(Id.) The contract states that it became effective as of January 27, 1988. The "Base Amounts" against which any duty and tax savings were to be measured were the amounts that Lio Ho paid in duties and taxes at the time the parties executed the contract. (Exh. A to Compl. at P 4(a).)
The parties do not dispute that ICA dissuaded Taiwan from implementing a ten percent duty increase on Lio Ho imports; they refer to this increase as the "upward valuation." However, while the plaintiffs contend that this entitled them to a fee under the agreement, the defendants claim that it did not. It is the defendants' refusal to pay the plaintiffs a contingency fee for avoiding the upward valuation that the plaintiffs claim constitutes a breach of the contract.
The plaintiffs allege a second breach of contract by the defendants. The plaintiffs claim that because the defendants directed them not to enlist the assistance of the United States government in securing a decrease in customs duties beyond the rates in effect in September, 1988, the defendants prevented them from earning additional fees under the contract. The plaintiffs claim that the parties to the contract understood that in performing its obligations under the contract, ICA could enlist the assistance of the United States government in securing decreased duties for Lio Ho.
Arising out of these same events, the plaintiffs also allege that the defendants are liable under a theory of quantum meruit.
The defendants argue that the complaint should be dismissed with respect to Ford pursuant to Federal Rule of Civil Procedure 12(b)(6). "The court's function on a Rule 12(b)(6) motion is not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Festa v. Local 3 Int'l Bhd. of Elec. Workers, 905 F.2d 35, 37 (2d Cir. 1990); see also Kopec v. Coughlin, 922 F.2d 152, 155 (2d Cir. 1991). Therefore, a motion to dismiss must be denied unless "it appears beyond doubt that the plaintiff[s] can prove no set of facts in support of [their] claim which would entitle [them] to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); accord Staron v. McDonald's Corp., 51 F.3d 353, 355 (2d Cir. 1995).
Under this standard, the complaint must be dismissed with respect to Ford for failure to state a claim upon which relief can be granted.
First, with respect to the contract claim, a contract cannot bind a non-party. See, e.g., Abraham Zion Corp. v. Lebow, 761 F.2d 93, 103 (2d Cir. 1985) (a non-signatory to a contract was not bound by a contract where the party who signed the contract was not the non-signatory's agent); see also Crabtree v. Tristar Automotive Group, Inc., 776 F. Supp. 155, 166 (S.D.N.Y. 1991) (Goettel, J.) ("It is hornbook law that a non-signatory to a contract cannot be named as a defendant in a breach of contract action unless it has thereafter assumed or been assigned the contract."); Beacon Syracuse Assocs. v. City of Syracuse, 560 F. Supp. 188, 201 (N.D.N.Y. 1983) ("Only those who are parties to a contract may be held liable for a breach of that contract.") (citation omitted); Dember Constr. Corp. v. Staten Island Mall, 56 A.D.2d 768, 769, 392 N.Y.S.2d 299, 300 (1st Dep't 1977) ("Since [the defendant] was not a party to the contract, the complaint against it must be dismissed."). And, Ford clearly is not a signatory to the contract; rather, the contract was entered into by ICA and Lio Ho and signed by both entities' respective presidents. There is no ambiguity in the contract to support any argument to the contrary. The contract explicitly provides that Lio Ho is to pay the contingency fee to ICA. It is indisputable that this is an obligation only of Lio Ho under the contract, and that any failure to make payments under the contract, if payments were owed, was solely a failure of Lio Ho.
Acknowledging that Ford is not a signatory to the contract, the plaintiffs claim that Ford is a proper defendant on their breach of contract claim because the contract gave Ford express rights under the contract and imposed corresponding obligations, making Ford liable for any breach of the contract.
