Opinion
03 Civ. 15 (RWS).
June 7, 2007
Attorney for Third Party Defendants Terry May and TMI, LLC SHELDON J. FLEISHMAN, ESQ. New York, New York.
Attorney for Third Party Plaintiff E-21 Global, Inc. RICHARD M. GREENE, ESQ. Greensboro, NC.
OPINION
Third-party defendants Terry E. May ("May") and TMI, LLC ("TMI") (collectively the "Third-Party Defendants") have moved: (1) under Rule 12(f), Fed.R.Civ.P., to strike certain words from the Third-Party Complaint ("TPC") of third-party plaintiff E-21 Global, Inc. ("E-21"); (2) to take judicial notice of certain facts; and (3) under Rule 12(b)(6), Fed.R.Civ.P., to dismiss the TPC. For the reasons set forth below, the motions are granted in part and denied in part.
The Parties
E-21 is a New York corporation with its principal place of business located in Malverne, New York.
TMI is a California limited liability company with its principal place of business located in San Bernardino, California.
May is the manager and chief executive officer of TMI. Upon information and belief, May is a resident of California.
Prior Proceedings
The history of this litigation is set forth in the following opinions of this court: Bangkok Crafts Corp. v. Capitolo Di San Pietro in Vaticano, No. 03 Civ. 15(RWS), 2006 WL 1997628 (S.D.N.Y. July 18, 2006); Bangkok Crafts Corp. v. Capitolo Di San Pietro in Vaticano, No. 03 Civ. 15(RWS), 2005 WL 1706490 (S.D.N.Y. July 21, 2005); Bangkok Crafts Corp. v. Capitolo Di San Pietro in Vaticano, 376 F. Supp. 2d 426 (S.D.N.Y. 2005); Bangkok Crafts Corp. v. Capitolo Di San Pietro in Vaticano, No. 03 Civ. 15(RWS), 2005 WL 1595285 (S.D.N.Y. July 6, 2005); Bangkok Crafts Corp. v. Capitolo Di San Pietro in Vaticano, 331 F. Supp. 2d 247 (S.D.N.Y. 2004).
The TPC against May and TMI was filed on November 27, 2003, alleging causes of action for: (1) fraud (TPC ¶¶ 14-24); (2) negligent misrepresentation (id. ¶¶ 25-36); (3) breach of contract (id. ¶¶ 37-43); (4) unjust enrichment (id. ¶¶ 44-46); (5) money had and received (id. ¶¶ 47-51); and (6) rescission (id. ¶¶ 52-56).
The instant motions were heard and marked fully submitted on September 27, 2006.
The Third-Party Complaint
The following is drawn from the allegations contained in the TPC and does not constitute findings of the Court.
On or about February 8, 1996, plaintiff Bangkok Crafts Corporation ("BCC") entered into a license with the Capitolo di San Pietro in Vaticano ("Capitolo"), in which Capitolo granted to BCC the exclusive rights to manufacture and sell reproductions of artwork owned by Capitolo (the "1996 License"). The 1996 License required BCC to pay royalties to Capitolo.
On or about June 1, 1997, BCC assigned all of its rights under the 1996 License to counterclaim defendant Treasures of St. Peter's in the Vatican, Ltd. ("TSV"). In response to Capitolo's written objection to BCC's assignment of the 1996 License, BCC advised Capitolo that BCC had retained ownership of the 1996 License, but had "assigned the operation" of the license to TSV. (Id. ¶¶ 9.)
BCC and TSV are referred to collectively as "BCC/TSV."
On or about August 15, 1997, BCC/TSV appointed third-party defendant Gerald Colapinto ("Colapinto"); his company, Second Renaissance, LLC ("SRLLC"); and his daughter, Sandra Nutt, to serve as the exclusive management, sales, and marketing representatives for selling sublicenses under the 1996 License. In consideration for their services, Colapinto and his daughter were to receive forty percent of all advance royalties and royalty fees paid by the sublicensees. (Id. ¶ 10.)
On or about July 1, 1998, TSV, acting through its agents Colapinto and SRLLC, entered into a sublicense agreement with TMI for the sale and manufacture of confectionery products (the "Confections Sublicense"). At all times relevant herein, May owned 99.9 percent of TMI and was TMI's manager and chief executive officer. At all times relevant herein, May and Colapinto had a close, personal relationship with each other. Neither May nor TMI paid any consideration for the Confections Sublicense, but were given the sublicense by Colapinto because of their close, personal relationship. (Id. ¶¶ 12-13.)
