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SUDUL v. COMPUTER OUTSOURCING SERVS.

November 8, 1994

JOSEPH SUDUL, Plaintiff,
v.
COMPUTER OUTSOURCING SERVICES, et al., Defendants.


MARTIN, JR.


The opinion of the court was delivered by: JOHN S. MARTIN, JR.

JOHN S. MARTIN, JR., District Judge:

 Plaintiff in this diversity action is suing the defendants for breach of contract and fraud. In his amended complaint, plaintiff alleges that for approximately 25 years prior to August 1993 he was a "key employee, shareholder, officer and director" of defendant Datafast Inc. (DFI). Am. Compl. P 8. The complaint states that in December 1992, DFI entered into an agreement to sell its business to defendant Computer Outsourcing Services, Inc., (COSI), and that COSI simultaneously entered into an employment agreement with Sudul having a four-year term. See id. PP 11, 12, id. Ex. B P 5. From the moment that COSI entered into this employment contract, however, it and the other defendants allegedly did not intend that COSI would honor the agreement. Id. PP 24-26. Instead, the defendants allegedly pressured Sudul into accepting a pay cut under threat of discharge and then, in August 1993, fired him despite satisfactory performance of his duties under the agreement. Id. PP 16, 18-20.

 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.

 Second Count

 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.

 Third Count

 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).

 Fourth Count

 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 ...


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