From Casetext: Smarter Legal Research

I.S. Sahni, Inc. v. Scirocco Financial Group, Inc.

United States District Court, S.D. New York
Sep 28, 2005
04 Civ. 9251 (RMB)(RLE) (S.D.N.Y. Sep. 28, 2005)

Summary

stating that "[t]here can be no covenant of good faith and fair dealing implied where there is no contract"

Summary of this case from Umeze v. Fidelis Care N.Y.

Opinion

04 Civ. 9251 (RMB)(RLE).

September 28, 2005


DECISION AND ORDER


I. Introduction

On or about February 9, 2005, I.S. Sahni, Inc. ("Sahni, Inc.") and Inderbir Sahni (a/k/a Rana Sahni) ("Sahni") (together, "Plaintiffs") filed an amended complaint ("Amended Complaint") against Scirocco Financial Group, Inc. ("Defendant") asserting defamation, libel, libel per se, intentional and/or tortious interference with business relationships, and breach of the implied covenant of good faith and fair dealing. (Amended Complaint ¶¶ 21, 24, 48, 51.) Plaintiffs contend that Defendant "commenced a campaign to impugn, smear, and harm Plaintiffs' business and personal reputation in Plaintiffs' clientele by informing Plaintiffs' clients that [Defendant] no longer did business with Plaintiffs as a result of Plaintiffs' alleged fraudulent activities." (Id. ¶ 18.)

On or about March 15, 2005, Defendant filed a motion to dismiss the Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure because (i) "documents recently produced by plaintiff demonstrate the truth of [Defendant's allegedly false and defamatory] statements"; (ii) "no such cause of action exists under New York law . . . [for] `Intentional and/or Tortious Interference with Business Relations'"; and (iii) "there is no derivative implied duty of good faith arising from the oral agreement" between the parties. (See Defendant's Memorandum of Law in Support of its Motion to Dismiss, dated March 15, 2005 ("Defendant's Motion"), at 6, 10, 15.) On or about March 29, 2005, Plaintiffs opposed the motion, arguing that (i) Defendant accused Sahni of "commit[ting] `fraudulent activities' knowing such statement to be false"; (ii) Plaintiffs "have met all four elements in pleading the cause of action for tortious interference with business relationships"; and (iii) "all contracts contain an implied agreement that neither party will engage in conduct which would interfere with the other party's right to realize the benefit of the bargain." (See Plaintiffs' Memorandum of Law in Opposition of Defendant's Motion to Dismiss, dated March 29, 2005 ("Plaintiffs' Opposition"), at 7, 13-15.) On or about April 4, 2005, Defendant filed its reply. (See Defendant's Reply Memorandum of Law in Further Support of its Motion to Dismiss, dated April 4, 2005 ("Defendant's Reply").) For the reasons stated below, Defendant's Motion to Dismiss is granted and Plaintiffs' Amended Complaint is dismissed.

Defendant also argues that "sanctions [pursuant to Rule 11 of the Federal Rules of Civil Procedure] should be awarded" because there is "documentary evidence which belies plaintiffs' allegations, which plaintiffs were aware of at the time of the filing and service of the Amended Complaint." (See Defendant's Reply at 7-8.)

II. Background

For the purposes of this motion, the allegations of the Amended Complaint are taken as true unless otherwise noted. Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998).

Plaintiff Sahni is "an independent insurance broker" in New York, "primarily engaged in the sale of insurance policies for individual and business clientele." (Amended Complaint ¶¶ 2, 3.) Defendant is a New Jersey corporation "involved in providing insurance products and financial services." (Id. ¶¶ 4, 5.) In or about September 2002, Plaintiffs and Defendant "entered into a verbal agreement, whereby, inter alia, Plaintiffs agreed to place some of their insurance business through [Defendant]" in exchange for half of "all commissions, fees, etc., realized on an account brought to [Defendant] via [Plaintiffs]" ("September 2002 Agreement"). (Id. ¶¶ 8, 10.) Plaintiffs allege that their business "is completely dependent upon Plaintiffs' reputation in the insurance industry and Plaintiffs generate their business based almost entirely through referrals from current and/or former clients." (Id. ¶ 12.)

