Opinion
00-CV-897 (HGM)(GJD).
November 9, 2000.
For The Plaintiff, Jeffrey J. Calabrese, Esq., Harter, Secrest Law Firm, Rochester, New York.
For The Defendants, Harris Lindenfeld, Esq., Cazenovia, New York.
MEMORANDUM DECISION AND ORDER INTRODUCTION
Currently before the court are defendant's motion to dismiss the complaint and motion for summary judgment. See Dkt. No. 6. These motions were made in lieu of an answer. Plaintiff opposes these motions and moves pursuant to Rule 56(f) of the Federal Rules of Civil Procedure to obtain the discovery that is necessary to oppose summary judgment. See Dkt. No. 13. For the following reasons, the court grants defendant's motion to dismiss, and denies defendant's motion for summary judgment and plaintiffs Rule 56(f) motion for responsive discovery.
BACKGROUND
Plaintiff, L. Robert Kimball Associates ("Kimball"), is an architectural firm incorporated in the State of North Carolina and doing business principally in the State of Pennsylvania. Defendant, Homer Central School District ("the District"), is a New York State municipal corporation located in Cortland County. Plaintiff brings this cause of action pursuant to the court's diversity jurisdiction alleging a breach of contract. See 28 U.S.C. § 1332. Specifically, Kimball asserts the following five causes of action: (1) breach of contract; (2) breach of binding preliminary agreement; (3) breach of binding preliminary commitment; (4) promissary estoppel; and (5) unjust enrichment/quantum meruit.
According to plaintiff, the parties entered into a two stage contract for general architectural services.
Defendant moves to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure claiming the contract expired under its own terms and that the District fully performed its contractual obligations. See Dkt. No. 6. Although it has not yet answered, defendant also moves for summary judgment on the basis that: (1) the contract is invalid because it was not authorized by the Board of Education; (2) plaintiff failed to timely file a Notice of Claim as required by New York State Education Law § 3813(1); and (3) the applicable statute of limitations expired before plaintiff instituted this action. Id.
In response, plaintiff seeks a continuance to obtain discovery specific to the issues presented in defendant's summary judgment motion. See Dkt. No. 13. Kimball asserts that it needs to depose witnesses, review records, plans, specifications and other documents relating to the District's capital improvement project.Id. Moreover, plaintiff argues that the proposed discovery will create issues of material fact that will prohibit summary dismissal. Id. The court will address these issues seriatim.
FACTS
On July 10, 1996, plaintiff entered into a written agreement with Harold Ferguson, Superintendent of the Homer School District, in which it committed to supply architectural and engineering, services for the District. The agreement states that plaintiff would provide two stages of services for the District's 1997 capital improvement program. See Compl. Ex. A. Apparently, the District sought to improve its existing facilities and construct several new buildings during the 1997/1998 school year. However, these improvements could not occur without approval of a Bond referendum by the District's voters. Therefore, the agreement includes provisions for Stage 1 (pre-referendum) services and Stage 2 (post-referendum) services.
In Stage 1, the agreement states that plaintiff would: (1) survey the District's facilities; (2) develop a construction budget; (3) prepare and present materials for a Bond referendum vote; (4) participate in public information meetings; and (5) participate in a development meeting with the District Administration. In Stage 2, plaintiff agreed to complete Architectural/Engineering services for the approved Bond referendum project. The details of these services were to be outlined in a Standard Agreement between Owner and Architect, AIA B141.
The July 10, 1996, agreement also contains a preliminary outhne of the scope of work to be undertaken by the District. Moreover, it describes the services to be rendered at each stage, contains a fee proposal for these stages and a preliminary work schedule.Id. In exchange for these services, plaintiff agreed to complete Stage 1 for the lump sum of $15,000 and carry out Stage 2 for 6% of the project cost.
On August 20, 1996, Superintendent Ferguson executed the July 10, 1996, agreement and plaintiff began Stage 1. On June 23, 1997, the parties presented the resultant capital improvement plan for voter approval, but the referendum was defeated. Despite the referendum's failure, the District paid plaintiff the agreed sum of $15,000 and allowed it to undertake a second capital improvement plan for voter referendum. Plaintiff was paid another $15,000 for these services. At this time, the parties also began to negotiate the terms of the Standard Agreement between Owner and Architect, but, on March 3, 1998, the second referendum failed. After this defeat, the District allegedly breached the July 10, 1996, agreement when it would not allow Kimball to produce a third capital improvement plan. Subsequently, defendant hired a new architectural firm to perform pre-referendum services and produce a third capital improvement plan. The resulting referendum for the amount of $30,000,000 was approved on June 15, 1999.
