Cronos Group Ltd. v. XComIP, LLC

[64 180] NYS3d al., XComIP, LLC, et v Respondent, Group Limited, Appellants. September Department,

First OF COUNSEL APPEARANCES (.Michael Tsang City Tsang Firm, of P.C., York Law New counsel), appellants. for City Postrygacz, Attorney Law, P.C., York at New Neil L.

(Yan counsel), respondent. Margolin of for OF THE COURT OPINION J.P. Friedman, recurring among ques- appeal presents, issues, the other

This give in the rise the facts tion of whether fraud. We hold that the of contract and claims for both breach allega- on fraud, for to the extent is based cause of action they gave assurances that would tions that the defendants false obligation, have been dismissed a contractual should duplicative ground is of the contract claim and on the that it is by allegations specific giving supported to an of facts rise their assur- did not intend to honor inference that defendants remaining they portion the of ances made. Because when were legally insufficient, that is cause of action otherwise fraud entirety, although in its we have dismissed claim should been correctly denied to the to dismiss was find that motion part, In reach- the account stated claim. and, contract claim explore plead- ing raised conclusions, we the issues these ing fraud based on causes of action for contract and of substantially the set of facts. same Group LLC XComlP, and defendant

Plaintiff Cronos Limited companies supplying wholesale are both business Jay Defendant Adams telecommunications services. XComIP’s member. Cronos managing and XComlP entered into a written Network Carrier “Reciprocal Services Agreement” dated (RNCSA), May 2013, which, at relevant times, governed each party’s transmission of its customers’ calls on the other network and party’s other party’s international (IPRNs).1 rate premium numbers Section of the RNCSA provides that “each will Party international provide telephone communication Services to other Party the terms and Schedule(s).” conditions set forth in the attached 4 of RNCSA, Section entitled “Billing Payment,” as amended as of October for provides billing every seven with due days, payment within seven days the date of the invoice, and for a charge per 1.50% month late payments. In addition, section 4 provides:

“In the event due paid are not in full Date, the Due each shall Party have the right all or suspend any portion the Services to the (1) other after Party giving one business day’s prior . notice . . until such time as the Party other has in full paid all then due including late . charges. Further, . . each Party reserves the right to offset the other invoice Party’s for Services in amount corresponding any amount undisputed owed but not received by the Due Date.” 5 of RNCSA, Section entitled “Billing Adjustments,” provides, pertinent part: request adjustment for must

“Any billing be made (7) in good writing days faith and in within seven in receipt of the invoice question. Any such shall include request detailed documentation to es- tablish the basis for any adjustment. Documenta- tion to be provided include, shall without limita- tion, country, the number minutes and/or rate is subject that to and include dispute may [call detail to records] be the provided by disputing in Party a form to acceptable Party. the responding to Subject each under Party’s rights Section the Party will responding determine, in its sole discre- complaint 1. alleges The that IPRNs are to 900 similar numbers the Thus, premium charge United States. caller the to an IPRN incurs a reaching the number. made and shall be any adjustment tion whether the against will be credited adjustments such any in its Party, If the responding invoice. next periodic the dispute, discretion, billing denies sole amount the disputed Party agrees pay disputing . If a . . remittance. next scheduled with credit is not or adjustment billing for a request (7) day period, this seven within writing made Party and each valid are deemed credits, offsets, adjust- or any rights its waives to them.” regard ments with RNCSA, “Responsibilities entitled 9 of

Section Parties,” provides: collecting its solely responsible Party

“Each is them it offers for services customers to its for prepar- network and Party’s other utilizing to these customers. invoices mailing ing costs, ex- from all each other indemnify Parties will allegedly from arising actions claims, or penses, through each other carried for calls fraudulent for payment Party responsible Each Services. Party the other amount from invoice the total for those pay customers its of whether regardless How- fraudulent calls. they are calls or Agreement prohibits in this contained ever, nothing action immediately taking from Party either calls.” prevent is “in the agreement provides the RNCSA 26 of

Section York, of New laws of the State by respects governed all New designates of laws.” Section to choice regard without aris- of any disputes for the resolution the venue City York “[attorneys and further RNCSA, provides ing paid costs shall be fees, fees and expert and paralegal [sic] Party.” the prevailing sent messages email alleges

The XComlP 2015, Cronos notified 22 and December October (in the customers two of its had informed that Cronos been second, a provider; retail service case, Portugese first that had fraudulent calls retail service provider) German IPRNs, thereby XComIP’s network to Cronos’s from gone with Cronos’s account charges automatically generating XComlP.2 Cronos alleges that, in response to each of these notifications, XComlP, through Adams, promptly gave Cronos oral assurances that Cronos “would not need to compensate XComlP for these fraudulent calls.” Cronos further alleges that, in reliance on assurances, these it continued to allow XComlP to transmit its customers’ calls over Cronos’s network, which resulted in XComlP continuing to incur charges owed to However, Cronos. on 7, December 2015, an employee XComlP notified Cronos that XComlP would not reverse the for the charges fraudulent calls. Thereafter, until December Cronos continued to demand that the charges for the fraudu- lent calls be annulled, while continuing allow XComlP ac- cess its network in response continued alleged promises “ from Adams that XComlP would ‘handle’ or ‘deal with’ the problem.” Finally, December 17, Cronos terminated XComIP’s access to Cronos’s services. Through date, XComlP used the allegedly calls, fraudulent $54,926.84, totaling to offset the same amount of charges that XComlP owed to Cronos for the use of Cronos’s network.

In January 2016, Cronos commenced this action against XComlP and Adams, asserting following eight causes of ac- (1) (2) (3) tion: breach of contract; declaratory judgment; ac- (4) (5) (6) count stated; fraud; (7) quantum meruit; conversion; tortious interference with advantageous relations; business (8) and unjust enrichment. The fraud and tortious interference claims are asserted against both XComlP Adams; claims remaining are asserted against XComlP In only. lieu of XComlP answering, and Adams moved to dismiss the complaint (a) (b) pursuant to CPLR 3211 (1), (7); 3016 and 3013. Supreme Court denied the motion in its XComlP entirety. and Adams have appealed.

We turn first to the cause of action for breach of contract. In support of its claim, contract in alleges, sum, refusing to annul for the calls, XComlP breached its obligation to “indemnify” Cronos against costs 2. The October 22 14,000 notification concerned more than calls that were Madagascar made to XComIP’s IPRNs in and the Maldives on October 20 and 2015. The 13,906 December 4 notification concerned calls that were made to XComIP’s during period IPRNs Guinea-Bissau through November 11 case, November 2015. In each the customer involved attributed the third-party calls to unknown hackers who had il- legitimately gained access to the customer’s network. The also al- leges that, case, in each Cronos notified XComlP of the fraudulent calls on day the same that Cronos received notice of the fraud from its customer.

