Mindspirit, LLC et al v. Evalueserve Ltd.
Filing
174
ORDER: denying 157 Motion for New Trial. For the reasons stated above, Defendant Evalueserve's motion for a new trial (Dkt. No. 157) is denied. The Clerk of Court is directed to terminate the motion and to close this case. SO ORDERED. (Signed by Judge Paul G. Gardephe on 7/04/2020) (ama)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
MINDSPIRIT, LLC,
Plaintiff,
ORDER
15 Civ. 6065 (PGG)
- against EVALUESERVE LTD.,
Defendant.
PAUL G. GARDEPHE, U.S.D.J.:
In this breach of contract action, Plaintiff Mindspirit, LLC claims that Defendant
Evalueserve Ltd. violated an agreement to issue 480,000 stock options to Mindspirit. As an
affirmative defense, Evalueserve has argued that the parties orally amended their contract such
that the options would be issued to non-parties Rajat Gupta and Anil Kumar instead of
Mindspirit. (Answer (Dkt. No. 47) at 10 ¶ 6; Second Proposed Jury Instructions (Dkt. No. 125)
at 10)) As an alternative affirmative defense, Evalueserve has argued that Mindspirit is estopped
from claiming breach of contract because Evalueserve reasonably relied on Gupta’s request to
transfer Mindspirit’s stock options to Gupta and Kumar. (Answer (Dkt. No. 47) at 11 ¶ 8;
Second Proposed Jury Instructions (Dkt. No. 125) at 9))
The case proceeded to trial on October 2, 2019. At the close of the evidence, the
Court ruled that no reasonable juror could find for Evalueserve on either affirmative defense.
(Tr. 1191-1203) 1 Accordingly, the Court did not instruct the jury on Evalueserve’s oral
amendment and estoppel defenses. (Tr. 1201-03) The jury returned a verdict in favor of
1
Citations to trial transcripts (“Tr.”) correspond to the pagination generated by the court
reporter. Citations to page numbers of other docketed material correspond to the pagination
generated by this District’s Electronic Case Files (“ECF”) system.
Mindspirit, finding Evalueserve liable for breach of contract. (Verdict (Dkt. No. 153)) On
October 24, 2019, the Court entered judgment in favor of Mindspirit in the amount of
$7,480,457.29. (Judgment (Dkt. No. 155))
On November 21, 2019, Evalueserve moved for a new trial pursuant to Fed. R.
Civ. P. 59(a)(1)(A). (Def. Br. (Dkt. No. 158)) Evalueserve argues that it is entitled to a new trial
because:
1. The court erred in holding that no reasonable jury could find that stock options were
issued to Gupta and Kumar.
2. Because a reasonable jury could have found that Evalueserve issued stock options to
Kumar and Gupta, the court erred in not instructing the jury on the affirmative
defenses of oral amendment and estoppel.
3. Evalueserve was prejudiced by the court’s failure to instruct the jury on estoppel and
oral amendment.
(Id. at 5-12) For the reasons stated below, Evalueserve’s new trial motion will be denied.
BACKGROUND
I.
PROCEDURAL HISTORY
The Complaint was filed on August 3, 2015. (Cmplt. (Dkt. No. 1)) On February
23, 2016, Evalueserve moved to dismiss. (Dkt. No. 22) In a September 24, 2016 order (Dkt. No.
45), the Court granted Evalueserve’s motion to dismiss as to all of Mindspirit’s claims, except
for breach of contract and unjust enrichment. On July 14, 2017, Evaluserve moved for summary
judgment on Mindspirit’s remaining claims. (Dkt No. 73) In a September 30, 2018
Memorandum Opinion & Order (Dkt. No. 90), this Court granted Evalueserve summary
2
judgment on Mindspirit’s unjust enrichment claim. Evalueserve’s summary judgment motion
was otherwise denied. 2
Mindspirit’s breach of contract claim – its sole surviving claim – proceeded to
trial on October 2, 2019. (Tr. (Dkt. No. 139)) In its proposed jury instructions, Evalueserve
asked the Court to charge the jury on Evalueserve’s affirmative defenses of oral amendment and
estoppel. (Proposed Jury Instructions (Dkt. No. 102) at 77-78; Second Proposed Jury
Instructions (Dkt. No. 125) at 9-10)
Mindspirit argued that the Court “should not instruct the jury on the law of oral
modifications and should bar [Evalueserve] from arguing that such modifications took place.”
(Pltf. Pretrial Br. (Dkt. No. 103) at 15) Mindspirit also argued that Evalueserve’s “estoppel
defense [was] merely a recharacterization of its . . . oral modification defense,” and that therefore
“any instruction or argument concerning estoppel should be precluded.” 3 (Id. at 18-19)
The Court did not rule on Evalueserve’s affirmative defenses of oral amendment
and estoppel – and the propriety of jury instructions concerning these affirmative defenses – until
the close of the evidence. (Tr. 1191-1203)
II.
THE EVIDENCE AT TRIAL 4
In 2001, Marc Vollenweider and Alok Aggarwal approached Rajat Gupta about
becoming an angel investor in Evalueserve, an India-based start-up company that Vollenweider
2
Familiarity with the September 24, 2016 order (Dkt. No. 45) and the September 30, 2018
Memorandum Opinion & Order (Dkt. No. 90) is assumed.
3
Evalueserve errs in arguing that the Court sua sponte raised the issue of whether jury
instructions concerning oral amendment and estoppel were appropriate. See Def. Br. (Dkt. No.
158) at 4. Mindspirit had moved to preclude these defenses. (Pltf. Pretrial Br. (Dkt. No. 103) at
15, 18-19)
4
For purposes of this Order, the Court focuses only on the evidence relevant to Evalueserve’s
motion for a new trial.
3
and Aggarwal co-founded. (Tr. 357-58 (R. Gupta)) Evalueserve was modeled after McKinsey
& Company, a leading management consulting firm where Vollenweider had come to know
Gupta, who was then McKinsey’s Managing Director. (Tr. 344, 358 (R. Gupta)) Vollenweider
and Aggarwal asked Gupta for a $100,000 investment, and Gupta agreed. (Tr. 358 (R. Gupta))
Anil Kumar, who had worked with Gupta and Vollenweider at McKinsey, also offered to invest
in the start-up. (Tr. 359 (R. Gupta); Tr. 329-30 (M. Kumar)) Evalueserve wanted to limit the
number of outside investors, however, and rejected Kumar’s offer. (Tr. 359 (R. Gupta)) Kumar
then asked Gupta if he could participate in Gupta’s $100,000 investment by contributing
$25,000. (Tr. 359-60 (R. Gupta)) Gupta and Evalueserve agreed to that arrangement. (Tr. 360
(R. Gupta))
Mindspirit was created to facilitate Gupta and Kumar’s joint investment in
Evalueserve. (Tr. 359 (R. Gupta)) Mindspirit had two owners: Rosewood Partners held a 75
percent share in Mindspirit, and Malvika Kumar – Kumar’s wife – held a 25 percent share. (Tr.
