Vilella v AT & T

[*1] Vilella v AT & T 2012 NY Slip Op 50853(U) Decided on May 14, 2012 Supreme Court, New York County Edmead, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 May 14, 2012
Supreme Court, New York County

Dennis Giacomo Vilella d/b/a JACK VILELLA, ESQ., Plaintiff,

against

AT & T d/b/a/AT & T ADVERTISING SOLUTIONS, YELLOWPAGES.COM LLC d/b/a YP CONNECT and JOHN DOE, Defendants.



650302/11



Plaintiff

MICHAEL P. MOSSBERG, ESQ.

225 BROADWAY, SUITE 2000

NEW YORK, NY 10007

2125878884

Attorneys for Defendant

DILWORTH PAXSON LLP by

Holly R. Rogers, Esq.

1500 Market St. 3500E

Philadelphia, P A 19102

Carol R. Edmead, J.

In this action to rescind a contract and to recover monetary damages, defendant Yellowpages.com LLC d/b/a AT & T Advertising Solutions (Yellowpages.com)[FN1] moves to dismiss plaintiff's complaint based upon documentary evidence (CPLR 3211 [a] [1]) and [*2]failure to state a claim (CPLR 3211 [a] [7]).

For the reasons below, Yellowpages.com's motion is granted only to the extent of dismissing plaintiff's fifth and sixth causes of action, and is otherwise denied.

Background

Plaintiff, a licensed attorney who practices bankruptcy law, alleges that, on August 3, 2010, he signed a contract in which defendants agreed to provide internet marketing services in exchange for a monthly payment (the contract). According to plaintiff, defendants' internet marketers induced him to sign the contract by promising to generate real, viable leads for plaintiff's bankruptcy practice and to timely build an internet "connector page" for marketing plaintiff's business.

Plaintiff alleges that defendants did not timely build the promised "connector page," nor did they generate any usable marketing leads under the contract. Instead, according to plaintiff, defendants' efforts generated a large amount of spam, which plaintiff spent an excessive time trying to eliminate. Plaintiff alleges that he complained to defendants about his ongoing problems with their services.

Plaintiff avers that he initially received no response to his complaints, and it was only after he threatened to cancel and rescind the contract that defendants orally responded, eventually building an incomplete and ineffective "connector page" for his business.

According to plaintiff, he continued his attempts to resolve his issues with defendant and continued to pay them, despite the fact that he continued to receive a large amount of spam and no genuine leads. However, on December 13, 2010, plaintiff faxed defendants a letter demanding rescission and termination of the contract.Plaintiff finally alleges that, despite his cancellation and rescission of the contract, defendants continue to bill him for services under the contract, have refused to return the monies that he has already paid, and are threatening to turn the account over to a collection agency and affect his credit standing, even though defendants have not provided to plaintiff the services for which he has contracted.

Plaintiff's complaint seeks rescission and monetary damages under six causes of action, including fraudulent inducement, breach of contract, conversion, unjust enrichment, tortious interference with prospective business relations, as well as for estoppel/libel/slander.

The Contract

The contract is a five-page document, including a two-page Insertion Order, and three pages of "TERMS AND CONDITIONS FOR INTERNET ADVERTISING." The first page of the Insertion Order [*3]indicates that plaintiff ordered the following items: (1) number "YCPE2340" entitled "2340 Enhanced Clicks" at a monthly rate of $1,190; (2) number "PLL" entitled "Bankruptcy Law Attorneys" at a monthly rate of $486; (3) number "CTNC" entitled "Complimentary Call-Tracking Number" at no charge; and (4) number "VPAO" entitled "Value Print Ad Online (150pts)," for free. The monthly rate for all of these items is stated on the Insertion Order as $1,676.00.

The Insertion Order additionally contains two other relevant provisions. The first provision, which is only contained on page one, is within the section entitled "Notes." It reads as follows: "this agreement is for 12 months, with 6 month option to cancel. This 6 month cancellation option only applies to the YPConnect Product. Customer must contact AT & T Advertising Solutions in writing no later than 15 days prior to the 6th month period to cancel. If customer does not contact AT & T Advertising Solutions the contract will continue to run for 12 months."

The second provision in smaller print, which is contained on both pages of the Insertion Order, states in relevant part: [t]his contract consists of and is governed by this Insertion Order, any additional Insertion Order pages attached thereto and the Terms and Conditions for Internet Advertising, all of which are incorporated herein by reference. By signing below you are representing to Yellowpages.com: (1) that you have received and had an opportunity to review a copy of the TERMS AND CONDITIONS FOR INTERNET ADVERTISING, (2) that they have the same force and effect as if given in full text on this document, and (3) that you acknowledge Yellowpages.com's reliance upon your acceptance of them.

