Korangy Publ., Inc. v Miceli

[*1] Korangy Publ., Inc. v Miceli 2009 NY Slip Op 50377(U) [22 Misc 3d 1130(A)] Decided on February 27, 2009 Supreme Court, New York County Shulman, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 February 27, 2009
Supreme Court, New York County

Korangy Publishing, Inc., d/b/a "The Real Deal,", Plaintiff,

against

Matthew Miceli and Jet Set Elite, Defendants.



110327/08



Appearances of Counsel:

Nassiripour & Schirtzer

Attorneys for Plaintiff

718.247.7294

Conover Law Offices

Attorneys for Defendants

212.588.9080

Martin Shulman, J.

In this employment action, defendants move to dismiss the complaint. For the following reasons, this motion is granted in part and denied in part.

BACKGROUND

Plaintiff Korangy Publishing, Inc. ("KPI") is a New York State licensed corporation engaged in the business of magazine publishing. See Notice of Motion, Exhibit D ("complaint"), ¶ 1. One of its magazines, "The Real Deal" ("TRD"), is geared toward the real estate market. Id., ¶ 2. KPI is owned and operated by Amir Korangy ("Korangy") and Yoav Barilan ("Barilan"), both of whom are residents of the State of New York. Id.; Miceli Affidavit, ¶ 8.

Defendant Matthew Miceli ("Miceli") is currently a resident of the state of Florida. Id.; ¶ 5. Miceli is the owner of co-defendant Jet Set Elite ("JSE"), a foreign corporation licensed in New York State, that engages in the business of providing travel and vacation related services. Id., ¶¶ 7-9.

On February 12, 2007, TRD and Miceli entered into an employment contract (the "employment contract"), by which Miceli was hired as an account manager at TRD. Id.; Miceli Affidavit, ¶ 8; Exhibit D (A). The employment contract provides, in pertinent part, as follows:

[TRD] is pleased to offer you the position of account manager. In this position, you will be reporting to the marketing and sales director, Yoav Barilan, the starting salary offered for this position is $1500.00 per month (for the first 6 months), plus commission (commission structure below) on a monthly schedule. ... [*2]

Commission structure: 15% commission will be paid by [TRD] for every advertising contract and upon receiving payment. (Example: you sign Company X for $1000.00 for 3 months, you receive $150.00 per month for the duration of the contract.) If the campaign is discounted by more than 15%, the commission for that contract drops to 10%. After the initial 6 months, you must bring in a minimum of $8000.00 (this amount will increase after your first year) [worth of] advertising contracts per issue in order to qualify for the 15% commission, otherwise the commission drops down to 10% for that month's entire invoice.

Please note that your employment with [TRD] is for no specified period and constitutes "at will" employment. As a result, you are free to resign at any time, for any reason or for no reason. Similarly, [TRD] is free to terminate its employment relationship with you at any time, with or without cause.

Your acceptance of this offer and commencement of employment with [TRD] are contingent upon your execution of [TRD]'s standard Confidential Information and Invention Assessment Agreement, a copy of which is enclosed for your review and execution, prior to your first day of employment with [TRD].

Id.; Exhibit D (A). The "Confidential Information and Invention Assessment Agreement" ("confidentiality agreement") referred to above provides, in pertinent part, as follows: For good consideration, and in consideration of being employed by [TRD] the undersigned employee hereby agrees and acknowledges:1.That during the course of my employ there may be disclosed to me certain trade secrets of [TRD]; said trade secrets consisting but not necessarily limited to:

(a)Technical Information: methods, processes, formulae, compositions, systems, techniques, inventions, machines, computer programs and research projects and methods.

(b)Business Information: customer lists, pricing data, sources of supply, financial data and marketing, production or merchandising systems or plans. 2.I agree that I shall not during, or at any time after the termination of my employment with [TRD] use for myself or others, or disclose or divulge to others including future employees, any trade secrets, confidential information, or any other proprietary data of [TRD] in violation of this agreement.3.That upon the termination of my employment from [TRD]:

(a)I shall return to [TRD] all documents and property of [TRD], including but not necessarily limited to: drawings, blueprints, reports, manuals, correspondence, client lists and contacts, computer programs, and all other materials and copies thereof relating in any way to [TRD]'s business, or in any way obtained by me during the course of my employ. I further agree that I shall not retain copies, notes or abstracts of the foregoing.

