The opinion of the court was delivered by: LAWRENCE KAHN, District Judge
MEMORANDUM DECISION AND ORDER*fn1
The Court is now faced with opposing summary judgment motions in the
above captioned matter. First, Plaintiff Rondout Valley Central School
District ("RVCSD" or "School District") seeks summary judgment that
Coneco Corporation ("Coneco") has breached the contract between them.
Second, all of the defendants, except Coneco, seek summary judgment
dismissing them as parties to this action. For the reasons that follow,
each motion is granted in part and denied in part.
(a) Basis of RVCSD's summary judgment motion
RVCSD filed the instant action alleging that Conceco breached its
agreement under the parties' Guaranteed Savings Energy Management
Agreement ("Agreement"), which resulted in damages of over $3 million.*fn2
On June 23, 1997, RVCSD and Coneco signed and entered into the
Guaranteed Savings Energy Management Agreement ("Agreement"). No other
corporate entities signed the Agreement under which, in an effort to
reduce the School District's energy expenses, Coneco was to provide
construction services, equipment installation, a lighting retrofit,
energy savings management, asbestos abatement services, to RVCSD, with
two schools receiving new roofs, as well.
RVCSD's summary judgment motion, which will be considered first, asks
the Court to hold Coneco in breach because several installed components
are not functioning properly, and Coneco has failed to provide energy
management services and maintain other systems pursuant to the
Agreement. RVCSD claims that it is undisputed that Coneco is in default
because in answering the motion, "Coneco does not contend that it has
fulfilled its obligations under the contract." RVCSD Mem. (Dkt. No. 58)
at 4. Coneco, in replying to RVCSD's cross-motion for summary judgment,
states that summary judgment is not appropriate because there are genuine
issues of material fact. For example, Coneco claims that in pursuing a
"massive school $15.1-million capital construction project," RVCSD
violated the Agreement because "written approval for that project was
never obtained by plaintiff from Coneco. . . ." Coneco Mem. (Dkt. No. 59)
at 3. (b) Basis of the Moving Defendants' summary judgment motion
Because Coneco is now dissolved and insolvent,*fn3 Def. Statement of
Facts (Dkt. No. 42) at ¶ 36, RVCSD asks the Court to pierce the
corporate veils of Coneco's parent and affiliated corporations.
Generally, RVCSD contends that it was misled to believe that a contract
with Coneco is a contract with Boston Edison Company ("Boston Edison"),
and as such, piercing the corporate veils to Boston Edison and its
affiliated corporations is warranted.
RVCSD named Boston Edison as a defendant because at the time of the
contract Coneco was a wholly owned subsidiary of Boston Edison and
"officers of Defendant Boston Edison . . . stated and represented to
members of [the School District's] Board of Education that [Coneco] was
financially secured by the assets of Defendant Boston Edison. . . ."
Complaint (Dkt. No. 1) at ¶ 3. RVCSD named the remaining defendants,
NSTAR, BEC Energy, Commonwealth Energy Systems, BEC Newco, Inc., and
Boston Energy Technology Group, Inc.*fn4 ("BETG"), because they "are
affiliated with or are successors in interest to [Coneco and Boston
Edison] and are legally responsible for the antecedent debts of [Coneco]
and Defendant Boston Edison Company." Complaint (Dkt. No. 1) at ¶ 5.
The second summary judgment motion that will be considered is filed by
BETG, BEC Energy, Inc., Commonwealth Energy System, BEC Newco, Inc.,
NSTAR, and Boston Edison (collectively "Moving Defendants"). Notice of Motion (Dkt. No. 40).*fn5
Coneco was the only defendant to the action which does not join in this
summary judgment motion. The Moving Defendants contend that summary
judgment should be granted in their favor because they did not cause the
damage suffered by RVCSD and, because the distinct corporate forms were
strictly maintained, the Court should not pierce the corporate veils to
reach their assets.
The facts that are material to the disposition of these motions
will be stated in the discussions below.
Federal Rule of Civil Procedure 56 provides that summary judgment is
proper when "the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law." Fed.R. Civ. P. 56(c); Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986). In applying this standard,
courts must "`resolve all ambiguities, and credit all factual inferences
that could rationally be drawn, in favor of the party opposing summary
judgment.'" Brown v. Henderson, 257 F.3d 246, 251 (2d Cir. 2001) (quoting
Cifra v. Gen. Elec., Co., 252 F.3d 205, 216 (2d Cir. 2001)).
Once the moving party meets its initial burden by demonstrating that no
material fact exists for trial, the nonmovant "must do more than simply
show that there is some metaphysical doubt as to the material facts."
