documents and agreements have been introduced into the litigation, all
but 3 of which contain a New York choice-of-law clause. Thus, this factor
now tips even more heavily in favor of the New York forum.
We therefore conclude that this litigation will impose burdens on all
parties regardless of whether it is located in New York or El Salvador.
Not only have the movants failed to establish that the balance of the
Gilbert factors weigh strongly in favor of dismissal, the arguments made
by them in this respect are acutely disingenuous. Despite the Affiliates'
attempt to prevent Delasa and ESI from placing the relevant ownership and
Trust documents before the Court,*fn86 we have now seen that the
Affiliates expressly consented to the jurisdiction and venue of the
United States District Court for the Southern District of New York with
respect to any issues involving their respective ownership interests in
the Project, and had explicitly waived any objections to such
jurisdiction and venue, specifically including forum non conveniens.
Accordingly, the Affiliates' motion (joined by Coastal Corp. and
Coastal Power) to dismiss on the grounds of forum non conveniens is
III. Plaintiff's Rule 11 Motion
In connection with its opposition to the Affiliates' Motion to Dismiss
on the grounds of lack of personal jurisdiction and forum non
conveniens, ESI filed a Notice of Cross-Motion seeking an order, pursuant
to Fed.R.Civ.P. 11(b) and (c), imposing an appropriate sanction on the
moving defendants and their attorneys.
As set forth in its Memorandum of Law in Opposition to the Affiliates'
Motion to Dismiss, ESI argues that the Affiliates and their attorneys
should be sanctioned under Fed.R.Civ.P. 11(b)(1), (2), (3) and (c) for
the numerous misrepresentations made to this Court both in telephone
conference and in the O'Toole and Vilanova affidavits submitted in
support of their motions to dismiss, with respect to the Affiliates'
involvement and ownership interests in the Plant and the extent of their
respective forum related activities.
In connection with the Affiliates' motion (joined by Coastal Corp. and
Coastal Power) on the ground of forum non conveniens, ESI seeks sanctions
against the movants and their attorneys under Fed. R.Civ.P. ll(b)(1), (2)
and (3) for their failure to disclose, and attempt to prevent the
disclosure of, the ownership and Trust related documents which, inter
alia, contain the Forum Selection Clause. ESI further alleges that, in
view of this Court's prior decision on "the matter, the forum non
conveniens motion was frivolous and filed to harass ESI and Delasa, to
cause unnecessary delay, and to increase the cost of this litigation.
ESI's Notice of Cross-Motion and Memorandum of Law, both dated February
17, 1999, were served on Coastal Corp., Coastal Power and the Affiliates
by U.S. mail on February 17, 1999. The original documents were then filed
with the Court and a courtesy copy of each was received in chambers on
February 18, 1999.
The Affiliates oppose the imposition of sanctions on the ground that
ESI failed to comply with the procedural prerequisites of Rule 11,
namely: (1) that the sanctions motion must be made separate and apart
from any other motion; and (2) that the motion may not be "filed with or
presented to the court unless, within 21 days after service of the motion
(or such other period as the court may prescribe), the challenged paper,
claim, defense, contention, allegation, or denial is not withdrawn or
appropriately corrected." Fed.R.Civ.P.
We need not decide whether ESI's service of a Notice of Cross-Motion
supported by a combined Memorandum of Law in Opposition to the
Affiliates' Motion to Dismiss and in Support of ESI's Cross-Motion
constitutes a separate and distinct motion because ESI failed to comply
with the mandatory "safe harbor" provision of Rule 11 by filing the
sanctions motion with the Court only one day after its service on the
defendants. Accordingly, ESI's motion requesting the imposition of
sanctions must be denied without a discussion of the merits of the
motion. See Hadges v. Yonkers Racing Corp., 48 F.3d 1320, 1328-29 (2d
Cir. 1995); Banfield v. UHS Home Attendants, Inc., No. 96 Civ. 4850
(JFK), 1997 WL 342422, *3 (S.D.N.Y. June 23, 1997) (procedural
requirements are strictly construed and failure to observe "safe harbor"
provision mandates denial).
IV. Motion for a More Definite Statement
Fed.R.Civ.P. 12(e) provides in pertinent part:
If a pleading to which a responsive pleading is permitted
is so vague or ambiguous that a party cannot reasonably
be required to frame a responsive pleading, the party may
move for a more definite statement before interposing a
"A motion pursuant to Rule 12(e) should not be granted "unless the
complaint is so excessively vague and ambiguous as to be unintelligible
and as to prejudice the defendant seriously in attempting to answer it.'"
