Opinion
00 CV 3557 (ILG)
February 1, 2001
Memorandum Order
This Complaint arises out of a contractual dispute between plaintiffs IntelliSec, Aria Kozak and Donna Kozak (collectively, "plaintiffs") and defendant Firecom, Inc. ("Firecom") concerning a distributorship agreement pursuant to which IntelliSec became a distributor and independent repair and service provider of Firecom fire safety equipment. Defendant has moved for dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6) of six of plaintiffs' fifteen claims. For the reasons that follow, defendants motion is granted.
BACKGROUND
Plaintiff IntelliSec is a California company that designs, installs, and services fire and life safety systems. (Compl., ¶ 3) Aria Kozak is the president of IntelliSec and he and his wife, Donna Kozak, are named plaintiffs. (Compl., ¶ 4) Firecom is a New York corporation that does business in and has an office in California. Firecom manufactures its own fire, life, safety, smoke control and mechanical test panel systems and equipment and also distributes, installs and maintains those systems and equipment. (Compl., ¶ 5).
As this is a motion to dismiss only six of plaintiffs' fifteen claims, only the facts relevant to those claims are discussed here. The Complaint alleges that on October 28, 1997, IntelliSec and Firecom entered into a distributorship agreement pursuant to which IntelliSec served as a distributor and independent Firecom repair and service provider. (Compl., ¶ 6 and Compl., Exh. A ("Agreement")) The initial Agreement lasted for a year and on October 29, 1998, the parties extended it with certain modifications by letter agreement for a period of one more year. Before the end of that year, on March 10, 1999 and April 14, 1999, the parties again agreed to extend the Agreement, this time until October 2002. In essence, the Agreement provided that Firecom would supply IntelliSec with its systems and equipment for installation and use in California and that IntelliSec would, in turn, analyze customers' needs, perform physical installation work on Firecom systems, train customers in the operation of the systems, maintain the systems, and repair Firecom systems on behalf of Firecom. (Agreement, ¶ 4) The Agreement also provides that IntelliSec will use its best efforts to exploit the market for Firecom products. (Agreement, ¶ 4) The Agreement contains an indemnification clause which provides that: "It is expressly understood and agreed that Firecom does not, and is not expected to perform any of these activities, and [IntelliSec] agrees to indemnify and hold harmless Firecom, its agents and employees, from any claims or damages arising from its performance of or failure to perform these activities." (Agreement, ¶ 4) The Agreement also contains forum selection and choice of law provisions which state that it "shall be construed with and governed by the laws of the State of New York. Both parties agree that the exclusive judicial forum for the resolution of any disputes shall be any appropriate State or Federal Courts situated within the State of New York, and both parties consent to the jurisdiction and venue thereof." (Agreement, ¶ 19).
The Complaint concerns six construction projects that plaintiffs entered into in California. These projects, briefly, were: (1) the "Spalding system," in which IntelliSec installed a Firecom fire/life safety system at a luxury residential condominium in Beverly Hills, California; (2) the "VA Hospital system," in which IntelliSec installed a Firecom fire/life safety system at the Veterans' Administration Hospital in West Los Angeles. California; (3) the "DePuy system," in which IntelliSec installed a Firecom fire/life safety system and contracted to maintain and repair this system for DePuy Ace Medical Company in El Segundo. California; (4) the "City Hall system," in which IntelliSec subcontracted to design, install and test a Firecom fire alarm system pursuant to a seismic rehabilitation of the Los Angeles City Hall; (5) the "Staples Center system," in which IntelliSec subcontracted to design, install and test a complete fire, life, safety, smoke control and mechanical test panel system at the Staples Center in Los Angeles, California; and, (6) the "Ocean Towers system," in which, IntelliSec contracted to design, install and test and to service and maintain a complete fire and life safety system in connection with seismic retrofit construction at a luxury residential complex known as "Ocean Towers" in Santa Monica, California. (Compl., ¶ 8) At five of these projects, Firecom systems and equipment were installed by IntelliSec (the "Spalding system," the "VA Hospital system," the Depuy system," the "Staples Center system," and the "Ocean, Towers system"), and at one project (the "City Hall system"), IntelliSec was terminated before it installed any fire safety systems or equipment.
This lawsuit arises out of a dispute that arose in August 1999 between Firecom and IntelliSec regarding amounts that Firecom claims were due from IntelliSec for Firecom systems and equipment, but that IntelliSec contended were not owed. As a result of that dispute, prior to filing this Complaint, plaintiffs filed, as plaintiff or as a co-defendant or third party-plaintiff, a number of actions against Firecom in the Superior Court of California, Los Angeles County, that are of immediate relevance to this dispute. (Compl., ¶¶ 27, 45, 64) Following the issuance of temporary relief, Firecom moved to dismiss and/or stay each of these proceedings pursuant to the "Governing Clause" provision of a Distributor Agreement entered into by Firecom and IntelliSec on October 28, 1997 and extended, since that date, on a number of occasions. (Compl., ¶¶ 31, 47, 66; Compl., Exh. A) In each instance, Firecom's motion was granted, and all proceedings by IntelliSec against Firecom in California were stayed. (Id.)
