Source: https://law.justia.com/cases/federal/appellate-courts/F3/111/284/630824/
Timestamp: 2020-08-08 21:16:35
Document Index: 342354893

Matched Legal Cases: ['§ 15', '§ 15', '§ 281', '§ 241', '§ 1275', '§ 4']

Frank Felix Associates, Ltd., Plaintiff-appellant, v. Austin Drugs, Inc., Defendant-appellee, 111 F.3d 284 (2d Cir. 1997) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Second Circuit › 1997 › Frank Felix Associates, Ltd., Plaintiff-appellant, v. Austin Drugs, Inc., Defendant-appellee
Frank Felix Associates, Ltd., Plaintiff-appellant, v. Austin Drugs, Inc., Defendant-appellee, 111 F.3d 284 (2d Cir. 1997)
US Court of Appeals for the Second Circuit - 111 F.3d 284 (2d Cir. 1997) Argued Dec. 12, 1996. Decided April 10, 1997
Frank Felix Associates ("Felix") appeals from the judgment of the United States District Court for the Eastern District of New York (Thomas C. Platt, Judge) awarding Felix damages of $10,250 for breach of a settlement agreement. Felix contends that upon breach of the settlement agreement by Austin Drugs, Inc. ("Austin"), Felix was entitled under New York General Obligations Law § 15-501(3) (McKinney 1989) to assert its pre-settlement claims. Finding no error, we affirm.
Assuming, as Felix argues, that the settlement agreement was an executory accord, under New York law an aggrieved party may elect to sue on the original obligation that is the subject of the accord in cases where the accord has not been performed. See Ellenbogen & Goldstein, P.C. v. Brandes, 226 A.D.2d 237, 641 N.Y.S.2d 28, 29 (1st Dep't 1996) (citing Denburg v. Parker Chapin Flattau & Klimpl, 82 N.Y.2d 375, 383, 604 N.Y.S.2d 900, 905, 624 N.E.2d 995, 1000 (1993)); Plant City Steel Corp. v. National Machinery Exch., Inc., 23 N.Y.2d 472, 478, 297 N.Y.S.2d 559, 562, 245 N.E.2d 213, 215 (1969).1 Under New York General Obligations Law § 15-501(3), " [i]f an executory accord is not performed according to its terms by one party, the other party shall be entitled either to assert his rights under the claim, cause of action, contract, [or] obligation ... which is the subject of the accord, or to assert his right under the accord."
New York law requires, as appellant stresses, that an executory accord be performed "according to its terms" if the obligee wishes to avoid the creditor's original claims. Id.; see also Albee Truck Inc. v. Halpin Fire Equip. Inc., 206 A.D.2d 789, 791, 615 N.Y.S.2d 118, 120 (3d Dep't 1994) (citing Denburg, 82 N.Y.2d at 383, 604 N.Y.S.2d at 905, 624 N.E.2d at 1000); American Bank & Trust Co. v. Koplik, 87 A.D.2d 351, 354, 451 N.Y.S.2d 426, 428 (1st Dep't 1982); Loblaw v. Wylie, 50 A.D.2d 4, 8, 375 N.Y.S.2d 706, 709-10 (4th Dep't 1975). However, the New York Court of Appeals has not addressed whether a non-material failure to perform an executory accord fully will allow a plaintiff to reinstate his prior claims, as neither Denburg nor Plant City Steel were confronted with the issue. While New York cases suggest that nothing less than full performance of an executory accord will bar suit on a creditor's original claims, each has involved substantial and material nonperformance by the obligee under the accord. See, e.g., Albee Truck Inc., 206 A.D.2d at 789, 615 N.Y.S.2d at 119 (" [t]he agreement was not implemented"); Koplik, 87 A.D.2d at 352-53, 451 N.Y.S.2d at 427 (defendant agreed to pay $50,000 but only paid $7,000); Loblaw, 50 A.D.2d at 6-8, 375 N.Y.S.2d at 708-09 (defendant did not attempt to satisfy $125,000 accord and allegedly transferred assets to defeat creditors).
Because no New York court has specifically addressed whether the breach of an executory accord must be material before a party to the accord can elect to sue on its original claims, it falls to this Court to predict how the New York Court of Appeals would interpret New York law on this point. See In re Joint Eastern & Southern Dist. New York Asbestos Lit., 897 F.2d 626, 636 (2d Cir. 1990); Calvin Klein Ltd. v. Trylon Trucking Corp., 892 F.2d 191, 195 (2d Cir. 1989). In this endeavor, we must consider "all the resources the highest court could use, including decisions reached in other jurisdictions." Francis v. INA Life Ins. Co., 809 F.2d 183, 185 (2d Cir. 1987) (citations omitted).
