Tropical Sails Corp. v. Yext, Inc.
Filing
24
OPINION & ORDER re: 12 MOTION to Dismiss the Class Action Complaint and Jury Demand Pursuant to Fed. R. Civ. P. 12(b)(6) and 9(b) filed by Yext, Inc.: For the foregoing reasons, counts three and four of the complaint-deceptive ac ts or practices and false advertising in violation of New York General Business Law sections 349 and 350- are dismissed. The remaining portions of Defendant's motion to dismiss are denied as set forth above. Counsel are directed to appear in Courtroom 20-C on May 28, 2015 at 11:30 a.m. for a conference to discuss certification of Plaintiff's putative class action. (Signed by Judge John F. Keenan on 5/18/2015) (tn)
Case 1:09-md-02013-PAC Document 57
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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TROPICAL SAILS CORP.,
:
UNITED STATES DISTRICT COURT
:
SOUTHERN DISTRICTPlaintiff,
OF NEW YORK
:
-----------------------------------------------------------x
:
In- againstMAE 2008 SECURITIES
re FANNIE : :
LITIGATION
::
YEXT, INC.,
::
::
-----------------------------------------------------------x
Defendant.
:
Filed 09/30/10 Page 1 of 45
USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: May 18, 2015
No. 14 Civ. 7582 (JFK)
08 Civ. 7831 (PAC)
09OPINION (PAC)
MD 2013 & ORDER
OPINION & ORDER
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APPEARANCES
HONORABLE PAUL A. CROTTY, United States District Judge:
FOR PLAINTIFF TROPICAL SAILS CORP.:
Allen Carney, Esq.
BACKGROUND1
CARNEY BATES & PULLMAN, PLLC
Thomas early Mullaney, Esq.
The M. years of this decade saw a boom in home financing which was fueled, among
FOR other things, by YEXT, INC.: and lax credit conditions. New lending instruments, such as
DEFENDANT low interest rates
Gavin J. Rooney, Esq.
Jewel Watson, Esq.
subprime mortgages (high credit risk loans) and Alt-A mortgages (low-documentation loans)
LOWENSTEIN SANDLER LLP
kept the boom going. Borrowers played a role too; they took on unmanageable risks on the
JOHN F. KEENAN, United States District Judge:
assumption that the market would continue to rise and that refinancing options would always be
Before the Court is Defendant Yext, Inc.’s motion to
available in the future. Lending discipline was lacking in the system. Mortgage originators did
dismiss Plaintiff’s putative class action complaint under Rule
not hold these high-risk mortgage loans. Rather than carry the rising risk on their books, the
12(b)(6) of the Federal Rules of Civil Procedure. Defendant’s
originators sold their loans into the secondary mortgage market, often as securitized packages
motion seeks dismissal on the grounds that (1) the complaint
known as mortgage-backed securities (“MBSs”). MBS markets grew almost exponentially.
fails to allege consumer-oriented conduct as required to state a
But then the housing bubble burst. In 2006, the demand for housing dropped abruptly
claim under sections 349 and 350 of the New York General
and home prices began to fall. In light of the changing housing market, banks modified their
Business law; (2) the complaint fails to allege fraud and
lending practices and became unwilling to refinance home mortgages without refinancing.
fraudulent inducement with particularity as required by Rule
9(b) of the Federal Rules of Civil Procedure; and
1
Unless otherwise indicated, all references cited as “(¶ _)” or to the “Complaint” are to the Amended Complaint,
dated June 22, 2009. For purposes of this Motion, all allegations in the Amended Complaint are taken as true.
1
(3) Plaintiff’s claim for unjust enrichment is precluded by the
existence of a contract between the parties.
For the reasons
discussed below, Defendant’s motion is denied, except that
counts three and four of the complaint—which assert claims under
New York General Business Law sections 349 and 350 for deceptive
acts and practices and false advertising, respectively—are
dismissed.
I. Background
The following facts are taken from the allegations in the
complaint and are accepted as true only for purposes of this
motion to dismiss.
Plaintiff Tropical Sails Corp. is a small
business located in Surprise, Arizona, which “facilitates
cruises in locations throughout the world.” (Compl. ¶ 7.)
