Shikhman v. Bobcat Endoscopy, LLC

Oleg Shikhman v. Bobcat Endoscopy, LLC et al.

No. X03HHDCV176087023S

Superior Court of Connecticut, Judicial District of Hartford, Hartford, Complex Litigation Docket

October 31, 2019

UNPUBLISHED OPINION

Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Schuman, Carl J., J.

MEMORANDUM OF DECISION

Carl J. Schuman Judge, Superior Court

The plaintiff, Oleg Shikhman (Shikhman), has filed suit against the defendants, Bobcat Endoscopy, LLC (f/k/a LumenR, LLC) ("LumenR") and Gregory Piskun, M.D. (Piskun) on grounds arising out of their business venture. The operative July 18, 2018 Second Amended Complaint (Complaint, Entry #126.00), after resolution of the defendants’ summary judgment motion and the plaintiff’s unilateral action alleges three counts of breach of contract (counts one, two and thirteen), two counts of breach of fiduciary duty (counts twelve and fourteen), and one count each of quantum meruit (count seven), unjust enrichment (count eight), and promissory estoppel (count nine). The operative amended answer (Answer, Entry #134.00), after summary judgment and the defendants’ unilateral action, contains a counterclaim by LumenR alleging tortious interference with contract (fifth counterclaim). A six-day bench trial of these claims took place between September 23 and October 3, 2019. The parties filed post-trial briefs on October 18, 2019. This memorandum contains the court’s findings of fact and decision in the case.

I. THE 2009 CONSULTING AGREEMENT (COUNTS ONE AND TWO)

A. The Defendants’ Breach

In 2006 Shikhman, a mechanical engineer, and Piskun, a medical doctor specializing in surgery, began working together on the invention of an endoluminal surgical device (the "LumenR device"). The device, as ultimately marketed "provides and facilitates tissue retraction," particularly during scoping of the lower gastrointestinal tract. (Ex. 337.) In a December 2006 email, Piskun offered Shikhman "15% of endoluminal" and a position as a "key decision maker in the [company’s] business directions." (Ex. 6.) There were further discussions but there was no signed contract at the time.

Shikhman did some work, of disputed value, in developing the device between 2006 and 2009. On July 13 and 14, 2009 Shikhman and Piskun, the latter as managing director of LumenR, signed a "Consulting Agreement." Paragraph 3(a) of the agreement stated: "In full consideration of Consultant’s [Shikhman’s] consulting services under this Agreement, Consultant shall be paid by the Company 15,000 of Profits Interests for the period ending December 31 2009." (Ex. 13, ¶3(a).) The contract contains a merger clause stating: "This Agreement constitutes the entire agreement between Consultant and the Company and supersedes all prior agreements and undertakings, both written and oral, with respect to the subject matter hereof. This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the Consultant and the Company." (Ex. 13, ¶12.) The contract also provides that it will be governed by New York law. (Ex. 13, § 12.)^[1]

In count one, Shikhman alleges that LumenR breached the Consulting Agreement by failing to issue Shikhman "15,000 units of ‘Profits Interests’ " in LumenR. (Complaint, ¶34.) Shikhman, then alleges, apparently relying on the 2006 email, that LumenR "also breached the Consulting Agreement by failing to issue Mr. Shikhman a 20% share of the outstanding equity of LumenR." (Complaint, ¶35.) Shikhman seeks damages based on his failure to receive a distribution from the sale of the LumenR device to Boston Scientific Corporation (BSC). (Complaint, ¶36.) Count two is identical except that it seeks specific performance of LumenR’s duty to recognize Shikhman’s ownership in the company and his entitlement to past and future distributions. (Complaint, ¶45.)^[2]

Under New York law, "a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms ... Extrinsic evidence of the parties’ intent may be considered only if the agreement is ambiguous, which is an issue of law for the courts to decide." (Citations omitted.) Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569, 780 N.E.2d 166 (2002). "[E]xtrinsic and parol evidence is not admissible to create an ambiguity in a written agreement which is complete and clear and unambiguous upon its face." (Internal quotation marks omitted.) W.W.W. Associates, Inc. v. Giancontieri, 77 N.Y.2d 157, 163, 566 N.E.2d 639 (1990). "[W]here a contract contains a merger clause, a court is obliged to require full application of the parol evidence rule in order to bar the introduction of extrinsic evidence to vary or contradict the terms of the writing." (Internal quotation marks omitted.) Schron v. Troutman Sanders, LLP, 20 N.Y.3d 430, 436, 986 N.E.2d 430 (2013).

