The opinion of the court was delivered by: William M. Skretny Chief Judge United States District Court
This lawsuit arises from a stalled housing project on the City of Buffalo's East Side. From 2007 to 2009, Plaintiffs NRP Holdings LLC and NRP Properties LLC (collectively "NRP"),*fn1 two intertwined housing development corporations, were working with the City of Buffalo on a project to build and manage 50 subsidized homes in the Masten and Cold Springs neighborhoods in the City of Buffalo. After each side had taken significant steps towards the project's completion, the City backed discontinued its involvement, allegedly because NRP rebuked Mayor Byron Brown's attempts to involve his political ally Richard Stenhouse, and Stenhouse's company, Jeremiah Partnership for Community Development, Inc. ("Jeremiah Partnership"), in the project.
NRP now brings claims against the City and several of its ranking employees under state contract and tort law, the Racketeer Influenced and Corrupt Organizations Act ("RICO"), and the United States Constitution. The City has moved to dismiss those claims in their entirety.*fn2 (Docket No. 26.) After briefing on the City's motion to dismiss concluded, NRP moved for leave to file a second amended complaint, refining their claims and seeking to add the City of Buffalo Urban Renewal Agency ("BURA") as a defendant. That motion also seeks to strike Defendants' reply thereto. For the following reasons, Defendants' motion to dismiss is granted in part and denied in part; and NRP's motion to amend is granted; its motion to strike the City's reply, however, is denied as moot.
As an initial matter, this Court must first address NRP's motion to further amend its complaint. Leave to amend is freely granted when justice so requires. See Fed. R. Civ. P. 15(a)(2). "This mandate is to be heeded." Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 9 L. Ed. 2d 222 (1962). But "there is a difference between freedom and license," Abram v. City of Buffalo, 2008 WL 5191675, at *5 (W.D.N.Y. Dec. 10, 2008) (quoting CL-Alexanders Laing & Cruickshank v. Goldfeld, 739 F. Supp. 158, 167 (S.D.N.Y.1990)), and the decision whether to grant leave to amend remains within the court's discretion, id. (citing John Hancock Mut. Life Ins. Co. v. Amerford Int'l Corp., 22 F.3d 458, 462 (2d Cir. 1994).
Employing that discretion, this Court finds that NRP should be permitted to amend its complaint. Although the motion is opposed by Defendants, the proposed amendments affect them only slightly. Moreover, Defendants have had an opportunity -- which they seized -- to respond to the allegations contained in the proposed second amended complaint. Thus, they will not be unduly prejudiced by the amendment. Although this Court finds that several of the proposed additions are simply legal conclusions, and therefore futile,*fn3 the proposed complaint does contain sufficient material to warrant the granting of NRP's motion. Accordingly, Defendants' motion to dismiss will be construed as against the second amended complaint.*fn4
As for NRP's desire to add BURA, having made their motion before discovery has commenced, this Court finds no undue delay or bad faith on NRP's part. To the extent that BURA may contend that this Court's present findings apply equally to it, it is free to bring a future motion citing this Court's present Decision and Order in support of that prospective motion.
Facts alleged in NRP's second amended complaint -- but not labels or legal conclusions -- must be accepted as true for the purposes of resolving this motion. See Ashcroft v. Iqbal, 556 U.S. 662, 668, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009); ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).
The events leading to this litigation began in November of 2007 when the City expressed its desire to work with NRP in constructing affordable single-family homes within the City limits.*fn5 (Second Am. Compl., ¶ 21; Docket No. 37-2.) NRP contends that an agreement to this end was formalized through a February 25, 2008 letter composed by Timothy Wanamaker, the Executive Director of Buffalo's Office of Strategic Planning. (Id., ¶ 23.) In that letter, Wanamaker wrote to NRP:
This letter is to confirm that the Buffalo Urban Renewal Agency has earmarked $1,600,000 of the City's HOME funds for the  project that consists of construction of fifty (50) units of single-family homes in the Masten Park and Cold Springs neighborhoods of the City of Buffalo. (Wanamaker Letter, attached as "Ex. A" to Am. Compl.; Docket No. 22-1.) After describing the details of the plan -- including the "lease-to-own" component, the City's promise to offer its "usual Low-Income Housing Pilot Agreement," and the City's commitment to provide 51 vacant lots at a price of $2,000 per lot -- Wanamaker noted, "This commitment letter is only valid if the developer is successful in securing a 2008 Low-Income Housing Tax Credit allocation to complete the project." (Id.) He concluded, "Of course, BURA is required to meet all applicable Federal, State, and local rules and regulations before issuance of HOME funds to eligible recipients."*fn6 (Id.)
