United States District Court, N.D. New York
ELIZABETH A. COMINOLLI, ESQ., JASON C. HALPIN, ESQ., JON P. DEVENDORF, ESQ., HISCOCK & BARCLAY, Syracuse, New York, Attorneys for Plaintiff.
STEPHEN T. HELMER, ESQ., WILLIAM B. HUNT, ESQ., MACKENZIE HUGHES LLP, Syracuse, New York, Attorneys for Defendant.
MEMORANDUM-DECISION AND ORDER
MAE A. D'AGOSTINO, District Judge.
On March 21, 2014, Plaintiff commenced this action against Defendant, alleging breach of contract, breach of express and implied warranties, and negligence. See Dkt. No. 1. Presently before the Court is Defendant's motion to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure or, in the alternative, to dismiss the complaint based upon the doctrine of forum non conveniens. See Dkt. No. 11. Plaintiff has opposed Defendant's motion. See Dkt. No. 12.
Plaintiff is a Delaware corporation with its principal place of business in East Syracuse, New York. Dkt. No. 1 at ¶ 2. Defendant is a Canadian corporation with its principal place of business in Kingston, Ontario, Canada. See id. at ¶ 3; Dkt. No. 11-2 at ¶ 3. Defendant supplies specialized engineering and manufacturing services and products, including custom-designed automation systems and continuous motion assembly machines for high-volume production, throughout the world. See Dkt. No. 1 at ¶ 11.
In 2006, the Communication Products division of Thomas & Betts Corporation ("Thomas & Betts"), which manufactured a variety of products for the cable and telecommunications industries, sought to improve efficiency in the production of its SNAP-N-SEAL brand of coaxial cable connectors by obtaining automated technology for its manufacturing facility in Horseheads, New York. See id. at ¶¶ 8-9. Specifically, Thomas & Betts desired technology that would increase the number of coaxial cable connector parts produced per minute and decrease the number of machine operators required. See id. at ¶ 9. In response to a request for information from Thomas & Betts, Defendant indicated that it could provide a specialized automated assembly machine that would meet the specific efficiencies sought by Thomas & Betts. See id. at ¶ 10. After negotiations, in October 2007, Thomas & Betts agreed to fund an engineering study in which Defendant aimed to produce a prototype machine capable of achieving the production rate and operator efficiency specified by Thomas & Betts. Id. at ¶ 12.
Defendant originally anticipated that the prototype study would take two and one-half months. Id. at ¶ 13. However, Defendant's work on the prototype was delayed by an internal resource issue, and Defendant completed the prototype in October 2008. See id. at ¶¶ 13-16. The prototype failed to meet the desired run rate in testing performed by Thomas & Betts. Id. at ¶ 16. While Defendant made efforts to remedy the prototype's performance issues, Thomas & Betts and Defendant continued to negotiate the terms of an agreement for the sale and purchase of a high speed assembly machine that would meet the operational requirements conveyed by Thomas & Betts. See id. at ¶¶ 17-18.
As a result, Thomas & Betts and Defendant entered into a purchase and sale agreement as of September 18, 2009 (the "Agreement"), in which Defendant agreed to deliver a high-speed continuous motion assembly machine that would produce coaxial cable connectors at a specific run rate per minute when operated by a single operator (the "Machine"). Id. at ¶¶ 19-20. The Agreement also contained specifications pertaining to the Machine's availability, performance, and yield. Id. at ¶ 21. The Agreement provided that the anticipated lead time from the start of the project to an initial test at Defendant's facility was eight and one-half months. Id. at ¶ 22.
After delays purportedly caused by Defendant's work on other projects, in March 2010, Defendant conducted the initial project meeting at the Thomas & Betts facility in Horseheads. See id. at ¶ 23. Defendant anticipated that the Machine would be ready for Factory Acceptance Testing ("FAT") by December 2010. Id. After the meeting, Thomas & Betts and Defendant maintained regular communication regarding the project. See id. at ¶ 25. During this period, Thomas & Betts provided Defendant with data that included drawings of the cable connectors and information on the component materials that would pass through the Machine, typical component non-conformities, and Thomas & Bett's current connector assembly machines. Id.
