Bolt Elec., Inc. v. City of New York

Decision Date13 April 1995
Docket NumberNo. 461,D,461
Citation53 F.3d 465
PartiesBOLT ELECTRIC, INC., Plaintiff-Appellant, v. The CITY OF NEW YORK, Defendant-Appellee, Spring City Electrical Manufacturing Co., Defendant. ocket 94-7390.
CourtU.S. Court of Appeals — Second Circuit

William F. Cavanaugh, Jr., New York City (John N. Lieber, Patterson, Belknap, Webb & Tyler, of counsel), for plaintiff-appellant.

Helen P. Brown, Asst. Corp. Counsel of the City of N.Y., New York City (Paul A. Crotty, Corp. Counsel of the City of N.Y., Larry A. Sonnenshein, Jane Tobey Momo, Asst. Corp. Counsels of the City of N.Y., of counsel), for defendant-appellee.

Before: WINTER, MAHONEY, and GODBOLD, * Circuit Judges.

MAHONEY, Circuit Judge:

Plaintiff-appellant Bolt Electric, Inc. ("Bolt") appeals from a judgment entered March 31, 1994 in the United States District Court for the Southern District of New York, Sonia Sotomayor, Judge, that granted the motion of defendant-appellee The City of New York (the "City"), pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss Bolt's complaint against the City for breach of contract. The district court ruled that Bolt could not recover under a written undertaking by the City's Department of Transportation (the "DOT") that allegedly guaranteed payment for materials ordered from Bolt by the general contractor on a City reconstruction project. This ruling was premised upon the City's failure to file the undertaking with the Comptroller of the City of New York (the "Comptroller"), and the Comptroller's consequent failure to provide the endorsement required by Sec. 6-101 of the New York City Administrative Code (the "Administrative Code"), see infra note 4, that there was an available appropriation or fund to finance the DOT guarantee. See Bolt Elec., Inc. v. City of New York, No. 93 Civ 3186 (SS), slip op. at 14-27, 1994 WL 97048 (S.D.N.Y. Mar. 23, 1994) (opinion supporting judgment).

We reverse the dismissal of Bolt's complaint against the City and remand.


Subject matter jurisdiction in this case is premised upon diversity of citizenship. New York law applies. This appeal is taken pursuant to Fed.R.Civ.P. 54(b), in accordance with which the district court determined that: "The claims against the City of New York are separate and distinct from the claims involving Spring City [Electrical Manufacturing Co.], and there being no just reason for delay of entry of a final judgment, [it is ordered] that final judgment be entered in favor of defendant the City of New York...." Bolt, slip op. at 27, 1994 WL 97048, at * 12.

A. The Allegations of Bolt's Amended Complaint.

Bolt's amended complaint (with attached exhibits) pleads that Naclerio Contracting Co., Inc. ("Naclerio") was selected by the City in 1987 to be the general contractor for a project involving the restoration of the Eastern Parkway in Brooklyn, New York (the "Project"). In accordance with state law and City requirements, Naclerio obtained performance and payment surety bonds from Aetna Insurance Co. ("Aetna").

On February 2, 1988, Naclerio ordered a number of items from Bolt for the Project, including "world fair" benches, hydrant fenders, and traffic sign posts. In 1990, the Project fell behind schedule, and Naclerio filed for bankruptcy protection. Bolt became concerned about Naclerio's ability to pay Bolt for materials ordered for the Project, and, in the summer of 1991, declined to accept any additional orders from Naclerio or to continue work on the February 1988 order unless the DOT guaranteed, in the event of a default by Naclerio, to purchase all materials ordered from Bolt by Naclerio for the Project.

As a result, Bernard McCoy, Deputy Commissioner of the DOT, sent a letter to Bolt dated September 25, 1991 (the "McCoy Letter") which stated in pertinent part:

I have been requested by Naclerio Contracting Co., Inc. to communicate with you regarding payment for materials supplied by your firm, to be incorporated into the [Project].

All conforming material ordered by Naclerio on their Purchase Order with you will be paid to Naclerio by the City of New York.

In the event Naclerio Contracting Co., Inc. defaults in its contract with the New York City Department of Transportation, the Department will purchase from Bolt Electric, Inc. all materials ordered specifically for the Eastern Parkway contract.

Immediately afterward, on October 1, 1991, Naclerio directed a purchase order to Bolt in the amount of $2,126,746.20 for lighting fixtures. Bolt thereafter performed under both outstanding purchase orders. In August 1992, after Bolt learned that the City was considering a declaration of default against Naclerio, Bolt obtained assurances from the City that the City stood by the commitment stated in the McCoy Letter.

