[*1]
2470 Cadillac Resources, Inc. v DHL Express (USA), Inc.
2014 NY Slip Op 51056(U) [44 Misc 3d 1208(A)]
Decided on July 1, 2014
Supreme Court, New York County
Ramos, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.


Decided on July 1, 2014
Supreme Court, New York County


2470 Cadillac Resources, Inc., A & E WORLDWIDE, INC. AAA EXPRESS, LLC, ABBA UNIVERSAL, INC., ACREE ENTERPRISES d/b/a WWE NW ARKANSAS, AEKC, LLC, AIR DELIVERY CONSULTANTS, LTD, AIR EXPRESS OF ILLINOIS, INC., AIR EXPRESS OF MICHIGAN, INC., ANGLICORR, INC., AUSTIN WORLDWIDE EXPRESS, LP, BALCONY VENTURES, INC., BAZOOKA CRUSH HOLDINGS, INC., BEAR FRANCHISING (CONNECTICUT), LLC, BEAR FRANCHISING (DALLAS), LLC, BEAR (LA), LLC, BEAR FRANCHISING (LICENSING), LLC, BEAR FRANCHISING (MANHATTAN), LLC, BEAR FRANCHISING (NEW JERSEY), LLC, BEAR FRANCHISING (RALEIGH), LLC, BEAR FRANCHISING, LLC, BKT WORLDWIDE, INC., BLACKSTONE RIDGE HOLDINGS, INC., BUCKEYE INCORPORATED, CJ & J ENTERPRISES OF CENTRAL FLORIDA, INC., CNM EXPRESS INC., COG EXPRESS, INC., D & C, LLC, DETROIT OVERNIGHT, LLC, DIRECT LLC, DM MARKETING GROUP, INC., DOUBLE BOTTOM, INC., DPX INTERNATIONAL, LLC, DSM SERVICES, INC., EFFECTABIZ, INC., ELMORE FRANCHISES I, INC., FUSION PARTNERS, LLC, HARRISBERG VENTURES, LLC, HIGH TIDE EXPRESS SHIPPERS, INC., HIRAW, LCC, HK PARTNERS DC, LLC, HOPSON ENTERPRISES, INC., HOPSON MCANAMON, INC., IGWT, INC., IRANI, INC., JBH ENTERPRISES, INC., JENKINS ENTERPRISES, INCORPORATED, KENT CLARK, KIGER COMPANY, INC., KIMAT L.P., L.A. OVERNIGHT, LLC, LBK/AMA WWEX, LP, LETTERS EXPRESS INCORPORATED, LINDREW, INC., INC., LINEAGE INVESTMENTS, INC., LM4, INC., MANAGED MAIL, INC., MARALO, INC., MATT FOLDS, MEMPHIS OVERNIGHT, LLC, NATIONS SHIPPING, LLC, NORMAN A. HARRIS, INC., ORANGE COUNTY OVERNIGHT, LLC, OTEY INTERESTS, LP, OVERNIGHT AIR EXPRESS OF NORTHERN INTDIANA, INC., OVERNIGHT AIR EXPRESS, INC., PHOENIX OVERNIGHT, LLC, PIGS INCORPORATED, RJD AND ASSOCIATES, LLC, RKK INCORPORATED, RYPAT, LLC, SAN FRANCISCO OVERNIGHT, LLC, SCHILLING ENTERPRISES, INC., SDL ENTERPRISES, INC., SHAMROCK OVERNITE SERVICE, LLC, SHIP EXPRESS, LLC, SHIPPING SOLUTIONS LP, SKYWAY EXPRESS, INC., SOUTHWEST FLORIDA EXPRESS INCORPORATED, STARS EXPRESS, LLC, STEWARD CORPORATION, TAVA, INC., TPL, INC., TRB INDUSTRIES, INC., TRINITY ONE, INC., UTAH OVERNIGHT, LLC, VEGAS OVERNIGHT, LLC, VENTURINE VENTURES, LLC, VIRGINIA BUSINESS EXPRESS INC., WORLDWIDE EXPRESS OF THE UPSTATE, INC., WORLDWIDE EXPRESS MOUNTAIN WEST, LCC, WORLDWIDE EXPRESS OF KNOXVILLE, INC., WW XPRESS, LLC, Plaintiffs,

against

DHL Express (USA), Inc. and DEUTSCHE POST AG, Defendants.



