UNITED STATES DISTRICT COURT FOR THE 

SOUTHERN DISTRICT OF NEW YORK 

DIRECT INVESTMENT PARTNERS AG, 

Plaintiff, 07 Civ. 3310 (LLS) (RLE) 

 - against - 

CERBERUS GLOBAL INVESTMENTS, LLC, 

CERBERUS CAPITAL MANAGEMENT, L.P., 

CERBERUS PARTNERS, L.P. and CERBERUS 

GLOBAL INVESTMENT ADVISORS, LLC 

FILED VIA ECF 

Defendants. 

DEFENDANTS’ REPLY MEMORANDUM OF LAW 

IN FURTHER SUPPORT OF THEIR MOTION TO DISMISS THE COMPLAINT 

 LOWENSTEIN SANDLER PC 

 1251 Avenue of the Americas 

18th Floor 

New York, New York 10020 

Tel: 212.262.6700 

Fax: 212.262.7402 

- and - 

65 Livingston Avenue 

Roseland, New Jersey 07068 

Tel: 973.597.2500 

Fax: 973.597.2400 

Attorneys for Defendants Cerberus Global 

Investments, LLC, Cerberus Capital Management, 

L.P., Cerberus Partners, L.P. and Cerberus Global 

Investment Advisors, LLC 

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 1 of 28
-iTABLE OF CONTENTS

Page

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

PRELIMINARY STATEMENT .....................................................................................................1 

LEGAL ARGUMENT.....................................................................................................................2 

I. PLAINTIFF’S CLAIMS (EXCEPT THE THIRD CAUSE OF ACTION) 

ARE BARRED BY THE STATUTE OF FRAUDS. ..............................................2 

A. Plaintiff Cannot Survive a Rule 12(b)(6) Motion by Engaging in 

Raw Speculation. .........................................................................................3 

B. The Part Performance Doctrine Is Not Applicable to Finder’s 

Contracts. .....................................................................................................4 

C. Plaintiff Has Not Proffered a Writing Sufficient to Satisfy the 

Statute of Frauds. .........................................................................................7 

D. Direct’s Equitable Claims Also Fail as a Matter of Law...........................11 

II. NO CONTRACT WAS EVER FORMED BETWEEN THE PARTIES. .............14 

III. DIRECT HAS FAILED TO STATE A CLAIM FOR FRAUD............................20 

CONCLUSION..............................................................................................................................23 

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 2 of 28
-iiTABLE OF AUTHORITIES

Cases Page

AG Ltd. v. Liquid Realty Partners, LLC, 

 448 F. Supp. 2d 583 (S.D.N.Y. 2006)................................................................4, 5, 8, 9, 12 

ATSI Commc'ns, Inc. v. The Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007)....................................4 

Allied Sheet Metal Works, Inc. v. Saunders, 206 A.D.2d 166, 

 619 N.Y.S.2d 260 (1st Dep't 1994)......................................................................................9 

Anostario v. Vicinanzo, 59 N.Y.2d 662, 450 N.E.2d 215, 463 N.Y.S.2d 409 (1983) .................5, 6 

Beautiful Jewellers Private Ltd. v. Tiffany & Co., No. 06 Civ. 3085(KMW), 

 2007 WL 867202 (S.D.N.Y. March 21, 2007) ......................................................12, 13, 21 

Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007) ..................................................................4 

Belotz v. Jefferies & Co., Inc., 213 F.3d 625, 

 2000 WL 665564 (2d Cir. May 22, 2000) .................................................................4, 6, 12 

Bronner v. Park Place Entm't. Corp., 137 F. Supp. 2d 306 (S.D.N.Y. 2001).............................5, 6 

Cal Distrib. Inc. v. Cadbury Schweppes Am. Beverages, Inc., 

 No. 06 Civ. 0496 RMB JCF, 2007 WL 54534 (S.D.N.Y. Jan. 5, 2007) ...........................20 

Channel Master Corp. v. Aluminum Ltd. Sales, Inc., 4 N.Y.2d 403 (1958)..................................21 

Conley v. Gibson, 355 U.S. 41 (1957) .............................................................................................4

Crabtree v. Elizabeth Arden Sales Corp., 305 N.Y. 48, 110 N.E.2d 551 (1953)............................8 

deCiutiis v. NYNEX Corp., No. 95 Civ. 9745 (PKL), 

 1996 WL 512150 (S.D.N.Y. Sept. 9, 1996).......................................................................13

DeRosis v. Kaufman, 219 A.D.2d 376, 641 N.Y.S.2d 831 (1st Dep't 1996)...................................9 

Ellis v. Provident Life & Accident Ins. Co., 3 F. Supp. 2d 399 (S.D.N.Y. 1998)..........................12 

Freedman v. Chemical Const. Corp., 43 N.Y.2d 260, 372 N.E.2d 12, 

 401 N.Y.S.2d 176 (1977).....................................................................................................2 

Greystone P'ships Group, Inc. v. Kominkluke Luchtvaart Maatschappij, 

 815 F. Supp. 745 (S.D.N.Y. 1993) ..............................................................................15, 16 

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 3 of 28
-iiiGracie Square Realty Corp. v. Choice Realty Corp., 305 N.Y. 271, 

 113 N.E.2d 416 (1953).........................................................................................................6 

I.R.V. Merch. Corp. v. Jay Ward Productions, Inc., 856 F. Supp. 168 (S.D.N.Y. 1994)........17, 18 

Intercontinental Planning, Ltd. v. Daystom, Inc., 24 N.Y.2d 372, 

 248 N.E.2d 576, 300 N.Y.S.2d 817 (1969)..........................................................................5 

Karlin v. Avis, 457 F.2d 57 (2d Cir. 1972) ..................................................................................7, 8 

Koch v. Mutiplan, Inc., No. 99 Civ. 11277 (CM) (LMS), 

 2001 WL 210004 (S.D.N.Y. Feb. 16, 2001)......................................................................13 

Kule Resources, Ltd. v. Reliance Group, Inc., 49 N.Y.2d 587 (1980) ............................................5 

Lauter v. W & J Sloane, Inc., 417 F. Supp. 252 (S.D.N.Y. 1976)...................................................9 

Longo v. Shore & Reich, Ltd., 25 F.3d 94 (2d Cir. 1994)..................................................14, 15, 16 

Merex A.G. v. Fairchild Weston Sys., Inc., 810 F. Supp. 1356 (S.D.N.Y. 1993)..................5, 8, 13 

Messner Vetere Berger McNamee Schmetterer Euro RSCG Inc. v. Aegis Group PLC, 

 93 N.Y.2d 229 (1999) ..................................................................................................5, 6, 7 

Minichiello v. Royal Business Funds Corp., 18 N.Y.2d 521 (1966) .............................................13 

Mobile Data Shred, Inc. v. United Bank of Switzerland, 

 No. 99 Civ. 10315, 2000 WL 351516 (S.D.N.Y. April 5, 2000)...............................6, 7, 13 

Morris Cohon & Co. v. Russell, 23 N.Y.2d 569, 245 N.E.2d 712, 

 297 N.Y.S.2d 947 (1969).............................................................................................13, 14 

Newman v. Crazy Eddie, Inc., 119 A.D.2d 738, 501 N.Y.S.2d 398 (2d Dep't 1986)....................13 

Philo Smith & Co., Inc. v. USLIFE Corp., 420 F. Supp. 1266 (S.D.N.Y. 1976).......................2, 12 

Rayward v. Silbermann, 356 F.2d 611 (2d Cir. 1966).....................................................................6 

R.G. Group, Inc. v. The Horn & Hardart Co., 751 F.2d 69 (2d Cir. 1984) ................14, 18, 19, 20 

Reprosystem, B.V. v. SCM Corp., 727 F.2d 257 (2d Cir. 1984) ........................................15, 16, 18 

