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November 22, 1994

COLUMBUS McKINNON CORPORATION, Plaintiff, -vs- CHINA SEMICONDUCTOR CO., LTD., Defendant. CHINA SEMICONDUCTOR CO., LTD., Third-Party Plaintiff, -vs- RAYMOND NEWMAN d/b/a Micro Designs, Third-Party Defendant.

The opinion of the court was delivered by: JOHN T. ELFVIN

 Presently before this Court is a motion by third-party defendant Newman to dismiss the Third-Party Complaint of China Semiconductor Co, Ltd. ("CSC") and, in the alternative, to request a more definite statement. For the reasons stated herein, Newman's motion to dismiss will be granted. *fn1"

 Plaintiff Columbus McKinnon Corporation ("CM") brought this diversity action against CSC in connection with CM's efforts to develop the first computer-assisted hoist. CM is a New York corporation with its principal place of business in the Town of Amherst, N.Y. CSC is a foreign corporation headquartered in Taiwan. Plaintiff's First Amended Complaint ("Complaint") PP 1-2. See 28 U.S.C. ยงยง 1332, 1391(a).

 By way of background, this case mainly and primarily focuses on an allegedly defective computer microprocessor ("chip") utilized in the control board of the hoist. CM asserts that in 1983 it entered into a written agreement with CSC for the purchase of computer boards manufactured by CSC for the hoists. The agreement provided that CSC would utilize "an Intel 8049 microprocessor" in such boards or, at CM's option, an equivalent chip. Complaint, P8. The control board was designed by Newman, who had been contractually retained by CM for that purpose. The Intel 8049 chip allegedly was an integral part of the control board design. Id. P7. At CSC's suggestion, CM and CSC agreed that CSC should purchase the chips from United Microelectronics Corp. ("UMC"), which CSC represented to be an Intel licensee. The manufactured control boards incorporating the UMC chip, were delivered to CM in New York. Id. PP 10-12. The control boards are alleged to have been defective, with CM later determining that the "faulty" chip (faulty because it was not an Intel 8049 equivalent) was the cause of many of the problems with the hoists. Id. PP 13-15.

 CM proceeds against CSC under the theories of breach of contract, breaches of implied and express warranties, as a third-party beneficiary of the contract between UMC and CSC for the purchase of the chips, and under a theory of fraudulent misrepresentation. Id. PP 16-48. Among the responses of CSC in its Answer to the First Amended Complaint ("Answer") are the assertions that CM, "its agents or other parties over which CSC had no control" caused the alleged defects in the computer boards. Answer P49. CSC further asserts that CM was responsible for the computer board design and "the software components of the computer chip" and that CSC cannot be held liable for damages resultant therefrom. Id. P51.

 The original complaint in this action was filed February 19, 1988, served on the defendants months thereafter and answered by CSC December 14, 1988. The First Amended Complaint was filed August 17, 1989 and answered by CSC September 15, 1989. Over three years later, CSC moved before United States Magistrate Judge Leslie G. Foschio of this Court for leave to file a third-party complaint against Newman. *fn2" Leave having been granted, CSC served and filed its Third-Party Complaint, reiterating its denial of any liability to CM, while alleging in the alternative that, if it is found liable to CM, "Newman is responsible in whole or in part for the damages suffered by [CM] based on his negligence, malfeasance, professional malpractice, and culpable acts and omissions." Third-Party Complaint P 15. CSC, in essence, does not seek to hold Newman liable to itself directly, but seeks instead "contribution and/or indemnification" from Newman for any damages for which CSC is found liable to CM. Newman's Third-Party Answer denies any responsibility for such damages. He now seeks dismissal of the third-party action "pursuant with Rule 56(b) because the complaint fails to state a claim against [him] upon which relief can be granted, or, alternatively, * * * pursuant with Rule 10-B, * * * for a more definite statement * * *." Notice of Motion to Dismiss for Failure to State a Claim and, in the alternative, Motion for a More Definite Statement, at 1-2.

