SUTTON ASSOCIATES v. LEXIS NEXIS PLC PLC

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Supreme Court, Nassau County, New York.

SUTTON ASSOCIATES, Plaintiff, v. LEXIS-NEXIS, A Member of the Reed Elsevier PLC Group, The Reed Elsevier PLC Group, and James Haggerty, Defendants.

Decided: April 29, 2003

Scott F. Guardino, P.C., Albertson, for Plaintiff. Proskauer Rose, LLP, New York, Reilly & Reilly, LLP, Mineola, for Defendant.

INTRODUCTION

Defendants Lexis-Nexis, Reed Elsevier PLC Group and James Haggerty move for an order (a) pursuant to CPLR 3211(a)(4), (5), and (7) dismissing the Plaintiffs' complaint and (b) dismissing all claims against co-defendant James Haggerty based on the failure to properly effectuate service of process pursuant to CPLR 3211(a)(8) and CPLR 308(1);  alternatively, consolidating the above-captioned matter with a related action pending before this Court entitled Reed Elsevier, Inc., d/b/a Lexis-Nexis v. Sutton Associates.

BACKGROUND

The Plaintiff, Sutton Associates, Inc. (“Sutton”), commenced the within action alleging that the Defendants Lexis-Nexis and James Haggerty (“Haggerty”) made false statements with respect to the subscription rates it charged Sutton for access to certain computer-assisted research services.

Sutton's fraud theory is predicated on allegations that Lexis-Nexis representatives, including Haggerty, falsely and fraudulently represented to Sutton that the subscription rates it intended to charge Sutton were the “best rates Lexis could offer” (Amended Cmplt., ¶ 15);  that these rates were similar to those paid by similarly situated businesses;  and that none of these similar businesses “were receiving a lower rate” (Amended Cmplt.,¶ 26-38).

According to Sutton, Haggerty's representations-on which Sutton claims to have relied-were “false and fraudulent when made” (Amended Cmplt., ¶¶ 29-30) since Sutton later allegedly discovered that comparable businesses were paying significantly less for similar services (Amended Cmplt., ¶ 32).

Moreover, Sutton contends that all the Lexis-Nexis subscriptions agreements contained confidentiality provisions which “prevented Sutton from disclosing the terms of the agreement to third persons” (Amended Cmplt., ¶ 34), and that it was constrained to pass on the Lexis-Nexis' “exorbitant fees” to its customers (Amended Cmplt., ¶ 49).

After terminating its relationship with Lexis-Nexis, Sutton commenced the within action against Lexis-Nexis and Haggerty, alleging causes of action for breach of contract, fraud, violation of General Business Law § 349 and declaratory relief.   The amended complaint seeks relief on the same theories.

Shortly thereafter, Lexis-Nexis commenced a related action in this Court to recover $168,054.09 from Sutton based upon Sutton's alleged failure to make payments due and owing under the subscription agreements (Defs' Exh. “3”).

DISCUSSION

A. General Business Law § 349

Accepting as true, the facts alleged in the Plaintiff's amended complaint, and affording them the benefit of every possible favorable inference (Sokoloff v. Harriman Estates Development Corp., 96 N.Y.2d 409, 414, 729 N.Y.S.2d 425, 754 N.E.2d 184 [2001].   See also, 511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 152, 746 N.Y.S.2d 131, 773 N.E.2d 496 [2002];  Polonetsky v. Better Homes Depot, 97 N.Y.2d 46, 54, 735 N.Y.S.2d 479, 760 N.E.2d 1274 [2001];  Leon v. Martinez, 84 N.Y.2d 83, 87, 88, 614 N.Y.S.2d 972, 638 N.E.2d 511 [1994] ), the Court concludes that cause of action founded upon violation of General Business Law § 349 must be dismissed.

 “General Business Law article 22 A, of which General Business Law §§ 349 and 350 are a part, is addressed to practices which ‘have a broader impact on consumers at large.   Private contract disputes, unique to the parties * * * would not fall within the ambit of the statute’.”  Canario v. Gunn, 300 A.D.2d 332, 751 N.Y.S.2d 310 (2nd Dept.2002), quoting from, Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20, 25, 623 N.Y.S.2d 529, 647 N.E.2d 741 (1995);  and Fekete v. GA Ins. Co. of New York, 279 A.D.2d 300, 719 N.Y.S.2d 52 (1st Dept.2001).

