The Supreme Court of New York County recently heard the case of Fischer v. Belmont. This was a case where the defendant allegedly did a great many bad things and the plaintiff filed a large list of different theories of liability in the complaint. For those of you unfamiliar with trial practice, the plaintiff was not merely attempting to be perverse, duplicative and wearisome. Rather, there is a general legal principle that all causes of action or theories of liability must be asserted against the defendant in the complaint, so long as these causes ‘arise out of’ the same or similar transactions or events. The court system views its time as a valuable resource, and thus they require cases and theories to be consolidated for efficiency purposes. Thus, if plaintiff were to omit a cause of action in the pleading stage, they could not (usually) go back and re-assert it at a later date. At any rate, one of the interesting allegations that plaintiff made in this case was that defendant was guilty of a ‘conspiracy to breach a contract.’
Background of the Case
The defendant was an attorney who allegedly deceived plaintiff into investing in two investment opportunities. These investments were alleged to be fraudulent in nature. Defendant Belmont promised to ‘double the investment’ and stated that the plaintiff’s money was just ‘for show’ and would remain in plaintiff’s escrow account the whole time. Defendant kept bleeding money out of plaintiff with last minute deals and emergencies, often issuing promissory notes. Defendant ultimately never paid plaintiff anything, and plaintiff sued. Plaintiff alleged that defendant, along with her co-conspirators in various financial and business institutions (named as co-defendants), embezzled or stole plaintiff’s money, and alleged various causes of action as alluded to above.
For our purposes, the most interesting claims are for breach of contract (the money was never paid back as part of the deal) and additionally for “conspiracy to breach the contract” as against co-defendants who were not actual parties to the contract.
Plaintiff stated that the actual breach of contract occurred when the defendants Belmonte and Munster took the Fischer’s money out of the law firm escrow account. One of the terms of the agreement was that the money would remain in the escrow account. The plaintiff then stated that the co-conspirators then ‘maneuvered and laundered’ the money so that they all benefited.
The court characterized the above actions as a conspiracy. While New York does not recognize a theory of civil conspiracy per se, it recognizes that a conspiracy to commit a tort, such as fraud, may exist. The liability for conspiracy depends on the liability for the underlying tort. And the tort may involve a breach of a duty, either a contractual duty or an independent one.
Viewed in the light of a motion to dismiss by defendant, the court stated that plaintiff stated a valid cause of action for conspiracy to commit fraud as against the co-defendants.
However, the court stated that the breach of contract claims against the co-conspirators should be dismissed. This was simply because the defendants, with the exception of Belmont, were not party to the contract. The court also stated that in New York, there is no cause of action for “conspiracy to breach a contract.” Plaintiff made a decent argument that parties not in privity (not having signed the contract) may still be liable premised on a close bond between the parties… however the court ruled that the case law cited applied only to negligent misrepresentation, not to contracts. Thus we see that a claim for ‘conspiracy to breach a contract’ will probably fail in New York.
If you have questions about breach of contract, please don’t hesitate to contact our officefor a consultation.