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586
(1986) (citations omitted). The nonmovant "must come forth with evidence
sufficient to allow a reasonable jury to find in her favor." Brown,
257 F.3d at 251 (citation omitted). Bald assertions or conjecture
unsupported by evidence are insufficient to overcome a motion for summary
judgment. Carey v. Crescenzi, 923 F.2d 18, 21 (2d Cir. 1991); W. World
Ins. Co. v. Stack Oil, Inc., 922 F.2d 118, 121 (2d Cir. 1990).
(b) Breach of the Agreement
First, the Court will take up RVCSD's motion for summary judgment and
determine whether either party breached its obligation under the
Agreement, as the question of corporate liability, the basis of the
Moving Defendants' summary judgment motion, is only relevant if there was
The Court will first consider whether Coneco breached its contractual
obligations to RVCSD. Actions constituting Coneco's default are provided
for in Section 25.2 of the Agreement:
A. The standard of service and comfort set forth in
"Schedule G" are not provided due to failure of
CONECO to maintain, repair, or adjust the Equipment
as set forth in "Schedule A", "Monitoring and
Reporting Agreement", and said failure continues for
thirty (30) days after written notice to CONECO
without good faith effort by CONECO to make the
necessary repairs or adjustments.
B. Any representation or warranty furnished by CONECO
in this Agreement is false or misleading in material
respect when made; and C. Any other material failure of CONECO to perform or
comply with the terms and conditions of this
Agreement, including breach of any covenant contained
herein, provided that such failure continues for
thirty (30) days, after written notice to CONECO
demanding that such failure to perform be cured or, if
cure cannot be affected in such thirty (30) days,
without commencement of a cure and subsequent
completion thereof as quickly as is reasonably
RVCSD's complaint lists the contractual obligations that Coneco has
allegedly breached: (1) the co-generators never worked correctly, and
Coneco has failed to repair them, (2) Coneco failed to maintain the
air-handling units, (3) "Coneco has failed to maintain other systems in
the District as specified by the terms of the Contract, [which] has
resulted in additional expense to the District both in maintenance costs
and the loss of energy efficiency," (4) Coneco has failed to provide
energy management services, and (5) Coneco has failed to replace faulty
lights installed in the lighting retrofit. Complaint (Dkt. No. 1) at ¶
To comply with the notice provision of Section 25 of the Agreement, on
October 15, 1999 and May 10, 2000, RVCSD sent written notices to Coneco
that it was in default of the Agreement. Letter of Marilyn O. Pirkle
(Dkt. No. 58, Attached to Affirmation of Leah Murphy as Ex. B); Letter of
Mario Spagnuolo (Dkt. No. 58, Attached to Affirmation of Leah Murphy as
Pursuant to the Agreement, co-generators were to be installed at
Rondout Valley High School and Rondout Valley Middle School. Agreement
(Dkt. No. 1, Ex. A) at Schedule G. Donald Gilligan, Coneco's 30(b)(6)
deponent, testified that the installed co-generator units "functioned[,]
though intermittently." Gilligan Dep. Tr. (Dkt. No. 56, Ex. 8) at 62. The
question, then, is whether installation of "intermittently" working
co-generators satisfies Coneco's obligation under the Agreement. The Agreement provides a "Co-Generation Warrantee [sic]" which
states, in the first paragraph:
Coneco warrants that all materials installed shall be
new high quality equipment, which meet or exceed
industry standards. Coneco shall insure that all
materials are free from defect at the time of
Agreement (Dkt. No. 1, Ex. A) at Schedule A2 (emphasis
As evidence that it fulfilled its obligations to install co-generators
that were free from defect at the time of installation, Coneco points to
the "Certificate of substantial completion" that RVCSD signed. (Dkt. No.
60, Ex. AA). Some courts have held that execution of a certificate of
substantial completion does not necessarily indicate "acceptance." See,
e.g., In re Rokmin, 1998 U.S. App. LEXIS 26000 (2d Cir. 1998) (upholding
lower court's ruling that "the certificates of substantial
completion . . . did not signal final acceptance by the owner"). However,
in the present case, the Agreement refers to the certificate as a
"Certificate of Substantial Completion and Acceptance".*fn6
Agreement (Dkt. No. 1, Ex. A) at § 5.2 (emphasis added). Moreover,
the certificate specifically states that its execution signifies that
"the [S]chool [D]istrict can occupy or utilize the project, except
designated portions thereof, for the use for which it was intended."
(Dkt. No. 60, Ex. AA). Such language indicates that upon installation,
RVCSD accepted the work, and the co-generators initially operated as
required, thus satisfying the first paragraph of the "co-generation
warrantee [sic]" provided in Schedule A2, as cited above.
