FILED: NEW YORK COUNTY CLERK 04/03/ :52 PM INDEX NO /2016 NYSCEF DOC. NO. 22 RECEIVED NYSCEF: 04/03/2017

Transcription

1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK XLON BEAUTY, LLC, Index No /2016 DORIS DAY, v. Plaintiff, MEMORANDUM OF LAW IN OPPOSITION TO DEFENDANT S MOTION TO DISMISS Defendant. Bowles Liberman & Newman LLP David K. Bowles Eric H. Newman Ajoe P. Abraham 54 W. 21 st Street, Suite 1007 New York, New York P: (212) F: (866) dbowles@blnlaw.com Attorneys for the Plaintiff 1 of 21

2 TABLE OF CONTENTS I. PRELIMINARY STATEMENT... 1 II. SUMMARY OF RELEVANT FACTS... 1 III. ARGUMENT... 3 a. Plaintiff s Fraud Claims Do Not Duplicate the Contract Claim and are Not Barred by a Merger Clause or the Parol Evidence Rule, and the Claim is Properly Pled... 3 b. Plaintiff Properly Pleads Fraud The Elements of Fraud and Fraudulent Inducement Plaintiff has Pled Misrepresentation of Facts Plaintiff has Pled Justifiable Reliance Plaintiff Has Pled Damages c. Plaintiff Properly Pleads Breach of Contract d. The Good Faith and Fair Dealing Claim Should Be Allowed in the Alternative e. The Unjust Enrichment Claim Should Be Allowed in the Alternative IV. CONCLUSION ii 2 of 21

3 TABLE OF AUTHORITIES Cases 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144 [2002] Amaro ex rel. Almazan v Gani Realty Corp., 60 AD3d 491 [1st Dept 2009]... 8, 9 Antares Real Estate Servs. II, LL v. 100 WP Prop.y, No /2013, 2014 WL , 7 Basis Yield Alpha Fund (Master) v Goldman Sachs Group, Inc., 115 AD3d 128 [1st Dept 2014]. 6, 11 Capital Z Fin. Servs. Fund II, L.P. v. Health Net, Inc., 43 A.D.3d 100, 840 N.Y.S.2d 16 [1st Dept.2007]) Channel Master Corp. v Aluminum Ltd. Sales, Inc., 4 NY2d 403 [1958]... 4 Cron v Hargro Fabrics, Inc., 91 NY2d 362 [1998]... 5, 8, 10 Danann Realty Corp. v Harris, 5 NY2d 317 [1959]... 5, 6, 11, 12 Deerfield Communications Corp. v Chesebrough-Ponds, Inc., 68 NY2d 954 [1986]... 4, 5, 7, 10 Flowers v 73rd Townhouse LLC, 99 AD3d 431 [1st Dept 2012]... 3 Goldman v Metro. Life Ins. Co., 5 NY3d 561 [2005] Granada Condominium III Ass'n v Palomino, 78 AD3d 996 [2d Dept 2010]... 3 Graubard Mollen Dannett & Horowitz v Moskovitz, 86 NY2d 112 [1995]... 4, 7 Harris v Seward Park Hous. Corp., 79 AD3d 425 [1st Dept 2010] HSH Nordbank AG v. UBS AG, 95 A.D.3d 185, 941 N.Y.S.2d 59 [1st Dept.2012] Kaufman v Cohen, 307 AD2d 113 [1st Dept 2003]... 8 MBIA Ins. Corp. v. Merrill Lynch, 81 A.D.3d 419, 916 N.Y.S.2d 54 [1st Dept.2011] Sabo v Delman, 3 NY2d 155 [1957]... 3, 4, 9 Sergeants Benev. Ass'n Annuity Fund v Renck, 19 AD3d 107 [1st Dept 2005] Silver Oak Capital L.L.C. v. UBS AG, 82 A.D.3d 666, 920 N.Y.S.2d 325 [1st Dept.2012] Steinhardt Group Inc. v Citicorp, 272 AD2d 255 [1st Dept 2000]... 6 Steinhardt Group v. Citicorp, 272 A.D.2d 255, 708 N.Y.S.2d Ward v. TheLadders.com, Inc., 3 F. Supp. 3d 151 (S.D.N.Y. 2014)... 8 Zuccarini v Ziff-Davis Media, Inc., 306 AD2d 404 [2d Dept 2003] iii 3 of 21

