President Container Grp. II, LLC v. Systec Corp.

• Decision Date: 17 June 2020
• Docket Number: 18-cv-4441 (NSR)
• Parties: PRESIDENT CONTAINER GROUP II, LLC, Plaintiff, v. SYSTEC CORPORATION d/b/a Systec Conveyors, Defendant.
• Court: U.S. District Court — Southern District of New York

467 F.Supp.3d 158

PRESIDENT CONTAINER GROUP II, LLC, Plaintiff,

v.SYSTEC CORPORATION d/b/a Systec Conveyors, Defendant.

18-cv-4441 (NSR)

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

Signed June 17, 2020

Gardiner S. Barone, Blustein, Shapiro, Rich & Barone, LLP, Goshen, NY, for Plaintiff.

Tony Miodonka, Evan I. Cohen, Finn Dixon & Herling LLP, Stamford, CT, for Defendant.

OPINION & ORDER

NELSON S. ROMÁN, United States District Judge:

Plaintiff President Container Group II, LLC ("Plaintiff" or "PCG") commenced the instant action on or about April 5, 2018 in the Supreme Court of the State of New York, Orange County. (See Complaint ("Compl."), ECF No. 1, Ex. A.) Plaintiff alleges fraudulent inducement and breach of contract claims under New York law against Defendant Systec Corporation d/b/a Systec Conveyors ("Defendant" or "Systec"). (Id. ) On May 22, 2018, Defendant filed a Notice of Removal removing the suit to federal court pursuant to 28 U.S.C. §§ 1332, 1441, and 1446, et seq. (Notice of Removal, ECF No. 1.)

Presently before the Court is Defendant's motion to dismiss the Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). (See ECF No. 12.) For the following reasons, Defendant's motion to dismiss is GRANTED in part and DENIED in part.

BACKGROUND

I. Factual Allegations

The following facts are derived from the Complaint and are taken as true and constructed in the light most favorable to Plaintiff for the purposes of this motion. See Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Nicosia v. Amazon.com, Inc. , 834 F.3d 220, 230 (2d Cir. 2016).

Plaintiff manufacturers corrugated boxes and point-of-purchase displays from its production facility in Middletown, New York (the "Plant"). (Compl. ¶¶ 2, 3.) To further this business, Plaintiff arranged to purchase a BOBST Model 820, a high speed flexo folder gluer, to produce boxes more efficiently. (Id. ¶ 16.) This new product, however, required the installation of a conveyer belt system. (Id. ¶ 17.) For this need, Plaintiff approached Defendant Systec in or about October 2016. (Id. at ¶ 19.)

After two months of negotiations, Plaintiff and Systec entered into two contracts in December 2016. (Id. ¶ 50; Exs. A & B.¹ ) One contract was for the design, manufacture, delivery and installation of a Dye Cut Conveyor, (Compl. ¶ 51; Ex. A); the other was for the BOBST 820 Conveyor System and the Mainline Conveyor System. (Compl. ¶ 52; Ex. B).

Systec manufactured, delivered, and installed the conveyer systems. (Compl. ¶ 84.) But Plaintiff gave notice to Systec that the systems "were not performing as required by the terms of the Contracts." (Id. ¶ 92.) Although Systec made several attempts to cure the alleged defects, the conveyer systems continued to perform deficiently. (Id. ¶¶ 93–97). Systec's efforts at repair, however, did "cure[ ] certain of the deficiencies." (Id. ¶ 102.)

Following these largely failed attempts to remedy the conveyer systems, Plaintiff filed, on April 5, 2018, its complaint in New York state court. (Id. ¶ 1.) Plaintiff seeks $1,100,015 for ongoing lost production because of the Conveyor Systems’ failure, $744,000 for the contract price Plaintiff paid to Defendant, and $515,000 for "special damages." (Id. ¶ 142(a)-(b).)

LEGAL STANDARDS

I. 12(b)(6)

To survive a 12(b)(6) motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). Factual allegations must "nudge [a plaintiff's] claim from conceivable to plausible." Twombly , 550 U.S. at 570, 127 S.Ct. 1955. A claim is plausible when the plaintiff pleads facts which allow the court to draw a reasonable inference the defendant is liable. Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. To assess the sufficiency of a complaint, the court is "not required to credit conclusory allegations or legal conclusions couched as factual allegations." Rothstein v. UBS AG , 708 F.3d 82, 94 (2d Cir. 2013). While legal conclusions may provide the "framework of a complaint," "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal , 556 U.S. at 678–79, 129 S.Ct. 1937.

Further, a court is generally confined to the facts alleged in the complaint for the purposes of considering a motion to dismiss pursuant to 12(b)(6). Cortec Indus. v. Sum Holding L.P. , 949 F.2d 42, 47 (2d Cir. 1991). A court may, however, consider documents attached to the complaint, statements or documents incorporated into the complaint by reference, matters of which judicial notice may be taken, public records, and documents that the plaintiff either possessed or knew about, and relied upon, in bringing the suit. See Kleinman v. Elan Corp. , 706 F.3d 145, 152 (2d Cir. 2013).

