Motion-Secondary: Trojan Maritime Inc. v. Tpg Sixth Street Partners, Llc, F/K/A Tpg Special Situations Partners, Llc

On November 15, 2016 a Motion-Secondary was filed involving a dispute between Trojan Maritime Inc., and Tpg Sixth Street Partners, Llc, F K A Tpg Special Situations Partners, Llc, for Commercial - Contract in the District Court of New York County.

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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK

TROJAN MARITIME INC.,

Plaintiff,

- against - INDEX NO.: 655978/2016

TPG SPECIAL SITUATIONS PARTNERS,
LLC,

Defendant.

PLAINTIFF’S MEMORANDUM OF LAW IN OPPOSITION TO
DEFENDANT’S MOTION TO DISMISS THE COMPLAINT

The Plaintiff, Trojan Maritime Inc. (“Trojan”), by and through its undersigned counsel,

Lennon, Murphy & Phillips, LLC, files the within Memorandum of Law in opposition to the

Defendant’s, TPG Special Situations Partners, LLC (“TSSP”), motion to dismiss the Complaint

pursuant to 3211(a)(7). For the reasons stated herein, Trojan has stated causes of action which

are cognizable at law and thus the Complaint should not be dismissed and TSSP’s motion should

be denied.

PRELIMINARY STATEMENT

TSSP’s entire argument in support of its Motion to Dismiss the Complaint ignores the

fact that the agreement between the parties provided that Trojan was to pre-fund a deposit to

TSSP for due diligence expenses upon the signing of a settlement agreement, and unless and

until a final settlement agreement was signed, any costs and/or expenses were to be solely for

each party’s own expense. As will be discussed more fully herein, Trojan pre-funded the deposit

in advance of the signing of a settlement agreement at the request and insistence of TSSP.

However, because the settlement agreement was never signed, the condition which would require

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Trojan to pay TSSP’s expenses was never satisfied. In addition, the Term Sheet further

expressly provides that the $150,000 pre-funded deposit shall be refunded to Trojan. Thus,

TSSP had a duty to refund the pre-funded deposit to Trojan, which is has failed to do. As such,

TSSP is liable to Trojan as alleged in the four counts of the Complaint.

STATEMENT OF FACTS

Trojan commenced this action by way of a four count complaint on or about November

15, 2016. NYSCEF Doc. 1. By way of background, in or about November, 2014, Trojan

commenced discussions with nonparty RMK Maritime LLP (“RMK”) for arrangement of

financing for the purpose of refinancing a fleet of supramax size bulk carrier motor vessels (the

“Transaction”). Complaint, ¶ 5. RMK was the “arranger” of the transaction and coordinated

negotiations with TSSP for the arrangement of refinancing of the vessels with non-party Royal

Bank of Scotland (“RBS”). Complaint, ¶¶ 6-7.

RMK drafted and presented to Trojan and TSSP a “Bareboat Charter Indicative Term

Sheet” (“the Terms Sheet”1) setting forth certain terms and conditions for the negotiation of the

Transaction. The Transaction was only to be concluded upon the execution of a formal

“Settlement Agreement.” The Term Sheet was negotiated and revised several times. Complaint,

¶ 8.

The original drafts of the Term Sheet included a section entitled “Transaction Expenses”

that provided for the party identified as the “Charterer” (Trojan) to pay “all of the expenses”

incurred by the “Arranger” (RMK) and TSSP “incurred in progressing the Transaction, including

but not limited to the costs and fees of legal, tax, technical and other professional advisers

whether or not the transaction is finalized or Definitive Documents are executed. An amount of

1
A redacted copy of the Term Sheet dated June 26, 2015 is attached to the Affirmation of Attorney Rosanne E.
Felicello Submitted in Support of Defendant TPG Special Situations Partners, LLC’s Motion to Dismiss the
Complaint as Exhibit C.

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$150,000 to be prefunded by the Charterer upon signing of the Term Sheet for TSSP’s expenses.”

Complaint, ¶ 10. However, during discussions with RMK concerning the provision of the

original drafts of the Term Sheet relating to the payment of expenses, Trojan sought protection

against the payment of expenses from the $150,000 deposit if the Transaction did not proceed

(i.e. if the Settlement Agreement was not signed). Complaint, ¶ 11.