329 (M. Kumar), 359-60, 385 (R. Gupta)) Rosewood Partners was a “family partnership” owned
by Gupta’s children. (Tr. 340-41 (R. Gupta)) Accordingly, neither Gupta nor Kumar held a
direct ownership stake in Mindspirit. (Tr. 385 (R. Gupta))
In April 2001, Mindspirit and Evalueserve agreed that Mindspirit would invest
$100,000 in Evalueserve in exchange for 180,000 shares of Evalueserve stock and 480,000 stock
options. (PX 1 (Stock Option Grant Notice), PX 2 (Schedule A to Securities Purchase
Agreement); Tr. 340 (R. Gupta)) The parties’ agreement is reflected in a Stock Option Grant
Notice, Stock Option Agreement, Equity Incentive Plan, and Securities Purchase Agreement.
(PX 1, PX 2) As part of the agreement, Gupta agreed to “open doors” for Evalueserve and to
4
“help,” “guide,” and “advise” the start-up, including by providing “references” and
“introductions” for the new company. (Tr. 877-78, 895 (Aggarwal))
In April 2001, Evalueserve issued a Stock Option Grant Notice and Stock Option
Agreement to Mindspirit that addressed, inter alia, (1) the vesting of the Evalueserve stock
options; (2) the number of stock options Mindspirit would receive and the exercise price; (3) the
method of payment; (4) whether Mindspirit could “exercise [its] Option only for whole shares of
Common Stock”; (5) securities law compliance; (6) the term of the options; (7) how the options
were to be exercised; and (8) the transferability of the options. (PX 1 (Stock Option Grant
Notice and Stock Option Agreement))
The Equity Incentive Plan annexed to the Stock Option Grant Notice provides that
any amendments to the stock option award must be in writing:
Amendment of Option Awards. [Evalueserve’s] Board at any time, and from
time to time, may amend the terms of any one or more Option Awards; provided,
however, that under the rights under any Option Award shall not be impaired by
any such amendment unless (i) [Evalueserve] requests the consent of the
Participant and (ii) the Participant consents in writing.
(PX 1 (Equity Incentive Plan attachment to Stock Option Grant Notice) at DEF0000039;
Tr. 1018 (Aggarwal) (testifying that Mindspirit was the “Participant” referenced in the
Equity Incentive Plan))
Aggarwal – Evalueserve’s chairman at all relevant times (Tr. 937, 952, 960
(Aggarwal)) – testified that, during a September 2001 telephone call, Gupta asked that
Mindspirit’s 480,000 options be recorded in the names of Gupta and Anil Kumar instead of in
Mindspirit’s name, and that Aggarwal agreed to make that change. (Tr. 899 (Aggarwal))
According to Aggarwal, Gupta asked that 360,000 options be issued to Gupta and 120,000 to
Anil Kumar. (Id.)
5
Gupta, by contrast, testified that he never asked Aggarwal or anyone else at
Evalueserve to transfer Mindspirit’s options to himself and Kumar. (Tr. 341, 366, 373 (R.
Gupta)) According to Gupta, “Rosewood was created as a family partnership so [he] could pass
on some investments and assets to [his] children,” and investments in Rosewood were “a oneway street.” (Id.) Gupta made “many, many investments” in the name of Rosewood and never
once had the investments “changed from Rosewood to [his] own personal name.” (Id.)
A November 7, 2001 Evalueserve board resolution (the “Board Resolution”)
received in evidence states that 360,000 Evalueserve stock options will be issued to Gupta and
120,000 Evalueserve stock options will be issued to Kumar. (PX 19 (Board Resolution)) The
Board Resolution makes no mention of Mindspirit. (Id.; Tr. 906 (Aggarwal)) The Board
Resolution lists the number of the options granted, the strike price, the vesting schedule, and the
expiration date. (PX 19 (Board Resolution)) It does not address other matters set forth in the
Stock Option Grant Notice and Stock Option Agreement, including the method of payment;
whether Mindspirit could “exercise [its] Option only for whole shares of Common Stock”;
securities law compliance; how the options were to be exercised; and the transferability of the
options. (PX 1 (Stock Option Grant Notice and Stock Option Agreement); PX 19 (Board
Resolution)) At trial, the parties stipulated that Evalueserve did not deliver copies of the Board
Resolution to Mindspirit, Gupta, the Kumars, or Rosewood at any time prior to this litigation.
(PX 85 ¶¶ 12-13) (“Evalueserve did not deliver copies of its Board Resolution[] dated November
7, 2001 . . . to Mindspirit[,] . . . Rajat Gupta, Anil Kumar, Malvika Kumar, or Rosewood Partners
prior to this litigation.”).
Aggarwal testified that Evalueserve followed a multi-step process when issuing
stock options. The first step in the process was for Evalueserve to send a stock option grant
6
notice to the prospective option holder. The option holder would then sign the stock option grant
notice and return it to Evalueserve. Only after this exchange would the Evalueserve board pass a
resolution granting the stock option. At trial, Chairman Aggarwal described the process as
follows:
Let me explain the process, how it went at least during the first ten years.
We would issue a particular stock option notice. . . . . Then we would expect the
person who was receiving it would sign it and send it back to us. We would then
pass a board resolution that these options have been granted.
(Tr. 898 (Aggarwal))
Later in his testimony, Aggarwal described the stock option grant process in a
similar fashion:
Typically, this particular kind of a grant notice would be sent out to the option
holder. At that particular point time that particular grant would be entered in what
we used to call an options register which was an option spreadsheet. It was
basically an Excel spreadsheet. At that particular point after that we would
receive the option holder to sign it. Then we would pass a board resolution. . . .
(Tr. 974-75 (Aggarwal); see also Tr. at 978-79 (Aggarwal))
Aggarwal also testified that every Evalueserve option holder received a stock
option grant notice:
THE COURT: With respect to this document that we’re looking at, Plaintiff’s
Exhibit One, the stock option grant notice, does every recipient of options from
Evalueserve get a grant notice similar to the one we’re looking at?
THE WITNESS: Yes, at least during the period I was there.
