Zigler v. Featherstone Foods, Inc.

Background

David Zigler sued Featherstone Foods, Inc.; Caraway Realty, LLC; Sesame Distribution, Inc.; Joel Schonfeld; Kuzari Group, LP; and Mark Rimer. He alleged that an agreement with Schonfeld gave him a right of first refusal—the first opportunity to buy the companies if Schonfeld decided to sell them. Zigler asserted a breach-of-contract claim against Schonfeld and the Featherstone Defendants, and a tortious-interference claim against the Kuzari Defendants, whom he alleged purchased Featherstone while knowing about the agreement.

In February 2018, Zigler and Schonfeld signed a one-sentence agreement stating that Schonfeld would give Zigler a right of first refusal to purchase Featherstone Foods, Sesame Distribution, Caraway, and related entities. The parties later exchanged a proposed four-page agreement, but neither signed it. Schonfeld eventually sold Featherstone to the Kuzari Defendants. Zigler then filed this action.

Breach of Contract

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. The court applied New York law because the parties’ briefs assumed that law controlled.

The court rejected the defendants’ argument that the agreement lacked consideration to the extent it relied on Zigler’s continued at-will employment. Continued at-will employment can constitute consideration. But Zigler’s decision to abandon his plan to purchase Wheatfield occurred before the February 2018 agreement and therefore was past consideration. Because the written agreement did not expressly describe that earlier conduct, it could not supply the consideration needed to enforce the agreement.

The court nevertheless held that the agreement was unenforceable because it was too indefinite. A binding contract must show mutual agreement on all material terms. A right-of-first-refusal agreement typically identifies the event that triggers the right, such as the owner’s receipt of a third-party offer and decision to accept it, and allows the right-holder to decide whether to match that offer. Zigler’s agreement identified no triggering condition, did not state how long the right would last, and did not identify the consideration for Schonfeld’s promise. Its wording—that Schonfeld “will give” Zigler the right in the future—also suggested that another agreement was contemplated. The later four-page draft was never executed. The court therefore concluded that the right-of-first-refusal agreement was not an enforceable contract, and Zigler’s breach-of-contract claim failed.

Tortious Interference

Zigler alleged that the Kuzari Defendants tortiously interfered with the right-of-first-refusal agreement. Under New York law, this claim requires a valid contract, the defendant’s knowledge of it, intentional procurement of a breach without justification, and damages. Because the court found that the agreement was not enforceable, there was no contract with which the Kuzari Defendants could interfere. The court therefore did not address the defendants’ remaining arguments about the tort claim.

Disposition

The court granted the defendants’ June 11, 2020 motion to dismiss. The Clerk of Court was directed to enter judgment for the defendants and close the case. The opinion does not state that the motion was granted with or without prejudice.