Lynx Tech. Partners, Inc. v. Pitts Mgmt. Assocs.

• Decision Date: 06 June 2021
• Docket Number: 18-cv-3881 (ENV) (PK)
• Parties: LYNX TECHNOLOGY PARTNERS, INC., Plaintiff, v. PITTS MANAGEMENT ASSOCIATES, INC. Defendant.
• Court: U.S. District Court — Eastern District of New York

LYNX TECHNOLOGY PARTNERS, INC., Plaintiff,
v.
PITTS MANAGEMENT ASSOCIATES, INC. Defendant.

18-cv-3881 (ENV) (PK)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

June 6, 2021

MEMORANDUM & ORDER

VITALIANO, D.J.

On July 5, 2018, Lynx Technology Partners, Inc. ("Lynx") filed this action against Pitts Management Associates, Inc. ("PMA"), bringing breach of contract, account stated and indemnification claims. The parties have cross-moved for summary judgment pursuant to Federal Rule of Civil Procedure 56(a). For the reasons set forth below, both motions are granted in part and denied in part.

Background¹

In December 2013, the State University of New York - Downstate Medical Center ("SUNY Downstate"), a Brooklyn-based academic medical center, contracted with PMA, a Louisiana-based healthcare consulting company, to carry out an organization-wide restructuring project, which was apparently spurred by financial difficulties at the hospital. See Pl.'s 56.1 Reply, Dkt. 38-1, ¶ 1; Perminter Opp'n Decl., Dkt. 38-2, ¶ 3; SUNY-PMA Contract, Dkt. 38-3; Murray Tr., Dkt. 37-11, at 31:14-23. Under the contract, PMA had to comply with SUNY's

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affirmative action requirements, which obligated PMA to allocate a portion of the work to minority- and women-owned business enterprises. Perminter Opp'n Decl. ¶¶ 4-5; SUNY-PMA Contract at 19-21; Murray Tr. at 46:10-23, 49:4-14. Lynx is a minority-owned business enterprise and PMA is not. Lynx had responded to SUNY Downstate's request for proposals on the restructuring project, but did not get the job. Elcock Tr., Dkt. 37-9, at 17:2-7, 31:19-32:2. PMA selected Lynx as a subcontractor on the project, however, and the companies entered into a contract in November 2013. Pl.'s 56.1 Reply ¶ 3; Lanius Tr., Dkt. 37-10, at 27:14-28:8; Revised PMA-Lynx Agreement, Dkt. 38-5.

To carry out the work, PMA recommended that Lynx hire as subcontractors the companies Expeditive and Nearterm, with whom PMA had worked previously on related projects, given their greater expertise in the project's tasks. See Murray Tr. at 40:9-18, 43:11-44:4; Mahin Tr. at 109:21-110:14. Lynx entered into subcontracts with both entities, who then supplied individual consultants. See Lynx-Nearterm Contract, Dkt. 38-6; Lynx-Expeditive Contract, Dkt. 38-7. The project was broken down into various focus areas—such as the "revenue cycle" by which SUNY Downstate would bill and receive payment from insurers—with each governed by a work order agreement ("WOA"). See Pl.'s 56.1 Reply ¶¶ 6-8; Elcock Tr. at 17:12-18:22. To request payment, Lynx would invoice PMA for consulting fees and expenses, sending invoices electronically from Lynx's email to PMA's. Mahin Tr. at 48:7-49:9, 52:1-7. It was not to be a short-term relationship; the restructuring project lasted two years, concluding in December 2015. Lanius Tr. at 18:21-19:8, 25:10-16. PMA ceased operations not long after, when its founder retired. See id. at 14:10-20; Murray Tr. at 21:2-18.

During and after the two-year project, disputes over payment arose at every level. The state audited PMA given concerns over improper expense reimbursements, such as a hotel room

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that cost over $1,000 per night. See Perminter Opp'n Decl. ¶ 24; Dkt. 38-13 at 6. PMA sued SUNY Downstate for around $875,000 in unpaid expense invoices. See Dkt. 38-14; Murray Tr. at 68:6-69:7. Both Expeditive and Nearterm sued Lynx over unpaid invoices. See Pl.'s 56.1 Reply ¶¶ 21-37. Hounded by the subcontractors' suits and given the failure of its prior efforts to agree with PMA on the amount of remaining unpaid invoices, Lynx filed the instant action. See id. ¶ 37; Edgens Aff., Dkt. 37-29, ¶¶ 17-21; Compl., Dkt. 1. It initially sought to recover about $416,000 in unpaid consultants' fees and expenses, though its subsequent withdrawal of various claims has lowered that sum to around $175,000.²

Discussion

I. Choice of Law

In preface to their larger battle, the parties dispute which state's law governs this action. PMA argues for the application of Louisiana law in accordance with the choice-of-law clause in the parties' contract, while Lynx argues that New York has the most significant interest in the dispute and its law should govern. The question presented is hardly novel. A federal court sitting in diversity will, ordinarily, apply the rule of its forum state to determine the choice of law. See Fireman's Fund Ins. Co. v. Great Am. Ins. Co. of New York, 822 F.3d 620, 641 (2d Cir. 2016). Following that rule of decision, where, as here, a contract between the parties contains an express choice-of-law provision, New York law determines that provision's validity and scope.

