Opinion
107129/2011
11-23-2011
Matthew Prince individually and on behalf of D'LITES L.A.M.D. B.H., Inc., Plaintiffs, v. Fox Television Stations, Inc., and ARNOLD DIAZ, Defendants.
COUNSEL FOR PLAINTIFF MATTHEW PRINCE: NAPOLI BERN RIPKA SHKOLNIK LLP By Adam J. Gana, Esq. COUNSEL FOR DEFENDANTS FOX TELEVISION: Hogan Lovells US LLP By Slade R. Metcalf, Esq.
COUNSEL FOR PLAINTIFF MATTHEW PRINCE: NAPOLI BERN RIPKA SHKOLNIK LLP By Adam J. Gana, Esq.
COUNSEL FOR DEFENDANTS FOX TELEVISION: Hogan Lovells US LLP By Slade R. Metcalf, Esq.
Carol R. Edmead, J.
In this defamation action, defendants Fox Television Stations, Inc., ("Fox") and Arnold Diaz ("Diaz") (collectively, "defendants") move to dismiss the Amended Complaint (the "complaint") of the plaintiff Matthew Prince individually ("Prince") and on behalf of D'Lites L.A.M.D. B.H. Inc. ("D'Lites LAMD") (collectively, "plaintiffs") pursuant to CPLR 3211 (a)(1) (based on documentary evidence) and (a)(7) (failure to state a claim).
The court notes that defendants' Notice of Motion, apparently in error, states that the relief is sought pursuant to CPLR §§3211 (7) and (8) (lack of personal jurisdiction), while the memo of law in support of the motion and reply refer to §§3211(1) and (7), and defendants' submission contain no arguments based on CPLR 3211 (a)(8).
Factual Background
This action stems from a May 12, 2011, television broadcast of the video clip within the popular Fox TV consumer news segment "Shame on You" about a misleading advertising of the "D'Lites" ice cream as a healthier alternative to traditional ice cream.
Non-party D'Lites Emporium, Inc., ("D'Lites Emporium") is a Florida-based company which advertises its ice cream as low in sodium, sugar, fat, carbohydrates and cholesterol (see Complaint, ¶1). In early 2011, plaintiff Prince, a restaurant proprietor, acquired a license to sell D'Lites ice cream, by entering into a sub-licensing agreement with a D'Lites's license holder in the New York, New Jersey and Connecticut tri-state area, First Class Products Group, LLC ("First Class Products"). The license granted Prince and his newly formed company D'Lites LAMD the rights to use the "D'Lites," "D'Lites Emporium" and "D'Lites Emporium Products" names and trademarks and to open three ice cream stores in Long Island, New York: Bayside, Commack and Babylon. According to plaintiffs, Prince invested approximately $1 million into acquiring the license rights and other business expenses.
Thereafter, shortly before plaintiffs were to open the three stores in Long Island, in or about March of 2011, one of defendants' employees Angela Cascarano, posing as a business woman interested in D'Lites's product license and equipped with a hidden video camera, met with the First Class Products's co-president Magda Abt ("Abt") at a D'Lites store in Woodbury, New York. Shortly after the meeting, Cascarano was suddenly joined by Diaz and a cameraman, who appeared near the Woodbury store and confronted Abt with questions about the claimed low calorie count of the D'Lites ice cream, and stated loudly that D'Lites was "selling a lie" and that Diaz had an independent lab's report to prove it (complaint, ¶¶35-37). According to plaintiffs, Diaz's lab report was inaccurate as it was based on the liquid measure of melted D'Lites, rather than the frozen product served to customers, which was injected with air and therefore, was larger in volume. D'Lites contacted the lab, pointing out this error, and the lab sent the second, corrected report to defendants. D'Lites's also sent its own lab report to defendants, showing "almost identical" results. Defendants aired the video report within the "Shame on You" segment (the "Report"), at the conclusion of which, Diaz inducted D'Lites into the segment's "Hall of Shame." The video clip of the segment was also posted on defendants' website.
www.myfoxny.com/dpp/news/healthy- ice-cream-nutritional-controversy-20110512 (last visited November 16, 2011).
Plaintiffs subsequently commenced this action, alleging seven causes of action: defamation, disparagement of goods, tortious interference with business relations, tortious interference with contract, violation of NY Gen. Bus. L. § 349, fraud, and negligent misrepresentation (Amended Complaint, ¶¶ 53-74).
On this motion, plaintiffs do not oppose the dismissal of the fourth through seventh causes of action; thus, the court deems said causes of actions abandoned, and therefore, dismissed.