On or about June 23, 2015, following further discussions between the parties, RMK

forwarded a revised draft of the Term Sheet which stated “we have changed the due diligence

cash deposit from the signing of the Term Sheet to the Settle (sic) Agreement with RBS to

remove risk to Trojan in the event that RBS does not agree and/or does not propose a counter

that is acceptable to Trojan.” Complaint, ¶ 12.

In late June 2015, prior to execution of the Term Sheet, RMK advised Trojan that

discussions and negotiations with TSSP and RBS were proceeding and encouraged Trojan to

pre-pay the $150,000 deposit for “Transaction Expenses” under the Term Sheet as a sign of good

faith and commitment to the Transaction. Complaint, ¶ 13.

Understandably, Trojan expressed concern to RMK about pre-funding the $150,000

deposit prior to conclusion and execution of the “Settlement Agreement” with RBS, as provided

for in the revised Term Sheet. Complaint, ¶ 14. After further discussions, the following changes

to the Term Sheet were made on or about June 26, 2015:

The Charterer and Charter Guarantors shall be jointly and severally responsible
for payment of all the Arranger’s and TSSP’s expenses incurred in progressing
the Transaction, including but not limited to the costs and fees of legal, tax,
technical and other professional advisers whether or not the transaction is
finalized or Definitive Documents are executed. An amount of $150,000 to be
prefunded by the Charterer Immediately upon a signed RBS Settlement
Agreement for TSSP’s expenses. In the event that expenses are greater than the
deposit amount, the Charterer is responsible for further expense and in the event
the expenses are less than the deposit amount, the Charterer will be refunded
any excess amounts.

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To avoid any doubt, the Charterer and Charter Guarantors shall not be
responsible for any expenses whatsoever, including but not limited to the
Arranger’s and TSSP’s expenses incurred in progressing the Transaction, the
costs and fees of legal, tax, technical and other professional advisers until a final
Settlement Agreement is agreed and signed with RBS. Any costs, expenses
incurred during the period waiting for RBS’ agreement and the signed
Settlement Agreement, shall be solely for each party’s own expense.

(emphasis added.) Complaint, ¶ 16.

Thereafter, despite the fact that RBS had not signed the Settlement Agreement to

refinance the Transaction, RMK urged Trojan to prefund the $150,000 to TSSP as a sign of good

faith because, according to RMK, TSSP would not otherwise proceed with the Transaction.

Complaint, ¶ 17. Thus, at RMK’s urging, in late July 2015 Trojan’s agents wire transferred

$150,000 in two installments into TSSP’s nominated account in the name of “TPG Opportunities

III Management,” per TSSP instructions via RMK. Complaint, ¶ 18.

Negotiations continued between the parties throughout September but final terms of the

Transaction could not be agreed between Trojan and TSSP and the negotiations were terminated

on September 30, 2015. Complaint, ¶ 19. On or about October 7, 2015, Trojan’s representatives

sent an email to RMK demanding prompt return of the $150,000 deposit payment. Complaint, ¶

20. Despite due demand, TSSP has failed and refused to refund the $150,000 deposit payment

to Trojan. Complaint, ¶ 21.

Trojan’s Complaint contains four causes of action, breach of fiduciary duty, constructive

trust, unjust enrichment and breach of contract. TSSP’s motion to dismiss all four causes of

action must be denied because Trojan has plead sufficient facts to support each cause of action.

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POINT ONE

LEGAL STANDARD ON A MOTION TO DISMISS

“In the context of a motion to dismiss pursuant to CPLR 3211, the court must afford the

pleadings a liberal construction . . . ” EBC I, Inc. v. Goldman Sachs & Co., 5 N.Y. 3d 11, 19,

799 N.Y.S.2d 170, 175 (2002). The Court:

must accept as true the facts as alleged in the complaint and
submissions in opposition to the motion, accord plaintiffs the benefit
of every possible favorable inference and determine only whether the
facts as alleged fit within any cognizable legal theory.

Sokoloff v. Harriman Estates Dev. Corp., 96 N.Y.S. 2d 409, 414, 729 N.Y.S.2d 425, 428 (2001).

The First Department explained in Wiener v. Lazard Freres & Co., 241 A.D.2d 114, 120

(1st Dep’t 1998):

It is well established that, on such a motion, the pleadings must be
liberally construed and the facts alleged accepted as true; the court
must determine “only whether the facts as alleged fit within any
cognizable legal theory.” So liberal is the standard under these
provisions that the test is simply “whether the proponent of the
pleading has a cause of action,” not even “whether he has stated one.”

