FILED: NEW YORK COUNTY CLERK 12/01/ :18 PM INDEX NO /2016 NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 12/01/2016

Transcription

1 FILED: NEW YORK COUNTY CLERK 12/01/ :18 PM INDEX NO /2016 NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 12/01/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK X CARL GRIMSTAD, : : Plaintiff, : : v. : : IPAYMENT HOLDINGS, INC. and : IPAYMENT, INC., : : Defendants. : X Index No.: /2016 Motion Seq. 002 DEFENDANTS REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF THEIR MOTION TO DISMISS THE COMPLAINT WILLKIE FARR & GALLAGHER LLP James C. Dugan Todd G. Cosenza 787 Seventh Avenue New York, New York (212) Attorneys for Defendants ipayment Holdings, Inc. and ipayment, Inc. 1 of 20

2 TABLE OF CONTENTS PRELIMINARY STATEMENT...1 ARGUMENT...3 I. THE BOARD S DECISION TO CURTAIL PLAINTIFF S DUTIES AS CEO DID NOT BREACH THE EMPLOYMENT AGREEMENT....3 a. The Employment Agreement, By Its Plain Language, Requires Plaintiff To Take Direction From The Board During The 90 Day Notice Period....3 b. The Employment Agreement, When Read Together With The Company s Bylaws, Further Underscores That Plaintiff Is Subject To The Direction And Control Of The Board....5 II. THE COMPANY DID NOT BREACH THE EMPLOYMENT AGREEMENT a. The Company Provided Plaintiff With The Proper 90-Day Notice Period As Required By Section 5(b) Of The Employment Agreement b. The Employment Agreement Does Not Contain A Provision That Entitles Plaintiff To Exercise The Powers Of CEO During The 90-Day Notice Period III. PLAINTIFF DOES NOT ADEQUATELY PLEAD DAMAGES IV. SECTION 10 OF THE EMPLOYMENT AGREEMENT HAS NOT BEEN BREACHED CONCLUSION...15 i 2 of 20

3 TABLE OF AUTHORITIES Cases Page(s) Bank of N.Y Mellon v. WMC Mortg., LLC., 136 A.D.3d 1, 22 N.Y.S.3d 3 (1st Dep t 2015)...11 CanWest Global Commc ns Corp. v. Mirkaei Tikshoret Ltd. 9 Misc. 3d 845, 804 N.Y.S.2d 549 (Sup. Ct. N.Y. Cty. 2005)...14 CCG Assocs. I v. Riverside Assocs., 157 A.D.2d 435, 556 N.Y.S.2d 859 (1st Dep t 1990)...7 Chimart Assocs. v. Paul, 66 N.Y.2d 570, 489 N.E.2d 231, 498 N.Y.S.2d 344 (1986)...7 Commander Oil Corp. v. Advance Food Serv. Equip. 991 F.2d 49 (2d Cir. 1993)...6, 7, 8 Crossmar, Inc. v. PortfolioScope, Inc., 307 A.D.2d 843, 762 N.Y.S.2d 878 (1st Dep t 2003)...7 Diamond Castle Partners IV PRC, L.P. v. IAC/InterActiveCorp, 82 A.D.3d 421, 918 N.Y.S.2d 73 (1st Dep t 2011)...11 Evans Prods. Co. v. Decker, 52 A.D.2d 991, 383 N.Y.S.2d 457 (3d Dep t 1976)...6 Four Cees Jewelry Inc. v Realty LLC, 11 Misc.3d 1056(A), 815 N.Y.S.2d 494, 2005 N.Y. Slip Op (U), 2005 WL (Sup. Ct. N.Y. Cty. Dec. 28, 2005)...13 Global Switching, Inc. v. Kasper, No. CV (CPS), 2006 WL (E.D.N.Y. Feb. 17, 2006) Goldman v. White Plains Ctr. for Nursing Care, LLC, 43 A.D.3d 251, 840 N.Y.S.2d 788 (1st Dep t 2007), aff d, 11 N.Y.3d 173 (2008)...7 Gordon v. Dino De Laurentiis Corp. 141 A.D.2d 435 (1st Dept.1988)...13 InKine Pharm. Co., Inc. v. Coleman 305 A.D.2d 151 (1st Dep t 2003)...12 Jackson & Wheeler, Inc. v. Vill. of Pleasantville, 56 A.D.3d 723, 869 N.Y.S.2d 122 (2d Dep t 2008)...7 ii 3 of 20