Defendant Yext is an online advertising company that assists
businesses in monitoring whether their information is accurately
listed on web directories. (Id. ¶ 1.)
Yext’s primary product is
the PowerListings Service, which is marketed as four separate
subscriptions priced between $199 and $999 per year. (Id. ¶ 12.)
Plaintiff alleges that the most popular of these is the $499per-year “Complete” package. (Id.)
According to Plaintiff, Yext identifies potential customers
through a free “Scan Your Business” search (hereinafter, the
“business scan”) offered on its website.
This search prompts
visitors to enter their business’s name and phone number in
2
order to compare that information against the records of Yext’s
partner web directories. (Id. ¶ 13-14.)
Visitors are then
transferred to a results page showing any errors found in online
listings associated with the visitor’s information, such as that
the listings are “Not Standing Out” or are of an “Unverified
Business.” (Id. ¶¶ 15-17.)
These errors are presented as either
a total number of “Location Data Errors” or an “Error Rate”
warning that “[X]% of the time customers search for you, they
will see incorrect information!” (Id.)
Plaintiff asserts that the data errors identified by Yext’s
business scan do not have any actual bearing on the accuracy of
a business’s online listings; rather, Plaintiff alleges that the
scan is deliberately engineered to show errors for any business
that has not purchased Yext’s PowerListings service. (Id. ¶¶ 1720.)
Plaintiff also alleges that the primary purpose of the
business scan is to provide Yext with the names and telephone
numbers of visitors to its website so that Yext can follow up
with sales calls about the PowerListings service.
According to
Plaintiff, the telemarketers who make these calls are instructed
by Yext to misrepresent both the benefits of PowerListings and
the number of data errors found in Yext’s partner web
directories associated with the potential customer’s business.
(Id. ¶¶ 24-29.)
Because Defendant supposedly knows that these
representations are false, Plaintiff contends that Yext’s
3
business model is designed around “high-pressure sales tactics,”
rather than customer satisfaction and retention. (Id. ¶¶ 30-31.)
Plaintiff therefore alleges that Yext’s strategy is “to get as
much in up-front fees from new customers as possible,” on the
assumption that most will become dissatisfied and cancel their
PowerListings subscription at the earliest opportunity. (Id.)
Consistent with the allegations concerning Yext’s general
business practices described above, Plaintiff states that it
first visited Yext’s website on or about January 14, 2014 and
entered its business name and telephone number into the “Scan
Your Business” search box. (Id. ¶ 33.)
According to Plaintiff,
it was then directed to a results page indicating the existence
of multiple “Location Data Errors,” including that each
identified listing was “Not Standing Out.” (Id.)
That same day,
a Yext telemarketer purportedly contacted Plaintiff, claiming
that there were errors and inconsistencies in Plaintiff’s
business listings “across Yext’s network of Web directories” and
promising that PowerListings would “fix these inaccuracies . . .
and feature [Plaintiff’s] business in Yext’s partner Web
directories whenever consumers conducted searches for comparable
businesses.” (Compl. ¶ 34.)
Following this call, Plaintiff
purchased the “Complete” PowerListings package for an annual fee
of $499. (Id.)
4
Roughly four months later, Plaintiff states that it again
checked the status of its online listings through the business
scan on Yext’s website and through a review page provided as
part of Plaintiff’s PowerListings subscription. (Id. ¶¶ 36-37.)
In both instances, the results showed that Plaintiff’s listings
had been published across all of Yext’s network of web
directories—with the possible exception of the websites
“Citybot” and “Local.com”—and that each directory was free from
errors and was “PowerListings Synced.” (Id.)
However, despite
the alleged promise by the Yext Telemarketer that PowerListings
would fix inaccuracies in Tropical Sails’ listings and feature
Plaintiff’s business in Yext’s partner Web directories,
Plaintiff contends a subsequent search for Tropical Sails on “EZ
Local”—one of Defendant’s partner web directories—returned no
results when relevant search terms were entered. (Id. ¶¶ 38-39.)
Similarly, another partner directory—“AmericanTowns”—listed
Plaintiff’s business beneath sixty-eight other listings, “many
of which ha[d] no relation to the search terms.” (Id. ¶ 40.)
