DAIRY KING INC v. BOAR HEAD PROVISIONS CO INC (2026)

DECISION & ORDER

In an action, inter alia, to recover damages for breach of contract, the defendants appeal, and the plaintiffs cross-appeal, from an order of the Supreme Court, Kings County (Reginald A. Boddie, J.), dated March 8, 2021.  The order, insofar as appealed from, denied those branches of the defendants’ separate motions which were pursuant to CPLR 3211(a) to dismiss the fifth and sixth causes of action insofar as asserted against each of them.  The order, insofar as cross-appealed from, granted those branches of the motion of the defendant Frank Brunckhorst Co., LLC, which were pursuant to CPLR 3211(a) to dismiss the first, second, third, fourth, seventh, eighth, ninth, and tenth causes of action and the demand for punitive damages insofar as asserted against it and, in effect, granted those branches of the motion of the defendant Boar's Head Provisions Co., Inc., which were pursuant to CPLR 3211(a) to dismiss the first, second, third, fourth, seventh, eighth, ninth, and tenth causes of action and the demand for punitive damages insofar as asserted against it.

ORDERED that the order is modified, on the law, (1) by deleting the provision thereof granting those branches of the motion of the defendant Frank Brunckhorst Co., LLC, which were pursuant to CPLR 3211(a) to dismiss the second, fourth, seventh, eighth, ninth, and tenth causes of action insofar as asserted it, and substituting therefor a provision denying those branches of the motion, (2) by deleting the provision thereof, in effect, granting those branches of the motion of the defendant Boar's Head Provisions Co., Inc., which were pursuant to CPLR 3211(a) to dismiss the second, fourth, seventh, eighth, ninth, and tenth causes of action insofar as asserted it, and substituting therefor a provision denying those branches of the motion, and (3) by deleting the provision thereof denying those branches of the defendants’ separate motions which were pursuant to CPLR 3211(a) to dismiss the fifth and sixth causes of action insofar as asserted against each of them, and substituting therefor a provision granting those branches of the motions;  as so modified, the order is affirmed insofar as cross-appealed from, without costs or disbursements.

The plaintiffs, Frank Barone and his company, Dairy King, Inc. (hereinafter Dairy King), commenced this action in 2020 against the defendants, Boar's Head Provisions Co., Inc. (hereinafter Boar's Head), and Frank Brunckhorst Co., LLC (hereinafter Brunckhorst).  The complaint alleged the following.  Boar's Head produced “delicatessen edibles,” which were distributed through Brunckhorst.  Brunckhorst distributed the products to authorized distributors, who, in turn, distributed the products to stores through the acquisition of distribution routes.  Boar's Head exercised a large degree of control over the authorized distributors and, among other things, required its approval of the sale of a distribution route from one authorized distributor to another and prohibited authorized distributors from engaging in any other food-related business.  In 1999, Dairy King became an authorized distributor and purchased a distribution route.  In August 2019, the defendants informed the plaintiffs that they would no longer provide Boar's Head products to Dairy King and that Dairy King would no longer be considered an authorized distributor.

The complaint asserted 10 causes of action, alleging tortious interference with contract (first cause of action), breach of contract (second cause of action), fraudulent inducement (third cause of action), economic duress (fourth cause of action), violations of the Franchise Sales Act (General Business Law § 680 et seq.) (fifth and sixth causes of action), and violations of the Labor Law (seventh through tenth causes of action).  The complaint also included a demand for punitive damages.

The defendants separately moved pursuant to CPLR 3211(a) to dismiss the complaint insofar as asserted against each of them.  In an order dated March 8, 2021, the Supreme Court, among other things, granted those branches of Brunckhorst's motion which were pursuant to CPLR 3211(a) to dismiss the first, second, third, fourth, seventh, eighth, ninth, and tenth causes of action and the demand for punitive damages insofar as asserted against it, and, in effect, granted those branches of Boar's Head's motion which were pursuant to CPLR 3211(a) to dismiss those causes of action and the demand for punitive damages insofar as asserted against it.  The court denied those branches of the defendants’ separate motions which were pursuant to CPLR 3211(a) to dismiss the fifth and sixth causes of action insofar as asserted against each of them.  The defendants appeal, and the plaintiffs cross-appeal.