On May 19, 2004, Deepak Khubchandani ("Khubchandani"), an insurance client of Plaintiffs', telephoned Defendant and notified Defendant that Sahni had falsified Khubchandani's name on a letter designating Defendant as Khubchandani's broker of record ("Broker of Record Letter"). (Defendant's Reply at 3.) That same day, Defendant faxed and mailed a letter to Sahni stating:

The circumstances surrounding Deepak Khubchandani have just been called to my attention. On April 15, 2004, you faxed to this office a signed Broker of Record letter. . . . I understand from Mr. Khubchandani that he, in fact, did not sign this BOR nor did he in any way authorize you to do so. . . . Falsifying a client's signature is unethical, prohibited by law and as such, not tolerated in this agency. Accordingly, we are immediately terminating your producer relationship with [Defendant].

(Letter from Cecilia Driza to Sahni, dated May 19, 2004, attached as Ex. A to Amended Complaint.) Also on May 19, 2004, Defendant wrote to the New York and New Jersey state departments of insurance ("Insurance Departments") stating that Defendant "ha[s] severed our relationship with the captioned independent producer [i.e., Sahni] after it was brought to our attention that the signature on a Broker of Record Letter provided to us by Rana Sahni was falsified and in no way authorized by the client." (Letter from Defendant to the Insurance Departments, dated May 19, 2004, attached as Exhibit B to Amended Complaint.)

On July 8, 2004, Defendant resubmitted its May 19, 2004 letter to the New York Department of Insurance. (Defendant's Reply at 4; see Letter from Defendant to New York Insurance Department, dated July 8, 2004, attached as Ex. B to Amended Complaint.)
On or about May 24, 2004, Defendant began to send letters to Plaintiffs' clients stating, in relevant part, that "[e]ffective immediately, Rana Sahni is no longer affiliated with [Defendant]. This does not, however, change our commitment to you, the client. . . . Our commitment to servicing your business remains a priority and we look forward to our continued business relationship." (Letter from Defendant to Chattar and Ranjit Sahni-Kahnpuri, dated May 24, 2004, attached as Ex. C to Amended Complaint.)

On May 20, 2004, Defendant received a letter from Khubchandani stating that "there was a misunderstanding between Rana Sahni and myself in our phone conversation. It seems that I did authorize [Sahni], after he reminded me of our conversation in April, to move the policy to [Defendant] and based on that information, he forwarded you the [Broker of Record Letter]. . . ." (Letter from Khubchandani to Defendant, dated May 20, 2004 ("May 20, 2004 Letter").) The May 20, 2004 Letter has been attached by Plaintiffs as Ex. D to the Amended Complaint to support their claim of defamation. Remarkably, as shown below, Defendant has attached to its moving papers another, lengthier and, on its face, more complete version of the May 20, 2004 Letter, which Defendant asserts was obtained during discovery ("supplemented May 20, 2004 Letter"). The supplemented May 20, 2004 Letter includes the following language which is not included in the version of the May 20, 2004 Letter attached to Plaintiffs' Amended Complaint:

I, Rana Sahni, understand that Deepak [Khubchandani] has written this letter to help me out of a serious situation with [Defendant]. Deepak actually did not authorize me to transfer the policy . . . to [Defendant]. The BOR letter was signed by me. I, Rana Sahni absolve Deepak Khubchandani from any legal issues or lawsuits that might arise regarding this matter.

(Letter from Khubchandani to Defendant, dated May 20, 2004, attached as Ex. B to Defendant's Motion to Dismiss.)

