COLE, SCHOTZ, MEISEL, FORMAN & LEONARD, P.A. A Professional Corporation Court Plaza North 25 Main Street P.O. Box 800 Hackensack, New Jersey 07602-0800 201-489-3000 201-489-1536 Facsimile Attorneys for Defendants, Lehigh Acquisition Corp. and Yorkville Advisors, LLC

WOODMONT PROPERTIES, LLC,

Plaintiff(s),

v.

LEHIGH ACQUISITION CORP. and YORKVILLE ADVISORS, LLC,

Defendant( s).

Fl lED MAY 1 2 20H

JOHN F. MALONE J.S.C.

SUPERIOR COURT OF NEW JERSEY CHANCERY DIVISION: UNION COUNTY DOCKETNO. UNN-C-15-11

Civil Action

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS PLAINTIFF'S COMPLAINT FOR FAILURE TO STATE A CLAIM UPON WHICH

RELIEF CAN BE GRANTED

Of Counsel and On the Brief: Steven R. Klein, Esq.

On the Brief: Neoma M. Ayala, Esq.

48687/0003-758445lv4

TABLE OF AUTHORITIES

TABLE OF AUTHORITIES .......................................................................................................... ii

PRELIMWARY STATEMENT .................................................................................................... 1

STATEMENT. OF FACTS ............................................................................................................. 4

LEGAL ARGUMENT ............................................................. 1 .•.•.•....•.•.•.•..•.••.•••..•.••.•.•••....•...•..•..• 9

I. RULE 4:6-2(E) MANDATES DISMISSAL WHERE THE CHALLENGED PLEADWG DOES NOT SET FORTH A LEGALLY ADEQUATE BASIS FOR RELIEF ....................................................................... 9

II. THE FIRST COUNT OF PLAWTIFF'S COMPLAWT FOR BREACH OF CONTRACT/SPECIFIC PERFORMANCE MUST BE DISMISSED .......... 10

III. THE SECOND COUNT OF PLAWTIFF'S COMPLAWT FOR BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALWG MUST ALSO BE DISMISSED ............................................... 14

IV. PLAWTIFF'S CLAIM FOR PROMISSORY ESTOPPEL FAILS TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED .................... 16

V. PLAWTIFF'S FRAUD CLAIM IS NOT PLEAD WITH THE REQUISITE SPECIFICITY REQUIRED BYLAW AND SHOULD BE DISMISSED ......................................................................................................... 18

VI. PLAWTIFF'S COUNT FOR UNJUST ENRICHMENT/QUASI CONTRACT MUST BE DISMISSED BECAUSE DEFENDANTS HAVE NOT BEEN UNJUSTLY ENRICHED BY PLAWTIFF'S PERFORMANCE ................................................................................................. ·21

CONCLUSION ............................................................................................................................. 24

1 48687/0003-7584451 v4

TABLE OF AUTHORITIES

Page(s) CASES

Ballantyne House Assocs. v. City ofNewark, 269 N.J. Super. 322 (App. Div. 1993) ................ 11

Banco Popular N.A., v. Gandi, 184 N.J. 161 (2005) ................................................................... 6, 9

Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210 (2005) ........................................................................................................... \' .......................... 14

Callano v. Oakwood Park Homes Corp., 91 N.J. Super. 105 (App. Div. 1966) ............................ 22

Camden County Energy Recovery Assoc., L.P. v. New Jersey Dep't ofEnv. Prot., 320 N.J. Super. 59 (App. Div. 1999) .............................................................................................. 10

Centex Homes Corporation v. Boag, 128 N.J.Super. 385 (Ch.Div.1974) ..................................... 11

Dechtman v. Sidpaul Corporation, 89 N.J. 547 (1982) ................................................................. 11

Evangelista v. Pub. Serv. Coordinated Transp., 7N.J. Super. 164 (App. Div. 1950) ................... 18

Faces, Inc. v. Kennedy, 185 N.J. Super. 113,124 (Law Div. 1981), affd, 185 N.J. Super. 77 (App. Div. 1982) ................................................................................................................. 18

Fields v. Thompson Printing Co., Inc., 363 F.3d 259 (3rd Cir. 2004) .......................................... .15

Fleischer v. James Drug Stores, 1 N.J. 138 (1948) ................................................... : .................... 11

Gennari v. Weichert Co. Realtors, 148 N.J. 582 (1997) ................................................................ 19

GFS/Morristown Limited Partnership v. Vector Whippany Associates, 2009 WL 857002 (N.J. Super. App. Div.) ............................................................................................................ 16

Henderson v. The Hertz Corp., 2005 WL 4127090 (N.J. Super. App. Div.) (June 22,

2006) ························································· ...... ················· .................................................. 13, 16

Hoffman v. Hampshire Labs, Inc., 405 N.J. Super. 105 (App. Div. 2009) ............................. 19, 21

Houseman v. Dare, 405 N.J.Super 538 (App.Div.2009) ............................................................... 11

Hyland v. Kirkman, 157 N.J. Super. 565 (Ch. Div. 1978) ............................................................ 18

Jones v. Intelli-Check, Inc., 274 F. Supp.2d 615 (D.N.J. 2003) ...................................................... 6

K-T Corp. v. JB Associates, 2009 WL 2365970 (App. Div.)(Aug. 4, 2009) .......................... 12, 13

11 48687/0003-758445lv4

TABLE OF AUTHORITIES- CONTINUED

Page(s)

Karl's Sales and Svc., Inc. v. Gimbel Bros., Inc., 249 N.J. Super. 487 (App. Div.), certif. denied, 127 N.J. 548 (1991) ..................................................................................................... 14

Levinson v. D' Alfonso & Stein, 320N.J. Super. 312 (App. Div. 1999) ...................................... 19

Lobiondo v. O'Callaghan, 357 N.J. Super. 488 (App. Div. 2003) ............................................. ( . .17

Malaker Corp. Stockholders Protective Comm. v. First Jersey Nat. Bank, 163 N.J. Super. 463 (App. Div. 1978), certif denied, 79 N.J. 488 (1979) ......................................................... 17

Mariani v. 94 Broadway, Inc., 374 N.J. Super 588 (App. Div. 2005) ..................................... 11, 12