4 I. PRELIMINARY STATEMENT Plaintiff Xlon Beauty, LLC ( Plaintiff or Xlon ) opposes the motion to dismiss by defendant Dr. Doris Day ( Defendant or Day ). This is a case in which Xlon contracted with Day for Day to promote Cura Perfect, a new anti-aging product sold by Xlon (the Product ). Day loved the Product, and promised to use her media connections to promote it if Xlon would enter into a contract granting her a percentage of revenues. Xlon did so. But instead of promoting it, she tried to buy the company away from the current owners, and even talked of sabotaging the company to obtain a more favorable price. Despite Day s arguments, the complaint is sound. The fraud claims are distinct from the contract claim and are not barred by parol evidence or the contract s merger clause. Further, the tort claims set out the requisite elements. The contract claim also sets out the necessary elements. The good faith and fair dealing is not duplicative of the contract claim. Finally, the unjust enrichment claim is not barred by the contract. Day s motion is otherwise inappropriate. She submits a gratuitous affidavit inappropriate for a defendant on a motion to dismiss and uses it to badmouth the Product in an obvious attempt to intimidate Xlon from pursuing its rights. Xlon respectfully requests that the Court deny Day s motion. II. SUMMARY OF RELEVANT FACTS In early- to mid-2015, two representatives of Plaintiff and Defendant met to discuss Defendant s endorsement and promotion of the Product. 1 Bowles Aff., Ex. 1 at 5. Defendant had previously tried the Product, and reported that her patients loved it. Affidavit of Jason 1 Unless otherwise stated herein, all factual statements refer to the allegations in the Amended Complaint. The Amended Complaint is attached to the Affidavit of David K. Bowles in Opposition to Defendant s Motion to Dismiss ( Bowles Aff. ), Ex of 21

5 Weinberg ( Weinberg Aff. ) at 2. 2 She wanted the be involved with the company, and to induce Plaintiff to enter into an agreement with her, promised to use her media connections to promote the Product. Bowles Aff. at 5-6; Weinberg Aff. at 5-6. Plaintiff and Defendant entered into an agreement, promising Defendant 3% of the revenues of the company, in August of 2015 (the 3% Agreement ). Bowles Aff., Ex. 1 at 6, also Ex. 2. A year or so later, at Defendant s request, Plaintiff and Defendant entered into a second agreement, promising her more money: 7% of the revenues of the company (the 7% Agreement ). Bowles Aff., Ex. 1 at 8, also Ex. 3. Defendant never had any intention of helping the company. Instead, she wanted to buy it away from the owners. Bowles Aff., Ex. 1 at 11; Weinberg Aff. at 15. She made at least three offers to do so. Bowles Aff., Ex. 1 at 11; Weinberg Aff. at 15. She even spoke of sabotage to the company, to drive the value down so that she could buy it away. Weinberg Aff. at 16. Defendant never did anything to promote Xlon or the Product. Bowles Aff., Ex. 1 at 7, 10. She never followed through on her promises to use her media contacts to promote the Product. Id. She even refused to show up for media appearances when Plaintiff scheduled them. Id. at Once Plaintiff rebuffed her offers to buy the company, Plaintiff tried to terminate the agreement. Id. at 15. Faced with Defendant s refusal to fulfil her promises, or to work anything out with Plaintiff, Plaintiff had no choice but to file this lawsuit. In response, Defendant has concocted a nonsensical tall tale in which she was worried about the quality of the Product but nonetheless agreed to promote it for more money. Id. at 7. She does not even address the unassailable fact that she sought to purchase the company a company that has Cura Perfect as its only product. Id. at 11. This is utterly inconsistent with the concept that she did not approve of the quality of the 2 As explained below in Section III.b.1, infra, plaintiff submits the affidavit of Jason Weinberg to clarify its claims, as is expressly permitted by the precedent described there. 2 5 of 21

