BSC Assocs., LLC v. Leidos, Inc.
| Decision Date | 17 February 2015 |
| Docket Number | No. 3:14–cv–00645 MAD/DEP.,3:14–cv–00645 MAD/DEP. |
| Citation | 91 F.Supp.3d 319 |
| Parties | BSC ASSOCIATES, LLC, Plaintiff, v. LEIDOS, INC., Defendant. |
| Court | U.S. District Court — Northern District of New York |
Hinman, Howard & Kattell, LLP, Albert J. Millus, Jr., Esq., of Counsel, Binghamton, NY, for Plaintiff.
Sheppard Mullin Richter & Hampton LLP, Kevin R. Puvalowski, Esq., Rena Andoh, Esq., of Counsel, New York, NY, for Defendant.
On April 18, 2014, Plaintiff commenced this action in New York State Supreme Court, Broome County, alleging that Defendant failed to pay licensing fees for the use of flight simulator software provided to Defendant by Plaintiff's predecessor-in-interest, Binghamton Simulator Company, Inc. (“Binghamton Simulator”), as was required by a subcontract between Binghamton Simulator and Defendant. Plaintiff seeks monetary damages. See Dkt. No. 1 at 7–13.1 Defendant removed the action to this Court on May 30, 2014. Id. at 1–4. Presently before the Court is Defendant's motion to dismiss Plaintiff's complaint pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6) or, in the alternative, to compel arbitration. Dkt. No. 4. Plaintiff has opposed the motion. See Dkt. No. 9.
At an unknown point in time prior to April 21, 2010, Defendant agreed to design and manufacture a helicopter flight simulator for the U.S. Army. See Dkt. No. 5 at ¶ 5.3 Pursuant to that agreement, Defendant and Binghamton Simulator entered into a subcontract agreement effective April 21, 2010 (the “Subcontract”), in which Binghamton Simulator agreed, inter alia, to provide Defendant with previously developed flight simulator software (the “Software”). See id. at ¶¶ 8–9.
Binghamton Simulator developed certain portions of the Software under the U.S. Government's Small Business Innovation Research (“SBIR”) Program and developed other portions entirely at its own expense. Id. at ¶ 9. The Software consisted of twelve modules. Id. at ¶ 12. Two of the Software modules were developed pursuant to the SBIR Program and were therefore entitled to certain intellectual property rights and protections. Id. at ¶ 13.
The Subcontract contained a provision on intellectual property rights, which provides as follows:
Dkt. No. 5–1 at § 18.0.
Pursuant to the Subcontract, Defendant agreed to purchase single-use license pay royalties for the Software for each simulator unit at varying prices per unit. Dkt. No. 5 at ¶ 14. The license fee per unit was set at $144,755 for the original unit, $124,200 for the second unit, and $90,000 for any subsequent units. Id.
Binghamton Simulator performed its obligations under the Subcontract for the first flight simulator unit, and Defendant paid the license fee of $144,755. Id. at ¶ 15. The parties subsequently amended the Subcontract to include a subcontract for a second simulator unit. Id. The second subcontract provided for a license fee for the Software in the previously negotiated amount of $124,000. Id. In or around August 2011, prior to completion of the second simulator unit, Defendant terminated the second subcontract for convenience. Id. at ¶ 16. Nonetheless, Defendant paid Binghamton Simulator the $124,000 license fee provided for by the second subcontract. Id. The funds used to pay the license fees for the first two simulator units originated with the U.S. Government. Id. at ¶ 17.
Defendant provided the U.S. Army with at least sixteen additional flight simulator units, each of which incorporated the Software. Id. at ¶ 18. Defendant failed to pay Binghamton Simulator license fees for the additional units. Id. The U.S. Army's position is that it acquired the Software in its entirety with “Government Purpose Rights” rather than SBIR rights, and therefore, the Government has refused to pay any further license fees. Id. at ¶¶ 19–20. Based on the Army's position, Plaintiff alleges that when Defendant delivered the Software to the Army as part of the flight simulators, Defendant failed to ensure that Binghamton Simulator's SBIR rights were recognized and protected. Id. at ¶ 21. In any event, Defendant refused to pay Binghamton Simulator any additional license fees. See id. at ¶ 20.
