Court Opinion

ID: 9912437
Source: CourtListenerOpinion
Date Created: 2023-12-22 15:02:38.326623+00
Date Added: 2024-06-11T12:59:19.363299
License: Public Domain

EFiled: Dec 22 2023 08:01AM EST
                                                  Transaction ID 71680064
                                                  Case No. 2022-0970-JTL

     IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

JOHN C. TATUM III and JCT CAPITAL          )
LLC,                                       )
                                           )
      Plaintiffs and Counterclaim          )
      Defendants,                          )
                                           )
      v.                                   )   C.A. No. 2022-0970-JTL
                                           )
FAIRSTEAD AFFORDABLE LLC, FCM              )
AFFORDABLE LLC, JD2 AFFORDABLE             )
LLC, STUART FELDMAN, JEFFREY               )
GOLDBERG, FSC EF&F LLC,                    )
FAIRSTEAD CAPITAL LLC, FAIRSTEAD           )
CAPITAL MANAGEMENT LLC, JD2                )
REALTY MANAGEMENT LLC, FA DC               )
LLC, FSC REALTY MANAGEMENT LLC,            )
and SDF FUNDING LLC,                       )
                                           )
      Defendants and Counterclaim          )
      Plaintiffs.                          )

       MEMORANDUM OPINION DENYING MOTION TO DISMISS
                  COUNTS V THROUGH XI

                      Date Submitted: November 6, 2023
                      Date Decided: December 22, 2023

Thomas A. Uebler, Adam J. Waskie, Sarah P. Kaboly, MCCOLLOM D’EMILIO
SMITH UEBLER LLC, Wilmington, Delaware; Rudolf Koch, RICHARDS, LAYTON
& FINGER, Wilmington, Delaware; Counsel for John C. Tatum III and JCT Capital
LLC.

Ryan D. Stottman, Thomas P. Will, Alec Hoeschel, MORRIS, NICHOLS, ARSHT &
TUNNELL LLP, Wilmington, Delaware; Michael B. Carlinsky, Rollo C. Baker,
Jonathan E. Feder, Alison Y. Lo, Cohl K. Love, Stephanie Keleman, QUINN
EMANUEL URQUHART & SULLIVAN, LLP, New York, New York; Counsel for
Fairstead Affordable LLC, FCM Affordable LLC, JD2 Affordable LLC, Stuart
Feldman, Jeffrey Goldberg, FSC EF&F LLC, Fairstead Capital LLC, Fairstead
Capital Management LLC, JD2 Realty Management LLC, FA DC LLC, FSC Realty
Management LLC, and SDF Funding LLC.

LASTER, V.C.
      The plaintiff worked for a real estate investment fund complex. He alleges that

the fund principals promised him a share of a promote if he worked on a project for

them. He never received the promised payout. He also alleges that the fund principals

induced him to transfer an equity interest in another project to one of their entities

by promising him that they would restructure the entity to increase his share. The

entity was never restructured, and his share never increased. The plaintiff has filed

various claims to recover monetary and equitable relief. The defendants moved to

dismiss seven of the claims. This decision denies the motion.

                      I.       FACTUAL BACKGROUND

      The facts are drawn from the currently operative complaint and the documents

it incorporates by reference. At this stage of the proceedings, the complaint’s

allegations are assumed to be true, and the plaintiff receives the benefit of all

reasonable inferences.1

A.    Fairstead’s Beginnings

      Defendants Stuart Feldman and Jeffrey Goldberg control defendant Fairstead

Affordable LLC, a Delaware limited liability company headquartered in New York

City. Fairstead Affordable is the central entity in an investment fund complex that

operates under the trade name “Fairstead.” Feldman and Goldberg own their

interests in Fairstead Affordable through defendants FCM Affordable LLC and JD2

      1 Citations in the form “Ex. ___” refer to documents attached to the amended

complaint.
Affordable LLC.

