Defendants David J. Prescott, Integra Optics, Inc. ("Integra") and Goshawk Funding Limited ("GFL") move, pre-answer, pursuant to CPLR 3211 (a) (1), (7) and (8) and CPLR 7503. Plaintiff Charles W. Doller opposes the motion.

According to the complaint, Doller was an experienced investment banker and financial industry executive. One of his longstanding clients was Prescott, with whom he worked closely for eight years in connection with various business transactions and entrepreneurial ventures, including Integra. Doller alleges that their relationship was so prosperous that Prescott asked him to serve as a consultant to help run Integra. Prescott also is said to have encouraged Doller [*2]to buy-out his then co-owner, Paul Ryan,^[FN1] and consider replacing Ryan as President of Integra. Doller asserts that Prescott's efforts eventually induced him to resign from his investment banking position to join Integra on a full-time basis.

This case arises out of two written agreements that allegedly formed the basis of the parties' business relationship. The first is a Memorandum of Understanding ("MOU"), dated June 1, 2012, that is signed by Prescott and Doller. By its terms, the MOU sets forth, in summary form, certain understandings reached by and between the signatories. "From and after [the date of execution of the MOU] each of the parties will proceed diligently in good faith to satisfy the conditions required in order to enter into definitive agreements and close the transactions contemplated herein" (MOU, Preamble).

The parties agreed that, following the conclusion of certain litigation between and among Prescott, Ryan, Integra and others ("Litigation"), they would "proceed diligently with a view toward" three contemplated transactions (id. ¶ 3). The first two transactions involved the appointment of Doller as a director of Integra and his election as President of the corporation (id. ¶ 3 [a], [b]). According to the MOU, Doller's current employment agreement was to be amended to reflect his promotion to President, but "[t]he remaining terms of Doller's employment as President of Integra shall be subject to a separate employment agreement which shall be negotiated . . . in good faith" (id. ¶ 3 [b]).

The third contemplated transaction was an offer of equity to Doller. More specifically, the MOU provided that "Doller shall be given a right of first refusal for Equity" (id. ¶ 3 [c]). The MOU defines the term "Equity" to mean "ownership or the rights of ownership in Integra" (id. ¶ 2 [c]). Doller's right of first refusal for "Equity" shall include, but not be limited to, "the right of first refusal to acquire [Ryan's shares of Integra] should they become available and/or equity grants or an equity earn in" (id. ¶ 3 [c]). "However, the precise manner in which this Equity is offered shall be determined" following the conclusion of the Litigation (id.). According to the MOU, "the offer of Equity [was] a material inducement to Doller entering into th[e] Agreement" (id.).

The second agreement at issue in this action is an Executive Employment Agreement ("Employment Agreement"), dated July 9, 2013. The Employment Agreement, to which Doller and Integra are parties, designates Doller as Integra's Executive Vice President and Chief Financial Officer and includes terms governing Doller's compensation and benefits.

In September 2014, Doller allegedly notified Prescott in writing that he intended to exercise his right of first refusal to purchase Ryan's 48.75% ownership interest in Integra. Prescott allegedly responded that he would be purchasing Ryan's shares for himself. At that point, Integra allegedly terminated Doller's employment without cause.

In November 2016, Doller commenced this action for declaratory relief and monetary damages, alleging, among other things, that Prescott breached the MOU by refusing to sell him Ryan's shares, and Integra breached the Employment Agreement by failing to make severance [*3]payments following the termination of his employment. Doller further alleges that he was fraudulently induced to enter into the MOU and Employment Agreement by Prescott's false representations concerning a right of refusal for equity in Integra. The instant motion practice ensued.

Defendants move to stay litigation of the third and fourth causes of action and to compel Doller to arbitrate these claims. The third cause of action alleges that defendants breached the Employment Agreement, and the fourth cause of action alleges that Doller fraudulently was induced to enter into the Employment Agreement. In seeking to compel arbitration, defendants rely on an arbitration clause in the Employment Agreement that reads, in pertinent part: "Executive and the Company agree to arbitrate . . . any and all disputes or claims arising from or relating in any way to this Agreement or the employment relationship between Executive and Company or the termination thereof" (Employment Agreement ¶ 8).