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See Fin. One Pub. Co. v. Lehman Bros. Special Fin., 414 F.3d 325, 333 (2d Cir. 2005). As to its validity, "New York law is clear in cases involving a contract with an express choice-of-law provision: Absent fraud or a violation of public policy, a court is to apply the law selected in the contract as long as the state selected has sufficient contacts with the transaction." Hartford Fire Ins. Co. v. Orient Overseas Containers Lines (UK) Ltd., 230 F.3d 549, 556 (2d Cir. 2000); see also Bank of New York v. Yugoimport, 745 F.3d 599, 609 (2d Cir. 2014). This rule reflects New York's recognition that "[a] basic precept of contract interpretation is that agreements should be construed to effectuate the parties' intent," so "[w]here an agreement is clear and unambiguous, a court is not free to alter it and impose its personal notions of fairness." Welsbach Elec. Corp. v. MasTec N. Am., Inc., 7 N.Y.3d 624, 629, 825 N.Y.S.2d 692, 859 N.E.2d 498 (2006).

Facts background to contract formation, moreover, are essentially undisputed. For example, there is no question that the contract between the parties provides that "[t]he laws of the State of Louisiana, with venue in East Baton Rouge Parish, shall govern this Agreement." Revised PMA-Lynx Agreement ¶ 23. Nor that PMA is incorporated in Louisiana and had its principal place of business in Baton Rouge, Louisiana. Pl.'s 56.1 Reply ¶¶ 1, 13. PMA's Chief Financial Officer, Robin Edgens, the contractually designated point-person overseeing payments to Lynx, worked at the Baton Rouge headquarters, as did the employee who helped her manage accounts payable and Executive Vice President and Chief Operating Officer Kimberly Murray, who signed the contract. See id.; Edgens Aff. ¶¶ 2-8; Revised PMA-Lynx Agreement ¶¶ 3, 17. As a matter of law, a party has sufficient contacts to support a contractual choice-of-law provision in the state where it maintains its principal place of business. See Cap Gemini Ernst & Young, U.S., L.L.C. v. Nackel, 346 F.3d 360, 366 (2d Cir. 2003); Finucane v. Interior Const. Corp., 264 A.D.2d 618, 620, 695 N.Y.S.2d 322 (1st Dep't 1999).

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Even though these facts could under New York law justify the application of Louisiana law in this case, Lynx contends that public policy nonetheless requires the application of New York law, pointing to New York's higher prejudgment interest rate and arguing that the state has an interest in ensuring PMA fully compensates the subcontractor picked in accordance with SUNY Downstate's affirmative action requirements. See Pl.'s Opp'n Mem., Dkt. 38, at 8-9; Pl.'s Reply, Dkt. 42, at 3. New York courts, however, "have reserved the public policy exception 'for those foreign laws that are truly obnoxious.'" Welsbach Elec. Corp., 7 N.Y.3d at 629 (quoting Cooney v. Osgood Mach., Inc., 81 N.Y.2d 66, 79, 595 N.Y.S.2d 919, 612 N.E.2d 277 (1993)). This places a "heavy burden" on the party invoking the exception. Id. at 632. Lynx has failed to meet this burden. First off, breach of contract claims in New York and Louisiana require plaintiffs to establish essentially the same elements.³ Cf. 2002 Lawrence R. Buchalter Alaska Tr. v. Philadelphia Fin. Life Assur. Co., 96 F. Supp. 3d 182, 209 (S.D.N.Y. 2015) (finding that applying another state's substantially similar breach of contract law was not "truly obnoxious" or against public policy). The prospect of greater recovery under New York law is not sufficient, nor are Lynx's "individual notions of expediency and fairness." Cooney, 81 N.Y.2d at 79-80 (internal citation and quotation marks omitted). In fact, New York law routinely requires the application of other states' lower prejudgment interest rates, because "under New York choice of law principles, the allowance of prejudgment interest is controlled

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by the law of [the state] whose law determined liability on the main claim." Schwartz v. Liberty Mut. Ins. Co., 539 F.3d 135, 147 (2d Cir. 2008) (awarding interest at California rate); see also, e.g., U.S. Bank Nat'l Ass'n v. Brooklyn Motor Cars, Inc., No. 18-CV-2609 (CBA) (PK), 2019 WL 1370696, at *5 (E.D.N.Y. Mar. 4, 2019) (applying Ohio prejudgment interest rates of 4% and 5% per contractual choice-of-law clause); Imperium Ins. Co. v. Am. W. Home Ins. Co., No. 15-CV-5471 (SJF) (SIL), 2018 WL 5298430, at *17 & n.5 (E.D.N.Y. Aug. 8, 2018) (applying New Jersey's 2.5% pre-judgment interest rate); Fin. Cas. & Sur. Co., Inc. v. Zouvelos, No. 12-CV-3476 (AMD) (RLM), 2018 WL 3950634, at *4 (E.D.N.Y. May 3, 2018) (applying Texas's 5% rate). Louisiana's lower pre-judgment interest rate, which ranged from 4% to 6% during the relevant time period, is not "truly obnoxious" so as to void the parties' choice-of-law provision. See Judicial Interest Rates, La. Off. Fin. Inst., http://www.ofi.state.la.us/Legal%20Judicial%20Rate.htm. Moreover, the parties are "both sophisticated commercial entities that knowingly and voluntarily entered into the subcontract." Welsbach Elec. Corp., 7 N.Y.3d at 632. The Court, therefore, finds the contract's Louisiana choice-of-law provision valid and enforceable.⁴

The next task, then, is to determine its scope. At a minimum, Louisiana law applies to Lynx's breach of contract and indemnification claims, which arise directly from the parties' agreement. Conversely, choice-of-law clauses typically do...