The parties stipulated to a Summary Bench Trial, agreeing that the Court could resolve any and all issues of fact submitted on the papers.

Plaintiff Andrew R. Taussig, a non-practicing attorney, is a managing director at Credit Suisse First Boston (CSFB). In the early 1990's, for regulatory reasons, CSFB formed a new entity, defendant The Clipper Group, L.P., a merchant banking partnership. Clipper became responsible for monetarizing CSFB's portfolio of merchant banking investments.

In 1994, CSFB determined that Clipper should become more active in identifying new merchant banking opportunities, and it committed to invest $325 million, from which Clipper could make investments. Profits earned on Clipper's investments would revert back to CSFB, or a related entity with Clipper retaining a "carried interest" equal to 15% of the profits earned.

In October 1994, CSFB held a "Managing Directors Conference" in New York City. At that time, Taussig headed CSFB's investment banking practice covering retail apparel and textile companies.

Robert B. Calhoun, who figures prominently in this action, is a former managing director at CSFB, who was instrumental in forming Clipper, and is Clipper's President. At the Conference, John M. Hennessey, then CSFB's Chairman and CEO, introduced Calhoun, who announced a new program to encourage officers, such as Taussig, to refer investments to Clipper. According to the program, up to 10% of Clipper's carried interest would be awarded to [*2]individuals responsible for referring investments to Clipper, and, to the extent that someone was solely responsible for the investment referral, that person would get the full 10% of the carried interest. Previously Clipper had made such awards in an informal manner, on a case-by-case basis.

In the Spring of 1995, Taussig referred the opportunity to invest in David's Bridal, Inc. (DBI), then the largest superstore retailer of bridal and special occasion apparel in the United States, to Clipper. Taussig was the person solely responsible for bringing the investment opportunity to Clipper. In June 1995, Clipper invested approximately $29,000,000 in DBI, in return for a substantial equity interest. As a result, Clipper became entitled to a 15% carried interest on any profits earned in the DBI investment.

In 1995, Clipper granted Taussig permission to co-invest $60,000 in DBI. In addition, Clipper agreed that Taussig would serve as a consultant to Clipper regarding the DBI investment, and would be treated as an indemnified party. Taussig was also designated to fill one of Clipper's three seats on DBI's Board. In addition, by unanimous consent of the DBI Board as of November 15, 1995, DBI awarded Taussig the right to purchase 15,000 shares of its common stock at an exercise price of $72.50 per share.

On May 26, 1999, DBI completed an initial public offering of 8,000,000 shares of common stock, of which Clipper sold 2,487,416 shares at a profit of approximately $19,000,000. In August 2000, May Department Stores Co. purchased DBI for $20 per share, as a result of which Clipper earned a profit of $69,241,591 (by selling its remaining shares), on which its "carried interest" is $10,386,239. The total "carried interest" on both transactions is 15% of $88,241,591, or $13,236,239 (see complaint ¶¶ 26-32 and answer ¶¶ 26-32).

Taussig claims entitlement to 10% of that amount, or $1,323,623.90, plus interest.

Taussig is seeking to recover this amount under theories of breach of contract and unjust enrichment. He contends that Calhoun's statements at the Conference constituted an offer by Clipper for a unilateral contract that Taussig accepted through performance, entitling him to 10% of the "carried interest" on the DBI investment. Taussig also pleads a cause of action for unjust enrichment, arguing that he conferred a substantial benefit upon Clipper with the expectation of compensation, and for which he deserves compensation.

Clipper does not deny that it created a finder's program, whereby CSFB employees could be awarded a share of Clipper's "carried interest" for referring an investment opportunity to it. Rather, it contends that Taussig does not have a contractual right to the "carried interest," because the alleged agreement is too vague to be enforceable, and it never intended to enter into a binding contract. It also contends that Taussig was granted stock options by DBI, something unprecedented for an outside director, only because he chose the options in lieu of a share of the "carried interest." Clipper contends further that the unjust enrichment claim is unavailing, because Taussig has already been richly compensated in connection with the DBI investment.

I find in Taussig's favor. The record contains evidence that convincingly supports Taussig's assertion that he and Clipper entered into a unilateral contract upon Taussig's performance, which performance was accepted by Clipper, and that he did not agree to forgo his right to the "carried interest" in favor of the DBI stock options. Even if the parties had not [*3]entered into a contract, as Clipper asserts, I would rule in Taussig's favor upon his alternate theory of unjust enrichment.

