Cirri v Daily News, L.P.
Annotate this CaseDecided on February 7, 2005
Supreme Court, Kings County
Christopher Cirri et al., Plaintiffs,
against
Daily News, L.P., Individually and as successor in interest to New York News Inc., Defendant.
26512/03
Carolyn E. Demarest, J.
Upon the foregoing papers in this action for breach of contract, conversion, and unjust enrichment, defendant Daily News, L.P., individually and as successor in interest to New York News Inc., (defendant) moves for an order dismissing plaintiffs' complaint as against it, pursuant to CPLR 3211 (a) (5), as barred by the doctrines of res judicata and collateral estoppel; pursuant to CPLR 3013 for failure to plead adequately; and, pursuant to CPLR 3211 (a) (7), for failure to state a cause of action.
Beginning in the early 1960's, defendant adopted a system of home delivery of the Daily News newspaper under which it designated individual carriers to have prime responsibility for delivery of the Daily News in specifically defined territories. Plaintiffs, who were carriers that participated in this program, executed carrier agreements with defendant. Plaintiffs allege that [*2]starting prior to 1995 and continuing to date, defendant has changed their work rules in breach of these carrier agreements with respect to delivery schedules, methods of collection, complaint resolution procedures, contract requirements, pricing, and customer lists, causing them to sustain damages and loss of business. Consequently, on July 15, 2003, plaintiffs commenced this action as against defendant, alleging causes of action for breach of contract, conversion, and unjust enrichment.
Two prior actions based upon the same claims asserted herein had been previously commenced by plaintiffs against defendant. One of these actions was brought in the Supreme Court, Richmond County (the State court action), and the other action was brought in the District Court for the Southern District of New York (the Federal court action).
In the State court action, plaintiffs had asserted a similar breach of contract claim to the one which they now assert in this action, and, in addition, had sought injunctive relief. Following a July 26, 1999 decision and order in the State court action which denied a preliminary injunction to plaintiffs, plaintiffs commenced the Federal court action, wherein they asserted five federal antitrust claims plus the same State law breach of contract claim asserted by them in the State court action. Plaintiffs, therefore, sought leave to discontinue the State court action, but due to a pending motion to dismiss by defendant in the Federal court action, that motion was denied on September 25, 2000, with leave to renew following a decision on that motion to dismiss in the Federal court action.
By decision and order dated July 23, 2001 (Mathias v Daily News, L.P., 152 F Supp 2d 465, 487 [SD NY 2001]), the District Court dismissed four of the five Federal antitrust claims, but sustained one of these federal antitrust claims, which had alleged a claim for secondary-line price discrimination under the Robinson-Patman Act (plaintiffs' second cause of action in the Federal complaint). The Federal court, in its July 23, 2001 decision and order, noted that in order to establish a claim of secondary-line price discrimination under the Robinson-Patman Act, plaintiffs would be required to prove that the sales at issue were made in interstate commerce; that defendant had discriminated in price as between purchasers; that the product supplied by defendant was of comparable grade or quality as to competing purchasers; and that the price discrimination had a prohibited effect on competition. The Federal court found that while plaintiffs had pleaded sufficient allegations to survive defendant's motion to dismiss this claim, further discovery would determine if this claim could ultimately be substantiated (id. at 475).
Following this July 23, 2001 decision and order in the Federal action, plaintiffs again moved for leave to voluntarily discontinue the State action without prejudice. The Supreme Court, Richmond County, by decision and order dated October 16, 2001, granted such discontinuance with prejudice, and such order was, subsequently, reversed by the Appellate Division, Second Department, which, by decision and order dated December 3, 2002, granted the discontinuance of the State court action without prejudice (Mathias v Daily News, L.P., 301 AD2d 503, 503-504 [2002]).
