NISSEN et al v. ROZSA

Filing 65

OPINION. Signed by Judge Jose L. Linares on 6/23/11. (dc, )

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
ROBERT NISSEN, et al.,

Civil Action No.: 08-5563 (JLL)

Plaintiffs,

OPINION

v.
THEODOR ROZSA, et al.,
Defendants.

LINARES, District Judge.
This matter comes before the Court by way of a motion for summary judgment filed by
Plaintiffs on April 1, 2011 and a cross motion for partial summary judgment filed by Defendants
on May 16, 2011. The Court has considered the submissions of the parties in support of and in
opposition to the present motions and decides the matter without oral argument pursuant to Rule
78 of the Federal Rules of Civil Procedure. For the reasons that follow, both motions are denied.
I.

BACKGROUND
The following facts are undisputed, except where noted. This matter arises from a

dispute regarding a commission paid in connection with the sale of Sagmel, a pharmaceutical
company, to Bayer Pharmaceutical (“Bayer”). In 2005, Sagmel entered into a representation
agreement with Defendant TR Strategic Group, LLC (“TR Strategic”) to assist it with finding
financing or a buyer for its business. (Pls.’ Stmt. of Uncontested Facts (“SOF”) ¶ 22.) TR
Strategic is a sole proprietorship owned by Defendant Theodor Rozsa (“Rozsa”). (SOF ¶ 19.)

