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June 18, 1991


The opinion of the court was delivered by: Haight, District Judge:


In this action founded upon diversity of citizenship, 28 U.S.C. § 1332, plaintiff Westinghouse Electric Corporation ("Westinghouse"), a Pennsylvania corporation, brings this action against defendants New York City Transit Authority ("NYCTA") and Metropolitan Transportation Authority ("MTA") to recover damages and related relief arising out of a contract between Westinghouse and defendants for the sale and delivery of power rectifier equipment for use in the New York City subway system. Defendants move under Rule 12(b)(6), Fed.R.Civ.P. to dismiss the complaint for failure to state a claim upon which relief can be granted, or in the alternative for partial summary judgment under Rule 56.


On October 17, 1983, the MTA, acting by the NYCTA, awarded Contract P36222 to Westinghouse for the sale and delivery of power rectifier equipment to five substations of the New York City subway system. Power rectifier equipment converts electric power to the proper voltage and directs the power to the subway tracks to power the trains.

By letter dated February 3, 1989, Westinghouse advised F.D. Westfall, Jr., a NYCTA employee whose title is Chief Engineer Electrical, that Westinghouse was "suspending further performance effective February 3." In another letter dated February 3, 1989, Westinghouse instructed its subcontractor, Northstar Electrical Contracting, to suspend its performance.

In its February 3, 1989, letter to Westfall, Westinghouse referred to an earlier letter dated November 3, 1988. That letter, as paraphrased by Westinghouse in its February 3, 1989, letter, "notified the Transit Authority that its failure to resolve numerous long-standing design problems and other restraints and prohibitions on the performance of our work constituted a constructive stop order." The earlier November 3, 1988 letter, Westinghouse reminded Westfall, "requested the Transit Authority to resolve all outstanding performance problems within 90 days." In Westinghouse's perception, the NYCTA had not adequately responded to that request. The February 3, 1989 letter concluded:

  Because the Transit Authority has decided not to
  remove the restraints and impediments, our
  remaining contract work is either unavailable,
  thereby rendering us physically unable to
  perform, or materially altered so as to change
  the nature of our contract obligations.
  Therefore, we are suspending further performance
  effective February 3.

The NYCTA responded to Westinghouse in a letter signed by Westfall and dated February 8, 1989. That letter acknowledged Westinghouse's formal advice that Westinghouse was suspending further performance under the contract, "This is a breach of contract," Westfall wrote to Westinghouse. His letter went on to advise that in view of specified failures to perform on Westinghouse's part, "Westinghouse is hereby directed to discontinue all work pursuant to the contract." In addition, Westfall advised Westinghouse "that a recommendation will be made that it be held in default under the contract."

After a further exchange of correspondence, the NYCTA in a letter dated June 13, 1989 signed by Robin C. Stevens, Deputy Vice President, advised Westinghouse that the NYCTA had declared Westinghouse to be in default in the performance of its obligations under the contract. That letter concluded:

  Therefore, pursuant to Article 7.01 of the
  Contract, you are hereby deemed to be in default
  and your contract is hereby terminated.

As an enclosure to a letter dated June 21, 1989, Westinghouse submitted to Westfall at the NYCTA a Request for Additional Compensation and Time Extension. The request included the cost of additional labor, materials and equipment, compensation for field office overhead, and additional general and administrative expenses which Westinghouse and its subcontractor, Northstar, incurred to perform the contract due to the NYCTA's alleged failure to discharge its contract obligations. Westinghouse also sought compensation for damages caused by the NYCTA deletion of contract work items. Lastly, Westinghouse asked that the NYCTA's declaration that Westinghouse was in default under the contract be rescinded. Westinghouse's forwarding letter of June 21, 1989 concluded:

  Westinghouse requests a Superintendent's decision
  as required by Article 8.03 of the contract. Our
  right to a timely decision on this claim is not
  affected by the recent declaration of default.

Article 8.03 of the contract, to which Westinghouse referred in its June 21, 1989 letter, provides in its entirety as follows:

  ARTICLE 8.03. Disputes. (a) In the event the
  Contractor and Authority are unable to resolve
  their differences concerning a determination by the

  the Contractor may initiate a dispute in
  accordance with the procedure set forth in this
  Article. Exhaustion of these ...

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