644 E. 14th Realty LLC v. Mount Sinai Health System, Inc.

Summary

The Appellate Division, First Department held that a letter-of-intent provision requiring payment of a $2 million breakup fee was enforceable because it stated unambiguous terms and an intent to be bound. The court dismissed the plaintiff's promissory estoppel and fraud claims because the letter of intent expressly stated that it would not bind either party and therefore plaintiff could not establish justifiable reliance.

Holdings

1. The provision in the letter of intent requiring payment of a $2 million fee if either party failed to execute a lease within 120 days was enforceable because its language reflected unambiguous terms and an intent to be bound.
2. The promissory estoppel claim had to be dismissed because reliance on promises to proceed with a transaction is unreasonable as a matter of law when the preliminary agreement expressly requires execution of a further written agreement before either party is contractually bound.
3. The fraud claim had to be dismissed because plaintiff could not establish justifiable reliance on defendant's promises to proceed, even assuming defendant had a duty to disclose its negotiations with a third party.

Questions Presented

1. Whether the breakup-fee provision in the letter of intent was enforceable despite the preliminary nature of the letter.
2. Whether plaintiff could maintain a promissory estoppel claim when the letter of intent required a further written agreement and expressly stated that it would not bind either party.
3. Whether plaintiff could maintain a fraud claim based on defendant's alleged nondisclosure of negotiations with a third party and promises to proceed with the transaction.

Disposition

reversed_and_remanded