"In considering a motion to stay or compel arbitration, a court must address the threshold issue[] of whether the parties made a valid agreement to arbitrate" (Matter of Wiederspiel [Carstens], 36 AD3d 971, 973 [3d Dept 2007] [internal quotation marks and citation omitted]). "Where there is no substantial question whether a valid agreement was made or complied with . . . the court shall direct the parties to arbitrate" (CPLR 7503 [a] [emphasis added]).

Doller opposes arbitration, claiming that the arbitration clause should not be given effect because the Employment Agreement includes "illegal aspects" insofar as it was the product of defendants' alleged fraud. "Where an agreement consists of an unlawful objective in part and a lawful objective in part, the court may sever the illegal aspect and enforce the legal one, so long as the illegal aspects are incidental to the legal aspects and are not the main objective of the agreement" (Lanza v Carbone, 130 AD3d 689, 692 [2d Dept 2015] [internal quotation marks and citation omitted]). In other words, absent proof of "a grand scheme to defraud which permeated the entire agreement, including the arbitration provision . . . , a broadly worded arbitration provision will be deemed separate from the substantive contractual provisions, and the agreement to arbitrate may be valid despite the underlying allegation of fraud" (Riverside Capital Advisors, Inc. v Winchester Global Trust Co. Ltd., 21 AD3d 887, 889 [2d Dept 2005] [internal quotation marks and citation omitted]).

Here, Doller does not allege that the arbitration clause is itself the product of fraud. Nor is there any allegation "that the [Employment A]greement was not the result of an arm's length negotiation, or the arbitration clause was inserted into the contract to accomplish a fraudulent scheme" (Markowits v Friedman, 144 AD3d 993, 997 [2d Dept 2016] [internal quotation marks and citation omitted]). Under the circumstances, "the arbitration agreement is valid and the claim of fraudulent inducement is for the arbitrator" to decide (id.).

Accordingly, the parties are directed to proceed with arbitration relative to the third and fourth causes of action (see CPLR 7503 [a]; Stark v Molod Spitz DeSantis & Stark, P.C., 9 NY3d 59, 66 [2007]), and this action shall be stayed as to the litigation of said causes of action (see Matter of Birchwood Vil. LP v Assessor of the City of Kingston, 94 AD3d 1374, 1376 [3d Dept 2012]; Matter of Princeton Info., 235 AD2d 234, 234 [1st Dept 1997]).

Defendants contend that the eighth cause of action, seeking punitive damages, must be dismissed because a demand for punitive damages cannot be maintained as an independent cause of action. Further, even if the allegations in support of the claim for punitive damages were construed as being attached to Doller's substantive causes of action, defendants contend that the demand for punitive damages fails because there is no allegation that defendants' conduct alleged was aimed at the public at large.

It is well established that "[a] demand or request for punitive damages is parasitic and possesses no viability absent its attachment to a substantive cause of action such as fraud" (Rocanova v Equitable Life Assur. Socy. of U.S., 83 NY2d 603, 616 [1994]; see Nova Info. Sys., Inc. v Scheidelman, 129 AD3d 1352, 1353 [3d Dept 2015]). Moreover, "[p]unitive damages are not recoverable for an ordinary breach of contract as their purpose is not to remedy private wrongs but to vindicate public rights" (Rocanova, 83 NY2d at 613; see New York Univ. v Continental Ins. Co., 87 NY2d 308, 316 [1995] [defendants' conduct must be part of a pattern directed at the public generally]; Calabrese Bakeries, Inc. v Rockland Bakery, Inc., 102 AD3d 1033, 1037 [3d Dept 2013]).

As there can be no separate cause of action for punitive damages, the Court concludes that dismissal of the eighth cause of action is warranted.

As a threshold matter, defendants argue that the complaint must be dismissed as against GFL for lack of personal jurisdictional due to improper service of process (see CPLR 3211 [a] [8]). It is Doller's burden of prove that personal jurisdiction has been acquired (see 2110-2118 ACBP, LLC v Holland-Harden, 118 AD3d 461, 461 [1st Dept 2014]; Hsu v Shields, 111 AD3d 674, 674 [2d Dept 2013]; Hopkins v Tinghino, 248 AD2d 794, 795 [3d Dept 1998]).