In the first cause of action entitled"Defamation/Slander" plaintiffs allege that defendants made false statements in the Report that D'Lites ice cream was "not low in carbs," or sugar; that D'Lites was "advertising something that's not true"; that half a cup of D'Lites ice cream contained "four times the amount of grams" claimed by D'Lites, "meaning if you eat it, you are swallowing about four times as much fat and calories"; that D'Lites ice cream contained "up to seventeen times the carbs," "twelve times the sugars;" "results confirmed what some customers had already [suspected], i.e., that D'Lites's products "were too good to be true" and the "[lab] tests found that D'Lites's results are way off"; that D'Lites claimed its ice cream is so low in sugar that even diabetics can eat it." It is also alleged that defendants knew that D'Lites's nutritional information was accurate but recklessly disregarded the truth with the only purpose to create a news-worthy story.
The second cause of action for disparagement of goods alleges that defendants made defamatory statements directed at the quality of D'Lites's goods and services.
And the third cause of action alleges that defendants intentionally tortiously interfered with plaintiff's business relations with D'Lites Emporium, by making false statements about D'Lites ice cream; "defendants knew and could reasonably expect that Plaintiffs would seek to or already had entered into" business relationship in order to grow the D'Lites brand and stores," based on defendants' statement during the broadcast that "D'Lites is a growing national chain" (complaint, ¶¶59-60).
Plaintiffs allege damages, common to all causes of action, namely, harm to plaintiffs' good will and business reputation; $1 million in investment losses; loss of customers as reduced from at least 500 a day to the "current number of customers"; delay and failure of plaintiffs' five-year growth plan; "interference and loss of business prospects with landlords and relators preventing plaintiffs from acquiring the real estate locations [ . . . ] for new D'Lites shop locations"; "interference and loss of business prospect under the licensing agreement resulting in decreased revenue due to cancellations of D'Lites store openings"; "interference and loss of business prospect under the profit-sharing agreement with First Class Products; interference and loss of business prospect with the interested licensees (complaint, ¶52). Defendants now move to dismiss plaintiffs' complaint.
As stated in footnote 3, this decision addresses solely the sufficiency of pleading of the first three causes of action.
In their motion, defendants argue that plaintiffs' claim for defamation should be dismissed on the grounds that the Report is not "of and concerning plaintiffs" and plaintiffs did not plead special damages; plaintiffs' remaining claims merely restate the defamation claim and plaintiffs failed to satisfy the necessary elements of the remaining claims.
Plaintiffs oppose the motion, arguing that a person defamed does not need to be named in the statements; and in any event, plaintiffs' three stores are easily identifiable in the Report as during Diaz's narrative, the names of the stores' locations were displayed on the screen (see Diaz Affidavit, exhibit A). Furthermore, since there are only seven D'Lites locations in the entire tri-state area, and there are no other stores selling D'Lites ice cream in Bayside, Commack and Babylon, the viewing public can conceivably infer that plaintiffs' stores, which are about to open in the three new locations, would also be selling the allegedly "misleading" ice cream; defendants' false statements directly caused damages to plaintiffs, even though they are not named in the Report.
Plaintiffs also note that the Babylon store opened on May 14, 2011, while the openings of Commack and Bayside stores were delayed due to the negative publicity generated by defendants' false statements. In addition, defendants ran multiple segments of the D'Lites story on May 12, 13, 14, and 15, 2011, and continue to re-publish the report on their website.
Alternatively, a reasonable viewer would understand that the defamatory statements referred to plaintiffs as members of a small group that has been defamed. Diaz did not mention specific D'Lites stores, but stated generally that "D'Lites claims that you can eat this ice cream guilt free" and that "D'Lites offers three sizes" of ice cream (see Diaz Affidavit, exhibit A).
Plaintiffs further assert that their claim for disparagement of goods is sufficiently stated since plaintiffs acquired "a legally protected property interest" through the licensing rights to D'Lites Emporium products, names and trademarks in three New York locations (complaint, ¶14).
Further, plaintiffs properly pled special damages. Defendants' disparaging statements were widely disseminated; the nature of the plaintiffs' business prevents the specific identification of the lost customers; plaintiffs sufficiently attempted to itemize their damages; the complaint specifically states that Prince entered into negotiations with four individuals who expressed their interest in the opening of seven D'Lites stores (complaint ¶ 22) and that he entered into negotiations with a landlord to acquire rental property in Wantaugh, New York, and that the "landlord, upon watching Defendants' Shame segment, ceased negotiations " (id., at ¶19).
Plaintiffs further assert that defendants tortiously interfered with plaintiffs' business relationships because defendants' broadcast was defamatory in nature and defendants knew about plaintiffs' business relations.
In reply, defendants no longer maintain that plaintiffs failed to allege special damages in their defamation claim. They argue that the Report only focuses on the excessive serving sizes of D'Lites ice cream served at two specific stores in Woodbury and West Caldwell and no images of plaintiffs' future stores appeared on the screen, and no reasonable viewer could understand the statements in the Report to be about ice cream "sold" at plaintiffs' stores which were not yet opened at the time of the Report.