60 above-quoted 9 of the calls the section

of fraudulent under alleged to have resulted from this breach of The loss RNCSA. nonpayment of of for $54,926.84 XComIP’s contract is against XComlP offset the network, use which of Cronos’s al- addition, calls. In the for the fraudulent outstanding leges pay an invoice from to that XComlP refused beyond amount and the $34,158.40, for an “above Cronos indemnity provision for the fraudu- under the $54,926.84 owed recover contract claim seeks to dam- lent calls.” breach of (the ages principal $89,085.24 amount of sum of in the total $34,158.40), plus 4 the late fee under section of $54,926.84 and legal under 27 of the RNCSA, fees recoverable section interest. RNCSA, and support contract claim

In of contention Cronos’s its legally argues insufficient, XComlP should be dismissed as provision RNCSA, of section 9 of the that the indemnification party relies, entitles each to be indemnified which by only against by third-parties [sic] “claims made other (as arising calls” stated in XComIP’s brief). appellate 9 Cronos, hand, on the other construes section obligation party pay for fraudulent relieve each of Supreme party’s the other network. calls transmitted over correctly ambiguity 9, in that discerned an in section Court support in sentence of construction finds the second Cronos’s support construction finds section, while XComIP’s RNCSA, face, 9 of the on its is third Because section sentence. interpretation, reasonably susceptible than of more one provision law, the documen cannot be construed as matter of conclusively tary relies on which XComlP does not evidence (a) dispose claim, and dismissal under CPLR 3211 of Cronos’s (1) (see (7) appropriate Inc., not New Univ. v is York Pfizer Lightstone Dept [1st 42, 2017]; 44 US N.A. v 151 AD3d Bank Holdings Telerep, 458, 2013]; 459 LLC, 103 AD3d Media, 2010]; AD3d 402 LLC, 401, LLC v U.S. Intl. 74 383, USA, Servs. v Futures Fortis Fin. Fimat 2002]). [1st Dept argues cause also of action breach of

XComlP procedures contract is barred Cronos’s failure abide requires above-quoted RNCSA, 5 of the which section request “billing adjustment” in days for a be submitted writ- that a ing, supporting documentation, seven with within receipt question. the extent However, of the invoice in Cro- ultimately prevails, it is section nos’s construction section 9, section that deals specifically with “fraudulent calls.” Where there inconsistency between a specific provision and a general provision of a contract, the specific provision Muzak v Hotel controls Corp. Corp., NY2d Taft Global, Matter TBA [1956]; LLC v Partners, Fidus LLC, 2015]). 204 [1st Dept Accordingly, the breach of contract claim cannot be dismissed based on section 5 of the RNCSA.3 established

Having that the motion to dismiss was correctly (a denied as to the contract claim determination on which this unanimous), bench is we turn to the fraud cause of action.4 The fraud claim has two prongs, which we will analyze separately. As previously noted, our conclusion is that neither prong should have survived the motion to dismiss.5

One prong fraud cause of action is based on the al legation that XComlP somehow orchestrated the fraudulent calls for which Cronos was charged.6 The complaint fails, however, to allege any specific facts if true, would give rise to a reasonable inference that some connection existed be tween XComlP and the fraudulent calls. Cronos offers nothing but speculation to support the contention that the unidentified hackers who unlawfully gained access to the networks of Cro- nos’s customers and originated the fraudulent calls were acting in concert with XComlP or at its behest, that XComlP otherwise had knowledge the hackers’ or that activity, XComlP had any kind of connection with the hackers. Because this prong of the fraud claim is not pleaded with the particularity required (b), CPLR 3016 it is legally insufficient Greschler v Greschler, 51 NY2d 368, ^[1980] [“conclusory allegations” do not satisfy Pludeman v Northern Leasing (b)]; CPLR 3016 cf. Inc., Sys., (b) 10 NY3d 493-494 [2008] [CPLR 3016 was satisfied where, from the facts alleged, factfinder could “rea- reason, 3. unavailing For the same also is pro- XComIP’s reliance on the vision of disposition section 5 that the request billing adjustment of a for a is committed to the “sole “responding Party.” discretion” of the remaining 4. The causes of action will be addressed at the end of this opinion. previously noted, 5. As the fraud cause of against action is asserted both XComlP discussing and Adams. In claim, the fraud unless otherwise indicated, we use the name ‘XComlP” collectively. to refer to both defendants Specifically, 6. complaint alleges, “Upon [unspecified] information and belief,” “authorized, that procured XComlP or otherwise caused the unknown place hackers to illegal these calls.” sonably knowledge infer the or requisite participation scheme]).7 individual in the alleged defendants” action, In the other of the fraud cause of Cronos al prong that Cro- leges XComlP, by giving that Cronos oral assurances calls, for the required pay illegitimate nos would not be fraudulently induced Cronos to allow XComlP to continue to network, charges use Cronos’s that XComlP thereby accruing to Cro- charges intended not to based on the offset for pay intent, nos for the fraudulent calls. With to XComIP’s regard “intentionally [sic] that XComlP mislead alleged (from 2015) November 2015 to December into believing Further, “[i]n these would be removed.” disputed charges resolving reliance on these false promises disputed amounts, . . . Cronos continued to allow XComlP to use Cro- services, incurring charges voice termination nos’[s] to have resulted XComlP would owe Cronos.” loss fraud, from this for which the claim seeks is the same recovery, loss of contract cause of action—XComIP’s breach $54,926.84 for the use of Cronos’s nonpayment network, against which XComlP offset for the below, calls. For the reasons set forth we conclude allegations that these do not state a cause of action for fraud Co., New York Univ. v Continental Ins. 308, 87 NY2d 318 ^[1995] [“General allegations that defendant entered into a contract while the intent to it are insufficient lacking perform (fraud) claim”]; Rocanova v Equitable Assur. support Life U.S., Socy. 603, 83 NY2d 614 contract action can [1994] [“a of merely by not be converted to one for fraud that alleging did not intend to meet contractual contracting party obliga its tions”]).

