Haughton v. Cognisight, LLC et al

Filing 19

ORDER granting in part and denying in part defendants' 7 Motion to Dismiss for Failure to State a Claim. The motion is granted as to plaintiff's sixth cause of action, for an accounting, and that claim is dismissed. In all other respects, the motion is denied. Signed by Hon. David G. Larimer on 7/12/13. (EMA) (Main Document 19 replaced on 7/12/2013) (EAK).

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
_______________________________________________
JOHN HAUGHTON,

Plaintiff,
DECISION AND ORDER
13-CV-6010L
v.
COGNISIGHT, LLC,
GREATER ROCHESTER INDEPENDENT
PRACTICE ASSOCIATION,

Defendants.
________________________________________________
This case arises out of an arrangement–whether it was a “contract” or not is one of the
principal issues in this case–between plaintiff John Haughton and defendants, Greater Rochester
Independent Practice Association (“GRIPA”), and Cognisight, LLC. Defendants have moved to
dismiss the complaint for failure to state a claim upon which relief can be granted, pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure.

BACKGROUND

The facts alleged in the complaint, which for the purposes of deciding defendants’ motion
are accepted as true, are as follows. GRIPA is a for-profit joint venture of hospitals and physicians,
with a principal place of business in Monroe County, New York. Cognisight is a wholly-owned
subsidiary of GRIPA.
Plaintiff, a physician residing in Maryland, is a “nationally recognized health care quality and
technology expert ... .” Complaint ¶ 7. In 2006, GRIPA asked Dr. Haughton to assist it in

developing certain services that GRIPA wanted to offer to third parties, relating to reimbursement
for Medicare-covered services. Dr. Haughton agreed, and began providing such services to GRIPA.
Apparently the parties never entered into a formal, written contract governing plaintiff’s
services or what he was to receive in return. That was a decision they probably now regret. In
March 2007, however, GRIPA’s president, Greg Coughlin, did outline some of those matters in a
written business plan (“Business Plan”) for a new company, Cognisight, which was intended “to
provide Medicare Advantage Plans (MAPs) with the opportunity to receive the most appropriate
reimbursement from Medicare for each of its MA members.” Dkt. #17-1 at 3. In that plan, which
Coughlin presented to GRIPA’s board of directors, Coughlin stated in part that GRIPA was
“collaborating with John Haughton M.D., a nationally recognized health care quality and technology
expert,” whose expertise would assist GRIPA and Cognisight in connection with Cognisight’s
provision of Medicare-related services to its customers. Dkt. #11-1 at 2.1 The plan also referred to
Haughton as a “partner,” Dkt. #17-1 at 5, and to Cognisight’s “partnership” with him. Id. at 2, 4.
In the Business Plan, under the heading “Financial Plan,” Coughlin outlined Cognisight’s
projected revenues and expenses over the next three years. He also stated, “With the assumption of
profit sharing of 23% (15% to employees and eight percent to John Haughton), payouts will range
between $1.5 million and $10.3 million ... .” Dkt. #11-1 at 4. Notably, under “Forecast
Assumptions,” Coughlin said that “John Haughton receives eight percent of profits after all other
expenses.” Dkt. #11-1 at 6.
The parties’ relationship proceeded smoothly, at first. Dr. Haughton did provide various
services to Cognisight, for which he received payments of $250,000 in 2007, $153,000 in 2008, and
$478,000 in 2009. Complaint ¶¶ 19-22. Plaintiff alleges that he was informed by Cognisight that

1

On a motion to dismiss, the court may consider documents that are referred to in, and
integral to, the complaint. Playwell Toy, Inc. v. Bureau Veritas Consumer Products Services,
Inc., No. 09-CV-0704, 2007 WL 2892031, at *9 (W.D.N.Y. Sept. 28, 2007) (citing Chambers v.
Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002)).
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the 2008 and 2009 payments represented 8% of Cognisight’s net profits for those calendar years.
Complaint ¶¶ 21, 23.
In late 2010, the first signs of trouble appeared. Cognisight’s president and executive vice
president were terminated, and additional employee terminations followed. Complaint ¶ 26. Dr.
Haughton continued to provide services to Cognisight, however, and in early 2011, Cognisight’s new
management team told him that his 2010 compensation would be calculated following the
completion of an internal audit. Complaint ¶ 30.
As months passed and no payment was forthcoming, Haughton became increasingly
concerned, particularly since Cognisight’s overall fortunes had taken a downturn. In response to
Haughton’s inquiries, Cognisight’s new president, Joseph Vasile, sent Haughton a letter, dated
September 22, 2011,2 which stated in part, “[W]e want to understand our current relationship with
you and the likelihood for an on-going relationship.” Stating that Cognisight “recognize[d] that
[Haughton] ... ha[d] made the following contributions to the company in the past few years,” Vasile
went on to list a number of services that Haughton had provided to Cognisight, such as helping to
develop and refine Cognisight’s business model and software, meeting with clients, and other related
services.
After reciting the payments that Cognisight had made to Haughton in the three preceding
years, Vasile then stated, under the heading, “Evaluation of Association During 2010,” that in 2000,
Haughton had attended meetings and a conference, participated in phone discussions with Cognisight
staff, and had been listed as “Consulting Medical Director” on some client contracts. “Accordingly,”
Vasile wrote, “we would like to pay a fee of $25,000 for your work in the year 2010.” He did not
explain how he or anyone else had arrived at that figure. Vasile also stated that Cognisight wanted