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The representation agreement between Sagmel and TR Strategic had a term of six
months—spanning from July 18, 2005 to January 18, 2006—and provided for Sagmel to pay TR
Strategic a commission if it obtained financing or located a buyer. (Id. at ¶ 22, 26.)
In July 2005, Rozsa sent Plaintiff Arthur Blumenthal (“Blumenthal”) an email
correspondence regarding an “exciting brokerage project for mutual profit.” (Id. at ¶ 30.) Rozsa
meant “for mutual profit” to be understood as a 50/50 split of the proceeds. (Id.) Thereafter,
Rozsa and Blumenthal began working together to find a buyer for Sagmel. (Id. at ¶ 33.) During
the fall of 2005, Blumenthal prepared a business plan for Sagmel and revised Sagmel’s financial
reports. (Id. at ¶ 50, 59.) Rozsa reviewed those reports, and the business plan was finalized in
late October. (Id. at ¶ 59, 61.) Rozsa states that during this time he contacted various
pharmaceutical companies as potential buyers for Sagmel. (Id. at ¶ 66–74.) In November 2005,
Rozsa received a telephone call from Blumenthal stating that he wished to bring in Plaintiff
Robert Nissen (“Nissen”) to assist with the Sagmel project. (Id. at ¶ 75–76.) Rozsa never
intended to compensate Nissen and believed that Nissen would be paid from any compensation
paid to Blumenthal. (Id. at ¶ 111.)
In January 2006, TR Strategic’s representation agreement with Sagmel expired without a
buyer having been found. (Id. at ¶ 80.) At that time, Rozsa temporarily ceased his efforts to
locate a buyer, (id.), but continued to contact Sagmel in the hopes of forming a new
representation agreement, (id. at ¶ 81). During the first half of 2006, Blumenthal contacted
several pharmaceutical companies concerning Sagmel. (Id. at ¶ 102.) In March 2006,
Blumenthal contacted Soumitra Mukherjee at Bayer regarding Sagmel, but nothing came of the
discussion. (Id. at ¶ 107.) Sometime in the summer of 2006, Nissen began working for Bayer as
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a business development consultant. (Id. at ¶ 134, 277.) On June 26, 2006, Nissen also
communicated with Soumitra Mukherjee regarding Sagmel, but likewise failed to generate
interest on the part of Bayer. (Id. at ¶ 106–7.)
In July 2006, Rozsa, Blumenthal, and Nissen met for dinner in Tarrytown, New York (the
“Tarrytown meeting”). (Id. at ¶ 113.) Prior to this meeting, Rozsa had prepared a list of
pharmaceutical companies that he thought might be interested in purchasing Sagmel. (Id. at ¶
116.) Bayer was identified on the list as a top candidate, but Rozsa did not suggest that the
parties contact Bayer, because no representation agreement with Sagmel was currently in place.
(Id. at ¶ 117.) Plaintiffs allege that at the close of the Tarrytown meeting, the parties agreed to
share evenly any income from the Sagmel project, with each receiving a 30% fee and with the
additional 10% to be allocated later. (Id. at ¶ 118, 128.) Defendants dispute this assertion,
contending that no such oral agreement was reached and that any discussion of sharing income
was “merely a toast to potential future collaborations . . . something which never came to
fruition.” (Defs.’ Resp. to Pls.’ Stmt. of Uncontested Facts [“Defs.’ Resp. Stmt.”] ¶ 118.) The
parties did not discuss the allocation of expenses, taxes, the governing law, or when any
agreement among them might terminate. (SOF ¶ 123–26.) No agreement was ever reduced to
writing. (Defs.’ Stmt. of Undisputed Mat’l Facts ¶ 6.)
In the summer of 2007, Nissen spoke with his supervisor at Bayer about the potential
acquisition of Sagmel. (SOF ¶ 137.) The supervisor referred Nissen to Peter Lauff, another
Bayer employee. In August 2007, Nissen spoke with Lauff about Sagmel, and Lauff expressed
interest in pursuing the matter further. (Id. at ¶ 136, 141.) Nissen then advised Rozsa that Bayer
was interested in Sagmel, and in September 2007, TR Strategic and Sagmel entered into a new
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representation agreement, which provided for TR Strategic to receive as a commission 1% of the
sale price. (Id. at ¶ 164, 165.) In October 2007, Nissen arranged a meeting between
representatives of Bayer and representatives of Sagmel to discuss the potential deal. (Id. at ¶ 156,
159.) Rozsa and Nissen were in attendance. (Id. at ¶ 159.) In November 2007, a second meeting
was held between Bayer and Sagmel representatives, with Rozsa, Blumenthal, and Nissen in
attendance. (Id. at ¶ 208.) Later that month, Rozsa met with Bayer officials in Germany, after
which Bayer made a verbal offer of $400 million to purchase Sagmel. (Id. at ¶ 219–20.) Rozsa
participated in the negotiations that followed. (Id. at ¶ 243–45.) From November 2007 to June
2008, Rozsa kept Blumenthal apprised of the status of the transaction, but Blumenthal was not
directly involved in the negotiations or the related due diligence. (Id. at ¶ 224–25.) Nissen also
does not appear to have been involved in the transaction after the November meetings. (See
generally id. at ¶ 214–66.)
On June 3, 2008, the Bayer-Sagmel deal closed. (Id. at ¶ 267.) As a result, TR Strategic
was entitled to, and eventually received, a commission of $4,300,0001 from Sagmel for its
services. (Id.) Blumenthal subsequently asked Rozsa for 33% of that commission for himself
and 10% for Nissen. (Id. at ¶ 271.) Rozsa responded by suggesting that the commissions be split
so that Blumenthal would receive 20% and Rozsa would retain the remaining 80%. (Id. at ¶
272.)
On November 12, 2008, the instant action was filed. On September 10, 2009,
Blumenthal and Nissen filed an Amended Complaint seeking to recover 60% of the commissions

1

The Amended Complaint alleges that the amount of the commission was “approximately
$4,320,000.” (First Am. Compl. ¶ 28.)
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received by TR Strategic, based on the agreement that was allegedly reached at the June 2006
meeting in Tarrytown. (First Am. Compl. ¶ 36.) The Amended Complaint alleges claims under
theories of breach of contract, breach of the implied covenant of good faith and fair dealing,
unjust enrichment, and fraud, and asks that a constructive trust be imposed on the commissions
currently in Defendants’ possession. On April 1, 2011, Plaintiffs moved for summary judgment
on all counts except fraud, and on May 16, 2011, Defendants cross moved for partial summary
judgment on the existence and enforceability of any contract among the parties.
II.