Id.; Exhibit D (B). [*3]

Miceli commenced working for TRD the week of February 15, 2007. Id.; Exhibit A. He generally performed his job at TRD's office at 36 East 23rd St. in the County, City and State of New York. Id. Korangy claims that Miceli also used TRD's facilities to further the business of JSE while he was working there. See Korangy Affidavit in Opposition, ¶¶ 6, 8, 9. Miceli alleges that Korangy and Barilan were both aware of and permitted his JSE-related activity. See Miceli Reply Affidavit, ¶ 8. Miceli also alleges that he surpassed his job performance goals for TRD to such an extent that Korangy sent him to Miami to open a TRD office there in January of 2008, and provided him with a laptop computer and an apartment rental stipend. See Notice of Motion, Miceli Affidavit, ¶ 13. Nonetheless, Miceli and Korangy fell into disputes over the amount of commission payments that Miceli claimed were due, as a result of which both sides agree that Miceli quit. Id., ¶ 9; Nassirpour Affirmation in Opposition, ¶ 11. The e-mail that memorializes Miceli's termination states as follows: Matthew, you are no longer on my payroll after you quit. You are entitled to the commission for the ads [that] you brought in and have been published. You helped Jay get up to speed, because that's part of the process when you quit a job abruptly. Are we on the same page?

See Notice of Motion, Exhibit G. Miceli sent TRD a demand letter for the allegedly unpaid commissions on May 14, 2008. Id.; Exhibit A. TRD responded on May 27, 2008, and both sides corresponded regarding this matter until June of that year. Id.; Exhibits B, C.

KPI thereafter commenced this action on July 23, 2008. The complaint sets forth causes of action for: 1) breach of contract; 2) negligence; 3) conversion; 4) misrepresentation; 5) "loss of reputation"; 6) breach of implied contract; 7) tortious interference; 8) breach of implied contract; and 9) conversion. Id.; Exhibit D. Rather than file an answer, Miceli brings this motion to dismiss the complaint.

DISCUSSION

When evaluating a defendant's motion to dismiss, pursuant to CPLR 3211 (a), the test "is not whether the plaintiff has artfully drafted the complaint but whether, deeming the complaint to allege whatever can be reasonably implied from its statements, a cause of action can be sustained." Jones Lang Wootton USA v LeBoeuf, Lamb, Greene & MacRae, 243 AD2d 168, 176 (1st Dept 1998), quoting Stendig, Inc. v Thom Rock Realty Co., 163 AD2d 46, 48 (1st Dept 1990). To this end, the court must accept all of the facts alleged in the complaint as true, and determine whether they fit within any "cognizable legal theory." See, e.g., Arnav Indus., Inc. Retirement Trust v Brown, Raysman, Millstein, Felder & Steiner, L.L.P., 96 NY2d 300, 303 (2001). However, where the documentary evidence submitted flatly contradicts the plaintiff's factual claims, the entitlement to the presumption of truth and the favorable inferences are both rebutted. Scott v Bell Atl. Corp., 282 AD2d 180, 183 (1st Dept 2001) affd as mod Goshen v Mutual Life Ins. Co. of New York, 98 NY2d 314 (2002), citing Ullmann v Norma Kamali, Inc., 207 AD2d 691, 692 (1st Dept 1994). Here, the court finds that Miceli's motion should be granted in part and denied in part.

KPI's first cause of action alleges breach of contract. The proponent of a breach of contract claim must plead the existence and terms of a valid, binding contract, its breach, and resulting damages. See, e.g., Gordon v Dino De Laurentiis Corp., 141 AD2d 435 (1st Dept 1988). Here, the complaint refers to both the employment contract and the confidentiality [*4]agreement, and alleges that "Miceli used his position in [TRD] to steal and take clients from [KPI] to start his own business, [JSE]." See Notice of Motion, Exhibit D, ¶ 15. Miceli argues that TRD and JSE engage in different types of business, and that even if "JSE sold a travel product to a client of TRD, that would not constitute a breach of contract, implied or otherwise." See Defendants' Memorandum of Law, at 8-20. KPI replies generally that it has stated a viable cause of action which is not barred by documentary evidence. See Nassiripour Affirmation in Opposition, ¶¶ 24, 28. The court agrees.