2

Since this letter effectively marked the end of Haughton’s and defendants’ relationship, it
began, appropriately enough, with the salutation, “Dear John.” See
http://www.worldwidewords.org/qa/qa-dea5.htm (explaining how the term “Dear John letter”
came to refer to “a letter from a woman to a boyfriend or husband saying that all is over between
them ... .”
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Haughton to continue to “provide services in an expert role,” with his compensation to be based on
client growth and revenue. Vasile expressed his hope that the parties could “achieve a mutually
beneficial arrangement ... .”
Apparently Haughton did not accept the $25,000 payment that was offered him, nor did the
parties’ relationship continue. There is no indication that either side formally terminated their
relationship, but it appears that Haughton did not provide any services for Cognisight after he
received Vasile’s “Dear John” letter.
Plaintiff then brought this action in New York State Supreme Court in December 2012.
Defendants removed the action to this Court in January 2013, based on this Court’s diversity
jurisdiction under 28 U.S.C. § 1332(a)(1).
The complaint asserts nine causes of action: (1) for breach of contract, based on defendants’
failure to pay plaintiff 8% of Cognisight’s net profits for 2010; (2) for breach of contract, based on
defendants’ failure to pay plaintiff 8% of Cognisight’s net profits for 2011, or at least a pro rata
portion of those profits; (3) for breach of contract, based on defendants’ failure to pay plaintiff 8%
of Cognisight’s net profits of Cognisight that accrued after the termination of plaintiff’s relationship
with defendants, but related to services provided before that termination; (4) for breach of fiduciary
duty; (5) for unjust enrichment; (6) for an accounting of the profits that Cognisight earned with
respect to 2007, 2008, and 2009; (7) for damages based on theories of promissory estoppel and
detrimental reliance; (8) for 8% of the value of Cognisight’s business as of the date of the
termination of plaintiff’s relationship with Cognisight; and (9) as an alternative to the eighth cause
of action, for a declaration by the Court that plaintiff is entitled to 8% of the value of Cognisight
upon its sale.

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DISCUSSION

I. General Principles
In deciding a motion to dismiss a complaint for failure to state a claim upon which relief can
be granted, the court must accept all well-pleaded, factual allegations in the complaint as true and
draw all inferences in favor of the plaintiff. GE Investors v. General Elec. Co., 447 Fed.Appx. 229,
230 (2d Cir. 2011) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007)).
To survive a motion to dismiss brought pursuant to Rule 12(b)(6), the pleadings must contain
“enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570; see
also Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009) (stating that a claim will have “facial plausibility
when the plaintiff pleads factual content that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged”).