The only other relevant entry on the second page of the Insertion Order is the $0.00 next to the words, "TOTAL Annual."

As respects the "TERMS AND CONDITIONS FOR INTERNET ADVERTISING," the paragraphs that are pertinent for the purposes of the instant motion are as follows: 1. Initial Term/Automatic Renewal/Termination:(c) Termination. Upon acceptance by us, neither party may terminate this Agreement during the Initial Term as to any Advertising Product, provided that we may terminate this Agreement in whole or in part at any time upon notice to you if you breach this Agreement or if we determine, in our sole discretion, that a particular Advertising Product does not conform to our specifications or editorial standards. ... If you choose to have an Advertising Product removed from any site and/or any advertising services discontinued prior to [*4]the end of the Initial Term..., you shall notify us in writing and the unpaid balance for the entire Initial Term ... will become immediately due and owing.7. Performance Based Advertising Products. With respect to any Advertising Product which is performance based, which has a performance element to it and/or for which we charge a fee based upon the delivery of certain Actions, you acknowledge that our only obligation shall be that the number of Actions identified in the Order, if any, will be provided. We do not guarantee that any Action (1) will be from potential customers for you; (2) will be of any benefit or value to you; and/o [sic] (3) have any other aspect or characteristic not expressly agreed to in the Order. .... Depending on the nature and distribution of your Advertising Product(s), you acknowledge that we cannot prevent distribution to and therefore Actions may come from or be associated with sites which may be potentially offensive to you, including adult sites or sites with adult sounding URLs, and/or be the result of prohibited or improper third party purposes, including spiders, robots, autodialers and other automated or mechanical means. Where appropriate, we will send or make available periodic reports from us or relevant Distribution Sites [FN2] regarding the number of Actions we deliver. You agree that such reports and the counts contained therein shall be the conclusive, definitive measurements of our performance, and that they shall determine your related obligations for all purposes of this Agreement. No other measurements or usage statistics from any source whatsoever shall be accepted by us or have any applicability to our obligations or your rights under this Agreement....We have no liability for any Actions you dispute. 10. Design of Sites, Statistics and Interruption of Our Services.... Neither any Distribution Site nor we will have any liability to you and you will remain responsible for all monies owed to us should there be an interruption in our Web site or any third party site or other interruption in our services hereunder for any period of time, although we may, at our sole [*5]discretion, issue credits or extend the term of this Agreement in the event of interruptions lasting several days or longer.11. Disclaimer of Warranties. EXCEPT AS EXPRESSLY PROVIDED ELSEWHERE IN THIS AGREEMENT, NEITHER WE NOR ANY DISTRIBUTION SITE MAKES, AND WE HEREBY EXPRESSLY DISCLAIM, ANY REPRESENTATIONS, WARRANTIES OR GUARANTEES TO YOU OF ANY KIND, EITHER EXPRESSED OR IMPLIED ... REGARDING THE FUNCTIONALITY, PERFORMANCE OF RESULTS OF THE ADVERTISEMENTS OR ADVERTISING PRODUCTS, LINKED SITES, ANY SITE WE MAY CREATE FOR YOU, OR OTHERWISE UNDER OR RELATED TO THIS AGREEMENT. AS A CONDITION OF OUR WILLINGNESS TO ENTER INTO THIS AGREEMENT, YOU AGREE THAT YOU HAVE NOT RELIED UPON ANY SUCH WARRANTY AND ASSUME ALL RISKS CONCERNING THE FUNCTIONALITY, PERFORMANCE OR RESULTS OF THE ADVERTISING PRODUCTS.15. Exclusive Remedies. If we breach our obligation hereunder to fulfill any advertising product or breach any other obligation hereunder, we will make commercially reasonable efforts to fulfill such Advertising Product at a later date on the same or substitute site or search engine, provide reasonably comparable makegoods and/or otherwise reasonably to cure such breach. THE FOREGOING CONSTITUTES OUR SOLE OBLIGATION AND YOUR SOLE OBLIGATION AND YOUR SOLE AND EXCLUSIVE REMEDY FOR ANY BREACH BY US OF THIS AGREEMENT (EITHER DIRECTLY OR THROUGH A FAILURE OF PERFORMANCE BY ANY DISTRIBUTION SITE).23. Entire Agreement. This Agreement constitutes the entire agreement between you and us with respect to the subject matter of this Agreement and supercedes all prior written and all prior or contemporaneous oral communications regarding such subject matter. Accordingly, you should not rely on any representations of warranties that are not expressly set forth in this Agreement.

