Opinion
13303/08.
Decided January 13, 2009.
Barry A. Goldbrenner, Esq., Goldberg Rimberg, PLLC, New York, NY, Attorney for Plaintiff.
Joseph Zelmanovitz, Esq., Stahl Zelmanovitz, New York, NY, Attorney for Defendants.
Upon the foregoing papers in this action by plaintiff B F Product Development, Inc. (plaintiff) alleging fraud in the inducement, breach of contract, unjust enrichment, breach of the warranty of merchantability, and breach of the implied covenant of good faith and fair dealing, defendants Fasst Products LLC (Fasst), Yosel Avtzon, and Herb Friend (collectively, defendants) move for an order dismissing each of the causes of action of plaintiff's complaint pursuant to CPLR 3211 (a) (1), based on a defense founded on documentary evidence, and, pursuant to CPLR 3211 (a) (7), for the failure to state a cause of action. Defendants' motion additionally seeks dismissal of plaintiff's fraud in the inducement claim, pursuant to CPLR 3016 (b), for the failure to state in detail the circumstances of the alleged wrong.
On February 1, 2007, plaintiff and Fasst entered into a License and Manufacturing Agreement (the Agreement) for the sale and distribution of certain bug repellent products. Under the Agreement, Fasst, the manufacturer of these products, granted plaintiff, as a distributor, the license to sell and promote the sale of these products. These products consisted of: a repellent genie blower/diffuser (Product A) and a flameless candle blower/diffuser (Product B) (both electric/battery operated) with pellet cartridges, and a repellent genie blower/diffuser and flameless candle blower/diffuser (also both electric/battery operated) with scented pellet cartridges (Product C) (collectively, the products). The Agreement (at page 1) represents that these products "repel mosquitoes and various other biting flies or insects using a product called Geraniol." Yosel Avtzon and Herb Friend executed the Agreement, on behalf of Fasst (which is a limited liability company), as its members. In addition, Yosel Avtzon and Herb Friend executed the Agreement, personally, with respect to paragraphs 2 and 8 of the Agreement.
Plaintiff claims that prior to entering into the Agreement, and to prove the efficacy of their products in their sales pitch to it, defendants had provided it with laboratory reports and promotional materials for the products, which included the representations that the products are effective at repelling mosquitos and various other insects for a distance of between 300 and 400 square feet from the placement of these products. A sample promotional flyer (annexed by plaintiff) states that the "[c]overage area [for the products is] approximately 400 square feet."
Under the Agreement, plaintiff was granted an exclusive license to market Products B and C within the territories delineated in the Agreement. The Agreement commenced as of February 1, 2007 and was to continue for five contract years. There was no minimum purchase requirement imposed upon the plaintiff as the distributor for the first contract year (from February 1 through December 31, 2007). Thereafter, the parties were to endeavor to agree upon a minimum purchase requirement, and if unable to agree, Fasst, as the manufacturer, could, in its discretion, terminate plaintiff's exclusive license and transform it into a non-exclusive license.
Plaintiff claims that in reliance upon the representations made by defendants regarding the efficacy of the products, it purchased in excess of $1.1 million of the products. The shipment of the products to plaintiff was made in four installments, beginning on April 5, 2007. After the products were inspected by QVC at the point of pick-up (apparently in Shenzhen China) and plaintiff accepted the products, it sold them to various third parties. Plaintiff claims, however, that the products did not work as represented by defendants, and that, as a result, it was forced to take back nearly $800,000 in inventory from one of its customers. Plaintiff also claims that it is stuck with $300,000 in unsaleable products and is paying carrying and storage costs thereon. Plaintiff asserts that its business and reputation have been severely harmed by the inefficacy of the products supplied by defendants. It points to several negative ratings and comments regarding the products posted over the Internet on a website; noting that some of the customer comments included statements that the products did not repel bugs, that the products did not work, and that the customers were bitten by bugs.
