J. Kaiser, for appellant.
Jean-Claude Mazzola, for respondents.
Kyle Connaughton appeals, as limited by his brief, from an
Appellate Division order affirming the dismissal of his
complaint under CPLR 3211(a)(7) for failure to state a cause
of action for fraudulent inducement against defendants
Chipotle Mexican Grill and its Chief Executive Officer,
Steven Ells. We affirm because plaintiff failed to adequately
plead compensable damages.
is a well-known chef who, prior to his employment with
Chipotle, was developing a concept for a ramen restaurant
chain. Plaintiff prepared a business plan and actively
pursued potential buyers until Ells showed interest in the
concept. Plaintiff then turned his efforts to developing
ideas specifically for Chipotle's restaurant platform.
Thereafter, Ells offered to purchase the concept, and
plaintiff, with the assistance of legal counsel, negotiated
an agreement whereby he would work on the restaurant design
for Chipotle with the title of Culinary Director based out of
New York City.
agreement expressly states that plaintiff's employment
was at-will, and that both plaintiff and Chipotle had the
right to terminate the contract at any time without notice or
cause. The agreement details plaintiff's compensation.
Chipotle agreed to pay plaintiff an annual salary of $150,
000, and monthly car and housing allowances totaling $2, 700.
Plaintiff was also eligible for a merit bonus, increased
salary, and a defined number of shares in Chipotle stock,
which vested based on years of uninterrupted employment. Some
stocks were scheduled to vest after two years, and another
set would vest after plaintiff reached his three-year
anniversary with Chipotle.
diligently worked to develop the ramen restaurant concept
with Chipotle, and traveled widely to perfect his ideas and
to purchase equipment and proprietary systems. In preparation
for the launch of the flagship restaurant, Chipotle promoted
the hiring of plaintiff as its new high-level chef. Plaintiff
appeared in various widely-circulated and noted publications,
spoke to journalists, and attended Chipotle-sponsored events
to help market Chipotle restaurant brands.
seemed to be going well and, in accordance with the
agreement, plaintiff received his annual salary, monthly
allowances, a first year-end bonus, and first set of vested
stock. It appeared that defendants were on schedule to launch
the restaurant in New York City by the end of plaintiff's
third year of employment. However, things took a very
plaintiff was working on staffing for the new restaurant, he
learned from Chipotle's Chief Marketing Officer (CMO)
that Ells had a non-disclosure agreement (NDA) with another
well-known chef, who previously worked with defendants on a
ramen restaurant concept, similar in both purpose and design
to the one defendants contracted plaintiff to develop. The
prior project fell apart when that chef and defendants failed
to agree on financial terms. Defendants remained subject to
the NDA with the other chef. Chipotle's CMO confided in
plaintiff that the chef would sue under the NDA if Chipotle
opened the ramen restaurant. Plaintiff further alleged that
defendants converted, without authorization, the other
chef's design for what became the Washington, D.C.
flagship restaurant for one of Chipotle's other brands.
plaintiff confronted Ells about the NDA, Ells told him to
continue with the work on the ramen restaurant, but plaintiff
refused. Soon thereafter, Ells fired plaintiff.
relevant to this appeal, plaintiff sued defendants for
fraudulent inducement . Plaintiff claimed that by virtue of
his reasonable reliance on Ells' omissions about the
business arrangement with the other chef, defendants
fraudulently induced him to work for Chipotle and to share
his restaurant concept to his detriment. He alleged that he
would not have entered into the agreement with defendants had
he known about the prior business arrangement. He further
asserted that the ideas the Chipotle staff contributed to
plaintiff's design for the restaurant concept actually
belonged to the other chef, and that using those ideas to
launch plaintiff's project would subject plaintiff to
legal action. Plaintiff claimed he was "damaged in an
amount to be determined at trial, including, but not limited
to, the value of his Chipotle equity and lost business
opportunities in connection with his ramen concept." He
further requested compensatory and punitive damages in
amounts to be determined at trial, as well as attorneys fees
moved to dismiss the complaint under CPLR 3211(a)(1) based on
the documentary evidence that established plaintiff's
at-will employment status, and under 3211(a)(7) for failure
to state a cause of action. Defendants argued, in part, that
a cause of action for fraudulent inducement may be maintained
only where a party has suffered out-of-pocket pecuniary loss,
not, as in plaintiff's case, where damages are
speculative or consist of lost business opportunities.
Court granted the motion and the Appellate Division affirmed
with two justices dissenting (135 A.D.3d 535');">135 A.D.3d 535 [1st Dept
2016]). The majority held that plaintiff's damages were
speculative and the facts alleged did not support an
inference of calculable damages. The dissent concluded that
because the pleading must be construed liberally and damages
need not be proven during the pleading stage, the case should
proceed to discovery to allow plaintiff to accumulate
evidence of a pecuniary loss. ...