6 product. One does not seek to buy a company that has only one product, if you do not believe in that product. Plaintiff s case is well grounded in fraud and fraudulent inducement, breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. Plaintiff respectfully submits that the Court should deny Defendant s motion in its entirety. 3 III. ARGUMENT a. Plaintiff s Fraud Claims Do Not Duplicate the Contract Claim and are Not Barred by a Merger Clause or the Parol Evidence Rule, and the Claim is Properly Pled Defendants are wrong in arguing that the fraud claims duplicate the contract claim and that they are barred by the merger clause and the parol evidence rule. (Def. Memo at 8-11.) Here, the fraud claims are based on a statement separate from the contract and the contract claim. Such statements are held actionable and not barred by a merger clause. Promises of future action with an undisclosed intention not to perform are actionable as fraud. The Court of Appeals stated clearly in Sabo v Delman, 3 NY2d 155, 160 [1957]: Id. at 160 (emphasis added). While Mere promissory statements as to what will be done in the future are not actionable... it is settled that, if a promise was actually made with a preconceived and undisclosed intention of not performing it, it constitutes a misrepresentation of a material existing fact upon which an action for rescission may be predicated. Other decisions confirm this principle. In Graubard Mollen Dannett & Horowitz v Moskovitz, 86 NY2d 112, 122 [1995], citing Sabo, the court held that oral promises by a departing 3 Defendant s affidavit with factual assertions (See, e.g., Day Aff. at 3-5) should be ignored on a motion to dismiss. Affidavits are not documentary evidence on a motion to dismiss. Granada Condominium III Ass'n v Palomino, 78 AD3d 996, 997 [2d Dept 2010] ( Neither affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR 3211(a)(1)d) ). Accord Flowers v 73rd Townhouse LLC, 99 AD3d 431 [1st Dept 2012] (Reversing dismissal on documentary evidence since The affidavits submitted by defendants were not documentary evidence. and citing Granada). 3 6 of 21

7 law partner prior to his written retirement agreement with the firm were actionable as fraud, reiterating that [a] false statement of intention is sufficient to support an action for fraud, even where that statement relates to an agreement between the parties. Similarly in Channel Master Corp. v Aluminum Ltd. Sales, Inc., 4 NY2d 403, 407 [1958], the court sustained a fraud claim where defendants stated an intention to sell quantities of aluminum, holding A person's intent, his state of mind, it has long been recognized, is capable of ascertainment and a statement of present intention is deemed a statement of a material existing fact, sufficient to support a fraud action (emphasis added). Further, such a promise without intent to perform, made separately from a contract, is separately actionable from that contract. Thus in Deerfield Communications Corp. v Chesebrough-Ponds, Inc., 68 NY2d 954, 956 [1986], the court upheld counterclaims for breach of a sale contract, and fraud for prior, oral promises of territorial restrictions. The court expressly held that the fraud claim was actionable because it alleged a promise made without intent to perform, and held the fraud claim was not barred by the written contract s merger clause or as duplicative: a promise.made with a preconceived and undisclosed intention of not performing it, constitutes a misrepresentation. Involved in defendant's third counterclaim, therefore, is not a mere promissory statement as to what will be done in the future... It alleged rather a representation of present fact, not of future intent collateral to, but which was the inducement for the contract, and thus was neither duplicative of the second counterclaim nor barred by the general merger clause contained in the contract.... Id. at 956 (emphasis added; additional citations omitted). 4 7 of 21

8 Here, the fraud claims (fraud and fraudulent inducement) are premised on defendant s statement, prior to the contract, that she would use her media contacts to promote the product. 4 That statement is separate and apart from the contract claim based on Defendant s failure to abide by her written contractual obligation to make specific promotional appearances when asked. Bowles Aff., Ex. 1 at Defendant s reliance on Danann Realty Corp. v Harris, 5 NY2d 317, 320 [1959] (D.Mem. at 8-11), and similar cases, is misplaced. So is her reliance on Antares Real Estate Servs. II, LL v. 100 WP Prop.y, No /2013, 2014 WL Dannan makes clear that it is enforcing a very specific no representations clause a clause which is not present in any form here. (Id. at 320; contrast Exs. 2 and 3, page 8, 21). In fact, since such a clause is absent, Dannan expressly supports the concept that Plaintiff s separate fraud action stands despite the contract and merger clause: [W]here the complaint states a cause of action for fraud, the parol evidence rule is not a bar to showing the fraud -- either in the inducement or in the execution -- despite an omnibus statement that the written instrument embodies the whole agreement, or that no representations have been made. Danann, 5 NY2d at 320 (citations omitted). This is reinforced by another case Defendant cites for the same proposition, Basis Yield Alpha Fund (Master) v Goldman Sachs Group, Inc., 115 AD3d 128, 137 [1st Dept 2014]. There, the court (citing Dannan) made clear that fraud claims survive even non-reliance waivers unless the waivers are specific: The law is abundantly clear in this state that a buyer's disclaimer of reliance cannot preclude a claim of justifiable reliance on the seller's misrepresentations or omissions unless (1) the disclaimer is made sufficiently specific to the particular type of fact misrepresented or 4 As noted, the nature of defendant s promise is clarified by affidavits from one of plaintiff s executives and an eyewitness, as permitted by, inter alia, Cron v Hargro Fabrics, Inc., 91 NY2d 362, 366 [1998]. 5 8 of 21

