The opinion of the court was delivered by: HAROLD BAER, JR., District Judge[fn1] [fn1] Etienne Dor, a Spring 2004 intern in my Chambers and a second-year law student at New York Law School, provided substantial assistance in the research and drafting of this Opinion.
Defendant Kids International Corp. ("Kids") moves pursuant to Federal
Rules of Civil Procedure ("Fed.R. Civ. P.") 9(b) and 12(b)(6) to dismiss
Count II of plaintiff's amended complaint ("Am. Compl."). Defendant
contends that plaintiff N.B. Garments (PVT.) Ltd. ("NB Garments") failed
to plead with sufficient particularity the elements necessary to states
cause of action for common law fraud. Kids further asserts that NB
Garments failed to make out a claim for common law fraud. For the
foregoing reasons, Kids' motion is granted.
This case arises out of a dispute between NB Garments, an apparel
manufacturer with its operations in Nepal, and Kids, an apparel importer
and wholesaler, based in New York. NB Garments alleges that on or about
January 30, 2002, it shipped orders of apparel worth approximately
$338,000.00 from Calcutta, India to Kids' in Long Beach, California. At
NB Garments' request, to facilitate such transaction, Kids opened a
letter of credit to the Nepal Bangladesh Bank through the Bank of New
York ("BNY") naming BNY as consignee*fn2 on the
bill of lading.*fn3 Am. Compl. ¶ 2.
NB Garments alleges that in March 2002, it issued five invoices to Kids
encompassing the entire $338,000.00 order.*fn4 According to NB
Garments, Kids never contested these invoices. Am. Compl. ¶ 18. NB
Garments asserts that on or about March 30, 2002, Kids instructed its
agent, Orient Consolidation Service (H.K.) Ltd. ("OCS"), a customs
broker, to draft the bill of lading and freight receipt, to reflect the
consignee's name as "Kids International, Corp." instead of BNY, for the
express purpose of inducing BNY to deliver the goods to Kids. Am. Compl.
¶¶ 12-14. Furthermore, the amended complaint alleges that BNY relied
on this alteration and delivered the goods to Kids' agent, OCS. Am.
Compl. ¶¶ 15-18, 24. NB Garments claims that Kids has refused to pay
for the goods despite repeated demands. Am. Compl. ¶¶ 18-19. Count II
of the amended complaint alleges that by instructing its agent to falsify
the bill of lading and freight cargo receipt, Kids "perpetrated a fraud."
Am. Compl. ¶ 24.
NB Garments filed its complaint in this action on October 10, 2003
seeking, inter alia compensatory and punitive damages and
reasonable attorneys' fees stemming from Kids' alleged fraud. On December
31, 2003, Kids' current motion to dismiss was fully-briefed.
A. Sufficiency of Pleading
A Fed.R.Civ.P. 12(b)(6) motion should not be granted "unless it
appears beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief." Ad-Hoc Comm.
of Baruch Black & Hispanic Alumni Ass'n. v. Bernard M. Baruch
College, 835 F.2d 980, 982 (2d Cir. 1987), citing Conley v.
Gibson, 355 U.S. 41,45-46 (1957). Pursuant to Rule 9(b), "[in] all
averments of fraud and mistake, the circumstances constituting fraud or
mistake shall be stated with particularity. Malice, intent, knowledge,
and other condition of mind of a person may be averred generally."
Therefore, "a complaint must adequately specify the statements it claims
were false or misleading, give particulars as to how the statements were
fraudulent, state when and where the statements were made, and identify
those responsible for the statements." Cosmas v. Hassett,
886 F.2d 8, 11 (2d Cir. 1989); see also DiVittorio v. Equidyne
Extractive Indus., Inc., 822 F.2d 1242, 1247 (2d Cir. 1987);
Hudson v. Larouche, 579 F. Supp. 623, 628 (S.D.N.Y 1983).
The requirement that the pleadings for fraud be stated with sufficient
particularity is relaxed under certain circumstances, including
situations when (a) "[t]he pleader is asserting that third persons have
been defrauded, and (b) "when facts are peculiarly within the opposing
party's knowledge." Segal v. Gordon, 467 F.2d 602, 607 (2d. Cir.
1972). See also Dominicus American Bohio v. Gulf & Western
Indus., Inc., 473 F. Supp. 680, 693 (S.D.N.Y. 1979) (When plaintiff
is claiming damages resulting from defendant's misrepresentation to a
third-party and the circumstances surrounding such transaction are
peculiarly within defendant's knowledge, the particularity requirement
will be relaxed). When the standard is relaxed, the allegations may be
pled based on information and belief, but "must be accompanied by a
statement of the facts upon which the belief is founded." Id.
"However, even the so-called relaxed standard does not eliminate the
particularity requirement, although we recognize that the degree of
particularity required should be determined in light of such
circumstances as whether the plaintiff has had an opportunity to take
discovery of those who may possess knowledge of the pertinent facts., A
complaint . . . which fails to adduce any specific facts supporting an
inference of knowledgeable participation in the alleged fraud, will not
satisfy even a relaxed standard." Devaney v. Chester,
813 F.2d 566, 569 (2d Cir. 1987).
In order to sustain a cause of action for common law fraud, the
plaintiff must establish with sufficient particularity that the defendant
"(1) made a material false statement; (2) knowing that the statement was
false; (3) acting with intent to defraud; that plaintiff (4) reasonably
relied on the false representation and (5) suffered damage proximately
caused by the defendant's actions." Morris v. Castle Rock Entm't,
Inc., 246 F. Supp.2d 290, 296 (S.D.N.Y, 2003). In this case, while
the relaxed pleading standard is applicable because NB Garments is
asserting that a third-party has been defrauded (Segal, 467 F.2d
at 607), NB Garments' amended complaint fails even this less rigorous
The amended complaint asserts only that (1) on or about March 30, 2002,
at the instruction of Kids, OCS altered the bill of lading and freight
cargo receipt to reflect Kids,
instead of BNY, as consignee (Am. Compl. ¶ 12), (2) the bill of
lading conflicts with the letter of /credit, which properly names BNY as
the true consignee (Am. Compl. ¶ 10), (3) Kids "caused the
alternation to be done without the knowledge, authorization or consent of
NB Garments" (Am. Compl. ¶ 13), (4) the alteration "was done for the
purpose of inducing the Bank of New York to deliver the goods to Kids
International" (Am. Compl. ¶ 14), (5) BNY delivered the goods to OCS,
as Kids' agent (Am. Compl. ¶ 15), (6) Kids eventually received the
goods and the invoices issued by NB Garments (Am. Compl. ¶ 17), and
(7) Kids never "protest[ed] those invoices or raise[ed] any defense with
respect to the quality of the goods" but has refused to pay for the goods
"despite due demand" (Am. Compl. ¶¶ 18-19). Notably, with respect to
the fraud claim, the complaint fails, among other things, to (1) identify
the specific individual within Kids who instructed "OCS", an entity, to
alter the bill of lading and cargo receipt, (2) identify the specific
individual within OCS who received this instruction and actually
performed the alteration, (3) provide the circumstances by which "Kids"
convinced "OCS" to alter the document, or (4) explain where or how the