United States District Court, Northern District of New York
December 12, 2001
AMERICORP FINANCIAL, INC., PLAINTIFF,
ST. JOSEPH'S HOSPITAL HEALTH CENTER, DEFENDANT.
The opinion of the court was delivered by: Munson, Senior District Judge.
MEMORANDUM-DECISION AND ORDER
On October 15, 1998, defendant St. Joseph's Hospital Health
Center ("St.Joseph's") entered into a Fee for Service Agreement
("the Agreement") with Computer Motion, Inc. ("CMI"). Pursuant
to the Agreement, CMI provided St. Joseph's with endoscopic
surgical equipment and St. Joseph's agreed to purchase a certain
number of "disposables" per month for use with the equipment.
Paragraph 11 of the Agreement allowed CMI to assign the
Agreement to a third party for financing purposes, subject to
St. Joseph's rights under the Agreement.
St. Joseph's and CMI also executed a Renewal/Conversion
Addendum ("Attachment A"). Attachment A applied to the Agreement
and allowed St. Joseph's, under certain circumstances, to return
the equipment and have no further financial obligations to CMI.
On June 19, 1998, CMI and plaintiff Americorp Financial, Inc.
("Americorp") executed a Vendor Program Agreement accompanied by
Schedule A — Assignment of Rights, Title, and Interest ("the
Assignment"). The Assignment was executed in accordance with
Paragraph 11 of the Agreement and it assigned all rights to
payment under the Agreement to Americorp. Following execution of
the Assignment, St. Joseph's performed its payment obligations
to Americorp for a period of many months.
In March 2001, St. Joseph's ceased making payments under the
Agreement. Upon demand for payment, St. Joseph's informed
Americorp that it had discontinued performance under the
Agreement pursuant to Attachment A. Attachment A provides:
Should St. Joseph's Hospital discontinue offering
endoscopic procedures applicable to the use of AESOP
at the end of the first 24 month payment period of
this Fee for Service Agreement, or should your
Equipment not perform to the standards of its proper
labeling, St. Joseph's Hospital may return the
Equipment and have no further financial obligations
for this Fee for Service Agreement, whatsoever.
On August 13, 2001, Americorp filed suit alleging that St.
Joseph's refusal to continue to pay under the Agreement is an
egregious breach of the contract.
Currently before this court is Defendants' motion to dismiss
the complaint pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure on the ground that it fails to state a claim
upon which relief can be granted. Plaintiff has entered
opposition to this motion.
1. Rule 12(b)(6) Standard
A dismissal under Rule 12(b)(6) of the Federal Rules of Civil
Procedure is a dismissal on the merits of the action, a
determination that the facts alleged in the complaint fail to
state a claim upon which relief
may be granted. See Teltronics Services, Inc. v. LM Ericsson
Telecommunications, Inc., 642 F.2d 31, 34 (2d Cir. 1981). Such
a dismissal is appropriate where "it appears beyond doubt that
the plaintiff can prove no set of facts in support of [its]
claim which would entitle [it] to relief." Harris v. City of
New York, 186 F.3d 243, 247 (2d Cir. 1999). Therefore, the
issue before the court on such a motion "is not whether a
plaintiff will ultimately prevail but whether the claimant is
entitled to offer evidence to support the claims." King v.
Simpson, 189 F.3d 284, 287 (2d Cir. 1999). "The task of the
court in ruling on a Rule 12(b)(6) motion is merely to assess
the legal feasibility of the complaint, not to assay the weight
of the evidence which might be offered in support thereof."
Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998) (internal
quotations omitted). Accordingly, in order to decide a
Rule 12(b)(6) motion, the court must accept as true all of the
allegations in the complaint and all reasonable inferences that
can be drawn therefrom, and view them in a light most favorable
to the non-moving party. See Harris, 186 F.3d at 247. However,
a "complaint which consists of conclusory allegations
unsupported by factual assertions fails even the liberal
standard of Rule 12(b)(6)." De Jesus v. Sears, Roebuck & Co.,
87 F.3d 65, 70 (2d Cir. 1996) (internal quotations omitted).
When deciding a Rule 12(b)(6) motion, the court generally
limits itself to the facts stated in the complaint, documents
attached to the complaint as exhibits, or documents incorporated
by reference in the complaint. See Dangler v. New York City Off
Track Betting Corp., 193 F.3d 130, 138 (2d Cir. 1999). If the
court looks to additional materials, the motion should be
converted into a motion for summary judgment. See Hayden v.