The first lawsuit centered around IntelliSec's work on the "Ocean Towers system;" the second around its work on the "City Hall system;" and the third centered around its work on the "Staples Center system." On November 3, 1999, IntelliSec filed a complaint arising out of the Ocean Towers system project in the Superior Court for the State of California, County of Los Angeles, No. SC 059 330, alleging causes of action for declaratory relief, specific performance, breach of contract, breach of the implied covenant of good faith and fair dealing, intentional and negligent interference with contractual relations and prospective economic advantage, violation of California Civil Code, § § 1790et seq. unfair competition under California Business Professions Code, §§ 17200 et seq. (Compl., ¶ 27) On November 4, 1999, IntelliSec sought and obtained a Temporary Restraining Order against Firecom, requiring it to provide needed services and equipment for the "Ocean Towers system." The TRO initially enjoined Firecom from refusing to supply IntelliSec with "such of its systems and equipment as IntelliSec may require in order to fulfill its obligations under the contracts it has entered into." (Compl., Exh. B) On November 23, 1999, a preliminary injunction was issued against Firecom which slightly narrowed the scope of the TRO by requiring IntelliSec to exchange certain old components it had for new components at no cost to Firecom. On November 24, 1999, a finding of contempt was entered against Firecom for its failure to provide the needed services and equipment and Firecom was ordered to pay $5,500.00 in attorneys' fees to IntelliSec. On December 23, 1999, Firecom moved to stay the action based on the "Governing Law" provision of the Distributor Agreement, and its motion was granted. (Compl., ¶ 31) Firecom states that it refused to provide IntelliSec with the needed services and equipment specified in the TRO because it objected to the TRO's broad language, which Firecom contends "inappropriately allowed IntelliSec carte blanche to purchase limitless supplies" of Firecom equipment. (Defs.' Reply Mem., 5).
On May 27, 1999, Helix Electric, Inc. ("Helix"), the electrical contractor which had subcontracted IntelliSec to perform installation work on the City Hall system, filed a Complaint against IntelliSec and its bonding company, American Contractors Indemnity Co. ("American"), alleging breach of contract and anticipatory breach of contract and seeking relief on a performance bond against IntelliSec and American. (I-Teller Aff., Exh. B) American filed a Cross-Complaint against IntelliSec and the Kozaks for recovery under a General Indemnity Agreement executed by each in favor of American. IntelliSec filed a Cross-Complaint against Helix and Firecom alleging, as against Firecom, negligent misrepresentation, implied indemnity, equitable indemnity and contribution. However, in February 2000, that action was stayed pursuant to Firecom's motion brought under the "Governing Law" provision contained in the Distributor Agreement, prompting plaintiffs to file the Complaint in this action.
In this Complaint, plaintiffs attempt to hold Firecom responsible for the fact that IntelliSec's bid for the City Hall work, which was based on the use of Firecom equipment, was ultimately rejected. The Complaint states that Firecom failed to inform IntelliSec that its use of Firecom equipment for the City Hall system had not been approved, or properly approved, by the City, in the place of Honeywell equipment that was originally specified in the City Hall project's plans and specifications, and that, in fact, Firecom employees represented that all necessary approvals for Firecom equipment had been obtained, causing IntelliSec to rely on these representations in a bid proposal to the City Bureau of Engineering, which subsequently was rejected. (Compl., ¶¶ 36, 37, 44,) Ironically, the Complaint acknowledges that IntelliSec only learned of the City Hall work when Firecom invited it to submit a bid for the work. (Compl., ¶ 33) Plaintiffs conceded at oral argument that they were aware that the City's specifications for the City Hall project did not call for Firecom equipment but contend that Firecom was responsible for obtaining necessary approvals to diverge from the City's specifications and that, had plaintiffs known that such approval had not been obtained, they would not have submitted a bid for the work. (Compl., ¶ 39).
The Complaint further contends that, prior to the City's rejection of its bid proposal, IntelliSec did work required to commence the installation of the City Hall system, including preparing materials lists, plans and sketches, performing demolition work and installing a temporary fire control panel, all using Firecom equipment. (Compl., ¶ 40) After its use of Firecom equipment had been rejected, the Complaint alleges that IntelliSec agreed to prepare a new bid incorporating the use of the originally-specified Honeywell equipment on the condition thac Helix enter into a subcontract at a higher price (to reflect the higher cost of the Honeywell equipment), but Helix chose to use others to complete the job and instead sued IntelliSec for the extra costs it incurred as a result of IntelliSec's claimed breach.
In papers in opposition to this motion, plaintiffs contend that, since the filing of the Complaint in this action, the Helix action has been settled, with IntelliSec paying Helix "approximately" $170,000, but they offer no proof of IntelliSec's payment. (Pls.' Opp'n, 9; Kozak Aff., ¶ 15).
The third lawsuit involves IntelliSec's work on the Staples Center system. On September 3, 1999, IntelliSec filed a Complaint against Rosendin Electric, Inc. ("Rosendin"), the electrical contractor which had subcontracted IntelliSec to perform design, installation and testing work for the Staples Center system, and Firecom, alleging, as against Firecom, intentional and negligent interference with contractual relations and prospective economic advantage, breach of the Distributor Agreement and a purchase order entered for the Staples Center system, and breach of the implied covenant of good faith and fair dealing. Rosendin filed a Cross-Complaint against IntelliSec alleging claims for breach of its subcontract with IntelliSec, enforcement of IntelliSec's performance and payment bonds, express and implied contractual indemnity and equitable indemnity. In addition, IntelliSec's bonding company, American, filed a Cross-Complaint against IntelliSec for recovery under the same General Indemnity Agreement referenced earlier. (Compl., ¶¶ 64-65) in February 2000, this action also was stayed based on the "Governing Law" provision in the Distributor Agreement, prompting plaintiffs to file the underlying Complaint.
The Complaint alleges that Firecom and IntelliSec entered into a purchase order agreement in October 1998 pursuant to which Firecom agreed to provide all material and equipment specified for the Staples Center system work. Soon thereafter, the Complaint alleges that Firecom falsely represented to Rosendin that IntelliSec was delinquent in paying Firecom's invoices and that IntelliSec was not providing qualified technical staffing for the Staples Center work, which caused Rosendin to place IntelliSec on "credit hold" and eventually causing it to terminate the subcontract with IntelliSec and retain Firecom to complete the work. (Compl., ¶ 53) Plaintiffs contend that these actions constituted a "plan and conspiracy" on the part of Firecom and Rosendin to exclude IntelliSec from the Staples Center work and divert payments that would have gone to IntelliSec for such work to Firecom instead. (Id.)