4 JFK Hotel Owner, LLC v. Hilton Hotels Corp., 42 Misc. 3d 1237(A), 986 N.Y.S.2d 866, 2014 WL (Sup. Ct. N.Y. Cty. Mar. 14, 2014)...13 Johnson v. Stanfield Capital Partners, 68 A.D.3d 628, 891 N.Y.S.2d 383 (1st Dep t 2009)...7 Mgmt. Techs., Inc. v. Morris, 961 F. Supp. 640 (S.D.N.Y. 1997)...10 NAB Constr. Corp. v. Consol. Edison Co. of N.Y. Inc., 222 A.D.2d 381, 636 N.Y.S.2d 37 (1st Dep t 1995)...7 Patrolmen s Benevolent Ass n of N.Y., Inc. v. City of N.Y., 46 A.D.3d 378, 848 N.Y.S.2d 80 (1st Dep t 2007)...11 PETRA CRE CDO , Ltd. v. Morgans Grp. LLC, 84 A.D.3d 614, 923 N.Y.S.2d 487 (1st Dep t 2011)...6 Quadrant Structured Prods. Co. v. Vertin, 23 N.Y.3d 549, 16 N.E.3d 1165, 992 N.Y.S.2d 687 (2014)...11 Rhythm & Hues, Inc. v. The Terminal Marketing Co., No. 01 Civ. 4697(AGS), 2002 WL (S.D.N.Y. June 19, 2002)...6, 7, 8 Rosenberg v. Home Box Office, Inc., 2006 N.Y. Slip Op (U), 2006 WL (Sup. Ct. N.Y. Cty. Jan. 30, 2006)...14 Rubin v. Nine W. Grp., Inc., No. 0763/99, 1999 WL (Sup. Ct. Westchester Cty. Nov. 3, 1999)...14 SBC Telecom Consulting Inc. v. Vega, 2015 NY Slip Op 32500(U) (Sup. Ct. N.Y. Cty. Dec. 2, 2015)...13 Schron v. Troutman Saunders LLP, 97 A.D.3d 87, 945 N.Y.S.2d 25 (1st Dep t 2012)...7 Tenzer, Greenblatt, Fallon & Kaplan v. Ellenberg, 199 A.D.2d 45, 604 N.Y.S.2d 947 (1st Dep t 1993) In re Trump, 194 A.D.2d 70, 605 N.Y.S.2d 248 (1st Dep t 1993)...11 Vision Dev. Grp. of Broward Cty., LLC v. Chelsey Funding, LLC, 43 A.D.3d 373, 841 N.Y.S.2d 272 (1st Dep t 2007)...7 VoiceAge Corp. v. RealNetworks, Inc., 926 F.Supp.2d 524 (S.D.N.Y. 2013)...6, 8 iii 4 of 20

5 Williams v. Mobil Oil Corp., 83 A.D.2d 434, 445 N.Y.S.2d 172 (2d Dep t 1981)...8 Wisdom Import Sales Co. v. Labatt Brewing Co. 339 F.3d 101 (2d Cir. 2003)...13 iv 5 of 20

6 Defendants ipayment Holdings, Inc. and ipayment, Inc. (collectively, ipayment or the Company ) 1 respectfully submit this reply memorandum of law in support of their Motion to Dismiss the Complaint (Compl., ECF No. 1), pursuant to CPLR PRELIMINARY STATEMENT Defendants remain willing to abide by the Employment Agreement and pay Plaintiff the amount owed for a release of claims, but Plaintiff nevertheless continues to pursue this meritless action. Notwithstanding his arguments to the contrary, Plaintiff fails to state a claim for breach of contract for three reasons: (1) under the plain language of the Employment Agreement, as well as the Bylaws, Plaintiff reports to the Board and must take direction from it, including the direction to curtail certain of his duties during the 90-day notice period if the Board sees fit to do so; (2) the Employment Agreement has not been breached because Plaintiff was given the 90 days notice to which he is contractually entitled (during which he remained employed as CEO); and (3) Plaintiff has failed to plead damages. Additionally, Plaintiff s claim for reimbursement of legal fees pursuant to Section 10 of his Employment Agreement fails because Section 10 only covers legal fees incurred in connection with a dispute arising under the Employment Agreement, which, by Plaintiff s own admission, is not the basis of his claim under Section 10. Plaintiff s arguments to the contrary are unavailing and, in fact, defy well-established New York corporate governance principles regarding the duties of boards of directors and CEOs. First, Plaintiff argues 2 that this Court should focus only on a few discrete phrases in Section 2 of the Employment Agreement in order to conclude that the Board s decision to deny Plaintiff access to the Company s offices, , and computer systems during the 90-day notice 1 Terms defined in Defendants Memorandum of Law in Support of their Motion to Dismiss the Complaint (Motion to Dismiss, ECF No. 37) will have the same meanings in this Reply Memorandum of Law. 2 Plaintiff s Opposition Brief ( Opp. ). 1 6 of 20

