stated that a constructive trust may be imposed notwithstanding the lack of a fiduciary relationship. The key factor in deciding whether to impose a constructive trust is the prevention of unjust enrichment. See In re Koreag Controle et Revision S.A., 961 F.2d at 352; Simonds, 45 N.Y.2d at 242, 408 N.Y.S.2d at 364. Plaintiff alleges that Baronowski, Coleman and Keating set up CMH and were the principal officers of both CMH and CM. See First Amended Complaint at PP 8, 9, 53. Assuming that the allegations set forth in the First Amended Complaint are true, CM and CMH benefited when plaintiff gave his money and time to Baronowski, Coleman and Keating. Thus, even if CMH and CM committed no wrongful acts, the two entities may have been unjustly enriched by plaintiff's loans to Baronowski, Coleman and Keating, and by the services plaintiff rendered in furtherance of the joint venture to acquire TCB. See Bridgestone/Firestone, Inc. v. Recovery Credit Services, 98 F.3d 13, 17-18 (2d Cir. 1996) (New York law disregards corporate form when it has been used to achieve fraud, or when it must be deemed an alter-ego). If so, plaintiff would be entitled to a constructive trust imposed against CMH and CM.
E. Fifth Claim: Accounting (against Baronowski, Coleman Keating, Barcol, CMH and CM)
Plaintiff alleges that defendants derived substantial income and profits from his loans and services, and seeks an accounting to determine the value of this income and profits. Defendants Coleman, Keating, Barcol, CMH and CM move to dismiss the Fifth claim for an accounting on the grounds that plaintiff has failed adequately to allege (1) the existence of fiduciary duties on their part, or (2) the existence of a trusting and confidential relationship between the parties and (3) that plaintiff entrusted money to defendants. For the reasons discussed above, the First Amended Complaint adequately pleads the existence of fiduciary duties on the part of Baronowski, Coleman and Keating. Assuming the facts set forth in the First Amended Complaint are true, Barcol, CMH and CM are merely the corporate alter-egos of Baronowski, Coleman and Keating. As such, these corporate entities may not successfully argue for the dismissal of plaintiff's request for an accounting by disavowing any fiduciary duty to plaintiff.
F. Sixth Claim: Quantum Meruit (against Baronowski, Coleman, Keating, and Barcol)
Defendants do not move to dismiss plaintiff's Sixth claim.
G. Seventh Claim: Unjust Enrichment (against Baronowski, Coleman, Keating, Barcol, CMH and CM)
The parties agree that to establish a claim for unjust enrichment, a plaintiff must allege that (1) a defendant has been unjustly enriched; (2) the enrichment was at plaintiff's expense; and (3) defendant's retention of the benefit would be unjust. See, e.g. Van Brunt v. Rauschenberg, 799 F. Supp. 1467, 1472 (S.D.N.Y. 1992). Defendants CM and CMH seek dismissal of the Seventh claim for unjust enrichment on the ground that it did not benefit from the acquisition of TCB and that plaintiff did not expect repayment from them but rather from defendants Baronowski, Coleman and Keating. For the reasons discussed above, CM and CMH cannot be distinguished from Baronowski, Coleman and Keating for purposes of deciding defendants' motions to dismiss. There is no legitimate reason to dismiss plaintiff's Seventh claim against CM and CMH as these entities are alleged to be the alter-egos of Baronowski, Coleman and Keating.
I. Eighth Claim: Tortious Interference with Contract (against BDS, McCabe, Barcol, CM, CMH, RavensRock and High View)
1. Defendants CM, CMH and Barcol
Plaintiff consents to withdraw its Eighth claim against CM, CMH and Barcol for tortious interference with contract. See Plaintiff's Memorandum of Law in Opposition to Defendants' Motion ("Plaintiff's Memo") at 24 n.7. I therefore need not address defendants' arguments with regard to the Eighth claim and these defendants.