Here, the affidavit of service filed by Doller reflects that GFL was "served" via hand-delivery to Prescott's wife at his residence (see Debrowski Aff., Ex. D). Doller has failed to demonstrate that a foreign corporation may be served in this manner (see CPLR 311 [a] [1]; Business Corporation Law §§ 306, 307). Accordingly, the complaint must be dismissed against GFL for lack of personal jurisdiction.^[FN2]

Defendants move to dismiss the claims founded upon the MOU under CPLR 3211 (a) (1) and (7). Plaintiff's first cause of action alleges that defendants breached the MOU by refusing to allow Doller to purchase Ryan's shares; the seventh cause of action alleges breach of the implied covenant of good faith and fair dealing with respect to the MOU; and the sixth cause of action seeks a declaration that Doller is entitled to damages in the amount of the difference between the price that Prescott paid for Ryan's shares and the current market value of the shares.

Dismissal is warranted under CPLR 3211 (a) (1) only "where the documentary evidence [*4]utterly refutes plaintiff's factual allegations, conclusively establishing a defense as a matter of law" (Ganje v Yusuf, 133 AD3d 954, 956 [3d Dept 2015] [internal quotation marks and citation omitted]; see Goshen v Mutual Life Ins. Co. of NY, 98 NY2d 314, 326 [2002]; New York State Workers' Compensation Bd. v Consolidated Risk Servs., Inc., 125 AD3d 1250, 1256 [3d Dept 2015]). "Materials that clearly qualify as documentary evidence include documents reflecting out-of-court transactions such as mortgages, deeds, contracts, and any other papers, the contents of which are essentially undeniable" (Midorimatsu, Inc. v Hui Fat Co., 99 AD3d 680, 682 [2d Dept 2012] [internal quotation marks and citations omitted], lv dismissed 22 NY3d 1036 [2013]; cf. Rabos v R & R Bagels & Bakery, Inc., 100 AD3d 849, 851 [2d Dept 2012]).

On a motion to dismiss pursuant to CPLR 3211 (a) (7), the Court must liberally construe the complaint, accord the nonmovant the benefit of every favorable inference, and limit its review to a determination as to whether the facts alleged fall within a cognizable legal theory (see Leon v Martinez, 84 NY2d 83, 87-88 [1994]; Slezak v Stewart's Shops Corp., 133 AD3d 1179, 1179 [3d Dept 2015]). However, the Court need not "accept as true legal conclusions or factual allegations that are either inherently incredible or flatly contradicted by documentary evidence" (1455 Washington Ave. Assoc. v Rose & Kiernan, 260 AD2d 770, 771 [3d Dept 1999] [internal quotation marks and citations omitted]).

In seeking dismissal of the claims founded upon the MOU, defendants argue principally that the MOU is a preliminary agreement that lacks sufficiently definite terms as to give rise to an enforceable contract. In particular, defendants maintain that the MOU does not prescribe the form that Doller's "right of first refusal for Equity" shall take and, instead, expressly contemplates subsequent negotiation and agreement between the parties. Defendants also contend that the MOU lacks definiteness with respect to the timing of the contemplated transaction. In opposition, Doller argues that the MOU is a valid and enforceable contract that gave him an unequivocal and unconditional right of first refusal to purchase Ryan's shares of Integra.

As the proponent of the alleged contract, Doller "must establish an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound" (Kowalchuck v Stroup, 61 AD3d 118, 121 [1st Dept 2009]; see Clearmont Prop., LLC v Eisner, 58 AD3d 1052, 1055 [3d Dept 2009]). As pertinent here, "a contract must be definite in its material terms in order to be enforceable" (Wilson v Ledger, 97 AD3d 1028, 1029 [3d Dept 2012] [internal quotation marks and citations omitted]). After all, "'a court cannot enforce a contract unless it is able to determine what in fact the parties have agreed to'" (F & K Supply v Willowbrook Dev. Co., 288 AD2d 713, 714 [3d Dept 2001], quoting Matter of 166 Mamaroneck Ave. Corp. v 151 E. Post Rd. Corp., 78 NY2d 88, 91 [1991]). The requirement of definiteness also assures that courts will not impose contractual obligations that the parties did not intend (Cobble Hill Nursing Home v Henry & Warren Corp., 74 NY2d 475, 482 [1989]).

