Gary Joseph Grappo v. Alitalia Linee Aeree Italiane, S.P.A. And Gianfranco Bianchi
Docket: 1073
Court: Court of Appeals for the Second Circuit; May 31, 1995; Federal Appellate Court
Gary Joseph Grappo filed a lawsuit against Alitalia Linee Aeree Italiane, S.p.A. for breach of contract and quantum meruit, alleging that the airline failed to honor an agreement to purchase his copyrighted customer service training program, "Guest*Star." Grappo also sought damages for unpaid wages and claimed fraud against a corporate officer, Gianfranco Bianchi, who managed Alitalia’s North American operations. Alitalia counterclaimed for overpaid wages. The district court granted summary judgment to Alitalia and dismissed Grappo's claims for unpaid wages, while also denying his request for further discovery. Grappo, a New York citizen, contended that Alitalia initially intended to buy a training program from Systema Corporation but later decided to approach him due to cost concerns. After presenting his program in Rome, Alitalia expressed interest and Bianchi directed Grappo to customize "Guest*Star" for the airline. Grappo incurred personal expenses to meet these requirements, and after further negotiations, Bianchi assured Grappo that Alitalia would pay him $50,000 for the non-exclusive license, credit him as the author, and promote him, contingent upon the completion of the tailored program. The case has been appealed, and the appellate court has reversed the district court's decision.
Grappo was officially promoted to Training and Development Manager at Alitalia on November 13, 1992, as part of a new Customer Service Program, which he tailored into the "Customers Come First" initiative. Training manuals featuring Grappo's copyright were distributed to Alitalia's North American managers, accompanied by a letter from the General Manager stressing the program's significance. Despite having budgeted $50,000 for the training, Alitalia did not pay Grappo's agent when billed. Instead, Alitalia opted to implement a competing training program developed by Irene Dinola, based on Grappo's materials, without giving him credit. Grappo resigned in July 1993.
Alitalia disputed the existence of a binding agreement to purchase Grappo's program, claiming negotiations were only for preliminary approval. They contended that the promotion of Grappo was contingent upon a potential agreement to use his program, which ultimately was not pursued.
In response, Grappo filed a lawsuit in the Southern District of New York for breach of contract, seeking damages for unpaid wages and alleging fraud against Bianchi. Alitalia counterclaimed for overpaid wages. The district court granted Alitalia summary judgment, ruling that the alleged agreement was unenforceable under the Statute of Frauds since it was not in writing. Grappo's claims for quantum meruit and fraud were also dismissed on the grounds that they could not be used as alternatives to a barred contract claim. The court did not take jurisdiction over wage-related claims and denied Grappo's request for further discovery. Grappo subsequently appealed the decision.
Grappo's complaint includes two breach of contract claims against Alitalia: one for $50,000 related to a "non-exclusive license" for using Guest*Star, which he created and holds copyright for, and another for $150,000 due to Alitalia's failure to implement the program and credit him as the creator. According to Section 1-206(1) of the New York Uniform Commercial Code (UCC), a contract for the sale of personal property exceeding $5,000 is unenforceable unless supported by a written agreement that specifies the contract terms and is signed by the enforcing party or their authorized agent. This section applies to "general intangibles," including literary rights and copyrights, and thereby governs Grappo's agreement with Alitalia.
There was no written agreement between the parties, leading to the conclusion that Grappo's claims are unenforceable for amounts over $5,000. The district court dismissed both claims entirely, but there is a legal interpretation that allows recovery of up to $5,000 on an oral contract despite the lack of writing. Relevant case law supports this interpretation, suggesting that while an oral contract claim over $5,000 is unenforceable without writing, recovery up to $5,000 is permitted. Grappo's attempts to characterize his arrangement with Alitalia differently to sidestep this limitation may not succeed, but the court may still have jurisdiction over his claims, albeit limited to $5,000. Under res judicata principles, if Grappo obtains a $5,000 judgment, he would be barred from recovering any additional amount.