In January 2012, at a sale conducted by Binghamton Simulator's primary secured lender under Uniform Commercial Code (“U.C.C.”) Article 9, BSC Partners, LLC (“BSC Partners”) purchased all of Binghamton Simulator's personal and intellectual property, including the Software and Binghamton Simulator's claims against Defendant.Id. at ¶ 22. In or around February 2014, Plaintiff acquired the instant cause of action from BSC Partners. Id. at ¶ 23.4
On April 18, 2014, Plaintiff filed a complaint in New York State Supreme Court asserting causes of action for breach of contract, unjust enrichment, and a violation of the Department of Defense Supplement to the Federal Acquisition Regulation (“DFARS”) clause 252.2277014(k)(2). See Dkt. No. 1 at 7–13. Plaintiff filed an amended complaint on June 27, 2014, which omitted the claim related to Defendant's alleged violation of DFARS clause 252.2277014(k)(2). See Dkt. No. 5. Accordingly, only Plaintiff's breach of contract and unjust enrichment claims remain.
“A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it.” Makarova v. United States, 201 F.3d 110, 113 (2d Cir.2000). A federal court's jurisdiction is limited by the requirement that a plaintiff have standing to bring its claim. Powell v. Am. Gen. Fin., Inc., 310 F.Supp.2d 481, 484 (N.D.N.Y.2004). “To survive a defendant's Rule 12(b)(1) motion to dismiss for lack of standing, plaintiffs ‘must allege facts that affirmatively and plausibly suggest that [they have] standing to sue.’ ” Kiryas Joel Alliance v. Village of Kiryas Joel, 495 Fed.Appx. 183, 188 (2d Cir.2012) (quoting Amidax Trading Group v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir.2011) (per curiam)).5 To establish standing, “[p]laintiffs must ‘allege, and ultimately prove, that [they] ha[ve] suffered an injury-in-fact that is fairly traceable to the challenged action of the defendant, and which is likely to be redressed by the requested relief.’ ” Id. (quoting Baur v. Veneman, 352 F.3d 625, 632 (2d Cir.2003) ). In evaluating such a motion, the Court “must accept all undisputed factual allegations as true and draw all reasonable inferences in the light most favorable to the non-moving party.” Beede v. Stiefel Labs., Inc., No. 1:13–CV–120, 2014 WL 896725 (N.D.N.Y. Mar. 6, 2014) (citations omitted). However, the Court may also refer to evidentiary submissions to the extent that such submissions dispute the allegations in the complaint. Id. (citing Robinson v. Malaysia, 269 F.3d 133, 140 (2d Cir.2001) ).
Defendant argues that Plaintiff has not established standing to bring its claim because the Subcontract contained an anti-assignment clause that prohibited Binghamton Simulator from assigning its rights under the Subcontract. Under New York law, only the parties to and intended third-party beneficiaries of a contract have standing to enforce the contract. Rajamin v. Deutsche Bank Nat'l Trust Co., 757 F.3d 79, 86 (2d Cir.2014) (citations omitted). However, “[w]hen a valid assignment is made, the assignee steps into the assignor's shoes and acquires whatever rights the latter had,” including the right to enforce the contract. In re Stralem, 303 A.D.2d 120, 123, 758 N.Y.S.2d 345 (2nd Dept.2003).
The rule adhered to in New York as to contractual anti-assignment clauses is that “[w]ith limited exception, contractual provisions prohibiting assignments are treated as personal covenants.” Pro Cardiaco Pronto Socorro Cardiologica S.A. v. Trussell,
863 F.Supp. 135, 137 (S.D.N.Y.1994) (citing Citibank, N.A. v. Tele/Resources, Inc., 724 F.2d 266, 268 (2d Cir.1983) ; Allhusen v. Caristo Constr. Corp., 303 N.Y. 446, 450, 103 N.E.2d 891 (1952) ). An assignment that violates a personal covenant prohibiting assignments gives rise to an action for damages against the assignor, but is enforceable.Id. (c...
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