Vioni et al v. Providence Investment Management, L.L.C.

Filing 78

OPINION & ORDER re: 55 MOTION for Summary Judgment 60 MOTION for Summary Judgment: CONCLUSION - For the foregoing reasons, Defendants' motions for summary judgment are GRANTED, and Plaintiffs' attorney Michael Q. Carey is sanctioned $6,400. The Clerk of Court is directed to close this case. SO ORDERED. (Signed by Judge Paul A. Crotty on September 26, 2011) (mov)

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: September 26, 2011

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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LISA VIONI, et al.,
:
:
Plaintiffs,
:
08 Civ. 2950 (PAC)
:
- against :
:
OPINION & ORDER
AMERICAN CAPITAL
:
STRATEGIES LTD., et al.,
:
:
Defendants.
:
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HONORABLE PAUL A. CROTTY, United States District Judge:

Lisa Vioni and Hedge Connection Inc. (“HCI”) (collectively, “Vioni”) 1 bring this
quantum meruit action against American Capital Strategies Ltd. (“Capital”), Providence
Investment Management LLC and Providence Investment Partners LLC (together,
“Providence”), and Russell Jeffrey (“Jeffrey”) (collectively “Defendants”). Vioni claims that she
had two separate agreements with Capital and Providence, respectively, to act as a finder for new
business opportunities; that she satisfied her obligations to each by introducing them to each
other; but that neither Defendant compensated her for these services.
Defendants now move for summary judgment under Fed. R. Civ. P. 56. They contend
that (1) Vioni’s quantum meruit claim fails because the emails allegedly constituting her
agreement with Defendants do not satisfy New York’s Statute of Frauds; and (2) Vioni had no
reasonable expectation of compensation prior to arranging the introduction. Defendants also
move under 28 U.S.C. § 1927, and the Court’s inherent power, to sanction Vioni’s attorney,
Michael Q. Carey (“Carey”), for conducting eight wasteful depositions. For the following

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HCI is wholly owned by Vioni, and “Vioni, individually, took the actions alleged in this amended complaint.”
(Am. Compl. ¶¶ 6-7.) While Providence asserts that HCI “did not perform any of the services that are the subject of
this action,” (Providence Mem. in Supp. 1), Vioni maintains that there is a question of fact as to who provided the
services. (Pl. Mem. 26.) Since the motion for summary judgment is granted, this dispute is moot.

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reasons, Defendants’ motions are GRANTED.
BACKGROUND
In late 2006, Robert Grunewald—Managing Director of Capital, a publicly traded
investment corporation—contacted Vioni for advice in creating an asset management business,
and ultimately decided to partner with a hedge fund. Vioni presented various marketing
proposals to Capital, which it did not utilize; she does not assert a claim for these services.
Around the same time, Vioni contacted her longtime professional colleague, Jeffrey, who
was Chief Executive Officer and Chief Investment Strategist of Providence, a small investment
management company. Providence was looking for an investor in a newly formed hedge fund.
Vioni gave Jeffrey advice on marketing materials and introduced him to potential investors.
In April 2007, Vioni introduced Grunewald and Jeffrey by conference call. After an
initial meeting, which Vioni arranged and attended, Capital expressed interest in acquiring
Providence. The two companies began negotiating a series of transactions (referred to as the
“ACSL Transactions”) through which Capital would acquire Providence’s investments, funds,
clients, and employees. Vioni claims that during the course of these negotiations, Capital
(through Grunewald) and Providence (through Jeffrey) repeatedly assured her that she would be
compensated for her efforts once the ACSL Transactions were finalized. According to Vioni,
these assurances were made both verbally and by email.
The ACSL Transactions were completed in September 2007. Capital hired Providence’s
employees, including Jeffrey, whom it placed in charge of a new mortgage-backed securities
investment team. Providence and Jeffrey also moved their investments, funds, and future
business opportunities to Capital.
According to Vioni, despite their earlier oral and written representations that she would