Prior to September 2000, Colapinto informed Claire Mahr ("Mahr"), president of E-21, that May, through her company TMI, owned the Confections Sublicense. Colapinto suggested to Mahr that it would make good business sense for E-21 to acquire May's and TMI's interest in the Confections Sublicense. At the time that Colapinto made this suggestion to Mahr, Colapinto knew that neither May nor TMI had paid any consideration for the Confections Sublicense, but had been granted the Confections Sublicense by Colapinto because of the close, personal relationship that existed between Colapinto and May. As a result of Colapinto's suggestions, Mahr approached May about acquiring her interest in the Confections Sublicense. (Id. ¶¶ 15-16.)
During September 2000, Mahr and May had meetings in New York City at which they discussed the sale and purchase of May's and TMI's interest in the Confections Sublicense. During these discussions, May represented to E-21 that: (1) the Confections Sublicense was valid and in full force and effect; (2) there were no factors or circumstances which could result in the breach, termination, or cancellation of the Confections Sublicense; and (3) she had paid an advance royalty fee of $150,000 for the Confections Sublicense. Colapinto was present during each of these discussions and made the same representations as May. These representations were false, and May and Colapinto knew they were false at the time they were made. May knew that neither she nor TMI had paid any consideration for the Confections Sublicense, knew that the Vatican Treasury licensing program required the payment of advanced royalties as a condition for the issuance of a sublicense, and knew that she had been granted the Confections Sublicense because of her relationship with Colapinto, but failed to disclose this information to E-21. (Id. ¶ 17.)
May represented that she was a licensed securities broker and had been one for a number of years, that she worked in a highly regulated business environment in which she was required to make accurate and complete disclosures, and that she had worked closely with Colapinto and BCC/TSV for two years to develop her sublicense business. (Id. ¶ 20.)
As a result of E-21's reliance on the false, fraudulent, and misleading representations made by Colapinto, SRLLC, May, and TMI, E-21 was fraudulently induced into entering into an agreement with May and TMI on or about September 21, 2000, wherein E-21 agreed to purchase May's ownership interest in TMI for $100,000, plus stock in E-21 and the appointment of May to E-21's board of directors. Pursuant to the agreement, E-21 made a partial payment to May of $40,850. Later, the parties modified the agreement between May and E-21, agreeing to release any interest May and TMI had in the Confections Sublicense and allowing BCC/TSV to grant a new Confections Sublicense directly to E-21. (Id. ¶ 22.)
After it discovered that May had made false, fraudulent, and misleading representations concerning the Confections Sublicense, E-21 made demand upon May to return the sum of $40,850, but May has refused and continues to refuse to return said sum. (Id. ¶ 23.)
Discussion
1. The Rule 12(f) Motion to Strike "Close," "Personal," and "Improper" is Granted in Part and Denied in Part
Rule 12(f) provides:
Upon motion made by a party before responding to a pleading or, if no responsive pleading is permitted by these rules, upon motion made by a party within 20 days after the service of the pleading upon the party or upon the court's own initiative at any time, the court may order stricken from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.
The standard that must be met in order to strike material pursuant to 12(f) is a stringent one. See Mikropul Corp. v. Desimone Chaplin-Airtech, Inc., 599 F. Supp. 940, 945 (S.D.N.Y. 1984). "A motion to strike immaterial or impertinent matter from a pleading will ordinarily not be granted unless the matter sought to be stricken clearly can have `no possible relation' to the matter in controversy." Gleason v. Chain Serv. Restaurant, 300 F. Supp. 1241, 1257 (S.D.N.Y. 1969), aff'd, 422 F.2d 343 (2d Cir. 1970).
The TPC alleges: "At all times relevant herein, May and Colapinto had a close, personal and improper relationship." (TPC ¶ 13.)
The descriptive "improper" is without legal significance and implies, without factual support, contact that could be considered scandalous. In that the exact nature of the relationship between Colapinto and May is not relevant to this litigation, the Rule 12(f) motion is granted in part and the word "improper" is stricken from the TPC.
2. The Motion to Take Judicial Notice and the Rule 12(b)(6) Motion
a. The Rule 12(b)(6) Review Standard
A motion to dismiss pursuant to Rule 12(b)(6) must be denied "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) (quotingConley v. Gibson, 355 U.S. 41, 45-46 (1957)). For the purposes of a Rule 12(b)(6) motion, all well-pleaded allegations are accepted as true, and all inferences are drawn in favor of the pleader.Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993).