After conducting discovery in the Federal action, plaintiffs concluded that they could not produce sufficient factual evidence to meet the foregoing requirements in order to sustain their claim under the Robinson-Patman Act and executed a Notice of Voluntary Dismissal dated January 6, 2003, wherein plaintiffs, "without prejudice to the[ir] rights . . . move[d] for voluntary dismissal with prejudice, of the[ir] claims for secondary-line price discrimination, as set forth within the "second cause of action" within the complaint." The Notice of Voluntary Dismissal expressly provided that [*3]plaintiffs "d[id] not seek dismissal or withdrawal of the remaining state law claims set forth within the complaint."
The Federal Court issued a Conditional Order of Discontinuance dated January 22, 2003 and filed on January 24, 2003 which stated that "the parties have reached an agreement in principle to dismiss the state claims remaining in this action and to pursue them in a related case now pending in state court" and provided that the Federal court action was "conditionally discontinued without prejudice," permitting plaintiffs to apply by letter for restoration of the action with respect to the State law claims in the event a stipulation setting forth such agreement was not consummated within 30 days.
Thereafter, plaintiffs and defendant entered into a Stipulation of Dismissal filed on February 24, 2003. The parties noted in that stipulation that the Federal court "had previously stated that it would not exercise supplemental jurisdiction over plaintiffs' remaining state law claims if the sole remaining Federal claim was dismissed," and that the Federal court had issued the January 22, 2003 Conditional Order of Discontinuance, which dismissed such sole remaining Federal claim. It was stipulated and agreed by the parties that plaintiffs' remaining State law claims were "dismissed without prejudice to refiling them in state court," and that defendant "w[ould] not contend that the dismissal of the remaining state law claims . . . was 'by a voluntary discontinuance.'" It also specifically provided that plaintiffs "may commence a new action upon the same transaction or occurrence or series of transactions or occurrences in state court within six months from January 22, 2003 (the date of the Conditional Order of Discontinuance)."
By its instant motion, defendant seeks dismissal of plaintiffs' complaint, pursuant to CPLR 3211 (a) (5), based upon the doctrine of res judicata. Under the doctrine of res judicata, where there is a valid final judgment on the merits, in an action which arises out of the same transaction or series of transactions, involving the same parties or those in privity with them, a plaintiff will be barred from relitigating in a later action the claims which were raised or which could have been raised in the original action (see O'Brien v City of Syracuse, 54 NY2d 353, 357 [1981]; Gramatan Home Investors Corp. v Lopez, 46 NY2d 481, 485 [1979]; Aard-Vark Agency v Prager, 8 AD3d 508, 509 [2004]; Troy v Goord, 300 AD2d 1086, 1086-1087 [2002]; Con-Solid Contr. Co. v Litwak Dev. Corp., 298 AD2d 544, 546 [2002]). In support of its motion, defendant asserts that there are allegations in plaintiffs' breach of contract claim, reiterated in their conversion and unjust enrichment claims, that, in breach of its contract with plaintiffs, defendant has commenced selling newspapers to other carriers at lower prices and has refused to sell newspapers to plaintiffs at the same lower price being offered to other carriers. Citing to parallel allegations in plaintiffs' price discrimination claim in the Federal action which also allege that defendant "sold the [Daily] News to [other] carriers at lower prices than those sold to Plaintiffs", Defendant argues that the allegations in plaintiffs' present complaint are thus based upon the same allegations or arise out of the same transactions or occurrences as the Federal price discrimination claim which was dismissed by the January 6, 2003 Notice of Voluntary Dismissal in the Federal action and that the Notice of Voluntary Dismissal bars plaintiffs' instant complaint pursuant to the doctrine of res judicata.
While "a stipulation of discontinuance 'with prejudice' is afforded res judicata effect and will bar litigation of the discontinued causes of action" (Van Hof v Town of Warwick, 249 AD2d 382, 382 [1998]; see also Dolitsky's Dry Cleaners v Y L Jericho Dry Cleaners, 203 AD2d 322, 322-323 [1994]; Rossi v Twinbogo Co., 193 AD2d 481, 483 [1993]), here, plaintiffs' State law claims were [*4]not discontinued or dismissed with prejudice. As noted above, the January 6, 2003 Notice of Voluntary Dismissal explicitly addressed plaintiffs' State law claims, stating that it did not seek dismissal or withdrawal of these claims, and the January 22, 2003 Conditional Order of Dismissal noted the parties' agreement to pursue the State claims remaining in that action in State court.
