cognitive Arts alone would make payments to Krepps. It was thus logical for Cognitive Arts to conduct the due diligence.
EA further highlights that Insead believed itself bound to Version Three of the agreement where Insead did not transmit its signature directly to Krepps and EA, but rather sent the signature page to Cognitive Arts for transmission to Krepps. However, Cognitive Arts acted simply as a transfer agent for the delivery of the signature and the evidence does not establish that it had the authority to bind Insead to an agreement. As Krepps testified, Cognitive Arts' role in transmitting the signature page seemed to be about "logistics." (Krepps Dep. at 176.) Insead agreed to be bound to Version Three because it signed it, not because Cognitive Arts had the authority to bind it.
Additionally, Insead did not engage in misconduct that would have reasonably misled Krepps to believe Cognitive Arts had the authority to bind Insead to Version Four of Termination Agreement. To establish apparent authority requires affirmatively misleading conduct on the part of the purported principal. Associated Dry Goods Crop, v. Towers Financial Corp. No. 88 Civ. 9178, 1989 U.S. Dist. LEXIS 12253, at *10 (S.D.N.Y. Oct. 13, 1989) (finding no apparent authority for attorney entering into a settlement agreement on behalf of client and holding that "the fact that a client knows that negotiations are going on, yet does not inform opposing counsel that his counsel's authority is limited, does not change the outcome."); GE Capital Mortg. Serv., Inc. v. Tavlor, 228 A.D.2d 475, 475-76 (2d Dep't 1996) ("[Plaintiff] failed to produce competent evidence of words or conduct of the [Defendant] that would give rise to the appearance and belief that the [alleged agent] possessed authority to enter into a transaction."). "While agents are often successful in creating an appearance of actual authority by their own acts and statements, such appearance does not create apparent authority."Cooperative Agricole Groupement de Producteurs Bovins de l'Quest v. Banesto Banking Corp. No. 86 Civ. 8921, 1989 U.S. Dist. LEXIS 8368, at *44-49 (S.D.N.Y. Jul. 19, 1989) (granting defendants' motion for summary judgment because plaintiff failed to identify acts of the principal that would create the alleged apparent authority in the third party); Rozsa v. May Davis Group. Inc. 187 F. Supp.2d 123, 130 (S.D.N.Y. 2002) (holding an agent's purported relay of the principal's directions not to "constitute representations or conduct directed by the purported principal").
As Krepps' cases reflect, negotiators will only be found to have apparent authority if the principal engaged in some misleading act beyond directing the plaintiff to deal with the negotiator. In Seetransport Wiking Trader Schiffarhtsgesellschaft MBH Co. v. Republic of Romania, 123 F. Supp.2d 174, 190 (S.D.N.Y. 2000), the Romanian Prime Minister explicitly assured the plaintiff that the country's Minister of Finance had the authority to negotiate and sign an agreement. In C.E. Towers Co. v. Trinidad and Tobago (BWIA Int'l) Airways Corp., 903 F. Supp. 515 (S.D.N.Y. 1995), the issue was whether defendant's Vice-President of North America who negotiated and signed a deal had the apparent authority to bind his employer. Defendant was found to have imbued its Vice-President with such authority when after receiving an un-executed copy of the agreement, which did not identify who should sign the document, the defendant collected the Vice-President's signature and returned an executed document to plaintiff.
Moreover, where an agent entirely abandons the interest of his principal in favor of the agent's or a third party's interest, the agent's conduct will not be imputed to the principal. Christopher S. v. Douglaston Club. 713 N.Y.S.2d 542, 543 (2d Dep't 2000). Here, in attaching Insead's Version Three signature page to Version Four, Cognitive Arts abandoned Insead's interests. See Layola Fed. Sav. Loan Ass'n v. Fickline, 783 F. Supp. 620, 625 (M.D. Ga. 1992) (holding that even if a party was a purported agent, "it stretches the imagination to believe that his authority would be so extensive as to allow him to substitute signature pages."). Although Cognitive Arts and Insead had mutual interests in entering into a Termination Agreement with EA, they were also separate parties with their own interests. At times, Reiner told Krepps that Cognitive Arts was attempting to exact terms from
Insead, and Krepps testified that Reiner made statements along the lines of "[t]his is what we're hoping to get out of Insead."