"[A] mere agreement to agree, in which a material term is left for future negotiations, is unenforceable" (Joseph Martin, Jr., Delicatessen v Schumacher, 52 NY2d 105, 109 [1981]; see Clifford R. Gray, Inc. v LeChase Constr. Servs., LLC, 31 AD3d 983, 985 [3d Dept 2006]). The key inquiry is "whether the [alleged contract] contemplated the negotiation of later agreements and if the consummation of those agreements was a precondition to a party's performance" (IDT Corp. v Tyco Group, S.A.R.L., 13 NY3d 209, 213 n 2 [2009]; see Offit v Herman, 132 AD3d 409, [*5]409-410 [1st Dept 2015]).

In evaluating the parties' contentions, the Court begins with the language of the MOU. The preamble states that the parties "will proceed diligently and in good faith to satisfy the conditions required in order to enter into definitive agreements . . . ." Thus, upon the conclusion of the Litigation, the "parties will proceed diligently with a view toward" undertaking the three contemplated transactions (MOU ¶ 3). With respect to "the right of first refusal for Equity," the MOU further provides that "the precise manner in which this Equity is offered shall be determined" by Prescott and Doller following the conclusion of the Litigation (id. ¶ 3 [c]). Accordingly, the plain language of the MOU demonstrates that the parties intended to negotiate a subsequent agreement governing the offer of "Equity" that "Doller shall be given" and that consummation of such an agreement was a precondition to defendants' performance (id.).

Additional support for this conclusion is found in the terms of the offer of "Equity" itself. While the MOU contemplated that Doller "shall be given" a right of first refusal for "ownership or the rights of ownership in Integra" (id. ¶¶ 3 [c], 2 [c]), the MOU does not guarantee Doller a right of first refusal to purchase Ryan's shares of Integra once they became available. Rather, the pertinent language of the MOU is written in the disjunctive and contemplates that the future offer of Equity may take one of several alternative forms: (1) a "right of first refusal to acquire [Ryan's shares of Integra] should they become available"; (2) "equity grants"; and/or (3) "an equity earn in" (id. ¶ 3 [c]). Thus, the text of the MOU plainly recognizes the need for subsequent negotiations to determine "the precise manner" in which Prescott shall offer ownership rights in Integra to Doller (id.).

Given the parties' failure to define the nature and extent of Doller's "right of first refusal for Equity," a highly material term of the agreement, the MOU lacks sufficient definiteness to be enforceable. Courts do not write contracts, parties do, and there simply is no objective method or standard by which to fashion a remedy giving Doller ownership, or the rights of ownership, in Integra.^[FN3] Thus, with respect to the offer of "Equity," the Court concludes that the MOU is an unenforceable "agreement to agree" (see Benham v eCommission Sols., LLC, 118 AD3d 605, 606-607 [1st Dept 2014] ["failure of the parties to agree on the precise form of the equity stake causes plaintiff's contract claim to fail for lack of definiteness"]; Wilson v Ledger, 97 AD3d 1028, 1029-1030 [3d Dept 2012]; Female Academy of the Sacred Heart v Doane Stuart School, [*6]91 AD3d 1254, 1255-1256 [3d Dept 2012]; Glanzer v Keilin & Bloom LLC, 281 AD2d 371, 372 [1st Dept 2001] [promise of "equity interest" in firm]).

Accordingly, the first, sixth and seventh causes of action are dismissed.^[FN4]

The fifth cause of action alleges that Prescott was unjustly enriched by "purchas[ing] the Ryan shares for himself, instead of honoring his agreement with [Doller], which specified that [Doller] was entitled to purchase the shares when they became available" (Complaint ¶ 61).

Initially, Doller's allegations of unjust enrichment are limited to Prescott and, in any event, there is no basis to infer that Integra was unjustly enriched by reason of Prescott's purchase of Ryan's shares. As such, this cause of action fails to state a claim against Integra and must be dismissed insofar as asserted against the corporation.

The cause of action also is subject to dismissal insofar as it is asserted against Prescott, as the claim is predicated on Prescott's alleged breach of the MOU with respect to the purchase of Ryan's shares and demands the same measure of damages as Doller's contractual claim (see Benham, 118 AD3d at 607; Walter H. Poppe Gen. Contr. v Town of Ramapo, 280 AD2d 667, 668 [2d Dept 2001]).^[FN5] In other words, the cause of action for unjust enrichment pleaded by plaintiff is nothing more than a restatement of his failed contractual claim (see Glinskaya v Zelman, 128 AD3d 771, 772 [2d Dept 2015] ["Quantum meruit and unjust enrichment are equitable remedies with their own prerequisites, not merely devices to give effect to unenforceable contracts"], lv dismissed 26 NY3d 960 [2015]).

