| Mañas v VMS Assoc., LLC |
| 2008 NY Slip Op 06350 [53 AD3d 451] |
| July 22, 2008 |
| Appellate Division, First Department |
| Daniela Mañas, Respondent, v VMS Associates, LLC,Doing Business as Violy & Company, et al., Appellants. |
—[*1] Sheppard, Mullin, Richter & Hampton, LLP, New York (James J. McGuire of counsel), forrespondent.
Order, Supreme Court, New York County (Doris Ling-Cohan, J.), entered April 5, 2007,which, insofar as appealed from, denied those portions of defendants' motion seeking dismissalof the second, sixth and seventh causes of action, unanimously reversed, on the law, withoutcosts, those portions of the motion granted and the second, sixth and seventh causes of actiondismissed.
Plaintiff was hired as an analyst by an investment banking firm, Violy, Byorum & PartnersHoldings (VBP), operated by defendant Violy McCausland-Seve. VBP, however, experiencedfinancial losses and began winding down its affairs in 2003. Around the time VBP beganwinding down its affairs, McCausland-Seve opened a new investment firm, defendant Violy &Co. (Violy), and offered a position in this new firm to plaintiff.
According to the allegations in her complaint, plaintiff, while interested in the new position,was concerned about the compensation she would receive if she accepted the position; in 2002and 2003 her salary at VBP was cut and she did not receive a year-end bonus in either of thoseyears. Moreover, McCausland-Seve had promised creditors of VBP that 20% of certain feesgenerated by Violy would be used to pay off VBP's debt. Thus, plaintiff "demanded assurancesfrom [McCausland-Seve] that [plaintiff] would receive adequate compensation for past andfuture services. [Plaintiff] also demanded assurances from [McCausland-Seve] that Violy wouldnot suffer the same financial mismanagement as VBP." Plaintiff asserted that McCausland-Seve"made the following representations and promises to [plaintiff] regarding compensation andmanagement at [Violy]":
"(a) The Short-Term Compensation Plan: At first, [plaintiff] would earn the samebase salary earned at the time VBP closed its doors (which reflected pay cuts). She would alsonot receive bonuses in connection with the closing of a few small, initial deals that were carriedover from VBP. Proceeds from those deals would be used to start-up Violy . . . andpay off past liabilities. After that initial period, [McCausland-Seve] would then compensate[plaintiff] for her financial losses and her ongoing performance in executing deals by, at aminimum, restoring her salary to the highest point at VBP and paying her bonuses at the timecertain deals closed in amounts [*2]unprecedented by past VBPstandards.
"(b) The Long-Term Compensation Plan: After the short-term compensation planexpired, [plaintiff] would be paid bonuses for closing deals on a semi-annual basis.
"(c) Firm Management: Violy['s] . . . budget would be monitored andcontrolled to engender transparency and prevent the type of overspending and mismanagementthat resulted in VBP's financial unsustainability and employees' lost earnings."
Plaintiff claimed that she relied "upon these promises and terms" in accepting in October2003 a position as a vice-president of Violy.
According to plaintiff, during Violy's first year of operation she requested thatMcCausland-Seve "crystalize specific numbers regarding [plaintiff's] short and long-term bonuscompensation structures." In response to plaintiff's requests, McCausland-Seve allegedly toldplaintiff that Violy was using money to pay off past debt and repay loans drawn on the firm'sworking capital line of credit. Thus, McCausland-Seve could not determine the amount orstructure of plaintiff's bonuses.
In "mid-2004" McCausland-Seve appointed another vice-president, Fernanda, "to finalize[plaintiff's] bonus structures." "Fernanda compiled charts proposing specific numbers for theshort and long-term compensation plans and frequently discussed the tenets of th[o]se plans with[plaintiff]." Each bonus under the short- and long-term compensation plans was based ondifferent factors that Fernanda outlined to plaintiff; however, each bonus was based in somemeasure on "deals closed" on which plaintiff worked. "Fernanda represented that[McCausland-Seve] had approved" the information in the charts.
Violy "closed" entire deals and phases of other deals on which plaintiff worked, therebygenerating fees that were to be distributed to plaintiff as bonuses under either the short- orlong-term compensation plans. Yet, despite numerous requests by plaintiff to McCausland-Sevethat she clarify Violy's bonus policies and pay plaintiff bonuses on deals on which plaintiffworked that had been entirely or partially closed, plaintiff received only one bonus under theshort-term compensation plan. In addition to alleging that McCausland-Seve "placated [plaintiff]with assurances that her concerns [regarding bonus payments] would be addressed or claimedthat [Violy] lacked sufficient funds to pay bonuses," plaintiff claimed that McCausland-Sevesquandered Violy's income by taking personal cash advances, purchasing an expensive personalautomobile and funding projects unrelated to Violy. Ultimately, plaintiff's employment withVioly was terminated in April 2006.