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be compensated for her role in facilitating the ACSL Transactions, neither Defendant paid her
for her work.
On March 20, 2008, Vioni commenced this lawsuit. On July 24, 2008, she filed an
Amended Complaint, asserting causes of action for breach of contract, quantum meruit, and
promissory estoppel. On January 23, 2009, the Court dismissed Vioni’s breach of contract and
promissory estoppel claims. The Court denied defendants’ motion to dismiss her claims for
quantum meruit. Vioni v. Am. Capital Strategies, Ltd., No. 08 Civ. 2950(PAC), 2009 WL
174937, at *5 (S.D.N.Y. Jan 23, 2009).
On September 30, 2010, Defendants moved for summary judgment on the grounds that
(1) the email exchanges supporting Vioni’s quantum meruit claim do not satisfy the Statute of
Frauds; and (2) even if they did, there is no evidence that Vioni had a reasonable expectation of
compensation at the time of the introduction. (Capital Mem. in Supp. 13; Providence Mem. in
Supp. 13.)
DISCUSSION
Summary judgment is appropriate when “there is no genuine issue as to any material fact
and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A fact is
material if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). The moving party bears the initial burden of producing
evidence on each material element of its claim demonstrating that it is entitled to relief. See
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The Court resolves all ambiguities and
draws all factual inferences in favor of the nonmovant, but “only if there is a genuine dispute as
to those facts.” Scott v. Harris, 550 U.S. 372, 380 (2007) (internal quotations omitted).
A claim in quantum meruit has the following requirements: (1) "the performance of

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services in good faith, (2) the acceptance of the services by the person to whom they are
rendered, (3) an expectation of compensation therefore, and (4) the reasonable value of the
services.” Mid–Hudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp., 418 F.3d 168,
175 (2d Cir. 2005) (internal quotations omitted).
I. Statute of Frauds
Defendants move to dismiss these claims as barred by the New York Statute of Frauds,
which provides:
a. Every agreement, promise or undertaking is void, unless it or
some note or memorandum thereof be in writing, as subscribed by
the party to be charged therewith, or by his lawful agent, if such
agreement, promise or undertaking:
...
10. Is a contract to pay compensation for services rendered in
negotiating . . . the purchase, sale, exchange, renting or leasing of .
. . a business opportunity, business, its goodwill, 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.
“Negotiation” 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 . . . .
N.Y. Gen. Oblig. Law § 5-701(a)(10) (emphasis added).
“In an action in quantum meruit . . . , for the reasonable value of brokerage services, if it
does not appear that there has been an agreement on the rate of compensation, a sufficient
memorandum need only evidence the fact of plaintiff's employment by defendant to render the
alleged services. The obligation of the defendant to pay reasonable compensation for the services
is then implied.” Morris Cohon & Co. v. Russell, 23 N.Y.2d 569, 574-75 (1969); see Kopelowitz
& Co., Inc. v. Mann, 2009 WL 1037734, at *8 (Sup. Ct. Kings County Apr. 17, 2009). A series
of correspondence and memoranda may constitute an agreement that satisfies the Statute of

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Frauds. Bronner v. Park Place Entm’t Corp., 137 F. Supp. 2d 306, 311 (S.D.N.Y. 2001) (citing
Crabtree v. Elizabeth Arden Sales Corp., 110 N.E.2d 551 (N.Y. 1953)).
Defendants contend that (1) their emails with Vioni show that they never reached a final
agreement on the issue of payment for the introduction of Capital and Providence; and (2) any
email negotiations about fee arrangements concerned prospective capital-raising services, which
were never performed, not the introduction. (Capital Mem. in Supp. 13; Providence Mem. in
Supp. 13.) Since a quantum meruit claim does not require that the parties reach a final
agreement as to compensation, the Statute of Frauds does not require that this term be in writing.
Morris Cohon, 23 N.Y.2d at 575-76; Papaioannou v. Britz, 139 N.Y.S.2d 658, 662 (N.Y. App.
Div. 2d Dept. 1955) (“As to consideration, it has been said that it need not be expressed in any
particular terms; it is sufficient if it appears by fair or necessary inference.” (internal quotations
omitted)). Had the parties done so, Vioni might have a viable breach of contract claim. Instead,
this case is proceeding under quantum meruit because no final agreement as to payment was
reached. Accordingly, Vioni must only produce writings indicating that Defendants requested
her services, and that “the parties reasonably expected that such services were not to be
performed gratuitously.” Shapiro v. Dictaphone Corp., 411 N.Y.S.2d 669, 673 (N.Y. App. Div.
2d Dep’t 1978).
Defendants are correct, however, that the writings provide no assurance that they
accepted Vioni’s offer to introduce Providence and Capital, with the understanding that she
expected compensation. Vioni first contacted Jeffrey, whom she had known professionally for
over 15 years, discussing the growth of her company’s website, and making herself available if
he “want[ed] to bounce anything off” her. (Providence Mem. in Supp. at 4; Vioni Aff. ¶ 28.)
Given their long-term, mentorship relationship, (56.1 St. ¶ 31), there is no indication that Vioni

