This action involves Plaintiffs', William Oppman, Steven Johnston and Gary Rountree (collectively "Plaintiffs'") suit against Defendants, IRMC Holdings, Inc. ("IRMC"), Harvest Partners, Inc., Harvest Partners III, Harvey Wertheim, Steve Eisenstein, Randy Christofferson, Vikas Kapoor and Does 1-25 (collectively "Defendants").

In 1998, Richard Schultz and Harvest Partners, Inc. ("Harvest") formed IRMC, the parent of IntelliRisk Management Corp, Inc.).^[FN1] IRMC was created to become a large accounts [*2]receivable collections company, and, upon its inception, IRMC began to purchase a number of other companies in the collections business. Among the companies purchased by IRMC were Automated Credit Management (of which Plaintiffs Oppman and Johnston were shareholders and officers) and Rountree Associates, Inc. (of which Plaintiff Gary Rountree was the sole stockholder.

Plaintiffs Oppman, Johnston and Rountree ("Oppman," "Johnston," or, collectively, "Plaintiffs"), sold their holdings in these two corporations to IRMC, entering into a stock purchase agreement (in which they received both common and preferred IRMC stock) as consideration. Oppman invested $25,000 in IRMC stock, Johnston invested $150,000, and Rountree invested $250,000. (Compl. ¶¶ 24-25). All three plaintiffs allege that they were assured verbally by Richard Schultz ("Schultz") and Rick Schwank ("Schwank") of IRMC and Johnathon Angrist ("Angrist") of Harvest Partners that they were being given the opportunity to purchase stock described as "Founders Stock" in IRMC.^[FN2] Plaintiffs further assert they were told that Harvest hoped to take the corporation public, and that the "Founders Stock" would have all the same rights and privileges (including opportunities to reinvest) as those provided to IRMC's institutional investors. (Compl. ¶26).^[FN3] Additionally, Plaintiffs claim that they were told their "Preferred A stock could be redeemed by the company at a price of $100 per share, plus accrued and unpaid dividends at the option of the Board of Directors."^[FN4] Finally, Plaintiffs contend that they sold their companies to IRMC for a lower price than they were being offered by other potential acquirers and that they chose to invest in IRMC because they were offered the opportunity discussed above. (Compl. at ¶28). Plaintiffs each entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") and became a party to the Amended and Restated [*3]Stockholders' Agreement (the "Stockholders Agreement") among IRMC and its shareholders.^[FN5]

In 2001, IRMC founder, Shultz, pled guilty to various tax-related felonies, was sentenced to prison, and permitted to resign from IRMC with a severance package valued in excess of $1.3 million. Plaintiffs allege that Harvey Wertheim ("Wertheim") and Steve Eisenstein ("Eisenstein") (IRMC directors from 1998 to the present) along with Harvest Partners III (a limited partnership owned and controlled by Harvest through interlocking ownership and Boards of Directors), (collectively the "Harvest Defendants") "anticipated and directed IRMC management to manage the Corporation as if it were being readied for a sale or an initial public offering. (Compl. ¶¶ 6, 8, 9, 17, 21, 37). Near the end of 2002 or the beginning of 2003, Wertheim stepped down as Chairman of the Board, and Randy Christofferson ("Christofferson") replaced Wertheim as Chairman and also hired Vikas Kapoor ("Kapoor") as an outside consultant. (Compl. ¶¶ 10, 38, 23).^[FN6]

Plaintiffs allege that in 2003 and 2004, Christofferson and Kapoor along with Harvest and the other Defendants (collectively "Defendants") engaged in a plan to refinance the debt of IRMC and thereby re-allocate the equity of the Corporation to a group of individuals, including themselves, wiping out the interests of certain minority shareholders including Plaintiffs. (Compl. ¶40). Plaintiffs claim that Defendants (by failing to disclose this plan) caused Plaintiffs to believe their investments in IRMC were safe. (Compl. 41).

On or about March 31, 2004, the IRMC Board of Directors (allegedly dominated and controlled by Harvest, Eisenstein, Christofferson and Kapoor - all of whom had an interest in the recommended transaction) recommended a recapitalization plan to certain shareholders. (Compl. ¶44.). This plan (which would effectively eliminate Plaintiffs interests in the corporation and adopt a new capital structure) was adopted by written shareholder consent. (Compl. ¶44). The plan was enacted as follows: On or about March 29, 2004, Defendants caused written consents to be executed, amending the Certificate of Incorporation to permit conversion of Old Series A Preferred Stock and providing that holders of that stock, who did not participate in the proposed refinancing, would automatically have each share of their preferred stock converted into one share of Class A Common Stock at a par value of $.01 per share. (Compl. ¶47). Plaintiffs allege they were not provided with the form of the amended Certificate of Incorporation. (Compl. ¶48).

Then, on or about March 31, 2004, IRMC filed two Certificates of Amendment with the Delaware Secretary of State (the "First Filed Amendment" and the "Second Filed Amendment"). The First Filed Amendment stated that the Amendment was submitted to the holders of the shares of outstanding capital stock of the Corporation entitled to vote thereon and that the majority of each class of stock consented to and adopted certain resolutions. (Compl. ¶49). [*4]These resolutions set a mandatory conversion date for stockholders not participating in the refinancing, provided for automatic conversion for those holders, and stated that non-participating holders be given written notice of the special mandatory conversion (but specified that this notice need not be given in advance of the conversion). (Compl. ¶49). The First Filed Amendment and resolutions also stated that non-participating Series A Preferred Stockholders would forfeit any right to receive a Liquidation Preference with respect to their Series A Preferred Stock. (Compl. ¶49).

The Second Filed Amendment stated that the Certificate of Incorporation was further amended so that each share of Class A Common Stock issued and outstanding or held as treasury shares (immediately prior to the Effective Date) would be combined (without any action on the part of the holder) into one one-millionth (1/1,000,000) of one share of outstanding Class A Common Stock. (Compl. ¶51).