9 undisclosed; and (2) the alleged misrepresentations or omissions did not concern facts peculiarly within the seller's knowledge. Id. at 137. (Citations omitted.) Similarly, Steinhardt Group Inc. v Citicorp, 272 AD2d 255, 257 [1st Dept 2000], cited by Defendant, holds that the waivers at issue were not specific enough to bar a fraud claim: The disclaimer relied on by defendants did not meet the specificity requirements of Danann with regard to these plaintiffs. Here, as noted, no such waiver of representations is in the contract at all. Exs. 2 and 3, page 8, 21. Antares is readily distinguished as involving use of pre-contractual agreements to either vary the contract or as a fraud claim. Antares, 2014 WL , *5. But as discussed above, the Court of Appeals expressly holds that promises made with no intention of performance as alleged here constitute a present statement of facts and are actionable as fraud. See Graubard Mollen 86 NY2d at 122, cited above ( [a] false statement of intention is sufficient to support an action for fraud, even where that statement relates to an agreement between the parties. ) And, the cases hold that such a statement is actionable as fraud despite a contract with a merger clause. See Deerfield Communications 68 NY2d at 956, quoted above. To the extent Antares is on point, it is at odds with these precedents. b. Plaintiff Properly Pleads Fraud Defendant also incorrectly argues that Plaintiff has not properly alleged the elements of fraud or fraudulent inducement. D.Mem. at Defendant is clearly wrong: Plaintiff has plead all of the elements of both fraudulent inducement (Claim 1; Bowles Aff., Ex. 1 at 18-23) and fraud (Claim 2, Bowles Aff., Ex. 1 at 24-34). As shown below, these allegations are supplemented with affidavit testimony from a Plaintiff witness. The fraud claims are properly alleged and should stand. 6 9 of 21

10 1. The Elements of Fraud and Fraudulent Inducement Plaintiff and Defendant agree on the essential elements of fraud and fraudulent inducement. To state a cause of action for fraud, a plaintiff must allege a representation of material fact, the falsity of the representation, knowledge by the party making the representation that it was false when made, justifiable reliance by the plaintiff and resulting injury. Kaufman v Cohen, 307 AD2d 113, 119 [1st Dept 2003]; see also Ward v. TheLadders.com, Inc., 3 F. Supp. 3d 151, 165 (S.D.N.Y. 2014) (similar). Defendant s statement of the elements is approximately the same. Memorandum of Law in Support of Defendant Doris Day, M.D. s Motion to Dismiss the Amended Complaint ( D.Mem. ) at Defendant fails to note, however, that Plaintiff s complaint is to be afforded a liberal construction and that the court must accept the facts alleged in the complaint as true and accord the plaintiffs the benefit of every possible favorable inference... Amaro ex rel. Almazan v Gani Realty Corp., 60 AD3d 491, 492 [1st Dept 2009]. When these rules are considered, Plaintiff s complaint clearly states the elements of fraud and fraudulent inducement. Further, a plaintiff may submit affidavits to remedy defects in the complaint and preserve inartfully pleaded, but potentially meritorious claims... such additional submissions of the plaintiff, if any, will similarly be given their most favorable intendment. Cron v Hargro Fabrics, Inc., 91 NY2d 362, 366 [1998]. Plaintiff has done so here, so as to remove any ambiguity in the pleading that might give the Court pause. 2. Plaintiff has Pled Misrepresentation of Facts Defendant s first argument is that Plaintiff has not properly pled a misrepresentation of a fact. D.Mem. at Their first argument is that Plaintiff pled that Defendant could use her business connections to promote the Product, but did not allege that she would do so. This is 7 10 of 21