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was working for him, as opposed to with him, in order to further her own prospects. The only
writing in which Jeffrey acknowledges Vioni’s expectation of compensation concerns an entirely
different transaction, for a potential investment in PIM funds that never occurred. (See Klausner
Decl. Ex.15). As to the Capital-Providence introduction, Jeffrey simply states that they should
meet to “iron out more specifics.” (See Aaron Decl. Ex. Q.) This vague offer to meet and talk
does not create a genuine dispute as to whether Jeffrey accepted Vioni’s offer to introduce him to
Grunewald with the understanding that she expected compensation.
As to Grunewald, the emails indicate that he initially approached Vioni to “potentially be
of help in helping [him] to think through how to raise capital for” the hedge fund he planned to
create at Capital. (Walsh Decl. Ex. CC.) The presentations and outlines she prepared for
Grunewald did not include introducing Capital to hedge fund managers; they focused on
marketing to investors—HCI’s specialty. (Aaron Decl. Ex. B.) Vioni does not dispute that
Capital did not accept her bid to perform these marketing services. (Aaron Decl. Ex. E, at
208:23-208:25.) Although two emails show that Grunewald accepted Vioni’s offer to arrange the
introduction, (Aaron Decl. Ex. O, P), there is no indication that he understood he was employing
her in this respect. The introduction appears incidental to Vioni’s interest in securing her own
capital-raising role in Capital, and Vioni did not express any expectation of compensation in her
offer to arrange this introduction.
Moreover, the only two emails that Vioni offers as evidence of Grunewald’s
appropriation of her introductory services indisputably shows him discussing payment for future
capital-raising services. (See Aaron Decl. Ex. R.) On April 19, 2007, Vioni first discusses with
Grunewald her payment for the introduction; she specifies that she was “formulating [her]

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payment from Russell for this acquisition.” 2 (Aaron Decl. Ex. R (emphasis added).) This
admission contradicts any argument that she expected Gruenwald compensate her for the
introduction. Vioni’s email continues that the framework of the Providence-Capital deal would
affect the form of payment she received from Jeffrey. No more is said regarding the
introduction.
In the second paragraph of this email, Vioni proposes a consultancy agreement with
Capital, stating that she is seeking Grunewald’s “guidance” so that she may “participate in the
growth of the business.” (See Aaron Decl. Ex. R.) She does not state that she is formally
requesting payment she believes to be rightfully hers, as compensation for past services.
Grunewald replies that “the only realistic way to work out a fee arrangement would be as a
straight advisory fee or a commitment on our part to use you for a bigger opportunity than would
have otherwise existed.” (See Aaron Decl. Ex. R.) Grunewald is clearly responding to a proposal
for future consultancy services, which never occurred. There is no other reasonable
interpretation of this email.
Indeed, it is not until July 17, 2007—three months after the introduction—that Vioni
discusses in writing payment from Capital for the introduction. Grunewald flatly repudiates any
obligation to pay Vioni for the introduction, informing her that “[Capital] does not pay fees other
than those for a retained search for the introduction of employees.” (Aaron Decl. Ex. Y.) This
email corroborates his argument that Vioni arranged the introduction in order to secure
prospective capital-raising opportunities: “[Vioni’s] introduction [of Capital to Providence]
should give [her] a right of first refusal to help [Capital] raise this capital on terms consistent
with those our treasury dept would otherwise receive.” (Aaron Decl. Ex. Y.) While the Statute of
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While Vioni informed Grunewald that she sought compensation from Jeffrey, Jeffrey was not copied on that email.
Like the other emails, therefore, it only evidences Vioni’s desire for compensation from Jeffrey, but is silent as to
Jeffrey’s understanding that he would be compensating her.

