Nastasi & Assocs. v. Bloomberg, L.P.
| Decision Date | 23 September 2022 |
| Docket Number | 20-CV-5428 (JMF) |
| Parties | NASTASI & ASSOCIATES, INC., Plaintiff, v. BLOOMBERG, L.P. et al., Defendant. |
| Court | U.S. District Court — Southern District of New York |
In 2018, the New York District Attorney's Office announced the indictment of several people, including employees of Bloomberg, L.P. and Turner Construction Corp. (“Turner”), in connection with a bribery and kickback scheme relating to construction work at Bloomberg. Following that announcement, Plaintiff Nastasi & Associates (“Nastasi”), an interior drywall subcontractor that had done work on Bloomberg projects brought this lawsuit against Bloomberg, Turner, Eurotech Construction Corp. (“Eurotech”), and Donaldson Acoustics, Co. Inc. (“Donaldson Acoustics”) along with a number of people who are or were employed by these companies (the “Individual Defendants”).[1] Nastasi alleges that Defendants organized and participated in a large-scale bid-rigging and bribery scheme. It brings antitrust claims pursuant to Section 1 of the Sherman Act, 15 U.S.C. § 1, and the Donnelly Act, N.Y. Gen. Bus. L. § 340 et seq.; claims under the Racketeering Influenced and Corrupt Organizations (“RICO”) Act, 18 U.S.C. § 1962(c) and (d); and common-law claims for negligent supervision and negligent retention. Defendants now move, pursuant to Rule 12 of the Federal Rules of Civil Procedure, to dismiss the claims. For the reasons described below, the motion is almost entirely DENIED.
Unless otherwise noted, the following factual summary is drawn from the facts alleged in the Complaint, which are taken as true and construed in the light most favorable to Nastasi for purposes of this motion to dismiss; from documents attached to, or incorporated by reference in, the Complaint; and from matters of which judicial notice may be taken. See e.g., Empire Merchants, LLC v. Reliable Churchill LLLP, 902 F.3d 132, 139 (2d Cir. 2018).
Nastasi and most Defendants are players in the interior construction services market in the greater New York region. ECF No. 52 (“Compl.”), ¶¶ 62-65. According to the Complaint, the market is supposed to work as follows. A corporate consumer, such as Bloomberg, will hire an interior construction general contractor, such as Turner, “to rebuild or renovate existing buildings, including by performing the design and planning for interior construction projects and working with subcontractors to perform the construction services.” Id. ¶ 63. The general contractor then puts out “requests for proposals,” or RFPs, seeking competitive bids from a “highly concentrated group of subcontractors,” including Nastasi, Donaldson Acoustics, and Eurotech, to perform specific services, including drywall, carpeting, plumbing, millwork, and electrical system work. Id. ¶¶ 6, 64. The general contractor runs the bidding process, which includes “leveling,” a process that “allow[s] the general contractor to organize the bids and determine the lowest bidder by ensuring that each of the bids provides an ‘apples to apples' comparison for the Corporate Consumer.” Id. ¶ 65. In this way, the corporate consumer is “led to believe” that “the winning bid is the most competitive bid for the particular construction service.” Id.
According to the Complaint, however, Turner has, for much of the last ten years, used its power as “one of the largest interior construction general contractors in the world” to corrupt this purportedly competitive process “through bid rigging and bid rotation schemes,” as well as kickbacks and bribes, allowing it to “profit[] from the resulting price inflation.” Id. ¶¶ 66, 68. Nastasi alleges that, when Turner was hired as a general contractor, it coordinated the bids of the subcontractors, determining which subcontractor would win the project before the bids were even made. Id. ¶ 70. Because the subcontractors all knew that the winning bidder was predetermined, and “usually who the winning bidder would be,” they had no incentive to submit competitive bids. Id. ¶¶ 71, 74. Instead, the “winning” subcontractor would submit an inflated bid, which Turner would pass along to the corporate consumer. Id. The other subcontractors would coordinate with each other and Turner to enter bids that were above the lowest, but “close enough to the winning number to create the appearance of a fair process.” Id. ¶ 72. In addition, the Complaint alleges that several Bloomberg executives were in on the plan. Id. at ¶¶ 72, 88.