On May 1, 2008, plaintiff filed this action against Fasst, Yosel Avtzon, and Herb Friend. Plaintiff's original complaint alleged that the results of a field trial study dated February 28, 2007, commissioned by defendants, on the efficacy of Product B revealed that it is effective only upon mosquitos and not upon "various other biting insects." Plaintiff asserted that its sales of Product B to various customers were premised on the representation in the Agreement that Product B would effectively repel both mosquitoes and "various other biting insects." Plaintiff's original first cause of action for material misrepresentations alleged that the products did not work as represented in the Agreement. Plaintiff's second cause of action for breach of contract asserted that defendants did not provide it with products that worked as represented in the Agreement. Plaintiff's third cause of action for unjust enrichment alleged that defendants were unjustly enriched due to their acts and misrepresentations with regard to the efficacy of the products, and plaintiff's fourth cause of action for fraud alleged that defendants knew or had reason to know that the products did not function as described in the Agreement and knowingly misrepresented facts to defraud it into entering the Agreement.
While paragraph 16 of the Agreement provides that the parties agree to submit all controversies between them relating to this Agreement to binding arbitration, defendants have waived this arbitration clause.
On June 18, 2008, defendants moved to dismiss plaintiff's complaint. In their motion, defendants argued that plaintiff's first cause of action for material misrepresentations and fourth cause of action for fraud should be dismissed since they were, in essence, merely breach of contract claims; that the third cause of action for unjust enrichment could not be maintained due to the existence of a valid and enforceable contract; and that the second cause of action for breach of contract was belied by undisputed documentary evidence, consisting of independent studies, tests, and reports, which directly refute plaintiff's allegations. Specifically, these studies, tests, and reports submitted by defendants indicated that Product B was found to be effective in repelling a broad variety of insects, including mosquitoes, biting flies, midges, and fire ants. Defendants also contended that Yosel Avtzon and Herb Friend, as members of Fasst, a limited liability company, could not be held liable for Fasst's debts or its alleged breach of contract.
On August 29, 2008, plaintiff filed and served an amended complaint. Plaintiff's amended complaint alleges that one of the laboratory reports dated July 25, 2004, which was annexed to defendants' motion to dismiss (and was received by plaintiff in June 2008 as an exhibit to defendants' motion), has now revealed to it that in a May 31-June 4, 2004 study period, well before the signing of the Agreement, it was shown that a "single diffuser under optimal conditions can at least reduce mosquitoes and midges in a distance of 3m (meters) about 70%." Plaintiff asserts that three meters is only roughly 9.8 feet and is not consistent with the effective distance represented to it in defendants' promotional materials, which stated that the "[c]overage area [was] approximately 400 square feet" and that it "[h]elp[ed] protect up to 200-300 sq[uare] f[ee]t depending on environmental conditions." Plaintiff further asserts that defendants knew or should have known at the time the Agreement was executed that the results of their own laboratory tests showed that the products were ineffective at the distances represented to it.
Plaintiff's amended complaint also alleges that it recently commissioned its own laboratory test, conducted by Laklin Labs, Inc. on July 31, 2008, which evaluated the products for zonal repellency to adult female mosquitoes in a laboratory enclosure. Plaintiff asserts that the results of this laboratory test (which it has submitted) indicate a lack of repellency for the two diffusers. Specifically, plaintiff states that this laboratory test shows that the products are ineffective against mosquitoes at a range of merely one foot.