Firecom now moves for dismissal of six of plaintiffs' fifteen claims, namely the Intentional Interference with Contract and Intentional Interference with Prospective Economic Advantage (relating only to the Ocean Towers system) (Plaintiffs' Fifth and Sixth Claims); the California Civil Code §§ 1790 et seq. (Plaintiffs Ninth Claim); and the Implied and Equitable Indemnity (Plaintiffs' Twelfth and Thirteenth Claims) and Contribution (Plaintiffs' Fourteenth Claim).
DISCUSSION
When deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court must take all allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff.Ortiz v. Cornetta, 867 F.2d 146, 149 (2d Cir. 1989). The court's consideration on a motion to dismiss is limited to the factual allegations in the complaint; documents incorporated by reference into the compiaint; matters of which judicial notice may be taken; and documents either in plaintiffs possession or of which plaintiff had knowledge and relied on in bringing suit. Brass v. American Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir. 1993). A complaint should not be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957 see also Easton v. Sundram, 947 F.2d 1011, 1014-15 (2d Cir. 1991), cert. denied, 493 U.S. 816 (1992).
I. Intentional Interference with Contract and Intentional Interference with Prospective Economic Advantage (Fifth and Sixth Claims) (both relating only to the "Ocean Towers system")
Insisting that Firecom should stand liable for wrongfully interfering with IntelliSec' s ability to perform obligations it had undertaken for Ocean Towers, IntelliSec claims that Firecom: (i) intentionally interfered with IntelliSec' s contract with Ocean Towers and (ii) intentionally interfered with IntelliSec' s prospective economic advantage. Because both of these claims are limited to IntelliSec's service contract with Ocean Towers, they are addressed together.
A claim for intentional interference with contract is recognized where a third party breaches a contract after being induced to do so by the defendant. NBT Bancorp v. Fleet/Norstar Fin. Group, 87 N.Y.2d 614, 620-21, 664 N.E.2d 492, 641 N.Y.S.2d 581 (1996). The Complaint alleges that: "Tirecom is now, and has been, intentionally and wrongfully interfering with IntelliSec's performance of its obligations under the Ocean Towers Installation Contract and the Maintenance Contracts, by,inter alia refusing to deliver its systems equipment, together with related personnel, including, without limitation, the Needed equipment and/or Services, to IntelliSec on any, or any reasonable, basis." (Compl., ¶ 90).
Firecom moves to dismiss because it alleges that IntelliSec fails to, and indeed cannot, allege that IntelliSec's contract with Ocean Towers has been breached. Plaintiffs initially conceded that the contract has not been breached, but submitted an affidavit by Aria Kazak with their opposition papers that states that IntelliSec' s nonpayment was a breach. In any event, plaintiffs take issue with defendant's characterization of the applicable law and, specifically, its requirement that interference alleged must cause an actual breach, as opposed to mere interference with performance.
The most recent pronouncement of the New York Court Appeals which dealt with intentional interference with contract, NBT Bancorp v. Fleet/Norstar Fin. Group, 87 N.Y.2d 614, 664 N.E.2d 492, 641 N.Y.S.2d 581 (1996), clearly hinges recovery on a plaintiffs ability to prove that there has been an actual breach:
NBT urges that, as a matter of precedent and policy, a defendant's deliberate interference with plaintiffs contractual rights that causes damage should be punishable as tortious interference whether or not the contract was actually breached.
New York law is to the contrary. Ever since tortious interference with contractual relations made its first cautious appearance in the New York Reports — decades after the seminal case Lumley v. Gye (2 E1 Bl 216, 118 Eng Rep 749 (1853)) — our Court has repeatedly linked availability of the remedy with a breach of contract (see, Posner Co. v. Jackson, 223 N.Y. 325; Lamb v. Cheney Son, 227 N.Y. 418). Indeed, breach of contract has repeatedly been listed among the elements of a claim for tortious interference with contractual relations (see, e.g., Gregoris Motors v. Nissan Motor Corp., 80 A.D.2d 631, 632, aff'd 54 N.Y.2d 634; Inselman Co. v. FNB Fin. Co., 41 N.Y.2d 1078, 1080; Israel v. Wood Dolson Co., 1 N.Y.2d 116, 120; see also Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94 [intentional inducement to breach or render performance impossible]).87 N.Y.2d at 620-21.
In Jack L. Inselman Co. v. FNB Financial Co., 41 N.Y.2d 1078; 364 N.E.2d 1119;
N YS.2d 347 (1977), moreover, cited with approval in NBT Bancorp, the Court stated:
In order for the plaintiff to have a cause of action for tortious interference of contract, it is axiomatic that there must be a breach of that contract by the other party (Israel v. Wood Dolson Co., 1 N.Y.2d 116, 120; Campbell v. Gates, 236 N.Y. 457; Lamb v. Cheney Son, 227 N.Y. 418; 32 N.Y. Jur, Interference, § 20), a situation not here present. An essential element of the case against FNB, then, is a breach by Guilford. No such breach had occurred and thus the complaint was properly dismissed.41 N.Y.2d at 1080. As the Southern District recently has recognized, "the Second Circuit has concurred in this view, holding that `under traditional principles of New York law, a party may not recover for tortious inducement of a breach of contract without proving that the contract has been breached.'" Fonar Corp. v. Magnetic Resonance Plus, 957 F. Supp. 477, 481 (S.D.N Y 1997) (citing Baylis v. Marriott Corp., 906 F.2d 874, 877 (2d. Cir. 1990) (citing Inselman)). Accord Enercomp, Inc. v. MeCorhill Pub., Inc., 873 F.2d 536, 541 (2d. Cir. 1989) ("To recover for tortious interference with a contract under New York law, a complainant must prove . . . defendants' improper intentional interference with its performance. . . . Improper intentional interference is generally evidenced by a tortfeasor inducing or otherwise causing a third person not to perform his contractual obligations to plaintiff'); CIBC Bank Trust Corp. v. Banco Cent. do Brasil, 886 F. Supp. 1105 (S.D.N.Y. 1995); American Express v. Accu-Weather, Inc., 849 F. Supp. 233, 241 (S.D.N.Y. 1994); Restatement (Second) of Torts § 766 (1979) (stating that in a tortious interference with contract claim, the interference be "with the performance of the contract . . . by inducing or otherwise causing the third person not to perform the contract.").
