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CLEVELAND WRECKING CO. v. HERCULES CONSTR. CORP.

September 29, 1998

CLEVELAND WRECKING COMPANY, Plaintiff, against HERCULES CONSTRUCTION CORP., and HERCULES CONSTRUCTION AND DEVELOPMENT, INC., Defendants.


The opinion of the court was delivered by: SEYBERT

MEMORANDUM AND ORDER

 SEYBERT, District Judge:

 Pending before the Court is Defendants' joint motion for summary judgment in this alleged contract dispute. Plaintiff is asserting claims for lost anticipated profits pursuant to a purported oral subcontract agreement entered into with Defendants. Defendants contend that no oral contract ever existed between the parties or, in the alternative, that the contract is barred by the applicable statute of frauds.

 BACKGROUND

 The Defendants, Hercules Construction Corporation and Hercules Construction and Development Corporation (collectively "Hercules") are engaged in the general contracting business. The plaintiff, Cleveland Wrecking Company ("Cleveland"), is a demolition subcontractor.

 On October 21, 1994, Hercules was preliminarily declared the apparent low bidder on the partial demolition and reconstruction of a subway car repair barn for the New York City Transit Authority (the "Project"). In November, 1994, Hercules solicited Cleveland to bid on the demolition work for the Project. Thereafter, Hercules' Project Manager, Frank Ruggiero, and its consultant, George Asimakos, met with Shelly Lipsett, Cleveland's Vice-President in charge of the New York office, at the Project site to review specifications and drawings outlining the scope of work to be performed. A few days later, Cleveland sent Steven Schwartz, a cost estimator to the Project site to determine Cleveland's cost to perform the work.

 On December 6, 1994, Cleveland sent its bid proposal to Hercules, detailing its proposed scope of work and price. On December 14, 1994, a meeting was held attended by Steve Schwartz and Shelly Lipsett, representing Cleveland, and Frank Ruggiero, George Asimakos and Gregory Rigas of Hercules wherein the scope of the work to be performed was modified, and a price of $ 980,000.00 was agreed upon. This price was based upon the assumption and assurances made by Hercules that access to the site would be permitted via a temporary road and rubble ramp to be located at the north/northwest side of the Project site. This would ensure the least expensive means of ingress and egress. The Project site is surrounded on the north/northwest side by the Bronx Zoo, a New York State Department of Transportation facility and a New York City Department of Parks and Recreation facility. Therefore, it was necessary for Hercules to obtain approval from these agencies in order to obtain the proposed access to the site.

 At the end of the meeting, the parties shook hands and Frank Ruggiero of Hercules agreed that a letter of intent would follow and a contract would be forthcoming once Hercules received the award of the project from the Transit Authority and the necessary access approval. On December 21, 1994, Hercules received formal notification from the Transit Authority that they had been accepted as general contractors for the project. However, Hercules was denied permission from the city to access the Project site from the proposed point of access on the north/northwest side. After numerous phone calls from Cleveland, Hercules informed Cleveland that they had hired another subcontractor to perform the demolition work.

 DISCUSSION

 I. STANDARDS GOVERNING MOTIONS FOR SUMMARY JUDGEMENT

 Pursuant to Federal Rule of Civil Procedure 56(c), courts may not grant a motion for summary judgment unless "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that 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 of proof is on the moving party to show that there is no genuine issue of material fact, Gallo v. Prudential Residential Servs., Ltd. Partnership, 22 F.3d 1219, 1223 (2d Cir. 1994)(citing Heyman v. Commerce & Indus. Ins. Co., 524 F.2d 1317, 1320 (2d Cir. 1975)), and "all ambiguities must be resolved and all inferences drawn in favor of the party against whom summary judgment is sought." Id. (citing Eastway Constr. Corp. v. City of New York, 762 F.2d 243, 249 (2d Cir. 1985), cert. denied, 484 U.S. 918, 108 S. Ct. 269, 98 L. Ed. 2d 226 (1987)).