Tagare v. NYNEX Network Systems Co., 921 F. Supp. 1146, 1153 (S.D.N Y
1996) (quoting Bower v. Weisman, 639 F. Supp. 532, 538 (S.D.N.Y. 1986)).
The Affiliates request that this Court "dismiss the Second Amended
Complaint as to these defendants for a more definite and consistent
statement of the claims averred against them." Rather than ESI's
pleading, it is the Affiliates' request to "dismiss the Second Amended
Complaint . . . for a more definite statement" that strikes this Court as
lacking intelligibility. Rule 12(e) provides an alternative to a motion
to dismiss under Rule 12(b) and the relief afforded if the motion is
granted is not dismissal — rather, the offending party is ordered
to serve an amended pleading within ten days. See Fed.R.Civ.P. 12(e).
Although we must therefore deny the Affiliates' request to dismiss the
Second Amended Complaint, we will consider whether ESI must nevertheless
provide them with a more definite statement.
First, the Affiliates argue that the Second Amended Complaint is
vague, ambiguous and unintelligible because ESI defined "Coastal
affiliates" to include Coastal Corp. and Coastal Power (2nd Amd. Compl.
¶ 13) and, therefore, Coastal Corp. and Coastal Power are alleged to
be alter egos of themselves (Id. at ¶¶ 14-17). Not only is this an
unreasonable interpretation, but paragraphs 14 through 17 make it clear
that ESI is referring only to Coastal Salvador, Coastal Nejapa and CTS
collectively as the "Coastal affiliates."
With respect to the alter ego allegations, the Affiliates claim that,
their motion should be granted because ESI fails to "identify which
defendant is referred to" and fails to "present any evidence that the
corporate forms of the defendants have not been observed." The
Affiliates' reliance on Bower in this regard is misplaced. First,
production of evidence is not required at the pleading stage (and Bower
certainly does not support the opposite proposition). Even if it were, as
discussed above in our discussion of general personal jurisdiction, ESI
has made a prima facie showing that the Affiliates are "mere departments"
of Coastal Corp., Coastal Power and/or LCC. Second, in Bower the
plaintiff employed the term "defendant" without specifying which of three
defendants was being identified. 639 F. Supp. at 538. The court granted
the motion for a more particular statement on the ground that a defendant
could not effectively respond to the complaint unless it knew
which claims the plaintiff was asserting against it. Id. There is no such
ambiguity in ESI's pleading.
Each and every allegation of the Second Amended Complaint clearly and
plainly states which defendant(s) is/are being addressed. LCC has only one
subsidiary, Crystal Power, and when ESI is referring to Nejapa Power it
so states. Mainly, the movants object to general references to Coastal
Corp. and/or Coastal Power's "affiliates" in ESI's statement of "Relevant
Facts." ESI acknowledges that the ownership and sharing agreements
attached to its opposition papers were not available to it when it filed
its Second Amended Complaint. However, the pleading certainly provides
sufficient detail, including the dates and general subject matter of
correspondence and agreements, to permit the Affiliates to identify the
documents to which they are parties. Further, the Affiliates know exactly
what ownership interest they possess and what role each of them had in
the Project. See 2 James WM. MOORE ET Al., MooRE's FEDERAL PRACTICE
§ 12.36 (3d ed. 1997) (if movant's existing knowledge enables it
to file responsive pleading, court may deny motion even if pleading is
arguably vague and ambiguous).
Next, the Affiliates advance a theoretical argument as to why any
allegations of fraud against the Affiliates based upon paragraph 17 would
have to be dismissed pursuant to Fed.R.Civ.P. 9(b). Paragraph 17 states,
"Coastal Power and/or Coastal Corp. used their/its complete dominion and
control over the Coastal affiliates and Nejapa Power for the purpose of
perpetrating a fraud against ESI, as more fully set forth herein." This
allegation, contained in the "Parties" section of the Second Amended
Complaint, clearly goes to ESI's assertion of a "mere department" theory
of personal jurisdiction over the Affiliates and does not set forth an
affirmative claim for relief. The causes of action asserted by ESI are
carefully set forth in detail in the appropriate section of the pleading
and the Twelfth Claim for Fraud is expressly pleaded only against
Delasa, LCC and Trigen.