Plaintiff commenced this action against Violy and McCausland-Seve, asserting seven causesof action. Defendants jointly moved under CPLR 3211 (a) (7) to dismiss all of the causes ofaction except the first, which is for breach of contract, i.e., Violy's failure to pay plaintiff salaryand bonuses in accordance with the short- and long-term compensation plans. Supreme Courtgranted the motion to the extent of dismissing the cause of action for promissory estoppel andplaintiff's claim for punitive damages, and plaintiff does not challenge those determinations. Anddefendants, for their part, do not seek review of the court's denial of those portions of the motionseeking dismissal of the causes of action for unjust enrichment and quantum meruit. Thus, thisappeal is limited to whether Supreme Court correctly denied those portions of the motion seekingdismissal of the causes of action for fraudulent inducement, fraud and [*3]defamation.
A fraud-based cause of action is duplicative of a breach of contract claim "when the onlyfraud alleged is that the defendant was not sincere when it promised to perform under thecontract" (First Bank of Ams. v Motor Car Funding, 257 AD2d 287, 291 [1999]). Afraud-based cause of action may lie, however, where the plaintiff pleads a breach of a dutyseparate from a breach of the contract (id.). Thus, where the plaintiff pleads that it wasinduced to enter into a contract based on the defendant's promise to perform and that thedefendant, at the time it made the promise, had a "preconceived and undisclosed intention of notperforming" the contract, such a promise constitutes a representation of present fact collateral tothe terms of the contract and is actionable in fraud (Deerfield Communications Corp. vChesebrough-Ponds, Inc., 68 NY2d 954, 956 [1986] [internal quotation marks omitted];see First Bank of Ams., supra).
Here, plaintiff does allege with respect to the cause of action for fraudulent inducement that"[a]t the time [d]efendants made the [alleged] representations [regarding the short- and long-termcompensation plans], [d]efendants did not intend to compensate [plaintiff] in conformity withtheir promises." Similarly, with respect to her cause of action for fraud, plaintiff alleges that"[d]efendants did not intend to compensate [plaintiff] in conformity with the[ ] promises andassurances [concerning the short- and long-term compensation plans]." However, theseallegations are not sufficient. Rather, because they are merely "[g]eneral allegations thatdefendant[s] entered into a contract while lacking the intent to perform it[, the allegations] areinsufficient to support [the fraud-based] claim[s]" (New York Univ. v Continental Ins.Co., 87 NY2d 308, 318 [1995]). Thus, the causes of action for fraudulent inducement andfraud must be dismissed.
Additionally, the fraud-based causes of action must be dismissed for another, independentreason. Causes of action for breach of contract and fraud based on the breach of a duty separatefrom the breach of the contract are designed to provide remedies for different species ofdamages: the damages recoverable for a breach of contract are meant "to place the nonbreachingparty in as good a position as it would have been had the contract been performed"(Brushton-Moira Cent. School Dist. v Thomas Assoc., 91 NY2d 256, 261 [1998]); thedamages recoverable for being fraudulently induced to enter a contract are meant to "indemni[f]yfor the loss suffered through that inducement" (Deerfield Communications Corp., 68NY2d at 956 [internal quotation marks and brackets omitted]), e.g., damages for foregoneopportunities (see Coppola v Applied Elec. Corp., 288 AD2d 41, 42 [2001]). Here,plaintiff did not allege that she sustained any damages that would not be recoverable under herbreach of contract cause of action; she seeks to recover salary and bonuses to which she claimsshe is entitled under the short- and long-term compensation plans. Thus, the fraud-based causesof action are duplicative of the breach of contract cause of action.
Regarding the cause of action for defamation, plaintiff did not plead in the complaint thespecific words allegedly used by McCausland-Seve, as required by CPLR 3016 (a), and hasoffered no excuse for her failure to do so. Instead, plaintiff appears to have paraphrased theallegedly defamatory statements. Thus, "[s]ince the actual defamatory words were never pleadedwith particularity, but were only paraphrased in a manner such that the actual words were notevident from the face of the complaint, the long-standing rule is that dismissal is required"(Murganti v Weber, 248 AD2d 208, 208-209 [1998] [citations omitted]; seeAmerican Preferred Prescription v Health Mgt., 252 AD2d 414, 420 [1998]; Gardner vAlexander Rent-A-Car, 28 AD2d 667 [1967]). Concur—Tom, J.P., Saxe, Friedman,Gonzalez and McGuire, JJ.