# Petition for Writ of Certiorari — Parke-Hayden, Inc. v. Loews Theatre Management Corp.

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1994
- **Citation:** 513 U.S. 875

## Text

Supreme Court, U.S.
rILBSsS -

94 195 JUL 28 1994

October Term, 1994
PARKE-HAYDEN, INC.,
Petitioner,
VS.
LOEWS THEATRE MANAGEMENT CORP.,
Respondent.

Petition for Writ of Certiorari to the United States Court of
Appeals for the Second Circuit

PETITION FOR WRIT OF CERTIORARI

ISRAEL WEINSTOCK
Counsel of Record
Attorney for Petitioner
140-06 Rockaway Beach Blvd.
Belle Harbor, New York 11694
(718) 318-1000

L te (800) 3 APPEAL « (800) 5 APPEAL (800) BRIEF 21

QUESTION PRESENTED FOR REVIEW

The District Court first found an
employment contract between petitioner and
respondent, then, expressing a personal
bias against litigants such as petitioner,
prevented the question of such contract
from being specially submitted to the
Jury, and thereupon abrogated the Jury’s
Verdict due, inter alia, to its own prior

omission of the said question.

Did the District Court's abrogation
of the Verdict violate petitioner’s VIIth
Amendment rights, when the Court’s General
Charge included the purportedly omitted
Question, respondent’s key employees
admitted its employment of petitioner so
as to procure its desired theater lease,
and New York law authorized the Verdict
due to respondent’s subsequent arbitrary

abrogation of the lease?

ii

Page
QUESTION PRESENTED FOR REVIEW......... i
ee | Soe. ES, “a. 6 i oo 6-0 & 6 6 & eek 1ii
REPORTS OF OPINIONS
a Ce ee ee GS 0g & eee Cd eee ewes 1
GROUNDS OF JURISDICTION cc cc cccccccsses 2
U.S. CONSTITUTION, AMENDMENT VII...... 3
STATEMENT | Re Ne ek er eee 3
REASONS FOR GRANTING THE WRIT......... 27
Blatant Legal and Factual
Error In Court’s Decasacmh....... 29
Clear “Fee Shifting” Rule
ie ee Se a oa hae ee hs en Se 32
Blatant Violation
Of Seventh Amendment ........... 36

GOmGTUGEO os caccek cewek ante 38

ili

TABLE OF AUTHORITIES
CASES
Aikens v. State of Wisconsin, 195 U.S.
pO ee | 27

Arnold v. Schmeidler, 144 App. Div.
408, 129 N.Y.S.2d 408 (lst Dept.
NESE TREES S21 Si I ee er 31-32

Charles H, Coppard, Inc. v. Chesbro, 34

A.D.2d 879, 312 N.Y.S.2d 444, 445 (4th
a ie os cig tb wide ald o és beck é ee 31

& Carbon Corp., 370 U. S. 690, 82 S.

I I ode kino O'S wD Coe Soe cc cece 36
Duross Co. v. Evans, 22 A.D.2d 573,
574, 257 N.Y.S.2d 674, 676-77 (1st
I oe 32-33

Fortunato v. Ford Motor Co., 464 F.2d 962
(2nd Cir. 1972), cert. denied, 409 U.S.

ee Ee Oe Be. | 37
Galloway v. United States, 319 U.S. 372,

ee ee eceen 36-37
Grossman v. Herman, 266 N.Y. 249, 253, 194
eee OE cee bees 33-34

Julien J, Studley, Inc. v. New York News,
Inc., 122 A.D.2d 633, 505 N.Y.S.2da 419

eee Pe bec Cee eee ae 33-34
Kaelin v. Warner, 27 N.Y.2d 352, 318
Lg 8S Sn ae 31

Kinnell v. Mid-Atlantic Mausoleums, Inc.,
a en eee ee ee EU eee ences 37

iV
Konok v. Champlain Valley Physicians
Hosp., 733 F.2d 1007 (2nd Cir.), cert.
denied, 469 U.S. 884, 104 S. Ct. 253
I iii ee ew eee 37

Lane—The Real Estate Department
Store, Inc. v. Lawlet Corp., 28
N.Y.2d 36, 319 N.Y.S.2d 836, 838
FO 2 nO ERA aE RO RCD Che Eee es Cee ee as. aas 35

McKnight v. McGuire, 117 Misc. 306, 191
N.Y.S. 323 (lst Dept. Appellate Term

ph ence ep ai AR MEARE ASE GRY Se eee rs a eK 2 ee eae 33
Rogers v. Missouri P. R.R., 352 U.S. 500,
oi a i ee 36

Schaechter v. Regency Properties, Inc.,
115 A.D.2da 981, 497 N.Y.S.2a@ 793 (4th

Ee bs sk ha a eek cbs Gauss ows 32
Sirota v. Silitron Devices, Inc,., 673 F.2d
566, 573 (2d Cir.), cert. denied, 459 U.S.
a Pe i ee re ea 37
U.S. v. Miller, 997 F.2d 1010, 1023 (2nd
i eC. ERS A a eg oa ey Te ren 5
Webb v. Illinois Central R.R., 352 U.S.
BEC ae Ee eee 36
Westhill Exports, Ltd. v. Pope, 12

N.Y.2d 491, 496, 240 N.Y.S.2d 961, 964
ee a ae 32
Wilkerson v. McCarthy, 336 U.S. 53, 63, 69

SiGe. Mae SAGE Bk oe oe eh en oseeee HUH at, 36

v
CONSTITUTIONAL PROVISIONS

United States Constitution, Amendment

VBS Ce vecev cabewe vee uh whee 8 ke ee ewe

STATUTES

ae U.8.C. 9 Sees See ee cks ekeesn sea

ao Uoe GC. B. Seem SOT Scie l eves thea tae

Rule 10 .1. (a) and (c) of this
COMPS. 6's 06a ee ESE Ae Ree 28,

OTHER AUTHORITIES

5A P. Kurland, D. Epstein, C.

Levine, F. Carlisle, K. Shirley,

Moore’s Federal Practice, q 50.02

ere Mk Bere ar ern bose eee

vi
APPENDIX

Appendix A— Order of the United States Court of Appeals
for the Second Circuit Filed April 28,1994 .........

Appendix B — Order of the United States Court of Appeals
for the Second Circuit Filed March 15,1994 ........

Appendix C — Opinion of the United States District Court
for the Southern District of New York Dated July 24,
OOTP ET TO PE rere Pr ey Perry Ty ere Tee

Appendix D — Opinion of the United States District Court
for the Southern District of New York Dated July 27,
BD shsicntsctenvesdccsakhsenbereas pea b eae

Appendix E— Opinion of the United States District Court
for the Southern District of New York Dated April 20,
PRE cise taviaethesbesasevevedeconsebesennees

la

4a

24a

a

]
REPORTS OF OPINIONS

DELIVERED IN THE CASE
The District Court’s April 20, 1992
opinion denying both parties summary

judgment is reported -< 789 F. Supp. 1257.

The District Court’s opinion both denying
respondent’s motion to disqualify
petitioner’s trial attorneys and
discussing the landlord mortgagee
partnership agreement at times relied on
respondent is reported at 794 F. Supp.

525.

The Court of Appeals’ summary affirmance

is reported at 22 F.3d 1091.

2
GROUNDS OF JURISDICTION

(1) The date of the entry of the judgment
below sought to be reviewed is March

15, 1994.

(ii) The date of the order of the Court
below denying petitioner’s timely
petition for rehearing is April 28,

1994.

(111i) The statutory provision believed by
' petitioner to confer on this Court
jurisdiction to review the judgment
below by writ of certiorari is 28

U.S.C. § 1254 (1).

3

U.S. CONSTITUTION, AMENDMENT VII:

In Suits at common law, where the value in
controversy shall exceed twenty dollars,
the right of trial by jury shall be
preserved, and no fact tried by jury,
Shall be otherwise re-examined in any
Court of the United States, than according

to the rules of the common law.

STATEMENT OF THE CASE

Petitioner is a commercial real
estate brokerage company, whose sole
employees are Hy Teich and his brother.
Petitioner’s action for damages
representing its lost broker’s commission
commenced on January 9, 1991. Jurisdiction
in the District Court was predicated on 28
U.S.C. § 1332 (1988), petitioner being a
New York corporation with its principal
place of business in New York and

respondent a wholly owned subsidiary of a

4

Delaware corporation with its principal
place of business in New Jersey, the
Delaware holding in turn being a wholly
owned subsidiary of Sony Corporation, a
Japanese concern, and the amount in
controversy exceeding $50,000, exclusive
of interest and costs.

Cross-motions for summary judgment
resulted in an April 20, 1992 District
Court Opinion explicitly determining that
respondent “employed” petitioner to
acquire a lease at or near the
intersection of Broadway and 72nd Street
in Manhattan for a planned new theater
complex; and that petitioner thereafter
materially aided respondent not only in
locating the lease site but in starting
negotiations with the property’s landlord
and in moving them forward in the precise

manner desired by respondent prior to the

ultimate preparation of a final lease.

5

The District Court’s central legal
determination in its April 20, 1992
decision read:

“In New York, absent an agreement
to the contrary, a real estate
broker earns his commission when
he procures a buyer who is ready,
willing and able to purchase at
the terms set by the seller

The affidavits and deposition
testimony . . . leave no doubt
that, under relevant New York

law, Loews emploved Teich to
r r f h 72nd

Street Property by soliciting and
accepting his services on Loews’
BGRALE".° Tee. ©. Bape. i257, at
1263. (emphasis added).

This ruling received immediate and
prominent coverage in the Wall Street
Journal”: and moreover has since been
cited with approval by the Second Circuit
Court of Appeals. U.S. v. Miller, 997 F.2d
1020, 12023 tana Cis. 2993).

Nevertheless, the District Court

denied petitioner’s motion for summary

judgment, finding the terms of its agency

“See Judge Sticks Buyer With Broker's Fee,
Wadi @t.. d., @peil 26, 32992, at B6,.coi.
3.

6

contract with respondent, j.,e., as

producing a “deal .. . palatable... to
both parties” “too indeterminate to form a
basis upon which to conclude .. . a
motion for summary judgment.” 789 F. Supp.
at 1263-64 and Note 2. The Court further
determined that despite the parties’
agreement on all of the terms as
determined in their final lease,
respondent’s access to results from rock
borings and asbestos tests under the site
might conceivably have constituted a
condition precedent to its signing the
lease, which condition was further
communicated to the Owner. JIJd., at 1264-
65.

At trial respondent’s site selector
Gil Littman testified that on his first
day of work in December 1987, he called
“about 88 brokers that I have been dealing
with for many years” to carry into effect

respondent’s intent to acquire theater

EA SS SEES son treme

7

sites in both Manhattan and its suburbs.
Littman testified in this regard: “Working
with brokers is a normal part of your job.
When you want to get a site the normal way
to do that is to get a broker who knows
the area.” One of the 88 brokers contacted
by Littman was petitioner. (J.A. 48, 50).*

According to Littman, petitioner at
this time was instrumental in developing
for respondent’s consideration additional
theater sites on Long Island and in
Brooklyn; Danbury, Connecticut;
Pree Srey Massachusetts; and Tinton
Falls, New Jersey (J.A. 53-58), and in the
same time period acquired for respondent a
further site at Third Avenue and 11th
Street in Manhattan.

Subsequent to petitioner’s Third

Avenue and llth Street acquisition, the

president of respondent’s then corporate

ey i Mena hs she

*“J.A.”" references are to the “Joint
Appendix Pursuant to F. R. App. P. 30” 4
filed by petitioner in the Court below. 2

8

parent, Columbia Pictures Entertainment,
Inc., Lew Korman, informed Littman that
Columbia strongly desired that respondent
acquire a further site at the Broadway and
72nd Street intersection in Manhattan.
Korman’s reasons for his interest in this
intersection included respondent’s
possession of a successful functioning
theater complex twelve blocks north, at
Broadway and 84th Street, and the crucial
paradox that the Broadway and 72nd Street
intersection, despite being “perhaps the
biggest trading area in the city” had “no
real theater”. (J.a.°:° Si) 4640 0Han
thereupon contacted three brokers to this
end, among them petitioner.

According to Littman, Teich
thereafter took Littman, Littman’s
“construction man, George McNeill and Jack
Held, an architect” to the Beacon Theater,
at 74th and Broadway. There, Littman
testified: “We all loved the site, great

location, perfect for a theater, but the

9

city has it landmarked so you can't do
anything with it”. As the parties exited
the Beacon, Littman testified:

“A. [W]e headed south towards
72nd. We came to 72nd and
Broadway[.] Teich pointed to the
building on 72nd and Broadway,
the southwest corner, and said,
‘{H]ow would you like that for a
theater?’ I immediately looked at
him and I recall the exact words
I told him. I said, ‘[B]Joy, you
are hired, get me that site.’

That is exactly what I told him’.
(J.A. 60).

Littman testified that he thereafter
reported to Korman: “Teich is on it and
it's owned by his friend Phil [Pilevsky,
general partner of the property's owner,
Broadway-72 Associates] and he got
instructions to get it.” Korman then
responded, Littman testified, by saying
“the same thing, ‘get it.’” (J.A. 61).

Teich thereafter reported back to
Littman that Pilevsky had no interest
whatsoever in leasing the site to
respondent, because he was making “more

money” with his existing commercial

10
tenants. (J.A. 62). Littman relayed
Pilevsky's categorical rejection to
Korman, who then, according to Littman,
once again insisted that petitioner
procure the site for respondent. Littman
thus testified:

"A. « « « Sie fRenmens eaae,
[‘GJet Teich, bust his horns, do
what you have to do. Get the
location’. I in turn got back to
Teich. I never forget, I called
him 12[:00] at night to make sure
he was home. I said, ‘[BJoy, we
want the site. You do what you
have to do. I will meet with you

and Phil. Get the location”.
(J.A. 63).

Littman some time thereafter
received a telephone call from the
landlord, Pilevsky, inviting Littman to a
meeting with himself and Teich in order to
discuss a letter received from Korman,
further urging Pilevsky to lease the site
to respondent. In the course of this

meeting, Littman testified:

“A. Pilevsky took the [Korman]
letter, tore it up and threw it

away.
Q. What did Mr. Teich do?

11

A. He went berserk. He grabbed
him. He said, ‘[({W])hat, are you
crazy? I want that for Littman
for Loews’ theater.’ I never saw
Teich that way. He flipped out
and he went after Phil[,] ina
friendly way[,] of course.” (J.A.
63-64).