Grappo contends that his contract with Alitalia was primarily for services related to tailoring the Guest*Star software, rather than for the sale of personal property, thus exempting it from the Uniform Commercial Code (UCC). He cites *Schenectady Steel Co. v. Bruno Trimpoli General Construction Co.*, which determined that a contractor's agreement primarily for services did not fall under the UCC. However, the court notes that, unlike in *Schenectady Steel*, the title to Guest*Star was central to Grappo's contract, as Alitalia's ability to utilize the software hinged on obtaining a license. Grappo describes the contract as one for a non-exclusive license, reinforced by an invoice specifying this arrangement.
Additionally, Grappo argues that the transaction involved the sale of "goods," specifically training materials, which should fall under UCC Section 2-201. The court dismisses this argument, reiterating that the primary focus of the contract was the non-exclusive license for the copyrighted software, rendering the training materials secondary and ineffective without the licensing rights.
Grappo further claims that even if the contract was for personal property, the Statute of Frauds should not apply due to a purported fiduciary relationship with his employer, which the court refutes by highlighting that as an at-will employee, Grappo had no such fiduciary relationship. The court references precedents indicating that a fiduciary duty arises in specific, established relationships, which were not present in Grappo's case.
Lastly, Grappo suggests that Alitalia should be estopped from invoking the Statute of Frauds due to potential unfairness. However, the court holds that allowing such estoppel would undermine the public policy underlying the Statute of Frauds, noting that Grappo did not demonstrate that Alitalia's actions led him to irreparably alter his situation in a manner that would constitute fraud.
Grappo's third claim for $200,000 in quantum meruit, seeking compensation for the reasonable value of his work, was dismissed by the district court on the grounds that New York law prevents recovering more than the contract price when a claim is barred by the Statute of Frauds. However, it is established that a plaintiff can recover the value of services rendered, independent of an unenforceable contract, as long as the claim is distinct from a breach of contract claim. The court emphasized that the label used does not determine the validity of the cause of action; rather, it should focus on whether the plaintiff seeks compensation for work performed.
Alitalia's argument that a plaintiff barred by the Statute of Frauds cannot recover in quantum meruit was countered by noting that in a related case (Martin H. Bauman Associates, Inc. v. H. M International Transport, Inc.), the dismissal was due to the plaintiff's failure to provide specific details of the reliance and value of services, not a blanket prohibition on quantum meruit claims. Additionally, Alitalia's assertion that Grappo, as an employee, was already compensated for his work was refuted by referencing previous case law that allows employees to seek compensation for work done on company time to prevent unjust enrichment.
Grappo's fourth claim of fraud against Bianchi, which involved false statements about contract approval and coercion to surrender his work, was also dismissed by the district court, deemed an error by the reviewing court.
A fraud claim cannot typically be established solely on the basis that a defendant entered a contract without the intention to perform. Case law indicates that actionable fraud requires allegations of additional fraudulent conduct beyond mere non-performance. Grappo's fraud claim is valid because he asserts that Bianchi, representing Alitalia, committed fraud by falsely reporting contract approval and misappropriating Guest*Star, distinguishing it from breach of contract claims.
Bianchi's assertion of immunity as a corporate employee is incorrect; immunity applies only to cases where an employee induces corporate contract breaches, not to fraud. Therefore, Bianchi cannot claim personal immunity for any fraudulent actions.
The district court dismissed Grappo’s unpaid wage claim and Alitalia’s counterclaim for overpayment as "pendent" claims. Grappo does not appeal this dismissal, and Alitalia did not challenge it either, leaving the jurisdictional issue unaddressed.
Grappo contends that discovery is incomplete, alleging Alitalia withheld documents pertinent to the disputed agreement and seeks to depose certain Alitalia officials. The district court denied further discovery based on the absence of written evidence satisfying the Statute of Frauds and perceived barring of Grappo's claims. However, given the reversal of the dismissal of Grappo's claims, further discovery is necessary.
In conclusion, the district court’s dismissal of Grappo’s contract claims and fraud claims is reversed, and the case is remanded for further proceedings. The court does not take a position on Grappo's wage claims or Alitalia's counterclaims.