      Plaintiff John C. Tatum III co-founded Fairstead Affordable in 2016 after being

recruited by his friend and former colleague, William Blodgett. Tatum signed an

employment agreement dated April 26, 2016 with JD2 Affordable LLC. Ex. 4 (the

“Employment Agreement”). Shortly thereafter, Goldberg, Feldman, and Tatum

negotiated an operating agreement to govern the internal affairs of Fairstead

Affordable. Ex. 1 (the “Operating Agreement”). The Operating Agreement

incorporated the Employment Agreement by reference and outlined many of Tatum’s

employment rights, obligations, and interests. Through the Operating Agreement,

Tatum’s entity, JCT Capital LLC, became a member of Fairstead Affordable with a

5.25% member interest.

      FSC EF&F (“EF&F”) is an investment vehicle for employees, friends, and

family to co-invest in Fairstead assets that are not owned by Fairstead Affordable.

Tatum invested in EF&F.

B.    The Hampstead Portfolio and the New York Portfolio

      Before the formation of Fairstead Affordable, Feldman had acquired a majority

interest in a separate portfolio of approximately 900 low-income housing units in New

York City (the “New York Portfolio”). Fairstead Affordable did not have any

ownership interest in the New York Portfolio. Tatum came to hold an indirect

ownership interest in the New York Portfolio through his investments in EF&F.

      In 2018, various units in the New York Portfolio had failed to pass housing

inspections, which could have triggered a default under the financing arrangements

that Feldman had used to fund the portfolio. At Goldberg’s request, Tatum began

                                         2
working to rehabilitate the New York Portfolio in 2018.

      Separately in 2018, Tatum played a role in helping Feldman and Goldberg

acquire a portfolio of 1,600 low-income housing units known as the “Hampstead

Portfolio.” The acquisition was completed through a special purpose entity called FA

Acquisitions II. Fairstead Affordable did not have any interest in FA Acquisitions,

and Tatum did not receive any interest in the Hampstead Portfolio. Instead, Feldman

and Goldberg agreed to give Tatum a share of the carried interest associated with the

portfolio, which in the real estate industry is typically called a promote. Tatum also

received a loan to invest in the Hampstead Portfolio though EF&F.

C.    Discussions About A Restructuring

      As early as 2018, Tatum, Blodgett, Feldman, and Goldberg discussed

restructuring Fairstead Affordable. Tatum and Blodgett wanted a larger equity

percentage that would better compensate them for their efforts. Conversations about

restructuring Fairstead Affordable continued throughout 2018 and 2019, primarily

around year-end performance reviews.

      Toward the end of 2019, Tatum and Goldberg signed documents creating their

respective interests in the Hampstead Portfolio promote. Tatum’s interest was set at

9.096%. In August 2020, as part of the ongoing conversations about the Fairstead

Affordable restructuring, Tatum transferred his 9.096% interest in the Hampstead

Portfolio promote to Fairstead Affordable. In return, Goldberg and Feldman promised

that Tatum would receive a greater interest in Fairstead Affordable through the

restructuring. At the time, Tatum owned only a 5.25% interest in Fairstead

Affordable, so he would have been exchanging a direct interest in 100% of his share

                                          3
of the Hampstead Portfolio promote for a 5.25% indirect interest in the promote.

Without the promised restructuring, that would have been economically irrational.

      Later in 2020, Feldman bought out the minority owners of the New York

Portfolio. Tatum had worked on the New York Portfolio throughout 2018, 2019, and

2020. Goldberg had promised Tatum on several occasions that he would receive a

share of the promote as compensation for his efforts. Tatum asserts that he would

never have worked on the New York Portfolio without that promise. A spreadsheet

memorializing the final deal model and cash flow waterfall of Feldman’s buyout

calculated the value of the promote associated with the transaction, assigned Tatum

a 5.25% interest in the promote, and valued that interest at approximately $1.1

million. Yet when the buyout closed, Tatum did not receive his share.

