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Momentive Performance Materials USA, Inc. v. AstroCosmos Metallurgical

September 23, 2009

MOMENTIVE PERFORMANCE MATERIALS USA, INC., PLAINTIFF,
v.
ASTROCOSMOS METALLURGICAL, INC.; CARBONE LORRAINE EQUIPEMENTS GENIE CHIMIQUE; AND ABC CORPORATION(S) 1 THROUGH 10, DEFENDANTS.



The opinion of the court was delivered by: Scullin, Senior Judge

MEMORANDUM-DECISION AND ORDER

I. INTRODUCTION

Currently before the Court is Defendant AstroCosmos Metallurgical Inc.'s ("AstroCosmos") motion to dismiss Plaintiff's amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.*fn1 The Court heard oral argument in support of, and in opposition to, this motion on August 13, 2009, and reserved decision. The following constitutes the Court's resolution of the pending motion.

II. BACKGROUND*fn2

In its amended complaint, Plaintiff asserts eight causes of action against Defendant AstroCosmos: (1) breach of the 1999 Purchase Agreement, (2) breach of the 2005 Replacement Agreement, (3) fraudulent inducement pertaining to the 1999 Purchase Agreement, (4) negligent misrepresentation relating to the 1999 Purchase Agreement, (5) professional negligence and engineering malpractice, (6) strict products liability, (7) breach of implied warranties, and (8) breach of express warranties. See Amended Complaint at Counts 1, 2, 3, 4, 7, 8, 9, 10, respectively.

In 1997, the Silicones business unit of General Electric Company ("GE") issued a request for proposal ("RFP") to various potential suppliers for the design, manufacture and installation of a weak acid reactor at GE's Waterford, New York facility. See id. at ¶ 7. In response to the RFP, Defendant AstroCosmos offered to design, manufacture, inspect, test and install a "tantalum- lined weak acid reactor." See id. at ¶ 10. GE informed Defendant AstroCosmos that it would use the weak acid reactor to recover waste hydrochloric acid and convert it for reuse at the Waterford Facility. See id. at ¶ 11. Defendant AstroCosmos represented to GE that it could design, manufacture, inspect, test and install a tantalum-lined weak acid reactor that would perform in a superior manner compared to a brick-lined weak acid reactor. See id. at ¶ 12. Defendant AstroCosmos also represented that a tantalum-lined weak acid reactor could be used to recover and convert waste hydrochloric acid at the required temperatures and pressures for reuse at the Waterford Facility. See id. at ¶ 13. Finally, Defendant AstroCosmos represented several times in writing that it had manufactured several tantalum-lined reactors of the size and type contained in GE's RFP. See id. at ¶ 14.

As a result of their negotiations, Defendant AstroCosmos prepared a final quotation for the design, manufacture, inspection, testing and installation of a tantalum-lined weak acid reactor for GE to convert hydrochloric acid for reuse at the Waterford Facility. See Amended Complaint at ¶ 15. In reliance on the representations and warranties contained in Defendant AstroCosmos' final quotation, GE agreed to purchase a tantalum-lined weak acid reactor from Defendant AstroCosmos. See id. at ¶ 16. Therefore, GE and Defendant AstroCosmos executed an equipment purchase agreement dated October 29, 1999 ("Purchase Agreement") for one tantalum-lined weak acid reactor ("Equipment"); the Purchase Agreement incorporated the final quotation that Defendant AstroCosmos had prepared and required that time was of the essence for the delivery of the Equipment. See id. at ¶ 17.

The Purchase Agreement contained implied warranties of merchantability, fitness for a particular purpose and warranties arising from course of dealing or usage of trade. See id. at ¶ 18. The Purchase Agreement also contained several express warranties, including a performance warranty that the Equipment would perform in accordance with the performance requirements as set forth in the specifications, that the Equipment would be designed and manufactured to conform to the specifications, and that the Equipment would be merchantable, of good material and workmanship, free from defects and fit and sufficient for the intended purpose. See id. at ¶ 19.

Plaintiff is the assignee of all of GE's rights, title and interest in the Purchase Agreement and is the sole member of the current owner in fee simple of the Waterford Facility, MPM Silicones, LLC. See Amended Complaint at ¶ 20. Defendant AstroCosmos delivered and installed one tantalum-lined vessel in April or May 2001. See id. at ¶ 21. Due to Defendant AstroCosmos' fault, the delivery and installation of the tantalum-lined vessel were behind the schedule set forth in the Purchase Agreement. See id. at ¶ 22.