The parties dispute who was to perform the extended maintenance on the
co-generators. If Coneco was to maintain the units after installation,
then it has breached its obligation by allowing the co-generators to operate only "intermittently." However, if RVCSD is
responsible for their long term maintenance, then Coneco has not breached
its obligations by failing to keep them in repair. With respect to the
extended maintenance of the co-generators, the second paragraph of the
"Co-generation Warrantee [sic]" in Schedule A2 provides that:
All material and equipment installed in connection
with the Project shall be covered under an extended
maintenance Contract for the duration of the
[Agreement]. Agreement (Dkt. No. 1, Ex. A) at Schedule
Not surprisingly, both Coneco and RVCSD point to other provisions in
the Agreement in an attempt to impute the extended maintenance warranty
of Schedule A2 to the other party.
Coneco contends that this statement alone provides "no indication . .
. as to which party will procure such extended maintenance contracts,"
Coneco Mem. (Dkt. No. 59) at 8, but goes on to point to §§ 8, 14, and
Schedule H to support its position that RVCSD is charged with the
co-generators' extended maintenance.
Coneco claims that RVCSD is responsible for procuring the extended
maintenance contract mentioned in Schedule A2 because the Agreement
indicates that "[c]ustomer [RVCSD] agrees that it shall adhere to,
follow, and implement the procedures and . . . maintenance set forth in
`Schedule A2' and `Schedule H'. . . ." Agreement (Dkt. No. 1, Ex. A) at
§ 8. This statement does not indicate, though, whether RVCSD must
implement maintenance services itself or simply allow the work to be
performed by an outside entity, such as Coneco, at its facilities.
Coneco also points to Schedule H, which is entitled "Customer Support
Responsibilities." Schedule H states that the "customer [RVCSD] agrees to
provide the following information and undertake the actions listed" which
includes "[o]ngoing, for the term of the [A]greement . . .
[r]eplacement/repair of equipment damaged, stolen, or vandalized" and
also "[r]equired maintenance of equipment." Agreement (Dkt. No. 1, Ex. A) at Schedule H.
Schedule H seems to impute some maintenance obligations to RVCSD, but the
provision is unclear as to what the "required maintenance" was and whether
RVCSD had an affirmative obligation to perform such maintenance or simply
provide information to Coneco when such actions were necessary.
Finally, Coneco relies on Section 14 of the Agreement in support of its
position that RVCSD is responsible for the extended maintenance of the
co-generators. This section, entitled "Warranty" states that "Customer
[RVCSD] shall incur no cost for service, repairs, or adjustments to the
equipment for a one year period commencing on the execution of [the
Certificate of Substantial Completion and Acceptance]." Agreement (Dkt.
No. 1, Ex. A) at § 14 (emphasis added). Coneco reasonably posits that
this provision indicates that it had maintenance obligations for only one
year, and thereafter, maintenance responsibilities became RVCSD's. This
statement alone does not support Coneco's position that RVCSD is liable
for the failure of the co-generators, though, because a question of fact
remains, namely, whether the co-generators failed prior to the expiration
of the one year period.
RVCSD, of course, contends that the long term maintenance of the
co-generators is imputed to Coneco under the Agreement, pointing to
Coneco's own admissions, and its failure to so comply is a breach. As
RVCSD first points out, it is "nonsensical" that "[RVCSD] entered into
the Agreement with [Coneco] and that [RVCSD] agreed to provide [to
itself] extended warranties for 15 years." RVCSD Mem. (Dkt. No. 58) at
6. Additionally, Coneco, without specifying the nature of the services,
has admitted that it was required to perform certain maintenance
services. Coneco's Reply Statement of Facts (Dkt. No. 61) at ¶ 7 ("The
project record indicates that Coneco provided maintenance serves as
required by the [Agreement] until approximately the end of year 2000") (citations omitted) (emphasis added). Coneco has also admitted that there
are services that will come due in the future which it will not perform.
Id. In fact, in its brief opposing RVCSD's summary judgment motion,
Coneco characterizes the Agreement as one "for construction-related
activities, maintenance obligations, and an energy savings guaranty."
Coneco Mem. (Dkt. No. 59) at 7 (emphasis added). Finally, in a memorandum
that Philippe Frangules sent to Donald Gilligan,*fn7
dated December 1,
1998, Mr. Frangules wrote that the project was:
[N]ot producing guaranteed savings, because the cogen
system is not working consistently. Cogen system under
warranty, and negotiations with the manufacturer are
underway. Substantial maintenance expenses apparently
not budgeted. No escrowed funds to cover maintenance
Dkt. No. 56, Ex. 35 (emphasis added).
