KSW Mech. Servs. v. Johnson Controls, Inc.

• Decision Date: 06 January 2014
• Docket Number: No. 12–CV–4779 (VMS).,12–CV–4779 (VMS).
• Citation: 992 F.Supp.2d 135
• Court: U.S. District Court — Eastern District of New York
• Parties: KSW MECHANICAL SERVICES, Plaintiff, v. JOHNSON CONTROLS, INC., Defendant. Johnson Controls, Inc., Counter Claimant, v. KSW Mechanical Services, Inc., Counter Defendant.

992 F.Supp.2d 135

KSW MECHANICAL SERVICES, Plaintiff,

v.JOHNSON CONTROLS, INC., Defendant.

Johnson Controls, Inc., Counter Claimant,

v.KSW Mechanical Services, Inc., Counter Defendant.

No. 12–CV–4779 (VMS).

United States District Court,

E.D. New York.

Jan. 6, 2014.

James F. Oliviero, Long Island City, NY, for Plaintiff.

James Barriere, Jennifer K. Harvey, Nathan Sabourin, Couch White LLP, Albany, NY, for Defendant.

MEMORANDUM & ORDER

SCANLON, VERA M., United States Magistrate Judge.

Defendant and Counter Claimant Johnson Controls, Inc. (“JCI” or “Defendant”) moves pursuant to Federal Rule of Civil Procedure (“FRCP”) 56(a) for an order of summary judgment 1) granting its second counterclaim alleging that Plaintiff and Counter Defendant KSW Mechanical Services, Inc. (“KSW” or “Plaintiff”) violated the New York Uniform Commercial Code (the “UCC”), N.Y. U.C.C. § 2–709, by failing to complete payment for goods delivered and accepted by KSW, and 2) dismissing KSW's claim alleging a breach of contract. For the following reasons, Defendant's motion is denied.

I. BACKGROUND

As required on a motion for summary judgment, all facts are drawn in the light most favorable to KSW, the non-moving party. See O & G Indus., Inc. v. Nat'l R.R. Passenger Corp., 537 F.3d 153, 159 (2d Cir.2008).

KSW is a Delaware corporation with a principal place of business located in Long Island City, New York. See Verified Compl. (“Compl.”) ¶ 1, Aug. 15, 2011, ECF No. 1 at Ex. A. On May 20, 2010, KSW entered into a contract to provide mechanical work for a project known as the Mount Sinai—Center for Science and Medicine (the “Project”). Id. ¶ 3.

JCI is a Wisconsin corporation with its principal place of business located in Milwaukee, Wisconsin. Id. at ¶ 2. On June 9, 2010, KSW contracted with JCI for JCI to provide air handling units (“AHUs”) for the Project, at a cost of $3.4 Million (the “Purchase Order”). Id. at ¶ 4. The Purchase Order stated, inter alia, that the AHUs would be provided “complete with all items as specified,” would “ship in multiple sections” ¹ and that JCI would “[p]rovide all supervision, components, etc. for field assembly of sections by sheetmetal and piping contractors.” Aff. of William J. Anderson (“Anderson Aff.”), Ex. A at 9, Oct. 30, 2013, ECF No. 26–5 & 26–6 (Exhibits A–D); see Compl. ¶ 7. The contract had also specified that JCI test the AHUs in the factory, but KSW later waived the requirement for factory testing due to timing issues. Compl. ¶ 9.

JCI delivered the AHUs in sealed crates to the rigger's yard between January 21, 2011 and mid-May 2011. Anderson Aff. ¶ 13; Aff. of Penny Olfano Clark (“Clark Aff.”) ¶¶ 3, 9, Nov. 27, 2013, ECF No. 27–1. The AHUs would eventually be rigged to the 11th floor of the Project. Anderson Aff. ¶ 15. According to Floyd Warkol (“Mr. Warkol”), the Chief Executive Officer of KSW, it is the custom and practice in the construction industry to not unpack sealed crates outdoors at a rigger's yard, but to unseal them after they are delivered by the rigger. Anderson Aff. ¶ 14; see Clark Aff. ¶ 5 (stating it would be “foolhardy” to unpack sealed crates in a rigger's yard).²

Nevertheless, KSW's employees provided testimony that at least some unpacking occurred at the rigger's yard, prior to delivery at the Project site. Penny Olfano Clark (“Ms. Clark”), KSW's Project Manager for the Project, described a JCI employee assisting with opening sealed crates in late April and early May 2011. Clark Aff. ¶¶ 1, 8.³ Ms. Clark also described KSW's and JCI's attempts, at the rigger's yard, to catalog items delivered to determine their weights and sizes, and to construct a “mock up” “to ascertain how the sections could be assembled.” Clark Aff. ¶¶ 6–10; see Aff. of James J. Barriere (“Barriere Aff.”) ¶ 11 & Ex. H, Nov. 1, 2013, ECF No. 26–3 & 26–4 (including excerpts from the deposition of Eduard Kochoumian, a Project Manager for KSW who testified about the mock up).