Moreover, EA had a duty to investigate the validity of Cognitive Arts' apparent authority to bind Insead before concluding that Version Four was in force. There is a duty to investigate an agent's apparent authority when (1) facts and circumstances put the third party on notice; (2) the transaction is extraordinary; or (3) the novelty of the transaction alerts the third party to the danger of fraud. Herbert Constr. Co. v. Continental Ins. Co., 931 F.2d 989, 996 (2d Cir. 1991). Here, Reiner had proven himself to be untrustworthy; Version Four differed significantly from Version Three; and the footers indicated Insead's agreement to Version Three, not Version Four.
The parties dispute whether or not EA was on notice of Insead's objection to non-contingent payment to Krepps. Although this is unresolved, it is clear that Version Three of the agreement differs significantly from Version Four, which provides for up-front, non-contingent payment to Krepps.
Moreover, Krepps' interactions with Reiner regarding Version Two of the agreement put Krepps on notice that Reiner was not to be trusted. Krepps signed Version Two when Reiner falsely notified him that Cognitive Arts and Insead had agreed to it.
Then, Reiner claimed that only certain insubstantial changes needed to be made, but significant changes were made in Version Three'.
Additionally, Reiner sent Krepps Insead's signature page with a Version Three footer. EA tries to minimize the significance of this by noting that document footers were not unique identifiers and that different versions created sometimes had the same document footer. However, EA does not contest that different footers always indicated different versions of the agreement and that Version Four of the agreement had a Version Four footer.
Insead further points to the August 23, 2001 letter that put Krepps on notice that Version Three had been sent to Insead as the final version of the agreement. However, EA disputes that it ever received this letter.
In fact, to a certain extent, EA recognized its duty to investigate whether Insead had agreed to Version Four of the Termination Agreement. EA asked Reiner to fax the entire agreement Insead agreed to. However, he did not further investigate the discrepancies in the footers. Although Insead was avoiding contact with Krepps, Krepps' email merely indicated that the parties had reached an agreement.
The parties disagree on whether or not EA can show detrimental reliance — that it was harmed by Cognitive Arts' representation that Insead had assented to Version Four of the agreement. Insead argues that EA cannot demonstrate that it could have found another buyer or improved its position in any way had it known on September 17, 2002 that Insead had not agreed to Version Four and that by November 13, 2001 EA was aware that an agreement had been reached and, nonetheless, failed to sell its interest between November 2000 and May 2001. EA claims Insead's failure in marketing the course drastically reduced the prospective value of its interest. Therefore a factual dispute exists with respect to detrimental reliance.
D. A Factual Dispute Exists as to Insead's Ratification of Version Four of the Agreement
"Ratification of the acts of an agent only occurs where the principal has full knowledge of all material facts and takes some action to affirm the agent's actions." Prisco. v. New York, 804 F. Supp. 518, 523 (S.D.N.Y. 1992). The assent necessary to demonstrate ratification "must be clearly established and may not be inferred from doubtful or equivocal acts or language." Holm v. C.M.P. Sheet Metal, Inc. 89 A.D.2d 229, 233, 455 N.Y.S.2d 429, 432 (4th Dep't 1982).
In support of Insead's ratification of Version Four of the Agreement, EA points to Insead's failure to respond to Krepps' September 27, 2001 email and to its continued development and marketing of courses after January 2002. On September 27, 2001, Krepps sent Reiner and Insead an email notifying them that payment was ten days overdue and asking for an explanation. EA does not establish that Insead was fully informed of all the circumstances surrounding Version Four of the Termination Agreement and, in fact, Insead claims not to have even been aware of its existence.
However, continued development and marketing of the courses after January 2002 and after Krepps filed his complaint in this action on October 29, 2001, presents an issue of fact as to ratification. Insead claims that it continued to develop the courses based upon its ownership of intellectual property contained in the courses and its belief that Version Three of the Termination Agreement was enforceable. According to Insead, when it first learned about the attachment of a Version Three signature page to Version Four, it attributed this to Krepps and not Reiner. It is thus unclear when Insead had "full knowledge or all material facts" and learned the full extent of Reiner's conduct.Prisco, 804 F. Supp. at 523. Summary judgment is thus inappropriate on EA's contract claims.
II. Quasi-Contract Claims
A. EA's Quasi-Contract Claims Are Note Barred by the Joint Venture Agreement
EA additionally raises two quasi-contract claims, maintaining its entitlement to payment under the doctrines of quantum meruit and unjust enrichment."A `quasi contract only applies in the absence of an express agreement, and is not really a contract at all, but rather a legal obligation imposed in order to prevent a party's unjust enrichment."Clark-Fitzpatrick, Inc. v. Long Island Rail Road Co. 70 N.Y.2d 382, 388 (1987). Thus, quasi-contract claims are barred "where the suing party has fully performed on a valid written agreement, the existence of which is undisputed, and the scope of which clearly covers the dispute between the parties." Id. at 389.