On a motion to dismiss pursuant to CPLR 3211(a), the complaint must be liberally construed (see id. § 3026;  Leon v. Martinez, 84 N.Y.2d 83, 87, 614 N.Y.S.2d 972, 638 N.E.2d 511).  The court must accept the facts as alleged in the complaint as true and accord the plaintiff the benefit of every possible favorable inference (see Leon v. Martinez, 84 N.Y.2d at 87, 614 N.Y.S.2d 972, 638 N.E.2d 511).  In assessing a motion to dismiss under CPLR 3211(a)(7) for failure to state a cause of action, the court must “determine only whether the facts as alleged fit within any cognizable legal theory” (Leon v. Martinez, 84 N.Y.2d at 87–88, 614 N.Y.S.2d 972, 638 N.E.2d 511;  see Langley v. Melville Fire Dist., 213 A.D.3d 748, 750, 183 N.Y.S.3d 516).  Under CPLR 3211(a)(1), dismissal is warranted “only where the documentary evidence utterly refutes [the] factual allegations [in the complaint], conclusively establishing a defense as a matter of law” (Goshen v. Mutual Life Ins. Co. of N.Y., 98 N.Y.2d 314, 326, 746 N.Y.S.2d 858, 774 N.E.2d 1190;  see Leon v. Martinez, 84 N.Y.2d at 88, 614 N.Y.S.2d 972, 638 N.E.2d 511).

Pursuant to CPLR 3211(a)(5), a party may move to dismiss a cause of action on the ground that it may not be maintained because of a release.  “Although a defendant has the initial burden of establishing that it has been released from any claims, a signed release shifts the burden of going forward to the plaintiff to show that there has been fraud, duress or some other fact which will be sufficient to void the release” (Centro Empresarial Cempresa S.A. v. América Móvil, S.A.B. de C.V., 17 N.Y.3d 269, 276, 929 N.Y.S.2d 3, 952 N.E.2d 995 [alterations and internal quotation marks omitted];  see Cames v. Craig, 181 A.D.3d 851, 852, 119 N.Y.S.3d 888).  Here, while a general release executed by the plaintiffs, by its terms, released the defendants from all known and unknown causes of action that accrued on or before October 29, 2019, the allegation in the complaint that the defendants threatened to deny approval of the plaintiffs’ sale of the distribution route was sufficient to support a possible finding that the general release was obtained under circumstances that indicated unfairness (see Farber v. Breslin, 47 A.D.3d 873, 877, 850 N.Y.S.2d 604;  see also China Dev. Indus. Bank v. Morgan Stanley & Co. Inc., 86 A.D.3d 435, 437, 927 N.Y.S.2d 52;  Pashtrik Realty Corp. v. Gjonlekaj, 234 A.D.2d 54, 54, 650 N.Y.S.2d 559).  The defendants’ contention that the plaintiffs ratified the general release is not properly before this Court, because it relies on matter dehors the record (see Yakubov v. Gaft, 231 A.D.3d 1099, 1101, 220 N.Y.S.3d 415).  Accordingly, the Supreme Court properly denied dismissal of the complaint on the ground that the causes of action were barred by the general release.

Contrary to the plaintiffs’ contention, the complaint failed to state a cause of action to recover damages for tortious interference with contract, as it failed to allege a breach of a valid contract between the plaintiffs and a third party and failed to allege the defendants’ intentional procurement of the third party's breach of such a contract (see Delanerolle v. St Catherine of Sienna Med. Ctr., 231 A.D.3d 1013, 1014–1015, 221 N.Y.S.3d 555;  Influx Capital, LLC v. Pershin, 186 A.D.3d 1622, 1624, 131 N.Y.S.3d 712).  Accordingly, the Supreme Court properly granted that branch of Brunckhorst's motion which was to dismiss the first cause of action insofar as asserted against it and properly, in effect, granted that branch of Boar's Head's motion which was to dismiss that cause of action insofar as asserted against it.

However, the Supreme Court should have denied those branches of the defendants’ separate motions which were to dismiss the second cause of action, alleging breach of contract, insofar as asserted against each of them.  “Even if a party is not in breach of its express contractual obligations, it may be in breach of the implied covenant of good faith and fair dealing when it exercises a contractual right as part of a scheme to deprive the other party of the benefit of its bargain” (JLO Dev. Corp. v. Amalgamated Bank, 232 A.D.3d 705, 706–707, 222 N.Y.S.3d 517;  see Ahmed Elkoulily, M.D., P.C. v. New York State Catholic Healthplan, Inc., 153 A.D.3d 768, 770, 61 N.Y.S.3d 83).  Here, the complaint adequately alleged that the defendants breached the implied covenant of good faith and fair dealing by confiscating one of the plaintiffs’ accounts and terminating the parties’ alleged distribution agreement without justification or good cause (see JLO Dev. Corp. v. Amalgamated Bank, 232 A.D.3d at 706–707, 222 N.Y.S.3d 517;  Ahmed Elkoulily, M.D., P.C. v. New York State Catholic Healthplan, Inc., 153 A.D.3d at 770–771, 61 N.Y.S.3d 83).  Contrary to the defendants’ contention, an excerpt of the defendants’ sales policy and the plaintiffs’ acknowledgment thereof did not utterly refute the plaintiffs’ allegations (see Array BioPharma, Inc. v. AstraZeneca AB, 184 A.D.3d 463, 464, 126 N.Y.S.3d 91;  Braddock v. Braddock, 60 A.D.3d 84, 91–92, 871 N.Y.S.2d 68).

