Daniela Mañas, Respondent, v VMS Associates, LLC, Doing Business as Violy & Company, et al., Appellants.
Supreme Court, Appellate Division, First Department, New York
48 AD3d 451 | 863 NYS2d 4
First Department judges: Tom, J.P., Saxe, Friedman, Gonzalez and McGuire, JJ.
Plaintiff was hired as an analyst by an investment banking firm, Violy, Byorum & Partners Holdings (VBP), operated by defendant Violy McCausland-Seve. VBP, however, experienced financial losses and began winding down its affairs in 2003. Around the time VBP began winding down its аffairs, McCausland-Seve opened a new investment firm, defendant Violy & Co. (Violy), and offered a position in this new firm to plaintiff.
According to the allegations in her complaint, plaintiff, while intеrested in the new position, was concerned about the compensation she would receive if she accepted the position; in 2002 and 2003 her salary at VBP was cut and she did not rеceive a year-end bonus in either of those years. Moreover, McCausland-Seve had promised creditors of VBP that 20% of certain fees generated by Violy would be used to pаy off VBP‘s debt. Thus, plaintiff "demanded assurances from [McCausland-Seve] that [plaintiff] would receive adequate compensation for past and future services. [Plaintiff] also demanded аssurances from [McCausland-Seve] that Violy would not suffer the same
"(a) The Short-Term Compensation Plan: At first, [plaintiff] would earn the same base salary earned at the time VBP closed its doors (which reflected pay cuts). She would also not receivе bonuses in connection with the closing of a few small, initial deals that were carried over from VBP. Proceeds from those deals would be used to start-up Violy . . . and pay off past liabilities. After that initial period, [McCausland-Seve] would then compensate [plaintiff] for her financial losses and her ongoing performance in executing deals by, at a minimum, restoring her salаry to the highest point at VBP and paying her bonuses at the time certain deals closed in amounts unprecedented by past VBP standards.
"(b) The Long-Term Compensation Plan: After the short-term cоmpensation plan expired, [plaintiff] would be paid bonuses for closing deals on a semi-annual basis.
"(c) Firm Management: Violy[‘s] . . . budget would be monitored and controlled to engender trаnsparency and prevent the type of overspending and mismanagement that resulted in VBP‘s financial unsustainability and employees’ lost earnings."
Plaintiff claimed that she relied "upon these promises and terms" in accepting in October 2003 a position as a vice-president of Violy.
According to plaintiff, during Violy‘s first year of operation she requested that McCausland-Seve "crystalize specific numbers regarding [plaintiff‘s] short and long-tеrm bonus compensation structures." In response to plaintiff‘s requests, McCausland-Seve allegedly told plaintiff that Violy was using money to pay off past debt and repay loans drawn on thе firm‘s working capital line of credit. Thus, McCausland-Seve could not determine the amount or structure of plaintiff‘s bonuses.
In "mid-2004" McCausland-Seve appointed another vice-president, Fernanda, "to finalize [plaintiff‘s] bonus structures." "Fernanda compiled charts proposing specific numbers fоr the short- and long-term compensation plans and frequently discussed the tenets of th[o]se plans with [plaintiff]." Each bonus under the short- and long-term compensation plans was based on diffеrent factors that Fernanda outlined to plaintiff; however, each bonus was based in some measure on "deals closed" on which plaintiff worked. "Fernanda represented that [McCausland-Seve] had approved" the information in the charts.
Violy "closed" entire deals and phases of other deals on which plaintiff worked, thereby generating fees that were to be distributed to plaintiff as bonuses under either the short- or long-term compensation plans. Yet, despite numerous requests by plaintiff to McCausland-Seve that she clarify Violy‘s bonus policies and pay plaintiff bonuses on deals on which plaintiff worked that had been entirely or partially closed, plaintiff received only one bonus under the short-term compensation plan. In addition to alleging that McCausland-Seve "placated [plaintiff] with assurances that her concerns [regarding bonus payments] would be addressed оr claimed that [Violy] lacked sufficient funds to pay bonuses," plaintiff claimed that McCausland-Seve squandered Violy‘s income by taking personal cash advances, purchasing an exрensive personal automobile and funding projects unrelated to Violy. Ultimately, plaintiff‘s employment with Violy was terminated in April 2006.
Plaintiff commenced this action against Violy and McCauslаnd-Seve, asserting seven causes of action. Defendants jointly moved under
A fraud-based cause of action is duplicative of a breach of contract claim "when the only fraud alleged is that the defendant was not sincere when it promised to perform under the contract" (First Bank of Ams. v Motor Car Funding, 257 AD2d 287, 291 [1999]). A fraud-based cause of action may lie, however, where the plaintiff pleads a breach of a duty separate from a breach of the contract (id.). Thus, where the plaintiff pleads that it was induced to enter into a contract based on the defendant‘s promise to perform and that the defendant, at the time it made the promise, had a "preconceived and undisclosed intention of not performing" the contract, such a promise constitutes a representation of present fact collateral to the terms of the contract and is actionable in fraud (Deerfield Communica-tions Corp. v Chesebrough-Ponds, Inc., 68 NY2d 954, 956 [1986] [internal quotation marks omitted]; see First Bank of Ams., supra).
Here, plaintiff does allege with resрect to the cause of action for fraudulent inducement that "[a]t the time [d]efendants made the [alleged] representations [regarding the short- and long-term compensation plans], [d]efendants did not intend to compensate [plaintiff] in conformity with their promises." Similarly, with respect to her cause of action for fraud, plaintiff alleges that "[d]efendants did not intend tо compensate [plaintiff] in conformity with the[ ] promises and assurances [concerning the short- and long-term compensation plans]." However, these allegations are not sufficient. Rather, because they are merely "[g]eneral allegations that defendant[s] entered into a contract while lacking the intent to perform it[, the allegations] are insufficiеnt to support [the fraud-based] claim[s]" (New York Univ. v Continental Ins. Co., 87 NY2d 308, 318 [1995]). Thus, the causes of action for fraudulent inducement and fraud must be dismissed.
Additionally, the fraud-based causes of action must be dismissed for another, independent reason. Causes of action for breach of contract and fraud based on the breach of a duty separate from the breach of the contract are designed to provide remedies for different species of damages: the damages recoverable for a breach of contract are meant "to place the nonbrеaching party in as good a position as it would have been had the contract been performed" (Brushton-Moira Cent. School Dist. v Thomas Assoc., 91 NY2d 256, 261 [1998]); the damages recoverable for being fraudulently induced to enter a contract are meant to "indemni[f]y for the loss suffered through that inducement" (Deerfield Communications Corp., 68 NY2d at 956 [internal quotation marks and brackets omitted]), e.g., damages for foregone opportunities (see Coppola v Applied Elec. Corp., 288 AD2d 41, 42 [2001]). Here, plaintiff did not allege that she sustained any damages that would not be recoverable under her breach of contract cause of action; she seeks to recover salary and bonuses to which she claims she is entitlеd under the short- and long-term compensation plans. Thus, the fraud-based causes of action are duplicative of the breach of contract cause of action.
Regarding the cause of action for defamation, plaintiff did not plead in the complaint the specific words allegedly used by McCausland-Seve, as required by