11 semantics, at best, and is an attempt to deny Plaintiff the favorable inferences of the pleading. The actual allegations are: Defendant represented to Garfinkle and Weinberg that she was a Board Certified dermatologist with business connections she could use to promote Plaintiff s anti-aging product Cura Perfect (the Product ) through provision of a variety of publicity, including but not limited to introductions to Dr. Oz and Christie Brinkley, and specifically that she could promote the Product on Good Morning America, Dr. Oz, The Talk, and the View, and television shows hosted by Wendy Williams, Ellen DeGeneres, and arrange to have the Product advertised in Allure magazine. Bowles Aff., Ex. 1 at 5 (emphasis added); see also 19 and 25. The complaint further alleges that in fact she did not use her connections to benefit the Proper or the Plaintiff in any way. Id. at The clear inference of the allegation is that Defendant promised that she could and would use her connections to promote the Product, and did not do so. As stated above, the pleading is to be given a liberal construction and the benefit of every possible favorable inference. Amaro ex rel. Almazan, 60 AD3d at 492. Further, to remove any possible doubt, Plaintiff submits herewith affidavit testimony of an eyewitness (one of the owners of Xlon), who testifies that Defendant represented that she could and would use her connections to promote the product. Weinberg Aff. at 5-6. It is quite clear that Defendant made these promises in order to induce Plaintiff to enter into the contract, and if there is any ambiguity in the complaint on this point, the affidavit clarifies it. As discussed above, affidavit evidence is acceptable to supplement a complaint, and therefore the Court should consider that evidence. Cron, 91 NY2d at Defendant entirely ignores this allegation, stating that Plaintiff only alleges that the representations were false. D.Mem. at 13. This is incorrect. Plaintiff clearly alleges that Defendant entirely failed to take any action that she had represented that she would do. Bowles Aff., Ex. 1 at 10, 20, 21, 27; Weinberg Aff. at 8, of 21

12 Defendant s second argument is that Defendant s statements were a promise of future performance, and therefore are not actionable. D.Mem at 14. Defendant is wrong on the law. As stated above at Section III.a., promises of future action without any intent to perform are actionable as fraud. See Sabo, 3 NY2d at 160, and discussion above. Here, Plaintiff has alleged that Defendant promised to use her media contacts to promote the Product. Bowles Aff., Ex. 1 at 19, 25. Plaintiff also alleges that Defendant knew that her representations were false but made them to induce Plaintiff to enter into the 3% Agreement.... Id. at 20. Plaintiff further alleges that Defendant repeated her representations... prior to entry into the 7% Agreement, and likewise knew they were false at that time.... Id. at 21. And again, Plaintiff alleges that Defendant knew that her representations were false but made them to induce reliance on thereon. Id. at 27. These allegations can only be read as an allegation that Defendant made a promise with a preconceived and undisclosed intention of not performing it. As in Deerfield Communications Corp., this constitutes an actionable fraud. Deerfield Communications Corp., 68 NY2d at 956. Further, it is the belief of one of the owners of Xlon that Defendant never intended to perform on her representations. She knew they were false at the time, but she made them anyway. Weinberg Aff. at 8. This was all apparently in service of her plan to buy the company if necessary, by harming it to drive down the price. Id. at This affidavit supplements the pleading, and further supports Plaintiff s claim of fraud. Cron, 91 NY2d at Plaintiff has Pled Justifiable Reliance Defendant argues that Plaintiff has not properly pled justifiable reliance. D.Mem. at Defendant s argument is ambiguous, but its thrust seems to be not that Plaintiff failed to plead reliance, but that the agreements at issue contradict such reliance. Id. Defendant is simply wrong of 21

13 First, Plaintiff has certainly pled reliance. The complaint says that Plaintiff entered into the Agreements in justifiable reliance on Defendant s misrepresentations. Bowles Aff., Ex. 1 at 21. Further, Plaintiff alleges that Plaintiff expended money on the Product and the company, and would not have made these expenses but for Defendant s misrepresentations. Id. at 29. These allegations clearly state reliance, and, considering that Plaintiff must be afforded all favorable inference of the allegations, Plaintiff has clearly met the pleading requirement. Defendant does not appear to argue otherwise. Defendant s argument therefore appears to rest on the idea that Plaintiff s reliance on Defendant s misrepresentations were inappropriate given that the contract has an integration clause, and does not expressly mention the use of Defendant s connections. Defendant argues that the allegation... is inconsistent with Dr. Day s contractual obligations under the 7% Agreement none of which actually require her to use her connections to benefit the Product. D.Mem. at 15. On this point, Defendant is wrong on the law. As discussed above (Section III.a, supra), the law is clear in this state that a buyer's disclaimer of reliance cannot preclude a claim of justifiable reliance on the seller's misrepresentations or omissions unless (1) the disclaimer is made sufficiently specific to the particular type of fact misrepresented or undisclosed; and (2) the alleged misrepresentations or omissions did not concern facts peculiarly within the seller's knowledge (Danann, 5 N.Y.2d at 323; see also MBIA Ins. Corp. v. Merrill Lynch, 81 A.D.3d 419, 916 N.Y.S.2d 54 [1st Dept.2011]; Capital Z Fin. Servs. Fund II, L.P. v. Health Net, Inc., 43 A.D.3d 100, 111, 840 N.Y.S.2d 16 [1st Dept.2007]). Accordingly, only where a written contract contains a specific disclaimer of responsibility for extraneous representations, that is, a provision that the parties are not bound by or relying upon representations or omissions as to the specific matter, is a plaintiff precluded from later claiming fraud on the ground of a prior misrepresentation as to the specific of 21