Finalyl, the movants claim that ESI's Second Amended Complaint is
incoherent because its allegations that, at all relevant times, Coastal
Corp. and/or Coastal Power exercised complete dominion and control over
Nejapa Power (2nd Amd.Compl. ¶¶ 15 and 47) are internally inconsistent
with the allegations that LCC exercised complete dominion and control
over Nejapa Power (2nd Amd.Compl. ¶¶ 20 and 22). This argument has in
essence, however, been rendered moot by this Court's decision above with
respect to general jurisdiction. The allegations complained of are set
forth in the "Parties" section of the Second Amended Complaint and, as we
noted earlier, are made in support of ESI's "mere department" basis for
asserting general personal jurisdiction over the Affiliates. We have
concluded that Nejapa Power is a "mere department" of Coastal Corp.
and/or Coastal Power for the purpose of exercising general personal
jurisdiction. Thus, there is no reason to require a more definite
statement from ESI.
The Affiliates have been given fair notice of the claims against them,
and nothing prevents them from formulating a responsive pleading.
Accordingly, their motion for a more definite statement is denied.
V. Motion to Strike
Coastal Power originally moved for an order pursuant to Fed.R.Civ.P.
12(f), striking the Second and Fourth Claims and additional defendants
named in ESI's Second Amended Complaint. However, since the motion was
filed: (1) in its Memorandum of Law in Opposition to Coastal Power's
Motion to Strike, ESI confirmed that it did not intend to pursue its
Second Claim and voluntarily withdrew the same from the Second Amended
Complaint; and (2) in its Reply Memorandum of Law in Support of its
Motion to Strike, Coastal Power conceded that the additional defendants
had been properly added by ESI with leave of court. The motion is
therefore granted insofar as it seeks to strike the Second Claim and
denied insofar as it seeks to strike the additional named defendants in
ESI's Second Amended Complaint.
We now turn to ESI's Fourth Claim for Tortious Interference with the
Three-Party Agreement. The elements of tortious interference with
contractual relations are: (1) the existence of a valid contract between
plaintiff and a third party; (2) defendant's knowledge of the contract;
(3) defendant's intentional inducement of the third party to breach the
contract; and (4) damages to plaintiff. See Foster v. Churchill,
87 N.Y.2d 744, 750-51, 665 N.E.2d 153, 156, 642 N.Y.S.2d 583, 586
(1996); Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94, 612 N.E.2d 289,
292, 595 N.Y.S.2d 931, 934 (1993). The defendant accused of tortiously
interfering with the contract cannot also be a party thereto. See Solow
v. Stone, 994 F. Supp. 173, 181 (S.D.N.Y.), aff'd, 163 F.3d 151 (2d Cir.
1998) (citing Burdett Radiology Consultants, P.C. v. Samaritan Hosp.,
158 A.D.2d 132, 136, 557 N.Y.S.2d 988, 991 (3d Dep't 1990).)
In its Amended Complaint, ESI alleged the following:
97. ESI realleges and incorporates by reference each
and every allegation contained in paragraphs 1-96
hereof, inclusive, as if fully set forth herein.
98. The Three-Party Agreement is a valid agreement between
ESI, La Casa Castro and Delasa.
99. Coastal [Power] had knowledge of the existence of the
Three-Party Agreement between ESI, La Casa Castro and Delasa.
100. Coastal [Power] intentionally and maliciously procured La Casa
Castro's and Delasa's breach of the Three-Party Agreement with
ESI . . .
On the motion of Coastal Power, we dismissed this claim pursuant to
Fed. R.Civ.P. 12(b)(6) on the grounds that ESI failed to allege that it
was a party to the Three-Party Agreement and that Coastal Power was not a
party to the contract because ESI had previously alleged that Coastal
Power is bound by the Three-Party Agreement as successor to Trigen and
Tenneco. See ESI I, 995 F. Supp. at 433.
On September 16, 1998, ESI filed its Second Amended Complaint wherein
it alleged the following by way of a claim for tortious interference with
the Three-Party Agreement:
138. ESI realleges and incorporates by reference each and
every allegation contained in paragraphs 1-137 hereof,
inclusive, as if fully set forth herein.
139. The Three-Party Agreement is a valid contract between
Trigen, La Casa Castro, Delasa and ESI (as Delasa's assignee).
