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Modular Devices, Inc. v. Alcatel Alenia Space Espana

August 12, 2010

MODULAR DEVICES, INC., PLAINTIFF,
v.
ALCATEL ALENIA SPACE ESPANA AND SPACE SYSTEMS/LORAL, INC., DEFENDANTS.



The opinion of the court was delivered by: Seybert, District Judge

MEMORANDUM & ORDER

On March 12, 2009, Plaintiff Modular Devices, Inc. ("MDI") brought this action in the Supreme Court of the State of New York, County of Suffolk. MDI alleges breach of contract against Alcatel Alenia Space Espana ("Alcatel") and tortious interference with contract against Space Systems/Loral, Inc. ("SS/L") ("Alcatel" and "SS/L" collectively, "Defendants"). On April 4, 2008, SS/L removed the action to this Court.

Thereafter, Defendants filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(c), which this Court denied. SS/L now moves for summary judgment pursuant to Federal Rule of Civil Procedure 56. For the reasons that follow, SS/L's motion for summary judgment is DENIED.

BACKGROUND

SS/L is engaged in the business of manufacturing satellites for commercial and governmental customers. (Def's 56.1 Stmt. ¶ 1, D.E. 43.) During 2005, in connection with contracts to produce two such satellites, SS/L entered into two subcontracts with Alcatel and Mier Communicaciones, S.A ("Mier"), a non-party. (Id. ¶ 2.) Both contracts were for the manufacture of certain "electronic modules" (Compl. ¶¶ 4-5) for ultimate use by SS/L. (Id. ¶ 2.) The contract between SS/L and Mier ("SS/LMier contract") stated, in pertinent part:

[s]eller [i.e., Mier] shall defend, indemnify and hold harmless Buyer [i.e., SS/L] and Buyer's Customer, and their respective affiliates, officers, directors, employees, shareholders and agents, from and against all losses, costs, damages, suits, expenses and liabilities (including, but not limited to, Buyer's reasonable attorneys' fees) arising from or related to the actions or omissions of Seller or its employees, agents and/or Lower Tier Subcontractors [e.g., MDI] in the performance of this Subcontract. (Id. ¶ 3) (alterations in original). Thereafter, Alcatel and Mier entered into separate subcontracts with MDI for the manufacture of "DC converters." (Id. ¶ 4.) Alcatel and Mier planned to incorporate these converters into the components they agreed to provide to SS/L. (Id.)

Around April 2006, Mier and Alcatel terminated their contracts with MDI. (Def's 56.1 Stmt. Ex. B, D.E. 43.) MDI alleges that, at the time of termination, it had already performed a substantial amount of work under each of the two contracts. (Id.) Thereafter, MDI commenced an action against Mier ("MDI-Mier Action") claiming that Mier wrongfully and unilaterally terminated its contract with MDI. (Id.) MDI also maintained that Mier persuaded Alcatel to terminate its contract with MDI, thereby tortiously interfering with MDI's contractual relationship with Alcatel. (Id.) The action was settled by stipulation on August 2, 2007. (Def's 56.1 Stmt. ¶¶ 8-9.) The 2007 Settlement Agreement ("Settlement Agreement") states that, "[i]t is hereby stipulated and agreed... that the above captioned matter be and hereby is dismissed, with prejudice." (Id. ¶ 8.)

In March 2008, MDI brought this suit against SS/L and Alcatel. (Id. ¶ 10.) MDI asserts that Alcatel breached its contract by directing MDI to cease production after MDI had performed a "substantial" portion of the contract. (Compl. ¶ 11, D.E. 1.) MDI also maintains that SS/L knew of Alcatel's contract with MDI and "intentionally procured... [Alcatel's] breach." (Id. ¶¶ 22-23.) MDI claims that SS/L gave work that MDI was to perform under its contract with Alcatel to another vendor chosen by SS/L. (Id. ¶¶ 22-23.) This act by SS/L, and the subsequent cancellation by Alcatel of its contract with MDI, is the basis for MDI's allegation against SS/L for tortious interference. (Id. ¶¶ 24-29.) Consequently, MDI seeks $411,823.00 in compensatory damages. (Id. ¶¶ 13, 29.) Damages include $131,591.10 for the sum allegedly due to MDI for products and services already delivered to Alcatel and $280,231.90 for the cost of work in progress. (Id. ¶ 12.) Around April 24, 2006, Alcatel communicated its "final termination charge" offer of $173,000 to MDI. (Id. ¶¶ 20-21.) MDI rejected the offer. (Id.)

SS/L now moves for summary judgment pursuant to Federal Rule of Civil Procedure 56, on the ground that MDI's action against SS/L is barred by the doctrine of res judicata. (Def.'s Mem. Supp. Summ. J. 2, D.E. 43-6.) SS/L argues that MDI's claim against SS/L asserted in this action should have, or could have, been brought against SS/L in the MDI-Mier Action. (Id. at 4.) Therefore, MDI is precluded from bringing its tortious interference claim against SS/L in this action. (Id.) SS/L asserts that the elements of res judicata are satisfied because:

(1) the Settlement Agreement between MDI and Mier was an adjudication on the merits, (2) the indemnification provision in SS/L's contract with Mier created a "relationship akin to privity" between SS/L and Mier, and (3) the MDI-Mier Action was based on the "same factual grouping" as that relied on by MDI in this action. (Id. at 4-11.)

MDI maintains that at the time it arrived at a settlement with Mier, MDI did not have any evidence of SS/L's role as a tortfeasor. (Pl.'s 56.1 Counter-Stmt. ¶¶ 12, 15, D.E. 46-2.) According to MDI, part of the consideration for the Settlement Agreement was Mier's disclosure of evidence revealing the identity of any party that may have induced Mier to breach its contract with MDI. (Id. ¶ 15.) Thus, MDI claims that it was not until after Mier provided MDI with certain documents pursuant to the Settlement Agreement, that MDI had any knowledge of SS/L's tortious conduct. (Id. ¶ 14.)

DISCUSSION

I. Standard of Review

A. Federal Rule of Civil ...


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