Opinion
No. 00 Civ. 7391 (HB)
May 29, 2002
OPINION ORDER
Cost Management Services, Inc. ("plaintiff") moves for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure ("FRCP") with respect to the first four claims in its complaint; Deloitte Consulting, LLC ("defendant") moves for summary judgment dismissing all five of plaintiffs claims. Additionally, defendant seeks an award of costs and attorneys' fees. Specifically, plaintiff brings the following five causes of action against defendant: (1) declaratory judgment that the parties' October 12, 1998 Agreement ("October 1998 agreement") may be terminated by plaintiff upon reasonable notice to defendant as well as that defendant may not interfere with plaintiffs performance on its own contractual obligations; (2) breach of the October 1998 agreement; (3) breach of duty to negotiate the appropriate option, under the October 1998 agreement, for amending payment terms contained in that agreement; (4) failure to provide legal assurances as to the legality of the proposed amendment to the October 1998 agreement; and (5) failure and negligent performance of certain services, in particular, failure to pursue retroactive funding opportunities. For the reasons detailed below, defendant's motion for summary judgment as to all five causes of action is granted and plaintiff's motion as to the first four causes of action in its complaint is denied. Defendant's motion for an award of costs and attorneys' fees is denied.
I agree with defendant that plaintiffs first two claims (one and two) and second two claims (three and four) are largely duplicative. Claims one and two arise from plaintiff's allegation that defendant failed to obtain client approval, pursuant to the 1998 agreement, before a full transfer of management and control from plaintiff to defendant was effected. Claims three and four arise from plaintiffs allegation that defendant breached the 1998 agreement by failing to obtain plaintiff's approval prior to proposing certain amendments to the 1998 agreement. Because plaintiffs claims arise from a common source — namely, interpretation of § 1.1(a) of the October 1998 agreement — my reading of that section will be dispositive of all four claims.
Although defendant moves this Court for an award of costs and attorneys' fees, it does not brief this issue in its memorandum of law. For this reason, I agree with plaintiff that defendant's claim for fees and costs must be dismissed since defendant "has failed to support [that request] with any legal basis whatsoever." (Tabora Affirmation ¶ 11).
BACKGROUND
Plaintiff is a consulting firm involved in assisting local school districts in Florida to obtain reimbursement for medical and administrative services provided by those districts under the Medicaid Act. (Compl. ¶ 8). Defendant is also a consulting firm that is similarly involved in providing advice and services to local school districts on reimbursement issues. (Graham Decl. ¶ 9). In February 1994, plaintiff entered into an agreement (the "prime contract") with the School Board of Hillsborough County, Florida ("HCSB"), to assist it in obtaining reimbursement for the direct medical services that were provided to students in the Hillsborough County school system under the federal Medicaid program. (Compl. ¶ 24; Graham Decl. ¶ 8). In October 1997, that agreement was amended and expanded to include services that HCSB provides in the area of "administrative outreach" — that is, in finding students entitled to receive Medicaid services. (Compl. ¶ 31; Graham Decl. ¶ 8). From 1996 to 1998, Deloitte assisted CMS in providing consulting services to HCSB under the 1994 Agreement even though a written contract between the parties did not exist during this period. (Compl. ¶ 26; Graham Decl. ¶ 9).The present action arises out of an agreement, an amendment to that agreement, and a settlement agreement executed by the parties between October 1998 and October 1999. Under the original agreement, the October 1998 agreement, plaintiff assigned the right and responsibility to defendant of providing Medicaid reimbursement consulting services to HCSB. (Compl. ¶ 41; Graham Decl. ¶ 10). The purpose of the October 1998 agreement was to transfer from plaintiff to defendant the "full management and control of the Hillsborough Project and the performance of the [Prime] Contract." (Graham Decl. Ex. 1). This agreement explicitly provides that if the parties are unable to obtain HCSB's consent to assign plaintiffs "right, title and interest" in the prime contract to defendant, then defendant would still receive "full management and control [over the project] . . . as if such assignment had occurred"; in addition, the agreement mandated that any amendments made to the prime contract would "only be made with the consent of [defendant] and [plaintiff] shall agree to any such amendment agreed to by [defendant] and [HCSB]." (Graham Decl. Ex. 1 § 1.1(a)). Under an amendment to the 1998 agreement ("November 1998 amendment"), defendant became responsible for seven additional school-based projects in Florida (collectively, the "Florida projects"). (Graham Decl. Ex. 4). Finally, under a settlement agreement between plaintiff and defendant ("October 1999 agreement"), both parties agreed to a mutual release of "any and all" pre-existing claims and reaffirmed the agreement and the amendment thereto. (Graham Decl. Ex. 5). In addition, defendant agreed to pay plaintiff and its principals $700,000.00 "to resolve any and all disputes between [CMS] and Deloitte." (Graham Ex. 5). According to all three documents, defendant was to assist HCSB as well as the Florida projects in recovering reimbursement from the federal government for services rendered by the school districts on behalf of children pursuant to the federal Medicaid program. In return, plaintiff was to receive a fixed percentage of the fees that the school districts recovered as a result of defendant's consulting services. (Graham Decl. Ex. 1).