140. ESI became a party, to the Three-Party Agreement by the express
language of the Assignment Agreement between Delasa and ESI.
141. Trigen and La Casa Castro consented in writing to ESI becoming
a party to the Three-Party Agreement.
142. Tenneco, Coastal Corp., Coastal Power and the Coastal affiliates
had knowledge of the existence of the Three-Party Agreement.
143. If Tenneco, Coastal Corp., Coastal Power, and the Coastal affiliates
are not considered parties to the Three-Party Agreement, these
defendants intentionally and maliciously procured Trigen's, La
Casa Castro's and Delasa's breach of the Three-Party Agreement
with ESI . . .
ESI contends that, in its Second Amended Complaint, the Fourth Claim
for tortious interference with the Three-Party Agreement is asserted as
an alternative theory for relief in case a jury finds that Coastal Power
is a third party unrelated to that contract*fn87 and that the new
allegations cure the defects found in the Amended Complaint. We agree.
Coastal Power argues, nevertheless, that the new pleading contains
contradictory allegations within Claim Four by virtue of ESI's
reallegation and incorporation (through ¶ 138) of ¶ 129 which
states that "[t]he Three-Party Agreement is a valid contract between ESI
(as Delasa' s assignee), La Casa Castro, Delasa, Trigen, Tenneco (as
Trigen's successor-in-interest) and Coastal Power (as Trigen's and
Tenneco's successor-in-interest)." This argument is without merit.
Fed.R.Civ.P. 8(e)(2) expressly permits a plaintiff to set forth
alternative and even inconsistent statements of a claim, "subject to the
obligations set forth in Rule 11." Although ESI should not have directly
incorporated the contradictory statements contained in prior claims, this
technical error does not require Claim Four to be stricken from the
Second Amended Complaint. Cf. Banque Arabe et Internationale
D'Investissement v. Bulk Oil (USA) Inc., 726 F. Supp. 1411, 1421
(S.D.N.Y. 1989) (refusing to dismiss Count IV solely on basis that it
incorporated by reference alternative allegations made in earlier counts
in violation of rule against asserting multiple theories of recovery in
Coastal Power further argues that ESI cannot allege truthfully or in
good faith that Coastal Power is not a party to the Three-Party
Agreement. Although the importance of this judicial admission on the part
of Coastal Power should not go unrecognized, it is apparent from the
evidence thus far placed before the Court that a jury could find the
contrary to be true. As noted above, the Purchase Agreement through which
Tenneco agreed to assign its interest in the Project was executed by
Coastal Salvador, not Coastal Power.
Lastly, Coastal Power requests that the allegations contained in ¶¶
105, 106 and 179 of the Second Amended Complaint, regarding conspiracy,
be stricken because this Court has previously dismissed all conspiracy
counts alleged against Coastal Power. In ESI I, we dismissed ESI's
independent' conspiracy claims because they were duplicative of ESI's
other tort claims and because New York does not recognize a substantive
tort of conspiracy. 995 F. Supp. at 433-35. In compliance with this
Court's previous order, no independent conspiracy tort claims are
asserted in ESI's Second Amended Complaint. The allegations of
conspiratorial conduct set forth in ¶¶ 105, 106 and 179 are properly
pleaded as part of the Statement of Facts and Ninth Claim seeking an
accounting and the imposition of a constructive trust.
Accordingly, Coastal Power's motion to strike is granted in part and
denied in part.
VI. Tenneco Colorado River Abstention Motion
We recognize that a parallel proceeding between Delasa and Tenneco is
currently pending before the state court in Louisiana for purposes of the
abstention doctrine set forth in Colorado River Water Conservation Dist.
v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976),
however, abstention "is an extraordinary and narrow exception to the duty
of a District Court to adjudicate a controversy
properly before it" and is justified only in "exceptional circumstances"
which are not present here. Village of Westfield v. Welch's, 170 F.3d 116,
121 (2d Cir. 1999) (quoting Colorado River, 424 U.S. at 813, 96 S.Ct.
Abstention is appropriate under Colorado River, only if the balance of
the following factors overcome the strong presumption in favor of
exercising jurisdiction: (1) the assumption of jurisdiction by either
court over any res or property; (2) the inconvenience of the federal
forum; (3) the order in which jurisdiction was obtained; (4) the
avoidance of piecemeal litigation; (5) whether state or federal law
supplies the rule of decision; and (6) whether the state court proceeding
will adequately protect the rights of the party seeking to invoke federal
jurisdiction. See Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp.,
460 U.S. 1, 16, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983); Welch's, 170 F.3d at
This is not an in rem action and does not involve jurisdiction over
property. Tenneco has never suggested that this forum is inconvement.