Defendants also note in the footnote that "given plaintiffs' allegation that they have expended significant resources establishing the D'Lites brand,' (see complaint, ¶ 17), it is likely they are public figures under the standards articulated in Gertz v Robert Welch, Inc., 418 US 323 (1974) and James v Gannett Co., 40 NY2d 415, 386 NYS2d 871 (1976) and must therefore demonstrate that defendants acted with actual malicei.e., knowledge of falsity or in fact entertained serious doubts about the truth of the Report" (see defendants' reply, footnote 3).
Likewise, plaintiffs' disparagement claim should be dismissed because the Report is not about plaintiffs' product; plaintiffs do not own D'Lites Emporium or any of the stores identified in the Report, and only the owner or manufacturer of the product may bring the claim for disparagement. Plaintiffs' investment costs in the Bayside and Commack stores, which were not yet open at the time of the broadcast of the Report, do not qualify as special damages and are speculative. Plaintiffs also failed to itemize their damages and to identify the customers they allegedly lost as a result of the claimed product disparagement by defendants.
The court notes that in their reply, defendants no longer dispute the sufficiency of plaintiffs' special damages allegations with respect to the Babylon store.
Finally, plaintiffs' tortious interference with business relations claim, like their defamation claim, should also be dismissed on "of and concerning" grounds; plaintiffs failed to plead what specific relations defendants knew about and interfered with.
Discussion
Pursuant to CPLR §3211 (a)(l), a party may move for judgment dismissing one or more causes of action asserted against him on the ground that "a defense is founded upon documentary evidence." Thus, where the "documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law," dismissal is warranted (Scott v Bell Atlantic Corp., 282 AD2d 180, 726 NYS2d 60 [1st Dept 2001] citing Leon v Martinez, 84 NY2d 83, 638 NE2d 511 [1994]).
In determining a motion to dismiss a complaint pursuant to CPLR §3211(a)(7) for failure to state a cause of action, the Court's role is ordinarily limited to determining whether the complaint states a cause of action (Frank v DaimlerChrysler Corp., 292 AD2d 118, 741 NYS2d 9 [1st Dept 2002]). When considering a motion to dismiss on this ground, the pleadings must be liberally construed (see, CPLR § 3026), and the court must "accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit into any cognizable legal theory" (Nonnon v City of New York, 9 NY3d 825 [2007]). Where the parties have submitted evidentiary material, including affidavits, or where the bare legal conclusions and factual allegations are "flatly contradicted by documentary evidence" the pertinent issue is whether claimant has a cause of action, not whether one has been stated in the complaint (see Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]; R.H. Sanbar Projects, Inc. v Gruzen Partnership, 148 AD2d 316, 538 NYS2d 532 [1st Dept 1989]). "Affidavits submitted by a [defendant] will almost never warrant dismissal under CPLR 3211 unless they establish conclusively that [petitioner] has no [claim or] cause of action'" (Lawrence v Miller, 11 NY3d 588, 873 NYS2d 517 [2008] citing Rovello v Orofino Realty Co., 40 NY2d 633, 636 [1976]).
At the outset, the court holds that Diaz's Affidavit submitted by defendants, does not conclusively establish that plaintiffs have no claim or cause of action against defendants. Affidavits do not qualify as "documentary evidence" for purposes of this rule ((see Williamson, Picket, Gross v Hirschfeld, 92 AD2d 289, 290 [1st Dept 1983] [stating that affidavits do not qualify as "documentary evidence" for purposes of this rule]; Realty Investors v Bhaidaswala, 254 AD2d 603, 679 NYS2d 179 [3d Dept 1988][rejecting use of reply affidavit to support a motion to dismiss based on documentary evidence]; Kearins v Gruberg, McKay & Stone, 2 Misc 3d 1001, 2004 WL 316521 [Supreme Court Bronx County 2004] [affidavits and depositions cannot be the basis for this motion]).
Defamation/Slander
"Defamation, the making of a false statement about a person that tends to expose the p[erson] to public contempt, ridicule, aversion or disgrace, or induce an evil opinion of him [ . . . ] can take one of two forms - slander or libel" (Ava v NYP Holdings, Inc., 64 AD3d 407, 885 NYS2d 247 [1st Dept 2009][internal citations omitted]).
"Generally speaking, slander is defamatory matter addressed to the ear while libel is defamatory matter addressed to the eye" (Ava v NYP Holdings., citing 2 PJI2d 3:23, at 196 [2009], Prosser and Keeton On Torts, § 112, at 786 [5th ed.]; Sack on Defamation § 2.3, at 2-9 [3d ed]).
