The opinion of the court was delivered by: GEORGE DANIELS, District Judge
Plaintiff brings suit alleging breach of contract, breach of
express and implied warranties, negligence, and fraudulent
misrepresentation. Defendant Comtrade Corporation ("Comtrade")
asserted cross-claims against Agri-Mark, Inc. ("Agri-Mark") and
Berkshire Dairy and Food Products, Inc. ("Berkshire"). Defendant
Agri-Mark filed a motion to dismiss plaintiff's complaint and
Comtrade's cross-claims pursuant to Fed.R.Civ.P. 12(c). For
the reasons stated below, defendant Agri-Mark's motion to dismiss
Plaintiff Inter Impex S.A.E. ("Inter Impex") is an Egyptian
corporation that imported skim milk powder into Egypt. Plaintiff
alleges that in December of 1997, it entered into an agreement
with defendants Comtrade and Berkshire to purchase 175 metric
tons of skim milk powder ("Agreement"). Subsequently, defendants
Comtrade and Berkshire invoiced plaintiff for this shipment. On
December 18, 1997, pursuant to this Agreement, plaintiff provided
a letter of credit for $309,750 payable to Comtrade for the
shipment made on or before December 31, 1997. Plaintiff alleges
that payment of this letter of credit "was assigned to defendants
Berkshire and Agri-Mark for the Shipment." Complaint at 3, ¶ 10.
Thereafter, the shipment was made in containers carrying 7000
bags of skim milk powder as per the packing list. Plaintiff
claims that the packing list indicated that the milk powder was "padded in
the three-ply paper bags with polyliner of 25 kgs. net each" and
that the product was produced by Agri-Mark, Inc. Id. at 3, ¶
11. The shipment arrived in Egypt on January 27, 1998 and was
discovered damaged on February 12, 1998. Plaintiff claims that
the damage to the shipment was due to improper packaging in
violation of the Agreement and letter of credit. Id. at 3, ¶
Inter Impex filed suit against defendants Comtrade, Berkshire
and Agri-Mark on January 7, 2000. Defendant Comtrade subsequently
asserted cross-claims against defendants Agri-Mark and Berkshire.
Comtrade alleges that it entered into an agreement with
"Berkshire for the purchase of the Shipment in December 1997 to
be manufactured, packaged and shipped to Plaintiff by
Cross-Defendants in compliance with the rules, regulations and
requirements of the Commodity Credit Corporation and the United
States Department of Agriculture ("USDA")." Comtrade's Answer and
Cross-Claims at 6, ¶ 26. Comtrade further maintains that
Berkshire and Agri-Mark employed a forwarding agent to prepare
the packing list and weight list who subsequently "misdescribed
the packaging of the Shipment provided and shipped by" Berkshire
and Agri-Mark. Id. at 6, ¶¶ 28-29. Comtrade alleges that the
shipment was, in fact, not shipped with a polyliner and that the
packing and closure of the bags provided by Berkshire and
Agri-Mark were not in accordance with the agreement of purchase,
invoices, Letter of Credit or the rules, regulations,
requirements and standards of the USDA or for export packaging.
Id. at 6, ¶ 29-30. Comtrade argues that Berkshire and Agri-Mark
are to be held liable for all of plaintiff's claims and,
therefore, must indemnify Comtrade for any liability.
Plaintiff Inter Impex and cross-claimant Comtrade assert four
causes of action against defendants Berkshire and Agri-Mark
including: breach of contract; breach of express and implied warranty; negligence; and fraudulent misrepresentation. In its
motion to dismiss, Agri-Mark argues that it was not a party to
plaintiff's contract with Comtrade and Berkshire and therefore
cannot be held liable for breach of contract. Agri-Mark asserts
that any negligence claim must be dismissed because plaintiff's
complaint and defendant Comtrade's cross-claim only allege
damages resulting in `economic loss.' Agri-Mark argues that
allegations of economic loss are insufficient to maintain a cause
of action under a theory of express or implied warranty. Lastly,
Agri-Mark asserts that plaintiffs and Comtrade have not
sufficiently pled a fraudulent misrepresentation claim.
Plaintiff Inter Impex and cross-claimant Comtrade submitted a
joint memorandum of law in opposition to Agri-Mark's motion and
further moved to amend their pleadings.
In evaluating a motion for judgment on the pleadings, this
Court accepts the allegations in the complaint as true and will
construe them in the light most favorable to the non-movant. See
King v. Am. Airlines, Inc., 284 F.3d 352, 355 (2d Cir. 2002).
All reasonable inferences will be drawn in favor of that party.
