Ghost in the Machine, Inc. v. Planned Parenthood Federation of America, Inc.

Background

Ghost in the Machine Inc., doing business as Snake Nation, worked with Planned Parenthood Global, Inc. and Planned Parenthood Federation of America, Inc. on a social-media campaign in Africa. Snake Nation and Planned Parenthood Global entered into a Master Services Agreement in 2017. In 2018, the parties signed a statement of work for a nine-month pilot campaign in Burkina Faso involving recruitment and training of young promoters called the “Billis.” The agreements provided for consulting payments and a direct-budget advance.

Snake Nation alleged that the defendants did not pay the contemplated advance or certain expenses, reviewed its work, and terminated the agreement on February 14, 2019. Snake Nation also alleged that representatives of the defendants later told the Billis that Snake Nation was responsible for unpaid salaries and sought to have the Billis work exclusively with Planned Parenthood. Snake Nation asserted six causes of action: breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, injurious falsehood, tortious interference, and unfair competition.

The defendants moved to dismiss all claims except the breach-of-contract claim against Planned Parenthood Global. The court evaluated the complaint under the standard for a motion to dismiss, accepting well-pleaded factual allegations as true for purposes of the motion and asking whether they plausibly stated claims for relief.

Breach of Contract Against Planned Parenthood Federation of America

The contract documents identified Planned Parenthood Global and Snake Nation as parties, not Planned Parenthood Federation of America. The court nevertheless held that Snake Nation plausibly alleged that Planned Parenthood Federation of America intended to be bound by the agreements. The allegations included that the campaign began at Planned Parenthood Federation of America’s invitation, one of its officers signed the statement of work, its employees were assigned to review Snake Nation’s work, it made contractual payments, and it exercised substantial oversight over the campaign.

The court distinguished this intent-to-be-bound theory from veil piercing, which can allow a parent company to be held liable by disregarding the separate corporate form. The court concluded that Snake Nation did not also need to allege that Planned Parenthood Federation of America used corporate domination to commit a fraud or wrong. The motion to dismiss the breach-of-contract claim against Planned Parenthood Federation of America was DENIED. The breach-of-contract claim against Planned Parenthood Global was not challenged by the motion.

Implied Covenant of Good Faith and Fair Dealing

Snake Nation presented three theories: that the defendants withheld the direct-budget advance, failed to engage in the contract’s good-faith billing-dispute process, and interfered with Snake Nation’s relationship with the Billis.

The court granted dismissal of the advance and billing-dispute theories because they relied on the same facts and contract provisions as Snake Nation’s express breach-of-contract claim. The court also granted dismissal of the Billis-related theory. Although the alleged communications with the Billis could otherwise appear to undermine the agreement, they occurred after the defendants terminated the contract. The court held that the implied covenant could not support a claim based on actions occurring after the contract ended, and that the termination itself could not support the claim because the agreement allowed Planned Parenthood to terminate it at any time. Dismissal of the implied-covenant claim was GRANTED.

Unjust Enrichment

The court first rejected the defendants’ argument that the unjust-enrichment claim was barred by a three-year limitations period. It held that the six-year period applied because Snake Nation characterized the claim as a quasi-contract claim—an obligation imposed by law when there is no agreement—and the claim was based on facts also supporting a contractual obligation. The motion to dismiss on limitations grounds was therefore DENIED.

The court nevertheless granted dismissal on the separate pleading issue. Snake Nation asserted unjust enrichment against Planned Parenthood Federation of America while also asserting a contract claim against Planned Parenthood Global concerning the same subject matter. The court recognized that alternative pleading may sometimes be allowed against a noncontracting party, including where that party independently took the benefit or diverted funds. But Snake Nation alleged that Planned Parenthood Federation of America acted through Planned Parenthood Global and did not allege that Planned Parenthood Federation of America diverted funds or that recovery against Planned Parenthood Global would be inadequate. The motion to dismiss the unjust-enrichment claim was GRANTED.

Injurious Falsehood

The court treated Snake Nation’s injurious-falsehood theory as a business defamation claim. Snake Nation adequately identified a February 26, 2019 statement by representatives of the defendants to the Billis that Snake Nation was responsible for their February and March salaries. That allegation identified the alleged statement, when and where it was made, and to whom it was communicated. However, allegations concerning unpaid vendors were too nonspecific and did not identify a sufficiently particular false statement.

The court then held that the surviving statement-based claim was barred by New York’s one-year limitations period for defamation claims. Snake Nation’s general allegation that the defendants continued to misrepresent the circumstances of the relationship was too conclusory to extend or restart the limitations period. The motion to dismiss the Fourth Cause of Action was GRANTED.

Tortious Interference

Snake Nation asserted tortious interference with business relations based on the defendants’ dealings with the Billis and tortious interference with contract based on alleged efforts by Planned Parenthood Federation of America to cause Planned Parenthood Global to terminate the agreement.

For the business-relations theory, the court held that taking over the Billis workforce, without allegations that the conduct was independently criminal or tortious or was undertaken solely to harm Snake Nation, was insufficient. Snake Nation could rely on the alleged salary statement because it plausibly alleged that the statement was defamatory, but that claim accrued on February 26, 2019 and was filed after the applicable limitations period, even accounting for the 228-day tolling period discussed by the court. The motion to dismiss this theory was GRANTED.

For the contract-interference theory, the court held that the claim accrued no later than February 14, 2019, when the agreement was terminated. The claim was therefore also outside the three-year limitations period, and the contractual billing-dispute period did not delay accrual. The motion to dismiss this theory was GRANTED.

Unfair Competition

Snake Nation proceeded under a misappropriation theory of unfair competition. The court held that the alleged property could include goodwill, not only tangible property, so Snake Nation could rely on its alleged goodwill with the Billis. The court also concluded that Snake Nation plausibly alleged that it competed with the defendants because the parties had worked together after a competitive bidding process and the defendants later took over the social-media campaign. The motion to dismiss the unfair-competition claim was DENIED.

Disposition

The court stated that the defendants’ motion to dismiss was GRANTED IN PART as to the claims for breach of the implied covenant, unjust enrichment, injurious falsehood, and tortious interference, and DENIED IN PART as to the breach-of-contract and unfair-competition claims. The clerk was directed to terminate the pending motion.