(Tr. 893 (Aggarwal))
Aggarwal admitted that these steps had not been followed with respect to the
Evalueserve stock options he claimed had been issued to Gupta and Kumar. (Tr. 906-07, 978-79
(Aggarwal)) Indeed, at trial the parties stipulated that “Evalueserve has no evidence that a Stock
7
Option Grant Notice reflecting Rajat Gupta [or] . . . Anil Kumar as an option holder for
Evalueserve options ever existed.” (PX 85 ¶¶ 10-11; Tr. 393 (quoting PX85)) Evalueserve’s
chief financial officer Nand Gangwani testified that he had never seen a stock option grant notice
in Gupta’s or Kumar’s name (Tr. 750, 759 (Gangwani)), and Marc Vollenweider – Evalueserve’s
chief executive officer (Tr. 699 (Vollenweider)) – testified that he had no knowledge of
Evalueserve stock option grant notices ever having been issued to Gupta or Kumar. (Tr. 689
(Vollenweider)) In email, Evalueserve employees discussed their inability to find Evalueserve
stock option grant notices that had been issued to Gupta and Kumar. (PX 74, PX 77)
Chairman Aggarwal testified that it was a “mistake” not to have issued stock
option grant notices to Gupta and Kumar, stating that it “slipped our mind” and that “[i]n the first
few years of a start-up . . . you do make some errors of these kinds unfortunately.” (Tr. 907
(Aggarwal)) He also blamed Gupta for the mistake, asserting that – during the September 2001
telephone call – “Gupta . . . said, look, it’s OK as long as you put it to the board resolution and
you get it all approved I’m okay with it.” (Id.)
III.
BENCH RULING CONCERNING EVALUESERVE’S AFFIRMATIVE
DEFENSES OF ORAL AMENDMENT AND EQUITABLE ESTOPPEL
On October 10, 2019, at the close of the evidence, the Court ruled that no
reasonable juror could find for Evalueserve on either its oral amendment or equitable estoppel
affirmative defense, and therefore Evalueserve was not entitled to a jury charge that presented
these defenses to the jury. The Court’s bench ruling, in relevant part, is set forth below:
In this action, plaintiff Mindspirit, [LLC], asserts a claim for breach of contract against
defendant Evalueserve Ltd. The evidence at trial has shown that the parties entered into
an agreement in 2001 in which Mindspirit agreed to make a $100,000 investment in
Evalueserve – then a start-up company – in exchange for 180,000 shares of Evalueserve
stock and 480,000 stock options. [PX 1, PX 2] The essence of Mindspirit’s claim in this
lawsuit is that Evalueserve breached the parties’ agreement by preventing Mindspirit
from exercising those stock options many years later.
8
On October 4, 2019 – the third day of this trial – I asked the lawyers to submit revised
jury instructions that “more properly reflect[] what the evidence is” in [this] case. [Tr.
536] That same day, I directed the parties to submit briefing concerning the propriety of
Evalueserve’s proposed jury instructions concerning its affirmative defenses of oral
amendment and estoppel. [Dkt. No. 128] Mindspirit and Evalueserve filed letter briefs
on October 6, 2019. [Dkt. Nos. 126, 127] In addition, Evalueserve filed a letter brief on
October 7, 2019 addressing certain arguments Mindspirit had made regarding the jury
instructions. [Dkt. No. 132]
I have carefully considered the parties’ proposed jury instructions as well as the legal
arguments they have made in their briefs. I will now rule on a number of legal issues
related to the jury charge. In doing so, I am of course guided by the general principle that
parties are entitled to have claims and defenses presented to a jury only where a
reasonable jury could find – based on the evidence presented at trial – that such claims or
defenses are meritorious. See, e.g., Anderson v. Branen, 17 F.3d 552, 557 (2d Cir. 1994)
(“A litigant is entitled to an instruction on a claim where that claim is supported by
evidence of probative value.”) Where the evidence is insufficient to support a particular
claim or theory, however, the jury should not be instructed on that claim or theory. [See
Harris v. O’Hare, 770 F.3d 224, 238 (2d Cir. 2014); City of New York v. Pullman, 662
F.2d 910 (2d Cir. 1981) (trial court’s refusal to give requested damages instruction was
appropriate, because the proposed damages remedy was not “supported by evidence of
any probative value”)].
I will begin with certain threshold issues in this case – whether there is evidence from
which a reasonable jury could find that (1) Evalueserve issued stock options to Rajat
Gupta and Anil Kumar; or (2) that Evalueserve transferred stock options that had been
issued to Mindspirit to Rajat Gupta and Anil Kumar. I will then address Evalueserve’s
affirmative defenses of oral amendment [and] estoppel. . . .
Evalueserve seeks to assert as affirmative defenses oral amendment and estoppel. [See
Second Proposed Jury Instructions (Dkt. No. 125) at 3] Evalueserve argues that it and
Mindspirit “orally amended the contract to provide that Rajat Gupta and Anil Kumar
would receive the stock options instead of Mindspirit.” Id. Evalueserve further contends
that “Mindspirit is estopped or denied from claiming a breach of contract because
Evalueserve reasonably relied to its detriment on Rajat Gupta’s request to transfer the
stock options to Mr. Gupta and Mr. Kumar.” Id. These arguments are premised on the
notion that Evalueserve issued stock options directly to Gupta and Kumar, or that it
transferred Mindspirit’s stock options to Gupta and Kumar. There is, however, no such
evidence.
As an initial matter, the parties stipulated – in Plaintiff[’s] 85 – that “Evalueserve has no
evidence that a stock option grant notice reflecting Rajat Gupta [or Anil Kumar] as an
option holder for Evalueserve options ever existed.” [See PX 85, ¶¶ 10-11] Moreover,
Nand Gangwani – Evalueserve’s chief financial officer – testified that he had never seen
a stock option grant notice in the name of Rajat Gupta or Anil Kumar. [Tr. 759] Marc
Vollenweider – one of the founders of Evalueserve – testified that he had never seen a
9
stock option grant notice in the name of Rajat Gupta or Anil Kumar. [Tr. 698] Alok
Aggarwal – Evalueserve’s Chairman at all relevant times – also testified that no stock
option grant notice had ever been issued in the name of Rajat Gupta or Anil Kumar and
that this was a “mistake.” [Tr. 906, 907] There are also e-mails [in] evidence from
Evalueserve employees in which they recount their inability to find any stock option
grant notice in the names of Gupta or Kumar. [PX 74, PX 77] In short, as the parties
have stipulated, there is no evidence that a stock option grant notice was ever issued to
Rajat Gupta or Anil Kumar.
While Evalueserve concedes that no stock option grant notice was ever issued to Rajat
Gupta or Anil Kumar, it points to a board resolution dated November 7, 2001, in which
the Evalueserve’s board authorized the issuance of stock options to Gupta and Kumar.
(Def. Oct. 6, 2019 Ltr. [Def. Oct. 6, 2019 Ltr. (Dkt. No. 127) at 1; PX 19 (Board
Resolution)] No reasonable jury could find that the November 7, 2001 board resolution
cited by Evalueserve is a substitute for [, or] the functional equivalent of[,] a stock option
grant notice.
Evalueserve’s chairman, Mr. Aggarwal, testified that the issuance of a stock option grant
notice is the first step in a multistep process leading to the issuance of stock options. [Tr.
at 974-975, 978] Mr. Aggarwal testified that every recipient of Evalueserve’s stock
options has received a stock option grant notice. And as I said, he further testified that
Evalueserve made . . . “mistake” in not issuing a stock option grant notice to Gupta and
Kumar. [Tr. 907]
The stock option [grant] notice issued to Mindspirit, together with the related stock
option agreement between Mindspirit and Evalueserve, are in evidence as Plaintiff’s
Exhibit 1, [and] these documents contain numerous important terms that are not
addressed in any fashion in the November 2001 board resolution cited by Evalueserve.