Plaintiffs contend that they were not provided with the Filed Amendments until nearly two months later, after Plaintiffs had already inquired about the refinancing and after the forfeitures of Plaintiffs holdings as non-participating shareholders had already occurred. (Compl. ¶51). Thus, Plaintiffs claim that they lost accrued dividend rights and liquidation preference rights as a result of the Amendments and the Filed Amendment converting the class of Preferred stock owned by plaintiffs into common stock, which was then diluted by one million to one and thus rendered worthless. (Compl. ¶52-3). Plaintiffs further argue that IRMC provided institutional investors such as Harvest III and "others associated with management" with the opportunity to participate in the refinancing and was obligated to also provide plaintiffs this opportunity. (Compl. ¶56.) Plaintiffs argue that the Recapitalization impermissibly allowed Defendants and other investors selected by Harvest to obtain complete control of the corporation to exclusion of the plaintiffs. (Compl. ¶60).

On March 17, 2006, Plaintiffs filed a complaint against Defendants asserting the following causes of action: (1) breach of fiduciary duties of disclosure, care, loyalty and good faith; (2) aiding and abetting breach of fiduciary duty; (3) breach of contract (including breach of an oral agreement and breach of the implied covenant of good faith and fair dealing); (4) intentional interference with contract; (5) fraudulent misrepresentation/constructive fraud; (6) fraudulent concealment; (7) negligence; (8) violations of Delaware Law 8 Del.C. §242 and 8 Del.C. §228(e); (9) unjust enrichment (constructive trust); (10) fraud in the inducement; and (11) promissory estoppel. (Compl. ¶1).

Plaintiffs moved for a preliminary injunction enjoining and restraining Defendants (or any persons or entities acting on or purporting to act on their behalf) from contracting for, or proceeding with, a sale or any other acts involving the sale or disposition of IRMC common stock, or acting in furtherance of the amended Certificate of Incorporation affecting IRMC common stock, pending the outcome of this action. Defendants cross-moved for dismissal of all claims pursuant to CPLR 3211(a)(1), 3211(a)(5), and 3211(a)(7).

On September 11, 2006, I heard arguments on both motions. It was undisputed that, prior to Plaintiffs filing the cross-motion, Defendants offered Plaintiffs the opportunity to invest in IRMC on the same terms as those available in the March 2004 Restructuring, and that Plaintiffs rejected this offer. (Trans. p. 4-6, and 11).

Turning first to Defendants' motion to dismiss plaintiffs claims, it is fundamental that, pursuant to CPLR 3211(a)(7), a court must accept facts alleged in the complaint as true when [*5]deciding a motion to dismiss. (Leon v. Martinez, 84 NY2d 83, 87 [1994]). Additionally, a court must accord the plaintiff "the benefit of every possible favorable inference and determine only whether the facts alleged fit within any cognizable legal theory." (Sokoloff v. Harriman Estates Dev. Corp. 96 NY2d 409, 414 [2001]). 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." (Richbell Information Services, Inc. v. Jupiter Partners, L.P., 309 AD2d 288. [1st Dept 2003] [quoting 511 W.232nd Owners Corp. v. Jennifer Realty Co., 98 NY2d 144, 152 (2002)]).

Breach of Contract as Against Harvest, Harvest III and IRMC (Third Cause of Action)

At issue is whether a merger clause in the Stockholder's Agreement bars plaintiffs breach of contract claim. As designated in the Stockholder's Agreement, New York law governs contract disputes arising. (Amended and Restated Stockholder's Agreement at ¶10[h] p.23 of Ex. 2, Tiedemann Aff.).

Plaintiffs allege that Defendants breached an oral agreement providing that Plaintiffs would be treated on a par with the institutional investors and that specifying that Plaintiffs would have the same opportunities and rights to be notified of the Corporation's financing and to reinvest in the Corporation as Harvest III or any institutional investor. (Compl. ¶¶24-30, 78-85).

Defendants argue that Plaintiffs' claim cannot survive a motion to dismiss because their allegations for breach of oral contract are barred both by ( i) the integration clause in the Stockholder's Agreement and (ii) the Statute of Frauds.

Plaintiffs counter that the integration clause should not bar their claim because the Stockholder's Agreement does not govern the full extent of the parties' agreement and that the Statute of Frauds does not apply to a contract that could have been performed within one year. Additionally, Plaintiffs' argue that Defendants breached the implied covenant of good faith and fair dealing by depriving Plaintiffs of the benefit of the alleged oral agreement.

To state a claim for breach of contract in New York, plaintiffs must allege (1) the existence of an agreement, (2) performance of the agreement by one party, (3) breach by the other party, and (4) damages. (See Noise In the Attic Productions, Inc. v. London Records 10 AD3d 303 [1st Dept 2004]; see also Furia v. Furia, 116 AD2d 694 [2d Dept 1986]; Commercial Litigation, vol. 4, §59:6, 59:12, [pp.1054-1055, 1066-1067], [Robert L. Haig et al. eds., 2d ed., Thompson/West 2005.)

In order to avoid dismissal, a plaintiff must properly plead all elements of a cause of action. Bonanni v. Straight Arrow Publishers, 133 AD2d 585, 586 [1st Dept, 1987]. At issue is whether Plaintiffs have pled facts that, when taken as true, satisfy the element of breach by Defendants. Here, Plaintiffs do not allege the breach of an express provision of the written agreements between the parties (Plaintiffs' Opp. M.O.L. p.10 and p.10 at footnote 5, citing Compl. ¶84). Instead, they assert that: (1) Defendants Harvest, Harvest III and IRMC breached oral agreements made to Plaintiffs prior to Plaintiffs' purchase of IRMC Preferred Stock; and (2) Defendants' Recapitalization Plan breached the implied covenant of good faith and fair dealing in depriving Plaintiffs of the benefit of this oral agreement.