 The purported misconduct attributed to Lexis-Nexis arises out of alleged misstatements with respect to prices and pricing schedules offered to a single commercial entity.   These alleged wrongs do not establish that Lexis-Nexis “engaged in acts or practices which were deceptive or misleading and which had an impact on consumers at large.”  Drepaul v. Allstate Ins. Co., 299 A.D.2d 391, 393, 749 N.Y.S.2d 439 (2nd Dept.2002);  and Korn v. First UNUM Life Ins. Co., 277 A.D.2d 355, 356, 717 N.Y.S.2d 606 (2nd Dept.2000).   Rather, Sutton's claims concern a private commercial dispute involving the two businesses involved in the transaction negating the applicability of General Business Law § 349.   See, e.g., Hassett v. New York Central Mut. Fire Ins. Co., 302 A.D.2d 886, 753 N.Y.S.2d 788, 789 (4th Dept.2003);  Security Mut. Life Ins. Co. of New York v. Dipasquale, 283 A.D.2d 182, 724 N.Y.S.2d 594 (1st Dept.2001);  Canario v. Gunn, supra;  Drepaul v. Allstate Ins. Co., supra;  Sheth v. New York Life Ins. Co., 273 A.D.2d 72, 73-74, 709 N.Y.S.2d 74 (1st Dept.2000).

Thus, Plaintiff's course of action based upon General Business Law § 349 must be dismissed.

B. Fraud

 The “elements of common-law fraud are a representation of a material fact, falsity, scienter, reliance, and injury.”  Kline v. Taukpoint Realty Corp., 302 A.D.2d 433, 754 N.Y.S.2d 899 (2nd Dept.2003).   See also, Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 421, 646 N.Y.S.2d 76, 668 N.E.2d 1370 (1996);  Clarke v. Wallace Oil Co., Inc., 284 A.D.2d 492, 493, 727 N.Y.S.2d 139 (2nd Dept.2001);  and Cohen v. Houseconnect Realty Corp., 289 A.D.2d 277, 734 N.Y.S.2d 205 (2nd Dept.2001).   The reliance alleged must be justified and reasonable.  802 F Realty Corp. v. American Intern. Specialty Lines Ins. Co., 295 A.D.2d 398, 743 N.Y.S.2d 533 (2nd Dept.2002);  and Laurel Ridge, LLC v. A. Alfredo Nurseries, Inc., 286 A.D.2d 710, 730 N.Y.S.2d 447 (2nd Dept.2001).   See also, 60A N.Y. Jur.2d Fraud and Deceit § 138.

 The material averments at issue effectively allege that over a period of years, Sutton-an entity specializing in private investigation-purportedly relied on statements made by Lexis-Nexis personnel that the rates offered were the “lowest” then available and that comparable rates were being paid by similarly situated business.

Assuming that these cryptic statements could be considered material in a commercial setting, the Court agrees that, at best, they constitute nonactionable, “puffery” and/or commendatory sales representations on which a sophisticated commercial entity could not reasonably rely.   See, e.g., Bader v. Siegel, 238 A.D.2d 272, 657 N.Y.S.2d 28 (1st Dept.1997);  and Sirohi v. Lee, 222 A.D.2d 222, 634 N.Y.S.2d 119 (1st Dept.1995).   See also, Dorfman Organization, Ltd. v. Greater New York Mut., Ins. Co., 279 A.D.2d 437, 719 N.Y.S.2d 573 (1st Dept.2001);  Sheth v. New York Life Ins. Co., supra;  and Reich v. Mitrani Plasterers Co., Inc., 268 A.D.2d 256, 701 N.Y.S.2d 368 (1st Dept.2000).   See gen'lly, 60A N.Y. Jur.2d Fraud and Deceit § 34.   Moreover, irrespective of whether the rate was the “lowest available” or not, or whether comparable businesses received higher or lower rates, Sutton was not constrained to enter into additional subscription agreements if it believed the proposed fee schedule offered by Lexis-Nexis was unfair, excessive or exorbitant.

The Court notes further that the Sutton's own complaint suggests that no injury was sustained by virtue of Lexis-Nexis' conduct since, according to Sutton, the allegedly excessive rates charged were simply passed on to their customers (Amended Cmplt., ¶ 49).

Plaintiff's cause of action sounding in fraud must be dismissed.

C. Breach of Contract/Implied Covenant of Good Faith

The third cause of action consists of four, conclusory paragraphs which incorporate the preceding factual averments and then allege without particularity that the “actions of “Lexis * * * constitute a material breach of the implied covenant of good faith and fair dealing” (Amended Cmplt., ¶ 53).

