Defendant, Westside Home Care Agency, moves for an order dismissing plaintiff's first cause of action in the amended complaint for "fraudulent inducement" and the second cause of action for "fraudulent concealment" against all defendants, dismissing the third cause of action for unjust enrichment against defendants Maxwell and Wagenhouser and dismissing the fifth cause of action for violation of GBL §349 as against all defendants. A previous motion to dismiss was made with respect to the originally filed complaint. That motion was withdrawn without prejudice after the complaint was amended.

The parties to this action have enjoyed a business relationship for at least the past decade, whereby defendant's employees provided personal care and other services to plaintiff's clients in their homes. In this action, plaintiff alleges that each contract with defendant required defendant to ensure that employees assigned to provide services to plaintiff's clients satisfied licensing and certification requirements required by federal and state law, rules, and regulations. Amended Complaint, ¶¶21-23, 30-31, 39-44, 49-55.

For example, the 2006 agreement provided that, "where Federal, State or local public jurisdictions require licenses or permits for the provision of services contemplated herein, . . . [Westside] shall procure and keep in effect such licenses or permits, and, where applicable, shall post such licenses or permits in a prominent place, as required." The agreement further provided, "any duty imposed upon . . . [Westside] under such regulations shall be deemed to have been made contractually agreed to here." The pertinent regulations include 10 N.Y.C.R.R. §763.13, §766.11, and §700.2. Under the agreement, Westside's personnel must meet the "requirements for nurses and aides specified by Federal and New York law, rules, or regulations and/or directors of the New York State Department of Health . . ."

On July 15, 2010, the New York State Department of Health's Regional Office informed plaintiff that defendant's personnel may not be properly credentialed. Id. at ¶67. Plaintiff alleges that it was required to, and did, notify the New York State Office of Medicaid Inspector General that plaintiff received Medicaid reimbursement for services provided by improperly credentialed personnel of defendant. Id. at ¶68. As a result, plaintiff alleges that it will likely be required to [*2]reimburse the Medicaid funds received for services provided by defendant's personnel who lacked the proper credentials. Id. at ¶69.

In the first cause of action alleging fraudulent inducement to enter into the agreements, plaintiff contends that, to induce plaintiff, defendants concealed the fact that its personnel lacked the required credentials. Id. at ¶75. Plaintiff alleges that defendants were aware that their personnel lacked proper credentials, that this information was not known to plaintiff, and that plaintiff believed defendant's personnel were properly certified. Id. at ¶¶76-78. It is alleged that, "[b]ut for Defendants' concealment," plaintiff would not have contracted with defendant or agreed to the payment of certain rates. Id. at ¶78. Plaintiff concludes that defendants' failure to disclose resulted in plaintiff paying defendant for services that were not provided as promised, and will require plaintiff to reimburse the Medicaid funds received for services provided by defendant's aides. Id. at ¶¶79-83.

The second cause of action alleges fraudulent concealment. Plaintiff alleges that defendants concealed their violations of applicable laws from plaintiffs, and that Westside's personnel did not meet required standards. Id. at ¶85. It is alleged that defendants were aware that Westside was not in compliance and that this information was not readily available to plaintiff. Id. at ¶¶86-87. Because Westside concealed the true fact, plaintiff alleges it believed that all personnel were in compliance. Id. at ¶88. Consequently, it is alleged that plaintiff paid rates for services that were not provided as promised, incurred costs and expenses, and suffered damage to its reputation and standing. Id. at ¶¶89-91.

The third cause of action alleges breach of contract against defendant Westside. Plaintiff alleges that HCR and Westside are parties to a contract, the 2006, 2008, and 2010 Agreements. Id. at ¶94. It is alleged that Westside breached the 2006 Agreement by failing to comply with federal and state licensing and certification rules and requirements, by failing to ensure that its aides met requirements, by failing to provide in service education to personnel, and by failing to ensure that the services provided complied with applicable laws. Id. at ¶95. It is further alleged that the 2008 and 2010 Agreements were breached by failing to ensure that personnel met licensure requirements, by failing to provide required in-service education to personnel, by failing to maintain required records, and by failing to ensure that the services provided complied with applicable laws and regulations. Id. at ¶96. Plaintiff alleges that it performed as required under the contract and has paid Westside. Id. at ¶97.

The fourth cause of action alleges unjust enrichment, stating that plaintiff paid defendants in good faith for defective services "not worth the rates paid." Id. at ¶101. It is alleged that defendants were not entitled to the rates paid, that defendants knew that the services it provided were defective, and thus defendants were unjustly enriched. Id. at ¶¶101-03.

