Newman & Schwartz v. Asplundh Tree Expert Co., Inc.

• Decision Date: 17 December 1996
• Docket Number: No. 477,D,477
• Citation: 102 F.3d 660
• Parties: NEWMAN & SCHWARTZ, Plaintiff-Appellant, v. ASPLUNDH TREE EXPERT CO., INC., Defendant-Appellee. ocket 96-7405.
• Court: U.S. Court of Appeals — Second Circuit

Page 660

102 F.3d 660

36 Fed.R.Serv.3d 1348

NEWMAN & SCHWARTZ, Plaintiff-Appellant, v. ASPLUNDH TREE EXPERT CO., INC., Defendant-Appellee.

No. 477, Docket 96-7405.

United States Court of Appeals, Second Circuit.

Argued Oct. 10, 1996.

Decided Dec. 17, 1996.

Paul A. Batista, New York City, for Plaintiff-Appellant.

Walter P. Loughlin, New York City (Latham & Watkins, of counsel), for Defendant-Appellee.

Before OAKES, CARDAMONE and MAHONEY, ^* Circuit Judges.

OAKES, Senior Circuit Judge:

Plaintiff-Appellant Newman & Schwartz appeals from dismissal of its complaint on defendant's Fed.R.Civ.P. 12(b)(6) motion. The judgment, dated March 14, 1996, and entered in the United States District Court for the Southern District of New York, Deborah A. Batts, Judge, found that plaintiff had failed to state a claim upon which relief could be granted, and dismissed its complaint. See Newman & Schwartz v. Asplundh Tree Expert Co., 917 F.Supp. 265 (S.D.N.Y.1996). We have jurisdiction pursuant to 28 U.S.C. § 1291. We reverse and remand.

I Facts

Plaintiff-Appellant Newman & Schwartz ("N & S"), a New York law firm, filed this action against Defendant-Appellee Asplundh Tree Expert Co. ("Asplundh") on February 7, 1995. The complaint sought to recover legal fees which N & S allegedly earned representing Robert E. Bates ("Bates"), a corporate executive of Vanguard Meters Service, Inc. ("Vanguard"), who was named as a defendant in a criminal indictment in the Supreme Court of the State of New York. N & S contended that Asplundh had guaranteed the obligation of Vanguard, its wholly owned corporate subsidiary, to pay Bates's legal fees in the criminal litigation.

On April 24, 1995, Asplundh gave notice that it would move for an order under Fed.R.Civ.P. 12(b)(6) to dismiss N & S's complaint for failure to state a claim on which relief could be granted. The motion was supported by an evidentiary affirmation ("Affirmation") of an Asplundh executive, Phillip E. Tatoian, Jr., and Asplundh's legal memorandum in support of the motion. The Affirmation was 16 paragraphs and attached several exhibits, including copies of correspondence to which no reference had been made in the complaint. The Affirmation detailed information including Asplundh's account of its purchase of Vanguard and Bates's alleged activities at Vanguard, and made mention of an attorney who allegedly represented Bates in the criminal investigation.

On or about June 8, 1995, N & S opposed the motion to dismiss. Asplundh's reply papers were served and filed on or about June 29, 1995, and the dismissal motion was submitted on that day to the district court, without oral argument.

On March 12, 1996, Judge Batts dismissed N & S's complaint in its entirety. Appellant filed timely notice of appeal on or about April 3, 1996. We review the district court's decision de novo. Citibank, N.A. v. K-H Corp., 968 F.2d 1489, 1494 (2d Cir.1992).

II Discussion

Appellant asserts that the district court committed error in explicitly considering and relying upon affirmations and other evidentiary materials outside of the complaint when granting defendant's motion to dismiss. ¹ "In considering a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6), a district court must limit itself to facts stated in the complaint or in documents attached to the complaint as exhibits or incorporated in the complaint by reference." Kramer v. Time Warner, Inc., 937 F.2d 767, 773 (2d Cir.1991). The court is further required to view all allegations raised in the complaint in the light most favorable to the non-moving party, here N & S, Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir.1989), and "must accept as true all the factual allegations in the complaint." Leatherman v. Tarrant County Narcotics Unit, 507 U.S. 163, 164, 113 S.Ct. 1160, 1161, 122 L.Ed.2d 517 (1993).

In making its decision to grant Asplundh's 12(b)(6) motion, the district court explicitly relied upon material which was not in the pleadings, specifically the Affirmation and its attachments. For example, the opinion asserts that "[t]here is no evidence of an Asplundh reply to either communication," citing the Affirmation for that statement. Likewise, it cited the Affirmation for extra-complaint information when referring to Vanguard's 1992 bankruptcy filing and N & S's alleged submission to Bankruptcy Court of a "claim for attorney's fees" from Vanguard. In short, the court improperly relied upon extra-complaint information in granting the motion to dismiss.

We find that Count One of N & S's complaint, which alleges breach of contract, is sufficiently supported by factual allegations as to withstand defendant's Rule 12(b)(6) motion. The complaint asserts Asplundh's purchase of Vanguard in 1990. It asserts the subsequent 1991 contract between Asplundh, Vanguard, and Bates ("Employment Agreement"), binding Asplundh to pay legal fees arising from Bates's criminal litigation. Although Asplundh argues that it is not a party to that agreement, the complaint asserts that the Agreement facially binds Asplundh by virtue of Jill Asplundh's execution in her capacity as Vice President of both Asplundh and Vanguard. The question of Asplundh's liability under this contract is a disputed issue which is not appropriately resolved on a 12(b)(6) motion. N & S has asserted facts which, when viewed in the light most favorable to it, could bind Asplundh to the contract.

Count One of the complaint further alleges N & S's status as a third-party beneficiary to the August 20, 1991, Employment Agreement. The complaint asserts that Bates retained N & S on November 6, 1991, to represent him in connection with the criminal indictment. It further asserts Bates's subsequent arraignment, and N & S's representation of him in that proceeding. Finally, the complaint asserts that N & S was due $494,419.97 in fees and disbursements for its criminal representation from December 4, 1991, through January 3, 1995.

Although Asplundh disputes that N & S was intended as a third party beneficiary of the Agreement, it is reasonable to assume that a provider of legal services is a third-party beneficiary of an agreement to pay for those services. A party need not necessarily be specifically mentioned in a contract to be considered a third-party beneficiary. See Restatement (Second) of Contracts, § 302(1) (1981); In re Gulf Oil/Cities Service Tender Offer Litigation, 725 F.Supp. 712, 733 (S.D.N.Y.1989). ("Although a third party need not be specifically mentioned in the contact before third-party beneficiary status is found, New York law requires that the parties' intent to benefit a third party must be shown on the face of the agreement.") (citing Hylte Bruks Aktiebolag v. Babcock & Wilcox Co., 399 F.2d 289, 292 (2d Cir.1968); New York State Energy Research & Dev. Authority v. Nuclear Fuel Serv., 561 F.Supp. 954, 979 (W.D.N.Y.1983); Port Chester Electrical Constr. Corp. v. Atlas, 40 N.Y.2d 652, 357 N.E.2d 983, 389 N.Y.S.2d 327 (1976)). The district court ought to have construed the facts and the law in favor of N...