McQuittyv. General Dynamics Corp., 204 N.J. Super. 514 (App. Div. 1985) ............................. 15

Morales v. Santiago, 217 N.J. Super. 496 (App. Div. 1987) ......................................................... 12

Noye v. Hoffman La-Roche, Inc., 238 N.J. Super. 430 (App. Div. 1990), cert. denied 122 N.J. 146 (1990) ........................................................................................................................ 15

Printing Mart-Morristown v. Sharp Electronics, 116 N.J. 739 (1989) .......................................... 10

R. & J. Auto Body v. Miller, 72 N.J. Super. 207 (App. Div. 1962) ................................................ 9

Rieder v. State Dep't ofTransp., 221 N.J. Super. 547 (App. Div. 1987) ........................................ 9

State ofNew Jersey v. Qwest Communications, 387 N.J. Super. 469 (App. Div. 2006) .............. 19

Stochastic Decisions, Inc. v. DiDomenico, 236 N.J. Super. 388 (App. Div. 1989) ...................... 20

TCBY Yogurt v. Resorts International Hotel, Inc., 307 N.J. Super. 461,469 (App. Div. 1998) ........................................................................................................................................ 17

Triffin v. Automatic Data Processing, Inc., 394 N.J. Super. 237 (App. Div. 2007) ................ 19, 21

U.S. Bank Nat. Ass'n v. Hylton, 403 N.J. Super. 630 (2008) ....................................................... 22

Wade v. Kessler Institute, 172 N.J. 327 (2002) ............................................................................. 15

Wanaque Borough Sewerage Auth. v. Township of West Milford, 144 N.J. 564 (1996) ............. 22

Washington Constr. Co., Inc. v. Spinella, 8 N.J. 212 (1951) ........................................................ 14

Washington Savings Bank v. First Fidelity Bank, N.A.,268, N.J. Super. 597 (App. Div. 1993) ........................................................................................................................................ 13

111 48687/0003-758445!v4

TABLE OF AUTHORITIES- CONTINUED

Page(s) RULES

R. 4:5-8 .............................................................................................................................. 18, 19,24

R. 4:6-2 .......................................................................................................................... 9, 10, 16,24

lV 48687/0003-7584451 v4

PRELIMINARY STATEMENT

This Memorandum of Law is submitted on behalf of Defendants, Lehigh Acquisition

Corp. ("Lehigh") and Yorkville Advisors, LLC ("Y arkville") (collectively Lehigh and Yorkville

are the "Lehigh Entities"), in support of their motion, in lieu of an Answer, to dismiss the

Complaint of Plaintiff, Woodmont Properties, LLC ("Plaintiff' or "Woodmont"), for failure to

state a claini upon which relief can be granted and for failure to plead fraud with the requisite

specificity. Plaintiffs five (5) count Complaint against the Lehigh Entities fails to state a single

cause of action. While Plaintiff may be unhappy that it was unable to close on the sale of a piece

of real property with Lehigh, Plaintiff has no basis to assert any contract and/or tort claims

against the Lehigh Entities. Fortunately for the Lehigh Entities, Plaintiffs allegations are belied

by the facts 1 including the language of the operative documents in this case, and Plaintiffs

retaliatory and malicious Complaint unquestionably should be summarily dismissed by the Court

at this juncture.

Plaintiff has absolutely no basis or theory upon which to assert any contract and/or tort

claims against the Lehigh Entities. As an initial matter, Plaintiffs claim for breach of

contract/specific performance must fail. Plaintiffs request for specific performance is untenable

because there is simply no underlying contractual obligation to enforce. The operative letter of

intent in this case expired according to its own terms and specific performance cannot be granted

where there is no underlying enforceable agreement warranting such extraordinary relief. Thus

Plaintiffs first count should be dismissed.

Plaintiffs claim for breach of the implied covenant of good faith and fair dealing also

fails as a matter of law. As a threshold matter, there is no contract here pursuant to which an

1 All the "facts" are taken from Plaintiffs Complaint and are deemed true only for purposes of this motion.

48687/0003-7584451 v4

implied covenant can arise. There also is absolutely no evidence presented by Plaintiff to

demonstrate that Lehigh acted in bad faith during the negotiation period. Rather, the objective

evidence shows that Lehigh was negotiating with Plaintiff in good faith after the letter of intent

had been signed and throughout the month ofNovember and was ready, willing and able to sell

the property to Plaintiff. After the letter of intent terminated according to its own terms, and a"

final purchase and sale agreement had not been signed, Lehigh opted to confirm termination of

the deal. Given the foregoing, there is absolutely no evidence of bad faith on the part of the

Lehigh Entities and the second count of Plaintiffs Complaint must also be dismissed.

Plaintiffs claims for promissory estoppel and unjust enrichment/quasi contract also fail

as a matter of law and should be dismissed by this Court. In its Complaint, Plaintiff alleges that

Lehigh breached alleged promises by failing to sell the property and further alleges that the

Lehigh Entities were unjustly enriched as a result of services rendered by Plaintiff. In reality,

however, Plaintiff cannot succeed on either of these claims. All services provided by Plaintiff, as

referenced in ~~17 and 91 of its Complaint, were provided in connection with a joint venture that

resulted in the LOI, which was subsequently terminated. Contrary to Plaintiffs allegations,

therefore, Plaintiffs claims, if any, would arise under the letter of intent-but it was properly

terminated. Thus, Plaintiffs allegations fail to state the elements of promissory estoppel and/or

unjust enrichment/quasi contract claims, and the Court therefore should dismiss counts three and

five of the Complaint.

Lastly, Plaintiffs fourth count for fraud also cannot survive the within motion to dismiss.

Plaintiff fails to allege any concrete misrepresentations by the Lehigh Entities that would support

a claim of fraud. Moreover, Plaintiffs fraud claim has not been plead with the specificity

2 48687/0003-7584451 v4

required by law to place the Lehigh Entities on notice of the allegations against them. As such,

count four of Plaintiffs Complaint should be dismissed.

In sum, Plaintiffs claims in this matter are fictitious and without merit. The Complaint is

fraught with pleading deficiencies and does not set forth any legal foundation upon which relief

can be granted. For all of the reasons set forth above, and those discussed more fully in detail

below, the Lehigh Entities respectfully submit that the Court should dismiss Plaintiffs

Complaint in its entirety, with prejudice, for failure to state a claim upon which relief may be

granted.