 Although a duty of good faith and fair dealing is implicit in every contract (1-10 Industry Assoc., LLC v. Trim Corp. of America, 297 A.D.2d 630, 747 N.Y.S.2d 29 [2nd Dept.2002].   See also, 511 West 232nd Owners Corp. v. Jennifer Realty Co., supra at 153, 746 N.Y.S.2d 131, 773 N.E.2d 496;  and Dalton v. Educational Testing Service, 87 N.Y.2d 384, 389-390, 639 N.Y.S.2d 977, 663 N.E.2d 289 [1995] ), the duty cannot be used to create independent obligations beyond those agreed upon and stated in the express language of the contract.  PT Kaltim Prima Coal v. AES Barbers Point, Inc., 180 F.Supp.2d 475, 483 (S.D.N.Y.2001);  and Granite Partners, L.P. v. Bear, Stearns & Co. Inc., 17 F.Supp.2d 275, 306 (S.D.N.Y.1998).

 Here, the complaint alleges that Lexis-Nexis fraudulently induced Sutton to pay exorbitant subscription rates, but fails to identify any specific contractual provision actually breached by Lexis.   See, Stabulas v. Brooks Piece Dye Works Corp., 111 A.D.2d 803, 804, 490 N.Y.S.2d 549 (2nd Dept.1985).   See also, Murrin v. Ford Motor Co., 303 A.D.2d 475, 756 N.Y.S.2d 596 (2nd Dept.2003).   Accordingly, the third cause of action is duplicative of and merely recasts Sutton's unavailing fraud theory as a purportedly independent “implied duty” claim.   See, Parker East 67th Associates, L.P. v. Minister, Elders and Deacons of Reformed Protestant Dutch Church of City of New York, 301 A.D.2d 453, 754 N.Y.S.2d 255 (1st Dept.2003).   Thus, this theory of recovery cannot survive.

D. Declaratory Judgment

The fourth cause of action for declaratory relief, incorporates by reference all the preceding allegations of wrongdoing and then asserts-without explanatory and/or particularized supporting averments-that the subscription agreements are “unconscionable and unenforceable” (Amended Cmplt.¶¶ 57-58).

Since the Court has previously reviewed the foundational allegations supporting this cause of action and determined that no sustainable claims have been stated based thereon, the claim for declaratory relief must similarly fail.   In any event, and in the commercial setting presented-where the “doctrine of unconscionability has little applicability” (Gillman v. Chase Manhattan Bank, N.A., 135 A.D.2d 488, 491, 521 N.Y.S.2d 729 [1987], affd., 73 N.Y.2d 1, 537 N.Y.S.2d 787, 534 N.E.2d 824 [1988];  and Lister Elec., Inc. v. Incorporated Village of Cedarhurst, 108 A.D.2d 731, 734, 484 N.Y.S.2d 897 [2nd Dept.1985] )-the inconclusive factual statements set forth in the amended complaint are insufficient to sustain a cause of action for the stated declaratory relief sought.

E. Defendants' Remaining Contentions

In light of the Court's determination, it is unnecessary to reach Defendants' remaining dismissal theories, including the allegation that co-defendant Haggerty was never properly served.

F. Leave To Replead

 Sutton's submissions fail to establish its entitlement to an order permitting it to replead its claims as requested in Plaintiff's Brief, at p. 2, fn. 2. CPLR 3211(e).   See, e.g., Lesesne v. Lesesne, 292 A.D.2d 507, 509, 740 N.Y.S.2d 352 (2nd Dept.2002);  Cuglietto v. Ferone, 269 A.D.2d 556, 703 N.Y.S.2d 752 (2nd Dept.2000);  and Shafran v. New York City Employee's Retirement System, 234 A.D.2d 444, 446, 651 N.Y.S.2d 140 (2nd Dept.1996).   In the absence of demonstrable merit to Plaintiff's claim, leave to replead should not be granted.  Montefiore v. Soja, 292 A.D.2d 241, 242, 738 N.Y.S.2d 839 (1st Dept.2002);  and Hornstein v. Wolf, 67 N.Y.2d 721, 499 N.Y.S.2d 938, 490 N.E.2d 857 (1986).

Accordingly, it is,

ORDERED, that the Defendants' motion to dismiss the amended complaint is granted pursuant to CPLR 3211(a)(7) and the amended verified complaint is hereby dismissed, and it is further,

ORDERED, that Defendants' motion for consolidation of the within action with Lexis-Nexis' related action pending before this Court and for dismissal on other grounds is denied as academic;  and it is further,

ORDERED, that Plaintiff's application for leave to replead is denied.

This constitutes the decision and Order of the Court.

LEONARD B. AUSTIN, J.

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