2. Defendants BDS and McCabe
Defendants BDS and McCabe argue the Eighth claim must be dismissed because it fails to allege with adequate specificity any conduct of BDS or McCabe that could rise to the level of tortious interference with contract. To adequately plead a claim for tortious interference with contract, a plaintiff must allege that (i) a valid contract existed between himself and a third party; (ii) defendant knew of this contract; (iii) defendant intentionally induced the third party to breach the contract or otherwise render performance impossible; (iv) damages. See, e.g., International Minerals & Resources, S.A. v. Pappas, 96 F.3d 586, 595 (2d Cir. 1996) (citing, inter alia, Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94, 595 N.Y.S.2d 931, 934, 612 N.E.2d 289 (1993)). The First Amended Complaint meets these requirements. See First Amended Complaint PP 94-97. Specifically, plaintiff alleges that even though McCabe and BDS were aware of the joint venture agreement, "BDS and its president McCabe saw an opportunity to oust Blank from the TCB deal" and "to this end . . . met with Baronowski, Coleman and Keating to discuss ousting Blank from the TCB acquisition, dropping Blank as a joint venture partner, and using BDS to locate investors for the TCB acquisition.". First Amended Complaint at P 96. BDS's argument that the Eighth claim must be dismissed because plaintiff has failed to set forth the precise substance, time and location of actual statements that allegedly induced the breach is without merit.
3. Defendants RavensRock and High View
Defendants RavensRock and High View also contend that the First Amended Complaint fails to adequately plead a claim for tortious interference with contract against them because it lacks specific allegations with regard to their conduct. However, the First Amended Complaint alleges that when McCabe tortiously interfered with plaintiff's contract, he did so as an agent of RavensRock and High View. See First Amended Complaint at P 96. It is also alleged that RavensRock and High View knew at all relevant times of the joint venture agreement. See id. at P 94. As explained above, the absence of specific factual allegations with regard to times, locations and precise statements or acts by the defendants does not require dismissal of the Eighth claim. The First Amended Complaint adequately pleads a claim for tortious interference with contract as to defendants RavensRock and High View.
4. Punitive Damages
Under New York law, punitive damages are allowable in tort cases involving claims for fraud, breach of fiduciary duty or tortious interference with contract even if there is no harm aimed at the general public "so long as the very high threshold of moral culpability is satisfied". Giblin v. Murphy, 73 N.Y.2d 769, 772, 536 N.Y.S.2d 54, 56, 532 N.E.2d 1282 (1988). See also Action S.A. v. Marc Rich & Co., 951 F.2d 504, 509 (2d Cir. 1991) (punitive damages available for tort claims involving "gross, wanton, or willful fraud or other morally culpable conduct" even if that conduct is not directed at the general public) (quotation omitted), cert. denied, 503 U.S. 1006, 118 L. Ed. 2d 425, 112 S. Ct. 1763 (1992); Roy Export Co. v. Columbia Broadcasting System, 672 F.2d 1095, 1106 (2d Cir.) (punitive damages for tort claims available "where a wrong is aggravated by recklessness or willfulness"), cert. denied, 459 U.S. 826, 74 L. Ed. 2d 63, 103 S. Ct. 60 (1982); Cohen v. Davis, 926 F. Supp. 399, 405 (S.D.N.Y. 1996). The underlying facts of this case allege a course of conduct that a reasonable jury might find to be so morally reprehensible as to justify the award of punitive damages. Defendants' arguments that plaintiff's tort claims may not sustain a request for punitive damages as a matter of law are therefore rejected.
J. Ninth Claim: Fraud (against Baronowski)
To prove fraud under New York law, a plaintiff must show that:
(1) the defendant made a material false statement, (2) the defendant intended to defraud the defendant thereby, (3) the plaintiff reasonably relied upon the representation, and (4) the plaintiff suffered damage as a result of such reliance.