The February 24, 2003 Stipulation of Dismissal plainly demonstrates that plaintiffs agreed to dismiss the State law claims against defendant solely with the understanding between them that they would be given the opportunity to refile these claims in State court within a period of six months from the date of the stipulation. The February 24, 2003 Stipulation of Dismissal, which was signed by both parties and "so ordered" by the Judge, contained express language, stating that plaintiffs' remaining State law claims were "dismissed without prejudice to refiling them in state court," and, thus, specifically reserved to plaintiffs the right to recommence these claims. In fact, as previously stated, defendant agreed therein that it would not contend that the dismissal of the State law claims in the Federal action was by a " voluntary discontinuance", and it agreed therein that plaintiffs may commence a new action in State court based upon the same series of transactions or occurrences.
The dismissal of plaintiffs' Federal secondary-line price discrimination claim did not have any effect upon plaintiffs' pending State law claims in the Federal action, which claims remained outstanding and not adjudicated at the time of the execution of the January 6, 2003 Notice of Voluntary Dismissal. The dismissal of the secondary-line price discrimination claim did not dispose of the State law claims which, as provided by the January 22, 2003 Conditional Order of Discontinuance, could have been restored to the active calendar of the Federal court if not for the execution of the February 24, 2003 Stipulation of Dismissal dismissing the State law claims without prejudice.
Moreover, the Federal claim for secondary line price discrimination under the Robinson-Patman Act did not encompass, but was entirely distinct from, plaintiff's State law claims in the Federal court action. As the District Court held, in order to sustain such price discrimination claim under the federal statute, plaintiffs were required to meet certain stringent requirements, showing that the sales at issue were made in interstate commerce, that the transactions involved the sale of comparable products or commodities to competing purchasers at discriminatory prices and that there was a prohibited effect on competition in the market. Plaintiffs need not meet these requirements in order to sustain their common law breach of contract claim. The Federal court, at no time, made any determinations as to the merits of plaintiffs' State law causes of action, and, thus, in the absence of any determination on the merits of plaintiffs' State law claims, which have yet to be adjudicated, such claims cannot be barred by the doctrine of res judicata (see Van Hof, 249 AD2d at 382-383; Dolitsky's Dry Cleaners, 203 AD2d at 323).
Defendant's further argument that the doctrine of collateral estoppel bars some of plaintiffs' claims, is similarly without merit. There was no "identity of issue which [w]as necessarily . . . decided in the prior [Federal Court] action and is decisive of the present action," nor was there "a full and fair opportunity to contest the decision now said to be controlling" (Schwartz v Public Administrator of County of Bronx, 24 NY2d 65, 71 [1969]; see also Bank v Brooklyn Law School, 297 AD2d 770, 770 [2002]). Contrary to defendant's assertion, the January 6, 2003 Notice of Voluntary Dismissal did not constitute a determination of issues in the Federal court action, which are decisive of plaintiffs' breach of contract claims herein. Consequently, defendant's motion, [*5]insofar as it seeks dismissal of plaintiffs' complaint, pursuant to CPLR 3211 (a) (5), as barred by the doctrines of res judicata and/or collateral estoppel, must be denied.
In support of its motion insofar as it seeks dismissal of plaintiffs' first cause of action for breach of contract, pursuant to CPLR 3013 and 3211 (a) (7), defendant asserts that plaintiffs' complaint fails to identify which plaintiffs - - the individuals or the corporations - - were parties to the alleged contracts with it. It contends that the lack of this essential element prevents it from having adequate notice of plaintiffs' claims. Defendant further claims that the complaint's allegations are vague and undifferentiated. Defendant argues that plaintiffs' breach of contract cause of action must, therefore, be dismissed, pursuant to CPLR 3013, for failure to plead with sufficient particularity to give the court and it "notice of the transactions, occurrences, or series of transactions or occurrences, intended to be proved and the material elements of each cause of action", and, pursuant to CPLR 3211 (a) (7), for failure to state a cause of action.