The stock option grant notice and the stock option agreement issued to Mindspirit
address, among other things, [1] the vesting of the stock options; [2] the number of shares
and exercise price; [3] the method of payment; [4] whether Mindspirit could “exercise
[its] [O]ption only for whole shares of [C]ommon [S]tock”; [5] securities law
compliance; [6] the term of the options; [7] how options are to be exercised; and [8] the
transferability of options. [PX 1] The November 7, 2001 board resolution states the
number of stock options granted to Gupta and Kumar, the strike price, the vesting
schedule and expiration date, but otherwise contains none of the information set forth in
the stock option grant notice and the stock option agreement. [PX 19]
The parties have also stipulated that the . . . November 2001 board resolution granting
options to Gupta and Kumar was never given to Mindspirit, Gupta or Kumar – or to the
members of Mindspirit, those being Malvika Kumar and Rosewood Partners – prior to
this litigation. [PX 85 ¶¶ 12-13]
Given these circumstances, no reasonable jury could find that the board resolution cited
by Evalueserve is the functional equivalent of a stock option grant notice. In sum, there
10
is no evidence that Evalueserve issued stock options to Gupta and Kumar, and there is no
evidence that Evalueserve ever transferred Mindspirit’s stock options to Gupta and
Kumar. While there is certainly evidence that Evalueserve told Gupta and Kumar that
stock options had been issued to them, that is not the same as stock options actually
having been issued to them.
Parenthetically, I note that Evalueserve’s former chairman, Mr. Aggarwal, testified today,
apparently for the first time in this lengthy and hard fought litigation, that the Mindspirit
options had been canceled. He testified that he discussed this with Evalueserve’s outside
counsel, Mr. David Adler. There is no documentary evidence of any sort showing that
Evalueserve canceled the 480,000 Mindspirit options. Up to now, Evalueserve’s position
and Mr. Aggarwal’s position had been that Evalueserve had never issued options to
Mindspirit. In any event, there is no board resolution regarding the alleged cancellation
of the [480,000] Mindspirit options. There is no written notice of any sort to Mindspirit
stating that the [480,000] Mindspirit options have been canceled. There is no email or
correspondence in which the cancellation of the 480,000 Mindspirit options are discussed
and there is no written communication between the outside counsel, David Adler, and
Evalueserve concerning the company’s alleged cancellation of the 480,000 Mindspirit
options and no written communication reflecting the conversation in which Mr. Aggarwal
allegedly disclosed the cancellation of these options to Adler. In short, there is no written
evidence of any sort that Evalueserve canceled the option grant to Mindspirit.
In any event, the absence of evidence showing that a stock option grant notice was issued
in the name of Rajat Gupta or Anil Kumar is fatal to Evalueserve’s affirmative defenses
of oral amendment and estoppel, which I will now discuss.
As I noted, Evalueserve contends that any agreement to issue options to Mindspirit was
orally amended by the parties. More specifically, Evalueserve contends that an oral
amendment [took] place in September 2001 when Gupta allegedly asked Aggarwal to
issue the options in his name and in Kumar’s name instead of in Mindspirit’s name.
Gupta denies making any such request. [Tr. 366] Aggarwal testified that Gupta made
this request. [Tr. 907, 969]
“To be enforceable, an oral modification must possess all of the elements necessary to
form a contract, including valid consideration.” [Cohan v. Movtady, 751 F. Supp. 2d
436, 442 (E.D.N.Y. 2010); see also Choice Money Transfer, Inc. v. Societe Int’l de
Change, Arimec, LLC, No. 17 CIV. 2639 (JSR), 2017 WL 6507108, at *4 (S.D.N.Y.
Dec. 18, 2017) (same); Baraliu v. Vinya Capital, L.P., 765 F. Supp. 2d 289, 298
(S.D.N.Y. 2011) (same).]
Evalueserve’s oral amendment argument fails ab initio, because there is no evidence that
Evalueserve performed. That is, there is no evidence that Evalueserve issued options in
the name of Gupta and Kumar. There is likewise no evidence of consideration flowing to
Mindspirit in exchange for its supposed agreement to give up its options.
11
Evalueserve argues that there was consideration here because “Mindspirit avoided an
obligation to provide ‘[help] and guidance’ to Evalueserve.” [Def. Oct. 6, 2019 Ltr. (Dkt.
No. 127) at 2] But Aggarwal testified that Gupta did in fact provide the advice and
introductions that Evalueserve had bargained for. [Tr. 878, 895] In short, there is no
evidence that Mindspirit received any consideration or any benefit in exchange for the
supposed oral amendment.
Evalueserve argues that “substantial performance of [a] contract by the parties erase[s]
the defenses of [lack of] mutuality and consideration.” [Def. Oct. 6, 2019 Ltr. (Dkt. No.
127) at 2) (quoting Scientific Management Institute, Inc. v. Mirrer, 278 N.Y.S.2d 58 (2d
Dept. 1967))] Here, however[,] there was no substantial performance by Evalueserve [–]
no stock option grant notice was ever issued to Gupta or Kumar. In short, Evalueserve
will not be permitted to present an oral amendment affirmative defense to the jury,
because no reasonable jury could find the factual predicates necessary to support such an
argument.
Evalueserve has submitted a proposed jury instruction addressing its affirmative defense
of equitable estoppel. “[T]o succeed on the defense of equitable estoppel, defendants
must establish three elements. These are: ‘[1] a misrepresentation by the plaintiff, [2]
reasonable reliance by the defendant, and [3] prejudice.’” [Johnson & Johnson v. Actavis
Grp., No. 06 CIV. 8209 (DLC), 2008 WL 228061, at *9 (S.D.N.Y. Jan. 25, 2008), as
corrected (Feb. 21, 2008) (quoting Veltri v. Bldg. Serv. 32B-J Pension Fund, 393 F.3d
318, 326 (2d Cir. 2004)); see also Rich v. Orlando, 128 A.D.3d 1330, 1331 (4th Dept.
2015) (“The elements pertaining to the party asserting estoppel are (1) lack of knowledge
of the true facts; (2) good faith reliance; and (3) a change of position”); Holm v. C.M.P.
Sheet Metal, Inc., 89 A.D.2d 239, 235 (4th Dept. 1982) (same).]
Here, there is no evidence that Evalueserve “changed its position” in reliance on Gupta’s
supposed request to issue the options in his name and in Kumar’s name rather than in
Mindspirit’s name. Again, there is no evidence that Evalueserve issued a stock option
grant notice to Gupta or Kumar.
