City of Yonkers v. Otis Elevator Co.

• Decision Date: 07 April 1988
• Docket Number: No. 1142,D,1142
• Citation: 844 F.2d 42
• Parties: , 10 Fed.R.Serv.3d 1088 CITY OF YONKERS and Yonkers Community Development Agency, Plaintiffs- Appellants, Vito J. Cassan, Esq., Appellant, v. OTIS ELEVATOR COMPANY and United Technologies Corporation, Defendants- Appellees. ocket 87-7092.
• Court: U.S. Court of Appeals — Second Circuit

Page 42

844 F.2d 42

56 USLW 2630, 10 Fed.R.Serv.3d 1088

CITY OF YONKERS and Yonkers Community Development Agency Plaintiffs- Appellants Vito J. Cassan, Esq., Appellant, v. OTIS ELEVATOR COMPANY and United Technologies Corporation Defendants- Appellees.

No. 1142, Docket 87-7092.

United States Court of Appeals Second Circuit.

Argued April 22, 1987.

Decided April 7, 1988.

Vito J. Cassan, New York City, John D. Calamari, Joseph M. Perillo, New York City, of counsel), for plaintiffs-appellants.

Robert Mazur, New York City (Wachtell, Lipton, Rosen & Katz, New York City, Donald N. Cohen, of counsel), for defendants-appellees.

Before KAUFMAN, MESKILL and MAHONEY, Circuit Judges.

MAHONEY, Circuit Judge:

This diversity case, acknowledged by all parties to be governed by New York law, arises out of the City of Yonkers' ("Yonkers") attempt to prevent a major employer within its borders, Otis Elevator Company ("Otis"), from moving out of the city. After Yonkers and the Yonkers Community Development Agency (the "Agency") granted Otis various benefits, Otis stayed in the city for a number of years. However, the Otis facility was rendered uneconomical due to technological changes in the manufacture of elevators, Otis' main product. Otis then left the city, ultimately selling the facility to the Port Authority of New York and New Jersey. Yonkers and the Agency then brought suit in the United States District Court for the Southern District of New York seeking damages from Otis and United Technologies Corporation ("United"), Otis' parent. After discovery, the district court, John E. Sprizzo, Judge, granted defendants' motion for summary judgment, and imposed a sanction of five thousand dollars upon plaintiffs and their counsel, Vito J. Cassan, for filing an unjustified fraud claim.

We affirm.

Background

Otis was founded in Yonkers in 1853, and continued in business there until 1976. In 1968, Otis' Yonkers plant required modernization and expansion to remain commercially viable. However, expansion appeared impossible due to limited land space, and Otis therefore considered alternatives, some of which involved closing the Yonkers plant.

The president of Otis, Ralph Weller, authorized Otis representatives to meet with Yonkers officials to try to solve Otis' space problems. A plan drafted by the Charles T. Main Company was rejected by Otis, but negotiations continued. Otis then formulated its own plan internally, tailored to meet Otis' land and space requirements in Yonkers. This plan recommended the use of urban renewal (with its accompanying provision for condemnation) ¹ to allow Otis to expand to the east of the plant. Accordingly, Otis notified Yonkers that if an adjoining parcel of land could be made available, Otis would be willing to expand and modernize its plant. After further negotiation, Otis, Yonkers and the Yonkers Urban Renewal Agency entered into a letter of intent dated June 5, 1972 which provided in relevant part:

1) The purpose of this letter and of the commitments set forth herein is the realization of the following goals:

a) the retention by Otis of its existing usable manufacturing facilities in Yonkers;

b) the improvement and expansion of those facilities with the cooperation and assistance of federal, state and local agencies;

c) the improvement in the aesthetic appearance of the older section of Yonkers in which these facilities are located; and

d) the continuation of existing opportunities for employment and training of the unemployed and the underemployed, such as are now provided by Otis.

The Yonkers City Council adopted an urban renewal plan on September 26, 1972 which included the land in question and set forth a number of goals and conditions, including obligations of Otis. At this point, Yonkers and the Agency began purchasing and clearing the property adjacent to the Otis factory, using funding received from the federal and state government as well as Yonkers' own resources. Otis also invested substantial funds renovating its Yonkers physical plant.

On September 13, 1974, the Agency and Otis entered into a land disposition agreement, and the Agency executed an indenture conveying the property adjacent to the Otis factory, which Yonkers had acquired, to Otis. Because most of the obligations between the parties relating to the details of the land transfer and renovation had been completed, on December 29, 1976, the parties entered into a termination agreement, which released the parties from further liability with respect to these obligations. Moreover, the actual redevelopment and construction were substantially completed; on November 3, 1976, the Agency accordingly issued a certificate of completion.