Defendant's argument is not convincing. Plaintiffs' complaint names the plaintiffs, alleges that plaintiffs were owners of defendant's franchises pursuant to contract between defendant and its franchise dealers, and sets forth the terms of those contracts. Plaintiffs' complaint has thus been pleaded with sufficient particularity, pursuant to CPLR 3013, to adequately advise and apprise defendant of plaintiffs' claim against it, and embraces all of the relevant substantive elements of a breach of contract cause of action (see Lane v Mercury Record Corp., 21 AD2d 602, 604 [1964], affd 18 NY2d 889 [1966]; Foley v D'Agostino, 21 AD2d 60, 63 [1964]).
Furthermore, on a motion to dismiss for failure to state a cause of action pursuant to CPLR 3211 (a) (7), the court must accept the facts alleged in the complaint as true, and accord plaintiffs the benefit of every possible favorable inference (Leon v Martinez, 84 NY2d 83, 87-88 [1994]; Collins v Telcon Intl. Corp., 283 AD2d 128, 131 [2001]; Waste Distillation Technology v Blasland & Bouck Engineers, 136 AD2d 633, 633 [1988]). Applying this standard, the court finds that plaintiffs have stated a viable cause of action for breach of contract. Thus, dismissal of plaintiffs' first cause of action for breach of contract must be denied.
With respect to defendant's motion seeking dismissal of plaintiffs' second cause of action for conversion, pursuant to CPLR 3211 (a) (7), it is well settled that "[a] claim to recover damages for conversion cannot be predicated on a mere breach of contract" (Priolo Communications v MCI Telecommunications Corp., 248 AD2d 453, 454 [1998]; see also Wolf v National Council of Young Israel, 264 AD2d 416, 417 [1999]; MBL Life Assurance Corp. v 555 Realty Co., 240 AD2d 375, 376-377 [1997]; Peters Griffin Woodward, Inc. v WCSC, Inc., 88 AD2d 883, 884 [1982]). Where a conversion claim is "duplicative of the breach of contract cause of action," it must be dismissed (Retty Financing v Morgan Stanley Dean Witter & Co., 293 AD2d 341, 341 [2002]).
Plaintiffs' second cause of action for conversion, in paragraph 38 of their complaint, repeats and reiterates the allegations contained in their first cause of action for breach of contract, and then alleges, in paragraph 39, that "defendant has implemented a pay-by-mail system through which it has commenced billing the plaintiffs [sic] customers directly, and thereby collecting fees and gratuities which are monies properly due and owing to the plaintiffs and/or their agents." It alleges, in paragraphs 40 and 41, that despite repeated demands by plaintiffs that defendant deliver these monies to them, defendant has failed to do so, and that these monies have been wrongfully converted by defendant. These paragraphs are virtually a verbatim repetition of paragraphs 25 and 27 of plaintiffs' first cause of action for breach of contract, which similarly alleges, respectively, that [*6]defendant directly breached its contract with plaintiff by unilaterally implementing the pay-by-mail system and thereby took monies which belong to plaintiffs, and by wrongfully obtaining gratuities from plaintiffs' customers. In fact, plaintiffs even use the words "conversion" and "converted" in their breach of contract cause of action.
Plaintiffs argue that their conversion claim is separate and distinct from their breach of contract claim because the tips and gratuities wrongfully collected and withheld by defendant were not part of the contractual agreement between the parties. Paragraph 27 of the complaint (which, as noted above, mirrors plaintiffs' conversion claim), however, plainly belies this argument since, in setting forth plaintiffs' breach of contract cause of action, it specifically and expressly alleges that defendant, "in further breach of its contracts with . . . plaintiffs . . . has wrongfully obtained from . . . plaintiffs' customers, and converted for its own use, gratuities which were intended for newspaper boys and girls employed by plaintiffs" (emphasis supplied). No factual basis for plaintiffs' cause of action for conversion has been pleaded other than the terms of the contract.