To the extent that Evalueserve contends that it transferred Mindspirit’s options to Gupta
and Kumar at Gupta’s request, any reliance on Gupta for this action would not [have]
been reasonable. Section 6(g) of the Equity Incentive Plan provides that “[a]
non[]statutory [S]tock [O]ption shall be transferable to the extent provided in the
[O]ption [A]greement.” [PX 1] Under Section Eight of the stock option agreement, the
“[O]ption is not transferable.” [Id.] Given this unambiguous provision forbidding
transfer, Evalueserve could not have reasonably relied on any requests by Gupta to
transfer[] Mindspirit’s options to Gupta and Kumar. [See Randolph Equities, LLC v.
Carbon Capital, Inc., 648 F. Supp. 2d 507, 524 (S.D.N.Y. 2009) (holding that “where
the ‘terms of an unambiguous contract are inconsistent with the statements that form the
basis of the claim, the claiming party could not have reasonably relied on those
statements as a matter of law.’” (quoting Ixe Banco, S.A. v. MBNA Am. Bank, N.A., 07
Civ. 0432 (LAP), 2008 WL 650403, at *11 (S.D.N.Y. Mar. 7, 20018)).]
12
(Tr. 1191-1202)
IV.
JURY VERDICT AND EVALUESERVE’S POST-TRIAL MOTION
On October 11, 2019, the jury returned a verdict for Mindspirit, finding
Evalueserve liable for breach of contract. (Verdict (Dkt. No. 153)) On October 24, 2019, this
Court entered judgment in favor of Mindspirit in the amount of $7,480,457.29. (Judgment (Dkt.
No. 155))
On November 21, 2019, Evalueserve moved for a new trial pursuant to Fed. R.
Civ. P. 59. (Def. Br. (Dkt. No. 158)) Evalueserve argues that this Court erred in refusing to
instruct the jury on its oral amendment and equitable estoppel affirmative defenses. (Id. at 4)
DISCUSSION
I.
LEGAL STANDARD
“Rule 59 of the Federal Rules of Civil Procedure permits a court, on motion, to
‘grant a new trial on all or some of the issues . . . after a jury trial, for any reason for which a new
trial has heretofore been granted in an action at all in federal court.’” Springer v. Cedro, 894 F.
Supp. 2d 474, 481 (S.D.N.Y. 2012) (quoting Fed. R. Civ. P. 59(a)(1)(A)). “The decision to grant
a new trial pursuant to Rule 59(a) is committed to the sound discretion of the trial judge.”
Livingston v. Escrow, No. 08 Civ. 6576 (FPG), 2014 WL 1466469, at *2 (W.D.N.Y. Apr. 15,
2014) (citing Sequa Corp. v. GBJ Corp., 156 F. 3d 136, 143 (2d Cir. 1998)). For a court “to
order a new trial under Rule 59(a), it must conclude that the jury has reached a seriously
erroneous result or . . . [that] the verdict is a miscarriage of justice, i.e., it must view the jury’s
verdict as against the weight of the evidence.” Manley v. AmBase Corp., 337 F.3d 237, 245 (2d
Cir. 2003) (internal quotations and citations omitted). “Accordingly, ‘[o]n a motion for a new
trial, the moving party bears [a] heavy burden.’” Prendergast v. Pac. Ins. Co., No. 09 Civ. 6248
13
(MWP), 2013 WL 5567656, at *5 (W.D.N.Y. Sept. 25, 2013) (quoting Manes v. Metro-North
Commuter R.R., 801 F. Supp. 954, 956 (D. Conn. 1992), aff’d, 990 F.2d 622 (2d Cir. 1993)).
“Furthermore, ‘Rule 59 is not a vehicle for relitigating old issues, presenting the case under new
theories, securing a rehearing on the merits, or otherwise taking a “second bite at the apple.”’”
Kogut v. Cty. of Nassau, No. 06 Civ. 6695 (JS) (WDW), 2013 WL 3820826, at *2 (E.D.N.Y.
July 22, 2013) (quoting O’Connell v. Onondaga Cty., No. 09 Civ. 0364 (FJS) (ATB), 2013 WL
998598, at *1 (N.D.N.Y. Mar. 13, 2013)).
“[A] trial court should be most reluctant to set aside that which it has previously
decided unless convinced that it was based on a mistake of fact or clear error of law, or that
refusal to revisit the earlier decision would work a manifest injustice.” Libutti v. United States,
178 F. 3d 114, 118 (2d Cir. 1999). “The unsuccessful party’s disagreement with the court’s
decisions or conclusion is insufficient to obtain relief under Rule 59.” Ullman v. Starbucks
Corp., 152 F. Supp. 2d 322, 326 (S.D.N.Y. 2001) (citing Farr Man Coffee, Inc. v. Chester, No.
88 Civ. 1692 (DNE), 1993 WL 328854, at *1 (S.D.N.Y. Aug. 26, 1993)).
“An erroneous jury instruction requires a new trial unless the error is harmless.”
Callahan v. Wilson, 863 F.3d 144, 148 (2d Cir. 2017). “A jury instruction is erroneous if it
misleads the jury as to the correct legal standard or does not adequately inform the jury on the
law.” Id. (internal quotation marks omitted). “‘A litigant is entitled to an instruction on a claim
where that claim is supported by evidence of probative value.’” Harris v. O’Hare, 770 F.3d 224,
238 n.9 (2d Cir. 2014) (quoting Anderson v. Branen, 17 F.3d 552, 557 (2d Cir. 1994)). “‘All that
a party needs to show is that there is some evidence supporting the theory behind the instruction
so that a question of fact may be presented to the jury.’” Id. (quoting Branen, 17 F.3d at 557).
But “[a] party is not entitled to have the court give the jury an instruction for which there is no
14
factual predicate in the trial record.” McCardle v. Haddad, 131 F.3d 43, 52 (2d Cir.1997); see
City of New York v. Pullman, 662 F.2d 910 (2d Cir. 1981) (trial court’s refusal to give requested
damages instruction was appropriate, because the proposed damages remedy was not “supported
by evidence of any probative value”).
II.
ANALYSIS
A.
Whether Evalueserve Offered Evidence at Trial that
it Had Issued Stock Options to Gupta and Kumar
Evalueserve’s affirmative defenses of oral amendment and equitable estoppel
were premised on the notion that it had transferred Mindspirit’s stock options to Gupta and
Kumar, after Gupta asked Aggarwal to make this change. (Tr. 1193-94) Evalueserve contends
that “[b]ecause a reasonable jury could have found that Evalueserve [issued] stock options to
Kumar and Gupta, the Court erred in not instructing the jury on oral amendment and estoppel.”
(Def. Br. (Dkt. No. 158) at 9) (emphasis omitted)) As this Court explained in its bench ruling
during trial, there is no evidence that Evalueserve issued stock options in the names of Gupta and
Kumar. Indeed, all the evidence is to the contrary.