Littman further testified that Teich
did more than locating the site and ‘going
after’ its owner, his friend Pilevsky.
Under the direct instructions of
respondent’s former President and Chief
Operating Officer, Jerry Esbin, Teich
further acted as respondent's exclusive
agent in gaining Pilevsky’s assent to
respondent’s essential lease terms.
Littman testified in this regard:

“Q. What role, if any, did you
ask Mr. Teich to play to help
Loews in connection with those
negotiations?

A. Well, start them and any time
we had anything to negotiate
further or get a lower rent we
would get Teich to handle it.

QO. Who was it who would get
Teich to handle it?

A. Esbin would get him to handle
it. I would get him to handle it.
Esbin would tell me, I would tell
Teich.

Q. Give us an example of
something that Mr. Esbin asked

12

you to get Mr. Teich to do in
terms of the deal that Mr. Esbin
asked you to get to Teich to.

A. I think he wanted the rent
lowered. So I told Teich to get

it lowered, and he got it
lowered.

Q. Did Mr. Teich respond to your
request?

A. Yes.

Q. And he --

A. He flipped out and got it
lowered.” (J.A. 64-65).

Esbin’s testimony was in complete
accord with Littman’s on this point. At
the outset of his cross-examination Esbin
thus graphically described the avidity
with which he, too, coveted Broadway and
72nd Street as a possible theater site for
Loews. In response to respondent’s trial
attorney’s question “[{W]Jhat did [Mr.
Littman] tell you [with respect to]
the 72nd Street transaction” Esbin thus
replied:

“He [Littman] said there is a
great location on 72nd and
Broadway to put up a theater, and
right off the bat I started to
Salivate because if I had the
money I would have put it up

myself.” (Esbin trial transcript,
at 438).

13
Esbin further testified that if

respondent: “had a problem with the
agreement or if we found something lacking
that Loews wanted probably to get a better
advantage, I would talk to Hy Teich or
[respondent’s vice president for real
estate] Ken Benjamin. I would tell Ken
Benjamin to talk to Hy Teich at times and
he would, and at times I would talk to Hy
Teich to try to resolve certain
problems.” (Esbin trial transcript, at
406-07). Esbin estimated that Teich
“went to Pilevsky . . . on about 80
percent of the time I needed to get
something done”. (id., at 408).

Esbin included among the "things"
that Teich accomplished for him both the
reduction of a year’s rent on the property
and a delay in any rent increase from the
fifth to the eleventh year of the lease.
With respect to the rent, Esbin testified:
“(W]e were at loggerheads. So I called in

Teich and I said, ‘[Y]Jou better get this

14

straightened out .. . The rent is too
high now and it will just be impossible. ’
Hy Teich went back to Pilevsky and we then
had a meeting with Pilevsky and it was
agreed .. . that the increase will be in
the eleventh year”. (id., at 409)

Esbin concluded his discussion of
respondent’s two-year employment of
petitioner by observing (id., at 409-10):

° . . © would say he was
performing services not only for
Loews but really for himself
because if these things didn’t
work the deal would have been
gone. I couldn’t live with a deal
in certain ways. So Hy Teich
worked for me to get my deal done
and at the same time he was
working for himself to get his
deal done. .. . He had a role
for himself and by my asking him
what to do, he was very prominent
in getting things done for
myself. Personally I don't think
I could have got some these
things done going head to head at
the beginning with Phil
Pilevsky”.

Between January and March 1990,

respondent’s and Pilevsky's attorneys

prepared and exchanged comments on

15

succeeding drafts of the proposed lease,
all of which drafts and comments, with
respondent’s evident knowledge and
consent, were communicated to petitioner.
(FAs BES, 216-27, 234-36, 243).
Respondent’s parent, Columbia, also
approved the lease. (J.A. 228, 242).
Petitioner separately agreed with
Pilevsky, who in accord with customary New
York real estate practice was expected by
all parties to pay petitioner’s commission
on the deal as landlord (J.A. 59), ona
figure of $792,333.00, based on
respondent’s agreement to pay $1,100,000
monthly in rent. (J.A. 207).

The parties thereafter completed a
final lease dated April 6, 1990, and
projected a May 1, 1990 closing date,
without stipulating in any way that time
was of the essence. (J.A. 99-202; 247).
The final lease further included an
Article 35, in which respondent and

Pilevsky identified petitioner as the sole

16

broker with whom any “conversations or
prior negotiations were had” by them in
connection with the lease and further
agreeing to hold each other harmless from
any “claims for brokerag2 commissions”
made by any other “broker or finder”.
(J.A. 179).

The final lease’s May 1, 1990
closing was aborted by a change in
respondent’s corporate ownership. Sony
Corporation having acquired respondent’s
parent, Columbia, in or about September
1989, Sony thereupon replaced Korman. In
or about the end of April 1990,
contemporaneously with the parties’
preparation of the final lease, Columbia’s
new management installed Alan Friedberg as
respondent’s chief executive. Friedberg
stated in an April 16, 1990 letter to
respondent’s General Counsel, Seymour H.
Smith, which letter was shown to the Jury,

that he killed the Broadway and 72nd

Street deal negotiated by Littman, Esbin,

17

Korman and petitioner due to his personal
opposition to several of the essential
lease terms already agreed on between
respondent and landlord Pilevsky. (J.A.
68-69, 203-06); see also 789 F. Supp. at
1261.

Subsequent to petitioner’s resting
of its trial case, respondent’s attorney
presented the District Court with a two-
part Fed. R. Civ. P. 50 (a) (1) motion,
the first branch of which asserted that
“at the time Loews decided not to proceed
with the lease” the evidence was
insufficient to show that the property’s
mortgagee had consented to it, as required
by the Pilevsky partnership agreement

(J.A. 276-77)* and the second branch of

“Beyond the fact that Friedberg’s above-
referenced April 16, 1993 letter to Smith
made it very clear that the presence or
absence of the mortgagee’s consent was
perfectly irrelevant to Loews’ decision to
abort the deal (J.A. 205), petitioner’s
trial attorney reminded the District Court
that it had found in its second opinion in
this action that the partnership’s escrow

Footnote continued

18

which resuscitated the “indeterminate
terms” theory appearing in the Court’s
April 20, 1992 summary judgment decision,
namely, that “the Petitioners have failed
to prove an agreement that existed between
respondent and the petitioner in this case
which was of sufficient definiteness to be
enforceable under the laws of New York”.
(J.A. 278).

Despite Teich's attorney's clear
rejoinder to this argument that the amount
of Teich’s broker's commission was not
only totally irrelevant to the Teich-Loews
agency agreement but in addition had been
definitely “reasonably certain” and
“agreed upon”, in this particular instance

between Pilevsky and petitioner,*~ the

agreement stipulated a never-attained May
31, 1990 deadline for the mortgagee's
consent. (J.A. 37, 279; 794 F. Supp. 525,
528).
*Teich's attorney further explained
petitioner’s theory of legal recovery to
the District Court, stating: “There is no
need that it be a term of an agreement as
to the financial terms of it between Loews
Footnote continued

19

District Court reacted to respondent’s
motion by demonstrating a callous
indifference to its constitutional duty
clearly to delineate the legal boundaries
of petitioner’s claim.

Thus, while denying respondent’s
dismissal motion under the correct theory
that petitioner’s performance of its
“employment” by respondent earned it its
commission due to respondent’s backing out
of the lease at the last moment, the
District Court, resuscitating once again
the “indefinite terms” objections voiced
in its April 20, 1992 summary judgment
opinion, nevertheless purported to
“dismiss” petitioner’s “contract claim’,
on the erroneous ground that petitioner’s
employment at the outset lacked the

preliminary precision thought by the

and the broker because indeed Loews was
not supposed to pay the broker except at
the end by backing out of the deal.” (J.A.
281) (emphasis added).

20
District Court to be a prerequisite to the

existence yel_ non of any

all.

The Court thus stated:

“My conclusion with respect to
the motion is yes and no. There
is not enough evidence in this
record to establish terms and
conditions of an agreement
between Loews and Parke-Hayden
with respect to the amounts or
time of payment. At least those
two conditions are certainly not
clear.

So a contract claim on behalf of
Parke-Hayden against respondent
is dismissed.

However, as I understand the
law, and I may be wrong about
this and I would be pleased to be
corrected at some other time, in
the event there is an agreement
between the parties on all the
essential terms and agreement,
even though it is not executed
and therefore not an enforceable
agreement under the statute of
frauds, if the buyer or in this
case the lessee frustrates the
agreement, the frustrator, in
this case the lessee, can be held
liable for the fee.

In other words, the broker
has earned his fee and is not
going to be deprived of the fee
in the event that the |
lessee determines he is not going
to go forward in the face of a
completed agreement.” (J.A. 285-
86) (emphasis added).

“agreement”

at

21
Further pressed thereafter by

respondent’s trial attorney to elucidate
his reasoning respecting its denial of
respondent’s motion, the District Judge
reiterated pot only its above-quoted
deliberate indifference to petitioner’s
basis for recovery but an evident personal
bias against litigants happening to
exercise petitioner’s particular

. *
profession.

“See April 28, 1993 proceedings (J.A. 296-
97, 299) (Court proclaims: “[T]his is an
area of the law which I am frank to tell
you I think is extremely confusing and

results from the courts cooking up a claim

really see a basis for it.

Parenthetically, no sense wasting time on
it, but what has created this problem is
the peculiarity of the real estate
profession where the broker is serving two
masters and is paid by one. Anybody who
has rented an apartment or bought a house
is very familiar with the bind in which
the innocent — and maybe Loews isn’t so

innocent — but the innocent purchaser
Finds bi Ee

Footnote continued

22
The Court thereafter on May 3, 1993

sent the case to the jury with the
following five Special Interrogatories
authorized by Fed. R. Civ. P. 49:

“Did Parke-Hayden, Inc.
(“Parke-Hayden” ) have an
agreement with [the landlord
partnership] Broadway 72
Associates to be paid a brokerage
commission in connection with the
execution of a lease to
respondent Theater Management
Corp. (“Loews”) of a portion of
the property owned by Broadway 72

ey N pee hic]
get around”.) (emphasis added); April 28,
1993 proceedings (J.A. 300-01) (Court
opines that potential quantum meruit basis
for recovery — put forward by petitioner’s
trial attorneys in evident desperation at
the Court’s above-quoted “dismissal” of
petitioner’s “contract claim” — “doesn’t
go to the jury at all because it's an
equity claim”, stating: “I don't see how
it goes to the jury so I can just quietly
deep sixth [sic] it as far as the jury is
concerned and then get to it in my own
time” thereupon querying counsel: “I don't
see it as a jury case, do you?”); April
30, 1993 proceedings (J.A. 314)
(addressing potential implied contract
basis for recovery, Court states: “Implied
contract by definition, it seems to me,
means you can't find a contract on the
facts.”)

23

Associates at Broadway and 72nd
Street (the lease)?

Was Broadway 72 Associates
ready, willing, and able to enter
into the lease?

Did Loews have a valid
reason not to proceed with the
execution of the lease?

Did Loews act in bad faith,
wrongfully or arbitrarily in not
proceeding with the execution of
the lease?

What damages, if any, to
which Parke-Hayden is entitled as
a result of the conduct of
Loews?” (J.A. 353-54).

The District Court's General Charge
supplemented the Special Interrogatories
by reinforcing in several ways the idea
that respondent need be found to be fully
satisfied with the lease terms acquired
for it by petitioner, as said terms were
communicated to petitioner by Littman and
Esbin. Thus the Instructions at numerous
points stated that respondent had to be
found to have “benefited” from, was
“satisfied” with, got “the deal it wanted

to get” and achieved its own “essential

terms” in the terms procured by petitioner

24

on its behalf. (J.A. 320, 323, 325, 326,
329, a3hy. 3eer
Under the heading “Loews’ Wrongful,
Arbitrary Conduct or Bad Faith Acts”, the
Instructions in fact concisely stated the
essence of petitioner’s legal claim
against respondent:
“The question is whether there
was a deliberate attempt in bad
faith to cause the failure of
negotiations. A party who has
engaged the broker to procure an
agreement cannot, after
negotiating terms to the point
that completion of the
transaction is imminent, then
change his mind and willfully

prevent a final agreement.” (J.A.
330).

The Jury on May 3, 1993 answered the
Court's Special Interrogatories and
General Charge by finding respondent
liable to petitioner for $792,553.00, the
full amount of his broker’s commission
initially agreed upon with Pilevsky. (J.A.
355-56, 207). ;

Respondent on May 19, 1993, prior to

the entry of Judgment on the Jury's

a

verdict, renewed its prior Fed. R. Civ. P.
50 motion, joining with it motions for a
stay of enforcement of the Verdict and for
a new trial. Respondent’s motion argued at
great length the same “indeterminate
terms” theory respecting the Teich-Loews
agency contract appearing in both the
District Court’s summary judgment opinion
and its denial of respondent’s Rule 50
motion. It further asserted, without any
additional elaboration -—- and indeed
without explaining in any manner whether
it was referring to alleged the lack of
mortgagee consent, raised by respondent’s
trial attorney on April 27, 1993, or, on
the other hand, to the year-old issue of
asbestos tests, surfacing in the District
Court’s summary judgment opinion but
completely omitted by respondent’s
attorney on April 27, 1993 — *“{T)he
landlord was not, at any time, ready,

willing and able to execute and deliver a

26
lease to respondent (see Special Verdict

Form % 2)”.*

The District Court thereafter on
July 24, 1993, without entering Judgment
on the Jury's verdict, issued an Opinion
and Order dismissing petitioner's
Complaint, or in the alternative (for the
identical reasons) granting a new trial,
pursuant to respondent’s motion. (J.A.
357-80). The Court’s opinion (see Appendix
hereto) is a discursive one, whose central
apparent point concerns the Court’s
deliberate failure specially to submit to
the Jury the Question of respondent’s
“contract” with petitioner. (see pages 3
and 6-7 thereof). The Court’s opinion
further enunciated certain flatly

erroneous findings of law and fact

*Respondent additionally asserted,
similarly without any further elaboration
or explanation: “[T]Jhere was no valid,
enforceable contract between petitioner
and Broadway-72 Associates as required by
the Court’s instructions (see Special
Verdict Form q 1)”.

27
directly contradicting its April 20, 1992

summary judgment opinion, discussed under

“Reasons for Granting the Writ”, below.

REASONS FOR GRANTING THE WRIT

Justice Holmes declared in Aikens vy.