Discussion

Yellowpages.com moves to dismiss plaintiff's complaint based upon documentary evidence (CPLR 3211 [a] [1]), as well as upon the failure to state a claim (CPLR 3211 [a] [7]). CPLR § 3211 provides, in relevant part: "(a) a party may move for judgment dismissing one or more causes of action asserted against him on the ground that: (1) a defense is founded upon documentary [*6]evidence; or ... (7) the pleading fails to state a cause of action."

In deciding a motion under CPLR 3211(a), the court is charged with liberally construing the complaint, and "accept[ing] as true the facts alleged [therein] and any submissions in opposition to the dismissal motion." 511 West 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 152 (2002).

CPLR 3211 (a) (1)

On a motion to dismiss pursuant to CPLR § 3211 (a) (1), "the court may grant dismissal [only] when documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law." Beal Sav. Bank v Sommer, 8 NY3d 318, 324 (2007) (internal citations omitted); see also Fortis Fin. Servs., LLC v Fimat Futures USA, Inc., 290 AD2d 383 (1st Dept 2002). A movant is entitled to dismissal if the proffered evidence unambiguously contradicts the factual allegations supporting the causes of action contained within the complaint (Rivietz v Wolohojian, 38 AD3d 301 [1st Dept 2007]; see also Goshen v Mutual Life Ins. Co. of New York, 98 NY2d 314 [2002]), regardless of any extrinsic evidence or self-serving allegations offered by the plaintiff. See Excel Graphics Tech., Inc. v CFG/AGSCB 75 Ninth Ave., L.L.C., 1 AD3d 65 (1st Dept 2003).Yellowpages.com proffers the contract to support that part of the instant motion for dismissal of plaintiff's complaint under CPLR 3211 (a) (1). The defendant maintains that the language of the contract specifically states that "the term of the contract is twelve (12) months, which information is contained in the [d]etails of [a]dvertising section as well as the Notes section." See Defendant's Memorandum of Law, at 7. Defendant additionally avers that the terms of the contract (see Contract, ¶15) specifically foreclose plaintiff from bringing this action.

Plaintiff, however, asserts that dismissal under CPLR 3211 (a) (1) is not warranted, as: (1) defendant breached the contract and defendant did nothing to cure such breach, and (2) the terms of the contract are void as against public policy.

Defendant contends, however, that, pursuant to ¶15 of the contract, as quoted above, defendant's sole obligation if it breaches its obligation is to make commercially reasonable efforts to fulfill the obligation at a later date, "provide reasonably comparable makegoods and/or otherwise reasonably to cure such breach." Defendant asserts that, after it learned of plaintiff's issues, it complied with the terms of the contract and that there is no breach of contract.

Plaintiff maintains, however, that by failing to provide the services he paid for, defendant breached the contract, which has not been remedied. He further asserts that the terms of the contract that do not allow him a legal remedy for such breach are void as against public policy. [*7]

Although a court's power to invalidate a contract is limited, and it cannot to do so "because of their subjective view of what is sound policy or good policy" (Matter of Estate of Walker, 64 NY2d 354, 359 [1985]), when a contract is "unreasonable in light of the mores and business practices of the time and place" (Gillman v Chase Manhattan Bank, N.A., 73 NY2d 1, 10 [1988], citing Mandel v Liebman, 303 NY 88, 94 [1951]) that contract will be held to be unenforceable.

Such a determination is a matter of law reserved for the court (see Wilson Trading Corp. v David Ferguson, Ltd, 23 NY2d 398 [1968]), and "is to be decided by a court against the background of the contract's commercial setting, purpose and effect." Sablosky v Edward S. Gordon Co., Inc., 73 NY2d 133, 138 (1989).

"As a general proposition, unconscionability [is] a flexible doctrine with roots in equity." State v Avco Fin. Serv. of New York Inc., 50 NY2d 383, 389 (1980). Generally, a contract will only be held to be unconscionable if it "was both procedurally and substantively unconscionable when made." Gillman v Chase Manhattan Bank, N.A., 73 NY2d at 10.

Examination of the "procedural element of unconscionability requires [scrutiny] of the contract formation process and the alleged lack of meaningful choice." Lawrence v Miller, 48 AD3d 1, 4 (1st Dept 2007). "It requires 'some showing of an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.'" Gendot Assocs. Inc. v Kaufold, 56 AD3d 421, 423 (2d Dept 2008) (citing Williams v Walker-Thomas Furniture Co., 350 F2d 445, 449 [DC Cir 1965]). "The focus is on such matters as the size and commercial setting of the transaction ..., whether deceptive or high-pressured tactics were employed, the use of fine print in the contract, the experience and education of the party claiming unconscionability, and whether there was disparity in bargaining power." Gillman v Chase Manhattan Bank, N.A., 73 NY2d at 11.

