Kyle Connaughton, Appellant,v.Chipotle Mexican Grill, Inc., et al., Respondents.

Brief

N.Y.March 21, 2017

ORIGINAL To Be Argued By: DANIEL J. KAISER Time Requested: 30 Minutes New York County Clerk's Index No. 115106/2013 STATE OF NEW YORK APL-2016-00036 KYLE CON).IAUGHTON, Plaint~[(-Appellant, -against- CHIPOTLE MEXlCAN GRILL, INC. and STEVEN ELLS, Defendants-Respondenls. REPLY BRIEF FOR PLAINTIFF-APPELLANT Of Counsel: Daniel J. Kaiser Henry L. Saurbom, Jr. May 25,2016 KAISER SAURBORN & MAJR, P.C. 111 Broadway, Suite 1805 New York, New York 10006 Telephone: (212) 338-9100 facsimile: (212) 338-9088 Attorneys for Plaintiff-Appellant TABLE OF CONTENTS Table of Authorities ................................................. ii PRELIMINARY STATEMENT ....................................... 1 ARGUMENT ...................................................... 2 POINT I DAMAGES SUSTAINED AS A CONSEQUENCE OF LOST BUSINESS OPPORTUNITY AND DAMAGE TO PROFESSIONAL REPUTATION ARE RECOVERABLE UNDER CLAIM FOR FRAUDULENT INDUCEMENT ................................. 2 POINT II NOMINAL DAMAGES ARE SUFFICIENT TO SUSTAIN A CLAIM FOR FRAUDULENT INDUCEMENT ..................... 3 POINT III DEFENDANTS' ARGUMENT THAT MR. CONNAUGHTON'S AT-WILL EMPLOYMENT STATUS PRECLUDES HIS FRAUDULENTINDUCEMENTCLAIMISCONTRARYTO CASE LAW AND COMMON SENSE ............................ 4 CONCLUSION .................................................... 6 TABLE OF AUTHORITIES Cases ACA Financial Guaranty Corp. v. Goldman Sachs & Co., 25 N.Y.3d 1043 (2015) .............................................. 5 Kwon v. Yun, 606 F.Supp.2d 344 (S.D.N.Y. 2009) ........................ 2 Luduzinski v. Alvarez & Marshall Taxland LLC, 132 A.D.3d 164 (1st Dep't 2015) ..................................... 4, 5 Smalley v. Dreyfus Corp., 10 N.Y.3d 55 (2008) ........................... 5 Stevenson Equipment, Inc. v. Chening Constr. Corp., 79 N.Y.2d 989 (1992) ............................................... 5 Stewart v. Jackson & Nash, 976 F.2d 86 (2nd Cir. 1992) .................... 2 Statutes New York CPLR §3013 ........................................... 1, 3 New York CPLR §3026 ........................................... 1, 3 11 PRELIMINARY STATEMENT Defendant-Respondents' opposition is premised upon their argument that Mr. Connaughton cannot prove his damages, but in doing so they fail to distinguish analytically between alleging and proving damages. Their argument is premature, however, because Mr. Connaughton easily satisfies the liberal notice pleading requirements ofCPLR §§3013 and 3026, and need not, at the pre-answer stage of the action, prove anything. Further, Defendants' argument that reputation damages and lost business opportunity are not recoverable as categories of damage in a fraud claim is contrary to the case law and counter-intuitive. Because Mr. Connaughton relied on defendants' fraudulent concealment, he missed out on pursuing alternative business opportunities and also suffered injury to his professional reputation. There is nothing about the elements of a fraud claim that would prevent Mr. Connaughton from recovering damages for such conduct if one day he is able to prove he sustained injuries as a result of defendants' actions. Defendants' argument that a fraudulent inducement claim may not exist in the employment at will context is also unavailing. Mr. Connaughton does not seek damages because he lost his. employment. As long as the damages he seeks do not flow from the termination of that employment - but rather are suffered because of 1 his reliance on defendants' withholding of information -then the claim for fraudulent inducement is actionable, even if the employment is at will. In sum, Mr. Connaughton's complaint adequately pleaded claim for fraudulent inducement. He should be permitted the chance to obtain discovery from the defendants and to prove the damages he suffered as a consequence of defendants alleged fraud. ARGUMENT POINT I DAMAGES SUSTAINED AS A CONSEQUENCE OF LOST BUSINESS OPPORTUNITY AND DAMAGE TO PROFESSIONAL REPUTATION ARE RECOVERABLE UNDER CLAIM FOR FRAUDULENT INDUCEMENT Because Mr. Connaughton contends that the defendants' fraud caused him to lose alternative job opportunities and damaged his professional reputation, he has adequately alleged that he suffered damages resulting directly from the fraud. Stewart v. Jackson & Nash, 976 F.2d 86 (2nd Cir. 1992) (at-will employee may recover damages for loss of professional opportunity and reputation when asserting a fraudulent inducement claim); Kwon v. Yun, 606 F.Supp.2d 344 (S.D.N.Y. 2009) (a fraudulent inducement claim permits recovery for loss of 2 professional reputation). Defendants