Accord Polonetsky v. Better Homes Depot, Inc., 97 N.Y.2d 46, 54; 760 N.E. 2d 1274; 735

N.Y.S.2d 479 (2001) (“if from [the Complaint’s] four corners factual allegations are discerned

which taken together manifest any cause of action cognizable at law a motion for dismissal will

fail.”)

In the posture of defendants’ CPLR 3211 motion to dismiss . . . [t]he
motion must be denied if from the pleadings’ four corners factual
allegations are discerned which taken together manifest any cause of
action cognizable at law.

511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 152, 746 N.Y.S.2d 131, 134

(2002)(internal citations and quotations omitted.)

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The allegations contained in Trojan’s Complaint satisfy this test and state a claim that

withstands TSSP’s motion to dismiss.

ARGUMENT

POINT I

Trojan’s First Count Alleges a Valid Cause of Action for Breach of Fiduciary Duty

“To establish a breach of fiduciary duty claim, plaintiff must prove (1) the existence of a

fiduciary relationship, (2) misconduct by the defendants, and (3) damages directly caused by the

defendant’s misconduct.” Poloik v. Poloik, 115 AD3d 428, 429, 982 N.Y.S.2d 67 (1st Dep’t

2014). TSSP argues that Trojan’s cause of action for breach of fiduciary duty should be

dismissed because there is no fiduciary relationship where there is no special relationship and

where a contract controls the terms of the relationship. See Defendant’s Memorandum of Law in

Support of Motion to Dismiss the Complaint (hereinafter “Defendant’s Memorandum of Law”),

page 3.

“[W]hile a cause of action for breach of fiduciary duty that merely restates contract

claims must be dismissed (see LaSalle Hotel Lessee, Inc v. Marriott Hotel Servs., Inc. 29 AD3d

464, 816 NYS2d 347 (2006)), conduct amounting to breach of a contractual obligation may also

constitute the breach of a duty arising out of the relationship created by contract which is

nonetheless independent of such contract (see Sally Lou Fashions Corp. v. Camhe-Marcille, 300

A.D.2d 224, 225, 755 N.Y.S.2d 67 (2002).” Bullmore v. Ernst & Young Cayman Is., 45 A.D.3d

461, 463, 846 N.Y.S.2d 145 (1st Dep’t 2007). “A defendant may be liable in tort for a breach

of fiduciary duty if ‘a legal duty independent of the contract has been violated’ or when a

defendant ‘has engaged in tortious conduct separate and apart from its failure to fulfill its

contractual obligations.’” Thymann v. AFG Mgt., LLC, 2014 N.Y. Misc. LEXIS 3089 at *3,

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2014 NY Slip Op 31803(U) (July 9, 2014) citing Bullmore v. Banc of Am. Sec. LLC, 485 F.

Supp. 2d 464, 469-470 (S.D.N.Y 2007).

In addition, “where a contract provides for a party to take custody of another’s property

and the custodian assumes unauthorized control over the property in question, the owner of said

property ‘may seek redress by demanding damages intended to remedy such tortious

misconduct.’” Thymann v. AFG Mgt., LLC, 2014 N.Y. Misc. LEXIS 3089 at * 5 citing Ball v.

Cook, 2012 WL 4841735, 2012 U.S. Dist. LEXIS 147380 (S.D.N.Y. Oct. 9, 2012).

Trojan has alleged that TSSP would not proceed with the Transaction if Trojan did not

pre-fund the $150,000 to TSSP as a sign of good faith. See Complaint, ¶ 17. Although the Term

Sheet provided that Trojan was to prefund the $150,000 deposit “[i]mmediately upon a signed

RBS Settlement Agreement for TSSP’s expenses,” Trojan pre-funded the $150,000 because

TSSP would not proceed otherwise. This provision, which was not bargained for in the Term

Sheet, created a position of trust and confidence on the part of TSSP. TSSP became the effective

custodian of the pre-funded deposit, and Trojan trusted it would abide by the provisions of the

Term Sheet, namely, that each party would be responsible for its own expenses in the event the

Settlement Agreement is not signed. While a normal arm’s length business transaction may not

give rise to a fiduciary relationship, when TSSP demanded that Trojan pre-fund the deposit, it

went outside the normal business transaction and created a position of trust.