No later than May 5, 2011, in connection with creating the mock up, KSW had the “[i]mpression” that the AHUs “were not built up in the factory and knocked down for shipment but [were] parts manufactured and put in crates [without pre-assembly].” Clark Aff. ¶ 9 & Ex. 17. However, KSW contends that it was not until approximately mid-June 2011, after the crates were rigged to the Project and then unpacked, that KSW was able to understand the “full dimension” of the problem. Clark Aff. ¶ 11. The Purchase Order had specified that JCI would split each AHU into twelve pre-assembled sections, but only eight of the sections were shipped pre-assembled, and four sections were shipped in pieces, located in 64 crates. Clark Aff. ¶ 12 & Ex. 3; Compl. ¶ 11. In addition, multiple pieces did not fit properly when assembled. Compl. ¶ 14.

KSW contends that it put JCI on notice of its breach of contract. See Compl. ¶ 13. On June 6, 2011, Ms. Clark emailed a senior JCI employee (and copied several JCI and KSW employees on the email), describing KSW's dissatisfaction with the AHUs not arriving in sections and the problems that had caused KSW. Clark Aff. ¶ 12 & Ex. 19. Ms. Clark wrote, “Please be informed that all work and rigging costs associated with the assembly of these [unassembled] sections and [sic] not described in our contract will be monitored and passed along to JCI.” Clark Aff. ¶ 12 & Ex. 19. On June 13, 2011, Ms. Clark sent another email to the same senior JCI employee and several other JCI and KSW employees in which she reiterated her concerns, described additional deficiencies with the AHUs and again stated, “Please be aware that since we were not informed that these units were coming KD'd [knocked down]—assembly time for this process was not purchased by us from our Contractor[s]. The cost of this extra time will be Johnson's responsibility.” Clark Aff. ¶ 13 & Ex. 20. Likewise, minutes prepared by Ms. Clark from a June 30, 2011 meeting between KSW and JCI employees included the statement, “[t]he Contractors building these units will be paid from JCI's money held by KSW since they can not [sic] be expected to finance this additional cost.” Clark Aff. ¶ 14 & Ex. 21. According to KSW, JCI later “backed away” from this resolution, and on August 16, 2011, Mr. Warkol wrote to JCI's General Manager, again complaining that “[t]he units were not built and assembled as specified and were not shipped as specified.” Clark Aff. ¶ 15 & Ex. 22.

KSW filed an action in the Supreme Court of the State of New York, County of Queens, alleging breach of contract. The total costs KSW attributes to JCI's alleged breach are $1,833,555. See Barriere Aff. Ex. G ¶ 12 (attaching a damages chart).⁴ As described in more detail below, these damages include amounts both paid and outstanding for subcontractors' work, and KSW's own increased overhead and lost profits. Id. In addition, of the original $3,400,000 contract price, KSW paid JCI a total of $2,432,992, which left $967,008 ⁵ outstanding. Id. ¶¶ 18–19; Def.'s Statement of Material Facts (“Def. 56.1”) ¶ 23, Oct. 30, 2013, ECF No. 26–7.

JCI removed this action to federal court, on the basis of diversity. Notice of Removal, Sept. 24, 2012, ECF No. 1. The Parties consented to have this case tried before the undersigned. Consent to Jurisdiction by U.S. Magistrate Judge, Feb. 21, 2013, ECF No. 11.

Defendant's final Answer asserted three counterclaims, including breach of contract, violation of the UCC, and unjust enrichment. Second Am. Answer (“Answer”) ¶¶ 18–34, Aug. 8, 2013, ECF No. 13. JCI seeks counterclaim damages of $967,008 (the outstanding balance on the Purchase Order), plus interest, costs and disbursements. Mem. of Law in Supp. of Def.'s Mot. for Summary Judgment (“Def. Mem.”) 1, Nov. 1, 2013, ECF No. 26–9; Def.'s Reply Mem. of Law in Further Supp. of Mot. for Summary Judgment (“Def. Reply Mem.”) 10, Dec. 9, 2013, ECF No. 28.⁶

II. DISCUSSION

JCI moves for summary judgment to grant its counterclaim alleging a violation of the UCC § 2–709, and to dismiss KSW's breach of contract claim. Def. Mem. 1. Pursuant to FRCP 56, “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see Aegis Ins. Servs., Inc. v. 7 World Trade Co., L.P., 737 F.3d 166 (2d Cir.2013) (same). In deciding a motion for summary judgment, the court must consider “the facts in the light most favorable to the nonmoving party and resolve all factual ambiguities in its favor.” O & G Indus., 537 F.3d at 159; see Easterling v. Collecto, Inc., 692 F.3d 229, 233 (2d Cir.2012) (same). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Aetna Cas. & Sur. Co. v. Aniero Concrete Co., Inc., 404 F.3d 566, 574 (2d Cir.2005) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). “Although the moving party bears the initial burden of establishing that there are no genuine issues of material fact, once such a showing is made, the non-movant must ‘set forth specific facts showing that there is a genuine issue for trial.’ ” Toussie v. Cnty. of Suffolk, 806 F.Supp.2d 558, 571 (E.D.N.Y.2011) (quoting Weinstock v. Columbia Univ., 224 F.3d 33, 41 (2d Cir.2000)).

A. JCI's Motion For Summary Judgment On Its Counterclaim

For the reasons stated below, JCI's motion for summary judgment concerning its counterclaim is denied in its entirety.

1. The UCC Applies to the Purchase Order

As a preliminary matter, the Parties dispute whether the Purchase Order is governed by the UCC. The UCC “applies to transactions in goods.” N.Y. U.C.C. Law § 2–102. “ ‘Goods' means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale....” N.Y. U.C.C. Law § 2–105(1). Contracts for goods which involve—incident to the sale of goods—services such...