LEGAL STANDARD
A court shall grant summary judgment under Rule 56(c) of the Federal Rules of Civil

Procedure “if the pleadings, the discovery and disclosure materials on file, and any affidavits
show that there is no genuine issue as to any material fact and that the movant is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(c).
On a summary judgment motion, the moving party must show, first, that no genuine issue
of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then
shifts to the non-moving party to present evidence that a genuine issue of material fact compels a
trial. Id. at 324. In so presenting, the non-moving party must offer specific facts that establish a
genuine issue of material fact, not just “some metaphysical doubt as to the material facts.”
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). Thus, the
non-moving party may not rest upon the mere allegations or denials in its pleadings. See
Celotex, 477 U.S. at 324. Further, the non-moving party cannot rely on unsupported assertions,
bare allegations, or speculation to defeat summary judgment. See Ridgewood Bd. of Educ. v.
N.E. ex rel. M.E., 172 F.3d 238, 252 (3d Cir. 1999). The Court must, however, consider all facts

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and their reasonable inferences in the light most favorable to the non-moving party. See
Pennsylvania Coal Ass’n v. Babbitt, 63 F.3d 231, 236 (3d Cir. 1995).
III.

DISCUSSION
Plaintiffs move for summary judgment on the grounds that (A) a partnership or joint

venture existed among the parties and (B) an enforceable oral contract existed among the parties.
Defendants cross move for summary judgment on the grounds that any oral contract that might
have existed among the parties is barred by the statute of frauds or, in the alternative, is
unenforceable because there was no agreement as to certain essential terms. Plaintiffs further
move for summary judgment on their claims of (C) breach of the implied covenant of good faith
and fair dealing, unjust enrichment, and for the imposition of a constructive trust.
A.

Partnership and Joint Venture Claims
As an initial matter, the Court rejects Plaintiffs’ motion for summary judgment that a

partnership or a joint venture existed among the parties, as the Amended Complaint contains no
cause of action based on either of those theories of liability. The Amended Complaint asserts
only that Blumenthal and Rozsa “formed a business partnership” in or about August 2005. (First
Am. Compl. ¶ 8). It does not seek recovery on that basis, or on a joint venture theory. “At the
summary judgment stage, the proper procedure for plaintiffs to assert a new claim is to amend
the complaint in accordance with [Federal Rule of Civil Procedure] 15(a).” Bell v. City of
Philadelphia, 275 F. App’x 157, 160 (3d Cir. 2008) (quoting Gilmour v. Gates, McDonald &
Co., 382 F.3d 1312, 1315 (11th Cir. 2004)). The Court will not address causes of action raised
for the first time in Plaintiffs’ summary judgment brief.

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B.

Breach of Contract Claim

1.

Statute of Frauds
Defendants’ cross motion for partial summary judgment argues that any oral agreement

that might have existed among the parties is void under the New Jersey Statute of Frauds.
N.J.S.A. 25:1-16(c) provides that “a business broker is entitled to a commission only if before or
after the sale of the business, the authority of the broker is expressed or recognized in a writing
signed by the seller or buyer or authorized agent, and the writing states either the amount or the
rate of commission.” The statute defines a “business broker” as “a person who negotiates the
purchase or sale of a business.” N.J.S.A. 25:1-16(a). Defendants argue that because Blumenthal
and Nissen assisted in the negotiation and procurement of the sale of Sagmel to Bayer, they acted
as business brokers within the meaning of N.J.S.A. 25:1-16(c).
Plaintiffs respond that Defendants misunderstand the purpose of the statute of frauds,
arguing that it is meant to protect the public from the fraudulent practices of brokers, not to
protect brokers from other brokers. (Pls.’ Reply Br. at 23); see C&J Colonial Realty, Inc. v.
Poughkeepsie Savings Bank, FSB, 810 A.2d 1086, 1102 (N.J. Super. Ct. App. Div. 2002) (“The
purpose of the statute of frauds as it pertains to real estate commissions is ‘to protect the public
from fraud, incompetence, misinterpretation, sharp or unconscionable practice[s]’ by real estate
brokers.” quoting Ellsworth Dobbs, Inc. v. Johnson, 236 A.2d 843, 856 (N.J. 1967)). Plaintiffs
argue that statute of frauds is therefore inapplicable to this “commercial dispute.” (Pls.’ Reply
Br. at 24.) This Court agrees. Plaintiffs do not seek to enforce an oral contract requiring a seller
to pay a commission to a broker. Plaintiffs rather seek the enforcement of an oral agreement
among multiple brokers to share such a commission, once it is received from the seller. This

