Somnia, Inc. v. Change Healthcare Technology Enabled Services, LLC et al

Filing 46

MEMORANDUM OPINION AND ORDER: Based upon the foregoing, the motion to dismiss is GRANTED in part. The second claim for relief, fraud in the inducement, is DISMISSED. The first claim for relief, breach of contract, as modified herein concerning th e covenant of good faith and fair dealing, shall proceed to discovery. Defendants are directed to file an Answer to the First Amended Complaint within fourteen (14) days of the date of this Memorandum Opinion and Order. The Court will issue an Ini tial Pretrial Conference Order and set a conference date in short order. The Clerk of the Court is respectfully directed to terminate the motion sequence pending at Doc. 42. SO ORDERED. re: 42 MOTION to Dismiss - Partial Motion to Dismiss Plaintiff Somnia, Inc.'s Amended Complaint. filed by Change Healthcare Technology Enabled Services, LLC, PST Services, Inc.. (Signed by Judge Philip M. Halpern on 2/16/2021) (ks)

Case 7:19-cv-08983-PMH Document 46 Filed 02/16/21 Page 1 of 12

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
SOMNIA, INC.,
Plaintiff,
-againstCHANGE HEALTHCARE TECHNOLOGY
ENABLED SERVICES, LLC, as successor-ininterest to PST SERVICES, INC., et al.,

MEMORANDUM OPINION
AND ORDER
19-CV-08983 (PMH)

Defendants.
PHILIP M. HALPERN, United States District Judge:
Plaintiff Somnia, Inc. (“Plaintiff”) initiated this breach of contract action against
Defendants Change Healthcare Technology Enabled Services, LLC, as successor-in-interest to
PST Services, Inc. (“CHT”) and PST Services, Inc. (“PST” and collectively, “Defendants”) in the
New York State Supreme Court, Westchester County, on March 15, 2019. (Doc. 1, “Not. of
Rem.”). Defendants removed the action to this Court on September 26, 2019. (Id.). Plaintiff, with
leave of Court, filed its First Amended Complaint thereafter on April 20, 2020. (Doc. 33, “FAC”).1
The First Amended Complaint presses two claims for relief: (1) breach of contract (id. ¶¶ 184210); and (2) fraud (id. ¶¶ 211-21).
Defendants served their motion to partially dismiss the First Amended Complaint under
Federal Rules of Civil Procedure 12(b)(6) and 9(b) on July 10, 2020. (Doc. 42; Doc. 43, “Def.
Br.”). Plaintiff served its opposition on August 10, 2020 (Doc. 44, “Opp. Br.”), and the motion
was briefed fully with service of Defendants’ reply on August 17, 2020 (Doc. 45, “Reply Br.”).
For the reasons set forth below, Defendants’ motion to dismiss is GRANTED in part.

1

Judge Karas, before whom this matter proceeded before reassignment to this Court on April 16, 2020,
granted Plaintiff leave to file its First Amended Complaint by April 17, 2020. (Doc. 31). The Clerk of the
Court rejected Plaintiff’s attempt to file the pleading on that date as deficient. (Apr. 20, 2020 Entry).

Case 7:19-cv-08983-PMH Document 46 Filed 02/16/21 Page 2 of 12

BACKGROUND
I.

Plaintiff’s Business
Plaintiff, “a nationwide provider of expert and tailored anesthesia services” (FAC ¶ 1), has

existed in its current form since at least September 2002 (id. ¶ 24). Among the various services
Plaintiff offers its clients is quality management (“QM”), which includes, inter alia, “reporting on
the quality, timeliness, and effectiveness of anesthesia care provided by its affiliated providers to
government

payers

(Medicare,

Medicaid),

commercial

payers

(e.g.,

Cigna,

Aetna,

UnitedHealthcare), the client Facilities, and various accreditation and oversight agencies.” (Id. ¶
4). QM, in turn, relies on revenue cycle management (“RCM”) (id. ¶¶ 2, 4), which is defined
generally as “the administration of transactions . . . from . . . medical encounters . . . .” (id. ¶ 3).
After almost twenty years of handling the services itself (id. ¶ 30), Plaintiff found that
“provi[ding] . . . RCM, QM[,] and related operational services for clients was . . . time-consuming
and costly” (id. ¶ 32), and “decided to outsource” them (id. ¶ 33). Plaintiff ultimately “issued a
nationwide request for proposals from expert anesthesia RCM firms who could handle the volume
and complexities associated with anesthesia billing throughout the United States.” (Id. ¶ 35). This
search led Plaintiff to PST.2 (Id. ¶ 37).
II.