Paragraph 5(b) of the contract, on which the plaintiffs rely for this theory of liability, provides:
[Lio Ho] and its parent or affiliated companies may adopt the recommendations of [ICA] in any country or countries other than the [Republic of China] without the prior written consent of [ICA] and shall have no obligation to pay any fees to [ICA] in connection therewith unless the company adopting the recommendation utilizes in presentations to government authorities confidential documentation prepared by [ICA] for [Lio Ho] hereunder, in which case the Company concerned and [ICA] will negotiate a reasonable fee for the use thereof taking into account the relative efforts of [ICA] as compared to its efforts under this agreement.
(Exh. A to Compl. at P 5(b).) This provision of the contract notwithstanding, Ford is not a proper defendant for the plaintiffs' breach of contract claim because the complaint does not contain any allegation that Ford used confidential documentation prepared by ICA in any presentations to government authorities. Indeed, there has been no allegation by the plaintiffs, and the complaint does not state any claim, that Ford or Lio Ho breached this provision of the contract.
The plaintiffs also argue that Lio Ho signed the contract as an agent for Ford. While the plaintiffs point to negotiations among Ford, Lio Ho and ICA, to documents and a provision in the contract indicating that Lio Ho was subject to Ford corporate policy and to the facts that Lio Ho is a subsidiary of Ford (and is listed on Ford's balance sheet) and that the contract between ICA and Lio Ho had to be approved by Ford, the complaint nowhere alleges facts that support the plaintiffs' argument that Lio Ho signed the agreement on behalf of Ford as an agent of Ford. See Kashfi v. Phibro-Salomon, Inc., 628 F. Supp. 727, 735 (S.D.N.Y. 1986) ("The test for determining whether a corporation is acting as an agent for a related corporation is the same as the test imposed under the doctrine of piercing the corporate veil."). Rather, the contract does not indicate, in any way, that Lio Ho entered into the agreement on behalf of Ford as opposed to on its own behalf. Indeed, the complaint alleges that the agreement "obligated Ford Lio Ho to pay plaintiffs a monthly fee for up to twenty-four consecutive months, contingent upon plaintiffs obtaining certain import duty and tax savings on behalf of Ford Lio Ho." (Compl. P 30.) And again: "ICA would earn its contingency fee under the Agreement if it effectuated tax savings on behalf of Ford Lio Ho through its own efforts." (Compl. P 32.) Parol evidence could not be introduced to contradict an essential term of the contract. Here, the identity of the contracting party who had the payment obligation is an essential term of the contract; therefore, the plaintiffs could not introduce parol evidence to prove that Ford is a party to the contract. See Kashfi, 628 F. Supp. at 732; see also Frishberg v. Esprit de Corp., Inc., 778 F. Supp. 793, 802 (S.D.N.Y. 1991) (Carter, J.) ("Under [the parol evidence] rule the clear and unambiguous terms of a valid, integrated written instrument cannot be contradicted or varied by prior or contemporaneous extrinsic oral or written evidence.") (citation omitted), aff'd, 969 F.2d 1042 (2d Cir. 1992).
Moreover, the complaint does not allege that Ford is the "alter ego" of Lio Ho and that the corporate veil should be pierced to reach Ford. See, e.g., Campo v. 1st Nationwide Bank, 857 F. Supp. 264, 271-72 (E.D.N.Y. 1994) (proposed amended complaint stated a cause of action for breach of contract against a non-signatory under an alter ego veil-piercing theory); Carrier Communications Corp. v. Cellular Tel. Enters., 189 A.D.2d 848, 848, 592 N.Y.S.2d 971, 971 (2d Dep't) ("The appellant failed to establish that [the respondent] was the alter ego of its parent. . . which would have allowed the court to pierce the corporate veil and hold a nonsignatory liable on the contracts in question. . . ."), leave to appeal denied, 82 N.Y.2d 656, 624 N.E.2d 177, 604 N.Y.S.2d 47, leave to appeal denied, 82 N.Y.2d 657, 624 N.E.2d 177, 604 N.Y.S.2d 47 (1993). Moreover, the complaint does not provide any other basis for holding Ford liable for an alleged breach of a contract to which it is not a signatory.