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case therefore does not concern the entitlement of a business broker to a commission from a
“seller or buyer or authorized agent,” as under the statute, but instead the distribution of that
commission from one business broker to other business brokers. The Court thus concludes that
any oral contract among the parties here would not be void under N.J.S.A. 25:1-16(c), and
Defendants’ cross motion for summary judgment on this issue is thus denied.
2.

Existence of an Oral Agreement
Plaintiffs’ motion for summary judgment asserts that they are entitled to recover on either

of two oral contracts allegedly made with Rozsa. The first contract, the “50/50 contract,” was
allegedly formed between Blumenthal and Rozsa in July 2005. Plaintiffs allege that in that
contract Blumenthal and Rozsa agreed to share equally the commissions from any sale of
Sagmel. The second contract, the “30/30/30/10 contract,” was allegedly formed at the Tarrytown
meeting in July 2006. Plaintiffs allege that in that contract Blumenthal, Nissen, and Rozsa
agreed to split the commissions 30% each, with the remaining 10% to be distributed by some
subsequent agreement. Plaintiffs urge that “[i]f the Court does not find that there was a sufficient
understanding or agreement between the parties to share the commissions 30% / 30% / 30% with
the additional 10% to be distributed thereafter by agreement, the Court should nevertheless
enforce the original agreement to share the commissions 50% / 50%, as that agreement was never
terminated or withdrawn.” (Pls.’ Reply Br. at 9; see Pls.’ Br. in Supp. of Mot. for Summ. J. at
48.) Plaintiffs’ submissions, however, are not entirely consistent on this point, as their statement
of the undisputed facts asserts that “[f]ollowing the Tarrytown, New York meeting the only

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agreement between the parties was to split the fee 30/30/30/10.”2 (SOF ¶ 129 (emphasis added).)
The Court need not address this issue here, though, because like Plaintiffs’ arguments
regarding partnerships and joint ventures, the Amended Complaint makes no mention of
recovery under the 50/50 contract. While the Amended Complaint does plead that in August
2005 “Plaintiff Blumenthal and Defendant Rozsa met and orally agreed to an equal split of any
commissions/proceeds that TR might receive from assisting Sagmel in the sale of its business,”
(First Am. Compl. ¶ 11), it seeks recovery under the 30/30/30/10 contract alone. The Amended
Complaint specifically “demand[s] judgment in the amount of at least $2,592,000.00 (60% of
$4,320,000 [the commission received by TR Strategic]) . . ., (id. at ¶ 36), with “60%” apparently
comprising the two 30% shares allegedly owed to Blumenthal and Nissen under the 30/30/30/10
contract. No count in the Amended Complaint seeks recovery under the 50/50 contract. Thus,
once again, the Court will not address a cause of action raised for the first time in Plaintiffs’
summary judgment brief.
The Court now turns to Plaintiffs’ motion for summary judgment with respect to breach
of the 30/30/30/10 contract, a claim which is actually asserted in the Amended Complaint.
Plaintiffs argue that there is no dispute that the parties agreed at the Tarrytown meeting to split
the proceeds of any commission 30% / 30% / 30% / 10%. Defendants respond that genuine
issues of material fact preclude summary judgment on this issue, contending that no such oral
agreement was reached and that any discussion of the sharing of commissions was “merely a
toast to potential future collaborations . . . something which never came to fruition.” (Defs.’