Affording the complaint a liberal construction and accepting the facts as alleged therein as true, the complaint failed to state a cause of action to recover damages for fraudulent inducement, inasmuch as it failed to allege reasonable reliance by the plaintiffs upon the defendants’ alleged misrepresentations (see CPLR 3016[b];  Riggs v. Brooklyn Hosp. Ctr., 207 A.D.3d 405, 406–407, 172 N.Y.S.3d 430;  Avery v. WJM Dev. Corp., 197 A.D.3d 1141, 1144, 153 N.Y.S.3d 511).  Thus, contrary to the plaintiffs’ contention, the Supreme Court properly granted that branch of Brunckhorst's motion which was to dismiss the third cause of action insofar as asserted against it and properly, in effect, granted that branch of Boar's Head's motion which was to dismiss that cause of action insofar as asserted against it.

The fourth cause of action sought to recover damages for economic duress.  Economic duress “permits a complaining party to void a contract and recover damages when it establishes that it was compelled to agree to the contract terms because of a wrongful threat by the other party which precluded the exercise of its free will” (805 Third Ave. Co. v. M.W. Realty Assoc., 58 N.Y.2d 447, 451, 461 N.Y.S.2d 778, 448 N.E.2d 445).  “The existence of economic duress or business compulsion is demonstrated by proof that immediate possession of needful goods is threatened or ․ by proof that one party to a contract has threatened to breach the agreement by withholding goods unless the other party agrees to some further demand” (Austin Instrument, Inc. v. Loral Corp., 29 N.Y.2d 124, 130, 324 N.Y.S.2d 22, 272 N.E.2d 533 [citation and internal quotation marks omitted]).  Here, the complaint alleged that the defendants threatened, inter alia, to “take all [of the plaintiffs’] stores away,” which was adequate to allege economic duress (see id. at 130–131, 324 N.Y.S.2d 22, 272 N.E.2d 533).  Accordingly, the Supreme Court should have denied those branches of the defendants’ separate motions which were to dismiss the fourth cause of action insofar as asserted against each of them.

The Supreme Court should have granted those branches of the defendants’ separate motions which were to dismiss the fifth and sixth causes of action, alleging violations of the Franchise Sales Act, insofar as asserted against each of them.  Pursuant to General Business Law § 691(1), a person who offers or sells a franchise in violation of specified sections of the Franchise Sales Act “is liable to the person purchasing the franchise for damages” (see Tyszka v. Make & Take Holding, LLC, 72 A.D.3d 1620, 1621, 900 N.Y.S.2d 211).  However, an action for such damages must be commenced within three years after the act or transaction constituting the violation (see General Business Law § 691[4]).  Here, since the complaint alleged that the plaintiffs purchased the distribution routes in 1999 and 2001, the causes of action alleging violations of the Franchise Sales Act were time-barred.

The Supreme Court erred in granting dismissal of the seventh through tenth causes of action on the ground that Barone was not an employee of the defendants.  “[T]he critical inquiry in determining whether an employment relationship exists pertains to the degree of control exercised by the purported employer over the results produced or the means used to achieve the results” (Bynog v. Cipriani Group, Inc., 1 N.Y.3d 193, 198, 770 N.Y.S.2d 692, 802 N.E.2d 1090).  “Where the record shows more than incidental control, ․ an issue of fact arises as to whether there is an employer-employee relationship” (Velasquez v. Sunstone Red Oak, LLC, 213 A.D.3d 883, 884, 184 N.Y.S.3d 787).  Here, the complaint alleged that the defendants exerted more than incidental control over the results produced and the means employed to achieve those results, including setting rules for work hours, setting prices, dictating marketing campaigns, and enforcing cosmetic standards (see Matter of Jani–King of N.Y., Inc. [Commissioner of Labor], 214 A.D.3d 1088, 1090–1091, 184 N.Y.S.3d 473).  Accordingly, the Supreme Court should have denied those branches of the defendants’ separate motions which were to dismiss the seventh through tenth causes of action insofar as asserted against each of them.

Contrary to the plaintiffs’ contention, the complaint failed to allege an independent tort sufficient to warrant punitive damages (see Michael Davis Constr., Inc. v. 129 Parsonage Lane, LLC, 194 A.D.3d 805, 808, 149 N.Y.S.3d 118).

BRATHWAITE NELSON, J.P., CHRISTOPHER, WAN and GOLIA, JJ., concur.