Alkholi v. Macklowe

Background

Hamza B. Alkholi and Ahmed Halawani sued Macklowe Investment Properties, LLC, referred to throughout the opinion as MIP, over an alleged agreement to pay them a 2% placement fee for helping secure investment in the retail component of 432 Park Avenue in Manhattan. The complaint asserted claims for breach of an oral contract, unjust enrichment, and quantum meruit. A prior order dismissed the written-contract claim against MIP and all claims against Harry B. Macklowe individually, but allowed these three claims against MIP to continue.

MIP moved for summary judgment, a procedure allowing judgment without a trial when there is no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law. MIP argued, among other things, that the claims were barred by New York’s Statute of Frauds.

The parties discussed a proposed joint venture in which plaintiffs would help obtain investors and receive a 2% fee. Harry Macklowe’s November 6, 2013 email stated, “I think a 2% fee will work,” and authorized Alkholi to contact potential partners. Later emails discussed the deal structure and who would pay the fee. On December 20, 2013, Bruce Kimmelman of MIP wrote that the 2% fee would be a deal cost included in the total capitalization and shared by all parties. Halawani responded, “Good enough.” Draft term sheets likewise contemplated payment by a future joint venture. That joint venture never came into existence. Instead, another investor became the sole investor, and plaintiffs received a $750,000 placement fee from that investor’s related entities and $5 million for the lost opportunity to participate as investors.

Court’s Analysis

The court applied New York law because the project was located in New York and the parties briefed the motion on that assumption. New York’s Statute of Frauds requires a signed writing for an agreement to pay compensation for services involving, among other things, negotiating a real-estate transaction or procuring an introduction to a transaction participant. The writing must contain the agreement’s material terms, including the identity of the party obligated to pay.

The court held that the November 6 email was sufficiently signed for purposes of the Statute of Frauds because Macklowe’s typed name and signature block appeared beneath the email. But the email did not identify who would pay the 2% fee. The later correspondence did not fill that gap in plaintiffs’ favor. Instead, the December 20 exchange showed that the fee was to be a cost of the proposed joint venture, shared by the investors. The draft term sheets also indicated that the future joint venture, rather than MIP, would pay the fee or provide equivalent interests.

The court rejected plaintiffs’ argument that the fee had already been agreed to as an obligation of MIP and that the later deal-structure discussions were irrelevant. It concluded that the evidence showed no meeting of the minds in the November 6 email about the identity of the fee payer. The court also ruled that plaintiffs’ efforts to identify potential investors could not overcome the Statute of Frauds through part performance, because New York law does not recognize that exception for this type of agreement.

The court separately treated unjust enrichment and quantum meruit as related implied-contract theories. It concluded that those claims also failed because the writings did not support an implied obligation for MIP itself to pay the 2% fee. Plaintiffs could not avoid the Statute of Frauds merely by labeling the claim unjust enrichment or quantum meruit.

The court did not reach MIP’s argument that the correspondence and payments operated as a release of claims. It noted, however, that plaintiffs’ agreement to accept $750,000 in exchange for making no further placement or brokerage-fee claims concerning the property was inconsistent with their later position that MIP still owed the fee.

Disposition

Judge P. Castel granted MIP’s motion for summary judgment. The court directed the Clerk to terminate the motion and enter judgment for the defendant. The opinion does not state that the judgment was entered with or without prejudice.