Initially, Cronos’s fraud cause of action falls short under the that a fraud claim principle by allegations is not stated that in duplicate, alleged the facts and simply damages sought, contract, by claim for breach of enhanced al- only conclusory made a legations pleader’s adversary promise while the concealed intent not to it. This Court harboring perform has held fraud claim that “ar[ises] numerous times that a (CPLR [b]) complaint’s “state[ ] 7. The failure detail” facts from complicity hacking reasonably which XComIP’s remedied could be inferred is not opposition by operating affidavit submitted Cronos’s chief of- ficer, Dinor Adam V. Levi. Levi fails to adduce sufficient facts from which it reasonably particular could be inferred that XComlP orchestrated the fraud- dispute. ulent calls at issue in this claim], contract accompanying [as the same facts s[eeks] and not a breach of damages allege any duty d[oes] identical to or of the independent parties’ agreements” collateral (Havell of the to dismissal as “redundant contract claim” subject Fund, Citibank, Enhanced Mun. Income L.P. v N.A., Capital Fairway see also Prime Estate 2011]; 588, [1st Dept Bank, LLC v First Am. Intl. 554, 99 AD3d 557 Mgt., Dept fraud claim “can be an insincere predicated 2012] [a future only where the false promise performance the contract executed; is collateral if the promise parties itself, concerned the the contract performance (internal fraud claim is to dismissal subject duplicative” HSH Nordbank AG v UBS omitted)], marks quotation quoting 2012]). AG, 185, Thus, 95 AD3d where a fraud Dept by allegations claim was the defendants had supported . . . their intentions with to the man “misrepresented respect their they perform duties, ner” which would contractual we the fraud claim as of the duplicative plaintiffs’ dismissed contract claim because the fraud claim was “based on the same underl[ay] action, [was] facts that the contract cause of not col to the not contract, damages d[id] lateral seek that would recoverable under a contract measure of damages” be (Financial AG, Ltd. v UBS Structures 77 AD3d 419 [1st 2010]). recent this shortage There is no decisions Dept Court to similar effect.8 holding (1st MMCT, Point, LLC, e.g. 122 AD3d 8. See LLC v JTR Coll. 2014) (“A duplicative cause of action is of a breach fraud-based only was not sin contract claim when the fraud is that the defendant promised quotation [internal cere when it under the contract” Caribe, Inc., omitted]); Group, v marks Mosaic Ltd. AllSettled 2014) (1st (a “duplicative fraud claim was insufficient as 422-423 [compensatory] sought dam of contract claim” because it “the same breach claim”); Advisory Group, v ages Laurel Hill LLC as the breach of contract (1st Co., LLC, 486, Dept 487 & Trust 112 AD3d

American Stock Transfer 2013) (affirming fraud counterclaim that was “based on the the dismissal of a counterclaim, underl[ay] [was] that the contract not collateral same facts damages call for that would not be recoverable d[id] the contract and Nuova, 473, sky, theory’); v Slow 62 AD3d under a contract Linea S.A. chow (1st 2009) (a Dept duplicated claim the al 473 fraud claim contract where leged misrepresentation “merely plaintiff [the defendant] assur[ed] duty comply obligation was al would with its contractual and no additional sought damages legedly “plaintiff no that were not also recov breached” and theory”); Liquidating RGH Trust v erable under its breach of contract (1st 516, 2008), LLP, Dept Iv 11 Deloitte & Touche 47 AD3d 517 dismissed (2008) (fraud “properly duplicative as of NY3d 804 claims were dismissed claim, alleged plaintiff’s] they [we]re based on [the breach of contract since assertions, fraud claim the dissent’s Cronos’s is Contrary contract, claim for breach of inasmuch as of its duplicative unkept promise perform is XComIP’s only fraud contract under the obligations parties’ certain of its preexisting (as the same Cronos), exactly for which Cronos seeks alleged by the claim for breach are under the rubric of sought damages Cronos’s fraud allegations, Based on Cronos’s own of contract. cause of ac- claim redundant of its breach-of-contract plainly contract claim seek to re- the fraud claim and the tion. Both $54,926.84 in for allegedly cover the same precisely annul, the charges that XComlP has refused to fraudulent calls li- XComIP’s own against for which XComlP has instead offset in of Cronos’s contractual Cronos, violation ability oral assurances.9 contrary to XComIP’s rights fraud of foregoing, from the cause apparent As should be only allegation the contract cause of action action adds to insincere oral assurances gave that XComlP obligation misrepresentations [contractual] related to defendants’ fraudulent misrepresentations extraneous to the allege [d] . . . and no collateral or (1st 41, Dept agreements”); Coppola Applied Corp., v Elec. 288 AD2d 2001) (affirming “duplicative” contract claim dismissal of fraud claim as of any damages complaint allege . . . that would not be re where the “did not damages” plead a under a contract measure of and “failed to breach coverable of contract”); Bridgestone/Firestone, duty separate of the accord from breach (2d 1996) Servs., Inc., 13, (“intentionally- Recovery Cir Inc. v Credit 98 F3d indicating [an] . . . intent to under contract” false statements law”); support a claim of fraud under New York Doukas are “not sufficient to (2d 2016) Ballard, (affirming Dept dismissal of fraud v claims that causes of action 135 AD3d only ar[o]se . of identical circumstances as the “[n]ot . . out contract, alleging [were] based identical breach of but any allegations, allege misrepresentation resulted in loss and did not that a contract; indeed, independent damages allegedly incurred for of breach Endwell, identical”); Group damages sought LIUS Intl. LLC v HFS were 2012) (2d Intl., Inc., (same); Del Ponte v 1910-12 Ave. 92 AD3d 2004) (2d (“Merely Realty alleging in Corp., U. scienter contract, damages repre for unless the a cause of action to recover breach alleged to be false are collateral or extraneous to the terms of the sentations agreement, of contract cause of action into one does not convert a breach omitted]). sounding quotation [internal in fraud” marks ($89,085.24) larger principal 9. While the demands a amount damages principal of action than the on the breach-of-contract cause ($54,926.84), recovery sought sought on the fraud claim on the amount $54,926.84 outstanding charges alleg- contract claim includes the same edly calls that the fraud claim seeks to recover. That Cronos’s contract, alleges an based on other contract claim conduct, additional breach damages sought, change additional are does not the fact for which claim, entirety, duplicates portion of the contract that the fraud its $54,926.84 for the claim based on XComIP’s refusal to annul fraudulent calls.

65 (reversal very perform XComlP would same act of the calls) contends, for the fraudulent that Cronos already contractually claim, that XComlP was contract obli- parties’ agreement. gated perform under the written Thus, allegedly promise was, false at issue in the fraud claim ac- cording complaint, par- to the under the any promise contract, ties’ not collateral or extraneous to that (see Capital, [a 84 contract Havell AD3d at 589 fraud claim duplicative where, alia, was contract claim inter plaintiff allege any duty “did not a breach of collateral in- to or dependent parties’ agreements”]; Linea 62 Nuova, AD3d [dismissing alleged misrepre- at 473 a fraud claim where the assur(ed) (the defendant) “merely plaintiff that sentation comply would obligation duty with its contractual and no additional Liquidating breached”]; Trust, was RGH 47 AD3d at [dismissing duplicative they fraud 517 claims because “al- leged) misrepresentations no collateral or extraneous to agreements”]; Co., Orix Credit Alliance v Hable 1998] [dismissing that, 115 a fraud counterclaim “far being directly contract, . . . collateral to was related (internal quotation specific provision of the contract” to a marks omitted)]; Corp. Co., Tesoro Petroleum v Holborn Oil AD2d [dismissing 1985] 607, 607 a fraud claim as “redun- plaintiff allege where, alia, dant” inter did not the breach “any duty separate apart . . . and from the contractual [1985]). duty”], appeal dismissed NY2d Moreover, concedes, as the dissent the fraud claim seeks recovery solely very for one of the same losses at issue in the (the calls), claim the fraudulent contract both damages very compensatory claims seek for that loss principal penny Caribe, amount, same dollar to the Mosaic [a duplicative 422-423 claim at fraud was because sought (compensatory) damages “the same as the breach Capital, [a claim”]; contract Havell 84 AD3d at 589 fraud claim duplicative where, alia, was of a contract claim inter the two “sought damages”]; Coppola, claims identical 288 AD2d at 42 [affirming a fraud alia, dismissal of claim inter “did allege any damages not . . . that would not be recoverable damages”]; under a Petroleum, contract measure of Tesoro [same]). AD2d at 607 argues duplicative