3 48687/0003-7584451v4

STATEMENT OF FACTS2

Plaintiff filed the within Complaint on or about February 3, 2011, approximately six (6)

weeks after the Lehigh Entities' provided written confirmation that the parties' deal had expired.

Plaintiffs Complaint alleges five causes of action, entitled breach of contract/specific

performance, breach of the implied covenant of good faith and fair dealing, promissory estoppel,

fraud and unjust enrichment/quasi contract.

According to the Complaint, on or about July 8, 2009, Plaintiff met with the Lehigh

Entities in their Jersey City, New Jersey office to discuss a potential joint venture concerning real

property owned by Lehigh. Cmplt. ~7. The real property was located at 555 South Street,

Cranford, New Jersey (the "Property"). Cmplt. ~7. At that time, the Lehigh Entities were

seeking a joint venture partner to help obtain approvals for development of the Property, which

was located in an area in need of redevelopment. Cmplt. ~~9, 17. The parties, however,

ultimately decided to form a limited liability company and agreed to draft an operating

agreement to define the parties' rights and responsibilities. Cmplt. ~11.

Ultimately, however, the parties' were unable to reach agreement on the terms of the

operating agreement and instead the Lehigh Entities (more specifically Lehigh, the Property

owner) offered to sell the Property to Woodmont. Cmplt. ~26. This culminated in a letter of

intent between the parties dated November 3, 2010 (the "LOI"). A true copy ofthe LOI is

attached to the Klein Cert. as Exhibit A The LOI was non-binding. See Klein Cert. Ex. A

Pursuant to the LOI, Plaintiff was to purchase the Property from Lehigh for a total of four

million dollars ($4,000,000). Cmplt. ~29; Klein Cert. Ex. A The LOI also set forth specific

2 The Statement of Facts contains a summary of the pertinent facts set forth in Plaintiffs Complaint and the documents referenced in the Complaint, which are attached as exhibits to the Certification of Steven R. Klein, Esq. (the "KleinCert.").

4 48687/0003-758445!v4

obligations for both parties and terms anticipated to be memorialized in a formal purchase and

sale agreement. The LOI stated: "The purpose of this non-binding Letter oflntent is to set forth

the key provisions under which the Seller makes an offer to sell the Property." Klein Cert. Ex.

A.

The LOI addressed various issues relating to the Property including the purchase price,

termination of the agreement, closing matters, approvals related to the Property, conditions

precedent to closing and risk of loss. See Klein Cert. Ex. A. Specifically, the LOI also

established a fifty-five (55) day due diligence period for Woodmont to inspect the Property and

also explicitly stated that a formal purchase and sale agreement was to be executed within

twenty-five (25) days ofthe signing of the non-binding LOI. See Klein Cert. Ex. A.

The LOI expressly provided that:

The Parties recognize and understand that a formal Purchase Agreement is intended to be drafted and executed within twenty­five (25) days from the date this Letter of Intent is fully executed. If a binding Purchase Agreement has not been executed within twenty-five (25) days, neither party shall have any further obligation to the other party.

Klein Cert. Ex. A (emphasis added).

The LOI also provided that both parties are to negotiate in "good faith" and that the terms

in the LOI "shall not be binding until such time a formal, written Purchase Agreement is

negotiated and executed by the parties." Klein Cert. Ex. A; Cmplt. ~32.

On or about November 9, 2010, pursuant to the LOI, Plaintiff circulated a draft purchase

and sale agreement (the "Purchase Agreement") to the Lehigh Entities for review. Cmplt. ~35.

The parties held multiple telephone conferences, which are referenced in Plaintiff's Complaint,

to discuss changes to the proposed Purchase Agreement. Cmp1t. ~3 7. As a result of those

telephonic conferences, on or about November 15, 2010, William Gardner, Esq., an in-house

5 48687/0003-7584451 v4

attorney for the Lehigh Entities, forwarded an email to Steve Santola of Woodmont, providing

that the draft Purchase Agreement was unacceptable because it failed to accurately reflect the

terms and conditions set forth in the LOI. A true copy of Mr. Gardner's November 15,2010

email is attached to the Klein Cert. as Exhibit B.3 The email described conflicts between the LOI

and the Purchase Agreement. For example, the Purchase Agreement drafted by Plaintiff required

the deposit be paid to Plaintiffs attorney, while the LOI explicitly provided that the deposit be

paid to Lehigh. See Klein Cert. Ex. B. Additionally, the draft Purchase Agreement did not

accurately reflect the termination period that was clearly spelled out in the LOI. See Klein Cert.

Ex. B. The draft Purchase Agreement also failed to incorporate the tolling provisions in the LOI

with respect to the appeals process and did not include a provision requiring the payment of the

purchase price to Lehigh. See Klein Cert. Ex. B. The parties, however, continued their

negotiations as may be seen from the Complaint, ~~37, 38, 40.

In furtherance ofthe parties' negotiations, on or about November 18,2010 Mr. Santola of

Plaintiff sent a second draft Purchase Agreement to Mr. Gardner and Louis Karp, outside counsel

to Lehigh. Cmplt. ~37. A true copy ofthe November 18,2010 email referenced in the

Complaint is attached to the Klein Cert. as Exhibit C.4 The email indicated that the draft

Purchase Agreement had been revised "utilizing additional provisions from the LOI." Klein

Cert., Ex. C. Upon receipt of the second draft Purchase Agreement, Lehigh immediately

3 It is well settled that on a motion to dismiss, a court may consider a document that is integral to or explicitly referenced in a complaint without converting the motion into a motion for summary judgment. Jones v. Intelli-Check, Inc., 274 F. Supp.2d 615, 625 (D.N.J. 2003). See also Banco Popular N.A., v. Gandi, 184 N.J. 161, 183 (2005). Since Plaintiff explicitly references the.conference calls it had with the Lehigh Entities after the draft Purchase Agreement was circulated, documents reflecting the parties' discussions can and should be considered in support of the Lehigh Entities' motion to dismiss.

4 See fn 3 infra.

6 48687/0003-7584451 v4

reviewed the document and identified areas of concern that were subsequently addressed in

multiple conference calls between the parties. Cmplt. ~38.