Plaintiff's amended complaint sets forth a first cause of action for fraud in the inducement, a second cause of action for breach of contract, a third cause of action for unjust enrichment, a fourth cause of action for breach of the warranty of merchantability, and a fifth cause of action for breach of the implied covenant of good faith and fair dealing. Plaintiff seeks rescission of the Agreement based upon the fraud in its inducement, an injunction enjoining defendants from enforcing the provisions of the Agreement, and $2 million in damages. Since plaintiff's amended complaint supersedes plaintiff's original complaint, defendants' motion will be addressed to plaintiff's amended complaint ( see 49 W. Tenants Corp. v Seidenberg , 6 AD3d 243, 243; Livadiotakis v Tzitzikalakis, 302 AD2d 369, 370; Sage Realty Corp. v Proskauer Rose, 251 AD2d 35, 38; Sholom Zuckerbrot Realty Corp. v Coldwell Bank Commercial Group, 138 Misc 2d 799, 801).
In addressing defendants' motion, it is noted that, in the context of a motion to dismiss pursuant to CPLR 3211, a court must "liberally construe the complaint . . . and accept as true the facts alleged in the complaint and any submissions in opposition to the dismissal motion" ( 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 152; see also Sokoloff v Harriman Estates Dev. Corp., 96 NY2d 409, 414; Leon v Martinez, 84 NY2d 83, 87). The court must also "accord [the] plaintiff[] the benefit of every possible favorable inference" ( 511 W. 232nd Owners Corp., 98 NY2d at 152). "The motion must be denied if from the pleadings' four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law'" ( 511 W. 232nd Owners Corp., 98 NY2d at 152, quoting Polonetsky v Better Homes Depot, 97 NY2d 46, 54).
With respect to plaintiff's first cause of action for fraudulent inducement, it is noted that the essential elements required to adequately plead a cause of action for fraudulent inducement are: that the defendant made a false representation of a material fact, that the defendant made such misrepresentation knowingly (i.e., with scienter), that the misrepresentation made was justifiably relied upon by the plaintiff, and that some injury or damage resulted to the plaintiff ( see Lama Holding Co. v Smith Barney, 88 NY2d 413, 421; New York Univ. v Continental Ins. Co., 87 NY2d 308, 318; Graubard Mollen Dannett Horowitz v Moskovitz, 86 NY2d 112, 122; Channel Master Corp. v Aluminum Ltd. Sales, 4 NY2d 403, 407; Gordon v Oster ,36 AD3d 525, 525; CFJ Assoc. of NY v Hanson Indus., 274 AD2d 892, 894; National Union Fire Ins. Co. of Pittsburgh, Pa. v Worley, 257 AD2d 228, 233).
Here, plaintiff alleges that prior to entering into the Agreement, defendants represented to it that the products are effective to a distance of up to 400 feet from the placement of the products to repel mosquitoes and other biting insects. Plaintiff also alleges that at the time the Agreement was signed, defendants, based upon their own laboratory testing, knew that these representations by them were patently false, and that these representations were made by defendants to induce it to enter into the Agreement. Plaintiff further alleges that it reasonably relied upon the misrepresentations to it by defendants in entering into the Agreement and in purchasing significant quantities of the products thereunder. Plaintiff additionally asserts that it has been damaged due to its inability to resell the products. Thus, plaintiff adequately alleges each of the requisite elements to set forth a claim for fraud in the inducement ( see Niagara Mohawk Power Corp. v Freed, 265 AD2d 938, 939).
Defendants, in support of their motion insofar as it seeks dismissal of plaintiff's first cause of action for fraudulent inducement, rely upon the general legal principle that a cause of action seeking damages for fraud cannot be sustained when the only fraud charged relates to a breach of contract or where the fraud claim is duplicative of a breach of contract claim ( see Sellinger Enters., Inc. v Cassuto , 50 AD3d 766, 768; Ross v DeLorenzo , 28 AD3d 631, 636; Lee v Matarrese ,17 AD3d 539, 540; Egan v New York Care Plus Ins. Co., 277 AD2d 652, 653; Non-Linear Trading Co. v Braddis Assoc., 243 AD2d 107, 118; Alamo Contract Bldrs. v CTF Hotel Co., 242 AD2d 643, 644; Weitz v Smith, 231 AD2d 518, 519; Gordon v Dino De Laurentiis Corp., 141 AD2d 435, 436). Defendants contend that plaintiff's first cause of action for fraud in the inducement is merely duplicative of its breach of contract claim, and impermissibly attempts to convert its breach of contract claim into a tort claim alleging fraud. Defendants point out that in order to plead fraud, a plaintiff must allege "[a] present intent to deceive," and that "a mere misrepresentation of an intention to perform under the contract is insufficient to allege fraud" ( W.I.T Holding Corp. v Klein, 282 AD2d 527, 528).
