Promise to Provide Products Not Required Under Contract Defeats Claim of Duplication

• Posted on: Mar 14 2022

By: Jeffrey M. Haber

A recurring theme in fraud jurisprudence is the dismissal of fraud claims that duplicate breach of contract claims. As we have noted, a fraud claim will not survive a dismissal motion when there is “a valid and enforceable written contract [that] govern[s] a particular subject matter” and the recovery sought arises out of the same facts and circumstances.¹ There are exceptions to this rule, such as where “a legal duty independent of the contract itself has been violated[,]” or where the misrepresentation is “collateral or extraneous to the terms of the parties’ agreement”.² The exceptions, however, often prove difficult to demonstrate. 

[Ed. Note: This Blog has recently written about the duplication doctrine here, here and here.] 

In Tecchia v. Bellati, 2022 N.Y. Slip Op. 01524 (1st Dept. Mar. 10, 2022) (here), the Appellate Division, First Department reversed the dismissal of a fraud claim on the grounds that it did not duplicate plaintiffs’ breach of contract claim. 

Tecchia involved a contract between Plaintiffs, Sara Tecchia and 5N Wooster LLC, and Defendant Canova, Inc. d/b/a Minimal USA to supply custom kitchen furnishings and millwork for renovations to Tecchia’s apartment in SoHo, New York (the “Project”). 

In 2012, Tecchia began the renovation process for the apartment. She visited the Minimal USA showroom in mid-2012, where she was shown numerous catalogs and products that she understood were manufactured by Minimal USA and not Minimal Cucine. Since 2012, Minimal USA has been the exclusive distributor for Minimal Cucine products in the United States pursuant to a Distribution Agreement. Tecchia believed that Minimal USA was an Italian company, Minimal Cucine, that provided custom-made home solutions and that it was represented in New York City by Minimal USA. Tecchia maintained that defendant, Bartolomeo Bellati, president of Minimal USA, told her he would provide “Minimal products” for the Project. Tecchia hired Minimal USA within a week of the initial meeting.

Pursuant to the contract by and between Minimal USA and Tecchia, Minimal USA agreed to sell, among other things, to Tecchia “[c]ustom furniture and millwork made in Italy” (the “Contract”). In particular, the Contract concerned the design and manufacture of custom goods, including a custom-built kitchen, customized shower, custom built master beds and guest beds, closets, doors, vanity, and plumbing and bath appliances. 

In September 2013, Tecchia hired a contractor to provide construction management services for the Project. During the Project, Tecchia claimed that items installed by Defendants were defective and needed replacement. Tecchia terminated the Contract with Minimal USA in or around February 2015.

Plaintiffs commenced the action alleging that Defendants breached the Contract by failing to provide Minimal Cucine products, failing to properly install the products, and failing to complete the job in a timely manner. Plaintiff asserted claims for (1) breach of contract against Minimal USA, (2) breach of contract against Minimal USA, and (3) fraud. Defendants asserted counterclaims for (1) breach of contract, and (2) delay damages. 

Defendants moved for summary judgment as to their first counterclaim for breach of contract and for dismissal of the complaint. Supreme Court granted the motion (here).

Supreme Court held that Plaintiffs failed to show evidence of damages that flowed from the alleged breach of the Contract. In particular, the court found that there was no breach of the Contract because there was nothing in the Contract that required Defendants to provide Minimal Cucine products – that is, the Contract did not expressly identify or provide for such products to be used/installed in the Project. Moreover, there could be no breach because Defendants supplied products that were available to satisfy Tecchia’s custom requirements.

Supreme Court also held that the fraud claim was duplicative of the breach of contract claim. The court explained that the agreement between the parties contained a future promise for the delivery of custom millwork pursuant to the express terms of the Contract. The claim that Tecchia paid for millwork by the wrong manufacturer, said the court, was both belied by the Contract, which is with Minimal USA and does not provide for Minimal Cucine products, and her deposition testimony where she indicated a lack of appreciation of the difference between Minimal USA and Minimal Cucine products. Accordingly, concluded the court, the fraud claim duplicated plaintiffs’ contract claim.

On appeal, the First Department reversed the dismissal of the fraud claim.

The Court held that “[t]he motion court should not have dismissed the cause of action for fraud as duplicative of the contract claims.” The Court explained that the Contract between Minimal USA and Tecchia did not require Minimal USA to provide Minimal Cucine products. In fact, noted the Court, “the contract [was not] ambiguous in that regard”. Therefore, defendants’ alleged misrepresentation that they would provide Minimal Cucine products was separate and apart from the Contract. Further, explained the Court, “in light of Tecchia’s deposition testimony, in which she stated that defendant Bartolomeo Bellati told her that Minimal USA would provide her with products made by Minimal Cucine, defendants have failed to sustain their burden of demonstrating that there are no issues of material facts with respect to fraud.” 

Takeaway

As we have noted, a fraud claim, which arises from the same facts, seeks identical damages and does not allege a breach of any duty collateral to or independent of the parties’ agreement, is duplicative of a contract claim. In Tecchia, plaintiff sufficiently demonstrated that the alleged misstatement was separate from the terms of the Contract, at least for purposes of defeating the motion for summary judgment. Thus, in contrast to many of the cases we have examined, Tecchia stands as an example of a pre-contract misstatement of material fact that does not duplicate the plaintiff’s breach of contract claim.

Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice. 

Footnotes

1. Clark-Fitzpatrick v. Long Is., 70 N.Y.2d 382 (1987).
2. Dormitory Auth. v. Samson Constr. Co., 30 N.Y.3d 704 (2018) (citation omitted).
3. Slip Op. at *2.
4. Id. at *1.
5. Id. at *2 (citing, Deerfield Communications Corp. v. Chesebrough-Ponds, Inc., 68 N.Y.2d 954, 956 (1986)).