Flemm v. Victory Commercial Management Inc.

Background

William Flemm sued Victory Commercial Management, Inc., alleging equitable fraud, common-law fraud, and negligent misrepresentation. He claimed that Victory caused him to resign from his position at The Howard Hughes Corporation by making him believe Victory would hire him as its chief operating officer. He sought $400,000 in damages, including alleged lost compensation, stock-option value, lost wages, medical expenses, reduced future compensation, and $70,000 for preparing a business proposal.

Flemm applied for Victory’s chief operating officer position and prepared a proposal concerning redevelopment of a Victory-owned property in China. Edward Liang, Victory’s managing director, was Flemm’s main contact. The September 27 offer letter stated that Flemm’s start date would be the time his proposal was accepted by Victory’s Board of Directors. It also stated that the employment would be at will. The parties disputed whether Flemm signed and delivered the letter before its October 1 expiration date, but the court found that dispute immaterial because the offer was expressly conditioned on Board acceptance of the proposal.

Flemm submitted the proposal on October 12, 2018. On October 16, Liang told him that the proposal “looks good,” that the Board might provide comments, and that the proposal had been translated for the Board’s review. Two days later, Flemm resigned from Howard Hughes, before the Board had accepted the proposal and before he had a start date at Victory. Victory later told him that it had decided to go in a different direction and had put recruitment on hold because of financial circumstances.

Legal standard

The court applied New York law because both parties assumed it applied. Summary judgment is appropriate when the evidence shows no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law. The court viewed the evidence in the light most favorable to Flemm, but explained that speculation or a small amount of supporting evidence is not enough to require a trial.

Common-law fraud

Under New York law, common-law fraud requires a material false statement, an intent to deceive, justifiable reliance, and financial loss caused by that reliance. Flemm identified several possible statements or theories.

First, Flemm argued that the September 27 offer letter was misleading because Liang allegedly did not tell him it was only a draft. The court held that this issue did not matter because the letter clearly stated that Flemm could not start until the Board accepted his business proposal. The court also noted that Liang repeated this condition on October 7, before Flemm resigned. Flemm admitted that the employment offer depended on Board acceptance of his proposal and that the Board had final hiring authority.

Second, Flemm relied on Liang’s October 16 statement that the proposal “looks good.” The court found that the statement was not material because Liang did not control the hiring decision and did not claim to be expressing the Board’s view. The court also found no evidence that Liang did not personally believe the proposal looked good.

Third, Flemm relied on Liang’s September 13 statement that Victory looked forward to having him act as chief operating officer “as soon as possible.” The court found that this statement was neither material nor inconsistent with the condition requiring Board acceptance of the proposal. Flemm also acknowledged that Victory never pushed him to resign.

Finally, Flemm argued that Victory had agreed to compensate him for stock-option value he would lose by resigning before the options’ November 1 exercise date. The court found that Flemm did not identify a specific false statement or explain why any such statement was false. Even accepting his account, the court held that he still understood the job offer was conditional and voluntarily resigned before the condition was satisfied.

The court separately held that Flemm had not offered evidence from which a jury could find that Victory intended to deceive him. The court therefore granted Victory’s motion for summary judgment on the common-law fraud claim.

Equitable fraud

The court said it was unclear whether equitable fraud is a valid claim for damages under New York law. It noted that the parties’ cited authority primarily involved claims under the Employee Retirement Income Security Act and equitable remedies such as changing the terms of a benefits plan. The court did not resolve whether Flemm’s equitable-fraud theory was legally available. Instead, assuming the claim was valid, it granted summary judgment because Flemm had not shown a false representation about a material fact.

Negligent misrepresentation

A negligent-misrepresentation claim under New York law requires, among other things, a special relationship creating a duty to provide accurate information, a false statement, and reasonable reliance causing harm. Flemm argued that Liang’s position as Victory’s managing director created the required relationship. The court rejected that argument, holding that the relationship between a prospective employer and a prospective employee is not a special relationship for this purpose. The court also held that the claim independently failed because Victory had not made a false representation.

Disposition

Judge John P. Cronan granted Victory’s motion for summary judgment on Flemm’s common-law fraud, equitable-fraud, and negligent-misrepresentation claims. The court entered judgment for Victory, directed the Clerk of Court to terminate the pending motion and other pending motions, and closed the case. The court did not award Flemm damages, including the requested $70,000 payment for his business proposal.