Opinion
1-1557/2003.
Decided October 14, 2004.
Paul Andrew Cooper Associates, Garden City, New York, counsel for plaintiff. (Plaintiff in Action No. 1)
Gately Goldman, LLP, Newton, MA., (Plaintiff in Action No. 2)
Peter K. Ledwith, Esq., Lynbrook, New York, counsel for defendant, (for Village of Lynbrook in Action No. 1).
Morris, Duffy, Alonso Faley, Esqs., New York, New York, (for Lincoln General Ins. Co.).
Ahmuty, Demers McManus, Esqs., Albertson, New York.
Defendant Cameron Engineering Associates, LLP. ("Cameron") moves for judgment pursuant to CPLR 3211(a)(7) and 3212 dismissing the seventh cause of action for business defamation, the ninth cause of action for punitive damages, the tenth cause of action for injunctive relief and the twelfth cause of action for tortious interference with contract or, in the alternative, for an order granting it the opportunity to renew this motion upon the conclusion of discovery.
Defendant Village of Lynbrook ("Village") cross-moves for judgment dismissing the sixth cause of action for business defamation, the eighth cause of action for punitive damages and the tenth cause of action for injunctive relief.
Plaintiff cross-moves for leave to file a fourth amended complaint to include, inter alia, claims for tortious interference with prospective economic advantage against both the Village and Cameron and an order expedited discovery or, alternatively, a continuance to permit further discovery and disclosure.
BACKGROUND
Plaintiff Techcon Contracting, Inc. ("Techcon") is a commercial construction contractor. It was the lowest responsible bidder on a project involving the improvement of approximately 9,433 linear feet of roadway ("the project") in the Village of Lynbrook. Techcon entered into a contract dated May 1, 2002, with the Village for the project. Pursuant to the contract, the work was to start on June 3, 2002 and was to be completed no later than October 31, 2002.
Cameron was the engineer of record on the project. Cameron designed the project, prepared the plans and specifications, evaluated the bids, and acted as the Village's representative on the project.
The Village terminated the contract with Techcon on September 23, 2002. At the time of termination, Techcon had received partial payments totaling approximately $430,668.92. The reason for the termination is disputed. The Village and Cameron allege that the termination was due to Techcon's extremely poor performance and failure to conform to the project plans and specifications. Techcon alleges that the termination was a pretext for avoiding a very unfavorable contract, due to an error by Cameron in Item No. 7 of the contract for "Preparing Fine Grade."
The unit price for Item #7 is correctly set forth as "One hundred twenty five dollars and no cents" or "$125.00" per unit, and the estimated quantity of the unit is 17,000 sq. yds. However, the multiplication of these two factors in the contract sets forth a total amount of $21,250.00, instead of the correct total of $2,125,000.00. In short, Techcon alleges that Item # 7 of the contract has an error of more than $2,000,000.00.
The current applications before this Court concern Techcon's claims for business defamation, injunctive relief and tortious interference with contract.
After Techcon's performance of the contract was terminated, it submitted bids on five other specific projects. Techcon claims that it was the low bidder, but that it was not awarded any of these contracts because defamatory statements were made by Cameron and/or the Village that Techcon's "work on the Project was substandard and not in accordance with the terms of the Contract" (Third amended complaint, ¶¶ 19, 22). The Village and Cameron argue that the claims against them for business defamation should be dismissed due to the lack of requisite particularity as required by CPLR 3016(a) and the failure to identify the third person(s) to whom the allegedly defamatory statements were made. Defendants further argue that the claims for injunctive relief and tortious interference are not viable as a matter of law.
DISCUSSION
A. Techcon's Cross-Motion
1. Leave to Serve Fourth Amended Complaint
Techcon requests leave to serve the proposed fourth amended complaint which includes, inter alia, additional factual allegations in support of its sixth and seventh causes of action for business defamation and adds new causes of action against the Village and Cameron for tortious interference with prospective economic advantage. Leave to amend a pleading should be freely given absent prejudice. (CPLR 3025[b]. See also, Ruby Land Development Ltd. v. Toussie, 4 A.D. 3d 518 [2nd Dept. 2004]), unless the proposed amendment is plainly lacking in merit. Rocioppi v. Bay Club Inc., 5 A.D. 3d 656 (2nd Dept. 2004).