Thus, if Insead is found to have ratified the Termination Agreement, this agreement would serve to bar Krepps' quasi-contract claims.
Insead argues that EA's quasi-contract claims are barred by the Joint Venture Agreement. However, the Joint Venture Agreement only covers the internal operations and financial structure of the joint venture and does not address the provision of services to and compensation by outside entities, such as Insead. The Joint Venture Agreement was solely between EA and Cognitive Arts, and Insead was not a signatory to it.
EA further claims that the Joint Venture Agreement does not govern because Cognitive Arts, one of its signatories, has denied its validity. This claim need not be dealt with here.
B. A Factual Dispute Exists with Respect to EA's Claims of Quantum Meruit and Unjust Enrichment
"To recover in quantum meruit, a party `must establish performance of his services in good faith, acceptance of the services by persons to whom such services were rendered, expectation of compensation, and the reasonable value of such services.'" Weinrich v. Sandhaus, 850 F. Supp. 1169, 1185 (S.D.N.Y. 1994) (citations omitted); accord Freedman v. Pearlman, 271 A.D.2d 301, 304, 706 N.Y.S.2d 405, 408 (1st Dep't 2000).An unjust enrichment claim, while a separate cause of action, requires that the plaintiff establish similar elements: (1) performance of services by plaintiff; (2) the defendant accepts and benefits from the services performed by plaintiff; and (3) the defendant under principles of equity and good conscience should not be permitted to keep the value of the services without restitution to the plaintiff. Wiener v. Lazard Feres Co. 241 A.D.2d 114, 119-20, 672 N.Y.S.2d 8, 12 (1st Dep't 1998).
Here, EA claims to have performed the following services for Insead between October 1999 and April 2001: conducted industry research and identified market opportunities, organized and managed a 3 day conference, created and delivered a conference presentation in London, arranged and conducted interviews at an Insead-sponsored conference, and conducted and taped executive interviews in San Francisco, New York, and Boston. According to EA, Insead accepted and enjoyed the benefits of EA's recording of the January 2000 conference and organization of executive interviews by utilizing these videotaped sessions in online learning proposals to at least two prospective clients and that EA's contributions are embodied in the work product produced by Insead and Cognitive Arts.
EA further claims to have reasonably expected compensation for these services. EA cites to the April 14, 2000 letter from Insead to Krepps, which confirmed that the parties "may collaborate," provided agreement is reached on certain terms and conditions, in support of its expectation of an eventual "formal" agreement and compensation. EA further points to the lengthy negotiation of a release from the Joint Venture Agreement at Insead's request, which centered around appropriate compensation to EA for its services. In the many drafts exchanged, the parties always contemplated that Insead would sign the Termination Agreement.
However, a dispute exists as to the services actually performed for and accepted by Insead and what is the proper measurement of their value. Insead claims that EA performed its services for the joint venture and not for Insead and disputes EA's valuation of the services. Insead does not have to compensate EA for services performed to further its own aims or those of the joint venture. However, if Insead benefitted from EA's services, EA should receive compensation. III. Vacatur of the February 2, 2004 Judgment
Insead cannot argue that it compensated EA through payment to the joint venture because Insead never made payments to the joint venture. It refused to do business with the joint venture and only commenced work with Cognitive Arts once it believed the joint venture was terminated.
In a judgment dated February 2, 2004 and entered on February 17, 2004 ("the February Judgment"), EA's summary judgment motion was granted with regards to Cognitive Arts. For the reasons set forth below, the February Judgment is hereby vacated.