As of November 23, 2010, just five (5) days before the LOI was set to terminate, Lehigh

and Plaintiff were still negotiating the terms of the Purchase Agreement and trying to resolve the

outstanding issues in the second draft provided by Mr. Santola on November 18,2010. As

Plaintiff indicates in its Complaint, the parties had'issues including the deposit to be provided

under the Purchase Agreement. Cmplt. ~38. On November 23, 2010, Mr. Gardner sent David

Bernhaut, the broker, an email discussing one of the business issues Lehigh had with the

Purchase Agreement regarding which party would hold the deposit. A true copy of the

November 23,2010 email from Mr. Gardner is attached hereto as Exhibit D.5

The parties thereafter were able to resolve the deposit issues, but additional issues still

needed to be resolved before the Purchase Agreement could be signed. Mr. Gardner confirmed

this fact in an email to Mr. Santola dated November 24, 2010, which is referenced in Paragraph

43 of Plaintiffs Complaint, and provides, in pertinent part, that, "[w]e have not yet provided

written comments because the drafts circulated by Woodmont contain terms and conditions that

differ materially from the terms and conditions set forth in the LOI. We have had several calls to

discuss these differences." A true copy ofthe November 24, 2010 email from Mr. Gardner is

attached to the Klein Cert. as Exhibit E. However, by November 28,2010, the LOI had expired

according to its terms. Reinstatement of the LOI was always a possibility, but the LOI was never

reinstated.

Plaintiffs Complaint brazenly alleges that the parties agreed to extend the twenty-five

(25) day period by which a formal Purchase Agreement was to be executed (Cmplt. ~~40, 41 ),

5 See fn 3 infra.

7 48687/0003-7584451 v4

but no evidence memorializing the phantom extension has been proffered by Plaintiff in the

Complaint or otherwise. In fact, an email from Mr. Santola on December 3, 2010 confirms quite

the opposite--that Amir Elbaz of Lehigh had not consented to an extension of the twenty-five day

period provided for in the LOI. A true copy of the December 3, 2010 email from Mr. Santola is

attached hereto as Exhibit F.

Tlie two draft Purchase Agreements and exchange of e-mails and telephone calls

concerning those drafts, as a matter of law, demonstrate the parties-including Defendants­

were engaged in good faith negotiations. Despite these negotiations, the parties were unable to

negotiate and execute an acceptable Purchase Agreement within twenty-five (25) days of the

execution of the LOI. Three weeks after the LOI terminated by its own terms, there was still no

Purchase Agreement executed, and on December 20, 2010, Lehigh elected to confirm

termination of the deal and notified Plaintiff that the LOI had expired according to its terms.

Cmplt. ~49. A true copy of Lehigh's December 20, 2010 letter is attached to the Klein Cert. as

Exhibit G.

Plaintiff filed its five (5) count Complaint and Notice of Lis Pendens six weeks after

Lehigh notified Plaintiff that the LOI had expired according to its own terms.

8 48687/0003-758445lv4

LEGAL ARGUMENT

I. RULE 4:6-2(E) MANDATES DISMISSAL WHERE THE CHALLENGED PLEADING DOES NOT SET FORTH A LEGALLY ADEQUATE BASIS FOR RELIEF.

Rule 4:6-2 allows a party, on motion, to seek the dismissal of a pleading on specifically

enumerated grounds. The motion must be made solely on the information contained in the

pleading in question or else it will be deemed~to be a motion for summary judgment.6

Specifically, R. 4:6-2 provides, in pertinent part, as follows:

Every defense, legal or equitable, in law or fact, to a claim for relief in any complaint, counterclaim, cross-claim, or third-party complaint shall be asserted in the answer thereto, except that the following defenses, unless otherwise provided by R. 4:6-3, may at the option ofthe pleader be made by motion, with briefs: (a) lack of jurisdiction over the subject matter, (b) lack of jurisdiction over the person, (c) insufficiency of process, (d) insufficiency of service of process, (e) failure to state a claim upon which relief can be granted, (f) failure to join a party without whom the action cannot proceed, as provided by R. 4:28-1. If a motion is made raising any of these defenses, it shall be made before pleading if a further pleading is to be made.

R. 4:6-2 (emphasis added).

On a motion made pursuant toR. 4:6-2(e), the court looks at the complaint, confining its

inquiry "to a consideration of the legal sufficiency of the alleged facts apparent on the face of the

challenged claims." Rieder v. State Dep't ofTransp., 221 N.J. Super. 547, 552 (App. Div. 1987)

(quoting R. & J. Auto Body v. Miller, 72 N.J. Super. 207,211 (App. Div. 1962)). Thus, where

the pleading does not set forth an adequate basis for relief on its face, R. 4:6-2( e) mandates

dismissal. Banco Popular North America v. Gandi 184 N.J. 161, 166 (2005) (stating that "[i]f

the complaint states no basis for relief and discovery would not provide one, dismissal is the

appropriate remedy.") In determining whether or not a plaintiff's complaint sets forth an

6 But see fn. 3, infra.

9 48687/0003-758445lv4

adequate basis for relief, the Court should "search in depth and with liberality to ascertain

whether the fundament of a cause of action may be gleaned even from an obscure statement of

claim." Printing Mart-Morristown v. Sharp Electronics, 116 N.J. 739, 746 (1989) (internal

citations omitted). That said, dismissal under R. 4:6-2(e) should not be denied or delayed to

allow the moving party the opportunity to establish a claim as "[ d]iscovery is intended to lead to

facts supporting or opposing an asserted legal theory; it is not designed to lead to formulation of 1

a legal theory." Camden County Energy Recovery Assoc., L.P. v. New Jersey Dep't ofEnv.

Prot., 320 N.J. Super. 59, 64 (App. Div. 1999).