Pre-Contract Negotiations
Plaintiff alleges that as PST courted Plaintiff, it made a variety of misrepresentations. (See

generally id. ¶¶ 38-78). PST’s misrepresentations concerned, inter alia, whether it had ever been
sued (id. ¶¶ 40(a), 42), its technical capabilities and the software employed (e.g., id. ¶¶ 38-39,
43(a), 44, 50, 52, 54, 57-58, 60-65, 74-75), whether it had a “perfect track record” (id. ¶¶ 43(c),

2

Although Plaintiff named CHT (PST’s successor-in-interest) as a Defendant, for ease of reference,
understanding, and continuity, because Plaintiff contracted with PST, the Court refers to that entity herein.

2

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44), its personnel (e.g., id. ¶¶ 47-48, 51), its expertise (e.g., id. ¶¶ 38-39, 47, 49), its employee
turnover (id. ¶¶ 48, 51), whether Plaintiff would have to secure funding for the transition of
services (e.g., id. ¶¶ 43(b), 53, 55), and whether the transition would increase collection rates (e.g.,
id. ¶¶ 43(a), 44). Accepting these representations, Plaintiff disbanded its “RCM offices and
[terminated] the more than 140 people it employed there, and transitioned away QM personnel,
due to the redundancy in operations.” (Id. ¶ 78; see also id. ¶ 125). This decision rendered Plaintiff
completely reliant on PST for RCM and QM services. (Id. ¶ 78).
III.

The Master Services Agreement and Deterioration of the Parties’ Relationship
The parties executed a contract, the Master Service Agreement (“MSA”), on December 23,

2013. (Id. ¶ 79; see also MSA Pt. 1 at 1).3 Under the MSA, PST agreed to perform a variety of
services, including, inter alia: (1) enrolling and recredentialing providers (MSA Pt. 1 at 17); (2)
managing payer contracts and, on request, negotiating contracts and performing “deep dive”
analyses (id. at 18-19); (3) providing quality control services (id. at 21); (4) “implement[ing] and
maintain[ing] a billing regulatory compliance program,” which encompassed using specific
programs “to identify billing and remittance patterns that deviate from the norm” (id. at 24); (5)
providing staff trained and certified to provide services, along with an assigned client manager (id.
at 7, 10); (6) performing RCM services (id. at 13-16); and (7) providing staff trained to handle the
transition from in-house operations (id. at 5-6; MSA Pt. 2 at 1). Plaintiff maintains that PST
breached each of these, and other, terms. (See FAC ¶ 197).

3

The MSA was annexed to the First Amended Complaint. The main body of the contract, Exhibit 2 to the
First Amended Complaint, was filed over two docket entries. For ease of reference, Doc. 33-2 (which
contains the first thirty-one pages) will be cited as “MSA Pt. 1,” and Doc. 33-3 (which contains the last
twenty-seven pages) will be cited as “MSA Pt. 2.” PST’s Request for Proposals Response (“RFPR”),
Exhibit 1 to the First Amended Complaint and Attachment 2 to the MSA, was filed as Doc. 33-1. References
to the MSA and RFPR will correspond to the pagination for that particular docket entry generated by ECF.

3

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Although the MSA began on March 1, 2014 and called for an initial term of five years
(MSA Pt. 1 at 10), the parties terminated their relationship on July 1, 2018. (FAC ¶ 140). According
to Plaintiff, the four years during which the MSA governed the parties’ relationship were marred
with PST’s deficient performance and attempts to undermine Plaintiff’s business relationships.
(See id. ¶¶ 92-139). In fact, Plaintiff contends that on at least one occasion, one of PST’s agents
contacted one of Plaintiff’s clients and advocated PST’s “ability to directly provide anesthesia
billing and related services.” (Id. ¶ 139; see also id. ¶ 204). As a result of PST’s breaches, Plaintiff
maintains it suffered myriad damages, specifically: (1) lost revenues and profits in connection with
collection rates (id. ¶¶ 143-50); (2) lost reputation and good will (id. ¶¶ 151-58); (3) lost revenue
associated with payer contract mismanagement (id. ¶¶ 159-62); (4) unnecessary fees, interest, and
expenses which decreased Plaintiff’s valuation by approximately thirty to fifty million dollars (id.
¶¶ 163-68); (5) loss of capital to invest in client relationships (id. ¶¶ 169-71); (6) terminations and
downsizing (id. ¶ 172); (7) lost financial incentives from government medial programs (id. ¶¶ 17377); (8) time spent rectifying PST’s errors (id. ¶ 178); (9) its inability to mitigate damages (id. ¶¶
179-81); and (10) reducing Plaintiff’s ability to offer services to the public (id. ¶¶ 182-83).
When the parties separated, Plaintiff’s valuation had fallen from a pre-relationship
estimation of $55,000,000 to approximately $20,000,000. (Id. ¶ 164). Plaintiff maintains that it
“reserved its rights to pursue any available claims against PST” (FAC ¶ 141; see also id. ¶ 15),
and, through this action, seeks to pursue those rights.