The parties stipulated that “Evalueserve has no evidence that a Stock Option
Grant Notice reflecting Rajat Gupta [or] . . . Anil Kumar as an optionholder for Evalueserve
options ever existed.” (PX 85 ¶¶ 10-11) Multiple Evalueserve witnesses – including Chairman
Aggarwal, CEO Vollenweider, and CFO Gangwani – testified that they had no knowledge of
stock option grant notices ever having been issued in the names of Gupta or Kumar. (Tr. 689
(Vollenweider), 759 (Gangwani), 906-07 (Aggarwal)) Mindspirit also introduced emails of
Evalueserve employees in which they discussed their inability to find Evalueserve stock option
grant notices in the names of Gupta and Kumar. (PX 74, PX 77) Accordingly, as this Court
15
ruled during trial, no reasonable juror could find that Evalueserve had issued stock options in the
names of Gupta and Kumar.
As discussed above, Chairman Aggarwal testified that the issuance of a stock
option grant notice is the first step in a multi-step process leading to the issuance of stock
options. (Tr. 898, 974-975, 978-79 (Aggarwal)) Indeed, Aggarwal testified that “every recipient
of options from Evalueserve” received a stock option grant notice. (Tr. 893 (Aggarwal))
According to Aggarwal, Evalueserve simply made a “mistake” in not issuing stock option grant
notices to Gupta and Kumar. 5 (Tr. 907 (Aggarwal))
Although Evalueserve pointed to a November 7, 2001 Board Resolution
authorizing the issuance of Evalueserve stock options to Gupta and Kumar, there was no
evidence that the Board Resolution was a substitute for a stock option grant notice. To the
contrary, Aggarwal testified that the issuance of a stock option grant notice was a separate step
that preceded the issuance of a board resolution. (Tr. 898, 974-75 (Aggarwal)) Moreover, as
discussed above, the Board Resolution lacked much of the information included in an
Evalueserve stock option grant notice – including information related to the method of payment,
whether the options could be exercised “only for whole shares of Common Stock,” securities law
compliance information, how the options were to be exercised, and the transferability of the
5
Chairman Aggarwal was the critical witness for Evalueserve at trial, and he was not a credible
witness. His deposition testimony was inconsistent with his trial testimony, and his trial
testimony was internally inconsistent. During cross-examination, he was impeached on a variety
of topics. (See, e.g., Tr. 1022-28, 1088-91, 1126-28) As discussed in this Court’s bench ruling,
after years of hard-fought litigation, Aggarwal raised for the first time at trial the notion that the
Mindspirit options had been cancelled – an assertion for which there was no evidentiary support.
(Tr. 1198) And with respect to Evalueserve’s admitted failure to issue a stock option grant
notice to Gupta and Kumar, Aggarwal gave a series of shifting explanations, variously
attributing this omission to (1) “a mistake”; (2) Gupta telling Aggarwal not to bother issuing a
stock option grant notice to Gupta; (3) it “slipped our mind”; and (4) “start-up[s] . . . make some
errors of these kinds unfortunately and we did.” (Tr. 900-07) (Aggarwal))
16
stock options. 6 (Compare PX 1 with PX 19) Moreover, the parties stipulated that the Board
Resolution was never provided to Mindspirit, Gupta, the Kumars, or Rosewood prior to this
litigation. (PX 85 ¶¶ 12-13) (“Evalueserve did not deliver copies of its Board Resolution[] dated
November 7, 2001 . . . to Mindspirit[,] . . . Rajat Gupta, Anil Kumar, Malvika Kumar, or
Rosewood Partners prior to this litigation.”). Given this evidence, no reasonable jury could have
found that the Board Resolution was the functional equivalent of a stock option grant notice,
which Aggarwal testified was sent to every Evalueserve option holder. (Tr. 893, 974
(Aggarwal))
Evalueserve argues that Aggarwal’s testimony about his September 2001
telephone call with Gupta – in which Gupta allegedly told Aggarwal not to bother sending Gupta
a stock option grant notice – creates a fact issue as to whether it was necessary for Evalueserve to
issue a stock options grant notice. (Def. Br. (Dkt. No. 158) at 6) Aggarwal’s testimony on this
point was as follows:
I said I’ll perhaps sent out option certificate or something like that. And then
[Gupta] said, well, that’s not required. It’s up to you but board resolution is
definitely required and I believe I never sent these option certificate either to
[Gupta] or [Kumar]. . . .
. . . [Gupta] said as long as you put it in the register properly in the options
register properly and you do your, I’m only interested in the results. . . .
I do not know exactly the words but he did say that as long as you put it in your
board resolution and in the options register, options spreadsheet, that’s perfectly
fine. . . .
6
Evalueserve complains that the Court did not “state that the missing terms were essential or
even why they were important.” (Def. Br. (Dkt. No. 158) at 7) This argument misses the point.
The issue is not whether the missing terms are “essential” for the issuance of stock options, but
rather whether the Board Resolution is somehow the equivalent of a stock option grant notice.
The differences in content between the Board Resolution and an Evalueserve stock option grant
notice undermines Evalueserve’s argument that the Board Resolution was the equivalent of a
stock option grant notice.
17
Q. Now, did in fact Evalueserve to your knowledge ever issue a stock option
grant notice to Mr. Gupta in person himself individually?
A. To the best of my knowledge, no, sir.
Q. Did Evalueserve ever issue a stock option grant notice to Mr. Kumar?
A. To the best of my knowledge, no, sir.
Q. And why was that?
A. I believe one, it was in hindsight it was a mistake but I believe because I was
talking to Mr. Gupta and he said, look, it’s OK as long as you put it to the board
resolution and you get it all approved I’m okay with it. I talked to Anil [Kumar].
It also slipped our mind. In the first few years of a start-up not making any
excuses but you do make some errors of these kinds unfortunately and we did.
(Tr. 900-07 (Aggarwal))
Even accepting Aggarwal’s testimony that Gupta told him not to bother
sending a stock option grant notice, this testimony does not contradict or undermine the
undisputed evidence that the issuance of a stock option grant notice is a necessary step in
Evalueserve’s process for issuing stock options. (See Tr. 893, 898, 974-75, 978-79
(Aggarwal))
Finally, without offering any supporting citations to the trial transcript,
Evalueserve argues that the “parties’ future conduct” – a reference to post-2001 conduct –
demonstrates that Evalueserve stock options were in fact issued in the names of Gupta and
Kumar. (Def. Br. (Dkt. No. 158) at 7-8) Evalueserve appears to be referencing Gupta’s
unsuccessful attempt to exercise the Evalueserve options in his own name in April 2011 – a
decade after they had been issued to Mindspirit – after Aggarwal told him that Evalueserve had
issued options in Gupta’s name, and that a failure to exercise them immediately would result in
negative tax consequences. (Tr. 405-14 (Gupta)) The fact that in 2011 – ten years after the
Evalueserve stock options had been issued to Mindspirit – Evalueserve represented to Gupta that
18
options had been issued in his and Kumar’s names (see, PX 43) does not – in the circumstances
of this case – constitute evidence that Evalueserve stock options had in fact been issued in the
names of Gupta and Kumar.