A fair interpretation of the evidence convincingly supports Taussig, who supports his claim with a plethora of very credible witnesses whose testimony was submitted through deposition and affidavits, as well as numerous items of persuasive documentary evidence.

I credit Taussig's deposition testimony that, at the Conference, Clipper announced the introduction of a finder's program to reward those who brought investment opportunities to it (Taussig Tr., at 80-87). It is undisputed that, thereafter, Taussig brought the DBI opportunity to Clipper's attention. As a result, the parties entered into a unilateral contract upon Taussig's performance (Papa v New York Tel. Co., 72 NY2d 879, rearg denied 72 NY2d 953 [1988]).

Taussig's testimony about the program announced at the Conference is supported by Jonathan Plutzik, Vice Chairman of CSFB, and a CSFB Managing Director since 1988. Plutzik, who attended the Conference, stated that Calhoun discussed Clipper's ability to perform merchant banking transactions, and that from that point forward, Clipper would be providing an award to CSFB investment bankers who share investment opportunities with Clipper, provided that the investment was profitable. The award would be based upon the person's role in bringing the opportunity to Clipper. A CSFB investment banker who was solely or primarily responsible for bringing the investment opportunity to Clipper would be entitled to a reward at the high end of the range, i.e., up to 10% of the "carried interest" (Affidavit of Plutzik, sworn to January 10, 2002).

Evidence of the finder's fee program, as well as Clipper's acknowledgment of Taussig's entitlement thereunder, is also documented in numerous writings, including, among others, (1) a January 19, 1995 CSFB "News" bulletin, stating that Clipper will make available a portion of its "carried interest" in the realized profits of transactions to those CSFB employees who perform an important role in the introduction and completion of successful investments (Exh. "4" to Affidavit of Gerald D. Silver, Esq., sworn to December 2, 2002 [Silver Aff.]); (2) a July 24, 1995 CSFB "News" bulletin, discussing the $29,000,000 DBI investment, and stating that if "an investment is made as a result of such a referral, the referring professionals will be rewarded with a share of the carried interest earned on that investment" (Silver Aff., Exh. "5"); (3) a September 16, 1996 Clipper memorandum, stating that the individuals that facilitated certain investments (including the DBI investment) have been awarded carried interest (Silver Aff., Exh. "6"); (4) a memorandum from David C. O'Leary, a CSFB Managing Director, and the head of human resources, acknowledging Taussig's entitlement to a percentage of CSFB's profit on the DBI investment (Silver Aff., Exh. "8"); and (5) an October 1995 document entitled "CS First Boston Managing Investment Program," that provides that "CS First Boston employees who refer transactions to Clipper or Windward are eligible for a finder's profit participation of up to 10% of the carried interest attributable to the investment" (Exh. 21, C00970-971, to Affidavit of Peter A. Bellacosa, Esq., sworn to December 3, 2002 [Bellacosa Aff.]).

Moreover, contrary to Clipper's assertion, the terms of the finder's program offer are not so vague as to render it unenforceable. Clipper agreed that it would award up to 10% of its carried interest to individuals that were responsible for referring investments to it, and, to the extent that someone was solely responsible for the investment referral, that person would get the [*4]full 10% of the carried interest. As stated by CSFB's former Chairman Hennessey at his deposition, "[w]e didn't need a lot of details with this" (Hennessey Tr., at 21).

Furthermore, there was an intent by Clipper to be bound, and the only variable was the percentage of the carried interest, something that could be discerned through use of an objective method, thereby rendering the agreement enforceable (In the Matter of 166 Mamaroneck Ave. Corp. v 151 E. Post Road Corp., 78 NY2d 88 [1991]). For example, the extent to which the referring person was responsible could be discerned through a comparison of the roles that others played in referrals of similar investments. "Striking down a contract as indefinite and in essence meaningless is at best a last resort'" (id. at 91, quoting Heyman Cohen & Sons v M. Lurie Woolen Co., 232 NY 112, 114 [1921]).