It appears from the complaint that this letter prompted NRP to begin taking the project's requisite preliminary steps. On August 20, 2008, NRP obtained the crucial low-income-housing tax credits from the New York State Division of Housing and Community Renewal. (Second Am. Compl., ¶¶ 28, 29; Tax Credit letter, attached as "Ex. B" to Am. Compl.) NRP also secured a low-interest loan for the project. (Second Am. Compl., ¶ 30.) The City, itself, took preliminary steps: It selected location sites for the planned homes. (Id., ¶ 33.) And the Buffalo Planning Board approved NRP's site plan, design, and elevations for the project. (Id., ¶ 34.)
According to NRP, however, progress was interrupted beginning in early 2009 when Mayor Brown imposed "significant stipulations" on the project, including that NRP "'find a role for . . . the Jeremiah Partnership from the East Side.'" (Id., ¶ 36) (ellipses in original). Shortly thereafter, on March 30, 2009, the Mayor's Office contacted NRP and "demanded that it let them know within 'the next 1 and 1/2 hours' whether the Jeremiah Partnership would be provided a service contract on the project" and that it "'needed to make [Richard] Stenhouse happy' for the project to proceed." (Id., ¶¶ 37, 39.) Later that day, Richard Stenhouse, President of the Jeremiah Partnership, sent NRP an e-mail requiring a "'contract to provide mwbe and section 3 [sic]*fn7 subcontractors for the fifty houses. Cost $30,000 and an agreement with [NRP] to do management training for a year for the Jeremiah Partnership. These items would need to be formally signed before we will sign off.'" (As reproduced in the Second Am. Compl., ¶ 40; emphasis removed).
NRP did not agree to this condition. On April 15, 2009, it learned through an e-mail from an unidentified third party that "Stenhouse is ready to place his call to the Mayor endorsing [NRP's] approach, provided I can show him an executed agreement with [NRP]." (Second Am. Compl., ¶ 45.) NRP also learned that the "cost" had risen from $30,000 to $60,000. (Id.) According to NRP, Mayor Brown also threw his weight behind Stenhouse's involvement. One unidentified NRP representative reported that the Mayor admonished NRP: "'If you do not hire the right company, you do not have my support for the project.'" (Id., ¶ 72.)
Later in April of that year, NRP issued a "Request for Proposal" for certain, again unidentified, project services. (Id., ¶ 52.) The relationship between this request and Stenhouse's demands, if any, is unclear at this time. Stenhouse and the Jeremiah Partnership, however, were invited to apply. (Id., ¶ 55.) NRP received three proposals, one of which was from Stenhouse.
Stenhouse's proposal entailed a total budget of $80,000 and included what NRP calls "numerous and suspect budget items," such as a $3,600 allotment for refreshments at twelve planned meetings, and a "$35,000 'administrative fee' for postage, telephone, and 'Jeremiah involvement.'" (Id., ¶ 58.) The proposal was rejected in favor of a bid prepared by the University at Buffalo ("UB"). It proposed a $40,524,00 total budget -- nearly half that of Stenhouse's proposal. (Id., ¶ 59.)
With that, NRP alleges that the City killed the project. In May of 2009, an individual retained by NRP to intervene on its behalf reported that Deputy Mayor Steven Casey said, "The deal is dead without Stenhouse." (Id., ¶ 69.) NRP also received an e-mail from "city officials" explaining that "'everything was ready to go on Tuesday until Stenhouse called and said he was unhappy.'" (Id., ¶ 70.) Mayor Brown also expressed this sentiment: in the course of a meeting after NRP selected the UB proposal, the Mayor was reported as saying, "'I told you what you had to do and you hired the wrong company.'" (Id., ¶ 74.)
This litigation followed.
NRP filed a complaint in this Court on June 6, 2011. (Docket No. 1.)
