Fraud Added to Huffington Post Theft-of-Idea Suit; Judge Denies Dismissal

A New York judge refused for a second time Arianna Huffington and Ken Lerer's request to dismiss a lawsuit claiming that the media moguls stole the idea for the Huffington Post

A New York judge refused for a second time Arianna Huffington and Ken Lerer's request to dismiss a lawsuit alleging that the media moguls stole the idea for the Huffington Post, according to court documents obtained by TheWrap.

The new ruling on Thursday also includes claims of fraud and unjust enrichment, new allegations in a case that has been ongoing since October 2011, when two Democratic political operatives, Peter Daou and James Boyce, sued Huffington and Lerer for allegedly stealing an idea they brought to the pair in 2004.

The news site, which started as a collective of liberal blogs, launched in 2005. Huffington is editor-in-chief of the site, as well as president of AOL's Huffington Post Media Group. Lerer, a co-founder of HuffPo, runs the venture-capital firm Lerer Ventures.

Daou and Boyce were involved in the early discussions about the now-sprawling media empire, but just how involved they were is unclear.

Also read: Suit Claiming Arianna Huffington Stole HuffPost Idea to Go to Trial

In October 2011, New York Supreme Court Judge Charles Ramos threw out seven of the eight claims against HuffPo in October 2011 but allowed the claim of idea misappropriation to move forward.

On Thursday, in addition to allowing the case to move forward, he agreed to the addition of new claims of idea theft, fraud and unjust enrichment but tossed out a fourth claim of breach of implied contract.

Read the full opinion here.

In their amended complaint, Daou and Boyce contended that "there was an implied contract between them and Huffington and Lerer; that Huffington and Lerer fraudulently induced to reveal the business plan which Huffington and Lerer then used to launch the Huffington Post without giving either credit or an interest in the Huffington Post to plaintiffs."

In response, Ramos wrote: “Plaintiffs have adequately alleged that defendants took the information that plaintiffs provided, secretly shared it with another person, camouflaged the origin to make it appear as if it came from that other person and, in effect, stole the idea and developed it with that other person."

The judge said Daou and Boyce showed adequate grounds to allege fraud, saying Huffington and Lerer delayed a partnership with the duo to prevent them from launching a HuffPo-style site on their own.

Also read: Lawsuit Claims Arianna Huffington Stole Idea for HuffPo

"This Court concludes that the amended complaint alleges concrete facts that establish the basic elements of a fraud claim, namely, that defendants deliberately led plaintiffs to believe that they would be partners in the venture in order to delay, and ultimately prevent, the plaintiffs from launching their own project based on the business plan," Ramos said.

As for the dismissal, "Although the amended complaint contains additional allegations, it does not alter the essential nature of the claim which survived the prior motion to dismiss," Ramos said. 

The Huffington Post said it will move forward and "present the full record to the court."

"The court has made only a preliminary decision based solely on the uncontradicted allegations of the complaint and without any consideration of the proven facts.  As we have said from day 1, there is no merit to these allegations," HuffPo said in a statement to TheWrap. "They are make believe. With this ruling, we will now be able to move for summary judgment and lay out the actual evidence in this case.  We look forward to the opportunity to present the full record to the court."

Pamela Chelin contributed to this report.