TSSP relies on Perez v. Ethical Culture Fieldston Sch., 2016 Misc. LEXIS 3627, at *7,

2016 NY Slip Op 31871 (U), at * 5 (Sup. Ct. NY Cnty Oct. 5, 2016) in support of its argument

that Trojan has not stated a claim for breach of fiduciary duty. In Perez, the court granted the

defendant’s motion for summary judgment dismissing the plaintiff’s cause of action for breach

of fiduciary duty, holding “[d]efendants have no fiduciary duty separate and apart from the

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contractual obligations to which defendants committed in the Settlement Agreement.” However,

as stated above, in this case, TSSP created a separate duty for itself when it demanded Trojan

pre-fund the deposit. TSSP’s refusal to refund the pre-funded deposit after negotiations fell

through constitutes misconduct on part of TSSP which has directly caused damages to Trojan.

“The nature of the injury, the manner in which the injury occurred and the resulting harm are all

relevant factors in considering whether the claims for breach of contract and tort may exist side

by side.” Bloostein v. Morrison Cohen LLP, 2016 N.Y. Misc. LEXIS 2611, at *7 2016 NY Slip

Op 31309 (U) (July 11, 2016).

Thus, Trojan has alleged a valid cause of action for breach of fiduciary duty separate and

apart from its breach of contract cause of action. Put another way, assuming arguendo that this

Court were to find that the provisions of the Term Sheet do not require TSSP to return the pre-

funded deposit (which is denied2), Trojan can still prevail on its breach of fiduciary duty claim

because, as alleged in its First Cause of Action, the pre-funded deposit, demanded by TSSP

created a fiduciary relationship and caused Trojan to bear a risk inherent in prefunding TSSP’s

expenses, and which created a fiduciary relationship that Trojan relied upon in pre-funding the

deposit.

For the foregoing reasons, TSSP’s Motion to Dismiss the First Cause of Action for

breach of fiduciary duty should be denied.

2
The Term Sheet expressly provides “[i]n the event that expenses are greater than the deposit amount, the
Charterer is responsible for further expense and in the event the expenses are less than the deposit amount, the
Charterer will be refunded any excess amounts.” Felicello Aff. Exh. C.

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POINT TWO

Trojan’s Second Cause of Action Alleges a Valid Claim
For Imposition of a Constructive Trust

Trojan has also pled a valid cause of action for imposition of a constructive trust. A

constructive trust is an equitable remedy. “A constructive trust is the formula through which the

conscience of equity finds expression. When property has been acquired in such circumstances

that the holder of legal title may not in good conscience retain the beneficial interest, equity

converts him into a trustee.” Simonds v. Simonds, 45 N.Y.2d 233, 241, 380 N.E.2d 189 (May

31, 1978) citing Beatty v. Guggenheim Exploration Co., 255 NY 380, 368. The elements of a

constructive trust under New York law are: (1) a confidential or fiduciary relationship; (2) a

promise, express or implied; (2) a transfer made in reliance on that promise; and (4) unjust

enrichment. See Sharp v. Kosmalski, 40 N.Y.2d 119, 121, 351 N.E.2d 721, 386 N.Y.S.2d 72, 75

(1976).

Although the four factors were set out by the New York Court of
Appeals in Sharp v. Kosmalski, 40 N.Y.2d 119, 121, 351 N.E.2d 721,
723, 386 N.Y.S.2d 72, 75 (1976), the same court later noted that
“although the factors are useful in many cases constructive trust
doctrine is not rigidly limited”, Simonds v. Simonds, 45 N.Y.2d 233,
241, 380 N.E.2d 721, 723, 386 N.Y.S.2d 72, 75 (1978). . . No breach
of promise is necessary for the imposition of a constructive trust,
which “will be erected whenever necessary to satisfy the demands of
justice.” Latham v. Father Divine, 299 N.Y. 22, 27, 85 N.E.2d 168,
170 (1949). Simply stated, to impose a constructive trust, “what is
required, generally, is that a party hold property ‘under such
circumstances that in equity and good conscience he ought not to
retain it.’ Simonds, 45 N.Y.2d at 242, 380 N.E.2d at 194, 408
N.Y.S.2d at 364 (quoting Miller v. Schloss, 218 N.Y. 400, 407, 113
N.E. 337, 339 (1916). In pleading as in proof, a constructive trust is a
flexible device and must not be bound by an “unyielding formula.”
Beatty v. Guggenheim Exploration Co., 225 N.Y. 380, 389, 122 N.E.
378, 381 (1919)(Cardozo J.).