Plaintiff is an experienced bankruptcy attorney, who had previously employed another internet marketing company to provide similar services to that for which he engaged plaintiff. Additionally, he admitted signing the contract that defendant has now proffered. See Complaint, ¶ 23. However, he alleges that very high pressure deceptive tactics were used to obtain his signature on the contract. Specifically, he states that defendant pursued him relentlessly, assured him of assistance with a successful campaign, as well as told him that his salesperson would be his contact person.

Finally, plaintiff maintains that the salesperson pressured plaintiff to sign immediately because of a possible rise in prices. [*8]

Although this court has sympathy for plaintiff's position, given the complexity of internet marketing and the difficulties in keeping up with computer advances, plaintiff, as an attorney, should have read and understood the entire contract, as well as understood the ramifications of the provisions therein. Certainly, plaintiff's education and experience afforded him the necessary tools with which to make a decision regarding whether or not to enter into this contract.

Given plaintiff's education and experience with contracts and internet marketing, his court holds that the contract at issue herein is not procedurally unconscionable.

Procedural and substantive unconscionability operate on a sliding scale (see State v Wolowitz, 96 AD2d 47 [2d Dept 1983]), and under certain circumstances substantive elements alone may be sufficient to render the terms of a contract unenforceable. See Brower v Gateway 2000, Inc., 246 AD2d 246 (1st Dept 1998). Such a determination requires extreme cases where the contractual terms are "so outrageous and oppressive as to warrant a finding of unconscionability irrespective of the contract formation process." Id. at 68.

Therefore, although the general "test for substantive unconscionability is whether one or more of the key terms of the contract is unreasonably favorable to one party" (People v Two Wheel Corp., 71 NY2d 693, 699 [1988], if this court were to hold the contract substantively unconscionable, a much higher standard would have to be met.

Such may, in fact, be the case here, where the terms of the contract may or may not obligate the defendant to provide the expected services (see Contract, ¶¶7, 10); where all measurement of such services is in the hands of defendantany numbers developed by defendant regarding its performance must be unconditionally accepted by the customer (see Contract, ¶10); and where the only remedy for a breach by defendant is "commercially reasonable efforts" to rectify any alleged problem (see Contract, ¶15).

In addition to the above provisions, the contract specifically states that there is no guarantee that the campaign will result in customer satisfaction (see Contract, ¶¶7, 11), no liability for defendant should the campaign harm the customer (see Contract, ¶11), and if there are no services provided at all because the web site(s) are down, the customer has no recourse, unless the defendant decides in its own discretion to issue a refund. See Contract, ¶10.

Finally, should a customer decide, for any reason, to cancel during the term of the contract, all payments that would be due during its term become immediately due. See Contract, ¶1.

When there are questions as to whether there are elements of unconscionability in a contract, "there must be a hearing where [*9]the parties have an opportunity to present evidence with regard to ... the disputed terms' setting, purpose and effect." Davidovits v DeJesus Realty Corp., 100 AD2d 924, 925 (2d Dept 1984). When there is no doubt of the unconscionability of the terms, there is no need for a hearing to settle the issue (see Simar Holding Corp. v GSC, 87 AD3d 688 [2d Dept 2011]), but where, as here, unconscionability is being considered on a motion to dismiss, a hearing is necessary to allow both the plaintiff and defendant the opportunity to proffer any evidence it may wish to address regarding this issue.

Therefore, a hearing on the issue of substantive unconscionability will be held by this court.

In addition to the hearing regarding any substantive unconscionability in the contract, this court takes notice of certain language within the Notes section of the Insertion Order. Defendant makes mention of the Notes when it states that the term of the contract is 12 months, and again generally when it avers that "the [c]ontract at issue is unambiguous with respect to [p]laintiff's rights concerning the alleged breach of contract by YellowPages.com." See Defendant's Memorandum of Law, at 16.

The Notes at issue provide as follows: "This contract is for 12 months, with a 6 month option to cancel. Customer must contact AT & T Advertising Services in writing not later than 15 days prior to the 6 month period to cancel. If customer does not contact AT & T Advertising Solutions the contract will continue to run for 12 months."

In reading the Notes, this court finds a possible ambiguity in its language. It can be read that at the sixth month date, i.e., on one date exactly six months from the August 3, 2010 contract date, plaintiff had the option to cancel, had he given notice at least 15 days before. However, the Notes can also be read to mean that plaintiff could cancel anytime within the first six months, upon 15 days notice. If the later is the case, then plaintiff's alleged written notice of December 13, 2010 may have been sufficient to end the contract, entitling him at least to damages as a result of any payments taken after that date.

