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May 23, 2003


The opinion of the court was delivered by: VICTOR Marrero, District Judge.

Plaintiff Danny Lam ("Lam") brings this action for compensatory and punitive damages alleging fraudulent inducement, breach of contract, and federal and state claims for national origin and age discrimination in violation of 42 U.S.C. § 1983, New York Executive Law § 296, New York Administrative Code § 8-107 and Labor Law § 198 (1-a). Defendant American Express Company ("American Express") moves for the partial dismissal of Lam's claims pursuant to Rule 9(b) and Rule 12(b) of the Federal Rules of Civil Procedure ("Fed.R. Civ. P."). For the reasons set forth below, the motion is GRANTED in part and DENIED in part.


This case is before the Court on a partial motion to dismiss. The material allegations in Lam's Amended Complaint ("Complaint" or "Compl."), dated July 18, 2002, along with such reasonable inferences as might be drawn in Lam's favor are therefore taken as admitted for the purposes of this motion. See Dwyer v. Regan, 777 F.2d 825, 828-29 (2d Cir. 1985), modified by, 793 F.2d 457 (1986); Murray v. City of Milford, 380 F.2d 468, 470 (2d Cir. 1967); Carlucci v. Owens-Corning Fiberglass Corp., 646 F. Supp. 1486, 1488 (E.D.N.Y. 1986)

American Express extended a formal offer of employment to Lam on May 15, 1998 to work in its CapitaFinance department. At the time that he received this offer, Lam was employed by AT&T Capital/Newcort Financial ("AT&T"), as head of a joint venture between AT&T and American Express (the "Joint Venture"). American Express's offer was expressly contingent upon: (i) Lam's waiver of any rights that he had under his severance agreement with AT&T (the "AT&T Severance Plan"), and (ii) the closing of a deal under which American Express purchased AT&T's interest in the Joint Venture. Lam accepted the employment offer, waiving his rights under the AT&T Severance Plan. American Express purchased AT&T's interest in the Joint Venture, finalizing Lam's employment with American Express under the terms of his employment agreement as set forth in the May 15, 1998 offer letter (hereinafter, the "Employment Agreement")

According to the Employment Agreement, Lam was hired as an at-will employee of American Express and was to receive $185,000 per year in salary, as well as the opportunity to participate in three employee incentive programs. First, American Express agreed to provide Lam with "a one time grant of stock options and a Performance Grant award" (hereinafter referred to as the "Portfolio Grant Award") Lam alleges that the Portfolio Grant Award would have resulted in a payment of $150,000 on the vesting date of March 1, 2001. Second, Lam was entitled to continue his participation in an annual bonus program, which Lam alleges guaranteed him a minimum of $79,600 per year (hereinafter, the "Annual Bonus Program"). Finally, Lam was offered participation in a Long-Term Incentive Plan ("LTIP") that allowed him to defer a portion of his annual salary to be paid back after being multiplied by certain "leverage factors" set by American Express ("Performance Deferral Program"). The terms and conditions of the incentive plans included under Lam's Employment Agreement are outlined in the Compensation and Benefits Summary and brochure, which was attached to the Employment Agreement (hereinafter, "Compensation and Benefits Summary")

Under the Performance Deferral Program, Lam had set aside $287,850 by March 2000. In or about May 2000, Lam received a payment from this program of $273,000. Disappointed with this amount, which was below his expectation of $407,000 based on the leverage factors in the Compensation and Benefits Summary, Lam requested an explanation as to how the sum was calculated. Richard Tambor ("Tambor"), a Senior Vice President for American Express Travel Related Services Company, Inc., a wholly-owned subsidiary of American Express, explained to Lam that the payment was determined through "managerial discretion". On October 13, 2000, before the Portfolio Grant Award or the Annual Bonus Program for that year vested, Lam was terminated from American Express without cause.

The Complaint also alleges that, as of the time of the filing of this action, Lam was not paid from October 7, 2000 through October 13, 2000 — the day of his termination. Moreover, Lam complains that he was not paid for his accrued but unused vacation days, and that therefore $5,234.98 is owed to him on this account.

Lam also asserts a claim of discrimination based on his national origin and age. To this end, Lam sues under 42 U.S.C. § 1983, as well as New York Executive Law § 296, New York Administrative Code § 8-107 and Labor Law § 198.