The dissent that the fraud claim is not the contract claim because the two claims are somehow (.Financial Structures, “based on the same facts” 77 AD3d at 419) and the fraud claim—although plainly based on XComIP’s failure to an perform alleged contractual duty—is somehow (id.). “collateral to the contract” The dissent bases these conten- tions on the inclusion in the fraud arguable claim—but absence from the contract claim—of allegations XComlP, after the parties’ agreement was already effect, and in response to the notice it had received from Cronos of the calls, fraudulent “intentionally [sic] mislead . . . into that believing these would disputed charges be removed.”10 In words, other the dissent finds that the fraud claim is not redundant of the contract claim because the contract claim alleges only that XComlP failed to an perform alleged contractual duty, while the fraud claim alleges that XComlP failed to follow through assurances, made after the contract was already effect, that it would that perform same alleged Thus, contractual duty. to the according dissent, even though one cannot convert a contract claim to a fraud claim by inserting into the pleading “[g]eneral allegations that defendant entered into a contract (New while the intent Univ., York lacking perform it” 318), NY2d at a litigant may achieve the same result insert- ing into the pleading allegations that the other party gave false reassurance that it would perform its obligations under a previously executed agreement. This argument has already been considered and rejected by this Court.

In Fairway Prime Estate Mgt., LLC v First Am. Intl. Bank (99 AD3d 554 2012]), plaintiff (Fairway) received (FAIB) a commitment letter hank from the defendant to lend funds to finance a development project. Fairway’s owner al that leged FAIB, to induce him to sign agreement to extend FAIB’s time to loan, make the had “assured him that defend ant would go Loan, forward with the if he signed the document (id. [i.e., the extension agreement] on behalf of plaintiff” at 556 omitted]). [internal quotation marks brackets Ultimately, FAIB did not lend funds, and Fairway sued for breach of contract and fraud. On Fairway’s appeal the order granting FAIB’s motion to dismiss the complaint, we modified to reinstate the contract claim but affirmed the dismissal of (id. the fraud claim as of the duplicative contract claim at fact, 10. In arguably the contract cause of action does contain a reference to XComIP’s disputed charges assurances that would be an- Paragraph complaint, nulled. part which is of the cause of action for contract, “By breach of purposely delaying states: investigation their of these calls, promising re-open matter, refusing and then indemnify calls, Cronos for Agreement.” these XComlP breached the 206). citing doing, rejected HSHNordbank, 95 AD3d at In so we Fairway’s argument misrep that the fraud claim concerned a obligations resentation collateral to FAIB’s contractual under (as Fairway’s appel the commitment letter because stated in brief) “Fairway [that] late has never claimed FAIB entered into the Term Sheet or Commitment with the fraudulent intention breaching Fairway Instead, them. FAIB asserts that developed [sic] ‘lenders remorse’ as the credit markets deterio pretended on, rated Later FAIB that the loan would afterwards. [still] place Fairway rejected . take . . . . . .” Because the fore going argument, proposition the case stands for the that a false promisor preexisting assurance will obligation contractual is not collateral to the contract—a hold ing fully applies Fairway case, to this whether or not ambiguity.11 involved an issue of contractual point making We do not take issue with the dissent’s that a promise something harboring future, to do in the while an un- promise disclosed intention to break that when the time comes perform, misrepresentation existing to constitutes a of an fact Corp. Chesebrough-Ponds, Communications v Deerfield [1986]). sight Inc., 954, of, 68 NY2d What the dissent loses promised per- law, however, is under our case where the obligation promisor an under an formance is enforceable parties, only damages sought and the are contract between allegations contract, those recoverable for a breach of of such (Castellotti promise” Free, 198, an v 138 AD3d “insincere 2016]) Dept par- are redundant of a claim for breach of the and, therefore, state a of action for ties’ contract do not cause fraud.

The rule that an to a contractual insincere obligation is not as fraud—absent which contract actionable routinely pleaded claims would be in the alternative as fraud— Prods., Metropolitan Transp. Triumph 11. See also Auth. v Adv. 116 AD2d (1st 1986) 526, (dismissing against president fraud claim 527-528 a corporation of a to have its contract with the MTA on the breached ground “only representation performance implicit in that a breach of the performance by pres- making subsequent [the . . . and a assurance bid alleged, light allegations ident]” were which were “redundant of the first against corporate defendant” cause of action for breach of contract added]); (holding [emphasis Bridgestone/Firestone, 98 F3d at 19 that cf. pleadings “knowingly falsely repre- and evidence that the defendants plaintiff] [the defendant] intended to remit all [the sented to that indebted owing plaintiff] [preexisting] [the Collection sums due and to under Agreement” legally support judgment were a for fraud under insufficient omitted]). quotation [internal New York law marks guards against erosion of the distinction between the two causes of action. This distinction serves to prevent the expan sion of potential liability for conduct essentially a constituting breach of contract to persons and entities not in contractual with the privity plaintiff. distinction should also be maintained given “[f]raud is wrongful enough occupy (Gaidon civil classification just short of criminal conduct” v [1999]). Am., Guardian Ins. Co. NY2d In Life contrast, recognizes that, the law generally, breach party may an if agreement is party prepared to bear the li resulting ability to the other. “The option breach a contract and pay damages always available, is even where the breaching party had no intention of performing its when it obligations entered (Banc into the agreement” Am. Sec. LLC v Solow Co. Bldg. II, L.L.C., 47 AD3d 2007], [1st Dept citing stein v Brief 1959]). Co., Rotondo Constr. 351 [1st As this Court stated in fstein: Brie

“To that a say contracting party intends when he enters into an not agreement to be bound is not to state ‘fraud’ in an area, actionable but state a willingness to risk paying damages breach of contract. . . . Implicit policy sanctioning the formalization of contractual under- takings precaution against intention existing to be bound by the agreement as well as a future change of mind about bound it. being by Ac- tionable relief hangs breach; and . . . relief does not lie for fraud resting on an intention not (id.). perform” The Court of in Appeals’ decision Communications Deerfield (68 v