14 matter (see, e.g., Silver Oak Capital L.L.C. v. UBS AG, 82 A.D.3d 666, 667, 920 N.Y.S.2d 325 [1st Dept.2012]; Steinhardt Group v. Citicorp, 272 A.D.2d 255, 256, 708 N.Y.S.2d 91). In other words, where there is such a disclaimer, no representations exist, and that being so, there can be no reliance (HSH Nordbank AG v. UBS AG, 95 A.D.3d 185, 201, 941 N.Y.S.2d 59 [1st Dept.2012]). Basis Yield Alpha Fund (Master) v Goldman Sachs Group, Inc., 115 AD3d 128, 137 [1st Dept 2014]. Such is not the case here. Defendant does not and cannot argue that there is a specific disclaimer of responsibility for Dr. Day which says that she would not use her alleged contracts to promote the Product. There is no such disclaimer in the agreements. Bowles Aff., Exs. 2 and 3 (Section 21 in each agreement). Defendant certainly does not cite to any supporting language in the agreements. D.Mem. at Accordingly, as Danann and the similar cases cited above show, Defendant cannot hide behind disclaimer language in the agreement. There is none. 4. Plaintiff Has Pled Damages Finally, Defendant argues that Plaintiff has not pled actionable damages. D.Mem. at Once more, Defendant is incorrect. With regard to fraud, Plaintiff has extensively pled damages. Plaintiff has alleged: 28. Based on Defendant s misrepresentations, Plaintiff expended in excess of $145,000 for promotion of the Product, including marketing and inventory. 29. Plaintiff has been damaged by Defendant s misrepresentations, as it would not have made these expenses but for Defendant s misrepresentations. 30. The Product is substantially similar to another product in the industry, known as Instantly Ageless. 31. Instantly Ageless is, on information and belief, manufactured by a Florida LLC known as Jeunesse Global Holdings, LLC ( JGH ) either directly or through one or more subsidiaries of 21

15 32. On information and belief, JGH had had profits in the millions of dollars from Instantly Ageless. 33. On information and belief, had Defendant fulfilled her promises to Plaintiff, Plaintiff s profits from the Product would have been similar to or have exceeded JGH s profits on the sale of Instantly Ageless. 34. Plaintiff has therefore been damaged in excess of $145,000 for investments that it would not have made but for Defendant s misrepresentations, and further damaged in the amount of lost profits, in the millions of dollars, which it would have made but for Defendant s misrepresentations. Bowles Aff., Ex. 1 at 28-34; see also 23. These allegations only appear in the fraud claim, but should reasonably be read to apply to both the fraud and fraudulent inducement claims, as the concept applies to both sets of allegations, and Plaintiff requests that they be so read. Defendant attacks these allegations with rhetorical questions: wouldn t Xlon have spent more money on its own promotion? D.Mem. at (emphasis in original). Further, with regard to Plaintiff s allegations that Cura Perfect was similar to the Instantly Ageless product, and that this could support damages, Defendant lamely argues that [t]here may, of course, be differences between the products.... D.Mem. at 18 This sort of attorney hand waving has no place in a motion to dismiss: at best, Defendant is arguing about facts before discovery. Plaintiff has pled clear damages, well described, and that is all that matters at this phase of the proceedings. c. Plaintiff Properly Pleads Breach of Contract Defendant argues that Plaintiff has failed to allege the elements of a breach of contract. D.Mem. at Again, Defendant is in error. The parties agree on the elements of a claim of breach of contract, which are the existence of a contract, the plaintiff's performance thereunder, the defendant's breach thereof, and resulting damages. Harris v Seward Park Hous. Corp., 79 AD3d 425, 426 [1st Dept 2010]; compare with D.Mem. at 19. However, as shown below, Plaintiff has pled these elements of 21