The elements of a defamation claim are: (1) the publishing of a false statement to a third party; (2) without authorization or privilege; (3) fault, judged at a minimum by a negligence standard; and (4) special harm or defamation per se (Dillon v City of New York, 261 AD2d 34, 704 NYS2d 1 [1st Dept 1999], citing Restatement of Torts (Second) § 558). Special damages, i.e., the loss of something having economic or pecuniary value, need not be plead or proven when the cause of action is for defamation per se (Brooks v Anderson, 18 Misc 3d 1109, 856 NYS2d 22 [Sup Ct Bronx County 2007], citing Rinaldi v Holt, Rinehart & Winston, Inc., 42 NY2d 369 [1977]). Under New York law, words are per se slanderous if they import criminal activity, impute an offensive disease, would tend to injure a party's trade, occupation or business, or impute unchastity or homosexuality (43 NYJur2d, Defamation §1, at 498 [1985]).
As applicable here, "[a] statement which concerns a person in his trade or business and tends to injure him therein is actionable per se" (Vacca v General Elec. Credit Corp., 88 AD2d 740, 451 NYS2d 869 [3d Dept 1982]). Likewise, with regard to business entities, "statements which impugn the basic integrity, creditworthiness, or competence of the business, are defamatory per se, and thus, special damages need not be pleaded(Ruder & Finn Inc. v Seaboard Surety Co., 439 NYS2d 858, 862 [1981]; Drug Research Corp. v Curtis Publishing Co., 199 NYS2d 33, 37 [1960]).
Defendants' central argument is that plaintiffs' defamation claim should be dismissed because the Report is not about plaintiffs or their product, but rather, about D'Lites stores in Woodbury and West Caldwell.
"As a threshold, and constitutional, matter, a plaintiff alleging defamation must demonstrate that the allegedly defamatory statement was of and concerning' him or her" (Diaz v NBC Universal, Inc., 337 Fed Appx 94, 2009 WL 2143216 [CA2d 2009], citing New York Times Co. v Sullivan, 376 US 254, 288-90, 84 SCt 710 [1964]; Julian v Am. Bus. Consultants, Inc., 2 NY2d 1, 17 [1956]; Gross v Cantor, 270 NY 93, 200 NE 592 [1936]). Plaintiff bears the burden of pleading and proving that, "the libel [or slander] designates the plaintiff in such a way as to let those who knew him understand that he was the person meant. It is not necessary that all the world should understand the libel; it is sufficient if those who knew the plaintiff can make out that he is the person meant" (Stern v News Corp., Slip Copy, 2010 WL 5158635 [SDNY 2010], citing Fetler v Houghton Mifflin Co., 364 F2d 650, 651 [1966]; Cole Fisher Rogow, Inc. v Carl Ally, Inc., 29 AD2d 423, 288 NYS2d 556, 561-62 [1st Dept1968][plaintiffs need not be named in the allegedly defamatory publication to recover, and may give evidence of all the surrounding circumstances and other extraneous facts to elucidate the reference]). This burden has been found to be met, for example, in cases where plaintiff, as here, did business using the name of a third-party company and defamatory statements were made about the third party (Golden Bear Distributing Systems v Chase Revel, Inc., 708 F.2d 944 [5th Cir 1983][where the plaintiff company's business was selling a third-party company's products using the third-party company's name as its own, the communication that defamed the third-party company also defamed the plaintiff]); or where evidence showed that the president and chief executive officer of a corporation made all business decisions for the corporation, and therefore, the president and the officer were defamed by the allegations of the corporation's fraud and corrupt practices (Caudle v Thomason, 942 FSupp 635 [DDC 1996]) .
Generally, "whether a complaint alleges facts sufficient to demonstrate a connection between the plaintiff and the alleged libel is a question for the court" (Cardone v Empire Blue Cross and Blue Shield, 884 FSupp 838, 847 [SDNY1995], citing Springer v Viking Press, 60 NY2d 916, 917, 470 NYS2d 579 [1982]). However, a question for the jury may be presented when the defamation complained of is ambiguous in regard to the identity of the person that is the object of the defendant's statement (see 114 Am Jur Proof of Facts 3d 513 [2010]).
The review of the complaint shows that it does not allege that defendants made false statements explicitly directed at either Prince or D'Lites LAMD. Rather, it alleges that the false statements were made "about D'Lites and D'Lites products"; defendants' reporting was malicious and willful because they knowingly made false and misleading statements concerning facts about plaintiffs' ice cream and, as a result, plaintiffs suffered damages (complaint, ¶¶49, 53- 55).
However, the court finds that, with respect to the claims on behalf of the corporate plaintiff D'Lites LAMD, plaintiffs' allegations, in conjunction with the evidence of all the surrounding circumstances and other extraneous facts, tend to show that defendants' statements about D'Lites's misleading advertising of the "healthier" ice cream could also be understood as applying to D'Lites LAMD, even though it was not specifically named in the Report (see Cole Fisher Rogow, Inc. v Carl Ally, Inc., 29 AD2d 423, supra; Stern v News Corp., 2010 WL 5158635, supra).
