21-797-cv Kumaran v. Northland Energy Trading, LLC
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 13th day of December, two thousand twenty-three.
PRESENT: DEBRA ANN LIVINGSTON, Chief Judge, MICHAEL H. PARK, WILLIAM J. NARDINI, Circuit Judges. _____________________________________
THE A STAR GROUP, INC., DBA TIMETRICS, SAMANTHA SIVA KUMARAN,
Plaintiffs-Appellants,
v. 21-797 (L), 21-798 (Con), 22-743 (Con), 22-771 (Con)
NORTHLAND ENERGY TRADING, LLC, HEDGE SOLUTIONS, INC., RICHARD M. LARKIN, DANIEL LOTHROP, DOMENIC BRAMANTE,
Defendants-Appellees.
_____________________________________
For Plaintiff-Appellant Kumaran: SAMANTHA SIVA KUMARAN, pro se, New York, NY. For Plaintiff-Appellant BRIAN S. GINSBERG, Harris A Star Group, Inc.: Beach PLLC, New York, NY (David S. Kostus, Kostus Law, LLC, Lodi, NJ, on the brief).
For Defendants-Appellees: MICHAEL KWON (Ellen Tobin, on the brief), Westerman Ball Ederer Miller Zucker & Sharfstein, LLP, Uniondale, NY.
Appeal from a judgment of the United States District Court for the Southern District of
New York (Vyskocil, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is AFFIRMED in part, VACATED in part,
and the matter is REMANDED for further proceedings consistent with this order.
Plaintiffs-Appellants Samantha Siva Kumaran and A Star Group, Inc., the former
proceeding pro se, appeal the district court’s dismissal of their complaint which charged the
Defendants-Appellees Northland Energy Trading, LLC, Hedge Solutions, Inc., and related
individuals with stealing trade secrets and misappropriating their intellectual property. The
complaint, among other claims, alleged that the Defendants-Appellees fraudulently induced a 2016
settlement agreement by misrepresenting that they were not misappropriating the relevant
intellectual property when, in fact, they were. We assume the parties’ familiarity with the
underlying facts, the procedural history of the case, and the issues on appeal.
We review de novo a district court’s grant of a motion to dismiss pursuant to Federal Rule
of Civil Procedure 12(b)(6), “accepting all factual allegations in the complaint as true and drawing 2 all inferences in the plaintiff’s favor.” Walker v. Schult, 717 F.3d 119, 124 (2d Cir. 2013). A
complaint survives dismissal under Rule 12(b)(6) if it alleges sufficient facts to state a plausible
claim to relief. See Pauwels v. Deloitte LLP, 83 F.4th 171, 178 (2d Cir. 2023) (quoting Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009)). When interpreting New York law, we are bound by the
decisions of the New York Court of Appeals and consider decisions of the Appellate Division to
be “helpful indicators of how the [Court of Appeals] would rule.” 10012 Holdings, Inc. v.
Sentinel Ins. Co., Ltd., 21 F.4th 216, 221 (2d Cir. 2021).
Having carefully reviewed the pleadings and the documents extraneous to the proceedings
that we (and the district court) may consider, we affirm most of the judgment for substantially the
same reasons given by the district court. However, we disagree with the dismissal on one narrow
ground—which, in turn, requires vacatur of other portions of the dismissal that were reliant on that
ground.
At issue is the fraudulent inducement claim, which (as explained above) is based on the
Defendants-Appellees’ alleged ongoing misuse of the intellectual property at the time of the 2016
settlement agreement, while representing the contrary in the agreement itself. The complaint
claimed, in relevant part, that this misrepresentation was intended to fraudulently induce the
Plaintiffs-Appellants into signing the agreement.
“In alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind
may be alleged generally.” Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d
160, 171 (2d Cir. 2015) (quoting Fed. R. Civ. P. 9(b)). This “requires that the plaintiff (1) detail
3 the statements (or omissions) that the plaintiff contends are fraudulent, (2) identify the speaker, (3)
state where and when the statements (or omissions) were made, and (4) explain why the statements
(or omissions) are fraudulent.” Fin. Guar. Ins. Co. v. Putnam Advisory Co., LLC, 783 F.3d 395,
403 (2d Cir. 2015) (internal quotation marks omitted). Under New York law, a plaintiff who
seeks to invalidate a release due to fraudulent inducement “must establish the basic elements of
fraud, namely a representation of material fact, the falsity of that representation, knowledge by the
party who made the representation that it was false when made, justifiable reliance by the plaintiff,
and resulting injury.” Centro Empresarial Cempresa S.A. v. América Móvil, S.A.B. de C.V., 929
N.Y.S.2d 3, 8 (2011) (internal quotation marks omitted).
We conclude that the Plaintiffs-Appellants adequately pleaded a fraudulent inducement
claim—one that, significantly, was not duplicative of the breach of contract claims and thus was
not subject to dismissal simply because the contract claim failed. Under New York law, a
fraudulent inducement claim is independent of a related claim of breach of contract if it “allege[s]
misrepresentations of present fact, not merely misrepresentations of future intent to perform under
the contract,” and the alleged breach of duty is “separate from or in addition to the contract duty.”
