When a client comes in with a commercial breach of contract case against a corporate contracting partner, one strategy we explore is whether distinct fraud and/or negligent misrepresentation claims can be asserted in connection with the contract’s formation. Asserting those claims on top of a contract claim may give us valuable leverage in the litigation by enabling our client to pursue recovery against the principals of the corporate counterparty and potentially expanding the types of available damages beyond direct losses from the contractual breaches. Similarly, when a client who has been sued in contract and fraud in a commercial dispute, one of the first arguments we analyze is whether the fraud and contract claims are duplicative. If they are, then the fraud claim may be subject to early dismissal, undermining the plaintiff’s perceived settlement leverage.
Under established Second Circuit precedent, to preserve a fraud claim as distinct from a contract claim, a plaintiff must either “(i) demonstrate a legal duty separate from the duty to perform under the contract; (ii) demonstrate a fraudulent misrepresentation collateral or extraneous to the contract; or (iii) seek special damages that are caused by the misrepresentation and unrecoverable as contract damages.” Bridgestone/Firestone, Inc. v. Recovery Credit Servs. Inc., 98 F.3d 13, 20 (2d Cir. 1996). We previously discussed the risks of pleading duplicative claims in our blog post Kitchen-Sink Pleading Has Its Limits: Tort Claims Duplicative of Contract Claims will be Dismissed, where we analyzed a complaint that failed to demonstrate the existence of “a duty, breach and damages outside the contractual obligations.” A recent case from the Southern District of New York, White Plains Division demonstrates a more successful approach, as Judge Román denied a motion to dismiss fraud and negligent misrepresentation claims, finding them distinct from the plaintiff’s contract claims.
The Case: Rothman v. Hasz Project Management and Design, d/b/a Hudson Trailer Company, et al. No. 7:24-CV-03651-NSR, (S.D.N.Y. June 24, 2025)
The plaintiff operated a business providing vintage vehicle mobile bar catering services for weddings and other events. In 2022, he was considering renovating a vintage bus into a mobile bar and lounge and reached out to the defendant after reviewing the defendant’s website and social media, which marketed the company as “the leader in luxury custom food trucks, mobile business trailers and custom lifestyle projects.” After communicating his prospect of renovation to the defendant, the plaintiff received repeated assurance from the defendant that they would be able to meet his requirements and achieve his goals. The defendant further promised that they would provide the plaintiff with a timeline once the project details were finalized.
Relying on these assurances, the plaintiff declined lower quotes from other companies and entered into a Service Agreement (the “Agreement”) with the defendant. The Agreement outlined specific design features but did not include the multiple assurances. The defendant failed to provide a timeline until five months after the execution of the Agreement. Upon completion of the mobile bar, the plaintiff discovered that most specifications in the contract were not met, and he was forced to incur significant costs to remediate the defects in the bus renovation.
The plaintiff brought several causes of action against the defendant, including tort claims for fraudulent inducement and negligent misrepresentation, and a breach of contract claim to recover his loss. The defendant moved to dismiss the tort claims as duplicative of the breach of contract claim. The court denied the motion in its entirety, finding that while the two claims arose from the same transaction, the plaintiff had pleaded sufficient factual allegations to support each claim independently. For the tort claims, the plaintiff alleged that the defendant’s marketing materials and pre-contractual promises, including the assurance of performance and a project timeline, induced him to enter the Agreement. The contract claim, on the other hand, focused on the defendant’s failure to meet the specifications outlined in the Agreement. Thus, the court found that “the allegations in support of Plaintiff’s fraud claims are not completely subsumed by the contract claims as Defendants argue.”
Takeaway:
The addition of viable fraud claims to a commercial breach of contract action can substantially increase a case’s value, affording a plaintiff with valuable settlement leverage. To improve the chances of surviving a motion to dismiss, litigation counsel should carefully evaluate whether there are sufficient facts to support each individual claim, whether the factual allegations are separable and distinct, and whether the alleged duty breached in tort is independent from the contractual obligations underlying the breach of contract claim.