Defendants' argument is unavailing. It is well established that "a misrepresentation of material fact, which is collateral to the contract and serves as an inducement for the contract, is sufficient to sustain a cause of action alleging fraud" ( id.; see also Deerfield Communications Corp. v Chesebrough-Ponds, Inc., 68 NY2d 954, 956; Sellinger Enters., Inc., 50 AD3d at 768; First Bank of Ams. v Motor Car Funding, 257 AD2d 287, 291-292). Thus, a fraud claim may be based on allegations that the defendant fraudulently induced the plaintiff to enter into a contract and a party who is fraudulently induced to enter into a contract may join a cause of action for fraud with one for breach of the same contract where the misrepresentations alleged consist of more than mere promissory statements about what is to be done in the future ( see Deerfield Communications Corp., 68 NY2d at 956; Sellinger Enters., Inc., 50 AD3d at 768; First Bank of Ams., 257 AD2d at 291-292).
Where a plaintiff alleges misrepresentations of present facts, rather than merely of future intent, that were collateral to the contract and which induced the allegedly defrauded party to enter into the contract, a fraudulent inducement claim is not duplicative of a breach of contract claim ( see Sellinger Enters., Inc., 50 AD3d at 768; W.I.T. Holding Corp., 282 AD2d at 528; First Bank of Ams., 257 AD2d at 291-292). The same set of circumstances giving rise to a breach of contract claim may also form the basis of a cause of action for fraud and, thus, a fraud claim which is not duplicative of a contract claim may be maintained ( see Deerfield Communications Corp., 68 NY2d at 956; Sellinger Enters., Inc., 50 AD3d at 768; Fresh Direct v Blue Martini Software , 7 AD3d 487, 489; W.I.T. Holding Corp., 282 AD2d at 528; First Bank of Ams., 257 AD2d at 291-292; RKB Enters.v Ernst Young, 182 AD2d 971, 972; Tarrytown House Condominiums v Hainje, 161 AD2d 310, 312).
Here, plaintiff does not merely allege that Fasst did not intend to perform or fulfill its obligations under the Agreement ( compare Wilmoth v Sandor, 259 AD2d 252, 255; Bamira v Greenberg, 256 AD2d 237, 239). Rather, plaintiff alleges that fraudulent misrepresentations were made by defendants prior to, and as an inducement for it to enter into the Agreement. Plaintiff's fraudulent inducement claim is not premised upon the alleged breach of a duty arising under the contract, but, rather, is based upon representations that are extraneous to the terms of the parties' Agreement ( see Sellinger Enters., Inc., 50 AD3d at 768; Fresh Direct, 7 AD3d at 489; W.I.T. Holding Corp., 282 AD2d at 528; First Bank of Ams., 257 AD2d at 291-292). The fraud allegedly perpetrated by defendants occurred prior to the parties' entry into the Agreement, and arose from circumstances separate and distinct from plaintiff's breach of contract claim ( see Deerfield Communications Corp., 68 NY2d at 956; Sellinger Enters., Inc., 50 AD3d at 768; W.I.T. Holding Corp., 282 AD2d at 528; First Bank of Ams., 257 AD2d at 291-292). Thus, contrary to defendants' argument, the contract does not limit the scope of the duties owed to plaintiff but, instead, plaintiff's claim is based upon a separate and distinct legal duty independent of the contract.