In the present case, the contract does contain an ambiguity because the phrase "15,000 of Profits Interests" is obviously missing a word or phrase. This ambiguity is readily resolved, however, by looking at two exhibits from the time immediately preceding the July 13 signing. The first is a draft of the Consulting Agreement. Paragraph 3(a) of the draft provides that Shikhman shall receive "15,000 Class E Units of the Company. The terms and conditions of the Class E Units shall be set forth in a separate unit award agreement." (Ex. 21, p. 1784.)^[3] The second exhibit consists of a series of emails beginning with one dated June 30 from Piskun in which he sends the draft consulting agreement to Shikhman. In a July 5 email, Shikhman asks Piskun "could you please tell me how many units are being issued?" Piskun responds on July 6 that "[t]he company has two types of units at the moment. ‘A Units’ have been available for the purchase only. ‘E Units’ have been created for the exclusive employees and consultants ... In the same period of time, the company is issuing 75 E Units ... 50— to me, and 15— to you." An email Piskun sent four minutes later stated: "I meant 75,000 E Units: ... 50,000— to me, and 15,000— to you." (Ex. 25.)^[4]

These exhibits make clear that "15,000 of Profits Interests" meant 15,000 E units and that the company was also issuing A units "at the moment." To the degree that Shikhman claims that "15,000 of Profits Interests" means 15% or 20% of the entire company, there is no credible basis for the claim. While Shikhman’s claim for 15% comes from the December 2006 email and his claim for 20% comes from the fact that 15,000 E units is 20% of 75,000 units, there is nothing in writing contemporaneous with the 2009 agreement suggesting that the phrase that the court must actually interpret— "15,000 of Profits Interests"— means that Shikhman would receive 15% or 20% of the entire company. To the extent that the court considers oral testimony on this point, the court credits Piskun’s testimony that the parties did not talk about a percentage ownership of the company at the time.^[5]

Shikhman’s real complaint is not so much that the contract is ambiguous but rather that it is incomplete. Shikhman seeks to add a phrase awarding him 15% or 20% of the outstanding equity in the company. The parties could certainly have added such a phrase to the contract, but they did not. Under the merger clause of the contract, the court cannot "vary or contradict the terms of the writing" based on Shikhman’s extrinsic evidence. (Internal quotation marks omitted.) Schron v. Troutman Sanders, LLP, supra, 20 N.Y.3d 436.

The plaintiff also relies on a Restatement rule providing essentially that "a party who makes a contract knowing of a misunderstanding is sufficiently at fault to justify his being subjected to the other party’s understanding." Centron DPL Co. v. Tilden Financial Corp., 965 F.2d 673, 675 (8th Cir. 1992).^[6] It is questionable whether this rule applies to commercial cases in New York today, as Shikhman cites only a 1913 civil case; Nellis v. Western Life Indemnity Co., 207 N.Y. 320, 332, 100 N.E. 1119 (1913); and a 1980 criminal case in which the issue was interpretation of a drug sale statute. See People v. Houston, 72 A.D.2d 369, 383, 424 N.Y.S.2d 726 (1980) ("Where the promisor has reason to suppose that the promisee understands a promise in a particular sense, that meaning should be adopted in construing the agreement").

Even if the rule applies in New York, the plaintiff cannot prevail on this theory. The plaintiff’s argument is that Piskun knew of Shikhman’s belief that he was getting 15% or 20% of the company and therefore Piskun should be bound by that belief. As mentioned, however, Piskun testified credibly that he and Shikhman did not discuss ownership of the company in percentage terms in 2009. Indeed, there is nothing in writing from either party from that time period that addresses percentage ownership. On the other hand, Piskun did write Shikhman at that time that he understands that Shikhman is "very busy with new and prior responsibilities and [I] plan to engage you at this stage only on [an] as needed basis, likely infrequently." (Ex. 21.) Such a statement is not consistent with offering Shikhman a significant percentage of ownership of the company.

The plaintiff relies on an October 13, 2012 email in which Piskun wrote Shikhman that "[y]our percentage in ‘our company’ was 17.6% (15,000/85,000) before investment." (Ex. 35 p. 8571.) According to Shikhman, this email reveals Piskun’s thinking in 2009. Interpretation of this email, however, is not so straightforward. Piskun uses the phrase "our company" twice more in italics, suggesting that it has some meaning other than the usual meaning of "company." Piskun writes: "The issue for all was that there was no value...