of some misleading conduct on the part of the principal — not
the agent." In Matter of Claim of Bruckner v. Hartford Acc. and Indem.
Co., 239 A.D.2d 806, 807, 657 N.Y.S.2d 514, 514 (1997). The "existence of
apparent authority is normally a question of fact, and therefore
inappropriate for resolution on a motion for summary judgment." Graffman
v. Delecea, 1997 WL 620833, at *4 (S.D.N.Y. Oct. 8, 1997).
Defendant argues that William Sullivan and Edmond Nolin lacked the
apparent authority to amend the ESLA in 1994. It references the deposition
testimony of Arthur Lennon, EUA's former vice president, who stated that
he knew it was "customary for school districts to bring matters of this
type to the board for approval." (Hamell Aff. at Exh. 6 (Lennon Dep.) at
62.) Plaintiff disputes that Lennon stated at any point that he knew that
the contract would not be valid and binding absent board approval.
Accordingly, the record reveals the existence of issues of fact as to
whether Nolin had implied authority to enter the contract on behalf of
2. Estoppel and Ratification
But even if Nolin did not have apparent authority to enter into
the 1994 Amendment to ESLA, defendants are estopped from asserting lack
of authority, because they performed under the amended contract for four
A governmental agency may be subject to estoppel if it is shown
that a manifest injustice resulted from actions taken by the agency in
its proprietary or contractual capacity. See Branca v. Board of
Education, 239 A.D.2d 494, 495-96, 657 N.Y.S.2d 445, 445 (N.Y.App. Div.
1997). Such actions must induce justifiable reliance by a party who then
changes position to his or her detriment. See id. (citing Allen v. Board
of Educ., 168 A.D.2d 403, 404, 563 N.Y.S.2d 422 (N.Y.App. Div. 1990).) As
a general rule, "where a governmental subdivision acts or comports itself
wrongfully or negligently, inducing reliance by a party who . . . changes
his position to his detriment or prejudice, that subdivision should be
estopped from asserting a right or defense which it otherwise could have
raised." Bender v. New York City Health and Hospitals Corp., 38 N.Y.2d 662,
668, 382 N.Y.S.2d 18, 345 N.E.2d 561 (1976); Henry Boeckmann, Jr. &
Assocs. v. Board of Education, 207 A.D.2d 773, 616 N.Y.S.2d 395 (1994)
Defendant relies on In Re Dayho Motel v. Assessor of the Town of
Orangetown, 229 A.D.2d 435, 645 N.Y.S.2d 87 (N.Y.App. Div. 199 6) for the
proposition that any reliance by EUA on Nolin's ability to sign the 1994
amendment on the District's behalf was unreasonable based on past
dealings. It seems possible, even likely, that Lennon — who had
done prior contracting on behalf of EUA with school boards — had
actual knowledge that Nolin lacked the requisite authority to enter into
the contract. In response to a question about whether the school board
needed to review and approve the contract with EUA, Lennon responded: "It
was discussed at the meeting that it would get presented to the board."
(Lennon Dep. at 63.)
However, the District will be bound by the amendment if, with actual or
imputed knowledge, it ratified Nolin's actions. See Prisco v. State of
New York, 804 F. Supp. 518, 523 (S.D.N.Y. 1992) ("Ratification of the
acts of an agent only occurs where the principal has full knowledge of
all material facts and takes some action to affirm the agent's
actions."). In Prisco, the court held that a state entity can ratify acts
of its agents by knowingly enjoying the benefits of those acts, even if
the acts were unauthorized at the time they were made. See id. at 523.
Affirmance of the intent to ratify may be inferred from "knowledge of the
principal coupled with a failure to timely repudiate, where the party
seeking a finding of ratification has in some way relied upon the
principal's silence . . ." Trustees of Am. Fed. of Musicians and Empls.
Pension Fd. v. Steven Scott Enterprises,
Inc., 40 F. Supp.2d 503, 511 (S.D.N.Y. 1999) (quoting Monarch
Ins. Co. Ohio v. Ins. Corp. of Ireland, Ltd., 835 F.2d 32, 36 (2d Cir.
1987); J.M. Heinike Assocs., Inc. v. Chili Lumber Co., 83 A.D.2d 751,
443 N.Y.S.2d 512, 513 (N.Y.App. Div. 1981) ("[A]ffirmance may be inferred
from silence when, in the normal course of affairs, one who does not wish
to consent would speak out.")). From 1994 until June 1, 1998, each
monthly payment made by the District to EUA was approved by the
District's Director of Facilities the Superintendent for Business, and
the Board of Education. (Hammel Aff. at Exh. 5).