After the parties' unsuccessful attempt to resolve the dispute through
mediation (Docket No. 19), NRP filed an amended complaint on December
23, 2011, which, inter alia, added Defendant Casey as a party. (Docket
No. 22.) Thereafter, on January 13, 2012, NRP voluntarily dismissed
Jeremiah Partnership and Richard Stenhouse as defendants.*fn8
same day, the remaining defendants moved to dismiss the amended
complaint. (Docket Nos. 26, 27.) Briefing on those motions concluded
on March 16, 2012.
On April 4, 2012, NRP moved for leave to file a second amended complaint. (Docket No. 37.) Defendants opposed that motion, and briefing concluded on May 21, 2012, at which time this Court took the motions under consideration without oral argument.
A. Motion to Dismiss Standard -- Rule 12(b)(6)
Rule 12(b)(6) allows dismissal of a complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Federal pleading standards are generally not stringent; Rule 8 requires only a short and plain statement of a claim. Fed. R. Civ. P. 8(a)(2). But the plain statement must "possess enough heft to show that the pleader is entitled to relief." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1966, 167 L. Ed. 2d 929 (2007).
When determining whether a complaint states a claim, the court must construe it liberally, accept all factual allegations as true, and draw all reasonable inferences in the plaintiff's favor. ATSI Commc'ns, 493 F.3d at 98. Legal conclusions, however, are not afforded the same presumption of truthfulness. See Iqbal, 556 U.S. at 678 ("The tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.").
"To 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.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). Labels, conclusions, or a "formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555. Facial plausibility exists when the facts alleged allow for a reasonable inference that the defendant is liable for the misconduct charged. Iqbal, 556 U.S. at 678. The plausibility standard is not, however, a probability requirement: the pleading must show, not merely allege, that the pleader is entitled to relief. Id. at 678; Fed. R. Civ. P. 8 (a)(2). Well-pleaded allegations must nudge the claim "across the line from conceivable to plausible." Twombly, 550 U.S. at 570.
Courts therefore use a two-pronged approach to examine the sufficiency of a complaint, which includes "any documents that are either incorporated into the complaint by reference or attached to the complaint as exhibits." Blue Tree Hotels Inv. (Can.), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004). This examination is context specific and requires that the court draw on its judicial experience and common sense. Iqbal, 556 U.S. at 679. First, statements that are not entitled to the presumption of truth -- such as conclusory allegations, labels, and legal conclusions -- are identified and stripped away. See Id. Second, well-pleaded, non-conclusory factual allegations are presumed true and examined to determine whether they "plausibly give rise to an entitlement to relief." Id.
In deciding a motion to dismiss pursuant to Rule 12(b)(6), courts generally may consider facts stated in the complaint or "[d]ocuments that are attached to the complaint or incorporated in it by reference." Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007). "Where a document is not incorporated by reference, the court may nevertheless consider it where the complaint 'relies heavily upon its terms and effect,' thereby rendering the document 'integral' to the complaint." DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010) (quoting Mangiafico v. Blumenthal, 471 F.3d 391, 398 (2d Cir. 2006)).
B. The City of Buffalo's Motion to Dismiss
As noted, the City of Buffalo seeks dismissal of each claim brought by NRP. This Court will discuss those claims, and the City's arguments for dismissal, below.
1. Breach of Contract*fn9
The City of Buffalo argues that NRP cannot state a claim for breach of contract because (1) Wanamaker did not have the authority to bind the City and (2) no legal contract existed. Because this Court agrees with the City's latter contention, it need not discuss, at this time, Wanamaker's authority to enter into contracts on the City's behalf.*fn10
NRP's breach-of-contract claim is premised exclusively on Wanamaker's February 25, 2008 letter. NRP argues that this letter bound the City to negotiate in good faith and that the City breached this agreement when it abruptly cancelled the deal. Specifically, NRP argues that the Wanamaker letter constitutes a "Type II" agreement.
The division of agreements into types finds its provenance in Judge Pierre Leval's seminal decision, Teachers Insurance and Annuity Association v. Tribune Co., 670 F. Supp. 491 (S.D.N.Y. 1987). After collecting relevant New York law, Judge Leval found that one type of agreement, later dubbed a "Type I" agreement, reflects a meeting of the minds on "all the issues perceived to require negotiation." Id. at 498. Such an agreement "binds both sides to their ultimate contractual objective." Adjustrite Sys., Inc. v. GAB Bus. Servs., Inc., 145 F.3d ...