As set forth in detail below, Plaintiffs Complaint fails to state a claim for which relief

can be granted as against the Lehigh Entities. When, as here, "no matter how 'generously' or

'indulgently' the [counts at issue] are scrutinized," the conclusion is inescapable that they are

simply not cognizable at law, dismissal is warranted. Id. at 65. No amount of discovery can cure

this patent defect. As set forth in detail below, dismissal of the Complaint as against the Lehigh

Entities, with prejudice, is appropriate. 7

II. THE FIRST COUNT OF PLAINTIFF'S COMPLAINT FOR BREACH OF CONTRACT/SPECIFIC PERFORMANCE MUST BE DISMISSED.

In the first count of its Complaint, Plaintiff alleges that the Lehigh Entities are liable for

breach of contract/specific performance. However, Plaintiffs count for breach of

7 If this Court is inclined to deny the Lehigh Entities' motion to dismiss Plaintiffs Complaint, this Court should, alternatively, grant the motion to dismiss Plaintiff's Complaint as to Yorkville. Plaintiff has plead absolutely no viable facts that would lead to Yorkville's liability. The operative agreement in this case, the LOI, was signed only by Plaintiff and Lehigh (because Lehigh is the owner of the Property), and negotiations therefore were between those two parties only for the Purchase Agreement. It would be inequitable to hold Yorkville responsible for some alleged breach by Lehigh. Accordingly, in the event this Court will not grant the motion to dismiss as to both Defendants, the Lehigh Entities respectfully request that the motion to dismiss be granted in its entirety as to the Complaint against Yorkville.

10 48687/0003-7584451 v4

contract/specific performance is untenable because there is simply no underlying contractual

obligation that exists to be breached or enforced. The LOI expired according to its own terms

and neither a breach nor specific performance can be found where there is no underlying

enforceable agreement warranting such extraordinary relief. Accordingly, Plaintiffs first count

for breach of contract/specific performance should be dismissed with prejudice.

"Specific performance is !!.Q! an automatic remedy for a breach of contract ... "

Ballantyne House Assocs. v. City ofNewark, 269 N.J. Super. 322, 334 (App. Div. 1993)

(emphasis added) (finding that specific performance should not have been ordered without

reference to equitable considerations.) Rather, it is a "discretionary remedy". Marioni v. 94

Broadway, Inc., 374 N.J. Super 588, 599 (App. Div. 2005). Under New Jersey law, a party

seeking specific performance must demonstrate that: (1) there is a valid enforceable agreement,

(2) the essential elements of the agreement must be clear, definite, certain and complete, (3) the

moving party has no adequate remedy at law, and (4) "an order requiring performance of the

contract will not result in inequity to the offending party, reward the recipient for unfair dealing

or conflict with public policy." Houseman v. Dare, 405 N.J.Super 538, 542-543

(App.Div.2009); see also Dechtman v. Sidpaul Corporation, 89 N.J. 547, 552 (1982). A court

should not order specific performance if "the remedy at law is adequate and complete and as

efficient as the remedy of specific enforcement." Fleischer v. James Drug Stores, 1 N.J. 138,

146 (1948); see also Centex Homes Corporation v. Boag, 128 N.J.Super. 385,389 (Ch.Div.1974)

(denying specific performance because damages were readily measurable and remedy at law was

wholly adequate).

In order to establish a right to specific performance "a plaintiff must demonstrate that the

contract in question is valid and enforceable at law" and "that the terms of the contract are

11 48687/0003-7584451 v4

expressed in such fashion that the Court can determine, with reasonable certainty the duties of

each party and the conditions under which performance is due." Marioni, 374 N.J. Super. at

598-99 (internal citations omitted). The Court in Marioni went on to note that "the right to

specific performance turns not only on whether the plaintiff has demonstrated a right to legal

relief but also whether the performance of the contract represents an equitable result." Id. at 599.

In the ca~e ofK-T Corp. v. JB Associates, 2009 WL 2365970 *4 '(App. Div.)(Aug. 4,

2009), the Appellate Division was considering whether a letter of intent relating to the separation

of several businesses constituted a valid contract between the parties such that specific

performance was appropriate. The Court stated that "[w]hether a preliminary agreement such as

a letter of intent is 'binding is a matter of the parties' intent.'" I d. (citing Morales v. Santiago,

217 N.J. Super. 496, 501 (App. Div. 1987)(finding that where agreement lacked essential terms

of agreement and expressly contemplated later signing of contract there was evidence that parties

did not intend to be bound by agreement.) The Appellate Division continued that "if the parties

intend that their preliminary agreement be subject to the terms of their later contract, they are not

bound by their preliminary agreement." Id. at 4. (internal citations omitted)

The Appellate Division in K-T Corp. ultimately found that the letter of intent at issue

clearly indicated that it did not intend to be a binding agreement. Id. at 5. The letter opened with

the phase "[t]he purpose of this Letter oflntent ... is to set forth certain non-binding

understandings and agreements between" the parties. Id. The letter of intent also specified that

until the "realignment" of the companies was complete, nothing would change between the

parties. Id. The Court found that the drafter made "a concerted effort to foreclose any argument

that the parties intended the letter to be a binding agreement even if no formal contract was

12 48687/0003-758445lv4

subsequently executed." Id. at 6. The Appellate Division thus found that the trial court erred in

granting specific performance of the letter of intent and reversed. I d. at 7.

Applying the foregoing legal and equitable principles to this case, specific performance is

not an available remedy for Lehigh's alleged breach of the LOI. The LOI, the only operative

signed contract between Lehigh and Plaintiff, was a non-binding term sheet that offered terms

and conditions under which Leliigh would sell the Property if the terms provided for in the LOI

were met, just like the LOI inK-T Corp. The LOI specifically proviqed that:

The Parties recognize and understand that a formal Purchase Agreement is intended to be drafted and executed within twenty-five (25) days from the date this Letter of Intent is fully executed. If a binding Purchase Agreement has not been executed within twenty-five (25) days, neither party shall have any further obligation to the other party.

Klein Cert. Ex. A (emphasis added). The parties' intent not to be bound by the LOI could not be

more clear.

Lehigh endeavored, in good faith, to negotiate the terms of a Purchase Agreement with

Plaintiff. This Court need simply review the draft Purchase Agreements and exchange of

electronic mail concerning these drafts to reach this inescapable conclusion. 8 Ultimately,

however, an acceptable Purchase Agreement was not negotiated by the parties within the twenty-

five day period provided for in the LOI. Subsequently, more than three weeks after the LOI

8 This Court can and should find as a matter of law that Defendants acted in good faith. See generally Henderson v. The Hertz Corp., 2005 WL 4127090 *10 (N.J. Super. App. Div.) (June 22, 2006)(finding that as a matter oflaw plaintiffs claim failed to set forth claim for breach of the covenant of good faith and fair dealing, as well as other claims, and trial court properly granted defendant's motion to dismiss); Washington Savings Bank v. First Fidelity Bank, N.A.,268 N.J. Super. 597, 602 (App. Div. 1993 )(finding that conduct of plaintiff and employee was so egregious as to allow court to conclude that as a matter of law plaintiff did not pay checks in good faith and summary judgment was proper on plaintiffs claim.)