Rosenblatt v. Christie, Manson & Woods Ltd.........................................................................20, 21 

Scheck v. Francis, 26 N.Y.2d 466, 260 N.E.2d 493, 311 N.Y.S.2d 841 (1970) ...............14, 15, 16 

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 4 of 28
-ivSchlaifer Nance & Co. v. Estate of Andy Warhol, 119 F.3d 91 (2d Cir. 1997).............................22 

Solin Lee Chu v. Ling Sun Chu, 9 A.D.2d 888, 193 N.Y.S.2d 859 (1st Dep't 1959) ......................8 

Springwell Corp. v. Falcon Drilling Co., Inc., 16 F. Supp. 2d 300 (S.D.N.Y. 1998) ...................13 

Stephen Pevner, Inc. v. Ensler, 309 A.D.2d 722, 766 N.Y.S.2d 183 (1st Dept. 2003) ...............5, 7 

Teachers Ins. & Annuity Ass'n of Am. v. Tribune Co., 670 F. Supp. 491 (S.D.N.Y. 1987) ..........17 

The Horn & Hardart Co. v. The Pillsbury Co., 888 F.2d 8 (2d Cir. 1989) ...............................8, 11 

Valentino v. Davis, 270 A..D.2d 635, 703 N.Y.S.2d 609 (3rd Dept. 2000) ....................................5 

Whitman Heffernan Rhein & Co., Inc. v. Griffin Co., 163 A.D.2d 86, 

 557 N.Y.S.2d 342 (1st Dep't 1990)......................................................................................2 

Winston v. Mediafare Entm't Corp., 777 F.2d 78 (2d Cir. 1986) ..................................................16 

Wright v. Ernst & Young LLP, 152 F.3d 169 (2d Cir. 1998)...........................................................4 

Statutes

N.Y. Gen. Oblig. Law § 5-701............................................................................................... passim 

N.Y. Gen. Oblig. Law § 5-703.........................................................................................................5 

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 5 of 28
C3378/216 

12/05/2007 2258944.02

Defendants Cerberus Global Investments, LLC (“Cerberus Global”), Cerberus 

Capital Management, L.P. (“Cerberus Capital”), Cerberus Partners, L.P. (“Cerberus Partners”), 

and Cerberus Global Investment Advisors, LLC (“Cerberus Advisors”) (collectively 

“Defendants” or “Cerberus”) respectfully submit this reply memorandum of law in further 

support of their motion to dismiss the Complaint.1

PRELIMINARY STATEMENT

Plaintiff’s Complaint is replete with deficiencies that require its dismissal. 

Nothing in its opposition brief alters that fact. All of Plaintiff’s claims (except fraud) are barred

by New York’s statute of frauds, and none of the purported exceptions to the statute on which 

Plaintiff relies can salvage those claims. Even were the statute of frauds inapplicable, Cerberus 

expressly reserved the right not to be bound to a contract with Plaintiff until a mutuallysatisfactory written agreement was executed by both sides. That never happened, which means 

as a matter of law that no contract was ever formed between the parties. Finally, Plaintiff’s fraud 

claim fails because it is entirely duplicative of its breach of contract claim, and because Plaintiff 

has failed to allege the essential element of reasonable reliance given that it concededly never 

relied on the purported truth of any of Cerberus’s alleged misrepresentations. 

In short, Plaintiff has not satisfied the Supreme Court’s requirement under Rule 

12(b)(6) of pleading facts that demonstrate the existence of a plausible claim for relief. To the 

contrary, all of Plaintiff’s claims are woefully deficient as a matter of law. The Court should 

grant Defendants’ motion to dismiss the Complaint with prejudice. 

 

1

 The Memorandum of Law in Support of Defendants’ Motion to Dismiss is referred to 

herein as “Mov. Br.” Direct Investment Partners AG’s Memorandum of Law in Opposition to 

Defendants’ Motion to Dismiss the Complaint is referred to as “Direct Br.” Unless otherwise 

indicated, capitalized terms used herein have the same meaning as in Defendants’ moving brief. 

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 6 of 28
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LEGAL ARGUMENT

I. PLAINTIFF’S CLAIMS (EXCEPT THE THIRD CAUSE OF ACTION) ARE 

BARRED BY THE STATUTE OF FRAUDS. 

Plaintiff concedes, as it must, that the statute of frauds applicable to finder’s fee 

cases set forth in N.Y. Gen. Oblig. Law § 5-701(a)(10) governs this case. (Direct Br. at 51 

(citing Freedman v. Chemical Const. Corp., 43 N.Y.2d 260, 266 (1977))).2 Although (somewhat 

curiously) Plaintiff devotes three pages of its brief to arguing why a different provision of the 

statute of frauds -- N.Y. Gen. Oblig. Law § 5-701(a)(1), which concerns contracts that cannot be 

performed within a year -- does not apply to its alleged contract with Defendants, that argument 

is simply irrelevant. (Direct Br. at 45-47). Defendants rely on paragraph (a)(10) of section 5-

701 to bar Plaintiff’s claims, not paragraph (a)(1). And, as noted, Plaintiff does not contest the 

conclusion that paragraph (a)(10) applies to its alleged finder’s contract. (Direct Br. at 51). 

Since the only version of the document Plaintiff says was the parties’ contract is unsigned by 

either party, and given that Plaintiff concedes in its Complaint that it never received such a 

signed document from Cerberus (Complaint, ¶¶ 76-78 and Ex. C), its claims for breach of 

contract and under related quasi-contract theories are barred as a matter of law. See Whitman 

Heffernan Rhein & Co., Inc. v. Griffin Co., 163 A.D.2d 86, 87, 557 N.Y.S.2d 342, 343 (1st Dep’t 

1990) (holding that an unsigned draft agreement, even if in final form and setting forth the terms 

of the performance fee, is insufficient to satisfy the statute of frauds); Philo Smith & Co., Inc. v. 

USLIFE Corp., 420 F. Supp. 1266, 1271 (S.D.N.Y. 1976) (holding that due to the principal 

importance of protecting businesses from the “mischief” created by interlopers seeking 

 

2

 Section 5-701(a)(10) provides that “[e]very agreement, promise or undertaking is void, 

unless it or some note or memorandum thereof be in writing, and subscribed by the party to be 

charged therewith, or by his lawful agent, if such agreement, promise or undertaking . . . [i]s a 

contract to pay compensation for services rendered in negotiating a loan, or in negotiating the 

purchase, sale, exchange, renting or leasing of any real estate or interest therein, or of a business 

opportunity, business, its good will, inventory, fixtures or an interest therein, including a 

majority of the voting stock interest in a corporation and including the creating of a partnership 

interest. ‘Negotiating’ includes procuring an introduction to a party to the transaction or 

assisting in the negotiation or consummation of the transaction. This provision shall apply to a 

contract implied in fact or in law to pay reasonable compensation[.]”

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 7 of 28
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compensation for their alleged role in consummating a business transaction, the New York 

Legislature made “absolutely clear that all contracts to pay compensation for the services 

rendered by a finder were void unless in a signed writing”) (emphasis added), aff’d, 554 F.2d 34 

(2d Cir. 1977). 

Plaintiff makes essentially four arguments for why its Complaint should survive 

Defendants’ 12(b)(6) motion notwithstanding the clearly-applicable statute of frauds bar. First, 

although it has no facts to support its unadulterated speculation, Plaintiff surmises that maybe, 

just maybe, Cerberus might have signed the February 2003 Draft Consulting Agreement all 

along and just failed to deliver it to Direct. (Direct Br. at 47-48). Second, it claims that 

Cerberus’s part performance of the parties’ alleged contract defeats the statute of frauds defense. 

(Id. at 51-54). Third, Direct tries to piece together a writing sufficient to satisfy the statute of 

frauds from various documents attached to or referred to in the Complaint. (Id. at 48-51). 

