The opinion of the court was delivered by: CONNER
Plaintiff Independent Energy Corporation filed this diversity action on December 15, 1994. Plaintiff contends that it is entitled to reimbursement of $ 228,100 plus interest from Defendant Trigen Energy Corporation for expenses that plaintiff allegedly incurred in furtherance of its efforts to develop a construction project in El Salvador. Plaintiff asserts claims against defendant for breach of written and oral promises, common law fraud, failure of consideration, unjust enrichment, and breach of fiduciary duty. Defendant has moved under Fed. R. Civ. P. 56(c) for summary judgment dismissing the complaint or, in the alternative, under Fed. R. Civ. P. 9(b) for an order dismissing plaintiff's common law fraud claim for failure to plead with particularity. Defendant has also moved for partial summary judgment on several of plaintiff's claims in the event that they are not dismissed. For the reasons set forth below, defendant's motion is granted in part and denied in part.
In 1993, the government of El Salvador, through its nationally-owned utility, Comision Ejecutiva Hidroelectrica del Rio Lempa ("CEL"), solicited bids from developers interested in acquiring the right to develop an eighty megawatt electrical generating plant in El Salvador. Pursuant to CEL's bidding process, the bidder selected by CEL would receive the exclusive right, for a fixed period, to negotiate and enter into a "power purchase agreement" with CEL. This agreement would establish the terms and conditions under which the bidder would agree to construct and operate the power plant, and CEL would agree to purchase electricity from that facility.
With a view toward securing the right to develop the Salvadoran project, United Thermal Corporation ("UTC") and Plaintiff Independent Energy Corporation ("IEC"), in conjunction with Desarrollos Energeticos Latino Americanos, S.A. ("DELASA") and La Casa Castro, S.A. (collectively the "Participants") submitted a bid to CEL on behalf of the "IEC/UTC limited partnership."
In addition, the Participants posted a $ 2 million bond as required by CEL. CEL's bidding rules provided that if, after being awarded the project, the successful bidder failed to reach agreement with CEL on the terms of the power purchase agreement by the end of the negotiating period, the bond would be subject to forfeiture.
On February 3, 1994, CEL accepted the Participants' bid but formally awarded the project to IEC and UTC as independent entities, rather than as a limited partnership. Additionally during this period, Defendant Trigen Corporation ("Trigen") acquired UTC, although the parties disagree as to whether Trigen formally completed its acquisition of UTC before or after CEL awarded the project.
Trigen's board of directors harbored reservations about the Salvadoran project and indicated to Trigen's management that the board would not authorize Trigen to proceed unless Trigen secured an equity partner willing to assume a significant share of the project's risk, obtained a source of debt financing, and entered into an engineering, procurement, and construction contract ("EPC contract") with a suitable contractor.
By mid-May 1994, Trigen's management had taken steps to comply with its board's requirements. Trigen's management signed a letter of intent with Wartsila Diesel Corporation to enter into an EPC contract and had identified Tenneco Gas International, Inc. as a potential equity partner for the project. Also in May 1994, Trigen signed an agreement with La Casa Castro and DELASA setting forth conditions under which Trigen agreed to enter into the power purchase agreement with CEL on behalf of La Casa Castro and DELASA.
Last, Trigen sought to modify the proposed power purchase agreement then under negotiation with CEL in order to provide Trigen with the right to cancel the agreement prior to June 17, 1994 or to assign its interest subject to CEL's approval.
On May 16, 1994, one day before the expiration of the time allotted by CEL for IEC and Trigen to enter into the power purchase agreement with CEL, representatives of IEC and Trigen convened to negotiate IEC's assignment of its project rights to Trigen. Such an assignment would enable Trigen alone to sign the power purchase agreement with CEL. At this meeting, IEC's general counsel proposed that Trigen unconditionally promise to reimburse IEC $ 228,100 for the expenses IEC had incurred in connection with the project. In exchange for Trigen's promise to pay, IEC offered to assign its project rights to Trigen immediately.