4

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STANDARD OF REVIEW
A Rule 12(b)(6) motion enables a court to dismiss a complaint for “failure to state a claim
upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). “To survive a motion to dismiss, a
complaint must contain 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)). A claim is plausible on its face “when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “The plausibility standard is
not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant
has acted unlawfully.” Id. (citing Twombly, 550 U.S. at 556). The factual allegations pled “must
be enough to raise a right to relief above the speculative level . . . .” Twombly, 550 U.S. at 555.
“When there are well-ple[d] factual allegations, a court should assume their veracity and
then determine whether they plausibly give rise to an entitlement to relief.” Iqbal, 556 U.S. at 679.
Thus, the Court must “take all well-ple[d] factual allegations as true, and all reasonable inferences
are drawn and viewed in a light most favorable to the plaintiff[].” Leeds v. Meltz, 85 F.3d 51, 53
(2d Cir. 1996). The presumption of truth, however, “‘is inapplicable to legal conclusions,’ and
‘[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.’” Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009) (quoting Iqbal, 556
U.S. at 678 (alteration in original)). Therefore, a plaintiff must provide “more than labels and
conclusions” to show entitlement to relief. Twombly, 550 U.S. at 555.
In addition, the Federal Rules of Civil Procedure require a heightened level of specificity
when pleading claims sounding in fraud. Specifically, “[i]n alleging fraud or mistake, a party must
state with particularity the circumstances constituting fraud or mistake,” Fed. R. Civ. P. 9(b), “the
5

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who, what, when, where, and how: the first paragraph of any newspaper story.” Backus v. U3
Advisors, Inc., No. 16-CV-8990, 2017 WL 3600430, at *9 (S.D.N.Y. Aug. 18, 2017) (quoting Am.
Federated Title Corp. v. GFI Mgmt. Servs., Inc., 39 F. Supp. 3d 516, 520 (S.D.N.Y. 2014)).
ANALYSIS
I.

First Claim for Relief: Breach of Contract
“Under New York law[4 ], a breach of contract claim requires (1) the existence of an

agreement, (2) adequate performance of the contract by the plaintiff, (3) breach of the contract by
the defendant, and (4) damages.” Ohr Somayach/Joseph Tanenbaum Educ. Ctr. v. Farleigh Int’l
Ltd., --- F. Supp. 3d ---, 2020 WL 5211062, at *8 (S.D.N.Y. Sept. 1, 2020) (quoting Sackin v.
TransPerfect Glob., Inc., 278 F. Supp. 3d 739, 750 (S.D.N.Y. 2017)). With respect to this claim
for relief, Defendants argue that: (1) any claim for breach of the implied covenant of good faith
and fair dealing must “be dismissed as duplicative of [Plaintiff’s] breach of contract cause of
action” (Def. Br. at 15); and (2) Plaintiff failed to link any breach to any specific damages (id. at
18-20). The Court addresses these arguments seriatim.5

4

The MSA provides that it “shall be governed by the laws of the State of New York. Any controversy
arising out of this Agreement shall be submitted only to the federal or state courts for Westchester County,
State of New York. The aforesaid applicable law shall apply without regard to conflicts of laws provisions
thereof.” (MSA Pt. 1 at 9).

5

Defendants argue also for dismissal insofar as Plaintiff seeks damages that are unavailable under the MSA
(i.e., consequential damages) or beyond its liability cap. (Def. Br. at 20-24; see also MSA Pt. 1 at 6). The
Court does not address these arguments at this juncture because “a motion to dismiss is addressed to a
‘claim’—not to a form of damages.” New York ex rel. James v. Pennsylvania Higher Educ. Assistance
Agency, No. 19-CV-9155, 2020 WL 2097640, at *18 (S.D.N.Y. May 1, 2020) (quoting Amusement Indus.,
Inc. v. Stern, 693 F. Supp. 2d 301, 318 (S.D.N.Y. 2010)); see also Okyere v. Palisades Collection, LLC,
961 F. Supp. 2d 522, 536 (S.D.N.Y. 2013) (denying motion to dismiss plaintiff’s request for punitive
damages because it was “procedurally premature”).