Additionally, plaintiffs have failed to allege that they had "ownership, possession or control of the money" before its conversion, as required for a conversion claim (see Peters Griffin Woodward, Inc., 88 AD2d at 884). While plaintiffs assert that they were the rightful owners of the tips and gratuities which their customers forwarded to defendant, it is noted that, as defendant points out, the complaint alleges that the gratuities "were intended for newspaper boys and girls employed by plaintiffs" rather than for plaintiffs. Although plaintiffs assert, in their opposition papers, that many of them delivered their own papers, this is not alleged in the complaint. In addition, while plaintiffs state that they paid their delivery boys and girls additional monies to replace the gratuities lost by them, this would not be a basis upon which plaintiffs could predicate their claim for conversion against defendant. These very same allegations with regard to their replacement of their delivery persons' loss of gratuities is set forth in their breach of contract cause of action as being "in further breach" of defendant's contract with plaintiffs, and is, therefore, redundant of their breach of contract claim and the damages claimed thereunder.
Thus, inasmuch as plaintiffs predicate their conversion cause of action upon the identical allegations upon which their breach of contract cause of action is based, plaintiffs' "claim alleging conversion merely restates [their] cause of action to recover damages for breach of contract and does not allege a separate taking" (Priolo Communications, 248 AD2d at 454). Plaintiffs' conversion claim covers only what their complaint alleges was an express contractual obligation; the conversion claim "does not stem from a wrong which is independent of the alleged breach" of the contracts (Wolf, 246 AD2d at 417). Therefore, plaintiffs cannot recast their contract claim as a cause of action in tort for conversion, and their duplicative conversion claim must be dismissed (see CPLR 3211 [a] [7]; Wolf, 264 AD2d at 417; Priolo Communications, 248 AD2d at 454; MBL Life Assurance Corp., 240 AD2d at 376-377; Peters Griffin Woodward, Inc., 88 AD2d at 884).
With respect to defendant's motion insofar as it seeks dismissal of plaintiffs' third cause of action for unjust enrichment for failure to state a cause of action, the court notes that it is well established that "[a] party may not recover based on the theory of unjust enrichment where there is a valid express agreement between the parties which explicitly covers the same subject matter for which the relief sounding in quasi-contract is sought" (Smith v Pagano, 154 AD2d 586, 587 [1989]; see also Clark-Fitzpatrick, Inc. v Long Is. R.R. Co., 70 NY2d 382, 388 [1987]; Chadirjian v Kanian, 123 AD2d 596, 598 [1986]). [*7]
Plaintiffs assert that they have provided many services to defendant in which a benefit to defendant was derived, such as billing customers, collecting monies, advertising, seeking out new customers, and delivering newspapers on defendant's behalf; that they were not adequately compensated for these services; and that many of these services were outside the
scope of the contracts entered into between them and defendant. They argue that this permits them to maintain an unjust enrichment claim, along with their breach of contract claim. It does not appear however from the allegations in the complaint that plaintiffs provided any services which were outside the scope of the contracts (compare Rab Contractors v Stillman, 266 AD2d 70, 71 [1999]). Rather, the unjust enrichment claim is based upon the very same subject matter as the breach of contract cause of action, and nothing is alleged in the unjust enrichment claim that is not alleged in the breach of contract cause of action.
Plaintiffs' unjust enrichment cause of action merely incorporates the breach of contract allegations and then simply adds the allegation that defendant has been unjustly enriched at the expense of plaintiffs and their agents by virtue of "[h]aving directly billed . . . plaintiffs' customers and thereby collect[ing] and retain[ing] monies [from them] to which [it] possesses no lawful claim." This allegation is fully covered by the allegation in plaintiffs' breach of contract cause of action that the explicit terms of plaintiffs' franchise contracts with plaintiffs provide that plaintiffs "possess the sole and exclusive right to determine the mode and manner in which the collection of all monies, shall be made," and that defendant collected these monies for its own use and refused to give them to plaintiffs. Thus, since there is no bona fide dispute as to the existence of valid and enforceable written contracts which govern this dispute and explicitly cover the same subject matter for which plaintiffs seek to recover based upon a claim of unjust enrichment, they cannot assert such unjust enrichment claim (see Cherry v Resource Am., 285 AD2d 989, 991 [2001]).