These admissions lend support to RVCSD's position that the Agreement
intended that Coneco would provide extended maintenance for the
There are other provisions in the Agreement that are relevant to this
discussion, although not discussed in detail by the parties. For
example, the Agreement also specifies that "Customer [RVCSD] shall
provide access to the Facilities for Coneco and its contractors or
subcontractors during regular business hours, or such other hours as may
be agreed upon by Coneco and Customer, in order to fulfill Coneco's
obligations to install and complete the requirements of `Schedule D' and
`Schedule G' hereof and for the continued operation, maintenance, and
repair of the equipment subsequent to the completion of installation."
Agreement (Dkt. No. 1, Ex. A) at § 12.
In contrast, the Energy Savings Guarantee [sic] Certificate in
Schedule F implies that RVCSD will perform the extended maintenance mentioned in Schedule A2,
because it states that the energy savings guaranty provided by Coneco
will be canceled upon "Customer [RVCSD's] failure to maintain the
Projects [sic] equipment as agreed in `Schedule A2' . . . (if Customer
[RVCSD] elects to maintain Projects [sic] equipment). Agreement (Dkt.
No. 1, Ex. A) at Schedule F, ¶ 4.
In the present case, as a matter of law, the Agreement is ambiguous
with respect to which party is obligated to provide extended maintenance
of the co-generators because, as explained above, the extended
maintenance is imputed to RVCSD in some provisions and to Coneco in
others. See AFBT-II, L.L.C. v. Country Vill. of Mooney Pond, Inc.,
305 A.D.2d 340, 341-42 (N.Y.App. Div. 2003) (explaining that whether the
meaning of a contract term is ambiguous is a question of law for the
court) (citations omitted). The interpretation of this ambiguous
provision is, therefore, a question of fact, one which, as explained
above, the parties dispute. See Manchester Tech., Inc v. Didata, Inc.,
303 A.D.2d 726, 757 N.Y.S.2d 439 (N.Y.App. Div. 2003) ("`While the
meaning of a contract is ordinarily a question of law, when a term or
clause is ambiguous and the determination of the parties' intent depends
upon the credibility of extrinsic evidence or a choice among inferences to
be drawn from extrinsic evidence, then the issue is one of fact.'")
When there is an ambiguous contract provision, the meaning of which
becomes an issue of fact, summary judgment must be denied. See, e.g.,
Envtl. Safety & Control Corp. v. Board of Educ., Camden Cent. Sch.
Dist., 179 A.D.2d 1012 (N.Y.App. Div. 1992) (denying summary judgment
where question of fact remained based on ambiguity in contract provision
relating to the amount of asbestos abatement work that was to be
performed for the school district). From the submissions of the parties,
the Court cannot resolve this factual question. The Agreement provisions
are ambiguous, and, significantly, neither party has submitted the "extended
maintenance Contract" that was referenced in Schedule A2 of the
Agreement, if, in fact, one exists. Even if no "extended maintenance
Contract" exists, there is still a question of fact, because the
Agreement's provisions are ambiguous as to which party was obliged to
enter into such a Contract. Therefore, because a question of a material
fact remains based on the ambiguous warranty provision in Schedule A2 of
the Agreement, summary judgment is not warranted.
The Agreement required that "Multi-Zone Roof Top Air Handlers" be
installed into Rondout Valley Middle School and Rosendale Elementary.
Agreement (Dkt. No. 1, Ex. A) at Schedule G. In its complaint, RVCSD
alleges that "Coneco has failed to maintain the air-handling units.
Although Coneco did not install these units, Coneco was required to
maintain these units. Presently all of the units need to be replaced."
Complaint (Dkt. No. 1) at ¶ 44(b). Schedule A2 provides a warranty for
the "Central Air-Handling Units":
Coneco warrants that all materials installed shall be
new high quality equipment, which meet or exceed
industry standards. Coneco shall insure that all
materials are free from defect at the time of
All manufacturers warrantees [sic] shall be in effect
from the time of installation to the published
expiration date of such warranties.
Agreement (Dkt. No. 1, Ex. A) at Schedule A2.
RVCSD signed the Certificate of Substantial Completion, which, as
explained above, is the School District's acknowledgment that the
air-handling units initially operated as required. As for the extended
maintenance, Coneco points to the testimony of RVCSD's 30(b)(6) witness,
Jerome Plaza, who stated that the Agreement required RVCSD to maintain
the units after manufacturers' warranties expired. Plaza Tr. (Dkt. No.
56, Ex. 6) at 171. Plaza also asserted, however, that Coneco "never corrected" all of the problems with the units. Id. Therefore,
because there is a remaining question of fact whether the air-handling
units were malfunctioning prior to the expiration of the manufacturers'
warranties, it is not clear which party was responsible for their
repair. As such, summary judgment must be denied.
(iii) Energy management services
With respect to RVCSD's claim that Coneco has failed to provide energy
management services pursuant to the Agreement, no questions of ...