FILED: NEW YORK COUNTY CLERK 12/24/ :25 PM INDEX NO /2014 NYSCEF DOC. NO. 46 RECEIVED NYSCEF: 12/24/2014

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1 FILED: NEW YORK COUNTY CLERK 12/24/ :25 PM INDEX NO /2014 NYSCEF DOC. NO. 46 RECEIVED NYSCEF: 12/24/2014 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x DR. STEVEN ROSENFELD, Plaintiff, - against - Index No /2014 JOEL SCHREIBER, DR. SAMUEL WAKSAL, KADMON CAPITAL, LLC & KADMON CORPORATION, LLC, Defendants x MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS MOTION TO DISMISS THE SECOND AMENDED COMPLAINT MORVILLO ABRAMOWITZ GRAND IASON & ANELLO P.C. 565 Fifth Avenue New York, New York (212) (telephone) (212) (facsimile) Attorneys for Defendants

2 TABLE OF AUTHORITIES Page Cases 2004 Bowery Partners, LLC v. E.G. West 37th LLC, 32 Misc.3d 1210(A), 2011 N.Y. Slip Op (U) (Sup. Ct., N.Y. County 2011) Brylgrove Ltd. v. Tomkins, PLC, 218 A.D.2d 575 (1st Dep't 1995) Chappo & Co., Inc. v. Ion Geophysical Corp., 83 A.D.3d 499 (1st Dep't 2011) Dorfman v. Am. Student Assistance, 104 A.D.3d 474 (1st Dep't 2013) Edward Gottlieb, Inc. v. City & Commercial Commc'ns PLC, 200 A.D.2d 395 (1st Dep't 1994) Ferghana Partners Inc. v. Bioniche Life Sciences Inc., 33 Misc. 3d 1220(A), 2011 N.Y. Slip Op (U) (Sup. Ct., N.Y. County 2011)... 16, 17 Georgia Malone & Co., Inc. v. Ralph Rieder, 86 A.D.3d 406 (1st Dep't 2011) Great White Bear, LLC v. Mervyns, LLC, No. 06 Civ (RMB), 2007 WL (S.D.N.Y. Apr. 26, 2007) Hermandad Y Asociados, Inc. v. Movimiento Misionero Mundial, Inc., 22 Misc. 3d 1138(A), 2009 N.Y. Slip Op (U) (Sup. Ct., N.Y. County 2009) Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372 (1969)... 3 Klein v. Smigel, 44 A.D.2d 248 (1st Dep't 1974)... 3 Komolov v. Segal, 40 Misc. 3d 1228(A), 2013 N.Y. Slip Op (U) (Sup. Ct., N.Y. County 2013)... 3 Martin H. Bauman Assocs., Inc. v. H & M Int'l Transp., Inc., 171 A.D.2d 479 (1st Dep't 1991)... 18, 19 McCants v. Emerol Mfg. Co., 81 N.Y.S.2d 770 (Sup. Ct., N.Y. County 1948)... 3 Minichiello v. Royal Bus. Funds Corp., 18 N.Y.2d 521 (1966)... 2, 3 Moore v. Sutton Res., Ltd., No. 96 Civ (RWS), 1998 WL (S.D.N.Y. Feb. 18, 1998) Naldi v. Grunberg, 80 A.D.3d 1 (1st Dep't 2010)... 3 Ohlbaum v. Commercial Cas. Ins. Co., 218 A.D. 842 (2d Dep't 1926) Paloger v. Cohen, 37 Misc. 3d 1220(A), 2012 N.Y. Slip Op. 5209(U) (Sup. Ct., Nassau County 2012) Prof'l Health Servs., Inc. v. City of New York, 34 A.D.2d 918 (1st Dep't 1970)... 13, 14, 17 i

3 Sands & Co., Inc. v. Christie's Inc., No /04, 2005 WL (Sup. Ct., N.Y. County 2005)... 4 Skillgames, LLC v. Brody, 1 A.D.3d 247 (1st Dep't 2003) Stevens v. Publicis, S.A., 50 A.D.3d 253 (1st Dep't 2008)... 4 Taibi v. Am. Banknote Co., 135 A.D.2d 810 (2d Dep't 1987)... 14, 16 Walker v. Knowles, 15 Misc. 3d 1124(A), 2007 Slip Op (U) (Sup. Ct., N.Y. County 2007) Yorktown Square Assocs. v. Union Dime Sav. Bank, 79 A.D. 2d 1040 (2d Dep't 1981)... 7, 8 Statutes CPLR 3211(a)(5) CPLR 3211(a)(7) G.O.L 5-701(a)(10)... 1, 2 ii