At some time between March 2010 and December 2011, Plaintiff's parent organization, Belden Inc., acquired Thomas & Bett's Communications Products business - including the Agreement - and integrated it into Plaintiff. See id. at ¶ 26.
After a series of additional delays, Defendant presented the Machine to Plaintiff for FAT at Defendant's facility in Ontario on December 12, 2011. See id. at ¶ 27. Defendant stopped FAT on the second day of testing because of a problem with one of the Machine's feeder components. See id. at ¶ 28. After repairs, FAT resumed in February 2012. Id. at ¶ 29. During this testing, Defendant allegedly utilized multiple employees for each testing period, contrary to the Agreement's requirement that the Machine be operated by a single operator, and cleaned the Machine for several hours after each eight-hour testing period, which was not supposed to be necessary under normal operating conditions. See id.
In March 2012, Defendant delivered the Machine to Plaintiff's Horseheads facility for Site Acceptance Testing ("SAT"). Id. at ¶ 30. Defendant postponed SAT almost immediately because of problems with the Machine's pneumatics. See id. Defendant resumed and completed SAT of the Machine in late April 2012. See id.
Beginning almost immediately following SAT, Plaintiff experienced reoccurring problems with the Machine. See id. at ¶ 32. From April through August 2012, Plaintiff submitted numerous requests that Defendant fix the Machine. See id. at ¶ 33. In response, Defendant made some efforts to remedy the Machine's defective performance. See id. Nonetheless, the problems continued, and on August 24, 2012, Plaintiff took the Machine out of service because of continued output shortfalls and damage to connector assemblies. See id. at ¶ 34.
On or about September 13, 2012, Plaintiff and Defendant met to discuss the Machine's performance issues. Id. at ¶ 35. Defendant acknowledged that it had anticipated certain mechanical issues requiring post-delivery work that resulted from oversights in the Machine's original design. See id. Defendant committed to ensuring that the Machine would achieve the agreed-upon productivity requirements and agreed to toll all warranty periods until the Machine could be placed back into service at the required production level. See id. at ¶¶ 35-36.
From September 2012 through April 2013, Defendant visited Plaintiff's Horseheads facility on several occasions in an effort to fix the Machine's production problems. See id. at ¶ 37. Defendant also brought a number of the Machine's parts back to its own facility for repairs. See id. Defendant's repair efforts proved unsuccessful, and on or about July 25, 2013, Plaintiff sought a refund of the Machine's purchase price from Defendant. See id. at ¶¶ 37-38. Defendant refused to refund the purchase price and did not fix the Machine's defects. See id. at ¶ 39.
On March 21, 2014, Plaintiff filed the instant complaint alleging six causes of action based in breach of contract, breach of express and implied warranties, and negligence. Plaintiff seeks damages of no less than $4, 249, 369, including lost profits, labor costs, and expenses.
A. Failure to State a Claim
1. Legal Standards
A motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the party's claim for relief and pleadings without considering the substantive merits of the case. See Global Network Commc'ns, Inc. v. City of New York, 458 F.3d 150, 155 (2d Cir. 2006). In considering the legal sufficiency, a court must accept as true all well-pleaded facts in the pleading and draw all reasonable inferences in the pleader's favor. See ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (citation omitted). This presumption of truth, however, does not extend to legal conclusions. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted).
To survive a motion to dismiss, a party need only plead "a short and plain statement of the claim, " Fed.R.Civ.P. 8(a)(2), with sufficient factual "heft to sho[w] that the pleader is entitled to relief[, ]'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007) (quoting Fed R. Civ. P. 8(a)(2)). Under this standard, the pleading's "[f]actual allegations must be enough to raise a right of relief above the speculative level, " id. at 555, and present claims that are "plausible on [their] face, " id. at 570. "The plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (citation omitted). "Where a complaint pleads facts that are merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of "entitlement to relief."'" Id. (quoting Twombly, 550 U.S. at 557). Ultimately, "when the allegations in a complaint, however true, could not raise a claim of entitlement to relief, " Twombly, 550 U.S. at 558, or where a plaintiff has "not nudged [its] claims across the line from conceivable to plausible, [the] complaint must be dismissed, " id. at 570.