Because there is no provision in the contract for a situation where plaintiff would validly cancel the contract and defendant would continue to take money out of plaintiff's account, this court holds that the ¶22, entitled Applicable Law, is controlling. That provision states as follows: "[t]his [contract] shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts entered into and performed in New York by residents thereof."

Under New York law, an appropriate venue for seeking a monetary remedy for breach of the Notes section of the contract is this court. Thus, as to that portion of defendant's motion [*10]that seeks to dismiss the cause of action for breach of the Notes provision of the contract under CPLR 3211 (a) (1) is denied.

As respects that portion of defendant's motion that seeks dismissal based upon CPLR 3211(a)(7), a court must "accept the facts as alleged in the complaint as true, accord the plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory." Leon v Martinez, 84 NY2d 83, 87—88 (1994).

Because any determination on the motion to dismiss plaintiff's first four causes of action, i.e., for fraudulent inducement, breach of contract, conversion, and unjust enrichment, will require this court to first determine the status of the contract, that portion of the instant motion that seeks dismissal of the first through fourth causes of action in the complaint is held in abeyance pending the hearing scheduled above.

As to plaintiff's fifth cause of action, for tortious interference with prospective business relations, such cause of action requires that a plaintiff be able to demonstrate that a contract would have been entered into with a prospective buyer 'but for' defendant's conduct" (Parrott v Logos Capital Mgt., LLC, 91 AD3d 488, 489 [1st Dept 2012]), as well as allege that such interference "was accomplished by 'wrongful means' and that defendant acted for the sole purpose of harming the plaintiff." GS Plasticos Limitada v Bureau Veritas, 88 AD3d 510, 510 (1st Dept), lv denied 17 NY3d 714 (2011).

Because the complaint does not allege "wrongful means" nor does it allege that YellowPages.com entered into the contract for the sole purpose of harming plaintiff, the fifth cause of action in the complaint is dismissed.

Plaintiff's sixth cause of action, for estoppel/libel/slander, is also dismissed. This cause of action is based upon potential future reporting to credit agencies and possible future collection attempts, as plaintiff has not alleged that defendant has submitted a negative report to any credit agency nor is there any indication of current collection activity. Although not framed as a preliminary injunction, plaintiff seeks to estop and enjoin defendant from negatively reporting plaintiff's account to the credit reporting bureaus, but then seeks damages "for a sum to be determined at trial."

Defamation claims require publication (see Salvatore v Kumar, 45 AD3d 560 [2d Dept 2007], lv denied 10 NY3d 703 [2008]; see also O'Neill v New York Univ., __ AD3d ___, 2012 WL 1584369 [1st Dept 2012]), which is a term of art (see Rossignol v Silvernail, 146 AD2d 907 [3d Dept 1989], lv denied 80 NY2d 760 [1992]). Further, to obtain a preliminary injunction, a movant must make a clear showing of (1) a likelihood of ultimate success on the merits, [*11](2) irreparable harm unless the injunction is granted, and (3) that the equities are balanced in its favor. See OraSure Tech., Inc. v Prestige Brands Holdings, Inc., 42 AD3d 348 (1st Dept 2007). There has been neither an allegation of a publication nor has plaintiff's allegations included the requirements for a preliminary injunction. Therefore, the sixth cause of action is dismissed.

Order

Accordingly, it is hereby

ORDERED that defendant's motion to dismiss is granted only to the extent of dismissing plaintiff's fifth and sixth cause of action, and is otherwise denied; and it is further

ORDERED that a hearing on the issue of substantive unconscionability will be held before Justice Carol R. Edmead, Supreme Court, New York County, 60 Centre Street, Part 35, Room 438 on Monday, June 25, 2012 at 10:00 a.m.; and it is further

ORDERED that counsel for plaintiff shall serve a copy of this order with notice of entry within twenty (20) days of entry on all counsel.

Dated: May 14, 2012

ENTER:

______________________________

Carol Robinson Edmead, J.S.C. Footnotes

Footnote 1: Per a March 16, 2011 stipulation between the parties to this action, it was agreed that the sole and proper defendant in this action is "Yellowpages.com d/b/a AT & T Advertising Solutions." However, no motion has been made to amend the caption in this action, and the court was not informed of this prior to reviewing the papers proffered with this motion.

Footnote 2: The contract defines a "Distribution Site" as "[e]ach of our distribution or fulfilment vendors or internet search engines on which we place or through which we distribute your advertising product[s]." See the contract, paragraph 1.