The new information set forth in paragraph 19 of the fourth amended complaint is critical to the survival of the sixth and seventh causes of action, as it gives the context and detail of the alleged defamatory statements which are the subject of those causes of action. There can be no prejudice to Defendants as the new detail concerns Techcon's bids for other projects as to which Defendants allegedly had conversations. Leave to amend the third amended complaint to add this information should be granted.
2. Tortious Interference with Prospective Economic Advantage
A claim for tortious interference with prospective economic advantage or prospective contractual relations requires a showing that the Defendants' interference with Plaintiff's prospective business relations was accomplished by "wrongful means" or that Defendants acted for the sole purpose of harming the Plaintiff. Snyder v. Sony Music Entertainment, Inc., 252 AD2d 294 (1st Dept. 1999). "Wrongful means" has been defined to include "physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure". NBT Bancorp v. Fleet/Norstar Financial Group, Inc., 87 NY2d 614, 624 (1996), quoting, Guard-Life Corp. v. Parker Hardware Mfg. Corp., 50 NY2d 183, 191 (1980).
Techcon cannot establish that the Village acted with the sole purpose of harming it because it has alleged that part of the motivation on the part of the Village was to "obscure the fact that Lynbrook * * * had entered into an unfavorable contract with Techcon (fourth amended complaint, ¶ 41). Similarly, Techcon cannot establish that Cameron's actions were taken with the sole purpose of harming it because Techcon alleges that Cameron's actions were taken "to hide Cameron's own professional misconduct" (fourth amended complaint, ¶ 51).
Nevertheless, the test regarding Defendants' interference is set forth in the disjunctive. Even in the absence of a sole motivation to harm Techcon, there is an allegation of "wrongful means" in the nature of Defendants' alleged "misrepresentation" of Techcon's work. This allegation suffices for pleading purposes. Consequently, the Court finds that Techcon has adequately pleaded its new claims for tortious interference with prospective economic advantage. Therefore, leave to serve the proposed fourth amended complaint adding this theory of recovery must be granted.
B. Defendants' Summary Judgment Motions
At the outset, the Court notes that Cameron's request for summary judgment is premature. A motion for summary judgment may not be made before issue is joined. CPLR 3212 (a). This requirement is strictly enforced. City of Rochester v. Chiarella, 65 NY2d 92, 101 (1985); and Sonny Boy Realty Inc. v. City of New York, 8 A.D.3d 171 (1st Dept. 2004). As Cameron has not yet served its answer, issue has not been joined. Consequently, summary judgment must be denied.
C. Defendants' Dismissal Motion
In the alternative, Cameron seeks dismissal pursuant to CPLR 3211. The Court deems the Village's application to seek dismissal pursuant to CPLR 3211 as well.
On a motion pursuant to CPLR 3211, the pleading is to be afforded every favorable inference and the court must determine whether the allegations fit within any cognizable legal theory. Leon v. Martinez, 84 NY2d 83, 87 (1994); and Bernberg v. Health Management Systems Inc., 303 AD2d 348 (2nd Dept. 2003). The court must further accept as true any facts alleged in the complaint and any submission in opposition to the dismissal motion. 511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 NY2d 144, 152 (2002).
In opposition to the motions by Cameron and the Village, Techcon has submitted a proposed fourth amended complaint. As this latest pleading addresses, in part, Defendants' objections regarding the business defamation claims and leave to serve the fourth amended complaint should be granted, the Court has considered this to be the operative pleading for the purposes of all of the remaining applications decided herein.
