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AET Rail Group, LLC v. Siemens Transportation Systems

December 30, 2009


The opinion of the court was delivered by: Michael A. Telesca United States District Judge



Plaintiff AET Rail Group, LLC ("plaintiff" and/or "AET"), brings this diversity action against defendant Siemens Transportation Systems, Inc. ("defendant" and/or "STS"), alleging five causes of action including: breach of contract, quantum meruit, breach of California's "Prompt Payment" laws, theft of intellectual property and tortious interference of plaintiff's relationships with its employees. Originally, plaintiff commenced this action in the Supreme Court of the State of New York by filing a summons and complaint (the "Complaint"). Defendant timely filed a petition for removal based on diversity jurisdiction pursuant to 28 U.S.C. §1332 and as a result the action was removed to this Court. Thereafter, the defendant served and filed an Answer, which included three counterclaims against plaintiff. Upon receipt of the counterclaims, plaintiff served and filed its response to defendant's counterclaims. The defendant thereafter wished to withdraw the counterclaims. Although the defendant believes the counterclaims are meritorious, it does not believe it will be able to sustain its burden of proof as to damages at trial. The plaintiff however, refused to stipulate to a dismissal of the counterclaims in accordance with Federal Rule of Civil Procedure 41(a)(1)(A)(ii) and (c).

Both plaintiff and defendant have filed various motions, which the court will set forth in the order they were filed. Defendant filed a Motion to Withdraw its Counterclaims without prejudice pursuant to Rule Fed.R.Civ.P.41(a)(2). Plaintiff did not directly oppose this motion but filed a Cross-Motion to Dismiss the defendant's first two counterclaims with prejudice*fn1 pursuant to Fed.R.Civ.P 56 and/or 12(c). In addition, plaintiff requests the Court to dismiss defendant's First, Second, Sixth, Seventh and Eighth Affirmative Defenses under Rules 56 and/or 12(c). Plaintiff also asks that the Court strike the "for cause" language in defendant's Answer at paragraphs 18 and 23 pursuant to Rule 12(f). Further, defendant filed a motion for partial Summary Judgment dismissing plaintiff's Second and Fourth Causes of Action, which plaintiff has opposed. The Court will address these motions seriatim.


On October 14, 2003, the California Department of Transportation ("Caltrans") awarded a contract to STS ("Contract #75AO205") for the overhaul of 66 bi-level intercity rail cars. See Docket #16 Plaintiff's Statement of Facts, ¶5 ("PSOF"). The overhaul consisted of HVAC systems, toilets, trucks, wheelchair lifts and floors, at the rate of two cars per month. See id., ¶6. The work pertaining to wheelchair lifts formed a part of the work that defendant sub-contracted plaintiff to perform. See Docket #22 Defendant's Responding Statement of Facts, ¶7 ("Def. Facts"). The defendant hired plaintiff to perform certain work as a sub-contractor in connection with a train car refurbishment project under certain written contracts, purchase orders ("P.O."s) and service orders ("S.O."s). See Docket #17 Defendant's Statement of Facts ("DSOF"), ¶1. The work included refurbishment of wheelchair lifts that were installed in train cars. See id., ¶2. In this regard, the parties entered into sub-contracts as set forth in defendant's contracts numbered #213 and #222, together with addendums. See PSOF, ¶8.

According to the defendant, the work on the wheelchair was governed by a written S.O., which included a "Release of Information" provision. See DSOF, ¶¶3-4.*fn2 Plaintiff disputes defendant's assertion and states that the work on the wheelchair lifts were not only governed by a written S.O., but were also governed by defendant's contract #222 together with plaintiff's revised proposal dated July 7, 2004, which provided the details of the parties' agreement. See Docket #25. Plaintiff's Responding Statement of Facts, ¶1 ("Pltf. Facts"). Plaintiff claims that the S.O. referred to by defendant was to enable the plaintiff to invoice the defendant for the work. However, it was not the parties' agreement. See id. Moreover, plaintiff states that the parties' agreement relating to the wheelchair lift work was as noted in the July 7, 2004 proposal from plaintiff to defendant. See id., ¶2.

In addition, plaintiff contends that the P.O.s included a termination for convenience clause, allowing the defendant to terminate the agreement without cause, upon written notice. See PSOF, ¶11. The clause required that upon such termination, the parties were to use their best efforts to agree by negotiation, within three months, on the amount of payment, if any, to be made to the terminated party. See id. On or about May 2006, after the agreement between the parties had been in effect for approximately two years, defendant decided to accelerate the overhaul project, with the goal of completing the overhaul of a car a week instead of two per month, which was the rate in effect until that time. See id., ¶12. After making the decision to accelerate, plaintiff claims defendant attempted to compel plaintiff's acquiescence to this alteration of the parties' agreement, while refusing to agree to plaintiff's request for additional compensation. See id., ¶14. When plaintiff would not agree to the acceleration of the overhaul project, defendant retaliated by terminating the agreement and transferring plaintiff's work to a local company. See id., ¶15. The termination was effectuated by correspondence dated October 24, 2006 wherein the defendant referred to the inability of the parties to come to an acceptable agreement to accelerate the overhaul as the reason for the termination. See id., ¶16. Following the termination, the parties entered into negotiations, as required and proposed by the defendant in its termination correspondence.