Where a written contract contains a merger clause, negotiated at arm's length, inserted by sophisticated parties and stating that the written agreement constitutes the entire agreement of the parties, the parol evidence rule bars plaintiffs from introducing evidence of an oral contract [*6]between those parties. (Benjamin Goldstein Prods., Ltd. v. Fish, 198 AD2d 137 [1st Dept 1993]. The Stockholders Agreement contains a such a merger clause providing that "[this] writing constitutes the entire agreement of the parties with respect to the subject matter hereof and may not be modified or amended except by a written instrument duly executed by the holders of at least a majority of the outstanding shares of Common Stock of the Investor Group." (Amended and Restated Stockholder's Agreement, ¶10[a] of Ex. 2 to Affirmation of Robert E. Tiedemann.). Moreover, Plaintiffs bargained for the receipt of IRMC stock in exchange for their ownership in corporations IRMC sought to acquire and of which they served as officers. (Compl. ¶¶24-25) Clearly, the plaintiffs were sophisticated businessmen engaging in an arm's length transaction. Because Plaintiffs were sophisticated business people, and because the merger clause in the Stockholder's Agreement supercedes any purported oral agreements between the parties, there is no reason why parol evidence of alleged prior oral agreements should be permitted to create ambiguity in an agreement that is facially clear. Thus, Plaintiffs allegations that Defendants breached provisions of a previous oral contract are barred by the merger clause in the Stockholder's Agreement.

Next, turning to Plaintiffs' argument regarding the covenant of good faith and fair dealing, while a merger clause does not permit a court from inferring a covenant of good faith and fair dealing, such an obligation can only be found where the implied term is consistent with the other terms in the contract. (Dalton v. Educational Testing Service, 87 NY2d 384, 389 [1995]. SNS Bank, N.V. v. Citibank, N.A. 7 AD3d 352, 354-355 [1st Dept 2004]). Plaintiffs argue that the Stockholders Agreement does not govern the full extent of the parties' relationship, however the written agreements between the parties contemplate the type of transaction which was entered into by the Defendants.

Plaintiffs signed an integrated, written Stockholder's Agreement, under which they purchased their shares, and their rights and obligations as stockholders in the privately held IRMC are therefore governed by that agreement as well as by IRMC's Certificate of Incorporation and By-Laws. The Certificate of Incorporation expressly permits the corporation to authorize shares of capital stock pari passu with or senior to the Old Series A Preferred with the consent of a majority of the holders of outstanding shares of the Old Series A Preferred, and the requisite written consents were obtained on or about March 29, 2004. (Compl. ¶¶47, 82 and Tiedemann Aff. Ex. 3, Certificate of Incorporation at Art. 4 sec B.9 [as amended]). Moreover, Section 1.10 of IRMC's By-Laws permit the Board of Directors to dispense with a stockholder meeting, prior notice thereof and a vote of the stockholders when an action is taken by written consent of the stockholders (as was the case when IRMC approved the Restructuring). (Tiedemann Aff. Ex. 4.). On these facts, I should not imply a covenant of good faith and fair dealing despite the merger clause. Instead, the existence of written agreements which specify the manner in which new Preferred Stock is to be issued and which contain no requirement that current Preferred Stockholders be notified of such an issue, further supports dismissal of Plaintiffs' contract claim.^[FN7] Because plaintiffs allegations fail to establish that the Defendants [*7]breached any provision of a contract with the Plaintiffs, and because the merger clause bars Plaintiffs from introducing evidence of the alleged prior agreements, I need not address Defendant's arguments that evidence of an oral contract between the parties is barred by the Statute of Frauds or by the fact that the terms of the alleged oral agreement are insufficiently vague to require enforcement. Nor need I address the sufficiency of damages as pled by the plaintiff. Therefore, the third cause of action is dismissed.

Intentional Interference with Oral Contract (Fourth Cause of Action)

A claim of intentional interference with contractual relations requires (1) the existence of a valid contract between plaintiff and a third party; (2) that defendant have knowledge of the contract; (3) that Defendant intentionally procured the third party's breach of contract without justification; (4) an actual breach of contract; and (5) damages to the plaintiff as a result of that breach. (Lama Holding v. Smith Barney Inc., 88 NY2d 413, 424 [1996]). New York courts have repeatedly found that a claim for intentional interference with a contract cannot stand where the plaintiff has failed to state a claim for breach of contract. (e.g. NBT Bancorp, Inc. v. Fleet/Norstar Financial Group, Inc. 87 NY2d 614, 620-621 [1996]). Because Plaintiffs have not stated a claim for breach of contract, this cause of action is dismissed.

Breach of Fiduciary Duty (First Cause of Action) and Aiding and Abetting Breach of Fiduciary Duty (Second Cause of Action)

(A) Breach of Fiduciary Duty (First Cause of Action)

Plaintiffs first cause of action alleges that Defendants breached the fiduciary duties of disclosure, care, loyalty and good faith. (Compl. ¶65). They assert that IRMC Board members breached these fiduciary duties by failing to disclose the Recapitalization Plan to Plaintiffs, failing to deal with Plaintiffs honestly, failing to protect the interests of Plaintiffs and other minority shareholders, and recommending the elimination of Plaintiffs' interests to serve their own interests (Compl. ¶66). They further claim that the Board of Directors had a duty to scrutinize the refinancing proposal to determine whether minority shareholders were being treated fairly before recommending the Recapitalization to the shareholders who were permitted to vote. (Compl. ¶65). While Plaintiffs frame their complaint in the language of general principles of fiduciary duty, it is important to bear in mind that the rights Plaintiffs actually seek to enforce are those held as preferred rather than common shareholders.^[FN8]

Defendants move to dismiss the first cause of action for three reasons. First, they argue that Plaintiffs fail to state a claim for breach of fiduciary duty because (a) the fiduciary duty claim duplicates Plaintiffs' contract claim, and (b) the rights of Plaintiffs, as preferred [*8]shareholders, are governed by principles of contract rather than those of fiduciary duty. Second, Defendants contend that no breach of fiduciary duty claim can be stated against IRMC because Delaware law prevents IRMC, itself, from being held liable for a breach of fiduciary duties by its directors. Third, they claim that the Exculpatory Clause, adopted by IRMC in its Certificate of Incorporation pursuant to 8 Del. C. §102(b)(7), eliminates any potential personal liability of the IRMC director defendants. (Defendant's M.O.L., at p. 20).