4 Defendants Dr. Samuel Waksal, Kadmon Capital, LLC ( Kadmon Capital ), and Kadmon Corporation, LLC ( Kadmon Corporation ) (collectively, Kadmon or Defendants ) respectfully submit this memorandum of law in support of their motion to dismiss the Second Amended Complaint ( SAC ). 1 Preliminary Statement This is Plaintiff Steven Rosenfeld s ( Plaintiff ) third attempt to plead a cause of action for breach of a contract he claims he and Defendant Joel Schreiber ( Schreiber ) had with Kadmon. That contract, according to Plaintiff, provides that if he and Schreiber raised $50 million for Kadmon, they would receive a 6% equity package. Plaintiff s third attempt to plead a cause of action suffers from the same deficiencies that led him to abandon his first complaint and that led this Court to dismiss his Amended Complaint. The SAC again fails to satisfy the statute of frauds. In addition, in attempting to comply with this Court s directive to provide additional detail supporting his claims, the SAC pleads facts showing that Plaintiff and Schreiber never satisfied their fundraising obligations to Kadmon under the alleged agreement. The SAC should be dismissed because it does not satisfy the statute of frauds and does not state a cause of action for breach of contract or quantum meruit. Procedural History Plaintiff filed his original Complaint on February 3, Ex. A. Kadmon moved to dismiss on March 3, 2014 under the statute of frauds, G.O.L 5-701(a)(10), because Plaintiff had failed to allege that he had a signed agreement with Kadmon. Plaintiff then filed an Amended Complaint (the First Amended Complaint or FAC ) on March 22, 2014, alleging that 1 The Second Amended Complaint is annexed as Exhibit F to the accompanying Affirmation of Lawrence Iason, dated December 23, 2014 (hereinafter the Iason Affirmation ). The Second Amended Complaint is cited as SAC. Documents cited to herein as Ex. refer to additional documents annexed to the Iason Affirmation.

5 the contract had been signed. Ex. B. The following week, on March 30, 2014, Plaintiff also filed an opposition to the motion to dismiss his original Complaint. Kadmon moved to dismiss the FAC on April 11, 2014, filing a combined brief in support of that motion and in reply to its motion to dismiss the original Complaint. Plaintiff filed his opposition to the motion to dismiss the FAC on May 23, 2014, maintaining that the contract had been signed, but acknowledging that he could not produce the signed contract, claiming that the contract had been lost in a flood (Ex. G 3-4). Kadmon filed a reply on June 3, This Court held a hearing on October 16, 2014, at which it disposed of the original Complaint as a nullity, see Ex. E, Transcript of October 16, 2014 Hearing (hereinafter 10/16/14 Tr. ) at 3:12-25, and dismissed the FAC for failure to satisfy the statute of frauds under G.O.L (a)(10). Id. at 5:6-19, 31: The Court also dismissed the Plaintiff s claim for quantum meruit, holding that [o]nce the statute of frauds is triggered, quantum meruit claims... are also barred by the statute of frauds. Id. at 31: The Court gave Plaintiff 60 days to file a Second Amended Complaint, and directed Plaintiff to address specific deficiencies identified by the Court during the October 16 hearing. Id. at 23:9-13, 32:5-7. Argument I. The SAC Should Be Dismissed Because It Does Not Satisfy the Statute of Frauds. Plaintiff does not dispute that the contract he seeks to enforce is covered by the statute of frauds. Instead, he seeks to satisfy the requirement for a signed writing with a bare allegation that such a writing once existed but was lost or destroyed. Such self-serving allegations are insufficient to satisfy the requirement of a writing, which the legislature specifically imposed in the context of broker commissions and finder s fees, because [t]he nature of the[se] transactions is such that, in the absence of the requirement of a writing, unfounded and multiple claims for commissions are frequently asserted. Minichiello v. Royal Bus. Funds Corp., 18 N.Y.2d 521, 2

6 526 (1966) (quotation omitted); see Klein v. Smigel, 44 A.D.2d 248, 250 (1st Dep t 1974), aff'd, 36 N.Y.2d 809 (1975) ( the aim of the [statute of frauds] is to protect businessmen from the type of claim being asserted here a claim for a $90,000 finder s fee, not supported by the written evidence ); see generally Intercontinental Planning, Ltd. v. Daystrom, Inc., 24 N.Y.2d 372, 385 (1969) ( The general purpose underlying a Statute of Frauds can be characterized as the protection of parties who are sued for alleged promises informally made.... ). For this reason, consideration of the statute of frauds is particularly appropriate on a motion to dismiss to weed out meritless claims and avoid needless discovery. See, e.g., McCants v. Emerol Mfg. Co., 81 N.Y.S.2d 770, 771 (Sup. Ct., N.Y. County 1948) (where plaintiffs failed to show the existence of any memorandum sufficient to satisfy the statute of frauds, they were not entitled to a fishing expedition into defendant s files). Accordingly, to state a claim sufficient to overcome the statute of frauds, the plaintiff must produce a signed agreement. See, e.g., Komolov v. Segal, 40 Misc. 3d 1228(A), 2013 N.Y. Slip Op (U), *2 (Sup. Ct., N.Y. County 2013), aff'd 117 A.D.3d 557 (1st Dep t 2014) (dismissing action due to fact that plaintiff could not provide any written agreement regarding the transfer at time action was commenced, even though plaintiff s counsel asserted that he did not have a copy of the agreement because he was having difficulty obtaining it from prior counsel); Walker v. Knowles, 15 Misc. 3d 1124(A), 2007 Slip Op (U), *2-*3 (Sup. Ct., N.Y. County 2007) (granting the defendant s motion to dismiss because there was no signed agreement between the parties). Alternatively, under certain circumstances, an or a series of s can satisfy the statute of frauds but only if the s reflect unqualified acceptance of the agreement. See Naldi v. Grunberg, 80 A.D.3d 1, (1st Dep t 2010) (finding that, even though an may 3