6

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A. Breach of the Implied Covenant of Good Faith and Fair Dealing
“Implicit in all contracts is a covenant of good faith and fair dealing in the course of
contract performance.” Schiff v. ZM Equity Partners, LLC, No. 19-CV-4735, 2020 WL 5077712,
at *7 (S.D.N.Y. Aug. 27, 2020) (quoting Dalton v. Educ. Testing Serv., 663 N.E.2d 289, 291 (N.Y.
1995)). This covenant “is not designed to enlarge or create new substantive rights between the
parties,” Ferguson v. Lion Holding, Inc., 478 F. Supp. 2d 455, 479 (S.D.N.Y. 2007), but “embraces
a pledge that neither party shall do anything which will have the effect of destroying or injuring
the right of the other party to receive the fruits of the contract.” Nat’l Gear & Piston, Inc. v.
Cummins Power Sys., LLC, 861 F. Supp. 2d 344, 364 (S.D.N.Y. 2012) (quoting Fishoff v. Coty
Inc., 634 F.3d 647, 653 (2d Cir. 2011)). The covenant “can only impose an obligation consistent
with other mutually agreed upon terms in the contract,” and may “survive[] a motion to dismiss
where the implied promise protects either the contract’s central purpose or a party’s right under a
specific contractual provision.” Schiff, 2020 WL 5077712, at *7 (alteration in original, internal
citations and quotation marks omitted). Practically, a breach of the implied covenant of good faith
and fair dealing requires the pleader to identify an obligation which supports the written terms of
the agreement itself but is not in haec verba contained therein. A breach of the implied covenant
is not a claim for relief separate from one for breach of contract; rather, it is, itself, a breach of
contract. Trahan v. Lazar, 457 F. Supp. 3d 323, 358 (S.D.N.Y. 2020) (quoting Fishoff, 634 F.3d
at 653); see also Ellington Credit Fund, Ltd. v. Select Portfolio Servicing, Inc., 837 F. Supp. 2d
162, 205 (S.D.N.Y. 2011).
Plaintiff pled that PST breached the implied covenant of good faith and fair dealing by: (1)
hiding its noncompliance with the MSA (FAC ¶¶ 199-200); (2) failing to fulfill its obligations
under the MSA (id. ¶¶ 201, 203); (3) billing for claims that could not be collected (id. ¶ 202); and
7

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(4) poaching clients (id. ¶¶ 198, 204). The first three categories complain merely about PST’s
compliance with the MSA and cannot support a claim for breach of the implied covenant; “[a]
cause of action to recover damages for breach of the implied covenant . . . ‘cannot be maintained’
where ‘the alleged breach is intrinsically tied to the damages allegedly resulting from a breach of
the contract.’” Zam & Zam Super Mkt., LLC v. Ignite Payments, LLC, 736 F. App’x 274, 278 (2d
Cir. 2018) (quoting Deer Park Enters., LLC v. Ail Sys., Inc., 870 N.Y.S.2d 89, 90 (App. Div.
2008)); see also Corazzini v. Litton Loan Servicing LLP, No. 09-CV-199, 2010 WL 1132683, at
*7 (N.D.N.Y. Mar. 23, 2010) (dismissing claim for breach of the implied covenant where the
claim “only repeat[ed] the allegations that comprise Plaintiff’s breach of contract claim, and those
allegations consist of Defendants’ non-compliance with a term of their contract”).
The latter category, stealing Plaintiff’s clients and undermining relationships, constitutes a
breach of the implied covenant of good faith and fair dealing on the facts alleged. Plaintiff suggests
that the MSA’s central purpose, its raison d’être, was to outsource administrative functions from
Plaintiff to PST. (FAC ¶ 33; see also MSA Pt. 1 at 1 (“WHEREAS, [Plaintiff] desires . . . billing
and accounts receivable management, consulting and transition services . . . .”)). More pointedly,
the MSA existed because Plaintiff wanted PST’s assistance in running one aspect of its nationwide,
multimillion-dollar business. (See, e.g., FAC ¶¶ 1, 13, 35, 47, 72, 104, 106, 119, 121, 142, 147,
153, 163-68). In light of that purpose, Plaintiff’s allegation that PST actively undermined client
relationships and sought to steal clients as Plaintiff suffered—ostensibly as a result of PST’s
noncompliance with the MSA—represents a breach of the implied covenant of good faith and fair
dealing separate from the MSA’s express provisions. See Atlas Elevator Corp. v. United Elevator
Grp., Inc., 910 N.Y.S.2d 476, 478 (App. Div. 2010) (plaintiff stated claim for breach of the implied
covenant where defendants, who had acquired a confidential customer list during negotiations
8

