(attached)," the attachment is not included in the exhibit and
the Amended Complaint does not supply its terms. Moreover, the
memorandum goes on to state that "[Paper Corporation] will
present [the matrix] to Fasson with the possibility of a
follow-up meeting with STP [Schoeller] personnel," indicating
that the matrix was merely a proposal, which is not alleged to
have been accepted by Fasson.
Consequently, the Amended Complaint fails to cure the defects
that previously led this court to hold that Paper Corporation's
allegations relating to Fasson are barred by the statute of
The Fraud Claim is Dismissed
While it is actionable in New York to make a promise without
intent to perform, Channel Master Corp. v. Aluminum Ltd. Sales,
Inc., 4 N.Y.2d 403, 176 N.Y.S.2d 259, 151 N.E.2d 833 (1958), it
is insufficient merely to allege lack of intent; one "must
allege facts to show that the defendant, at the time the
promissory representation was made, never intended to honor or
act on [its] statement." Roney v. Janis, 77 A.D.2d 555, 557,
430 N.Y.S.2d 333, 335 (1st Dept. 1980), aff'd, 53 N.Y.2d 1025,
442 N.Y.S.2d 484, 425 N.E.2d 872 (1981); Carlucci v.
Owens-Corning Fiberglas Corp., 646 F. Supp. 1486, 1491 (E.D.N Y
No facts are set forth in the Amended Complaint to show
Schoeller did not intend to honor its alleged commitments. In
addition, it is not alleged that the purported promises were
made with the intent to deceive Paper Corporation, an essential
element of any common law fraud claim.
Paper Corporation also alternatively alleges a failure to
disclose a subsequent change of intent. Where the alleged fraud
concerns the performance of a contract, as it does here, the
claim is treated in New York as one sounding in contract rather
than tort. Trusthouse Forte (Garden City) Management, Inc. v.
Garden City Hotel, Inc., 106 A.D.2d 271, 483 N.Y.S.2d 216 (1st
Dept. 1984); see Vista Co. v. Columbia Pictures Industry Inc.,
725 F. Supp. 1286, 1294 (S.D.N.Y. 1989); Airlines Reporting
Corp. v. Aero Voyagers, Inc., 721 F. Supp. 579, 582 (S.D.N Y
Further, Paper Corporation fails to plead with the required
specificity. The Court of Appeals has stated that "allegations,
which fail to specify the time, place, speaker, and sometimes
even the content of the alleged misrepresentation, lack the
`particulars' required by Rule 9(b)." Luce v. Edelstein,
802 F.2d 49, 54 (2d Cir. 1986).
Paragraph 89(a), even when supplemented by paragraph 24 and
Exhibit A, fails to identify who at Schoeller allegedly
promised that if Paper Corporation allowed Schoeller to sell
directly to 3M, Schoeller would not deal directly with any
other customer. The Amended Complaint also does not indicate
whether this purported promise was made orally or in writing
and to whom.
Paragraph 89(b) refers to an alleged representation made on
July 14, 1988 that Schoeller would not deal directly with
Fasson while Paper Corporation continued to work within a
reasonable margin. The subparagraph does not state who the
participants were, either for Schoeller or Paper Corporation,
or whether the representation was made orally or in writing.
Exhibit C, an internal Schoeller memorandum of that discussion
states that after Kemper commented that "Schoeller would not
consider [selling to Fasson] as long as [Paper Corporation]
continued to work `within a reasonable margin, such as 5%',"
Fitzgerald of Paper Corporation "said that he disagreed . . ."
Consequently, Paper Corporation could not have reasonably
relied on Kemper's statement. Therefore the alleged
misrepresentation is not actionable. Singer v. Bell,
613 F. Supp. 198, 204 (S.D.N.Y. 1985).
Paragraph 89(c), read in conjunction with paragraph 49 of the
Amended Complaint, fails to state to whom Mr. Gallenkamp
allegedly guaranteed, in June 1988, that Schoeller would not
deal directly with Hallmark so long as Paper Corporation
continued to work within a 5% margin. The Amended Complaint
also fails to state whether the promise was oral or in writing.
Paragraph 89(d) does not satisfy Rule 9(b) because the
writing (Exhibit D) incorporated by reference through paragraph
50, does not state that the sales to Hallmark would be "through
[Paper Corporation]." Paragraph 89(e) presents the same
problem, because Exhibit E (which is incorporated by paragraph
51) similarly does not make any reference to the Hallmark sales
being effected through Paper Corporation.
The remaining allegations of paragraph 89(e-j) all relate to
"omissions," rather than to affirmative misrepresentations.