A complaint “that offers ‘labels and

conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do,’ ... [n]or does
a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal,
129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 555, 557, 127 S.Ct. 1955).
Nevertheless, it is clear from Twombly itself that the Supreme Court has not “imposed a
heightened standard that requires a complaint to include specific evidence, factual allegations in
addition to those required by Rule 8, and declarations from the persons who collected the evidence
... .” As noted in Twombly, Rule 8(a)(2) of the Federal Rules of Civil Procedure “requires only ‘a
short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to give
the defendant fair notice of what the ... claim is and the grounds upon which it rests.” 550 U.S. at
555 (other internal quotation marks omitted).
What is necessary, then, is not “detailed factual allegations,” but more than “labels and
conclusions ... .” The ultimate question is whether the complaint’s factual allegations are “enough
to raise a right to relief above the speculative level,” i.e., enough to make the claim “plausible.”
Twombly, 550 U.S. at 555, 570.
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II. Statute of Frauds
In support of their motion to dismiss, defendants contend that plaintiff’s contract claims are
barred by New York’s Statute of Frauds, which provides that any “agreement, promise or
undertaking” that “[b]y its terms is not to be performed within one year from the making thereof,”
as well as any “contract to pay compensation for services rendered in negotiating ... a business
opportunity,” “is void, unless it or some note or memorandum thereof be in writing, and subscribed
by the party to be charged therewith, or by his lawful agent ... .” N.Y. Gen. Ob. L. § 5-701(a)(1),
(10). Defendants contend that the alleged contract here falls into both those categories, i.e., that it
could not be performed within a year and that it was an agreement to negotiate a business
opportunity, and that it is void because it was not reduced to writing.
With respect to the one-year provision of subsection (a), “the law is clear that for a contract
to fall within the Statute of Frauds, performance of the contract within one year must be virtually
impossible.” Cleveland Wrecking Co. v. Hercules Const. Corp., 23 F.Supp.2d 287, 300 (E.D.N.Y.
1998) (emphasis added), aff’d, 198 F.3d 233 (2d Cir. 1999). See, e.g., Ohanian v. Avis Rent A Car
Sys., Inc., 779 F.2d 101, 106 (2d Cir. 1985) (“The one-year provision has been held not to preclude
an oral contract unless there is not ... the slightest possibility that it can be fully performed within
one year”); Stillman v. Kalikow, 22 A.D.3d 660, 662 (2d Dep’t 2005) (“The statute encompasses
only those agreements which, by their terms, ‘have absolutely no possibility in fact and law of full
performance within one year’”) (quoting D & N Boening v. Kirsch Beverages, 63 N.Y.2d 449, 454
(1984)).
“Thus, it matters not whether it is ‘unlikely or improbable’ that the agreement can be
performed within one year, because the ‘critical test’ is whether ‘by its terms the agreement is not
to be performed within a year.’” Klagsbrun v. Rose, No. 93 CIV. 7709, 1995 WL 43664, at *4
(S.D.N.Y. Feb. 3, 1995) (quoting Festa v. Gilston, 183 A.D.2d 525, 526 (1st Dep’t 1992), and
Freedman v. Chemical Constr. Corp., 43 N.Y.2d 260, 265 (1977)).

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The alleged contract here did not have any fixed duration, or termination date. Whether the
contract is viewed as creating an employment relationship, a partnership, or a joint venture, it is
therefore presumed to have been terminable at will. See LoGerfo v. Trustees of Columbia University
in City of New York, 35 A.D.3d 395, 396 (2d Dep’t 2006) (“whether it gave rise to an at-will
employment relationship or to a relationship in the nature of a joint venture or partnership, [parties’]
relationship was terminable at will by either party,” since it “lacked a definite term of duration”);
Doynow v. Nynex Pub. Co., 202 A.D.2d 388, 388 (2d Dep’t 1994) (“Absent an agreement
establishing a fixed duration or a limitation by express agreement, employment by a private employer
is presumed to be at will, and terminable by either party at any time”) (citing Sabetay v. Sterling
Drug, 69 N.Y.2d 329 (1987)).
A contract that is terminable at will is not subject to the Statute of Frauds. See Gizara v. New
York Times Co., 80 A.D.3d 1026, 1028 (3d Dep’t 2011) (“The statute of frauds is not implicated in
the case of oral agreements that are terminable at will because such agreements are capable of
completion within one year”) (citing D & N Boening, 63 N.Y.2d at 456). For that same reason,
courts generally hold that “[t]he statute of frauds is inapplicable to an agreement to create a joint
venture or partnership because an oral agreement for an indefinite period creates a partnership or
joint venture at will.” Moses v. Savedoff, 96 A.D.3d 466, 469 (1st Dep’t 2012) (holding that “the
parties’ alleged agreement to share in the profits of certain cases, when reasonably interpreted, could
have been performed within one year”).
As stated, the parties’ agreement had no specific end point–neither a particular date nor some
identifiable task or goal to be accomplished. It was therefore terminable at will, and outside the
Statute of Frauds. The fact that the parties’ relationship actually lasted longer than a year does not
alter that result. See GB Marketing USA Inc. v. Gerolsteiner Brunnen GmbH & Co., 782 F.Supp.
763, 777 (W.D.N.Y. 1991) (“The fact that an alleged oral contract in fact lasted more than one year
does not mean that it violated the Statute of Frauds, so long as nothing in its terms barred
performance within a year”) (citing cases).
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Although defendants’ arguments concerning the Statute of Frauds appear unavailing, the
issue presented by defendants’ motion is not whether their Statute of Frauds defense is defective, as
a matter of law, but whether plaintiff’s claims are meritless, as a matter of law. As to that latter
question, even if there were some doubt about the matter, I would at the least find that there are
issues of fact that preclude dismissal. See Cron v. Hargro Fabrics, Inc., 91 N.Y.2d 362, 371 (1998)
(reversing dismissal of complaint where plaintiff alleged facts which, if true, supported the
conclusion that each party’s contractual performance would not have necessarily extended beyond
a year); see also Stillman v. Kalikow, 22 A.D.3d 660, 662 (2d Dep’t 2005) (fact question as to
whether alleged agreement could be performed within one year precluded summary judgment based
on statute of frauds).
For similar reasons, I also deny the motion to dismiss insofar as it is based on the statute’s
“business opportunity” provision, Gen. Ob. L. § 5-70(a)(10). For one thing, it is not clear at this
point precisely what Haughton’s duties were supposed to consist of, but they seem to have gone well
beyond, if they even included, merely negotiating a business opportunity. The Business Plan
indicated that Haughton would “provide[] support in the formulation of the underlying specific logic
of the product from a clinical standpoint, in compliance with Federal Guidelines ... .” The plan did
state that Haughton’s “relationships [within the health care industry] will provide a significant
number of potential customers for Cognisight, LLC,” Dkt. #17-1 at 5, but even that statement does
not explicitly state that he was to negotiate a particular business opportunity.
Likewise, Vasile’s September 22, 2011 letter to Haughton, which recited the services that
Haughton had rendered to Cognisight since 2007, stated that Haughton had been “[a]vailable as the
Consulting Medical Director, for Cognisight,” that he had “[h]elp[ed] develop and refine the
business model,” “[h]elp[ed] research, develop and refine the analytic software,” “[h]elp[ed]
incorporate new CMS guidelines into operation,” and met with existing clients to discuss various
issues. Dkt.#17-1 at 17-18. Vasile did state that Haughton had been “[i]nstrumental in Cognisight

