PHL Variable Ins. Co. v. Town of Oyster Bay

• Decision Date: 30 May 2017
• Docket Number: 16-CV-4013 (SJF)(AKT)
• Parties: PHL VARIABLE INSURANCE COMPANY, Plaintiff, v. TOWN OF OYSTER BAY, Defendant.
• Court: U.S. District Court — Eastern District of New York

PHL VARIABLE INSURANCE COMPANY, Plaintiff, v. TOWN OF OYSTER BAY, Defendant.

16-CV-4013 (SJF)(AKT)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

May 30, 2017

OPINION and ORDER

FEUERSTEIN, District Judge:

On or about July 19, 2016, plaintiff PHL Variable Insurance Company ("plaintiff" or "PHL"), commenced this action against defendant Town of Oyster Bay ("defendant" or "the Town") pursuant to this Court's diversity of citizenship jurisdiction under 28 U.S.C. § 1332, asserting claims seeking damages for breach of contract, unjust enrichment, innocent misrepresentation, negligent misrepresentation and fraud. On July 27, 2016, plaintiff filed an amended complaint, inter alia, asserting additional claims against defendant seeking damages for innocent misrepresentation, negligent misrepresentation and fraud. Pending before the Court is defendant's motion to dismiss plaintiff's claims against it in the amended complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim for relief. For the reasons set forth below, defendant's motion is granted to the extent set forth herein.

I. BACKGROUND

A. Factual Background¹

Defendant is a town located within the County of Nassau, in the State of New York, that owns and operates, inter alia, a municipal golf course (the "Golf Course"). (Amended Complaint ["Am. Compl."], ¶¶ 5, 8). There are several dining and concession facilities at the Golf Course ("the Facilities"), including: (1) a restaurant, catering and banquet facility commonly known as "The Woodlands at Woodbury;" (2) a snack bar called "The Halfway House," located on the eighth (8^th) tee; and (3) other concessions "sited at the driving range." (Id., ¶ 9).

On or about October 30, 2000, defendant entered into a license agreement ("the Concession Agreement") with SRB Catering Corp., d/b/a H.R. Singleton's Classic American Grille ("SRB Catering"), (Am. Compl., ¶ 11), in order "to secure the efficient and beneficial operation of a food and beverage service at the . . . Golf Course, and to provide major capital improvements to the Club House." (Id., Ex. A at 1). Specifically, pursuant to the Concession Agreement, inter alia, SRB Catering agreed "to maintain and operate a food and beverage service at the Club House, the Halfway House, and the Driving Range, on the . . . Golf Course," (id., Ex. A, ¶ 2); and "to make capital improvements to the facility, with a total value of approximately $2,097,000.00," pursuant to plans, specifications and a schedule approved by the Town, within the first three (3) years of the Concession Agreement. (Id., ¶ 39). The Concession Agreement further provides, inter alia, that "[t]itle to all [capital] improvements shall vest in the [Town] upon completion and acceptance of the work." (Id., ¶ 39(g)).

The term of the Concession Agreement was for a period of twenty (20) years, beginningJanuary 1, 2001, and ending on December 31, 2020, (Am. Compl., ¶ 37), but it could be renewed for a period of ten (10) years "[a]t the sole option of the [Town]." (Id.) Pursuant to paragraph thirty-seven (37) of the Concession Agreement, SRB Catering was required to pay the Town a license fee of forty-eight thousand dollars ($48,000.00), in equal monthly payments of four thousand dollars ($4,000.00) per month, for the period from January 1, 2001 through December 31, 2001. (Id.) For each subsequent year, the annual license fee was increased by three percent (3%) from the previous year. (Id.) However, the Concession Agreement also gave the Town, at its sole option, "the right to convert th[e] [annual license] payment provision to require [SRB Catering] to pay [it] a percentage of annual gross receipts." (Id.) In the event that the Town exercised that option, SRB Catering was required to pay it a yearly license fee equal to (i) five percent (5%) of annual gross receipts; or (ii) six percent (6%) of annual gross sales if the annual gross sales of SRB Catering exceeded two million dollars ($2,000,000.00). (Id.) Except as provided in Paragraph 37 of the Concession Agreement, all income derived from the operation of the Concession Agreement belonged to SRB Catering. (Id., ¶ 9). The Concession Agreement was executed by Harendra Singh ("Singh"), as "V.P.," presumably vice president, of SRB Catering, and the then-Town Supervisor, John Venditto ("Venditto"), on behalf of the Town, (id. at 24-25), pursuant to Town Resolution No. 638-2000, which was adopted on October 3, 2000. (See Am. Compl., Ex. C at 1, Ex. D at 5 and Ex. F at 1).