American Express moves to dismiss from the Complaint Lam's first cause of action for fraudulent inducement, his second cause of action for breach of contract and his third cause of action for violation of 42 U.S.C. § 1933 et seq.



On a motion to dismiss pursuant to 12(b)(6) of the Fed. R. Civ. P., the Court must accept as true the factual allegations in the complaint and draw all reasonable inferences in favor of the pleader. Leatherman v. Tarrant County Narcotics and Coordination Unit, 507 U.S. 163, 165 (1993); Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993). Dismissal is proper only when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claims which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); accord Cohen v. Koenig, 25 F.3d 1668, 1172 (2d Cir. 1994). The issue that must be determined by the Court "is not whether a Plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)

While it is only the Complaint and not factual assertions or evidence that is properly considered at this juncture, "`[t]he complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference.'" Int'l Audiotext Network Inc. v. Am. Tel. and Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995) (quoting Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991)). In this case, therefore, in ruling on the instant motion to dismiss, the Court will consider the Employment Agreement, the Summary of Compensation and Benefits included as an addendum to the Employment Agreement, attached as Exh. A to the Affidavit of Tambor ("Tambor Aff."), dated September 10, 2002, and the 1996 AT&T Capital Corporation Leadership Severance Plan, attached as Exh. B to the Tabor Aff. The Employment Agreement is attached to the Complaint and the AT&T Severance Plan is incorporated by reference in the Complaint and integral to Lam's claims.


To prove fraud under New York law, "`a plaintiff must show that: (i) the defendant made a material false representation; (ii) the defendant intended cc defraud the plaintiff thereby; (iii) the plaintiff reasonably relied upon the representation, and (iv) the plaintiff suffered damage as a result of such reliance.'" Bridgestone/Firestone, Inc. v. Recovery Credit Services, Inc., 98 F.3d 13, 19 (2d Cir. 1996) (quoting Banque Arabe et Internationale D'Investissement v. Maryland Nat'l Bank, 57 F.3d 146, 153 (2d Cir. 1995))

American Express argues that since the fraud claim is "brought alongside a breach of contract claim" Lam has the burden of distinguishing the two claims or the fraud claim fails as a matter of law. Lam argues that his fraud and breach of contract claims are mutually exclusive.

New York courts addressing this issue have enunciated seemingly conflicting doctrine. Some have held that a contractual obligation "made with a preconceived and undisclosed intention of not performing it, . . . constitutes a misrepresentation'" for purposes of a fraud claim that is not duplicative of a contract claim. See Deerfield Comm. Corp. v. Chesebrough-Ponds, Inc., 502 N.E.2d 1003, 1004 (N.Y. 1986) (quoting Sabo v. Delman, 143 N.E.2d 906, 908 (N.Y. 1987)); see also Smehlik v. Athletes & Artists, Inc., 861 F. Supp. 1162, 1171 (W.D.N.Y. 1994). Others have declared that "a contract action cannot be converted to one for fraud merely by alleging that the contracting party did not intend to meets its contractual obligations." Rocanova v. Equitable Life Assurance Society of the U.S., 83 N.Y.2d 603, 614 (N.Y. 1994); accord Caniglia v. Chicago Tribune-New York News Syndicate, Inc., 612 N.Y.S.2d 146, 147 (App. Div. 1st Dep't 1994); Guterman v. RGA Accessories, Inc., 602 N.Y.S.2d 116, 117 (App. Div. 1st Dep't 1993); see also Cougar Audio, Inc. v. Reich, No. 99 Civ. 4498, 2000 WL 420546, at *6 (S.D.N.Y. April 18, 2000); Papa's-June Music, Inc. v. McLean, 921 F. Supp. 1154, 1162 (S.D.N.Y. 1996)

The Second Circuit has endeavored to resolve this apparent conflict, indicating that the latter line of cases represents the general principle, while the former are individual applications of this rule providing for certain exceptions:

To maintain a claim of fraud 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.
(citing Deerfield, 502 N.E.2d at 1004) (other citations omitted). Accordingly, although the general rule is that a fraud claim can not be based solely on allegations that a party did not intend to perform a contract, there are three ...

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