13 48687/0003-7584451 v4

terminated by its own terms (because a Purchase Agreement had not been executed within 25

days), on December 20, 2010 Lehigh confirmed termination ofthe deal. See Klein Cert. Ex. G.

As the Complaint, LOI and related documents confirm, the LOI terminated according to

its own terms. Thus there is no underlying contractual obligation that could be breached and/or

upon which specific performance can or should be granted by this Court. Plaintiff is, in effect,

asking this Court to revive the parties' obligatiohs under the LOI and then to award specific

performance. However, "[c]ourts generally should not tinker with a finely drawn and precise

contract entered into by experienced business people that regulates their financial affairs."

Brunswick Hills RacguetClub, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 223 (2005)

Thus, Lehigh cannot be held to the terms of a bargain that expired according to its own terms

before complete performance was achieved. See Karl's Sales and Svc., Inc. v. Gimbel Bros.,

Inc., 249 N.J. Super. 487,493 (App. Div.), certif. denied, 127 N.J. 548 (1991) ("Where the

terms of a contract are clear and unambiguous, there is no room for interpretation or

construction, and the courts must enforce those terms as written."); Washington Constr. Co., Inc.

v. Spinella, 8 N.J. 212,217 (1951) (noting that courts will not create a better agreement for either

party than the parties themselves have created).

Given the foregoing, Plaintiffs claim for breach of contract/specific performance as

against Lehigh must be dismissed.

III. THE SECOND COUNT OF PLAINTIFF'S COMPLAINT FOR BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING MUST ALSO BE DISMISSED.

The second count of Plaintiffs Complaint alleging breach of the implied covenant of

good faith and fair dealing must also be dismissed against Lehigh. Plaintiff has presented no

objective credible evidence of bad faith conduct on the part of Lehigh that might entitle it to

damages or specific performance. To the contrary, the exhibits attached to the Complaint and

14 48687/0003-7584451 v4

referenced therein (and attached to the Klein Cert.) demonstrate manifest good faith in the

attempt to agree upon a Purchase Agreement. Given this fatal flaw in the Complaint,

Defendants' motion to dismiss count two of the Complaint should be granted.

In New Jersey, there is an implied covenant of good faith and fair dealing read into all

contracts. See Wade v. Kessler Institute, 172 N.J. 327, 340 (2002). Thus, to sustain a claim for

breach ~f the implied covenant of good faith and fair dealing, tliere must be a contract, whether

express or implied, upon which such a claim is premised. See Noye v. Hoffman La-Roche, Inc.,

238 N.J. Super. 430, 434 (App. Div. 1990), cert. denied 122 N.J. 146 (1990) (stating "in the

absence of a contract, there can be no b:reach of an implied covenant of good faith and fair

dealing"); see also McQuitty v. General Dynamics Corp., 204 N.J. Super. 514, 520 (App. Div.

1985). "Under the implied covenant of good faith and fair dealing, neither party shall do

anything which will have the effect of destroying or injuring the right of the other party to

receive the fruits of the contract." Fields v. Thompson Printing Co., Inc., 363 F.3d 259, 270 (3rd

Cir. 2004). Here, the contract (i.e. LOI) terminated and any implied covenant terminated with it.

As to the express covenant in the LO I prior to termination, the factual evidence

demonstrates that Lehigh complied with the good faith requirement both under applicable New

Jersey law and the LOI. This may be plainly seen from a review of the draft Purchase

Agreements and electronic mail exchange. Lehigh attempted to negotiate the terms of a final

Purchase Agreement with Plaintiff, but the negotiations bore no fruit in the time period the

parties allotted themselves for the negotiation. This is reflected in the conference calls and

discussions between the parties that Plaintiff references in its pleading. See Cmplt. ~~39,40,43.

In fact, the evidence shows that Lehigh was negotiating in good faith with Plaintiff throughout

the month of November and was ready, willing and able to sell the Property to Plaintiff at that

15 48687/0003-7584451 v4

time. However, three weeks after the LOI terminated according to its own terms, and a final

Purchase Agreement still had not been signed, Lehigh opted to confirm termination of the deal.

Given the foregoing, there is absolutely no evidence of bad faith on the part of Lehigh proffered

by Plaintiff in the Complaint and the second count of Plaintiff's Complaint therefore must be

dismissed pursuant to R. 4:6-2( e) because it fails to state a claim upon which relief can be

granted. See GFS/Mo~istown Limited Partnership v. Vector Whippany Associates, 2009 WL

857002 * 17 (N.J. Super. App. Div.) (finding that where there was "no pattern of evasion" and

the parties were "merely engaged in negotiations that never bore fruit" and were actively trying

to reach an agreement, there was no evidence of bad faith.); Henderson v. The Hertz Corp., 2005

WL 4127090 *10 (N.J. Super. App. Div.) (June 22, 2006)(finding that as a matter oflaw

plaintiffs claim failed to set forth claim for breach of the covenant of good faith and fair dealing,

as well as other claims, and trial court properly granted defendant's motion to dismiss).

Given the foregoing, Lehigh respectfully submits that the Court should dismiss the

second count of Plaintiff's Complaint for breach of the implied covenant of good faith and fair

dealing as against Lehigh.

IV. PLAINTIFF'S CLAIM FOR PROMISSORY ESTOPPEL FAILS TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED.

In addition to dismissing the foregoing claims, this Court should also dismiss Plaintiffs

claim for promissory estoppel against the Lehigh Entities because there were no clear and

definite promises made by the Lehigh Entities that are actionable.

To establish a claim for promissory estoppel, a plaintiff must show:

(1) a clear and definite promise by the promisor; (2) the promise was made with the expectation that the promise would rely thereon; (3) the promisee must in fact reasonably rely on the promise, and ( 4) detriment of a definite and substantial nature must be incurred in reliance on the promise.