On or about April 19, 2005, the Town entered into a license agreement (the "First Amended Concession Agreement" or "FACA") with "SRB Convention and Catering Corp., d/b/aThe Woodlands and PassionFish" ("SRB Convention")², (Am. Compl., Ex. B at 1), in order "to secure the efficient and beneficial operation of a food and beverage concession service at the . . . Golf Course, to accept the major capital improvements heretofore performed by [SRB] to the Club House, and to provide for future improvements[.]" (Id.) Pursuant to the FACA, inter alia, SRB Convention agreed "to maintain and operate a food and beverage concession service at the Club House, the Breakfast House and the Halfway House, and the Driving Range if so requested, on the . . . Golf Course." (Id., Ex. B, ¶ 2).

Paragraph 32 of the FACA, under the heading, "Termination of Agreement," provides:

"The [Town] has the right to terminate this [FACA] if:

a) [SRB Convention] does not fulfill its obligations, or any part thereof, with diligence to insure proper services within the term of this [FACA], including any authorized extension.

b) [SRB Convention] does not comply with all laws, ordinances, rules, or provisions governing this [FACA] or is otherwise in violation of any provision of this [FACA].

c) [SRB Convention] is in violation of any law, rule, regulation or judicial order applicable to the operation of this [FACA] by [SRB Convention].

d) This [FACA], or any part of it, is subcontracted without first obtaining the consent of the [Town], which consent shall not be unreasonablywithheld, provided the subcontract is consistent with the purposes of this [FACA].

e) This [FACA], or any claim under it, is assigned by [SRB Convention] in a way not specified in this [FACA].

f) [SRB Convention] is in default of any of the material terms and conditions of this [FACA].

g) [SRB Convention] does not timely make the monthly concession payments.

Upon the occurrence of any of the abovementioned events, the [Town], without prejudice or waiver of any of its rights or interests under this [FACA], shall give [SRB Convention] written notice of such default, and [SRB Convention] shall have sixty (60) days after the receipt of said notice to cure such default. If, after said period, [SRB Convention] has failed to cure or has not diligently commenced to cure such default, the [Town] has the right to declare [SRB Convention] in default of this [FACA], to terminate this [FACA], and to assume possession and control of all materials, equipment and operations under this [FACA]. The [Town] may thereupon undertake all appropriate measures for the completion of this [FACA].

In the event the [Town] terminates this [FACA] for any reason other than the default of [SRB Convention], the [Town] shall pay to [SRB Convention] a sum equal to 4% of the capital improvements made to the facility by [SRB Convention], for each year or part of a year remaining in this [FACA], up to 100% of the value of said improvements. In addition, the [Town] will pay [SRB Convention] for lost profits on catering events which were booked prior to a termination for any reason other than the default of [SRB Convention], subject to an offset for deposits being held by [SRB Convention] for said events.

[SRB Convention] shall notify the [Town] of the name, address and telephone number of each financing entity. The [Town] shall notify each financing entity, of which the [Town] has notice, of the occurrence of any of the events listed in the herein Paragraph. Such financing entity shall have the right to cure any default, consistent with the provisions contained in the herein Paragraph. In the event of a default of [SRB Convention], the financing entity shall be entitled to receive any payments then due to [SRB Convention] by the [Town]."

(Am. Compl., Ex. B, ¶ 32) (italicized language was subsequently amended as set forth below).

Paragraph 37 of the FACA provides, in pertinent part:

"The term of the original [Concession Agreement] was for a period of twenty years, beginning January 1, 2001, and ending on December 31, 2020. The original [Concession Agreement] provided for a ten-year renewal, at the option of the [Town]. In light of the financial obligations entered into by [SRB] in performing the capital improvements, which exceeded its contractual obligation by more than one hundred percent, the [Town] hereby exercises the renewal. Accordingly, this [FACA] shall be effective through December 31, 2029."

(Am. Compl., Ex. B, ¶ 37). The payment provisions in the FACA remained the same as in the original Concession Agreement.

Paragraph 39 of the FACA provides, in pertinent part:

"a) In the original [Concession Agreement], [SRB] agreed to make capital improvements to the facility, with a total value of approximately $2,097,000.00. [SRB] has presented paid invoices to the [Town] indicating that the project cost to date is $4,462,715.00. The [Town] had an independent firm review the invoices, and perform a visual inspection of the work performed. Based upon said review, a value of $4,600,000.00 was established for the work. The [Town] hereby accepts the capital improvements to the Golf Course Club House.

b) [SRB] may make additional capital improvements to the facility, at its own cost and expense, with no setoff from the concession payment to the [Town], however all such capital improvements must be approved by the [Town].

. . .

d) Title to all capital improvements shall vest in the [T

...