Finally, Plaintiff argues that, even if its breach of contract action is barred, Plaintiff’s quasicontract claims remain viable notwithstanding the applicability of N.Y. Gen. Oblig. Law § 5-

701(a)(10). (Id. at 54-62). None of these arguments is even remotely persuasive. 

a. Plaintiff Cannot Survive a Rule 12(b)(6) Motion by Engaging in Raw 

Speculation. 

Lacking any facts even suggesting that a signed version of the February 2003 

Draft Consulting Agreement exists, Plaintiff speculates that “[a]s far as [it] knows, Cerberus 

actually signed the Consulting Agreement as Mr. Teitelbaum pledged, but neglected to return it 

for Mr. Koidl’s signature.” (Id. at 47-48). Plaintiff evidently believes that it can survive a 

12(b)(6) motion simply by speculating that the facts are as it would hope them to be. The gambit 

fails. 

As a preliminary matter, Plaintiff’s unadorned surmise appears nowhere in the 

Complaint (as the lack of a citation in Plaintiff’s opposition brief confirms). (Direct Br. at 48). 

What is more, it actually contradicts what Plaintiff does allege -- namely that Cerberus’s April 

15, 2003 letter of introduction to the IRU “signified Cerberus’s execution of” the February 2003 

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 8 of 28
-4- 

Draft Consulting Agreement. (Id. at 47 (citing Complaint, ¶¶ 76-78)). While (as explained 

below) the plausibility of this allegation is open to serious question, one thing is for certain: it 

would have made no sense for Cerberus to sign the February 2003 Draft, keep it hidden from 

Direct in its files, and yet two months later sign a different letter to “signif[y]” its supposed 

“execution” of that same draft. Leaving aside the black letter principle that a plaintiff cannot 

amend its complaint through its brief in opposition to a motion to dismiss, Wright v. Ernst & 

Young LLP, 152 F.3d 169, 178 (2d Cir. 1998), the new allegation is simply implausible -- if not 

irrational -- in light of what Plaintiff has already alleged. See Bell Atlantic Corp. v. Twombly, 

127 S.Ct. 1955, 1974 (2007) (to survive a motion to dismiss, the claim must be “plausible on its 

face”). 

Moreover, Plaintiff’s merely throwing out the possibility that a signed version of 

the February 2003 Draft Agreement exists somewhere is exactly the kind of speculative, 

inadequate allegation that is no longer permissible after the Supreme Court’s abrogation in 

Twombly of the “any set of facts” language from Conley v. Gibson, 355 U.S. 41, 45-46 (1957). 

Because pleading in this manner is insufficient to raise its right to relief above the speculative 

level, Plaintiff cannot survive a motion to dismiss by pointing to some theoretically conceivable 

set of facts that might give it the basis for a claim. ATSI Commc’ns, Inc. v. The Shaar Fund, 

Ltd., 493 F.3d 87, 98 (2d Cir. 2007). 

b. The Part Performance Doctrine Is Not Applicable to Finder’s 

Contracts. 

 Direct’s attempt to avoid the statute of frauds by invoking the part performance 

doctrine also fails. There is a consistent, unbroken line of case law establishing that the doctrine 

of partial performance does not apply to finder’s fee contracts like the one under which Direct 

seeks to recover here. Belotz v. Jefferies & Co., Inc., 213 F.3d 625, 2000 WL 665564, at *2 (2d 

Cir. May 22, 2000) (unpublished opinion) (“Section 5-701(a)(10) does not expressly provide a 

part performance exception, and the New York Court of Appeals has firmly stated that there is 

no such exception”); accord AG Ltd. v. Liquid Realty Partners, LLC, 448 F. Supp. 2d 583, 588 

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 9 of 28
-5- 

n.2 (S.D.N.Y. 2006); Messner Vetere Berger McNamee Schmetterer Euro RSCG Inc. v. Aegis 

Group PLC, 93 N.Y.2d 229, 234 n.1, 711 N.E.2d 953, 956 n.1, 689 N.Y.S.2d 674, 677 n.1 

(1999) (stating that the Court has “not ... adopted [the] proposition” that there is a “judiciallycreated part performance exception to” section 5-701); Kule Resources, Ltd. v. Reliance Group, 

Inc., 49 N.Y.2d 587, 592, 404 N.E.2d 734, 736, 427 N.Y.S.2d 612, 614 (1980); Stephen Pevner, 

Inc. v. Ensler, 309 A.D.2d 722, 722, 766 N.Y.S.2d 183, 184 (1st Dept. 2003); Valentino v. Davis, 

270 A..D.2d 635, 637, 703 N.Y.S.2d 609, 611 (3rd Dept. 2000). Indeed, the Court of Appeals in 

Messner Vetere expressly stated that it had refused to apply part performance as an exception to 

the statute of frauds outside the context of contracts for the conveyance of interests in real 

property governed by N.Y. Gen. Oblig. Law § 5-703. 93 N.Y.2d at 234 n. 1, 711 N.E.2d at 956 

n.1, 689 N.Y.S.2d at 677 n.1. Since this case is governed by section 5-701 -- not 5-703 -- 

Plaintiff cannot invoke part performance to escape the statute of frauds bar. 

 This result makes perfect sense in light of the purpose the New York Legislature 

sought to achieve when it amended N.Y. Gen. Oblig. Law § 5-701(a)(10) in 1964. Prior to the 

statute’s enactment, “courts were clogged with oral brokerage contract cases which all too often 

degenerated into swearing contests.” Merex A.G. v. Fairchild Weston Sys., Inc., 810 F. Supp. 

1356, 1366 (S.D.N.Y. 1993), aff’d, 29 F.3d 821 (2d Cir. 1994). In order to defend itself “from 

what was perceived to be widespread perjury,” as well as its reputation as a national and 

international center for the purchase and sale of businesses and interests therein, New York 

sought to protect businesses against unfounded claims of brokers and finders. Id.; see also 

Intercontinental Planning, Ltd. v. Daystom, Inc., 24 N.Y.2d 372, 383, 248 N.E.2d 576, 582, 300 

N.Y.S.2d 817, 826 (1969) (The nature of business brokers’ contracts for commissions “is such 

that, in the absence of the requirement of a writing, unfounded and multiple claims for 

commissions are frequently asserted[.]”) (quoting 1949 Report of N.Y. Law Rev. Comm.[N.Y. 

Legis. Doc., 1949, No. 65 (G)], p. 615.)). As New York courts have consistently noted, too 

often, as in this case, finder-plaintiffs undertake “preparatory steps” “with a view toward 

consummation of an agreement in the future.” Anostario v. Vicinanzo, 59 N.Y.2d 662, 664, 450 

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 10 of 28
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N.E.2d 215, 216, 463 N.Y.S.2d 409, 410 (1983) (citing Gracie Square Realty Corp. v. Choice 

Realty Corp., 305 N.Y. 271, 282, 113 N.E.2d 416 (1953)); Bronner v. Park Place Entm’t. Corp., 

137 F. Supp. 2d 306, 313 (S.D.N.Y. 2001). If courts were to lend credence to the part 

performance doctrine in finder’s fee cases, the exception would soon thereafter swallow the rule. 

Scores of plaintiffs would, in the absence of a signed agreement, make self-serving allegations of 

their own partial performance, which may seem reasonable to a jury and, ultimately, be difficult 

to disprove -- precisely the outcome that the Legislature sought to prevent when it enacted the 

statute in the first place. 

 The only authority cited by Direct for the contrary proposition is the Second 

Circuit’s decision in Rayward v. Silbermann, 356 F.2d 611 (2d Cir. 1966). (Direct Br. at 52). 