In the fourth amended complaint, Plaintiff alleges five causes of action against the Village for various breaches of the contract. The sixth and eighth causes of action allege claims for business defamation and punitive damages against the Village and against Cameron, as the agent of the Village. The seventh and ninth causes of action allege claims for business defamation and punitive damages against Cameron in its individual capacity and not as the agent of the Village. The tenth cause of action seeks injunctive relief against both the Village and Cameron. The new eleventh and twelfth causes of action allege claims for tortious interference with prospective economic advantage against both the Village and Cameron. The thirteenth cause of action is for negligence against Cameron. The fourteenth cause of action alleges a claim against Cameron for tortious interference with Plaintiff's contract with the Village.
1. Business Defamation
Turning to the business defamation claims and the issue of the particularity with which these claims are alleged, the Court notes that, in the fourth amended complaint Techcon has specifically identified the five projects where its lowest bid was not accepted, its bid, its expected profit and, with respect to three of those projects, the person to whom allegedly defamatory statements were made. Again, Techcon reiterates the allegedly defamatory statements to be that its work "did not meet Contract specifications and was 'substandard'." (Fourth amended complaint, ¶¶ 19[a], [b], [c], [d] and [e]).
A complaint is valid on its face if it gives both the court and the defendants adequate notice of the various occurrences by which the plaintiff intends to prove the allegedly defamatory remarks by the defendants. See gen'lly, Taub v. Amana Imports, Inc., 140 AD2d 687 (2nd Dept. 1988) (complaint facially valid where it contained sufficient facts and circumstances so as to give adequate notice of occurrences and contained the words on which defamation claim was based). For pleading purposes, the Court finds that the new allegations in the fourth amended complaint are adequate with respect to particularity. See, Torres v. Prime Realty Services, Inc., 7 A.D. 3d 343 (1st Dept. 2004) (failure to specify exactly what words were spoken by which defendant at tenants' meeting not fatal; plaintiff adequately set forth the circumstances of the publication of allegations at tenants' meeting that plaintiff misappropriated petty cash, fraudulently cashed checks and was a thief); and Kelleher v. Corinthian Media, Inc., 208 AD2d 477 (1st Dept. 1994) (statement that defendants' failure to return credits to plaintiff's clients was the result of plaintiff's "incompetence" satisfied the particularity standard of CPLR 3016 [a]).
The next issue presented is whether the subject statements are defamatory. In evaluating whether a cause of action for defamation is successfully pleaded, the words must be construed in the context of the entire statement, tested against the understanding of the average person. Dillon v. City of New York, 261 AD2d 34, 38 (1st Dept. 1999), citing, Silsdorf v. Livine, 59 NY2d 8, cert. den., 464 U.S. 831 (1983). A statement tending to injure one in business or trade may be actionable as defamation. Liberman v. Gelstein, 80 NY2d 429, 435 (1992); and Schneidman Heating Inc v. New York Plumbers' Specialties Co., Inc., 238 App Div 318 (1st Dept. 1933). See gen'lly, John Langenbacher Co., Inc. v. Tolksdorf, 199 AD2d 64 (1st Dept. 1993). Charges of incompetence on a construction project and use of inferior materials are actionable. Brancaleone v. Mesagna, 290 AD2d 467 (2nd Dept. 2002).
In contrast, a general reflection upon a plaintiff's character or qualities that is not incompatible with the proper conduct of the plaintiff's business and the mere expression of unhappiness with plaintiff's fulfilling her duties, is not defamatory. Aronson v. Wiersma, 65 NY2d 592, 594 (1985) (statements that plaintiff is "neglectful," "isn't doing their job," "chores had not been completed" and "dissatisfaction with plaintiff's performance" held not defamatory of a linguist working as a legislative assistant.) The description of a manuscript for publication as "substandard" has been held to be constitutionally protected opinion. Locke v. Aston, 1 A.D. 3d 160 (1st Dept. 2003). Expressions of general dissatisfaction with a plaintiff's performance have been held not to be libelous. Angel v. Levittown Union Free School Dist. No. 5, 171 AD2d 770 (2nd Dept 1991); and Tufano v. Schwarz, 95 AD2d 852 (2nd Dept 1983).