7 satisfy the statute of frauds, the on which plaintiff relied did not satisfy the statute as it established that there was never a meeting of the minds between the parties); Sands & Co., Inc. v. Christie's Inc., No /04, 2005 WL (Sup. Ct., N.Y. County Feb. 28, 2005) (Trial Order) (citing King v. King, 208 A.D.2d 1143, (3d Dep t 1994)) (dismissing complaint where plaintiff s fail[ed] to demonstrate an unambiguous and unequivocal acceptance of the offer ). Cf. Stevens v. Publicis, S.A., 50 A.D.3d 253, (1st Dep t 2008) ( exchange between parties evidenced unqualified acceptance where defendant s chairman and CEO ed plaintiff with specific terms of an agreement, plaintiff responded I accept your proposal..., and defendant s CEO responded that day, acknowledging plaintiff s acceptance). At the October 16, 2014 hearing, the Court held that Plaintiff s allegation that he once had a signed agreement but cannot produce it because his only copy was lost in a flood on or about September 1, 2011 was insufficient to satisfy the statute of frauds. The Court made clear that in the absence of the signed agreement, Plaintiff bears the burden of alleging corroborating facts sufficient to show that there was a signed agreement... actually subscribed to by the party to be charged. 10/16/14 Tr. at 23: The Court stated that the allegations in the FAC failed to meet this burden (id. at 26:22-26 & 27:1-2), noting that if an agreement had been signed, and if Plaintiff had exerted substantial effort to carry out the terms of the agreement, significant corroborating evidence should exist. Specifically, the Court observed that it would have expected to see communications referencing a final or signed agreement, as well as conduct following execution of the alleged agreement consistent with having reached a deal to raise $50 million. ( I can t believe you are doing a $50 million deal or a $500 million deal that you don t have any conversation until afterward, id. at 27:10-12). The Court also questioned the 4

8 plausibility of Plaintiff s story that the signed document was destroyed in a flood. It noted the improbability of leaving such an important document where it could be destroyed by a flood, and questioned when Plaintiff learned that he had a claim against Kadmon, relative to the alleged flood. Id. at 9:19-26, 10:1-8, 11:14-19, 25:7-8. Ultimately the Court held that Plaintiff s bald allegation that Dr. Waksal had given him a signed agreement could not survive Defendants motion to dismiss, but gave Plaintiff one last chance to amend his Complaint. Although, in the SAC Plaintiff attempts to address the deficiencies raised by the Court during the October 16 hearing, he ultimately fails to do so. Plaintiff provides no corroborating evidence that an agreement was actually subscribed by the Dr. Waksal, or even that a final agreement was reached, and hence the SAC should be dismissed. a. Plaintiff has not come forward with additional allegations showing that a final agreement was signed. During the October 16 hearing, the Court found that the facts alleged and documents put forward by Plaintiff did not support the claim that there had been a signed agreement. The Court noted the absence of s one would expect to find in July 2009 when the agreement was supposedly signed, referring to the final version. ( Your allegations don t tell me post the alleged agreement being signed in July of 2009 that he says in his s that July 17, 2009, well this is the final or the document attached to the , the final version. We signed it some time around that time...., 10/16/14 Tr. at 12:4-8). The Court also found that an exchange from December 15, 2009 in which Kadmon s General Counsel wrote to Plaintiff s attorney that he hoped a new proposed approach to the 6% equity interest doesn t create too many waves cast doubt on whether an agreement had been signed. ( [L]ater on there were subsequent s that indicates perhaps maybe there was no signed document..., id. at 5

9 20:15-18); ( My problem is with respect to Exhibit E of this, Dr. Rosenfeld s affidavit, casting the doubt whether or not there was a signed agreement, id. at 23:18-20). In response to the Court s concern that the s relied on by the Plaintiff provided insufficient evidence that an agreement was actually signed, Plaintiff points to two additional s in the SAC that were not before the Court on October 16 that he alleges relate to the issue of whether the parties reached an agreement. 2 However, upon further inspection, neither corroborates the existence of a signed agreement, as requested by the Court at the October 16 hearing. The first is a July 22, chain from Schreiber to Dr. Waksal, Kadmon s Chairman and CEO, in which Schreiber wrote: we look forward to take this off together and Dr. Waksal responded: as do I. (SAC 21). This exchange supports the undisputed fact that the two men contemplated working together, but is a far cry from establishing that the parties had reached a final agreement. 2 In the SAC, Plaintiff has alleged only nine new s that were not previously before the Court at the October 16 hearing. (SAC 21, 24, 25, 26, 29, 32, 33). Aside from the two s discussed above, three of these s attempt to bolster an allegation made by Plaintiff that his attorney at SRFF, Mark Ross, was sending numerous E- Mails to Defendant Waksal seeking to gain his favor and ultimately his additional business (SAC 23), but are utterly irrelevant to Plaintiff s claim. At the October 16 hearing, the Court questioned the lack of details as to Plaintiff s alleged substantial efforts to secure capital investments for Defendants. 10/16/14 Tr. at 19:16-21, 20:10-21:9. At the hearing, Plaintiff claimed he could not produce such documentary evidence in part due to the fact that his lawyers at SRFF were suddenly cozying up to defendant and hence the firm was reluctan[t]... to provide the client s own files (id. at 21:13-23:6), and the Court encouraged Plaintiff to flesh out any such arguments relating to the allegations in the complaint, (id. at 23:7-13). In response, in the SAC, Plaintiff alleges three s in which Mark Ross, a partner at SRFF, wrote to Dr. Waksal, stating that he looked forward to having the opportunity to work with [Dr. Waksal] (SAC 24), wanted to know how I can help move this project forward so we can all, including me, make some money (SAC 25), and wishing Dr. Waksal a happy new year, welcoming Dr. Waksal s efforts to upgrade [his] clientele, (SAC 26). While we disagree with Plaintiff s claim that these s show that his lawyers had a conflict of interest, these s clearly do not support Plaintiff s claim that Dr. Waksal entered into an agreement with Plaintiff and Schreiber. Plaintiff also makes general allegations, without quoting the content, of three sets of s allegedly sent on August 17 and 19, 2009, and January 31, 2010 relating to attempt[s] to set up investor meetings with Defendant Waksal and in relation to a potential Israeli biotech investor. (SAC 29) (emphases added). As alleged, these s do not support Plaintiff s claim that the parties had entered into a signed agreement. Plaintiff also referred to a single from April 2013 to support his allegation that Plaintiff and Schreiber introduced Colbeck to Kadmon two years earlier. That also fails to support Plaintiff s claim that the parties entered into a signed agreement. 6

