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CONTRACT ALLEGATIONS DUPLICATED FRAUD ALLEGATIONS, FRAUD CAUSE OF ACTION SHOULD HAVE BEEN DISMISSED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Friedman, over a dissenting opinion, determined the fraud cause of action should have been dismissed as duplicative of the breach of contract cause of action. The action is between two telecommunications companies. The allegations involve the responsibility for payment for fraudulent phone calls. Plaintiff (Cronos) alleged the contract required defendant (XComIP) to indemnify it for fraudulent calls. The complaint stated a cause of action for breach of contract. However, the fraud allegations were based on speculation about defendant’s intent, i.e., that defendant entered into the contract with the intention to avoid paying for fraudulent calls:

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Cronos’s fraud cause of action falls short under the principle that a fraud claim is not stated by allegations that simply duplicate, in the facts alleged and damages sought, a claim for breach of contract, enhanced only by conclusory allegations that the pleader’s adversary made a promise while harboring the concealed intent not to perform it. This Court has held numerous times that a fraud claim that “ar[ises] from the same facts [as an accompanying contract claim], s[eeks] identical damages and d[oes] not allege a breach of any duty collateral to or independent of the parties’ agreements” is subject to dismissal as “redundant of the contract claim”… . Thus, where a fraud claim was supported by allegations that the defendants had “misrepresented . . . their intentions with respect to the manner” in which they would perform their contractual duties, we dismissed the fraud claim as duplicative of the plaintiffs’ contract claim because the fraud claim was “based on the same facts that underlie the contract cause of action, [was] not collateral to the contract, and d[id] not seek damages that would not be recoverable under a contract measure of damages” … .

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… Cronos’s fraud claim is duplicative of its claim for breach of contract, inasmuch as the only fraud alleged is XComIP’s unkept promise to perform certain of its preexisting obligations under the parties’ contract (as alleged by Cronos), for which Cronos seeks exactly the same damages as are sought under the rubric of the claim for breach of contract. Based on Cronos’s own allegations, Cronos’s fraud claim is plainly redundant of its breach-of-contract cause of action. Cronos Group Ltd. v XComIP, LLC, 2017 NY Slip Op 06515, 1st Dept 9-19-17

 

CONTRACT LAW (FRAUD, CONTRACT ALLEGATIONS DUPLICATED FRAUD ALLEGATIONS, FRAUD CAUSE OF ACTION SHOULD HAVE BEEN DISMISSED (FIRST DEPT))/FRAUD (CONTRACT ALLEGATIONS DUPLICATED FRAUD ALLEGATIONS, FRAUD CAUSE OF ACTION SHOULD HAVE BEEN DISMISSED (FIRST DEPT))

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