Aquavella v. Viola
914 N.Y.S.2d 498, 79 A.D.3d 1590 (2010)
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Rule of Law:
An oral agreement that cannot be performed within one year and purports to incorporate terms from a prior written agreement is unenforceable under the Statute of Frauds unless there are sufficient signed and unsigned writings that, without the aid of parol evidence, contain all essential terms of the oral contract, including the incorporation itself.
Facts:
- In 1995, James V Aquavella, M.D. (Aquavella) sold the assets of his ophthalmology practice to EquiVision, Inc., which then entered into a services agreement with Urban Oncology Service, EC. (Urban Oncology), making Aquavella an employee of Urban Oncology.
- In July 1996, defendant began working as a staff ophthalmologist for the practice and executed a written employment agreement with Urban Oncology (1996 written agreement), which included a noncompete clause.
- In 1998, EquiMed (formerly EquiVision) sold its interest in the practice assets to Physicians Resource Group, Inc. (PRG); following a dispute, PRG terminated all nonmedical employees, and Urban Oncology stopped paying physicians.
- Later in 1998, Aquavella spoke with defendant, and they orally agreed that defendant would continue his employment with Aquavella, M.D., P.C. (Aquavella, EC.) and James V Aquavella, M.D. (plaintiffs) as his employers; the parties disputed whether this 1998 oral agreement incorporated all terms, including the noncompete clause, of the 1996 written agreement.
- In August 1999, plaintiffs and defendant undertook negotiations concerning defendant's proposed purchase of the practice, which were ultimately unsuccessful.
- In 2002, defendant departed from plaintiffs’ practice and opened a competing practice within 300 yards of his former employers.
Procedural Posture:
- Plaintiffs James V Aquavella, M.D., P.C. and James V Aquavella, M.D. commenced an action in the Supreme Court, Monroe County (a trial court/court of first instance), seeking damages for defendant's alleged breach of a 1998 oral employment agreement.
- Plaintiffs' amended complaint alleged that the 1998 oral agreement incorporated the noncompete clause of a 1996 written employment agreement.
- The case proceeded to trial, where a jury determined that an oral employment agreement existed, that it included all terms and conditions of the 1996 written agreement, and that defendant breached the noncompete clause, awarding plaintiffs damages of $248,798.76.
- Defendant moved pursuant to CPLR 4404 (a) for judgment notwithstanding the verdict (JNOV) and dismissal of the amended complaint.
- The Supreme Court granted defendant's motion for JNOV, setting aside the jury verdict and dismissing plaintiffs' amended complaint on the grounds that defendant had not admitted to the incorporation of the 1996 terms and that the writings were insufficient to satisfy the Statute of Frauds.
- Plaintiffs appealed the Supreme Court's order to the New York Supreme Court, Appellate Division, Fourth Department (an intermediate appellate court).
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Issue:
Are various signed and unsigned writings, when read together, sufficient to satisfy the Statute of Frauds for an oral employment agreement that allegedly incorporated a prior written agreement's non-compete clause, or does the absence of a written reference to the incorporation itself render the oral agreement unenforceable?
Opinions:
Majority - Per Curiam
No, various signed and unsigned writings are not sufficient to satisfy the Statute of Frauds for an oral employment agreement that allegedly incorporated a prior written agreement's non-compete clause, because the essential term of incorporation itself is not present in the writings. The noncompete clause, spanning two years, cannot be performed within one year and is thus subject to the Statute of Frauds (General Obligations Law § 5-701 [a] [1]). The court found that defendant consistently disputed that the terms of the 1996 written agreement were incorporated into the 1998 oral agreement. While the Statute of Frauds permits piecing together separate writings, all terms of the contract must be set out in the various writings, and at least one signed writing must establish a contractual relationship. Here, the essential term of the alleged oral incorporation of the 1996 written agreement into the 1998 oral agreement does not appear in any of the writings. The letters of intent, signed by defendant for a proposed practice purchase, explicitly addressed a 'written termination of the employment contract between [defendant] and Aquavella[, P.C.], together with a release of all covenants contained therein,' as well as 'proof satisfactory' that Aquavella, P.C. was the 'sole unencumbered assignee of said contract' (the 1996 written agreement). The court interpreted this as defendant’s attempt to extinguish existing obligations from the 1996 agreement, not an admission of its incorporation into the 1998 oral agreement. Furthermore, separate language in the letters of intent regarding 'written releases executed by [defendant] and Aquavella each releasing the other from any claims relating to the current employment of [defendant]' (paragraph 4(f)) demonstrates a distinction between the 1996 agreement and the 'current' 1998 oral agreement. The court reiterated that parol evidence is admissible only to connect papers, not to establish missing terms, and the only evidence of the alleged 1998 oral adoption was Aquavella's trial testimony, which cannot satisfy the Statute of Frauds.
Dissenting - Scudder, P.J., and Peradotto, J.
Yes, the signed and unsigned writings admitted in evidence, when read together with defendant’s admissions at trial, are sufficient to satisfy the Statute of Frauds. The dissent agreed that the 1998 oral agreement was subject to the Statute of Frauds. However, applying the principle that signed and unsigned writings related to the same transaction, containing all essential terms, may be read together, and that parol evidence is admissible to show the connection between writings and the defendant's agreement to them, the dissent found the evidence sufficient. The letters of intent and a draft asset purchase agreement, signed by defendant or prepared by his attorney, required as a condition of sale the "written termination of the employment contract between [defendant] and Aquavella[, P.C.], together with a release of all covenants contained therein." The dissent emphasized defendant's trial testimony that "the employment agreement" referenced in these documents was the 1998 oral agreement. This, combined with the phrase "all covenants contained therein," clearly indicates that the 1998 oral agreement incorporated the restrictive covenant from the 1996 written agreement. The dissent rejected the majority's interpretation of paragraph 4(f) as separating the agreements, arguing that 4(e) specifically referred to the termination of 'the' employment contract and its covenants. The dissent also pointed to a memorandum drafted by defendant, stating "My contract stated that I was to be paid 30% of my collections," which aligns with a term only found in the 1996 written agreement. The dissent concluded that the 1996 written agreement could serve as the memorandum for the essential terms of the 1998 oral agreement, as the parties orally adopted it, and the purpose of the Statute of Frauds (preventing fraud) would not be served by refusing enforcement given defendant's admissions and recovery of compensation under the 1998 oral agreement.
Analysis:
This case underscores a strict application of the Statute of Frauds, particularly when an oral agreement purports to incorporate the terms of a previous written contract. It highlights the importance of having all essential terms, including the act of incorporation itself, explicitly present in the written memorandum. The ruling serves as a cautionary tale for parties relying on oral agreements, even when prior written terms are well-known, emphasizing that clear written evidence of every critical element is necessary to avoid unenforceability, especially for agreements not performable within a year. The case also illustrates the interplay between documentary evidence and trial testimony in satisfying the Statute of Frauds, setting a high bar for linking the two to establish essential terms without resorting to impermissible parol evidence.