Defendants also argue that plaintiff has failed to plead its fraud claim with the requisite particularity pursuant to CPLR 3016 (b). This argument is rejected. As discussed above, plaintiff has pleaded the circumstances constituting the wrong in sufficient detail to satisfy the pleading requirement of CPLR 3016 (b).
In seeking dismissal of plaintiff's fraudulent inducement claim, defendants deny making any misrepresentations as to the effectiveness of the products. Herb Friend, who is Fasst's CEO and member, in his affidavit, states that plaintiff has misread the field trial reports which represented the products' effectiveness for at least 300 square feet. Herb Friend asserts that the diffuser works circularly with the air blown and the product spread in a circular manner, and that the radius of this circle is a distance of about 10 feet or a diameter of 20 feet. He claims that the area of a circle with a radius of 10 feet is over 300 feet. The court, however, finds it unclear from this conclusory explanation (unsupported by any scientific or expert proof) that a radius of 10 feet would be spread in a circular manner to a circle of 300 square feet, as defendants claim. While the mathematical computation may be accurate, there remains a dispute as to whether this is so.
Plaintiff has submitted a study by Laklin Labs, Inc., wherein it was shown that the products were ineffective against mosquitoes at a range of one foot. Defendants point to the fact that this study was not conducted by a university or other similarly independent academic group, but by a private laboratory. Defendants claim that the protocol used in this study was unsuitable for area diffusers, but was, instead, more appropriate for liquid application on skin. Defendants further assert that this study was flawed because it used hungry mosquitoes in a cage, with no place to escape, rather than conducting a field trial. However, the reliability of this study merely raises factual issues not appropriate for determination on a motion to dismiss.
Defendants further argue that plaintiff's first cause of action for fraudulent inducement is barred by the merger and integration clauses contained in paragraph 12 of the Agreement, which state as follows:
"12.1 This Agreement constitutes the entire agreement between the parties pertaining to the subject matter contained in it, and supersedes all prior and contemporaneous agreements, representations and understandings of the parties.
"12.2No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by all the parties to this Agreement."
Defendants' argument must be rejected. It is well established that a general merger or integration clause (such as set forth above) is ineffective to exclude parol evidence of fraud in the inducement ( see Barash v Pennsylvania Term. Real Estate Corp., 26 NY2d 77, 86; Gizzi v Hall, 300 AD2d 879, 881; Dyke v Peck, 279 AD2d 841, 842; CFJ Assoc. of NY v Hanson Indus., 274 AD2d 892, 894; Cetnar v Kinowski, 263 AD2d 842, 843; Landes v Sullivan, 235 AD2d 657, 658-659). The general rule of merger, meaning broadly that all prior negotiations become embodied in the writing when both parties sign a written contract, does not ordinarily apply in the case of fraud ( see Gizzi, 300 AD2d at 881; Cetnar, 263 AD2d at 843). Fraud in the preliminary negotiations for a written contract cannot, by its nature, be merged into the contract since it is such deception, not disclosed in the terms of the agreement, that is the essence of the cause of action. Thus, fraud in the inducement is not merged into the contract so as to preclude an action for such fraud ( see Gizzi, 300 AD2d at 881; Landes, 235 AD2d at 658-659). Dismissal of plaintiff's first cause of action must, therefore, be denied.
Defendants' motion also seeks dismissal of plaintiff's second cause of action for breach of contract, which alleges that the products do not repel mosquitoes and other biting insects as described in the Agreement, and that defendants, by failing to provide products as described in the Agreement, breached the Agreement. Defendants contend that plaintiff cannot maintain its second cause of action for breach of contract due to the merger and integration clauses contained in paragraph 12 of the Agreement. Defendants' contention is without merit since page 1 of the Agreement itself specifically provided that the products "repel mosquitoes and various other biting flies or insects," which is the provision plaintiff claims defendants breached.
