Opinion ID: 4525695
Heading Depth: 3
Heading Rank: 2

Heading: Promissory Fraud Claim

Text: EPAC argues the district court erred in dismissing EPAC’s promissory fraud claim at the summary judgment stage. EPAC’s promissory fraud claim alleged that Thomas Nelson “promised that it would provide all of its requirements of the specified ranges or printing to EPAC” but in reality, Thomas Nelson “had already obtained lower pricing from [Lightning Source]” and it “had no intention to perform under the Requirements Contract.” According to EPAC, the district court erroneously applied New York law to the claim, arguing instead that Tennessee law applies. Not so. The district court correctly applied New York law. We review choice-of-law questions de novo, Mill’s Pride, Inc. v. Cont’l Ins. Co., 300 F.3d 701, 704 (6th Cir. 2002), as well as a district court’s grant of summary judgment, GMC v. Lanard Toys, Inc., 468 F.3d 405, 412 (6th Cir. 2006). Two choice-of-law levels govern this dispute. First, federal courts apply the forum state’s choice-of-law provisions to state law claims, Performance Contracting, Inc. v. DynaSteel Corp., 750 F.3d 608, 611 (6th Cir. 2014), which is Tennessee. Second, we turn to Tennessee law to see what state law governs EPAC’s promissory fraud (tort) claim. This issue boils down to whether the choice-of-law provision in the MSA encompasses EPAC’s promissory fraud claim: This Agreement will be governed by and construed in accordance with the laws of the State of New York as applicable to agreements entered into and to be performed entirely within that state by residents thereof. Any dispute arising under this Agreement, if brought by Customer, shall be resolved exclusively in the state and federal courts of New York, New York; and, if brought by EPAC shall be resolved exclusively in the state and federal courts of Nashville, Tennessee. Because the parties executed the agreement in Tennessee, we turn to Tennessee contract law to interpret the choice-of-law provision. Town of Smyrna, Tenn. v. Mun. Gas Auth. of Georgia, 723 F.3d 640, 646 (6th Cir. 2013). Tennessee will honor a choice-of-law provision “so long as - 14 - Case Nos. 19-5836/5838, EPAC Technologies, Inc. v. HarperCollins Christian Publishing, Inc. the provision was executed in good faith, there is a material connection between the law and the transaction, and the chosen law is not contrary to the fundamental policies of Tennessee.” Id. at 645–46. Tennessee is apt to construe choice-of-law provisions broadly. See Frizzell Const. Co. v. Gatlinburg, L.L.C., 9 S.W.3d 79, 85 (Tenn. 1999). And there’s no indication from a Tennessee court that the language in the choice-of-law provision above does not contain related tort claims. Persuasively, our circuit has already found that a nearly identical contract provision encompasses related tort claims. Banek Inc. v. Yogurt Ventures U.S.A., Inc., 6 F.3d 357, 363 (6th Cir. 1993); Moses v. Bus. Card Express, Inc., 929 F.2d 1131, 1139–40 (6th Cir. 1991) (finding “governed by” language is the key phrase that encompasses tort claims). Accordingly, the choice-of-law provision here applies to EPAC’s promissory fraud claim because the promissory fraud claim “put[s] the validity of the contract in issue, and such a claim would appear to be encompassed by the language.” Moses, 929 F.2d at 1140. Therefore, New York law applies and bars EPAC’s promissory estoppel claim. Under New York law, a claim based on promissory fraud is barred if (1) the legal duty to perform under the contract is the same; (2) the fraudulent misrepresentation is not collateral or extraneous to the contract; and (3) the damages for this claim are the same under the contract. Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13, 20 (2d Cir. 1996)). All of this is true here, and EPAC doesn’t dispute this. Rather, EPAC argues New York law can’t apply because there are no material connections between New York and the transaction, and, in any event, New York law offends fundamental policies of Tennessee law. See Town of Smyrna, 723 F.3d at 645–46. Not so. First, there are material connections between the transaction at issue and New York. EPAC argued as much earlier on in the case. EPAC’s President and CEO who signed the MSA was based - 15 - Case Nos. 19-5836/5838, EPAC Technologies, Inc. v. HarperCollins Christian Publishing, Inc. in EPAC’s New York office and negotiated the terms of the contract from New York. Thomas Nelson continued to have discussions with EPAC’s CEO, based in New York. Further, communications with an EPAC officer (based in New York) continued even after the termination of the MSA. This is enough to establish a material connection to New York. Cf. Curtis 1000, Inc. v. Martin, 197 F. App’x 412, 418–19 (6th Cir. 2006) (finding no material connection to Delaware where no work was performed in Delaware and where there was no Delaware office). Second, applying New York law here does not offend a fundamental policy of Tennessee. Under Tennessee law, a fundamental policy is something that implicates “public health, safety, or welfare.” Franklin v. Swift Transp. Co., Inc., 210 S.W.3d 521, 529 (Tenn. Ct. App. 2006) (quoting Guy v. Mut. Of Omaha Ins. Co., 79 S.W.3d 528, 537 (Tenn. 2002)). Or it concerns an activity that is “in violation of the criminal or civil code of” Tennessee. Sanders v. Henry Cty., No. W200801832-COA-R3-CV, 2009 WL 1065916, at  (Tenn. Ct. App. Apr. 21, 2009) (quoting Tenn. Code Ann. § 50-1-304((a)(3) (2008)). No Tennessee fundamental policy is offended simply because New York law bars a promissory fraud claim, and Tennessee law may allow it. See Carbon Processing & Reclamation, LLC v. Valero Mktg. & Supply Co., 694 F. Supp. 2d 888, 908 (W.D. Tenn. 2010) (reconsidered on different grounds). All to say, New York law applies and bars EPAC’s promissory fraud claim.