VALERIE CAPRONI, District Judge.
Plaintiffs Anthony Choquette and Stephanie Pedroza are independent distributors for Motor Information Systems ("Motor"), which is an operating division of Defendant Hearst Business Publishing, Inc. that publishes manuals regarding vehicle service and repairs.
Motor sells vehicle service and repair manuals. It does so both through direct sales and through independent distributors. Def. 56.1 Stmt. ¶¶ 1-4. Anthony Choquette and Stephanie Pedroza are independent distributors, each in the business of selling such manuals in or around Massachusetts and Utah, respectively. Id. ¶¶ 5-8. Choquette's and Pedroza's "Independent Sales Distribution Agreements" ("Agreements")
Several provisions in the Agreements are relevant to Plaintiffs' claims. Each Plaintiff is authorized to sell Products to certain types of customers, designated as "Qualified Customers," within a limited geographic territory that is defined in each of the Agreements.
At the time Pedroza signed her Agreement in 2007, Motor and Alldata, which developed and sold the MAS product to Motor, were parties to a contract that allowed Motor to sell MAS through 2016. Id. ¶¶ 85-86. In December 2013, Motor and Alldata mutually agreed to end their relationship. Id. ¶ 87. On December 18, 2013, Motor notified Plaintiffs, as well as other independent distributors, that they must stop selling MAS. Id. ¶ 88. Since then, Plaintiffs have not sold MAS. Id. ¶ 93. In an attempt to encourage distributors to continue working with Motor, Motor offered to pay its independent distributors, including Plaintiffs, a lump sum to offset the loss of MAS. Id. ¶ 89. Plaintiffs rejected the offer and attempted to renegotiate their Agreements. Id. ¶¶ 90-91. When those negotiations were unsuccessful, Plaintiffs filed this Complaint in the United States District Court for the District of Massachusetts. Dkt. 1. Upon Defendant's motion to transfer for improper venue, the case was transferred to the Southern District of New York on November 24, 2015. Dkt. 21.
Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial." Scott v. Harris, 550 U.S. 372, 380 (2007) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)) (internal quotation marks omitted). Courts "construe the facts in the light most favorable to the non-moving party and resolve all ambiguities and draw all reasonable inferences against the movant." Delaney v. Bank of Am. Corp., 766 F.3d 163, 167 (2d Cir. 2014) (per curiam) (quoting Aulicino v. N.Y.C. Dep't of Homeless Servs., 580 F.3d 73, 79-80 (2d Cir. 2009)) (alteration omitted).
The nonmoving party, however, "must do more than simply show that there is some metaphysical doubt as to the material facts," and "may not rely on conclusory allegations or unsubstantiated speculation." Jeffreys v. City of New York, 426 F.3d 549, 554 (2d Cir. 2005) (citations and internal quotation marks omitted). Rather, the nonmoving party must come forward with "specific facts showing that there is a genuine issue for trial." Sista v. CDC Ixis North America, Inc., 445 F.3d 161, 169 (2d Cir. 2006) (citation omitted). "The plain language of Rule 56(c) mandates the entry of summary judgment . . . against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322.
To prove breach of contract under New York law, a plaintiff must prove "(1) a contract; (2) performance of the contract by one party; (3) breach by the other party; and (4) damages." Terwilliger v. Terwilliger, 206 F.3d 240, 245-46 (2d Cir. 2000). Plaintiffs bear the burden of proof as to all elements of a breach of contract claim. See Barton Grp., Inc. v. NCR Corp., 796 F.Supp.2d 473, 498 (S.D.N.Y. 2011), aff'd, 476 F. App'x 275 (2d Cir. 2012) ("Under the applicable New York law, a `party asserting a breach of contract claim has the burden of proving the material allegations in the complaint by a fair preponderance of the evidence.'" (quoting Raymond v. Marks, 116 F.3d 466, 466 (2d Cir. 1997))). New York law requires that unambiguous contractual terms be given their plain meaning. See, e.g., LaSalle Bank Nat'l Ass'n v. Nomura Asset Capital Corp., 424 F.3d 195, 206 (2d Cir. 2005); see also CIBC World Markets Corp. v. TechTrader, Inc., 183 F.Supp.2d 605, 610-11 (S.D.N.Y. 2001) ("[W]hen parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms." (quoting W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 157 (1990))).