State of Wisconsin, 195 U.S. 194, 25 S.Ct.
3, 6 (1904) (quoted in Wilkerson vy.
MeCarthy, 3384 U.S. S3, 63, GF S.ce. 418
(1949)): “But it must be assumed that the
constitutional tribunal does its duty, and
finds facts only because they are proved.”
The callous indifference to “the
constitutional tribunal” manifested by the
Article III District Court Judge herein,
i.e., successively to his own decision
earlier in this same litigation, to the
Verdict of the Jury following his own
Instructions, and — in arbitrarily and
Ccapriciously overturning the Verdict, to

the decisions of this Court and the Court

of Appeals -—- reveals an abuse of the

28

judicial power of the United States so
blatant and cynical as to cry out for this
Court’s exercise of its supervisory power.
The Court of Appeals’ affirmance, solely
on the basis of what it chose to call
“Judge Sweet’s thorough and well-reasoned
opinion below” clearly “sanction[s]” the
District Court’s abuse herein of its noble
constitutional role, within the meaning of
Rule 10 .1. (a) of this Court.

Here, a published opinion of the
United States District Court for the
Southern District of New York, prominently
displayed in the nation’s leading
commercial news service and followed
thereafter as guiding jurisprudence in the
leading federal Circuit, has now been
directly contradicted, by the same
District Court initially authoring the
opinion. Moreover, this Court delights in
proclaiming before litigants such as

petitioner not only that they manage to

“get something each way” but that he “may

29

be wrong about [the law governing their
claims]” and “would be pleased to be
corrected at some other time’.

Here, that “some other time”
occurred after the Court had sent the case
to the Jury under Special Interrogatories
well supporting its ensuing Verdict. The
District Court had this case right the
first time; its feverish attempt to undo
the Verdict produced by its
Interrogatories and General Instructions
cannot stand against this Court’s power to
enforce “the accepted and usual course of

judicial proceedings”.

Blatant Legal and Factual Error

The District Court's July 24, 1993
opinion rests on the following clearly
erroneous conclusions of law and fact, all

of them flatly contradicting the same

court’s April 20, 1992 summary judgment

opinion:

30

(i) The parties having been prevented by
respondent from executing their final
lease of April 6, 1990, the District
Court on this basis erroneously
concluded: “This fee-shifting of the
broker's commission [sought by
petitioner herein] has occurred only
in cases where the transaction
actually closed . , . if the
transaction does not close for
whatever reason, the broker can
recover only from the party which

employed him.” (J.A. 368).

(ii) Flatly ismenten the testimony of
Littman and Esbin (as well as Teich
and Pilevsky) conclusively
demonstrating respondent ’s
solicitation and two-year use of
petitioner’s services, the Court’s
opinion further purported to find as

a fact: “Although Loews requested

Parke-Hayden to locate properties in

3]

which it might be interested, Loews
never requested that Parke-Hayden act
as its broker in connection with the
potential lease transactions.” (J.A.

3763.”

“The District Court’s opinion further
reiterated at length its essential error
respecting petitioner’s broker’s fee,
surfacing both in its April 20, 1992
summary judgment opinion and in its April
27, 1993 response to respondent's initial
Rule 50 motion, j,e,: “Testimony at trial
indicated that Parke-Hayden had never
agreed on the amount of its fee with
respomaent . . . *., (WJ.A. 373; eee also
J.A. 375). As fully recognized in the
District Court’s April 20, 1992 summary
judgment opinion, petitioner’s claim
against respondent was grounded not in
contract but in the “fee-shifting” cases
erroneously distinguished by the District
Court — as of July 24, 1993 — as requiring
a formal closing between the principals.
Moreover, with respect to the Court’s
“indefinite terms” confusion, clear New
York authorities reveal that a broker, as
common understanding would suggest, may
earn his commission by negotiating a deal
whose terms are not yet in existence.
inc,, 28 N.Y.2d 36, 319 N.Y.S.2d 836, 838
(1971) (dictum); Kaelin v. Warner, 27
N.Y¥.2d 352, 318 N.Y.S.2d 294 (1971);

» 24
A.D.2d 879, 312 N.Y.S.2d 444, 445 (4th
Dept. 1970) (agreement to find client “a

home of our desire”); Arnold vy.

Footnote continued

32

As set out in the District Court’s
own April 20, 1992 summary judgment
opinion, authoritative New York decisions
stretching back into the nineteenth
century impose liability for a real estate
broker’s lost commission on a principal
who after employing the broker
unjustifiably aborts a fully consummated
deal subsequently achieved by him, despite
the fact that the commission was to be
paid by the other contracting principal,
and further despite the lack of any
written “contract” between the broker and
the principal thus found liable. Westhill
Exports, Ltd. v. Pope, 12 N.Y.2d 491, 496,
240 N.Y.S.2d 961, 964 (1963); Schaechter
vy. Regency Properties, Inc,, 115 A.D.2d
981, 497 N.Y.S.2d 793 (4th Dept. 1985);
Duross Co. v. Evans, 22 A.D.2d 573, 574,

Schmeidler, 144 App. Div. 408, 129
N.Y.S.2d 408 (lst Dept. 1911).

33
257 N.Y.S.2d 674, 676-77 (1st Dept. 1965) ;

McKnight v. McGuire, 117 Misc. 306, 291
N.Y.S. 323, 324 (lst Dept. Appellate Term
1921) (defining the lost commission as the
broker's consequential damages, fully
foreseeable to the aborting principal) ;
compare Lane—The Real Estate Department
Store, Inc, v, Lawlet Corp,, 28 N.Y.2d 36,
319 N.Y.S.2d 836, 838 (1971) (broker earns
commission despite landlord’s subsequent
conveyance of property prior to closing,
or due to failure of any condition for
which his principal is responsible) .

The District Court’s opinion relies
principally on Grossman v. Herman, 266
N.Y. 249, 253, 194 N.E. 694, 695 (1934);
and Julien J. Studley, Inc, vy. New York

News, Inc,, 122 A.D.2d 633, 505 N.Y.S.2a
419 (lst Dept. 1986), both of which are

completely inapposite to the case at bar.
Thus, in Grossman, a broker employed

by the owner of real property repeatedly

solicited a buyer before gaining the

ie

34

buyer’s assent to an oral proposition to

purchase the property, formulated by the
broker. The owner thereupon gave an “oral
acceptance” of the proposition relayed
back to him by the broker. In exculpating
the buyer from its purchase contract, the
court stressed the parties’ failure to
agree on any of the conveyance’s essential
terms. 194 N.E. at 695.

In Studley, the broker learned from
an unsolicited approach to the owner that
its property was for sale, but also that
no asking price had yet been determined.
The broker later returned to the owner
with an offer specifying a 3% commission
for itself, but without further specifying
who ‘would pay it. The court held that the
owner had never employed the broker. 505
N.Y.S.2d at 420.

Relying on Grossman and Studley, the
Court’s central legal determination in its
opinion is that “This fee-shifting of the

broker's commission has occurred only in

35

cases where the transaction actually
closed” (J.A. 368; 379). This conclusion,
however, directly contravenes governing
New York law, as set out in the Court’s
April 20, 1992 summary judgment opinion.
eee Lane—The Real Estate Department Store,
inc., Supra, 28 N.Y.2d at 42, 319 N.y.S.2a
at 840-41 ("“[I]t is a well-settled rule in
this State that in the absence of an
agreement to the contrary, a real estate
broker will be deemed to have earned his
commission when he produces a buyer who is
ready, willing and able to purchase at the
terms set by the seller. ... The parties
are, of course, free to provide otherwise
by agreement. For example, they can
condition the seller's liability on the

Closing of title... *).

36
Wistet Wotan Es —e en

This Court has regularly reinstated
jury verdicts illicitly overturned by both
the District and Circuit Courts on

arbitrary and insufficient bases. This
Court thus stated in Continental Ore Co,

v. Union Carbide & Carbon Corp., 370 U.S.
690, 82 S. Ct. 1404, 1409 (see also Note 6

thereto):

“The Court of Appeals, was, of
course, bound to view the
evidence in the light most
favorable to Continental [the
party against whom the Court of
Appeals directed a judgment] and
to give it the benefit of all
inferences which the evidence
fairly supports, even though
contrary inferences might
reasonably be drawn”.

Accord: Webb v. Illinois Central
2.2... 352 08.- $42, 37. 83.Ct. 491. £2957);

Rogers v. Missouri P. R.R., 352 U.S. 500,
77 §.Ct. 459 (1957); Wilkerson vy.
McCarthy, supra; Galloway v. United

37
atates, 319 U.S. 372,.63 s.ct. 109779

(1943).

The Second Circuit follows the
identical rule. See, e.g,, Sirota vy,
Silitron Devices, Inc., 673 F.2d 566, 573
(2d Cir.), cert, denied, 459 U.S. 838
(1982); Konok v, Champlain Valley
Physicians Hosp., 733 F.2d 1007 (2nd
Cir.), cert, denied, 469 U.S. 884, 104 Ss.

Ct. 253 (1984); Fortunato v. Ford Motor

Co,, 464 F.2d 962 (2nd Cir. 1972), cert,

denied, 409 U.S. 1038, 93 S. Ct. 517
(1972);. see also, e.g., Kinnell v. Mid-
Atlantic Mausoleums, Inc., 850 F.2d 958

(3d Cir. 1988); see generally 5A Moore’s

Federal Practice, ¢ 50.02 [1] at 50-33-35.

38
CONCLUSION

Petitioner respectfully concludes
that the District Court’s conduct herein
justifies the issuance of this Court’s
writ pursuant to both Rule 10 .1. (a) and
.1. (c). The Judgment and Order under
review should be reversed in all respects
and the Jury's May 3, 1993 Verdict
awarding petitioner the full amount of its
lost $792,553.00 commission in damages
against respondent, plus interest,
reinstated by this Court.

Dated: New York, New York
July 25, 1994

Israel Weinstock

Counsel of Record

140-06 Rockaway

Beach Boulevard
Belle Harbor, N.Y. 11694
(718) 318-1000

la

APPENDIX A — ORDER OF THE UNITED STATES
COURT OF APPEALS FOR THE SECOND CIRCUIT
FILED APRIL 28, 1994

UNITED STATES COURT OF APPEALS
FOR THE
SECOND CIRCUIT

Ata stated term of the United States Court of Appeals for the
Second Circuit, held at the United States Courthouse in the City of
New York, on the 28th day of April one thousand nine hundred and
ninety-four.

DOCKET No. 93-7864
Parke-Hayden, Inc.
Plaintiffs-Appellants,
vs.

Loews Theatre Management Corp.,
Defendant-Appellee.

A petition for rehearing having been filed herein by Plaintiff-
Appellant Parke-Hayden, Inc. in the above entitled matters,

Upon consideration by the panel that decided the appeal, it is

Ordered that said petition for rehearing is DENIED.

FOR THE COURT

GEORGE LANGE

By: s/ Carolyn Clark Campbell
Carolyn Clark Campbell

Chief Deputy Clerk

2a

APPENDIX B — ORDER OF THE UNITED STATES
COURT OF APPEALS FOR THE SECOND CIRCUIT
FILED MARCH 15, 1994

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

Ata stated term of the United States Court of Appeals for the
Second Circuit, held at the United States Courthouse in the City of
New York, on the 15th day of March, one thousand, nine hundred
and ninety-four.

Present:

Honorable John M. Walker, Jr.,
Honorable Dennis G. Jacobs,
Circuit Judges,

Honorable Richard Owen,*
District Judge.

No. 93-7864

PARKE-HAYDEN, INC.,
Plaintiff-Appellant,

Vv.

LOEWS THEATRE MANAGEMENT CORP.,
Defendant-Appellee.
ORDER

* The Honorable Richard Owen, United States District Judge for the
Southern District of New York, sitting by designation.

3a
Appendix B

Appeal from the United States District Court for the Southern
District of New York.

This cause came on to be heard on the transcript of the record
from the United States District Court for the Southern District of
New York (Sweet, J.) and was argued.

ON CONSIDERATION WHEREOF, it is now hereby
ordered, adjudged, and decreed that the judgment of said District
Court be and it hereby is AFFIRMED.

The plaintiff Parke-Hayden, Inc. appeals from the district
court’s order entering judgment as a matter of law in favor of

defendant Loews Theatre Management Corp. following a jury
trial.

We have carefully considered the issues presented by the
parties, and we affirm the district court’s judgment for
substantially the reasons stated in Judge Sweet’s thorough and
well-reasoned opinion below. See Parke-Hayden, Inc. v. Loews
Theatre Management Corp., No. 91 Civ. 0215 (RWS), 1993 U.S.
Dist. LEXIS 10318 (S.D.N.Y. July 24, 1993).

Accordingly, judgment of the district court is affirmed.

s/ John M. Walker, Jr.
Hon. John M. Walker, Jr., U.S.C.J.

s/ Dennis G. Jacobs
Hon. Dennis G. Jacobs, U.S.C.J.

s/ Richard Owen
Hon. Richard Owen, U.S.D.J.

4a
APPENDIX C — OPINION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK DATED JULY 24, 1993

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

91 Civ. 0215 (RWS)

PAR KE-HAYDEN, INC.,

Plaintiff,
- against -
LOEWS THEATRE MANAGEMENT CORP.,
Defendant.
OPINION
APPEARANCES:
DAVIS & GILBERT
Attorney for Plaintiff
1740 Broadway

New York, NY 10019
By: HOWARD J. RUBIN, ESQ.
Of Counsel

MARKS & MURASE

Attorney for Defendant

399 Park Avenue

New York, NY 10022

By: DOUGLAS J. DANZIG, ESQ.
GLENN T. IKEDA, ESQ.
Of Counsel

Sa

Appendix C
Sweet, D.J.

Defendant Loews Theater Management Corp. (“Loews”) has
renewed its motion submitted at the close of trial for judgment as a
matter of law pursuant to Rule 50(b), Fed. R. Civ. P., or, in the
alternate, for a new trial pursuant to Rule 59, Fed. R. Civ. P. anda
stay of the enforcement of judgment pursuant to Rule 62 (b), Fed.
R. Civ. P.

For the reasons given below, the motion for judgment as a
matter of law pursuant to Rule 50(b) is granted.

Parties

Loews is a Delaware corporation with its principal place of
business in Secaucus, New Jersey. Loews’ parent company at all
relevant times was Columbia Pictures Entertainment, Inc.
(“Columbia Pictures”). Loews engages in the operation and
management of movie theaters throughout the United States
through its own subsidiary and affiliated corporations.

Parke-Hayden, Inc. (“Parke-Hayden”) is a licensed New York
real estate broker with its principal place of business in Great
Neck, New York.

Broadway-72 Associates (“Broadway-72”) is a New York
partnership which was seeking to lease property located at 72nd
Street and Broadway in New York City (the “72nd Street
Property”) to Loews upon the understanding that Loews would
construct and operate a partially below-grade movie theater
complex.