"Generally, consideration of a motion to dismiss under Rule 12(b)(6) is limited to consideration of the complaint itself" unless all parties are given a reasonable opportunity to submit extrinsic evidence. Faulkner v. Beer, 463 F.3d 130, 134 (2d Cir. 2006). "In ruling on a motion to dismiss pursuant to Rule 12(b)(6), a district court generally must confine itself to the four corners of the complaint and look only to the allegations contained therein." Robinson v. Town of Kent, No. 11 Civ. 2875, 2012 WL 3024766, *4 (S.D.N.Y. July 24, 2012) (citing Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007)). However, in considering a motion to dismiss, "the Court may consider documents attached as an exhibit thereto or incorporated by reference, documents that are integral' to plaintiff's claims, even if not explicitly incorporated by reference, and matters of which judicial notice may be taken." Thomas v. Westchester County Health Care Corp., 232 F.Supp.2d 273, 275 (S.D.N.Y. 2002) (citations omitted). To incorporate a document by reference, "the Complaint must make a clear, definite and substantial reference to the document." Id. at 275-76 (citations omitted). Moreover, "when a plaintiff chooses not to attach to the complaint or incorporate by reference a [document] upon which it solely relies and which is integral to the complaint, the defendant may produce the [document] when attacking the complaint for its failure to state a claim, because plaintiff should not so easily be allowed to escape the consequences of its own failure." Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47 (2d Cir. 1991); see also Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002) ("[O]n a motion to dismiss, a court may consider documents attached to the complaint as an exhibit or incorporated in it by reference, ... matters of which judicial notice may be taken, or... documents either in plaintiffs' possession or of which plaintiffs had knowledge and relied on in bringing suit.'" (quoting Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993))). Notably, "a plaintiff's reliance on the terms and effect of a document in drafting the complaint is a necessary prerequisite to the court's consideration of the document on a dismissal motion; mere notice or possession is not enough." Chambers, 282 F.3d at 153 (footnote omitted). As the Second Circuit has explained,
[i]n most instances where this exception is recognized, the incorporated material is a contract or other legal document containing obligations upon which the plaintiff's complaint stands or falls, but which for some reason - usually because the document, read in its entirety, would undermine the legitimacy of the plaintiff's claim - was not attached to the complaint. The exception thus prevents plaintiffs from generating complaints invulnerable to Rule 12(b)(6) simply by clever drafting.
Global Network, 458 F.3d at 157 (citations omitted).
"Rule 12(b) gives district courts two options when matters outside the pleadings are presented in response to a 12(b)(6) motion: the court may exclude the additional material and decide the motion on the complaint alone or it may convert the motion to one for summary judgment under Fed.R.Civ.P. 56 and afford all parties the opportunity to present supporting material." Fonte v. Bd. of Managers of Cont'l Towers Condo., 848 F.2d 24, 25 (2d Cir. 1988); see also Friedl v. City of New York, 210 F.3d 79, 83 (2d Cir. 2000) (quoting the same). Thus, while a court must convert a motion to dismiss for failure to state a claim into a motion for summary judgment if "matters outside the pleadings are presented to and not excluded by the court, " Fed.R.Civ.P. 12(d), conversion is not required if the court disregards the extrinsic material, Cleveland v. Caplaw Enters., 448 F.3d 518, 521 (2d Cir. 2006) (matters outside the pleadings presented to the court were "excluded" within the meaning of Rule 12(d) by the district court's explicit refusal to consider the outside materials).