DHL EXPRESS (USA), INC., Counterclaim Plaintiff, - -

against

2470 CADILLAC RESOURCES, INC., et al., Counterclaim Defendants.




603613/2008



Appearances



Plaintiff



K & L GATES, LLP



599 Lexington Avenue



New York, New York 10022



BY: STEVEN P. WRIGHT, ESQ.



and



EINBINDER & DUNN, LLP



104 West 40th Street



New York, New York 10018



BY: MICHAEL EINBINDER, ESQ.



Defendant



DECHERT LLP



633 West 5th Street, 37th floor



Los Angeles, California 90071



BY: CHRISTOPHER S. RUHLAND, ESQ.



AMY RUDD, ESQ.



and MICHAEL SULLIVAN, ESQ.


Charles E. Ramos, J.

In motion sequence 012, the plaintiffs (collectively, the Franchisees) move to dismiss the fourth counterclaim in the defendant DHL Express (USA), Inc.'s (DHL) fifth amended answer.[FN1] [*2]Background

For a full recitation of the facts, please see this Court's decisions, filed on September 21, 2009 and January 28, 2013.

Briefly, the Franchisees are all franchisees of Worldwide Express Operations, LLC (Worldwide), a former reseller of DHL shipping services. Pursuant to their agreement, DHL provided Worldwide shipping services at wholesale rates in exchange for Worldwide promoting and reselling DHL shipping services. The Franchisees were not parties to this agreement.

Instead, the Franchisees each entered into individual agreements with Worldwide to purchase DHL shipping services, directly from Worldwide, using rates that Worldwide negotiated with DHL. The agreements provided that DHL shipping services would be provided on a credit basis with the obligation that the Franchisees periodically pay any outstanding balances due for the shipping services. It is undisputed that Worldwide was authorized to negotiate with DHL with respect to its shipping rates on behalf of the Franchisees.



Discussion

The Franchisees move to dismiss DHL's fourth counterclaim for fraudulent inducement in its fifth amended answer on the basis that DHL fails to state a cause of action.

"On a motion to dismiss pursuant to CPLR 3211, the pleading is to be afforded a liberal construction" (Leon v Martinez, 84 NY2d 83, 87 [1994]). "We accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (id.). Whether a plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss (EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]).

The premise of DHL's counterclaims is that each package shipped by the Franchisees created an implied contract obligating DHL to ship the package and the Franchisees to pay DHL for its services.

DHL alleges in its fourth counterclaim for fraudulent inducement that in November and early December 2008, it was fraudulently induced to enter into numerous implied contracts to continue providing shipping services to the Franchisees based on misrepresentations that they would pay any outstanding balances due on their accounts. DHL alleges that the Franchisees never intended to fulfill their obligations when they misrepresented, either directly or through Worldwide, their intention to pay. As a result of the misrepresentations, DHL alleges it continued shipping the additional packages to its detriment.

"To state a claim for fraudulent inducement, there must be a knowing misrepresentation of material present fact, which is intended to deceive another party and induce that party to act on it, resulting in injury" (Gosmile, Inc. v Levine, 81 AD3d 77, 81 [1st Dept 2010]; Vance v Indian Hammock Hunt & Riding Club, [*3]Ltd., 403 So 2d 1367, 1371 [Fla Dist Ct App 1981]).[FN2] The exception to this rule is that a cause of action "based upon a statement of future intention must allege facts that show that the defendant, at the time the promissory representation was made, never intended to honor or act on his statement" (Lanzi v Brooks, 54 AD2d 1057 [3d Dept 1976] affd, 43 NY2d 778 [1977]). It is well settled that "[i]f a promise was actually made with a preconceived and undisclosed intention of not performing it, it constitutes a misrepresentation of a material existing fact...'" (Neckles Builders, Inc. v Turner, 2014 NY Slip Op 03668 [2d Dept 2014] citing Sabo v Delman, 3 NY2d 155, 160 [1957]). Furthermore, given the reluctance of people to admit that they are lying, a present intention not to perform may be inferred from the surrounding circumstances, but should not be based solely on the fact that performance did not, in fact, occur (Braddock v Braddock, 60 AD3d 84, 89 [1st Dept 2009]).