"The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Villager Pond. Inc. v. Town of Darien, 56 F.3d 375, 378 (2d Cir. 1995) (quoting Scheuer, 416 U.S. at 236). In other words, "`the office of a motion to dismiss is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof.'"Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co., 375 F.3d 168, 176 (2d Cir. 2004) (quoting Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980)). Dismissal is only appropriate when "it appears beyond doubt that the [claimant] can prove no set of facts which would entitle him or her to relief." Sweet v. Sheahan, 235 F.3d 80, 83 (2d Cir. 2000); accord Eternity Global Master Fund Ltd., 375 F.3d at 176-77.
In addition to the allegations contained in the Complaint, the court may refer "to documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in plaintiffs possession or of which plaintiffs had knowledge and relied on in bringing suit." Brass v. Am. Film Tech., Inc., 987 F.2d 142, 150 (2d Cir. 1993); see also Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir. 1991); Calcutti v. SBU, Inc., 224 F. Supp. 2d 691, 696 (S.D.N.Y. 2002). Rule 201 of the Federal Rules of Evidence generally permits a court to take judicial notice of any facts "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b)(2).
b. The Motion to Take Judicial Notice Is Denied
The facts for which the Third-Party Defendants seek judicial notice are not appropriate, pursuant to Federal Rule of Evidence 201(b). Accordingly, despite the lack of opposition, the motion is denied. Nonetheless, the Court may still rely on certain of the documents cited in support of the motion, pursuant to the Rule 12(b)(6), Fed.R.Civ.P., review standard; specifically, the TPC. See supra.
c. The Motion to Dismiss the Fraud Claim Is Denied
Under New York law, the elements of a fraud claim are: (1) that the defendant made a material false representation, (2) that the defendant intended to defraud the plaintiff thereby, (3) that the plaintiff reasonably relied upon the representation, and (4) that the plaintiff suffered damage as a result of such reliance. See Bangkok Crafts Corp., 2006 WL 1997628, at *4 (citing Manning v. Utils. Mut, Ins. Co., 254 F.3d 387, 400 (2d Cir. 2001); Lama Holding Co. v. Smith Barney, Inc., 668 N.E.2d 1370, 1373 (1996)).
Additionally, an earlier opinion in this case set forth the following:
Under Fed.R.Civ.P. 9(b) "the circumstances constituting fraud . . . shall be stated with particularity." . . . "To satisfy Rule 9(b)'s particularity requirements, a plaintiff's complaint must: (1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." Flash Electronics. Inc. v. Universal Music Distribution Corp., 312 F. Supp. 2d 379, 402 (E.D.N.Y. 2004) (quoting Stevelman v. Alias Research, Inc., 174 F.3d 79, 84 (2d Cir. 1999)). Included in an explanation of why the statements were fraudulent should be a statement of what the defendants `obtained' as a result of the fraud." Morin v. Trupin, 823 F. Supp. 201, 205 (S.D.N.Y. 1993) (citing Beck v. Manufacturers Hanover Trust Co., 645 F. Supp. 675, 682 (S.D.N.Y. 1986), aff'd 820 F.2d 46 (2d Cir. 1987)).Bangkok Crafts Corp., 331 F. Supp. 2d at 253; see also Bangkok Crafts Corp., 2006 WL 1997628, at *5.
Paragraph 17 of the TPC has included the alleged misrepresentations, the dates on which each misrepresentation was made, the locations at which each misrepresentation was made, and the speakers and recipients of each misrepresentation. It has been alleged in the TPC that E-21 relied upon these misrepresentations, that its reliance was reasonable, and that it has been damaged as a result of its reliance on the misrepresentations. Similarly pled claims by E-21 for fraud against Loata, Colapinto, and their companies were determined to have been adequately alleged in an earlier opinion. See Bangkok Crafts Corp., 2006 WL 1997628, at *5-9.