Based upon this figure, plaintiff contends that its fee for Stage 2 services would have equaled $1,800,000 and argues that it would have realized 40% or $720,000 in profit. It also states that its Stage 1 services were actually worth $170,466.94 for which $138,787.25 remains unpaid.
DISCUSSION
I. Motion to Dismiss: The Legal StandardFederal Rule of Civil Procedure 12(b)(6) provides that a cause of action shall be dismissed if a complaint fails "to state a claim upon which relief can be granted." In analyzing a motion to dismiss, the facts alleged by plaintiff are assumed to be true and must be liberally construed in the light most favorable to him. See e.g., Easton v. Sundram, 947 F.2d 1011, 1014-15 (2d Cir. 1991). While a court need not accept mere conclusions of law, it should accept the pleader's description of what happened along with any conclusions that can reasonably be drawn therefrom. SeeMurray v. City of Milford, 380 F.2d 468 (2d Cir. 1967). Furthermore, when a party makes a Rule 12(b)(6) motion, a court will limit its consideration to the facts asserted on the face of the complaint. See Cosmas v. Hassett, 886 F.2d 8, 13 (2d Cir. 1989). A complaint will not be dismissed for failure to state a claim unless it appears, beyond a reasonable doubt, that a plaintiff cannot prove any set of facts entitling him or her to relief. See Wanamaker v. Columbian Rope Co., 740 F. Supp. 127 (N.D.N.Y. 1990). With this standard in mind, the court turns to the sufficiency of plaintiffs claims.
II. The Contract Claims
It is well settled under New York law that to establish a claim for breach of contract, a plaintiff must prove: (1) that an agreement existed between it and defendant; (2) what the respective obligations of the parties were; (3) that plaintiff performed its obligations; (4) that defendant breached the agreement by failing to perform its obligations; and (5) that plaintiff was damaged by the breach. See Eli Attia Architects v. Safra, 1996 WL 480721, at *3 (S.D.N.Y. August 23, 1996). In this case, the existence of a contract and plaintiffs performance under the agreement are not disputed issues. However, great discord exists between the litigants concerning defendant's contractual obligations and whether it breached the July 10, 1996, agreement.
In its motion to dismiss, defendant concedes that a contract exists. Specifically, defendant argues that it fully performed its Stage 1 obligations under the contract and in so doing admits that it contracted with plaintiff. However, defendant does not concede that it agreed to include Stage 2 services in the July 10, 1996, contract.
In its motion to dismiss, defendant contends that it fully performed its obligations under the agreement. Specifically, it argues that its agreement with plaintiff was limited in scope to the development of a capital project plan to be passed in the 1997/1998 school year. Once that academic year ended without a referendum having passed voter muster, defendant believes that the contract terminated and the District was free to seek another architect. To support this assertion, defendant refers, as it should, to the specific language of the contract which includes, inter alia, a preliminary schedule for project completion and references to the 1997/1998 school year. While admitting that the contract lacks a specific provision regarding duration, defendant argues that the court should assume that the parties intended to limit their respective obligations for a reasonable time limit. Essentially, defendant contends that no reasonable party would bind itself to a perpetual contractual obligation. For this reason, the District insists that the court must cure the contract's failings, supply the missing ephemeral term and find that the agreement ended once the 1997/1998 academic year passed without an approved referendum.
In response, plaintiff argues that the services performed by the District's new architect and the approved capital improvement project itself are identical to those contemplated in the July 10, 1996, contract. For reasons not clearly articulated, plaintiff believes that the similarities between its two failed referendums and the successful plan substantiate its claims. Yet, despite its professed conviction about the assonant nature of these projects, Kimball also suggests that questions of fact exist concerning whether or not the new project and the new architect's services are identical to those contemplated by the litigants in the July 10, 1996, contract. According to plaintiff, these questions should be explored through discovery and must be resolved at trial.
Plaintiff also contends that defendant, through its motion, raises other factual issues that must be resolved at trial. In particular, plaintiff attacks the idea that the July 10, 1996, contract was limited to the 1997/1998 school year. It claims that the specific academic year is irrelevant to the actual duration of the parties' contractual obligations. Instead, it maintains that the exact nature of the capital program contemplated at the time of contract controls the duration of the parties' obligations. Because it alleges that the approved project was part of the contemplated project, Kimball believes that it is entitled to discovery on this issue.
Furthermore, plaintiff argues that the actual language of the contract does not support the District's interpretation of its temporal limit. Specifically, plaintiff finds it significant that the contract does not contain the terms "school year" or "academic year." It also notes that the contract's only temporal reference is found in the first sentence, where it states that the District would undertake its capital program in 1997/1998. Moreover, plaintiff implies that the contract could not terminate without a specific provision stating that a referendum must pass in the 1997/1998 school year.
