The opinion of the court was delivered by: Rakoff, District Judge.
On March 11, 1999 plaintiffs IKEA North American Services, Inc.
("IKEA") and Deutsch, Inc. filed this diversity action against
defendants Northeast Graphics, Inc., Precision Technology, Inc.
and Spectrum Direct, Inc., alleging breach of contract, fraud,
negligence, and violations of the New Hampshire and Connecticut
consumer protection statutes. Defendants promptly moved to
dismiss. Following briefing and oral argument, the Court
telephonically informed counsel on June 18, 1999 that defendants'
motions would be granted in part and denied in part. This
Memorandum Order will formally confirm those determinations and
briefly set forth the reasons therefor.
The allegations of the Complaint pertinent to these motions are
as follows. In the summer of 1998, IKEA, through its North
American advertising agent Deutsch, hired defendant Northeast
Graphics to produce a "holiday" brochure advertising IKEA
products and to mail the brochure to 3.8 million homes throughout
the United States and Canada. Complaint ¶¶ 2-4. To maximize
impact on holiday shopping, Northeast Graphics contractually
committed to (i) begin the mass mailings no later than October
22, 1998, (ii) mail at least 2.6 million of the brochures by
November 13, and (iii) complete the mailing by November 20. Id.
¶ 4. In furtherance of the contract, Northeast Graphics hired
co-defendants Precision Technology and Spectrum Direct to
collate, bind, and distribute the brochures. Id. ¶ 22.
Between early November and November 17, 1998, Deutsch, on
behalf of IKEA, repeatedly asked Northeast Graphics about the
status of the mailing and received oral assurances that the
campaign was proceeding as agreed. Id. ¶¶ 10, 30-32.
Additionally, on November 12, 1998, as evidence of its progress,
Northeast Graphics sent Deutsch thirteen "Postal Register
Statements" — post office documents attesting to the weight,
number of items, and postage placed in the mail — purportedly
showing the mailing of 2,999,641 brochures by Spectrum Direct.
Id. ¶¶ 7, 33-34, Ex. A. In actuality, however, the oral
assurances were lies, and the Postal Register Statements were
fabrications and forgeries. Id. ¶¶ 35-36. As late as November
20, 1999 (the deadline for completion of the entire mailing) 80%
of the brochures remained on a factory floor at Precision
Technology and were not delivered until thereafter. Id. at 42.
Assessing defendants' motions in light of these allegations
taken most favorably to plaintiffs, the following conclusions
First, these and the other allegations of the Complaint fail
to make out claims of fraud distinct from the claims of breach of
contract, and the claims of fraud must therefore be dismissed
with prejudice. Under New York State law,*fn1 a plaintiff cannot
maintain a claim of fraud against a party with whom plaintiff has
contracted unless the plaintiff can (i) demonstrate that the
fraud arises from a legal duty owed to plaintiff separate from
the defendant's duty to perform under the contract, (ii)
demonstrate that defendant has made a fraudulent
misrepresentation collateral or extraneous to the contract, or
(iii) demonstrate the plaintiff is entitled to special damages
caused by the fraud that are unrecoverable as contract damages.
See Bridgestone/Firestone, Inc. v. Recovery Credit Services,
Inc., 98 F.3d 13, 19-20 (2d Cir. 1996) (applying New York law);
see also Hargrave v. Oki Nursery, Inc., 636 F.2d 897, 899 (2d
Cir. 1980) (same). By contrast, even intentionally misleading
statements by a defendant falsely indicating an intent to perform
under a contract and/or concealing a breach of the contract do
not give rise to an action for fraud. See Bridgestone, 98 F.3d
at 19; see also Reuben H. Donnelley Corp. v. Mark I Marketing
Corp., 893 F. Supp. 285, 290 (S.D.N.Y. 1995) (applying New York
The oral and written misrepresentations here alleged, while
serious, are limited to false statements of contractual
performance and attempted concealments of contractual breach.