Wyle Inc. v. ITT Corp., 13 N.Y.S.3d 375, 376–77 (1st Dep’t 2015); see also Trump Vill. Section
4, Inc. v. Vilensky, 158 N.Y.S.3d 883, 884 (2d Dep’t 2022) (requiring facts “collateral to the
contract” that serve as an “inducement to enter into the contract” (internal quotation marks
omitted)). Fraudulent inducement claims can also be based on “a breach of contractual warranties
notwithstanding the existence of a breach of contract.” Wyle, 13 N.Y.S.3d at 377 (distinguishing
cases involving contractual representations relating to “future performance”); see also MBIA Ins.
4 Corp. v. Countrywide Home Loans, Inc., 928 N.Y.S.2d 229, 234 (1st Dep’t 2011) (“It is of no
consequence that some of the allegedly false representations are also contained in the agreements
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21-797-cv Kumaran v. Northland Energy Trading, LLC
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 13th day of December, two thousand twenty-three.
PRESENT: DEBRA ANN LIVINGSTON, Chief Judge, MICHAEL H. PARK, WILLIAM J. NARDINI, Circuit Judges. _____________________________________
THE A STAR GROUP, INC., DBA TIMETRICS, SAMANTHA SIVA KUMARAN,
Plaintiffs-Appellants,
v. 21-797 (L), 21-798 (Con), 22-743 (Con), 22-771 (Con)
NORTHLAND ENERGY TRADING, LLC, HEDGE SOLUTIONS, INC., RICHARD M. LARKIN, DANIEL LOTHROP, DOMENIC BRAMANTE,
Defendants-Appellees.
_____________________________________
For Plaintiff-Appellant Kumaran: SAMANTHA SIVA KUMARAN, pro se, New York, NY. For Plaintiff-Appellant BRIAN S. GINSBERG, Harris A Star Group, Inc.: Beach PLLC, New York, NY (David S. Kostus, Kostus Law, LLC, Lodi, NJ, on the brief).
For Defendants-Appellees: MICHAEL KWON (Ellen Tobin, on the brief), Westerman Ball Ederer Miller Zucker & Sharfstein, LLP, Uniondale, NY.
Appeal from a judgment of the United States District Court for the Southern District of
New York (Vyskocil, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is AFFIRMED in part, VACATED in part,
and the matter is REMANDED for further proceedings consistent with this order.
Plaintiffs-Appellants Samantha Siva Kumaran and A Star Group, Inc., the former
proceeding pro se, appeal the district court’s dismissal of their complaint which charged the
Defendants-Appellees Northland Energy Trading, LLC, Hedge Solutions, Inc., and related
individuals with stealing trade secrets and misappropriating their intellectual property. The
complaint, among other claims, alleged that the Defendants-Appellees fraudulently induced a 2016
settlement agreement by misrepresenting that they were not misappropriating the relevant
intellectual property when, in fact, they were. We assume the parties’ familiarity with the
underlying facts, the procedural history of the case, and the issues on appeal.
We review de novo a district court’s grant of a motion to dismiss pursuant to Federal Rule
of Civil Procedure 12(b)(6), “accepting all factual allegations in the complaint as true and drawing 2 all inferences in the plaintiff’s favor.” Walker v. Schult, 717 F.3d 119, 124 (2d Cir. 2013). A
complaint survives dismissal under Rule 12(b)(6) if it alleges sufficient facts to state a plausible
claim to relief. See Pauwels v. Deloitte LLP, 83 F.4th 171, 178 (2d Cir. 2023) (quoting Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009)). When interpreting New York law, we are bound by the
decisions of the New York Court of Appeals and consider decisions of the Appellate Division to
be “helpful indicators of how the [Court of Appeals] would rule.” 10012 Holdings, Inc. v.
Sentinel Ins. Co., Ltd., 21 F.4th 216, 221 (2d Cir. 2021).
Having carefully reviewed the pleadings and the documents extraneous to the proceedings
that we (and the district court) may consider, we affirm most of the judgment for substantially the
same reasons given by the district court. However, we disagree with the dismissal on one narrow
ground—which, in turn, requires vacatur of other portions of the dismissal that were reliant on that
ground.
At issue is the fraudulent inducement claim, which (as explained above) is based on the
Defendants-Appellees’ alleged ongoing misuse of the intellectual property at the time of the 2016
settlement agreement, while representing the contrary in the agreement itself. The complaint
claimed, in relevant part, that this misrepresentation was intended to fraudulently induce the
Plaintiffs-Appellants into signing the agreement.