Next, plaintiff contends that the District's post-referendum actions belie its argument that the academic year controls the contract's life span. According to Kimball, the District never indicated that it would terminate plaintiff if a referendum did not pass during the 1997/1998 school year. Plaintiff also indicates that it was actually terminated before the end of that academic year. Finally, Kimball argues that whether or not the District should have awarded its capital improvement contract to plaintiff is a question of fact that must be decided by the trier of fact. For these reasons, it maintains that the District's motion to dismiss the complaint must be denied.
To the extent that plaintiff's argument is an aspect of his Rule 56(f) motion, the court concludes that additional discovery is not required. The type of project approved on July 15, 1999, is not relevant to resolution of defendant's motion to dismiss.
Essentially, the instant dispute is a matter of contract interpretation. When construing contracts, a trial court's primary objective is to "give effect to the intent of the parties as revealed by the language they chose to use." Times Mirror Magazines. Inc. v. Field Stream Licenses Co., 103 F. Supp.2d 711, 721 (S.D.N.Y. 2000) ( quoting Seiden Assoc., Inc. v. ANC Holdings. Inc., 959 F.2d 425, 428 (2d Cir. 1992) (internal quotation marks omitted)). Therefore, New York law requires a court to first decide whether the contract is ambiguous. Id. A contract provision is considered ambiguous
whenever it admits more than one interpretation when viewed objectively by a reasonable intelligent person who examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in a particular trade or business.Id. at 722. A provision is not ambiguous if it has a "definite and precise meaning" and there is no danger of misconception or basis for differing opinions. Id. If the contract terms are not ambiguous, a court need not investigate extrinsic evidence to determine the parties respective obligations. Id. However, if the contract is ambiguous evidence of the parties intent is admissible. Id.
Furthermore, New York courts have made it clear that "in searching for the probable intent of the parties, lest form swallow substance, [the court's] goal must be to accord the words of the contract their `fair and reasonable meaning'" Sutton v. East River Savings Bank, 55 N.Y.2d 555, 450 N.Y.S.2d 460, 463, 435 N.E.2d 1075, 1078 (1982) (citations omitted). In other words, "the aim [of a court] is a practical interpretation of the expressions of the parties to the end that there be a realization of [their] reasonable expectations." Id. This means that "not merely literal language, but whatever may be reasonably implied therefrom must be taken into account." Id. However, "unless there are reservations to the contrary, embraced in the interpretative result should be `any promises which a reasonable person in the position of the promisee would be justified in understanding were included.'" Id. ( quoting Rowe v. Atlantic Pacific Tea Co., 46 N.Y.2d 62, 69, 412 N.Y.S.2d 827, 830, 385 N.E.2d 566, 569 (1978)).
In this case, the specific question raised by the litigants concerns the intended duration of their agreement. Defendant maintains that the existence of the contract was limited to the 1997/1998 academic year, while plaintiff insists that the nature of the project contemplated in the agreement determines its life span. The court does not fully agree with either party. Instead, it finds that the contract is not ambiguous in any material term and so consideration of any extrinsic evidence, i.e., the parties' intent, is unnecessary. Furthermore, review of the contract reveals that the scope of work contemplated by the contract signatories was limited to the District's 1997/1998 capital improvement program. Not only does the contract state that it concerned the "1997 Capital Program", see Compl. Ex. A; Dkt. No. 1, but it also establishes a proposed work schedule, which ended in November of 1998. This clearly shows the contract to be an agreement with a terminable existence.
Regardless, the actual duration of the contract and any possible ambiguity that may surround the parties' intent are not material to plaintiffs breach of contract claims. Instead, the appropriate inquiry relates to whether the contract terminated after failure of the first referendum. Once again, the contract's terms plainly show that defendant's obligation to plaintiff ended with the failure of the first referendum. Specifically, the contract is constructed in two parts. In Stage 1, the parties agreed that plaintiff would prepare a referendum for voter approval for a cost of $15,000. In Stage 2, plaintiff agreed to "undertake complete Architectural/Engineering Services for theapproved Bond Referendum Project . . ." See Compl. Ex. A (emphasis added). The only reasonable interpretation of this provision is that plaintiff would undertake Stage 2 services if their Stage 1 referendum was approved. Because the first proposed referendum failed, the contract automatically terminated and defendant's obligation to plaintiff ceased.
