Barshay v. Naithani

Background

Yan Barshay alleged that he paid the principal of a $100,000 loan on Mahesh Naithani’s behalf in 2003. According to Barshay, the parties then made an oral agreement requiring Naithani to repay the principal with 10% annual compound interest, but they did not set a repayment date. Barshay alleged that Naithani later made two payments and that, in January 2018, the parties orally agreed that Naithani would pay $250,000 when Medmeme was sold.

Medmeme’s sale closed on October 4, 2019. In connection with payments made around the sale, Barshay signed a document titled “Release.” It stated that, in exchange for $1,100, Barshay released Medmeme, Pharmaspectra LLC, Medical Intelligence Solutions LLC, and Naithani individually—collectively called the “Borrowers”—from “any claims, liabilities, or obligations” owed to him. Barshay later alleged that Naithani breached the repayment agreement by failing to pay after the sale and by disputing the amount owed.

Motion to Dismiss

Naithani moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. The court considered the release because Barshay’s second amended complaint quoted or relied on it. The court disregarded factual assertions in Barshay’s opposition affidavit because a complaint cannot be changed through papers filed in response to a motion to dismiss.

Court’s Analysis

The court held that the Release was clear and unambiguous. Its reference to Naithani and the other entities as “Borrowers,” and its release of “any claims, liabilities, or obligations,” covered Barshay’s loan-related claim. The court rejected Barshay’s argument that the Release was limited to employment matters because it was signed at the same time as a separate employment-related settlement agreement. The two documents addressed different subjects: the separate settlement agreement referred to employment and related payments, while the Release referred broadly to obligations of the Borrowers.

The court also rejected Barshay’s reliance on the surrounding circumstances and later communications. Because the Release was unambiguous, the court interpreted it from the document’s language and did not consider outside evidence to narrow its scope. The court noted that Barshay knew about the alleged loan claim when he signed the Release and that the alleged repayment date coincided with the business sale and execution of the Release. The court therefore concluded that the Release barred the breach-of-contract claim.

The court gave an alternative reason for dismissal. It treated the alleged 2018 agreement as a possible novation, meaning a new contract that replaces and ends an earlier contract. But under New York law, a novation requires a valid existing obligation. The court concluded that the 2003 agreement, which had no repayment date, required performance within a reasonable time. Fifteen years was beyond a reasonable period under the allegations, so there was no valid existing obligation in 2018 that could be replaced by a novation. The court also concluded that Barshay could not plead a breach or anticipatory repudiation of the original agreement without a performance date.

Disposition

The court granted Naithani’s motion to dismiss the second amended complaint. Because Barshay had already amended twice, Naithani had filed two successful dismissal motions, and further amendment would be futile—particularly because of the Release—the court denied further leave to amend. The Clerk was directed to terminate all pending motions, adjourn the remaining dates, and close the case.