Since its installation in 2001, the tantalum-lined vessel has never functioned according to the terms of the Purchase Agreement and has been shut down on numerous occasions for repair. See id. at ¶ 23. The vessel failed within the first eleven months of operation and had to be shut down for repairs. See id. at ¶ 24. Since that first shut down in April 2002 to the filing of the complaint, the vessel has never operated continuously for a period of more than ten months. See id. at ¶ 25. Defendant AstroCosmos has undertaken several repair attempts on a number of occasions between April 2002 and May 2006. See id. at ¶ 26. Since it installed the vessel in 2001, Defendant AstroCosmos has replaced several parts of the vessel. See id. at ¶ 27. Defendant AstroCosmos paid for the replacement parts and repairs, acknowledging that the problems were due to its conduct and were its responsibility. See id. at ¶ 28.

On repeated occasions in March 2005 and thereafter, Defendant AstroCosmos admitted that the vessel was manufactured in a defective manner and that it could not function for its intended and/or particular purpose. See id. at ¶ 29. In March 2005 and on several occasions thereafter, GE requested that Defendant AstroCosmos replace the vessel. See id. at ¶ 30.

In July 2005, Defendant AstroCosmos modified the Purchase Agreement and provided an additional warranty of future performance for one year from June 2005 that, if the vessel failed within one year, Defendant AstroCosmos would replace the vessel. See Amended Complaint at ¶ 31. The vessel failed shortly after June 2005, and GE asked Defendant AstroCosmos to manufacture and deliver a new vessel. See id. at ¶ 32.

During 2005, GE and Defendant AstroCosmos had several meetings regarding the design, manufacture, inspection, testing, installation and operation of a replacement vessel to be supplied at Defendant AstroCosmos' cost. See id. at ¶ 33. In or around November 2005, GE and Defendant AstroCosmos came to an agreement relating to the replacement vessel ("Replacement Agreement"). See id. at ¶ 34. The Replacement Agreement provided that Defendant AstroCosmos would design, manufacture, inspect, test and install a replacement tantalum-lined weak acid reactor with what Defendant AstroCosmos described as "better technology" and continue to repair the existing vessel until the replacement vessel could be installed. See id. at ¶ 35.

The Replacement Agreement also provided that, in exchange for Defendant AstroCosmos' agreement to provide a new tantalum-lined weak acid reactor and for continuing to repair the existing one, GE would award Defendant AstroCosmos, Defendant Carbone Lorraine Equipements Genie Chimique ("CLEGC") and certain of their affiliates preferred vendor status for identified projects. See id. at ¶ 36.

From November 2005 through May 2006, GE and Defendant AstroCosmos had several meetings about the design, manufacture, inspection, testing, installation and operation of the replacement vessel under the terms of the Replacement Agreement; Defendant AstroCosmos began performance under the terms of the Replacement Agreement; and GE awarded certain projects to Defendant AstroCosmos, Defendant CLEGC and/or certain of their affiliates pursuant to the preferred vendor status arrangement. See id. at ¶ 37. Plaintiff is the assignee of GE's rights, title and interest in the Purchase Agreement and in the Replacement Agreement, see id. at ¶ 38, and is the assignee of all of GE's rights and claims of any nature against any third parties, see id. at ¶ 39.

In or around April 2006, Defendant CLEGC requested an inspection of the existing vessel at the Waterford Facility. See Amended Complaint at ¶ 40. In or around May 2006, Defendants AstroCosmos and CLEGC conducted an inspection of the existing vessel at the Waterford Facility. See id. at ¶ 41. On or about May 18, 2006, Defendant AstroCosmos' repair crew arrived at the Waterford Facility to begin a round of repairs, which Defendant AstroCosmos had estimated would take four to five weeks to complete. See id. at ¶ 42.

In or around June 2006, GE met with Defendants AstroCosmos and CLEGC. At that meeting, Defendants took the position, for the first time, that GE was at fault for the performance failures because of the hydrochloric acid process that GE conducted in the tantalum-lined vessel. See id. at ¶ 43. These were the same performance failures that Defendant AstroCosmos had previously admitted were due solely to its defective manufacturing. See id. After the meeting, Defendant AstroCosmos refused to design, manufacture, inspect and test the replacement tantalum-lined weak acid reactor and refused to continue to repair the existing vessel as required under the terms of the Replacement Agreement. See id. at ¶ 44.

III. DISCUSSION

A. Standard of Review

Rule 8(a)(2) of the Federal Rules of Civil Procedure requires that a pleading contain "a short and plain statement of the claim showing that the pleader is entitled to relief . . . ." Fed. R. Civ. P. 8(a)(2). As the Supreme Court explained in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), Rule 8's pleading standard does not require "detailed factual allegations," but it does require "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action . . . ." Id. at 555 (citations omitted). "Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Ashcroft v. Iqbal, No. 07-1015, - U.S. -, 129 S.Ct. 1937, 1949 (2009) (quoting [Twombly, 550 U.S.], at 557, 127 S.Ct. 1955).

As the Supreme Court explained in Iqbal, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Id. (quoting [Twombly, 550 U.S.], at 570, 127 S.Ct. 1955). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing [Twombly, 550 U.S.], at 556, 127 S.Ct. 1955).