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Golden Budha Corp. v. Canadian Land Co., N.V., 931 F.2d 196, 202, 1991 U.S. App. LEXIS

7066 (2d Cir. 1991). In Golden Budha Corp., the appellant argued on appeal that the trial court

erred in dismissing its constructive trust claim based on a finding that it failed to demonstrate the

existence of a fiduciary duty. Id. at 197. The Second Circuit Court of Appeals agreed, and

overturned the decision of the trial court, finding that appellant did in fact adequately plead the

elements of a claim for the imposition of a constructive trust, since it appeared from the

complaint that defendants held property they should not retain in good conscience and equity.

Id. at 202.

TSSP argues that because Trojan has not alleged a confidential or fiduciary relationship

between Trojan and TSSP, it cannot maintain a cause of action seeking a constructive trust. As

set forth in Point One, Trojan has validly alleged a cause of action for breach of fiduciary duty,

and thus, a constructive trust should be imposed. However, even assuming arguendo that this

Court finds that Trojan has not established a fiduciary relationship, TSSP does not deny that it

accepted and retained the pre-funded deposit and has refused to refund it to Trojan. While

Trojan alleges that the Terms Sheet is silent regarding what happens ifthe funds are deposited

prior to the signing of the Settlement Agreement, the Term Sheet is not silent on the allocation of

expenses prior to signing the Settlement Agreement. Rather, the Term Sheet provides that in

such circumstances, each party bears its own costs, and it further provides for a refund to Trojan.

Thus, TSSP is holding property that it should not be allowed to retain.3

TSSP cites to Kastrat v. Wynnykiw, 13A.D.3d 283, 788 N.Y.S.2d 339, 340 (1st Dep’t

2004) in support of its argument that a constructive trust claim cannot be maintained against a

3
TSSP’s repeated incantation that Trojan failed to allege that TSSP used Trojan’s funds for an improper
purpose is a clever, albeit it hollow, attempt to foist a pleading burden on Trojan that does not exist in order to
validly plead the causes of action stated in the Complaint.And, TSSP has failed to cite any law in support of its
contention.

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party with whom a plaintiff does not have a fiduciary relationship. However, Kastrat is

distinguishable from this case. In Kastrat, the court dismissed the plaintiff's cause of action for

imposition of a constructive trust based, in part, on a finding that the plaintiff never had an

interest in the property it was seeking a constructive trust over. Id. at 340. Here, it is undisputed

that Trojan owned the pre-funded deposit.

For the foregoing reasons, Trojan has alleged a valid cause of action for imposition of a

constructive trust.

POINT THREE

Trojan’s Third Cause of Action Alleges a Valid Claim for Unjust Enrichment

Unjust enrichment is a quasi-contractual claim. To allege a valid cause of action for

unjust enrichment, a plaintiff must show “that the defendant received a benefit or was enriched at

the plaintiff’s expense under circumstances that would make it unjust or inequitable for the

defendant to retain the benefit.” Skycom SRL v. F.A. & Partners, Inc., 2015 N.Y. Misc. LEXIS

26, * 10, 2015 NY Slip Op 30007(U) (January 7, 2015) citing Clark-Fitzpatrick, Inc. v. Long Is.

R.R. Co., 70 N.Y.2d 382, 516 N.E.2d 190, 521 N.Y.S.2d 653 (1987). “Where itis unclear

whether there is an express agreement on the same subject matter, unjust enrichment and breach

of contract can be pleaded alternatively.” Skycom SRL v. F.A. & Partners, Inc., 2015 N.Y. Misc.

LEXIS 26, * 10 (finding plaintiff may maintain an alternative claim for unjust enrichment where

there is an issue of fact as to whether the parties’ sub- agreement covered the same subject matter

as the express agreement.) According to TSSP, the Term Sheet is silent regarding what happens

if the deposit is pre-funded prior to signing the Settlement Agreement.4 Defendant’s

Memorandum of Law, p 7. Thus, if the Court concludes there is an issue as to whether the Term

4
As set forth herein and in the Complaint, the Parties’ agreement is not silent on the issue, but rather it
provides for TSSP to refund the deposited funds to Trojan.