7 period somehow amounts to a breach of contract. However, Plaintiff s reading of the Employment Agreement is myopic and defies common sense. Plaintiff cannot have unlimited and irrevocable powers during the Employment Term. The Employment Agreement, as can be expected, provides that Plaintiff has certain duties as Chief Executive Officer of the Company, and has all authority and duties consistent with [that] position. The Employment Agreement does not provide a list of immutable powers, nor can any CEO who reports solely to a Board of Directors have any expectation of being guaranteed absolute power during the entirety of his or her term of employment. Indeed, as the Employment Agreement makes express, the list of the CEO s duties is on its face incomplete and non-exhaustive. Section 2 of the Employment Agreement refers to all authority and duties consistent with [the CEO] position including but not limited to the duties set forth in Section 2. This Section makes clear that Plaintiff: (2) shall report solely to the Board of Directors... ; and (3) shall have all authority and duties consistent with [the CEO] position, including but not limited to (A) having sole responsibility for the execution of the strategic direction of the Companies; (B) having sole responsibility for the deployment of the senior management team; and (C) being the sole person to which all key business functions of the Company shall report. (Compl. Ex. A, at 2, ECF No. 2 (emphasis added).) Here, the Board, acting through its Executive Committee, directed that Plaintiff not exercise certain of his duties throughout the 90- day notice period, even though he remained employed as CEO during that time. That is consistent with each of: (i) Plaintiff s duties as CEO, (ii) the Board s role as the ultimate manager of the Company, and (iii) the Employment Agreement read as a whole, which it must be under New York law. Moreover, New York law makes clear that documents executed contemporaneously and as part of the same transaction must be read together. Plaintiff s Employment Agreement and the 2 7 of 20

8 Company s amended and restated Bylaws were each executed on December 29, 2014 in connection with the same transaction the restructuring of the Company. When read together, the Employment Agreement and the Bylaws make unmistakably clear that one of Plaintiff s fundamental duties was to take direction from the Board, which is consistent with wellestablished New York law. Notwithstanding this, Plaintiff points to a supposedly ironclad merger clause in his Employment Agreement and asks the Court to hold contrary to precedent that such a clause effectively supersedes the Company s Bylaws. There are no cases cited by Plaintiff that support such a proposition. Furthermore, such a reading of the Employment Agreement would render the Bylaws provisions relating to the CEO s duties a nullity, which is contrary to bedrock principles of contract interpretation. Plaintiff misstates the law and fails to state a claim for breach of contract. The Complaint should be dismissed in its entirety. ARGUMENT I. THE BOARD S DECISION TO CURTAIL PLAINTIFF S DUTIES AS CEO DID NOT BREACH THE EMPLOYMENT AGREEMENT. a. The Employment Agreement, By Its Plain Language, Requires Plaintiff To Take Direction From The Board During The 90 Day Notice Period. In his opposition brief, Plaintiff points exclusively to a handful of phrases in Section 2 of the Employment Agreement and argues that these phrases, taken in isolation, amount to an inviolable guarantee that he effectively be allowed to exercise total control of the Company, unhindered by the oversight or supervision of the Board of Directors, presumably, until the day after the last day of his 90-day notice period. But this argument is contrary both to common sense and to the plain language of the Employment Agreement that Plaintiff signed. As a practical matter, it defies common sense that the Company would agree that its Board, precisely at the time when the Company has decided to cut ties with its CEO, would abdicate all control over the Company for a period of 90 days to the very CEO that it just decided 3 8 of 20

9 to terminate. In fact, a common sense reading of Employment Agreement compels the opposite conclusion: that the Company was free to direct Plaintiff as the Board (via its Executive Committee) saw fit during the 90 day termination notice period, provided that Plaintiff remained employed by the Company in the CEO position during that time. That is precisely what happened here. In contrast, the reading of the Agreement that Plaintiff advocates would compel the conclusion that the Company s Board could take no action regarding the CEO s conduct during the 90-day notice period an absurd result that clearly cannot be consistent with the Board s fiduciary duties. Such inaction during the 90-day notice period would have had disastrous consequences here, where Plaintiff had already hired litigation counsel and had made his hostile intentions clear to the Company and its Board. To support his absurd reading of the Employment Agreement, Plaintiff points to entirely extra-contractual statements not set forth in the Complaint of his supposed intent in negotiating for the 90-day notice period; namely, the desire to control his transition out of the CEO position and to hand-pick his successor in the CEO role. But these statements of Plaintiff s alleged subjective intent (which he does not allege were ever communicated to the Board or the Company) are not only improper to consider on a motion to dismiss, they are flatly inconsistent with the plain language of the Employment Agreement, which nowhere provides for Plaintiff to control his transition out of the CEO role or to hand pick his successor (a power that belongs exclusively to the Company s Board). 3 In fact, the Employment Agreement could not be clearer that the duties which Plaintiff claims were ironclad guarantees throughout the 90 day notice period were subject to the direction of the Company s Board of Directors. 3 In any event, As Mr. Rawls Plaintiff s preferred successor as CEO is now currently serving as the CEO of ipayment, it is difficult to see how Plaintiff s succession plan was jeopardized by any action taken by the Company. 4 9 of 20

