Fraudulent Inducement Insufficiently Pleaded Where Alleged Misrepresentation Is Limited To Intent To Perform Obligations That Underlie Accompanying Contract Claim

Posted: April 7, 2025 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Categories Fraud/Misrepresentation, Fraudulent Inducement, Breach of Contract, Breach of Implied Covenant of Good Faith

Fraudulent Inducement Insufficiently Pleaded Where Alleged Misrepresentation Is Limited To Intent To Perform Obligations That Underlie Accompanying Contract Claim

On February 28, 2025, in Martha Stewart Living Omnimedia, LP v. Snow Joe LLC Index No. 653155/2023, Justice Andrea Masley dismissed a counterclaim and affirmative defense alleging fraudulent inducement asserted by Snow Joe LLC (“Snow Joe”), a licensee of Martha Stewart Living Omnimedia, LP (the “Licensor”), for failure to allege misrepresentations of present fact.

Instead, the counterclaim (and analogous affirmative defense) alleging fraudulent inducement were based only on the Licensor’s misrepresentation of its intention to perform rather than any independent statements of present fact:

Allegations that Licensee was induced to enter into the License Agreement by reason of the agreement’s provisions and that Licensor failed to perform cannot form basis for a fraudulent inducement counterclaim. (See Wyle Inc. [v. ITT Corp.,] 130 AD3d 438, 438-39 (1st Dept 2015); see also ESBE Holdings, Inc. v Vanquish Acquisition Partners, LLC, 50 AD3d 397, 398 (1st Dept 2008) (dismissing fraud claims “since they arose directly from the written provisions of the various subscription and other agreements” (citation omitted)); Gordon [v. Dino De Laurentiis Corp., 141 AD2d [435], at 436 [1st Dept 1988] (“A fraud claim is not sufficiently stated where it alleges [in essence] that a defendant did not intend to perform a contract with a plaintiff when he made it”.)

Slip op., p. 12.

The court also held that Snow Joe could not cure this deficiency with additional allegations that Snow Joe reasonably understood that the Licensor would not endorse a competitor’s products, or would offer specific licensing support, because such allegations failed to identify any specific false representations of present fact as is required to establish fraudulent inducement. Id., pp. 12-13.

By contrast, Snow Joe’s counterclaim for breach of the license agreement survived because the claim was sufficiently pled on its face and “[a]t this motion to dismiss stage, Licensor’s reliance on an affidavit to establish that Licensee has not performed under the License Agreement is misplaced.” Slip op., p. 5. However, Snow Joe’s counterclaim for breach of the implied covenant of good faith and fair dealing failed as duplicative of the contract claim.

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning fraudulent inducement or breach of contract.