Furthermore, the theory of unjust enrichment "is equitable in nature" (Manufacturers Hanover Trust Co. v Chemical Bank, 160 AD2d 113, 117 [1990]), and "equity will not entertain jurisdiction where there is an adequate remedy at law (Boyle v Kelley, 42 NY2d 88, 91 [1977]). Plaintiffs have failed to plead that no adequate remedy at law exists, and they could not support any such allegation.
Plaintiffs' argument that it would be premature to dismiss their unjust enrichment cause of action because they are unsure of how the scope and applicability of the written contracts will be interpreted by the court, is rejected. If the contracts are not ultimately construed in plaintiffs' favor, this does not afford plaintiffs a cause of action for unjust enrichment since such contracts nevertheless would be dispositive of plaintiffs' right to recovery (see Clark-Fitzpatrick, Inc., 70 NY2d at 388; Smith, 154 AD2d at 587). Thus, dismissal of plaintiffs' third cause of action for unjust enrichment is mandated (see CPLR 3211 [a] [7]; Clark-Fitzpatrick, Inc., 70 NY2d at 388; Cherry, 285 AD2d at 991; Smith, 154 AD2d at 587; Chadirjian, 123 AD2d at 598).
Defendant also seeks to dismiss plaintiffs' complaint with respect to plaintiff George Alysandratos (Alysandratos). It argues that such dismissal is required because, although Alysandratos is explicitly named as a plaintiff in the caption of the action, the body of the complaint fails to specifically mention his name as an individual engaged in the business of newspaper delivery, as it does with the other plaintiffs. It is noted that plaintiffs assert that this was simply an inadvertent error. [*8]
Defendant's argument is unavailing. Since Alysandratos is named in the caption as a plaintiff, he is encompassed within the complaint's allegations with respect to "plaintiffs." Therefore, since defendant was properly apprised of Alysandratos' existence within this litigation by his inclusion as one of the named plaintiffs within the caption and by the description of the "plaintiffs'" claims throughout the body of the complaint, this irregularity has not prejudiced any substantial right of defendant, and, at this early stage of the action, it may be disregarded or corrected (see CPLR 2001).
Defendant's argument that Alysandratos had no contract upon which to base a claim and that the absence of a specific allegation with respect to him is not a technical defect which may be disregarded or corrected under CPLR 2001, but a substantive failure requiring dismissal of his claim, is premature on this motion pursuant to CPLR §3211. As discussed above, the complaint specifically alleges that "[e]ach of the plaintiffs herein are owners of . . . Daily News franchises," that defendant entered into franchise contracts with plaintiffs, and that defendant breached these contracts. At this pleading stage of the action, plaintiffs' allegations must be presumed to be true and accorded every favorable inference (see Leon, 84 NY2d at 87-88; Telcoa Intl. Corp., 283 AD2d at 131; Waste Distillation Technology, 136 AD2d at 633), and defendant has made no affirmative showing of an absence of a contract between it and Alysandratos. Consequently, dismissal of the complaint with respect to Alysandratos' claim is not warranted.
Accordingly, defendant's motion is granted to the extent that plaintiffs' second cause of action for conversion and third cause of action for unjust enrichment are dismissed, pursuant to CPLR 3211 (a) (7), for failure to state a cause of action. Defendant's motion is denied insofar as it seeks to dismiss plaintiffs' first cause of action for breach of contract.
The parties shall appear before this Court for conference at 9:45 a.m. on March 9, 2005.
This constitutes the decision and order of the court.
E N T E R,
J. S. C.
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