10 The second chain on which Plaintiff relies similarly fails to fill the void identified by the Court. That chain, dated December 15, 2009, consists of an to Plaintiff and Schreiber from their attorney, with a copy to Steven Gordon, Kadmon s General Counsel, stating that there should be subscription docs for your 6% and you can work out at that time, with the accountants what to show as consideration and capital contribution, to which Mr. Gordon replied thank you. (SAC 32). This newly proffered chain simply indicates that the parties were deferring the allocation of compensation until Plaintiff and Schreiber had actually raised money. This December 15, chain, like the portion of that December 15, highlighted by the Court at the October 16 hearing (10/14/16 Tr. at 23:18-20 (referencing original exhibit E attached to Ex. G of Iason Affirmation)), in which Mr. Gordon stated that Sam wants the 6% to be of the amount that they raise... I hope this doesn t create too many waves, raises, rather than resolves, questions about whether an agreement was finalized and executed some six months earlier as Plaintiff alleges. Plaintiff s effort to avoid the implications of these December s is unavailing. He asserts that the PPM was not a condition precedent to the Agreement. (SAC 28). Regardless of whether the PPM was a condition precedent to any agreement, as the Court has already recognized, the fact that the parties were still negotiating whether the 6% equity compensation would be contingent on the amount that they raise demonstrates that no agreement had been finalized by that point. Thus, none of the s Plaintiff referred to in the SAC corroborate his claim that the letter circulated on July 21, 2009 became a final signed agreement. See Yorktown Square Assocs. v. Union Dime Sav. Bank, 79 A.D. 2d 1040, 1041 (2d Dep t 1981) (holding that defendant s motion to dismiss should have been granted; stating that Plaintiff must, for example, show some conduct or act on defendant s part, other than preparation of proposed draft 7

11 contracts, which indicates that actual agreement had been reached. ) (citation omitted). Particularly in light of the sworn statements from Dr. Waksal that no final agreement was reached or executed, and from Mr. Gordon that no signed agreement exists in Kadmon s files, (see Ex. C 3 & Ex. D 5) the Plaintiff s allegations, after multiple rounds of pleading, fail to satisfy the statute of frauds. b. Plaintiff, likewise, has not alleged the type of activity that would have followed execution of the agreement he alleges was finalized on July 21, The second major deficiency that the Court noted at the October 16, 2014 hearing is that Plaintiff failed to allege the type of activity after July 2009 that one would expect to follow execution of the alleged agreement in this case. ( [H]e tells me everything that happens before and what got to the agreement or what got to this kind of final agreement but he didn t tell me what happened afterwards except that he introduced Co[l]beck Industries allegedly to the defendants, 10/16/14 Tr. at 12:10-15). The Court expressly asked for documents and detailed allegations regarding Plaintiff s allegedly substantial efforts, including: (a) what transpired between July of 2009 and December 2009 instead of giving me these scant documents that I have to try to interpret and try to figure out ; (b) time sheets or billables or reference to attorney, to support Plaintiff s previous claims that he expended tens of thousands of dollars on attorneys fees in furtherance of the deal ; and (c) a promissory note evidencing the 100,000 note to evidence Plaintiff s claim that he loaned a hundred thousand to Kadmon interest free. Id. at 27:5-8, 20:26, 21:1-9 (referencing Ex. G at 10 (stating that In furtherance of my Agreement... I spent hundreds of hours... assisting the attorneys [with the PPM]... I also expended tens of thousands of dollars on attorneys fees in furtherance of the deal. ). At the hearing, Plaintiff s attorney assured the Court that [t]here were plenty of conversations. There were a box of documents (id. at 27:13-14), and accepted the Court s offer that he try to remedy these 8