On September 18, 2014, Plaintiff commenced this action by
filing a class action complaint against Yext.
On November 13,
2014, Defendant advised the Court that, in lieu of an answer, it
had served Plaintiff with the present motion to dismiss.
The
motion was fully briefed on December 23, 2014 and oral argument
was held on April 8, 2015.
5
II. Discussion
A.
Legal Standard
A motion to dismiss should be denied so long as the
complaint “contain[s] sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Accordingly, in addressing a 12(b)(6) motion, a court must
accept the plaintiff’s allegations of fact as true and draw all
reasonable inferences in the plaintiff’s favor. See Ganino v.
Citizens Utils. Co., 228 F.3d 154, 161 (2d Cir. 2000); Fed.
Treasury Enter. Sojuzplodoimport v. Spirits Int’l B.V., 4 F.
Supp. 3d 395, 403 (S.D.N.Y. Aug. 25, 2014).
B.
Analysis
Plaintiff brings this action under the Class Action
Fairness Act of 2005, on the basis that the matter in
controversy exceeds $5,000,000.00 and that some of the
prospective class members are alleged to be citizens of states
different than Defendant. See 28 U.S.C. § 1332(d)(2)(A).
The
complaint asserts four causes of action against Defendant,
including (count one) fraud and fraudulent inducement based on
Yext’s alleged use of false directory results and deceptive
statements to mislead prospective customers; (count two) unjust
enrichment to recover payments made by those customers to Yext
6
in reliance upon Yext’s allegedly false statements; (count
three) use of deceptive acts and practices to deceive consumers
in violation of New York General Business Law section 349; and
(count four) use of false advertising in violation of General
Business Law section 350.
As discussed below, Defendant’s
motion to dismiss is granted with respect to Plaintiff’s General
Business Law claims under counts three and four, but is denied
with respect to counts one and two.
1. New York General Business Law Sections 349 and 350
Defendant seeks to dismiss Plaintiff’s claims under New
York General Business Law sections 349 and 350 on the ground
that the complaint describes a purely business-versus-business
dispute. (Pl.’s Mem. at 8-12.)
Sections 349 and 350 form part
of New York’s Consumer Protection Act and prohibit “deceptive
acts or practices” and “false advertising,” respectively. N.Y.
GEN BUS. LAW §§ 349-50.
Although not explicitly stated in the
text of either provision, courts have consistently found that
the gravamen of a section 349 or 350 claim is “consumer injury
or harm to the public interest.” Securitron Magnalock Corp. v.
Schnalbolk, 65 F.3d 256, 264 (2d Cir. 1995) (noting that section
349 is “at its core, a consumer protection device”); see also
Maurizio v. Goldsmith, 230 F.3d 518, 522 (2nd Cir. 2000) (citing
Securitron and noting that the same interpretation has been
applied to section 350).
Consequently, a plaintiff asserting
7
claims under either section must charge conduct of the defendant
that is consumer oriented. See Oswego Laborers’ Local 214
Pension Fund v. Marine Midland Bank, N.A., 85 N.Y.2d 20, 24
(1995) (noting that a plaintiff must show that the complained-of
conduct has “a broader impact on consumers at large”).
In interpreting the consumer-oriented requirement of
sections 349 and 350, however, New York state and federal courts
have consistently distinguished between the meaning of
“consumer” and the types of plaintiffs that may have standing to
assert consumer-injury claims.
See Beth Israel Med. Ctr. v.
Verizon Bus. Network Servs., No. 11 Civ. 4509, 2013 WL 1385210,
at *5 (S.D.N.Y. Mar. 18, 2013) (noting that the consumeroriented requirement is satisfied “if the challenged conduct
potentially affect[s] similarly-situated consumers” (quoting
Oswego, 85 N.Y.2d at 26-27)).
With respect to the former,
courts have defined “consumer” narrowly as an individual who
‘purchases goods and services for personal, family or household
use.’” Spirit Locker, Inc. v. EVO Direct, LLC, 696 F. Supp. 2d
296, 303 (E.D.N.Y. 2010) (citing authority from New York state
appellate courts); see also U1IT4Less, Inc. v. FedEx Corp., 896
F. Supp. 2d 275, 295 (S.D.N.Y. 2012) (noting that this
definition has repeatedly been applied to section 349 claims).
