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Brian Wishneff & Associates v. 10 South Street Associates, LLC

United States District Court, W.D. Virginia, Roanoke Division

November 11, 2016



          Hon. Michael F. Urbanski United States District Judge

         Currently pending before the court in this breach of contract case are defendant 10 South Street Associates, LLC's second motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) or, in the alternative, motion for summary judgment (ECF No. 44), and its third motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) (ECF No. 63).[1] At a hearing held on the former motion on May 2, 2016, the court questioned whether it had subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1332-specifically, whether the amount in controversy exceeds the $75, 000 jurisdictional threshold. The court took 10 South Street's Rule 12(b)(6) motion under advisement, ed a period of jurisdictional discovery, and allowed time for further briefing. 10 South Street thereafter filed its Rule 12(b)(1) motion. The issues have been fully briefed and are now ripe for adjudication.

         As set forth in detail below, the court finds there is a genuine issue of material fact as to the amount of any fee due plaintiff Brian Wishneff & Associates ("Wishneff') under the contract and the payment schedule for such a fee. The court therefore cannot find to a legal certainty that Wishneff is unable to recover an amount exceeding the jurisdictional threshold. As such, 10 South Street's third motion to dismiss pursuant to Rule 12(b)(1) will be DENIED.

         Additionally, because there is a genuine issue of material fact as to whether 10 South Street owes any fee to Wishneff for its performance under the contract prior to termination, 10 South Street's Rule 12(b)(6) motion, which the court will treat as a motion for summary judgment, will be DENIED. This matter will be set down for further proceedings.


         10 South Street is a real estate developer designated by the City of New York for the potential renovation of the former Battery Maritime Building at the southern tip of Manhattan ("the Project"). In connection with the Project's development, 10 South Street sought to utilize the federal and state historic tax credit program to assist in funding a portion of the renovation cost. To that end, 10 South Street enlisted the consulting services of plaintiff Brian Wishneff & Associates to locate and secure historic tax credit ("HTC") investors and other financial incentives. 10 South Street and Wishneff entered into the Battery Maritime Building Historic Tax Credit Agreement on October 26, 2009 ("the Agreement"). Wishneff s obligations under the Agreement included managing the tax credit process through to payment, evaluating ways to maximize the Project's qualified rehabilitation expenses, and securing at least three term sheets or offers from at least three historic tax credit investors. The Agreement provides in a section tided "Fees and Schedule" that Wishneff shall earn a fee for its work

in an amount equal to 7% of the gross equity payment by the historic tax credit Investor; however such a fee payment(s) shall not exceed $1, 000, 000. If sufficient funds are available from a credit investor and/or a bridge loan lender, the Consultant [Wishneff] shall be paid 20% of its fee at closing, 20% half-way through to closing, 45% at certificate of occupancy or occupancy and 5% upon any final equity payment by the Investor. In addition, the Consultant shall be reimbursed on a monthly basis for direct expenses such as travel, long distance calls and sending overnight packages, whether a tax credit closing occurs or not. However, the Consultant's expenses to be reimbursed shall not exceed $10, 000 and such expenses shall be subtracted from the fee.

ECF No. 45-5, at 5. The Agreement also contains the following termination provision:

If the Consultant [Wishneff] has not produced a term-sheet from a historic tax credit investor within 90 days, then after 90 days the Developer [10 South Street] may terminate this Agreement at any time for convenience. If at any point in the future the Developer withdraws from the project the Developer can terminate for convenience. In addition, at any time after the eighteen (18) month anniversary of execution of this Agreement, the Developer may terminate this Agreement for convenience. Upon such a termination, Consultant shall deliver a list of all potential investors ("Potential Investors") that it has contacted related to the HTCs being generated by the Project. If any [sic] anytime in the future, Developer proceeds with the Project and one of the Protected Investors becomes an investor in any [historic tax credits] generated by the Project, Consultant shall earn its full fee pursuant to the Fee and Schedule section above. If, however, Developer moves forward with a HTC investor that is not one of the Protected Investors, Consultant shall earn one-half (1/2) of the fee that it would have otherwise earned under the Fee and Schedule section above.

Id. at 7.

         In its second amended complaint, Wishneff alleges that it secured PNC Bank as an HTC investor "with projected $37, 201, 038 in capital contributions" on January 24, 2012. Second Am. Compl., ECF No. 68, at ¶ 15. Wishneff claims mat at "the initial equity closing for the Project on or about June 25, 2012, " PNC made an "initial equity contribution of $200, 000 into the Project." 14 at ¶ 16. On December 10, 2012, Wishneff invoiced 10 South Street for twenty percent of the fee it claims was due at the closing of the PNC investor loan. Id. at ¶ 19. 10 Soum Street refused to make a payment. Id. On March 26, 2015, Wishneff invoiced 10 South Street for twenty percent of its fee that was due, and again 10 South Street refused to make payment. Id. at ¶ 20. On July 27, 2015, 10 South Street served Wishneff with a "Notice to Terminate Agreement, " in which defendant stated it was withdrawing from the Project "for convenience." Id. at ¶ 21. Wishneff filed the instant breach of contract action on July 29, 2015, alleging that 10 South Street breached the parties' Agreement by failing to pay Wishneff its fee of seven percent of PNC's projected contribution of $37, 201, 038, capped at $1, 000, 000. Id. at ¶ 26. Wishneff claims this fee was "earned when the HTC investor, PNC Bank, made its investment." Id. at ¶ 27. Wishneff seeks $1, 000, 000 plus interest and costs in its second amended complaint. Id. at ¶ 28.[2]