10 Indeed, Section 1 of the Agreement, entitled Employment Term, clearly provides that: except for earlier termination as provided for in Section 5 hereof, each of the Companies agrees to employ Executive... for a period beginning on [December 29, 2014] and ending on December 31, The period of Executive s employment under this Agreement is referred to herein as the Employment Term. (Compl. Ex. A, at 1, ECF No. 2 (emphasis added).) Section 2, in turn, provides that [d]uring the Employment Term, the Executive shall serve as Chief Executive Officer of the Companies... and goes on to provide a non-exhaustive list of the CEO s duties during the Employment Term, including, importantly, that Plaintiff must report solely to the Board of Directors of ipayment Holdings. (Id. at 2 (emphasis added).) As was established in Defendants opening brief in support of their Motion to Dismiss (which Plaintiff has utterly failed to rebut), the word report, as a matter of plain English usage, means to be in a position below (someone, who is in charge of reviewing one s work, etc.). (Mot. to Dismiss at 13, ECF No. 37.) Consequently, the plain language of the Employment Agreement, consistent with common sense and contrary to Plaintiff s argument, provides that the Board retains the power to give direction to Plaintiff during the Employment Term, including during the 90-day notice period. Importantly, the early termination provisions in Section 5 are silent on the question of which duties Plaintiff is entitled to exercise during the 90 day notice period and therefore must incorporate Plaintiff s duty to report to the Board during that time. (See Compl. Ex. 1, at 5, ECF No. 2.) b. The Employment Agreement, When Read Together With The Company s Bylaws, Further Underscores That Plaintiff Is Subject To The Direction And Control Of The Board. Plaintiff does not seriously dispute that the Employment Agreement and Bylaws were executed contemporaneously in connection with the restructuring of the Company, and likewise, that when read together, the Employment Agreement and the Bylaws make unmistakably clear that Plaintiff is subject to the direction of the Board during the Employment Term. Nevertheless, 5 10 of 20

11 Plaintiff asks this Court to ignore the Bylaws which, among other things, define the role of the CEO because his Employment Agreement is unambiguous and because it contains a supposedly ironclad merger clause. (Opp. at ) In doing so, Plaintiff asks this Court to ignore well-established New York law requiring that contemporaneous instruments forming part of the same transaction be read together as one. PETRA CRE CDO CDO, Ltd. v. Morgans Grp. LLC, 84 A.D.3d 614, 615, 923 N.Y.S.2d 487, 488 (1st Dep t 2011) ( Agreements executed at substantially the same time and related to the same subject matter are regarded as contemporaneous writings and must be read together as one. ) (Emphasis added); Evans Prods. Co. v. Decker, 52 A.D.2d 991, 992, 383 N.Y.S.2d 457, 459 (3d Dep t 1976) ( it is a wellestablished rule of contract law that all contemporaneous instruments between the same parties relating to the same subject matter are to be read together and interpreted as forming part of one and the same transaction. ) (Emphasis added). Notwithstanding Plaintiff s argument to the contrary, (Opp. at 13) under New York law, the presence of a merger or integration clause does not bar courts from considering separately executed agreements together, where, as here, they form part of the same transaction. See, e.g., Rhythm & Hues, Inc. v. The Terminal Mktg. Co., No. 01 Civ (AGS), 2002 WL , at *5 (S.D.N.Y. June 19, 2002) (finding presence of integration clause did not bar reading two agreements together since, as part of the same transaction, neither contract was, by definition, extrinsic of the other). Indeed, in VoiceAge Corp. v. RealNetworks, Inc. a case relied upon by Plaintiff the court made clear that there are cases in which merger clauses may be overcome when agreements are signed contemporaneously, by the same parties, for the same purpose. 926 F.Supp.2d at 530; Commander Oil Corp. v. Advance Food Serv. Equip., 991 F.2d 49, (2d 6 11 of 20

