On January 10, 2022, Justice Borrok of the New York County Commercial Division issued a decision in K-Land Lex 47th LLC v. Lex 47th Prop. Owner LLC, 2022 NY Slip Op. 30075(U), declining to dismiss a claim based on the failure to negotiate in good faith, explaining:
Pursuant to the Purchase and Sale Agreement, the Purchaser further agreed to negotiate in good faith to secure funding from the EB-5 Provider on substantially the same terms that the Seller had secured. One month after the parties entered into the Purchase and Sale Agreement, the Purchaser sent an email to the EB-5 Provider to begin discussions. The EB-5 Provider provided a draft Operating Agreement, dated March 12, 2020. It is undisputed that the draft agreement was never executed. By letter dated June 5, 2020, the Purchaser informed the escrow agent that it had not entered into an agreement with the EB-5 Provider and requested the disbursement of the $1,500,000. The Seller sent an objection notice to the escrow agent, asserting that the Purchaser had not negotiated with the EB-5 Provider in good faith.
Pursuant to CPLR 321 l(a)(l) and (a)(7), a party may move to dismiss the complaint based on documentary evidence and for failure to state a cause of action. On a motion to dismiss, the pleadings are afforded a liberal construction, the court must accept the facts as alleged in the complaint as true and afford a plaintiff the benefit of every possible favorable inference. The court must only determine whether the facts as alleged fit within any cognizable legal theory. To plead a cause of action for breach of contract, a plaintiff must allege the existence of a contract, plaintiff’s performance under the contract, defendant’s breach, and resulting damages.
As an initial matter, the contractual requirement that the Purchaser negotiate with the EB-5 Provider in good faith is enforceable. Although the Purchaser was not compelled to enter into an agreement with the EB-5 Provider and could end negotiations in its discretion, the Purchaser was required to negotiate in good faith. The Complaint alleges that the Purchaser failed to negotiate in good faith by, among other things, never engaging the Seller meaningfully in facilitating the production of transaction documents that conformed with the EB-5 Letter of Intent. The Purchaser’s alleged failure to negotiate in good faith was solely to facilitate a $1,500,000 deduction in the purchase price. This is sufficient at this stage of the pleadings to allege that the Purchaser breached the Purchase and Sale Agreement’s express requirement that the Purchaser negotiate in good faith. For completeness, whether the Purchaser could have obtained financing from the EB-5 Provider during the COVID-19 pandemic or whether the Purchaser met its obligation to negotiate in good faith is a factual issue that is not properly resolved on a motion to dismiss and the documentary evidence is insufficient to establish as a matter of law that the Purchaser did in fact negotiate in good faith. Stated differently, that the Purchaser sent some emails and received drafts of an Operating Agreement does not conclusively establish that it negotiated in good faith warranting dismissal at this time.
(Internal quotations and citations omitted).