At the same time, courts have permitted an expansive view of the
types of plaintiffs who may have standing under sections 349 and
8
350. See Tasini v. AOL, Inc., 851 F. Supp. 2d 734, 743 (S.D.N.Y.
2012); see also Dollar Phone Corp. v. Dun & Bradstreet Corp.,
No. 09 Civ. 3645, 2010 WL 5313737, at *3 (E.D.N.Y. Sept. 2,
2010) (“Although the scope of [sections 349 and 350] is
generally limited to claims by consumers, ‘a business may bring
a § 349 claim if it is harmed by consumer-oriented conduct.’”
(quoting Spirit Locker, Inc., 696 F. Supp. 2d at 302)).
Accordingly, a business may bring a claim under sections
349 and 350 where it is injured by conduct that is also directed
at consumers or that causes harm to the public at large. See
Spread Enters., Inc. v. First Data Merch. Servs., No. 11 Civ.
4743, 2012 WL 3679319, at *7 (E.D.N.Y. Aug. 22, 2012); see also
Spirit Locker, Inc., 696 F. Supp. 2d at 303 (“[S]o long as the
conduct is consumer-oriented, even a defendant’s business
competitor has standing to bring a claim under § 349, provided
the competitor is incidentally harmed by the defendant’s
deceptive conduct.”).
By comparison, where the “activity
complained of involves the sale of commodities to business
entities only, such that it does not directly impact consumers,”
sections 349 and 350 are inapplicable. U1IT4Less, Inc., 896 F.
Supp. 2d at 295; see also Dollar Phone Corp., 2010 WL 5313737,
at *3 (explicitly rejecting the argument that a small business
is a consumer under section 349); Cruz v. NYNEX Info. Res., 263
A.D.2d 285, 289 (1st Dep't 2000) (holding that the term
9
“consumer” did not encompass small businesses that purchase
services available only to businesses).
Here, Defendant’s alleged misconduct is targeted only at
businesses.
Plaintiff’s seeks to avoid this conclusion by
noting that Yext’s potential customers include “[m]any
individuals who have not incorporated—artists, landscapers, and
bakers, for example.“ (Pl.’s Mem. at 15.)
As discussed above,
however, the distinction under New York law between an
individual consumer and a business is not dependent on the use
of a corporate form; rather, the issue is whether the product is
purchased “for personal, family or household use.” See Dollar
Phone Corp., 2010 WL 5313737, at *3.
Therefore, to the extent
that artists, landscapers, and bakers purchase a product for
personal, family or household use, Plaintiff is correct that
they may be considered consumers.
As alleged in the complaint,
however, Defendant markets PowerListings to those who—like
Plaintiff—“wish to sell their goods and services and to list
themselves on a web directory.” (Pl.’s Mem. at 15.)
Such a
product is, by its nature, directed only at businesses. See
Cruz, 263 A.D.2d at 291 (noting that “advertisement space . . .
is, by definition, a commodity available to businesses only”);
see also Spin Master Ltd. v. Bureau Veritas Consumer Prods., No.
08 Civ. 923, 2011 WL 1549456, at *3-4 (W.D.N.Y. Mar. 7, 2011)
(noting that defendant’s services were not available to the
10
general public and holding that, to the extent plaintiff was
attempting to assert claims as a consumer, it was “neither the
type of ‘consumer’ that section 349 is intended to protect nor
is the transaction at issue the type of ‘consumer’ transaction
contemplated by the statute”).
Accordingly, Defendant has not
demonstrated that Defendant’s alleged misconduct is directed at
consumers.
Defendant’s alleged misconduct also does not amount to a
public harm.
Plaintiff contends that Defendant’s “deceptive
sales tactics impact not only their small-business customers,
but also individual consumers who rely on those small
businesses.” (Pl.’s Mem. at 21-23.)
In so doing, Plaintiff
asserts that the Court should follow decisions from other courts
within the Second Circuit allowing businesses to assert claims
under sections 349 and 350, on the basis that the defendants’
deceptive conduct caused the plaintiff to incur additional costs
that were passed on to consumers or unnecessarily diverted the
plaintiff’s attention from activities that would have better
served the public interest. See, e.g., Allstate Ins. Co. v.
