United States District Court, S.D. New York.

                      Nandakumar CHANAYIL, et al., Plaintiffs,

                                         v.

                         Deepak GULATI, et al., Defendants.

                                No. 94 Civ. 710(TPG).


                                   Feb. 17, 2000.



                                       OPINION


GRIESA, J.


*1 On July 11, 1996 the court dismissed this action in its entirety as to the VOA
defendants. On March 2, 1999 the court of appeals affirmed the dismissal of the
"RICO" counts (Counts I and II), and remanded the remaining courts-the state law
counts-for further proceedings. The court of appeals held that Count III was a
sufficient pleading of common law fraud, but that the district court should
consider whether to exercise supplemental jurisdiction under 28 U.S.C. s 1367.
Finally, the court of appeals directed the district court to determine whether
Counts IV and V properly state claims upon which relief can be granted and whether
supplementary jurisdiction should be exercised over them.


The VOA defendants have now moved to dismiss Counts IV and V as not stating claims
upon which relief can be granted, and for costs and attorneys' fees. The VOA
defendants do not ask the court to decline jurisdiction of any of the presently
remaining counts (Counts III, IV and V).


This court can, of course, decline to exercise jurisdiction over the state law
claims on its own motion. On the other hand, as the court of appeals indicated,
the court has discretion to retain jurisdiction under 28 U.S.C. s 1367. The court
believes that the latter course is proper. The case is now six years old. It is
simply too late to send the parties to another court.


As to the substantive issues, it is necessary to start with the court of appeals'
treatment of Count III. Although the court held that this count, alleging common
law fraud, was sufficiently pleaded, it construed the count quite specifically. It
interpreted Count III as alleging that the VOA defendants, with intent to defraud,
described the Gulati segment of the broadcasts as a probono feature and a public
service to the Indian-American community without disclosing the fact that Gulati
paid for the segment. In other words, the court of appeals did not construe Count
III as alleging that the VOA defendants joined in the presentation or creation of
the fraudulent statements of Gulati.


Count IV alleges the following:


Defendants made affirmative misrepresentations of material facts to plaintiffs.
Assuming for the sake of argument that they did not know the falsity of such
misrepresentations when they were made, defendants ought to have known of such
falsity.


Thus, in pleading Count IV, plaintiffs do not specify exactly which
misrepresentations were allegedly made by Gulati and which were made by the VOA
defendants. That is also true of Count III. But the court of appeals, obviously
making use of the introductory portions of the complaint, determined that there
are very limited allegations of misrepresentations as to the VOA defendants. This
led to the construction which the court of appeals gave to Count III.


The same interpretation should apply to Count IV. The second amended complaint
does not allege that the VOA defendants, as distinct from defendant Gulati, "made
affirmative misrepresentations" except as to certain limited things-that the
Gulati segment was a probono feature and a public service to the Indian-American
community, failing to disclose that the VOA and/or Khandalawala were paid by
Gulati. See summaries of paragraphs 53 and 55 of the second amended complaint in
this court's July 11, 1996 opinion. Construing Count IV to allege negligent
misrepresentation in respect to what has just been described, the court declines
to dismiss Count IV.


*2 The same basic analysis and interpretation apply to Count V. Moreover, the
court is not prepared to say, on the present record, that the exclusion in N.Y.
Gen. Bus. Law s 349(e) regarding advertisements applies in the present case. Nor
is the claim preempted by federal law. See Marcus v. AT & T Corp., 138 F.3d 46, 54
(2d Cir.1998).



                                     Conclusion


The court will retain jurisdiction over Counts III, IV and V of the second amended
complaint. The court denies the motion of the VOA defendants to dismiss Counts IV
and V for failure to state a claim upon which relief can be granted.


SO ORDERED.


S.D.N.Y.,2000.

Chanayil v. Gulati