Plaintiff claims that defendant breached its obligations under the agreement, the amendment thereto, and the release in the following three ways: (1) by negotiating extensive modifications to the prime contract with HCSB in November 1999 without first notifying plaintiff of the modifications — despite the fact that plaintiffs President, James Durkin, signed those modifications as an amendment on September 28, 2000 (Compl. ¶ 61; Graham Decl. Ex. 8); (2) by failing to include plaintiff in the negotiations with HCSB (Compl. ¶ 64); and (3) by failing to give plaintiff a legal opinion or other written "assurances" that the amendment complied with a recently amended Florida statute. (Compl. ¶ 127). Defendant maintains that because all three agreements between the parties contain clear and explicit terms that allocate managerial responsibility and control to defendant, neither plaintiff's nor HCSB's consent was a prerequisite to working directly with HCSB. In fact, defendant points to the fact not only that both plaintiff and HCSB accepted the financial benefits of defendant's efforts, but also that HCSB neither objected to defendant's management nor requested that plaintiff replace defendant in its consulting capacity. (Graham Decl. ¶¶ 18, 22-23).
DISCUSSION
1) Summary Judgment Standard
A motion for summary judgment places the burden on the moving party to establish that no genuine issues of material fact are in dispute and that it is entitled to judgment as a matter of law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Fed.R.Civ.P. 56(c). A dispute regarding a material fact is genuine "`if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Aldrich v. Randolph Cent. Sch. Dist., 963 F.2d 520, 523 (2d Cir. 1992) (quoting Anderson, 477 U.S. at 248, cert. denied, 506 U.S. 965 (1992)). The court resolves all ambiguities and draws all inferences in favor of the nonmoving party in order to determine how a reasonable jury would decide. Aldrich, 963 F.2d at 523. In contract disputes generally, it is well-settled that "`[w]here contract language is ambiguous, the differing interpretations of the contract present a triable issue of fact' and summary judgment is therefore inappropriate.'" Record Club of Am., Inc. v. United Artists Records, Inc., 890 F.2d 1264, 1270-71 (2d Cir. 1989) (citation omitted). However, summary judgment is appropriate if the language of the contract is "unambiguous" with respect to the provision at issue. Bouzo v. Citibank, N.A., 96 F.3d 51, 58 (2d Cir. 1996);Wechsler v. Hunt Health Sys., Ltd., No. 94 Civ. 8294 (PKL), 2002 WL 628633, at *6 (S.D.N.Y. Apr. 18, 2002).
2) The Scope of Defendant's Control Under the 1998 1999 Agreements
Plaintiffs claims derive from two related premises: (1) that defendant's right to exercise "full management and control" was conditioned on obtaining HCSB's consent to that arrangement; and (2) that, on or about October 19, 1998, HSBC objected to this arrangement and denied its consent. Specifically, plaintiff maintains that defendant breached the 1998 agreement by making unilateral decisions about how to manage the Florida projects without first obtaining HCSB's consent. By contrast, defendant contends that the October 1998 agreement indisputably invests it with "full authority and decision-making control" even in the absence of HCSB's consent, and that, for this reason alone, all of plaintiffs claims should be dismissed. Further, defendant maintains that the November 1998 amendment not only expanded the number of projects over which it could exercise management and control but also reaffirmed the fact that HCSB's consent was not a prerequisite to defendant's assumption of control. Indeed, defendant posits that plaintiff ratified the arrangement with defendant by accepting without objection the financial benefits of defendant's full management and control over the Florida projects, and that HCSB itself implicitly consented by permitting defendant to continue running the program for more than two and a half years and, like plaintiff, accepting without objection the benefits of defendant's work.
As a preliminary matter, plaintiff claims that, because neither the October 1998 agreement nor the subsequent amendment and release contain full integration clauses, the writings and admissions made by defendant with respect to plaintiff's role surrounding the Florida projects are admissible. By contrast, defendant maintains that the October 1998 agreement is not only unambiguous but also contains a complete integration clause, both of which preclude the Court from referring to anything other than the words of the contract itself. Specifically, § 7.3 states that "[t]his Agreement, together with the Schedules annexed hereto (which are incorporated herein by reference), (I) and the other agreements referred to herein or related hereto constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof." (Graham Decl. Ex. 1). Under New York law, a court may not consider extrinsic evidence to vary, contradict, add to, or explain the terms of an unambiguous and integrated writing. Muse, Inc. v. Digital-on-Demand, Inc., 123 F. Supp.2d 118, 128 n. 9 (S.D.N.Y. 2000). Because § 7.3 constitutes an integration clause, and because I find the critical terms of the 1998 October agreement to be unambiguous for reasons detailed more fully infra, I concur with defendant and therefore will not consider any extrinsic evidence — be it oral or written — in resolving the parties' contractual dispute.
