The opinion of the court was delivered by: BARBARA JONES, District Judge
On or about August 27, 2002, Plaintiff's filed suit in the Supreme
Court of the State of New York, County of New York, alleging common law
claims of fraud, conversion, and breach of contract. Plaintiff's seek in
excess of $300,000 damages for each of these claims and $1 million in
punitive damages for the alleged fraudulent activities of Defendants.
Pursuant to 28 U.S.C. § 1441, Defendants removed the action to this
Court on October 23, 2002.*fn1 On October 30, 2002, Defendants filed a
motion to dismiss
Plaintiff' Complaint against Defendants collectively, or against
Defendants Diane Warga-Arias and Henry Arias individually, pursuant to
Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim
upon which relief may be granted. For the reasons set forth below, this
motion is GRANTED in part and DENIED in part.
In early 2001, W.B. David began preliminary discussions with DWA
Communications, Inc. ("DWA), regarding a potential business arrangement.
(Compl. at ¶ 8). Dianne Warga-Arias, and Henry Arias are the alleged
principals of DWA (collectively "Defendants"). (Compl. at ¶¶ 4-5).
Under the alleged agreement, DWA would promote and market a trade
marketing association to be operated under the name "The Lending Jewelers
of the World" ("LJW"). Id.
On February 26, 2001, DWA submitted a project proposal to W.B. David
concerning the scope and anticipated costs of the promotion and marketing
project, named the "Phoenix Project". (Compl. at ¶ 10). In connection
with the proposal, Defendants made several alleged representations*fn2
to W.B. David and SJD (collectively "Plaintiff's"). Relying upon the
representations made by Defendants, Plaintiff's accepted the proposal and
services of Defendants. (Compl. at ¶ 11).
During the course of the engagement, SJD managed the day-today
operations of LJW and owned the LJW trademark. (Compl. at ¶ 9). Until
December 2001, W.B. David funded all the operations of LJW. (Compl. at
¶¶ 4-5). Defendants regularly billed Plaintiff's for expenses related
to, and work performed for, the Phoenix Project. (Compl. at ¶ 12).
Plaintiff's compensated Defendants for their services, and all
outstanding invoices were paid in full through the end of 2001.
Between February and April of 2002, the Defendants submitted over
$100,000 in invoices to Plaintiff's. Compl. at ¶ 13). Up until this
point, $750,000 had been paid to Defendants under the Phoenix Project.
(Compl. at ¶ 13). W.B. David became concerned that Defendants were
overcharging for services allegedly rendered, and that Defendants had not
performed several services claimed to have been provided. (Compl. at
¶ 14). Upon these suspicions, Plaintiff's hired an independent
accountant to audit the Phoenix Project and the LJW account. (Compl. at
Allegedly, the accountant's report indicated a number of billing
improprieties and inappropriate expenses.*fn3 Of particular concern,
Defendants allegedly charged Plaintiff's for a substantial
number of services that were not performed or undelivered,
including: conceptual design development, color print production, and web
site development. (Compl. at ¶ 16). In May of 2002, Plaintiff's
approached Defendants with the audited report, invited Defendants to
respond to the report and demanded adjustment to their account. (Compl.
at ¶ 17). To date, there has been no response to the substance of the
audited report. (Compl. at ¶ 18). As a result, Plaintiff's brought
suit for breach of contract, fraud and conversion.
When ruling on a Rule 12(b)(6) motion, a District Court must limit
its inquiry to the "facts stated in the complaint." High View Fund,
LP v. Hall, 27 F. Supp.2d 420, 424 (S.D.N.Y. 1998). The Court must
"accept all allegations contained in the complaint as true and draw all
reasonable inferences in favor of the nonmoving party." Sheppard v.
Beerman, 18 F.3d 147, 150 (2d Cir. 1994). However, "conclusory
allegations of the legal status of the defendants' acts need not be
accepted as true for the purposes of ruling on a motion to dismiss."
Frontier-Kemper Constructors, LLC v. American Rock Salt Co.
244 F. Supp.2d 520, 525 (W.D.N.Y. 2002). The Court's function is to assess
the legal feasibility of the complaint, but not to assay the weight of
the evidence that may be offered in support of the claim. American
Inc. v. Defonseca, 1996 U.S. Dist. LEXIS 9160 at *6
(S.D.N.Y. 1996). The motion shall not be granted unless "it appears
beyond doubt that the plaintiff can prove no set of facts in support of
his claim which will entitle him to relief." Conley v. Gibson,
355 U.S. 41, 45-46 (1957).
To state a claim for breach of contract under New York law, the
complaint must allege (1) the existence of a contract, (2) the
plaintiff's performance of his obligations thereunder, (3) the
defendant's failure to perform his obligations, and (4) resulting damages
to the Plaintiff. See Keady v. Nike, Inc.,
116 F. Supp.2d 428, 438 (S.D.N.Y. 2000); Coastal Aviation, Inc. v.
Commander Aircraft Co., 937 F. Supp. 1051 (S.D.N.Y. 1996).
Defendants contend that the Complaint fails to identify any of the
specific provisions of the parties' agreement which Defendants allegedly
breached, and that the Complaint fails to allege that Plaintiff complied
with their contractual obligations. (Def. Mem. at 4-7; Reply Mem. at
10-11). The Court finds these arguments unpersuasive, and denies
Defendants' 12(b)(6) motion to dismiss Plaintiff's' breach of contract
First, the Complaint properly pleads sufficient facts to establish the
existence of an implied-in-fact contract based upon the conduct of the
parties. "`An agreement implied in fact is founded upon a meeting of
[the] minds, which, although not embodied
in an express contract, is inferred, as a fact, from conduct of the
parties showing, in light of the surrounding circumstances, their tacit
understanding.'"Health & Community Living, Inc. v. Goldis
Financial Group, Inc., 1998 U.S. Dist. LEXIS 3069 at *12-13 (March
13, 1998)(quoting Hercules Inc. v. United States, 516 U.S. 417,
424 (1996)). The Complaint alleges that the Defendants' agreed to promote
and Market "LJW" by performing various services such as conceptual design
development, color print production, and web site development. (Compl. at
¶¶ 10-12, 16). Furthermore, the Complaint alleges that ...