12 Cir. 1993) (intent of the parties controls whether separately executed agreements are read together). 4 Nor does Plaintiff s attempt to describe the Employment Agreement as unambiguous change the result here. Plaintiff cites Crossmar, Inc. v. PortfolioScope, Inc. for the proposition that [w]here the language of a contract is clear and unambiguous, the contract must be interpreted by reference to that language alone, without resort to extrinsic evidence. 307 A.D.2d 843, 843, 762 N.Y.S.2d 878, 878 (1st Dep t 2003). 5 But the Company has not argued that the Employment Agreement is ambiguous thus requiring extrinsic evidence in the form of the Bylaws to interpret it but rather, that the Bylaws and the Employment Agreement were entered into in connection with the same transaction namely, the 2014 restructuring of the Company and as such, should be read together. See Commander Oil Corp., 991 F.2d at (holding that separate writings are construed as one agreement if they relate to the same subject matter and are executed simultaneously and that lower court properly read a purchase agreement and lease 4 Plaintiff s remaining cases on this point hold no differently. While Vision Dev. Grp. of Broward Cty., LLC v. Chelsey Funding, LLC, 43 A.D.3d 373, 374, 841 N.Y.S.2d 272, 273 (1st Dep t 2007), NAB Constr. Corp. v. Consol. Edison Co. of N.Y.. Inc., 222 A.D.2d 381, 381, 636 N.Y.S.2d 31, 38 (1st Dep t 1995), Goldman v. White Plains Ctr. for Nursing Care, LLC, 43 A.D.3d 251, 253, 840 N.Y.S.2d 788, (1st Dep t 2007), aff d, 11 N.Y.3d 173 (2008), and Johnson v. Stanfield Capital Partners, LLC, 68 A.D.3d 628, 629, 891 N.Y.S.2d 383, (1st Dep t 2009) may stand for the proposition that merger and integration clauses generally prevent courts from considering extrinsic evidence, that principle is inapplicable where, as here, the separately executed instruments form part of the same transaction and are thus, not extrinsic to one another. See Rhythm & Hues, Inc., 2002 WL , at *5. Further, Schron v. Troutman Saunders LLP, 97 A.D.3d 87, 92-94, 945 N.Y.S.2d 25, (1st Dep t 2012), which Plaintiff cites for the proposition that merger clauses bar the consideration of parol evidence where a contract is unambiguous, is equally inapposite as the two agreements in Schron were neither related nor interdependent. 5 Plaintiff s other cases on this point are equally irrelevant. Chimart Assocs. v. Paul, 66 N.Y.2d 570, 574, 489 N.E.2d 231, , 498 N.Y.S.2d 344, 347 (1986), Jackson & Wheeler, Inc. v. Vill. of Pleasantville, 56 A.D.3d 723, , 869 N.Y.S.2d 122, 123 (2d Dep t 2008), and CCG Assocs. I v. Riverside Assocs., 157 A.D.2d 435, 440, 556 N.Y.S.2d 859, (1st Dep t 1990) all concern situations in which courts rejected the use of extrinsic, rather than intrinsic, evidence to interpret a contract. The Company does not dispute that unambiguous agreements should be interpreted on their terms, without departing from the four corners of the document. Here, because the Employment Agreement and Bylaws form part of the same transaction, the Court would not be departing from the four corners of the document in considering these documents together of 20

13 together where intent of parties indicated they were meant to be part of same transaction); Rhythm & Hues, Inc., 2002 WL , at *5-6 ( all writings forming part of a single transaction are to be read together and the parol evidence rule barring extrinsic evidence does not apply to intrinsic evidence. ). 6 Plaintiff s argument that Section of the Bylaws is irrelevant to the question of the relationship between the Bylaws and Employment Agreement because it addresses only conflicts between the Certificate of Incorporation and By-Laws, and the Investor Rights Agreement and By-Laws (Opp. at 15-16) fares no better. As a matter of law, the rule that separately executed agreements that are part of the same transaction should be construed together applies even [if] such contract does not refer in terms to the other. Williams v. Mobil Oil Corp., 83 A.D.2d 434, 439, 445 N.Y.S.2d 172, 175 (2d Dep t 1981) (internal citations omitted). Additionally, by its own terms, Section of the Bylaws deals only with the contemporaneous instruments controlling on the Bylaws. (Alibhai Aff. Ex. 1, at 10.01, ECF No. 14.) That the Employment Agreement does not control the Bylaws is unsurprising and as such, the absence of a reference to the Employment Agreement in Section of the Bylaws should not, as Plaintiff argues (Opp. at 15), be interpreted as a decision by the parties that the Employment Agreement be read in isolation from the Bylaws, particularly on the topic of Plaintiff s duties as CEO of the Company. 6 Plaintiff cites VoiceAge Corp., 926 F.Supp.2d at 530 for the proposition that the Employment Agreement and Bylaws being entered into on the same date is insufficient to compel this Court to read the two documents together. (Opp. at 14.) But even writings executed at different times should be interpreted together if the parties assented to all the promises as a whole. Commander Oil Corp., 991 F.2d at 53 (internal citations omitted). Here, in addition to being executed on the same day, the Employment Agreement and the Bylaws alongside other agreements, including the Investor Rights Agreement, the Indenture, the supplemental Indenture, and the Intercreditor Agreement were intended to be part of the same restructuring transaction. Prior to this restructuring, ipayment was owned by Plaintiff outright. It was this very restructuring of ipayment, necessary to secure financing for the Company, which reduced Plaintiff s ownership share in the Company, and required the formalization of his role as CEO by way of the Employment Agreement and the amended and restated Bylaws of 20

