Media Glow Digital, LLC v. Panasonic Corp. of N. Am.

• Decision Date: 06 March 2019
• Docket Number: 16 Civ. 7907 (JFK)(HBP)
• Parties: MEDIA GLOW DIGITAL, LLC, et al., Plaintiffs, v. PANASONIC CORPORATION OF NORTH AMERICA, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

MEDIA GLOW DIGITAL, LLC, et al., Plaintiffs, v. PANASONIC CORPORATION OF NORTH AMERICA, et al., Defendants.

16 Civ. 7907 (JFK)(HBP)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

March 6, 2019

REPORT AND RECOMMENDATION

Table of Contents

I. Introduction ........................ 1

II. Facts ........................... 1

A. The Millennium Contract ................ 1

B. The DoubleTree Contract ................ 7

C. Procedural History .................. 9

III. Analysis ........................ 10

A. Summary Judgment Standard .............. 10

B. Plaintiffs' Claims Against Panasonic ........ 13

1. Negligence ................... 13

a. Cognizable Duty of Care .......... 14

b. The Economic Loss Doctrine ........ 20

2. Negligent Misrepresentation .......... 26

a. Special Relationship ........... 27

b. The Negligent Misrepresentation Claim is Duplicative ...... 33 3. Fraud and Fraudulent Inducement ........ 35

4. Breach of Warranty ............... 37

5. Panasonic's Breach of Contract Counterclaim ............ 43

C. Plaintiffs' Claims Against ICON ........... 46

1. Breach of Contract .............. 46

2. Negligence and Professional Malpractice ............ 55

a. Cognizable Duty of Care .......... 56

b. Economic Loss Doctrine .......... 59

c. Lack of Expert Proof ........... 61

3. Negligent Misrepresentation .......... 63

IV. Conclusion ....................... 65

V. OBJECTIONS ........................ 66

PITMAN, United States Magistrate Judge:

TO THE HONORABLE JOHN F. KEENAN, United States District Judge,

I. Introduction

By notice of motion dated April 6, 2018 (Docket Item ("D.I.") 139), defendant Panasonic Corporation of North America ("Panasonic") moves for summary judgment. By notice of motion dated April 5, 2018 (D.I. 164), defendants Icon Architectural Group, LLC, Icon Architectural Group, PLLC and Icon HD LLC (collectively "ICON") move for summary judgment. For the reasons set forth below, I respectfully recommend that both motions be granted in part and denied in part.

II. Facts

In principal part, this is an action arising out of defendants' alleged breaches of contracts to design, fabricate and install a large light-emitting diode ("LED") sign in New York's Times Square.

A. The Millennium Contract

In April 2010, plaintiff Media Glow Digital ("MGD"), an Oklahoma-based limited liability company, entered into a lease to build and operate a large LED sign on the facade of the Millen-nium Broadway Hotel on West 44th Street in New York City (Plaintiffs' Rule 56.1 Statement of Undisputed Facts Regarding Panasonic's Motion for Summary Judgment, dated Apr. 27, 2018 (D.I. 148) ("Pl. Rule 56 Stat.") ¶¶ 1, 15).¹ In June 2011, MGD hired Lovell-Belcher to conduct a survey of the Millennium Broadway's facade, including the air rights of the adjacent Bow Tie building (the "Lovell-Belcher survey") (Pl. Rule 56 Stat. ¶ 60).² Six months later, on December 5, 2011, MGD contracted with Panasonic to purchase a 7,000-square-foot LED sign to be installed on the facade of the Millennium Broadway Hotel, within the available air space (Pl. Rule 56 Stat. ¶ 82; Second Amended Complaint, dated May 8, 2017 (D.I. 33) ("SAC") ¶¶ 27-29).

This agreement provided, in pertinent part, that:

• Panasonic [was to] provide a preliminary design package within 2 weeks of [the completion of a] detailed site survey . . . .

• Panasonic [was to] provide detailed drawings with revisions as required throughout the course of the project and a final document package certified by a registered P[rofessional] E[ngineer] in the state of New York.

• Panasonic [was to] follow state and local codes during [the] installation process.

(Millennium Hotel, NYC LED Project Purchase Agreement, annexed to Declaration of Chad D. Hansen as Ex. 1, dated Apr. 27, 2018 ("Hansen Decl.") (D.I. 150-1) ("Millennium Contract") § 1.1). The Millennium Contract further provided that

Panasonic represents and warrants to [MGD] for the warranty period of twenty-four (24) months following substantial completion of the Integrated System that the Integrated System will be free from defects in workmanship and materials. Except as set forth in the immediately preceding sentence, the Equipment shall be covered solely by the standard within manufacturer's warranty (if any) included with such equipment when delivered. The warranties set forth in this paragraph are exclusive and are in lieu of all other warranties on the system, whether oral or written, express or implied, including the warranties of merchantability or fitness for a particular purpose or noninfringement, all of which are hereby waived by [MGD].

(Millennium Contract § 4.1).

Finally, the Millennium Contract expressly limited Panasonic's liability to the "total dollar amount of any [MGD] purchase of equipment, integrated systems, or related services" and excluded lost profits and incidental or consequential damages (Millennium Contract § 5.1).