Though plaintiffs cite the decision in S S Hotel Ventures Ltd. Partnership v. 777 S.H. Corp., 108 A.D.2d 351; 489 N.Y.S.2d 478 (1st Dep't 1985) for the contrary proposition, namely that plaintiff need not alleged breach to state a claim for tortious interference with contract, the First Department's pronouncements on the need to prove a breach, as defendant correctly argues, have been undermined significantly by the NBT Bancorp decision and their application here is misguided. See Fonar Corp. v. Magnetic Resonance Plus, 957 F. Supp. 477, 481 (S.D.N Y 1997) (declining to follow S S Hotel Ventures and other cases which held, prior to NBT Bancorp, that a showing that defendant's interference made contract impossible to perform is sufficient to make out claim for tortious interference with contract). Plaintiffs' other citations to cases that predate NBT Bancorp are inapposite for the same reason. See, e.g., Chemical Bank v. Bright Star Holding, Inc., 1995 WL 447792 at *5 (S.D.N.Y. 1995) (holding that plaintiff need only allege interference with the performance of a contract to assert claim for tortious interference, but noting that "[w]e have not located any case in which this question was presented which casts doubt on . . . S S Hotel"); New York Yankees v. Sportschannel Assoc., 126 A.D.2d 470, 510 N.Y.S.2d 870 (1st Dep't 1987) (same); Maison Lazard v. Manfra. Tordella Brooks, Inc., 585 F. Supp. 1286 (S.D.N.Y. 1984) (extending tort of intentional interference with contractual relations to cases in which performance of contract is rendered more difficult or a party's enjoyment of contract's benefits is lessened by wrongdoer's actions).
Furthermore, the cases cited by plaintiff in support of their argument that Firecom's interference with their performance of the Ocean Towers contract was "just as much of a legal wrong" as an unlawful inducement of a breach (Pls.' Mem, 6 n. 2), are actually cases in which there was a breach by the third party. See, e.g., David Goldrever Ltd. v. VanDe Wetering, 217 A.D.2d 434, 438, 630 N.Y.S.2d 18 (1st Dep't 1995) (pre-NBT Bancorp decision stating that claim of tortious interference with contract requires "interference with performance" but also noting that third party "was induced to breach the Mutual Receipt Agreement") andSeamen Equipment Co. v. Otis Elevator Co., 34 A.D.2d 838, 838 313 N.Y.S.2d 944 (2d Dep't 1970) (pre-NBT Bancorp decision dismissing allegation that "agreement was wrongfully canceled" as a result of tortious interference with contract claim with dissent, cited by plaintiffs, suggesting that "interference in the performance of a contract" is sufficient to permit recovery).
As was the Southern District in Fonar, this court is persuaded that New York law requires an allegation that defendant induced a third party to breach the contract with plaintiffs in order to make out a claim for tortious interference with contractual relations. Because plaintiffs have not alleged, and cannot allege, a breach of their contract with Ocean Towers, this claim must be dismissed.
To state a claim for intentional interference with prospective economic advantage under New York law, a plaintiff must allege that defendant "interfered with business or economic relations between the plaintiff and a third party, either (1) with the purpose of harming the plaintiff; or (2) by dishonest, unfair or improper means." Campo v. 1st Nationwide Bank, 857 F. Supp. 264, 273 (E.D.N.Y. 1974) (emphasis added). "[T]he defendant must interfere with the business relationship directly; that is, the defendant must direct some activities towards the third party and convince the third party not to enter into a business relationship with the plaintiff." Fonar, 957 at 483 (citing G.K.A. Beverage Corp. v. Honickman, 55 F.3d 762 (2d Cir. 1995)).
Firecom urges dismissal on two grounds: plaintiffs' failure to allege any act, contact or communication intended to induce Ocean Towers to alter its relationship with plaintiffs and plaintiffs' failure to allege any facts suggesting that Firecom was acting solely to harm plaintiffs, rather than to protect itself from further damage caused by plaintiffs' failure to pay for equipment sold and delivered to plaintiffs pursuant to the Distributor Agreement. The insufficiency of plaintiffs' allegations is clear from reading the Complaint. The gravamen of this claim is that Firecom' s refusal to deliver systems and equipment even after the California superior Court's entry of a Temporary Restraining Order, which ultimately forced IntelliSec to move for contempt, constitutes the kind of intentional conduct proscribed by this tort. However, nowhere do they suggest contact with Ocean Towers that was intended by Firecom to harm plaintiffs or was otherwise improper or dishonest. Instead, plaintiffs' own allegations suggest that Firecom's refusal to follow the California TRO stemmed from its fear of extending more credit to IntelliSec that would not be timely paid. (Compl., ¶ 16 ("In August of 1999, a dispute arose . . . regarding certain amounts . . . that Firecom claimed were due from IntelliSec for Firecom's systems and equipment, but that IntelliSec disputed. Thereafter, Firecom claimed that IntelliSec had breached the Distributor Agreement, and that Firecom was therefore entitled to cease performing thereunder . . . .")) Moreover, the Complaint contains no suggestion that Firecom had any contact with anyone involved on the Ocean Tower project, no less contact designed to harm plaintiff. Instead, the Complaint itself suggests that Firecom's actions were taken in self-protection. The affidavit plaintiffs submit with their opposition does little to cure this defect. It merely contains self-serving suggestions that Firecom "attempted to sabotage" plaintiffs relationship with Ocean Towers by refusing to deliver equipment necessary for IntelliSec's performance of the Ocean Towers agreement, that this refusal damaged IntelliSec's relationship with Ocean Towers, and that it permitted Firecom to replace IntelliSec as the provider of services in the contract with Ocean Towers. (Kozak Aff., ¶¶ 6, 9).