Defendant also cites A.C. Transp., Inc. v. Board of Education,
253 A.D.2d 330, 337, 687 N.Y.S.2d 1 (N.Y.App. Div. 1999) for the
proposition that "the defense of estoppel (or ratification, acquiescence
or laches) `cannot be invoked against a governmental agency to prevent it
from discharging its statutory duties.'" Id. (quoting In Re New York
State Medical Transp. Assoc., Inc. v. Perales, 77 N.Y.2d 126,
564 N.Y.S.2d 1007, 566 N.E.2d 134 (1990)). While the New York Court of
Appeals in Perales indeed held that estoppel claims foreclosed "in all but
the rarest cases," it dismissed a claim for ratification on different
grounds than are present in this case. The Court held that there was no
ratification because that the principal did not know of the material
facts concerning allegedly binding transaction; that there was no showing
that the principal knew of and condoned the agent's practice; the record
did not demonstrate that principal retained benefits from the
petitioners; and that the underlying contract was illegal, and thus,
unenforceable. See Perales, 77 N.Y.2d at 131, 564 N.Y.S.2d 1007,
566 N.E.2d 134.
In A.C. Transp., 253 A.D.2d at 337, 687 N.Y.S.2d 1, a local Board of
Education asserted estoppel defenses (brought as affirmative claims) to
the recoupment of funds paid to it by the New York State Education
Department for transportation contracts. The State contended that it had
overpaid the local Board of Education — based on an incorrect
methodology — and sought to recoup the funds. See id. at 335,
687 N.Y.S.2d 1. The Board of Education had already paid school bus
operators pursuant to the Education Law, and argued that "principles of
estoppel prevent the State Education Department from recouping
overpayments." Id. The Appellate Division disallowed the Board of
Education to pursue the claim against the State Education Department, and
disallowed a similar claim by the school bus operators against the Board
of Education, because they would have interfered with a governmental
agency's ability to discharge its responsibility for complying with state
law governing rates of compensation for such contracts. See id. The court
noted that in order to discourage fraud on a massive scale, estoppel
claims against a government agency will only be considered in the rarest
cases. See id. at 337, 687 N.Y.S.2d 1.
The case at bar presents a different situation. The District's agent
Nolin may not have had actual or apparent authority to sign the 1994
Amendment on the District's behalf. However, the District acted on that
contract, remitting over $100,000 of overdue payments from a period prior
to the amendment, and continuing to pay the fixed rate of $15,315 per
month for nearly four years afterward. The District therefore had to know
of Nolin's actions, see Prisco v. State of New York, 804 F. Supp. 518,
523 (S.D.N.Y. 1992), took action to ratify them by consistently paying
EUA under the amended contract until 1998, and did not repudiate the
contract in a way that would be anticipated by one who does not wish to
consent. See Trustees of the Am. Fed of Musicians and Empls. Pension Fd.
v. Steven Scott Enterprises, Inc., 40 F. Supp.2d 503, 511 (S.D.N.Y.
1999). Furthermore, neither party has alleged that the underlying
contract was of an illegal nature, see Perales, 77 N.Y.2d at 131,
564 N.Y.S.2d 1007, 566 N.E.2d 134,
that the District was prevented from carrying out statutory duties, see
A.C. Transp., 253 A.D.2d at 337, 687 N.Y.S.2d 1, nor was there any
allegation of fraud. See id.
As a result of the District's ratification of Nolin's action, the
District is estopped from denying that the 1994 amendment served as part
of the ESLA.
c. The Integrated Contract Terms
The 1994 Amendment adds the following Section 4 of the ESLA, pertaining
to "Payment Method (Energy Savings)":
Customer agrees to make One (1) payment in the amount
of $99,999.95 which Customer and Cogenex agree
represents the amount currently owing under the
Agreement and is due upon execution of this Amendment
by Customer; and Customer agrees to make One Hundred
Fifty-Four (154) consecutive monthly payments each in
the amount of $15,315.00 commencing with the invoice
for the billing period of May 20 through June 20,
1994. This payment amount shall remain fixed
throughout the Term of the Agreement. The value of any
additional units of energy saved will be retained by
the customer. . . . The effect of this First Amendment
shall be the same as if the Agreement had been correct
originally and in all other respects, all of the terms
and conditions of the above captioned Agreement shall
remain in full force and effect.