Defendants further argue that, to the extent plaintiff claims that the Agreement was breached because the products do not repel mosquitoes, this claim is directly refuted by plaintiff's own words in an advertisement by plaintiff over the Internet, which states that the products repel insects up to 300 square feet using Geraniol. Such argument is unavailing. Plaintiff's advertisement of the products do not constitute a judicial admission of their effectiveness. In any event, plaintiff's representations were purportedly premised upon information provided to it by defendants.
Defendants additionally argue that plaintiff's second cause of action for breach of contract is also barred because paragraph 4.7 of the Agreement provides that the "Distributor shall be entitled to inspect the purchased Products at factory point of pick-up," and paragraph 4.8 of the Agreement provides:
"The approval of QVC of any Product inspected by QVC or the pick-up by Distributor of any Product (whether or not Distributor availed itself of its inspection right pursuant to subparagraph 4.7 above) shall constitute definite and binding proof that each such Product has been delivered in accordance with the purchase order and is not defective or damaged in any manner."
Defendants assert that the inspection reports by QVC show that it approved the products and that the products fully conformed to specifications. Defendants argue that, therefore, pursuant to paragraph 4.8 of the Agreement, the approval of the products by QVC and the pick-up of the products by plaintiff constituted definitive and binding proof that the products were not defective.
Defendants' argument is rejected. While QVC's inspection and plaintiff's pick-up indicate that the items shipped were delivered in accordance with the purchase order and were not "defective,"these inspections, as shown by QVC's inspection reports, related to an inspection for criteria such as quantity, labeling, packaging, cracks, color consistency, batteries, inclusion of instructions, scratches, and basic operational defects. Thus, the determination of lack of defect by QVC pertained to physical packaging and shipping defects, and compliance with the terms of the order, rather than to a design defect or the ineffectiveness of the products. There is no indication that QVC assessed the effectiveness of the products in deterring insect bites.
It also appears that this right of inspection related to the distributor's right to return defective products pursuant to paragraph 9 of the Agreement, which provided that the manufacturer shall immediately replace all defective products at the manufacturer's expense. Paragraph 9, however, specifically provided that "defective products are only those products that are defective in operation, not in design." Thus, QVC's inspection and plaintiff's resulting acceptance of the products cannot preclude plaintiff's claim for breach of contract predicated upon the products' failure to perform its intended purpose as described in the contract.
Finally, defendants contend that plaintiff's second cause of action for breach of contract should be dismissed, pursuant to CPLR 3211 (a) (1), based upon documentary evidence, consisting of studies, tests, and reports. Specifically, defendants have submitted test results from Professor J. F. Butler dated August 3, 1998, showing the efficacy of Geraniol on the stable fly; a cover note dated March 18, 2003 from Professor Butler with an accompanying chart showing test results using pellets containing Geraniol in the airstream as applied to the stable fly; a May 12, 2003 letter from Professor Butler reporting on repellent activity for Geraniol-based formulations against stable flies, house flies, horn flies, and the red fire ant, as well as against various species of mosquitoes and ticks; a July 25, 2004 report by Dr. Gunter C. Muller, Robert W. Weiss and Kravchenko Vasiliy, concluding that Geraniol diffusers provided a steady and satisfactory protection from biting midges and mosquitoes; a February 22, 2007 comparison report of mosquito repellant units from QVC's product quality engineer; a February 28, 2007 report by Dr. Muller; and a letter dated May 5, 2008 by Dr. Muller regarding the effectiveness of geraniol polymer pellet based cartridge diffusers.
The granting of a motion to dismiss based upon documentary evidence under CPLR 3211 (a) (1) "is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law'" ( 511 W. 232nd Owners Corp., 98 NY2d at 152, quoting Leon, 84 NY2d at 88; see also Levenherz v Povinelli , 14 AD3d 658, 658-659; Morris v Morris, 306 AD2d 449, 451). The studies, tests, and reports submitted by defendants do not constitute definitive documentary proof that defendants' products work as claimed sufficient to refute plaintiff's contrary claims herein as a matter of law. Rather, when compared to the study submitted by plaintiff, which determined that the products were ineffective at a range of merely one foot, they simply raise triable issues of fact.