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landing [a particular] account,” id. at 18, but it is not clear from the letter exactly what Haughton did
in that regard.
It is far from clear, then, whether the parties, at the time they entered into the alleged contract,
mutually envisioned that Haughton would be expected to negotiate any business opportunities for
Cognisight. The bulk of his duties seem to have been related to other matters. See Super v.
Abdelazim, 108 A.D.2d 1040, 1041-42 (3d Dep’t 1985) (“The record contains allegations which, if
believed by the trier of fact, demonstrate that plaintiff’s role was more extensive than merely
negotiating a business opportunity; rather, he was to render a wide variety of services, making his
claim broad enough to survive the limitations of General Obligations Law § 5-701(a)(10)”).
In addition, although “[a]s a general rule, if part of an entire contract is void under the statute
of frauds, the whole contract is void,” courts have also held that “where an oral agreement is a
severable one, ... that part which, if standing alone, is not required to be in writing, may be enforced,
provided such apportionment of the agreement may be accomplished without doing violence to its
terms or making a new contract for the parties.” Apostolos v. R.D.T. Brokerage Corp., 159 A.D.2d
62, 65-66 (1st Dep’t 1990); accord Dickenson v. Dickenson Agency, Inc., 127 A.D.2d 983, 984 (4th
Dep’t 1987). Just as it remains to be seen exactly what Haughton’s duties were expected to be, so
it is not clear at this point whether any agreement regarding the negotiation of business opportunities
might be severable from the other parts of the contract. See Oxyn Telecomm’s, Inc. v. Onse Telecom,
No. 01 Civ. 1012, 2003 WL 22271224, at *5 (S.D.N.Y. Sept. 30, 2003).

III. Writing Requirement
Even if the Statute of Frauds does apply to the alleged contract here, I find that plaintiff has
presented enough to show that the alleged contract was reduced to writing, to survive a motion to
dismiss. The Business Plan and Vasile’s September 22, 2011 letter to Haughton, taken together,
could be found to constitute sufficient written evidence of a contract to satisfy the Statute of Frauds.