Furthermore, the District's decision to permit plaintiff to develop a second referendum did not create a perpetual obligation to allow Kimball to participate in the project. Moreover, even if the District's actions resurrected the original contract or if it created a new agreement under identical terms, defendant's contractual obligations would again terminate after the second referendum failed. Therefore, the District's contractual obligation to allow plaintiff to further participate in Stage 1, and eventually engage in Stage 2, terminated after the demise of the first and second referendums. Thereafter, defendant was free to retain a new architect without breaching its contract with plaintiff. For these reasons, the court finds that plaintiffs breach of contract claim is deficient and grants defendant's Rule 12(b)(6) motion to dismiss.
III. Remaining Claims
Although defendant does not address them in its motion, plaintiff asserts four additional causes of action: (1) breach of binding preliminary agreement; (2) breach of binding preliminary commitment; (3) promissary estoppel; and (5) unjust enrichment/quantum meruit. In spite of defendant's disregard of these claims, the court will briefly address each as necessary.
A. Binding Preliminary Agreement/Commitment Claims
Preliminary agreements are manifestations of assent requiring further negotiation or further contracts. See Shann v. Dunk, 84 F.3d 73, 77 (2d Cir. 1996). Normally, these agreements do not create binding obligations, except in rare circumstances where the agreement clearly manifests the intention to be bound. Id. There are two types of preliminary agreements: (1) the binding preliminary agreement, and (2) the binding preliminary commitment. See Gorodensky v. Mitsubishi Pulp Sales, Inc., 92 F. Supp.2d 249, 254 (S.D.N.Y. 2000). The binding preliminary agreement is created "`when the parties agree on all points that require negotiation . . . but agree to memorialize their agreement in a more formal document.'" Id. ( quoting Adjustrite Sys., Inc. v. GAB Business Servs., Inc., 145 F.3d 543, 548 (2d Cir. 1998)). This agreement is binding because it contemplates the execution of an elaborate contract only as a formality. SeeId. ( citing Teachers Ins. Annuity Ass'n v. Tribune Co., 670 F. Supp. 491, 497 (S.D.N.Y. 1987)). A binding preliminary commitment is created "`when the parties agree on certain major terms, but leave other terms open for further negotiation.'" Id. ( quoting Adjustrite, 145 F.3d at 548). Parties to these agreements accept the commitment to negotiate in good faith to reach a final agreement. See Id. ( quoting Tribune, 670 F. Supp. at 498).
In order to ascertain the parties' intent to be bound by a binding preliminary agreement, the court must examine: (1) the language of the agreement; (2) the existence of open terms; (3) whether there has been partial performance; and (4) the necessity of putting the agreement in final form as indicated by the customary form of such transactions. See Id. at 254-255. To determine the intent to enter a binding preliminary commitment, the court examines the same four factors plus the context of the negotiations resulting in the commitment. See Id.
In the instant case, plaintiff contends that the July 10, 1996, contract is both a preliminary binding agreement and a binding preliminary commitment. In regard to the binding agreement, plaintiff claims that the parties consented to memorialize their agreement in a more formal document, namely the Standard Agreement between Owner and Architect referenced in the Stage 2 provision of the July 10, 1996, contract. Regarding the binding commitment, plaintiff contends that the parties agreed to negotiate the open terms of Stage 2 services.
Despite plaintiffs convictions, the agreement between Kimball and the District is neither a binding preliminary agreement nor a binding preliminary commitment. First, the defendant concedes, and the court agrees, that the parties entered into a contract. Next, the specific language of the contract does not indicate that the parties agree to either formalize their contract terms in a more elaborate document, or negotiate in good faith about open terms. Although the contract states that plaintiff would undertake Stage 2 services for the approved project as outlined in the Standard Agreement between Owner and Architect, it does not contemplate the need to execute an elaborate contract as a mere formality. In fact, there is no indication that the Standard Owner and Architect agreement is anything more than an addendum to the existing contract; the court certainly considers it as such.
Furthermore, the contract does not clearly indicate the commitment to negotiate in good faith to reach a final agreement. Even if the contract did manifest such a need, further negotiation would only become necessary once the bond referendum project was approved. Since neither of plaintiffs proposed projects were approved, the obligation to negotiate did not materialize. Certainly the conditional nature of this contingency does not absolutely commit defendant to negotiate to reach a final agreement. At most, this indicates the District's intent to finalize plaintiffs duties under the contract, if the appropriate condition materializes.
Because preliminary agreements are not normally binding and the court must avoid trapping parties into unintended contractual obligations, the undersigned finds that these claims are legally deficient. Consequently, plaintiffs binding preliminary agreement and commitment claims are dismissed.