The review of the video clip shows that, during Diaz's narrative, stating that "D'Lites is a growing national chain; [ . . . ] there are 22 stores [ . . . ] and four more New York locations about to open," plaintiffs' store locations were displayed on the screen (see Diaz Affidavit, exhibit A). The Report then went on to characterize the D'Lites's advertisement of the nutritional and calorie value of the "D'Lites ice cream" as false (id.). Based on such use of the general, abbreviated name "D'Lites," and reference to D'Lites "stores," and in light of plaintiffs' assertion that no other stores in the named three locations sell D'Lites ice cream, it is possible that the public might have understood the name "D'Lites" to refer both to "D'Lites Emporium" and "D'Lites LAMD" stores, and therefore, inferred that D'Lites LAMD's advertising of the nutritional value of the "D'Lites ice cream" was false as well (see Golden Bear Distributing Systems v Chase Revel, Inc., 708 F 2d 944, supra; see also Gorman v Swaggart, 524 So2d 915 [La Ct App 1988], cert. denied, 489 US 1017 [1989][holding that the religious corporation "Marvin Gorman Ministries" could bring suit about allegations that the eponymous Marvin Gorman had acted immorally because the reputations of the man and his church were inextricably intertwined]). Assuming the facts of the complaint (and plaintiffs' submissions) as true, as this Court must, defendants' statements which allegedly impugn "D'Lites" encompass plaintiffs' stores.
Thus, in light of the ambiguity as to "whether the words were spoken of and concerning' [D'Lites LAMD], requiring a showing of extrinsic facts [ . . . ], "the question of whether the statements are in fact imputable to [D'Lites LAMD] is better left to a jury" (see Angio-Medical Corp. v Eli Lilly & Co., 720 FSupp 269 [SDNY1989]; Bruno v New York News, Inc., 89 AD2d 260, 456 NYS2d 837 [3d Dept 1982]).
Defendants rely heavily on Kirch v Liberty Media Corp. (449 F3d 388 [2d Cir 2006]), to support its proposition that the alleged statements about "D'Lites ice cream" and "D'Lites stores" are not imputable to plaintiffs. In that case, the Second Circuit held that statements about plaintiff Kirch Media Group's "cash flow problem" could not serve as a basis for a defamation claim by the company's exclusive agent ITTC, "solely because the communication contains an allegedly false implication that the person bringing suit is at risk of loss" [emphasis added]. The court posed a hypothetical of whether defamation of IBM would be "of and concerning" IBM's suppliers, employees and dealers, and concluded it would not, regardless of how much those other parties might be injured by the statement, and regardless of the business relationship between the companies.
Kirch, however,is distinguishable from the instant case because, unlike ITTC and Kirch, D'Lites LAMD and D'Lites Emporium share a common name, D'Lites, which was generally referred to in the alleged defamatory statements. The ambiguity in regard to the identity of the entity that was the object of the alleged defamation was not present in Kirch. Neither is D'Lites LAMD's defamation claim premised solely on the risk of loss or business relationship with any of the D'Lites entities. Moreover, the Kirch court went on to acknowledge that in some cases, a statement may be "of and concerning" the plaintiff even though on its face it was aimed at another person or entity, but "could have been understood by a reasonable reader as being, in substance, actually about him or her" (Kirch, at 399).
Accordingly, since a reasonable viewer could have understood that the Report referred to D'Lites LAMD so as to infer that its advertising of D'Lites ice cream was also misleading to consumers, the dismissal of the defamation claim on behalf of D'Lites LAMD for failure to state a cause of action or based on documentary evidence is unwarranted at this juncture.
However, as to Prince as individual, there is no actionable defamation/slander claim based on the statements complained of in the Report. None of the alleged defamatory statements assert or even imply that Prince's individual business practices were dishonest or misleading to customers (see Cole Fisher Rogow, Inc. v Carl Ally, Inc., 29 AD2d 423, supra; see, Nichols v Item Publishers, 309 NY 596, 601), there is no commonality of names of Prince and D'Lites, and "it is doubtful if the general public was aware of [Prince's] existence or even concerned with [him]" (see Rogow, supra). Moreover, it is established New York doctrine that "a publication defamatory of a place or product is not a libel against its owner unless the owner himself is accused of disreputable conduct" (El Meson Espanol v NYM Corp., 521 F2d 737 [2d Cir 1975]). Thus, the first cause of action for defamation/slander by Prince individually, is dismissed.
