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District Court Granted Defendant’s Motion to Dismiss Plaintiff’s Fraud and Breach of Contract Claims Finding that Neither Puffery, Nor Opinions Constituted Fraud or Breach Where the Contract Promised Efforts, Not Outcomes

Bancroft v. Goroff et al.
No. CCB—14—2796 (D. Md. December 31, 2014)
by Sarah M. Grago, Law Clerk
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.mdd.uscourts.gov/Opinions/Opinions/Bancroft%2031%20Dec%2014.pdf

In Bancroft v. Goroff et al., the United States District Court for the District of Maryland granted Defendants’ motion to dismiss Plaintiff’s complaint and denied Plaintiff’s motion to compel answers to interrogatories as moot. The Plaintiff, Bancroft Commercial, Inc., (“Bancroft”), doing business as Bancroft Press, sued Sandra Goroff and Burton Peretsky (collectively, “the Defendants”) for fraud and breach of contract. The Defendants filed a motion to dismiss both claims and, in response, Bancroft filed an untimely three-lined opposition and a motion to compel answers to interrogatories. Bancroft, however, contends that the Defendants breached their contractual obligations in failing to promote the books and, that this failure led to lost sales.

Bancroft, a Baltimore-based book publisher, entered into two contracts with the Defendants to procure publicity services for two (2) Bancroft books, namely My Father’s Day Gift and Aftershock. At the heart of both contracts was the agreement that the Defendants would use their “best efforts to secure appropriate print, broadcast, online and social media” to promote the books. In addition to the breach of contract claims, Bancroft also asserted that the Defendants fraudulently misrepresented their prior work history both orally and on their website.

Specifically, with respect to My Father’s Gift, the Defendants promoted the book by scheduling an appearance of the author on a local radio show while misrepresenting that the radio station had “national reach.” Although Bancroft had independent avenues by which it could have promoted the book, it declined to pursue them “in hopes that the Defendants would succeed” in executing their part of the bargain, i.e., garnering sufficient publicity to promote book sales.

Similarly, with regard to the second book, Aftershock, Bancroft contended that the Defendants only obtained two (2) forms of minor publicity an article in a local, not national, newspaper, and a radio interview of the author.

Bancroft alleged that the Defendants committed fraud when they represented themselves as having “above-average clout with the national media” and, that the misrepresentation detrimentally impacted Bancroft’s sales. Further, Bancroft alleged that this failure entitled it to consequential and punitive damages.

The court measured each claim against the standard mandated by Federal Rule of Civil Procedure 12(b)(6). In order to survive a motion to dismiss, a plaintiff need not “forecast” evidence sufficient to prove all elements of the claim pled; yet, the plaintiff must demonstrate that the complaint crosses the line from “conceivable to plausible.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). Additionally, the court noted that it was not bound to merely considering the pleadings in its analysis, but could review documents incorporated by reference so long as they were integral to the complaint.

In addressing the fraud claim, the court first delved into a choice of law analysis, ultimately finding that Maryland law applied. It noted that Maryland courts had not yet provided guidance as to what law applied in negligent misrepresentation cases where the alleged wrongful act and the alleged loss occurred in different jurisdictions. Nevertheless, the court noted that the highest court of Maryland would adhere to lex loci delecti in multi-state misrepresentation cases and, because Bancroft’s alleged injuries transpired in Maryland, Maryland law would apply to the fraud claim.

Under Maryland law, to succeed on a civil fraud claim based on affirmative misrepresentation, a plaintiff must show:

(1) the defendant made a false representation to the plaintiff, (2) the falsity of the representation was either known to the defendant or the representation was made with reckless indifference to its truth, (3) the misrepresentation was made for the purpose of defrauding the plaintiff, (4) the plaintiff relied on the misrepresentation and had the right to rely on it, and (5) the plaintiff suffered compensable injury as a result of the misrepresentation.

Additionally, the court explained that, for fraud claims, it applied a heightened pleading standard as set forth in Federal Rule of Civil Procedure 9(b) requiring a plaintiff to plead with particularity as to the circumstances constituting the fraud.

In the case at bar, the court found that Bancroft failed to satisfy any of the above elements as to Mr. Peretsky because it did not allege that Mr. Peretsky made any misrepresentations upon which it relied. As to the fraud claim against Ms. Goroff, the court concluded that none of the alleged misrepresentations supported a successful fraud claim. Bancroftt did not plead with particularity any allegations to support that Ms. Goroff made any misrepresentations to defraud Bancroft.

Of the many reasons the court cited in support, it found that Bancroft failed to provide evidence that its president read and relied on her website prior to entering into the contracts or that the website information was specifically to Bancroft. Ultimately, the court held that “statements amounting to mere puffing,” similar to those on Ms. Goroff’s website, “by a seller of goods or services [could] not support a fraud claim,” nor could mere opinion constitute a false representation. Bancroft, thus, failed to satisfy the heightened pleading standard required for a fraud claim to survive a motion to dismiss.

The court also dismissed the breach of contract claims as to the two (2) book agreements with the Defendants. Similar to the fraud claim, the court found that Maryland law applied under lex loci contractus as the last act necessary to make the contract binding occurred in Maryland. Next, it dismissed Mr. Peretsky as he was not a party to either of the agreements at issue.

Starting with the first agreement concerning My Father’s Day Gift, the court concluded that the Defendants did not breach the “best efforts” clause. The court stated that the Plaintiff’s allegations did not concern the Defendants’ publicity efforts, but instead concerned outcomes. For example, the Plaintiff alleged that the Defendants breached the first agreement when they failed to produce a certain level and degree of publicity where the contract did not promise outcomes, but effort.

In a similar fashion, the court found that the Defendants did not breach the “best efforts” clause in the second agreement relating to Aftershock for the aforementioned reasons. It noted, however, that the second agreement differed from the first in that it created a duty for the Defendants to work cooperatively with Bancroft. While the court did not explicitly reject these allegations, it noted that Bancroft failed to file a timely opposition to the motion to dismiss, and as such, dismissed the claim on procedural grounds.

The court granted Defendants’ motion to dismiss the breach of contract and fraud claims and denied Plaintiff’s motion to compel as moot.