16 First, Plaintiff has pled the existence of a contract. Plaintiff alleges that on or about August 8, 2016, the parties entered into a revised Endorsement Agreement.... Bowles Aff., Ex. 1, at 8. 6 Defendant apparently do not dispute that Plaintiff properly alleged this element. D.Mem. at 19. Second, Plaintiff has pled that Plaintiff performed. For example, Plaintiff was required under the 7% Agreement to provide Defendant with thirty (30) days written notice of any photo/video shoots or public appearances at which Defendant was expected to appear. Bowles Aff., Ex. 3 at 4(B). The complaint alleges that [a]s an example of Defendants failure of duty, on or around September 29, 2016, Plaintiff s representative requested in writing that Defendant appear for a video promotion on November 1, Bowles Aff., Ex. 1 at 14. Likewise, the agreement mandates that Xlon shall supply Endorser, at no charge, such amount of Product as Endorser may reasonably require to perform her obligations under this Agreement. Bowles Aff., Ex. 3 at 6. The complaint alleges that Plaintiff, in compliance with the Agreements requirement that Plaintiff provide Product to Defendant as she may require in performance of her obligations, provided Defendant with 50 Cura Perfect Light boxes, 50 Cura Perfect Medium boxes, and 10 Cura Perfect Dark boxes.... Bowles Aff., Ex. 1 at 13. Granting Plaintiff the most favorable inferences of its allegations, as is required, these are clearly allegations that Plaintiff performed. Defendant raises only one instance in which she claims that Plaintiff did not perform, but at best that argument is hypertechnical, subject to issues of fact, and certainly cannot be resolved at the pleading stage. Defendant argues that the notice provisions of the 7% Agreement apply (Bowles Aff., Ex. 3 at 5), and that therefore any notice to Defendant to request that she make a 6 Plaintiff has, in fact, pled the existence of two agreements: the 7% Agreement, as stated, and an earlier 3% Agreement. Bowles Aff., Ex. 1 at of 21

17 promotional appearance would be honored only if made via certified mail, registered mail, or overnight service. D.Mem. at Section 5 of the 7% Agreement is a boilerplate section, and is properly applied to all legal notices (such as termination of the agreement), but not to every request by Plaintiff to Defendant that she should perform under the agreement. Weinberg testifies that this was certainly his understanding when the parties negotiated the agreement. Weinberg Aff. at In any case, the intent of the parties must be an issue of fact, and should not be resolved at this stage in the proceedings. Third, Plaintiff has clearly alleged a breach. Plaintiff s allegation is that on or around September 29, 2016, Plaintiff s representative requested in writing that Defendant appear for a video promotion on November 1, 2016, and that she failed to do so. Bowles Aff., Ex. 1 at 14; see also 38. Plaintiff further alleges that Defendant failed to [make herself available] on multiple occasions. Id. at 37. These allegations certainly suffice to satisfy the element. Finally, Defendant argues that Plaintiff has not alleged damages. D.Mem. at However, Plaintiff clearly alleges that Defendant suffered damages attributable to Defendant s breach of the 75% Agreement. Bowles Aff., Ex. 1 at 40. The damages are obvious: the entire thrust of the complaint is that Plaintiff would have been able to sell more Product had Defendant performed; her failure to perform therefore reduced Plaintiff s profits. These are damages. Granting Plaintiff the favorable inferences of the allegation, it is quite clear that this is a sufficient allegation of damages. Further, one of the owners of Xlon provides affidavit testimony clarifying this point: of course Plaintiff suffered damages due to Defendant s entire failure to comply with the agreement. Weinberg Aff. at of 21