These subparagraphs fail to allege the factual basis for Paper
Corporation's allegation that Schoeller intended to deceive
Paragraph 90 states that "[t]hrough treachery and devise,
Schoeller approached Hallmark and Fasson and induced them to
deal directly with Schoeller." The Amended Complaint fails to
state who on behalf of Schoeller approached whom on behalf of
Fasson or when or what was allegedly said or why it was
fraudulent. And while paragraphs 60-61 purport to give some
additional information concerning Schoeller's allegedly
wrongful conduct as to Hallmark, the Amended Complaint fails to
allege who at Schoeller communicated with whom at Hallmark and
whether the communications were oral or in writing. Moreover,
the allegedly false statements are not alleged to have been
made to Paper Corporation, Paper Corporation is not alleged to
have been deceived by the alleged misrepresentations, and Paper
Corporation is not alleged to have relied on them. In short,
Paper Corporation lacks standing to complain of them.
Peerless Mills, Inc. v. American Tel. & Tel. Co., 527 F.2d 445,
449-50 (2d Cir. 1975).
Quantum Meruit May Be Pled In The Alternative
A party cannot sue for quantum meruit when there is an
express contract that covers the same subject matter.
Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382,
521 N.Y.S.2d 653, 516 N.E.2d 190 (1987). A party cannot
circumvent the statute of frauds by recharacterizing a breach
of contract claim as one for quantum meruit. Seven Star Shoe
Co. v. Strictly Goodies, Inc., 628 F. Supp. 1237, 1240 (S.D.N Y
1986) (citing Klein v. Smigel, 44 A.D.2d 248, 354 N.Y.S.2d 117
(1st Dept. 1974), aff'd, 36 N.Y.2d 809, 370 N.Y.S.2d 897,
331 N.E.2d 679 (1975)). However, where, as here, the existence of
the contract is in dispute, Paper Corporation can plead quantum
meruit in the alternative pursuant to Rule 8(e) of the Federal
Rules of Civil Procedure. See Shapiro v. Dictaphone Corp.,
66 A.D.2d 882, 411 N.Y.S.2d 669 (2d Dept. 1978) (where the statute
of frauds not satisfied, writings may sustain quantum meruit
Promissory Estoppel Claim Fails to Allege Unconscionability
The Opinion with respect to Paper Corporation's promissory
estoppel claims, stated:
Paper Corporation has alleged no facts that would
establish an "unconscionable injury" supporting
its claims for promissory estoppel.
Opinion, p. 21.
Paper Corporation has now alleged generally that it has
"suffered substantial damages" of at least $50,000 as a result
of Schoeller's alleged dishonor of its promises, but no single
expense that it incurred has been identified.
In D & N Boening, Inc. v. Kirsch Beverages, Inc., 99 A.D.2d 522,
471 N.Y.S.2d 299 (2d Dept. 1984), aff'd, 63 N.Y.2d 449,
483 N.Y.S.2d 164, 472 N.E.2d 992 (1984), the Appellate
Division, after reviewing the allegations set forth in the
plaintiff's complaint and assuming them to be true, held, as a
matter of law, that they were not sufficiently egregious to
make it unconscionable to enforce the statute of frauds. The
present allegation thus fails to identify an injury for
pleading purposes that can be considered as "unconscionable."
The Tortious Interference Claim Remains Deficient
The Opinion noted that tortious interference failed to allege
either that Schoeller acted with the sole purpose of
harming Paper Corporation or employed means that are criminal
or fraudulent. (Opinion, pp. 23-25).
While Paper Corporation purports to charge Schoeller with
fraud, the allegations are inadequately pled as set forth
above. In the absence of an allegation concerning criminal or
fraudulent conduct or an interest other than economic
self-interest, the pleading remains insufficient.
The Unfair Competition Claim is Deficient
The eighth and final claim for relief, denominated as "unfair
competition" simply incorporates seventy-six of the prior
paragraphs (Amended Complaint, ¶ 128), states that "[b]y the
foregoing conduct, Schoeller has unlawfully and unfairly
competed with [Paper Corporation]" (Amended Complaint, ¶ 129),
and demands damages in excess of $50,000 (Amended Complaint, ¶
As the Court of Appeals noted, when faced with a similar
New York law in this area [of unfair competition]
is indeed flexible, but it is not that flexible.
Saratoga Vichy Spring Co. v. Lehman, 625 F.2d 1037, 1044 (2d
Thomas McCarthy, Trademarks and Unfair Competition § 1.5 at
16-17 (1984), sets forth an exhaustive list of conduct that
courts in various jurisdictions have found to be unfair
trademark infringement, dilution of good will in
trademarks; use of similar corporate, business and
professional names; use of similar titles of
literary works or other literary property, and or
commercial goods; the appropriation of distinctive
literary and entertainment characterizations;
simulation of a container or product
configuration; simulation of trade dress and
packaging; misappropriation; "bait and switch"
selling tactics; false representations and false
advertising; "palming off" goods by unauthorized
substitution of one brand for the brand ordered;
competition by a seller of a business with the
buyer; theft of trade secrets; and a former
employee's solicitation of his employer's
customers by use of confidential information.
In Ray v. Proxmire, 581 F.2d 998, 1002 (D.C. Cir. 1978),