Trigen's management, however, was unwilling to incur an unconditional obligation to reimburse IEC's expenses, and after a period of negotiations regarding the reimbursement issue, Trigen and IEC reached the following agreement:
In consideration of the assignment by Independent Energy Corporation ("IEC") of all of its interests in and to the electrical generating plant to be developed in El Salvador (the "Project") pursuant to Adjudicacion Licitacion No. CEL-1304 from Comision Ejecutiva Hidroelectrica del Rio Lempa ("CEL"), dated February 3, 1994, including the right to negotiate a power purchase agreement with CEL (the "PPA"), to Trigen and other good and lawful consideration, the receipt and sufficiency whereof is hereby acknowledged, and not withstanding any release by IEC of claims against Trigen in connection with the bid to CEL, Trigen hereby promises to pay to IEC the sum $ 228,100.00 on the happening of the second of 1) June 17, 1994 and 2) the date on which Trigen receives the approval of its Board of Directors to fully implement the Project, provided that, if Trigen shall not have received such Board approval by December 31, 1994, this promise to pay shall be null and void.
Letter Agreement dated May 16, 1994 attached as Exhibit 3 to Affirmation of Edward Kehoe, dated July 15, 1996 (emphasis in original). In addition, IEC obtained agreements from Trigen, DELASA, and La Casa Castro absolving IEC of any obligations stemming from the Salvadoran project.
The following morning, notwithstanding the recently concluded letter agreement between Trigen and IEC, Trigen's board of directors instructed Trigen's management not to enter into the power purchase agreement with CEL. However, later that day, Tenneco agreed to accept a complete assignment of Trigen's interest under the power purchase agreement. Trigen's board of directors then granted Trigen's management the authority to execute the power purchase agreement and assign Trigen's entire interest in the project to Tenneco.
On May 18, 1994, Trigen did, in fact, enter into the power purchase agreement and assign its rights to Tenneco. Tenneco, however, assumed no obligation to reimburse IEC for its development expenses. Subsequently, Tenneco reassigned the project rights to the Coastal Corporation, which guided the project to its completion.
I. Summary Judgment Standard
Summary judgment should be granted when "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The Supreme Court has held that the entry of summary judgment is appropriate "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The party seeking summary judgment "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those [materials] which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323. It may discharge that burden merely by "pointing out to the district court  that there is an absence of evidence to support the nonmoving party's case." Id. at 325; Gallo v. Prudential Residential Servs., Ltd., 22 F.3d 1219, 1223-24 (2d Cir. 1994).
In order to defeat summary judgment, the nonmoving party must "go beyond the pleadings and . . . designate 'specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324. No genuine issue for trial exists unless there is sufficient evidence favoring the nonmoving party for a reasonable jury to return a verdict for that party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). The burden on the nonmoving party is tempered, however, by the rule that "the evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255.
A. Breach of Written Contract
The parties are at loggerheads over the proper interpretation of defendant's obligation under the May 16, 1994 letter agreement. Specifically, they dispute the intent behind, and meaning of, the clause that predicates plaintiff's reimbursement on defendant's board of directors granting approval "to fully implement the Project." Defendant asserts that summary judgment on plaintiff's claim is appropriate because defendant never received the requisite board approval, and therefore, as a matter of law, it is not bound to reimburse the plaintiff.
Defendant contends that the letter agreement unambiguously obligated it to reimburse plaintiff only if defendant's board granted permission to "implement" the Salvadoran project, which, in defendant's view, meant to complete construction of the power facility, and operate the facility after its completion. In support of this interpretation of the clause at issue, defendant adverts to Webster's Ninth Collegiate Dictionary, which defines "implement" to mean "carry out" or "accomplish." Because defendant's board authorized defendant to enter into the power purchase agreement only for the limited purpose of immediately assigning defendant's rights to Tenneco, defendant reasons that it was never authorized to "carry out" or "accomplish" the project.
Defendant contends that its analysis of the letter agreement is reinforced by the parties' inclusion in the letter agreement of the adverb "fully" to modify "implement." According to defendant, this further demonstrates that plaintiff was not entitled to reimbursement unless defendant received board permission to complete, rather than merely to advance, the project. In defendant's view, plaintiff's contention that the board-approval requirement was satisfied when the board permitted defendant to sign the power purchase agreement would render "fully" meaningless.
Not surprisingly, plaintiff ascribes a wholly different meaning to the letter agreement. In plaintiff's view, the condition at issue required only that defendant execute the power purchase agreement by December 31, 1994 and refrain from canceling that agreement during the cancellation period. Nonetheless, plaintiff acknowledges that the letter agreement is ambiguous on its face as to what would trigger the defendant's obligation to reimburse plaintiff. Plaintiff argues, however, that this ambiguity compels the court to deny summary judgment. According to plaintiff, the meaning of an ambiguous contract must be resolved by a finder of fact who has had an opportunity at trial to evaluate evidence of the parties' intentions.