6a

Appendix C

Prior Proceedings

After Parke-Hayden brought suit, both parties moved for
summary judgment. Loews alleged that it was under no obligation
to the broker in the absence of an express or implied contract of
employment with the broker and in the absence of a signed and
executed lease. This Court found that Parke-Hayden had alleged
sufficient evidence of a contract between Parke-Hayden and
Loews to allow the case to go to trial. See Parke-Hayden Inc. v.
Loews Theatre Management Corp., 789 F. Supp. 1257 (S.D.N.Y.
1992), familiarity with which is assumed.

The case went to trial on April 20, 1993. At the close of the
plaintiff’s case, prior to presenting its defense, Loews moved for
judgment as a matter of law, again alleging that Parke-Hayden had
failed to demonstrate an enforceable contract either with Parke-
Hayden or with Broadway-72 and that, in the absence of either
contract, Loews owed no obligation to the broker. The motion was
granted in part and denied in part. On April 27, 1993, the court
ruled from the bench that although Parke-Hayden had failed to
allege all the necessary elements of an express contract,' the jury
could still find that Loews liable if it found all of the following
elements:

First, Parke-Hayden must establish that it was
employed as a broker by Broadway-72
Associates. Second, ParkeHayden must prove
that it performed the services required by its
brokerage agreement, and that Loews
benefited by its services. Third, it must prove

1. The court in granting the motion to dismiss the contract claim referred
generally to “contract.” All the cases relied upon by Loews in its motion papers were
examples of express contracts, usually written option riders on other agreements.

7a

Appendix C

that Loews and Broadway-72 Associates had a
meeting of the minds on all essential terms of
the agreement. Fourth, it must prove the Loews
broke off the transactions wrongfully,
arbitrarily and in bad faith.

The jury returned a verdict for Parke-Hayden via special
verdict which did not ask whether the jury had found an
emp!oyment agreement between Parke-Hayden and Loews.

Facts

The facts set forth below were established during the trial and
are not presently in contention.

Sometime in early 1988, Hy Teich (“Teich”), the president of
Parke-Hayden, brought the 72nd Street Property to the attention of
Loews’s employee, Gil Littman (“Littman”), who had been hired
by Loews in December 1987 to locate potential theater sites for
Loews. Loews, Parke-Hayden, and the New York real estate
developer Philip Pilevsky (“Pilevsky”) began negotiations in 1988
about Loews’ purchase of two properties partly owned by
Pilevsky: one located at Third Avenue and Eleventh Street in
Manhattan and the other the 72nd Street Property. Loews’ sublease
of the property at Third Avenue and Eleventh Street was ultimately
executed, and Pilevsky paid Teich a brokerage fee in connection
with this sublease.

Negotiations for the 72nd street lasted for almost two years.
Teich alleges that in the course of negotiations his efforts led to
agreements between the parties on several key points. By about
March 1990, Loews and Broadway-72 had reached agreements on
term, rent, taxes, construction of the theater, options for additional

8a

Appendix C

years, air rights, changes in zoning and mortgages, and other
matters. Several drafts of the lease agreement were drawn up,
although Parke-Hayden alleges that the last represents a “final”
draft agreement. All provided that Parke-Hayden was the sole
broker or finder and that Broadway-72 would pay Parke-Hayden
its brokerage commission for the lease transaction. No lease
agreement was ever signed or executed.

Because the theater complex was to be partially below-grade,
demolition of the existing building and construction of a new
facility would be necessary. Loews contended at trial that it had
always conditioned its signing of the lease upon satisfactory
results from soil and environmental tests at the 72nd Street
Property. Physical due diligence conducted at the request of Loews
revealed the presence of bedrock and asbestos. The estimated cost
of excavation through bedrock would increase the cost of the
project by $800,000 to $1,000,000. Loews’ officials informed
Pilevsky that it was concerned about bearing the one million dollar
cost of excavation and asbestos removal and inquired about
possible concessions from Broadway-72.

Meanwhile, in September 1989, Columbia had been taken
over by Sony Corporation, at which time certain of the Loews
executives who had been dealing with Teich and Parke-Hayden left
and were replaced by new management. Loews’ new management
refused to sign the draft lease agreement and terminated the lease
negotiations. Parke-Hayden then brought suit against Loews,
alleging that since it had provided Loews with a “ready, willing,
and able” seller according to the terms initially set by Loews, it had
performed its duties as a broker and was still entitled to its
commission.

9a
Appendix C
Discussion
Judgment as Matter of Law

In reviewing a jury’s verdict, “the judge’s duty is essentially to
see that there is no miscarriage of justice. If convinced that there
has been then it is his duty to set the verdict aside; otherwise not,”
Berevino v. Saydjari, 574 F.2d 676, 684 (2d Cir. 1978). Where a
jury verdict imposes liability, and the applicable law does not
impose liability under the factual circumstances established at
trial, such a miscarriage of justice occurs and a motion for
judgment as a matter of law should be granted.

Loews maintains that instructing the jury to determine
whether Loews bargained in good faith without first finding either
an express or an implied contract of employment as a matter of law
between Loews and Parke-Hayden misinstructed the jury. In
reviewing a claim that the jury was erroneously instructed, a court
will determine whether the jury was misled in any way and whether
it had understanding of the issues and its duty to determine those
issues. The court should grant judgment as a matter of law if the
charge creates substantial and ineradicable doubt about whether
the jury has been properly guided in its deliberations. Pierce v.
Ramsey Winch Co., 753 F.2d 416, 425 (Sth Cir. 1985) (citations
omitted). In this case, it was error to instruct the jury to determine
Loews’ good faith without first determining, as a matter of law, the
source of such an obligation to Parke-Hayden.

Duty to Bargain in Good Faith

Traditional principles of Anglo-American common law
grounded a duty of good faith-only in some form of obligation
either incurred by the parties or else imposed by law. Absent fraud,

10a
Appendix C

misrepresentation, concealment, and duress, parties negotiation
for a contract are dealing at arm’s length and therefore have no duty
to act in good faith. “A duty to negotiate in good faith arises only
when there is a binding agreement between the parties . . . or a
binding agreement to negotiate,” Ogden Martin Systems, Inc. v.
Tri-Continental Leasing Corp., 734 F. Supp. 1057, 1071 (S.D.N.Y.
1990) (Sweet, J.), citing Reprosystem, B.V. v. SCM Corp., 727 F.2d
257, 264 (2d Cir. 1984), cert. denied, 469 U.S. 828 (1985) and
Teachers Ins. and Annuity Ass’n v. Tribune Co., 670 F.Supp. 491,
498 (S.D.N.Y. 1987)). The reason for the failure of the negotiations
is “immaterial absent the threshold finding of whether there was
any sort of binding obligation,” Ogden, 734 F. Supp. at 1071.

New York law still adheres to the common law doctrine of
caveat emptor in real estate negotiations, London v. Courduff, 141
A.D.2d 803, 529 N. Y.S.2d 874, 875 (2d Dep’t 1988). The lack of a
duty to bargain in good faith has been considered part of the
definition of freedom of contract:

In a _ business transaction both sides
presumably try to get the best of the deal. This
is the essence of bargaining and the free
market. And in the context of this case, no legal
rule bounds the mun of business interest. So one
cannot characterize self-interest as bad faith.
No particular demand in negotiations could be
termed dishonest, even if it seemed outrageous
to the other party. The proper recourse is to
walk away from the bargaining table, not to sue
for “bad faith” in negotiations.

Feldman vy. Allegheny Int’l, Inc., 850 F.2d 1217, 1223 (7th Cir.
1988). Contract and compulsion, in this view, are antithetical

lla
Appendix C

notions, for there can be no obligation to contract except on the
terms agreed upon. Freedom of contract has its corollary in the
“policy of certainty,” or definiteness, under which the terms of an
agreement to be enforceable should be so certain that parties know
precisely what to rely on and courts can determine when
performance of breach has occurred and what the precise remedy
should be. See generally Friedrich Kessler and Edith Fine, Culpa
in Contrahend,. Bargaining in Good Faith, and Freedom of
Contract: A Comparative Study, 77 Harv. L. Rev. 401, 409 (1964)
(comparing common law contract to contracts under the civil law).

The Law of Real Estate Brokers in New York

“(I]t is a well-settled rule in this State that in the absence of an
agreement to the contrary, a real estate broker will be deemed to
have earned his commission when he produces a buyer who is
ready, willing and able to purchase at the terms set by the seller,”
Lane-The Real Estate Department Store, Inc. v. Lawlet Corp., 28
N.Y.2d 36, 42; 268 N.E.2d 635; 319 N.Y.S.2d 836, 840 (1971);
Kalmon Dolgin Affiliates, Inc. v. Estate of Nutman, 172 A.D.2d
917, 568 N.Y.S.2d 204 (3d Dep’t 1991). Lane speaks of a “ready,
willing, and able buyer” because the broker is typically employed
by the seller. It is undisputed that all parties interested in the 72nd
Street Transaction contemplated that Broadway-72 would pay
Parke-Hayden’s commission, as memorialized in each draft of the
proposed lease agreement. However, provided the parties to the
underlying contract close the transaction, the courts have allowed
the broker to recover his fee from the buyer even if he was
originally employed by the seller. In Gronich & Co. v. 649
Broadway Equities Co., 169 A.D.2d 600, 565 N.Y.S.2d 18 (ist
Dep’t 1991), the lessee was held to the broker’s commission when
the lease was executed and the lessor would not pay:

12a

Appendix C

[I]t cannot be assumed that a broker works
gratuitously and the lessor and lessee are held
to such knowledge when they accept the result
of the broker’s services . ... when the seller
and buyer have agreed upon terms and execute
a lease agreement, the broker’s work is done
and he has earned a commission.

Gronich at 601. See also Hecht v. Meller, 23 N.Y.2d 301, 244
N.E.2d 77, 296 N. Y.S.2d 561 (1968) (either seller or buyer must be
liable for broker’s fee after contract of sale is executed despite
buyer’s justified later recession due to destruction of property).

This fee-shifting of the broker’s commission has occurred
only in cases where the transaction actually closed, however; if the
transaction does not close for whatever reason, the broker can
recover only from the party which employed him.

The question of law is reduced to this
proposition: Is a prospective purchaser liable
for commissions to a broker employed by the
owner when the prospective purchaser fails to
Carry out an oral acceptance of an offer made
by that broker? There can be no such liability
unless the prospect employed the broker. . . If
the broker is not employed, he takes his
chances in respect to a consummation of
pending negotiations and unless he definitely
brings the parties together to such an extent
that the prospective purchaser is bound, his
services are rendered without right to
compensation. Otherwise, every conditional
offer or tentative acceptance by a prospect
would result in a contract of employment.

13a

Appendix C

Grossman v. Herman, 266 N.Y. 249, 253, 194 N.E. 694 (1935). If
the buyer employs the broker, the law of New York provides for a
buyer who breaches a written contract of sale to pay the broker
even in acontract where the seller was responsible for the broker’s
compensation.

It is the general rule that a prospective
purchaser of real estate is not liable for failure
to accept an offer unless it appears that the
broker was employed by the purchaser. Niesen
v. Galewski, 211 App. Div. 858, 207 N.Y.S.
885, aff’d 240 N.Y. 652, 148 N.E. 744)....
However, where there is a contract of
employment between the purchaser and
broker, the breach thereof on the part of the
purchaser results in the latter’s liability for
damages. (Parker v. Simon, 231 N.Y. 503, 507-
08, 132 N.E. 404, 405).

Duross Co. v. Evans, 22 A.D.2d 573, 257 N.Y.S.2d 674, 676 (Ist
Dep’t 1965).

Absent express exclusion of the broker’s
rights, where a buyer employs a broker who
procures an agreement which the buyer fails or
refuses to perform, the buyer is liable for the
commission the broker would have earned if
the agreement had been executed.

Schaechter v. Regency Properties Inc., 115 A.D.2d 981, 497 4
N.Y.S.2d 793, 794 (4th Dep’t 1985) (citations omitted). 4

We start with the proposition that where there

14a
Appendix C

is a contract of employment between the
purchaser and the broker which does not
expressly exclude the broker’s right to
commission unless the purchaser actually
enters into a contract of sale, the purchaser’s
refusal to contract with the seller willing to
contract on the purchaser’s terms makes the
purchaser liable to the broker for the
commission the broker would have received
from the seller.

Tulp v. Padula, 70 Misc. 2d 306, 333 N. Y.S.2d 3, 6 (Civ. Ct., Bronx
Cty., 1972) (citations omitted).

Employment by the buyer is required for the broker to recover
from the buyer. However, employment by the seller does not
prevent the broker from being employed by the buyer as well. The
mere fact that Parke-Hayden was to receive its commission from
and thus was employed by Broadway-72, does not prevent it from
also being employed by Loews. See Grossman, 266 N.Y. at 251-52
(1935); Long Island Bus. Exch., Inc. v. DeLuca, 58 A.D.2d 594,
594, 395 N.Y.S.2d 244, 246 (2d Dep’t 1977); Simon v. Allied Chem.
Corp., 35 A.D.2d 273, 275, 278 N.E.2d 340, 315 N.Y.S.2d 919, 922
(Ist Dep’t 1970), aff’d, 29 N.Y.2d 861, 328 N.Y.S.2d 169 (1971);
Pease & Elliman, 216 A.D. 421, 423, 215 N.Y.S. 346 (Ist Dep’t
1926) (quoting McKnight, 117 Misc. 306, 308, 191 N.Y.S. 323).
The question is whether the facts may be held as matter of law to
justify an inference of double employment, Grossman, 266 N.Y. at
252, especially when either or both such contracts of employment
may be express or implied.

There are three types of contract at common law: express,
implied-in-fact, and quantum meruit or implied-in-law. An express

15a

Appendix C

contract requires the classic “meeting of the minds”: the parties
must have reached a fundamental agreement on every substantive
term, and the terms must be sufficiently definite and certain to be
enforceable. An implied-in-fact contract is one where the parties
have assented to the contract, but the assent is inferred from their
course of dealing, not from any explicit statement; the parties’
intentions are implied from the facts of the case. Quantum meruit,
by contrast, is a form of quasi-contract claim where payment for
services is sought in the absence of any contract or understanding
between the parties.

