North America Photon Infotech, Ltd. v. ZoomInfo LLC
1:20-cv-02180
S.D.N.Y.Jun 8, 2020Background
- Photon, a digital marketing company, contracted with DiscoverOrg on May 11, 2017 for data services (term to May 11, 2018); contract §5.2 required DiscoverOrg to deliver ≥95% accurate data or cure within 30 days (or allow Photon to terminate and obtain prorated refund).
- DiscoverOrg markets a database and a service that reviews customers' pre-existing contact data for accuracy and advertises its data as 95% accurate.
- Photon alleges DiscoverOrg replaced accurate contact data with false information when reviewing Photon's data, including over 450 email addresses that routed to domains owned by DiscoverOrg, harming Photon's marketing and causing wasted resources.
- Photon sued for breach of contract, intentional misrepresentation, and unfair competition (New York law and the Lanham Act); DiscoverOrg moved to dismiss the misrepresentation and unfair competition claims.
- The Court dismissed Counts II (intentional misrepresentation) and III (unfair competition) with prejudice, holding those tort claims duplicative or inadequately pleaded; only the breach claim remains. The Court also denied leave to amend, finding amendment futile and noting plaintiff had time and opportunity to plead the necessary facts (e.g., total data points).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether intentional misrepresentation is a distinct tort separate from contract | Photon says DiscoverOrg committed fraud (fraud in inducement/extraneous misrepresentations) and thus may pursue tort remedies | DiscoverOrg argues the dispute is governed by the contract; fraud claim is merely a repackaged breach | Dismissed as duplicative: fraud claim rests on same facts as breach and fails Guilbert test for a separate tort |
| Whether intentional misrepresentation plausibly pleads scienter (knowledge/intent) | Photon points to inaccurate database, 95% accuracy advertising, deletion/replacement of accurate data, and 450 false emails linked to DiscoverOrg domains | DiscoverOrg says those facts do not plausibly show knowledge or intent to defraud; at best negligence | Dismissed for failure to plead scienter plausibly under Twombly/Iqbal |
| Whether New York unfair competition claim survives | Photon alleges false advertising, fraudulent promises and bad-faith provision of false data | DiscoverOrg contends claim lacks required bad faith and is duplicative of contract remedies | Dismissed: lacks allegation of intent and is duplicative of contract claim |
| Whether Lanham Act (false advertising) claim is adequately pleaded | Photon alleges DiscoverOrg's 95% accuracy claim was false because DiscoverOrg supplied significant false data to Photon | DiscoverOrg argues Photon fails to allege falsity quantitatively (no denominator or total data provided), so advertising is not shown false | Dismissed for failure to allege falsity (no total number of data points); leave to amend denied as futile given plaintiff's opportunity and inability to supply the missing facts |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (establishes plausibility pleading standard)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading must ‘‘nudge’’ claims from conceivable to plausible)
- Guilbert v. Gardner, 480 F.3d 140 (2d Cir.) (fraud and breach both permitted only when separate duty, collateral misrepresentation, or special damages exist)
- Telecom Int'l Am., Ltd. v. AT&T Corp., 280 F.3d 175 (2d Cir.) (a promisor's alleged lack of intent at contracting generally insufficient to create independent tort)
- Crigger v. Fahnestock & Co., Inc., 443 F.3d 230 (2d Cir.) (scienter requirement for fraud pleading)
- Deerfield Communications Corp. v. Chesebrough-Ponds, Inc., 68 N.Y.2d 954 (N.Y.) (permitting separate fraud and contract damages when claims rest on distinct facts)
- Nadel v. Play-By-Play Toys & Novelties, Inc., 208 F.3d 368 (2d Cir.) (New York unfair competition requires bad faith)
- Sofi Classic S.A. de C.V. v. Hurowitz, 444 F. Supp. 2d 231 (S.D.N.Y.) (false statements of intent to perform contractual obligations generally insufficient to support fraud)
- Merck Eprova AG v. Brookstone Pharm., LLC, 920 F. Supp. 2d 404 (S.D.N.Y.) (Lanham Act false advertising elements discussion)
- Dougherty v. Town of N. Hempstead Bd. of Zoning Appeals, 282 F.3d 83 (2d Cir.) (leave to amend may be denied when futile)
- Bytemark, Inc. v. Xerox Corp., 342 F. Supp. 3d 496 (S.D.N.Y.) (contract-based conduct cannot sustain a New York unfair competition claim)