Greenstone/Fontana Corp. v. Feldstein, 2008 NY Slip Op 51387(U) (N.Y. Sup. Ct. 6/23/2008)
| Decision Date | 23 June 2008 |
| Docket Number | 019510/2006. |
| Parties | GREENSTONE/FONTANA CORPORATION F/K/A TOPLINE ADVERTISING, INC., Plaintiff/Counterclaim-Defendant, v. NEIL FELDSTEIN INDIVIDUALLY, NEIL BUICK CORPORATION, NEIL LINCOLN-MERCURY/HYUNDAI CORPORATION, WORLDWIDE AUTOMOTIVE, LLC, WORLDWIDE AUTOMOTIVE III, LLC, "XYZ No. 1" through "XYZ No 50", (the last fifty names being fictitious and unknown to Plaintiff, the persons and/or entities intended being the persons and/or entities, if any, that received and/or benefitted from the services provided by the Plaintiff described in the Verified Complaint), Defendants/Counterclaim-Plaintiffs, TOPLINE ADVERTISING, INC., JEANNE FONTANA, ROBERT WILLIAMS, RON GREENSTONE and REBECCA KOPPRASCH, Additional Counterclaim-Defendants. |
| Court | New York Supreme Court |
For Third Party Defendants: Westerman Ball Ederer Miller & Sharfstein, LLP, Attention: Jeffrey A. Miller, Esq., Mineola, NY.
For Plaintiff Greenstone/Fontana: Forchelli Curto Schwartz Mineo Carlino & Cohn, LLP, Attention: Andrew E. Curto, Esq., Mineola, NY.
For Neil Feldstein and corporate defendants/ counter Claim Plaintiffs: Ackerman Levine Cullen Brickman & Limmer, LLP, Attention: John M. Brickman, Esq., Great Neck, NY.
The motion by counterclaim-defendants, Jeanne Fontana, Robert Williams, Ron Greenstone ("Principals") and Rebecca Kopprasch ("Kopprasch"), for an order pursuant to CPLR 3211(a)(7) dismissing all counterclaims asserted by defendants-counterclaim plaintiffs, Neil Feldstein individually, Neil Buick Corporation, Neil Lincoln-Mercury/Hyundai Corporation, Worldwide Automotive, LLC, and Worldwide Automotive III, LLC's, ("Dealerships") against them, or, in the alternative, an order pursuant to CPLR 3211(a)(5) dismissing the Dealerships' second, third, fourth, fifth, sixth, seventh, eighth, ninth, tenth, eleventh and twelfth counterclaims as barred by the doctrines of res judicata and/or collateral estoppel, is determined as follows.
The motion by plaintiff, Greenstone/Fontana Corporation, and Topline Advertising, Inc. as a defendant on the counterclaim, ("Agencies") for an order pursuant to CPLR 1003 and 3211(a) dismissing all of the Dealerships' counterclaims against them is determined as follows.
In this action, the Agencies seek to recover sums allegedly due to them for advertising services they provided to the Dealerships from 1988 up until August 14, 2006. They allege that they prepared and designed advertisements, purchased media space and time, and placed advertisements in print and electronic media on the Dealerships' behalf and that the Dealerships have a balance owing of $118,462.52. The Agencies also allege that with intentional malice and disregard of their rights, the Dealerships have misappropriated and converted their advertising designs resulting in both unfair competition and the Dealerships' unjust enrichment and that the Dealerships have breached the covenant of good faith and fair dealing.
The Dealerships plead counterclaims against the Agencies, the Principals and Kopprasch, an employee of the Agencies, seeking to recover damages for fraud and violations of the Racketeering Influenced and Corrupt Organizations Act ("RICO") (18 U.S.C. § 1962); the defendant Worldwide Automotive III seeks to recover for breach of contract. The remaining Dealerships advanced claims sounding in breach of contract in a prior action, Neil Buick Corporation, Neil Lincoln-Mercury/Hyundai Corp. and Worldwide Automotive III, LLC v Topline Advertising Inc. and Greenstone/Fontana Corporation, Index No. 016004-06 (Supreme Court Nassau County) ("Prior Action"). The Dealerships claim that the Agencies and Principals agreed to charge their the lowest commission rates of all and that they failed to do so. The Dealerships' fraud and RICO counterclaims are premised upon the Agencies', the Principals' and/or Kopprasch's alleged falsification of billing records, specifically, Affidavits of Performance, which were supplied to the Agencies by the television and radio stations and which set forth the pertinent information concerning each ad run as well as the amount due the radio or television station and the agency.