Corp. Inc. Chesebrough-Ponds, [1986]), NY2d 954 which the dissent mistakenly relies, is not to the contrary. false promise held to be actionable as fraud in was a Deerfield promise that had not been included in the terms of the parties’ written agreement.12 For that reason, the extra-contractual in promise was held to have been “collateral to . . . Deerfield (68 956) the contract” NY2d and, therefore, at the fraud claim (id.). did not duplicate the contract claim The dissent’s misread- ing of to mean that a party’s misrepresentation of its Deerfield intention by to abide the terms of its contract concerns a mat- 12. promise by buyer involved an oral Deerfield, inventory of certain territories, not to resell the merchandise in certain which restriction was (68 956). parties’ set integrated agreement forth in the written at NY2d ter collateral to that contract renders the word “collateral” meaningless support language reasoning and finds no or Appeals. misinterpreta Moreover, of the Court of the dissent’s contrary great weight of tion to the of our case law, Deerfield recognizes which confirms the rule that a false Deerfield promise only promised perform is actionable as fraud if the any parties ance is (see outside terms of contract between the Nordbank, HSH 206; 95 AD3d at Wilshire WestwoodPlaza [1st Dept Sec., LLC v UBS Real Inc., 514, Estate 94 AD3d 2012]; Sec., Triton Partners v Prudential 301 AD2d 411, 411 Dept [1st 2003]; Bloom, Glanzer v Keilin & 281 AD2d 371, 372 Dept [1st Bridgestone/ 2001]; Orix, 115; 256 AD2d at accord Funding Group, Firestone, 20; 98 F3d at Global LLC v 133 Community Rd., Ltd., 1944194, 2017 WL *4-5, 2017 US Dist (DRH) May [ED 71446, NY, 10, 2017, LEXIS *12-13 15 CV 6595 (AKT)]).13 ways

The dissent draws distinction between different expressing concept promise, say, of a false is to promisor keep made while the intended Thus, not to it. promises the dissent states that XComlP made harboring honoring “while no intention of them . . . consti- misrepresentations present tuted fact rather than mere promises performance.” insincere of future The distinction here promises harboring drawn dissent between made “while honoring no them,” hand, intention of on the one and “mere promises performance,” hand, insincere of future on the other scrutiny cannot and, aware, withstand so far as we are has not (see 42; previously recognized Coppola, 13. As this Court has 288 AD2d at Morgan Knitting Bros., Dept [1st J.E. Mills v Reeves 1997]; Big Apple City York, 1996]), Car v New 234 AD2d (86 the fraud & Graubard Mollen Dannett Horowitz v Moskovitz [1995]) Deerfield, NY2d 112 was—like the fraud in but unlike the parties’ agreement. inapposite fraud here—extraneous to the Also are three dissent, cases of this Court cited which the fraud claims were not alleged misrepresentations based on of the defendants’ intentions to Media, obligations their contractual in the future American Inc. Bain v Labs., bridge Knight LLC, 2016] [the & 477-478 de allegedly misrepresented capitalization Bainbridge fendant "the and the GoSmile, $850,000 receivable”]; Levine, existence of an account Inc. v 81 Dept [“plaintiff alleged plaintiff [1st AD3d 2010] 80 that defendant lied to represented when he and warranted that he had and never breached was not currently agreement], in breach” of an earlier lv dismissed 17 NY3d 782 [2011]; Funding, First Bank Ams. v Motor Car 292 [“plaintiff’s premised 1999] allegations fraud claim is that defend misrepresented pertinent ants various facts about the individual loans that plaintiff purchased”]). recognized previously Castellotti, in law been our case properly [“the AD3d at 211 inducement claim was alleges only it insincere dismissed because of future added)], performance (emphasis citing under the oral contract” Forty S., Anza, Cent. Park Inc. v 117 AD3d [“the complaint 2014] to of action for fraudu- fails state cause essentially alleges that defendant did inducement, lent since it perform when he made the not intend to under the contract added)]). (emphasis promissory statements” Similarly attempt distinguish is the dissent’s Te- unsound ground that the defendants in that case soro Petroleum on ” “falsely (quoting promised perform ‘future acts’ 607). just plaintiff case, Petroleum, at In as in this Tesoro “misrepre- in its fraud claim that the defendants had promised” parties’ their intent sented (id.), allegations contract and we held that these were (id.). claim The dissent cannot “redundant” of the contract distinguish by referring this case Tesoro Petroleum allegedly misrepresented “contempora- intentions as XComIP’s allegations, plans.” Assuming neous the truth of Cronos’s when dispute XComlP assured that “the would be resolved in Cronos added), Cronos’[s] (emphasis “promise[d] to favor” ‘handle’ added), problem” (emphasis or ‘deal with’ the XComlP was representing in future, that the would be removed they being very Indeed, not that were removed at that moment. it is clear from the itself that Cronos understood promises XComIP’s assurances to be of future conduct. Cronos specifically alleges—as support it must to a fraud claim—that it relied on XComIP’s assurances ultimately would by “continuing] be reversed to allow XComlP to use alleges Cronos’[s] that it voice termination services.”14Cronos relied on the assurances for a month and a half about (from 17), November to December and that its reliance days continued for after received email notice on charges. December 7 that XComlP would not reverse the Although argument, Cronos itself does not make this the dis- position sent takes the that the fraud cause of action should be ambiguity sustained the event the aforementioned section ultimately XComlP, 9 of the RNCSA is resolved in favor of affidavit, Similarly, opposition operating 14. in his Cronos’s chief officer promises “[XComIP’s] states that were relied on and induced Cronos to giving services, allowing [XComlP] continue access to its as well as [XComlP’s] clients to use IPRNs.” the of the of the contract claim portion dismissal resulting find to be the fraud claim. While this duplicated that we at first it cannot withstand glance, seem theory might plausible If of the RNCSA scrutiny. interpretation closer XComIP’s will be based a deter- necessarily upon that outcome prevails, they that the when entered into the parties, agree- mination contends, ment, intended it to as XComlP now operate placing (here, the using risk of fraud the other’s services upon party the Cronos) If this is what the parties in the relevant instance. contracted, it would mean they according intended when assurances, gave apparently to the XComlP complaint, XComlP would bear a loss that had parties that gratis, would, situation, in that be borne Cronos. We do not agreed an as- that Cronos could have relied reasonably upon believe what, under XComIP’s interpre- that it would receive surance would have been a contract, essentially gift tation of the Therefore, reading should XComIP’s one business to another. claim must fail for lack correct, Cronos’s fraud of section be (see ACA Fin. Guar. v Gold- e.g. Corp. reliance justifiable man, Co., a Sachs & plead [2015] [“To NY3d (fraud) facts to , allege support . . . must plaintiff claim the alleged misrepresenta- that it relied on justifiably claim tions”]).15 the fraud cause of action is