2

Defendants’ submissions only deepen the Court’s confusion here, as Defendants appear
to deny that the 50/50 contract was formed, (see Defs.’ Resp. Stmt. ¶ 31), but then fail to address
the existence or enforceability of that alleged contract in their briefing.
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Resp. Stmt. ¶ 118.)
“A contract arises from offer and acceptance, and must be sufficiently definite ‘that the
performance to be rendered by each party can be ascertained with reasonable certainty.’ ”
Weichert Co. Realtors v. Ryan, 608 A.2d 280, 284 (N.J. 1992) (quoting West Caldwell v.
Caldwell, 138 A.2d 402, 410 (N.J. 1958)). An enforceable contract is thus created if the parties
“agree on essential terms and manifest an intention to be bound by those terms.” Id. Plaintiffs
rely on their own deposition testimony to support their contention that an oral agreement was
formed at the Tarrytown meeting. (See SOF ¶ 120–22, 127–29.) Defendants, however, point to
the deposition testimony of Defendant Rozsa to show that the parties merely discussed the
possibility of future collaboration and did not intend to form a contract. (See Defs.’ Resp. Stmt.
¶ 118.) The determination of the parties’ objective intent to be bound by a contract thus turns on
the credibility of the witnesses to the Tarrytown meeting. The Court therefore concludes that
genuine issues of material fact preclude summary judgment on the issue of whether a valid
contract was formed at the Tarrytown meeting, and Plaintiffs’ motion for summary judgment on
this issue is thus denied. See California Natural, Inc. v. Nestle Holdings, Inc., 631 F. Supp. 465,
470–71 (D.N.J. 1986) (denying summary judgment on the existence of an oral agreement citing
conflicting deposition testimony).
3.

Essential Terms
Defendants’ cross motion for summary judgment relies on the uncertainty surrounding

the Tarrytown meeting to argue that because there was no definite agreement among the parties
as to the manner of the contract’s performance, its duration, or the compensation to be paid, any
potential contract would be unenforceable even if it were supported by an offer and acceptance.

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Plaintiffs respond that the parties did in fact agree on the manner of performance and
compensation to be paid under the contract, and that an appropriate duration can be inferred from
the circumstances surrounding its formation.
As an initial matter, the parties clearly dispute whether an agreement was reached
regarding manner of performance and compensation. Plaintiffs contend that the parties
manifested their agreement to work together on the sale of Sagmel and to split any resulting
commissions, (SOF ¶ 118–122, 128), while Defendants dispute the extent to which the parties
discussed and agreed to the proposed collaboration as well as any compensation that would flow
therefrom, (see Defs.’ Resp. Stmt. ¶ 118; see also Defs.’ Stmt. of Undisputed Mat’l Facts ¶ 8–10;
Pls.’ Resp. to Defs.’ Stmt. of Uncontested Facts ¶ 8–10). Indeed, the fundamental dispute in this
case is what, if anything, the parties agreed to at the Tarrytown meeting. Thus, the determination
as to whether these two terms are indeed “missing” depends on the resolution of disputed
material facts. Summary judgment is therefore inappropriate.
With respect to duration, however, the parties do not dispute that “[t]here was never any
discussion or understanding between Defendant Rozsa, Plaintiff Blumenthal and Plaintiff Nissen
as to the duration of the alleged oral agreement or the circumstances under which the alleged
agreement could be terminated.” (Defs.’ Stmt. of Undisputed Mat’l Facts ¶ 12; see Pls.’ Resp. to
Defs.’ Stmt. of Uncontested Facts ¶ 12.) Plaintiffs nonetheless contend that a definite time
period can be “inferred from the parties and the surrounding circumstances,” thereby rendering
the alleged contract enforceable. (Pls.’ Reply Br. at 13 (quoting Restatement (Second) of
Contracts § 204 (1981)).) “Where the parties do not agree to one or more essential terms . . .
courts generally hold that the agreement is unenforceable.” Ryan, 608 A.2d at 284. However,