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Sheet covers the pre-funding of the deposit before the signing of the Term Sheet, Trojan may

maintain its claim for unjust enrichment.

Moreover, while TSSP argues that Trojan has failed to allege that TSSP did not use the

funds for their intended purpose, i.e. due diligence, and therefore it has been not been unjustly

enriched, (Defendant’s Memorandum of Law, p. 7), the intended purpose of the pre-funded

deposit was to cover TSSP’s costs and expenses after a final Settlement Agreement was signed

with TSSP and RBS. That did not happen, and as such, TSSP has been unjustly enriched by its

retention of the pre-funded deposit.

TSSP attempts to place the blame on Trojan for trusting TSSP and pre-funding the

deposit. TSSP argue that where a party fails “to exercise caution with respect to a business

transaction” unjust enrichment does not lie to relieve such failure. Defendant’s Memorandum of

Law, p. 7 citing Dragon Inv. Co. II LLC v. Shanahan, 49 A.D.3d 403, 405, 854 N.Y.S.2d 115,

118 (1st Dep’t 2008). In Dragon Inv. Co. II LLC v. Shanahan, the court dismissed plaintiff’s

claims for unjust enrichment stemming from defendant’s alleged fraudulent written statements

where the court found the plaintiff failed to exercise due diligence with respect to the agreement

it was entering into. Id. at 405. TSSP also cites to Tasini v. AOL, Inc., 851 F. Supp.2d 734, 741

(S.D.N.Y. 2012) and Charles Hyman, Inc. v. Olsen Indus., 227 A.D.2d 270, 277, 642 N.Y.S.2d

306, 311 (1st Dep’t 1996) in support of its argument that Trojan failed to exercise caution and

“went into the arrangement with eyes wide open.” Defendant’s Memorandum of Law, p. 7.

Tasini v. AOL, Inc. is readily distinguishable from this case because it was undisputed

that the Tasini plaintiffs “entered into their transactions with the defendants with full knowledge

of the facts and no expectation of [financial] compensation” and that they got what they

bargained for, which was not monetary compensation but rather exposure on the defendant’s

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website. Id. at 740. In such circumstances, the court held, “equity and good conscience counsel

against retroactively altering the parties’ clear agreement.” Id. Additionally, TSSP’s argument

completely ignores the well-pleaded facts contained in Trojan’s Complaint, which show that

Trojan did exercise caution and expressed its concern with pre-funding the deposit prior to the

execution of the Settlement Agreement, and for that reason, and “to avoid any doubt” the Term

Sheet was revised to expressly provide that any costs or expenses incurred during the period

waiting for the Settlement Agreement to be signed were for each party’s own expense. See

Complaint, ¶¶14-16. Trojan exercised due diligence by including a provision in the Term Sheet

that provided it was not responsible for TSSP’s costs and expenses unless and until a Settlement

Agreement was signed.

Unlike the plaintiffs in both Dragon Inv. Co. II LLC, Charles Hyman, Inc., and Tasini v.

AOL, Inc., Trojan did exercise caution with respect to the Transaction. Furthermore, TSSP was

the party who insisted that Trojan pre-fund the deposit if it were to proceed with the Transaction.

Thus, it created the condition that gave rise to its unjust enrichment, and it would be against

equity and good conscience to allow TSSP to retain the prefunded deposit.

For the reasons set forth herein, Trojan has alleged a valid cause of action for unjust

enrichment and TSSP’s motion to dismiss should therefore be denied.

POINT FOUR

Trojan’s Fourth Cause of Action Alleges a Valid Claim for Breach of Contract

Trojan’s Fourth Cause of Action alleges that TSSP breached the terms of the parties’

contract. While TSSP argues that Trojan alleges there was an “implied term” in the contract that

if the settlement agreement was not signed, then any pre-funded deposit would be refunded

(Memorandum of Law in Support of Application, p. 1), Trojan need not resort to “implying” any

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terms in the contract, as the plain words contained in “Transaction Expenses” clause speak for

themselves and provide that each party bears it own costs until a Settlement Agreement is signed.

Furthermore, it expressly provides for TSSP to refund the pre-funded deposit to Trojan.

Complaint ¶¶ 15-16.

