United States District Court, Southern District of New York
September 11, 1991
JOHN'S INSULATION, INC., PLAINTIFF,
SISKA CONSTRUCTION COMPANY, INC., A/K/A SISKA CONSTRUCTION CO., INC., A/K/A SISKA CONSTRUCTION, INC., DEFENDANT. UNITED STATES FOR THE USE OF SISKA CONSTRUCTION COMPANY, INC., PLAINTIFF, V. JOHN'S INSULATION, INC. AND HARTFORD ACCIDENT & INDEMNITY COMPANY, DEFENDANTS.
The opinion of the court was delivered by: William C. Conner, District Judge.
OPINION AND ORDER
This action arises out of a construction project known as
"O.S.H.A. Deficiencies Project" located at Fort Devens,
Massachusetts. The Department of the Army awarded a contract to
John's Insulation Inc. ("John's") to perform the work. John's
then entered into a written subcontract agreement with Siska
Construction Company, Inc. ("Siska") to perform most of the
general contract work at the Fort Devens site. In April 1986,
John's allegedly was directed by the Army to terminate Siska's
subcontract. Affidavit of John Fenn ("Fenn Aff.") at ¶ 3. In
that same month John's terminated the contract. The action is
presently before the Court on Siska's motion for summary
judgment. Also before the Court is John's cross-motion to
dismiss the second, eleventh, twelfth, fourteenth, fifteenth,
sixteenth, seventeenth, eighteenth, nineteenth and twentieth
counts of Defendants' Amended Counterclaim on the ground that
said counts fail to state claims against John's for which
relief can be granted. In the alternative, John's moves for
summary judgment dismissing said counts of the counterclaim on
the grounds that there are no genuine issues of material fact.
John's filed suit against Siska in the Supreme Court of the
State of New York, New York County in December 1986 for breach
of contract. In January 1987 Siska removed the action to this
Court on the basis of diversity of citizenship. Subsequent to
John's filing suit, Siska brought suit under the Miller Act,
40 U.S.C. § 270a-270d (1982), against John's and Hartford
Accident and Indemnity Company, the surety on John's payment
bond, in the United States District Court for the District of
Massachusetts. The Massachusetts action was for John's alleged
failure of payment on the Fort Devens construction contract. It
was transferred to this Court and consolidated for trial with
the action pending here.
John's maintains that the termination of Siska's subcontract
was warranted because of Siska's poor workmanship, failure to
follow direction and unauthorized deviations from contract
requirements. John's asserts that the termination was
procedurally proper under the terms of the subcontract
Siska claims that such termination was wrongful and came at
the behest of the Army's contracting officer. It argues that
its performance was proper and that the Army's contracting
officer was without authority to direct that John's terminate
Siska. It alleges that it was removed from the project
improperly so as
to silence any criticism of the site engineer's
ineptitude, to bury the fact that the government
had awarded contracts to several firms to perform
the same work, that there were embarrassing
shortcomings in the plans, and that the defendants
would be able to pocket the earnings due to the
plaintiff through its participation in illegal and
conspiratorial act [sic].
Siska Brief at 8-9. John's counters that, regardless of whether
or not the officer had the authority to direct John's to
terminate Siska, the termination of Siska's subcontract was
warranted based upon Siska's failure to perform properly.
Siska claims that it was entitled to notice and an
opportunity for a hearing pursuant to the prime contract and
certain federal regulations. John's, however, asserts that the
notice and other procedural requirements to which Siska refers
are contained in John's prime contract with the government and
are rights and protections afforded John's by the government.
Fenn Aff. at ¶ 13. John's maintains that the subcontract
between John's and Siska contains no such provisions and
affords Siska no such
rights.*fn1 Siska had no contract with the government.
Despite its assertion that Siska was not entitled to notice
or a hearing, John's alleges Siska was given notice of
deficiencies in its performance but took no action to correct
any of the deficiencies. Fenn Aff. at ¶ 14. Nor, maintains
John's, did it request an opportunity to do so. Id. In
addition, John's asserts, Siska failed to protest the
termination or to request John's to submit a claim on its
behalf to the government.*fn2 By failing timely to protest the
termination or to submit a claim to John's for submission to
the government, Siska is alleged to have deprived John's of the
opportunity to present the issue of the propriety of the
termination, as well as its allegations of conspiracy, to the
Army for review in accordance with the Act. Fenn Aff. at ¶ 15.