But Rayward does not say that part performance can be used to escape the statute of frauds bar in 

finder’s cases. To the contrary, the Second Circuit merely construed the pre-1964 predecessor to 

N.Y. Gen. Oblig. Law § 5-701(a)(10) and held that it did not apply to finder’s contracts at all -- a 

result the New York Legislature repudiated by amending the statute in 1964. 356 F.2d at 613. 

In any event, the Rayward Court never had occasion to consider the issue presently before this 

Court, and its decision cannot overcome the clear instruction of cases like Belotz and Messner

Vetere that the part performance doctrine does not apply here. 

Even if that doctrine were applicable, Plaintiff has not satisfied its requirements. 

Plaintiff recites ad nauseam what it claims Cerberus did to perform the alleged contract, ignoring 

the clear rule in New York that the defendant’s conduct is irrelevant for purposes of determining 

whether part performance takes a contract out of the statute of frauds. Messner Vetere, 93 

N.Y.2d at 237, 711 N.E.2d at 957, 689 N.Y.S.2d at 679 (holding that the only relevant acts under 

the part performance doctrine are “those of the party insisting on the contract, not those of the 

party insisting on the Statute of Frauds”). Because Direct’s own alleged conduct is not 

“‘unintelligible” or “extraordinary’” in the absence of a contract, it is insufficient to constitute 

the requisite part performance. Anostario, 59 N.Y.2d at 664, 450 N.E.2d at 216, 463 N.Y.S.2d at 

410; see also Mobile Data Shred, Inc. v. United Bank of Switzerland, No. 99 Civ. 10315 SAS, 

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 11 of 28
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2000 WL 351516, at *3 (S.D.N.Y. April 5, 2000); Messner Vetere, 93 N.Y.2d at 235, 711 

N.E.2d at 956, 689 N.Y.S.2d at 677 (holding that to take an oral agreement out of the Statute of 

Frauds, the alleged acts of partial performance must be “unequivocally referable” to the 

agreement). Indeed, Plaintiff’s alleged conduct in continuing to bring investment opportunities 

to Cerberus’s attention and working to set up meetings is equally consistent with there being no 

contract between the parties. These activities can be explained just as persuasively by inferring 

that Plaintiff was making preparations for the contract it hoped would come into fruition, 

undertaking less than strenuous efforts to broker a deal that it might use to persuade Cerberus to 

provide some form of monetary reward at a later date, or merely attempting to curry favor with 

Cerberus in the hopes of expanding their business relationship in the future. See Mobile Data, 

2000 WL 351516, at *3. Accordingly, the statute of frauds bars Plaintiff’s claims. 

c. Plaintiff Has Not Proffered a Writing Sufficient to Satisfy the Statute 

of Frauds. 

In lieu of a signed Consulting Agreement, Plaintiff claims that some combination 

of the following documents is sufficient to satisfy the “writing” requirement of section 5-

701(a)(10): (i) the December 26th E-mail; (ii) the January 2003 Draft; (iii) the February 2003 

Draft; and (iv) the “follow-up writings,” which presumably include the April 15, 2003 letter of 

introduction supposedly signed by a Cerberus representative. (Direct Br. at 50). Plaintiff is 

wrong. 

To begin, several of the documents on which Plaintiff relies cannot satisfy the 

writing requirement -- either alone or in combination with other documents -- as a matter of law. 

For example, the February 2003 Draft, which is an unsigned draft agreement prepared by 

Plaintiff itself, cannot be considered part of the alleged writing. See Stephen Pevner, Inc. v. 

Ensler, 309 A.D.2d 722, 722, 766 N.Y.S.2d 183, 184 (1st Dep’t 2003) (holding that collective 

writings are insufficient to satisfy the statute of frauds where “they rely almost entirely upon the 

unexecuted agreements prepared by plaintiff himself”); see also Karlin v. Avis, 457 F.2d 57, 62 

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 12 of 28
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(2d Cir. 1972); Solin Lee Chu v. Ling Sun Chu, 9 A.D.2d 888, 889, 193 N.Y.S.2d 859, 860 (1st 

Dep’t 1959) (“To permit the unsigned document prepared by the plaintiff to serve as a portion of 

the requisite memorandum would open the door to the evils the Statute of Frauds was designed 

to avoid.”). Similarly, the April 2003 letter of introduction -- the only document of any apparent 

significance purportedly signed by Cerberus -- is irrelevant because it does not “itself establish ‘a 

contractual relationship between the parties.’” The Horn & Hardart Co. v. The Pillsbury Co., 

888 F.2d 8, 11 (2d Cir. 1989) (quoting Crabtree v. Elizabeth Arden Sales Corp., 305 N.Y. 48, 

56, 110 N.E.2d 551, 554 (1953) (Fuld, J.)). Instead of establishing the existence of a contract 

between itself and Cerberus, Plaintiff alleges that the letter merely “acknowledged Mr. Koidl’s 

role in introducing Cerberus to IRU, referring to Mr. Koidl as Cerberus’s advisor.” (Complaint, 

¶ 77). Plaintiff does not allege that the letter itself (as opposed to what Cerberus representatives 

supposedly said about the letter) refers to either Direct or to the existence of a contract. 

Moreover, the mere acknowledgment that Koidl was serving as an “advisor” to Cerberus says 

nothing about whether Koidl -- much less Direct -- had a contract with Cerberus, or what the 

terms of that purported contract consist of. Without this letter, Plaintiff cannot point to a single 

document signed by Cerberus that even remotely relates to the alleged consulting agreement, 

which defeats its attempt to circumvent the statute. See AG Ltd., 448 F. Supp. 2d at 586 (noting 

that documents offered as collective “writing” within meaning of statute of frauds must be 

“‘connected with one another either expressly or by the internal evidence of subject-matter and 

occasion,’” and at least one of them must be signed by the defendant). 

Also of no consequence to the statute of frauds analysis are Plaintiff’s allegations 

about what Cerberus’s representatives supposedly said concerning the significance of the 

documents on which it relies in an attempt to satisfy the statute. (E.g., id, ¶ 44 (“Mr. Teitelbaum 

represented that the terms of the February 10, 2003 Consulting Agreement were accepted, and 

also promised he would secure the signature of Cerberus to the February 10, 2003 Consulting 

Agreement.”); ¶ 78 (“Messrs. Teitelbaum and Koidl agreed that the April 15th letter was the 

writing that confirmed that Direct introduced Cerberus to the IRU portfolio of investments and 

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recognized and confirmed and ratified the parties’ contract. Along with e-mail exchanges, this 

was an additional ‘signature’ to the Consulting Agreement.”); Direct Br. at 47). Parol evidence 

such as this is not admissible either as a substitute for the required writing or to render adequate a

purported “writing” that fails to satisfy the statute’s rigorous standards. See Merex A.G., 810 F. 

Supp. at 1367 (“Parol evidence, even in affidavit form, is immaterial to the threshold issue of 

whether the documents are sufficient on their face to satisfy the Statute of Frauds. Consideration 

of parol evidence in assessing the adequacy of a writing for Statute of Frauds purposes would 

otherwise undermine the very reason for a Statute of Frauds in the first instance.”). Nor are the 

allegations plausible in any event. Indeed, if Cerberus was inclined to sign the February 2003 

Consulting Agreement, it would have just done so. It is most implausible to believe that, in order 

to achieve the same result, Cerberus would have gone through the elaborate, indirect route of 

signing a separate letter that does not even mention either Direct or the Consulting Agreement. 

However, even if the Court considers all of the materials proffered by Plaintiff, 

the statute’s bar still applies. Plaintiff acknowledges, as it must, that the documents collectively 

used to form the “writing” must contain all of the material terms of the alleged agreement. 