I. STS's Motion for Voluntary Dismissal

Where a plaintiff moves for voluntary dismissal of an action without defendant's consent, the court may grant the motion only "upon such terms and conditions as the court deems proper." Fed.R.Civ.P. 41(a)(2). Where, as here, an answer with counterclaims and motions for summary judgment have been filed, and the plaintiff has refused to stipulate to dismissal of defendant's counterclaims, voluntary dismissal may only be effectuated by order of the court. See Fed.R.Civ.P. 41(a)(2) (court may grant motion for voluntary dismissal only "upon such terms and conditions as the court deems proper."); see also Fed.R.Civ.P. 41(c) (rule applies to counterclaims as well as to plaintiff's claims). The decision whether to grant a Rule 41(a)(2) motion for voluntary dismissal lies within the sound discretion of the court. See Catanzano v. Wing, 277 F.3d 99, 109 (2d Cir.2001). The court's decision should be informed by the following factors: (1) the diligence in bringing the motion; (2) any "undue vexatiousness" on the part of the defendant in this case; (3) the extent to which the suit has progressed, including plaintiff's effort and expense in preparation for trial; (4) the duplicative expense of potential relitigation; and (5) the adequacy of the defendant's explanation for the need to dismiss. See Zagano v. Fordham Univ., 900 F.2d 12, 14 (2d Cir.1990); Catanzano, 277 F.3d at 109-10.

In this case, all the aforementioned factors militate in favor of dismissal. First, STS's conduct in this case has not been unduly vexatious. STS's counterclaims were not baseless or frivolous, nor has STS engaged in any patently dilatory or inappropriate motion practice. There is no suggestion that the counterclaims were so devoid of merit that its only purpose could have been to harass AET. A court can resolve the question of vexatiousness without first holding a trial on the merits of STS's counterclaims. It is not necessary for the Court to show that AET's conduct was blameless to conclude that STS's counterclaims was vexatious to the litigation. In any event, STS's view of the law may be reasonable even if it is not ultimately sustained. Thus, in ruling that STS's conduct has not been vexatious, the court reaches no conclusion concerning whether STS would have prevailed on the merits had these counterclaims been brought forth at trial; instead, the court simply finds that the counterclaims were filed in good faith, and that the legal arguments and litigation strategies employed by STS were neither malicious, nor frivolous, nor otherwise improper.

On the matter of expenses, it does not appear that dismissal of the counterclaims at this juncture would result in duplicative expenses should the counterclaims be re-asserted in the future. At the time the motion was filed, discovery had not yet fully commenced, and a trial date had not been set. Moreover, STS has no expectation of recovering damages from AET based on its voluntary dismissal of the counterclaims. Accordingly, from STS's perspective, there is little point in pursuing and continuing its counterclaims. This explanation is reasonable and betrays no sign of bad faith or ulterior motive. With respect to STS's diligence in bringing the motion for voluntary dismissal, it did not delay in bringing the motion. STS sought voluntary dismissal soon after it filed its Answer with counterclaims when the litigation had barely begun, a scheduling order had just been entered and the parties were serving initial discovery demands. Further, the final Zagano factor-the extent to which the case has progressed-also weighs in favor of dismissal of STS's counterclaims. As mentioned above, discovery has not fully commenced and trial preparation has not begun. The case is still in its early stages and as such the parties have done little (if anything) to prepare for trial. Accordingly, the five Zagano factors weigh in favor of dismissal of the counterclaims. Thus, I find that the conditions of this case favor granting voluntary dismissal.

II. Aet Rail's Cross-Motion For Summary Judgment and/or Judgment on the Pleadings

A. Standards of Review

1. Summary Judgment Standard

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." See Fed. R. Civ. P. 56(c). When considering a motion for summary judgment, all genuinely disputed facts must be resolved in favor of the party against whom summary judgment is sought. See Scott v. Harris, 550 U.S. 372; 127 S.Ct. 1769, 1776 (2007). If, after considering the evidence in the light most favorable to the nonmoving party, the court finds that no rational jury could find in favor of that party, a grant of summary judgment is appropriate. See Scott, 550 U.S. at ---; 127 S.Ct. at 1776 (citing Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-587.

2. Judgment on the Pleadings Standard

In deciding a Rule 12(c) motion, courts apply the same standard as that applicable to a motion to dismiss under Rule 12(b)(6). See Burnette v. Carothers, 192 F.3d 52, 56 (2d Cir.1999). Accordingly, when considering a motion to dismiss under Rule 12(b)(6), a trial court must "accept as true all factual statements alleged in the [Answer and affirmative defenses] and draw all reasonable inferences in favor of the non-moving party," McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir.2007) (citation omitted), although mere "'conclusions of law or unwarranted deductions'" need not be accepted. See First Nationwide Bank v. Gelt Funding Corp., 27 F.3d 763, 771 (2d Cir.1994) (quoting 2A Moore, James William & Jo Desha Lucas, Moore's Federal Practice ΒΆ 12.08, at 2266-69 (2d ed.1984)). Conclusory ...

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