14 Finally, while arguing that certain cherry-picked phrases of the Employment Agreement are dispositive of his claim, (Opp. at 7, 16) Plaintiff asks this Court to ignore other phrases in the Agreement that he finds less convenient. Specifically, the Employment Agreement makes clear that it does not purport to outline the full extent of Plaintiff s CEO role. The Employment Agreement provides that the CEO: (3) shall have all authority and duties consistent with [the CEO] position, including but not limited to (A) having sole responsibility for the execution of the strategic direction of the Companies; (B) having sole responsibility for the deployment of the senior management team; and (C) being the sole person to which all key business functions of the Company shall report. (Compl. Ex. A, at 2, ECF No. 2 (emphasis added).) On its face, therefore, the list of Plaintiff s duties set forth in Section 2 is non-exhaustive and must be supplemented by the Company s Bylaws, which provide, in Section 4.06, that the CEO s authority is, at all times, limited and controlled by the Board of Directors. That section states that, among other things, the CEO shall: [H]ave general supervision of the policies and operations of the Corporation, subject, however, to the control of the Board of Directors and any authorized Committee of the Board of Directors, and shall see that all orders and resolutions of the Board of Directors are carried into effect. (Alibhai Aff. Ex. 1, at 4.06, ECF No. 14 (emphasis added).) That the Bylaws are the logical place to determine the scope of the CEO s authority is also borne out by the fact that the Employment Agreement makes clear that the CEO reports solely to the Board of Directors. (Compl. Ex. A, at 2, ECF No. 2.) Any other reading of the Employment Agreement would require this Court to accept that the Board entered into an agreement to hire Plaintiff as CEO on terms that would grant him near-absolute power over the Company, immune from direction from the Board during the entirety of the Employment Term. Such a reading is contrary to New York law, which obliges officers of a corporation to carry out 9 14 of 20

15 the plans, instructions, or directions of the board. Mgmt. Techs., Inc. v. Morris, 961 F. Supp. 640, 647 (S.D.N.Y. 1997). Indeed, as this very Court held in denying Plaintiff s Motion for a Temporary Restraining Order and Preliminary Injunction, under the by-laws of the defendant Company plaintiff Grimstad reports to the Board of Directors, which is ultimately responsible for the management of the affairs of the Company. (Decision and Order Denying Pl. s Mot. for TRO and Prelim. Inj., at 2 ECF No. 28 (internal citations omitted).) II. THE COMPANY DID NOT BREACH THE EMPLOYMENT AGREEMENT. a. The Company Provided Plaintiff With The Proper 90-Day Notice Period As Required By Section 5(b) Of The Employment Agreement. Plaintiff concedes, as he must, that the Company did, in fact, provide him with the required 90-day notice of termination, when he states in the Complaint that the Termination Notice defined the Termination Date as November 24, 2016 ninety days after the date of the Termination Notice, as required by Section 5(b). (Opp. at 6.) Nevertheless, Plaintiff argues that the provision of such notice was supposedly deficient insofar as it was accompanied by limitations on Plaintiff s ability to access the Company offices, s, and computer systems. (Id. at 11.) However, beyond a bare recitation of the non-exhaustive list of the powers of the CEO enumerated in Section 2 of the Employment Agreement, (Id. at 17) Plaintiff has failed to point to any provision of the Employment Agreement that supports his contention that the Board is prohibited from curtailing Plaintiff s duties during the 90-day notice period. Nor could he. There is nothing in the Employment Agreement to suggest that Section 5(b) s notice requirement in any way limits Plaintiff s duty to report solely to the Board as set forth in Section 2 of the Agreement of 20