B. Promissary Estoppel
A cause of action for promissory estoppel under New York law requires plaintiff to prove three elements: (1) a clear and unambiguous promise; (2) reasonable and foreseeable reliance on that promise; and (3) injury to the relying party as a result of the reliance. See Kaye v. Grossman, 202 F.3d 611, 615 (2d Cir. 2000). In this case, plaintiff maintains that its agreement with defendant constitutes a promise to allow Kimball to perform Stage 1 pre-referendum services and Stage 2 post-referendum services. It also claims that it reasonablely relied upon that promise and was subsequently damaged by defendant's breach.
Although the principle of promissory estoppel allows enforcement of a promise even in the absence of an enforceable contract, plaintiff states no claim herein. For the reasons articulated above, the court has found that defendant's commitment to allow plaintiff to conduct both Stage 1 and State 2 services ended when the contract terminated. Specifically, defendant's promises to plaintiff were conditioned upon the passage of a voter referendum within the 1997/1998 academic year. Since this condition did not occur, not only did defendant not breach its contractual obligations but any reliance by plaintiff upon these promises was unjustified.
Moreover, plaintiffs estoppel claim is based upon promises that are consistent with the obligations contemplated in the contract between the parties. The argument that defendant breached its promise to plaintiff is duplicative of its breach of contract claim and so it must be dismissed. See Four Finger Art Factory, Inc., v. Dinicola, 2000 WL 145466, at *8 (S.D.N.Y. February 9, 2000) (dismissing promissary estoppel claim as duplicative of breach of contract claim). For the reasons stated above, plaintiffs promissary estoppel claims are dismissed.
C. Unjust Enrichment/Quantum Meruit
Invoking the doctrines of quantum meruit and unjust enrichment, plaintiff contends that it performed Stage 1 services, which were actually worth $170,466.94, but received only $31,679.69 in fees. For this reason, plaintiff alleges that the District was unjustly enriched when it knowingly accepted Stage 1 services without fully compensating Kimball.
Under New York law, "[t]he existence of a valid and enforceable written contract governing a particular subject . . . precludes recovery in quasi-contract . . ." which includes both quantum meruit and unjust enrichment theories. See Valley Juice Ltd. v. Evian Waters of France, Inc., 87 F.3d 604 (2d Cir. 1996);see alsoFercus S.R.L. v. Palazzo, 2000 WL 1118925, at *4 *5 (S.D.N Y August 8, 2000). In this case, plaintiff specifically contracted to perform Stage 1 services for $15,000. Because it performed these services twice, plaintiff was paid $31,679.69. Although the actual value of these services far exceeds the amount paid, plaintiff knowingly contracted to provide them for this amount and cannot recover under either quantum meruit or unjust enrichment theories. These claim are dismissed.
The contract stated that plaintiff would conduct Stage 1 services for a lump sum of $15,000 and that the District would pay for collateral costs. There is no explanation why plaintiff was paid $1,679.69 beyond the agreed fee.
IV. Summary Judgment: Procedural Issues
Defendant has also moved for summary judgment claiming that: (1) the contract is invalid because it was not authorized by the Board of Education; (2) plaintiff failed to timely file a Notice of Claim as required by New York State Education Law § 3813(1); and (3) the applicable statute of limitations expired before institution of this claim. At this juncture, the court notes that defendant makes this motion despite not having answered the complaint. Although it refers to Rule 56 of the Federal Rules of Civil Procedure and Local Rule 7.1, defendant seems unaware that neither rule allows a litigant to move for summary judgment in lieu of answer. Since the court has already granted defendant's motion to dismiss, consideration of the summary judgment motion is not necessary at this juncture.
V. Motion for Responsive Discovery
Finally, plaintiff moves pursuant to Rule 56(f) of the Federal Rules of Civil Procedure to obtain the discovery that is necessary to oppose summary judgment. See Dkt. No. 13. Because the court has granted defendant's motion to dismiss, the requested discovery is unnecessary and plaintiffs motion is dismissed.
WHEREFORE, for the foregoing reasons, it is hereby
ORDERED, that defendant's Rule 12(b)(6) motion to dismiss the complaint is GRANTED. It is further
ORDERED, that defendant's Rule 56 motion for summary judgment is DENIED. It is further
ORDERED, that plaintiffs Rule 56(f) motion for a continuance to obtain responsive discovery is DENIED. It is further
ORDERED, that the Clerk of the Court serve a copy of this Memorandum Decision and Order upon the parties by regular mail.
Dated: November 8, 2000 Syracuse, New York HOWARD G. MUNSON UNITED STATES DISTRICT JUDGE