Defendants also assert that the negative comments made by customers over the Internet are insufficient to support plaintiff's complaint as there are only 20 comments listed, some of which are not even negative, when about 20,000 units were sold. This argument is without moment as these comments simply raise factual issues regarding the effectiveness of the products. Plaintiff is not required to establish its claim at this pleadings stage of the action, and, thus, dismissal of plaintiff's second cause of action must be denied.
Defendants also argue that plaintiff cannot maintain its third cause of action, which seeks recovery for unjust enrichment, because the existence of a valid and express enforceable written agreement precludes such recovery. However, where a plaintiff claims that a contract is invalid because it was procured by fraud, the plaintiff may concurrently assert a breach of contract claim and an unjust enrichment claim ( see Gordon v Oster , 36 AD3d 525, 525). Plaintiff seeks rescission of the written agreement based upon the fraud in its inducement and is contending that its performance under the terms of the void Agreement and its purchase of the defective products unjustly enriched defendants. Such claims are viable.
Defendants' motion also seeks dismissal of plaintiff's fourth cause of action, which alleges that defendants breached the warranty of merchantability by providing goods not fit for the purpose for which they were intended. Defendants contend that paragraph 4.8 of the Agreement (quoted above) excludes this warranty of merchantability.
This contention is devoid of merit. Warranties of merchantability and fitness for use are implied by Uniform Commercial Code §§ 2-314 and 2-315, unless expressly excluded or modified pursuant to Uniform Commercial Code § 2-316. Pursuant to Uniform Commercial Code § 2-316 (2), in order "to exclude or modify the implied warranty of merchantability . . . the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous." Here, paragraph 4.8 of the Agreement does not mention merchantability and does not contain any conspicuous language excluding all implied warranties of fitness( see Uniform Commercial Code § 2-316, [3] [a]). Moreover, an examination of the delivered products by QVC would not, in the circumstances, have revealed the claimed lack of effectiveness of the products ( see Uniform Commercial Code § 2-316 [b]). Thus, contrary to defendants' argument, this warranty was not excluded by paragraph 4.8 of the Agreement, and plaintiff's fourth cause of action may be maintained by plaintiff ( see Dempsey v Rosenthal, 121 Misc 2d 612, 615; Stream v Sportscar Salon, 91 Misc 2d 99, 104).
Plaintiff's fifth cause of action alleges that defendants breached the implied covenant of good faith and fair dealing contained in every contract by providing non-functional products. However, "[a] cause of action to recover damages for breach of the implied covenant of good faith and fair dealing cannot be maintained where the alleged breach is intrinsically tied to the damages allegedly resulting from a breach of the contract'" ( Deer Park Enters., LLC v A1 Sys., Inc., ___ AD3d ___, 2008 NY Slip. Op. 09945, *1 [2008], quoting Canstar v Jones Constr. Co., 212 AD2d 452, 453; see also Hawthorne Group v RRE Ventures ,7 AD3d 320, 323).
Here, the conduct and resulting damages alleged in plaintiff's fifth cause of action are the same as those alleged in plaintiff's second cause of action for breach of contract. Thus, plaintiff's fifth cause of action is dismissed as duplicative of plaintiff's second cause of action for breach of contract ( see Deer Park Enters., LLC, 2008 NY Slip Op 09945, *1; R. I. Is. House, LLC v North Town Phase II Houses, Inc. , 51 AD3d 890, 896; Pier 59 Studios L.P. v Chelsea Piers, L.P. , 27 AD3d 217, 218; Canstar v Jones Constr. Co., 212 AD2d 452, 453).
