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STAMELMAN v. FLEISHMAN-HILLARD

United States District Court, S.D. New York


July 29, 2004.

PETER STAMELMAN, Plaintiff,
v.
FLEISHMAN-HILLARD, INC., Defendant.

The opinion of the court was delivered by: SHIRA SCHEINDLIN, District Judge

OPINION AND ORDER

I. INTRODUCTION

  Peter Stamelman brings this action against his former employer, Fleishman-Hillard, Inc. ("Fleishman"), alleging that Fleishman fraudulently induced him to accept employment with the company.*fn1 Fleishman now moves for summary judgment.

  II. BACKGROUND

  A. The Facts*fn2

  Fleishman is an international public relations agency with twenty-one offices in the United States. Stamelman has worked in the entertainment industry for almost thirty years, and has held positions at The Economist Group, Creative Artists Agency, ABC Television, The Arts and Entertainment Network, Showtime Networks, and various talent agencies throughout the United States and Europe. Before working for Fleishman, Stamelman was a Vice President at TBWA Entertainment, a division of TBWA/Chiat Day, which is a major advertising agency. Fleishman and TBWA are both subsidiaries of the Omnicom Group.*fn3

  While working for TBWA, Stamelman worked with Fleishman employee Kate Childress on a New Jersey anti-tobacco campaign from January through April 2001.*fn4 Stamelman left TBWA on or about June 1, 2001.*fn5

  Prior to Stamelman's departure from TBWA, Childress suggested that Stamelman talk to Fleishman employees Peter Verrengia and Eric Blinderman about developing an entertainment capability within Fleishman. Stamelman proposed to Blinderman that Fleishman hire him to offer entertainment-based services to Fleishman clients. For example, Stamelman offered to secure celebrity spokespersons for public relations campaigns.*fn6

  Blinderman discussed the idea with Verrengia and Fleishman employee Nancy Seliger, and Stamelman eventually met with Verrengia and Seliger. Stamelman testified that he told Verrengia and Seliger that the new capability would require: (1) "buy in" from Fleishman, that is, Fleishman employees who would propose the new service to existing clients; (2) "buy-in" from clients, that is, an opportunity to present his ideas and services to senior executives at Fleishman's client companies; (3) a travel budget; and (4) a grace period of one year before the new capability would become a profit center for Fleishman.*fn7

  Seliger told Stamelman that clients had expressed interest in entertainment-based projects. Verrengia and Seliger also represented that it would not be a problem for Stamelman to meet with clients' senior management, that he would be able to travel, and that the year-long grace period sounded reasonable.*fn8 On June 12, 2001, Verrengia sent an e-mail to Bill Anderson, a Fleishman Regional President, asking permission to hire Stamelman to set up the entertainment capability. "We are happy to host, incubate, and pay for this experiment in [New York]," he wrote, "but if it's going to work in a significant way, this ultimately has to be a category for the firm as a whole to embrace."*fn9 Anderson responded that Verrengia was free to hire Stamelman.*fn10

  On June 15, 2001, Verrengia sent Stamelman a standard employment offer letter ("the Offer Letter"). Stamelman did not sign the letter because it did not reflect the requirements that Stamelman felt he needed in order to succeed at Fleishman. However, Stamelman verbally accepted Fleishman's offer, and began working for Fleishman on June 19, 2001.*fn11

  During his first few months of employment at Fleishman, Stamelman worked on a business plan and presentation to introduce the new entertainment service to Fleishman offices and clients. Stamelman completed this presentation at the end of August. Blinderman decided that he and Stamelman would travel to Fleishman offices around the United States after Labor Day. Fleishman issued a press release announcing the arrival of Stamelman and the new capability on September 10, 2001.*fn12

  After the terrorist attacks of September 11, 2001, Fleishman experienced financial setbacks. The firm instituted a temporary, company-wide policy that precluded employees from making travel arrangements that were not billable to a specific client. Thus, Stamelman was unable to travel to firm offices throughout the country.*fn13

  Though Stamelman tried to present some of his entertainment ideas to Fleishman's clients, the Fleishman employees who were responsible for servicing those clients ("gatekeepers") did not feel that Stamelman offered ideas that their clients could afford, given the post-September 11th economic climate.*fn14 Fleishman itself cut salaries, including Stamelman's, and laid off several senior employees, as it tried to recover from its own financial losses.*fn15 Ultimately, Fleishman decided that it could no longer afford to experiment with developing the new entertainment service and terminated Stamelman on May 27, 2002.*fn16

  Stamelman filed suit against Fleishman on October 18, 2002, alleging breach of contract and fraudulent inducement. On July 30, 2003, I granted Fleishman's motion to dismiss Stamelman's claims without prejudice.*fn17 As a result, Stamelman filed an amended complaint asserting only fraudulent inducement. Fleishman again moved to dismiss, and I denied Fleishman's second motion.*fn18 Fleishman now moves for summary judgment.

