This action arises out of two separate construction contracts pursuant to which Capolino agreed to perform certain repairs on two WPHA buildings (the Winbrook and the Schyuler DeKalb Contracts). General was Capolino's surety under the contracts, and when the WPHA declared Capolino in default, General performed a separate investigation, concluded that Capolino was in fact in default, and completed performance under the contracts, receiving the remainder of the progress payments.
These events have inspired abundant litigation; this action is only one component of the numerous legal disputes among the WPHA, Capolino and General. In February 1994, Capolino filed an action in New York State court asserting claims against General for, inter alia, tortious interference with, and breach of, contract. The action also asserted claims against the WPHA for, inter alia, breach of contract, fraud and RICO violations. That action was removed to federal court and subsequently dismissed by Judge Brieant. In addition, an action is currently pending in New York State court between the WPHA and Capolino that encompasses their respective claims of breach of contract. The state action, with the exception of the defamation claims, is currently stayed.
On November 8, 1994, General filed this diversity action seeking to recover from Capolino, under the terms of its indemnity agreement with Capolino and under common law principles, approximately $ 132,000 in expenses that it has incurred in completing the projects and in bringing this action. Capolino filed counterclaims against General seeking a declaratory judgment that Capolino is not liable for the costs of completion. Capolino also seeks damages in the amount of the contract balances paid to General and indemnity for any judgment that the WPHA may be awarded against Capolino. Finally, Capolino has alleged damages of $ 250,000 from General's purported tortious interference in Capolino's contractual relationship with the WPHA. Both General and Capolino filed motions for summary judgment, arguing respectively that the other was in default.
We denied both motions, finding that there were material issues of fact as to whether the WPHA or Capolino was in default that precluded summary judgment.
After our denial of the cross-motions for summary judgment, in March of 1996 General amended its complaint and added claims in the alternative against the WPHA demanding that if the WPHA is found in default, it is required to make restitution for unjust enrichment to General for the expenses General incurred in completing the work under the contract (4th claim for relief), that the WPHA is liable to General for any damages awarded to other defendants on their counterclaims against General (5th claim), and for certain unpaid claims for change orders and extra work (6th claim). In its answer to the amended complaint, Capolino brought a cross claim for breach of contract against the WPHA (count 1) and impleaded the Additional Defendants, commissioners and employees of the WPHA, alleging, inter alia, negligent failure to administer and supervise the contracts and negligent misrepresentation (count 2). In its answer, the WPHA brought five cross-claims against Capolino, for, inter alia, declaratory judgment that it was not in default on either project, and restitution. The Additional Defendants now bring this motion, to dismiss Capolino's third-party claims against them for failure to state a claim, which we consider under Fed. R. Civ. P. 56.
Summary judgment is appropriate "only if the evidence, viewed in the light most favorable to the party opposing the motion, presents no genuine issue of material fact." Cable Science Corp. v. Rochdale Village, Inc., 920 F.2d 147, 151 (2d Cir. 1990). A genuine issue of material fact exists if "a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).
Additional Defendants urge that count 2 should be dismissed for several reasons. First, they argue that, to the extent that count 2 attempts to state a claim on theories other than negligence, such as fraud or interference with contract, these claims should be dismissed because they have already been dismissed by Judges Brieant and Natasi. Second, they argue that as mere officers of WPHA they owe no duty to Capolino either arising out of or independent of the contract, and thus they cannot have been negligent with respect to Capolino. Third, Additional Defendants argue that Capolino has not stated a claim for negligent misrepresentation against them since it failed to identify which Additional Defendants were personally involved in the alleged misrepresentations.
A. Interpretation of Claim 2
In their brief in support of this motion, the WPHA and the Additional Defendants have argued that Capolino has merely attempted to "recycle" claim language alleging tortious interference with contract and possibly fraud that has already been rejected by both the state and federal courts. We note at the outset that count 2, self-titled "(Negligence)" does not attempt to state, and could not support, a claim for fraud. In addition, to the extent it could be possibly construed to state a claim for tortious interference with contractual relations against the Additional Defendants (and we are not at all certain that it could be so construed), we find that such a claim against Anthony Tascione is barred by Judge Natasi's March 6, 1996 Decision and Order dismissing this claim against Tascione on the merits. See Tascione Aff. Exh. 3 (Officer or director of corporation is not personally liable on theory of inducing breach of contract merely because while acting on behalf of the corporation he has made decisions and taken steps that resulted in the corporation's promise being broken). Additionally, we agree with the Additional Defendants' argument that since a tortious interference claim is barred against Tascione, it is also barred against the Commissioners, who were even further removed from the administration and oversight of the contracts at issue.