“In alleging fraud or mistake, a party must state with particularity the circumstances
constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind
may be alleged generally.” Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d
160, 171 (2d Cir. 2015) (quoting Fed. R. Civ. P. 9(b)). This “requires that the plaintiff (1) detail
3 the statements (or omissions) that the plaintiff contends are fraudulent, (2) identify the speaker, (3)
state where and when the statements (or omissions) were made, and (4) explain why the statements
(or omissions) are fraudulent.” Fin. Guar. Ins. Co. v. Putnam Advisory Co., LLC, 783 F.3d 395,
403 (2d Cir. 2015) (internal quotation marks omitted). Under New York law, a plaintiff who
seeks to invalidate a release due to fraudulent inducement “must establish the basic elements of
fraud, namely a representation of material fact, the falsity of that representation, knowledge by the
party who made the representation that it was false when made, justifiable reliance by the plaintiff,
and resulting injury.” Centro Empresarial Cempresa S.A. v. América Móvil, S.A.B. de C.V., 929
N.Y.S.2d 3, 8 (2011) (internal quotation marks omitted).
We conclude that the Plaintiffs-Appellants adequately pleaded a fraudulent inducement
claim—one that, significantly, was not duplicative of the breach of contract claims and thus was
not subject to dismissal simply because the contract claim failed. Under New York law, a
fraudulent inducement claim is independent of a related claim of breach of contract if it “allege[s]
misrepresentations of present fact, not merely misrepresentations of future intent to perform under
the contract,” and the alleged breach of duty is “separate from or in addition to the contract duty.”
Wyle Inc. v. ITT Corp., 13 N.Y.S.3d 375, 376–77 (1st Dep’t 2015); see also Trump Vill. Section
4, Inc. v. Vilensky, 158 N.Y.S.3d 883, 884 (2d Dep’t 2022) (requiring facts “collateral to the
contract” that serve as an “inducement to enter into the contract” (internal quotation marks
omitted)). Fraudulent inducement claims can also be based on “a breach of contractual warranties
notwithstanding the existence of a breach of contract.” Wyle, 13 N.Y.S.3d at 377 (distinguishing
cases involving contractual representations relating to “future performance”); see also MBIA Ins.
4 Corp. v. Countrywide Home Loans, Inc., 928 N.Y.S.2d 229, 234 (1st Dep’t 2011) (“It is of no
consequence that some of the allegedly false representations are also contained in the agreements
as warranties and form a basis of the breach of contract claim.”).
At the outset, the complaint pleaded with the requisite particularity the basic elements for
an underlying common law fraudulent inducement claim. The Plaintiffs-Appellants alleged that
the Defendants-Appellees actively misrepresented that they had not kept a copy of the software,
which they might use to clone the Plaintiffs-Appellants’ program and deprive them of royalties
and licensing fees, all while negotiating an agreement that contained a broad release of liability
and was premised on the absence of such misconduct. These allegations were pleaded with the
requisite particularity because the Plaintiffs-Appellants alleged that they were made during the
settlement agreement negotiations, during phone conversations, in person at a coffee shop on
specific dates, and in writing in the settlement agreement itself.
Second, the claims are not duplicative of the breach of contract claims because they rely
on a representation and warranty in the parties’ 2016 settlement agreement pertaining to present
facts. In deciding otherwise, the district court relied on language from Project Cricket
Acquisition, Inc. v. FCP Investors VI, L.P., 74 N.Y.S.3d 517, 519 (1st Dep’t 2018), which
dismissed a fraudulent inducement claim “as duplicative of the breach of contract claims to the
extent it [was] based on the falsity of the representations and warranties” made in a stock purchase
agreement. 1 But Project Cricket applied Delaware law, not New York law. See id. at 600 (“We
1 The district court also relied on our decision in Bridgestone/Firestone, Inc. v. Recovery Credit Services, Inc., 98 F.3d 13, 20 (2d Cir. 1996), but Bridgestone did not address the warranty/promise distinction discussed above. 5 decide the substantive legal issues pursuant to Delaware law in accordance with the . . . choice of
law provision.”). Under New York law, the breach of a warranty—which is “not a promise of
performance, but a statement of present fact”—can be collateral to the contract precisely because
it is not otherwise actionable under a claim for breach of a contractual promise. Wyle, 13
N.Y.S.3d at 378 (internal quotation marks and emphasis omitted).
Accordingly, we conclude that the operative complaint adequately pleaded fraudulent
inducement arising out of the warranties in the settlement agreement, and we vacate the dismissal
of that claim.
The district court also dismissed the common law fraud claims predating the settlement
and claims raising breaches of an earlier non-disclosure agreement based on the broad release of
claims found in the settlement agreement. Yet if the settlement agreement was the product of
fraudulent inducement, the release itself might be invalidated. See GoSmile, Inc. v. Levine, 915
N.Y.S.2d 521, 525 (1st Dep’t 2010) (“To be sure, if plaintiff is able to prevail on its fraudulent
inducement claim and its request for rescission, the 2008 agreements (and the releases contained
therein) may be rendered void.”). Accordingly, we vacate the dismissal of those claims as well.
6 We have considered Plaintiffs-Appellants’ remaining arguments and find them to be
without merit. Accordingly, we AFFIRM the judgment in part, VACATE in part, and
REMAND for further proceedings consistent with this order. Appellant Kumaran’s motion to
file an oversized reply brief is DENIED as unnecessary.
FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court