In our interpretation of New York law, we are aided by decisions in other jurisdictions. State high courts and federal appellate courts interpreting state laws have uniformly determined that before a party to an executory accord can elect to sue on its original claims, the executory accord must be materially breached. See, e.g., Zenith Drilling Corp. v. Internorth, Inc., 869 F.2d 560, 563 (10th Cir. 1989) (interpreting Oklahoma law, noting that defendant breached executory accord and that "the only question is whether that breach was material"); Coffeyville State Bank v. Lembeck, 227 Kan. 857, 610 P.2d 616, 618-19 (1980) (debtor's material breach of executory accord revives discharged agreement); Warner v. Rossignol, 513 F.2d 678, 683 (1st Cir. 1975) (interpreting Maine law, the court characterized a settlement agreement as an "accord executory" and held that " [i]f defendant did not repudiate or commit a material breach of the settlement agreement, ... defendant is entitled to specific performance of the compromise"). This Court cited Warner with approval in holding that a settlement agreement was enforceable absent special circumstances, including a material breach of the agreement. See In re Air Crash Disaster at John F. Kennedy Int'l Airport on June 24, 1975, 687 F.2d 626, 629 (2d Cir. 1982); see also Clark v. Elza, 286 Md. 208, 406 A.2d 922, 927 (1979). "An executory accord is simply a type of bilateral contract. As long as the basic requirements to form a contract are present, there is no reason to treat a settlement agreement differently than other contracts which are binding." Id. 406 A.2d at 928. Lower state and federal courts have reached the same conclusion.2 Based on this authority, at least one federal district court within this Circuit has held that New York law would require an executory accord to be materially breached before pre-settlement claims may be reinstated. See Conan Properties, Inc. v. Mattel, Inc., No. 84-Civ.-5799 (JSM), 1990 WL 209366, * 3-4 (S.D.N.Y. Dec. 4, 1990).
Our conclusion is also consistent with the view taken in the Restatement (Second) of Contracts, which states that " [w]hether a breach by the obligor discharges the obligee's duty under the accord is governed by the rules [relating to performance and nonperformance of contracts]." Restatement (Second) of Contracts § 281 cmt. b (1981). These rules include the requirement that for an obligor's duties to be discharged on account of failed performance, the obligee's failure to perform must be material. Id. § 241; see also 6 A. Corbin, Corbin on Contracts § 1275, pp. 111-13 (1962) (To "make [ ] the creditor's prior claim again enforceable .... the debtor's breach must be a material breach, going to the essence, and discharging the creditor from his contractual duty."); E. Allan Farnsworth, Contracts §§ 4.24 n.9, 8.18 (1990) (applying rules relating to the material breach of contracts to accords).
Whether Austin materially breached the executory accord is a question of law. Therefore, while we defer to the district court's findings regarding the relevant facts, we review its conclusion that Austin did not commit a material breach de novo. See Petereit v. S.B. Thomas, 63 F.3d 1169, 1176 (2d Cir. 1995).
See, e.g., Kapco Mfg. Co. v. C & O Enterp., Inc., 605 F. Supp. 253, 256 (N.D. Ill. 1985) (applying Illinois law, holding that a "material breach" is necessary to reinstate plaintiff's claims under the First Circuit's reasoning in Warner) ; Caldwell v. Armstrong, 642 P.2d 47, 49 (Colo.App.1981) (holding that " [o]nce it is established that there is a valid accord and satisfaction, it is governed by the same rules as applied to other contracts," including the doctrine of substantial performance); Browning v. Holloway, 620 S.W.2d 611, 617 n. 6 (Tex.Civ.App.1981) ("the inquiry should be whether there was a breach, and, if so, whether the breach was material so as to give plaintiffs the election to rescind"); Tuskegee Alumni Housing Found., Inc. v. National Homes Constr. Corp., 450 F. Supp. 714, 720 (S.D. Ohio 1978) ("This Court has decided that the better reasoning is that substantial performance of an [executory] accord is sufficient to satisfy it.") (Ohio law), aff'd mem., 624 F.2d 1101 (6th Cir. 1980)