How does a release work and what are its limits? This is the question that Avnet, Inc. v Deloitte Consulting LLP 2019 NY Slip Op 33026(U)
October 11, 2019 Supreme Court, New York County Docket Number: 653146/2019 Judge: Jennifer G. Schecter answers in great detail. The opinion comes with extensive and fascinating footnotes. They are too extensive to reprint here, but well worth the read.
“In 2008, the parties entered into a Master Services Agreement govemmg
consulting work performed by Deloitte for Avnet (Dkt. 29 [the MSA]). For each consulting matter, the parties would enter into a separate Work Order (see id. at 2-3). The MSA provides that all litigation “based on or arising out of’ it must be brought in New York and that the MSA “and each Work Order, and all matters relating to [the MSA ]” are governed by New York law (id. at 15 [emphasis added]).
Beginning m 2013, the parties executed Work Orders governmg Deloitte’s
development and implementation of a software platfonn known as “Project Evolve” (see Dkt. 38). That system went live on April 4, 2016. It was riddled with problems. Avnet claims that Deloitte was at fault. However, rather than litigate, on September 7, 2016, the ‘parties executed a settlement agreement in which Avnet released all of its claims against Deloitte – both known and unknown – relating to Project Evolve (Dkt. 28 [the Settlement Agreement]). The Settlement Agreement is governed by New York law (id. at 4).”
“Shortly after executing the Settlement Agreement, the parties executed a Work Order governing Deloitte’s attempts to fix the system. In March 2017, Avnet terminated Deloitte and decided it would abandon Project Evolve as soon as an alternative system could be implemented.
On May 28, 2019, Avnet commenced this action against Deloitte. In its
complaint, it asserts 13 causes of action. The first six concern Deloitte’s work on Project Evolve through August 1, 2016: 1 (1) fraud; (2) constructive fraud; (3) fraudulent inducement; ( 4) breach of contract and breach of the implied covenant of good faith and fair dealing; ( 5) professional negligence; and ( 6) ‘violation of New York General Business Law (GBL) § 349. The remaining seven causes of action, number~d here as in the complaint, concern Deloitte’s conduct after August 1, 2016: (7) fraud; (8) constructive fraud; (9) fraudulent inducement . of the Settle~nent Agreement and post-Settlement
consulting work; (10) breach of contract (the MSA and Work Orders) and breach of the implied covenant of ‘good faith and fair dealing; (11) professional negligence; (12) violation of GBL § 349; and (13) unjust enrichment.
Deloitte moves to dismiss, arguing that: (1) the first six causes of action are barred by the Settlement Agreement; (2) Avnet does not plead a viable claim for fraudulent inducement of the. Settlement Agreement or any post-Settlement Agreement work; (3) none of the claims based on Delditte’ s post-Settlement conduct are viable; and ( 4) in the
alternative, all of the post-Settlement Agreement work claims (;ir e duplicative of the express breach of contract claim pleaded in the tenth cause of action.”
“”It is well established that a valid release constitutes a complete bar to an action on a claim which is the,subject of the release” (Global Minerals & Metals Corp. v Solme, 35 AD3d 93, 98 [1st Dept 2006]). If “the language of a release is clear and unambiguous, the signing of a release is a ‘jural act’ binding on the parties” (Booth v 3669 Delaware,·
Inc., 92 NY2d 934, 935 ). “A release should never be converted into a starting point for, .. litigation except under circumstances and under rules which would render any other result a grave injustice” (Centro Empresarial Cempresa S.A. v Am. Movil, S.A.B. de C. V, 17 NY3d 269, 276 ). Significantly, “a release may encompass unknown
claims, including unknown fraud claims, if the parties so intend and the agreement is ‘fairly and knowingly made”‘ (id.,, quoting Mangini v McClurg, 24 NY2d 556, 568 ). . ‘)
The Settlement ~Agreement released Deloitte from “any and an claims . . . or actions or causes of action of every nature and. description,” including both “known and unknown” claims relating to Project Evolve. This includes an claims for breach of the MSA and the pre-settlement Work Orders and any rel~ted tort and statutory claims, Avnets’ contention that alleged fraud committed by Deloitte in conjunction with its presettlement work on Project Evolve is beyond the scope of the release is baseless. A release of all unknown claims includes fraud claims whose basis was not· yet known to the plaintiff at the time of the release (see Centro, 17 NY3d at 277). That is the essence of a release of unknown claims.”
Read on in the original for footnotes 1-4