III. Legal Standard

In reviewing a motion to dismiss, the court "must accept as true the factual allegations in the complaint and draw all inferences in favor of the plaintiff." Hofmann v. Dist. Council 37, No. 99 Civ. 8636, 2002 U.S. Dist. LEXIS 8703, at *6 (S.D.N.Y. May 9, 2002). Dismissal of the claim is proper when "it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief."Abramson v. Pataki, 278 F.3d 93, 99 (2d Cir. 2002). "The issue is not whether a plaintiff is likely to prevail ultimately, but whether the claimant is entitled to offer evidence to support the claims." Dweck Law Firm, L.L.P. v. Mann, No. 02 Civ. 8481, 2003 U.S. Dist. LEXIS 19535, at *7 (S.D.N.Y. Nov. 3, 2003). "Conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss."Lewittes v. Cohen, No. 03 Civ. 189, 2004 U.S. Dist. LEXIS 9697, at *2 (S.D.N.Y. May 26, 2004).

In deciding a motion to dismiss, a court may consider the pleadings and exhibits attached thereto, statements or documents incorporated by reference in the pleadings, and matters of which judicial notice may be taken. See Henneberry v. Sumitomo Corp. of Am., No. 04 Civ. 2128, 2005 U.S. Dist. LEXIS 7475, at *12 (S.D.N.Y. Apr. 27, 2005).

IV. Analysis

Defamation and Libel Claims

Defendant argues that the May 20, 2004 Letter, in its complete form, contains "admissions [which] belie the [Plaintiffs'] claims herein and demonstrate what defendant is accused of `falsely' reporting to the Insurance Department, was in fact true. It demonstrates that Sahni forged the signature [of Khubchandani] and falsified an insurance related document." (Defendant's Memorandum at 4.) Plaintiffs "vehemently dispute this allegation" and claim that "it is obvious that Sahni in no way intended [this portion of the supplemented May 20, 2004 Letter] to be an admission at all," but rather "a Release to Mr. Khubchandani from any liability that could arise in connection with Mr. Khubchandani's initial wrongful report of forgery to Defendant." (Plaintiff's Opposition at 8.)

A defamatory statement exposes an individual "to public hatred, shame, obloquy, contumely, odium, contempt, ridicule, aversion, ostracism, degradation, or disgrace, or . . . induces an evil opinion of one in the minds of right-thinking persons, and . . . deprives one of . . . confidence and friendly intercourse in society." Celle v. Filipino Reporter Enters., 209 F.3d 163, 177 (2d Cir. 2000). Under New York law, a plaintiff must prove four elements to prevail on a defamation claim: "(1) a false and defamatory statement of fact; (2) regarding the plaintiff; (3) published to a third party by the defendant; and, (4) resulting in injury to the plaintiff." Treppel v. Biovail Corp., 2005 U.S. Dist. LEXIS 18511, at *22 (S.D.N.Y. 2005); see Weldy v. Piedmont Airlines, Inc., 985 F.2d 57, 61 (2d Cir. 1993); Dellefave v. Access Temps., Inc., 2001 U.S. Dist. LEXIS 97, No. 99 Civ. 6098, 2001 WL 25745, at *4 (S.D.N.Y. Jan. 10, 2001). A claim for libel exists where a plaintiff establishes the elements of defamation and can prove that the allegedly false statement was made in writing. See Meloff v. N.Y. Life Ins. Co., 240 F.3d 138, 145 (2d Cir. 2001).

When a written statement "tends to disparage [plaintiff] in the way of his office, profession or trade," Davis, 754 F.2d at 82, it may constitute libel per se, "in which case plaintiff's compensable injury is presumed." See Marek v. Old Navy (Apparel) Inc., 348 F. Supp. 2d 275, 281 (S.D.N.Y. 2004).

Plaintiffs do not adequately plead the elements of defamation and libel. Although Defendant's (written) statements concerned Sahni, were published to third parties, and Plaintiffs allege that they were injured, (See Amended Complaint ¶ 40 ("as a result of [Defendant's] malicious assertions, Sahni's reputation has been irreparably harmed"), Plaintiffs' allegations that Defendant's statements were false are flatly contradicted by the supplemented May 20, 2004 Letter which Defendant obtained during discovery.