Disparagement of Goods
In order to state a claim for product disparagement, a plaintiff must allege a false statement; about the condition, value, or quality of plaintiff's product or property; publication to a third person; actual malice, and special damages (see Ruder & Finn Inc., 439 NYS2d 858, 439 NYS2d 858 [1981]; see Thome v Alexander & Louisa Calder Foundation, 70 AD3d 88, 105, 890 NYS2d 16, 28 [1st Dept 2009]).
The alleged statements giving rise to plaintiffs' product disparagement claim are the same statements used in support of plaintiffs' defamation claim - namely, that D'Lites products were "not low in carbs," or sugar, that half a cup of D'Lites ice cream contained "four times the amount of grams" claimed by D'Lites, "meaning if you eat it, you are swallowing about four times as much fat and calories"; that the ice cream contained "up to seventeen times the carbs," "twelve times the sugars;" that D'Lites's products "were too good to be true" and the "[lab] tests found that D'Lites's results are way off" (complaint, ¶50).
Under New York law, slander/defamation and disparagement of goods constitute distinct causes of action (Fashion Boutique of Short Hills, Inc. v Fendi USA, Inc., 314 F.3d 48, 59 [2d Cir 2002]). Case law thus elucidates the difference between, on the one hand, statements concerning a party's "integrity or business methods," and on the other hand, statements denigrating the quality of a party's goods or services. The former provides a basis for a claim of defamation [per se] and the latter provides a basis for [product disparagement] claim (Henneberry v Sumitomo Corp. of America, 415 FSupp2d 423 [S.D.N.Y 2006], citing Fashion Boutique).
Defendants argue that plaintiffs' status as a licensee precludes them from maintaining the claim of disparagements of goods because D'Lites ice cream is not "plaintiffs' property," and thus, the statements in the Report are not about "plaintiff's product." This court's research uncovered no New York cases affording such a narrow interpretation of this element of the claim as to require plaintiff to be an actual owner of the goods claimed to be disparaged (see Ruder & Finn Inc. v Seaboard Sur. Co, supra [observing that through the history of the product disparagement claim, "it was extended to include [ . . . ] the disparagement of the quality of, as distinguished from title to, property]; Fashion Boutique of Short Hills, Inc. v Fendi USA, Inc., 314 F 3d 48 [2d Cir 2002][stating that under New York law, to recover for disparagement of goods, the plaintiff must show that the defendant published an oral, defamatory statement directed at the quality of a business's goods][emphasis added]).
Likewise, defendants' position that only a manufacturer of a product can recover for disparagement of the product is not sustained by any controlling authority. The cases defendants rely on are distinguishable as they are premised on vicarious claims by a retailer/distributor solely based on "allegations of losses of sales sustained by virtue of the defamation of another." Unlike the retailer or distributor in those cases, plaintiffs here allege that they acquired certain property rights through a license, which is not solely limited to the right to sell, but also includes the use of the trade names and marks of the D'Lites' brand (complaint, ¶14), and the alleged damages include, among others, investment losses and loss of commercial lease deals for rental space for the new stores.
Defendants rely on Simmons Ford, Inc. v Consumers Union of U.S. (516 FSupp 742, 751 [SDNY 1981]) and Isuzu Motors Ltd. v Consumers Union of U.S., Inc. (12 FSupp 2d 1035 [CD Cal 1998]). In Simmons, where a retailer of an electrically powered automobile sought to recover in [trade] libel action against a magazine for an allegedly defamatory review of the automobile, the court, relying on the "long line of cases holding that First Amendment considerations preclude a plaintiff from recovering based on losses sustained by virtue of the defamation of another,'"denied the relief to the retailer because the article contained no direct or indirect reference to the retailer, whose only losses sustained by it were lost sales.
Moreover, New York courts have consistently sustained disparagement claims brought by retailers of products (Fashion Boutique of Short Hills, Inc. v Fendi USA, Inc., 314 F3d 48 [a claim for product disparagement was proper where one clothing store alleged that another competing clothing store's employees made disparaging misrepresentations to its customers regarding the quality and authenticity of the products sold at the former's store]; Gucci America, Inc. v Duty Free Apparel, Ltd.277 FSupp2d 269 [SDNY 2003][counterclaim by a retailer for disparagement of goods]). Thus, in the absence of an applicable precedent as to the viability of disparagement claims brought by licensees of a product, the court declines to dismiss plaintiffs' claim on this ground.
