When Is A Fraud Claim Duplicative Of A Breach Of Contract Claim?

March 08, 2018

Generally speaking, a fraud claim that is “duplicative” of a breach of contract claim will be dismissed. But when is a fraud claim sufficiently duplicative of a breach of contract claim so as to warrant its dismissal? The New York County Commercial Division (Sherwood, J.) recently answered this question in xLon Beauty, LLC v Day, 2018 NY Slip Op 30142(U) (Sup Ct, NY County Jan. 24, 2018).

In that case, the plaintiff, xLon Beauty, LLC (“Plaintiff”), a manufacturer of an “anti-aging” product (the “Product”), entered into a series of agreements (collectively, the “Contracts”) with the defendant, Doris Day, M.D. (“Defendant”), a publicly-known dermatologist regularly featured on radio and television shows. Pursuant to the Contracts, Defendant granted Plaintiff the right to license and utilize Defendant’s name and likeness to promote the Product in exchange for a 7% royalty fee.

Defendant ultimately sought to terminate the Contracts on the grounds that she (i) was not being adequately compensated, despite her efforts to promote and market the Product; and (ii) was receiving multiple complaints from customers concerning the quality and efficacy of the Product. Thereafter, Plaintiff commenced an action against Defendant alleging, among other things, breach of contract and fraudulent inducement.

Plaintiff’s breach of contract claim alleged that Defendant failed to “make herself available . . . for photographs, speaking engagements and/or commercials in video format” in accordance with the terms of the Contracts. The fraudulent inducement claim centered on Defendant’s purported representations prior to entering into the first agreement that she would use her business connections and acumen to help promote the Product.

Specifically, Plaintiff alleged that prior to entering into the Contracts, Defendant made certain oral promises to Plaintiff that she would “use her media connections to promote the Product if Plaintiff entered into the [Contracts],” but that Defendant was “insincere” because “she did not intend to fulfill her promises to promote the Product when she made them.” However, in a sworn affidavit, Defendant admitted that during that meeting, Defendant “never made any promises or representations to [Plaintiff] – beyond that which [she] agreed to in the written contracts [the parties] entered – concerning [her] endorsement or promotion of [the Product].”

In dismissing Plaintiff’s fraudulent inducement cause of action as duplicative of the breach of contract claim, the Court explained that a fraud claim may only be asserted in conjunction with a breach of contract claim when the alleged misrepresentation is “extraneous to the contract and involve[s] a duty separate and apart from or in addition to that imposed by the contract.” When the only fraud alleged is that the defendant was not sincere when it promised to perform under the contract, the fraud-based cause of action is duplicative of a breach of contract claim, and will be dismissed. Applying these principles, the Court dismissed Plaintiff’s claims, finding that the “alleged deceit here was integral to the contract, not extraneous or collateral to it as is required in order to make out a claim for fraudulent inducement.”

In sum, a cause of action for fraudulent inducement may be sustained on the basis of an allegation that the defendant made a promise to undertake some action separate and apart from his or her obligations under the contract. However, where a fraud claim arises out of the same facts as the breach of contract claim, and the only fraud alleged is that the defendant was not sincere when it promised to perform under the contract, the fraud claim is duplicative and will be dismissed.