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before the “unconsummated” deal, “develop[ed] maintenance and service contracts with the
plaintiff’s customers by use of the plaintiff’s customer list”).
Accordingly, Defendants’ motion to dismiss Plaintiff’s claim for breach of contract, to the
extent it seeks redress for a breach of the implied covenant of good faith and fair dealing
concerning stealing Plaintiff’s clients and undermining Plaintiff’s customer relationships, is
denied. The remainder of Plaintiff’s breach of the implied covenant of good faith and fair dealing
theories are dismissed.
B. Sufficiency of Breaches and Damages
Defendants argue initially that Plaintiff failed to plead with the requisite specificity how
PST breached “specific provisions in the MSA” or “how those alleged breaches led to [Plaintiff’s]
purported damages.” (Def. Br. at 18). Yet, Defendants narrow this argument by conceding that
Plaintiff identified at least “seven contractual provisions that were breached” but arguing that six
of those breaches are not actionable because Plaintiff “fail[ed] to allege specific damages”
associated with those breaches aside from its general claim for damages no less than $100,000,000.
(Id. at 19; see also FAC ¶ 210). In short, “[w]hile speculative, this allegation is sufficient for
[Plaintiff] to state a breach of contract claim.” Arista Coffee Inc. v. Casale, No. 18-CV-6237, 2020
WL 1891882, at *7 (E.D.N.Y. Apr. 16, 2020) (allegation that defendant’s “various breaches”
resulted in “damages in an amount not yet determined or ascertainable” stated a breach of contract
claim under New York law). As such, the motion to dismiss the breach of contract claim for failure
to plead causation between breaches and specific damages is denied.
II.

Second Claim for Relief: Fraud in the Inducement
There are two species of claims for fraud in New York: “[f]raud by affirmative

misrepresentation, or actual fraud, and fraud by omission, or fraudulent concealment . . . .” Wiedis
9

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v. Dreambuilder Invs., LLC, 268 F. Supp. 3d 457, 466 n.3 (S.D.N.Y. 2017) (first alteration in
original, internal quotation marks omitted). To state the former claim for relief, which Plaintiff
pursues here, it must allege: “(1) a material misrepresentation . . . of fact[;] (2) made by defendant
with knowledge of its falsity[;] (3) and intent to defraud; (4) reasonable reliance on the part of the
plaintiff; and (5) resulting damage to the plaintiff.” Tuosto v. Philip Morris USA Inc., 672 F. Supp.
2d 350, 359 (S.D.N.Y. 2009) (quoting Crigger v. Fahnestock & Co., Inc., 443 F.3d 230, 235 (2d
Cir. 2006)). Defendants contend, inter alia, that this claim for relief must be dismissed because it
is duplicative of the breach of contract claim. (Def. Br. at 9-11). The Court agrees.
The basis of Plaintiff’s fraud claim is that PST induced Plaintiff into the MSA through
various misrepresentations. Explicitly, Plaintiff asserts that “PST knew that it did not have the
same infrastructure, resources, personnel, tools, software, or other capabilities and expertise of
McKesson [its parent] (or ready access thereto) to deliver on its promises” and that “PST . . . lied
about its then present capabilities, resources, and experiences.” (FAC ¶¶ 214-15). “Where a fraud
claim is based on inducement to enter a contract, the fraud claim is duplicative [of a claim for
breach of contract] unless the plaintiff ‘(i) demonstrate[s] a legal duty separate from the duty to
perform under the contract; or (ii) demonstrate[s] a fraudulent misrepresentation collateral or
extraneous to the contract; or (iii) seek[s] special damages.’” Mariano v. CVI Invs. Inc., 809 F.
App’x 23, 26 (2d Cir. 2020) (quoting Bridgestone/Firestone, Inc. v. Recovery Credit Servs., 98
F.3d 13, 19 (2d Cir. 1996) (first alteration added)). Plaintiff does not identify the existence of a