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Several general principles bear upon this issue. First, the statute’s requirement of a writing
does not mean that the contract must be set forth in a single, formally written document. “The statute
of frauds does not require the ‘memorandum ... to be in one document. It may be pieced together
out of separate writings, connected with one another either expressly or by the internal evidence of
subject-matter and occasion.’” Marcella v. ARP Films, Inc., 778 F.2d 112, 116 (2d Cir. 1985)
(quoting Crabtree v. Elizabeth Arden Sales Corp., 305 N.Y. 48, 54 (1953)). Accord Wellnauer
Trading Co. v. Annis, 516 F.2d 878, 880 (2d Cir. 1975).
Second, the fact that one of the writings, Vasile’s letter, was written around the time of, or
even after, the termination of the parties’ relationship, does not prevent it from constituting a writing
for purposes of the Statute of Frauds. “[D]ocuments need not be in existence at the time the contract
is made but may be supplied at a later date.” Weitnauer Trading Co. v. Annis, 516 F.2d 878, 880 (2d
Cir. 1975). See, e.g., Merschrod v. Cornell Univ., 139 A.D.2d 802, 805 (3d Dep’t 1988)
(requirement of writing for university’s alleged two-year contract to employ plaintiff could be
satisfied by eight documents which, when explained and connected and combined with oral
testimony, were legally sufficient to pose a factual question as to whether employment contract
existed). The question is whether the writings sufficiently set forth the terms of the agreement.
Where two or more documents are alleged, together, to satisfy the writing requirement, they
must “refer to the same subject matter, together contain all the material terms, and at least one of
[them must be] signed or prepared by the party to be charged.” United Resource Recovery Corp. v.
Ramko Venture Management, Inc., 584 F.Supp.2d 645, 654 (S.D.N.Y. 2008) (internal quote
omitted). Accord Direct Investment Partners AG v. Cerberus Global Investments, LLC, No. 07 CIV.
3310, 2008 WL 355467, at *7 (S.D.N.Y. Feb. 7, 2008). Here, the Business Plan did set forth, in
some detail, the services that plaintiff would be expected to provided to Cognisight, and it also
indicated that he would be entitled to profit sharing in the amount of 8%. Dkt. #11-1 at 4.
Vasile’s “Dear John” letter plainly related to the same subject matter as the Business Plan,
insofar as Haughton’s services are concerned. That letter was also signed by Vasile, and between
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the two of them, they appear to lay out the material terms of the alleged contract, including plaintiff’s
general duties and his compensation. That is not to say that the documents are crystal clear as
regards all those matters, but I find that plaintiff has sufficiently alleged at the pleading stage that
there was a meeting of the minds as to the parties’ respective obligations, and that those obligations
were set forth in these writings. After all, there appears to be no doubt that plaintiff was paid in prior
years at precisely the rate, 8%, mentioned in the Business Plan.
At the very least, this presents enough of a fact question to defeat a motion to dismiss. See
Strain v. Strain, 228 A.D.2d 491, 491 (2d Dep’t 1996) (“Whether these documents are sufficient to
satisfy the Statute of Frauds and establish a binding agreement with respect to the sale of the
company containing all of the essential terms on which there was agreement raises material triable
issues of fact which preclude an award of summary judgment”); Merschrod v. Cornell Univ., 139
A.D.2d 802, 805 (3d Dep’t 1988) (“At trial plaintiff produced eight documents which, when
explained, connected and combined with oral testimony, were legally sufficient to pose a factual
question as to whether an employment contract existed”); Paper Corp. of U.S. v. Schoeller Technical
Papers, Inc., 724 F.Supp. 110, 118 (S.D.N.Y. 1989) (factual issues existed as to whether writings
satisfied Statute of Frauds).