In the confidentiality agreement, Miceli contracted "that I shall not during, or at any time after the termination of my employment with [TRD] use for myself or others ... any trade secrets, confidential information, or any other proprietary data of [TRD]," including "business information" consisting of "customer lists" and "marketing plans." See Notice of Motion, Exhibit D (B). KPI has produced lists of TRD clients and leads, and details of TRD marketing events that Miceli forwarded via e-mail to his partners at JSE. See Korangy Affidavit in Opposition, ¶¶ 16-17, Exhibits E, F. In his reply papers, Miceli argues that it is plain that the documents that contain the foregoing information were all publicly disseminated, and therefore cannot constitute trade secrets. See Defendants' Reply Memorandum, at 11-14. However, upon perusing those documents, the court cannot unequivocally determine that they were all publicly disseminated, as Miceli claims.

In any event, a dismissal motion is more properly directed to the pleadings, and not to the proof. See, e.g., Imprimis Investors LLC v Insight Venture Mgmt., Inc., 300 AD2d 109 (1st Dept 2002). Here, the pleadings allege each of the elements of a breach of contract claim. Therefore, the court discounts Miceli's argument.[FN1] The court notes that Miceli's secondary argument, that KPI cannot establish any damages as a result of its claimed breach, may well eventually prove to be correct. See Defendants' Reply Memorandum, at 14-16. However, that too is a matter of proof that must be resolved later in this litigation. Accordingly, the court finds that KPI's breach of contract claim should not be dismissed at this juncture.

KPI's second cause of action alleges negligence. Pursuant to New York law, "the traditional common-law elements of negligence" are: "duty, breach, damages, causation and foreseeability." Hyatt v Metro-North Commuter R.R., 16 AD3d 218 (1st Dept 2005). Here, the complaint alleges "that Miceli had a duty to devote his time to the business of [KPI]" that he breached by using KPI's "equipment and facilities to conduct his own business." See Notice of Motion, Exhibit D, ¶¶ 18, 20. Miceli argues that the foregoing duty did not exist independently from his contractual obligations to KPI, and that it cannot therefore support a negligence claim. See Defendants' Memorandum of Law, at 8-11. KPI does not address this argument in its opposition papers.

The court finds that Miceli's argument has merit. New York law is clear that a breach of contract claim is not to be considered tort, unless a legal duty independent of the contract has [*5]been violated, and that legal duty springs from circumstances extraneous to, and not constituting elements of, the contract. See, e.g., Clark-Fitzpatrick, Inc. v Long Island R.R. Co., 70 NY2d 382 (1987); Sergeants Benevolent Ass'n Annuity Fund v Renck, 19 AD3d 107 (1st Dept 2005). Here, it is plain that the duty referred to in the complaint concerns Miceli's obligations as a KPI employee, all of which obligations are embodied in the employment contract and the confidentiality agreement. Thus, KPI has failed to allege the duty component of its negligence claim. Further, Miceli correctly notes that New York State law does not recognize a cause of action for negligent performance of a contract. See, e.g., City of New York v 611 W. 152nd St., Inc., 273 AD2d 125 (1st Dept 2000). Accordingly, the court finds that KPI's negligence claim should be dismissed.

KPI's third and ninth causes of action allege conversion. The Court of Appeals has held that the "[t]wo key elements of conversion are (1) plaintiff's possessory right or interest in the property and (2) defendant's dominion over the property or interference with it, in derogation of plaintiff's rights [internal citations omitted]." Colavito v New York Organ Donor Network, Inc., 8 NY3d 43, 49-50 (2006). Both causes of action in the complaint allege that Miceli has failed to return KPI property, consisting of a laptop computer, in violation of paragraph 3 (a) of the confidentiality agreement. See Notice of Motion, Exhibit D, ¶¶ 25-26, 54-55. Miceli argues that these claims should be dismissed as redundant because they merely restate breach of contract claims. See Defendants' Memorandum of Law, at 16-17. KPI does not address this argument in its opposition papers, except to reiterate that it did not give Miceli permission to keep the laptop. See Nassiripour Affirmation in Opposition, ¶ 24.