On October 1, 1992, the City declared Naclerio in default. On October 26, 1992, prior to Bolt being informed about the default, City officials urged Bolt to continue its performance. Aetna assumed responsibility for completing the project pursuant to its performance bond. Aetna named a new general contractor and electrical contractor for the Project, but assured Bolt that it would be continued as the electrical supplier, and that the McCoy Letter would be honored.

Bolt was nonetheless terminated on February 12, 1993. The City and Aetna thereafter refused Bolt's demands that the City purchase the materials specified in the February 1988 and October 1991 purchase orders, as promised in the McCoy Letter, even though Bolt stood ready to perform, and had never breached, its obligations thereunder. Bolt alleged that as a result, "the City ha[d] repudiated and breached the contract with Bolt memorialized in [the McCoy Letter]."

Bolt's complaint also alleged that Spring City Electrical Manufacturing Co. ("Spring City"), the new electrical supplier on the Project, had misused proprietary information supplied to Spring City by Bolt to displace Bolt as electrical supplier on the Project. Bolt's claims against Spring City are not involved in this appeal.

B. The Decision of the District Court.

The City moved to dismiss Bolt's amended complaint, pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim upon which relief can be granted. According to the district court, for purposes of the motion, the City "accept[ed] the proposition that a contract between DOT and Bolt existed [, ... but] argue[d] that because the McCoy Letter does not comply with mandatory statutory requirements, ... it is an unenforceable contract, either because it is statutorily invalid or because it violates public policy." Bolt, slip op. at 8, 1994 WL 97048, at * 4 (footnote omitted).

Bolt argued that the McCoy Letter was authorized by Sec. 6-102(b) of the Administrative Code, 1 which empowers a city agency, in the event of a default, to "complete the [contract] in the manner provided for in the contract," taken together with Article 48 of the agreement between the City and Naclerio (the "Naclerio Agreement"), 2 which provides the Commissioner of the DOT with broad authority, in the event of a default, to "have the work completed by such means and in such manner ... as he may deem advisable."

The district court concluded that formalities as to competitive bidding and authorized alternatives for original contracts were inapplicable, see infra note 6, and that Article 48 authorized a contract in anticipation of a declaration of default. Bolt, slip op. at 11-13, 1994 WL 97048, at * 5-6. The court ruled, however, that there had not been compliance with provisions of the New York City Charter (the "Charter"), 3 the Administrative Code, 4 and the New York City Procurement Policy Board Rules (the "PPB Rules") 5 that require the filing of contracts with, and their endorsement by, the Comptroller, rendering the McCoy Letter unenforceable. Bolt, slip op. at 14-20, 1994 WL 97048, at * 7-9. The district court also ruled that the City was not estopped to assert noncompliance with these requirements, and that Bolt could not recover in quantum meruit. Id. at 20-27, at 1994 WL * 9-12.

This appeal followed.


The district court's dismissal for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6) is reviewed de novo. Rent Stabilization Ass'n v. Dinkins, 5 F.3d 591, 593 (2d Cir.1993) (citing Citibank, N.A. v. K-H Corp., 968 F.2d 1489, 1494 (2d Cir.1992)). On a motion to dismiss under Rule 12(b)(6), the court must accept as true the factual allegations in the complaint, Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, --- U.S. ----, ----, 113 S.Ct. 1160, 1161, 122 L.Ed.2d 517 (1993); Walker v. City of New York, 974 F.2d 293, 298 (2d Cir.1992), cert. denied, --- U.S. ----, ----, 113 S.Ct. 1387, 1412, 122 L.Ed.2d 762, 784 (1993), and draw all reasonable inferences in favor of the plaintiff. Walker, 974 F.2d at 298. "The district court should grant such a motion only if, after viewing plaintiff's allegations in this favorable light, 'it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' " Id. (quoting Ricciuti v. New York City Transit Auth., 941 F.2d 119, 123 (2d Cir.1991)).

The City points to various provisions of the Charter, the Administrative Code, and the PPB Rules that provide detailed rules regarding the formation and approval of City contracts via competitive bidding and specified alternative methods. 6 We agree with the district court, however, that Administrative Code Sec. 6-102(b), supra note 1, and Article 48, supra note 2, authorized the City to arrange for completion of the Project without replicating the procedures required for the initial formation of a contract with the City. We note also that the policy underlying Sec. 6-102(b) is eminently sensible. It would be in most cases cumbersome, and in some cases calamitous, to require a replay of the panoply of City procedures attendant upon the initiation of a contract whenever...

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