Defendants' second point of contention is that plaintiffs failed to plead special damages. It is established that the allegations of special damages "must be fully and accurately stated" (see Drug Research Corp., 199 NYS2d 33; Fashion Boutique of Short Hills, Inc. v Fendi USA, Inc., 314 F.3d 48 [2dCir 2002]). In certain situations, however, courts apply more relaxed special damages pleading requirement, holding that estimations of damages rather than precise figures are sufficient (see Drug Research, supra; Gen. Sec, Inc. v APX Alarm Sec. Solutions, Inc., 647 FSupp2d 207, 215-16 [NDNY 2009][although plaintiff may eventually be required to provide evidence of more specific dollar amounts, plaintiff stated the damages resulting from defendants' allegedly disparaging statements with sufficient particularity at this stage in the proceedings, by providing damage estimates for the cost of reinstalling its home security equipment and for the loss of revenue arising from cancelled service subscriptions]).
Here, plaintiffs' allegations of special damages include: "harm to the reputation of goods and services; losses of approximately $1 million in investments in the D'Lites brand representing months of work, resources, expenditures, and investments to expand D'Lites in the New York region; acquiring license rights, property and location rights, renovations, and supplies for the D'Lites store locations; loss of business from at least 500 customers per day to "the number of current D'Lites's customers"; and postponement and failure of plaintiff's five-year plan to eventually own and operate 15 D'Lites stores in the tri-state area (complaint ¶¶17; 52).
The court finds that, to the extent that plaintiffs' store in Babylon was opened for operation at the time when the subsequent broadcast of the Report was aired on May 15, 2011, plaintiffs' estimates for the loss in customers and attempted itemization of investment costs are sufficient at this pleading stage (Gen. Sec., Inc. v APX Alarm Sec. Solutions, Inc., 647 FSupp2d 207, supra). And, contrary to defendants' contention, plaintiffs are not required to identify the customers they allegedly lost as a result of the alleged product disparagement. While under the general rule, the courts require that "the persons who ceased to be customers, or who refused to purchase, [ . . . ] be named" (Drug Research Corp., 199 NYS2d 33, supra; Fashion Boutique of Short Hills, Inc. v Fendi USA, Inc., 314 F3d 48 [2d Cir 2002]), in the situations, as here, where "the defendant's disparaging comments are disseminated widely, and the nature of the plaintiffs' business prevents the specific identification of lost customers, those customers need not be named" (see Charles Atlas, Ltd. v Time—Life Books, Inc., 570 FSupp 150, 156 [SDNY1983][allowing exception because plaintiff sold only by mail order, making it difficult to identify those who did not order because of defendant's misrepresentations]; cf. Fashion Boutique, 75 FSupp2d at 240 [disallowing exception because misrepresentations were not widely disseminated]).
Here, the television broadcast of the subject Report throughout the tri-state area is sufficient to suggest the type of widespread dissemination required for this claim, thus relieving plaintiffs from the requirement of naming the lost customers. Thus, the allegations of the loss of customers from 500 a day, the estimate derived from the other Long Island store in Woodbury, are sufficient at this pleading stage.
However, with respect to the still unopened stores in Bayside and Commack, plaintiffs have no sustainable claim of damages attributable to the complained-of broadcast (Cusack v 60 Minutes Div of CBS, Inc., 299 AD2d 180, 749 NYS2d 242 [1st Dept 2002], citing SRW Assoc, v Bellport Beach Prop Owners, 29 AD2d 328, 517 NYS2d 741 [2d Dept 1987]["to recover damages for injurious falsehood, special damages must be proved to be the direct and natural result of the falsehood, [ . . . ] and when the matter is one of pure speculation or conjecture, a cause of action to recover damages for injurious falsehood does not lie]). With respect to these stores, the allegations that plaintiffs entered into negotiations for rental property in Wantaugh, New York, and that the "landlord, upon watching Defendants' Shame segment, ceased negotiations," and also negotiated with four people interested in opening seven D'Lites stores (complaint ¶¶19- 22) are not sufficient for special damages pleading. And since there was no loss of customers at the still unopened stores in Bayside and Commack, which could be attributed to the disparaging statements in the Report, plaintiff failed to satisfy the special damages element of the claim.
Thus, at this juncture, plaintiffs' claim for disparagement of goods is sustained as limited solely to the claimed losses attributable to the Babylon store, but not as to the Commack or Babylon stores.
Tortious Interference with Business Relationship
Tortious interference with business relations occurs when defendants use unlawful means to disrupt plaintiffs' business, resulting in injury (Delano Village Cos. v Orridge, 147 Misc 2d 302, 310, 553 NYS2d 938, 944 [Sup Ct New York County 1990]; citing Della Pietra v State of New York, 125 AD2d 936, 938, aff'd 71 NY2d 792).
To state a claim for intentional interference with business relations, a plaintiff must show that (1) the plaintiff had a business relationship with a third party; (2) the defendant knew of that relationship and intentionally interfered with it; (3) defendant acted solely out of malice or used improper or illegal means that amounted to a crime or independent tort; and (4) defendant's interference caused injury to the relationship with the third party (Amaranth LLC v J.P. Morgan Chase & Co., 71 AD3d 40, 47, 888 NYS2d 489, 494 [1st Dept 2009], citing Carvel Corp. v Noonan, 3 NY3d 182, 189, 785 NYS2d 359, 361-62 [2004]).