On this record, the Court finds that the subject statements may be interpreted by the average person to be defamatory because the statements allege more than general dissatisfaction with Plaintiff's performance. The subject statements go to the heart of Techcon's business; namely, compliance with contractual plans and specifications and the quality of the work performed. Furthermore, an original manuscript as in Locke is not comparable to construction work performed pursuant to plans and specifications. Hence, the description of the latter as "substandard" may have a different legal consequence than the same description of the former.
Defendants further seek dismissal on the grounds that the subject statements are nonactionable opinion. Whether the statements may constitute nonactionable opinion is one of law for the court. It must be answered on the basis of what the average person would understand the statement to mean. Steinhilber v. Alphonse, 68 NY2d 283, 290 (1986). The four factors for consideration are: (1) whether the specific language in issue has a precise meaning which is readily understood or whether it is indefinite and ambiguous; (2) whether the statement is capable of being objectively characterized as true or false; (3) an examination of the full context of the communication in which the statement appears; and (4) the broader social context or setting surrounding the communication including the existence of any applicable customs or conventions which might signal to readers that the statement is likely to be an opinion. Id. Where the statements complained of imply that the speaker knows certain facts, unknown to his audience, which supports his opinion and are detrimental to the person about whom he is speaking, the statements are considered to be "mixed opinion" which are actionable. Id. at 290; Brach v. Congregation Yetev Lev D'Satmar, Inc., 265 AD2d 360 (2nd Dept. 1999); and Kelleher v. Corinthian Media, Inc., supra at 477.
Application of these rules reveals that context and verifiability are the key considerations. Statements by a construction manager at a meeting attended by employees, co-workers, and superiors that a subcontractor was "terrible," "incompetent" and "caused a lot of problems" were held to be "pure opinion" and, thus, not actionable. Pontos Renovation Inc. v. Kitano Arms Corp., 226 AD2d 191 (1st Dept. 1996). Statements by an engineering company in a project report finding the plaintiff/contractor responsible for delays in the project completion, were found to be engineering opinion adequately supported by the underlying facts. John Grace Co., Inc v. Todd Assocs., Inc. of New York, 188 AD2d 585 (2nd Dept 1992). However, a series of 25 letters containing statements by an architect to the owner, other contractors and suppliers that the general contractor was incompetent and used inferior materials was found to be defamatory and not opinion because the statements "would appear to be factual assertions to the average person reading or hearing them." Brancaleone v. Mesagna, supra at 468.
Here, the Court finds that the statements alleged in the specific factual context provided in the sixth and seventh causes of action of the fourth amended complaint purport to allege verifiable breaches of a construction contract. Accordingly, the Court rejects the argument that the statements are nonactionable opinion and concludes that, at best, the statements are mixed opinion.
The more relevant objection concerns qualified privilege. The "common interest privilege" extends to a "communication made by one person to another upon a subject in which both have an interest." Liberman v. Gelstein, supra at 437; and Park Knoll Assocs. v. Schmidt, 59 NY2d 205, 211 (1983). The rule of law that permits such a publication of a defamatory statement grew out of the desirability in the public interest of encouraging a full and fair statement by persons having a legal or moral duty to communicate their knowledge and information about a person in whom they have an interest to another who also has an interest in such person. Shapiro v. Health Ins. Plan of Greater NY, 7 NY2d 56, 60 (1959). However, the privilege can be lost if the Plaintiff demonstrates that the Defendant acted with malice. Liberman v. Gelstein, supra at 437. Common law malice means personal spite or ill will ( Shapiro v. Health Ins. Plan of Greater NY, supra at 61), while constitutional malice refers to a reckless disregard of truth or falsity. Liberman v. Gelstein, supra at 438. In order to lose the qualified common interest privilege, either type of malice will suffice. Id. at 438.
Techcon alleges, in the fourth amended complaint, that the Village and Cameron "acted in a grossly irresponsible manner in making such false and misleading statements, and did so with the intent to harm Techcon's reputation in the construction community" (Fourth amended complaint, ¶ 20) and that Cameron also acted in such manner in its own independent capacity and not as an agent of the Village (Fourth amended complaint, ¶¶ 22-23). Assuming the truth of these allegations, which this Court must (See, e.g., Leon v. Martinez, supra), they suffice to allege both constitutional and common law malice. Therefore, Plaintiff has pleaded claims sufficient to survive Defendants' CPLR 3211 dismissal motions for business defamation in its sixth and seventh causes of action in the fourth amended complaint.