  B. The Allegations

  Stamelman contends that Fleishman never intended to develop an entertainment capability,*fn19 but hired Stamelman in order to usurp his celebrity contacts.*fn20 He alleges that Fleishman employees fraudulently induced him to enter into an employment agreement by intentionally misrepresenting existing facts.*fn21 Specifically, Stamelman asserts that Verrengia and Seliger misrepresented that Fleishman employees throughout the firm were enthusiastic about, and willing to implement, Stamelman's proposed entertainment capability — in other words, Stamelman alleges that Fleishman misrepresented that there was "buy in" from its employees.*fn22

  Stamelman also insists that Seliger and Verrengia misrepresented that Seliger could arrange for Stamelman to meet with the senior-level management of Fleishman's clients.*fn23 Stamelman testified, however, that he does not know whether Seliger actually has senior-level client contacts.*fn24 Stamelman also attests that although he was promised that he could meet with senior executives, Fleishman gatekeepers shut Stamelman out of key meetings with those clients.*fn25

  Because Stamelman has offered no evidence to support his allegations, he cannot defeat Fleishman's motion for summary judgment.

  III. LEGAL STANDARD

  A. Summary Judgment Summary judgment is permissible "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law."*fn26 "An issue of fact is `genuine' if `the evidence is such that a jury could return a verdict for the nonmoving party.'"*fn27 "A fact is `material' for these purposes if `it might affect the outcome of the suit under the governing law.'"*fn28

  The party seeking summary judgment has the burden of demonstrating that no genuine issue of material fact exists.*fn29 Accordingly, the non-moving party can defeat summary judgment by raising a genuine issue of material fact. However, she "must do more than simply show that there is some metaphysical doubt as to the material facts,"*fn30 and she "may not rely on conclusory allegations or unsubstantiated speculation."*fn31 Rather, the non-moving party must produce admissible evidence that supports her pleadings.*fn32

  "If the moving party carries its preliminary burden, the opposing party may not defeat the motion by relying on the contentions of its pleading."*fn33 "The mere existence of a scintilla of evidence' supporting the non-movant's case is . . . insufficient to defeat summary judgment."*fn34 "General allegations which may have been sufficient to state a cause of action in the complaint [may] become insufficient once opposed by a motion for summary judgment."*fn35

  B. Fraudulent Inducement*fn36

  To prevail on a claim of fraudulent inducement, a plaintiff must show: (1) a representation of material fact; (2) falsity; (3) scienter; (4) reasonable reliance; and (5) injury.*fn37 Because an action based on fraud differs from an action based on breach of contract, a plaintiff alleging fraud must do more than show that the defendant failed to do what she promised. "The failure to fulfill a promise to perform future acts is not ground for a fraud action unless there existed an intent not to perform at the time the promise was made."*fn38

  With respect to the first element, the New York Court of Appeals has distinguished between "promissory statements as to what will be done in the future," which give rise only to a breach of contract claim, and "false representations of fact," which give rise to a separable claim of fraudulent inducement.*fn39 A claim of fraudulent inducement may be based on a promise of future action if that promise "was actually made with a preconceived and undisclosed intention of not performing it."*fn40 However, the fraud alleged must relate to a promise that is "the inducement for the contract" itself.*fn41 The reason for this requirement is that "a contract action cannot be converted to one for fraud merely by alleging that the contracting party did not intend to meet its contractual obligations."*fn42

  III. DISCUSSION

  Stamelman's breach of contract claim was previously dismissed because Stamelman admitted that he had verbally accepted the terms in the Offer Letter when he agreed to work for Fleishman. That letter contained none of the promises that Stamelman alleges Fleishman failed to keep, and it contained an employment-at-will clause. Further, the parol evidence rule barred Stamelman from arguing that the Offer Letter did not express the terms of a fully integrated agreement.*fn43

  Thus, Stamelman now alleges only fraudulent inducement, claiming that he relied on intentional misstatements and false promises when he agreed to work for Fleishman.*fn44 Stamelman alleges that Fleishman misrepresented existing fact when it told Stamelman that it had secured "buy in" from other Fleishman offices.*fn45 He asserts that Fleishman never intended to keep its future promises to allow Stamelman one year to develop the capability, to travel to other Fleishman offices, and to meet with senior executives at client companies.*fn46 For the following reasons, each of Stamelman's claims fails.