Lyons, 843 F. Supp. 2d 358, 376 (E.D.N.Y. 2012) (noting that the
defendants had “unlawfully stripped millions of dollars from
Allstate, which has likely increased the premiums of
consumers”); Securitron Magnalock Corp., 65 F.3d at 264
(concluding that “the harm to the public was manifest” where the
11
defendant gave false information to “the only city agency having
jurisdiction to approve materials . . . for use in city
construction projects,” which “caused [the agency] to undertake
unnecessary investigations and interfered with its
decisionmaking process”).
Plaintiff’s allegations, however, lack the “certain,
specific, and direct public impact” needed to support an
inference of consumer-oriented conduct. See Beth Israel Med.
Ctr., 2013 WL 1385210, at *7.
According to the complaint, an
annual subscription to PowerListings costs between $199 and $999
and “most if not all” of Yext’s customers do not renew their
subscriptions because of dissatisfaction with the service. (Id.
¶¶ 12, 31.)
Unlike the millions of dollars ostensibly lost by
Allstate in Lyons, therefore, the losses allegedly suffered by
any one of Yext’s customers are comparatively minor and are not
“likely” to harm the public at large. See Lyons, 843 F. Supp. 2d
at 376; see also Spread Enters., 2012 WL 3679319, at *8
(rejecting similar arguments and noting that, if this type of
allegation were sufficient, then any conduct that causes a
business to lose money could be construed as affecting
consumers).
Likewise, even if “depriv[ing] [consumers] of
transparent online listings” and denying them the “fully panoply
of choices for vendors of goods and services” could be
sufficient to constitute a manifest harm to the public interest,
12
the complaint contains no allegations to suggest that accurate
directory information for Plaintiff’s business was not otherwise
available to consumers online or that Defendant’s conduct
affected the quality of business listings on the “few well-known
websites” that Plaintiff explains are generally used by
consumers to search for products and services. (Compl. ¶¶ 43-47;
Pl.’s Mem. at 23.)
Therefore, unlike the allegations of “direct governmental
and consumer harm in Securitron and the massive and
reverberating scheme in Lyons,” the harm alleged by Plaintiff is
too attenuated to establish that Defendant’s conduct harmed the
public, such that the consumer-oriented requirement of sections
349 and 350 would be satisfied.
See Beth Israel Med. Ctr., 2013
WL 1385210, at *7 (addressing a “routine case of overbilling”
and concluding that allegations of “hypothetical harm” to the
public did not provide a basis for a section 349 claim).
To
conclude otherwise would stretch the scope of sections 349 and
350 beyond recognition. See Spread Enters., 2012 WL 3679319, at
*8.
Consequently, Plaintiff’s General Business Law claims under
counts three and four are dismissed.
2. Plaintiff’s Fraud-Based Claims
Defendant also requests that the Court dismiss count one of
the complaint, on the basis that Plaintiff fails to allege fraud
and fraudulent inducement with particularity. (Pl.’s Mem. at 1213
15.)
In order to state a claim for fraud and fraudulent
inducement, a complaint must sufficiently allege (1) a material
misrepresentation of fact by the defendant; (2) that the
defendant intended to deceive the plaintiff; (3) that the
plaintiff reasonably relied on defendant’s misrepresentation;
and (4) that the plaintiff was injured as a result. See Johnson
v. Nextel Commc’ns, Inc., 660 F.3d 131, 143 (2d Cir. 2011).
Additionally, these facts must be pled with particularity under
Rule 9(b), which requires that a plaintiff (1) specify the
statements that the plaintiff contends were fraudulent,
(2) identify the speaker, (3) indicate where and when the
statements were made, and (4) explain why the statements were
fraudulent. See Fed. R. Civ. P. 9(b); ATSI Commc’ns., Inc. v.
Shaar Fund, Ltd., 493 F.3d 87, 99 (2d Cir. 2007); Rombach v.
Chang, 355 F.3d 164, 170 (2d Cir. 2004).
Because reliance is an
essential element of fraud, it must also be pled with
particularity under Rule 9(b). See Bank of Am. Corp. v. Braga
Lemgruber, 385 F. Supp. 2d 200, 230 (S.D.N.Y. 2005).