(Direct Br. at 49 and n. 2); see Allied Sheet Metal Works, Inc. v. Saunders, 206 A.D.2d 166, 168, 

619 N.Y.S.2d 260, 262 (1st Dep’t 1994); DeRosis v. Kaufman, 219 A.D.2d 376, 379, 641 

N.Y.S.2d 831, 832-33 (1st Dep’t 1996); AG Ltd., 448 F. Supp. 2d at 586. Indeed, they must 

collectively amount to “a complete reflection of the agreement that was made.” Lauter v. W & J 

Sloane, Inc., 417 F. Supp. 252, 259 (S.D.N.Y. 1976). The documents proffered by Plaintiff 

simply do not satisfy that requirement. 

The only three pieces of paper that even purport to discuss the terms of the 

contract are the December 26th e-mail, the January 2003 Draft Consulting Agreement and the 

February 2003 Draft. But the descriptions contained in these documents of the terms that would 

govern the relationship between Cerberus and Direct cannot be reconciled with one another. 

Although Plaintiff now tries to downplay the significance of the substantive differences between 

the January and February Drafts (see Direct Br. at 8-15), that attempt flies in the face of its own 

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allegations. Were the differences between the two drafts immaterial, Direct would not have 

insisted that its own draft be signed. In any event, two examples suffice to show why those 

differences render any attempt to reconstruct the material terms of the supposed “contract” 

between the parties a futile exercise. 

The December 26th E-mail refers to Direct receiving a fee in the amount of “1% 

of the Cerberus net invested amount of exclusive deals” it sourced exclusively.” (Complaint, Ex. 

A). Under the January 2003 Draft, Cerberus proposed that “amounts obtained by Leverage” 

would be excluded from the calculation of the 1% fee, and defined Leverage as “any amounts 

invested by Cerberus in a Proposed Investment from the proceeds of loans, borrowings or other 

indebtedness or credit support obtained from a third party which is not an Affiliate of Cerberus.” 

(Id., Ex. B, ¶ 3.1). In its February 2003 Draft, Direct changed this definition by providing that 

amounts borrowed from a lender that also receives an equity participation in the Proposed 

Investment would not be considered part of Leverage. (Id., Ex. C, ¶ 3.1). Although both drafts 

are consistent with the concept of “net invested amount” discussed in the December 26th E-mail, 

they could not be more different in terms of their economic impact. As explained in Cerberus’s 

moving brief, the difference between the two drafts’ respective definitions of Leverage could 

have resulted in multi-million dollar variances in Direct’s 1% fee on a given transaction, 

depending on whether or not a lender providing financing for the transaction also received equity 

in the deal. (Mov. Br. at 6-7). That is material by any definition. 

Even more striking are the two drafts’ differences with respect to the 20% 

Incentive Allocation. Again, the December 26th E-mail explained the concept behind this item 

of compensation -- that Direct would receive “20% of all profits above a US$20% unlevered IRR 

[i.e., internal rate of return] of exclusive deals” sourced exclusively by Direct. (Id., Ex. A). But 

this formulation raised more questions than it resolved. As an initial matter, the parties needed to 

figure out whether Cerberus’s unlevered internal rate of return would be calculated on an 

investment-by-investment basis, which would have considered the performance of each 

investment in isolation, or across all investments sourced by Direct under the agreement with 

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gains in one investment offset against losses in another. Direct’s February 2003 Draft takes the 

former approach (which is more favorable to Direct), while Cerberus’s January 2003 Draft 

adopts the latter. Again, although both are consistent with the concept of a “20% unlevered 

IRR” set forth in the December 26th E-mail, they each represent radically different allocations of 

risk between the parties. As explained in Cerberus’s moving brief, the economic results under 

the two approaches are radically different. Indeed, the decision of which approach to adopt 

would in many cases be determinative of not just how large a fee Direct received, but whether it 

would have received a fee at all -- needless to say, a point that it highly material. (Mov. Br. at 7-

8 and n. 2). Moreover, as if to compound the discrepancy, Cerberus’s proposed draft did not 

define the phrase “compounded unlevered internal rate of return”. Direct’s tried to, but left the 

definition blank. (Id., Ex. C, ¶ 3.3(b) (“The ‘compounded unlevered internal rate of return’ 

within the meaning of the preceding sentence shall mean ________________.”)). 

As these two examples demonstrate, one cannot tell just from reading the 

documents proffered by Plaintiff what the material terms of the alleged contract between Direct 

and Cerberus are. The documents generate the very kind of “speculation” and “hypothesis” that 

are anathema to the statute of frauds. The Horn & Hardart Co., 888 F.2d at 11. Plaintiff can say 

that the unsigned February 2003 Draft contains the “real” terms as many times as it likes, but that 

simply begs the very question that must be answered in order to comply with the statute of 

frauds. Saying it does not make it so. Since the material terms of the contract cannot be 

ascertained from the documents Plaintiff has amassed, the statute of frauds bars Plaintiff’s claims 

as a matter of law. 

d. Direct’s Equitable Claims Also Fail as a Matter of Law. 

Direct’s inability to overcome the Statute of Frauds also bars its remaining claims 

sounding in promissory estoppel, unjust enrichment and quantum meruit. Although courts have, 

on rare occasion, permitted equitable claims such as promissory estoppel to proceed in the 

absence of a written, enforceable contract, those cases are distinguishable in one critical respect -

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- the plaintiff’s allegations established more than simply a failure to deliver fees purportedly due 

under a finder’s contract. Unlike here, the injury alleged was “substantial” and the conduct of 

the defendant was “unconscionable” as a matter of law. Philo Smith, 554 F.2d at 36. 

A mere failure to pay the finder his claimed fees does not meet the rigorous 

standard of unconscionability required to sustain a promissory estoppel claim in the absence of a 

writing sufficient to satisfy section 5-701(a)(10). Belotz, 1999 WL 587916, at *5 (Courts have 

“consistently held that ‘lost fees . . . constitute insufficient injury to invoke the doctrine [of 

promissory estoppel as a bar to assertion of a Statute of Frauds defense].’”) (quoting Ellis v. 

Provident Life & Accident Ins. Co., 3 F. Supp. 2d 399, 410 (S.D.N.Y. 1998)) (alterations and 

ellipse in original). Indeed, the Second Circuit has noted that “it is difficult to imagine a case in

which the mere failure to seek an uncertain prospective benefit could ever generate a sufficient 

level of unconscionability to warrant the application of the doctrine.” Philo Smith, 554 F.2d at 

36. This effectively forecloses claims for promissory estoppel where, like here, N.Y. Gen. 

Oblig. Law § 5-701(a)(10) has barred the plaintiff’s contract claim.

Direct has not met the rigorous standard required to state a claim for promissory 

estoppel. Indeed, it does not cite to a single allegation in the Complaint that demonstrates it 

suffered a substantial injury separate and apart from the loss of its fees or that Cerberus engaged 

in conduct deemed unconscionable as a matter of law. That failure dooms Plaintiff’s claim. 

This Court’s decision Beautiful Jewellers Private Ltd. v. Tiffany & Co., No. 06 

Civ. 3085(KMW), 2007 WL 867202 (S.D.N.Y. March 21, 2007) (cited in Direct Br. at 59), is 

not to the contrary. That case involved application of N.Y. Gen. Oblig. Law § 5-701(a)(1), not 

N.Y. Gen. Oblig. Law § 5-701(a)(10). Id. at *3. As a result, the Court was able to conclude that 

partial performance removed the case from the statute of frauds, including the plaintiff’s claims 

for promissory estoppel. Id. at *3-4. In contrast, for the reasons discussed above, the part 

performance doctrine cannot be invoked in this case. Belotz, 213 F.3d at 625; AG Ltd., 448 F. 

Supp. 2d at 588 n.2. Consequently, in order to keep the statute of frauds from barring its 

promissory estoppel claim, Direct was required plead both substantial injury and 

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unconscionability. See Beautiful Jewellers, 2007 WL 867202, at *7. Its failure to do so 

demands dismissal.