Clipper has failed to submit persuasive evidence to support its contention that it never intended to be bound by the finder's program offer. Significantly, Calhoun stated that he was unable to recall what was said at the Conference, which is surprising considering the important role that he played there. In addition, the assertion that Calhoun would not have stated that a person solely responsible for a referral would receive the full 10% is belied by a February 7, 1994 memorandum wherein Calhoun stated: "For example, if we have a 15% profits interest in an investment we would award 10% of our return (1.5% of the deal profit) if the source really controlled or strongly influenced the sell-side and 5% of our profit if the source simply had an idea or an introduction" (Exh. "12" to Bellacosa Aff.).

According to Hennessey, who introduced Calhoun at the Conference, the agreed upon compensation structure, of up to 10% of carried interest, was broadly announced and discussed by Calhoun in his presence on numerous occasions. To be effective, Clipper actively promoted the concept to CSFB professionals, and there were several meetings and at least one memorandum directed toward this end (Affidavit of Hennessey, sworn to April 19, 2001 [Hennessey Aff.]). I credit this evidence.

I am also persuaded that Taussig is entitled to the full 10% of Clipper's carried interest in the DBI investment. Taussig was the person primarily responsible for referring the investment opportunity (see e.g. Affidavit of Steven Erlbaum, a founder of DBI, and formerly its Chairman and CEO, sworn to February 28, 2001; Hennessey Aff.; Affidavit of Charles G. Ward III, a CSFB Managing Director, and head of the investment banking department, sworn to January 19, 2000 [Ward Aff.], ¶ 6; Memorandum from O'Leary, dated September 28, 1995, acknowledging Taussig's role in the transaction as "unique" [Exh. "8" to Silver Aff.]).

Taussig's importance to the transaction is evidenced by the fact that Clipper permitted Taussig to co-invest $60,000 of his own money, Clipper agreed that Taussig would serve as a consultant to it with respect to the DBI and would be treated as an indemnified party by Clipper's investment partnerships, and consented to Taussig filling one of Clipper's three seats on DBI's Board of Directors, which he held for more than four years.

Clipper's attempt to downplay the role that Taussig played in the investment is an afterthought and unconvincing. For example, in the September 16, 1999 memorandum, Clipper stated that in each of the several transactions discussed in the memo, including the one at issue:

"[A] First Boston banker recognized the potential need for private equity and integrated us into the discussion, leading to a solution for his or her client and an equity investment for Clipper and CS First Boston. In recognition of this contribution, a portion of the [*5]carried interest has been awarded to the First Boston individual(s) that facilitated the investment. These individuals were also permitted to invest directly in the transaction."

I do not find that Taussig agreed to exchange his entitlement to carried interest for stock options. I credit the overwhelming testimony and evidence that, taken together, establish that the grant of stock options to Taussig was separate and apart from his entitlement to carried interest, and this supports my finding that Taussig did not forgo his entitlement to carried interest in exchange for the options.

According to Steven Erlbaum, a founder of DBI, and formerly its Chairman and CEO, when DBI was searching for a new Chief Operating Officer, it was Taussig who suggested Robert Huth, formerly an Executive Vice President of Melville Corporation, who was subsequently hired. To entice Huth's acceptance, DBI offered him, among other things, options to purchase up to 3% of its outstanding common stock. Huth advised him, however, that he and Taussig had a prior agreement, whereby they would share evenly in any options or warrants awarded to either of them in connection with merchant banking investments that they were involved in together, and, thus, he was obligated to provide Taussig with half of the options that he would receive from DBI.

In the Fall of 1995, DBI's Board agreed to provide Huth and Taussig with options to purchase 3% and 1½ %, respectively, of DBI common stock. The 1.5% offered to Taussig represents 50% of the 3% originally offered to Huth. Erlbaum personally negotiated this arrangement, and personally advised Calhoun of it, because Clipper had a substantial equity stake in DBI. Erlbaum states further that DBI's award of the options to Taussig were unrelated with any carried interest or other amount that Clipper owed to Taussig, and that he never had any discussions with Calhoun or anyone else about options being paid in lieu of carried interest, or anything even remotely of that nature. He queried why DBI would pay out additional options to satisfy an obligation of Clipper without receiving anything in return? I credit this testimony.