In their moving papers, Plaintiffs characterize the Restructuring as a freeze-out transaction, arguing that Defendants, breached the duty of loyalty owed to minority shareholders by virtue of their position as controlling majority shareholders. They further argue that their fiduciary duty claims are not identical to their contract claims but are instead are based on "the controlling shareholders' and directors' duties of good faith, loyalty and disclosure," which arise "automatically independent of any agreement." (Plaintiff's M.O.L, at pp. 12-13).

Defendants reply by reiterating that Plaintiffs' status as preferred stockholders precludes their recovery as a matter of law, because the relationship between a corporation and a preferred stockholder is primarily contractual in nature. They also contend that Plaintiffs' breach of fiduciary duty claim relates only to rights they purport to hold as preferred stockholders rather than from any rights shared by all common stockholders. (Defendants' Reply M.O.L., at pp. 6-7). Additionally, they argue that plaintiffs fiduciary duty claims relate to obligations that are expressly treated by the Partnership Agreement and that are the subject of Plaintiffs breach of contract claim. Finally, they assert that Plaintiffs dispute neither dismissal of their breach of fiduciary duty claim against IRMC nor dismissal of their duty of care claims.

At issue is whether Plaintiffs' fiduciary duty claims are precluded (a) because they are duplicative of Plaintiff's contract claims, and/or (b) because, Plaintiffs status as preferred shareholders bars them from bringing a fiduciary duty claim on these facts.

First, Plaintiffs' claim for breach of fiduciary duty cannot survive Defendants motion to dismiss if the claim merely restates Plaintiff's failed contract claim. Delaware's Court of Chancery has held that, where a contract claim addresses the alleged wrongdoing by the Board, any fiduciary duty claim arising out of the same conduct is superfluous, (Gale v. Bershad, 1998 WL 118022, *5 [Del. Ch. 1986]). Similarly, in the more recent case of Blue Chip Capital Fund II Ltd. Partnership v. Turbergen, the Court held that it is impermissible for a plaintiff to allege both contractual and fiduciary duty claims for the same alleged misconduct. (906 A2d 827, 832 [Del. Ch. 2006]). If, as is the case here, the same facts that underlie a plaintiff's implied contract claim also form the basis of that plaintiff's fiduciary duty claim and if the duty sought to be enforced arises out of the parties' contractual as opposed to their fiduciary relationship, then the fiduciary duty claim should be dismissed. (Id. at 832 , citing Gale, 1998 WL 118022 at *5).

Plaintiffs cite RJ Associates (A2d 1999 WL 550350 [Del. Ch. 1999]) to support the proposition that a claim for breach of fiduciary duty can stand alongside a contract claim. However, RJ Associates is distinguishable because, in that case, the contract between the parties expressly stated that the defendant, a general partner of a limited partnership, was "under a fiduciary duty to conduct and manage the affairs for the Partnership in a prudent, businesslike and lawful manner." (Id. at *1 and *10). In that case, the language of the contract incorporated principles of fiduciary duties recognized under Delaware law, and violation of these fiduciary duties was a necessary condition precedent to a breach of certain contract provisions. (Id. at *10). [*9]

Here, Defendants were not bound to contractual fiduciary duties, and allegations that Defendants breached their fiduciary duties by failing to notify Plaintiffs of the terms of the refinancing and to give them an opportunity to invest in the new corporation simply restates Plaintiffs' failed contract claim and, as such, warrants dismissal. (Compl. ¶71; Gale, 1998 WL 118022 at *5, Madison Realty Partners 7, LLC, 2001 WL 40268, at *6 [Del.Ch. 2001]). Moreover, although Plaintiffs describe Defendants' alleged breach of fiduciary duty as a freeze out of minority shareholders, by controlling majority shareholders, their fiduciary duty claim, nevertheless relies on the same conduct, facts and allegations as their breach of contract claim, i.e., allegedly intentionally concealing the details of the transaction until well after the fact in order to appropriate to themselves an unfair share of the Corporation's equity and the rights and preferences that were associated with the Corporation's equity. (Compl. ¶71).

Additionally, while Plaintiffs allege that the Recapitalization Plan was inherently unfair to them and other minority shareholders, the damages they seek (an amount according to proof and including the value of their investments and accrued dividends) are both redundant to the relief they seek in their contract claim and additionally are tied to their holdings as preferred shareholders. (Compl. ¶72, 85).

Also, in Gale v. Bershad, (1998 WL 118022 at *5 [Del. Ch. 1998]) the Court held that a preferred shareholder's claim for breach of fiduciary duty may not coexist with an implied contractual claim that Defendants violated the covenant of good faith and fair dealing, because to allow otherwise would "undermine the primacy of contract law over fiduciary law in matters involving the essentially contractual rights and obligations of preferred stockholders."

Second, dismissal of Plaintiffs' breach of fiduciary duty claim is further warranted because Plaintiffs claim for breach of fiduciary duty relates to purported rights which they held as preferred shareholders and which they did not share with the common stock. (Moore Bus. Forms, Inc. v. Cordant Holdings Corp. 1995 WL 662685, at *6 [Del. Ch. 1995], citing Jedwab v. MGM Grand Hotels, Inc., 509 A2d 585, 594 [Del. Ch. 1986]).