The fifth cause of action alleges violations of General Business Law §349. The amended complaint alleges that defendants committed deceptive acts in arranging for the services of aides that were not properly certified. Id. at ¶107. Plaintiff alleges that neither the consumers served by defendants nor plaintiff knew or had reason to know that the aides were not properly certified. Id. at ¶108. Neither consumers nor plaintiff would have used defendants' aides had the truth been known. Id. at ¶109. Defendants knew the aides were not properly certified and understood that their conduct was deceptive. Id. at ¶110. As a result, plaintiff has been damaged by exposure to claims from consumers, the State payors, as well as damage to its standing and reputation. Id. at [*3]¶111. Plaintiff has also incurred significant costs as a result. Id. at ¶112.

On a motion to dismiss pursuant to CPLR §3211(a)(7) the complaint must be given every favorable inference and the allegations in the complaint are deemed to be true. See Dannasch v. Bifulco, 184 AD2d 415, 417 (1st Dep't 1992). When considering such a motion, it is the task of the court to determine whether, " accepting as true the factual averments of the complaint, plaintiff can succeed upon any reasonable view of the facts stated.'" Campaign for Fiscal Equity, Inc. v. State of New York, 86 NY2d 307, 318 (1995)(citations omitted). If the court determines "that plaintiffs are entitled to relief on any reasonable view of the facts stated," the court's inquiry is complete, and the complaint is deemed legally sufficient. See id.

First and Second Causes of Action

Defendants contend that the fraud causes of action cannot lie because they are merely duplicative of the breach of contract claims. " A cause of action alleging fraud does not lie where the only fraud claim relates to a breach of contract . . . A present intent to deceive must be alleged and a mere misrepresentation of an intention to perform under the contract is insufficient to allege fraud . . . Conversely, a misrepresentation of material fact, which is collateral to the contract and served as an inducement for the contract, is sufficient to sustain a cause of action alleging fraud.'" Ross v. DeLorenzo, 28 AD3d 631, 636 (2d Dept. 2006), quoting WIT Holding Corp. v. Klein, 282 AD2d 527, 528 (2d Dept. 2001). A cause of action is duplicative if it is based on the same facts that underlie the contract cause of action, is not collateral to the contract, and seeks damages recoverable under a contract measure of damages. Charles v. Onondaga Community College, 69 AD2d 144 (4th Dept. 1999). See Financial Structures, Ltd. v. UBS AG, ___ AD3d ___, 909 N.Y.S.2d 45 (1st Dept. 2010). The fact that the duty described in the contract also springs from a statute does not, by itself, rid a cause of action for fraud of it duplicative nature. Charles v. Onondaga Community College, 69 AD2d 144, 149 (4th Dept. 1979).

While to state a cause of action for fraud "[a]n affirmative misrepresentation is not always necessary[,]" and "[i]t may be sufficient to state a cause of action that there was a failure to disclose a material fact, and that this was calculated to induce a false belief [citation omitted], . . . in such a situation there must be a confidential or fiduciary relationship such as to create a duty to disclose." County of Westchester v. Welton Becket Associates, 102 AD2d 34, 50-51 (2d Dept. 1984), aff'd for reasons stated below, 66 NY2d 642 (1985). The complaint does not even attempt to allege that the parties stood in "a confidential or fiduciary relationship such as to create [independent of the contract] a duty to disclose." County of Westchester, 102 AD2d at 50-51. In the absence of allegations that a confidential and fiduciary relationship existed, a cause of action for fraudulent concealment does not lie, First Kestone Consultants, Inc. v. DDR Construction Services, 74 AD3d 1135, 1139 (2d Dept. 2010); Wirsing v. Douzi Marine, Inc., 30 AD3d 589, 590 (2d Dept. 2006), unless plaintiff alleges "special facts" warranting the conclusion that defendant should have disclosed.

In the circumstances and regulatory environment set forth in the complaint, plaintiff could not succeed in alleging such "special facts," and therefore the court declines to grant leave to replead. Under the special facts doctrine, "a duty to disclose arises where one party's superior knowledge of essential facts renders a transaction without disclosure inherently unfair." Swersky v. Dreyer and Traub, 219 AD2d 321, 327 (1st Dept 1996). See also, Barrett v. Freifeld, 64 AD3d 736 (2d Dept 2009). "[W]here one party possesses superior knowledge, not readily available to [*4]the other, and knows that the other is acting on the basis of mistaken knowledge, there is a duty to disclose that information.'" Stevenson Equip. Inc. v. Chemig Constr. Corp., 170 AD2d 769, 771 (3d Dept 1991), affd, 79 NY2d 989 (1992), quoting Aaron, Ferer & Sons v. Chase Manhattan Bank, Natl. Assn, 731 F.2d 112, 123 (2d Cir. 1984). "[T]he doctrine requires satisfaction of a two-prong test: that the material fact was information peculiarly within the knowledge of [defendant], and that the information was not such that could have been discovered by [plaintiff] through the exercise of ordinary intelligence.'" Jana L. v. West 129th Street Realty Corp., 22 AD3d 274, 278 (1st Dept. 2005), quoting Black v. Chittenden, 69 NY2d 665, 669 (1986), quoting Schumaker v. Mather, 133 NY 590, 596 (1892).