See Patel v. Searles, 305 F.3d 130, 134-35 (2d Cir. 2002). "A
complaint will only be dismissed if it appears beyond doubt that
the plaintiff can prove no set of facts in support of his claim
which would entitle him to relief." Id. at 135 (internal
quotations omitted), quoting Conley v. Gibson, 355 U.S. 41,
Plaintiff's first cause of action alleges that the "improper
packaging was in violation of the Agreements and letter of credit
by the Defendants." Complaint at 3, ¶ 13. Plaintiff, however, has
failed to allege that defendant Agri-Mark was a party to that
Agreement. On the contrary, plaintiff has specifically alleged that it "entered into an
agreement unto Defendants Comtrade and Berkshire for the
purchase of 175 metric tons 3% of skim milk powder. . . ."
Id. at 2, ¶ 7 (emphasis added). Plaintiff has also failed to
allege that Agri-Mark was a party to the letter of credit,
stating instead that "Plaintiff provided its letter of credit in
the amount of $309,750.00 payable to Defendant Comtrade." Id.
at 3, ¶ 9 (emphasis added).*fn1 In Alaska Textile Co., Inc.
v. Chase Manhattan Bank, N.A., 982 F.2d 813 (2d Cir. 1992), the
Second Circuit described the basic function of letters of credit
In its classic form, the letter of credit is only one
of three distinct relationships between three
different parties: (1) the underlying contract for
the purchase and sale of goods between the buyer
("account party") and the seller ("beneficiary"),
with payment to be made through a letter of credit to
be issued by the buyer's bank in favor of the seller;
(2) the application agreement between the bank and
the buyer, describing the terms the issuer must
incorporate into the credit and establishing how the
bank is to be reimbursed when it pays the seller
under the letter of credit; and (3) the actual letter
of credit which is the bank's irrevocable promise to
pay the seller-beneficiary when the latter presents
certain documents . . . that conform with the terms
of the credit. The great utility of the letter of
credit derives from the fact that these three
relationships are utterly independent of one another.
Id. at 815. Plaintiff in the present case fails to allege that
Agri-Mark acted as either the account party, the beneficiary, or
the bank in the creation of the letter of credit. Cross-claimant
Comtrade likewise fails to allege that Agri-Mark was a party to
either the purchase agreement or the letter of credit.
Rather, plaintiff Inter Impex and cross-claimant Comtrade rely
solely on Inter Impex's sole allegation that "the letter of
credit was assigned to the Defendants Berkshire and Agri-Mark for
the Shipment." Id. at 3, ¶ 9. This claim, however, is bald,
conclusory and unsupported by any factual allegations of a specific assignment agreement. An
assignment is a separate agreement between the assignor and the
assignee which merely transfers the assignor's contract rights,
leaving them in full force and effect as to the party charged.
Citibank, N.A. v. Tele/Resources, Inc., 724 F.2d 266, 269 (2d
Cir. 1983) (citing Molina v. Barany, 56 N.Y.S.2d 124, 132
(1945). Plaintiff fails to allege any such agreement. Plaintiff
attempts to support this conclusory allegation by submitting the
declaration of Fouad Abouelezz, cross-claimant Comtrade's
president. In his declaration, Abouelezz asserts that the "Letter
of Credit was assigned and paid to the Defendants Berkshire and
Agri-Mark for Shipment. See Robbins collection letter to the
bank (Exhibit 4)." Declaration of Fouad Abouelezz Pursuant to
FRCP Rule 12(c) and 15 at 3, ¶ 8. Upon examination, however, the
Robbins Fleisig Forwarding, Inc. letter attached as Exhibit 4,
upon which cross-claimant Comtrade relies, does not identify
defendant Agri-Mark as the assignee of the letter of credit.
Indeed, Agri-Mark is not named in the entire document.
Even if plaintiff had sufficiently alleged the existence of an
assignment agreement, plaintiff and cross-claimant still fail to
allege that they were a party to such an agreement, giving them
privity with defendant Agri-Mark, or that Comtrade transferred
their beneficiary status under the letter of credit to Agri-Mark
and, therefore, were owed duties by Agri-Mark. Plaintiff's sole
allegation of assignment does not specify whether plaintiff is
alleging an assignment of the proceeds of the letter of credit or
a transfer of the letter of credit. "The distinction between
transfer of a letter of credit and assignment of the proceeds is
significant, for a transfer effectuates a more complete change.
The transferee is effectively substituted for the original
beneficiary, an assignment of proceeds, by contrast, changes only
the party entitled to receive payment of the proceeds." Die-Matic Tool Company v.
Advanced Air Support Services, Inc., ...