Oct 30, 2017Litigation & Dispute Resolution
Source: www.nyfraudclaims.com As explained in my previous posts, cases attempting to allege fraud in the context of future employment opportunities often face difficult obstacles. A recent case in the United States District Court for the Southern District of New York — Moore v. Thomson Reuters (GRC) Inc., 17 Civ. 0211, NYLJ 1202798525835, at *1 (SDNY, Decided September 13, 2017) — is a good example. Case Facts Plaintiff was a senior vice president of sales for a company located in England. His employer was then acquired by the defendant Thomson Reuters. Plaintiff and Defendant then began discussing Plaintiff’s becoming a Sales Specialist and relocating with his family to New York. Defendant allegedly told Plaintiff that “if he stayed in the United Kingdom, his tenure with Defendant might be in jeopardy” and that if he did not transfer, “he may no longer have a position with Thomson Reuters.” Defendant then sent Plaintiff a written offer of employment for a sales position in New York, expressly emphasizing that Plaintiff’s continued employment would be on an “at-will” basis and disclaiming any and all prior representations or promises. Plaintiff ultimately accepted the position. However, thereafter, Defendant allegedly did not support the products over which Plaintiff had sales obligations, and he was not able to achieve the monetary benefits he desired. Plaintiff then sued for breach of contract and fraud. Dismissal Motion Defendant moved to dismiss both claims under Federal Rule of Civil Procedure 12(b)(6). The court had no trouble dismissing the breach of contract claim, finding that the offer letter could not form the basis of an enforceable contract insofar as it emphasized the at-will nature of the employment relationship under which the Defendant had the right to change the terms of the relationship going forward. The court noted that the fraud claim implicated both the substantive elements of fraud and the heightened pleadings standard under Federal Rule of Civil Procedure 9(b), requiring a party “to state with particularity the circumstances constituting fraud.” As to the pleadings requirements under Rule 9(b), the court observed: First, “the complaint must (1) detail the statements…that the plaintiff contends are fraudulent, (2) identify the speaker, (3) state where and when the statements…were made, and (4) explain why the statements…are fraudulent.” Loreley, 797 F.3d at 171 (internal quotation marks omitted). Second, the complaint must “allege facts that give rise to a strong inference of fraudulent intent.” Id. (internal quotation marks omitted). “The requisite ‘strong inference’ of fraud may be established either (a) by alleging facts to show that defendants had both motive and opportunity to commit fraud, or (b) by alleging facts that constitute strong circumstantial evidence of conscious misbehavior or recklessness.” Lerner v. Fleet Bank, N.A., 459 F.3d 273, 290-91 (2d Cir. 2006); accord Walia v. Veritas Healthcare Sols., L.L.C., No. 13 Civ. 6935, 2015 WL 4743542, at *6 (S.D.N.Y. Aug. 11, 2015). As to the elements of the fraud claim, the court stated: To state a claim for fraud under New York law, a plaintiff must allege: “(1) a material misrepresentation or omission of a fact, (2) knowledge of that fact’s falsity, (3) an intent to induce reliance, (4) justifiable reliance by the plaintiff, and (5) damages.” Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 170 (2d Cir. 2015) (applying New York law); accord Connaughton v. Chipotle Mexican Grill, Inc., 75 N.E.3d 1159, 1163 (N.Y. 2017). The court then proceeded to reject Plaintiff’s fraud claims in their entirety. The court found particular fault with two main aspects of Plaintiff’s complaint. One, Plaintiff did not provide sufficient detail of the “who, what and when” of the allegedly fraudulent statements. Two, the alleged “misrepresentations” that Plaintiff sought to rely upon were not false statements of existing facts but rather essentially promises, opinions or predictions of future employment opportunities or events, which were not actionable for fraud. Rule 9(b) Failings The court noted the alleged misrepresentations that Plaintiff was attempting to rely upon as follows: 1. During the negotiation process, the CEO of Plaintiff’s then employer represented to Plaintiff in a face-to-face meeting that accepting Defendant’s offer would be a positive step in Plaintiff’s career. 2. During the negotiation process, Defendant’s representatives met with Plaintiff on a weekly basis and misrepresented the advisability of Plaintiff accepting the transfer to New York. 3. During the negotiation process, Defendant’s Sales Specialist Manager misrepresented to Plaintiff that he would become a Sales Specialist per the offer beginning in 2015. 4. Before Plaintiff accepted Defendant’s offer, Defendant misrepresented that it would take all steps necessary to support the products that Plaintiff would be trying to sell…when in fact, it was not capable of doing so in the United States. 