Thus, DHL must identify the misrepresentations that it was induced by, and allege facts that provide a basis for this Court to infer that the Franchisees did not intend to perform when the misrepresentations were made.

DHL's newly asserted allegations identify the misrepresentations made by some of the Franchisees, either directly or through Worldwide, that: 1) they would pay outstanding invoices (Foster Aff., Ex. A, ¶ 413 [f], [h], [j], [r], [mm], [ss], [tt], [zz]), 2) investigate the non-payment issues (id. at ¶ 413 [f], [s]), or 3) that the Franchisee knew that Worldwide was communicating on behalf of the Franchisee regarding billing issues and assuring DHL that a particular Franchisee would pay outstanding invoices (id. at ¶ 413 [n], [q]).

The statements referenced by DHL are merely representations that the Franchisees would pay any outstanding invoices, but not representations that the Franchisees would continue to pay for additional future invoices. Furthermore, DHL fails to identify the misrepresentations made by a large majority of the Franchisees.

Based on the allegations, it is not apparent that the Franchisees were representing to DHL that it would pay future invoices.

Putting aside the insufficiency of the purported misrepresentations, DHL further alleges that the Franchisees made a decision not to pay outstanding and future invoices and then concealed that decision from DHL.[*4]DHL's generic allegations of the Franchisees' intent and concealment fail to provide any factual circumstances relating to the Franchisees undisclosed intention to not perform at the time the alleged misrepresentations were made. DHL fails to allege sufficient facts to support an inference that the Franchisees did not have an intention of fulfilling their obligations.General allegations that the Franchisees did not intend to perform are insufficient to support a cause of action for fraudulent inducement (Manas v VMS Assoc., LLC, 53 AD3d 451, 454 [1st Dept 2008]). A cause of action for breach of contract cannot be converted into a cause of action for fraud by merely alleging that the "contracting party never intended to perform its promise" (Smart Egg Pictures, S.A. v New Line Cinema Corp., 213 AD2d 302, 303 [1st Dept 1995]), without alleging facts that demonstrate the Franchisees never intended to perform (627 Acquisition Co., LLC v 627 Greenwich, LLC, 85 AD3d 645, 647 [1st Dept 2011]).

Florida law does not compel a different result (See Noack v Blue Cross and Blue Shield of Florida, Inc., 742 So 2d 433, 434 [Fla Dist Ct App 1999]["In order for a promise of future performance to serve as a predicate for a claim of fraud, it must be established that the promise was made with the present intention not to comply"]).

Furthermore, this Court does not find that additional discovery will cure the deficiencies in DHL's pleadings. After limited discovery, DHL is still unable to establish any factual basis that would support a conclusion that the Franchisees engaged in fraudulent conduct.

Consequently, DHL's fourth counterclaim for fraudulent inducement must be dismissed.

Accordingly, it is

ORDERED that the plaintiffs' motion to dismiss the fourth counterclaim for fraudulent inducements is granted in its entirety, thereby dismissing the fourth counterclaim in the fifth amended answer, and it is further

ORDERED that the parties shall contact the Clerk of Part 53 to schedule a status conference to be held on or before July 21, 2014.



Dated: July 1, 2014

ENTER:

_______________________

J.S.C.

Footnotes


Footnote 1:The term "Franchisees" includes all plaintiffs listed in the caption.

Footnote 2:The parties cite to both New York law and Florida law in their motion briefs. However, since no conflict exists between the laws of the two jurisdictions as to the issues contained herein, this Court shall apply the law of the forum state, New York (Elson v Defren, 283 AD2d 109, 114 [1st Dept 2001]).