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concluding that contract language stating that "all matters relating to this Agreement . . . shall be governed by . . . the laws of the State of New York . . . is broad enough to encompass plaintiff's claim that defendant negligently performed the services it was supposed to provide ...."
Summary of this case from ETC Ne. Pipeline, LLC v. Associated Elec. & Gas Ins. Servs.Opinion
11948 Index No. 653146/19 Case No. 2019-04851
10-06-2020
AVNET, INC., Plaintiff–Appellant, v. DELOITTE CONSULTING LLP, Defendant–Respondent.
Kasowitz Benson Torres LLP, New York (Mark P. Ressler of counsel) for appellant. Kirkland & Ellis LLP, New York (Matthew Solum of counsel), for respondent.
Kasowitz Benson Torres LLP, New York (Mark P. Ressler of counsel) for appellant.
Kirkland & Ellis LLP, New York (Matthew Solum of counsel), for respondent.
Friedman, J.P., Webber, Kern, Moulton, JJ.
Order, Supreme Court, New York County (Jennifer G. Schechter, J.), entered October 11, 2019, which, to the extent appealed from as limited by the briefs, granted defendant's motion to dismiss the first through fifth, seventh through ninth, and eleventh causes of action pursuant to CPLR 3211, unanimously modified, on the law, to deny the motion as to the seventh cause of action (post-August 1, 2016 fraud) and so much of the ninth cause of action as alleges fraudulent inducement of Work Order No. 3 and Project Change Request EMA–003–01, and otherwise affirmed, without costs.
The court correctly dismissed the first through fifth causes of action (pre-August 2, 2016 claims) based on the release. It also properly dismissed so much of the ninth cause of action as alleges fraudulent inducement of the release. "[A] party that releases a fraud claim may later challenge that release as fraudulently induced only if it can identify a separate fraud from the subject of the release" ( Centro Empresarial Cempresa S.A. v. América Móvil, S.A.B. de C.V., 17 N.Y.3d 269, 276, 929 N.Y.S.2d 3, 952 N.E.2d 995 [2011] ).
As the motion court found, plaintiff's contention that it did not release a fraud claim is baseless. Plaintiff released defendant from "any and all claims ..., whether known or unknown, that are based upon, relate directly or indirectly to, or arise from or in connection with Project Evolve [a software system designed by defendant] ... from the beginning of time through" August 1, 2016, excepting only claims for breach of the Settlement Agreement. This language is broad enough to encompass a claim that defendant fraudulently induced plaintiff to enter into the work orders for Project Evolve (see Kafa Invs., LLC v. 2170–2178 Broadway LLC, 114 A.D.3d 433, 979 N.Y.S.2d 529 [1st Dept. 2014], lv denied 24 N.Y.3d 902, 2014 WL 4454910 [2014] ).
Contrary to plaintiff's claim, the scope of a release is not always an issue of fact. For example, in Centro, the Court of Appeals affirmed our CPLR 3211 dismissal of claims – including a fraud claim – due to a release (see 17 N.Y.3d at 274–277, 929 N.Y.S.2d 3, 952 N.E.2d 995 ).
Plaintiff did not allege a separate fraud from the subject of the release (see Centro Empresarial Cempresa S.A. v. América Móvil, S.A.B. de C.V., 76 A.D.3d 310, 318, 901 N.Y.S.2d 618 [1st Dept. 2010], affd 17 N.Y.3d 269, 929 N.Y.S.2d 3, 952 N.E.2d 995 [2011] ).