2. Breach of Contract
In Count I of the complaint, Plaintiff alleges that Defendant breached the Agreement by "failing to timely produce a continuous motion assembly machine meeting the requirements of Plaintiff and the Agreement." Dkt. No. 1 at ¶ 53. Defendant argues that Plaintiff cannot state a claim for breach of contract because it certified the Machine's compliance with the Agreement's specifications and accepted the Machine by signing off on the FAT and SAT. See Dkt. No. 11-1 at 6-9. In support of its arguments, Defendant attached a number of exhibits to its motion to dismiss, including the Agreement, Snap-N-Seal High-Speed Assembly System Proposal Number 506TNB001 Revision 10 (the "Proposal"), phase completion reports for phases 1, 3, and 4 of the project, and design review meeting minutes. See Dkt. No. 11-4; Dkt. No. 11-5; Dkt. No. 11-6; Dkt. No. 11-7; Dkt. No 11-12. Defendant also argues that Plaintiff cannot state a claim for breach of contract based on untimely delivery because the parties agreed that the delivery dates could be changed and in fact did change those dates via signed change logs. See Dkt. No. 13 at 4. In support of this argument, Defendant submitted an exhibit containing a number of change logs executed by the parties. See Dkt. No. 13-2. Plaintiff urges the Court not to consider this argument because Defendant raised it for the first time in reply and to strike the exhibit because the change logs fall outside of the Agreement. See Dkt. No. 14.
As an initial matter, the Court declines to convert Defendant's motion into a motion for summary judgment. Neither party requested that Defendant's motion be so converted. In light of the fact-specific nature of Plaintiff's claims and the fact that no discovery has been completed, the Court declines to covert Defendant's motion sua sponte. See Trs. of the Bldg. Trades Educ. Benefit Fund v. Crana Elec., Inc., No. 10 CV 2065, 2011 WL 4434190, *6 (E.D.N.Y. Sept. 22, 2011) (declining to convert the defendant's motion to dismiss to a motion for summary judgment where neither party requested conversion and no discovery had been taken). Accordingly, in deciding this motion, the Court will disregard the extraneous materials presented to it.
However, a number of Defendant's exhibits comprise documents that are integral to Plaintiff's complaint. Plaintiff's claims are based in their entirety upon the terms and effect of the Agreement. Plaintiff cannot escape the Court's consideration of the Agreement in evaluating the present motion simply because Plaintiff did not attach the Agreement to its complaint. Moreover, the Agreement expressly incorporates the Proposal and the change logs, and the Proposal incorporates the phase completion reports into the Agreement. Dkt. No. 11-4 at ¶¶ 1.2, 5.1, 20.1; Dkt. No. 11-5 at § 4.4. Therefore, the Court will consider these documents in deciding Defendant's motion.
Pursuant to the Agreement's choice-of-law provision, Plaintiff's contractual claims are governed by Ontario law. See Dkt. No. 11-4 at ¶ 19.1. Under Ontario law, the elements of a claim for breach of contract are "the particulars of the alleged contract including its terms, the nature of the alleged breach, causation and damages that are alleged to have flowed from the breach." McCarthy Corp. PLC v. KPMG LLP, No. 05-CL-5816,  O.J. 1492, 2006 ON. C. LEXIS 1447, *22 (O.S.C.J. Apr. 3, 2006). Ontario law provides that "[t]he general rule is that the words in a contract are to be given their plain, literal and ordinary meaning." Argentini v. Wellington Ins. Co., 26 O.R.3d 408, 413 (O. Ct. J. Gen. Div. 1995). "In a commercial contract the words must be construed in a business fashion and in accordance with business common sense so as to avoid any interpretation that would result in a commercial absurdity." Id. Extrinsic evidence is admissible to explain ambiguous terms in a contract where the evidence does not qualify or contradict the written contract. See Doral Holdings Ltd. v. Steinberg Inc., 60 O.R.2d 554, 558 (O. High Ct. J. 1987).
Under the Canadian Sale of Goods Act (the "CSGA"),
where the contract is for specific goods the property in which has passed to the buyer, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated.
Sale of Goods Act, R.S.O., ch. S.1 § 12.3 (1990), amended by R.S.O, c. 27, § 54 (1994). A buyer is deemed to have ...