May and TMI have sought dismissal of the fraud cause of action for failure of E-21 to allege justifiable reliance, citingCrigger v. Fahnestock Co., Inc., 443 F.3d 230 (2d Cir. 2006), in which the Court of Appeals stated:
Reasonable reliance entails a duty to investigate the legitimacy of an investment opportunity where "plaintiff was placed on guard or practically faced with the facts." Mallis v. Bankers Trust Co., 615 F.2d 68, 81 (2d Cir. 1980), abrogated in part on other grounds by Peltz v. SHB Commodities, 115 F.3d 1082, 1090 (2d Cir. 1997). Only "[w]hen matters are held to be peculiarly within defendant's knowledge [is it] said that plaintiff may rely without prosecuting an investigation, as he ha[d] no independent means of ascertaining the truth." Id. at 80. A plaintiff cannot close his eyes to an obvious fraud, and cannot demonstrate reasonable reliance without making inquiry and investigation if he has the ability, through ordinary intelligence, to ferret out the reliability or truth about an investment. . . .Id. at 234.
However, a plaintiff suing for fraud need only allege that he relied on the misrepresentations made by the defendant to overcome a motion to dismiss "since the reasonableness of his reliance implicates factual issues whose resolution would be inappropriate at this early stage." Internet Law Library, Inc. v. Southridge Capital Mgmt., 223 F. Supp. 2d 474, 485 (S.D.N.Y. 2002). Here, the TPC stated the basis of E-21's reliance.
It has previously been determined that E-21's allegations with regard to its reliance on Colapinto's misrepresentations were adequate to support a fraud claim and Colapinto's motion to dismiss was accordingly denied, in part, on the grounds that a "factual misrepresentation by Colapinto about the amount paid by May . . . [is] sufficient to support claims based on fraud."Bangkok Crafts Corp., 2006 WL 1997628, at *7. Here, it is alleged that May made the same misrepresentation that Colapinto had made about the amount that she paid for her sublicense and that E-21 reasonably relied on that misrepresentation.
May and TMI also have contended that the fraud claim should be dismissed because E-21 was not damaged as a result of its reliance on May's misrepresentation. Rather, May and TMI contend that the agreement between E-21 and the May defendants subsequently was "cancelled" and that E-21 then negotiated directly with BCC/TSV to acquire a new Confections Sublicense. (Defs.' Mem. in Supp. 14-15.) According to the TPC, however, E-21 "modified" its agreement with the May defendants, it did not cancel the agreement. (TPC ¶ 22.) As alleged in the TPC, E-21 paid May $40,850 based on her representations about the amount she had paid for the Confections Sublicense. (Id. ¶¶ 22-24.) An adequate allegation of damage has therefore been set forth.
Accordingly, based on the foregoing analysis, the motion to dismiss the fraud claim is denied.
d. The Motion to Dismiss the Negligent Misrepresentation Claim is Granted
Under New York law, the elements of a claim for negligent misrepresentation are that:
(1) the defendant had a duty, as a result of a special relationship, to give correct information; (2) the defendant made a false representation that he or she should have known was incorrect; (3) the information supplied in the representation was known by the defendant to be desired by the plaintiff for a serious purpose; (4) the plaintiff intended to rely and act upon it; and (5) the plaintiff reasonably relied on it to his or her detriment.Bangkok Crafts Corp., 2006 WL 1997628, at *10 (citing Greenberg v. Chrust, 198 F. Supp. 2d 578, 584 (S.D.N.Y. 2002)).
In the TPC, E-21 has alleged that May made a number of false statements to E-21 (TPC ¶¶ 17, 26-29), that May knew that E-21 would rely on those statements, and that E-21 did rely on those statements (id. ¶¶ 27-31). E-21 has further alleged that because May knew that she would be the source of much of the information regarding the Confections Sublicense on which E-21 would rely and because May would become a member of E-21's board of directors and a stockholder in E-21 as part of the terms of E-21's purchase of the Confections Sublicense from May and TMI, May had a special duty to exercise reasonable care in providing such information. (Id. ¶ 33.) Finally, E-21 has alleged that May violated that duty owed to E-21. (Id. ¶ 34.)
May and TMI have contended that E-21's claim for negligent misrepresentation should be dismissed for failure to allege the requisite "special relationship," citing Hydro Investors. Inc. v. Trafalgar Power, Inc., 227 F.3d 8, 20 (2d Cir. 2000), and Steed Fin. LDC v. Nomura Sec. Int'l, 148 F. App'x 66, 69 (2d Cir. 2005) (citing Hydro Investors, Inc., 227 F.3d at 20). (Defs.' Mem. in Supp. 16-17.)