Here, Defendant does not directly challenge the complaint’s
allegations of materiality, intent, or damages.
Instead,
Defendant seeks to dismiss Plaintiff’s fraud-based claims on the
ground that the complaint fails to sufficiently allege (1) any
specific statement made to Plaintiff by Yext that was fraudulent
or (2) that Plaintiff relied upon any such misstatement in
14
purchasing the PowerListings service. (Def.’s Mem. at 13.)
Upon
review of the complaint, however, the Court concludes that
Plaintiff’s claim for fraud and fraudulent inducement is alleged
with sufficient particularity under Rule 9(b).
First, Plaintiff plainly identifies the particular
statements it contends were fraudulent, as well as the speaker,
time, and place as required to plead a cause of action under
Rule 9(b).
The complaint indicates that, on or about January
14, 2014, Plaintiff visited Yext’s website and entered its
information into the business scan. (Compl. ¶ 33.)
Plaintiff
was then directed to a results page showing that multiple
“Location Data Errors” related to Plaintiff’s information had
been found in Yext’s partner web directories. (Compl. ¶ 33
(referring to this statement as the “Business-Scan
Misrepresentation”); Pl.’s Mem. at 8.)
The complaint also
specifies that Plaintiff was contacted by a Yext telemarketer
that same day, who asserted that there were errors and
inconsistencies in Plaintiff’s online listings and promised that
“the PowerListings service would fix these inaccuracies . . .
and feature [Plaintiff’s] business in Yext’s partner Web
directories whenever consumers conducted searches for comparable
businesses.” (Compl. ¶ 34 (referring to this statement as the
“Product-Quality Misrepresentation”); Pl.’s Mem. at 8-9.)
15
Second, the complaint also explains why the Business-Scan
and Product-Quality Misrepresentations were allegedly false—
namely, because (1) the “Location Data Errors” reported by the
business scan meant that Plaintiff did not have a PowerListings
account and not, as Defendant’s website supposedly represented,
that incorrect information about Plaintiff’s business had been
found in Yext’s partner web directories; and (2) that Yext
falsely represented that PowerListings would fix inaccuracies in
Plaintiff’s listings and would feature Plaintiff’s business in
its partner directories. (Id. ¶¶ 17-20, 34-38.)
These
assertions are further supported by specific factual allegations
showing that, after Plaintiff purchased PowerListings, the
business scan no longer reported any “Location Data Errors” for
Tropical Sails and instead listed each directory as
“PowerListings Synced.” (Id. ¶ 37.)
According to Plaintiff,
however, subsequent searches for its business on many of the
“PowerListings Synced” directories—including EZLocal and
AmericanTowns—either returned no results for Plaintiff’s
business or buried Plaintiff’s listings beneath many other
irrelevant listings. (Id. ¶¶ 38-40.)
Plaintiff therefore claims
that Yext knowingly misrepresented that the business scan
detected deficiencies in Plaintiff’s online listings and that
Powerlistings would fix these deficiencies and feature
16
Plaintiff’s business in Yext’s partner web directories. (Compl.
¶¶ 17, 34-38, 61-63.)
Finally, the complaint alleges that Plaintiff relied on
Yext’s misrepresentations in purchasing a PowerListings
subscription.
Specifically, Plaintiff states that it “enrolled
in PowerListings . . . paying an annual fee of $499” and that,
in doing so, it was “[r]easonably relying on both the BusinessScan Misrepresentation and the Product-Quality
Misrepresentation.” (Id. ¶ 34, 64.)
Viewed as a whole, therefore, the complaint alleges that
Plaintiff actually purchased a specific subscription to
PowerListings based on particular misrepresentations made to it
by Yext, which is sufficient to state a claim for fraud at this
stage of the proceedings. Compare Duafala v. Globecomm Sys.
Inc., No. 13 Civ. 4944, 2015 WL 502233, at *7 (E.D.N.Y. Feb. 5,
2015) (finding that a fraud claim was sufficiently pleaded where
the complaint identified specific misrepresentations made by the
defendant to shareholders of a company and alleged that the
shareholders relied on those misrepresentations in accepting the
defendant’s offer to purchase their shares); with Int’l Fund
Mgmt. S.A. v. Citigroup Inc., 822 F. Supp. 2d 368, 386 (S.D.N.Y.
