Gross v. Derhagopian

Background

Felicia Gross, also known as Joy Gross, and Kenneth Gross sued David Derhagopian on state-law claims for breach of contract and unjust enrichment. The dispute concerned business dealings involving Entec Polymers, Inc. and related entities. The plaintiffs alleged that, in or around 2006, they and Derhagopian made an oral agreement under which the plaintiffs would receive $3.3 million for the value of their ownership interest in Entec Polymers. They alleged that payment would occur when Derhagopian converted restricted stock or otherwise received payment connected to the sale of the business to Ravago, at a time no earlier than January 2013.

Derhagopian disputed that he made the alleged agreement. He also maintained that Felicia Gross had sold her shares earlier and that he received cash, rather than restricted stock, in the 2006 transaction. The parties disputed other aspects of the companies’ ownership and transactions, but the court concluded that most of those disputes were not material to the motion.

Summary Judgment Standard and Governing Law

The court considered Derhagopian’s motion for summary judgment under Federal Rule of Civil Procedure 56. Summary judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment as a matter of law. The court must view the evidence favorably to the nonmoving party, but speculation, conclusory assertions, and unsupported denials cannot create a genuine issue for trial.

The court stated that the case was based on diversity jurisdiction. It applied New York law because Derhagopian relied on New York law and the plaintiffs did not dispute its application in their opposition papers.

Breach of Contract

The court held that the alleged 2006 oral contract was barred by New York’s Statute of Frauds. That law requires certain agreements to be in writing and signed by the party against whom enforcement is sought when, by their terms, they cannot possibly be fully performed within one year. The plaintiffs’ own amended complaint, interrogatory response, and Kenneth Gross’s deposition testimony described an oral agreement made in 2006 that contemplated payment years later, in or around 2013. The agreement therefore could not be fully performed within one year and was not enforceable without a signed writing.

The plaintiffs argued in their opposition that the dispute involved written stock-purchase or stockholders’ agreements, including a 1996 Buy-Sell Agreement. The court rejected that argument because the amended complaint did not allege a written agreement requiring Derhagopian to pay $3.3 million. The court stated that the plaintiffs could not use new facts and legal theories in opposition to summary judgment to amend their pleadings.

The court also ruled that Kenneth Gross’s declaration could not create a factual dispute. The declaration described a written stockholders’ agreement, while his deposition testimony, the amended complaint, and the interrogatory response described the relevant agreement as oral. Applying the “sham affidavit” doctrine, the court declined to credit a declaration that contradicted the prior discovery record on a central issue.

The court further stated that disputes about whether Felicia Gross’s shares were sold in 2001 or 2002 did not change the result. Even assuming she still held the shares in 2006, the alleged oral agreement was still barred by the Statute of Frauds. The court therefore granted summary judgment to Derhagopian on the breach-of-contract claim.

Unjust Enrichment

The court explained that the Statute of Frauds does not automatically bar every unjust-enrichment claim. But a plaintiff cannot recover through unjust enrichment damages that depend on an oral agreement barred by the statute. Here, the amended complaint based the unjust-enrichment claim on the same alleged agreement and the same requested payment as the contract claim. The court held that the plaintiffs could not avoid the Statute of Frauds merely by labeling the claim unjust enrichment and granted summary judgment to Derhagopian on that claim as well.

Disposition

The court granted Derhagopian’s motion for summary judgment and dismissed the action with prejudice. It directed the Clerk of Court to enter judgment in Derhagopian’s favor. Because both claims were resolved under the Statute of Frauds, the court did not address Derhagopian’s arguments concerning the statute of limitations or whether Kenneth Gross was a proper party.