         The burden of proving subject matter jurisdction lies with the plaintiff. See McNutt v. Gen. Motors Acceptance Corp.. 298 U.S. 178, 189 (1936). On its face, Wishneff s second amended complaint appears to satisfy the amount-in-controversy requirement of § 1332, and "[c]ourts generally determine the amount in controversy by reference to the plaintiffs complaint." JTH Tax. Inc. v. Frashier, 624 F.3d 635, 638 (4th Cir. 2010) (citing Wiggins v. N. Am. Equitable Life Assurance Co., 644 F.2d 1014, 1016 (4th Cir. 1981) ("Ordinarily the jurisdictional amount is determined by the amount of the plaintiffs original claim, provided that the claim is made in good faith.")).[3]

         While the sum claimed by the plaintiff typically controls the amount in controversy requirement, a court may dismiss an action for lack of subject matter jurisdiction if '"it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed.'" Id. (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938)) (emphasis added by the Fourth Circuit).

Defendants, seeking dismissal of diversity actions for lack of a sufficient amount in controversy, must therefore shoulder a heavy burden. They must show "the legal impossibility of recovery" to be "so certain as virtually to negative the plaintiffs good faith in asserting the claim." Wiggins v. N. Am. Equitable Life Assurance Co., 644 F.2d 1014, 1017 (4th Cir. 1981) (internal quotation omitted). A mere dispute over the mathematical accuracy of a plaintiffs damages calculation does not constitute such a showing. See McDonald v. Patton, 240 F.2d 424, 425 (4th Cir. 1957) (noting that plaintiffs may secure federal jurisdiction even when "it is apparent on the face of the claim" that the claim to the requisite amount is subject to a "valid defense").



         In its third motion to dismiss, [4] 10 South Street argues Wishneff s claim is a legal impossibility under the parties' Agreement. The Agreement provides that Wishneff is entitled to seven percent of the "gross equity payment by the historic tax creditor Investor, " which fee is capped at $1, 000, 000. It further provides that "[i]f sufficient funds are available, " Wishneff shall be paid "20% of its fee at closing...." There is no dispute that PNC bank only delivered $200, 000 in connection with the Project. 10 South Street argues that, at best, Wishneff is entitled to seven percent of that $200, 000 payment ($14, 000) and of that, only twenty percent ($2, 800) was due at closing per the contract terms.

         Wishneff insists that it is entitled to seven percent of PNC's projected contribution of $37, 201, 038, capped at $1, 000, 000, twenty percent of which ($200, 000) was due at closing on June 25, 2012. Wishneff asserts that "[t]he Fees and Schedule section of the Agreement [between Wishneff and 10 South Street] must be read in total and in the context of the original agreement that Wishneff had on the BMB project." Pl's Opp. Br. to Third Mot. to Dismiss, ECF No. 66, at 5. This contract between Wishneff and the original developer of the Project, BMB Associates, LLC, provided for a fee often percent of the amount paid by an HTC investor, with no cap on the amount Wishneff could earn. See Id. at Ex. 1. Stephen Benjamin, on behalf of BMB Associates, negotiated this original contract with Wishneff. Rule 30(b)(6) Dep. of 10 South Street Assoc, ECF No. 66-2, at 9. BMB Associates ultimately did not proceed with the Project, and the entity dissolved during the ensuing financial crisis. Id. 10 South Street later was formed and began developing the Project "fresh." Id. In connection with this new Project development, a new Historic Tax Credit Agreement was executed between Wishneff and 10 South Street, which Stephen Benjamin again negotiated, this time on behalf of 10 South Street. Id. at 10-11. Benjamin testified that in order to do business a second time on the Project, Wishneff s fee had to be lower because the ten percent rate was "inappropriate for what we were doing." Id. at 12. Benjamin also insisted on a cap. Id. Wishneff claims that it specifically negotiated a front-loaded fee arrangement with 10 South Street in exchange for reducing its flat rate fee from ten percent to seven percent and capping it at $1, 000, 000. According to Wishneff, this was a deviation from its standard practice and the reason the payment schedule, providing for Wishneff s fee to be paid in stages over the course of the Project development, with twenty percent due at closing, was incorporated into the Agreement. Pl's Opp. Br. to Third Mot. to Dismiss, ECF No. 66, at 2, 3; Rule 30(b)(6) Dep. of Brian Wishneff & Assoc, ECF No. 66-3, at 90. Wishneff argues there are genuine issues of material fact surrounding the fee it earned pursuant to the Agreement and the schedule of payment of that fee. And because the amount in controversy is in dispute, Wishneff asserts it would be improper for the court to dismiss this case for lack of jurisdiction pursuant to Rule 12(b)(1).