Express Contract

A buyer may be liable to a broker under an express contract
even if that contract depend upon an unfilled condition. In Nuvest,
S.A. v. Gulf & Western Ind. Inc., 649 F.2d 943 (2d Cir. 1981), Gulf
and Western executed a finder’s fee contract for a coal company
with a broker, Nuvest, under which Nuvest would not be paid
unless Gulf and Western actually acquired the type of interest
specified in the contract. Although Gulf and Western never
acquired such an interest, the court found that Gulf and Western
had deliberately prevented an acquisition and therefore awarded
Nuvest five percent of the price (as provided in Nuvest’s contract)
which the buyer and seller would have agreed upon in their final
transaction. According to the express terms of the Gulf & Western-
Nuvest contract, Gulf & Western owed Nuvest nothing until the
deal was closed, but the existence of an express contract with the
buyer created a duty either to bargain with the seller in good faith or
to pay the broker. This is in accordance with New York law, and
represents nothing more than the proposition that a party cannot
prevent liability under a contract by refusing to perform because of
an unfilled condition whose fulfillment rests entirely in the power
of that party:

16a

Appendix C

It should be observed, however, that even
where the broker and seller expressly provide
that there shall be no right to a commission
unless some condition is fulfilled, and the
condition is not performed, the seller will
nevertheless be liable if he is responsible for
the failure to perform the condition.

Nuvest, 649 F.2d at 947, quoting Lane, 28 N.Y. at 43,319 N.Y.S.2d
at 841.

However, a buyer may not be liable to a broker under an
express contract if the contract between the buyer and the broker
actually fails for want of an essential term:

If an agreement is not reasonably certain in
its material terms, there can be no legally
enforceable contract... The doctrine of
definiteness serves two related purposes.

First, unless a court can determine what the
agreement is, it cannot know whether the
contract has been breached, and it cannot
fashion a proper remedy .... Second, the
requirement of definiteness assures that courts
will not impose contractual obligations when
the parties did not intend to conclude a binding

agreement.

~

Cobble Hill Nursing Home, Inc. v. Henry & Warren Corp., 74
N.Y.2d 475, 482, 548 N.Y.S.2d 203, 923 (1989) (citations
omitted), cert. denied 498 U.S. 816, 111 S.Ct. 58, 112 L.Ed.2d 33
(1990). Parke-Hayden’s express contract of employment by Loews

17a

Appendix C

failed here because at least one essential term was indefinite. At
trial, Parke-Hayden failed to establish that Loews and Parke-
Hayden had agreed upon any terms of compensation:

As price is an essential ingredient of every
contract for the rendering of services, an
agreement must be definite as_ to
compensation. ...Where no fee is stated, courts
may not calculate a fee without custom and
usage evidence to establish an extrinsic
standard which is “fixed and invariable” in the
industry in question. . . . As no objective
method or formula was provided for
determining a commission .. . [the agreement]
was unenforceable.

Cooper Square Realty, Inc. v. A.R.S. Management, Ltd., 181
A.D.2d 551, 581 N.Y.S.2d 50, 51 (Ist Dep’t 1992) (real estate
broker’s alleged brokerage agreement insufficient for want of rate
of compensation). Under New York law, custom and usage
evidence must establish that the omitted term is “fixed and
invariable” in the industry in question, Hutner v. Greene, 734 F.2d
896, 898 (2d Cir. 1984) (plaintiff’s evidence that Lehman formula
was only frequently, not invariably, used for calculating
compensation made finder’s agreement insufficient).

Testimony at trial indicated that Parke-Hayden had never
agreed on the amount of its fee with Loews and that there was no
fixed and invariable rate scale in New York city for real estate
transactions of this type. Absent a definite agreement on Parke-
Hayden’s commission, there was no express contract.

18a

Appendix C

Implied-in-fact Contract

Any implied-in-fact contract also fails on the same ground.
Although brokers have recovered under implied contracts, Parke-
Hayden has not alleged a course of dealing sufficient to infer an
implied contract sufficiently definite as a matter of law. In
Schaechter, the buyer breached a contract to purchase real property
and was held liable for a fee to his broker:

[W]here a buyer employs a broker who
procures an agreement which the buyer fails or
refuses to perform, the buyer is liable for the
commissions the broker would have earned if
the agreement had been executed . . . . This is
true even where the contract or the usual
practice contemplates that the seller will pay
the commissions. . . and where there is only an
implied contract of employment between the
buyer and the broker and the buyer has not
expressly undertaken to pay commissions.

Schaechter, 497 N.Y.S.2d at 794.

This tbhecry of a broker’s ‘implied’
employnic.ut was recognized by the Court of
Appeals as early as 1881, when in Sibbald v.
Bethlehem Jron Co. (83 N.Y. 378, 380-381) it
stated: ‘the contract of employment may be
established ... by facts showing, in the
absence of [an] express agreement, a conscious
appropriation of the labors of the broker.’

Gronich, 169 A.2d at 602, 20. “Although the assent of a person to

19a

Appendix C

be charged under an implied contract is necessary, a person may
conduct himself in such a manner that his assent may fairly be
inferred.” Gurney, Becker & Bourne v. Benderson Dev. Co. 62
A.D.2d 1165, 404 N.Y.S.2d 203, 204 (4th dep’t 1978), rev’d on
other grounds, 47 N.Y.2d 995, 394 N.E.2d 282, 420 N.Y.2d 212
(1979) (error to submit issue of account stated to jury); Miller v.
Schloss, 218 N.Y. 400, 113 N.E. 337 (1916).

It is clearly settled that before a broker can
collect his commissions, he must have been
employed by his principal. Such employment
may be express or implied. If express, it may be
either written or oral. If implied, the facts
surrounding employment must establish that
the broker was indeed employed to perform the
services performed. . . . Brokers who rely upon
verbal or implied contracts of employment do
so at their own peril.

Black v. Vaeth, 55 Misc. 2d 502, 504; 285 N.Y.S.2d 557, 561 (City
Ct. Utica Cty. 1967).

The one class [of implied contract] consists of
those contract which are evidenced by the acts
of the parties and not by their verbal or written
words — true contracts which rest upon an
implied promise in fact. . .. Acontract cannot
be implied in fact where the facts are
inconsistent with its existence; or against the
declaration of the party to be charged; or where
there is an express contract covering the
subject matter involved; or against the
intention or understanding of the parties,

20a
Appendix C

Miller, at 406-07, 113 N.E. at 339. The failure of the parties to
establish the amount of Parke-Hayden’s compensation to be paid
by Loews can be considered to be a fact inconsistent with the
existence of an implied contract. Implied-in-facts contracts are
“true contracts” which must be at least definite enough to be
enforceable. Such liability lies in contract, and therefore if the
court is unable to ascertain the terms of the contract, it cannot
enforce an inferred contract for the reasons stated in Cobble Hill,
supra. At least one case indicates that an implied promise must be
as definite on the essential term of compensation as an explicit
promise. See Towers v. Doroshaw, 5 Misc. 2d 241, 159 N.Y.S.2d
367, 378 (Sup. Ct. Onondaga Cty. 1957). Although courts will
often use a standard of reasonableness in implying these terms, the
absence of a fixed and definite term of compensation here makes it
unreasonable to imply a brokerage fee.

Even if that is not the case, however, Parke-Hayden did not
allege at trial a course of dealing from which terms of an
employment contract with Loews could be inferred. All drafts of
the lease contemplated that the broker would be paid by the seller.
In Julien J. Studley, Inc. v. New York News Inc., 122 A.D.2d 633,
505 N.Y.S.2d 419, 421 (ist Dep’t 1986), aff’d, 518 N.Y.S.2d 749
(1987), the court held that where the parties agreed in writing that
the purchaser, as opposed to the defendant seller, was to pay the
plaintiff’s commission, “[t]he legal effect of this documentary
evidence is to negate any implication of employment” between the
plaintiff and the defendant. Although there was no agreement in
writing in this case, evidence that the draft lease indicated the
lessor was to pay the fee is also a fact inconsistent with the implied
contract.

An implied contract of employment by the buyer may exist
where the seller will pay the fee, as it did in Schaechter. However,

2la
Appendix C

in that case the general course of dealing between the parties made
it clear that the broker was working for the buyer. Here, there was
no such indications. Although Loews requested Parke-Hayden to
locate properties in which It might be interested, Loews never
requested that Parke-Hayden act as its broker in connection with
the potential lease transactions. Acceptance of terms
communicated by the broker does not automatically lead to the

inference that both sides employed the broker. See Grossman v.
Herman, 266 N.Y. at 253.

Quantum Meruit

Parke-Hayden has also asserted a separate claim under the
second type of implied contract, which is referred to as a contract
implied-by-law or quantum meruit. “There are two classes of
implied contracts, those implied in fact as a result of the acts of the
parties ... and quasi or constructive contracts resting upon
equitable principles.” Adams & Co. Real Estate, Inc. v. E. & B.
Super Markets, Inc., 26 A.D.2d 365, 366, 274 N.Y.S.2d 776, 778
(Ist Dep’t 1966). “This procedural term ... is sometimes used
inexactly as a synonym for the more general term quasi-contract,
which refers to any money claim for the redress of unjust
enrichment.” Alan Farnsworth, Contracts § 2.20 (1982). Because
payment is sought for services rendered in the absence of any
contract, a benefit conferred on the other party, or unjust
enrichment, is an essential element of a quantum meruit of other
quasi-contract claim. Sven Salen AB v. Jacq. Pierot Jr. & Sons Inc.,
559 F. Supp. 503, 506 (S.D.N.Y. 1983), aff’d, 738 F.2d 419 (1984).

A quasi or constructive contract rests upon the
equitable principle that a person shall not be
allowed to enrich himself unjustly at the
expense of another. In truth, it is not a contract

22a

Appendix C

or promise at all. It is an obligation which the
law creates, in the absence of any agreement,
when and because the acts of the parties or
others have placed in the possession of one
person money, or its equivalent, under such
circumstances that in equity and good
conscience he ought not to retain.

Miller, 218 N.Y. at 407, 113 N.E. at 339. A benefit must be
conferred upon the defendant under circumstances where allowing
the defendant to retain the benefit was unjust. Reprosystem B.V. v.
SCM Corp., 727 F.2d at 263; Indyk v. Habib Bank, Ltd., 694 F.2d
54, 57 (2d Cir. 1982); Marcraft Recreation Corp. v. Frances Devlin
Co., 459 F. Supp. 195, 197 (S.D.N.Y. 1978); Bradkin v. Leverton,
26 N.Y.2d 192, 257 N.E.2d 643, 309 N.Y.S.2d 192, 196 (1970).

Here, even the fact that the broker may have worked diligently
for a two-year period is not relevant unless Loews received a
benefit from such work. Because a benefit in a real estate
transaction can only be incurred when the property is bought or
leased, a broker’s claim for quantum meruit becomes cognizable
only when and if a lease arises. Jn re C.H. Stuart Inc., 16 B.R. 296,
297-98 (W.D.N.Y. 1981). In general, where a party provides
services seeking to achieve a specific result to benefit another, the
party cannot recover unless those services bring about that
particular result. See Martin H. Bauman Assoc., Inc. v. H. & M Int'l
Transport, Inc., 171 A.D.2d 479, 567 N.Y.S.2d 404 (Ist Dep’t
1991) (failure to recruit candidates who were hired resulted in no
benefit conferred); Reisner v. Recco Temporary Services, Inc., 136
A.D.2d 686, 524 N.Y.S.2d 102 (2d Dep’t 1988) (failure to generate
new business); Adams & Co. Real Estate, Inc. v. E&B Super
Markets Inc., 26 A.D.2d 365, 274 N.Y.S.2d 776 (ist Dep’t 1966)
(failure of leasing efforts); Towers, 159 N.Y.S.2d at 379 (same): cf.

23a

Appendix C

Gronich, 169 A.D.2d at 602 (real estate broker entitled to fee from
purchaser absent employment agreement where lease was
executed).

In short, in every case in which liability has been established
against a party in favor of a broker, the broker was employed by the
party from whom it was seeking compensation. The plaintiff’s case
here does not match, on its facts, any of the cases cited above where
the broker has collected from the buyer. United States v. Burger,
717 F. Supp. 245, 251 (S.D.N.Y. 1989) (JNOV motion grented in
civil tax case where court was “unable to find a single case” finding
the defendant liable under factual circumstances similar to those
established at trial). For this reason, defendant’s motion is granted.

Conclusion

Loews’ motion for judgment as a matter of law is granted and
the complaint of Parke-Hayden is dismissed. In the event Parke-
Hayden appeals from this decision and is successful, a new trial is
warranted, and therefore Loews’ motions for a new trial pursuant
to Rule 59, Fed. R. Civ. P., and for a stay of the enforcement of the
judgment pursuant to Rule 62(b), Fed. R. Civ. P. will be granted for
the reasons given above. See Carvel Corp. v. Diversified
Management Group, Inc., 930 F.2d 228, 232 (2d Cir. 1991) (new
trial warranted when trial court issues jury instructions that give
jury misleading impression or inadequate understanding of law).

It is so ordered.
New York, N. Y. s/ Robert W. Sweet
July 24 , 1993 Robert W. Sweet

U.S.D.J.

24a
APPENDIX D — OPINION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK DATED JULY 27, 1992

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

91 Civ.0215 (RWS)
PARKE-HAYDEN, INC.,
Plaintiff,

- against -

LOEWS THEATRE MANAGEMENT CORP.,
Defendant.
APPEARANCES:

DAVIS & GILBERT

Attorney for Plaintiff

1740 Broadway

New York, New York 10019

By: BRUCE GINSBERG, ESQ.
Of Counsel

MARKS & MURASE

Attorney for Defendant

399 Park Avenue

New York, New York 10022

By: LANCE GOTTHOFFER, ESQ.
GLENN T. IKEDA, ESQ.
Of Counsel

atlas

25a

Appendix D

OPINION

Sweet, D. J.

Defendant Loews Theatre Management Corp. (“Loews”) has
moved by order to show cause for an order pursuant to DR 5-
102(B) of the Disciplinary Rules of the Code of Professional q
Responsibility (“DR 5-102(B)”), 22 N.Y.C.R.R. § 1200.21, ;
disqualifying the firm of Davis & Gilbert from representing 4
plaintiff Parke-Hayden, Inc. (“Parke-Hayden”).

The facts of this case have been discussed in detail in a prior
opinion of this court, familiarity with which is assumed. See
Parke-Hayden, Inc. v. Loews Theatre Mgt. Corp., __ F. Supp. __
No. 91 Civ. 0215 (S.D.N.Y. Apr. 20, 1992) (the “Opinion”).

On June 1, 1992, Loews moved by order to show cause for an
order, among other things compelling the deposition of Robert P.
Reichman (“Reichman”). Reichman is an attorney at Davis &
Gilbert who provided legal services to Broadway-72 Associate’
(the Owner), prior to becoming associated with Davis & Gilbert. In
a bench ruling on June 9, 1992, this court granted Loews’s
application to the extent of ordering Reichman’s deposition. After
conducting Reichman’s deposition, Loews brought the present
motion by order to show cause on July 15, 1992. The motion was
made returnable on July 21, 1992, at which time oral argument was
heard and the motion considered fully submitted.