12 deficiencies within the 60 days provided by the Court. The Second Amended Complaint utterly fails to provide the additional detail requested by the Court. Rather, on Plaintiff s third attempt at pleading a viable claim, and in response to specific questions posed by the Court, Plaintiff alleges only that he and Schreiber took the following actions after the agreement was allegedly executed: (1) late in 2009, Plaintiff and Schreiber introduced Dr. Waksal to Colbeck at Colbeck s offices (SAC 33); (2) Plaintiff and Schreiber personally provided $250,000 to Defendant Waksal and Kadmon as a direct initial investment in the company, of which $100,000 was comprised of the Plaintiff s own personal funds which was returned by Dr. Waksal several months later after Plaintiff had provided his time and efforts... in locating third party funding sources (SAC 35); (3) Plaintiff and Schreiber reviewed numerous versions of the PPM so that they could provide this PPM to potential investors who were interested in providing capital (SAC 22); and (4) Plaintiff and Defendant Schreiber made numerous and substantial efforts to locate funding sources including s with Dr. Waksal attempting to set up investor meetings... just over a month after their concluded Agreement (SAC 28-29). With regard to Plaintiff s allegation that he and Schreiber introduced Colbeck to Defendant Waksal, Plaintiff attaches no supporting documents showing that this meeting occurred, such as underlying communications setting up the meeting. 3 Instead, he references a single from April 2013, written years after the alleged meeting. Plaintiff also fails to allege any follow-up communications after the initial meeting, or any actions taken by Plaintiff during the negotiation process or implementing any Colbeck-related deal. In fact, Plaintiff s allegation that he did not know that an agreement stemming from the introduction to Colbeck 3 In his affidavit, Dr. Waksal has denied that Plaintiff and Schreiber introduced him to Colbeck. (Ex. C 5). 9

13 had occurred until December 2012 (SAC 36) demonstrates that Plaintiff played no role in helping Kadmon obtain financing. If Plaintiff had played a meaningful role in raising money for Kadmon, he surely would have been aware of what was going on. Similarly, with regard to the allegation that Plaintiff lent Kadmon $100,000, Plaintiff fails to attach any sort of documentation to support his claim despite the Court s invitation that he do so. Indeed, the allegations in the SAC make clear that the $100,000 was offered as an attempted investment in Kadmon, not as a loan. Plaintiff s allegations that he and Schreiber introduced Colbeck to Defendants, and that he and Schreiber sought to invest $250,000 in the company, do not come close to satisfying the Court s request for details and documents corroborating Plaintiff s claim that he and Schreiber undertook substantial efforts to raise money for Kadmon. If, as Plaintiff alleges, he performed extensive work to pursue investors and bring in capital, where is the corroborating evidence, such as s to potential investors, attorney timesheets, and most importantly, executed investor deal documents? In short, Plaintiff s allegations about actions taken and effort expended to raise capital for the initial Kadmon offering fail to remedy the fatal deficiencies noted by the Court. c. Plaintiff s account of the flood remains implausible. At the October 16 hearing, the Court also questioned why the Plaintiff would have left a document as important as his only copy of the signed agreement where it could be destroyed, and expressed interest in understanding when Plaintiff introduced Colbeck to Kadmon and when he learned that he was not going to get the equity to which he now claims entitlement. ( When did [Rosenfeld] realize that he wasn t going to get an equity interest in this business?... if he knew prior to December 1, 2011, the flood that happened in his office, he would have taken care of finding that document because if he got scammed prior to December 1, 2011, don t you think a 10

14 reasonable person would then look for the document and say I got a signed document. I m going to sue these guys now, (10/16/14 Tr. at 9:19-26, 10:1-8, 11:14-19); ( I d like to know where and what time did your client realize that he wasn t getting his interest that he was promised or at least that the agreement memorialized because that s a very critical issue because if he had known prior to September 1, 2011, that something was happening, then it would be nice then it would be interesting to see what his allegations were to protect his interest rather than leave an important document on the floor to get destroyed, id. at 25:7-15). In the SAC Plaintiff tries to address the Court s concern by alleging that he and Schreiber introduced Colbeck to Kadmon sometime in late 2009 (SAC 33), but did not learn of the alleged Colbeck-related transaction until December 2012 (SAC 36), after the flood occurred. However, the sequence of events as alleged in the SAC is not credible either. The flood occurred nearly two-and-a-half years after the contract was allegedly executed, and approximately two years after Plaintiff allegedly introduced Colbeck to Kadmon. By the time the alleged flood occurred, the arrangement contemplated in the alleged agreement had not come to fruition and, even according to Plaintiff s allegations, he had left the document in a place where it could be destroyed by a flood. These additional facts undercut, rather than corroborate Plaintiff s contention that an agreement was finalized and acted upon. Accordingly, despite the roadmap provided by the Court to avoid dismissal on statute of fraud grounds, Plaintiff has again failed to point to a single or any other writing or document in which the parties say they have reached a final, signed agreement, or any other evidence that corroborates Plaintiff s claim that a final agreement was executed. On his third attempt, Plaintiff has again failed to satisfy the statute of frauds. Plaintiff still has not produced a 11