16 48687/0003-7584451 v4

Malaker Corp. Stockholders Protective Comm. v. First Jersey Nat. Bank, 163 N.J. Super. 463

(App. Div. 1978), certif denied, 79 N.J. 488 (1979); accord Pop's Cones, Inc. t/a TCBY Yogurt

v. Resorts International Hotel, Inc., 307 N.J. Super. 461,469 (App. Div. 1998). The rationale

behind the doctrine of promissory estoppel is to avoid substantial injustice if a promise is not

enforced. Resorts International Hotel, Inc., 307 N.J. Super. at 469. However, "[t]oo liberal an

application of the copcept will result in' unwitting and unintended undermining of the traditionai

rule requiring consideration for a contract." Malaker Corp. Stockholders Protective Comm.,l63

N.J. Super. at 484. Application of the foregoing legal principles to Plaintiffs Complaint,

warrants dismissal of Plaintiffs third count for promissory estoppel.

The only allegations Plaintiff makes in support of its claim for promissory estoppel are

that the Lehigh Entities promised to make Plaintiff its joint venture partner and that the Lehigh

Entities agreed to sell Plaintiff the Property. However, Plaintiff and Lehigh entered into the LOI

that then governed those parties' relationship. Any prior promises merged into the LOI. The

reality here further is that Plaintiff and Lehigh were in active negotiations to sell the Property

pursuant to the LOI, but the parties ultimately could not agree on the terms of the Purchase

Agreement necessary to close the transaction. Once the LOI terminated according to its own

terms, no party was left with any binding obligations or affirmative duty to the other party. That

is what the LOI states. A claim for promissory estoppel cannot possibly be sustained under these

irrefutable facts. See Lobiondo v. O'Callaghan, 357 N.J. Super. 488, 500 (App. Div. 2003)

(finding that where plaintiff was attempting to utilize the doctrine of promissory estoppel to

obtain specific performance of contract and no clear and convincing evidence was presented at

trial, judgment for specific performance must be reversed.) Given the foregoing, count three of

17 48687/0003-758445lv4

Plaintiffs Complaint against the Lehigh Entities must be dismissed for failure to state a claim

upon which relief can be granted.

V. PLAINTIFF'S FRAUD CLAIM IS NOT PLEAD WITH THE REQUISITE SPECIFICITY REQUIRED BYLAW AND SHOULD BE DISMISSED.

Plaintiffs Complaint is filled with bluster and flowery prose regarding the strength and

1 conviction of its claims, but those allegations fall far short of the legal and factual bases

necessary to support a fraud claim. Plaintiff fails to offer any misrepresentations or

concealments by the Lehigh Entities that would support a claim of fraud. Moreover, Plaintiffs

fraud claim has not been plead with the specificity required by law to place the Lehigh Entities

on notice of the allegations against them. As such, count four of Plaintiffs Complaint should be

dismissed.

Rule 4:5-8 states, "[in] all allegations of misrepresentation, fraud, mistake, breach of

trust, willful default, or undue influence, particulars of the wrong, W!th dates and items if

necessary, shall be stated insofar as practicable. Malice, intent, knowledge, and other conditions

of mind of a person may be alleged generally." R. 4:5-8. Stated otherwise, "fraud is a

conclusion of law and may not be charged in general terms; the pleadings must state the facts

relied on as constituting fraud." Hyland v. Kirkman, 157 N.J. Super. 565, 584 (Ch. Div. 1978).

The purpose of this rule is "to require the pleader to state the facts which are relied on as

constituting the wrong with enough particularity to enable the person charged to deny or

disprove or explain these facts." Evangelista v. Pub. Serv. Coordinated Transp., 7 N.J. Super.

164, 168-69 (App. Div. 1950); see also Faces, Inc. v. Kennedy, 185 N.J. Super. 113,124 (Law

Div. 1981), affd, 185 N.J. Super. 77 (App. Div. 1982) (holding that plaintiffs complaint was

procedurally insufficient because it failed to allege intent on the part of defendant to have

plaintiff rely on alleged misrepresentations). This rule generally requires the plaintiffto state the

18 48687/0003-7584451 v4

"who, what, when and where" of the alleged misrepresentation, as well as how it caused injury to

the plaintiff. See generally State ofNew Jersey v. Qwest Communications, 387 N.J. Super. 469,

484-85 (App. Div. 2006). Accordingly, courts may dismiss a pleading based on failure to

sufficiently plead a claim pursuant toR. 4:5-8. See Levinson v. D' Alfonso & Stein, 320 N.J.

Super. 312 (App. Div. 1999) (dismissing a fraud claim with prejudice because the particulars of

the alleged fraud were not properly plead).

To prove a cause of action for common law fraud, a plaintiff must establish "(1) a

material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the

defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable reliance

thereon by the other person; and (5) resulting damages." Triffin v. Automatic Data Processing,

Inc., 394 N.J. Super. 237, 246 (App. Div. 2007) (citing Gennari v. Weichert Co. Realtors, 148

N.J. 582, 610 (1997); accord Hoffman v. Hampshire Labs, Inc., 405 N.J. Super. 105, 116 (App.

Div. 2009) Here, Plaintiff fails to set forth facts with particularity as to these elements and

therefore cannot support a cause of action for fraud.

In this case, with few exceptions, Plaintiff has provided only the "who", and not the

"what, when and where" to support its fraud claim. Plaintiffs major factual allegation in support

of its fraud claim is that the Lehigh Entities made alleged representations to Plaintiff that the

parties would enter into a joint venture with respect to the Property. Of course, as stated

previously, the parties' discussions resulted in a LOI and as such no fraud claim can be based on

these pre-LOI discussions. See generally Triffin, 394 N.J. Super. at 246.

The Complaint concedes that the parties tried to consummate an operating agreement for

a joint venture, but no such agreement was ever reached. Instead, the parties agreed and opted to

enter into the LOI. Thus, any past representations by the Lehigh Entities about the joint venture

19 48687/0003-758445lv4

cannot form the basis of a fraud claim because there were no material misrepresentations made

by the Lehigh Entities, nor was there an intent to deceive on the part of the Lehigh Entities. As

set forth in the Complaint, the parties jointly opted to pursue a different investment vehicle and

the Lehigh Entities should not subsequently be punished for these business decisions made by

the parties.