County of Nassau, 180 F.3d 42, 54 (2d Cir. 1999). However,
where the court simply refers to supplementary materials, but
does not rely to them or use them as a basis for its decision,
the 12(b)(6) motion is not converted into a motion for summary
judgment. See id. With this standard in mind, the court turns
to the sufficiency of plaintiffs claim.
2. Breach of Contract Claim
It is well-settled under New York law that to establish a
claim for breach of contract, a plaintiff must prove the
following elements: (1) the existence of a contract; (2) breach
by the other party; and (3) damages suffered as a result of the
breach. See Terwilliger v. Terwilliger, 206 F.3d 240, 245-46
(2d Cir. 2000). In pleading such a claim, plaintiff must provide
specific allegations as to an agreement between the parties, the
terms of that agreement, and what provisions of the agreement
were breached as a result of the acts at issue. See Levy v.
Bessemer Trust Co., N.A., 1997 WL 431079, at *5 (S.D.N.Y. July
30, 1997). The court should construe plaintiffs allegations
liberally because Rule 8 of the Federal Rules of Civil Procedure
only requires general or "notice" pleading, but liberal
construction has its limits. See 2 JAMES WM. MOORE ET AL.,
MOORE'S FEDERAL PRACTICE ¶ 12.34[b], at 12-60 to 12-61 (3d
ed. 1999). "[T]he pleading must at least set forth sufficient
information for the court to determine whether some recognized
legal theory exists on which relief could be accorded the
pleader. If it fails to do so, a motion under Rule 12(b)(6) will
be granted." Id.
In the present case, Americorp alleges in its complaint that
St. Joseph's failed to make the payments required under the
terms of the Agreement and is in default pursuant to Paragraph
13 of the Agreement. Americorp claims that St. Joseph's failure
to pay under the terms of the Agreement constitutes a breach of
As stated above, the court may consider documents attached to
complaint as exhibits when deciding a motion to dismiss.
Accordingly, the court has reviewed the Agreement, Attachment A,
the Assignment, and a letter dated June 19, 2001 from Donald L.
Nicholas, Esq., counsel to St. Joseph's, to CMI and Americorp.
There is no dispute that the Agreement is valid or that it was
assigned properly to Americorp. The issue is whether St.
Joseph's breached the Agreement by terminating the payments to
Americorp. Therefore, the claim turns on the applicability of
Attachment A to the Agreement and whether St. Joseph's acted
appropriately when it terminated payments in May 2001 pursuant
to the language of Attachment A.
In its complaint, Americorp alleges that Attachment A was
executed solely between CMI and St. Joseph's, and that it had no
knowledge of Attachment A at the time of assignment. Each of
these allegations are irrelevant to Americorp's current claim.
After examining the Agreement and Attachment A, the court
finds that the Agreement and Attachment A were executed
contemporaneously to create a contract for the purchase of a
certain number of "disposables" for use with endoscopic surgical
equipment. This conclusion was reached for a number of reasons.
First, each was signed on October 15, 1998 by Clifton D.
Leonard, Sales Administration Manager of CMI, and Gene F.
Morreale, Executive Vice-President/Chief Operating Officer of
St. Joseph's. Additionally, Attachment A specifically states at
the top of the document that "THIS RENEWAL/CONVERSION ADDENDUM A
IS VALID FOR ST. JOSEPH'S HOSPITAL, SYRACUSE, NEW YORK ONLY."
Finally, Attachment A states that "The following Renewal and
Conversion Terms apply to St. Joseph's Hospital's Fee for
Service Agreement. This Addendum will serve as Attachment A."