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“[t]he law generally and in New Jersey does not favor voiding a contract for vagueness.” Lo
Bosco v. Kure Engineering Ltd., 891 F. Supp. 1020, 1026 (D.N.J. 1995). Thus, “when parties to
a contract have not agreed in respect of a term that is essential to a determination of their rights
and duties, a term that is reasonable in the circumstances is supplied by the court.” In re Miller’s
Estate, 447 A.2d 549, 554 (N.J. 1982). “[I]f a definite period of time can be inferred from the
conduct of the parties and the surrounding circumstances, then that time period should govern the
duration of the agreement.” Id. Here, any inference by the Court of a definite time period for the
alleged 30/30/30/10 agreement would require consideration of “surrounding circumstances”
which clearly remain in dispute. While it is undisputed that the parties met in Tarrytown to
discuss the potential sale of Sagmel, the details of those discussions are evidenced only through
the conflicting deposition testimonies of the parties. The Court therefore cannot conclude that
the alleged agreement would be void for vagueness or that a missing essential term can be
inferred from the circumstances without resolving the factual issues surrounding the Tarrytown
meeting. As such, summary judgment on this issue is inappropriate, and Defendants’ cross
motion is denied.
C.

Plaintiffs’ Remaining Claims
Plaintiffs further seek summary judgment on their implied covenant of good faith and fair

dealing claim and unjust enrichment claim, and ask that the Court impose a constructive trust on
commissions in the Defendants’ possession. As the Court has already found that genuine issues
of material fact preclude summary judgment on question of whether an oral contract existed
among the parties, the Court does not reach the question of whether the implied covenant of good
faith and fair dealing has been breached, because “[i]n the absence of a contract, there is no

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implied covenant of good faith and fair dealing.” Nolan v. Control Data Corp., 579 A.2d 1252,
1257 (N.J. Super. Ct. App. Div. 1990). The Court likewise does not reach Plaintiffs’ unjust
enrichment claim, as recovery under that theory is only available in the absence of a valid
contract. See Van Orman v. Am. Ins. Co., 680 F.2d 301, 311 (3d Cir. 1982); Caputo v. Nice-Pak
Prods., Inc., 693 A.2d 494, 498 (N.J. Super. Ct. App. Div. 1997) (“Because unjust enrichment is
an equitable remedy resorted to only when there was no express contract providing for
remuneration, a plaintiff may recover on one or the other theory, but not both.”). Summary
judgment on these issues is thus denied.
The Court further denies Plaintiffs’ request for the imposition of a constructive trust. The
Court has already denied Plaintiffs’ previous application for a preliminary injunction imposing a
constructive trust on commissions in the possession of Defendant Rozsa. See Docket Entry Nos.
21 & 22 (Opinion and Order dated August 3, 2009). Now, Plaintiffs again seek a constructive
trust on the basis of both “wrongful conduct and unjust enrichment” on the part of Defendant
Rozsa. A constructive trust is an equitable remedy and not a cause of action in and of itself. See
Flanigan v. Munson, 818 A.2d 1275, 1281 (2003); Bergen-Eastern Pension Trust v. Sorensen,
No. BER-L-7669-03, 2007 WL 283440, at *2 n.3 (N.J. Super. Ct. App. Div. Jan 11, 2007). As
the Court has not granted summary judgment on any of the causes of action properly asserted in
Plaintiffs’ Amended Complaint, it does not reach the question of whether the imposition of a
constructive trust is appropriate. Plaintiffs’ motion for summary judgment on this issue is thus
denied.
IV.

CONCLUSION
For the foregoing reasons, Plaintiffs’ motion for summary judgment is denied, and
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Defendants’ cross motion for partial summary judgment is denied. An appropriate Order
accompanies this Opinion.

DATED: June 23, 2011

/s/ Jose L. Linares
JOSE L. LINARES
UNITED STATES DISTRICT JUDGE

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