(Hammel Aff. at Exh. 18.)
The parties dispute the effect of the Amendment on the ESLA. Prior to
the Amendment, "[t]he amount of payment made by [the District] for energy
savings shall be equal to 0% for year 1, 60% for years 2 through 4, 55%
for years 5 through 10 and 50% for years 11 through 15 of the savings as
shown on the ECR each month for a term of 15 years." (ESLA, Hammel Aff.
at Exh. 2.) Despite changing the measurement terms, after the 1994
Amendment, all other terms of the ESLA "remain in full force and
The question of whether the District's agreement to move to a
flat-rate payment scheme relieved EUA from providing the "promised"
savings is a material fact for a jury to consider. This court is
empowered to resolve ambiguity in contractual language as a matter of law
if the evidence about the parties' meaning is so one-sided that no
reasonable person could decide to the contrary. See Compagnie Financiere
De Cic Et De L'UNION Europeenne, Management Invest. Funding Ltd v.
Merrill Lynch, Pierce, Fenner & Smith Inc., 232 F.3d 153, 157-58 (2d
Cir. 2000). And summary judgment will be granted only where the language
of the contract is wholly unambiguous. See id.
There is sufficient ambiguity in the language of the amended ESLA to
deny plaintiffs motion for summary judgment. The ESLA is a contract
requiring EUA "to survey, install, maintain and control Energy
Conservation Equipment" for the purpose of reducing energy consumption at
District schools. (ESLA, ¶ 1.) As originally conceived, EUA was to be
paid as a percentage of the energy savings by the District. (Id. ¶
4(a).) The District bore the responsibility of sending on monthly
electric bills to EUA for calculation of "the exact amount due and
payable and the difference between such amount and the amount previously
billed." (Id. ¶ 13.)
The defendant alleges that the flat-payment as specified in the
Amendment did not relieve EUA of its responsibility to provide energy
savings at a certain level. However, by changing the terms of the ESLA,
the parties created an ambiguity as to EUA's performance requirements
under the contract. Furthermore, after the Amendment, EUA removed its
measuring equipment from the District's premises, which made calculation
of energy savings impossible. For the foregoing reasons, I conclude that
there remain material facts in dispute regarding the terms of the
ESLA on which reasonable minds could disagree.
Plaintiffs motion for summary judgment is therefore denied.
2. Covenant of Good Faith and Fair Dealing
Under New York law, there is a covenant of fair dealing and
good faith implied in all contracts. See Carvel Corp. v. Diversified
Mgmt. Group, 930 F.2d 228, 230 (2d Cir. 1991). "The boundaries set by the
duty of good faith are generally defined by the parties' intent and
reasonable expectations in entering the contract." Cross & Cross
Properties, Ltd. v. Everett Allied Co., 886 F.2d 497, 502 (2d Cir.
1989). In addition, "[a] claim for breach of the implied covenant will be
dismissed as redundant where the conduct allegedly violating the implied
covenant is also the predicate for breach of covenant of an express
provision of the underlying contract." ICD Holdings S.A. v. Frankel,
976 F. Supp. 234, 243-44 (S.D.N.Y. 1997); Geler v. National Westminster
Bank USA, 770 F. Supp. 210, 215 (S.D.N.Y. 1991) (same); Murphy v.
American Home Prods. Corp., 58 N.Y.2d 293, 461 N.Y.S.2d 232, 448 N.E.2d 86
(1983) (holding that the implied obligation is simply "in aid and
furtherance of other terms of the agreement of the parties.")
Such a claim may be brought, if at all, only if it is based on
allegations different than those underlying the accompanying breach of
contract claim. See Siradas v. Chase Lincoln First Bank, 1999 WL 787658,
*6 (S.D.N.Y. Sept. 30, 1999).
Plaintiff argues that the District breached the covenant by failing to
pay amounts due and owing under the ESLA. Plaintiff does not charge that
this claim is different than the claims underlying the breach of contract
action, see id., so it is plainly duplicative. Accordingly, Defendant's
motion for summary judgment on the breach f the covenant of good faith
and fair dealing claim is granted.