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Frauds does not require that the writing itself predate the services, the writing must indicate that
there was a reasonable expectation at the time they were rendered. Weitnauer Trading Co. v.
Annis, 516 F.2d 878, 880 (2d Cir. 1975); Bloomgarden v. Coyer, 479 F.2d 201, 212 n.66 (D.C.
Cir. 1973). For an act as ambiguous as introducing colleagues—which could be a friendly
courtesy or a professional service—retroactive requests speak little to the recipient’s state of
mind at the time of the service.
The emails are entirely one-sided. They show that Vioni expected, or desired, some
compensation, but reflect nothing about the Defendants’ understanding. While Defendants did
accept her introductory services, the focus of their professional relationship was on Vioni’s
capital-raising and marketing, not introductory, services. In this context, the introduction
appears to be a minor happening, incidental to a larger deal that was never consummated.
Absent some documentation that Defendants understood this act to be a professional service, as
opposed to a courtesy that might position Vioni to benefit from future, compensable employment
or other financial opportunities, there is no viable quantum meruit claim. 3
Accordingly, the Statute of Frauds bars this claim from proceeding. No reasonable juror
could conclude that these writings provide assurance that Capital and Providence employed
Vioni’s introductory services with the understanding that she expected compensation. As a
result, the Court need not consider whether such expectation of compensation would have been
reasonable.
II. Sanctions
Defendants move, under 28 U.S.C. § 1927 and the Court’s inherent power, to sanction
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Defendants discuss Vioni’s distinction between “lift-out” services, performed in connection with Capital’s hiring
of Jeffrey and eight other Providence employees, and “marketing” services, based on introducing investors to funds
managed by Providence. (Providence Mem. in Supp. 1-2.) Vioni does not dispute Providence’s assertion that none
of the investors introduced by Vioni actually invested in any such funds. (Providence Reply 4.) Accordingly, the
only claimed basis for recovery is Vioni’s introduction of Capital and Providence.

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Mr. Carey for the following allegedly unnecessary and wasteful depositions: from Providence,
Michael Owens, Richmond Jeffrey, Raymond Yu, and Ed Smith; and from Capital, Malon
Wilkus, John Erickson, Thomas McHale, and Chris Sajewicz. 4 The statutory standard for
sanctions is that the “attorney’s actions are so completely without merit as to require the
conclusion that they must have been undertaken for some improper purpose such as delay.”
Vacco v. Operation Rescue Nat’l, 80 F.3d 64, 72 (2d Cir. 1996) (internal quotations omitted).
The Court also has inherent authority to sanction a party or her attorney where either “has acted
in bad faith, vexatiously, wantonly, or for oppressive reasons.” Alyeska Pipeline Serv. Co. v.
Wilderness Soc’y, 421 U.S. 240, 258-59 (1975) (internal quotations omitted). Both grounds for
sanctions require a showing of bad faith. Oliveri v. Thompson, 803 F.2d 1265, 1273 (2d Cir.
1986).
Mr. Carey does not dispute that these witnesses have minimal knowledge of Defendants’
interactions with Vioni. Rather, he argues that their depositions were necessary to calculate
Vioni’s fee, which includes the Providence employees’ compensation from Capital that is not
disclosed on their W-2 forms; and to elicit information about Capital’s document retention and
information technology (“IT”) systems, in order to determine whether Capital violated its
discovery obligations by allegedly failing to produce certain emails. (Pl. Mem. at 34.)
In the face of Mr. Carey’s demand for more and more, wider and wider, and hopesprings-eternal discovery, the Court warned him that he would be sanctioned if the depositions
were not meaningful and productive. At the March 4, 2010 conference, the Court stated, “I
assume that you’re proceeding on a good faith basis. I have no reason to quarrel with that or
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Providence does not seek sanctions for the remaining Providence depositions—Russell Jeffrey’s and the Rule
30(b)(6) corporate deposition. Capital has offered no arguments in support of sanctions for the remaining Capital
depositions—Jason Campbell, Lionel Ferguson, and McHale’s Rule 30(b)(6) corporate deposition—so they will not
be considered. The Court does, however, consider Capital’s arguments concerning McHale’s individual deposition.
Vivian Garcia-Tunon’s deposition was noticed but never occurred, so she also is not a subject of this motion.

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question that. But to prove that good faith basis, you got to be able to get something from these
people that makes some sense. Now you’ve heard from [Capital’s attorney] that [these
witnesses] don’t know anything about it. If their answer is they don’t know anything about it,
then you’ve wasted their time.” (Tr. 26:23-27:5, Mar. 4, 2010). The Court reiterated that there
would “be consequences” if Mr. Carey did not “get relevant information.” (Id. at 28:6-28:7). In
addition, after Mr. Carey informed of his intent to depose “Mr. Jeffrey and . . . one or two others
from the company,” the Court instructed him to “start with Jeffrey” in order to proceed more
efficiently with the other depositions, to which he responded that he “ha[d] no objection.” (Id. at
31:13-31:14.) The Court also specifically directed Mr. Carey to reassess the testimony that was
still needed following each deposition. (Id. at 31:5-31:6, 33:19-33:24.) By the May 13, 2010
conference, Mr. Carey had noticed “three or four depositions.” (Tr. 8:2-8:3, May 13, 2010.) The
Court again admonished Mr. Carey of sanctions, if the depositions were not meaningful and
productive. (Id. at 9:8-9:9, 16:25-17:3, 33:19-33:24 (“[If the depositions are] just rambling
through, there’ll be consequences in the form of sanctions. I repeat that.”).
Despite these warnings, Mr. Carey made no attempt to target his inquiries or proceed in a
deliberate manner. Indeed, he seemed to proceed in the opposite direction, beginning at some
length with those who knew the least, before proceeding with the key witnesses (i.e., Russell
Jeffrey and the Rule 30(b)(6) corporate representatives). He also subjected each witness to the
whole gamut of questioning. The few examples of arguably relevant testimony that Mr. Carey
elicited from the minor witnesses—additional forms of compensation and compliance with
discovery obligations—account for only a small percentage of his total questioning.
The depositions of Richmond Jeffrey, Owens, Erickson, and Wilkus each lasted nearly
the full 7 hours called for in the Federal Rules. Yu’s deposition lasted approximately 5 hours,

