Tuesday, March 26, 2013

Robert C. Apfel v. Prudential–Bache Securities, Inc. case brief

Robert C. Apfel v. Prudential–Bache Securities, Inc. case brief summary
81 N.Y.2d 470, 600 N.Y.S.2d 433, 616 N.E.2d 1095 (N.Y. 1993)

SYNOPSIS:
Plaintiffs, banker and lawyer, and defendant investment bank sought review of a decision by the Appellate Division of the Supreme Court in the First Judicial Department, New York, which modified an order of the lower court and reinstated a cause of action and the allegations of consideration in the answer and counterclaim, and struck plaintiffs' demand for punitive damages, in plaintiffs' cause of action for breach of contract.

OVERVIEW: Plaintiffs, banker and lawyer, sold an idea for issuing and selling municipal bonds to defendant investment bank. Defendant stopped paying on the contract because it claimed that plaintiffs had no property right in the idea because it was not novel and, therefore, consideration for the contract was lacking. Plaintiffs filed suit. The supreme court dismissed all claims, but the appellate division modified the order by reinstating defendant's claim that the agreement lacked consideration.

HOLDING:
On appeal, the court affirmed as modified. The modification struck defendant's remaining claim. The court held that a showing of novelty was not required to validate the contract.

ANALYSIS:
-The decisive question was whether the idea had value, not whether it was novel.
-The court ruled that absent fraud or unconscionability, the adequacy of consideration was not a proper subject for judicial scrutiny.
-The court concluded that the transaction was controlled by the express agreement of the parties and their rights and liabilities were to be determined solely on theories of breach of contract and the partial defense of waiver.

OUTCOME: The court held that the appellate court had erred in reinstating plaintiffs', banker and lawyer's, cause of action, and struck defendant investment bank's counterclaims and defenses. The court held that the transaction between plaintiffs and defendant was controlled by the express agreement of the parties and their rights and liabilities were to be determined solely on theories of breach of contract and the partial defense of waiver.

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