On the basis of the foregoing language, the court finds that CMI
and St. Joseph's intended Attachment A to apply exclusively to
the Agreement and to create a valid and potentially-assignable
contract. Therefore, the contract as a whole, including the
Agreement and Attachment A, was assigned to Americorp pursuant
to the Assignment and Americorp's allegation that Attachment A
was executed solely between CMI and St. Joseph's is irrelevant
to the current claim.
Likewise, Americorp's claim that it did not have any knowledge
of the existence of Attachment A at the time of assignment is
irrelevant to its current claim of breach of contract.
Regardless of whether or not CMI provided Americorp with a copy
of Attachment A, it is a part of the contract executed between
CMI and St. Joseph's, and later assigned to Americorp.
Therefore, Americorp's knowledge at the time of the assignment
is irrelevant to its claim that St. Joseph's failure to pay
under the terms of the Agreement constitutes a breach of
The court now turns to the question of whether St. Joseph's
acted appropriately when it terminated payments in May 2001
pursuant to the language of Attachment A. As stated above,
Attachment A allows St. Joseph's to return the equipment without
further financial obligation under the Agreement if it
"discontinue[s] offering endoscopic procedures applicable to the
use of AESOP at the end of the first 24 month payment period."
In his letter to CMI and Americorp, Mr. Nicholas, on behalf of
St. Joseph's, states:
St. Joseph's Hospital has fully completed the first
24 month payment period under the Agreement, and
currently offers no endoscopic procedures for which
the use of AESOP is applicable. As stated in the
aforementioned correspondence, and specifically in
the January 9, 2001 letter to Mr. Candino, the
physicians of St. Joseph's Hospital have altered the
rendering the AESOP inapplicable. Any use of the
AESOP in current endoscopic procedures could
seriously jeopardize patient safety.
In its Memorandum of Law in Response to Defendant's Motion to
Dismiss, Americorp disputes the veracity of Mr. Nicholas'
statement for the first time and alleges, "upon information and
belief, [St. Joseph's] terminated the Agreement because it no
longer desired to use the equipment, not because [St. Joseph's]
no longer provides endoscopic procedures." Americorp has not
presented the court with an affidavit setting forth any
evidentiary allegations to show that St. Joseph's termination of
the Agreement was improper.
Under Rule 12(b)(6), "the well-pleaded material allegations of
the complaint are taken as admitted; but conclusions of law or
unwarranted deductions of fact are not admitted." First
Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 771 (2d
Cir. 1994) (quoting 2A MOORE & LUCAS, MOORE'S FEDERAL PRACTICE ¶
12.08, at 2266-69 (2d ed. 1984)). The court finds that
Americorp's allegation that St. Joseph's expressed reason for
termination is untrue constitutes an impermissible deduction of
fact. Americorp failed to even raise the allegation in its
complaint. Once it did raise the allegation in its Memorandum of
Law, Americorp failed to provide even a minimal factual
assertion necessary to meet the liberal standard of
Rule 12(b)(6). Therefore, Americorp has failed to support this
allegation in support of its breach of contract claim.
On the basis of the foregoing reasons, the court finds that
Americorp has failed to state a claim upon which relief may be
granted. Although Americorp established the existence of a
contract, it failed to establish a breach of that contract. The
documents attached to the complaint provide a sufficient factual
basis for dismissal of the complaint. St. Joseph's termination
of the Agreement based upon the fact that they no longer offer
endoscopic procedures utilizing the AESOP equipment was
permissible according to the terms of Attachment A. Since
Attachment A applied exclusively to the Agreement and together a
valid contract was formed, St. Joseph's actions do not
constitute a breach of contract and dismissal of the complaint
for failure to state a claim is warranted.
CONCLUSION WHEREFORE, for the foregoing reasons, it is
ORDERED, that defendant's motion to dismiss is GRANTED and
the complaint is hereby DISMISSED in its entirety. It is
ORDERED, that the Clerk of Court serve a copy of this
Memorandum — Decision and Order upon the parties by regular
IT IS SO ORDERED.
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