In sum, based on the evidence offered at trial, no reasonable juror could conclude
that Evalueserve had issued stock options to Gupta and Kumar. As discussed below, the absence
of evidence showing that Evalueserve issued stock options in the names of Gupta and Kumar is
fatal to Evalueserve’s oral amendment and equitable estoppel defenses.
B.
Oral Amendment
Evalueserve acknowledges that Evalueserve’s Equity Incentive Plan bars oral
amendments to the Stock Option Agreement, but argues that Gupta and Aggarwal nevertheless
agreed to orally amend the Stock Option Agreement by changing the recipient of the Evalueserve
stock options from Mindspirit to Gupta and Kumar. (Def. Br. (Dkt. No. 158) at 6; Def. Pretrial
Br. (Dkt. No. 100) at 2) Evalueserve goes on to argue that – had the Court instructed the jury on
its oral amendment defense – the jury would have found that Evalueserve performed its
obligations under the orally amended agreement by transferring Mindspirit’s stock options to
Gupta and Kumar. (Def. Br. (Dkt. No. 158) at 9)
“New York law generally recognizes and enforces [contractual clauses that
prohibit oral modification].” 7 Ba Chub Cay, LLC v. McCrory, No. 08 CIV. 5217 (JSR), 2009
WL 976826, at *2 (S.D.N.Y. Apr. 8, 2009) (citing N.Y. Gen. Oblig. Law § 15-301(1)).
“However, the parties may waive a no-oral modification clause, and an oral modification ‘may
be enforced even in the absence of a writing if either party has partially performed under the
7
This Court has previously ruled that New York law governs (Memorandum Opinion & Order
(Dkt. No. 90) at 26 n.7, 38-45), and Evalueserve’s new trial motion does not challenge the
application of New York law.
19
terms of that oral agreement.’” Assembly Point Aviation, Inc. v. Richmor Aviation, Inc., No.
1:13-CV-298 (FJS) (DJS), 2016 WL 7742808, at *6 (N.D.N.Y. Mar. 14, 2016) (quoting Merrill
Lynch Interfunding, Inc. v. Argenti, 155 F.3d 113, 121 (2d Cir. 1998)). “Under this doctrine, an
oral agreement may modify a preexisting written agreement if (1) there has been partial
performance of the oral modification and (2) that partial performance is unequivocally referable
to the oral modification – that is, the conduct constituting the alleged partial performance must
not be compatible with the written agreement.” Mooney v. AXA Advisors, L.L.C., 19 F. Supp.
3d 486, 504 (S.D.N.Y. 2014) (citing Rose v. Spa Realty Assocs., 42 N.Y.2d 338, 343-44 (1977)).
“‘To be enforceable, an oral modification must possess all of the elements
necessary to form a contract, including valid consideration.’” Baraliu v. Vinya Capital, L.P., 765
F. Supp. 2d 289, 298 (S.D.N.Y. 2011) (quoting Cohan v. Movtady, 751 F. Supp. 2d 436, 442
(E.D.N.Y. 2010)). “Under New York law, consideration is defined as ‘some right, interest, profit
or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility, given,
suffered, or undertaken by the other.’” Alpha Capital Anstalt v. Real Goods Solar, Inc., 311 F.
Supp. 3d 623, 630 (S.D.N.Y. 2018) (quoting Hamer v. Sidway, 124 N.Y. 538, 545 (1892)).
Evalueserve’s oral amendment affirmative defense fails as a matter of law for two
reasons. First, no reasonable juror could conclude that there was substantial performance of the
alleged oral modification because, as discussed above, there is no evidence that Evalueserve
performed by issuing stock options in the names of Gupta and Kumar. Given that none of the
480,000 options in dispute were ever issued to Gupta and Kumar, no reasonable juror could have
found that Evalueserve performed or substantially performed. See Triboro Quilt Mfg. Corp. v.
Luve LLC, No. 10 CV 3604 VB, 2014 WL 1508606, at *11 (S.D.N.Y. Mar. 18, 2014) (noting
that there is no “‘simple test for determining whether substantial performance has been
20
rendered,’” but that one factor is the “ratio of the performance already rendered to that
unperformed”) (quoting Hadden v. Consol. Edison Co. of New York, 34 N.Y.2d 88, 96 (1974)).
Second, no reasonable juror could find that the alleged oral amendment was
supported by consideration. See Ershow v. Site Holdings, Inc., No. 95 CIV. 2451 (RPP), 1995
WL 384457, at *4 (S.D.N.Y. June 28, 1995) (“[A]n agreement unsupported by consideration is
invalid. . . . Fresh consideration is required for an oral modification of a written contract. . . .”)
(citations omitted). Evalueserve has argued that there was consideration because Mindspirit
avoided an obligation to provide help and guidance to Evalueserve. (Def. Br. (Dkt. No. 158) at
10) But Chairman Aggarwal testified that Gupta provided Evalueserve with help and guidance –
including strategic advice and introductions to important potential clients – even after the alleged
oral amendment. (Tr. 878-80, 895 (Aggarwal)) Accordingly, the alleged oral amendment did
not relieve Mindspirit of any obligation owed to Evalueserve.
Evalueserve further contends that Mindspirit was an investment vehicle without
employees, and therefore the jury could infer that “Gupta was providing the advice and
introductions in his individual capacity rather than as an agent for Mindspirit.” (Def. Br. (Dkt.
No. 158) at 10) The evidence at trial showed, however, that – both before and after the alleged
oral modification – the parties expected Gupta, not Mindspirit, to assist Evalueserve. (Tr. 87680, 895 (Aggarwal)) And given that Mindspirit was at all times an investment vehicle without
employees, the only reasonable view of the evidence was that the parties understood that Gupta
would be providing “help and guidance” to Evalueserve as Mindspirit’s agent. (Tr. 895
(Aggarwal))
21
Citing Aggarwal’s testimony, Evalueserve contends that Gupta told Aggarwal that
the transfer of stock options into his name would help him avoid “future problems.” 8 (Def. Br.
(Dkt. No. 158) at 9) The trial evidence contains no explanation as to the “future problems”
Gupta was allegedly trying to avoid. In any event, any benefit to Gupta from the change in
option holder would not constitute consideration to Mindspirit.
Finally, Evalueserve argues that the alleged issuance of options to Gupta and
Kumar reduced Evalueserve’s profits. (Def. Br. (Dkt. No. 158) at 10) As an initial matter –
even if this were true – that effect would not constitute consideration flowing to Mindspirit. In
any event, there was no evidence at trial as to the relative cost to Evalueserve of issuing options
to Mindspirit as opposed to later transferring or re-issuing those same options to Gupta and
Kumar. The evidence cited by Evalueserve refers to the expense associated with issuing stock
options generally (id. (citing Tr. 904-05 (Aggarwal))), and Evalueserve cites no evidence
demonstrating that transferring or re-issuing the stock options to Gupta and Kumar was more
expensive than the original issuance of these same options to Mindspirit. In sum, no reasonable
juror could have found that the alleged oral amendment was supported by consideration.