Moreover, because section 5-701(a)(10) applies to bar the alleged finder’s 

contract here, Direct “cannot circumvent the statute of frauds by merely recharacterizing [it]s 

contractual claim as one for recovery in quantum meruit.” deCiutiis v. NYNEX Corp., No. 95 

Civ. 9745 (PKL), 1996 WL 512150, at *3 (S.D.N.Y. Sept. 9, 1996); Merex, 810 F. Supp. 1368 

(holding that in finder’s cases the statute of frauds “cannot be avoided by an action for 

compensation in quantum meruit”) (quotations omitted); Minichiello v. Royal Business Funds 

Corp., 18 N.Y.2d 521, 527 (1966) (“The nature of the services rendered by business brokers and 

finders is such that a demand for payment is not usually made until they have completed their 

services. Thus, to allow recovery for the reasonable value of these services is to substantially 

defeat the writing requirement.”); (see also Mov. Br. at 27-29). 

Plaintiff’s reliance on Morris Cohon & Co. v. Russell, 23 N.Y.2d 569, 245 N.E.2d 

712, 297 N.Y.S.2d 947 (1969), and its progeny is misplaced. (Direct Br. at 60-61). Those cases 

provide an extremely narrow exception for quantum meruit/unjust enrichment claims by finders 

where there exists a writing signed by the defendant that contains all of the material terms of a 

contractual relationship between the finder and the defendant except the rate of compensation. 

See, e.g., Newman v. Crazy Eddie, Inc., 119 A.D.2d 738, 738-39, 501 N.Y.S.2d 398, 398 (2d

Dep’t 1986); Koch v. Mutiplan, Inc., No. 99 Civ. 11277 (CM) (LMS), 2001 WL 210004, *5 

(S.D.N.Y. Feb. 16, 2001). Keeping this exception within narrow bounds is necessary to prevent 

the “risk that juries will erroneously award a plaintiff compensation based upon an unfounded 

claim or perjurious testimony[,]” which is the “very risk against which the Statute of Frauds was 

designed to guard.” Springwell Corp. v. Falcon Drilling Co., Inc., 16 F. Supp. 2d 300, 315 

(S.D.N.Y. 1998) (citing Morris Cohon, 23 N.Y.2d at 574, 245 N.E.2d at 715, 297 N.Y.S.2d at 

952). 

Plaintiff has not identified a writing that even comes close to meeting the 

stringent requirements of Morris Cohon. The only signed document of significance to which it 

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has pointed is the April 15, 2003 letter of introduction, which does not identify any terms of the 

alleged business relationship between Plaintiff and Cerberus. None of the other documents 

relied upon by Plaintiff is signed, and in any event they are so inconsistent and contradictory of 

one another that numerous material terms besides just the rate of compensation cannot be 

ascertained. (See Mov. Br. at 5-8 (discussing differences between January and February 2003 

Drafts with respect to such material terms as the definitions of “Exclusive Investment” and 

“Proposed Investment,” Direct’s ability to provide Proposed Investments rejected by Cerberus to 

third parties, dispute resolution procedures and the circumstances under which Direct forfeits its 

fee as a result of Cerberus’s being forced to hire another consultant to consummate the 

investment). Morris Cohon provides no support for Plaintiff. 

The statute of frauds bars Plaintiff’s claims for promissory estoppel, unjust 

enrichment and quantum meruit, and those claims must be dismissed. 

II. NO CONTRACT WAS EVER FORMED BETWEEN THE PARTIES. 

In their moving brief, Defendants established that, irrespective of the applicability 

of the statute of frauds, the documents attached to Plaintiff’s Complaint established beyond 

dispute that no contract was ever formed between the parties as a matter of law. (Mov. Br. at 12-

18). The reason is that under New York law, if parties do not intend to be bound by an 

agreement until it is put in writing and signed, then there is no contract unless and until that 

event occurs -- even if the parties orally agreed on all of the alleged terms. Longo v. Shore & 

Reich, Ltd., 25 F.3d 94, 97 (2d Cir. 1994); R.G. Group, Inc. v. The Horn & Hardart Co., 751 

F.2d 69, 74 (2d Cir. 1984); Scheck v. Francis, 26 N.Y.2d 466, 469-70, 260 N.E.2d 493, 494, 311 

N.Y.S.2d 841, 843 (1970). Cerberus expressed precisely such an intention not to be bound in 

Mr. Teitelbaum’s December 26th E-mail, which made numerous references to the need for a 

written contract and stated in terms as clear as day that “this brief email only captures certain of 

the more important commercial terms that we discussed but is not a legal obligation for Cerberus 

or you.” (Complaint, Ex. A). Moreover, the circumstances surrounding the parties’ negotiations 

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strongly corroborate Cerberus’s expressed intention not to be bound until both sides signed a 

comprehensive written agreement. The commercial terms described in the e-mail itself were 

highly conceptual, with numerous material aspects of the relationship remaining to be negotiated 

and drafted. And, the complexity of the terms was such that one would expect the agreement to 

be set forth in a formal written contract signed by both parties. Since Plaintiff concedes that the 

parties never signed a written agreement, no binding contract was ever formed. 

Despite devoting more than twenty pages of the argument section of its brief to 

this issue (Direct Br. at 24-45), Plaintiff has put forth nothing that undermines the above 

analysis. However, a few specific points raised by Plaintiff warrant a response. 

 First, Direct’s attempt to dismiss the plain language of the December 26th E-mail 

evincing Cerberus’s intent not to be bound absent a signed, written contract defies credulity as 

well as the applicable case law. Its assertion that the “not a legal obligation” language referred 

merely to the “Consulting Agreement that was to be delivered by Cerberus’s lawyers” is refuted 

by the e-mail’s plain wording. (Direct Br. at 36). What Teitelbaum actually wrote was that 

“[t]here is a approx. 10 page contract that will reflect these terms which needs to be modified” 

and that “this brief email only captures certain of the more important commercial terms that we 

discussed but is not a legal obligation for Cerberus or you.” (Complaint, Ex. A). There is no 

ambiguity in either sentence. Indeed, the only way to read the second sentence is as 

communicating that the e-mail was not a binding obligation for either party. Plaintiff only gets 

to its contrary reading by misquoting the sentence. (Direct Br. at 36 (incorrectly quoting the 

December 26th E-mail as saying that “this is not a legal obligation for Cerberus or you”). 

 Moreover, the case law in this Circuit demonstrates that the two above-quoted 

sentences were more than adequate to convey Cerberus’s intent not to be bound until both parties 

signed a mutually-satisfactory written contract. Compare Reprosystem, B.V. v. SCM Corp., 727 

F.2d 257, 262 (2d Cir. 1984); Longo, 25 F.3d at 97 (letter asking to “please sign [contracts] and 

then pass them on to [company management]” deemed sufficient for explicit statement not to be 

bound); Greystone P’ships Group, Inc. v. Kominkluke Luchtvaart Maatschappij, 815 F. Supp. 

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745, 748 (S.D.N.Y. 1993) (“We are ready to proceed on this matter but we need a signed 

agreement.”); Scheck, 26 N.Y.2d at 469, 260 N.E.2d at 494, 311 N.Y.S.2d at 843 (letter 

requesting that plaintiff “[p]lease sign all copies, have [the defendant] sign all copies and 

distribute the copies” sufficient for explicit statement not to be bound). 

 Longo is a typical example of the “explicit statement” required. In Longo, an 

employee sued her employer to recover severance pay allegedly due to her pursuant to the terms 

of an unsigned employment contract. Id. at 96. The plaintiff negotiated and exchanged several 

draft contracts, but none were executed. Id. After commencing her employment, the defendant 

company sent the plaintiff a letter along with two unsigned copies of an employment contract. 

Id. The letter stated as follows: “Enclosed are two execution copies of your employment 

agreement. These reflect the changes we discussed by phone. If the enclosed are satisfactory, 

please sign them both and then pass them on to [the company’s Chief Executive Officer].” Id. 