confuse loss of reputation and business opportunity that takes the form of expectation damages with such damages when they assume the form of reliance damages. The complaint plainly alleges that when Mr. Connaughton relied on defendants' fraud, it resulted in his foregoing alternative business opportunities that would otherwise have been available to him and by pushing forward with defendants, he also incurred injury to his professional reputation. His alleged damages are not expectation damages, but rather the loss he suffered because of his reasonable reliance on defendants' fraud. The notice pleading rules require nothing more. CPLR §§3013, 2026. He is absolutely entitled to an opportunity to obtain evidence of and prove these damages. POINT II NOMINAL DAMAGES ARE SUFFICIENT TO SUSTAIN A CLAIM FOR FRAUDULENT INDUCEMENT As the dissent in the Appellate Division rightly noted, that because an important technical right is at stake, an award of nominal damages to Mr. Connaughton is appropriate. [ CA -164-165] Here, the defendants' purposeful concealment of critical information from 3 Mr. Connaughton caused him to provide his specialized talents to defendant Chipotle, when circumstances from the very beginning rendered it impossible to actually implement his ramen noodle concept, is a type of fraud that society as a whole has an interest in preventing. Certainly, allowing the prospect of recovering at least nominal damages by the victim sends the important message that fraud of this kind is not tolerable in New York. Hence, Mr. Connaughton's lawsuit vindicates an important technical right to be free of this fraud. Moreover, where the basis of the court's dismissal is a pre-answer and pre- discovery finding that Mr. Connaughton's damages are speculative, such a determination is inconsistent with applicable the pleading requirements and cannot be allowed to stand unchallenged. POINT III DEFENDANTS' ARGUMENT THAT MR. CONNAUGHTON'S AT-WILL EMPLOYMENT STATUSPRECLUDESHISFRAUDULENT INDUCEMENT CLAIM IS CONTRARY TO CASE LAW AND COMMON SENSE Because Mr. Connaughton pleads injuries separate and apart from any damages he incurred flowing from his termination, he alleges a cognizable fraudulent inducement claim. Luduzinski v. Alvarez & Marshall Taxland LLC, 132 4 A.D.3d 164 (1st Dep't 2015); See, Smalley v. Dreyfus Corp., 10 N.Y.3d 55 (2008); [CA-162-163]. Defendants argue that where no fiduciary relationship existed between Mr. Connaughton and them, there is no legal basis on which to plead a fraudulent concealment claim. Defendants, however, ignore an alternative and well- established legal basis for asserting a such a fraud claim- superior knowledge. ACA Financial Guaranty Corp. v. Goldman Sachs & Co., 25 N.Y.3d 1043 (2015); Stevenson Equipment, Inc. v. Chening Constr. Corp., 79 N.Y.2d 989 (1992). The dissent in the Appellate Division recognized that where defendants clearly possess superior knowledge of the existence of a non-disclosed agreement, a sufficient basis for alleging fraudulent concealment was pled. [CA-161-162]. That reasoning is sound, is consistent with the applicable case law, and this Court should confirm that it supports Mr. Connaughton's right to pursue a claim under the facts alleged. 5 CONCLUSION It is respectfully submitted that, for the reasons set forth above, the order of the Appellate Division, First Department, entered January 19, 2016, should be reversed, the second cause of action for fraudulent inducement should be reinstated, and the action should be remanded to the Supreme Court for discovery and trial. Dated: New York, New York May 26,2016 Of counsel: Daniel J. Kaiser, Esq. Henry L. Saurbom, Esq. KAISER SAURBORN & MAIR, P.C. aniel J. Kaiser A Member of the Firm 111 Broadway, Suite 1805 New York, New York 10006 Telephone: (212) 338-9100 Facsimile: (212) 338-9088 Attorneys for Plaintiff-Appellant 6 AFFIDAVIT OF SERVICE Sharon Bruck, being duly sworn, deposes and says, that she is not a party to the within action, is over 18 years of age and resides in New York State. That on the 25th day of May 2016, affiant served three copies ofthe within REPLY BRIEF FOR PLAINTIFF-APPELLANT upon counsel for defendants-respondents by mailing true copies of the same to their offices via FedEx, in a sealed envelope with postage prepaid thereon, address to: MESSNER REEVES LLP 733 Third Avenue New York, New York 10017-5639 MORVILLO ABRAMOWITZ GRAND IASON & ANELLI P.C. 565 Fifth A venue New York, New York 10017 Sworn to before me this 25th Day ofMay 2016 ~h NOTARYPUBLIC ' HENRY L. SAURBORN JR. Notary Public, State of New York No. 31-4983532 Qualified in New York County Commission Expires July 1, 20 "4 lY~~&__ Sharon Brjlck