 A district court in ruling upon a FRCvP 12(b) motion to dismiss a complaint for failure to state a claim upon which relief can be granted has two options when, as in this case, matter outside the pleading has been presented in support thereof. The court may exclude the additional material and decide the motion on the complaint alone or it may convert the motion to one for summary judgment under FRCvP 56 and afford the parties an opportunity to present pertinent supporting material. FRCvP 12(b); Kopec v. Coughlin, 922 F.2d 152, 153 (2d Cir. 1991); Fonte v. Bd. of Mgers. of Continental Towers Condo., 848 F.2d 24, 25 (2d Cir. 1988). Because this motion was originally noticed by Newman as one under FRCvP 56(b) and both parties have submitted affidavits in support of their respective positions and have participated in oral arguments on the motion, this Court will proceed as if it were one for summary judgment under FRCvP 56. Grand Union Co. v. Cord Meyer Development Corp., 735 F.2d 714, 716-717 (2d Cir. 1984). Such motion may be granted if it is shown "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FRCvP 56(b); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). Only disputes over facts that might affect the outcome of the suit under the governing substantive law will properly preclude the granting of such a motion. In other words, only genuine issues that relate to material facts will defeat a motion for summary judgment. Facts that do not relate to the legal elements of a claim are not material. Anderson, 477 U.S. at 247-248. Further, the party opposing the motion may not rest solely on mere allegations, but must present competent evidence showing that there is a genuine and material factual issue for trial; a "mere existence of a scintilla of evidence" supporting the non-movant's case is insufficient to defeat a motion for summary judgment. Anderson, 477 U.S. at 252.

 Newman has submitted an affidavit and several exhibits in support of his motion. To the extent that his averments are uncontested, they may be summarized as follows: As a consultant he entered into a "non-specific 'Consultant's Agreement' with [CM] on September 14, 1982 to perform research, development and design work." Third Party Defendant's Affidavit in Support of His Motion to Dismiss, or Alternatively, to be supplied with a more definite statement (sworn to July 29, 1993) ("Newman Affidavit"), at PP 1, 2. He relates therein that, on September 30, 1982, he and CM entered into an "agreement" for the development of hardware and software for control boards using a microprocessor chip, that a prototype was built using Newman's design and "an Intel chip," that this prototype worked properly and that, after he had learned that CM could not secure an adequate supply of the specified chips from Intel, he had cautioned CM against purchasing chips that were made neither in the United States nor by a "US licensee." Newman continuingly states that he had not been involved in the agreement between CM and CSC to buy UM8049 chips manufactured by UMC and that he had not been involved in arranging for the purchase of those chips. After the chips had been installed in the hoists and the hoists placed in operation, malfunctioning occurred. Newman thereafter cooperated with CM in an attempt to repair and redesign the hoists so that they would operate properly, traveling to Taiwan in February 1985 at the request of CM. He then diagnosed the source of the trouble as the intolerance of the UM8049 chips to "random 'electrical noise.'" It evolved that these chips had been manufactured by an offshore producer who was not a US licensee. After Newman had redesigned the hoists, employing a chip meeting his original specifications, they operated properly. Newman then notes that the agreement to purchase the UM8049 chips had been entered into between CM and CSC, that he was never a party to such contract and that he never contracted to supply such chips. He also states that he had never been in privity with CSC and never had had any "mutuality of interest" with CSC. Exhibit B to the Newman Affidavit is said to be the above-mentioned written agreement between CM and Newman and appears to cover the design of hardware and software and the delivery of a working prototype in six weeks including "production field test unit debugging." Newman Affidavit, Exhibit B. Exhibits C and D thereto appear to be after-the-fact letters by Newman, recounting the problems with the hoists and his involvement in resolving the problems that arose post-production. The affidavit and exhibits make clear that his relationship with CM had been contractual and that he had had no contractual relationship with CSC. In opposition to Newman's motion, CSC submitted an affidavit of its attorney with, as Exhibits A, B and C, excerpts from transcripts of the deposition testimony given by CM's employee Robert H. Broyden and Broyden's December 8, 1981 interoffice memorandum and other CM documents as Exhibit D. Affidavit of Michael A. Brady, Esq. (sworn to August 6, 1993); Defendant and Third-Party Plaintiff, China Semiconductor Co. Ltd.'s Memorandum of Law in Opposition to Motion of Third-Party Defendant to Dismiss or in the Alternative for a More Definite Statement ("CSC's Memorandum of Law").