10

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duty outside the contract or connect any special damages6 to the alleged misrepresentations (see
FAC ¶¶ 211-21); the focus, then, concerns whether Plaintiff pled a “misrepresentation collateral
or extraneous to the contract.” It has not done so.
Plaintiff complains that PST knew it did not have the resources of McKesson and that it
misrepresented its infrastructure as it courted Plaintiff. (FAC ¶¶ 214-15). These issues were
addressed in the one-hundred-ninety-six-page RFPR which was “attached . . . and . . . incorporated
. . . by reference” into the MSA. (MST Pt. 1 at 9). The RFPR contains representations regarding,
inter alia: PST’s relationship to McKesson, organizational structure, expertise and experience
being offered to Plaintiff, locations of offices, staffing and support, existence of lawsuits or fines,
and software, programs, and processes utilized. (See, e.g., RFPR at 1-3, 5-11, 13-19, 27-37, 4243, 45-46, 53-56, 60-67, 75-82, 84-87, 92-95, 103-104, 107-12, 119-22, 128, 144-49, 152-53).
Accordingly, Plaintiff has pled issues contained within the MSA, not misrepresentations
extraneous or collateral thereto. See Khodeir v. Sayyed, 323 F.R.D. 193, 203 (S.D.N.Y. 2017)
(noting that the counterclaim for fraud did not concern a collateral promise because it concerned a
clause “contained in the contract itself”); Telesco v. Neuman, No. 14-CV 3480, 2015 WL 2330166,
at *3 (S.D.N.Y. Mar. 11, 2015) (dismissing fraud claim as duplicative “[b]ecause nothing” in the

6

Plaintiff argued that it suffered special damages apart from the breach of the MSA (see Opp. Br. at 8-9),
but the First Amended Complaint reveals otherwise. Even if the Court were to assume that Plaintiff met the
heightened pleading standard required by Rule 9(b), Plaintiff seeks the same monetary damage—i.e., “in
no event less than $100,000,00.00”—for both claims for relief, without specification. (Compare FAC ¶
210, with id. ¶ 221). This strengthens the Court’s conclusion that the fraud and breach of contract claims
are duplicative. See Bell v. Carey, No. 18-CV-2846, 2020 WL 3578150, at *4-5 (S.D.N.Y. July 1, 2020)
(noting that the plaintiff sought the same amount of damages under his fraud and breach of contract claims
and concluding that “[b]ecause Plaintiff seeks monetary damages for the fraudulent inducement (for which
he would not be entitled), those claims must be dismissed as duplicative of the breach of contract claim”);
see also Mosaic Caribe, Ltd. v. AllSettled Grp., Inc., 985 N.Y.S.2d 33, 35 (App. Div. 2014) (finding fraud
claim duplicative of breach of contract claim where, “[a]mong other things, apart from an unelaborated
request for punitive damages in connection with the fraud claim,” it sought “the same damages as the breach
of contract claim”).

11

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defendant’s “alleged oral representations goes beyond what is contained” in the contract); see
generally Int'l Bus. Machs. Corp. v. De Freitas Lima, No. 20-CV-04573, 2020 WL 5261336, at
*14 (S.D.N.Y. Sept. 3, 2020) (observing, on a misappropriation of trade secrets claim in a contract
dispute, “that a plaintiff cannot turn a contract claim into a tort claim arising from a duty similar
to the obligations set forth in the contract”), aff’d sub. nom. Int'l Bus. Machs. Corp. v. Lima, --- F.
App’x ---, 2021 WL 222129 (2d Cir. Jan. 22, 2021).
Consequently, Plaintiff’s claim for fraud in the inducement is dismissed because it is
duplicative of Plaintiff’s breach of contract claim.7
CONCLUSION
Based upon the foregoing, the motion to dismiss is GRANTED in part. The second claim
for relief, fraud in the inducement, is DISMISSED. The first claim for relief, breach of contract,
as modified herein concerning the covenant of good faith and fair dealing, shall proceed to
discovery. Defendants are directed to file an Answer to the First Amended Complaint within
fourteen (14) days of the date of this Memorandum Opinion and Order. The Court will issue an
Initial Pretrial Conference Order and set a conference date in short order.
The Clerk of the Court is respectfully directed to terminate the motion sequence pending
at Doc. 42.
SO ORDERED:
Dated:

White Plains, New York
February 16, 2021
PHILIP M. HALPERN
LIP M HALPER
United States District Judge

7

Given the Court’s conclusion that the fraud claim is duplicative of the breach of contract claim, it need
not and does not reach Defendants’ alternative theories in support of dismissal. (See Def. Br. at 10-15).

12