Nat'l Gear & Piston, Inc. v. Cummins Power Sys., LLC

• Citation: 861 F.Supp.2d 344
• Decision Date: 17 May 2012
• Docket Number: Case No. 10–CV–4145 (KMK).
• Court: U.S. District Court — Southern District of New York
• Parties: NATIONAL GEAR & PISTON, INC., Plaintiff, v. CUMMINS POWER SYSTEMS, LLC and Cummins Inc., Defendants.

861 F.Supp.2d 344

NATIONAL GEAR & PISTON, INC., Plaintiff,

v.CUMMINS POWER SYSTEMS, LLC and Cummins Inc., Defendants.

Case No. 10–CV–4145 (KMK).

United States District Court, S.D. New York.

May 17, 2012.

George Phillip McKeegan, Esq., Andrew James Cavanaugh, Esq., McKeegan & Shearer, P.C., New York, NY, for Plaintiff.

Michael K. Madden, Esq., Michael J. Volpe, Esq., Megan Hope Mann, Esq., Michael Colbert Hartmere, Esq., Venable LLP, New York, NY, for Defendant Cummins Power Systems, LLC.

Amanda Lynn Devereux, Esq., Samuel Goldblatt, Esq., Nixon Peabody LLP, New York, NY, for Defendant Cummins Inc.

OPINION AND ORDER

KENNETH M. KARAS, District Judge:

National Gear & Piston, Inc. (“Plaintiff”) brings this action against Cummins Power Systems, LLC (“CPS”) and Cummins Inc. (“Cummins”) (collectively, “Defendants”). Plaintiff alleges breach of contract, breach of the duty of good faith and fair dealing, tortious interference with contract, tortious interference with business relations, and violation of Section 340(1) of the New York General Business Law (“the Donnelly Act”). Defendants separately each move to dismiss all of Plaintiff's claims pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons explained herein, Defendants' motions are granted.

I. Background

A. Plaintiff's Allegations

For purposes of deciding the instant motions, the Court assumes the truth of Plaintiff's allegations in its Amended Complaint. Plaintiff is a New York corporation which supplies and services “essential automotive components” for public agencies, including the New York State Department of Transportation (“NYSDOT”), Metropolitan Transit Authority (“MTA”), and the New York City Transit Authority (“NYCTA”). (Am. Compl. ¶ 6.) A major part of its business is the sales of engines and engine parts manufactured by Cummins, which allegedly manufactures the only mass transit bus engines that comply with EPA regulations. ( Id. ¶¶ 9, 24.) Plaintiff has sold these engines since 1998 as an authorized Cummins dealer, first under the territory distributor Cummins Metropower, Inc. (“CMP”), then under its successor, CPS.¹ ( Id. ¶¶ 7–8.) As an authorized dealer representative, Plaintiff has “developed customer relationships; offered for sale components and materials required by customers; set pricing and payment terms for such sales; acquired from [Defendants] inventory to fulfill orders actually placed, and provided after-sale service and information to customers.” ( Id. ¶ 18.) Plaintiff “has developed a significant business reputation as a lead trading partner with local transit agencies in connection with the procurement of [Cummins] machinery and materials ... built on a history of competitive bidding, fair dealing and customer service.” ( Id. ¶ 22.)

Cummins is an Indiana corporation and “a major provider of automotive components utilized in the general purpose truck and revenue transit sectors.” ( Id. ¶ 7.) CPS is a Delaware limited liability company that is a territory distributor for Cummins. ( Id. ¶ 8.) CPS, and before it CMP, acted as an upstream distributor to Plaintiff, maintaining a first level business-to-business relationship with Cummins for Plaintiff's benefit, acquiring inventory from Cummins and then reselling it to Plaintiff, and financing Plaintiff's inventory purchases. ( Id. ¶ 19.) CPS, and before it CMP, also functioned as a competitor of Plaintiff, distributing Cummins products both to authorized dealers and end users, and often bidding on the same contracts on which Plaintiff and other authorized dealers were bidding. ( Id. ¶ 20.)

In November 2007, CMP provided Plaintiff with a written agreement (“Agreement”), “setting out the respective rights and obligations of CMP as Distributor and [Plaintiff] as Dealer.” ( Id. ¶ 10.) The Agreement was allegedly originally formulated by Cummins, as the standard form used by all Cummins distributors. ( Id. ¶ 11.) The Agreement states that it is effective “upon the date fully executed.” ( Id. Ex. A, § 7.1.) It may be terminated (1) without cause “upon 60 days' prior written notice to the other party” (pursuant to Section 7.2 of the Agreement), or (2) “at any time, without further notice, if [Plaintiff] is in breach of this Agreement, or other good cause for termination exists, and [Plaintiff] fails to cure the breach or cause within 30 days of written notification thereof from [CMP]” (pursuant to Section 7.4 of the Agreement). ( Id. §§ 7.2, 7.4.) If the Agreement is terminated, any prior orders “shall not in any way be affected.” ( Id. § 7.6(c).)