In opposing the motion to dismiss its claim for negligent misrepresentation, E-21 has relied primarily on Mallis v. Bankers Trust Co., 615 F.2d 68 (2d Cir. 1980), in which the Court of Appeals noted that "the critical factor in the relationship between the parties is their reasonable expectations, not their formal legal relationship." Id. at 82 (applying the majority rule reflected in the Restatement (2d) of Torts § 552 (1977)). However, since its decision in Mallis, the Court of Appeals and other courts in this federal circuit have acknowledged the New York Court of Appeals' rejection of this majority rule inOssining Union Free Sch. Dist. v. Anderson, 539 N.E.2d 91, 95 (N.Y. 1989) (defining the duty element "more narrowly than other jurisdictions" and rejecting the Restatement rule). See, e.g.,St. Paul Fire Marine Ins. Co. v. Heath Fielding Ins. Broking Ltd., 976 F. Supp. 198, 204 n. 6 (S.D.N.Y. 1996).
In Kimmell v. Schaeffer, 675 N.E.2d 450 (N.Y. 1996), the New York Court of Appeals explained the duty requirement under New York law as follows:
In the commercial context, a duty to speak with care exists when "the relationship of the parties, arising out of contract or otherwise, [is] such that in morals and good conscience the one has the right to rely upon the other for information" (International Prods. Co. v. Erie R.R. Co., 244 N.Y. 331, 338, 155 N.E. 662). . . .
[W]e have recognized that not all representations made by a seller of goods or provider of services will give rise to a duty to speak with care (see International Prods. Co., supra, at 338, 155 N.E. 662). Rather, liability for negligent misrepresentation has been imposed only on those persons who possess unique or specialized expertise, or who are in a special position of confidence and trust with the injured party such that reliance on the negligent misrepresentation is justified. Professionals, such as lawyers and engineers, by virtue of their training and expertise, may have special relationships of confidence and trust with their clients, and in certain situations we have imposed liability for negligent misrepresentation when they have failed to speak with care (see, e.g., Ossining Union Free School Dist. v. Anderson LaRocca Anderson, 539 N.E.2d 91 [engineering consultants]; White v. Guarente, 372 N.E.2d 315 [accountants]; Ultramares Corp. v. Touche, 174 N.E. 441 [accountants]; Glanzer v. Shepard, 135 N.E. 275 [public weighers]).
The analysis in a commercial case such as this one is necessarily different from those cases because of the absence of obligations arising from the speaker's professional status. In order to impose tort liability here, there must be some identifiable source of a special duty of care. The existence of such a special relationship may give rise to an exceptional duty regarding commercial speech and justifiable reliance on such speech.Id. 454; see also In re Lois/USA, Inc., 264 B.R. 69, 118-123 (S.D.N.Y. 2001) (dismissing negligent misrepresentation claim for failure to show the requisite duty despite allegation of fiduciary duty between lender and creditor; citing cases); Qatar Nat'l Navigation Transp. Co., Ltd. v. Citibank, N.A., No. 89 Civ. 464(CSH), 1998 WL 516117, at *13-16 (S.D.N.Y. Aug. 20, 1998) (dismissing negligent misrepresentation claim for lack of special relationship between bank and beneficiary of letter of credit);St. Paul Fire Marine Ins. Co., 976 F. Supp. at 203-06 (finding no special relationship between broker and insurer).
Here, E-21 has not alleged that May and E-21 were in privity at the time of the alleged misrepresentation or that May possessed any sort of unique or specialized expertise that would create a duty to speak with care.
Moreover, the Second Circuit has held that when sophisticated business parties engaged in major transactions fail to exercise care in their affairs, "New York courts are particularly disinclined to entertain claims of justified reliance." Lazard Freres Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1541, 1543 (2d Cir. 1997). Such parties "will not be heard to complain that [they were] induced to enter into the transaction by misrepresentations." Schumaker v. Mather, 133 N.Y. 590, 596 (1892).
Accordingly, it is concluded that neither May nor TMI had a duty to E-21 sufficient to support a claim for negligent misrepresentation. Therefore, the motion is granted and the claim for negligent misrepresentation as against Third-Party Defendants May and Tmi is dismissed.
e. The Motion to Dismiss the Breach of Contract Claim is Denied
May and TMI have contended that the TPC has not adequately alleged a breach of contract claim and that the claim should therefore be dismissed. In addition, May and TMI have contended that the breach of contract claim should be dismissed because any obligations that TMI and May had to E-21 were discharged by E-21's agreement to purchase the Confection Sublicense directly from BCC/TSV. (Defs.' Mem. in Supp. 18-20.)