Bridgestone/Firestone Inc., 98 F.3d at 19 (quotations omitted). An action for breach of contract may not be converted into one for fraud merely by alleging that the contracting party never intended to meet his contractual obligation, for this would allow a plaintiff to plead two independent claims, and recover twice, for the same conduct. See, e.g., GSGSB, Inc. v. New York Yankees, 862 F. Supp. 1160, 1177 (S.D.N.Y. 1994); New York University v. Continental Ins. Co., 87 N.Y.2d 308, 319-320, 639 N.Y.S.2d 283, 289, 662 N.E.2d 763 (1995). Rather, as the Court of Appeals has explained,
In such a situation a plaintiff must either: (i) demonstrate a legal duty separate from the duty to perform under the contract; or (ii) demonstrate a fraudulent misrepresentation collateral or extraneous to the contract; or (iii) seek special damages that are caused by the misrepresentation and unrecoverable as contract damages.
Bridgestone/Firestone, Inc., 98 F.3d at 20 (citations omitted). See also Hargrave v. Oki Nursery, Inc., 636 F.2d 897, 898-99 (2d Cir. 1980) ("If the only interest at stake is that of holding the defendant to a promise, the courts have said that the plaintiff may not transmogrify the contract claim into one for tort.").
Thus the same acts may independently give rise to actions for both fraud and breach of contract. Whether the First Amended Complaint adequately pleads misrepresentations collateral to the alleged joint venture agreement, however, is a close question. The allegedly false and misleading statements made by Baronowski closely track the terms of the joint venture agreement. See First Amended Complaint at PP 104-105 (false statements were that plaintiff was Baronowski's partner, that plaintiff would receive the same amount of stock as Coleman and Keating and the same salary as Coleman, and that plaintiff would participate fully in the TCB acquisition). Plaintiff, however, does not only allege that Baronowski made these false statements before the formation of the joint venture agreement in order to induce plaintiff's consent, but also that Baronowski repeated them each time he asked to borrow money from plaintiff after the joint venture agreement was allegedly formed. See id. at 106.
Plaintiff's fraud claim therefore alleges that Baronowski made false representations regarding the existence of a joint venture agreement in order to induce plaintiff to loan him money on the strength of that contract. Although these false representations essentially repeated the terms of the joint venture agreement, they were "extraneous" to the contract in that they misrepresented a present fact (i.e., that defendant believed a joint venture agreement existed) rather than defendant's future intent to honor that contract. See Bridgestone/Firestone, Inc., 98 F.3d at 20 (citing Deerfield Communications Corp. v. Chesebrough-Ponds Inc., 68 N.Y.2d 954, 956, 510 N.Y.S.2d 88, 89, 502 N.E.2d 1003 (1986)). As plaintiff's fraud claim does not merely duplicate his claims for breach of the joint venture agreement, but rather is grounded in fraudulent statements made after its formation, defendants' motion to dismiss the Ninth claim is denied.
K. Tenth Claim: Breach of Contract
Defendants argue that plaintiff's Tenth claim for breach of contract must be dismissed as to defendants CM and CMH. As plaintiff consents to withdraw its Tenth claim against CM and CMH, see Plaintiff's Memo at 24 n.7, I need not rule on defendants' motion.
L. Eleventh Claim
Defendants do not move to dismiss plaintiff's Eleventh claim.
Rule 12(b)(6) can provide a swift and inexpensive means to terminate nonviable claims before trial. Yet all too often, defendants in civil cases move under this rule even when confronted with viable claims. Such motions squander judicial resources, needlessly delay litigation on the merits of the plaintiff's claims, and ultimately defeat the purpose of Rule 12(b)(6). This may well have been one such motion. For the foregoing reasons, defendants' motions are denied. Plaintiff withdraws its Eighth claim against CM, CMH and Barcol, and its Tenth claim against CM and CMH.
Shira A. Scheindlin
Dated: New York, New York
March 11, 1997