D.    The Restructuring Never Happens.

      Despite various conversations about the Fairstead Affordable restructuring,

and despite repeated promises from Goldberg and Feldman, no restructuring took

place. In early 2021, Tatum learned that Goldberg had been working to get Feldman

to buy out some or all of the interest that Goldberg and his co-investors held in

Fairstead Affordable. Tatum told Goldberg that he and Blodgett could try to raise

capital to buy those interests.

      By May 2021, Tatum had concluded that Goldberg and Feldman would not

support either a restructuring or a buyout, so he began preparing for an amicable

departure. In August 2021, he created and implemented a written transition plan.

He wrote and signed a resignation letter later that month, but he was told that

Feldman would fire him for cause if he resigned. Tatum therefore did not formally

                                         4
resign, but he continued to carry out his transition plan. He communicated regularly

with Goldberg about his progress, and he worked with Fairstead’s general counsel

and chief financial officer on the transition.

      By October 2021, Tatum’s transition plan was essentially complete. But on

October 21, 2021, Fairstead’s general counsel wrote to Tatum and purported to accept

his resignation without good cause. The letter noted that Tatum had begun to move

his 401(k) account to another provider and had sent an email asking for clarification

about what Fairstead was saying externally about his employment. Fairstead’s

general counsel told Tatum that this behavior evidenced his resignation without good

cause. The “without good cause” concept had significance under the Operating

Agreement, which set out specific resignation procedures.

      One procedure applicable to a resignation without good case was a 120-day

written notice requirement. After accepting Tatum’s resignation as “without good

cause,” Fairstead invoked that notice provision, meaning that Tatum would breach

the operating agreement if he did not stay another 120 days.

      Before receiving the letter from Fairstead’s general counsel, Tatum understood

that he could leave Fairstead after completing his transition plan. No one had

indicated that Fairstead would insist on Tatum following the formal resignation

process contemplated by the Operating Agreement.

      But with Tatum getting ready to leave, Fairstead invoked the formal process

and enforced the notice provision. That meant Tatum’s employment would not

officially end until February 10, 2022. It is reasonable to infer that Fairstead hoped

                                            5
Tatum would start working elsewhere during the notice period, thereby setting up a

claim for breach of the Operating Agreement.

      Under the Operating Agreement, Tatum’s termination caused his 5.25%

membership interest to convert into a 5.25% economic interest in specific Fairstead

deals. Under the operating agreement, a resignation without good cause meant

Tatum was entitled to 100% of his ownership percentage in stabilized deals, but not

in other vested deals. The operating agreement defines a “vested deal” as one where

the parties have executed a purchase and sale agreement. It defines a “stabilized

deal” as a vested deal where the parties have also completed substantial construction,

the deal is eligible for permanent financing, and any construction or stabilization

guarantees from Fairstead members have been released. By deeming Tatum’s

resignation to be without good cause, Fairstead restricted Tatum to stabilized deals.

      In April 2022, Fairstead Affordable exercised its right under the Operating

Agreement to repurchase Tatum’s economic interests. The Operating Agreement

called for an appraiser to determine the value of the interests.

      In June 2022, Fairstead Affordable abruptly changed course and asserted that

Tatum had forfeited all of his economic interests. Fairstead Affordable claimed that

after Tatum resigned, it learned about misconduct that could support a termination

for cause. Fairstead retroactively deemed Tatum to have been terminated for cause

and cancelled his interests. Fairstead Affordable also refused to return Tatum’s

capital contributions.

E.    This Litigation

      Tatum sued on October 26, 2022. He seeks to compel Fairstead Affordable to

                                          6
comply with the repurchase provisions in the Operating Agreement or to recover

money damages for breach of those provisions. Tatum also seeks contract and quasi-

contract remedies for the defendants’ alleged breaches of the agreement governing

EF&F, the defendants’ breach of their agreement to pay him the New York Portfolio

promote, and the defendants’ breach of their promise to restructure Fairstead

Affordable to grant him a greater equity interest.