Siska alleges that it was not paid for the work it performed
on the project. Siska claims an unpaid balance of $104,092 due
for work performed. Defendants' Amended Counterclaim at ¶¶ 4,
40. John's submits that Siska's claims as asserted in this
action are grossly inflated and fabricated for the purposes of
this litigation. John's argues that of the $41,205, which on
August 18, 1986 Siska claimed to have been due for work
performed on the contract, $33,175 was paid by John's to
subcontractors and suppliers of Siska whom Siska had refused to
pay subsequent to its termination. Fenn Aff. at ¶¶ 18-19.
John's alleges that since the time of Siska's alleged default,
John's has had to perform extensive repair work and to complete
the remaining portion of Siska's work. John's alleges that the
costs incurred by John's in completing and correcting Siska's
work far exceeded the balance of Siska's subcontract price that
Siska's Motion for Summary Judgment
Rule 56(c), Fed.R.Civ.P., provides that summary judgment is
appropriate if "there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as a
matter of law." The burden is on the moving party to
demonstrate the absence of a material, factual dispute.
Fed.R.Civ.P. 56(e); Adickes v. S.H. Kress & Co., 398 U.S. 144,
157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970). "In
considering the motion, the court's responsibility is not to
resolve disputed issues of fact but to assess whether there are
any factual issues to be tried, while resolving ambiguities and
drawing reasonable inferences against the moving party." Knight
v. U.S. Fire Insurance Company, 804 F.2d 9, 11 (2d Cir. 1986),
cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762
(1987). Thus, "[s]ummary judgment is appropriate when, after
drawing all reasonable inferences in favor of the party against
whom summary judgment is sought, no reasonable trier of fact
could find in favor of the nonmoving party." Lund's, Inc. v.
Chemical Bank, 870 F.2d 840, 844 (2d Cir. 1989).
Siska's motion for summary judgment is denied.*fn3 Material
issues of fact exist as to
the motive and circumstances surrounding Siska's termination.
There is an issue of fact as to whether Siska was removed from
the project for cause; whether the termination of Siska's
subcontract was procedurally proper; and whether Siska was paid
all sums to which it was entitled.*fn4
Siska makes a number of allegations including conspiracy,
denial of due process and antitrust violations. The essence of
Siska's claims, however, appears to be that its subcontract on
a certain construction project was wrongfully terminated.
John's maintains that the termination of Siska's subcontract
was justified and warranted due to Siska's alleged failure to
perform satisfactorily its work on the contracts. John's
supporting affidavit gives numerous examples of defective and
incorrect work performed by Siska and of Siska's failure to
follow the project plans and specifications. On its behalf,
Siska asserts that its performance was adequate. The issue of
the adequacy of a contractor's performance on a construction
project, particularly in determining whether a termination was
proper, is not one that should be decided summarily on motion.
In support of its claim of improper termination, Siska relies
mainly on what it claims is the Army's finding, made several
years after the fact, that the termination was "unjustified and
unlawful." The Army made no such finding. The Army only found
that the Resident Engineer did not have authority to direct
John's to terminate a subcontractor. The report does not
address whether termination of Siska's subcontract was
warranted based upon Siska's alleged failure to perform.
Regardless of the Army's authority, or lack thereof, that is
the issue that must be determined.
Siska argues that the termination was procedurally improper.
Siska maintains that it stands in the shoes of the contractor
and therefore has rights under the master contract. John's
asserts that no rights afforded it under the prime contract are
conferred through to Siska and that, with respect to
termination, Siska cannot be entitled to notice or a hearing or
other due process from the government. Whether the termination
of Siska's contract was procedurally proper is a question not
justiciable on this motion for summary judgment.
Siska fails to make the requisite showing as to liability to
succeed on a motion for summary judgment. In addition, Siska
fails to submit any support for its alleged costs. Nor its
there any explanation as to how the damages are calculated.
Such unsupported claims for damages cannot be granted on a
motion for summary judgment.
John's Motion to Dismiss
In order to prevail on a motion to dismiss, the moving party
must demonstrate "beyond doubt that the [non-moving party] 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,
78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Dahlberg v. Becker,
748 F.2d 85, 88 (2d Cir. 1984), cert. denied, 470 U.S. 1084, 105 S.Ct.
1845, 85 L.Ed.2d 144 (1985). A court must take the factual
allegations of the non-moving party's pleadings as true and
construe them in the light most favorable to that party. See
Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40
L.Ed.2d 90 (1974); Dwyer v. Regan, 777 F.2d 825, 828-829 (2d
Cir. 1985), reh'g denied, 793 F.2d 457 (2d Cir. 1986).