In support of its contention that the letter agreement can reasonably be construed to require only that defendant's board approve the signing of the power purchase agreement and that defendant not subsequently cancel the agreement with CEL, plaintiff deploys several arguments. First, plaintiff asserts that "in the power development industry, the phrase 'to fully implement a project' means to get a power purchase agreement executed because that triggers all of the obligations to actually build and operate the power plant." Plaintiff's Memorandum at 36. In addition to industry custom, plaintiff cites the construction of the letter agreement. Plaintiff observes that, pursuant to the letter agreement, defendant's obligation to reimburse plaintiff did not arise until June 17, 1994, at the earliest. According to plaintiff, the letter agreement refers to June 17, 1994 because that was the date until which defendant was entitled under the power purchase agreement to cancel that agreement with CEL. Plaintiff reasons that the letter agreement's board-approval requirement "also refers to the [power purchase agreement]. If it did not, the date of June 17, 1994 would be rendered meaningless." Id. at 36.
Last, plaintiff argues that its interpretation of the letter agreement is consistent with what the parties in fact intended. Plaintiff asserts that, prior to entering into the disputed letter agreement, defendant had clearly indicated that it wished to assign its rights under the power purchase agreement. Plaintiff maintains that, knowing defendant's intentions, plaintiff would not have entered into an agreement that was predicated upon defendant receiving approval from its board to participate in the project until its completion. Moreover, according to plaintiff, at the time defendant assigned its rights to Tenneco, defendant also attempted to assign to Tenneco the obligation to reimburse plaintiff. This, in plaintiff's view, evinced defendant's own understanding that it was bound to reimburse plaintiff after signing the power purchase agreement.
It is axiomatic that the objective of contract interpretation is to give effect to the parties' clearly expressed intentions. Metropolitan Life Ins. Co. v. RJR Nabisco, Inc., 906 F.2d 884, 889 (2d Cir. 1990); Slatt v. Slatt, 64 N.Y.2d 966, 488 N.Y.S.2d 645, 646, 477 N.E.2d 1099, 1100 (N.Y. 1985). Where the language of a contract is unambiguous, the question of interpretation is one of law, and summary judgment may be granted. Seiden Assoc., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992). In such cases, "the intent of the parties must be determined from their final writing and no parol evidence or extrinsic evidence is admissible." International Klafter Co., Inc. v. Continental Cas. Co., 869 F.2d 96, 100 (2d Cir. 1989) (citations omitted); W.W.W. Assoc., Inc. v. Giancontieri, 77 N.Y.2d 157, 565 N.Y.S.2d 440, 443, 566 N.E.2d 639, 641 (N.Y. 1990) (extrinsic evidence may not be considered in order to create an ambiguity). However, where contractual language is ambiguous, and where there is conflicting extrinsic evidence relevant to the parties' actual intent, a material question of fact exists, and summary judgment should be denied. Burger King Corp. v. Horn & Hardart Co., 893 F.2d 525, 528 (2d Cir. 1990); Heyman v. Commerce & Industry Ins. Co., 524 F.2d 1317, 1320 (2d Cir. 1975).
Under New York law,
the determination of whether a contract term is ambiguous is a threshold question for the court. Walk-In Med. Centers, Inc. v. Breuer Capital Corp., 818 F.2d 260, 263 (2d Cir. 1987). A contractual phrase is ambiguous as a matter of law if it is capable of "more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages, and terminology as generally understood in the particular trade or business." Id. (quoting Eskimo Pie Corp. v. Whitelawn Dairies, Inc., 284 F. Supp. 987, 994 (S.D.N.Y. 1968)). By contrast, language that has "a definite and precise meaning, unattended by danger of misconception in the purport of the [contract] itself, and concerning which there is no reasonable basis for a difference in opinion," is unambiguous. Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir. 1989) (quoting Breed v. Insurance Co. of North America, 46 N.Y.2d 351, 413 N.Y.S.2d 352, 355, 385 N.E.2d 1280, 1282 (N.Y. 1978)). Moreover, the language of a contract is not made ambiguous simply because the parties urge different interpretations. Wards Co., Inc. v. Stamford Ridgeway Assoc., 761 F.2d 117, 120 (2d Cir. 1985). Nor does ambiguity exist where one party's view "strain[s] the contract language beyond its reasonable and ordinary meaning." Bethlehem Steel Co. v. Turner Constr. Co., 2 N.Y.2d 456, 141 N.E.2d 590, 593, 161 N.Y.S.2d 90, 92 (N.Y. 1957).