Plaintiffs appear to allege that Motor has breached their Agreements in three ways. First, Plaintiffs allege that Motor "arbitrarily erod[ed] [Plaintiffs'] sales territories and accounts by interfering with their customers in an attempt to lure them as a company account. . . ." Compl. ¶ 13. The Agreements, however, allow Motor to "change the Territory from time to time. . . ." provided that such "[c]hanges . . . will not be arbitrary. . . ." Agreements § 3. "Territory," given its plain meaning and viewed in light of each Agreement as a whole, refers exclusively to the geographical area in which each Plaintiff can distribute Products (rather than to whom or the quantity of Products Plaintiffs can sell).
Second, Plaintiffs allege that Motor refused to "pay [Plaintiffs] direct or residual commissions" for their sales of Motor products. Compl. ¶ 14. The Agreements provide for commissions only with reference to MAS. Agreements §6(e) ("Distributor shall be entitled to the then current renewal commission for renewals of MAS sold by the Distributor while this Agreement is in effect."). Plaintiffs have nowhere alleged that they are owed commissions for sales that were made before Alldata discontinued Motor's right to sell MAS. Rather, it appears that Plaintiffs are suing for the prospective commissions that they would have earned if Alldata had not terminated its agreement with Motor as to MAS.
Finally, Plaintiffs allege that "Motor has wrongfully debited money from certain accounts developed and funded by each of their independent sales performance under the Distributor Agreement." Compl. ¶ 15. Because the Complaint does not identify what provision of the Agreements Motor has allegedly breached by wrongfully debiting money from certain accounts—nor can the Court identify a relevant provision—this allegation fails.
For these reasons, summary judgment is granted as to Plaintiffs' breach of contract claim.
Plaintiffs allege that Motor fraudulently induced them to enter into their contracts by making certain misrepresentations that "a reasonably prudent person would rely upon . . . in deciding whether to contract with the company." Compl. ¶ 22. Under New York law, to state a claim for fraud in the inducement, "a plaintiff must demonstrate: (1) a misrepresentation or omission of material fact; (2) which the defendant knew to be false; (3) which the defendant made with the intention of inducing reliance; (4) upon which the plaintiff reasonably relied; and (5) which caused injury to the plaintiff." Podlin v. Ghermezian, No. 13-CV-4117 (WHP), 2014 WL 2601416, at *7 (S.D.N.Y. May 28, 2014) (citing Wynn v. AC Rochester, 273 F.3d 153, 156 (2d Cir. 2001)), aff'd, 601 F. App'x 31 (2d Cir. 2015).
"Under New York law, a cause of action sounding in fraud cannot be maintained when the only fraud charged relates to a breach of contract." Ellington Credit Fund, Ltd. v. Select Portfolio Servicing, Inc., 837 F.Supp.2d 162, 197 (S.D.N.Y. 2011) (citations omitted). In certain circumstances, though, a fraud claim may arise out of the same set of facts as a breach of contract claim. "Under New York law . . . [b]oth claims will lie when a plaintiff can show either a legal duty distinct from the duty to perform under the contract, a fraudulent misrepresentation collateral or extraneous to the contract, or special damages caused by the misrepresentation that are unrecoverable as contract damages." Vorcom Internet Servs., Inc. v. L & H Eng'g & Design LLC, No. 12-CV-2049 (VB), 2013 WL 335717, at *4 (S.D.N.Y. Jan. 9, 2013) (citing Bridgestone/Firestone v. Recovery Credit Servs., 98 F.3d 13, 20 (2d Cir. 1996)). None of those exceptions applies here.