Generally, "Preferred shareholders have the same rights with respect to the management of the corporation as the common shareholders, except insofar as they may be excluded by their contract." (Jennifer L. Berger, J.D., Carol A. Jones, J.D. and Britta M. Larsen, J.D., Fletcher Cyclopedia of the Law of Private Corporations §5300 [p. 519] [Perm Ed. 2003 Revised Volume]). Additionally, in RJ Associates, the Court of Chancery held that conduct by an entity occupying a fiduciary position may form the basis for both contract and fiduciary duty claims. (1999 WL 550350 at *9 [Del. Ch. 1999]). Nevertheless, it is a well established principle of Delaware Law that "because of the primacy of contract law over fiduciary duty law, if the duty sought to be enforced arises from the parties' contractual relationship, a contractual claim will preclude a fiduciary claim." (Solow v. Aspect Resources 2004 WL 2694916 at *4; Gale, 1998 WL 118022 at *5; Madison, 2002 WL 40268 at *6, RJ Associates A2d 1999 WL 550350 at *9-10).

In Jedwab, (509 A2d 584, 593-594 [Del. Ch. 1986]) the Court of Chancery held that, the relationship between a corporation and its preferred stockholders is primarily contractual in nature and primarily involves rights created in the certificate designating and defining the legal rights of the preferred stockholders, but that in limited circumstances, the directors owe fiduciary duties to preferred stockholders as well as common. The determining factor in whether the board owes a fiduciary duty to preferred stockholders is whether the right or obligation at issue [*10]is specific to contractual obligations owed to the preferred shareholders or one shared equally with the common stockholders. (Id. at 594; Moore 1995 WL 662685 at *4). Only in the latter case will the directors owe duties to preferred shareholders other than those specified by contract. (Jedwab, 509 A2d at 594).

Plaintiffs here allege neither that all common stockholders had the right to participate in the Recapitalization to avoid a stock split, nor that Plaintiffs' common stock holdings were treated any differently than those of other common stockholders. (Compl. ¶51). Even though Plaintiffs point out that they also held common stock and that all common stock was rendered worthless by liquidation, the crux of Plaintiffs claim is that they were denied the opportunity to invest in the restructured IRMC or otherwise recoup their investment - rights they would have held only as preferred shareholders and only under the purported oral contract with Defendants (Compl. ¶71).

Plaintiffs attempt to analogize their situation to Acker v. Transurgical, Inc. (2004 WL 1230945 *1, n.6 [Del. Ch. 2004]), in which the Court held that a contracting party may be charged with a separate tort liability arising from a breach of duty distinct from or in addition to a breach of contract claim, but this case is distinguishable because, in Acker, the plaintiff held primarily common stock and the defendant held mostly preferred. Plaintiff has cited to no case which varies from the above stated principles, under which a preferred stockholder, seeking to enforce rights held by virtue of its position as a preferred shareholder may not state a claim for breach of fiduciary duty.

For these reasons, Plaintiffs cannot state a claim for breach of fiduciary duty against the Defendants. Accordingly, I need not address Defendants arguments that IRMS owes no fiduciary duty to its shareholders under Delaware law or that the exculpatory clause included in IRMC's Certificate of Incorporation (as authorized under Section 102(b)(7) of Delaware Corporations Law) mandates dismissal of Plaintiffs' breach of duty of care claims against Defendants Wertheim, Eisenstein, Christofferson and Kapoor. Plaintiffs' first cause of action is dismissed.

B.Abetting Breach of Fiduciary Duty (Second Cause of Action)

In order to state a claim for aiding and abetting a breach of fiduciary duty, a plaintiff must allege facts demonstrating: (i) the existence of a fiduciary relationship; (ii) breach of that relationship; (iii) knowing participation in the breach by a defendant who is not a fiduciary; and (iv) damages proximately caused by the breach. (In re: General Motors (Hughes) Shareholder Litig., 2005 WL 1089021, at *23 [Del.Ch. 2005]). Where, as here, Plaintiffs cannot state an underlying claim for breach of fiduciary duty, their claim for aiding and abetting a breach of fiduciary duty also warrants dismissal. (Id. at *23).

Consequently, I dismiss Plaintiffs' second cause of action.

Fraud Claims: Fraudulent Misrepresentation/Constructive Fraud (Fifth Cause of Action); Fraudulent Concealment (Sixth Cause of Action); Fraud in the Inducement (Tenth Cause of Action)

Plaintiffs have alleged (i) fraud and constructive fraud against Harvest, Wertheim, Eisenstein, Christofferson and Kapoor (Fifth Cause of Action), (ii) fraudulent inducement against IRMC and Harvest (Tenth Cause of Action), and (iii) fraudulent concealment against all [*11]Defendants (Sixth Cause of Action).

Defendants argue that Plaintiffs claims for fraud must be dismissed for two reasons: (1) because Plaintiffs may not recast their failed contract claims as fraud; and (2) because Plaintiffs have failed to plead each element of fraud with sufficient particularity.

In response to Defendants' first argument, Plaintiffs cite to, Bridgestone/Firestone Credit Services, Inc. (98 F3d 13, 20 [2d Cir. 1996]) for the proposition that, where a plaintiff claims that defendant intended to breach a contract, a claim for fraud may also lie where: (i) the defendant owes a legal duty to plaintiff apart from the duty to perform under the contract; (ii) the defendant makes a fraudulent statement that is collateral or extraneous to the contract; or (iii) plaintiff seeks special damages unrecoverable as contract damages.^[FN9]

Defendants respond by arguing that Plaintiffs claim must be dismissed because (i) Plaintiffs fraud claims relate to the breach of contract, (ii) the alleged fraudulent statements are not "collateral or extraneous to the contract" and (iii) the alleged damages for both fraud and breach of contract causes of action are the same (the purported loss of the value of Plaintiffs' investments). Defendants further argue that Plaintiffs' claim for punitive damages is frivolous as to both the contract and the fraud claims. Additionally, Defendants reiterate that Plaintiffs have failed to state their fraud claims with particularity.

The First Department has held that a contract action may not be converted into one for fraud by the mere additional allegation that the contracting party did not intend to meet its contractual obligation. (Richbell, 309 AD2d 288; DePinto v. Ashley Scott, Inc., 222 AD2d 288 [1st Dept 1995]). The First Department has also held that, where Plaintiffs allege a fraud claim, (i) which is based on the same facts underlying the contract claim, (ii) where the fraud claim is not collateral to the contract, and (iii) if no damages are alleged that would not be recoverable under a contract claim, then such a claim is properly dismissed as duplicative. (J.E. Morgan Knitting Mills v. Reeves Bros., Inc., 243 AD2d 422, 422-423 [1st Dept 1997].