                          II.       LEGAL ANALYSIS

      The defendants have moved to dismiss Counts V–XI of Tatum’s complaint

under Court of Chancery Rule 12(b)(6). “When considering a defendant’s motion to

dismiss, a trial court should accept all well-pleaded factual allegations in the

Complaint as true, accept even vague allegations in the Complaint as ‘well-pleaded’

if they provide the defendant notice of the claim, draw all reasonable inferences in

favor of the plaintiff, and deny the motion unless the plaintiff could not recover under

any reasonably conceivable set of circumstances susceptible of proof.” Cent. Mortg.

Co. v. Morgan Stanley Mortg. Cap. Hldgs. LLC, 27 A.3d 531, 536 (Del. 2011).

A.    Count V: Breach Of Contract—New York Portfolio

      In Count V, Tatum asserts a claim for breach of contract. He alleges that

Goldberg agreed to pay him a share of the promote for the New York Portfolio as

consideration for his work on the portfolio. Tatum contends that Goldberg breached

that agreement by failing to pay him. Tatum has stated a claim for breach of contract.

                                           7
             1.     The Statue of Frauds

      The defendants argue that Count V is barred by the statute of frauds. The

parties agree that New York law governs this issue.

      New York’s statute of frauds invalidates any “agreement, promise or

undertaking” not in writing “if such agreement, promise or undertaking [b]y its terms

is not to be performed within one year from the making thereof.” N.Y. G.O.L. § 5-

701(a)(1). The defendants contend that this provision invalidates the agreement to

rehabilitate the New York Portfolio because it could not be completed in one year.

That argument fails for two reasons. First, the work could have been completed in

one year. Second, there is a writing that documents the agreement.

             a.     Whether The Work Could Be Completed In One Year

      The statute of frauds invalidates unwritten contracts that cannot be performed

within one year. Put differently, the statute of frauds applies when “‘by its terms’ the

agreement is not to be performed within a year.” Freedman v. Chemical Const. Corp.,

401 N.Y.S.2d 176, 180 (1977). “[W]here performance is possible, however unlikely or

improbable that may be, within one year, the agreement does not come within the

proscription of the statute.” Pace v. Perk, 440 N.Y.S.2d 710, 718 (1981).

      The agreement regarding the New York Portfolio was not a multi-year contract

that could not be performed in one year by its terms. The agreement theoretically

could have been completed in one year. The New York Portfolio was in trouble

because various units had failed to pass their housing inspections. Goldberg asked

Tatum to rehabilitate the properties. If Tatum had been given enough resources, he

could have completed all of the work within one year. The agreement thus was not,

                                           8
by its terms, impossible to perform within a year. Nor did its terms call for it to be

performed across multiple years.

      It may have been unlikely or improbable that Tatum could have completed the

rehabilitation within one year. No one imposed a one-year deadline or told him to get

it done at all costs. But performance within one year was not impossible. The contract

therefore does not fall within this aspect of the statute of frauds.

             b.     The Presence Of A Writing

      The oral agreement also does not fall within the statute of frauds because a

writing sufficiently memorializes it. New York law does not require a formal contract

to defeat a statute of frauds defense. Written evidence of a contract satisfies the

statute of frauds “so long as such evidence provides a reasonable basis for concluding

that a contract was made.” N.Y. G.O.L. § 5-701(3)(d). “An e-mail sent by a party,

under which the sending party’s name is typed, can constitute a writing for purposes

of the statute of frauds.” Newmark & Co. Real Est. Inc. v. 2615 E. 17 St. Realty LLC,

914 N.Y.S.2d 162, 164 (2011). The evidence need not be a single document; a party

can rely on multiple documents that are “pieced together to defeat the Statute of

Frauds.” Manela v. Barkow, 2012 WL 10007038, at *4 (N.Y. Sup. Ct. July 10, 2012).

In Manela, the court found that a spreadsheet with commission percentages was

sufficient in combination with emails. See id. at *3.