3. Unjust Enrichment
In order to prevail on a theory of unjust enrichment, "the
plaintiff must demonstrate that (a) the defendant has been enriched; (b)
the enrichment was at the plaintiffs expense; and (c) defendant's
retention of the benefit would be unjust." Van Brunt v. Rauschenberg,
799 F. Supp. 1467 (S.D.N.Y. 1992) (quoting Hutton v. Klabal,
726 F. Supp. 67, 72 (S.D.N.Y. 1989)); see also Mayer v. Bishop,
158 A.D.2d 878, 551 N.Y.S.2d 673 (3d Dep't), appeal denied, 76 N.Y.2d 704,
559 N.Y.S.2d 983, 559 N.E.2d 677 (1990).
The existence of a valid and enforceable written contract
governing a particular subject matter ordinarily precludes recovery in
quasi-contract for events arising out of the same subject matter. See
Clark-Fitzpatrich, Inc. v. Long Island R.R. Co., 70 N.Y.2d 382, 388,
521 N.Y.S.2d 653, 656, 516 N.E.2d 190 (1987) (citing Blanchard v.
Blanchard, 201 N.Y. 134, 138, 94 N.E. 630 (1911)). A "quasi contract"
only applies in the absence of an express agreement, and is not really a
contract at all, but rather a legal obligation imposed in order to
prevent a party's unjust enrichment. See Parsa v. State, 64 N.Y.2d 143,
148, 485 N.Y.S.2d 27, 474 N.E.2d 235 (1984). The New York Court of
Appeals in Clark-Fitzpatrick stated that:
Quasi contracts are not contracts at all, although
they give rise to obligations more akin to those
stemming from contract than from tort. The contract is
a mere fiction, a form imposed in order to adapt the
case to a given remedy. Briefly stated, a
quasi-contractual obligation is one imposed by law
where there has been no agreement or expression of
assent, by word or act, on the part of either party
involved. The law creates it, regardless of the
intention of the parties, to assure a just and
Clark-Fitzpatrick, 70 N.Y.2d at 388, 521 N.Y.S.2d 653, 516 N.E.2d 190
Bradkin v. Leverton, 26 N.Y.2d 192, 196, 309 N.Y.S.2d 192, 195,
257 N.E.2d 643, 645).
It is impermissible to seek damages in an action sounding in quasi
contract where the suing party has fully performed on a valid written
agreement, the existence of which clearly covers the dispute between the
parties. See id. It is only available where the services alleged are
sufficiently outside the terms of the contract, see id.; D'Accord Fin.
Servs. v. Metsa — Serla Oy, 1999 WL 58916 (S.D.N Y Feb. 8, 1999),
or where there is a bona fide dispute as to the existence of a contract.
See Joseph sternberg, Inc. v. Walber 36th St. Assoc., 187 A.D.2d 225, 228
594 N.Y.S.2d 144, 146 (1993).
The governing document in this case is the ESLA. Plaintiff alleges
that it fully performed under ESLA and its 1994 Amendment, which is part
of the governing agreement between the parties as a matter of law. There
is no allegation that the services provided by plaintiff were outside the
contract, see D'Accord, 1999 WL 58916 at *3, nor is there a bona fide
dispute as to the existence of a governing contract. See Sternberg, 187
A.D.2d at 228, 594 N.Y.S.2d 144. EUA cannot seek damages in an action
sounding in quasi contract, because the suing party is alleging that it
fully performed on a valid written agreement which covers the dispute
between the parties. See id. Accordingly I grant summary judgment for
defendant on the unjust enrichment claim.
4. Counterclaim under N.Y Gen Bus. L § 349
New York law prohibits the use of deceptive acts or practices in
the conduct of any business, trade or commerce or in the furnishing of
any service. N.Y.Gen. Bus.Law § 349. As a threshold matter,
plaintiffs claiming the benefit of Section 349 must charge conduct of the
defendant that is consumer-oriented — namely, that the acts or
practices have a broader impact on consumers at large. See Oswego
Laborers' Local 214 Pension Fd. v. Marine Midland Bank, 85 N.Y.2d 20,
25, 623 N.Y.S.2d 529, 647 N.E.2d 741 (1995). "To state a claim under this
section, a plaintiff must allege that (1) defendant has engaged in an act
or practice that is deceptive or misleading in a material way, and (2)
