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NO OUT-OF-POCKET LOSS ALLEGED, FRAUDULENT INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION.

The Court of Appeals, in a full-fledged opinion by Judge Rivera, determined plaintiff chef’s failure to allege out-of-pocket loss in this fraudulent inducement action required dismissal of the complaint for failure to state a cause of action. Plaintiff was hired by defendant restaurant (Chipotle) to develop a ramen restaurant chain. Plaintiff was an at will employee by the terms of his contract. All went well until plaintiff was told defendant had contracted with another chef for the same service, the deal had fallen apart, and the other chef would sue upon the opening of the ramen restaurant. Plaintiff was fired after confronting defendant about the deal with the other chef. Plaintiff alleged he was fraudulently induced to contract with Chipotle in that he never would have entered the agreement had he been informed of the failed deal with the other chef:

In New York, as in multiple other states, “‘[t]he true measure of damage is indemnity for the actual pecuniary loss sustained as the direct result of the wrong’ or what is known as the ‘out-of-pocket’ rule” … . Under that rule, “[d]amages are to be calculated to compensate plaintiffs for what they lost because of the fraud, not to compensate them for what they might have gained . . . . [T]here can be no recovery of profits which would have been realized in the absence of fraud” … . Moreover, this Court has “consistent[ly] refus[ed] to allow damages for fraud based on the loss of a contractual bargain, the extent, and indeed . . . the very existence of which is completely undeterminable and speculative” … . Connaughton v Chipotle Mexican Grill, Inc., 2017 NY Slip Op 03445, CtApp 5-2-17

FRAUD (NO OUT-OF-POCKET LOSS ALLEGED, FRAUDULENT INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION)/CONTRACT LAW (FRAUDULENT INDUCEMENT, NO OUT-OF-POCKET LOSS ALLEGED, FRAUDULENT INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION)/FRAUDULENT INDUCEMENT (CONTRACT LAW, NO OUT-OF-POCKET LOSS ALLEGED, FRAUDULENT INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION)/EMPLOYMENT LAW (FRAUDULENT INDUCEMENT, CONTRACT LAW, NO OUT-OF-POCKET LOSS ALLEGED, FRAUDULENT INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED FOR FAILURE TO STATE A CAUSE OF ACTION)

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