      Tatum cites the spreadsheet that shows the breakdown of payments from the

New York Portfolio promote and the parties that would receive them. Tatum alleges

that Goldberg frequently referenced the spreadsheet as evidencing an agreement on

the payment of the promote. That is sufficient at the pleading stage.

                                           9
             2.       Lack of Consideration

      The defendants next argue that Tatum could not have provided any valid

consideration in exchange for the share of the New York Portfolio promote because

he had a pre-existing duty under the Employment Agreement to work on the New

York Portfolio. That is a possible reading of the Employment Agreement, but not the

only one. The defendants are therefore not entitled to dismissal on this ground.

      “A valuable consideration, in the sense of the law, may consist either in some

right, interest, profit, or benefit accruing to the one party, or some forbearance,

detriment, loss, or responsibility given, suffered, or undertaken by the other.” Hamer

v. Sidway, 124 N.Y. 538, 545 (1891). “The slightest consideration is sufficient to

support the most onerous obligation . . . . Forbearance is valuable consideration

supporting the enforcement of an obligation.” Lebedev v. Blavatnik, 142 N.Y.S.3d 511,

517–18 (2021).

      “A promise to perform an existing legal obligation is not valid consideration to

form the basis for a contract.” Nam Tai Elecs., Inc. v. UBS PaineWebber Inc., 850

N.Y.S.2d 11, 13 (2007). Yet,

      [p]erformance rendered by an at-will employee, before any notice of
      revocation, creates a unilateral contract binding the employer to pay the
      specified wage and to perform all other promises that he may have made
      in the agreement. Thus, the continued service by an employee is
      sufficient consideration to support an employer’s promise to pay an at-
      will employee a bonus.

Kaplan v. Aspen Knolls Corp., 290 F. Supp. 2d 335, 338 (E.D.N.Y. 2003) (internal

citations omitted).

      The Employment Agreement describes Tatum’s duties as follows:

                                         10
      You are being employed as a real estate director responsible for directing
      the acquisition and execution activities of Fairstead Affordable and to
      provide all other work and services assigned to you, including, but not
      limited to services for the Firm, its direct or indirect, principals,
      affiliates, parent or subsidiary entities, and any and all company or
      companies owned by or related to the Firm or its direct or indirect
      principals.

Ex. 4 § 1(A). The Employment Agreement also contemplates that Tatum can receive

additional compensation in the form of an annual bonus “for services [] perform[ed]

outside of [] Fairstead Affordable activities.” Id. § 1(D). And the Employment

Agreement references fees and discretionary bonuses that Tatum could receive for

executing “Low Income Housing Tax Credit Deals.” Id. § 1(F).

      The defendants accept for purposes of their motion that Fairstead Affordable

did not own the New York Portfolio; Feldman and Goldberg owned it outside of

Fairstead Affordable. The defendants argue that the work nevertheless fell within

the scope of the Employment Agreement because it constituted work “for the . . .

principals” of Fairstead Affordable. They conclude that Tatum was both obligated to

work on the New York Portfolio and compensated for that work under the terms of

his Employment Agreement.

      That is not the only possible reading of the Employment Agreement. Another

possible reading is that the Employment Agreement contemplated services for

Fairstead Affordable and its affiliates, but not entities or projects outside of Fairstead

Affordable. Under this reading, the Employment Agreement does not cover the New

York Portfolio at all.

      Yet another reading is that the work on the New York Portfolio fell within the

Employment Agreement, but that the Employment Agreement envisioned that

                                           11
Tatum would receive additional compensation for that work. The Employment

Agreement refers expressly to Tatum receiving additional compensation for services

performed “outside of Fairstead Affordable activities.” The New York Portfolio would

fall under that heading.

      Supporting that inference, Tatum argues that no one ever acted as if the

Employment Agreement governed his work on the New York Portfolio. He did not

receive the 7.5% developer fee contemplated by Section 1(F) of the Employment

Agreement. He instead was promised a 5.25% interest in the promote.