“The elements of a cause of action for breach of contract are: (1) the existence of a

contract between the plaintiff and the defendant; (2) the plaintiff’s performance thereunder, (3)

the defendant’s breach of the contract, and (4) damages.” US Bank Natl. Assn. v. Lieberman, 98

A.D.3d 422, 423, 950 N.Y.S.2d 127 (1st Dep’t 2012).

TSSP argues that “[b]ecause the settlement agreement was never executed, Trojan is asking the

Court to imply a term into the agreement that would require TSSP to refund the funds that were

advanced for due diligence.” Memorandum of Law in Support of Application, p. 1. However, it is the

very fact that the Settlement Agreement was never executed which requires TSSP to refund Trojan’s

pre-funded deposit. Moreover, the Term Sheet expressly provides for TSSP to refund the pre-funded

deposit to Trojan where it states: “[i]n the event that expenses are greater than the deposit amount, the

[Trojan] is responsible for further expense and in the event the expenses are less than the deposit

amount, the [Trojan] will be refunded any excess amounts.” Felicello Aff. Exh. C. TSSP’s argument

also completely ignores the undisputed fact that Trojan insisted on including a provision in the contract

under the heading “Transaction Expenses” which provided that any costs and/or expenses incurred

during the period waiting for the RBS’ agreement and the signed Settlement Agreement, shall solely be

for each party’s own expense. Id. Thus, the Court need not imply any terms into the Parties’

agreement. Because a final Settlement Agreement was never signed, the plain terms of the contract

provide that Trojan is not responsible for either the Arranger’s or TSSP’s expenses, and further provides

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for a refund to Trojan of the pre-funded deposit. Therefore, TSSP is not entitled to retain Trojan’s funds,

regardless of the alleged purposes for which TSSP used them.

TSSP argues that Trojan has not pointed to any provision of the Term Sheet which it

breached. The unambiguous terms of the Term Sheet provide that any costs and expenses

incurred before the Settlement Agreement is signed are for each party’s own expense. Trojan, as

a show of good faith, pre-funded $150,000 toward TSSP’s expenses incurred in progressing the

Transaction. The Settlement Agreement was never signed and therefore all costs are for each

party’s own expense. TSSP admits that ithas refused to refund any portion of Trojan’s pre-

funded $150,000. Trojan does not need to imply any terms into the contract.

As correctly pointed out by TSSP “under New York law, parties are held to the terms of

the agreements that they sign, not the terms of the agreements they wished they had signed.”

Memorandum of Law in Support of Application, p. 1. The Term Sheet which TSSP signed

provides that any costs, expenses incurred during the period waiting for the RBS’ agreement and

the signed Settlement Agreement, shall solely be for each party’s own expense.

TSSP also argues that to substitute this “implied term” for the terms of the written

agreement, which TSSP argues, “merely discuss the timing as to when the funds would be sent to

TSSP” would alter the intent at the time they executed the written agreement. Memorandum of

Law in Support of Application, p. 8. However, the intent at the time the parties’ entered into the

Term Sheet was for each party to pay its own costs and expenses until a Settlement Agreement

was signed. The alleged “implied term” is actually more consistent with the intent at the time the

parties executed the contract as it reaches the result the parties intended.

“To determine whether a breach has occurred, the court must interpret the Agreement ‘in

accord with the parties’ intent.’” Greenfield v. Philles Records, Inc., 98 NY2d 562, 569, 780

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N.E.2d 565 (2002). “Additionally, it is well settled that ‘a contract should not be interpreted to

produce an absurd result, one that is commercially unreasonable, or one that is contrary to the

intent of the parties’”. A & A Wholesale Inc. Pension Plan v. Overlook Group LLC, 2016 N.Y.

Misc. LEXIS 1051, *12; 2016 NY Slip Op 30520(U) (2016) citing Cole v. Macklowe, 99 A.D.3d

595, 596, 953 N.Y.S.2d 21 (1st Dep’t 2012).

It is common ground between the parties that the Term Sheet should be interpreted

according to their intent. Accordingly, TSSP has breached the contract by failing to abide by its

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CRANE, MELISSA Track Judge’s New Case

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April 10, 2017

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November 15, 2016

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Motion-Secondary: Trojan Maritime Inc. v. Tpg Sixth Street Partners, Llc, F/K/A Tpg Special Situations Partners, Llc

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