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Arnold Chevrolet LLC v. Tribune Co.

September 17, 2007

ARNOLD CHEVROLET LLC, ET AL., PLAINTIFFS,
v.
TRIBUNE COMPANY, NEWSDAY, INC., AND STALUPPI HOLDING COMPANY, INC., DEFENDANTS.



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

MEMORANDUM AND ORDER

Plaintiffs Arnold Chevrolet LLC, et al. ("Plaintiffs") filed the instant action alleging that, inter alia, defendants Newsday, Inc. ("Newsday") and Tribune Company ("Tribune") (collectively, "Defendants") engaged in a fraudulent advertising scheme whereby they made false representations regarding Newsday's circulation volume. Plaintiffs allege that as a direct result of Defendants' fraudulent scheme, Plaintiffs paid more for placing advertisements in Newsday than they would have otherwise. Defendants move to dismiss counts eleven and thirteen of the Revised Second Amended Complaint ("RSAC") pursuant to Federal Rules of Civil Procedure ("Rules") 12(b)(6) and 9(b). For the reasons that follow, Defendants' motions are granted and Plaintiffs' claims are dismissed without prejudice to replead consistent with this decision.

BACKGROUND

The background of this case is set forth in the Court's prior Order, dated March 2, 2006, familiarity with which is assumed. Thus, the Court will state only the facts necessary for disposition of the instant motion.

Newsday is "the most widely circulated and read daily newspaper in Nassau and Suffolk Counties, the two counties which comprise that area of New York known as Long Island." (RSAC ¶ 11.) Plaintiffs are owners and operators of automobile dealerships on Long Island who purchased newspaper advertising from Newsday for publication in its newspaper. (Id. ¶¶ 5, 16.) The ads ran from September 1995 through July 30, 2004. (Id. ¶ 16.)

Plaintiffs commenced this action on July 21, 2004 and filed a First Amended Complaint on August 23, 2006. In their First Amended Complaint, Plaintiffs asserted claims for, inter alia, common law fraud and negligent misrepresentation against Defendants, alleging that "Newsday falsified the circulation volumes it reported to [an independent auditing company known as] ABC."*fn1 (Mar. 2, 2006 Order at 2.) Defendants moved to dismiss both claims, "argu[ing] that Plaintiffs fail[ed] to state a claim for fraud because the alleged misrepresentations were not made by Tribune or Newsday to Plaintiffs; rather they were made to . . . ABC." (Id. at 25.) The Court denied Defendants' motion to dismiss the fraud claim, finding that New York law permits recovery for misrepresentations made to third parties under limited circumstances. (Id. at 25-26.)

As to Plaintiffs' negligent misrepresentation claim, the Court rejected Defendants' argument that Plaintiffs had not alleged facts which would create a special relationship among the parties and held that Plaintiffs had "sufficiently alleged a relationship of privity or of that approaching privity between Plaintiffs and Newsday." (Id. at 28.) Plaintiffs were granted leave to amend with regard to several other claims.

On April 3, 2006, Plaintiffs filed a Second Amended Complaint. Thereafter, pursuant to a stipulation entered on April 28, 2006, Plaintiffs filed their RSAC.

The RSAC alleges that "beginning in or about August 1995" (RSAC ¶ 25), the rates Plaintiffs paid Newsday for advertising were based on artificially inflated circulation figures represented by Newsday and its distributors to ABC. (Id. ¶ 19.) "The greater the circulation, the higher the rate charged to advertisers such as Plaintiffs." (Id.) As a result, Plaintiffs claim to have paid "a much higher advertising fee" than they should have. (Id. ¶ 226.) Plaintiffs' eleventh cause of action asserts claims for fraud and conspiracy to defraud based upon Newsday's alleged false representations to Plaintiffs and/or their agents, viz. "certain advertising agencies that were responsible for placing in Newsday automotive advertisements [o]n behalf of their plaintiff clients." (Id. ¶ 218.) This claim also asserts that Tribune conspired with Newsday to defraud Plaintiffs. (Id. ¶¶ 223-25.) The thirteenth cause of action asserts a claim of negligent misrepresentation against Newsday only.

Newsday now moves to dismiss counts eleven and thirteen of the RSAC, arguing that both claims fail to comply with Rules 12(b)(6) and 9(b). Tribune moves to dismiss count eleven under the same Rules. For the reasons stated below, their motions are granted and Plaintiffs are granted leave to amend consistent with the following.

DISCUSSION

I. Motion to Dismiss: Legal Standards

Rule 8(a) provides that a pleading shall contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Supreme Court recently clarified the pleading standard applicable in evaluating a motion to dismiss under Rule 12(b)(6). In Bell Atl. Corp. v. Twombly, -- U.S.--, 127 S.Ct. 1955 (2007), the Court disavowed the well-known statement in Conley v. Gibson, 355 U.S. 41 (1957) that "a complaint should not be dismissed for failure to state a claim 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." Id. at 45-46. The Twombly Court stated that this language "is best forgotten as an incomplete, negative gloss on an accepted pleading standard: once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." 127 S.Ct. at 1969. Instead, to survive a motion to dismiss under Twombly, a plaintiff must allege "only enough facts to state a claim to relief that is plausible on its face." Id. at 1274.

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).

Id. at 1964-65 (citations and internal quotation marks omitted).

The Second Circuit has stated that Twombly does not require a universally heightened standard of fact pleading, but "instead requir[es] a flexible 'plausibility standard,' which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible." Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007). In other words, Twombly "'require[s] enough facts to 'nudge[plaintiffs'] claims across the line from conceivable to plausible.'" In re Elevator Antitrust Litig., -- F.3d --, No. 06-3128-CV, 2007 WL 2471805, at *2 (2d Cir. Sept. 4, 2007) (quoting Twombly, 127 S.Ct. at 1974)).*fn2 As always, the Court must "accept[] all factual allegations in the complaint and draw[] all reasonable inferences in the plaintiff's favor." ATSI Commcn's, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).

II. Defendants' Motion is Not Barred By Rule 12(g)

Plaintiffs argue that Defendants' motion should be denied because Defendants waived the right to invoke Rule 9(b) by failing to raise it in their initial motion to dismiss. Plaintiffs' argument is premised upon Rule 12(g), which precludes the filing of motions that raise arguments that a party did not raise at the first available opportunity. Plaintiffs' contention is without merit.

Rule 12(g) provides in pertinent part:

If a party makes a motion under this rule but omits therefrom any defense or objection then available to the party which this rule permits to be raised by motion, the party shall not thereafter make a motion based on the defense or objection so omitted, except a motion as ...


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