In this case, Plaintiffs' fraud claim is clearly duplicative under both the standard articulated by the Second Circuit in Bridgestone (98 F3d 13, 20) and under the very similar criteria set forth by the First Department in J.E. Morgan (243 AD2d 422, 422-423). Defendants bargained at arm's length with, and owed no separate legal duty to, Plaintiffs when the parties negotiated the purchase of IRMC stock, and Plaintiff's fraud claim is based on the same alleged promise as the contract claim (i.e. that Plaintiffs would be treated on par with the institutional investors). (See Compl. ¶¶ 91, 125, 130). Consequently, an application of the first and second factors of either test indicate that Plaintiffs should not be permitted to recast their contract claim as fraud. As to the third factor in both tests (allegations of damages unrecoverable in contract), Plaintiffs argue that, because they seek recovery for all consequential injury and for punitive damages, that their fraud claims should therefore survive. (Plaintiff's M.O.L., pp.17-18). This argument, however, is unpersuasive. Plaintiffs cannot bootstrap what is essentially a contract claim into an action for fraud merely by tacking a request for punitive damages onto their claim - particularly since there is no basis set forth in the claim on which to conclude that punitive [*12]damages are appropriate. Plaintiff's claim is clearly a contract claim masquerading as a claim for fraud, and adding the words "punitive damages" or "equitable" relief does not alter its nature.

Because I have determined that Plaintiffs have impermissibly attempted to recast contract causes of action as fraud claims, I need not discuss the other deficiencies in Plaintiffs' fraud claims including a failure to plead each claim with the requisite particularity. For the reasons set forth above, Plaintiffs, fifth, sixth and tenth causes of action are dismissed.

Negligence (Seventh Cause of Action)

Defendants move to dismiss Plaintiffs negligence claim as duplicative of Plaintiffs' failed claims for breach of contract and breach of fiduciary duty. First, Defendants assert that a cause of action simply alleging that Plaintiffs were injured by Defendants' actions with respect to a purported oral contract must be dismissed because New York does not recognize a cause of action for negligent performance of contract. (Fluhr v. Goldsheider, 264 AD2d 570, 571 [1st Dept 1999]). Second, Defendants move for dismissal of the negligence claim, arguing that, under Delaware law, the claim that a fiduciary acted "negligently," is not actionable and that only where a director fails to act as a result of ignorance, can a claim for negligence be brought against a fiduciary (Werner v. Miller Tech. Mgt., LP., 831 A.2d 318 n.51 [Del. Ch. Ct. 2003]; Rabkin v. Philip A. Hunt Chemical Corp. 547 A2d 963 [Del. Ch. 1986]).

Plaintiffs respond by claiming that Defendants owed Plaintiffs a duty not to endanger their interests and that this duty was separate from Plaintiffs' contractual duties. Additionally, they emphasize, in a footnote, that their claim "alleges mere negligence as opposed to the gross negligence that would be considered a breach of fiduciary duty." (Plaintiff's M.O.L., p. 21, n.8). However, they have cited no authority supporting a finding they may validly state this claim.

As correctly pointed out in the Defendants' reply papers, Lutz v. Boas, (171 A2d 381, 396 [Del. Ch. 1961]), a 1961 Delaware case cited by Plaintiffs, concerns directors who failed to exercise general supervision that would have revealed improper actions on the part of the company, and Higgins v. New York Stock Exchange, (10 Misc 3d 257, 286 [NY Cty. 2005]) a 2005) a New York County case, involves directors who failed to reasonably inform themselves of consequences of a merger. Here, Plaintiffs have alleged facts distinguishable from either scenario having argued that the corporation and its directors engaged in a deliberate scheme to "wipe out the interests of certain minority shareholders including Plaintiffs." (Compl. ¶¶40, 46, 47, 60). Defendants also argue that Plaintiffs cannot restate failed contract and fiduciary duty claims as negligence claims.

First, plaintiffs have not alleged facts that would support the existence of a tort claim for negligence in addition to their contract claims under New York law. "Merely charging a breach of duty of due care,' employing language familiar to tort law, does not, without more, transform a simple breach of contract into a tort claim. (Clark-Fitzpatrick, 70 NY2d 382, 390 [1987]). In Sommer v. Federal Signal, (79 NY2d 540, 552) the Court of Appeals established "guideposts" in determining whether an action may sound in tort as well as contract. First, the Court restated the holding in Clark-Fitzpatrick, supra (70 NY2d 382 at 389-390). Second, the Court stated that a legal duty independent of contractual obligations may be imposed by law as an incident to the parties' relationship where they have a heightened duty of care such as professionals, common carriers and bailees. Third, and most relevant here, the Court listed several criteria to be used in "disentangling tort and contract claims." Fourth, and finally, it asserted that either a failure to act [*13]or an affirmative act could give rise to a negligence claim.

First, and most importantly, Plaintiffs have not met the criteria for stating a tort claim under the third "guidepost" in the Sommer case. The Court in Sommer considered the following: (a) the nature of the injury; (b) the manner in which the injury occurred; and (c) the resulting harm. (Id. at 552). Further, it stated that, where the plaintiff is essentially seeking enforcement of the bargain, the action should proceed under a contract rather than a tort theory. (Id. at 552), citing Clark-Fitzpatrick, 70 NY2d 382 at 389-390). Here, where the alleged injury was that Plaintiffs lost the value of an investment, where the injury did not occur as the result of an "abrupt, cataclysmic occurrence," and where the harm was strictly economic in nature, the facts militate against Plaintiffs' having viable claims in tort as well as in contract. (Sommer, 79 NY2d 540, 553).

