New Jersey Court Denies Plaintiffs’ Claims for Tort Damages Arising From Contractual Obligations

In Scherillo v. Dun & Bradstreet, Inc., 2011 WL 2610134 (D. N.J. June 30, 2011), the court granted the defendant’s motion for summary judgment finding that neither plaintiff can base their claims in tort when the obligations rose out of contractual obligations. In their individual complaints, the plaintiffs claimed that Dun & Bradstreet (“D & B”) negligently misrepresented thoroughly investigating Agape World, Inc. (“Agape”) and failed to reveal that Agape’s CEO had a securities fraud conviction from 1999. Agape purportedly provided high interest bridge loans for large construction projects and claimed to offer a 10% return on investment over a two-month period.

In 2007 and 2008, individual plaintiffs John Scherillo and Richard Racioppi invested more than $1 million in Agape. Each investor was concerned about the validity of the company and sought a risk assessment report from D & B.  The report indicated that there had been no criminal action against Agape’s management.  Relying on the D&B report, each plaintiff continued to invest significant amounts of money in Agape. In 2008, Racioppi and Scherillo were unable to withdraw their investments in Agape. Agape executives informed Racioppi and Scherillo that contracts were being delayed and all funds were frozen. The plaintiffs later found that Agape’s CEO was convicted of securities fraud in 1999, information that was omitted from the D & B report.

In March of 2009, each plaintiff filed a complaint against D & B alleging gross negligence and negligent misrepresentation.  Scherillo sought $75,000 in compensatory damages and $5 million in punitive damages while Racioppi sought $1 million in compensatory damages and $5 million in punitive damages.

On June 30, 2011, the court granted the defendant’s motion for summary judgment, finding that neither plaintiff could base their claims in tort when the obligations arose out of a contractual obligation. Specifically, the court found that “a tort remedy does not arise from a contractual relationship unless the breaching party owes an independent duty imposed by law.”  New Jersey imposed an independent duty only on physicians, attorneys, insurance brokers, and manufacturers. Here, the plaintiff’s contended that D & B assumed the duty to fully and properly disclose information. The plaintiffs, however, admitted in their complaints that this duty arose out of a contractual obligation. The court found that there was no independent duty to fully and properly disclose information. Thus, D & B was not under an independent duty imposed by law and the plaintiff’s claims were actionable only under contract law.  

The primary materials for this case may be found on the DU Corporate Governance website.