As alleged by plaintiffs, Firecom' s acts do not rise to the level of intentional acts designed to harm plaintiffs. Plaintiffs in G.K.A. Beverage, 55 F.3d at 768, were, like plaintiffs here, distributors who contended that defendants interfered with their relationships with retailers and other final purchasers of soft drinks. In rejecting their claim of intentional interference with prospective economic advantage, the Second Circuit held that plaintiffs made "no allegations that [defendants] had any contact with the distributors' customers or that [defendants] tried to convince the customers to make contracts with them rather than the distributors. It is axiomatic that, in order to prevail on this claim, the distributors would have to show that the appellees intentionally caused the retailers not to enter into a contractual relation with them." Id. (citing Marilyn Miglin, Inc. v. Gottex Indus., 790 F. Supp. 1245, 1254 (S.D.N.Y. 1992) ("Miglin alleges no actions taken towards third parties by Gottex, and therefore this claim must be dismissed") and Volvo North America Corp. v. Men's Int'l Professional Tennis Council, 857 F.2d 55, 74 (2d Cir. 1988) (vacating dismissal of a claim for tortious interference with prospective business relations where "requisite interference" with the plaintiffs prospective relations with third parties had been alleged, including such acts as directing intimidating letters and threats of punitive action to producers of tournaments that might otherwise have allowed the plaintiff to sponsor their events)).
Plaintiffs here have failed to allege facts required under New York law to make out a claim for intentional interference with prospective economic advantage and this claim therefore must be dismissed.
II. Violation of California Civil Code §§ 1790 et seq. (Ninth Claim)
The Song-Beverly Consumer Warranty Act (the "Act"), Cal. Civil Code §§ 1790 et seq., provides "consumer protection measures for buyers of consumer goods." Music Acceptance Corp. v. Lofing, 32 Cal. app. 4th 610, 619, 39 Cal.Rptr.2d 159 (3d App. Dist. 1995). "[T]he Act is manifestly a remedial measure, intended for the protection of the consumer; it should be given a construction calculated to bring its benefits into action." Kwan v. Mercedes-Benz of North America, Inc., 23 Cal.App.4th 174, 184, 28 Cal.Rptr.2d 371 (1st App. Dist. 1994). "Consumer goods" are defined as "any new product or part thereof that is used, bought, or leased for use primarily for personal, family, or household purposes, except for clothing and consumables." § 1791(a). The Act "regulates warranty terms, imposes service and repair obligations on manufacturers, distributors, and retailers who make express warranties, requires disclosure of specified information in express warranties, and broadens a buyer's remedies to include costs, attorney's fees, and civil penalties." Krotin v. Porsche Cars North America, Inc., 38 Cal.App.4th 294, 301, 45 Cal.Rptr.2d 10 (2d App. Dist. 1995) (citation omitted). A "buyer" or "retailer buyer" is defined under the Act as "any individual who buys consumer goods from a person engaged in the business of manufacturing, distributing, or selling consumer goods at retail[,]" and a "person" is defined as "any individual, partnership, corporation, limited liability company, association, or other legal entity that engages in any such business." § 1791(b). "Consumer goods" are defined as "any new product or part thereof that is used, bought, or leased for use primarily for personal, family, or household purposes, except for clothing and consumables." § 1791(a).
In view of the "Governing Law" provision of the Distributor Agreement (Compi., Exh. A, ¶ 19), which provides that only New York law governs disputes arising under the Agreement, the question follows whether this California law has any applicability in this dispute. Defendant has not here attempted to argue that it does not govern, but instead argues, persuasively, that plaintiff lacks standing to assert a violation thereunder.
Section 1793.3 of the Act provides, in relevant part, that:
If the manufacturer of consumer goods sold in this state for which the manufacturer has de an express warranty . . . does not make available to authorized service and repair facilities service literature and replacement tarts sufficient to effect repair during the express warranty period, the buyer of such manufacturer's "conconforming goods may . . . (c) [s]ecure the services of an independent repair or service facility for the service or repair of the nonconforming consumer goods, when service or repair of the goods can be economically accomplished. In that event the manufacturer shall be liable to the buyer, or to the independent repair or service facility upon an assignment of the buyer's rights, for the actual and reasonable cost of service and repair, including any cost for parts and any reasonable cost of transporting the goods or parts, plus a reasonable profit.
§ 1793.3(c). Section 1794.1 of the Act provides, in relevant part, that independent repair or service facilities of consumer goods may bring an action for damages if they are injured by a willful or repeated violation of the Act. § 1794.1(b). An "independent repair or service facility" is defined as "any individual, partnership, corporation, association, or other legal entity, not an employee or subsidiary of a manufacturer or distributor, that engages in the business of servicing and repairing consumer goods." § 1791(f) (emphasis added). A distributor is defined as "any individual, partnership, corporation, association, or other legal relationship that stands between the manufacturer and the retail seller in purchases, consignments, or contracts for sale of consumer goods." § 1791(e).