         Wishneff s argument is grounded in extrinsic evidence, yet it fails to identify any ambiguity in the Agreement that would allow the court to consider evidence outside the four corners of the contract. See Greenfield v. Philles Records. Inc., 98 N.Y.2d 562, 569, 780 N.E.2d 166, 170 (2002) ("Extrinsic evidence of the parties' intent may be considered only if the agreement is ambiguous... .").[5] Nonetheless, ambiguity is ultimately an issue of law for the court to decide. Id.

         "An agreement is ambiguous when 'the agreement on its face is reasonably susceptible of more than one interpretation.'" Nappy v. Nappy. 40 A.D.3d 825, 826, 836 N.Y.S.2d 256, 257 (2007) (quoting Chimart Assoc, v. Paul 66 N.Y.2d 570, 573, 498 N.Y.S.2d 344, 489 N.E.2d 231 (1986))).

A contract is unambiguous if the language it uses has "a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion" (Breed v. Insurance Co. of N. Am., 46 N.Y.2d 351, 355, 413 N.Y.S.2d 352, 385 N.E.2d 1280 [1978], rearg. denied 46 N.Y.2d 940, 415 N.Y.S.2d 1027, 388 N.E.2d 372 [1979]). Thus, if the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity (see e.g. Teichman v. Community Hosp. of W. Suffolk, 87 N.Y.2d 514, 520, 640 N.Y.S.2d 472, 663 N.E.2d 628 [1996]; First Natl. Stores v. Yellowstone Shopping Ctr., 21 N.Y.2d 630, 638, 290 N.Y.S.2d 721, 237 N.E.2d 868, rearg. denied 22 N.Y.2d 827, 292 N.Y.S.2d 1031, 239 N.E.2d 659 [1968]).

Greenfield, 98 N.Y.2d at 569-70, 780 N.E.2d at 170-71. In deciding whether an agreement is ambiguous, the court "'should examine the entire contract and consider the relation of the parties and the circumstances under which it was executed.'" Nappy, 40 A.D.3d at 826, 836 N.Y.S.2d at 257 (quoting Kass v. Kass, 91 N.Y.2d 554, 566, 673 N.Y.S.2d 350, 696 N.E.2d 174 (1998)). Having done so in this case, the court concludes the Agreement is ambiguous- specifically the language in the Fees and Schedule provision.[6] The parties dispute the meaning of the term "gross equity payment." Indeed, it is reasonably susceptible of more than one interpretation. 10 South Street argues the word "payment" means payment-funds actually delivered-and the only payment made by PNC in connection with the Project was $200, 000. On the other hand, the word "gross" suggests the parties intended to calculate Wishneff s fee based on the aggregate amount of capital contributions the HTC investor agreed to contribute to the Project, as Wishneff argues. "Gross equity payment" is not defined in the parties' Agreement and its meaning is unclear.

         There is also ambiguity in the structured payment schedule. The contract reads "the Consultant shall be paid 20% of its fee at closing, 20% half-way through to closing, 45% at certificate of occupancy or occupancy and 5% upon any final equity payment by the Investor." ECF No. 45-5, at 5 (emphasis added). This makes little sense. On brief, Wishneff substitutes the word "completion" for "closing, " so that the second payment of 20% is due "halfway through to completion." That might well be what the parties intended, but that is not how the contract reads.

         Given these ambiguities, the court cannot find the contract language has a definite and precise meaning. Extrinsic evidence is therefore admissible to determine the parties' intent.


         Stepping outside the four corners of the contract, the court agrees with Wishneff that there are at least genuine issues of material fact as to the fee potentially due Wishneff under the Agreement, as well as the payment schedule for that fee. The original contract between Wishneff and BMB Associates provides for a ten percent fee and states: "The Consultant shall be paid on the same schedule as the Developer receives payments and/or benefits from the Historic Tax Credit Investor and all other Incentives received." Pl's Br. in Opp. to Third Mot. to Dismiss, ECF No. 66-1. In the course of negotiating the second contract between Wishneff and 10 South Street, Stephen Benjamin made handwritten changes to this provision of the BMB Associates contract. See 10 South Street Rule 30(b)(6) Dep., ECF No. 63-7, at 15.

         (IMAGE OMITTED)

         Benjamin crossed out the 10% figure and wrote in the margin: "7% provided the total fee and expense reimbursement shall not exceed $1, 000, 000." Id. As regards the payment schedule, he crossed out "and all other Incentives received" and wrote in the margin: "(if developer receives 10% of the total credit payment amount the consultant receives 10% of fee)." Id. Benjamin testified that the lower fee, the cap, and the payment schedule reflected in these handwritten changes were all his suggestions. 10 South Street Rule 30(b)(6) Dep., ECF No. 66-2, at 12, 16.

         Two of these suggested changes-the reduction to a 7% fee and the $1, 000, 000 cap-were incorporated into the new Agreement between Wishneff and 10 South Street. Benjamin's handwritten change to the sentence setting out the payment schedule does not appear in the final Agreement, however. Indeed, the contract contains an entirely new payment schedule, reinforcing Wishneff s Rule 30(b)(6) deposition testimony and argument on brief that it wanted its ...

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