II. Rule 9(b)

While the rules of federal pleading typically require a "short and plain statement," see Fed. R. Civ. P. 8, fraud claims have heightened pleading requirements. See Fed. R. Civ. P. 9(b) (requiring parties to "state with particularity the circumstances constituting fraud or mistake."). To meet Rule 9(b) ’s pleading standard, a plaintiff must "(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." Rombach v. Chang , 355 F.3d 164, 170 (2d Cir. 2004). "[A] plaintiff need not plead dates, times, and places with absolute precision, so long as the complaint gives fair and reasonable notice to defendants of the claim and the grounds upon which it is based." Minnie Rose LLC v. Yu , 169 F. Supp. 3d 504, 516 (S.D.N.Y. 2016) (quoting Rana v. Islam , 305 F.R.D. 53, 58 (S.D.N.Y. 2015) ). "Allegations that are conclusory or unsupported by factual assertions are insufficient." ATSI Commc'ns Inc. v. Shaar Fund, Ltd. , 493 F.3d 87, 99 (2d Cir. 2007).

DISCUSSION

First, Systec moves to dismiss Plaintiff's fraudulent inducement claim. (See ECF. No. 12.) Second, while not conceding it breached the contract, Systec also moves to dismiss the breach of contract claim to the extent Plaintiff seeks damages excluded by the contracts. (Id. ) The Court considers each claim in turn.

I. Fraudulent Inducement

Plaintiff bases its fraudulent inducement claim on certain representations that Systec made to Plaintiff during their contract negotiations. Plaintiff alleges these representations were false and induced Plaintiff to enter into the contracts and subsequently suffer damages. (Compl. ¶¶ 125–142.) Systec responds that Plaintiff has failed to sufficiently plead fraudulent inducement to contract because it failed to plead with sufficient particularity, it failed to plead any false material representations, it failed to plead reasonable reliance, and it failed to plead fraud separable from the contract.

a. Particularity Required by Rule 9(b)

Plaintiff fails to plead the alleged fraud with the particularity required by Rule 9(b). See Lerner v. Fleet Bank, N.A. , 459 F.3d 273, 290 (2d Cir. 2006). The Complaint alleges that Systec made several representations, including that:

• "the Conveyor Systems shown on said plans would meet Plaintiff's expectations" (Compl. at ¶ 37);

• it "had the skill and expertise required to design, manufacture and install the BOBST Conveyor Systems ... to utilize[e] the full production capacity of the BOBST 820, and to do so in an automated and efficient manner" (id. at ¶ 46);

• "the Conveyor System would be designed, manufactured, modified, installed and configured to integrate with Plaintiff's manufacturing operations so as to result in the same operating at a higher level of efficiency and production" (id. at ¶ 47); • it "would be able to design and install a Conveyor System that integrated with plaintiff's manufacturing operations so as to increase the efficiency of plaintiff's manufacturing operations" (id. at ¶ 48);

• "the Conveyor Systems would be designed, manufactured, modified, installed and configured to integrate with Plaintiff's manufacturing operations so as to result in the same operating at a higher level of efficiency and production" (id. at ¶ 80);

• it "would design and manufacture Conveyor Systems for Plaintiff that consisted of high quality materials and parts, and that it would provide adequate, efficient and uninterrupted service" (id. at ¶ 125);

• it "would design and manufacture Conveyor Systems for Plaintiff that incorporated [Systec's] extensive knowledge and experience in designing automated conveyor systems for plants such as Plaintiff's" (id. at ¶ 126); and

• it "would design and manufacture Conveyor Systems for Plaintiff that was superior in its design as to the conveyor systems offered by [Systec's] competitors" (id. at ¶ 127).

Plaintiff further alleges that when Systec made the aforementioned representations, it was aware that they were false. (See id. ¶ 131.)

These allegations fail to identify who made these statements and when, where, and to whom they were made. See Rombach , 355 F.3d at 170. Liberally construed, the Complaint implies the timeframe of the representations occurred between October 2016, when Plaintiff approached Defendant, and December 15, 2016, when the contracts were executed—that is, the full pre-contract negotiation period. (See Pl. Memorandum in Opposition ("Pl. Mem."), ECF No. 15, at 17.) The Court finds that this time range of several months is insufficient to plead fraud with particularity. See CapLOC, LLC v. McCord , No. 17CIV5788ATRWL, 2018 WL 3407708, at *10 (S.D.N.Y. June 12, 2018) (allegation that misrepresentations took place "over the course of several months" was insufficiently specific); Innovation Ventures, LLC v. Ultimate One Distrib. Corp. , No. 12-CV-5354 KAM RLM, 2014 WL 1311979, at *5 (E.D.N.Y. Mar. 28, 2014) (collecting c...