Furthermore, the Court stated that there are "[t]wo working principles [that] underlie [its] decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions . . . [and] [s]econd, only a complaint that states a plausible claim for relief survives a motion to dismiss. . . ." Id. at 1949-50 (internal citations omitted). The Court also stated that

[d]etermining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. . . . But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged -- but it has not "show[n]" -- "that the pleader is entitled to relief." Fed. R. Civ. Proc. 8(a)(2).

Id. at 1950 (internal quotation and citations omitted).

Therefore, the Court instructed that, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id.

Finally, when addressing a motion to dismiss, "the court may, without converting the motion to dismiss into a motion for summary judgment, consider (1) any documents relied on and/or referenced in the complaint (even if those documents are not attached to the complaint, if those documents are provided by defendants in their motion to dismiss) . . . ." Richards v. Goord, No. 9:04-CV-1433, 2007 WL 201109, *5 (N.D.N.Y. Jan. 23, 2007) (footnote omitted).

Applying this two-part plausibility standard to Plaintiff's amended complaint, the Court must now determine whether Plaintiff's claims are sufficient to withstand Defendant AstroCosmos' motion to dismiss.

B. Plaintiff's Tort Claims

"Under New York law, the assignment of the right to assert contract claims does not automatically entail the right to assert tort claims arising from that contract." Banque Arabe et Internationale D'Investissement v. Maryland Nat'l Bank, 57 F.3d 146, 151 (2d Cir. 1995). However, "New York law does not require specific boilerplate language to accomplish the transfer of causes of action sounding in tort." Id. Instead, "'any act or words are sufficient which "show an intention of transferring the chose in action to the assignee."'" Id. at 151-52 (quotation omitted).

Defendant AstroCosmos argues that Plaintiff has not pled "that it received an assignment of any claims other than the breach of contract claims." See Defendant's Memorandum of Law at 20. Despite this assertion, Plaintiff's amended complaint clearly states that it "is the assignee of all of Silicones business unit of GE's rights and claims of any nature against any third parties." See Amended Complaint at ¶ 39 (emphasis added). The Court finds that the use of the phrase "any nature" to define the claims assigned is sufficient to demonstrate an intention to transfer all claims, including those sounding in tort. Therefore, the Court denies Defendant AstroCosmos' motion to dismiss Plaintiff's tort claims on this ground.

C. Count One -- Breach of the Purchase Agreement

A four-year statute of limitations governs claims that arise under New York's Uniform Commercial Code. See Int'l Design Concepts, LLC v. Saks Inc., 486 F. Supp. 2d 229, 240 (S.D.N.Y. 2007) (citing N.Y. U.C.C. § 2-275(1) (McKinney's 1962)). "The general rule is that a cause of action sounding in contract accrues when the act complained of occurs." Zielinski v. Alfa-Laval, Inc., No. CIV-86-296E, 1989 WL 29482, *2 (W.D.N.Y. Mar. 27, 1989) (citation and footnote omitted).

An exception to this general rule is the doctrine of equitable estoppel. "[E]quitable estoppel is invoked in cases where the plaintiff knew of the existence of his cause of action but the defendant's conduct caused him to delay in bringing his lawsuit." Cerbone v. Int'l Ladies' Garment Workers' Union, 768 F.2d 45, 50 (2d Cir. 1985) (citations omitted). For example, plaintiffs have invoked this doctrine "where the defendant misrepresented the length of the limitations period or in some way lulled the plaintiff into believing that it was not necessary for him to commence litigation." Id. (citations omitted).

To support its claim that Defendant AstroCosmos should be equitably estopped from raising a statute-of-limitations defense, Plaintiff argues that, in reliance on Defendant AstroCosmos' promises to repair the defects in the equipment, Plaintiff delayed filing this action. Plaintiff's reliance on this so-called "repair doctrine" is misplaced. As the court noted in Zielinski, this doctrine "has been endorsed in relatively few jurisdictions." Zielinski, 1989 WL 29482, at *4 (citation omitted). Moreover, "such equitable doctrine represents neither a recent nor a vital trend in the law." Id. Furthermore, in Triangle Underwriters, Inc. v. Honeywell, Inc., 604 F.2d 737 (2d Cir. 1979), the court held that "New York . . . hold[s] that attempts by the seller to remedy defects giving rise to the cause of action do not toll the U.C.C.'s four-year period of limitations." Id. at 743 (citing Thalrose v. General Motors, 8 U.C.C. Rep. Serv. 1257, Aff'd. without opinion, 41 A.D.2d 906, 343 N.Y.S.2d 303 (1st Dept. 1973)).

Since Defendant AstroCosmos' alleged breach of the Purchase Agreement occurred in April 2002 and the "repair doctrine" does not toll the applicable limitations period, the Court concludes that Plaintiff's first cause of action for breach of the Purchase Agreement is time- barred; and, ...


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