IV. Evidence of a Contract
Defendants further contend that, aside from the Statute of Frauds, plaintiff has simply failed
to plead a valid cause of action for breach of contract. To state a claim for breach of contract under
New York law, the complaint must allege the existence of an agreement, plaintiff’s performance of
his obligations under the agreement, defendants’ nonperformance, and resulting damages. Harsco
Corp. v. Segui, 91 F.3d 3\37, 348 (2d Cir. 1996); Elisa Dreier Reporting Corp. v. Global NAPS
Networks, Inc., 84 AD3d 122, 127 (2d Dep’t 2011).
Defendants assert that plaintiff’s allegations are vague and conclusory, and that they fail to
specify the exact terms of the contract that are alleged to have been breached. Again, though, the
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allegations, and the relevant documents, do set forth the general terms of the agreement, and the
respective obligations of the parties. At the pleading stage, more than that is not required. See
Comfort Inn Oceanside v. Hertz Corp., No. 11-CV-1534, 2011 WL 5238658, at *6 (E.D.N.Y. Nov.
1, 2011) (“While the amended complaint is devoid of specifics, ... those specifics are not required
in pleading a breach of contract action”); S.E.C. v. Lee, 720 F.Supp.2d 305, 331-32 (S.D.N.Y. 2010)
(contract claim was separate and distinct from fraud claim, and was not subject to the heightened
pleading standard of Rule 9(b)).
Furthermore, the parties did allegedly perform, for a time at least, according to the terms of
the contract as alleged by plaintiff and as set out in the relevant documents. That includes
defendants’ payment to Haughton of 8% of Cognisight’s net profits, at least for the years 2008 and
2009.
“The parties’ course of conduct under a contract is persuasive evidence of their agreed
intention.” Carol B. v. Sanford B., 54 A.D.3d 653, 654 (1st Dep’t 2008). See also Brown Bros. Elec.
Contractors, Inc. v. Beam Const. Corp., 41 N.Y.2d 397, 399 (1977) (“In determining whether the
parties entered into a contractual agreement and what were its terms, it is necessary to look ... to the
objective manifestations of the intent of the parties as gathered by their expressed words and deeds”);
Gulf Ins. Co. v. Transatlantic Reinsurance Co., 69 A.D.3d 71, 85 (1st Dep’t 2009) (“How the parties
perform a contract necessarily is manifested after execution of the contract, but their performance
is highly probative of their state of mind at the time the contract was signed”); Gurney’s Inn Resort
& Spa Ltd. v. Benjamin, 878 F.Supp.2d 411, 430 (E.D.N.Y. 2012) (“It is well settled that ‘[i]ntent
can be gleaned from many sources, including ... the manner in which the provision has been applied
in practice over time’”) (quoting Congregation Yetev Lev D’Satmar, Inc. v. Kahana, 31 A.D.3d 541,
548-49 (2d Dep’t 2006), aff’d 9 N.Y.3d 282 (2007)); Rondout Valley Central School Dist. v. Coneco
Corp., 339 F.Supp.2d 425, 436 (N.D.N.Y. 2004) (contractor’s performance of maintenance services
for several years constituted implicit admission that parties’ contract required contractor to perform
such services).
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Given the Business Plan’s reference to “eight percent to John Haughton,” plaintiff’s
allegation that he was told by defendants that his payments for 2008 and 2009 represented 8% of
Cognisight’s net profits for those years does tend to show that the parties had agreed that he would
be so compensated for his services.
Those allegations also support plaintiff’s claim that defendants breached the contract by
failing to pay him 8% of Cognisight’s net profit for 2010. Vasile’s offer of $25,000 lacked any
explanation of where that figure came from. On the face of it, it seems to have been nothing more
than a purely subjective valuation of the worth to Cognisight of Haughton’s services in 2010. If a
factfinder agrees with plaintiff that the parties did have a contract calling for payment at the 8% rate,
then, defendants could be found to have breached that provision.
None of this means, of course, that plaintiff will ultimately prevail. The issue before the
Court now is simply whether plaintiff has alleged enough facts to make out a facially valid claim for
breach of contract. I conclude that he has clearly done so.

V. Particular Contract Claims
The Court’s finding that plaintiff has sufficiently alleged that there was a contract between
him and Cognisight, and that the contract is not barred by the Statute of Frauds, does not necessarily
mean that each of his contract claims should survive. Each cause of action must still be assessed on
its own merits.
To the extent that plaintiff alleges that defendants breached their contractual obligations to
him by failing to pay him 8% of Cognisight’s net profit during the period in which Haughton
provided services for Cognisight, I conclude that he has stated valid contract claims. Plaintiff has
clearly alleged that the parties had an agreement that he would be compensated at a certain rate, and
that defendants failed to do so. Thus, the first and second causes of action can survive.
I also find that the third cause of action, which alleges that plaintiff is contractually entitled
to 8% of Cognisight’s net profits that accrued after the termination of the parties’ relationship,
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sufficiently alleges a claim at the pleading stage. Defendants contend that the complaint fails to
allege facts supporting this claim, but the fact that the parties’ contract may have been silent or
ambiguous with respect to what profits would be included in the 8% calculation does not mean that
no contract existed in that regard. Furthermore, to the extent that the alleged contract could be found
to be ambiguous on this score, “ambiguous contract terms are interpreted against the drafter.”
Nocella v. Fort Dearborn Life Ins. Co. of New York, 99 A.D.3d 872, 876 (2d Cir. 2012) (citing
Guardian Life Ins. Co. of Am. v. Schaefer, 70 N.Y.2d 888, 890 (1987)).
The eighth and ninth causes of action, alleging that plaintiff is entitled to 8% of the value of
Cognisight as of the date of termination of the parties’ relationship, or upon the sale of Cognisight,
present a closer call. The complaint alleges that under the parties’ agreement, plaintiff was to
receive, in addition to his profit-sharing payments, “warrants that would be exercisable on the sale
of [Cognisight] that would provide Dr. Haughton with 8% of the net value of the ... company upon
its sale by GRIPA.” Dkt. #1-2 at 4, ¶ 12.
Plaintiff has not identified, nor has the Court discovered, any mention in the Business Plan
of such warrants, nor does plaintiff allege that he ever received such warrants in writing. The fact
remains, however, that he has alleged that the parties agreed on this matter, and the Court cannot
simply ignore that allegation. In addition, in a letter to “GRIPA leadership” dated June 6, 2011,
however,3 Haughton stated, “I am concerned that the company ... may have lost sight of its
obligations to me. As you know, those obligations include not only the annual [8%] payment
described above, but also the right to be paid 8% of the proceeds from the sale of [the] business if
and when the same takes place.” Dkt. #17-1 at 22.
That is some indication, then, that plaintiff, at least, believed that the parties’ agreement
encompassed such a provision. Certainly plaintiff’s letter could also be seen as purely self-serving,
and it is not conclusive proof of the matter, but such proof is not required at this point. In short,
3