Under the regulations cited by plaintiff, and those associated regulations applicable to plaintiff and those entities with whom plaintiff contracts to provide home health care services, plaintiff cannot allege any set of facts meeting the latter requirement. Nor indeed under the contracts attached to the complaint can plaintiff succeed in pleading that it could not have discovered the true state of licensing of defendants' personnel. This is because the regulations and contractual documents placed the duty to verify the existence of the licenses applicable for any type of contractor or contractor personnel squarely on plaintiff, a duty it could not delegate to defendant under any authorized contract. 10 N.Y.C.R.R. §763.12(a)(2)("governing authority may enter into contracts" for patient services, but such contracts "shall specify . . . "that contracted personnel meet the personnel requirements as set forth in section 763.13 of this Part, which can be verified by written documented evidence and examined by the agency and the department on request")(emphasis supplied); §763.13(b)(1)("agency shall ensure for all personnel: . . . that qualifications as specified in section 700.2 of this Title are met"); §766.9(m)(2)(I) (applicable to management contracts, not relevant here but consistent with overall regulatory scheme placing responsibility for regulatory compliance on the agency, not the contract manager); and (esp. for the subject contracts) §766.10(c) ("[c]ontract personnel shall meet the personnel requirements as set forth in section 766.11 of this Part, which can be verified by written documented evidence and examined by the agency and the department")(emphasis supplied); §766.10(d)(1) (contractual arrangements "shall not diminish the licensed home care services agency's responsibility for maintaining adequacy of services" and such contracts must contain a provision providing that "the licensed home care services agency remains responsible for: (1) ensuring that any service provided pursuant to this contract complies with all pertinent provisions of Federal, State and local statutes, rules and regulations"); §766.11(b)(governing authority or operator shall ensure for all health care personnel: . . . that qualifications for home health aide and personal care aide as specified in section 700.2 of this Title are met"); §766.11(g)(plaintiff must ensure that defendants' personnel records include "verifications of . . . qualifications for duties assigned and, . . . records of professional licenses and registrations").

Given the statutory and regulatory duty to inquire of the relevant qualifications and licenses of defendants' personnel, plaintiff cannot meet the two part test of the "special facts" doctrine. Plaintiff makes no allegation that it even made inquiry of defendants of the existence of the licenses, and it assuredly failed to discharge its regulatory duty to "ensure" their existence. Accordingly, the first two causes of action are dismissed.

Defendants also claim that the pleadings' fraud claims lack the required specificity. CPLR 3016(b). In view of the above disposition, it is unnecessary to reach this issue.

[*5]Fourth Cause of Action

Defendants seek dismissal of the unjust enrichment cause of action, arguing that the amended complaint does not allege that the individual defendants were unjustly enriched. Plaintiff's opposition is that sufficient allegations are made because it is reasonable to assume at the pleading stage that the individual defendants benefitted "through salary or otherwise." Plaintiff's Memorandum of Law, at 8.

A claim of unjust enrichment requires a "plaintiff to demonstrate that services were performed for the defendant resulting in its unjust enrichment." Kagan v. K-Tel Entertainment, Inc., 172 AD2d 375, 376 (1st Dept. 1991). "It is not enough that the defendants received a benefit from the activities of the plaintiff (Armstrong v. I.T.T.S. Corp., 10 AD2d 711); if services were performed at the behest of someone other than the defendant, the plaintiff must look to that person for recovery." Id. See also, Seneca Pipe & Paving Co. v. South Seneca Cent. Sch. Dist., 63 AD3d 1556 (4th Dept. 2009); Joan Hansen & Co., Inc. v. Everlast World's Boxing Headquarters Corp., 296 AD2d 103 (1st Dept. 2002); Citron v Columbia Broadcasting System Inc., 29 AD2d 740, 740 (1st Dept. 1968).