The Agreement was never executed, and remains unsigned by either party. (Am. Compl. ¶ 17.) Plaintiff claims that the Agreement “memorialized the terms and practices of the business relationship as it had existed between the parties since 1999,” and asserts that the parties “performed generally pursuant to the terms set forth in the un-executed contract.” ( Id.)

In April 2008, CPS acquired CMP. ( Id. ¶ 21.) Plaintiff alleges that initially CPS and Plaintiff “continued on the terms and practices of the business relationship previously established,” with CPS acting as a distributor and Plaintiff acting as its authorized dealer. ( Id.) ² This “relationship” allegedly included preferred credit status for Plaintiff with CPS, as well as volume and unit discounts. ( Id. ¶ 25.) Plaintiff claims, however, that “[s]ometime after the date that it acquired CMP, CPS began instituting increasingly onerous and unnecessary business constraints on [Plaintiff], depriving it of its effective operation as a dealer and designed to destroy its business model and its commercial viability.” ( Id. ¶ 26.) Plaintiff alleges that CPS made these operational changes “to constrain the ability of [Plaintiff] to bid effectively in its marketplace.” ( Id. ¶ 47.)

The first alleged change was the imposition on Plaintiff of a non-published price structure for certain components in October 2009, which allegedly impaired Plaintiff's ability to submit meaningful and actionable offers of sale in reply to customers' requests for bids. ( Id. ¶ 27.) The second change was in December 2009, when CPS representatives allegedly instructed Plaintiff and other dealers that they were “prohibited from bidding on all MTA and NYCTA Requests for Bids covering machine components for buses.” ( Id. ¶¶ 34, 36.) According to Plaintiff, CPS representatives explained that the purpose of the prohibition was to let CPS maintain this business for itself, “at improved margins, and ultimately at greater cost for end use consumers.” ( Id. ¶ 35.) Since this prohibition, Plaintiff “has observed the overall bid activity” on MTA and NYCTA requests for bids “to be considerably diminished.” ( Id. ¶ 37.) Plaintiff initially complied, and refrained from bidding on the relevant contracts, but “[s]hortly thereafter” resumed bidding. ( Id. ¶ 39.) Plaintiff's first new major bid was to provide Bosch injectors to NYCTA. ( Id. ¶ 40.) CPS also bid, but Plaintiff won the contract, which allegedly “resulted in a substantial loss to CPS.” ( Id. ¶¶ 42, 44.) While Plaintiff normally would have obtained the Bosch injectors from CPS, due to CPS's prohibition, Plaintiff instead obtained the injectors directly from Bosch. ( Id. ¶ 41.)

The third alleged change occurred in January 2010, and concerned a different NYCTA bid. In October 2009, Plaintiff was the winning bidder on NYCTA's bid number 76037 for reconditioned Cummins engine parts. ( Id. ¶¶ 28–29.) The bid request specified that all responses quote a discount from list price, which Plaintiff claims it did. ( Id. ¶ 28.) CPS was allegedly the only bidder other than Plaintiff. ( Id.) In January 2010, CPS allegedly communicated to NYCTA that the bid was inappropriate, “because there was no list price for reconditioned [Cummins] engine parts.” ( Id. ¶ 30.) Plaintiff claims that this information “contradicted the procedures that [Plaintiff] had used for many years in responding to [similar] Requests for Bid,” and that in any case such information would customarily be provided immediately after the Request for Bid was issued, not after NYCTA had determined the low bidder. ( Id. ¶ 31.) NYCTA then cancelled the bid, allegedly because of the information it learned from CPS. ( Id. ¶¶ 32–33.)

The fourth alleged change occurred “[i]mmediately after the NYCTA awarded [Plaintiff] the contract for the Bosch injectors.” ( Id. ¶ 45.) In January 2010, CPS “unilaterally and without reason” altered Plaintiff's payables status “from preferred credit to COD fulfillment only.” ( Id.) Plaintiff claims that it was not “delinquent or untimely in paying its bills,” and alleges that CPS changed Plaintiff's credit status as punishment for bidding on the Bosch injectors contract, despite CPS's bidding prohibition. ( Id. ¶ 46.)

On April 14, 2010 Plaintiff received a letter from CPS proposing to terminate their distributor-dealer relationship (“Termination Letter”). ( Id. ¶ 49.) Plaintiff claims that this letter was sent because of Plaintiff's “continued bidding on requests for proposal from its long time customers.” ( Id.) The Termination Letter stated that “[a]fter careful review” of Plaintiff's compliance with CPS's territory and customer support requirements, CPS would terminate Plaintiff's “independent dealer relationship ... effective May 16, 2010.” ( Id. Ex. B.) The stated reasons were: (1) Plaintiff violated the requirement that authorized Cummins dealers use only Cummins products for repairs when Cummins warranties are in effect; (2) Plaintiff violated the requirement that dealers in the New York City area have technicians qualified to repair midrange Cummins engines; (3) Plaintiff took “unilateral, unauthorized discounts and deductions” from CPS invoices, in “direct violation of dealer and company policies”; and (4) Plaintiff did not comply with CPS's payment terms. ( Id.) As a result of the termination, Plaintiff would no longer be eligible for “any Dealer programs or...