The letter is referenced in paragraph 36 of the complaint, see Dkt. 1-2 at 8, and thus may
be considered on a motion to dismiss.
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whether it was the parties’ understanding that plaintiff would be entitled to 8% of the value of
Cognisight upon its sale cannot be resolved on a motion to dismiss.
Admittedly, the allegations in support of some of these claims are thin, and they may well
not survive a later motion for summary judgment, after a period of discovery. In deciding
defendants’ motion to dismiss, however, the Court’s task is not to weigh the evidence, but to
determine whether, “accept[ing] the allegations contained in the complaint as true, and draw[ing]
all reasonable inferences in favor of the non-movant,” the plaintiff has stated a facially valid claim.
Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir.1994). See also Todd v. Exxon Corp., 275 F.3d 191,
198 (2d Cir. 2001) (issue on a motion to dismiss is “not whether a plaintiff will ultimately prevail
but whether the claimant is entitled to offer evidence to support the claims”) (internal quotations
omitted). Though I have some doubt about the ultimate merits of these claims based on the alleged
warrants, I will deny defendants’ motion to dismiss them.

VI. Quasi-Contractual and Noncontractual Claims
In addition to his contract claims, plaintiff has asserted claims for breach of fiduciary duty,
unjust enrichment, an accounting, and for promissory estoppel. Defendants seek dismissal of all
these claims, on various grounds.
Defendants contend that the claims for unjust enrichment and promissory estoppel should
be dismissed on the ground that such claims cannot be used to avoid the Statute of Frauds. Since
the Court has already ruled that the Statute of Frauds does not bar plaintiff’s contract claims, that
does not provide a basis for dismissal of these claims.4
4

The existence of a valid contract also bars quasi-contractual claims. See IDT Corp. v.
Morgan Stanley Dean Witter & Co., 12 N.Y.3d 132, 142 (2009) (“Where the parties executed a
valid and enforceable written contract governing a particular subject matter, recovery on a theory
of unjust enrichment for events arising out of that subject matter is ordinarily precluded”).
Defendants, who deny the existence of a valid contract with plaintiff, do not appear to rely on
that ground, and in any event plaintiff may plead contract and noncontract claims in the
alternative. See, e.g., Bushkin Associates, Inc. v. Raytheon Co., 815 F.2d 142, 149 (1st Cir. 1987)
(continued...)
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Defendants also contend that the promissory estoppel claim must be dismissed because
plaintiff has failed to allege a clear and unambiguous promise.5 See Kavitz v. IBM Corp., 458
Fed.Appx. 18, 20 (2d Cir. 2012). Plaintiff, however, has alleged that after the Business Plan was
approved by GRIPA’s Board of Directors, “GRIPA’s President confirmed to Dr. Haughton his role
as ‘founder’ and ‘partner,’ his 8% profits interest and his 8% interest in ‘shared value built.’” Dkt.
#1-2 at 4 ¶ 5. Even post-Twombly, plaintiff is not required to plead specific evidence at to this claim,
and I find that plaintiff has adequately alleged a promise in this regard.
With respect to plaintiff’s claim for breach of fiduciary duty, defendants argue that plaintiff
has failed to allege facts to support his allegation of a fiduciary relationship between him and
defendants, and that he has not alleged the manner in which that relationship was allegedly breached.
As stated, the Business Plan did use the terms “partner” and “partnership” when referring to
Haughton and describing Cognisight’s relationship with him. Dkt. #17-1 at 2-5. In general, “[t]he
members of a partnership owe each other a duty of loyalty and good faith, and [a]s a fiduciary, a
partner must consider his or her partners’ welfare” in conducting the business of the partnership.
Gibbs v. Breed, Abbott & Morgan, 271 A.D.2d 180, 184 (1st Dep’t 2000); see also Maillet v.
Frontpoint Partners, L.L.C., No. 02 CIV. 7865, 2003 WL 21355218, at *4 (S.D.N.Y. June 10, 2003)
(“It is well settled ... that a partner in an organization owes a fiduciary duty of loyalty to fellow
partners in that organization”); Zeising v. Kelly, 152 F.Supp.2d 335, 347 (S.D.N.Y. 2001)
(“coventurers, like co-partners, owe each other the finest loyalty and the utmost good faith
throughout the course of the enterprise”).
4