The plaintiff signed them and forwarded them along as instructed, but the Chief Executive 

Officer refused to sign. After being terminated from her employment, the plaintiff sued to 

recover for the remaining term of the unsigned contract. Id. However, based on the employer’s 

cover letter, however ministerial it may have seemed, and despite the conduct of the parties, 

Chief Judge Newman had little difficulty concluding that it “evidence[d] the intention of the 

parties not to be bound until the agreements were signed[.]” Id. at 97 (quoting Scheck, 26 

N.Y.2d at 494, 260 N.E.2d at 495, 311 N.Y.S.2d at 843) (some alternations in original). 

Therefore, no contract was found to exist. 

 The central message of Longo, as well as Reprosystem, Greystone P’ships and the 

numerous cases they cite, is apparent -- no “magic words” or complicated, legalistic phraseology 

is required to convey an objective intent not to be bound. Quite the contrary, a simple indication 

that a signed writing is expected and forthcoming is sufficient -- particularly in light of the 

“realities of the complex transaction at issue” and the “practical business need to record all the 

parties’ commitments in definitive documents.” Reprosystem, 727 F.2d at 262; see also Winston 

v. Mediafare Entm’t Corp., 777 F.2d 78 (2d Cir. 1986) (indicating that a complex or lucrative 

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transaction is one usually put to writing). Under this standard, there is no doubt that Cerberus 

adequately communicated its intent not to be bound. 

 Second, Direct’s reliance on Teachers Ins. & Annuity Ass’n of Am. v. Tribune Co., 

670 F. Supp. 491 (S.D.N.Y. 1987), and I.R.V. Merch. Corp. v. Jay Ward Productions, Inc., 856 

F. Supp. 168 (S.D.N.Y. 1994), is totally misplaced. (Direct Br. at 27-28, 37-38). Conceding that 

there is no Type II agreement under Teachers Ins. here (i.e., a preliminary commitment giving 

rise to a mutual obligation to continue negotiations in good faith), Plaintiff nevertheless attempts 

to force the facts into Judge Leval’s Type I category by calling the December 26th E-mail a 

“binding agreement which was not signed and left open terms.” (Id. at 29). The argument does 

not work. As Judge Leval noted in Teachers Ins., a sine qua non of a Type I agreement is that 

the parties “have reached complete agreement (including the agreement to be bound) on all the 

issues perceived to require negotiation.” 670 F. Supp. at 498 (emphasis added). Indeed, the 

letter determined to constitute such an agreement in Teachers Ins. expressly stated that upon 

countersignature (which occurred) it was to “become a binding agreement” between the parties. 

Id. at 494. But the December 26th E-mail says exactly the opposite. Far from an agreement by 

both sides to be bound, the e-mail expresses in unmistakable terms that neither party is bound. 

Thus, Plaintiff’s argument to the contrary notwithstanding, the December 26th E-mail cannot be 

a Type I agreement under Teachers Ins. Stated simply, Teachers Ins. has nothing to do with this 

case. If anything, it actually supports Cerberus’s position, since Judge Leval followed the wellestablished principle that it “is fundamental to contract law that mere participation in 

negotiations and discussions does not create binding obligation, even if agreement is reached on 

all disputed terms,” where one of the parties has an “understanding that neither side would be 

bound until final agreement was reached.” Id.. at 497. 

 I.R.V. is no more supportive of Plaintiff’s position. Similar to the agreement in 

Teachers Ins., the Memorandum at issue in I.R.V. expressly stated that the parties’ agreement 

was effective as of the date of the Memorandum. 856 F. Supp. at 173. The Court inferred quite 

reasonably from this statement that the parties intended to be bound to the deal from the date of 

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the Memorandum. Id. That is not the case here. Cerberus expressly informed Direct in the 

December 26th E-mail that there was no binding obligation on either party. (Complaint, Ex. A). 

Moreover, and also unlike the facts here, the Court in I.R.V. concluded that the type of agreement 

at issue in that case was simple enough that it would not have been expected to be memorialized 

in a formal, written contract, which rendered moot the fact that the Memorandum did not resolve 

all material issues between the parties. 856 F. Supp. at 173-74. By contrast, the size and 

complexity of the arrangement that Direct and Cerberus were discussing would ordinarily have 

been set forth in a formal document. See R.G. Group, 751 F.2d at 77 (holding that it was “most 

telling” that the parties contemplated an initial investment of approximately $2 million and that 

plaintiffs alleged damages of at least $80 million; “[w]ith that amount of money at stake, a 

requirement that the agreement be in writing and signed simply cannot be a surprise to anyone”); 

Reprosystem, B.V., 727 F.2d at 262-63 (contract for $4 million sale of six companies was of the 

type that would normally be in writing). The December 26th E-mail’s failure to resolve all 

material issues between Plaintiff and Cerberus is critical, and corroborates the conclusion that no 

contract was ever formed. 

 Third, the documents attached to Plaintiff’s Complaint clearly demonstrate that 

the parties still needed to engage in extensive negotiations before a final contract could be 

signed. To no avail, Plaintiff spills a great deal of ink trying to minimize the differences between 

Cerberus’s January 2003 Draft Consulting Agreement, and the February 2003 Draft with which 

it countered. Although Plaintiff keeps harping that the “key commercial terms” supposedly 

never changed and that its alterations to the January 2003 Draft were merely attempts to conform 

the written document to those terms (E.g., Direct Br. at 13-14), the reality is that both drafts were 

consistent with the conceptual terms discussed in the December 26th E-mail. As is often the 

case with complex contracts, it took the concrete nature of the drafting process to reveal that the 

parties actually had quite different understandings of the terms they had discussed. See R.G. 

Group, Inc., 751 F.2d at 75 (“The actual drafting of a written instrument will frequently reveal 

points of disagreement, ambiguity, or omission which must be worked out prior to execution. 

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Details that are unnoticed or passed by in oral discussion will be pinned down when the 

understanding is reduced to writing. These considerations are not minor; indeed, above a certain 

level of investment and complexity, requiring written contracts may be the norm in the business 

world, rather than the exception.”). That is precisely why Courts enforce statements of intention 

by parties -- like the one by Cerberus here -- not to be bound until a written contract is signed. 

Otherwise, the risk is too great that a party will be bound to an “agreement” into which it never 

intended to enter. 

 Two other points bear mention in this regard. The first is that the Complaint does 

not allege that Direct ever signed either draft of the Consulting Agreement. If Direct really 

believed the parties had reached a definitive agreement, one would have expected Direct to sign 

the draft of the agreement that it proffered to Cerberus. The only inference that can be drawn 

from Direct’s failure to do so is that it too believed that negotiations had not been completed. 

 In addition, the Court should reject Plaintiff’s attempt to gloss over material 

differences between the draft contracts on the grounds that the issues reflected by those 

differences would not have been relevant to the dAF investment (i.e., the investment on which 

Direct claims it has a right to be paid). (See Direct Br. at 13 (explaining that the differences in 

calculation of the 1% fee were supposedly irrelevant because “the dAF transaction was not 

financed in such a manner”)). The issue before the Court is whether Cerberus and Direct 

reached agreement on the terms of an enforceable contract to govern their business relationship. 

The fact that the two drafts circulated between them contained cavernous gaps on material 

financial and non-financial terms generates a strong inference that no such agreement was ever 

reached, particularly in light of Cerberus’s expressed intention not to be bound until a definitive 

written agreement was signed by both parties. Plaintiff cannot come after the fact and claim 

those disagreements were irrelevant simply because, as things ultimately turned out, they would 

not have mattered to the investment on which he now seeks compensation. Such bootstrapping 

has no place here. 