5. Before Plaintiff accepted Defendant’s offer, Defendant misrepresented that Plaintiff would be the only Thomson Reuters representative in the United States who would be selling those products. 6. Before Plaintiff accepted Defendant’s offer, Defendant misrepresented that Plaintiff would be able to earn uncapped commissions for all of the deals that he closed. First, the court found that Plaintiff had not provided the necessary detail under Rule 9(b): None of the alleged misrepresentations is pleaded with sufficient specificity to state a claim for fraud under New York law. Four of the six (Nos. 2, 4, 5 and 6) are insufficient because they fail to identify any speaker, attributing the statement only to “Defendant” or “Defendant’s representatives.” See, e.g., Riker v. Premier Capital, LLC, No. 15 Civ. 8293, 2016 WL 5334980, at *5-*6 (S.D.N.Y. Sept. 22, 2016) (rejecting fraud claim based on failure to satisfy Rule 9(b) where defendant “[did] not sufficiently identify an individual speaker” and failed to allege “the ‘where and when’ of the statements”). All six of the alleged misrepresentations fail to state where and when the statement was made, pleading only that it was made “[d]uring the negotiation process” or “[b]efore Plaintiff accepted Defendant’s Offer.” These facts are insufficient to meet Rule 9(b)’s heightened pleading standard. See id. Plaintiff’s providing additional details in his Opposition is insufficient as “Rule 9(b) mandates pleading these circumstances.” Id. at *6 (emphasis in original) (rejecting argument that plaintiff can meet Rule 9(b)’s heightened pleading standard by supplying the missing information during discovery). Non-Actionable Statements The court then ripped apart the Plaintiff’s assertion that the statements made to him were actionable misrepresentations of fraud: Defendant’s alleged misrepresentations that “accepting Defendant’s Offer would be a positive step in Plaintiff’s career” (No. 1) and that it was “advisab[le]” for Plaintiff to accept the transfer to New York (No. 2) are not actionable. See Cohen v. Avanade, Inc., 874 F. Supp. 2d 315, 323 (S.D.N.Y. 2012) (dismissing fraud claim, in part, because plaintiff failed to allege sufficient facts that defendants knew or should have known that their “ statements of subjective opinion” were false) (citing Int’l Fin. Corp. v. Carrera Holdings Inc., 920 N.Y.S.2d 310, 310-11 (1st Dep’t 2011) (holding that plaintiffs’ alleged misstatements were “expressions of hope and opinion,” and therefore could not support a counterclaim for fraudulent inducement). Defendants’ alleged misrepresentations that Plaintiff would become a sales manager in 2015; that Defendant would take all necessary steps to support the products Plaintiff expected to sell; that Plaintiff would be the only Thomson Reuters representative in the United States; and that Plaintiff would be able to earn uncapped commissions (Nos. 3-6) are likewise not actionable as fraud. These statements are not, as the Complaint alleges, material false representations of an existing fact; rather, they are opinions or predictions about Plaintiff’s future at Thomson Reuters, which cannot state a claim for fraud under New York law. See Lombardi v. Lombardi, 7 N.Y.S.3d 447, 450 (2d Dep’t 2015) (finding that the alleged misrepresentations “were merely representation[s] of opinion or a prediction of something which is hoped or expected to occur in the future, which cannot not sustain a fraud claim”) (internal quotation marks omitted and alteration in original). Even assuming these statements were promises of future action, such promises “give rise only to a breach of contract cause of action.” Merrill Lynch & Co. v. Allegheny Energy, Inc., 500 F.3d 171, 184 (2d Cir 2007). The Offer Letter contains an integration clause that negates any such claim, stating that “this offer supersedes…all prior understandings” and “that there are no other terms.” See Broyles v. J.P. Morgan Chase & Co., No. 08 Civ. 3391, 2010 WL 815123, at *4 (S.D.N.Y. Mar. 8, 2010) (applying New York law and dismissing plaintiff’s breach of contract claims where a valid offer letter stated that its terms constituted “the entire understanding of the parties with respect to the terms and conditions of the offer of employment and supersede [ ] any prior verbal or written communication”) (alteration in original). Finally, the court denied Plaintiff’s motion to amend the complaint, finding that Plaintiff could not cure the substantive deficiencies identified above. Commentary Fraud claims in the context of future employment are particularly difficult. As the court in Moore observed, promises about future employment conditions or opportunities do not establish the necessary misrepresentations, especially where the subject employment is expressly stipulated as “at-will.” A plaintiff in this context will fare much better if the alleged misrepresentations were false statements about facts that purported existed at the time of the negotiations of future employment. Of course, the plaintiff must also identify who made those statements, when and how.
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