Court Opinion

ID: 9952484
Source: CourtListenerOpinion
Date Created: 2024-03-19 20:09:38.432452+00
Date Added: 2024-06-11T14:39:48.325374
License: Public Domain

Thayer v Paulus, Sokolowski &
                     Sartor, LLC
               2024 NY Slip Op 30820(U)
                     March 12, 2024
           Supreme Court, New York County
        Docket Number: Index No. 652747/2023
                 Judge: Gerald Lebovits
Cases posted with a "30000" identifier, i.e., 2013 NY Slip
 Op 30001(U), are republished from various New York
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  York State Unified Court System's eCourts Service.
 This opinion is uncorrected and not selected for official
                       publication.
                                                                                                                      INDEX NO. 652747/2023
  NYSCEF DOC. NO. 17                                                                                            RECEIVED NYSCEF: 03/12/2024

                                   SUPREME COURT OF THE STATE OF NEW YORK
                                             NEW YORK COUNTY
            PRESENT:             HON. GERALD LEBOVITS                                             PART                             07
                                                                                      Justice
            ---------------------------------------------------------------------------------X    INDEX NO.          652747/2023
             BARBARA THAYER, P.E., ARCH., LANDSCAPE
             ARCHITECTURE, L.S., D.P.C.,                                                          MOTION DATE         01/23/2024

                                                         Plaintiff,                               MOTION SEQ. NO.        001

                                                 -v-
                                                                                                    DECISION + ORDER ON
             PAULUS, SOKOLOWSKI AND SARTOR, LLC,
                                                                                                          MOTION
                                                         Defendant.
            ---------------------------------------------------------------------------------X

            The following e-filed documents, listed by NYSCEF document number (Motion 001) 4, 5, 6, 7, 8, 9, 10,
            11, 12, 13, 14
            were read on this motion to                                                          DISMISS DEFENSE                   .

            Jaspan Schlesinger Narendran LLP, Garden City, NY (Scott B. Fisher of counsel), for plaintiff.
            Faegre Drinker Biddle & Reath LLP, New York, NY (Frank F. Velocci and Justin M. Ginter of
            counsel), for defendant.

            Gerald Lebovits, J.:

                   Plaintiff, Barbara Thayer, P.E., Arch., Landscape Architecture, L.S., D.P.C., moves to
            dismiss the counterclaim for breach of contract by defendant, Paulus, Sokolowski and Sartor,
            LLC (“PS&S”). The motion is granted.

                                                                   BACKGROUND

                   On January 24, 2022, plaintiff, as seller, and defendant, as buyer, entered into an asset
            purchase agreement whereby defendant agreed to buy Thayer’s non-excluded assets, contracts,
            and business operations and to assume certain liabilities.

                     The closing date for the asset sale was April 4, 2022. Under the asset-purchase
            agreement, defendant assumed liabilities under assumed contracts that required performance
            after the closing date, “were incurred in the ordinary course of business,” were unrelated to any
            failure to perform, improper performance, or any default, and did “not relate to any project where
            the remaining effort (i.e., hours times rates) to complete such project exceeds the amount
            available to be billed with respect to such project (‘Budget Overruns’), except to the extent such
            Budget Overruns are caused by the acts or omissions of Buyer.” (NYSCEF No. 8 at 3.)

                 In April 2022, the parties executed an amendment to the agreement. Under the
            amendment, the parties set an end date, the one-year anniversary of the closing date. Up until the

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            end date, defendant would be permitted to retain $225,000 of all payments and reimbursements
            received after the closing date. And if buyer, before the end date, would “incur[ ], or reasonably
            expects to incur, Budget Overruns, Buyer shall be entitled to propose for set-off . . . from any
            and all amounts in the Book-Entry Account, the amount of Budget Overruns incurred, or
            reasonably expected to occur.” (NYSCEF No. 9 at 4.)

                    In June 2023, plaintiff brought this action against defendant for its alleged failure to pay
            plaintiff the $225,000.00 held in the separate book-entry account.

                    Defendant answered the complaint and asserted a counterclaim for breach of contract.
            Defendant alleges that plaintiff failed to disclose to defendant that defendant would incur
            significant license and user fees for software products. Defendant further contends that plaintiff
            assumed liability for the license and user fees under the agreement. (NYSCEF No. 3 at 13-14.)

                   Plaintiff moves under CPLR 3211 (a) (1) and (7) to dismiss defendant’s counterclaim.

                                                       DISCUSSION
                  I.   Terms of the Agreement

                   A CPLR 3211 (a) (1) motion to dismiss should be granted “only if the documentary
            evidence submitted utterly refutes plaintiff's factual allegations.” (Mill Fin., LLC v. Gillett, 122
            AD3d 98, 103 [1st Dept 2014] [internal quotation marks omitted].) Plaintiff submits the
            agreement and amendment in support of its motion.