16 b. The Employment Agreement Does Not Contain A Provision That Entitles Plaintiff To Exercise The Powers Of CEO During The 90-Day Notice Period. Undeterred by the absence of a single provision in the Employment Agreement granting him the right to exercise the powers of the office of CEO during the 90-day notice period, Plaintiff asks this Court to create such a right for him. In support of this request, Plaintiff cites Bank of N.Y Mellon v. WMC Mortg., LLC, 136 A.D.3d 1, 6, 22 N.Y.S.2d 3, 6 (1st Dep t 2015) for the proposition that courts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing and Patrolmen s Benevolent Ass n of N.Y., Inc. v. City of N.Y., 46 A.D.3d 378, 380, 848 N.Y.S.2d 80, 82 (1st Dep t 2007) for the proposition that every clause and word [of a contract] should be given meaning. Yet, if the Court were to apply these very cases and the doctrine of expressio unius est exclusio alterius, as Plaintiff argues it should (Opp. at 17-18), it is clear that the Court may not invent for Plaintiff a contractual provision preventing the Board from providing direction to Plaintiff during the 90-day notice period, as it did here. 7 Quadrant Structured Prods. Co. v. Vertin, 23 N.Y.3d 549, 560, 16 N.E.3d 1165, 1172, 992 N.Y.S.2d 687, 694 (2014) ( if parties to a contract omit terms particularly, terms that are readily found in other, similar contracts the inescapable conclusion is that the parties intended the omission. ). With no support in the Employment Agreement itself, Plaintiff nevertheless claims that the actions of the Executive Committee of the Board stripped Plaintiff of his bargained-for right to (i) assist... in assuring an orderly succession and transition and thus help to preserve 7 Plaintiff s remaining cases stand for little more than the rather unremarkable rule that court[s] adopt an interpretation that renders no portion of the contract meaningless, Diamond Castle Partners IV PRC. L.P. v. IAC/InterActivecorp., 82 A.D.3d 421, 422, 918 N.Y.S.2d 73, 75 (1st Dep t 2011), and reject interpretations that eliminate a bargained-for right. In re Trump, 194 A.D.2d 70, 75, 605 N.Y.S.2d 248, 251 (1st Dep t 1993). Plaintiff s own authority, therefore, proves Defendants point: the Employment Agreement does not contain a provision that prevents the Board from altering Plaintiff s duties during the 90-day notice period. If the parties had intended for such a protection to exist, they would have indicated as much in the Employment Agreement. This Court should not grant Plaintiff a right not bargained for of 20

17 shareholder value; (ii) ensure the team of employees and senior management that he built would be well-treated; and (iii) reasonably manage his departure from the Company so as to prevent harm to his reputation and his ability to earn a living in the future. 8 (Opp. at 18.) As an initial matter, to the extent Plaintiff bargained for these so-called rights, he does not plead this allegation in the Complaint, which makes sense given that there is nothing on the face of the Employment Agreement to indicate this (or any other) purpose to the 90-day notice period required for not-forcause termination. And beyond that, the diminution of Plaintiff s duties as CEO during the 90- day notice period contemplated by the Termination Notice did nothing to jeopardize these rights. 9 III. PLAINTIFF DOES NOT ADEQUATELY PLEAD DAMAGES. While Defendants have offered to pay Plaintiff an amount appropriate for release of all claims against the Company, Plaintiff instead chose to bring this action without adequately pleading what damages he has a right to recover. 10 Plaintiff acknowledges that he must plead allegations from which damages attributable to defendant s conduct might be reasonably inferred. (Opp. at 19 (citing InKine Pharm. Co., Inc. v. Coleman, 305 A.D.2d 151, 152 (1st Dep t 2003); Tenzer, Greenblatt, Fallon & Kaplan v. Ellenberg, 199 A.D.2d 45, 45, If there has been any prejudice to Plaintiff s ability to assist in an orderly succession, ensure the well-being of his management team, and manage his own departure, it has been caused by Plaintiff s own hostile actions towards the Company, including in bringing this very litigation. Furthermore, even if Plaintiff did have a right to ensure senior management was well treated, he fails to point to a single instance in his Complaint or anywhere else of a member of senior management being terminated, demoted, or otherwise poorly treated following Plaintiff s receipt of the Termination Notice. 9 In any event, as was demonstrated in the Initial Brief, (Mot. to Dismiss at 16-17, ECF No. 37.) to the extent that Plaintiff suffered a diminution in his duties based on the Board s direction to curtail certain of his activities as CEO, the Employment Agreement contains a remedy that is addressed to that specific situation Termination for Good Reason. (Compl. Ex. A, at 5(a)(vi), ECF No. 2.) Here, for whatever reason, Plaintiff elected not to pursue that remedy, but instead chose to file the Complaint and assert a baseless claim for breach of contract. 10 As recently as November 28, 2016, the Company sent to Plaintiff the release attached to his Employment Agreement so that the Company could pay Plaintiff his severance. To date, Plaintiff has not returned to the Company a signed copy of the release of 20