15 signed agreement and has not produced any other evidence establishing that the parties reached a final subscribed agreement. II. In This Case, s Cannot Substitute for a Signed Agreement Because Dr. Waksal Stated that the Agreement Could be Finalized Only When It Was Signed. In this case, s cannot suffice to bind the parties, because Dr. Waksal explicitly stated that any agreement would have to be signed. Courts have held that where parties specify that an agreement is to be finalized through formal subscription, an exchange will not suffice. See Paloger v. Cohen, 37 Misc. 3d 1220(A), 2012 N.Y. Slip Op. 5209(U), *5-*7 (Sup. Ct., Nassau County 2012) (holding that an exchange was not sufficient to satisfy the statute of frauds because the parties intended, as evidenced by the express language in the [ ] e- mails, that the settlement reached would be reduced to a formal writing ); 2004 Bowery Partners, LLC v. E.G. West 37th LLC, 32 Misc.3d 1210(A), 2011 N.Y. Slip Op (U) (Sup. Ct., N.Y. County 2011) (granting motion to dismiss where documentary evidence in the form of correspondence and s between the parties established that negotiations between the parties failed and parties expressed their intention not to be bound until the Proposed Agreement was fully executed). Thus, a signed agreement is required because Dr. Waksal specified in a July 17, to Plaintiff that any agreement would only be finalized through a physically subscribed document. (SAC 17 ( I have enclosed an engagement letter which you can modify and get back to me. I will then sign it and get you the original. )). Because Plaintiff has failed to produce a signed agreement, his contract claim should be dismissed with prejudice. Moreover, as the Court stated, because an unenforceable contract cannot be used as the basis for proceeding with quasi-contract claims (10/16/15 Tr. at 31:10-16), Plaintiff s quantum meruit claim also should be dismissed. 12

16 III. Even if a Valid Contract Existed, Plaintiff Does Not Allege that He Fulfilled His Obligation to Raise Capital for Kadmon and No Payment to Him Ever Came Due. Separate and apart from Plaintiff s failure to satisfy the statute of frauds, the SAC should be dismissed because Plaintiff fails to allege a cause of action for breach of contract or quantum meruit. The agreement that Plaintiff puts forward as the final, enforceable agreement with Kadmon, by its terms, required Plaintiff and Schreiber to raise approximately $50 million toward a specific Kadmon venture. Plaintiff does not allege that he and Schreiber raised anything close to the $50 million they agreed to raise for Kadmon. Indeed it is clear that they failed to satisfy their obligations under the agreement Plaintiff alleges. Rather, the essence of Plaintiff s claim is that they introduced Colbeck to Kadmon in 2009, and that [u]pon information and belief, via this introduction to Colbeck, [Kadmon] received over [$250,000,000] in debt and equity (SAC 34) for which Plaintiff is owed compensation. Plaintiff does not allege anything that he or Schreiber did after the alleged introduction to help Kadmon obtain any money except for $250,000 he claims that he and Schreiber attempted to invest in Kadmon. (SAC 35). The allegations in the SAC do not state a cause of action for breach of the contract Plaintiff seeks to enforce. a. Plaintiff fails to allege a cause of action for breach of contract because he has not alleged that he performed under the contract. To state a cause of action for breach of contract under New York law, a plaintiff must establish the following four elements: (1) the existence of a valid contract; (2) plaintiff's performance of the contract; (3) defendant's material breach of the contract; and (4) resulting damages. Hermandad Y Asociados, Inc. v. Movimiento Misionero Mundial, Inc., 22 Misc. 3d 1138(A), 2009 N.Y. Slip Op (U), *4 (Sup. Ct., N.Y. County 2009) (citations omitted). Although Plaintiff claims that he duly performed under the alleged contract (see SAC 41), Plaintiff alleges no facts that support this allegation. See Prof'l Health Servs., Inc. v. City of New 13

17 York, 34 A.D.2d 918, 918 (1st Dep t 1970) (a complaint that fails to state the essential facts constituting the material elements of a cause of action does not provide the notice required under the CPLR). To the contrary, Plaintiff s allegations make clear that in fact he did not perform. See Ohlbaum v. Commercial Cas. Ins. Co., 218 A.D. 842, 842 (2d Dep t 1926) ( If plaintiff has performed, then that fact should be alleged without qualification. ). New York courts will dismiss a breach of contract claim where a plaintiff fails to allege [his] own performance under the contract. Chappo & Co., Inc. v. Ion Geophysical Corp., 83 A.D.3d 499, 500 (1st Dep t 2011) (dismissing breach of contract claim because even though plaintiff alleged that it found a lender under the relevant contract, the documentary evidence showed that no terms had been finalized and that the loan amount was less than half the amount required by the contract); see also Dorfman v. Am. Student Assistance, 104 A.D.3d 474 (1st Dep t 2013) (affirming summary judgment where plaintiff borrower failed to establish her own performance under contract required for her breach of contract claim against lenders after they declared her in default). More specifically, New York courts have held, in the context of broker s and finder s fees, that where a plaintiff fails to allege facts showing that he has performed his duties to be entitled to a commission under a contract, the complaint should be dismissed. See, e.g., Taibi v. Am. Banknote Co., 135 A.D.2d 810, 811 (2d Dep t 1987) (explaining that absent allegations that a broker has performed all of his duties under the broker agreement, the claim for compensation is legally insufficient). Here Plaintiff has not alleged facts showing that he and Schreiber performed their obligation of raising approximately $50 million in capital (or anything close to $50 million) for the project identified in the alleged contract. In fact, Plaintiff s allegations establish that he and Schreiber did not raise the funds they agreed to raise for Kadmon. By Plaintiff s own admission, 14