Within this Circuit, "there can be no question" that a district court has the power to vacate its own judgment. See Fort Knox Music Inc. v. Baptiste, 257 F.3d 108, 110-11 (2d Cir. 2001). As the Second Circuit has had recent occasion to explain:
Rule 60(b) of the Federal Rules of Civil Procedure allows the district court to grant relief from a judgment for "any . . . reason justifying relief from the operation of the judgment." Fed.R.Civ.P. 60(b)(6). While normally such relief is sought by motion of a party, see Fed.R.Civ.P. 60(b), nothing forbids the court to grant such relief sua sponte.Id. at 111 (citing International Controls Corp. v. Vesco, 556 F.2d 665, 668 n. 2 (2d Cir. 1977)); cf. Sea Spray Holdings, Ltd. v. Pali Financial Group, Inc., 269 F. Supp.2d 356, 365 (S.D.N.Y. 2003) (vacating a default judgment sua sponte under Rule 60(b)(6)); N.A.A.C.P. v. Acusport Corp., 216 F. Supp.2d 59, 61 (E.D.N.Y. 2002) (noting that a district court may act sua sponte and reconsider its own orders in light of changed circumstances). See generally United States v. Pauley, 321 F.3d 578, 581 n. 1 (6th Cir. 2003) ("Circuits are split on the question whether a district court may grant Rule 60(b) relief sua sponte. The Tenth Circuit agrees with our view that such relief is impermissible. The Second, Fourth, Fifth, and Ninth Circuits have held that such sua sponte relief is permissible.") (internal citations omitted).
A district court may thus vacate a judgment sua sponte, provided the parties have notice. See International Controls Corp. 556 F.2d at 668 n. 2 ("[T]he district court . . . had power to decide sua sponte whether its judgment should be vacated, provided all parties had notice. . . .") (citations omitted). Notice of this Court's intention to vacate the February Judgment was provided to EA on March 24, 2004, and EA thereafter submitted a letter asserting its entitlement to summary judgment.
EA's motion for summary judgment against Cognitive Arts was granted in the February Judgment due to lack of opposition. It is the law of this Circuit, however, that "even when a nonmoving party chooses the perilous path of failing to submit a response to a summary judgment motion, the district court may not grant the motion without first examining the moving party's submission to determine if it has met its burden of demonstrating that no material issue of fact remains for trial" and that summary judgment is appropriate as a matter of law. Amaker v. Foley, 274 F.3d 677, 681 (2d Cir. 2001). See also Holtz v. Rockefeller Co. Inc., 258 F.3d 62, 74 n. 1 (2d Cir. 2001); Booker v. Federal Reserve Bank of New York, Nos. 01 Civ. 2290 (DC) 01 Civ. 2291 (DC), 2003 WL 1213148, at *12 (S.D.N.Y. Mar. 17, 2003); Mattel Inc. v. Pitt, 229 F. Supp.2d 315, 320 (S.D.N.Y. 2002). It was therefore error to issue the February Judgment without' first determining whether EA had met its burden on its unopposed motion for summary judgment on its contract claims against Cognitive Arts.
Although EA argued in its motion papers for summary judgment dismissing Cognitive Arts' counterclaim, no such relief was specifically sought in EA's Notice of Cross-Motion for Summary Judgment. In light of the vacatur of the February Judgment, it is not necessary to address whether the February Judgment, by granting EA's motion, also eliminated Cognitive Arts' counterclaim.
As discussed above, four elements must be shown to establish a breach of contract: "the making of a contract, performance of the contract by the plaintiff, breach of the contract by the defendant, and damages suffered by the plaintiff." Coastal Aviation. Inc. 937 F. Supp. at 1060. To determine whether EA has satisfied these four elements, and in the absence of an opposition by Cognitive Arts, the facts set forth by EA in its Local Rule 56.1 statement are taken as true for the purposes of this motion. See LeSane v. Hall's Sec. Analyst, Inc. 239 F.3d 206, 211 (2d Cir. 2001);Baker v. Dorfman, 239 F.3d 415, 422 (2d Cir. 2000) (citing Gubitosi v. Kapica, 154 F.3d 30, 31 n. 1 (2d Cir. 1998)). Where, however, "the record does not support the asser-tions made in a Local Rule 56.1 statement, those assertions should be disregarded and the record reviewed independently." Holtz, 258 F.3d at 74 (citation omitted).
As set forth elsewhere in this opinion, the record demonstrates the existence of certain factual disputes as to whether Version Four constitutes a valid contract entered into by EA, Cognitive Arts and Insead. Although these factual disputes center on whether Insead agreed to Version Four rather than whether Cognitive Arts so agreed, their existence precludes a grant of summary judgment to EA on its contract claims against Cognitive Arts in the absence of any showing that some or all of Version Four may be separately enforceable by EA against Cognitive Arts. This conclusion requires the vacatur of the February Judgment pursuant to Fed.R.Civ.P. 60(b)(6).
Conclusion
For the reasons set forth, Insead's summary judgment motion is denied, as is EA's summary judgment motion against
Insead. The February 2, 2004 judgment granting EA's motion against Cognitive Arts is hereby vacated.
It is so ordered.