Preliminarily, Defendant has properly submitted the supplemented May 20, 2004 Letter because "plaintiff should not so easily be allowed to escape the consequences of its own failure."Cortec, 949 F.2d at 47; see also I. Meyer Pincus Assocs. v. Oppenheimer Co., Inc., 936 F.2d 759, 762 (2d Cir. 1991) ("when plaintiff fails to introduce a pertinent document as part of his pleading, defendant may introduce the exhibit as part of his motion attacking the pleading") (citations omitted); Phila. Parking Auth. v. Fed. Ins. Co., No. 03 Civ. 6748, 2005 U.S. Dist. LEXIS 460, at *12 (S.D.N.Y. Jan. 14, 2005). "[I]f the allegations of a complaint are contradicted by documents made a part thereof, the document controls and the court need not accept as true the allegations of the complaint." Sazerac Co. v. Falk, 861 F. Supp. 253, 257 (S.D.N.Y. 1994) (citing Feick v. Fleener, 653 F.2d 69, 75 n. 4 (2d Cir. 1981)). The supplemented May 20, 2004 Letter is central to this motion because it is signed by Sahni and it flatly contradicts the allegations in Plaintiffs' Amended Complaint. (Compare Amended Complaint ¶¶ 24, 25, 31, 32 with supplemented May 20, 2004 Letter (Khubchandani "actually did not authorize me to transfer the policy. . . . The BOR letter was signed by me.").) (Supplemented Letter from Khubchandani to Defendant, dated May 20, 2004, attached as Ex. B to Defendant's Motion to Dismiss.) Truth is an absolute defense to a defamation claim. See Leadertex v. Morganton Dyeing Finishing Corp., 67 F.3d 20, 28 (2d Cir. 1995).

Plaintiffs' claim that this language was intended "as a Release to Mr. Khubchandani from any liability that could arise in connection with Mr. Khubchandani's initial wrongful report of forgery to Defendant" is unpersuasive, (Plaintiffs' Opposition at 8), because "there can be no reasonable doubt that Sahni did in fact falsify a client's name, without the client's authority." (Defendant's Reply at 4.)

Interference with Business Relationships Claim

Defendant argues that "no such cause of action [for tortious/intentional interference with business relationships] exists under New York law," and that, in any event, Defendant's letters to Plaintiffs' clients make "no reference to anything critical or derogatory of plaintiffs." (Defendant's Memorandum at 9.) Plaintiffs argue that Defendant "wrongfully and intentionally interfered with . . . business relationships between Plaintiffs and its clients by unfairly and improperly defaming Plaintiffs to Plaintiffs' current and/or former clients," and that "but for the wrongful interference of [Defendant] in Plaintiffs' business relationships, Plaintiffs' clients would have continued to seek insurance related services from Plaintiffs, instead of directly going to [Defendant]." (Amended Complaint ¶¶ 44, 47.) And, "[i]n contacting Plaintiffs' clients prior to making a diligent inquiry into the allegations asserted by Mr. Khubchandani, the Defendant improperly and implicitly misrepresented Plaintiffs' business as one filled with dishonest practices." (Plaintiffs' Opposition at 14.)

Under New York law, Plaintiffs must show "(1) business relations with a third party, (2) the defendant's interference with those business relations, (3) the defendant acted with the sole purpose of harming the plaintiff or used dishonest, unfair, or improper means, and (4) injury to the business relationship."Excellus Health Plan, Inc. v. Tran, 287 F. Supp. 2d 167, 177 (W.D.N.Y. 2003); see also Nadel v. Play-By-Play Toys Novelties, Inc., 208 F.3d 368, 382 (2d Cir. 2000).

