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Erika TRONNI, Plaintiff, v. ACCESSORIES DIRECT INTERNATIONAL USA, INC. and Rody Moreira, Defendants.
Defendants bring this pre-answer motion to dismiss the complaint for failure to state a cause of action (CPLR § 3211 [a]  ). Accordingly, for the purpose of this motion, the Court “afford[s] the ‘pleading ․ a liberal construction,’ accept[s] the facts as alleged in the complaint as true, ‘accord plaintiffs the benefit of every possible favorable inference,’ and thus ‘determine only whether the facts as alleged fit within any cognizable legal theory’ ” (Children's Magical Garden, Inc. v. Norfolk Street Development, LLC, 164 A3d 73, 80 [1st Dept 2018] [citing Leon v. Martinez, 84 NY2d 83, 87-88 (1994] ).
For the reason above, the Court turns to the complaint. Plaintiff Erika Tronni sues Accessories Direct (Accessories), a handbag designer and manufacturer, as well as Accessories' president and CEO Rody Moreira (Moreira). Plaintiff states that in her prior job, which she held for over nine years, she handled off-price sales, or sales to designer discount stores, she earned more than $200,000 annually in compensation and benefits. In March 2017, she began discussions with Accessories about a possible job there. She alleges that Moreira sent an email to her recruiter in which he falsely represented that one employee, Kenny Luca, generated over $18 million in sales. Subsequently, on March 22, 2017, plaintiff met with Moreira and Alberto Rosenthal, Accessories' vice president of sales. She alleges that at the meeting the two men made numerous false statements about the company and her prospective position there. By way of example, plaintiff asserts that Moreira told her that the company had more than $20 million in sales in 2016, when in fact sales were around $11 million. He and Rosenthal also stated that Luca earned around $500,000 per year. Plaintiff's value to Accessories, they stated, was her experience with off-price stores, as Accessories had struggled in this area. Plaintiff also states that defendants told her that TK Maxx's complaint against Accessories — that Accessories delivered lower-quality items than the ones TK Maxx purchased — was unfounded. Plaintiff further states that she believed the misrepresentations of Moreira and Rosenthal.
On April 18, 2017, plaintiff met with Moreira and Rosenthal for the second time. They offered, and she accepted, the position of Director of Off-Price Sales. According to plaintiff, she was promised a salary of $100,000, and a draw of $120,000 against future commissions. Furthermore, she states, she was told that she could work from home two days a week for the first 90 days, after which, if she met her sales goals, she could work from home whenever she chose. Plaintiff states that she had concerns about Accessories' future financial stability but relied on Moreira's comments about the company's success. Plaintiff states that had she realized Accessories realized only $11 million in sales she would not have accepted the job offer. Despite the parties' agreement, the complaint states, defendants told plaintiff that it would no longer pay her a monthly draw. In addition, the complaint states that Moreira denied plaintiff's July 31, 2017 request to work from home on a full-time basis. Finally, on August 23, 2017, defendants terminated plaintiff's employment.
In her complaint, plaintiff asserts two causes of action. First, she alleges fraudulent inducement in that defendants induced her to work for them by making false statements about the company and its profitability. Second, she asserts fraudulent misrepresentation in that defendants made material misstatements to them when they recruited her. She seeks a declaratory judgment that defendants engaged in illegal business practices, an injunction permanently barring defendants from engaging in such activities in New York, damages based on her pain and suffering, damages for actual economic harm along with interest, costs, and reasonable attorney's fees.
In moving to dismiss, defendants contend that plaintiff does not state a claim for fraudulent inducement. Even if, as the complaint asserts, defendants lied to induce her to take a job, she cannot show reasonable reliance, especially as she became aware of the alleged misrepresentation well before her termination. As an at-will employee, moreover, she could not have relied on any purported representations of job security. Further, defendants state that plaintiff cannot show damages, as she earned more at Accessories than she earned at her prior job. Plaintiff also does not state or show a causal connection between defendants' misrepresentations and her termination, defendants note. Finally, defendants argue that no claim lies against Moreira in his capacity as president and CEO, and there is no basis for piercing the corporate veil.
Plaintiff opposes the motion. She states that the basis of her claim is not that defendants fired her but that, through fraudulent misrepresentation about the company's financial health, defendants induced her to leave her prior job. Thus, she states, the arguments in the motion are inapplicable. Plaintiff contends that a fraudulent inducement claim exists here because it is distinct from her termination. Due to this misunderstanding of her complaint, plaintiff alleges, defendants rely on caselaw which is readily distinguishable. Plaintiff states that she can rely on the statements Mr. Moreira made to her recruiter in support of her claims. She alleges that she sustained damages due to the misrepresentation, in that she left a secure job as a result and could no longer go back to her former employment. Plaintiff clarifies that, as damages, she does not rely on any lost income during her period of employment with defendants, but instead seeks the amount she would have received had she remained at her prior place of employment. Plaintiff contends that defendants' argument that plaintiff cannot pierce the corporate veil is irrelevant because she has the right to sue a corporate officer where, as here, the individual participated in the fraud.1
In reply, defendants argue that they understood the complaint perfectly, and that it does not state a viable cause of action against them. They claim that because plaintiff earned more money at their company she cannot argue damages except as they relate to her termination — and, as they argued, this is not a basis for a claim against them. Defendants state that in cases which recognize a cause of action the misrepresentation relates to the nature of the job the employer offers to the employee. Here, defendants argue, they accurately represented the nature of the job, but allegedly misrepresented the company's financial stability. This, in turn, relates to the security of plaintiff's job, defendants argue, and thus is not actionable. They further note that the complaint does not support her allegation of fraud, as it notes that they informed her defendants were struggling to develop their off-price sales and her job would be to use her experience and contacts to develop this portion of their sales. They reiterate that their alleged misrepresentation of the company's sales figures is not relevant.
