## Facts

- Theatrical Services and Supplies, Inc. (Theatrical) was a New York company that sold theatrical supplies, with its principal place of business in Hauppauge, New York.
- GAM Products, Inc. (GAM) was a California company that manufactured specialty lighting products used in the entertainment industry, with its principal place of business in Los Angeles, California.
- In 2007, Theatrical and GAM negotiated for Theatrical to distribute GAM’s products on the East Coast.
- On September 1, 2007, the parties executed a written distributor agreement giving Theatrical a **nonexclusive** right to sell GAM products to retail end users.
- The written agreement contained (1) a **California choice-of-law** provision and (2) a **merger clause** stating that all agreements between the parties were “contained in this agreement which supersedes and terminates all other agreements between the parties.”
- Theatrical alleged that, separate from the written agreement, the parties also entered into an earlier **oral “master-distributor” agreement**, allegedly reflected in pre-September 2007 emails.
- Under the alleged oral arrangement, Theatrical claimed it could sell to small East Coast distributors who could not meet GAM’s minimum purchase requirements; GAM allegedly would not compete for those small orders, would direct those customers to Theatrical, and would take marketing and transition steps aimed at making Theatrical an exclusive master distributor.
- In reliance on the alleged oral arrangement, Theatrical ordered roughly **\$30,000** in GAM products that it later could not sell.
- Theatrical sued for breach of contract based on both the written distributor agreement and the purported oral master-distributor agreement, and also asserted a fraudulent inducement claim tied to the alleged oral agreement.
- GAM moved to dismiss under CPLR 3211, arguing the merger clause and parol evidence rule barred any claim based on the alleged oral agreement and that the fraud claim was not independent of the contract allegations.

## Issues

1. Whether the merger clause in the written distributor agreement barred a breach-of-contract claim based on a separate alleged oral master-distributor agreement.
2. Whether Theatrical stated a fraudulent inducement claim where the alleged misrepresentations were promises about future performance connected to the asserted contractual obligations.
3. Whether the complaint sufficiently stated breach claims based on the written distributor agreement to survive a CPLR 3211 motion to dismiss.

## Decision

- The court **dismissed** the first cause of action **to the extent** it alleged breach of a purported **oral** master-distributor agreement.
- The court **dismissed** the third cause of action for **fraudulent inducement**.
- The court **otherwise denied** the motion, allowing the contract claims grounded in the **written** distributor agreement to proceed.

## Legal Principles

- A written contract containing a clear merger/integration clause is treated as the complete statement of the parties’ agreement; prior or contemporaneous oral terms that add to, vary, or contradict the writing cannot be used to support a separate contract claim.
- A fraud claim cannot rest solely on an alleged false promise of future performance that merely restates the claimed contractual duties; the pleaded misrepresentation must be collateral to the contract and not duplicative of the breach claim.
- On a CPLR 3211 motion to dismiss, the court accepts the complaint’s factual allegations as true, gives the plaintiff favorable inferences, and asks only whether the pleaded facts fit within a recognized legal theory; adequately pleaded breach claims based on the written agreement may proceed even if extra-contract theories are dismissed.

## Conclusion

The court treated the September 1, 2007 distributor agreement as a fully integrated contract and, based on its merger clause, dismissed the portion of the contract claim that depended on an alleged oral master-distributor agreement. It also dismissed the fraudulent inducement claim because the alleged misrepresentations were essentially promises about how GAM would perform and were not separate from the asserted contractual obligations. The remaining breach claims tied to the written distributor agreement survived the pleading-stage motion to dismiss.


Theatrical Services & Supplies, Inc. v. GAM Products, Inc., 34 Misc. 3d 1224(A) (2012)