18 under the contemplated agreement Plaintiff and Schreiber agreed to raise approximately US$50 million, for which they would be compensated with a 6% equity package. (SAC 18). This equity was to come due only after it was earned. (SAC 31). Here, on the face of the SAC, Plaintiff and Defendant Schreiber failed to perform the terms of the alleged agreement. The purported July 21, 2009 agreement required Plaintiff and Schreiber to raise $50 million in investments i.e. to negotiate to fruition capital contributions in the amount of $50 million in order to obtain their fee. (SAC 13, 16, 18). Plaintiff s claim that he worked on the PPM and that he and Schreiber engaged in numerous and substantial efforts to locate funding sources (SAC 28) does not constitute raising capital for Kadmon and does not entitle Plaintiff to compensation under the contract. Indeed, the SAC alleges only one investment successfully raised for Kadmon namely, that Plaintiff Rosenfeld and Defendant Schreiber personally provided $250,000 to Dr. Waksal and Kadmon as a direct initial investment. (SAC 35). They clearly failed in their efforts to raise $50 million for Kadmon. Instead, Plaintiff alleges merely that he and Schreiber introduced Dr. Waksal to Colbeck in late 2009 at Colbeck s offices. (SAC 33). Aside from this alleged meeting, Plaintiff alleges no further communications with Colbeck, or actions taken by Plaintiff or Schreiber to raise, negotiate or ensure an investment by Colbeck in Kadmon. In fact, Plaintiff s general allegations that at an undisclosed date, via this introduction to Colbeck, Defendants... received over [$250,000,000] in debt and equity, and that Plaintiff only happened to learn of such deal from Defendant Schreiber in December 2012, three years later, (SAC 34, 36), without any specific allegations setting forth details of the relevant transaction, including who made the alleged contribution of $250,000,000 in debt and equity or when the investment occurred, demonstrate that Plaintiff and Schreiber were not involved in obtaining any money for 15

19 Kadmon and is fatal to Plaintiff s contract claim. See, e.g., Taibi, 135 A.D.2d at (complaint dismissed where broker introduced the defendant to a proposed buyer, holding that broker was not entitled to a commission where he failed to meet remaining terms of broker agreement to negotiate investment to fruition). Tellingly, Plaintiff does not allege that Colbeck made any investment in Kadmon. Rather, he employs the passive voice, stating only that via the Colbeck introduction Defendants Waksal and Kadmon Capital LLC received over two hundred and fifty million dollars ($250,000) in debt and equity... (SAC 34) (emphasis added). Perhaps even more tellingly, Schreiber, who also stood to gain under the purported contract, has not joined Plaintiff in this action and indeed is named as a defendant. Even under a finder s fee agreement providing for compensation based on an introduction to investors, requiring far less than the alleged contract at issue here, courts have held that a mere introduction, without some additional involvement with the investment, is insufficient to earn a fee. Courts read into such finder s fee agreements an implicit requirement that that the finder establish a continuing connection between plaintiff's initial efforts and the [ultimate transaction]. Edward Gottlieb, Inc. v. City & Commercial Commc'ns PLC, 200 A.D.2d 395, 399 (1st Dep t 1994) (quoting Simon v. Electrospace Corp., 28 N.Y.2d 136, 142 (1971)) (dismissing claim for finder s fee where plaintiff failed to meet its burden of showing that the defendant s acquisition of a third party was a direct result of plaintiff s disclosure of that opportunity); see Moore v. Sutton Res., Ltd., No. 96 Civ (RWS), 1998 WL 67664, at *4 (S.D.N.Y. Feb. 18, 1998), aff'd 165 F.3d 14 (2d Cir. 1998) (applying New York law). To establish this causal connection, the finder must show that there is some continuing connection, a continuity of negotiations, between the finder s initial efforts and the transaction that came about. Ferghana Partners Inc. v. Bioniche Life Sciences Inc., 33 Misc. 3d 1220(A), 2011 N.Y. 16

20 Slip Op (U) (Sup. Ct., N.Y. County 2011) (citing, inter alia, Moore, 1998 WL 67664, at *4; Karelitz v. Damson Oil Corp., 820 F.2d 529, 532 (1st Cir1987) (applying New York law, and finding no continuity of negotiations requiring payment of a finder s fee where the successful negotiations bore no relationship to the original introduction)). Here, because Plaintiff s own allegations establish that he had no contact with Colbeck following the alleged initial 2009 introduction, he has not alleged the requisite continuing connection to sustain a claim for a finder s fee for an introduction alone even if the contract had contemplated such an arrangement. Accordingly, even if Plaintiff had alleged an enforceable agreement, he has not alleged facts that would entitle him to a fee under the alleged agreement, and his claim for breach of contract in the SAC should be dismissed, with prejudice, for failure to state a cause of action. b. Plaintiff fails to allege the factual basis necessary to support a quantum meruit cause of action. The SAC does little more than parrot the elements for a quantum meruit cause of action, and for that reason alone the pleading is insufficient as a matter of law. See Prof'l Health Servs., Inc., 34 A.D.2d at 918. Even searching the SAC in the light most favorable to Plaintiff for activities he allegedly performed for Kadmon s benefit, Plaintiff s claim for quantum meruit is insufficient. In order to establish a quantum meruit claim, plaintiff must show the performance of services in good faith, acceptance of the services by the person to whom they are rendered, an expectation of compensation therefor, and the reasonable value of the services. Georgia Malone & Co., Inc. v. Ralph Rieder, 86 A.D.3d 406, 410 (1st Dep t 2011), aff'd 19 N.Y.3d 511 (2012) (internal quotations omitted). The SAC does not allege any actions taken by Plaintiff that would support a quantum meruit claim. 17