Moreover, the dismissal that it is “based a statement upon on the required ground de allege to] intention fails facts show [but future made, was fendant, representation at the time promissory (Laura Co statement” [its] never intended to honor or act M.D., Inc., rio, Design, PLLC v R. Lewin Interior omitted]), marks quotation 2008] [internal 412 [1st aforementioned state Appeals’ in the Court of implicit principle entered into a that defendant “[g]eneral allegations ment it are insufficient while the intent lacking contract argu- support of this the dissent cites in 15. We also note that case proposition Demetre v HMS Hold- actually opposite for the ment stands [affirming 2015] the dismissal ings Corp., 493-494 claim,” although “duplicative claim as of the breach of contract of a fraud was provision agreement on which the contract claim was based 1944194, *4, 2017 “ambiguous”]; Funding Group, 2017 WL US accord Global law, denying 71446, *10, governed by [in a case New York Dist LEXIS *12-13 ground that the claims for breach of contract on the a motion to dismiss dismissing “ambiguous” the fraud provisions were while relevant contractual entirely upon allegations that defendants did not restfed] claim “because any allege comply [id] the contract” and “d intend to with the terms of contract”]). to the misrepresentations collateral or extraneous (New support [fraud] Univ., claim” York 87 NY2d at 318). explained, As this Court has present deceive, “Absent intention to a statement of future intentions ... is not actionable on the grounds of fraud. A based a state- allege ment of future intention must facts to show promissory rep- defendant, that the resentation was at the time the made, never intended to honor or (Non-Linear Trading act on his statement” Co. v 1998] Assoc., Braddis 243 AD2d 107, 118 [internal quotation omitted], marks and citation quoting [3d Brooks, Lanzi v Dept 1976] noting “any [further inference expectation drawn from the fact that the did not plaintiff’s occur is not sufficient to sustain the showing falsely burden of that the defendant stated [1977]). intentions”], his 43 NY2d 778 affd apparently dispute principle The dissent does not the promise, where a fraud claim is based false plaintiff required plead specific the may is to facts from which it reasonably

be inferred that the defendant did not intend keep [b] [in the when it was made CPLR 3016 pleading a fraud of action, cause “the circumstances constitut- detail”]). ing wrong the shall be stated in The dissent, however, believes that the fraud claim before us meets this standard complaint alleges “immediately because the that XComlP offset charges against legitimate the amount of fraudulent use charges Cronos’[s] (emphasis incurred XComlP for Services” added). “immediately” In view, our the word cannot bear the weight places upon the dissent it. begin, although obviously

To knows when it received allegedly wrongful billing, allege the the does not passed alleged misrepre- how much time between XComIP’s charged sentations that Cronos would not be for the fraudulent appearance charges calls and the of those on bills. But more fundamentally, wrongful the claim that XComIP’s conduct was billing (billing pre- the initial for the fraudulent calls that was sumably generated automatically), rather than the ultimate refusal promises to reverse the in accord with the Cronos, is at odds with Cronos’s own account of parties operated agreement. how the under their complaint alleges pro- that section 9 of the RNCSA—the by refusing vision that XComlP breached to reverse question—“required Party receiving pay- [here, ment indemnify Paying [here, XComlP] Cro- party in the event ‘allegedly nos] calls’ were previ- for.” Cronos’s brief ously paid appellate elaborates this point as follows: provision

“[T]his to section type [referring 9] tailored telecom- specifically internet[-]based munications and IPRN/IPRS services. Specifically, telecommunication services are carried by multiple different carriers finally being before delivered to (‘terminated’) (in an end user aby carrier the case usage, terminating IPRN/IPRS would party [XComlP]). provider, be service such as Parties only they can be assured that are those paid by Therefore, with whom are in of contract. they privity agreements require party using service often to pay up-front, regardless whether traffic remedy was real or paid for fraudulent. for calls that later turn party pay up-front for forced (which out to be munications) is common in telecom- fraudulent is to seek the from indemnification added). the party they paid usage” (emphasis for effect, Levi, Cronos, To the same the chief officer of operating that he understood that his affidavit explains opposition XComIP’s for the fraudu- pay charges Cronos was required (as lent calls and that section 9 of the RNCSA “immediately,” Cronos) subsequently XComlP interpreted by required Cronos for those indemnify charges:

“It is the nature of the telecommunications busi- that all who income providers generate ness (and users) must providers other not end charging have they be since turn costs paid immediately, to cover. The of is to force the purpose indemnity from the fraud to back party benefiting pay [sic] it; however, of the the because party aggrieved above, custom mentioned cannot be used indemnity . . . The payment. very as an immediate defense to the initial nature is we must indemnity pay (paragraph and then be covered for it later” charge, omitted). breaks paragraph numbers Thus, account, that it would Cronos, by contemplated its own that the calls, expected be for the fraudulent but initially billed request. would reversed to its charges ultimately pursuant be fact, In noted, as Cronos continued to await the previously charges days reversal of the for 10 after XComlP notified it by not be email that the charges Therefore, would reversed. the of the on bills appearance “immediately” after alleged XComIP’s that Cronos not assurances would have to for the fraudulent not pay give any calls does rise to inference them) that the that assurances XComlP made were (assuming given. fraudulent when

In that arguing scienter be inferred from the may vague alle- gation that Cronos was for the billed fraudulent calls “im- mediately,” ignores the dissent the fact completely under Cronos’s own the interpretation parties’ agreement, initial for the calls billing completely was consistent with the contract. The dissent also itself, fact that Cronos ignores based on its own allegations, did understand the “immedi- ate” have been billing to inconsistent with the assurances al- leged to have constituted fraud. Given that the parties’ written agreement, allegations and Cro- complaint nos’s own appellate arguments establish that the “immediate” for the billing calls was with consistent both the contract and oral assurances would reversed, be fail to we see how scienter can inferred be billing—which, given that relevant took place events in 2015, no was doubt generated automatically. One cannot infer that XComlP did not intend to honor its assur- ances from an act that completely was with consistent those assurances, pleaded itself.16 by turn

Finally, we to the six causes action we have not yet discussed. The states cause of action an ac- count only $34,158.40 stated with respect charges at issue, as to XComlP which is never have raised an objection. The at remaining ($54,926.84), amount issue having been when disputed XComlP offset it the against charges Cronos for the calls, cannot support ac- (see v Vassallo, count stated claim Fleming 278, 278- 2007]). 279 [1st Dept five claims should remaining have been dismissed. Because has an plaintiff legal rem- adequate edy for breach of contract, the cause of a action for declaratory Co., (Singer Asset Fin. judgment should be LLC v dismissed Melvin, 2006]). 33 AD3d Dept [1st Similarly, because disagree 16. We with the dissent’s statement issue that an exists as to promises whether XComIP’s “assurances were of future rather than contemporaneous By definition, acts.” always a of is future conduct. agreement, governed a written at are matters issue unjust quantum enrichment claims should have and meruit (MG Episco Michael’s Prot. W. 100 LLC v St. dismissed been 2015]). Dept [1st pal The conver 127 AD3d Church, merely legally restates insufficient because claim is sion damages contract, based on a failure to for breach of claim for allege owing, charges allegedly pay and and does due any any possessory deprivation Cronos in interest held of (see Corp., Payments, property particular Data TOT LLC v First 2015]). The claim for tortious 128 AD3d legally insufficient business relations interference with allege harmed that XComIP’s conduct does not because Cronos any relationship Amaranth with of its customers Cronos’s Morgan 40, 47 Co., Chase & LLC v J.P. [2010]). part part, in 14 NY3d 736 in denied