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 Finally, Plaintiff’s allegations of part performance by the parties are simply too 

ambiguous to overcome the force of Cerberus’s expressed intent not to be bound and the parties’ 

evident failure to reach agreement on the terms of a written contract. Setting up some meetings, 

sending some letters and obtaining reimbursement of expenses is just not enough to warrant the 

conclusion that a binding contract was in place that purportedly entitled Direct to hundreds of 

millions of dollars in compensation from a single transaction. The alleged acts of partial 

performance do not confirm the terms of the agreement alleged by Plaintiff. If Plaintiff had 

actually closed a deal and obtained payment from Cerberus in accordance with what it claims the 

terms of the alleged contract were, it might have had a claim. But allowing this case to proceed 

on the basis of nothing more than the meager allegations of part performance presented by 

Plaintiff threatens the very freedom and flexibility in structuring one’s private commercial 

arrangements that the courts have sought to protect by enforcing a party’s right not to be bound 

to an agreement until a mutually-satisfactory contract document has been executed by both 

parties. See R.G. Group, Inc., 751 F.2d at 74 (“The point of these rules is to give parties the 

power to contract as they please, so that they may, if they like, bind themselves orally or by 

informal letters, or that they may maintain ‘complete immunity from all obligation’ until a 

written agreement is executed.”) (quoting 1 A. Corbin, CORBIN ON CONTRACTS § 30, at 98 

(1963)). Plaintiff and Cerberus never formed a binding contract. 

III. DIRECT HAS FAILED TO STATE A CLAIM FOR FRAUD. 

Nothing in Plaintiff’s opposition brief salvages its facially-deficient fraud claim. 

Because Plaintiff has failed to plead fraud independent of its claim for breach of contract, and 

has also failed to allege the essential element of reasonable reliance, the Complaint’s Third 

Cause of Action must be dismissed. 

Plaintiff concedes that the only “fraud” supposedly committed by Cerberus 

consisted of its making allegedly false statements to justify getting out of the contract Plaintiff 

claims had been formed between the parties. (Direct Br. at 65 (arguing that “the Complaint 

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asserts that after Cerberus believed it contracted with Direct, it wanted to invent a reason not to 

pay Direct, coming-up [sic] with the plan to avoid Direct and later claim dAF was derived from 

another source.”)). But that alleged conduct does not constitute fraud under New York law -- 

even if proven, it would amount merely to a breach of contract. E.g., Rosenblatt v. Christie, 

Manson & Woods Ltd., No. Civ. 4205(PKC), 2005 WL 2649027, at *10 (S.D.N.Y. Oct. 14, 

2005) (“Under New York law, [i]t is well settled that a cause of action for fraud will not arise 

when the only fraud charged relates to a breach of contract.”) (alteration in original) (quotations 

omitted), aff’d, 195 Fed. Appx. 11 (2d Cir. 2006); Cal Distrib. Inc. v. Cadbury Schweppes Am. 

Beverages, Inc., No. 06 Civ. 0496 RMB JCF, 2007 WL 54534, at *8 (S.D.N.Y. Jan. 5, 2007). 

At bottom, Plaintiff alleges nothing more than that Cerberus refused to pay Direct 

under the parties’ alleged contract. Its contention that Cerberus supposedly gave fanciful reasons 

for why it was refusing to pay does not alter the substance of that claim, since both the duty that 

Cerberus supposedly violated (its purported obligation to pay Direct a finder’s fee) and the injury 

that allegedly flowed to Direct derive from the contract. Cal Distrib., 2007 WL 54534, at *8 

(viable fraud claim requires plaintiff to demonstrate the existence of a legal duty “separate from 

the duty to perform under the contract” and “special damages that are caused by the 

misrepresentation and unrecoverable as contract damages”) (emphasis added); Rosenblatt, 2005 

WL 2649027, at *11 (no fraud claim where the plaintiff merely seeks recovery of the contractual 

benefit of the bargain). As Plaintiff candidly observes, far from being separate and independent 

from its breach of contract claim, its fraud claim is entirely dependent on the success of its 

allegation that a contract existed between the parties. (Direct Br. at 65 (conceding that “to 

sustain Direct’s fraud count, a contract has to be assumed”)). That is the very antithesis of a 

viable fraud claim under New York law. 

Although it is undoubtedly the case that “a contracting party may be liable for 

fraud when at the time it made a promise, it did not intend to keep the promise” (id. at 64 (citing 

Channel Master Corp. v. Aluminum Ltd. Sales, Inc., 4 N.Y.2d 403 (1958)), Plaintiff’s own 

allegations disclaim reliance on this rule of law. Not only does Plaintiff fail to allege that 

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 26 of 28
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Cerberus lacked the intent to honor its alleged contractual promises to Plaintiff at the time it 

supposedly made them, but it contends exactly the opposite. According to Plaintiff, Cerberus did 

not develop the intent to “defraud” Direct until after the parties had begun performing under the 

alleged contract. (Complaint, ¶¶ 103 (“Cerberus did not enter into its contract and agreement 

intending to defraud Direct, but after learning the value of IRU, and having gained the trust of 

IRU through its involvement in negotiating Project Phoenix, Cerberus decided that it did not 

need Mr. Koidl to negotiate dAF, and did not want to pay Direct if it closed a deal for dAF.”); 

Direct Br. at 63 (“Direct does not allege that Cerberus set out to defraud Direct from the 

beginning of the parties’ relationship; instead, after Cerberus learned the value of potential IRU 

transactions, Cerberus sought to marginalize Direct so that it could later claim Direct had nothing 

to do with dAF.”) (citing Complaint, ¶¶ 102-104, 107) (emphasis added)). Plaintiff has simply 

not made the necessary allegations to support a valid fraud claim. 

In addition, although Defendants clearly argued in their opening brief that 

Plaintiff’s own allegations establish beyond cavil that it did not rely on their alleged 

misrepresentations (Mov. Br. at 30-31), Plaintiff’s opposition brief tellingly does not even 

address the point. Plaintiff does not -- because it cannot -- deny that it always believed that 

Defendants’ purported representations were false from the moment they were supposedly 

uttered. As a matter of law and logic, a party cannot rely on the truth of a statement it believes to

have been false when made. See Schlaifer Nance & Co. v. Estate of Andy Warhol, 119 F.3d 91, 

99 (2d Cir. 1997). Thus, even assuming that Plaintiff pled fraud independent of its breach of 

contract claim, the fraud count is still deficient as a matter of law.3

 

3 In its moving brief, Cerberus also argued that Direct’s claim was not pled with particularity as 

required by Rule 9(b) of the Federal Rules of Civil Procedure. In response, Direct merely 

asserts, without analysis, that “the Complaint is replete with specific statements and dates, 

assigning the statements and conduct to particular persons.” (Direct Br. at 66.). That is not an 

adequate response, and the fraud claim should also be dismissed for failure to comply with Rule 

9(b). 

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CONCLUSION

For the foregoing reasons and those set forth in their moving brief, Defendants 

respectfully request that the Court grant their motion and dismiss the Complaint in its entirety 

with prejudice. 

Respectfully submitted, 

LOWENSTEIN SANDLER PC 

By: s/ Lawrence M. Rolnick_______ 

 Lawrence M. Rolnick (LR-0546) 

 Thomas E. Redburn, Jr. (TR-3902) 

Dated: December 4, 2007 1251 Avenue of the Americas 

18th Floor 

New York, New York 10020 

Tel: 212.262.6700 

Fax: 212.262.7402 

- and - 

65 Livingston Avenue 

Roseland, New Jersey 07068 

Tel: 973.597.2500 

Fax: 973.597.2400 

Attorneys for Defendants Cerberus Global 

Investments, LLC, Cerberus Capital Management, 

L.P., Cerberus Partners, L.P. and Cerberus Global 

Investment Advisors, LLC 

Case 1:07-cv-03310-LLS Document 22 Filed 12/05/2007 Page 28 of 28