Farsura v. QC Terme US Corp

Background

Stefano Farsura and SF Capital Partners LLC sued QC Terme US Corp. over efforts to develop and operate a spa facility on Governors Island. The plaintiffs asserted two remaining, alternative claims: breach of an operating agreement and breach of fiduciary duty if the operating agreement was not binding.

The parties had discussed for years a business structure under which QC Terme would hold 78% of a holding company and Farsura’s company would hold 22%. They created several limited liability companies, and QC Terme NY LLC eventually signed a lease with The Trust for Governors Island. The parties exchanged many drafts of an operating agreement, but they never signed the document.

In 2018, QC Terme US purchased QC Terme NY from US Holding in exchange for a $500,000 promissory note. QC Terme US later dissolved US Holding, leaving Farsura with a 22% interest in the note. The plaintiffs claimed this conduct breached the parties’ agreement or fiduciary duties.

Summary-judgment motion

QC Terme US moved for summary judgment, which asks the court to decide a claim without a trial when there is no genuine dispute about a fact important to the outcome. QC Terme US argued that the operating agreement was not enforceable because the parties had not agreed on all important terms, had not signed it, and acted afterward as though it was still unfinished.

The court denied that motion. It held that the record did not conclusively establish that the parties had failed to agree on the disputed put-and-call and drag-and-tag provisions. The court also explained that the absence of signatures did not automatically prevent contract formation; the key question was whether the parties objectively intended to be bound before signing a formal document. Evidence pointing in both directions—including Varni’s statements that the text reflected the parties’ understanding and Farsura’s testimony—created a factual dispute for the factfinder.

The court likewise found that the parties’ later conduct did not conclusively show that no contract existed. Their failure to follow certain provisions could be considered, but its significance was for the factfinder rather than the court to decide on summary judgment.

Fiduciary-duty claim

QC Terme US argued that the operating agreement waived fiduciary duties and that the fiduciary-duty claim was untimely. The court rejected the waiver argument at this stage. It found evidence outside the operating agreement—including testimony, emails, company records, and tax returns—from which a reasonable juror could find that Farsura held a 22% interest in US Holding before the operating agreement was drafted. QC Terme US did not dispute that its conduct would violate fiduciary duties if those duties existed.

The court also found the claim timely. Although QC Terme US identified earlier conduct, the court determined that the alleged wrongdoing culminated in November 2018, when US Holding transferred its interest in the Governors Island spa to QC Terme US for the $500,000 promissory note. Because the plaintiffs filed suit on September 7, 2021, the court concluded that the claim was filed within the comparable three-year limitations period.

Motions to seal

The court held that documents submitted in support of summary judgment are judicial documents subject to a presumption of public access. It granted the motions to seal Defense Exhibits 1, 4, 59, 61–62, 70–71, 73, and 103 and Plaintiff Exhibits 2–3, 26, 30–31, 46, and 49. These materials included tax returns and financial, contractual, and business-strategy information that was largely collateral to the central issues and could reveal sensitive business information.

The court denied without prejudice QC Terme US’s motion to fully seal Defense Exhibit 78 and Plaintiff Exhibit 77, which contained minutes from an October 25, 2017 executive-committee meeting. Although some portions could properly be sealed, pages 1 through 3 contained information relevant to the validity of the operating agreement and Farsura’s role in the development. The court gave QC Terme US until January 31, 2025, to propose appropriate redactions; otherwise, the Clerk of Court would be directed to unseal the exhibits.

Disposition

QC Terme US’s motion for summary judgment was DENIED. The specified sealing motions were GRANTED, and the motion to seal Defense Exhibit 78 and Plaintiff Exhibit 77 was DENIED without prejudice.