Erlbaum's statements are consistent with that of Huth, who stated that at the time that DBI sought to induce him to accept the position as Chief Operating Officer, he had a prior agreement with Taussig to share evenly any warrants or options awarded to either of them in connection with any merchant banking investments that they were involved in together. He stated that Calhoun tried to convince him to renege on his agreement with Taussig, but that he refused to go back on his word (see also Ward Aff.). I credit this evidence.

Calhoun testified at his deposition that he remembers having a conversation with Taussig, that he thinks was in person, because Eugene Lynch, a Clipper Managing Director, was there, but he does not remember where they were, and that in response to his statement to Taussig that he could have the options or carried interest, but not both, Taussig said he would take the options because the "deal is chump change" (Calhoun Tr., 123-24). Lynch testified that he was with Taussig and Calhoun, in the Summer or Fall of 1995, and they were either at Penn Station getting on a train to go to Philadelphia to visit DBI, or coming back from Philadelphia having visited DBI, and Taussig said that he would go with the options because "the finder's interest is junk change, and I need to make real money on this deal" (Lynch Tr., 27-28). Even if the conversation did occur as set forth, I do not assign any great significance to it. All that it appears to indicate is Taussig's belief that the value of the options was greater than the value of the [*6]carried interest.

Furthermore, Clipper asserts that everything that it did was documented in writing, including (1) Taussig's co-investment of $60,000, (2) Taussig's service as a consultant to Clipper with respect to its DBI investment, (3) Taussig's filling of one of Clipper's three seats on DBI's Board, and (4) Taussig's indemnification resulting therefrom. Assuming the accuracy of this assertion, I find it significant that Clipper alleges that it was able to persuade Taussig to forgo his carried interest in exchange for options, without the parties acknowledging this in any writing.

Clipper places great emphasis upon a note that Calhoun wrote on the side of a memorandum from O'Leary to Hennessey and Allen D. Wheat dated August 23, 1995 (Exh. "14" to Silver Aff.). The memorandum sets forth the status of Taussig's interest in the DBI investment, including his entitlement to "a share of the Clipper carried interest." On the side of the memorandum, Calhoun's handwritten note reads "David - We feel [Taussig] is getting more than enough via the options and we are not giving him a share of our carry. Andy is aware of this - he wanted the options and not the carry. RBC." However, one month later, on September 28, 1995, O'Leary sent a memorandum to Taussig, that indicates his continued understanding that Taussig is entitled to a percentage of carried interest, and that he would be granted options because of his "unique" role in the transaction (Exhibit "8" to Silver Aff.). I do not find Calhoun's handwritten note significant, and find it peculiar that the investment banking professionals would document in this manner the alleged understanding with Taussig, purporting to forgoing in excess of one million dollars. In fact, the note to O'Leary, written on the side of the August 23, 1995 memorandum was not received by O'Leary until January 19, 1996, five months later.

Although I find that Taussig is entitled to 10% of the carried interest based upon contract, if I had deemed the contract unenforceable, I would find, nevertheless, for Taussig under his alternate theory of unjust enrichment. To recover under an unjust enrichment theory, a party must prove "(1) the performance of the services in good faith, (2) the acceptance of the services by the person to whom they are rendered, (3) an expectation of compensation therefor, and (4) the reasonable value of the services" (Curtis Properties Corp. v Greif Companies, 236 AD2d 237, 239 [1st Dept 1997][citation omitted]). For the reasons set forth above, the transaction at issue satisfies all of these elements. Taussig referred the DBI investment in good faith, and Clipper accepted his services. Because the finder's program was widely publicized within the organization, Taussig had a reasonable expectation of compensation, and because of the important role he played in the transaction, he is entitled to the full 10%. Clipper's assertion that he has already been adequately compensated through the stock option grant is without merit, because of my finding that the award was separate and apart from the services entitling him to carried interest.

Taussig is entitled to $1,323,623.90, representing 10% of the $13,236,239 generated by the DBI investment. Although Clipper contends that a portion of that should be deducted, because it represents expenses, not profit (see fn "9" to Clipper's Reply Memorandum of Facts and Law), it failed to substantiate that claim.

Taussig is entitled to interest from September 1, 2000, based upon the last event generating carried interest (the sale to the May Department Stores Co.) occurring in August 2000.

Settle Judgment. [*7]

Dated:February 25, 2004

ENTER:

_______/s/__________

J.S.C.