The Complaint alleges that IntelliSec is "a buyer of Firecom products and . . . an authorized Firecom service and repair facility" and that Firecom is "a manufacturer of consumer goods sold in the State of California, and is, as such, obligated to comply with the requirements for such manufacturers set forth . . . in Civil Code sections 1790 et seq., including . . . the obligation of fulfilling its warranties and making available to its services and repair facilities, including IntelliSec, sufficient replacement parts to effect repairs during the warranty period." (Compl., ¶¶ 104, 105) The Complaint seeks damages consisting of actual and reasonable costs of the service and repairs IntelliSec has incurred as a result of Firecom's failure acts and omissions, as well as attorneys' fees. Compl., ¶ 106) Firecom avers that IntelliSec is neither a buyer nor an "authorized service and repair facility" under the Act, but a "distributor" and therfore lacks standing to challenge an alleged violation of the Act. Firecom moreover argues that its products are not consumer goods. Each of these contentions is addressed in turn.
The court begins with IntelliSec's asserted status as a "buyer." Section 1791(b), as referenced above, expressly provides that a "buyer" is any "individual who buys consumer goods from a person engaged in" proscribed business activities. This section goes on to define that a "person" means "any individual, partnership, corporation, limited liability company, association, or other legal entity that engages in any such business." (emphasis added) Because the Act defines "person" as including corporations or other non-person entities, but does not so define "buyer," it is clear that a corporation, such as IntelliSec, cannot be a buyer. Plaintiffs have provided no authority to the contrary and, as such, they cannot call upon the remedies provided to buyers in the Act.
Next the court considers IntelliSec' s asserted status as an "independent repair or service facility." While it is conceded that IntelliSec is a "distributor," the question presented is whether IntelliSec can also be considered an "independent repair or service facility," thereby enabling it to bring a claim under the Act. Again, this issue is easily resolved through a plain reading of § § 1791(e) and (f) of the Act. Section 1791(f) provides, in relevant part, that "independent repair or service facility" may consist of "any . . . corporation . . . not a . . . distributor, that engages in the business of servicing and repairing consumer goods." (emphasis added) Section 1791(e) provides, in relevant part, that a "distributor" is a "corporation . . . that stands between the manufacturer and the retail seller in purchases, consignments, or contracts for sale of consumer goods." The functions of a distributor and a repair or service facility thus are clearly distinguished. While IntelliSec is admittedly a distributor, it also "engages in the business of servicing and repairing consumer goods[,]" as provided in § 1791(f), and to that extent it engages in the activities required of an independent repair or service facility. The Distributor Agreement which forms the basis of this lawsuit provides as much when it describes "required post installation service to the customer" (Agreement 4) and describes "the importance of prompt, effective and courteous maintenance and repair service" and requires the maintenance of "such inventories of spare parts and tools as are required to achieve effective sales and service of Firecom products." (Agreement 5) Despite Firecom' s insistence that the "language and context of the Act" (Def.'s Mem., 9) preclude IntelliSec from bringing an action under the Act because it is a distributor, this case presents the unique situation, unaccounted for in the Act, involving a corporation that is both a distributor and a repair service facility. Having envisioned such a hybrid role for IntelliSec and its other distributors, Firecom cannot now claim that IntelliSec is not engaged in the repair service activities envisioned by the Act.
Having found that IntelliSec qualifies an "independent repair or service facility" and can assert violations under the Act, however, does not resolve the question of whether IntelliSec can make out a claim in this dispute. Although § 1794.1 permits repair or service facilities to bring damages actions for pervasive violations of the Act. § 1793.3(c), as referenced above, limits manufacturer liability to such facilities to "the actual and reasonable cost of service and repair, including any cost for parts and any reasonable cost of transporting the goods or parts, plus a reasonable profit." Plaintiffs have not alleged any other circumstance provided in the statute in which a manufacturer such as Firecom might incur liability to a repair or service facility such as IntelliSec. While it is certainly true that IntelliSec could sue Firecom if a buyer assigned its rights under § 1793.3 and Firecom failed to pay IntelliSec what is it owed under the Act, those are simply not the facts of this case. As such, IntelliSec's status as a service or repair facility brings it no closer to recovery based on this claim, even under a "construction calculated to bring [the Act's] benefits into action." Kwan, 23 Cal.App.4th at 184.
The final question arising from this claim is whether Firecom's goods are "consumer goods." Section 1791 of the Act, as referenced above, considers such goods to consist of "any new product or part thereof that is used, bought, or leased for use primarily for personal, family, or household purposes, except for clothing and consumables." As Firecom correctly notes, most of the uses to which IntelliSec has put Firecom's products do not involve primarily personal, family, or household purposes. Even IntelliSec's Ocean Towers client, a residential complex, is not embraced as a user for personal, family or household purposes, since the users there would be the actual residents of Ocean Towers. Given IntelliSec's inability to establish that any part of the Act permits it, as a service or repair facility, to recover against Firecom under the circumstances alleged here, however, this issue requires no further elaboration and dismissal is appropriate on this claim.
III. Implied and Equitable Indemnity (Twelfth and Thirteenth Claims) and Contribution (Fourteenth Claim)
Plaintiffs' twelfth, thirteenth and fourteenth claims for implied and equitable indemnity and contribution seek "liability-over" against Firecom based on potential, future liability that plaintiffs may incur in litigation they are currently facing in California.