John's cross-moves to dismiss the second, eleventh, twelfth,
thirteenth, fourteenth, fifteenth, sixteenth, seventeenth,
eighteenth, nineteenth and twentieth counts of Defendants'
Amended Counterclaim on the basis that said counts fail to
state causes of action upon which relief can be granted.
Count Two of Defendants' Amended Counterclaim asserts a claim
quantum meruit. It is well settled in New York that the
existence of a valid and enforceable written contract governing
a particular subject matter precludes recovery in quasi
contract, or quantum meruit, for events arising out of the same
subject matter.*fn5 Clark-Fitzpatrick, Inc. v. Long Island
Rail Road Company, 70 N.Y.2d 382, 521 N.Y.S.2d 653,
516 N.E.2d 190 (1987). In the present case, there is a valid enforceable
written subcontract agreement. Accordingly, there can be no
claim for quantum meruit. Hence, Siska's second counterclaim is
dismissed pursuant to Rule 12(b)(6) Fed.R.Civ.P.
The twelfth and sixteenth counts of Defendants' Amended
Counterclaim assert claims for damages under 42 U.S.C. § 1983.
Siska's reliance on these statutes is misplaced. The terms of
42 U.S.C. § 1983 make plain the two elements that the aggrieved
party must prove for recovery, that (i) the defendant deprived
him of a right secured by the "Constitution and laws" and that
(ii) the defendant deprived him of this right under color of
State law. Adickes v. S.H. Kress & Co., supra, 398 U.S. at 150,
90 S.Ct. at 1604. Actions of the Federal Government or its
officers are exempt from the proscriptions of § 1983. District
of Columbia v. Carter, 409 U.S. 418, 424-25, 93 S.Ct. 602,
606-07, 34 L.Ed.2d 613 (1973). The only government actor
involved in the instant matter is the Department of the Army,
an arm of the Federal Government. On that basis alone, these
causes of action must be dismissed. Moreover, the contract in
question was between two private parties. The counterclaim does
not allege that John's acted under color of State law, nor can
this court find any factual allegations which would justify an
inference that John's acted under color of State law.*fn6
Given the absence of any "color of state law" as contemplated
by 42 U.S.C. § 1983, Siska's twelfth and sixteenth
counterclaims are dismissed pursuant to Rule 12(b)(6)
Defendants' eleventh counterclaim asserts claims for damages
for conspiracy. Civil conspiracy is not of itself actionable
under New York law.*fn8 Ghazoul v. International Management
Services, Inc., 398 F. Supp. 307 (S.D.N.Y. 1975). "The damage
for which recovery may be had in a civil action is not the
conspiracy itself but the injury to the plaintiff produced by
specific overt acts." Rutkin v. Reinfeld, 229 F.2d 248, 252 (2d
Cir. 1956), cert. denied, 352 U.S. 844, 77 S.Ct. 50, 1 L.Ed.2d
60 (1956). A claimant must plead specific wrongful acts which
constitute an independent tort. Valdan Sportswear v. Montgomery
Ward & Co., 591 F. Supp. 1188 (S.D.N.Y. 1984); Smukler v. 12
Lofts Realty, Inc., 156 A.D.2d 161, 548 N.Y.S.2d 437 (1st Dept.
1989). "The charge of conspiracy in a civil action is merely
the string whereby the
plaintiff seeks to tie together those who, acting in concert,
may be held responsible in damages for any overt act or acts."
Rutkin v. Reinfeld, supra, 229 F.2d at 252. Allegations of a
civil conspiracy, therefore, are proper only for the purpose of
establishing joint liability by co-participants in tortious
conduct. Grove Press, Inc. v. Angleton, 649 F.2d 121, 123 (2d
The focus or goal of the alleged conspiracy between John's
and the Department of the Army, as set forth in Count Eleven,
was an improper termination of a contract. A breach of contract
is not to be considered a tort unless a legal duty independent
of the contract itself has been violated. The legal duty must
spring from circumstances extraneous to and not constituting
elements of the contract. Clark-Fitzpatrick, Inc. v. Long
Island Rail Road Company, 70 N.Y.2d 382, 521 N.Y.S.2d 653,
516 N.E.2d 190 (1987). Siska alleges that John's failed to provide
suitable plans, to superintend and monitor the work, and to
effect the timely resolution of disputes. Siska Memorandum of
Law at ¶ 34. Each of these allegations, however, is merely a
restatement of "implied" contractual obligations. Merely
charging a breach of a duty of due care does not, without more,
transform a simple breach of contract into a tort claim.
