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DOPP v. YARI

May 30, 1996

PAUL S. DOPP, Plaintiff,
v.
BOB YARI, Defendant.



The opinion of the court was delivered by: FISHER

 FISHER, District Judge

 This consolidated action involves the question of the enforceability of a contract for the financing of litigation in exchange for a division of the final proceeds. *fn1" The underlying litigation has now been completed, and the parties have both filed suit seeking to litigate the enforceability of the agreement, which both parties agree calls for Paul S. Dopp ("Dopp") to pay Bob Yari ("Yari") $ 1.5 million. The matter comes before the court on Yari's motion for summary judgment entering judgment on the first count of Yari's complaint for breach of contract in this consolidated matter. Also before the court is Dopp's cross-motion for summary judgment. Because this court finds no genuine issues of material fact and concludes that the agreement is an enforceable contract, Yari's motion will be granted, Dopp's motion will be denied and judgment will be entered in favor of Yari in the amount of $ 1.5 million.

 This matter involves what may be the final battle in a case that has taken on a life of its own. See Dopp v. HTP Corp., 755 F. Supp. 491 (D.P.R. 1991) (Dopp I); Dopp v. HTP Corp., 947 F.2d 506 (1st Cir. 1991) (Dopp II); Dopp v. Pritzker, 831 F. Supp. 939 (D.P.R. 1993) (Dopp III); Dopp v. Pritzker, 38 F.3d 1239 (1st Cir. 1994) (Dopp IV) cert. denied, U.S. , 131 L. Ed. 2d 851, 115 S. Ct. 1959 (1995); Pritzker v. Yari, 42 F.3d 53 (1st Cir. 1994) (Dopp V) cert. denied, U.S. , 131 L. Ed. 2d 851, 115 S. Ct. 1959 (1995); Dopp v. Pritzker, 68 F.3d 455 (Table), 1995 WL 628569 (1st Cir. 1995). In recognition of this history, this court will provide a brief factual summary.

 The present matter involves the third financing agreement between the parties and the second of two financing agreements between Yari and Dopp in which Yari purchased a stake in the outcome of civil litigation between Dopp and Jay A. Pritzker in exchange for providing Dopp with necessary financing of that litigation as well as maintaining Dopp's lifestyle. As will be discussed, the underlying litigation has now been completed, and Yari seeks to enforce the terms of the third and final litigation agreement.

 The underlying litigation between Dopp and Pritzker stemmed from an oral contract between Dopp and Pritzker concerning the purchase of the Dorado Beach Hotel Corporation ("DBHC"), a company that controlled a complex of hotels and golf courses along the north shore of Puerto Rico. According to the parties, in 1984 Dopp obtained an option to purchase the DBHC but lacked the necessary financing. Dopp and Pritzker subsequently entered into an oral agreement in which Pritzker would provide the necessary financing and Dopp would receive a portion of corporate shares of a company formed for the purpose of acquiring DBHC. The basis of the case against Pritzker was the allegation that Pritzker had employed duress and deceit to pressure Dopp into signing documents which amended the oral agreement and granted Pritzker an option to retire Dopp's interest, which Pritzker subsequently executed.

 In 1988, Dopp initiated a diversity suit against Pritzker in the United States District Court for the District of Puerto Rico alleging deceit and duress and seeking damages or reformation. In 1990 the case was tried and the jury found Pritzker liable in the amount of $ 2,000,000. Dopp v. HTP Corp., 755 F. Supp. 491, 493 (D. P.R. 1991). Ten appeals followed. On October 4, 1991, the First Circuit affirmed the finding of liability against Pritzker but remanded to the district court for a new trial on the issues of remedies and damages.

 Faced with the costs of a second trial on the issue of damages and other related living costs, Dopp and Yari entered into an agreement in which Yari agreed to provide Dopp with necessary funding in exchange for a division of any final judgment against Pritzker. The agreement provides in relevant part:

 
5- Any monetary proceeds from any final Judgment of the Court with respect to the Action (the "Judgment") after deduction of any sums due Ledesma, Palou & Miranda ("Counsel") . . . shall be distributed between Yari and Dopp as follows:
 
(i) First to repayment of all indebtedness to the Bank in relation to the Line of Credit.
 
(ii) Secondly, the sum of $ 2,500,000 (or $ 3,000,000 if the Line of Credit is extended to $ 3,000,000) to Yari (or any fraction of that amount if the Proceeds will not cover the full amount),
 
(iii) Thirdly, the sum of $ 12,000,000 to Dopp,
 
(iv) Fourthly, the sum of $ 7,000,000 to Yari,
 
(v) and any remaining shall be equally divided between Dopp and Yari.