Thus we conclude that count 2 does not state a viable claim either for fraud or for tortious interference with contract.
B. Negligent Administration
Capolino's count two can be interpreted, in part, as an attempt to bring a claim for negligent administration against the WPHA and the Additional Defendants. In New York, municipalities do not have sovereign immunity from tort liability but are equally answerable with private corporations and individuals for the wrongs of their employees. Motyka v. New York, 15 N.Y.2d 134, 256 N.Y.S.2d 595, 597, 204 N.E.2d 635 (1965). However, "when a claim is made that a municipality has negligently exercised a governmental function, liability turns on the existence of a special duty to the injured person, in contrast to a general duty owed to the public." Garrett v. Holiday Inns, Inc., 58 N.Y.2d 253, 460 N.Y.S.2d 774, 779, 447 N.E.2d 717 (1983), (citing Florence v. Goldberg, 44 N.Y.2d 189, 404 N.Y.S.2d 583, 375 N.E.2d 763; Sanchez v. Village of Liberty, 42 N.Y.2d 876, 397 N.Y.S.2d 782, 366 N.E.2d 870 (no duty to fire victims), app. d'md on other gnds, 406 N.Y.S.2d 295 (1978)). "Such a duty exists when a special relationship exists between the municipality and an individual or class of persons, warranting the imposition of a duty to use reasonable care for these persons' benefit." Garratt, 460 N.Y.S.2d at 778. "This principle operates to impose liability where the municipality has violated a duty commanded by a statute enacted for the special benefit of particular persons" Id. (citations omitted); "where the municipality has voluntarily assumed a duty, the proper exercise of which was justifiably relied upon by persons benefited thereby" Id., (citing Florence, supra, (by enacting special rules and regulations city assumed duty to supervise school crossings for the benefit of young children) and Schuster v. City of New York, 5 N.Y.2d 75, 180 N.Y.S.2d 265, 154 N.E.2d 534 (1958) (city assumed duty to exercise reasonable care for safety of witness cooperating in prosecution)); "or in circumstances in which a known, latent and dangerous safety violations exists." Id.6, (citing Smullen v. City of New York, 28 N.Y.2d 66, 320 N.Y.S.2d 19, 268 N.E.2d 763 (liability found where construction worker killed after city inspector inspected trench and laws required trench to be shored.)) Thus, in order to prevail, Capolino must point to circumstances creating a special duty.
We agree with Additional Defendants' assertion that the two contracts at issue, standing alone, do not generate an independent duty of due care to supervise and administer the contracts that can serve as a basis for liability in tort for negligence. It is a well established principle that a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated. Clark-Fitzpatrick v. Long Island R.R., 70 N.Y.2d 382, 521 N.Y.S.2d 653, 656-57, 516 N.E.2d 190 (1987) (allegation of failure to exercise "due care" is "merely a restatement" of the implied contractual obligations asserted in the cause of action for breach of contract). This conclusion is bolstered by the Fourth Department's decision in Brum v. Niagara Falls, 145 A.D.2d 928, 535 N.Y.S.2d 856 (4th Dep't 1988), app. denied, 545 N.Y.S.2d 104 (1989), in which the court rejected a lessee's argument a city was liable for negligent failure to investigate the illegality of a lease contract. The court noted that a contracting party has no legal duty to investigate the legality of the contract, and that the lessee's remedy was limited to a cause of action for breach of contract. Id. ("merely alleging a breach of a duty by 'employing language familiar to tort law, does not, without more, transform a simple breach of contract into a tort claim.'"). Since "there was no evidence of any fraud, misrepresentation or overreaching by the defendant to subject it to liability for a breach of duty distinct from a breach of contract," it reversed the negligence verdict for plaintiff. Id. at 857. Thus to the extent that Capolino relies upon the contract as a source for an independent duty to exercise due care in the contract's administration, its reliance is ill-founded.
In an attempt to find a separate source of an independent duty owed to it by the Additional Defendants, Capolino points to HUD regulations and the "White Plains Housing Authority Procurement Policies," which require that the WPHA follow certain "specific procedures in resolving disputes and claims." A review of the HUD regulation excerpts reveals that all requirements are directed to the "PHA" (Public Housing Authority), not to its officers, directors or Commissioners. See Meyer Aff. Exh. D. Similarly, a review of the excerpt Capolino provided from the WPHA Procurement Policies reveals no mention of the Commissioners, with the exception of Section 3, which states:
The Authority will adhere to the following procurement procedures to handle protests and resolve disputes:
a. Review of written notification from the protester by the Executive Director, Contract officer or selection committee.