 For the purposes of background, additional facts that appear at least arguably pertinent are referenced under two subheadings under the heading "Statement of Facts" within CSC's Memorandum of Law, the first being "The Selection of the 8049 Microprocessor," which may be summarized as follows: CM relied on Newman for the selection of the original and soon-to-be-unavailable microprocessor, and later for recommendations as to other manufacturers of a compatible chip after it had been learned that the original could not be obtained. Brady Affidavit at Exhibit A, pp. 39, 42-46. Broyden eventually had found what he either believed or was led to believe by CSC to be an Intel licensee in defendant UMC and another entity, Electronics Research & Service Organization. Newman's input had been neither requested nor offered relative to the selection of any of the defendant suppliers up to this point. Newman did, however, travel to Taiwan in June 1984 at the request of CM. According to the excerpts from the transcript of Broyden's testimony, Newman, at least to some extent, inspected the specifications for UMC's chip and reported back to Broyden that he was satisfied that the UMC chip was the equivalent of the Intel chip, confirming what Broyden already believed. Brady Affidavit, Exhibit A at 101, 114-115, 118-122. *fn3" CSC specifically points out that Newman's Affidavit makes no mention of the June 1984 trip to Taiwan.

 The second subheading of factual references in CSC's Memorandum of Law is entitled "The Involvement of and Wrong-Doing By Newman and Micro Designs." Id. at 4. This section of the Statement of Facts deals with the design and preproduction testing of the control board and hoist as described in the CM-Newman agreement mentioned supra. It should be noted that these allegations also appear to reiterate the affirmative defenses that CSC has posed against CM -- viz., that any defect in the computer boards was caused by CM or its agents, CM's failure to mitigate and CSC's lack of control over the computer board design or the software components -- which either reduce or obviate CSC's liability. See Answer PP 49-51.

 FRCvP 14(a) provides in part:

"[A] defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the third party plaintiff." (Emphasis added.)

 As the above-emphasized language makes clear, a third-party claim is proper only if a non-party might be found liable to the defendant for all or a part of a plaintiff's successfully-asserted claim against a defendant. In a diversity action, a federal court must look to the applicable state substantive law in order to determine if such contingent liability exists. Widett v. U.S. Fidelity and Guar. Co., 815 F.2d 885, 886 (2d Cir. 1987). In the present case, there is no contention that New York law is not controlling as between these parties. See Brown v. Cranston, 132 F.2d 631, 633 (2d Cir. 1942) (state law of contribution controls whether third-party plaintiff may sustain a claim under such a theory), cert. denied sub nom. Cranston v. Thompson, 319 U.S. 741, 87 L. Ed. 1698, 63 S. Ct. 1028 (1943). Thus, irrespective of the lenient notice-pleading requirements of the federal rules and the broad discretion courts have in allowing the impleading of third parties -- see Old Republic Ins. Co. v. Concast, Inc., 99 F.R.D. 566, 568 (S.D.N.Y. 1983) --, there still must be a basis for the third-party's liability to the defendant under state law. Under New York law, CSC claims that Newman is liable to it under the theories of indemnification and/or contribution for any damages for which it might be found liable.

 CSC does not seek to hold Newman directly liable to it for any direct damages. Whether such a claim were grounded in contract or in tort, Newman owed no duty to CSC. Because he contracted solely with CM, there was no privity of contract by him with CSC and thus no contractual duty owed by him to CSC. It is also doubtful that CSC could assert that it was a third-party beneficiary of Newman's contract with CM. See Morse/Diesel, Inc. v. Trinity Industries, Inc. ("Morse/Diesel III"), 859 F.2d 242, 247-248 (2d Cir. 1988) (under New York law there can be direct liability between or among subcontractors absent privity only when their respective contractual duties inure to the benefit of a third party asserting liability). Finally, because of this lack of any duty to CSC and because CSC has not suffered any injury to its person or property due to a dangerously defective product, Newman may not be found directly liable to CSC under a theory of negligence or strict products liability. See, e.g., Schiavone Const. Co. v. Elgood Mayo Corp., 81 A.D.2d 221, 439 N.Y.S.2d 933, 937-940 (1st Dept. 1981) (Silverman, J., dissenting)(in commercial setting, loss of value, cost of repair, other economic losses should be recoverable under contract and warranty theories, not tort theories), rev'd, 56 N.Y.2d 667, 451 N.Y.S.2d 720, 436 N.E.2d 1322 (1982) (adopting Judge Silverman's ...

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