18 d. The Good Faith and Fair Dealing Claim Should Be Allowed in the Alternative Defendant moves to dismiss the breach of good faith and fair dealing claim as duplicative of the breach of contract claim, despite the fact that she also moves to dismiss the breach of contract claim. D.Mem. at 22. Defendant is wrong on all points. Defendant argues that Xlon has premised this Cause of Action on the exact same allegations that form the basis of its failed claim for breach.... D.Mem. at 22. This is simply untrue, as can be seen by comparing the two claims. Plaintiff s claim for breach of contract is that Defendant failed to make herself available for specific photographs, speaking engagements and/or commercials when requested to do so by Plaintiff. Bowles Aff., Ex. 1 at Plaintiff s claim for breach of the duties of good faith and fair dealing is that Defendant was engaged to use her business connections to garner publicity for the Product, and that her failure to do so deprived Plaintiff of the right to receive the benefits of the contract. Id. at These are not the same allegations, and Defendant should not conflate them. The Court of Appeals holds that the implied duty of good faith and fair dealing encompasses any promises which a reasonable person in the position of the promisee would be justified in understanding were included. 511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 153 [2002]. This is Plaintiff s claim. While the duty to use Defendant s business contacts to promote the Product was not express in the Agreements, it certainly was a promise that Plaintiff was justified in expecting that Defendant would fulfill. At a minimum this is a factual issue that cannot be resolved on the pleading, and therefore the motion on this count should be denied of 21

19 e. The Unjust Enrichment Claim Should Be Allowed in the Alternative Defendant is wrong in asserting the contract bars the unjust enrichment claim. (D.Mem. at 23.) The basis for the claim is failure to return sample products, a subject not covered by the contract. Therefore, the claim should stand. Plaintiff asserts unjust enrichment based on Defendant s failure to return or account for the sample products plaintiff provided. (Bowles Aff., Ex. 1 at 12-13, 48-52). Plaintiff believes discovery will show Defendant sold the samples for her own gain. (Id. at 13, 49). All the contract says on this point is that the samples would be provided to defendant to perform her obligations under this Agreement. 7 It does not specifically address what should be done with the samples left over or upon termination. 8 An unjust enrichment claim may stand in the face of a contract where, as here, that contract does not cover the dispute at issue. Thus, in Sergeants Benev. Ass'n Annuity Fund v Renck, 19 AD3d 107 [1st Dept 2005], the court reversed dismissal of an unjust enrichment claim against investment advisers alleged to have diverted funds, because the issue was not covered by the contract with those advisors: While the existence of a valid and enforceable written contract precludes recovery on a theory of unjust enrichment (Cornhusker Farms v Hunts Point Coop. Mkt., 2 AD3d 201, 206 [2003]), the unjust enrichment claim here, based on the Rencks' alleged retention 7 The entire provision in the 7% agreement reads: 6. ENDORSED PRODUCTS FOR ENDORSER'S USE During the Term of this Agreement, Xlon shall supply Endorser, at no charge, such amounts of Product as Endorser may reasonably require to perform her obligations under this Agreement. Bowles Aff., Ex. 3 at 6. 8 Notably, plaintiffs claim for breach of contract does not include Defendant s failure to return the samples. Bowles Aff., Ex. 1 at of 21

20 Id. at 112 (emphasis added). of funds to which they were not entitled, is predicated on conduct not covered by the contract. Further, an unjust enrichment claim can stand beside a contract claim where the contract does not cover the dispute addressed by unjust enrichment. So, in Zuccarini v Ziff-Davis Media, Inc., 306 AD2d 404, 405 [2d Dept 2003], the court reversed, holding the unjust enrichment claim could exist beside a contract claim, where the contract did not cover the dispute: Id. at 405 (emphasis added). [W]here the contract does not cover the dispute in issue, a plaintiff may proceed upon a theory of quasi contract as well as contract, and will not be required to elect his or her remedies (see Old Salem Dev. Group v Town of Fishkill, 301 AD2d 639 [2003]; Sforza v Health Ins. Plan, 210 AD2d 214 [1994]). The two cases cited by defendant are inapposite, as they both involve contracts that covered the dispute at issue. In fact, the main decision Defendant cites, Goldman v Metro. Life Ins. Co., 5 NY3d 561 [2005], makes clear that the contract in question must cover the issue to bar an unjust enrichment claim Given that the disputed terms and conditions fall entirely within the insurance contract, there is no valid claim for unjust enrichment. Id. at 572 (emphasis added). Here, where the contract does not address return of samples, the unjust enrichment claim should stand of 21

21 IV. CONCLUSION For the reasons stated above, Plaintiff respectfully requests that the Court deny Defendant s motion in its entirety. In the alternative, should the Court grant any portion of Defendant s motion, Plaintiff respectfully requests the opportunity to re-plead the complaint. Dated: New York, New York April 3, 2017 Bowles Liberman & Newman LLP David K. Bowles Eric H. Newman Ajoe P. Abraham 54 W. 21 st Street, Suite 1007 New York, New York P: (212) F: (866) dbowles@blnlaw.com Attorneys for the Plaintiff By: David K. Bowles of 21