The “winning” subcontractor benefitted from the scheme because its inflated bid was more than a competitive market would otherwise bear. Id. ¶¶ 71, 76. Each “losing” subcontractor participated so that Turner would choose it to win next time - if a subcontractor refused to play ball, the Complaint alleges, “the subcontractor would not be selected in future bid rotation or bid-rigging arrangements.” Id. ¶¶ 71, 75. Turner would then further inflate the price that it presented to the corporate consumer, pocketing the price differential between what the corporate consumer would pay and the amount it passed along to the winning subcontractor, sometimes demanding additional price concessions from the subcontractor at that point. Id. ¶¶ 74-76. The losers in this scheme, then, were the corporate consumers, including Bloomberg, which overpaid for interior construction work, and any subcontractors who refused to participate in the conspiracy, such as Nastasi, as they were excluded altogether from the market. Id. ¶ 77.
Nastasi, which was an interior drywall subcontractor at all times relevant to this case, alleges that it was harmed by the above-described scheme in connection with two Bloomberg projects - one at 120 Park Avenue (the “120 Park Project”) and the other at 731 Lexington Avenue (the “731 Lexington Project”). In 2005, Nastasi had been awarded a contract, through an RFP, for maintenance work to be performed at Bloomberg's then-existing headquarters at 731 Lexington Avenue. Id. ¶ 106. The 2005 Services Agreement between Nastasi and Bloomberg required Nastasi to have six employees on site, full-time, to perform work on the building. Id. The 2005 Services Agreement was to run for an initial term of two years, with automatic renewal on a month-to-month basis until termination. Id. In 2010, Bloomberg issued a new RFP for the services work at 731 Lexington Avenue and again awarded the contact to Nastasi. Id. ¶ 107. The 2010 Master Services Agreement similarly had an initial term of two years and was to be automatically renewed for an additional year at the end of each term, unless terminated by either party with thirty days' written notice. Id.
In 2010, Bloomberg also announced that it had acquired real estate at 120 Park Avenue to build a new headquarters to accommodate its rapid growth. Id. ¶ 111. That same year, Bloomberg hired Turner as the general contractor on all its major construction projects throughout New York City, including the 120 Park Project, replacing its former go-to general contractor, Structure Tone. Id. ¶ 82, 111. According to Nastasi, the switch “coincided with the revelation of Structure Tone's involvement in a massive,” but unrelated, “five-year bid rigging and bribery scheme that culminated in a series of corruption charges and a $55 million restitution payment.” ECF No. 73 (“Pl.'s Opp'n), at 4; see Compl. ¶ 80. Turner issued the RFPs for subcontractor work to be performed on the 120 Park Project. Id. Nastasi believed the bidding process “would be fair and competitive” and that it was likely to be awarded the contract because of its history of “twenty years of consistently performing quality services for Bloomberg and consistently winning contracts it bid for at Bloomberg's locations.” Id. ¶¶ 111, 114.
The 120 Park Project was huge - it was slated to cost billions, including approximately $40 million in carpentry and related construction work, and was to be bid out in phases over at least five years. Id. ¶ 121. In late 2010, Nastasi began submitting bids to Turner for the interior drywall work, which Turner reviewed in consultation with Bloomberg. Id. ¶¶ 111, 114. Nastasi alleges that it was the lowest bidder for the first two phases of work, yet in each instance Donaldson Acoustics was awarded the job “in exchange for, among other cash and non-cash bribes, building a cigar room and wine cellar, at no cost,” for a Turner purchasing manager. Id. ¶ 123. In or around July 2011, Nastasi submitted a bid for the third phase of work. Id. ¶ 125. Nastasi's bid was approximately $800,000, and it “was informed and was aware that it was the lowest bid for the work to be performed.” Id. ¶ 126. Nevertheless, when the bidding closed, Nastasi learned that Donaldson Acoustics had been awarded that contract as well. Id. Anthony Nastasi, Nastasi's principal, began to investigate, calling associates at Turner who confirmed that Nastasi had been the lowest bidder. Id. ¶ 127. Nastasi later discovered that its bid had been “manually adjusted from $800,000 to $900,000,” creating the false impression that Donaldson Acoustic's bid had been the lowest. Id. ¶ 128.
Armed with this information, Nastasi “confronted” Defendant Anthony Guzzone, Bloomberg's Head of Global Construction. Id. ¶ 129. ” Id. Guzzone responded: ...
To continue reading
Request your trial