This case was referred to Magistrate Judge Hugh B. Scott on March 29, 2007. Third-party defendant Federal-Mogul Corp. ("Federal-Mogul") moved to dismiss the third-party complaint filed against it by GS1 US, Inc. ("GS1"), and GS1 opposed the motion. On June 18, 2007, Magistrate Judge Scott issued a report and recommendation recommending that the motion to dismiss be granted.
GS1 filed objections to the report and recommendation and Federal-Mogul filed a response urging the Court to deny the objections and adopt the report and recommendation. While the objections were pending, GS1 moved for leave to file an amended third-party complaint.
On August 6, 2007, the Court heard oral argument on the objections and directed Federal-Mogul to respond to GS1's motion for leave to file an amended third-party complaint. On August 17, 2007, Federal-Mogul filed a brief opposing GS1's motion and arguing that amendment of GS1's third-party complaint would be futile. GS1 filed a reply on August 24, 2007 and the matter was deemed submitted. In the interim, both Federal-Mogul and GS1 consented to stay discovery pending resolution of this issue. See Motion to Stay Discovery, Dkt. 43.
For the purposes of this Decision and Order, the Court assumes familiarity with facts underlying this litigation, the parties' respective arguments and Magistrate Judge Scott's report and recommendation.
I. Objections of Report and Recommendation
Pursuant to 28 U.S.C. §636(b)(1), this Court must make a de novo determination of those portions of the report and recommendation to which objections have been made. Upon a de novo review, and after reviewing the submissions of the parties, the Court hereby adopts Magistrate Judge Scott's report and recommendation and grants Federal-Mogul's motion to dismiss the third-party complaint for the reasons stated by Magistrate Judge Scott.
II. Leave to Amend the Third-Party Complaint
As noted, GS1 seeks leave to amend its third-party complaint to correct the deficiencies identified in Magistrate Judge Scott's report and recommendation. Federal-Mogul opposes the motion to amend arguing that amendment is futile.
A motion to amend is governed by Rule 15(a) of the Federal Rules of Civil Procedure, which states that "[t]he court should freely give leave when justice so requires." Fed.R.Civ.P. 15(a). However, a court may deny a motion to amend "for good reason, including futility, bad faith, undue delay, or undue prejudice to the opposing party." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007) (citing Forman v. Davis, 371 U.S. 178, 182 (1962)).
A motion to amend may be denied as futile if the amendment would not withstand a motion to dismiss pursuant to Rule 12(b)(6). See Oneida Indian Nation of New York v. City of Sherill, 337 F.3d 139, 168 (2d Cir. 2003), rev'd on other grounds, 544 U.S. 197 (2005). To survive a 12(b)(6) motion, a complaint need only include enough facts to state such a claim "that is plausible on its face." Bell Atlantic Corp. v. Twombly, --- U.S. ----, 127 S.Ct. 1955, 1974 (2007). The allegations offered by the plaintiff "must be enough to raise a right to relief above the speculative level." Id. at 1965.
Federal-Mogul argues that amendment of the complaint is futile because GS1 cannot prevail on a negligent misrepresentation theory. The parties dispute whether New York or Ohio law applies to GS1's negligent representation claim. GS1 claims that Ohio law governs, while Federal-Mogul relies upon the law of New York. Like the Magistrate Judge, this Court finds it unnecessary to determine whether Ohio or New York law applies to GS1's negligent misrepresentation claim because, even applying the more stringent New York standard (as urged by Federal-Mogul), the Court finds that leave to amend should be granted.
The elements for a negligent representation claim under New York law are that:
(1) the defendant had a duty, as a result of a special relationship, to give correct information; (2) the defendant made a false representation that it should have known was incorrect; (3) the information supplied in the representation was known by the defendant to be desired by the plaintiff for a serious purpose; (4) the plaintiff intended to rely and acted upon it; and (5) the plaintiff reasonably relied on it to his or her detriment. See Hydro Investors, Inc. v. Trafalgar Power, Inc., 227 F.3d 8, 20 (2d Cir. 2000) (citing King v. Crossland Savs. Bank, 111 F.3d 251, 257-58 (2d Cir. 1997) and Eiseman v. State of New York, 70 N.Y.2d 175, 187 (1987)).
Federal-Mogul argues that GS1 cannot satisfy the "special relationship" element of its negligent misrepresentation claim because, according to Federal-Mogul, their relationship was "nothing other than an ordinary business relationship." See ...