                    Plaintiff argues that “Budget Overrun” in the agreement does not include software
            licenses and user fees for which defendant seeks damages and therefore that defendant may not
            get damages on those licenses and fees.

                     Plaintiff notes that the contract defines budget overruns as when “the remaining effort
            (i.e., hours times rates) to complete such project exceeds the amount available to be billed with
            respect to such project.” (NYSCEF No. 8 at 3.) Plaintiff argues that a budget overrun occurs
            when the remaining labor costs exceed what can be billed for the costs, and that if the agreement
            intended for an item such as software to be included as a budget overrun, it would have referred
            to “costs to complete” or used similar language. Plaintiff also suggests the use of “i.e.” in the
            provision refers to an exhaustive list. Thus, according to plaintiff, the definition of budget
            overruns unambiguously refers to when the remaining effort—hours times rates—to complete a
            project exceeds what may be billed for the costs.

                    Defendant, on the other hand, argues that plaintiff’s interpretation of “budget overrun” is
            too narrow and that plaintiff unduly emphasizes the phrase “i.e.,” a phrase which is often
            confused with “e.g.” Defendant contends that the plain meaning of the provision “in context with
            the whole of the agreement, demonstrates that PS&S is entitled to seek an offset where the costs
            of an assigned project exceed the amount available to be billed for the project—the very
            definition of a budget overrun.” (NYSCEF No. 13 at 5.) Defendant further argues that at this
            stage of the litigation, defendant need only allege breach of contract. (Id. at 4-5.)

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                   A reasonable reading of “budget overrun” in its context supports plaintiff’s contention.
            Defendant’s reading of the phrase discounts the surrounding text of the provision, namely the
            phrase concerning “the remaining effort (i.e., hours times rates).” Plaintiff’s motion to dismiss is
            granted.

                 II.   Notice and Documentation Requirements

                     Plaintiff further argues that defendant did not comply with the notice and documentation
            requirements for off-setting budget overruns, and therefore that defendant’s counterclaim must
            be dismissed. Under the amendment to the agreement, defendant, as buyer, may propose a set-off
            if it incurs or expects to incur budget overruns before the end date. To do so, the amendment
            requires that defendant “shall provide notice of such proposed set-off to Seller, along with
            documentation reasonably supporting such set-off.” (NYSCEF No. 9 at 4.)

                    According to plaintiff, defendant informed plaintiff about the license and user fees by
            letter dated April 24, 2023, 20 days after the end date. Plaintiff contends that the untimely notice
            bars defendant’s counterclaim. Plaintiff further contends that defendant did not provide plaintiff
            with documentation to support the proposed set-off.

                    Defendant states that this argument has no substantive bearing on this motion. Defendant
            argues that in its answer, it denied plaintiff’s allegations that it did not provide proper notice and
            documentation. (NYSCEF No. 1 at ¶¶ 105-107, 3 at ¶¶ 105-107.) Defendant also alleges in its
            counterclaim that it provided notice. (See NYSCEF No. 3 at 14.) But defendant submits no
            evidence to counter plaintiff’s assertion that defendant’s notice was post-end date and
            unsupported by documentation. And defendant does not dispute that it would be required to
            provide notice before the end date and supplement that notice with documentation. Plaintiff’s
            motion to dismiss is granted.

                 The court therefore does not reach the branch of plaintiff’s motion to dismiss under
            CPLR 3211 (a) (7).

                   Accordingly, it is

                   ORDERED that Barbara Thayer, P.E., Arch., Landscape Architecture, LS, D.P.C.’s
            motion to dismiss defendant’s counterclaim under CPLR 3211 (a) (1) is granted, and the
            counterclaim is dismissed with costs and disbursements as taxed by the Clerk upon the
            submission of an appropriate bill of costs; and it is further

                     ORDERED that the balance of the claims in this action are severed and shall continue;
            and it is further

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                    ORDERED that plaintiff serve a copy of this order with notice of its entry on defendant
            and on the office of the County Clerk (by the means set forth in the court’s e-filing protocol,
            available on the e-filing page of the court’s website, https://ww2.nycourts.gov/
            courts/1jd/supctmanh/E-Filing.shtml), which shall enter judgment accordingly.

                                                                                       )5
                    3/12/2024
                                                                               HON. GERALD
                                                                                       $SIG$
                                                                                             LESO'A!JlS
                                                                                                       J.S.C . -
                      DATE
             CHECK ONE:                  CASE DISPOSED                X   NON-FINAL DISPOSITION

                                                         □                                         □
                                     X   GRANTED             DENIED       GRANTED IN PART              OTHER

             APPLICATION:                SETTLE ORDER                     SUBMIT ORDER

                                                                                                   □
             CHECK IF APPROPRIATE:       INCLUDES TRANSFER/REASSIGN       FIDUCIARY APPOINTMENT        REFERENCE

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