The Twelfth Claim, in relevant part, states that:
IntelliSec has denied, and continues to deny, any liability arising out of the City Hall action and the Staples Center Action, and Plaintiffs have denied, and continue to deny, any "liability arising out of the Cross-Complaints filed by IntelliSec's bonding company in the City Hall Action. If, however, it is found that Plaintiffs, or any of them, are responsible . . . then Plaintiffs are informed and believe . . . that any such responsibility will have resulted from the negligence, misrepresentations, intentional or unintentional concealment of material facts and/or acts or omissions of Firecom, which in whole or in part contributed to the occurrence of the matters alleged in the City Hall Action and the Staples Center Action . . . . from which damages alleged therein have arisen.
(Compl., ¶ 125) The Thirteenth Claim, in relevant part, states:
In equity and good conscience, if Helix, Rosendin and/or IntelliSec's bonding company should establish liability on the part of Plaintiffs, or any of them, under their respective pleadings filed in the City Hall Action or the Staples Center Action, which liability Plaintiffs each expressly deny, then such liability will have arisen solely from the active and primacy conduct, breach and wrongful acts and omissions of Firecom, and any liability or fault found on the part of Plaintiffs, or any of them, will be only passive and secondary liability or fault.
(Id. ¶ 128). The Fourteenth Claim seeks "contribution from Firecom for the damages allegedly sustained by Helix, Rosendin and/or IntelliSec's bonding company, if any, as the wrongful acts asserted in the City Hall Action or the Staples Center Action against Plaintiffs, and each of them." (Id. ¶ 132).
Firecom seeks dismissal of each of these claims, arguing that: (i) all three claims are premature, as plaintiffs' liability has yet to be established; (ii) plaintiffs fail to state a valid claim for indemnity, as indemnification is not available where defendant's liability to plaintiffs in the underlying action is not based solely on the wrongful act of the alleged indemnifier, Aetna Casualty Surety Co. v. Spartan Mechanical Corp., 738 F. Supp. 664 (E.D.N.Y. 1990) (refusing to permit partial indemnity); and, (iii) plaintiffs fail to state a valid claim for contribution, as New York law prohibits contribution claims where the underlying claim, like the claims in the litigation for which plaintiffs seek contribution, seeks damages for economic loss only resulting from a breach of contract, not for tort. Morse/Diesel Inc. v. Trinity Industries, Inc., 859 F.2d 242, 249 (2d Cir. 1988) (citing Board of Educ. v. Sargent Webster Crenshaw Folley, 71 N.Y.2d 21, 24, 523 N.Y.S.2d 475, 476, 517 N.E.2d 1360, 1361 (1987)). These three arguments are considered in turn below.
A. Prematurity
Defendant first argues that plaintiffs indemnification and contribution claims are premature. New York law clearly provides that a claim for indemnification or contribution is premature where there has been neither entry of judgment nor payment. State v. Syracuse Rigging Co., 249 A.D.2d 758, 760, 671 N.Y.S.2d 801, 803 (3d Dep't 1998) (declining to adopt exception to general rule where "record discloses the existence of factual issues regarding plaintiffs potential negligence arising out of it supervision and control over the worksite. If it is ultimately determined that plaintiff was negligent and that its negligence contributed to [third party's] injuries, plaintiff cannot prevail upon its indemnification claims[.]"; Bay Ridge Air Rights, Inc. v. State, 57 A.D.2d 237, 239, 394 N.Y.S.2d 464, 466 (3d Dep't 1977), aff'd, 44 N.Y.2d 49, 404 N.Y.S.2d 73 (1978) (where "there has been neither entry of judgment nor payment[,] and there is no suggestion that" interests of fairness and judicial economy will be furthered by allowing all parties to establish their rights and liabilities in one action . . . we choose not to depart from the general rule that `the obligation or liability which is the subject of the indemnity must have accrued and become fixed before an action to recover indemnity therefor[e] may be maintained'") (internal citation omitted)).
In this case, neither Helix, Rosendin, nor American has obtained a final judgment against InteiliSec, though IntelliSec claims that it has settled the action with Helix. Plaintiffs concede that this is the "general rule" in new York, but argue, unpersuasively, for an exception based on "fairness and judicial economy" because factual issues raised in the indemnification case will be similar to issues raised in the underlying breach of contract cases. As in Syracuse Rigging Co., 249 A.D.2d at 760, however — where the questionable validity of the plaintiffs indemnification and contribution claims was insufficient to warrant an exception to the rule given the plaintiffs own potential negligence arising out of its inadequate supervision and control of a work site — this court is not persuaded to depart from the New York's general rule, in particular considering the allegations that have been raised as to IntelliSec's underlying conduct here. As such, plaintiffs' indemnification and contribution claims have not accrued and should be dismissed as premature.
For reasons already stated above, without adequate substantiation of this settlement, it cannot be definitively determined that there has been payment by IntelliSec.
B. Indemnification
Defendant next contends that plaintiffs fail to state a valid claim for indemnification. Indemnification under New York law, whether categorized as implied or equitable (in plaintiffs' terminology), is not available where the party seeking indemnification was "partially at fault" or "responsible to any degree." Monanhan v. SZS 33 Assoc., L.P., 73 F.3d 1276, 1284 (2d Cir. 1996) (holding that indemnification is not available under New York law to party who is itself partially at fault or is alleged to have himself violated the same duty to the underlying plaintiff); Rosada v. Proctor Schwartz, Inc., 66 N.Y.2d 21, 24-25, 494 N.Y.S.2d 851, 854 (1985) (holding that a party seeking indemnification may not be held responsible to any degree."); Aetna Casualty Surety Co. v. Spartan Mechanical Corp., 738 F. Supp. 664, 678 (E.D.N.Y. 1990) ("in seeking indemnity for only that liability for which indemnifcation is even remotely possible — i.e., the performance bond liability — the third-party complaint merely alleges a basis for proportionate, not full, liability, and therefore fails to state a claim for indemnification. Even where a defendant claims that a portion of its liability is one hundred percent due to the fault of another, such a claim does not seek to shift the entire burden of loss, and, thus is not a claim for indemnity."). Despite plaintiffs' assertions in the Complaint that any liability established by Helix, Rosendin or American will have arisen "solely from" wrongs committed by Firecom and that "any liability or fault" found on the part of plaintiffs will be only passive and secondary," (Compl., ¶ 128) (emphasis added), the claims and cross-claims in the underlying California lawsuits — which allege acts, omissions and breaches based on plaintiffs' direct, not vicarious, liability — tell a different story.