Siska also alleges in Count Eleven that John's conspired to
and did deprive Siska of its materials, supplies, tools, goods
and wares through the abuse of authority. See Defendants'
Amended Counterclaim at ¶ 47. Taking all factual allegations of
the complaint as true and drawing all reasonable inferences in
favor of the non-moving party, as the Court is compelled to do
on a motion to dismiss, this Court concludes that Siska has
alleged a colorable claim for conversion of property
independent of the alleged conspiracy. Accordingly, Count
Eleven of Defendants' Amended Counterclaim is dismissed but for
its claims of conversion of property.
In Counts Fifteen and Eighteen of Defendants' Amended
Counterclaim Siska alleges that John's participated in a
conspiracy not only to terminate Siska's participation on the
O.S.H.A. Deficiencies project but also to deprive Siska of
subsequent prime contract awards with "all government agencies
and ruin his business." Defendants' Amended Counterclaim at
¶ 79. As discussed above, Siska's allegations of civil
conspiracy do not state claims for which relief can be granted.
The focus or goal of the alleged conspiracy between John's
and the Department of the Army, as set forth in Counts Fifteen
and Eighteen, was the ruination of Siska's business through
"libel, slander, false swearings, [and] subornation to perjury
[sic]." Siska claims that John's "contributed several documents
for these purposes." Defendants' Amended Counterclaim at ¶ 63.
Siska alleges in Count Eighteen that it lost potential profit
on three contracts "denied because of John's wrongful
termination of Siska, and its false swearings, and libelous
statements. . . ." Defendants' Amended Counterclaim at ¶ 77.
While Siska fails to specify precisely which documents and
statements support its allegations of libel and slander, it
does in Counts Fifteen and Eighteen plead specific wrongful
acts sufficient to raise colorable tort claims independent of
the alleged conspiracy. Accordingly, Counts Fifteen and
Eighteen of the Amended Counterclaim are dismissed but for
their allegations of libel and slander.*fn9
In the fourteenth count of the amended counterclaim Siska
alleges "a combination and a conspiracy causing an unreasonable
restraint of trade" in violation of the antitrust laws,
15 U.S.C. § 1 et seq. The basis for this claim is the allegation
that John's engaged in concerted action to deny Siska the
benefit of other government contracts following its removal
from the O.S.H.A. Deficiencies Project. The standard to be
applied on a motion to dismiss for failure to state a claim is
even more stringent in evaluation of antitrust claims, where
proof is in the hands of the
alleged conspirators. See Poller v. Columbia Broadcasting
System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d
458 (1962). However, conclusory allegations which merely recite
the litany of antitrust will not suffice. This court retains
the power to insist upon some specificity in pleading before
allowing a potentially massive factual controversy to proceed.
See, Associated General Contractors of California, Inc. v.
California State Council of Carpenters, 459 U.S. 519, 528 n.
17, 103 S.Ct. 897, 903 n. 17, 74 L.Ed.2d 723 (1983).
Count Fourteen makes only the barest allegations of antitrust
violations and offers no support for Siska's legal conclusions.
In the instant case, Siska's allegations of restraint of trade
are mere statements of a legal conclusion. The complaint
alleges no competitive injury in the antitrust sense, defines
no market, refers to no market-wide anticompetitive effects,
actual or probable. Absent any allegations of fact tending to
show a lessening of competition in interstate commerce or other
public injury, Siska has failed to state a cause of action for
which relief can be granted under the antitrust laws. Moreover,
Siska's allegations of conspiracy are grossly insufficient. A
general allegation of conspiracy, such as made in the Amended
Counterclaim, is a mere allegation of a legal conclusion and is
inadequate of itself to state a cause of action. Accordingly,
Count Fourteen of the Defendants' Amended Counterclaim is
dismissed for failure to state a claim.
The nineteenth count of Siska's counterclaim appears to go to
the issue of mitigation of damages. This Court, concluding that
dismissal of such a claim at this juncture would be
inappropriate, hereby denies John's motion to dismiss with
respect to Count Nineteen of Defendants' Counterclaim.
In the thirteenth count of its counterclaim, Siska alleges a
conspiracy between John's and the government actors to commit
certain criminal violations. Siska's conclusory allegations of
conspiracy fail to state a claim upon which relief can be
granted. This Court turns, therefore, directly to the alleged
underlying criminal violations. The first such violation
involves an alleged conspiracy "hatched between Mr. John H.