With respect to the plaintiffs' quantum meruit claim, the defendants are correct that where there is a valid and enforceable contract, a plaintiff cannot recover on a theory of quantum meruit. See, e.g. Stissi v. Interstate & Ocean Transp. Co. of Philadelphia, 814 F.2d 848, 851 (2d Cir. 1987) ("It is an elementary principle of contract law that, where there exists an express contract for compensation, an action outside that contract will not lie."); Weinreich v. Sandhaus, 850 F. Supp. 1169, 1182 (S.D.N.Y.) (Sweet, J.) ("It is well settled that recovery in quantum meruit is unavailable where an express contract covers the subject matter.) (citing Yonkers v. Otis Elevator Co., 844 F.2d 42, 48 (2d Cir. 1988)), amended in part on other grounds, 156 F.R.D. 60 (S.D.N.Y. 1994); Clark-Fitzpatrick, Inc. v. Long Island R.R., 70 N.Y.2d 382, 388, 516 N.E.2d 190, 193, 521 N.Y.S.2d 653, 656 (1987) (no action in quasi-contract ordinarily lies where there is a valid and enforceable contract governing the subject matter); Foss v. American Tel. & Tel. Co., 199 A.D.2d 668, 669, 605 N.Y.S.2d 143, 144 (3d Dep't 1993) (no cause of action for quasi-contract or quantum meruit where there was an express contract). However, alternative pleading is permitted. See, e.g., John J. Kirlin, Inc. v. Conopco, Inc., 1995 U.S. Dist. LEXIS 368, No. 94 Civ. 2675, 1995 WL 15468, *2 (S.D.N.Y. Jan. 17, 1995) (Schwartz, J.) ("While a party may not recover in quantum meruit and for breach of contract for events arising out of the same subject matter, 'consistency in pleading is not required by the federal rules, [and] a party may claim alternatively on an express contract and on an implied contract.'") (quoting 5 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure: Civil 2d, § 1235 at 274 (1990 & Supp. 1994)).
Nevertheless, the complaint in this case fails to state a claim against Ford in quantum meruit because it does not contain any allegations against Ford that would support a theory of quantum meruit, even viewing all of the allegations in the light most favorable to the plaintiffs. To prevail on a claim of quantum meruit, a plaintiff must prove: (1) that the plaintiff rendered services to the defendant; (2) that the defendant accepted such services; (3) that the plaintiff expected reasonable compensation; and (4) the reasonable value of the services. GSGSB, Inc. v. New York Yankees, 862 F. Supp. 1160, 1170 (S.D.N.Y. 1994); see also Benevento v. RJR Nabisco, Inc., 1993 U.S. Dist. LEXIS 6226, No. 89 Civ. 6266, 1993 WL 126424, *8 (S.D.N.Y. April 1, 1993) (Leisure, J.) ("In order to prevail on claims of unjust enrichment and quantum meruit, 'a plaintiff must prove that the defendant was enriched, and that such enrichment was at plaintiff's expense, and that the circumstances were such that in equity and good conscience the defendant should return the money or property to the plaintiff.'") (quoting Dolmetta v. Uintah Nat'l Corp., 712 F.2d 15, 20 (2d Cir. 1983)).
Here, the complaint does not allege that ICA ever performed any services for Ford; rather, it claims that it performed services for Lio Ho. For example, the complaint alleges:
The Agreement obligated Ford Lio Ho to pay plaintiffs a monthly fee for up to twenty-four consecutive months, contingent upon plaintiffs obtaining certain import duty and tax savings on behalf of Ford Lio Ho.. . . ICA would earn its contingency fee under the Agreement if it effectuated tax savings on behalf of Ford Lio Ho through its own efforts.
(Compl. PP 30, 32 (emphasis added).) The complaint proceeds to allege:
Taiwan Customs, in reliance on the presentations of Boros and ICA, rendered its Duty Memo in December, 1988, which eliminated the 10% revaluation, thereby saving Ford Lio Ho tens of millions of American dollars in retroactive and prospective taxes and obligating Ford Lio Ho to pay ICA and Boros a contingency fee under the Agreement.