Defendants further seek dismissal of all claims asserted by plaintiff as against Yosel Avtzon and Herb Friend, individually. In opposition to this branch of defendants' motion, plaintiff contends that Yosel Avtzon and Herb Friend signed the Agreement in their individual capacities.
Yosel Avtzon and Herb Friend executed the Agreement in their personal capacities "with respect to paragraphs 2 and 8" of the Agreement. Paragraph 8.2 provides: "For purposes of this Agreement with regard to Manufacturer, the term "Affiliate" shall include Yosel Avtzon (Avtzon) [and] Herb Friend (Friend)." While paragraph 8.3 makes reference to obligations imposed upon a party under paragraphs 1 and/or 2 and/or subparagraphs 4.1 and/or 4.2, the broad language of subparagraph 8.2 makes it unclear as to the specific limitations intended by such provision, notwithstanding defendants' contention that paragraph 8 was intended merely to prevent an individual principal from circumventing exclusivity and non-competition provisions by creating a new entity in contravention of paragraphs 2 and 8. Paragraph 1 recognizes the manufacturer's exclusive license to produce the products; subparagraph 4.1 prohibits the distributor from manufacturing or purchasing the product from any entity other than the manufacturer; and subparagraph 4.2 provides that the distributor may not directly retain the factory manufacturing the products. Although those paragraphs deal with the exclusive license granted and the non-complete restrictions undertaken by the parties, representations contained therein may be relevant to the substance of plaintiff's claims.
While members of limited liability companies, like corporate officers, may not be held personally liable on the contract of a limited liability company where they did not purport to bind themselves individually under the contract ( see Lichtman v Mount Judah Cemetery, 269 AD2d 319, 320; Westminster Constr. Co., Inc. v Sherman, 160 AD2d 867, 868), it is not clear that Yosel Avtzon and Herb Friend did not undertake to bind themselves or undertake any personal contractual obligation with regard to the claims asserted by plaintiff in its amended complaint. Given the deference to be accorded to pleadings on a motion to dismiss, the motion cannot be granted at this point.
Moreover, with respect to plaintiff's first cause of action for fraudulent inducement, it is well established that "members of limited liability companies, [like] corporate officers, may be held personally liable if they participate in the commission of a tort in furtherance of company business" ( Rothstein v Equity Ventures, 299 AD2d 472, 474; see also Retropolis, Inc. v 14th St. Dev. LLC , 17 AD3d 209, 211; W. Joseph McPhillips, Inc. v Ellis, 278 AD2d 682, 684; Westminster Constr. Co., Inc., 160 AD2d at 868; Widlitz v Scher, 148 AD2d 530, 530-531). Here, plaintiff's allegations are sufficient to support its claim that Yosel Avtzon and Herb Friend participated in the commission of fraud in furtherance of company business and, therefore, dismissal of plaintiff's fraud claim, is not warranted ( see Kew Gardens Hills Apt. Owners, Inc. v Horing, Welikson Rosen, P.C. , 35 AD3d 383, 386; Retropolis, Inc., 17 AD3d at 211; Rothstein, 299 AD2d at 474; W. Joseph McPhillips, Inc., 278 AD2d at 684; Westminster Constr. Co., 160 AD2d at 868; Widlitz, 148 AD2d at 530-531). Similarly, dismissal of plaintiff's third cause of action for unjust enrichment as against the individual defendants is not warranted ( see Gordon, 36 AD3d at 525; Taylor Jennings v Bellino Bros. Constr. Co., 106 AD2d 779, 780-781).
Accordingly, defendants' motion is granted to the extent that plaintiff's fifth cause of action is dismissed as against all defendants and is otherwise denied.
Defendants shall serve and file their answer within thirty days of the date hereof. A preliminary conference addressed to discovery is scheduled for March 18, 2009. Attorneys with knowledge of the case and authority to bind the parties must appear.
This constitutes the decision and order of the court.