New York Case Law Round-up: Puffery and Account-Stated
In Coppelson v. Serhant, Coppelson and other plaintiffs bought an investment property from Serhant, a real estate broker in Manhattan. Serhant misleadingly told Coppelson that the property was “a gold mine” and would be worth well over five million dollars shortly. The Coppelson plaintiffs claim that they chose to buy this property for $4.375 million over another based on these statements. After the purchase, the Coppelson plaintiffs learned that Serhant also represented the seller of the property and had received an undisclosed referral fee for selling the house. This prompted them to hastily resell the property at a $700,000 loss.
After the District Court for the Southern District of New York dismissed the First Amended Complaint without prejudice, plaintiffs amended their complaint, alleging fraud, promissory estoppel, breach of the implied duty of good faith and fair dealing, and unjust enrichment. Last month, the court dismissed all claims, and it all turned on puffery.
Plaintiffs’ fraudulent inducement and concealment claims were subject to the doctrine of caveat emptor. The Coppelson plaintiffs were responsible for checking the value of the property before making their purchase. Serhant’s statements were mere puffery. Actions against licensed brokers serving as dual agents are limited to regulatory actions, so Serhant’s conduct here was not actionable fraud.
The Coppelson plaintiffs’ claim for promissory estoppel failed because Serhant failed to disclose important information. That’s not enough. He made no promises. Nor could there be a breach of the implied duty of good faith and fair dealing, because that requires a contract, and there was no contract here between Serhant and the Coppleston plaintiffs. Finally, the unjust enrichment claim failed because it was duplicative of their fraud claims. Plaintiffs made no allegation that Serhant benefitted or was enriched in a way he was not entitled to. Again, he made no promise that he was not also representing the sellers of the house, and his misleading statements were simply matters of opinion and sales puffery.
In 2017, Plaintiff Federal Corporation (Federal), a Taiwanese a tire supplier, and Defendant Future Tire (Future), a New York tire distributor, established a contractual relationship through an exchange of emails and texts. Future thought the contract provided for it to be the exclusive distributor of National’s tires. But National contends that it never intended for the relationship to be exclusive.
In Federal Corporation v. Future Tire Company, decided last month, Judge Denis Hurley of the U.S. District Court for the Eastern District of New York granted plaintiff’s motion for summary judgment. Federal delivered and Future accepted but later failed to pay for deliveries of tires invoiced for over $1 million. Future’s only defenses were that Federal breached first by selling to some of Future’s competitors and the statute of frauds.
The District Court had no difficulty finding that Federal had made out its claim for account stated. We don’t spend much time on the blog, or in the first-year course, talking about account stated. The elements of the claim under New York law are: “(1) an account was presented; (2) it was accepted as correct; and (3) Defendant promised to pay the amount stated.” In this case, there were 26 invoices proving that the account was presented. Future never disputed the invoices and also never paid. Future’s statute of frauds defense failed because “receipt and acceptance either of goods or of the price constitutes an unambiguous overt admission by both parties that a contract actually exists.”
Future’s motion for summary judgment on its account stated claim was granted, with pre-judgment interest, and the court saw no need to address its breach of contract claim, as that was duplicative of the account stated claim.
H/T The New York Contracts Law Twitter Feed. Thanks to ContractsProf Blog Intern, Alyssa Cross, for her research assistance!