      At the pleading stage, it is not possible to decide among these readings. The

defendants’ proffered reading is not the only one, so the motion to dismiss Count V is

denied.

B.    Count VI: Promissory Estoppel—New York Portfolio

      In Count VI, Tatum asserts a claim for promissory estoppel based on

Goldberg’s promise to pay him a share of the promote for the New York Portfolio.

Count VI thus asserts a quasi-contract claim based on the same facts underlying

Count V. The defendants identify three grounds for dismissal. None succeeds.2

      2 The defendants make another argument that can be addressed briefly. They

argue that Tatum’s promissory estoppel claim is barred by the statute of frauds
because when an underlying contract claim is barred by the statute of frauds,
promissory estoppel cannot give rise to a claim. Assuming for the sake of argument
that the defendants’ position was correct, the court has declined to dismiss the
contract claim as barred by the statute of frauds. By its own terms, their argument
misses the boat on the quasi-contract claim.

                                         12
             1.     The Employment Agreement Argument

      The defendants argue that the existence of the Employment Agreement

prevents Tatum from asserting a claim based on promissory estoppel. That is not so.

      Although the existence of a valid and enforceable contract governing a
      particular subject matter generally precludes recovery in quasi contract,
      where there is a bona fide dispute as to the existence of a contract or the
      application of a contract to the dispute at issue, a plaintiff may proceed
      upon a theory of quasi contract as well as breach of contract.

Old Salem Dev. Grp., Ltd. v. Town of Fishkill, 754 N.Y.S.2d 333, 334 (2003) (internal

citations omitted) (emphasis added).

      As discussed in the preceding section, one possible reading of the Employment

Agreement is that it did not govern Tatum’s work on the New York Portfolio. At a

minimum, a genuine dispute exists about whether the Employment Agreement

governs. The existence of that agreement therefore does not provide a basis for

dismissing the promissory estoppel claim.

             2.     Whether Tatum Has Pled Legal Detriment

      The defendants next argue that Tatum failed to plead legal detriment. The

defendants again reference the Employment Agreement and argue that Tatum

received compensation under its terms. That argument again fails because a genuine

dispute exists about whether the Employment Agreement covers the New York

Portfolio. It also fails because Tatum has pled legal detriment.

      “In New York, promissory estoppel has three elements: a clear and

unambiguous promise; a reasonable and foreseeable reliance by the party to whom

the promise is made; and an injury sustained by the party asserting the estoppel by

reason of the reliance.” Cacchillo v. Insmed, Inc., 551 F. App’x 592, 594 (2d Cir. 2014).

                                           13
The defendants describe the injury requirement using the language of legal

detriment.

      Tatum has pled that he was injured and suffered legal detriment. Tatum

alleges that he received a bonus in March 2021 that did not reflect his work on the

New York Portfolio. He also alleges that he did not negotiate for a higher salary or

bonus in reliance on Goldberg’s promise to pay him a share of the promote. Tatum

also alleges that he worked on the New York Portfolio, which he never would have

done absent Goldberg’s promise. Tatum was an at-will employee who could have left

Fairstead Affordable at any time. Instead, he remained at the company, performed

his duties, and worked on the New York Portfolio. Those allegations satisfy the

requirement to plead injury, even if characterized as a requirement to plead legal

detriment.

             3.     The Failure To Allege Unconscionability

      Finally, the defendants argue that Tatum cannot assert a claim for promissory

estoppel because he has not alleged an unconscionable injury. That element is not

required in this setting.

       “When promissory estoppel is asserted to overcome a defense based on the

Statute of Frauds, an ‘unconscionable’ injury is required under New York law.”

Cacchillo, 551 F. App’x at 595; accord In re Est. of Hennel, 58 N.Y.S.3d 271, 275–76.