  A. "Buy In" from Fleishman

  Stamelman insists that Verrengia misrepresented that Fleishman employees in other offices were supportive of Stamelman's hire and proposed project.*fn47 Stamelman states that Verrengia gave him the impression that he had spoken to people throughout the firm about the entertainment capability.*fn48 Specifically, Stamelman testified that Verrengia said that he had "run [the concept] up the flagpole, and people had saluted."*fn49 Viewing the evidence in the light most favorable to the non-moving party, I shall assume that Verrengia did, in fact, represent to Stamelman that he had received "buy in" from other Fleishman offices. However, Stamelman has not alleged, and cannot prove, that the statement made by Verrengia was actually false. It is undisputed that Verrengia contacted Fleishman employees to discuss Stamelman's potential hire. In his June 12, 2001, e-mail to Bill Anderson, Verrengia wrote that he had discussed Stamelman's hire with Doug Michelman, the Regional President responsible for the West Coast, who had expressed interest in "collaborating actively" with Stamelman.*fn50 Verrengia did not state how many people had "saluted." Stamelman admits that Verrengia did seek approval for his hire from several Fleishman employees in other offices.*fn51 While Stamelman may have assumed that Verrengia had spoken to more Fleishman employees, his assumption does not transform Verrengia's statement into a misrepresentation.

  Because Verrengia did not falsely represent to Stamelman that "people had saluted," the Court need not inquire whether Verrengia intended to misrepresent the level of Fleishman "buy in," or whether Stamelman relied on this misrepresentation and was injured because of this reliance.

  B. "Buy In" from Clients

  Stamelman alleges that at the time Fleishman made its promise of client "buy in," it did not intend to allow him to meet with senior management at its client companies.*fn52 Stamelman asserts that he was promised "a place at the table" with clients' senior-level executives.*fn53 These representations were false, as Stamelman was not given a real opportunity to present his ideas to clients.*fn54

  However, Fleishman insists that it did intend to allow Stamelman to meet with clients when it represented that he would have a place at the table.*fn55 According to Fleishman, Stamelman was ultimately unable to present his ideas to clients because its gatekeepers decided that Stamelman's proposed projects were inappropriate for their clients.*fn56 Verrengia never promised Stamelman that he would not have to seek the approval of Fleishman gatekeepers in order to meet with clients.

  Stamelman does not dispute that Fleishman gatekeepers prevented him from speaking with clients,*fn57 or that he would have been able to meet with clients if the gatekeepers had approved his proposals. Stamelman's only "proof" of Fleishman's fraudulent intentions is the fact that the client meetings never took place.*fn58 However, failure to fulfill a promise, standing alone, is insufficient to prevail on a claim of fraudulent inducement.*fn59

  C. Promises of Travel Budget and One-Year Grace Period

  Finally, Stamelman alleges that Fleishman never intended to allow him to travel, or to employ him for one year, as it had promised him.*fn60 Although Fleishman insists that "no particulars were discussed," Fleishman admits that it made these promises to Stamelman.*fn61 Fleishman further claims that it intended to fulfill these promises, but the events of September 11th forced the company to cut back on expenses.*fn62 Fleishman asserts that, after September 11th, it did not subsidize any employee's travel expenses, and that it reduced salaries and laid off several people, including Stamelman.*fn63 Stamelman does not deny that Fleishman implemented a company-wide ban on subsidized travel, nor does he claim that he was the only employee to be laid off when Fleishman suffered financial losses as a result of September 11th.*fn64 He simply bases his conclusion that Fleishman did not intend to keep its promises, and did not seriously intend to start an entertainment capability, on "the fact that it never happened."*fn65

  IV. CONCLUSION

  As noted, allegations of non-performance are not legally sufficient to support a fraud claim. Because Stamelman has not shown that Fleishman did not intend to keep its promises at the time they were allegedly made, Fleishman's claim of fraudulent inducement must fail. Accordingly, Fleishman's motion for summary judgment is granted. The Clerk of the Court is instructed to close this motion [docket # 22] and this case. SO ORDERED:


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