Business litigation often involves both contract and tort claims. A fraud or negligence claim that is deemed “duplicative” of a breach of contract claim, however, will be dismissed. When is that the case? The Westchester Commercial Division and the Appellate Division, Second Department recently answered this question in Oceanview Associates, LLC v. HLS Builders Corp., et al., Index No. 51687/2018, 2020 N.Y. Slip Op. 03519 (2d Dep’t June 24, 2020).
Oceanview Associates, LLC commenced this action to recover damages for an allegedly defectively constructed parapet wall on the roof of a multi-unit residential building. The defendants included the project’s general contractor and superintendent of construction. The complaint asserted claims, inter alia, to recover damages for breach of contract, negligence, and fraud.
Westchester Commercial Division Justice Linda S. Jamieson dismissed the defendants’ negligence and fraud claims pursuant to CPLR 3211(a) on the grounds that the allegations underlying those claims were the same as the allegations underpinning the breach of contract claim. The plaintiff appealed.
The Second Department affirmed the dismissal of the plaintiff’s negligence claim.
“[A] simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated …. This legal duty must spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract.” Clark-Fitzpatrick, Inc. v. Long Is. R.R. Co., 70 N.Y.2d 382, 389 (1987) (citations omitted). “Put another way, where the damages alleged ‘were clearly within the contemplation of the written agreement … [m]erely charging a breach of a ‘duty of due care,’ employing language familiar with tort law, does not, without more, transform a simple breach of contract into a tort claim.’” Dormitory Auth. of the State of N.Y. v. Samson Constr. Co., 30 N.Y.3d 704, 711 (2018) (quoting Clark-Fitzpatrick, Inc., 70 N.Y.2d at 390).
Against this backdrop, the Second Department agreed with the Westchester Commercial Division and concluded: “Here, the complaint did not allege facts that would give rise to a duty owed to the plaintiff that is independent of the duty imposed by the parties’ contract” (slip op. at 3-4).
The Court also affirmed the dismissal of the plaintiff’s fraud claim.
“[W]here…a claim to recover damages for fraud is premised upon an alleged breach of contractual duties and the supporting allegations do not concern representations which are collateral or extraneous to the terms of the parties’ agreement, a cause of action sounding in fraud does not lie.” McKernin v. Fanny Farmer Candy Shops, 176 A.D.2d 233, 234 (2d Dep’t 1991).
Here, the Second Department held that as the plaintiff’s fraud claim was based on the same allegations as its breach of contract claim “and amounted to nothing more than a failure to perform under the contract” (slip op. at 4) (citations omitted), its dismissal was proper.
Takeaway: To survive a challenge that a tort claim is really just a contract claim in tort claim clothing, a party must sufficiently allege that a legal duty, independent of the contract itself, has been violated.
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George Krikorian, a law student at Elisabeth Haub School of Law at Pace University, assisted with the preparation of this post.