In all of the claims against IntelliSec for which it seeks indemnification, breaches of IntelliSec's responsibilities are alleged for which Firecom could not possibly have had any responsibility. In the case of Helix's claims against IntelliSec arising from the City Hall project, for example, Helix alleges that it entered into a written subcontract with IntelliSec whereby IntelliSec agreed to provide labor, materials and equipment for the project, that plaintiff: (i) breached the subcontract by failing and refusing to submit Honeywell as the equipment manufacturer; failing and refusing to provide proper and timely submittals; failing and refusing to timely and properly perform under the subcontract per plan specifications; and (ii) repudiated the subcontract by failing to perform according to "plans and specs." (Compl., ¶ 45; Heller Decl. Exh. B).
As for Rosendins Cross-Complaint filed against InteiliSec arising from the project, Rosendm Alleges that it enterered into a written subcontract with IntelliSec for the design, installation and testing of fire, life, safety, smoke control, and mechanical test panel systems and that IntelliSec breached the subcontract in fifteen ways, including its failure to: (i) diligently "prosecute" the work called for; (ii) make the progress required to timely complete the work; (iii) diligently pay subcontractors and suppliers; (iv) install required equipment; (v) provide adequate planning and manpower needed to timely complete the work; (vi) complete required pre-testing on schedule; (vii) provide technically trained manpower; (viii) complete required installation drawings; (ix) submit drawings; (x) provide revised schedules; (xi) submit change order quotes; (xii) provide adequate assurance of its ability to timely perform and complete the project, and its: (xiii) abandonment of its work in August 1999 and refusal to perform further work or provide overtime labor; (xiv) improper removal of a computer interface module that had been installed already; and (xv) failure to provide and updated systems drawings. (Compl., ¶ 65; Heller Decl., Exh. D)
Finally, in American's Cross-Complaint claims against IntelliSec also arising from the Staples project, American seeks total and complete contractual and statutory indemnification against plaintiffs based upon the allegations of the Rosendin Cross-Complaint. (Compl., ¶ 65; Heller Decl., Exh. E).
In view of these claims and the fact that IntelliSec has cited no authority suggesting that the court may assume, for purposes of its indemnification claim, that Firecom is wholly liable for the breach in those actions before IntelliSec's liability has been litigated, the court finds no basis for making that assumption. As such, plaintiffs' twelfth, thirteenth and fourteenth claims should be dismissed.
C. Contribution
Defendant finally contends that plaintiffs fail to state a valid claim for contribution. New York courts, once again, are clear on this issue when they state that contribution claims are unavailable when the underlying claim is for purely economic loss resulting from the breach of contractual obligations. Morse/Diesel, Inc. v. Trinity Industries, Inc., 859 F.2d 242 (2d Cir. 1988) (stating that New York Court of Appeals has construed New York's contribution statute as "not permitting `contribution between two parties whose potential liability to a third party is for economic loss resulting only from a breach of contract' [and as] creat[ing] a right of contribution only among joint tort feasors.") (quoting Board of Educ. v. Sargent Webster Crenshaw Folley, 71 N.Y.2d 21, 24, 523 N.Y.S.2d 475, 476 (1987)); see also Aetna Casualty Surety Co. v. Spartan Mechanical Corp., 738 F. Supp. 664, 678 (E.D.N.Y. 1990) ("Since [defendant] is sought to be liable to [plaintiff] only for breach of contract, not for tort, [defendant] can state no claim for contribution"); Lawrence Development Corp. v. Jobin Waterproofing, Inc., 186 A.D.2d 634. 588 N.Y.S.2d 422 (2d Dep't 1992) (same); General Conference of Seventh Day Adventists v. Aon Reinsurance Agency. Inc., 826 F. Supp. 107, 110 (S.D.N.Y. 1993) (same); SSDW Co. v. Feldman-Misthopolous Assoc., 151 A.D.2d 293, 542 N.Y.S.2d 565 (1st Dep't 1989) (claim for contribution is limited to actions for "personal injury, injury to property or wrongful death.") (citation omitted).
In all of the underlying actions for which plaintiffs seek contribution, the relief sought is limited to economic damages. The Helix complaint, for example, seeks only economic damages for IntelliSec's breach of its subcontract in the City Hall project. (Complaint, ¶ 45; Heller Decl., Exh. B) in its Cross-Complaint arising from the City Hall project. American seeks only economic damages for intelliSec's breach of the general indemnity agreement. (Heller Decl., Exh. C) The Rosendin Cross-Complaint also seeks purely economic damages for IntelliSec's breach of its subcontract in the Staples Center project. (Compl., ¶ 46; Heller Decl., Exh. D) Again, American's Cross-Complaint seeks only economic damages. (Compl. ¶ 65, Heller Decl., Exh. E) As such, plaintiffs cannot state a valid claim for contribution and their fourteenth claim must be dismissed.
CONCLUSION
For the reasons discussed above, defendant's motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) is granted, and plaintiffs' fifth, sixth, ninth, twelfth, thirteenth, and fourteenth claims are dismissed for failure to state a cause of action upon which relief may be granted.
SO ORDERED.