While Plaintiffs allege that they engaged in business relations with third parties contacted by Defendant and that Plaintiffs' "have lost business and clients" due to Defendant's contacts, (Amended Complaint ¶¶ 44, 48), they have not adequately plead the third element, i.e., that Defendant (i) acted with the sole purpose of harming Plaintiffs or (ii) used dishonest, unfair or improper means in contacting Plaintiffs' clients. First, Plaintiffs do not adequately plead that Defendant's "sole purpose" was to harm Plaintiffs as a matter of law. "A cause of action does not lie absent an allegation that the action complained of was motivated solely by malice or to inflict injury by unlawful means rather than by self-interest or other economic considerations." Kramer v. Pollock-Pollock Found., 890 F. Supp. 250, 258 (S.D.N.Y. 1995) (dismissing claim where plaintiff did not plead that the refusal of auction houses to sell paintings without certified authenticity was not "intended to advance their own legitimate interests"); see also U.S. Fid. Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34, 82 (2d Cir. 2004) (explaining that "a defendant acting in its economic interest is liable for tortious interference only if that defendant was acting with a malicious or illegal purpose" and dismissing claim where defendant oil consortium "had an economic interest in the decision whether to pay the amounts owed" to plaintiff after defaulting on a large Brazilian naval construction project); see also Carvel Corp. v. Noonan, 3 N.Y.3d 182, 191-92 (N.Y. 2004) (explaining that tortious interference claims should be dismissed "as long as defendant is motivated by legitimate economic self-interest" and dismissing claim where franchisees complained that an ice cream maker should not be permitted to sell its products in supermarkets); NBT Bancorp v. Fleet/Norstar Fin. Group, 159 A.D.2d 902, 913-14 (N.Y.App.Div. 1990) (dismissing shareholder claim of tortious interference where a director with "a sincere belief that his fellow directors in the majority were acting for their own self-interests" brought suit to defeat merger).

Second, Plaintiffs do not allege that Defendant used on improper means when contacting third parties. Under New York law, a competitor "will not be liable so long as the `means employed are not wrongful.'" Carvel, 3 N.Y.3d at 191 (citing Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 191 (N.Y. 1980)). "`Wrongful means' include physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure; they do not, however, include persuasion alone although it is knowingly directed at interference with a contract." Guard-Life, 50 N.Y.2d at 191. "[I]f one competitor succeeds in diverting business from his competitor by virtue of superiority in matters relating to their competition, he serves the purposes for which competition is encouraged," and no cause of action for tortious interference exists. Scutti Enters. v. Park Place Entm't Corp., 322 F.3d 211, 216 (2d Cir. 2003) (citations omitted); see also Flash Elecs v. Universal Music, 312 F.Supp.2d 379, 405 (E.D.N.Y. 2004) (no evidence of wrongful means on motion to dismiss where third party could "freely choose to accept or reject [defendant's contact] as it wished."). In the instant case, Defendant "inform[ed] Plaintiffs' clients that [Defendant] no longer did business with Plaintiffs as a result of Plaintiffs' alleged fraudulent activities," (Amended Complaint ¶ 18), based upon truthful information. See Treppel, 2005 U.S. Dist. LEXIS, at **14-15 (dismissing tortious interference claim because it "rest[ed] solely upon the allegations of non-defamatory conduct"); Kirch v. Liberty Media Corp., No. 04 Civ. 667, 2004 U.S. Dist. LEXIS 19228, at *37 (S.D.N.Y. Sept. 27, 2004) (dismissing claim where, "to the extent that [Defendant's] statements caused such pressure, they did so merely as a result of their persuasive effect on third parties who, in the end, independently decided not to [enter or continue] various subsequent agreements with the [Plaintiff]."); Excellus, 287 F. Supp. 2d at 177 (dismissing claim because evidence of "[p]ersuasion alone, even though knowingly directed at interference with the business relationship, is insufficient").

Covenant of Good Faith Claim

Defendant argues that the September 2002 Agreement pursuant to which Plaintiffs agreed to place some of their insurance business through Defendant "is void and unenforceable" under the New York Statute of Frauds, N.Y. Gen. Oblig. Law § 5-701(a), because "there is no allegation that the oral agreement was to be performed, to be completed, within one year." (Defendant's Memorandum at 14.) Defendant also argues that "there can be no breach of an implied covenant of an unenforceable contract" and that "there is no breach with respect to a contract terminable at the will of either party." (Id.) Plaintiffs allege that Defendant "through its attempts to intentionally harm Plaintiffs' present and future business, breached its implied covenant of good faith and fair dealing to Plaintiffs," (Amended Complaint ¶¶ 8, 51), and that the September 2002 Agreement "did not have to be reduced to a writing." (Plaintiffs' Opposition at 17.)

"Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing" if the agreement "[b]y its terms is not to be performed within one year from the making thereof . . ." N.Y. Gen. Oblig. Law § 5-701(a)(1). "An oral agreement is enforceable under New York law and not within the Statute of Frauds if it can be construed as being capable of performance within one year of its making." Curtis v. Harry Winston, Inc., 653 F. Supp. 1504, 1510 (S.D.N.Y. 1987); see also Ohanian v. Avis Rent-a-Car Sys., Inc., 779 F.2d 101, 106 (2d Cir. 1985) ("The one-year provision has been held not to preclude an oral contract unless there is `not . . . the slightest possibility that it can be fully performed within one year.'") (citations omitted).

The September 2002 Agreement was capable of performance within one year because both parties had the right to terminate the contractual relationship at will. See Curtis, 653 F. Supp. at 1510 ("as an at-will employee, [plaintiff] could have been terminated by [defendant] at any time, including within the first year of what turned out to be an eight-year term of employment.") At the same time, Plaintiffs have not adequately pled that Defendant breached its duties of good faith and fair dealing by terminating its relationship with Plaintiffs. Because Defendant was free to terminate Plaintiffs at any time ("at will"), and for any or no reason, Defendant could not have breached duties of good faith and fair dealing by ending the relationship. See Sargent v. Columbia Forest Prods., Inc., 75 F.3d 86, 88 (2d Cir. 1995) ("[plaintiff] was an at-will employee and, therefore, could not assert a claim based on implied covenants of good faith and fair dealing"); Baron Assocs. v. RSKCO, 2005 N.Y. App. Div. LEXIS 2325 (2d Dep't 2005); Sebetay v. Sterling Drug, Inc., 69 N.Y.2d 329 (1987). And, because Defendant's statements to the Insurance Departments dated May 19, 2004 and June 8, 2004 and to Plaintiffs' clients dated May 24, 2004 occurred after any contract between the parties had ended (i.e., after Defendant terminated its relationship with Plaintiffs by letter and facsimile dated May 19, 2004), Defendant did not breach duties of good faith and fair dealing. See GR Moojestic Treats Inc. v. Maggie Moo's Int'l, No. 03 Civ. 10027, 2004 U.S. Dist. LEXIS 8806, at **22-23 (S.D.N.Y. May 19, 2004) ("there can be no covenant of good faith and fair dealing implied where there is no contract") (citations omitted); John F. Dillon Co. LLC v. Foremost Mar. Corp., No. 02 Civ. 7803, 2004 U.S. Dist. LEXIS 11383, at **18-20 (S.D.N.Y. June 21, 2004).

V. Conclusion and Order

For the reasons stated herein, Defendant's Motion [17] is granted and the Amended Complaint is dismissed. The Clerk of the Court is respectfully requested to close this case.


Summaries of

I.S. Sahni, Inc. v. Scirocco Financial Group, Inc.

United States District Court, S.D. New York
Sep 28, 2005
04 Civ. 9251 (RMB)(RLE) (S.D.N.Y. Sep. 28, 2005)

stating that "[t]here can be no covenant of good faith and fair dealing implied where there is no contract"

Summary of this case from Umeze v. Fidelis Care N.Y.
Case details for

I.S. Sahni, Inc. v. Scirocco Financial Group, Inc.

Case Details

Full title:I.S. SAHNI, INC. and INDERBIR S. SAHNI, a/k/a Rana Sahni, Plaintiffs, v…

Court:United States District Court, S.D. New York

Date published: Sep 28, 2005

Citations

04 Civ. 9251 (RMB)(RLE) (S.D.N.Y. Sep. 28, 2005)

Citing Cases

Wellington Shields & Co. v. Breakwater Inv. Mgmt. LLC

Thus, "[a] cause of action does not lie absent an allegation that the action complained of was motivated…

Umeze v. Fidelis Care N.Y.

As such, there was no Agreement in existence in 2003. See I.S. Sahni. Inc. v. Scirocco Fin. Group, Inc., 2005…