as a whole, the Court will have to consider extrinsic evidence regarding the parties' intent upon entering the contract, and Defendant will bear the burden of demonstrating that "'it would be unreasonable for the average man reading the policy'" to construe it in the same manner as the insured. Vargas, 651 F.2d at 840. Defendant's motion to dismiss Plaintiff's ERISA and common law breach of contract claims is denied.
Defendant also moves to dismiss Plaintiffs' claim for fraud and misrepresentation, arguing that Plaintiffs have attempted improperly to convert their contract claims into claims for fraud. (Def.'s Reply Mem. at 7). Plaintiffs allege that Defendant's promotional brochures fraudulently misrepresent its Medigap policies. Amended Complaint P40.
There is a split in New York case law regarding whether a cause of action for fraud can be created out of a claim for breach of contract when the only fraud charged relates to a breach of contract. Some courts have held that allegations that a defendant never intended to abide by the terms of an agreement are not sufficient to state a cause of action for fraud because one party's "'failure to fulfill promises to perform acts in the future is a breach of contract, and not fraud.'" Spellman v. Columbia Manicure Mfg. Co., Inc., 111 A.D.2d 320, 489 N.Y.S.2d 304, 308 (1985) (citations omitted). See also Tesoro Petroleum Corp. v. Holborn Oil Co., Ltd., 108 A.D.2d 607, 484 N.Y.S.2d 834, 835 (1985) (stating that "a failure to perform promises of future acts is merely a breach of contract"). Other courts have held that a cause of action for fraud is stated when a plaintiff alleges that defendant made a fraudulent misrepresentation of intention in order to induce plaintiff to enter a contract. See Bower v. Weisman, 650 F. Supp. 1415, 1422-23 (S.D.N.Y. 1986), citing Channel Master Corp. v. Aluminum Ltd. Sales, Inc., 4 N.Y.2d 403, 176 N.Y.S.2d 259, 262, 151 N.E.2d 833 (1958).
Here, the Court need not decide which line of cases to follow because Plaintiff has alleged misrepresentation that is independent of the breached contract terms. See Wallach Marine Corp. v. Donzi Marine Corp., 675 F. Supp. 838, 841 (S.D.N.Y. 1987). The court in Wallach found that plaintiffs' allegations that defendant made false statements in order to persuade plaintiffs to enter the contract constituted an "alleged affirmative misrepresentation independent of a breached contract term . . . distinguishing that pleading from those that simply reiterate a contract breach cast in terms of fraud." Id. In this case, Plaintiffs point to language in Defendant's promotional brochure stating that Defendant's Medigap policies provide beneficiaries with "total protection" and that they "fill in the gaps of Medicare." Amended Complaint P40; Pl.'s Opp. Mem. at 22. The Court finds that these promotional provisions are distinct from Defendant's promise to abide by the contract and are sufficient to state a cause of action for fraud that is separate from Plaintiffs breach of contract claims.
For the reasons stated above, the Court denies Defendant's motion to dismiss Plaintiffs' Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted.
DATED: New York, New York
April 15, 1992
Kimba M. Wood
United States District Judge
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