Because an application of the criteria set forth in the third Sommer "guidepost" so clearly indicates that, yet again, Plaintiffs have impermissibly attempted to recast claims properly brought as contract claims, it is unnecessary to discuss at length the other guideposts in Sommer. Again, as set forth in the first guidepost of Sommer, a mere allegation that the duty of care was violated will not transform a contract claim into a tort. (79 NY2d 540, 552, citing Clark-Fitzpatrick, 70 NY2d 382 at 389-390).

Second, Plaintiffs negligence claim should be dismissed because, under Delaware law, such a claim is not actionable and, only where a director fails to act as a result of ignorance, can a claim for negligence be brought against a fiduciary (Werner v. Miller Tech. Mgt., LP., 831 A.2d 318, 331, n.51 [Del. Ch. 2003]; Rabkin v. Philip A. Hunt Chemical Corp. 547 A2d 963 [Del. Ch. 1986]). Plaintiffs have cited no authority to suggest that the facts of this case support deviating from this rule.

For the reasons set forth above, Plaintiffs' seventh cause of action is dismissed.

Violation of Delaware Law (Eighth Cause of Action)

In addition to other relief sought, Plaintiffs seek a declaratory judgment determining that the amendments of IRMC's Certificate of Incorporation are invalid. They also seek an injunction restraining the directors of IRMC from acting pursuant to the purported amended Certificate of Incorporation and whatever other relief the court deems just. (Compl. ¶117). This complaint was filed nearly two years after the amendments to the Certificate had been made and the Restructuring had occurred. Additionally, I have reviewed Plaintiffs Complaint, and find this cause of action to be rambling, largely incomprehensible, and, in certain instances, inconsistent with other portions of the Complaint or with Plaintiff's Memorandum of Law.

First, Plaintiffs base their entitlement to relief on vague and general allegations that the Restructuring violated 8 Del. C. §242, but they do not cite to an applicable section of the statue in their Complaint. (Compl. ¶¶ 111, 113-115). Moreover, in the Complaint, Plaintiffs raise only one specific violation of §242. They argue that Board could not permissibly declare the amendments to the Certificate of Incorporation advisable, even though the statute sets forth no requirements as to how or when a Board should make an advisability determination. As Defendants correctly note in their Reply Memorandum, Plaintiffs later dropped this claim and instead argue in their opposition papers that Defendants violated 242(b)(2) (requiring that "the holders of outstanding shares of a class shall be entitled to vote as a class upon a proposed amendment...if the amendment would...alter of change the powers, preferences or special rights [*14]of the shares of such class so as to affect them adversely.") (Defendants' Reply M.O.L. p. 18; Plaintiff's M.O.L. 23). Even if Plaintiffs could state a valid cause of action for this reason, it has not been properly set forth in the Complaint, which makes vague references to lack of proper notice and to a voting requirement without citing the applicable statue much less the relevant section thereof (Compl. ¶¶ 113-115).

Second, Plaintiffs provide no support for their allegation that the requisite number of consents were not obtained in order for the Certificate of Incorporation to be amended without notice or a meeting. Plaintiffs argue that a majority of the shareholders adversely affected by the action should have been permitted to vote, but again, their Complaint refers to neither the relevant Delaware law nor the applicable section. In their Reply Memorandum, Plaintiffs reiterate their allegation that "the requisite number of consents" were not obtained, but, again they do not cite to any sections of Delaware Law or any case law to support this argument. ^[FN10]

Third, while Plaintiffs do cite to the applicable statute in support of their allegation that "prompt notice of the corporate action" was not provided as required by 8 Del C. §228(e), the statute is silent as to what period of time constitutes "prompt notice." Plaintiffs cite one case to support their argument (H-M Wexford LLC v. Encorp. Inc., 832 A.2d 129 [Del. Ch. 2003]), but this case does nothing to define "prompt notice." Moreover, H-M Wexford does not discuss 8 Del. C. §228(e) at all. Plaintiffs cite it in support of their argument that even seemingly minor violations of 8 Del. C. §228(e) can be grounds for finding a corporate action invalid; however, this case is too far removed from the facts at hand. As Defendants point out in their Reply Memorandum, H-M Wexford concerns a violation of 8 Del. C. §228(c) for failure to comply with the requirement that written consents shall bear the date of signature. (Defendants' Reply M.O.L. p.17, n.7; supra 832 A.2d at 151-2). Unlike the 8 Del. C. §228(c) requirement, with which compliance or lack thereof is clear on the face of the consents, the "prompt notice" requirement of 8 Del. C. §228(e) does not specify when notice need be given. Consequently, where Plaintiffs have conceded that notice was provided within one month and have cited to no cases indicating that provision of notice within this time frame violates the statute, there is no reason not to dismiss the claim. (Comp. ¶59).^[FN11] [*15]

Finally, Plaintiffs argue in their Opposition Memorandum that, even if Defendants can show adherence to the "letter of the statutes," that Plaintiffs are not precluded from recovering in equity, and they cite to Hollinger Int'l, Inc. v. Black (844 A.2d 1022, 1077-78 [Del. Ch. 2004]) in support of this proposition. (Plaintiff's M.O.L., p. 23). However, there is no reason, on these facts, why an equitable remedy should be available to Plaintiffs, who have challenged a transaction approximately two years after the fact, and who have stated only vague and conclusory allegations.

Plaintiff's eighth cause of action is dismissed.

Unjust Enrichment (Ninth Cause of Action) and Promissory Estoppel (Eleventh Cause of Action)

Defendants argue that both of Plaintiffs' quasi-contractual claims must be dismissed because the subject matter of the alleged wrongdoing is governed by integrated written agreements. (Apfel v. Prudential Securities, Inc., 81 NY2d 470, 479 [1993]). Defendants also argue that Plaintiffs have not satisfied the elements necessary to state a claim for promissory estoppel. Additionally, with regards to Plaintiffs promissory estoppel claim, Defendants argue that Plaintiffs do not allege any "clear and unambiguous" oral promise concerning stockholder rights. (New York City Health & Hosp. Corp. v. St. Barnabas Hosp., 10A.D.3d 489, [1st Dept 2004]).