 The substantive law governing the case will identify those facts that are material and "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986) (citing 10A C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure § 2725, at 93-95 (1983)). A party opposing a motion for summary judgment "'may not rest upon the mere allegations or denials of his pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial.'" Id. at 248, 106 S. Ct. at 2510 (quoting First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 288-89, 88 S. Ct. 1575, 1592, 20 L. Ed. 2d 569 (1968). Under the law of the Second Circuit, "when no rational jury could find in favor of the nonmoving party because the evidence is so slight, there is no genuine issue of material fact and a grant of summary judgment is proper." Gallo, 22 F.3d at 1224 (citing Dister v. Continental Group, Inc., 859 F.2d 1108, 1114 (2d Cir. 1988)). "Conclusory allegations will not suffice to create a genuine issue. There must be more than a 'scintilla of evidence,' and more than 'some metaphysical doubt as to the material facts.'" Delaware & Hudson Ry. Co. v. Consolidated Rail Corp., 902 F.2d 174, 178 (2d Cir. 1990) (quoting Anderson, 477 U.S. at 252, 106 S. Ct. at 2512, and Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986)), cert. denied, 500 U.S. 928, 111 S. Ct. 2041 (1991). "The non-movant cannot escape summary judgment merely by vaguely asserting the existence of some unspecified disputed material facts, or defeat the motion through mere speculation or conjecture." Western World Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990)(internal quotations omitted).

 In the context of a contractual dispute, summary judgment may be granted where the contract conveys a "definite and precise meaning absent any ambiguity," Seiden Assoc., Inc. v. ANC Holdings, Inc., 959 F.2d 425, 428 (2d Cir. 1992), and under New York law, whether contract language is ambiguous is a question of law properly resolved on a motion for summary judgment. Id. See also Arcadian Phosphates, Inc. v. Arcadian Corp., 884 F.2d 69, 73 (2d Cir. 1989) (finding summary judgment "perfectly appropriate" where intent can be ascertained).

 It is within this framework that the Court addresses the present summary judgment motion.

 II. NEW YORK LAW APPLIES

 Jurisdiction in this action is based upon diversity of citizenship as Cleveland is a Delaware Corporation with its principal place of business in California and Hercules is a New York Corporation with its principal place of business in New York. A federal court sitting in diversity must apply the choice of law rules of the state in which it sits. Klaxon Co. v. Stentor Electric Mfg. Co. of North America, 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941). In contract cases, New York courts apply a "center of gravity" or "grouping of contacts" approach. Lazard Freres & Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1539 (2d Cir.), cert. denied, U.S. , 139 L. Ed. 2d 112, 118 S. Ct. 169 (1997). The relevant factors or contacts include the place of contracting, the places of negotiation and performance, the location of the subject matter, and the domicile or place of business of the contracting parties. See In re Allstate Ins. Co., 81 N.Y.2d 219, 227, 597 N.Y.S.2d 904, 908, 613 N.E.2d 936 (1993). The paramount factors are the place of contracting and the place of performance. Id. Public policy considerations, however, may trump this determination "where the policies underlying conflicting laws in a contract dispute are readily identifiable and reflect strong governmental interests." Id. at 226, 597 N.Y.S.2d at 907. In the instant action, all the relevant factors require application of New York law, to which neither party disputes.

 III. THE EXISTENCE OF AN ORAL CONTRACT

 As an initial consideration, Defendants contend that summary judgment is appropriate because, as a matter of law, no oral contract existed between the parties. Specifically, they assert that there was no meeting of the minds on the essential terms of price and the scope of the work to be performed.

 To establish a claim for breach of contract under New York law, a plaintiff must prove: (1) that an agreement existed between it and defendant; (2) what the respective obligation of the parties were; (3) that the plaintiff performed its obligations under the agreement; (4) that the defendant breached the agreement by failing to perform its obligations; and (5) that the plaintiff suffered damages as a result of the breach. Paper Corp. of the United States v. Schoeller Technical Papers, Inc., 807 F. Supp. 337, 341 (S.D.N.Y. 1992). "Under New York law, no contract exists, nor may one be implied, where parties do not agree to its material terms." Tower Int'l, Inc. v. Caledonian Airways, Ltd., 1996 U.S. Dist. LEXIS 20311, No. CV-93-1122, 1996 WL 68531, at *4 (E.D.N.Y. Jan. 25, 1996) (citing Cyberchron Corp. v. Calldata Systems Dev., 831 F. Supp. 94 (E.D.N.Y. 1993), aff'd in part, vacated in part, 47 F.3d 39 (2d cir. 1995)). The essential elements of a construction contract include price, scope of work to be performed, and the time of performance. See, e.g., A & M Wallboard, Inc. v. Marina Towers Assocs., 169 A.D.2d 751, 565 N.Y.S.2d 118, 119 (2d Dep't 1991). The parties herein negotiated a price of $ 980,000.00, the scope of work to be performed essentially consisted of demolishing the existing structure at the site, and the time of performance was to be 16 weeks from commencement of the work, upon the award of the prime contract.