Fenn and the government actors to withhold payment for on-going
work, and to steal, purloin or convert articles and objects
belonging to the subcontractor, in violation of Title 18
U.S.C.A. Chapter 31, Section 641." Defendants' Amended
Counterclaim at ¶ 57. Section 641 deals with embezzling,
stealing, purloining or knowingly converting property of the
United States. Such a claim should be asserted by the
government, not Siska. If the property involved in a dispute
does not belong to the United States then no violation of § 641
is possible. Theft of property belonging to the subcontractor,
Siska, is not contemplated by 18 U.S.C. § 641.
The second alleged violation is of 18 U.S.C. § 245(c).
Siska's claim appears to be that by terminating Siska's
subcontract, John's deprived Siska of employment. This federal
criminal statute, 18 U.S.C.A. § 245, which permits federal
prosecution for interference with a list of federally protected
activities, confers neither substantive rights nor a private
right of action for damages. Dugar v. Coughlin, 613 F. Supp. 849,
852 (S.D.N.Y. 1985).
The third alleged violation is of the Hobbs Act, 18 U.S.C. § 1951.
Under the Hobbs Act:
[w]hoever in any way or degree obstructs, delays,
or affects commerce or the movement of any article
or commodity in commerce, by robbery or extortion
or attempts or conspires so to do, or commits or
threatens physical violence to any person or
property in furtherance of a plan or purpose to do
anything in violation of this section shall be
fined not more than $10,000 or imprisoned not more
than twenty years of both.
18 U.S.C. § 1951(a). There is no implied private cause of
action under the Hobbs Act. Peterson v. Philadelphia Stock
Exchange, 717 F. Supp. 332, 336 (E.D.Pa. 1989); Creech v.
Federal Land Bank of Wichita, 647 F. Supp. 1097, 1099 (D.Colo.
Since 18 U.S.C.A. § 245 and 18 U.S.C. § 1951 only provide for
criminal sanctions, and since Siska's claims do not involve any
property of the United States, Count Thirteen of Defendants'
Amended Counterclaim fails to state a claim for which relief
can be granted.
Count Seventeen of Defendants' Amended Counterclaim purports
to plead a claim for tortious interference with contract. Siska
claims "upon information knowledge and belief, Mr. John H. Fenn
had clandestine meetings with firms and individuals under
contract to Siska and induced them to break contract with Siska
and enter contract directly with John's." Defendants' Amended
Counterclaim at ¶ 70. A claimant seeking recovery for tortious
interference with contract must prove (1) the existence of a
valid contract between claimant and another, (2) defendant's
knowledge of that contract, (3) defendant's intentional
interference with or procurement of breach of that contract and
(4) damages. Perry v. International Transport Workers'
Federation, 750 F. Supp. 1189 (S.D.N.Y. 1990). While Siska's
references to specific contractors are vague and confusing, it
does enumerate particular subcontractors whose breaches John's
is alleged to have induced. See Defendants' Amended Complaint
at ¶ 72. Moreover, Siska alleges that official government
records "memorialize when the secret meetings took place, who
was present, and what was discussed." Siska Memorandum at ¶ 44.
While John's claims that its contacts with contractors were
motivated only by legitimate business purposes, John's intent
is a question of fact not appropriately addressed on a motion
to dismiss. John's motion to dismiss Count Seventeen of the
Defendants' Amended Counterclaim is hereby denied.
John's motion to dismiss Count Twenty of Defendants' Amended
Counterclaim, a plea for attorneys fees, as well as its prayer
for Rule 11 sanctions are also denied.
For the reasons stated above, Siska's motion for summary
judgment is denied. John's cross-motion to dismiss the second,
eleventh, twelfth, fourteenth, fifteenth, sixteenth,
seventeenth, eighteenth, nineteenth and twentieth courts of
Defendants' Amended Counterclaim is granted in part and denied
in part. Counts Two, Twelve, Thirteen, Fourteen, and Sixteen of
Defendants' Amended Counterclaim are hereby dismissed in their
entirety pursuant to Rule 12(b)(6) Fed.R.Civ.P. Counts Eleven,
Fifteen, and Eighteen are dismissed pursuant to Rule 12(b)(6)
but for their respective allegations of conversion of property,
libel, and slander. John's Cross-Motion is denied with respect
to Counts Seventeen, Nineteen and Twenty of Defendants' Amended
Counterclaim. John's motion for sanctions under Rule 11,
Fed.R.Civ.P. is also denied.