By this action, Parke-Hayden seeks to obtain from Loews a
brokerage commission relating to a proposed lease between Loews
and the Owner on the grounds that it was impliedly employed by
Loews to procure the lease. At the time the proposed lease was
being negotiated, Reichman, then a member of the firm of Dreyer

26a

Appendix D

& Traub, represented the Owner in the negotiations. Although
Loews has characterized Reichman as the Owner’s “principal
negotiator” the prominence of his role has not been established by
fact. It uncontested, however, that Reichman was privy to
conversations between Loews and the Owner and had many
conversations himself with Loews representatives regarding the
proposed lease. In response to interrogatories, Parke-Hayden has
identified Reichman as one of four people having knowledge of
facts material to this case.

Sometime after the events at issue in this litigation, Reichman
left Dreyer & Traub and joined Davis & Gilbert.

Referring to the Opinion, Loews characterizes the “case
dispositive issues at trial” to include (1) the terms of the lease to
which Loews supposedly agreed; (2) whether the Owner was
ready, willing and able to meet Loews’s terms; and (3) whether
Loews had the right to perform physical tests on the Property, as
defined in the opinion, to assure no adverse rock or asbestos
condition existed prior to obligating itself to the lease. Loews
maintains that, as “chief negotiator” for the Owner in connection
with the transaction, Reichman is the only non-party witness who
can testify as to facts relevant to these issues. Moreover, based on
Reichman’s deposition and various documents submitted as
exhibits to Loews’s motion, Loews maintains that his testimony
may be prejudicial'to Parke-Hayden.

Loews’s motion to disqualify Davis & Gilbert is based on DR
5-102(B), which provides that:

If, after undertaking employment in
contemplated or pending litigation, a lawyer
learns or it is obvious that the lawyer or a

27a
Appendix D

lawyer in his firm may be called as a witness
other than on behalf of the client, the lawyer
may continue the representation until it is
apparent that the testimony is or may be
prejudicial to the client at which point the
lawyer and the firm must withdraw from acting
as an advocate before the tribunal.

Loews argues that this rule mandates Davis & Gilbert’s withdrawal
because Reichman, a lawyer in the firm of Davis & Gilbert, “may”
be called as a defense witness and because his testimony “is or may
be prejudicial” to Parke-Hayden.

In view of the potential for use as a tactical device, motions to
disqualify are subject to “fairly strict scrutiny, particularly motions
under subdivision (B) [of DR 5-102].” Lamborn v. Dittmer, 873
F.2d 522, 531 (2d Cir. 1989). Although a literal reading of DR 5-
102(B) mandates disqualification merely on the showing that the
potential testimony of a witness-advocate may be prejudicial to the
party his firm represents, under New York law the party seeking
disqualification must demonstrate that it is likely that the
“ ‘testimony to be given by the witness is necessary’ ” and that it is
substantially likely to be prejudicial to the party represented by his
firm. Luk Lamellen U. Kupplungsbau GmbH v. Lerner, 167 A.D.2d
451, 452-53, 562 N.Y.S.2d 134 (2d Dep’t 1990) (quoting S & S
Hotel Ventures Ltd. Partnership v. 777 S. H. Corp., 69 N.Y.2d 437,
515 N.Y.S.2d 735 (1987)), see also, e.g., Plotkin v. Interco Dev.
Corp., 137 A.D.2d 671, 524 N.Y.S.2d 763 (2d Dep’t 1988); In re
Estate of Bartoli, 137 Misc.2d 499, 521 N.Y.S.2d 392 (Surr. Ct.
Nassau County 1987), aff’d, 143 A.D.2d 830, 533 N.Y.S.2d 324
(2d Dep’t 1988); L-S Plate & Wire Corp. v. Federal Ins. Co., N. 88
Civ. 0706, slip op. at 4 (S.D.N.Y. Mar. 28, 1989) (movant must
demonstrate genuine necessity for testimony and substantial

28a

Appendix D

prejudice); Rice v. Baron, 456 F. Supp. 1361, 1371 (S.D.N.Y. 1978)
(movant bears burden of establishing existence of factors
warranting disqualification).

In determining the “necessity” of the testimony, a court should
consider such factors as the significance of the matter, the weight
of the testimony and the availability of other evidence. S & S Hotel
Ventures Ltd. Partnership, 69 N.Y.2d at 446. For testimony to be
“prejudicial” under the rule,

the “projected testimony of a lawyer or firm
member must be sufficiently adverse to the
factual assertions or account of events offered
on behalf of the client such that the bar or the
client might have an interest in the lawyer’s
independence in discrediting that testimony.”
Furthermore, the moving party “bears the
burden of demonstrating specifically how and
as to what issues in the case the prejudice may
occur and that the likelihood of prejudice
occurring is substantial.”

Rice, 456 F. Supp. at 1371 (citations amen quoted in Lamborn,
873 F.2d at 531.

Loews first maintains that Reichman’s testimony as to certain
consents from the Owner’s mortgagee and limited partners may be
prejudicial to Parke-Hayden because it will demonstrate that the
owner was not “ready, willing and able” to enter into the lease as of
April 17, 1990. According to Loews, these consents were
necessary to allow the Owner to enter into the lease. Reichman
testified that it was his understanding that, absent these consents:

29a
Appendix D

[t]here would be no transaction I presume. And
the reason I say I presume is because I think
there was also a possibility that, and I don’t
recall the general partners getting into this fact,
the consent was not required but they
determined to go ahead and get the consent

anyway.

Reichman further testified that, as of April 17, 1990, the consents
were not obtained.

Reichman also testified about the substance of a proposed
escrow agreement between the Owner and Loews. According to
4 5 of that agreement, the effect of a failure to obtain the consents
by May 31, 1991 was to render the lease of no further force and
effect. See Danzig Aff. Ex. C. { 5. The escrow agreement also
states that:

WHEREAS, as of the date hereof, Landlord
has not yet obtained the consent of [the
Mortgagee] . . . and the consent of the Limited
Partners and, as a result, Landlord may not at
this time convey a leasehold interest in the
Premises to [Loews]... .

See id.

Although Reichman’s testimony relates toa material element
of Parke-Hayden’s case, namely, whether the Owner was “able” to
convey a leasehold interest to Loews, there is insufficient
information before the court at this time to determine whether the
testimony is likely to prejudice Parke-Hayden and whether it is
“necessary” for purposes of disqualification. It is unclear, for

30a
Appendix D

instance, whether the Owner’s failure to obtain consents from its
mortgagee and limited partners would actually impair its power of
alienation or whether it would simply put Loews into default under
agreements with those parties. Moreover, the magical quality of
the date April 17, 1990 has not been established. The escrow
agreement plainly states the operative date to be May 31, 1990.
Finally, any inconsistency between Reichman’s testimony and
Teich’s testimony that consents had been obtained is not
“sufficiently adverse to the factual assertions or account of events
offered on behalf of the client such that the bar or the client might
have an interest in the lawyer’s independence in discrediting that
testimony.” Assuming that Teich is an appropriate witness on this
subject in the first place, he testified that he did not know what date
the approvals were obtained and that he was unaware if the
approvals were written or oral. Teich’s testimony suggests that his
understanding of consents was a mere oral sign-off and that he was
not commenting on contractual formalities. See Danzig Aff. Ex. D
at 136-37 (“He [Pilevsky] got in touch . . . with all his limited
partners and it was agreed.”).

Furthermore, Loews has not demonstrated that Reichman’s
testimony is “necessary” for purposes of disqualification under
DR 5-102(B). First, Reichman’s testimony as to the substance of
the escrow agreement is unnecessary because “other evidence” is
available, not the least of which is the agreement itself. See
Kirshon, Shron, Cornell & Teitelbaum P.C. v. Savarese, 581
N.Y.S.2d 487 (App. Div. 3d Dep’t 1992) (testimony not
“necessary” where cumulative of other evidence); see also
Lamborn, 873 F.2d at 532 (not disturbing district court finding that
testimony on certain issue would have been cumulative and
therefore not grounds for disqualification). Second, Loews has not
established that Reichman is the sole witness capable of testifying
as to when the consents were or were not obtained. Presumably, the

3la

Appendix D

Owner’s principals involved in the transaction would have this
knowledge at their disposal. However, Loews brought this motion
prior to the scheduled depositions of those individuals, thus
rendering it impossible to determine the necessity of Reichman’s
testimony. Because Reichman’s testimony as to the consents issue
may prove to be merely cumulative, it is not appropriate to
disqualify Davis & Gilbert on this basis at this time. See id.
(disqualification premature where discovery has not been had).

Loews next argues that Reichman’s testimony will be
prejudicial to Parke-Hayden because it indicates Parke-Hayden’s
awareness that favorable rock and asbestos test results were a
condition precedent to Loews entering into the lease. Loews’s
assertion is unsupported by any of its factual submissions on this
motion. These submissions establish nothing more than that Parke-
Hayden was aware that Loews was interested in conducting tests at
the Premises before the commencement of the term of the lease.
However, neither Reichman’s deposition testimony or the
documentary exhibits to Loews’s papers evidence an awareness
that these tests were a condition to Loews entering into the lease.
The evidence simply does not support Loews’s conclusory
assertion that “Mr. Reichman knew full well that Loews needed to
determine whether there was a rock problem before it could agree
to sign a lease.” Loews Memo. at 13.

Finally, Loews argues that Reichman’s testimony will be
prejudicial because it conflicts with Teich’s testimony as to his
awareness (or lack thereof) of the projected cost of asbestos and
rock removal and as to his discussions (or lack thereof) of
conversations regarding the rock issue after April 20, 1992.
However, given the questionable materiality of the underlying
evidence, any such contradictions have not been shown to be
sufficiently adverse to the Owner at this time to warrant
disqualification.

32a
Appendix D

For the foregoing reasons, Loews motion to disqualify Davis
& Gilbert from representing Parke-Hayden is denied.

It is so ordered.
s/ Robert W. Sweet
ROBERT W. SWEET
U.S.D.J.
New York, N.Y.

July 27, 1992

. oa
”

33a

APPENDIX E — OPINION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISRICT OF
NEW YORK DATED APRIL 20, 1992

United States District Court,
S.D. New York.

April 20, 1992

No. 91 Civ. 0215 (RWS)

PARKE-HAYDEN, INC.,

Plaintiff,

LOEWS THEATRE MANAGEMENT CORP.,

Defendant.

Davis & Gilbert, New York City (Bruce Ginsberg, of counsel),
for plaintiff.

Marks Murase & White, New York City (Douglas J. Danzig,
of counsel), for defendant.

34a
Appendix E
OPINION
SWEET, District Judge.

Plaintiff Parke-Hayden, Inc. (“Parke-Hayden”) has moved
pursuant to Fed. R.Civ.P. 56 for an order granting summary
judgment in its favor on the First Claim contained in the complaint.
Defendant Loews Theatre Management Corp. (“Loews”) has also
moved for partial summary judgment in its favor dismissing the
Third and Fourth Claims of the complaint as well as Parke-
Hayden’s request for punitive damages in connection with the First
and Third Claims. For the following reasons, Parke-Hayden’s
motion is denied; Loews’s motion is granted.

The Parties

Parke-Hayder is a licensed real estate brokerage firm which is
a New York corporation with its principal place of business at 98
Cutter Mill Road in Great Neck, New York.

Loews is a Delaware corporation with its principal place of
business at 400 Plaza Drive in Secaucus, New Jersey. Through its
subsidiary and affiliated corporations, Loews engages in the
operation and management of movie theaters throughout the
United States.

The Facts

This lawsuit arises out of two unconsummated real estate
transactions to which Loews was a party and in which Parke-
Hayden acted as broker. With regard to both transactions, Parke-
Hayden seeks to recover brokerage commissions, as well as
punitive damages, from Loews.

35a
Appendix E
The 72nd Street Property

The First Claim of the Complaint, on which Parke-Hayden
seeks summary judginent, involves property located at 72nd Street
and Broadway in New York City (the “72nd Street Property”) and
negotiations by Loews to lease the 72nd Street Property and
construct and operate a partially below-grade movie theater
complex (the “72nd Street Transaction”).

Sometime in early 1988, Hy Teich (“Teich”), the president of
Parke-Hayden, brought the 72nd Street Property to the attention of
Loews’s employee, Gil Littman (“Littman”), Teich Dep. at 32, who
had been hired by Loews in December 1987 to locate potential
theater sites for Loews. Littman had started searching for a theater
site in the neighborhood of West 72nd Street in early 1988. It is
unclear which of the men approached the other: Littman testified
that he asked Teich, a longtime friend, to find potential sites for
Loews in that area, Littman Dep. at 20; Teich, on the other hand,
testified that he “made someone aware ... that we had this
outrageous corner. Teich Dep. at 32. In any event, Teich showed
Littman the Beacon Theater and the 72nd Street Property. Jd. at 22.

According to Littman’s testimony, when Teich showed him
the 72nd Street Property, Littman said “Teich, we want the deal.”
Id. at 26. Lou Korman (“Korman”), who was at all relevant times
chairman of Loews’s parent, Columbia Pictures Entertainment,
Inc. (“Columbia”), told Littman to make the deal, and Littman
called Teich and said “hey, we want the deal. Let’s go.” Littman
Dep. at 27; see also Teich Dep. at 32 (Korman told Teich directly
that “I’d like to get that property”). Teich conveyed Loews’s
interest to Philip Pilevsky (“Pilevsky”), a general partner of
Broadway-72 Associates (the “Owner”), the owner of the 72nd
Street Property. Teich reported back to Littman that Pilevsky was

4

ed

:
=

36a
Appendix E

not interested in a transaction with Loews for that property Littman
insisted that Teich continue trying to get the 72nd Street Property.
When Littman informed Korman that Pilevsky would not do the
deal, Korman said that he did not care “what it takes. Make the
deal. Get 72nd Street. Get Teich and make the deal.” Jd. at 27, 30.
Littman thereafter had “Teich continue to work for [Loews] to get
the deal” by calling him at all hours of the day and night “to make
sure he understood that I wanted it.” Jd; see also Teich Dep. at 34
(Littman told Teich to “try to get it. Try to get it.”).

In his affidavit, Pilevsky states that he never asked Teich to
seek a lessee for the 72nd Street Property and did not have the
property listed with any broker, Pilevsky Aff. { 3, and that when
Teich approached him, he told Teich that he did not want to lease
the property to Loews. Jd. Subsequently, according to Pilevsky,
Teich repeatedly asked him to agree to Loews’s proposal. Finally,
Teich persuaded Pilevsky to enter into negotiations with Loews.
Id. F4.