21 i. Plaintiff Fails to Allege the Performance of Services that would Support Quantum Meruit As a preliminary matter, in the finder s fee context, it is insufficient to allege merely that some services were performed. Instead, the services must result in the desired outcome: in this case actual capital raised for the Kadmon project identified in the alleged agreement. See Brylgrove Ltd. v. Tomkins, PLC, 218 A.D.2d 575, 575 (1st Dep t 1995) (plaintiff not entitled to a finder s fee under a quantum meruit theory where there was no evidence tending to show that plaintiff made the introductions that resulted in defendant s acquisition of the target company ). Thus, even if Plaintiff and Schreiber introduced Defendants to Colbeck as alleged (SAC 33), that would not support a quantum meruit claim. Plaintiff s other claims that he reviewed the PPM (SAC 22), and that he exerted other efforts, such as attempting to set up investor meetings (SAC 28-29) are also insufficient because Plaintiff does not allege that these efforts resulted in any investment in Kadmon. If anything, these activities are properly categorized as preparatory acts that do not qualify for compensation under quantum meruit. See generally Martin H. Bauman Assocs., Inc. v. H & M Int'l Transp., Inc., 171 A.D.2d 479, 484 (1st Dep t 1991) (quoting Farash v. Sykes Datatronics, Inc., 59 N.Y.2d 500, 506 (1983)) ( The quasicontractual concept of benefit continues to be recognized by the rule that the defendant must have received the plaintiff's performance; acts merely preparatory to performance will not justify an action for restitution. ). More generally, even accepting Plaintiff s characterization that the $100,000 he attempted to invest and that was returned to him was an interest free loan (SAC 35), payment of money cannot support a quantum meruit action. See Skillgames, LLC v. Brody, 1 A.D.3d 247, 251 (1st Dep t 2003) (court was unaware of any case applying quantum meruit to the provision of money rather than services ). 18

22 Accordingly, Plaintiff has failed to allege with any specificity that he performed services sufficient to support his quantum meruit claim. ii. Plaintiff Fails to Plead the Reasonable Value of Any Services Because Plaintiff fails to allege specific services he performed for Kadmon, he necessarily also fails to identify the reasonable value of any services, an independent basis for dismissal of his quantum meruit claim. The purpose of quantum meruit is to restore the plaintiff s former status, including compensation for expenditures made in reliance upon defendant s representations. Martin H. Bauman Assocs., 171 A.D.2d at 484 (citation omitted). Thus, it is incumbent on the party seeking to recover under such a theory to provide the Court with a means of understanding the value of the services rendered. Where a plaintiff fails to do so, the claim should be dismissed. Id. (dismissing complaint where plaintiff s complaint, as well as all its other submissions, [was] entirely devoid of any indication of what it spent or, in fact, of the reasonable value of any services which it may have performed ). Plaintiff does not even attempt to quantify services actually performed for Kadmon but instead purports to seek $150 million in damages based on his quantum meruit claim the very amount he alleges under the breach of contract cause of action. Courts have routinely rejected such a quantum meruit valuation because quantum meruit is not a device wherein a plaintiff may enforce a purported agreement which might ultimately be found not to be viable. Martin H. Bauman Assocs., 171 A.D.2d at 484 (finding plaintiff s demands for the full contract price insufficient to support a quantum meruit claim); see generally Great White Bear, LLC v. Mervyns, LLC, No. 06 Civ (RMB), 2007 WL , at *4 (S.D.N.Y. Apr. 26, 2007) (dismissing quasi-contractual claim where plaintiff failed to specify the reasonable value of services performed, and, instead, cited the full contract amount, rendering it indistinguishable from plaintiff s contract claim). 19

23 Accordingly, Plaintiffs cause of action for quantum meruit should be dismissed as he has not, and cannot, establish a value of any services rendered to Defendants. CONCLUSION Defendants respectfully request that the Court dismiss the Second Amended Complaint with prejudice pursuant to CPLR 321 l(a)(5) and CPLR 321 l(a)(7). Dated: New York, New York December 24, 2014 MORVILLO ABRAMOWITZ GRAND IASON & ANELLO P.C. By: -----=~~~=~~~'~~~"--~~~-r; ~--L-~~~~ Lawrence lason Judith L. Mogul 565 Fifth Avenue New York, New York (212) (telephone) (212) (facsimile) liason@maglaw.com Attorneys for Defendants 20