 For an agreement to be enforced, "it must be sufficiently 'definite and explicit so [that the parties'] intention may be ascertained to a reasonable degree of certainty.'" Best Brands Beverage, Inc. v. Falstaff Brewing Corp., 842 F.2d 578, 587 (2d Cir. 1987) (applying New York law, quoting Candid Prods., Inc. v. International Skating Union, 530 F. Supp. 1330, 1333 (S.D.N.Y. 1982)). Thus, "if an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract." 166 Mamaroneck Ave. Corp. v. 151 E. Post Rd. Corp., 78 N.Y.2d 88, 91, 571 N.Y.S.2d 686, 687, 575 N.E.2d 104 (1991)(internal quotations and citations omitted). A court considering whether or not a contract has been formed must apply an objective test:

 
What is looked to in determining whether an agreement has been reached is not the parties' after-the-fact professed subjective intent, but their objective intent as manifested by their expressed words and deeds at the time. . . . In determining whether the parties entered into a contractual agreement and what were its terms, "disproportionate emphasis is not to be put on any single act, phrase, or other expression, but instead, on the totality of all of these, given the attendant circumstances, the situation of the parties, and the objectives they were striving to attain. . . ."

 Reprosystem, B.V. v. SCM Corp., 522 F. Supp. 1257, 1275 (S.D.N.Y. 1981)(quoting Brown Bros. Elec. Contractors, Inc. v. Beam Constr. Corp., 41 N.Y.2d 397, 399-400, 393 N.Y.S.2d 350, 352, 361 N.E.2d 999 (1977)), rev'd in part on other grounds, 727 F.2d 257 (2d Cir.), cert. denied, 496 U.S. 828, 105 S. Ct. 110 (1984). It is not the parties' subjective intent that is determinative, thus, even where the parties "believe they are bound, if the terms of the agreement are so vague and indefinite that there is . . . no means by which such terms may be made certain, then there is no enforceable contract." Deligiannis v. PepsiCo, Inc., 757 F. Supp. 241, 256 (S.D.N.Y. 1991)(internal citations omitted). Therefore, where a contract does not have such essential terms as the time or manner of performance or price to be paid, the contract is unenforceable. Id.

 A plaintiff faces a heavier burden when trying to prove an alleged oral contract. See Winston v. Mediafare Entertainment Corp., 777 F.2d 78, 80 (2d Cir. 1986). To ensure that parties are not trapped into "surprise contractual obligations that they never intended," Arcadian Phosphates, Inc., 884 F.2d at 72 (internal quotations omitted), more than agreement on each detail is required, there must be an overall agreement to enter into the binding contract. N.F.L. Ins. Ltd. v. B & B Holdings, Inc., 874 F. Supp. 606, 613 (S.D.N.Y. 1995). In the context of settlement agreements, the Second Circuit recently considered the negative policy implications of binding oral agreements, finding that "enforcing premature oral settlements against the expressed intent of one of the parties will not further a policy of encouraging settlements. People may hesitate to enter into negotiations if they cannot control whether and when tentative proposals become binding." Ciaramella v. Reader's Digest Ass'n, Inc., 131 F.3d 320, 323 (2d Cir. 1997).

 The Court is of the opinion that the parties to the instant action did come to substantial agreement on the scope of the work to be performed. The established price, however, was based on the representation by Hercules' that access approval was forthcoming, and the subsequent receipt thereof, along with receipt of the formal award of the ...


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