Pursuant to the case law, it is not enough for plaintiff to allege that the individual defendants benefitted from payments made by plaintiff to Westside. As the individual defendants were not parties to the agreements and benefitted only through "their salary or otherwise," as argued by plaintiff (Plaintiff's Memorandum of Law, at 8), the unjust enrichment claim fails against the individual defendants.

Furthermore, a plaintiff cannot maintain an unjust enrichment claim while simultaneously alleging the existence of an express contract covering the same subject matter. MJM Adv. v. Panasonic Indus. Co., 294 AD2d 265 (1st Dept. 2002)("plaintiffs cannot recover for unjust enrichment while simultaneously alleging the existence of an express contract covering the same subject matter"). See also, Sergeants Benev. Ass'n Annuity Fund v. Renck, 19 AD3d 107 119 (1st Dept. 2005). Accordingly, the motion to dismiss the unjust enrichment claim against the individual defendants is granted.

Fifth Cause of Action

GBL §349 states provides that it is unlawful to engage in "[d]eceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service . . . ." This statute has a "public focus," and the intent "is directed at wrongs against the consuming public." Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, 85 NY2d 20, 24 (1995). "Thus, as a threshold matter, plaintiffs claiming the benefit of section 349 . . . must charge conduct of the defendant that is consumer-oriented." Id. 85 NY2d at 25. To prevail on a GBL §349 claim a litigant must "demonstrate that the acts or practice have a broader impact on consumers at large." Id. "Private contract disputes, unique to the parties, for example, would not fall within the ambit of the statute." Id. Nor would deceptive and misleading conduct that is aimed at consumers not "similarly situated" with plaintiff fall within the ambit of the statute. Id. 85 NY2d at 26-27 ("threshold test . . . that the acts they complain of are consumer-oriented in the sense that they potentially affect similarly situated consumers"); Corsello v. Verizon New York, Inc., 77 AD3d 344, 365 (2d Dept. 2010)("plaintiff must demonstrate only that the acts or practices have a broader impact on consumers at large, in the sense that they are directed to consumers or potentially affect similarly situated consumers"). "Deceptive or misleading [*6]representations or omissions are defined objectively as those likely to mislead a reasonable consumer acting reasonably under the circumstances,' i.e., the plaintiff's circumstances." Solomon v. Bell Atlantic Corp., 9 AD3d 49, 54 (1st Dept. 2004)(emphasis supplied)(quoting Oswego, 85 NY2d at 26, 27).

Plaintiff's claim thus is, at best, an odd fit with §349(h). Plaintiff's reliance on consumer orientation is based exclusively on the patients receiving home health care services, who are, manifestly, not "similarly situated" with plaintiff, a certified home health care agency under the regulatory scheme. 10 N.Y.C.R.R. §700.2(a)(7). Moreover, if it is a prerequisite to recovery that the consumers misled be " reasonable consumer[s] acting reasonably under the circumstances' i.e., the plaintiff's circumstances," Solomon, 9 AD3d at 54, plaintiff cannot prevail. The consumers plaintiff relies on to meet the consumer orientation element are not acting under plaintiff's circumstances under any conceivable scenario.

It is difficult to imagine that the Legislature intended that a plaintiff which is under the regulatory restraints certified home health care agencies are, which include regulations for contracting with licensed companies such as defendant for the provision of home health care services, is a proper party plaintiff to recover for deceptive omissions that the regulations require plaintiff to ferret out for itself. Under those regulations, set forth above in some detail, plaintiff had the duty to ensure that its independent contractors employed licensed nurses and aides. Yet the complaint wholly fails to allege any effort on plaintiff's part to discharge this regulatory duty. To permit recovery under §349(h) to such a plaintiff seems absurd, at best. In other words, given the regulatory environment described above, even "[a]ssuming that plaintiff's complaints are consumer-oriented and the complained of action or inaction . . . was improper, plaintiffs failed to make the requisite showing that the complained of conduct was deceptive or misleading to them." Polzer v. TRW, Inc., 256 AD2d 248, 249 (1st Dept. 1998).

There is no allegation that defendants engaged in any conduct aimed at soliciting or deceiving consumers directly; indeed, under the contracts appended to the Amended Complaint, the announced "purpose of this Agreement is for . . . [Westside] to provide nursing and/or aide personnel . . . to . . . [plaintiff] as, if and when requested by . . . [plaintiff]." There is also no allegation, nor could there be one, that plaintiff would qualify as a consumer.

As the fifth cause of action falls outside the purview of GBL §349, the motion to dismiss must be granted.

SO ORDERED.

______________________

KENNETH R. FISHER

JUSTICE SUPREME COURT

DATED:January 7, 2011

Rochester, New York