Gray•Duffy, LLP Obtains Summary Judgment on Behalf of Clients Sued for Breach of Contract and Fraud

January 2015

Overview

Plaintiff Neman Real Estate Investments, LLC sued the owners of a multi-tenant commercial/industrial building in downtown Los Angeles for specific performance and fraud arising out of negotiations for the sale of the property which never culminated in a written purchase and sale agreement. David Fisher of Gray•Duffy’s Encino office, in representing the Defendants – three siblings in their 70s and 80s – successfully obtained a summary judgment in their favor on the cusp of trial, dismissing the case entirely.

Discussion

In 2010, the Plaintiff offered to purchase the Defendants’ downtown Los Angeles commercial property for $8 million. Between 2010 and March 1, 2012, the Plaintiff and the Defendant, Fred Oken, engaged in on-again, off-again negotiations for the sale of the Property, with the last offer coming in at $9 million. For reasons not entirely clear, the Plaintiff signed a Purchase and Sale Agreement (PSA) dated July 7, 2012, but none of the Defendants accepted or signed the PSA. Mr. Oken sent an email after receiving the PSA stating that he would sign it after certain conditions were met. Subsequently, the parties continued to negotiate the terms of a possible sale, and at least three subsequent PSAs were prepared after the original one on July 7, 2012. On March 1, 2012, Mr. Oken sent a letter to the Plaintiff and its real estate agent cancelling all further negotiations. Shortly thereafter, the Plaintiff filed a lawsuit for breach of written and implied contract, and for specific performance and fraud. Trial was set to start January 20, 2015. The Defendants filed a Motion for Summary Judgment (MSJ) which was heard on December 30, 2014. The basis for the MSJ was several-fold, including, but not limited to:

• There was no writing that satisfied the Statute of Frauds and the email that Fred Oken sent did not satisfy the requirements of the Uniform Electronic Transaction Act (UETA);
• There was no enforceable implied agreement because the promissory estoppel exception to the Statute of Frauds was inapplicable as the Plaintiff could not establish justifiable reliance; and
• Constructive fraud failed because there was no fiduciary or special relationship between the parties.

In granting the Defendants’ MSJ, the Judge rejected the allegations in the Plaintiff’s Third Amended Complaint that a binding contract was formed because the Plaintiff deposited $1.5 million with escrow and retained counsel to review a preliminary title report. The Judge also rejected the Plaintiff’s argument that Mr. Oken’s email constituted written acceptance of the July 7, 2012 PSA, finding that an email alone, without more (i.e., an intent for the email to constitute a written signature) was insufficient to satisfy the requirements of the UETA.

Please Note: This article is necessarily general in nature and is not a substitute for legal advice with respect to any particular case. Readers should consult with an attorney before taking any action affecting their interests.