 Affidavit of Yari, Ex. A.

 Although the First Circuit has upheld liability at the time of the agreement, the agreement acknowledges that "the [underlying] action entails a degree of risk and that there may be no Proceeds to disburse." Id.

 On March 27, 1993, a second jury returned a verdict for full damages against Pritzker in the amount of $ 17,000,000. To the surprise of Yari, Article 1425 of the Civil Code of Puerto Rico confers on a defendant the right to redeem the interest a third party has in the judgment in exchange for the amount the third party paid to purchase the share, along with the judicial costs and interest at the rate of 6%. P.R. Laws Ann., title 31, § 3950. The purpose of this statute is to prevent the precise form of speculation in litigation that occurred in this case. Pritzker v. Yari, 42 F.3d 53, 66 (1st Cir. 1994). As of March 27, 1993, Yari had provided Dopp financing in the amount of $ 450,000.00.

 Upon learning of this statutory right, Pritzker filed suit against Yari in the United States District Court for the District of Puerto Rico seeking, inter alia, to extinguish Yari's portion of the proceeds. By opinion and order dated March 5, 1993, and opinion and order dated September 9, 1993, the district court granted Pritzker's motions and entered an order granting Pritzker the opportunity to extinguish Yari's share in the Dopp litigation and reduce the total judgment by $ 3,503,767.29 in exchange for tendering Yari $ 450,000.00 plus interest and costs. In computing the amount of credit, the district court limited the amount of the final judgment Pritzker could reduce by half. The court made this adjustment on the basis that it was inequitable to punish Dopp under the circumstances. Two appeals followed.

 In the first appeal, Dopp suggested, inter alia, full damages properly computed totaled $ 60,581,000; Pritzker suggested $ 35,000. Dopp v. Pritzker, 38 F.3d 1239 (1st Cir. 1994) cert. denied, U.S. , 131 L. Ed. 2d 851, 115 S. Ct. 1959 (1995). In the second appeal, Yari challenged, inter alia, the application of § 1425 of the Civil Code and Pritzker challenged the district court's authority to limit the amount by which the final judgment could be reduced. Pritzker v. Yari, 42 F.3d 53 (1st Cir. 1994), cert. denied, U.S. , 131 L. Ed. 2d 851, 115 S. Ct. 1959 (1995).

 While the two cases were on appeal, the second and third financing agreements originated. First, on April 7, 1993, Yari provided Dopp an additional $ 50,000. Then, on June 21, 1993, Yari wired Dopp an additional $ 25,000.00 along with correspondence detailing the parties' arrangement. The letter provides in relevant part:

 
Pursuant to your request, I am wiring today an additional $ 25,000.00 to your account. I am writing this letter to gain your consent to the following: Provided our agreement of July 23, 1992 is finally transferred to Pritzker pursuant to the District Court's ruling under Article 1425, in which event, and only in such event, this and any future payment would not fall under our agreement as continued funding pursuant to the September 24, 1992 amendment, then, and only then, you agree to repay this and any future payments you receive from me hereafter upon your receipt of any proceeds from your underlying litigation with Pritzker including interest at a rate of 9% per annum.

 Affidavit of Yari, Ex. J. (emphasis in original).

 Following the issuance of the First Circuit opinion, Dopp sent to Yari an "Irrevocable Offer To Settle" dated November 7, 1994. The offer provides in relevant part:

 
You are finding it difficult to understand that my complete focus, since October 28th, has been upon First Circuit's biased and unexpected decision. In the interest of setting your mind at rest over our agreement, and keeping in mind your reluctance to execute, now, my earlier offers to document our July 18th understanding, I offer the following:
 
In consideration of your past continued funding (now $ 700,000 & not inclusive of the Piper Project $ 10,000 & The SANWA BANK $ 50,000 Mtge accommodation), I will offer, irrevocably until ten days following the entry of a final judgment in all Pritzker litigation, to pay you 16% percent of all proceeds (after deducting only LP&M's share) against a minimum of $ 1.5 million. In addition, I will agree to repay the $ 700,000 with your % 16 share representing consideration for such $ 700,000 funding. (The Piper due diligence expenses, for which I have now disbursed in excess of $ 30,000, and the SANWA BANK $ 50,000 are the subject of separate agreements).
 
Naturally, a detailed document reflecting the Irrevocable Offer To Settle, I am certain, will be required. This, however, is, and does, put at rest your unwarranted concerns over our July 18th agreement and permits me to fully concentrate on the urgent work at hand. Please have Roger (or whomever you prefer) prepare the appropriate documentation for this ...

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