"To make out a viable claim for breach of contract a `complaint need only allege (1) the existence of an agreement, (2) adequate performance of the contract by the plaintiff, (3) breach of contract by the defendant, and (4) damages.'" Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co., 375 F.3d 168, 177 (2d Cir. 2004) (quoting Harsco Corp. v. Segui, 91 F.3d 337, 348 (2d Cir. 1996)).
Here, E-21 has made out a viable claim for breach of contract. In satisfaction of the first element of the pleading requirement, the TPC alleges that E-21 entered into an agreement with May on or about September 21, 2000, under which E-21 agreed to purchase May's ownership interest in TMI for $100,000, issue E-21 stock to May, and appoint May to E-21's board of directors. (TPC ¶ 22.) In satisfaction of the second element, the TPC alleges that pursuant to the agreement, E-21 made a partial payment to May of $40,850 prior to the modification of the agreement. (Id.) Furthermore, in satisfaction of the third element, the TPC alleges that May and TMI breached their warranties and representations, including the implied covenants of good faith and fair dealing, by failing to disclose that no amount had been paid for the Confections Sublicense, that the terms of the Confections Sublicense conflicted with the terms of the 1996 License, and that the Confections Sublicense had not been validly issued. (Id. ¶¶ 40, 42-43.) Finally, in satisfaction of the fourth element of the pleading requirement, the TPC alleges that E-21 suffered damages as a result of the alleged breaches of contract. (Id. ¶ 43.)
In support of their assertion of a novation and that any obligations under the agreement were discharged, May and TMI cite to Stahl Management Corporation v. Conceptions Unlimited, 554 F. Supp. 890, 892 n. 2 (S.D.N.Y 1983). Stahl Management Corp., in turn, cites to S L Paving Corp. v. McMurray Tractor, Inc., 304 N.Y.S.2d 652 (N.Y.Sup.Ct. 1969), in which the court indicated that as raised by the Third-Party Defendants here, the assertion of a novation most commonly constitutes a defense. Id. at 658. The court in S L Paving Corp. also noted that whether a new contract was created is a question for the trier of fact. Id.
Accordingly, based on the foregoing analysis, the motion to dismiss the breach of contract claim is denied.
f. The Motion to Dismiss the Unjust Enrichment Claim Is Denied
The Third-Party Defendants contend that the unjust enrichment claim must fail because it rests solely on the unsupported allegation that the Confections Sublicense was invalid and unenforceable.
"The basic elements of an unjust enrichment claim in New York require proof that (1) defendant was enriched, (2) at plaintiff's expense, and (3) equity and good conscience militate against permitting defendant to retain what plaintiff is seeking to recover." Briarpatch Ltd., L.P. v. Phoenix Pictures, Inc., 373 F.3d 296, 306 (2d Cir. 2004) (citing Clark v. Daby, 751 N.Y.S.2d 622, 623 (2002)); accord MacShane v. City of New York, No. 05 Civ. 6021 (SJ) (RML), 2007 WL 1062936, at *10 (E.D.N.Y. Mar. 30, 2007). E-21 has sufficiently alleged all three elements in the TPC.
In general, an unjust enrichment claim is inappropriate when a valid and enforceable contract exists between the parties. See Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 516 N.E.2d 190, 193 (N.Y. 1987) (citing Blanchard v. Blanchard, 94 N.E. 630; 66 Am.Jur.2d, Restitution and Implied Contracts, § 6, at 949). New York courts and courts in this federal district have held, however, that a claim of unjust enrichment may be alleged in addition to a breach of contract claim when the validity of the contract is in question, because recovery under a quasi-contract theory may be proper if the contract is found to be void. See In re Vivendi Universal, S.A. Sec. Litig., 2004 WL 876050, at *12;Chrysler Capital Corp. v. Century Power Corp., 778 F. Supp. 1260, 1272 (S.D.N.Y. 1991); Nakamura v. Fujii, 677 N.Y.S.2d 113, 116 (N.Y.App.Div. 1st Dep't 1998) (citing Curtis Props, Corp. v. Greif Cos., 653 N.Y.S.2d 569 (N.Y.App.Div. 1st Dep't 1997);Sforza v. Health Ins. Plan of Greater N.Y., Inc., 619 N.Y.S.2d 734 (N.Y.App. Div. 2d Dep't 1994)).
