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Supreme Court, Appellate Division, First Department, New York.

GE OIL & GAS, INC., Plaintiff–Respondent, v. TURBINE GENERATION SERVICES, L.L.C., et al., Defendants–Appellants.

Turbine Generation Services, L.L.C., et al., Third–Party Plaintiffs–Appellants, v. General Electric Company, Third–Party Defendant–Respondent.


Decided: January 22, 2019

Sweeny, J.P., Richter, Tom, Kern, Singh, JJ. Mintz & Gold LLP, New York (Elliot Sagor of counsel), for appellants. Reed Smith LLP, New York (Casey D. Laffey of counsel), for respondents.

Order, Supreme Court, New York County (Shirley Werner Kornreich, J.), entered February 10, 2017, which, insofar as appealed from as limited by the briefs, granted plaintiff and third-party defendant's (together, the GE Parties) motion to dismiss defendants/third-party plaintiffs' (the TGS Parties) promissory estoppel and fraud claims and granted leave to amend the breach of contract claim (failure to negotiate in good faith) only to Turbine Generation Services, L.L.C. (TGS), unanimously affirmed, with costs.  Order, same court and Justice, entered July 18, 2017, which, insofar as appealed from as limited by the briefs, denied the TGS Parties' motion to replead their promissory estoppel claim, unanimously affirmed, with costs.

The motion court correctly dismissed the TGS Parties' fraud claim, which is premised on the GE Parties' alleged promise that they would provide funding as agreed in the term sheet, because the alleged promise is not a misrepresentation of fact but a nonactionable statement of prediction or expectation (see Naturopathic Labs. Intl., Inc. v. SSL Ams., Inc., 18 A.D.3d 404, 795 N.Y.S.2d 580 [1st Dept. 2005];  see also e.g. Pacnet Network Ltd. v. KDDI Corp., 78 A.D.3d 478, 479, 912 N.Y.S.2d 178 [1st Dept. 2010] ).  While the statement would be deemed a material misstatement of fact if the GE Parties knew that it was false (see Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Wise Metals Group, LLC, 19 A.D.3d 273, 275, 798 N.Y.S.2d 14 [1st Dept. 2005] ), the TGS Parties' claim fails to set forth facts from which the GP Parties' scienter can be inferred (see Giant Group v. Arthur Andersen LLP, 2 A.D.3d 189, 190, 770 N.Y.S.2d 291 [1st Dept. 2003] ).

Even if, arguendo, the fraud claim satisfied the elements of scienter and a misrepresentation of a material existing fact, it would still fail for lack of justifiable or reasonable reliance, because the term sheet explicitly required “definitive documentation” before it would constitute a contractual commitment (see 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 Naturopathic, 18 A.D.3d at 405, 795 N.Y.S.2d 580).

For the same reason, the promissory estoppel claim fails for lack of justifiable reliance (see e.g. Hollinger Digital v. Looksmart, Ltd., 267 A.D.2d 77, 699 N.Y.S.2d 682 [1st Dept. 1999];  Prospect St. Ventures I, LLC v. Eclipsys Solutions Corp., 23 A.D.3d 213, 804 N.Y.S.2d 301 [1st Dept. 2005];  Jordan Panel Sys. Corp. v. Turner Constr. Co., 45 A.D.3d 165, 179–180, 841 N.Y.S.2d 561 [1st Dept. 2007];  Prestige Foods v. Whale Sec. Co., 243 A.D.2d 281, 663 N.Y.S.2d 14 [1st Dept. 1997] ).

The third amended counterclaims and third amended third-party complaint did not remedy the above defect in the promissory estoppel claim.  Hence, the motion court providently exercised its discretion in denying the TGS Parties' motion for leave to amend that claim (see e.g. Peach Parking Corp. v. 346 W. 40th St., LLC, 42 A.D.3d 82, 86, 835 N.Y.S.2d 172 [1st Dept. 2007] ).

Moreno is not a party to the term sheet.  Thus, the court correctly dismissed his claim for breach of the term sheet and providently exercised its discretion in denying his motion for leave to amend that claim.