By 1982, however, the technology of elevator manufacture had undergone substantial change. The Yonkers plant was used to manufacture three mechanical components. In the early 1980's, two of those three were replaced by electronic components. Accordingly, operation of the Yonkers plant became economically unfeasible, and Otis closed it down in 1982.

Yonkers then commenced this action in the United States District Court for the Southern District of New York. None of the agreements or other documents pertaining to this situation includes any specific commitment by Otis to continue production at its Yonkers facility, and obviously there was therefore no specific commitment to do so for any designated period of time. Yonkers contends, however, that under various theories, ² Otis was obliged to continue in operation in Yonkers "for a reasonable time to be set by law, ... alleged to be at least sixty years." Otis denies any such obligation, and further contends that the New York statute of frauds, N.Y.Gen.Oblig.Law Sec. 5-701 subd. a(1) (McKinney 1978), precludes any relief for Yonkers because the asserted contract between the parties was not to be performed within one year from its making, and the crucial asserted term as to duration was not memorialized in a writing subscribed by Otis.

After discovery, the district court issued an opinion, 649 F.Supp. 716 (S.D.N.Y.1986), which determined that the New York statute of frauds applied to the contract alleged in Yonkers' complaint, there was no writing sufficient to satisfy the statute of frauds, and even assuming arguendo that the statute of frauds did not bar plaintiffs' claim, defendants had demonstrated that no rational finder of fact could find for plaintiffs on the facts of this case on either a theory of contract (express or implied), equitable estoppel or unjust enrichment. See id. at 726. Defendants' motion for summary judgment was accordingly granted. ³

The district court also imposed a Rule 11 sanction of five thousand dollars upon plaintiffs and their attorney, Vito J. Cassan, for filing fraud claims that "lacked any colorable factual basis," id. at 735, reaffirming an earlier opinion, 106 F.R.D. 524 (S.D.N.Y.1985), which imposed the sanction upon finding "that the plaintiffs' allegations of fraud had no basis in fact, ... that ... plaintiffs were afforded an ample opportunity to withdraw those allegations and unjustifiably refused to do so," and that "[i]t was only after defendants' motion [for summary judgment] was brought that plaintiffs finally consented to withdraw the fraud claim." Id. at 525. The amount of the sanction was apparently premised upon the cost to defendants of moving to dismiss plaintiffs' fraud claims.

This appeal followed.

Discussion

A. Summary Judgment.

Our role in reviewing the district court's grant of summary judgment is to determine whether a material issue of fact exists and whether the law was applied correctly below. 10 C. Wright, A. Miller & M. Kane, Federal Practice and Procedure Sec. 2716, at 654 (2d ed. 1983). Our function in doing so is plenary, in the sense that we apply the same standard as that employed by the trial court pursuant to Fed.R.Civ.P. 56(c). Id. Sec. 2716 (2d ed. Supp.1987); Burtnieks v. City of New York, 716 F.2d 982, 985 (2d Cir.1983). Further, the record must be read in the light most favorable to the party against whom summary judgment was granted. Id. at 985-86. Finally, plaintiffs may not defeat a motion for summary judgment merely by pointing to a potential issue of fact; there must be a genuine issue of material fact. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 584, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986).

Plaintiffs contend that Otis was obligated to remain in the city for "a reasonable time," that in 1982 a reasonable time had not yet passed, and therefore that Otis' withdrawal in that year constituted a breach of contract. Yonkers argues in the alternative that if no contractual liability is found to exist, relief should be provided on the basis of quasi-contract or equitable estoppel.

Plaintiffs concede that no express promise to remain for a reasonable time was made by Otis. ⁴ They argue instead for a promise implied either in fact or in law.

Implied terms have been divided into three categories: (1) terms that the parties intended, (2) terms that the parties would have intended had they thought about it and (3) terms that are fair. The first involves a search for the parties' intention, the second involves a search for the parties' hypothetical intention, the third has nothing to do with the parties' intention, except that the court will generally not imply a term in the face of the parties' expressed intent to the contrary.... "Implied in law" or "constructive" terms ... include the second and third categories.

Hadjiyannakis, The Parol Evidence Rule and Implied Terms: The Sounds of Silence, 54 Fordham L. Rev. 35, 38 n. 22 (1985) (citations omitted); see Barco Urban Renewal Corp. v. Housing Authority, 674 F.2d 1001, 1007 (3d Cir.1982); Haines v. City of New York, 41 N.Y.2d 769, 772-73, 396 N.Y.S.2d 155, 157-58, ...