In the Prior Action, the Dealerships, with the exceptions of Worldwide Automotive LLC, sought to recover damages from the Agencies for breach of contract, fraud, unjust enrichment, breach of fiduciary duty, and to impose a constructive trust on the Agencies' assets. In response to the Agencies' motion pursuant to CPLR 3211 to dismiss that complaint, on January 24, 2007, the Dealerships stipulated to discontinue all claims except the breach of contract claims and "any cause[s] of action against defendants [which are] based upon misrepresentations made by defendants, their agents, principals, employees, or assigns, which . . . were extraneous to any contract that was then being negotiated between the parties or existed previously between the parties." (Emphasis added).
The Agencies, Principals and Kopprasch seek dismissal of the fraud and RICO causes of action pursuant to the doctrines of res judicata and collateral estoppel based on that Stipulation of Discontinuance. In the alternative, they seek dismissal of those causes of action for failure to state a cause of action. Dismissal of Worldwide Automotive LLC's breach of contract claims is also sought due to the identical claims which were brought by the other Dealerships in the prior pending action.
In determining whether a complaint is sufficient to withstand a motion to dismiss pursuant to CPLR § 3211(a)(7) "the sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law." Guggenheimer v. Ginzburg, 43 NY2d 268 (1977). The facts as alleged must be accepted by the court as true and are to be accorded every favorable inference. On a motion to dismiss for failure to state a cause of action, the court's attention "should be focused on whether the plaintiff has a cause of action rather than on whether he has properly stated one." Rovello v. Orofino Realty Co., 40 NY2d 633, 634 (1976).
"Under the transactional approach to res judicata issues, once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy.' " State of New York v. Seaport Manor, 19 AD3d 609, 610 (2d Dept. 2005) quoting O'Brien v. City of Syracuse, 54 NY2d 353, 357 (1981). " A Stipulation of Settlement which discontinues a claim with prejudice is subject to the doctrine of res judicata." Id. at 610. And, the doctrine of res judicata applies not only to parties of record, but to those in privity with them as well. Id., citing Watts v. Swiss Bank Corp., 27 NY2d 270 (1970).
The First and Second Counterclaims: Fraud
"The essential elements of a cause of action sounding in fraud are a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury." Orlando v. Kukielka, 40 AD3d 829, 831 (2d Dept. 2007), citing Lama Holding Co. v. Smith Barney, Inc., 88 NY2d 413, 421(1996); Channel Master Corp. v. Aluminum Limited Sales, Inc., 4 NY2d 403, 406-407 (1958); Urguhart v. Philbor Motors, Inc., 9 AD3d 458 (2nd Dept. 2004).
Here, whether the fraud causes of action survive the Stipulation of Discontinuance and whether they state a claim under CPLR 3211(a)(7) present the identical issue: The Stipulation of Discontinuance permits fraud claims based on misrepresentations "extraneous to the contract" to be advanced. While a fraud claim does not lie where the only fraud alleged arises from the breach of contract, "a misrepresentation of material fact that is collateral to the contract and serves as an inducement for the contract is sufficient to sustain a cause of action alleging fraud." Selinger Enterprises, Inc. v. Cassuto, 50 AD3d 766 (2d Dept. 2008) citing WIT Holding Corp. v. Klein, 282 AD2d 527, 528 (2d Dept. 2001); Tiffany at Westbury Condominium v. Marelli Dev. Corp., 40 AD3d 1073, 1076 (2d Dept. 2007).
By way of their first and second counterclaims, the Dealerships seek to recover of the Agencies and Principals respectively for fraud based upon falsified billing. The Dealerships claim that pursuant to their agreement, the commission due the Agencies was equal to a percentage of the amount charged by a radio or television station for an ad. The Dealerships allege that in an attempt to curtail fraudulent billing in the advertising industry, the Association of National Advertisers and the Radio and Television Advertising Bureau, which are national industry trade groups, require radio and television stations to maintain "Affidavits of Performance." These Affidavits of Performance are made under oath and the contents are averred under the penalties of perjury. They attest to an ad's content, the costs, and date and time of air play as proof of services. The Dealerships allege that the Affidavits of Performance which were provided to the Agencies by the radio and television station reflected the total amount owed, i.e., the amount due the radio or television station as well as the commission due the Agencies.
The Dealerships allege that rather than forwarding a true copy of the Affidavits of Performance to them with the accompanying invoice, the Agencies, at the direction of the Principals and/or Kopprasch, sent altered Affidavits of Performance with the total cost of the advertisements "whited out" and a higher figure including additional commissions substituted, thereby resulting in the Dealerships being regularly overcharged.
The Dealerships assert that they did not...
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