Negotiations took place over approximately the next two
years. During the negotiations, according to Pilevsky, Teich would
often ask him to agree to points desired by Loews, and, “as a result
of his efforts, agreements were reached.” Jd. J 5. Indeed, Teich’s
role in this regard is confirmed by former Loews President and
Chief Operating Officer, Jerry Esbin (“Esbin’”). Esbin testified that
“fhje [Teich] would convey various things that I [Esbin] wanted to
Mr. Pilevsky.” Esbin Dep. at 26. The purpose of his conveying such
information was “to allow [Loews] to ultimately get the deal that
[Loews] wanted.” Jd. at 28. According to Littman’s deposition
testimony, if anything came up with respect to the 72nd Street
Transaction Esbin would say “get to Teich. Let’s say some business
point came up that bothered Jerry, or something. He said, get Teich
and have him take care of this with Phil [Pilevsky].” Littman Dep.

37a

Appendix E

at 32. At the same time, Esbin’s testimony clearly establishes that
he regarded and understood Teich to be acting as broker for the
Owner. See, e.g, Esbin Dep. at 27.

By about March 1990, Loews and the Owner reached
agreement on term, rent, taxes, construction of the theater, options
for additional years, air rights, changes in zoning and mortgages.
Esbin Dep. at 31. Esbin testified that at that point he told Mr. Teich
that there would be a deal based on everything negotiated to that
point, namely, the “economic points.” Esbin Dep. at 55. Esbin
testified that at the time the economic points were negotiated,
Loews did not take into consideration the possible results of
asbestos tests or rock borings. Jd. at 58.

After negotiations and many drafts of a lease, a “final lease”
was prepared and agreed to by both parties, which, according to
Parke-Hayden, was ready for execution. Pilevsky Aff. 4 9, Ex. A.
This lease agreement, like the drafts before it, provided that Parke-
Hayden was the sole broker or finder and that the Owner would pay
Parke-Hayden its brokerage commission for the lease transaction.
Pilevsky Aff. Ex. AJ 35.01. After they worked out the rent, Esbin
told Teich that “with respect tc those points that we have discussed
the economic points, up to that point, ... everything was
satisfactory to me and there would be a deal based on everything at
that point.” Esbin Dep. at 55.

Nevertheless, as Esbin testified, all of the points had not yet
been negotiated at that time. Esbin Dep. at 54-55. Because the
theater complex was to be partially below-grade, demolition of the
existing building and construction of a new facility would be
necessary. Loews contends that it had always conditioned its
signing of the lease upon satisfactory results from soil and
environmental tests at the 72nd Street Property. Thus, according to

38a

Appendix E

Loews, as of April 1990, the “critical point concerning the expense
of excavating bedrock and removing asbestos from the property
had yet to be negotiated.” Loews Memo. in Opp. at 7. Loews
claims that this condition was known to both Teich and the Owner
as early as January 1990 when the parties began negotiating a
formal agreement for Loews to conduct the tests (the “Access
Agreement”). Teich, on the other hand, testified that it was his
understanding that the test results had no bearing on the parties’
obligation to go forward on the deal that Teich Dep. at 118-19.

The physical due diligence revealed the presence of rock and
asbestos. The estimated cost of excavation would increase the cost
of the project by $800,000 to $1,000,000. Esbin informed Pilevsky
that he was concerned about bearing the one-million dollar cost of
excavation and asbestos removal and img@eired about possible
concessions from the Owner. According to Pilevsky, he
“immediately agreed to work that out with him. . . . The possible
cost of the rock excavation was not a stumbling block and would
not have hindered our closing this deal.” Pilevsky Aff. { 16; see
also Esbin Dep. at 96. However, according to Loews, it determined
that it could not accept the risk and expense involved in blasting the
rock at the 72nd Street Property and decided not to go through with
the transaction. See Benjamin 1/6/92 Aff. { 3.

Meanwhile, in or about September 1989, Columbia had been
taken over by Sony Corp., at which time Korman exited as
Columbia’s chief executive officer and Peter Guber (“Guber’’) and
Jon Peters (“Peters”) took the helm. Sometime in the end of April
or beginning of May 1990, Guber and Peters replaced Bernie
Myerson with Alan Friedberg (“Friedberg”) as Loews’s Chairman.
Esbin was relieved of his position in May 1990. It is undisputed
that Loews’s new management terminated the 72nd Street
Transaction and made no attempt to close a lease with the Owner.

39a
Appendix E

The Danbury Transaction

The Third and Fourth Claims of the Complaint, which Loews
seeks to have dismissed on summary judgment, relate to a
proposed joint venture agreement between Loews and real estate
developers Pilevsky and David Lavipour (“Lavipour”), who
formed an entity known as PL Danbury Cinemas Associates (“PL
Associates”). The purpose of the proposed joint venture was to
construct and operate a motion picture cinema at a site in Danbury,
Connecticut (the “Danbury Transaction”). According to Parke-
Hayden, Tech was retained by the proposed joint venture as a
broker to facilitate the transaction. This assertion is not disputed on
this motion.

Negotiations took place beginning in the spring of 1989.
Loews was, and in fact continues to be, subject to a 1952 consent
judgment (the “Consent Judgment”) under which it is enjoined
“from acquiring or continuing to own any beneficial interest in any
motion picture theatre in conjunction with an actual or potential
independent exhibitor.” Smith 12/6/91 Aff. Ex. B, art. III, { 5(b).
Each draft of the proposed partnership agreement contained a
clause referring to the Consent Judgment and providing that the
proposed partners would not do anything to cause Loews to be in
violation of the Consent Judgment. See, e.g., id. Ex. C, at 22-23,
44-45, 46-47.

In early 1990, Loews learned that Lavipour and Pilevsky had
interests in other motion picture theaters, whereupon Loews
informed all of the parties that it needed to obtain Department of
Justice (“DOJ”) approval for the proposed transaction. In February
1990, Loews contacted its antitrust counsel, Allen Kezsbom of
Fried, Frank, Harris, Shriver & Jacobson to request that he obtain
an opinion from the DOJ that the Danbury Transaction would not

40a

Appendix E

constitute a violation of the Consent Judgment. On March 6, 1990,
Kezbom sent a letter to Frederick Haynes of the Antitrust Division
of the DOJ outlining why the proposed Danbury Transaction did
not violate the Consent Judgment. Kezbom subsequently
forwarded to the DOJ the proposed partnership agreement and the
agreements documenting the theater interests of Lavipour and
Pilevsky. On April 26,1990, Kezbom sent Haynes another letter
summarizing relevant case law.

Nevertheless, Seymour Smith, who at all relevant times was
Executive Vice President and General Counsel for Loews, affirms
that in late September 1990, Haynes informed him and Kezsbom at
a meeting at the DOJ that the DOJ would consider the
consummation of the Danbury Transaction a violation of the
Consent Judgment. Smith 12/6/92 Aff. 1128. On October 9, 1990,
Kezsbom confirmed that Haynes had repeated this view to him. /d.
Ex. F. Loews informed the other parties of the DOJ determination
in early October 1990. Loews contends that, in view of this
determination, it abandoned the Danbury Transaction. Parke-
Hayden argues, on the other hand, that Loews had terminated the
deal long before the DOJ determination for reasons other than any
prohibitions imposed by the Consent Judgment.

Discussion
I. Standard for Summary Judgment

The standard for summary judgment is well-known. As the
Second Circuit has recently written:

Summary judgment may be granted only when
there is no genuine issue of material fact
remaining for trial and the moving party is

4la

Appendix E

entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(c). “As a general rule, all
ambiguities and inferences to be drawn from
the underlying facts should be resolved in favor
of the party opposing the motion, and all
doubts as to the existence of a genuine issue for
trial should be resolved against the moving
party.”

Bay v. Times Mirror Magazines, Inc., 936 F.2d 112, 116 (2d
Cir.1991) (citations omitted). The court will find that there is no
genuine issue of material fact and may therefore grant summary
judgment where, “[v]iewing the evidence produced in the light
most favorable to the nonmovant, . . . a rational trier could not find
for the nonmovant.” Binder v. Long Island Lighting Co., 933 F.2d
187, 191 (2d Cir.1991); see also Bay, 936 F.2d at 116.

II. Parke Hayden’s Motion for Summary Judgment

The First Claim of the Complaint, on which Parke-Hayden
moves for summary judgment, relates to the 72nd Street
Transaction. Parke-Hayden alleges that Loews employed Parke-
Hayden to procure a lease of the 72nd Street Property on its behalf,
that Loews wrongfully refused to enter into the lease procured by
Parke-Hayden, and that Loews is liable to Parke-Hayden in the
amount of the brokerage commission Parke-Hayden would have
received from the owner if not for Loews’s wrongful conduct.
Loews challenges Parke-Hayden’s characterization of its
relationship with Loews, contending that at no time did it employ
Parke-Hayden as broker, that Parke Hayden was employed as
Pilevsky’s broker and that Loews regarded Teich as a “conduit”
who was “nothing more than Pilevsky’s agent and Loews’
‘contact’ with Pilevsky and his organization.” Smith 1/6/92 Aff.
TI 12-14.

42a

Appendix E

It is undisputed that all parties interested in the 72nd Street
Transaction contem plated that the Owner would pay Parke-
Hayden’s commission, as memorialized in each draft of the
proposed lease agreement, see, e.g., Smith 12/6/91 Aff. Ex. A,
{ 35.01. Moreover, Parke-Hayden concedes that it has never
alleged or sought to prove any agreement by Loews to pay
commission to Parke-Hayden in connection with the 72nd Street
Transaction. Parke-Hayden Reply Memo. at 9.

Under New York law,

Where there is a contract of employment
between the purchaser and the broker which
does not expressly exclude the broker’s right to
commission unless the purchaser actually
enters into a contract of sale, the purchaser’s
refusal to contract with a seller willing to
contract on the purchaser’s terms makes the
purchaser liable to the broker for the
commission the broker would have received
from the seller.

This liability is predicated upon the
proposition that when the prospective
purchaser knows that the broker will earn a
commission from the seller, the law will imply
a promise on the part of the prospective
purchaser to complete the transaction, and if he
fails or refuses to do so without a valid reason,
the prospective purchaser becomes liable to the
broker for breach of an implied promise, with
damages chargeable to him measured by the
amount of commission the broker would have
earned.

43a

Appendix E

Tulp v. Padula, 70 Misc.2d 306, 308, 333 N.Y.S.2d 3, 6
(Civ.Ct.1972); see Westhill Exports, Ltd. v. Pope, 12 N.Y.2d 491,
496, 240 N.Y.S.2d 961, 964, 191 N.E.2d 447, 449 (1963);
Schaecter v. Regency Props, Inc, 115 A.D.2d 981, 981, 497
N.Y.S.2d 793, 794 (4th Dep’t 1985); Duross Co. v. Evans, 22
A.D.2d 573, 574, 257 N.Y.S.24 674, 676 (1st Dep’t 1965); Pease
& Elliman, Inc. v. Gladwin Realty Co., 216 A.D. 421, 424, 215
N.Y.S. 346 (1st Dep’t 1926); McKnight v. McGuire, 117 Misc. 306,
308, 191 N.Y.S. 323 (Sup.Ct.1921).

In New York, absent an agreement to the contrary, a real estate
broker earns his commission when he procures a buyer who is
ready, willing and able to purchase at the terms set by the seller.
Lane—Real Estate Dep't Store, Inc. v. Lawlet Corp., 28 N.Y.2d 36,
42, 319 N.Y.S.2d 836, 840, 268 N.E.2d 635, 638 (1971); Kalmon
Dolgin Affiliates, inc. v. Estate of Nutman, 172 A.D.2d 917, 568
N.Y.S.2d 204 (3d Dep’t 1991).

For the broker to prevail therefore, it must be shown that the
purchaser employed the broker, that the broker procured a seller
who was ready willing and able to enter the proposed transaction,
and that the failure to complete the transaction was due to the fault
of the purchaser. The burden of proof is borne by the broker, in this
case Parke-Hayden. Tulp, 70 Misc.2d at 308, 333 N.Y.S.2d at 6
(citing cases).

The mere fact that Parke-Hayden was to receive its
commission from, and thus was employed by, the Owner, does not
prevent it from also being employed by Loews. See Grossman v.
Herman, 266 N.Y. 249, 251-52, 194 N.E. 694 (1935); Long Island
Bus. Exch., Inc. v. De Luca, 58 A.D.2d 594, 594, 395 N.Y.S.2d 244,
246 (2d Dep’t 1977); Simon v. Allied Chem. Corp., 35 A.D.2d 273,
275, 315 N.Y.S.2d 919, 922 (1st Dep’t 1970), aff'd, 29 N.Y.2d 861,

d4a

Appendix E

328 N.Y.S.2d 169, 278 N.E.2d 340 (1971); Pease & Elliman, 216
A.D. at 423, 215 N.Y.S. at 423 (quoting McKnight, 117 Misc. at
308, 191 N.Y.S. 323).

Rather, the question is whether the facts may be held as matter
of law to justify an inference of a double employment. Grossman,
266 N.Y. at 252, 194 N.E. 694. There must be a contract between
Loews and Parke-Hayden which Loews has broken with resulting
liability for damages. Jd.

“(T]he contract of employment may be
established ... by facts showing, in the
absence of an express agreement, a conscious
appropriation of the labors of the broker. . . in
some cases ‘by the mere acceptance of the
labors of the broker.’ ”

Gronich v. 649 Broadway Equities Co., 169 A.D.2d 600, 565
N.Y.S.2d 18 (1st Dep’t 1991) (quoting Sibbald v. Bethlehem Iron
Co., 83 N.Y. 378, 380-81 (1881)).

The affidavits and deposition testimony cited above leave no
doubt that, under relevant New York law, Loews employed Teich to
procure a lease of the 72nd Street Property by soliciting and
accepting his services on Loews’s behalf.' See Tulp, 70 Misc.2d at
309, 333 N.Y.S.2d at 7 (plaintiff-broker was “employed” by

1. The record contains evidence additional to that reviewed in the discussion of
facts that establish that Teich was performing services on behalf of Loews in the 72nd
Street Transaction. See, e.g., Esbin Dep. at 25-28 (Teich was “performing services for
Loews in this regard [helping Loews get the site from Pilevsky]” and Esbin
understood Teich to be working for him “to the extent that he would convey what I
needed to Mr. Pilevsky” for the purpose of getting the deal Loews wanted).