Seeking to avoid the obvious bar to a fraud claim premised on
such misrepresentations, plaintiffs theorize that the
misrepresentations breached an independent duty to plaintiffs
created by the federal mail fraud statute, 18 U.S.C. § 1341,
which makes it a federal crime to
use the mails in furtherance of a scheme to defraud. Plaintiffs'
theory, if true, would virtually destroy the state law bar to
fraud claims premised on concealment of contractual breaches,
since virtually any such misrepresentation for the purpose of
obtaining or retaining contractual payment could qualify as a
mail fraud offense if there was any use of the mails in any way
incident to the furtherance of the scheme. See Schmuck v. United
States, 489 U.S. 705, 710, 109 S.Ct. 1443, 103 L.Ed.2d 734
But no such evisceration of established state law is here
warranted, because it is well settled that the mail fraud statute
creates no independent duty to private individuals, nor gives
rise in itself of any private rights of action. See e.g.,
Official Publications, Inc. v. Kable News Co., 884 F.2d 664, 667
(2d Cir. 1989). Rather, the victim of mail fraud is the United
States, and the burden of enforcing the duties created by the
statute is on the United States. See generally, Jed S. Rakoff,
"The Federal Mail Fraud Statute, Part I," 18 Duquesne L.Rev. 771
Accordingly, plaintiffs' fraud claims are dismissed with
Second, for similar reasons, plaintiffs' claims of negligence
must also be dismissed with prejudice because defendants have
breached no duty distinct from, or in addition to, their
contractual duties. See Sommer v. Federal Signal Corporation,
79 N.Y.2d 540, 553, 583 N.Y.S.2d 957, 593 N.E.2d 1365 (1992);
see also Gen. Ins. Co. v. K. Capolino Construction Corp.,
957 F. Supp. 457, 462 (S.D.N.Y. 1997). While additional duties of
special care sounding in tort have been read into contractual
relationships in certain circumstances (such as where a party has
obtained a position of special confidence or trust with respect
to the other, or possesses specialized or unique expertise), here
the factual allegations of the Complaint, even when read most
favorably to plaintiffs, fail to make out a claim of any such
special circumstances. See Kimmell v. Schaefer, 89 N.Y.2d 257,
652 N.Y.S.2d 715, 675 N.E.2d 450 (1996).
Third, and again for similar reasons, plaintiffs' claims
under the New Hampshire and Connecticut Unfair Trade Practices
Acts (assuming, arguendo, that those statutes otherwise apply)
must also be dismissed with prejudice because those statutes do
not apply to circumstances involving a simple breach of contract,
even when, as here, misrepresentations have been made regarding
performance. See Barrows v. Boles, 141 N.H. 382, 390,
687 A.2d 979 (1996); see also Retrofit Partners v. Lucas Industries,
Inc., 47 F. Supp.2d 256, 271 (D.Conn. 1999); Chaspek Manuf.
Corp. v. Tandet, 1995 WL 447948, *12 (Conn. Sup.er. 1995).
Fourth, while the breach of contract claim against Northeast
Graphics survives, plaintiffs concede that they have failed to
plead any valid theory for pursuing their contractual claims
against the subcontractors, Precision Technology and Spectrum
Direct, but represent that they may still be able to do so. The
Court therefore dismisses the contract claims against Precision
Technology and Spectrum Direct without prejudice to plaintiffs'
attempting to re-plead these claims if, as envisioned by the Case
Management Plan, they can do so by September 3, 1999.
Fifth, the motion of two of the defendants to dismiss
plaintiff Deutsch from the case for lack of standing is denied
without prejudice to its being renewed following discovery. See
generally Allen v. West-Point-Pepperell, Inc., 945 F.2d 40, 44
(2d Cir. 1991).
In summary, plaintiffs' fraud, negligence, and consumer
protection claims are dismissed with prejudice, plaintiffs'
contract claims against defendants Precision Technology and
Spectrum Direct are dismissed with leave to re-plead by no later
than September 3, 1999, and defendants'
motion to ...