2009], lv dismissed Supreme Accordingly, Court, New York the order of the J.), August (Barry Ostrager, County 17, 2016, which entered complaint, should be motion to dismiss denied defendants’ grant ac- as to the causes of law, to the motion modified, on the quantum declaratory judgment, meruit, fraud, tion for a relations, and with business conversion, tortious interference unjust action for an account to the cause of enrichment, issue, and at $54,926.84 of of to the extent stated affirmed, without costs. otherwise (dissenting part). concur with While otherwise J. I Kahn, disposition appeal, majority’s the or- I would affirm of this appealed dismissal of that it denied from to the extent

der portion plaintiff’s the al- fraud cause of action based of promises Jay legations to a made false Adams that defendant plaintiff fraud- principal related to to reverse aspect claim to have of the fraud I that calls, ulent as believe stage, preliminary sufficiently pleaded, to survive this at been part. respectfully I dissent Therefore, a motion to dismiss. allegations fraud claim is based the extent that To misrepresented Dinor XComlP, Adams, an executive plaintiff operating Cronos, chief officer Levi, Adam V. plaintiff calls, the the fraudulent not be liable for would complaint alleges permitting inference that a reasonable facts inducing plaintiff purpose al- to continue for the he did so (see Eurycleia lowing plaintiff’s to use services defendants Kissel, 553, 559 Partners, LLP, 12 NY3d LP v Seward & [2009]). deciding appeal a motion an order involves Where

76 complaint dismiss, to construction, afforded liberal all allegations factual are deemed true and the (Leon plaintiff is entitled to all favorable Martinez, inferences v [1994]). complaint alleges 83, 84 NY2d 87 Here, the that on misrepresentations plaintiff’s occasions, two representative Adams made to dispute Levi that would be resolved in plaintiff’s plaintiff compensate favor and that would not need to allegation defendant XComlP for the fraudulent calls. The plaintiff occasions, on both XComlP billed for the fraudulent immediately following misrepresentations calls these Ad- favorably plaintiff, ams, viewed most suffices, on this motion allege dismiss, that Adams knew that the statements were false when he made them.

Adams’s assurances to Cronos that it would not have pay to plaintiff’s demonstrate defendant Adams’s intent to induce allegation

reliance on his assurances. The plaintiff plaintiff’s continued to allow XComlP to use voice plaintiff’s representative termination services after received plaintiff’s justifiable Adams’s assurances establishes reliance plaintiff those assurances at a time when had no reason especially following not to take word, Adams at his the first oc- allegedly gave casion on which defendant Adams those assur- plaintiff. allegedly ances to As a result, XComlP incurred fur- charges owing plaintiff plaintiff ther $54,926.84. Thus, (see pleaded particularity has fraud with sufficient as to Adams 559). 12 NY3d at may personally

Furthermore, Adams be held liable on the portion question, notwithstanding po- the fraud claim in his liability company, sition as an officer of a limited because he is personally participated to have in the commission of a company tort in furtherance of business Pludeman v Leasing Sys., Northern Inc., 486, 10 NY3d [2008]; 491 277 Mott St. LLC v Fountainhead LLC, Constr. AD3d Equity 2011]; Rothstein v Ventures, AD2d 2002]). [2d Dept pari portion

Moreover, under the doctrine of in delicto, the involving promises the fraud claim Adams’s false may imputed be excep- to XComlP unless the “adverse interest” imputation agent tion to exists, in which the executive or has “totally principal’s [is] acting abandoned his interests and en- (New tirely purposes” Litig. his own or another’s Greenwich Trustee, [Europe] LLC v Citco Fund Servs. B.V., quoting 2016], Kirschner v LLP, KPMG 15 NY3d

77 446, 465, ^[2010] [internal quotation marks omitted]). here, Under the circumstances where Adams’s assur- XComlP to continue to have the ances benefit of permitted them, services without for and where he paying was plaintiff’s for his acting entirely purposes, not own adverse interest Thus, does not however. of the exception apply, portion fraud claim should not be dismissed as to either Adams or XComlP. alleging of the fraud claim that Adams made false aspect is not of contract duplicative to Cronos breach

promises In order for a fraud claim to be of a breach of duplicative claim. claim, contract the fraud claim must be “based on the same of action, [must] [be] facts that underlie the contract cause not not contract, damages [must] collateral to the and seek damages” of would not be recoverable under contract measure AG, v UBS Structures Ltd. (Fi nancial 2010]). Financial Structures whether prong, With to first respect of facts, here, claims are on the same the breach both based reference to the false promises contract claim makes no clear and Cronos to remove the disputed made Adams to Levi claim calls, clearly the fraudulent while fraud for charges most favor- Therefore, viewing them. the complaint includes on the same facts the fraud claim is not based ably plaintiff, of action. that underlie the contract cause Financial Structures prong, to the second regard With contract, we the fraud claim is not collateral to the whether that, of both involving allegations have a case explained of fraud, misrepresentation present “[a] contract and breach of claim separate contract and supports [a] fact is collateral (American Labs., Media, & Bainbridge Knight Inc. v fraud” for Com LLC, 2016], citing Deerfield Inc., 68 NY2d Chesebrough-Ponds, munications v Corp. and un made a preconceived . . . with [1986] [“a a mis it, . . . constitutes intention of not performing disclosed to, duplica- collateral not ... of fact” present representation (citations internal claim of, tive a breach of contract omitted)]). marks quotation al- question the fraud claim