Plaintiffs allege that based on the Diaz's statement in the Report that D'Lites is a growing chain with "four more New York locations about to open," which necessarily require "business relationships and licensing contracts," defendants "knew that Prince was about to open his stores and would have acquired licensing rights, rental contracts, supply contracts, and renovation contracts, and other business relations in connection with opening the new stores" (complaint, ¶64), and "could reasonably expect that Plaintiffs would seek to or already had entered into business contracts and relations" (id., ¶60).
The court finds that these allegations are inadequate to state that defendants actually knew of any specific business relationship of Prince or D'Lites LAMD, or that they knowingly interfered with those relationships (Duane Read v Clark, 2 Misc 3d 1007(A), 784 NYS2d 920 [Sup Ct, New York County 2004], citing Bus. Networks of NY, Inc. v Complete Network Solutions, Inc., 265 AD2d 194, 696 NYS2d 433 [1st Dept 1998][Duane Reade has not plead that the advertisement interfered with any particular relationship or contract or any potential relationship or contract with any third party, or that any contract whatsoever was breached]; see A A Tube Testing Co. v Sohne, 20 AD2d 639, 639, 246 NYS2d 247, 248 [2d Dept 1964][plaintiff's allegations that defendants should have known of the existence of the contract held insufficient to allege actual knowledge]). Likewise, plaintiffs have failed sufficiently to specify what relationships defendants interfered with (see Schoettle v Taylor, 282 AD2d 411, 411, 723 NYS2d 665 [1st Dept 2001][affirming the dismissal of tortious interference claim because plaintiffs failed to allege any specific business relationship they were prevented from entering into as a result of the purported tortious interference]).
Accordingly, plaintiffs' claim of tortious interference with business relations is dismissed.
Conclusion
Based on the foregoing, it is hereby
ORDERED that the branch of the defendants Fox Television Stations, Inc.,'s and Arnold Diaz's motion, pursuant to CPLR 3211 (a)(1) and (7) to dismiss plaintiffs' first cause of action for defamation is granted solely to the extent that the claim of plaintiff Matthew Prince individually, is severed and dismissed; and this branch of the motion is otherwise denied; and it is further
ORDERED that the branch of the defendants' motion dismissing the second cause of action for disparagement of goods is granted solely with respect to the claims relating to the Bayside and Commack stores, and denied as to claims relating to the Babylon store; and it is further
ORDERED that the branches of the defendants' motion to dismiss the third, fourth, fifth, sixth and seventh causes of action of the plaintiff Matthew Prince individually and on behalf of D'Lites L.A.M.D. B.H. Inc., are granted and said causes of action are severed and dismissed; and the remainder of the action shall continue; and it is further
ORDERED that defendants shall serve and file their Answer within 20 days of receipt of a copy of this decision and order with notice of entry; and it is further
ORDERED that the parties shall appear for an in-court conference at Room 438, Part 35, 60 Centre Street, New York, New York, on December 20, 2011 at 2:30 p.m.; and it is further
ORDERED that plaintiffs serve a copy of this order with notice of entry upon all parties within 20 days of entry.
This constitutes the decision and order of the court.
____________________________
Hon. Carol Robinson Edmead, J.S.C.
In accordance with the accompanying memorandum decision, it is hereby
ORDERED that the branch of the defendants Fox Television Stations, Inc.,'s and Arnold Diaz's motion, pursuant to CPLR §§3211 (a)(1) and (7) to dismiss plaintiffs' first cause of action for defamation is granted solely to the extent that the claim of plaintiff Matthew Prince individually, is severed and dismissed; and this branch of the motion is otherwise denied; and it is further
ORDERED that the branch of the defendants' motion dismissing the second cause of action for disparagement of goods is granted solely with respect to the claims relating to the Bayside and Commack stores, and denied as to claims relating to the Babylon store; and it is further
ORDERED that the branches of the defendants' motion to dismiss the third, fourth, fifth, sixth and seventh causes of action of the plaintiff Matthew Prince individually and on behalf of D'Lites L.A.M.D. B.H. Inc., are granted and said causes of action are severed and dismissed; and the remainder of the action shall continue; and it is further
ORDERED that defendants shall serve and file their Answer within 20 days of receipt of a copy of this decision and order with notice of entry; and it is further
ORDERED that the parties shall appear for an in-court conference at Room 438, Part 35, 60 Centre Street, New York, New York, on December 20, 2011 at 2:30 p.m.; and it is further
ORDERED that plaintiffs serve a copy of this order with notice of entry upon all parties within 20 days of entry.
This constitutes the decision and order of the court.