United States District Court, S.D. New York
RUSSELL PUBLISHING GROUP, LTD. and JANE RUSSELL, Plaintiffs,
BROWN PRINTING COMPANY, Defendant.
Richard Pu, Esq., Richard Pu, P.C., New York, New York. For Plaintiffs.
John Siegal, Esq., Sammi Malek, Esq., Stephen Langston Ball, Esq., Baker & Hostetler LLP (NYC), New York City, New York. For Brown:
OPINION AND ORDER
SHIRA A. SCHEINDLIN, District Judge.
Magazine publisher Russell Publishing Group, Ltd. ("RPG") and its proprietor, Jane Russell, bring this suit against RPG's printer, Brown Printing Company ("Brown") based on a billing dispute between RPG and Brown. Plaintiffs allege that Brown overbilled RPG for various services from 2007 through 2012, and bring multiple causes of action, including: (1) breach of contract; (2) breach of the covenant of good faith; (3) fraud; (4) breach of fiduciary duty; and (5) conversion. Plaintiffs also bring an action for an accounting. Russell seeks emotional distress damages on the tort claims. Brown moves to dismiss every cause of action except RPG's breach of contract claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Brown also argues that all claims must be dismissed as to Russell because she lacks standing to bring these claims in her individual capacity. For the reasons stated below, the motion to dismiss is GRANTED.
In January 2007, RPG and Brown entered into a five-year contract (the "Printing Agreement") under which Brown was to provide printing services for RPG's three magazines. The Printing Agreement grants Brown an interest in RPG's undelivered magazines as collateral security for payment owed to Brown. Under the Printing Agreement, if a payment dispute was not resolved within thirty days, RPG agreed "to pay the disputed amount in escrow to [Brown] or to a mutually accepted third party." Prices set forth in the Agreement for materials purchased by Brown were subject to adjustment based on any change in Brown's costs. Also, work commenced after January 16, 2010 was subject to adjustment by fifty percent of the increase or decrease in the Consumer Price Index. The Printing Agreement states that Brown's "failure to give timely notice of any price change set forth in [the Printing Agreement] shall not constitute a waiver by [Brown] of its right to charge prices in accordance with [the Printing Agreement]." Finally, the Printing Agreement specifies that disputes will be governed by New York law.
Through a series of billing errors, Brown overcharged RPG by $193, 706.78. Plaintiffs allege that, among other things, Brown changed the configuration of RPG's magazines in a way that raised costs, sold paper to RPG without disclosing that it could have been purchased more cheaply, and billed for services that were never provided. In an August 10, 2012 email, Brown's president acknowledged "some mistake in the book layout and billing" from 2008 through 2012, and offered RPG a credit of approximately $74, 000. When offering this credit, Brown itemized its billing errors, allegedly admitting that it failed to provide the most economical paper stock and book configuration, charged storage fees in excess of the amounts agreed upon in the Printing Agreement, and mistakenly billed for transportation. Because the parties could not resolve their billing dispute, RPG refused to pay certain invoices and Brown subsequently refused to release RPG's magazines for distribution.
Plaintiffs contend that Brown's overbilling was part of a fraudulent scheme engineered by one of Brown's owners. They allege that because the printing industry is in financial trouble, because of the pervasiveness of the billing errors, and because Brown "knew what it was permitted to bill" based on the Printing Agreement, overbilling could not have been accidental. They further allege that Brown "held itself out as... an advisor, " "encouraged customers to rely on [its] superior knowledge, " and "sought to foster a close and confidential relationship [with RPG]." Plaintiffs allege that Brown undertook to act as an advisor by offering price quotes to RPG before the parties had entered into a contract and by providing suggestions related to various printing and shipping services over the life of the Printing Agreement.
III. LEGAL STANDARD
A. Motion to Dismiss
In deciding a motion to dismiss under Rule 12(b)(6), the court must "accept all factual allegations in the complaint as true and draw all reasonable inferences in plaintiff's favor." The court evaluates the sufficiency of the complaint under the two-pronged approach announced by the Supreme Court in Ashcroft v. Iqbal . Under the first prong, a court may "begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Thus, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."
Under the second prong, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief." A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." "The plausibility standard is not akin to a ...