against all of the defendants. Defendants COSI and Lonstein, COSI's president and principal shareholder, have moved to dismiss the amended complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Their motion is granted as to plaintiff's second through fifth counts, but denied as to his first count.
The plaintiff's first count adequately alleges that an employment agreement existed between him and defendant COSI; that plaintiff performed his duties under that agreement; that COSI breached the agreement; and that the breach resulted in damages to the plaintiff. Plaintiff thus states the prerequisites for a breach of contract claim under New York law, see Stephens v. Am. Home Assurance Co., 811 F. Supp. 937, 958 (S.D.N.Y. 1993); Van Brunt v. Rauschenberg, 799 F. Supp. 1467, 1470 (S.D.N.Y. 1992), and defendants' motion to dismiss must be denied as to count one.
The plaintiff's second count alleges that defendants falsely represented to him that they had the right, under the employment agreement and the COSI-DFI agreement, to terminate his employment immediately, and that plaintiff accepted a decrease in salary in reliance on these misrepresentations.
In order to state a claim for fraud under New York law, plaintiff must have justifiably relied on the intentional misrepresentations allegedly made by defendants. Royal Am. Managers, Inc. v. IRC Holding Corp., 885 F.2d 1011, 1016 (2d Cir. 1989); Demov, Morris, Levin & Shein v. Glantz, 78 A.D.2d 883, 433 N.Y.S.2d 46, 47 (App. Div. 1980), aff'd, 53 N.Y.2d 553, 444 N.Y.S.2d 55, 428 N.E.2d 387 (1981); 60 N.Y.Jur.2d Fraud & Deceit § 142, at 650 (1987). Sudul clearly was not justified in relying on the misrepresentations alleged in his second count. He knew, just as well as the defendants did, what he had accomplished during the first several months of his employment by COSI. He presumably had read his employment contract, see Pimpinello v. Swift & Co., 253 N.Y. 159, 170 N.E. 530 (1930), and understood the termination provision contained in Paragraph Five of that contract. Possessed of all of the relevant facts, he could and should have decided for himself whether defendants' representations were accurate. See Royal Am. Managers, 885 F.2d at 1016; 60 N.Y.Jur.2d Fraud & Deceit § 143. Plaintiff's second count is dismissed as to all defendants because, in the absence of justifiable reliance, plaintiff fails to state a claim for fraud.
The third count of the complaint alleges that COSI had an obligation, under its agreement with DFI, not to breach any employment agreement into which it entered with Sudul; that Sudul was a third-party beneficiary of this provision of the COSI-DFI agreement; and that COSI violated this provision by prematurely terminating Sudul. This claim essentially duplicates plaintiff's claim for breach of the employment agreement, involving the same promisor, the same acts of breach and the same measure of damages. The court strikes it as redundant pursuant to Federal Rule of Civil Procedure 12(f).
In the fourth count of his amended complaint, plaintiff claims that all four defendants induced him to enter into the employment agreement by promising that COSI would honor its obligations under that agreement, even though the defendants did not actually intend that COSI would do so. Sudul further alleges that he was in "a legal and economic position to control the significant assets and future of DFI and its business," and that defendants' misrepresentations led him to surrender this control by entering into the employment agreement. Am. Compl. P 28.
In general, mere allegations of breach of contract do not give rise to a claim for fraud, e.g. Scally v. Simcona Elec. Corp., 135 A.D.2d 1086, 523 N.Y.S.2d 307 (App. Div. 1987); Trusthouse Forte (Garden City) Management, Inc. v. Garden City Hotel, Inc., 106 A.D.2d 271, 483 N.Y.S.2d 216 (App. Div. 1984), or fraudulent inducement, e.g. C.B. W. Fin. Corp. v. Computer Consoles, Inc., 122 A.D.2d 10, 504 N.Y.S.2d 179, 182 (App. Div. 1986); Wegman v. Dairylea Coop., Inc., 50 A.D.2d 108, 376 N.Y.S.2d 728, 734-35 (App. Div. 1975), appeal dismissed, 38 N.Y.2d 918, 382 N.Y.S.2d 979, 346 N.E.2d 817 (1976), under New York law. However, New York's Court of Appeals has held that a contracting party can be held liable for fraud when, at the time he made a promise, he did not intend to keep it. Channel Master Corp. v. Aluminium Ltd. Sales, Inc., 4 N.Y.2d 403, 176 N.Y.S.2d 259, 151 N.E.2d 833 (1958); Sabo v. Delman, 3 N.Y.2d 155, 164 N.Y.S.2d 714, 143 N.E.2d 906 (1957).
A long line of New York courts have carved out an exception to the rule laid down in Sabo and Channel Master. See, e.g., Locascio v. Aquavella, 185 A.D.2d 689, 586 N.Y.S.2d 78 (App. Div. 1992); Lustig v. Anywear, Inc., 145 A.D.2d 328, 535 N.Y.S.2d 694 (App. Div. 1988); Gordon v. Dino De Laurentiis Corp., 141 A.D.2d 435, 529 N.Y.S.2d 777 (App. Div. 1988); Comtomark v. Satellite Communications Network, 116 A.D.2d 499, 497 N.Y.S.2d 371 (App. Div. 1986); Spellman v. Columbia Manicure Mfg. Co., 111 A.D.2d 320, 489 N.Y.S.2d 304 (App. Div. 1985); Tesoro Petroleum Corp. v. Holborn Oil Co., 108 A.D.2d 607, 484 N.Y.S.2d 834 (App. Div.), appeal dismissed, 65 N.Y.2d 637 (1985); L. Fatato, Inc. v. Decrescente Distrib. Co., 86 A.D.2d 600, 446 N.Y.S.2d 120 (App. Div. 1984); Chase v. United Hosp., 60 A.D.2d 558, 400 N.Y.S.2d 343 (App. Div. 1977). These courts have held that, where a fraud claim arises out of the same facts as plaintiff's breach of contract claim, with the addition only of an allegation that defendant never intended to perform the precise promises spelled out in the contract between the parties, the fraud claim is redundant and plaintiff's sole remedy is for breach of contract. These courts have adopted, in varying degrees, the reasoning first articulated in Briefstein v. P.J. Rotondo Constr. Co., 8 A.D.2d 349, 187 N.Y.S.2d 866, 868 (App. Div. 1959), a case decided shortly after Channel Master and Sabo:
To say that a contracting party intends when he enters an agreement not to be bound by it is not to state 'fraud' in an actionable area, but to state a willingness to risk paying damages for breach of contract. . . .