Even if plaintiff had alleged a separate fraud, its claim that it was fraudulently induced to sign the release would still fail for lack of justifiable reliance (see e.g. Centro, 17 N.Y.3d at 278, 929 N.Y.S.2d 3, 952 N.E.2d 995 ). The Settlement Agreement does not merely contain a general merger clause ("This Agreement constitutes the entire understanding of the Parties ... with respect to the subject matter hereof"); it also says, "The Parties represent ... that in executing this Agreement they did not rely ... upon any representation or statement, whether oral or written, made by the other Party ... with regard to the subject matter, basis or effect of this Agreement or otherwise." The latter sentence forecloses plaintiff's reliance on defendant's oral statements (see e.g. WT Holdings Inc. v. Argonaut Group, Inc., 127 A.D.3d 544, 5 N.Y.S.3d 731 [1st Dept. 2015] ; Plaza PH2001, LLC v. Plaza Residential Owners LP, 79 A.D.3d 587, 914 N.Y.S.2d 26 [1st Dept. 2010] ).
Plaintiff's post-August 1, 2016 claims are, of course, not barred by the release. Its post-release fraud claims are not duplicative of its post-release contract claim (see e.g. Wyle Inc. v. ITT Corp., 130 A.D.3d 438, 13 N.Y.S.3d 375 [1st Dept. 2015] ). The essence of the contract claim is that defendant failed to fix Evolve. The essence of the fraud claims is that defendant misrepresented that Evolve was fundamentally sound; if plaintiff had known that Evolve was unfixable, it would have fired defendant sooner and would not have entered into Work Order No. 3 and Project Change Request EMA–003–01.
The Master Service Agreement (MSA) that governs the work orders limits plaintiff's damages to the fees it has paid defendant, unless defendant acted in bad faith or committed intentional misconduct. Because this limitation might be upheld, one cannot say, "as a matter of law, that the damages sought in connection with the fraud claim are the same as those sought in connection with the contract claims" ( Ambac Assur. Corp. v. Countrywide Home Loans Inc., 179 A.D.3d 518, 519, 118 N.Y.S.3d 13 [1st Dept. 2020] ).
Plaintiff pled its fraud claims with sufficient particularity (see e.g. Pludeman v. Northern Leasing Sys., Inc., 10 N.Y.3d 486, 491, 860 N.Y.S.2d 422, 890 N.E.2d 184 [2008] ).
Defendant contends that plaintiff cannot establish the reliance necessary for its fraud claims because it failed to conduct an investigation. However, "the question of what constitutes reasonable reliance is not generally a question to be resolved as a matter of law on a motion to dismiss" ( ACA Fin. Guar. Corp. v. Goldman, Sachs & Co., 25 N.Y.3d 1043, 1045, 10 N.Y.S.3d 486, 32 N.E.3d 921 [2015] ). The constructive fraud claim was correctly dismissed because the MSA expressly disclaims any fiduciary relationship between the parties, each of which is a sophisticated corporate entity. The existence of a fiduciary or confidential relationship is also negated by the fact that, by the time the constructive fraud claim allegedly arose, the parties had assumed an adversarial posture toward each other, making it necessary for them to enter into a settlement agreement to continue their business relationship (see Aoki v. Aoki, 27 N.Y.3d 32, 39–40, 29 N.Y.S.3d 864, 49 N.E.3d 1156 [2016] ; INTL FCStone Mkts., LLC v. Corrib Oil Co., 172 A.D.3d 492, 101 N.Y.S.3d 18 [1st Dept. 2019] ; AQ Asset Mgmt. LLC v. Levine, 154 A.D.3d 430, 431, 62 N.Y.S.3d 321 [1st Dept. 2017] ).
The court properly dismissed the eleventh cause of action, for professional negligence under Arizona law. The MSA says, "This Agreement and each Work Order, and all matters relating to this Agreement and each Work Order, shall be governed by ... the laws of the State of New York (without giving effect to the choice of law principles thereof)" (emphasis added). The italicized language is broad enough to encompass plaintiff's claim that defendant negligently performed the services it was supposed to provide under the work orders (see e.g. Capital Z Fin. Servs. Fund II, L.P. v. Health Net, Inc., 43 A.D.3d 100, 109, 840 N.Y.S.2d 16 [1st Dept. 2007] [citing Turtur v. Rothschild Registry Intl., Inc., 26 F.3d 304 [2d Cir.1994] ).