2011) (addressing securities fraud claims and noting that the
complaint “lack[ed] supporting factual matter indicating how
plaintiffs relied on the alleged misrepresentations”).
17
Accordingly, Defendant’s request to dismiss Plaintiff’s fraudbased claims is denied.
3. The Availability of Quasi-Contract Remedies
Finally, Defendant asks the Court to dismiss count two of
the complaint because Plaintiff’s claim for unjust enrichment is
precluded by the existence of a contractual relationship between
the parties. (Pl.’s Mem. at 16-18.)
A party asserting a claim
for unjust enrichment must demonstrate (1) “that the defendant
was enriched at the plaintiff’s expense” and (2) “that equity
and good conscience require the plaintiff to recover the
enrichment from the defendant.” Giordano v. Thomson, 564 F.3d
163, 170 (2d Cir. 2009).
Generally, an unjust enrichment claim is not “available
where it simply duplicates, or replaces, a conventional contract
or tort claim.” Corsello v. Verizon N.Y., Inc., 18 N.Y.3d 777,
790 (2012).
New York courts have, however, permitted an
exception to this rule, such that “a claim for unjust enrichment
is not duplicative of a breach of contract claim where the
plaintiff alleges that the contracts were induced by fraud.”
Rodriguez v. It’s Just Lunch, Int’l, No. 07 Civ. 9227, 2013 WL
1749590, at *5 (S.D.N.Y. Apr. 23, 2013) (quoting Pramer S.C.A.
v. Abaplus Int’l Corp., 907 N.Y.S.2d 154, 161–62 (N.Y. App. Div.
2010)); see also Chigirinskiy v. Panchenkova, No. 14 Civ. 4410,
2015 WL 1454646, at *18 (S.D.N.Y. Mar. 31, 2015) (“[U]njust
18
enrichment may be pleaded in the alternative to breach of
contract.”).
Moreover, a quasi-contract claim may be asserted,
notwithstanding the existence of a contract between the parties,
where the complained-of conduct falls outside the scope of that
contract. See Lyons, 843 F. Supp. 2d at 376 (refusing to dismiss
unjust enrichment claims because they were “predicated on
conduct not covered by the contract” and “stem from defendants’
misrepresentations”).
Here, the complaint alleges (1) that Plaintiff enriched
Defendant by paying $499.00 for PowerListings and (2) that it
would be inequitable for Defendant to retain a sum that it
induced by fabricating “errors” in Plaintiff’s web presence and
promising services that it knew it would not provide. (Compl. ¶
66-71.)
Moreover, Plaintiff has alleged that any agreement
between the parties was induced by fraudulent representations
made by Yext to Plaintiff. (Id. ¶ 33-34, 64.)
Therefore,
because the Court finds that Plaintiff has adequately stated a
claim for fraudulent inducement, it is also entitled at this
stage to maintain its claim for unjust enrichment, on the basis
that any contract between the parties concerning Plaintiff’s
purchase of PowerListings might be found unenforceable. See St.
John's Univ., New York v. Bolton, 757 F.Supp.2d 144, 183
(E.D.N.Y.2010) (“At the pleading stage, Plaintiff is not
19
---·--
----------------~
required to guess whether it will be successful on its contract,
tort, or quasi-contract claims," as it may be that "no valid
contracts exist or that the breaches alleged by Plaintiff were
not breaches of duties governed by the contracts.").
Accordingly, Defendant's request to dismiss Plaintiff's claim
for unjust enrichment is denied.
III. Conclusion
For the foregoing reasons, counts three and four of the
complaint-deceptive acts or practices and false advertising in
violation of New York General Business Law sections 349 and 350are dismissed.
The remaining portions of Defendant's motion to
dismiss are denied as set forth above.
Counsel are directed to
appear in Courtroom 20-C on May 28, 2015 at 11:30 a.m. for a
conference to discuss certification of Plaintiff's putative
class action.
SO ORDERED.
Dated:
New York, New York
May/
2015
g,
~f'~
{r
John F. Keenan
United States District Judge
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