plaintiff has been injured by reason thereof. The first element requires
that a reasonable consumer would have been misled by the defendant's
conduct." S.Q.K.F.C., Inc. v. Bell Atlantic Tricon Leasing Corp.,
84 F.3d 629, 636 (2d Cir. 1996) Generally, claims under the statute are
available to an individual consumer who falls victim to
misrepresentations made by a seller of consumer goods through false or
misleading advertising. See Genesco Entertainment v. Koch,
593 F. Supp. 743, 751 (S.D.N.Y. 1984).
In Oswego, 85 N.Y.2d at 25, 623 N.Y.S.2d 529, 647 N.E.2d 741, the
plaintiff union desired to open certain interest earning savings accounts
with the defendant bank. However, the defendant's representative
allegedly opened less advantageous accounts, causing the union to lose
more than $30,000 in interest. See id. In reinstating the union s
consumer fraud claim, the Court of Appeals noted that in enacting General
Business Law § 349, the Legislature sought to protect the consuming
public from deceptive practices aimed at them. See id. The court further
noted that the practices proscribed by the statute were those likely to
have a broader impact on consumers-at-large and that a plaintiff must
prove that the defendant acted deceptively in a meaningful way, resulting
in injury to the consumer. See id. Though cognizant of a potential flood
of litigation, the court concluded that insofar as the bank allegedly
steered the union into a less advantageous account without providing full
disclosure of the pertinent facts, the plaintiff alleged a viable claim
of consumer fraud. See id.
Although ostensibly directed at "any business," Section 349 is in
"directed at wrongs against the consuming public." Id. at 24-25,
623 N.Y.S.2d 529, 647 N.E.2d 741. The threshold requirement of
consumer-oriented conduct is met by proof that "the acts or practices
have a broader impact on the consumer at large" in that they are
"directed to consumers" or "potentially affect similarly situated
consumers." Id. at 25-27, 623 N.Y.S.2d 529, 647 N.E.2d 741. Judge
Weinfeld's opinion in Genesco Entertainment v. Koch, 593 F. Supp. 743
(S.D.N.Y. 1984), is still instructive:
The typical violation contemplated by the statute
involves an individual consumer who falls victim to
misrepresentations made by a seller of consumer goods
usually by way of false and misleading advertising.
The consumer oriented nature of the statute is
evidenced by the remedies it provides. . . . The New
York cases where plaintiffs have recovered under
section 349(h) further reflect its consumer
orientation since they uniformly involve transactions
where the amount in controversy is small. That the
deceptive practices this statute seeks to combat
involve recurring transactions of a consumer type is
further supported by the origin of the statute.
Section 349(h) is substantially modeled on the Federal
Trade Commission Act.
Genesco Entertainment, 593 F. Supp. at 751-52 (citations omitted).
The District has made no showing that the contract for the
provision of energy-saving equipment is "consumer-oriented" under §
349, nor could it under current case law. Although business-to-business
transactions could in some rare cases have a wide enough impact on
consumers to justify a § 349 claim, see Oswego, 85 N.Y.2d at 25-26,
623 N.Y.S.2d 529, 647 N.E.2d 741, it is well established that "[p]rivate
contract disputes, unique to the parties . . . would not fall within the
ambit of the statute." See Parex Bank v. Russian Savings Bank,
116 F. Supp.2d 415, 428 (quoting New York Univ. v. Continental Ins. Co.,
87 N.Y.2d 308, 320, 639 N.Y.S.2d 283, 662 N.E.2d 763 (1995)). See, e.g.,
Spirit Partners, L.P. v. audiohighway.com, No. 99 Civ. 9020, 2000 WL
685022, *7 (S.D.N.Y. May 25, 2000) (finding no § 349 claim for
securities transactions); Barroso v. Polymer Research Corp. of America,
80 F. Supp.2d 39, 43 (W.D.N.Y. 1999) (no § 349 claim for
manufacturer's action against chemical company); Sheth v. New York Life
Insurance Co., 273 A.D.2d 72, 709 N.Y.S.2d 74, 75 (2000) (finding no
§ 349 claim for act of life insurance company against prospective
life insurance agents).
At issue in the present case is a fifteen year contract, negotiated
with the assistance of counsel, involving over $1 million in Equipment.
The District therefore cannot prove the first element of a § 349
claim, that EUA's alleged deceptive practices were "consumer oriented."
Plaintiffs motion for summary judgment of Defendant's counterclaim
under § 349 is granted. As a result, the Court need not address the
other elements of § 349 or whether the District's claim was filed
within the relevant statute of limitations period.
There remains one single issue to be tried before a jury: whether the
District should be held liable for breach of contract under the ESLA and
its 1994 Amendment.
This constitutes the decision and order of the Court.
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