Initially, the Court notes that plaintiff was an at-will employee and, as the parties agree, “absent a constitutionally impermissible purpose, a statutory proscription, or an express limitation in the individual contract of employment, an employer's right at any time to terminate an employment at will remains unimpaired” (Smalley v. Dreyfus Corp., 10 NY3d 55, 58, reargument denied, 10 NY3d 852  ). In Smalley, five at-will employees contended that they accepted job offers from the defendant and remained at their jobs in reliance on the defendant's fraudulent representation that it had no intention to buy a fund management company and merge it with the defendant's existing fund management corporation. The Court determined that the purported injury — accepting employment with a company that was about to merge with another company, thus resulting in the loss of the plaintiffs' jobs — was merely a “pathway[ ] around” the plaintiffs' at-will status. Moreover, they stated, there was “no injury separate and apart from termination” (id. at 59). Where the asserted fraud “is predicated on an alleged expression of a future expectation or intent to perform, rather than on a misrepresentation of fact,” a breach of contract rather than a fraudulent inducement claim exists (see Pate v. BNY Mellon-Alcentra Mezzanine III, LP, 163 AD3d 429 [1st Dept 2018] ).
For the above reasons, a plaintiff who is an at-will employee “will generally be unable to establish reasonable reliance on a prospective employer's misrepresentations” (Hobler v. Hussain, 111 AD3d 1006, 1007 [3rd Dept 2013] ). A cause of action for fraudulent inducement nonetheless can exist in an at-will employment situation. For example, in Laduzinski v. Alvarez & Marsal Taxand LLC (132 AD3d 164 [1st Dept 2015] ), the plaintiff quit his job and signed on to work with the defendant as senior director. Although the plaintiff knew that he was to use his contacts to develop the company's client base, he alleged that he relied on defendants' misrepresentation that primary role would be as manager of the defendants' companies' workload. The Laduzinski Court found that because the job description was false, and the defendants hired the plaintiff solely to obtain his contact list for themselves, the plaintiff had successfully alleged “an injury separate and distinct from termination” and therefore the complaint supported a fraudulent inducement cause of action (Laduzinski, 132 AD3d at 168). Moreover, the court found that the plaintiff's damages were not speculative because stemmed from his loss of employment with his former employer, J.P. Morgan (id.). In Laduzinski, too, the court determined that the plaintiff had relied on the misrepresentation to his detriment. Absent evidence of detrimental reliance, no claim will lie (see Meyercord v. Curry, 38 AD3d 315, 316 [1st Dept 2007] ).
After careful consideration of the parties' legal briefs and of the additional cases the Court has found in its research, the Court grants the motion to dismiss. Here, plaintiff cites to three alleged misrepresentations: first, that they had done $20 million in business; second, that an employee at the business earned a higher commission than he had earned in fact; and third, that defendants had not provided TJ Maxx with a lesser product than the company had ordered from them. As defendants point out, however, the complaint acknowledges that plaintiff found the first representation to be suspect, and that she quickly learned about the employee's commissions and the truth of TJ Maxx's allegations. Although the complaint states that plaintiff would not have left her job had she been aware of the above, the document does not indicate that plaintiff suffered any harm due to these three misrepresentations or that she left the company or looked for work elsewhere because of them. Moreover, plaintiff does not challenge the statement that she earned more money with defendants than with her former employer or that she raised any of these issues prior to her termination. Thus, she has not alleged detrimental reliance (id.).2 Plaintiff's remaining allegations — that defendants discontinued her monthly draw and denied her the right to work from home — relate to their performance pursuant to the contract and therefore do not support a claim for fraudulent inducement (see Manas v. VMS Assoc., LLC, 53 AD3d 451, 453-54 [1st Dept 2008].
The Court has considered all of the parties' arguments and they do not change its decision that plaintiff's claims constitute an attempt to avoid the prohibition against suing for termination of an at-will employment agreement (see Smalley v. Dreyfus Corp., 10 NY3d at 59). Therefore, it is
ORDERED that the motion is granted and the action is dismissed.
1. Plaintiff also points out that defendants partially rely on affidavits or plaintiff's W-2 form, and she states these are impermissible as “documentary evidence” in a CPLR § 3211 motion. The Court rejects this position (see Wiernik v. Kurth, 59 AD3d 535, 537 [2nd Dept 2009] ).
2. To the extent that plaintiff contends she sustained financial harm because she would have retained her former job and continued to be employed after the date on which defendants fired her, plaintiff's argument is related to her termination and thus not the basis for a cause of action.
Carmen Victoria St. George, J.
Response sent, thank you
Docket No: 154319/2018
Decided: October 24, 2018
Court: Supreme Court, New York County, New York.
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