The court finds Miceli's argument persuasive. The Appellate Division, First Department, routinely upholds dismissals of conversion claims that merely seek damages for breach of contract. See, e.g., Automobile Coverage, Inc. v Am. Int'l Group, Inc., 42 AD3d 405 (1st Dept 2007); Richbell Info. Servs., Inc. v Jupiter Partners, L.P., 309 AD2d 288 (1st Dept 2003). Here, the complaint even specifies the provision of the contract that was alleged to have been breached. See Notice of Motion, Exhibit D, ¶¶ 25-26, 54-55. Accordingly, the court finds that KPI's conversion claims are duplicative of its breach of contract claim, and that they should, therefore, be dismissed.

KPI's fourth cause of action alleges misrepresentation. "The elements of [a fraudulent misrepresentation claim] are [that]: (1) the defendant made a material false representation, (2) the defendant intended to defraud the plaintiffs thereby, (3) the plaintiffs reasonably relied upon the representation, and (4) the plaintiffs suffered damage as a result of their reliance." Swersky v Dreyer & Traub, 219 AD2d 321, 326 (1st Dept 1996). Here, the complaint alleges that, during his attempts to sell advertising to clients, Miceli falsely represented "that [KPI] had international distribution capabilities." See Notice of Motion, Exhibit D, ¶¶ 30-31. Miceli first argues that this alleged misrepresentation is insufficient to sustain a fraud claim, as a matter of law, because he purportedly made it to unspecified third-party clients (i.e., not to KPI) and therefore lacked the intent to defraud KPI. See Defendants' Memorandum of Law, at 4-5. Miceli then argues that the misrepresentation claim should also be dismissed because it, too, is merely duplicative of KPI's breach of contract claim. Id. at 6-7. KPI fails to address either of these argument in its opposition papers.

Both arguments are correct. In the first place, KPI lacks standing to sue for allegedly [*6]fraudulent statements made to third-parties. See, e.g., Aymes v Gateway Demolition Inc., 30 AD3d 196 (1st Dept 2006). In the second place, it has been held that "[t]o plead a viable cause of action for fraud arising out of a contractual relationship, the plaintiff must allege a breach of duty which is collateral or extraneous to the contract between the parties' [internal citations omitted]." Krantz v Chateau Stores of Canada Ltd., 256 AD2d 186, 187 (1st Dept 1998), quoting Americana Petroleum Corp. v Northville Indus. Corp., 200 AD2d 646, 647 (2d Dept 1994). Here, as previously discussed, KPI has failed to allege any such duty. Accordingly, the court finds that KPI's misrepresentation claim should be dismissed.

KPI's fifth cause of action alleges "loss of reputation," in that "[KPI]'s reputation has been damaged in the community within which [KPI] publishes [TRD]." See Notice of Motion, Exhibit D, ¶ 36. Miceli argues that no such cause of action exists under New York law. See Defendants' Memorandum of Law, at 4 n 1. Again, KPI fails to address Miceli's argument in its opposition papers. The court notes that New York law does recognize causes of action for defamation, libel, slander and various prima facie and business torts, although the court is unable to determine from the complaint which, if any, of these claims KPI intends to make. Accordingly, the court believes that the correct course is to dismiss KPI's fifth cause of action without prejudice to KPI's right to timely move for leave to replead this claim, should it choose to do so.

KPI's sixth and eighth causes of action each allege that Miceli breached an "implied contract" to use "his time at work" and "[KPI]'s computers, cell phones and other equipment," respectively, "to promote [TRD]." See Notice of Motion, Exhibit D, ¶¶ 40, 50. The court notes that, like the fifth cause of action, it is unclear from the foregoing exactly what extra-contractual claims KPI intends to make against Miceli. In anticipation of such claims, however, Miceli argues that because the documentary evidence clearly establishes that KPI permitted him to engage in JSE activity, such evidence refutes any allegation that he breached a duty of loyalty to KPI pursuant to the "faithless servant" doctrine. See Defendants' Memorandum of Law, at 18-20. KPI's opposition papers shed no further light on its intentions.