Plaintiffs respond by pointing to the language of Apfel and emphasize its holding that the "transaction [was] controlled by express agreements between the parties." Plaintiffs then attempt to argue that the written contracts in this case do not cover the parties' relationship in case of a recapitalization. Plaintiffs do not address Defendants second argument, that they have not alleged the necessary elements to state a promissory estoppel claim, and instead argue that plaintiff can proceed on a quasi contract theory as well as one for breach of contract because the existence of a contract or the application of a contract to the dispute is in issue. (Old Salem Development Group, Ltd. v. Town of Fishkill, 301 AD2d 639 [2d Dept. 2003].). This argument, however, depends on Plaintiffs having stated a valid cause of action for fraud in the inducement and is thus moot. Defendants challenge Plaintiffs' argument that the written contracts do not govern the parties' relationship in the event of a recapitalization, pointing out that Plaintiffs' own allegations include arguments that the Restructuring breached the parties' written agreements (Compl. ¶¶80-84). Thus, Defendants correctly argue that the invalidity of plaintiff's fraudulent inducement claim precludes application of the Old Salem rule.

A.Unjust Enrichment (Ninth Cause of Action)

Unjust enrichment occurs when a defendant enjoys a benefit bestowed by the plaintiff without adequately compensating the plaintiff. (Sergeants Benevolent Ass'n Annuities Fund v. Renck, 19 AD3d 107, 111 [1st Dept. 1998]). "A valid and enforceable written contract precludes recovery on a theory of unjust enrichment." (Cornhusker Farms v. Hunts Point Co-op Market, Inc., 2 AD3d 201 [1st Dept 2003], citing Clark-Fitzpatrick, 70 NY2d 382, 389).

The subject matter of the alleged wrongdoing is governed by the written, integrated Stockholders' Agreement and the Certificate of Incorporation. These documents expressly permit the corporation to issue shares of capital stock in the manner it did with the consent of the majority of the holders of the outstanding shares of Old Series A Preferred Stock (which it [*16]obtained on March 29, 2004), and the By-Laws permit IRMC to act by written consent of the stockholders. (Compl. ¶¶47, 82 and Tiedemann Aff. Ex. 3, Certificate of Incorporation at Art. 4 sec. B.9 [as amended]).

Moreover, Plaintiffs claim that Defendant was unjustly enriched is based on the same facts alleged in support of their failed contract claim. Because the written agreements between the parties govern the rights and obligations of the parties during events comprising the Restructuring (amendments being made to the certificate, issuance of preferred stock, etc.), and because the subject matter of both these claims is identical, I dismiss Plaintiffs' ninth cause of action for unjust enrichment.

B.Promissory Estoppel (Eleventh Cause of Action)

To avoid dismissal of a promissory estoppel claim, a plaintiff must allege: ( i) an unambiguous promise; (ii) reasonable and foreseeable reliance on the promise; and (iii) injury as a result of that reliance. (Urban Holding Corp. v. Haberman 162 AD2d 230, 231 [1st Dept. 1990]).

It is not alleged that there was a "clear and unambiguous promise." Plaintiffs assert that Oppman and Johnston were promised, at a meeting with Angrist and Schultz, that they were receiving stock at a more favorable price than the institutional investors, that they would have the same opportunity for an exit strategy as the institutional investors, that the value of their stock would be protected, and that they, as shareholders would be accorded the same rights as institutional investors (Compl. at ¶30). As to Rountree, Plaintiffs allege that he was told by Shultz and Schwank that he would "have the opportunity to acquire Founders' stock, identical to that of institutional investors, in the amount of $250,000 only (though he was willing to invest more)." (Compl. ¶30). None of the promises recited by Plaintiffs, if taken as true, specify what Defendants' duties would entail or precisely what Plaintiffs' rights would include. Instead, the assertions recited above are too vague to satisfy the first element of a promissory estoppel claim

Additionally, in light of the fact that Plaintiffs were sophisticated businessmen negotiating for the sale of their ownership in companies of which they were directors and officers, and that they signed written, integrated agreements which contradicted promises made Angrist, Schultz, and Schwank, Plaintiffs also cannot satisfy the second element - reasonable and foreseeable reliance. (Comp. ¶¶ 16, 24, 25). The First Department has found it neither reasonable, nor foreseeable, for plaintiffs to rely on a promise, where the individuals purportedly making the promise lacked sufficient control over whether such promises would be honored, which occurred here, where Plaintiffs allegedly negotiated for extra-contractual shareholder rights in a corporation owned and managed by parties in addition to those with whom Plaintiffs transacted. (Knight Securities, L.P. v. Fiduciary Trust Company 5 AD3d 172 [1st Dept 2004]).

Because Plaintiffs have alleged neither a clear and unambiguous promise nor reasonable reliance thereon, they have not satisfied the necessary elements of a promissory estoppel claim. Consequently, I need neither analyze whether plaintiffs satisfied the injury element of promissory estoppel, nor evaluate Defendants first argument, that this claim is barred by the existence of a valid and enforceable written contract. Accordingly, the eleventh cause of action is dismissed.

Plaintiff's Request for Punitive Damages [*17]

Plaintiff's request for punitive damages is denied because they have not succeeded in stating a cause of action, much less egregious conduct by Defendants.

Plaintiffs's Request for Leave to Amend the Breach of Contract Claims

In their opposition papers, Plaintiffs request leave to amend their breach of contract claims in accordance with additional facts, once those facts are disclosed. (Plaintiffs' M.O.L., p. 11). Because Plaintiffs failed to state a cause of action, there is no basis to grant this request.

Plaintiff's Motion for Preliminary Injunction

Because none of Plaintiffs claims have survived Defendants motion to dismiss, Plaintiffs' motion for Preliminary Injunction is DENIED as moot.

Accordingly, it is

ORDERED that Defendants' motion to dismiss is GRANTED.

ORDERED that Plaintiffs' motion for a preliminary injunction is DENIED

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J.S.C.