If E-21 succeeds in proving that it was fraudulently induced into entering into the contract with May and TMI and the contract is thereby rendered void, recovery under a theory of unjust enrichment may be proper. Therefore, the motion to dismiss the unjust enrichment claim is denied.
g. The Motion to Dismiss the Claim for Money Had and Received Is Denied
Under New York law, in order to state a claim for money had and received, a plaintiff must allege that: (1) defendant received money belonging to plaintiff, (2) defendant benefitted from the receipt of the money, and (3) under principles of equity and good conscience, defendant should not be permitted to keep the money.See AT T Co. v. N. Am. Indus., Inc., 772 F. Supp. 777, 789,amended by 783 F. Supp. 810 (S.D.N.Y. 1991).
Here, accordingly, E-21 has alleged that it paid the Third-Party Defendants specific sums of money as payment for the Confections Sublicense, that the Third-Party Defendants benefitted from the receipt of such funds, and that the Third-Party Defendants are required to return the funds under principles of equity and good conscience. (TPC ¶¶ 48-51.)
The Third-Party Defendants have asserted that E-21's claim for money had and received is duplicative of its unjust enrichment claim and is therefore superfluous to the complaint. In addition, the Third-Party Defendants assert that a claim for money had and received must be dismissed because it is an equitable remedy that will not lie when there is a remedy "at law." (Defs.' Mem. in Supp. 22.)
The Third-Party Defendants have failed to cite any law in support of dismissing the claim for "money had and received" as duplicative of the unjust enrichment claim. A motion to dismiss claims for unjust enrichment and "money had and received" has been denied, however, even when both claims were based on the same factual allegations. See Onanuga v. Pfizer, Inc., No. 03 Civ. 5405 (CM) (GAY), 2004 WL 601689, at *3 (S.D.N.Y. Mar. 16, 2004). "A district court should not dismiss pleadings as redundant on a motion to dismiss where the redundant claim has validity." Calcutti, 224 F. Supp. 2d at 700 (citing Coffman v. Wilson Police Dep't, 739 F. Supp. 257, 261-62 (E.D. Pa. 1990)).
Furthermore, although a claim for "money had and received" rests on equitable principles, it has been "considered an action at law." Brewer v. Vill. of Old Field, 311 F. Supp. 2d 390, 405 (S.D.N.Y. 2004) (quoting State v. Barclays Bank of New York, N.A., 563 N.E.2d 11 (1990)).
Therefore, as with the claim for unjust enrichment, if E-21 succeeds in proving that it was fraudulently induced into entering into the contract with May and TMI and the contract is thereby rendered void, recovery under a theory of money had and received may be proper. Accordingly, the motion to dismiss the claim for money had and received is denied.
h. The Motion to Dismiss the Claim for Rescission Is Denied
According to E-21, the equitable remedy of rescission is available where a party has been induced by a misrepresentation to enter into a contract. Telford v. Metropolitan Life Ins. Co., 223 A.D. 175, 177 (1928). E-21 alleges that it was induced by the misrepresentations of May to enter into the agreement for the Confections Sublicense, and therefore is entitled to rescind the agreement. (TPC ¶¶ 54-56.)
The Third-Party Defendants have addressed this claim primarily within the context of a breach of contract theory, rather than the misrepresentation theory being asserted, at least in part, by E-21. Therefore, the cases to which the Third-Party Defendants cite are not directly on point. See, e.g., New Windsor Volunteer Ambulance Corps, Inc. v. Meyers, 442 F.3d 101, 117 (2d Cir. 2006); C3 Media Marketing Group, LLC v. FirstGate Internet. Inc., 419 F. Supp. 2d 419, 435 (S.D.N.Y. 2005).
Accordingly, to the extent that the rescission claim rests not on a breach of contract, but rather on a misrepresentation theory, the motion to dismiss the rescission claim is denied.
Conclusion
For the foregoing reasons, the motion to strike pursuant to Rule 12(f), Fed.R.Civ.P., is granted in part and denied in part; the motion to take judicial notice is denied; and the motion to dismiss pursuant to Rule 12(b)(6), Fed.R.Civ.P., is granted in part and denied in part, and the claim for negligent misrepresentation is dismissed as against Third-Party Defendants May and TMI.
It is so ordered.