With respect to plaintiff's claim that defendant breached the October 1998 agreement, I agree with defendant that the agreement clearly and unambiguously assigns management and control to defendant. Specifically, § 1.1(a) of the October 1998 agreement is unequivocal and provides that, should plaintiff be unsuccessful in assigning to defendant "all of its right, title and interest in an to the Hillsborough Project and the Contract," then
[defendant] shall operate as a subcontractor under the Contract and shall have full management and control of the Hillsborough Project and the performance of the Contract (including, without limitation, the full authority and decision-making control), with all rights, powers and discretion of the prime contractor thereunder as if such assignment had occurred, [and] amendments to the Contract shall only be made with the consent of [defendant] and [plaintiff] shall agree to any such amendment agreed to by [defendant] and the Client, provided that no amendment to the Contract that extends the term of the Contract beyond September 30, 2002 shall be entered into without the consent of each of [defendant] and [plaintiff] (which consent may be withheld or given at such party's sole discretion) and [also] the parties shall use their best efforts to obtain the Client's consent to such arrangement, in each case to the extent permissible under applicable law, regulations and professional standards.
Furthermore, that same section defines "full authority and decision-making control" as including, "without limitation, any and all rights, powers or discretion of the prime contractor in respect of the Hillsborough Project and the Contract." (Graham Decl. Ex. 1). Similarly, the November 1998 amendment that adds seven additional Florida projects reiterates the following: (1) that "[defendant] shall operate as the exclusive prime subcontractor under each such contract and shall have full management and control of each such project and the performance of the related contract (including, without limitation, the full authority and decision-making control)"; and (2) that "amendments to each such contract shall only be made with the consent of [defendant] and [plaintiff] shall agree to any such amendment agreed to by [defendant] and the relevant client. . . ." (Graham Decl. Ex. 4). Finally, the October 1999 release states once again that plaintiffs "agree that [defendant] retains full management and control of the Florida projects and performance of the prime contracts including, without limitation, the full authority and decision making control. . . ." Indeed, all three documents clearly state that defendant would be invested with full decision-making authority and control even in the absence of the client's consent. This being the case, I cannot find that defendant breached the October 1998 agreement by making unilateral decisions about how to manage the Florida projects without first obtaining HCSB's consent. Accordingly, defendant's motion for summary judgment on plaintiffs first two claims is granted.
My view is no different with respect to plaintiffs claims that defendant breached the October 1998 agreement by failing to obtain plaintiffs approval prior to proposing certain amendments to that agreement. As noted in the discussion supra, the October 1998 agreement explicitly provides that "amendments to the Contract shall only be made with the consent of [defendant] and [plaintiff] shall agree to any such amendment agreed to by [defendant] and the Client, provided that no amendment to the Contract that extends the term of the Contract beyond September 30, 2002 shall be entered into without the consent of each of [defendant] and [plaintiff]." (Graham Decl. Ex. 1). Similarly, the November 1998 amendment states that "amendments to each such contract shall only be made with the consent of [defendant] and [plaintiff] shall agree to any such amendment agreed to by [defendant] and the relevant client. . . ." (Graham Decl. Ex. 4). Consequently, it was entirely within defendant's discretion to negotiate an amendment to the October 1998 agreement that did not extend beyond September 30, 2002 without first procuring plaintiffs consent. Accordingly, defendant's motion for summary judgment on plaintiffs third and fourth claims is granted.
Finally, defendant moves for summary judgment on plaintiffs fifth claim, namely, failure to provide and negligent performance of certain services, in particular, retroactive funding opportunities. As with plaintiffs first four claims, the clear contractual language grants decision-making authority and control to defendant and is dispositive of this claim as well. Finally, I agree with defendant that because defendant's right to exercise management and control was not conditioned on obtaining HCSB's consent, none of these decisions regarding retroactive funding opportunities constitute negligent performance of certain services as alleged by the plaintiff.
CONCLUSION
For the foregoing reasons, defendant's motion for summary judgment on plaintiffs five claims is granted and its request for an award of costs and attorneys' fees and denied. The clerk is requested to close this case and remove it from my docket.
IT IS SO ORDERED.