Further, where, as here, there have been no proceedings on the merits,
and discovery has not yet been completed in state court,*fn89 "the fact
that the state action was commenced before [Delasa filed its cross-claim
against Tenneco] carries little weight." Welch's, 170 F.3d at 122
(quoting Andrea Theatres, Inc. v. Theatre Confections, Inc., 787 F.2d 59,
64 (2d Cir. 1986)). The outcome of the appeal pending in Louisiana
regarding the scope of the Memorandum of Settlement between Delasa and
LCC will not conflict with any proceedings before this Court. If the
appellate court finds that the Memorandum of Settlement somehow includes
Tenneco, the pleadings before this Court can be amended accordingly.
Moreover, Tenneco's concern over the adverse effects of piece-meal
litigation is disingenuous. All parties to the Louisiana litigation have
expressed their desire to consolidate the actions and proceed before this
Court alone, yet Tenneco has refused to cooperate in this endeavor. See
Exs. 11-14 attached to Delasa's Mem. in Opp. to Tenneco's Motion to
Dismiss. Even if we were to dismiss Delasa's cross-claim, we would
"proceed to determine most of the relevant issues anyway due to the
virtually complete overlap with ESI's claims against Tenneco.
Finally, although Delasa's cross-claim does not require the application
of federal law, the majority of the agreements at issue are to be
governed and construed under the laws of the State of New York. And,
perhaps most importantly, unlike the Louisiana action, this action
includes all parties necessary for a full and complete adjudication of
the ownership rights in the Project and the income from the Plant.
Accordingly, Tenneco's motion to dismiss Delasa's Cross-Claim based on
the Colorado River abstention doctrine is denied.
VII. Motions to Dismiss for Failure to State a Claim
The Court's duty in determining a motion to dismiss pursuant to
12(b)(6) is "necessarily a limited one." Hamilton Chapter of Alpha Delta
Phi, Inc. v. Hamilton College, 128 F.3d 59, 62 (2d Cir. 1997). A
complaint should not be dismissed for failure to state a claim "unless it
appears beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief." Padavan v.
United States, 82 F.3d 23, 26 (2d Cir. 1996) (quoting Hughes v. Rowe,
449 U.S. 5, 10, 101 S.Ct. 173, 66 L.Ed.2d 163 (1980)). The issue is not
whether the plaintiff will ultimately prevail, but whether it is entitled
to offer evidence in support of its claims. See Wright v. Ernst & Young
LLP, 152 F.3d 169, 173 (2d Cir. 1998), cert. denied, ___ U.S. ___, 119
S.Ct. 870, 142 L.Ed.2d 772 (1999); Hamilton College, 128 F.3d at 62.
In assessing the legal sufficiency of a claim, the Court may consider
not only the facts alleged in the complaint, but also any document
attached as an exhibit or incorporated by reference, and any matters of
which judicial notice may be taken. See Fed.R.Civ.P. 10(c); Hertz Corp.
v. City of New York, 1 F.3d 121, 125 (2d Cir. 1993); Cortec Indus., Inc.
v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991). All wellpleaded
factual allegations will be accepted as true and all reasonable
inferences must be drawn in favor of the plaintiff. See Wright, 152 F.3d
at 173. However, "if the allegations of a complaint are contradicted by
documents made a part thereof, the document controls." Sazerac Co. v.
Falk, 861 F. Supp. 253, 257 (S.D.N.Y. 1994) (citing Feick v. Fleener,
653 F.2d 69, 75 n. 4 (2d Cir. 1981)).
A. Breach of the Three-Party Agreement and Related Claims: ESI's
Third, Fifth, Sixth and Eleventh Claims; Delasa's Second, Third
and Fifth Claims
Tenneco argues that ESI's and Delasa's breach of contract and related
claims against it must be dismissed as a matter of law because: (1) it is
not and never has been a party to the Three-Party Agreement; and (2) the
Trigen-Tenneco Assignment of the PPA makes it clear that Tenneco never
accepted an assignment of, or assumed Trigen's obligations under, the