MGD agreed to a total contract price of $4,183,296.73, one-half to be paid upon execution of the contract, and the remainder payable at certain project milestones (Pl. Rule 56 Stat. ¶ 85). However, the contract was modified in February 2012 to reduce MGD's initial down payment to $100,000.00 with asubsequent payment of $798,000.00 that MGD alleges it paid prior to March 30, 2012 (Pl. Rule 56 Stat. ¶¶ 85-86).

Panasonic subcontracted fabrication of the sign components to a Chinese company, SZRetop Shenzhen ("Retop"), which, according to plaintiffs, had a poor reputation in the relevant industry (Pl. Rule 56 Stat. ¶¶ 167, 258; SAC ¶ 35). Panasonic also subcontracted the design, construction and installation of the sign to defendant ICON, a North Dakota-based firm with no experience in constructing or installing large LED signs in New York City (Pl. Rule 56 Stat. ¶¶ 164-65; SAC ¶¶ 36-37). MGD was aware of these subcontracts and did not object to them (Pl. Rule 56 Stat. ¶¶ 165, 167; SAC ¶¶ 38-39).

MGD provided the documents from the Lovell-Belcher survey to Panasonic, which, in turn, provided them to ICON (Pl. Rule 56.1 Stat. ¶¶ 183, 315). Relying on the Lovell-Belcher survey calculations, ICON designed the sign to be three-and-three quarters inches deep (Pl. Rule 56.1 Stat. ¶ 183). However, the Lovell-Belcher survey was incorrect and a sign of that depth would not fit within the Millennium Broadway Hotel's air space (Pl. Rule 56.1 Stat. ¶ 188; SAC ¶¶ 62-63). The parties dispute whether Panasonic was required to perform an independent air rights survey under the Millennium Contract (Pl. Rule 56.1 Stat.¶ 183).³ Plaintiffs further allege that ICON's architect and engineer warned Panasonic that they believed the Lovell-Belcher survey's air space measurements were inaccurate (Pl. Rule 56.1 Stat. ¶ 183). However, the parties agree that neither Panasonic, nor ICON, performed an independent air rights survey for the Millennium project (Pl. Rule 56.1 Stat. ¶ 191).

The Millennium Contract provided that installation of the sign was to begin in March 2012, but Panasonic had not even ordered all of the components from Retop by that time (Millennium Contract § 2.1; SAC ¶¶ 33, 42-43). The project suffered additional delays thereafter. In April 2012, MGD submitted ICON's proposed design and installation procedures for review by a third-party engineer, as required by the Millennium Broadway Hotel (Pl. Rule 56.1 Stat. ¶ 359; SAC ¶ 45). ICON was allegedly unprepared and non-responsive during the review process, and the reviewing engineers found some of ICON's methods "unacceptable" (Pl. Rule 56.1 Stat. ¶ 364; SAC ¶ 46). On March 1, 2013, MGD instructed Panasonic to begin installing the sign upon completion of the review process, but ICON had still not applied for permits or hired the workforce necessary to install the sign (Pl. Rule 56.1 Stat. ¶ 365; SAC ¶ 49).

When MGD demanded a revised schedule, Panasonic proposed completion of the project between June and August 2013. Nevertheless, as of October 2013, defendants still had not finished the work (SAC ¶¶ 51, 57).⁴ In the meantime, the Millennium Broadway required MGD to sign a new long-term lease with a $1.6 million non-refundable pre-payment (Pl. Rule 56.1 Stat. ¶¶ 374, 377).

In October 2013, counsel for the Bow Tie building advised MGD that the sign, as designed, encroached on Bow Tie's air space (Pl. Rule 56.1 Stat. ¶ 188).⁵ MGD communicated this claim to Panasonic and ICON, and defendants responded that they had relied on the Lovell-Belcher survey, rather than obtaining their own survey (Pl. Rule 56.1 Stat. ¶¶ 189-93). MGD then commissioned another survey, which confirmed the errors in the Lovell-Belcher survey and the encroachment on Bow Tie's air space (Pl. Rule 56.1 Stat. ¶¶ 189-93). According to plaintiffs, Panasonic offered to "modify the existing sign to fit within the Millennium's air space," but no such re-design was ever created (SAC ¶ 64).

In early 2014, MGD abandoned the Millennium Broadway sign project; by that time, MGD alleges that it had paid more than $3 million to Panasonic and $3 million in rent and other expenses (Pl. Rule 56.1 Stat. ¶ 382; SAC ¶ 65).

B. The DoubleTree Contract

On June 12, 2014, plaintiff TSL, an Oklahoma-based limited liability company comprised of the principals of MGD, contracted with Panasonic to re-purpose the existing sign for installation on the facade of the DoubleTree Suites Hotel at the corner of West 47th Street and Broadway in New York (Pl. Rule 56.1 Stat. ¶¶ 112-22, 138; Purchase Agreement, annexed to the Declaration of Michael L. Simes as Ex. 16, dated Apr. 6, 2018 (D.I. 142-16) ("Simes Decl.") ("DoubleTree Contract")). Like the Millennium Contract, the contract for the DoubleTree sign limited the parties' liability as follows:

Except with respect to the indemnification obligations of the parties set forth above and for any damages incurred by customer as a result of a default by Panasonic under the purchase agreement which causes a default under the lease or the license agreement, in no event shall either party be liable, to the

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