2. Punitive Damages
No separate cause of action for punitive damages lies for pleading purposes. Paisley v. Coin Device Corp., 5 A.D. 3d 748 (2nd Dept. 2004). Plaintiff has not opposed Defendants' requests for dismissal of the eighth and ninth causes of action for punitive damages arising from the aforementioned alleged business defamation. Under these circumstances, Defendants' request for dismissing the eighth and ninth causes of action for punitive damages must be granted.
3. Injunctive Relief
In the tenth cause of action, Plaintiff seeks to enjoin the Village and Cameron from "making written or oral statements to others about the purported termination of the Contract for cause, or about Techcon's performance on the Project" (Fourth amended complaint, ¶ 37). Plaintiff alleges that because of Defendants' false and misleading statements, it will be prejudiced in submitting a bid for construction contracts before it "has an opportunity to be heard by this Court" (Fourth amended complaint, ¶ 35). Plaintiff further alleges that it has no adequate remedy at law (Fourth amended complaint, ¶ 36).
To be entitled to permanent injunctive relief, a Plaintiff must demonstrate irreparable harm and the absence of an adequate legal remedy. See, McDermott v. City of Albany, 309 AD2d 1004 (3rd Dept. 2003), lv. app. den., 1 NY 3d 509 (2004).
At this stage, Techcon need only plead these elements which it has. As a matter of proper pleading, this cause of action alleges a claim for injunctive relief. Consequently, Defendants' motions for dismissal of the tenth cause of action for injunctive relief must be denied.
4. Tortious Interference with Contract
In the fourteenth cause of action in the fourth amended complaint (the twelfth cause of action in the third amended complaint), Techcon alleges a claim against Cameron for tortious interference with its contract with the Village.
An agent cannot be held liable for inducing its principal to breach a contract with a third person, where the agent is acting on behalf of his principal and within the scope of his authority. Cunningham v. Lewenson, 294 AD2d 327 (2nd Dept.), app. dism., 99 NY2d 531 (2002); Kartiganer Assocs., P.C. v. Town of New Windsor, 108 AD2d 898 (2nd Dept.), app. dism., 65 NY2d 925 (1985). The fourteenth cause of action does not contain an allegation that Cameron was acting outside the scope of his authority with respect to its advice and recommendations to the Village. Inasmuch as Cameron was the Village's representative on the project, no such claim can be sustained.
Consequently, the fourteenth cause of action fails to state a cause of action for tortious interference with contract against Cameron and must be dismissed.
5. Leave to Renew
Cameron's alternative request for leave to renew its motion for summary judgment upon the conclusion of discovery is appropriate albeit unnecessary. Therefore, it should be granted.
Accordingly, it is,
ORDERED, that the motion by Cameron for summary judgment is denied as premature and leave is hereby granted to renew upon the completion of discovery; and it is further,
ORDERED, that the motions by Cameron and the Village for judgment dismissing the seventh and eighth causes of action for business defamation are denied; and it is further,
ORDERED, that the motions by Cameron and the Village for judgment dismissing the eighth and ninth causes of action for punitive damages arising from the alleged business defamation are granted; and it is further,
ORDERED, that the motions by Cameron and the Village for judgment dismissing the tenth cause of action for a permanent injunction is denied; and it is further,
ORDERED, that the motion by Cameron for judgment dismissing the fourteenth cause of action for tortious interference with contract is granted; and it is further,
ORDERED, that the cross-motion by Techcon for leave to serve and file the proposed fourth amended complaint is granted; and it is further,
ORDERED, that upon service of a copy of this Order together with Notice of Entry, the fourth amended complaint shall be deemed served; and it is further,
ORDERED, that Plaintiff's request for an order expediting discovery is granted. A Preliminary Conference Order establishing the discovery schedule herein has been granted on this date.
This constitutes the decision and Order of the Court.