In assessing whether an alleged misrepresentation is collateral to a contract, New York courts examine "whether the alleged misrepresentation was warrantied or not mentioned by the contract; whether it was the misstatement of a present fact which induced entry into the contract; whether it constituted the failure to perform a duty specified in the contract; and whether it is generally duplicative of the breach of contract claim." Great Earth Int'l Franchising Corp. v. Milks Dev., 311 F.Supp.2d 419, 428 (S.D.N.Y. 2004). Pedroza pointed in her deposition to statements made by a former Motor employee that she would be paid for MAS renewals through 2016. Pedroza Tr. 34:25-36:8. The Court cannot consider these statements, which are not mentioned in the Complaint. See, e.g., Maxim Grp., LLC v. Life Partners Holdings, Inc., 690 F.Supp.2d 293, 308 (S.D.N.Y. 2010) (holding that the Court should disregard a revised theory of fraudulent inducement "because a party cannot amend its pleading through an opposition brief."). Even if the Court could consider these statements, they cannot serve as the basis for a fraud in the inducement claim because Pedroza has not demonstrated that they were "false `representation[s] of present fact.'" Stewart v. Jackson & Nash, 976 F.2d 86, 89 (2d Cir. 1992) (quoting Deerfield Commc'ns Corp. v. Chesebrough-Pond's, Inc., 502 N.E.2d 1003, 1004 (N.Y. 1986). Pedroza stated she was told that she would either be paid for all MAS renewals through 2016 or that Alldata would "buy that block of business back plus two years," if the contract between Motor and Alldata was terminated See Pedroza Tr. 34:25-36:8.
Finally, there is nothing in the record indicating that Motor owed a separate legal duty to Plaintiffs or that Plaintiffs are seeking the sort of "special damages" unrecoverable in contract. "Parties to a commercial contract do not ordinarily bear a fiduciary relationship to one another unless they specifically so agree." Maxim Grp., 690 F. Supp. 2d at 307 (citation omitted); see also Ne. Gen. Corp. v. Wellington Advert., Inc., 624 N.E.2d 129, 131 (N.Y. 1993) ("If the [contracting] parties . . . do not create their own relationship of higher trust, courts should not ordinarily . . . fashion the stricter duty for them."). Indeed, the parties here specifically disclaimed any special relationship. Agreements § 5 ("[T]he sole relationship between the parties is the sale of Products by Motor to Distributor and by Distributor to Qualified Customers for and on behalf of Motor and [] no other relationship exists."). As for damages, Plaintiffs seek the profits from their distribution relationships with Motor that they claim they were promised. Such damages alone cannot sustain a fraud claim. See Ostano Commerzanstalt v. Telewide Sys., Inc., 794 F.2d 763, 766 (2d Cir. 1986) ("[T]he law of New York is plain that out-of-pocket rather than benefit-of-the-bargain damages are awarded for fraud so that all elements of profit are excluded.") (citation and internal quotation marks omitted).
For these reasons, summary judgment is granted as to Plaintiffs' fraud in the inducement claim.
"To state a claim for tortious interference with business relations, a plaintiff must adequately allege that: `(1) the plaintiff had business relations with a third party; (2) the defendant interfered with those business relations; (3) the defendant acted for a wrongful purpose or used dishonest, unfair, or improper means; and (4) the defendant's acts injured the relationship.'" Glob. Packaging Servs., LLC v. Glob. Printing & Packaging, No. 15-CV-7747 (NSR), 2017 WL 1232731, at *4 (S.D.N.Y. Mar. 31, 2017) (quoting Valley Lane Indus., Co. v. Victoria's Secret Direct Brand Mgmt., L.L.C., 455 F. App'x 102, 105 (2d Cir. 2012) (summary order)).
Plaintiffs argue that Motor acted "for a wrongful purpose" or used "improper means" because it "withheld" MAS commissions "in an effort to coerce and manipulate them into executing a new distributor agreement. . . ." Pls. Opp. at 7. These alleged actions, however, cannot serve as the basis for a tortious interference claim because Plaintiffs have not alleged that Motor interfered with Plaintiffs' business relationship with a third party; they have alleged only that Motor was coercive in its business relationship vis-à-vis Plaintiffs. Carvel Corp. v. Noonan, 818 N.E.2d 1100, 1104 (N.Y. 2004) ("[Tortious interference is] by definition, conduct directed not at the plaintiff itself, but at the party with which the plaintiff has or seeks to have a relationship.").