Mindful of these precepts, we turn to examine the critical language at issue in the letter agreement. If, as defendant contends, a plain reading of the letter agreement admits of no other conclusion than that the obligation to reimburse plaintiff depended upon board approval for defendant to participate in the project until completion of the plant, summary judgment is appropriate because plaintiff concedes that defendant's board never granted such broad approval. However, if the agreement's language is also reasonably susceptible of plaintiff's interpretation, then the agreement is ambiguous, and the parties must be permitted to introduce extrinsic evidence to clarify the agreement.
We are unpersuaded by plaintiff's contention that because the letter at one point agreement refers to June 17, 1994 -- the date until which the power purchase agreement permitted defendant to cancel its contract with CEL -- this somehow compels the conclusion that the defendant's board of directors satisfied the letter agreement's approval requirement when it granted permission for defendant to sign the power purchase agreement. Whatever the significance of June 17, 1994, might be, the parties' unstated reasons for agreeing that defendant's reimbursement obligation would not ripen until that date are not relevant at this point. On its face, the reference to June 17, 1994, indicates only that the parties intended that a period of time should transpire before the defendant's duty to perform would arise. Also unhelpful are plaintiff's conclusory assertions that the power plant industry's practice is to deem a project fully implemented when the parties sign a power purchase agreement. Plaintiff offers no persuasive evidence of custom, usage, or business practice bearing on the significance of the power purchase agreement. See Baker's Aid v. Hussmann Foodservice Co., 730 F. Supp. 1209, 1212-13 (S.D.N.Y. 1990) (finding disputed term unambiguous in part because of defendant's failure to offer relevant evidence of business custom).
Nonetheless, we find that the clause at issue, and in particular the word "implement," are not so wholly unambiguous as to render plaintiff's claim capable of disposition on summary judgment. On its face, defendant's reading of the disputed clause is not implausible. We do not doubt that "approval . . . to fully implement the Project" could be construed to require permission from defendant's board of directors to carry the power plant project to the point of completion. However, it is also reasonable to conclude, as plaintiff urges, that the clause at issue was satisfied when the board of directors authorized defendant to take the decisive step of signing the power purchase agreement, which arguably ensured that the project would eventually come to fruition. This interpretation is consistent with The American Heritage Dictionary's definition of "implement": "To provide a definite plan or procedure to ensure the fulfillment of". The American Heritage Dictionary (New College ed. 1976), see Webster's Third New International Dictionary (1971) (defining "implement," inter alia, as "to give practical effect to and ensure of actual fulfillment by concrete measures"). Given that the interpretation propounded by plaintiff is consistent with one of the ordinary meanings attributable to the word "implement," we are not persuaded that the presence of "fully" in the board-approval clause removes the letter agreement's inherent ambiguity and imbues the clause with a precise meaning.
Having determined that the letter agreement admits of more than one reasonable interpretation, we next examine extrinsic evidence of the parties' intent in order to determine whether there is a genuine issue of material fact as to their understandings of the letter agreement's meaning. See Seiden Assoc., Inc. v. ANC Holdings, Inc, 959 F.2d 425, 428-30 (2d Cir. 1992). In Burger King, 893 F.2d at 528, the Second Circuit considered an ambiguous agreement and stated that "summary judgment normally is inappropriate when a contractual term is ambiguous because 'a triable issue of fact exists as to its interpretation." Id. (quoting Leberman v. John Blair & Co., 880 F.2d 1555, 1559 (2d Cir. 1989). Of course, it is consistent with the Second Circuit's view to conclude that summary judgment would be appropriate if, after all the facts alleged to be material to the meaning of an ambiguous contract have been presented, a rational fact-finder could only find for the movant. Pryor v. USX Corp., 806 F. Supp. 460, 463 (S.D.N.Y. 1992). In other words, if defendant in this case were able to present undisputed extrinsic evidence that buttressed its interpretation of the letter agreement to such an extent that no reasonable fact-finder could resolve the ambiguity against defendant, that would constitute grounds for summary judgment. Id.; see Adipietro v. Chubb Life ...