The court notes that New York law permits plaintiff-employers to assert claims against employees who engage in a "persistent pattern of disloyalty." See, e.g., Bon Temps Agency, Ltd. v Greenfield, 212 AD2d 427 (1st Dept 1995); Schwartz v Leonard, 138 AD2d 692 (2d Dept 1988). However, as previously stated, it is impossible to garner KPI's exact intentions from the complaint, or to determine whether the behavior it complains of is merely duplicative of its breach of contract claim. Accordingly, the court again finds that the correct course of action here is to dismiss KPI's sixth and eighth causes of action without prejudice to KPI's right to timely move for leave to replead said claims, should it choose to do so.

KPI's seventh cause of action alleges tortious interference by JSE. The proponent of a claim for tortious interference with preexisting contractual relations must allege "(1) the existence of a valid contract between plaintiff and a third party, (2) defendant's knowledge of the contract, (3) defendant's intentional procurement of a breach of the contract without justification, (4) actual breach of the contract, and (5) resulting damages." Snyder v Sony Music Entm't, Inc., 252 AD2d 294, 299 (1st Dept 1999), quoting American Preferred Prescription, Inc. v Health Mgmt., Inc., 252 AD2d 414 (1st Dept 1998). Here, the complaint alleges that "[JSE] knew or should have known that it had no right whatsoever to promote its own products using [KPI]'s [*7]clients and [KPI]'s client list." See Notice of Motion, Exhibit D, ¶ 46. Miceli argues that this allegation is impermissibly vague in that it fails to identify, with particularity, which contracts JSE is purported to have interfered with. See Defendants' Memorandum of Law, at 14-15. With unfortunate consistency, KPI again fails to address Miceli's argument in its opposition papers.

Miceli correctly points out that the Appellate Division, First Department, has held that a plaintiff's failure to plead each element of a tortious interference claim with specificity requires dismissal of that claim. See, e.g., Bonanni v Straight Arrow Publishers, Inc., 133 AD2d 585 (1st Dept 1987). Accordingly, because it is impossible to determine from the complaint which contracts JSE is alleged to have tortiously interfered with, or how, the court finds that KPI's seventh cause of action should also be dismissed with leave to timely replead said claim with greater specificity, should it choose to do so.

DECISION

ACCORDINGLY, for the foregoing reasons, it is hereby

ORDERED that defendants Matthew Miceli's and Jet Set Elite's motion is granted to the extent that the second, third, fourth, fifth, sixth, seventh, eighth and ninth causes of action in the complaint are severed and dismissed, without prejudice to plaintiff Korangy Publishing, Inc.'s right to timely move for leave to replead the fifth, sixth, seventh and eighth causes of action, and is denied with respect to the complaint's first cause of action; and it is further

ORDERED that defendant Miceli is directed to serve an answer to the complaint within 10 days after service of a copy of this order with notice of entry.

The Clerk is directed to enter judgment dismissing the complaint as to defendant Jet Set Elite and to dismiss the second, third, fourth, fifth and sixth causes of action as to defendant Matthew Miceli.

Counsel for the parties are directed to appear for a preliminary conference on March 24, 2009 at 9:30 a.m., I.A.S. Part 1, 111 Centre Street, Room 1127B, New York, New York.

The foregoing constitutes this court's Decision and Order. Courtesy copies of this Decision and Order have been sent to counsel for the parties.

Dated: New York, New York

February 27, 2009



Hon. Martin Shulman, J.S.C. Footnotes

Footnote 1: The court also discounts the affidavit that Miceli presented from Edward DeValle, the CEO of a former TRD client called the American Media Group, who asserts that his company has never done business with JSE. See DeValle Reply Affidavit. American Media Group is listed prominently on JSE's website as a "partner." See http://www.jetsetelite.com.