Defendants move to dismiss Doller's second cause of action, alleging that he was fraudulently induced to enter into the MOU, on the ground that the allegations of fraud are conclusory and lack the particularity required by CPLR 3016 (b). A cause of action for fraudulent inducement requires a plaintiff to "'allege a misrepresentation or concealment of a material fact, falsity, scienter by the wrongdoer, justifiable reliance on the deception, and resulting injury'" (Lusins v Cohen, 49 AD3d 1015, 1017 [3d Dept 2008], quoting Zanett Lombardier, Ltd. v Maslow, 29 AD3d 495, 495 [1st Dept 2006]). The circumstances constituting the alleged fraudulent inducement must be stated in sufficient detail to put the defendants on notice of the incidents complained of (see CPLR 3016 [b]; New York State Workers' Compensation Bd. v SGRisk, LLC, 116 AD3d 1148, 1154 [3d Dept 2014]).

In this regard, the Court concludes that the allegations of the complaint (see ¶¶ 16-24, 39-[*7]46) are sufficiently pleaded and detailed to state a cause of action for fraud. The complaint alleges that Prescott made clear and unequivocal misrepresentations that Doller would be entitled to purchase Ryan's shares, and Doller actually and justifiably relied upon the misrepresentations in joining Integra. Further, the allegations of the complaint, taken in a light most favorable to Doller, suffice to permit a rational inference of fraud (see Pludeman v Northern Leasing Sys., Inc., 10 NY3d 486, 492 [2008]).

Defendants further contend, however, that the fraud claim is duplicative of the breach of contract claim. To establish a fraud claim arising in connection with a contractual relationship, "the plaintiff must allege a breach of duty which is collateral or extraneous to the contract between the parties" (Krantz v Chateau Stores of Canada, 256 AD2d 186, 187 [1st Dept 1998]). In other words, the alleged fraud must be "sufficiently discrete from that underlying the breach of contract claim [in order to] state a separate cause of action" (Kosowsky v Willard Mtn., Inc., 90 AD3d 1127, 1129 [3d Dept 2011]).

Here, Doller's allegations that he was fraudulently induced to enter into the MOU with Prescott are not sufficiently collateral from the alleged breach of contract so as to state a separate cause of action. Rather, the alleged misrepresentations directly concern the purchase of Ryan's shares of Integra stock and Doller's alleged right of first refusal to do so — the same conduct that forms the basis of the contractual claim (see Complaint ¶ 43; Cole, Schotz, Meisel, Forman & Leonard, P.A. v Brown, 109 AD3d 764, 765 [1st Dept 2013]).^[FN6] Under the circumstances, the Court finds that the fraud cause of action must be dismissed as duplicative of the breach of contract claim.^[FN7]

Accordingly, it is

ORDERED that plaintiff's first, second, fifth, sixth, seventh and eighth causes of action are dismissed; and it is further

ORDERED that the complaint is dismissed as against Goshawk Funding Limited; and it is further

ORDERED that litigation of the third and fourth causes of action is stayed, and the remaining parties to this action are directed to proceed to arbitration of such claims in accordance with the terms of the Executive Employment Agreement; and it further

ORDERED that defendants' motion is granted to the extent indicated herein and denied in all other respects.

This constitutes the Decision & Order of the Court. The original Decision & Order is being transmitted to counsel for defendants; all other papers are being transmitted to the Albany [*8]County Clerk. The signing of this Decision & Order shall not constitute entry or filing under CPLR Rule 2220, and counsel is not relieved from the applicable provisions of that Rule.

1.Notice of Motion, dated January 18, 2017; Affirmation of F. Charles Dayter, Esq., dated January 18, 2017, with annexed exhibits; Memorandum of Law in Support of Motion by the Defendants, dated January 18, 2017;

2.Affirmation of Mark D. Debrowski in Support of Plaintiff's Opposition to Defendants' Motion to Dismiss, dated February 24, 2017, with annexed exhibits; Plaintiff's Memorandum of Law in Opposition to Defendants' Motion to Dismiss, dated February 24, 2017; and

3.Reply Affirmation of F. Charles Dayter, Esq., dated March 1, 2017.