The second basis for Plaintiffs fraud claim is premised on the fact that the Lehigh

Entities made alleged misrepresentations to Plaintiff that led Plaintiff to believe that Lehigh

would sell the Property to Plaintiff. Casting aside the fact that Plaintiff fails to identify with

specificity any of the misrepresentations it alleges the Lehigh Entities made, Plaintiff cannot

establish the core elements of a fraud claim. Plaintiff cannot show the existence of a material

misrepresentation of a present or past fact or that such statements were made knowing they were

false and with the intent they be relied on. See Stochastic Decisions, Inc. v. DiDomenico, 236

N.J. Super. 388, 395 (App. Div. 1989).

Indeed, when the parties negotiated and executed the LOI, the parties (Lehigh and

Woodmont) agreed the sale would occur pursuant to a purchase and sale agreement negotiated

and executed within the 25 day period prescribed by the LOI. Both parties agreed, in writing,

that the terms contained in the LO I would "not be binding until such time a formal, written

Purchase Agreement is negotiated and executed by the parties." See Klein Cert. Ex. A. During

the time the parties were endeavoring to negotiate the Purchase Agreement, Lehigh's intent to

sell the Property to Plaintiff was manifest. Lehigh even continued to pursue reinstatement of the

transaction with Plaintiff for approximately three weeks after the expiration of the twenty-five

(25) day period provided for in the LOI.

20 48687/0003-758445lv4

Lehigh's representations to Plaintiff that it intended to sell the Property were true at the

time they were made to Plaintiff. There is no contrary evidence. Plaintiff does not identify any

specific representations made by the Lehigh Entities that it now alleges were false and that were

intended to mislead Plaintiff. Accordingly, facts establishing the element of scienter are lacking

from the Complaint, and the fraud count fails as a result. See Triffin, 394 N.J. Super. at 246;

Hoffman v. Hampshire Labs, Inc., 405 N.J. Super. 105, 116 (App. Div. 2009) (finding that a

complaint lacking specific facts to establish defendants had knowledge of the falsity of their

statements fails to state a claim for fraud.) Given this inescapable deficiency in the pleading and

the absence of any legal basis for Plaintiffs fraud claim, the Lehigh Entities' motion to dismiss

count four should be granted.

In sum, Plaintiff has in no way placed the Lehigh Entities on notice of the claims against

them such that an adequate defense can be prepared. As a result, Plaintiff has not met the

heightened pleading requirements for a fraud claim and has not alleged facts demonstrating the

elements of its fraud claim. Given the foregoing, count four of Plaintiffs Complaint should be

dismissed with prejudice.

VI. PLAINTIFF'S COUNT FOR UNJUST ENRICHMENT/QUASI CONTRACT MUST BE DISMISSED BECAUSE DEFENDANTS HAVE NOT BEEN UNJUSTLY ENRICHED BY PLAINTIFF'S PERFORMANCE.

Plaintiffs claim for unjust enrichment/quasi contract fails because the Lehigh Entities

have received no tangible benefit from Plaintiffby which the Lehigh Entities have been unjustly

enriched. It would be patently absurd to allow Plaintiff to proceed on its claim for unjust

enrichment where there is no evidence that the Property or Defendants have been enhanced by

Plaintiffs services. As alleged, the parties in questions pursued a joint venture, LLC and then

sale of the Property. Lehigh and Woodmont's agreement to pursue a sale of the Property was

21 48687/0003-7584451 v4

evidenced by the LOI. They did not agree that Woodmont could pursue an unjust enrichment

claim for past services. Thus Plaintiff cannot properly plead a cause of action for unjust

enrichment/quasi contract and this count too should be dismissed with prejudice.

Quasi contractual obligations rest on a "legal fiction and are not contract obligations at

all .... " Callano v. Oakwood Park Homes Corp., 91 N.J. Super. 105, 108 (App. Div. 1966)

Generally speaking courts "employ the fiction of [q]uasi or c~nstructive contract with caution."

Callano, 91 N.J. Super. at 108. Under New Jersey law, "[t]o recover under [the doctrine of

unjust enrichment], the plaintiff must prove that the defendant received a benefit, and that

retention of the benefit without payment therefor[ e) would be unjust." U.S. Bank Nat. Ass'n v.

Hylton, 403 N.J. Super. 630, 642 (2008) (citations omitted). In fact, the "key element of a quasi­

contract claim is that one party has been unjustly enriched at the expense of another." W anague

Borough Sewerage Auth. v. Township of West Milford, 144 N.J. 564, 575 (1996). The recovery

ofthe plaintiff thus is typically measured by the amount defendant has been enriched by

plaintiffs performance. See Wanaque Borough Sewerage Auth., 144 N.J. at 575. Applying

these elements to the case at bar, Plaintiff cannot successfully prove its quasi contract claim.

Plaintiffs allegation of the Lehigh Entities' purported liability for quasi contract rests on

Plaintiffs baseless assertions that it was never paid for services rendered to the Lehigh Entities

with respect to the Property. However, Plaintiff cannot proverbially have its cake and eat it too.

Plaintiff alleges that Lehigh breached its contractual obligations by failing to sell the Property

under the LOI. Now, Plaintiff attempts to get a second bite at the apple by holding the Lehigh

Entities liable under a quasi contractual theory. In reality, however, Plaintiff cannot succeed on

either its breach of contract claim or its quasi-contract claim. All of the services provided by

Plaintiff, as referenced in '1!'1!17 and 91 of its Complaint, were provided in connection with a joint

22 48687/0003-7584451 v4

CONCLUSION

For all of the foregoing reasons, the Court should grant the Lehigh Entities' motion to

dismiss the Complaint, in its entirety, with prejudice, for failure to state a claim for which relief

can be granted pursuant toR. 4:6-2(e) and for failure to plead fraud with the requisite specificity

required by R. 4:5-8.

.-

DATED: May 12,2011

24 48687/0003-758445Iv4

Respectfully submitted,

COLE, SCHOTZ, MEISEL, FORMAN & LEONARD, P.A. Attorneys for The Lehigh Entities Lehigh Acquisition Corp. and Y arkville Advisors, LLC

v J.l )~ . yr;e By: __ Q_--=-.L::.-.-~~-=:__:_ _____ _

STEVEN R. KLEIN