45a
Appendix E

defendants prospective purchasers of a one-family home — who
had “requested” that plaintiff show them one-family houses in a
certain price range in a certain area).

The problem on this motion for summary judgment, however,
is that the record is bare of evidence of the terms of that
employment other than Teich’s testimony that “[m]y obligation
was to try to bring — my obligation was to try to have Phil Pilevsky
and his partners lease that parcel of property. My obligation to
Loews was to negotiate a palatable deal once the plans were
acceptable to both parties.” Jd. at 52-53 (emphasis added). This
description of the terms is simply too indeterminate to form a basis
upon which to conclude on a motion for summary judgment that
Loews breached the purported agreement or “contract” with
Parke-Hayden.”

Moreover, questions of fact exist as to whether Parke-Hayden
procured a “ready, willing and able lessor” on the terms proposed
by the Loews. Very specifically, the factual submissions raise a
question as to whether a favorable result from the rock and

2. This case should be contrasted to McKnight v. McGuire, 117 Misc. 306, 191
N.Y.S. 323 (Sup.Ct. 1921), in which the court held the lessee liable to the broker for
breaching his agreement with the broker to enter into a lease agreement. In that case,
the lessee had employed the broker to submit an offer to the owner of the premises, had
agreed to lease the premises if the broker could obtain specific terms (which the
broker ultimately did), and knew. that the broker anticipated receiving acommission
from the owner. Id. at 307-09, 191 N.Y.S.323; see also Westhill Exports, 12N.Y .2dat
494, 240 N.Y.S.2d at 962-63, 191 N.E.2d at 448 (broker authorized to negotiate for
paper supply contract; price, term, quantity and quality terms of desired contract
specified); Julien J. Studley, Inc. v. New York News, Inc., 122 A.D.2d 633, 635, 505
N.Y.S.2d 419, 420 (1st Dep’t 1986) (no implied-in-fact contract where defendant-
seller never specified asking price), aff'd, 70 N.Y.2d 628, 518 N.Y.S.2d 779, 512
N.E.2d 300 (1987).

46a

Appendix E

asbestos tests was a condition to Loews concluding the 72nd Street
Transaction which the Owner failed to meet.

Loews maintains that it had always made clear, both to Teich
and Pilevsky, that favorable results from soil and environmental
tests were a condition to Loews signing a final lease, while Teich
testified that this was not his understanding.’ The bulk of Loews’s
“evidence” of this condition or of the other parties’ awareness
thereof is either conclusory,‘ or fails to speak to whether the Owner
or Teich were aware that these tests and/or favorable results were a
condition to be met or a term to be negotiated before Loews would
sign a lease.°

Of a more substantial nature, is Smith’s affirmation regarding
a January 11, 1990 meeting at Pilevsky’s office at which the 72nd
Street Transaction was discussed. Among those present were
Smith, Pilevsky, Esbin and Teich. According to Smith, Loews’s
need for asbestos and subsoil testing was discussed along with
other lease terms and “Pilevsky promised that before any
documents would be signed, he would furnish Loews with a copy

3. Teich testified that rent and air rights were a topic of hot negotiation. Teich
Dep. at 44-46. Unfortunately, the pages of the Teich deposition transcript which
presumably contain Teich’s response when asked what other issues were subject to
negotiation have been omitted. Parke-Hayden Notice of Motion, Teich Dep. at 46-7.

4. See, e.g., Smith 1/6/92 Aff. Ff 16-19 (“This fact [that favorable results was a
condition] was no secret to Pilevsky or Teich. In fact, Loews’ intentions in this regard
were made known to Pilevsky and Teich as early as January of 1990. . . .”); id. at21
(“As both Pilevsky and plaintiff were well aware, that [determining whether Loews
shouldenter into the lease) was the precise purpose of conducting these due diligence
environmental tests before Loews would sign the lease.” (emphasis in original)).

5. See, e.g., Smith 1/6/92 Aff. { 19, stating merely that “the importance of the
soil and environmental tests was continuously reiterated.” (emphasis added).

a

47a
Appendix E

of an asbestos report he had prepared.” Smith 1/6/92 Aff. { 16
(emphasis in original). Furthermore, in a March 23, 1990 letter to
Pilevsky’s attorney, David Badain, Deputy General Counsel to
Loews, requested execution of the Letter of Agreement for Loews
to conduct its physical due diligence “as soon as possible so that we
can commence our physical due diligence and facilitate the
execution of the Lease.” Danzig 1/6/92 Aff. Ex. G (emphasis
added). Finally, Esbin testified that Loews’s lawyers conveyed to
the landlord’s lawyers that Loews wanted to do the asbestos test
and the rock boring, Esbin Dep. at 58, that there were discussions
“amongst ourselves only at Loews” that the “economic points”
upon which all had agreed were contingent on the results of the
asbestos and boring tests, and that he was “not sure” whether he
told Teich that the results of the tests were a contingency to
entering into the lease. Esbin Dep. at 78-79.

Drawing all inferences and resolving all ambiguities in favor
of Loews, there is a material factual dispute as to whether a
favorable result from the environmental tests was a term Or
condition unsatisfied by the Owner and thus as to whether Parke-
Hayden procured for Loews a ready, willing and able lessor. See
Tulp, 70 Misc.2d at 310, 333 N.Y.S.2d at 8 (plaintiff not entitled to
commission where failed to prove he had procured seller ready,
willing and able to sell on defendants’ terms); cf. Sanders A. Kahn,
Assocs. v. Maidman, 69 Misc.2d 90, 93, 329 N.Y.S.2d 121,124
(Sup. 1971) (“Where the owner merely specifies the purchase price
of property, without fixing the other terms of sale, commissions are
not earned until and unless the person produced by the broker
reaches an agreement with the owner not only as to price but also as
to the terms upon which the sale is to be made.”), aff'd, 38 A.D.2d
798, 329 N.Y.S.2d 318 (1st Dep’t), aff’d, 30 N.Y.2d 831, 335
N.Y.S.2d 77, 286 N.E.2d 462 (1972).

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Appendix E

Parke-Hayden contends, nevertheless, that Loews is liable for
its commission regardless of any unfulfilled condition because the
failure of the condition was due to the bad faith repudiation of the
deal as part of a house-cleaning by the Loews management team
that took over in the late spring of 1990. Under New York law,
regardless of unfulfilled terms or conditions, the party who
employs the broker will be liable for the commission if he is
responsible for the failure to perform the condition. Nuvest, S.A. v.
Gulf & Western Indus., Inc., 649 F.2d 943 (2d Cir.1981) (citing
Lane, 28 N.Y.2d at 43, 319 N.Y.S.2d at 841, 268 N.E.2d at 639);
Collins Tuttle & Co. v. Ausnit, 95 A.D.2d 668, 669, 463 N.Y.S.2d
219 (1st Dep’t 1983) (“ ‘a defendant who is sued for a commission
cannot be heard to complain where it was her own act which
prevented the natural progress of the transaction’ ” (quoting
Trylon Realty Corp. v. Di Martini, 40 A.D.2d 1029, 1030, 338
N.Y.S.2d 945 (2d Dep’t 1972), aff'd, 34 N. Y.2d 899, 359 N. Y.S.2d
284, 316 N.E.2d 718 (1974)). In other words, if the sale is not
consummated due to the bad faith, wrongful or arbitrary conduct
by the party who retained the broker, that party may not avoid his
liability to the broker under their agreement.®

While Parke-Hayden has presented evidence suggesting that
the demise of the 72nd Street Transaction may have been due to the
mere unwillingness of the new management team to proceed even
on the terms to which all of the parties had already agreed,’ there

6. Loews contests the availability of this theory to Parke-Hayden in the first
instance, claiming that it applies only where the party allegedly acting in bad faith
employed the broker. As discussed above, Parke-Hayden was employed by Loews.

7. Esbin and Pilevsky both testified that when Esbin approached Pilevsky
about the potential added cost of the asbestos and rock excavation, Pilevsky indicated
a willingness to negotiate concessions, stating that they would “work something out.”
Esbin Dep. at 95; Pilevsky Aff. ¥{ 16-17 Nevertheless, this possibility was never

(Cont'd)

49a

Appendix E

are questions of fact as to whether the cost of the rock and asbestos
removal was a genuine deal-stopper.* There is no proof, for
instance, that Pilevsky indeed would have “worked out” issues
regarding the cost of the removal within the terms undisputedly
satisfactory to Loews. Because factual questions exist as to these
issues, Parke-Hayden’s motion for summary judgment on the First
Claim is denied.

Ill. Loews’s Motion for Partial Summary Judgment

A. Motion to Dismiss Third and Fourth Claims Based on the
Danbury Transaction

The first half of Loews’s motion for summary judgment seeks
dismissal of the Third and Fourth Claims, in which Parke-Hayden
claims lost brokerage commissions relating to the Danbury
Transaction. Unlike the dispute relating to the 72nd Street
Property, Loews does not contest Parke-Hayden’s allegation that it
was acting as Loews’s broker in the Danbury Transaction. Rather,
Loews contends that because the Consent Judgment prohibited the
joint venture between Loews and PL Associates, Parke-Hayden
did not secure ready, willing and able partners for the proposed
joint venture. As such, Loews argues that Parke-Hayden is not

(Cont'd)

pursued by Loews’s new management, and the record establishes that it opted not to
proceed with the deal because it was “financially unsound.” Friedberg Aff. {f 2, 5-6.
Thus, there is “testimony from which the jury could. . . conclude{ } that [the Owner]
might have met [Loews’s] price term” if Loews had negotiated the concessions
further. Nuvest, 649 F.2d at 949.

8. Kenneth Benjamin, a Vice President of Loews since May 1989, states in his
affirmation that, as of April 1990, the discovery of rock posed a “major problem in
going forward with the proposed transaction.” Benjamin Aff. {3.

50a
Appendix E

entitled to a commission as a matter of New York law. See, e.g.,
Lane, 28 N.Y.2d at 42, 319 N.Y.S.2d at 840, 268 N.E.2d at 639.

Parke-Hayden opposes Loews’s motion contending first that
Loews cannot raise the Consent Judgment as a shield because it
was within Loews’s power to have the prohibition lifted, enabling
it to consummate the Danbury Transaction. Secondiy, Parke-
Hayden contends that the Consent Judgment was not the real
reason for Loews’s decision to back out of the deal.

There is no dispute concerning the awareness of the parties
that compliance with the Consent Order was a term of the
transaction. Each draft of the proposed partnership agreement
contained provisions stating that PL Associates had been alerted to
the existence of the Consent Judgment, had been advised that it
prohibited Loews “from acquiring or continuing to own any
beneficial interest in any motion picture theatre in conjunction
with an actual or potential independent exhibitor,” and had agreed
“not to do or perform any act... which would cause Loews... to
be in violation of said provision. . . .” See Smith 12/6/91 Aff. Ex.
C, at 45-46. There is also no dispute that Loews sought an opinion
from the DOJ as to whether the Danbury Transaction would violate
the Consent Order and that the DOJ advised Loews in September
1990 that it would view the transaction as violative. Nevertheless,
Parke-Hayden argues that Loews’s motion should be denied,
asserting that Loews could have had the Consent Judgment lifted
but failed to take any steps to do so. See Parke-Hayden Memo. in
Opp. at 5 (“Loews had but to ask the Department of Justice that it
consent to the elimination of the decree.”’).

Parke-Hayden’s assertion that the Consent Judgment would
have been lifted had Loews made the effort is not supported by
facts. Concededly, the DOJ did submit a memorandum in support

Sla
Appendix E

of Loews October 1990 motion to lift the decree. Nevertheless,
even to this date, no evidence has been presented that that motion
was successful. Thus, even if Loews had taken action during the
pendency of negotiations with PL Associates, there is no factual
basis for Parke-Hayden’s facile contention that Loews would have
been freed of the constraints imposed by the Consent Judgment. As
things stood at the time of the negotiations, and indeed, as they still
stand today, Loews was subject to the Consent Judgment which,
according to the DOJ, prohibits a joint venture with PL Associates.

Moreover, even assuming that Loews could have had the
Consent Judgment eradicated by merely lifting its finger, this is not
material to the inquiry as to whether Parke-Hayden procured ready,
willing and able partners under the terms of the proposed
partnership. Loews never agreed, nor was it a condition of any
agreement with PL Associates or Parke-Hayden, that Loews would
make any efforts to have the Consent Judgment lifted. To the
contrary, the proposed partnership agreements clearly
contemplated the existence and survival of the Consent Judgment.
Thus, this case is distinguishable fiom Long Island Bus. Exch. v.
De Luca, 58 A.D.2d 594, 395 N.Y.S.2d 244 (2d Dep’t 1977),
invoked by Parke-Hayden. In that case, a condition of the proposed
agreement was that the defendant would obtain a liquor license
within eight weeks. Because the defendant allegedly failed to
apply timely for the license, the court held that the plaintiff had
stated a cause of action for its commission because the defendant
allegedly acted deliberately to cause the transaction to founder. /d.
at 594, 395 N.Y.S.2d at 245.

Parke-Hayden also claims that the Consent Judgment had
nothing to do with the failure of the transaction because Loews
terminated the transaction long before it received the DOJ’s
opinion in September 1990. Even assuming the truth of the

52a

Appendix E

assertion that the Consent Judgment was not the primary reason for
Loews’s decision to terminate the transaction, the fact remains that
the Consent Judgment existed at all times and legally prevented
Loews from being “able” to participate in this joint venture.

Because the undisputed facts establish that Parke-Hayden
failed to procure ready, willing and able partners for the Danbury
joint venture, Loews’s motion for summary judgment dismissing
the Third and Fourth Claims is granted.

B. Motion to Dismiss Parke-Hayden’s Claim for Punitive
Damages

Loews also has moved for summary judgment dismissing
Parke-Hayden’s claim for punitive damages on the First and Third
Claims.

As a preliminary matter, it bears noting that, even assuming
Loews’s bad faith, these claims sound in contract, not tort. Pittston
Warehouse Corp. v. American Motorists Ins. Co., 715 F.Supp.
1221, 1227 (S.D.N. Y.1989) (“tort of bad faith breach of contract”
except in the insurance context), aff’d 954 F.2d 62 (2d Cir.1992).
Under New York law, punitive damages generally are not available
for a simple breach of contract. Smith v. Lightning Bolt Prods., Inc.,
861 F.2d 363, 371 (2d Cir.1988) (citing New York cases). New
York courts, the Second Circuit and courts within this district are
virtually unanimous that punitive damages may not be awarded in
breach of contract cases, unless the wrong is aimed at th

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_0181%3A1. Public record. Not legal advice.