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McHale and Smith’s less than 3. The record indicates that minimal time was spent on Vioni’s
services. Richmond Jeffrey was not questioned about Vioni until page 179 of a 275-page
transcript; Yu until page 34 of a 148-page transcript; and Erickson until page 144 of a 348-page
transcript. McHale was questioned for two days—in his corporate capacity and individually—
but never about Vioni. Wilkus was not questioned about Vioni until page 172—almost halfway
through the 368-page deposition. He testified that he had not met or communicated with Vioni
before that day, and was unaware of her claim for compensation before this lawsuit. (See Walsh
Decl. Ex. N, at 367:13-368:6.)
Indeed, Mr. Carey only sought these witnesses’ testimony for a few narrow legal issues,
and they proved to be of limited use. For example, Mr. Carey admitted that he “wouldn’t be
surprised” if Wilkus “didn’t know anything about the introduction,” and sought only to inquire
about “what came of the introduction” in calculating its reasonable value. (Tr. 27:13-27:19, Mar.
4, 2010.) He questioned Wilkus about a forgiven contractual obligation, deferred compensation,
and other possible benefits that would not appear on a W-2, in order to calculate the reasonable
value of the introduction. While Mr. Carey was entitled to pursue this line of questioning, the
information asked and received did not warrant seven hours. Capital had already represented
that it had produced documents reflecting the full amount of compensation paid to the former
Providence employees, (Walsh Decl. ¶ 9); certainly no more than an hour of questioning was
needed to determine whether the witness had any contrary information. Indeed, Mr. Carey took
up 60 pages on background questions and Wilkus’s personal employment history, asking follow
up questions about previous jobs on a fishing boat, a shrimp business, and a noodle factory.
(Walsh Decl. Ex. N, at 16-58). The remainder concerns Capital’s structure and investments,
including certain investment vehicles to which Vioni concedes she never introduced any third

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party investors. (Walsh Ex. H, Resps. 5 & 6.) Erickson and McHale, who met Vioni briefly and
had no written communications with her, were primarily questioned about the same aspects of
Capital’s structure and investments that Wilkus had already extensively addressed. (See Walsh
Decl. ¶¶ 33, 37-39, 43, 44.)
Similarly, Richmond Jeffrey, Yu, Smith, and Owens had little to no contact with Vioni.
Mr. Carey spent the majority of their depositions on the same topics posed to Wilkus, Erickson,
and McHale; irrelevant questions about their training and work experience; and inquiries about
Jeffrey’s state of mind, which the witnesses could not be expected to know and were better put
directly (and initially) to Jeffrey. While some level of corroboration or contradiction is helpful,
there was no excuse for deposing these minor players for so long and in such an obviously
inefficient manner.
Likewise, Chris Sajewicz was deposed for approximately 5 hours about Capital’s
document retention practices and IT systems. Mr. Carey argues that this inquiry was relevant to
Capital’s alleged failure to produce certain emails—a narrow issue that could have been
addressed in less than half the time.
While Vioni and her counsel are entitled to extract information that may be relevant to
the reasonable value of Vioni’s services, this does not justify or excuse redundant questioning on
topics that are irrelevant or that the witness cannot be expected to know. In other words, Mr.
Carey has failed to rebut Defendants’ demonstration that his depositions were unjustifiably
protracted. Moreover, Mr. Carey’s decision to conducting these depositions before taking the
major witnesses’ testimony, cannot have been made in good faith. His decision was made with
complete disregard for the Court’s instruction that he begin with Jeffrey’s deposition to avoid
wasting time.

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