Here, of tellingly, portion Adams’s occasions, following promises on two leges disputed charges remove the Cronos that XComlP would amount offset the calls, immediately the fraudulent ‘XComlP incurred charges use legitimate charges against by XComlP for Cronos’ [s]ervices.” Based these allega tions of two instances of immediate of Cronos billing XComlP following Adams’s assurances to the contrary, readily inferable that Adams made these promises with the and undisclosed preconceived intention them. performing very least, At the at the time of the second instance of immedi ate billing disputed Cronos for following Adams’s that such promises removed, would be clearly Adams Cronos, would have made the promises while no harboring intention of them. As honoring Adams’s con promises stituted misrepresentations fact rather than present mere insincere promises of future performance, alleged miscon (see duct here is collateral to the contract Deerfield, 68 NY2d at Media, 478; GoSmile, American 956; Inc. v Le 135 AD3d at vine, lv 81 AD3d dismissed 17 NY3d 2010], Dept [2011]). bases its majority conclusion that Adams’s as surances to Cronos are not collateral to the contract on its view these are promises nothing more than promises made on behalf of XComlP to fulfill its preexisting contractual obligation to Cronos for indemnify expenses from fraud arising ulent calls in accordance with section 9 of the agreement. As the majority concedes, section 9 also states that each party to the agreement is obligated pay invoices from the other party, even if the invoices are for charges related to fraudulent calls. Given the ambiguity of section 9 of the agreement as to whether each is party responsible for payment of fraudulent invoices from the other or party, is entitled to indemnity the other party, there is no basis which this Court can presently determine whether XComlP any had preexisting (see contractual New York obligation reverse its charges Inc., Univ. v 2017] [“because Pfizer section 9 n language ... is ambiguous, we cannot determine on this motion to dismiss that either party’s interpretation law”]). the agreement controls as a matter Where, at the pleading stage there proceedings, are undeveloped issues a breach concerning of contract claim due to the of a ambiguity contractual provision, premature is claim, dismiss another such as the portion here, fraud claim in question as duplicative, and both claims should be to stand permitted (Demetre v HMS Holdings Corp., 493-494 [1st 2015]).

Thus, as in these in Deerfield, cases, recent as well as promises allegedly made by cannot, Adams at this juncture, be demonstrably upon any preexisting said to have been based obligation. light Therefore, contractual when viewed in the plaintiff, promises most favorable to Adams’s were collateral to 956). the contract 68 NY2d at Deerfield, analysis performed case, In this to be under the second prong of the Financial Structures rubric in order to determine duplicative necessarily whether the fraud claim is involves determining making promises the nature of Adams’s intent in may reasonably Cronos, to legations presented. be inferred from the factual al- although principles governing

Thus, duplicative separate whether claims are are and distinct from governing part those whether an intent to defraud on the of a (in Adams) may reasonably case, defendant this be inferred allegations presented, application from the factual of those two principles necessarily converge sets of case, this with the principles governing being ap- reasonable inference of intent plied step inquiry in furtherance of one of the overall as to portion question duplica- whether the fraud claim in tive. reaching promises

In conclusion Adams’s were not agreement, majority’s Fairway collateral to the reliance on (99 Mgt., Prime Estate LLC v First Am. Intl. Bank AD3d 554 2012]) (138 Dept [1st Dept [1st and Castellotti v Free AD3d 198 2016]), misplaced. Fairway Neither nor Castellotti involved ambiguous provision question contractual that called into whether the defendant who made a false or insincere promise preexisting obligation perform had a contractual by promised. what Here, contrast, above, was as discussed the ambiguous provisions agreement, 9 of the if section construed light plaintiff, in most favorable to would mean that de preexisting fendants XComlP and Adams were under no obligation perform promises allegedly contractual the false by thereby rendering promises Adams, made those false collat agreement. eral to the alleged promises

Moreover, this is not case where the made (in Adams) by case, defendant this are not indicative of “a present intention to deceive” because does “allege [Adams], facts to show that the defendant at the time promissory representation made, was never intended to (Non-Linear Trading honor or act on his v Brad statement” Co. Dept quota 1998] [internal Assoc., dis 243 AD2d quoting omitted], Brooks, tion marks Lanzi v [1977]). [3d 1976], Rather, viewed NY2d affd light plaintiff, allegation most favorable to of the im billing by mediate following of Cronos XComlP on both occasions contrary, ambigu

Adams’s assurances to the and the ity paragraph agreement, 9 of the which could be construed imposing preexisting obligation upon as no contractual defend promises, ants, establish Adams’s intention not to honor his agreement, which were collateral to the at the time he made 118). (cf. Non-Linear, them 243 AD2d at Funding Our decision in First Bank Ams. v Motor Car (257 1999]), by majority, supports AD2d 287 cited position. There, this both breach of contract and fraud claims had been but the fraud claim had been dismissed, and ground this Court reinstated the fraud claim on the that the alleged misrepresentations purchased defendants’ about loans agreement question [s] under the constituted “statement (id. 294). present Corp. fact” at In Tesoro Petroleum v Hol (108 [1st Dept appeal born Oil Co. 1985], dismissed [1985]), by majority, 65 NY2d 637 complaint also cited where the had both breach of contract and claims; fraud we affirmed the dismissal of the fraud claim because that claim solely upon plaintiff’s allegations was based the de falsely promised pursuant fendants “future acts” 607). (Tesoro, by the terms of the contract Here, 108 AD2d at promises alleged by contrast, the made Cronos, Adams to as plaintiff, misrepresented contemporaneous plans, Adams’s immediately allegation which were effected. From the billing Adams’s assurances were followed the immediate may reasonably Cronos for the calls, be inferred slightest honoring that Adams never harbored the intention of his to reverse to Cronos for those calls. Additionally, noted, whether or not Adams’s statements re preexisting obligations lated to his under the contract cannot juncture. be determined at this maintaining prolonged

In that Cronos’s reliance on Adams’s promises period approximately over a months, as dem- IV2 by permitting onstrated Cronos’s XComlP continued access to regarded Cronos’s services, indicates that Cronos Adams’s promises promises majority acts, future separate conflates two and distinct elements of fraud. On the one hand, there is the element of intent defraud, which is a (in matter of the intent of the case, defrauder this Ad- (in ams), allegedly plaintiff not of the defrauded case, this Cro- nos). On the other hand, there is the reliance, element of which plaintiff whether the defrauded is a matter of believes accordingly. otherwise, to be true and acts Put a false determining whether, case, contemporaneous in promises this Adams’s assurances were acts, future rather than de- governed perception termination is not meaning Cronos’s of the governed promises. Rather, it of those what making were in them. Adams’s intentions prong The third Financial Structures examines whether the damages sought under the fraud claim would not be recover- damages. majority under a measure of As the able contract cor- rectly sought points out, $54,926.84 in the fraud claim is sought $89,085.24 included within the on the of contract breach may claim, and therefore also recoverable under a contract be damages. Nonetheless, measure of because Financial Struc- requires tures that all three of its criteria be satisfied in order duplicative claim, for a fraud claim to be of a breach of contract portion question and because the of the fraud claim here criteria, meet two out three Financial does not Structures duplicative it is not of the breach of contract claim in this case. Accordingly, Supreme I would affirm the order of Court to the extent denied defendants’ motion to dismiss plaintiff’s alleging portion action, fraud, fourth cause of promises principal plaintiff. that Adams had made false to a Kapnick, JJ., J.P.; Kahn, Friedman, Richter concur with J., dissents in in a part separate opinion. County, August Supreme Court,

Order New York entered affirmed, modified, law, should be on the and otherwise without costs.

Case Details

Case Name: Cronos Group Ltd. v. XComIP, LLC

Court Name: Appellate Division of the Supreme Court of the State of New York

Date Published: Sep 19, 2017

Citation: 2017 WL 4125643

Docket Number: 650187/16 3186

Court Abbreviation: N.Y. App. Div.