In other words, if the statute of frauds otherwise would apply, then a plaintiff can

still assert a claim for promissory estoppel by pleading that “the circumstances are

so egregious as to render it unconscionable to permit the defendant to invoke the

                                         14
statute of frauds.” Buddman Distrib., Inc. v. Labatt Imps., Inc., 458 N.Y.S.2d 395,

397 (1982).

      Tatum has pled claims that survive the statute of frauds. He therefore does

not have to plead unconscionability.

C.    Count VII: Unjust Enrichment—New York Portfolio

      In Count VII, Tatum asserts a claim for unjust enrichment based on the

defendants’ failure to pay him his share of the New York Portfolio promote. The

defendants make the same arguments based on the statute of frauds and the

Employment Agreement that they advanced against the claim for promissory

estoppel. The arguments fail for the same reasons.

D.    Count VIII: Quantum Meruit—New York Portfolio

      In Count VIII, Tatum asserts a claim to recover under quantum meruit for the

value of the services he provided when working on the New York Portfolio. The

defendants make the same arguments based on the statute of frauds and the

Employment Agreement that they advanced against the claim for promissory

estoppel and unjust enrichment. The arguments fail for the same reasons.

E.    Count IX: Promissory Estoppel—Hampstead Portfolio

      In Count IX, Tatum asserts a claim for promissory estoppel based on the

Hampstead Portfolio promote. Tatum alleges that he owned a 9.096% direct interest

in the Hampstead Portfolio promote. He alleges that he transferred that interest to

Fairstead Affordable based on Goldberg’s promise that Tatum’s interest in Fairstead

Affordable would increase in the anticipated restructuring. The restructuring never

happened, meaning that Tatum transferred a direct 9.096% interest in the

                                        15
Hampstead Portfolio promote to Fairstead Affordable in return for an indirect 5.35%

interest. The defendants rely on the Employment Agreement and the need to plead

legal detriment and unconscionability.3

      The defendants reprise their argument about the Employment Agreement

governing Tatum’s compensation, including any payment related to the Hampstead

Portfolio promote. That argument is substantially identical to the defendants’

argument that the Employment Agreement governs any compensation that Tatum

could receive for the New York Portfolio. It fails for the same reasons. Indeed, the

argument is even weaker for the Hampstead Portfolio because the oral agreement did

not involve compensating Tatum for work on that portfolio. It involved transferring

his interest to Fairstead Affordable. The Employment Agreement does not govern

that transaction.

      The defendants also reprise their arguments that Tatum must plead legal

detriment and unconscionability. He has obviously pled legal detriment. He does not

need to plead unconscionability because he is not attempting to overcome the statute

of frauds.

      3 The defendants initially argued that the Hampstead Portfolio promote was

subject to the statute of frauds because the promote represented an interest in real
property. That argument was frivolous. See Davis v. Davis, 205 N.Y.S. 710, 711
(Super. Ct. 1924); see also Shaw v. Shaw, 356 F. Supp. 2d 383, 387 (S.D.N.Y. 2005).
At oral argument, the defendants prudently withdrew it.

                                          16
F.    Count X: Unjust Enrichment—Hampstead Portfolio

      In Count X, Tatum asserts a claim for unjust enrichment based on the transfer

of his interest in the Hampstead Portfolio. The defendants seek dismissal on the

theory that the Employment Agreement governs, but that argument fails yet again

for the reasons this decision has already discussed.4

G.    Count XI: Quantum Meruit—Hampstead Portfolio

      In Count VIII, Tatum asserts a claim to recover under quantum meruit in the

event he does not otherwise recover for the transfer of the Hampstead Portfolio. The

defendants again rely on the Employment Agreement, and that argument fails yet

again for the same reasons.

                           III.       CONCLUSION

      The defendants’ efforts to dismiss Counts V–XI are denied. Those claims can

proceed past the pleading stage.

      4 Here too, the defendants initially invoked the statute of frauds on the theory

that the Hampstead Portfolio involved an interest in real property. They prudently
abandoned that frivolous position.

                                         17