Because there was no evidence at trial that (1) Evalueserve performed or
substantially performed under the alleged orally amended agreement, or (2) the alleged oral
modification was supported by consideration, Evalueserve was not entitled to a jury instruction
concerning its oral amendment affirmative defense. Harris, 770 F.3d at 238 n.9 (a party seeking
a jury instruction has the burden to present “‘evidence supporting the theory behind the
8
The transcript says “avoid any potential information” as opposed to “future problems” (Tr. 899
(Aggarwal)), but Evalueserve attributes this wording to a transcription error, and Mindspirit does
not argue otherwise. (Def. Br. (Dkt. No. 158) at 9 n.2; Pltf. Opp. (Dkt. No. 165) at 15)
22
instruction so that a question of fact may be presented to the jury’”) (quoting Anderson, 17 F.3d
at 557).
C.
Equitable Estoppel
Evalueserve contends that it relied on Gupta’s statements in issuing the stock
options in the names of Gupta and Kumar, and that Mindspirit should therefore be estopped from
seeking enforcement of the parties’ agreement. (Def. Br. (Dkt. No. 158) at 10; Def. Reply (Dkt.
No. 168) at 11) “[T]o succeed on the defense of equitable estoppel, defendants must establish
three elements. These are: ‘(1) a misrepresentation by the plaintiff, (2) reasonable reliance by
the defendant, and (3) prejudice.’” Johnson & Johnson v. Actavis Grp., No. 06 CIV. 8209
(DLC), 2008 WL 228061, at *9 (S.D.N.Y. Jan. 25, 2008), as corrected (Feb. 21, 2008) (quoting
Veltri v. Bldg. Serv. 32B-J Pension Fund, 393 F.3d 318, 326 (2d Cir. 2004)); see also Rich v.
Orlando, 128 A.D.3d 1330, 1331 (4th Dept. 2015) (“The elements pertaining to the party
asserting estoppel are (1) lack of knowledge of the true facts; (2) good faith reliance; and (3) a
change of position”).
Here, there is no evidence that Evalueserve changed its position in reliance on
Gupta’s alleged request to issue the options in his and Kumar’s name. As discussed above, there
is no evidence that Evalueserve ever actually issued stock options to Gupta and Kumar. See,
e.g., Reisler v. 60 Gramercy Park N. Corp., 88 A.D.2d 312, 317 (1st Dep’t 1982) (“no equitable
estoppel” where there was “no change of position” and “no performance”).
Moreover, any reliance by Evalueserve on Gupta’s alleged oral request to transfer
Mindspirit’s options to Gupta and Kumar, or re-issue them in the names of Gupta and Kumar,
would have been unreasonable. The Stock Option Grant Notice Evalueserve issued to Mindspirit
states that any amendments must be in writing. (PX 1 at DEF0000039) Moreover, Section 6(g)
23
of Evalueserve’s Equity Incentive Plan provides that “[a] nonstatutory Stock Option shall be
transferable to the extent provided in the Option Agreement” (PX 1 at DEF0000033), and the
Stock Option Agreement states that the “Option is not transferable.” 9 (PX 1 at DEF0000022)
Given that oral modifications and transfers are not permitted under the governing documents,
Evalueserve could not have reasonably relied on Gupta’s alleged request by telephone to transfer
Mindspirit’s options to Gupta and Kumar.
Courts addressing claims of equitable estoppel have repeatedly held that it is
unreasonable to rely on oral representations that contradict a written contract’s express terms. 10
See, e.g., Cent. New York Laborers’ Health v. JWJ Indus., Inc., No. 5:12-CV-1319 (NAM)
(DEP), 2015 WL 12564221, at *11 (N.D.N.Y. Mar. 5, 2015) (“[Defendant’s] . . . equitable
estoppel [argument] based on the oral modifications . . . is . . . unavailing. . . . Given the clear
language of the . . . contractual terms to which the parties were bound, it was unreasonable for
[defendant] to rely on any oral modification.”); King v. Unique Rigging Corp., No. 01-CV-3797
(DLI) (VVP), 2005 WL 2290585, at *4 (E.D.N.Y. Sept. 20, 2005) (“Defendants are not entitled
to an equitable estoppel defense. . . . It was unreasonable for defendants to rely on any supposed
oral modification . . . because the language in the [labor contract] clearly set forth contractual
terms, to which the parties were bound.”); 1407 Broadway Real Estate LLC v. Tsui, 36 Misc. 3d
9
Vollenweider testified that Evalueserve stock options do not become “live” until they receive
board and regulatory approval (Tr. 579-80 (Vollenweider)), and Evalueserve cites this testimony
in arguing that Evalueserve stock options are freely transferable prior to board and regulatory
approval. (Def. Br. (Dkt. No. 158) at 7) The stock option grant notice issued to Mindspirit
states, however, that the options are not transferable, and nothing in the grant notice suggests that
the restrictions on transferability only apply after board and regulatory approval. (PX 1 (Stock
Option Grant Notice))
10
Evalueserve complains that this Court’s bench ruling relies on promissory estoppel cases
rather than equitable estoppel cases. (Def. Br. (Dkt. No. 158) at 11) As the cases cited in this
Order demonstrate, courts have reached the same conclusion in the context of equitable estoppel.
24
1219(A), 959 N.Y.S.2d 90 (N.Y. Sup. Ct. 2012) (“The Court finds defendants’ argument
regarding the applicability of the doctrine of equitable estoppel insufficient to raise a triable issue
of fact. Defendants do not show reasonable reliance on the representations by plaintiff. . . .
[B]oth parties were involved in discussions about a modification of the lease. However, since
there was no written modification of the lease it was not reasonable for defendants to rely on
plaintiff’s oral representations[.]”).
Reliance on a telephone call from Gupta would have been all the more
unreasonable given that Gupta had no clear authority to transfer options away from Mindspirit.
Although Gupta facilitated Mindspirit’s investment in Evalueserve, Gupta had no ownership
stake in Mindspirit and no apparent authority to transfer its assets to himself. See Adriana Dev.
Corp. N.V. v. Gaspar, 81 A.D.2d 235, 237 (1st Dep’t 1981) (“Even a general power to an agent
does not include the power to convey his principal’s property to himself.”). Because no
reasonable juror could have found that Evalueserve relied – much less reasonably relied – on
Gupta’s alleged statements, Evalueserve was not entitled to a jury instruction concerning its
affirmative defense of equitable estoppel.
CONCLUSION
For the reasons stated above, Defendant Evalueserve’s motion for a new trial
(Dkt. No. 157) is denied. The Clerk of Court is directed to terminate the motion and to close this
case.
Dated: New York, New York
July 4, 2020
25
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