644 14TH REALTY LLC v. MOUNT SINAI HEALTH SYSTEM INC (2022)

Order, Supreme Court, New York County (Andrea Masley, J.), entered on or about March 11, 2021, which, to the extent appealed from as limited by the briefs, denied defendant's motion to dismiss plaintiff's breach of contract, promissory estoppel, and fraud claims, unanimously modified, on the law, to dismiss the promissory estoppel and fraud claims, and otherwise affirmed, without costs.

The motion court properly denied defendant's motion to dismiss plaintiff's claim for breach of the provision in the February 9, 2018 letter of intent entitling either party to a “breakup fee,” which stated, “Should either party fail to execute a lease within 120 days of the execution date of this Letter of Intent, that party shall pay a fee equal to $2 million to the other party as compensation.”  Contrary to defendant's contention, this provision of the letter of intent is enforceable, as the language reflects the unambiguous terms of the agreement to pay the fee and an intent to be bound (Stonehill Capital Mgt., LLC v. Bank of the W., 28 N.Y.3d 439, 448, 45 N.Y.S.3d 864, 68 N.E.3d 683 [2016]).

The promissory estoppel and fraud claims should have been dismissed.  “Where a term sheet or other preliminary agreement explicitly requires the execution of a further written agreement before any party is contractually bound, it is unreasonable as a matter of law for a party to rely upon the other party's promises to proceed with the transaction in the absence of that further written agreement” (StarVest Partners II, L.P. v. Emportal, Inc., 101 A.D.3d 610, 613, 957 N.Y.S.2d 93 [1st Dept. 2012];  see also King Penguin Opportunity Fund III, LLC v. Spectrum Group Mgt. LLC, 187 A.D.3d 688, 689, 135 N.Y.S.3d 363 [1st Dept. 2020]).  Although the motion court credited plaintiff's argument with respect to the fraud claim that the special-facts doctrine could impose a duty to disclose defendant's negotiations with a third party based on defendant's superior knowledge of those negotiations (Jana L. v. West 129th St. Realty Corp., 22 A.D.3d 274, 277, 802 N.Y.S.2d 132 [1st Dept. 2005]), here, as in King Penguin, plaintiff cannot establish justifiable reliance on defendant's promises to proceed with the transaction even if there was such a duty, as the letter of intent expressly stated that it “shall not bind” either party (187 A.D.3d at 689, 135 N.Y.S.3d 363).

We have considered the parties’ remaining contentions and find them unavailing.