In Daou v. Huffington, No. 651997/2010 (N.Y. Sup. Ct., N.Y. Cnty. Feb. 14, 2013)—a case strikingly similar to the Facebook lawsuit popularized in The Social Network—the Supreme Court (J. Ramos) ruled that political consultants Peter Daou and James Boyce (collectively “Plaintiffs”) could proceed on the majority of their claims asserting that Arianna Huffington (“Huffington”), Kenneth Lerer (“Lerer”), and TheHuffingtonPost.com (the “Huffington Post,” and collectively “Defendants”) stole Plaintiffs’ idea regarding the creation of the Huffington Post. The decision revives Plaintiffs’ suit, which seemed all but dead a year ago.
Plaintiffs’ claims arose from failed negotiations between the parties in 2004 to develop the now-famous news website and blog. Plaintiffs contend that they developed and proposed the idea for the website to Huffington and Lerer. Plaintiffs further asserted that Huffington intentionally led them to believe that the parties had established a joint venture, and thereby lured Plaintiffs into providing specific detail regarding their business plans. Armed with that knowledge, according to Plaintiffs, Huffington stole Plaintiffs’ idea and launched the Huffington Post.
Due to pleading insufficiencies, in 2011, the court dismissed all but one of Plaintiffs’ initial claims, but allowed Plaintiffs to amend their complaint. On May 21, 2012, Plaintiffs filed their amended complaint, asserting several causes of action, including fraud and unjust enrichment, in addition to their lone surviving claim, idea misappropriation. Defendants moved to dismiss all claims.
As a procedural matter, the court denied the motion to dismiss Plaintiffs’ claim of idea misappropriation, adopting Plaintiffs’ argument that Defendants’ motion was barred by the single motion rule, which prohibits a repeat challenge to a single claim. The court held that even where a plaintiff amends its complaint by incorporating completely new allegations, an unaltered individual claim cannot be subjected to a challenge that previously failed.
The court also denied Defendants’ motion to dismiss Plaintiffs’ fraud claim, rejecting Defendants’ argument that the complaint’s allegations did not contain the level of specificity required under C.P.L.R. § 3016(b). The court affirmed that the heightened pleading standard should not be read so strictly “as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud.” Rather, the standard may be met when a party states facts “sufficient to permit a reasonable inference of the alleged conduct.” According to the court, that standard was met through Plaintiffs’ recitation of concrete facts inferring Defendants’ fraudulent intent.
Finally, the court denied Defendants’ motion to dismiss Plaintiffs’ claim of unjust enrichment. The court held that the relationship between the parties was not so attenuated as to make Plaintiffs’ reliance on Defendants’ representations unreasonable. While a claim for unjust enrichment cannot be based solely on negotiating a deal that fails to come to fruition, the court found that Plaintiffs sufficiently pled that Defendants intentionally led Plaintiffs to believe that they became partners for the purpose of poaching Plaintiffs’ business plan.