(...continued)
(“appellants were certainly entitled to plead in the alternative, arguing a quantum meruit theory
as well as an express contract theory”).
5

The complaint frames this cause of action as based on “the doctrines of promissory
estoppel and/or detrimental reliance.” Dkt. #1-2 at 10, ¶ 55. Detrimental reliance, however, is
not a separate ground for recovery, but an element of a claim for promissory estoppel. See, e.g.,
Ashland Inc. v. Morgan Stanley & Co., Inc., 652 F.3d 333, 339 (2d Cir. 2011); Thome v.
Alexander & Louisa Calder Foundation, 70 A.D.3d 88, 105 (1st Dep’t 2009), leave to appeal
denied, 15 N.Y.3d 703 (2010).
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Coughlin’s use of such terminology is not necessarily determinative of the actual nature of
plaintiff’s status or relationship with respect to Cognisight, and Coughlin may well have used those
words loosely. This is, nonetheless, some indication that a fiduciary relationship may have existed
among the parties here.
In addition, the Court cannot rule as a matter of law at this juncture that plaintiff’s allegations
concerning defendants’ failure or refusal to pay him 8% of Cognisight’s net profits, in contravention
of the parties’ understanding and past practice, could not constitute a breach of fiduciary duty.
Again, this claim may be subject to dismissal at some point, either on the merits or as duplicative
of plaintiff’s contract claims, but I am not prepared to dismiss it on a Rule 12(b)(6) motion.
As to plaintiff’s claim for an accounting, to make out such a claim, plaintiff must allege (1)
a fiduciary relationship with defendants (2) involving the entrustment of money or property, (3) that
no other remedy exists, and (4) that plaintiff demanded and was refused an accounting. In re Mary
XX, 33 A.D.3d 1066, 1068 (3d Dep’t 2006); see also Kastle v. Steibel, 120 A.D.2d 868, 869 (3d
Dep’t 1986) (“In order to be entitled to an equitable accounting, plaintiff must prove a confidential
relationship which induced him to entrust Steibel with money or property and that no adequate legal
remedy exists”).
Where parties have engaged in a joint venture, they generally have a right to an accounting
upon dissolution of the venture. See, e.g., Scholastic, Inc. v. Harris, 259 F.3d 73, 90 (2d Cir. 2001)
(“Even if Scholastic already possesses detailed financial information regarding the joint venture,
there is nevertheless still ‘an absolute right to an accounting’”) (quoting Koppel v. Wien, Lane &
Malkin, 125 A.D.2d 230, 234 (1st Dep’t 1986). In addition, an accounting may be warranted even
absent dissolution “where a partner alleges a breach of fiduciary duty or a wrongful exclusion, when
such is provided for by agreement, or where otherwise ‘just and reasonable.’” Id. at 91 (quoting
N.Y. Part. L. §§ 43, 44).
Plaintiff, however, seeks an accounting only for the 2007, 2008 and 2009 calendar years, and
as to those years, he has not alleged any facts showing a basis for an accounting. There is no
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indication that he ever doubted or had reason to doubt that he was in fact paid 8% of Cognisight’s
net profits for those years; indeed, it was defendants’ unexpected failure to do so for 2010–contrary
to their past practice–that prompted this lawsuit. In addition, there is no allegation that plaintiff ever
demanded an accounting for those prior years, nor is there any basis for finding that plaintiff lacks
an adequate legal remedy. If plaintiff was entitled to 8% of Cognisight’s profits, as he claims, he
may recover the amounts owed him through his other claims in this action. This cause of action is
therefore dismissed.

CONCLUSION

Defendants’ motion to dismiss the complaint (Dkt. #7) is granted in part and denied in part.
The motion is granted as to plaintiff’s sixth cause of action, for an accounting, and that claim is
dismissed. In all other respects, the motion is denied.
IT IS SO ORDERED.

_______________________________________
DAVID G. LARIMER
United States District Judge
Dated: Rochester, New York
July 12, 2013.

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