To the extent Plaintiffs intend to allege that Motor has interfered with Plaintiffs' business relations with third parties because Motor has allegedly interfered with Plaintiffs' customers, Plaintiffs' tortious interference claim still fails. As a general rule, tortious interference claims that are duplicative of contract claims are precluded. See, e.g., Uitz v. Lustigman Firm, P.C., No. 13-CV-6040 (RMB), 2014 WL 3767056, at *2 (S.D.N.Y. July 28, 2014) ("[A] simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated." (quoting Clark-Fitzpatrick, Inc. v. Long Island R.R. Co., 516 N.E.2d 190, 193 (N.Y. 1987)). As Defendant correctly notes, these claims are duplicative of Plaintiffs' contract claims because they just reassert that Motor interfered with Plaintiffs' customers by soliciting their business. Plaintiffs do not claim that Defendant breached a duty that "spring[s] from circumstances extraneous to and not constituting elements of, the [parties'] contract." Clark-Fitzpatrick, 516 N.E.2d at 194; see also Uitz, 2014 WL 3767056, at *3 (dismissing tortious interference claim that relied on same facts as contract claim, where plaintiff did not identify any independent duty).
In addition, Plaintiffs have not raised a genuine issue of material fact as to whether Motor has "acted for a wrongful purpose or used dishonest, unfair, or improper means. . . ." 16 Casa Duse, LLC v. Merkin, 791 F.3d 247, 261 (2d Cir. 2015) (citation omitted). To satisfy this element of a tortious interference claim, "a defendant's conduct must amount to a crime or an independent tort." Friedman v. Coldwater Creek, Inc., 321 F. App'x 58, 60 (2d Cir. 2009) (quoting Carvel, 818 N.E.2d at 1103). When, in contrast, "a defendant has acted with a permissible purpose, such as normal economic self-interest," wrongful means cannot be shown, "even if the defendant was indifferent to the plaintiff's fate." 16 Casa Duse, 791 F.3d at 262 (citations and internal quotation marks omitted). As discussed above, Plaintiffs have presented no evidence to show that Motor has withheld commissions for past sales. Even if Motor had done so, that would not amount to an independent tort but would be merely a breach of contract; Plaintiffs are only entitled to commissions because of the parties' contractual relationship.
While occasionally economic pressure brought by a party to a contract can constitute a tort, Carvel, 818 N.E.2d at 1105, in order to qualify the pressure must be "extreme" to the point of being "wrongful." In this case, Motor offered Plaintiffs a lump sum payment to acknowledge the sudden discontinuance of MAS and to encourage Plaintiffs to continue as independent distributors. There is nothing about such an offer that is either extreme or wrongful. Id.
The Court therefore grants summary judgment as to Plaintiffs' tortious interference claim.
For the foregoing reasons, Defendants' Motion for Summary Judgment is GRANTED. The Clerk of the Court is respectfully directed to terminate docket entry 58 and to close the case.
The Complaint also alleged "Negligent Interference with Advantageous Business Representation" and "Intentional Infliction of Emotional Distress," Plaintiffs' third and fifth counts. Because New York law does not recognize negligent interference with contract as a tort, PAB Aviation, Inc. v. United States, 169 F. App'x 61, 63 n.2 (2d Cir. 2006), Plaintiffs' third count is dismissed. Plaintiffs also abandoned the intentional infliction of emotional distress claim on the record at a pretrial conference. See Bishop Decl. Ex. N, Tr. 5:7-15 (Dkt. 61-14) ("[IIED] was a count in the complaint that your Honor surmised correctly at the first conference would go by the wayside."). Accordingly, Plaintiffs' fifth count is dismissed.
