In a December 28, 2011 decision by Justice Whelan, the court denied the defendant’s motion to dismiss the complaint and permitted a subcontractor to proceed with its breach of contract and unjust enrichment claims against the property owner, as well as the claim for fraudulent inducement against the individual defendants who the plaintiff claimed induced its performance under the contract. The contractor entered into a sub-contract with a non-party for electrical goods which, in turn, entered into a sub-contract with the plaintiff. When the non-party stopped paying the plaintiff, the general contractor and the individual defendants convinced the plaintiff to enter into a joint checking account agreement, by which the monies owed to the non-party would be held for the plaintiff’s benefit, so that the plaintiff would continue to supply goods to the project. The plaintiff brought suit when the defendants failed to make payments under the joint checking account agreement.
The defendants moved to dismiss on the grounds that they lacked privity of contract with the plaintiff. Although the court recognized the basic rule of law that a sub-contractor cannot state a breach of contract claim against an owner in the absence of privity of contract, it found that such a claim could be maintained where the owner had direct dealings with the subcontractor, to justify imposing an obligation on the contractor. Finding no dispute that the owner had direct dealings with the plaintiff in order to keep it engaged in the project, and based on the factual allegations and documentation submitted in connection with the motion, the court found the plaintiff stated cognizable claims for recovery. The court also found that the plaintiff sufficiently stated a fraudulent inducement claim against the individual defendants because it satisfied the specificity pleadings requirements of CPLR § 3016(b) and because the plaintiff could state a claim against corporate officers and directors who participated in or had knowledge of the fraud, and where the plaintiff specifically alleged a breach of duty separate from or in addition to the breach of the contract.
Schwing Elec. Supply Corp. v Hunter Roberts Constr. Group LLC, Sup Ct, Suffolk County, December 28, 2011, Whelan, J, Index No. 4328-11