18 N.Y.S.2d 947, (1st Dep t 1993).) Yet, the bare allegations in the Complaint cannot surmount even this modest hurdle. Even on a motion to dismiss, Plaintiff must set forth facts showing the damage upon which the action is based, SBC Telecom Consulting Inc. v. Vega, 2015 NY Slip Op 32500(U), 12 (Sup. Ct. N.Y. Cty. Dec. 2, 2015), and must plead what damages were suffered and how the alleged breach caused those damages. JFK Hotel Owner, LLC v. Hilton Hotels Corp., 42 Misc. 3d 1237(A), 986 N.Y.S.2d 866, 2014 WL , at *8 (Sup. Ct. N.Y. Cty. Mar. 14, 2014). See also Four Cees Jewelry Inc. v Realty LLC, 11 Misc.3d 1056(A), 815 N.Y.S.2d 494, 2005 N.Y. Slip Op (U), 2005 WL , at *2 (Sup. Ct. N.Y. Cty. Dec. 28, 2005) (alleged damages were vague and conclusory and insufficient to sustain a breach of contract cause of action ) (citing Gordon v. Dino De Laurentiis Corp., 141 A.D.2d 435, 436 (1st Dep t.1988)). Plaintiff attempts to argue that under New York law, the loss by an employee of his voice in the company s management (Opp. at 20) amounts to compensable harm. However, Plaintiff inexplicably fails to inform the Court that he remains a director of the Company and has continued to participate fully in this capacity throughout the pendency of this suit. As such, Plaintiff does have a voice in the company s management, and any contention to the contrary is meritless. Furthermore, in an attempt to support this argument Plaintiff relies on wholly inapplicable cases concerning disputes regarding minority stakeholders loss of bargained for management rights pursuant to joint venture or membership agreements (id.). See, e.g., Wisdom Import Sales Co. v. Labatt Brewing Co., 339 F.3d 101, 114 (2d Cir. 2003) (plaintiff, a company, was a thirty percent interest holder in a joint venture which enjoyed veto power over key management decisions pursuant to a joint venture agreement); Global Switching, Inc. v. Kasper, No. CV (CPS), 2006 WL , at *1 (E.D.N.Y. Feb. 17, 2006) (plaintiff, a of 20

19 corporation, was a fifty percent stakeholder seeking arbitration of disputes pursuant to a management agreement); CanWest Global Commc ns Corp. v. Mirkaei Tikshoret Ltd., 9 Misc.3d 845, , 804 N.Y.S.2d 549, (Sup. Ct. N.Y. Cty. 2005) (plaintiff, a company, brought suit concerning a failed joint acquisition agreement). No doubt recognizing his failure to adequately plead damages, Plaintiff attempts to amend his Complaint by way of his opposition brief by claiming that he is entitled to nominal damages for the supposed breach of contract that occurred here. (Opp. at 21 n.9.) But nowhere in the Complaint does Plaintiff seek nominal damages, 11 and it is black letter law that a claim for relief may not be amended by the briefs in opposition to a motion to dismiss. Rubin v. Nine W. Grp., Inc., No. 0763/99, 1999 WL , at *4 (Sup. Ct. Westchester Cty. Nov. 3, 1999) (internal citations omitted); Rosenberg v. Home Box Office, Inc., 2006 N.Y. Slip Op (U), 2006 WL (Sup. Ct. N.Y. Cty. Jan. 30, 2006) ( plaintiff may not amend his complaint to add a new legal theory via statements in a memorandum of law in opposition to a pending dispositive motion. ). IV. SECTION 10 OF THE EMPLOYMENT AGREEMENT HAS NOT BEEN BREACHED. Plaintiff s claim that he is entitled to reimbursement for legal fees under Section 10 of the Employment Agreement fails also. By its own terms, Section 10 of the Employment Agreement purports only to reimburse Plaintiff for reasonable legal fees incurred in connection with any contest, dispute or proceeding... undertaken by any member of the Company Group or by the Executive with respect to the validity or enforceability of, or liability under, any provision of th[e Employment] Agreement. (Compl. Ex. A, at 10, ECF No. 2 (emphasis added).) The alleged 11 Compl. at 9, ECF No. 1 (Plaintiff seeks compensatory damages in an amount to be determined at trial. (Emphasis added.)) of 20

20 investigation by the Board into purported misconduct by Grimstad (Opp. at 22) for which Plaintiff seeks reimbursement is not a contest, dispute or proceeding... with respect to the validity or enforceability of, or liability under, any provision of th[e Employment] Agreement. (Compl. Ex. A, at 10, ECF No. 2.) Nor could the investigation into alleged wrongdoing by Plaintiff be described as a contest, dispute, or proceeding as required by the Employment Agreement. As such, the indemnification obligations pursuant to Section 10 of the Employment Agreement have not been triggered here as demonstrated by the Plaintiff s own allegations. CONCLUSION Accordingly, and for the foregoing reasons, Defendants respectfully request that the Court dismiss the Complaint in its entirety. Respectfully submitted, Dated: New York, New York December 1, 2016 By:_/s/ James C. Dugan James C. Dugan (A Member of the Firm) WILLKIE FARR & GALLAGHER LLP 787 Seventh Avenue New York, New York (212) Attorneys for Defendants ipayment Holdings, Inc. and ipayment, Inc of 20